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As filed with the Securities and Exchange Commission on January  16 , 2018

Registration No. 333-221997

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Amendment No. 1

to

FORM S-11

FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933

OF SECURITIES OF CERTAIN REAL ESTATE COMPANIES

 

 

VICI PROPERTIES INC.

(Exact name of registrant as specified in governing instruments)

 

 

8329 W. Sunset Road, Suite 210

Las Vegas, Nevada 89113

(702) 820-3800

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

Edward B. Pitoniak

Chief Executive Officer

VICI Properties Inc.

8329 W. Sunset Road, Suite 210

Las Vegas, Nevada 89113

(702) 820-3800

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

with a copy to:

 

Todd E. Lenson, Esq.

Jordan M. Rosenbaum, Esq.

Kramer Levin Naftalis & Frankel LLP

1177 Avenue of the Americas

New York, New York 10036

(212) 715-9100

 

Edward F. Petrosky, Esq.

Bartholomew A. Sheehan, III Esq.

Sidley Austin LLP

787 Seventh Avenue

New York, New York 10019

(212) 839-5300

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

If any of the Securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box:  ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer   ☒ (Do not check if a smaller reporting company)    Smaller reporting company  
     Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐

 

 

CALCULATION OF REGISTRATION FEE

 

 

Title of Each Class of

Securities to be Registered

 

Proposed

Maximum

Aggregate

Offering Price (1)(2)

 

Amount of

Registration Fee

Common Stock

  $100,000,000   $12,450 (3)

 

 

(1) Estimated solely for the purposes of calculating the registration fee pursuant to Rule 457(o) of the Securities Act of 1933, as amended.
(2) Includes shares subject to the underwriters’ overallotment option to purchase additional shares from us, if any.
(3) Previously paid.

 

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


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The information contained in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in a jurisdiction where the offer or sale is not permitted.

 

Subject to completion, dated January 16, 2018

PROSPECTUS

Shares

 

 

LOGO

VICI Properties Inc.

Common Stock

 

 

This is the initial public offering of VICI Properties Inc. We are offering              shares of our common stock. We anticipate that the initial public offering price will be between $             and $             per share.

In connection with this offering, we have applied to list our common stock on the New York Stock Exchange (the “NYSE”) under the ticker symbol “VICI”.

We intend to elect and qualify to be taxed as a real estate investment trust as defined under Section 856(a) of the Internal Revenue Code of 1986, as amended (the “Code”), for U.S. Federal income tax purposes. We currently expect such election to be effective commencing with our taxable year ending December 31, 2017. To assist us in qualifying to be taxed as a REIT, among other purposes, our charter contains certain restrictions relating to the ownership and transfer of our shares and a provision generally restricting stockholders from owning more than 9.8% in value or in number, whichever is more restrictive, of any class or series of our shares, including if repurchases by us cause a person’s holdings to exceed such limitations. In addition to the restrictions set forth above, our outstanding shares of capital stock are held subject to applicable gaming laws. Any person owning or controlling at least 5% of the outstanding shares of any class of our capital stock is required to promptly notify us of such person’s identity. See “Description of Capital Stock” for a detailed description of the ownership and transfer restrictions applicable to our shares.

Investing in our common stock involves risks. You should carefully consider the matters described under the caption “ Risk Factors ” beginning on page 23 of this prospectus.

 

 

 

      

Per Share

      

Total

 

Initial public offering price

       $                      $              

Underwriting discounts and commissions to be paid by us (1)

       $                      $              

Proceeds, before expenses, to us

       $                      $              

 

(1) We refer you to “Underwriting” beginning on page 191 of this prospectus for additional information regarding underwriting compensation.

The underwriters may also exercise their overallotment option to purchase an additional              shares from us, at the initial public offering price, less the underwriting discounts, for 30 days after the date of this prospectus.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE OR OTHER SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The underwriters expect to deliver the shares against payment in New York, New York on                     , 2018.

 

 

Joint Book-Running Managers

 

Morgan Stanley   Goldman Sachs & Co. LLC   BofA Merrill Lynch

The date of this Prospectus is                     , 2018.


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LOGO

INVEST IN THE EXPERIENCE TM VICI TM CAESARS PALACE LAS VEGAS, NV HARVEYS LAKE TAHOE STATELINE, NV BALLY’S ATLANTIC CITY ATLANTIC CITY, NJ CASCATA GOLF COURSE BOULDER CITY, NV HARRAH’S LAS VEGAS, NV HARRAH’S GULF COAST BILOXI, MS


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You should rely only on the information contained in this prospectus, any free writing prospectus prepared by us or information to which we have referred you. Neither we nor the underwriters have authorized any other person to provide you with different or additional information, and if anyone provides you with different or additional information, you should not rely on it. Neither we nor the underwriters are making an offer to sell, or soliciting an offer to buy, these securities in a jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus is accurate only as of the date on the front cover of this prospectus or another date as may be specified herein. Our business, financial condition, cash flows, operating and financial results, and prospects may have changed since such dates.

 

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TRADEMARKS AND TRADE NAMES

The names of the brands under which the properties operate are trademarks of the respective owners of those brands, and neither they nor any of their officers, directors, agents or employees:

 

    have approved any disclosure in which they or the names of their brands appear; or

 

    are responsible or liable for any of the content of this document.

CERTAIN NON-GAAP FINANCIAL MEASURES OF THE COMPANY

In this prospectus, we present Funds From Operations (“FFO”), Adjusted Funds From Operations (“AFFO”) and Adjusted EBITDA, which are not required by, or presented in accordance with, generally accepted accounting principles in the United States (“GAAP”). These are non-GAAP financial measures and should not be construed as alternatives to net income or as an indicator of operating performance (as determined in accordance with GAAP). We believe FFO, AFFO and Adjusted EBITDA provide a meaningful perspective of the underlying operating performance of our business.

FFO is a non-GAAP financial measure that is considered a supplemental measure for the real estate industry and a supplement to GAAP measures. Consistent with the definition used by The National Association of Real Estate Investment Trusts (“NAREIT”), we define FFO as net income (or loss) (computed in accordance with GAAP) excluding gains (or losses) from sales of property plus real estate depreciation. We define AFFO as FFO adjusted for direct financing lease adjustments and other depreciation (which is comprised of the depreciation related to our golf course operations). We define Adjusted EBITDA as net income as adjusted for gains (or losses) from sales of property, real estate depreciation, direct financing lease adjustments, other depreciation (which is comprised of the depreciation related to our golf course operations), provision for income taxes and interest expense, net.

Because not all companies calculate FFO, AFFO and Adjusted EBITDA in the same way we do and other companies may not perform such calculations, those measures as used by other companies may not be consistent with the way we calculate such measures and should not be considered as alternative measures of operating income or net income. Our presentation of these measures does not replace the presentation of our financial results in accordance with GAAP.

Please see “Prospectus Summary—Summary Pro Forma Financial Data,” for reconciliations of net income to FFO, AFFO and Adjusted EBITDA, in each case on a pro forma basis.

CERTAIN NON-GAAP FINANCIAL MEASURES OF CAESARS AND CEOC

In this prospectus, we include Adjusted EBITDA of Caesars (which is the guarantor of the lease payment obligations under the Formation Lease Agreements) and CEOC (subsidiaries of which are tenants under the Formation Lease Agreements), all as reported by Caesars in its publicly available filings with the SEC. Adjusted EBITDA is a non-GAAP financial measure and should not be construed as an alternative to net income/(loss) as an indicator of operating performance or as an alternative to cash flow provided by operating activities as a measure of liquidity (as determined in accordance with GAAP) of Caesars or CEOC.

Adjusted EBITDA of Caesars and CEOC is defined as net income/(loss) before (i) interest expense, net of interest capitalized and interest income, (ii) income tax provision, (iii) depreciation and amortization, (iv) corporate expenses, and (v) certain items that are not considered indicative of ongoing operating performance at an operating property level, further adjusted to exclude certain non-cash and other items.

Adjusted EBITDA of Caesars and CEOC may not be comparable to similarly titled measures reported by other companies within the industry. Caesars has indicated in its publicly available filings with the SEC that

 

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management of Caesars uses Adjusted EBITDA of Caesars and CEOC to measure performance and allocate resources and believes that Adjusted EBITDA provides investors with additional information consistent with that used by management and allows a better understanding of the results of operational activities separate from the financial impact of decisions made for the long-term benefit of the Caesars and CEOC. We, in turn, use Adjusted EBITDA of Caesars and CEOC to evaluate the capacity of Caesars and CEOC to meet their respective obligations under the Formation Lease Agreements. Such information is not publicly available for the applicable tenant under the HLV Lease Agreement or its guarantor.

Please see Annex I for reconciliations of net income/(loss) of Caesars and CEOC to Adjusted EBITDA of Caesars and CEOC, respectively, all as reported by Caesars in its publicly available filings with the SEC.

MARKET AND INDUSTRY DATA

Although we are responsible for all of the disclosures contained in this prospectus, this prospectus contains industry, market and competitive position data and estimates that are based on industry publications and studies conducted by third parties. The industry publications and third-party studies generally state that the information that they contain has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe that the market position, market opportunity and market size information included in this prospectus is generally reliable, we have not independently investigated or verified such data. The industry forward-looking statements included in this prospectus may be materially different than our or the industry’s actual results.

 

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GLOSSARY OF SELECTED TERMS

Unless the context otherwise requires, the following terms used throughout this prospectus have the following meanings:

Amended and Restated Right of First Refusal Agreement ” refers to the Amended and Restated Right of First Refusal Agreement, dated as of December 22, 2017, by and between Caesars and VICI.

Caesars ” refers to Caesars Entertainment Corporation, a Delaware corporation and guarantor of the lease payment obligations under the Formation Lease Agreement, (NASDAQ: CZR), and, unless the context otherwise requires, its consolidated subsidiaries.

Caesars Entertainment Outdoor ” refers to the historical operations of the following golf courses that were transferred from CEOC to VICI Golf on the Formation Date: the Rio Secco golf course in Henderson, Nevada; the Cascata golf course in Boulder City, Nevada; the Grand Bear golf course in Saucier, Mississippi; and the Chariot Run golf course in Laconia, Indiana.

Call Right Agreements ” refers to our option to acquire three properties from subsidiaries of Caesars pursuant to call right agreements.

CEOC ” refers to Caesars Entertainment Operating Company, Inc., a Delaware corporation, prior to the Formation Date, and following the Formation Date, CEOC, LLC, a Delaware limited liability company and the tenant, together with certain of its subsidiaries, under the Formation Lease Agreements.

CPLV ” or “ Caesars Palace Las Vegas ” refers to Caesars Palace Las Vegas facilities located on the Las Vegas Strip, which was transferred by CEOC to CPLV Mortgage Borrower on the Formation Date.

CPLV CMBS Debt ” refers to $1.55 billion of asset-level real estate mortgage financing of CPLV, incurred by CPLV Mortgage Borrower on October 6, 2017.

CPLV Lease Agreement ” refers to the lease agreement for Caesars Palace Las Vegas.

“CPLV Mortgage Borrower” refers to CPLV Property Owner LLC, a Delaware limited liability company, the special purpose bankruptcy remote entity that is the fee owner of CPLV (subject to the CPLV Lease Agreement) and that is indirectly wholly-owned by VICI PropCo.

CRC ” refers to Caesars Resort Collection, LLC, a subsidiary of Caesars and guarantor of the lease payment obligations under the HLV Lease Agreement.

Eastside Property ” refers to the approximately 18.4 acres of land located in Las Vegas, Nevada, east of Harrah’s Las Vegas, which we sold to Caesars in December 2017.

Eastside Convention Center Property ” refers to a convention center that Caesars may construct on the Eastside Property (which is currently anticipated to be approximately 300,000 square feet, but which must be at least 250,000 square feet in order for the put right or call right to be exercised), together with the Eastside Property and all buildings, fixtures and improvements located thereon and all real property rights and interests relating thereto.

Formation Date ” refers to October 6, 2017, the effective date of the Plan of Reorganization.

Formation Lease Agreements ” refers collectively to the CPLV Lease Agreement, the Non-CPLV Lease Agreement and the Joliet Lease Agreement.

Formation Transactions ” refer to the transactions described under “Formation of Our Company.”

General Partner ” refers to VICI Properties GP LLC, a Delaware limited liability company and wholly owned subsidiary of VICI REIT.

 

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HLV ” or “ Harrah’s Las Vegas ” refers to the real estate of Harrah’s Las Vegas Hotel & Casino facility located in the Las Vegas Strip, which we purchased from a subsidiary of Caesars in December 2017.

HLV Lease Agreement ” refers to the lease agreement for the Harrah’s Las Vegas facilities.

HLV Owner ” refers to Claudine Propco LLC, a Delaware limited liability company and an indirect, wholly owned subsidiary of VICI REIT.

HLV Tenant ” refers to Harrah’s Las Vegas, LLC, a Delaware limited liability company and an indirect subsidiary of Caesars.

Joliet Lease Agreement ” refers to the lease agreement for the facilities in Joliet, Illinois.

Las Vegas Strip ” or “ the Strip ” refers to the four-mile stretch of Las Vegas Boulevard South of Las Vegas, Nevada.

Lease Agreement s ” refers collectively to the CPLV Lease Agreement, the Non-CPLV Lease Agreement, the Joliet Lease Agreement and the HLV Lease Agreement, unless the context otherwise requires.

Mandatory Conversions ” refers to the Mandatory Preferred Conversion and the Mandatory Mezzanine Conversion.

Mandatory Mezzanine Conversion ” refers to the automatic conversion of the junior tranche of the Prior CPLV Mezzanine Debt in the aggregate amount of $250.0 million into an aggregate of 17,630,700 shares of our common stock on November 6, 2017.

Mandatory Preferred Conversion ” refers to the automatic conversion of all of our shares of Series A preferred stock into 51,433,692 shares of our common stock on November 6, 2017.

MGCL ” refers to the Maryland General Corporation Law.

MSA ” refers to metropolitan statistical area.

Non-CPLV Lease Agreement ” refers to the lease agreement for regional properties other than the facilities in Joliet, Illinois and the facilities subject to the HLV Lease Agreement.

Operating Partnership ” refers to VICI Properties L.P., a Delaware limited partnership and our operating partnership.

Plan of Reorganization ” refers to Third Amended Joint Plan of Reorganization of Caesars Entertainment Operating Company, Inc. et. al. confirmed by the United States Bankruptcy Court for the Northern District of Illinois (Chicago) on January 17, 2017.

Prior CPLV Mezzanine Debt ” refers to three tranches of mezzanine debt of CPLV in the initial aggregate principal amount of $650.0 million, of which $250.0 million was subject to the Mandatory Mezzanine Conversion on November 6, 2017 and the balance was repurchased in full in December 2017.

Prior First Lien Notes ” refers to $311.7 million aggregate principal amount of first priority senior secured floating rate notes due 2022 issued by a subsidiary of our Operating Partnership, which were discharged in full in December 2017.

Prior Term Loans ” refers to $1.6 billion aggregate principal amount of senior secured first lien term loans under a senior secured credit facility issued by a subsidiary of our Operating Partnership, which were repaid in full in December 2017.

 

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Private Equity Placement ” refers to the issuance and sale in December 2017 of 54,054,053 shares of our common stock at a price of $18.50 per share in a private placement transaction, for net proceeds of approximately $963.9 million, contemporaneously with the consummation of the acquisition of the Harrah’s Las Vegas.

Purchase Agreement ” refers to that certain Purchase and Sale Agreement, dated as of November 29, 2017, by and between HLV Tenant, as seller, and Claudine Property Owner LLC, a Delaware limited liability company, as buyer, relating to the purchase of all of the equity interests in HLV Owner, the owner of the Harrah’s Las Vegas real estate.

Put-Call Agreement ” refers to the agreement between HLV Owner and certain subsidiaries of Caesars which provides for rights and obligations between Caesars and HLV Owner with respect to the Eastside Convention Center Property and HLV.

REIT ” refers to a real estate investment trust within the meaning of Sections 856 through 860 of the Code.

Revolving Credit Facility ” refers to $400 million five year first lien revolving credit facility entered into by VICI PropCo in December 2017.

Sale Agreement ” refers to that certain Purchase and Sale Agreement, dated as of November 29, 2017, by and between Vegas Development LLC, a Delaware limited liability company, as seller, and Eastside Convention Center, LLC, a Delaware limited liability company, as buyer, relating to the sale of all of the equity interests in Vegas Development Land Owner LLC, a Delaware limited liability company, the owner of the Eastside Property.

Second Lien Notes ” refers to $766.9 million aggregate principal amount of 8.0% second-priority senior secured notes due 2023 issued by a subsidiary of our Operating Partnership in October 2017.

Tax Matters Agreement ” refers to the tax matters agreement that addresses matters relating to the payment of taxes and entitlement to tax refunds by Caesars, CEOC, the Operating Partnership and us.

Term Loan B Facility ” refers to $2.2 billion seven year senior secured first lien term loan B facility entered into by VICI PropCo in December 2017.

TRS ” refers to a taxable REIT subsidiary.

VICI Golf ” refers to VICI Golf LLC, a Delaware limited liability company, which is a TRS and the owner and operator of the Caesars Entertainment Outdoor business.

VICI PropCo ” refers to VICI Properties 1 LLC, a Delaware limited liability company, which through its subsidiaries owns our real estate assets.

VICI PropCo Credit Facility ” refers to the new credit facility entered into by VICI PropCo in December 2017, consisting of the Term Loan B Facility and the Revolving Credit Facility.

VICI REIT ,” “ VICI ,” “ we ,” “ our ,” “ us ” and “ our company ” refers to VICI Properties Inc., a Maryland corporation, and, unless the context otherwise requires, its subsidiaries.

 

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PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. It does not contain all of the information that may be important to you and your investment decision. You should read the following summary, together with the more detailed information and financial statements appearing elsewhere in this prospectus. You should read this entire prospectus carefully, including the “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Cautionary Note Regarding Forward-Looking Statements” sections and the consolidated and pro forma financial information and the notes to those financial statements appearing elsewhere in this prospectus before making an investment decision to invest in our common stock.

Except as otherwise indicated or unless the context otherwise requires, all references in this prospectus to “on a pro forma basis” refers to on a pro forma basis giving effect to the items described in “Selected Historical and Pro Forma Financial Data—Unaudited Pro Forma Combined Condensed Financial Information.”

Unless otherwise indicated, the information contained in this prospectus is as of the date set forth on the cover of this prospectus, is based on an initial public offering of                  shares of our common stock at a price of $         per share, which is the midpoint of the price range set forth on the front cover of this prospectus, and assumes that the underwriters’ overallotment option is not exercised.

Overview of the Company

We are an owner, acquirer and developer of experiential real estate assets across leading gaming, hospitality, entertainment and leisure destinations. Our national, geographically diverse portfolio consists of 20 market-leading properties, including Caesars Palace Las Vegas and Harrah’s Las Vegas, two of the most iconic entertainment facilities on the Las Vegas Strip. Our entertainment facilities are leased to leading brands that seek to drive consumer loyalty and value with guests through superior services, experiences, products and continuous innovation. Across more than 36 million square feet, our well-maintained properties are located in nine states, contain nearly 14,000 hotel rooms and feature over 150 restaurants, bars and nightclubs. Our portfolio also includes approximately 37 acres of undeveloped land adjacent to the Strip that is leased to Caesars, which we may look to monetize as appropriate. We also own and operate four championship golf courses located near certain of our properties, two of which are in close proximity to the Las Vegas Strip. As a growth focused public real estate company, we expect our relationship with our partners will position us for the acquisition of additional properties across leisure and hospitality.

In December 2017, we acquired from an affiliate of Caesars and then leased back the real estate assets of Harrah’s Las Vegas for approximately $1.14 billion, and we simultaneously sold to Caesars approximately 18.4 acres of undeveloped land located behind the LINQ Hotel & Casino and Harrah’s Las Vegas for $73.6 million. Simultaneous with the transaction, we entered into a new VICI PropCo credit facility, comprised of a $2.2 billion senior secured Term Loan B Facility and a $400 million senior secured Revolving Credit Facility, and we used the proceeds from the Term Loan B Facility and drawings under the Revolving Credit Facility to refinance a portion of our outstanding long-term debt. See “—Recent Developments” below.

We believe we have a mutually beneficial relationship with Caesars, a leading owner and operator of gaming, entertainment and leisure properties. Our long-term triple-net Lease Agreements with subsidiaries of Caesars provide us with a highly predictable revenue stream with embedded growth potential. We believe our geographic diversification limits the effect of changes in any one market on our overall performance. We are focused on driving long-term total returns through managing assets and allocating capital diligently, maintaining a highly productive tenant base, capitalizing on strategic development and redevelopment opportunities, and optimizing our capital structure to support opportunistic growth.

 



 

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Our portfolio is competitively positioned and well-maintained. Pursuant to the terms of the Lease Agreements, which require Caesars to invest in our properties, and in line with its commitment to build guest loyalty, we anticipate Caesars will continue to make strategic value-enhancing investments in our properties over time, helping to maintain their competitive position. In addition, given our scale and deep industry knowledge, we believe we are well-positioned to execute highly complementary single-asset and portfolio acquisitions to augment growth.

We intend to elect and qualify to be taxed as a REIT for U.S. Federal income tax purposes commencing with our taxable year ending December 31, 2017. We believe our election of REIT status combined with the income generation from the Lease Agreements will enhance our ability to make distributions to our stockholders, providing investors with current income as well as long-term growth.

We are one of the largest net lease REITs in the United States with $648.9 million and $862.5 million of revenue, $         million and $         million of net income and $         million and $         million of Adjusted EBITDA for the nine months ended September 30, 2017 and for the year ended December 31, 2016, respectively, in each case on a pro forma basis. For a definition of Adjusted EBITDA and a reconciliation to net income, in each case on a pro forma basis, see “—Summary Pro Forma Financial Data.”

Overview of Caesars

Caesars is a leading owner and operator of gaming, entertainment and leisure properties. Caesars maintains a diverse brand portfolio with a wide range of options that appeal to a variety of gaming, travel and entertainment consumers. As of September 30, 2017 and after giving effect to the sale of Harrah’s Las Vegas to us, Caesars operates 48 properties, consisting of 20 owned and operated properties, eight properties that it manages on behalf of third parties and 20 properties that it leases from us. Caesars or CRC guarantee the lease payment obligations of the properties leased from us. Caesars has a market capitalization in excess of $9 billion as of the date of this prospectus.

For the year ended December 31, 2016, Caesars had net loss attributable to Caesars of approximately $3.6 billion and Adjusted EBITDA of approximately $1.1 billion and CEOC had net income of approximately $337 million and Adjusted EBITDA of approximately $1.1 billion. For the twelve months ended September 30, 2017, Caesars had net loss attributable to Caesars of approximately $3.0 billion and Adjusted EBITDA of approximately $1.1 billion and CEOC had net income of approximately $425 million and Adjusted EBITDA of approximately $1.1 billion.

We use Adjusted EBITDA of Caesars and CEOC to evaluate the capacity of Caesars and CEOC to meet their respective obligations under the Formation Lease Agreements. Such information is not publicly available for the applicable tenant under the HLV Lease Agreement or its guarantor, CRC.

Please see Annex I for reconciliations of net income/(loss) of Caesars and CEOC to Adjusted EBITDA of Caesars and CEOC, respectively, all as reported by Caesars in its publicly available filings with the SEC.

Caesars has diverse sources of revenue, with revenues coming from gaming, food and beverage, hotel operations and from other sources, including entertainment and retail. Caesars has invested significant resources in updating its hotels, with over 50% of its rooms being renovated during the past two years. Caesars’ properties have been rewarded with 25 TripAdvisor Certificates of Excellence in 2017. Caesars’ pioneering Total Rewards ® program is the gaming industry’s first, largest and most preferred loyalty program. Additionally, Caesars’ entertainment offerings have made it the number three live entertainment promoter worldwide.

 



 

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The historical audited and unaudited financial statements of Caesars (which are not included or incorporated by reference in this prospectus), as the parent and guarantor of CEOC, our significant lessee, have been filed with the SEC. Caesars files annual, quarterly and current reports and other information with the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. Caesars’ SEC filings are also available to the public from the SEC’s web site at www.sec.gov. We make no representation as to the accuracy or completeness of the information regarding Caesars that is contained in this prospectus, which is obtained from Caesars’ publicly available information, or that is available through the SEC’s website or otherwise made available by Caesars, and none of such publicly available Caesars’ information is incorporated by reference in this prospectus.

Overview of Our Lease Agreements with Caesars

We derive substantially all of our revenues from rental revenue from the leases of our properties to certain subsidiaries of Caesars pursuant to the Lease Agreements, each of which are “triple-net” leases with an initial term of 15 years, followed by four 5-year renewal options exercisable by the tenants, provided that for certain facilities the aggregate lease term, including renewals, may be cut back to the extent it would otherwise exceed 80% of the remaining useful life of the applicable leased property, solely at the option of the tenants. Caesars will not have any purchase option under the Lease Agreements, except with respect to the HLV Lease Agreement if we engage in certain transactions with entities deemed to be competitors, or the landlord under the lease otherwise becomes a competitor of Caesars. Under the CPLV Lease Agreement, rent is $165.0 million for the first seven years, subject to an annual escalator commencing in the second year of the lease term. Beginning in the eighth year, a portion of the rent amount will be designated as variable rent and will be adjusted periodically, with the balance of the rent amount designated as base rent and continuing to be subject to the annual escalator. At each renewal term, the base rent amount will be set at fair market value for the rent but will not be less than the amount of base rent due from the tenant in the immediately preceding year nor will the base rent increase by more than 10% compared to the immediately preceding year. Under each of the Non-CPLV Lease Agreement and Joliet Lease Agreement, rent is $433.3 million and $39.6 million, respectively, for the first seven years, subject to an annual escalator commencing in the sixth year of the lease term. With respect to the Joliet Lease Agreement, we are entitled to receive 80% of the rent thereunder pursuant to the operating agreement of our joint venture, Harrah’s Joliet Landco LLC. Beginning in the eighth year, a portion of each rent amount will be designated as variable rent and will be adjusted periodically, with the balance of the rent amount designated as lease rent and continuing to be subject to the annual escalator. At each renewal term, each base rent amount will be set at fair market value for the rent but will not be less than the amount of base rent due from the applicable tenant in the immediately preceding year nor will such base rent increase by more than 10% compared to the immediately preceding year. Under the HLV Lease Agreement, rent is $87.4 million for each of the first seven years of the lease term, subject to an annual escalator commencing in the second year of the lease term (subject to satisfaction of an EBITDAR to rent ratio commencing in the sixth year of the lease term). Beginning in the eighth year, a portion of the rent amount will be designated as variable rent and will be adjusted periodically. At each renewal term, the base rent amount will be set at fair market value for the rent but will not be less than the amount of base rent due from the tenant in the immediately preceding year nor will the base rent increase by more than 10% compared to the immediately preceding year. The Lease Agreements provide for portions of the rent to be designated as variable rent with periodic variable rent resets following the seventh year and tenth year of the leases and at the commencement of each renewal term based on the tenant’s net revenue from the facilities at such time. See “Business—Our Relationship with Caesars” for additional information on the Lease Agreements.

 



 

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Our Properties

 

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The following table summarizes the properties that we own as of the date of this prospectus:

 

Major MSAs Served

  

Location

   Approx. Structure
Sq. Ft. (000’s)
     Hotel Rooms  

Las Vegas—Destination Gaming

        

Caesars Palace Las Vegas

   Las Vegas, NV      8,579        3,980  

Harrah’s Las Vegas

   Las Vegas, NV      4,100        2,530  

Cascata Golf Course

   Boulder City, NV      37        N/A  

Rio Secco Golf Course

   Henderson, NV      30        N/A  

San Francisco / Sacramento

        

Harvey’s Lake Tahoe

   Lake Tahoe, NV      1,670        740  

Harrah’s Reno

   Reno, NV      1,371        930  

Harrah’s Lake Tahoe

   Stateline, NV      1,057        510  

Philadelphia

        

Caesars Atlantic City

   Atlantic City, NJ      3,632        1,140  

Bally’s Atlantic City

   Atlantic City, NJ      2,547        1,250  

Chicago

        

Horseshoe Hammond

   Hammond, IN      1,716        N/A  

Harrah’s Joliet (1)

   Joliet, IL      1,011        200  

Dallas

        

Horseshoe Bossier City

   Bossier City, LA      1,419        600  

Harrah’s Louisiana Downs

   Bossier City, LA      1,118        N/A  

Kansas City

        

Harrah’s North Kansas City

   North Kansas City, MO      1,435        390  

Memphis

        

Horseshoe Tunica

   Robinsonville, MS      1,008        510  

Tunica Roadhouse

   Tunica Resorts, MS      225        130  

Omaha

        

Harrah’s Council Bluffs

   Council Bluffs, IA      790        250  

Horseshoe Council Bluffs

   Council Bluffs, IA      632        N/A  

Nashville

        

Harrah’s Metropolis

   Metropolis, IL      474        260  

New Orleans

        

Harrah’s Gulf Coast

   Biloxi, MS      1,031        500  

Grand Bear Golf Course

   Saucier, MS      5        N/A  

Louisville, KY

        

Horseshoe Southern Indiana

   Elizabeth, IN      2,510        500  

Bluegrass Downs

   Paducah, KY      184        N/A  

Chariot Run Golf Course

   Laconia, IN      5        N/A  
  

 

  

 

 

    

 

 

 

Total

   24      36,586        14,420  
  

 

  

 

 

    

 

 

 

 

(1) Owned by Harrah’s Joliet Landco LLC, a joint venture of which we are the 80% owner and the managing member.

 



 

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Our Competitive Strengths

We believe the following strengths effectively position us to execute our business and growth strategies:

Leading portfolio of high-quality experiential gaming, hospitality, entertainment and leisure assets.

Our portfolio features Caesars Palace Las Vegas and Harrah’s Las Vegas and market-leading regional properties with significant scale. Our properties are well-maintained and leased to leading brands, such as Caesars, Horseshoe, Harrah’s and Bally’s. These brands seek to drive loyalty and value with guests through superior service and products and continuous innovation. Our portfolio benefits from its strong mix of demand generators, including casinos, guest rooms, restaurants, entertainment facilities, bars and nightclubs and convention space. We believe our properties are well-insulated from incremental competition as a result of high replacement costs, as well as regulatory restrictions and long-lead times for new development. The high quality of our properties appeals to a broad base of customers, stimulating traffic and visitation.

Our portfolio is anchored by our Las Vegas properties, Caesars Palace Las Vegas and Harrah’s Las Vegas, which are located at the center of the Strip. We believe Las Vegas is one of the most attractive travel destinations in the United States, with a record 42.9 million visitors in 2016, according to the Las Vegas Convention and Visitors Authority. We believe Las Vegas is a market characterized by steady economic growth and high consumer and business demand with limited new supply. Our Las Vegas properties, which are two of the most iconic entertainment facilities in Las Vegas, feature gaming entertainment, large-scale hotels, extensive food and beverage options, state-of-the-art convention facilities, retail outlets and entertainment showrooms. Our Las Vegas properties continue to benefit from positive macroeconomic trends, including, according to Caesars’ publicly available information, record visitation levels in 2016 and strong convention attendance, hotel occupancy and average daily rates, among other key indicators.

Our portfolio also includes market-leading regional resorts that we believe are benefitting from significant invested capital over recent years. The regional properties we own include award-winning land-based and dockside casinos, hotels and entertainment facilities that are market leaders within their respective regions. The properties operate primarily under the Caesars, Harrah’s, Horseshoe and Bally’s trademark and brand names, which, in many instances, have market-leading brand recognition.

Under the terms of the Lease Agreements, the tenants are required to continue to invest in the properties, which we believe will enhance the value of our properties.

Formation Lease Agreements . The Formation Lease Agreements provide that CEOC is required to continue to invest in the properties subject to such Lease Agreements as follows (subject to decrease in the event a property is no longer subject to a Formation Lease Agreement):

 

    annually, in a minimum amount of (a) with respect to the Non-CPLV Lease Agreement and the Joliet Lease Agreement, collectively, (x) $100.0 million in capital expenditures (which may include certain expenditures incurred by a certain CEOC affiliate or with respect to certain other CEOC assets not leased from us pursuant to the applicable Lease Agreement), and (y) 1% of the actual net revenue generated during the immediately prior year by the properties leased from us pursuant to the Non-CPLV Lease Agreement and Joliet Lease Agreement, and (b) with respect to the CPLV Lease Agreement, 1% of the actual net revenue generated during the immediately prior year by the property leased pursuant to the CPLV Lease Agreement, and

 

    during every period of three calendar years, in a minimum amount of (a) with respect to the Non-CPLV Lease Agreement and the Joliet Lease Agreement, collectively, $495.0 million in capital expenditures (which may include certain expenditures incurred by a certain CEOC affiliate or with respect to other CEOC assets not leased from us), and (b) $350.0 million in capital expenditures across the properties leased from us pursuant to the Formation Lease Agreements, and allocated amongst our properties as described under “Business—Our Relationship with Caesars—Lease Agreements.”

 



 

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HLV Lease Agreement. The HLV Lease Agreement provides that the tenant is required to invest in the property subject to such Lease Agreement as follows:

 

    $171 million in capital expenditures for the period commencing January 1, 2017 and ending December 31, 2021, and

 

    annually thereafter, 1% of the actual net revenue generated during the immediately prior year from such property.

Our properties feature diversified sources of revenue on both a business and geographic basis.

Our portfolio includes 20 geographically diverse casino resorts that serve numerous MSAs nationally. This diversity reduces our exposure to adverse events that may affect any single market. This also allows our tenants to derive revenue from an economically diverse set of customers who work in a variety of industries. Additionally, although the Lease Agreements are with subsidiaries of Caesars, Caesars generates revenue from a diverse set of services that it offers its customers. These include gaming, food and beverage, entertainment, hospitality and other sources of revenue. We believe that this geographic diversity and the diversity of revenue sources that our tenants derive from our leased properties improves the stability of rental revenue.

The following charts illustrate the geographic diversity of our properties leased to Caesars’ subsidiaries as of the date of this prospectus and, according to Caesars’ publicly available information, the sources of revenue that Caesars derives from its operations.

 

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(1) Includes entertainment revenues, rental income, and parking revenues.

Our long-term Lease Agreements provide a highly predictable base level of rent with embedded growth potential.

Our properties are 100% occupied pursuant to our long-term triple-net Lease Agreements with subsidiaries of Caesars, providing us with a predictable level of rental revenue to support future cash distributions to our stockholders. In October 2017, we entered into the CPLV Lease Agreement, the Non-CPLV Lease Agreement for our regional properties (other than for the Joliet facilities), and the Joliet Lease Agreement, and in December 2017, we entered into the HLV Lease Agreement.

Caesars is generally not permitted to remove individual properties from the Non-CPLV Lease Agreement and has the right, following certain casualty events or condemnations, to terminate the respective Lease Agreement with respect to affected properties. Nearly all of our properties are established assets with extensive operating histories. Based on historical performance of the properties, we expect that the properties will generate sufficient revenues for Caesars’ subsidiaries to pay to us all rent due under the Lease Agreements.

 



 

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Under the terms of the Lease Agreements, the tenants are responsible for ongoing costs relating to our properties thereunder, including property taxes, insurance, and maintenance and repair costs. Each Lease Agreement provides for a fixed base rent for the first seven years of the lease term, contributing to the expected stability of rental revenue. In addition, each Lease Agreement contains a fixed annual rent escalator on the base rent equal to (a) with respect to the Lease Agreements other than the HLV Lease Agreement, the greater of 2% and the increase in the Consumer Price Index commencing in the second year of the lease with respect to the CPLV Lease Agreement and in the sixth year of the lease with respect to the Non-CPLV Lease Agreement and the Joliet Lease Agreement, and (b)(i) with respect to the HLV Lease Agreement, 1% commencing in the second year of the lease term and (ii) the greater of 2% and the increase in the Consumer Price Index commencing in the sixth lease year subject to such increase not resulting in the EBITDAR to rent ratio being less than 1.6 to 1, in which event the increase will be such reduced percentage provided that such reduction shall not result in the base rent being less than the prior year’s rent. The Lease Agreements provide for portions of the rent to be designated as variable rent with periodic variable rent resets following the seventh year and tenth year of the leases and at the commencement of each renewal term based on the tenant’s net revenue from the facilities at such time. See “Business—Our Relationship with Caesars.” As further described below, the tenants’ payment obligations under the Lease Agreements are guaranteed by Caesars with respect to the Formation Lease Agreements and CRC with respect to the HLV Lease Agreement, which provides additional credit support.

We believe our relationship with Caesars, including our contractual agreements with it and its applicable subsidiaries, will continue to drive significant benefits and mutual alignment of strategic interests in the future.

Caesars or CRC guarantees the payment obligations of our tenants under the Lease Agreements.

All of our existing properties are leased to subsidiaries of Caesars. Caesars guarantees the payment obligations of our tenants under the Formation Lease Agreements and CRC, a subsidiary of Caesars, guarantees the payment obligations of our tenant under the HLV Lease Agreement. Caesars operates a nationally-recognized portfolio of brands, including Caesars, Harrah’s, Horseshoe and Bally’s, and operates its portfolio of properties (including the properties that are leased from us) using the Total Rewards ® customer loyalty program. Core to Caesars’ cross-market strategy, the Total Rewards ® program is designed to encourage Caesars’ customers to direct a larger share of their entertainment spending to Caesars. See “—Overview of Caesars” above regarding information of Caesars referred to in this prospectus.

We intend to maintain a strong balance sheet with significant financial flexibility.

On a pro forma basis, we had debt of $         million ($         million, net of deferred financing cost and original issue discount) as of September 30, 2017, and $862.5 million of revenue, $         million of net income and $         million of Adjusted EBITDA for the year ended December 31, 2016. In December 2017, we completed a multi-billion dollar refinancing of certain of our outstanding indebtedness. See “—Recent Developments—VICI PropCo Credit Facility and Debt Refinancing.” As a result, the Revolving Credit Facility is available to us to fund acquisitions and for general corporate purposes, and our $         million aggregate principal amount of our Second Lien Notes after giving effect to this offering become due in 2023, which we believe provides us with financial flexibility to grow our business. Over time, we intend to operate with a prudent financial strategy by growing cash flow through internal, built-in lease escalations and external acquisitions and repaying indebtedness using cash flow from operations.

Experienced management team and independent board of directors with robust corporate governance

We have an experienced management team that has been actively engaged in the leadership, acquisition and investment aspects of the hospitality, gaming, entertainment and real estate industries throughout their careers. Our Chief Executive Officer, Edward Pitoniak, and President and Chief Operating Officer, John Payne, are

 



 

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industry veterans with an average of 30 years of experience in the REIT industry and experiential real estate companies, during which time they were able to drive controlled growth and diversification of significant real estate and gaming portfolios. Mr. Pitoniak’s service as an independent board member of public companies provides him with a unique and meaningful management perspective and will enable him to work as a trusted steward with our independent board of directors as a trusted steward of our extensive portfolio. Our independent board of directors, which is made of highly skilled and seasoned real estate, gaming and corporate professionals, was established to ensure that there was no overlap between our tenants and the companies with which our directors are affiliated. In addition, our board of directors is not staggered, with each of our directors subject to re-election annually. Robust corporate governance in the best interests of our stockholders is of central importance to the management of our company, as we have a separate Chairman of the Board and Chief Executive Officer and all members of our audit and finance committee qualify as an “audit committee financial expert” as defined by the SEC. Directors are elected in uncontested elections by the affirmative vote of a majority of the votes cast, and stockholder approval is required prior to, or in certain circumstances within twelve months following, the adoption by our board of a stockholder rights plan.

Business and Growth Strategies

We intend to establish our company as a leading REIT, creating long term total returns for our stockholders through the payment of consistent cash distributions and the growth of our cash flow and asset base. The strategies we intend to execute to achieve this goal include:

Producing stable income with an internal growth profile.

We derive our revenues from long-term contractual cash flows pursuant to the Lease Agreements, which include annual rent escalators. We expect these escalators to provide the opportunity for stable long-term growth, which will increase the rent we receive under the Lease Agreements from an aggregate of $630.0 million in the first year of the Formation Lease Agreements and $87.4 million in the first year of the HLV Lease Agreement to an aggregate of approximately $669.6 million in the seventh year of the Formation Lease Agreements and $94.6 million in the seventh year of the HLV Lease Agreement. In addition, the Lease Agreements include periodic variable rent resets after year seven and year ten, based on the tenant’s net revenue generated from the facilities at such time, enabling us to benefit from future revenue growth at the properties. See “Business—Our Relationship with Caesars.”

Pursuing opportunities to acquire additional properties from Caesars.

Option Properties. We have an option to acquire three properties from Caesars pursuant to the Call Right Agreements. These agreements allow us to exercise our call rights at any time up to October 6, 2022, and apply to the following properties:

 

    Harrah’s Atlantic City . Harrah’s Atlantic City is an integrated hotel and resort located in the Marina district of Atlantic City, New Jersey. Harrah’s Atlantic City has approximately 155,000 square feet of gaming space, approximately 2,600 hotel rooms and suites, and 12 major food and beverage and nightlife outlets. Additionally, it has approximately 125,000 square feet of meeting and event space that opened in 2015.

 

    Harrah’s New Orleans. Harrah’s New Orleans is an integrated destination hotel and casino located in downtown New Orleans near the French Quarter, Mississippi Riverfront, Superdome and New Orleans convention center. It has approximately 125,000 square feet of gaming space, approximately 450 hotel rooms and suites, and 10 major food and beverage and nightlife outlets. Additionally, it has approximately 15,000 square feet of meeting and event space.

 

 



 

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    Harrah’s Laughlin. Harrah’s Laughlin is an integrated hotel and resort located on the banks of the Colorado River in Laughlin, Nevada. It has approximately 56,000 square feet of gaming space, approximately 1,500 hotel rooms and suites, and 11 major food and beverage and nightlife outlets.

Right of First Refusal. We have a right of first refusal pursuant to which we have the right, subject to certain exclusions, to (i) acquire (and lease to Caesars) any domestic gaming facilities located outside of the Gaming Enterprise District of Clark County, Nevada, proposed to be acquired or developed by Caesars, and (ii) acquire (and lease to Caesars) any of the properties that Caesars has recently agreed to acquire from Centaur Holdings, LLC, should Caesars determine to sell any such properties.

Caesars has agreed to acquire certain properties from Centaur, which include two gaming properties located in Indiana—the Hoosier Park Racing & Casino and Indiana Grand Racing & Casino—that contain approximately 400,000 square feet and have more than 2,000 slot machines and table games, as well as dining outlets and horse racing tracks. Each property also has its own horse racing course.

Potential Future Convention Center and Put-Call Agreement. In connection with our recent acquisition of Harrah’s Las Vegas from Caesars, we sold to Caesars approximately 18.4 acres of undeveloped land located behind the LINQ Hotel & Casino and Harrah’s Las Vegas. We expect that Caesars will use this land, together with certain other land, to construct a convention center of approximately 300,000 square feet adjacent to Harrah’s Las Vegas. Upon closing of our acquisition of Harrah’s Las Vegas, we entered into the Put-Call Agreement with Caesars that includes rights that we or Caesars may exercise at a specified time after the opening of the planned convention center, which, among other things, provides us the opportunity to acquire the convention center and lease it back to Caesars, subject to certain exclusions.

Other Caesars Owned Properties . We may seek to purchase additional Caesars properties, similar to our recent acquisition of Harrah’s Las Vegas. Additional owned properties of Caesars include: Octavius Tower, Las Vegas, NV; Paris Las Vegas, Las Vegas, NV; Bally’s Las Vegas, Las Vegas, NV; The Cromwell, Las Vegas, NV; Flamingo Las Vegas, Las Vegas, NV; The LINQ Hotel & Casino, Las Vegas, NV; Planet Hollywood Resort & Casino, Las Vegas, NV; Rio All Suites Hotel and Casino, Las Vegas, NV; Horseshoe Baltimore, Baltimore, MD; and Harrah’s Philadelphia, Philadelphia, PA. These properties collectively represent approximately 724,000 square feet of gaming space and have over 17,000 hotel rooms.

We will actively seek to further diversify and grow our portfolio through acquisitions of experiential real estate in dynamic markets spanning hospitality, entertainment, leisure and gaming properties.

We will actively seek to acquire additional hospitality, entertainment, leisure, and gaming-related properties from, or in partnership with, third-party owners under attractive triple-net lease and other REIT-permissible structures. We believe we are uniquely positioned to execute on this strategy, currently being one of the largest, independently-owned REITs whose board of directors and management team have direct operational and executive leadership and experience across these core industries.

Focus industries

 

    Our focus is on those gaming, hospitality, entertainment, and leisure-related sectors we believe benefit from long-term demographic, economic, geographic and cultural dynamics and that deliver destination experiences to consumers.

 

    The sale-leaseback market in the gaming space is of considerable size but has historically seen limited appetite to purchase large assets. We believe that the advent of large gaming REITs, like VICI, will drive the additional bifurcation of gaming operations from their real estate and fuel gaming REIT industry growth.

 

 



 

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    We believe the hospitality, entertainment and leisure sectors offer comparable sizable opportunities not harnessed to-date, and that our scale, experience and partnership approach can naturally aid in the facilitation of industry transactions not previously undertaken.

Asset characteristics

 

    Our current real estate portfolio is differentiated by virtue of advantageous geographic market location and real estate qualities such as physical features and amenities, age, and opportunity for future value enhancement. Furthermore, our assets are of mixed-use, with casino, hospitality, retail, dining, live entertainment, convention and other components. As a result, our real estate assets attract and cater to patrons seeking business, recreational and entertainment experiences across both short social gatherings and destination-stay environments. This breadth of usage enhances our tenants’ revenue generation and provides us with unmatched lease income and stability. We will seek to replicate these attractive dynamics in our future acquisitions.

Financial characteristics

 

    Our future acquisitions will be selected based on an adherence to a strict financial discipline consistent with our founding principles, including but not limited to: an established operating history, high income quality, attractive expected financial performance and sustainability of cash flows, and financially attractive purchase price and overall yield.

Lease Structure

 

    We will seek to replicate our current long term, built-in escalator triple-net leases that are in place with our current tenants in our future acquisitions.

Market Overview

 

 

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Las Vegas Overview

Las Vegas is one of the world’s premier entertainment, gaming, tourist, and meeting and convention destinations. With a uniquely dense concentration of approximately 40 casinos, approximately 150,000 hotel rooms, extensive convention and meeting facilities, and world-class retail, dining, and entertainment offerings, Las Vegas has broad appeal to a wide audience and attracted a record 42.9 million visitors from around the world in 2016. Total annual visitation to Las Vegas has doubled over the last 25 years, reflecting the Las Vegas market’s increasing long-term significance as a major destination for U.S. and international visitors.

Limited new supply. Limited availability of desirable land and high ongoing capital expenditure needs limit the ability of potential competitors to build new large-scale casino resorts on the Strip, a vibrant four-mile stretch of Las Vegas Boulevard South. As a result, over the next several years few lodging or gaming real estate developments of significance are expected to open along the Strip despite a rebounding Las Vegas economy.

 

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This limited new supply, coupled with strong and growing visitation levels, has already driven improved performance in Las Vegas, as evidenced by hotel occupancy levels of nearly 90% for the twelve months ending September 30, 2017 and a compound annual growth rate in average daily hotel room rates of 4% since 2010, according to the Las Vegas Convention and Visitors Authority.

Growing mix of revenue sources provides the market with continued diversification. The Strip has historically been dependent on commercial gaming for the majority of its revenues. However, over the last 15 years the Strip’s revenue mix has diversified, as property owners have invested heavily in non-gaming entertainment options and amenities to satisfy changes in consumer demand and increase the durability of revenues. As a result of these investments, the Strip has solidified its position as a premier destination for conventions and meetings as well as leisure travelers who are increasingly drawn to Las Vegas’ unique mix of entertainment offerings. For the year ended December 31, 2016, non-gaming revenues accounted for approximately 65% of all casino resort revenues in Las Vegas, up from just 42% in 1990.

Regional Market Overview

We own regional properties located in ten diverse and distinct markets across 9 states, many of which comprise the major U.S. regional gaming jurisdictions. Total nationwide regional gaming revenues were approximately $64 billion in 2016, equal to annual gaming revenues of approximately $320 per U.S. adult. The industry, and our regional properties, have proven to exhibit particularly attractive characteristics:

 

   

Attractive competitive dynamics . We believe the gaming markets in which our current tenants operate present an attractive and predictable real estate environment. The number of casinos is

 



 

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limited either directly through regulatory statutes (several states such as Indiana and Louisiana have limited the total number of gaming licenses) or through local level factors such as demand dynamics or geographic location constraints. While the inter and intra-state competitive environment is subject to change, we continue to believe that, as a whole, our properties are unlikely to face material incremental competition. We believe that where this may happen, it is likely to be subject to lengthy lead time construction development cycles.

 

    Strategically located in proximity to a large percentage of the U.S. population . Our regional properties collectively have access to 59 million total individuals within their MSAs (18% of the U.S. population), according to the U.S. Census Bureau, and these MSAs generated $4.4 trillion of the United States’ annual gross domestic product, according to the Bureau of Economic Analysis. Our properties are also in close proximity to major U.S. population centers, with 14 of our regional properties within a three hour drive of a major U.S. population center such as Chicago, Dallas, Kansas City, Louisville, Memphis, New Orleans, Southern New York and Philadelphia.

 

    Historically stable gaming revenues . According to the American Gaming Association, UNLV Center for Gaming Research and the NIGC, over the five years ending 2016 total nationwide regional gaming revenues grew by an average of 2.4% per year.

Distribution Policy

We intend to make regular quarterly distributions to holders of shares of our common stock. We expect our quarterly distribution rate to be $0.2625 per share. On an annualized basis, this would be $1.05 per share, or an annual distribution rate of approximately     %, based on an assumed initial public offering price of $         per share, which is the midpoint of the price range set forth on the front cover of this prospectus. The actual distributions paid to shareholders with respect to the period commencing upon the completion of this offering and ending on March 31, 2018 will be pro-rated, calculated from the closing of this offering through March 31, 2018. For the twelve months ending on September 30, 2018, we expect to pay distributions in cash in an amount equal to approximately     % of cash available for distribution for such period. Our ability and determination to pay regular quarterly distributions is subject to various restrictions and other factors described in more detail under “Distribution Policy.”

Recent Developments

Acquisition of Harrah’s Las Vegas and Sale of Eastside Property

Purchase of Harrah’s Las Vegas Real Estate

In December 2017, we acquired all of the land and real property improvements associated with Harrah’s Las Vegas Hotel & Casino from a subsidiary of Caesars, for a purchase price of approximately $1.14 billion.

On the closing date, we entered into the HLV Lease Agreement with a subsidiary of Caesars, as tenant, pursuant to which we lease back Harrah’s Las Vegas to Caesars, and CRC guarantees the tenant’s payment obligations under the HLV Lease Agreement.

Sale of Eastside Property

In December 2017, we sold approximately 18.4 acres of certain parcels located in Las Vegas, Nevada, east of Harrah’s Las Vegas, to a subsidiary of Caesars, for a purchase price of $73.6 million.

 



 

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After the closing, subsidiaries of Caesars are the owners of certain parcels of real property located adjacent to Harrah’s Las Vegas (including the Eastside Property) (collectively, the “Designated Property”), all or a portion of which Designated Property may in the future be improved by a convention center (in such case, the “Eastside Convention Center Property”). At the closing, we entered into the Put-Call Agreement with certain subsidiaries of Caesars, which provides Caesars and us with certain rights and obligations in connection with: (i) the sale by subsidiaries of Caesars to us and simultaneous leaseback by us to subsidiaries of Caesars of the Eastside Convention Center Property; and (ii) in the event the transactions described in item (i) are triggered by Caesars and such transactions do not close for reasons other than a default by Caesars or failure to obtain any required regulatory approvals (among other things), and Caesars so elects, the sale by us to Caesars of Harrah’s Las Vegas, all on and subject to the terms and conditions set forth in the Put-Call Agreement. At the closing, VICI PropCo delivered a Guaranty, in which VICI PropCo guaranteed to certain subsidiaries of Caesars the payment in full of any Seller Liquidated Damages Amount (as defined in the Purchase Agreement) and the payment of losses resulting from our breach of certain warranties under the Sale Agreement.

Amended and Restated Right of First Refusal Agreement

On the closing date, the Operating Partnership and Caesars entered into an Amended and Restated Right of First Refusal Agreement pursuant to which we also have a right of first refusal on any sale-leaseback by Caesars of the gaming facilities of Centaur Holdings, LLC, which are proposed to be acquired by Caesars, and certain income-producing improvements if built by Caesars in lieu of a large-scale convention center on the Eastside Property, subject to certain exclusions.

$2.6 Billion Senior Secured VICI PropCo Credit Facility and Debt Refinancing

On December 22, 2017, VICI PropCo entered into a new $2.6 billion senior secured VICI PropCo Credit Facility, comprised of a $2.2 billion Term Loan B Facility and a $400 million Revolving Credit Facility, and refinanced all of the outstanding indebtedness under the Prior Term Loans and purchased all of the then outstanding Prior CPLV Mezzanine Debt. The proceeds of the Term Loan B Facility, together with $300 million of borrowings under the Revolving Credit Facility, provided a portion of the proceeds used to purchase the Harrah’s Las Vegas property, to repay in full the Prior Term Loans, to repurchase in full the then outstanding Prior CPLV Mezzanine Debt and to discharge in full its obligations under the Prior First Lien Notes.

Unsolicited Proposal

On January 5, 2018 we received an unsolicited non-binding, written proposal from MGM Growth Properties LLC (NYSE:MGP) (“MGP”) for MGP to acquire all of the outstanding shares of common stock of the Company for $19.50 per share in the form of MGP shares.

Private Equity Placement

In December 2017, we sold, contemporaneously with the consummation of the previously disclosed acquisition of the Harrah’s Las Vegas property, 54,054,053 shares of our common stock at a price of $18.50 per share in a private placement transaction, for net proceeds of approximately $963.9 million. The net proceeds from the transaction were used to partially fund the purchase price for the Harrah’s Las Vegas property and for working capital and general corporate purposes. At closing, we entered into a registration rights agreement with the investors, which provides, among other things, for us to file a shelf registration statement for the benefit of the investors party to the agreement within 75 days following the closing. See “Certain Relationships and Related Party Transactions—Registration Rights Agreements.”

UPREIT—Operating Partnership Structure

We operate through an UPREIT structure. We own all the common units of our Operating Partnership. Our wholly-owned subsidiary, VICI Properties GP LLC, is the sole general partner of our Operating Partnership. As

 



 

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the sole general partner of our Operating Partnership, we have the exclusive power under the limited partnership agreement to manage and conduct our business and affairs. Substantially all of our assets are held by, and substantially all of our operations are conducted through, our Operating Partnership and its subsidiaries. The only portion of our assets and operations not held by, or conducted through, our Operating Partnership are our golf course operations, consisting of four golf courses, which are held by our wholly-owned subsidiary, VICI Golf, a TRS. In the future, our Operating Partnership may form other subsidiaries, which would be sister companies of VICI PropCo, to hold other assets and such subsidiaries may arrange for independent financing.

While limited partners of the Operating Partnership will not have a direct or indirect ownership interest in the VICI Golf, limited partners holding common units in the Operating Partnership will be entitled to receive additional distributions from the Operating Partnership on a pro rata basis and in preference to VICI equal to an amount that is proportional to the distributions paid by VICI to its stockholders from distributions that VICI has received from VICI Golf. As a result, limited partners of the Operating Partnership would receive the same distribution per common unit as the distribution per share of common stock of VICI. Using this structure may give us an advantage in acquiring real estate properties from persons who may not otherwise be willing to sell their properties to us because of unfavorable tax consequences. Generally, a sale or contribution of property directly to a REIT is a taxable transaction to the selling property owner. Given our Operating Partnership structure, a property owner who desires to defer taxable gain on the transfer of the owner’s property may contribute the property to our Operating Partnership in exchange for common and/or preferred units in our Operating Partnership which may, subject to the terms of the operating partnership agreement, be exchanged, at the option of the Operating Partnership, for cash or shares of our common stock or preferred stock, as applicable on a one-for-one basis on or after the date that is the later of (x) the twelve-month anniversary of a limited partner first becoming a holder of common units of the Operating Partnership, and (y) October 6, 2018.

The following diagram depicts our ownership structure as of the date of this prospectus on a pro forma basis.

 

LOGO

 



 

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Restrictions on Ownership and Transfer of our Common Stock

Subject to certain exceptions, our charter provides that no person may own, or be deemed to own by virtue of applicable attribution provisions of the Code, with respect to any class or series of our capital stock, more than 9.8% (in value or by number of shares, whichever is more restrictive) of the aggregate of the outstanding shares of such class or series of our capital stock, which we refer to as the “ownership limit,” and imposes certain other restrictions on ownership and transfer of our stock. An exemption from the 9.8% ownership limit was granted to certain stockholders, and our board may in the future provide exceptions to the ownership limit for other stockholders, subject to certain initial and ongoing conditions designed to protect our status as a REIT. Any attempted transfer of our stock that, if effective, would result in a violation of the above limitations or the ownership limit (except for a transfer which results in shares being owned by fewer than 100 persons, in which case such transfer will be void ab initio and the intended transferee shall acquire no rights in such shares) will cause the number of shares causing the violation, rounded up to the nearest whole share, to be automatically transferred to a trustee, appointed by us, as trustee of a trust for the exclusive benefit of one or more charitable beneficiaries designated by the trustee, and the intended transferee will not acquire any rights in the shares. These restrictions are intended to protect our REIT status.

In addition to the restrictions set forth above, our outstanding shares of capital stock are held subject to applicable gaming laws. Any person owning or controlling at least 5% of the outstanding shares of any class of our capital stock is required to promptly notify us of such person’s identity. Our charter provides that any shares of our capital stock that are owned or controlled by an unsuitable person (as defined in the charter) or an affiliate of an unsuitable person are redeemable by us, out of funds legally available for that redemption, to the extent required by the gaming authorities making the determination of unsuitability or to the extent determined to be necessary or advisable by our board of directors.

The aforementioned ownership limits, restrictions and notice requirements may have the effect of delaying, deferring or preventing a change in control of us, including an extraordinary transaction (such as a merger, tender offer or sale of all or substantially all of our assets), that might provide a premium price for our stockholders or otherwise be in their best interest. See “Description of Capital Stock—Restrictions on Ownership and Transfer” and “—Redemption of Securities Owned or Controlled by an Unsuitable Person or Affiliate.”

Our Tax Status

We intend to elect and qualify to be taxed as a REIT for U.S. Federal income tax purposes commencing with our taxable year ending December 31, 2017, and expect to continue to operate in a manner that will allow us to continue to be classified as such. Our qualification as a REIT depends upon our ability to meet, on a continuing basis, through actual investment and operating results, various complex requirements under the Code, relating to, among other things, the sources of our gross income, the composition and value of our assets, our distribution levels and the diversity of ownership of our shares. Further, in order to qualify as a REIT, we must distribute any “earnings and profits,” as defined in the Code, that are allocated from CEOC to us in connection with the spin-off transaction by the end of the first taxable year in which we elect REIT status (the “purging distribution”). Based on analysis of CEOC’s earnings and profits, we currently do not believe any earnings and profits were allocated to us in connection with the spin-off and therefore do not currently expect to be required to make a purging distribution. We believe that, at the time of such election, we will be organized in conformity with the requirements for qualification and taxation as a REIT under the Code and that our intended manner of operation will enable us to meet the requirements for qualification and taxation as a REIT.

The Internal Revenue Service issued a private letter ruling with respect to certain issues relevant to our separation from CEOC and our qualification as a REIT. Although we may generally rely upon the ruling, subject to the completeness and accuracy of the representations made to the IRS, no assurance can be given that the IRS will not challenge our qualification as a REIT on the basis of other issues or facts outside the scope of the ruling.



 

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So long as we qualify to be taxed as a REIT, we generally will not be subject to U.S. Federal income tax on our REIT taxable income that we distribute currently to our stockholders. If we fail to qualify to be taxed as a REIT in any taxable year and do not qualify for certain statutory relief provisions, we would be subject to U.S. Federal income tax at regular corporate rates and would be precluded from re-electing to be taxed as a REIT for the subsequent four taxable years following the year during which we lost our REIT qualification. Even if we qualify to be taxed as a REIT, we may be subject to certain U.S. Federal, state and local taxes on our income or property, and the income of VICI Golf and any other TRS of ours will be subject to taxation at regular corporate rates. See “Material U.S. Federal Income Tax Considerations.”

Corporate Information

We were initially organized as a limited liability company in the State of Delaware on July 5, 2016 as a wholly owned subsidiary of CEOC. On May 5, 2017, we subsequently converted to a corporation under the laws of the State of Maryland and issued shares of common stock to CEOC as part of our Formation Transactions, which shares were subsequently transferred by CEOC to its creditors as part of the Plan of Reorganization. See “Formation of Our Company.” Our principal executive offices are located at 8329 W. Sunset Road, Suite 210, Las Vegas, NV 89113 and our main telephone number at that location is (702) 820-3800. Our website address is www.viciproperties.com. None of the information on, or accessible through, our website or any other website identified herein is incorporated in or constitutes a part of, this prospectus, and the inclusion of our website address in this prospectus is an inactive textual reference only.

Summary Risk Factors

An investment in our common stock involves a high degree of risk. Any of the factors set forth under “Risk Factors” may limit our ability to successfully execute our business and growth strategies. You should carefully consider all of the information set forth in this prospectus and, in particular, should evaluate the specific factors set forth under “Risk Factors” in deciding whether to invest in our common stock. Among these important risks are the following:

 

    our dependence on subsidiaries of Caesars as tenant of all of our properties and Caesars or CRC as guarantor of the lease payments and the consequences any material adverse effect on their business could have on us;

 

    our dependence on the gaming industry;

 

    our ability to pursue our business and growth strategies may be limited by our substantial debt service requirements and by the requirement that we distribute 90% of our REIT taxable income in order to qualify for taxation as a REIT and that we distribute 100% of our REIT taxable income in order to avoid current entity level U.S. Federal income taxes;

 

    the impact of extensive regulation from gaming and other regulatory authorities;

 

    the ability of our tenants to obtain and maintain regulatory approvals in connection with the operation of our properties;

 

    the possibility that the tenants may choose not to renew the Lease Agreements following the initial or subsequent terms of the leases;

 

    restrictions on our ability to sell our properties subject to the Lease Agreements;

 

    Caesars’ historical results may not be a reliable indicator of its future results;

 

    our substantial amount of indebtedness and ability to service and refinance such indebtedness;

 

    our historical and pro forma financial information may not be reliable indicators of our future results of operations and financial condition;

 



 

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    our inability to operate as a stand-alone company;

 

    our inability to achieve the expected benefits from operating as a company independent of Caesars;

 

    the possibility our separation from CEOC fails to qualify as a tax-free spin-off, which could subject us to significant tax liabilities;

 

    our inability to qualify or maintain our qualification for taxation as a REIT;

 

    the impact of changes to the U.S. Federal income tax laws; and

 

    our reliance on distributions received from our Operating Partnership to make distributions to our stockholders due to our being a holding company.


 

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This Offering

 

Common stock offered by us

                    shares

 

Overallotment option

                    shares

 

Common stock to be outstanding upon completion of this offering

                    shares

 

Use of proceeds

We will contribute the net proceeds from this offering to the Operating Partnership, which we estimate will be $             (or $            if the underwriters’ overallotment option is exercised in full) based on the assumed initial public offering price of $            per share, which is the midpoint of the price range set forth on the front cover of this prospectus. Our Operating Partnership will use the net proceeds to: (a) pay down $             million of the indebtedness outstanding under the Revolving Credit Facility; (b) redeem $             million in aggregate principal amount of the Second Lien Notes at a redemption price of 108% plus accrued and unpaid interest to the date of redemption; (c) repay $             million of the Term Loan B Facility; and (d) pay fees and expenses related to this offering; the remainder, if any, of the net proceeds will be used for general business purposes. Any proceeds received in connection with the exercise by the underwriters of their overallotment option will be used by the Operating Partnership for general business purposes. See “Use of Proceeds.”

 

Directed share program

At our request, the underwriters have reserved up to five percent of the shares of our common stock offered by this prospectus for sale, at the initial public offering price, to certain of our directors, officers, employees, business associates and related persons. If purchased by these persons, these shares will be subject to a 180-day lock-up restriction described in the “Underwriting” section of this prospectus. The number of shares of our common stock available for sale to the general public will be reduced to the extent these individuals purchase such reserved shares. Any reserved shares that are not so purchased will be offered by the underwriters to the general public on the same basis as the other shares offered by this prospectus.

 

Listing

In connection with this offering, we have applied to list our common stock on the NYSE under the ticker symbol “VICI.”

 

Ownership and transfer restrictions

To assist us in qualifying to be taxed as a REIT, among other purposes, our charter contains certain restrictions relating to the ownership and transfer of our shares and a provision generally restricting stockholders from owning more than 9.8% in value or in number, whichever is more restrictive, of any class or series of our shares, including if repurchases by us cause a person’s holdings to exceed such limitations. An exemption from the 9.8% ownership limit was granted to certain stockholders, and our board may in the future

 



 

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provide exceptions to the ownership limit for other stockholders, subject to certain initial and ongoing conditions designed to protect our status as a REIT. In addition to the restrictions set forth above, our outstanding shares of capital stock are held subject to applicable gaming laws. Any person owning or controlling at least 5% of the outstanding shares of any class of our capital stock is required to promptly notify us of such person’s identity. See “Description of Capital Stock—Restrictions on Ownership and Transfer” and “—Redemption of Securities Owned or Controlled by an Unsuitable Person or Affiliate.”

 

Risk factors

Investing in our common stock involves a high degree of risk. You should carefully read and consider the information set forth under “Risk Factors” beginning on page 23 and all other information in this prospectus before making a decision to invest in our common stock.

 

Material U.S. Federal income tax consequences

For a discussion of other material U.S. Federal income tax consequences that may be relevant to prospective stockholders, please read “Material U.S. Federal Income Tax Considerations.”

Unless otherwise indicated, the information contained in this prospectus is based on an initial public offering price of $             per share, which is the midpoint of the price range set forth on the front cover of this prospectus, assumes that the underwriters’ overallotment option is not exercised, and excludes 12,750,000 shares that are reserved for future issuance under our equity incentive plan.



 

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Summary Pro Forma Financial Data

The following unaudited summary pro forma combined condensed balance sheet data of VICI REIT as of September 30, 2017, gives effect to the pro forma adjustments described in “Selected Historical and Pro Forma Financial Data—Unaudited Pro Forma Combined Condensed Financial Information,” as if they had occurred on September 30, 2017, and the following unaudited summary pro forma combined condensed statements of operations for the nine months ended September 30, 2017, and for the year ended December 31, 2016, give effect to above transactions, as if they had occurred on January 1, 2016.

The following summary financial data does not reflect the financial condition or results of operations of VICI REIT for the periods indicated. The assumptions used and pro forma adjustments derived from such assumptions are based on currently available information, and in many cases are based on estimates and preliminary information. We believe such assumptions are reasonable under the circumstances and reflect the best currently available estimates and judgments. However, the pro forma financial information may not be indicative of our future performance and does not necessarily reflect what our financial condition and results of operations would have been had the transactions to which the pro forma adjustments relate actually occurred at the beginning of the period presented.

The following table should be read in conjunction with “Selected Historical and Pro Forma Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the historical combined condensed financial statements of Caesars Entertainment Outdoor, our predecessor, our balance sheet, the combined statements of investments of real estate assets to be contributed to us and our pro forma combined condensed financial statements, and in each case, the related notes thereto, included elsewhere in this prospectus.

 

     Nine Months Ended
September 30, 2017
    Year Ended
December 31, 2016
 
     (in thousands, except per share data)  

Income statement data:

    

Net revenues

   $ 648,879     $ 862,508  

Total operating expenses

     (67,443     (89,926
  

 

 

   

 

 

 

Operating income

     581,436       772,582  

Interest expense, net

    
  

 

 

   

 

 

 

Income before income taxes

    

Provision for income taxes

     (907     (1,523
  

 

 

   

 

 

 

Net income

   $     $  
  

 

 

   

 

 

 

Weighted average number of shares of common stock and potentially dilutive securities

    

Basic and diluted

    

Basic and diluted earnings per common share

   $     $  

Other operating data:

    

FFO (1)

   $     $  

AFFO (1)

    

Adjusted EBITDA (1)

    

Balance sheet data (as of period end):

    

Cash and cash equivalents

   $    

Total assets

    

Long-term debt

    

Stockholders’ equity

    


 

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(1) FFO, AFFO and Adjusted EBITDA are not required by, or presented in accordance with, GAAP. These are non-GAAP financial measures and should not be construed as alternatives to net income or as an indicator of operating performance (as determined in accordance with GAAP). We believe FFO, AFFO and Adjusted EBITDA provide a meaningful perspective of the underlying operating performance of our business.

 

   FFO is a non-GAAP financial measure that is considered a supplemental measure for the real estate industry and a supplement to GAAP measures. Consistent with the definition used by NAREIT, we define FFO as net income (or loss) (computed in accordance with GAAP) excluding gains (or losses) from sales of property plus real estate depreciation. We define AFFO as FFO adjusted for direct financing lease adjustments and other depreciation (which is comprised of the depreciation related to our golf course operations). We define Adjusted EBITDA as net income as adjusted for gains (or losses) from sales of property, real estate depreciation, direct financing lease adjustments, other depreciation (which is comprised of the depreciation related to our golf course operations), provision for income taxes and interest expense, net.

 

   Because not all companies calculate FFO, AFFO and Adjusted EBITDA in the same way as we do and other companies may not perform such calculations, those measures as used by other companies may not be consistent with the way we calculate such measures and should not be considered as alternative measures of operating income or net income. Our presentation of these measures does not replace the presentation of our financial results in accordance with GAAP.

 

   The following table reconciles pro forma net income to FFO, AFFO and Adjusted EBITDA, in each case on a pro forma basis, for the periods presented:

 

     Nine Months
Ended
September 30, 2017
    Year Ended
December 31, 2016
 
     (in thousands)  

Net income

   $     $  

Real estate depreciation

     —         —    
  

 

 

   

 

 

 

FFO

    
  

 

 

   

 

 

 

Direct financing lease adjustments

     (43,100     (56,919

Amortization of debt issuance costs and original issue discount

    

Other depreciation

     1,854       2,473  
  

 

 

   

 

 

 

AFFO

    
  

 

 

   

 

 

 

Interest expense, net

    

Provision for income taxes

     907       1,523  
  

 

 

   

 

 

 

Adjusted EBITDA

   $     $  
  

 

 

   

 

 

 

 

  (a) Represents the non-cash adjustment to recognize fixed amounts due under the Lease Agreements on an effective interest basis at a constant rate of return over the terms of the leases.
  (b) Represents depreciation related to our golf course operations.


 

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RISK FACTORS

An investment in our common stock involves a high degree of risk and uncertainty. You should carefully consider the following risks, as well as the other information contained in this prospectus, before making an investment in our common stock. If any of the following risks actually occur, our business, results of operations, financial condition, cash flows and prospects, the market price of our common stock and our ability to make distributions to our stockholders and to satisfy any debt service obligations may be materially and adversely affected. This could cause the value of our common stock to decline and you could lose part or all of your investment. The risks and uncertainties described below are not the only ones we face, but do represent those risks and uncertainties that we believe are material to us. Additional risks and uncertainties not presently known to us or that as of the date of this prospectus we deem immaterial may also have a material adverse effect on us. Some statements included in this prospectus, including statements in the following risk factors, constitute forward-looking statements. Please refer to the section entitled “Cautionary Note Regarding Forward-Looking Statements.”

Risks Related to Our Business and Operations

We are dependent on Caesars for the foreseeable future, and an event that has a material adverse effect on Caesars’ business, financial condition, liquidity, results of operations or prospects would have a material adverse effect on our business, financial condition, liquidity, results of operations and prospects.

Subsidiaries of Caesars are the lessees of all of our properties pursuant to the Lease Agreements and Caesars or CRC guarantees the obligations of the applicable tenants under the Lease Agreements. The Lease Agreements account for a significant majority of all of our revenues. Additionally, because the Lease Agreements are triple-net leases, we depend on the tenants to pay all insurance, taxes, utilities, and maintenance and repair expenses in connection with these leased properties and to indemnify, defend, and hold us harmless from and against various claims, litigation, and liabilities arising in connection with our businesses. See “Business.” There can be no assurance that the tenants will have sufficient assets, income, and access to financing to enable them to satisfy their payment obligations on account of the Lease Agreements, or that Caesars or its CRC will be able to satisfy its guarantee of the applicable tenant’s obligations under the Lease Agreements. The tenants and the applicable guarantor rely on the properties they or their subsidiaries own and/or operate for income to satisfy their obligations, including their debt service requirements and lease payments due to us under the Lease Agreements and the guarantees. If income from these properties were to decline for any reason, if any tenant’s or the applicable guarantor or their subsidiaries’ debt service requirements were to increase (whether due to an increase in interest rates or otherwise), or if Caesars’ subsidiaries were prevented from making distributions to Caesars or CRC (whether due to restrictions in their financing arrangements or otherwise), a tenant may become unable or unwilling to satisfy its payment obligations under the Lease Agreements and the applicable guarantor may become unable or unwilling to make payments under its guarantee of the Lease Agreements.

The inability or unwillingness of a tenant or the applicable guarantor to meet their rent and other obligations to us under the Lease Agreements and the related guarantee would materially and adversely affect our business, financial condition, liquidity, results of operations and prospects, including our ability to make distributions to our stockholders as required to maintain our status as a REIT. For these reasons, if any tenant and/or the applicable guarantor were to experience a material adverse effect on its business, financial condition, liquidity, results of operations or prospects, we would also be materially and adversely affected.

In addition, due to our dependence on rental payments from Caesars as a primary source of revenues, we may be limited in our ability to enforce our rights under the Lease Agreements or to terminate the applicable lease with respect to a particular property. Failure by the tenants to comply with the terms of the Lease Agreements or to comply with the gaming regulations to which the leased properties are subject could require us to find another lessee for such leased property, to the extent possible, and there could be a decrease or cessation of rental payments by the tenants. In such event, we may be unable to locate a suitable, credit-worthy lessee at similar rental rates or at all, which could have a material and adverse effect on us.

 

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Because several of our major gaming casinos are concentrated on the Strip, we are subject to greater risks than a company that is more geographically diversified.

On a pro forma basis, our two properties on the Strip generated approximately 36% of our revenue for the nine months ended September 30, 2017. Therefore, our business may be significantly affected by risks common to the Las Vegas tourism industry. For example, the cost and availability of air services and the impact of any events that disrupt air travel to and from Las Vegas can adversely affect the business of our tenants. We cannot control the number or frequency of flights to or from Las Vegas, but the tenants rely on air traffic for a significant portion of their visitors. Reductions in flights by major airlines as a result of higher fuel prices or lower demand can impact the number of visitors to our properties. Additionally, there is one principal interstate highway between Las Vegas and Southern California, where a large number of the customers that frequent our properties reside. Capacity constraints of that highway or any other traffic disruptions may also affect the number of customers who visit our facilities. Moreover, due to the importance of our two properties on the Strip, we may be disproportionately affected by general risks such as acts of terrorism, natural disasters, including major fires, floods and earthquakes, and severe or inclement weather, should such developments occur in or nearby Las Vegas.

Caesars and its subsidiaries are party to certain leasing and financial commitments with us, which may have a negative impact on Caesars’ business and operating condition.

Caesars and/or its subsidiaries entered into certain leasing and financial commitments, evidenced by agreements, with us. See “Business—Our Relationship with Caesars” for additional information regarding such agreements.

As disclosed in Caesars’ quarterly report on Form 10-Q for the nine months ended September 30, 2017, (i) CEOC is obligated to pay us in the aggregate approximately $640 million in fixed annual rents for the first seven lease years, subject to certain escalators and adjustments, (ii) Caesars issued approximately $1.1 billion of Convertible Notes at 5.00% per annum that will mature in 2024, and CEOC entered a new credit agreement providing for funded debt obligations of approximately $1.2 billion, and (iii) Caesars and its subsidiaries expect to have aggregate annual cash outflows of approximately $1.3 billion in 2018 (including its rental payment obligation to us and expected debt service costs). If Caesars’ businesses and properties fail to generate sufficient earnings, the applicable tenants, Caesars and/or CRC may be unable to satisfy their respective obligations under the Lease Agreements or the related guarantees, respectively. Additionally, these obligations may limit their ability to make investments to maintain and grow their portfolio of businesses and properties, which may adversely affect their competitiveness and ability to satisfy their obligations to us. See “—We are dependent on Caesars for the foreseeable future, and an event that has a material adverse effect on Caesars’ business, financial condition, liquidity results of operations or prospects would have a material adverse effect on our business, financial condition, liquidity, results of operations and prospects” above.

Subsidiaries of Caesars are required to pay a significant portion of their cash flow from operations to us pursuant to, and subject to the terms and conditions of, the Lease Agreements, which could adversely affect Caesars’ ability to fund their operations or development projects, raise capital, make acquisitions, and otherwise respond to competitive and economic changes and its ability to satisfy its payment obligations to us under the Lease Agreements and the related guarantees.

Subsidiaries of Caesars are required to pay a significant portion of their cash flow from operations to us pursuant to, and subject to the terms and conditions of, the Lease Agreements. See “Business—Our Relationship with Caesars.” As a result of this commitment, Caesars’ ability to fund its operations or development projects, raise capital, make acquisitions and otherwise respond to competitive and economic changes may be adversely affected, which could adversely affect the ability of the applicable tenants to satisfy their obligations to us under the Lease Agreements and the ability of Caesars and/or CRC to satisfy their respective obligations to us under the related guarantees.

 

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In addition, the annual rent escalations under the Lease Agreements will continue to apply regardless of the amount of cash flows generated by the properties that are subject to the Lease Agreements. Accordingly, if the cash flows generated by such properties decrease, or do not increase at the same rate as the rent escalations, the rents payable under the Lease Agreements will comprise a higher percentage of the cash flows generated by the subsidiaries of Caesars, which could make it more difficult for the applicable subsidiaries to make their payment obligations to us under the Lease Agreements and ultimately could adversely affect Caesars’ and/or CRC’s ability to satisfy their respective obligations to us under the related guarantees.

Caesars’ substantial indebtedness and the fact that a significant portion of its cash flow is used to make interest payments could adversely affect its ability to satisfy its obligations under the Lease Agreements.

As disclosed in its quarterly report on Form 10-Q for the nine months ended September 30, 2017, Caesars’ consolidated estimated debt service (including principal and interest) for the remainder of 2017 was $189 million and $8.1 billion thereafter to maturity. On October 16, 2017, two wholly-owned subsidiaries of Caesars issued $1.7 billion aggregate principal amount of 5.25% senior notes due 2025; on or about December 22, 2017, the proceeds of the senior notes were released from escrow, and CRC assumed the obligations of one of the original issuer entities pursuant to a supplement to the original indenture governing the senior notes. On December 22, 2017, CRC entered into new $5.7 billion senior secured credit facilities, comprised of a $1 billion revolving credit facility maturing in 2022 and a $4.7 billion first lien term loan facility maturing in 2024, which amortizes at 0.25% per quarter. As a result, a significant portion of Caesars’ liquidity needs are for debt service, including significant interest payments. Such substantial indebtedness and the restrictive covenants under the agreements governing such indebtedness could limit the ability of the applicable tenants to satisfy their obligations to us under the Lease Agreements and the ability of Caesars’ and/or CRC to satisfy their respective obligations under the related guarantees.

We are dependent on the gaming industry and may be susceptible to the risks associated with it, which could materially and adversely affect our business, financial condition, liquidity, results of operations and prospects.

As the landlord of gaming facilities, we are impacted by the risks associated with the gaming industry. Therefore, so long as our investments are concentrated in gaming-related assets, our success is dependent on the gaming industry, which could be adversely affected by economic conditions in general, changes in consumer trends and preferences and other factors over which we and our tenants have no control. As we are subject to risks inherent in substantial investments in a single industry, a decrease in the gaming business would likely have a greater adverse effect on us than if we owned a more diversified real estate portfolio, particularly because a component of the rent under the Lease Agreements will be based, over time, on the performance of the gaming facilities operated by Caesars on our properties and such effect could be material and adverse to our business, financial condition, liquidity, results of operations and prospects.

The gaming industry is characterized by a high degree of competition among a large number of participants, including riverboat casinos, dockside casinos, land-based casinos, video lottery, sweepstakes and poker machines not located in casinos, Native American gaming, internet lotteries and other internet wagering gaming services and, in a broader sense, gaming operators face competition from all manner of leisure and entertainment activities. Gaming competition is intense in most of the markets where our facilities are located. Recently, there has been additional significant competition in the gaming industry as a result of the upgrading or expansion of facilities by existing market participants, the entrance of new gaming participants into a market or legislative changes. As competing properties and new markets are opened, we may be negatively impacted. Additionally, decreases in discretionary consumer spending brought about by weakened general economic conditions such as, but not limited to, lackluster recoveries from recessions, high unemployment levels, higher income taxes, low levels of consumer confidence, weakness in the housing market, cultural and demographic changes and increased stock market volatility may negatively impact our revenues and operating cash flows.

 

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We face extensive regulation from gaming and other regulatory authorities, and our charter provides that any of our shares held by investors who are found to be unsuitable by state gaming regulatory authorities are subject to redemption.

The ownership, operation, and management of gaming and racing facilities are subject to pervasive regulation. These gaming and racing regulations impact our gaming and racing tenants and persons associated with our gaming and racing facilities, which in many jurisdictions include us as the landlord and owner of the real estate. Certain gaming authorities in the jurisdictions in which we hold properties may require us and/or our affiliates to maintain a license as a key business entity or supplier because of our status as landlord. Gaming authorities also retain great discretion to require us to be found suitable as a landlord, and certain of our stockholders, officers and directors may be required to be found suitable as well.

In many jurisdictions, gaming laws can require certain of our stockholders to file an application, be investigated, and qualify or have his, her or its suitability determined by gaming authorities. Gaming authorities have very broad discretion in determining whether an applicant should be deemed suitable. Subject to certain administrative proceeding requirements, the gaming regulators have the authority to deny any application or limit, condition, restrict, revoke or suspend any license, registration, finding of suitability or approval, or fine any person licensed, registered or found suitable or approved, for any cause deemed reasonable by the gaming authorities.

Gaming authorities may conduct investigations into the conduct or associations of our directors, officers, key employees or investors to ensure compliance with applicable standards. If we are required to be found suitable and are found suitable as a landlord, we will be registered as a public company with the gaming authorities and will be subject to disciplinary action if, after we receive notice that a person is unsuitable to be a stockholder or to have any other relationship with us, we:

 

    pay that person any distribution or interest upon any of our voting securities;

 

    allow that person to exercise, directly or indirectly, any voting right conferred through securities held by that person;

 

    pay remuneration in any form to that person for services rendered or otherwise; or

 

    fail to pursue all lawful efforts to require such unsuitable person to relinquish his or her voting securities, including, if necessary, the immediate purchase of the voting securities for cash at fair market value.

Many jurisdictions also require any person who acquires beneficial ownership of more than a certain percentage of voting securities of a gaming company and, in some jurisdictions, non-voting securities, typically 5% of a publicly-traded company, to report the acquisition to gaming authorities, and gaming authorities may require such holders to apply for qualification, licensure or a finding of suitability, subject to limited exceptions for “institutional investors” that hold a company’s voting securities for passive investment purposes only. Our outstanding shares of capital stock are held subject to applicable gaming laws. Any person owning or controlling at least 5% of the outstanding shares of any class of our capital stock is required to promptly notify us of such person’s identity. See “Description of Capital Stock—Restrictions on Ownership and Transfer” and “—Redemption of Securities Owned or Controlled by an Unsuitable Person or Affiliate.” Some jurisdictions may also limit the number of gaming licenses in which a person may hold an ownership or a controlling interest.

Further, our directors, officers, key employees and investors in our shares must meet approval standards of certain gaming regulatory authorities. If such gaming regulatory authorities were to find such a person or investor unsuitable, we may be required to sever our relationship with that person or the investor may be required to dispose of his, her or its interest in us. Our charter provides that all of our shares held by investors who are found to be unsuitable by regulatory authorities are subject to redemption upon our receipt of notice of such finding.

Additionally, the loss of our gaming licenses could result in an event of default under our certain of our indebtedness, and cross-default provisions in our debt agreements could cause an event of default under one debt

 

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agreement to trigger an event of default under our other debt agreements. See “—Covenants in our debt agreements limit our operational flexibility, and a covenant breach or default could materially and adversely affect our business, financial condition, liquidity, results of operations and prospects.”

Finally, substantially all material loans, significant acquisitions, leases, sales of securities and similar financing transactions by us and our subsidiaries must be reported to, and in some cases approved by, gaming authorities in advance of the transaction. Neither we nor any of our subsidiaries may make a public offering of securities without the prior approval of certain gaming authorities. Changes in control through merger, consolidation, stock or asset acquisitions, management or consulting agreements, or otherwise may be subject to receipt of prior approval of certain gaming authorities. Entities seeking to acquire control of us or one of our subsidiaries (and certain of our affiliates) must satisfy gaming authorities with respect to a variety of stringent standards prior to assuming control. Failure to satisfy the stringent licensing standards may preclude entities from acquiring control of us or one of our subsidiaries (and certain of our affiliates) and/or require the entities to divest such control.

Required regulatory approvals can delay or prohibit transfers of our gaming properties, which could result in periods in which we are unable to receive rent for such properties and have a material adverse effect on our business, financial condition, liquidity, results of operations and prospects.

Our tenants are (and any future tenants of our gaming properties will be) required to be licensed under applicable law in order to operate any of our properties as gaming facilities. If the Lease Agreements, or any future lease agreements we will enter into, are terminated (which could be required by a regulatory agency) or expire, any new tenant must be licensed and receive other regulatory approvals to operate our properties as gaming facilities. Any delay in, or inability of, the new tenant to receive required licenses and other regulatory approvals from the applicable state and county government agencies may prolong the period during which we are unable to collect the applicable rent. Further, in the event that the Lease Agreements or future lease agreements are terminated or expire and a new tenant is not licensed or fails to receive other regulatory approvals, the properties may not be operated as gaming facilities and we will not be able to collect the applicable rent. Moreover, we may be unable to transfer or sell the affected properties as gaming facilities, which could materially and adversely affect our business, financial condition, liquidity, results of operations and prospects.

Tenants may choose not to renew the Lease Agreements.

The Lease Agreements each have an initial lease term of 15 years with the potential to extend the term for up to four additional five-year terms thereafter, provided that for certain facilities the aggregate lease term, including renewals, is cutback to the extent it would otherwise exceed 80% of the remaining useful life of the applicable leased property, solely at the option of the tenants. At the expiration of the initial lease term or of any additional renewal term thereafter, a tenant may choose not to renew the Lease Agreements. If the Lease Agreements expire without renewal and we are not able to find suitable, credit-worthy tenants to replace a tenant on the same or more attractive terms, our business, financial condition, liquidity, results of operations and prospects may be materially and adversely affected, including our ability to make distributions to our stockholders at the then current level, or at all. This risk would be exacerbated if Caesars determined not to renew, or was prohibited from renewing due to the remaining useful life of the leased property, all Lease Agreements at any one time.

Net leases may not result in fair market lease rates over time, which could negatively impact our results of operations and cash flows and reduce the amount of funds available to make distributions to stockholders.

All of our rental revenue is generated from the Lease Agreements, which are triple-net leases, and provide greater flexibility to the respective tenants related to the use of the applicable leased property than would be the case with ordinary property leases, such as the right to freely sublease portions of each leased property, to make

 

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alterations in the leased premises and to terminate the lease prior to its expiration under specified circumstances. Furthermore, net leases typically have longer lease terms and, thus, there is an increased risk that contractual rental increases in future years will fail to result in fair market rental rates during those years. As a result, our results of operations and cash flows and distributions to our stockholders could be lower than they would otherwise be if we did not enter into a net lease.

The Lease Agreements may restrict our ability to sell the properties.

Our ability to sell or dispose of our properties may be hindered by the fact that such properties are subject to the Lease Agreements, as the terms of the Lease Agreements require that a purchaser assume the Lease Agreements or enter into a severance lease with the tenants for the sold property on substantially the same terms as contained in the applicable Lease Agreement, which may make our properties less attractive to a potential buyer than alternative properties that may be for sale.

Properties within our portfolio are, and properties that we may acquire in the future are likely to be, operated and promoted under certain trademarks and brand names that we do not own.

Most of the properties within our portfolio are currently operated and promoted under trademarks and brand names not owned by us, including Caesars Palace, Horseshoe, Harrah’s and Bally’s. In addition, properties that we may acquire in the future may be operated and promoted under these same trademarks and brand names, or under different trademarks and brand names we do not, or will not, own. During the term that our properties are managed by Caesars, we will be reliant on Caesars to maintain and protect the trademarks, brand names and other licensed intellectual property used in the operation or promotion of the leased properties. Operation of the leased properties, as well as our business and financial condition, could be adversely impacted by infringement, invalidation, unauthorized use or litigation affecting any such intellectual property. Moreover, if any of our properties are rebranded unsuccessfully, it could have a material adverse effect on our business, financial condition, liquidity, results of operations and prospects, as we may not enjoy comparable recognition or status under a new brand. A transition of management away from a Caesars entity could also have a material adverse effect on our business, financial condition, liquidity, results of operations and prospects.

A substantial portion of our cash is used to satisfy our debt service obligations and our distribution obligations to maintain our status as a REIT and avoid or otherwise minimize current entity level U.S. Federal income taxes, which may expose us to interest rate fluctuation risk, expose us to the risk of default under our debt obligations and limit our ability to pursue our business and growth strategies.

We have a substantial amount of indebtedness outstanding. On a pro forma basis, as of September 30, 2017, we would have had an aggregate of $                 million of outstanding indebtedness ($                 million, net of deferred financing cost and original issue discount), requiring us to make debt service payments of approximately $             million in 2018.

Our indebtedness is collateralized by substantially all of our properties. Payments of principal and interest under this indebtedness, or any other instruments governing debt we may incur in the future, may leave us with insufficient cash resources to pursue our business and growth strategies or to pay the distributions currently contemplated or necessary to qualify or maintain qualification as a REIT. Our substantial outstanding indebtedness or future indebtedness, and the limitations imposed on us by our debt agreements, could have other significant adverse consequences, including the following:

 

    our cash flow may be insufficient to meet our required principal and interest payments;

 

    we may be unable to borrow additional funds as needed or on favorable terms, which could, among other things, adversely affect our ability to capitalize upon emerging acquisition opportunities, including exercising our rights of first refusal and call rights described herein, or meet operational needs;

 

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    we may be unable to refinance our indebtedness at maturity or the refinancing terms may be less favorable than the terms of our original indebtedness;

 

    we may be forced to dispose of one or more of our properties if permitted under the Lease Agreements, possibly on disadvantageous terms at a loss;

 

    we may fail to comply with the payment and restrictive covenants in our loan documents, which would entitle the lenders to accelerate payment of outstanding loans and foreclose on any properties servicing such loans; and

 

    we may be unable to hedge floating rate debt, counterparties may fail to honor their obligations under our hedge agreements and these agreements may not effectively hedge interest rate fluctuation risk.

If any one of these events were to occur, our financial condition, results of operations, cash flows, the market price of our common stock and our ability to satisfy our debt service obligations and to pay distributions to our stockholders could be materially and adversely affected. In addition, the foreclosure on our properties could create taxable income without accompanying cash proceeds, which could result in entity level taxes to us or could adversely affect our ability to meet the distribution requirements necessary to qualify or maintain qualification as a REIT.

In addition, the Code generally requires that a REIT distribute annually to its stockholders at least 90% of its REIT taxable income (with certain adjustments), determined without regard to the deduction for dividends paid and excluding net capital gains, and that it pay tax at regular corporate rates to the extent that it distributes annually less than 100% of its REIT taxable income, including capital gains. VICI Golf is also subject to U.S. Federal income tax at regular corporate rates on any of its taxable income. In order to maintain our status as a REIT and avoid or otherwise minimize current entity-level U.S. Federal income taxes, a substantial portion of our cash flow after operating expenses and debt service will be required to be distributed to our stockholders.

Because of the limitations on the amount of cash available to us after satisfying our debt service obligations and our distribution obligations to maintain our status as a REIT and avoid or otherwise minimize current entity- level U.S. Federal income taxes, our ability to pursue our business and growth strategies will be limited.

Any mechanic’s liens or similar liens incurred by the tenants under the Lease Agreements may attach to, and constitute liens on, our interests in the properties.

To the extent the tenants under the Lease Agreements make any improvements, these improvements could cause mechanic’s liens or similar liens to attach to, and constitute liens on, our interests in the properties. To the extent that mechanic’s liens or similar liens are recorded against any of the properties or any properties we may acquire in the future, the holders of such mechanic’s liens or similar liens may enforce them by court action and courts may cause the applicable properties or future properties to be sold to satisfy such liens, which could negatively impact our revenues, results of operations, cash flows and distributions to our stockholders. Further, holders of such liens could have priority over our stockholders in the event of bankruptcy or liquidation, and as a result, a trustee in bankruptcy may have difficulty realizing or foreclosing on such properties in any such bankruptcy or liquidation, and the amount of distributions our stockholders could receive in such bankruptcy or liquidation could be reduced.

Adverse changes in our credit rating may affect our borrowing capacity and borrowing terms.

Our outstanding debt is periodically rated by nationally recognized credit rating agencies. The credit ratings are based upon our operating performance, liquidity and leverage ratios, overall financial condition, and other factors viewed by the credit rating agencies as relevant to both our industry and the economic outlook. Our credit rating may affect the amount of capital we can access, as well as the terms of any financing we obtain. Because we rely in part on debt financing to fund growth, the absence of an investment grade credit rating or any credit rating downgrade or negative outlook may have a negative effect on our future growth.

 

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We will have future capital needs and may not be able to obtain additional financing on acceptable terms.

We may incur additional indebtedness in the future to refinance our existing indebtedness or to finance newly acquired properties or for general corporate or other purposes. Any significant additional indebtedness could require a substantial portion of our cash flow to make interest and principal payments due on our indebtedness. Greater demands on our cash resources may reduce funds available to us to pay distributions, make capital expenditures and acquisitions, or carry out other aspects of our business and growth strategies. Increased indebtedness can also limit our ability to adjust rapidly to changing market conditions, make us more vulnerable to general adverse economic and industry conditions and create competitive disadvantages for us compared to other companies with relatively lower debt levels. Increased future debt service obligations may limit our operational and financial flexibility. Further, to the extent we were required to incur indebtedness, our future interest costs would increase, thereby reducing our earnings and cash flows from what they otherwise would have been.

Moreover, our ability to obtain additional financing and satisfy our financial obligations under indebtedness outstanding from time to time will depend upon our future operating performance, which is subject to then prevailing general economic and credit market conditions, including interest rate levels and the availability of credit generally, and financial, business and other factors, many of which are beyond our control. The prolonged continuation or worsening of current credit market conditions would have a material adverse effect on our ability to obtain financing on favorable terms, if at all.

We may be unable to obtain additional financing or financing on favorable terms or our operating cash flow may be insufficient to satisfy our financial obligations under indebtedness outstanding from time to time (if any). Among other things, the absence of an investment grade credit rating or any credit rating downgrade or negative outlook could increase our financing costs and could limit our access to financing sources. If financing is not available when needed, or is available on unfavorable terms, we may be unable to pursue our business and growth strategies or otherwise take advantage of new business opportunities or respond to competitive pressures, any of which could have a material adverse effect on our business, financial condition, liquidity, results of operations and prospects. We may raise additional funds in the future through the issuance of equity securities and, as a result, our stockholders may experience significant dilution, which may adversely affect the market price of our common stock and make it more difficult for our stockholders to sell our shares at a time and price that they deem appropriate and could impair our future ability to raise capital through an offering of our equity securities.

Our ability to refinance our indebtedness as it becomes due depends on many factors, some of which are beyond our control.

Our ability to refinance our existing indebtedness and any future indebtedness will depend, in part, on our current and projected financial condition, liquidity and results of operations and economic, financial, competitive, legislative, regulatory and other factors. Many of these factors are beyond our control. We cannot assure you that we will be able to refinance any of our indebtedness as it becomes due, on commercially reasonable terms or at all. If we are not able to refinance our indebtedness as it becomes due, we will be obligated to pay such indebtedness with cash from our operations and we may not have sufficient cash to do so, which would have a material and adverse effect on us.

Covenants in our debt agreements limit our operational flexibility, and a covenant breach or default could materially and adversely affect our business, financial condition, liquidity, results of operations and prospects.

The agreements governing our indebtedness contain customary covenants, including restrictions on our ability to grant liens on our assets, incur indebtedness, sell assets, make investments, engage in acquisitions, mergers or consolidations and pay certain dividends and other restricted payments. These covenants could impair

 

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our ability to pursue our business and growth strategies, take advantage of new business opportunities or successfully compete. A breach of any of these covenants or covenants under any other agreements governing our indebtedness could result in an event of default. Cross-default provisions in our debt agreements could cause an event of default under one debt agreement to trigger an event of default under our other debt agreements. Upon the occurrence of an event of default under any of our debt agreements, the lenders could elect to declare all outstanding debt under such agreements to be immediately due and payable. If we were unable to repay or refinance the accelerated debt, the lenders could proceed against any assets pledged to secure that debt, including foreclosing on or requiring the sale of our properties, and our assets may not be sufficient to repay such debt in full. Covenants that limit our operational flexibility as well as defaults under our debt instruments could have a material adverse effect on our business, financial condition, liquidity, results of operations and prospects.

A rise in interest rates may increase our overall interest rate expense and could adversely affect our stock price.

Our Revolving Credit Facility and Term Loan B Facility are subject to variable interest rates. A rise in interest rates may increase our overall interest rate expense and have an adverse impact on our ability to pay distributions to our stockholders. The risk presented by holding variable rate indebtedness can be managed or mitigated by utilizing interest rate protection products. However, there is no assurance that we will utilize any of these products or that such products will be available to us. In addition, in the event of a rise in interest rates, new debt, whether fixed or variable, is likely to be more expensive and we may be unable to replace maturing debt with new debt at equal or better interest rates.

Further, the dividend yield on our common stock, as a percentage of the price of such common stock, will influence the market price of such common stock. Thus, an increase in market interest rates may lead prospective purchasers of our common stock to expect a higher dividend yield, which would adversely affect the market price of our common stock.

We may not be able to purchase the properties subject to the Call Right Agreements, the Amended and Restated Right of First Refusal Agreement or the Put-Call Agreement if we are unable to obtain additional financing. In addition, we may be forced to dispose of Harrah’s Las Vegas to Caesars, possibly on disadvantageous terms.

The Call Right Agreements provide for our right for up to five years after the Formation Date to enter into binding agreements to purchase the real property interest and all improvements associated with Harrah’s Atlantic City, Harrah’s Laughlin, and/or Harrah’s New Orleans from Caesars. The Put Call Agreement that we entered into with Caesars, among other things, provides us with the opportunity or the obligation to acquire the Eastside Convention Center Property and lease it back to Caesars. The Amended and Restated Right of First Refusal Agreement provides us the right, subject to certain exclusions, to (i) acquire (and lease to Caesars) any domestic gaming facilities located outside of the Gaming Enterprise District of Clark County, Nevada, proposed to be acquired or developed by Caesars, and (ii) acquire (and lease to Caesars) any of the properties that Caesars has recently agreed to acquire from Centaur Holdings, LLC, in each case, should Caesars determine to sell any such properties. In order to exercise these rights, we would likely be required to secure additional financing and our substantial level of indebtedness following the Formation Date or other factors could limit our ability to do so on attractive terms or at all. If we are unable to obtain financing on terms acceptable to us, we may not be able to exercise these rights and acquire these properties. Even if financing with acceptable terms is available to us, there can be no assurance that we will exercise any of these rights.

The Put-Call Agreement, among other things, grants Caesars the right to sell to (and simultaneously lease back from) us the Eastside Convention Center Property. If Caesars exercises the right to sell to (and lease from) us the Eastside Convention Center Property and the transactions do not close for reasons other than a default by Caesars or a failure to obtain any required regulatory approvals, Caesars will have the right to acquire Harrah’s Las Vegas from us, all on and subject to the terms and conditions set forth in the Put-Call Agreement. In

 

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addition, the HLV Lease Agreement grants Caesars the right to purchase Harrah’s Las Vegas from us if we engage in certain transactions with entities deemed to be competitors of Caesars or if the landlord under the lease otherwise becomes a competitor of Caesars. The disposition of Harrah’s Las Vegas to Caesars pursuant to the Put-Call Agreement or the HLV Lease Agreement may be at disadvantageous terms and could have a material adverse effect on our business, financial condition, liquidity, results of operations and prospects.

The bankruptcy or insolvency of any tenant or guarantor could result in the termination of the Lease Agreements and the related guarantees and material losses to us.

Although the tenants’ performance and payments under the Lease Agreements are guaranteed by Caesars or CRC, as the case may be, a default by the applicable tenant under the Lease Agreement, or by Caesars or CRC with regard to its guarantee, may cause a default under certain circumstances with regard to the entire portfolio covered by the Lease Agreements. In event of a bankruptcy, there can be no assurances that the tenants, Caesars or CRC would assume the Lease Agreements or the related guarantees, and if the Lease Agreements or guarantees were rejected, the tenant, Caesars or CRC, as applicable, may not have sufficient funds to pay the damages that would be owed to us a result of the rejection and we might not be able to find a replacement tenant on the same or better terms. Similarly, in the event of a bankruptcy of Caesars or CRC, any claim for damages under the guarantee may not be paid in full. For these and other reasons, the bankruptcy of one or more tenants, Caesars or CRC would have a material adverse effect on our business, financial condition, liquidity, results of operations and prospects.

Our pursuit of investments in, and acquisitions or development of, additional properties may be unsuccessful or fail to meet our expectations.

We intend to pursue acquisitions of additional properties and seek acquisitions and other strategic opportunities. Accordingly, we may often be engaged in evaluating potential transactions and other strategic alternatives. In addition, from time to time, we may engage in discussions that may result in one or more transactions. Although there is uncertainty that any of these discussions will result in definitive agreements or the completion of any transaction, we may devote a significant amount of our management resources to such a transaction, which could negatively impact our operations. We may incur significant costs in connection with seeking acquisitions or other strategic opportunities regardless of whether the transaction is completed and in combining our operations if such a transaction is completed.

We operate in a highly competitive industry and face competition from other REITs, investment companies, private equity and hedge fund investors, sovereign funds, lenders, gaming companies and other investors, some of whom are significantly larger and have greater resources, access to capital and lower costs of capital. Increased competition will make it more challenging to identify and successfully capitalize on acquisition opportunities that meet our investment objectives. If we cannot identify and purchase a sufficient quantity of gaming properties and other properties at favorable prices or if we are unable to finance acquisitions on commercially favorable terms, our business, financial condition, liquidity, results of operations and prospects could be materially and adversely affected. Additionally, the fact that we must distribute 90% of our REIT taxable income in order to maintain our qualification as a REIT may limit our ability to rely upon rental payments from our leased properties or subsequently acquired properties in order to finance acquisitions. As a result, if debt or equity financing is not available on acceptable terms, further acquisitions might be limited or curtailed.

Investments in and acquisitions of gaming properties and other properties we might seek to acquire entail risks associated with real estate investments generally, including that the investment’s performance will fail to meet expectations, that the cost estimates for necessary property improvements will prove inaccurate or the operator or manager will underperform. Real estate development projects present other risks, including construction delays or cost overruns that increase expenses, the inability to obtain required zoning, occupancy and other governmental approvals and permits on a timely basis, and the incurrence of significant development costs prior to completion of the project.

 

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Further, even if we were able to acquire additional properties in the future, there is no guarantee that such properties would be able to maintain their historical performance. In addition, our financing of these acquisitions could negatively impact our cash flows and liquidity, require us to incur substantial debt or involve the issuance of substantial new equity, which would be dilutive to existing stockholders. We have a substantial amount of indebtedness outstanding, which may affect our ability to pay distributions, may expose us to interest rate fluctuation risk and may expose us to the risk of default under our debt obligations. In addition, we cannot assure you that we will be successful in implementing our business and growth strategies or that any expansion will improve operating results. The failure to identify and acquire new properties effectively, or the failure of any acquired properties to perform as expected, could have a material adverse effect on our business, financial condition, liquidity, results of operations and prospects and our ability to make distributions to our stockholders.

We may sell or divest different properties or assets after an evaluation of our portfolio of businesses. Such sales or divestitures would affect our costs, revenues, results of operations, financial condition and liquidity.

From time to time, we may evaluate our properties and may, as a result, sell or attempt to sell, divest, or spin-off different properties or assets, subject to the terms of the Lease Agreements. These sales or divestitures would affect our costs, revenues, results of operations, financial condition, liquidity and our ability to comply with financial covenants. Divestitures have inherent risks, including possible delays in closing transactions (including potential difficulties in obtaining regulatory approvals), the risk of lower-than-expected sales proceeds for the divested businesses, and potential post-closing claims for indemnification. In addition, current economic conditions and relatively illiquid real estate markets may result in fewer potential bidders and unsuccessful sales efforts.

Our properties are subject to risks from natural disasters such as earthquakes, hurricanes, severe weather and terrorism.

Our properties are located in areas that may be subject to natural disasters, such as earthquakes, and extreme weather conditions, including, but not limited to, hurricanes. Such natural disasters or extreme weather conditions may interrupt operations at the casinos, damage our properties, and reduce the number of customers who visit our facilities in such areas. A severe earthquake could damage or destroy our properties. In addition, our operations could be adversely impacted by a drought or other cause of water shortage. A severe drought of extensive duration experienced in Las Vegas or in the other regions in which we operate could adversely affect the business and financial results at our properties. Although the tenants are required to maintain both property and business interruption insurance coverage, such coverage is subject to deductibles and limits on maximum benefits, including limitation on the coverage period for business interruption, and we cannot assure you that we or the tenants will be able to fully insure such losses or fully collect, if at all, on claims resulting from such natural disasters. While the Lease Agreements require, and new lease agreements are expected to require, that comprehensive insurance and hazard insurance be maintained by the tenants, there are certain types of losses, generally of a catastrophic nature, such as earthquakes, hurricanes and floods, that may be uninsurable or not economically insurable. Insurance coverage may not be sufficient to pay the full current market value or current replacement cost of a loss. Inflation, changes in building codes and ordinances, environmental considerations, and other factors also might make it infeasible to use insurance proceeds to replace the property after such property has been damaged or destroyed. Under such circumstances, the insurance proceeds received might not be adequate to restore the economic position with respect to such property. If we experience a loss that is uninsured or that exceeds our policy coverage limits, we could lose the capital invested in the damaged properties as well as the anticipated future cash flows from those properties.

Terrorist attacks or other acts of violence may result in declining economic activity, which could harm the demand for goods and services offered by our tenants and the value of our properties and might adversely affect the value of an investment in our common stock. Such a resulting decrease in retail demand could make it difficult for us to renew or re-lease our properties to suitable, credit-worthy tenants at lease rates equal to or

 

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above historical rates. Terrorist activities or violence also could directly affect the value of our properties through damage, destruction or loss, and the availability of insurance for such acts, or of insurance generally, might be lower or cost more, which could increase our operating expenses and adversely affect our results of operations and cash flows. To the extent that any of our tenants is affected by future terrorist attacks or violence, its business similarly could be adversely affected, including the ability of our tenants to continue to meet their obligations to us. These events might erode business and consumer confidence and spending and might result in increased volatility in national and international financial markets and economies. Any one of these events might decrease demand for real estate, decrease or delay the occupancy of our new or redeveloped properties, and limit our access to capital or increase our cost of raising capital.

In addition, the Lease Agreements, as applicable, allow the tenants to remove a property from the Non-CPLV Lease Agreement and to terminate the CPLV Lease Agreement, the Joliet Lease Agreement or the HLV Lease Agreement, as the case may be, during the final two years of the lease terms if the cost to rebuild or restore a property in connection with a casualty event exceeds 25% of total property fair market value. Similarly, if a condemnation event occurs that renders a facility unsuitable for its primary intended use, the applicable tenants may remove the property from the Non-CPLV Lease Agreement and may terminate the CPLV Lease Agreement, the Joliet Lease Agreement or the HLV Lease Agreement, as the case may be. If a property is removed from the Non-CPLV Lease Agreement or if the CPLV Lease Agreement, the Joliet Lease Agreement or the HLV Lease Agreement, as the case may be, is terminated, we will lose the rent associated with the related facility, which would have a negative impact on our financial results. In this event, following termination of the lease of a property, even if we are able to restore the affected property, we could be limited to selling or leasing such property to a new tenant in order to obtain an alternate source of revenue, which may not happen on comparable terms or at all.

Changes in building and/or zoning laws may require us to update a property in the event of recapture or prevent us from fully restoring a property in the event of a substantial casualty loss and/or require us to meet additional or more stringent construction requirements.

Due to changes, among other things, in applicable building and zoning laws, ordinances and codes that may affect certain of our properties that have come into effect after the initial construction of the properties, certain properties may not comply fully with current building and/or zoning laws, including electrical, fire, health and safety codes and regulations, use, lot coverage, parking and setback requirements, but may qualify as permitted non-conforming uses. Although the Lease Agreements require our tenants to pay for and ensure continued compliance with applicable law, there is no assurance that future leases will be negotiated on the same basis or that our tenants will make any changes required by the terms of the Lease Agreements and/or any future leases we may enter into. In addition, such changes may limit a tenant’s ability to restore the premises of a property to its previous condition in the event of a substantial casualty loss with respect to the property or the ability to refurbish, expand or renovate such property to remain compliant, or increase the cost of construction in order to comply with changes in building or zoning codes and regulations. If a tenant is unable to restore a property to its prior use after a substantial casualty loss or is required to comply with more stringent building or zoning codes and regulations, we may be unable to re-lease the space at a comparable effective rent or sell the property at an acceptable price, which may materially and adversely affect our business, financial condition, liquidity, results of operations and prospects.

Certain properties are subject to restrictions pursuant to reciprocal easement agreements, operating agreements or similar agreements.

Many of the properties that we own are, and properties that we may acquire in the future may be, subject to use restrictions and/or operational requirements imposed pursuant to ground leases, restrictive covenants or conditions, reciprocal easement agreements or operating agreements or other instruments (collectively, “Property Restrictions”) that could, among other things, adversely affect our ability to lease space to third parties. Such Property Restrictions could include: limitations on alterations, changes, expansions, or reconfiguration of

 

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properties; limitations on use of properties; limitations affecting parking requirements; or restrictions on exterior or interior signage or facades. In certain cases, consent of the other party or parties to such agreements may be required when altering, reconfiguring, expanding or redeveloping. Failure to secure such consents when necessary may harm our ability to execute leasing strategies, which could adversely affect us.

The loss of the services of key personnel could have a material adverse effect on our business.

Our success and ability to grow depends, in large part, upon the leadership and performance of our executive management team, particularly our chief executive officer, our president and chief operating officer, and our chief financial officer. Any unforeseen loss of our executive officers’ services, or any negative market or industry perception with respect to them or arising from their loss, could have a material adverse effect on our business. We do not have key man or similar life insurance policies covering members of our senior management. We have employment agreements with our executive officers, but these agreements do not guarantee that any given executive will remain with us, and there can be no assurance that any such officers will remain with us. The appointment of certain key members of our executive management team will be subject to regulatory approvals based upon suitability determinations by gaming regulatory authorities in the jurisdictions where our properties are located. If any of our executive officers is found unsuitable by any such gaming regulatory authorities, or if we otherwise lose their services, we would have to find alternative candidates and may not be able to successfully manage our business or achieve our business objectives.

If we cannot attract, retain and motivate employees, we may be unable to compete effectively and lose the ability to improve and expand our businesses.

Our success and ability to grow depend, in part, on our ability to hire, retain and motivate sufficient numbers of talented people with the increasingly diverse skills needed to serve clients and expand our business. We face intense competition for highly qualified, specialized technical, managerial, and consulting personnel. Recruiting, training, retention and benefit costs place significant demands on our resources. Additionally, CEOC’s bankruptcy proceedings and our recent formation may make recruiting executives to our business more difficult. The inability to attract qualified employees in sufficient numbers to meet particular demands or the loss of a significant number of our employees could have an adverse effect on us.

We may become involved in legal proceedings that, if adversely adjudicated or settled, could have a material adverse effect on our business, financial condition, liquidity, results of operations and prospects.

The nature of our business subjects us to the risk of lawsuits related to matters incidental to our business filed by our tenants, customers, employees, competitors, business partners and others. As with all legal proceedings, no assurance can be provided as to the outcome of these matters and, in general, legal proceedings can be expensive and time consuming. We may not be successful in the defense or prosecution of these lawsuits, which could result in settlements or damages that could have a material adverse effect on us.

Environmental compliance costs and liabilities associated with real estate properties owned by us may materially impair the value of those investments.

As an owner of real property, we are subject to various Federal, state and local environmental and health and safety laws and regulations. Although we do not operate or manage most of our properties, we may be held primarily or jointly and severally liable for costs relating to the investigation and clean-up of any property from which there has been a release or threatened release of a regulated material as well as other affected properties, regardless of whether we knew of or caused the release, and to preserve claims for damages. Further, some environmental laws create a lien on a contaminated site in favor of the government for damages and the costs the government incurs in connection with such contamination.

Although under the Lease Agreements the tenants are required to indemnify us for certain environmental liabilities, including environmental liabilities it causes, the amount of such liabilities could exceed the financial

 

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ability of the applicable tenants to indemnify us. In addition, the presence of contamination or the failure to remediate contamination may adversely affect our ability to sell or lease our properties or to borrow using our properties as collateral.

We may be required to contribute insurance proceeds with respect to casualty events at our properties to the lenders under our debt financing agreements.

In the event that we were to receive insurance proceeds with respect to a casualty event at any of our properties, we may be required under the terms of our debt financing agreements to contribute all or a portion of those proceeds to the repayment of such debt, which may prevent us from restoring such properties to their prior state. If the remainder of the proceeds (after any such required repayment) were insufficient to make the repairs necessary to restore the damaged properties to a condition substantially equivalent to its state immediately prior to the casualty, we may not have sufficient liquidity to otherwise fund these repairs and may be required to obtain additional financing, which could materially and adversely affect our business, financial condition, liquidity, results of operations and prospects.

If we fail to establish and maintain an effective system of integrated internal controls, we may not be able to report our financial results accurately, which could have a material adverse effect on us.

As a reporting company, we are required to develop and implement substantial control systems, policies and procedures in order to qualify and maintain our qualification as a REIT and satisfy our periodic SEC reporting requirements. We cannot assure you that we will be able to successfully develop and implement these systems, policies and procedures and to operate our company or that any such development and implementation will be effective. Failure to do so could jeopardize our status as a REIT or as a reporting company, and the loss of such statuses would materially and adversely affect us. If we fail to develop, implement or maintain proper overall business controls, including as required to support our growth, our operating and financial results could be harmed or we could fail to meet our reporting obligations. In addition, the existence of a material weakness or significant deficiency could result in errors in our financial statements that could require a restatement, cause us to fail to meet our SEC reporting obligations and cause investors to lose confidence in our reported financial information, which could have a material adverse effect on us and on the market price of our common stock.

Risk Factors Relating to the Formation Transactions

We may be unable to make, on a timely or cost-effective basis, the changes necessary to operate as a stand-alone company primarily focused on owning a portfolio of gaming properties.

We have limited historical operations as an independent company. As a stand-alone entity, we are subject to, and responsible for, regulatory compliance, including periodic public filings with the SEC, and compliance with the listing requirements of the New York Stock Exchange, where we have applied to list our common stock, and with applicable state gaming rules and regulations, as well as compliance with generally applicable tax and accounting rules. Because our business did not operate as a stand-alone company until the Formation Date, we cannot ensure that we will be able to successfully implement the infrastructure or retain the personnel necessary to operate as a stand-alone company or that we will not incur costs in excess of anticipated costs to establish such infrastructure and retain such personnel.

The historical and pro forma financial information included in this prospectus may not be a reliable indicator of future results.

We are a newly organized company with limited operating history and did not operate as a REIT or otherwise as a stand-alone business prior to the Formation Date. Therefore, our growth prospects must be considered in light of the risks, expenses and difficulties frequently encountered when any new business is formed. We cannot assure you that we will be able to successfully operate our business profitably or implement our operating policies and business and growth strategies as described in this prospectus. We urge you to carefully consider the information included in this prospectus concerning us in making an investment decision.

 

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The financial statements and the pro forma financial information included herein may not reflect what our business, financial condition, cash flows or results of operations will be in the future now that we are a separate public company. The properties acquired by our Operating Partnership from subsidiaries of Caesars were historically operated by subsidiaries of Caesars as part of its larger corporate organization and not as a stand-alone business or independent company. The pro forma financial information that we have included in this prospectus may not reflect what our financial condition or results of operations would have been had we existed as a stand-alone business or independent entity, or had we operated as a REIT, during the periods presented. Significant changes have occurred in our cost structure, financing and business operations as a result of our operation as a stand-alone company and the entry into transactions with Caesars that have not existed historically, including the Lease Agreements and the related guarantees.

The pro forma financial information included in this prospectus was prepared on the basis of assumptions derived from available information that we believe to be reasonable. However, these assumptions may change or may be incorrect, and actual results may differ, perhaps significantly. Therefore, the pro forma financial information we have included in this prospectus may not necessarily be indicative of what our financial condition or results of operations will be in the future. For additional information about the basis of presentation of the financial information included in this prospectus, see “Selected Historical and Pro Forma Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operation” and the historical combined condensed financial statements of Caesars Entertainment Outdoor, our predecessor, the balance sheet of VICI REIT and the combined statements of investments of real estate assets to be contributed to VICI REIT, and in each case, the related notes thereto, included elsewhere in this prospectus.

Our actual financial results may vary significantly from the financial projections filed with the Bankruptcy Court.

In connection with the Plan of Reorganization, the Debtors were required to file projected financial information with the Bankruptcy Court to demonstrate the feasibility of the Plan of Reorganization and the ability of the Debtors to continue operations upon emergence from bankruptcy. These projections were prepared for the specific purpose of satisfying statutory requirements in connection with confirmation of the Plan of Reorganization, not for purposes of this offering, and are neither included nor incorporated by reference in this prospectus and should not be relied upon in connection with the purchase of our common stock in this offering. At the time they were filed, the projections reflected numerous assumptions concerning anticipated future performance and market and economic conditions that were and remain beyond our and the Debtors’ control and that may not materialize. Projections are inherently subject to uncertainties and to a wide variety of significant business, economic and competitive risks. Our actual results will vary from those contemplated by the projections and the variations may be material.

We may be unable to achieve the expected benefits from operating as a company independent of Caesars.

We believe that as a company independent from Caesars, we will have the ability, subject to the Amended and Restated Right of First Refusal Agreement and the Lease Agreements, to pursue transactions with other gaming operators, to fund acquisitions with equity on significantly more favorable terms than those that would be available to Caesars, to diversify into different businesses in which Caesars, as a practical matter, could not diversify, and to pursue certain transactions that Caesars otherwise would be disadvantaged by or precluded from pursuing due to regulatory constraints. However, we may not be able to achieve some or all of the benefits from operating as a company independent from Caesars in a timely manner, if at all .

Some members of our management team may have limited experience operating as part of a REIT structure.

The requirements for qualifying as a REIT are highly technical and complex. We did not operate as a REIT prior to the Formation Date, and some members of our management team may have limited experience in

 

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complying with the income, asset, and other limitations imposed by the real estate investment provisions of the Code. Any failure to comply with those provisions in a timely manner could prevent us from qualifying as a REIT or could force us to pay unexpected taxes and penalties, which could materially harm our business, financial condition, liquidity, results of operations and prospects. In addition, there is no assurance that any past experience with the acquisition, development, and disposition of gaming facilities will be sufficient to enable us to successfully manage our portfolio of properties as required by our business plan or the REIT provisions of the Code.

We cannot be certain that the bankruptcy proceedings will not adversely affect our operations going forward.

Our properties operated in bankruptcy for over two years and we cannot assure you that having been subject to bankruptcy will not adversely affect our operations going forward. For example, we may be subject to claims that were not discharged in the bankruptcy proceedings. Substantially all, if not all, of the material claims against the Debtors that arose prior to the date of the bankruptcy filing were addressed during the bankruptcy proceedings. In addition, the Bankruptcy Code provides that the confirmation of a plan of reorganization discharges a debtor from substantially all debts arising prior to confirmation and certain debts arising afterwards. Circumstances in which claims and other obligations that arose prior to the bankruptcy filing were not discharged primarily relate to certain actions by governmental units under police power authority, where CEOC agreed to preserve a claimant’s claims, as well as, potentially, instances where a claimant had inadequate notice of the bankruptcy filing. If any such claims remain and can be asserted against us, the ultimate resolution of such claims and other obligations may have a material adverse effect on our results of operations and profitability.

Our separation from subsidiaries of Caesars could give rise to disputes or other unfavorable effects, which could have a material adverse effect on our business, financial condition, liquidity, results of operations and prospects.

Disputes with third parties could arise out of our separation from subsidiaries of Caesars, and we could experience unfavorable reactions to the separation from employees, ratings agencies, regulators, or other interested parties. For example, The City Of Hammond, Indiana, The City of Hammond Department of Redevelopment, Department of Waterworks of The City Of Hammond, and Hammond Port (collectively, the “Hammond Entities”) filed an objection with the Bankruptcy Court in November 2017 to the assignment of the respective leases, licenses and contracts to which they are counterparties relating to Horseshoe Hammond property. The Objection alleges that given the prohibition terms of the various leases, licenses, contracts and the Hammond agreements, the Debtors had no authority or power to make the assignments to VICI and, at the present, the Hammond Entities do not consent and do object to the property assignments. These disputes and reactions of third parties could have a material adverse effect on our business, financial condition, liquidity results of operations and prospects. In addition, disputes between us and Caesars could arise in connection with any of the Lease Agreements, the Management and Lease Support Agreements, the Amended and Restated Right of First Refusal Agreement, the Call Right Agreements, the Put-Call Agreement, the Tax Matters Agreement or other agreements.

If our separation from CEOC, together with certain related transactions, does not qualify as a transaction that is generally tax-free for U.S. Federal income tax purposes, CEOC could be subject to significant tax liabilities and, in certain circumstances, we could be required to indemnify CEOC for material taxes pursuant to indemnification obligations under the Tax Matters Agreement.

The IRS issued a private letter ruling with respect to certain issues relevant to our separation from CEOC, including relating to the separation and certain related transactions as tax-free for U.S. Federal income tax purposes under certain provisions of the Code. The IRS ruling does not address certain requirements for tax-free treatment of the separation. CEOC received from its tax advisors a tax opinion substantially to the effect that, with respect to such requirements on which the IRS did not rule, such requirements should be satisfied. The IRS

 

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ruling and the tax opinion that CEOC received, relied on (among other things) certain representations, assumptions and undertakings, including those relating to the past and future conduct of our business, and the IRS ruling and the opinion would not be valid if such representations, assumptions and undertakings were incorrect in any material respect.

Notwithstanding the IRS ruling and the tax opinion, the IRS could determine the separation should be treated as a taxable transaction for U.S. Federal income tax purposes if it determines any of the representations, assumptions or undertakings that were included in the request for the IRS ruling are false or have been violated or if it disagrees with the conclusions in the opinion that are not covered by the IRS ruling.

If the reorganization fails to qualify for tax-free treatment, in general, CEOC would be subject to tax as if it had sold our assets to us in a taxable sale for their fair market value, and CEOC’s creditors who received shares of our common stock pursuant to the Plan of Reorganization would be subject to tax as if they had received a taxable distribution in respect of their claims equal to the fair market value of such shares.

Under the Tax Matters Agreement that we entered into with Caesars, we generally are required to indemnify Caesars against any tax resulting from the separation to the extent that such tax resulted from certain of our representations or undertakings being incorrect or violated. Our indemnification obligations to Caesars are not limited by any maximum amount. As a result, if we are required to indemnify Caesars or such other persons under the circumstances set forth in the Tax Matters Agreement, we may be subject to substantial liabilities.

We may not be able to engage in desirable strategic or capital-raising transactions following the spin-off. In addition, we could be liable for adverse tax consequences resulting from engaging in significant strategic or capital-raising transactions.

To preserve the tax-free treatment to CEOC of the spin-off, for the two-year period following the spin-off, we may be prohibited, except in specific circumstances, from: (1) entering into any transaction pursuant to which all or a portion of our stock would be acquired, whether by merger or otherwise, (2) issuing equity securities beyond certain thresholds, (3) repurchasing our common stock, (4) ceasing to actively conduct the business of operating VICI Golf, or (5) taking or failing to take any other action that prevents the spin-off and related transactions from being tax-free. These restrictions may limit our ability to pursue strategic transactions or engage in new business or other transactions that may maximize the value of our business.

Risks Related to our Status as a REIT

We may not qualify or maintain our qualification as a REIT.

We intend to elect and qualify to be taxed as a REIT for U.S. Federal income tax purposes commencing with our taxable year ending December 31, 2017, and expect to operate in a manner that will allow us to continue to be classified as such. Once an entity is qualified as a REIT, the Code generally requires that such entity distribute annually to its stockholders at least 90% of its REIT taxable income (with certain adjustments), determined without regard to the deduction for dividends paid and excluding net capital gains, and that it pay tax at regular corporate rates to the extent that it distributes annually less than 100% of its REIT taxable income, including capital gains. In addition, a REIT is required to pay a 4% nondeductible excise tax on the amount, if any, by which the distributions it makes in a calendar year are less than the sum of 85% of its ordinary income, 95% of its capital gain net income and 100% of its undistributed income from prior years. As a result, in order to avoid current entity level U.S. Federal income taxes, a substantial portion of our cash flow after operating expenses and debt service will be required to be distributed to our stockholders.

If we were to fail to qualify as a REIT in any taxable year, we would be subject to U.S. Federal income tax on our taxable income at regular corporate rates, and dividends paid to our stockholders would not be deductible by us in computing our REIT taxable income. Any resulting corporate tax liability could be substantial and

 

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would reduce the amount of cash available for distribution to our stockholders, which in turn could have an adverse impact on the market price of our common stock. Unless we were entitled to relief under certain Code provisions, we also would be disqualified from re-electing to be taxed as a REIT for the four taxable years following the year in which we failed to qualify as a REIT. As a result, the amount available for distribution to holders of equity securities that would otherwise receive dividends would be reduced for the year or years involved. Furthermore, the U.S. Federal income tax consequences of distributions and sales of our shares to certain of our stockholders could be adversely impacted if we were to fail to qualify as a REIT.

Qualification to be taxed as a REIT involves highly technical and complex provision of the Code, and violations of these provisions could jeopardize our REIT qualification.

Qualification as a REIT involves the application of highly technical and complex Code provisions for which only limited judicial and administrative authorities exist. Even a technical or inadvertent violation could jeopardize our REIT qualification. Our qualification as a REIT depends on our satisfaction of certain asset, income, organizational, distribution, stockholder ownership and other requirements on a continuing basis. In addition, our ability to satisfy the requirements to qualify as a REIT may depend in part on the actions of third parties over which we have no control or only limited influence, including in cases where we own an equity interest in an entity that is classified as a partnership for U.S. Federal income tax purposes.

The opinion we will receive regarding our status as a REIT does not guarantee our ability to qualify as a REIT.

We intend to operate in a manner that will allow us to qualify to be taxed as a REIT for U.S. Federal income tax purposes. We expect that we will receive an opinion of Kramer Levin Naftalis & Frankel LLP (“REIT Tax Counsel”) that, commencing with our taxable year ending December 31, 2017, we are organized in conformity with the requirements for qualification and taxation as a REIT under the U.S. Federal income tax laws and our proposed method of operations will enable us to satisfy the requirements for qualification and taxation as a REIT under the U.S. Federal income tax laws for our taxable year ending December 31, 2017 and subsequent taxable years. Investors should be aware, however, that opinions of counsel are not binding on the IRS or any court. The opinion of REIT Tax Counsel represents only the view of REIT Tax Counsel, based on its review and analysis of existing law and on certain representations as to factual matters and covenants made by us, including representations relating to the values of our assets and the sources of our income. The opinion is expressed as of the date of this offering. REIT Tax Counsel will have no obligation to advise us or the holders of shares of our common stock of any subsequent change in the matters stated, represented or assumed or of any subsequent change in applicable law. Furthermore, both the validity of the opinion of REIT Tax Counsel and our qualification to be taxed as a REIT will depend on our satisfaction of certain asset, income, organizational, distribution, stockholder ownership and other requirements on a continuing basis, the results of which will not be monitored by REIT Tax Counsel. Our ability to satisfy the asset tests depends upon our analysis of the characterization and fair market values of our assets, some of which are not susceptible to a precise determination, and for which we will not obtain independent appraisals. Any failure to qualify to be taxed as a REIT, or failure to remain to be qualified to be taxed as a REIT, would have a material and adverse effect on us.

We may in the future choose to pay dividends in the form of our own common stock, in which case stockholders may be required to pay income taxes in excess of the cash dividends they receive.

We may seek in the future to distribute taxable dividends that are payable in cash or our common stock. Taxable stockholders receiving such dividends will be required to include the full amount of the dividend as ordinary income to the extent of our current and accumulated earnings and profits for U.S. Federal income tax purposes as to which non-corporate stockholders will generally be eligible for a deduction equal to 20% of such distributions. As a result, stockholders receiving dividends in the form of common stock may be required to pay income taxes with respect to such dividends in excess of the cash dividends received, if any. If a U.S. stockholder sells the common stock that it receives as a dividend in order to pay this tax, the sales proceeds may be less than

 

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the amount included in income with respect to the dividend, depending on the market price of our common stock at the time of the sale. In addition, in such case, a U.S. stockholder could have a capital loss with respect to the common stock sold that could not be used to offset such dividend income. Moreover, with respect to certain non-U.S. stockholders, we may be required to withhold U.S. Federal income tax with respect to such dividends, including in respect of all or a portion of such dividend that is payable in common stock. Furthermore, such a taxable share dividend could be viewed as equivalent to a reduction in our cash distributions, and that factor, as well as the possibility that a significant number of our stockholders determine to sell our common stock in order to pay taxes owed on dividends, may put downward pressure on the market price of our common stock.

Changes to the U.S. Federal income tax laws, including the recent enactment of certain tax reform measures, could have a material and adverse effect on us.

U.S. federal income tax laws governing REITs and other corporations and the administrative interpretations of those laws may be amended at any time, potentially with retroactive effect. We cannot predict whether, when or to what extent new U.S. federal tax laws, regulations, interpretations or rulings will be issued. Prospective investors are urged to consult their tax advisors regarding the effect of potential changes to the U.S. Federal tax laws on an investment in our common stock.

Recently enacted changes to the U.S. federal income tax laws could have a material and adverse effect on us. For example, certain changes in law pursuant to the Tax Cuts and Jobs Act could reduce the relative competitive advantage of operating as a REIT as compared with operating as a C corporation, including by:

 

    reducing the rate of tax applicable to individuals and C corporations, which could reduce the relative attractiveness of the generally single level of taxation on REIT distributions;

 

    permitting immediate expensing of capital expenditures, which could likewise reduce the relative attractiveness of the REIT taxation regime; and

 

    limiting the deductibility of interest expense, which could increase the distribution requirement of REITs (though such limitations under the tax bills currently under consideration should not affect REITs).

We could fail to qualify to be taxed as a REIT if income we receive from Caesars or its subsidiaries is not treated as qualifying income.

Under applicable provisions of the Code, we will not be treated as a REIT unless we satisfy various requirements, including requirements relating to the sources of our gross income. See “Material U.S. Federal Income Tax Considerations.” Rents received or accrued by us from Caesars or its subsidiaries will not be treated as qualifying rent for purposes of these requirements if the leases are not respected as true leases for U.S. federal income tax purposes and instead are treated as service contracts, joint ventures or some other type of arrangement. If some or all of our leases are not respected as true leases for U.S. Federal income tax purposes, we may fail to qualify to be taxed as a REIT. Furthermore, our qualification as a REIT will depend on our satisfaction of certain asset, income, organizational, distribution, stockholder ownership and other requirements on a continuing basis. Our ability to satisfy the asset tests depends upon our analysis of the characterization and fair market values of our assets, some of which are not susceptible to a precise determination, and for which we may not obtain independent appraisals.

In addition, subject to certain exceptions, rents received or accrued by us from Caesars or its subsidiaries will not be treated as qualifying rent for purposes of these requirements if we or an actual or constructive owner of 10% or more of our stock actually or constructively owns 10% or more of the total combined voting power of all classes of Caesars stock entitled to vote or 10% or more of the total value of all classes of Caesars stock. Our charter provides for restrictions on ownership and transfer of our shares of stock, including restrictions on such ownership or transfer that would cause the rents received or accrued by us from Caesars or its subsidiaries to be

 

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treated as non-qualifying rent for purposes of the REIT gross income requirements. The provisions of our charter that restrict the ownership and transfer of our stock are described in “Description of Capital Stock—Restrictions on Ownership and Transfer.” Nevertheless, there can be no assurance that such restrictions will be effective in ensuring that rents received or accrued by us from Caesars or its subsidiaries will not be treated as qualifying rent for purposes of REIT qualification requirements.

REIT distribution requirements could adversely affect our ability to execute our business plan.

We generally must distribute annually to our stockholders at least 90% of our REIT taxable income (with certain adjustments), determined without regard to the dividends paid deduction and excluding any net capital gains, in order for us to qualify as a REIT so that U.S. Federal corporate income tax does not apply to earnings that we distribute. To the extent that we satisfy this distribution requirement and qualify for taxation as a REIT but distribute less than 100% of our REIT taxable income, determined without regard to the dividends paid deduction and including any net capital gains, we will be subject to U.S. Federal corporate income tax on any undistributed portion of such taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we distribute to our stockholders in a calendar year is less than a minimum amount specified under U.S. Federal tax laws. We intend to make distributions to our stockholders to comply with the REIT requirements of the Code and to avoid or otherwise minimize paying entity level Federal or excise tax (other than at any TRS of ours). We may generate taxable income greater than our income for financial reporting purposes prepared in accordance with GAAP. In particular, during the first several years of the leases, under the terms of the Lease Agreements, rental income will be allocated for tax purposes generally in an amount greater than cash rents. Further, we may generate taxable income greater than our cash flow from operations after operating expenses and debt service as a result of differences in timing between the recognition of taxable income and the actual receipt of cash or the effect of nondeductible capital expenditures, the creation of reserves or required debt or amortization payments. In order to avoid or otherwise minimize current entity level U.S. Federal income taxes, we will generally be required to distribute sufficient cash flow after operating expenses and debt service payments to satisfy the REIT distribution requirements. While we intend to make distributions to our stockholders to comply with the REIT requirements of the Code, we may not have sufficient liquidity to meet the REIT distribution requirements. If our cash flow is insufficient to satisfy the REIT distribution requirements, we could be required to raise capital on unfavorable terms, sell assets at disadvantageous prices, distribute amounts that would otherwise be invested in future acquisitions or issue dividends in the form of shares of our common stock to make distributions sufficient to enable us to pay out enough of our REIT taxable income to satisfy the REIT distribution requirement and to avoid corporate income tax and the 4% excise tax in a particular year. These alternatives could increase our costs or change the value of our equity. Thus, compliance with the REIT requirements may hinder our ability to grow, which could adversely affect the market price of our common stock.

Even if we qualify as a REIT, we may face other tax liabilities that reduce our cash flow.

Even if we qualify for taxation as a REIT, we may be subject to certain U.S. Federal, state and local taxes on our income and assets, including taxes on any undistributed income and state or local income, property and transfer taxes. For example, in order to meet the REIT qualification requirements, we currently hold and expect in the future to hold some of our assets and conduct certain of our activities through one or more taxable REIT subsidiaries or other subsidiary corporations that will be subject to Federal, state, and local corporate-level income taxes as regular C corporations (i.e., corporations generally subject to corporate-level income tax under Subchapter C of Chapter 1 the Code). In addition, we may incur a 100% excise tax on transactions with a taxable REIT subsidiary if they are not conducted on an arm’s length basis. Any of these taxes would decrease cash available for distribution to our stockholders.

Complying with REIT requirements may cause us to liquidate or forgo otherwise attractive opportunities.

To qualify as a REIT, we must ensure that, at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and “real estate assets” (as defined in the Code),

 

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including certain mortgage loans and securities. The remainder of our investments (other than government securities, qualified real estate assets and securities issued by a taxable REIT subsidiary) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our total assets (other than government securities, qualified real estate assets and securities issued by a taxable REIT subsidiary) can consist of the securities of any one issuer, and no more than 25% of the value of our total assets can be represented by securities of one or more taxable REIT subsidiaries (20% for taxable years beginning after December 31, 2017). If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we may be required to liquidate or forgo otherwise attractive investments. These actions could have the effect of reducing our income and amounts available for distribution to our stockholders. In addition to the asset tests set forth above, to qualify as a REIT we must continually satisfy tests concerning, among other things, the sources of our income, the amounts we distribute to our stockholders and the ownership of our stock. We may be unable to pursue investments that would be otherwise advantageous to us in order to satisfy the source-of-income or asset-diversification requirements for qualifying as a REIT. Thus, compliance with the REIT requirements may hinder our ability to make certain attractive investments.

We may be subject to built-in gains tax on the disposition of certain of our properties.

If we acquire certain properties in tax-deferred transactions, which properties were held by one or more C corporations before they were held by us, we may be subject to a built-in gain tax on future disposition of such properties. This is the case with respect to all or substantially all of the properties acquired from CEOC pursuant to the Formation Transactions. If we dispose of any such properties during the five-year period following acquisition of the properties from the respective C corporation (i.e., during the five-year period following ownership of such properties by a REIT), we will be subject to U.S. Federal income tax (and applicable state and local taxes) at the highest corporate tax rates on any gain recognized from the disposition of such properties to the extent of the excess of the fair market value of the properties on the date that they were contributed to or acquired by us in a tax-deferred transaction over the adjusted tax basis of such properties on such date, which are referred to as built-in gains. Similarly, if we recognize certain other income considered to be built-in income during the five-year period following the property acquisitions described above, we could be subject to U.S. Federal tax under the built-in gains tax rules. We would be subject to this corporate-level tax liability (without the benefit of the deduction for dividends paid) even if we qualify and maintain our status as a REIT. Any recognized built-in gain will retain its character as ordinary income or capital gain and will be taken into account in determining REIT taxable income and the REIT distribution requirements. Any tax on the recognized built-in gain will reduce REIT taxable income. We may choose to forego otherwise attractive opportunities to sell assets in a taxable transaction during the five-year built-in gain recognition period in order to avoid this built-in gain tax. However, there can be no assurance that such a taxable transaction will not occur. The amount of any such built-in gain tax could be material and the resulting tax liability could have a negative effect on our cash flow and limit our ability to pay distributions required to qualify and maintain our status as a REIT.

Complying with REIT requirements may limit our ability to hedge effectively and may cause us to incur tax liabilities.

The REIT provisions of the Code substantially limit our ability to hedge our assets and liabilities. Income from certain hedging transactions that we may enter into to manage risk of interest rate changes with respect to borrowings made or to be made to acquire or carry real estate assets or from transactions to manage risk of currency fluctuations with respect to any item of income or gain that satisfy the REIT gross income tests (including gain from the termination of such a transaction) does not constitute “gross income” for purposes of the 75% or 95% gross income tests that apply to REITs, provided that certain identification requirements are met. To the extent that we enter into other types of hedging transactions or fail to properly identify such transaction as a hedge, the income is likely to be treated as non-qualifying income for purposes of both of the gross income tests.

 

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As a result of these rules, we may be required to limit our use of advantageous hedging techniques or implement those hedges through a taxable REIT subsidiary. This could increase the cost of our hedging activities because the taxable REIT subsidiary may be subject to tax on gains or expose us to greater risks associated with changes in interest rates that we would otherwise want to bear. In addition, losses in the taxable REIT subsidiary will generally not provide any tax benefit, except that such losses could theoretically be carried back or forward against past or future taxable income of the taxable REIT subsidiary.

We may pay a purging distribution, if any, in common stock and cash.

In order to qualify as a REIT, we must distribute any “earnings and profits,” as defined in the Code, that are allocated from CEOC to us in connection with the Formation Transactions by the end of the first taxable year in which we elect REIT status. Based on analysis of CEOC’s earnings and profits, we currently do not believe that any earnings and profits were allocated to us in connection with the Formation Transactions and therefore do not currently expect to be required to make a purging distribution. If notwithstanding this expectation we are required to make a purging distribution, we may pay the purging distribution to our stockholders in a combination of cash and shares of our common stock. Each of our stockholders will be permitted to elect to receive the stockholder’s entire entitlement under the purging distribution in either cash or shares of our common stock, subject to a cash limitation. If our stockholders elect to receive a portion of cash in excess of the cash limitation, each such electing stockholder will receive a pro rata portion of cash corresponding to the stockholder’s respective entitlement under the purging distribution declaration. The IRS issued a private letter ruling with respect to certain issues relevant to the separation from Caesars providing generally that, subject to the terms and conditions contained therein, the amount of any shares of our common stock received by any of our stockholders as part of a purging distribution, if any, will be considered to equal the amount of cash that could have been received instead. Although we may generally rely upon the ruling, no assurance can be given that the IRS will not challenge our qualification as a REIT on the basis of other issues or facts outside the scope of the ruling. Furthermore, the IRS has issued a revenue procedure that provides that, so long as a REIT complied with certain provisions therein, certain distributions that are paid partly in cash and partly in stock will be treated as taxable dividends that would satisfy the REIT distribution requirements and qualify for the dividends paid deduction for U.S. Federal income tax purposes. In a purging distribution, if any, a stockholder of our common stock will be required to report dividend income equal to the amount of cash and common stock received as a result of the purging distribution even though we may distribute no cash or only nominal amounts of cash to such stockholder.

Risks Related to Our Organizational Structure

Our rights and the rights of our stockholders to take action against our directors and officers are limited.

The MGCL provides that a director has no liability in any action based on an act of the director if he or she has acted in good faith, in a manner he or she reasonably believes to be in the corporation’s best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances. As permitted by the MGCL, our charter limits the liability of our directors and officers to our company and our stockholders for money damages, to the maximum extent permitted by Maryland law. Under Maryland law, our present directors and officers will not have any liability to us or our stockholders for money damages other than liability resulting from:

 

    actual receipt of an improper benefit or profit in money, property or services; or

 

    a final judgment based upon a finding that his or her action or failure to act was the result of active and deliberate dishonesty by the director or officer and was material to the cause of action adjudicated.

Our charter provides that we have the power to obligate ourselves, and our amended and restated bylaws obligate us, to indemnify our directors and officers for actions taken by them in those capacities and to pay or reimburse their reasonable expenses in advance of final disposition of a proceeding to the maximum extent

 

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permitted by Maryland law. In addition, we have entered into indemnification agreements with our directors and executive officers that provide for indemnification and advance expenses to the maximum extent permitted by Maryland law. As a result, we and our stockholders may have more limited rights against our directors and officers than might otherwise exist under common law.

Our board of directors may change our major corporate policies without stockholder approval and those changes may materially and adversely affect us.

Our board of directors will determine and may eliminate or otherwise change our major corporate policies, including our acquisition, investment, financing, growth, operations and distribution policies. While our stockholders have the power to elect or remove directors, changes in our major corporate policies may be made by our board of directors without stockholder approval and those changes could adversely affect our business, financial condition, liquidity, results of operations and prospects, the market price of our common stock and our ability to make distributions to our stockholders and to satisfy our debt service requirements.

The ability of our board of directors to revoke or otherwise terminate our REIT qualification, with stockholder approval, may cause adverse consequences to our stockholders.

Our charter provides that our board of directors may revoke or otherwise terminate our REIT election, only with the affirmative vote of stockholders entitled to cast a majority of all votes entitled to be cast on the matter, if the board determines that it is no longer in our best interests to continue to qualify as a REIT. If we cease to be a REIT, we would become subject to Federal income tax on our taxable income and would no longer be required to distribute most of our taxable income to our stockholders, which may have adverse consequences on the total return to our stockholders.

Our charter and bylaws contain provisions that may delay, defer or prevent an acquisition of our common stock or a change in control.

Our charter and bylaws contain provisions, the exercise or existence of which could delay, defer or prevent a transaction or a change in control that might involve a premium price for our stockholders or otherwise be in their best interests, including the following:

Our charter contains restrictions on the ownership and transfer of our stock.

In order for us to qualify as a REIT, no more than 50% of the value of outstanding shares of our stock may be owned, beneficially or constructively, by five or fewer individuals (or certain other persons) at any time during the last half of each taxable year (“closely held”). Subject to certain exceptions, our charter prohibits any stockholder from owning beneficially or constructively, with respect to any class or series of our capital stock, more than 9.8% (in value or by number of shares, whichever is more restrictive) of the aggregate of the outstanding shares of such class or series of our capital stock.

The constructive ownership rules under the Code are complex and may cause the outstanding stock owned by a group of related individuals or entities to be deemed to be constructively owned by one individual or entity. As a result, the acquisition of 9.8% or less of the outstanding shares of a class or series of our stock by an individual or entity could cause that individual or entity or another individual or entity to own constructively in excess of the relevant ownership limits.

Among other restrictions on ownership and transfer of shares, our charter also prohibits any person from owning shares of our stock that would result in our being “closely held” under Section 856(h) of the Code or otherwise cause us to fail to qualify as a REIT. Any attempt to own or transfer shares of our common stock or of any of our other capital stock in violation of these restrictions may result in the shares being automatically transferred to a charitable trust or may be void.

 

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Our charter provides that our board may grant exceptions to the 9.8% ownership limit, subject in each case to certain initial and ongoing conditions designed to protect our status as a REIT. These ownership limits may prevent a third-party from acquiring control of us if our board of directors does not grant an exemption from the ownership limits, even if our stockholders believe the change in control is in their best interests. An exemption from the 9.8% ownership limit was granted to certain stockholders, and our board may in the future provide exceptions to the ownership limit for other stockholders, subject to certain initial and ongoing conditions designed to protect our status as a REIT.

Our board of directors has the power to cause us to issue and authorize additional shares of our capital stock without stockholder approval.

Our charter authorizes us to issue authorized but unissued shares of common or preferred stock in addition to the shares of common stock issued and outstanding as of the date of this prospectus. In addition, our board of directors may, without stockholder approval, amend our charter to increase the aggregate number of our shares of stock or the number of shares of stock of any class or series that we have authority to issue and classify or reclassify any unissued shares of common or preferred stock and set the preferences, rights and other terms of the classified or reclassified shares. As a result, our board of directors may establish a class or series of shares of common or preferred stock that could delay or prevent a transaction or a change in control that might involve a premium price for our shares of common stock or otherwise be in the best interests of our stockholders. See “Description of Capital Stock—Power to Reclassify and Issue Stock.”

Certain provisions of Maryland law may limit the ability of a third party to acquire control of us.

Certain provisions of the MGCL may have the effect of inhibiting a third party from acquiring us or of impeding a change of control under circumstances that otherwise could provide our common stockholders with the opportunity to realize a premium over the then prevailing market price of such shares, including:

 

    “business combination” provisions that, subject to limitations, (a) prohibit certain business combinations between an “interested stockholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our outstanding shares of voting stock or an affiliate or associate of ours who, at any time within the two-year period immediately prior to the date in question, was the beneficial owner of 10% or more of the voting power of our then outstanding shares of our common stock) or an affiliate of any interested stockholder and us for five years after the most recent date on which the stockholder becomes an interested stockholder, and (b) thereafter impose two super-majority stockholder voting requirements on these combinations; and

 

    “control share” provisions that provide that holders of “control shares” of our company (defined as voting shares of stock that, if aggregated with all other shares of stock owned or controlled by the acquirer (except solely by virtue of a revocable proxy), would entitle the acquirer to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of “control shares”) have no voting rights with respect to “control shares” except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all of the votes entitled to be cast on the matter, excluding all votes entitled to be cast by the acquirer of control shares, and by any of our officers and employees who are also our directors.

Our charter provides that, notwithstanding any other provision of our charter or our bylaws, the Maryland Business Combination Act (Title 3, Subtitle 6 of the MGCL) does not apply to any business combination between us and any interested stockholder or any affiliate of any interested stockholder of ours and that we expressly elect not to be governed by the provisions of Section 3-602 of the MGCL in whole or in part. Any amendment to such provision of our charter must be approved by the affirmative vote of stockholders entitled to cast a majority of all votes entitled to be cast on the matter. Pursuant to the MGCL, our bylaws contain a provision exempting from the Maryland Control Share Acquisition Act any and all acquisitions by any person of

 

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shares of our stock. This provision of our bylaws may not be altered, amended or repealed except by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter. There can be no assurance that this exemption contained in our bylaws will not be amended or eliminated at any time in the future.

Additionally, provisions of Title 3, Subtitle 8 of the MGCL permit a Maryland corporation such as the Company, by action of its board of directors and without stockholder approval and regardless of what is provided in the charter or bylaws, to elect to avail itself of certain takeover defenses, such as a classified board, unless the charter or a resolution adopted by the board of directors prohibits such election. Our charter provides that we are prohibited from making any such election unless first approved by our stockholders by the affirmative vote of a majority of all votes entitled to be cast on the matter. See “Description of Capital Stock—Certain Provisions of Maryland Law and Our Charter and Bylaws—Business Combinations,” “—Control Share Acquisitions” and “—Subtitle 8.”

A small number of our stockholders could significantly influence our business and affairs.

As of the date of this prospectus, a few stockholders own substantial amounts of our outstanding voting stock. Large holders may be able to affect matters requiring approval by our stockholders, including the election of directors and the approval of mergers or other business combination transactions.

Risks Related to Our Common Stock

The cash available for distribution to stockholders may not be sufficient to pay dividends at expected levels, nor can we assure you of our ability to make distributions in the future. We may use borrowed funds to make distributions.

If cash available for distribution is less than the amount necessary to make cash distributions, our inability to make the expected distributions could result in a decrease in the market price of our common stock. All distributions will be made at the discretion of our board of directors and will depend upon various factors, including, but not limited to: our historical and projected financial condition, cash flows, results of operations and REIT taxable income, limitations contained in financing instruments, debt service requirements, operating cash inflows and outflows, including capital expenditures and acquisitions, limitations on our ability to use cash generated in one or more taxable REIT subsidiaries, if any, to fund distributions and applicable law. We may not be able to make distributions in the future. In addition, some of our distributions may include a return of capital. To the extent that we decide to make distributions in excess of our current and accumulated earnings and profits in the future, such distributions would generally be considered a return of capital for Federal income tax purposes to the extent of the holder’s adjusted tax basis in their shares. A return of capital is not taxable, but it has the effect of reducing the holder’s adjusted tax basis in our common stock. To the extent that such distributions exceed the adjusted tax basis of a holder’s shares, they will be treated as gain from the sale or exchange of such stock. If we borrow to fund distributions, our future interest costs would increase, thereby reducing our earnings and cash available for distribution from what they otherwise would have been.

For purposes of satisfying the minimum distribution requirement to qualify for and maintain REIT status, our REIT taxable income will be calculated without reference to our cash flow. Consequently, under certain circumstances, we may not have available cash to make our required distributions, and we may need to raise additional equity or debt in order to fund our intended distributions, or we may distribute a portion of our distributions in the form of our common stock or debt instruments, which could result in significant stockholder dilution or higher leverage. While the IRS has issued a revenue procedure indicating that certain distributions that are made partly in cash and partly in stock will be treated as taxable dividends that would satisfy that REIT annual distribution requirement and qualify for the dividends paid deduction for U.S. Federal income tax purposes, no assurance can be provided that we will be able to satisfy the requirements of the revenue procedure. Therefore it is unclear whether and to what extent we will be able to make taxable dividends payable in-kind. In

 

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addition, to the extent we were to make distributions that include our common stock or debt instruments, a stockholder of ours will be required to report dividend income as a result of such distributions even though we distributed no cash or only nominal amounts of cash to such stockholder.

VICI REIT is a holding company with no direct operations and will rely on distributions received from the Operating Partnership to make distributions to its stockholders.

VICI REIT is a holding company and conducts its operations through subsidiaries, including the Operating Partnership and VICI Golf. VICI REIT does not have, apart from the units that it owns in the Operating Partnership and VICI Golf, any independent operations. As a result, VICI REIT relies on distributions from its Operating Partnership to make any distributions to its stockholders it might declare on its common stock and to meet any of its obligations, including any tax liability on taxable income allocated to it from the Operating Partnership (which might not be able to make distributions to VICI REIT equal to the tax on such allocated taxable income). In turn, the ability of subsidiaries of the Operating Partnership to make distributions to the Operating Partnership, and therefore, the ability of the Operating Partnership to make distributions to VICI REIT, depends on the operating results of these subsidiaries and the Operating Partnership and on the terms of any financing arrangements they have entered into. In addition, because VICI REIT is a holding company, claims of common stockholders of VICI REIT are structurally subordinated to all existing and future liabilities and other obligations (whether or not for borrowed money) and any preferred equity of the Operating Partnership and its subsidiaries. Therefore, in the event of our bankruptcy, liquidation or reorganization, VICI REIT’s assets and those of the Operating Partnership and its subsidiaries will be available to satisfy the claims of VICI REIT common stockholders only after all of VICI REIT’s, the Operating Partnership’s and its subsidiaries’ liabilities and other obligations and any preferred equity of any of them have been paid in full.

The Operating Partnership may, in connection with its acquisition of additional properties or otherwise, issue additional common units or preferred units to third parties. Such issuances would reduce VICI REIT’s ownership in the Operating Partnership. Because stockholders of VICI REIT do not directly own common units or preferred units of the Operating Partnership, they do not have any voting rights with respect to any such issuances or other partnership level activities of the Operating Partnership.

Conflicts of interest could arise between the interests of our stockholders and the interests of holders of Operating Partnership units which may impede business decisions that could benefit our stockholders.

Conflicts of interest could arise as a result of the relationships between us, on the one hand, and our Operating Partnership or any limited partner thereof, if any, on the other. Our directors and officers have duties to us under applicable Maryland law. At the same time, we, as general partner of our Operating Partnership, have fiduciary duties and obligations to our Operating Partnership and its limited partners under Delaware law and the partnership agreement of our Operating Partnership in connection with the management of our Operating Partnership. Our duties as general partner to our Operating Partnership and its limited partners may come into conflict with the duties of our directors and officers to VICI REIT. These conflicts may be resolved in a manner that is not in the best interests of our stockholders.

Risks Related to this Offering

There is currently no public market for our shares. An active, liquid and orderly trading market for our common stock may not develop or be sustained, and you may be unable to sell your shares at a price above the initial public offering price or at all.

Prior to this offering, our common stock was quoted on the OTC Markets Group, Inc.’s “Grey Market” under the symbol “VICI.” We cannot assure you that an active, liquid and orderly trading market for shares of our common stock will develop after this offering or, if one develops, be sustained. Active, liquid and orderly trading markets usually result in less price volatility and more efficiency in carrying out investors’ purchase and

 

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sale orders. In the absence of such a market, you may be unable to liquidate an investment in shares. The initial public offering price of our common stock will be determined by negotiations between us and the underwriters. The initial public offering price will not necessarily bear any relationship to our book value, assets or financial condition or any other established criteria of value and may not be indicative of the market price for our common stock after this offering. The price at which our common stock trade after the completion of this offering may be lower than the price at which the underwriters sell them in this offering.

The market price and trading volume of shares of our common stock may be volatile following this offering.

The market price of our common stock may be volatile. In addition, the trading volume in our common stock may fluctuate and cause significant price variations to occur. If the market price of our common stock declines, you may be unable to resell your shares at or above the public offering price or at all. We cannot assure you that the market price of our common stock will not fluctuate or decline significantly in the future.

Some of the factors, many of which are beyond our control, that could negatively affect the market price of our common stock or result in fluctuations in the price or trading volume of our common stock include:

 

    actual or anticipated variations in our quarterly results of operations or distributions;

 

    changes in our earnings, FFO, AFFO or Adjusted EBITDA estimates;

 

    publication of research reports about us, Caesars or the real estate or gaming industries;

 

    adverse developments involving Caesars;

 

    changes in market interest rates that may cause purchasers of our shares to demand a different yield;

 

    changes in market valuations of similar companies;

 

    market reaction to any additional capital we raise in the future;

 

    additions or departures of key personnel;

 

    actions by institutional stockholders;

 

    speculation in the press or investment community about our company or industry or the economy in general;

 

    the occurrence of any of the other risk factors presented in this prospectus; and

 

    general market and economic conditions.

An increase in market interest rates could cause potential investors to seek higher returns and therefore reduce demand for our common stock and result in a decline in our share price.

One of the factors that may influence the price of shares of our common stock is the return on our shares (i.e., the amount of distributions as a percentage of the price of shares of our common stock) relative to market interest rates. An increase in market interest rates, which are currently at low levels relative to historical rates, may lead prospective purchasers of our common stock to expect a return which we may be unable or choose not to provide. Higher interest rates would likely increase our borrowing costs and potentially decrease the cash available for distribution. Thus, higher market interest rates could cause the market price of shares of our common stock to decline.

Future offerings of debt, which would be senior to our shares upon liquidation, and/or preferred equity securities, which may be senior to our shares for purposes of distributions or upon liquidation, could adversely affect the market price of our common stock.

In the future, we may attempt to increase our capital resources by making additional offerings of debt or preferred equity securities, including medium-term notes, trust preferred securities, senior or subordinated notes

 

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and preferred shares. If a liquidation event were to occur, holders of our debt securities and preferred shares and lenders with respect to other borrowings will receive distributions of our available assets prior to the holders of our shares. Additional equity offerings may dilute the holdings of our existing stockholders or reduce the market price of our common stock, or both. Holders of shares of our common stock are not entitled to preemptive rights or other protections against dilution. Our preferred shares, if issued, could have a preference on liquidating distributions or a preference on distribution payments that could limit our ability to make a distribution to the holders of shares of our common stock. Since our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, our stockholders bear the risk of our future offerings reducing the market price of shares of our common stock and diluting their shareholdings in us.

The number of shares available for future sale could adversely affect the market price of shares of our common stock.

We cannot predict whether future issuances of our shares or the availability of shares of our common stock for resale in the open market will decrease the market price per share of shares of our common stock. Sales of a substantial number of shares of our common stock in the public market, or the perception that such sales might occur, could adversely affect the market price of shares of our common stock. In addition, we, all of our directors and officers and certain of our stockholders have agreed with the underwriters not to offer, pledge, sell, contract to sell or otherwise transfer or dispose of any shares or securities convertible into or exercisable or exchangeable for shares of our common stock for a period of 180 days, after the date of this prospectus; however, these lock-up agreements are subject to numerous exceptions and Morgan Stanley & Co. LLC, on behalf of the underwriters, may waive these lock-up provisions without notice. If any or all of these holders cause, or there is a perception that they may cause, a large number of their shares to be sold in the public market, the sales could reduce the trading price of shares of our common stock and could impede our ability to raise future capital, In addition, the exercise of the underwriters’ overallotment option or other future issuances of our shares would be dilutive to existing stockholders.

Our earnings and cash distributions could affect the market price of shares of our common stock.

Our common stock may trade at prices that are higher or lower than the net asset value per share. To the extent that we retain operating cash flow for investment purposes, working capital reserves or other purposes rather than distributing the cash flows to stockholders, these retained funds, while increasing the value of our underlying assets, may negatively impact the market price of shares of our common stock. Our failure to meet market expectations with regard to future earnings and cash distributions could adversely affect the market price of shares of our common stock.

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this prospectus, including statements such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “target,” “can,” “could,” “may,” “should,” “will,” “would” or similar expressions, constitute “forward-looking statements” within the meaning of the federal securities law. Forward-looking statements are based on our current plans, expectations and projections about future events. We caution you therefore against relying on any of these forward-looking statements. They give our expectations about the future and are not guarantees. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance and achievements to materially differ from any future results, performance and achievements expressed in or implied by such forward-looking statements.

The forward-looking statements included herein are based upon our current expectations, plans, estimates, assumptions and beliefs that involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results, performance and achievements could differ materially from those expressed in or by the forward-looking statements and may be affected by a variety of risks and other factors, including, among others:

 

    our dependence on subsidiaries of Caesars as tenant of all of our properties and Caesars or CRC as guarantor of the lease payments and the consequences any material adverse effect on their business could have on us;

 

    our dependence on the gaming industry;

 

    our ability to pursue our business and growth strategies may be limited by our substantial debt service requirements and by the requirement that we distribute 90% of our REIT taxable income in order to qualify for taxation as a REIT and that we distribute 100% of our REIT taxable income in order to avoid current entity level U.S. Federal income taxes;

 

    the impact of extensive regulation from gaming and other regulatory authorities;

 

    the ability of our tenants to obtain and maintain regulatory approvals in connection with the operation of our properties;

 

    the possibility that the tenants may choose not to renew the Lease Agreements following the initial or subsequent terms of the leases;

 

    restrictions on our ability to sell our properties subject to the Lease Agreements;

 

    Caesars’ historical results may not be a reliable indicator of its future results;

 

    our substantial amount of indebtedness and ability to service and refinance such indebtedness;

 

    our historical and pro forma financial information may not be reliable indicators of our future results of operations and financial condition;

 

    our inability to achieve the expected benefits from operating as a company independent of Caesars;

 

    limits on our operational and financial flexibility imposed by our debt agreements;

 

    the possibility our separation from CEOC fails to qualify as a tax-free spin-off, which could subject us to significant tax liabilities;

 

    the impact of changes to the U.S. Federal income tax laws;

 

    the possibility of foreclosure on our properties if we are unable to meet required debt service payments;

 

    the impact of a rise in interest rates on us;

 

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    our inability to successfully pursue investments in, and acquisitions or development of, additional properties;

 

    the impact of natural disasters or terrorism on our properties;

 

    the loss of the services of key personnel;

 

    the inability to attract, retain and motivate employees;

 

    the costs and liabilities associated with environmental compliance;

 

    failure to establish and maintain an effective system of integrated internal controls;

 

    the costs of operating as a public company;

 

    our inability to operate as a stand-alone company ;

 

    our inability to qualify or maintain our qualification for taxation as a REIT;

 

    our reliance on distributions received from our Operating Partnership to make distributions to our stockholders due to our being a holding company;

 

    our management team’s limited experience operating as a company that intends to qualify for taxation as a REIT;

 

    competition for acquisition opportunities from other REITs and gaming companies that may have greater resources and access to capital and a lower cost of capital than us; and

 

    additional factors discussed herein under “Risk Factors.”

Any of the assumptions underlying forward-looking statements could be inaccurate. You are cautioned not to place undue reliance on any forward-looking statements included in this prospectus. All forward-looking statements are made as of the date of this prospectus and the risk that actual results, performance and achievements will differ materially from the expectations expressed in or referenced by this prospectus will increase with the passage of time. Except as otherwise required by the Federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements after the date of this prospectus, whether as a result of new information, future events, changed circumstances or any other reason. In light of the significant uncertainties inherent in the forward-looking statements included in this prospectus, the inclusion of such forward-looking statements should not be regarded as a representation by us, the underwriters or any other person that the objectives and strategies set forth in this prospectus will be achieved.

 

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USE OF PROCEEDS

We estimate that we will receive net proceeds from this offering of approximately $             million, or approximately $            million if the underwriters exercise their overallotment option in full, in each case, based on an initial public offering price of $            , which is the midpoint of the price range set forth on the front cover of this prospectus, after deducting the underwriting discounts and commissions related to this offering and estimated offering expenses. We will contribute the net proceeds from this offering to the Operating Partnership, which will use the net proceeds to: (a) pay down $             million of the indebtedness outstanding under the Revolving Credit Facility; (b) redeem $             million in aggregate principal amount of the Second Lien Notes at a redemption price of 108% plus accrued and unpaid interest to the date of redemption; (c) repay $             million of the Term Loan B Facility; and (d) pay fees and expenses related to this offering; the remainder, if any, of the net proceeds will be used for general business purposes. Any proceeds received in connection with the exercise by the underwriters of their overallotment option will be used by the Operating Partnership for general business purposes.

The $766.9 million in aggregate principal amount of 8.0% Second Lien Notes bear interest at an annual rate of 8.0% per annum and mature on October 15, 2023. We expect to redeem the $             million in aggregate principal amount of the Second Lien Notes on or about February     , 2018. The Second Lien Notes were issued in October 2017 to certain creditors of CEOC. As of January 1, 2018, $2,200.0 million of indebtedness was outstanding under the Term Loan B Facility and $300.0 million of indebtedness was outstanding under the Revolving Credit Facility. The Term Loan B Facility matures in December 2024 and the Revolving Credit Facility matures in December 2022. Borrowings under the Term Loan B Facility and the Revolving Credit Facility initially bear interest at LIBOR plus 2.25% (approximately 3.76% as of January 1, 2018), provided that following completion of this offering, the interest rate will be LIBOR plus 2.00%. The Term Loan B Facility and the Revolving Credit Facility were entered into in December 2017, and we used the proceeds from the Term Loan B Facility and drawings under the Revolving Credit Facility to refinance a portion of our outstanding long-term debt.

Certain of the underwriters and/or their respective affiliates own a portion of the Second Lien Notes for their own account and/or for the accounts of customers, and therefore will receive a portion of the net proceeds of this offering. In addition, certain of the underwriters and/or their respective affiliates are acting as agents, arrangers and/or lenders under the Term Loan B Facility and the Revolving Credit Facility, and therefore will receive an additional portion of the net proceeds of this offering. Please read “Underwriting—Other Relationships.”

 

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MARKET PRICES

Our common stock is quoted on the OTC Markets Group, Inc.’s “Grey Market” under the symbol “VICI.” These quotations are not considered particularly relevant in determining the initial public offering price because there has historically been low volume resulting in a relative illiquid trading market. The following table sets forth the per share high and low closing prices for our common stock as quoted on the OTC Market for the period presented.

 

     Share Price  
     Low      High  

2018

     

January 1, 2018 to January 12, 2018

   $ 19.50      $ 20.50  

2017

     

October 18, 2017 to December 31, 2017

   $ 18.00      $ 21.00  

As of January 12, 2018, the closing price of our common stock as reported on the OTC U.S. market was $19.99 per share. As of January 12, 2018, there were approximately 216 stockholders of record of our common stock, not including beneficial owners of shares registered in nominee or street name.

In connection with this offering, we have applied to list our common stock for trading on the NYSE, under the symbol “VICI.”

 

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CAPITALIZATION

The following table sets forth our cash and cash equivalents and capitalization as of September 30, 2017:

 

    on a historical basis;

 

    on a pro forma basis to give effect to the adjustments described in “Selected Historical and Pro Forma Financial Data—Unaudited Pro Forma Combined Condensed Financial Information,” and

 

    on a pro forma as adjusted basis to give further effect for the issuance of                  shares of our common stock in this offering at an assumed initial public offering price of $             per share, which is the midpoint of the price range set forth on the cover of this prospectus, after deducting the underwriting discounts and commissions related to this offering, estimated offering expenses and the use of proceeds from the offering as described herein in “Use of Proceeds.”

This table should be read in conjunction with “Use of Proceeds,” “Selected Historical and Pro Forma Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the historical combined condensed financial statements of Caesars Entertainment Outdoor, our predecessor, our balance sheet, the combined statements of investments of real estate assets to be contributed to VICI REIT and our pro forma combined condensed financial statements, and in each case, the related notes thereto, included elsewhere in this prospectus.

The pro forma information below is illustrative only and our capitalization following the completion of this offering will be adjusted based on the actual initial offering price and other terms of this offering determined at pricing.

 

     As of September 30, 2017  
     Historical      Pro Forma     Pro Forma As
Adjusted
 
     (in thousands, except per share amounts)  

Cash and cash equivalents

   $         —      $ 11,555     $  
  

 

 

    

 

 

   

 

 

 

Debt: (1)

       

Term Loan B Facility

            2,200,000    

Revolving Credit Facility (2)

            300,000    

Second Lien Notes

            766,900    

CPLV CMBS Debt

            1,550,000    

Debt issuance costs

            (30,897  
  

 

 

    

 

 

   

 

 

 
            4,786,003    
  

 

 

    

 

 

   

 

 

 

Total debt, net

            4,774,448    
  

 

 

    

 

 

   

 

 

 

Equity:

       

Preferred stock, $0.01 par value, 50,000,000 shares authorized and no shares to be issued and outstanding on a pro forma as adjusted basis (3)

                   

Common stock, $0.01 par value, 750,000,000 shares authorized and 300,278,939 shares issued and outstanding on a pro forma basis and                  shares issued and outstanding on a pro forma as adjusted basis

            3,003    

Additional paid-in capital

            4,588,679    
  

 

 

    

 

 

   

 

 

 

Total equity

            4,591,682    
  

 

 

    

 

 

   

 

 

 

Total capitalization

   $      $ 9,366,130     $                   
  

 

 

    

 

 

   

 

 

 

 

(1)

On December 22, 2017, in connection with the acquisition of Harrah’s Las Vegas and the entry into of the Term Loan B Facility and the Revolving Credit Facility, we repaid in full the Prior Term Loans and we

 

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  caused VICI PropCo to purchase all of the then outstanding Prior CPLV Mezzanine Debt from the originating mezzanine lenders (such that VICI PropCo is now the holder of 100% of the outstanding Prior CPLV Mezzanine Debt). In addition, in December 2017, we repaid in full all of the then outstanding Prior First Lien Notes. We will use $         million and $         million of the proceeds from this offering to buydown a portion of the Second Lien Notes and Term B Loan Facility, respectively.
(2) As of January 16, 2018, we had approximately $300.0 million in borrowings outstanding under our Revolving Credit Facility. On December 22, 2017, we borrowed $300.0 million under our Revolving Credit Facility in connection with the closing of the acquisition of Harrah’s Las Vegas and the concurrent refinancing of certain of our long-term debt. We will use $         million of the proceeds from this offering to repay $         million of the Revolving Credit Facility.
(3) Of the 50,000,000 shares of preferred stock, $0.01 par value, authorized, 12,000,000 shares are classified as Series A preferred stock, all of which were issued on the Formation Date and automatically converted on November 6, 2017 in accordance with the terms of the Series A preferred stock into 51,433,692 shares of Company common stock. Accordingly, none of the authorized shares of Series A preferred stock are currently issued or outstanding.

 

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DISTRIBUTION POLICY

We intend to make regular quarterly distributions to holders of shares of our common stock. We expect our quarterly distribution rate to be $0.2625 per share. On an annualized basis, this would be $1.05 per share, or an annual distribution rate of approximately         %, based on an assumed initial public offering price of $         per share, which is the midpoint of the price range set forth on the front cover of this prospectus. The actual distributions paid to shareholders with respect to the period commencing upon the completion of this offering and ending on March 31, 2018 will be pro-rated, calculated from the closing of this offering through March 31, 2018. For the twelve months ending on September 30, 2018, we expect to make distributions in cash in an amount equal to approximately         % of cash available for distribution.

Federal income tax law requires that a REIT distribute annually at least 90% of its REIT taxable income (with certain adjustments), determined without regard to the dividends paid deduction and excluding any net capital gains, and that it pay tax at regular corporate rates to the extent that it annually distributes less than 100% of its REIT taxable income, determined without regard to the dividends paid deduction and including any net capital gains. In addition, a REIT will be required to pay a 4% nondeductible excise tax on the amount, if any, by which the distributions it makes in a calendar year are less than the sum of 85% of its ordinary income, 95% of its capital gain net income and 100% of its undistributed income from prior years. For more information, see “Material U.S. Federal Income Tax Considerations.”

We intend to make distributions to our stockholders to comply with the REIT requirements of the Code and to avoid or otherwise minimize paying entity level Federal or excise tax (other than at any TRS of ours). We may generate taxable income greater than our income for financial reporting purposes prepared in accordance with GAAP. In particular, during the first several years of the leases, under the terms of the Lease Agreements, rental income will be allocated for tax purposes generally in an amount greater than cash rents. Further, we may generate REIT taxable income greater than our cash flow from operations after operating expenses and debt service as a result of differences in timing between the recognition of REIT taxable income and the actual receipt of cash or the effect of nondeductible capital expenditures, the creation of reserves or required debt or amortization payments.

In order to avoid or otherwise minimize current entity level U.S. Federal income taxes, we will generally be required to distribute sufficient cash flow after operating expenses and debt service payments to satisfy the REIT distribution requirements. We anticipate that our estimated cash available for distribution will be sufficient to enable us to meet the annual distribution requirements applicable to REITs and to avoid or minimize the imposition of corporate and excise taxes. However, under some circumstances, we may be required to make distributions in excess of cash available for distribution in order to meet these distribution requirements or to avoid or minimize the imposition of tax, and we may need to raise capital to make certain distributions and/or make a portion of our distributions with shares of our common stock. The IRS issued a private letter ruling with respect to certain issues relevant to our separation from Caesars providing generally that, subject to the terms and conditions contained therein, the amount of any shares of our common stock received by any of our stockholders as part of a distribution will be considered to equal the amount of cash that could have been received instead. Although we may generally rely upon the ruling, no assurance can be given that the IRS will not challenge our qualification as a REIT on the basis of other issues or facts outside the scope of the ruling. Furthermore, the IRS has issued a revenue procedure that provides that, so long as a REIT complied with certain provisions therein, certain distributions that are paid partly in cash and partly in stock will be treated as taxable dividends that would satisfy the REIT distribution requirements and qualify for the dividends paid deduction for U.S. Federal income tax purposes. In a distribution that consists in part of shares of our common stock, a stockholder of our common stock will be required to report dividend income equal to the amount of cash and common stock received as a result of the distribution even though we may distribute no cash or only nominal amounts of cash to such stockholder. For more information, see “Material U.S. Federal Income Tax Considerations—Annual Distribution Requirements.” We currently believe that we will have sufficient available cash to pay our required distribution for 2018 in cash but there can be no assurance that this will be the case.

 

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All distributions will be made by us at the discretion of our board of directors and will depend on our historical and projected financial condition, cash flows, results of operations and REIT taxable income, our capital requirements, financing covenants (which are expected to include limits on distributions by us), applicable law and other factors as our board of directors deems relevant. Our board of directors has not yet determined when any distributions will be declared or paid.

We presently anticipate that acquisitions will be financed through borrowings under our existing debt agreements, other debt financings or the issuance of equity securities. To the extent that those sources of funds are insufficient to meet all such cash needs, or the cost of such financings exceeds the cash flow generated by the acquired properties for any period, cash available for distribution could be reduced. In that event, we may also borrow funds, liquidate or sell a portion of our properties, issue equity securities or find another source of funds in order to make our required distributions.

We anticipate that our distributions generally will be taxable to our stockholders as ordinary income as to which non-corporate stockholders will generally be eligible for a deduction equal to 20% of such distributions, although a portion of the distributions may be designated by us as qualified dividend income or a capital gain dividend or may constitute a return of capital. We will furnish annually to each of our stockholders a statement setting forth distributions paid during the preceding year and their characterization as ordinary income, return of capital, qualified dividend income or capital gain. For a more complete discussion of the U.S. federal income tax treatment of distributions to our shareholders, See “Material U.S. Federal Income Tax Considerations—Taxation of Shareholders—Taxation of Taxable U.S. Shareholders.”

We have included below our estimated cash available for distribution for the twelve months ending September 30, 2018. We have presented estimated cash available for distribution for the twelve months ending September 30, 2018, because we intend to report this data on a calendar year basis after the conclusion of this offering. Our estimated cash available for distribution is a forward-looking statement and reflects our judgment as of the date of this prospectus of the conditions we expect to exist and the course of action we expect to take during the twelve months ending September 30, 2018. It should be read together with the historical consolidated financial statements and the accompanying notes thereto included elsewhere in this prospectus and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

We believe that we have a reasonable basis for these estimates and that our actual results of operations will approximate those reflected in our estimated cash available for distribution, but we can give no assurance that our estimated results will be achieved. The assumptions underlying our estimated cash available for distribution are inherently uncertain and, although we consider them reasonable as of the date of this prospectus, they are subject to a wide variety of significant business, economic and competitive risks and uncertainties that could cause actual results to differ materially from estimated results, including, among others, the risks and uncertainties described in “Risk Factors.” Any of the risks discussed in this prospectus, to the extent they occur, could cause actual results of operations to vary significantly from those presented below. Accordingly, there can be no assurance that our estimated cash available for distribution will be indicative of our future performance or that actual results will not differ materially from those presented in our estimated cash available for distribution. If our estimated results are not achieved, we may not be able to make a regular quarterly distribution at our initial distribution rate or at all. Inclusion of our estimated cash available for distribution in this prospectus should not be regarded as a representation by us, the underwriters or any other person that the results contained in our estimated cash available for distribution will be achieved. Therefore, you are cautioned not to put undue reliance on this information.

The accompanying table was not prepared with a view toward complying with the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information. Neither our independent auditors, nor any other independent accountants, have compiled, examined or performed any procedures with respect to our estimated cash available for distribution, nor have they expressed any opinion or any other form of assurance on our estimated cash available for distribution or its achievability, and our

 

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independent auditors assume no responsibility for, and disclaim any association with, our estimated cash available for distribution.

We do not undertake any obligation to release publicly any revisions or updates that we may make to our estimated cash available for distribution or the assumptions used to prepare our estimated cash available for distribution to reflect events or circumstances after the date of this prospectus other than as required by law.

The following table describes our pro forma net income for the twelve months ended December 31, 2016, and the adjustments we have made to calculate our estimated cash available for distribution for the twelve months ending on September 30, 2018, as adjusted (amounts in thousands, except share amounts, per share amounts and percentages):

 

Pro forma net income for the year ended December 31, 2016

   $               

Less: pro forma net income for the nine months ended September 30, 2016

  

Add: pro forma net income for the nine months ended September 30, 2017

  
  

 

 

 

Pro forma net income for the twelve months ended September 30, 2017

   $               

Add: depreciation expense

  

Add: amortization of deferred financing costs and original issue discount

  

Less: additional general and administrative expenses as a result of being a public company

  

Less: direct financing lease adjustments

  
  

 

 

 

Estimated cash flows from operating activities for the twelve months ended September 30, 2018

   $               
  

 

 

 

Estimated cash flows used in investing activities

   $               

Estimated cash flows used in financing activities—scheduled principal amortization payments

   $               
  

 

 

 

Estimated cash flow available for distribution for the year ending September 30, 2018

   $               
  

 

 

 

Total estimated initial annual distributions to shareholders

   $               
  

 

 

 

Estimated initial annual distributions per share

   $               
  

 

 

 

Payout ratio based on our share of estimated cash available for distribution

                 
  

 

 

 

Assumptions and Considerations

Set forth below are the material assumptions that we have made to demonstrate our ability to generate our estimated cash available for distribution for the twelve months ending September 30, 2018. The estimate has been prepared by, and is the responsibility of, our management. Our estimate reflects our judgment of the conditions we expect to exist and the course of action we expect to take during the estimate periods. The assumptions we disclose are those we believe are material to our estimated results of operations. We believe we have a reasonable basis for these assumptions. However, we can give no assurance that our estimated results will be achieved. There will likely be differences between our estimated and our actual results, and those differences may be material. If our estimate is not achieved, we may not be able to make cash distributions on our shares of common stock at our initial distribution rate or at all. For more information regarding the factors that may cause our estimates to prove inaccurate and the risks that could materially and adversely affect our ability to make distributions to our shareholders, please see “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements.”

The estimate assumes that on September 30, 2017 we raised net proceeds of $         million in this offering (after deducting the underwriting discount and expenses) through the issuance of          shares of our common stock at a price of $         per share (based on the midpoint of the price range set forth on the front cover of this prospectus). The estimate also assumes, as described in “Use of Proceeds” elsewhere in this prospectus, that the net proceeds of this offering will be used to: (a) pay down $         million of indebtedness outstanding under the

 

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Revolving Credit Facility; (b) redeem $             million in aggregate principal amount of the Second Lien Notes at a redemption price of 108% plus accrued and unpaid interest to the date of redemption; (c) redeem $             million of the Term Loan B Facility plus accrued and unpaid interest to the date of redemption; and (d) pay fees and expenses related to this offering; the remainder, if any, of the net proceeds will be used for general business purposes.

We estimate that our general and administrative costs on a consolidated basis, including costs of being a public company, could result in incremental general and administrative expenses of $12 million to $14 million per year.

 

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SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA

Selected Historical Combined Financial Data

The following table sets forth the selected historical combined financial data of Caesars Entertainment Outdoor as our predecessor, the operations of which were contributed to VICI Golf on October 6, 2017 as part of our Formation Transactions. These operations are comprised of: the Rio Secco golf course in Henderson, Nevada; the Cascata golf course in Boulder City, Nevada; the Grand Bear golf course in Saucier, Mississippi; and the Chariot Run golf course in Laconia, Indiana. The following selected historical combined financial data of Caesars Entertainment Outdoor for the nine month periods ended September 30, 2017 and 2016 and the selected historical combined balance sheet data as of September 30, 2017 have been derived from the unaudited combined financial statements of Caesars Entertainment Outdoor included elsewhere in this prospectus. The following selected historical combined financial data of Caesars Entertainment Outdoor for the three years in the period ended December 31, 2016 and the selected historical combined balance sheet data as of December 31, 2016 and 2015 have been derived from the audited combined financial statements of Caesars Entertainment Outdoor included elsewhere in this prospectus.

The following selected historical combined financial data of Caesars Entertainment Outdoors does not reflect the financial condition or results of operations of VICI REIT for the periods indicated. This historical financial data only reflects the historical operations of the golf course properties, which comprise a small portion of our total operations. The following table should be read in conjunction with “—Unaudited Pro Forma Combined Condensed Financial Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the historical combined condensed financial statements of Caesars Entertainment Outdoor, our predecessor, the balance sheet of VICI REIT, the combined statements of investments of real estate assets to be contributed to VICI REIT and the pro forma combined condensed financial statements of VICI REIT, and in each case, the related notes thereto, included elsewhere in this prospectus.

 

     Nine Months Ended
September 30,
    Year Ended
December 31,
 
     2017     2016     2016     2015     2014  
    

(in thousands)

 

Income statement data:

          

Net revenues

   $ 13,827     $ 13,962     $ 18,785     $ 18,077     $ 18,908  

Total operating expenses

     13,827       13,956       18,778       18,059       18,869  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

           6       7       18       39  

Interest expense, net

           (6     (7     (18     (39
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

                              

Income tax benefit

                       3       4  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $     $     $     $ 3     $ 4  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Other data:

          

Net cash provided by operating activities

   $ 2,244     $ 2,386     $ 2,721     $ 2,888     $ 3,073  

Net cash used in investing activities

     (1,918     (793     (869     (732     (11

Net cash used in financing activities

     (1,162     (1,108     (1,283     (2,026     (2,968

Depreciation

     2,402       2,227       3,030       2,882       2,904  

Capital expenditures

     1,918       793       869       798       17  

Balance sheet data (as of period end):

          

Cash and cash equivalents

   $ 84       $ 920     $ 351    

Total assets

     89,250         90,475       92,034    

Long-term debt

                   14    

Liabilities subject to compromise

     249         265       267    

Stockholders’ equity

     82,995         84,143       85,375    

 

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Unaudited Pro Forma Combined Condensed Financial Information

The following unaudited pro forma combined condensed balance sheet of VICI REIT as of September 30, 2017 gives effect to (i) the Formation Transactions, (ii) the Mandatory Conversions, (iii) the Acquisition of Harrah’s Las Vegas, (iv) the Capital Transactions, and (v) the consummation of this offering, as if they had occurred on September 30, 2017, and the following unaudited pro forma combined condensed statements of operations for the nine months ended September 30, 2017 and for the year ended December 31, 2016 give effect to such transactions as if they had occurred on January 1, 2016. See “Prospectus Summary—Recent Developments” and “Formation of Our Company.” The unaudited pro forma combined condensed financial statements have been prepared in accordance with Article 11 of Regulation S-X.

The following unaudited pro forma combined condensed financial information does not reflect the financial condition at the date or results of operations of VICI REIT for the periods indicated. The assumptions used and pro forma adjustments derived from such assumptions are based on currently available information, and in many cases are based on estimates and preliminary information. The assumptions underlying the pro forma adjustments are described in the accompanying notes to the unaudited pro forma combined condensed financial statements. We believe such assumptions are reasonable under the circumstances and reflect the best currently available estimates and judgments. However, the pro forma financial information may not be indicative of our future performance and does not necessarily reflect what our financial condition and results of operations would have been had the transactions to which the pro forma adjustments relate actually occurred on the dates indicated above.

The unaudited pro forma combined condensed financial statements should be read in conjunction with “—Selected Historical and Pro Forma Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the historical combined condensed financial statements of Caesars Entertainment Outdoor, our predecessor, the balance sheet of VICI REIT and the combined statements of investments of real estate assets to be contributed to VICI REIT, and in each case, the related notes, included elsewhere in this prospectus.

The following unaudited pro forma combined condensed financial statements give effect to this offering and the following transactions, including:

Formation Transactions

 

    the transfer of CEOC’s real property assets to VICI REIT and its subsidiaries;

 

    the execution of the Lease Agreements on the Formation Date;

 

    the incurrence by subsidiaries of VICI REIT of approximately $4.917 billion of indebtedness on the Formation Date and use of proceeds therefrom;

 

    the transfer of Caesars Entertainment Outdoor to VICI Golf;

 

    the entry into the Golf Course Use Agreement;

 

    the issuance of 177,160,494 shares of VICI REIT common stock to certain of CEOC’s creditors on October 6, 2017; and

 

    the issuance of 12,000,000 shares of Series A preferred stock with an aggregate liquidation preference of $300.0 million to certain of CEOC’s creditors and backstop investors on October 6, 2017 (debt issuance costs incurred on the Formation Date were paid by CEOC and did not offset the gross amounts of the debt reflected in the pro forma financial statements).

Mandatory Conversions

 

    the mandatory conversion on November 6, 2017 of all of the Series A preferred stock into 51,433,692 shares of the Company’s common stock for no additional consideration; and

 

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    the mandatory conversion on November 6, 2017 of $250.0 million of a junior tranche of Prior CPLV Mezzanine Debt into an aggregate of 17,630,700 shares of the Company’s common stock.

Acquisition of Harrah’s Las Vegas

 

    the acquisition of Harrah’s Las Vegas for a purchase price of approximately $1.14 billion; and

 

    the sale of approximately 18.4 acres of certain undeveloped land parcels located in Las Vegas, Nevada for $73.6 million.

Capital Transactions

 

    the sale in December 2017 of 54,054,053 shares of common stock at a price of $18.50 per share in a private placement, for net proceeds of approximately $963.9 million;

 

    the purchase in December 2017 of the remaining $400 million of Prior CPLV Mezzanine Debt at an aggregate purchase price of $438 million (plus certain transaction costs); and

 

    the refinancing of certain outstanding indebtedness as further described in “Prospectus Summary—Recent Developments.”

The unaudited pro forma combined condensed financial statements give effect to the application of “fresh start” reporting in accordance with ASC 852—Reorganizations (“ASC 852”). The pro forma adjustments related to the Formation Transactions are based on an assumed fair value of approximately $8.3 billion of the assets of VICI REIT. Fair values of assets and liabilities, including leases, on the pro forma combined condensed balance sheet are based on preliminary valuations, have been made solely for purposes of developing the unaudited pro forma combined condensed financial information and are subject to further revisions and adjustments. Updates to such preliminary valuations will be completed in the periods subsequent to those reported in this prospectus and will be calculated as of the Formation Date and, to the extent such updates reflect a valuation different than those used in these unaudited pro forma combined condensed financial statements, there may be adjustments in the carrying values of certain assets and liabilities and related deferred taxes and such adjustments may also affect the revenues and expenses that would be recognized in the combined condensed statement of operations of VICI REIT following the Formation Date. As such, the following unaudited pro forma combined condensed financial information is not intended to represent our actual post-Formation Date financial condition and results of operations, and any differences could be material.

 

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Unaudited Pro Forma Combined Condensed Balance Sheet

As of September 30, 2017

(in thousands)

 

          Formation     Pro Forma Adjustments        
    VICI
REIT
(a)
    Caesars
Entertainment
Outdoor

(b)
    Real Estate
Assets to be
Contributed
(c)
    Pro Forma
Adjustments
    Subtotal     Mandatory
Conversions

(m)
    Acquisition
of
Harrah’s
Las Vegas
Real Estate
(n)
    Capital
Transactions
(o)
    This
Offering
(r)
    Total Pro
Forma
 

Assets

                   

Real Estate Investments:

                   

Accounted for using the operating method

  $     $     $     $ 1,184,760  (d)    $ 1,184,760     $     $ (73,600   $     $     $ 1,111,160  

Accounted for using the direct financing method

                      7,040,240  (d)      7,040,240         1,136,200               8,176,440 (p) 

Property, net

                4,831,000       (4,831,000 )(d)              73,600               73,600  

Property and equipment, used in operations, net

          88,347             (13,347 )(e)      75,000                       75,000  

Cash and cash equivalents

          84             55,725  (f)      55,809         (1,069,205     1,024,951      

Other assets

          819                   819               7,483         8,302  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

  $     $ 89,250     $ 4,831,000     $ 3,436,378     $ 8,356,628     $     $ 66,995     $ 1,032,434     $                  $  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities

                   

Long-term debt

  $     $     $     $ 4,917,000  (g)    $ 4,917,000     $ (250,000   $     $ (180,997     $              (q) 

Deposit Liability

               
73,600
 
   

 
   

Short-term debt

                                  300,000          

Accounts payable

          194             (194 )(h)                             

Accrued expenses

          769             (769 )(h)                             

Deferred income taxes

          5,043             4,400  (i)      9,443                       4,772  
                  (4,671 )(e)      (4,671                  

Other liabilities

          249             (249 )(h)                             
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

          6,255             4,915,517       4,921,772       (250,000     73,600       119,003      

Redeemable preferred stock

                      758,814  (j)      758,814       (758,814                        

Equity

                   

Net investments

          82,943       4,831,000       3,394,000  (d)                             
                  (8,676 )(e)             
          (4,400 )(i)             
                  55,725  (f)             
                  (1,772 )(k)             
                  (4,917,000 )(g)             
                  194  (h)             
                  769  (h)             
                  249  (h)             
                  (758,814 )(j)             
                  52  (l)             
                  (2,674,270            

Common stock

                      1,772  (k)      1,772       690             541      

Additional paid in capital

                      2,674,270       2,674,270       1,008,124       (6,605     912,890      

Retained earnings

          52             (52 )(l)                                     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total equity

          82,995       4,831,000       (2,237,953     2,676,042       1,008,814       (6,605     913,431      
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and equity

  $     $ 89,250     $ 4,831,000     $ 3,436,378     $ 8,356,628     $     $ 66,995     $ 1,032,434     $     $  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of and should be read together with, this unaudited pro forma combined condensed financial information.

 

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Unaudited Pro Forma Combined Condensed Statement of Operations

For the Nine Months Ended September 30, 2017

(in thousands, except share and per share amounts)

 

          Formation     Pro Forma Adjustments  
    VICI
REIT

(aa)
    Caesars
Entertainment
Outdoor(bb)
    Pro Forma
Adjustments
    Subtotal     Acquisition
of Harrah’s
Las Vegas

Real Estate
    Capital
Transactions
    This
Offering
    Total
Pro
Forma
 

Revenues

               

Earned income from direct financing leases

  $     $     $ 477,941 (cc)    $ 477,941     $ 69,712 (ll)    $     $     $ 547,653  

Rental income from operating leases

                36,375 (dd)      36,375             36,375  

Golf course

          13,827       5,460 (ee)      19,287             19,287  

Property taxes reimbursed

                43,254 (ff)      43,254       2,310 (ff)          45,564  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

          13,827       563,030       576,857       72,022                   648,879  

Operating Expenses

               

Depreciation

          2,402       (548 )(gg)      1,854             1,854  

Golf course

          10,084       1,691 (hh)      11,775             11,775  

General and administrative

          1,341       6,909 (hh)      8,250             8,250  

Property taxes

                43,254 (ff)      43,254       2,310 (ff)          45,564  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

          13,827       51,306       65,133       2,310                   67,443  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

                511,724       511,724       69,712                   581,436  

Interest expense

                193,025 (ii)      193,025         (20,135 )(nn)                   (oo)                   (mm) 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

                318,699       318,699       69,712       20,135      

Provision for income taxes

                907 (jj)      907                         907  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

  $     $     $ 317,792     $ 317,792     $ 69,712     $ 20,135     $     $  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
               

Weighted average number of common and potentially dilutive securities outstanding

               

Basic

          246,224,886 (kk)                         (kk) 

Diluted

          246,224,886          

Basic earnings per common share

        $ 1.29           $  
       

 

 

         

 

 

 

Diluted earnings per common share

        $ 1.29           $

 
       

 

 

         

 

 

 

The accompanying notes are an integral part of and should be read together with, this unaudited pro forma combined condensed financial information.

 

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Unaudited Pro Forma Combined Condensed Statement of Operations

For the Year Ended December 31, 2016

(in thousands, except share and per share amounts)

          Formation     Pro Forma Adjustments  
   

VICI
REIT(aa)

   

Caesars
Entertainment
Outdoor(bb)

   

Pro Forma
Adjustments

   

Subtotal

   

Acquisition of
Harrah’s
Las Vegas
Real Estate

   

Capital

Transactions

   

This
Offering

   

Total
Pro Forma

 

Revenues

               

Earned income from direct financing leases

  $         —     $     $ 633,223  (cc)    $ 633,223     $ 92,596 (ll)    $     $     $ 725,819  

Rental income from operating leases

                48,500  (dd)      48,500             48,500  

Golf course

          18,785       8,651  (ee)      27,436             27,436  

Property taxes
reimbursed

                57,672  (ff)      57,672       3,081 (ff)          60,753  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

          18,785       748,046       766,831       95,677                   862,508  

Operating expenses

               

Depreciation

          3,030       (557 )(gg)      2,473             2,473  

Golf course

          13,739       1,961  (hh)      15,700             15,700  

General and administrative

          2,009       8,991  (hh)      11,000             11,000  

Property taxes

                57,672  (ff)      57,672       3,081 (ff)          60,753  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

          18,778       68,067       86,845       3,081                   89,926  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

          7       679,979       679,986       92,596               772,582  

Interest expense

          7       257,367  (ii)      257,374           (26,855 )(nn)                   (oo)                   (mm) 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

                422,612       422,612       92,596       26,855      

Provision for income taxes

                1,523  (jj)      1,523                         1,523  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

  $     $     $ 421,089     $ 421,089     $ 92,596     $ 26,855     $                  $  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average number of common and potentially dilutive securities
outstanding

               

Basic

          242,440,536  (kk)                         (kk) 

Diluted

          242,440,536          

Basic earnings per common share

        $ 1.74           $  
       

 

 

         

 

 

 

Diluted earnings per common share

        $ 1.74           $  
       

 

 

         

 

 

 

The accompanying notes are an integral part of and should be read together with, this unaudited pro forma combined condensed financial information.

Note 1—Balance Sheet Pro Forma Adjustments

 

  (a)   VICI REIT was formed as Rubicon Controlled LLC, a Delaware limited liability company, on July 5, 2016, and was renamed VICI Properties Inc., referred to herein as VICI REIT, and converted into a Maryland corporation on May 5, 2017. VICI REIT had no assets and no operating activity prior to the Formation Date.

 

  (b)   Represents the balance sheet derived from the historical unaudited combined financial statements of Caesars Entertainment Outdoor, included elsewhere in this prospectus. Caesars Entertainment Outdoor was transferred to VICI Golf on the Formation Date.

 

  (c)   Represents amounts derived from the historical unaudited combined statement of investments of real estate assets to be contributed to VICI REIT from CEOC, which is included elsewhere in this prospectus.

 

  (d)   Represents the adjustment to the real estate assets to fair value on the Formation Date under ASC 852 for real estate assets under lease through the Formation Lease Agreements and the reclassification of such real estate assets as investments in direct financing leases and operating leases.

 

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The real estate assets are valued using an income approach and, more specifically, the discounted cash flow (“DCF”) technique. Future lease payments for the properties are modeled according to the terms contained in the Lease Agreements. Although management believes the length of the leases with CEOC will extend to the full thirty-five year lease term (assuming the exercise of tenant renewal options) per the Lease Agreements, the real property valuation analysis contemplates typical market participant oriented nine and 14 year hold periods as a best methodology to estimate the value of the cash flow during the full term lease. Appropriate expenses are estimated and deducted from the future contract rent to derive expected future cash flows. Terminal or reversion values are calculated for both hold period scenarios based on estimated market terminal capitalization rates. The DCF technique estimates value by discounting back to present value the anticipated future cash flows for the interim periods in the DCF model plus the present value of the terminal values using an appropriate discount rate. The discount rate was derived based upon a weighted average cost of capital (“WACC”). The WACC was estimated based upon observations of a peer group of guideline companies whose stock was publicly traded on recognized exchanges as such guideline companies were considered comparable to VICI REIT. Factors considered in deriving a WACC included general market rates of return at the valuation date, business risks associated with the industry in which VICI REIT operates, and other specific risk factors deemed appropriate. An estimated discount rate of 9.0% was selected as a base rate for all properties. Individual property discount rates were then adjusted based on the specific additional aforementioned risk factors and, once adjusted, ranged from 7.5% to 17.5%.

Under guidance in ASC 840—Leases (“ASC 840”), the Lease Agreements are bifurcated between operating leases and direct financing leases. The fair value assigned to certain portions of the land qualify for operating lease treatment while the fair value assigned to the buildings is classified as a direct financing lease, and the portion of the land which was not bifurcated is also classified as part of direct financing lease.

Land accounted for under the operating method has an indefinite useful life and is not depreciated.

 

  (e)   Represents the adjustment to fair value of $75.0 million for the Caesars Entertainment Outdoor assets and liabilities based on a preliminary purchase price allocation and the related impact to historical deferred tax liability relating to the assets adjusted. The assets and liabilities contributed will be reported in accordance with fresh start reporting.

 

  (f)   Represents cash contributed by CEOC on the Formation Date pursuant to the Plan of Reorganization.

 

  (g)   Represents the gross amounts of indebtedness incurred by subsidiaries of VICI REIT on the Formation Date described below. The respective financing and issuance costs incurred for debt issued on the Formation Date were paid by CEOC.

 

         Pro forma debt of VICI REIT on the Formation Date includes: (1) Term Loans with a variable interest rate per annum of LIBOR plus 3.5%, maturing in 2022; (2) First Lien Notes with variable interest rate per annum based on the sum of (A) the greater of (i) LIBOR and (ii) 1.0% plus (B) 3.5%, maturing in 2022; (3) Second Lien Notes with a fixed interest rate per annum of 8.0%, maturing in 2023; (4) Prior CPLV CMBS Debt with a fixed interest rate per annum of 4.36%, maturing in October 2022; and (5) CPLV Mezzanine Debt with a fixed interest rate per annum of 6.75% (with respect to the senior tranche) and 7.45% (with respect to the intermediate tranche).

 

         The table below shows the amount of debt outstanding on the Formation Date.

 

(in millions)       

CPLV CMBS Debt

   $ 2,200.0  

Term Loans and First Lien Notes

     1,950.1  

Second Lien Notes

     766.9  
  

 

 

 

Total Debt

   $ 4,917.0  
  

 

 

 

 

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  (h)   Represents reversal of accounts payable and accrued expenses and other liabilities recorded on the historical Caesars Entertainment Outdoor financial statements that were not transferred to VICI REIT in connection with the Formation Transactions.

 

  (i)   Represents the reversal of the historical deferred tax liability associated with property and equipment that was retained by CEOC. The pro forma combined condensed financial information has been prepared based on the assumption that VICI REIT qualifies for taxation as a REIT under the Code. As such, VICI REIT generally will not be subject to Federal corporate income tax to the extent it distributes its REIT taxable income to its stockholders. In order to qualify for taxation as a REIT, we will be required to distribute 90% of our REIT taxable income. To the extent that we satisfy this distribution requirement and qualify for taxation as a REIT but distribute less than 100% of our REIT taxable income, we will be subject to U.S. Federal corporate income tax on any undistributed portion of such REIT taxable income. REITs are subject to a number of other organizational and operational requirements. We may still be subject to (i) certain state and local taxes on our income and property and (ii) federal corporate income and excise taxes on our undistributed REIT taxable income.

 

  (j)   Represents the fair value of the Series A preferred stock issued pursuant to the Plan of Reorganization giving effect to the Mandatory Conversions, which collectively resulted in the issuance of an aggregate of 246,224,886 shares of common stock. Due to the redemption and repayment provisions of the Series A preferred stock, it was classified as mezzanine equity in accordance with ASC 480 prior to the Mandatory Preferred Conversion. See “Description of Capital Stock—Preferred Stock.”

 

  (k)   Represents the par value of 177,160,494 shares of common stock issued pursuant to the Plan of Reorganization prior to the Mandatory Conversions.

 

  (l)   Represents retained earnings of Caesars Entertainment Outdoor that were not transferred to VICI REIT on adoption of “fresh start” reporting.

 

  (m)    Represents the mandatory conversion on November 6, 2017 of all of the Series A preferred stock with a fair value of $758.8 million into 51,433,692 shares (par value of $514,336) of common stock for no additional consideration and the mandatory conversion of $250.0 million of a junior tranche of Prior CPLV Mezzanine Debt into an aggregate of 17,630,700 shares (par value of $176,207) of common stock for no additional consideration.

 

  (n)   Represents the acquisition of the land and real property associated with Harrah’s Las Vegas for a purchase price of approximately $1.14 billion and the sale of approximately 18.4 acres of certain undeveloped land parcels located in Las Vegas, Nevada for $73.6 million. Due to the put/call option on these land parcels, the transaction does not meet the requirements of a completed sale for accounting purposes. As a result, the company will reclassify $73.6 million from Real estate assets accounted for using the operating method to Property, net in its combined condensed balance sheet. Additionally, the company will record a $73.6 million Deposit liability in its combined condensed balance sheet.

 

  (o)   Represents adjustments related to certain capital transactions on December 22, 2017, including

 

  (i) The private placement of 54,054,053 shares (par value of $541,054) of common stock to existing shareholders at $18.50 per share for gross proceeds of $1,000.0 million (net proceeds of $963.9 million).

 

  (ii) The issuance of $2,200.0 million aggregate principal amount ($2,169.1 million, net of deferred financing cost and original issue discount) of senior secured first lien term loans (“Term Loan Facility”) initially bearing interest at LIBOR plus 2.25%, provided that following an underwritten public offering of the equity interest of any parent entity of VICI PropCo which results in such equity interests being listed on a national securities exchange and generates gross cash proceeds of at least $500.0 million to such parent entity, such interest rate will be reduced by 0.25%. The Term Loan Facility is subject to amortization of 1.0% of principal per annum payable in equal quarterly installments.

 

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  (iii) The borrowing of $300.0 million ($292.5 million, net of deferred financing cost and original issue discount) of the Company’s $400.0 million senior secured revolving credit facility (the “Revolving Credit Facility”) initially bearing interest at LIBOR plus 2.25%, provided that following an underwritten public offering of the equity interest of any parent entity of VICI PropCo which results in such equity interests being listed on a national securities exchange and generates gross cash proceeds of at least $500.0 million to such parent entity, such interest rate will be reduced by 0.25%.

 

  (iv) The refinancing of $1,638.4 million aggregate principal amount of senior secured first lien term loans and redemption of $311.7 million aggregate principal amount of first-priority senior secured floating rate notes.

 

  (v) The repurchase of $400.0 million aggregate principal amount of Prior CPLV Mezzanine Debt at a purchase rate of 109.5% plus accrued and unpaid interest from the existing holders of such debt.

 

(p) The Company’s pro forma investment in direct financing leases consisted of the following as of September 30, 2017:

 

(in thousands)       

Minimum lease payments receivable (i)

   $ 29,390,697  

Estimated residual values of leased property (unguaranteed)

     1,987,651  
  

 

 

 

Gross investment in direct financing leases

     31,378,348  

Unamortized initial direct costs

     —    

Less: Unearned income

     (23,201,908
  

 

 

 

Net investment in direct financing leases

   $ 8,176,440  
  

 

 

 

 

(i) Minimum lease payments do not include contingent rent that may be received under the Lease Agreements. Contingent rent amounted to $0 for the nine months ended September 30, 2017 and the year ended December 31, 2016.

At September 30, 2017, pro forma minimum lease payments for each of the five succeeding fiscal years were as follows:

 

(in thousands)       

2017

   $ 180,394  

2018

     725,823  

2019

     730,148  

2020

     734,550  

2021

     748,332  

 

(q) The table below shows the amount of pro forma debt outstanding on September 30, 2017:

 

(in millions)       

Term Loan B Facility

   $               

CPLV CMBS Debt

  

Second Lien Notes

  

Revolving Credit Facility

  
  

 

 

 

Total Face Value Debt

  

Deferred financing cost

  

Original issue discount

  
  

 

 

 

Total Book Value Debt

   $  
  

 

 

 

 

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The pro forma combined condensed statements of operations assumes that the weighted average yield on the Term Loan B Facility, CPLV Debt and Second Lien Notes outstanding on September 30, 2017 will require annual cash interest payments of $             million, based upon the rates provided in the respective loan agreements.

 

(r) Represents the net proceeds from this offering as well as the repayment of certain indebtedness as described below. We expect to raise net proceeds of $             million in this offering (after deducting underwriting discounts and expenses) through the issuance of                  of our common stock at a price of $             per share based on the midpoint of the price range set forth on the front cover of this prospectus.

 

     We will use the proceeds from this offering to: (a) pay down $             million of indebtedness outstanding under the Revolving Credit Facility; (b) redeem $             million in aggregate principal amount of the Second Lien Notes at a redemption price of 108% plus accrued and unpaid interest to the date of redemption; (c) redeem $             million of the Term Loan B Facility plus accrued and unpaid interest to the date of redemption; and (d) pay fees and expenses related to this offering; the remainder, if any, of the net proceeds will be used for general business purposes.

 

     For purposes of this pro forma presentation, the net issuance proceeds from this offering and the use of proceeds described above have been applied to the pro forma combined condensed consolidated balance sheet assuming they occurred on September 30, 2017.

Note 2—Statement of Operations Pro Forma Adjustments

 

  (aa)   VICI REIT was formed as Rubicon Controlled LLC, a Delaware limited liability company, on July 5, 2016, and was renamed VICI Properties Inc., referred to herein as VICI REIT, and converted into a Maryland corporation on May 5, 2017. VICI REIT had no assets and had no operating activity prior to the Formation Date.

 

  (bb)   Represents the results of operations derived from the historical unaudited and audited combined financial statements of Caesars Entertainment Outdoor, included elsewhere in this prospectus. Caesars Entertainment Outdoor was transferred to VICI Golf on the Formation Date, including the historical expenses directly associated with the assets contributed by CEOC, comprised of depreciation, property taxes, insurance, operating expenses and payroll costs.

 

  (cc)   Represents lease income associated with the rent from the Formation Lease Agreements which are accounted for as direct financing leases. Under the CPLV Lease Agreement, base rent is $165.0 million for the first seven years with an annual increase of the greater of 2% and the increase in the Consumer Price Index commencing in the second year. Beginning in the eighth year, a portion of the rent amount will be designated as variable rent and will be adjusted periodically to reflect changes in net revenue for the property through the end of the lease term. At each renewal term, the base rent amount will be set at the fair market value for the rent but will not be less than the amount of rent due from CEOC in the immediately preceding year nor will the rent increase by more than 10% compared to the immediately preceding year. The portion of the overall rent amount attributable to any facility for which the renewal term extends beyond 80% of its useful life will be adjusted to fair market value for that facility.

 

        

Under each of the Non-CPLV Lease Agreement and Joliet Lease Agreement, base rent is equal to $433.3 million and $39.6 million, respectively, for the first seven years with an annual increase of the greater of 2% and the increase in the Consumer Price Index commencing in the sixth year. With respect to the Joliet Lease Agreement, we are entitled to receive 80% of the rent pursuant to the operating agreement of our joint venture, Harrah’s Joliet Landco LLC. Beginning in the eighth year, a portion of each rent amount will be designated as variable rent and will be adjusted periodically to reflect changes in net revenue for the respective properties through the end of the lease term. At each renewal term, each base rent amount will be set at the fair market value for the rent but will not be less than the

 

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  amount of rent due from CEOC in the immediately preceding year nor will such rent increase by more than 10% compared to the immediately preceding year.

Base rent and variable rent that are known at the lease commencement date will be recorded on an effective interest method basis over the thirty-five year lease term, which includes the initial fifteen-year non-cancelable lease term and all four five-year tenant optional renewal terms under the Formation Lease Agreements, as such renewal terms have been determined to be reasonably assured.

For the nine months ended September 30, 2017 and the year ended December 31, 2016, pro forma rent payments under the Formation Lease Agreements accounted for under the direct financing lease method total $438.3 million and $581.5 million, respectively. Pro forma earned income from those direct financing leases is $477.9 million and $633.2 million, respectively.

The difference of $39.6 million and $51.7 million, respectively, represents the adjustment to recognize fixed amounts due under the Formation Lease Agreements on an effective interest basis at a constant rate of return over the lease term.

 

  (dd)   Represents the portion of lease income associated with the rent from the Formation Lease Agreements that is accounted for under the operating lease method. Rental income was allocated to operating lease assets based on CEOC’s incremental borrowing rate in accordance with ASC 840.

 

  (ee)   Represents the increase in revenues resulting from the Golf Course Use Agreement by and among subsidiaries of VICI Golf, CEOC, and Caesars Enterprise Services, LLC (among others). Revenues under this agreement are comprised of a membership fee, use fee and minimum rounds fee.

 

  (ff)   Represents reimbursements from our tenants for the property taxes paid by our tenants under the Formation Lease Agreements and the HLV Lease Agreement with offsetting expenses recorded in operating expenses, as one of our subsidiaries is the primary obligor.

 

  (gg)   Represents the change in depreciation expense for the assets of Caesar Entertainment Outdoor due to recording the assets at fair value under ASC 852. The depreciation expense is recorded over the estimated useful lives of the respective assets using the straight-line method.

 

  (hh)   Represents additional general and administrative costs, including payroll costs, information technology costs, rent expense and external audit fees incurred independently to operate VICI REIT as an independent company. This adjustment represents the costs which were determined to be factually supportable, directly attributable to and, with respect to the pro forma statement of operations, expected to have a continuing impact.

We also expect to incur other additional costs, including but not limited to salaries, director’s and officer’s insurance, tax advisory, and legal fees. Additionally, we have incremental costs as a result of becoming a publicly traded company. As these amounts are not directly attributable to the Formation Transactions, an adjustment for such additional general and administrative costs has been excluded.

We estimate that general and administrative costs for VICI REIT on a combined basis, including costs of being a reporting company, could result in incremental general and administrative expenses of $12 million to $14 million per year.

 

  (ii)   Represents interest expense related to borrowings incurred by our subsidiaries in connection with the Formation Transactions. See note (g) for additional details regarding this debt.

 

  (jj)   Reflects the income tax expense expected to be incurred by Caesars Entertainment Outdoor as a taxable REIT subsidiary based on an estimated effective income tax rate of 21% in accordance with the tax reform bill signed into law at the end of 2017.

 

  (kk)   Diluted earnings per share is computed using the weighted-average number of common shares and the effect of potentially dilutive securities outstanding during the period.

 

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  (ll)   Represents lease income associated with the rent from the HLV Lease Agreement which is accounted for as a direct financing. Under the HLV Lease Agreement, base rent is $87.4 million for the first seven years with an annual increase of 1% for the first five years and an annual increase of the greater of 2% and the increase in the Consumer Price Index commencing in the sixth year. Beginning in the eighth year, a portion of the rent amount will be designated as variable rent and will be adjusted periodically to reflect changes in net revenue for the property through the end of the lease term. At each renewal term, the base rent amount will be set at the fair market value for the rent but will not be less than the amount of rent due from the tenant in the immediately preceding year nor will the rent increase by more than 10% compared to the immediately preceding year. The portion of the overall rent amount attributable to any facility for which the renewal term extends beyond 80% of its useful life will be adjusted to fair market value for that facility.

Base rent and variable rent that are known at the lease commencement date will be recorded on an effective interest method basis over the thirty-five year lease term, which includes the initial fifteen- year non-cancelable lease term and all four five-year tenant optional renewal terms under the HLV Lease Agreement, as such renewal terms have been determined to be reasonably assured.

For the nine months ended September 30, 2017 and the year ended December 31, 2016, pro forma rent payments under the HLV Lease Agreement accounted for under the direct financing lease method total $66.2 million and $87.4 million, respectively. Pro forma earned income from those direct financing leases is $69.7 million and $92.6 million, respectively.

The difference of $3.5 million and $5.2 million, respectively, represents the adjustment to recognize fixed amounts due under the HLV Lease Agreement on an effective interest basis at a constant rate of return over the lease term.

 

  (mm)   Represents interest expense related to pro forma borrowings incurred by our subsidiaries as of September 30, 2017. It is estimated that a 1% increase or decrease in the annual interest rate on our variable rate obligations would increase or decrease our annual cash interest expense by approximately $             million on an annual basis. See note (q) for additional details regarding this debt.

 

  (nn)   Represents the reduction in interest expense resulting from the Capital Transactions described in Note (o). For purposes of this pro forma presentation, these transactions have been applied to the pro forma combined condensed statements of operations assuming they occurred on January 1, 2016.

 

  (oo)   Represents the reduction in interest expense resulting from the company using the net proceeds from this offering to (a) pay down $             million of indebtedness outstanding under the Revolving Credit Facility; (b) redeem $             million in aggregate principal amount of the Second Lien Notes; and (c) redeem $             million of the Term Loan B Facility. Additionally, the adjustment includes a 0.25% interest rate reduction on $             million of pro forma aggregate principal amount of Term Loan B indebtedness outstanding resulting from the consummation of this offering. For purposes of this pro forma presentation, the reduction in indebtedness from the use of the net proceeds from this offering have been applied to the pro forma combined condensed statements of operations assuming they occurred on January 1, 2016.

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the historical combined condensed financial statements of Caesars Entertainment Outdoors, our predecessor, the balance sheet of VICI REIT, the combined statements of investments of real estate assets to be contributed to VICI REIT and the pro forma combined condensed financial statements of VICI REIT, and in each case, the related notes thereto, included elsewhere in this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our business and growth strategies, statements regarding the industry outlook, our expectations regarding the future performance of our business and the other non-historical statements contained herein are forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements.” You should also review the “Risk Factors” section of this prospectus for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by such forward-looking statements.

Overview

VICI REIT is a Maryland corporation. On the Formation Date, in connection with the Plan of Reorganization, subsidiaries of CEOC transferred certain real estate assets and four golf course businesses to VICI REIT in exchange for 100% of VICI REIT’s common stock, series A convertible preferred stock (“Series A preferred stock”) and other consideration, including debt issued by other subsidiaries of VICI REIT and the proceeds of mortgage backed debt issued by other subsidiaries of VICI REIT, for distribution to CEOC’s creditors.

VICI REIT contributed the real property assets to VICI PropCo and the Caesars Entertainment Outdoor operations to VICI Golf, VICI REIT’s wholly-owned subsidiary. VICI REIT intends to elect on its U.S. Federal income tax return for our taxable year ending December 31, 2017, to be treated as a REIT and has elected for VICI Golf to be treated as a TRS.

Following the Formation Date, VICI REIT is a stand-alone entity initially owned by certain former creditors of CEOC.

VICI REIT is primarily engaged in the business of owning, acquiring and developing gaming, hospitality and entertainment destinations. Subsidiaries of VICI REIT lease the properties to certain subsidiaries of Caesars under the Lease Agreements.

Key Trends That May Affect Our Business

The following discussion includes forward-looking statements based on our management’s current beliefs, expectations and estimations. Forward-looking statements involve inherent risks and uncertainties. Our future operating and financial performance may differ materially from these forward-looking statements, including due to many factors outside of our control. We do not undertake any obligation to update forward-looking statements in the event of changed circumstances or otherwise. For more information, see “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” in this prospectus.

Subsidiaries of Caesars are the lessees of all of our properties pursuant to the Lease Agreements, and Caesars or CRC guarantees the obligations of the tenants under the Lease Agreements. The Lease Agreements account for substantially all of our revenues. Additionally, we expect to experience organic growth in rental revenue through annual rent escalators in our Lease Agreements. Accordingly, we are dependent on Caesars, the gaming industry and the health of the economies in the areas where our properties are located for the foreseeable future, and an event that has a material adverse effect on Caesars’ business, financial condition, liquidity, results of operations or prospects would have a material adverse effect on our business, financial condition, liquidity, results of operations and prospects. See “Risk Factors—Risks Related to Our Business and Operations.”

 

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Additionally, we expect to grow our portfolio through acquisitions by pursuing opportunities to execute sale leaseback transactions with Caesars, pursuant to: (i) the Call Right Agreements, relating to three properties; (ii) rights of first refusal relating to certain domestic gaming facilities proposed to be acquired or developed by Caesars located outside the Gaming Enterprise District of Clark County, Nevada and the properties that Caesars recently agreed to acquire from Centaur Holdings, LLC; and (iii) the Put-Call Agreement, which includes rights relating to the Eastside Convention Center Property in Las Vegas. Additionally, we will actively seek to grow our portfolio through acquisitions of experiential real estate in dynamic markets spanning hospitality, entertainment, leisure and gaming properties. Finally, we believe the approximately 37 acres (after giving effect to the sale of approximately 18.4 acres to Caesars in December 2017) of undeveloped land adjacent to the Las Vegas Strip that we own will provide attractive opportunities for potential future expansion and development. See “Business—Business and Growth Strategies.” In pursuing external growth initiatives, we will generally seek to acquire properties that can generate stable rental revenue through long-term, triple-net leases with tenants with established operating histories, and we will consider various factors when evaluating acquisitions, including the ability to diversify our tenant base, by potentially leasing properties to parties unaffiliated with Caesars, and increasing our geographic diversification.

Our operating and financial performance in the future will be significantly influenced by the success of our acquisition strategy, and the timing and the availability and terms of financing of any acquisitions that we may complete. While we can provide no assurance that we will exercise any of our contractual rights to purchase one or more properties from Caesars or otherwise be successful in acquiring any properties.

Additionally, our ability to successfully implement our acquisition strategy will depend upon the availability and terms of financing, including debt and equity capital. Further, the pricing of any acquisitions we may consummate and the terms of any leases that we may enter into will significantly impact our future results. Competition to execute sale leaseback transactions with attractive properties and desirable tenants is intense, and we can provide no assurance that any future acquisitions or leases will be on terms as favorable to us as those relating to recent transactions. Should we exercise an option to purchase a property under a Call Right Agreement, the purchase price will be equal to ten times the property’s annual rent, which, in turn, will equal approximately 60% of the trailing property EBITDAR at the time of exercise. Accordingly, the purchase price and rent for any property we may acquire under a Call Right Agreement and lease to Caesars will depend upon the property’s EBITDAR at the time of exercise.

We anticipate that we would seek to finance these acquisitions with a majority of our equity, although no assurance can be given that we would be able to issue equity in such amounts on favorable terms, or at all, or that we would not determine to incur more debt on a relative basis at the relevant time due market conditions or otherwise.

In addition to rent, our tenant is required to pay the following: (1) all facility maintenance; (2) all insurance required in connection with the leased properties and the business conducted on the leased properties; (3) taxes levied on or with respect to the leased properties (other than taxes on our income); and (4) all utilities and other services necessary or appropriate for the leased properties and the business conducted on the leased properties. Accordingly, due to the “triple-net” structure of our leases, we do not expect to incur significant property-level expenses. As a public company, we expect to incur annual incremental general and administrative expenses of $12 million to $14 million.

Discussion of the Historical Results of Operations of Caesars Entertainment Outdoor

The following discussion relates to the historical operations of Caesars Entertainment Outdoor, which, following the Formation Date, is owned by VICI Golf, our TRS. The golf courses include the Cascata golf course in Boulder City, Nevada, the Rio Secco golf course in Henderson, Nevada, the Grand Bear golf course in Biloxi, Mississippi and the Chariot Run golf course in Laconia, Indiana. The golf courses generate revenue through fees

 

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charged for general golf course usage (including green fees, golf club rentals, and cart charges), annual or corporate memberships (at Rio Secco, Grand Bear and Chariot Run), a school of golf (at Rio Secco), and food, beverage, and merchandise sales.

For financial reporting periods occurring after the Formation Date, the assets and liabilities of Caesars Entertainment Outdoor will be reflected on our consolidated balance sheet together with other real estate assets and liabilities acquired by us. Following the Formation Date, such assets and liabilities will not be comparable to the assets and liabilities of Caesars Entertainment Outdoor as reported at fair value, for periods prior to the Formation Date due to the application of fresh-start reporting.

Nine months ended September 30, 2017 compared to nine months ended September 30, 2016

Net revenues for Caesars Entertainment Outdoor were $13.8 million and $14.0 million for nine months ended September 30, 2017 and 2016, respectively. Revenues for the nine months ended September 30, 2017 were comprised of golf revenues of $11.2 million, food and beverage revenues of $1.3 million and retail and other revenues of $1.3 million. Revenues for the nine months ended September 30, 2016 were comprised of golf revenues of $10.9 million, food and beverage revenues of $1.6 million and retail and other revenues of $1.5 million. The decrease in revenue for the nine months ended September 30, 2017 was primarily due to the planned closure of Rio Secco for planned renovations to the golf course beginning late May 2017 and continuing through early October 2017.

Operating expenses for Caesars Entertainment Outdoor decreased $0.2 million to $13.8 million for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016, primarily due to the closure of the Rio Secco golf course due to planned renovations beginning late May 2017 and continuing through early October 2017.

Year ended December 31, 2016 compared to year ended December 31, 2015

Net revenues for Caesars Entertainment Outdoor were $18.8 million and $18.1 million for the year ended December 31, 2016 and 2015, respectively. Revenues for the year ended December 31, 2016 were comprised of golf revenues of $14.6 million, food and beverage revenues of $2.1 million and retail and other revenues of $2.1 million. Revenues for the year ended December 31, 2015 were comprised of golf revenues of $14.1 million, food and beverage revenues of $2.1 million and retail and other revenues of $1.9 million.

Operating expenses for Caesars Entertainment Outdoor increased $0.7 million, or 4.0%, to $18.8 million for the year ended December 31, 2016 compared to the year ended December 31, 2015, primarily due to higher direct golf expenses associated with higher golf revenues.

Year ended December 31, 2015 compared to year ended December 31, 2014

Net revenues for Caesars Entertainment Outdoor were $18.1 million and $18.9 million for the year ended December 31, 2015 and 2014, respectively. Revenues for the year ended December 31, 2015 were comprised of golf revenues of $14.1 million, food and beverage revenues of $2.1 million and retail and other revenues of $1.9 million. Revenues for the year ended December 31, 2014 were comprised of golf revenues of $14.5 million, food and beverage revenues of $2.3 million and retail and other revenues of $2.1 million.

Operating expenses for Caesars Entertainment Outdoor decreased $0.8 million, or 4.3%, to $18.1 million in 2015 when compared to the year ended December 31, 2014, primarily due to lower direct golf expenses driven by lower golf revenues.

Revenues

Substantially all of our revenues are derived from our leased properties, with the balance derived from our golf course operations. Our Lease Agreements are comprised of the following: one with respect to the CPLV

 

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facilities, one with respect to all regional properties (other than the Joliet facilities), one with respect to the Joliet facilities and one with respect to HLV. Each of the Lease Agreements has an initial 15 year term, subject to four five-year renewal terms at the option of the respective tenant. The rent is comprised of base rent and variable rent components which are described below:

CPLV Lease Rent

Base Rent: CPLV Lease Agreement

The base rent is a fixed amount initially equal to $165.0 million annually during the first seven years of the CPLV Lease Agreement. The fixed amount includes an annual rent escalator for years two through seven of the lease that is equal to the greater of (i) 2% and (ii) the increase of the Consumer Price Index from the prior year. After year seven, base rent in year eight will be equal to 80% of the overall rent for year seven increased by the escalator. Base rent in subsequent years during the initial term will be equal to the base rent of the immediately preceding year plus the applicable escalator. Base rent during each renewal term will be, for the first year of each such renewal term, an amount equal to fair market value rent, but no less than the base rent in the prior year and no more than 110% of the base rent in the prior year, and for each year following such first year of such renewal term, an amount equal to the amount payable as base rent in the immediately prior year, subject to the annual escalator.

Variable Rent: CPLV Lease Agreement

The variable rent commences in year eight. During lease years eight through ten, the variable rent consists of a fixed annual amount of 20% of the rent for year seven increased or decreased, as applicable by 13% of the difference between the annual revenue of the CPLV facilities for year seven compared to the year prior to the first year of the lease term, as described in “Business—Our Relationship with Caesars.” Thereafter, the variable rent for years eleven through the initial stated expiration date will be a fixed annual amount equal to the variable rent in years eight through ten, increased or decreased, as applicable, by 13% of the difference between the annual revenue for the CPLV facilities for year ten compared to year seven, as described in “Business—Our Relationship with Caesars.” Variable rent during each renewal term will be equal to the variable rent in effect for the prior year, increased or decreased, as applicable, by 13% of the difference in annual revenue from the CPLV facilities (x) for the first renewal term, from year ten to year fifteen, and (y) for each subsequent renewal term, from the year prior to the first year of the immediately preceding renewal term to the last year of the immediately preceding renewal term.

Non-CPLV and Joliet Lease Rent

Base Rent: Non-CPLV Lease Agreement and Joliet Lease Agreement

The base rent of each of the Non-CPLV Lease Agreement and Joliet Lease Agreement is a fixed annual amount initially equal to $433.3 million and $39.6 million, respectively, during the first seven years of each such lease agreement. Each fixed amount includes an annual rent escalator beginning in the sixth lease year that is equal to the greater of (i) 2% and (ii) the increase of the Consumer Price Index from the prior year. After year seven, base rent in years eight through ten will be equal to (x) for year eight, 70% of the overall rent for year seven increased by the escalator, and (y) for years nine and ten, the amount of the base rent in the immediately preceding year increased by the annual escalator. Base rent in subsequent years of the initial term will be equal to (x) for year eleven, 80% of year ten overall rent increased by the annual escalator and (y) for each subsequent year, the amount of the base rent in the immediately preceding year increased by the annual escalator. Base rent during each renewal term will be equal to, for the first year of such renewal term, fair market value rent, but no less than the base rent in the prior year and no more than 110% of the base rent in the prior year, and for each year following such first year of such renewal term, an amount equal to the amount payable as base rent in the immediately prior year, subject to the annual escalator. With respect to the Joliet Lease Agreement, we are entitled to receive 80% of the rent pursuant to the operating agreement of our joint venture, Harrah’s Joliet Landco LLC.

 

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Variable Rent: Non-CPLV Lease Agreement and Joliet Lease Agreement

The variable rent commences in year eight. The variable rent consists of a fixed annual amount of 30% of the overall rent for year seven increased or decreased, as applicable, by (a) 19.5% of the difference between the annual revenue of Non-CPLV and Joliet facilities for year seven compared to the year prior to the first year of the lease term, as described in “Business—Our Relationship with Caesars.” Thereafter, the variable rent for years eleven through the initial stated expiration date will be equal to a fixed annual amount of 20% of the overall rent for the tenth lease year increased or decreased, as applicable, by 13% of the difference between annual revenue of Non-CPLV and Joliet facilities for year ten compared to year seven, as described in “Business—Our Relationship with Caesars.” Variable rent during each renewal term will be equal to the variable rent in effect for the prior year, increased or decreased, as applicable, by 13% of the difference in annual revenue from the Non-CPLV and Joliet facilities (x) for the first renewal term, from year ten to year fifteen, and (y) for each subsequent renewal term, from the year prior to the first year of the immediately preceding renewal term to the last year of the immediately preceding renewal term.

HLV Lease Rent

Base Rent: HLV Lease

The base rent for the first seven years of the HLV Lease term is $87.4 million per year, subject to an annual escalator equal to (a) 1% commencing in the second year of the lease term, and (b) the greater of 2% and the Consumer Price Index increase commencing in the sixth year of the lease term, provided, however, with respect to clause (b), in the event such escalation in rent will cause the EBITDAR to Rent Ratio (as more particularly defined in the HLV Lease Agreement) to be less than 1.6:1, the escalator will be reduced to an amount that would result in a 1.6:1 EBITDAR to Rent Ratio for such lease year (but in no event shall the escalator be less than zero). For the eighth year of the lease term through the tenth year of the lease term, base rent will be (i) for the eighth year, 80% of the overall rent for the seventh lease year, subject to the annual escalator and (ii) for each subsequent year, an amount equal to the base rent for the immediately prior year, subject to the annual escalator. From and after the commencement of the eleventh year of the lease term, base rent will be (i) for the eleventh year, 80% of the overall rent for the tenth year of the lease term, subject to the annual escalator and (ii) for each subsequent year, an amount equal to the base rent for the immediately prior year, subject to the annual escalator. Base rent in each renewal term will be, for the first year of each such renewal term, an amount equal to fair market value rent, but in no event less than the base rent payable during the year immediately preceding the commencement of such renewal term or greater than 110% of the prior year’s base rent and, for each year following such first year of such renewal term, an amount equal to the amount payable as base rent in the immediately prior year, subject to the annual escalator.

Variable Rent: HLV Lease

The variable rent commences in year eight. During lease years eight through ten, the variable rent consists of a fixed annual amount equal to 20% of the overall rent for the seventh lease year, increased or decreased, as applicable, by 4.0% of the difference in net revenue of the operations of HLV, from the year prior to the first year of the lease term to the seventh year of the lease term as described in “Business—Our Relationship with Caesars.” Thereafter, the variable rent for years eleven through the initial stated expiration date will be a fixed annual amount equal to 20% of the overall rent for the tenth year of the lease term, increased or decreased, as applicable, by 4.0% of the difference in net revenue from the operations of HLV from the seventh year of the lease term to the tenth year of the lease term. Annual variable rent during each renewal term will be an amount equal to the variable rent in effect for the year of the lease term immediately preceding the first year of such renewal term, with such variable rent increased or decreased, as applicable, by 4.0% of the difference in net revenue from the operations of HLV from year ten of the lease term to year 15 of the lease term (in the event of the first renewal period) or from the year prior to the first year of the immediately preceding renewal term to the last year of the immediately preceding renewal term (in the event of subsequent renewal periods).

 

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Revenue Recognition

The accounting treatment of the Lease Agreements is bifurcated between operating leases and direct financing leases. We recognize lease income with respect to the buildings and a portion of the land under the direct financing lease method, and rental revenue with respect to a certain portion of the land under the operating lease method.

For the nine months ended September 30, 2017 and the year ended December 31, 2016, pro forma cash received under our Lease Agreements was $540.9 million and $717.4 million, respectively, of which $36.4 million and $48.5 million, respectively, were accounted for under the operating lease method and $504.6 million and $668.9 million were accounted for under the direct financing lease method.

Rental income from operating leases was $36.4 million and $48.5 million in the nine months ended September 30, 2017 and in 2016, respectively, on a pro forma basis. Pro forma earned income from direct financing leases for the nine months ended September 30, 2017 and the year 2016 was $547.7 million and $725.8 million, respectively. On a pro forma basis, earned income from direct financing leases exceeded cash payments accounted for using the direct financing lease method due to the adjustment to recognize fixed amounts due on an effective interest basis at a constant rate of return over the lease term.

Golf Course Revenue

Revenue generated by Caesars Entertainment Outdoor is derived primarily from our golf course operations. As part of the Formation Transactions, we entered into the Golf Course Use Agreement with Caesars whereby we will receive a $10 million annual membership fee as consideration for providing discounted green fees for individuals and events and preferred blocked tee times. The membership fee will be subject to increase or decrease, as applicable, whenever rent under the Non-CPLV Lease Agreement is adjusted in accordance with the terms of the Non-CPLV Lease Agreement. The adjusted membership fee will be calculated based on the proportionate increase or decrease, as applicable, in rent under the Non-CPLV Lease Agreement. In addition to the annual membership fee, we will also receive use fees and minimum round fees, which will be subject to an annual escalator equal to the greater of 2% and the increase in the Consumer Price Index from the prior year beginning at the times provided under the Golf Course Use Agreement.

General and Administrative Expenses

General and administrative costs are expected for items such as compensation costs (including stock based compensation awards), professional services, office costs, and other costs associated with development activities. As of the date of this prospectus, we have approximately 140 employees at the Operating Partnership or VICI Golf or their respective subsidiaries. Compensation arrangements and equity grants have not yet been determined.

As a reporting company, we expect to incur incremental costs to support our business, including management personnel, legal expenses, finance, and human resources as well as certain costs associated with being a reporting company. We estimate that general and administrative costs for VICI REIT on a combined basis, including costs of being a reporting company, could result in incremental general and administrative expenses of $12 million to $14 million per year.

Property Operating Expenses

Property operating expenses are expected for expenditures necessary to maintain the premises in reasonably good order and repair and will be paid by the tenants pursuant to the Lease Agreements. Property operating expenses will also include other expenses expected to be paid or reimbursed by the tenants such as property taxes. Pro forma property taxes were $45.6 million in the nine months ended September 30, 2017 and $60.8 million for the year ended December 31, 2016. All of such expenses would have been paid or reimbursed by the tenants had this transaction occurred on January 1, 2016.

 

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Interest Expense

We will incur interest expense from our borrowing obligations. As of September 30, 2017, on a pro forma basis, our debt totaled $         million ($         million, net of deferred financing cost and original issue discount). On a pro forma basis, we expect to have annual cash interest costs of approximately $         million, based on an estimated weighted average interest rate of         % per annum. See “—Liquidity and Capital Resources” below for more information.

Revenues and operating expenses of VICI Golf

VICI Golf holds the golf course properties, which include the operations of the Rio Secco golf course in Henderson, Nevada, the Cascata golf course in Boulder City, Nevada, the Grand Bear golf course in Saucier, Mississippi, and the Chariot Run golf course in Laconia, Indiana. Revenue generated by the golf course properties is derived from golf course operations, food and beverage and merchandise sales. On a pro forma basis, the golf course properties would have generated net revenues of $19.3 million and $27.4 million, respectively, and would have incurred total operating expenses (including direct golf course expenses, depreciation and general and administrative costs) of $13.6 million and $18.2 million for the nine months ended September 30, 2017 and the year ended December 31, 2016, respectively. Additionally, on a pro forma basis the tax rate for VICI Golf operations for the nine months ended September 30, 2017 and the year ended December 31, 2016 would have been 21.0%.

Liquidity and Capital Resources

Cash Flow Analysis

Cash Flows from Operating Activities

Net cash provided by operating activities for Caesars Entertainment Outdoor totaled $2.2 million and $2.4 million for the nine months ended September 30, 2017 and 2016, respectively. The decrease in net cash provided by operating activities of $0.2 million for the nine months ended September 30, 2017 compared to the corresponding period in the prior year was comprised primarily of lower cash receipts from customers due to the closure of Rio Secco due to renovations. This was partially offset by lower cash paid for operating expenses for the nine months ended September 30, 2017 compared to the corresponding period in the prior year.

Cash Flows from Investing Activities

Net cash used in investing activities for Caesars Entertainment Outdoor totaled $1.9 million and $0.8 million for the nine months ended September 30, 2017 and 2016, respectively, which was solely for expenditures for property and equipment, net of construction payables. Cash used in investing activities during 2017 was due primarily to the $1.8 million invested in the renovation of the Rio Secco course from late May to the end of September.

Cash Flows from Financing Activities

Net cash used in financing activities for Caesars Entertainment Outdoor totaled $1.2 million and $1.1 million for the nine months ended September 30, 2017 and 2016, respectively. The increase in net cash used in financing activities of $0.1 million for the nine months ended September 30, 2017 compared to the corresponding period in the prior year was due to an increase of funding transactions with parent.

Debt

On the Formation Date, VICI PropCo issued $1,638.4 million of Prior Term Loans, $311.7 million aggregate principal amount of Prior First Lien Notes and $766.9 million aggregate principal amount of Second

 

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Lien Notes. CPLV Mortgage Borrower and certain of its affiliates that comprised the mezzanine borrowers borrowed $2,200.0 million of debt from third parties, in the form of the CPLV CMBS Debt and the Prior CPLV Mezzanine Debt. The junior tranche of the Prior CPLV Mezzanine Debt in the aggregate amount of $250.0 million was automatically exchanged for 17,630,700 shares of our common stock on November 6, 2017. The cash proceeds from the CPLV CMBS Debt and Prior CPLV Mezzanine Debt were distributed to certain creditors of CEOC under the Plan of Reorganization.

Prior Term Loans

On the Formation Date, our subsidiary VICI PropCo, as borrower, and certain of its subsidiaries entered into the senior secured credit facilities. The senior secured credit facilities provide for senior secured financing consisting of Prior Term Loans distributed to certain of CEOC’s creditors pursuant to the terms of the Plan of Reorganization in an aggregate principal amount of $1,638.4 million, which mature in 2022. The senior secured credit facilities have capacity to add incremental loans in an aggregate amount of: (a) $60 million plus (b) $1,450 million plus (c) additional amounts, subject, in the case of this clause (c), to the borrower and its restricted subsidiaries not exceeding certain leverage ratios.

The Prior Term Loans require scheduled quarterly payments in amounts equal to 0.25% of the original aggregate principal amount of the Prior Term Loans, with the balance due at maturity.

The borrower will pay interest quarterly on the Prior Term Loans at a rate per annum, reset quarterly, equal to (i) with respect to any ABR borrowings, the sum of ABR (as defined in the credit agreement) and 2.5% and (ii) with respect to any Eurocurrency borrowings, the sum of the Adjusted Eurocurrency Rate (as defined in the credit agreement) and 3.5%.

VICI PropCo is the borrower under the senior secured credit facilities and the material, domestic wholly-owned subsidiaries of VICI PropCo other than CPLV, CPLV’s subsidiaries and VICI FC Inc. (which is a co-issuer of our notes), are guarantors. The senior secured credit facilities are secured by a pledge of substantially all of the existing and future property and assets of VICI PropCo and the restricted subsidiary guarantors, including a pledge of the capital stock of the wholly-owned domestic subsidiaries held by VICI PropCo and the subsidiary guarantors and 65% of the capital stock of the first-tier foreign subsidiaries held by the VICI PropCo and the subsidiary guarantors, in each case subject to exceptions.

Under the senior secured credit facilities, VICI PropCo is also be required to meet specified leverage ratios in order to take certain actions, such as incurring certain debt. In addition, the senior secured credit facilities include covenants, subject to certain exceptions, restricting or limiting VICI PropCo’s ability and the ability of its restricted subsidiaries to, among other things: (i) incur additional debt; (ii) create liens on certain assets; (iii) enter into sale and lease-back transactions; (iv) make certain investments, loans and advances; (v) consolidate, merge, sell or otherwise dispose of all or any part of its assets; (vi) pay dividends or make distributions or make other restricted payments; (vii) enter into certain transactions with its affiliates; and (viii) amend or modify the articles or certificate of incorporation, by-laws and certain agreements or make certain payments or modifications of certain indebtedness.

The Prior Term Loans are prepayable at VICI PropCo’s option, in whole or in part, at any time, and from time to time, at a price equal to 100% of the principal amount of the Prior Term Loans redeemed plus accrued and unpaid interest to the redemption date plus (i) prior to the first anniversary of the issuance of such loans, a “make-whole” premium and (ii) thereafter, a prepayment premium equal to (a) 3% of the amount redeemed on and after the first anniversary of such issuance, (b) 2% of the amount redeemed on and after the second anniversary of such issuance, (c) 1% of the amount redeemed on and after the third anniversary of such issuance and (d) 0% on and after the fourth anniversary of such issuance; provided, however, that no “make-whole” or prepayment premium shall be payable in the event of any voluntary prepayment in cash of all Prior Term Loans prior to the six-month anniversary of the issuance of such loans.

 

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The Prior Term Loans were repaid in full on December 22, 2017.

Prior First Lien Notes

On the Formation Date, our subsidiaries VICI PropCo and VICI FC Inc. (collectively, the “notes co-issuers”) issued $311.7 million in aggregate principal amount of Prior First Lien Notes to certain creditors pursuant to the terms of the Plan of Reorganization. The Prior First Lien Notes are due in 2022.

The notes co-issuers will pay interest quarterly on the Prior First Lien Notes at a rate per annum, reset quarterly, equal to the sum of LIBOR (as defined in the indenture), with a floor of 1.00%, and 3.5%.

The Prior First Lien Notes are senior secured obligations of the notes co-issuers and rank equally and ratably in right of payment with all existing and future senior obligations and senior to all future subordinated indebtedness. The Prior First Lien Notes are guaranteed on a senior secured basis by the subsidiary guarantors that guarantee indebtedness under the senior secured credit facilities and secured by a first-priority security interest, subject to permitted liens, in the collateral that also secures the senior secured credit facilities. None of VICI REIT, our Operating Partnership or certain subsidiaries of VICI PropCo, including CPLV and its subsidiaries, are subject to the covenants of the indenture governing the Prior First Lien Notes or are guarantors of the Prior First Lien Notes.

The indenture governing the Prior First Lien Notes contains covenants that limit the notes co-issuers’ and their restricted subsidiaries’ ability to, among other things: (i) incur additional debt; (ii) pay dividends on or make other distributions in respect of their capital stock or make other restricted payments; (iii) make certain investments; (iv) sell certain assets; (v) create or permit to exist dividend and/or payment restrictions affecting their restricted subsidiaries; (vi) create liens on certain assets; (vii) consolidate, merge, sell or otherwise dispose of all or substantially all of their assets; (viii) enter into certain transactions with their affiliates; and (ix) designate their subsidiaries as unrestricted subsidiaries.

The Prior First Lien Notes are redeemable at VICI PropCo’s option, in whole or in part, at any time, and from time to time, at a price equal to 100% of the principal amount of the Prior First Lien Notes so redeemed plus accrued and unpaid interest to the redemption date plus, (i) prior to the first anniversary of the issuance of such notes, a “make-whole” premium and (ii) thereafter, a prepayment premium equal to (a) 3% of the amount redeemed on and after the first anniversary of such issuance, (b) 2% of the amount redeemed on and after the second anniversary of such issuance, (c) 1% of the amount redeemed on and after the third anniversary of such issuance and (d) 0% on and after the fourth anniversary of such issuance; provided, however, that no “make-whole” or prepayment premium shall be payable in the event of any optional redemption in cash of all of the Prior First Lien Notes on or prior to April 15, 2018. In addition, prior to the first anniversary of such issuance, up to 35% of the original aggregate principal amount of the Prior First Lien Notes may be redeemed at VICI PropCo’s option with the net cash proceeds of certain issuances of common or preferred equity by VICI PropCo, VICI REIT or any parent entity of VICI PropCo, at a price equal to 100% of the principal amount of the Prior First Lien Notes redeemed plus a premium equal to the interest rate per annum on the Prior First Lien Notes in effect on the date on which notice of redemption is given plus accrued and unpaid interest to the redemption date; provided, however, that at least 50% of the original aggregate principal amount of the Prior First Lien Notes must remain outstanding after any such redemption.

The Prior First Lien Notes were discharged in full in December 2017.

Second Lien Notes

On the Formation Date, the notes co-issuers issued $766.9 million in aggregate principal amount of Second Lien Notes to certain creditors pursuant to the terms of the Plan of Reorganization. The Second Lien Notes are due in 2023.

 

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The notes co-issuers will pay interest semi-annually on the Second Lien Notes at a rate per annum of 8.0%.

The Second Lien Notes are senior secured obligations of the notes co-issuers and rank equally and ratably in right of payment with all existing and future senior obligations and senior to all future subordinated indebtedness. The Second Lien Notes are guaranteed on a senior secured basis by each of the VICI PropCo existing and subsequently acquired direct and indirect wholly owned material domestic restricted subsidiaries, and secured by a second priority lien and security interest on substantially all of VICI PropCo and each such restricted subsidiaries’ material assets, including pledges of equity interests in their respective restricted subsidiaries and mortgages on their respective real estate (which mortgages are to be entered into within a certain period of time following the issuance of the Second Lien Notes), subject in each case to customary exceptions. Such guarantees are required to be provided by the same subsidiary guarantors that guarantee the indebtedness under the VICI PropCo Credit Facility or Prior First Lien Notes and such liens and security interests are required to be in the same collateral that secures the indebtedness under the VICI PropCo Credit Facility or Prior First Lien Notes. Neither VICI REIT or our Operating Partnership or certain subsidiaries of VICI PropCo, including CPLV and its subsidiaries, are subject to the covenants of the indenture governing the Second Lien Notes or are guarantors of the Second Lien Notes.

The indenture governing the Second Lien Notes contains covenants that limit the notes co-issuers’ and their restricted subsidiaries’ ability to, among other things: (i) incur additional debt; (ii) pay dividends on or make other distributions in respect of their capital stock or make other restricted payments; (iii) make certain investments; (iv) sell certain assets; (v) create or permit to exist dividend and/or payment restrictions affecting their restricted subsidiaries; (vi) create liens on certain assets to secure debt; (vii) consolidate, merge, sell or otherwise dispose of all or substantially all of their assets; (viii) enter into certain transactions with their affiliates; and (ix) designate their subsidiaries as unrestricted subsidiaries.

The Second Lien Notes are redeemable at VICI PropCo’s option, in whole or in part, at any time, from time to time, at a price equal to 100% of the principal amount of the Second Lien Notes so redeemed and, (1) prior to the third anniversary of the issuance of such Notes, a “make-whole” premium and (2) thereafter, a prepayment premium equal to (y) 4% of the amount redeemed on and after the third anniversary of such issuance, and (z) 0% on and after the fourth anniversary of such issuance plus accrued and unpaid interest to the redemption date. In addition, prior to the third anniversary of such issuance, up to 35% of the original aggregate principal amount of the Second Lien Notes may be redeemed at VICI PropCo’s option with the net cash proceeds of certain issuances of common or preferred equity by VICI PropCo, VICI REIT or any parent entity of VICI PropCo, at a price equal to 108% of the principal amount of the Second Lien Notes redeemed plus accrued and unpaid interest to the redemption date; provided, however, that at least 50% of the original aggregate principal amount of the Second Lien Notes must remain outstanding after any such redemption.

CPLV Loans

CPLV CMBS Debt

On the Formation Date, CPLV Mortgage Borrower borrowed the CPLV CMBS Debt, which matures in October 2022 and consists of asset-level real estate mortgage financing from various third-party financial institutions. The proceeds of such financing were $1,550.0 million in cash, which were distributed to certain of CEOC’s creditors pursuant to the terms of the Plan of Reorganization.

The CPLV CMBS Debt has an interest rate of 4.36% per annum and is secured by, among other things, all of the assets of CPLV Mortgage Borrower, including, but not limited to, CPLV Mortgage Borrower’s (1) fee interest (except as provided in (2)) in and to CPLV, (2) leasehold interest with respect to Octavius Tower, and (3) interest in the CPLV Lease Agreement and all related agreements. The CPLV CMBS Debt is a first priority lien, subject only to permitted encumbrances (which are set forth in the loan documentation), and an obligation to repay a specified sum with interest. The CPLV CMBS Debt was evidenced by certain promissory notes and

 

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secured by a deed of trust that created a mortgage lien on the fee and/or leasehold interest of the CPLV Mortgage Borrower.

The Operating Partnership provided a customary non-recourse carve-out guaranty with respect to the CPLV CMBS Debt.

The loan documents governing the CPLV CMBS Debt contain covenants limiting CPLV Mortgage Borrower’s ability to, among other things: (i) incur additional debt; (ii) enter into certain transactions with its affiliates; (iii) consolidate, merge, sell or otherwise dispose of its assets; and (iv) allow transfers of its direct or indirect equity interests.

Prior CPLV Mezzanine Debt

On the Formation Date, three direct and indirect special-purpose parent entities of CPLV Mortgage Borrower borrowed the Prior CPLV Mezzanine Debt from various third-party financial institutions. The Prior CPLV Mezzanine Debt matures in October 2022 and consists of three tranches: senior, intermediate and junior, in an amount of $200.0 million, $200.0 million and $250.0 million, respectively. The proceeds from such financing were distributed to certain of CEOC’s creditors pursuant to the terms of the Plan of Reorganization. On November 6, 2017, the junior tranche of the Prior CPLV Mezzanine Debt was subject to the Mandatory Mezzanine Conversion described under “Formation Transactions.” The senior and intermediate tranches have interest rates of 6.75% and 7.45%, respectively.

Each tranche of Prior CPLV Mezzanine Debt is secured by each borrower’s equity interests in its direct wholly-owned subsidiary. In particular, the senior tranche of the Prior CPLV Mezzanine Debt is secured by a pledge of the entirety of CPLV Mez 1 LLC’s 100% direct equity interest in CPLV Mortgage Borrower, the fee owner of CPLV and the direct borrower of the CPLV CMBS Debt. In turn, the intermediate tranche of the Prior CPLV Mezzanine Debt is secured by a pledge of the entirety of CPLV Mezz 2 LLC’s 100% direct equity interest in CPLV Mezz 1 LLC, and, prior to the Mandatory Mezzanine Conversion, the junior trance of the Prior CPLV Mezzanine Debt was secured by a pledge of the entirety of CPLV Mezz 3 LLC’s 100% direct equity interest in CPLV Mezz 2 LLC. CPLV Mezz 3 LLC is 100% owned by VICI PropCo.

The Operating Partnership provided a customary non-recourse carve-out guaranty with respect to the Prior CPLV Mezzanine Debt.

The loan documents governing the Prior CPLV Mezzanine Debt contain covenants limiting each borrower’s ability to, among other things: (i) incur additional debt; (ii) enter into certain transactions with its affiliates; (iii) consolidate, merge, sell or otherwise dispose of its assets; and (iv) allow transfers of its direct or indirect equity interests.

On December 22, 2017, VICI PropCo purchased from the originating mezzanine lenders the entirety of the outstanding Prior CPLV Mezzanine Debt (i.e., the senior and intermediate tranches) such that it is now the holder of 100% of the mezzanine lender’s interest in the same. Payments must continue to be made on account of such outstanding Prior CPLV Mezzanine Debt in accordance with the loan documents governing the Prior CPLV Mezzanine Debt and the loan documents governing the CPLV CMBS Debt (which call for, among other things, all income derived from CPLV by CPLV Mortgage Borrower to be paid into a blocked account under the control of the lenders’ agent under the CPLV CMBS Debt, which agent applies such income on a monthly basis in accordance with the waterfall provisions of the loan documents governing the CPLV CMBS Debt). Such waterfall provisions call for continued payment of, among other things, debt service on the outstanding Prior CPLV Mezzanine Debt, which is paid to the administrative agent of such Prior CPLV Mezzanine Debt and then released by such administrative agent to VICI PropCo, as the current mezzanine lender of such outstanding Prior CPLV Mezzanine Debt.

 

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VICI PropCo Credit Facility

On December 22, 2017, VICI PropCo entered into the VICI PropCo Credit Facility, comprised of the $2.2 billion senior secured Term Loan B Facility and a $400.00 million senior secured Revolving Credit Facility. The Revolving Credit Facility and Term Loan B Facility will initially bear interest at LIBOR plus 2.25%. Following completion of this offering, the interest rate will be LIBOR plus 2.00%. The Revolving Credit Facility will mature in 2022 and the Term Loan B Facility will mature in 2024. As of December 31, 2017, $300 million was drawn on the Revolving Credit Facility. If more than 30% of the Revolving Credit Facility is utilized at any quarter-end, VICI PropCo is required to maintain a maximum total net debt to adjusted total assets ratio.

The VICI PropCo Credit Facility contains customary covenants that, among other things, limit the ability of VICI PropCo and its restricted subsidiaries to: (i) incur additional indebtedness; (ii) merge with a third party or engage in other fundamental changes; (iii) make restricted payments; (iv) enter into, create, incur or assume any liens; (v) make certain sales and other dispositions of assets; (vi) enter into certain transactions with affiliates; (vii) make certain payments on certain other indebtedness; (viii) make certain investments; and (ix) incur restrictions on the ability of restricted subsidiaries to make certain distributions, loans or transfers of assets to the VICI PropCo or any restricted-subsidiary. These covenants are subject to a number of important exceptions and qualifications, including, with respect to the restricted payments covenant, the ability to make unlimited restricted payments to maintain the REIT status of VICI.

The VICI PropCo Credit Facility also provides for customary events of default, including, without limitation, (i) payment defaults, (ii) inaccuracies of representations and warranties, (iii) covenant defaults, (iv) cross-defaults to certain other indebtedness in excess of specified amounts, (v) certain events of bankruptcy and insolvency, (vi) judgment defaults in excess of specified amounts, (vii) actual or asserted invalidity or impairment of any loan documentation, (viii) the security documents cease to create a valid and perfected first priority lien on any material portion of the collateral, (ix) ERISA defaults, (x) termination of the Non-CPLV Lease Agreement or the HLV Lease Agreement and (xi) change of control. The Term Loan B Facility is subject to amortization of principal in equal quarterly installments with 1.0% of the initial aggregate principal amount of the Term Loan B Facility to be payable each year. The Revolving Credit Facility and the Term Loan B Facility are both guaranteed by each of the VICI PropCo existing and subsequently acquired direct and indirect wholly owned material domestic restricted subsidiaries, and secured by a first priority lien and security interest on substantially all of VICI PropCo and such restricted subsidiaries’ material assets, including pledges of equity interests in their respective restricted subsidiaries and mortgages on their respective real estate (which mortgages are to be entered into within a certain period of time following the closing of such facility), subject in each case to customary exceptions.

Capital Expenditures

We may agree, at CEOC’s request, to fund the cost of certain capital improvements on arms-length terms and conditions, which may include an agreed upon increase in rent under the Lease Agreements. Otherwise, except as described below in connection with a deconsolidation event, capital expenditures for the properties leased under the Lease Agreements are the responsibility of the tenants. The Lease Agreements require the tenants to spend on an annual basis (A) with respect to the Non-CPLV Lease Agreement and the Joliet Lease Agreement, a minimum of $100.0 million in capital expenditures (which may include certain expenditures incurred by a certain CEOC affiliate or with respect to other CEOC assets) and (B) for each of the properties covered by the CPLV Lease Agreement and the properties covered by the Non-CPLV Lease Agreement and the Joliet Lease Agreement, in each case, an amount equal to at least 1% of actual revenue (from the prior year) generated, in the case of the CPLV Lease Agreement, by the CPLV facilities and in the case of the Non-CPLV Lease Agreement and the Joliet Lease Agreement, the other properties, as applicable, on capital expenditures that constitute installation or restoration and repair or other improvements of items with respect to the leased properties under the Formation Lease Agreements. In addition, the Formation Lease Agreements require the tenants to spend on a triennial basis (A) with respect to the Non-CPLV

 

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Lease Agreement and the Joliet Lease Agreement, a minimum of $495.0 million in capital expenditures (which may include certain expenditures incurred by a certain CEOC affiliate or with respect to other CEOC assets) and (B) across the properties leased from us a minimum of $350.0 million in capital expenditures and excluding capital expenditures for any services entity, foreign subsidiaries and unrestricted subsidiaries of CEOC, gaming equipment, corporate shared services and properties not included in the Formation Lease Agreements. These amounts, in each case, may be decreased under the same circumstances as with respect to the annual requirement. Further, with respect to the requirement to expend a minimum of $350.0 million in capital expenditures, such capital expenditures will be allocated as follows: (i) $84.0 million to the facilities covered by the CPLV Lease Agreement; (ii) $255.0 million to the facilities covered by the Non-CPLV Lease Agreement and the Joliet Lease Agreement; and (iii) the balance to facilities covered by any Formation Lease Agreement in such proportion as CEOC may elect. Lastly, the HLV Lease Agreement requires the tenant thereunder to spend (x) $171.0 million in capital expenditures for the period commencing January 1, 2017 and ending December 31, 2021, and, (y) commencing in 2022, annually, 1% of the actual net revenue generated during the immediately prior year from such property on capital expenditures that constitute installation, restoration, repair, maintenance or replacement of physical improvements or other physical items with respect to the leased property under the HLV Lease.

Contractual Obligations and Commitments

Information concerning our obligations and commitments to make future payments under contracts such as our indebtedness and future minimum lease commitments under operating leases is included in the following table on a pro forma basis as of September 30, 2017. This table does not include commitments related to operating lease obligations that are variable in nature and as such does not show the total anticipated payments that we will incur in connection with operating leases over five years following September 30, 2017.

 

     Payments Due by Period  
     (in millions)  
     Total      Within 1
Year
     1-3
Years
     4-5
Years
     After 5
Years
 

Long-term debt

     

Term Loan B Facility, principal (1)

   $               $               $               $               $           

CPLV CMBS Debt, principal (2)

              

Second Lien Notes, principal (3)

              

Revolving Credit Facility, principal (4)

              

Estimated interest payments (5)

              
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total contractual obligations

   $      $      $      $      $  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) The Term Loan B Facility requires scheduled quarterly payments in amounts equal to 0.25% of the original aggregate principal amount, with the balance due at maturity in 6 years.
(2) The CPLV CMBS Debt will mature in five years.
(3) The Second Lien Notes will mature in 2023.
(4) The Revolving Credit Facility will mature in five years.
(5) Estimated interest is based on an a LIBOR rate of 1.50%.

Critical Accounting Policies and Estimates

Our financial statements are prepared in accordance with GAAP. We have identified certain accounting policies that we believe are the most critical to the presentation of our financial information over a period of time. These accounting policies may require our management to take decisions on subjective and/or complex matters relating to reported amounts of assets, liabilities, revenue, costs, expenses and related disclosures. These would further lead us to estimate the effect of matters that may inherently be uncertain.

Estimates are required in order to prepare the financial statements in conformity with U.S. GAAP. Significant estimates, judgments, and assumptions are required in a number of areas, including, but not limited

 

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to, the application of fresh start reporting, determining the useful lives of real estate properties, and evaluating the impairment of long-lived assets, and allocation of costs and deferred income taxes. The judgment on such estimates and underlying assumptions is based on our historical experience that we believe is reasonable under the circumstances. These form the basis of our judgment on matters that may not be apparent from other available sources of information. In many instances changes in the accounting estimates are likely to occur from period to period. Actual results may differ from the estimates. We believe the current assumptions and other considerations used to estimate amounts reflected in our financial statements are appropriate. However, if actual experience differs from the assumptions and other considerations used in estimating amounts reflected in our financial statements, the resulting changes could have a material adverse effect on our consolidated results of operations and, in certain situations, could have a material adverse effect on our financial condition.

Revenue Recognition

Leases

As a REIT, the majority of our revenues are derived from rent received from our tenants under long-term triple-net leases. The accounting guidance under ASC 840 is complex and requires the use of judgments and assumptions by management to determine the proper accounting treatment of a lease. We perform a lease classification upon lease inception, to determine if we will account for the lease as a capital or operating lease.

Under ASC 840, for leases of both building and land, if the fair value of the land is 25 percent or more of the total fair value of the leased property at lease inception we consider the land and building separately for lease classification. In these cases, if the building element of the lease meets the criteria to be classified as a capital lease, then we account for the building element as a capital lease and the land separately as an operating lease. If the building element does not meet the criteria to be classified as a capital lease, then we account for the building and land elements as a single operating lease.

To determine if the building portion of a lease triggers capital lease treatment we conduct the four lease tests in ASC 840 outlined below. If a lease meets any of the four criteria below, it is accounted for as a capital lease.

 

  (1)   Transfer of ownership. The lease transfers ownership of the property to the lessee by the end of the lease term. This criterion is met in situations in which the lease agreement provides for the transfer of title at or shortly after the end of the lease term in exchange for the payment of a nominal fee, for example, the minimum required by statutory regulation to transfer title.

 

  (2)   Bargain purchase option. The lease contains a bargain purchase option, which is a provision allowing the lessee, at its option, to purchase the leased property for a price which is sufficiently lower than the expected fair value of the property at the date the option becomes exercisable. In addition, the exercise of the option must be reasonably assured at lease inception.

 

  (3)   Lease term. The lease term is equal to 75% or more of the estimated economic life of the leased property. However, if the beginning of the lease term falls within the last 25 percent of the total estimated economic life of the leased property, including earlier years of use, this criterion shall not be used for purposes of classifying the lease. This test is conducted on a property by property basis.

 

  (4)   Minimum lease payments. The present value of the minimum lease payments at the beginning of the lease term, excluding that portion of the payments representing executory costs such as insurance, maintenance, and taxes to be paid by the lessor, including any profit thereon, equals or exceeds 90% of the fair value of the leased property to the lessor at lease inception less any related investment tax credit retained by the lessor and expected to be realized by the lessor. If the beginning of the lease term falls within the last 25% of the total estimated economic life of the leased property, including earlier years of use, this criterion shall not be used for purposes of classifying the lease.

The tests outlined above, as well as the resulting calculations, require subjective judgments, such as determining, at lease inception, the fair value of the assets, the residual value of the assets at the end of the lease

 

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term, the likelihood a tenant will exercise all renewal options (in order to determine the lease term), the estimated remaining economic life of the leased assets, the incremental borrowing rate of the lessee and the interest rate implicit in the lease. A change in estimate or judgment can result in a materially different financial statement presentation.

The revenue recognition model is different under capital leases and operating leases.

Under the operating lease model, as the lessor, at lease inception the land is recorded as Real Estate Investments Accounted for Using the Operating Method in our Combined Condensed Balance Sheet and we record rental income from operating leases on a straight-line basis over the lease term. The amount of annual minimum lease payments attributable to the land element after deducting executory costs, including any profit thereon, is determined by applying our incremental borrowing rate to the value of the land. We record this lease income as Rental Income from Operating Leases in our Combined Condensed Statement of Operations.

Under the direct financing lease model, as lessor, at lease inception we record the lease receivable as Real Estate Investments Accounted for Using the Direct Financing Method in our Combined Condensed Balance Sheet. Under the direct financing lease method, we recognize fixed amounts due on an effective interest basis at a constant rate of return over the lease term. As a result, the cash payments accounted for under direct financing leases will not equal the earned income from direct financing leases as a portion of the cash rent we receive is recorded as Earned Income from Direct Financing Leases in our Combined Condensed Statement of Operations and a portion is recorded as a reduction to the Real Estate Investments Accounted for using the Direct Financing Method.

Real Estate Investments

For real estate investments accounted for using the operating method, we continually monitor events and circumstances that could indicate that the carrying amount of our real estate investments may not be recoverable or realized. When events or changes in circumstances indicate that a potential impairment has occurred or that the carrying value of a real estate investment may not be recoverable, we use an estimate of the undiscounted value of expected future operating cash flows to determine whether the real estate investment is impaired. If the undiscounted cash flows plus net proceeds expected from the disposition of the asset is less than the carrying value of the assets, we recognize an impairment charge equivalent to the amount required to reduce the carrying value of the asset to its estimated fair value. We group our real estate investments together by property, the lowest level for which identifiable cash flows are available, in evaluating impairment. In assessing the recoverability of the carrying value, we must make assumptions regarding future cash flows and other factors. Factors considered in performing this assessment include current operating results, market and other applicable trends and residual values, as well as the effect of obsolescence, demand, competition and other factors. If these estimates or the related assumptions change in the future, we may be required to record an impairment loss.

For real estate investments accounted for using the direct financing method, our net investment in the direct financing lease is evaluated for impairment as necessary, if indicators of impairment are present, to determine if there has been an-other-than-temporary decline in the residual value of the property or a change in the lessee’s credit worthiness.

Income Taxes—REIT Qualification

We intend to elect to be taxed and qualify as a REIT for U.S. Federal income tax purposes commencing with our taxable year ending December 31, 2017, and we intend to continue to be organized and to operate in a manner that will permit us to qualify as a REIT beyond that taxable year end. To qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our annual REIT taxable income to stockholders (with certain adjustments), determined without regard to the dividends paid deduction and excluding any net capital gains. As a REIT, we generally will not be subject to

 

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Federal income tax on income that we pay as distributions to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to U.S. Federal income tax on our taxable income at regular corporate income tax rates, and distributions paid to our stockholders would not be deductible by us in computing taxable income. Additionally, any resulting corporate liability created if we fail to qualify as a REIT could be substantial and could materially and adversely affect our net income and net cash available for distribution to stockholders. Unless we were entitled to relief under certain Code provisions, we also would be disqualified from re-electing to be taxed as a REIT for the four taxable years following the year in which we failed to qualify to be taxed as a REIT.

Quantitative and Qualitative Disclosures about Market Risk

We face market risk exposure in the form of interest rate risk. This market risk arises from our debt obligations.

Our primary market risk exposure is interest rate risk with respect to our indebtedness. On a pro forma basis, as of September 30, 2017, we would have had an aggregate face value of $         million of outstanding indebtedness. Approximately $         million of our pro forma indebtedness has variable interest rates. A one percent increase or decrease in the annual interest rate on our pro forma variable rate borrowings of $         million would increase or decrease our annual cash interest expense by approximately $         million.

We may manage, or hedge, interest rate risks related to our borrowings by means of interest rate swap agreements. We also expect to manage our exposure to interest rate risk by maintaining a mix of fixed and variable rates for our indebtedness. However, the REIT provisions of the Code substantially limit our ability to hedge our assets and liabilities. See “Risk Factors—Risks Related to our Status as a REIT—Complying with REIT requirements may limit our ability to hedge effectively and may cause us to incur tax liabilities.”

 

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INDUSTRY

Las Vegas Market

Las Vegas is one of the world’s premier entertainment, gaming, tourist, and meeting and convention destinations. With a uniquely dense concentration of approximately 40 casinos, approximately 150,000 hotel rooms, extensive convention and meeting facilities, and world-class retail, dining, and entertainment offerings, Las Vegas has broad appeal to a wide audience and attracted a record of 42.3 million visitors from around the world in 2015. Total annual visitation to Las Vegas has doubled over the last 25 years, reflecting the Las Vegas market’s increasing long-term significance as a major destination for U.S. and international visitors.

 

 

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Largest gaming market in the United States with strong fundamentals and growth. The Strip, a vibrant four-mile stretch of Las Vegas Boulevard South, represents the majority of the Las Vegas market and is the largest gaming market in the United States, with total gross gaming revenues of $6.4 billion for the year ended December 31, 2016 according to the UNLV Center for Gaming Research. As the Strip has continued to diversify its sources of revenue and benefit from an improving economy with limited new supply, gaming revenues have shown strong and steady growth, increasing at a compound annual growth rate of 1.9% since the year ended December 31, 2010.

 

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Growing mix of revenue sources provides the market with continued diversification. The Strip has historically been dependent on commercial gaming for the majority of its revenues, but over the last 15 years this balance has shifted as property owners have invested heavily in non-gaming entertainment options and amenities to satisfy changes in consumer demand and reinforce the durability of revenues through diversification. As a result of these investments, the Strip has solidified its position as a premier destination for conventions and meetings as well as leisure travelers who are increasingly drawn to Las Vegas’ unique mix of entertainment offerings. Hosting 6.3 million convention attendees in 2016 across approximately 22,000 conventions, the Las Vegas market has been recognized by Trade Show News Network as the number one trade show destination in the U.S. for 21 consecutive years. In the twelve months ended December 31, 2016, non-gaming revenues accounted for approximately 6% of all casino resort revenues in Las Vegas, up from just 42% in 1990.

 

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Limited new supply should support strong operating performance. Limited availability of desirable land and the need to make significant capital expenditures limit the ability of potential competitors to build new large-scale casino resorts on the Strip. As a result, over the next several years few lodging or gaming real estate developments of significance are expected to open along the Strip despite a rebounding Las Vegas economy. This limited new supply, coupled with strong and growing visitation levels, has already driven improved performance in Las Vegas, as evidenced by hotel occupancy levels of nearly 90% for the twelve months ending September 30, 2017 and a compound annual growth rate in average daily hotel room rates of 4.4% since 2010 according to the Las Vegas Convention and Visitors Authority.

 

 

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Regional Market Overview

We own regional properties located in ten diverse and distinct markets across 9 states, many of which comprise the major U.S. regional gaming jurisdictions. Total nationwide regional gaming revenues were approximately $64 billion in 2016, equal to annual gaming revenues of approximately $320 per U.S. adult. The industry, and our regional properties, have proven to exhibit particularly attractive characteristics:

 

    Attractive competitive dynamics . We believe the gaming markets in which our current tenants operate present an attractive and predictable real estate environment. The number of casinos is limited either directly through regulatory statutes (several states such as Indiana and Louisiana have limited the total number of gaming licenses) or through local level factors such as demand dynamics or geographic location constraints. While the inter and intra-state competitive environment is subject to change, we continue to believe that, as a whole, our regional properties are unlikely to face material incremental competition. We believe that where this may happen, it is likely to be subject to lengthy lead time construction development cycles.

 

   

Strategically located in proximity to a large percentage of the U.S. population . Our regional properties collectively have access to 59 million total individuals within their MSAs (18% of the U.S. population), according to the U.S. Census Bureau, and these MSAs generated $4.4 trillion of

 

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the United States’ annual gross domestic product, according to the Bureau of Economic Analysis. Our regional properties are also in close proximity to major U.S. population centers, with 14 of our regional properties within a three hour drive of a major U.S. population center such as Chicago, Dallas, Kansas City, Louisville, Memphis, New Orleans, Southern New York and Philadelphia.

 

    Historically stable gaming revenues . According to the American Gaming Association, UNLV Center for Gaming Research and the NIGC, over the five years ending 2016 total nationwide regional gaming revenues grew by an average of 2.4% per year.

 

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BUSINESS

Overview of the Company

We are an owner, acquirer and developer of experiential real estate assets across leading gaming, hospitality, entertainment and leisure destinations. Our national, geographically diverse portfolio consists of 20 market-leading properties, including Caesars Palace Las Vegas and Harrah’s Las Vegas, two of the most iconic entertainment facilities on the Las Vegas Strip. Our entertainment facilities are leased to leading brands that seek to drive consumer loyalty and value with guests through superior services, experiences, products and continuous innovation. Across more than 36 million square feet, our well-maintained properties are located in nine states, contain nearly 14,000 hotel rooms and feature over 150 restaurants, bars and nightclubs. Our portfolio also includes approximately 37 acres of undeveloped land adjacent to the Strip that is leased to Caesars, which we may look to monetize as appropriate. We also own and operate four championship golf courses located near certain of our properties, two of which are in close proximity to the Las Vegas Strip. As a growth focused public real estate company, we expect our relationship with our partners will position us for the acquisition of additional properties across leisure and hospitality.

In December 2017, we acquired from an affiliate of Caesars and then leased back the real estate assets of Harrah’s Las Vegas for approximately $1.14 billion, and we simultaneously sold to Caesars approximately 18.4 acres of undeveloped land located behind the LINQ Hotel & Casino and Harrah’s Las Vegas for $73.6 million. Simultaneous with the transaction, we entered into a new credit facility, comprised of a $2.2 billion senior secured Term Loan B Facility and a $400 million senior secured revolving credit facility, and we used the proceeds from the Term Loan B Facility and drawings under the revolving credit facility to refinance a portion of our outstanding long-term debt. See “—Recent Developments” below.

We believe we have a mutually beneficial relationship with Caesars, a leading owner and operator of gaming, entertainment and leisure properties. Our long-term triple-net Lease Agreements with subsidiaries of Caesars provide us with a highly predictable revenue stream with embedded growth potential. We believe our geographic diversification limits the effect of changes in any one market on our overall performance. We are focused on driving long-term total returns through managing assets and allocating capital diligently, maintaining a highly productive tenant base, capitalizing on strategic development and redevelopment opportunities, and optimizing our capital structure to support opportunistic growth.

Our portfolio is competitively positioned and well-maintained. Pursuant to the terms of the Lease Agreements, which require Caesars to invest in our properties, and in line with its commitment to build guest loyalty, we anticipate Caesars will continue to make strategic value-enhancing investments in our properties over time, helping to maintain their competitive position. In addition, given our scale and deep industry knowledge, we believe we are well-positioned to execute highly complementary single-asset and portfolio acquisitions to augment growth.

We intend to elect and qualify to be taxed as a REIT for U.S. Federal income tax purposes commencing with our taxable year ending December 31, 2017. We believe our election of REIT status combined with the income generation from the Lease Agreements will enhance our ability to make distributions to our stockholders, providing investors with current income as well as long-term growth.

We are one of the largest net lease REITs in the United States with $648.9 million and $862.5 million of revenue, $         million and $         million of net income and $         million and $         million of Adjusted EBITDA for the nine months ended September 30, 2017 and for the year ended December 31, 2016, respectively, in each case on a pro forma basis. For a definition of Adjusted EBITDA and a reconciliation to net income, in each case on a pro forma basis, see “Prospectus Summary—Summary Pro Forma Financial Data.”

 

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Overview of Caesars

Caesars is a leading owner and operator of gaming, entertainment and leisure properties. Caesars maintains a diverse brand portfolio with a wide range of options that appeal to a variety of gaming, travel and entertainment consumers. As of September 30, 2017, and after giving effect to the sale of Harrah’s Las Vegas to us, Caesars operates 48 properties, consisting of 20 owned and operated properties, eight properties that it manages on behalf of third parties and 20 properties that it leases from us. Caesars or CRC guarantee the lease payment obligations of the properties leased from us. Caesars has a market capitalization in excess of $9 billion as of the date of this prospectus. For the year ended December 31, 2014, Caesars had net loss attributable to Caesars of approximately $2.8 billion and Adjusted EBITDA of approximately $1.5 billion. Commencing January 15, 2015, the results of CEOC, a subsidiary of Caesars, are no longer consolidated with Caesars due to CEOC’s bankruptcy proceedings. As a result, in its publicly available filings with the SEC subsequent to January 15, 2015, Caesars began reporting the Adjusted EBITDA of Caesars and CEOC separately. For the year ended December 31, 2015, Caesars had net income attributable to Caesars of approximately $5.9 billion and Adjusted EBITDA of approximately $1.0 billion and CEOC had net loss of approximately $2.4 billion and Adjusted EBITDA of approximately $1.1 billion. For the year ended December 31, 2016, Caesars had net loss attributable to Caesars of approximately $3.6 billion and Adjusted EBITDA of approximately $1.1 billion and CEOC had net income of approximately $337 million and Adjusted EBITDA of approximately $1.1 billion. For the twelve months ended September 30, 2017, Caesars had net loss attributable to Caesars of approximately $3.0 billion and Adjusted EBITDA of approximately $1.1 billion and CEOC had net income of approximately $425 million and Adjusted EBITDA of approximately $1.1 billion.

We use Adjusted EBITDA of Caesars and CEOC to evaluate the capacity of Caesars and CEOC to meet their respective obligations under the Formation Lease Agreements. Such information is not publicly available for the applicable tenant under the HLV Lease Agreement or its guarantor, CRC.

Please see Annex I for reconciliations of net income/(loss) of Caesars and CEOC to Adjusted EBITDA of Caesars and CEOC, respectively, all as reported by Caesars in its publicly available filings with the SEC.

Caesars has diverse sources of revenue, with revenues coming from gaming, food and beverage, hotel operations and from other sources, including entertainment and retail. Caesars has invested significant resources in updating its hotels, with over 50% of its rooms being renovated during the past two years. Caesars’ properties have been rewarded with 25 TripAdvisor Certificates of Excellence in 2017. Caesars’ pioneering Total Rewards ® program is the gaming industry’s first, largest and most preferred loyalty program. Additionally, Caesars’ entertainment offerings have made it the number three live entertainment promoter worldwide.

The historical audited and unaudited financial statements of Caesars (which are not included or incorporated by reference in this prospectus), as the parent and guarantor of CEOC, our significant lessee, have been filed with the SEC. Caesars files annual, quarterly and current reports and other information with the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. Caesars’ SEC filings are also available to the public from the SEC’s web site at www.sec.gov. We make no representation as to the accuracy or completeness of the information regarding Caesars that is contained in this prospectus, which is obtained from Caesars’ publicly available information, or that is available through the SEC’s website or otherwise made available by Caesars, and none of such publicly available Caesars’ information is incorporated by reference in this prospectus.

Our Competitive Strengths

We believe the following strengths effectively position us to execute our business and growth strategies:

Leading portfolio of high-quality experiential gaming, hospitality, entertainment and leisure assets.

Our portfolio features Caesars Palace Las Vegas and Harrah’s Las Vegas and market-leading regional properties with significant scale. Our properties are well-maintained and leased to leading brands, such as

 

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Caesars, Horseshoe, Harrah’s and Bally’s. These brands seek to drive loyalty and value with guests through superior service and products and continuous innovation. Our portfolio benefits from its strong mix of demand generators, including casinos, guest rooms, restaurants, entertainment facilities, bars and nightclubs and convention space. We believe our properties are well-insulated from incremental competition as a result of high replacement costs, as well as regulatory restrictions and long-lead times for new development. The high quality of our properties appeals to a broad base of customers, stimulating traffic and visitation.

Our portfolio is anchored by our Las Vegas properties, Caesars Palace Las Vegas and Harrah’s Las Vegas, which are located at the center of the Strip. We believe Las Vegas is one of the most attractive travel destinations in the United States, with a record 42.9 million visitors in 2016, according to the Las Vegas Convention and Visitors Authority. We believe Las Vegas is a market characterized by steady economic growth and high consumer and business demand with limited new supply. Our Las Vegas properties, which are two of the most iconic entertainment facilities in Las Vegas, feature gaming entertainment, large-scale hotels, extensive food and beverage options, state-of-the-art convention facilities, retail outlets and entertainment showrooms. Our Las Vegas properties continue to benefit from positive macroeconomic trends, including, according to Caesars’ publicly available information, record visitation levels in 2016 and strong convention attendance, hotel occupancy and average daily rates, among other key indicators.

Our portfolio also includes market-leading regional resorts that we believe are benefitting from significant invested capital over recent years. The regional properties we own include award-winning land-based and dockside casinos, hotels and entertainment facilities that are market leaders within their respective regions. The properties operate primarily under the Caesars, Harrah’s, Horseshoe and Bally’s trademark and brand names, which, in many instances, have market-leading brand recognition.

Under the terms of the Lease Agreements, the tenants are required to continue to invest in the properties, which we believe will enhance the value of our properties.

Formation Lease Agreements . The Formation Lease Agreements provide that CEOC is required to continue to invest in the properties subject to such Lease Agreements as follows (subject to decrease in the event a property is no longer subject to a Formation Lease Agreement):

 

    annually, in a minimum amount of (a) with respect to the Non-CPLV Lease Agreement and the Joliet Lease Agreement, collectively, (x) $100.0 million in capital expenditures (which may include certain expenditures incurred by a certain CEOC affiliate or with respect to certain other CEOC assets not leased from us pursuant to the applicable Lease Agreements) and (y) 1% of the actual net revenue generated during the immediately prior year by the properties leased from us pursuant to the Non-CPLV Lease Agreement and Joliet Lease Agreement and (b) with respect to the CPLV Lease Agreement, 1% of the actual net revenue generated during the immediately prior year by the property leased pursuant to the CPLV Lease Agreement, and

 

    during every period of three calendar years, in a minimum amount of (a) with respect to the Non-CPLV Lease Agreement and the Joliet Lease Agreement, collectively, $495.0 million in capital expenditures (which may include certain expenditures incurred by a certain CEOC affiliate or with respect to other CEOC assets not leased from us) and (b) $350.0 million in capital expenditures across the properties leased from us pursuant to the Formation Lease Agreements, and allocated amongst our properties as described under “Business—Our Relationship with Caesars—Lease Agreements.”

HLV Lease Agreement . The HLV Lease Agreement provides that the tenant is required to invest in the property subject to such Lease Agreement as follows:

 

    $171 million in capital expenditures for the period commencing January 1, 2017 and ending December 31, 2021, and

 

    annually thereafter, 1% of the actual net revenue generated during the immediately prior year from such property.

 

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Our properties feature diversified sources of revenue on both a business and geographic basis.

Our portfolio includes 20 geographically diverse casino resorts that serve numerous MSAs nationally. This diversity reduces our exposure to adverse events that may affect any single market. This also allows our tenants to derive revenue from an economically diverse set of customers who work in a variety of industries. Additionally, although the Lease Agreements are with subsidiaries of Caesars, Caesars generates revenue from a diverse set of services that it offers its customers. These include gaming, food and beverage, entertainment, hospitality and other sources of revenue. We believe that this geographic diversity and the diversity of revenue sources that our tenants derive from our leased properties improves the stability of rental revenue.

The following charts illustrate the geographic diversity of our properties leased to Caesars’ subsidiaries as of the date of this prospectus and, according to Caesars’ publicly available information, the sources of revenue that Caesars derives from its operations.

 

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(1) Includes entertainment revenues, rental income, and parking revenues.

Our long-term Lease Agreements provide a highly predictable base level of rent with embedded growth potential.

Our properties are 100% occupied pursuant to our long-term triple-net Lease Agreements with subsidiaries of Caesars, providing us with a predictable level of rental revenue to support future cash distributions to our stockholders. In October 2017, we entered into the CPLV Lease Agreement, the Non-CPLV Lease Agreement for our regional properties (other than for the Joliet facilities), and the Joliet Lease Agreement, and in December 2017, we entered into the HLV Lease Agreement.

Caesars is generally not permitted to remove individual properties from the Non-CPLV Lease Agreement and has the right, following certain casualty events or condemnations, to terminate the respective Lease Agreement with respect to affected properties. Nearly all of our properties are established assets with extensive operating histories. Based on historical performance of the properties, we expect that the properties will generate sufficient revenues for Caesars’ subsidiaries to pay to us all rent due under such Lease Agreements.

Under the terms of the Lease Agreements, the tenants are responsible for ongoing costs relating to our properties thereunder, including property taxes, insurance, and maintenance and repair costs. Each Lease Agreement provides for a fixed base rent for the first seven years of the lease term, contributing to the expected stability of rental revenue. In addition, each Lease Agreement contains a fixed annual rent escalator on the base rent equal to (a) with respect to the Lease Agreements other than the HLV Lease Agreement, the greater of 2% and the increase in the Consumer Price Index commencing in the second year of the lease with respect to the CPLV Lease Agreement and in the sixth year of the lease with respect to the Non-CPLV Lease Agreement and the Joliet Lease Agreement, and (b)(i) with respect to the HLV Lease Agreement, 1% commencing in the second year of the lease term and (ii) the greater of 2% and the increase in the Consumer Price Index commencing in the sixth lease year subject to such increase not resulting in the EBITDAR to rent ratio being less than 1.6 to 1, in

 

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which event the increase will be such reduced percentage provided that such reduction shall not result in the base rent being less than the prior year’s base rent. The Lease Agreements provide for portions of the rent to be designated as variable rent with periodic variable rent resets following the seventh year and tenth year of the leases and at the commencement of each renewal term based on the tenant’s net revenue from the facilities at such time. See “Business—Our Relationship with Caesars.” As further described below, the tenants’ payment obligations under the Lease Agreements are guaranteed by Caesars with respect to the Formation Lease Agreements and CRC with respect to the HLV Lease Agreement, which provides additional credit support.

We believe our relationship with Caesars, including our contractual agreements with it and its applicable subsidiaries, will continue to drive significant benefits and mutual alignment of strategic interests in the future.

Caesars or CRC guarantees the payment obligations of our tenants under the Lease Agreements.

All of our existing properties are leased to subsidiaries of Caesars. Caesars guarantees the payment obligations of our tenants under the Formation Lease Agreements and CRC, a subsidiary of Caesars, guarantees the payment obligations of our tenant under the HLV Lease Agreement. Caesars operates a nationally-recognized portfolio of brands, including Caesars, Harrah’s, Horseshoe and Bally’s, and operates its portfolio of properties (including the properties that are leased from us) using the Total Rewards ® customer loyalty program. Core to Caesars’ cross market strategy, the Total Rewards ® program is designed to encourage Caesars’ customers to direct a larger share of their entertainment spending to Caesars. See “—Overview of Caesars” above regarding information of Caesars referred to in this prospectus.

We intend to maintain a strong balance sheet with significant financial flexibility.

On a pro forma basis, we had debt of $         million ($         million, net of deferred financing cost and original issue discount) as of September 30, 2017 and $862.5 million of revenue, $         million of net income and $         million of Adjusted EBITDA for the year ended December 31, 2016. In December 2017, we completed a multi-billion dollar refinancing of certain of our outstanding indebtedness. See “—Recent Developments—VICI PropCo Credit Facility and Debt Refinancing.” As a result, the Revolving Credit Facility is available to us to fund acquisitions and for general corporate purposes, and our $         million aggregate principal amount of our Second Lien Notes after giving effect to this offering become due in 2023, which we believe provides us with financial flexibility to grow our business. Over time, we intend to operate with a prudent financial strategy by growing cash flow through internal, built-in lease escalations and external acquisitions and repaying indebtedness using cash flow from operations.

Experienced management team and independent board of directors with robust corporate governance

We have an experienced management team that has been actively engaged in the leadership, acquisition and investment aspects of the hospitality, gaming, entertainment and real estate industries throughout their careers. Our Chief Executive Officer, Edward Pitoniak, and President and Chief Operating Officer, John Payne, are industry veterans with an average of 30 years of experience in the REIT industry and experiential real estate companies, during which time they were able to drive controlled growth and diversification of significant real estate and gaming portfolios. Mr. Pitoniak’s service as an independent board member of public companies provides him with a unique and meaningful management perspective and will enable him to work as a trusted steward with our independent board of directors as a trusted steward of our extensive portfolio. Our independent board of directors, which is made of highly skilled and seasoned real estate, gaming and corporate professionals, was established to ensure that there was no overlap between our tenants and the companies with which our directors are affiliated. In addition, our board of directors is not staggered, with each of our directors subject to re-election annually. Robust corporate governance in the best interests of our stockholders is of central importance to the management of our company, as we have a separate Chairman of the Board and Chief Executive Officer and all members of our audit and finance committee qualify as an “audit committee financial expert” as defined by the SEC. Directors are elected in uncontested elections by the affirmative vote of a

 

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majority of the votes cast, and stockholder approval is required prior to, or in certain circumstances within twelve months following, the adoption by our board of a stockholder rights plan.

Business and Growth Strategies

We intend to establish our company as a leading REIT, creating long term total returns for our stockholders through the payment of consistent cash distributions and the growth of our cash flow and asset base. The strategies we intend to execute to achieve this goal include:

Producing stable income with an internal growth profile.

We derive our revenues from long-term contractual cash flows pursuant to the Lease Agreements, which include annual rent escalators. We expect these escalators to provide the opportunity for stable long-term growth, which will increase the rent we receive under the Lease Agreements from an aggregate of $630.0 million in the first year of the Formation Lease Agreements and $87.4 million in the first year of the HLV Lease Agreement to an aggregate of approximately $669.6 million in the seventh year of the Formation Lease Agreements and $94.6 million in the seventh year of the HLV Lease Agreement. In addition, the Lease Agreements include periodic variable rent resets after year seven and year ten, based on the tenant’s net revenue generated from the facilities at such time, enabling us to benefit from future revenue growth at the properties. See “Business—Our Relationship with Caesars.”

Pursuing opportunities to acquire additional properties from Caesars.

Option Properties. We have an option to acquire three properties from Caesars pursuant to the Call Right Agreements. These agreements allow us to exercise our call rights at any time up to October 6, 2022, and apply to the following properties:

 

    Harrah’s Atlantic City . Harrah’s Atlantic City is an integrated hotel and resort located in the Marina district of Atlantic City, New Jersey. Harrah’s Atlantic City has approximately 155,000 square feet of gaming space, approximately 2,600 hotel rooms and suites, and 12 major food and beverage and nightlife outlets. Additionally, it has approximately 125,000 square feet of meeting and event space that opened in 2015.

 

    Harrah’s New Orleans. Harrah’s New Orleans is an integrated destination hotel and casino located in downtown New Orleans near the French Quarter, Mississippi Riverfront, Superdome and New Orleans convention center. It has approximately 125,000 square feet of gaming space, approximately 450 hotel rooms and suites, and 10 major food and beverage and nightlife outlets. Additionally, it has approximately 15,000 square feet of meeting and event space.

 

    Harrah’s Laughlin. Harrah’s Laughlin is an integrated hotel and resort located on the banks of the Colorado River in Laughlin, Nevada. It has approximately 56,000 square feet of gaming space, approximately 1,500 hotel rooms and suites, and 11 major food and beverage and nightlife outlets.

Right of First Refusal. We have a right of first refusal pursuant to which we have the right, subject to certain exclusions, to (i) acquire (and lease to Caesars) any domestic gaming facilities located outside of the Gaming Enterprise District of Clark County, Nevada, proposed to be acquired or developed by Caesars and (ii) acquire (and lease to Caesars) any of the properties that Caesars has recently agreed to acquire from Centaur Holdings, LLC, should Caesars determine to sell any such properties.

Caesars has agreed to acquire certain properties from Centaur, which include two gaming properties located in Indiana—the Hoosier Park Racing & Casino and Indiana Grand Racing & Casino—that contain approximately 400,000 square feet and have more than 2,000 slot machines and table games, as well as dining outlets and horse racing tracks. Each property also has its own horse racing course.

 

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Potential Future Convention Center and Put-Call Agreement. In connection with our recent acquisition of Harrah’s Las Vegas from Caesars, we sold to Caesars approximately 18.4 acres of undeveloped land located behind the LINQ Hotel & Casino and Harrah’s Las Vegas. We expect that Caesars will use this land, together with certain other land, to construct a convention center of approximately 300,000 square feet adjacent to Harrah’s Las Vegas. Upon closing of our acquisition of Harrah’s Las Vegas, we entered into the Put-Call Agreement with Caesars that includes rights that we or Caesars may exercise at a specified time after the opening of the planned convention center, which among other things, provides us the opportunity to acquire the convention center and lease it back to Caesars, subject to certain exclusions.

Other Caesars Owned Properties . We may seek to purchase additional Caesars properties, similar to our recent acquisition of Harrah’s Las Vegas. Additional owned properties of Caesars include: Octavius Tower, Las Vegas, NV; Paris Las Vegas, Las Vegas, NV; Bally’s Las Vegas, Las Vegas, NV; The Cromwell, Las Vegas, NV; Flamingo Las Vegas, Las Vegas, NV; The LINQ Hotel & Casino, Las Vegas, NV; Planet Hollywood Resort & Casino, Las Vegas, NV; Rio All Suites Hotel and Casino, Las Vegas, NV; Horseshoe Baltimore, Baltimore, MD; and Harrah’s Philadelphia, Philadelphia, PA. These properties collectively represent approximately 724,000 square feet of gaming space and have over 17,000 hotel rooms.

We will actively seek to further diversify and grow our portfolio through acquisitions of experiential real estate in dynamic markets spanning hospitality, entertainment, leisure and gaming properties.

We will actively seek to acquire additional hospitality, entertainment, leisure, and gaming-related properties from, or in partnership with, third-party owners under attractive triple-net lease and other REIT-permissible structures. We believe we are uniquely positioned to execute on this strategy, currently being one of the largest, independently-owned REITs whose board of directors and management team have direct operational and executive leadership and experience across these core industries.

Focus industries

 

    Our focus is on those gaming, hospitality, entertainment, and leisure-related sectors we believe benefit from long-term demographic, economic, geographic and cultural dynamics and that deliver destination experiences to consumers.

 

    The sale-leaseback market in the gaming space is of considerable size but has historically seen limited appetite to purchase large assets. We believe that the advent of large gaming REITs, like VICI, will drive the additional bifurcation of gaming operations from their real estate and fuel gaming REIT industry growth.

 

    We believe the hospitality, entertainment and leisure sectors offer comparable sizable opportunities not harnessed to-date, and that our scale, experience and partnership approach can naturally aid in the facilitation of industry transactions not previously undertaken.

Asset characteristics

 

    Our current real estate portfolio is differentiated by virtue of advantageous geographic market location and real estate qualities such as physical features and amenities, age, and opportunity for future value enhancement. Furthermore, our assets are of mixed-use, with casino, hospitality, retail, dining, live entertainment, convention and other components. As a result, our real estate assets attract and cater to patrons seeking business, recreational and entertainment experiences across both short social-gatherings and destination-stay environments. This breadth of usage enhances our tenants’ revenue generation and provides us with unmatched lease income and stability. We will seek to replicate these attractive dynamics in our future acquisitions.

Financial characteristics

 

   

Our future acquisitions will be selected based on an adherence to a strict financial discipline consistent with our founding principles, including but not limited to: an established operating history, high

 

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income quality, attractive expected financial performance and sustainability of cash flows, and financially attractive purchase price and overall yield.

Lease Structure

 

    We will seek to replicate our current long term, built-in escalator triple-net leases that are in place with our current tenants in our future acquisitions.

Competition

We will compete for real property investments with other REITs, gaming companies, investment companies, private equity and hedge fund investors, sovereign funds, lenders and other investors. In addition, revenues from our properties will be dependent on the ability of our tenants, currently subsidiaries of Caesars, and operators to compete with other gaming operators. The operators of our properties compete on a local and regional basis for customers. The gaming industry is characterized by a high degree of competition among a large number of participants, including riverboat casinos, dockside casinos, land-based casinos, video lottery, sweepstakes and poker machines not located in casinos, Native American gaming, emerging varieties of Internet gaming and other forms of gaming in the United States.

As a landlord, we compete in the real estate market with numerous developers and owners of properties. Some of our competitors are significantly larger, have greater financial resources and lower costs of capital than we have, have greater economies of scale and have greater name recognition than we do. Increased competition will make it more challenging to identify and successfully capitalize on acquisition opportunities that meet our investment objectives. Our ability to compete is also impacted by national and local economic trends, availability of investment alternatives, availability and cost of capital, construction and renovation costs, existing laws and regulations, new legislation and population trends. See “Risk Factors—Risks Related to Our Business and Operations—A substantial portion of our cash is used to satisfy our debt service obligations and our distribution obligations to maintain our status as a REIT and avoid current entity level U.S. Federal income taxes, limiting our ability to pursue our business and growth strategies” and “—Our pursuit of investments in, and acquisitions or development of, additional properties may be unsuccessful or fail to meet our expectations.”

Employees

As of the date of this prospectus, approximately 140 employees are employed by us. These employees are employed at our Operating Partnership or VICI Golf or their respective subsidiaries.

Governmental Regulation and Licensing

The ownership, operation and management of gaming and racing facilities are subject to pervasive regulation. Each of our gaming and racing facilities is subject to regulation under the laws, rules, and regulations of the jurisdiction in which it is located. Gaming laws and regulations generally require gaming industry participants to:

 

    ensure that unsuitable individuals and organizations have no role in gaming operations;

 

    establish and maintain responsible accounting practices and procedures;

 

    maintain effective controls over their financial practices, including establishment of minimum procedures for internal fiscal affairs and the safeguarding of assets and revenues;

 

    maintain systems for reliable record keeping;

 

    file periodic reports with gaming regulators; and

 

    ensure that contracts and financial transactions are commercially reasonable, reflect fair market value and are arms-length transactions.

 

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Gaming laws and regulations impact our business in two respects: (1) our ownership of land and buildings in which gaming activities are operated by subsidiaries of Caesars (or other tenants) pursuant to the Lease Agreements (or other lease agreements); and (2) the operations of subsidiaries of Caesars (or other tenants). Further, many gaming and racing regulatory agencies in the jurisdictions in which our tenants operate require us and our affiliates to apply for and maintain a license as a key business entity or supplier because of our status as landlord.

Our businesses and the business of Caesars (or other tenants) are also subject to various Federal, state and local laws and regulations in addition to gaming regulations. These laws and regulations include, but are not limited to, restrictions and conditions concerning alcoholic beverages, environmental matters, employees, health care, currency transactions, taxation, zoning and building codes and marketing and advertising. Such laws and regulations could change or could be interpreted differently in the future, or new laws and regulations could be enacted. Material changes, new laws or regulations, or material differences in interpretations by courts or governmental authorities could adversely affect our operating results.

Violations of Gaming Laws

If we, our subsidiaries or the tenants of our properties violate applicable gaming laws, our gaming licenses could be limited, conditioned, suspended or revoked by gaming authorities, and we and any other persons involved could be subject to substantial fines. Further, a supervisor or conservator can be appointed by gaming authorities to operate our gaming properties, or in some jurisdictions, take title to our gaming assets in the jurisdiction, and under certain circumstances, earnings generated during such appointment could be forfeited to the applicable jurisdictions. Furthermore, violations of laws in one jurisdiction could result in disciplinary action in other jurisdictions. Finally, the loss of our gaming licenses could result in an event of default under our certain of our indebtedness, and cross-default provisions in our debt agreements could cause an event of default under one debt agreement to trigger an event of default under our other debt agreements. As a result, violations by us of applicable gaming laws could have a material adverse effect on us.

Review and Approval of Transactions

Substantially all material loans, leases, sales of securities and similar financing transactions by us and our subsidiaries must be reported to and in some cases approved by gaming authorities. Neither we nor any of our subsidiaries may make a public offering of securities without the prior approval of certain gaming authorities. Changes in control through merger, consolidation, stock or asset acquisitions, management or consulting agreements, or otherwise are subject to receipt of prior approval of gaming authorities. Entities seeking to acquire control of us or one of our subsidiaries must satisfy gaming authorities with respect to a variety of stringent standards prior to assuming control.

Insurance

The Lease Agreements require the tenants to maintain, with financially sound and reputable insurance companies (and in certain cases subject to the right of the tenants to self-insure), insurance (subject to customary deductibles and retentions) in such amounts and against such risks as are customarily maintained by similarly situated companies engaged in the same or similar businesses operating in the same or similar locations. The Lease Agreements provide that the amount and type of insurance that the tenants have in effect as of the commencement of the leases will satisfy for all purposes the requirements to insure the properties. However, such insurance coverage may not be sufficient to fully cover our losses.

Environmental Matters

Our properties are subject to environmental laws regulating, among other things, air emissions, wastewater discharges and the handling and disposal of wastes, including medical wastes. Certain of the properties we own

 

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utilize above or underground storage tanks to store heating oil for use at the properties. Other properties were built during the time that asbestos-containing building materials were routinely installed in residential and commercial structures. The Lease Agreements generally obligate our tenants to comply with applicable environmental laws and to indemnify us if its noncompliance results in losses or claims against us, and we expect that any future leases will include the same provisions for other operators. A tenant’s failure to comply could result in fines and penalties or the requirement to undertake corrective actions which may result in significant costs to the operator and thus adversely affect their ability to meet their obligations to us.

Pursuant to U.S. Federal, state and local environmental laws and regulations, a current or previous owner or operator of real property may be required to investigate, remove and/or remediate a release of hazardous substances or other regulated materials at, or emanating from, such property. Further, under certain circumstances, such owners or operators of real property may be held liable for property damage, personal injury and/or natural resource damage resulting from or arising in connection with such releases. Certain of these laws have been interpreted to be joint and several unless the harm is divisible and there is a reasonable basis for allocation of responsibility. We also may be liable under certain of these laws for damage that occurred prior to our ownership of a property or at a site where we sent wastes for disposal. The failure to properly remediate a property may also adversely affect our ability to lease, sell or rent the property or to borrow funds using the property as collateral.

In connection with the ownership of our current properties and any properties that we may acquire in the future, we could be legally responsible for environmental liabilities or costs relating to a release of hazardous substances or other regulated materials at or emanating from such property. We are not aware of any environmental issues that are expected to have a material impact on the operations of any of our properties.

Our Relationship with Caesars

We are independent from Caesars. Although we lease all our gaming facilities to subsidiaries of Caesars, we anticipate diversifying our portfolio over time.

To govern the ongoing relationship between us and Caesars and our respective subsidiaries, we entered into various agreements with Caesars and/or its subsidiaries as described herein. The summaries presented below are not complete and are qualified in their entirety by reference to the full text of the applicable agreements, which are included as exhibits to the registration statement of which this prospectus is a part.

Formation Lease Agreements for Caesars Palace Las Vegas and our Regional Properties

On the Formation Date, we entered into the Formation Lease Agreements with CEOC, which govern the lease of the facilities of CPLV and of our regional properties.

The payment obligations of CEOC under the Formation Lease Agreements are guaranteed by Caesars under the Management and Lease Support Agreements.

Term. Each Formation Lease Agreement has an initial 15 year term with four five-year renewal terms exercisable at the option of the respective tenant; provided that with regards to the Non-CPLV Lease Agreement the respective tenant shall not have the right to exercise a renewal term with respect to any particular property under the Non-CPLV Lease Agreement to the extent the term (including the initial term plus all prior and their current renewal terms) would exceed 80% of such property’s remaining useful life (measured as of the effective date of the applicable Lease Agreement). Other than upon mutual agreement, or in limited circumstances in the case of certain casualty or condemnation events, CEOC does not have a right to terminate the Formation Lease Agreements. We only have the right to terminate the Formation Lease Agreements during an event of default or in the case of certain casualty events.

 

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Rent. CPLV Lease Agreement. The annual rent for the first seven years of the lease term is $165.0 million per year, subject to an annual escalator equal to the greater of 2% and the Consumer Price Index increase commencing in the second year of the lease term. From and after the commencement of the eighth year of the lease term, rent for each lease year will be (i) (a) for the eighth year, base rent equal to 80% of the overall rent for the seventh year of the lease term, subject to the annual escalator and (b) for each subsequent year, base rent equal to the base rent payable in the immediately prior year, subject to the annual escalator, plus (ii) (a) from the eighth to the tenth year of the lease, variable rent equal to 20% of the overall rent for the seventh year of the lease term, with such variable rent amount increased or decreased, as applicable, by 13.0% of the difference in net revenue from the operations of the facilities subject to the CPLV Lease Agreement (the “CPLV facilities”) from the year prior to the first year of the lease term to the seventh year of the lease term (such resulting amount being referred to herein as “CPLV Initial Variable Rent”) and (b) from and after the commencement of the eleventh year of the lease, variable rent equal to the CPLV Initial Variable Rent, with such variable rent amount increased or decreased, as applicable, by 13.0% of the difference in net revenue from the operations of the CPLV facilities from the seventh year of the lease term to the tenth year of the lease term.

For each renewal term after the initial 15 year term, annual rent will be (i) as base rent, for the first year of such renewal term, an amount equal to fair market value rent and in no event less than the base rent payable during the year immediately preceding the commencement of such renewal term or greater than 110% of such prior year’s base rent, and for each year following such first year of such renewal term, an amount equal to the amount payable as base rent in the immediately prior year subject to the annual escalator and (ii) as variable rent, for each year of such renewal term an amount equal to the variable rent in effect for the year of the lease term immediately preceding the first year of such renewal term, with such variable rent increased or decreased, as applicable, by 13.0% of the difference in net revenue of the CPLV facilities from year ten of the lease term to year 15 of the lease term (in the event of the first renewal period) or from the year prior to the first year of the immediately preceding renewal term to the last year of the immediately preceding renewal term (in the event of subsequent renewal periods). The CPLV Lease Agreement contains a customary mechanism by which the fair market value adjustment to base rent (for the fair market rent valuation as of the date of commencement of each applicable renewal term) is commenced to be determined at least 12 months prior to the commencement of the applicable renewal term.

Non-CPLV Lease Agreement. The base rent for the first seven years of the lease term is $433.3 million per year, subject to the annual escalator equal to the greater of 2% and the Consumer Price Index increase commencing in the sixth year of the lease term.

From and after the eighth year of the lease term through the tenth year of the lease term, annual rent will be (i) (a) for the eighth year, base rent equal to 70% of the overall rent for the seventh lease year, subject to the annual escalator and (b) for each subsequent year, base rent equal to the base rent payable in the immediately prior year, subject to the annual escalator, plus (ii) variable rent equal to 30% of the overall rent for the seventh lease year, increased or decreased, as applicable, by 19.5% of the difference in net revenue from the operations of the regional facilities leased to CEOC, other than CPLV and the Joliet Facilities, from the year prior to the first year of the lease term to the seventh year of the lease term.

From and after the commencement of the eleventh year of the lease term, annual rent will be (i) (a) for the eleventh year, base rent equal to 80% of the overall rent for the tenth year of the lease term, subject to the annual escalator and (b) for each subsequent year, base rent equal to the base rent payable in the immediately prior year, subject to the annual escalator, plus (ii) variable rent equal to 20% of the overall rent for the tenth year of the lease term, increased or decreased, as applicable, by 13.0% of the difference in net revenue of the operations of the regional facilities leased to CEOC, other than CPLV and the Joliet Facilities, from the seventh year of the lease term to the tenth year of the lease term.

For each renewal term after the initial 15 year term, annual rent will be (i) as base rent, for the first year of such renewal term, fair market value rent and in no event less than the base rent payable during the year

 

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immediately preceding the commencement of such renewal term or greater than 110% of such prior year’s base rent, and for each year following such first year of such renewal term, an amount equal to the amount payable as base rent in the immediately prior year subject to the annual escalator, and (ii) as variable rent, for each year of such renewal term an amount equal to the variable rent in effect for the year of the lease term immediately preceding the first year of such renewal term, with such variable rent increased or decreased, as applicable, by 13.0% of the difference in net revenue from the operations of the regional facilities leased to CEOC, other than CPLV and the Joliet facilities, from year ten of the lease term to year 15 of the lease term (in the event of the first renewal period) or from the year prior to the first year of the immediately preceding renewal term to the last year of the immediately preceding renewal term (in the event of subsequent renewal periods). The Non-CPLV Lease Agreement contains a mechanism to adjust renewal term rent to fair market value rent (without regard to the above-mentioned cap or floor) with respect to any assets for which the useful life does not extend until the end of the applicable renewal term. The Non-CPLV Lease Agreement also contains a customary mechanism by which the fair market value adjustment to base rent (for the fair market rent valuation as of the date of commencement of each applicable renewal term) is commenced to be determined at least 12 months prior to the commencement of the applicable renewal term.

Joliet Lease Agreement. The Joliet facilities are owned by Harrah’s Joliet Landco LLC, a joint venture of which we are the 80% owner and the managing member. We are entitled to receive 80% of the rent generated by the Joliet facilities and the other member is entitled to receive the remaining 20%.

The annual rent for the first seven years of the lease term is $39.6 million per year, subject to the annual escalator equal to the greater of 2% and the Consumer Price Index increase commencing in the sixth year of the lease term.

From and after the eighth year of the lease term through the tenth year of the lease term, annual rent for each lease year will be (i) (a) for the eight lease year, base rent equal to 70% of the overall rent for the seventh year of the lease term, subject to the annual escalator and (b) for each subsequent year, base rent equal to the base rent payable in the immediately prior year, subject to the annual escalator, plus (ii) variable rent equal to 30% of the overall rent for the seventh year of the lease term, with such variable rent increased or decreased, as applicable, by 19.5% of the difference in net revenue from the operations of the Joliet facilities from the year prior to the first year of the lease term to the seventh year of the lease term. From and after the commencement of the eleventh year of the lease term until the expiration of the initial lease term, annual rent will be (i) (a) for the eleventh year base rent equal to 80% of the overall rent for the tenth year of the lease term, subject to the annual escalator and (b) for each subsequent year, base rent equal to the base rent payable in the immediately prior year, subject to the annual escalator, plus (ii) variable rent equal to 20% of the overall rent for the tenth year of the lease term, with such variable rent increased or decreased, as applicable, by 13.0% of the difference in net revenue from the operations of the Joliet facility from the seventh year of the lease term to the tenth year of the lease term. For each renewal term after the initial 15 year term, annual rent will be (i) as base rent for the first year of such renewal term, an amount equal to fair market value rent and in no event less than the prior year’s base rent nor greater than 110% of the prior year’s base rent, and for each year following such first year of such renewal term, an amount equal to the amount payable as base rent in the immediately prior year subject to the annual escalator, and (ii) as variable rent for each year of such renewal term, an amount equal to the variable rent in effect for the prior year, with such variable rent increased or decreased, as applicable, by 13.0% of the difference in net revenue of the Joliet facility from the tenth year of the lease term to the fifteenth year of the lease term (with respect to the first renewal term) or from the year prior to the first year of the immediately preceding renewal term to the last year of the immediately preceding renewal term (with respect to subsequent renewal terms). The Joliet Lease Agreement contains a mechanism by which the fair market value adjustment to base rent (for the fair market rent valuation as of the date of commencement of each applicable renewal term) is commenced to be determined at least 12 months prior to the commencement of the applicable renewal term.

Rent Allocation. For U.S. Federal income tax purposes, the Code provides that the amount of rent which accrues during any taxable year (and the amount of rent which is therefore deductible to the lessee and included

 

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in taxable income to the lessor) shall be made by allocating rents in accordance with the lease agreement. Applicable guidance permits a lessor and lessee to agree to a rent allocation schedule for these purposes that differs from the rent payment schedule under a lease, including a rent allocation schedule that provides for a rent holiday of up to three months and for increasing or decreasing rent generally within specified parameters. Each of the Formation Lease Agreements include a rent allocation schedule for U.S. federal income tax purposes for the initial 15 year term that differs from the rent payment schedule under the applicable lease which will generally result in the amount of taxable income to VICI for each taxable year differing from the amount of rent received by VICI during such year.

Triple Net Lease, Capital Expenditures, Material Alterations. Each of the Formation Lease Agreements are structured as triple-net, with CEOC responsible for the taxes, insurance, maintenance and repair of the facilities. CEOC pays all rent absolutely net to us, without abatement, and unaffected by any circumstance (except in certain cases of casualty and condemnation).

In addition to CEOC’s responsibility to pay taxes, insurance and maintenance and repair expenses, in each calendar year, CEOC must satisfy both of the following requirements (A) under the Non-CPLV Lease Agreement and Joliet Lease Agreement, expend a minimum of $100.0 million in capital expenditures (which may include certain expenditures incurred by a certain CEOC affiliate or with respect to certain other CEOC assets), which amount may be decreased under certain circumstances, such as removal of property from a Formation Lease Agreement due to casualty or condemnation or disposition of a material property, by an amount in proportion to the EBITDAR of the property being removed or disposed of, and (B) for each of the properties covered by the Formation Lease Agreements, expend an amount equal to at least 1% of actual net revenue (from the prior year) generated by the properties, as applicable, on capital expenditures that constitute installation or restoration and repair or other improvements of items with respect to the leased properties.

In addition, every period of three calendar years, CEOC must satisfy both of the following requirements: (A) under the Non-CPLV Lease Agreement and Joliet Lease Agreement, expend a minimum of $495.0 million in capital expenditures (which may include certain expenditures incurred by a certain CEOC affiliate or with respect to certain other CEOC assets), and (B) expend a minimum of $350.0 million in capital expenditures excluding capital expenditures for any services entity, foreign subsidiaries and unrestricted subsidiaries of CEOC, gaming equipment, corporate shared services and properties not included in the Formation Lease Agreements. These amounts, in each case, may be decreased under the same circumstances with respect to the annual requirement. Further, with respect to the requirement to expend a minimum of $350.0 million in capital expenditures, such capital expenditures will be allocated as follows: (i) $84.0 million to the facilities covered by the CPLV Lease Agreement; (ii) $255.0 million to the facilities covered by the Non-CPLV Lease Agreement and the Joliet Lease Agreement; and (iii) the balance to facilities covered by any Formation Lease Agreement in such proportion as CEOC may elect.

The HLV Lease Agreement requires the tenant thereunder to spend (x) $171 million in capital expenditures for the period commencing January 1, 2017 and ending December 31, 2021, and, (y) commencing in 2022, annually, 1% of the actual net revenue generated during the immediately prior year from such property on capital expenditures that constitute installation, restoration, repair, maintenance or replacement of physical improvements or other physical items with respect to the leased property under the HLV Lease Agreement.

In addition to customary default remedies, if CEOC does not spend the full amount of the minimum capital expenditures as required under the applicable Formation Lease Agreement, we have the right to seek the remedy of specific performance to require CEOC to spend any such unspent amount or deposit such amounts in a reserve account. CEOC’s obligations to spend the minimum capital expenditures will constitute monetary obligations included in Caesars’ obligations as guarantor with respect to these Formation Lease Agreements.

CEOC is permitted to make any alterations and improvements, including materially altering a facility, expanding a facility or developing the undeveloped land leased pursuant to the Formation Lease Agreements,

 

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except that (i) CEOC is required to obtain our consent (not to be unreasonably withheld) for any alterations with a budgeted cost in excess of $75 million and (ii) CEOC is required to obtain our consent (not to be unreasonably withheld, but subject to a reasonable economic arrangement benefitting us) to develop certain vacant land in Las Vegas, Nevada. CEOC will not be required to obtain our consent to construct a certain new tower at the CPLV facility, as long as CEOC satisfies all applicable conditions thereto set forth in the document governing the CPLV CMBS Debt. In addition, where the cost of the alteration exceeds $50.0 million (such activity, a “Material Alteration”), we have the right (except if CEOC is financing the same with cash) to offer to provide financing for such Material Alteration. If we decline to provide financing, or CEOC rejects our financing proposal, subject to certain conditions, CEOC may use existing available financing or seek outside financing. In such event, following expiration of the term of the lease, we will have the option to reimburse CEOC for such Material Alteration for fair market value. If we do not elect to reimburse CEOC for such Material Alteration, CEOC will, at its option, either remove the Material Alteration from the leased property and restore the leased property to the condition existing prior to such Material Alteration being constructed at CEOC’s own cost and expense prior to expiration or earlier termination of the term of the lease, or leave the Material Alteration at the leased property at the expiration or earlier termination of the term of the lease, at no cost to us. If we elect to reimburse CEOC for the Material Alteration, any amount due to CEOC will be credited against any amounts owed by CEOC to us under the applicable Formation Lease Agreement. In certain instances (including, for example, if the applicable Formation Lease Agreement is terminated due to CEOC’s default), such Material Alterations not funded by us nevertheless will revert to us at no cost to us.

Assignment. Under the Formation Lease Agreements, the tenant does not have the right to assign any portion of the leases. However, certain assignments are permitted, including an assignment of an entire lease to a permitted lender for collateral purposes or upon foreclosure to a lender or subsequent purchaser, an assignment to an affiliate of the tenant, to Caesars or an affiliate of Caesars, and, subject to certain conditions, any sublease of any portion of the premises, pursuant to a bona-fide third party transaction. In addition, certain transfers of direct and indirect interests in the tenant are permitted.

Other Terms. The Formation Lease Agreements contain various terms and conditions related to subleasing of properties, insurance, casualty and condemnation, and other customary matters. See “—Insurance” for more information relating to insurance provisions in the Formation Lease Agreements. The Formation Lease Agreements also include events of default, including certain events of cross default between the Formation Lease Agreements, such that (i) an event of default under the CPLV Lease Agreement will trigger an event of default under the other Formation Lease Agreements during the term of the Prior Term Loans, Prior First Lien Notes and Second Lien Notes (but not following the replacement of such financings), (ii) an event of default under the Non-CPLV Lease Agreement or Joliet Lease Agreement will not trigger an event of default under the CPLV Lease Agreement and (iii) an event of default under either the Non-CPLV Lease Agreement or the Joliet Lease Agreement will trigger an event of default under the other such Formation Lease Agreement. Among other remedies, we have the right to terminate the Formation Lease Agreements during an event of default (subject to notice and cure periods in favor of the tenants and their lenders). The Formation Lease Agreements also require CEOC, in the event of a termination of the agreements, to provide certain transition services to us in respect of the properties subject to the agreements for a limited time following such event.

Under the Formation Lease Agreements, sale of the leased property to competitors of Caesars is not restricted, but if the landlord under the Formation Lease Agreements becomes (or comes under common control with) a competitor of Caesars, then certain modifications to such Leases are triggered, including, among other things, (i) Caesars is no longer required to furnish any competitively sensitive information to us in connection with its reporting requirements, (ii) certain approval rights (e.g., the right to approve certain alterations) are eliminated, and (iii) we are required to form an independent committee to evaluate, negotiate and approve all consent, approval and decision making rights granted to landlord under the leases (or under the corresponding Management and Lease Support Agreements) relating to competitively sensitive matters pertaining to the use and operation of the leased property and the tenant’s business conducted thereat (other than any right of landlord to grant waivers and amend or modify the terms of the lease).

 

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HLV Lease Agreement

In December 2017, we entered into an amended and restated lease agreement with Harrah’s Las Vegas, LLC (“HLV Tenant”), which governs the lease of the facilities of Harrah’s Las Vegas. The payment obligations of HLV Tenant under the HLV Lease Agreement are guaranteed by CRC under the Guaranty of Lease.

Term. The HLV Lease Agreement has an initial 15-year term with four five-year renewal terms exercisable at the option of the HLV Tenant. Other than upon mutual agreement, or in limited circumstances in the case of certain casualty or condemnation events, HLV Tenant does not have a right to terminate the HLV Lease Agreement (unless we engage in certain types of transactions with an entity(ies) that is(are) a competitor of Caesars or if the landlord thereunder becomes a competitor of Caesars, in which case the tenant has a right to buy the property from us). We only have the right to terminate the Lease Agreement during an event of default or in the event of a certain casualty events.

Rent. The base rent for the first seven years of the lease term is $87.4 million per year, subject to an annual escalator equal to (a) 1% commencing in the second year of the lease term, and (b) the greater of 2% and the Consumer Price Index increase commencing in the sixth year of the lease term, provided, however, with respect to clause (b) in the event such escalation in rent will cause the EBITDAR to Rent Ratio (as defined in the HLV Lease Agreement) to be less than 1.6 to 1, the escalator will be reduced to an amount that would result in a 1.6 to 1 EBITDAR to Rent Ratio for such lease year (but in no event shall rent be less than in the prior year).

For the eighth year of the lease term through the tenth year of the lease term, annual rent will be (i) (a) for the eighth year, base rent equal to 80% of the overall rent for the seventh lease year, subject to the annual escalator and (b) for each subsequent year, an amount equal to the base rent for the immediately prior year, subject to the annual escalator, plus (ii) variable rent equal to 20% of the overall rent for the seventh lease year, increased or decreased, as applicable, by 4.0% of the difference in net revenue of the operations of HLV, from the year prior to the first year of the lease term to the seventh year of the lease term.

From and after the commencement of the eleventh year of the lease term, rent will be (i) (a) for the eleventh year, base rent equal to 80% of the overall rent for the tenth year of the lease term, subject to the annual escalator and (b) for each subsequent year, an amount equal to the base rent for the immediately prior year, subject to the annual escalator, plus (ii) variable rent equal to 20% of the overall rent for the tenth year of the lease term, increased or decreased, as applicable, by 4.0% of the difference in net revenue from the operations of HLV from the seventh year of the lease term to the tenth year of the lease term.

For each renewal term after the initial 15-year term, annual rent will be (i) as base rent, for the first year of such renewal term an amount equal to fair market value rent and in no event less than the base rent then payable during the year immediately preceding the commencement of such renewal term or greater than 110% of the prior year’s base rent and for each year following such first year of such renewal term, an amount equal to the amount payable as base rent in the immediately prior year, subject to the annual escalator, and (ii) as variable rent, for each year of such renewal term an amount equal to the variable rent in effect for the year of the lease term immediately preceding the first year of such renewal term, with such variable rent increased or decreased, as applicable, by 4.0% of the difference in net revenue from the operations of HLV from year ten of the lease term to year 15 of the lease term (in the event of the first renewal period) or from the year prior to the first year of the immediately preceding renewal term to the last year of the immediately preceding renewal term (in the event of subsequent renewal periods).

Triple Net Lease, Capital Expenditures, Material Alterations. The HLV Lease Agreement is structured as triple-net, with HLV Tenant responsible for the taxes, insurance, maintenance and repair of the facilities. HLV Tenant pays all rent absolutely net to us, without abatement, and unaffected by any circumstance (except in certain cases of casualty and condemnation).

In addition to HLV Tenant’s responsibility to pay taxes, insurance and maintenance and repair expenses, in each calendar year, the HLV Tenant must expend a minimum of $171.0 million in capital expenditures at HLV

 

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for the period commencing on January 1, 2017 and ending December 31, 2021, and thereafter on an annual basis expend an amount equal to at least 1% of actual net revenue (from the prior year) generated by HLV on capital expenditures that constitute installation or restoration, repair, maintenance or replacement of any physical improvements with respect to HLV.

In addition to customary default remedies, if HLV Tenant does not spend the full amount of the minimum capital expenditures as required under the HLV Lease Agreement, we have the right to seek the remedy of specific performance to require HLV Tenant to spend any such unspent amount or deposit such amounts in a reserve account. HLV Tenant’s obligations to spend the minimum capital expenditures will constitute monetary obligations included in CRC’s obligations as guarantor with respect to the HLV Lease Agreement.

HLV Tenant is permitted to make any alterations and improvements, including materially altering a facility, expanding a facility or developing the undeveloped land leased pursuant to the lease, except that HLV Tenant is required to obtain our consent (not to be unreasonably withheld) for any alterations with a budgeted cost in excess of $75 million. In addition, where the cost of the alteration exceeds $50.0 million (such activity, a “Material Alteration”), we have the right (except if HLV Tenant is financing the same with cash or if obtaining such financing from us would cause a breach by HLV Tenant or CRC of its indebtedness with unrelated third parties in an aggregate principal amount exceeding $75 million) to offer to provide financing for such Material Alteration. If we decline to provide financing, or HLV Tenant rejects our financing proposal, subject to certain conditions, HLV Tenant may use existing available financing or seek outside financing. In such event, following expiration of the term of the lease, we will have the option to reimburse HLV Tenant for such Material Alteration for fair market value. If we do not elect to reimburse HLV Tenant for such Material Alteration, HLV Tenant will, at its option, either remove the Material Alteration from the leased property and restore the leased property to the condition existing prior to such Material Alteration being constructed at HLV Tenant’s own cost and expense prior to expiration or earlier termination of the term of the lease, or leave the Material Alteration at the leased property at the expiration or earlier termination of the term of the lease, at no cost to us. If we elect to reimburse HLV Tenant for the Material Alteration, any amount due to HLV Tenant will be credited against any amounts owed by HLV Tenant to us under the lease. In certain instances (including, for example, if the lease agreement is terminated due to HLV Tenant’s default), such Material Alterations not funded by us nevertheless will revert to us at no cost to us.

Assignment. Under the HLV Lease Agreement, certain assignments are permitted, including an assignment of the entire lease to a permitted lender for collateral purposes or upon foreclosure to a lender or subsequent purchaser, an assignment to an affiliate of the tenant, to Caesars or an affiliate of Caesars, and, subject to certain conditions, any sublease of any portion of the premises, pursuant to a bona-fide third party transaction. In addition, certain transfers of direct and indirect interests in the HLV Tenant are permitted.

Other Terms. The HLV Lease Agreement contains various terms and conditions related to subleasing of properties, insurance, casualty and condemnation, and other customary matters. See “—Insurance” for more information relating to insurance provisions in the HLV Lease Agreement. The HLV Lease Agreement also includes events of default. Among other remedies, we have the right to terminate the HLV Lease Agreement during an event of default (subject to notice and cure periods in favor of the tenants and their lenders). The HLV Lease Agreement also requires HLV Tenant, in the event of a termination of the lease, to provide a two year license for certain specific intellectual property used in conjunction with HLV.

Under the HLV Lease Agreement, sales of the HLV facility to competitors of Caesars are prohibited. If the Landlord under the HLV Lease nonetheless becomes (or comes under common control with) a competitor of Caesars (including by way of a transaction affecting all of VICI REIT’s properties generally), then, (i) certain modifications to the HLV Lease Agreement are triggered, similar to the modifications to the Formation Lease Agreements described above, and (ii) Caesars is granted the option to purchase the HLV facility from us at its fair market value, determined through a process described in the HLV Lease Agreement.

 

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CRC Guaranty. Pursuant to the Guaranty of Lease, CRC guarantees the payment of all monetary obligations of HLV Tenant under the HLV Lease Agreement.

Management and Lease Support Agreements

We have entered into a separate Management and Lease Support Agreement in connection with each Formation Lease Agreement with Caesars or a wholly-owned subsidiary of Caesars serving as managers (collectively, the “Managers”). Pursuant to the Management and Lease Support Agreements, Caesars guarantees CEOC’s payment obligations, including capital expenditures and monetary damages, under the Formation Lease Agreements and the “User’s” payment obligations under the Golf Course Use Agreement.

Term. The Management and Lease Support Agreements commenced on the Formation Date and will terminate with respect to a specific property, if such property is no longer subject to the applicable Formation Lease Agreement. With respect to each Formation Lease Agreement, the respective Management and Lease Support Agreement will terminate upon the earlier of (i) the date that all of the facilities covered by such Management and Lease Support Agreement are no longer subject to such management and lease pull out agreement as a result of certain events of casualty, condemnation or taking (ii) the expiration of the term (including any renewal term) of the applicable Formation Lease Agreement (iii) the date that we, Caesars, the Manager and CEOC terminate the respective Management and Lease Support Agreement, (iv) the foreclosure of the leased facilities covered by such Formation Lease Agreement where the foreclosing party elects to terminate the Management and Lease Support Agreement and (v) the termination of the respective Formation Lease Agreement by us as a result of certain defaults thereunder.

A termination of any or all of the Management and Lease Support Agreements by CEOC or the Managers (including in the case of a rejection in bankruptcy) will not, subject to certain exceptions described below, result in the termination of Caesars’ guaranty obligations under any of the Management and Lease Support Agreements.

Operations and Management. Under the Management and Lease Support Agreements, the Managers manage and operate the leased facilities. The Managers manage the facilities in their reasonable business judgment, on terms set forth in the Management and Lease Support Agreements and, in any event are required, among other things, to manage (x) each facility under the Non-CPLV Lease Agreement and the Joliet Lease Agreement (i) at a standard and level of service and quality and on terms and in a manner for all of the facilities under the Non-CPLV Lease Agreement and the Joliet Lease Agreement, taken as a whole, that is not lower than the standard and level of service and quality for all of the facilities under the Non-CPLV Lease Agreement and the Joliet Lease Agreement, taken as a whole, as of the date of commencement of the Management and Lease Support Agreements, and (ii) in accordance in all material respects with the policies and programs in effect as of the date of commencement of the Management and Lease Support Agreements at each of the facilities under the Non-CPLV Lease Agreement and the Joliet Lease Agreement, with certain revisions to such policies and programs from time to time as the applicable Manager may implement in a non-discriminatory manner; and (y) CPLV (i) at a standard and level of service and quality and on terms and in a manner for CPLV that is not lower than the standard and level of service and quality for CPLV as of the date of commencement of the Management and Lease Support Agreements, and (ii) in accordance in all material respects with the policies and programs in effect as of the of the date of commencement of the Management and Lease Support Agreements at CPLV with certain revisions to such policies and programs from time to time as Manager may implement in a non-discriminatory manner, in each case subject to certain operating limitations more particularly described in the Management and Lease Support Agreements.

All direct expenses for operating the facilities incurred by the applicable Manager in accordance with each Management and Lease Support Agreement are reimbursed by our tenant (including, without limitation, fees and expenses allocated to the Managers and/or our tenant for the facilities under arrangements with Caesars Enterprise Services, (“CES”)). The Managers entered into separate shared services arrangements with CES (and,

 

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if necessary, any other applicable affiliates) for access to shared services (including without limitation use of the Total Rewards ® customer loyalty program) for the benefit of the facilities so that the facilities can be operated, promoted and marketed consistent with, and on no less favorable terms and conditions agreed to with, any other facilities directly or indirectly owned, operated or managed by Caesars (or Caesars’ affiliates). The Managers may delegate duties under the Management and Lease Support Agreements to one or more affiliates on customary terms so long as neither us nor our tenant is prejudiced thereby.

CEOC has an exclusive (subject to certain carve-outs), perpetual right to use the name “Caesars Palace Las Vegas” for hotels, casinos and other leisure, entertainment or commercial properties throughout the world, which requires our consent to terminate. Horseshoe, Harrah’s, Bally’s and other trademarks and brand names under which the properties subject to the Non-CPLV Lease Agreement are operated and promoted, are also licensed to CEOC or the Managers, and these can be changed without our consent. Tenant’s obligations to pay rent under the Lease Agreements would continue regardless of any rebranding.

We also have rights to use other intellectual property, including guest data, owned by Caesars that is necessary for our properties’ operation or management, for so long as such property is managed by a Caesars entity. If management is transitioned away from Caesars, there would be a two year transition period (which may end earlier if our needs ceased) to phase out any such use. A new manager would have no right to use this intellectual property, including the Total Rewards ® program, following the transition period. Caesars and we would both be permitted to use guest data existing at the time of any such transition, with the exception that guest data pertaining to certain exclusive customers of Caesars Palace Las Vegas would be exclusively ours.

Additionally, we have the right to use trademarks, images and other creative works from Caesars for fundraising, financing, investment reporting, investor relations, business development and similar activities relating to the leased properties, for so long as such properties are leased and managed by Caesars. Caesars also has the right to use any creative works that we develop related to the leased properties for their marketing and promotion of such properties.

Caesars Guaranty. Pursuant to the Management and Lease Support Agreements, Caesars guarantees the payment and performance of all monetary obligations of CEOC and/or its subsidiaries under the Formation Lease Agreements and the “User’s” under the Golf Course Use Agreement, subject to the following terms: (i) Caesars will be liable for the full amounts of the monetary obligations owed by our tenants and/or its subsidiaries in respect of the Formation Lease Agreements and the “User’s” under the Golf Course Use Agreement (not merely for any deficiency amount), unless and until irrevocably paid in full; (ii) Caesars will have no obligation to make a payment with respect to the leases unless an event of default is continuing under the applicable Formation Lease Agreement; (iii) if an event of default under a Formation Lease Agreement occurs, Caesars will have no obligation to make a payment (other than payments in respect of such damages to which we are entitled due to a termination pursuant to the Formation Lease Agreements and enforcement costs), unless Caesars was given notice of the applicable default (or event or circumstance that is or would become a default) of our tenant and/or its subsidiaries under the CPLV Lease Agreement, the Non-CPLV Lease Agreement or Joliet Lease Agreement, as applicable, and, with respect to monetary defaults, did not cure such default within the period set forth in the agreements; (iv) Caesars’ and the Managers’ obligations with respect to each Management and Lease Support Agreement (including, without limitation, Caesars’ guaranty obligations with respect to a Formation Lease Agreement) will terminate in the event the applicable Formation Lease Agreement is terminated by us expressly in writing (or with our express written consent), except to the extent of any accrued and unpaid guaranty obligations through the date of such termination and such damages to which we are entitled due to such termination pursuant to the Formation Lease Agreements; and (v) Caesars’ obligations with respect to each Management and Lease Support Agreement (including, without limitation, Caesars’ guaranty obligations with respect to a Formation Lease Agreement) will also terminate in the event (x) the Management and Lease Support Agreement is terminated by us, CEOC and/or its subsidiaries, the Manager and Caesars expressly in writing (or the parties’ express written consent), (y) a replacement Lease Agreement and Management and Lease Support Agreement are entered into by us, Caesars and/or its affiliates upon certain bankruptcy-related events (or if we

 

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elect in writing not to enter into such replacement agreements or such replacement agreements are not entered into as a direct and proximate result of our acts or failure to act in accordance with the Management and Lease Support Agreement provisions in respect of replacing such agreements) or (z) we terminate a Manager for cause (as defined in the Management and Lease Support Agreements) and an arbitrator appointed in accordance with the Management and Lease Support Agreements determines that cause did not exist. Notwithstanding the foregoing, Caesars’ guaranty obligations will continue (i) to the extent of any accrued and unpaid guaranty obligations through the date of termination of the guaranty and such damages to which we are entitled due to such termination pursuant to the Formation Lease Agreements and enforcement costs, (ii) during a two-year post-termination transition period during which the applicable Manager continues to act as manager and (iii) in all respects if the Managers are terminated for cause (as defined in the Management and Lease Support Agreements). Except as provided above, Caesars’ guaranty obligations under the Management and Lease Support Agreements will not terminate for any reason.

Collateral. In the event that CEOC’s first lien debt is (i) guaranteed by Caesars and such guaranty is secured by Caesars’ or certain of its subsidiaries’ assets, or (ii) secured by Caesars’ or certain of its subsidiaries’ assets, then, unless the collateral is limited to the equity interests in CEOC, the collateral securing any such first lien debt of CEOC shall also secure Caesars’ guaranty obligations pursuant to the Management and Lease Support Agreements on a pari passu basis with such CEOC first lien debt under the security agreement and any other related instruments securing CEOC’s first lien debt or the Caesars guaranty in respect of CEOC’s first lien debt (or any Caesars guaranty in respect of any refinancing thereof) in order to provide a security interest in all collateral thereunder to secure Caesars’ obligations under the Management and Lease Support Agreements. Such security interest will automatically be released upon the earlier to occur of (i) the termination of the security interest granted by Caesars or its subsidiaries securing CEOC’s first lien debt (or Caesars’ guaranty thereof) and (ii) (x) the date on which Caesars’ guaranty obligations under the Management and Lease Support Agreements have been irrevocably paid or (y) to the extent Caesars’ guaranty obligation under the Management and Lease Support Agreement is terminated by the express terms of the Management and Lease Support Agreements, twelve months after such termination. Such security interest would be a “silent” security interest that provides us with a secured claim against Caesars while any such Caesars debt guaranty or pledge of assets remains in effect, but we will have no voting, enforcement or default related rights with respect to such debt guaranty or collateral, unless and until the earlier of (x) the occurrence of a default in respect of any of Caesars’ guaranty obligations with respect to the Lease Agreements, or (y) the occurrence of an event of default that would cause the holders of CEOC’s first lien debt to take enforcement action in respect of the security interest in Caesars’ or its subsidiaries’ assets, in which case we would have all rights afforded to a secured creditor with respect such assets of Caesars and its subsidiary, including all rights available to holders of CEOC’s first lien debt. We would be a party to such security agreement and all related instruments that provide for such rights. The collateral that secures Caesars’ guaranty obligations will be the same collateral that secures any such Caesars debt guaranty obligations at any time, and Caesars’ guaranty obligations will be secured by such collateral on a pari passu basis with such Caesars debt guaranty obligations for so long as and at any time that such debt guaranty obligations are secured. Caesars will cause the parties benefitting from any security interest in Caesars’ or certain of its subsidiaries’ assets to enter into an intercreditor agreement containing, among other things, provisions governing the pari passu coverage of such collateral provisions and the “waterfall” by which any proceeds of, or collections on, the collateral will be distributed as between CEOC’s first lien debt and the lease guaranty obligations.

Caesars Covenants

The Management and Lease Support Agreements contain customary terms and waivers of all suretyship and other defenses by Caesars and include a covenant by Caesars requiring that (a) a sale of certain material assets by Caesars be for fair market value consideration, on arm’s-length terms in certain cases, with the approval of Caesars’ board of directors, and (b) non-cash dividends by Caesars are permitted only to the extent such dividends would not reasonably be expected to result in Caesars’ inability to perform its guaranty obligations under the Management and Lease Support Agreements.

 

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In addition, until October 6, 2023, or, if earlier, (x) on the date on which Caesars’ guaranty obligations under the Management and Lease Support Agreements have been irrevocably paid or (y) to the extent Caesars’ guaranty obligation under the Management and Lease Support Agreements are terminated by the express terms of the Management and Lease Support Agreements, twelve months after such termination, Caesars may not directly or indirectly (i) declare or pay, or cause to be declared or paid, any dividend, distribution, any other direct or indirect payment or transfer (in each case, in cash, stock, other property, a combination thereof or otherwise) with respect to any of Caesars’ capital stock or other equity interests, (ii) purchase or otherwise acquire or retire for value any of Caesars’ capital stock or other equity interests, or (iii) engage in any other transaction with any direct or indirect holder of Caesars’ capital stock or other equity interests, which is similar in purpose or effect to those described above. However, Caesars will be permitted to execute such transactions if (a) Caesars’ equity market capitalization after giving pro forma effect to such dividend, distribution, or other transaction is at least $5.5 billion, (b) the amount of such dividend, distribution, or other transaction (together with any and all other such dividends and distributions and other transactions made under this clause (b) but excluding, any dividends, distributions or other transactions to be made under clause (c) or (d) below in such fiscal year), does not exceed, in the aggregate, (x) 25% of the net proceeds, up to a cap of $25 million in any fiscal year, from the disposition of assets by Caesars and its subsidiaries and (y) $100 million from other sources in any fiscal year, (c) Caesars’ equity market capitalization after giving pro forma effect to such dividend, distribution, or other transaction is at least $4.5 billion and such dividend, distribution or other transaction made under this clause (c) (excluding, any dividends, distributions or other transactions made under clause (b) above or clause (d) below in such fiscal year) is less than or equal to $125 million per annum and is funded solely by asset sale proceeds or (d) solely with respect to a transaction described in clause (a) above, the aggregate amount of such transactions (excluding transactions made under clause (b) or (c) above) is not more than $199.5 million. Similarly, until October 6, 2023, or earlier, (x) the date on which Caesars’ guaranty obligations under the Management and Lease Support Agreements have been irrevocably paid or (y) to the extent Caesars’ guaranty obligation under the Management and Lease Support Agreements are terminated by the express terms of the Management and Lease Support Agreements, twelve months after such termination, except in the case of the exceptions set forth under clauses (a) and (c) above, any net proceeds from the disposition of assets by Caesars or its subsidiaries in excess of $25 million that are directly or indirectly distributed to, or otherwise received by, Caesars in any fiscal year will not be used to fund any restricted payment of Caesars described above in clauses (i) through (iii) above.

Amended and Restated Right of First Refusal Agreement

The Amended and Restated Right of First Refusal Agreement contains a right of first refusal in our favor, pursuant to which we have the right to own (and cause to be leased to, and managed by, Caesars (or its affiliate or affiliates)) any domestic gaming facility located outside of Greater Las Vegas, proposed to be acquired or developed by Caesars (and/or its subsidiaries) that is not (i) then subject to a pre-existing lease, management agreement or other contractual restriction that was not entered into in contemplation of such acquisition or development and which (x) was entered into on arms’-length terms and (y) would not be terminated upon or prior to such transaction, (ii) a transaction for which the opco/propco structure would be prohibited by applicable laws, rules or regulations or which would require governmental consent, approval, license or authorization (unless already received), (iii) any transaction that does not consist of owning or acquiring a fee or leasehold interest in real property, (iv) a transaction in which Caesars and/or its subsidiaries will not own at least 50% of, or control, the entity that will own the gaming facility, (v) a transaction in which one or more third parties will own or acquire, in the aggregate, a beneficial economic interest of at least 30% in the applicable gaming facility, and such third parties are unable, or make a bona fide, good faith refusal, to enter into the opco/propco structure, (vi) a transaction in which Caesars or its subsidiaries proposes to acquire a then-existing gaming facility from Caesars or its subsidiaries, and (vii) a transaction with respect to any asset remaining in CEOC after the Formation Transactions. The Amended and Restated Right of First Refusal further provides us, subject to certain exclusions, the right to acquire (and lease to Caesars) any of the properties that Caesars has recently agreed to acquire from Centaur Holdings, LLC, should Caesars determine to sell any such properties. If we decline to exercise our right of first refusal, the Non-CPLV and Joliet Lease Agreements will provide for the establishment of a variable rent floor applicable to any non-CPLV facility with respect to which the new facility is located

 

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within a 30-mile radius of such facility leased thereunder and outside of Greater Las Vegas. If we exercise such right, we and Caesars (or its designee) will structure such transaction in a manner that allows the subject property to be owned by us and leased to Caesars (or its designee). In such event, Caesars (or its designee) will enter into a lease with respect to the subject property whereby (i) rent thereunder will be established based on formulas consistent with the EBITDAR coverage ratio (determined based on the prior 12 month period) with respect to the Lease Agreement then in effect and (ii) such other terms as are agreed by the parties.

The Amended and Restated Right of First Refusal Agreement also contains a right of first refusal in favor of Caesars, pursuant to which Caesars will have the right to lease and manage any domestic gaming facility located outside of Greater Las Vegas, proposed to be acquired or developed by us that is not: (i) any asset that is then subject to a pre-existing lease, management agreement or other contractual restriction that was not entered into in contemplation of such acquisition or development and which (x) was entered into on arms’ length terms and (y) would not be terminated upon or prior to closing of such transaction, (ii) any transaction for which the opco/propco structure would be prohibited by applicable laws, rules or regulations or which would require governmental consent, approval, license or authorization (unless already received), (iii) any transaction structured by the seller as a sale-leaseback, (iv) any transaction in which we and/or our affiliates will not own at least 50% of, or control, the entity that will own the gaming facility, and (v) any transaction in which we or our affiliates propose to acquire a then-existing gaming facility from ourselves or our affiliates. If Caesars (or its designee) exercises such right, we and Caesars (or its designee) will structure such transaction in a manner that allows the subject property to be owned by us and leased to Caesars (or its designee). In such event, Caesars (or its designee) will enter into a lease with respect to the additional property whereby (i) rent thereunder will be established based on formulas consistent with the adjusted EBITDA coverage ratio (as set forth in the Amended and Restated Right of First Refusal Agreement) with respect to the lease then in effect and (ii) such other terms as are agreed by the parties.

In the event that the foregoing rights are not exercised by us or Caesars and CEOC, as applicable, each party will have the right to consummate the subject transaction without the other’s involvement, provided the same is on terms no more favorable to the counterparty than those presented to us or Caesars and CEOC, as applicable, for consummating such transaction.

The rights of first refusal will not apply if (A) the Management and Lease Support Agreements have been terminated or have expired by their terms or with our consent, (B) Caesars (or a subsidiary thereof) is no longer managing the facilities, or (C) a change of control occurs with respect to either Caesars or us.

Call Right Agreements

The Call Right Agreements provide our Operating Partnership with the opportunity to acquire Harrah’s Atlantic City, Harrah’s New Orleans and Harrah’s Laughlin from CERP or CGP, as applicable. Our Operating Partnership can exercise the call rights within five years from the Formation Date by delivering a request to the applicable owner of the property containing evidence of our ability to finance the call right. The purchase price for each property will be 10 multiplied by the initial property lease rent for the respective property, with the initial property lease rent for each property being the amount that causes the ratio of (x) EBITDAR of the property for the most recently ended four quarter period for which financial statements are available to (y) the initial property lease rent to equal 1.67.

Upon such election, if the owner of the property determines that (i) the sale of the property would not be permitted under a debt agreement under which at least $100.0 million of indebtedness (individually or in the aggregate) is outstanding, (ii) the consummation of the call right would not be approved by the applicable gaming authorities or (iii) the property is not for any other reason deliverable to our Operating Partnership, the owner may propose one or more replacement properties and the material terms of the purchase and if such proposal is at least as economically beneficial to us as the exercise of the call right, the parties must proceed with the sale of that property and any dispute with respect to the same (including whether such proposal was a qualifying proposal) will be submitted to arbitration.

 

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If the exercise of the call right is not permissible because a debt agreement does not permit the sale and such limitation is not resolved within one year from exercise of the right and the owner has not made an alternative proposal, or has made an alternative proposal that is not at least as economically beneficial to us as the exercise of the call right, the owner must pay us an amount equal to the value of our loss, which, as of the Formation Date, was equal to $114.0 million, $84.0 million and $62.0 million for Harrah’s Atlantic City, Harrah’s New Orleans and Harrah’s Laughlin, respectively. These amounts will increase at a rate of 8.5% per annum, with annual compounding for the period from the date of each agreement until the date on which payment of the value loss amount is made.

If the exercise of the call right is not permissible due to a reason other than because of a debt limitation (including that the sale was not approved by the gaming authorities or the failure to obtain the consent of a landlord) and the owner has not made an alternative proposal, or has made an alternative proposal that is not at least as economically beneficial to us as the exercise of the call right, then the parties must use commercially reasonable efforts to resolve the issue until the earlier of (A) one year from the date of the exercise of the call right or (B) the date on which the parties determine that there is no reasonable chance that the issue will be resolved. If the applicable issue making the transaction impermissible is not resolved by the foregoing described deadline, the owner must use commercially reasonable efforts to sell the property to an alternative purchaser for the fair market value of the property. Upon the closing of any such alternative transaction, the net cash proceeds of the sale of the property will be allocated (i) first, to owner in an amount not to exceed the purchase price that would otherwise be determined in accordance with the applicable Call Right Agreement and (ii) any excess of such amount, to us (subject to any necessary approvals from applicable gaming authorities required for owner to pay, and us to receive, such funds).

If the exercise of the call right is permissible, the parties will use good faith, commercially reasonable efforts, for a period of ninety days following the delivery of the election notice to negotiate and enter into a sale agreement and conveyance and ancillary documents with respect to the applicable property together with a leaseback agreement.

Put-Call Agreement

The Put-Call Agreement provides for (i) a put right in favor of Caesars, which, if exercised, would result in the sale by Caesars to HLV Owner and simultaneous leaseback by HLV Owner to Caesars of the Eastside Convention Center Property (the “Put Right”), (ii) if Caesars exercises the put right and, among other things, the sale of the Eastside Convention Center Property to HLV Owner does not close for certain reasons more particularly described in the agreement, then a repurchase right in favor of Caesars, which, if exercised, would result in the sale by HLV Owner to Caesars of HLV (the “HLV Repurchase Right”) and (iii) a call right in favor of HLV Owner, which, if exercised, would result in the sale by Caesars to HLV Owner and simultaneous leaseback by HLV Owner to Caesars of the Eastside Convention Center Property (the “Call Right”). The Put Right may be exercised by Caesars during the period of time commencing on January 1, 2024 and ending on December 31, 2024. If applicable, the HLV Repurchase Right may be exercised by Caesars during a one year period commencing on the date upon which the closing under the Put Right transaction does not occur and ending on the day immediately preceding the first anniversary thereof. The purchase price for HLV would be an amount equal to 13 times the rent due under the HLV Lease Agreement for the most recently ended four consecutive fiscal quarter period for which financial statements are available as of the date of Caesars’ election to execute the HLV Repurchase Right. If applicable, the Call Right may be exercised by HLV Owner during the period of time commencing on January 1, 2027 and ending on December 31, 2027. The purchase price for the Eastside Convention Center Property is equal to thirteen times the rent due in connection with the leaseback thereof which will be determined pursuant to the formulas set forth in the Put-Call Agreement. The Put-Call Agreement also provides that the closing of the applicable transaction(s) would occur approximately 180 days after the entering into of the purchase and sale agreement. Simultaneously with the execution of the Put-Call Agreement: (x) CRC entered into a Guaranty, whereby CRC guaranteed Caesars’ obligations to pay certain liquidated damages amounts and perform certain obligations in connection with the construction of the

 

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convention center, and (y) VICI Properties 1 LLC, a Delaware limited liability company (“VICI 1”), entered into a Guaranty, whereby VICI 1 guaranteed HLV Owner’s obligations to pay certain liquidated damages amounts.

Golf Course Use Agreement

Pursuant to the Golf Course Use Agreement, VICI Golf granted to CEOC and CES (collectively, the “users”) certain priority rights and privileges with respect to access and use of the following golf course properties: Rio Secco (Henderson, Nevada), Cascata (Boulder City, Nevada), Chariot Run (Laconia, Indiana) and Grand Bear (Saucier, Mississippi). Pursuant to the Golf Course Use Agreement, the users are granted specific rights and privileges to the golf courses, including (i) preferred access to tee times for guests of users’ casinos and/or hotels located within the same markets as the golf courses, (ii) preferred rates for guests of users’ casinos and/or hotels located within the same markets as the golf courses, and (iii) availability for golf tournaments and events at preferred rates and discounts. In addition, VICI Golf is required to reserve a certain number of tee times for users’ guests on any and all dates as well as make commercially reasonable efforts to place users’ guests once the aforementioned reserved tee times have been utilized and at all other times when tee time inventory is limited. Pursuant to the Golf Course Use Agreement, the users are required to use commercially reasonable efforts to refer to VICI Golf a minimum number of complimentary golf rounds per month at each of the golf courses. Payments under the Golf Course Use Agreement are comprised of a $10.0 million annual membership fee, use fees and minimum rounds fees. The membership fee is subject to increase or decrease, as applicable, whenever rent under the Non-CPLV Lease Agreement is adjusted in accordance with the terms of the Non-CPLV Lease Agreement. The adjusted membership fee will be calculated based on the proportionate increase or decrease, as applicable, in rent under the Non-CPLV Lease Agreement. The use fees and minimum round fees are subject to an annual escalator equal to the greater of 2% and the increase in the Consumer Price Index from the prior year beginning at the times provided under the Golf Course Use Agreement.

Tax Matters Agreement

The Tax Matters Agreement addresses matters relating to the payment of taxes and entitlement to tax refunds by Caesars, CEOC, the Operating Partnership and us, and allocates certain liabilities, including providing for certain covenants and indemnities, relating to the payment of such taxes, receipt of such refunds, and preparation of tax returns relating thereto. In general, the Tax Matters Agreement provides for the preparation and filing by Caesars of tax returns relating to CEOC and for the preparation and filing by us of tax returns relating to us and our operations. To the extent that any matters contained in any tax return prepared by Caesars relate to our taxes, we have the right to review and comment on such items and, similarly, to the extent that any matters contained in any tax return prepared by us relate to CEOC’s taxes, Caesars has the right to review and comment on such items. Under the Tax Matters Agreement, Caesars has agreed to indemnify us for any taxes allocated to CEOC which we are required to pay pursuant to our tax returns and we have agreed to indemnify Caesars for any taxes allocated to us which Caesars or CEOC is required to pay pursuant to a Caesars or CEOC tax return. We have the right to participate in the contest of any matters relating to any Caesars or CEOC tax return that relate to matters for which we have indemnification responsibilities, and Caesars will have the right to participate in the contest of any matters relating to any of our tax returns that relate to matters for which Caesars has indemnification responsibilities.

The Tax Matters Agreement sets forth the parties’ intent that certain transactions entered into as part of the Plan of Reorganization qualify as tax-free under the Code. The Tax Matters Agreement provides that Caesars, CEOC and we will not take certain actions which may be inconsistent with certain facts presented and representations made relating to the foregoing intended tax treatment without obtaining a supplemental ruling from the IRS or, if mutually agreed, an opinion of a nationally recognized law or accounting firm that such actions will not affect the foregoing intended tax treatment. The parties agreed generally not to file tax returns or take any other action (or refrain from taking action) in a manner inconsistent with the foregoing intended tax treatment. Under the Tax Matters Agreement, Caesars has agreed indemnify us for taxes attributable to acts or omissions taken by Caesars and we have agreed to indemnify Caesars for taxes attributable to our acts or

 

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omissions, in each case that cause a failure of the transactions entered into as part of the Plan of Reorganization to qualify for the intended tax treatment described above.

Investment Policies

Investment in Real Estate or Interests in Real Estate

Our investment objectives are to increase cash flow from operations, achieve sustainable long-term growth and maximize stockholder value to allow for stable dividends and stock appreciation. We have not established a specific policy regarding the relative priority of these investment objectives.

Our business is focused primarily on gaming and leisure sector properties and activities directly related thereto. We own 20 market-leading properties and own and operate four golf courses. We believe there are potential opportunities to acquire or develop additional gaming, hospitality and entertainment destinations. Our future investment and development activities will not be limited to any geographic area or to a specific percentage of our assets. We intend to engage in such future investment or development activities in a manner that is consistent with our qualification as a REIT for U.S. Federal income tax purposes. We do not have a specific policy to acquire assets primarily for capital gain or primarily for income. In addition, we may purchase or lease income-producing commercial and other types of properties for long-term investment, expand and improve the properties we presently own or other acquired properties, or sell such properties, in whole or in part, when circumstances warrant.

We may participate with third parties in property ownership, through joint ventures or other types of co-ownership, and we may engage in such activities in the future if we determine that doing so would be the most effective means of owning or acquiring properties. We do not expect, however, to enter into a joint venture or other partnership arrangement to make an investment that would not otherwise meet our investment policies. We also may acquire real estate or interests in real estate in exchange for the issuance of common stock, preferred stock or options to purchase stock or interests in our subsidiaries, including our Operating Partnership.

Equity investments in acquired properties may be subject to existing mortgage financing and other indebtedness or to new indebtedness which may be incurred in connection with acquiring or refinancing these investments. Principal and interest on our debt will have a priority over any dividends with respect to our common stock. Investments are also subject to our policy not to be required to register as an investment company under the Investment Company Act of 1940, as amended.

Investments in Real Estate Mortgages

Although we do not presently intend to invest in mortgages or deeds of trust, other than in a manner that is ancillary to an equity investment, we may elect, in our discretion, to invest in mortgages and other types of real estate interests, including, without limitation, participating or convertible mortgages; provided, in each case, that such investment is consistent with our qualification as a REIT. Investments in real estate mortgages run the risk that one or more borrowers may default under certain mortgages and that the collateral securing certain mortgages may not be sufficient to enable us to recoup our full investment.

Securities of or Interests in Persons Primarily Engaged in Real Estate Activities and Other Issuers

Subject to the asset tests and gross income tests necessary for REIT qualification, we may invest in securities of other REITs, other entities engaged in real estate activities or securities of other issuers, including for the purpose of exercising control over such entities. We do not currently have any policy limiting the types of entities in which we may invest or the proportion of assets to be so invested, whether through acquisition of an entity’s common stock, limited liability or partnership interests, interests in another REIT or entry into a joint venture. We have no current plans to make additional investments in entities that are not engaged in real estate

 

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activities. Our investment objectives are to maximize the cash flow of our investments, acquire investments with growth potential and provide cash distributions and long-term capital appreciation to our stockholders through increases in the value of our company. We have not established a specific policy regarding the relative priority of these investment objectives.

Investment in Other Securities

Other than as described above, we do not intend to invest in any additional securities of third parties, such as bonds, preferred stocks or common stock.

Financing Policies

We expect to employ leverage in our capital structure in amounts that we determine appropriate from time to time. Our board of directors has not adopted a policy which limits the total amount of indebtedness that we may incur, but will consider a number of factors in evaluating our level of indebtedness from time to time, as well as the amount of such indebtedness that will be either fixed or variable rate. We are, however, and expect to continue to be subject to certain indebtedness limitations pursuant to the restrictive covenants of our outstanding indebtedness. We may from time to time modify our debt policy in light of then-current economic conditions, relative availability and costs of debt and equity capital, market values of our properties, general market conditions for debt and equity securities, fluctuations in the market price of our shares of common stock, growth and acquisition opportunities and other factors. If these limits are relaxed, we could become more highly leveraged, resulting in an increased risk of default on our obligations and a related increase in debt service requirements that could adversely affect our financial condition, liquidity and results of operations and our ability to make distributions to our stockholders. To the extent that our board of directors or management determines that it is necessary to raise additional capital, we may, without stockholder approval, borrow money under the VICI PropCo Credit Facility, issue debt or equity securities, including securities senior to our shares, retain earnings (subject to the REIT distribution requirements for U.S. Federal income tax purposes), assume indebtedness, obtain mortgage financing on a portion of our owned properties, engage in a joint venture, or employ a combination of these methods.

 

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Our Properties

The following table summarizes the properties that we own as of the date of this prospectus:

 

Major MSAs Served

  

Location

   Approx. Structure
Sq. Ft. (000’s)
     Hotel Rooms  

Las Vegas—Destination Gaming

        

Caesars Palace Las Vegas

   Las Vegas, NV      8,579        3,980  

Harrah’s Las Vegas

   Las Vegas, NV      4,100        2,530  

Cascata Golf Course

   Boulder City, NV      37        N/A  

Rio Secco Golf Course

   Henderson, NV      30        N/A  

San Francisco / Sacramento

        

Harvey’s Lake Tahoe

   Lake Tahoe, NV      1,670        740  

Harrah’s Reno

   Reno, NV      1,371        930  

Harrah’s Lake Tahoe

   Stateline, NV      1,057        510  

Philadelphia

        

Caesars Atlantic City

   Atlantic City, NJ      3,632        1,140  

Bally’s Atlantic City

   Atlantic City, NJ      2,547        1,250  

Chicago

        

Horseshoe Hammond

   Hammond, IN      1,716        N/A  

Harrah’s Joliet (1)

   Joliet, IL      1,011        200  

Dallas

        

Horseshoe Bossier City

   Bossier City, LA      1,419        600  

Harrah’s Louisiana Downs

   Bossier City, LA      1,118        N/A  

Kansas City

        

Harrah’s North Kansas City

   North Kansas City, MO      1,435        390  

Memphis

        

Horseshoe Tunica

   Robinsonville, MS      1,008        510  

Tunica Roadhouse

   Tunica Resorts, MS      225        130  

Omaha

        

Harrah’s Council Bluffs

   Council Bluffs, IA      790        250  

Horseshoe Council Bluffs

   Council Bluffs, IA      632        N/A  

Nashville

        

Harrah’s Metropolis

   Metropolis, IL      474        260  

New Orleans

        

Harrah’s Gulf Coast

   Biloxi, MS      1,031        500  

Grand Bear Golf Course

   Saucier, MS      5        N/A  

Louisville, KY

        

Horseshoe Southern Indiana

   Elizabeth, IN      2,510        500  

Bluegrass Downs

   Paducah, KY      184        N/A  

Chariot Run Golf Course

   Laconia, IN      5        N/A  
  

 

  

 

 

    

 

 

 

Total

   24      36,586        14,420  
  

 

  

 

 

    

 

 

 

 

(1) Owned by Harrah’s Joliet Landco LLC, a joint venture of which we are the 80% owner and the managing member.

 

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Description of our Properties

Chicago

Harrah’s Joliet

Harrah’s Joliet is a hotel and casino resort located in the Chicagoland area of Illinois owned by a joint venture of which VICI PropCo is the 80% owner and managing member. It consists of a 39,000 square foot casino, including over 1,000 slots and table-gaming units, a 200 room hotel, four restaurants and 6,110 square feet of meeting and event space. The property also features nightlife offerings.

Horseshoe Hammond

Horseshoe Hammond is a casino resort located in Hammond, Indiana. It consists of a 121,479 square foot casino, including over 2,600 slot and table-gaming units and a 2,500 seat concert venue. The property features seven restaurants as well as nightlife offerings.

Dallas

Harrah’s Louisiana Downs

Louisiana Downs is a “racino” located in Bossier City, Louisiana. It consists of a 12,000 square foot casino, including over 800 slot units and a race track. The property features five casual restaurants and three bars onsite.

Horseshoe Bossier City

Horseshoe Bossier City is a hotel and casino resort located in Bossier City, Louisiana. It consists of a 28,100 square foot casino, including over 1,400 slot and table-gaming units, a 604 room hotel and 21,594 square feet of meeting and event space. The property features seven restaurants, nightlife venues and amenities, such as a spa and an outdoor pool, and is adjacent to the Louisiana Boardwalk outlets.

Kansas City

Harrah’s Kansas City

Harrah’s North Kansas City is a hotel and casino resort located in North Kansas City, Missouri. It consists of a 60,100 square foot casino, including over 1,300 slot and table-gaming units, a 390 room hotel and 12,800 square feet of meeting and event space. The property features four restaurants as well as nightlife venues.

Las Vegas

Caesars Palace Las Vegas

Caesars Palace is a hotel and casino resort located in Las Vegas, Nevada. It was opened in 1966 and features six hotel towers uniquely designed to address the varied demands of our diverse customer base, 124,181 square feet of casino space including over 1,400 slot and table gaming units, a 14,187 square foot high limit casino area, a 4,557 square foot high limit slots area and a 24-hour poker room, approximately 300,000 square feet of meeting, convention and ballroom facilities, the 4,300-seat Colosseum entertainment venue, the 81,300 square foot OMNIA Nightclub, over 20 restaurants, lounges and bars, approximately 702,000 square feet of retail space, approximately 40,450 square feet of spa facilities and five swimming pools spanning eight acres.

Harrah’s Las Vegas

Harrah’s Las Vegas is a hotel and casino resort located in Las Vegas, Nevada. It was constructed in 1973 and features 90,600 square feet of casino space, 1,210 slot machines and 90 gaming tables. The property has

 

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2,530 rooms and suites, 1,600 of which have been renovated over the past two years, 16 restaurants and bars, retail shopping, spa services and 24,000 square feet of meeting space.

Louisville

Bluegrass Downs

Bluegrass Downs is a live harness horse racing track located in Paducah, Kentucky.

Horseshoe Southern Indiana

Horseshoe Southern Indiana is a hotel and casino resort located in Elizabeth, Indiana. It consists of an 86,600 square foot casino, including over 1,700 slot and table-gaming units, a 503 room hotel and 24,000 square feet of convention center space. The property features eight restaurants and entertainment venues and amenities, such as a spa and local golf course.

Memphis

Horseshoe Tunica

Horseshoe Tunica is a hotel and casino resort located in Robinsonville, Mississippi. It consists of a 63,000 square foot casino, including nearly 1,200 slot and table-gaming units, a 505 room hotel and 2,079 square feet of meeting and event space. The property features six restaurants and entertainment venues and amenities, such as a spa and outdoor pool.

Tunica Roadhouse

Tunica Roadhouse is a hotel and casino resort located in Tunica Resorts, Mississippi. It consists of a 33,000 square foot casino, including over 700 slot and table-gaming units, a 130 room hotel and 10,200 square feet of meeting and event space. The property features entertainment venues and amenities, such as a spa and outdoor pool.

Nashville

Harrah’s Metropolis

Harrah’s Metropolis is a hotel and casino resort located in Metropolis, Illinois. It consists of a 23,669 square foot casino, including over 850 slot and table-gaming units and a 260 room hotel. The property features three restaurants as well as nightlife offerings.

New Orleans

Harrah’s Gulf Coast

Harrah’s Gulf Coast is a hotel and casino resort located in Biloxi, Mississippi, which replaced the former Grand Casino Biloxi which was destroyed by Hurricane Katrina. It was opened in 2006 and consists of a 31,300 square foot casino, including over 500 slot and table-gaming units and a 500 room hotel. The property features five restaurants, a 16,000 square foot spa and salon and an outdoor pool. The Great Lawn, a festival-style green space, features a 10.5 acre outdoor concert space along the waterfront. The resort also has access via the Golf Course Use Agreement, to Grand Bear Golf Course, an 18-hole course set over 650 acres of rolling land in the piney woods of the DeSoto National Forest. The course, designed by Jack Nicklaus, is considered one of the top courses in the Southern United States and is a short drive from the casino.

 

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Omaha

Harrah’s Council Bluffs

Harrah’s Council Bluffs is a hotel and casino resort located in Council Bluffs, Iowa, across the Missouri River from Omaha, Nebraska. It consists of a 25,000 square foot casino, including over 500 slot and table gaming units, a 250 room hotel, three restaurants and 5,731 square feet of meeting and event space. The property also features nightlife offerings.

Horseshoe Council Bluffs

Horseshoe Council Bluffs is a casino resort located in Council Bluffs, Iowa. It consists of a 78,800 square foot casino, including over 1,400 slot and table-gaming units. The property features three restaurants as well as nightlife offerings.

Philadelphia

Bally’s Atlantic City

Bally’s Atlantic City is a hotel and casino resort located along the Boardwalk in Atlantic City, New Jersey. It was opened in 1979 and consists of a 121,624 square foot casino, including over 1,900 slot and table-gaming units, a 1,251 room hotel, 63,589 square feet of convention center space, eight restaurants, four lounges and bars, shopping venues and a spa with indoor pool.

Caesars Atlantic City

Caesars Atlantic City is a hotel and casino resort located in Atlantic City, New Jersey. It was opened in 1979 and consists of an 115,225 square foot casino, including over 1,900 slot and table-gaming units, a 1,141 room hotel, 28,590 square feet of convention center space, a 1,100 seat concert venue, a 10,000 square foot multi-level nightclub, over 15 lounges and bars, a spa and an indoor/outdoor rooftop pool. The property also features 15 restaurants and shopping and entertainment venues and amenities.

San Francisco/Sacramento

Harrah’s Lake Tahoe

Harrah’s Lake Tahoe is a hotel and casino resort located on Lake Tahoe in Stateline, Nevada. It consists of a 45,136 square foot casino with nearly 900 slot and table-gaming units, a 510 room hotel and 18,000 square feet of meeting and event space. The property features eleven restaurants, shopping and nightlife venues and amenities, such as a spa and salon.

Harvey’s Lake Tahoe

Harvey’s Lake Tahoe is a hotel and casino resort located on Lake Tahoe in Stateline, Nevada. It consists of a 44,200 square foot casino, including over 800 slot and table-gaming units, a 740 room hotel and 19,000 square feet of meeting and event space. The property features nine restaurants, nightlife venues and amenities, such as an outdoor pool.

Harrah’s Reno

Harrah’s Reno is a hotel and casino resort located in Reno, Nevada. It consists of a 40,200 square foot casino, including over 650 slot and table-gaming units, a 930 room hotel and 21,765 square feet of meeting and event space. The property features six restaurants, nightlife venues and amenities, such as a spa and salon and an outdoor pool.

 

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Golf Courses

We own and operate four golf courses, located near some of our properties, two of which are close to Caesars Palace. Cascata was built in 2000 by golf course architect Rees Jones. It is located southeast of Las Vegas, approximately 25 miles from the Strip, and includes a clubhouse with a restaurant, golf shop, and event space.

Chariot Run is a Bill Bergin-designed, equestrian-themed, bent-grass course. It opened in 2002 and is located 12 miles from the Horseshoe Southern Indiana Casino. The course includes a clubhouse with a dining room, pro shop and event space. Grand Bear, designed by Jack Nicklaus, is a short drive away from the Harrah’s Gulf Coast casino and is considered one of the top courses in the Southern United States. The course includes a clubhouse with a restaurant and golf shop. Rio Secco, designed by Rees Jones, opened in 1997 and is located in the south Las Vegas foothills, approximately 14 miles from the Strip. The course operates the Butch Harmon School of Golf and includes a clubhouse with a restaurant, golf shop and event space.

Mortgages, Liens or Encumbrances

In connection with the VICI PropCo Credit Facility and the Second Lien Notes, VICI PropCo and certain of its subsidiaries will enter into mortgages or deeds of trust against its properties for the benefit of the lenders under such indebtedness. Similarly, in connection with the CPLV CMBS Debt, CPLV Mortgage Borrower has entered into a deed of trust against the CPLV facilities as well as other pledges and security agreements for the benefit of the lenders under such facilities. In addition, certain mechanic’s liens and similar liens recorded by contractors performing work on behalf of the tenants on the properties subject to the Lease Agreements may attach to, and constitute liens on, our interests in those properties.

 

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MANAGEMENT

Executive Officers and Directors

Our board of directors consists of six members. Pursuant to our charter and bylaws, each of our directors will be elected by our stockholders to serve until the next annual meeting of our stockholders and until such director’s successor is duly elected and qualified. See “Description of Capital Stock—Certain Provisions of Maryland Law and Our Charter and Bylaws—Election and Removal of Directors.” Our first annual meeting of stockholders will be held in 2018. Subject to any employment agreements, officers serve at the pleasure of our board of directors.

The following table sets forth certain information regarding our executive officers and directors and director elects as of the date of this prospectus.

 

Name

  

Age

    

Position

Executive Officers

     

Edward Baltazar Pitoniak

     61     

Chief Executive Officer and Director

John Payne

     48     

President and Chief Operating Officer

David Kieske

     46     

Chief Financial Officer

Directors

     

James Robert Abrahamson

     62     

Chair of the Board of Directors

Eugene Irwin Davis

     62     

Director

Eric Littmann Hausler

     47     

Director

Elizabeth I. Holland

     52     

Director Elect (subject to the receipt of all regulatory approvals)

Craig Macnab

     61     

Director

Michael David Rumbolz

     63     

Director

Edward Baltazar Pitoniak was appointed as our chief executive officer on the Formation Date. Mr. Pitoniak served as Vice Chairman of Realterm, a private equity real estate manager based in Annapolis, Maryland, that invests in logistics real estate, from January 2015 to July 2017. Mr. Pitoniak has served as an independent director on the board of directors of Ritchie Bros. Auctioneers Incorporated, a NYSE-listed global asset management and disposition company from July 2006 to the present. Mr. Pitoniak served as Managing Director, Acting Chief Executive Officer and Trustee of InnVest, a publicly listed REIT, from April 2014 to February 2015, where he was responsible for recapitalizing the REIT and transitioning its management function from an external, third-party management model, to an internal management model. He then served as Chairman and Trustee of InnVest from February 2015 to August 2016, when the REIT was sold and taken private. He also served as a director of Regal Lifestyle Communities (TSE: RLC), a Canadian seniors housing real estate owner and operator, from 2012 until its sale in 2015. Mr. Pitoniak retired in 2009 from the position of President and Chief Executive Officer and Director of bcIMC Hospitality Group, a hotel property and brand ownership entity (formerly a public income trust called Canadian Hotel Income Properties Real Estate Investment Trust (“CHIP”)), where he was employed from 2004 to 2009. As Chief Executive Officer of CHIP, he led the company to four consecutive years of total return leadership among Canadian hotel REITs, and then to a sale in 2007. Mr. Pitoniak was also a member of CHIP’s Board of Trustees before it went private. Prior to joining CHIP, Mr. Pitoniak was a Senior Vice-President at Intrawest Corporation, a ski and golf resort operator and developer, for nearly eight years. Before Intrawest, Mr. Pitoniak spent nine years with Times Mirror Magazines, where he served as editor-in-chief and associate publisher with Ski Magazine. Mr. Pitoniak has a Bachelor of Arts degree from Amherst College. Mr. Pitoniak provides our board of directors with valuable experience in the hospitality, entertainment and real estate industries and, in particular, with respect to publicly held REITs. Our company and our board of directors also benefit from Mr. Pitoniak’s extensive previous and current board service. In addition,

 

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Mr. Pitoniak’s position as our Chief Executive Officer allows him to advise our board of directors on management’s perspective over a full range of issues affecting the Company.

John Payne has been our president and chief operating officer since our conversion to a Maryland corporation on May 5, 2017. Until the Formation Date, Mr. Payne served as the chief executive officer of CEOC (which filed for Chapter 11 bankruptcy in January 2015), a position he held since 2014. Mr. Payne has 21 years of experience in the gaming and hospitality business. Prior to 2014, Mr. Payne served as President of Central Markets and Partnership Development of Caesars from 2013 to 2014, Caesars’ President of Enterprise Shared Services from 2012 to 2013, Caesars’ President of Central Division from 2007 to 2012 and Atlantic City Regional President in 2006. In 2005, Mr. Payne also served as the Gulf Coast Regional President. Mr. Payne served as the Senior Vice President and General Manager of Harrah’s New Orleans from 2002 to 2005. Mr. Payne is a Board Member of the Audubon Institute, Crimestoppers of Greater New Orleans and the Business Council of New Orleans, as well as Chairman of the Board of The Idea Village. Mr. Payne holds a Bachelor’s degree in Political Science from Duke University and a Master’s Degree in Business Administration from Northwestern University.

David Kieske has been our chief financial officer since January 1, 2018, and served as Special Advisor to the Chief Executive Officer from November 27, 2017 until December 31, 2017. Prior to joining the Company, Mr. Kieske worked at Wells Fargo Securities / Eastdil Secured since 2007, where he most recently served as Managing Director in the Real Estate & Lodging Investment Banking Group. In his role, David was responsible for providing capital raising and financial advisory services to companies in the real estate and lodging industries. Prior to Eastdil, Mr. Kieske worked in the Real Estate & Lodging Investment Banking Groups at both Citigroup and Bank of America. Early in Mr. Kieske’s career, he was a senior accountant at Deloitte & Touche and Assistant Vice President & Corporate Controller at TriNet Corporate Realty Trust. Mr. Kieske holds a Bachelor’s degree from University of California Davis and a Master’s Degree in Business Administration from the University of California Los Angeles.

James R. Abrahamson is Chairman of Interstate Hotels & Resorts (“Interstate”), the leading U.S.-based global hotel management company comprising over 400 hotels. He previously served as Interstate’s Chief Executive Officer from 2011 to March 2017; he was named to the additional position of Chairman in October 2016. Mr. Abrahamson also serves as an independent Director at La Quinta Holdings, Inc. (NYSE: LQ) and at BrightView Corporation (a private company). Prior to joining Interstate in 2011, Mr. Abrahamson also held senior leadership positions with InterContinental Hotels Group (NYSE: IHG), Hyatt Corporation, Marcus Corporation and Hilton Worldwide. At IHG, where he served from 2009 to 2011, he served as President of the Americas division and, from 2009 to 2011, as executive director. At Hyatt, which he joined in 2004, he was Head of Development for the Americas division. At Marcus, where he served from 2000 to 2004, Mr. Abrahamson was President of the Baymont Inn and Suites and Woodfield Suites hotels division consisting of approximately 200 properties, both owned and franchised. At Hilton, where he served from 1988 to 2000, Mr. Abrahamson oversaw the Americas region franchise division for all Hilton brands and launched the Hilton Garden Inn brand. Mr. Abrahamson currently serves as president of the Marriott International National Association owners’ organization and has served as national board chair of the American Hotel and Lodging Association in 2015 and 2016 and as national board chair of the U.S. Travel Association in 2013 and 2014. He holds a degree in Business Administration from the University of Minnesota. Mr. Abrahamson’s vast experience in, and knowledge of, the hospitality industry provides our board of directors with valuable insight into the industry. Skills gained from extensive previous and current board service in public and private companies are also valuable for our company and our board of directors.

Eugene I. Davis is Chairman and Chief Executive Officer of PIRINATE Consulting Group, LLC, a privately held consulting firm specializing in turnaround management, merger and acquisition consulting, hostile and friendly takeovers, proxy contests, and strategic planning advisory services for domestic and international public and private business entities. Since forming PIRINATE in 1997, Mr. Davis has advised, managed, sold, liquidated and served as a chief executive officer, chief restructuring officer, director, committee chairman or chairman of a number of businesses operating in diverse sectors. From 1990 to 1997, Mr. Davis served as

 

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President, Vice Chairman, and director of Emerson Radio Corporation and from 1996 to 1997 as Chief Executive Officer and Vice Chairman of Sport Supply Group, Inc. He began his career as an attorney and international negotiator with Exxon Corporation and Standard Oil Company (Indiana) and was in private practice from 1984 to 1998. Mr. Davis currently serves as Chairman of the Board of Atlas Iron Limited (ASX: AGO) and, until its 2018 annual meeting, US Concrete, Inc. (Nasdaq: USCR), and also serves as a director of Verso Corporation (NYSE: VRS) and Titan Energy, LLC (OTC: TTEN), as well as certain non-SEC reporting companies. During the past five years, Mr. Davis has also been a director of the following SEC registrants: Atlas Air Worldwide Holdings, Inc. (Nasdaq: AAWW), The Cash Store Financial Services, Inc. (NYSE: CSFS), DexOne Corp. (NYSE: DEXO), Genco Shipping & Trading Limited (NYSE: GNK), Global Power Equipment Group, Inc. (NYSE: GLPW), Goodrich Petroleum Corp. (NYSE: GDP), Great Elm Capital Corporation (Nasdaq: GECC), GSI Group, Inc. (Nasdaq: GSIG), Hercules Offshore, Inc., HRG Group, Inc. (NYSE: HRG), Knology, Inc. (Nasdaq: KNOL), SeraCare Life Sciences, Inc. (Nasdaq: SRLS), Spansion, Inc. (NYSE: CODE), SpectrumBrands Holdings, Inc. (NYSE: SPB) and WMIH Corp. (Nasdaq: WMIH). Mr. Davis’ prior experience also includes having served on the board of directors of each of ALST Casino Holdco, LLC and Trump Entertainment Resorts, Inc. Mr. Davis holds a bachelor’s degree from Columbia College, a master of international affairs degree (MIA) in international law and organization from the School of International Affairs of Columbia University, and a Juris Doctorate from Columbia University School of Law. Mr. Davis’ deep knowledge of the management and operation of public companies and extensive service in public and private company boards in many industries, including in the casino, entertainment and real estate industries, and in particular with respect to companies emerging from bankruptcy, are valuable to our board of directors providing it with insight into the operation of a company following restructuring.

Eric L. Hausler held the position of Chief Executive Officer of Isle of Capri Casinos, Inc. (NYSE: ISLE), a developer, owner and operator of branded gaming facilities and related dining, lodging and entertainment facilities in regional markets in the United States, from April 2016 to May 2017. Prior to that, Mr. Hausler served as ISLE’s Chief Financial Officer from 2014 to 2016, as its Chief Strategic Officer from 2011 to 2014, and as its Senior Vice President, Strategic Initiatives from 2009 to 2011. Mr. Hausler retired from ISLE in May 2017 immediately following the company’s merger with Eldorado Resorts. From 2006 to 2009, Mr. Hausler served as Senior Vice President of Development for Trump Entertainment Resorts, Inc., which filed for Chapter 11 bankruptcy in February 2009. From 2005 to 2006, Mr. Hausler served as Managing Director in Fixed Income Research, covering the gaming, lodging and leisure industries for Bear Stearns & Co. Inc. From 2003 to 2005, Mr. Hausler was a Senior Equity Analyst for Susquehanna Financial Group covering the gaming industry. Mr. Hausler also held positions in equity research covering the gaming, lodging and leisure industries at Bear Stearns & Co. Inc. and Deutsche Bank Securities Inc. from 1999 to 2003. Prior to working in securities research, from 1996 to 1999, Mr. Hausler worked for the New Jersey Casino Control Commission. Mr. Hausler holds a Bachelor’s degree from Binghamton University and a Master’s degree from the New Jersey Institute of Technology. Mr. Hausler’s extensive expertise leading companies in the gaming, entertainment and real estate industries, as well as his experience in the capital markets, regulatory and acquisitions and divestiture fields in these industries are valuable to the achievement of the Company’s business strategy.

Elizabeth I. Holland was appointed to the Board of Directors in November 2017, subject to the receipt of all regulatory approvals. Ms. Holland is the Chief Executive Officer of Abbell Credit Corporation and Abbell Associates, LLC, a 77 year-old private real estate acquisition, development and management company with a portfolio of shopping center, office and enclosed mall properties. She has held these roles since 1997. Prior to joining Abbell Associates, Ms. Holland was a senior staff attorney on the National Bankruptcy Review where she was a member of a Congressional commission charged with making recommendations to Congress for bankruptcy code reform. Prior to that, she was a restructuring and business reorganization attorney at Skadden, Arps, Slate, Meagher & Flom LLP in New York City. Ms. Holland was also a fixed income portfolio manager. Ms. Holland is an independent trustee of Federal Realty Investment Trust, a leading shopping center REIT. She is an active member of the International Council of Shopping Centers (“ICSC”) serving as the organization’s Chairman from 2016 to 2017, Vice Chairman from 2015 to 2016, and currently serves on the Executive Board and the Board of Trustees. She is also a member of the Real Estate Roundtable and the Urban Land Institute and

 

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its CRC Blue Flight Council. Ms. Holland’s retail real estate expertise and experience as Chairman of ICSC will be valuable and complimentary skill sets to have on our board of directors.

Craig Macnab held the position of Chairman and Chief Executive Officer of National Retail Properties, Inc. (NYSE: NNN), a real estate investment trust that acquires, owns, invests in and develops properties that are leased primarily to retail tenants, since 2008 (with his service as Chief Executive Officer beginning in 2004). Mr. Macnab retired from NNN in April 2017. Mr. Macnab is an independent director of Cadillac Fairview Corporation (a private company), since 2011 and of American Tower Corporation (NYSE: AMT), since 2014 and served as a director of Eclipsys Corporation from 2008 to 2014. Mr. Macnab also served as a director of DDR Corp. (NYSE: DDR), a real estate investment trust, from 2003 to 2015. Mr. Macnab holds a Bachelor’s degree in Economics and Accounting from the University of the Witwatersrand and a Master of Business Administration from Drexel University. Mr. Macnab brings to our company and board of directors extensive experience leading a publicly held REIT as well as skills gained from vast public and private board experience.

Michael D. Rumbolz is President and Chief Executive Officer of Everi Holdings Inc. (NYSE: EVRI), a developer of gaming products and services, Chairman of the Board of Directors of Employers Holding, Inc. (NYSE: EIG), and an independent director of Seminole Hard Rock Entertainment, LLC. Mr. Rumbolz served as Chairman and Chief Executive Officer of Cash Systems, Inc., a provider of cash access services to the gaming industry, from 2005 until 2008 when Cash Systems, Inc. was acquired by Everi. Mr. Rumbolz also has from time to time provided consulting services and held a number of public and private sector employment positions in the gaming industry, including serving as Member and Chairman of the Nevada Gaming Control Board from 1985 through 1988. Mr. Rumbolz was also the former Vice Chairman of the Board of Casino Data Systems until it was sold in 2001, was the President and CEO of Anchor Gaming from 1995 to 2000, was the director of Development for Circus Circus Enterprises (later Mandalay Bay Group) from 1992 to 1995, and was the President of Casino Windsor at the time of its opening in Windsor, Ontario in 1995. In addition, Mr. Rumbolz is the former Chief Deputy Attorney General of the State of Nevada. Mr. Rumbolz’s experience in the highly regulated gaming industry, both as an operator and as a regulator, are of value to our company and our board of directors. Our company and our board of directors also benefit from Mr. Rumbolz’s extensive previous and current public and private board service.

There are no family relationships among any of our directors or executive officers.

Director Independence

We define “independent director” by reference to the rules, regulations and listing qualifications of the New York Stock Exchange. In general, a director is deemed independent if the director has no relationship to us that may interfere with the exercise of the director’s independence from management and our company. Our board of directors has affirmatively determined that all of the company’s non-employee directors, James R. Abrahamson, Eugene I. Davis, Eric L. Hausler, Craig Macnab and Michael D. Rumbolz, are independent directors and Ms. Holland will be an independent director. In making this determination, the board of directors reviewed the non-employee directors’ relationships, if any, with us, and determined that there are no relationships that would interfere with the exercise of such directors’ independence from management and our company.

Board Committees

Our board of directors has three standing committees: an audit and finance committee, a compensation committee and a nominating and governance committee. Our committees are composed entirely of independent directors as defined under the rules, regulations and listing qualifications of the New York Stock Exchange. In general, a director is deemed independent if the director has no relationship to us that may interfere with the exercise of the director’s independence from management and our company.

Audit and Finance Committee. The audit and finance committee will monitor the integrity of our financial statements and financial reporting processes, our compliance with legal and regulatory requirements, our

 

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continued qualification as a REIT, the performance of our internal audit function and independent auditors, the qualifications and independence of our independent auditor, our primary financial policies and programs, including those relating to leverage ratio, debt coverage, dividend policy and major financial risk policies, and our policies and transactions related to corporate finance, capital markets activities, capital allocation and major strategic initiatives. The audit and finance committee will select, assist and meet with the independent auditor, oversee each annual audit and quarterly review, establish and maintain our internal audit controls and prepare the report that Federal securities laws require be included in our annual proxy statement. In addition, the audit and finance committee will be responsible for reviewing and assessing our policies and procedures related to our compliance with applicable gaming regulations. Eugene I. Davis is chair and Eric L. Hausler and Michael D. Rumbolz (Elizabeth I. Holland will replace Mr. Rumbolz upon her formal appointment to the Board of Directors) are members of the audit and finance committee. Our board of directors has affirmatively determined that these directors qualify as independent directors under the independence requirements of Rule 10A-3 of the Exchange Act and each will satisfy the requirement of an “audit committee financial expert” as defined by the SEC.

Compensation Committee. The compensation committee will review and approve the compensation and benefits of our executive officers and directors, administer and make recommendations to our board of directors regarding our compensation and stock incentive plans, produce an annual report on executive compensation for inclusion in our proxy statement and publish an annual committee report for our stockholders. Craig Macnab is chair and Eugene I. Davis and Michael D. Rumbolz are members of the compensation committee.

Nominating and Governance Committee. The nominating and governance committee will develop and recommend to our board of directors adoption of a set of corporate governance principles, a code of ethics, policies with respect to conflicts of interest, and will monitor our compliance with corporate governance requirements of state and Federal law, establish criteria for prospective members of our board of directors, conduct candidate searches and interviews, oversee and evaluate our board of directors and management, evaluate from time to time the appropriate size and composition of our board of directors and recommend, as appropriate, increases, decreases and changes in the composition of our board of directors and formally propose the slate of directors to be elected at each annual meeting of our stockholders. Eric L. Hausler is chair and Eugene I. Davis and Craig Macnab are members of the nominating and governance committee.

Our board of directors may from time to time establish certain other committees to facilitate the management of our company.

Compensation Committee Interlocks and Insider Participation

As of the date of this prospectus, there are no compensation committee interlocks and none of our employees participated on the compensation committee.

Directors who are employees of our company or our subsidiaries do not receive compensation for their services as directors.

Code of Business Conduct

Our board of directors has established a code of business conduct that applies to our officers, directors and employees. Among other matters, our code of business conduct is designed to deter wrongdoing and to promote:

 

    honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

 

    full, fair, accurate, timely and understandable disclosure in our SEC reports and other public communications;

 

    compliance with applicable governmental laws, rules and regulations;

 

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    prompt internal reporting of violations of the code to appropriate persons identified in the code; and

 

    accountability for adherence to the code.

Only our board of directors, or a committee designated by the board of directors, will be able to approve any waiver of the code of business conduct for our executive officers or directors, and any such waiver shall be promptly disclosed as required by law.

Corporate Governance Profile

We have structured our corporate governance in a manner that we believe closely aligns our interests with those of our stockholders. Notable features of our corporate governance structure include the following:

 

    our board of directors is not staggered, with each of our directors subject to re-election annually;

 

    all of the Company’s non-employee directors are independent;

 

    we have a separate Chairman of the Board and Chief Executive Officer;

 

    all members of our audit and finance committee qualify as an “audit committee financial expert” as defined by the SEC;

 

    directors are elected in uncontested elections by the affirmative vote of a majority of the votes cast; and

 

    we shall seek stockholder approval prior to or in certain circumstances within twelve months following the adoption by our board of a stockholder rights plan.

Our directors will stay informed about our business by attending meetings of our board of directors and its committees and through supplemental reports and communications. Our independent directors will meet regularly in executive sessions without the presence of our corporate officers or non-independent directors.

 

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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

The following discussion and analysis of compensation arrangements of our named executive officers for the year ended December 31, 2017 should be read together with the compensation tables and related disclosures about our current plans, considerations, expectations and determinations regarding future compensation programs.

Background and Overview

This section discusses the principles underlying our executive compensation policies and decisions. It provides qualitative information regarding the manner in which compensation is earned by our executive officers and places in context the data presented in the tables that follow. Our named executive officers for 2017 were: Edward B. Pitoniak, Chief Executive Officer; John Payne, President and Chief Operating Officer; and Mary Beth Higgins, our former Chief Financial Officer. David Kieske, who previously served as Special Advisor to the Chief Financial Officer, became Chief Financial Officer effective January 1, 2018, and Ms. Higgins became a consultant to the company through March 31, 2018.

VICI REIT is a newly formed company that had not conducted operations until the Formation Date. Therefore, we had not paid any compensation to the individuals who became our executive officers prior to October 2017. Information as to the historical compensation by CEOC of certain persons who became our executive officers on the Formation Date is not indicative of the compensation of those executives following the Formation Date. Accordingly, we have not included information regarding compensation and other benefits paid to those executives by CEOC, as the case may be, during 2016 or prior years.

Following the Formation Date, our board of directors established a compensation committee, which oversees and determines the compensation of our executive officers. Our compensation committee evaluates and determines the appropriate executive compensation philosophy and objectives for VICI REIT, the process for establishing executive compensation, and the appropriate design of our executive compensation program and compensation arrangements. The compensation committee has retained a compensation consultant, Lyons, Benenson & Company Inc., to provide advice and support to the committee in the design and implementation of our executive compensation program.

Compensation Philosophy

Our compensation arrangements have been designed to reward our executives for achieving both short- and long-term performance goals that are aimed at driving increases in our equity value. These arrangements seek to align the interests of our executives with those of our shareholders through heavy reliance on short- and long-term performance-oriented incentive plans. Our compensation committee will review and consider this philosophy and may make adjustments as it determines necessary or appropriate. The principal objectives of our compensation philosophy and program are to:

 

    attract, motivate, retain and reward the key leadership and managerial talent needed for our company to achieve its goals and objectives;

 

    align the interests of our executives and shareholders through the use of performance-based annual cash incentive compensation and service and performance-based long-term equity incentive compensation; and

 

    ensure line-of-sight between key performance measures that are indicative of company growth and gains in value and actual results.

 

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Primary Elements of Compensation

Our executive compensation program consists of the following key elements:

Base Salary. Each of our executive officers is paid a base salary. Base salary is the fixed element of an executive officer’s annual cash compensation and is intended to attract and retain highly qualified executives and to compensate for expected day-to-day performance. Factors considered in making determinations about the base salaries for our executive officers include the executive officer’s position, responsibilities associated with that position, experience, expertise, knowledge and qualifications, market factors, the industry in which we operate and compete, recruitment and retention factors, the executive officer’s individual compensation history, salary levels of the other members of our executive team and similarly situated executives at comparable companies, and our overall compensation philosophy.

Annual Incentive Compensation. Our executive officers are eligible for annual incentive compensation, which is intended to motivate the executive officers to achieve short-term company performance goals, to align executive officers’ interests with those of the stockholders and to reward the executive officers for superior individual achievements.

Long-Term Equity-Based Incentive Awards . Our executive officers are eligible to participate in a long-term equity incentive compensation plan, which is designed motivate executive officers to achieve long-term performance goals and to ensure goal alignment with our stockholders. The amount and timing of any long-term equity-based incentive compensation to be paid or awarded to our executive officers will be determined by our compensation committee.

Employment and Post-Termination Arrangements of Executive Officers

On the Formation Date, we entered into employment agreements with each of our named executive officers, and we entered into an employment agreement in November 2017 with our current Chief Financial Officer, Mr. Kieske. Below is a summary of such employment agreements. The summaries below are not complete and are qualified in their entirety by reference to the full text of the agreements, which are included as exhibits to the registration statement of which this prospectus is a part.

Chief Executive Officer

On the Formation Date, the Company entered into an employment agreement with Mr. Edward B. Pitoniak, pursuant to which he serves as our Chief Executive Officer. The employment agreement provides for an initial term that ends on December 31, 2020, which term will be automatically extended by successive one-year terms at the end of the then-current term unless either party provides 90 days’ advance notice of non-renewal. Under the terms of the employment agreement, Mr. Pitoniak is entitled to receive an annual base salary of $725,000. Mr. Pitoniak is also eligible to receive annual incentive compensation comprised of a cash bonus with a target value of 100% of his base salary and a maximum value of 200% of his base salary, and equity awards with a target value of 250% of Mr. Pitoniak’s base salary. Our compensation committee will establish the performance goals on which the annual cash bonus beginning in 2018 will be based and the form and terms of any equity awards. Mr. Pitoniak’s 2017 bonus, which will be paid in 2018, will be a $150,000 cash bonus and common stock valued at $500,000, which cannot be transferred until January 15, 2020. In addition, Mr. Pitoniak will receive an equity grant valued at $1,250,000, which shall vest at a rate of 25% per year on each of the first four anniversaries of the grant date, and a $161,500 cash bonus.

If Mr. Pitoniak’s employment is terminated by us without “cause” (as defined in the employment agreement), by him for “good reason” (as defined in the employment agreement), he is entitled to certain severance benefits set forth below, subject to his executing a separation agreement and release. The severance benefits include (1) 150% of base salary and the target bonus for the year of termination, paid over 12 months, (2) a pro-rata cash bonus for the year of termination, (3) accelerated vesting of time-based equity awards and

 

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(4) non-forfeiture of a pro-rata portion of outstanding performance based equity until the end of the applicable performance period, at which time it may vest based on achievement of the performance goals. If the termination is within six months before or 12 months after a change in control (as defined in the employment agreement) of the Company, the above severance is modified, with the cash severance being 200% of base salary and target bonus and paid in a lump sum, and full vesting of all equity awards.

If Mr. Pitoniak’s employment is terminated due to his death or disability (as defined in the employment agreement), he will be entitled to receive a pro-rata cash bonus for the year of termination and accelerated vesting of all time-based equity awards. If Mr. Pitoniak’s employment is terminated because we elect not to renew the term of the employment agreement, all time-based equity awards will vest but will not be entitled to any other severance.

Mr. Pitoniak’s employment agreement provides for customary non-competition and non-solicitation covenants that apply for one year after his termination of employment, except that if a termination of employment results from Mr. Pitoniak giving a notice of nonrenewal, the non-competition period applies for three months after the date of termination, and if a termination of employment results from the Company’s decision not to renew the agreement, the non-competition period ends on the date of termination.

President and Chief Operating Officer

On the Formation Date, the Company entered into an employment agreement with Mr. John Payne pursuant to which he serves as our President and Chief Operating Officer. The employment agreement provides for an initial two-year employment term, which term will be automatically extended by one year at the end of the then-current term unless either party provides 90 days’ advance notice of non-renewal. Under the terms of the employment agreement, Mr. Payne is entitled to receive an annual base salary of $1,200,000. Mr. Payne also is eligible to receive annual incentive compensation with a target value of $1,800,000, divided between a cash bonus and equity awards. We anticipate that each of the cash bonus and equity awards will have a target value of $900,000, but the determination will be made by our compensation committee. Our compensation committee also will establish the performance goals (both individual and company objectives) on which the cash bonus will be based and the form and terms of any equity awards. Mr. Payne’s 2017 annual bonus will be pro-rated for the partial year that he was employed, and will include at least $300,000 to be based on the successful implementation of the Plan of Reorganization, as measured by criteria to be determined by our compensation committee.

If Mr. Payne’s employment is terminated by us without “cause” (as defined in the employment agreement), by him for “good reason” (as defined in the employment agreement), or due to our non-renewal of the employment term, he will be entitled to certain severance benefits set forth below, subject to his executing a separation agreement and release, and being available to consult through the earlier of December 31, 2018 and 90 days after the completion of an initial public offering (the “Start-Up Period”). The severance benefits include (1) continued payment of base salary until the later of (a) the first anniversary of his termination of employment and (b) the third anniversary of the Formation Date, (2) a pro-rata cash bonus for the year of termination, and (3) continued vesting of any outstanding equity awards through the Start-Up Period, at which point they shall become fully vested.

If Mr. Payne’s employment is terminated due to his death or disability (as defined in the employment agreement), he will be entitled to receive a pro-rata cash bonus for the year of termination but no other severance benefits.

Mr. Payne’s employment agreement provides for customary non-competition and non-solicitation covenants that apply through the later of one year after his termination of employment and the third anniversary of the Formation Date. The non-competition covenant bars Mr. Payne from working for REITs during the specified period. In addition, for a shorter period ending the earlier of December 31, 2018 and 180 days after an initial public offering, Mr. Payne may not work for any entity in the gaming business.

 

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Chief Financial Officer

Mary Beth Higgins

On the Formation Date, the Company entered into an employment agreement with Ms. Mary Beth Higgins pursuant to which she served as our Chief Financial Officer from the Formation Date until December 31, 2017. Under the terms of the employment agreement, Ms. Higgins was entitled to receive an annual base salary of $500,000. Ms. Higgins was also eligible to receive annual incentive compensation with a target value of $700,000, divided between a cash bonus and equity awards. We anticipate that each of the cash bonus and equity awards will have a target value of $350,000, but the determination will be made by our compensation committee. Our compensation committee also will establish the performance goals (both individual and company objectives) on which the cash bonus will be based and the form and terms of any equity awards. Ms. Higgins’s 2017 annual bonus will be pro-rated for the partial year that she was employed, and will include at least $117,000 to be based on the successful implementation of the Plan of Reorganization, as measured by criteria to be determined by our compensation committee.

If Ms. Higgins’s employment is terminated without “cause” (as defined in the employment agreement), by her for “good reason” (as defined in the employment agreement), or due to our non-renewal of the employment term, she will be entitled to certain severance benefits set forth below, subject to her executing a separation agreement and release, and being available to consult during the Start-Up Period. The severance benefits include (1) continued payment of base salary for one year, (2) a pro-rata cash bonus for the year of termination, and (3) continued vesting of any outstanding equity awards through the Start-Up Period, at which point they shall become fully vested. In addition, Ms. Higgins is entitled to a lump sum payment equal to the amount by which $1.2 million exceeds the severance, salary and bonus amounts paid to Ms. Higgins.

If Ms. Higgins’s employment is terminated due to her death or disability (as defined in the employment agreement), she will be entitled to receive a pro-rata cash bonus for the year of termination but no other severance benefits.

Ms. Higgins’s employment agreement provides for customary non-competition and non-solicitation covenants that apply for a one-year following her termination of employment. The non-competition covenant bars Ms. Higgins from working for REITs during the specified period. In addition, for a shorter period ending the earlier of December 31, 2018, 90 days after an initial public offering and 180 days after the Company or Ms. Higgins provides notice of Ms. Higgins’ termination of employment, Ms. Higgins may not work for any entity in the gaming business.

On November 9, 2017, we entered into a separation agreement and release with Ms. Higgins. Under the separation agreement, Ms. Higgins is entitled to severance benefits generally consistent with her current employment agreement and former agreement with Caesars Entertainment Operating Company, Inc. that include (a) payment of her base salary for one year, (b) continued eligibility to receive a bonus in respect of 2017, and (c) entitlement to a lump sum payment equal to the amount by which $1.2 million exceeds the sum of (i) the aggregate cash bonus payments (but not salary) paid to her by the Company, and (ii) the severance payable to her. Under the agreement, Ms. Higgins has also agreed to provide consulting services to the Company through March 31, 2018 on a substantially full-time basis and will receive a consulting fee of $41,650 per month.

David Kieske

On November 10, 2017, we announced that David Kieske was appointed by our board of directors to the role of Special Advisor to the Chief Executive Officer of the Company, effective November 27, 2017. Effective January 1, 2018, Mr. Kieske became Executive Vice President and Chief Financial Officer, succeeding Mary Beth Higgins, who will continue to consult with the Company through March 31, 2018.

On November 9, 2017, we entered into an employment agreement with Mr. Kieske. The employment agreement provides that Mr. Kieske will serve in the capacities noted above, and has an initial term that ends on

 

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December 31, 2020, which term will be automatically extended by successive one-year terms at the end of the then-current term unless either party provides 90 days’ advance notice of non-renewal. Under the terms of the employment agreement, Mr. Kieske is entitled to receive an annual base salary of $450,000. Mr. Kieske also will be eligible to receive annual incentive compensation comprised of a cash bonus with a target value of 85% of his base salary and a maximum value of 170% of his base salary, and equity awards with a target value of 150% of his base salary. Our compensation committee will establish the performance goals on which the annual cash bonus will be based and the form and terms of any equity awards.

Mr. Kieske will receive certain compensation on account of foregone bonus and incentives and forfeited equity awards, including an initial $150,000 cash bonus within 30 days of commencing employment and an additional $150,000 cash bonus within 30 days of the first anniversary of commencing employment. The initial bonus is subject to repayment if Mr. Kieske’s employment is terminated for “cause” (as defined in the employment agreement) or he resigns without “good reason” (as defined in the employment agreement) before the first anniversary of commencing employment and the second bonus is subject to repayment if his employment is terminated for cause or he resigns without good reason before the second anniversary of commencing employment. Mr. Kieske also will receive an initial equity grant equal to $500,000, valued as of the date Mr. Kieske commences employment, which will vest at the rate of 25% on each of the first four anniversaries of the date Mr. Kieske commences employment. The shares underlying the grant may not be transferred or encumbered until the earlier of two years after vesting or four years after the date Mr. Kieske commences employment.

Mr. Kieske’s 2017 bonus, which will be paid in 2018, will be a $350,000 cash bonus and shares of the Company’s common stock valued at $400,000. The equity portion of the bonus will vest at the rate of 25% on each of January 15, 2019, 2020, 2021 and 2022 and may not be transferred or encumbered until the earlier of two years after vesting or four years after grant.

If Mr. Kieske’s employment is terminated without cause or by him for good reason, he will be entitled to certain severance benefits set forth below, subject to his executing a separation agreement and release. The severance benefits include (1) cash severance equal to the sum of Mr. Kieske’s base salary and target bonus for the year of termination, paid over 12 months, (2) a pro rata cash bonus for the year of termination, (3) accelerated vesting of time-based equity awards and (4) non-forfeiture of a pro rata portion of outstanding performance-based equity awards until the end of the applicable performance period, at which time the awards may vest based on achievement of the performance goals, (5) a $27,500 cash payment, (6) the lapsing of any transfer restrictions on vested equity awards and (7) payment of the initial $150,000 cash bonus and $150,000 cash bonus payable within 30 days of the first anniversary of Mr. Kieske commencing employment, to the extent such bonuses have not yet been paid, and (8) issuance of his initial equity grant if not previously granted. If the termination is within six months before or 12 months after a “change in control” (as defined in the employment agreement) of the Company, the above severance is modified, by (i) the cash severance is increased to 150% of base salary and target bonus, and is paid in a lump sum rather than over 12 months, (ii) non-forfeiture of all (rather than a pro rata portion) outstanding performance based equity awards until the end of the applicable performance period, at which time the awards may vest based on achievement of the performance goals and (iii) a cash payment of $40,000 rather than $27,500.

If Mr. Kieske’s employment is terminated due to his death or “disability” (as defined in the employment agreement), he will be entitled to receive a pro-rata cash bonus for the year of termination, accelerated vesting of all time-based equity awards, the lapsing of any transfer restrictions on vested equity awards and, to the extent such bonuses have not yet been paid, payment of the initial $150,000 cash bonus and $150,000 cash bonus payable within 30 days of the first anniversary of Mr. Kieske commencing employment. If Mr. Kieske’s employment is terminated because the Company elects not to renew the term of the employment agreement, all time-based equity awards will vest and all transfer restrictions on vested equity awards will lapse, but he will not be entitled to any other severance. If Mr. Kieske’s employment is terminated because he elects not to renew the term of the employment agreement, all transfer restrictions on vested equity awards will lapse, but he will not be entitled to any other severance.

 

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Mr. Kieske’s employment agreement also provides for customary non-competition and non-solicitation covenants that apply for one year after his termination of employment.

The VICI 2017 Stock Incentive Plan

On the Formation Date, the VICI 2017 Stock Incentive Plan (the “VICI 2017 Stock Plan”) became effective. The following is a summary of the principal provisions of the VICI 2017 Stock Plan. This description of the VICI 2017 Stock Plan is qualified in its entirety by reference to the full text of the VICI 2017 Stock Plan, which is filed as an exhibit to the registration statement of which this prospectus is a part.

Purposes

The purposes of the VICI 2017 Stock Plan are to provide certain key persons, on whose initiative and efforts the successful conduct of the business of the Company depends and who are responsible for the management, growth and protection of the business of the Company or its subsidiaries, with incentives to: (a) enter into and remain in the service of the Company or a Company subsidiary, (b) acquire a proprietary interest in the success of the Company, (c) maximize their performance and (d) enhance the long-term performance of the Company (whether directly or indirectly through enhancing the long-term performance of a Company subsidiary).

Types of Awards to Be Granted

The VICI 2017 Stock Plan provides for the granting of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, unrestricted stock and dividend equivalent rights. Any of the foregoing is referred to as an “Award.”

Eligibility

Awards under the VICI 2017 Stock Plan may be granted to officers, directors (whether or not they are employed by the Company), and executive, managerial, professional or administrative employees of, and consultants to, the Company and its subsidiaries. The compensation committee in its sole discretion shall select which individuals receive Awards.

Shares Available Under the VICI 2017 Stock Plan

The VICI 2017 Stock Plan provides for the grant of Awards with respect to an aggregate of 12,750,000 shares of our common stock, subject to adjustment in the case of certain corporate changes.

No employee may be granted Awards in any calendar year with respect to more than 2,500,000 shares of our common stock. A non-employee director of the Company may not be granted Awards in any calendar year that, in the aggregate, result in the Company recognizing an expense in excess of $450,000 in connection with the grant of such awards. However, Awards that are granted as part of a director’s annual retainer that otherwise would be paid in cash are not included in the annual limit.

Administration

The VICI 2017 Stock Plan is administered by our compensation committee or such other committee which is designated by our board of directors to administer the VICI 2017 Stock Plan. It is intended that each of the members of the compensation committee shall be a “non-employee director” within the meaning of Rule 16b-3 promulgated by the SEC under the Exchange Act. However, no Award shall be invalidated if members of the compensation committee are not non-employee directors. If the compensation committee does not exist, or for any other reason determined by our board of directors, the board of directors may act as the compensation

 

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committee. The compensation committee or the board of directors may delegate to one or more officers or managers of the Company the authority to designate the individuals who will receive Awards under the VICI 2017 Stock Plan and certain administrative functions related to those awards, provided that the compensation committee shall itself grant all Awards to those individuals who could reasonably be considered to be subject to the insider trading provisions of Section 16 of the Exchange Act. The compensation committee determines the persons who will receive Awards, the type of Awards granted, and the number of shares subject to each Award. The compensation committee also determines the prices, expiration dates, vesting schedules, forfeiture provisions and other material features of Awards. The compensation committee has the authority to interpret and construe any provision of the VICI 2017 Stock Plan and to adopt such rules and regulations for administering the VICI 2017 Stock Plan as it deems necessary or appropriate. All decisions and determinations of the compensation committee are final, binding and conclusive.

Adjustments

In the event of certain corporate actions affecting the Company’s stock, including, for example, a recapitalization, stock split, reverse stock split, reorganization, merger, consolidation or spin-off, the compensation committee shall adjust the number of shares of our common stock available for grant under the VICI 2017 Stock Plan and shall adjust any outstanding Awards (including the number of shares subject to the Awards and the exercise price of stock options) in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the VICI 2017 Stock Plan or those Awards.

Amendment and Termination of the VICI 2017 Stock Plan

The board of directors may suspend, discontinue, revise or amend the VICI 2017 Stock Plan or any portion thereof at any time; provided that no such action shall be taken without stockholder approval if such approval is necessary to comply with any legal or regulatory requirement. The compensation committee may amend any Award, except that consent of the Award recipient is necessary if the amendment would impair the recipient’s rights under the Award. The compensation committee may not amend a stock option or stock appreciation right to reduce the exercise price of the Award.

Summary of Awards Available Under the VICI 2017 Stock Plan

Non-Qualified Stock Options. The exercise price per share of each non-qualified stock option (“NQO”) granted under the VICI 2017 Stock Plan is determined by the compensation committee on the grant date and will not be less than the fair market value of a share of our common stock on the grant date. Each NQO is exercisable for a term, not to exceed ten years, established by the compensation committee on the grant date. The exercise price must be paid by certified or official bank check or, subject to the approval of the compensation committee, in shares of our common stock valued at their fair market value on the date of exercise or by such other method as the compensation committee may from time to time prescribe.

The VICI 2017 Stock Plan contains provisions applicable to the exercise of NQOs subsequent to a grantee’s termination of employment for “cause,” other than for cause, or due to “disability” (as each such term is defined in the VICI 2017 Stock Plan) or death. These provisions apply unless the compensation committee establishes alternative provisions with respect to an Award. In general, these provisions provide that NQOs that are not exercisable at the time of such termination shall expire upon the termination of employment and NQOs that are exercisable at the time of such termination shall remain exercisable until the earlier of the expiration of their original term and (i) in the event of a grantee’s termination other than for cause, the expiration of three months after such termination of employment and (ii) in the event of a grantee’s disability or death (or the grantee’s death after termination of employment), the first anniversary of such termination. In the event the Company terminates the grantee’s employment for cause, all NQOs held by the grantee, whether or not then exercisable, terminate immediately as of the commencement of business on the date of termination of employment.

 

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Stock options generally are not transferrable other than by will or the laws of descent and distribution, except that the compensation committee may permit transfers to the grantee’s family members or trusts for the benefit of family members.

Incentive Stock Options.  Generally, an incentive stock option (“ISO”) is an option that may provide certain Federal income tax benefits to a grantee not available with a NQO. An ISO has the same plan provisions as a NQO (including with respect to various termination events as described above), except that:

 

    In order to receive the tax benefits, a grantee must hold the shares acquired upon exercise of an ISO for at least two years after the grant date and at least one year after the exercise date.

 

    The aggregate fair market value of shares of our common stock (determined on the ISO grant date) with respect to which ISOs are exercisable for the first time by a grantee during any calendar year (whether issued under the VICI 2017 Stock Plan or any other plan of the Company or its subsidiaries) may not exceed $100,000.

 

    In the case of an ISO granted to any individual who owns stock possessing more than ten percent of the total combined voting power of all classes of stock of the Company, the exercise price per share must be at least 110% of the fair market value of a share of our common stock at the time the ISO is granted, and the ISO cannot be exercisable more than five years from the grant date.

 

    An option cannot be treated as an ISO if it is exercised more than three months following the grantee’s termination of employment for any reason other than death or disability, or more than one year after the grantee’s termination of employment for disability, unless the grantee died during such three-month or one-year period. ISOs are not transferable other than by will or by the laws of descent and distribution.

Stock Appreciation Rights. A stock appreciation right (“SAR”) entitles the grantee to receive upon exercise, for each share subject to the SAR, an amount equal to the excess of (i) the fair market value of a share of our common stock on the date of exercise over (ii) the fair market value of a share of our common stock on the date of grant (or such greater value as the compensation committee may set at grant). Each SAR shall be exercisable for a term, not to exceed ten years, established by the compensation committee on the grant date. A SAR may be settled in cash or shares of our common stock (valued at their fair market value on the date of exercise of the SAR), in the compensation committee’s discretion.

Restricted Stock.  Prior to the vesting of any restricted shares, the shares are not transferable by the grantee and are forfeitable. Vesting of the shares may be based on continued employment with the Company and/or upon the achievement of specific performance goals, as the compensation committee determines on the grant date. The compensation committee may at the time that shares of restricted stock are granted impose additional conditions to the vesting of the shares. Unless the compensation committee provides otherwise, unvested shares of restricted stock are automatically and immediately forfeited upon a grantee’s termination of employment for any reason.

Restricted Stock Units.  A restricted stock unit entitles the grantee to receive a share of our common stock, or in the sole discretion of the compensation committee, the value of a share of our common stock, on the date that the restricted stock unit vests or on such later date as may be determined by the compensation committee at grant. Payment shall be in cash, other securities or other property, as determined in the sole discretion of the compensation committee. Unless the compensation committee provides otherwise, unvested restricted stock units are forfeited upon a grantee’s termination of employment for any reason.

Dividend Equivalent Rights.  The Administrator may, in its sole discretion, include as part of an Award of stock options and stock appreciation rights, a dividend equivalent right entitling the grantee to receive amounts equal to the ordinary dividends that would be paid, during the time such Award is outstanding and unexercised, on the shares of common stock covered by such Award if such shares were then outstanding. In the event such a provision is included with respect to an Award, the Administrator shall determine whether such payments shall be made in cash or in shares of common stock, the time or times at which they shall be made, and such other vesting and forfeiture provisions and other terms and conditions as the Administrator shall deem appropriate.

 

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Unrestricted Stock . The Administrator may grant (or sell at a purchase price at least equal to par value) shares of common stock free of restrictions under the VICI 2017 Stock Plan, to such key persons and in such amounts and subject to such forfeiture provisions as the Administrator shall determine in its sole discretion. Shares may be thus granted or sold in respect of past services or other valid consideration.

Performance-Based Awards. The VICI 2017 Stock Plan provides that granting or vesting of Awards may be conditioned on the achievement of specified performance goals. The performance goals may be based on one or more of: (a) earnings (either in the aggregate or on a per-share basis, reflecting dilution of shares as the compensation committee deems appropriate and, if the compensation committee so determines, net of or including dividends); (b) gross or net sales; (c) cash flow(s) (including either operating or net cash flows); (d) financial return ratios; (e) total shareholder return, shareholder return based on growth measures or the attainment by the shares of a specified value for a specified period of time, share price or share price appreciation; (f) value of assets, return or net return on assets, net assets or capital (including invested capital); (g) adjusted pre-tax margin; (h) margins, profits and expense levels; (i) dividends; (j) market share, market penetration or other performance measures with respect to specific designated products or product groups and/or specific geographic areas; (k) reduction of losses, loss ratios or expense ratios; (l) reduction in fixed costs; (m) operating cost management; (n) cost of capital; (o) debt reduction; (p) productivity improvements; (q) funds from operations; or (r) customer satisfaction based on specified objective goals or a Company-sponsored customer survey Each such performance goal may (1) be expressed with respect to the Company as a whole or with respect to one or more divisions or business units, (2) be expressed on a pre-tax or after-tax basis, (3) be expressed on an absolute and/or relative basis, (4) employ comparisons with past performance of the Company (including one or more divisions) and/or (5) employ comparisons with the current or past performance of other companies, and in the case of earnings-based measures, may employ comparisons to capital, stockholders’ equity and shares outstanding.

To the extent applicable, the measures used in performance goals set under the VICI 2017 Stock Plan shall be determined in a manner consistent with the methods used in the Company’s Forms 10-K and 10-Q, except that in the determination of the compensation committee and consistent with applicable tax regulations, adjustments may be made for certain items, including special, unusual or non-recurring items, acquisitions and dispositions and changes in accounting principles.

Summary of Federal Income Tax Consequences

The following is a brief description of the Federal income tax treatment that will generally apply to Awards under the VICI 2017 Stock Plan based on current Federal income tax rules.

Non-Qualified Stock Options.  The grant of an NQO will not result in taxable income to the grantee. Except as described below, the grantee will realize ordinary income at the time of exercise in an amount equal to the excess of the fair market value of the our common stock acquired over the exercise price for those shares, and the Company will be entitled to a corresponding deduction. Gains or losses realized by the grantee upon disposition of such shares will be treated as capital gains and losses, with the basis in such shares of our common stock equal to the fair market value of the shares at the time of exercise.

Incentive Stock Options.  The grant of an ISO will not result in taxable income to the grantee. The exercise of an ISO will not result in taxable income to the grantee provided that the grantee was, without a break in service, an employee of the Company or a subsidiary during the period beginning on the date of the grant of the option and ending on the date three months prior to the date of exercise (one year prior to the date of exercise if the grantee is disabled, as that term is defined in the Code). The excess of the fair market value of the our common stock at the time of the exercise of an ISO over the exercise price is an adjustment that is included in the calculation of the grantee’s alternative minimum taxable income for the tax year in which the ISO is exercised.

 

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If the grantee does not sell or otherwise dispose of the shares of our common stock within two years from the date of the grant of the ISO or within one year after the transfer of the shares of our common stock to the grantee, then, upon disposition of such shares of our common stock, any amount realized in excess of the exercise price will be taxed to the grantee as capital gain and the Company will not be entitled to a corresponding deduction. A capital loss will be recognized to the extent that the amount realized is less than the exercise price. If the foregoing holding period requirements are not met, the grantee will generally realize ordinary income at the time of the disposition of the shares, in an amount equal to the lesser of (i) the excess of the fair market value of the shares of our common stock on the date of exercise over the exercise price, or (ii) the excess, if any, of the amount realized upon disposition of the shares over the exercise price, and the Company will be entitled to a corresponding deduction. If the amount realized exceeds the value of the shares on the date of exercise, any additional amount will be capital gain. If the amount realized is less than the exercise price, the grantee will recognize no income, and a capital loss will be recognized equal to the excess of the exercise price over the amount realized upon the disposition of the shares. The Company will be entitled to a deduction to the extent that the grantee recognizes ordinary income because of a disqualifying disposition.

Stock Appreciation Rights.  The grant of a SAR will not result in taxable income to the grantee. Upon exercise of a SAR, the fair market value of our common stock received will be taxable to the grantee as ordinary income and the Company will be entitled to a corresponding deduction. Gains and losses realized by the grantee upon disposition of any such shares will be treated as capital gains and losses, with the basis in such shares equal to the fair market value of the shares at the time of exercise.

Restricted Stock.  The grant of restricted stock will not result in taxable income at the time of grant and the Company will not be entitled to a corresponding deduction, assuming that the restrictions constitute a “substantial risk of forfeiture” for Federal income tax purposes. Upon the vesting of shares of restricted stock, the holder will realize ordinary income in an amount equal to the then fair market value of those shares, and the Company will be entitled to a corresponding deduction. Gains or losses realized by the grantee upon disposition of such shares will be treated as capital gains and losses, with the basis in such shares equal to the fair market value of the shares at the time of vesting. Dividends paid to the holder during the restriction period, if so provided, will also be compensation income to the grantee and the Company will be entitled to a corresponding deduction. A grantee may elect pursuant to Section 83(b) of the Code to have income recognized at the date of grant of a restricted stock award and to have the applicable capital gain holding period commence as of that date, and the Company will be entitled to a corresponding deduction.

Restricted Stock Units.  The grant of a restricted stock unit will not result in taxable income at the time of grant and the Company will not be entitled to a corresponding deduction. Upon the settlement of the restricted stock unit, the holder will realize ordinary income in an amount equal to the then fair market value of the shares received, and the Company will be entitled to a corresponding deduction. Gains or losses realized by the grantee upon disposition of such shares will be treated as capital gains and losses, with the basis in such shares equal to the fair market value of the shares at the time of settlement, when issued to the grantee.

Unrestricted Stock . The grant of unrestricted stock will result in the ordinary income for the recipient at the time of grant in an amount equal to the then fair market value of those shares, and the Company will be entitled to a corresponding deduction. Gains or losses realized by the grantee upon the subsequent disposition of such shares will be treated as capital gains and losses, with the basis in such shares equal to the fair market value of the shares at the time of grant.

Dividend Equivalent Rights . The grant of dividend equivalent rights will not result in income to the recipient or in a tax deduction for the Company. When any amount is paid or distributed to a recipient in respect of a dividend equivalent right, the recipient will recognize ordinary income equal to the fair market value of any property distributed and/or the amount of any cash distributed, and the Company will be entitled to a corresponding deduction.

 

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Withholding of Taxes.  The Company may withhold amounts from grantees to satisfy withholding tax requirements. Subject to guidelines established by the compensation committee, grantees may have our common stock withheld from Awards or may tender our common stock to the Company to satisfy tax withholding requirements.

$1 Million Limit.  Section 162(m) of the Code disallows a Federal income tax deduction for compensation in excess of $1 million per year paid to each of the Company’s chief executive officer, chief financial officer and its three other most highly compensated executive officers. Under tax law as in effect prior to 2018, compensation that qualified as “performance-based compensation” was not subject to the $1 million limit. However, effective January 1, 2018, this exemption has been repealed.

Section 409A.  Section 409A of the Code imposes significant restrictions on deferred compensation and may impact on Awards under the VICI 2017 Stock Plan. If the Section 409A restrictions are not followed, a grantee could be subject to accelerated liability for tax on the non-complying award, as well as a 20% penalty tax. The VICI 2017 Stock Plan is intended to be exempt from or to comply with the requirements of Section 409A.

Tax Advice.  The preceding discussion is based on Federal tax laws and regulations presently in effect, which are subject to change, and the discussion does not purport to be a complete description of the Federal income tax aspects of the VICI 2017 Stock Plan. A grantee may also be subject to state and local taxes in connection with the grant of Awards under the VICI 2017 Stock Plan. Grantees are encouraged to see their own legal, tax and accounting advice.

2017 Summary Compensation Table

This Summary Compensation Table summarizes the total compensation paid or earned by each of our named executive officers for the fiscal year ended December 31, 2017.

 

Name and

Principal Position

  Year     Salary
($)
    Bonus
($)
    All Other
Compensation
($) (1)
    Total
($)
 

Edward B. Pitoniak

    2017       170,096       311,500       77,300       558,896  

Chief Executive Officer

         

Mary Beth Higgins

    2017       117,308       117,000             234,308  

Former Chief Financial

Officer

         

John Payne

    2017       281,538       300,000       3,462       585,000  

President

         

 

(1) The amounts set forth in this column consist of a relocation bonus of $75,000 for Mr. Pitoniak and company matching contributions of $2,300 and $3,462 for Mr. Pitoniak and Mr. Payne, respectively, under our 401(k) plan.

Narrative Disclosure to 2017 Summary Compensation Table

The 2017 Summary Compensation Table includes 2017 actual cash compensation for our Chief Executive Officer, our former Chief Financial Officer and our President and Chief Operating Officer. The base salary amounts shown represent the pro rata amounts that were paid to these executives based on the time they actually served in these roles (October 6, 2017 through December 31, 2017). The bonus amounts shown represent the contractually negotiated bonus amounts to be paid for the year. The All Other Compensation includes a relocation bonus for Mr. Pitoniak and company matching contributions under our 401(k) plan for Messrs. Pitoniak and Payne. Mr. Pitoniak is due to receive an equity grant (some of which will be in the form of restricted stock or restricted stock units) in 2018. It is not yet possible to state the number of shares and/or units that he will receive. Mr. Payne may also be entitled to an equity bonus to be determined by the compensation committee.

 

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Potential Payments Upon Termination Occurring on December 31, 2017, Including in Connection With a Change In Control

The table below provides our best estimate of the amounts that would be payable (including the value of certain benefits) to each of our named executive officers had a termination hypothetically occurred on December 31, 2017 under various scenarios, including a termination of employment associated with a change in control. The table does not include payments or benefits under arrangements available on the same basis generally to all other eligible employees of the Company. The potential payments were determined under the terms of each named executive officer’s employment agreement in effect on December 31, 2017 and in accordance with our plans and arrangements in effect on December 31, 2017. We also retain the discretion to provide additional payments or benefits to any of our named executive officers upon any termination of employment or change in control. This table includes equity grants that were contractually committed but that have not yet been made. The equity included has been stated at the contractually intended grant date values.

 

     Termination (a)
for Cause, (b)
without Good
Reason or (c)
due to non-
renewal
by the  executive
($)
     Termination (other than
in connection with a
Change in Control), (a)
without Cause (other
than by reason of death
or disability) by us, (b)
for Good Reason or (c)
due to non-renewal by us

($)
     Termination in
connection with
a Change in
Control
($)
     Death or
Disability
($)
 
Edward B. Pitoniak            

Cash Severance

   $ 0      $ 2,062,500      $ 2,750,000      $ 0  

Annual Bonus

   $ 0      $ 811,500      $ 811,500      $ 811,500  

Equity Awards (Intrinsic Value)

           

Unvested Restricted Stock (1)

   $ 0      $ 1,250,000      $ 1,250,000      $ 1,250,000  
Mary Beth Higgins            

Cash Severance

   $ 0      $ 1,083,000      $ 1,083,000      $ 0  

Annual Bonus

   $ 0      $ 117,000      $ 117,000      $ 117,000  

Equity Awards (Intrinsic Value)

           

Unvested Restricted Stock

   $ 0      $ 0      $ 0      $ 0  
John Payne            

Cash Severance

   $ 0      $ 3,314,234      $ 3,314,234      $ 0  

Annual Bonus

   $ 0      $ 300,000      $ 300,000      $ 300,000  

Equity Awards (Intrinsic Value)

           

Unvested Restricted Stock

   $ 0      $ 0      $ 0      $ 0  

 

(1) This represents the Formation Date value of this grant, which will be based on an independent valuation of the value of the common stock on the Formation Date. These shares, which have not yet been granted, will vest in full upon termination of employment. It is not yet possible to determine the number of shares or the value of these shares as of December 31, 2017.

In connection with Ms. Higgins separation from service on December 31, 2017, Ms. Higgins is entitled to receive $1,083,000 in accordance with the terms of the separation agreement between us and Ms. Higgins.

Compensation of Directors

Each of our directors who is not an employee of our company or our subsidiaries receives an annual retainer of $225,000, payable in a combination of cash and equity. Additional annual retainers, also payable in a combination of cash and equity, are paid to the chair of the board of directors ($75,000), members of the audit and finance committee ($20,000; with the chair receiving $40,000), members of the compensation committee ($10,000; with the chair receiving $20,000), and members of the nominating and governance committee ($7,500;

 

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with the chair receiving $15,000). An initial grant of shares of common stock with a value of $132,500 as of the Formation Date will be made to outside directors other than the chair of the board of directors, and an initial grant with an Formation Date value of $200,000 will be made to the chair of the board of directors, in each case as determined by the board of directors at a later time based on an independent appraisal of the value of the common stock on the Formation Date. Our directors may elect to defer some or all of their compensation pursuant to a deferral plan.

Compensation of Directors

The following table summarizes all compensation for our non-employee directors for the fiscal year ended December 31, 2017.

 

Name

   Fees Earned
or Paid in
Cash($)
     Total
($)
 

James R. Abrahamson

     28,369        28,369  

Eugene I. Davis

     26,715        26,715  

Eric L. Hausler

     24,586        24,586  

Craig Macnab

     23,877        23,877  

Michael D. Rumbolz

     28,369        28,369  

 

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information regarding the beneficial ownership of our common stock upon consummation of this offering by:

 

    each stockholder known to us to be the beneficial owner of more than 5% of the common stock;

 

    each director;

 

    each executive officer; and

 

    all directors and executive officers as a group.

The column entitled “Shares Beneficially Owned Prior to Offering—Percentage” is based on a total of             shares of our common stock outstanding as of January 1, 2018. The column entitled “Shares Beneficially Owned After Offering—Percentage” is based on shares of our common stock to be outstanding after this offering, including the shares of our common stock that we are selling in this offering, but not including any additional shares issuable upon exercise of the underwriters’ overallotment option.

Beneficial ownership of shares is determined under rules of the SEC and generally includes any shares over which a person exercises sole or shared voting or investment power. Except as noted by footnote, and subject to community property laws where applicable, we believe based on the information provided to us that the persons and entities named in the table below have sole voting and investment power with respect to all shares of our common stock shown as beneficially owned by them. Unless otherwise noted below, the address of the persons listed in the table is c/o VICI Properties Inc., 8329 W. Sunset Road, Suite 210, Las Vegas, Nevada 89113.

 

     Shares Beneficially
Owned Prior to the Offering
    Shares Beneficially
Owned After the Offering
 

5% Stockholders, Officers and Directors

   Number      Percentage     Number      Percentage  

Beneficial Owners of 5% or More of Our Common Stock:

          

Canyon Capital Advisors LLC (1)

     42,960,110        14.3     

Pacific Investment Management Company LLC (2)

     28,177,017        9.4     

Soros Fund Management LLC (3)

     21,528,558        7.2     

Senator Global Opportunity Master Fund LP (4)

     17,508,580        5.8     

Directors and Executive Officers:

          

Edward Baltazar Pitoniak

                  

John Payne

                  

David Kieske

                  

James Robert Abrahamson

                  

Eugene Irwin Davis

                  

Eric Littmann Hausler

                  

Craig Macnab

                  

Michael David Rumbolz

                  

Directors and Executive Officers as a Group (8 persons)

                  

 

(1) Beneficial ownership is based on the Schedule 13G filed on November 14, 2017 with the SEC by Canyon Capital Advisors LLC, Mitchell R. Julis and Joshua S. Friedman, relating to 36,473,624 shares of our common stock, as supplemented by Company records. According to the Schedule 13G, Canyon Capital Advisors LLC has sole voting power and sole dispositive power over all the shares covered by the Schedule 13G, and Messrs. Julis and Friedman have shared voting and dispositive power. We do not have information regarding voting or dispositive power with respect to any other shares of common stock beneficially owned by Canyon Capital Advisors LLC. The business address of the parties is 2000 Avenue of the Stars, 11th Floor, Los Angeles, CA 90067.

 

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(2) Beneficial ownership is based on the Schedule 13G filed on November 13, 2017 with the SEC by Pacific Investment Management Company LLC (“PIMCO”) relating to 20,209,673 shares of our common stock, according to which PIMCO has sole voting power over 20,196,522 shares of our common stock, shared voting power over 13,151 shares of our common stock and sole dispositive power over 20,209,673 shares of our common stock; and is supplemented by Company records. We do not have information regarding voting or dispositive power with respect to any other shares of common stock beneficially owned by PIMCO. The business address of PIMCO is 650 Newport Center Drive, Newport Beach, CA 92660.
(3) Beneficial ownership is based on the Schedule 13G filed on October 16, 2017 with the SEC by Soros Fund Management LLC (“SFM LLC”), George Soros and Robert Soros, relating to 15,001,531 shares of our common stock, as supplemented by Company records. According to the Schedule 13G, SFM LLC has sole voting and dispositive power over all the shares covered by the Schedule 13G, and Messrs. Soros and Soros have shared voting and dispositive power. We do not have information regarding voting or dispositive power with respect to any other shares of common stock beneficially owned by SFM LLC. The business address of the parties is 250 West 55th Street, 38th Floor, New York, NY 10019.
(4) Beneficial ownership is based on the Schedule 13G filed on January 2, 2018 with the SEC by Senator Investment Group LP, Alexander Klabin and Douglas Silverman, pursuant to which they have shared voting and dispositive power over the shares. According to the Schedule 13G, Senator Investment Group LP serves as investment manager to various investment funds and, as such, has investment discretion with respect to such funds. Mr. Klabin and Mr. Silverman have control of a Delaware limited liability company that may be deemed to control Senator Investment Group LP. The business address of the reporting persons are c/o Senator Investment Group LP, 510 Madison Avenue, 28th Floor, New York, New York 10022.

 

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FORMATION OF OUR COMPANY

We are a Maryland corporation that was created to hold certain real estate assets that were owned by Caesars Entertainment Operating Company, Inc., a Delaware corporation upon its emergence from bankruptcy. On January 15, 2015, Caesars Entertainment Operating Company and certain of its subsidiaries (collectively, the “Debtors”) filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Northern District of Illinois. On January 13, 2017, the Debtors filed a Third Amended Joint Plan of Reorganization of Caesars Entertainment Operating Company, Inc., et al. (the “Plan of Reorganization”), which was confirmed by the U.S. Bankruptcy Court on January 17, 2017. On October 6, 2017, the effective date of the Plan of Reorganization (the “Formation Date”), the historical business of Caesars Entertainment Operating Company was separated by means of a spin-off transaction whereby the Debtors’ real property assets and golf course operations were transferred through a series of transactions to VICI REIT and its subsidiaries (the “Formation Transactions”). Under the Plan of Reorganization and the transactions contemplated therein, on the Formation Date, certain creditors of the Debtors were issued VICI REIT’s common stock. On the Formation Date, Caesars Entertainment Operating Company merged with and into CEOC, a Delaware limited liability company, with CEOC surviving the merger.

On the Formation Date, VICI REIT issued 177,160,494 shares of common stock and 12,000,000 shares of Series A preferred stock with an aggregate liquidation preference of $300.0 million ($25 per share) to CEOC and certain of its subsidiaries in exchange for the transferred real property assets and golf course operations. CEOC distributed such shares to certain of its creditors and to certain backstop parties. Of the 12,000,000 shares of Series A preferred stock issued on the Formation Date, an aggregate of 6,002,907 shares of Series A preferred stock (the “Backstop Shares”) were sold to certain backstop purchasers at a price of $20.83 per share, with the cash proceeds of such purchases being paid to certain creditors of CEOC, and an aggregate of 5,997,093 shares of Series A preferred stock were issued to certain creditors of CEOC as a portion of the recovery on account of their claims.

On November 6, 2017, all of the Series A preferred stock automatically converted into 51,433,692 shares of the Company’s common stock (the “Mandatory Preferred Conversion”). No additional consideration was payable in connection with the Mandatory Preferred Conversion.

On the Formation Date, a subsidiary of our Operating Partnership issued to certain of CEOC’s creditors $1,638.4 million aggregate principal amount of Prior Term Loans, $311.7 million aggregate principal amount of Prior First Lien Notes, and $766.9 million aggregate principal amount of Second Lien Notes.

CPLV Mortgage Borrower and certain of its affiliates that comprised the mezzanine borrowers borrowed $2,200.0 million from third parties, including $1,550.0 million of asset-level CPLV CMBS Debt and three tranches of Prior CPLV Mezzanine Debt in the aggregate principal amount of $650.0 million. The cash proceeds from the CPLV CMBS Debt and Prior CPLV Mezzanine Debt were distributed to certain creditors of CEOC under the Plan of Reorganization.

The junior tranche of the Prior CPLV Mezzanine Debt in the aggregate amount of $250.0 million automatically converted into an aggregate of 17,630,700 shares of our common stock on November 6, 2017.

 

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DESCRIPTION OF CAPITAL STOCK

The following is a summary of the rights and preferences of our capital stock. This summary does not purport to be complete and is subject to and is qualified in its entirety by reference to our charter and bylaws and applicable provisions of the Maryland General Corporation Law, or MGCL. While we believe the following summary covers the material terms of our capital stock, the description may not include all of the information that is important to you. We encourage you to read carefully this entire prospectus, our charter and bylaws and the other documents we refer to for a more complete understanding of our capital stock. Copies of our charter and bylaws are filed as exhibits to the registration statement of which this prospectus is a part.

General

Our charter authorizes us to issue up to 700,000,000 shares of common stock, $0.01 par value per share, and up to 50,000,000 shares of preferred stock, $0.01 par value per share, of which 12,000,000 shares are classified as Series A preferred stock, $0.01 par value per share. Our charter authorizes our board of directors, without stockholder approval, to amend our charter to increase or decrease the aggregate number of shares of stock that we are authorized to issue or the number of authorized shares of any class or series, subject to the terms of any outstanding preferred stock.

Immediately following the completion of this offering,                  shares of our common stock will be issued and outstanding, and no shares of preferred stock will be issued and outstanding.

Under Maryland law, a stockholder generally is not liable for a corporation’s debts or obligations solely as a result of the stockholder’s status as a stockholder.

Common Stock

Subject to the restrictions on ownership and transfer of our stock discussed below under the caption “—Restrictions on Ownership and Transfer” and the voting rights of holders of outstanding shares of any other class or series of our stock, holders of our common stock will be entitled to one vote for each share held of record on all matters on which stockholders are entitled to vote generally, including the election or removal of directors. The holders of our common stock will not have cumulative voting rights in the election of directors.

Holders of our common stock will be entitled to receive dividends if as and when authorized by our board of directors and declared by us out of assets legally available for the payment of dividends. Upon our liquidation, dissolution or winding up and after payment in full of all amounts required to be paid to creditors and to the holders of outstanding shares of any class or series of our stock having liquidation preferences, if any, the holders of our common stock will be entitled to receive pro rata our remaining assets available for distribution. Holders of our common stock will not have preemptive, subscription, redemption, preference, exchange, conversion or appraisal rights. There will be no sinking fund provisions applicable to the common stock. All shares of our common stock will be fully paid and nonassessable and will have equal dividend and liquidation rights. The rights, powers, preferences and privileges of holders of our common stock will be subject to those of the holders of any shares of our preferred stock or any other class or series of stock we may authorize and issue in the future.

Under Maryland law, a Maryland corporation generally may not amend its charter, consolidate, merge, convert, sell all or substantially all of its assets, engage in a statutory share exchange or dissolve unless the action is advised by its board of directors and approved by the affirmative vote of stockholders entitled to cast at least two-thirds of the votes entitled to be cast on the matter. As permitted by Maryland law, our charter provides that any of these actions may be approved by the affirmative vote of stockholders entitled to cast a majority of all of the votes entitled to be cast on the matter, except for amendments to the charter provisions relating to indemnification, limitation of liability and amendments to our charter, which require the affirmative vote of stockholders entitled to cast 75% of all of the votes entitled to be cast on those matters. See “Certain Provisions

 

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of Maryland Law and Our Charter and Bylaws.” Maryland law also permits a corporation to transfer all or substantially all of its assets without the approval of its stockholders to an entity owned, directly or indirectly, by the corporation. In addition, because many of our operating assets are held by our subsidiaries, these subsidiaries will be able to merge or sell all or substantially all of their assets without the approval of our stockholders.

Power to Reclassify and Issue Stock

Subject to the rights of holders of any outstanding shares of our preferred stock, our board of directors will be able to, without approval of holders of our common stock, classify and reclassify any unissued shares of our stock into other classes or series of stock, including one or more classes or series of stock that have preference over our common stock with respect to dividends or upon liquidation, or have voting rights and other rights that differ from the rights of the common stock, and authorize us to issue the newly-classified shares. Before authorizing the issuance of shares of any new class or series, our board of directors will be required to set, subject to the provisions in our charter relating to the restrictions on ownership and transfer of our stock, the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption for each class or series of stock. In addition, our charter authorizes our board of directors, with the approval of a majority of our board of directors and without stockholder approval, to amend our charter to increase or decrease the aggregate number of shares of stock, or the number of shares of any class or series of stock, that we are authorized to issue, subject to the rights of holders of our preferred stock. These actions will be able to be taken without the approval of holders of our common stock unless such approval is required by applicable law, the terms of any other class or series of our stock or the rules of any stock exchange or automated quotation system on which any of our stock is listed or traded.

Preferred Stock

Prior to issuance of shares of each class or series of preferred stock having terms not already established pursuant to our charter, our board of directors is required by the MGCL and our charter to set the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption for each such class or series. Our board of directors could authorize the issuance of shares of preferred stock that have priority over our common stock with respect to dividends or rights upon liquidation or with terms and conditions which could have the effect of delaying, deferring or preventing a transaction or a change of control of our company that might involve a premium price for holders of our common stock or otherwise be in their best interests.

Series A Preferred Stock

Of the 50,000,000 shares of preferred stock authorized for issuance under our charter, 12,000,000 shares are classified as Series A preferred stock, $0.01 par value per share, all of which were issued on the Formation Date and automatically converted on November 6, 2017 in accordance with the terms of the Series A preferred stock into shares of our common stock. As a result of this conversion, none of the authorized shares of Series A preferred stock are currently issued or outstanding. Our board of directors has no plans to issue any shares of Series A preferred stock as currently constituted, and given the terms applicable to the Series A preferred stock and the circumstances in which originally issued, any such additional issuance would be impractical. Our board of directors could, however, without stockholder approval, reclassify the authorized but unissued shares of Series A preferred stock as preferred stock without further designation, or into one or more other or additional series or classes of our capital stock, pursuant to its power to reclassify stock, as described above, and cause us to issue the newly-classified shares, subject, however, to the rights of holders of any then outstanding shares of our preferred stock.

Our charter sets forth the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption and conversion, and

 

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other applicable terms, of our authorized Series A preferred stock. Our charter provides that the Series A preferred stock ranks, with respect to rights upon liquidation or involuntary liquidation, dissolution or winding up of our affairs, senior to all classes or series of our common stock, and any other class or series of preferred stock established after the original issue date of the Series A preferred stock, except any such class or series designated as senior or pari passu to the Series A preferred stock, or issued upon the requisite approval of the holders of the Series A preferred stock. Our charter sets forth the terms upon which dividends are payable on outstanding shares of Series A preferred stock, but further provides that no dividends were payable on the Series A preferred stock prior to the mandatory conversion on November 6, 2017. Our charter also includes terms regarding optional redemption, voting rights, and board observer rights, as applicable to any outstanding shares of Series A preferred stock and any holders thereof. The terms of the Series A preferred stock provide for no maturity date, nor is the Series A preferred stock subject to any sinking fund. However, the terms of the Series A preferred stock provide for the mandatory conversion described above, as a result of which all previously issued shares of Series A preferred stock have been converted, and no shares of Series A preferred stock are currently outstanding. For detail regarding these and other terms applicable to our authorized Series A preferred stock, we encourage you to read carefully the terms thereof, as set forth in our charter.

Restrictions on Ownership and Transfer

In order for us to qualify as a REIT for U.S. Federal income tax purposes, our stock must be beneficially owned by 100 or more persons during at least 335 days of a taxable year of 12 months or during a proportionate part of a shorter taxable year. Also, not more than 50% of the value of the outstanding shares of our stock may be owned, directly or indirectly, by five or fewer individuals (as defined in the Code to include certain entities such as qualified pension plans) during the last half of a taxable year.

Our charter contains restrictions on the ownership and transfer of our stock. Subject to the exceptions described below, our charter provides that no person or entity will be able to beneficially own, or be deemed to own by virtue of the applicable constructive ownership provisions of the Code, with respect to any class or series of our capital stock, more than 9.8% (in value or by number of shares, whichever is more restrictive) of the aggregate of the outstanding shares of such class or series of our capital stock.

The constructive ownership rules under the Code are complex and may cause stock owned actually or constructively by a group of related individuals and/or entities to be owned constructively by one individual or entity. As a result, the acquisition of 9.8% or less of a class or series of our capital stock, or the acquisition of an interest in an entity that owns our stock, could, nevertheless, cause the acquirer or another individual or entity to own our stock in excess of the ownership limit.

An exemption from the 9.8% ownership limit was granted to certain stockholders, and our board may in the future provide exceptions to the ownership limit for other stockholders, subject to certain initial and ongoing conditions designed to protect our status as a REIT. In addition, our charter provides that our board of directors will have the power to, upon receipt of certain representations and agreements and in its sole discretion, prospectively or retroactively, exempt a person from the ownership limit or establish a different limit on ownership for a particular stockholder if the stockholder’s ownership in excess of the ownership limit would not result in our being “closely held” under Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable year) or otherwise failing to qualify as a REIT. As a condition to granting a waiver of the ownership limit or creating an excepted holder limit, our board of directors will be able, but will not be required, to require an opinion of counsel or IRS ruling satisfactory to our board of directors as it may deem necessary or advisable to determine or ensure our status as a REIT and may impose such other conditions or restrictions as it deems appropriate.

In connection with granting a waiver of the ownership limit or creating or modifying an excepted holder limit, or at any other time, our charter provides that our board of directors will be able to increase or decrease the

 

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ownership limit unless, after giving effect to any increased or decreased ownership limit, five or fewer individuals (as defined in the Code to include certain entities such as qualified pension plans) could beneficially own, in the aggregate, more than 50% in value of the shares of our stock then outstanding or we would otherwise fail to qualify as a REIT. A decreased ownership limit will not apply to any person or entity whose percentage ownership of our stock is in excess of the decreased ownership limit until the person or entity’s ownership of our stock equals or falls below the decreased ownership limit, but any further acquisition of our stock will be subject to the decreased ownership limit.

Our charter also provides that:

 

    any person is prohibited from owning shares of our stock that, if effective, would cause us to constructively own more than 10% of the ownership interests, assets or net profits in (i) any of our tenants or (ii) any tenant of one of our direct or indirect subsidiaries, to the extent such ownership would cause us to fail to qualify as a REIT;

 

    any person is prohibited from beneficially or constructively owning shares of our stock that would result in our being “closely held” under Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable year) or otherwise cause us to fail to qualify as a REIT; and

 

    any person is prohibited from transferring shares of our stock if the transfer would result in shares of our stock being beneficially owned by fewer than 100 persons.

Our charter provides that any person who acquires or attempts or intends to acquire beneficial or constructive ownership of shares of our stock that will or may violate the ownership limit or any other restrictions on ownership and transfer of our stock discussed above, and any person who owned or would have owned shares of our stock that are transferred to a trust for the benefit of one or more charitable beneficiaries described below, will be required to give immediate written notice of such an event or, in the case of a proposed or attempted transfer, give at least five days’ prior written notice to us and provide us with such other information as we may request in order to determine the effect of the transfer on our status as a REIT. The provisions of our charter relating to the restrictions on ownership and transfer of our stock will not apply if our board of directors determines that it is no longer in our best interests to attempt to qualify, or to continue to qualify, as a REIT, or that compliance is no longer required in order for us to qualify as a REIT.

Our charter provides that any attempted transfer of our stock that, if effective, would result in our stock being beneficially owned by fewer than 100 persons will be void ab initio and the intended transferee will acquire no rights in such shares of stock. Our charter provides that any attempted transfer of our stock that, if effective, would result in a violation of the ownership limit (or other limit established by our charter or our board of directors), any person owning shares of our stock that, if effective, would cause us to constructively own more than 10% of the ownership interests, assets or net profits in (i) any of our tenants or (ii) any tenant of one of our direct or indirect subsidiaries, to the extent such ownership would cause us to fail to qualify as a REIT, or our being “closely held” under Section 856(h) of the Code or our otherwise failing to qualify as a REIT will be void ab initio and the intended transferee will acquire no rights in such shares of stock and, if such voidness is not effective, the number of shares causing the violation (rounded up to the nearest whole share) will be transferred automatically to a trust for the exclusive benefit of one or more charitable beneficiaries, and the intended transferee will not acquire any rights in the shares. The automatic transfer will be effective as of the close of business on the business day before the date of the attempted transfer or other event that resulted in a transfer to the trust. Our charter provides that if the transfer to the trust as described above does not occur or is not automatically effective, for any reason, to prevent a violation of the applicable restrictions on ownership and transfer of our stock, then the attempted transfer which, if effective, would have resulted in a violation on the restrictions of ownership and transfer of our stock, will be void ab initio and the intended transferee will acquire no rights in such shares of stock.

 

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Our charter provides that shares of our stock held in the trust will be issued and outstanding shares. The intended transferee may not benefit economically from ownership of any shares of our stock held in the trust and will have no rights to dividends and no rights to vote or other rights attributable to the shares of our stock held in the trust. The trustee of the trust will exercise all voting rights and receive all dividends and other distributions with respect to shares held in the trust for the exclusive benefit of the charitable beneficiary of the trust. Our charter provides that any dividend or other distribution paid before we discover that the shares have been transferred to a trust as described above must be repaid by the recipient to the trustee upon demand by us. Pursuant to our charter, subject to Maryland law, effective as of the date that the shares have been transferred to the trust, the trustee will have the authority to rescind as void any vote cast by an intended transferee before our discovery that the shares have been transferred to the trustee and to recast the vote in accordance with the direction of the trustee acting for the benefit of the charitable beneficiary of the trust.

Pursuant to our charter, within 20 days of receiving notice from us of a transfer of shares to the trust, the trustee must sell the shares to a person, designated by the trustee, that would be permitted to own the shares without violating the ownership limit or the other restrictions on ownership and transfer of our stock in our charter. After such sale of the shares, the interest of the charitable beneficiary in the shares sold will terminate and the trustee must distribute to the intended transferee, an amount equal to the lesser of:

 

    the price paid by the intended transferee for the shares or, if the intended transferee did not give value for the shares in connection with the event that resulted in the transfer to the trust at the market price of the shares on the day of the event that resulted in the transfer of such shares to the trust; and

 

    the sales proceeds received by the trustee for the shares.

Any net sales proceeds in excess of the amount payable to the intended transferee shall be paid to the charitable beneficiary.

Our charter provides that shares of our stock held in the trust will be deemed to be offered for sale to us, or our designee, at a price per share equal to the lesser of:

 

    the price per share in the transaction that resulted in the transfer to the trust or, in the case of a gill, devise or other such transaction, at market price, at the time of such gift, devise or other such transaction; and

 

    the market price on the date we accept, or our designee accepts, such offer.

The amount payable to the transferee may be reduced by the amount of any dividends or other distributions that we paid to the intended transferee before we discovered that the shares had been transferred to the trust and that is owed by the intended transferee to the trustee as described above. We may accept the offer until the trustee has otherwise sold the shares of our stock held in the trust. Pursuant to our charter, upon a sale to us, the interest of the charitable beneficiary in the shares sold will terminate and the trustee must distribute the net proceeds of the sale to the intended transferee and distribute any dividends or other distributions held by the trustee with respect to the shares to the charitable beneficiary.

Every owner of 5% or more (or such lower percentage as required by the Code or the regulations promulgated thereunder) of the outstanding shares of our stock, within 30 days after the end of each taxable year, must give us written notice stating the person’s name and address, the number of shares of each class and series of our stock that the person beneficially owns and a description of the manner in which the shares are held. Each such owner also must provide us with any additional information that we request in order to determine the effect, if any, of the person’s beneficial ownership on our status as a REIT and to ensure compliance with the ownership limit. In addition, any person or entity that is a beneficial owner or constructive owner of shares of our stock and any person or entity (including the stockholder of record) who is holding shares of our stock for a beneficial owner or constructive owner will be required to, on request, disclose to us such information as we may request in order to determine our status as a REIT or to comply, or determine our compliance, with the requirements of any governmental or taxing authority.

 

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If our board of directors authorizes any of our shares to be represented by certificates, the certificates will bear a legend referring to the restrictions described above.

These restrictions on ownership and transfer of our stock could delay, defer or prevent a transaction or a change of control of us that might involve a premium price for our common stock or otherwise be in the best interests of our stockholders.

Redemption of Securities Owned or Controlled by an Unsuitable Person or Affiliate

In addition to the restrictions set forth above, all of our outstanding shares of capital stock will be held subject to applicable gaming laws. Any person owning or controlling at least 5% of the outstanding shares any class of our capital stock will be required to promptly notify us of such person’s identity. Our charter provides that any shares of our capital stock that are owned or controlled by an unsuitable person or an affiliate of an unsuitable person are redeemable by us, out of funds legally available for that redemption, to the extent required by the gaming authorities making the determination of unsuitability or to the extent determined to be necessary or advisable by our board of directors. From and after the redemption date, the securities will not be considered outstanding and all rights of the unsuitable person or affiliate will cease, other than the right to receive the redemption price. The redemption price with respect to any securities to be redeemed will be the price, if any, required to be paid by the gaming authority making the finding of unsuitability or if the gaming authority does not require a price to be paid (including if the finding of unsuitability is made by our board of directors alone), an amount that in no event exceeds (1) the market price of such securities as reported on a securities exchange, a generally recognized reporting system or domestic over-the-counter market, as applicable, or (ii) if such securities are not quoted by any recognized reporting system, then the fair market value thereof, as determined in good faith and in the reasonable discretion of the board of directors. The redemption price may be paid in cash, by promissory note, or both, as required by the applicable gaming authority and, if not, as determined by us. If all or a portion of the redemption price is paid with a promissory note, such note shall have a ten year term, bear interest at 3% and amortize in 120 equal monthly installments and contain such other terms determined by our board.

Our charter provides that the redemption right is not exclusive and that our capital stock that is owned or controlled by an unsuitable person or an affiliate of an unsuitable person may also be transferred to a trust for the benefit of a designated charitable beneficiary, and that any such unsuitable person or affiliate will not be entitled to any dividends on the shares or be entitled to vote the shares or receive any proceeds from the subsequent sale of the shares in excess of the lesser of the price paid by the unsuitable person or affiliate for the shares or the amount realized from the sale, in each case less a discount in a percentage (up to 100%) to be determined by our board of directors in its sole and absolute discretion.

Our charter requires any unsuitable person and any affiliate of an unsuitable person to indemnify us and our affiliated companies for any and all costs, including attorneys’ fees, incurred by us and our affiliated companies as a result of the unsuitable person’s ownership or control or failure to promptly divest itself of any securities of VICI REIT when and in the specific manner required by a gaming authority or by our charter.

Under our charter, an unsuitable person will be defined as one who (i) fails or refuses to file an application, or has withdrawn or requested the withdrawal of a pending application, to be found suitable by any gaming authority or for any gaming license, (ii) is denied or disqualified from eligibility for any gaming license by any gaming authority, (iii) is determined by any gaming authority to be unsuitable or disqualified to own or control any of our capital stock, (iv) is determined by any gaming authority to be unsuitable to be affiliated, associated or involved with a person engaged in gaming activities or holding a gaming license in any gaming jurisdiction, (v) causes any gaming license of our company or any of our affiliates to be lost, rejected, rescinded, suspended, revoked or not renewed, or causes our company or any of our affiliates to be threatened by any gaming authority with the loss, rejection, rescission, suspension, revocation or non-renewal of any gaming license, or (vi) is deemed likely, in the sole and absolute discretion of our board, to preclude or materially delay or jeopardize any

 

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gaming license, cause or otherwise result in, the disapproval, cancellation, termination, material adverse modification or non-renewal of any material contract to which our company or our affiliates is a party, or cause or otherwise result in the imposition of any materially burdensome or unacceptable terms or conditions on any gaming license of our company or any of our affiliates.

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is Computershare Trust Company.

Certain Provisions of Maryland Law and Our Charter and Bylaws

The following summary of certain provisions of Maryland law and of our charter and bylaws is only a summary, and is subject to, and qualified in its entirety by reference to, our charter and bylaws and the applicable provisions of the MGCL. Copies of our charter and bylaws are filed as exhibits to the registration statement of which this prospectus is a part.

Election and Removal of Directors

Our charter and bylaws provide that the number of our directors may be established only by our board of directors but may not be more than fifteen or fewer than the minimum number permitted by the MGCL, which is one. The number of directors is set at seven. Our bylaws provide for the election of directors, in uncontested elections, by a majority of the votes cast. In contested elections, the election of directors shall be by a plurality of the votes cast. Our bylaws provide that a director may not be an “unsuitable person” as defined in our charter.

Our bylaws provide that any vacancy on our board of directors may be filled only by the affirmative vote of a majority of the remaining directors in office, even if the remaining directors do not constitute a quorum of the board of directors except that a vacancy created by the removal of a director by stockholders may also be filled by the requisite vote or consent of stockholders set forth in our bylaws.

Our charter also provides that, subject to the rights of holders of one or more classes or series of preferred stock to elect one or more directors, a director may be removed, with or without cause, by the affirmative vote of stockholders holding a majority of all of the shares of our stock entitled to vote generally in the election of directors.

Amendment to Charter and Bylaws

Except as provided in our charter with respect to indemnification, limitation of liability and amendments to our charter, which require the affirmative vote of stockholders entitled to cast 75% of all the votes entitled to be cast on those matters, amendments to our charter must be advised by our board of directors and approved by the affirmative vote of our stockholders entitled to cast a majority of all of the votes entitled to be cast on the matter. Our board of directors and our stockholders, by the affirmative vote of not less than a majority of all shares then outstanding and entitled to be cast on the matter have the power to amend our bylaws, provided that the section of our bylaws relating to the opt out from the control share acquisition statute may not be amended except by the vote of at least two-thirds of all votes entitled to be cast on the matter, and the section of our bylaws relating to amending the bylaws, and the last sentence of the section of our bylaws relating to stockholder rights plans, may not be amended except by the vote of at least 75% of all votes entitled to be cast on the matter.

Business Combinations

Under the MGCL, certain “business combinations” between a Maryland corporation and an interested stockholder or an affiliate of an interested stockholder are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. These business combinations include a

 

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merger, consolidation, share exchange, and, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities. An interested stockholder is defined as:

 

    any person who beneficially, directly or indirectly, owns 10% or more of the voting power of the corporation’s outstanding voting stock; or

 

    an affiliate or associate of the corporation who, at any time within the two-year period before the date in question, was the beneficial owner, directly or indirectly, of 10% or more of the voting power of the corporation’s then outstanding voting stock.

A person is not an interested stockholder under the MGCL if the corporation’s board of directors approves in advance the transaction by which the person otherwise would have become an interested stockholder. In approving the transaction, the board of directors may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by the board.

After the five-year prohibition, any business combination between the Maryland corporation and the interested stockholder generally must be recommended by the corporation’s board of directors and approved by the affirmative vote of at least:

 

    80% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation; and

 

    two-thirds of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation other than shares held by the interested stockholder with whom or with whose affiliate the business combination is to be effected or held by an affiliate or associate of the interested stockholder.

These super-majority vote requirements do not apply if the corporation’s common stockholders receive a minimum price, as defined under the MGCL, for their shares in the form of cash or other consideration in the same form as previously paid by the interested stockholder for its shares.

The MGCL provides various exemptions from its provisions, including business combinations that are exempted by the board of directors before the time that the interested stockholder becomes an interested stockholder. Our charter provides that, notwithstanding any other provision of our charter or our bylaws, the Maryland Business Combination Act (Title 3, Subtitle 6 of the MGCL) will not apply to any business combination between us and any interested stockholder of ours and that we expressly elect not to be governed by the provisions of Section 3-602 of the MGCL in whole or in part. Any amendment to such provision of our charter must be approved by the affirmative vote of stockholders entitled to cast a majority of all votes entitled to be cast on the matter. Consequently, the five-year prohibition and the supermajority vote requirements will not apply to a business combination between us and any other person. As a result, any person described in the preceding sentence may be able to enter into a business combination with us that may not be in the best interests of our stockholders, without compliance with the supermajority vote requirements and other provisions of the statute. We cannot assure you that this provision of our bylaws will not be amended or repealed in the future. In that event, business combinations between us and an interested stockholder or an affiliate of an interested stockholder would be subject to the five-year prohibition and the super-majority vote requirements.

Control Share Acquisitions

The MGCL provides that a holder of control shares of a Maryland corporation acquired in a control share acquisition has no voting rights with respect to the control shares except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter. Shares owned by the acquirer, by officers or by employees who are directors of the corporation are excluded from shares entitled to vote on the matter. Control shares are voting shares of stock that, if aggregated with all other shares of stock owned by the acquirer or in respect of which the acquirer is able to exercise or direct the exercise of voting power (except solely by virtue of a

 

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revocable proxy), would entitle the acquirer to exercise voting power in electing directors within one of the following ranges of voting power:

 

    one-tenth or more but less than one-third;

 

    one-third or more but less than a majority; or

 

    a majority or more of all voting power.

Control shares do not include shares the acquirer is then entitled to vote as a result of having previously obtained stockholder approval or shares acquired directly from us. A control share acquisition means the acquisition of issued and outstanding control shares, subject to certain exceptions.

A person who has made or proposes to make a control share acquisition may compel the board of directors of the corporation to call a special meeting of stockholders to be held within 50 days of demand to consider the voting rights of the shares. The right to compel the calling of a special meeting is subject to the satisfaction of certain conditions, including an undertaking to pay the expenses of the meeting. If no request for a meeting is made, the corporation may itself present the question at any stockholders meeting.

If voting rights are not approved at the meeting or if the acquirer does not deliver an acquiring person statement as required by the statute, then the corporation may, subject to certain limitations and conditions, redeem for fair value any or all of the control shares, except those for which voting rights have previously been approved. Fair value is determined, without regard to the absence of voting rights for the control shares, as of the date of the last acquisition of control shares by the acquiring person in a control share acquisition; or, if a meeting of stockholders is held at which the voting rights of the shares are considered and not approved, then as of the date of the meeting. If voting rights for control shares are approved at a stockholders meeting and the acquirer becomes entitled to exercise or direct the exercise of a majority of the voting power, all other stockholders may exercise appraisal rights. The fair value of the shares as determined for purposes of appraisal rights may not be less than the highest price per share paid by the acquirer in the control share acquisition.

The control share acquisition statute does not apply (a) to shares acquired in a merger, consolidation or share exchange if the corporation is a party to the transaction or (b) to acquisitions approved or exempted by the charter or bylaws of the corporation.

Our bylaws contain a provision exempting any acquisition of our stock by any person from the foregoing provisions on control shares. In the event that our bylaws are amended by our stockholders to modify or eliminate this provision, acquisitions of our common stock may constitute a control share acquisition and may be subject to the control share acquisition statute.

Subtitle 8

Subtitle 8 of Title 3 of the MGCL (“Subtitle 8”) permits a Maryland corporation with a class of equity securities registered under the Exchange Act and at least three independent directors to elect, by provision in its charter or bylaws or a resolution of its board of directors and without the need for stockholder approval, and notwithstanding any contrary provision in the charter or bylaws, unless the charter or a resolution adopted by the board of directors prohibits such election, to be subject to any or all of five provisions, including:

 

    a classified board of directors;

 

    a two-thirds vote requirement for removing a director;

 

    a requirement that the number of directors be fixed only by vote of the board of directors;

 

    a requirement that a vacancy on the board of directors be filled only by the affirmative vote of a majority of the remaining directors and for the remainder of the full term of the class of directors in which the vacancy occurred and until a successor is elected and qualifies; and

 

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    a provision that a special meeting of stockholders must be called upon stockholder request only on the written request of stockholders entitled to cast a majority of the votes entitled to be cast at the meeting.

We do not currently have a classified board. Our charter provides that we are prohibited from electing to be subject to any or all of the provisions of Title 3, Subtitle 8 of the MGCL unless such election is first approved by the affirmative vote of stockholders of not less than a majority of all shares of ours then outstanding and entitled to be cast on the matter.

Through provisions in our charter and bylaws unrelated to Subtitle 8, we (1) vest in our board of directors the exclusive power to fix the number of directors, and (2) require the request of stockholders entitled to cast a majority of the votes entitled to be cast at the meeting to call a special meeting (unless the special meeting is called by our board of directors, the chairman of our board of directors, our president or chief executive officer as described below under “—Special Meetings of Stockholders”).

Special Meetings of Stockholders

Our board of directors, the chairman of our board of directors, our president or our chief executive officer may call a special meeting of our stockholders. Our bylaws provide that a special meeting of our stockholders to act on any matter that may properly be considered at a meeting of our stockholders must also be called by our secretary upon the written request of stockholders entitled to cast a majority of all the votes entitled to be cast on such matter at the meeting and containing the information required by our bylaws.

Stockholder Action by Written Consent

The MGCL generally provides that, unless the charter of the corporation authorizes stockholder action by less than unanimous consent, stockholder action may be taken by consent in lieu of a meeting only if it is given by all stockholders entitled to vote on the matter. Our charter permits stockholder action by consent in lieu of a meeting to the extent permitted by our bylaws. Our bylaws provide that any action required or permitted to be taken at any meeting of the holders of common stock entitled to vote generally in the election of directors may be taken without a meeting (a) if a unanimous consent setting forth the action is given in writing or by electronic transmission by each stockholder entitled to vote on the matter and filed with the minutes of proceedings of the stockholders or (b) if the action is advised, and submitted to the stockholders for approval, by our board and a consent in writing or by electronic transmission of stockholders entitled to cast not less than the minimum number of votes that would be necessary to authorize or take the action at a meeting of stockholders is delivered to us in accordance with Maryland law. We will be required to give notice of any action taken by less than unanimous consent to each stockholder not later than ten days after the effective time of such action.

Competing Interests and Activities of Our Directors or Officers

Our charter provides that we have the power to renounce, by resolution of the board of directors, any interest or expectancy in, or in being offered an opportunity to participate in, business opportunities or classes or categories of business opportunities that are (i) presented to us or (ii) developed by or presented to one or more of our directors or officers.

Advance Notice of Director Nomination and New Business

Our bylaws provide that nominations of individuals for election as directors and proposals of business to be considered by stockholders at any annual meeting may be made only (1) pursuant to our notice of the meeting, (2) by or at the direction of our board of directors or any duly authorized committee of our board of directors or (3) by any stockholder present in person or by proxy who was a stockholder of record at the time of provision of notice by the stockholders and at the time of the meeting, who is entitled to vote at the meeting in the election of the individuals so nominated or on such other proposed business who is not an “unsuitable person” as defined in

 

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our charter, and who has complied with the advance notice procedures of our bylaws. Stockholders generally must provide notice to our secretary not earlier than the 150th day or later than the close of business on the 120th day before the first anniversary of the date of our proxy statement for the preceding year’s annual meeting.

Only the business specified in the notice of the meeting may be brought before a special meeting of our stockholders. Nominations of individuals for election as directors at a special meeting of stockholders may be made only (1) by or at the direction of our board of directors or any duly authorized committee of our board of directors or (2) if the special meeting has been called in accordance with our bylaws for the purpose of electing directors, by a stockholder who is a stockholder of record both at the time of provision of notice and at the time of the special meeting, who is entitled to vote at the meeting in the election of each individual so nominated and who has complied with the advance notice procedures of our bylaws. Stockholders generally must provide notice to our secretary not earlier than the 120th day before such special meeting or later than the later of the close of business on the 90th day before such special meeting or the tenth day after the first public announcement of the date of the special meeting and the nominees of our board of directors to be elected at the meeting.

A stockholder’s notice must contain certain information specified by our bylaws about the stockholder, its affiliates and any proposed business or nominee for election as a director, including information about the economic interest of the stockholder, its affiliates and any proposed nominee in us.

Effect of Certain Provisions of Maryland Law and our Charter and Bylaws

The restrictions on ownership and transfer of our stock discussed under the caption “—Restrictions on Ownership and Transfer” prohibit any person from acquiring, with respect to any class or series of our capital stock, more than 9.8% (in value or by number of shares, whichever is more restrictive) of the aggregate of the outstanding shares of such class or series of our capital stock without the approval of our board of directors. These provisions may delay, defer or prevent a change in control of us. Further, subject to the rights of holders of preferred stock, our board of directors has the power to increase the aggregate number of authorized shares and classify and reclassify any unissued shares of our stock into other classes or series of stock, and to authorize us to issue the newly-classified shares, as discussed under the captions “—Common Stock” and “—Power to Reclassify and Issue Stock,” and could authorize the issuance of shares of common stock or another class or series of stock, including a class or series of preferred stock, that could have the effect of delaying, deferring or preventing a change in control of us. We believe that the power to increase the aggregate number of authorized shares and to classify or reclassify unissued shares of common or preferred stock, without approval of holders of our common stock, provides us with increased flexibility in structuring possible future financings and acquisitions and in meeting other needs that might arise.

Our charter and bylaws also provide that the number of directors may be established only by our board of directors, which prevents our stockholders from increasing the number of our directors and filling any vacancies created by such increase with their own nominees. The provisions of our bylaws discussed above under the captions “—Special Meetings of Stockholders” and “—Advance Notice of Director Nomination and New Business” require stockholders seeking to call a special meeting, nominate an individual for election as a director or propose other business at an annual meeting to comply with certain notice and information requirements. We believe that these provisions will help to assure the continuity and stability of our business strategies and policies as determined by our board of directors and promote good corporate governance by providing us with clear procedures for calling special meetings, information about a stockholder proponent’s interest in us and adequate time to consider stockholder nominees and other business proposals. However, these provisions, alone or in combination, could make it more difficult for our stockholders to remove incumbent directors or fill vacancies on our board of directors with their own nominees and could delay, defer or prevent a change in control, including a proxy contest or tender offer that might involve a premium price for our common stockholders or otherwise be in the best interest of our stockholders.

 

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Exclusive Forum

Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Circuit Court for Baltimore City, Maryland, or, if that court does not have jurisdiction, the United States District Court for the District of Maryland, Baltimore Division, will be the sole and exclusive forum for (a) any derivative action or proceeding brought on our behalf, (b) any action asserting a claim of breach of any duty owed by any of our present or former directors or officers or other employees or stockholders to us or to our stockholders, as applicable, or any standard of conduct applicable to our directors, (c) any action asserting a claim against us or any of our present or former directors or officers or other employees arising pursuant to any provision of the MGCL or our charter or bylaws or (d) any action asserting a claim against us or any of our present or former directors or officers or other employees that is governed by the internal affairs doctrine.

Limitation of Liability and Indemnification of Directors and Officers

Maryland law permits us to include a provision in our charter eliminating the liability of our directors and officers to us and our stockholders for money damages, except for liability resulting from (a) actual receipt of an improper benefit or profit in money, property or services or (b) a final judgment based upon a finding that his or her action or failure to act was the result of active and deliberate dishonesty by the director or officer and was material to the cause of action adjudicated. Our charter contains a provision that eliminates our directors’ and officers’ liability to us and our stockholders for money damages to the maximum extent permitted by Maryland law.

The MGCL requires us (unless our charter were to provide otherwise, which our charter does not) to indemnify a director or officer who has been successful, on the merits or otherwise, in the defense of any proceeding to which he or she is made or threatened to be made a party by reason of his or her service in that capacity. The MGCL permits us to indemnify our present and former directors and officers, among others, against judgments, penalties, fines, settlements and reasonable expenses actually incurred by them in connection with any proceeding to which they may be made or threatened to be made a part to, or witness in, by reason of their service in those or certain other capacities unless it is established that:

 

    the act or omission of the director or officer was material to the matter giving rise to the proceeding and (a) was committed in bad faith or (b) was the result of active and deliberate dishonesty;

 

    the director or officer actually received an improper personal benefit in money, property or services; or

 

    in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful.

However, the MGCL prohibits us from indemnifying a director or officer who has been adjudged liable in a suit by us or on our behalf or in which the director or officer was adjudged liable on the basis that a personal benefit was improperly received. A court may order indemnification if it determines that the director or officer is fairly and reasonably entitled to indemnification, even though the director or officer did not meet the standard of conduct for indemnification set forth above or was adjudged liable on the basis that personal benefit was improperly received. However, indemnification for an adverse judgment in a suit by us or on our behalf, or for a judgment of liability on the basis that personal benefit was improperly received, is limited to expenses.

In addition, the MGCL permits us to advance reasonable expenses to a director or officer upon our receipt of (a) a written affirmation by the director or officer of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification and (b) a written undertaking by him or her or on his or her behalf to repay the amount paid or reimbursed if it is ultimately determined that the standard of conduct was not met.

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preliminary determination of the ultimate entitlement to indemnification, pay or reimburse reasonable expenses in advance of final disposition of a proceeding to:

 

    any present or former director or officer who is made or threatened to be made a party to, or witness in, a proceeding by reason of his or her service in that capacity; or

 

    any individual who, while a director or officer of our company and at our request, serves or has served as a director, officer, partner, trustee, member or manager of another corporation, REIT, limited liability company, partnership, joint venture, trust, employee benefit plan or any other enterprise and who is made or threatened to be made a party to, or witness in, the proceeding by reason of his or her service in that capacity.

Our charter and bylaws provide that we have the power, with approval of our board, to provide such indemnification and advance of expenses to a person who served a predecessor of us in any such capacity described above and to any employee or agent of us or a predecessor of us.

Indemnification Agreements

We have entered into an indemnification agreement with each of our directors and executive officers. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors or executive officers, we have been informed that in the opinion of the SEC such indemnification is against public policy and is therefore unenforceable.

We have purchased and maintain insurance on behalf of all of our directors and executive officers against liability asserted against or incurred by them in their official capacities, whether or not we are required to have the power to indemnify them against the same liability.

Description of Our Operating Partnership Agreement

We have summarized the material terms of the limited partnership agreement of our Operating Partnership. This summary does not purport to be complete and is subject to and qualified in its entirety by reference to the limited partnership agreement of VICI Properties L.P., a form of which is filed as an exhibit to the registration statement of which this prospectus is a part.

General

Our Operating Partnership, VICI Properties L.P., is a Delaware limited partnership. All of our assets (other than the golf course assets), are held by, and all of our operations (other than the golf course operations) are and will be conducted through, our Operating Partnership, either directly or through subsidiaries. VICI Properties GP LLC, our wholly-owned subsidiary, is the sole General Partner of our Operating Partnership.

In the future, some of our property acquisitions could be financed by issuing partnership units in exchange for property owned by third parties. Such third parties would then be entitled to share in cash distributions from, and in the profits and losses of, our Operating Partnership in proportion to their respective percentage interests in our Operating Partnership. Holders of outstanding partnership units will, later of (x) the twelve-month anniversary a limited partner first becoming a holder of common units of the Operating Partnership, and (y) October 6, 2018 (subject to the terms of the limited partnership agreement), have the right to elect to redeem their partnership units for cash, based upon the value of an equivalent number of shares of our common stock at the time of the election to redeem, subject to our right to acquire the partnership units tendered for redemption in exchange for an equivalent number of shares of our common stock, subject to the restrictions on ownership and transfer of our stock to be set forth in our charter. The partnership units will not be listed on any securities exchange or quoted on any inter-dealer quotation system.

 

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Provisions in the limited partnership agreement may delay or make more difficult unsolicited acquisitions of us or changes in our control. These provisions could discourage third parties from making proposals involving an unsolicited acquisition of us or change of our control, although some stockholders might consider such proposals, if made, desirable. These provisions also make it more difficult for third parties to alter the management structure of our Operating Partnership without the concurrence of our board of directors. These provisions include, among others:

 

    redemption rights of limited partners and certain assignees of partnership units or other Operating Partnership interests;

 

    transfer restrictions on partnership units and restrictions on admission of partners;

 

    a requirement that VICI Properties GP LLC may not be removed as the General Partner of our Operating Partnership without its consent;

 

    the ability of the General Partner in some cases to amend the limited partnership agreement and to cause our Operating Partnership to issue preferred partnership interests in our Operating Partnership with terms that it may determine, in either case, without the approval or consent of any limited partner; and

 

    the right of any future limited partners to consent to transfers of units of other Operating Partnership interests except under specified circumstances, including in connection with mergers, consolidations and other business combinations involving us.

Purpose, Business and Management

Our Operating Partnership is formed for the purpose of conducting any business, enterprise or activity permitted by or under the Delaware Revised Uniform Limited Partnership Act (the “DRULPA”), including (1) to conduct the business of ownership, construction, reconstruction, development, redevelopment, alteration, improvement, maintenance, operation, sale, leasing, transfer, encumbrance, financing, refinancing, conveyance and exchange of any asset or property of the Operating Partnership, (2) to acquire or invest in any securities and/or loans relating to such properties, (3) to enter into any partnership, joint venture, business or statutory trust arrangement, limited liability company or other similar arrangement to engage in any business permitted by or under the DRULPA, or to own interests in any entity engaged in any business permitted by or under the DRULPA, (4) to conduct the business of providing property and asset management and brokerage services, and (5) to do anything necessary or incidental to the foregoing. However, our Operating Partnership may not, without the General Partner’s specific consent, which it may give or withhold in its sole and absolute discretion, take, or refrain from taking, any action that, in its judgment, in its sole and absolute discretion:

 

    could adversely affect our ability to continue to qualify as a REIT;

 

    could subject us to any taxes under Code Section 857 or Code Section 4981 or any other related or successor provision under the Code;

 

    could violate any law or regulation of any governmental body or agency having jurisdiction over us or our securities or our Operating Partnership; or

 

    could cause us not to be in compliance in all material respects with any covenants, conditions or restrictions pursuant to an agreement to which we are party unless we have provided our consent to such action.

The General Partner is accountable to our Operating Partnership as a fiduciary and consequently must exercise good faith and integrity in handling partnership affairs. If there is a conflict between our interests or the interests of our stockholders, on the one hand, and the Operating Partnership or any current or future limited partners, on the other hand, the General Partner will endeavor in good faith to resolve the conflict in a manner not adverse to either us or our stockholders or any limited partners; provided, however, that any conflict that cannot

 

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be resolved in a manner not adverse to either us or our stockholders or any limited partners shall be resolved in favor of us and our stockholders. The limited partners of our Operating Partnership expressly acknowledge that VICI Properties GP LLC, as General Partner of our Operating Partnership, is acting for the benefit of the Operating Partnership, the limited partners and our stockholders collectively. Neither our company nor our board of directors will be under any obligation to give priority to the separate interests of the limited partners or our stockholders in deciding whether to cause our Operating Partnership to take or decline to take any actions, except as described above. The limited partners agree that our status as a REIT and as a reporting company under Section 12 of the Exchange Act is of benefit to the Operating Partnership and that all actions taken in good faith by the General Partner in support thereof shall be deemed actions taken for the benefit of the Operating Partnership and all partners including the limited partners.

The limited partnership agreement also provides that the General Partner will not be liable to our Operating Partnership, its partners or any other person bound by the limited partnership agreement for monetary damages for losses sustained, liabilities incurred or benefits not derived by our Operating Partnership or any limited partner, except for any such losses sustained, liabilities incurred or benefits not derived as a result of (i) an act or omission on the part of the General Partner that was committed in bad faith or was the result of active and deliberate dishonesty; (ii) in the case of any criminal proceeding, an act or omission on the part of the General Partner that it had reasonable cause to believe was unlawful; or (iii) for any loss resulting from any transaction for which the General Partner actually received an improper personal benefit in money, property or services in violation or breach of any provision of the limited partnership agreement. Moreover, the limited partnership agreement will provide that our Operating Partnership is required to indemnify the General Partner and its members, managers, managing members, officers, employees, agents and designees from and against any and all claims that relate to the operations of our Operating Partnership, except (1) if the act or omission of the person was material to the matter giving rise to the action and either was committed in bad faith or was the result of active or deliberate dishonesty, (2) for any transaction for which the indemnified party received an improper personal benefit, in money, property or services in violation or breach of any provision of the limited partnership agreement or (3) in the case of a criminal proceeding, if the indemnified person had reasonable cause to believe that the act or omission was unlawful.

Except as otherwise expressly provided in the limited partnership agreement and subject to the rights of future holders of any class or series of partnership interest, all management powers over the business and affairs of our Operating Partnership are exclusively vested in VICI Properties GP LLC, in its capacity as the sole General Partner of our Operating Partnership. No limited partner, in its capacity as a limited partner, has any right to participate in or exercise management power over the business and affairs of our Operating Partnership (provided, however, that we, in our capacity as the sole member of the General Partner and not in our capacity as a limited partner of the Operating Partnership, may have the power to direct the actions of the General Partner with respect to the Operating Partnership). VICI Properties GP LLC may not be removed as the General Partner of our Operating Partnership, with or without cause, without its consent, which it may give or withhold in its sole and absolute discretion. In addition to the powers granted to the General Partner under applicable law or any provision of the limited partnership agreement, but subject to certain other provisions of the limited partnership agreement and the rights of future holders of any class or series of partnership interest, VICI Properties GP LLC, in its capacity as the General Partner of our Operating Partnership, has the full and exclusive power and authority to do all things that it deems necessary or desirable to conduct the business and affairs of our Operating Partnership, to exercise or direct the exercise of all of the powers of our Operating Partnership and to effectuate the purposes of our Operating Partnership without the approval or consent of any limited partner. The General Partner may authorize our Operating Partnership to incur debt and enter into credit, guarantee, financing or refinancing arrangements for any purpose, including, without limitation, in connection with any acquisition of properties, on such terms as it determines to be appropriate, and to acquire or dispose of any, all or substantially all of its assets (including goodwill), dissolve, merge, consolidate, reorganize or otherwise combine with another entity, without the approval or consent of any limited partner. With limited exceptions, the General Partner may execute, deliver and perform agreements and transactions on behalf of our Operating Partnership without the approval or consent of any limited partner.

 

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The limited partnership agreement provides that our Operating Partnership will assume and pay when due, or reimburse us for payment of all costs and expenses relating to the operations of, or for the benefit of, our Operating Partnership.

Additional Limited Partners

The General Partner of our Operating Partnership may cause our Operating Partnership to issue additional partnership units or other partnership interests and to admit additional limited partners to our Operating Partnership from time to time, on such terms and conditions and for such capital contributions as it may establish in its sole and absolute discretion, without the approval or consent of any limited partner, including:

 

    upon the conversion, redemption or exchange of any debt, partnership units or other partnership interests or securities issued by our Operating Partnership;

 

    for less than fair market value; or

 

    in connection with any merger of any other entity into our Operating Partnership.

The net capital contribution need not be equal for all limited partners. Each person admitted as an additional limited partner must make certain representations to each other partner relating to, among other matters, such person’s ownership of any tenant of our Operating Partnership. No person may be admitted as an additional limited partner without the consent of the General Partner, which the General Partner may give or withhold in its sole and absolute discretion, and no approval or consent of any limited partner will be required in connection with the admission of any additional limited partner.

Our Operating Partnership may issue additional partnership interests in one or more classes, or one or more series of any of such classes, with such designations, preferences, conversion or other rights, voting powers or rights, restrictions, limitations as to distributions, qualifications or terms or conditions of redemption (including, without limitation, terms that may be senior or otherwise entitled to preference over the units) as the general partner may determine, in its sole and absolute discretion, without the approval of any limited partner or any other person. Without limiting the generality of the foregoing, the General Partner may specify, as to any such class or series of partnership interest:

 

    the allocations of items of partnership income, gain, loss, deduction and credit to each such class or series of partnership interest;

 

    the right of each such class or series of partnership interest to share, on a junior, senior or pari passu basis, in distributions;

 

    the rights of each such class or series of partnership interest upon dissolution and liquidation of our Operating Partnership;

 

    the voting rights, if any, of each such class or series of partnership interest; and

 

    the conversion, redemption or exchange rights applicable to each such class or series of partnership interest.

Transferability of Interests

Except in connection with a transaction described in “—Termination Transactions,” VICI Properties GP LLC, as General Partner, may not voluntarily withdraw from our Operating Partnership, or transfer or assign all or any portion of its interest in our Operating Partnership, without the consent of the holders of a majority of the limited partnership interests (excluding units owned directly or indirectly by us). Holders of limited partnership units do not vote on matters submitted to our stockholders for approval and do not generally vote on actions to be taken by the Operating Partnership, except as set forth in the preceding sentence, and as set forth below, See “—Amendments of the Limited Partnership Agreement,” “—Termination Transactions,” and “Dissolution.” The

 

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limited partners will agree not to sell, assign, encumber or otherwise dispose of their Operating Partnership units to any person (other than to us, or the General Partner, to immediate family members or any trust for their benefit, to affiliates of such partner, including, without limitation, any entity controlled by such partner, to a charitable entity or a trust for their benefit, or to a lending institution as collateral for a bona fide loan, subject to certain limitations) unless they have provided the General Partner a right of first offer. All transfers must be made only to “accredited investors” as defined under Rule 501 of the Securities Act or otherwise in accordance with applicable securities laws.

Amendments of the Limited Partnership Agreement

Amendments to the limited partnership agreement may be proposed by our General Partner, or by the limited partners owning at least 50% of the partnership units held by the limited partners (including units held directly or indirectly by us).

Generally, the limited partnership agreement may not be amended, modified or terminated without the approval of both the General Partner and limited partners holding a majority of all outstanding partnership units held by the limited partners (other than, in each case, Operating Partnership units owned directly or indirectly by us). The General Partner has the power to unilaterally make certain amendments to the limited partnership agreement without obtaining the consent of the limited partners as may be required to:

 

    add to its obligations as General Partner or surrender any right or power granted to it as General Partner or any of our affiliates for the benefit of the limited partners;

 

    reflect the issuance of additional partnership units, transfer of any partnership interest or the admission, substitution, termination or withdrawal of limited partners in each case in accordance with the terms of the limited partnership agreement;

 

    reflect a change of an inconsequential nature that does not adversely affect the limited partners in any material respect, or cure any ambiguity, correct or supplement any provisions of the limited partnership agreement not inconsistent with law or with other provisions of the limited partnership agreement, or make other changes concerning matters under the limited partnership agreement that will not otherwise be inconsistent with the limited partnership agreement or law;

 

    set forth or amend the designations, rights, preferences, privileges and other terms and conditions of any new class of partnership interest permitted to be issued under the limited partnership agreement;

 

    satisfy any requirements, conditions or guidelines of Federal or state law;

 

    reflect changes that are reasonably necessary for us to maintain our status as a REIT or to satisfy REIT requirements, reflect the transfer of all or any part of a partnership interest among the General Partner and any entity disregarded as separate from the General Partner for tax purposes or to ensure that the Operating Partnership will not be classified as a publicly traded partnership for tax purposes;

 

    modify the manner in which capital accounts are computed or net income or net loss are allocated; or

 

    to reflect any other modification as is reasonably necessary for the business or operation of the Operating Partnership or the General Partner, which does not violate the restrictions on the General Partner.

Amendments that would, among other things, convert a limited partner’s interest into a General Partner’s interest, modify the limited liability of a limited partner, adversely alter a partner’s right to receive any distributions or allocations of profits or losses, adversely alter or modify the redemption rights, reduce any limited partner’s right to indemnity, create any liability of a limited partner, amend these restrictions or admit any other person as a General Partner other than in accordance with the successor provisions of the limited partnership agreement or alter the protections of the limited partners in connection with Termination Transactions described below, which, in each case, must be approved by each limited partner that would be adversely affected by such amendment.

 

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In addition, without the written consent of a majority of the partnership units held by limited partners (excluding units owned directly or indirectly by us), the General Partner, may not do any of the following:

 

    take any action in contravention of an express prohibition or limitation contained in the limited partnership agreement;

 

    perform any act that would subject a limited partner to liability as a General Partner in any jurisdiction or any liability not contemplated in the limited partnership agreement;

 

    enter into any contract, mortgage loan or other agreement that prohibits or restricts, or has the effect of prohibiting or restricting, the ability of a limited partner to exercise its redemption/exchange rights explained below; or

 

    withdraw from the Operating Partnership or transfer any portion of its general partnership interest.

Distributions to Unitholders

The limited partnership agreement provides that holders of partnership units will be entitled to receive distributions of 100% of available cash, at least quarterly, on a pro rata basis in accordance with the number of partnership units held by each of them and by us (subject to the rights, preferences and privileges of the holders of any class of preferred partnership interests that may be authorized and issued after the offering). In the event that we declare and pay any dividend of cash or assets to holders of our common stock from the cash flow or assets of VICI Golf, each limited partner (other than us) will be paid in preference to any distribution to which we are entitled, an amount equal to the portion of any such dividend, which such limited partner would have received on account of our common stock, which such limited partner would have received if such limited partner’s units had been redeemed for shares of our common stock.

Redemption/Exchange Rights

Each limited partner shall have the right, commencing on the first anniversary of the issuance of the applicable partnership units, to require our Operating Partnership to redeem part or all of its partnership units for cash based upon the fair market value of an equivalent number of shares of our common stock at the time of the redemption. Alternatively, we may elect to acquire those partnership units in exchange for shares of our common stock. Any such exchange will be on a one-for-one basis, subject to adjustment in the event of stock splits, stock dividends, issuances of stock rights, specified extraordinary distributions and similar events. Commencing on the first anniversary of the issuance of the applicable partnership units, limited partners who hold partnership units may exercise this redemption right from time to time, in whole or in part, except when, as a consequence of shares of our common stock being issued, any person’s actual or constructive stock ownership would exceed our ownership limits, or any other limit as provided in our charter or as otherwise determined by our board of directors as described under the section entitled “Description of Capital Stock—Restrictions on Ownership and Transfer.”

In addition, if the number of partnership units delivered by a limited partner for redemption, together with other shares of our common stock owned or attributed to that limited partner, exceeds 9.8% of the outstanding shares of any class or series of our capital stock (in value or by number of shares, whichever is more restrictive) and we are eligible to file a registration statement on Form S-3 under the Securities Act, then we may also elect to redeem the partnership units with the proceeds from a public offering or private placement of our common stock. In the event we elect this option, we may require the other limited partners to also elect whether or not to participate. Participating limited partners will receive on the redemption date the proceeds per share in the public offering (less any discount or commission), but will have a limited opportunity to withdraw their partnership units from the redemption immediately prior to the pricing of the public offering.

Capital Contributions

The limited partnership agreement provides that the General Partner may determine that, subsequent to the Formation Date, our Operating Partnership requires additional funds for the acquisition of additional properties

 

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or for other purposes. Under the limited partnership agreement, we are obligated to contribute the proceeds of any offering of our shares of stock as additional capital to our Operating Partnership, except, among others circumstances, in the event that the proceeds from such offering are used to operate or invest in assets of the golf course properties owned by VICI Golf on the Formation Date and only if such proceeds would exceed an amount yet to be determined.

The limited partnership agreement provides that we may make additional capital contributions, including properties, to our Operating Partnership in exchange for additional partnership units. If we contribute additional capital and receive additional partnership interests for the capital contribution, our percentage interests will be increased on a proportionate basis based on the amount of the additional capital contributions and the value of our Operating Partnership at the time of the contributions. Conversely, the percentage interests of the other limited partners will be decreased on a proportionate basis. In addition, if we contribute additional capital and receive additional partnership interests for the capital contribution, the capital accounts of the partners may be adjusted upward or downward to reflect any unrealized gain or loss attributable to the properties as if there were an actual sale of the properties at the fair market value thereof. No person has any preemptive, preferential or other similar right with respect to making additional capital contributions or loans to the Operating Partnership or the issuance or sale of any partnership units or other partnership interests.

Our Operating Partnership could issue preferred partnership interests in connection with acquisitions of property or otherwise. Any such preferred partnership interests would have priority over common partnership interests with respect to distributions from our Operating Partnership, including the partnership interests that we own.

Tax Matters

For U.S. Federal income tax purposes, our Operating Partnership will be viewed as “disregarded as an entity separate from its owner,” VICI, which will beneficially own 100% of the equity interests of our Operating Partnership. As a result, all assets, liabilities and items of income, deduction and credit of the Operating Partnership will be treated as assets, liabilities and items of income, deduction and credit of VICI itself, including for purposes of the gross income and asset tests applicable to VICI. However, in the future, if one or more third-party investors are admitted as partners of the Operating Partnership, it will be classified as a partnership for U.S. Federal income tax purposes, in which case VICI Properties GP LLC will serve as the tax matters partner or partnership representative of our Operating Partnership and, as such, will have authority to make tax elections under the Code on behalf of our Operating Partnership.

Termination Transactions

The limited partnership agreement provides that our company shall not and the Operating Partnership shall not engage in any merger, consolidation or other combination with or into another person, sale of all or substantially all of its assets or any reclassification or any recapitalization or change in outstanding shares of our common stock or the Operating Partnership’s partnership interests (a “termination transaction”), unless in connection with a termination transaction,

(A) all limited partners will receive, or have the right to elect to receive, for each partnership unit an amount of cash, securities or other property equal to the product of:

 

    the number of shares of our common stock into which each partnership unit is then exchangeable, and

 

    the greatest amount of cash, securities or other property paid to the holder of one share of our common stock in consideration of one share of our common stock in connection with the termination transaction,

provided that, if, in connection with a termination transaction, a purchase, tender or exchange offer is made to and accepted by the holders of more than 50% of the outstanding shares of our common stock, each holder of

 

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partnership units will receive, or will have the right to elect to receive, the greatest amount of cash, securities or other property which such holder would have received had it exercised its redemption right and received shares of our common stock in exchange for its partnership units immediately prior to the expiration of such purchase, tender or exchange offer and accepted such purchase, tender or exchange offer; or

(B) the following conditions are met:

 

    substantially all of the assets of the surviving entity are held directly or indirectly by our Operating Partnership or another limited partnership or limited liability company which is the surviving partnership of a merger, consolidation or combination of assets with our Operating Partnership;

 

    the holders of partnership units own a percentage interest of the surviving partnership based on the relative fair market value of the net assets of our Operating Partnership and the other net assets of the surviving partnership immediately prior to the consummation of this transaction;

 

    the rights, preferences and privileges of such unit holders in the surviving partnership are at least as favorable as those in effect immediately prior to the consummation of the transaction and as those applicable to any other limited partners or non-managing members of the surviving partnership; and

 

    the limited partners may exchange their interests in the surviving partnership for either the consideration available to the limited partners pursuant to the first paragraph in this section, or the right to redeem their common units for cash on terms equivalent to those in effect with respect to their units immediately prior to the consummation of the transaction or if the ultimate controlling person of the surviving partnership has publicly traded common equity securities, shares of those common equity securities, at an exchange ratio based on the relative fair market value of those securities and our common stock; or

(C) the terms are otherwise consented to by the limited partners holding a majority of the limited partnership units (excluding units owned directly or indirectly by us).

Dissolution

Our Operating Partnership will dissolve, and its affairs will be wound up, upon the first to occur of any of the following:

 

    an event of withdrawal, as defined in DRULPA, including, without limitation, by reason of the bankruptcy of our General Partner, unless, within 90 days after the withdrawal, a majority of interest of the remaining partners agree in writing to continue the business of our Operating Partnership and to the appointment, effective as of the date of withdrawal, of a successor General Partner;

 

    an election to dissolve our Operating Partnership made by the General Partner, with the consent of the limited partners (including units owned directly or indirectly by us); or

 

    the entry of a decree of judicial dissolution of our Operating Partnership pursuant to the provisions of DRULPA.

Upon dissolution of our Operating Partnership, the General Partner, or, in the event that there is no remaining General Partner, a liquidator will proceed to liquidate the assets of our Operating Partnership and apply the proceeds from such liquidation in the order of priority set forth in the limited partnership agreement.

 

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SHARES ELIGIBLE FOR FUTURE SALE

Our common stock is quoted on the OTC Markets under the symbol “VICI.” Prior to this offering, there has been no other public market for our shares. We cannot predict the effect, if any, that sales of shares or the availability of shares for sale will have on the market price of shares of our common stock prevailing from time to time. Sales of substantial amounts of shares of our common stock in the public market, or the perception that such sales could occur, could adversely affect the prevailing market price of our common stock.

Upon completion of this offering,              shares of our common stock will be issued and outstanding. If the underwriters exercise their overallotment option in full,              shares of our common stock will be issued and outstanding immediately after the completion of this offering.

Lock-Up Agreements

In connection with this offering, we, our executive officers and directors, and certain stockholders with respect to              shares of our common stock held by them have agreed with the underwriters, subject to certain exceptions, not to sell, dispose of or hedge any of our common stock or securities convertible into or exchangeable for shares of common stock, during the period ending 180 days after the date of this prospectus, except with the prior written consent of Morgan Stanley & Co. LLC. See “Underwriting.” We may, however, grant awards under our equity incentive plans, and we may issue or sell shares of common stock under certain other circumstances.

2017 Stock Incentive Plan

Awards for up to 12,750,000 shares of our common stock may be granted under the VICI 2017 Stock Plan. No equity awards are currently outstanding under the VICI 2017 Stock Plan. In October 2017, we filed a registration statement on Form S-8 under the Securities Act to register the shares of our common stock issuable under the VICI 2017 Stock Plan, which is automatically effective upon filing. Accordingly, all of the shares registered under such registration statement are available for sale in the open market following the effective date, unless such shares are subject to vesting restrictions, Rule 144 restrictions applicable to our affiliates or the lock-up agreements described below.

Rule 144

In general, under Rule 144 of the Securities Act (“Rule 144”), as currently in effect, once we have been subject to public company reporting requirements for at least 90 days, a person who is not deemed to have been one of our affiliates for purposes of the Securities Act at any time during the 90 days preceding a sale and who has beneficially owned the shares proposed to be sold for at least six months, including the holding period of any prior owner other than our affiliates, is entitled to sell such shares without complying with the manner of sale, volume limitation, or notice provisions of Rule 144, subject to compliance with the public information requirements of Rule 144. If such a person has beneficially owned the shares proposed to be sold for at least one year, including the holding period of any prior owner other than our affiliates, then such person is entitled to sell such shares without complying with any of the requirements of Rule 144.

In general, under Rule 144, as currently in effect, our affiliates or persons selling shares on behalf of our affiliates, who have beneficially owned the shares proposed to be sold for at least six months, are entitled to sell, subject to any lock-up agreements described above, within any three-month period beginning 90 days after the date we first became subject to the public company reporting requirements, a number of shares that does not exceed the greater of:

 

    1% of the number of shares then outstanding, which will equal approximately              shares immediately after this offering; or

 

    the average weekly trading volume of the shares during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale.

 

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Sales under Rule 144 by our affiliates or persons selling shares on behalf of our affiliates are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us.

For purposes of the requirements of Rule 144, a person who beneficially owns shares of our common stock as a result of our determination to cause us to elect to exchange shares of our common stock for Operating Partnership units tendered for redemption in accordance with the partnership agreement of the Operating Partnership, will be deemed to have acquired such shares on the date that such person originally acquired the Operating Partnership units subsequently exchanged for shares of our common stock.

Registration Rights Agreements

We are party to a registration rights agreement with the investors who purchased shares of our common stock in the Private Equity Placement. Under the registration rights agreement, we agreed to file within 75 days of the closing of the Private Equity Placement a resale shelf registration statement covering up to 54,054,053 shares of our common stock and use commercially reasonable efforts to cause it to become effective, and remain effective, thereafter. In addition, these investors have certain piggyback and demand registration rights with respect to these shares. Shares registered under any such registration statement will be available for sale in the open market unless lock-up restrictions apply. See “Certain Relationships and Related Party Transactions—Registration Rights Agreements.”

Shares of Common Stock Issued in the Formation Transactions Eligible for Future Sale

Pursuant to Section 1145 of the Bankruptcy Code, except as noted below, the offering, issuance, and distribution of our common stock pursuant to the Plan of Reorganization is exempt from, among other things, the registration requirements of Section 5 of the Securities Act and any other applicable U.S. state or local law requiring registration prior to the offering, issuance, distribution, or sale of securities. The shares of our common stock issued in reliance on Section 1145 of the Bankruptcy Code are not “restricted securities” as defined in Rule 144(a)(3) under the Securities Act, and are freely tradable and transferable by any initial recipient thereof that (i) is not an “affiliate” of ours as defined in Rule 144(a)(1) under the Securities Act, (ii) has not been such an “affiliate” within 90 days of such transfer, and (iii) is not an entity that is an “underwriter” as defined in Section 1145(b) of the Bankruptcy Code.

Section 1145(b)(1) of the Bankruptcy Code defines an “underwriter” as any person who:

 

    purchases a claim against, an interest in, or a claim for an administrative expense against the debtor, if that purchase is with a view to distributing any security received in exchange for such a claim or interest;

 

    offers to sell securities offered under a plan of reorganization for the holders of those securities;

 

    offers to buy those securities from the holders of the securities, if the offer to buy is (i) with a view to distributing those securities; and (ii) under an agreement made in connection with the plan of reorganization, the completion of the plan of reorganization, or with the offer or sale of securities under the plan of reorganization; or

 

    is an issuer with respect to the securities, as the term “issuer” is defined in section 2(a)(11) of the Securities Act.

To the extent that persons who received common stock issued under the Plan of Reorganization that are exempt from registration under the Securities Act or other applicable law by Section 1145 of the Bankruptcy Code are deemed to be “underwriters,” resales by those persons would not be exempted from registration under the Securities Act or other applicable law by Section 1145 of the Bankruptcy Code and may only be sold pursuant to a registration statement or pursuant to exemption therefrom, such as the exemption provided by

 

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Rule 144 under the Securities Act. In accordance with the Plan of Reorganization, on the Formation Date, we entered into a customary registration rights agreement providing for, among other things, our obligation to file a resale shelf registration statement for certain holders of our equity that cannot freely transfer their equity pursuant to section 1145 of the Bankruptcy Code. See “Certain Relationships and Related Party Transactions—Registration Rights Agreements.”

Whether or not any particular person would be deemed an “underwriter” with respect to our common stock received pursuant to the Plan of Reorganization would depend upon various facts and circumstances applicable to that person. Accordingly, we express no view as to whether any particular person that received our common stock pursuant to the Plan of Reorganization is deemed an “underwriter” with respect to such shares.

Shares of Common Stock Issued in the Mandatory Conversions Eligible for Future Sale

All of our shares of Series A preferred stock issued on the Formation Date and the junior tranche of the Prior CPLV Mezzanine Debt automatically converted into 51,433,692 and 17,630,700 shares of our common stock in the Mandatory Preferred Conversion and the Mandatory Mezzanine Conversion, respectively. The shares of our common stock issued in the Mandatory Preferred Conversion and the Mandatory Mezzanine Conversion are “restricted securities,” as that phrase is defined in Rule 144 under the Securities Act, and may be resold only after registration under the Securities Act or pursuant to an exemption from such registration, such as the exemption provided by Rule 144 under the Securities Act. Holders of shares of common stock issued upon conversion of our Series A preferred stock and the junior tranche of the Prior CPLV Mezzanine Debt may become parties to the Registration Rights Agreement mentioned above. In that case, following the effectiveness of a resale registration statement, the shares of common stock issued in the Mandatory Conversions will be available for sale in the public market.

 

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Approval Policies

Our audit and finance committee is responsible for the review, approval and ratification of “related person transactions” between us and any related person pursuant to a written related person transaction policy adopted by our board of directors. Under SEC rules, a related person is an officer, director, nominee for director or beneficial holder of more than of 5% of any class of our voting securities since the beginning of the last fiscal year or an immediate family member of any of the foregoing. In the course of its review and approval or ratification of a related person transaction, the audit and finance committee will consider:

 

    the nature of the related person’s interest in the transaction;

 

    the material terms of the transaction, including the amount involved and type of transaction;

 

    the importance of the transaction to the related person and to our company;

 

    whether the transaction would impair the judgment of a director or executive officer to act in our best interest and the best interest of our stockholders; and

 

    any other matters the audit and finance committee deems appropriate.

Any member of the audit and finance committee who is a related person with respect to a transaction under review will not be permitted to participate in the deliberations or vote on the approval or ratification of the transaction. However, such a director may be counted in determining the presence of a quorum at a meeting of the committee that considers the transaction.

Registration Rights Agreements

In accordance with the Plan of Reorganization, on the Formation Date, we entered into a customary registration rights agreement providing for, among other things, our obligation to file a resale shelf registration statement for certain holders of our equity that cannot freely transfer their equity pursuant to section 1145 of the Bankruptcy Code. Under the registration rights agreement, we are required to keep registration statements, if any, up to date that do not automatically incorporate by reference our SEC filings. In addition, these holders will have the ability to exercise certain piggyback registration rights in respect of certain shares of common stock held by them in connection with registered offerings initiated by us, and may have the ability under certain circumstances to exercise certain demand registration rights if an effective shelf registration statement is not available to the holders to sell their shares. To date, no parties have joined the registration rights agreement.

At the closing of the Private Equity Placement in December 2017, we entered into a registration rights agreement with the investors pursuant to which we granted them and their permitted transferees the right, under certain circumstances and subject to certain restrictions, to require us to register under the Securities Act for resale the shares of common stock acquired by the investors in the Private Equity Placement. Under the registration rights agreement, we agreed to file within 75 days of the closing of the Private Equity Placement a resale shelf registration statement and use commercially reasonable efforts to cause it to become effective, and remain effective, thereafter. In addition, these investors will have the ability to exercise certain piggyback registration rights in respect of the shares of common stock acquired by them in the Private Equity Placement in connection with registered offerings initiated by us, and may have the ability under certain circumstances to exercise certain demand registration rights if an effective shelf registration statement is not available to the holders to sell these shares. The registration rights agreement also provides that the investors must enter into a customary lock-up agreement in connection with this offering and certain future offerings with respect to the shares of common stock subject to the benefits of the registration rights agreement.

Other than as described above, there is not currently proposed any transaction or series of similar transactions to which we are a party in which the amount involved exceeded or will exceed $120,000 and in which any related person had or will have a direct or indirect material interest.

 

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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS

U.S. Federal Income Tax Considerations of an Investment in our Common Stock

The following is a summary of the material U.S. Federal income tax considerations of an investment in our common stock. For purposes of this section under the heading “Material U.S. Federal Income Tax Considerations,” references to “VICI REIT,” “we,” “our” and “us” generally mean VICI REIT and its subsidiaries or other lower-tier entities, except as otherwise indicated, and references to “tenants” are to persons who are treated as lessees of real property for purposes of the REIT requirements. This summary is based upon the Code, the regulations promulgated by the Treasury, rulings and other administrative pronouncements issued by the IRS, and judicial decisions, all as currently in effect, and all of which are subject to differing interpretations or to change, possibly with retroactive effect. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax consequences described below. The summary is also based upon the assumption that we and our subsidiaries and affiliated entities will operate in accordance with our and their applicable organizational documents. This summary is for general information only and is not tax advice. It does not discuss any state, local or non-U.S. tax laws or the possible application of the alternative minimum tax, the 3.8% Medicare tax on net investment income or U.S. Federal gift or estate taxes, and it does not purport to discuss all aspects of U.S. Federal income taxation that may be important to a particular investor in light of its investment or tax circumstances or to investors subject to special tax rules, such as:

 

    banks, insurance companies, regulated investment companies, or other financial institutions;

 

    dealers or brokers in securities or currencies;

 

    partnerships, other pass-through entities and trusts, including REITs;

 

    partners in partnerships holding common stock;

 

    persons who hold shares of our common stock on behalf of other persons as nominees;

 

    persons who receive shares of our common stock as compensation;

 

    persons holding shares of our common stock as part of a “straddle,” “hedge,” “conversion transaction,” “synthetic security” or other integrated investment;

 

    persons who are subject to alternative minimum tax;

 

    tax-exempt organizations, except to the extent provided in “—Taxation of Shareholders—Taxation of Tax-Exempt Shareholders” below; and

 

    foreign investors, except to the extent provided in “—Taxation of Shareholders—Taxation of Non-U.S. Shareholders” below.

This summary assumes that investors will hold their shares as a capital asset, which generally means property held for investment.

The U.S. Federal income tax treatment of holders of shares of our common stock depends in some instances on determinations of fact and interpretations of complex provisions of U.S. Federal income tax law for which no clear precedent or authority may be available. In addition, the tax consequences to any particular investor holding shares of our common stock will depend on the investor’s particular tax circumstances. You are urged to consult your tax advisor regarding the U.S. Federal, state, local, and foreign income and other tax consequences to you in light of your particular investment or tax circumstances of acquiring, holding, exchanging, or otherwise disposing of shares of our common stock.

Taxation of VICI REIT

We intend to elect to be taxed as a REIT under Sections 856 through 860 of the Code commencing with our taxable year ending December 31, 2017, upon the filing of our U.S. Federal income tax return for such period.

 

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We believe that we are organized and operate in such a manner, and will continue to be organized and operate in such a manner as to qualify for taxation as a REIT under the applicable provisions of the Code.

In connection with this offering, we expect to receive an opinion of REIT Tax Counsel to the effect that commencing with our taxable year ending December 31, 2017, we are organized in conformity with the requirements for qualification and taxation as a REIT under the Code, and our proposed method of operation will enable us to meet the requirements for qualification and taxation as a REIT under the U.S. Federal income tax laws for our taxable year ending December 31, 2017 and subsequent taxable years. It must be emphasized that the opinion of REIT Tax Counsel will be based on various assumptions relating to our organization and operation, and is conditioned upon fact-based representations and covenants made by our management regarding our organization, assets, and income, and the present and future conduct of our business operations. While we intend to operate so that we will qualify to be taxed as a REIT, given the highly complex nature of the rules governing REITs, the ongoing importance of factual determinations, and the possibility of future changes in our circumstances, no assurance can be given that we will qualify to be taxed as a REIT for any particular year. The opinion is expressed as of the date issued. REIT Tax Counsel will have no obligation to advise us or our shareholders of any subsequent change in the matters stated, represented or assumed, or of any subsequent change in the applicable law. You should be aware that opinions of counsel are not binding on the IRS or the courts, and no assurance can be given that the IRS will not challenge the conclusions set forth in such opinion.

Our qualification and taxation as a REIT depends on our ability to meet on a continuing basis, through actual operating results, distribution levels, and diversity of share ownership, various qualification requirements imposed upon REITs by the Code, the compliance with which will not be reviewed by REIT Tax Counsel. Our ability to qualify to be taxed as a REIT also requires that we satisfy certain asset tests, some of which depend upon the fair market values of assets that we own directly or indirectly. Such fair market values may not be susceptible to a precise determination. Accordingly, no assurance can be given that the actual results of our operations for any taxable year will satisfy such requirements for qualification and taxation as a REIT.

Taxation of REITs in General

As indicated above, our qualification and taxation as a REIT depends upon our ability to meet, on a continuing basis, various qualification requirements imposed upon REITs by the Code. The material qualification requirements are summarized below under “—Requirements for Qualification—General.” While we intend to operate so that we qualify and continue to qualify to be taxed as a REIT, no assurance can be given that the IRS will not challenge our qualification, or that we will be able to operate in accordance with the REIT requirements in the future. See “—Failure to Qualify,” below.

Provided that we qualify to be taxed as a REIT, generally we will be entitled to a deduction for distributions that we pay and therefore will not be subject to U.S. Federal corporate income tax on our REIT taxable income that is currently distributed to our shareholders. This treatment substantially eliminates the “double taxation” at the corporate and shareholder levels that generally results from an investment in a “C corporation.” A C corporation is a corporation that generally is required to pay tax at the corporate level. Double taxation means taxation once at the corporate level when income is earned and once again at the shareholder level when the income is distributed. In general, the income that we generate (other than at any TRS of ours) is taxed only at the shareholder level upon a distribution to our shareholders.

Most U.S. shareholders (as defined below) that are individuals, trusts or estates are taxed on corporate dividends at a maximum U.S. Federal income tax rate of 20% (the same as long-term capital gains). With limited exceptions, however, distributions from us or from other entities that are taxed as REITs are generally not eligible for this rate and will continue to be taxed at rates applicable to ordinary income but non-corporate stockholders will generally be eligible for a deduction equal to 20% of such distributions. Currently, the highest marginal non-corporate U.S. Federal income tax rate (exclusive of any Medicare tax, if applicable) applicable to ordinary income is 37% (before application of the 20% deduction which results in an effective 29.6% tax rate). See “—Taxation of Shareholders—Taxation of Taxable U.S. Shareholders—Distributions” below.

 

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Any net operating losses, foreign tax credits and other tax attributes will be utilized at the corporate level and generally do not pass through to VICI REIT shareholders, subject to special rules for certain items such as the capital gains that we recognize. See “—Taxation of Shareholders—Taxation of Taxable U.S. Shareholders—Distributions” below.

If we qualify to be taxed as a REIT, we will nonetheless be subject to U.S. Federal tax in the following circumstances:

 

    We will be taxed at regular corporate rates on any undistributed taxable income, including undistributed net capital gains.

 

    We may be subject to the “alternative minimum tax” on our items of tax preference, under certain circumstances, including deductions of net operating losses.

 

    If we have net income from prohibited transactions, which are, in general, sales or other dispositions of inventory or property held primarily for sale to customers in the ordinary course of business, other than foreclosure property, such income will be subject to a 100% tax. See “—Prohibited Transactions” and “—Foreclosure Property” below.

 

    If we elect to treat property that we acquire in connection with certain leasehold terminations as “foreclosure property,” we may thereby avoid the 100% tax on gain from a resale of that property (if the sale would otherwise constitute a prohibited transaction), but the income from the sale or operation of the property may be subject to corporate income tax at the highest applicable rate (currently 21%).

 

    If we fail to satisfy the 75% gross income test and/or the 95% gross income test, as discussed below, but nonetheless maintain our qualification as a REIT because we satisfy other requirements, we will be subject to a 100% tax on an amount based on the magnitude of the failure, as adjusted to reflect the profit margin associated with our gross income.

 

    If we violate the asset tests (other than certain de minimis violations) or certain other requirements applicable to REITs, as described below, and yet maintain qualification as a REIT because there is reasonable cause for the failure and other applicable requirements are met, we may be subject to a penalty tax. In that case, the amount of the penalty tax will be at least $50,000 per failure, and, in the case of certain asset test failures, will be determined as the amount of net income generated by the nonqualifying assets in question multiplied by the highest corporate tax rate (currently 21%) if that amount exceeds $50,000 per failure.

 

    If we fail to distribute during each calendar year at least the sum of (i) 85% of our ordinary income for such year, (ii) 95% of our capital gain net income for such year and (iii) any undistributed net taxable income from prior periods, we will be subject to a nondeductible 4% excise tax on the excess of the required distribution over the sum of (a) the amounts that we actually distributed and (b) the amounts we retained and upon which we paid income tax at the corporate level.

 

    We may be required to pay monetary penalties to the IRS in certain circumstances, including if we fail to meet record-keeping requirements intended to monitor our compliance with rules relating to the composition of a REIT’s shareholders, as described below in “—Requirements for Qualification—General” below.

 

    A 100% tax may be imposed on certain transactions between us and a TRS that do not reflect arm’s-length terms.

 

   

If we acquire appreciated assets from a corporation that is not a REIT (i.e., a “C” corporation) in a transaction in which the adjusted tax basis of the assets in our hands is determined by reference to the adjusted tax basis of the assets in the hands of the C corporation, we may be subject to tax on such appreciation at the highest corporate income tax rate then applicable if we subsequently recognize gain on a disposition of any such assets during the five-year period following our acquisition from the C corporation. Treasury regulations exclude from the application of this built-in gains tax any gain from

 

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the sale of property we acquire in an exchange under Section 1031 (a like-kind exchange) or 1033 (an involuntary conversion) of the Code.

 

    The earnings of any TRS will be subject to U.S. Federal corporate income tax.

 

    We may elect to retain and pay income tax on our net capital gain. In that case, a shareholder would include its proportionate share of our undistributed net capital gain (to the extent we make a timely designation of such gain to the shareholder) in its income, would be deemed to have paid the tax that we paid on such gain, and would be allowed a credit for the shareholder’s proportionate share of the tax deemed to have been paid, and an adjustment would be made to increase the shareholder’s basis in shares of our common stock.

In addition, we and our subsidiaries may be subject to a variety of taxes, including payroll taxes and state, local, and foreign income, property, gross receipts and other taxes on our assets and operations. We could also be subject to tax in situations and on transactions not presently contemplated.

Requirements for Qualification—General

The Code defines a REIT as a corporation, trust or association:

 

  1.   that is managed by one or more trustees or directors;

 

  2.   the beneficial ownership of which is evidenced by transferable shares, or by transferable certificates of beneficial interest;

 

  3.   that would be taxable as a domestic corporation but for its election to be subject to tax as a REIT;

 

  4.   that is neither a financial institution nor an insurance company subject to specific provisions of the Code;

 

  5.   the beneficial ownership of which is held by 100 or more persons;

 

  6.   in which, during the last half of each taxable year, not more than 50% in value of the outstanding shares or other beneficial interest is owned, directly or indirectly, by five or fewer “individuals” (as defined in the Code to include certain entities such as qualified pension plans);

 

  7.   that makes an election to be taxed as a REIT, or has made such an election for a previous taxable year which has not been revoked or terminated;

 

  8.   that has no earnings and profits from any non-REIT taxable year at the close of any taxable year; and

 

  9.   that meets other tests described below, including with respect to the nature of its income and assets and the amounts of its distributions.

The Code provides that conditions (1) through (4) above must be met during the entire taxable year, and that condition (5) above must be met during at least 335 days of a taxable year of 12 months, or during a proportionate part of a shorter taxable year. Conditions (5) and (6) above need not be met during an entity’s initial tax year as a REIT (which, in our case, will be 2017). Our operating agreement provides restrictions regarding the ownership and transfers of our shares of beneficial interest, which are intended to assist us in satisfying the share ownership requirements described in conditions (5) and (6) above. These restrictions, however, may not ensure that we, in all cases, will be able to satisfy the share ownership requirements described in conditions (5) and (6) above. If we fail to satisfy these share ownership requirements, except as provided in the next two sentences, our status as a REIT will terminate. If, however, we comply with the rules contained in applicable Treasury regulations that require us to ascertain the actual ownership of our shares and we do not know, or would not have known through the exercise of reasonable diligence, that we failed to meet the requirements described in condition (6) above, we will be treated as having met this requirement: Moreover, if our failure to satisfy the share ownership requirements is due to reasonable cause and not willful neglect, we may retain our REIT qualification but will be required to pay a penalty of $50,000 for each such failure.

 

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To monitor compliance with the share ownership requirements, we generally are required to maintain records regarding the actual ownership of our shares of beneficial interest. To do so, we must demand written statements each year from the record holders of significant percentages of our common stock pursuant to which the record holders must disclose the actual owners of the shares (i.e., the persons required to include our distributions in their gross income). We must maintain a list of those persons failing or refusing to comply with this demand as part of our records. We could be subject to monetary penalties if we fail to comply with these record-keeping requirements. If you fail or refuse to comply with the demands, you will be required by Treasury regulations to submit a statement with your tax return disclosing your actual ownership of our common stock and other information.

In addition, an entity generally may not elect to become a REIT unless its taxable year is the calendar year. We intend to adopt December 31 as our year-end and will thereby satisfy this requirement.

Effect of Subsidiary Entities

Ownership of Partnership Interests

If we are a partner in an entity that is treated as a partnership for U.S. Federal income tax purposes, Treasury regulations provide that we are deemed to own our proportionate share of the partnership’s assets, and to earn our proportionate share of the partnership’s income, for purposes of the asset and gross income tests applicable to REITs. Our proportionate share of a partnership’s assets and income is based on our capital interest in the partnership (except that for purposes of the 10% value test, described below, our proportionate share of the partnership’s assets is based on our proportionate interest in the equity and certain debt securities issued by the partnership). In addition, the assets and gross income of the partnership are deemed to retain the same character in our hands. Thus, our proportionate share of the assets and income of any of our subsidiary partnerships will be treated as our assets and items of income for purposes of applying the REIT requirements.

We have control of the Operating Partnership and its subsidiaries and intend to operate them in a manner consistent with the requirements for our qualification as a REIT. If we become a limited partner or non-managing member in any partnership or limited liability company and such entity takes or expects to take actions that could jeopardize our status as a REIT or require us to pay tax, we may be forced to dispose of our interest in such entity. In addition, it is possible that a partnership or limited liability company could take an action which could cause us to fail the gross income or asset test, and that we would not become aware of such action in time to dispose of our interest in the partnership or limited liability company or take otherwise corrective action on a timely basis. In that case, we could fail to qualify to be taxed as a REIT unless we were entitled to relief, as described below.

Disregarded Subsidiaries

If we own a corporate subsidiary that is a “qualified REIT subsidiary,” that subsidiary is generally disregarded as a separate entity for U.S. Federal income tax purposes, and all of the subsidiary’s assets, liabilities and items of income, deduction and credit are treated as our assets, liabilities and items of income, deduction and credit, including for purposes of the gross income and asset tests applicable to REITs. A qualified REIT subsidiary is any corporation, other than a TRS (as described below), that is directly or indirectly wholly owned by a REIT. Other entities that are wholly owned by us or our subsidiaries, including single member limited liability companies that have not elected to be taxed as corporations for U.S. Federal income tax purposes, are also generally disregarded as separate entities for U.S. Federal income tax purposes, including for purposes of the REIT income and asset tests. Disregarded subsidiaries, along with any partnerships in which we hold an equity interest, are sometimes referred to herein as “pass-through subsidiaries.” The Operating Partnership is currently a disregarded entity for Federal income tax purposes.

In the event that a disregarded subsidiary of ours ceases to be wholly-owned—for example, if any equity interest in the subsidiary is acquired by a person other than us or another disregarded subsidiary of ours—the

 

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subsidiary’s separate existence would no longer be disregarded for U.S. Federal income tax purposes. Instead, the subsidiary would have multiple owners and would generally be treated as a either a partnership or a taxable corporation. Such an event could, depending on the circumstances, adversely affect our ability to satisfy the various asset and gross income requirements applicable to REITs, including the requirements that REITs generally may not own, directly or indirectly, more than 10% of the securities of another corporation. See “—Asset Tests” and “—Income Tests” below.

Taxable REIT Subsidiaries

In general, we may jointly elect with a subsidiary corporation, whether or not wholly-owned, to treat such subsidiary corporation as a TRS. We generally may not own more than 10% of the securities of a taxable corporation, as measured by voting power or value, and no more than 5% of the value of our assets can be represented by the securities of any single taxable corporation, in each case unless we and such corporation elect to treat such corporation as a TRS, provided that not more than 20% of the value of our total assets is represented by securities of one or more TRSs (25% for our 2017 taxable year). The separate existence of a TRS or other taxable corporation is not ignored for U.S. Federal income tax purposes. Accordingly, a TRS or other taxable subsidiary corporation generally is subject to corporate income tax on its earnings, which may reduce the cash flow that we and our subsidiaries generate in the aggregate and may reduce our ability to make distributions to VICI REIT shareholders.

We are not treated as holding the assets of a TRS or other taxable subsidiary corporation or as receiving any income that the subsidiary earns. Rather, the stock issued by a taxable subsidiary corporation to us is an asset in our hands, and we treat the distributions paid to us from such taxable subsidiary corporation, if any, as income. This treatment can affect our income and asset test calculations, as described below. Because we do not include the assets and income of TRSs or other taxable subsidiary corporations on a look-through basis in determining our compliance with the REIT requirements, we may use such entities to undertake indirectly activities that the REIT rules might otherwise preclude us from doing directly or through pass-through subsidiaries. For example, we may use TRSs or other taxable subsidiary corporations to perform services or conduct activities that give rise to certain categories of income or to conduct activities that, if conducted by us directly, would be treated in our hands as prohibited transactions.

U.S. Federal income tax law limits the deductibility of interest paid or accrued by a TRS to its parent REIT to assure that the TRS is subject to an appropriate level of corporate taxation. Further, the rules impose a 100% excise tax on certain transactions between a TRS and its parent REIT or the REIT’s tenants that are not conducted on an arm’s-length basis. We intend that all of our transactions with our TRSs, if any and as applicable, will be conducted on an arm’s-length basis.

Income Tests

In order to qualify to be taxed as a REIT, we must satisfy two gross income requirements on an annual basis. First, at least 75% of our gross income for each taxable year, excluding gross income from sales of inventory or dealer property in “prohibited transactions,” discharge of indebtedness, certain hedging transactions and certain foreign currency gains, generally must be derived from “rents from real property,” gains from the sale of real estate assets (other than publicly offered REIT debt instruments that would not be real estate assets but for the inclusion of publicly offered REIT debt instruments in the meaning of real estate assets), interest income derived from mortgage loans secured by real property or an interest in real property (including certain types of mortgage-backed securities and certain mortgage loans secured by both real and personal property), dividends received from other REITs, and specified income from temporary investments. Second, at least 95% of our gross income in each taxable year, excluding gross income from “prohibited transactions,” discharge of indebtedness, certain hedging transactions and certain foreign currency gains, must be derived from some combination of income that qualifies under the 75% gross income test described above, as well as other dividends, interest, and gain from the sale or disposition of stock or securities, which need not have any relation to real property. Income

 

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and gain from certain hedging transactions will be excluded from both the numerator and the denominator for purposes of both the 75% and 95% gross income tests.

Rents from Real Property

Rents we receive from a tenant generally will qualify as “rents from real property” for the purpose of satisfying the gross income requirements for a REIT described above only if all of the conditions described below are met:

 

    The amount of rent is not based in whole or in part on the income or profits of any person. However, an amount we receive or accrue generally will not be excluded from the term “rents from real property” solely because it is based on a fixed-percentage or percentages of gross receipts or sales;

 

    Neither we nor an actual or constructive owner of 10% or more of VICI REIT shares actually or constructively owns 10% or more of the interests in the assets or net profits of a non-corporate tenant, or, if the tenant is a corporation, 10% or more of the total combined voting power of all classes of stock entitled to vote or 10% or more of the total value of all classes of stock of the tenant. Rents we receive from such a tenant that is a TRS of ours, however, will not be excluded from the definition of “rents from real property” as a result of this condition if at least 90% of the space at the property to which the rents relate is leased to third parties, and the rents paid by the TRS are substantially comparable to rents paid by our other tenants for comparable space. Whether rents paid by a TRS are substantially comparable to rents paid by other tenants is determined at the time the lease with the TRS is entered into, extended, and modified, if such modification increases the rents due under such lease. Notwithstanding the foregoing, however, if a lease with a “controlled taxable REIT subsidiary” is modified and such modification results in an increase in the rents payable by such TRS, any such increase will not qualify as “rents from real property.” For purposes of this rule, a “controlled taxable REIT subsidiary” is a TRS in which the parent REIT owns stock possessing more than 50% of the voting power or more than 50% of the total value of the outstanding stock of such TRS;

 

    Rent attributable to personal property that is leased in connection with a lease of real property is not greater than 15% of the total rent received under the lease. If this condition is not met, then the portion of the rent attributable to personal property will not qualify as “rents from real property”; and

 

    We generally are not permitted to operate or manage our properties or to furnish or render services to our tenants, subject to a 1% de minimis exception and except as further provided below. We are permitted, however, to perform directly certain services that are “usually or customarily rendered” in connection with the rental of space for occupancy only and are not otherwise considered “rendered to the occupant” of the property. Examples of these permitted services include the provision of light, heat, or other utilities, trash removal and general maintenance of common areas. In addition, we are permitted to employ an independent contractor from whom we derive no revenue, or a TRS that is wholly or partially owned by us, to provide both customary and non-customary property management or services to our tenants without causing the rent that we receive from those tenants to fail to qualify as “rents from real property.” Any dividends that we receive from a TRS with respect to the TRS’s provision of non-customary services will, however, be nonqualifying income under the 75% gross income test.

We believe that all of our leases meet the above requirements so that rents we receive are “rents from real property.” We intend to structure future leases such that we are in compliance with the 75% and 95% gross income tests.

Interest Income

Interest income constitutes qualifying mortgage interest for purposes of the 75% gross income test (as described above) to the extent that the obligation upon which such interest is paid is secured by a mortgage on

 

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(i) real property or an interest in real property or (ii) property described in (i) and other property if such other property constitutes 15% or less of the total fair market value of the secured property. If we receive interest income with respect to a mortgage loan that is described in the preceding clause (ii), such interest income may need to be apportioned between the real property and the other collateral for purposes of the 75% gross income test. Even if a loan is not secured by real property, or is undersecured, the income that it generates may nonetheless qualify for purposes of the 95% gross income test. For these purposes, the term “interest” generally does not include any amount received or accrued, directly or indirectly, if the determination of all or some of the amount depends in any way on the income or profits of any person.

However, an amount received or accrued generally will not be excluded from the term “interest” solely by reason of being based on a fixed percentage or percentages of receipts or sales.

Dividend Income

We may directly or indirectly receive distributions from TRSs or other corporations that are not REITs or qualified REIT subsidiaries. These distributions generally are treated as dividend income to the extent of the earnings and profits of the distributing corporation. Such distributions will generally constitute qualifying income for purposes of the 95% gross income test, but not for purposes of the 75% gross income test. Any dividends that we receive from another REIT, however, will be qualifying income for purposes of both the 95% and 75% gross income tests.

Fee Income

Any fee income that we earn will generally not be qualifying income for purposes of either gross income test. Any fees earned by a TRS, however, will not be included for purposes of our gross income tests.

Hedging Transactions

Any income or gain that we or our pass-through subsidiaries derive from instruments that hedge certain risks, such as the risk of changes in interest rates, will be excluded from gross income for purposes of both the 75% and 95% gross income tests, provided that specified requirements are met, including the requirement that the instrument is entered into during the ordinary course of our business, the instrument hedges risks associated with indebtedness issued by us or our pass-through subsidiary that is incurred or to be incurred to acquire or carry “real estate assets” (as described below under “—Asset Tests,” below), and the instrument is properly identified as a hedge along with the risk that it hedges within prescribed time periods. Certain items of income or gain attributable to hedges of foreign currency fluctuations with respect to income that satisfies the REIT gross income requirements may also be excluded from the 95% and 75% gross income tests as well as certain items of income or gain attributable to certain counteracting hedges that offset prior qualifying hedges where the prior debt is repaid or qualifying assets underlying such prior hedges are sold. To the extent that we do not properly identify such transactions as hedges or we hedge with other types of financial instruments, the income from those transactions is not likely to be treated as qualifying income for purposes of the gross income tests. We intend to structure any hedging transactions in a manner that does not jeopardize our status as a REIT.

Failure to Satisfy the Gross Income Tests

If we fail to satisfy one or both of the 75% or 95% gross income tests for any taxable year, we may still qualify to be taxed as a REIT for such year if we are entitled to relief under applicable provisions of the Code. These relief provisions will be generally available if (i) our failure to meet these tests was due to reasonable cause and not due to willful neglect and (ii) following our identification of the failure to meet the 75% or 95% gross income test for any taxable year, we file a schedule with the IRS setting forth each item of our gross income for purposes of the 75% or 95% gross income test for such taxable year in accordance with Treasury regulations. It is not possible to state whether we would be entitled to the benefit of these relief provisions in all

 

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circumstances. If these relief provisions are inapplicable to a particular set of circumstances, we will not qualify to be taxed as a REIT. Even if these relief provisions apply, and we retain our status as a REIT, we will be required to pay a tax equal to (1) the greater of (A) the amount by which we fail to satisfy the 75% gross income test and (B) the amount by which we fail to satisfy the 95% gross income test, multiplied by (2) a fraction intended to reflect our profitability (i.e. ; generally our net income divided by our gross income). We may not always be able to comply with the gross income tests for REIT qualification despite periodic monitoring of our income.

Asset Tests

At the close of each calendar quarter, we must also satisfy certain tests relating to the nature of our assets. Specifically:

 

    At least 75% of the value of our total assets must be represented by some combination of “real estate assets,” cash, cash items, U.S. government securities, and, under some circumstances, stock or debt instruments purchased with new capital. For this purpose, real estate assets include interests in real property and stock of other REITs, as well as some kinds of mortgage-backed securities and mortgage loans. The term “real estate assets” also includes debt instruments of publicly offered REITs, personal property securing a mortgage secured by both real property and personal property if the fair market value of such personal property does not exceed 15% of the total fair market value of all such property, and personal property leased in connection with a lease of real property for which the rent attributable to personal property is not greater than 15% of the total rent received under the lease. Assets that do not qualify for purposes of the 75% asset test are subject to the additional asset tests described below;

 

    The value of any one issuer’s securities that we own may not exceed 5% of the value of our total assets;

 

    We may not own more than 10% of any one issuer’s outstanding securities, as measured by either voting power or value. The 5% and 10% asset tests do not apply to securities of TRSs or qualified REIT subsidiaries and the 10% asset test does not apply to “straight debt” having specified characteristics or to certain other securities described below. Solely for purposes of the 10% asset test, the determination of our interest in the assets of a partnership or limited liability company in which we own an interest will be based on our proportionate interest in any securities issued by the partnership or limited liability company, excluding for this purpose certain securities described in the Code;

 

    The aggregate value of all securities of TRSs that we hold, together with other non-qualified assets (such as furniture and equipment or other tangible personal property (to the extent such property does not constitute a “real estate asset”) or non-real estate securities), may not, in the aggregate, exceed 25% of the value of our total assets. For taxable years beginning after December 31, 2017, the aggregate value of all securities of TRSs that we hold may not exceed 20% of the value of our total assets; and

 

    Not more than 25% of the value of our total assets may be represented by debt instruments of publicly offered REITs to the extent those debt instruments would not be real estate assets but for the inclusion of debt instruments of publicly offered REITs in the meaning of real estate assets.

Notwithstanding the general rule, as noted above, that for purposes of the REIT income and asset tests we are treated as owning our proportionate share of the underlying assets of a subsidiary partnership, if we hold indebtedness issued by a partnership, the indebtedness will be subject to, and may cause a violation of, the asset tests unless the indebtedness is a qualifying mortgage asset or other conditions are met.

Similarly, although stock of another REIT is a qualifying asset for purposes of the REIT asset tests, any non-mortgage debt that is issued by another REIT may not so qualify (although such debt will not be treated as “securities” for purposes of the 10% asset test, as explained below).

Certain securities will not cause a violation of the 10% asset test (for purposes of value) described above. Such securities include instruments that constitute “straight debt,” which term generally excludes, among other

 

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things, securities having contingency features. A security does not qualify as “straight debt” where a REIT (or a controlled TRS of the REIT) owns other securities of the same issuer which do not qualify as straight debt, unless the value of those other securities constitute, in the aggregate, 1% or less of the total value of that issuer’s outstanding securities. In addition to straight debt, the Code provides that certain other securities will not violate the 10% value limitation. Such securities include (i) any loan made to an individual or an estate, (ii) certain rental agreements pursuant to which one or more payments are to be made in subsequent years (other than agreements between a REIT and certain persons related to the REIT under attribution rules), (iii) any obligation to pay rents from real property, (iv) securities issued by governmental entities that are not dependent in whole or in part on the profits of (or payments made by) a non-governmental entity, (v) any security (including debt securities) issued by another REIT and (vi) any debt instrument issued by a partnership if the partnership’s income is of a nature that it would satisfy the 75% gross income test described above under “—Income Tests.” In applying the 10% value limitation, a debt security issued by a partnership is not taken into account to the extent, if any, of the REIT’s proportionate interest in the equity and certain debt securities issued by that partnership.

No independent appraisals have been obtained to support our conclusions as to the value of our total assets or the value of any particular security or securities. Moreover, the values of some assets may not be susceptible to a precise determination, and values are subject to change in the future. Furthermore, the proper classification of an instrument as debt or equity for U.S. Federal income tax purposes may be uncertain in some circumstances, which could affect the application of the REIT asset requirements. Accordingly, there can be no assurance that the IRS will not contend that our interests in our subsidiaries or in the securities of other issuers will not cause a violation of the REIT asset tests.

Certain relief provisions are available to allow REITs to satisfy the asset requirements or to maintain REIT qualification, notwithstanding certain violations of the asset and other requirements. For example, if we should fail to satisfy the asset tests at the end of a calendar quarter, such a failure would not cause VICI REIT to lose its REIT qualification if (i) it satisfied the asset tests at the close of the preceding calendar quarter and (ii) the discrepancy between the value of its assets and the asset requirements was not wholly or partly caused by an acquisition of non-qualifying assets, but instead arose from changes in the relative market values of our assets. If the condition described in (ii) were not satisfied, VICI REIT still could avoid disqualification by eliminating any discrepancy within 30 days after the close of the calendar quarter in which it arose or by making use of the relief provisions described below.

In the case of de minimis violations of the 10% and 5% asset tests, a REIT may maintain its qualification despite a violation of such requirements if (i) the value of the assets causing the violation does not exceed the lesser of 1% of the REIT’s total assets and $10,000,000 and (ii) the REIT either disposes of the assets causing the failure within nine months after the last day of the quarter in which it identifies the failure or the period of time prescribed by Treasury regulations to be issued, or the relevant tests are otherwise satisfied within that time frame.

Even if we did not qualify for the foregoing relief provisions, one additional provision allows a REIT that fails one or more of the asset requirements to nevertheless maintain its REIT qualification if (i) the REIT provides the IRS with a description of each asset causing the failure, (ii) the failure is due to reasonable cause and not willful neglect, (iii) the REIT pays a tax equal to the greater of (a) $50,000 per failure and (b) the product of the net income generated by the assets that caused the failure multiplied by the highest applicable corporate tax rate (currently 21%) and (iv) the REIT either disposes of the assets causing the failure within nine months after the last day of the quarter in which it identifies the failure or the period of time prescribed by Treasury regulations to be issued, or otherwise satisfies the relevant asset tests within that time frame.

 

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Annual Distribution Requirements

In order to qualify to be taxed as a REIT, we are required to make distributions, other than capital gain dividends, to our shareholders in an amount at least equal to the sum of:

 

    90% of our REIT taxable income (with certain adjustments), computed without regard to our net capital gains and the deduction for dividends paid; and

 

    90% of our after-tax net income, if any, from foreclosure property (as described below); minus the excess of the sum of specified items of non-cash income over 5% of our REIT taxable income, computed without regard to our net capital gain and the deduction for dividends paid.

We generally must make these distributions in the taxable year to which they relate, or in the following taxable year if declared before we timely file our tax return for the year and if paid with or before the first regular distribution payment after such declaration. These distributions will be treated as received by VICI REIT shareholders in the year in which paid.

To the extent that we distribute at least 90%, but less than 100%, of our REIT taxable income, as adjusted, we will be subject to tax at ordinary corporate tax rates on the retained portion. We may elect to retain, rather than distribute, some or all of our net long-term capital gains and pay tax on such gains. In this case, we could elect for VICI REIT shareholders to include their proportionate shares of such undistributed long-term capital gains in income, and to receive a corresponding credit for their share of the tax that we paid. VICI REIT shareholders would then increase the adjusted basis of their shares by the difference between (i) the amounts of capital gain dividends that we designated and that they include in their taxable income, minus (ii) the tax that we paid on their behalf with respect to that income.

To the extent that we may have available net operating losses carried forward from prior tax years, such losses may reduce the amount of distributions that we must make in order to comply with the REIT distribution requirements. Such losses, however, will generally not affect the tax treatment to VICI REIT shareholders of any distributions that are actually made. See “—Taxation of Shareholders—Taxation of Taxable U.S. Shareholders—Distributions,” below.

If we fail to distribute during each calendar year at least the sum of (i) 85% of our ordinary income for such year, (ii) 95% of our capital gain net income for such year and (iii) any undistributed net taxable income from prior periods, we will be subject to a non-deductible 4% excise tax on the excess of such required distribution over the sum of (a) the amounts actually distributed, plus (b) the amounts of income we retained and on which we have paid corporate income tax.

From time to time, we may not have sufficient cash or other liquid assets to meet the distribution requirements described above, including due to timing differences between the actual receipt of income and actual payment of deductible expenses, and the inclusion of income and deduction of expenses in determining our taxable income. In addition, we may decide to retain our cash, rather than distribute it, in order to repay debt, acquire assets, or for other reasons. If these timing differences occur, we may borrow funds to pay distributions or we may pay distributions through the distribution of other property (including our common stock) in order to meet the distribution requirements, while preserving our cash.

If our taxable income for a particular year is subsequently determined to have been understated, we may be able to rectify a resultant failure to meet the distribution requirements for a year by paying “deficiency dividends” to shareholders in a later year, which may be included in our deduction for distributions paid for the earlier year but treated as an additional distribution to our shareholders in the year such dividends are paid. In this case, VICI REIT may be able to avoid losing REIT qualification or being taxed on amounts distributed as deficiency dividends, subject to the 4% excise tax described above. We will be required to pay interest based on the amount of any deduction taken for deficiency dividends.

 

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For purposes of the 90% distribution requirement and excise tax described above, any distribution that we declare in October, November or December of any year and that is payable to a shareholder of record on a specified date in any such month will be treated as both paid by us and received by the shareholder on December 31 of such year, provided that we actually pay the distribution before the end of January of the following calendar year.

Prohibited Transactions

Net income that we derive from a prohibited transaction is subject to a 100% tax. The term “prohibited transaction” generally includes a sale or other disposition of property (other than foreclosure property, as discussed below) that is held as inventory or primarily for sale to customers in the ordinary course of a trade or business. We intend to conduct our operations so that no asset that we own (or are treated as owning) will be treated as, or having been, held as inventory or for sale to customers, and that a sale of any such asset will not be treated as having been in the ordinary course of our business. Whether property is held as inventory or “primarily for sale to customers in the ordinary course of a trade or business” depends on the particular facts and circumstances. No assurance can be given that any property that we sell will not be treated as inventory or property held for sale to customers, or that we can comply with certain safe-harbor provisions of the Code that would prevent such treatment. The 100% tax does not apply to gains from the sale of property that is held through a TRS or other taxable corporation, although such income will be subject to tax in the hands of the corporation at regular corporate rates. We intend to structure our activities to avoid prohibited transaction characterization.

Like-Kind Exchanges

We may dispose of properties in transactions intended to qualify as like-kind exchanges under the Code. Such like-kind exchanges are intended to result in the deferral of gain for U.S. Federal income tax purposes. The failure of any transaction to qualify as a like-kind exchange could require us to pay U.S. Federal income tax, possibly including the 100% prohibited transaction tax, depending on the facts and circumstances surrounding such transactions.

Derivatives and Hedging Transactions

We may enter into hedging transactions with respect to interest rate exposure on one or more of our assets or liabilities. Any such hedging transactions could take a variety of forms, including the use of derivative instruments such as interest rate swap contracts, interest rate cap or floor contracts, futures or forward contracts, and options. Except to the extent provided by Treasury regulations, (i) income from a hedging transaction we enter into (A) in the normal course of our business primarily to manage risk of interest rate changes or currency fluctuations with respect to borrowings made or to be made, or ordinary obligations incurred or to be incurred, to acquire or carry real estate assets, including gain from the sale or disposition of a position in such a transaction or (B) primarily to manage risk of currency fluctuations with respect to any item of income or gain that would be qualifying income under the 75% or 95% income tests will not constitute gross income for purposes of the 75% or 95% gross income test; and (ii) if we enter into a position described in clause (i)(A) above with respect to indebtedness described therein or clause (i)(B) above with respect to property generating income described therein, and in connection with the extinguishment or disposition of such indebtedness or property we enter into a transaction that would be a hedging transaction within the meaning of clause (i) above as to any position referred to in this clause (ii) if such position were ordinary property, then any income from such a position or transaction described in this clause (ii) will not constitute gross income for purposes of the 75% or 95% gross income test so long as, in each of the foregoing clauses (i) and (ii), the transaction or position is clearly identified, as specified in Treasury regulations, before the close of the day on which it was acquired, originated, or entered into. To the extent that we enter into hedging transactions that are not described in the preceding clause (i) or (ii), the income from these transactions is likely to be treated as non-qualifying income for purposes of both the 75% and 95% gross income tests. Moreover, to the extent that a position in a hedging transaction has positive value at any

 

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particular point in time, it may be treated as an asset that does not qualify for purposes of the REIT asset tests. We intend to structure any hedging transactions in a manner that does not jeopardize our qualification as a REIT. We may conduct some or all of our hedging activities (including hedging activities relating to currency risk) through a TRS or other corporate entity, the income from which may be subject to U.S. Federal income tax, rather than by participating in the arrangements directly or through pass-through subsidiaries. No assurance can be given, however, that our hedging activities will not give rise to income or assets that do not qualify for purposes of the REIT tests, or that our hedging activities will not adversely affect our ability to satisfy the REIT qualification requirements.

Foreclosure Property

Foreclosure property is real property and any personal property incident to such real property (i) that we acquire as the result of having bid in the property at foreclosure, or having otherwise reduced the property to ownership or possession by agreement or process of law, after a default (or upon imminent default) on a lease of the property or a mortgage loan held by us and secured by the property, (ii) for which we acquired the related loan or lease at a time when default was not imminent or anticipated and (iii) with respect to which we made a proper election to treat the property as foreclosure property. We generally will be subject to tax at the maximum corporate rate (currently 21%) on any net income from foreclosure property, including any gain from the disposition of the foreclosure property, other than income that would otherwise be qualifying income for purposes of the 75% gross income test. Any gain from the sale of property for which a foreclosure property election has been made will not be subject to the 100% tax on gains from prohibited transactions described above, even if the property would otherwise constitute inventory or dealer property. We do not anticipate receiving any income from foreclosure property that does not qualify for purposes of the 75% gross income test.

Penalty Tax

Any redetermined rents, redetermined deductions, excess interest or redetermined TRS service income we generate will be subject to a 100% penalty tax. In general, redetermined rents are rents from real property that are overstated as a result of any services furnished to any of our tenants by a TRS, and redetermined deductions and excess interest represent any amounts that are deducted by a TRS for amounts paid to us that are in excess of the amounts that would have been deducted based on arm’s-length negotiations or if the interest payments were at a commercially reasonable rate. Rents that we receive will not constitute redetermined rents if they qualify for certain safe harbor provisions contained in the Code. Redetermined TRS service income generally represents income of a TRS that is understated as a result of services provided to us or on our behalf.

Record Keeping Requirements

We are required to comply with applicable record keeping requirements. Failure to comply could result in monetary penalties. For example, we must request on an annual basis information from our shareholders designed to disclose the actual ownership of our outstanding common shares.

Built-In Gains Tax

If we dispose of any asset we acquired from a corporation which is or has been a C corporation in a transaction in which our basis in the asset is determined by reference to the basis of the asset in the hands of that C corporation, during the five-year period beginning on the date we acquire the asset, we could be required to pay tax at the highest corporate rate on the gain, if any, we recognize on the disposition of the asset, to the extent that gain does not exceed the excess of (1) the fair market value of the asset over (2) our adjusted basis in the asset, in each case on the date we acquired the asset. Such gain is taken into account in determining our taxable income and capital gains, and the amount of tax paid is taken into account as a loss for purposes of the distribution requirements.

 

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Failure to Qualify

If we fail to satisfy one or more requirements for REIT qualification other than the income or asset tests, we could avoid disqualification as a REIT if our failure is due to reasonable cause and not to willful neglect and we pay a penalty of $50,000 for each such failure. Relief provisions are also available for failures of the income tests and asset tests, as described above in “—Income Tests” and “—Asset Tests.”

If we fail to qualify for taxation as a REIT in any taxable year, and the relief provisions described above do not apply, we would be subject to tax on our taxable income at regular corporate rates. We cannot deduct distributions to shareholders in any year in which we are not a REIT, nor would we be required to make distributions in such a year. In this situation, to the extent of current and accumulated earnings and profits (as determined for U.S. Federal income tax purposes), distributions to shareholders would be taxable as regular corporate dividends. Such dividends paid to U.S. shareholders that are individuals, trusts and estates may be taxable at the preferential income tax rates (i.e., the 20% maximum U.S. Federal rate) for qualified dividends. In addition, subject to the limitations of the Code, corporate distributees may be eligible for the dividends received deduction. Unless we are entitled to relief under specific statutory provisions, we would also be disqualified from re-electing to be taxed as a REIT for the four taxable years following the year during which we lost our qualification. It is not possible to state whether, in all circumstances, we would be entitled to this statutory relief.

Tax Aspects of Investments in Partnerships

General

In general, partnerships are “pass-through” entities that are not subject to U.S. Federal income tax. Rather, partners are allocated their proportionate shares of the items of income, gain, loss, deduction and credit of a partnership, and are subject to tax on these items without regard to whether the partners receive a distribution from the partnership. VICI REIT will include its allocable share of these partnership items for purposes of computing its REIT taxable income, and for purposes of the various REIT income tests, will include its proportionate share of these partnership items based on its capital interest in such partnership. Moreover, for purposes of the REIT asset tests, VICI REIT must include its proportionate share of assets held by subsidiary partnerships, based on its capital interest in such partnerships (other than for purposes of the 10% value test, for which the determination of its interest in partnership assets will be based on VICI REIT’s proportionate interest in any securities issued by the partnership excluding, for these purposes, certain excluded securities as described in the Code). Consequently, to the extent that VICI REIT holds an equity interest in a partnership, such partnership’s assets and operations may affect VICI REIT’s ability to continue to qualify as a REIT, even though it may have no control, or only limited influence, over any such partnership.

Entity Classification

The ownership by VICI REIT of equity interests in a partnership involves special tax considerations, including the possibility of a challenge by the IRS of the status of a subsidiary partnership as a partnership, as opposed to an association taxable as a corporation, for U.S. Federal income tax purposes. If a subsidiary partnership were treated as an association for U.S. Federal income tax purposes, it would be taxable as a corporation and, therefore, generally would be subject to an entity-level tax on its income. In such a situation, the character of VICI REIT’s assets and items of its gross income would change and would preclude it from satisfying the REIT asset tests (particularly the tests generally preventing a REIT from owning more than 10% of the voting securities, or more than 10% of the value of the securities, of any one corporation) or the gross income tests as discussed in “—Asset Tests” and “—Income Tests” above, and in turn would prevent VICI REIT from qualifying as a REIT. See “—Failure to Qualify,” above, for a discussion of the effect of VICI REIT’s failure to meet these tests for a taxable year.

In addition, any change in the status of a subsidiary partnership for tax purposes might be treated as a taxable event, in which case VICI REIT could have taxable income that is subject to the REIT distribution requirements without receiving any cash.

 

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Tax Allocations with Respect to an Investment in a Partnership

Under the Code and Treasury regulations promulgated thereunder, income, gain, loss and deduction attributable to appreciated or depreciated property that is contributed to a partnership in exchange for an interest in the partnership must be allocated for tax purposes in a manner such that the contributing partner is charged with, or benefits from, the unrealized gain or unrealized loss associated with the property at the time of the contribution. The amount of the unrealized gain or unrealized loss at the time of contribution is generally equal to the difference between the fair market value of the contributed property at the time of contribution, and the adjusted tax basis of such property at the time of contribution, or the book-tax difference. Such allocations are solely for U.S. Federal income tax purposes and do not affect the book capital accounts or other economic or legal arrangements among the partners.

Under Section 704(c) of the Code, income, gain, loss and deduction attributable to appreciated or depreciated property that is contributed to a partnership in exchange for an interest in the partnership or partnership property that has been revalued on the books of the partnership, must be allocated in a manner so that the contributing partners, or partners who held an interest in the partnership at the time of such revaluation, are charged with the unrealized gain or benefit from the unrealized loss associated with the property at the time of such contribution or revaluation. Any elections or other decisions relating to Operating Partnership allocations under Section 704(c) of the Code (including whether to use the “traditional method,” the “traditional method with curative allocations” or the “remedial method”) shall be made by the General Partner of the Operating Partnership, which is a wholly-owned subsidiary of VICI REIT.

Partnership Audit Rules

The recently enacted Bipartisan Budget Act of 2015 changes the rules applicable to U.S. Federal income tax audits of partnerships. Under the new rules (which are generally effective for taxable years beginning after December 31, 2017), among other changes and subject to certain exceptions, any audit adjustment to items of income, gain, loss, deduction, or credit of a partnership (and any partner’s distributive share thereof) is determined, and taxes, interest, or penalties attributable thereto are assessed and collected, at the partnership level. ‘Although it is uncertain how these new rules will be implemented, it is possible that they could result in partnerships in which we directly or indirect invest, including the Operating Partnership, being required to pay additional taxes, interest and penalties as a result of an audit adjustment, and we, as a direct or indirect partner of these partnerships, could be required to bear the economic burden of those taxes, interest, and penalties even though we, as a REIT, may not otherwise have been required to pay additional corporate-level taxes as a result of the related audit adjustment. The changes created by these new rules are sweeping and in many respects dependent on the promulgation of future regulations or other guidance by the Treasury. Investors are urged to consult their tax advisors with respect to these changes and their potential impact on their investment in our common stock.

Taxation of Shareholders

Taxation of Taxable U.S. Shareholders

The following is a summary of certain material U.S. Federal income tax consequences of the ownership and disposition of our common stock applicable to taxable U.S. shareholders. A U.S. shareholder is any holder of shares of our common stock that is, for U.S. Federal income tax purposes:

 

    an individual who is a citizen or resident of the United States;

 

    a corporation (or entity treated as a corporation) created or organized in the United States or under the laws of the United States, or of any state thereof, or the District of Columbia;

 

    an estate, the income of which is includible in gross income for U.S. Federal income tax purposes regardless of its source; or

 

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    a trust if (i) a U.S. court is able to exercise primary supervision over the administration of such trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (ii) the trust has a valid election in effect under applicable Treasury regulations to be treated as a U.S. person for U.S. Federal income tax purposes.

If a partnership, including for this purpose any entity that is treated as a partnership for U.S. Federal income tax purposes, holds shares of our common stock, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. An investor that is a partnership and the partners in such partnership should consult their tax advisors about the material U.S. Federal income tax consequences of the acquisition, ownership and disposition of shares of our common stock.

Distributions

So long as we qualify to be taxed as a REIT, the distributions that we make to our taxable U.S. shareholders out of current or accumulated earnings and profits (as determined for U.S. Federal income tax purposes) that we do not designate as capital gain dividends will generally be taken into account by such shareholders as ordinary income and will not be eligible for the dividends received deduction for corporations. With limited exceptions, our distributions are not eligible for taxation at the preferential income tax rates (i.e., the 20% maximum U.S. Federal income tax rate) for qualified dividends received by most U.S. shareholders that are individuals, trusts and estates from taxable C corporations but are generally eligible for a deduction equal to 20% of such distributions. This deduction applies for taxable years beginning January 1, 2018 and after and is scheduled to expire after 2025. Such shareholders, however, are taxed at the preferential rates on distributions designated by and received from REITs to the extent that the distributions are attributable to:

 

    income retained by the REIT in the prior taxable year on which the REIT was subject to corporate-level income tax (less the amount of corporate tax on such income);

 

    dividends received by the REIT from TRSs or other taxable C corporations; or

 

    income in the prior taxable year from the sales of “built-in gain” property acquired by the REIT from C corporations in carryover basis transactions (less the amount of corporate tax on such income).

Dividends that we designate as capital gain dividends will generally be taxed to our U.S. shareholders as long-term capital gains to the extent that such dividends do not exceed our actual net capital gain for the taxable year or our dividends paid for the taxable year, without regard to the period for which the shareholder that receives such dividend has held its shares. We may elect to retain and pay taxes on some or all of our net long-term capital gains, in which case we may elect to apply provisions of the Code that treat our U.S. shareholders as having received, solely for tax purposes, our undistributed capital gains, and the shareholders as receiving a corresponding credit for taxes that we paid on such undistributed capital gains. See “—Taxation of VICI REIT” and “—Annual Distribution Requirements.” U.S. shareholders may be required to treat up to 20% of some capital gain dividends as ordinary income. Long-term capital gains are generally taxable at maximum U.S. Federal rates of 20% in the case of U.S. shareholders that are individuals, trusts and estates (although depending on the characteristics of the assets that produced these gains and on designations that we may make, certain capital gain dividends may be taxed at a 25% rate), and 21% in the case of U.S. shareholders that are corporations.

Distributions in excess of our current and accumulated earnings and profits (as determined for U.S. Federal income tax purposes) will generally represent a return of capital and will not be taxable to a U.S. shareholder to the extent that the amount of such distributions does not exceed the adjusted basis of the U.S. shareholder’s shares in respect of which the distributions were made. Rather, the distribution will reduce the adjusted basis of the U.S. shareholder’s shares. To the extent that such distributions exceed the adjusted basis of a U.S. shareholder’s shares, the shareholder generally must include such distributions in income as long-term capital gain if the shares have been held for more than one year, or short-term capital gain if the shares have been held for one year or less. In addition, any distribution that we declare in October, November or December of any year

 

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and that is payable to a U.S. shareholder of record on a specified date in any such month will be treated as both paid by us and received by the U.S. shareholder on December 31 of such year, provided that we actually pay the distribution before the end of January of the following calendar year.

To the extent that we have available net operating losses and capital losses carried forward from prior tax years, such losses may reduce the amount of distributions that we must make in order to comply with the REIT distribution requirements. See “—Taxation of VICI REIT” and “—Annual Distribution Requirements.”

Such losses, however, are not passed through to U.S. shareholders and do not offset income of U.S. shareholders from other sources, nor would such losses affect the character of any distributions that we make, which are generally subject to tax in the hands of U.S. shareholders to the extent that we have current or accumulated earnings and profits (as determined for U.S. Federal income tax purposes).

Dispositions of our Common Stock

If a U.S. shareholder sells or disposes of shares of our common stock, it will generally recognize gain or loss for U.S. Federal income tax purposes in an amount equal to the difference between the amount of cash and the fair market value of any property received on the sale or other disposition, and the shareholder’s adjusted tax basis in the shares (generally the amount paid for such shares). In general, capital gains recognized by individuals, trusts and estates upon the sale or disposition of shares of our common stock will be subject to a maximum U.S. Federal income tax rate of 20% if the shares are held for more than one year, and will be taxed at ordinary income rates (of up to 37%) if the shares are held for one year or less. Gains recognized by U.S. shareholders that are corporations are subject to U.S. Federal income tax at a maximum rate of 21%, whether or not such gains are classified as long-term capital gains. Capital losses recognized by a U.S. shareholder upon the disposition of shares of our common stock that were held for more than one year at the time of disposition will be considered long-term capital losses, and are generally available only to offset capital gain income of the U.S. shareholder but not ordinary income (except in the case of individuals, trusts and estates who may also offset up to $3,000 of ordinary income each year). In addition, any loss upon a sale or exchange of shares of our common stock by a U.S. shareholder who has held the shares for nine months or less, after applying holding period rules, will be treated as a long-term capital loss to the extent of actual or deemed distributions that we make that are required to be treated by the shareholder as long-term capital gain.

If an investor recognizes a loss upon a subsequent disposition of shares of our common stock or other securities in an amount that exceeds a prescribed threshold, it is possible that the provisions of Treasury regulations involving “reportable transactions” could apply, with a resulting requirement to separately disclose the loss-generating transaction to the IRS. These regulations, though directed towards “tax shelters,” are broadly written and apply to transactions that would not typically be considered tax shelters. The Code imposes significant penalties for failure to comply with these requirements. You should consult your tax advisor concerning any possible disclosure obligation with respect to the receipt or disposition of shares of our common stock or securities or transactions that we might undertake directly or indirectly. Moreover, you should be aware that we and other participants in the transactions in which we are involved (including their advisors) might be subject to disclosure or other requirements pursuant to these regulations.

Passive Activity Losses and Investment Interest Limitations

Distributions that we make and gains arising from the sale or exchange by a U.S. shareholder of our common stock will not be treated as passive activity income. As a result, shareholder will not be able to apply any “passive losses” against income or gain relating to our common stock. A U.S. shareholder may elect to treat capital gain dividends, capital gains from the disposition of our capital shares and income designated as qualified dividend income, as described above, as investment income for purposes of computing the investment interest limitation, but in such case, the shareholder will be taxed at ordinary income rates on such amount. To the extent that distributions we make do not constitute a return of capital, they will generally be treated as investment income for purposes of computing the investment interest limitation.

 

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Taxation of Non-U.S. Shareholders

The following is a summary of certain U.S. Federal income and estate tax consequences of the ownership and disposition of shares of our common stock applicable to non-U.S. shareholders. A “non-U.S. shareholder” is any holder of shares of our common stock other than a partnership or U.S. shareholder.

Ordinary Dividends

The portion of distributions received by non-U.S. shareholders that (i) is payable out of our current or accumulated earnings and profits, (ii) is not designated as capital gains, (iii) is not effectively connected with a U.S. trade or business of the non-U.S. shareholder (or if required by an applicable income tax treaty, the non-U.S. shareholder does not maintain a permanent establishment in the United States to which such distributions are attributable) and (iv) is not attributable to gains from the sales or exchanges of United States real property interests, as defined in Section 897 of the Code (“USRPIs”), will be subject to U.S. withholding tax at the rate of 30%, unless reduced or eliminated by treaty. Under certain treaties, however, lower withholding rates generally applicable to dividends do not apply to dividends from a REIT.

In general, non-U.S. shareholders will not be considered to be engaged. in a U.S. trade or business solely as a result of their ownership of shares of our common stock. In cases where the distribution income from a non-U.S. shareholder’s investment in our common stock is, or is treated as, effectively connected with the non-U.S. shareholder’s conduct of a U.S. trade or business (through a United States permanent establishment, where applicable), the non-U.S. shareholder generally will be subject to U.S. Federal income tax at graduated rates, in the same manner as U.S. shareholders are taxed with respect to such distributions. Such effectively connected income must generally be reported on a U.S. income tax return filed by or on behalf of the non-U.S. shareholder. The income, as adjusted for certain items, may also be subject to a branch profits tax at the rate of 30% (unless reduced or eliminated by treaty) in the case of a non-U.S. shareholder that is a corporation.

Except as otherwise provided below, we expect to withhold U.S. Federal income tax at the rate of 30% on any distributions made to a non-U.S. shareholder unless (i) a lower treaty rate applies and the non-U.S. shareholder provides us an IRS Form W-8BEN or W-8BEN-E (or applicable successor form) evidencing eligibility for that reduced treaty rate; or (ii) the non-U.S. shareholder provides us an IRS Form W-8ECI (or applicable successor form) with us claiming that the distribution is income effectively connected with the non-U.S. shareholder’s trade or business.

Non-Dividend Distributions

Unless shares of our common stock constitute a USRPI, distributions that we make which are not dividends out of our earnings and profits, not attributable to gain from the disposition of USRPIs and not in excess of the adjusted tax basis of the non-U.S. shareholder’s shares will not be subject to U.S. income tax. If we cannot determine at the time a distribution is made whether or not the distribution will exceed current and accumulated earnings and profits, the distribution will be subject to withholding at the rate applicable to dividends. For withholding purposes, because we generally cannot determine at the time we make a distribution whether the distribution will exceed our current and accumulated earnings and profits, we expect to treat all distributions as made out of our current or accumulated earnings and profits. The non-U.S. shareholder may seek a refund from the IRS of any amounts withheld if it is subsequently determined that the distribution was, in fact, in excess of our current and accumulated earnings and profits. To the extent that such distributions exceed the non-U.S. shareholder’s adjusted tax basis in such shares, the distributions will generally give rise to gain from the sale or exchange of such shares, the tax treatment of which is described below. However, recent legislation may cause such excess distributions to be treated as dividend income for certain non-U.S. shareholders.

 

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Capital Gain Dividends and Distributions Attributable to a Sale or Exchange of United States Real Property Interests

Under the Foreign Investment in Real Property Tax Act of 1980 (“FIRPTA”), a distribution that we make to a non-U.S. shareholder, to the extent attributable to gains from dispositions of USRPIs that we held directly or through pass-through subsidiaries, or USRPI capital gains, will, except as described below, be considered effectively connected with a U.S. trade or business of the non-U.S. shareholder and will be subject to U.S. income tax at the rates applicable to U.S. individuals or corporations, without regard to whether we designate the distribution as a capital gain dividend. See above under “—Ordinary Dividends” for a discussion of the consequences of income that is effectively connected with a U.S. trade or business. In addition, we will be required to withhold tax equal to 35% (20% to the extent provided in Treasury regulations) of the maximum amount that could have been designated as USRPI capital gain dividends. Distributions subject to FIRPTA may also be subject to a branch profits tax at the rate of 30% (unless reduced or eliminated by treaty) in the hands of a non-U.S. shareholder that is a corporation. A distribution is not attributable to USRPI capital gain if we held an interest in the underlying asset solely as a creditor. Dividends received by a non-U.S. shareholder that we properly designate as capital gain dividends and are attributable to dispositions of assets other than USRPIs generally are not subject to U.S. Federal income or withholding tax, unless (i) the investment in our common stock is effectively connected with the non-U.S. shareholder’s U.S. trade or business (through a United States permanent establishment where applicable), in which case the non-U.S. shareholder would be subject to the same treatment as U.S. shareholders with respect to such gain, except that a non-U.S. shareholder that is a corporation may also be subject to a branch profits tax at the rate of 30% (unless reduced or eliminated by treaty), or (ii) the non-U.S. shareholder is a nonresident alien individual who was present in the United States for 183 days or more during the taxable year and certain other conditions are met, in which case the non-U.S. shareholder will be subject to a 30% tax on his capital gains (reduced by certain capital losses). Substantially all of our assets will constitute USRPIs.

A capital gain dividend that would otherwise have been treated as a USRPI capital gain will not be so treated or be subject to FIRPTA, and generally will not be subject to the 35% withholding tax described above, and instead will be treated in the same manner as an ordinary dividend ; if the distribution is received (i) with respect to a class of shares that is regularly traded on an established securities market located in the United States and the recipient non-U.S. shareholder does not own more than 10% of that class of shares at any time during the year ending on the date on which the distribution is received; (ii) by certain non-U.S. publicly traded shareholders that meet certain record-keeping and other requirements (“qualified shareholders”) except to the extent owners of such qualified shareholders that are not also qualified shareholders own, actually or constructively, more than 10% of our capital shares; or (iii) by a “qualified foreign pension fund” (as defined in the Code) or any entity all of the interests of which are held by such a qualified foreign pension fund. We anticipate that our common stock will be “regularly traded” on an established securities exchange.

Retention of Net Capital Gains

Although the law is not clear on the matter, it appears that amounts we designate as retained net capital gains in respect of our common stock held by U.S. shareholders generally should be treated with respect to non-U.S. shareholders in the same manner as actual distributions of capital gain dividends. Under this approach, the non-U.S. shareholders may be able to offset as a credit against their U.S. Federal income tax liability their proportionate share of the tax paid by us on such retained net capital gains and to receive from the IRS a refund to the extent their proportionate share of such tax paid by us exceeds their actual U.S. Federal income tax liability. If we were to designate any portion of our net capital gain as retained net capital gain, non-U.S. shareholders should consult their tax advisors regarding the taxation of such retained net capital gain.

Dispositions of Our Common Stock

Unless shares of our common stock constitute USRPIs, a sale of the shares by a non-U.S. shareholder generally will not be subject to U.S. taxation under FIRPTA. Subject to certain exceptions discussed below,

 

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shares of our common stock will be treated as USRPIs if 50% or more of our assets throughout a prescribed testing period consist of interests in real property located within the United States, excluding, for this purpose, interests in real property solely in a capacity as a creditor. We believe that 50% or more of our assets consist, and will continue to consist, of USRPIs.

Even if the foregoing 50% test is met, however, shares of our common stock will not constitute a USRPI if we are a “domestically controlled qualified investment entity.” A domestically controlled qualified investment entity includes a REIT, less than 50% of value of which is held, directly or indirectly, by non-U.S. persons at all times during a specified testing period. No assurance can be given that we will be a domestically controlled qualified investment entity.

In the event that we are not a domestically controlled qualified investment entity, but shares of our common stock are “regularly traded,” as defined by applicable Treasury regulations, on an established securities market, a non-U.S. shareholder’s sale of shares of our common stock nonetheless also would not be subject to tax under FIRPTA as a sale of a USRPI, provided that the selling non-U.S. shareholder held 10% or less of our outstanding shares at all times during a prescribed testing period. We expect that our common stock will be regularly traded on an established securities market.

Even if none of the foregoing tests are met and shares of our common stock are not considered to be regularly traded on an established securities market, dispositions of our capital shares by qualified shareholders would still be exempt from FIRPTA, except to the extent owners of such qualified shareholders own, actually or constructively, more than 10% of our capital shares. Furthermore, dispositions of our capital shares by “qualified foreign pension funds” or entities all of the interests of which are held by “qualified foreign pension funds” are exempt from FIRPTA. Non-U.S. holders should consult their tax advisors regarding the application of these rules.

If gain on the sale of shares of our common stock were subject to taxation under FIRPTA, the non-U.S. shareholder would be required to file a U.S. Federal income tax return and would be subject to the same treatment as a U.S. shareholder with respect to such gain, subject to applicable alternative minimum tax and a special alternative minimum tax in the case of non-resident alien individuals. Moreover, in order to enforce the collection of the tax, the purchaser of the shares could be required to withhold 15% of the purchase price and remit such amount to the IRS.

Gain from the sale of shares of our common stock that would not otherwise be subject to FIRPTA will nonetheless be taxable in the United States to a non-U.S. shareholder in two cases: (i) if the non-U.S. shareholder’s investment in the shares is effectively connected with a U.S. trade ‘or business conducted by such non-U.S. shareholder (through a United States permanent establishment, where applicable), the non-U.S. shareholder will be subject to the same treatment as a U.S. shareholder with respect to such gain, except that a non-U.S. shareholder that is a corporation may also be subject to a branch profits tax at a rate of 30% (unless reduced or eliminated by treaty), or (ii) if the non-U.S. shareholder is a nonresident alien individual who was present in the United States for 183 days or more during the taxable year and certain other conditions are met, the nonresident alien individual will be subject to a 30% tax on the individual’s capital gain (reduced by certain capital losses). In addition, even if we are a domestically controlled qualified investment entity, upon disposition of shares of our common stock, a non-U.S. shareholder may be treated as having gain from the sale or exchange of a USRPI if the non-U.S. shareholder (a) disposes of shares of our common stock within a 30-day period preceding the ex-dividend date of a distribution, any portion of which, but for the disposition, would have been treated as gain from the sale or exchange of a USRPI and (b) acquires, or enters into a contract or option to acquire, other of shares of our common stock during the 61-day period beginning with the first day of the 30-day period described in clause (a). The preceding sentence shall not apply to a non-U.S. shareholder if the non-U.S. shareholder did not own more than 5% of the shares at any time during the one-year period ending on the date of the distribution described in clause (a) of the preceding sentence and the class of shares is “regularly traded,” as defined by applicable Treasury regulations, on an established securities market in the United States.

 

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Non-U.S. shareholders are urged to consult their tax advisors regarding the U.S. federal, state, local and foreign income and other tax consequences of owning shares of our common stock.

Taxation of Tax-Exempt Shareholders

Tax-exempt entities, including qualified employee pension and profit sharing trusts and individual retirement accounts, generally are exempt from U.S. Federal income taxation. However, they may be subject to taxation on their unrelated business taxable income (“UBTI”). While some investments in real estate may generate UBTI, the IRS has ruled that dividend distributions from a REIT to a tax-exempt entity do not constitute UBTI. Based on that ruling, and provided that a tax-exempt shareholder has not held shares of our common stock as “debt financed property” within the meaning of the Code (i.e., where the acquisition or holding of the property is financed through a borrowing by the tax-exempt shareholder), distributions that we make and income from the sale of the shares generally should not give rise to UBTI to a tax-exempt shareholder.

Tax-exempt shareholders that are social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts, and qualified group legal services plans exempt from U.S. Federal income taxation under sections 501(c)(7), (c)(9), (c)(17) and (c)(20) of the Code are subject to different UBTI rules, which generally require such shareholders to characterize distributions that we make as UBTI.

In certain circumstances, a pension trust that owns more than 10% of shares of our common stock could be required to treat a percentage of any distributions received from it as UBTI if we are a “pension-held REIT.” We will not be a pension-held REIT unless (i) we are required to “look through” one or more of our pension trust shareholders in order to satisfy the REIT “closely held” test and (ii) either (a) one pension trust owns more than 25% of the value of shares of our common stock or (b) one or more pension trusts, each individually holding more than 10% of the value of the shares, collectively own more than 50% of the value of the shares. Certain restrictions on ownership and transfer of our shares generally should prevent a tax-exempt entity from owning more than 10% of the value of our common stock and generally should prevent us from becoming a pension-held REIT.

Tax-exempt shareholders are urged to consult their tax advisors regarding the U.S. federal, state, local and foreign income and other tax consequences of owning our common stock.

Other Tax Considerations

Legislative or Other Actions Affecting REITs

The present U.S. Federal income tax treatment of REITs may be modified, possibly with retroactive effect, by legislative, judicial or administrative action at any time. The REIT rules are constantly under review by persons involved in the legislative process, the IRS and the Treasury which may result in statutory changes as well as revisions to regulations and interpretations. Recently enacted changes to the U.S. federal income tax laws could have an adverse impact on an investment in our common stock. For example, certain changes in law pursuant to the Tax Cuts and Jobs Act could reduce the relative competitive advantage of operating as a REIT as compared with operating as a C corporation, including by (i) reducing the rate of tax applicable to individuals and C corporations, which could reduce the relative attractiveness of the generally single level of taxation on REIT distributions, (ii) permitting immediate expensing of capital expenditures, which could likewise reduce the relative attractiveness of the REIT taxation regime, and (iii) limiting the deductibility of interest expense, which could increase the distribution requirement of REITs (though such limitations under the tax bills currently under consideration should not affect REITs).

Backup Withholding and Information Reporting

In general, VICI REIT is required to report to U.S. shareholders of our common stock and the IRS the amount of dividends paid during each calendar year and the amount of any tax withheld. Backup withholding

 

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may apply to dividends paid to a U.S. holder of shares of our common stock unless such holder (1) is a corporation or comes within other exempt categories and, when required, demonstrates this fact or (2) provides a taxpayer identification number or social security number, certifies under penalties of perjury that such number is correct and that such holder is not subject to backup withholding and otherwise complies with applicable requirements of the backup withholding rules. A U.S. holder of shares of our common stock that does not provide its correct taxpayer identification number or social security number may also be subject to penalties imposed by the IRS.

In general, VICI REIT is required to report annually to non-U.S. shareholders of shares of our common stock the IRS the amount of dividends paid to such non-U.S. shareholders and the tax withheld with respect to such dividends, regardless of whether withholding was required. Copies of the information returns reporting such dividends and withholding may also be made available to the tax authorities in the country in which the non-U.S. holder of shares of our common stock resides under the provisions of an applicable income tax treaty. A non-U.S. holder of shares of our common stock may be subject to backup withholding unless applicable certification requirements are met.

Payment of the proceeds from a sale of our common stock within the United States is subject to both backup withholding and information reporting requirements unless the beneficial owner certifies under penalties of perjury that it is a non-U.S. holder (and the payor does not have actual knowledge or reason to know that the beneficial owner is a United States person) or the holder otherwise establishes an exemption. Payment of the proceeds of a sale of our common stock conducted through certain United States related financial intermediaries is subject to information reporting requirements (but not backup withholding) unless the financial intermediary has documentary evidence in its records that the beneficial owner is a non-U.S. holder and specified conditions are met or an exemption is otherwise established.

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against the applicable holder’s U.S. Federal income tax liability, provided the required information is timely furnished to the IRS.

Foreign Account Tax Compliance Act

A U.S. Federal withholding tax of 30% generally will be imposed on certain payments made to a “foreign financial institution” (as specifically defined under the Foreign Account Tax Compliance Act rules) unless such institution enters into an agreement with the U.S. tax authorities to withhold certain payments and to collect and provide to the U.S. tax authorities Substantial information regarding U.S. account holders of such institution (which includes certain equity and debt holders of such institution, as well as certain account holders that are foreign entities with U.S. owners) or otherwise qualifies for an exemption from these rules. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing these withholding and reporting requirements may be subject to different rules. Under the Foreign Account Tax Compliance Act and administrative guidance, a U.S. Federal withholding tax of 30% generally also will be imposed on certain payments made to a non-financial foreign entity unless such entity provides the withholding agent with certification identifying certain of its direct and indirect U.S. owners. Under certain circumstances, a shareholder may be eligible for refunds or credits of such taxes. These withholding taxes are imposed on distributions paid with respect to our common stock, and on gross proceeds from the sale or other taxable disposition of shares of our common stock after December 31, 2018 by, foreign financial institutions or non-financial entities (including in their capacity as agents or custodians for beneficial owners of shares of our common stock) that fail to satisfy the above requirements. Shareholders should consult with their tax advisors regarding the possible implications of this legislation on their ownership and disposition of shares of our common stock.

 

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State, Local and Foreign Taxes

We and our subsidiaries and shareholders may be subject to state, local or foreign taxation in various jurisdictions, including those in which we or they transact business, own property or reside. Our state, local or foreign tax treatment and that of our shareholders may not conform to the U.S. Federal income tax treatment discussed above. Any foreign taxes that we incur do not pass through to shareholders as credit against their U.S. Federal income tax liability. Prospective investors should consult their tax advisors regarding the application and effect of state, local and foreign income and other tax laws applicable to an investment in our common stock.

 

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UNDERWRITING

Under the terms and subject to the conditions in an underwriting agreement dated the date of this prospectus, the underwriters named below, for whom Morgan Stanley & Co. LLC, Goldman Sachs & Co. LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated are acting as representatives, have severally agreed to purchase, and we have agreed to sell them, severally, the number of shares of our common stock indicated below:

 

Name

  

Number

of Shares

 

Morgan Stanley & Co. LLC

  

Goldman Sachs & Co. LLC

  

Merrill Lynch, Pierce, Fenner & Smith

                      Incorporated

  
  

 

 

 

Total:

  
  

 

 

 

The underwriters and the representatives are collectively referred to as the “underwriters” and the “representatives,” respectively. The underwriters are offering the shares of our common stock subject to their acceptance of the shares from us and subject to prior sale. The underwriting agreement provides that the obligations of the several underwriters to pay for and accept delivery of the shares of our common stock offered by this prospectus are subject to the approval of certain legal matters by their counsel and to certain other conditions. The underwriters are obligated to take and pay for all of the shares of our common stock offered by this prospectus if any such shares are taken. However, the underwriters are not required to take or pay for the shares covered by the underwriters’ overallotment option described below.

The underwriters initially propose to offer part of the shares of our common stock directly to the public at the offering price listed on the cover page of this prospectus and part to certain dealers at a price that represents a concession not in excess of $            per share under the public offering price. After the initial offering of the shares of our common stock, the offering price and other selling terms may from time to time be varied by the representatives.

We have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to            additional shares of our common stock at the public offering price listed on the cover page of this prospectus, less underwriting discounts and commissions. The underwriters may exercise this option solely for the purpose of covering over allotments, if any, made in connection with the offering of the shares of our common stock offered by this prospectus. To the extent the option is exercised, each underwriter will become obligated, subject to certain conditions, to purchase about the same percentage of the additional shares of our common stock as the number listed next to the underwriter’s name in the preceding table bears to the total number of shares of our common stock listed next to the names of all underwriters in the preceding table.

The following table shows the per share and total initial public offering price, underwriting discounts and commissions to be paid by us and proceeds, before expenses, to us. These amounts are shown assuming both no exercise and full exercise of the underwriters’ overallotment option.

 

            Total  
     Per
Share
     No Exercise      Full Exercise  

Initial public offering price

   $                       $                       $                   

Underwriting discounts and commissions to be paid by us

   $      $      $  

Proceeds, before expenses, to us

   $      $      $  

The estimated offering expenses payable by us, exclusive of the underwriting discounts and commissions, are approximately $            . We have agreed to reimburse the underwriters for expense relating to clearance of this offering with the Financial Industry Regulatory Authority up to $            .

 

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Our common stock is quoted on the OTC Market under the symbol “VICI”. In connection with this offering, we have applied to list our common stock on the NYSE under the ticker symbol “VICI”.

We and all of our directors and officers and certain of our stockholders have agreed that, without the prior written consent of Morgan Stanley & Co. LLC on behalf of the underwriters, we and they will not, during the period ending 180 days after the date of this prospectus (the “restricted period”):

 

    offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, any shares of our common stock or any securities convertible into or exercisable or exchangeable for shares of our common stock;

 

    file any registration statement with the SEC relating to the offering of any shares of our common stock or any securities convertible into or exercisable or exchangeable for common stock; or

 

    enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the common stock.

whether any such transaction described above is to be settled by delivery of common stock or such other securities, in cash or otherwise. In addition, we and each such person agrees that, without the prior written consent of the representatives on behalf of the underwriters, we or such other person will not, during the restricted period, make any demand for, or exercise any right with respect to, the registration of any shares of our common stock or any security convertible into or exercisable or exchangeable for common stock.

The restrictions described in the immediately preceding paragraph to do not apply to:

 

    the sale of shares of our common stock to the underwriters;

 

    the issuance by the Company of shares of our common stock upon the exercise of an option or a warrant or the conversion of a security outstanding on the date of this prospectus of which the underwriters have been advised in writing;

 

    transactions by any person other than us relating to shares of our common stock or other securities acquired in open market transactions after the completion of the offering of the shares; provided that no filing under Section 16(a) of the Exchange Act is required or voluntarily made in connection with subsequent sales of the common stock or other securities acquired in such open market transactions; or

 

    the establishment of a trading plan pursuant to Rule 10b5-1 under the Exchange Act for the transfer of shares of our common stock, provided that (i) such plan does not provide for the transfer of common stock during the restricted period and (ii) to the extent a public announcement or filing under the Exchange Act, if any, is required or voluntarily made regarding the establishment of such plan, such announcement or filing shall include a statement to the effect that no transfer of common stock may be made under such plan during the restricted period.

The representatives, in their sole discretion, may release the common stock and other securities subject to the lock-up agreements described above in whole or in part at any time.

In order to facilitate the offering of the common stock, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the common stock. Specifically, the underwriters may sell more shares than they are obligated to purchase under the underwriting agreement, creating a short position. A short sale is covered if the short position is no greater than the number of shares available for purchase by the underwriters under the overallotment option. The underwriters can close out a covered short sale by exercising the overallotment option or purchasing shares in the open market. In determining the source of shares to close out a covered short sale, the underwriters will consider, among other things, the open market price of shares compared to the price available under the overallotment option. The underwriters may also sell shares in excess of the overallotment option, creating a naked short position. The underwriters must close out any naked short

 

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position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market after pricing that could adversely affect investors who purchase in this offering. As an additional means of facilitating this offering, the underwriters may bid for, and purchase, shares of our common stock in the open market to stabilize the price of the common stock. These activities may raise or maintain the market price of the common stock above independent market levels or prevent or retard a decline in the market price of the common stock. The underwriters are not required to engage in these activities and may end any of these activities at any time.

We and the underwriters have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act.

A prospectus in electronic format may be made available on websites maintained by one or more underwriters, or selling group members, if any, participating in this offering. The representatives may agree to allocate a number of shares of our common stock to underwriters for sale to their online brokerage account holders. Internet distributions will be allocated by the representatives to underwriters that may make Internet distributions on the same basis as other allocations.

Other Relationships

The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. Certain of the underwriters and their respective affiliates have, from time to time, performed, and may in the future perform, various financial advisory and investment banking services for us, for which they received or will receive customary fees and expenses.

Certain of the underwriters and/or their respective affiliates own a portion of the Second Lien Notes for their own account and/or for the accounts of customers, and therefore will receive a portion of the net proceeds of this offering. In addition, certain of the underwriters and/or their respective affiliates, including Morgan Stanley & Co. LLC, Goldman Sachs & Co. LLC and Merrill Lynch, Pierce, Fenner & Smith Incorporated, are acting as agents, arrangers and/or lenders under the Term Loan B Facility and the Revolving Credit Facility, and therefore may receive an additional portion of the net proceeds of this offering.

In addition, in the ordinary course of their various business activities, the underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and instruments. Such investment and securities activities may involve our securities and instruments. The underwriters and their respective affiliates may also make investment recommendations or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long or short positions in such securities and instruments.

Pricing of the Offering

Prior to this offering, there has been no limited over-the-counter trading. The initial public offering price was of our common stock in this offering was determined by negotiations between us and the representatives. Among the factors considered in determining the initial public offering price were our future prospects and those of our industry in general, our historical and pro forma revenue, earnings and certain other financial and operating information in recent periods, and the price-earnings ratios, price-sales ratios, market prices of securities, and certain financial and operating information of companies engaged in activities similar to ours.

 

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Directed Share Program

At our request, the underwriters have reserved up to five percent of the shares of our common stock offered by this prospectus for sale, at the initial public offering price, to certain of our directors, officers, employees, business associates and related persons. If purchased by these persons, these shares will be subject to a 180-day lock-up restriction described above. The number of shares of our common stock available for sale to the general public will be reduced to the extent these individuals purchase such reserved shares. Any reserved shares that are not so purchased will be offered by the underwriters to the general public on the same basis as the other shares offered by this prospectus.

Selling Restrictions

European Economic Area

This prospectus is not a prospectus for the purposes of the Prospectus Directive (defined below). In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”) an offer to the public of any shares of our common stock may not be made in that Relevant Member State, except that an offer to the public in that Relevant Member State of any shares of our common stock may be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State:

 

  (a)   to any legal entity which is a qualified investor as defined in the Prospectus Directive;

 

  (b)   to fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive), subject to obtaining the prior consent of the representatives for any such offer; or

 

  (c)   in any other circumstances falling within Article 3(2) of the Prospectus Directive,

provided that no such offer of shares of our common stock shall result in a requirement for the publication by us or any underwriter of a prospectus pursuant to Article 3 of the Prospectus Directive.

For the purposes of this provision, the expression an “offer to the public” in relation to any shares of our common stock in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any shares of our common stock to be offered so as to enable an investor to decide to purchase or subscribe for any shares of our common stock, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State, the expression “Prospectus Directive” means Directive 2003/71/EC (and amendments thereto, including by Directive 2010/73/EU, and includes any relevant implementing measure in the Relevant Member State.

United Kingdom

Each underwriter has represented and agreed that:

 

  (a)   it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (“FSMA”) received by it in connection with the issue or sale of the shares of our common stock in circumstances in which Section 21(1) of the FSMA does not apply to us; and

 

  (b)   it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the shares of our common stock in, from or otherwise involving the United Kingdom.

Canada

The shares of our common stock may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or

 

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subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations . Any resale of the shares of our common stock must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.

Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.

 

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LEGAL MATTERS

Certain legal matters relating to this offering will be passed upon for us by Kramer Levin Naftalis & Frankel LLP, New York, New York. The validity of our shares of common stock sold in this offering and certain other matters of Maryland law will be passed upon for us by Ballard Spahr LLP, Baltimore, Maryland. Kramer Levin Naftalis & Frankel LLP, New York, New York has also represented us with respect to tax and certain corporate matters. Certain legal matters in connection with this offering will be passed upon for the underwriters by Sidley Austin LLP, New York, New York.

EXPERTS

The combined financial statements of Caesars Entertainment Outdoor as of December 31, 2016 and 2015, and for each of the three years in the period ended December 31, 2016, included in this prospectus, have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing herein. Such financial statements are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.

The balance sheet of VICI Properties Inc. as of December 31, 2016, included in this prospectus, has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing herein. Such balance sheet is included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.

The combined statement of investments of real estate assets to be contributed to VICI Properties Inc. and financial statement schedule as of December 31, 2016, included in this prospectus, has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report appearing herein. Such combined statement of investments of real estate assets to be contributed to VICI Properties Inc. is included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We have filed a Registration Statement on Form S-11 with the SEC with respect to our shares of common stock described in this prospectus. This prospectus, which is a part of such Registration Statement, does not include all of the information that you can find in such Registration Statement or the exhibits and schedules to such Registration Statement. You should refer to the Registration Statement, including its exhibits and schedules, for further information about us and our shares. Statements contained in this prospectus as to the contents of any contract or document are not necessarily complete and, if the contract or document is filed as an exhibit to a registration statement, is qualified in all respects by reference to the relevant exhibit.

The historical audited and unaudited financial statements of Caesars Entertainment Corporation (which are not included or incorporated by reference in this prospectus), as the parent and guarantor of CEOC, our significant lessee, have been filed with the SEC. Caesars Entertainment Corporation files annual, quarterly and current reports and other information with the SEC.

 

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You may read and copy any document we file at the SEC’s public reference rooms in Washington, D.C. at 100 F Street, N.E., Washington, D.C. 20549 and at the SEC’s regional offices in New York at 233 Broadway, New York, New York 10279 and in Chicago at Citicorp Center, 500 W. Madison Street, Suite 1400, Chicago, Illinois 60661. Please call the SEC at 1-800-SEC-0330 for further information about the public reference rooms. Our and Caesars’ SEC filings are also available to the public from the SEC’s web site at www.sec.gov , and our SEC filings are available at our website at www.viciproperties.com . None of the information on, or accessible through, our website or any other website identified herein is incorporated into this prospectus, and does not constitute a part of this prospectus, and the inclusion of our website address in this prospectus is an inactive textual reference only. We make no representation as to the accuracy or completeness of the information regarding Caesars that is available through the SEC’s website or otherwise made available by Caesars or any third party, and none of such information is incorporated by reference in this prospectus.

 

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INDEX TO FINANCIAL STATEMENTS

 

     Page  

Caesars Entertainment Outdoor (Debtor-in-Possession)

  

Unaudited Combined Condensed Financial Statements as of September 30, 2017 and December 31, 2016 and for the Three and Nine Month Period Ended September 30, 2017 and 2016

  

Combined Condensed Balance Sheets

     F-2  

Combined Condensed Statements of Operations

     F-3  

Combined Condensed Statements of Equity

     F-4  

Combined Condensed Statements of Cash Flows

     F-5  

Notes to Combined Condensed Financial Statements

     F-6  

Audited Combined Financial Statements as of December 31, 2016 and 2015 and for Each of the Three Years in the Period Ended December 31, 2016

  

Report of Independent Registered Public Accounting Firm

     F-14  

Combined Balance Sheets

     F-16  

Combined Statements of Operations

     F-17  

Combined Statements of Equity

     F-18  

Combined Statements of Cash Flows

     F-19  

Notes to Combined Financial Statements

     F-20  

VICI Properties Inc.

  

Unaudited Balance Sheets as of September 30, 2017 and December 31, 2016

  

Balance Sheets

     F-33  

Notes to Balance Sheets

     F-34  

Audited Balance Sheet as of December 31, 2016

  

Report of Independent Registered Public Accounting Firm

     F-46  

Balance Sheet

     F-47  

Notes to Balance Sheet

     F-48  

Combined Statement of Investments of Real Estate Assets to be Contributed to VICI Properties Inc.

  

Unaudited Combined Statement of Investments of Real Estate Assets to be Contributed to VICI Properties Inc. as of September 30, 2017 and December 31, 2016

  

Combined Statement of Investments of Real Estate Assets to be Contributed to VICI Properties Inc.

     F-52  

Notes to Combined Statement of Investments of Real Estate Assets to be Contributed to VICI Properties Inc.

     F-53  

Audited Combined Statement of Investments of Real Estate Assets to be Contributed to VICI Properties Inc. as of December 31, 2016

  

Report of Independent Registered Public Accounting Firm

     F-56  

Combined Statement of Investments of Real Estate Assets to be Contributed to VICI Properties Inc.

     F-57  

Notes to Combined Statement of Investments of Real Estate Assets to be Contributed to VICI Properties Inc.

     F-58  

Properties to be Contributed to VICI Properties Inc. Schedule III—Real Estate and Accumulated Depreciation

  

Audited Schedule of Real Estate and Accumulated Depreciation as of December 31, 2016

  

Schedule of Real Estate Assets and Accumulated Depreciation

     F-61  

 

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CAESARS ENTERTAINMENT OUTDOOR

(DEBTOR-IN-POSSESSION)

COMBINED CONDENSED BALANCE SHEETS

(AMOUNTS IN THOUSANDS)

(UNAUDITED)

 

     September 30,
2017
     December 31,
2016
 

Assets

     

Current assets

     

Cash

   $ 84      $ 920  

Receivables, net

     206        77  

Inventories

     528        371  

Prepayments

     85        276  
  

 

 

    

 

 

 

Total current assets

     903        1,644  

Property and equipment, net

     88,347        88,831  
  

 

 

    

 

 

 

Total assets

   $ 89,250      $ 90,475  
  

 

 

    

 

 

 

Liabilities and Equity

     

Current liabilities

     

Accounts payable

   $ 194      $ 305  

Accrued expenses

     769        705  

Current portion of long-term debt

            14  
  

 

 

    

 

 

 

Total current liabilities

     963        1,024  

Deferred income taxes

     5,043        5,043  

Liabilities subject to compromise

     249        265  
  

 

 

    

 

 

 

Total liabilities

     6,255        6,332  

Commitments and contingencies (Note 8)

     

Equity

     

Net investment

     82,943        84,091  

Retained earnings

     52        52  
  

 

 

    

 

 

 

Total equity

     82,995        84,143  
  

 

 

    

 

 

 

Total liabilities and equity

   $ 89,250      $ 90,475  
  

 

 

    

 

 

 

 

See accompanying Notes to Combined Condensed Financial Statements.

 

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CAESARS ENTERTAINMENT OUTDOOR

(DEBTOR-IN-POSSESSION)

COMBINED CONDENSED STATEMENTS OF OPERATIONS

(AMOUNTS IN THOUSANDS)

(UNAUDITED)

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
         2017              2016         2017      2016  

Revenues

          

Golf ($2,892, $2,279, $5,562 and $5,131 attributable to related parties)

   $ 3,682      $ 3,631     $ 11,146      $ 10,901  

Food and beverage

     233        340       1,338        1,541  

Retail and other

     187        312       1,343        1,520  
  

 

 

    

 

 

   

 

 

    

 

 

 

Net revenues

     4,102        4,283       13,827        13,962  
  

 

 

    

 

 

   

 

 

    

 

 

 

Operating expenses

          

Direct

          

Golf

     1,461        1,484       5,088        5,294  

Food and beverage

     235        363       1,119        1,359  

Retail and other

     185        317       1,041        1,166  

Property costs

     1,127        883       2,836        2,341  

Depreciation

     801        776       2,402        2,227  

Administrative and other

     293        459       1,341        1,569  
  

 

 

    

 

 

   

 

 

    

 

 

 

Total operating expenses

     4,102        4,282       13,827        13,956  
  

 

 

    

 

 

   

 

 

    

 

 

 

Income from operations

            1              6  

Interest expense

            (1            (6
  

 

 

    

 

 

   

 

 

    

 

 

 

Income before taxes

                          

Income taxes

                          
  

 

 

    

 

 

   

 

 

    

 

 

 

Net income

   $      $     $      $  
  

 

 

    

 

 

   

 

 

    

 

 

 

See accompanying Notes to Combined Condensed Financial Statements.

 

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CAESARS ENTERTAINMENT OUTDOOR

(DEBTOR-IN-POSSESSION)

COMBINED CONDENSED STATEMENTS OF EQUITY

(AMOUNTS IN THOUSANDS)

(UNAUDITED)

 

     Net
Investment
    Retained
Earnings
     Total
Equity
 

Balance at December 31, 2015

   $ 85,323     $ 52      $ 85,375  

Net income

                   

Transactions with parent, net

     (1,070            (1,070
  

 

 

   

 

 

    

 

 

 

Balance at September 30, 2016

   $ 84,253     $ 52      $ 84,305  
  

 

 

   

 

 

    

 

 

 

Balance at December 31, 2016

   $ 84,091     $ 52      $ 84,143  

Net income

                   

Transactions with parent, net

     (1,148            (1,148
  

 

 

   

 

 

    

 

 

 

Balance at September 30, 2017

   $ 82,943     $ 52      $ 82,995  
  

 

 

   

 

 

    

 

 

 

 

 

See accompanying Notes to Combined Condensed Financial Statements.

 

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CAESARS ENTERTAINMENT OUTDOOR

(DEBTOR-IN-POSSESSION)

COMBINED CONDENSED STATEMENTS OF CASH FLOWS

(AMOUNTS IN THOUSANDS)

(UNAUDITED)

 

     Nine Months Ended
September 30,
 
     2017     2016  

Cash flows from operating activities

    

Net income

   $     $  

Adjustments to reconcile net income to cash flows provided by operating activities:

    

Depreciation

     2,402       2,227  

Provisions for bad debt

     11       31  

Change in current assets and liabilities:

    

Receivables

     (141     (26

Inventories

     (157     (9

Prepayments

     192       (32

Accounts payable

     (127     114  

Accrued expenses

     64       81  
  

 

 

   

 

 

 

Cash flows provided by operating activities

     2,244       2,386  
  

 

 

   

 

 

 

Cash flows from investing activities

    

Acquisitions of property and equipment, net of change in related payables

     (1,918     (793
  

 

 

   

 

 

 

Cash flows used in investing activities

     (1,918     (793
  

 

 

   

 

 

 

Cash flows from financing activities

    

Repayments for capital leases

     (14     (38

Transactions with parent, net

     (1,148     (1,070
  

 

 

   

 

 

 

Cash flows used in financing activities

     (1,162     (1,108
  

 

 

   

 

 

 

Net increase (decrease) in cash and cash equivalents

     (836     485  

Cash and cash equivalents, beginning of period

     920       351  
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 84     $ 836  
  

 

 

   

 

 

 

 

     Nine Months Ended
September 30,
 
         2017              2016      

Supplemental Cash Flow Information:

     

Cash paid for interest

   $      $ 6  

Cash paid for income taxes

             

 

See accompanying Notes to Combined Condensed Financial Statements.

 

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Table of Contents

CAESARS ENTERTAINMENT OUTDOOR

(DEBTOR-IN-POSSESSION)

NOTES TO COMBINED CONDENSED FINANCIAL STATEMENTS

(UNAUDITED)

In these notes, the words “Caesars Entertainment Outdoor,” “Business,” “Outdoor Business,” “we,” “our,” and “us” refer to the business and operation of the golf courses listed in Note 1 that are wholly-owned by Caesars Entertainment Operating Company, Inc.

“CEOC” refers to the Caesars Entertainment Operating Company, Inc. “CEC”, “Caesars” and “Caesars Entertainment” refer to Caesars Entertainment Corporation. On October 6, 2017 (the “Emergence Date”), CEOC merged with and into CEOC, LLC, a Delaware limited liability company (“New CEOC”) with New CEOC surviving the merger. See “Explanatory Note” in this prospectus.

We also refer to (i) our Combined Condensed Financial Statements as our “Financial Statements,” (ii) our Combined Condensed Statements of Operations as our “Statements of Operations,” and (iii) our Combined Condensed Balance Sheets as our “Balance Sheets.”

Note 1—Business and Basis of Presentation

Organization

Prior to the Emergence Date, the Outdoor Business was a wholly-owned business of CEOC, and included the operations of the Cascata golf course in Boulder City, Nevada, the Rio Secco golf course in Henderson, Nevada, the Grand Bear golf course in Biloxi, Mississippi, and the Chariot Run golf course in Elizabeth, Indiana. Caesars Entertainment Golf, Inc., Rio Development Company, Inc., Grand Casinos of Biloxi, LLC, and Riverboat Casino, LLC, directly owned these golf courses, respectively, and were debtor-in-possession subsidiaries of CEOC.

The golf courses generate revenue through fees charged for general golf course usage (including green fees, golf club rentals, and cart charges), annual or corporate memberships (at Rio Secco, Grand Bear and Chariot Run), a school of golf (at Rio Secco), and food, beverage, and merchandise sales.

Bankruptcy

On January 15, 2015, CEOC and certain of its subsidiaries (the “Caesars Debtors”) voluntarily filed for relief under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) with the United States Bankruptcy Court for the Northern District of Illinois (the “Bankruptcy Court”). As a result of this filing, CEOC operated as a debtor-in-possession under the Bankruptcy Code. Because each of the four golf courses were owned by Caesars Debtor entities, the Outdoor Business was also considered a debtor-in-possession prior to the Emergence Date. CEOC’s plan of reorganization (the “Plan”) was confirmed by the Bankruptcy Court on January 17, 2017.

On the Emergence Date, subsidiaries of CEOC transferred the ownership of the Business to VICI REIT. Following emergence, VICI REIT is a separate entity initially owned by certain former creditors of CEOC.

Basis of Presentation

The accompanying Interim Financial Statements have been prepared under the rules and regulations of the Securities and Exchange Commission applicable of interim periods, and therefore, do not include all information and footnotes necessary for complete financial statements in conformity with accounting principles generally accepted in the United States (“US GAAP”). The results for the interim periods reflect all adjustments (consisting of normal recurring adjustments) that management considers necessary for a fair presentation of statement of financial position, results of operations, and cash flows. The results of operations for our interim periods are not necessarily indicative of the results of operations that may be achieved for the entire 2017 fiscal year.

 

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CAESARS ENTERTAINMENT OUTDOOR

(DEBTOR-IN-POSSESSION)

NOTES TO COMBINED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

The Business’ Financial Statements were derived from the financial statements of CEOC, prepared on a “carve-out” basis, to present the financial position and results of operations of the Outdoor Business on a stand-alone basis. The legal entities that own the Grand Bear and the Chariot Run golf courses also include non-golf course operations that are excluded from these carve-out financial statements.

The Financial Statements include allocations of certain revenue amounts and general corporate expenses among affiliated entities. Such allocated revenue and expenses may not reflect the results we would have incurred if we had operated as a stand-alone company nor are they necessarily indicative of our future results.

Management believes the assumptions and methodologies used in the allocation of these revenues and expenses are reasonable.

Each of the golf courses represents a separate operating segment and we aggregate all such operations into one reportable segment.

The Business’ Financial Statements reflect the application of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 852, Reorganizations . This guidance requires that transactions and events directly associated with the reorganization be distinguished from the ongoing operations of the business. In addition, the guidance provides for changes in the accounting and presentation of liabilities.

Golf Revenue

Golf revenue from CEOC and Caesars’ affiliates includes reimbursement for below market-rate golf tee times and free play for certain casino guests. Included in golf revenue are market-rate fees received from public customers as well as discounted fees received from CEOC and Caesars-affiliated customers or associates. In addition, certain VIP casino guests play the golf courses for free. In these cases, the golf course receives amounts paid by CEOC and Caesars’ affiliates at an agreed upon rate for the free play provided to their VIP guests. The reimbursement for free play was approximately $150,000 and $91,000 for the three months ended September 30, 2017 and 2016, respectively, and $603,000 and $458,000 for the nine months ended September 30, 2017 and 2016, respectively.

There are additional variable golf fees provided by CEOC and Caesars’ affiliates based on revenue shortfalls necessary to cover the cost of operating the courses at a high level appropriate for casino guests. The variable fee is dependent upon the number of rounds played, the types of rounds played (market-rate or discounted rate), and costs incurred to allow the golf course to continue to offer golf as an amenity to gaming customers of CEOC and Caesars’ affiliates. Variable golf fees included in golf revenue were approximately $2,695,000 and $2,076,000 for the three months ended September 30, 2017 and 2016, respectively, and $4,570,000 and $4,068,000 for the nine months ended September 30, 2017 and 2016, respectively.

Subsequent Events

On the Emergence Date, subsidiaries of VICI Golf LLC, a subsidiary of the VICI REIT, entered into a golf course use agreement (the “Golf Course Use Agreement”) with New CEOC and Caesars Enterprise Services, LLC (“CES”) (collectively, the “users”), whereby the users were granted certain priority rights and privileges with respect to access and use of certain golf course properties. Payments under the Golf Course Use Agreement are comprised of a $10.0 million annual membership fee, use fees and minimum rounds fees. The annual membership fee, use fees and minimum round fees are subject to an annual escalator beginning at the times provided under the Golf Course Use Agreement.

 

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CAESARS ENTERTAINMENT OUTDOOR

(DEBTOR-IN-POSSESSION)

NOTES TO COMBINED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

The Business completed its subsequent events review through November 13, 2017, the date on which the Financial Statements were available to be issued, and noted no further items requiring disclosure.

Note 2—Recently Issued Accounting Pronouncements

The Financial Accounting Standards Board (the “FASB”) issued the following authoritative guidance amending the FASB Accounting Standards Codification.

Business Combinations—January 2017 : Updated amendments intend to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisition (or disposals) of assets or businesses. Amendments in this update provide a more robust framework to use in determining when a set of assets and activities is a business and to provide more consistency in applying the guidance, reduce the costs of application, and make the definition of a business more operable. The amendments are effective to annual periods beginning after December 15, 2017, including interim periods within those periods. Early adoption is allowed as follows: (1) Transactions for which acquisition date occurs before the issuance date or effective date of the amendments, only when the transaction has not been reported in financial statements that have been issued or made available for issuance and (2) transactions in which a subsidiary is deconsolidated or a group of assets is derecognized that occur before the issuance date or effective date of the amendments, only when the transaction has not been reported in financial statements that have been issued or made available for issuance. We are currently assessing the effect the adoption of this standard will have on our financial statements.

Financial Instruments-Credit Losses—June 2016 (amended January 2017) : Amended guidance that replaces the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of broader range of reasonable and supportable information to inform credit loss estimates. Amendments affect entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables and any other financial assets not excluded from the scope that have the contractual right to receive cash. Amendments are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. We are currently assessing the effect the adoption of this standard will have on our financial statements.

Leases—February 2016 (amended January 2017) : The amended guidance requires most lease obligations to be recognized as a right-of-use asset with a corresponding liability on the balance sheet. The guidance also requires additional qualitative and quantitative disclosures to assess the amount, timing, and uncertainty of cash flows arising from leases. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The guidance should be implemented for the earliest period presented using a modified retrospective approach, which includes optional practical expedients primarily focused on leases that commence before the effective date. The qualitative and quantitative effects of adoption are still being analyzed. We are in the process of evaluating the full impact the new guidance will have on our financial statements.

Revenue Recognition—May 2014 (amended January 2017) : This new guidance is intended to clarify the principles for recognizing revenue and to develop a common revenue standard for GAAP applicable to revenue transactions. Existing industry guidance will be eliminated. The FASB has recently issued several amendments to the standard, including clarification on accounting for and identifying performance obligations. This guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those reporting periods. The guidance should be applied using the full retrospective method or retrospectively with the cumulative effect initially applying the guidance recognized at the date of initial application. We anticipate

 

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CAESARS ENTERTAINMENT OUTDOOR

(DEBTOR-IN-POSSESSION)

NOTES TO COMBINED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

adopting this standard effective January 1, 2018. We have performed a preliminary assessment and anticipate this standard will not have a material effect on our financial statements.

Income Taxes—October 2016 : Amended guidance that addresses intra-entity transfers of assets other than inventory, which requires the recognition of any related income tax consequences when such transfers occur. The amendments should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. Amendments are effective for fiscal years beginning after December 15, 2017, and interim reporting periods within those years. Early adoption is permitted. We are assessing the effect the adoption of this standard will have on our financial statements.

Statement of Cash Flows—August 2016 : Amended guidance addresses eight specific cash flow issues with the objective of reducing diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments should be applied retrospectively to each period presented. The amendments are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. We are currently assessing the effect the adoption of this standard will have on our financial statements.

Note 3—Property and Equipment, Net

 

(In thousands)

   September 30,
2017
    December 31,
2016
 

Land and non-depreciable land improvements

   $ 35,525     $ 35,525  

Depreciable land improvements

     40,183       40,174  

Buildings and improvements

     35,153       35,133  

Furniture and equipment (including capital leases)

     4,833       5,445  

Construction in progress

     1,826        
  

 

 

   

 

 

 

Total property and equipment

     117,520       116,277  

Less: accumulated depreciation

     (29,173     (27,446
  

 

 

   

 

 

 

Total property and equipment, net

   $ 88,347     $ 88,831  
  

 

 

   

 

 

 

 

     Three Months
Ended
September 30,
     Nine Months
Ended
September 30,
 

(In thousands)

   2017      2016      2017      2016  

Depreciation expense (including capital lease amortization)

   $ 801      $ 776      $ 2,402      $ 2,227  
  

 

 

    

 

 

    

 

 

    

 

 

 

Note 4—Accrued Expenses

 

(In thousands)

   September 30,
2017
     December 31,
2016
 

Accrued utilities

   $ 197      $ 87  

Payroll and other compensation

     158        228  

Accrued real estate taxes and other taxes

     158        130  

Advance deposits

     117        112  

Accrued legal and professional fees

     80        23  

Deferred revenue

     51        125  

Advance deposits

     8         
  

 

 

    

 

 

 

Total accrued expenses

   $ 769      $ 705  
  

 

 

    

 

 

 

 

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CAESARS ENTERTAINMENT OUTDOOR

(DEBTOR-IN-POSSESSION)

NOTES TO COMBINED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

Note 5—Liabilities Subject to Compromise

On March 25, 2015, the Bankruptcy Court entered an order establishing May 26, 2015 as the bar date for potential general creditors to file proofs of claims and established the required procedures with respect to filing such claims. A bar date is the deadline by which creditors must file a proof of claim against the Caesars Debtors for the claim to be allowed. In addition, a bar date of July 14, 2015 was established as a deadline for claims from governmental units.

As of September 30, 2017, the Business had received 55 proofs of claim, a portion of which assert, in part or in whole, unliquidated claims. These proofs of claims include 9 claims that were carved out of the legal entities that own the Business and that have additional claims, which do not correspond to the Business. In addition, the Business has been assigned by the court an additional 13 claims. In the aggregate, total asserted liquidated proofs of claim for approximately $122.2 million had been filed against or assigned to the Business. Based on reasonable current estimates, the Business expects to ask the Bankruptcy Court to disallow 19 claims representing approximately $116.3 million of such claims. These claims are classified by the Business as amended and replaced, duplicate, redundant or non-Caesars Debtor claims.

As of September 30, 2017 and December 31, 2016, liabilities subject to compromise was approximately $249,000 and $265,000, respectively, and consisted of accounts payable-related liabilities.

On October 6, 2017, the Business settled claims included in liabilities subject to compromise for $125,000 recognizing a reorganization gain of $124,000. In addition, approximately $5.1 million of claims are still disputed and unresolved and have been transferred to New CEOC for final resolution.

Note 6—Income Taxes

Since Caesars Entertainment Outdoors does not have a formal tax sharing agreement in place with Caesars Entertainment for Federal income tax purposes, Caesars Entertainment pays all of Caesars Entertainment Outdoors’ Federal income taxes.

As there was no pre-tax book income/loss recorded for the three and nine months ended September 30, 2017 and 2016, no income tax benefit/expense was recorded for those respective periods.

Note 7—Related Party Transactions

We had transactions with CEOC resulting in net distributions of approximately $1,148,000 and $1,070,000 for the nine months ended September 30, 2017 and 2016, respectively. The net distributions are the result of cash generated by the operations of the Business and proceeds from the sale of assets, partially offset by amounts contributed by CEOC to fund capital improvements and capital lease obligations. These transactions are included as transactions with parent, net in our Combined Statements of Equity.

 

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CAESARS ENTERTAINMENT OUTDOOR

(DEBTOR-IN-POSSESSION)

NOTES TO COMBINED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

Related Party Fees and Expenses

The following amounts are recorded with respect to the related-party transactions described in this section:

 

(In thousands)         Three Months
Ended
September 30,
     Nine Months
Ended
September 30,
 

Transaction type

  

Recorded as:

   2017      2016      2017      2016  

Insurance expense

   Administrative and other    $ 12      $ 8      $ 37      $ 30  

Allocation of indirect expenses from CEOC and Caesars’ affiliates (1)

   Administrative and other      36        58        210        235  

Golf revenue from CEOC and Caesars’ affiliates (2)

   Golf revenue      2,844        2,168        5,173        4,527  

Pass-through revenue with CEOC and Caesars’ affiliates (3)

   Golf revenue      48        111        389        604  
   Food and beverage revenue      12        14        107        56  
   Retail and other revenue      26        36        114        119  

 

(1) The Statements of Operations include allocated overhead costs for certain functions historically performed by CEOC and Caesars’ affiliates, including allocations of direct and indirect operating and maintenance costs and expenses for procurement, logistics and general and administrative costs and expenses related to executive oversight, marketing, information technology, accounting, treasury, tax, and legal. These costs were allocated on the basis of either revenue or payroll expense.
(2) See Business and Basis of Presentation—Golf Revenue
(3) Primarily includes transactions where CEOC and Caesars affiliates’ customers charge their golf, food and beverage and retail purchases directly to their hotel bill. Amounts collected from the customer by the hotel are remitted to the golf course.

Savings and Retirement Plans

CEOC maintains a defined contribution savings and retirement plan that allows certain employees of the Business to make pre-tax and after-tax contributions. Under the plan, participating employees may elect to contribute up to 50% of their eligible earnings, subject to IRS rules and regulations, and are eligible to receive a company match of up to $600. Participating employees become vested in matching contributions on a pro-rata basis over five years of credited service. Our contribution expense, included in direct operating expenses and administrative and other expense, was approximately $1,000 and $5,000 for the three months ended September 30, 2017 and 2016, respectively, and $27,000 and $34,000 for the nine months ended September 30, 2017 and 2016, respectively.

Note 8—Litigation, Contractual Commitments and Contingent Liabilities

Litigation

The Business and its operations may be subject to litigation involving employment matters, personal injuries, and other matters that arise in the normal course of business. We do not expect the outcome of such ordinary and routine litigation to have a material effect on our combined financial position, results of operations, or cash flows.

Contingent Liabilities

In January 2015, a majority of the Trustees of the National Retirement Fund (“NRF”), a multi-employer defined benefit pension plan, voted to expel CEC and certain of its affiliates from the plan. The NRF has advised

 

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CAESARS ENTERTAINMENT OUTDOOR

(DEBTOR-IN-POSSESSION)

NOTES TO COMBINED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

CEC and Caesars Entertainment Resort Properties, LLC (“CERP”) that this expulsion triggered a withdrawal liability with a present value of approximately $360 million, payable in 80 quarterly payments of about $6 million. The NRF filed a similar claim against each Caesars Debtor in CEOC’s bankruptcy. Although the Business’ employees did not participate in this plan, because the entities that own the Business are a member of the Caesars Group (as defined below), such entities are jointly and severally liable with CEC and CEOC for any liability under the NRF’s claims.

On March 13, 2017, CEOC, CEC, CERP, the Caesars employers that contribute to the NRF, and the NRF and certain of its related parties entered into a settlement agreement resolving all issues related to the disputes with the NRF. Under the terms of the settlement, CEC, or a person on CEC’s behalf, was required to pay a total of $45 million to the NRF on the Emergence Date.

Under the Caesars Debtors’ Plan, the NRF is barred from asserting any claims against the Company and its subsidiaries to the extent such claims arose prior to the Emergence Date.

Operating Lease Commitments

The Business is liable under operating leases for land at the Cascata golf course, equipment and other miscellaneous assets, which expire at various dates through 2039. Total rental expense under these agreements included in direct golf operating expenses and property costs in our Statements of Operations were approximately $219,000 and $222,000 for the three months ended September 30, 2017 and 2016, respectively, and $645,000 and $766,000 for the nine months ended September 30, 2017 and 2016, respectively.

The future minimum lease commitments relating to the base lease rent portion of noncancelable operating leases at September 30, 2017 are as follows:

 

(In thousands)

   Operating
Leases
 

Remaining 2017

   $ 211  

2018

     873  

2019

     891  

2020

     908  

2021

     926  

2022 and thereafter

     20,234  
  

 

 

 

Total minimum rental commitments

   $ 24,043  
  

 

 

 

Other Commitments

The Business utilizes a third-party golf maintenance company for its Rio Secco and Cascata golf courses. The agreements are for five years and expire in February 2019 and include all labor and equipment necessary to maintain both golf course grounds. Total expenses under these agreements included in direct golf operating expenses in the Statements of Operations were approximately $600,000 and $589,000 for the three months ended September 30, 2017 and 2016, respectively, and $2,149,000 and $2,110,000 for the nine months ended September 30, 2017 and 2016, respectively.

 

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CAESARS ENTERTAINMENT OUTDOOR

(DEBTOR-IN-POSSESSION)

NOTES TO COMBINED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

The future commitments relating to these agreements at September 30, 2017 are as follows:

 

(In thousands)

   Maintenance
Agreement
 

Remaining 2017

   $ 775  

2018

     2,969  

2019

     225  
  

 

 

 

Total maintenance agreement commitments

   $ 3,969  
  

 

 

 

 

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Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of

Caesars Entertainment Operating Company, Inc.:

We have audited the accompanying combined balance sheets of Caesars Entertainment Outdoor (Debtor-in-Possession) (wholly-owned by Caesars Entertainment Operating Company, Inc. (“CEOC”)) (the “Business”), as of December 31, 2016 and 2015, and the related combined statements of operations, equity, and cash flows for each of the three years in the period ended December 31, 2016. These combined financial statements are the responsibility of the Business’s management. Our responsibility is to express an opinion on these combined financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States) and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free of material misstatement. The Business is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Business’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such combined financial statements present fairly, in all material respects, the financial position of the Business as of December 31, 2016 and 2015, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the combined financial statements, on January 15, 2015, CEOC and the entities that currently own the Business filed for reorganization under Chapter 11 of the United States Bankruptcy Code. The accompanying combined financial statements do not purport to reflect or provide for the consequences of the bankruptcy proceedings. In particular, such financial statements do not purport to show (1) as to assets, their realizable value on a liquidation basis or their availability to satisfy liabilities; (2) as to pre-petition liabilities, the settlement amounts for allowed claims, or the status and priority thereof; (3) as to equity accounts, the effect of any changes that may be made in the capitalization of the Business; or (4) as to operations, the effect of any changes that may be made in its business.

The accompanying combined financial statements have been prepared assuming the Business will continue as a going concern. As discussed in Note 1 to the combined financial statements, the bankruptcy filing referred to above constitutes an event of default under CEOC’s pre-petition debt obligations and those debt obligations became immediately due and payable. The entities that own the Business are guarantors of certain of CEOC’s debt and certain assets held by the Business are pledged as collateral. The Business’s ability to continue as a going concern is dependent upon CEOC and its affiliates’ ability to restructure its indebtedness and continue to fund the Business, the Business’s ability to emerge from bankruptcy, and a favorable resolution to the continued ability to use cash collateral. These matters raise substantial doubt about the Business’s ability to continue as a going concern. Management’s plans concerning these matters are discussed in Note I to the combined financial statements. The combined financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

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Table of Contents

The accompanying combined financial statements have been prepared from the separate records maintained by the Business and may not necessarily be indicative of the conditions that would have existed or the results of operations if the Business had been operated as an unaffiliated company. Portions of certain revenues and expenses represent allocations made from CEOC items applicable to CEOC as a whole.

/s/ Deloitte & Touche, LLP

Las Vegas, Nevada

February 14, 2017

 

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Table of Contents

CAESARS ENTERTAINMENT OUTDOOR

(DEBTOR-IN-POSSESSION)

COMBINED BALANCE SHEETS

(In thousands)

 

     As of December 31,  
     2016      2015  

Assets

     

Current assets

     

Cash

   $ 920      $ 351  

Receivables, net

     77        183  

Inventories

     371        442  

Prepayments

     276        54  

Other current assets

            12  
  

 

 

    

 

 

 

Total current assets

     1,644        1,042  

Property and equipment, net

     88,831        90,992  
  

 

 

    

 

 

 

Total assets

   $ 90,475      $ 92,034  
  

 

 

    

 

 

 

Liabilities and Equity

     

Current liabilities

     

Accounts payable

   $ 305      $ 342  

Accrued expenses

     705        831  

Current portion of long-term debt

     14        51  
  

 

 

    

 

 

 

Total current liabilities

     1,024        1,224  

Long-term debt

            14  

Deferred income taxes

     5,043        5,154  

Liabilities subject to compromise

     265        267  
  

 

 

    

 

 

 

Total liabilities

     6,332        6,659  

Commitments and contingencies (Note 9)

     

Equity

     

Net investment

     84,091        85,323  

Retained earnings

     52        52  
  

 

 

    

 

 

 

Total equity

     84,143        85,375  
  

 

 

    

 

 

 

Total liabilities and equity

   $ 90,475      $ 92,034  
  

 

 

    

 

 

 

See accompanying Notes to Combined Financial Statements.

 

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CAESARS ENTERTAINMENT OUTDOOR

(DEBTOR-IN-POSSESSION)

COMBINED STATEMENTS OF OPERATIONS

(In thousands)

 

     Years Ended December 31,  
     2016     2015     2014  

Revenues

      

Golf ($6,353, $5,146 and $5,139 attributable to related parties)

   $ 14,558     $ 14,071     $ 14,489  

Food and beverage

     2,150       2,150       2,338  

Retail and other

     2,077       1,856       2,081  
  

 

 

   

 

 

   

 

 

 

Net revenues

     18,785       18,077       18,908  
  

 

 

   

 

 

   

 

 

 

Operating expenses

      

Direct

      

Golf

     7,082       6,767       7,194  

Food and beverage

     1,828       1,936       2,087  

Retail and other

     1,691       1,581       1,655  

Property costs

     3,138       3,133       3,131  

Depreciation

     3,030       2,882       2,904  

Administrative and other

     2,009       1,760       1,898  
  

 

 

   

 

 

   

 

 

 

Total operating expenses

     18,778       18,059       18,869  
  

 

 

   

 

 

   

 

 

 

Income from operations

     7       18       39  

Interest expense

     (7     (18     (39
  

 

 

   

 

 

   

 

 

 

Income before taxes

                  

Income tax benefit

           3       4  
  

 

 

   

 

 

   

 

 

 

Net income

   $     $ 3     $ 4  
  

 

 

   

 

 

   

 

 

 

See accompanying Notes to Combined Financial Statements.

 

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CAESARS ENTERTAINMENT OUTDOOR

(DEBTOR-IN-POSSESSION)

COMBINED STATEMENTS OF EQUITY

(In thousands)

 

     Net
Investment
    Retained
Earnings
     Total
Equity
 

Balance at January 1, 2014

   $ 90,046     $ 45      $ 90,091  

Net income

           4        4  

Transactions with parent, net

     (2,742            (2,742
  

 

 

   

 

 

    

 

 

 

Balance at December 31, 2014

   $ 87,304     $ 49      $ 87,353  

Net income

           3        3  

Transactions with parent, net

     (1,981            (1,981
  

 

 

   

 

 

    

 

 

 

Balance at December 31, 2015

   $ 85,323     $ 52      $ 85,375  

Net income

                   

Transactions with parent, net

     (1,232            (1,232
  

 

 

   

 

 

    

 

 

 

Balance at December 31, 2016

   $ 84,091     $ 52      $ 84,143  
  

 

 

   

 

 

    

 

 

 

See accompanying Notes to Combined Financial Statements.

 

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CAESARS ENTERTAINMENT OUTDOOR

(DEBTOR-IN-POSSESSION)

COMBINED STATEMENTS OF CASH FLOWS

(In thousands)

 

     Years Ended December 31,  
     2016     2015     2014  

Cash flows from operating activities

      

Net income

   $     $ 3     $ 4  

Adjustments to reconcile net income to cash flows provided by operating activities:

      

Depreciation

     3,030       2,882       2,904  

Net gain on asset sales

           (38      

Deferred income taxes

     (111     (101     (91

Provisions for (recoveries of) bad debt

     (10     31       3  

Change in current assets and liabilities:

      

Receivables

     116       (137     (30

Other current assets

     12       69       (66

Inventories

     71       (5     (54

Prepayments

     (223     6       253  

Accounts payable

     (39     52       419  

Accrued expenses

     (125     126       (269
  

 

 

   

 

 

   

 

 

 

Cash flows provided by operating activities

     2,721       2,888       3,073  
  

 

 

   

 

 

   

 

 

 

Cash flows from investing activities

      

Acquisitions of property and equipment, net of change in related payables

     (869     (798     (17

Proceeds from sale of assets

           66       6  
  

 

 

   

 

 

   

 

 

 

Cash flows used in investing activities

     (869     (732     (11
  

 

 

   

 

 

   

 

 

 

Cash flows from financing activities

      

Repayments for capital leases

     (51     (45     (226

Transactions with parent, net

     (1,232     (1,981     (2,742
  

 

 

   

 

 

   

 

 

 

Cash flows used in financing activities

     (1,283     (2,026     (2,968
  

 

 

   

 

 

   

 

 

 

Net increase in cash and cash equivalents

     569       130       94  

Cash and cash equivalents, beginning of period

     351       221       127  
  

 

 

   

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 920     $ 351     $ 221  
  

 

 

   

 

 

   

 

 

 

 

     Years Ended December 31,  
       2016          2015          2014    

Supplemental Cash Flow Information:

        

Cash paid for interest

   $ 7      $ 18      $ 39  

Cash paid for income taxes

                    

See accompanying Notes to Combined Financial Statements.

 

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CAESARS ENTERTAINMENT OUTDOOR

(DEBTOR-IN-POSSESSION)

NOTES TO COMBINED FINANCIAL STATEMENTS

In these notes, the words “Caesars Entertainment Outdoor,” “Business,” “Outdoor Business,” “we,” “our,” and “us” refer to the business and operation of the golf courses listed in Note 1 that are wholly-owned by Caesars Entertainment Operating Company, Inc.

In addition, “CEOC” refers to the Caesars Entertainment Operating Company, Inc. “CEC,” “Caesars” and “Caesars Entertainment” refer to Caesars Entertainment Corporation.

We also refer to (i) our Combined Financial Statements as our “Financial Statements,” (ii) our Combined Statements of Operations as our “Statements of Operations,” and (iii) our Combined Balance Sheets as our “Balance Sheets.”

Note 1—Business and Basis of Presentation

Organization

The Outdoor Business is a wholly-owned business of CEOC, and includes the operations of the Cascata and Rio Secco golf courses in Las Vegas, Nevada, the Grand Bear golf course in Biloxi, Mississippi, and the Chariot Run golf course in Laconia, Indiana. Caesars Entertainment Golf, Inc., Rio Development Company, Inc., Grand Casinos of Biloxi, LLC, and Riverboat Casino, LLC, directly own these golf courses, respectively, and are debtor-in-possession subsidiaries of CEOC. The golf courses generate revenue through fees charged for general golf course usage (including green fees, golf club rentals, and cart charges), annual or corporate memberships (at Rio Secco, Grand Bear and Chariot Run), a school of golf (at Rio Secco), and food, beverage, and merchandise sales.

Bankruptcy

On January 15, 2015 (the “Petition Date”), CEOC and certain of its affiliates (the “Debtors”) filed for reorganization under Chapter 11 of the United States Bankruptcy Code with the United States Bankruptcy Court for the Northern District of Illinois (the “Bankruptcy Court”). The filing of the Chapter 11 cases constituted an immediate event of default of CEOC’s pre-petition debt obligations, and those debt obligations became automatically and immediately due and payable. The Debtors continue to operate their business as a debtor-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. Because each of the four golf courses are owned by Debtor entities, the Outdoor Business is also considered a debtor-in-possession.

As part of CEOC’s issuance of debt securities, certain of its subsidiaries served as guarantors of certain debt securities and pledged their property and assets as collateral. The entities that own each of the four golf courses are guarantors of CEOC’s debt securities but only the Rio Secco golf course was pledged as collateral for CEOC’s debt. The circumstances that would require the owners of the four golf courses to perform under their guarantees are dependent upon the outcome of the bankruptcy proceedings.

In October 2016, CEOC negotiated the terms of a revised plan of reorganization and definitive restructuring support agreements with several of its major creditors. In connection therewith, CEOC entered into or amended, as applicable, restructuring support agreements with holders of claims under CEOC’s credit facility, holders of CEOC’s first lien notes, holders of CEOC’s second lien notes and holders of CEOC’s subsidiary guaranteed notes. Thereafter, a substantial majority of classes voted in favor of the plan of reorganization at each Debtor entity. The final version of the plan of reorganization was filed with the Bankruptcy Court on January 13, 2017. The plan of reorganization was confirmed by order of the Bankruptcy Court on January 17, 2017.

 

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CAESARS ENTERTAINMENT OUTDOOR

(DEBTOR-IN-POSSESSION)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

 

The plan of reorganization contemplates that CEOC separates its operating assets and real property assets into an operating company and a newly formed real estate investment trust (the “REIT”). This separation is planned to occur through a tax-free spinoff, and the REIT will include an operating partnership, two property companies and a taxable REIT subsidiary (“TRS”). The TRS will own and operate the Outdoor Business.

Even though the plan of reorganization was approved by the Bankruptcy Court, the plan of reorganization and the Debtors’ emergence from bankruptcy is still subject to numerous conditions and third party approvals. There can be no assurance that the restructuring of the Debtors will be completed on the schedule contemplated in the plan of reorganization.

Our cash, to the extent it constitutes cash collateral, is subject to the final order of the Bankruptcy Court that permits the Debtors to use cash collateral subject to certain terms and conditions, including adhering to certain Chapter 11 case milestones. The Debtors did not meet a milestone in February 2016. Failure to meet this milestone is an event of default under the cash collateral order, which may result in termination of the cash collateral order. If the Debtors are restricted from using cash collateral for any reason, such restrictions could have a material adverse effect on our ability to continue to operate the Business.

Basis of Presentation

The Business’ Financial Statements were prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), which require the use of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, contingent assets and liabilities, and other required disclosures. Actual amounts could differ from those estimates.

The Business’ Financial Statements were derived from the financial statements of CEOC, prepared on a “carve-out” basis, to present the financial position and results of operations of the Outdoor Business on a stand-alone basis. Accordingly, in preparing these Financial Statements, subsequent events were considered through May 12, 2017 for the 2016 Financial Statements. The legal entities that own the Grand Bear and the Chariot Run golf courses also include non-golf course operations that are excluded from these carve-out financial statements.

The Financial Statements include allocations of certain revenue amounts and general corporate expenses among affiliated entities. Such allocated revenue and expenses may not reflect the results we would have incurred if we had operated as a stand-alone company nor are they necessarily indicative of our future results.

Golf revenue from CEOC and Caesars’ affiliates includes reimbursement for below market-rate golf tee times and free play for certain casino guests. Variable golf fees provided by CEOC and Caesars affiliates are based on revenue shortfalls necessary to cover the cost of maintaining the courses in appropriate playing conditions for casino guests. The variable fee is dependent upon the number of rounds played, the types of rounds played (market-rate or discounted rate), and costs incurred to allow the golf course to continue to offer golf as an amenity to its gaming customers. These reimbursements and adjustments are included in golf revenue in the Statements of Operations.

Management believes the assumptions and methodologies used in the allocation of these revenues and expenses are reasonable.

Each of the golf courses represents a separate operating segment and we aggregate all such operations into one reportable segment.

 

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CAESARS ENTERTAINMENT OUTDOOR

(DEBTOR-IN-POSSESSION)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

 

As of December 31, 2016, we adopted ASU No. 2014-15, Presentation: Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. This guidance amended the existing requirements for disclosing information about an entity’s ability to continue as a going concern and explicitly requires management to assess an entity’s ability to continue as a going concern and to provide related footnote disclosure in certain circumstances. This guidance was effective for annual reporting periods ending after December 15, 2016. The following information reflects the results of management’s assessment of the Business’ ability to continue as a going concern. The Business’ Financial Statements have been prepared on a going concern basis, which assumes continuity of operations and realization of assets and liabilities in the ordinary course. The Business relies on funding from, affiliates of CEOC and CEC to fund capital improvements, management fees, insurance programs and other miscellaneous charges. The ability of the Business to continue as a going concern is dependent upon CEOC’s ability to restructure its indebtedness, the ability of the Debtors, including entities that own the golf courses, to emerge from bankruptcy and a favorable resolution to the continued ability to use cash collateral. These uncertainties raise substantial doubt about the ability of the Outdoor Business to continue as a going concern. The Financial Statements do not include any adjustments that might result from the outcome of uncertainties, including the possibility that the Business loses some or substantially all of its assets to foreclosure as a result of these uncertainties.

The Business’ Financial Statements reflect the application of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 852, Reorganizations. This guidance requires that transactions and events directly associated with the reorganization be distinguished from the ongoing operations of the business. In addition, the guidance provides for changes in the accounting and presentation of liabilities.

Note 2—Summary of Significant Accounting Policies

Cash

Cash consists of cash-on-hand and cash-in-bank.

Receivables

Accounts receivable are non-interest bearing and are initially recorded at cost. They include amounts for sponsorship and other golf tournament fees, amounts due for hosted private events, and amounts due from credit card clearing activities. The allowance for doubtful accounts is established and maintained based on our best estimate of accounts receivable collectibility. Management estimates collectibility by specifically analyzing accounts receivable aging, known troubled accounts and other historical factors that affect collections. Accounts are written off when management deems the account to be uncollectible. Recoveries of accounts previously written off are recorded into income when received. Trade receivables are due within one year or less and approximates fair value.

Allowance for Doubtful Accounts

 

(In thousands)    2016     2015     2014  

Balance as of January 1,

   $ 19     $ 1     $ 3  

Charges (credits) to income

     (10     31       3  

Write-offs less recoveries

     (2     (13     (5
  

 

 

   

 

 

   

 

 

 

Balance as of December 31,

   $ 7     $ 19     $ 1  
  

 

 

   

 

 

   

 

 

 

 

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CAESARS ENTERTAINMENT OUTDOOR

(DEBTOR-IN-POSSESSION)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

 

Inventory

Inventory, which consists primarily of food and beverages and merchandise held for resale, is stated at the lower of cost or market. Losses on obsolete or excess inventory are not material.

Long-Lived Assets

We have significant capital invested in our long-lived assets and judgments are made in determining their estimated useful lives and salvage values and if or when an asset (or asset group) has been impaired. The accuracy of these estimates affects the amount of depreciation and amortization expense recognized in our financial results and whether we have a gain or loss on the disposal of an asset. We assign lives to our assets based on our standard policy, which is established by management as representative of the useful life of each category of asset.

We review the carrying value of our long-lived assets whenever events and circumstances indicate the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. We typically estimate the fair value of assets starting with a “Replacement Cost New” approach and then deduct appropriate amounts for both functional and economic obsolescence to arrive at the fair value estimates. Other factors considered by management in performing this assessment may include current operating results, trends, prospects, as well as the effect of demand, competition, and other economic, legal, and regulatory factors. In estimating expected future cash flows for determining whether an asset is impaired, assets are grouped at the lowest level of identifiable cash flows, which in this case, is the individual golf course. These analyses are sensitive to management assumptions and the estimates of the obsolescence factors. Changes in these assumptions and estimates could have a material impact on the analyses and the Financial Statements. In 2016, 2015 and 2014, no impairment on long-lived assets was recorded.

Additions to property and equipment are stated at cost. We capitalize the costs of improvements that extend the life of the asset. We expense maintenance and repair costs as incurred. Gains or losses on the dispositions of property and equipment are recognized in the period of disposal. With respect to golf course improvements (included in land improvements), only costs associated with original construction, complete replacements of items such as tee boxes and putting greens, or the addition of new trees, sand traps, fairways or putting greens are capitalized. All other related costs are expensed as incurred. For building improvements, only costs that extend the useful life of the building are capitalized.

Certain land improvements include site preparations that prepare land for its intended use as a golf course. Like the land itself, these improvements are inexhaustible and therefore not depreciated. Examples include excavation, filling, grading and preparation of fairways and roughs. Depreciable land improvements are defined as improvements made to land that have determinable estimated useful lives and deteriorate with use or passage of time. These improvements were built or installed to enhance or facilitate the use of the land for a particular purpose. Depreciable land improvements associated with the golf courses include greens, bunkers, tee boxes, cart paths, fences and gates, landscaping and sprinkler systems.

 

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CAESARS ENTERTAINMENT OUTDOOR

(DEBTOR-IN-POSSESSION)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

 

Depreciation is calculated using the straight-line method over the shorter of the estimated useful life of the asset or the related lease, as follows:

Useful Lives

 

Land improvements

     12-60 years  

Buildings and leasehold improvements

     40 years  

Building improvements

     5-15 years  

Furniture, fixtures, and equipment

     2-10 years  

Leasehold improvements are amortized over the shorter of the term of the respective lease or their useful life using the straight-line method.

Liabilities Subject to Compromise

Under bankruptcy law, actions by creditors to collect amounts owed prior to the Petition Date are stayed and certain other prepetition contractual obligations may not be enforced against the companies that own the Business. Substantially all liabilities of the Debtors as of the Petition Date, except those paid under certain first day motions filed with the Bankruptcy Court, have been classified as liabilities subject to compromise in the Balance Sheets. Liabilities subject to compromise, including claims that became known after the bankruptcy petition was filed, are reported using our best estimates of the expected amount of the total allowed claim.

Revenue Recognition

Revenues from golf course operations, food and beverage and merchandise sales are recognized at the time of sale or when the service is provided and are reported net of sales tax. Golf memberships sold are not refundable and are deferred and recognized within golf revenue in the Statements of Operations over the expected life of an active membership, which is typically one year or less.

Included in golf revenue are market-rate fees received from public customers as well as discounted fees received from CEOC and Caesars-affiliated customers or associates. In addition, certain VIP casino guests play the golf courses for free. In these cases, the golf course receives amounts paid by CEOC and Caesars’ affiliates at an agreed upon rate for the free play provided to their VIP guests. The reimbursement for free play was approximately $620,000, $708,000 and $798,000 for the years ended December 31, 2016, 2015 and 2014, respectively.

There are additional variable golf fees provided by CEOC and Caesars’ affiliates based on revenue shortfalls necessary to cover the cost of operating the courses at a high level appropriate for casino guests. The variable fee is dependent upon the number of rounds played, the types of rounds played (market-rate or discounted rate), and costs incurred to allow the golf course to continue to offer golf as an amenity to its gaming customers. Variable golf fees included in golf revenue were approximately $4,862,000, $3,669,000 and $3,456,000 for the years ended December 31, 2016, 2015 and 2014, respectively.

Advertising Expense

We market our golf courses through advertising and other promotional activities. Advertising expense is charged to income during the period incurred. Advertising expense totaled approximately $118,000, $74,000 and $90,000 for the years ended December 31, 2016, 2015 and 2014, respectively, and is included in Administrative and other in our Statements of Operations.

 

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CAESARS ENTERTAINMENT OUTDOOR

(DEBTOR-IN-POSSESSION)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

 

Property Costs

Property costs are charged to income during the period incurred and include land rent, utilities and general repairs and maintenance.

Income Taxes

Historically, the Outdoor Business has been included in the consolidated Federal income tax return of CEC, as well as certain state tax returns where CEC or one of its subsidiaries files a state tax return. We apply the provisions of FASB ASC Topic 740, Income Taxes, and compute the provision for income taxes on a separate return basis. The separate return method applies the accounting guidance for income taxes to the stand-alone combined financial statements as if we were a separate taxpayer and a stand-alone enterprise for the periods presented. As discussed in Note 7, these Financial Statements include certain allocations of income and expense amongst affiliated entities. We have calculated the tax provision assuming such allocations were appropriate for income tax reporting purposes and do not include any transfer pricing adjustments with respect to such allocations. The calculation of income taxes on a separate return basis requires a considerable amount of judgment and use of both estimates and allocations. We believe that the assumptions and estimates used to compute these tax amounts are reasonable. However, our Financial Statements may not necessarily reflect our income tax expense or tax payments in the future, or what our tax amounts would have been if we had been a stand-alone enterprise during the periods presented.

Federal and state income taxes currently payable are settled though our net investment equity account. We provide for taxes that are deferred because of temporary differences between reporting income and expenses for financial statement purposes versus tax purposes. Federal income tax credits are recorded as a reduction of income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in earnings in the period that includes the enactment date. We classify accruals for tax uncertainties within other liabilities in our combined balance sheets. Amounts accrued relate to any potential income tax liabilities resulting from uncertain tax positions, as well as potential interest or penalties associated with those liabilities.

Note 3—Recently Issued Accounting Pronouncements

During 2016, we adopted ASU No. 2014-15, Going Concern: Managements assessment of an entity’s ability to continue as a going concern (Note 1).

The FASB issued the following authoritative guidance amending the FASB ASC:

Income Taxes—October 2016 : Amended guidance addresses intra-entity transfers of assets other than inventory, which requires the recognition of any related income tax consequences when such transfers occur. The amendments should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. Amendments are effective for fiscal years beginning after December 15, 2017, and interim reporting periods within those years. Early adoption is permitted. We are currently assessing the impact the adoption of this standard will have on our Financial Statements.

Statement of Cash Flows—August 2016 : Amended guidance addresses eight specific cash flow issues with the objective of reducing diversity in how certain cash receipts and cash payments are presented and classified in

 

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CAESARS ENTERTAINMENT OUTDOOR

(DEBTOR-IN-POSSESSION)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

 

the statement of cash flows. Updated amendments should be applied retrospectively to each period presented. Amendments are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. We are currently assessing the effect the adoption of this standard will have on our Financial Statements.

Financial Instruments-Credit Losses—June 2016 (amended January 2017) : Amended guidance replaces the incurred loss impairment methodology with methodology that reflects expected credit losses and requires consideration of broader range of reasonable and supportable information to inform credit loss estimates. Amendments affect entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables and any other financial assets not excluded from the scope that have the contractual right to receive cash. Amendments are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. We are currently assessing the effect the adoption of this standard will have on our Financial Statements.

Leases—February 2016 (amended January 2017) : The amended guidance requires most lease obligations to be recognized as a right-of-use (“ROU”) asset with a corresponding liability on the balance sheet. The guidance also requires additional qualitative and quantitative disclosures to assess the amount, timing, and uncertainty of cash flows arising from leases. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The guidance should be implemented for the earliest period presented using a modified retrospective approach, which includes optional practical expedients primarily focused on leases that commenced before the effective date, including continuing to account for leases that commenced before the effective date in accordance with previous guidance, unless the lease is modified.

Operating leases will be recorded on the balance sheet as an ROU asset with a corresponding lease liability, which will be amortized using the effective interest rate method as payments are made. The ROU asset will be depreciated on a straight-line basis and recognized as lease expense. The qualitative and quantitative effects of adoption are still being analyzed. We are in the process of evaluating the full impact the new guidance will have on our Financial Statements.

Revenue . from Contracts with Customers—May 2014 (amended August 2015, March 2016, April 2016 and May 2016) : The new guidance is intended to clarify the principles for recognizing revenue and to develop a common revenue standard for GAAP applicable to revenue transactions. This guidance provides that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additional revenue recognition topics in the amendments cover principal versus agent considerations, identifying performance obligations, licensing implementation guidance, collectibility criterion, contract modifications and presentation of sales tax. This guidance is effective for annual reporting periods beginning after December 15, 2017. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. We will adopt this standard effective January 1, 2017. We are currently assessing the effect the adoption of this standard will have on our Financial Statements.

 

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CAESARS ENTERTAINMENT OUTDOOR

(DEBTOR-IN-POSSESSION)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

 

Note 4—Property and Equipment, Net

 

     As of December 31  

(In thousands)

   2016     2015  

Land and non-depreciable land improvements

   $ 35,525     $ 35,525  

Depreciable land improvements

     40,174       40,096  

Buildings and improvements

     35,133       35,150  

Furniture and equipment (including capital leases)

     5,445       4,988  
  

 

 

   

 

 

 

Total property and equipment

     116,277       115,759  

Less: accumulated depreciation

     (27,446     (24,767
  

 

 

   

 

 

 

Total property and equipment, net

   $ 88,831     $ 90,992  
  

 

 

   

 

 

 

 

     Years Ended December 31,  

(In thousands)

   2016      2015      2014  

Depreciation expense (including capital lease amortization)

   $ 3,030      $ 2,882      $ 2,904  
  

 

 

    

 

 

    

 

 

 

Note 5—Accrued Expenses

 

     As of December 31,  

(In thousands)

     2016          2015    

Payroll and other compensation

   $ 228      $ 176  

Accrued real estate taxes and other taxes

     130        212  

Deferred revenue

     125        114  

Advance deposits

     112        176  

Accrued utilities

     87        125  

Other accruals

     23        28  
  

 

 

    

 

 

 

Total accrued expenses

   $ 705      $ 831  
  

 

 

    

 

 

 

Note 6—Liabilities Subject to Compromise

On March 25, 2015, the Bankruptcy Court entered an order establishing May 26, 2015 as the bar date for potential general creditors to file proofs of claims and established the required procedures with respect to filing such claims. A bar date is the deadline by which creditors must file a proof of claim against the Debtors for the claim to be allowed. In addition, a bar date of July 14, 2015 was established as a deadline for claims from governmental units.

As of December 31, 2016, the Business had received 60 proofs of claim, a portion of which assert, in part or in whole, unliquidated claims. These proofs of claims include 14 claims that were carved out of the legal entities that own the Business and that have additional claims, which do not correspond to the Business. In addition, the Business has been assigned by the court an additional 7 claims. In the aggregate, total asserted liquidated proofs of claim for approximately $122.2 million had been filed against or assigned to the Business. Based on reasonable current estimates, the Business expects to ask the Bankruptcy Court to disallow 20 claims representing approximately $121.0 million of such claims. These claims are classified by the Business as amended and replaced, duplicate, redundant or non-Debtor claims. New and amended claims may be filed in the future, including claims amended to assign values to claims originally filed with no designated value. As of December 31, 2016, there were 2 proofs of claim which had not been assessed.

 

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CAESARS ENTERTAINMENT OUTDOOR

(DEBTOR-IN-POSSESSION)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

 

The Business continues the process of reconciling such claims to the amounts listed in their schedules of assets and liabilities, as amended. Differences in liability amounts estimated by the Business and claims filed by creditors continue to be investigated and resolved, including through the filing of objections with the Bankruptcy Court, where appropriate. The companies that own the Business may ask the Bankruptcy Court to disallow claims that the companies that own the Business believe are duplicative, have been later amended or superseded, are without merit, are overstated or should be disallowed for other reasons. The amounts recorded in liabilities subject to compromise require the use of estimates and assumptions that affect the reported amounts.

At December 31, 2016 and 2015, liabilities subject to compromise was approximately $265,000 and $267,000, respectively, and consisted of accounts payable-related liabilities.

Note 7—Income Taxes

Income Tax (Provision)/Benefit

 

     Years Ended December 31,  
(In thousands)      2016         2015         2014    

Current:

      

Federal

   $ (111   $ (98   $ (87

State

                  

Deferred

     111       101       91  
  

 

 

   

 

 

   

 

 

 

Income Tax Benefit

   $     $ 3     $ 4  
  

 

 

   

 

 

   

 

 

 

Since the Outdoor Business does not have a formal tax sharing agreement in place with Caesars Entertainment for Federal income tax purposes, Caesars Entertainment pays all of the Outdoor Business’ Federal income taxes. The Outdoor Business’ portion was approximately $111,000, $98,000 and $87,000 in the respective 2016, 2015 and 2014 periods.

Income Tax Expense Reconciliation

 

     Years Ended December 31,  
(In thousands)      2016          2015          2014    

Expected Federal tax at the statutory tax rate

   $      $      $  

Increases/(decreases) in tax resulting from:

        

Federal tax credits

            3        4  
  

 

 

    

 

 

    

 

 

 

Income tax (expense)/benefit

   $      $ 3      $ 4  
  

 

 

    

 

 

    

 

 

 

 

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CAESARS ENTERTAINMENT OUTDOOR

(DEBTOR-IN-POSSESSION)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

 

Temporary Differences Resulting in Deferred Tax Assets and Liabilities

 

     As of December 31,  

(In thousands)

   2016     2015  

Deferred tax assets:

    

Federal net operating loss

   $ 5,847     $ 6,194  

State net operating loss

     392       402  

Federal tax credits

     82       82  

Other

     9       6  
  

 

 

   

 

 

 

Subtotal

     6,330       6,684  

Less: valuation allowance

     1,930       1,930  
  

 

 

   

 

 

 

Total deferred tax assets

     4,400       4,754  
  

 

 

   

 

 

 

Deferred tax liabilities:

    

Depreciation and other property related items

     (9,423     (9,893

Accrued expenses

     (20     (15
  

 

 

   

 

 

 

Total deferred tax liabilities

     (9,443     (9,908
  

 

 

   

 

 

 

Net deferred tax liability

   $ (5,043   $ (5,154
  

 

 

   

 

 

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

As of December 31, 2016 and 2015 we had Federal NOL carryforwards of $20.1 million and $21.1 million, respectively. These NOL carryforwards will begin to expire in 2019. In addition, we have Federal general business tax credit carryforwards of approximately $82,000 which will begin to expire in 2033. As of December 31, 2016 and 2015 we had state NOL carryforwards of $15.5 million and $15.8 million, respectively. These NOL carryforwards will begin to expire in 2019.

Reconciliation of Unrecognized Tax Benefit

 

     Years Ended December 31,  

(In thousands)

   2016      2015      2014  

Balance at beginning of year

   $ 1,309      $ 1,309      $ 1,270  

Additions based on tax positions related to the current year

                   39  
  

 

 

    

 

 

    

 

 

 

Balance at end of year

   $ 1,309      $ 1,309      $ 1,309  
  

 

 

    

 

 

    

 

 

 

We classify reserves for tax uncertainties within accrued expenses and deferred credits and other in our balance sheets, separate from any related income tax payable or deferred income taxes. Reserve amounts related to potential income tax liabilities resulting from uncertain tax positions as well as potential interest or penalties associated with those liabilities.

We accrue interest and penalties related to unrecognized tax benefits in income tax expense. There were no adjustments to our accrual for the three periods ending December 31, 2016, 2015 and 2014, respectively, for accrued interest or penalties. There are no unrecognized tax benefits included in the balances of unrecognized tax benefits as of December 31, 2016, 2015 and 2014 that, if recognized, would impact the effective tax rate.

 

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CAESARS ENTERTAINMENT OUTDOOR

(DEBTOR-IN-POSSESSION)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

 

Caesars Entertainment’s tax returns are subject to examination by Federal and state authorities. As of December 31, 2016, the tax years prior to 2012 are not subject to examination for U.S. Federal or state tax purposes.

Note 8—Related Party Transactions

We had transactions with CEOC resulting in net distributions of approximately $1.2 million, $2.0 million, and $2.7 million for the years ending December 31, 2016, 2015, and 2014, respectively. The net distributions are the result of cash generated by the operations of the Business and proceeds from the sale of assets, partially offset by amounts contributed by CEOC to fund capital improvements and capital lease obligations. These transactions are included as transactions with parent, net in our Combined Statements of Equity.

Related Party Fees and Expenses

The following amounts are recorded with respect to the related-party transactions described in this section:

 

(In thousands)         Years Ended December 31,  

Transaction type

  

Recorded as:

   2016      2015      2014  

Insurance expense

   Administrative and other    $ 45      $ 55      $ 51  

Allocation of indirect expenses from CEOC and Caesars’ affiliates (1)

   Administrative and other      330        318        345  

Golf revenue from CEOC and Caesars’ affiliates (2)

   Golf revenue      5,482        4,377        4,254  

Pass-through revenue with CEOC and Caesars’ affiliates (3)

   Golf revenue      871        769        885  
   Food and beverage revenue      83        66        97  
   Retail and other revenue      143        102        165  

 

(1) The Statements of Operations include allocated overhead costs for certain functions historically performed by CEOC and Caesars’ affiliates, including allocations of direct and indirect operating and maintenance costs and expenses for procurement, logistics and general and administrative costs and expenses related to executive oversight, marketing, information technology, accounting, treasury, tax, and legal. These costs were allocated on the basis of either revenue or payroll expense.
(2) See Summary of Significant Accounting Policies—Revenue Recognition.
(3) Primarily includes transactions where CEOC and Caesars affiliates’ customers charge their golf, food and beverage and retail purchases directly to their hotel bill. Amounts collected from the customer by the hotel are remitted to the golf course.

Savings and Retirement Plans

CEOC maintains a defined contribution savings and retirement plan that allows certain employees of the Business to make pre-tax and after-tax contributions. Under the plan, participating employees may elect to contribute up to 50% of their eligible earnings, subject to IRS rules and regulations, and are eligible to receive a company match of up to $600. Participating employees become vested in matching contributions on a pro-rata basis over five years of credited service. Our contribution expense, included in direct operating expenses and administrative and other expense, was approximately $34,000, $39,000, and $38,000 for the years ended December 31, 2016, 2015, and 2014, respectively.

 

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CAESARS ENTERTAINMENT OUTDOOR

(DEBTOR-IN-POSSESSION)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

 

Note 9—Litigation, Contractual Commitments and Contingent Liabilities

Litigation

The Business and its operations may be subject to litigation involving employment matters, personal injuries, and other matters that arise in the normal course of business. We do not expect the outcome of such ordinary and routine litigation to have a material effect on our combined financial position, results of operations, or cash flows.

Contingent Liabilities

In January 2015, a majority of the Trustees of the National Retirement Fund (“NRF”), a multi-employer defined benefit pension plan, voted to expel CEC and certain of its affiliates from the plan. The NRF has advised CEC and Caesars Entertainment Resort Properties, LLC (“CERP”) that this expulsion triggered a withdrawal liability with a present value of approximately $360 million, payable in 80 quarterly payments of about $6 million. The NRF has filed a similar claim against each Debtor in CEOC’s bankruptcy. Although the Business’ employees did not participate in this plan, because the entities that own the Business are a member of the Caesars Group (as defined below), such entities are jointly and severally liable with CEC and CEOC for any liability under the NRF’s claims.

CEC and its subsidiaries, including the entities that own the Business (the “Caesars Group”), have asserted in litigation against the NRF that the Caesars Group is current with respect to pension contributions to the NRF. The Caesars Group opposed the NRF’s actions and has sought a declaratory judgment in federal district court challenging the NRF’s authority to expel the Caesars Group and also seeking relief in the CEOC bankruptcy proceeding. The parties entered into a Standstill Agreement in March 2015 purporting to stay CEC’s and CERP’s obligation to commence quarterly payments. The Standstill Agreement was to require CEC and CERP to continue making monthly contributions until the resolution of certain motions filed by CEOC in the bankruptcy proceeding asserting that the NRF’s actions violated the automatic stay and requesting an injunction to halt the NRF’s collection efforts against CEC and CERP. The Bankruptcy Court has yet to rule on CEOC’s motion for an injunction, but it denied CEOC’s motions to enforce the automatic stay in November 2015. CEOC appealed the ruling to the district court. Oral argument on the appeal is currently scheduled for May 15, 2017.

On December 25, 2015, the United States District Court for the Southern District of New York dismissed CEC’s declaratory judgment action regarding the NRF’s ability to expel the employers from the plan. CEC has appealed this ruling.

On February 26, 2016, the NRF and its fund manager, in a separate action brought by the NRF in the United States District Court for the Southern District of New York (despite the Standstill Agreement), filed a motion for summary judgment against CEC and CERP for payment of the first quarterly payment of withdrawal liability and for interest, liquidated damages, attorneys’ fees and costs. The magistrate judge overseeing this matter has issued a report recommending that the United States District Court for the Southern District of New York require CEC and CERP to make the first quarterly payment. On November 7, 2016, the United States District Court for the Southern District of New York adopted the report and recommendation of the magistrate judge, resulting in summary judgment in favor of the NRF against CEC and CERP in the amount of $7.9 million. On December 23, 2016, the NRF filed a motion seeking leave to amend its complaint and summary judgment motion to require CEC and CERP to pay the seven other withdrawal liability installments due through December 15, 2016 and to require CEC and CERP to pay all future installments as they become due. In early January 2017, CEC and CERP requested that the magistrate judge certify the judgment for appeal and requested that all proceedings at the magistrate court level be stayed pending the outcome of the appeal. On January 9, 2017, following CEC’s and

 

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CAESARS ENTERTAINMENT OUTDOOR

(DEBTOR-IN-POSSESSION)

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

 

CERP’s request for a temporary restraining order, CEC, CERP and the NRF entered a stipulation and the Southern District of New York entered an order providing that the NRF will not attempt to collect on the $7.9 million judgment unless and until the judgment becomes a final judgment. On January 11, 2017, the Southern District of New York entered an order increasing the judgment to approximately $8.6 million, making the judgment appealable, and denying CEC’s and CERP’s request to stay all proceedings pending the outcome of the appeal.

The Caesars Group believes that its legal arguments against the actions undertaken by NRF are well-supported and will continue to pursue them vigorously. We cannot currently estimate a range of reasonably possible losses, if any, on the matters at issue.

Operating Lease Commitments

The Business is liable under operating leases for land at the Cascata golf course, equipment and other miscellaneous assets, which expire at various dates through 2039. Total rental expense under these agreements included in direct golf operating expenses and property costs in our Statements of Operations were approximately $1.0 million for each of the years ended December 31, 2016, 2015, and 2014.

The future minimum lease commitments relating to the base lease rent portion of noncancelable operating leases at December 31, 2016 are as follows:

 

(In thousands)

   Operating Leases  

2017

   $ 856  

2018

     873  

2019

     891  

2020

     908  

2021

     926  

2022 and thereafter

     20,234  
  

 

 

 

Total minimum rental commitments

   $ 24,688  
  

 

 

 

Other Commitments

The Business utilizes a third-party golf maintenance company for its Rio Secco and Cascata golf courses. The agreements are for five years and expire in February 2019 and include all labor and equipment necessary to maintain both golf course grounds. Total expense under these agreements included in direct golf operating expenses in the Statements of Operations were approximately $2.9 million, $2.8 million and $2.6 million for the years ended December 31, 2016, 2015, and 2014, respectively.

The future commitments relating to these agreements at December 31, 2016 are as follows:

 

(In thousands)

   Maintenance
Agreements
 

2017

   $ 2,924  

2018

     2,969  

2019

     225  
  

 

 

 

Total maintenance agreement commitments

   $ 6,118  
  

 

 

 

 

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VICI PROPERTIES INC.

BALANCE SHEETS

(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

(UNAUDITED)

 

     September 30,
2017
     December 31,
2016
 

Assets

     

Total assets

   $         —      $         —  
  

 

 

    

 

 

 

Commitments and contingencies (Note 5)

     

Equity

     

Common stock, $0.01 par value, 100,000,000 shares authorized and 1,000 shares issued and outstanding as of September 30, 2017

   $     

Membership interest as of December 31, 2016

      $  
  

 

 

    

 

 

 

Total equity

   $      $  
  

 

 

    

 

 

 

See accompanying Notes to Balance Sheets

 

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VICI PROPERTIES INC.

NOTES TO BALANCE SHEETS

(UNAUDITED)

In these notes, the words “VICI REIT,” “Company,” “we,” “our,” and “us” refer to VICI Properties Inc., unless otherwise stated or the context requires otherwise. In addition, “CEOC” refers to Caesars Entertainment Operating Company, Inc., and “CEC” refers to Caesars Entertainment Corporation, the parent of CEOC.

On October 6, 2017 (the “Emergence Date”), CEOC merged with and into CEOC, LLC, a Delaware limited liability company (“New CEOC”), with New CEOC surviving the merger. See “Explanatory Note” in this Registration Statement.

“VICI PropCo” refers to VICI Properties 1 LLC, a Delaware limited liability company, which through its subsidiaries own the real estate assets transferred by CEOC to VICI REIT on the Emergence Date and “CPLV” refers to the Caesars Palace Las Vegas facility located in the Las Vegas Strip, which was owned by CEOC prior to the Emergence Date and whose related real estate assets were transferred by CEOC to us on the Emergence Date.

Note 1—Business Formation and Basis of Presentation

Business Formation

On January 15, 2015, CEOC and certain of its subsidiaries (the “Caesars Debtors”) voluntarily filed for relief under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) with the United States Bankruptcy Court for the Northern District of Illinois (the “Bankruptcy Court”). As a result of this filing, CEOC operated as a debtor-in-possession under the Bankruptcy Code. CEOC’s plan of reorganization (the “Plan”) was confirmed by the Bankruptcy Court on January 17, 2017.

VICI REIT was organized as a limited liability company and wholly owned subsidiary of CEOC in Delaware on July 5, 2016 and was subsequently converted to a corporation under the laws of the State of Maryland. On May 5, 2017, VICI REIT issued common stock to CEOC in conjunction with VICI REIT’s conversion to a corporation under the laws of the State of Maryland. As of September 30, 2017, VICI REIT had not conducted operations and had no assets or liabilities.

On the Emergence Date, subsidiaries of CEOC transferred certain real estate assets (the “Properties”) and four golf course businesses (“Caesars Entertainment Outdoor”) to VICI REIT in exchange for 100% of VICI REIT’s common stock, series A convertible preferred stock (“Series A Preferred Stock”) and other consideration, including debt issued by certain subsidiaries of VICI REIT and the proceeds of mortgage backed debt issued by other subsidiaries of VICI REIT, for distribution to certain of CEOC’s creditors.

Following the Emergence Date, VICI REIT is a stand-alone entity initially owned by certain former creditors of CEOC. VICI REIT is primarily engaged in the business of owning, acquiring and developing gaming, hospitality and entertainment destinations. A subsidiary of VICI REIT leases the Properties to New CEOC and certain of its subsidiaries under lease agreements (the “Master Leases”). VICI REIT conducts its real property business through an operating partnership and its golf course business through a taxable REIT subsidiary (“TRS”), Caesars Entertainment Outdoor. VICI REIT intends to make an election on its Federal income tax return for its taxable year ending December 31, 2017 to be treated as a real estate investment trust (“REIT”).

The balance sheets should be read in conjunction with the Combined Statement of Investments of Real Estate Assets to be Contributed to VICI Properties Inc. and the combined financial statements of Caesars Entertainment Outdoor, which are included elsewhere within this prospectus.

 

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VICI PROPERTIES INC.

NOTES TO BALANCE SHEETS (CONTINUED)

(UNAUDITED)

 

Basis of Presentation

The accompanying balance sheets are prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”). Statements of operations, cash flows and equity are not presented as there has been no activity since the date of inception through September 30, 2017.

VICI REIT must distribute at least 90% of its taxable income to shareholders to maintain its intended qualification as a REIT. To the extent VICI REIT annually distributes less than 100% of its taxable income, it will be subject to income tax at regular corporate rates on any undistributed net taxable income. In addition, VICI REIT’s TRS will also be subject to income tax at regular corporate rates on any of its taxable income.

Reportable Segments

Our real property business and our golf course business will represent two reportable segments. The real property business segment will consist of leased real property and will represent the substantial majority of our business. The golf course business segment will consist of four golf courses, which each will be operating segments and will be aggregated into one reportable segment.

Note 2—Summary of Significant Accounting Policies

Estimates are required in order to prepare the financial statements in conformity with US GAAP. Significant estimates, judgments, and assumptions will be required in a number of areas, including, but not limited to: the application of fresh start reporting; the recognition of revenue from our leases; determining the useful lives of real estate properties; and evaluating the impairment of long-lived assets. The judgment on such estimates and underlying assumptions is based on our historical experience that we believe is reasonable under the circumstances. In many instances changes in the accounting estimates are likely to occur from period to period. Actual results may differ from the estimates.

Revenue Recognition—Leases

As a REIT, the majority of our revenues will be derived from rent received from our tenants under long-term triple-net leases. The accounting guidance under ASC 840—Leases (“ASC 840”) is complex and requires the use of judgment and assumptions by management to determine the proper accounting treatment of a lease. We will perform a lease classification upon lease inception, to determine if we account for the lease as a capital or operating lease.

Under ASC 840, for leases of both building and land, if the fair value of the land is 25% or more of the total fair value of the leased property at lease inception we consider the land and building separately for lease classification. In these cases, if the building element of the lease meets the criteria to be classified as a capital lease, then we account for the building as a capital lease and the land separately as an operating lease. If the building element does not meet the criteria to be classified as a capital lease, then we account for the building and land as a single operating lease.

To determine if the building portion of a lease triggers capital lease treatment we will conduct the four lease tests under ASC 840 as outlined below. If a lease meets any of the criteria below, it is accounted for as a capital lease.

 

  1.   Transfer of ownership. The lease transfers ownership of the property to the lessee by the end of the lease term. This criterion is met in situations in which the lease agreement provides for the transfer of title at or shortly after the end of the lease term.

 

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VICI PROPERTIES INC.

NOTES TO BALANCE SHEETS (CONTINUED)

(UNAUDITED)

 

  2.   Bargain purchase option. The lease contains a provision allowing the lessee, at its option to purchase the leased property for a price which is sufficiently lower than the expected fair value of the property at the date the option becomes exercisable.

 

  3.   Lease term. The lease term is equal to 75% or more of the estimated economic life of the leased property. However, if the beginning of the lease falls within the last 25% of the total estimated economic life of the leased property, including earlier years of use, this criterion shall not be used for purposes of classifying the lease. This test is conducted on a property by property basis.

 

  4.   Minimum lease payments. The present value of the minimum lease payments at the beginning of the lease term, excluding the portion of payments representing executory costs such as insurance, maintenance and taxes to be paid by the lessor, including any profit thereon, equals or exceeds 90% of the fair value of the leased property to the lessor at lease inception less any related investment tax credit retained by the lessor. If the beginning of the lease term falls within the last 25% of the total estimated economic life of the lease property, including earlier years of use, this criterion shall not be used for purposes of classifying the lease.

The tests outlined above, as well as the resulting calculations, require subjective judgments, such as determining, at lease inception, the fair value of the assets, the residual value of the assets at the end of the lease term, the likelihood a tenant will exercise all renewal options (in order to determine the lease term), the estimated remaining economic life of the leased assets, the incremental borrowing rate of the lessee and the interest rate implicit in the lease. A change in estimate or judgment can result in a materially different financial statement presentation.

The revenue recognition model is different under capital leases and operating leases.

Under the operating lease model, as the lessor, at lease inception the land is recorded as Real Estate Investments Accounted for Using the Operating Method and we record rental income from operating leases on a straight-line basis over the lease term. The amount of annual minimum lease payments attributable to the land after deducting executory costs, including any profit thereon, is determined by applying our incremental borrowing rate to the value of the land. We record this lease income as Rental Income from Operating Leases.

Under the direct financing lease model, as the lessor, at lease inception we record the lease receivable as Real Estate Investments Accounted for Using the Direct Financing Method. Under the direct financing lease method, we recognize fixed amounts due on an effective interest basis at a constant rate of return over the lease term. As a result, the cash payments accounted for under direct financing leases will not equal the earned income from direct financing leases as a portion of the cash rent we receive is recorded as Earned Income from Direct Financing Leases and a portion recorded as a reduction to the Real Estate Investments Accounted for using the Direct Financing Method.

Concentrations of Credit Risk

Following the Emergence Date, all of the real estate holdings of VICI REIT (other than Caesars Entertainment Outdoor) are leased to New CEOC and certain of its subsidiaries, and substantially all of VICI REIT’s revenues are derived from the Master Leases, which represents a concentration of credit risk due to the single tenant nature of our leases. Management believes that the corporate lease guaranty by New CEOC’s parent, CEC, and the rent coverage ratio mitigate this risk. Management does not believe there are any other significant concentrations of credit risk.

 

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VICI PROPERTIES INC.

NOTES TO BALANCE SHEETS (CONTINUED)

(UNAUDITED)

 

Real Estate Investments

For real estate investments accounted for using the operating method, we will continually monitor events and circumstances that could indicate that the carrying amount of our real estate investments may not be recoverable or realized. When events or changes in circumstances indicate that a potential impairment has occurred or that the carrying value of a real estate investment may not be recoverable, we use an estimate of the undiscounted value of expected future operating cash flows to determine whether the real estate investment is impaired. If the undiscounted cash flows plus net proceeds expected from the disposition of the asset is less than the carrying value of the assets, we recognize an impairment charge equivalent to the amount required to reduce the carrying value of the asset to its estimated fair value. We group our real estate investments together by property, the lowest level for which identifiable cash flows are available, in evaluating impairment. In assessing the recoverability of the carrying value, we make assumptions regarding future cash flows and other factors. Factors considered in performing this assessment include current operating results, market and other applicable trends and residual values, as well as the effect of obsolescence, demand, competition and other factors. If these estimates or related assumptions change in the future, we may be required to record an impairment loss.

For real estate investments accounted for using the direct financing method, our net investment in the direct financing lease is evaluated for impairment as necessary, if indicators of impairment are present, to determine if there has been an-other-than-temporary decline in the residual value of the property or a change in the lessee’s credit worthiness.

Income Taxes—REIT Qualification

We intend to elect to be taxed and qualify as a REIT for U.S. Federal income tax purposes commencing with our taxable year ending December 31, 2017, and we intend to continue to be organized and to operate in a manner that permits us to qualify as a REIT beyond that taxable year end. To qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our annual REIT taxable income to shareholders, determined without regard to the dividends paid deduction and excluding any net capital gains. As a REIT, we generally will not be subject to Federal income tax on income that we pay as distributions to our shareholders. If we fail to qualify as a REIT in any taxable year, we will be subject to U.S. Federal income tax, including any applicable alternative minimum tax, on our taxable income at regular corporate income tax rates, and distributions paid to our shareholders would not be deductible by us in computing taxable income. Any resulting corporate liability created if we fail to qualify as a REIT could be substantial and could materially and adversely affect our net income and net cash available for distribution to shareholders. Unless we were entitled to relief under certain Code provisions, we also would be disqualified from re-electing to be taxed as a REIT for the four taxable years following the year in which we failed to qualify to be taxed as a REIT.

Note 3—Recently Issued Accounting Pronouncements

The Financial Accounting Standards Board (the “FASB”) issued the following authoritative guidance amending the FASB Accounting Standards Codification.

Derivatives and Hedging—August 2017 : This revised accounting guidance expands hedge accounting by making additional hedge strategies eligible for hedge accounting and amending presentation and disclosure requirements. The intent of these revisions is to simplify application of hedge accounting and increase transparency of information about an entity’s risk management activities. The amended guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently assessing the impact this guidance will have on our financial statements.

 

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VICI PROPERTIES INC.

NOTES TO BALANCE SHEETS (CONTINUED)

(UNAUDITED)

 

Compensation—Stock Compensation—May 2017 : Amendments in this update provide guidance regarding which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. An entity should account for the effects of a modification unless all of the following are met: (i) the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award; (ii) the vesting conditions of the modified award are the same as the vesting conditions of the original award; and (iii) the classification of the modified award as an equity instrument or a liability instrument is the same as before the original award was modified. Amendments in this update are effective for all periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted. Application of amended guidance should be applied prospectively to an award modified on or after the adoption date.

Business Combinations—January 2017: Updated amendment intending to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for acquisitions (or disposals) of assets or businesses. Amendments in this update provide a more robust framework to use in determining when a set of assets and activities is a business and to provide more consistency in applying the guidance, reduce the costs of application, and make the definition of a business more operable. Amendments should be applied on a prospective basis on or after the effective date. No disclosures are required at transition. The amendments are effective to annual periods beginning after December 15, 2017, including interim periods within those periods. Early adoption is allowed as follows: (1) transactions for which the acquisition date occurs before the issuance date or effective date of the amendments, only when the transaction has not been reported in financial statements that have been issued or made available for issuance and (2) transactions in which a subsidiary is deconsolidated or a group of assets is derecognized that occur before the issuance date or effective date of the amendments, only when the transaction has not been reported in financial statements that have been issued or made available for issuance. We are currently assessing the effect the adoption of this standard will have on our financial statements.

Financial Instruments-Credit Losses—June 2016 (amended January 2017) : Amended guidance that replaces the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of broader range of reasonable and supportable information to inform credit loss estimates. Amendments affect entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables and any other financial assets not excluded from the scope that have the contractual right to receive cash. Amendments are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. We are currently assessing the effect the adoption of this standard will have on our financial statements.

Leases—February 2016 (amended January 2017): The amended guidance requires most lease obligations to be recognized as a right-of-use asset with a corresponding liability on the balance sheet. The guidance also requires additional qualitative and quantitative disclosures to assess the amount, timing, and uncertainty of cash flows arising from leases. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The guidance should be implemented for the earliest period presented using a modified retrospective approach, which includes optional practical expedients primarily focused on leases that commence before the effective date. The qualitative and quantitative effects of adoption are still being analyzed. We are in the process of evaluating the full impact the new guidance will have on our financial statements.

Revenue from Contracts with Customers—May 2014 (amended January 2017) : The new guidance is intended to clarify the principles for recognizing revenue and to develop a common revenue standard for GAAP applicable to revenue transactions. Existing industry guidance will be eliminated. The FASB has recently issued

 

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VICI PROPERTIES INC.

NOTES TO BALANCE SHEETS (CONTINUED)

(UNAUDITED)

 

several amendments to the standard, including clarification on accounting for and identifying performance obligations. This guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those reporting periods. The guidance should be applied using the full retrospective method or retrospectively with the cumulative effect initially applying the guidance recognized at the date of initial application. We anticipate adopting this standard effective January 1, 2018. We have performed a preliminary assessment and anticipate this standard will not have a material effect on our financial statements. We expect the most significant effect will be related to the accounting for the golf course revenue, which will be immaterial to the operations of VICI REIT. However, the quantitative effects of these changes are being analyzed. We are assessing the full effect the adoption of this standard will have on our financial statements.

Income Taxes—October 2016 : Amended guidance that addresses intra-entity transfers of assets other than inventory, which requires the recognition of any related income tax consequences when such transfers occur. The amendments should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. Amendments are effective for fiscal years beginning after December 15, 2017, and interim reporting periods within those years. Early adoption is permitted. We are assessing the impact the adoption of this standard will have on our financial statements.

Statement of Cash Flows—August 2016 : Amended guidance that addresses eight specific cash flow issues with the objective of reducing diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments should be applied retrospectively to each period presented. The amendments are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. We are currently assessing the effect the adoption of this standard will have on our financial statements.

Note 4—Income Taxes

To qualify as a REIT, VICI REIT must meet certain organizational, income, asset, and distribution tests. Accordingly, VICI REIT will generally not be subject to corporate U.S. Federal or state income tax to the extent that it makes qualifying distributions to its shareholders and provided it satisfies on a continuing basis, through actual investment and operating results, the REIT requirements, including certain asset, income, distribution, and share ownership tests. VICI REIT intends to comply with these requirements and maintain REIT status. However, VICI REIT may still be subject to Federal excise tax, as well as certain state and local income and franchise taxes and VICI Golf LLC will be subject to Federal, state and local income taxes.

Note 5—Commitments and Contingencies

Litigation

In the ordinary course of business, from time to time, VICI REIT may be subject to legal claims and administrative proceedings, none of which are currently outstanding.

Note 6—Subsequent Events

Emergence Date

Pursuant to the Plan, on the Emergence Date, the historical business of CEOC was separated by means of a spin-off transaction whereby the Caesars Debtors’ real property assets (subject to certain exceptions) and golf course operations were transferred to VICI REIT. New CEOC and certain of New CEOC’s subsidiaries lease the transferred real property assets pursuant to the Master Leases. CEC guarantees the payment obligations of the tenants under the Master Leases and an affiliate of CEC manages the operating activities of such properties.

 

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VICI PROPERTIES INC.

NOTES TO BALANCE SHEETS (CONTINUED)

(UNAUDITED)

 

Management estimates that the properties transferred have a fair value range between $8.2 billion and $8.4 billion.

Accounting Impact of Emergence

Upon emergence, the Company will apply fresh start accounting to its consolidated financial statements. Our Annual Report on Form 10-K for the fiscal year ending ended December 31, 2017 will reflect the consummation of the Plan and the adoption of fresh start accounting.

In the application of fresh start accounting, the Company allocates the enterprise value to the fair value of assets and liabilities in conformity with the guidance for the acquisition method of accounting for business combinations. The amount remaining after allocation of the enterprise value to the fair value of identified tangible and intangible assets and liabilities, if any, is reflected as goodwill and subject to periodic evaluation for impairment. In addition to fresh start accounting, the Company’s consolidated financial statements will reflect all effects of the transactions contemplated by the Plan. Accordingly, the Company’s consolidated balance sheet at December 31, 2017 will not be comparable to its balance sheet for periods prior to the adoption of fresh start accounting and prior to accounting for the effects of the Plan.

At emergence, management estimates that Real Estate Investments accounted for using the direct financing method have a fair value between $7.0 billion and $7.1 billion; Real Estate Investments accounted for using the operating method have a fair value between $1.1 billion and $1.2 billion; and property and equipment transferred that is used in operations have a fair value between $50 million and $100 million. In accordance with the Plan, CEOC transferred $55.7 million of cash to the Company at emergence.

In addition, at emergence, the Company entered into debt agreements totaling $4.917 billion, of which $250.0 million was exchanged for shares of VICI REIT’s common stock on November 6, 2017 (see “ The Mandatory Conversions ” below).

Rentals under Direct Financing and Operating Leases

On the Emergence Date, VICI REIT entered into three Master Leases with New CEOC and certain of its subsidiaries. They include a separate lease for Caesars Palace Las Vegas (“CPLV Lease Agreement”) which provides for a fixed annual base rent for each of the first seven years of the lease term of $165.0 million per year; a separate lease for the Harrah’s Joliet facilities (“Joliet Lease Agreement”) in which the Company’s portion of the base rent for the first seven years of the lease term is 80% of $39.6 million per year; and a lease for all other properties leased to New CEOC and certain of its subsidiaries (“Non-CPLV Lease Agreement”) which provides for a fixed annual base rent for each of the first seven years of the lease term of $433.3 million per year. The Master Leases provide for an initial term of 15 years commencing on the Emergence Date, with no purchase option. At the option of New CEOC, the Master Leases may be extended for up to four five-year renewal terms beyond the initial term, on substantially the same terms and conditions. In addition, each lease agreement contains a fixed annual rent escalator on the base rent equal to the greater of 2% or the increase in the Consumer Price Index commencing on the second year of the lease with respect to the CPLV Lease Agreement and on the sixth year of the lease with respect to the Joliet and Non-CPLV Lease Agreements.

 

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VICI PROPERTIES INC.

NOTES TO BALANCE SHEETS (CONTINUED)

(UNAUDITED)

 

Future Minimum Rental Payments Due from Noncancelable Leases (1)(2)

 

     (In millions)  

Remaining 2017

   $ 149.0  

2018

     630.6  

2019

     633.9  

2020

     637.2  

2021

     640.7  

2022 and thereafter

     24,948.3  
  

 

 

 

Total

   $ 27,639.7  
  

 

 

 

 

(1) Amounts exclude any variable rental payments during the terms of the Master Leases
(2) Amounts include renewal terms and minimum fixed annual rent escalator (minimum 2% annual increases described above)

Golf Course Use Agreement

On the Emergence Date, subsidiaries of VICI Golf LLC, a subsidiary of the Company, entered into a golf course use agreement (the “Golf Course Use Agreement”) with New CEOC and Caesars Enterprise Services, LLC (“CES”) (collectively, the “users”), whereby the users were granted certain priority rights and privileges with respect to access and use of certain golf course properties. Payments under the Golf Course Use Agreement are comprised of a $10.0 million annual membership fee, use fees and minimum rounds fees. The membership fee is subject to increase or decrease, as applicable, whenever rent under the Non-CPLV Lease Agreement is adjusted in accordance with the terms of the Non-CPLV Lease Agreement; and the adjusted membership fee will be calculated based on the proportionate increase or decrease, as applicable, in rent under the Non-CPLV Lease Agreement. The use fees and minimum round fees are subject to the Annual Escalator beginning at the times provided under the Golf Course Use Agreement.

Common Stock and Preferred Stock

Effective on the Emergence Date, the Company has authority to issue 750,000,000 shares of stock, consisting of 700,000,000 shares of Common Stock, $0.01 par value per share and 50,000,000 shares of Preferred Stock, $0.01 par value per share (“Preferred Stock”), of which 12,000,000 shares has been classified as Series A Convertible Preferred Stock, $0.01 par value per share (“Series A Preferred Stock”).

On the Emergence Date, the Company issued 177,160,494 shares of common stock and 12,000,000 shares of Series A preferred stock with an aggregate liquidation preference of $300.0 million ($25 per share) to CEOC and certain of its subsidiaries in exchange for the Properties and Caesars Entertainment Outdoor. CEOC distributed such shares to certain of its creditors and to certain backstop parties.

Pursuant to the Plan and a Backstop Commitment Agreement dated September 12, 2017, the backstop purchasers agreed, or otherwise had the right, to purchase a specified number of the shares of the Series A preferred stock for cash, with the cash proceeds of such purchases being paid to certain creditors of CEOC. An aggregate of 6,002,907 shares of Series A preferred stock were purchased by the backstop purchasers on the Emergence Date (the “Backstop Shares”) at a price of $20.83 per share and an aggregate of 5,997,093 shares of Series A preferred stock were issued to certain creditors of CEOC as a portion of the recovery on account of their claims.

 

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VICI PROPERTIES INC.

NOTES TO BALANCE SHEETS (CONTINUED)

(UNAUDITED)

 

The Mandatory Conversions

On November 6, 2017, all of the Series A preferred stock automatically converted into 51,433,692 shares of the Company’s common stock (the “Mandatory Preferred Conversion”). No additional consideration was payable in connection with the Mandatory Preferred Conversion.

In addition, on the Emergence Date, CPLV Mezz 3, a special-purpose parent entity of CPLV, issued a junior tranche of CPLV Mezzanine Debt in an amount of $250.0 million to institutional accredited investors, which debt automatically converted into an aggregate of 17,630,700 shares of the Company’s common stock on November 6, 2017 (the “Mandatory Mezzanine Conversion”). No additional consideration was payable in connection with the Mandatory Mezzanine Conversion.

Indebtedness Following Emergence from Bankruptcy

 

     Final
Maturity
     Rate      Book Value at Emergence
(Dollars in millions)
 

Senior Secured First Lien Term Loans (“Term Loans”)

     2022        Variable        1,638.4  

First Priority Senior Secured Notes (“First Lien Notes”)

     2022        Variable        311.7  

Second Priority Senior Secured Notes (“Second Lien Notes”)

     2023        8.00%        766.9  

CPLV Debt (1)

        

CPLV Market Debt

     2022        4.36%        1,550.0  

CPLV Mezzanine Debt (2)

     2022        Various        650.0  
        

 

 

 

Total Debt

         $ 4,917.0  
  

 

 

 

 

(1) Syndicated debt issued to third parties for cash. Proceeds were distributed to certain creditors of CEOC under the Plan.
(2) Three tranches of mezzanine debt for $650.0 million were issued under the CPLV Mezzanine Loan Agreement. The $250.0 million junior tranche was automatically exchanged for Company stock on November 6, 2017.

Senior Secured Credit Facilities

On the Emergence Date, VICI PropCo and certain of its subsidiaries entered into a first lien credit agreement (the “Credit Agreement”) among VICI PropCo, as borrower, the lenders party thereto, and Wilmington Trust, National Association, as administrative agent, governing the senior secured credit facilities. The senior secured credit facilities provide for senior secured financing consisting of senior secured first lien term loans (“Term Loans”) distributed to certain of CEOC’s creditors pursuant to the terms of the Plan in an aggregate principal amount of $1,638.4 million which mature in 2022. The senior secured credit facilities have capacity to add incremental loans in an aggregate amount of: (a) $60.0 million plus (b) $1,450.0 million plus (c) additional amounts, subject to the borrower and its restricted subsidiaries not exceeding certain leverage ratios.

VICI PropCo will pay interest quarterly on the Term Loans at a rate per annum, reset quarterly, equal to (i) with respect to any ABR borrowings, the sum of ABR (as defined in the Credit Agreement) and 2.50% and (ii) with respect to Eurocurrency borrowings, the sum of the Adjusted Eurocurrency Rate (as defined in the Credit agreement) and 3.50%. The senior secured credit facilities mature on October 15, 2022.

VICI PropCo’s material, domestic wholly-owned subsidiaries, other than CPLV, certain CPLV-related entities and VICI FC Inc. are guarantors. The senior secured credit facilities are secured by a pledge of

 

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VICI PROPERTIES INC.

NOTES TO BALANCE SHEETS (CONTINUED)

(UNAUDITED)

 

substantially all of the existing and future property and assets of VICI PropCo and the restricted subsidiary guarantors, including a pledge of the capital stock of the wholly-owned domestic subsidiaries held by VICI PropCo and the subsidiary guarantors and 65% of any capital stock of first-tier foreign subsidiaries held by VICI PropCo and the subsidiary guarantors, in each case subject to exceptions.

Under the senior secured credit facilities, VICI PropCo is required to meet specified leverage ratios in order to take certain actions, such as incurring certain debt. In addition, the senior secured credit facilities contain customary representations and warranties, events of default and affirmative and negative covenants.

The Term Loans are prepayable at VICI PropCo’s option, in whole or in part, at any time, and from time to time, at prices defined in the credit agreement, provided, however, that no “make-whole” or prepayment premium shall be payable in the event of any voluntary prepayment in cash of all Term Loans prior to the six-month anniversary of the issuance of such loans on the Emergence Date.

First Lien Notes

On the Emergence Date, VICI PropCo and its wholly-owned subsidiary, VICI FC Inc. (together, the “notes co-issuers”) entered into an indenture (the “First Lien Indenture”) with UMB Bank, National Association, as trustee, governing the $311.7 million in aggregate principal amount of First-Priority Senior Secured Floating Rate Notes due 2022 (the “First Lien Notes”) issued pursuant to the Plan. The First Lien Notes mature on October 15, 2022.

The notes co-issuers will pay interest quarterly on the First Lien Notes at a rate per annum, reset quarterly, equal to the sum of LIBOR (as defined in the First Lien Indenture), with a floor of 1.00%, and 3.50%.

The First Lien Notes are senior secured obligations and rank equally and ratably in right of payment with all existing and future senior obligations and senior to all future subordinated indebtedness. The First Lien Notes are guaranteed on a senior secured basis by the subsidiary guarantors that guarantee indebtedness under the senior secured credit facilities and are secured by a first-priority security interest, subject to permitted liens, in the collateral that also secures the senior secured credit facilities. Neither VICI REIT nor certain subsidiaries of VICI PropCo, including CPLV and its subsidiaries, are subject to the covenants of the indenture governing the First Lien Notes or are guarantors of the First Lien Notes.

The First Lien Indenture contains customary events of default and affirmative and negative covenants. Generally, if an event of default occurs, the trustee or the holders of at least 30% in principal amount of the then outstanding First Lien Notes may declare the principal of and accrued but unpaid interest on all of the First Lien Notes to be due and payable immediately.

The First Lien Notes are redeemable at VICI PropCo’s option, in whole or in part, at any time, or from time-to-time at prices defined in the indenture. No premium is payable upon redemption if all of the first lien notes are redeemed on or before April 15, 2018. In addition, prior to the first anniversary of such issuance, up to 35% of the original aggregate principal amount of the First Lien Notes may be redeemed at VICI PropCo’s option with the net cash proceeds of certain issuances of common or preferred equity by VICI PropCo or VICI REIT, at a price equal to 100% of the principal amount of the First Lien Notes redeemed plus a premium equal to the interest rate per annum on the First Lien Notes in effect on the date on which notice of redemption is given plus accrued and unpaid interest to the redemption date; provided, however, that at least 50% of the original aggregate principal amount of the First Lien Notes must remain outstanding after any such redemption.

 

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VICI PROPERTIES INC.

NOTES TO BALANCE SHEETS (CONTINUED)

(UNAUDITED)

 

Second Lien Notes

On the Emergence Date, VICI PropCo and its wholly-owned subsidiary, VICI FC Inc. entered into an indenture (the “Second Lien Indenture”) among the notes co-issuers, the subsidiary guarantors party thereto from time to time, and UMB Bank, National Association, as trustee, governing the $766.9 million in aggregate principal amount of 8.00% Second-Priority Senior Secured Notes due 2023 (the “Second Lien Notes”) issued pursuant to the Plan. The Second Lien Notes mature on October 15, 2023.

The notes co-issuers will pay interest semi-annually on the Second Lien Notes at a rate per annum of 8.00%.

The Second Lien Notes are senior secured obligations and rank equally and ratably in right of payment with all existing and future senior obligations and senior to all future subordinated indebtedness. The Second Lien Notes are guaranteed on a senior secured basis by the subsidiary guarantors that guarantee indebtedness under the senior secured credit facilities and the First Lien Notes and secured by a second-priority security interest, subject to permitted liens, in the same collateral that secures the senior secured credit facilities and the First Lien Notes. Neither VICI REIT nor certain subsidiaries of VICI PropCo, including CPLV and its subsidiaries, are subject to the covenants of the indenture governing the Second Lien Notes or will be guarantors of the Second Lien Notes.

The Second Lien Indenture contains customary events of default and affirmative and negative covenants. Generally, if an event of default occurs, the trustee or the holders of at least 30% in principal amount of the then outstanding Second Lien Notes may declare the principal of and accrued but unpaid interest on all of the Second Lien Notes to be due and payable immediately.

The Second Lien Notes are redeemable at VICI PropCo’s option, in whole or in part, at any time, or from time-to-time, at the prices defined in the indenture. In addition, prior to the third anniversary of such issuance, up to 35% of the original aggregate principal amount of the Second Lien Notes may be redeemed at VICI PropCo’s option with the net cash proceeds of certain issuances of common or preferred equity by VICI PropCo or VICI REIT, at a price equal to 108% of the principal amount of the Second Lien Notes redeemed plus accrued and unpaid interest to the redemption date; provided, however, that at least 50% of the original aggregate principal amount of the Second Lien Notes must remain outstanding after any such redemption.

CPLV Debt

On the Emergence Date, CPLV and its special-purpose parent entities entered into loan documents governing $2,200.0 million of debt borrowed from third parties, including (i) $1,550.0 million of asset level real estate mortgage financing from various third-party financial institutions (the “CPLV CMBS Debt”), and (ii) three tranches of mezzanine debt in the aggregate principal amount of $650.0 million (the “CPLV Mezzanine Debt,” and together, the “CPLV Debt”). The proceeds of the CPLV Debt were distributed to certain of CEOC’s creditors pursuant to the terms of the Plan.

CPLV CMBS Debt

The $1,550.0 million of CPLV CMBS Debt is secured by all of the assets of CPLV, including, but not limited to, CPLV’s (1) fee interest (except as provided in (2)) in and to CPLV, (2) leasehold interest with respect to Octavius Tower, and (3) interest in the CPLV Lease Agreement and all related agreements, including the Master Lease Agreements. The CPLV CMBS Debt is a first priority lien, subject only to permitted encumbrances and an obligation to repay a specified sum with interest. The CPLV CMBS Debt was evidenced by certain promissory notes and secured by a deed of trust that created a mortgage lien on the fee and/or leasehold interest of CPLV.

 

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VICI PROPERTIES INC.

NOTES TO BALANCE SHEETS (CONTINUED)

(UNAUDITED)

 

The CPLV CMBS Debt matures on October 10, 2022. Interest payments are due monthly on the CPLV CMBS Notes at a rate per annum of 4.36%.

The loan documents governing the CPLV CMBS Debt contain covenants limiting CPLV’s ability to, among other things: (i) incur additional debt; (ii) enter into certain transactions with its affiliates; (iii) consolidate, merge, sell or otherwise dispose of its assets; and (iv) allow transfers of its direct or indirect equity interests.

CPLV Mezzanine Debt

On the Emergence Date, three direct and indirect special-purpose parent entities of CPLV issued $650.0 million of CPLV Mezzanine Debt, which was placed by various third-party financial institutions. The CPLV Mezzanine Debt was issued in three tranches: senior, intermediate and junior, in an aggregate amount of $200.0 million, $200.0 million and $250.0 million, respectively. The proceeds from such financing were distributed to certain CEOC creditors pursuant to the terms of the Plan. Each tranche of CPLV Mezzanine Debt was secured by each borrower’s equity interests in its direct wholly-owned subsidiary. The CPLV Mezzanine Debt is an obligation to repay the principal amount with interest, and is evidenced by one or more promissory notes and secured by, among other things, a pledge of equity interests or other similar security instrument that creates a lien on the equity interests held by the respective special purpose entity.

The loan documents governing the CPLV Mezzanine Debt contain covenants limiting each issuer’s ability to, among other things: (i) incur additional debt; (ii) enter into certain transactions with its affiliates; (iii) consolidate, merge, sell or otherwise dispose of its assets; and (iv) allow transfers of its direct or indirect equity interests.

Each of the three tranches has, or had, in the case of the junior tranche, a contractual maturity date of October 31, 2022. Interest payments are, or were, in the case of the junior tranche, due monthly on each tranche of the CPLV Mezzanine Debt at a rate per annum of 6.75% on the senior tranche, 7.45% on the intermediate tranche, and 8.07% on the junior tranche, respectively.

The junior tranche of $250.0 million was automatically exchanged for 17,630,700 shares of the Company’s common stock on November 6, 2017.

 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Caesars Entertainment Operating Company, Inc.

We have audited the accompanying balance sheet of VICI Properties Inc. (wholly-owned by Caesars Entertainment Operating Company, Inc. (“CEOC”)) (the “Company”) as of December 31, 2016. This balance sheet is the responsibility of the Company’s management. Our responsibility is to express an opinion on this balance sheet based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the balance sheet is free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the balance sheet, assessing the accounting principles used and significant estimates made by management, as well as evaluating the balance sheet presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, such balance sheet presents fairly, in all material respects, the financial position of the Company as of December 31, 2016, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the balance sheet, on January 15, 2015, CEOC and the entities that currently own the Company, filed for reorganization under Chapter 11 of the United States Bankruptcy Code. The accompanying balance sheet does not purport to reflect or provide for the consequences of the bankruptcy proceedings.

The accompanying balance sheet has been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the balance sheet, although CEOC’s plan of reorganization was confirmed by order of the Bankruptcy Court on January 17, 2017, several issues must be resolved before CEOC successfully emerges from bankruptcy. The Company’s ability to continue as a going concern is dependent upon CEOC’s ability to restructure its indebtedness and emerge from bankruptcy. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans concerning these matters are discussed in Note 1 to the balance sheet. The balance sheet does not include any adjustments that might result from the outcome of this uncertainty.

/s/ Deloitte & Touche, LLP

Las Vegas, Nevada

May 12, 2017

 

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VICI PROPERTIES INC.

BALANCE SHEET

 

     December 31, 2016  

Assets

  

Total assets

   $  
  

 

 

 

Commitments and contingencies (Note 6)

  

Member equity

  

Membership interest

   $  
  

 

 

 

Total member equity

   $  
  

 

 

 

See accompanying Notes to Balance Sheet

 

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VICI PROPERTIES INC.

NOTES TO BALANCE SHEET

In these notes, the words “VICI REIT,” “Company,” “we,” “our,” and “us” refer to VICI Properties Inc., unless otherwise stated or the context requires otherwise. In addition, “CEOC” refers to Caesars Entertainment Operating Company, Inc.

Note 1—Business Formation and Basis of Presentation

Business Formation

On January 15, 2015, CEOC and certain of its subsidiaries (the “Debtors”) voluntarily filed for reorganization under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) with the United States Bankruptcy Court for the Northern District of Illinois (the “Bankruptcy Court”). As a result of this filing, CEOC operates as a debtor-in-possession under the Bankruptcy Code. CEOC’s plan of reorganization (the “Plan”) was confirmed by the Bankruptcy Court on January 17, 2017.

VICI REIT was organized as a limited liability company and wholly owned subsidiary of CEOC in Delaware on July 5, 2016 and was subsequently converted to a corporation under the laws of the State of Maryland. Pursuant to CEOC’s Plan, CEOC intends to engage in a series of transactions in connection with its emergence from bankruptcy in which subsidiaries of CEOC will transfer certain real estate assets (the “Properties”) and four golf course businesses (the “Caesars Entertainment Outdoor”) to VICI REIT in exchange for 100% of VICI REIT’s common stock and Series A preferred stock and other consideration, including debt issued by a subsidiary of VICI REIT and the proceeds of mortgage backed debt issued by another subsidiary of VICI REIT, for distribution to CEOC’s creditors in accordance with the Plan (the “Transactions”).

Upon CEOC’s emergence from bankruptcy, VICI REIT will be a stand-alone entity owned by certain creditors of CEOC, primarily engaged in the business of owning, acquiring and developing gaming, hospitality and entertainment destinations. A subsidiary of VICI REIT will then lease the Properties back to CEOC under lease agreements (the “Leases”). VICI REIT will also own and operate four golf courses under a taxable REIT subsidiary.

VICI REIT expects to conduct its real property business through an operating partnership and Caesars Entertainment Outdoor through a taxable REIT subsidiary. VICI REIT intends to make an election on its Federal income tax return for its taxable year ending December 31, 2017 to be treated as a “real estate investment trust” (a “REIT”).

Basis of Presentation

The accompanying balance sheet is prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Statements of operations, cash flows and shareholder’s equity are not presented as there has been no activity since the date of inception through December 31, 2016.

VICI REIT generally will not be subject to U.S. Federal income taxes on its taxable income to the extent that it annually distributes at least 90% of its taxable income to shareholders and maintains its intended qualification as a REIT. To the extent VICI REIT annually distributes less than 100% of its taxable income, it will be subject to pay tax at regular corporate rates on any undistributed net taxable income.

Going Concern

Our Balance Sheet has been prepared on a going concern basis. The following information reflects the results of management’s assessment of VICI REIT’s ability to continue as a going concern.

 

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VICI PROPERTIES INC.

NOTES TO BALANCE SHEET (CONTINUED)

 

Although the Plan was confirmed by order of the Bankruptcy Court on January 17, 2017, several issues must be resolved before CEOC successfully emerges from bankruptcy. VICI REIT’s ability to continue as a going concern is dependent upon CEOC’s ability to restructure its indebtedness and emerge from bankruptcy. The Debtors emergence from bankruptcy is still subject to numerous conditions and third party approvals, including a favorable resolution to the continued ability to use cash collateral. These uncertainties raise substantial doubt about VICI REIT’s ability to continue as a going concern. The Balance Sheet does not include any adjustments that might result from the outcome of uncertainties. There can be no assurance that the restructuring of the Debtors will be completed as contemplated in the Plan.

Reportable Segments

Our real property business and our golf course business represent two reportable segments. The real property business segment will consist of leased real property and represent the substantial majority of our business. The golf course business segments will consist of four golf courses, which will each be operating segments and will be aggregated into one reportable segment.

Note 2—Summary of Significant Accounting Policy

Concentrations of Credit Risk

Following the Transactions, all of the real estate holdings of VICI REIT (other than Caesars Entertainment Outdoor) will be leased to CEOC, and most of VICI REIT’s revenues will be derived from the Leases. Other than VICI REIT having a single tenant from which it will derive most of its revenue, management does not believe there are any other significant concentrations of credit risk.

Note 3—Recently Issued Accounting Pronouncements

Business Combinations—January 2017 : Updated amendments intend to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisition (or disposals) of assets or businesses. Amendments in this update provide a more robust framework to use in determining when a set of assets and activities is a business and to provide more consistency in applying the guidance, reduce the costs of application, and make the definition of a business more operable. Amendments should be applied on a prospective basis on or after the effective date. No disclosures are required at transition. The amendments are effective to annual periods beginning after December 15, 2017, including interim periods within those periods. Early adoption is allowed as follows: (1) transactions for which the acquisition date occurs before the issuance date or effective date of the amendments, only when the transaction has not been reported in financial statements that have been issued or made available for issuance and (2) transactions in which a subsidiary is deconsolidated or a group of assets is derecognized that occur before the issuance date or effective date of the amendments, only when the transaction has not been reported in financial statements that have been issued or made available for issuance. We are currently assessing the effect the adoption of this standard will have on our financial statements.

Financial Instruments-Credit Losses—June 2016 (amended January 2017) : Amended guidance replaces the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of broader range of reasonable and supportable information to inform credit loss estimates. Amendments affect entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables and any other financial assets not excluded from the scope that have the contractual right to receive cash. Amendments are effective for fiscal years

 

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VICI PROPERTIES INC.

NOTES TO BALANCE SHEET (CONTINUED)

 

beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. We are currently assessing the effect the adoption of this standard will have on our financial statements.

Leases—February 2016 (amended January 2017) : The amended guidance requires most lease obligations to be recognized as a right-of-use asset with a corresponding liability on the balance sheet. The guidance also requires additional qualitative and quantitative disclosures to assess the amount, timing, and uncertainty of cash flows arising from leases. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The guidance should be implemented for the earliest period presented using a modified retrospective approach, which includes optional practical expedients primarily focused on leases that commence before the effective date. The qualitative and quantitative effects of adoption are still being analyzed. We are in the process of evaluating the full impact the new guidance will have on our financial statements.

Revenue from Contracts with Customers—May 2014 (amended January 2017) : The new guidance is intended to clarify the principles for recognizing revenue and to develop a common revenue standard for GAAP applicable to revenue transactions. Existing industry guidance will be eliminated. The FASB has recently issued several amendments to the standard, including clarification on accounting for and identifying performance obligations. This guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those reporting periods. The guidance should be applied using the full retrospective method or retrospectively with the cumulative effect initially applying the guidance recognized at the date of initial application. We anticipate adopting this standard effective January 1, 2018. We are currently in the process of our analysis and anticipate this standard will not have a material effect on our financial statements. We expect the most significant effect will be related to the accounting for the golf course revenue, which will be immaterial to the operations of VICI REIT. However, the quantitative effects of these changes are still being analyzed. We are currently assessing the full effect the adoption of this standard will have on our financial statements.

Income Taxes—October 2016 : Amended guidance addresses intra-entity transfers of assets other than inventory, which requires the recognition of any related income tax consequences when such transfers occur. The amendments should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. Amendments are effective for fiscal years beginning after December 15, 2017, and interim reporting periods within those years. Early adoption is permitted. We are currently assessing the impact the adoption of this standard will have on our financial statements.

Statement of Cash Flows—August 2016 : Amended guidance addresses eight specific cash flow issues with the objective of reducing diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments should be applied retrospectively to each period presented. The amendments are effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted. We are currently assessing the effect the adoption of this standard will have on our financial statements.

Note 4—Member’s Equity

In conjunction with VICI REIT’s conversion to a corporation under the laws of the State of Maryland, VICI REIT authorized 100,000,000 shares of common stock with a par value of $0.01 per share. On May 5, 2017, VICI REIT issued 1,000 shares of common stock to CEOC.

Note 5—Income Taxes

VICI REIT intends to elect to be taxed as a REIT as defined under Section 856(a) of the Internal Revenue Code, commencing with its taxable year ending December 31, 2017. To qualify as a REIT, VICI REIT must meet

 

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VICI PROPERTIES INC.

NOTES TO BALANCE SHEET (CONTINUED)

 

certain organizational, income, asset, and distribution tests. Accordingly, VICI REIT will generally not be subject to corporate U.S. Federal or state income tax to the extent that it makes qualifying distributions to its shareholders and provided it satisfies on a continuing basis, through actual investment and operating results, the REIT requirements, including certain asset, income, distribution, and share ownership tests. VICI REIT currently intends to comply with these requirements and maintain REIT status. However, VICI REIT may still be subject to Federal excise tax, as well as certain state and local income and franchise taxes.

Note 6—Commitments and Contingencies

In the ordinary course of business, from time to time, VICI REIT expects to be subject to legal claims and administrative proceedings, none of which are currently outstanding.

Note 7—Subsequent Events

Events subsequent to December 31, 2016 were evaluated through May 12, 2017, the date this audited Balance Sheet was available to be issued, and no events were identified requiring further disclosure.

 

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C OMBINED STATEMENT OF INVESTMENTS OF REAL ESTATE ASSETS

TO BE CONTRIBUTED TO VICI PROPERTIES INC.

(UNAUDITED)

 

(In millions)    September 30,
2017
     December 31,
2016
 

Assets

     

Property, net

   $ 4,831.0      $ 4,856.6  
  

 

 

    

 

 

 

Total assets

   $ 4,831.0      $ 4,856.6  
  

 

 

    

 

 

 

See accompanying Notes to Combined Statement of Investments of Real Estate Assets to be Contributed to VICI Properties Inc.

 

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NOTES TO COMBINED STATEMENT OF INVESTMENTS OF REAL ESTATE ASSETS

TO BE CONTRIBUTED TO VICI PROPERTIES INC.

(UNAUDITED)

In these notes, the words “VICI REIT,” “Company,” “we,” “our,” and “us” refer to VICI Properties Inc., unless otherwise stated or the context requires otherwise. “VICI PropCo” refers to VICI Properties 1 LLC, a Delaware limited liability company, which through its subsidiaries own the real estate assets transferred by Caesars Entertainment Operating Company, Inc. (“CEOC”) to VICI REIT on the Emergence Date.

In addition, we refer to the Combined Statement of Investments of Real Estate Assets to be Contributed to VICI Properties Inc. as the “Combined Statement of Investments of Real Estate Assets.”

On October 6, 2017 (the “Emergence Date”), CEOC merged with and into CEOC, LLC, a Delaware limited liability company (“CEOC”), with CEOC surviving the merger. See “Explanatory Note” in this prospectus.

Note 1—Business Formation and Basis of Presentation

Business Formation

On January 15, 2015, CEOC and certain of its subsidiaries (the “Caesars”) voluntarily filed for relief under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) with the United States Bankruptcy Court for the Northern District of Illinois (the “Bankruptcy Court”). As a result of this filing, CEOC operated as a debtor-in-possession under the Bankruptcy Code. CEOC’s plan of reorganization (the “Plan”) was confirmed by the Bankruptcy Court on January 17, 2017.

VICI Properties Inc. was organized as a limited liability company in Delaware on July 5, 2016 and was subsequently converted to a corporation under the laws of the State of Maryland. VICI REIT intends to elect to be treated as a “real estate investment trust” (“REIT”) for Federal income tax purposes. As of September 30, 2017, VICI REIT had not conducted operations and had no assets or liabilities.

On the Emergence Date, CEOC emerged from bankruptcy and completed the restructuring as contemplated by the Plan in which subsidiaries of CEOC contributed certain real estate assets (the “Properties”) and the assets and operations comprising CEOC’s four golf course businesses (“Caesars Entertainment Outdoor”) to VICI REIT (the “Transactions”). VICI REIT is an owner, acquirer and developer of gaming, hospitality and entertainment destinations.

The accompanying Combined Statement of Investments of Real Estate Assets reflects financial information as of September 30, 2017 relating to the owned real estate gaming and related facilities that were transferred from CEOC to VICI REIT on the Emergence Date.

Basis of Presentation

The accompanying Combined Statement of Investments of Real Estate Assets reflects the assets directly attributable to CEOC’s real estate holdings to be owned by VICI REIT, with the exception of Caesars Entertainment Outdoor. The Combined Statement of Investments of Real Estate Assets is combined on the basis of common control and is prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”). Management believes the assumptions underlying the Combined Statement of Investments of Real Estate Assets are reasonable; however, the Combined Statement of Investments of Real Estate Assets may not necessarily reflect VICI REIT’s financial position in the future or what their financial position would have been had VICI REIT operated as a standalone company during the periods presented.

 

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NOTES TO COMBINED STATEMENT OF INVESTMENTS OF REAL ESTATE ASSETS

TO BE CONTRIBUTED TO VICI PROPERTIES INC. (CONTINUED)

(UNAUDITED)

 

The Properties

 

Bally’s Atlantic City    Harrah’s Reno
Bluegrass Downs    Harvey’s Lake Tahoe
Caesars Atlantic City    Horseshoe Bossier City
Caesars Palace Las Vegas    Horseshoe Council Bluffs
Harrah’s Gulf Coast    Horseshoe Hammond
Harrah’s Council Bluffs    Horseshoe Southern Indiana
Harrah’s Joliet (1)    Horseshoe Tunica
Harrah’s Lake Tahoe    Louisiana Downs
Harrah’s Metropolis    Tunica Roadhouse
Harrah’s North Kansas City    Other property (2)

 

(1) Owned by Harrah’s Joliet LandCo LLC, a joint venture of which VICI PropCo is the 80% owner and the managing member.
(2) Consists primarily of miscellaneous vacant land holdings.

Note 2—Summary of Significant Accounting Policies

Estimates are required in order to prepare the financial statements in conformity with US GAAP. Significant estimates, judgments, and assumptions are required in a number of areas, including, but not limited to: the application of fresh start reporting; determining the useful lives of real estate properties; and evaluating the impairment of long-lived assets. The judgment on such estimates and underlying assumptions is based on our historical experience that we believe is reasonable under the circumstances. In many instances changes in the accounting estimates are likely to occur from period to period. Actual results may differ from the estimates.

Concentrations of Credit Risk

Following the Emergence Date, all of the real estate holdings of VICI REIT (other than those of Caesars Entertainment Outdoor) are leased to New CEOC and certain of its subsidiaries, and substantially all of VICI REIT’s revenues (other than those of Caesars Entertainment Outdoor) are derived from the underlying leases. Other than VICI REIT having a single tenant from which it derives substantially all of its revenue, management does not believe there are any other significant concentrations of credit risk.

Useful Lives of Real Estate Properties

Additions to land and buildings are stated at cost. We capitalize the costs of improvements that extend the life of the asset. We expense maintenance and repair costs as incurred. Gains or losses on the dispositions of property and equipment are recognized in the period of disposal.

Depreciation is calculated using the straight-line method over the shorter of the estimated useful life of the asset or the related lease as follows:

 

Land improvements

     12 years  

Buildings and improvements

     5 to 40 years  

Long Lived Assets

We have significant capital invested in our long-lived assets, and judgments are made in determining their estimated useful lives and salvage values and if or when an asset (or asset group) has been impaired. The

 

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NOTES TO COMBINED STATEMENT OF INVESTMENTS OF REAL ESTATE ASSETS

TO BE CONTRIBUTED TO VICI PROPERTIES INC. (CONTINUED)

(UNAUDITED)

 

accuracy of these estimates affects the amount of depreciation and amortization expense recognized in our financial results and whether we have a gain or loss on the disposal of an asset. We assign lives to our assets based on our standard policy, which is established by management as representative of the useful life of each category of asset.

We monitor events and circumstances that could indicate that the carrying amount of our real estate investments may not be recoverable or realized. When events or changes in circumstances indicate that a potential impairment has occurred or that the carrying value of a real estate investment may not be recoverable, we use an estimate of the undiscounted value of expected future operating cash flows to determine whether the real estate investment is impaired. If the undiscounted cash flows plus net proceeds expected from the disposition of the asset is less than the carrying value of the assets, we recognize an impairment charge equivalent to the amount required to reduce the carrying value of the asset to its estimated fair value. We group our real estate investments together by property, the lowest level for which identifiable cash flows are available, in evaluating impairment. In assessing the recoverability of the carrying value, we make assumptions regarding future cash flows and other factors. Factors considered in performing this assessment include current operating results, market and other applicable trends and residual values, as well as the effect of obsolescence, demand, competition and other factors. If these estimates or related assumptions change in the future, we may be required to record an impairment loss. Changes in these assumptions and estimates could have a material impact on the analysis and the Combined Statement of Investments of Real Estate Assets.

Note 3—Property

 

     (In millions)  
     September 30, 2017     December 31, 2016  

Land and improvements

   $ 2,505.5     $ 2,492.6  

Buildings and improvements

     3,646.5       3,571.7  
  

 

 

   

 

 

 

Total property

     6,152.0       6,064.3  

Less: accumulated depreciation

     (1,321.0     (1,207.7
  

 

 

   

 

 

 

Total property, net

   $ 4,831.0     $ 4,856.6  
  

 

 

   

 

 

 

Note 4—Subsequent Events

As discussed in Note 1, CEOC emerged from bankruptcy on October 6, 2017 and in connection with the restructuring, contributed to VICI REIT land and buildings with a book value of approximately $4.8 billion, net of accumulated depreciation.

Management estimates that the properties transferred have a fair value range between $8.2 billion and $8.4 billion

The Company completed its subsequent events review through November 13, 2017, the date on which the Financial Statements were available to be issued, and noted no further items requiring disclosure.

 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Caesars Entertainment Operating Company, Inc.

We have audited the accompanying combined statement of investments (the “combined statement”) of real estate assets to be contributed to VICI Properties Inc. as of December 31, 2016. Our audit also included the financial statement schedule listed in the Index to the financial statements. This combined statement and financial statement schedule are the responsibility of Caesars Entertainment Operating Company, Inc.’s (the “Company”) management. Our responsibility is to express an opinion on this combined statement and financial statement schedule based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States) and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined statement is free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined statement, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall combined statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, such combined statement presents fairly, in all material respects, real estate assets to be contributed to VICI Properties Inc. as of December 31, 2016, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic combined statement taken as a whole, present fairly, in all material respects, the information set forth therein.

/s/ Deloitte & Touche, LLP

Las Vegas, Nevada

May 12, 2017

 

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COMBINED STATEMENT OF INVESTMENTS OF REAL ESTATE ASSETS

TO BE CONTRIBUTED TO VICI PROPERTIES INC.

 

(In millions)    December 31,
2016
 

Assets

  

Property, net

   $ 4,856.6  
  

 

 

 

Total assets

   $ 4,856.6  
  

 

 

 

See accompanying Notes to Combined Statement of Investments of Real Estate Assets to be Contributed to VICI Properties, Inc.

 

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NOTES TO COMBINED STATEMENT OF INVESTMENTS OF REAL ESTATE ASSETS

TO BE CONTRIBUTED TO VICI PROPERTIES INC.

In these notes, we refer to the Combined Statement of Investments of Real Estate Assets to be Contributed to VICI Properties Inc. as the “Combined Statement of Investments of Real Estate Assets.”

Note 1—Business Formation and Basis of Presentation

Business Formation

Caesars Entertainment Operating Company, Inc. (“CEOC”) owns, operates and manages gaming and resort properties. On January 15, 2015, CEOC and certain of its subsidiaries (the “Debtors”) voluntarily filed for reorganization under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) with the United States Bankruptcy Court for the Northern District of Illinois (the “Bankruptcy Court”). As a result of this filing, CEOC operates as a debtor-in-possession under the Bankruptcy Code. CEOC’s plan of reorganization (the “Plan”) was confirmed by the Bankruptcy Court on January 17, 2017.

VICI Properties Inc. (“VICI REIT”) was organized as a limited liability company in Delaware on July 5, 2016 and was subsequently converted to a corporation under the laws of the State of Maryland. VICI REIT intends to elect to be treated as a “real estate investment trust” (“REIT”) for federal income tax purposes. CEOC intends to engage in a series of transactions in connection with its emergence from bankruptcy in which subsidiaries of CEOC will transfer certain real estate assets (the “Properties”) and the assets and operations comprising CEOC’s historical golf course business (the “Caesars Entertainment Outdoor”) to VICI REIT (the “Transactions”). Following effectiveness of the Plan, VICI REIT will be an owner, acquirer and developer of gaming, hospitality and entertainment destinations.

The accompanying Combined Statement of Investments of Real Estate Assets reflects certain owned real estate gaming and related facilities that will be transferred from CEOC to VICI REIT upon effectiveness of the Plan.

Basis of Presentation

The accompanying Combined Statement of Investments of Real Estate Assets reflects the assets directly attributable to CEOC’s real estate holdings to be owned by VICI REIT, with the exception of the four golf course businesses. The Combined Statement of Investments of Real Estate Assets is combined on the basis of common control and is prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Management believes the assumptions underlying the Combined Statement of Investments of Real Estate Assets are reasonable; however, the Combined Statement of Investments of Real Estate Assets may not necessarily reflect VICI REIT’s financial position in the future or what their financial position would have been had VICI REIT operated as a stand-alone company.

 

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NOTES TO COMBINED STATEMENT OF INVESTMENTS OF REAL ESTATE ASSETS

TO BE CONTRIBUTED TO VICI PROPERTIES INC. (CONTINUED)

 

The Properties

 

Bally’s Atlantic City    Harrah’s Reno
Bluegrass Downs    Harvey’s Lake Tahoe
Caesars Atlantic City    Horseshoe Bossier City
Caesars Palace Las Vegas    Horseshoe Council Bluffs
Harrah’s Gulf Coast    Horseshoe Hammond
Harrah’s Council Bluffs    Horseshoe Southern Indiana
Harrah’s Joliet    Horseshoe Tunica
Harrah’s Lake Tahoe    Louisiana Downs
Harrah’s Metropolis    Tunica Roadhouse
Harrah’s North Kansas City    Other property (1)

 

(1) Consists primarily of miscellaneous vacant land holdings.

Going Concern

The Combined Statement of Investments of Real Estate Assets has been prepared on a going concern basis. The following information reflects the results of management’s assessment of VICI REIT’s ability to continue as a going concern.

Although the Plan was confirmed by order of the Bankruptcy Court on January 17, 2017, several issues must be resolved before CEOC successfully emerges from bankruptcy. VICI REIT’s ability to continue as a going concern is dependent upon CEOC’s ability to restructure its indebtedness and emerge from bankruptcy. The Debtors’ emergence from bankruptcy is still subject to numerous conditions and third party approvals, including a favorable resolution to the continued ability to use cash collateral. These uncertainties raise substantial doubt about VICI REIT’s ability to continue as a going concern. The Combined Statement of Investments of Real Estate Assets does not include any adjustments that might result from the outcome of uncertainties. There can be no assurance that the restructuring of the Debtors will be completed as contemplated in the Plan.

Note 2—Summary of Significant Accounting Policies

Long-Lived Assets

We have significant capital invested in our long-lived assets, and judgments are made in determining their estimated useful lives and salvage values and if or when an asset (or asset group) has been impaired. The accuracy of these estimates affects the amount of depreciation and amortization expense recognized in our financial results and whether we have a gain or loss on the disposal of an asset. We assign lives to our assets based on our standard policy, which is established by management as representative of the useful life of each category of asset.

We review the carrying value of our long-lived assets whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. Other factors considered by management in performing this assessment may include current operating results, trends, prospects, and third-party appraisals, as well as the effect of demand, competition, and other economic, legal, and regulatory factors. In estimating expected future cash flows for determining whether an asset is impaired, assets are grouped at the lowest level of identifiable cash flows, which, for most of our assets, is the individual property. We typically estimate the fair value of assets starting with a “Replacement Cost New” approach and then deduct appropriate amounts for both functional and economic

 

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NOTES TO COMBINED STATEMENT OF INVESTMENTS OF REAL ESTATE ASSETS

TO BE CONTRIBUTED TO VICI PROPERTIES INC. (CONTINUED)

 

obsolescence to arrive at the fair value estimates. These analyses are sensitive to management assumptions and the estimates of the obsolescence factors. Changes in these assumptions and estimates could have a material impact on the analyses and the Combined Statement of Investments of Real Estate Assets.

Land is recorded at cost and buildings are recorded at cost, less accumulated depreciation. Additions to property and equipment are stated at cost. We capitalize the costs of improvements that extend the life of the asset. We expense maintenance and repair costs as incurred. Gains or losses on the dispositions of property and equipment are recognized in the period of disposal.

Depreciation is calculated using the straight-line method over the shorter of the estimated useful life of the asset or the related lease as follows:

 

Land improvements

     12 years  

Buildings and improvements

     5 to 40 years  

Note 3—Property, Net

 

(In millions)    December 31, 2016  

Land and improvements

   $ 2,492.6  

Buildings and improvements

     3,571.7  
  

 

 

 

Total property

     6,064.3  

Less: accumulated depreciation

     (1,207.7
  

 

 

 

Total property, net

   $ 4,856.6  
  

 

 

 

Note 4—Concentration of Credit Risks

Following the Transactions, all of the real estate holdings of VICI REIT (other than Caesars Entertainment Outdoor) will be leased to CEOC, and substantially all of VICI REIT’s revenues will be derived from the leases with CEOC. Other than VICI REIT having a single tenant from which it will derive substantially all of its revenue, management does not believe there are any other significant concentrations of credit risk.

Note 5—Subsequent Events

Events subsequent to December 31, 2016 were evaluated through May 12, 2017, the date this audited Combined Statement of Investments of Real Estate Assets was available to be issued, and no events were identified requiring further disclosure.

 

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PROPERTIES TO BE CONTRIBUTED TO VICI PROPERTIES INC.

SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION

December 31, 2016

 

(In millions)               Acquisition Costs     Costs Capitalized Subsequent
to Acquisition
    Gross Amount at Which
Carried at Close of Period (c)
                         

Property

  Location     Encumbrances     Land and
Improvements
    Building
and
Improvements
    Land and
Improvements
    Building
and
Improvements
    Land
and
Improvements
    Building
and
Improvements
    Total (c)     Accumul
ated
Depreciation (e)
    Date
Acquired
    Useful
Life
 

Bally’s Atlantic City

   
Atlantic
City, NJ
 
 
    a       b       b       b       b     $ 27.8     $ 31.6     $ 59.4     $ 11.0       b       d  

Bluegrass Downs

   
Paducah,
KY
 
 
    a       b       b       b       b       0.5             0.5             b       d  

Caesars Atlantic City

   
Atlantic
City, NJ
 
 
    a       b       b       b       b       12.4       52.4       64.8       8.5       b       d  

Caesars Palace Las Vegas

   
Las Vegas,
NV
 
 
    a       b       b       b       b       1,518.1       1,414.1       2,932.2       503.8       b       d  

Harrah’s Gulf Coast

    Biloxi, MS       a       b       b       b       b       28.5       117.7       146.2       36.5       b       d  

Harrah’s Council Bluffs

   
Council
Bluffs, IA
 
 
    a       b       b       b       b       16.5       59.6       76.1       22.4       b       d  

Harrah’s Joliet

    Joliet, IL       a       b       b       b       b       10.3       117.9       128.2       37.4       b       d  

Harrah’s Lake Tahoe

   
Lake
Tahoe, NV
 
 
    a       b       b       b       b       32.1       120.1       152.2       38.7       b       d  

Harrah’s Metropolis

   
Metropolis,
IL
 
 
    a       b       b       b       b       5.9       99.6       105.5       39.8       b       d  

Harrah’s North Kansas City

   
N Kansas
City, MO
 
 
    a       b       b       b       b       8.9       173.7       182.6       67.2       b       d  

Harrah’s Reno

    Reno, NV       a       b       b       b       b       10.0       19.6       29.6       3.1       b       d  

Harvey’s Lake Tahoe

   
Lake
Tahoe, NV
 
 
    a       b       b       b       b       13.9       98.6       112.5       28.9       b       d  

Horseshoe Bossier City

   
Bossier
City, LA
 
 
    a       b       b       b       b       8.1       197.0       205.1       58.3       b       d  

Horseshoe Council Bluffs

   
Council
Bluffs, IA
 
 
    a       b       b       b       b       8.0       78.3       86.3       27.6       b       d  

Horseshoe Hammond

   
Hammond,
IN
 
 
    a       b       b       b       b       19.0       518.3       537.3       164.6       b       d  

Horseshoe Southern Indiana

   
Elizabeth,
IN
 
 
    a       b       b       b       b       7.5       264.6       272.1       94.5       b       d  

Horseshoe Tunica

   
Tunica,
MS
 
 
    a       b       b       b       b       8.9       152.0       160.9       44.8       b       d  

Louisiana Downs

   
Bossier
City, LA
 
 
    a       b       b       b       b       8.0       5.1       13.1       2.0       b       d  

Tunica Roadhouse

   
Tunica,
MS
 
 
    a       b       b       b       b       14.5       35.9       50.4       14.0       b       d  

Other property

      a       b       b       b       b       733.7       15.6       749.3       4.6       b       d  
             

 

 

   

 

 

   

 

 

   

 

 

     
              $ 2,492.6     $ 3,571.7     $ 6,064.3     $ 1,207.7      
             

 

 

   

 

 

   

 

 

   

 

 

     

 

(a) All assets were pledged by Caesars Entertainment Operating Company, Inc. (“CEOC”), which owned and operated the real property, to secure obligations under CEOC’s credit facilities. None of the subsidiaries that pledged the above referenced real properties are being contributed to V1C1 Properties Inc. (“VICI REIT”) in connection with CEOC’s emergence from bankruptcy and all such subsidiaries will remain operating subsidiaries of CEOC following its emergence from bankruptcy. However, in connection with CEOC’s emergence, the above referenced real properties will be released from the above-mentioned pledges in connection with their transfer to VICI REIT.
(b) We have prepared Schedule III—Real Estate and Accumulated Depreciation (“Schedule III”) omitting certain of the required information articulated in Securities and Exchange Commission Rule 12-28 in Regulation S-X. Rule 12-28 requires property-specific information for the initial cost capitalized, costs capitalized subsequent to acquisition, and the date of construction and/or acquisition; however, these disclosures have been omitted from Schedule III on the basis that compiling these disclosures on a site-by-site basis would be impracticable because the real estate assets were constructed by other companies that were later acquired by our parent, CEOC.
(c) The aggregate cost of land, buildings and improvements for Federal income tax purposes is approximately $7,227.1 million.
(d) Depreciation is computed based on the following estimated useful lives:

 

Land improvements

     12 years  

Buildings and improvements

     5 to 40 years  

 

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(e) The net book value of real estate assets was $4,856.6 million as of December 31, 2016 and was comprised of the following activity:

 

(In millions)    Real Estate      Accumulated Depreciation  

Balance as of January 1,

   $ 5,916.0      $ 1,027.9  

Additions

     148.3         

Depreciation expense

            179.8  
  

 

 

    

 

 

 

Balance as of December 31,

   $ 6,064.3      $ 1,207.7  
  

 

 

    

 

 

 

 

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ANNEX I

UNAUDITED RECONCILIATION OF NON-GAAP FINANCIAL MEASURES OF

CAESARS AND CEOC

The following table reconciles net income/(loss) of Caesars and CEOC to Adjusted EBITDA of Caesars and CEOC, respectively, for the periods indicated. Commencing January 15, 2015, the results of CEOC, a subsidiary of Caesars, are no longer consolidated with Caesars due to CEOC’s bankruptcy proceedings. As a result, in its publicly available filings with the SEC subsequent to January 15, 2015, Caesars began reporting the Adjusted EBITDA of Caesars and CEOC separately.

 

    

 

Year Ended December 31,

    Twelve
Months Ended
September 30,

2017
 

(in millions)

   2014     2015 (7)     2016    

Caesars

        

Net income/(loss) attributable to Caesars

   $ (2,783   $ 5,920     $ (3,569   $ (2,997

Net income/(loss) attributable to non-controlling interests

     (83     132       822       152  

Net (income)/loss from discontinued operations

     143       (155     (3,380     (29

Income tax provision/(benefit)

     (596     (119     27       73  

Deconsolidation and restructuring of CEOC and other (1)

     95       (6,115     5,758       2,744  

Interest expense

     2,669       683       599       560  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income/(loss) from operations

     (555     346       257       503  

Depreciation and amortization

     658       374       439       460  

Impairment of goodwill

     695                    

Impairment of tangible and other intangible assets

     299       1              

Other operating costs (2)

     203       152       89       63  

Corporate expense

     232       174       166       158  

Caesars Interactive Entertainment stock-based compensation

     49       31       189       1  

EBITDA attributable to discontinued operations

     (7                  
  

 

 

   

 

 

   

 

 

   

 

 

 

Property EBITDA

   $ 1,574     $ 1,078     $ 1,140     $ 1,185  
  

 

 

   

 

 

   

 

 

   

 

 

 

Corporate expense

     (232     (174     (166     (158

Stock-based compensation expense (3)

     45       62       40       30  

Other items (4)

     75       50       56       59  
  

 

 

   

 

 

   

 

 

   

 

 

 

Caesars Adjusted EBITDA (5)

   $ 1,462     $ 1,016     $ 1,070     $ 1,116  
  

 

 

   

 

 

   

 

 

   

 

 

 

CEOC

        

Net income/(loss)

     $ (2,434   $ 337     $ 425  

Loss from discontinued operations, net of income taxes

       13       4       1  

Income tax provision/(benefit)

       (26     14       12  

Other income, including interest income

       (8     (47     (22

Reorganization items

       2,615       223       129  

Interest expense

       345       260       256  
    

 

 

   

 

 

   

 

 

 

Income/(loss) from operations

       504       791       801  
    

 

 

   

 

 

   

 

 

 

Depreciation and amortization

       347       379       363  

Write-downs, reserves, and project opening costs, net of recoveries

       81       9       45  

Impairment of intangible assets

       130              

(Gain)/loss on interests in non-consolidated affiliates

       (1     (2     (63

Corporate expense

       67       72       105  

 

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Year Ended December 31,

    Twelve
Months Ended
September 30,

2017
 

(in millions)

   2014      2015 (7)     2016    

Acquisition and integration costs

      $ 6     $ 1     $ 4  

Amortization of intangible assets

        39       29       23  

Impact of consolidating The LINQ and Octavius Tower

        (14     (14     (14

EBITDA attributable to discontinued operations

              1        
     

 

 

   

 

 

   

 

 

 

Property EBITDA

      $ 1,160     $ 1,266     $ 1,264  
     

 

 

   

 

 

   

 

 

 

Corporate expense

        (67     (72     (105

Stock-based compensation expense

        1              

Other

        10       (48     (18
     

 

 

   

 

 

   

 

 

 

CEOC Adjusted EBITDA (6)

      $ 1,104     $ 1,146     $ 1,141  
     

 

 

   

 

 

   

 

 

 

Adjusted EBITDA of Caesars and CEOC

   $ 1,462      $ 2,120     $ 2,216     $ 2,257  
  

 

 

    

 

 

   

 

 

   

 

 

 

 

(1) Amounts during 2016 and 2017 primarily represent Caesars’ estimated costs in connection with CEOC’s restructuring. Amount during 2015 primarily represents Caesars’ gain recognized upon the deconsolidation of CEOC.
(2) Amounts primarily represent pre-opening costs incurred in connection with property openings and expansion projects at existing properties and costs associated with the acquisition and development activities and reorganization activities.
(3) Amounts represent stock-based compensation expense related to shares, stock options, and restricted stock units granted to the Caesars employees.
(4) Amounts represent add-backs and deductions from EBITDA, permitted under certain indentures. Such add-backs and deductions include litigation awards and settlements, costs associated with the restructuring and related litigation, severance and relocation costs, sign-on and retention bonuses, permit remediation costs, and business optimization expenses.
(5) In prior periods, as permitted under the indentures governing CEOC’s existing notes and the credit agreement governing CEOC’s senior secured credit facilities, Caesars presented adjustments to include 100% of the Adjusted EBITDA of Baluma Holdings. On May 18, 2017, Baluma Holdings sold its 55% share in Punta del Este Conrad in Uruguay to Enjoy S.A., giving Enjoy S.A. 100% ownership in the Punta del Este Conrad. Baluma Holdings received net proceeds from the transaction of approximately $180 million after distributions to certain minority investors. Because of the sale, Caesars’ Adjusted EBITDA excludes the Adjusted EBITDA of Baluma Holdings for all periods presented.
(6) In prior periods, as permitted under the indentures governing CEOC’s existing notes and the credit agreement governing CEOC’s senior secured credit facilities, CEOC presented adjustments to include 100% of the Adjusted EBITDA of Baluma Holdings. On May 18, 2017, Baluma Holdings sold its 55% share in Punta del Este Conrad in Uruguay to Enjoy S.A., giving Enjoy S.A. 100% ownership in the Punta del Este Conrad. Baluma Holdings received net proceeds from the transaction of approximately $180 million after distributions to certain minority investors. Because of the sale, CEOC’s Adjusted EBITDA excludes the Adjusted EBITDA of Baluma Holdings for all periods presented.
(7) Certain prior year amounts have been reclassified to conform to the current year’s presentation. For the year ended December 31, 2015, $51.8 million of depreciation expense previously reported as corporate expense was reclassified to depreciation and amortization expense.

 

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LOGO

HARRAH’S RENO RENO, NV HARRAH’S LAKE TAHOE STATELINE, NV 20 PROPERTIES 36 MILLION SQFT 150 RESTAURANTS/BARS 14K HOTEL ROOMS 4 CHAMPIONSHIP GOLF COURSES 1.3M SQFT OF GAMING SPACE 760K SQFT MEETING/CONFERENCE SPACE 50+ RETAIL OUTLETS 1,600 CONCERTS/LIVE SHOWS PER YEAR HORSESHOE BOSSIER CITY BOSSIER CITY, LA CAESARS ATLANTIC CITY ATLANTIC CITY, NJ HARVEYS TAHOE STATELINE, NV CAESARS PALACE LAS VEGAS, NV HARVEYS OUTDOOR AMPITHEATER STATELINE, NV INVEST IN THE EXPERIENCE TM VICI TM


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LOGO

VICI Properties Inc.

Common Stock

 

 

PROSPECTUS

 

 

Joint Book-Running Managers

Morgan Stanley

Goldman Sachs & Co. LLC

BofA Merrill Lynch

 

The date of this Prospectus is                      , 2018.


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PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

 

Item 31. Other Expenses of Issuance and Distribution

The following is a statement of the expenses estimated to be incurred by us in connection with the distribution of the securities registered under this Registration Statement:

 

Item

   Amount  

SEC Registration Fee

   $     *      

Printing Fees and Expenses

   $     *      

NYSE Listing Fee

   $     *      

Legal Fees and Expenses

   $     *      

Accounting Fees and Expenses

   $     *      

Miscellaneous

   $     *      
  

 

 

 

Total

   $     *      
  

 

 

 

 

* To be furnished by amendment

 

Item 32. Sales to Special Parties.

None.

 

Item 33. Recent Sales of Unregistered Securities.

On May 5, 2017, we issued 1,000 shares of our common stock to Caesars Entertainment Operating Company, Inc. (“CEOC”), our parent company prior to the Formation Date, pursuant to Section 4(a)(2) of the Securities Act. CEOC disposed of all such shares in connection with the Formation Transactions.

On October 6, 2017, VICI REIT issued 177,160,494 shares of common stock and 12,000,000 shares of Series A preferred stock with an aggregate liquidation preference of $300 million ($25 per share). On November 6, 2017, the Series A preferred stock automatically converted into an aggregate of 51,433,692 shares of VICI REIT’s common stock in the Mandatory Preferred Conversion. No additional consideration was paid in connection with the Mandatory Preferred Conversion.

Pursuant to the Plan of Reorganization and a Backstop Commitment Agreement dated September 12, 2017, backstop purchasers agreed, or otherwise had the right, to purchase a specified number of the shares of the Series A preferred stock for cash, with the cash proceeds of such purchases being paid to certain creditors of CEOC. 6,002,907 shares of Series A preferred stock were purchased by the backstop purchasers on the Formation Date (the “Backstop Shares”) at a price of $20.83 per share and 5,997,093 shares of Series A preferred stock were issued to creditors of CEOC as a portion of the recovery on account of their claims.

Pursuant to section 1145 of the Bankruptcy Code, the offering and issuance of the shares of VICI REIT’s common stock, Series A preferred stock and the shares of common stock issuable upon conversion of the Series A preferred stock (in each case, other than the Backstop Shares), are exempt from, among other things, the registration requirements of Section 5 of the Securities Act and any other applicable U.S. state or local law requiring registration prior to the offering, issuance, distribution, or sale of securities. The offering and issuance of the Backstop Shares and the common stock issuable in connection with the Mandatory Preferred Conversion are exempt from registration under Section 5 of the Securities Act in reliance on Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D under the Securities Act, as an offering to “accredited investors.” The issuance of the common stock in connection with the Mandatory Preferred Conversion of the Backstop Shares, to the extent constituting an offer or sale, is exempt from registration under Section 3(a)(9) of the Securities Act as an offering and sale to existing security holders.

 

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On October 6, 2017, VICI PropCo issued $311.7 million aggregate principal amount of First Lien Notes and $766.9 million in aggregate principal amount of Second Lien Notes. Pursuant to section 1145 of the Bankruptcy Code, the offering and issuance of these securities as contemplated by the Plan of Reorganization is exempt from, among other things, the registration requirements of Section 5 of the Securities Act and any other applicable U.S. state or local law requiring registration prior to the offering, issuance, distribution, or sale of securities.

In addition, on October 6, 2017, CPLV Mezz 3 LLC, a wholly owned subsidiary of VICI PropCo and an indirect wholly-owned subsidiary of VICI REIT, issued a junior tranche of CPLV Mezzanine Debt in an amount of $250.0 million to institutional accredited investors, which debt automatically converted on November 6, 2017 into an aggregate of 17,630,700 shares of VICI REIT’s common stock in the Mandatory Mezzanine Conversion. No additional consideration was paid in connection with the Mandatory Mezzanine Conversion. The net proceeds from the issuance of the junior tranche of the CPLV Mezzanine Debt were distributed to creditors under the Plan of Reorganization. The offering and issuance of the junior tranche of the CPLV Mezzanine Debt and the common stock issuable in connection with the Mandatory Mezzanine Conversion are exempt from registration under Section 5 of the Securities Act in reliance on Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D under the Securities Act, as an offering to “accredited investors.”

On December 22, 2017 we issued 54,054,053 shares of our common stock at a price of $18.50 per share, for net proceeds to the Company of approximately $963.9 million pursuant to that certain Common Stock Purchase Agreement, dated November 29, 2017, to the parties named therein, a copy of which is filed as Exhibit 10.10 to this Registration Statement. The net proceeds from the transaction of approximately $963.9 million were used to partially fund the purchase price for the Harrah’s Las Vegas Property with the balance for working capital and general corporate purposes. We made a cash payment equal to 2% of the committed amount, or $17 million in the aggregate, to the investors who entered into the purchase agreement with us at the closing of the private placement. The shares were sold in reliance upon an exemption from the registration requirements of the Securities Act of 1933, as amended, pursuant to Rule 506(c) of Regulation D promulgated thereunder.

 

Item 34. Indemnification of Directors and Officers.

Maryland law permits us to include a provision in our charter eliminating the liability of our directors and officers to us and our stockholders for money damages, except for liability resulting from (a) actual receipt of an improper benefit or profit in money, property or services or (b) a final judgment based upon a finding that his or her action or failure to act was the result of active and deliberate dishonesty by the director or officer and was material to the cause of action adjudicated. Our charter contains a provision that eliminates our directors’ and officers’ liability to us and our stockholders for money damages to the maximum extent permitted by Maryland law.

The MGCL requires us (unless our charter were to provide otherwise, which our charter does not) to indemnify a director or officer who has been successful, on the merits or otherwise, in the defense of any proceeding to which he or she is made or threatened to be made a party by reason of his or her service in that capacity. The MGCL permits us to indemnify our present and former directors and officers, among others, against judgments, penalties, fines, settlements and reasonable expenses actually incurred by them in connection with any proceeding to which they may be made or threatened to be made a party to, or witness in, by reason of their service in those or certain other capacities unless it is established that:

 

    the act or omission of the director or officer was material to the matter giving rise to the proceeding and (a) was committed in bad faith or (b) was the result of active and deliberate dishonesty;

 

    the director or officer actually received an improper personal benefit in money, property or services; or

 

    in the case of any criminal proceeding, the director or officer had reasonable cause to believe that the act or omission was unlawful.

 

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However, the MGCL prohibits us from indemnifying a director or officer who has been adjudged liable in a suit by us or on our behalf or in which the director or officer was adjudged liable on the basis that a personal benefit was improperly received. A court may order indemnification if it determines that the director or officer is fairly and reasonably entitled to indemnification, even though the director or officer did not meet the standard of conduct for indemnification set forth above or was adjudged liable on the basis that personal benefit was improperly received. However, indemnification for an adverse judgment in a suit by us or on our behalf, or for a judgment of liability on the basis that personal benefit was improperly received, is limited to expenses.

In addition, the MGCL permits us to advance reasonable expenses to a director or officer upon our receipt of (a) a written affirmation by the director or officer of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification and (b) a written undertaking by him or her or on his or her behalf to repay the amount paid or reimbursed if it is ultimately determined that the standard of conduct was not met.

Our charter provides that we will have the power to obligate ourselves, and our bylaws obligate us, to the maximum extent permitted by Maryland law in effect from time to time, to indemnify and, without requiring a preliminary determination of the ultimate entitlement to indemnification, pay or reimburse reasonable expenses in advance of final disposition of a proceeding to:

 

    any present or former director or officer who is made or threatened to be made a party to, or witness in, a proceeding by reason of his or her service in that capacity; or

 

    any individual who, while a director or officer of our company and at our request, serves or has served as a director, officer, partner, employee, agent, fiduciary, trustee, member or manager of another corporation, REIT, limited liability company, partnership, joint venture, trust, employee benefit plan or any other enterprise and who is made or threatened to be made a party to, or witness in, the proceeding by reason of his or her service in that capacity.

Our charter and bylaws provide that we have the power, with approval of our board, to provide such indemnification and advance of expenses to a person who served a predecessor of us in any such capacity described above and to any employee or agent of us or a predecessor of us.

We have entered into an indemnification agreement with each of our directors and executive officers.

We have purchased and maintain standard policies of insurance that provide coverage (i) to our directors and officers against loss rising from claims made by reason of breach of duty or other wrongful act and (ii) to us with respect to indemnification payments that it may make to such directors and officers.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling the registrant pursuant to the foregoing provisions, the registrant has been advised that in the opinion of the staff of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

The proposed form of Underwriting Agreement to be filed as Exhibit 1.1 to this Registration Statement provides for indemnification to our directors and officers by the underwriters against certain liabilities.

 

Item 35. Treatment of Proceeds from Stock Being Registered.

None of the proceeds will be contributed to an account other than the appropriate capital account.

 

Item 36. Financial Statements and Exhibits.

(A) Financial Statements. See Index to Financial Statements and the related notes thereto.

 

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(B) Exhibits. The following exhibits are filed as part of, or incorporated by reference into, this Registration Statement on Form S-11:

 

Exhibit

  

Description

    1.1*    Form of Underwriting Agreement
    2.1**    Third Amended Joint Plan of Reorganization of Caesars Entertainment Operating Company, Inc., et al., under Chapter 11 of the Bankruptcy Code, dated January 13, 2016 (incorporated by reference to Exhibit T3E-2 to VICI Properties 1 LLC’s Amendment No. 1 to Form T-3 with respect to the First-Priority Senior Secured Floating Rate Notes Due 2022 filed with the Securities and Exchange Commission on August 11, 2017 (File No. 022-29021))
    2.2**    Separation Agreement, dated as of October  6, 2017, between Caesars Entertainment Operating Company, Inc. and VICI Properties (incorporated, referenced to Exhibit 2.1 to VICI Properties Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 11, 2017 (File No. 000-55791))
    3.1**    Articles of Amendment and Restatement of VICI Properties Inc. (incorporated by reference to Exhibit 3.1 to VICI Properties Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 11, 2017 (File No. 000-55791))
    3.2**    Amended and Restated Bylaws of VICI Properties Inc. (incorporated by reference to Exhibit 3.2 to VICI Properties Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 11, 2017 (File No. 000-55791))
    4.1    Form of Certificate of Common Stock of VICI Properties Inc.
    4.2**    Indenture, dated as of October  6, 2017, among VICI Properties 1 LLC, VICI FC Inc., the subsidiary guarantors party thereto from time to time, and UMB Bank, National Association, as trustee, governing the First-Priority Senior Secured Floating Rate Notes due 2022 (incorporated by reference to Exhibit 4.1 to VICI Properties Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 11, 2017 (File No. 000-55791))
    4.3**    Indenture, dated as of October  6, 2017, among VICI Properties 1 LLC, VICI FC Inc., the subsidiary guarantors party thereto from time to time, and UMB Bank, National Association, as trustee, governing the 8.0% Second-Priority Senior Secured Notes due 2023 (incorporated by reference to Exhibit 4.2 to VICI Properties Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 11, 2017 (File No. 000-55791))
    4.4**    Registration Rights Agreement, dated as of October  6, 2017, between VICI Properties Inc. and the holders named therein (incorporated by reference to Exhibit 4.3 to VICI Properties Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 11, 2017 (File No. 000-55791))
    4.5    Registration Rights Agreement, dated as of December 22, 2017, between VICI Properties Inc. and the other parties named therein
    5.1*    Opinion of Ballard Spahr LLP regarding the legality of the securities being issued
    8.1*    Opinion of Kramer Levin Naftalis & Frankel LLP regarding tax matters

 

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Exhibit

  

Description

  10.1**    Lease (CPLV), dated as of October  6, 2017, by and among CPLV Property Owner LLC, Desert Palace LLC, Caesars Entertainment Operating Company, Inc. and CEOC, LLC, relating to the CPLV Facilities. (incorporated by reference to Exhibit 10.1 to VICI Properties Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 11, 2017 (File No. 000-55791))
  10.2**    Lease (Non-CPLV), dated as of October  6, 2017, by and among the entities listed on Schedules A and B thereto and CEOC, LLC, relating to the Non-CPLV Facilities. (incorporated by reference to Exhibit 10.2 to VICI Properties Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 11, 2017 (File No. 000-55791))
  10.3**    Lease (Joliet), dated as of October  6, 2017, by and between Harrah’s Joliet Landco LLC and Des Plaines Development Limited Partnership, relating to the Joliet Facilities. (incorporated by reference to Exhibit 10.3 to VICI Properties Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 11, 2017 (File No. 000-55791))
  10.4**    Golf Course Use Agreement, dated as of October  6, 2017, by and among Rio Secco LLC, Cascata LLC, Chariot Run LLC, Grand Bear LLC, Caesars Enterprise Services, LLC, CEOC, LLC, and, solely for purposes of Section  2.1(c) thereof, Caesars License Company, LLC. (incorporated by reference to Exhibit 10.4 to VICI Properties Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 11, 2017 (File No. 000-55791))
  10.5**    Management and Lease Support Agreement, dated as of October  6, 2017, by and among Desert Palace LLC, Caesars Entertainment Operating Company, Inc., CEOC, LLC, CPLV Manager, LLC, Caesars Entertainment Corporation, CPLV Property Owner LLC, and solely for certain articles and sections named therein, Caesars License Company, LLC and Caesars Enterprise Services, LLC relating to the CPLV Facilities. (incorporated by reference to Exhibit 10.5 to VICI Properties Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 11, 2017 (File No. 000-55791))
  10.6**    Management and Lease Support Agreement, dated as of October 6, 2017, by and among CEOC, LLC, the entities listed therein, Non-CPLV Manager, LLC, Caesars Entertainment Corporation and solely for certain articles and sections named therein, Caesars License Company, LLC and Caesars Enterprise Services, LLC relating to the Non-CPLV Facilities. (incorporated by reference to Exhibit  10.6 to VICI Properties Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 11, 2017 (File No. 000-55791))
  10.7**    Purchase and Sale Agreement, dated as of November  29, 2017, by and between Harrah’s Las Vegas, LLC, a Nevada limited liability company, as seller, and Claudine Property Owner LLC, a Delaware limited liability company, as buyer (incorporated by reference to Exhibit 10.1 to VICI Properties Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 30, 2017 (File No. 000-55791)).
  10.8**    Purchase and Sale Agreement, dated as of November  29, 2017, by and between Vegas Development LLC, a Delaware limited liability company, as seller and Eastside Convention Center, LLC, a Delaware limited liability company, as buyer (incorporated by reference to Exhibit 10.2 to VICI Properties Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 30, 2017 (File No. 000-55791)).
  10.9**    Guaranty, made and entered into as of November  29, 2017 by VICI Properties I LLC, a Delaware limited liability company, as guarantor (incorporated by reference to Exhibit 10.3 to VICI Properties Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 30, 2017 (File No. 000-55791)).

 

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Exhibit

  

Description

10.10**    Common Stock Purchase Agreement, dated as of November  29, 2017, between the Company and each purchaser, or the investment advisor or manager for one or purchasers identified on Schedule I thereto (incorporated by reference to Exhibit 10.4 to VICI Properties Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 30, 2017 (File No. 000-55791)).
10.11**    Management and Lease Support Agreement, dated as of October  6, 2017, by and among Des Plaines Development Limited Partnership, Joliet Manager, LLC, Caesars Entertainment Corporation, Harrah’s Joliet Landco LLC and solely for certain articles and sections named therein, Caesars License Company, LLC and Caesars Enterprise Services, LLC relating to the Joliet Facilities. (incorporated by reference to Exhibit 10.7 to VICI Properties Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 11, 2017 (File No. 000-55791))
10.12   

Amended and Restated Right of First Refusal Agreement, dated as of December 22, 2017, by and between Caesars Entertainment Corporation and VICI Properties L.P. (incorporated by reference to Exhibit 10.2 to VICI Properties Inc.’s Current Report on Form 8-K filed with the SEC on December 26, 2017 (File No. 000-55791))

10.13**    Call Right Agreement, dated as of October  6, 2017, by and between VICI Properties L.P. and Caesars Entertainment Corporation relating to Harrah’s New Orleans. (incorporated by reference to Exhibit 10.9 to VICI Properties Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 11, 2017 (File No. 000-55791))
10.14**    Call Right Agreement, dated as of October  6, 2017, by and between VICI Properties L.P. and Caesars Entertainment Corporation relating to Harrah’s Laughlin. (incorporated by reference to Exhibit 10.10 to VICI Properties Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 11, 2017 (File No. 000-55791))
10.15**    Call Right Agreement, dated as of October  6, 2017, by and between VICI Properties L.P. and Caesars Entertainment Corporation relating to Harrah’s Atlantic City. (incorporated by reference to Exhibit 10.11 to VICI Properties Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 11, 2017 (File No. 000-55791))
10.16**    Tax Matters Agreement, dated as of October  6, 2017, by and among Caesars Entertainment Corporation, CEOC, LLC, VICI Properties Inc., VICI Properties L.P. and CPLV Property Owner LLC. (incorporated by reference to Exhibit 10.12 to VICI Properties Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 11, 2017 (File No. 000-55791))
10.17**    Loan Agreement, dated as of October  6, 2017, by and among CPLV Property Owner LLC, as borrower, JPMorgan Chase Bank, National Association, Barclays Bank PLC, Goldman Sachs Mortgage Company and Morgan Stanley Bank, N.A., as lenders, governing the CPLV CMBS Debt. (incorporated by reference to Exhibit 10.13 to VICI Properties Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 11, 2017 (File No. 000-55791))
10.18**    Mezzanine C Loan Agreement, dated as of October  6, 2017, by and among CPLV Mezz 3 LLC, Wilmington Savings Fund Society, FSB, as Administrative Agent and Collateral Agent, and the lenders party thereto, governing the junior mezzanine debt. (incorporated by reference to Exhibit  10.14 to VICI Properties Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 11, 2017 (File No. 000-55791))
10.19**    Mezzanine B Loan Agreement, dated as of October  6, 2017, by and among CPLV Mezz 2 LLC, Wilmington Savings Fund Society, FSB, as Administrative Agent and Collateral Agent, and the lenders party thereto, governing the intermediate mezzanine debt. (incorporated by reference to Exhibit 10.15 to VICI Properties Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 11, 2017 (File No. 000-55791))

 

II-6


Table of Contents

Exhibit

  

Description

10.20**    Mezzanine A Loan Agreement, dated as of October  6, 2017, by and among CPLV Mezz 1 LLC, Wilmington Savings Fund Society, FSB, as Administrative Agent and Collateral Agent, and the lenders party thereto, governing the senior mezzanine debt. (incorporated by reference to Exhibit  10.16 to VICI Properties Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 11, 2017 (File No. 000-55791))
10.21**    Mandatory Conversion Implementation Agreement, dated as of October  6, 2017, by and between VICI Properties Inc. and CPLV Mezz 3 LLC. (incorporated by reference to Exhibit 10.17 to VICI Properties Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 11, 2017 (File No. 000-55791))
10.22**    First Lien Credit Agreement, dated as of October  6, 2017, among VICI Properties 1 LLC, as the Borrower, the lenders party thereto, and Wilmington Trust, National Association, as Administrative Agent. (incorporated by reference to Exhibit 10.18 to VICI Properties Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 11, 2017 (File No. 000-55791))
10.23**    First Lien Intercreditor Agreement, dated as of October  6, 2017, among VICI Properties 1 LLC and VICI FC Inc., as the Borrowers, Wilmington Trust, National Association, as Collateral Agent and Authorized Representative under the Credit Agreement, UMB Bank, National Association, as the Initial Other Authorized Representative, and each additional Authorized Representative from time to time party hereto. (incorporated by reference to Exhibit 10.19 to VICI Properties Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 11, 2017 (File No. 000-55791))
10.24**    First Lien Collateral Agreement, dated as of October  6, 2017, among VICI Properties 1 LLC, VICI FC Inc., each Subsidiary Party thereto, and Wilmington Trust, National Association, as Collateral Agent. (incorporated by reference to Exhibit 10.20 to VICI Properties Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 11, 2017 (File No. 000-55791))
10.25**    Second Lien Intercreditor Agreement, dated as of October  6, 2017, among VICI Properties 1 LLC and VICI FC Inc., as the Borrowers, Wilmington Trust, National Association, as Credit Agreement Agent, UMB Bank, National Association, as the Initial Other First Priority Lien Obligations Agent, and each Other First Priority Lien Obligations Agent from time to time party hereto. (incorporated by reference to Exhibit 10.21 to VICI Properties Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 11, 2017 (File No. 000-55791))
10.26**    Second Lien Collateral Agreement, dated as of October  6, 2017, among VICI Properties 1 LLC, VICI FC Inc., each Subsidiary Party thereto, and UMB Bank, National Association, as Collateral Agent. (incorporated by reference to Exhibit 10.22 to VICI Properties Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 11, 2017 (File No. 000-55791))
10.27**    Amended and Restated Agreement of Limited Partnership of VICI Properties L.P. (incorporated by reference to Exhibit 10.23 to VICI Properties Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 11, 2017 (File No. 000-55791))
10.28**    Form of Indemnification Agreement, between VICI Properties Inc. and its directors and officers (incorporated by reference to Exhibit 10.20 to VICI Properties Inc.’s Registration Statement on Form 10 filed with the Securities and Exchange Commission on September 28, 2017 (File No. 000-55791))
10.29†**    Employment Agreement, dated as of October  6, 2017, by and between VICI Properties Inc. and Edward Pitoniak. (incorporated by reference to Exhibit 10.25 to VICI Properties Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 11, 2017 (File No. 000-55791))

 

II-7


Table of Contents

Exhibit

  

Description

10.30†**    Employment Agreement, dated as of October  6, 2017, by and between VICI Properties Inc. and John Payne. (incorporated by reference to Exhibit 10.26 to VICI Properties Inc.’s Current Report on Form  8-K filed with the Securities and Exchange Commission on October 11, 2017 (File No. 000-55791))
10.31†**    Employment Agreement, dated as of October 6, 2017, by and between VICI Properties Inc. and Mary  E. Higgins. (incorporated by reference to Exhibit 10.27 to VICI Properties Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 11, 2017 (File No. 000-55791))
10.32†    Employment Agreement, dated as of November 27, 2017 by and between VICI Properties Inc. and David Kieske
10.33†    Separation Agreement and Release, dated as of October 6, 2017, by and between VICI Properties, Inc. and Mary E. Higgins
10.34†**    VICI Properties Inc. 2017 Stock Incentive Plan (incorporated by reference to Exhibit 10.28 to VICI Properties Inc.’s Current Report on Form 8-K filed with the SEC on October 11, 2017 (File No. 000-55791))
10.35    Credit Agreement, dated as of December 22, 2017, among VICI Properties 1 LLC, as the borrower, Goldman Sachs Bank USA, as administrative agent and the other parties thereto (incorporated by reference to Exhibit 10.1 to VICI Properties Inc.’s Current Report on Form 8-K filed with the SEC on December 26, 2017 (File No. 000-55791))
10.36    Guaranty of Lease as of the 22nd day of December, 2017 by and between Caesars Resort Collection, LLC and Claudine Propco, LLC
10.37    Amended and Restated Lease dated as of December 22, 2017, by and among Claudine Propco, LLC and Harrah’s Las Vegas, LLC
10.38    Put-Call Agreement dated as of December 22, 2017, by and among Claudine Propco LLC, Vegas Development Land Owner LLC and 3535 LV Newco, LLC
21.1    Subsidiaries of VICI REIT
23.1    Consent of Deloitte & Touche LLP
23.2    Consent of Deloitte & Touche LLP
23.3    Consent of Deloitte & Touche LLP
23.4*    Consent of Ballard Spahr LLP (included in Exhibit 5.1)
23.5*    Consent of Kramer Levin Naftalis & Frankel LLP (included in Exhibit 8.1)
24.1**    Power of Attorney (included in signature page)
24.2    Power of Attorney of David Kieske

 

Management plan or arrangement
* To be filed by amendment
** Previously filed

 

Item 37. Undertakings.

(a) The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreements, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

 

II-8


Table of Contents

(b) Insofar as indemnification of liabilities arising under the Securities Act may be permitted to directors, officers or controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

(c) The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance under Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new Registration Statement relating to the securities offered therein, and this offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

II-9


Table of Contents

SIGNATURE

Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-11 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Las Vegas, Nevada, on January 16, 2018.

 

VICI Properties Inc.
By:  

/s/ Edward B. Pitoniak

  Name: Edward B. Pitoniak
  Title: Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated, on January 16, 2018.

 

Name

  

Title

/s/ Edward B. Pitoniak

   Chief Executive Officer (Principal Executive Officer) and Director
Edward B. Pitoniak   

/s/ David Kieske

   Chief Financial Officer (Principal Financial Officer)
David Kieske   

/s/ Kenneth J. Kuick

   Senior Vice President and Chief Accounting Officer (Principal Accounting Officer)
Kenneth J. Kuick   

*

   Chair of the Board of Directors
James Robert Abrahamson   

*

   Director
Eugene Irwin Davis   

*

   Director
Eric Littmann Hausler   

*

   Director
Craig Macnab   

*

   Director
Michael David Rumbolz   

*By:

 

/s/ Edward B. Pitoniak

Edward B. Pitoniak

  

Attorney-in-fact for the persons indicated

 

II-10

Exhibit 4.1

 

LOGO

THIS CERTIFIES THAT is the owner of CUSIP DATED COUNTER SIGNED AND REGISTERED: COMPUTER SHARE TRUST COMPANY, N.A. TRANSFER AGENT AND REGISTRAR, FULLY-PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF VICI Properties Inc. (hereinafter called the “Company”), transferable on the books of the Company in person or by duly authorized attorney, upon surrender of this Certificate properly endorsed. This Certificate and the shares represented hereby, are issued and shall be held subject to all of the provisions of the Charter and the Bylaws, as amended, of the Company (copies of which are on file with the Company and with the Transfer Agent), to all of which each holder, by acceptance hereof, assents. This Certificate is not valid unless countersigned and registered by the Transfer Agent and Registrar. Witness the facsimile seal of the Company and the facsimile signatures of its duly authorized officers. COMMON STOCK PAR VALUE $0.01 COMMON STOCK SEE REVERSE FOR CERTAIN DEFINITIONS SEE REVERSE FOR IMPORTANT NOTICE ON TRANSFER AND OWNERSHIP RESTRICTIONS AND OTHER INFORMATION Certificate Number Shares. VICI PROPERTIES INC. INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND President Treasurer By AUTHORIZED SIGNATURE May 5, 2017 MARYL AND IN C O RPORAT EVICI Properties Inc.ZQ|CERT#|COY|CLS|RGSTRY|ACCT#|TRANSTYPE|RUN#|TRANS#925652 10 9 DD-MMM-YYYY* * 000000* * * * * * * * * * * * * * * * * ** * * 000000* * * * * * * * * * * * * * * * ** * * * 000000* * * * * * * * * * * * * * * ** * * * * 000000* * * * * * * * * * * * * * ** * * * * * 000000* * * * * * * * * * * * * *** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample**** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr.Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample ****Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample**** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr.Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample ****Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Sample **** Mr. Sample** 000000* * Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** Shares**** 000000** S***ZERO HUNDRED THOUSAND ZERO HUNDRED AND ZERO*** MR. SAMPLE & MRS. SAMPLE & MR. SAMPLE & MRS. SAMPLE ZQ00000000 Certificate Numbers 1234567890/1234567890 1234567890/1234567890 1234567890/1234567890 1234567890/1234567890 1234567890/1234567890 1234567890/1234567890 Total Transaction Num/No.123456 Denom.123456 Total 1234567MR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 PO BOX 43004, Providence, RI 02940-3004 CUSIP XXXXXX XX X Holder ID XXXXXXXXXX Insurance Value 1,000,000.00 Number of Shares 123456 DTC 12345678 123456789012345 THIS CERTIFICATE IS TRANSFERABLE INCITIES DESIGNATED BY THE TRANSFER AGENT, AVAILABLE ONLINE AT www.computershare.com


LOGO

The IRS requires that the named transfer agent (“we”) report the cost basis of certain shares or units acquired after January 1, 2011. If your shares or units are covered by the legislation, and you requested to sell or transfer the shares or units using a specific cost basis calculation method, then we have processed as you requested. If you did not specify a cost basis calculation method, then we have defaulted to the first in, first out (FIFO) method. Please consult your tax advisor if you need additional information about cost basis. If you do not keep in contact with the issuer or do not have any activity in your account for the time period specified by state law, your property may become subject to state unclaimed property laws and transferred to the appropriate state. For value received, hereby sell, assign and transfer unto Shares Attorney Dated: 20 Signature: Signature: Notice: The signature to this assignment must correspond with the name as written upon the face of the certificate, in every particular, without alteration or enlargement, or any change whatever. PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE, OF ASSIGNEE) of the capital stock represented by the within Certificate, and do hereby irrevocably constitute and appoint to transfer the said stock on the books of the within-named Company with full power of substitution in the premises. . VICI PROPERTIES INC. IMPORTANT NOTICE THE COMPANY IS AUTHORIZED TO ISSUE CAPITAL STOCK OF MORE THAN ONE CLASS OR SERIES, CONSISTING OF COMMON STOCK AND ONE OR MORE CLASSES OR SERIES OF PREFERRED STOCK. THE BOARD OF DIRECTORS IS AUTHORIZED TO DETERMINE THE PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS OF ANY CLASS OR SERIES OF PREFERRED STOCK BEFORE THE ISSUANCE OF SUCH CLASS OR SERIES OF PREFERRED STOCK. THE COMPANY WILL FURNISH TO ANY STOCKHOLDER, ON REQUEST AND WITHOUT CHARGE, A FULL STATEMENT OF THE INFORMATION REQUIRED BY SECTION 2-211(b) OF THE CORPORATIONS AND ASSOCIATIONS ARTICLE OF THE ANNOTATED CODE OF MARYLAND WITH RESPECT TO THE DESIGNATIONS AND ANY PREFERENCES, CONVERSION AND OTHER RIGHTS, VOTING POWERS, RESTRICTIONS, LIMITATIONS AS TO DIVIDENDS AND OTHER DISTRIBUTIONS, QUALIFICATIONS, AND TERMS AND CONDITIONS OF REDEMPTION OF THE STOCK OF EACH CLASS WHICH THE COMPANY HAS AUTHORITY TO ISSUE AND, IF THE COMPANY IS AUTHORIZED TO ISSUE ANY PREFERRED OR SPECIAL CLASS IN SERIES, (I) THE DIFFERENCES IN THE RELATIVE RIGHTS AND PREFERENCES BETWEEN THE SHARES OF EACH SERIES TO THE EXTENT SET, AND (II) THE AUTHORITY OF THE BOARD OF DIRECTORS TO SET SUCH RIGHTS AND PREFERENCES OF SUBSEQUENT SERIES. THE FOREGOING SUMMARY DOES NOT PURPORT TO BE COMPLETE AND IS SUBJECT TO AND QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE CHARTER OF THE COMPANY, A COPY OF WHICH, WILL BE FURNISHED TO EACH HOLDER OF CAPITAL STOCK ON REQUEST AND WITHOUT CHARGE. REQUESTS FOR SUCH COPY MAY BE DIRECTED TO THE SECRETARY OF THE COMPANY AT ITS PRINCIPAL OFFICE. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON BENEFICIAL AND CONSTRUCTIVE OWNERSHIP AND TRANSFER FOR THE PURPOSE OF THE COMPANY’S MAINTENANCE OF ITS STATUS AS A REAL ESTATE INVESTMENT TRUST UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”). SUBJECT TO CERTAIN FURTHER RESTRICTIONS AND EXCEPT AS EXPRESSLY PROVIDED IN THE COMPANY’S CHARTER, (I) NO PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY OWN SHARES OF ANY CLASS OR SERIES OF THE COMPANY’S CAPITAL STOCK IN EXCESS OF 9.8% (IN VALUE OR IN NUMBER OF SHARES, WHICHEVER IS MORE RESTRICTIVE) OF THE AGGREGATE OUTSTANDING SHARES OF ANY SUCH CLASS OR SERIES OF THE COMPANY’S CAPITAL STOCK UNLESS SUCH PERSON IS AN EXCEPTED HOLDER (IN WHICH CASE THE EXCEPTED HOLDER LIMIT SHALL BE APPLICABLE); (II) NO PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY OWN SHARES OF CAPITAL STOCK THAT WOULD RESULT IN THE COMPANY BEING “CLOSELY HELD” UNDER SECTION 856(H) OF THE CODE OR OTHERWISE CAUSE THE COMPANY TO FAIL TO QUALIFY AS A REIT; AND (III) NO PERSON MAY TRANSFER SHARES OF CAPITAL STOCK IF SUCH TRANSFER WOULD RESULT IN THE SHARES BEING OWNED BY FEWER THAN 100 PERSONS. ANY PERSON WHO BENEFICIALLY OR CONSTRUCTIVELY OWNS OR ATTEMPTS TO BENEFICIALLY OR CONSTRUCTIVELY OWN SHARES OF CAPITAL STOCK WHICH OWNERSHIP CAUSES OR WILL CAUSE A PERSON TO BENEFICIALLY OR CONSTRUCTIVELY OWN CAPITAL STOCK IN EXCESS OR IN VIOLATION OF THE ABOVE LIMITATIONS MUST IMMEDIATELY NOTIFY THE COMPANY. ATTEMPTED TRANSFERS OF OWNERSHIP IN VIOLATION OF THESE RESTRICTIONS SHALL BE NULL AND VOID AB INITIO. IN ADDITION, IF ANY OF THE RESTRICTIONS ON TRANSFER OR OWNERSHIP ARE VIOLATED, THE SHARES REPRESENTED HEREBY WILL BE AUTOMATICALLY TRANSFERRED TO A TRUSTEE OF A TRUST FOR THE BENEFIT OF ONE OR MORE CHARITABLE BENEFICIARIES. IN ADDITION, UPON THE OCCURRENCE OF CERTAIN EVENTS, ATTEMPTED TRANSFERS IN VIOLATION OF THE RESTRICTIONS DESCRIBED ABOVE MAY BE NULL AND VOID AB INITIO. ALL TERMS USED IN THIS LEGEND HAVE THE MEANINGS DEFINED IN THE CHARTER OF THE COMPANY, AS THE SAME MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH, INCLUDING THE RESTRICTIONS ON TRANSFER AND OWNERSHIP, WILL BE FURNISHED TO EACH HOLDER OF SHARES OF CAPITAL STOCK ON REQUEST AND WITHOUT CHARGE. THE SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE HELD SUBJECT TO THE PROVISIONS OF THE CHARTER OF THE COMPANY TO PROTECT THE COMPANY AND AFFILIATED COMPANIES FROM, AMONG OTHER THINGS, DENIAL OR LOSS OR THREATENED DENIAL OR LOSS OF ANY GAMING LICENSE. THESE PROVISIONS PROVIDE THAT PERSONS OWNING OR CONTROLLING THE SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE SUBJECT TO, AMONG OTHERS, THE FOLLOWING RIGHTS, LIMITATIONS AND OBLIGATIONS: (I) THE OBLIGATION TO COMPLY WITH ALL APPLICABLE GAMING LAWS, INCLUDING BUT NOT LIMITED TO THE REQUIREMENT TO FILE APPLICATIONS FOR GAMING LICENSES, TO PROVIDE INFORMATION TO GAMING AUTHORITIES AND TO CONSENT TO THE PERFORMANCE OF ANY BACKGROUND INVESTIGATION REQUIRED BY GAMING AUTHORITIES, (II) THE OBLIGATION TO NOTIFY THE COMPANY OF THE OWNERSHIP OR CONTROL OF FIVE PERCENT (5%) OR MORE OF ANY CLASS OR SERIES OF THE COMPANY’S SECURITIES, (III) UPON NOTICE OF A DETERMINATION OF UNSUITABILITY OR DISQUALIFICATION OF THE PERSON OWNING OR CONTROLLING OF THE SECURITIES BY GAMING AUTHORITIES OR THE BOARD OR UPON THE DETERMINATION BY THE BOARD THAT THE PERSON OWNING OR CONTROLLING THE SECURITIES IS AN UNSUITABLE PERSON, THE RIGHT OF THE COMPANY TO REDEEM THE SECURITIES, AND (IV) UPON NOTICE OF A DETERMINATION OF UNSUITABILITY OR DISQUALIFICATION OF THE PERSON OWNING OR CONTROLLING THE SECURITIES BY GAMING AUTHORITIES OR UPON THE DETERMINATION BY THE BOARD THAT THE HOLDER OF THE SECURITIES IS AN UNSUITABLE PERSON, THE IMMEDIATE PROHIBITION AGAINST (A) THE RECEIPT OF ANY DIVIDEND, PAYMENT, DISTRIBUTION OR INTEREST WITH REGARD TO THE SECURITIES, (B) THE EXERCISE, DIRECTLY OR INDIRECTLY OR THROUGH ANY PROXY, TRUSTEE, OR NOMINEE, OF ANY VOTING OR OTHER RIGHT CONFERRED BY SUCH SECURITIES, AND SUCH SECURITIES SHALL NOT FOR ANY PURPOSES BE INCLUDED IN THE SECURITIES OF THE COMPANY OR THE APPLICABLE AFFILIATED COMPANY ENTITLED TO VOTE, (C) THE RECEIPT OF ANY REMUNERATION THAT MAY BE DUE TO SUCH PERSON, ACCRUING AFTER THE DATE OF SUCH NOTICE OF DETERMINATION OF UNSUITABILITY OR DISQUALIFICATION BY ANY GAMING AUTHORITY, IN ANY FORM FROM THE COMPANY OR ANY AFFILIATED COMPANY FOR SERVICES RENDERED OR OTHERWISE, OR (D) THE EXISTENCE OR CONTINUATION OF SUCH PERSON AS A MANAGER, OFFICER, PARTNER OR DIRECTOR OF THE COMPANY OR ANY AFFILIATED COMPANY. CERTAIN TERMS USED IN THIS LEGEND HAVE THE MEANINGS DEFINED IN ARTICLE VIII OF THE COMPANY’S CHARTER AS AMENDED FROM TIME TO TIME. A COPY OF THE CHARTER, INCLUDING THE PROVISIONS REFERRED TO IN THIS LEGEND, WILL BE SENT TO EACH STOCKHOLDER WHO SO REQUESTS, WITHOUT CHARGE. THE BOARD OF DIRECTORS MAY REQUIRE THE OWNER OF A LOST OR DESTROYED STOCK CERTIFICATE, OR HIS LEGAL REPRESENTATIVES, TO GIVE THE COMPANY A BOND TO INDEMNIFY IT AND ITS TRANSFER AGENTS AND REGISTRARS AGAINST ANY CLAIM THAT MAY BE MADE AGAINST THEM ON ACCOUNT OF THE ALLEGED LOSS OR DESTRUCTION OF ANY SUCH CERTIFICATE. Signature(s) Guaranteed: Medallion Guarantee Stamp THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (Banks, Stockbrokers, Savings and Loan Associations and Credit Unions) WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM—as tenants in common UNIF GIFT MIN ACT—Custodian (Cust) (Minor) TEN ENT—as tenants by the entireties under Uniform Gifts to Minors Act (State) JT TEN—as joint tenants with right of survivorship UNIF TRF MIN ACT—Custodian (until age) and not as tenants in common (Cust) under Uniform Transfers to Minors Act (Minor) (State) Additional abbreviations may also be used though not in the above list.

Exhibit 4.5

EXECUTION COPY

VICI PROPERTIES INC.

REGISTRATION RIGHTS AGREEMENT

This REGISTRATION RIGHTS AGREEMENT (this “ Agreement ”) is made and entered into as of December 22, 2017 by and among VICI Properties Inc., a Maryland corporation (the “ Company ”), and the Holders (as defined below) of Company Common Stock (as defined below) listed on Schedule I hereto. The Company and the Holders are referred to collectively herein as the “ Parties ”. Capitalized terms used herein have the meanings set forth in Section 1.

WITNESSETH:

WHEREAS, the Parties hereto have entered into that certain Common Stock Purchase Agreement, dated as of November 29, 2017 (the “ Purchase Agreement ”), which pursuant to which the Holders will purchase from the Company shares of Company Common Stock (the “ Transaction ”); and

WHEREAS, the Transaction is being consummated simultaneously herewith; and

WHEREAS, the Holders and the Company desire to enter into this Agreement to provide the Holders with certain rights relating to the registration of the Company Common Stock;

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by each Party, and intending to be legally bound, the Parties agree as follows:

1.      Definitions . As used in this Agreement, the following terms shall have the respective meanings set forth in this Section 1 :

Affiliate ” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 144 under the Securities Act.

Agreement ” has the meaning set forth in the preamble.

Automatic Shelf Registration Statement ” means an “automatic shelf registration statement” as defined in Rule 405.

beneficially owned ”, “ beneficial ownership ” and similar phrases have the same meanings as such terms have under Rule 13d-3 (or any successor rule then in effect) under the Exchange Act, except that in calculating the beneficial ownership of any Holder, such Holder shall be deemed to have beneficial ownership of all securities that such Holder has the right to acquire, whether such right is currently exercisable or is exercisable upon the occurrence of a subsequent event.

Bought Deal ” has the meaning set forth in Section  2(a)(v) .


Business Day ” means any day that is not a Saturday, a Sunday or other day on which banks are required or authorized by law to be closed in New York, New York.

Capital Stock ” means with respect to a corporation, any and all shares, interests or equivalents of capital stock of such corporation (whether voting or nonvoting and whether common or preferred) and any and all options, warrants and other securities that at such time are convertible into, or exchangeable or exercisable for, any such shares, interests or equivalents (including, without limitation, any note or debt security convertible into or exchangeable for shares of Company Common Stock).

Commission ” means the Securities and Exchange Commission or any other federal agency then administering the Securities Act or Exchange Act.

Company ” has the meaning set forth in the preamble.

Company Common Stock ” means the shares of common stock, par value $0.01 per share, of the Company.

Demand Notice ” has the meaning set forth in Section  2(b)(i) .

Demand Registration ” has the meaning set forth in Section  2(b)(i) .

Demand Registration Statement ” has the meaning set forth in Section  2(b)(i) .

Demand Request ” has the meaning set forth in Section  2(b)(i) .

Due Diligence Information ” has the meaning set forth in Section  4(p) .

Effective Date ” means the closing date of the transactions contemplated by the Purchase Agreement

Effectiveness Period ” has the meaning set forth in Section  2(b)(iv) .

Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.

FINRA ” means the Financial Industry Regulatory Authority or any successor regulatory authority agency.

Follow-On Holdback Period ” has the meaning set forth in Section  6(b)(ii) .

Form S-3 Shelf ” has the meaning set forth in Section  2(a)(i) .

Form S-11 Shelf ” has the meaning set forth in Section  2(a)(i) .

Free Writing Prospectus ” means any “free writing prospectus” as defined in Rule 405 promulgated under the Securities Act.

Holdback Period ” has the meaning set forth in Section  6(b)(i) .

 

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Holdback Registrable Securities ” means, with respect to any Holdback Period or Follow-On Holdback Period, any securities that constitute Registrable Securities as of the time that such period commences, whether or not such securities cease to be Registrable Securities during such period.

Holder ” and “ Holder of Registrable Securities ” means each Person that is party to this Agreement on the date hereof and any Person who hereafter becomes a party to this Agreement pursuant to Section  10(g) of this Agreement. A Person shall cease to be a Holder hereunder at such time as it ceases to beneficially own any Registrable Securities.

Holder Indemnified Persons ” has the meaning set forth in Section  8(a) .

Holders of a Majority of Included Registrable Securities ” means Holders of a majority of the Registrable Securities included in a Demand Registration or Underwritten Shelf Takedown, as applicable. For the avoidance of doubt, only Registrable Securities held by Persons who are party to this Agreement as of the date hereof or who thereafter execute a joinder in accordance with Section 10(g) shall be considered in calculating a majority of the Registrable Securities.

Holders of a Majority of Registrable Securities ” means Holders of a majority of the Registrable Securities For the avoidance of doubt, only Registrable Securities held by Persons who are party to this Agreement as of the date hereof or who thereafter execute a joinder in accordance with Section 10(g) shall be considered in calculating a majority of the Registrable Securities.

“Included Registrable Securities ” means the Registrable Securities included in a Demand Registration or Underwritten Shelf Takedown, as applicable.

Indemnified Persons ” has the meaning set forth in Section  8(b) .

indemnifying party ” has the meaning set forth in Section  8(c) .

Issuer Free Writing Prospectus ” means an issuer free writing prospectus, as defined in Rule 433, relating to an offer of the Registrable Securities.

Lock-Up Agreement ” has the meaning set forth in Section  6(a) .

Losses ” has the meaning set forth in Section  8(a) .

Maximum Offering Size ” has the meaning set forth in Section  2(a)(vi) .

Other Registrable Securities ” means (a) Company Common Stock (including Company Common Stock beneficially owned as a result of, or issuable upon, the conversion, exercise or exchange of any other Capital Stock), (b) any securities issued or issuable with respect to, on account of or in exchange for Company Common Stock, whether by stock split, stock dividend, recapitalization, merger, consolidation or other reorganization, charter amendment or otherwise, (c) any options, warrants or other rights to acquire Company Common Stock, and (d) any securities received as a dividend or distribution in respect of, any of the securities described in

 

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clauses (a) and (b) above, in each case beneficially owned by any other Person who has rights to participate in any offering of securities by the Company pursuant to a registration rights agreement or other similar arrangement (other than this Agreement) with the Company or any direct or indirect parent of the Company relating to the Company Common Stock; provided, that in the case of an Underwritten Shelf Takedown or an Underwritten Demand, Other Registrable Securities shall be limited to the securities of the class and series being offered in such Underwritten Shelf Takedown or Demand Registration.

Parties ” has the meaning set forth in the preamble.

PDF ” means portable document format (.pdf).

Person ” means any individual, partnership, corporation, company, association, trust, joint venture, limited liability company, unincorporated organization, entity or division, or any government, governmental department or agency or political subdivision thereof.

Piggyback Eligible Holders ” has the meaning set forth in Section  2(c)(i) .

Piggyback Notice ” has the meaning set forth in Section  2(c)(i) .

Piggyback Offering ” has the meaning set forth in Section  2(c)(i) .

Piggyback Registration ” has the meaning set forth in Section  2(c)(i) .

Piggyback Request ” has the meaning set forth in Section  2(c)(i) .

Plan ” means the Third Amended Joint Plan of Reorganization Pursuant to Chapter 11 of the Bankruptcy Code dated January 17, 2017, for Caesars Entertainment Operating Company, Inc. pursuant to the Bankruptcy Code.

Proceeding ” means any action, claim, suit, proceeding or investigation (including a preliminary investigation or partial proceeding, such as a deposition) pending or known to the Company to be threatened.

Prospectus ” means the prospectus included in a Registration Statement (including a prospectus that includes any information previously omitted from a prospectus filed as part of an effective Registration Statement in reliance upon Rule 430A promulgated under the Securities Act), all amendments and supplements to the Prospectus, including post-effective amendments, all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.

Public Offering ” means any sale or distribution to the public of Capital Stock of the Company pursuant to an offering registered under the Securities Act, whether by the Company, by Holders and/or by any other holders of the Company’s Capital Stock.

Purchase Agreement ” has the meaning set forth in the Recitals.

 

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Qualified Holder ” means a Holder who, together with its Affiliates, beneficially owns in the aggregate twenty percent (20%) or more of the Registrable Securities issued as of the date hereof; provided that, for purposes of Sections 2(a)(x) , 2(b)(i) , 2(b)(iv) , and 2(e), the term “Qualified Holder” shall include any two or more Holders acting together who, together with their Affiliates, own in the aggregate twenty percent (20%) or more of such Registrable Securities.

Questionnaire ” has the meaning set forth in Section  2(a)(ii) .

Registrable Securities ” means (a) the Company Common Stock issuable pursuant to the Purchase Agreement, and (b) any securities issued or issuable with respect to, on account of or in exchange for the securities referred to in clause (a), whether by way of split, dividend, distribution, combination, recapitalization, merger, consolidation or other reorganization, charter amendment or otherwise (it being understood that, for purposes of this Agreement, a Person shall be deemed to be a Holder of Registrable Securities whenever such Person has the right to then acquire or obtain from the Company any Registrable Securities, whether or not such acquisition has actually been effected), in each case that are beneficially owned on or after the date hereof by the Holders and their Affiliates or any transferee or assignee of any Holder or its Affiliates after giving effect to a transfer made in compliance with Section  10(g) , all of which securities are subject to the rights provided herein until such rights terminate pursuant to the provisions of this Agreement. As to any particular Registrable Securities, such securities shall not be Registrable Securities when (i) a Registration Statement registering such Registrable Securities under the Securities Act has been declared effective and such Registrable Securities have been sold, transferred or otherwise disposed of by the Holder thereof pursuant to such effective Registration Statement, (ii) such Registrable Securities are sold, transferred or otherwise disposed of pursuant to Rule 144 and such Registrable Securities are thereafter freely transferable by such Person (without limitations on volume) without registration under the Securities Act, (iii) such Registrable Securities cease to be outstanding, or (iv) such Registrable Securities are eligible for sale pursuant to Rule 144 without volume or manner-of-sale restrictions and without the requirement for the Company to be in compliance with the current public information requirement under Rule 144(c)(1).

Registration Expenses ” has the meaning set forth in Section  5 .

Registration Statement ” means a registration statement of the Company filed with or to be filed with the Commission under the Securities Act and other applicable law, including an Automatic Shelf Registration Statement, and including any Prospectus, amendments and supplements to each such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement.

Related Party ” has the meaning set forth in Section  10(r) .

Representatives ” means, with respect to any Person, such Person’s directors, officers, members, partners, limited partners, general partners, shareholders, subsidiaries, managed accounts or funds, managers, management company, investment manager, affiliates, principals, employees, agents, investment bankers, attorneys, accountants, advisors, consultants, fund advisors, financial advisor and other professionals of such Person, in each case, in such capacity, serving on or after the date of this Agreement.

 

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road show ” has the meaning set forth in Section  8(a) .

Rule 144 ” means Rule 144 promulgated by the Commission pursuant to the Securities Act, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

Rule 158 ” means Rule 158 promulgated by the Commission pursuant to the Securities Act, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

Rule 405 ” means Rule 405 promulgated by the Commission pursuant to the Securities Act, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

Rule 424 ” means Rule 424 promulgated by the Commission pursuant to the Securities Act, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

Rule 433 ” means Rule 433 promulgated by the Commission pursuant to the Securities Act, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

Sale Transaction ” has the meaning set forth in Section  6(b)(i) .

Seasoned Issuer ” means an issuer eligible to use a registration statement on Form S-3 under the Securities Act and who is not an “ineligible issuer” as defined in Rule 405 promulgated by the Commission pursuant to the Securities Act.

Securities ” has the meaning set forth in Section  6(b)(i) .

Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.

Selling Expenses ” means all underwriting fees, discounts, selling commissions and stock transfer taxes applicable to the sale of Registrable Securities and related legal and other fees of a Holder not included within the definition of Registration Expenses.

Shelf Period ” has the meaning set forth in Section  2(a)(i) .

Shelf Public Offering Requesting Holder ” has the meaning set forth in Section  2(a)(iv) .

Shelf Registrable Securities ” has the meaning set forth in Section  2(a)(v) .

 

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Shelf Registration ” means the registration of an offering of Registrable Securities on a Form S-11 Shelf or a Form S-3 Shelf, as applicable, on a delayed or continuous basis under Rule 415 under the Securities Act, pursuant to Section  2(a)(i) .

Shelf Registration Statement ” has the meaning set forth in Section  2(a)(i) .

Shelf Takedown Notice ” has the meaning set forth in Section  2(a)(v) .

Shelf Takedown Request ” has the meaning set forth in Section  2(a)(v) .

Subsidiary ” means, when used with respect to any Person, any corporation or other entity, whether incorporated or unincorporated, (a) of which such Person or any other Subsidiary of such Person is a general partner (excluding partnerships, the general partnership interests of which held by such Person or any Subsidiary of such Person do not have a majority of the voting interests in such partnership) or (b) at least a majority of the securities or other interests of which having by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions with respect to such corporation or other entity is directly or indirectly owned or controlled by such Person or by any one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries.

Suspension Event ” has the meaning set forth in Section  2(e) .

Suspension Notice ” has the meaning set forth in Section  2(e) .

Suspension Period ” has the meaning set forth in Section  2(e) .

Trading Market ” means the principal national securities exchange in the United States on which Registrable Securities are (or are to be) listed.

Transaction ” has the meaning set forth in the Recitals.

Underwritten Demand ” means a Demand Registration conducted as an underwritten Public Offering.

Underwritten Shelf Takedown ” has the meaning set forth in Section  2(a)(iv) .

WKSI ” means a “well known seasoned issuer” as defined under Rule 405.

2. Registration.

(a) Shelf Registration .

(i) Filing of Shelf Registration Statement . Promptly after the Effective Date, but in no event later than 75 days after the Effective Date, to the extent permitted by the Commission’s rules and regulations, the Company shall file a Registration Statement for a Shelf Registration on Form S-11 covering the resale of all of the Registrable Securities beneficially owned by the Holders on a delayed or continuous basis (the “ Form S-11 Shelf ”). After the Company becomes a Seasoned Issuer or WKSI, the Company shall convert the Form S-11 Shelf to a Registration Statement on

 

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Form S-3 (or other appropriate short form registration statement then permitted by the Commission’s rules and regulations) covering the resale of all of the Registrable Securities beneficially owned by the Holders on a delayed or continuous basis (the “ Form S-3 Shelf ” and, together with the Form S-11 Shelf, the “ Shelf Registration Statement ”) (which shall be an Automatic Shelf Registration Statement if the Company is a WKSI) as soon as reasonably practicable after the Company becomes so eligible. Subject to the terms of this Agreement, including any applicable Suspension Period, the Company shall use commercially reasonable efforts to cause the Shelf Registration Statement to be declared effective under the Securities Act as promptly as reasonably practicable following the filing of the Shelf Registration Statement. The Company shall use commercially reasonable efforts to keep such Shelf Registration Statement continuously effective under the Securities Act until the date that all Registrable Securities covered by such Registration Statement are no longer Registrable Securities, including, to the extent a Form S-11 Shelf is converted to a Form S-3 Shelf and the Company thereafter becomes ineligible to use Form S-3, by using commercially reasonable efforts to file a Form S-11 Shelf or other appropriate form specified by the Commission’s rules and regulations as promptly as reasonably practicable after the date of such ineligibility and using its commercially reasonable efforts to have such Shelf Registration Statement declared effective as promptly as reasonably practicable after the filing thereof (the period during which the Company is required to keep the Shelf Registration Statement continuously effective under the Securities Act in accordance with this clause (i), the “ Shelf Period ”). The Company shall promptly notify the Holders named in the Shelf Registration Statement via e-mail to the addresses set forth on Schedule I hereof of the effectiveness of a Form S-11 Shelf. The Company shall file a final Prospectus in respect of such Shelf Registration Statement with the Commission to the extent required by Rule 424. The “Plan of Distribution” section of such Shelf Registration Statement shall include a plan of distribution, which includes the means of distribution substantially in the form set forth in Exhibit B hereto.

(ii) Holder Information . Notwithstanding any other provision hereof, no Holder of Registrable Securities shall be entitled to include any of its Registrable Securities in any Shelf Registration Statement pursuant to this Agreement unless and until such Holder agrees in writing to be bound by all of the provisions of this Agreement applicable to such Holder, and the Holder furnishes to the Company a fully completed notice and questionnaire in the form attached hereto as Exhibit C (the “ Questionnaire ”) and such other information in writing as the Company may reasonably request in writing for use in connection with the Shelf Registration Statement or Prospectus included therein and in any application to be filed with or under state securities laws. In order to be named as a selling securityholder in the Shelf Registration Statement at the time it is first made available for use, a Holder must furnish the completed Questionnaire and such other information that the Company may reasonably request in writing, if any, to the Company in writing no later than the fifth Business Day prior to the targeted effective date; provided that any holder providing a completed Questionnaire within that time period may provide updated information regarding such Holder’s beneficial ownership and the number of shares requested to be included up to the second Business Day prior to the effective date. Each Holder as to which any Shelf Registration is being effected agrees to furnish to the Company all information with respect to such Holder necessary to make the information previously furnished to the Company by such Holder not materially misleading.

 

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(iii) Supplements . From and after the effective date of the Shelf Registration Statement, upon receipt of a completed Questionnaire and such other information that the Company may reasonably request in writing, if any, the Company will use its commercially reasonable efforts to file as promptly as reasonably practicable, but in any event on or prior to the tenth Business Day after receipt of such information (or, if a Suspension Period is then in effect or initiated within five Business Day following the date of receipt of such information, the tenth Business Day following the end of such Suspension Period) either (i) if then permitted by the Securities Act or the rules and regulations thereunder (or then-current Commission interpretations thereof), a supplement to the Prospectus contained in the Shelf Registration Statement naming such Holder as a selling securityholder and containing such other information as necessary to permit such Holder to deliver the Prospectus to purchasers of the Holder’s Registrable Securities, or (ii)  if it is not then permitted under the Securities Act or the rules and regulations thereunder (or then-current Commission interpretations thereof) to name such Holder as a selling securityholder in a supplement to the Prospectus, a post-effective amendment to the Shelf Registration Statement or an additional Shelf Registration Statement as necessary for such Holder to be named as a selling securityholder in the Prospectus contained therein to permit such Holder to deliver the Prospectus to purchasers of the Holder’s Registrable Securities (subject, in the case of either clause (i) or clause (ii), to the Company’s right to delay filing or suspend the use of the Shelf Registration Statement as described in Section 2(e) hereof). If the Company is not a WKSI or is not otherwise eligible to add additional selling stockholders by means of a prospectus supplement, notwithstanding the foregoing, the Company shall not be required to file more than one (1) post-effective amendment or additional Shelf-Registration Statements in any fiscal quarter for all Holders pursuant to this Section 2(a)(iii) ; provided that the foregoing limitation shall not apply if the Registrable Securities to be added represent beneficial ownership of more than $10 million of the Company Common Stock (as determined in good faith by the Company to the extent the Company Common Stock is not then listed on a national exchange). If the Company is a WKSI or is otherwise eligible to add additional selling stockholders by means of a prospectus supplement, notwithstanding the foregoing, the Company shall not be required to file more than two (2) prospectus supplements for all Holders pursuant to this Section 2(a)(iii) in any fiscal quarter; provided that the foregoing limitation shall not apply if the Registrable Securities to be added represent beneficial ownership of more than $10  million of the Company Common Stock (as determined in good faith by the Company to the extent the Company Common Stock is not the listed on a national exchange).

(iv) Underwritten Shelf Takedown . At any time during the Shelf Period (subject to any Suspension Period), any one or more Holders of Registrable Securities (such Holder, a “ Shelf Public Offering Requesting Holder ”) may request to sell all or any portion of their Registrable Securities in an underwritten Public Offering that is registered pursuant to the Shelf Registration Statement (each, an “ Underwritten Shelf Takedown ”); provided , that, and subject to Section 2(a)(v) below, the Company shall not be obligated to effect (x)  an Underwritten Shelf Takedown for any Registrable Securities other than Company Common Stock; (y)  more than four (4)  Underwritten Shelf Takedowns (together with any Demand Registrations) in aggregate; or (z)  any Underwritten Shelf Takedown if the aggregate proceeds expected to be received from the sale of the Registrable Securities requested to be sold in such Underwritten Shelf Takedown, in the good faith judgment of the managing underwriter(s) therefor, is less than $100  million as of the date of the Company receives a Shelf Takedown Request.

 

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(v) Notice of Underwritten Shelf Takedown . All requests for Underwritten Shelf Takedowns shall be made by giving written notice to the Company (the “ Shelf Takedown Request ”). Each Shelf Takedown Request shall specify the approximate number of shares of Company Common Stock to be sold in the Underwritten Shelf Takedown and the expected price range (net of underwriting discounts and commissions) of such Underwritten Shelf Takedown. Subject to Section 2(e) below, after receipt of any Shelf Takedown Request, the Company shall give written notice (the “ Shelf Takedown Notice ”) of such requested Underwritten Shelf Takedown (which notice shall state the material terms of such proposed Underwritten Shelf Takedown, to the extent known) to all other Holders of Registrable Securities that have Registrable Securities registered for sale under a Shelf Registration Statement and that have requested to receive such notices (“ Shelf Registrable Securities ”). Such notice shall be given not more than ten (10)  Business Days and not less than five (5)  Business Days, in each case prior to the expected date of commencement of marketing efforts for such Underwritten Shelf Takedown. Subject to Section 2(c)(ii) , the Company shall include in such Underwritten Shelf Takedown all Shelf Registrable Securities that are Company Common Stock with respect to which the Company has received written requests for inclusion therein within (x)  in the case of a “bought deal” or “overnight transaction” (a “ Bought Deal ”), two (2)  Business Days; (y)  in the case any other Underwritten Shelf Takedown, five (5)  Business Days, in each case after the giving of the Shelf Takedown Notice. For the avoidance of doubt, the Company shall not be required to provide a Shelf Takedown Notice with respect to a Public Offering utilizing a Shelf Registration Statement other than an Underwritten Shelf Takedown, and Holders shall not have rights to participate therein under this Section 2(a)(v) .

(vi) Priority of Registrable Shares . If the managing underwriters for such Underwritten Shelf Takedown advise the Company and the Holders of Shelf Registrable Securities proposed to be included in such Underwritten Shelf Takedown that in their reasonable view the number of Shelf Registrable Securities proposed to be included in such Underwritten Shelf Takedown exceeds the number of Shelf Registrable Securities which can be sold in an orderly manner in such offering within a price range acceptable to the Holders of a Majority of Included Registrable Securities requested to be included in the Underwritten Shelf Takedown (the “ Maximum Offering Size ”), then the Company shall promptly give written notice to all Holders of Shelf Registrable Securities proposed to be included in such Underwritten Shelf Takedown of such Maximum Offering Size, and shall include in such Underwritten Shelf Takedown the number of Shelf Registrable Securities which can be so sold in the following order of priority, up to the Maximum Offering Size: (A) first, the Shelf Registrable Securities requested to be included in such Underwritten Shelf Takedown by the Holders of such Shelf Registrable Securities, allocated, if necessary for the offering not to exceed the Maximum Offering Size, pro rata among such Holders on the basis of the number of Shelf Registrable Securities requested to be included therein by each such Holder, (B)  second, any securities proposed to be offered by the Company, and (C)  Other Registrable Securities requested to be included in such Underwritten Shelf Takedown to the extent permitted hereunder, allocated, if necessary for the offering not to exceed the Maximum Offering Size, pro rata among the respective holders of such Other Registrable Securities on the basis of the number of securities requested to be included therein by each such holder.

(vii) Restrictions on Timing of Underwritten Shelf Takedowns . The Company shall not be obligated to effect an Underwritten Shelf Takedown (A) within ninety (90)  days (or such longer period

 

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specified in any applicable lock-up agreement entered into with underwriters) after the consummation of a previous Underwritten Shelf Takedown or Demand Registration or consummation of a Company-initiated Public Offering or (B) within sixty (60)  days prior to the Company’s good faith estimate of the date of filing of a Company-initiated registration statement.

(viii) Selection of Bankers and Counsel . The Holders of a Majority of Included Registrable Securities requested to be included in an Underwritten Shelf Takedown shall have the right to: (A) select the investment banker(s) and manager(s) to administer the offering (which shall consist of one (1)  or more reputable nationally recognized investment banks, subject to the Company’s approval (which shall not be unreasonably withheld, conditioned or delayed)) and one (1)  firm of legal counsel to represent all of the Holders (along with one local counsel, to the extent reasonably necessary, for any applicable jurisdiction), in connection with such Underwritten Shelf Takedown, and (B)  determine the price, underwriting discount and other financial terms of the related underwriting agreement for the Registrable Securities included in such Underwritten Shelf Takedown; provided that the Company shall select such investment banker(s), manager(s) and counsel (including local counsel) if the Holders of such Majority of Included Registrable Securities cannot so agree on the same within a reasonable time period.

(ix) Withdrawal from Registration . Any Holder whose Registrable Securities were to be included in any such registration pursuant to Section 2(a)(ii) may elect to withdraw any or all of its Registrable Securities therefrom, without liability to any of the other Holders and without prejudice to the rights of any such Holder or Holders to include Registrable Securities in any future registration (or registrations), by written notice to the Company delivered prior to the effective date of the relevant Underwritten Shelf Takedown.

(x) WKSI Filing . Upon the Company first becoming a WKSI, if requested by a Qualified Holder with securities registered on an existing Shelf Registration Statement, the Company will convert such existing Shelf Registration Statement to an Automatic Shelf Registration Statement.

(b) Demand Registration .

If the Company (i) is in violation of its obligation to file a Shelf Registration Statement pursuant to Section 2(a) or (ii)  following the effectiveness of the Shelf Registration Statement contemplated by Section  2(a), thereafter ceases to have an effective Shelf Registration Statement during the Shelf Period (other than during any Suspension Period), subject to the terms and conditions of this Agreement (including Section 2(b)(iii) ), upon written notice to the Company (a “ Demand Request ”) delivered by a Qualified Holder requesting that the Company effect the registration (a “ Demand Registration ”) under the Securities Act of any or all of the Registrable Securities beneficially owned by such Qualified Holder(s), the Company shall give a notice of the receipt of such Demand Request (a “ Demand Notice ”) to all other Holders of Registrable Securities that have requested to receive such notices (which notice shall state the material terms of such proposed Demand Registration, to the extent known). Such Demand Notice shall be given not more than ten (10)  Business Days and not less than five (5)  Business Days, in each case prior to the expected date of the public filing of the registration statement (the (i) “ Demand Registration Statement ”) for such Demand Registration. Subject to the provisions of Section 2(a)(iv) and Section 2(e) below, the Company shall include in such Demand Registration

 

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all Registrable Securities that are Company Common Stock with respect to which the Company has received written requests for inclusion therein within five (5) Business Days after the later of the Company (i)  the giving the Demand Notice and (ii)  five (5) Business Days prior to the actual public filing of the Demand Registration Statement. Nothing in this Section  2(b) shall relieve the Company of its obligations under Section 2(a) .

(ii) Demand Registration Using Form S-3 . The Company shall effect any requested Demand Registration using a Registration Statement on Form S-3 whenever the Company is a Seasoned Issuer or a WKSI, and shall use an Automatic Shelf Registration Statement if it is a WKSI.

(iii) Limitations on Demand Registration . The Company shall not be required to effect more than four (4) Underwritten Demands (together with any Underwritten Shelf Takedowns) in aggregate. The Company shall not be required to effect an Underwritten Demand if the aggregate proceeds expected to be received from the sale of the Registrable Securities requested to be registered in such Underwritten Demand, in the good faith judgment of the managing underwriter(s) therefor, is less than $100  million as of the date the Company receives a written request for an Underwritten Demand. The Company shall not be obligated to effect a Demand Registration (A)  within ninety (90)  days (or such longer period specified in any applicable lock-up agreement entered into with underwriters) after the consummation of a previous Demand Registration or Underwritten Shelf Takedown or Company-initiated Public Offering or (B)  within sixty (60)  days prior to the Company’s good faith estimate of the date of filing of a Company-initiated registration statement.

(iv) Effectiveness of Demand Registration Statement . The Company shall use its commercially reasonable efforts to have the Demand Registration Statement declared effective by the Commission and keep the Demand Registration Statement continuously effective under the Securities Act for the period of time necessary for the underwriters or Holders to sell all the Registrable Securities covered by such Demand Registration Statement or such shorter period which will terminate when all Registrable Securities covered by such Demand Registration Statement have been sold pursuant thereto (including, if necessary, by filing with the Commission a post-effective amendment or a supplement to the Demand Registration Statement or the related Prospectus or any document incorporated therein by reference or by filing any other required document or otherwise supplementing or amending the Demand Registration Statement, if required by the rules, regulations or instructions applicable to the registration form used by the Company for such Demand Registration Statement or by the Securities Act, any state securities or “blue sky” laws, or any other rules and regulations thereunder) (the “ Effectiveness Period ”). A Demand Registration shall not be deemed to have occurred (A) if the Registration Statement is withdrawn without becoming effective, (B)  if the Registration Statement does not remain effective in compliance with the provisions of the Securities Act and the laws of any state or other jurisdiction applicable to the disposition of the Registrable Securities covered by such Registration Statement for the Effectiveness Period, (C)  if, after it has become effective, such Registration Statement is subject to any stop order, injunction or other order or requirement of the Commission or other governmental or regulatory agency or court for any reason other than a violation of applicable law solely by any selling Holder and has not thereafter become effective, (D)  in the event of an Underwritten Demand, if the conditions to closing specified in the underwriting agreement entered into in connection with such registration are not satisfied or waived other than by reason of some act or omission by a Qualified Holder, or (E)  if the number

 

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of Registrable Securities included on the applicable Registration Statement is reduced in accordance with Section 2(b)(v) such that less than 66 2/3% of the Registrable Securities of the Holders of Registrable Securities who sought to be included in such registration are so included in such Registration Statement.

(v) Priority of Registration . Notwithstanding any other provision of this Section 2(b) , if (A)  a Demand Registration is an Underwritten Demand and (B)  the managing underwriters advise the Company that in their reasonable view, the number of Registrable Securities proposed to be included in such offering (including Registrable Securities requested by Holders to be included in such Public Offering and any securities that the Company or any other Person proposes to be included that are Other Registrable Securities) exceeds the Maximum Offering Size, then the Company shall so advise the Holders with Registrable Securities proposed to be included in such Underwritten Demand, and shall include in such offering the number of Registrable Securities which can be so sold in the following order of priority, up to the Maximum Offering Size: (I)  first, the Registrable Securities requested to be included in such Underwritten Demand by the Holders, allocated, if necessary for the offering not to exceed the Maximum Offering Size, pro rata among the Holders on the basis of the number of Registrable Securities requested to be included therein by each such Holder, (II)  second, any securities proposed to be registered by the Company, and (III)  third, Other Registrable Securities requested to be included in such underwritten Public Offering to the extent permitted hereunder, allocated, if necessary for the offering not to exceed the Maximum Offering Size, pro rata among the respective holders of such Other Registrable Securities on the basis of the number of securities requested to be included therein by each such holder.

(vi) Underwritten Demand . The determination of whether any Public Offering of Registrable Securities pursuant to a Demand Registration will be an Underwritten Demand shall be made in the sole discretion of the Holders of a Majority of Included Registrable Securities included in such Demand Registration, and such Holders of a Majority of Included Registrable Securities included in such Underwritten Demand shall have the right to (A) determine the plan of distribution, the price at which the Registrable Securities are to be sold and the underwriting commissions, discounts and fees and other financial terms, and (B)  select the investment banker(s) and manager(s) to administer the offering (which shall consist of one (1)  or more reputable nationally recognized investment banks, subject to the Company’s approval (which shall not be unreasonably withheld, conditioned or delayed)) and one (1)  firm of legal counsel to represent all of the Holders (along with one local counsel, to the extent reasonably necessary, for any applicable jurisdiction), in connection with such Demand Registration; provided that the Company shall select such investment banker(s), manager(s) and counsel (including local counsel) if the Holders of a Majority of Included Registrable Securities cannot so agree on the same within a reasonable time period.

(vii) Withdrawal of Registrable Securities . Any Holder whose Registrable Securities were to be included in any such registration pursuant to Section 2(b) may elect to withdraw any or all of its Registrable Securities therefrom, without liability to any of the other Holders and without prejudice to the rights of any such Holder to include Registrable Securities in any future registration (or registrations), by written notice to the Company delivered on or prior to the effective date of the relevant Demand Registration Statement.

 

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(c) Piggyback Registration.

(i) Registration Statement on behalf of the Company . If at any time the Company proposes to file a Registration Statement or conduct an Underwritten Shelf Takedown, other than a Shelf Registration pursuant to Section 2(a) or a Demand Registration pursuant to Section 2(b) , in connection with an underwritten Public Offering of Capital Stock (other than registrations on Form S-8 or Form S-4) (a “ Piggyback Offering ”), and the registration form to be used may be used for the registration of Registrable Securities, the Company shall give prompt written notice (the “ Piggyback Notice ”) to all Holders that have requested to receive such notices (collectively, the “ Piggyback Eligible Holders ”) of the Company’s intention to conduct such underwritten Public Offering; provided that, in the case of an Underwritten Shelf Takedown from an existing effective shelf registration statement, the Company shall not be required to provide a Piggyback Notice or include any Registrable Securities in such Public Offering unless either (i)  such registration statement with respect to which the Company is conducting an Underwritten Shelf Takedown may be used for the registration and offering of Registrable Securities without the need to file a post-effective amendment thereto, (ii)  the Company is a WKSI eligible to file an automatically effective registration statement or automatically effective post-effective amendment or (iii)  if the Company is not a WKSI, the need to file any such post-effective amendment or new registration statement would not reasonably be expected to have a material adverse effect on the timing of the Company’s primary offering, in the good faith determination of the Company’s Board of Directors. The Piggyback Notice shall be given, (i)  in the case of a Piggyback Offering that is an Underwritten Shelf Takedown, not earlier than ten (10)  Business Days and not less than five (5)  Business Days, in each case under this clause (i), prior to the expected date of commencement of marketing efforts for such Underwritten Shelf Takedown; or (ii)  in the case of any other Piggyback Registration, not less than five (5)  Business Days after the public filing of such Registration Statement. The Piggyback Notice shall offer the Piggyback Eligible Holders the opportunity to include for registration in such Piggyback Offering the number of Registrable Securities of the same class and series as those proposed to be registered as they may request, subject to Section 2(c)(ii) (a “ Piggyback Registration ”). Subject to Section 2(c)(ii) , the Company shall include in each such Piggyback Offering such Registrable Securities constituting Common Stock for which the Company has received written requests (each, a “ Piggyback Request ”) for inclusion therein from Piggyback Eligible Holders within (x)  in the case of a Bought Deal, two (2)  Business Days; (y)  in the case any other Underwritten Shelf Takedown, three (3)  Business Days; or (z)  otherwise, five (5)  Business Days, in each case after the date of the Company’s notice; provided that the Company may not commence marketing efforts for such Public Offering until such periods have elapsed and the inclusion of all such securities so requested, subject to Section  2(c)(ii). If a Piggyback Eligible Holder decides not to include all of its Registrable Securities in any Piggyback Offering thereafter filed by the Company, such Piggyback Eligible Holder shall nevertheless continue to have the right to include any Registrable Securities in any subsequent Piggyback Offerings or Registration Statements as may be filed by the Company with respect to offerings of Registrable Securities, all upon the terms and conditions set forth herein. The Company shall use its commercially reasonable efforts to effect the registration under the Securities Act of all Registrable Securities which the Company has been so requested to register pursuant to the Piggyback Requests, to the extent required to permit the disposition of the Registrable Securities so requested to be registered.

 

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(ii) Priority of Registration . If the managing underwriter or managing underwriters of such Piggyback Offering advise the Company and the Piggyback Eligible Holders that, in their reasonable view the amount of securities requested to be included in such registration (including Registrable Securities requested by the Piggyback Eligible Holders to be included in such offering and any securities that the Company or any other Person proposes to be included that are not Registrable Securities) exceeds the Maximum Offering Size (which, for the purposes of a Piggyback Registration relating to a primary offering of the Company’s Capital Stock, shall be within a price range acceptable to the Company), then the Company shall so advise all Piggyback Eligible Holders with Registrable Securities proposed to be included in such Piggyback Registration, and shall include in such offering the number which can be so sold in the following order of priority, up to the Maximum Offering Size: (A) first, (x) if the Piggyback Registration includes a primary offering of the Company’s Capital Stock, such securities that the Company proposes to sell up to the Maximum Offering Size, or (y)  if the Piggyback Registration is an offering at the demand of the holders of Other Registrable Securities, the securities that such holders propose to sell and thereafter any securities proposed to be offered by the Company, in each case up to the Maximum Offering Size, and (B)  second, the Company Common Stock constituting Registrable Securities or Other Registrable Securities requested to be included in such Piggyback Registration by each Piggyback Eligible Holder and any holder of Other Registrable Securities with rights to participate in such offering, allocated, if necessary for the offering not to exceed the Maximum Offering Size, pro rata on the basis of the amount of Company Common Stock or other Capital Stock constituting Registrable Securities and Other Registrable Securities requested in aggregate to be included therein. All Piggyback Eligible Holders requesting to be included in the Piggyback Registration must sell their Registrable Securities to the underwriters selected as provided in Section 2(c)(iv) on the same terms and conditions as apply to the Company.

(iii) Withdrawal from Registration . The Company shall have the right to terminate or withdraw any registration initiated by it under this Section 2(c) , whether or not any Piggyback Eligible Holder has elected to include Registrable Securities in such Registration Statement, without prejudice, however, to the right of the Holders to request that such registration be effected as a registration under Section 2(b) to the extent permitted thereunder and subject to the terms set forth therein. The Registration Expenses of such withdrawn registration shall be borne by the Company in accordance with Section 5 hereof. Any Holder that has elected to include Registrable Securities in a Piggyback Offering may elect to withdraw such Holder’s Registrable Securities at any time prior to the Business Day prior to the execution of the underwriting agreement entered into in connection therewith.

(iv) Selection of Bankers and Counsel . If a Piggyback Registration pursuant to this Section 2(c) involves an underwritten Public Offering, the Company shall have the right to (A)  determine the plan of distribution, including the price at which the Registrable Securities are to be sold and the underwriting commissions, discounts and fees and (B)  select the investment banker or bankers and managers to administer the Public Offering, including the lead managing underwriter or underwriters, each of which shall be a nationally recognized investment bank. Holders of a Majority of Included Registrable Securities included in such underwritten Public Offering shall have the right to select one (1)  firm of legal counsel to represent all of the Holders (along with one local counsel, to the extent reasonably necessary, for any applicable jurisdiction), in connection with such Piggyback Registration; provided , that the Company shall select such counsel (including local counsel) if the Holders of a Majority of Included Registrable Securities cannot so agree on the same within a reasonable time period.

 

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(v) Effect of Piggyback Registration . No registration effected under this Section 2(c) shall relieve the Company of its obligations to effect any registration of the offer and sale of Registrable Securities under Section 2(a) or Section 2(b) hereof, and no registration effected pursuant to this Section 2(c) shall be deemed to have been effected pursuant to Section 2(a) or Section 2(b) hereof.

(d) Notice Requirements . Any Demand Request, Piggyback Request or Shelf Takedown Request shall (i) specify the maximum number or class or series of Registrable Securities intended to be offered and sold by the Holder making the request, (ii)  express such Holder’s bona fide intent to offer up to such maximum number of Registrable Securities for distribution, (iii)  describe the nature or method of the proposed offer and sale of Registrable Securities (to the extent applicable), and (iv)  contain the undertaking of such Holder to provide all such information and materials and take all action as may reasonably be required in order to permit the Company to comply with all applicable requirements in connection with the registration of such Registrable Securities.

(e) Suspension Period . Notwithstanding any other provision of this Section 2 , the Company shall have the right but not the obligation to defer the filing of (but not the preparation of), or suspend the use by the Holders of, any Demand Registration or Shelf Registration (whether prior to or after receipt by the Company of a Shelf Takedown Request or Demand Request)  (i) if the Company reasonably believes (with the advice of competent counsel expert in such matters) that any such registration or offering would require the Company, under applicable securities laws and other laws, to make disclosure of material nonpublic information that would not otherwise be required to be disclosed at that time and the Company believes in good faith that such disclosures at that time would not be in the Company’s best interests; provided that the exception in clause (i)  shall continue to apply only during the time in which such material nonpublic information has not been disclosed and remains material; and (ii)  if the Company’s Board of Directors determines in good faith, after consultation with its external advisors or legal counsel, that the offer or sale of Registrable Securities would reasonably be expected to have a material adverse effect on any proposal or plan by the Company or any of its subsidiaries to engage in any material acquisition of assets or stock (other than in the ordinary course of business) or any material merger, consolidation, tender offer, recapitalization, reorganization or other transaction involving the Company or any of its subsidiaries; provided that, the period of any delay or suspension under exceptions (i)  and (ii) shall not exceed a period of sixty (60)  days and any such delays or extensions shall not in aggregate exceed ninety (90)  days in any twelve (12)  month period (any such period, a “ Suspension Period ”, and any event triggering any such delay or suspension, a “ Suspension Event ”); provided , however , that in such event, the Qualified Holders will be entitled to withdraw any request for a Demand Registration and, if such request is withdrawn, such Demand Registration will not count as a Demand Registration and the Company will pay all Registration Expenses in connection with such registration, regardless of whether such registration is effected. The Company shall give written notice to the Holders of Registrable Securities registered under or pursuant to any Shelf Registration Statement or any Demand Registration with respect to its declaration of a Suspension Period and of the expiration of the relevant Suspension Period (a “ Suspension Notice ”). If the filing of any Demand

 

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Registration is suspended or an Underwritten Shelf Takedown is delayed pursuant to this Section 2(e) , once the Suspension Period ends, the Qualified Holders may request a new Demand Registration or a new Underwritten Shelf Takedown (and such request shall not be counted as an additional Underwritten Shelf Takedown or Demand Registration for purposes of either Section 2(a)(iv) or Section 2(b)(i) ). The Company shall not include any material non-public information in the Suspension Notice and or otherwise provide such information to a Holder unless specifically requested by a Holder in writing. A Holder shall not effect any sales of the Registrable Securities pursuant to a Registration Statement at any time after it has received a Suspension Notice from the Company and prior to receipt of an End of Suspension Notice. Holders may recommence effecting sales of the Registrable Securities pursuant to a Registration Statement following further written notice from the Company to such effect (an “ End of Suspension Notice ”) from the Company, which End of Suspension Notice shall be given by the Company to the Holders with Registrable Securities included on any suspended Registration Statement and Counsel to the Holders, if any, promptly (but in no event later than two Business Days) following the conclusion of any Suspension Event. Notwithstanding any provision herein to the contrary, if the Company gives a Suspension Notice with respect to any Registration Statement pursuant to this Section  2(e), the Company agrees that it shall (i)  extend the period which such Registration Statement shall be maintained effective pursuant to this Agreement by the number of days during the period from the date of receipt by the Holders of the Suspension Notice to and including the date of receipt by the Holders of the End of Suspension Notice; and (ii)  provide copies of any supplemented or amended prospectus necessary to resume sales, if requested by any Holder; provided that such period of time shall not be extended beyond the date that there are no longer Registrable Securities covered by such Registration Statement.

(f) Required Information . The Company may require each Holder of Registrable Securities as to which any Registration Statement is being filed or sale is being effected to furnish to the Company such information regarding the distribution of such securities and such other information relating to such Holder and its ownership of Registrable Securities as the Company may from time to time reasonably request in writing ( provided that such information shall be used only in connection with such registration), and the Company may exclude from such registration or sale the Registrable Securities of any such Holder who fails to furnish such information within a reasonable time after receiving such request or who does not consent to the inclusion in a Registration Statement or Prospectus related to such registration or sale of such information related to such Holder that is required by the rules and regulations of the Commission. Each Holder agrees to furnish such information to the Company and to cooperate with the Company as reasonably necessary to enable the Company to comply with the provisions of this Agreement.

(g) Other Registration Rights Agreements . The Company represents and warrants to each Holder that, as of the date of this Agreement, it has not entered into any agreement with respect to any of its securities granting any registration rights to any Person with respect to the Registrable Securities. The Company will not enter into on or after the date of this Agreement, unless this Agreement is modified or waived as provided in Section 10(c) , any agreement that is inconsistent with the rights granted to the Holders with respect to Registrable Securities in this Agreement or otherwise conflicts with the provisions hereof in any material respect. Other than as set forth in this Agreement, if the Company enters into any agreement that would allow any holder of Company Common Stock or other Capital Stock of the Company to include such

 

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Capital Stock in any Registration Statement of the Company on a basis more favorable than the rights of the Holders under this Agreement (as determined in good faith by the Company), this Agreement shall be automatically amended to provide for such more favorable terms and, to the extent the Company enters into any agreement that would allow any holder of Company Common Stock or other Capital Stock of the Company to include such Capital Stock in any Registration Statement or Underwritten Shelf Takedown under Section  2(a) or 2(b) of this Agreement, such other agreement shall similarly provide for the Holders to have reciprocal rights with respect to any demand registrations or underwritten offerings thereunder.

(h) Cessation of Registration Rights . All registration rights granted under this Section 2 shall continue to be applicable with respect to any Holder until such time as the Holder no longer holds any Registrable Securities.

(i) Confidentiality . Each Holder agrees that such Holder shall treat as confidential the receipt of a Demand Notice, Shelf Takedown Notice or Piggyback Notice and shall not disclose or use the information contained in any such notice without the prior written consent of the Company until such time as the information contained therein is or becomes available to the public generally, other than as a result of disclosure by the Holder in breach of the terms of this Agreement; provided that no Holder will be entitled to receive any such notices (and shall not be eligible to participate in any offering related thereto, notwithstanding any other provision of this Agreement) unless a Holder has provided written notice to the Company in the manner specified in Section 10 requesting to receive such notices.

3. [Reserved]

4. Registration Procedures . The procedures to be followed by the Company and each participating Holder to register the sale of Registrable Securities pursuant to a Registration Statement in accordance with this Agreement, and the respective rights and obligations of the Company and such Holders with respect to the preparation, filing and effectiveness of such Registration Statement, are as follows:

(a) The Company will (i)  prepare and file a Registration Statement or a prospectus supplement, as applicable, with the Commission (within the time period specified in Section 2(a) or Section 2(b) , as applicable, in the case of a Shelf Registration, an Underwritten Shelf Takedown or a Demand Registration) which Registration Statement (A)  shall be on a form selected by the Company for which the Company qualifies, (B)  shall be available for the sale of the Registrable Securities in accordance with the intended method or methods of distribution, and (C)  shall comply as to form in all material respects with the requirements of the applicable form and include and/or incorporate by reference all financial statements required by the Commission to be filed therewith, (ii)  use its commercially reasonable efforts to cause such Registration Statement to become effective and remain effective for the periods provided under Section 2(a) or Section 2(b) , as applicable, in the case of a Shelf Registration Statement or a Demand Registration Statement. The Company will furnish to any Qualified Holder named as a selling stockholder therein, any counsel designated by such Qualified Holder, counsel for the Holders of a Majority of Included Registrable Securities (selected as provided herein) and the managing underwriter or underwriters of an underwritten Public Offering of Registrable Securities, if applicable, copies of all correspondence from the Commission received in connection with such

 

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Public Offering, subject in the case of any Qualified Holder to such Holder entering into a confidentiality agreement with respect thereto if requested by the Company. The Company will (I)  at least two (2)  Business Days (or such shorter period as shall be reasonably practicable under the circumstances) prior to the anticipated filing of the Shelf Registration Statement, a Demand Registration Statement or any related Prospectus or any amendment or supplement thereto, or before using any Issuer Free Writing Prospectus, furnish to any Qualified Holder named as a selling stockholder therein, any counsel designated by such Qualified Holder and counsel for the Holders of a Majority of Included Registrable Securities (selected as provided herein) and the managing underwriter or underwriters of an underwritten Public Offering of Registrable Securities, if applicable, copies of all such documents proposed to be filed (subject in the case of any Qualified Holder to such Holder entering into a confidentiality agreement with respect thereto if requested by the Company), (II) use its commercially reasonable efforts to address in each such document prior to being so filed with the Commission such comments as any of the foregoing Persons reasonably shall propose and (III)  without limiting the Company’s rights under Section 2(f) , not include in any Registration Statement or any related Prospectus or any amendment or supplement thereto information regarding a participating Holder to which a participating Holder reasonably objects; provided , however , the Company shall not be required to provide copies of any amendment or supplement filed solely to incorporate in any Form S-11 (or other form not providing for incorporation by reference) any filing by the Company under the Exchange Act or any amendment or supplement filed for the purpose of adding additional selling stockholders thereunder.

(b) The Company will as promptly as reasonably practicable (i)  prepare and file with the Commission such amendments, including post-effective amendments, and supplements to each Registration Statement and the Prospectus used in connection therewith as (A)  may be reasonably requested by any Holder of Registrable Securities covered by such Registration Statement necessary to permit such Holder to sell in accordance with its intended method of distribution, to the extent consistent such intended method of distribution is consistent with Exhibit B hereto, or (B)  may be necessary under applicable law to keep such Registration Statement continuously effective with respect to the disposition of all Registrable Securities covered thereby for the periods provided under Section 2(a) or Section 2(b) , as applicable, in accordance with the intended method of distribution.

(c) The Company will make all required filing fee payments in respect of any Registration Statement or Prospectus used under this Agreement (and any Public Offering covered thereby) within the deadlines specified by the Securities Act.

(d) The Company will notify each Holder of Registrable Securities named as a selling stockholder in any Registration Statement and the managing underwriter or underwriters of an underwritten Public Offering of Registrable Securities, if applicable, (i)  as promptly as reasonably practicable when any Registration Statement or post-effective amendment thereto has been declared effective; (ii)  of the issuance or threatened issuance by the Commission or any other governmental or regulatory authority of any stop order, injunction or other order or requirement suspending the effectiveness of a Registration Statement covering any or all of the Registrable Securities or the initiation or threatening of any Proceedings for that purpose; (iii)  of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or

 

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the initiation or threatening of any Proceeding for such purpose; or (iv)  of the discovery that, or upon the happening of any event the result of which, such Registration Statement or Prospectus or Issuer Free Writing Prospectus relating thereto or any document incorporated or deemed to be incorporated therein by reference contains an untrue statement in any material respect or omits any material fact necessary to make the statements in the Registration Statement or the Prospectus or Issuer Free Writing Prospectus relating thereto not misleading, or when any Issuer Free Writing Prospectus includes information that may conflict with the information contained in the Registration Statement or Prospectus, or if, for any other reason, it shall be necessary during such time period to amend or supplement such Registration Statement or Prospectus in order to comply with the Securities Act, correct such misstatement or omission or effect such compliance.

(e) Upon the occurrence of any event contemplated by Section 4(d)(iv) , as promptly as reasonably practicable, the Company will (x)  prepare a supplement or amendment, including a post-effective amendment, if required by applicable law, to the affected Registration Statement or a supplement to the related Prospectus or any document incorporated or deemed to be incorporated therein by reference or to the applicable Issuer Free Writing Prospectus, (y)  furnish, if requested, a reasonable number of copies of such supplement or amendment to the selling Holders, their counsel and the managing underwriter or underwriters of an underwritten Public Offering of Registrable Securities, if applicable, and (z)  file such supplement, amendment and any other required document with the Commission so that, as thereafter delivered to the purchasers of any Registrable Securities, such Registration Statement, such Prospectus or such Issuer Free Writing Prospectus shall not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of a Prospectus or an Issuer Free Writing Prospectus, in light of the circumstances under which they were made) not misleading, and such Issuer Free Writing Prospectus shall not include information that conflicts with information contained in the Registration Statement or Prospectus, in each case such that each selling Holder can resume disposition of such Registrable Securities covered by such Registration Statement or Prospectus. Following receipt of notice of any event contemplated by clauses 4(d)(ii)-(iv), a Holder shall suspend sales of the Registrable Securities pursuant to such Registration Statement and shall not resume sales until such time as it has received written notice from the Company to such effect. The Company shall provide any supplemented or amended prospectus necessary to resume sales, if requested by any Holder.

(f) The Company will use its commercially reasonable efforts to avoid the issuance of, or, if issued, obtain the withdrawal of (i)  any stop order or other order suspending the effectiveness of a Registration Statement or the use of any Prospectus, or (ii)  any suspension of the qualification (or exemption from qualification) of any of the Registrable Securities for sale in any jurisdiction, as promptly as practicable, or if any such order or suspension is made effective during any Suspension Period, as promptly as practicable after the Suspension Period is over.

(g) During the Effectiveness Period or the Shelf Period, as applicable, the Company will furnish to each selling Holder, its counsel and the managing underwriter or underwriters of an underwritten Public Offering of Registrable Securities, if applicable, upon their request, without charge, at least one conformed copy of each Registration Statement and each amendment thereto and all exhibits to the extent requested by such selling Holder or underwriter (including those incorporated by reference) promptly after the filing of such documents with the Commission.

 

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(h) The Company will promptly deliver to each selling Holder and the managing underwriter or underwriters of an underwritten Public Offering of Registrable Securities, if applicable, without charge, as many copies of the applicable Registration Statement, each amendment and supplement thereto, the Prospectus included in such Registration Statement (including each preliminary Prospectus, final Prospectus, and any other Prospectus (including any Prospectus filed under Rule 424, Rule 430A or Rule 430B promulgated under the Securities Act and any Issuer Free Writing Prospectus)), all exhibits and other documents filed therewith and such other documents as such selling Holder or underwriter may reasonably request in order to facilitate the disposition of the Registrable Securities by such selling Holder or underwriter, and upon request, subject to any confidentiality undertaking as the Company shall reasonably request, a copy of any and all transmittal letters or other correspondence to or received from the Commission or any other governmental authority relating to such offer. Subject to Section  2(e) hereof, the Company consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders and any applicable underwriter in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto.

(i) The Company will (i)  register or qualify the Registrable Securities covered by a Registration Statement, no later than the time such Registration Statement is declared effective by the Commission, under all applicable securities laws (including the “blue sky” laws) of such jurisdictions each underwriter, if any, or any selling Holder shall reasonably request; (ii)  keep each such registration or qualification effective during the period such Registration Statement is required to be kept effective under the terms of this Agreement; and (iii)  do any and all other acts and things which may be reasonably necessary or advisable to enable such underwriter, if any, and each selling Holder to consummate the disposition in each such jurisdiction of the Registrable Securities covered by such Registration Statement; provided , however , that the Company will not be required to (x)  qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this subparagraph, (y)  subject itself to taxation in any such jurisdiction, or (z)  consent to general service of process (other than service of process in connection with such registration or qualification or any sale of Registrable Securities in connection therewith) in any such jurisdiction.

(j) The Company will cooperate with the Holders and the underwriter or managing underwriter of an underwritten Public Offering of Registrable Securities, if any, to facilitate the timely preparation and delivery of certificates or book-entry statements representing Registrable Securities to be delivered to a transferee pursuant to a Registration Statement, which certificates or book-entry statements shall be free of all restrictive legends, indicating that the Registrable Securities are unregistered or unqualified for resale under the Securities Act, Exchange Act or other applicable securities laws, and to enable such Registrable Securities to be in such denominations and registered in such names as any such Holders or the underwriter or managing underwriter of an underwritten Public Offering, as applicable, may reasonably request and instruct any transfer agent and registrar of Registrable Securities, if any, may request. In connection therewith, if required by the Company’s transfer agent, the Company will promptly, after the effective date of the Registration Statement, cause an opinion of counsel as to the effectiveness of the Registration Statement to be delivered to and maintained with such transfer agent, together with any other authorizations, certificates and directions required by the transfer agent which authorize and direct the transfer agent to issue such Registrable Securities without

 

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any such legend upon the sale by any Holder or the underwriter or managing underwriter of an underwritten Public Offering of Registrable Securities, if any, of such Registrable Securities under the Registration Statement and to release any stop transfer orders in respect thereof. At the request of any Holder or the managing underwriter, if any, the Company will promptly deliver or cause to be delivered an opinion or instructions to the transfer agent in order to allow the Registrable Securities to be sold from time to time free of all restrictive legends.

(k) The right of any Holder to include such Holder’s Registrable Securities in an underwritten offering shall be conditioned upon (x)  such Holder’s participation in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein, (y)  such Holder entering into customary agreements, including an underwriting agreement in customary form, and sell such Holder’s Registrable Securities on the basis provided in any underwriting arrangements approved by the Holders entitled to select the managing underwriter or managing underwriters hereunder ( provided that (I)  any such Holder shall not be required to make any representations or warranties to the Company or the underwriters (other than (A)  representations and warranties regarding (1)  such Holder’s ownership of its Registrable Securities to be sold or transferred, (2)  such Holder’s power and authority to effect such transfer, (3)  such matters pertaining to compliance with securities laws as may be reasonably requested by the Company or the underwriters, (4)  the accuracy of information concerning such Holder as provided by or on behalf of such Holder, and (5)  any other representations required to be made by the Holder under applicable law, and (B)  such other representations, warranties and other provisions relating to such Holder’s participation in such Public Offering as may be reasonably requested by the underwriters) or to undertake any indemnification obligations to the Company with respect thereto, except as otherwise provided in Section 8(b) hereof, or to the underwriters with respect thereto, except to the extent of the indemnification being given to the underwriters and their controlling Persons in Section 8(b) hereof) and (II)  and the aggregate amount of the liability of such Holder in connection with such offering shall not exceed such Holder’s net proceeds from the disposition of such Holder’s Registrable Securities in such offering) and (z)  such Holder completing and executing all questionnaires, powers of attorney, custody agreements and other documents reasonably required under the terms of such underwriting arrangements or by the Company in connection with such underwritten Public Offering.

(l) The Company agrees with each Holder that, in connection with any underwritten Public Offering (including an Underwritten Shelf Takedown), the Company shall: (i)  enter into and perform under such customary agreements (including underwriting agreements in customary form, including customary representations and warranties and provisions with respect to indemnification and contribution) and take all such other actions as the Holders of a Majority of Included Registrable Securities being sold or the underwriters, if any, reasonably request in order to expedite or facilitate the disposition of such Registrable Securities and provide reasonable cooperation, including causing appropriate officers to attend and participate in “road shows” and analyst or investor presentations and such other selling or other informational meetings organized by the underwriters, if any (taking into account the needs of the Company’s businesses and the responsibilities of such officers with respect thereto). The Company and its management shall not be required to participate in any marketing effort that lasts longer than five (5)  Business Days.

 

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(m) The Company will use commercially reasonable efforts to obtain for delivery to the underwriter or underwriters of an underwritten Public Offering of Registrable Securities (i)  a signed counterpart of one or more comfort letters from independent public accountants of the Company in customary form and covering such matters of the type customarily covered by comfort letters and (ii)  an opinion or opinions from counsel for the Company (including any local counsel reasonably requested by the underwriters) dated the date of the closing under the underwriting agreement, in customary form, scope and substance, covering the matters customarily covered in opinions requested in sales of securities in an underwritten Public Offering, which opinions shall be reasonably satisfactory to such underwriters and their counsel.

(n) The Company will (i)  provide and cause to be maintained a transfer agent and registrar for all Registrable Securities covered by the applicable Registration Statement from and after a date not later than the effective date of such Registration Statement and provide and enter into any reasonable agreements with a custodian for the Registrable Securities and (ii)  no later than the effective date of the applicable Registration Statement, provide a CUSIP number for all Registrable Securities.

(o) The Company will cooperate with each Holder of Registrable Securities and each underwriter or agent, if any, participating in the disposition of Registrable Securities and their respective counsel in connection with any filings required to be made with FINRA.

(p) The Company will, upon reasonable notice and at reasonable times during normal business hours, make available for inspection by a representative appointed by the Holders of a Majority of Included Registrable Securities, counsel selected by such Holders in accordance with this agreement, any underwriter participating in any disposition pursuant to such registration, as applicable, and any other attorney or accountant retained by such underwriter, all financial and other records and pertinent corporate documents of the Company, and cause the Company’s officers, directors, employees and independent accountants to supply all information reasonably requested by any such Holder, underwriter, attorney or accountant in connection with such Registration Statement or Underwritten Shelf Takedown, as applicable, and make themselves available at mutually convenient times to discuss the business of the Company and other matters reasonably requested by any such Holders, sellers, underwriter or agent thereof in connection with such Registration Statement as shall be necessary to enable them to exercise their due diligence responsibility, as applicable (any information provided under this Section 4(p) , “ Due Diligence Information ”), subject in each case to the foregoing persons entering into customary confidentiality and non-use agreements with respect to any confidential information of the Company. The Company shall not provide any Due Diligence Information to a Holder unless such Holder explicitly requests such Due Diligence Information in writing.

(q) The Company will comply with all applicable rules and regulations of the Commission, the Trading Market, FINRA and any state securities authority, and make available to each Holder, as soon as reasonably practicable after the effective date of the Registration Statement, an earnings statement covering at least 12  months which shall satisfy the provisions of Section  11(a) of the Securities Act and Rule 158.

(r) The Company will ensure that any Issuer Free Writing Prospectus utilized in connection with any Prospectus complies in all material respects with the Securities Act, is filed in accordance with the Securities Act to the extent required thereby, and is retained in accordance with the Securities Act to the extent required thereby.

 

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(s) Each Holder represents that it has not prepared or had prepared on its behalf or used or referred to, and agrees that it will not prepare or have prepared on its behalf or used or refer to, any Free Writing Prospectus without the prior written consent of the Company and, in connection with any underwritten Public Offering, the underwriters.

(t) Following the listing of the Company Common Stock in accordance with the requirements of the Plan, the Company will use commercially reasonable efforts to cause the Registrable Securities of the same class, to the extent any further action is required, to be similarly listed and to maintain such listing until such time as the securities cease to constitute Registrable Securities.

(u) The Company shall, if such registration for an underwritten Public Offering is pursuant to a Registration Statement on Form S-3 or any similar short-form registration, include in such Registration Statement such additional information for marketing purposes as the managing underwriter(s) reasonably request(s).

(v) The Company shall hold in confidence and not use or make any disclosure of information concerning a Holder provided to the Company, unless (i)  disclosure of such information is necessary to comply with federal or state securities laws, (ii)  the disclosure of such information is necessary to avoid or correct a misstatement or omission in any Registration Statement, (iii)  the release of such information is ordered pursuant to a subpoena or other final, non-appealable order from a court or governmental body of competent jurisdiction, or (iv)  such information has been made generally available to the public other than by disclosure in violation of this Agreement or any other agreement known to the Company. The Company agrees that it shall, upon learning that disclosure of such information concerning a Holder is sought in or by a court or governmental body of competent jurisdiction or through other means or otherwise determining that any such disclosure is required under the foregoing clauses (i)  through (iii), give prompt written notice to such Holder and allow such Holder, at the Holder’s expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, such information.

(w) In order to render the Registrable Securities eligible for resale pursuant to Rule 144A under the Securities Act, while any of the Registrable Securities remain “restricted securities,” it will make available, upon request, to any Holder of the Registrable Securities or prospective purchasers of the Registrable Securities the information specified in Rule 144A(d)(4), unless the Company furnishes information to the Commission pursuant to Section  13 or 15(d) of the Exchange Act.

5. Registration Expenses . The Company shall bear all reasonable Registration Expenses incident to the Parties’ performance of or compliance with their respective obligations under this Agreement or otherwise in connection with any Demand Registration, Shelf Registration, Shelf Takedown Request or Piggyback Registration (excluding any Selling Expenses), whether or not any Registrable Securities are sold pursuant to a Registration Statement.

Registration Expenses ” shall include, without limitation, (i) all registration, qualification and filing fees and expenses (including fees and expenses (A) of the Commission or FINRA, (B) incurred in connection with the listing of the Registrable Securities on the Trading Market,

 

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and (C) in compliance with applicable state securities or “Blue Sky” laws (including reasonable fees and disbursements of counsel for the underwriters in connection with blue sky qualifications of the Registrable Securities as may be set forth in any underwriting agreement)); (ii) expenses in connection with the preparation, printing, mailing and delivery of any registration statements, prospectuses and other documents in connection therewith and any amendments or supplements thereto (including expenses of printing certificates for the Company’s shares and printing prospectuses); (iii) analyst or investor presentation or road show expenses of the Company and the underwriters, if any; (iv) messenger, telephone and delivery expenses; (v) reasonable fees and disbursements of counsel (including any local counsel), auditors and accountants for the Company (including the expenses incurred in connection with “comfort letters” required by or incident to such performance and compliance); (vi) the reasonable fees and disbursements of underwriters to the extent customarily paid by issuers or sellers of securities (including, if applicable, the fees and expenses of any “qualified independent underwriter” (and its counsel) that is required to be retained in accordance with the rules and regulations of FINRA and the other reasonable fees and disbursements of underwriters (including reasonable fees and disbursements of counsel for the underwriters) in connection with any FINRA qualification; (vii) fees and expenses of any special experts retained by the Company; (viii) Securities Act liability insurance, if the Company so desires such insurance; (ix) reasonable fees and disbursements of one third-party counsel (along with one local counsel, to the extent reasonably necessary, for any applicable jurisdiction) representing all Holders mutually agreed by Holders of a Majority of Included Registrable Securities participating in the related registration; (x) fees and expenses payable in connection with any ratings of the Registrable Securities, including expenses relating to any presentations to rating agencies; (xi) internal expenses of the Company (including all salaries and expenses of its officers and employees performing legal or accounting duties); (xii) transfer agents’ and registrars’ fees and expenses and the fees and expenses of any other agent or trustee appointed in connection with such offering. In addition, the Company shall be responsible for all of its expenses incurred in connection with the consummation of the transactions contemplated by this Agreement (including expenses payable to third parties and including all salaries and expenses of the Company’s officers and employees performing legal or accounting duties), the expense of any annual audit and any underwriting fees, discounts, selling commissions and stock transfer taxes and related legal and other fees applicable to securities sold by the Company and in respect of which proceeds are received by the Company. Each Holder shall pay any Selling Expenses applicable to the sale or disposition of such Holder’s Registrable Securities pursuant to any Demand Registration Statement or Piggyback Offering, or pursuant to any Shelf Registration Statement under which such selling Holder’s Registrable Securities were sold, and in any other fees and expenses not constituting Registration Expenses in proportion to the amount of such selling Holder’s shares of Registrable Securities sold in any offering under such Demand Registration Statement, Piggyback Offering or Shelf Registration Statement.

6. Lock-Up Agreements .

(a) Holder Lock-Up . In connection with any underwritten Public Offering expected to result in gross proceeds of at least $50.0  million, if requested by (i)  the managing underwriters of such Public Offering and (ii)  the Company, in the case of a Company-initiated Public Offering, or the Holders of a Majority of Included Registrable Securities, in the case of any Underwritten Shelf Takedown or Underwritten Demand pursuant to Section 2(a) or 2(b) , each Holder of Holdback Registrable Securities participating in such Public Offering and, if requested by the managing

 

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underwriters of such Public Offering, each Holder of Holdback Registrable Securities shall enter into a lock-up agreement with the managing underwriters of such Public Offering to not make any sale or other disposition of any of the Holdback Registrable Securities owned by such Holder (a “ Lock-Up Agreemen t”); provided that all executive officers and directors of the Company and the Holders requesting such Lock-Up Agreements are bound by and have entered into substantially similar Lock-Up Agreements; provided , further , that the foregoing provisions shall only be applicable to the Holders if all stockholders, officers and directors are treated similarly with respect to any release prior to the termination of the lock-up period such that if any such persons are released, then all Holders shall also be released to the same extent on a pro rata basis. The Company may impose stop-transfer instructions with respect to the shares of Capital Stock (or other securities) subject to the restrictions set forth in this Section 6(a) until the end of the applicable period of the Lock-Up Agreement. The provisions of this Section 6(a) shall cease to apply to such Holder once such Holder no longer beneficially owns any Holdback Registrable Securities.

(b) Lock-Up Agreements . The Lock-Up Agreement shall provide for the following unless the underwriters managing such underwritten Public Offering otherwise agree in writing:

(i) in connection with an initial underwritten Public Offering of the Company involving the offer and sale of Company Common Stock by the Company prior to the one-year anniversary of the date of this Agreement, such holder shall not (A)  offer, sell, contract to sell, pledge or otherwise dispose of (including sales pursuant to Rule 144), directly or indirectly, any Holdback Registrable Securities of the Company (including Holdback Registrable Securities of the Company that may be deemed to be owned beneficially by such holder in accordance with the rules and regulations of the Commission) (collectively, “ Securities ”), (B) enter into a transaction with respect to the Securities which would have the same effect as described in clause (A)  above, (C) enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences or ownership of any Securities, whether such transaction is to be settled by delivery of such Securities, in cash or otherwise (each of (A), (B) and (C)  above, a “ Sale Transaction ”), or (D)  publicly disclose the intention to enter into any Sale Transaction, commencing on the date requested by the managing underwriters (which shall be no earlier than seven (7)  days prior to the anticipated “pricing” date for such Public Offering) and continuing to the date that is 180 days following the “pricing” date for such initial Public Offering (the “ Holdback Period ”).

(ii) in connection with all other underwritten Public Offerings of the Company prior to the one-year anniversary of the date of this Agreement, such holder shall not effect any Sale Transaction commencing on the date requested by the managing underwriters (which shall be no earlier than seven (7)  days prior to the anticipated “pricing” date for such Public Offering) and continuing to the date that is 90 days following the “pricing” date for such Public Offering (a “ Follow-On Holdback Period ”).

(iii) For the purpose of the lock-up provisions of this Section 6 , any Company Common Stock that is (x)  issued in the Transaction, and (y)  held by a Holder during the period ending one-year after the date of this Agreement, shall be subject to the lock-up provisions of this Section 6 regardless of whether such Company Common Stock no longer constitutes “Registrable Securities”; provided that, for the avoidance of doubt, any such Company Common Stock sold to a non-affiliated third party transferee, either in a public resale under Rule 144 or pursuant to a registered offering, shall not be subject to the lock-up requirements of this Section 6 .

 

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(c) Company Lock-Up . In connection with any underwritten Public Offering, and upon the reasonable request of the managing underwriters, the Company shall: (i)  agree to a customary lock-up provision applicable to the Company in an underwriting agreement as reasonably requested by the managing underwriters during any Holdback Period or Follow-On Holdback Period; and (ii)  cause each of its executive officers and directors to enter into Lock-Up Agreements, in each case, in customary form and substance, and with exceptions that are customary, for an underwritten Public Offering.

7. [Reserved]

8. Indemnification .

(a) The Company shall indemnify, defend and hold harmless each Holder, its partners, stockholders, equityholders, general partners, limited partners, managers, members, and Affiliates and each of their respective officers and directors and any Person who controls any such Holder (within the meaning of Section  15 of the Securities Act or Section  20 of the Exchange Act) and any agent, employee, attorney or Representative thereof (collectively, “ Holder Indemnified Persons ”), and any underwriter that facilitates the sale of the Registrable Securities and any Person who controls such underwriter (within the meaning of Section  15 of the Securities Act or Section  20 of the Exchange Act), to the fullest extent permitted by applicable law, from and against any and all losses, claims, damages, liabilities, joint or several, costs (including reasonable costs of preparation and investigation and reasonable attorneys’, accountants’ and experts’ fees, whether or not the Indemnified Person is a party to any Proceeding) and expenses, judgments, fines, penalties, interest, settlements or other amounts arising from any and all Proceedings, whether civil, criminal, administrative or investigative, in which any Indemnified Person may be involved, or is threatened to be involved, as a party or otherwise, under the Securities Act or otherwise (collectively, “ Losses ”), as incurred, arising out of, based upon, resulting from or relating to (i)  any untrue or alleged untrue statement of a material fact contained in any Registration Statement under which any Registrable Securities were registered, Prospectus, preliminary prospectus, road show, as defined in Rule 433(h)(4) under the Securities Act (a “ road show ”), or in any summary or final prospectus or Issuer Free Writing Prospectus or in any amendment or supplement thereto or in any documents incorporated by reference in any of the foregoing or (ii)  any omission or alleged omission to state therein a material fact required to be stated therein or necessary, in the case of any Prospectus, preliminary prospectus, road show or Issuer Free Writing Prospectus, in light of the circumstances under which they were made, to make the statements therein not misleading, or (iii)  any violation or alleged violation by the Company or any of its Subsidiaries of any federal, state or common law rule or regulation relating to action or inaction in connection with any Company provided information in such registration, disclosure document or related document or report, and the Company will reimburse such Indemnified Person for any legal or other expenses reasonably incurred by it in connection with investigating or defending any such Proceeding; provided , however , that the Company shall not be liable to any Indemnified Person to the extent that any such Losses arise out of, are based upon or results from an untrue or alleged untrue statement or omission or alleged omission made in such Registration Statement, such preliminary, summary or final prospectus or Issuer Free Writing Prospectus or such amendment or supplement, in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Indemnified Person specifically for use in the preparation thereof.

 

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(b) In connection with any Registration Statement filed by the Company pursuant to Section 2 hereof in which a Holder has registered for sale its Registrable Securities, each such selling Holder agrees (severally and not jointly) to indemnify, defend and hold harmless, to the fullest extent permitted by law, the Company, its directors and officers, Affiliates, employees, members, managers, agents and each Person who controls the Company (within the meaning of Section  15 of the Securities Act or Section  20 of the Exchange Act) (together with Holder Indemnified Persons, collectively, “ Indemnified Persons ”), from and against any Losses resulting from (i)  any untrue statement of a material fact contained in any Registration Statement under which such Registrable Securities were registered, Prospectus, preliminary prospectus, road show, Issuer Free Writing Prospectus, or any amendment thereof or supplement thereto or any documents incorporated by reference therein, or (ii)  any omission to state therein a material fact required to be stated therein or necessary, in the case of any Prospectus, preliminary prospectus, road show, Issuer Free Writing Prospectus, in light of the circumstances under which they were made, to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or omission is contained in any information furnished in writing by or on behalf of such selling Holder to the Company specifically for inclusion therein and has not been corrected in a subsequent writing prior to the sale of the Registrable Securities. In no event shall the liability of any selling Holder hereunder be greater in amount than the dollar amount of the net proceeds (after deducting underwriters’ discounts, fees and commissions) received by such Holder under the sale of Registrable Securities giving rise to such indemnification obligation less any amounts paid (including such Holder’s share of any other Selling Expenses) by such Holder in connection with such sale and any amounts paid by such Holder as a result of liabilities incurred under the underwriting agreement, if any, related to such sale.

(c) Any Indemnified Person shall give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification under this Section 8 ( provided that any delay or failure to so notify the Person obligated to indemnify the Indemnified Person with respect to such claim (the “ indemnifying party ”) shall not relieve the indemnifying party of its obligations hereunder except to the extent, if at all, that it is actually and materially prejudiced by reason of such delay or failure). The indemnifying party shall be entitled to assume the defense of such claim with counsel reasonably satisfactory to the Indemnified Person; provided , however , that any Indemnified Person shall have the right to select and employ its own counsel (and one local counsel in each relevant jurisdiction), and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel if (A)  the Indemnified Person has reasonably concluded (based upon advice of its counsel) that there may be legal defenses available to it or other Indemnified Persons that are different from or in addition to those available to the indemnifying party, or (B)  in the reasonable judgment of any such Indemnified Person (based upon advice of its counsel) a conflict of interest may exist between such Indemnified Person and the indemnifying party with respect to such claims; (C)  the indemnifying party shall not have employed counsel satisfactory to the Indemnified Person to represent the Indemnified Person within a reasonable time after notice of the institution of such action; (D)  the indemnifying party shall authorize the Indemnified Person to employ separate counsel at the expense of the indemnifying party; or (E)  the indemnifying party shall have failed to assume the defense of such

 

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claim within a reasonable time after receipt of notice of such claim from the Indemnified Person and employ counsel reasonably satisfactory to such Indemnified Person. An indemnifying party shall not be liable under this Section 8(c) to any Indemnified Person regarding any settlement or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the Indemnified Person is an actual or potential party to such claim or action) unless such settlement, compromise or consent is consented to by such indemnifying party, which consent shall not be unreasonably withheld. No action may be settled without the consent of the Indemnified Person, provided that the consent of the Indemnified Person shall not be required if (A)  such settlement includes an unconditional release of such Indemnified Person in form and substance satisfactory to such Indemnified Person from all liability on the claims that are the subject matter of such settlement, (B)  such settlement provides for the payment by the indemnifying party of money as the sole relief for such action, and (C)  such settlement does not include any statement as to or any admission of fault, culpability or a failure to act by or on behalf of any Indemnified Person. It is understood that the indemnifying party or parties shall not, except as specifically set forth in this Section 8(c) , in connection with any Proceeding or related Proceedings in the same jurisdiction, be liable for the reasonable fees, disbursements or other charges of more than one separate firm admitted to practice in such jurisdiction at any one time.

(d) In the event that the indemnity provided in Section 8(a) or Section 8(b) above is unavailable to or insufficient to hold harmless an Indemnified Person for any reason, then the indemnifying party under Section 8(a) or 8(b) , as applicable, in lieu of indemnifying such Indemnified Person thereunder, agrees to contribute to the aggregate Losses (including reasonable costs of preparation and investigation and reasonable attorneys’, accountants’ and experts’ fees, whether or not the Indemnified Person is a party to any Proceeding) to which such indemnifying party may be subject in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party on the one hand and by the Indemnified Person on the other from the Public Offering of the Company Common Stock; provided , however , that the maximum amount of liability in respect of such contribution shall be limited in the case of any Holder to the net proceeds (after deducting underwriters’ discounts, fees and commissions and other Selling Expenses) received by such Holder in connection with such registration. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law, then the indemnifying party shall contribute to such amount paid or payable by such Indemnified Person in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the indemnifying party on the one hand and the Indemnified Person on the other in connection with the statements or omissions which resulted in such Losses, as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party on the one hand or the Indemnified Person on the other and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

(e) The Parties agree that it would not be just and equitable if contribution pursuant to Section 8(d) were determined by pro rata allocation (even if the Holders of Registrable Securities or any agents or underwriters or all of them were treated as one entity for such purpose) or by any other

 

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method of allocation which does not take account of the equitable considerations referred to above in Section 8(d) . The amount paid or payable by an Indemnified Person as a result of the Losses referred to above in Section  8(d) shall be deemed to include any reasonable legal or other reasonable out-of-pocket expenses incurred by such Indemnified Person in connection with investigating or defending any such action or claim.

(f) Notwithstanding the provisions of Section 8(d) , no Person guilty of fraudulent misrepresentation (within the meaning of Section  11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

(g) For purposes of Section 8(d) , each Person who controls any Holder, agent or underwriter (within the meaning of Section  15 of the Securities Act or Section  20 of the Exchange Act), and each director, officer, employee and agent of any such Holder, agent or underwriter, shall have the same rights to contribution as such Holder, agent or underwriter, and each Person who controls the Company (within the meaning of Section  15 of the Securities Act or Section  20 of the Exchange Act) and each officer and director of the Company shall have the same rights to contribution as the Company, subject in each case to the applicable terms and conditions of this Section 8(d) .

(h) The provisions of this Section 8 will remain in full force and effect, regardless of any investigation made by or on behalf of any Holder or the Company or any of the officers, directors or controlling Persons referred to in this Section 8 hereof, and will survive the transfer of Registrable Securities.

(i) The remedies provided for in this Section 8 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any Indemnified Person at law or in equity.

9. [Reserved]

10. Miscellaneous .

(a) Remedies . In the event of a breach by the Company of any of its obligations under this Agreement, each Holder, in addition to being entitled to exercise all rights granted by law and under this Agreement, including recovery of damages, will be entitled to specific performance of its rights under this Agreement. The Company agrees that monetary damages would not provide adequate compensation for any losses incurred by reason of a breach by it of any of the provisions of this Agreement and further agrees that, in the event of any action for specific performance in respect of such breach, it shall waive the defense that a remedy at law would be adequate and shall waive any requirement for the posting of a bond.

(b) Discontinued Disposition . Each Holder agrees by its acquisition of Registrable Securities that, upon receipt of a notice from the Company of the occurrence of any event of the kind described in clauses (ii)  through (iv) of Section 4(d) or the occurrence of a Suspension Period, such Holder will forthwith discontinue disposition of such Registrable Securities under the Registration Statement until such Holder’s receipt of the copies of the supplemental Prospectus or amended Registration Statement or until it is advised in writing by the Company that the use of the applicable Prospectus may be resumed, and, in either case, has received copies of any additional or supplemental filings that are incorporated or deemed to be incorporated by reference in such

 

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Prospectus or Registration Statement. The Company may provide appropriate stop orders to enforce the provisions of this Section 10(b) . In the event the Company shall give any such notice, the period during which the applicable Registration Statement is required to be maintained effective 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 seller of Registrable Securities covered by such Registration Statement either receives the copies of the supplemented or amended Prospectus or is advised in writing by the Company that the use of the Prospectus may be resumed.

(c) Amendments . This Agreement may be amended, modified, extended or terminated, and the provisions hereof may be waived, only with (i)  the consent of the Company and (ii)  the affirmative vote of Holders of a Majority of Registrable Securities; provided that in no event shall the obligations of any Holder of Registrable Securities be increased or the rights of any Holder be adversely affected (without similarly increasing or adversely affecting the rights of all Holders), except with the written consent of such Holder; and provided further , any provision that is for the express benefit of only Qualified Holders shall be amended only with the consent of the Holders of a majority of the Registrable Securities held by all Qualified Holders. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Holders of Registrable Securities whose securities are being sold pursuant to a Registration Statement and that does not directly or indirectly affect the rights of other Holders of Registrable Securities may be given by holders of at least a majority of the Registrable Securities being sold by such Holders pursuant to such Registration Statement.

(d) Waivers . No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any Party to exercise any right hereunder in any manner impair the exercise of any such right.

(e) Termination and Effect of Termination . This Agreement shall terminate with respect to each Holder when such Holder no longer holds any Registrable Securities and will terminate in full when no Holder holds any Registrable Securities, except for the provisions of Section 8 , which shall survive any such termination. No termination under this Agreement shall relieve any Person of liability for breach or Registration Expenses incurred prior to termination. In the event this Agreement is terminated, each Person entitled to indemnification rights pursuant to Section 8 shall retain such indemnification rights with respect to any matter that (i)  may be an indemnified liability thereunder and (ii)  occurred prior to such termination.

(f) Notices . Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (i)  the date of transmission, if such notice or communication is delivered via facsimile (with confirmation of delivery) or electronic mail in PDF or similar electronic or digital format (with confirmation of receipt) prior to 5:00 p.m. (New York time) on a business day in the place of receipt, (ii)  the business day after the date of transmission, if such notice or communication is delivered via facsimile (with confirmation of delivery) or electronic mail in PDF or similar electronic or digital format (with confirmation of receipt) later than 5:00  p.m. (New York time)

 

- 31 -


on any date and earlier than 11:59 p.m. (New York time) on such date, (iii)  the Business Day following the date of mailing, if sent by nationally recognized overnight courier service or (iv)  upon actual receipt by the Party to whom such notice is required to be given. The address for such notices and communications shall be as follows (or at such other address as shall be given in writing by any Party to the other Parties):

If to the Company:

VICI Properties Inc.

8329 W. Sunset Road, Suite 210

Las Vegas, NV 89113

Attn.: Chief Financial Officer

with a copy (which shall not constitute notice) to:

Kramer Levin Naftalis & Frankel LLP

1177 Avenue of the Americas

New York, NY 10036

Attn.: Abbe Dienstag and Christopher Auguste

If to any other Person who is then a Holder, to the address of such Holder as it appears on the signature pages hereto or such other address as may be designated in writing hereafter by such Person.

(g) Successors and Assigns; Transfers; New Issuances . This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective heirs, executors, administrators, successors and legal representatives. The Registrable Securities and the rights of a Holder hereunder may be transferred, assigned, or otherwise conveyed on a pro rata basis in connection with any transfer, assignment, or other conveyance of Registrable Securities to any transferee or assignee; provided that all of the following additional conditions are satisfied with respect to any transfer, assignment or conveyance of Registrable Securities or rights hereunder: (i)  such transfer or assignment is made in compliance with the Securities Act, any other applicable securities or “blue sky” laws, or rules or regulations promulgated by FINRA, and the terms and conditions of the certificate of incorporation and the by-laws of the Company; (ii)  such transferee or assignee shall have delivered to the Company a Joinder Agreement in substantially the form attached hereto as Exhibit A agreeing to become subject to and bound by the terms of this Agreement; provided, however, that notwithstanding the foregoing, no transferee or assignee of Capital Stock of the Company issued in the Transaction that has been sold, transferred or otherwise disposed of by the Holder thereof pursuant to (x)  a public resale under Rule 144 or (y)  a registered offering, will be required to deliver a Joinder Agreement; and (iii)  the Company is given written notice by such Holder of such transfer or assignment, stating the name and address of the transferee or assignee, identifying the Registrable Securities with respect to which such rights are being transferred or assigned and the total number of Registrable Securities and other Capital Stock of the Company beneficially owned by such transferee or assignee. Notwithstanding any other provision of this Agreement to the contrary, the Company shall not transfer or assign its rights or obligations hereunder without the prior written consent of each Holder.

 

- 32 -


(h) Governing Law . This Agreement, and any claim, controversy or dispute arising under or related to this Agreement, shall be governed by, and construed in accordance with, the laws of the State of New York, without regard to the choice of law or conflicts of law.

(i) Submission to Jurisdiction . Each of the Parties, by its execution of this Agreement, (i)  hereby irrevocably submits to the exclusive jurisdiction of the United States District Court for the Southern District of New York and the state courts sitting in the State of New York, County of New York for the purpose of any Proceeding arising out of or based upon this Agreement or relating to the subject matter hereof, (ii)  hereby waives to the extent not prohibited by applicable law, and agrees not to assert, and agrees not to allow any of its Subsidiaries to assert, by way of motion, as a defense or otherwise, in any such action, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that any such Proceeding brought in one of the above-named courts is improper, or that this Agreement or the subject matter hereof or thereof may not be enforced in or by such court and (iii)  hereby agrees not to commence or maintain any Proceeding arising out of or based upon this Agreement or relating to the subject matter hereof or thereof other than before one of the above-named courts nor to make any motion or take any other action seeking or intending to cause the transfer or removal of any such Proceeding to any court other than one of the above-named courts whether on the grounds of inconvenient forum or otherwise. Notwithstanding the foregoing, to the extent that any party hereto is or becomes a party in any litigation in connection with which it may assert indemnification rights set forth in this Agreement, the court in which such litigation is being heard shall be deemed to be included in clause (i)  above. Notwithstanding the foregoing, any party to this Agreement may commence and maintain an action to enforce a judgment of any of the above-named courts in any court of competent jurisdiction. Each party hereto hereby consents to service of process in any such Proceeding in any manner permitted by New York law, and agrees that service of process by registered or certified mail, return receipt requested, at its address specified pursuant to Section 10(f) hereof is reasonably calculated to give actual notice.

(j) Waiver of Venue . The Parties irrevocably and unconditionally waive, to the fullest extent permitted by applicable law, (i)  any objection that they may now or hereafter have to the laying of venue of any Proceeding arising out of or relating to this Agreement in any court referred to in Section 10(i) and (ii)  the defense of an inconvenient forum to the maintenance of such Proceeding in any such court.

(k) WAIVER OF JURY TRIAL . EACH OF THE PARTIES HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

(l) Cumulative Remedies . The remedies provided herein are cumulative and not exclusive of any remedies provided by law.

(m) Severability . If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction to be invalid, illegal, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions set forth herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated, and the Parties shall use their commercially

 

- 33 -


reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such term, provision, covenant or restriction. It is hereby stipulated and declared to be the intention of the Parties that they would have executed the remaining terms, provisions, covenants and restrictions without including any of such that may be hereafter declared invalid, illegal, void or unenforceable.

(n) Entire Agreement . This Agreement constitutes the entire agreement among the Parties with respect to the subject matter hereof and supersedes all prior contracts or agreements with respect to the subject matter hereof and supersedes any and all prior or contemporaneous discussions, agreements and understandings, whether oral or written, that may have been made or entered into by or among any of the Parties or any of their respective Affiliates relating to the transactions contemplated hereby.

(o) Execution of Agreement . This Agreement may be executed and delivered (by facsimile, by electronic mail PDF or otherwise) in any number of counterparts, each of which, when executed and delivered, shall be deemed an original, and all of which together shall constitute the same agreement.

(p) Determination of Ownership . In determining ownership of Company Common Stock hereunder for any purpose, the Company may rely solely on the records of the transfer agent for the Company Common Stock or other Capital Stock of the Company from time to time, or, if no such transfer agent exists, the Company’s stock ledger.

(q) Headings; Section References . The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

(r) No Recourse . Notwithstanding anything that may be expressed or implied in this Agreement, and notwithstanding the fact that certain of the Holders may be partnerships or limited liability companies, each of the Holders and the Company agrees and acknowledges that no recourse under this Agreement or any documents or instruments delivered in connection with this Agreement shall be had against any of the Company’s or the Holder’s former, current or future direct or indirect equity holders, controlling persons, stockholders, directors, officers, employees, agents, Affiliates, members, financing sources, managers, general or limited partners or assignees (each, a “ Related Party ” and collectively, the “ Related Parties ”), in each case other than the Company, the current or former Holders or any of their respective assignees under this Agreement, whether by the enforcement of any assessment or by any legal or equitable Proceeding, or by virtue of any applicable law, it being expressly agreed and acknowledged that no personal liability whatsoever shall attach to, be imposed on or otherwise be incurred by any of the Related Parties, as such, for any obligation or liability of the Company or the Holders under this Agreement or any documents or instruments delivered in connection herewith for any claim based on, in respect of or by reason of such obligations or liabilities or their creation; provided , however, nothing in this Section 10(r) shall relieve or otherwise limit the liability of the Company or any current or former Holder, as such, for any breach or violation of its obligations under this Agreement or such agreements, documents or instruments.

(s) Descriptive Headings; Interpretation; No Strict Construction . Unless the context requires otherwise: (i)  any pronoun used in this Agreement shall include the corresponding masculine,

 

- 34 -


feminine or neuter forms; (ii)  references to Sections, paragraphs and clauses refer to Sections, paragraphs and clauses of this Agreement; (iii)  the terms “ include ,” “ includes ,” “ including ” or words of like import shall be deemed to be followed by the words “without limitation”; (iv) the terms “ hereof ,” “ herein ” or “ hereunder ” refer to this Agreement as a whole and not to any particular provision of this Agreement; (v)  unless the context otherwise requires, the term “or” is not exclusive and shall have the inclusive meaning of “and/or”; (vi) defined terms herein will apply equally to both the singular and plural forms and derivative forms of defined terms will have correlative meanings; (vii)  references to any law or statute shall be deemed to refer to such law or statute as amended or supplemented from time to time and shall include all rules and regulations and forms promulgated thereunder, and references to any law, rule, form or statute shall be construed as including any legal and statutory provisions, rules or forms consolidating, amending, succeeding or replacing the applicable law, rule, form or statute; (viii)  references to any agreement or contract are to that agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof; (ix)  references to any Person include such Person’s successors and permitted assigns; (x)  references to “days” are to calendar days unless otherwise indicated; and (xi)  references to “writing”, “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form. Each of the parties hereto acknowledges that each party was actively involved in the negotiation and drafting of this Agreement and agrees that no law or rule of construction shall be raised or used in which the provisions of this Agreement shall be construed in favor or against any party hereto because one is deemed to be the author thereof. All references to laws, rules, regulations and forms in this Agreement shall be deemed to be references to such laws, rules, regulations and forms, as amended from time to time or, to the extent replaced, the comparable successor thereto in effect at the time. All references to agencies, self-regulatory organizations or governmental entities in this Agreement shall be deemed to be references to the comparable successors thereto from time to time.

(t) Recapitalizations, Exchanges, etc . The provisions of this Agreement shall apply to the fullest extent set forth herein with respect to (i)  the Company Common Stock, (ii)  any and all securities into which shares of Company Common Stock is converted, exchanged or substituted in any recapitalization or other capital reorganization by the Company and (iii)  any and all equity securities of the Company or any successor or assign of the Company (whether by merger, consolidation, sale of assets or otherwise) which may be issued in respect of, in conversion of, in exchange for or in substitution of, the Company Common Stock and shall be appropriately adjusted for any stock dividends, splits, reverse splits, combinations, recapitalizations and the like occurring after the date hereof. The Company shall cause any successor or assign (whether by merger, consolidation, sale of assets or otherwise) to assume the obligations of the Company under this Agreement or enter into a new registration rights agreement with the Holders on terms substantially the same as this Agreement as a condition of any such transaction.

[ Signature Pages Follow ]

 

- 35 -


IN WITNESS WHEREOF, the parties have executed this Registration Rights Agreement as of the date first written above.

 

VICI PROPERTIES INC.

By:   /s/ Mary E. Higgins

Name:

 

Mary E. Higgins

Title:

 

CFO

[ REMAINDER OF PAGE INTENTIONALLY LEFT BLANK ]


QUANTUM PARTNERS LP

By:    QP GP LLC, ITS GENERAL PARTNER

By:   /s/ Thomas O’Grady

Name:

 

Thomas O’Grady

Title:

 

Attorney-in-Fact


Canyon Capital Advisors LLC,

on behalf of its participating funds and

managed accounts

By:   /s/ John P. Plaga

Name:

 

John P. Plaga

Title:

 

Authorized Signatory


Senator Global Opportunity Master Fund LP
By:   /s/ Evan Gartenlaub

Name:

 

Evan Gartenlaub

Title:

 

Authorized Person


HBK MASTER FUND L.P.
By:   HBK Services LLC, its investment advisor
By:   /s/ Jon L. Mosle III

Name:

 

Jon L. Mosle III

Title:

 

Authorized Power


For and on behalf of Pentwater Capital Management, LP
As investment advisor to:

PWCM Master Fund Ltd

Oceana Master Fund Ltd

Pentwater Equity Opportunities Master Fund Ltd

Pentwater Merger Arbitrage Master Fund Ltd

MAP 98 Segregated Portfolio

By:   /s/ Neal Nenadovic

Name:

 

Neal Nenadovic

Title:

 

Chief Financial Officer


Monarch Debt Recovery Master Fund Ltd

Monarch Capital Master Partners III LP

Monarch Capital Master Partners IV LP

MCP Holdings Master LP

Monarch Special Opportunities Master Fund Ltd

By:    Monarch Alternative Capital LP, as

investment manager

By:   /s/ Chris Santana

Name:

 

Chris Santana

Title:

 

Managing Principal


TACONIC OPPORTUNITY MASTER FUND L.P.

By: Taconic Capital Advisors L.P., its

investment manager

By:   /s/ Peyton McNutt

Name:

 

Peyton McNutt

Title:

 

Associate General Counsel


TACONIC MASTER FUND 1.5 L.P.

By: Taconic Capital Advisors L.P., its

investment manager

By:   /s/ Peyton McNutt

Name:

 

Peyton McNutt

Title:

 

Associate General Counsel


HG VORA SPECIAL OPPORTUNITIES MASTER FUND, LTD.

By:

 

HG Vora Capital Management, LLC

as investment adviser

By:   /s/ Mandy Lam

Name:

 

Mandy Lam

Title:

 

Authorized Signatory


SILVER POINT CAPITAL FUND, L.P.

BY SILVER POINT CAPITAL, L.P., ITS

INVESTMENT MANAGER

By:   /s/ Steven Weiser

Name:

 

Steven Weiser

Title:

 

Authorized Signatory


SILVER POINT CAPITAL OFFSHORE MASTER FUND. L.P.,

BY SILVER POINT CAPITAL, L.P., ITS

INVESTMENT MANAGER

By:   /s/ Brett Rodda

Name:

 

Brett Rodda

Title:

 

Authorized Signatory


Centerbridge Special Credit Partners III, L.P.
By:   /s/ Susanne V. Clark

Name:

 

Susanne V. Clark

Title:

 

Authorized Signatory


Centerbridge Credit Partners Master, L.P.
By:   /s/ Susanne V. Clark

Name:

 

Susanne V. Clark

Title:

 

Authorized Signatory


Centerbridge Credit Partners, L.P.
By:   /s/ Susanne V. Clark

Name:

 

Susanne V. Clark

Title:

 

Authorized Signatory


Dwight Place Capital Partners, LLC
By:   /s/ Ilan Mandel

Name:

 

Ilan Mandel

Title:

 

CFO


Dwight Place Capital Management, LLC
By:   /s/ Ilan Mandel

Name:

 

Ilan Mandel

Title:

 

CFO


MASTER SIF SICAV SIF

By: Marathon Asset Management L.P.

Its Investment Manager and Authorized Signatory

By:   /s/ Louis T. Hanover

Name:

 

Louis T. Hanover

Title:

 

Authorized Signatory


MARATHON SPECIAL OPPORTUNITY MASTER FUND LTD.

By: Marathon Asset Management L.P.

Its Investment Manager and Authorized Signatory

By:   /s/ Louis T. Hanover

Name:

 

Louis T. Hanover

Title:

 

Authorized Signatory


MARATHON BLUE GRASS CREDIT FUND LP

By: Marathon Asset Management L.P.

Its Investment Manager and Authorized Signatory

By:   /s/ Louis T. Hanover

Name:

 

Louis T. Hanover

Title:

 

Authorized Signatory


TRS CREDIT FUND LP

By: Marathon Asset Management L.P.

Its Investment Manager and Authorized Signatory

By:   /s/ Louis T. Hanover

Name:

 

Louis T. Hanover

Title:

 

Authorized Signatory


HIGHLINE CAPITAL PARTNERS, L.P.
By:   /s/ Michael Klarman

Name:

 

Michael Klarman

Title:

 

Member of the GP


HIGHLINE CAPITAL PARTNER QP, LP
By:   /s/ Michael Klarman

Name:

 

Michael Klarman

Title:

 

Member of the GP


HIGHLINE CAPITAL MASTER LP
By:   /s/ Michael Klarman

Name:

 

Michael Klarman

Title:

 

Member of the GP


HIGHLINE CAPITAL QUALIFIED MASTER LP
By:   /s/ Michael Klarman

Name:

 

Michael Klarman

Title:

 

Member of the GP


HIGHLINE ENHANCED QUALIFIED MASTER LP
By:   /s/ Michael Klarman

Name:

 

Michael Klarman

Title:

 

Member of the GP


HIGHLINE A MASTER FUND LLC
By:   /s/ Michael Klarman

Name:

 

Michael Klarman

Title:

 

Member of the GP


HIGHLINE B MASTER FUND LLC
By:   /s/ Michael Klarman

Name:

 

Michael Klarman

Title:

 

Member of the GP


ECF Value Fund, LP
By:   /s/ Marc Blatter

Name:

 

Marc Blatter

Title:

 

Chief Financial Officer


ECF Value Fund II, LP
By:   /s/ Marc Blatter

Name:

 

Marc Blatter

Title:

 

Chief Financial Officer


ECF Value Fund International Master, LP
By:   /s/ Marc Blatter

Name:

 

Marc Blatter

Title:

 

Chief Financial Officer


Long Pond Offshore Master, L.P.
By:   /s/ Anthony Famiglietti

Name:

 

Anthony Famiglietti

Title:

 

CFO, Long Pond Capital


Long Pond U.S. Master, LP
By:   /s/ Anthony Famiglietti

Name:

 

Anthony Famiglietti

Title:

 

CFO, Long Pond Capital


SOUND POINT CAPITAL

MANAGEMENT, LP, AS INVESTMENT

MANAGER FOR FUNDS LISTED ON

SCHEDULE 1 HERETO

By:   /s/ Wendy Ruberti

Name:

 

Wendy Ruberti

Title:

 

General Counsel

Schedule 1

Sound Point Credit Opportunities Master Fund, LP

Sound Point Beacon Master Fund, LP

Sound Point Montauk Fund, LP

Neuberger Berman Alternative funds — Neuberger Berman Absolute Return Multi-Manager Fund

Neuberger Berman Investment Funds, Plc

Principal Funds, Inc. — Global Market Strategy Fund

SP Co-Invest, LLC


Diameter Master Fund LP

By:   /s/ Christopher H. Sullivan

Name:

 

Christopher H. Sullivan

Title:

 

Authorized Signatory


OCM VICI HOLDINGS, LLC

By: Oaktree Fund GP IIA, LLC

Its: Manager

By: Oaktree Fund GP III, L.P.

Its: Managing Member

By:   /s/ Kaj Vazales

Name:

 

Kaj Vazales

Title:

 

Authorized Signatory

By:   /s/ Steven Tesoriere

Name:

 

Steven Tesoriere

Title:

 

Authorized Signatory


MARBLE RIDGE MASTER FUND LP

By:   /s/ Dan Kamensky

Name:

 

Dan Kamensky

Title:

 

Managing Partner


Associated British Foods Pension Scheme

By: Beach Point Capital Management LP

Its Investment Manager

By:   /s/ Carl Goldsmith

Name:

 

Carl Goldsmith

Title:

 

Co-Chief Investment Officer


Beach Point Multi-Asset Credit Fund Ltd.

By: Beach Point Capital Management LP

Its Investment Manager

By:   /s/ Carl Goldsmith

Name:

 

Carl Goldsmith

Title:

 

Co-Chief Investment Officer


Beach Point Multi-Strategy Credit Master Fund, L.P.

By: Beach Point Capital Management LP

Its Investment Manager

By:   /s/ Carl Goldsmith

Name:

 

Carl Goldsmith

Title:

 

Co-Chief Investment Officer


Beach Point Orange SCF LP

By: Beach Point Capital Management LP

Its Investment Manager

By:   /s/ Carl Goldsmith

Name:

 

Carl Goldsmith

Title:

 

Co-Chief Investment Officer


Beach Point SCF 0166 LP

By: Beach Point Capital Management LP

Its Investment Manager

By:   /s/ Carl Goldsmith

Name:

 

Carl Goldsmith

Title:

 

Co-Chief Investment Officer


Beach Point SCF IV LLC

By: Beach Point Capital Management LP

Its Investment Manager

By:   /s/ Carl Goldsmith

Name:

 

Carl Goldsmith

Title:

 

Co-Chief Investment Officer


Beach Point SCF Multi-Port LP

By: Beach Point Capital Management LP

Its Investment Manager

By:   /s/ Carl Goldsmith

Name:

 

Carl Goldsmith

Title:

 

Co-Chief Investment Officer


Beach Point SCF VIII, Ltd.

By: Beach Point Capital Management LP

Its Investment Manager

By:   /s/ Carl Goldsmith

Name:

 

Carl Goldsmith

Title:

 

Co-Chief Investment Officer


Beach Point SCF X, LP

By: Beach Point Capital Management LP

Its Investment Manager

By:   /s/ Carl Goldsmith

Name:

 

Carl Goldsmith

Title:

 

Co-Chief Investment Officer


Beach Point Select Fund LP

By: Beach Point Capital Management LP

Its Investment Manager

By:   /s/ Carl Goldsmith

Name:

 

Carl Goldsmith

Title:

 

Co-Chief Investment Officer


Beach Point TX SCF LP

By: Beach Point Capital Management LP

Its Investment Manager

By:   /s/ Carl Goldsmith

Name:

 

Carl Goldsmith

Title:

 

Co-Chief Investment Officer


Beach Point SCF I LP

By: Beach Point Capital Management LP

Its Investment Manager

By:   /s/ Carl Goldsmith

Name:

 

Carl Goldsmith

Title:

 

Co-Chief Investment Officer


Beach Point Global Master Fund, L.P.

By: Beach Point Capital Management LP

Its Investment Manager

By:   /s/ Carl Goldsmith

Name:

 

Carl Goldsmith

Title:

 

Co-Chief Investment Officer


Beach Point Total Return Master Fund L.P.

 

By: Beach Point Capital Management LP

Its Investment Manager

By:   /s/ Carl Goldsmith
Name:   Carl Goldsmith
Title:   Co-Chief Investment Officer


Beach Point Securitized Credit Fund LP

 

By: Beach Point Capital Management LP

Its Investment Manager

By:   /s/ Carl Goldsmith
Name:   Carl Goldsmith
Title:   Co-Chief Investment Officer


HBOS Final Salary Pension Scheme

 

By: Beach Point Capital Management LP

Its Investment Manager

By:   /s/ Carl Goldsmith
Name:   Carl Goldsmith
Title:   Co-Chief Investment Officer


MERCER QIF FUND PLC — MERCER INVESTMENT FUND 1

 

By: Beach Point Capital Management LP

Its Investment Manager

By:   /s/ Carl Goldsmith
Name:   Carl Goldsmith
Title:   Co-Chief Investment Officer


Lloyds Bank Pension Scheme No. 1

 

By: Beach Point Capital Management LP

Its Investment Manager

By:   /s/ Carl Goldsmith
Name:   Carl Goldsmith
Title:   Co-Chief Investment Officer


Lloyds Bank Pension Scheme No. 2

 

By: Beach Point Capital Management LP

Its Investment Manager

By:   /s/ Carl Goldsmith
Name:   Carl Goldsmith
Title:   Co-Chief Investment Officer


Pacific Coast Investment Fund LLC

 

By: Beach Point Capital Management LP

Its Investment Manager

By:   /s/ Carl Goldsmith
Name:   Carl Goldsmith
Title:   Co-Chief Investment Officer


CORPORATE CAPITAL TRUST II

By:   /s/ Nicole J. Macarchuk
Name:   Nicole J. Macarchuk
Title:   Authorized Signatory


KKR GLOBAL CREDIT

OPPORTUNITIES MASTER FUND L.P.

By:   /s/ Nicole J. Macarchuk
Name:   Nicole J. Macarchuk
Title:   Authorized Signatory


KKR INCOME OPPORTUNITIES FUND

By:   /s/ Nicole J. Macarchuk
Name:   Nicole J. Macarchuk
Title:   Authorized Signatory


TACTICAL VALUE SPN-GLOBAL

CREDIT OPPORTUNITIES L.P.

By:   /s/ Nicole J. Macarchuk
Name:   Nicole J. Macarchuk
Title:   Authorized Signatory


SCHEDULE I

COMMON STOCKHOLDERS

Canyon-ASP Fund, L.P. — Investing (New)

Canyon Balanced Master Fund, Ltd.

Canyon Distressed Opportunity Master Fund II, L. P.

Canyon-SL Value Fund LP

The Canyon Value Realization Master Fund, L.P.

Canyon Blue Credit Investment Fund L.P.

Canyon-GRF Master Fund II, L.P.

Canyon Distressed Opportunity Investing Fund II, L.P.

EP Canyon Ltd

CANYON NZ-DOF INVESTING L.P.

Canyon Value Realization MAC 18 Ltd.

Canyon Value Realization Fund, L.P. — Investing

HBK Master Fund L.P.

HG Vora Special Opportunities Master Fund, Ltd.

Monarch Capital Master Partners III LP

MCP Holdings Master LP

Monarch Debt Recovery Master Fund Ltd

Monarch Special Opportunities Master Fund Ltd

Monarch Capital Master Partners IV LP

PWCM Master Fund Ltd.

Oceana Master Fund Ltd.

Pentwater Equity Opportunities Master Fund Ltd.

Pentwater Merger Arbitrage Master Fund Ltd.

MAP 98 Segregated Portfolio

Senator Global Opportunity Master Fund LP

Silver Point Capital Fund, L.P.

Silver Point Capital Offshore Master Fund, L.P.

Quantum Partners LP

Taconic Master Fund 1.5 LP

Taconic Opportunity Master Fund LP


Beach Point Total Return Master Fund, L.P.

Beach Point Select Fund LP

Beach Point SCF X LP

Beach Point Multi-Asset Credit Fund Ltd.

Beach Point Multi-Strategy Credit Master Fund, L.P.

Beach Point SCF VIII Ltd.

Beach Point Global Master Fund, L.P.

Beach Point Securitized Credit Fund LP

Beach Point SCF IV LLC

Beach Point SCF Multi-Port LP

Beach Point TX SCF LP

Beach Point SCF I LP

Pacific Coast Investment Fund LLC

Lloyds Bank Pension Scheme No.1

Lloyds Bank Pension Scheme No.2

HBOS Final Salary Pension Scheme

Associated British Foods Pension Plan

Mercer QIF Fund PLC

Beach Point Orange SCF LP

Beach Point SCF 0166 LP

Centerbridge Credit Partners Master, L.P.

Centerbridge Credit Partners, L.P.

Centerbridge Special Credit Partners III, L.P.

Diameter Master Fund LP

ECF Value Fund, L.P.

ECF Value Fund II, L.P.

ECF Value Fund International Master L.P.

Dwight Place Capital Partners, LLC

Dwight Place Capital Management, LLC

Highline Capital Partners, L.P.

Highline Capital Partners QP, L.P.

Highline Capital Master, L.P.

Highline Capital Qualified Master, L.P.

Highline Enhanced Qualified Master, L.P.

Highline A Master Fund, LLC

Highline B Master Fund, LLC

Corporate Capital Trust II


KKR Global Credit Opportunities Master Fund L.P.

KKR Income Opportunities Fund

Tactical Value SPN-Global Credit Opportunities L.P.

Long Pond U.S. Master, LP

Long Pond Offshore Master, L.P.

Marathon Blue Grass Credit Fund LP

TRS Credit Fund L.P.

Marathon Special Opportunity Master Fund Ltd

Master SIF SICAV SIF

Marble Ridge Master Fund LP

OCM VICI Holdings, LLC

Sound Point Credit Opportunities Master Fund, LP

Sound Point Beacon Master Fund, LP

Sound Point Montauk Fund, LP

Neuberger Berman Alternative Funds — Neuberger Berman Absolute Return Multi-Manager Fund

Neuberger Berman Investment Funds, Plc

Principal Funds, Inc — Global Multi-Strategy Fund

SP Co-Invest Fund, LLC


EXHIBIT A

Form of Joinder Agreement

The undersigned hereby agrees, effective as of the date set forth below, to become a party to that certain Registration Rights Agreement (as amended, restated and modified from time to time, the “ Agreement ”) dated as of [●], by and among VICI Properties Inc., a Maryland corporation (the “ Company ”), and the holders of the Company Common Stock named therein, and for all purposes of the Agreement the undersigned will be included within the term “Holder” (as defined in the Agreement). The address, facsimile number and email address to which notices may be sent to the undersigned are as follows:

 

Address:    
   
   

Facsimile No.:

   

Email:

   

Date:

   

 

[ If entity ]

[ ENTITY NAME ]

By:    
  Name:  
  Title:  

 

[ If individual ]
 

 

Individual Name:

 

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EXHIBIT B

Form of Plan of Distribution 1

The selling stockholders, or their pledgees, donees, transferees, or any of their successors in interest selling shares received from a named selling stockholder as a gift, partnership distribution or other permitted transfer after the date of the applicable prospectus (all of whom may be selling stockholders), may sell some or all of the securities covered by this prospectus from time to time on any stock exchange or automated interdealer quotation system on which our common stock is listed, in the over-the-counter market, in privately negotiated transactions or otherwise, at fixed prices that may be changed, at market prices prevailing at the time of sale, at prices related to prevailing market prices or at prices otherwise negotiated. The selling stockholders may sell the securities by one or more of the following methods, without limitation:

 

    block trades in which the broker or dealer so engaged will attempt to sell the securities as agent but may position and resell a portion of the block as principal to facilitate the transaction;

 

    purchases by a broker or dealer as principal and resale by the broker or dealer for its own account pursuant to this prospectus;

 

    an exchange distribution in accordance with the rules of any stock exchange on which our common stock is listed;

 

    ordinary brokerage transactions and transactions in which the broker solicits purchases;

 

    privately negotiated transactions;

 

    short sales, either directly or with a broker-dealer or affiliate thereof;

 

    through the writing of options on the common stock, whether or not the options are listed on an options exchange;

 

    through loans or pledges of the common stock to a broker-dealer or an affiliate thereof;

 

    by entering into transactions with third parties who may (or may cause others to) issue securities convertible or exchangeable into, or the return of which is derived in whole or in part from the value of, our common stock;

 

    through the distribution by any selling stockholder to its partners, members or stockholders;

 

    one or more underwritten offerings on a firm commitment or best efforts basis; and

 

    any combination of any of these methods of sale.

For example, the selling stockholders may engage brokers and dealers, and any brokers or dealers may arrange for other brokers or dealers to participate in effecting sales of our

 

1  

The Plan of Distribution will be appropriately modified in the event that any securities other than common stock are offered for distribution in accordance with the terms of the Agreement.

 

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common stock. These brokers, dealers or underwriters may act as principals, or as an agent of a selling stockholder. Broker-dealers may agree with a selling stockholder to sell a specified number of shares of our common stock or preferred stock at a stipulated price per share. If the broker-dealer is unable to sell the common stock acting as agent for a selling stockholder, it may purchase as principal any unsold securities at the stipulated price. Broker-dealers who acquire common stock as principals may thereafter resell the common stock from time to time in transactions on any stock exchange or automated interdealer quotation system on which the common stock is then listed, at prices and on terms then prevailing at the time of sale, at prices related to the then-current market price or in negotiated transactions. Broker-dealers may use block transactions and sales to and through broker-dealers, including transactions of the nature described above.

A selling stockholder may also enter into hedging and/or monetization transactions. For example, a selling stockholder may:

 

    enter into transactions with a broker-dealer or affiliate of a broker-dealer or other third party in connection with which that other party will become a selling stockholder and engage in short sales of our common stock under this prospectus, in which case the other party may use shares of our common stock received from the selling stockholder to close out any short position;

 

    sell short our common stock under this prospectus and use shares of our common stock held by the selling stockholder to close out any short position;

 

    enter into options, forwards or other transactions that require the selling stockholder to deliver, in a transaction exempt from registration under the Securities Act, shares of our common stock to a broker-dealer or an affiliate of a broker-dealer or other third party who may then become a selling stockholder and publicly resell or otherwise transfer shares of our common stock under this prospectus;

 

    loan or pledge shares of our common stock to a broker-dealer or affiliate of a broker-dealer or other third party who may then become a selling stockholder and sell the loaned shares or, in an event of default in the case of a pledge, become a selling stockholder and sell the pledged shares, under this prospectus. As and when a selling stockholder takes such actions, the number of securities offered under this prospectus on behalf of such selling stockholder will decrease. The plan of distribution for that selling stockholder’s common stock will otherwise remain unchanged; or

 

    enter into derivative transactions with third parties, or sell securities not covered by this prospectus to third parties in privately negotiated transactions. If the applicable prospectus supplement indicates, in connection with those derivatives, the third parties may sell securities covered by this prospectus and the applicable prospectus supplement, including in short sale transactions. If so, the third party may use securities pledged by the selling stockholder or borrowed from the selling stockholder or others to settle those sales or to close out any related open borrowings of common stock, and may use securities received from the selling stockholder in settlement of those derivatives to close out any related open borrowings of stock. The third party in such sale transactions may be an underwriter and, if applicable, will be identified as such in the applicable prospectus supplement (or a post-effective amendment).

 

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The selling stockholders may also sell shares of our common stock pursuant to Rule 144 under the Securities Act.

We do not know of any arrangements by the selling stockholders for the sale of our common stock.

To the extent required under the Securities Act, the aggregate amount of selling stockholders’ common stock being offered and the terms of the offering, the names of any agents, brokers, dealers or underwriters and any applicable commission with respect to a particular offer will be set forth in an accompanying prospectus supplement. Any underwriters, dealers, brokers or agents participating in the distribution of the common stock may receive compensation in the form of underwriting discounts, concessions, commissions or fees from a selling stockholder and/or purchasers of selling stockholders’ common stock for whom they may act (which compensation as to a particular broker-dealer might be in excess of customary commissions).

The selling stockholders and any underwriters, brokers, dealers or agents that participate in the distribution of the common stock may be deemed to be “underwriters” within the meaning of the Securities Act, and any discounts, concessions, commissions or fees received by them and any profit on the resale of the common stock sold by them may be deemed to be underwriting discounts and commissions.

The selling stockholders and other persons participating in the sale or distribution of the common stock will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M. This regulation may limit the timing of purchases and sales of any of the common stock by the selling stockholders and any other person. The anti-manipulation rules under the Exchange Act may apply to sales of common stock in the market and to the activities of the selling stockholders and their affiliates. Furthermore, Regulation M may restrict the ability of any person engaged in the distribution of the common stock to engage in market-making activities with respect to the particular common stock being distributed for a period of up to five business days before the distribution. These restrictions may affect the marketability of the common stock and the ability of any person or entity to engage in market-making activities with respect to the common stock.

To the extent permitted by applicable law, this plan of distribution may be modified in a prospectus supplement or otherwise.

We agreed to register the common stock under the Securities Act and to keep the registration statement of which this prospectus is a part effective for a specified period of time. We have also agreed to indemnify the selling stockholders against certain liabilities, including liabilities under the Securities Act. The selling stockholders have agreed to indemnify us in certain circumstances against certain liabilities, including liabilities under the Securities Act.

We will not receive any proceeds from sales of any common stock by the selling stockholders.

We cannot assure you that the selling stockholders will sell all or any portion of the common stock offered hereby. All of the foregoing may affect the marketability of the securities offered hereby.

 

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EXHIBIT C

Form of Notice and Holder Questionnaire

The undersigned beneficial holder of common stock, par value $0.01 per share, which shares the undersigned believes are Registrable Securities (as defined in the Registration Rights Agreement (as defined below)), understands that the Company intends to file or has filed with the Commission a registration statement (the “ Shelf Registration Statement ”) on Form S-11 for the registration and resale under Rule 415 of the Securities Act of 1933, as amended (the “ Securities Act ”), of the Registrable Securities, in accordance with the terms of the registration rights agreement (the “ Registration Rights Agreement ”), among the Company and the Holders named therein. A copy of the Registration Rights Agreement is available from the Company upon request at the address set forth below. All capitalized terms not otherwise defined herein shall have the meaning ascribed thereto in the Registration Rights Agreement.

Each beneficial holder of Registrable Securities (each a “ beneficial owner ”) is entitled to the benefits of the Registration Rights Agreement. In order to sell, or otherwise dispose of, any Registrable Securities pursuant to the Shelf Registration Statement, a beneficial owner of Registrable Securities will be required to be named as a selling securityholder in the related prospectus, deliver a prospectus to purchasers of Registrable Securities (to the extent required by applicable law) and be bound by those provisions of the Registration Rights Agreement applicable to such beneficial owner (including certain indemnification provisions as described below). Beneficial owners that do not (i) complete this Notice and Questionnaire and (ii) execute a Joinder in the Form attached as Exhibit A of the Registration Rights Agreement (if required) and deliver both documents to the Company as provided below will not be named as selling securityholders in the prospectus and, therefore, will not be permitted to sell any Registrable Securities pursuant to the Shelf Registration Statement.

Further, the right of a beneficial owner to receive notices of and participate in underwritten offerings, exercise piggyback rights or include shares pursuant to the demand rights set forth in the Registration Rights Agreement is conditioned upon an affirmative election to receive such notices. A beneficial owner may provide such notice pursuant to this Notice and Questionnaire by making the elections in Question 6 or by providing written notice in the manner contemplated by the Registration Rights Agreement.

Certain legal consequences arise from being named as a selling securityholder in the Shelf Registration Statement and the related prospectus. Accordingly, holders and beneficial owners of Registrable Securities are advised to consult their own securities legal counsel regarding the consequences of being named or not being named as a selling securityholder in the Shelf Registration Statement and the related prospectus.

NOTICE

The undersigned beneficial owner (the “ Selling Securityholder ”) of Registrable Securities hereby gives notice to the Company of its intention to sell or otherwise dispose of Registrable Securities beneficially owned by it and listed below in Item 3 (unless otherwise specified under such Item 3) pursuant to the Shelf Registration Statement. The undersigned, by signing and returning this Notice and Questionnaire, understands that it will be bound by the terms and conditions of this Notice and Questionnaire and the Registration Rights Agreement.

 

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Pursuant to the Registration Rights Agreement, the undersigned has agreed to indemnify and hold harmless the Company, its directors and officers, affiliates, employees, members, managers, agents and each person who controls the Company (within the meaning of Section 15 of the Securities Act or Section 20 of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), from and against certain losses arising in connection with statements or omissions concerning the undersigned that are made in, or omitted from, the Shelf Registration Statement or the related prospectus in reliance upon the information provided in this Notice and Questionnaire.

QUESTIONNAIRE

Please respond to every item, even if your response is “none.” If you need more space for any response, please attach additional sheets of paper. Please be sure to indicate your name and the number of the item being responded to on each such additional sheet of paper, and to sign each such additional sheet of paper before attaching it to this Questionnaire. Please note that you may be asked to answer additional questions depending on your responses to the following questions.

If you have any questions about the contents of this Questionnaire or as to who should complete this Questionnaire, please contact the Mary Beth Higgins, Chief Financial Officer of the Company, at (702) 407-6556.

The undersigned hereby provides the following information to the Company and represents and warrants that such information is accurate and complete:

 

1.        Identity and Background of the Record Holder of the Registrable Securities.
   (a)   Full legal name:
   (b)   (i)   Business address (including street address) (or residence if no business address), telephone number and e-mail address of record holder:
       Address:
       Telephone No.:
       E-mail address:
       Contact person:
     (ii)   If an entity:
       Type of entity:
       State of formation:

 

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  (c)   Are you a broker-dealer registered pursuant to Section 15 of the Exchange Act?

Yes.

No.

 

  (d)   If your response to Item 1(c) above is no, are you an “affiliate” of a broker-dealer registered pursuant to Section 15 of the Exchange Act?

Yes.

No.

For the purposes of this Item 1(d), an “affiliate” of a registered broker-dealer includes any person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such broker-dealer, and does not include any individuals employed by such broker-dealer or its affiliates.

 

  (e)   Full legal name of the person, if any, through which you hold the Registrable Securities (i.e., name of your broker or the DTC participant, if applicable, through which your Registrable Securities are held):

Name of Broker:

DTC No.:

Contact person:

Telephone No.:

 

2. Your Relationship with the Company.

 

  (a)   Have you or any of your affiliates, officers, directors or principal equity holders (owners of 5% or more of the equity securities of the undersigned) held any position or office or have you had any other material relationship with the Company (or its predecessors or affiliates) within the past three years?

Yes.

No.

 

  (b)   If your response to Item 2(a) above is yes, please state the nature and duration of your relationship with the Company:

 

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3. Your Interest in the Registrable Securities.

 

  (a)   In the table below, state the type and amount of Registrable Securities beneficially owned by you.

 

Type of Security

   Number of Shares      Type of Ownership (direct, or
indirect through trust,
partnership, etc.)
 
     
     
     

 

  (b)   Other than as set forth in your response to Item 3(a) above, do you beneficially own any other securities of the Company?

Yes.

No.

 

  (c)   If your answer to Item 3(b) above is yes, state the type and the aggregate amount of such other securities of the Company beneficially owned by you.

Type:

Aggregate amount:

 

  (d)   If your response to Item 1(d) is yes, did you acquire the securities listed in Item 3(a) above in the ordinary course of business?

Yes.

No.

 

  (e)   If your response to Item 1(d) is yes, at the time of your acquisition of the securities listed in Item 3(a) above, did you have any agreements or understandings, direct or indirect, with any person to distribute the securities?

Yes.

No.

 

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  (f)   If your response to Item 3(e) above is yes, please describe such agreements or understandings:

Note : If you are an affiliate of a broker-dealer and did not acquire your Registrable Securities in the ordinary course of business or at the time of acquisition had any agreements or understandings, direct or indirect, with any person to distribute the securities, the Company may be required to identify you as an underwriter in the Shelf Registration Statement and related Prospectus.

 

  (g)   Is any of the Registrable Securities subject to a pledge? If so, please describe.

Yes.

No.

 

4. Nature of your Beneficial Ownership.

If the Selling Securityholder is not a natural person or is a natural person who has delegated voting or dispositive power by contract or otherwise in respect of the Registrable Securities, please identify the natural person or persons who have voting or investment control over the Registrable Securities listed in Item 3(a) and describe the relationship by which they exercise such powers. If voting and dispositive powers are divided among such listed persons, so indicate.

 

5. Plan of Distribution.

Except as set forth below, the undersigned Selling Securityholder intends to distribute the Registrable Securities listed above in Item 3(a) only pursuant to the section entitled “Plan of Distribution” to be included in the Shelf Registration Statement and related Prospectus, a form of which is attached as Exhibit B to the Registration Rights Agreement.

State any exceptions here:

Note: In no event will such method(s) of distribution take the form of an underwritten offering of the Registrable Securities, except in accordance with the terms of the Registration Rights Agreement.

 

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6. The undersigned hereby affirmatively elects to receive the following notices (as defined in the Registration Rights Agreement) (please check all that apply):

☐    Demand Notice

☐    Piggyback Notice

☐    Shelf Takedown Notice

The undersigned acknowledges its obligation to comply with the provisions of the Exchange Act and the rules thereunder relating to stock manipulation, particularly Regulation M thereunder (or any successor rules or regulations), in connection with any offering of Registrable Securities pursuant to the Registration Rights Agreement. The undersigned agrees that neither it nor any person acting on its behalf will engage in any transaction in violation of such provisions.

The undersigned beneficial owner and Selling Securityholder hereby acknowledges its obligations under the Registration Rights Agreement to indemnify and hold harmless certain persons as set forth therein. Pursuant to the Registration Rights Agreement, the Company has agreed under certain circumstances to indemnify Selling Securityholders against certain liabilities.

In accordance with the undersigned’s obligation under the Registration Rights Agreement to provide such information as may be required by law for inclusion in the Shelf Registration Statement, the undersigned agrees to promptly notify the Company of any inaccuracies or changes in the information provided herein that may occur subsequent to the date hereof at any time while the Shelf Registration Statement remains effective.

All notices to the beneficial owner hereunder and pursuant to the Registration Rights Agreement shall be made in writing to the undersigned at the address set forth in Item 1(b) of this Notice and Questionnaire.

By signing below, the undersigned acknowledges that it is the beneficial owner of the Registrable Securities set forth herein, represents that the information provided herein is accurate, consents to the disclosure of the information contained in this Notice and Questionnaire and the inclusion of such information in the Shelf Registration Statement and the related Prospectus. The undersigned understands that such information will be relied upon by the Company in connection with the preparation or amendment of the Shelf Registration Statement and the related Prospectus.

Once this Notice and Questionnaire is executed by the undersigned beneficial owner and received by the Company, the terms of this Notice and Questionnaire, and the representations and warranties contained herein, shall be binding on, shall inure to the benefit of and shall be enforceable by the respective successors, heirs, personal representatives and assigns of the Company and the undersigned beneficial owner. This Notice and Questionnaire shall be governed, adjudicated and enforced in accordance with terms of the Registration Rights Agreement.

 

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IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused this Notice and Questionnaire to be executed and delivered either in person or by its duly authorized agent.

 

NAME OF BENEFICIAL OWNER:
 
(Please Print)

Signature:

   

Date:

   

 

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PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND

QUESTIONNAIRE TO VICI PROPERTIES INC. AS FOLLOWS:

VICI Properties Inc.

8329 W. Sunset Road, Suite 210

Las Vegas, Nevada 89113

Attention Mary Elizabeth Higgins, Chief Financial Officer

E-mail Address: mbhiggins@caesars.com

This Notice and Questionnaire must be returned in the manner and within the time period set forth in the Registration Rights Agreement in order to include Registrable Securities in such Shelf Registration Statement.

 

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Exhibit 10.32

EXECUTION COPY

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “ Agreement ”), dated as of November 27, 2017 (the “ Effective Date ”), by and between VICI Properties Inc., with its principal place of business at 8329 W. Sunset Road, Suite 210, Las Vegas, Nevada 89113 (the “ Company ”), and David Kieske (“ Executive ”).

WHEREAS, the Company wishes to offer employment to Executive, and Executive wishes to accept such offer, on the terms set forth below.

Accordingly, the parties hereto agree as follows:

1.     Term . The Company hereby employs Executive, and Executive hereby accepts such employment, for a term (as the same may be extended, the “ Term ”) commencing as of the Effective Date and continuing until December 31, 2020 (the “ Initial Period ”) unless terminated earlier in accordance with the provisions of Section 4. Unless either party notifies the other party of non-renewal in writing, in accordance with Section 10, not less than 90 days prior to the expiration of the Initial Period or any subsequent renewal period, the Term shall automatically be extended for successive one-year periods in accordance with the terms of this Agreement (subject to earlier termination as aforesaid).

2.     Duties . During the Term, Executive shall be employed by the Company initially as Special Advisor to the Chief Executive Officer of the Company (the “ CEO ”), with such title to change to Executive Vice President and Chief Financial Officer on January 1, 2018 or such later date as Executive receives the regulatory approvals necessary for him to hold and execute such role. Executive shall report to the CEO. Executive shall faithfully perform for the Company the duties of said office and shall perform such other duties of an executive, managerial or administrative nature as shall be specified and designated from time to time by the CEO, which duties shall not be materially inconsistent with the duties performed by executives holding similar offices with comparable companies. Executive shall devote substantially all of his business time and effort to the performance of his duties hereunder, except that Executive may devote reasonable time and attention to civic, charitable, business or social activities so long as such activities do not interfere with Executive’s employment duties. In addition, Executive will be permitted to serve, with the prior written consent of the Board of Directors of the Company (the “ Board ”), as a member of the board of directors or advisory boards (or their equivalents, in the case of a non-corporate entity) of non-competing businesses. Executive shall comply with the policies, procedures, standards, and regulations established from time to time by the Company (the “ Policies ”). Executive shall obtain and keep in full force and effect throughout the Term all gaming licenses or approvals necessary or appropriate for Executive’s position. During the Term, Executive shall be based in the Company’s offices in New York, NY, except for reasonably required travel on the Company’s business consistent with Executive’s position.

3.     Compensation .

3.1     Salary . For purposes of this Agreement, a “ Contract Year ” shall mean each calendar year during the Term. The Company shall pay Executive a base salary at the rate of $450,000 per annum (as the same may be increased from time to time, the “ Annual Salary ”), in


accordance with the customary payroll practices of the Company applicable to senior executives, but not less frequently than monthly. The CEO shall review Executive’s base salary each Contract Year and may recommend to the Compensation Committee of the Board (the “ Compensation Committee ”) an increase in such amount as he may deem advisable, and the Compensation Committee may approve or disapprove of any such recommended increase in its sole discretion. The Annual Salary shall be prorated (on the basis of a 365-day year) for any partial Contract Year.

3.2     Bonus and Incentive Compensation . Executive will be entitled to participate in the Company’s annual bonus program as follows:

(a)     Annual Bonus Compensation . Executive shall be eligible to receive a bonus each Contract Year commencing with the 2018 Contract Year (“ Annual Bonus ”) with a target amount equal to 85% of Annual Salary (“ Target Bonus ”) and a maximum amount equal to 170% of Annual Salary. Executive’s Annual Bonus shall be based on performance goals for the applicable year, all of which shall be determined by the Compensation Committee, which also shall determine the levels of performance below which no bonus will be payable. The Annual Bonus shall be paid in cash on a date within the 74-day period commencing on January 1 of the year following the year in which the applicable performance period ends. The payment of any Annual Bonus following Executive’s termination of employment shall be as set forth in Section 4.

(b)     Initial Bonus . Executive shall receive an initial cash bonus as of the Effective Date in the amount of $150,000 (the “ Initial Bonus ”), payable within thirty days after the Effective Date. Executive shall repay to the Company the full amount of the initial cash bonus in the event his employment is terminated by the Company for Cause or by Executive without Good Reason, in each case prior to the first anniversary of the Effective Date.

(c)     First Anniversary Bonus . Executive shall receive a cash bonus in the amount of $150,000 (the “ First Anniversary Bonus ”), payable within thirty days after the first anniversary of the Effective Date provided that he is continuously employed by the Company through such date. Executive shall repay to the Company the full amount of such bonus in the event his employment is terminated by the Company for Cause or by Executive without Good Reason, in each case prior to the second anniversary of the Effective Date.

(d)     Equity Incentive Awards . Executive shall receive each Contract Year commencing with the 2018 Contract Year awards under the Company’s equity incentive plan or such other plans or programs as the Compensation Committee shall determine with a target value, as determined by the Compensation Committee, of at least 150% of Annual Salary.

(e)     Initial Equity Grant . In order to align the interests of Executive with the interests of the Company’s shareholders, on or within 30 days after the Effective Date, Executive shall receive a long-term incentive award under the Company’s equity incentive plan consisting of shares of the Company’s common stock with a fair market value (without any discount to reflect restrictions) equal to $500,000, valued as of the Effective Date, as determined by the Company with reference to the trading price of the Company’s common stock (the “ Initial Equity Grant ”). Such award shall vest at the rate of 25% on each of the first four anniversaries of

 

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the Effective Date. No portion of such award shall be transferable and no portion may be encumbered until the earlier of (X) two years after the date of vesting of such portion and (Y) the fourth anniversary of the Effective Date.

(f)     2017 (Stub Period) Incentive Compensation . Executive shall receive a bonus for the 2017 Contract Year comprised of (i) shares of the Company’s common stock with a fair market value (without any discount to reflect restrictions) equal to $400,000 (the “ Share Bonus ”), measured as of January 15, 2018 (the “ Share Bonus Grant Date ”), rounded up to the nearest whole share and (ii) $350,000 in cash. Such bonus shall be paid within the 74-day period commencing on January 1, 2018. The Share Bonus shall vest at the rate of 25% on each of the first four anniversaries of the Share Bonus Grant Date. No portion of the Share Bonus shall be transferable and no portion may be encumbered until the earlier of (X) two years after the date of vesting of such portion and (Y) the fourth anniversary of the Share Bonus Grant Date.

(g)     Clawback . Notwithstanding any provision in this Agreement to the contrary, amounts payable hereunder shall be subject to clawback or disgorgement, to the extent applicable, under (A) the Policies or any claw-back policy adopted by the Company, (B) the Dodd-Frank Wall Street Reform and Consumer Protection Act, as amended, and rules, regulations, and binding, published guidance thereunder, which legislation provides for the clawback and recovery of incentive compensation in the event of certain financial statement restatements and (C) the Sarbanes-Oxley Act of 2002. If pursuant to Section 10D of the Securities Exchange Act of 1934, as amended (the “ Act ”), the Company or any Company Affiliate (as defined below) would not be eligible for continued listing, if applicable, under Section 10D(a) of the Act if it (or they) did not adopt policies consistent with Section 10D(b) of the Act, then, in accordance with those policies that are so required, any incentive-based compensation payable to Executive under this Agreement or otherwise shall be subject to claw-back in the circumstances, to the extent, and in the manner, required by Section 10D(b)(2) of the Act, as interpreted by rules of the Securities Exchange Commission. Nothing in this provision is intended to supersede any existing or future claw-back provision adopted or amended by the Company, including, but not limited to the provision that may be set forth in the Company’s equity incentive plan. For purposes of this Agreement a “ Company Affiliate ” shall mean any individual or entity that directly or indirectly controls, is controlled by, or is under common control with the Company.

3.3     Benefits . Executive shall be permitted during the Term to participate in any group life, hospitalization or disability insurance plans, health programs, retirement plans, fringe benefit programs and similar benefits that may be available to other senior executives of the Company generally, on the same terms as such other executives, in each case to the extent that Executive is eligible under the terms of such plans or programs. Executive shall be entitled to paid vacation in accordance with the normal vacation policies of the Company, as applicable to employees at Executive’s level.

3.4     Expenses . The Company shall pay or reimburse Executive for all ordinary and reasonable out-of-pocket expenses incurred by Executive during the Term in the performance of Executive’s services under this Agreement; provided that such expenses are incurred and accounted for by Executive in accordance with the relevant Company Policies.

 

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3.5     Indemnification Agreement; Directors and Officers Liability Insurance . Executive and the Company shall enter into an Indemnification Agreement in the standard form used by the Company for its directors and officers. Executive will be covered by directors and officers liability insurance on the same basis as generally applied to the Company’s directors and other officers.

4.     Termination of Employment .

4.1     Termination by the Company for Cause; Termination by Executive without Good Reason .

(a)    The Company shall have the right to terminate Executive’s employment for Cause. Upon the reasonable belief by the Board that Executive has committed an act (or has failed to act in a manner) which constitutes Cause, the Board may immediately suspend Executive from Executive’s duties herein and bar Executive from its premises during the period of the Company’s investigation of such acts (or failures to act) (the “ Investigation Period ”) and any such suspension shall not be deemed to be a breach of this Agreement by the Company or the Executive and/or otherwise provide Executive a right to terminate Executive’s employment for Good Reason; provided , however , that the Company shall have the right to terminate Executive’s employment for Cause immediately and nothing in this Agreement shall require the Company to provide an Investigation Period or otherwise provide advance notice of termination for Cause, except to the extent that a cure period is available as provided for herein. To the extent that the events giving rise to Cause are, in the reasonable determination of the Board, able to be cured, the Company shall provide the Executive with written notice setting out the events giving rise to Cause and provide Executive with a 5-day period in which to cure such events prior to terminating Executive’s employment for Cause. For purposes of this Agreement, “ Cause ” shall mean:

 

  (i) Executive’s commission of, guilty plea or plea of no contest to, a felony or a misdemeanor (or its equivalent under applicable law),

 

  (ii) conduct by Executive that constitutes fraud or embezzlement, or any acts of dishonesty in relation to Executive’s duties with the Company,

 

  (iii) Executive’s gross negligence, bad faith, or misconduct which causes either reputational or economic harm to the Company or any Company Affiliate, as determined by the Board in its sole discretion,

 

  (iv) Executive’s willful refusal or failure to perform Executive’s duties hereunder, as determined by the Board in its sole discretion,

 

  (v) Executive’s refusal or failure to perform any reasonable directive of the Company,

 

  (vi) Executive’s knowing misrepresentation of any material fact that the Company reasonably requests,

 

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  (vii) Executive being found unsuitable for, or having been denied, a gaming license, or having such license revoked by a gaming regulatory authority in any jurisdiction in which the Company or any Company Affiliate conducts operations,

 

  (viii) Executive’s violation, as determined by the Board, of any securities or employment laws or regulations or other laws, rules, or regulations of all jurisdictions, or agencies, boards or commissions thereof, having regulatory jurisdiction over the employment or activities of Executive hereunder, or

 

  (ix) Executive’s breach of Executive’s obligations under this Agreement or violation of the Policies, as determined by the Board in its sole discretion.

For purposes of clause (iii) above, an act or omission shall not be deemed to be bad faith or misconduct if taken or omitted in the good faith belief that such act or omission was in, or not opposed to, the best interests of the Company.

(b)    The Company may terminate Executive’s employment hereunder for Cause as set forth above, and Executive may, upon 90 days prior written notice to the Company, terminate his employment at any time. If the Company terminates Executive’s employment for Cause, or Executive terminates his employment and the termination by Executive is not covered by Section 4.3 or 4.4, then (i) within ten (10) business days following such termination, the Company shall pay to Executive any unpaid Annual Salary earned through the date of termination, (ii) within thirty (30) days following such termination or submission of documentation of such expenses, whichever is later, the Company shall reimburse Executive pursuant to Section 3.4 for reasonable expenses incurred but not paid prior to such termination of employment, and (iii) the Company shall provide to Executive other or additional benefits (if any), in accordance with the then-applicable terms of any then-applicable plan, program, agreement or other arrangement of any of the Company or any Company Affiliates in which Executive participates (the rights, including the time of payment, described in sub-clauses (i), (ii), and (iii) are collectively referred to as the “ Accrued Obligations ”). Executive shall have no further rights to any other compensation or benefits hereunder on or after the termination of employment, or any other rights hereunder.

4.2     Termination upon Death or Disability . If Executive dies during the Term, the obligations of the Company to or with respect to Executive shall terminate in their entirety except as otherwise provided under this Section 4.2. If Executive becomes “disabled” (defined for purposes of this Agreement, if Executive by virtue of ill health or other disability is unable to perform substantially the duties assigned to him for at least 90 consecutive or non-consecutive days out of any consecutive 12-month period), the Company shall have the right, to the extent permitted by law (including under the Americans with Disabilities Act), to terminate the employment of Executive upon notice in writing to Executive. Upon death or termination of employment by virtue of disability in accordance with this Section 4.2, Executive (or Executive’s estate or beneficiaries in the case of the death of Executive) shall have no right to receive any compensation or benefits hereunder on and after the effective date of the termination of employment other than:

 

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(A)    the Accrued Obligations, as set forth in Section 4.1;

(B)    any Annual Bonus earned for the Contract Year prior to the year of termination but not yet paid, which shall be paid at the date such Annual Bonus would have been paid had Executive’s employment not been terminated (any such entitlement, including the payment date, an “ Accrued Bonus ”);

(C)    a cash payment equal to the prorated portion (based on the number of complete months employed during the Contract Year) of the Annual Bonus that Executive would have received had his employment not been terminated (based on the actual level of achievement of the applicable performance goals) for the Contract Year in which Executive’s employment hereunder terminates, payable at such time as the Annual Bonus would have been paid had Executive’s employment not been terminated, provided, however, that Executive shall not receive the Pro-Rata Bonus if the Company does not pay bonuses to employees generally for such Contract Year (such entitlement, including the payment date, a “ Pro-Rata Bonus ”);

(D)    elimination of any time-based vesting conditions on each outstanding unvested restricted stock, stock option or other equity award and other incentive award in the Company that Executive had been granted and which Executive then continues to hold;

(E)    to the extent the Initial Bonus or First Anniversary Bonus has not previously been paid, payment of such bonuses on the sixtieth day following the date of termination and, to the extent the Initial Equity Grant has not yet been issued, the Initial Equity Grant shall be granted and shall be deemed fully vested as of the date of grant; and

(F)    to the extent that any of Executive’s vested equity awards are subject to a restriction on sale within a specified period following vesting, such restriction shall be lifted as of the date of termination.

Executive (or, in the case of his death, his estate and beneficiaries) shall have no further rights to any other compensation or benefits hereunder on or after the termination of employment, or any other rights hereunder.

4.3     Termination by the Company without Cause or by Executive for Good Reason .

(a)     Good Reason . For purposes of this Agreement, Executive shall have “ Good Reason ” to terminate Executive’s employment if, (i) within thirty (30) days after Executive knows (or has reason to know) of the occurrence of any of the following events, Executive provides written notice to the Company requesting that it cure such event, (ii) the Company fails to cure such event, if curable, within sixty (60) days following such notice, except as set forth below, and, (iii) within ten (10) days after the expiration of such cure period, Executive terminates his employment:

 

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  (i) a reduction in Executive’s Base Salary or target or maximum bonus opportunity or failure to pay compensation due under this Agreement, which reduction only may be cured within ten (10) days following written notice by Executive;

 

  (ii) a material diminution in Executive’s duties or responsibilities or the assignment to Executive of duties materially inconsistent with Executive’s positions, titles, offices, duties, or responsibilities with the Company (not including any Investigation Period), which diminution or assignment only may be cured within ten (10) days following written notice by Executive;

 

  (iii) relocation of Executive’s principal business office to any location outside of New York, NY; or

 

  (iv) any other material breach by the Company of any of its obligations to the Executive under this Agreement.

(b)     Severance . If the Company terminates Executive’s employment and the termination is not covered by Section 4.1, 4.2, 4.4, 4.5, or 4.6 or if Executive terminates his employment for Good Reason, the following shall apply:

 

  (i) The Company shall pay the Accrued Obligations as set forth in Section 4.1.

 

  (ii) Subject to Executive’s delivery of a separation agreement and release in the form attached hereto as Exhibit A (with such changes as may be necessary due to applicable law) (the “ Separation Agreement ”), which Separation Agreement shall have become irrevocable, and subject to Executive’s compliance with the covenants set forth in Section 6, Executive (or Executive’s estate or beneficiaries in the case of Executive’s death) shall be entitled to:

 

  (A) any Accrued Bonus, paid as set forth in Section 4.2(B);

 

  (B) a Pro-Rata Bonus, if any, paid as set forth in Section 4.2(C);

 

  (C) a cash payment equal to the sum of (i) Executive’s Annual Salary and (ii) Executive’s Annual Bonus at the target level for the Contract Year in which Executive’s employment hereunder terminates, payable in equal installments over a 12-month period in accordance with the Company’s usual and customary payroll practices;

 

  (D) a cash payment of $27,500;

 

  (E) elimination of any time-based vesting conditions on any restricted stock, stock option or other equity awards in the Company that Executive had been granted and which Executive then continues to hold, to the extent then unvested;

 

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  (F) a pro-rata portion (based on the number of complete months employed during the applicable performance period and applied separately to each performance goal, to the extent applicable) of outstanding unvested equity awards that are subject to performance-based vesting conditions (whether or not in tandem with time-based vesting conditions) will not be forfeited as of such termination of employment but will continue to be outstanding until the end of the applicable performance period, at which time they may vest pursuant to achievement of the applicable performance goals;

 

  (G) to the extent that Executive holds outstanding vested stock options as of the termination of employment (including to the extent vested pursuant to clause (E) above), such stock options shall remain exercisable until the date six months after the effective date of such termination of employment, or the option expiration date, if earlier;

 

  (H) to the extent that any of Executive’s vested equity awards are subject to a restriction on sale within a specified period following vesting, such restriction shall be lifted as of the date the Separation Agreement has become irrevocable;

 

  (I) to the extent the Initial Bonus or First Anniversary Bonus has not previously been paid, payment of such bonuses on the sixtieth day following the date of termination and, to the extent the Initial Equity Grant has not yet been issued, the Initial Equity Grant shall be granted and shall be deemed fully vested as of the date of grant.

 

  (iii) Subject to Section 4.7, amounts payable pursuant to clause (C) of Section 4.3(b)(ii) shall commence, and the amount payable pursuant to clause (D) of Section 4.3(b)(ii) shall be paid, on the 74 th day following the separation from service (the “ Payment Commencement Date ”), provided Executive has delivered the Separation Agreement to the Employer and such Separation Agreement has become irrevocable, and provided, further, that the first such payment with respect to clause (C) shall be equal to the amount that would have been payable under such clauses between the date of termination and the Payment Commencement Date had such payments commenced at the separation from service.

 

  (iv) Executive shall have no further rights to any other compensation or benefits hereunder on or after the termination of employment, or any other rights hereunder.

 

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4.4 Termination by the Company without Cause or by Executive for Good Reason in Connection with a Change in Control . If the Company terminates Executive’s employment and the termination is not covered by Section 4.1, 4.2, 4.5, or 4.6 or if Executive terminates his employment for Good Reason, and the date of notice of such termination of employment is either within six months before or twelve months after a Change in Control, as defined below, the following shall apply in lieu of the provisions of Section 4.3(b):

 

  (i) The Company shall pay the Accrued Obligations as set forth in Section 4.1.

 

  (ii) Subject to Executive’s delivery of a Separation Agreement, which shall have become irrevocable, and subject to Executive’s compliance with the covenants set forth in Section 6, Executive (or Executive’s estate or beneficiaries in the case of the death of Executive) shall be entitled to:

 

  (A) any Accrued Bonus, paid as set forth in Section 4.2(B);

 

  (B) a Pro-Rata Bonus, if any, paid as set forth in Section 4.2(C) assuming achievement of all performance goals at target and regardless of whether the Company pays bonuses to employees generally for such Contract Year;

 

  (C) a cash payment equal to 150% of the sum of (i) Executive’s Annual Salary and (ii) Executive’s Annual Bonus at the target level for the Contract Year in which Executive’s employment hereunder terminates, payable in a lump sum;

 

  (D) a cash payment of $40,000;

 

  (E) elimination of any time-based vesting conditions on any restricted stock, stock option or other equity awards in the Company that Executive had been granted and which Executive then continues to hold, to the extent then unvested;

 

  (F) all performance-based equity will remain outstanding and eligible to vest, subject solely to achievement of the applicable performance goals prorated through the date of termination;

 

  (G) to the extent that Executive holds outstanding stock options as of the termination of employment, such stock options shall remain exercisable until the date six months after the effective date of such termination of employment, or the option expiration date, if earlier; and

 

  (H) to the extent that any of Executive’s vested equity awards are subject to a restriction on sale within a specified period following vesting, such restriction shall be lifted as of the date the Separation Agreement has become irrevocable.

 

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  (iii) Subject to Section 4.7, amounts payable pursuant to clauses (B), (C) and (D) of Section 4.4(ii) shall be paid on the Payment Commencement Date, provided Executive has delivered the Separation Agreement to the Employer and such Separation Agreement has become irrevocable.

 

  (iv) Executive shall have no further rights to any other compensation or benefits hereunder on or after the termination of employment, or any other rights hereunder.

 

  (v) For purposes of this Agreement, a “Change in Control” shall mean:

 

  (A) any transaction or group of related transactions (whether a merger, consolidation, sale or otherwise) pursuant to which any Person, as defined below, (in any case, excluding the Company and any Company Affiliate) or group (within the meaning of Section 13(d)(3) of the Exchange Act) of such Persons acting together pursuant to which such Person or group of Persons acquires a majority of the aggregate voting power of the capital stock ordinarily entitled to elect directors of the Company;

 

  (B) any disposition in one transaction or a series of related transactions, of all or substantially all of the assets of the Company and its Subsidiaries, determined on a consolidated basis, to any Person or Persons (in any case, excluding the Company and any Company Affiliate); or

 

  (C) within a 12-month period, a majority of the members of the Board cease to be Continuing Directors; as used herein, a “Continuing Director” means any member of the Board who was a member of such Board on the date hereof; provided that any person becoming a director subsequent to such date whose election or nomination for election was supported by a majority of the directors who then comprised the Continuing Directors shall be considered to be a Continuing Director.

For the purposes hereof, the term “ Person ” shall mean an individual, partnership, corporation, limited liability company, association, joint stock company, trust, joint venture, unincorporated organization, association or other entity or a governmental entity. Notwithstanding the foregoing, to the extent that a Change in Control is the basis for a payment that is subject to Section 409A of the Code, a Change in Control shall be deemed to occur with respect to such payment only if a change in the ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company shall also be deemed to have occurred under Section 409A of the Code.

 

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4.5     Natural Termination Due to Company Non-Renewal . In the event that Executive’s employment by the Company terminates at the scheduled expiration of the Term because of a non-renewal of the Term as a result of a decision by the Company not to renew as contemplated by and in accordance with the last sentence of Section 1 (and not theretofore under Section 4.1, 4.2, 4.3 or 4.4),

 

  (i) Executive shall (subject, in the case of the following clause (C), to Executive’s delivery of a Separation Agreement, which shall have become irrevocable and Executive’s compliance with the covenants set forth in Section 6) be entitled to:

 

  (A) the Accrued Obligations, paid as set forth in Section 4.1;

 

  (B) any Accrued Bonus, paid as set forth in Section 4.2(B);

 

  (C) elimination of any time-based vesting conditions on any restricted stock, stock option or other equity awards in the Company that Executive had been granted and which Executive then continues to hold, to the extent then unvested; and

 

  (D) to the extent that any of Executive’s vested equity awards are subject to a restriction on sale within a specified period following vesting, such restriction shall be lifted as of the date the Separation Agreement has become irrevocable.

 

  (ii) Executive shall have no further rights to any other compensation or benefits hereunder on or after the termination of employment, or any other rights hereunder.

4.6     Natural Termination Due to Executive Non-Renewal . In the event that Executive’s employment by the Company terminates at the scheduled expiration of the Term because of a non-renewal of the Term as a result of a decision by Executive not to renew as contemplated by and in accordance with the last sentence of Section 1 (and not theretofore under Section 4.1, 4.2, 4.3 or 4.4), Executive shall be entitled to (A) the Accrued Obligations, paid as set forth in Section 4.1; (B) any Accrued Bonus, paid as set forth in Section 4.2(B); and (B) to the extent that any of Executive’s vested equity awards are subject to a restriction on sale within a specified period following vesting, such restriction shall be lifted as of the date the Separation Agreement has become irrevocable. Executive shall have no further rights to any other compensation or benefits hereunder on or after the termination of employment, or any other rights hereunder.

4.7     Delay in Payment to a Specified Employee . If Executive is a “specified employee” within the meaning of Treasury Regulation Section 1.409A-1(i) as of the date of Executive’s separation from service, the provisions of this Section 4.7 shall apply, but only if and to the extent required to avoid the imputation of any tax, penalty or interest pursuant to Section 409A of the Internal Revenue Code of 1986, as amended (the “ Code ”) and the regulations and interpretive guidance promulgated thereunder (collectively, “ Section  409A ”). No distribution shall be made to Executive under Section 4.2, 4.3 or 4.4 of this Agreement before the date that is

 

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six months after his separation from service or, if earlier, the date of Executive’s death. Any amounts otherwise payable to Executive upon or in the six month period following Executive’s separation from service that are not so paid by reason of this Section 4.7 shall be paid (without interest) as soon as practicable (and in all events within 10 days) after the date that is six months after Executive’s separation from service (or, if earlier, as soon as practicable, and in all events within 10 days, after the date of Executive’s death).

5.     Limitation on Payments .

5.1     General . In the event that the payments and benefits (the “ Payments ”) paid or provided to Executive under this Agreement or otherwise (a) constitute “parachute payments” within the meaning of Section 280G of the Code (“ Section  280G ”), and (b) but for this Section 5, would be subject to the excise tax imposed by Section 4999 of the Code (“ Section  4999 ”), then the Payments shall be either (x) delivered in full, or (y) delivered as to such lesser extent which would result in no portion of the Payments being subject to excise tax under Section 4999, whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the excise tax imposed by Section 4999, results in the receipt by Executive on an after-tax basis of the greatest amount of the Payments, notwithstanding that all or some portion of the Payments may be taxable under Section 4999. The provisions of this Section 5 shall apply if, at the time of any change in ownership or control of the Company (within the meaning of Section 280G), the Company is an entity whose stock is readily tradable on an established securities market (or otherwise), within the meaning of Section 280G.

5.2     Accountants’ Determinations . Unless the Company and Executive otherwise agree in writing, any determination required under this Section 5 shall be made in writing by the Company’s independent public accountants (the “ Accountants ”) immediately prior to the transaction described in Section 280G(b)(2)(A)(i) of the Code, whose determination shall be conclusive and binding upon Executive and the Company for all purposes. For purposes of making the calculations required by this Section 5, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Section 280G and Section 4999. The Company and Executive shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section 5. The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section 5. If a reduction in the Payments constituting “parachute payments” as defined in Section 280G is necessary so that benefits are delivered to a lesser extent, reduction will occur in the following order: (a) reduction of the cash payments and (b) cancellation of accelerated vesting of equity awards. In the event that the accelerated vesting of equity awards is to be cancelled, such vesting acceleration shall be cancelled in the reverse chronological order of Executive’s equity awards’ grant dates.

6.     Non-Competition, Non-Solicitation, and Confidentiality; Certain Other Covenants . Executive acknowledges that: (i) as a result of Executive’s employment by the Company, Executive has obtained and will obtain Confidential Information (as defined below); (ii) the Confidential Information has been developed and created by the Company and Company Affiliates at substantial expense and the Confidential Information constitutes valuable proprietary assets of the Company; (iii) the Company and the Company Affiliates will suffer

 

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substantial damage and irreparable harm which will be difficult to compute if, during the Term or thereafter, Executive should violate the provisions of this Section 6; (iv) the nature of the Company’s and the Company Affiliates’ business is such that it can be conducted anywhere in the world and is not limited to a geographic scope or region; (v) the Company and the Company Affiliates will suffer substantial damage which will be difficult to compute if, during the Term or thereafter, Executive should solicit or interfere with the Company’s or the Company Affiliates’ employees, clients, or customers in violation of the provisions of this Section 6 or should divulge Confidential Information relating to the business of the Company or the Company Affiliates; (vi) the provisions of this Agreement are reasonable and necessary for the protection of the business of the Company and the Company Affiliates; (vii) the Company would not have hired or continued to employ Executive or grant the benefits contemplated under this Agreement unless Executive agreed to be bound by the terms hereof; and (viii) the provisions of this Agreement will not preclude Executive from other gainful employment following Executive’s termination from the Company.

6.1     Disclosure of Confidential Information . Executive acknowledges that the Company will provide Executive with confidential and proprietary information regarding the business in which the Company and Company Affiliates are involved, and the Company and the Company Affiliates will provide Executive with trade secrets of the Company and the Company Affiliates (hereinafter all such confidential information and trade secrets referred to as the “ Confidential Information ”). For purposes of this Agreement, “Confidential Information” includes, but is not limited to:

(a)    Information related to the business of the Company and the Company Affiliates, including but not limited to marketing strategies and plans, sales procedures, operating policies and procedures, pricing and pricing strategies, player identification systems (including information gleaned from Total Rewards), business and strategic plans, finances, financial management systems, financial statements and projections, accounting and tax positions and procedures, organizational charts, salary and benefit programs, and other business and financial information of the Company and the Company Affiliates;

(b)    Information regarding the customers of the Company and the Company Affiliates which Executive acquired as a result of his employment with the Company, including but not limited to, customer contracts, customer lists, work performed for customers, customer contacts, customer requirements and needs, data used by the Company and the Company Affiliates to formulate customer proposals, customer financial information and other information regarding the customer’s business;

(c)    Information regarding the vendors of the Company and the Company Affiliates which Executive acquired as a result of his employment with the Company, including but not limited to, product and service information and other information regarding the business activities of such vendors;

(d)    Training materials developed by and utilized by the Company and the Company Affiliates;

 

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(e)    Any other information which Executive acquired as a result of his employment with the Company and which Executive has a reasonable basis to believe the Company or the Company Affiliates, as the case may be, would not want disclosed to a business competitor or to the general public; and

(f)    Information which:

 

  (i) is proprietary to, about or created by the Company or the Company Affiliates;

 

  (ii) gives the Company or any of the Company Affiliates some competitive advantage, the opportunity of obtaining such advantage or the disclosure of which could be detrimental to the interests of the Company or the Company Affiliates;

 

  (iii) is not typically disclosed to non-executives by the Company or otherwise is treated as confidential by the Company or the Company Affiliates; or

 

  (iv) is designated as Confidential Information by the Company or from all the relevant circumstances should reasonably be assumed by Executive to be confidential to the Company or any Company Affiliates;

provided , however , that Confidential Information shall not include information which at the time of receipt or thereafter becomes publicly known or is obtainable in the public domain, in either case through no wrongful act of Executive.

6.2     Covenant Not to Compete . While employed by the Company and, in the event of a termination of Executive’s employment, for a period of 12 months thereafter in the event of all terminations of employment other than termination pursuant to Section 4.5 or 4.6, and for a period of 3 months thereafter in the event of a termination by reason of Executive’s delivery of a non-renewal notice pursuant to Section 1 (for clarity, the restrictions contained in this Section 6.2 shall terminate on Executive’s last day of employment where such termination results from the Company’s delivery of a non-renewal notice pursuant to Section 1), in consideration of the obligations of the Company hereunder, including without limitation its disclosure of Confidential Information to Executive, Executive shall not, directly or indirectly, for compensation or otherwise, engage in or have any interest in (i) Gaming and Leisure Properties, Inc. and its Subsidiaries and Affiliates, (ii) MGM Growth Properties LLC and its Subsidiaries and Affiliates, and (iii) any sole proprietorship, partnership, corporation, company, association, business or any other person or entity (whether as an employee, officer, corporation, business or any creditor, consultant or otherwise) that, directly or indirectly, competes with the Company’s “Business” (as defined below) in any and all states in which the Company or any Company Affiliate conducts such business or within 100 miles of any location where the Company or any Company Affiliate conducts such business while Executive is employed by the Company or any Company Affiliate and, with respect to the period following the termination of Executive’s employment, within the two-year period preceding such termination of employment; provided, however, Executive may continue to hold securities of the Company or any Company Affiliate or continue to hold or

 

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acquire, solely as an investment, shares of capital stock or other equity securities of any company if (a) he currently holds an interest in such stock or other securities, and before the date hereof has disclosed to the Board in detail (i) the applicable company (or companies) and (ii) the specific stock or other equity securities of the entity he owns, or (b) the stock or other securities are traded on any national securities exchange or are regularly quoted in the over-the-counter market, so long as Executive does not control, acquire a controlling interest in, or become a member of a group which exercises direct or indirect control of more than 1% of any class of capital stock of such entity (other than through an investment in any mutual, private equity or hedge fund or similar pooled investment vehicle). For purposes of this Agreement, the Company’s “ Business ” is defined as the ownership or operation of a Real Estate Investment Trust that invests in lines of business in which the Company invests or in which the Company has active plans to invest as of the date Executive’s employment terminates, and such other businesses conducted by the Company or any Company Affiliate after the date hereof, and from time to time during the Term or such other businesses that the Company or any Company Affiliate had active plans to engage in as of the date Executive’s employment terminates.

6.3     Non-Solicitation of Certain Persons . While employed by the Company and, in the event of a termination of Executive’s employment, for a period of 12 months thereafter, in consideration of the obligations of the Company hereunder, including without limitation its disclosure of Confidential Information to Executive, Executive shall not, directly or indirectly, for himself or as principal, agent, independent contractor, consultant, director, officer, member, or employee of any other person, firm, corporation, partnership, company, association, business or other entity, solicit, attempt to contract with, or enter into a contractual or business relationship of any kind pertaining to any aspect of the Company’s Business, or any other business conducted by the Company or any Company Affiliate at the time of termination of employment or at any time in the prior 12-month period, with any person or entity with which the Company or any Company Affiliate has any contractual or business relationship of a material operating or strategic nature or in the previous 12 months has engaged in negotiations toward such a relationship.

6.4     Non-Solicitation of Employees . While employed by the Company and, in the event of a termination of Executive’s employment for a period of 12 months thereafter, in consideration of the obligations of the Company hereunder, including without limitation its disclosure of Confidential Information to Executive, Executive shall not directly or indirectly, for himself or as principal, agent, independent contractor, consultant, director, officer, member, or employee of any other person, firm, corporation, partnership, company, association or other entity, either (a) hire, attempt to employ, contact with respect to hiring, solicit with respect to hiring or enter into any contractual arrangement with any employee or former employee of the Company or any Company Affiliate, or (b) induce or otherwise advise or encourage any employee of the Company or any Company Affiliate to leave his or her employment.

6.5     Confidentiality . Subject to Sections 6.6 and 6.10, while employed by the Company and after Executive’s employment terminates, in consideration of the obligations of the Company hereunder, including without limitation its disclosure of Confidential Information to Executive, Executive shall keep secret and retain in strictest confidence, shall not disclose to any third-party, and shall not use for his benefit or the benefit of others, except in connection with the business affairs of the Company or any Company Affiliate (collectively, the “ Benefited

 

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Persons ”), any Confidential Information unless such disclosure is required by a valid subpoena or other legal mandate or otherwise by rule of law or other valid order of a court or government body or agency or in any litigation between the Executive and any Benefited Person. In the event disclosure is so required, Executive shall provide the Company with written notice within three (3) days of receiving such subpoena or other order if legally permitted to do so, and shall cooperate with the Company in seeking an appropriate protective order and in attempting to keep such information confidential to the maximum extent possible. Executive agrees to promptly deliver to the Company upon request the originals and all copies, in whatever medium, of all such Confidential Information in Executive’s possession, custody or control.

6.6     Permitted Uses of Trade Secrets . Misappropriation of a trade secret of the Company in breach of this Agreement may subject Executive to liability under the Defend Trade Secrets Act of 2016 (the “ DTSA ”), entitle the Company to injunctive relief, and require Executive to pay compensatory damages, double damages, and attorneys’ fees. Notwithstanding any other provision of this Agreement, Executive hereby is notified in accordance with the DTSA that Executive will not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made (a) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, in each case solely for the purpose of reporting or investigating a suspected violation of law; or (b) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Executive is further notified that if Executive files a lawsuit for retaliation by the Company for reporting a suspected violation of law, Executive may disclose the Company’s trade secrets to Executive’s attorney and use the trade secret information in the court proceeding if Executive files any document containing the trade secret under seal and does not disclose the trade secret except pursuant to court order.

6.7     Tangible Items . All files, records, documents, manuals, books, forms, reports, memoranda, studies, data, calculations, recordings, or correspondence, whether visually perceptible, machine-readable or otherwise, in whatever form they may exist, and all copies, abstracts and summaries of the foregoing, and all physical items related to the business of the Company, whether of a public nature or not, and whether prepared by Executive or not, are and shall remain the exclusive property of the Company, and shall not be removed from its premises, except as required in the course of Executive’s employment by the Company, without the prior written consent of the Company. Such items, including any copies or other reproductions thereof, shall be promptly returned by Executive to the Company at any time upon the written request of the Company and in all events upon termination of his employment (or, if requested by the Company, destroyed by Executive).

6.8     Remedies . The Company and Executive acknowledge and agree that a breach by Executive of any of the covenants contained in this Section 6 will cause immediate and irreparable harm and damage to the Company and its Affiliates, and that monetary damages will be inadequate to compensate the Company and its Affiliates, as the case may be, for such breach. Accordingly, Executive acknowledges that the Company and its Affiliates shall, in addition to any other remedies available to it at law or in equity, be entitled to an injunction from any court of competent jurisdiction enjoining and restraining any violation of said covenants by Executive or any of his affiliates, associates, partners or agents, either directly or indirectly, without the necessity of posting a bond, or proving the inadequacy of legal remedies or irreparable harm.

 

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6.9     Modification . If, at any time, a reviewing court of appropriate jurisdiction called upon to issue an injunction in accordance with Section 6.8 finds any of the provisions of this Section 6 to be invalid or unenforceable under any applicable law, by reason of being vague or unreasonable as to area, duration, or scope of activity, this Agreement shall be considered divisible and such court shall have authority to modify this Agreement to cover only such area, duration, and scope as shall be determined to be reasonable and enforceable by the court. Executive and the Company agree that this Agreement, as so amended, shall be valid and binding as though any invalid or unenforceable provision had not been included herein.

6.10     Confidential Disclosure to Governmental and Quasi-Governmental Entities . Nothing in this Agreement prohibits or restricts Executive from reporting possible violations of federal, state, or local law or regulation to, or discussing any such possible violations with, any governmental agency or entity or self-regulatory organization, including by initiating communications directly with, responding to any inquiry from, or providing testimony before any federal, state, or local regulatory authority or agency or self-regulatory organization, including without limitation the Securities and Exchange Commission, the Equal Employment Opportunity Commission, FINRA, and the Occupational Safety and Health Administration, or making any other disclosures that are protected by the whistleblower provisions of any federal, state, or local law or regulation.

6.11     Company Property . The parties hereto agree that any work of authorship, invention, design, discovery, development, technique, improvement, source code, hardware, device, data, apparatus, practice, process, method, or other work product whatever related to the Company’s or the Company Affiliates’ business (whether patentable or subject to copyright, or not, and hereinafter collectively called “ discovery ”) that Executive, either solely or in collaboration with others, conceives, creates, makes, discovers, invents, develops, perfects, or reduces to practice during the term of Executive’s employment, whether or not during regular business hours or on the Company’s or any Company Affiliates’ premises, shall be the sole and complete property of the Company and/or the Company Affiliates. More particularly, and without limiting the foregoing, Executive agrees that all of the foregoing and any (i) inventions (whether patentable or not, and without regard to whether any patent therefor is ever sought); (ii) marks, names, or logos (whether or not registrable as trade or service marks, and without regard to whether registration therefor is ever sought); (iii) works of authorship (without regard to whether any claim of copyright therein is ever registered); and (iv) trade secrets, ideas, and concepts (subsections (i) - (iv) collectively, “ Intellectual Property Products ”) created, conceived, or prepared on the Company’s or the Company Affiliates’ premises or otherwise, whether or not during normal business hours, and related to the Company’s business, shall perpetually and throughout the world be the exclusive property of the Company and/or the Company Affiliates, as shall all tangible media (including, but not limited to, papers, computer media, and digital and cloud-based of all types and models) in which such Intellectual Property Products shall be recorded or otherwise fixed. Upon termination of Executive’s employment with the Company for any reason whatsoever, and at any earlier time the Company so requests, Executive will immediately deliver to the custody of the person designated by the General Counsel of the Company all originals and copies of any documents and other property of the Company or any Company Affiliates in Executive’s possession or under Executive’s custody or control.

 

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6.12     Works for Hire . Executive agrees that all works of authorship created in whole or in part by Executive during Executive’s engagement by the Company and related to the Company’s business shall be works made for hire of which the Company or the Company Affiliates is the author and owner of copyright. To the extent that any competent decision-making authority should ever determine that any work of authorship created by Executive during Executive’s engagement by the Company is not a work made for hire, Executive hereby assigns all right, title, and interest in the copyright therein, in perpetuity and throughout the world, to the Company. To the extent that this Agreement does not otherwise serve to grant or otherwise vest in the Company or any of the Company Affiliates all rights in any Intellectual Property Product created in whole or in part by Executive during Executive’s engagement by the Company, Executive hereby assigns all right, title, and interest therein, in perpetuity and throughout the world, to the Company. Executive agrees to execute, immediately upon the Company’s reasonable request and without any additional compensation, any further assignments, applications, conveyances or other instruments, at any time after execution of this Agreement, whether or not Executive remains employed by the Company at the time such request is made, in order to permit the Company, the Company Affiliates, and/or their respective successors and assigns to protect, perfect, register, record, maintain, or enhance their rights in any Intellectual Property Product; provided , that , the Company shall bear the cost of any such assignments, applications, or consequences.

7.     Litigation and Regulatory Cooperation . Executive agrees that upon separation for any reason from the Company, Executive will cooperate and assist in all ways reasonably requested by the Company in assuring an orderly transition of all matters being handled by him, subject however to Executive’s subsequent professional and employment obligations. During the Term and continuing thereafter upon termination of employment, Executive shall reasonably cooperate with the Company and the Company Affiliates in the defense or prosecution of any claims or actions now in existence or that may be brought or threatened in the future against or on behalf of any of the Company, the Company Affiliates, or any divisions, successors, and assigns thereof, about which the Company believes Executive may have relevant information. Executive’s cooperation in connection with such claims or actions shall include, but not be limited to, being available to meet with counsel to prepare for discovery or trial and to act as a witness on behalf of the Company, the Company Affiliates, or any successors and assigns thereof at mutually convenient times. Executive also shall, subject however to Executive’s subsequent professional and employment obligations, cooperate fully with the Company in connection with any investigation or review by any federal, state, or local regulatory authority as any such investigation or review relates to events or occurrences that transpired while Executive was employed by the Company. Executive’s cooperation and assistance pursuant to this Section 7 shall be without additional consideration; provided , that , the Company will pay in advance for Executive’s reasonable travel expenses incurred with respect to such cooperation and assistance. Executive shall not be required to cooperate against his legal interests or the legal interests of any entity that is then his employer.

8.     Dispute Resolution . Except with respect to claims arising out of or related to a breach or alleged breach of Section 6, which claims may be brought in court, all disputes between the parties or any claims concerning the performance, breach, construction or interpretation of this Agreement, or in any manner arising out of this Agreement or Executive’s employment by the Company, shall be submitted to binding arbitration in accordance with the Employment Arbitration Rules, as amended from time to time, of the American Arbitration Association (the “ AAA ”), which arbitration shall be carried out in the manner set forth below:

 

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  (i) Such arbitration shall be conducted in New York, New York or such other location as the Company’s headquarters may be located at such time, and the arbitrator will apply New York law, including federal law as applied in New York courts. The arbitration shall be conducted in accordance with the AAA’s Employment Arbitration Rules, as modified by the terms set forth in this Agreement. The arbitration will be conducted by a single arbitrator, who shall be an attorney who specializes in the field of employment law and shall have prior experience arbitrating employment disputes. The fees and costs of the arbitrator and/or the AAA shall be divided among the Company and Executive, subject to reallocation as provided in Section 8(iv) below.

 

  (ii) The arbitrator shall not have the authority to modify the terms of this Agreement except to the extent that the Agreement violates any governing statue, in which case the arbitrator may modify the Agreement solely as necessary to not conflict with such statute. The arbitrator shall have the authority to award any remedy or relief that a court of the State of New York or federal court located in the State of New York could grant in conformity with the applicable law on the basis of claims actually made in the arbitration. The arbitrator shall render an award and written opinion which shall set forth the factual and legal basis for the award.

 

  (iii) The award of the arbitrator shall be final and binding on the Company and Executive, and judgment on the award may be confirmed and entered in any state or federal court located in New York, New York. The arbitration shall be conducted on a strictly confidential basis, and Executive shall not disclose the existence of a claim, the nature of a claim, any documents, exhibits, or information exchanged or presented in connection with any such a claim, or the result of any arbitration (collectively, “ Arbitration Materials ”), to any third party, with the sole exception of Executive’s legal counsel, who Executive shall ensure adheres to all confidentiality terms in this Agreement. In the event of any court proceeding to challenge or enforce an arbitrator’s award, the Company and Executive hereby consent to the exclusive jurisdiction of the state and federal courts in New York and agree to venue in that jurisdiction. The Company and Executive agree to take all steps necessary to protect the confidentiality of the Arbitration Materials in connection with any such proceeding, agree to file all Confidential Information (and documents containing Confidential Information) under seal to the extent possible, and agree to the entry of an appropriate protective order encompassing the confidentiality terms of this Agreement.

 

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  (iv) Each of the Company and Executive agrees to pay its own costs and fees in connection with any arbitration of a dispute arising under this Agreement, and any court proceeding arising therefrom, provided, however, that (a) the arbitrator shall be authorized to award attorneys’ fees and costs to any party in accordance with applicable law and (b) the arbitrator shall award to the party substantially prevailing in such arbitration his or its costs, including reasonable attorneys’ fees.

 

  (v) TO THE EXTENT ANY DISPUTE IS FOUND NOT TO BE SUBJECT TO THIS ARBITRATION PROVISION, BOTH THE COMPANY AND EXECUTIVE HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY.

EXECUTIVE ACKNOWLEDGES THAT EXECUTIVE HAS CAREFULLY READ THIS SECTION 8, VOLUNTARILY AGREES TO ARBITRATE ALL DISPUTES, AND HAS HAD THE OPPORTUNITY TO REVIEW THE PROVISIONS OF SECTION 8 WITH ANY ADVISORS AS EXECUTIVE CONSIDERED NECESSARY. BY SIGNING BELOW, EXECUTIVE SIGNIFIES EXECUTIVE’S UNDERSTANDING AND AGREEMENT TO SECTION 8.

9.     Severability . As the provisions of this Agreement are independent of and severable from each other, the Company and Executive agree that if, in any action before any court or agency legally empowered to enforce this Agreement, any term, restriction, covenant, or promise hereof is found to be unreasonable or otherwise unenforceable, then such decision shall not affect the validity of the other provisions of this Agreement, and such invalid term, restriction, covenant, or promise shall also be deemed modified to the extent necessary to make it enforceable.

10.     Notice . For purposes of this Agreement, notices, demands and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when received if delivered in person, the next business day if delivered by overnight commercial courier (e.g., Federal Express), or the third business day if mailed by United States certified mail, return receipt requested, postage prepaid, to the following addresses:

 

  (a) If to the Company, to:

VICI Properties Inc.

8329 W. Sunset Road, Suite 210

Las Vegas, Nevada 89113

Attn: General Counsel

 

  (b) If to Executive, to:

David Kieske

at the address on record with the Company

 

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with a copy to:

Goodwin Procter LLP

100 Northern Avenue

Boston, Massachusetts 02210

Attn: Daniel P. Adams, Esq.

Either party may change its address for notices in accordance with this Section 10 by providing written notice of such change to the other party.

11.     Governing Law . This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts to be performed therein.

12.     Benefits; Binding Effect; Assignment . This Agreement shall be binding upon and inure to the benefit of the parties and their respective heirs, personal representatives, legal representatives, successors and permitted assigns. Executive shall not assign this Agreement or any of Executive’s obligations hereunder in whole or in part. However, the Company is expressly authorized to assign this Agreement to a Company Affiliate upon written notice to Executive, provided that (a) the assignee assumes all of the obligations of the Company under this Agreement, (b) Executive’s role when viewed from the perspective of Company Affiliates in the aggregate is comparable to such role immediately before the assignment, and (c) the Company, for so long as an affiliate of the assignee, remains secondarily liable for the financial obligations hereunder.

13.     Attorneys’ Fees . The Company agrees to reimburse Executive up to $15,000 for his reasonable legal fees incurred in reviewing this Agreement.

14.     Interpretation . As both parties have had the opportunity to consult with legal counsel of their own choosing, no provision of this Agreement shall be construed against or interpreted to the disadvantage of any party by reason of such party having, or being deemed to have, drafted, devised, or imposed such provision.

15.     Entire Agreement . This Agreement constitutes the entire agreement between the parties, and all prior understandings, agreements or undertakings between the parties concerning Executive’s employment or the other subject matters of this Agreement are superseded in their entirety by this Agreement.

16.     Waivers and Amendments . This Agreement may be amended, superseded, canceled, renewed or extended, and the terms hereof may be waived, only by a written instrument signed by the parties or, in the case of a waiver, by the party waiving compliance. No delay on the part of any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any party of any such right, power or privilege nor any single or partial exercise of any such right, power or privilege, preclude any other or further exercise thereof or the exercise of any other such right, power or privilege.

17.     No Duty to Mitigate . Executive shall not be required to mitigate damages or the amount of any payment provided for under this Agreement by seeking other employment or otherwise, nor will any payments hereunder be subject to offset in the event Executive does mitigate.

 

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18.     Counterparts . This Agreement may be executed in counterparts, each of which will be deemed an original, but which together shall be one and the same instrument.

19.     Tax Advice . Executive confirms and represents to the Company that he has had the opportunity to obtain the advice of legal counsel, financial and tax advisers, and such other professionals as he deems necessary for entering into this Agreement, and he has not relied upon the advice of the Company or the Company’s officers, directors, or employees.

20.     Withholding . Any payments made to Executive under this Agreement shall be reduced by any applicable withholding taxes or other amounts required to be withheld by law or contract.

21.     Section 409A . This Agreement is intended to comply with, or be exempt from, the requirements of Section 409A, with respect to amounts subject thereto, and shall be interpreted and construed consistent with that intent. No expenses eligible for reimbursement, or in-kind benefits to be provided, during any calendar year shall affect the amounts eligible for reimbursement in any other calendar year, to the extent subject to the requirements of Section 409A, and no such right to reimbursement or right to in-kind benefits shall be subject to liquidation or exchange for any other benefit. For purposes of Section 409A, each payment in a series of installment payments provided under this Agreement shall be treated as a separate payment. Any payments to be made under this Agreement upon a termination of employment shall only be made upon a “separation from service” under Section 409A.

22.     Survivability . Those provisions and obligations of this Agreement which are intended to survive shall survive notwithstanding termination of Executive’s employment with the Company.

[ Signature Page Follows ]

 

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IN WITNESS WHEREOF, the parties hereto have signed their names as of the day and year first above written.

 

VICI PROPERTIES INC.
By:   /s/ Edward B. Pitoniak
Name: Edward B. Pitoniak
Title: CEO
/s/ David Kieske
David Kieske

 

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EXHIBIT A

SEPARATION AGREEMENT AND RELEASE

In consideration of and in accordance with the ________, 2017 Employment Agreement by and between David Kieske, (“ Executive ”) and VICI Properties Inc., with offices at VICI Properties Inc., 8329 W. Sunset Road, Suite 210 Las Vegas, Nevada 89113 (together with its successors and assigns, the “ Company ”) (“ Employment Agreement ”), of which this Exhibit A is part, Executive hereby agrees as follows. All terms not defined in this Separation Agreement and Release (“ Separation Agreement ”) shall have the same meanings as those set forth in the Employment Agreement.

1.     Consideration . Executive acknowledges and agrees that the payments and benefits to be paid to Executive under Section [4.3][4.4][4.5] of the Employment Agreement, as set forth in a schedule hereto (the “ Consideration Amounts ”), represent good, valuable, and sufficient consideration for signing this Separation Agreement, and exceed any amounts or interests to which Executive otherwise would be entitled. Executive acknowledges and agrees that except as specifically provided in this Separation Agreement, the Company shall have no other obligations or liabilities, monetary or otherwise, to Executive following the date hereof and that the payments and benefits contemplated herein constitute a complete settlement, satisfaction, and waiver of any and all claims Executive may have against the Company.

2.     Release of Claims .

(a)    Executive, for Executive, Executive’s spouse, and each of Executive’s heirs, beneficiaries, representatives, agents, successors, and assigns (collectively, “ Executive Releasors ”), irrevocably and unconditionally releases and forever discharges the Company, (i) each and all of its predecessors, parents, Subsidiaries, Affiliates, divisions, successors, and assigns (collectively with the Company, the “ Company Entities ”), (ii) each and all of the Company Entities’ current and former officers, directors, employees, and, in their respective capacities as such, each and all of the Company Entities’ shareholders, representatives, attorneys, agents, and assigns (collectively, with the Company Entities, the “ Company Releasees ”), from any and all causes of action, claims, actions, rights, judgments, obligations, damages, demands, accountings, or liabilities of any kind or character, whether known or unknown, whether accrued or contingent, that Executive has, had, or may have against them, or any of them, by reason of, arising out of, connected with, touching upon, or concerning Executive’s employment with the Company, Executive’s separation from the Company, and Executive’s relationship with any or all of the Company Releasees, and from any and all statutory claims, regulatory claims, claims under the Employment Agreement, and any and all other claims or matters of whatever kind, nature, or description, arising from the beginning of the world up through the Separation Agreement Effective Date (as defined below) (collectively, the “ Released Claims ”). Executive acknowledges that the Released Claims specifically include, but are not limited to, any and all claims for fraud, breach of express or implied contract, breach of the implied covenant of good faith and fair dealing, interference with contractual rights, violation of public policy, invasion of privacy, intentional or negligent infliction of emotional distress, intentional or negligent misrepresentation, defamation, libel, slander, or breach of privacy; claims for failure to pay wages, benefits, deferred compensation, commissions, bonuses, vacation pay, expenses,

 

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severance pay, attorneys’ fees, or other compensation of any sort; claims related to stock options, equity awards, or other grants, awards, or warrants; claims related to any tangible or intangible property of Executive that remains with the Company; claims for retaliation, harassment or discrimination on the basis of race, color, sex, sexual orientation, national origin, ancestry, religion, age, disability, medical condition, marital status, gender identity, gender expression, or any other characteristic or criteria protected by law; any claim under Title VII of the Civil Rights Act of 1964 (Title VII, as amended), 42 U.S.C. §§ 2000e, et seq., the Civil Rights Act of 1991, the Civil Rights Act of 1866, the Family and Medical Leave Act (“ FMLA ”), 29 U.S.C. §§ 2601, et seq., the Fair Labor Standards Act (“ FLSA ”), 29 U.S.C. §§ 201, et seq., the Equal Pay Act, 29 U.S.C. §206(a) and interpretive regulations, the Americans with Disabilities Act (“ ADA ”), 42 U.S.C. §§ 12101, et seq., the Consolidated Omnibus Budget Reconciliation Act of 1986 (“ COBRA ”), the Occupational Safety and Health Act (“ OSHA ”) or any other health and/or safety laws, statutes, or regulations, the Uniformed Services Employment and Reemployment Rights Act (“ USERRA ”), 38 U.S.C. §§ 4301-4333, the Employee Retirement Income Security Act of 1974 (“ ERISA ”), 29 U.S.C. §§ 301, et seq., the Immigration Reform and Control Act of 1986, 8 U.S.C. §§ 1101, et seq., or the Internal Revenue Code of 1986, as amended, the Worker Adjustment and Retraining Notification Act; all claims arising under the Sarbanes-Oxley Act of 2002 (Public Law 107-204), including whistleblowing claims under 18 U.S.C. §§ 1513(e) and 1514A; the applicable state Wage and Hour Laws, and any and all other foreign, federal, state, or local laws, common law, or case law, including but not limited to all statutes, regulations, common law, and other laws in place in New York, New York. Notwithstanding anything in this Separation Agreement to the contrary, Executive is not releasing pursuant to this Separation Agreement any claims with respect to (i) Annual Salary due under the Employment Agreement through the date of termination, (ii) vested employee benefits or vested deferred compensation under the Company’s applicable plans and arrangements, (iii) matters which cannot be released under applicable law and/or (iv) indemnification by the Company to the maximum extent pursuant to its by-laws and to third party directors’ and officers‘ liability or other insurance coverage.

(b)    Executive acknowledges that there is a risk that after the execution of this Separation Agreement, Executive will incur or suffer damage, loss, or injury that is in some way caused by or connected with Executive’s employment with the Company or its Subsidiaries or Affiliates or Executive’s separation from the Company or its Subsidiaries or Affiliates, and any relationship with or membership or investment in the Company Releasees, but that is unknown or unanticipated at the time of execution of this Separation Agreement. Executive specifically assumes that risk, and agrees that this Separation Agreement and the Released Claims apply to all unknown or unanticipated, accrued or contingent claims and all matters caused by or connected with Executive’s employment with the Company or its Subsidiaries or Affiliates and/or Executive’s separation from the Company or its Subsidiaries or Affiliates, as well as those claims currently known or anticipated. Executive acknowledges and agrees that this Separation Agreement constitutes a knowing and voluntary waiver of any and all rights and claims Executive does or may have as of the Separation Agreement Effective Date. Executive acknowledges that Executive has waived rights or claims pursuant to this Separation Agreement in exchange for consideration, the value of which exceeds payment or remuneration to which Executive otherwise would be entitled.

 

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(c)    To the extent permitted by law, Executive agrees never to file a lawsuit or other adversarial proceeding with any court or arbitrator against the Company or any other Company Releasee asserting any Released Claims. Executive represents and agrees that, prior to signing this Separation Agreement, Executive has not filed or pursued any complaints, charges, or lawsuits of any kind with any court, governmental or administrative agency, arbitrator, or other forum against the Company or any of the other Company Releasees, asserting any claims whatsoever. Executive understands and acknowledges that, in the event Executive files an administrative charge or commences any proceeding with respect to any Released Claim, or in the event another person or entity does so in whole or in part on Executive’s behalf, Executive waives and is estopped from receiving any monetary award or other legal or equitable relief in connection with any such proceeding.

(d)    Executive represents and warrants that Executive has not assigned, transferred, or permitted the subrogation of any of Executive’s rights, claims, and/or causes of action, including any claims referenced in this Separation Agreement, or authorized any other person or entity to assert any such claim or claims on Executive’s behalf, and Executive agrees to indemnify and hold harmless the Company against any assignment, transfer, or subrogation of said rights, claims, and/or causes of action.

3.     Survival . The following Sections of the Employment Agreement shall remain in full force and effect following the Termination Date: Section 3.2(g) (“Clawback”), Section 4 (“Termination of Employment”), Section 6 (“Non-Competition, Non-Solicitation, and Confidentiality; Certain Other Covenants”), Section 7 (“Litigation And Regulatory Cooperation”) Section 8 (“Dispute Resolution”), Section 10 (“Notice”) and Section 12 (“Benefits; Binding Effect; Assignment”). Any disputes arising in connection with this Separation Agreement or otherwise arising between any of Executive Releasors, on the one hand, and any of the Company Releasees, on the other hand, shall be resolved in accordance with Sections 6 and 8 of the Employment Agreement.

4.     Tax Liability . Executive expressly acknowledges that neither the Company nor its attorneys have made any representations to Executive regarding the tax consequences of the consideration provided to Executive pursuant to this Separation Agreement and the Employment Agreement. It is the intention of the parties to this Separation Agreement that no payments made under this Separation Agreement and/or the Employment Agreement be subject to the additional tax on deferred compensation imposed by Section 409A of the Internal Revenue Code of 1986, as amended (the “ Code ”), but Company does not guarantee that any such payment complies with or is exempt from Code Section 409A. Each payment made under this Separation Agreement or the Employment Agreement will be treated as a separate payment for purposes of Code Section 409A and the right to a series of installment payments under this Separation Agreement is to be treated as a right to a series of separate payments.

5.     Knowing/Voluntary Waiver .

(a)    Executive is entitled to consider the terms of this Separation Agreement for twenty-one (21) days before signing it. If Executive fails to execute this Separation Agreement within this twenty-one (21) day period, this Separation Agreement will be null and void and of no force or effect. To execute this Separation Agreement, Executive must sign and

 

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date the Separation Agreement below, and return a signed copy hereof to Attn: General Counsel, VICI Properties Inc., 8329 W. Sunset Road, Suite 210 Las Vegas, Nevada 89113, (phone): (702) 407-6000, via nationally recognized overnight carrier or email.

(b)    Executive may revoke this Separation Agreement within seven (7) days of Executive’s signing it by delivering a written notice of such revocation to Attn: General Counsel, VICI Properties Inc., 8329 W. Sunset Road, Suite 210 Las Vegas, Nevada 89113, (phone): (702) 407-6000, via nationally recognized overnight carrier or email. If Executive revokes this Separation Agreement within seven (7) days of signing it, this Separation Agreement and the promises contained herein automatically will be null and void. If Executive signs this Separation Agreement and does not revoke this Separation Agreement within seven (7) days of signing it, this Separation Agreement shall become binding, effective, and irrevocable on the eighth (8th) day after the Separation Agreement is executed by both parties (the “ Separation Agreement Effective Date ”).

(c)    Executive acknowledges that Executive (a) has carefully read this Separation Agreement and the Employment Agreement; (b) is competent to manage Executive’s own affairs; (c) fully understands the Separation Agreement’s and Employment Agreement’s contents and legal effect, and understands that Executive is giving up any legal claims Executive has against any of the Company Releasees, including but not limited to any and all legal rights or claims under the Age Discrimination in Employment Act of 1967 (“ ADEA ”) (29 U.S.C. § 626, as amended), and all other federal, state, foreign, and local laws regarding age discrimination, whether those claims are presently known or hereafter discovered; (d) has been advised to consult with an attorney of Executive’s choosing prior to signing this Separation Agreement, if Executive so desires; and (e) has chosen to enter into this Separation Agreement freely, without coercion, and based upon Executive’s own judgment, and that Executive has not relied upon any promises made by any of the Company Releasees, other than the promises explicitly contained in this Separation Agreement.

6.     Miscellaneous .

This Separation Agreement may be executed in counterparts, each of which shall be deemed an original, and both of which together shall constitute one and the same instrument. The section headings in this Separation Agreement are provided for convenience only and shall not affect the construction or interpretation of this Separation Agreement or the provisions hereof.

This Separation Agreement shall not in any way be construed as an admission that the Company, Executive, or any other individual or entity has any liability to or acted wrongfully in any way with respect to Executive, the Company, or any other person.

This Separation Agreement shall not be construed against either Party, and no consideration shall be given or presumption made on the basis of who drafted the Separation Agreement or any particular provision hereof or who supplied the form of this Separation Agreement. In construing the Separation Agreement, (i) examples shall not be construed to limit, expressly or by implication, the matter they illustrate, (ii) the connectives “and,” “or,” and “and/or” shall be construed either disjunctively or conjunctively so as to construe a sentence or

 

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clause most broadly and bring within its scope all subject matter that might otherwise be construed to be outside of its scope; (iii) the word “includes” and its derivatives means “includes, but is not limited to” and corresponding derivative expressions, (iv) a defined term has its defined meaning throughout the Separation Agreement, whether it appears before or after the place where it is defined, and (v) the headings and titles herein are for convenience only and shall have no significance in the interpretation hereof.

The Parties agree that each of the Company Releasees is an intended third party beneficiary of this Separation Agreement and shall have the authority to enforce the provisions applicable to it, her, or Executive in accordance with the terms of hereof.

7.     Entire Agreement . Except as otherwise specifically provided herein, this Separation Agreement constitutes the entire agreement of the Parties with respect to the subject matter hereof, contains all the covenants, promises, representations, warranties, and agreements between the Parties with respect to Executive’s separation from the Company and all positions therewith; provided , however , that nothing in this Agreement shall supersede the Sections in the Employment Agreement identified in Paragraph 3 (“ Survival ”) of this Separation Agreement. Any modification of this Separation Agreement will be effective only if it is in writing and signed by Executive and the Chief Executive Officer or General Counsel of the Company.

[ Signature Page Follows ]

 

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IN WITNESS WHEREOF, the parties hereto have executed this General Release on this ___ day of ____________.

 

EXECUTIVE

 

 

David Kieske

 

VICI Properties Inc.

By:    
Name:    
Title:    

 

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Exhibit 10.33

SEPARATION AGREEMENT AND RELEASE

In consideration of and in accordance with the Employment Agreement by and between Mary Elizabeth Higgins, (“ Executive ”) and VICI Properties Inc. (together with its successors and assigns, the “ Company ”) entered into as of October 6, 2017 (“ Employment Agreement ”), Executive hereby agrees as follows. All terms not defined in this Separation Agreement and Release (“ Separation Agreement ”) shall have the same meanings as those set forth in the Employment Agreement.

1. Resignation; Consulting Engagement . Executive resigns her employment with the Company as of December 31, 2017 (the “ Date of Termination ”). Executive hereby resigns as of the Date of Termination from any positions she holds with the Company and any of its Subsidiaries and Affiliates. Following the Date of Termination, Executive shall serve as a consultant to the Company and its Subsidiaries and Affiliates in accordance with a Consulting Agreement in the form attached hereto as Exhibit A.

2. Consideration . Executive acknowledges and agrees that the payments and benefits paid or granted to Executive under this Separation Agreement represent good, valuable, and sufficient consideration for signing this Separation Agreement and exceed any amounts or interests to which Executive otherwise would be entitled. Executive acknowledges and agrees that except as specifically provided in this Separation Agreement, the Company shall have no other obligations or liabilities, monetary or otherwise, to Executive following the date hereof and that the payments and benefits contemplated herein constitute a complete settlement, satisfaction, and waiver of any and all claims Executive may have against the Company. In full consideration for Executive’s promises, covenants and agreements set forth herein, provided that Executive timely executes and delivers to the Company and does not revoke this Separation Agreement, executes and delivers to the Company on or after December 31, 2017 and on or before January 13, 2018 the General Release attached as Exhibit B and does not revoke such General Release, and is in compliance with her obligations under this Separation Agreement and the Consulting Agreement:

(a) Executive shall be entitled to payment of the Accrued Obligations in accordance with the Employment Agreement;

(b) The Company will continue to pay Executive’s Base Salary for a period commencing on the Date of Termination and ending on the first anniversary of the Date of Termination, to be paid to Executive in accordance with the Company’s customary payroll practices, commencing on the March 1, 2018 (the “ First Payment Date ”);

(c) Executive will be eligible to receive a 2017 Bonus in accordance with Section 4(c) of the Employment Agreement; and

(d) The Company shall pay to Executive in cash the amount (the “ Additional Payment ”), if any, by which One Million Two Hundred Thousand Dollars ($1,200,000) exceeds the sum of (I) the aggregate Cash Bonus payments paid to Executive (including pursuant to Section 1(c) above) by the Company and (II) the amounts payable pursuant to Section 1(b) above. The Additional Payment, if any, shall be payable in accordance with the Company’s customary payroll practices on the First Payment Date.


3. Release of Claims .

(a) Executive, for Executive, Executive’s spouse, and each of Executive’s heirs, beneficiaries, representatives, agents, successors, and assigns (collectively, “ Executive Releasors ”), irrevocably and unconditionally releases and forever discharges the Company, each and all of its predecessors, parents, Subsidiaries, Affiliates, divisions, successors, and assigns (collectively with the Company, the “ Company Entities ”), and each and all of the Company Entities’ current and former officers, directors, employees, shareholders, representatives, attorneys, agents, and assigns (collectively, with the Company Entities, the “ Company Releasees ”), from any and all causes of action, claims, actions, rights, judgments, obligations, damages, demands, accountings, or liabilities of any kind or character, whether known or unknown, whether accrued or contingent, that Executive has, had, or may have against them, or any of them, by reason of, arising out of, connected with, touching upon, or concerning Executive’s employment with the Company, Executive’s separation from the Company, and Executive’s relationship with any or all of the Company Releasees, and from any and all statutory claims, regulatory claims, claims under the Employment Agreement, and any and all other claims or matters of whatever kind, nature, or description, arising from the beginning of the world up through the Separation Agreement Effective Date (as defined below) (collectively, the “ Released Claims ”). Executive acknowledges that the Released Claims specifically include, but are not limited to, any and all claims for fraud, breach of express or implied contract, breach of the implied covenant of good faith and fair dealing, interference with contractual rights, violation of public policy, invasion of privacy, intentional or negligent infliction of emotional distress, intentional or negligent misrepresentation, defamation, libel, slander, or breach of privacy; claims for failure to pay wages, benefits, deferred compensation, commissions, bonuses, vacation pay, expenses, severance pay, attorneys’ fees, or other compensation of any sort; claims related to stock options, equity awards, or other grants, awards, or warrants; claims related to any tangible or intangible property of Executive that remains with the Company; claims for retaliation, harassment or discrimination on the basis of race, color, sex, sexual orientation, national origin, ancestry, religion, age, disability, medical condition, marital status, gender identity, gender expression, or any other characteristic or criteria protected by law; any claim under Title VII of the Civil Rights Act of 1964 (Title VII, as amended), 42 U.S.C. §§ 2000e, et seq., the Civil Rights Act of 1991, the Civil Rights Act of 1866, the Family and Medical Leave Act (“ FMLA ”), 29 U.S.C. §§ 2601, et seq., the Fair Labor Standards Act (“ FLSA ”), 29 U.S.C. §§ 201, et seq., the Equal Pay Act, 29 U.S.C. §206(a) and interpretive regulations, the Americans with Disabilities Act (“ ADA ”), 42 U.S.C. §§ 12101, et seq., the Consolidated Omnibus Budget Reconciliation Act of 1986 (“ COBRA ”), the Occupational Safety and Health Act (“ OSHA ”) or any other health and/or safety laws, statutes, or regulations, the Uniformed Services Employment and Reemployment Rights Act (“ USERRA ”), 38 U.S.C. §§ 4301-4333, the Employee Retirement Income Security Act of 1974 (“ ERISA ”), 29 U.S.C. §§ 301, et seq., the Immigration Reform and Control Act of 1986, 8 U.S.C. §§ 1101, et seq., or the Internal Revenue Code of 1986, as amended, the Worker Adjustment and Retraining Notification Act; all claims arising under the Sarbanes-Oxley Act of 2002 (Public Law 107-204), including whistleblowing claims under 18 U.S.C. §§ 1513(e) and 1514A; the applicable state Wage and Hour Laws, and any and all other foreign, federal, state, or local laws, common law, or case law, including but not limited to all statutes, regulations, common law, and other laws in place in Las Vegas, Nevada.

 

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(b) Executive acknowledges that there is a risk that after the execution of this Separation Agreement, Executive will incur or suffer damage, loss, or injury that is in some way caused by or connected with Executive’s employment with the Company or its Subsidiaries or Affiliates or Executive’s separation from the Company or its Subsidiaries or Affiliates, and any relationship with or membership or investment in the Company Releasees, but that is unknown or unanticipated at the time of execution of this Separation Agreement. Executive specifically assumes that risk, and agrees that this Separation Agreement and the Released Claims apply to all unknown or unanticipated, accrued or contingent claims and all matters caused by or connected with Executive’s employment with the Company or its Subsidiaries or Affiliates and/or Executive’s separation from the Company or its Subsidiaries or Affiliates, as well as those claims currently known or anticipated. Executive acknowledges and agrees that this Separation Agreement constitutes a knowing and voluntary waiver of any and all rights and claims Executive does or may have as of the Separation Agreement Effective Date. Executive acknowledges that Executive has waived rights or claims pursuant to this Separation Agreement in exchange for consideration, the value of which exceeds payment or remuneration to which Executive otherwise would be entitled.

(c) To the extent permitted by law, Executive agrees never to file a lawsuit or other adversarial proceeding with any court or arbitrator against the Company or any other Company Releasee asserting any Released Claims. Executive represents and agrees that, prior to signing this Separation Agreement, Executive has not filed or pursued any complaints, charges, or lawsuits of any kind with any court, governmental or administrative agency, arbitrator, or other forum against the Company or any of the other Company Releasees, asserting any claims whatsoever. Executive understands and acknowledges that, in the event Executive files an administrative charge or commences any proceeding with respect to any Released Claim, or in the event another person or entity does so in whole or in part on Executive’s behalf, Executive waives and is estopped from receiving any monetary award or other legal or equitable relief in connection with any such proceeding.

(d) Notwithstanding the foregoing, nothing in this Separation Agreement is intended to limit in any way Executive’s right or ability to file a charge or claim of discrimination with the United States Equal Employment Opportunity Commission (“EEOC”), the National Labor Relations Board, or comparable state or local agencies. These agencies have the authority to carry out their statutory duties by investigating the charge, issuing a determination, or taking any other action authorized under the statutes such agencies enforce. Executive retains the right to participate in any such action, provided that Executive hereby waives any right Executive otherwise would have to recover monetary damages in connection with any charge, complaint, or lawsuit filed by Executive or by anyone else on her behalf. Executive retains the right to communicate with the EEOC and comparable state or local agencies and such communication can be initiated by Executive or in response to a communication from any such agency, and is not limited by any obligation contained in this Separation Agreement.

 

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(e) Executive represents and warrants that Executive has not assigned, transferred, or permitted the subrogation of any of Executive’s rights, claims, and/or causes of action, including any claims referenced in this Separation Agreement, or authorized any other person or entity to assert any such claim or claims on Executive’s behalf, and Executive agrees to indemnify and hold harmless the Company against any assignment, transfer, or subrogation of said rights, claims, and/or causes of action.

4. Survival . The following Sections of the Employment Agreement shall remain in full force and effect following the Termination Date: Section 5 (“Claw-Back”), Section 9 (“Compensation Upon Termination”), Section 10 (“Restrictive Covenants and Confidentiality”), Section 11 (“Assignability; Binding Nature”), Section 13 (“Litigation And Regulatory Cooperation”), Section 14 (“Resolution of Disputes”), Section 15 (“Notices”), and Section 16 (“Miscellaneous”). Any disputes arising in connection with this Separation Agreement or otherwise arising between any of Executive Releasors, on the one hand, and any of the Company Releasees, on the other hand, shall be resolved in accordance with Sections 10 and 14 of the Employment Agreement.

5. Tax Liability . Executive expressly acknowledges that neither the Company nor its attorneys have made any representations to Executive regarding the tax consequences of the consideration provided to Executive pursuant to this Separation Agreement and Section 9 of the Employment Agreement. It is the intention of the parties to this Separation Agreement that no payments made under this Separation Agreement and/or Section 9 of the Employment Agreement be subject to the additional tax on deferred compensation imposed by Section 409A of the Internal Revenue Code of 1986, as amended (the “ Code ”), but the Company does not guarantee that any such payment complies with or is exempt from Code Section 409A. Each payment made under this Separation Agreement or Section 9 of the Employment Agreement will be treated as a separate payment for purposes of Code Section 409A and the right to a series of installment payments under this Separation Agreement is to be treated as a right to a series of separate payments.

6. Knowing/Voluntary Waiver .

(a) Executive is entitled to consider the terms of this Separation Agreement for twenty-one (21) days before signing it. If Executive fails to execute this Separation Agreement within this twenty-one (21) day period, this Separation Agreement will be null and void and of no force or effect. To execute this Separation Agreement, Executive must sign and date the Separation Agreement below, and return a signed copy hereof to Kramer Levin Naftalis & Frankel LLP, 1177 Avenue of the Americas, New York, New York 10036, Attn: Robert N. Holtzman, Esq., Email: RHoltzman@KramerLevin.com, via nationally recognized overnight carrier or email.

(b) Executive may revoke this Separation Agreement within seven (7) days of Executive’s signing it by delivering a written notice of such revocation to Kramer Levin Naftalis & Frankel LLP, 1177 Avenue of the Americas, New York, New York 10036, Attn: Robert N. Holtzman, Esq., Email: RHoltzman@KramerLevin.com, via nationally recognized overnight carrier or email. If Executive revokes this Separation Agreement within seven (7) days of signing it, this Separation Agreement and the promises contained herein or in Section 9 of the

 

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Employment Agreement automatically will be null and void. If Executive signs this Separation Agreement and does not revoke this Separation Agreement within seven (7) days of signing it, this Separation Agreement shall become binding, effective, and irrevocable on the eighth (8th) day after the Separation Agreement is executed by both parties (the “ Separation Agreement Effective Date ”).

(c) Executive acknowledges that Executive (a) has carefully read this Separation Agreement and the Employment Agreement; (b) is competent to manage Executive’s own affairs; (c) fully understands the Separation Agreement’s and Employment Agreement’s contents and legal effect, and understands that Executive is giving up any legal claims Executive has against any of the Company Releasees, including but not limited to any and all legal rights or claims under the Age Discrimination in Employment Act of 1967 (“ ADEA ”) (29 U.S.C. § 626, as amended), and all other federal, state, foreign, and local laws regarding age discrimination, whether those claims are presently known or hereafter discovered; (d) hereby is advised to consult with an attorney of Executive’s choosing prior to signing this Separation Agreement; (e) has chosen to enter into this Separation Agreement freely, without coercion, and based upon Executive’s own judgment; and (f) Executive has not relied upon any promises made by any of the Company Releasees, other than the promises explicitly contained in this Separation Agreement.

7. Miscellaneous .

(a) This Separation Agreement may be executed in counterparts, each of which shall be deemed an original, and both of which together shall constitute one and the same instrument. The section headings in this Separation Agreement are provided for convenience only and shall not affect the construction or interpretation of this Separation Agreement or the provisions hereof.

(b) This Separation Agreement shall not in any way be construed as an admission that the Company, Executive, or any other individual or entity has any liability to or acted wrongfully in any way with respect to Executive, the Company, or any other person.

(c) This Separation Agreement shall not be construed against either Party, and no consideration shall be given or presumption made on the basis of who drafted the Separation Agreement or any particular provision hereof or who supplied the form of this Separation Agreement. In construing the Separation Agreement, (i) examples shall not be construed to limit, expressly or by implication, the matter they illustrate, (ii) the connectives “and,” “or,” and “and/or” shall be construed either disjunctively or conjunctively so as to construe a sentence or clause most broadly and bring within its scope all subject matter that might otherwise be construed to be outside of its scope; (iii) the word “includes” and its derivatives means “includes, but is not limited to” and corresponding derivative expressions, (iv) a defined term has its defined meaning throughout the Separation Agreement, whether it appears before or after the place where it is defined, and (v) the headings and titles herein are for convenience only and shall have no significance in the interpretation hereof.

 

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(d) The Parties agree that each of the Company Releasees is an intended third party beneficiary of this Separation Agreement and shall have the authority to enforce the provisions applicable to it, her, or Executive in accordance with the terms of hereof.

8. Entire Agreement . Except as otherwise specifically provided herein, this Separation Agreement constitutes the entire agreement of the Parties with respect to the subject matter hereof, contains all the covenants, promises, representations, warranties, and agreements between the Parties with respect to Executive’s separation from the Company and all positions therewith; provided, however, that nothing in this Agreement shall supersede the Sections in the Employment Agreement identified in Section 4 (“ Survival ”) of this Separation Agreement. Any modification of this Separation Agreement will be effective only if it is in writing and signed by Executive and the Chief Executive Officer or General Counsel of the Company.

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the parties hereto have executed this General Release.

 

EXECUTIVE    
/s/ Mary Elizabeth Higgins     11/9/17
Mary Elizabeth Higgins     Date
VICI Properties Inc.    
By:   /s/ Edward Pitoniak     11/9/17
 

Edward Pitoniak

Chief Executive Officer

    Date

 

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EXHIBIT A

CONSULTING AGREEMENT

This Consulting Agreement (this “ Agreement ”) is entered into as of January 1, 2018 (the “ Effective Date ”), by and between VICI Properties Inc. (together with its successors and assigns, the “ Company ”) and Mary Elizabeth Higgins (“ Consultant ”). Consultant and the Company shall each be referred to as a “ Party ” and collectively, as the “ Parties .” All terms not defined in this Agreement shall have the same meanings as those set forth in the Employment Agreement by and between Consultant and the Company entered into as of October 6, 2017 (the “ Employment Agreement ”).

1. Term of Engagement . The Company hereby agrees to engage Consultant under this Agreement, and Consultant hereby accepts such engagement, as of the Effective Date. The period from the Effective Date through March 31, 2018 shall be referred to herein as the Term.

2. Services to be Provided .

(a) During the Term, Consultant will provide consulting services related to transitioning her prior work to her successor and otherwise relating to the finances and financial arrangements of the Company. During the Term, such services will be provided on a substantially full-time basis.

(b) Consultant’s services hereunder shall be performed by Consultant in the Company’s offices located in Las Vegas, Nevada; provided , that Consultant may be required to travel in connection with services performed during the Term.

3. Consulting Fee . During the Term, the Company shall pay Consultant a consulting fee (the “ Consulting Fee ”) in the amount of $41,650 per month, payable monthly in arrears. Consultant also shall be entitled to reimbursement of disbursements actually incurred in connection with the performance of her services hereunder, subject to and in accordance with the policies of the Company generally applicable to executives of the Company.

4. Consultant’s Independent Contractor Status .

(a) In performing the consulting services hereunder, Consultant shall be an independent contractor. Nothing herein contained shall be construed to constitute the parties hereto as partners or joint venturers, or either as an agent of the other. Consultant shall not be considered as having an employee status during Consultant’s consulting engagement and shall not be entitled to participate in any employee plans, arrangements or distributions by the Company or any of its Subsidiaries and Affiliates during such period or to receive any other benefits provided to employees of the Company or its Subsidiaries and Affiliates. Consultant shall not provide any services under the name of the Company or any of its Subsidiaries and Affiliates or act as an agent of the Company or any of its Subsidiaries and Affiliates. Under no circumstances shall Consultant (i) enter into any agreements on behalf of the Company or its Subsidiaries and Affiliates, (ii) incur any obligations on behalf of the Company or its Subsidiaries and Affiliates, (iii) act for or to bind the Company or any of its Subsidiaries and Affiliates in any way, (iv) sign the name of the Company or any of its Subsidiaries and Affiliates, (v) represent that the Company or any of its Subsidiaries and Affiliates is in any way responsible for the acts or omissions of Consultant or (vi) refer to the Company or any of its Subsidiaries and Affiliates as a customer in any manner or format.


(b) Except as otherwise required by law, the Company shall not withhold any sums from the Consulting Fee for Social Security or other federal, state or local tax liabilities or contributions, and all such withholdings, liabilities, and contributions shall be solely Consultant’s responsibility.

(c) All of Consultant’s activities during the consulting engagement will be at Consultant’s own risk, and Consultant shall have sole responsibility for arrangements to guard against physical, financial, and other risks, as appropriate.

(d) Notwithstanding the parties’ intention and agreement that Consultant be an independent contractor and Consultant shall not be considered to be employees of the Company during Consultant’s consulting engagement, the parties recognize that the applicable law and proper application thereof is not always clear. Consultant understands and agrees that if Consultant should be classified as an employee of the Company under any such law, Consultant shall nonetheless remain ineligible to participate in any bonus, pension, profit-sharing (including 401(k)), health, life, or other employee benefit plans of the Company or any of its affiliates, and Consultant expressly waives any right to any such benefits. The Consulting Fee to be paid to Consultant under this Agreement takes into account the fact that Consultant is ineligible in all events to participate in such plans, and constitutes part of the consideration for this waiver.

5. Termination of the Term . The Term may be terminated by Consultant or the Company prior to the end of the Term upon thirty days’ prior written notice, and shall automatically terminate upon Consultant’s death. Upon termination of the Term, Consultant shall be entitled to receive the Consulting Fees through the date of termination (prorated for any partial month) and reimbursement in accordance with Section 3 for expenses incurred through such date of termination. Termination of the Term shall not terminate Consultant’s obligation to continue to be available to provide consulting services as are reasonably requested by the Company through the earlier of the end of the Start-Up Period and the end of the Severance Period.

6. Confidentiality .

(a) Acknowledgments . Consultant acknowledges that: (i) as a result of Consultant’s engagement by the Company, Consultant will obtain Confidential Information (as defined below); (ii) the Confidential Information has been developed and created by the Company and its Subsidiaries and Affiliates at substantial expense and the Confidential Information constitutes valuable proprietary assets of the Company; (iii) the Company and its Subsidiaries and Affiliates will suffer substantial damage and irreparable harm which will be difficult to compute if Consultant should violate the provisions of paragraph (e) of this Section 10; (iv) the Company and its Subsidiaries and Affiliates will suffer substantial damage which will be difficult to compute if, during the engagement or thereafter, Consultant should divulge Confidential Information relating to the business of the Company or its Subsidiaries or Affiliates; (v) the provisions of this Agreement are reasonable and necessary for the protection of the business of the Company and its Subsidiaries and Affiliates; (vi) the Company would not have

 

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engaged Consultant unless Consultant agreed to be bound by the terms hereof; and (vii) the provisions of this Agreement will not preclude Consultant from other gainful work following the end of her engagement hereunder. “ Confidential Information ” as used in this Agreement shall mean any and all confidential and/or proprietary knowledge, data, or information of the Company or any Subsidiary or Affiliate, including, without limitation, any: (A) food and beverage procedures, recipes, finances, financial management systems, player identification systems (Total Rewards), pricing systems, organizational charts, salary and benefit programs, or training programs, (B) trade secrets, drawings, inventions, methodologies, mask works, ideas, processes, formulas, source or object codes, data, programs, software source documents, data, film, audio and digital recordings, works of authorship, know-how, improvements, discoveries, developments, designs or techniques, intellectual property or other work product of the Company or any Affiliate, whether or not patentable or registrable under trademark, copyright, patent, or similar laws; (C) information regarding plans for research, development, new service offerings and/or products, marketing, advertising, and selling, distribution, business plans, business forecasts, budgets, and unpublished financial statements, licenses, prices, costs, suppliers, customers, or distribution arrangements; (D) non-public information regarding and collected from employees, suppliers, customers, clients, suppliers, vendors, agents, and/or independent contractors of the Company or any Subsidiary or Affiliate; (E) concepts and ideas relating to the development and distribution of content in any medium or to the current, future, or proposed business opportunities, products or services of the Company or any Subsidiary or Affiliate; or (F) any other information, data, or the like that is designated as confidential or treated as confidential by the Company or any of its Subsidiaries or Affiliates.

(b) Confidentiality . In consideration of the Consulting Fee, Consultant agrees not to, at any time, either during the engagement hereunder or thereafter, divulge, post, use, publish, or in any other manner reveal, directly or indirectly, to any person, firm, corporation or any other form of business organization or arrangement and keep in the strictest confidence any Confidential Information, except (i) as may be necessary to the performance of Consultant’s duties hereunder, (ii) with the express written consent of the Company’s Chief Executive Officer or General Counsel, (iii) to the extent that any such information is in or becomes in the public domain other than as a result of Consultant’s breach of any of obligations hereunder or under any other agreement between Consultant and the Company, (iv) as permitted under Section 6(c) or (d) below, or (v) where required to be disclosed by court order, subpoena or other government process and in such event, provided that Consultant notifies the Company in writing in accordance with Section 10 below within three (3) days of receiving such order, subpoena, or process, cooperates with the Company in seeking an appropriate protective order and in attempting to keep such information confidential to the maximum extent possible. Consultant agrees to promptly deliver to the Company the originals and all copies, in whatever medium, of all such Confidential Information in Consultant’s possession, custody or control upon termination of her engagement hereunder or earlier request by the Company.

(c) Permitted Uses of Trade Secrets . Misappropriation of a trade secret of the Company in breach of this Agreement may subject Consultant to liability under the Defend Trade Secrets Act of 2016 (the “ DTSA ”), entitle the Company to injunctive relief, and require Consultant to pay compensatory damages, double damages, and attorneys’ fees. Notwithstanding any other provision of this Agreement, Consultant hereby is notified in accordance with the DTSA that Consultant will not be held criminally or civilly liable under any

 

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federal or state trade secret law for the disclosure of a trade secret that is made (a) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, in each case solely for the purpose of reporting or investigating a suspected violation of law; or (b) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Consultant is further notified that if Consultant files a lawsuit for retaliation by the Company for reporting a suspected violation of law, Consultant may disclose the Company’s trade secrets to Consultant’s attorney and use the trade secret information in the court proceeding if Consultant files any document containing the trade secret under seal and does not disclose the trade secret except pursuant to court order.

(d) Other Permitted Disclosures . Notwithstanding any provision to the contrary contained herein, nothing in this Agreement prohibits or restricts Consultant from reporting possible violations of federal, state, or local law or regulation to, or discussing any such possible violations with, any governmental agency or entity or self-regulatory organization, including by initiating communications directly with, responding to any inquiry from, or providing testimony before any federal, state, or local regulatory authority or agency or self-regulatory organization, including without limitation the Securities Exchange Commission and the Equal Employment Opportunity Commission, or making any other disclosures that are protected by the whistleblower provisions of any federal, state, or local law or regulation.

(e) Enforcement . If Consultant commits a breach of any of the provisions of this Section 6, the Company shall have the right and remedy to have the provisions specifically enforced by any court having jurisdiction. Consultant acknowledges and agrees that any such breach will cause irreparable injury to the Company and its Subsidiaries and Affiliates and that money damages will not provide an adequate remedy to the Company or its Subsidiaries or Affiliates. The rights and remedies described in this paragraph (e) shall be in addition to, and not in lieu of, any other rights and remedies available to the Company and its Subsidiaries and Affiliates, at law or in equity. Accordingly, Consultant consents to the issuance of a temporary and/or preliminary injunction, in aid of arbitration, consistent with the terms of this Agreement.

7. Assignability; Binding Nature . The rights and benefits of Consultant hereunder shall not be assignable, whether by voluntary or involuntary assignment or transfer by Consultant or otherwise. This Agreement shall be binding upon, and inure to the benefit of, the successors and assigns of the Company, and the heirs, beneficiaries, executors, and administrators of Consultant, and shall be assignable by the Company only to any entity acquiring substantially all of the assets of the Company, whether by merger, consolidation, sale of assets or similar transactions.

8. Litigation and Regulatory Cooperation . Consultant agrees that upon separation for any reason from the Company, Consultant will cooperate and assist in all ways reasonably requested by the Company in assuring an orderly transition of all matters being handled by her, subject however to Consultant’s subsequent professional and employment obligations. During the engagement and thereafter, Consultant shall reasonably cooperate with the Company and its Subsidiaries and Affiliates in the defense or prosecution of any claims or actions now in existence or that may be brought or threatened in the future against or on behalf of any of the Company, its Subsidiaries, Affiliates, divisions, successors, and assigns, about which the Company believes Consultant may have relevant information. Consultant’s

 

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cooperation in connection with such claims or actions shall include, but not be limited to, being available to meet with counsel to prepare for discovery or trial and to act as a witness on behalf of the Company, its Subsidiaries, Affiliates, successors and assigns at mutually convenient times. Consultant also shall, subject however to Consultant’s subsequent professional and employment obligations, cooperate fully with the Company in connection with any investigation or review by any federal, state, or local regulatory authority as any such investigation or review relates to events or occurrences that transpired while Consultant was providing services to the Company. Consultant’s cooperation and assistance pursuant to this Section 8 shall be without additional consideration; provided , that , the Company will pay in advance for Consultant’s reasonable travel expenses incurred with respect to such cooperation and assistance.

9. Resolution of Disputes . Any dispute arising in connection with the validity, interpretation, enforcement, or breach of this Agreement or arising out of Consultant’s engagement with the Company; under any statute, regulation, ordinance or the common law; or otherwise arising between Consultant, on the one hand, and the Company or any of its Subsidiaries or Affiliates, on the other hand, the Parties shall (except to the extent otherwise provided in Section 6(e) with respect to certain requests for injunctive relief) be submitted to binding arbitration before the American Arbitration Association (“ AAA ”) for resolution. Such arbitration shall be conducted in Las Vegas, Nevada, and the arbitrator will apply Nevada law, including federal law as applied in Nevada courts. The arbitration shall be conducted in accordance with the AAA’s Employment Arbitration Rules, as modified by the terms set forth in this Agreement. The arbitration will be conducted by a single arbitrator, who shall be an attorney who specializes in the field of employment law and shall have prior experience arbitrating employment disputes. The Company will pay the fees and costs of the Arbitrator and/or the AAA, except that if such arbitration is commenced by the Consultant, then Consultant will be responsible for paying the applicable filing fee not to exceed the fee that Consultant would otherwise pay to file a lawsuit asserting the same claim in court. The arbitrator shall not have the authority to modify the terms of this Agreement except to the extent that the Agreement violates any governing statue, in which case the arbitrator may modify the Agreement solely as necessary to not conflict with such statute. The Arbitrator shall have the authority to award any remedy or relief that could a court of the State of Nevada or federal court located in the State of Nevada could grant in conformity with the applicable law on the basis of claims actually made in the arbitration. The Arbitrator shall render an award and written opinion which shall set forth the factual and legal basis for the award. The award of the arbitrator shall be final and binding on the Parties, and judgment on the award may be confirmed and entered in any state or federal court located in Las Vegas, Nevada. The arbitration shall be conducted on a strictly confidential basis, and Consultant shall not disclose the existence of a claim, the nature of a claim, any documents, exhibits, or information exchanged or presented in connection with any such a claim, or the result of any arbitration (collectively, “ Arbitration Materials ”), to any third party, with the sole exception of Consultant’s legal counsel, who Consultant shall ensure adheres to all confidentiality terms in this Agreement. In the event of any court proceeding to challenge or enforce an arbitrator’s award, the Parties hereby consent to the exclusive jurisdiction of the state and federal courts in Nevada and agree to venue in that jurisdiction. The Parties agree to take all steps necessary to protect the confidentiality of the Arbitration Materials in connection with any such proceeding, agree to file all Confidential Information (and documents containing Confidential Information) under seal to the extent possible, and agree to the entry of an appropriate protective order encompassing the confidentiality terms of this Agreement. Each

 

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Party agrees to pay its own costs and fees in connection with any arbitration of a dispute arising under this Agreement, and any court proceeding arising therefrom, provided, however, that if either party prevails substantially in such arbitration such party shall be entitled to an award by the arbitrator of her or its costs including reasonable attorneys’ fees. To the extent any dispute is found not to be subject to this arbitration provision, both Consultant and Company hereby waive their respective rights to trial by jury.

CONSULTANT ACKNOWLEDGES THAT CONSULTANT HAS CAREFULLY READ THIS SECTION 9, VOLUNTARILY AGREES TO ARBITRATE ALL DISPUTES, AND HAS HAD THE OPPORTUNITY TO REVIEW THE PROVISIONS OF SECTION 9 WITH ANY ADVISORS AS CONSULTANT CONSIDERED NECESSARY. BY SIGNING BELOW, CONSULTANT SIGNIFIES CONSULTANT’S UNDERSTANDING AND AGREEMENT TO SECTION 9.

10. Notices . Any notice, consent, demand, request, or other communication given to a Person in connection with this Agreement shall be in writing and shall be deemed to have been given to such Person (a) when delivered personally to such Person (with proof of such delivery) or (b) two days after being sent by a nationally recognized overnight courier, to the address (if any) specified below for such Person (or to such other address as such Person shall have specified by providing ten (10) days advance notice in accordance with this Section 10).

If to the Company:

VICI Properties Inc.

8329 W. Sunset Road, Suite 210

Las Vegas, Nevada 89113

Attention: General Counsel

If to Consultant: To the address of Consultant’s principal residence as it appears in the Company’s records.

11. Miscellaneous .

(a) Entire Agreement . This Agreement contains the entire understanding and agreement among the Parties concerning the subject matter hereof and supersedes all prior agreements, understandings, discussions, negotiations, and undertakings, whether written or oral, among them with respect thereto; provided, however, that this Agreement does not supersede any provision of the Separation Agreement and Release between the Company and Consultant or such provisions of the Employment Agreement as survive the execution of the Separation Agreement and Release.

(b) Amendment or Waiver . No provision in this Agreement may be amended unless such amendment is set forth in a writing that specifically identifies the provision being amended and that is signed by both Parties. No waiver by any Person of any breach of any condition or provision contained in this Agreement shall be deemed a waiver of any similar or dissimilar condition or provision at the same or any prior or subsequent time.

 

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(c) Headings . The headings of the Sections and sub-sections contained in this Agreement are for convenience only and shall not be deemed to control or affect the meaning or construction of any provision of this Agreement.

(d) Survivorship . Except as otherwise set forth in this Agreement, the respective rights and obligations of the Parties hereunder shall survive any termination of Consultant’s engagement under this Agreement.

(e) Governing Law . This Agreement shall be governed, construed, performed and enforced in accordance with its express terms and otherwise in accordance with the laws of the State of Nevada applicable to contracts to be performed therein.

(f) Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall be deemed to be one and the same instrument.

(g) Construction . This Agreement shall not be construed against either Party, and no consideration shall be given or presumption made on the basis of who drafted the Agreement or any particular provision hereof or who supplied the form of this Agreement. In construing the Agreement, (i) examples shall not be construed to limit, expressly or by implication, the matter they illustrate, (ii) the connectives “and,” “or,” and “and/or” shall be construed either disjunctively or conjunctively so as to construe a sentence or clause most broadly and bring within its scope all subject matter that might otherwise be construed to be outside of its scope; (iii) the word “includes” and its derivatives means “includes, but is not limited to” and corresponding derivative expressions, (iv) a defined term has its defined meaning throughout the Agreement, whether it appears before or after the place where it is defined, and (v) the headings and titles herein are for convenience only and shall have no significance in the interpretation hereof.

(h) Third Party Beneficiaries . The Parties agree that each of the Company’s Affiliates and Subsidiaries are intended third party beneficiaries of this Agreement and shall have the authority to enforce the provisions applicable to them in accordance with the terms of hereof.

(i) Expenses . Each party shall pay all costs and expenses it incurs with respect to the negotiation, execution, delivery and performance of this Agreement.

 

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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first set forth above.

 

CONSULTANT
 

 

Mary Elizabeth Higgins

 

VICI Properties Inc.    
By:            
  Edward Pitoniak Date       Date
  Chief Executive Officer      

 

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EXHIBIT B

GENERAL RELEASE

(to be executed on or after December 31, 2017

and on or before January 13, 2018)

1. Mary Elizabeth Higgins (“ Executive ”), for herself, her spouse, and each of her heirs, beneficiaries, representatives, agents, successors, and assigns (collectively, “ Executive Releasors ”), irrevocably and unconditionally releases and forever discharges VICI Properties Inc. (together with its successors and assigns, the “ Company ”) and each and all of its predecessors, parents, Subsidiaries, Affiliates, divisions, successors, and assigns (collectively with the Company, the “ Company Entities ”), and each and all of the Company Entities’ current and former officers, directors, employees, shareholders, representatives, attorneys, agents, and assigns (collectively, with the Company Entities, the “ Company Releasees ”), from any and all causes of action, claims, actions, rights, judgments, obligations, damages, demands, accountings, or liabilities of any kind or character, whether known or unknown, whether accrued or contingent, that Executive has, had, or may have against them, or any of them, by reason of, arising out of, connected with, touching upon, or concerning Executive’s employment with the Company, Executive’s separation from the Company, and Executive’s relationship with any or all of the Company Releasees, and from any and all statutory claims, regulatory claims, claims under the Employment Agreement, and any and all other claims or matters of whatever kind, nature, or description, arising from the beginning of the world up through her execution of this General Release (collectively, the “ Released Claims ”). Executive acknowledges that the Released Claims specifically include, but are not limited to, any and all claims for fraud, breach of express or implied contract, breach of the implied covenant of good faith and fair dealing, interference with contractual rights, violation of public policy, invasion of privacy, intentional or negligent infliction of emotional distress, intentional or negligent misrepresentation, defamation, libel, slander, or breach of privacy; claims for failure to pay wages, benefits, deferred compensation, commissions, bonuses, vacation pay, expenses, severance pay, attorneys’ fees, or other compensation of any sort; claims related to stock options, equity awards, or other grants, awards, or warrants; claims related to any tangible or intangible property of Executive that remains with the Company; claims for retaliation, harassment or discrimination on the basis of race, color, sex, sexual orientation, national origin, ancestry, religion, age, disability, medical condition, marital status, gender identity, gender expression, or any other characteristic or criteria protected by law; any claim under Title VII of the Civil Rights Act of 1964 (Title VII, as amended), 42 U.S.C. §§ 2000e, et seq., the Civil Rights Act of 1991, the Civil Rights Act of 1866, the Family and Medical Leave Act (“ FMLA ”), 29 U.S.C. §§ 2601, et seq., the Fair Labor Standards Act (“U”), 29 U.S.C. §§ 201, et seq., the Equal Pay Act, 29 U.S.C. §206(a) and interpretive regulations, the Americans with Disabilities Act (“ ADA ”), 42 U.S.C. §§ 12101, et seq., the Consolidated Omnibus Budget Reconciliation Act of 1986 (“ COBRA ”), the Occupational Safety and Health Act (“ OSHA ”) or any other health and/or safety laws, statutes, or regulations, the Uniformed Services Employment and Reemployment Rights Act (“ USERRA ”), 38 U.S.C. §§ 4301-4333, the Employee Retirement Income Security Act of 1974 (“ ERISA ”), 29 U.S.C. §§ 301, et seq., the Immigration Reform and Control Act of 1986, 8 U.S.C. §§ 1101, et seq., or the Internal Revenue Code of 1986, as amended, the Worker Adjustment and Retraining Notification Act; all claims arising under the Sarbanes-Oxley Act of 2002 (Public Law 107-204), including whistleblowing claims under 18 U.S.C. §§ 1513(e) and 1514A; the applicable state Wage and Hour Laws, and any and all other foreign, federal, state, or local laws, common law, or case law, including but not limited to all statutes, regulations, common law, and other laws in place in Las Vegas, Nevada.


2. Executive acknowledges that there is a risk that after the execution of this General Release, Executive will incur or suffer damage, loss, or injury that is in some way caused by or connected with Executive’s employment with the Company or its Subsidiaries or Affiliates or Executive’s separation from the Company or its Subsidiaries or Affiliates, and any relationship with or membership or investment in the Company Releasees, but that is unknown or unanticipated at the time of execution of this General Release. Executive specifically assumes that risk, and agrees that this General Release and the Released Claims apply to all unknown or unanticipated, accrued or contingent claims and all matters caused by or connected with Executive’s employment with the Company or its Subsidiaries or Affiliates and/or Executive’s separation from the Company or its Subsidiaries or Affiliates, as well as those claims currently known or anticipated. Executive acknowledges and agrees that this General Release constitutes a knowing and voluntary waiver of any and all rights and claims Executive does or may have as of the date of her execution of this General Release. Executive acknowledges that Executive has waived rights or claims pursuant to this General Release in exchange for consideration, the value of which exceeds payment or remuneration to which Executive otherwise would be entitled.

3. To the extent permitted by law, Executive agrees never to file a lawsuit or other adversarial proceeding with any court or arbitrator against the Company or any other Company Releasee asserting any Released Claims. Executive represents and agrees that, prior to signing this General Release, Executive has not filed or pursued any complaints, charges, or lawsuits of any kind with any court, governmental or administrative agency, arbitrator, or other forum against the Company or any of the other Company Releasees, asserting any claims whatsoever. Executive understands and acknowledges that, in the event Executive files an administrative charge or commences any proceeding with respect to any Released Claim, or in the event another person or entity does so in whole or in part on Executive’s behalf, Executive waives and is estopped from receiving any monetary award or other legal or equitable relief in connection with any such proceeding.

4. Notwithstanding the foregoing, nothing in this General Release is intended to limit in any way Executive’s right or ability to file a charge or claim of discrimination with the United States Equal Employment Opportunity Commission (“ EEOC ”), the National Labor Relations Board, or comparable state or local agencies. These agencies have the authority to carry out their statutory duties by investigating the charge, issuing a determination, or taking any other action authorized under the statutes such agencies enforce. Executive retains the right to participate in any such action, provided that Executive hereby waives any right Executive otherwise would have to recover monetary damages in connection with any charge, complaint, or lawsuit filed by Executive or by anyone else on her behalf. Executive retains the right to communicate with the EEOC and comparable state or local agencies and such communication can be initiated by Executive or in response to a communication from any such agency, and is not limited by any obligation contained in this General Release.

 

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5. Executive represents and warrants that Executive has not assigned, transferred, or permitted the subrogation of any of Executive’s rights, claims, and/or causes of action, including any claims referenced in this General Release, or authorized any other person or entity to assert any such claim or claims on Executive’s behalf, and Executive agrees to indemnify and hold harmless the Company against any assignment, transfer, or subrogation of said rights, claims, and/or causes of action.

6. Executive has been provided at least twenty-one (21) days to consider the terms of this General Release before signing it. If Executive fails to execute this General Release by January 13, 2018, she will not be entitled to receive any amount or benefit pursuant to Section 2 of the Separation Agreement entered into by and between Executive and the Company (the “ Separation Agreement ”) or Section 9(e)(ii) of the Employment agreement entered into by and between Executive and the Company. To execute this General Release, Executive must sign and date the General Release below, and return a signed copy hereof to Kramer Levin Naftalis & Frankel LLP, 1177 Avenue of the Americas, New York, New York 10036, Attn: Robert N. Holtzman, Esq., Email: RHoltzman@KramerLevin.com, via nationally recognized overnight carrier or email.

7. Executive may revoke this General Release within seven (7) days of Executive’s signing it by delivering a written notice of such revocation to Kramer Levin Naftalis & Frankel LLP, 1177 Avenue of the Americas, New York, New York 10036, Attn: Robert N. Holtzman, Esq., Email: RHoltzman@KramerLevin.com, via nationally recognized overnight carrier or email. If Executive revokes this General Release within seven (7) days of signing it, this General Release will be null and void. If Executive signs this General Release and does not revoke this General Release within seven (7) days of signing it, this General Release shall become binding, effective, and irrevocable on the eighth (8th) day after the General Release is executed by Executive.

8. Executive acknowledges that Executive (a) has carefully read this General Release; (b) is competent to manage Executive’s own affairs; (c) fully understands the General Release’s contents and legal effect, and understands that Executive is giving up any legal claims Executive has against any of the Company Releasees, including but not limited to any and all legal rights or claims under the Age Discrimination in Employment Act of 1967 (“ ADEA ”) (29 U.S.C. § 626, as amended), and all other federal, state, foreign, and local laws regarding age discrimination, whether those claims are presently known or hereafter discovered; (d) hereby is advised to consult with an attorney of Executive’s choosing prior to signing this General Release; (e) has chosen to enter into this General Release freely, without coercion, and based upon Executive’s own judgment; and (f) Executive has not relied upon any promises made by any of the Company Releasees, other than the promises explicitly contained in the Separation Agreement.

 

EXECUTIVE    
       
Mary Elizabeth Higgins     Date

 

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Exhibit 10.36

GUARANTY

This GUARANTY OF LEASE (this “ Guaranty ”), is made and entered into as of the 22 nd  day of December, 2017 by and between Caesars Resort Collection, LLC, a Delaware limited liability company (“ Guarantor ”), and Claudine Propco LLC, a Delaware limited liability company (“ Landlord ”).

RECITALS

A. Landlord and Harrah’s Las Vegas LLC, a Nevada limited liability company (“ Tenant ”) have entered into that certain Lease dated of even date herewith (as may be amended, restated, supplemented, waived or otherwise modified from time to time, the “ Lease ”). All capitalized terms used and not otherwise defined herein shall have the same meanings given such terms in the Lease.

B. Guarantor is an affiliate of Tenant, will derive substantial benefits from the Lease and acknowledges and agrees that this Guaranty is given in accordance with the requirements of the Lease and that Landlord would not have been willing to enter into the Lease unless Guarantor was willing to execute and deliver this Guaranty.

AGREEMENTS

NOW , THEREFORE , in consideration of Landlord entering into the Lease with Tenant, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Guarantor agrees as follows:

(1) Guaranty . In consideration of the benefit derived or to be derived by it therefrom, as to the Lease, Guarantor hereby unconditionally and irrevocably guarantees, as a primary obligor and not merely as a surety, the prompt, faithful and complete payment and performance in full in cash of all monetary obligations of Tenant under the Lease of any nature, including, without limitation, Rent, Additional Charges and all other sums payable by Tenant under the Lease (including, without limitation, during any Transition Period), all indemnification obligations, insurance obligations and all monetary obligations relating to the requirements to operate, rebuild, restore or replace any facilities or improvements now or hereafter located on the Leased Property covered by the Lease, including, without limitation, Tenant’s obligation to expend the Required Capital Expenditures in accordance with the Lease (collectively, the “ Obligations ”), in each case including (a) amounts that would become due but for the operation of the automatic stay under Section  362(a) of the Bankruptcy Code (as defined below) or similar laws and (b) any late charges and interest provided for under the Lease (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, whether or not a claim for such interest is allowed or allowable in such proceeding). In the event of the failure of Tenant to pay any of the Obligations when due or within any applicable cure period under the Lease, Guarantor shall forthwith pay all Obligations and pay all costs of collection or enforcement and other damages that may result from the non-performance thereof by Tenant, in each case to the full extent provided under the Lease. As to the Obligations, Guarantor’s liability under this Guaranty is without limit except as provided in

 

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Section  12 hereof. Guarantor agrees that its guarantee provided herein constitutes a guarantee of payment when due and not of collection.

(2) Survival of Obligations . The obligations of Guarantor under this Guaranty shall not be released, diminished, impaired, reduced or adversely affected and shall survive and continue in full force and effect notwithstanding:

a. any amendment, modification, or extension of the Lease pursuant to its terms;

b. any compromise, release, consent, extension, indulgence or other action or inaction in respect of any terms of the Lease or any other guarantor;

c. any substitution or release, in whole or in part, of any security for this Guaranty which Landlord may hold at any time;

d. any exercise or non-exercise by Landlord of any right, power or remedy under or in respect of the Lease or any security held by Landlord with respect thereto, or any waiver of any such right, power or remedy;

e. any change in the existence, structure or ownership of, or any bankruptcy, insolvency, reorganization, arrangement, assignment for the benefit of creditors, receivership or trusteeship affecting, Tenant, Landlord or Guarantor or their respective successors or assigns or any of their respective Affiliates or any of their respective assets, or any actual or attempted rejection, assumption, assignment, separation, severance, or recharacterization of the Lease or any portion thereof, or any discharge of liability thereunder, in connection with any such proceeding or otherwise;

f. any limitation of Tenant’s liability under the Lease or any limitation of Tenant’s liability thereunder which may now or hereafter be imposed by any statute, regulation or rule of law, or any illegality, irregularity, invalidity or unenforceability, in whole or in part, of the Lease or any term thereof;

g. subject to Section  13 hereof, any sale, lease, or transfer of all or any part of any interest in the Facility or any or all of the assets of Tenant to any other Person;

h. any act or omission by Landlord with respect to any security instrument or any failure to file, record or otherwise perfect the same;

i. any extensions of time for performance under the Lease;

j. the release of Tenant from performance or observation of any of the agreements, covenants, terms or conditions contained in the Lease by operation of law or otherwise;

k. the fact that Tenant may or may not be personally liable, in whole or in part, under the terms of the Lease to pay any money judgment;

 

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l. the failure to give Guarantor any notice of acceptance, default or otherwise;

m. any other guaranty now or hereafter executed by Guarantor or anyone else in connection with the Lease;

n. any rights, powers or privileges Landlord may now or hereafter have against any other Person;

o. except as provided in Section  13 below, any assignment of the Lease, or any subletting or subsubletting of, or any other occupancy arrangements in respect of, all or any part of the Facility;

p. any other defenses, other than a defense of payment or performance in full, as the case may be, of the Obligations;

q. the existence of any claim, setoff, counterclaim, defense or other rights that may be at any time be available to, or asserted by, Guarantor or Tenant against Landlord, whether in connection with the Lease, the Obligations or otherwise, except to the extent of any such rights expressly provided to Tenant under the Lease;

r. any law or statute that may operate to cap, limit, or otherwise restrict the claims of a lessor of real property, including, but not limited to, Section  502(b)(6) of the Bankruptcy Code;

s. the invalidity, illegality or unenforceability of all or any part of the Obligations, or any document or agreement executed in connection with the Obligations (including the Lease) for any reason whatsoever;

t. the unenforceability (for any reason whatsoever) of this Guaranty, including, without limitation, as a result of rejection in any bankruptcy, insolvency, dissolution or other proceeding; or

u. any other circumstances, whether or not Guarantor had notice or knowledge thereof.

(3) Primary Liability . The liability of Guarantor with respect to the Obligations shall be an absolute, direct, immediate, continuing and unconditional guaranty of payment and performance and not of collection, may not be revoked by Guarantor and shall continue to be effective with respect to all of the Obligations notwithstanding any attempted revocation by Guarantor and shall not be conditional or contingent upon the genuineness, validity, regularity or enforceability of the Lease or any other documents or instruments relating to the Obligations, including any Person’s lack of authority or lawful right to enter into such document on such Person’s behalf, or the pursuit by Landlord of any remedies Landlord may have. Without limitation of the foregoing, Landlord may proceed against Guarantor: (a) prior to or in lieu of proceeding against Tenant, its assets, any security deposit, or any other guarantor; and (b) prior to or in lieu of pursuing any other rights or remedies available to Landlord. All rights and remedies afforded to Landlord by reason of this Guaranty or by law are separate, independent

 

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and cumulative, and the exercise of any rights or remedies shall not in any way limit, restrict or prejudice the exercise of any other rights or remedies.

In the event of any default under the Lease, a separate action or actions may be brought and prosecuted against Guarantor whether or not Tenant is joined therein or a separate action or actions are brought against Tenant. Landlord may maintain successive actions for other defaults. Landlord’s rights hereunder shall not be exhausted by its exercise of any of its rights or remedies or by any such action or by any number of successive actions until and unless all indebtedness and Obligations the payment and performance of which are hereby guaranteed have been paid and fully performed.

(4) Obligations Not Affected . In such manner, upon such terms and at such times as Landlord in its sole discretion deems necessary or expedient, and without notice to Guarantor, Landlord may: (a) amend, alter, compromise, accelerate, extend or change the time or manner for the payment or the performance of any Obligation hereby guaranteed; (b) extend, amend or terminate the Lease; or (c) release Tenant by consent to any assignment (or otherwise) as to all or any portion of the Obligations hereby guaranteed, in each case pursuant to the terms of the Lease. Any exercise or non-exercise by Landlord of any right hereby given Landlord, dealing by Landlord with Guarantor or any other guarantor, Tenant or any other Person, or change, impairment, release or suspension of any right or remedy of Landlord against any Person including Tenant and any other guarantor will not affect any of the Obligations of Guarantor hereunder or give Guarantor any recourse or offset against Landlord.

(5) Waiver . With respect to the Lease, Guarantor hereby waives and relinquishes all rights and remedies accorded by applicable law to sureties and/or guarantors or any other accommodation parties, under any statutory provisions, common law or any other provision of law, custom or practice, and agrees not to assert or take advantage of any such rights or remedies including, but not limited to:

a. any right to require Landlord to proceed against Tenant or any other Person or to proceed against or exhaust any security held by Landlord at any time or to pursue any other remedy in Landlord’s power before proceeding against Guarantor or to require that Landlord cause a marshaling of Tenant’s assets or the assets, if any, given as collateral for this Guaranty or to proceed against Tenant and/or any collateral, including collateral, if any, given to secure Guarantor’s obligation under this Guaranty, held by Landlord at any time or in any particular order;

b. any defense that may arise by reason of the incapacity or lack of authority of any other Person;

c. notice of the existence, creation or incurring of any new or additional indebtedness or obligation or of any action or non-action on the part of Tenant, Landlord, any creditor of Tenant or Guarantor or on the part of any other Person whomsoever under this or any other instrument in connection with any obligation or evidence of indebtedness held by Landlord or in connection with any obligation hereby guaranteed;

 

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d. any defense based upon an election of remedies by Landlord which destroys or otherwise impairs the subrogation rights of Guarantor or the right of Guarantor to proceed against Tenant for reimbursement, or both;

e. any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal;

f. any duty on the part of Landlord to disclose to Guarantor any facts Landlord may now or hereafter know about Tenant, regardless of whether Landlord has reason to believe that any such facts materially increase the risk beyond that which Guarantor intends to assume or has reason to believe that such facts are unknown to Guarantor or has a reasonable opportunity to communicate such facts to Guarantor, it being understood and agreed that Guarantor is fully responsible for being and keeping informed of the financial condition of Tenant and of all circumstances bearing on the risk of non-payment or non-performance of any Obligations or indebtedness hereby guaranteed;

g. any defense arising because of Landlord’s election, in any proceeding instituted under the Federal Bankruptcy Reform Act of 1978 (11 U.S.C. § 101, et seq.), as amended, reformed or modified from time to time and any rules or regulations issued from time to time thereunder (the “ Bankruptcy Code ”) of the application of Section  1111(b)(2) of the Bankruptcy Code;

h. any defense based on any borrowing or grant of a security interest under Section  364 of the federal Bankruptcy Code; and

i. all rights and remedies accorded by applicable law to guarantors, including without limitation, any extension of time conferred by any law now or hereafter in effect and any requirement or notice of acceptance of this Guaranty or any other notice to which the undersigned may now or hereafter be entitled to the extent such waiver of notice is permitted by applicable law.

(6) Information . Guarantor assumes all responsibility for being and keeping itself informed of the financial condition and assets of Tenant, and of all other circumstances bearing upon the risk of nonpayment of the Obligations and the nature, scope and extent of the risks that Guarantor assumes and incurs hereunder and agrees that Landlord will not have any duty to advise Guarantor of information regarding such circumstances or risks.

(7) No Subrogation . Until all Obligations of Tenant under the Lease have been satisfied and discharged in full, Guarantor shall have no right of subrogation and waives any right to enforce any remedy which Guarantor now has or may hereafter have against Tenant or any of Tenant’s assets (including any such remedy of Landlord) and any benefit of, and any right to participate in, any security now or hereafter held by Landlord with respect to the Lease.

(8) Agreement to Comply with terms of Lease . Guarantor hereby agrees (a) to comply with all terms of the Lease applicable to it hereunder in respect of the Obligations, (b) that it shall take no action, and that it shall not omit to take any action, which action or omission,

 

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as applicable, would cause a breach of the terms of the Lease and (c) that it shall not commence an involuntary proceeding or file an involuntary petition in any court of competent jurisdiction seeking (i) relief in respect of Tenant or any of its Subsidiaries, or of a substantial part of the property or assets of Tenant or any of its Subsidiaries, under the Bankruptcy Code, or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Tenant or any of its Subsidiaries or for a substantial part of the property or assets of Tenant or any of its Subsidiaries.

(9) Agreement to Pay; Contribution; Subordination; Claims in Bankruptcy . Without limitation of any other right of Landlord at law or in equity, upon the failure of Tenant to pay any Obligation when and as the same shall become due, Guarantor hereby promises to and will forthwith pay, or cause to be paid, to Landlord in cash the amount of such unpaid Obligation. Upon payment by Guarantor of any sums to Landlord as provided above, all rights of Guarantor against Tenant arising as a result thereof by way of subrogation, contribution, reimbursement, indemnity or otherwise shall be subject to the limitations set forth in this Section  9 . If for any reason whatsoever Tenant now or hereafter becomes indebted to Guarantor or any Affiliate of Guarantor, such indebtedness and all interest thereon shall at all times be subordinate to Tenant’s obligation to Landlord to pay as and when due in accordance with the terms of the Lease the guaranteed Obligations, it being understood that Guarantor and each Affiliate of Guarantor shall be permitted to receive payments from Tenant on account of such obligations except during the continuance of a Tenant Event of Default under the Lease relating to failure to pay amounts due under the Lease. During any time in which a Tenant Event of Default relating to failure to pay amounts due under the Lease has occurred and is continuing under the Lease (and provided that Guarantor has received written notice thereof), Guarantor agrees to make no claim for such indebtedness that does not recite that such claim is expressly subordinate to Landlord’s rights and remedies under the Lease. Furthermore, in the event of receivership, bankruptcy, reorganization, arrangement, debtor’s relief, or other insolvency proceedings involving Tenant as debtor, Guarantor hereby assigns to Landlord any right it may have to prove its claim in any such proceeding so as to establish its rights hereunder and receive directly from the receiver, trustee or other court custodian dividends and payments which would otherwise be payable to Guarantor with respect to debts and liabilities owing by Tenant to Guarantor up to the amounts owed to Landlord hereunder.

(10) Application of Payments . With respect to the Lease, and with or without notice to Guarantor, Landlord, in Landlord’s sole discretion and at any time and from time to time and in such manner and upon such terms as Landlord deems appropriate, may (a) apply any or all payments or recoveries following the occurrence and during the continuance of a Tenant Event of Default from Tenant or from any other guarantor under any other instrument or realized from any security, in such manner and order of priority as Landlord may determine, to any indebtedness or other obligation of Tenant with respect to the Lease and whether or not such indebtedness or other obligation is guaranteed hereby or is otherwise secured, and (b) refund to Tenant any payment received by Landlord under the Lease.

(11) Guaranty Default . Upon the failure of Guarantor to pay the amounts required to be paid hereunder when due following the occurrence and during the continuance of a Tenant Event of Default under the Lease, Landlord shall have the right to bring such actions at law or

 

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inequity, including appropriate injunctive relief, as it deems appropriate to compel compliance, payment or deposit, and among other remedies to recover its reasonable attorneys’ fees in any proceeding, including any appeal therefrom and any post judgment proceedings.

(12) Maximum Liability . Guarantor and, by its acceptance of the guarantees provided herein, Landlord, hereby confirms that it is the intention of all such Persons that the guarantees provided herein and the obligations of Guarantor hereunder not constitute a fraudulent transfer or conveyance for purposes of the United States Bankruptcy Code or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar foreign, federal or state law to the extent applicable to the guarantees provided herein and the obligations of Guarantor hereunder. To effectuate the foregoing intention, Landlord hereby irrevocably agrees that the obligations of Guarantor under this Guaranty shall be limited to the maximum amount as will result in such obligations not constituting a fraudulent transfer or conveyance.

(13) Release . Guarantor shall automatically be released from its obligations hereunder (other than with respect to the Guaranty Termination Obligations (as defined below)) (the date upon which a release as described in this Section  13 occurs is referred to in this Guaranty as the “ Guaranty Release Date ”) upon the occurrence of any one of the following: (i) upon the consummation of a Lease Foreclosure Transaction in compliance in all respects with Section  22.2(ii) of the Lease, including, without limitation, satisfaction of the requirements contained in clauses (1) through (4) of said Section  22.2(ii) , including, without limitation, satisfaction of the Tenant Transferee Requirement and delivery of the replacement Guaranty as and to the extent provided therein, (ii) upon the consummation of a transaction as described in and in compliance in all respects with S ection  22.2(vii) of the Lease, and, without limitation, delivery of an assumption of this Guaranty by the applicable transferee as described in such clause (vii) in a form reasonably satisfactory to Landlord, and (iii) upon the consummation of a transaction as described in and in compliance in all respects with Section  22.2(viii) of the Lease. “ Guaranty Termination Obligations ” means, collectively, the aggregate amount of any outstanding Obligations that are due and payable as of the Guaranty Release Date.

(14) Representations and Warranties . Guarantor represents and warrants that as of the date hereof:

a. As of the date of this Agreement Guarantor (i) is a limited liability company duly formed, validly existing, and in good standing under the laws of the state of Delaware; (ii) is duly qualified to do business and is in good standing under the laws of each jurisdiction where the conduct of its business requires such qualification; and (iii) is in compliance with all Legal Requirements except, in the case of clauses (ii) and (iii), where the failure to do so would not reasonably be expected to have a materially adverse effect on Guarantor’s ability to pay the Obligations or perform its other obligations in accordance with the terms hereof.

b. The execution, delivery, and performance of this Guaranty (i) are within Guarantor’s limited liability company powers, (ii) have been duly authorized by all necessary or proper limited liability company action, (iii) are not in contravention of any provision of Guarantor’s certificate of formation or other governing instruments, (iv) will

 

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not violate any law or regulations, or any order or decree of any court or governmental instrumentality except for any such violation that would not reasonably be expected to have a material adverse effect on Guarantor’s ability to pay the Obligations or perform its other obligations in accordance with the terms hereof, (v) will not conflict with or result in the breach of, or constitute a default under, any indenture, mortgage, deed of trust, lease, agreement, or other instrument to which Guarantor is a party or by which Guarantor or any of its property is bound , except as would not reasonably be expected to have an adverse effect on Guarantor’s ability to perform its obligations hereunder, and (vi) do not require the consent or approval of any governmental body, agency, authority, or any other person except those already obtained, except as would not reasonably be expected to have an adverse effect on Lease Guarantor’s ability to perform its obligations hereunder. This Lease Guaranty is duly executed and delivered on behalf of Lease Guarantor and constitutes a legal, valid, and binding obligation of Lease Guarantor, enforceable against Lease Guarantor in accordance with its terms (subject to any applicable principles of equity and bankruptcy, insolvency and other laws generally affecting creditors’ rights).

c. Guarantor owns, directly or indirectly, one hundred percent (100%) of the membership interests in Tenant and by entering into the Lease, Landlord will be conferring a direct and substantial economic benefit on Guarantor.

(15) [Reserved] .

(16) Notices . Any notice, request, demand, consent, approval or other communication required or permitted to be given by either party hereunder to the other party shall be in writing and shall be sent by registered or certified mail, postage prepaid and return receipt requested, by hand delivery or express courier service, by email transmission or by an overnight express service to the following address:

 

To Guarantor :

   Caesars Resort Collection, LLC
   One Caesars Palace Drive
   Las Vegas, NV 89109
   Attention: General Counsel
   Email: corplaw@caesars.com

To Landlord :

   Claudine Propco LLC
   8329 West Sunset Road, Suite 210
   Las Vegas, NV 89113
   Attention: General Counsel
   Email: corplaw@viciproperties.com

 

8


or to such other address as either party hereto may hereafter designate. Notice shall be deemed to have been given on the date of delivery if such delivery is made on a Business Day, or if not, on the first Business Day after delivery. If delivery is refused, Notice shall be deemed to have been given on the date delivery was first attempted. Notice sent by email shall be deemed given only upon an independent, non-automated confirmation from the recipient acknowledging receipt.

(17) Licensing Event . If there shall occur a Licensing Event with respect to either party hereto, then such party shall notify the other party, as promptly as practicable after becoming aware of such Licensing Event (but in no event later than twenty (20) days after becoming aware of such Licensing Event). In such event, the notifying party shall and shall cause any applicable Affiliates to use commercially reasonable efforts to resolve such Licensing Event within the time period required by the applicable Gaming Authorities by submitting to investigation by the relevant Gaming Authorities and cooperating with any reasonable requests made by such Gaming Authorities (including filing requested forms and delivering information to the Gaming Authorities). If the notifying party cannot otherwise resolve the Licensing Event within the time period required by the applicable Gaming Authorities and any aspect of such Licensing Event is attributable to any Person(s) other than the notifying party, then the notifying party shall disassociate with the applicable Persons to resolve the Licensing Event.

(18) Miscellaneous .

a. No term, condition or provision of this Guaranty may be waived except by an express written instrument to that effect signed by Landlord and Guarantor. No waiver of any term, condition or provision of this Guaranty will be deemed a waiver of any other term, condition or provision, irrespective of similarity, or constitute a continuing waiver of the same term, condition or provision, unless otherwise expressly provided. No term, condition or provision of this Guaranty may be amended or modified with respect to Guarantor except by an express written instrument to that effect signed by Landlord.

b. If any one or more of the terms, conditions or provisions contained in this Guaranty is found in a final award or judgment rendered by any court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining terms, conditions and provisions of this Guaranty shall not in any way be affected or impaired thereby, and this Guaranty shall be interpreted and construed as if the invalid, illegal, or unenforceable term, condition or provision had never been contained in this Guaranty.

c. THIS GUARANTY WAS NEGOTIATED IN THE STATE OF NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY. ACCORDINGLY, IN ALL RESPECTS THIS GUARANTY (AND ANY AGREEMENT FORMED PURSUANT TO THE TERMS HEREOF) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES OR CONFLICTS OF LAW) AND ANY APPLICABLE LAWS OF THE UNITED STATES

 

9


OF AMERICA, ALL CLAIMS, DEMANDS, CONTROVERSIES, DISPUTES, ACTIONS OR CAUSES OF ACTION OF ANY NATURE OR CHARACTER ARISING OUT OF OR IN CONNECTION WITH, OR RELATED TO, THIS GUARANTY, WHETHER LEGAL OR EQUITABLE, KNOWN OR UNKNOWN, CONTINGENT OR OTHERWISE, SHALL BE RESOLVED IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND ANY APPELLATE COURTS THERETO, OR IF FEDERAL JURISDICTION IS LACKING, THEN IN NEW YORK STATE SUPREME COURT, NEW YORK COUNTY (COMMERCIAL DIVISION) AND ANY APPELLATE COURTS THERETO. THE PARTIES AGREE THAT SERVICE OF PROCESS MAY BE EFFECTED UPON IT UNDER ANY METHOD PERMISSIBLE UNDER THE LAWS OF THE STATE OF NEW YORK. THIS PROVISION SHALL SURVIVE AND BE BINDING UPON THE PARTIES AFTER THE LEASE IS NO LONGER IN EFFECT

d. EACH OF GUARANTOR AND LANDLORD ACKNOWLEDGES THAT IT HAS HAD THE ADVICE OF COUNSEL OF ITS CHOICE WITH RESPECT TO ITS RIGHTS TO TRIAL BY JURY UNDER THE CONSTITUTION OF THE UNITED STATES, THE STATE OF NEW YORK AND THE OTHER STATES IN WHICH THE FACILITY IS LOCATED. EACH OF GUARANTOR AND LANDLORD HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS GUARANTY (OR ANY AGREEMENT FORMED PURSUANT TO THE TERMS HEREOF) OR (ii) IN ANY MANNER CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF LANDLORD AND GUARANTOR WITH RESPECT TO THIS LEASE (OR ANY AGREEMENT FORMED PURSUANT TO THE TERMS HEREOF) OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH; OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREINAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; EACH OF GUARANTOR AND LANDLORD HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY A COURT TRIAL WITHOUT A JURY, AND THAT EITHER PARTY MAY FILE A COPY OF THIS SECTION WITH ANY COURT AS CONCLUSIVE EVIDENCE OF THE CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY..

e. In the event of any suit, action, arbitration or other proceeding to interpret this Guaranty, or to determine or enforce any right or obligation created hereby, the prevailing party in the action shall recover such party’s reasonable costs and expenses incurred in connection therewith, including, but not limited to, reasonable attorneys’ fees and costs of appeal, post judgment enforcement proceedings (if any) and bankruptcy proceedings (if any). Any court, arbitrator or panel of arbitrators shall, in entering any judgment or making any award in any such suit, action, arbitration or other proceeding, in addition to any and all other relief awarded to such prevailing party, include in such judgment or award such party’s reasonable costs and expenses as provided in this Section  18(e) .

 

10


f. Guarantor (i) represents that it has been represented and advised by counsel in connection with the execution of this Guaranty; (ii) acknowledges receipt of a copy of the Lease; and (iii) further represents that Guarantor has been advised by counsel with respect thereto. This Guaranty shall be construed and interpreted in accordance with the plain meaning of its language, and not for or against Guarantor or Landlord, and as a whole, giving effect to all of the terms, conditions and provisions hereof.

g. Except as provided in any other written agreement now or at any time hereafter in force between Landlord and Guarantor, this Guaranty shall constitute the entire agreement of Guarantor with Landlord with respect to the subject matter hereof, and no representation, understanding, promise or condition concerning the subject matter hereof will be binding upon Landlord or Guarantor unless expressed herein.

h. All stipulations, obligations, liabilities and undertakings under this Guaranty shall be binding upon Guarantor and its successors and assigns and shall inure to the benefit of Landlord and to the benefit of Landlord’s successors and assigns.

i. Whenever the singular shall be used hereunder, it shall be deemed to include the plural (and vice-versa) and reference to one gender shall be construed to include all other genders, including neuter, whenever the context of this Guaranty so requires. Section captions or headings used in this Guaranty are for convenience and reference only, and shall not affect the construction thereof.

j. This Guaranty may be executed in any number of counterparts, each of which shall be a valid and binding original, but all of which together shall constitute one and the same instrument.

k. All words in this Guaranty shall be deemed to include any number or gender as the context or sense of this Guaranty requires. The words “will,” “shall,” and “must” in this Agreement indicate a mandatory obligation. The use of the words “include,” “includes,” and “including” followed by one (1) or more examples is intended to be illustrative and is not a limitation on the scope of the description or term for which the examples are provided. The words “day” and “days” refer to calendar days unless otherwise stated. The words “hereof”, “hereto” and “herein” refer to this Guaranty, and are not limited to the section, paragraph or clause in which such words are used.

[Signature Page to Follow]

 

11


IN WITNESS WHEREOF, this Guaranty has been executed by Guarantor and Landlord as of the date first written above.

 

GUARANTOR:

 

CAESARS RESORT COLLECTION, LLC ,

a Delaware limited liability company

By:   /s/ Eric Hession
Name: Eric Hession
Title: Chief Financial Officer and Treasurer

[Signatures continue on following page]

 

Signature page to Harrah’s – Net Lease Guaranty


LANDLORD:

 

Claudine Propco LLC,

a Delaware limited liability company

By:   /s/ John Payne
Name:   John Payne
Title:   President

 

Signature page to Harrah’s – Net Lease Guaranty

Exhibit 10.37

AMENDED AND RESTATED LEASE

By and Among

CLAUDINE PROPCO LLC,

a Delaware limited liability company,

together with its permitted successors and assigns)

as “Landlord”

and

HARRAH’S LAS VEGAS, LLC,

a Nevada limited liability company,

together with its permitted successors and assigns)

as “Tenant”

dated

December 22, 2017

for

Harrah’s Las Vegas


TABLE OF CONTENTS

 

     Page  

ARTICLE I DEMISE; TERM

     1  

1.1 Leased Property

     1  

1.2 Single, Indivisible Lease

     2  

1.3 Term

     3  

1.4 Renewal Terms

     3  

ARTICLE II DEFINITIONS

     3  

ARTICLE III RENT

     38  

3.1 Rent

     38  

3.2 Variable Rent Determination

     39  

3.3 Late Payment of Rent or Additional Charges

     40  

3.4 Method of Payment of Rent

     41  

3.5 Net Lease

     41  

ARTICLE IV ADDITIONAL CHARGES

     41  

4.1 Impositions

     41  

4.2 Utilities and Other Matters

     43  

4.3 Compliance Certificate

     43  

4.4 Impound Account

     43  

ARTICLE V NO TERMINATION, ABATEMENT, ETC.

     44  

ARTICLE VI OWNERSHIP OF REAL AND PERSONAL PROPERTY

     45  

6.1 Ownership of the Leased Property

     45  

6.2 Ownership of Tenant’s Property

     47  

ARTICLE VII PRESENT CONDITION & PERMITTED USE

     47  

7.1 Condition of the Leased Property

     47  

7.2 Use of the Leased Property

     48  

7.3 Ground Leases

     50  

7.5 Third-Party Reports

     50  

ARTICLE VIII REPRESENTATIONS AND WARRANTIES

     50  

ARTICLE IX MAINTENANCE AND REPAIR

     51  

9.1 Tenant Obligations

     51  

9.2 No Landlord Obligations

     51  

9.3 Landlord’s Estate

     51  

9.4 End of Term

     52  

ARTICLE X ALTERATIONS

     52  

10.1 Alterations, Capital Improvements and Material Capital Improvements

     52  

 

i


10.2 Landlord Approval of Certain Alterations and Capital Improvements

     53  

10.3 Construction Requirements for Alterations and Capital Improvements

     54  

10.4 Landlord’s Right of First Offer to Fund Material Capital Improvements

     55  

10.5 Minimum Capital Expenditures

     59  

ARTICLE XI LIENS

     62  

ARTICLE XII PERMITTED CONTESTS

     64  

ARTICLE XIII INSURANCE

     65  

13.1 General Insurance Requirements

     65  

13.2 Name of Insureds

     67  

13.3 Deductibles or Self-Insured Retentions

     68  

13.4 Waivers of Subrogation

     68  

13.5 Limits of Liability and Blanket Policies

     68  

13.6 Future Changes in Insurance Requirements

     68  

13.7 Notice of Cancellation or Non-Renewal

     69  

13.8 Copies of Documents

     69  

13.9 Certificates of Insurance

     70  

13.10 Other Requirements

     70  

ARTICLE XIV CASUALTY

     71  

14.1 Property Insurance Proceeds

     71  

14.2 Tenant’s Obligations Following Casualty

     71  

14.3 No Abatement of Rent

     73  

14.4 Waiver

     73  

14.5 Insurance Proceeds and Fee Mortgagee

     73  

ARTICLE XV EMINENT DOMAIN

     73  

15.1 Condemnation

     73  

15.2 Award Distribution

     74  

15.3 Temporary Taking

     74  

15.4 Condemnation Awards and Fee Mortgagee

     74  

ARTICLE XVI DEFAULTS & REMEDIES

     75  

16.1 Tenant Events of Default

     75  

16.2 Landlord Remedies

     77  

16.3 Damages

     78  

16.4 Receiver

     79  

16.5 Waiver

     79  

16.6 Application of Funds

     80  

16.7 Landlord’s Right to Cure Tenant’s Default

     80  

16.8 Miscellaneous

     80  

ARTICLE XVII TENANT FINANCING

     81  

17.1 Permitted Leasehold Mortgagees

     81  

17.2 Landlord Cooperation with Permitted Leasehold Mortgage

     89  

 

ii


ARTICLE XVIII TRANSFERS BY LANDLORD

     89  

18.1 Sale of the Leased Property

     89  

18.2 Transfers to Tenant Competitors

     91  

18.3 Specific Performance

     94  

ARTICLE XIX HOLDING OVER

     94  

ARTICLE XX RISK OF LOSS

     95  

ARTICLE XXI INDEMNIFICATION

     95  

21.1 General Indemnification

     95  

21.2 Encroachments, Restrictions, Mineral Leases, etc .

     97  

ARTICLE XXII TRANSFERS BY TENANT

     98  

22.1 Subletting and Assignment

     98  

22.2 Permitted Assignments and Transfers

     99  

22.3 Permitted Sublease Agreements

     102  

22.4 Required Subletting and Assignment Provisions

     103  

22.5 Costs

     104  

22.6 No Release of Tenant’s Obligations; Exception

     105  

22.7 Bookings

     105  

ARTICLE XXIII REPORTING

     105  

23.1 Estoppel Certificates and Financial Statements

     105  

23.2 SEC Filings; Offering Information

     111  

23.3 Landlord Obligations

     112  

ARTICLE XXIV LANDLORD’S RIGHT TO INSPECT

     113  

ARTICLE XXV NO WAIVER

     113  

ARTICLE XXVI REMEDIES CUMULATIVE

     114  

ARTICLE XXVII ACCEPTANCE OF SURRENDER

     114  

ARTICLE XXVIII NO MERGER

     114  

ARTICLE XXIX INTENTIONALLY OMITTED

     114  

ARTICLE XXX QUIET ENJOYMENT

     114  

ARTICLE XXXI LANDLORD FINANCING

     115  

31.1 Landlord’s Financing

     115  

31.2 Attornment

     116  

31.3 Compliance with Fee Mortgage Documents

     116  

ARTICLE XXXII ENVIRONMENTAL COMPLIANCE

     119  

32.1 Hazardous Substances

     119  

 

iii


32.2 Notices

     119  

32.3 Remediation

     119  

32.4 Indemnity

     120  

32.5 Environmental Inspections

     121  

ARTICLE XXXIII MEMORANDUM OF LEASE

     122  

ARTICLE XXXIV DISPUTE RESOLUTION

     122  

34.1 Expert Valuation Process

     122  

34.2 Arbitration

     124  

ARTICLE XXXV NOTICES

     125  

ARTICLE XXXVI END OF TERM SUCCESSOR ASSET TRANSFER

     126  

36.1 Transfer of Tenant’s Property and Operational Control of the Facility

     126  

36.2 [Reserved]

     127  

36.3 Determination of Successor Lessee and Successor Assets FMV

     127  

36.4 Operation Transfer

     129  

ARTICLE XXXVII ATTORNEYS’ FEES

     130  

ARTICLE XXXVIII BROKERS

     130  

ARTICLE XXXIX ANTI-TERRORISM REPRESENTATIONS

     130  

ARTICLE XL LANDLORD REIT PROTECTIONS

     131  

ARTICLE XLI MISCELLANEOUS

     132  

41.1 Survival

     132  

41.2 Severability

     132  

41.3 Non-Recourse

     132  

41.4 Successors and Assigns

     133  

41.5 Governing Law

     133  

41.6 Waiver of Trial by Jury

     134  

41.7 Entire Agreement

     135  

41.8 Headings

     135  

41.9 Counterparts

     135  

41.10 Interpretation

     135  

41.11 Deemed Consent

     135  

41.12 Further Assurances

     136  

41.13 Gaming Regulations

     136  

41.14 Certain Provisions of Nevada Law

     137  

41.15 Confidential Information

     137  

41.16 Time of Essence

     138  

41.17 Consents, Approvals and Notices

     138  

41.18 Reserved

     138  

41.19 Amendments

     139  

 

iv


EXHIBITS AND SCHEDULES

 

EXHIBIT A

         

FACILITY

EXHIBIT B

         

LEGAL DESCRIPTION OF LAND

EXHIBIT C

         

CAPITAL EXPENDITURES REPORT

EXHIBIT D

         

FORM OF SCHEDULE CONTAINING ANY ADDITIONS TO OR

     

RETIREMENTS OF ANY FIXED ASSETS CONSTITUTING LEASED

     

PROPERTY

EXHIBIT E

         

INTENTIONALLY OMITTED

EXHIBIT F

         

FORM OF GUARANTY

EXHIBIT G

         

INTENTIONALLY OMITTED

EXHIBIT H

         

FORM OF REIT COMPLIANCE CERTIFICATE

EXHIBIT I

         

FORM OF PACE REPORT

SCHEDULE 1

         

GAMING LICENSE

SCHEDULE 2

         

PERMITTED TITLE EXCEPTIONS

SCHEDULE 3

         

INTENTIONALLY OMITTED

SCHEDULE 4

         

SPECIFIED SUBLEASES

SCHEDULE 5

         

INTENTIONALLY OMITTED

SCHEDULE 6

         

DESCRIPTION OF TITLE POLICY(IES)

SCHEDULE 7

         

PROPERTY SPECIFIC MARKS

 

v


AMENDED AND RESTATED LEASE

THIS AMENDED AND RESTATED LEASE (this “ Lease ”) is entered into as of December 22, 2017, by and among Claudine Propco LLC, a Delaware limited liability company (together with its permitted successors and assigns, “ Landlord ”), and Harrah’s Las Vegas, LLC, a Nevada limited liability company (together with its permitted successors and assigns, “ Tenant ”).

RECITALS

A.    On December 18, 2017, Tenant formed Landlord as a wholly owned subsidiary of Tenant.

B.    On December 22, 2017, Landlord acquired from Tenant all of the real estate comprising the property commonly known as Harrah’s Las Vegas which is covered by this Lease and more particularly described on Exhibit A.

C.    On December 22, 2017, Landlord and Tenant entered into that certain Lease (the “ Original Lease ”), whereby Landlord leased to Tenant the property described in Recital B above.

D.    Immediately prior to the execution hereof, Claudine Property Owner LLC, a Delaware limited liability company acquired from Tenant one hundred percent (100%) of the membership interests in Landlord.

E.    Landlord and Tenant wish to amend and restate the Original Lease in its entirety.

F.     Capitalized terms used in this Lease and not otherwise defined herein are defined in Article  II hereof.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Original Lease is hereby amended and restated in its entirety and the Parties agree as follows:

ARTICLE I

DEMISE; TERM

1.1      Leased Property . Upon and subject to the terms and conditions hereinafter set forth, Landlord demises and leases to Tenant and Tenant accepts and leases from Landlord all of Landlord’s rights and interest in and to the following (collectively, the “ Leased Property ”):

(a)    the real property described in Exhibit B attached hereto, together with any ownership interests in adjoining roadways, alleyways, strips, gores and the like appurtenant thereto (collectively, the “ Land ”);

(b)    all buildings, structures, Fixtures and improvements of every kind now or hereafter located on the Land or the improvements located thereon or permanently affixed to the Land or the improvements located thereon, including, but not limited to, alleyways and


connecting tunnels, sidewalks, utility pipes, conduits and lines appurtenant to such buildings and structures (collectively, the “ Leased Improvements ”), provided, however , that the foregoing shall not affect or contradict the provisions of this Lease which specify that Tenant shall be entitled to certain rights with respect to or benefits of the Tenant Capital Improvements as expressly set forth herein; and

(c)    all easements, development rights and other rights appurtenant to the Land or the Leased Improvements. The Leased Property is leased subject to all covenants, conditions, restrictions, easements and other matters of any nature affecting the Leased Property or any portion thereof as of the Commencement Date and such subsequent covenants, conditions, restrictions, easements and other matters as may hereafter arise in accordance with the terms of this Lease or as may otherwise be agreed to in writing by Landlord and Tenant, whether or not of record, including any matters which would be disclosed by an inspection or accurate survey of the Leased Property or any portion thereof.

Except as more specifically provided in the following paragraph, to the extent Landlord’s ownership of any Leased Property or any portion thereof (including any improvement (including any Capital Improvement) or other property) that does not constitute “real property” within the meaning of Treasury Regulation Section 1.856-3(d), which would otherwise be owned by Landlord and leased to Tenant pursuant to this Lease, could cause Landlord REIT to fail to qualify as a “real estate investment trust” (within the meaning of Section 856(a) of the Code, or any similar or successor provision thereto), then a portion of such property shall automatically instead be owned by PropCo TRS LLC, a Delaware limited liability company, which is a “taxable REIT subsidiary” (within the meaning of Section 856(l) of the Code, or any similar or successor provision thereto) of Landlord REIT (the “ Propco TRS ”), to the extent necessary such that Landlord’s ownership of such Leased Property does not cause Landlord REIT to fail to qualify as a real estate investment trust, provided, there shall be no adjustment in the Rent as a result of the foregoing. In such event, Landlord shall cause the Propco TRS to make such property available to Tenant in accordance with the terms hereof; however, Landlord shall remain fully liable for all obligations of Landlord under this Lease and shall retain sole decision-making authority for any matters for which Landlord’s consent or approval is required or permitted to be given and for which Landlord’s discretion may be exercised under this Lease.

1.2      Single, Indivisible Lease . This Lease constitutes one indivisible lease of the Leased Property and not separate leases governed by similar terms. The Leased Property constitutes one economic unit, and the Rent and all other provisions have been negotiated and agreed upon based on a demise of all of the Leased Property to Tenant as a single, composite, inseparable transaction and would have been substantially different had separate leases or a divisible lease been intended. Except as expressly provided in this Lease for specific, isolated purposes (and then only to the extent expressly otherwise stated), all provisions of this Lease apply equally and uniformly to all components of the Leased Property collectively as one unit. The Parties intend that the provisions of this Lease shall at all times be construed, interpreted and applied so as to carry out their mutual objective to create an indivisible lease of all of the Leased Property and, in particular but without limitation, that, for purposes of any assumption, rejection or assignment of this Lease under 11 U.S.C. Section 365, or any successor or replacement thereof or any analogous state law, this is one indivisible and non-severable lease and executory

 

2


contract dealing with one legal and economic unit and that this Lease must be assumed, rejected or assigned as a whole with respect to all (and only as to all) of the Leased Property. The Parties may elect to amend this Lease from time to time to modify the boundaries of the Land, to exclude one or more components or portions thereof, and/or to include one or more additional components as part of the Leased Property, and any such future addition to the Leased Property shall not in any way change the indivisible and nonseverable nature of this Lease and all of the foregoing provisions shall continue to apply in full force.

1.3      Term . The “ Term ” of this Lease shall commence on the Commencement Date and expire on the Expiration Date (i.e., the Term shall consist of the Initial Term plus all Renewal Terms, to the extent exercised as set forth in Section  1.4 below, subject to any earlier termination of the Term pursuant to the terms hereof). The initial stated term of this Lease (the “ Initial Term ”) shall commence on December 22, 2017 (the “ Commencement Date ”) and expire on December 31, 2032 (the “ Initial Stated Expiration Date ”). The “ Stated Expiration Date ” means the Initial Stated Expiration Date or the expiration date of the most recently exercised Renewal Term, as the case may be.

1.4      Renewal Terms . The Term of this Lease may be extended for four (4) separate “ Renewal Terms ” of five (5) years each if (a) at least twelve (12), but not more than eighteen (18), months prior to the then current Stated Expiration Date, Tenant (or, pursuant to Section  17.1(e) , a Permitted Leasehold Mortgagee) delivers to Landlord a “ Renewal Notice ” stating that it is irrevocably exercising its right to extend this Lease for one (1) Renewal Term; and (b) no Tenant Event of Default shall have occurred and be continuing on the date Landlord receives the Renewal Notice or on the last day of the then current Term (other than a Tenant Event of Default that is in the process of being cured by a Permitted Leasehold Mortgagee in compliance in all respects with Section  17.1(d) and Section  17.1(e) ). Subject to the provisions, terms and conditions of this Lease, upon Tenant’s timely delivery to Landlord of a Renewal Notice, the Term of this Lease shall be extended for the then applicable Renewal Term. During any such Renewal Term, except as specifically provided for herein, all of the provisions, terms and conditions of this Lease shall remain in full force and effect. After the last Renewal Term, Tenant shall have no further right to renew or extend the Term. If Tenant fails to validly and timely exercise any right to extend this Lease, then all subsequent rights to extend the Term shall terminate.

ARTICLE II

DEFINITIONS

For all purposes of this Lease, except as otherwise expressly provided or unless the context otherwise requires, (i) the terms defined in this Article II have the meanings assigned to them in this Article and include the plural as well as the singular and any gender as the context requires; (ii) all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP; (iii) all references in this Lease to designated “Articles,” “Sections,” “Exhibits” and other subdivisions are to the designated Articles, Sections, Exhibits and other subdivisions of this Lease; (iv) the word “including” shall have the same meaning as the phrase “including, without limitation,” and other similar phrases; (v) the words “herein,”

 

3


“hereof” and “hereunder” and other words of similar import refer to this Lease as a whole and not to any particular Article, Section or other subdivision; (vi) all Exhibits, Schedules and other attachments annexed to the body of this Lease are hereby deemed to be incorporated into and made an integral part of this Lease; (vii) all references to a range of Sections, paragraphs or other similar references, or to a range of dates or other range ( e.g. , indicated by “-” or “through”) shall be deemed inclusive of the entire range so referenced; and (viii) for the calculation of any financial ratios or tests referenced in this Lease, this Lease, regardless of its treatment under GAAP, shall be deemed to be an operating lease and the Rent payable hereunder shall be treated as an operating expense and shall not constitute indebtedness or interest expense.

AAA ”: As defined in the definition of Appointing Authority.

Accepted MCI Financing Proposal ”: As defined in Section  10.4(b) .

Accountant ”: Either (i) a firm of independent public accountants designated by Tenant, or Guarantor, as applicable and reasonably acceptable to Landlord, or (ii) a “big four” accounting firm designated by Tenant.

Accounts ”: All Tenant’s accounts, including deposit accounts (but excluding any impound account established pursuant to Section  4.4 and any Fee Mortgage Reserve Account), all rents, profits, income, revenues or rights to payment or reimbursement derived from Tenant’s use of any space within the Leased Property or any portion thereof and/or from goods sold or leased or services rendered by Tenant from the Leased Property or any portion thereof (including, without limitation, from goods sold or leased or services rendered from the Leased Property or any portion thereof by the Affiliated property manager or Affiliated Subtenants) and all Tenant’s accounts receivable derived from the use of the Leased Property or goods or services provided from the Leased Property, in each case whether or not evidenced by a contract, document, instrument or chattel paper and whether or not earned by performance, including without limitation, the right to payment of management fees and all proceeds of the foregoing.

Acquirer ”: As defined in Article XVIII .

Additional Charges ”: All Impositions and all other amounts, liabilities and obligations (excluding Rent) which Tenant assumes or agrees or is obligated to pay under this Lease and, in the event of any failure on the part of Tenant to pay any of those items, except where such failure is due to the wrongful acts or omissions of Landlord, every fine, penalty, interest and cost which may be added for non-payment or late payment of such items pursuant to the terms hereof or under applicable law.

Additional Fee Mortgagee Requirements ”: As defined in Section  31.3 .

Additional Fee Mortgagee Requirements Period ”: As defined in Section  31.3 .

Affiliate ”: When used with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified. In no event shall Tenant or any of its Affiliates be deemed to be an Affiliate of Landlord or any of Landlord’s Affiliates.

 

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Alteration ”: Any construction, demolition, restoration, alteration, addition, improvement, renovation or other physical changes or modifications of any nature in, on or to the Leased Improvements that is not a Capital Improvement.

Annual Minimum Building and Improvement Cap Ex Amount ”: As defined in Section  10.5(a)( ii ) .

Applicable Deadline ”: As defined in Section  23.1(b)(i) .

Applicable Landlord Financing ” A financing obtained by Landlord or any one or more of its Affiliates that is secured by this Lease or the Leased Property.

Applicable Standards ”: The standards generally and customarily applicable from time to time during the Term to (i) large-scale, integrated gaming-hotel-entertainment facilities and (ii) if and when the Lease is amended to include the Convention Center Property pursuant to the Put-Call Agreement, a convention and exhibition center, as the case may be, that are located in Las Vegas, that are similar to the Hotel/Casino Facility or Convention Center Facility, as applicable, in size and quality of operation, that have annual capital expenditures and are of an age comparable to the age and quality of the Leased Improvements existing at the time this standard is being applied.

Appointing Authority ”: Either (i) the Institute for Conflict Prevention and Resolution (also known as, and shall be defined herein as, the “ CPR Institute ”), unless it is unable to serve, in which case the Appointing Authority shall be (ii) the American Arbitration Association (“ AAA ”) under its Arbitrator Select Program for non-administered arbitrations or whatever AAA process is in effect at the time for the appointment of arbitrators in cases not administered by the AAA, unless it is unable to serve, in which case (iii) the Parties shall have the right to apply to any court of competent jurisdiction to appoint an Appointing Authority in accordance with the court’s power to appoint arbitrators. The CPR Institute and the AAA shall each be considered unable to serve if it no longer exists, or if it no longer provides neutral appointment services, or if it does not confirm (in form or substance) that it will serve as the Appointing Authority within thirty (30) days after receiving a written request to serve as the Appointing Authority, or if, despite agreeing to serve as the Appointing Authority, it does not confirm appointment within sixty (60) days after receiving such written request.

Arbitration Provision ”: Each of the following: the calculation of the Minimum Cap Ex Amount; the determination of whether a Capital Improvement constitutes a Material Capital Improvement; the calculation of Net Revenue; the calculation of Rent (without limitation of the procedures set forth in Section  3.2) ; without limitation of the EBITDAR Calculation Procedures, any EBITDAR calculation made pursuant to this Lease or any determination or calculation made pursuant to this Lease for which EBITDAR is a necessary component of such determination or calculation and the calculation of any amounts under Sections 10.1(a) , 10.3 , 10.5(a) and 10.5(b) .

Architect ”: As defined in Section  10.2(b) .

 

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Award ”: All compensation, sums or anything of value awarded, paid or received from the applicable authority on a total or partial Taking or Condemnation, including any and all interest thereon.

Base Net Revenue Amount ”: $356,900,000, which amount Landlord and Tenant agree represents Net Revenue for the Fiscal Period immediately preceding the first (1 st ) Lease Year.

Base Rent ”: The Base Rent component of Rent, as defined in more detail in clauses (b) and (c) of the definition of “Rent.”

Beginning CPI ”: As defined in the definition of CPI Increase.

Bookings ”: Reservations, bookings and short-term arrangements with conventions, conferences, hotel guests, tours, vendors and other groups or individuals (it being understood that whether or not such arrangements or agreements are short-term or temporary shall be determined without regard to how long in advance such arrangements or agreements are entered into), in each case entered into in the ordinary course consistent with past practices.

Business Day ”: Each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which national banks in Las Vegas, Nevada or New York, New York are authorized, or obligated, by law or executive order, to close.

Cap Ex Reserve ”: As defined in Section  10.5(b)(ii) .

Cap Ex Reserve Funds ”: As defined in Section  10.5(b)(ii) .

Capital Expenditures ”: The sum of all expenditures actually paid by or on behalf of Tenant, on a consolidated basis, to the extent capitalized in accordance with GAAP and in a manner consistent with Tenant’s annual Financial Statements.

Capital Improvement ”: Any construction, restoration, alteration, addition, improvement, renovation or other physical changes or modifications of any nature (excluding maintenance, repair and replacement in the ordinary course) in, on, or to the Leased Improvements, including, without limitation, structural alterations, modifications or improvements of one or more additional structures annexed to any portion of the Leased Improvements or the expansion of existing Leased Improvements, in each case, to the extent that the costs of such activity are or would be capitalized in accordance with GAAP and in a manner consistent with Tenant’s Financial Statements, and any demolition in connection therewith.

Capital Lease Obligations ”: With respect to any Person, the obligations of such Person to pay rent or other amounts under any lease of (or other similar arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations have been or should be classified and accounted for as capital leases on a balance sheet of such person under GAAP (as in effect on the date hereof) and, for purposes hereof, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP (as in effect on the date hereof).

 

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Cash ”: Cash and cash equivalents and all instruments evidencing the same or any right thereto and all proceeds thereof.

Casualty Event ”: Any loss, damage or destruction with respect to the Leased Property or any portion thereof.

CEC ”: Caesars Entertainment Corporation, a Delaware corporation.

Change of Control : With respect to any party, the occurrence of any of the following: (a) the direct or indirect sale, exchange or other transfer (other than by way of merger, consolidation or amalgamation), in one or a series of related transactions, of all or substantially all the assets of such party and its Subsidiaries, taken as a whole, to one or more Persons; (b) an officer of such party becomes aware (by way of a report or any other filing pursuant to Section 13(d) of the Exchange Act, proxy, vote, written notice or otherwise) of the consummation of any transaction or series of related transactions (including, without limitation, any merger, consolidation or amalgamation), the result of which is that any “person” or “group” (as used in Section 13(d)(3) of the Exchange Act or any successor provision), other than, in the case of Tenant, CRC, becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act or any successor provision), directly or indirectly, of more than fifty percent (50%) of the Voting Stock of such party or other Voting Stock into which such party’s Voting Stock is reclassified, consolidated, exchanged or changed, measured by voting power rather than number of securities or other ownership interests; (c) the occurrence of a “change of control”, “change in control” (or similar definition) as defined in any indenture, credit agreement or similar debt instrument under which such party is an issuer, a borrower or other obligor, in each case representing outstanding indebtedness in excess of One Hundred Million and No/100 Dollars ($100,000,000.00); or (d) such party consolidates with, or merges or amalgamates with or into, any other Person (or any other Person consolidates with, or merges or amalgamates with or into, such party), in any such event pursuant to a transaction in which any of such party’s outstanding Voting Stock or any of the Voting Stock of such other Person is converted into or exchanged for cash, securities or other property, other than any such transaction where such party’s Voting Stock outstanding immediately prior to such transaction constitutes, or is converted into or exchanged for, a majority of the outstanding Voting Stock of the surviving Person or any direct or indirect Parent Entity of the surviving Person immediately after giving effect to such transaction measured by voting power rather than number of securities or other ownership interests. For purposes of the foregoing definition: (x) a party shall include any Parent Entity of such party; and (y) “Voting Stock” shall mean the securities or other ownership interests of any class or classes having general voting power under ordinary circumstances, in the absence of contingencies, to elect the directors, managers or trustees (or other similar governing body) of a Person. Notwithstanding the foregoing: (A) the transfer of assets between or among a party’s wholly owned subsidiaries and such party shall not itself constitute a Change of Control; (B) the term “Change of Control” shall not include a merger, consolidation or amalgamation of such party with, or the sale, assignment, conveyance, transfer or other disposition of all or substantially all of such party’s assets to, an Affiliate of such party (1) incorporated or organized solely for the purpose of reincorporating such party in another jurisdiction, and (2) the owners of which and the number and type of securities or other ownership interests in such party, measured by voting power and number of securities or other

 

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ownership interests, owned by each of them immediately before and immediately following such transaction, are materially unchanged; (C) a “person” or “group” shall not be deemed to have beneficial ownership of securities subject to a stock or asset purchase agreement, merger agreement or similar agreement (or voting or option or similar agreement related thereto) prior to the consummation of the transactions contemplated by such agreement; (D) a transaction will not be deemed to involve a Change of Control in respect of a party if (1) such party becomes a direct or indirect wholly owned subsidiary of a holding company, and (2) the direct or indirect owners of such holding company immediately following that transaction are the same as the owners of such party immediately prior to that transaction and the number and type of securities or other ownership interests owned by each such direct and indirect holder immediately following such transaction are materially unchanged from the number and type of securities or other ownership interests owned by such direct and indirect holder in such party immediately prior to that transaction; and (E) no Change of Control shall be deemed to exist for so long as CRC controls Tenant.

Code ”: The Internal Revenue Code of 1986 and, to the extent applicable, the Treasury Regulations promulgated thereunder, each as amended from time to time.

Commencement Date ”: As defined in Section  1.3 .

Commission ”: As defined in Section  41.15 .

Condemnation ”: The exercise of any governmental power, whether by legal proceedings or otherwise, by any public or quasi-public authority, or private corporation or individual, having such power under Legal Requirements, either under threat of condemnation or while legal proceedings for condemnation are pending.

Confidential Information ”: In addition to information described in Section  41.22 , any information or compilation of information relating to a business, procedures, techniques, methods, concepts, ideas, affairs, products, processes or services, including source code, information relating to distribution, marketing, merchandising, selling, research, development, manufacturing, purchasing, accounting, engineering, financing, costs, pricing and pricing strategies and methods, customers, suppliers, creditors, employees, contractors, agents, consultants, plans, billing, needs of customers and products and services used by customers, all lists of suppliers, distributors and customers and their addresses, prospects, sales calls, products, services, prices and the like, as well as any specifications, formulas, plans, drawings, accounts or sales records, sales brochures, catalogs, code books, manuals, trade secrets, knowledge, know-how, operating costs, sales margins, methods of operations, invoices or statements and the like.

Continuously Operated ”: With respect to the Facility, the Facility is continuously used and operated for its Primary Intended Use and open for business to the public during all business hours usual and customary for such use for comparable properties in Las Vegas, Nevada.

Control ”: The possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, partnership interests or any other Equity Interests or by contract, and “ Controlling ” and “ Controlled ” shall have meanings correlative thereto.

 

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Convention Center ”: The “Eastside Convention Center”, as such term is defined in the Put-Call Agreement.

Convention Center Facility ”: As defined in the definition of Facility.

Convention Center Property ”: The Eastside Convention Center Property, as defined in the Put Call Agreement

CPI ”: The United States Department of Labor, Bureau of Labor Statistics Revised Consumer Price Index for All Urban Consumers (1982-84=100), U.S. City Average, All Items, or, if that index is not available at the time in question, then the index designated by such Department as the successor to such index, and if there is no index so designated, an index for an area in the United States that most closely corresponds to the entire United States, published by such Department, or if none, by any other instrumentality of the United States, all as reasonably determined by Landlord and Tenant.

CPI Increase ”: The greater of (a) zero and (b) a fraction, expressed as a decimal, determined as of each Escalator Adjustment Date, (x) the numerator of which shall be the difference between (i) the average CPI for the three (3) most recent calendar months (the “ Prior Months ”) ending prior to such Escalator Adjustment Date (for which the CPI has been published as of such Escalator Adjustment Date) and (ii) the average CPI for the three (3) corresponding calendar months occurring one (1) year prior to the Prior Months (such average CPI, the “ Beginning CPI ”), and (y) the denominator of which shall be the Beginning CPI.

CPR Institute ”: As defined in the definition of Appointing Authority.

CRC ”: Caesars Resort Collection, LLC, a Delaware limited liability company.

Dollars ” and “ $ ”: The lawful money of the United States.

EBITDA ”: The same meaning as “EBITDAR” as defined herein but without giving effect to clause (xi) in the definition thereof.

EBITDAR ”: For any applicable twelve (12) month period, the consolidated net income or loss of a Person on a consolidated basis for such period, determined in accordance with GAAP, provided, however , that without duplication and in each case to the extent included in calculating net income (calculated in accordance with GAAP): (i) income tax expense shall be excluded; (ii) interest expense shall be excluded; (iii) depreciation and amortization expense shall be excluded; (iv) amortization of intangible assets shall be excluded; (v) write-downs and reserves for non-recurring restructuring-related items (net of recoveries) shall be excluded; (vi) reorganization items shall be excluded; (vii) any impairment charges or asset write-offs, non-cash gains, losses, income and expenses resulting from fair value accounting required by the applicable standard under GAAP and related interpretations, and non-cash charges for deferred tax asset valuation allowances, shall be excluded; (viii) any effect of a change in accounting

 

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principles or policies shall be excluded; (ix) any non-cash costs or expense incurred pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement or any stock subscription or shareholder agreement shall be excluded; (x) any nonrecurring gains or losses (less all fees and expenses relating thereto) shall be excluded; (xi) rent expense shall be excluded; and (xii) the impact of any deferred proceeds resulting from failed sale accounting shall be excluded. In connection with any EBITDAR calculation made pursuant to this Lease or any determination or calculation made pursuant to this Lease for which EBITDAR is a necessary component of such determination or calculation, (1) promptly following request therefor, Tenant shall provide Landlord with all supporting documentation and backup information with respect thereto as may be reasonably requested by Landlord, (2) such calculation shall be as reasonably agreed upon between Landlord and Tenant, and (3) if Landlord and Tenant do not agree within twenty (20) days of either party seeking to commence discussions, the same may be determined by an Expert in accordance with and pursuant to the process set forth in Section  34.2 hereof (clauses (1) through (3), collectively, the “ EBITDAR Calculation Procedures ”).

EBITDAR Calculation Procedures ”: As defined in the definition of EBITDAR.

EBITDAR to Rent Ratio ”: For any applicable Lease Year, as determined as of the Escalator Adjustment Date for such Lease year after giving effect to the proposed escalation on such date, the ratio of EBITDAR of Tenant for the applicable Trailing Test Period to Rent for such Lease Year. For purposes of calculating the EBITDAR to Rent Ratio, EBITDAR shall be calculated on a pro forma basis to give effect to any material acquisitions and material asset sales consummated by Tenant during any Trailing Test Period of Tenant as if each such material acquisition had been effected on the first day of such Trailing Test Period and as if each such material asset sale had been consummated on the day prior to the first day of such Trailing Test Period.

Eligible Account ”: A separate and identifiable account from all other funds held by the holding institution that is either (a) an account or accounts maintained with a federal or state-chartered depository institution or trust company which complies with the definition of Eligible Institution or (b) a segregated trust account or accounts maintained with a federal or state chartered depository institution or trust company acting in its fiduciary capacity that has a Moody’s rating of at least “Baa2” and which, in the case of a state chartered depository institution or trust company, is subject to regulations substantially similar to 12 C.F.R. §9.10(b), having in either case a combined capital and surplus of at least Fifty Million and No/100 Dollars ($50,000,000.00) and subject to supervision or examination by federal and state authority. An Eligible Account will not be evidenced by a certificate of deposit, passbook or other instrument.

Eligible Institution ”: Either (a) a depository institution or trust company insured by the Federal Deposit Insurance Corporation, the short-term unsecured debt obligations or commercial paper of which are rated at least “A-1+” by S&P and “P-1” by Moody’s in the case of accounts in which funds are held for thirty (30) days or less (or, in the case of Letters of Credit and accounts in which funds are held for more than thirty (30) days, the long-term unsecured debt obligations of which are rated at least “A+” by S&P and “Aa3” by Moody’s), or (b) Wells Fargo Bank, National Association, provided that the rating by S&P and Moody’s for the short term unsecured debt obligations or commercial paper and long term unsecured debt obligations of the same does not decrease below the ratings set forth in subclause (a)  hereof.

 

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Embargoed Person ”: Any person, entity or government subject to trade restrictions under U.S. law, including, but not limited to, The USA PATRIOT Act (including the anti-terrorism provisions thereof), the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701, et seq. , The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq. , and any Executive Orders or regulations promulgated thereunder including those related to Specially Designated Nationals and Specially Designated Global Terrorists, with the result that the applicable transaction is prohibited by law or in violation of law.

Encroachment ”: As defined in Section  21.2(i) .

End of Term Asset Transfer Notice ”: As defined in Section  36.1 .

Environmental Costs ”: As defined in Section  32.4 .

Environmental Laws ”: Any and all federal, state, municipal and local laws, statutes, ordinances, rules, regulations, orders, decrees or judgments, whether statutory or common law, as amended from time to time, now or hereafter in effect, or promulgated, pertaining to the environment, public health and safety and industrial hygiene and relating to the use, generation, manufacture, production, storage, release, discharge, disposal, handling, treatment, removal, decontamination, cleanup, transportation or regulation of any Hazardous Substance, including the Industrial Site Recovery Act, the Clean Air Act, the Clean Water Act, the Toxic Substances Control Act, the Comprehensive Environmental Response Compensation and Liability Act, the Resource Conservation and Recovery Act, the Federal Insecticide, Fungicide, Rodenticide Act, the Safe Drinking Water Act and relevant provisions of the Occupational Safety and Health Act.

Equity Interests ”: With respect to any Person, any and all shares, interests, participations, equity interests, voting interests or other equivalents, including membership interests (however designated, whether voting or non-voting), of equity of such Person, including, if such Person is a partnership, partnership interests (whether general or limited) and any other interest or participation that confers on a Person the right to receive a share of the profit, and losses of, or distributions of assets of, such partnership.

Escalator ”: (a) During the initial five (5) Lease Years, one (1.0) plus one one-hundredth (0.01), and (b) from and after the commencement of the sixth (6 th ) Lease Year, one (1.0) plus the greater of (I) two one-hundredths (0.02) and (II) the CPI Increase; provided, however, with respect to clause (b), in the event in any such Lease Year from and after the commencement of the sixth (6 th ) Lease Year, the Rent calculated pursuant hereto (after giving effect to increases resulting from the Escalator) will cause the EBITDAR to Rent Ratio to be less than 1.6:1, the Escalator will be reduced to such amount (but not less than one (1.0)) that would result in a 1:6.1 EBITDAR to Rent Ratio for such Lease Year.

Escalator Adjustment Date ”: The first day of each Lease Year, excluding the first Lease Year of the Initial Term, and the first Lease Year of each Renewal Term.

 

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Estoppel Certificate ”: As defined in Section  23.1(a) .

Exchange Act ”: The Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder.

Excluded Items ”: As defined in Section  36.1 .

Exercise Notice ”: As defined in Section  18.2(a)(i) .

Existing Fee Mortgage ”: The Fee Mortgages as in effect on the Commencement Date (if any), together with any amendments, modifications, and/or supplements thereto after the Commencement Date.

Existing Leases ”: Collectively, (i) that certain Lease (CPLV), dated October 6, 2017, by and between various Affiliates of Landlord, as “Landlord,” and various Affiliates of Tenant, as “Tenant,” with respect to various other Gaming Facilities and other real property assets, as amended, restated or otherwise modified from time to time, (ii) that certain Lease (Non-CPLV), dated October 6, 2017, by and between various Affiliates of Landlord, as “Landlord,” and various Affiliates of Tenant, as “Tenant,” with respect to various other Gaming Facilities and other real property assets, as amended, restated or otherwise modified from time to time, and (iii) that certain Lease (Joliet), dated October 6, 2017, by and between Harrah’s Joliet Landco LLC, as “Landlord,” and Des Plaines Development Limited Partnership, as “Tenant,” with respect to the Gaming Facility known as Harrah’s Joliet, located in Joliet, Illinois, as amended, restated or otherwise modified from time to time.

Expert ”: An independent third party professional, with expertise in respect of a matter at issue, appointed by the agreement of Landlord and Tenant or otherwise in accordance with Article XXXIV hereof.

Expert Valuation Notice ”: As defined in Section  34.1 .

Expiration Date ”: The Stated Expiration Date, or such earlier date as this Lease is terminated pursuant to its terms.

Facility ”: Collectively, (a) the assets comprising (i) the Leased Property as listed on Exhibit A attached hereto, including the respective Leased Improvements, easements, development rights, and other tangible rights (if any) forming a part thereof or appurtenant thereto, including any and all Capital Improvements (including any Tenant Material Capital Improvements), and (ii) all of Tenant’s Property located, or used in connection with the operation of the business conducted, on or about the Leased Property, and (b) the business operated by Tenant on or about the Leased Property or Tenant’s Property or any portion thereof or in connection therewith. If and when this Lease is amended to include the East Side Convention Center Property pursuant to the Put Call Agreement, (I) the term “ Hotel/Casino Facility ” shall be used to refer to the Facility as in effect immediately prior to effectuation of such amendment, (II) the term “ Convention Center Facility ” shall refer, collectively, to (a) the assets comprising (i) the Convention Center Property, including easements, development rights, and other tangible rights (if any) forming a part thereof or appurtenant thereto, including any and

 

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all Capital Improvements (including any Tenant Material Capital Improvements) with respect thereto, and (ii) all of Tenant’s Property located, or used in connection with the operation of the business conducted, on or about the Convention Center Property, and (b) the business operated by Tenant on or about the Convention Center Property or such Tenant’s Property or any portion thereof or in connection therewith, and (III) the term “ Facility ” shall refer, collectively, to the Hotel/Casino Facility and the Convention Center Facility.

Fair Market Base Rental Value ”: The Fair Market Rental Value, as determined with respect to Base Rent only (and not Variable Rent nor Additional Charges), assuming and taking into account that Variable Rent and Additional Charges shall continue to be paid hereunder during any period in which such Fair Market Base Rental Value shall be paid.

Fair Market Ownership Value ”: The fair market purchase price of the Leased Property, Facility or any applicable part thereof, as the context requires, as of the estimated transfer date, in its then-condition, that a willing purchaser would pay to a willing seller for Cash on arm’s-length terms (assuming (1) neither such purchaser nor seller is under any compulsion to sell or purchase and that both have reasonable knowledge of all relevant facts, are acting prudently and knowledgeably in a competitive and open market, and assuming price is not affected by undue stimulus and (2) neither party is paying any broker a commission in connection with the transaction), taking into account the provisions of Section  34.1(f) if applicable, and otherwise taking all then-relevant factors into account (whether favorable to one, both or neither Party) and subject to the further factors, as applicable, that are set forth in the definition of “Fair Market Rental Value” herein below as applicable, either (i) as agreed in writing by Landlord and Tenant, or (ii) as determined in accordance with the procedure specified in Section  34.1 of this Lease.

Fair Market Property Value ”: The fair market purchase price of the applicable personal property, as the context requires, as of the estimated transfer date, in its then-condition, that a willing purchaser would pay to a willing seller for Cash on arm’s-length terms (assuming (1) neither such purchaser nor seller is under any compulsion to sell or purchase and that both have reasonable knowledge of all relevant facts, are acting prudently and knowledgeably in a competitive and open market, and assuming price is not affected by undue stimulus and (2) neither party is paying any broker a commission in connection with the transaction), and otherwise taking all then-relevant factors into account (whether favorable to one, both or neither Party) either (i) as agreed in writing by Tenant and either Landlord or Successor Tenant (as applicable), or (ii) if not agreed upon in accordance with clause (i) above, as determined in accordance with the procedure specified in Section  34.1 .

Fair Market Rental Value ”: The annual fixed fair market rental value for the Leased Property or any applicable part thereof (excluding Tenant Material Capital Improvements), as the context requires, as of the first day of the period for which the Fair Market Rental Value is being determined, in its then-condition, that a willing tenant would pay to a willing landlord on arm’s length terms (assuming (1) neither such tenant nor landlord is under any compulsion to lease and that both have reasonable knowledge of all relevant facts, are acting prudently and knowledgeably in a competitive and open market, and assuming price is not affected by undue stimulus, (2) such lease contained terms and conditions identical to the terms and conditions of this Lease, other than with respect to the length of term and payment of Rent,

 

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(3) neither party is paying any broker a commission in connection with the transaction, and (4) that the tenant thereunder will pay such Fair Market Rental Value for the entire term of such demise ( i.e. , no early termination)), taking into account the provisions of Section  34.1(g) , and otherwise taking all then-relevant factors into account (whether favorable to one, both or neither Party), either (i) as agreed in writing by Landlord and Tenant, or (ii) as determined in accordance with the procedure specified in Section  34.1 of this Lease. In all cases, for purposes of determining the Fair Market Ownership Value or the Fair Market Rental Value, as the case may be, (A) the Leased Property (or Facility, as applicable) to be valued pursuant hereto (as improved by all then existing Leased Improvements, and all Capital Improvements thereto, but excluding any Tenant Material Capital Improvements), shall be valued as (or as part of) a fully-permitted Facility operated in accordance with the provisions of this Lease for the Primary Intended Use, free and clear of any lien or encumbrance evidencing a debt (including any Permitted Leasehold Indebtedness) or judgment (including any mortgage, security interest, tax lien, or judgment lien) ( provided, however , for purposes of determining Fair Market Ownership Value of any applicable Tenant Material Capital Improvements pursuant to Section  10.4(e) , the same shall be valued on the basis of the then-applicable status of any applicable permits, free and clear of only such liens and encumbrances that will be removed if and when conveyed to Landlord pursuant to said Section  10.4(e) ), (B) in determining the Fair Market Ownership Value or Fair Market Rental Value with respect to damaged or destroyed Leased Property, such value shall be determined as if such Leased Property had not been so damaged or destroyed (unless otherwise expressly provided herein), except that such value with respect to damaged or destroyed Tenant Material Capital Improvements shall only be determined as if such Tenant Material Capital Improvements had been restored if and to the extent Tenant is required to repair, restore or replace such Tenant Material Capital Improvements under this Lease ( provided, however , for purposes of determining Fair Market Ownership Value pursuant to Section  10.4(e) , the same shall be valued taking into account any then-existing damage), and (C) the price shall represent the normal consideration for the property sold (or leased) unaffected by sales (or leasing) concessions granted by anyone associated with the transaction. In addition, the following specific matters shall be factored in or out, as appropriate, in determining Fair Market Ownership Value or Fair Market Rental Value as the case may be: (i) the negative value of (x) any deferred maintenance or other items of repair or replacement of the Leased Property to the extent arising from breach or failure of Tenant to perform or observe its obligations hereunder, (y) any then current or prior Gaming or other licensure violations by Tenant, Guarantor or any of their Affiliates, and (z) any breach or failure of Tenant to perform or observe its obligations hereunder (in each case with respect to the foregoing clauses (x), (y) and (z), without giving effect to any applicable cure periods hereunder), shall, in each case, when determining Fair Market Ownership Value or Fair Market Rental Value, as the case may be, not be taken into account; rather, the Leased Property and every part thereof shall be deemed to be in the condition required by this Lease and Tenant shall at all times be deemed to have operated the Facility in compliance with and to have performed all obligations of Tenant under this Lease ( provided, however , for purposes of determining Fair Market Ownership Value under Section  10.4(e) , the negative value of the items described in clauses (x), (y) and (z) shall be taken into account); and (ii) in the case of a determination of Fair Market Rental Value, such determination shall be without reference to any savings Landlord may realize as a result of any extension of the Term of this Lease, such as savings in free rent and tenant concessions, and without reference to any “start-up” costs a new tenant would incur were it to replace the existing Tenant for any Renewal Term or otherwise.

 

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The determination of Fair Market Rental Value shall be of Base Rent and Variable Rent (but not Additional Charges), and shall assume and take into account that Additional Charges shall continue to be paid hereunder during any period in which such Fair Market Rental Value shall be paid. For the avoidance of doubt, the annual Fair Market Rental Value shall be calculated and evaluated as a whole for the entire term in question, and may reflect increases in one or more years during the applicable term in question (i.e., the annual Fair Market Rental Value need not be identical for each year of the term in question).

Fee Mortgage ”: Any mortgage, pledge agreement, security agreement, assignment of leases and rents, fixture filing or similar document creating or evidencing a lien on Landlord’s interest in the Leased Property or any portion thereof (or an indirect interest therein, including without limitation, a lien on direct or indirect interests in Landlord) in accordance with the provisions of Article XXXI hereof.

Fee Mortgage Documents ”: With respect to each Fee Mortgage and Fee Mortgagee, the applicable Fee Mortgage, loan agreement, pledge agreement, debt agreement, credit agreement or indenture, lease, note, collateral assignment instruments, guarantees, indemnity agreements and other documents or instruments evidencing, securing or otherwise relating to the loan made, credit extended, or lease or other financing vehicle entered into pursuant thereto.

Fee Mortgagee ”: The holder(s) or lender(s) under any Fee Mortgage or the agent or trustee acting on behalf of any such holder(s) or
lender(s).

Fee Mortgage Reserve Account ”: Any impound, escrow or other reserve or similar account that relates to any operating expenses of the Leased Property, including any fixture, furniture and equipment, capital repair or replacement reserves and/or impounds or escrow accounts for taxes, ground rent and/or insurance premiums.

FF&E ”: Collectively, furnishings, fixtures, inventory, and equipment located in the guest rooms, hallways, lobbies, restaurants, lounges, meeting and banquet rooms, parking facilities, public areas or otherwise in any portion of the Facility, including (without limitation) all beds, chairs, bookcases, tables, carpeting, drapes, couches, luggage carts, luggage racks, bars, bar fixtures, radios, television sets, intercom and paging equipment, electric and electronic equipment, heating, lighting and plumbing fixtures, fire prevention and extinguishing apparatus, cooling and air-conditioning systems, elevators, escalators, stoves, ranges, refrigerators, laundry machines, tools, machinery, boilers, incinerators, switchboards, conduits, compressors, vacuum cleaning systems, floor cleaning, waxing and polishing equipment, cabinets, lockers, shelving, dishwashers, garbage disposals, washer and dryers, gaming equipment and other casino equipment and all other hotel and casino resort equipment, supplies and other tangible property owned by Tenant, or in which Tenant has or shall have an interest, now or hereafter located at the Leased Property or used or held for use in connection with the present or future operation and occupancy of the Facility; provided , however , that FF&E shall not include items owned by subtenants that are neither Tenant nor Affiliates of Tenant, by guests or by other third parties.

 

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Financial Statements ”: (i) For a Fiscal Year, consolidated statements of a Person’s and its Reporting Subsidiaries’, if any, income, stockholders’ equity and comprehensive income and cash flows for such period and the related consolidated balance sheet as at the end of such period, together with the notes thereto, all in reasonable detail and setting forth in comparative form the corresponding figures for the corresponding period in the preceding Fiscal Year and prepared in accordance with GAAP and audited by a “big four” or other nationally recognized accounting firm, and (ii) for a Fiscal Quarter, consolidated statements of a Person’s and its Reporting Subsidiaries’, if any, income, stockholders’ equity and comprehensive income and cash flows for such period and for the period from the beginning of the Fiscal Year to the end of such period and the related consolidated balance sheet as at the end of such period, together with the notes thereto, all in reasonable detail and setting forth in comparative form the corresponding figures for the corresponding period in the preceding Fiscal Year or Fiscal Quarter, as the case may be, and prepared in accordance with GAAP (subject to normal year-end audit adjustments and the absence of footnotes).

First Variable Rent Period ”: As defined in clause (b)(ii)(A) of the definition of “Rent.”

First VRP Net Revenue Amount ”: As defined in clause (b)(ii)(A)(x) of the definition of “Rent.”

Fiscal Period ”: With respect to any Person, for any date of determination, the period of the four (4) most recently ended consecutive Fiscal Quarters of such Person for which Financial Statements are available.

Fiscal Quarter ”: With respect to any Person, for any date of determination, a fiscal quarter for each Fiscal Year of such Person. In the case of each of Tenant and CRC, “Fiscal Quarter” means each calendar quarter ending on March 31, June 30, September 30 and December 31, for each Fiscal Year of Tenant.

Fiscal Year ”: The annual period commencing January 1 and terminating December 31 of each year.

Fixtures ”: All equipment, machinery, fixtures and other items of property, including all components thereof, that are now or hereafter located in or on, or used in connection with, and permanently affixed to or otherwise incorporated into the Leased Improvements or the Land.

Foreclosure Purchaser ”: As defined in Section  31.1 .

Foreclosure Successor Tenant ”: Either (i) any assignee pursuant to Sections 22.2(ii)(b) or (c) , or (ii) any Permitted Leasehold Mortgagee or its Permitted Leasehold Mortgagee Designee that enters into a New Lease in compliance in all respects with Section  17.1(f) and all other applicable provisions of this Lease.

GAAP ”: Generally accepted accounting principles in the United States consistently applied in the preparation of financial statements, as in effect from time to time.

 

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Gaming ”: Casino, racetrack, racino, video lottery terminal or other gaming activities, including, but not limited to, the operation of slot machines, video lottery terminals, table games, pari-mutuel wagering or other applicable types of wagering (including, but not limited to, sports wagering).

Gaming Authorities ”: Any gaming regulatory body or any agency or governmental authority which has, or may at any time after the Commencement Date have, jurisdiction over the gaming activities at an applicable Leased Property or any successor to such authority.

Gaming Facility ”: A facility at which there are operations of slot machines, video lottery terminals, blackjack, baccarat, keno operation, table games, any other mechanical or computerized gaming devices, pari-mutuel wagering or other applicable types of wagering (including, but not limited to, sports wagering), or which is otherwise operated for purposes of Gaming, and all related or ancillary real property.

Gaming License ”: Any license, qualification, registration, accreditation, permit, approval, finding of suitability or other authorization issued by a state or other governmental regulatory agency (including any Native American tribal gaming or governmental authority) or Gaming Authority to operate, carry on or conduct any gaming, gaming device, slot machine, video lottery terminal, table game, race book or sports pool on the Leased Property or any portion thereof, or to operate a casino at the Leased Property required by any Gaming Regulation, including each of the licenses, permits or other authorizations set forth on Schedule 1 , and including those related to the Leased Property that may be added to this Lease after the Commencement Date.

Gaming Regulation(s) ”: Any and all laws, statutes, ordinances, rules, regulations, policies, orders, codes, decrees or judgments, and Gaming License conditions or restrictions, as amended from time to time, now or hereafter in effect or promulgated, pertaining to the operation, control, maintenance, alteration, modification or capital improvement of a Gaming Facility or the conduct of a person or entity holding a Gaming License, including, without limitation, any requirements imposed by a regulatory agency, commission, board or other governmental body pursuant to the jurisdiction and authority granted to it under applicable law, and all other rules, regulations, orders, ordinances and legal requirements of any Gaming Authority.

Gaming Revenues ”: As defined in the definition of “Net Revenue.”

Government List ”: (1) any list or annex to Presidential Executive Order 13224 issued on September 24, 2001 (“ EO13224 ”), including any list of Persons who are determined to be subject to the provisions of EO13224 or any other similar prohibitions contained in the rules and regulations of OFAC (as defined below) or in any enabling legislation or other Presidential Executive Orders in respect thereof, (2) the Specially Designated Nationals and Blocked Persons Lists maintained by OFAC, (3) any other list of terrorists, terrorist organizations or narcotics traffickers maintained pursuant to any of the Rules and Regulations of OFAC, or (4) any similar lists maintained by the United States Department of State, the United States Department of Commerce or any other governmental authority or pursuant to any Executive Order of the President of the United States of America.

 

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Ground Lease ”: Any lease with respect to the Leased Property or any portion thereof pursuant to which Landlord is a tenant that, subject to Section  7.3 , is entered into by Landlord.

Guarantor ”: CRC, together with its successors and permitted assigns, in its capacity as “Guarantor” under the Guaranty, and any other Person that becomes a party to the Guaranty by executing a joinder or replacement Guaranty in accordance with the Guaranty or the applicable provisions hereof, until, in the case of each such Guarantor, such Guarantor is released from its obligations if and to the extent provided under the express provisions of such Guaranty (or replacement Guaranty, as applicable).

Guaranty ”: That certain Guaranty of Lease dated as of the date hereof, a form of which is attached as Exhibit F hereto, as the same may be amended, supplemented or replaced from time to time, by and between Guarantor and Landlord.

Handling ”: As defined in Section  32.4 .

Hazardous Substances ”: Collectively, any petroleum, petroleum product or by product or any substance, material or waste regulated pursuant to any Environmental Law.

Impositions ”: Collectively, all taxes, including ad valorem, sales, use, single business, gross receipts, transaction privilege, rent or similar taxes; assessments, including assessments for public improvements or benefits, whether or not commenced or completed prior to the Commencement Date and whether or not to be completed within the Term; ground rents pursuant to Ground Leases (in effect as of the Commencement Date or otherwise entered into in accordance with this Lease); water, sewer and other utility levies and charges; excise tax levies; license, permit, inspection, authorization and similar fees; bonds and all other governmental charges, in each case whether general or special, ordinary or extraordinary, or foreseen or unforeseen, of every character to the extent in respect of the Leased Property or any portion thereof and/or the Rent and Additional Charges (but not, for the avoidance of doubt, in respect of Landlord’s income (as specified in clause (a) below)) and all interest and penalties thereon attributable to any failure in payment by Tenant, which at any time prior to or during the Term may be assessed or imposed on or in respect of or be a lien upon (i) Landlord or Landlord’s interest in the Leased Property or any portion thereof, (ii) the Leased Property or any portion thereof or any rent therefrom or any estate, right, title or interest therein, or (iii) any occupancy, operation, use or possession of, or sales from or activity conducted on or in connection with the Leased Property or any portion thereof or the leasing or use of the Leased Property or any portion thereof; provided, however that nothing contained in this Lease shall be construed to require Tenant to pay (a) any tax, fee or other charge based on net income (whether denominated as a franchise or capital stock or other tax) imposed on Landlord or any other Person (except Tenant and its successors), (b) any transfer, or net revenue tax of Landlord or any other Person (except Tenant and its successors and Affiliates), (c) any tax imposed with respect to the sale, exchange or other disposition by Landlord of any Leased Property or any portion thereof or the proceeds thereof, (d) any principal or interest on or other amount in respect of any indebtedness

 

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on or secured by the Leased Property or any portion thereof for which Landlord (or any of its Affiliates) is the obligor, or (e) any principal or interest on or other amount in respect of any indebtedness of Landlord or its Affiliates that is not otherwise included as “Impositions” hereunder; provided , further , however, that Impositions shall include (and Tenant shall be required to pay in accordance with the provisions of this Lease) (x) any tax, assessment, tax levy or charge set forth in clause (a) or (b) of the preceding proviso that is levied, assessed or imposed in lieu of, or as a substitute for, any Imposition (and, without limitation, if at any time during the Term the method of taxation prevailing at the Commencement Date shall be altered so that any new, non-income-based tax, assessment, levy (including, but not limited to, any city, state or federal levy), imposition or charge, or any part thereof, shall be measured by or be based in whole or in part upon the Leased Property, or any part thereof, and shall be imposed upon Landlord, then all such new taxes, assessments, levies, impositions or charges, or the part thereof to the extent that they are so measured or based, shall be deemed to be included within the term “Impositions” for the purposes hereof, to the extent that such Impositions would be payable if the Leased Property were the only property of Landlord subject to such Impositions, and Tenant shall pay and discharge the same as herein provided in respect of the payment of Impositions), (y) any transfer taxes or other levy or assessment imposed by reason of any assignment of this Lease or any interest therein subsequent to the execution and delivery hereof, or any transfer or Sublease or termination thereof (other than assignment of this Lease or the sale, transfer or conveyance of the Leased Property or any interest therein made by Landlord) and (z) any mortgage tax or mortgage recording tax imposed by reason of any Permitted Leasehold Mortgage or any other instrument creating or evidencing a lien in respect of indebtedness of Tenant or its Affiliates (but not any mortgage tax or mortgage recording tax imposed by reason of a Fee Mortgage or any other instrument creating or evidencing a lien in respect of indebtedness of Landlord or its Affiliates).

Incurable Default ”: Collectively or individually, as the context may require, any defaults not reasonably susceptible to being cured by a Permitted Leasehold Mortgagee or a subsequent owner of the Leasehold Estate through foreclosure thereof, including the defaults referred to in Sections 16.1(c), 16.1(d), 16.1(e), 16(f), 16.1(g), 16.1(h) and 16.1(l).

Indebtedness ”: Of any Person, without duplication, (a) all indebtedness of such Person for borrowed money, whether or not evidenced by bonds, debentures, notes or similar instruments, (b) all obligations of such Person as lessee under capital leases which have been or should be recorded as liabilities on a balance sheet of such Person in accordance with GAAP, (c) all obligations of such Person to pay the deferred purchase price of property or services (excluding trade accounts payable in the ordinary course of business), (d) all indebtedness secured by a lien on the property of such Person, whether or not such indebtedness shall have been assumed by such Person, (e) all obligations, contingent or otherwise, with respect to the face amount of all letters of credit (whether or not drawn) and banker’s acceptances issued for the account of such Person, (f) all obligations under any agreement with respect to any swap, forward, future or derivative transaction or option or similar arrangement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or combination of transactions, (g) all guarantees by such Person of any of the foregoing and (h) all indebtedness of the nature described in the foregoing clauses (a)-(g) of any partnership of which such Person is a general partner.

 

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Initial Minimum Cap Ex Amount ”: An amount equal to One Hundred Seventy-One Million and No/100 Dollars ($171,000,000.00).

Initial Minimum Cap Ex Period ”: The period commencing on January 1, 2017 and ending on December 31, 2021.

Initial Stated Expiration Date ”: As defined in Section  1.3 .

Initial Term ”: As defined in Section  1.3 .

Insurance Requirements ”: The terms of any insurance policy required by this Lease and all requirements of the issuer of any such policy and of any insurance board, association, organization or company necessary for the maintenance of any such policy.

Intellectual Property ” or “ IP ”: All rights in, to and under any of the following, as they exist anywhere in the world, whether registered or unregistered: (i) all patents and applications therefor and all reissues, divisions, divisionals, renewals, extensions, provisionals, continuations and continuations-in-part thereof, and all patents, applications, documents and filings claiming priority to or serving as a basis for priority thereof, (ii) all inventions (whether or not patentable), invention disclosures, improvements, business information, Confidential Information, Software, formulas, drawings, research and development, business and marketing plans and proposals, tangible and intangible proprietary information, and all documentation relating to any of the foregoing, (iii) all copyrights, works of authorship, copyrightable works, copyright registrations and applications therefor, and all other rights corresponding thereto, (iv) all industrial designs and any registrations and applications therefor, (v) all trademarks, service marks, trade dress, logos, trade names, assumed names and corporate names, Internet domain names and other numbers, together with all translations, adaptations, derivations and combinations thereof and including all goodwill associated therewith, and all applications, registrations and renewals in connection therewith (“Trademarks”), (vi) all databases and data collections (including all guest data) and all rights therein, (vii) all moral and economic rights of authors and inventors, however denominated, (viii) all Internet addresses, sites and domain names, numbers, and social media user names and accounts, (ix) any other similar intellectual property and proprietary rights of any kind, nature or description; and (x) any copies of tangible embodiments thereof (in whatever form or medium).

Land ”: As defined in clause  (a) of the first sentence of Section  1.1 .

Landlord ”: As defined in the preamble.

Landlord Indemnified Parties ”: As defined in Section  21.1(i) .

Landlord MCI Financing ”: As defined in Section 10.4(b).

 

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Landlord Prohibited Person ”: Any Person that, in the capacity it is proposed to be acting (but not in any other capacity), is more likely than not to jeopardize Landlord’s or any of its Affiliates’ ability to hold a Gaming License or to be associated with a Gaming licensee under any applicable Gaming Regulations (other than any Gaming Authority established by any Native American tribe).

Landlord REIT ”: VICI Properties Inc., a Maryland corporation, the indirect parent of Landlord.

Landlord Tax Returns ”: As defined in Section  4.1(a) .

Landlord Work ”: As defined in Section  10.5(e) .

Landlord’s MCI Financing Proposal ”: As defined in Section  10.4(a) .

Lease ”: As defined in the preamble.

Lease Assumption Agreement ”: As defined in Section  22.2(i) .

Lease Foreclosure Transaction ”: Either (i) an assignment pursuant to Section  22.2( ii )(b) or (c) , or (ii) entry by any Permitted Leasehold Mortgagee or its Permitted Leasehold Mortgagee Designee into a New Lease in compliance in all respects with Section  17.1(f) and all other applicable provisions of this Lease.

Lease Year ”: The first Lease Year of the Term shall be the period commencing on the Commencement Date and ending on the last day of the calendar month in which the first (1 st ) anniversary of the Commencement Date occurs, and each subsequent Lease Year shall be each period of twelve (12) full calendar months after the last day of the prior Lease Year, except that the final Lease Year of the Term shall end on the Expiration Date.

Leased Improvements ”: As defined in clause (c) of the first sentence of Section  1.1 .

Leased Property ”: As defined in Section  1.1 . For the avoidance of doubt, the Leased Property includes all Alterations and Capital Improvements, provided, however , that the foregoing shall not affect or contradict the provisions of this Lease which specify that Tenant shall be entitled to certain rights with respect to or benefits of the Tenant Capital Improvements as expressly set forth herein. Notwithstanding the foregoing, provisions of this Lease that provide for certain benefits or rights to Tenant with respect to Tenant Material Capital Improvements, such as, by way of example only and not by way of limitation, the payment of the applicable insurance proceeds to Tenant due to a loss or damage of such Tenant Material Capital Improvements pursuant to Section  14.1 , shall remain in effect notwithstanding the preceding sentence.

Leasehold Estate ”: As defined in Section  17.1(a) .

Legal Requirements ”: All applicable federal, state, county, municipal and other governmental statutes, laws (including securities laws), rules, policies, guidance, codes, orders, regulations, ordinances, permits, licenses, covenants, conditions, restrictions, judgments, decrees and injunctions, whether now or hereafter enacted and in force, as applicable to any Person or to

 

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the Facility, including those (a) that affect either the Leased Property or any portion thereof and/or Tenant’s Property, all Capital Improvements and Alterations (including any Material Capital Improvements) or the construction, use or alteration thereof, or otherwise in any way affecting the business operated or conducted thereat, as the context requires, and (b) which may (i) require repairs, modifications or alterations in or to the Leased Property or any portion thereof and/or any of Tenant’s Property, (ii) without limitation of the preceding clause (i), require repairs, modifications or alterations in or to any portion of any Capital Improvements (including any Material Capital Improvements), (iii) in any way adversely affect the use and enjoyment of any of the foregoing, or (iv) regulate the transport, handling, use, storage or disposal or require the cleanup or other treatment of any Hazardous Substance.

Letter of Credit ”: An irrevocable, unconditional, clean sight draft letter of credit reasonably acceptable to Landlord and Fee Mortgagee (as applicable) in favor of Landlord or, at Landlord’s direction, Fee Mortgagee and entitling Landlord or Fee Mortgagee (as applicable) to draw thereon based solely on a statement executed by an officer of Landlord or Fee Mortgagee (as applicable) stating that it has the right to draw thereon under this Lease in a location in the United States reasonably acceptable to Landlord or Fee Mortgagee (as applicable), issued by a domestic Eligible Institution or the U.S. agency or branch of a foreign Eligible Institution, and upon which letter of credit Landlord or Fee Mortgagee (as applicable) shall have the right to draw in full: (a) if Landlord or Fee Mortgagee (as applicable) has not received at least thirty (30) days prior to the date on which the then outstanding letter of credit is scheduled to expire, a notice from the issuing financial institution that it has renewed the applicable letter of credit; (b) thirty (30) days prior to the date of termination following receipt of notice from the issuing financial institution that the applicable letter of credit will be terminated; and (c) thirty (30) days after Landlord or Fee Mortgagee (as applicable) has given notice to Tenant that the financial institution issuing the applicable letter of credit ceases to either be an Eligible Institution or meet the rating requirement set forth above.

Licensing Event ”:

(a)    With respect to Tenant, (i) a communication (whether oral or in writing) by or from any Gaming Authority to Tenant or Tenant’s Affiliates (each, a “ Tenant Party ”) or to a Landlord Party (as defined below) or other action by any Gaming Authority that indicates that such Gaming Authority has found or is likely to find that the association of a Tenant Party with Landlord is likely to (A) result in a disciplinary action relating to, or the loss of, inability to reinstate or failure to obtain, any Gaming License or any other rights or entitlements held or required to be held by Landlord or any of its Affiliates (each, a “ Landlord Party ”) under any Gaming Regulations or (B) violate any Gaming Regulations to which a Landlord Party is subject; or (ii) a Tenant Party is required to be licensed, registered, qualified or found suitable under any Gaming Regulations, and such Tenant Party does not remain so licensed, registered, qualified or found suitable or, after becoming so licensed, registered, qualified or found suitable, fails to remain so, and, solely for purposes of determining whether a Tenant Event of Default has occurred under Section  16.1(i) , the same causes cessation of Gaming activity at the Facility and would reasonably be expected to have a material adverse effect on the Facility taken as a whole); and

 

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(b)    With respect to Landlord, (i) a communication (whether oral or in writing) by or from any Gaming Authority to a Landlord Party or to a Tenant Party or other action by any Gaming Authority that indicates that such Gaming Authority has found or is likely to find that the association of a Landlord Party with Tenant is likely to (A) result in a disciplinary action relating to, or the loss of, inability to reinstate or failure to obtain, any Gaming License or any other rights or entitlements held or required to be held by a Tenant Party under any Gaming Regulations or (B) violate any Gaming Regulations to which a Tenant Party is subject; or (ii) a Landlord Party is required to be licensed, registered, qualified or found suitable under any Gaming Regulations, and such Landlord Party does not remain so licensed, registered, qualified or found suitable or, after becoming so licensed, registered, qualified or found suitable, fails to remain so, and, solely for purposes of determining whether a default has occurred under Section  41.13 hereunder, the same causes cessation of Gaming activity at the Facility and would reasonably be expected to have a material adverse effect on the Facility taken as a whole).

Liquor Authority ”: As defined in Section  41.13 .

Liquor Laws ”: As defined in Section  41.13 .

Material Capital Improvement ”: Any single or series of related Capital Improvements that would or does (i) have a total budgeted or actual cost (as reasonably evidenced to Landlord) (excluding land acquisition costs) in excess of Fifty Million and No/100 Dollars ($50,000,000.00) and (ii) either (a) materially alter the Facility ( e.g. , shoring, permanent framework reconfigurations), (b) expand the Facility ( i.e. , construction of material additions to existing Leased Improvements) or (c) add improvements to undeveloped portion(s) of the Land.

Material Indebtedness ”: At any time, indebtedness of any one or more of Tenant (and its Subsidiaries) and any Guarantor owing to one or more unrelated third parties in an aggregate principal amount exceeding Seventy-Five Million and No/100 Dollars ($75,000,000.00).

Material Sublease ”: A Sublease (excluding a management agreement or similar agreement to operate but not occupy as a tenant a particular space at a Facility) under which the monthly rent and/or fees and other payments payable by the Subtenant (or manager) exceed Fifty Thousand and No/100 Dollars ($50,000.00) (which amount shall be increased by the Escalator on the first (1 st ) day of each Lease Year (commencing on the first (1 st ) day of the second (2 nd ) Lease Year)) per month.

Minimum Cap Ex Amount : The Initial Minimum Cap Ex Amount and the Annual Minimum Building and Improvement Cap Ex Amount, as applicable.

Minimum Cap Ex Requirements ”: The Initial Minimum Cap Ex Requirement and the Annual Minimum Cap Ex Building and Improvement Requirement, as applicable.

Net Revenue ”: The net sum of the following, without duplication, over the applicable time period of measurement: (i) the amount received by Tenant (and its Subsidiaries) from patrons at the Facility for gaming, less, (A) to the extent otherwise included in the calculation of Net Revenue, refunds and free promotional play provided pursuant to a rewards,

 

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marketing, and/or frequent users program (including rewards granted by Affiliates of Tenant) and (B) amounts returned to patrons through winnings at the Facility (the net amount described in this clause (i), “ Gaming Revenues ”); plus (ii) the gross receipts of Tenant (and its Subsidiaries) for all goods and merchandise sold, room revenues derived from hotel operations, food and beverages sold, the charges for all services performed, or any other revenues generated by or otherwise payable to Tenant (and its Subsidiaries) (including, without limitation, use fees, retail and commercial rent, revenue from rooms, accommodations, food and beverage, and the proceeds of business interruption insurance) in, at or from the Facility for cash, credit or otherwise (without reserve or deduction for uncollected amounts), but excluding pass-through revenues collected by Tenant to the extent such amounts are remitted to the applicable third party entitled thereto (the net amounts described in this clause (ii), “Retail Sales”); less (iii) to the extent otherwise included in the calculation of Net Revenue, the retail value of accommodations, merchandise, food and beverage and other services furnished to guests of Tenant at the Facility without charge or at a reduced charge (and, with respect to a reduced charge, such reduction in Net Revenue shall be equal to the amount of the reduction of such charge otherwise included in Net Revenue) (the amounts described in this clause (iii), “Promotional Allowances”). Notwithstanding anything herein to the contrary, the following provisions shall apply with respect to the calculation of Net Revenue:

(a)    For purposes of calculating adjustments to Variable Rent, the following provisions shall apply:

(1)    If Tenant enters into a Sublease with a Subtenant that is not directly or indirectly wholly-owned by (x) Guarantor or (y) CEC (for so long as CEC holds a Controlling direct or indirect interest in Tenant)(such that, after entering into such Sublease rather than the Gaming Revenues, Retail Sales and Promotional Allowances generated by the space covered by such Sublease being included in the calculation of Tenant’s Net Revenue, instead the revenue from such Sublease would be governed by clause (b)(1) or (b)(2) below), then, thereafter, any Gaming Revenues, Retail Sales and Promotional Allowances that would otherwise be included in the calculation of Net Revenue for the applicable base year with respect to the applicable subleased (or managed) space shall be excluded from the calculation of Net Revenue for the applicable base year, and the rent and/or fees and other consideration to be received by Tenant pursuant to such Sublease shall be substituted therefor.

(2)    If Tenant assumes operation of space that in the applicable base year was operated under a Sublease with a Subtenant that was not directly or indirectly wholly-owned by Guarantor or CEC (for so long as CEC holds a Controlling direct or indirect interest in Tenant), or if all of the direct or indirect ownership interests in a Person that was a Subtenant in the applicable base year are acquired by Guarantor or CEC (for so long as CEC holds a Controlling direct or indirect interest in Tenant) (in either case, such that after entering into such Sublease revenue that would otherwise be included in Net Revenue for the applicable base year pursuant to clause (b)(1) or (b)(2) below is converted to revenue with respect to which Gaming Revenues, Retail Sales and Promotional Allowances are included in Net Revenue for the applicable base year), then, thereafter, the rent and/or fees and other consideration received by Tenant pursuant to such Sublease that would otherwise be included in the calculation of Net Revenue for the applicable base year shall be excluded from the calculation of Net Revenue for the applicable base year, and the Gaming Revenues, Retail Sales and Promotional Allowances to be received by Tenant pursuant to its operation of such space shall be substituted therefor.

 

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(3)    Notwithstanding the foregoing, the adjustments provided for in clauses (a)(1) and (a)(2) above shall not be implemented in the calculation of Net Revenue with respect to any transaction involving any space for which aggregate Gaming Revenues, Retail Sales and Promotional Allowances do not exceed Ten Million and No/100 Dollars ($10,000,000.00) in each transaction and Fifteen Million and No/100 Dollars ($15,000,000.00) in the aggregate per Lease Year.

(b)    Amounts received pursuant to Subleases shall be included in Net Revenue as follows:

(1)    With respect to any Sublease from Tenant to a Subtenant in which Guarantor or CEC (for so long as CEC holds a Controlling direct or indirect interest in Tenant) directly or indirectly owns less than fifty percent (50%) of the ownership interests, Net Revenue shall not include Gaming Revenues, Retail Sales or Promotional Allowances received by such Subtenant but shall include the rent and/or fees and all other consideration received by Tenant pursuant to such Sublease.

(2)    With respect to any Sublease from Tenant to a Subtenant in which Guarantor or CEC (for so long as CEC holds a Controlling direct or indirect interest in Tenant) directly or indirectly owns fifty percent (50%) or more of the ownership interests, but less than all of the ownership interests, Net Revenue shall not include Gaming Revenues, Retail Sales or Promotional Allowances received by such Subtenant but shall include an amount equal to the greater of (x) the rent and/or fees and all other consideration actually received by Tenant for such Sublease from such Affiliate and (y) the rent and/or fees and other consideration that would be payable under such Sublease if at arms-length, market rates.

(3)    With respect to any Sublease from Tenant to a Subtenant that is directly or indirectly wholly-owned by Guarantor or CEC (for so long as CEC holds a Controlling direct or indirect interest in Tenant), Net Revenue shall not include the rent and/or fees or any other consideration received by Tenant pursuant to such Sublease but shall include Gaming Revenues, Retail Sales or Promotional Allowances received by such Subtenant.

(c)    For the avoidance of doubt, gaming taxes and casino operating expenses (such as salaries, income taxes, employment taxes, supplies, equipment, cost of goods and inventory, rent, office overhead, marketing and advertising and other general administrative costs) will not be deducted in arriving at Net Revenue.

(d)    Net Revenue will be calculated on an accrual basis for purposes of this definition, as required under GAAP. For the absence of doubt, if Gaming Revenues, Retail Sales or Promotional Allowances of a Subsidiary or subtenant, as applicable, are taken into account for purposes of calculating Net Revenue, any rent received by Tenant from such Subsidiary or subtenant, as applicable, pursuant to any sublease with such Subsidiary or subtenant, as applicable, shall not also be taken into account for purposes of calculating Net Revenues.

 

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Net Revenue to Rent Ratio ”: As at any date of determination, the ratio for any period of Net Revenue to Rent. For purposes of calculating the Net Revenue to Rent Ratio, Net Revenue shall be calculated on a pro forma basis (and shall be calculated to give effect to such other pro forma adjustments consistent with Regulation S-X under the Securities Act) to give effect to any material acquisitions and material asset sales consummated by Tenant during any Test Period of Tenant as if each such material acquisition had been effected on the first (1 st ) day of such Test Period and as if each such material asset sale had been consummated on the day prior to the first (1 st ) day of such Test Period.

New Lease ”: As defined in Section  17.1(f) .

Non-Core Tenant Competitor ”: A Person that is engaged or is an Affiliate of a Person that is engaged in the ownership or operation of a Gaming business so long as (i) such Person’s consolidated annual gross gaming revenues do not exceed Five Hundred Million and No/100 Dollars ($500,000,000.00) (which amount shall be increased by the Escalator on the first (1 st ) day of each Lease Year, commencing with the second (2 nd ) Lease Year) and (ii) such Person does not, directly or indirectly, own or operate a Gaming Facility within thirty (30) miles of a Gaming Facility directly or indirectly owned or operated by an Affiliate of Tenant. For purposes of the foregoing, ownership of the real estate and improvements where a Gaming business is conducted, without ownership of the Gaming business itself, shall not be deemed to constitute the ownership of a Gaming business. For purposes of this definition only, the term “Escalator” shall mean the sum of (a) one plus (b) the greater of (i) two one-hundredths (0.02) and the CPI Increase.

Notice ”: A notice given in accordance with Article XXXV .

Notice of Termination ”: As defined in Section  17.1(f) .

NRS ”: As defined in Section  41.14 .

OFAC ”: As defined in Article XXXIX .

Overdue Rate ”: On any date, a rate equal to five (5) percentage points above the Prime Rate, but in no event greater than the maximum rate then permitted under applicable law.

Parent Entity ”: With respect to any Person, any corporation, association, limited partnership, limited liability company or other entity which at the time of determination (a) owns or controls, directly or indirectly, more than fifty percent (50%) of the total voting power of shares of capital stock (without regard to the occurrence of any contingency) entitled to vote in the election of directors, managers or trustees of such Person, (b) owns or controls, directly or indirectly, more than fifty percent (50%) of the capital accounts, distribution rights, total equity and voting interests or general and limited partnership interests, as applicable, of such Person, whether in the form of membership, general, special or limited partnership interests or otherwise, or (c) is the controlling general partner or managing member of, or otherwise controls, such entity.

Partial Taking ”: As defined in Section  15.1(b) .

 

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Party ” and “ Parties ”: Landlord and/or Tenant, as the context requires.

Patriot Act Offense ”: Any violation of the criminal laws of the United States of America or of any of the several states, or that would be a criminal violation if committed within the jurisdiction of the United States of America or any of the several states, relating to terrorism or the laundering of monetary instruments, including any offense under (A) the criminal laws against terrorism, (B) the criminal laws against money laundering, (C) the Bank Secrecy Act, as amended, (D) the Money Laundering Control Act of 1986, as amended, or (E) the USA Patriot Act. “Patriot Act Offense” also includes the crimes of conspiracy to commit, or aiding and abetting another to commit, a Patriot Act Offense.

Payment Date ”: Any due date for the payment of the installments of Rent or Additional Charges payable under this Lease.

Permitted Exception Documents ”: (i) Property Documents (x) that are listed on the title polic(y)(ies) described on Schedule 6 attached hereto, or (y) that (a) Landlord entered into, as a party thereto, after the date hereof and (b) Tenant is required hereunder to comply with, and (ii) Specified Subleases (together with any renewals or modifications thereof made in accordance with the express terms thereof), but excluding Specified Subleases as to which the applicable Subtenant is CEC, CRC, the manager of the Leased Premises or any of their respective Affiliates.

Permitted Leasehold Mortgage ”: Any mortgage, pledge agreement, security agreement, assignment of leases and rents, fixture filing or similar document creating or evidencing a lien on Tenant’s leasehold interest (or subleasehold interest) in all of the Leased Property subject to exclusions with respect to items that are not capable of being mortgaged and that, in the aggregate, are de minimis (or all the direct or indirect interest therein at any tier of ownership, including without limitation, a lien on direct or indirect Equity Interests in Tenant), granted to or for the benefit of a Permitted Leasehold Mortgagee as security for the indebtedness of Tenant or its Affiliates.

Permitted Leasehold Mortgagee ”: The lender or noteholder or any agent or trustee or similar representative on behalf of one or more lenders or noteholders or other investors in connection with indebtedness secured by a Permitted Leasehold Mortgage, in each case as and to the extent such Person has the power to act (subject to obtaining the requisite instructions) on behalf of all lenders, noteholders or investors with respect to such Permitted Leasehold Mortgage; provided such lender or noteholder or any agent or trustee or similar representative (but not necessarily the lenders, noteholders or other investors which it represents) is a banking or other institution that in the ordinary course acts as a lender, agent or trustee or similar representative (in each case, on behalf of a group of lenders or noteholders) in respect of financings of such type; and provided , further , that, in all events, (i) no agent, trustee or similar representative shall be Tenant, CEC, CRC, or Guarantor or any of their Affiliates, respectively (each, a “Prohibited Leasehold Agent”), and (ii) no (A) Prohibited Leasehold Agent, (excluding any Person that is a Prohibited Leasehold Agent as a result of its ownership of publicly-traded shares in any Person), or (B) entity that owns, directly or indirectly (but excluding any ownership of publicly traded shares in CEC or any of its Affiliates), higher than the lesser of (1) ten percent (10%) of the Equity Interests in Tenant or (2) a Controlling legal or beneficial interest in Tenant,

 

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may collectively hold an amount of the indebtedness secured by a Permitted Leasehold Mortgage higher than the lesser of (x) twenty-five percent (25%) thereof and (y) the principal amount thereof required to satisfy the threshold for requisite consenting lenders to amend the terms of such indebtedness that affect all lenders thereunder.

Permitted Leasehold Mortgagee Designee ”: An entity (other than a Prohibited Leasehold Agent) designated by a Permitted Leasehold Mortgagee and acting for the benefit of the Permitted Leasehold Mortgagee, or the lenders, noteholders or investors represented by the Permitted Leasehold Mortgagee.

Permitted Operation Interruption ”: Any of the following: (i) A material Casualty Event or Condemnation and reasonable periods of restoration of the Leased Property following same, or (ii) periods of an Unavoidable Delay.

Person ”: Any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other form of entity.

Preceding Lease Year ”: As defined in clause (c)(i) of the definition of “Rent.”

Preliminary Studies ”: As defined in Section  10.4(a) .

Primary Intended Use ”: (i) Hotel and resort and related uses, (ii) gaming and/or pari-mutuel use, including, without limitation, horsetrack, dogtrack and other similarly gaming-related sporting uses, (iii) ancillary retail and/or entertainment use, (iv) such other uses required under any Legal Requirements (including those mandated by any applicable regulators), (v) such other ancillary uses, but in all events consistent with the current use of the Leased Property or any portion thereof as of the Commencement Date or with then-prevailing hotel, resort and gaming industry use, (vi) if and when the Lease is amended to include the Convention Center Property pursuant to the Put Call Agreement, convention center and related uses or such other uses as may be permitted under any Legal Requirements (including, but, not limited to uses related to an amphitheater or offices), and/or (vii) such other use as shall be approved by Landlord from time to time in its reasonable discretion.

Prime Rate ”: On any date, a rate equal to the annual rate on such date publicly announced by JPMorgan Chase Bank, N.A. (provided that if JPMorgan Chase Bank, N.A. ceases to publish such rate, the Prime Rate shall be determined according to the comparable prime rate of another comparable nationally known money center bank reasonably selected by Landlord), to be its prime rate for ninety (90)-day unsecured loans to its corporate borrowers of the highest credit standing, but in no event greater than the maximum rate then permitted under applicable law.

Prior Months ”: As defined in the definition of CPI Increase.

Prohibited Leasehold Agent ”: As defined in the definition of Permitted Leasehold Mortgagee.

 

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Prohibited Persons ”: As defined in Article XXXIX .

Promotional Allowances ”: As defined in the definition of “Net Revenue.”

Propco TRS ”: As defined in Section  1.1 .

Property Documents ”: Reciprocal easement and/or operating agreements, easements, covenants, exceptions, conditions and restrictions in each case affecting the Leased Property or any portion thereof, but excluding, in any event, all Fee Mortgage Documents.

Property Specific Guest Data ”: Any and all guest data (including without limitation any and all guest or customer profiles, contact information (e.g., addresses, phone numbers, facsimile numbers and email addresses), histories, preferences, game play and patronage patterns, experiences, results and demographic information, whether or not any of the foregoing constitutes personally identifiable information) to the extent in or under the possession or control of Tenant, an Affiliated manager, or their respective Affiliates, identifying, describing, concerning or generated by prospective, actual or past guests, website visitors and/or customers of the Facility, including retail locations, restaurants, bars, casino and Gaming facilities, spas and entertainment venues therein, but excluding, in all cases, (i) guest data that has been integrated into analytics, reports, or other similar forms in connection with the Total Rewards Program or any other customer loyalty program of Tenant (it being understood that this exception shall not apply to such guest data itself, i.e., in its original form prior to integration into such analytics, reports, or other similar forms in connection with the Total Rewards Program or other customer loyalty program), (ii) guest data that concerns facilities, other than the Facility and that does not concern the Facility, and (iii) guest data that concerns “Service Provider Proprietary Information and Systems” as defined in that certain Second Amended and Restated Omnibus Agreement and Enterprise Services Agreement, dated as of October 6, 2017, by and among Caesars Enterprise Services LLC, CEOC and the other parties thereto (as further amended, restated, supplemented or otherwise modified from time to time), and is not specific to the Facility.

Property Specific IP ”: All Intellectual Property (i) shown on Schedule 7 , or (ii) consisting of Property Specific Guest Data.

Purchase Option ”: As defined in Section  18.2(a) .

Put-Call Agreement ”: That certain Put-Call Agreement dated as of December 22, 2017, by and among Landlord, Vegas Development Land Owner LLC, a Delaware limited liability company and 3535 LV Newco, LLC, a Delaware limited liability company, as the same may be amended, supplemented or replaced from time to time.

Purchase Price ”: As defined in Section  18.2(a) .

Qualified Successor Tenant ”: As defined in Section  36.3 .

Qualified Transferee ”: A transferee that meets all of the following requirements: (a) such transferee has (1) at least five (5) years of experience (directly or through one or more of its Subsidiaries) operating or managing casinos with aggregate revenues in the immediately

 

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preceding fiscal year of at least Five Hundred Million and No/100 Dollars ($500,000,000.00) (or retains a manager with such qualifications, which manager shall not be replaced unless such transferee is able to satisfy the requirements of this definition without such manager), or (2) agreement(s) in place in a form reasonably satisfactory to Landlord to retain for a period of eighteen (18) months (or more) after the effective time of the transfer at least (I) eighty percent (80%) of Tenant and its Subsidiaries’ personnel employed at the Facility, and (II) eighty percent (80%) of the ten most highly compensated employees of Tenant and/or its Affiliates as of the date of the relevant agreement to transfer who are full time dedicated employees at the Leased Property, and are responsible for direct managerial and/or operational aspects of the Facility (including Gaming activities); (b) such transferee is not in the business, and that does not have an Affiliate in the business, of leasing properties to gaming operators; (c) such transferee and all of its applicable officers, directors, Affiliates (including the officers and directors of its Affiliates), to the extent required under applicable Gaming Regulations or other Legal Requirements, (i) are licensed and certified by applicable Gaming Authorities and hold all required Gaming Licenses to operate the Facility in accordance herewith and (ii) are otherwise found suitable to lease the Leased Property in accordance herewith; (d) such transferee is Solvent (defined herein below), and, other than in the case of a Permitted Leasehold Mortgagee, if such transferee has a Parent Entity, the Parent Entity of such transferee is Solvent; (e)(i) other than in the case of a Permitted Leasehold Mortgagee or Permitted Leasehold Mortgagee Designee, (x) the Parent Entity of such transferee or, if such transferee does not have a Parent Company, such transferee, has sufficient assets so that, after giving effect to its assumption of Tenant’s obligations hereunder or the applicable assignment (including pursuant to a Change in Control under Section  22.2(i) or Section  22.2 (viii) ), its Total Net Leverage Ratio for the Test Period is less than 6:1 on a pro forma basis based on projected earnings and after giving effect to the proposed transaction or (y) an entity that has an investment grade credit rating from a nationally recognized rating agency with respect to such entity’s long term, unsecured debt has provided a Guaranty, or (ii) in the case of a Permitted Leasehold Mortgagee or Permitted Leasehold Mortgagee Designee, (x) Tenant has a Total Net Leverage Ratio for the Test Period of less than 6:1 on a pro forma basis based on projected earnings and after giving effect to the proposed transaction, or (y) an entity that has an investment grade credit rating from a nationally recognized rating agency with respect to such entity’s long term, unsecured debt has provided a Guaranty; (f) such transferee has not been the subject of a material governmental or regulatory investigation which resulted in a conviction for criminal activity involving moral turpitude and has not been found liable pursuant to a non-appealable judgment in a civil proceeding for attempting to hinder, delay or defraud creditors; (g) such transferee has never been convicted of, or pled guilty or no contest to, a Patriot Act Offense and is not on any Government List; (h) such transferee has not been the subject of a voluntary or involuntary (to the extent the same has not been discharged) bankruptcy proceeding during the prior five (5) years from the applicable date of determination; (i) such transferee is not, and is not Controlled by an Embargoed Person or a person that has been found “unsuitable” for any reason or has had any application for a Gaming License withdrawn “with prejudice” by any applicable Gaming Authority; (j) such transferee shall not be a Landlord Prohibited Person; and (k) such transferee is not associated with a person who has been found “unsuitable”, denied a Gaming License or otherwise precluded from participation in the Gaming Industry by any Gaming Authority where such association would reasonably be expected to adversely affect any of Landlord’s or its Affiliates’ Gaming Licenses or Landlord’s or its Affiliates’ then-current standing with any Gaming Authority. For purposes hereof, a Person shall be “Solvent” if such Person shall (I) not be “insolvent” as such term is defined in Section 101 of title 11 of the United States Code, (II) be generally paying its debts (other than those that are in bona fide dispute) when they become due, and (III) be able to pay its debts as they become due.

 

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Renewal Notice ”: As defined in Section  1.4(a) .

Renewal Term ”: As defined in Section  1.4(a) .

Rent ”: An annual amount payable as provided in Article III , calculated as follows:

(a)    For the first seven (7) Lease Years, Rent shall be equal to Eighty Seven Million Four Hundred Thousand and No/100 Dollars ($87,400,000.00) per Lease Year, as adjusted annually as set forth in the following sentence. On each Escalator Adjustment Date during the second (2 nd ) through and including the seventh (7 th ) Lease Years, the Rent payable for such Lease Year shall be adjusted to be equal to the Rent payable for the immediately preceding Lease Year, multiplied by the Escalator. For purposes of clarification, there shall be no Variable Rent (defined below) payable during the first seven (7) Lease Years.

(b)    From and after the commencement of the eighth (8 th ) Lease Year, until the Initial Stated Expiration Date, annual Rent shall be comprised of both a base rent component (“ Base Rent ”) and a variable rent component (“ Variable Rent ”), each such component of Rent calculated as provided below:

(i)    Base Rent shall equal (w) for the eighth (8 th ) Lease Year, the product of eighty percent (80%) of Rent in effect as of the last day of the seventh (7 th ) Lease Year, multiplied by the Escalator, (x) for the ninth (9 th ) and tenth (10 th ) Lease Years, the Base Rent payable for the immediately, preceding Lease Year, as applicable, multiplied by the Escalator in each case, (y) for the eleventh (11 th ) Lease Year, the product of eighty percent (80%) of Rent in effect as of the last day of the tenth (10 th ) Lease Year, multiplied by the Escalator, and (z) for each Lease Year from and after the commencement of the twelfth (12 th ) Lease Year until the Initial Stated Expiration Date, the Base Rent payable for the immediately preceding Lease Year, as applicable, multiplied by the Escalator in each case.

(ii)    Variable Rent shall be calculated as further described in this clause (b)(ii). Throughout the Term, Variable Rent shall not be subject to the Escalator.

(A)    For each Lease Year from and after commencement of the eighth (8 th ) Lease Year through and including the end of the tenth (10 th ) Lease Year (the “ First Variable Rent Period ”), Variable Rent shall be a fixed annual amount equal to twenty percent (20%) of the Rent for the seventh (7 th ) Lease Year (such amount, the “ Variable Rent Base Amount ”), adjusted as follows (such resulting annual amount being referred to herein as “ Year 8 -10 Variable Rent ”):

(x)     in the event that the annual Net Revenue for the Fiscal Period ending immediately prior to the end of the seventh (7 th ) Lease Year (the “ First VRP Net Revenue Amount ”) exceeds the Base Net Revenue Amount (any such excess, the “ Year 8 Increase ”), the Year 8-10 Variable Rent shall equal the Variable Rent Base Amount increased by an amount equal to the product of (a) four percent (4%) and (b) the Year 8 Increase; or

 

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(y)    in the event that the First VRP Net Revenue Amount is less than the Base Net Revenue Amount (any such difference, the “ Year 8 Decrease ”), the Year 8-10 Variable Rent shall equal the Variable Rent Base Amount decreased by an amount equal to the product of (a) four percent (4%) and (b) the Year 8 Decrease.

(B)    For each Lease Year from and after commencement of the eleventh (11 th ) Lease Year until the Initial Stated Expiration Date (the “ Second Variable Rent Period ”), Variable Rent shall be a fixed annual amount equal to twenty percent (20%) of the Rent for the tenth (10 th ) Lease Year (such amount, the “ Second Variable Rent Base Amount ”), adjusted as follows (such resulting annual amount being referred to herein as “ Year 11 -15 Variable Rent ”):

(x)    in the event that the annual Net Revenue for the Fiscal Period ending immediately prior to the end of the tenth (10 th ) Lease Year exceeds the First VRP Net Revenue Amount (any such excess, the “ Year 11 Increase ”), the Year 11-15 Variable Rent shall equal the Year 8-10 Variable Rent increased by an amount equal to the product of (a) four percent (4%) and (b) the Year 11 Increase; or

(y)    in the event that the annual Net Revenue for the Fiscal Period ending immediately prior to the end of the tenth (10 th ) Lease Year is less than the First VRP Net Revenue Amount (any such difference, the “ Year 11 Decrease ”), the Year 11-15 Variable Rent shall equal the Year 8-10 Variable Rent decreased by an amount equal to the product of (a) four percent (4%) and (b) the Year 11 Decrease.

(c)    Rent for each Renewal Term shall be calculated as follows:

(i)    Base Rent for the first (1 st ) Lease Year of such Renewal Term shall be adjusted to be equal to the applicable annual Fair Market Base Rental Value; provided that (A) in no event will the Base Rent be less than the Base Rent in effect as of the last day of the Lease Year immediately preceding the commencement of such Renewal Term (such immediately preceding year, the respective “ Preceding Lease Year ”), (B) no such adjustment shall cause Base Rent to be increased by more than ten percent (10%) of the Base Rent in effect as of the last day of the Preceding Lease Year and (C) such Fair Market Base Rental Value shall be determined as provided in Section  34.1 . On each Escalator Adjustment Date during such Renewal Term, the Base Rent payable for such Lease Year shall be equal to the Base Rent payable for the immediately preceding Lease Year, multiplied by the Escalator.

 

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(ii)    Variable Rent for each Lease Year during such Renewal Term (for each Renewal Term, the “ Renewal Term Variable Rent Period ”) shall be equal to the Variable Rent in effect as of the last day of the Preceding Lease Year, adjusted as follows:

(A)    in the event that the annual Net Revenue for the Fiscal Period ending immediately prior to the end of the Preceding Lease Year exceeds the annual Net Revenue for the Fiscal Period ending immediately prior to the Lease Year five (5) years prior to the Preceding Lease Year ( i.e. , (x) in respect of the first (1 st ) Renewal Term, the tenth (10 th ) Lease Year, and (y) in respect of each subsequent Renewal Term, the Lease Year immediately preceding the first (1 st ) Lease Year of the immediately preceding Renewal Term) (any such excess, the respective “ Renewal Term Increase ”), the Variable Rent for such Renewal Term shall equal the Variable Rent in effect as of the last day of the Preceding Lease Year increased by an amount equal to the product of (a) four percent (4%) and (b) such Renewal Term Increase; or

(B)    in the event that the annual Net Revenue for the Fiscal Period ending immediately prior to the end of the Preceding Lease Year is less than the annual Net Revenue for the Fiscal Period ending immediately prior to the Lease Year five (5) years prior to the Preceding Lease Year ( i.e. , (x) in respect of the first (1 st ) Renewal Term, the tenth (10 th ) Lease Year and (y) in respect of each subsequent Renewal Term, the Lease Year immediately preceding the first (1 st ) Lease Year of the immediately preceding Renewal Term) (any such difference, the respective “ Renewal Term Decrease ”), the Variable Rent for such Renewal Term shall equal the Variable Rent in effect as of the last day of the Preceding Lease Year decreased by an amount equal to the product of (a) four percent (4%) and (b) such Renewal Term Decrease.

Notwithstanding anything herein to the contrary, (i) but subject to any reduction in Rent by the Rent Reduction Amount pursuant to and in accordance with the terms of this Lease, in no event shall annual Base Rent during any Lease Year after the seventh (7 th ) Lease Year be less than eighty percent (80%) of the Rent in the seventh (7 th ) Lease Year, and (ii) in no event shall the Variable Rent be less than Zero Dollars ($0.00).

Rent Reduction Amount ”: (i) With respect to the Base Rent, a proportionate reduction of Base Rent, which proportionate amount shall be determined by comparing (1) the EBITDAR of the Leased Property for the Trailing Test Period versus (2) the EBITDAR of the Leased Property for the Trailing Test Period calculated to remove the EBITDAR attributable to the portion of the Leased Property affected by a Partial Taking and (ii) with respect to Variable Rent, a proportionate reduction of Variable Rent calculated in the same manner as set forth with respect to Base Rent above. Following the application of the Rent Reduction Amount to the Rent hereunder, for purposes of calculating any applicable adjustments to Variable Rent based on increases or decreases in Net Revenue, such calculations of Net Revenue shall exclude Net Revenue attributable to the portion of the Leased Property affected by such Partial Taking (even if such portion of the Leased Property had not yet been affected by the Partial Taking as of the applicable Lease Year for which Net Revenue is being measured).

 

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Reporting Subsidiary ”: Any entity required by GAAP to be consolidated for financial reporting purposes by a Person, regardless of ownership percentage.

Representatives ”: With respect to any Person, such Person’s officers, employees, directors, accountants, attorneys and other consultants, experts or agents of such Person, and actual or prospective arrangers, underwriters, investors or lenders with respect to indebtedness or Equity Interests that may be issued by such Person or such Person’s affiliates, to the extent that any of the foregoing actually receives non-public information hereunder. In addition, and without limitation of the foregoing, the term “Representatives” shall include, (a) in the case of Landlord, PropCo 1, PropCo, Landlord REIT and any Affiliate thereof, and (b) in the case of Tenant, CEOC, CRC and any Affiliate thereof.

Required Capital Expenditures ”: The applicable Capital Expenditures required to satisfy the Minimum Cap Ex Requirements.

Retail Sales ”: As defined in the definition of “Net Revenue.”

Right to Terminate Notice ”: As defined in Section  17.1(d) .

SEC ”: The United States Securities and Exchange Commission.

Second Variable Rent Base ”: As defined in clause (b)(ii)(B) of the definition of “Rent.”

Second Variable Rent Period ”: As defined in clause (b)(ii)(B) of the definition of “Rent.”

Section  34.2 Dispute ”: As defined in Section  34.2 .

Securities Act ”: The Securities Act of 1933, as amended, or any successor statute, and the rules and regulations promulgated thereunder.

Software ”: As they exist anywhere in the world, any computer software, firmware, microcode, operating system, embedded application, or other program, including all source code, object code, specifications, databases, designs and documentation related to such programs.

Specified Sublease ”: Any Sublease (i) affecting any portion of the Leased Property, and (ii) in effect on the Commencement Date. A list of all Specified Subleases is annexed as Schedule 4 hereto.

Stated Expiration Date ”: As defined in Section  1.3 .

Subject Facility ”: As defined in Section  13.10(a) .

Sublease ”: Any sublease, sub-sublease, license, management agreement to operate (but not occupy as a tenant) a particular space at the Facility, or other similar agreement in respect of use or occupancy of any portion of the Leased Property, but excluding Bookings.

 

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Subsidiary ”: As to any Person, (i) any corporation more than fifty percent (50%) of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time stock of any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time of determination owned by such Person and/or one or more Subsidiaries of such Person, and (ii) any partnership, limited liability company, association, joint venture or other entity in which such Person and/or one or more Subsidiaries of such Person has more than a fifty percent (50%) Equity Interest at the time of determination.

Subtenant ”: The tenant under any Sublease.

Subtenant Subsidiary ”: Any subsidiary of Tenant that is a Subtenant under a Sublease from Tenant.

Successor Assets ”: As defined in Section  36.1 .

Successor Assets FMV ”: As defined in Section  36.1 .

Successor Tenant Rent ”: As defined in Section  36.3 .

Taking ”: Any taking of all or any part of the Leased Property and/or the Leasehold Estate or any part thereof, in or by Condemnation, including by reason of the temporary requisition of the use or occupancy of all or any part of the Leased Property by any governmental authority, civil or military.

Tenant ”: As defined in the preamble.

Tenant Capital Improvement ”: A Capital Improvement other than a Material Capital Improvement funded by Landlord pursuant to a Landlord MCI Financing. The term “Tenant Capital Improvement” shall not include Capital Improvements conveyed by Tenant to Landlord.

Tenant Competitor ”: As of any date of determination, any Person (other than Tenant and its Affiliates) that is engaged, or is an Affiliate of a Person that is engaged, in the ownership or operation of a Gaming business; provided, that, (i) for purposes of the foregoing, ownership of the real estate and improvements where a Gaming business is conducted, without ownership of the Gaming business itself, shall not be deemed to constitute the ownership of a Gaming business, (ii) any investment fund or other Person with an investment representing an equity ownership of fifteen percent (15%) or less in a Tenant Competitor and no Control over such Tenant Competitor shall not be a Tenant Competitor, (iii) solely for purposes of Section  18.2(d) , (x) a Person with an investment representing an equity ownership of twenty-five percent (25%) or less in a Non-Core Tenant Competitor shall be deemed to not have Control over such Non-Core Tenant Competitor, and (y) shall not be a Tenant Competitor, solely by reason of the investment described in this clause (iii), and (iv) solely for purposes of Section  18.2(a) and Section  18.2(b) , a Person that is engaged, or is an Affiliate of a Person that is engaged, in the ownership or operation of a Non-Core Tenant Competitor shall not be a Tenant Competitor solely by reason of the same.

 

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Tenant Event of Default ”: As defined in Section  16.1 .

Tenant Material Capital Improvement ”: As defined in Section  10.4(e) .

Tenant Transferee Requirement ”: As defined in Section  22.2(i) .

Tenant’s Initial Financing ”: The financing provided under that certain Credit Agreement dated on or about the Commencement Date among CRC, as borrower, Credit Suisse AG, Cayman Islands Brands, as administrative agent, and the other parties named therein from time to time.

Tenant’s MCI Intent Notice ”: As defined in Section  10.4(a) .

Tenant s Parent ”: CRC.

Tenant Prohibited Person ”: Any Person that, in the capacity it is proposed to be acting (but not in any other capacity), is more likely than not to jeopardize Tenant’s or any of its Affiliates’ ability to hold a Gaming License or to be associated with a Gaming licensee under any applicable Gaming Regulations (other than any Gaming Authority established by any Native American tribe).

Tenant s Property ”: With respect to the Facility, all assets including FF&E, Property Specific IP and other personal property (including all gaming equipment), licenses, permits, subleases, concessions, and contracts (other than the Leased Property and property owned by a third party) located at the Facility or that are primarily related to or used or held in connection with the operation of the business conducted on or about the Facility or any portion thereof, as then being operated, together with all replacements, modifications, additions, alterations and substitutes therefor.

Term ”: As defined in Section  1.3 .

Termination Notice ”: As defined in Section 17.1(d).

Test Period ”: With respect to any Person, for any date of determination, the period of the four (4) most recently ended consecutive fiscal quarters of such Person.

Third -Party MCI Financing ”: As defined in Section  10.4(c) .

Total Net Leverage Ratio ”: With respect to any Person and its Subsidiaries on a consolidated basis, on any date, the ratio of (i) (a) the aggregate principal amount of (without duplication) all indebtedness consisting of Capital Lease Obligations, indebtedness for borrowed money, unreimbursed obligations in respect of drawn letters of credit (but excluding contingent obligations under outstanding letters of credit) and other purchase money indebtedness and guarantees of any of the foregoing obligations, of such Person and its Subsidiaries determined on a consolidated basis on such date in accordance with GAAP (for the avoidance of doubt, with respect to Tenant and Guarantor, excluding any indebtedness consisting of its obligations or liabilities under this Lease) less (b) the aggregate amount of all cash or cash equivalents of such Person and its Subsidiaries that would not appear as “restricted” on a consolidated balance sheet of such Person and its Subsidiaries to (ii) EBITDA.

 

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Trailing Test Period ”: For any date of determination, the period of the four (4) most recently ended consecutive calendar quarters prior to such date of determination for which Financial Statements are available.

Transition Period ”: As defined in Section 36.1.

Unavoidable Delay ”: Delays due to strikes, lockouts, inability to procure materials, power failure, acts of God, governmental restrictions, enemy action, civil commotion, fire, unavoidable casualty or other causes beyond the reasonable control of the Party responsible for performing an obligation hereunder; provided, that lack of funds, in and of itself, shall not be deemed a cause beyond the reasonable control of a Party.

Unsuitable for Its Primary Intended Use ”: A state or condition of the Leased Property such that by reason of a Partial Taking, the Leased Property cannot, following restoration thereof (to the extent commercially practical), be operated on a commercially practicable basis for the Primary Intended Use for which it was primarily being used immediately preceding the taking, taking into account, among other relevant economic factors, the amount of square footage and the estimated revenue affected by such Partial Taking.

Variable Rent ”: The Variable Rent component of Rent, as defined in more detail in clauses (b) and (c) of the definition of “Rent.”

Variable Rent Base Amount ”: As defined in clause (b)(ii)(A) of the definition of “Rent.”

Variable Rent Determination Period ”: Each of (i) the Fiscal Period that ended immediately prior to the Commencement Date, and (ii) the Fiscal Period in each case that ends immediately prior to the commencement of the eighth (8 th ) Lease Year, the eleventh (11 th ) Lease Year, and the first (1 st ) Lease Year of each Renewal Term.

Variable Rent Payment Period ”: Collectively or individually, each of the First Variable Rent Period, the Second Variable Rent Period and each of the Renewal Term Variable Rent Periods.

Variable Rent Statement ”: As defined in Section  3.2(a) .

Work ”: Any and all work in the nature of construction, restoration, alteration, modification, addition, improvement or demolition in connection with the performance of any Alterations and/or any Capital Improvements.

Year 8 Decrease ”: As defined in clause (b)(ii)(A) of the definition of “Rent.”

Year 8 Increase ”: As defined in clause (b)(ii)(A) of the definition of “Rent.”

 

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Year 8-10 Variable Rent ”: As defined in clause (b)(ii)(A) of the definition of “Rent.”

Year 11 Decrease ”: As defined in clause (b)(ii)(B) of the definition of “Rent.”

Year 11 Increase ”: As defined in clause (b)(ii)(B) of the definition of “Rent.”

Year 11-15 Variable Rent ”: As defined in clause (b)(ii)(B) of the definition of “Rent.”

ARTICLE III

RENT

3.1      Rent .

(a)     Generally . During the Term, Tenant will pay to Landlord the Rent and Additional Charges in lawful money of the United States of America and legal tender for the payment of public and private debts, in the manner provided in Section  3.4 .

(b)     Payment of Rent until Commencement of Variable Rent . On the Commencement Date, Tenant shall pay a prorated portion of the first monthly installment of Rent for the period from the Commencement Date until the last day of the calendar month in which the Commencement Date occurs, based on the number of days during such period. Thereafter, for the first seven (7) Lease Years, Rent shall be payable by Tenant in consecutive monthly installments equal to one-twelfth (1/12 th ) of the Rent amount for the applicable Lease Year on the first (1 st ) day of each calendar month (or the immediately succeeding Business Day if the first (1 st ) day of the month is not a Business Day), in advance for such calendar month, during that Lease Year.

(d)     Payment of Rent following Commencement of Variable Rent . From the commencement of the eighth (8 th ) Lease Year and continuing until the Expiration Date, both Base Rent and Variable Rent during any Lease Year shall be payable in consecutive monthly installments equal to one-twelfth (1/12 th ) of the Base Rent and Variable Rent amounts for the applicable Lease Year on the first (1 st ) day of each calendar month (or the immediately succeeding Business Day if the first (1 st ) day of the month is not a Business Day), in advance for such calendar month, during that Lease Year; provided , however , that for each month where Variable Rent is payable but the amount thereof depends upon calculation of Net Revenue not yet known ( e.g. , the first few months of the eighth (8 th ) Lease Year, the eleventh (11 th ) Lease Year, and (if applicable) the first (1 st ) Lease Year of each Renewal Term), the amount of the Variable Rent payable monthly in advance shall remain the same as in the immediately preceding month, and provided , further , that Tenant shall make a payment to Landlord (or be entitled to set off against its Rent payment due, as applicable) on the first (1 st ) day of the calendar month (or the immediately succeeding Business Day if the first (1 st ) day of the month is not a Business Day) following the completion of such calculation in the amount necessary to “true-up” any underpayments or overpayments of Variable Rent for such interim period. Tenant shall complete such calculation of Net Revenue as provided in Section  3.2 of this Lease.

 

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(e)     Proration for Partial Lease Year . Unless otherwise agreed by the Parties in writing, Rent and Additional Charges shall be prorated on a per diem basis as to any Lease Year containing less than twelve (12) calendar months, and with respect to any installment thereof due for any partial months at the beginning and end of the Term.

3.2      Variable Rent Determination .

(a)     Variable Rent Statement . Tenant shall, no later than ninety (90) days after the end of each Variable Rent Determination Period during the Term, furnish to Landlord a statement (the “ Variable Rent Statement ”), which Variable Rent Statement shall (i) set forth the sum of the Net Revenues realized with respect to the Facility during each of (x) such just-ended Variable Rent Determination Period and (y) except with respect to the first (1 st ) Variable Rent Statement, the Variable Rent Determination Period immediately preceding such just-ended Variable Rent Determination Period, (ii) except with respect to the first (1 st ) Variable Rent Statement, set forth Tenant’s calculation of the per annum Variable Rent payable hereunder during the next Variable Rent Payment Period, (iii) be accompanied by reasonably appropriate supporting data and information, and (iv) be certified by a senior financial officer of Tenant and expressly state that such officer has examined the reports of Net Revenue therein and the supporting data and information accompanying the same, that such examination included such tests of Tenant’s books and records as reasonably necessary to make such determination, and that such statement accurately presents in all material respects the Net Revenues for the applicable periods covered thereby, so that Tenant shall commence paying the applicable Variable Rent payable during each Variable Rent Payment Period hereunder (in accordance with the calculation set forth in each such Variable Rent Statement) no later than the first (1 st ) day of the fourth (4 th ) calendar month during such Variable Rent Payment Period (or the immediately preceding Business Day if the first (1 st ) day of such month is not a Business Day).

(b)     Maintenance of Records Relating to Variable Rent Statement . Tenant shall maintain, at its corporate offices, for a period of not less than six (6) years following the end of each Lease Year, adequate records which shall evidence the Net Revenue realized by the Facility during each Lease Year, together with all such records that would normally be examined by an independent auditor pursuant to GAAP in performing an audit of Tenant’s Variable Rent Statements. The provisions and covenants of this Section  3.2(b) shall survive the expiration of the Term or sooner termination of this Lease.

(c)     Audits . At any time within two (2) years of receipt of any Variable Rent Statement, Landlord shall have the right to cause to be conducted an independent audit of the matters covered thereby, conducted by a nationally-recognized independent public accounting firm mutually reasonably agreed to by the Parties. Such audit shall be limited to items necessary to ascertain an accurate determination of the calculation of the Variable Rent payable hereunder, and shall be conducted during normal business hours at the principal executive office of Tenant. If it shall be determined as a result of such audit (i) that there has been a deficiency in the payment of Variable Rent, such deficiency shall become due and payable by Tenant to Landlord, within thirty (30) days after such determination, or (ii) that there has been an excess payment of

 

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Variable Rent, such excess shall become due and payable by Landlord to Tenant, within thirty (30) days after such determination. In addition, if any Variable Rent Statement shall be found to have understated the per annum Variable Rent payable during any Variable Rent Payment Period by more than two and one-half percent (2.5%), and Landlord is entitled to any additional Variable Rent as a result of such understatement, then (x) Tenant shall pay to Landlord all reasonable, out-of-pocket costs and expenses which may be incurred by Landlord in determining and collecting the understatement or underpayment, including the cost of the audit (if applicable) and (y) interest at the Overdue Rate on the amount of the deficiency from the date when said payment should have been made until paid. If it shall be determined as a result of such audit that the applicable Variable Rent Statement did not understate the per annum Variable Rent payable during any Variable Rent Payment Period by more than two and one-half percent (2.5%), then Landlord shall pay to Tenant all reasonable, out-of-pocket costs and expenses incurred by Tenant in making such determination, including the cost of the audit. In addition, if any Variable Rent Statement shall be found to have willfully and intentionally understated the per annum Variable Rent, by more than five percent (5%), such understatement shall, at Landlord’s option, constitute a Tenant Event of Default under this Lease. Any audit conducted pursuant to this Section  3.2(c) shall be performed subject to and in accordance with the provisions of Section  23.1(c) hereof. The receipt by Landlord of any Variable Rent Statement or any Variable Rent paid in accordance therewith for any period shall not constitute an admission of the correctness thereof.

3.3      Late Payment of Rent or Additional Charges . Tenant hereby acknowledges that the late payment by Tenant to Landlord of any Rent or Additional Charges will cause Landlord to incur costs not contemplated hereunder, the exact amount of which is presently anticipated to be extremely difficult to ascertain. Accordingly, if any installment of Rent or Additional Charges payable directly to Landlord shall not be paid within four (4) days after its due date, Tenant shall pay to Landlord on demand a late charge equal to the lesser of (a) five percent (5%) of the amount of such installment or Additional Charges and (b) the maximum amount permitted by law. The Parties agree that this late charge represents a fair and reasonable estimate of the costs that Landlord will incur by reason of late payment by Tenant. The Parties further agree that any such late charge constitutes Rent, and not interest, and such assessment does not constitute a lender or borrower/creditor relationship between Landlord and Tenant. If any installment of Rent (or Additional Charges payable directly to Landlord) shall not be paid within nine (9) days after its due date, the amount unpaid, including any late charges previously accrued and unpaid, shall bear interest at the Overdue Rate (from such ninth (9 th ) day after the due date of such installment until the date of payment thereof) (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, whether or not a claim for such interest is allowed or allowable in such proceeding), and Tenant shall pay such interest to Landlord on demand. The payment of such late charge or such interest shall not constitute a waiver of, nor excuse or cure, any default under this Lease, nor prevent Landlord from exercising any other rights and remedies available to Landlord. No failure by Landlord to insist upon strict performance by Tenant of Tenant’s obligation to pay late charges and interest on sums overdue shall constitute a waiver by Landlord of its right to enforce the provisions, terms and conditions of this Section  3.3 . No payment by Tenant nor receipt by Landlord of a lesser amount than may be required to be paid hereunder shall be deemed to be other than on account of any such payment, nor shall any endorsement or statement on any check or any letter accompanying any check tendered as payment be deemed an accord and satisfaction and Landlord, in its sole discretion, may accept such check or payment without prejudice to Landlord’s right to recover the balance of such payment due or pursue any other right or remedy in this Lease provided.

 

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3.4      Method of Payment of Rent . Rent and Additional Charges to be paid to Landlord shall be paid by electronic funds transfer debit transactions through wire transfer, ACH or direct deposit of immediately available federal funds and shall be initiated by Tenant for settlement on or before the applicable Payment Date in each case (or, in respect of Additional Charges, as applicable, such other date as may be applicable hereunder); provided, however , if the Payment Date is not a Business Day, then settlement shall be made next succeeding day which is a Business Day. Landlord shall provide Tenant with appropriate wire transfer, ACH and direct deposit information in a Notice from Landlord to Tenant. If Landlord directs, by written request, Tenant to pay any Rent or any Additional Charges to any party other than Landlord, Tenant shall send to Landlord, simultaneously with such payment, a copy of the transmittal letter or invoice and a check whereby such payment is made or such other evidence of payment as Landlord may reasonably require.

3.5      Net Lease . Landlord and Tenant acknowledge and agree that (i) this Lease is and is intended to be what is commonly referred to as a “net, net, net” or “triple net” lease, and (ii) the Rent (including, for the avoidance of doubt, following commencement of the obligation to pay Variable Rent hereunder, the Base Rent and Variable Rent components of the Rent) and Additional Charges shall be paid absolutely net to Landlord, without abatement, deferment, reduction, defense, counterclaim, claim, demand, notice, deduction or offset of any kind whatsoever, so that this Lease shall yield to Landlord the full amount or benefit of the installments of Rent (including, for the avoidance of doubt, following commencement of the obligation to pay Variable Rent hereunder, the Base Rent and Variable Rent components of the Rent) and Additional Charges throughout the Term, all as more fully set forth in Article V and except and solely to the extent expressly provided in Article XIV (in connection with a Casualty Event), in Article XV (in connection with a Condemnation), and in Section  3.1 (in connection with the “true-up”, if any, applicable to the onset of a Variable Rent Payment Period). If Landlord commences any proceedings for non-payment of Rent, Tenant will not interpose any defense, offset, claim, counterclaim or cross complaint or similar pleading of any nature or description in such proceedings unless Tenant would lose or waive such claim by the failure to assert it. This shall not, however, be construed as a waiver of Tenant’s right to assert such claims in a separate action brought by Tenant. The covenants to pay Rent and Additional Charges hereunder are independent covenants, and Tenant shall have no right to hold back, deduct, defer, reduce, offset or fail to pay any such amounts for default by Landlord or for any other reason whatsoever, except solely as and to the extent provided in Section  3.1 and this Section  3.5 .

ARTICLE IV

ADDITIONAL CHARGES

4.1      Impositions . Subject to Article  XII relating to permitted contests, Tenant shall pay, or cause to be paid, all Impositions as and when due and payable during the Term to the applicable taxing authority or other party imposing the same before any fine, penalty, premium

 

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or interest may be added for non-payment (provided, (i) such covenant shall not be construed to require early or advance payments that would reduce or discount the amount otherwise owed and (ii) Tenant shall not be required to pay any Impositions that under the terms of any applicable Ground Lease are required to be paid by the ground lessor thereunder). Tenant shall make such payments directly to the taxing authorities where feasible, and on a monthly basis furnish to Landlord a summary of such payments, together, upon the request of Landlord, with copies of official receipts or other reasonably satisfactory proof evidencing such payments. If Tenant is not permitted to, or it is otherwise not feasible for Tenant to, make such payments directly to the taxing authorities or other applicable party, then Tenant shall make such payments to Landlord at least ten (10) Business Days prior to the due date, and Landlord shall make such payments to the taxing authorities or other applicable party prior to the due date. Landlord shall deliver to Tenant any bills received by Landlord for Impositions, promptly following Landlord’s receipt thereof. Tenant’s obligation to pay Impositions shall be absolutely fixed upon the date such Impositions become a lien upon the Leased Property to the extent payable during the Term or any part thereof, subject to Article XII . Notwithstanding anything in the first sentence of this Section  4.1 to the contrary, if any Imposition may, at the option of the taxpayer, lawfully be paid in installments, whether or not interest shall accrue on the unpaid balance of such Imposition, Tenant may pay the same, and any accrued interest on the unpaid balance of such Imposition, in installments as the same respectively become due and before any fine, penalty, premium or further interest may be added thereto.

(a)    Landlord or Landlord REIT shall prepare and file all tax returns and reports as may be required by Legal Requirements with respect to Landlord’s net income, gross receipts, franchise taxes and taxes on its capital stock and any other returns required to be filed by or in the name of Landlord (the “ Landlord Tax Returns ”), and Tenant or Tenant’s applicable direct or indirect parent shall prepare and file all other tax returns and reports as may be required by Legal Requirements with respect to or relating to the Leased Property (including all Capital Improvements) and Tenant’s Property. If any property covered by this Lease is classified as personal property for tax purposes, Tenant shall file all required personal property tax returns in such jurisdictions where it is required to file pursuant to applicable Legal Requirements and provide copies to Landlord upon request.

(b)    Any refund due from any taxing authority in respect of any Imposition paid by or on behalf of Tenant shall be paid over to or retained by Tenant, and any refund due from any taxing authority in respect of any Imposition paid by or on behalf of Landlord, if any, shall be paid over to or retained by Landlord.

(c)    Landlord and Tenant shall, upon request of the other, provide such data as is maintained by the Party to whom the request is made with respect to the Leased Property as may be necessary to prepare any required tax returns and reports. Landlord, to the extent it possesses the same, and Tenant, to the extent it possesses the same, shall provide the other Party, upon request, with cost and depreciation records necessary for filing returns for any property classified as personal property. Where Landlord is legally required to file personal property tax returns, Landlord shall provide Tenant with copies of assessment notices indicating a value in excess of the reported value in sufficient time for Tenant to file a protest.

 

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(d)    Billings for reimbursement by Tenant to Landlord of personal property or real property taxes and any taxes due under the Landlord Tax Returns, if and to the extent Tenant is responsible for such taxes under the terms of this Section  4.1 (subject to Article XII ), shall be accompanied by copies of a bill therefor and payments thereof which identify in reasonable detail the personal property or real property or other tax obligations of Landlord with respect to which such payments are made.

(e)    Impositions imposed or assessed in respect of the tax-fiscal period during which the Commencement Date or the Expiration Date occurs shall be adjusted and prorated between Landlord and Tenant; provided , that Tenant’s obligation to pay its prorated share of Impositions imposed or assessed before the Expiration Date in respect of a tax-fiscal period during the Term shall survive the Expiration Date (and its right to contest the same pursuant to Article XII shall survive the Stated Expiration Date). Landlord will not enter into agreements that will result in, or consent to the imposition of, additional Impositions without Tenant’s consent, which shall not be unreasonably withheld, conditioned or delayed; provided , in each case, Tenant is given reasonable opportunity to participate in the process leading to such agreement. Impositions imposed or assessed in respect of any tax-fiscal period occurring (in whole or in part) prior to the Commencement Date, if any, shall be Tenant’s obligation to pay or cause to be paid.

4.2      Utilities and Other Matters . Tenant shall pay or cause to be paid all charges for electricity, power, gas, oil, water and other utilities used in the Leased Property. Tenant shall also pay or reimburse Landlord for all costs and expenses of any kind whatsoever which at any time with respect to the Term hereof may be imposed against Landlord by reason of any Property Documents, or with respect to easements, licenses or other rights over, across or with respect to any adjacent or other property which benefits the Leased Property or any Capital Improvement, including any and all costs and expenses associated with any utility, drainage and parking easements relating to the Leased Property (but excluding, for the avoidance of doubt, any costs and expenses under any Fee Mortgage Documents).

4.3      Compliance Certificate . Landlord shall deliver to Tenant, promptly following Landlord’s receipt thereof, any bills received by Landlord for items required to be paid by Tenant hereunder, including, without limitation, Impositions, utilities and insurance. Promptly upon request of Landlord (but so long as no Event of Default is continuing no more frequently than one time per Fiscal Quarter), Tenant shall furnish to Landlord a certification stating that all or a specified portion of Impositions, utilities, insurance premiums or, to the extent specified by Landlord, any other amounts payable by Tenant hereunder that have, in each case, come due prior to the date of such certification have been paid (or that such payments are being contested in good faith by Tenant in accordance herewith) and specifying the portion of the Leased Property to which such payments relate.

4.4      Impound Account . At Landlord’s option following the occurrence and during the continuation of a monetary Tenant Event of Default (to be exercised by thirty (30) days’ written notice to Tenant), and provided Tenant is not already being required to impound such payments in accordance with the requirements of Section  31.3 below, Tenant shall be required to deposit, at the time of any payment of Rent, an amount equal to one-twelfth (1/12 th ) of the sum of (i) Tenant’s estimated annual real and personal property taxes required pursuant to Section  4.1

 

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hereof (as reasonably determined by Landlord), and (ii) Tenant’s estimated annual insurance premium costs pursuant to Article XIII hereof (as reasonably determined by Landlord). Such amounts shall be applied to the payment of the obligations in respect of which said amounts were deposited, on or before the respective dates on which the same or any of them would become due. The reasonable cost of administering such impound account shall be paid by Tenant. Nothing in this Section  4.4 shall be deemed to affect any other right or remedy of Landlord hereunder.

ARTICLE V

NO TERMINATION, ABATEMENT, ETC.

Except as otherwise specifically provided in this Lease, Tenant shall remain bound by this Lease in accordance with its terms. The obligations of Landlord and Tenant hereunder shall be separate and independent covenants and agreements and the Rent and all other sums payable by Tenant hereunder shall continue to be payable in all events unless the obligations to pay the same shall be terminated pursuant to the express provisions of this Lease or by termination of this Lease as to all or any portion of the Leased Property other than by reason of a Tenant Event of Default. Without limitation of the preceding sentence, the respective obligations of Landlord and Tenant shall not be affected by reason of, except as expressly set forth in Articles XIV and XV , (i) any damage to or destruction of the Leased Property, including any Capital Improvement or any portion thereof from whatever cause, or any Condemnation of the Leased Property, including any Capital Improvement or any portion thereof or, discontinuance of any service or utility servicing the same; (ii) the lawful or unlawful prohibition of, or restriction upon, Tenant’s use of the Leased Property, including any Capital Improvement or any portion thereof or the interference with such use by any Person or by reason of eviction by paramount title; (iii) any claim that Tenant has or might have against Landlord by reason of any default or breach of any warranty by Landlord hereunder or under any other agreement between Landlord and Tenant or to which Landlord and Tenant are parties; (iv) any bankruptcy, insolvency, reorganization, consolidation, readjustment, liquidation, dissolution, winding up or other proceedings affecting Landlord or any assignee or transferee of Landlord; or (v) for any other cause, whether similar or dissimilar to any of the foregoing. Tenant hereby specifically waives all rights arising from any occurrence whatsoever which may now or hereafter be conferred upon it by law (a) to modify, surrender or terminate this Lease or quit or surrender the Leased Property or any portion thereof, or (b) which may entitle Tenant to any abatement, deduction, reduction, suspension or deferment of or defense, counterclaim, claim or set-off against the Rent or other sums payable by Tenant hereunder, except in each case as may be otherwise specifically provided in this Lease. Notwithstanding the foregoing, nothing in this Article V shall preclude Tenant from bringing a separate action against Landlord for any matter described in the foregoing clauses (ii), (iii) or (v) and Tenant is not waiving other rights and remedies not expressly waived herein. Tenant’s agreement that, except as may be otherwise specifically provided in this Lease, any eviction by paramount title as described in item (ii) above shall not affect Tenant’s obligations under this Lease, shall not in any way discharge or diminish any obligation of any insurer under any policy of title or other insurance, and, to the extent the recovery thereof is not necessary to compensate Landlord for any damages incurred by any such eviction, Tenant shall be entitled to a credit for any sums recovered by Landlord under

 

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any such policy of title or other insurance in respect of any such eviction up to the maximum amount paid by Tenant to Landlord under this Article V and Article XIV hereof in respect of any such eviction or the duration thereof, and Landlord, upon request by Tenant, shall assign Landlord’s rights under such policies to Tenant provided such assignment does not adversely affect Landlord’s rights under any such policy and provided further , that Tenant shall indemnify, defend, protect and save Landlord harmless from and against any liability, cost or expense of any kind that may be imposed upon Landlord in connection with any such assignment except to the extent such liability, cost or expense arises from the gross negligence or willful misconduct of Landlord.

ARTICLE VI

OWNERSHIP OF REAL AND PERSONAL PROPERTY

6.1      Ownership of the Leased Property .

(a)    Landlord and Tenant acknowledge and agree that they have executed and delivered this Lease with the understanding that (i) the Leased Property is the property of Landlord, (ii) Tenant has only the right to the possession and use of the Leased Property upon the terms and conditions of this Lease, (iii) this Lease is a “true lease,” is not a financing lease, mortgage, equitable mortgage, deed of trust, trust agreement, security agreement or other financing or trust arrangement, and the economic realities of this Lease are those of a true lease, (iv) the business relationship created by this Lease and any related documents is and at all times shall remain that of landlord and tenant, (v) this Lease has been entered into by each Party in reliance upon the mutual covenants, conditions and agreements contained herein, and (vi) none of the agreements contained herein is intended, nor shall the same be deemed or construed, to create a partnership between Landlord and Tenant, to make them joint venturers, to make Tenant an agent, legal representative, partner, subsidiary or employee of Landlord, or to make Landlord in any way responsible for the debts, obligations or losses of Tenant.

(b)    Each of the Parties covenants and agrees, subject to Section  6.1(d) , not to (i) file any income tax return or other associated documents, (ii) file any other document with or submit any document to any governmental body or authority, or (iii) enter into any written contractual arrangement with any Person, in each case that takes a position other than that this Lease is a “true lease” with Landlord as owner of the Leased Property (except as expressly set forth below) and Tenant as the tenant of the Leased Property. For U.S. federal, state and local income tax purposes, Landlord and Tenant agree that (x) Landlord shall be treated as the owner of the Leased Property eligible to claim depreciation deductions under Sections 167 or 168 of the Code with respect to all Leased Property excluding the Leased Property described in clause (y) below, and (y) Tenant shall be treated as owner of, and eligible to claim depreciation deductions under Sections 167 or 168 of the Code with respect to, all Tenant Capital Improvements (including, for avoidance of doubt and for purposes of this sentence, Tenant Material Capital Improvements) and Material Capital Improvements funded by Landlord pursuant to a Landlord MCI Financing that is treated as a loan for such income tax purposes.

 

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(c)    If, notwithstanding (i) the form and substance of this Lease, (ii) the intent of the Parties, and (iii) the language contained herein providing that this Lease shall at all times be construed, interpreted and applied to create an indivisible lease of all of the Leased Property, any court of competent jurisdiction finds that this Lease is a financing arrangement, then this Lease shall be considered a secured financing agreement and Landlord’s title to the Leased Property shall constitute a perfected first priority lien in Landlord’s favor on the Leased Property to secure the payment and performance of all the obligations of Tenant hereunder (and to that end, Tenant hereby grants, assigns and transfers to Landlord a security interest in all right, title or interest in or to any and all of the Leased Property, as security for the prompt and complete payment and performance when due of Tenant’s obligations hereunder). In such event, Tenant (and each Permitted Leasehold Mortgagee) authorizes Landlord, at the expense of Tenant, to make any filings or take other actions as Landlord reasonably determines are necessary or advisable in order to effect fully this Lease or to more fully perfect or renew the rights of Landlord, and to subordinate to Landlord the lien of any Permitted Leasehold Mortgagee, with respect to the Leased Property (it being understood that nothing in this Section  6.1(c) shall affect the rights of a Permitted Leasehold Mortgagee under Article XVII hereof). At any time and from time to time upon the request of Landlord, and at the expense of Tenant, Tenant shall promptly execute, acknowledge and deliver such further documents and do such other acts as Landlord may reasonably request in order to effect fully this Lease or to more fully perfect or renew the rights of Landlord with respect to the Leased Property as described in this Lease. If Tenant should reasonably conclude that, as a result of change in law or GAAP accounting standards, or a change in agency interpretation thereof, GAAP or the SEC require treatment different from that set forth in Section  6.1(b) for applicable non-tax purposes, then (x) Tenant shall promptly give prior Notice to Landlord, accompanied by a written statement that references the applicable pronouncement that controls such treatment and contains a brief description and/or analysis that sets forth in reasonable detail the basis upon which Tenant reached such conclusion, and (y) notwithstanding Section  6.1(b) and this Section  6.1(c) , Tenant may comply with such requirements.

(d)    Notwithstanding the foregoing, the Parties acknowledge that, as of the Commencement Date, for GAAP purposes this Lease is not expected to be treated as a “true lease” and that the Parties will prepare Financial Statements consistent with GAAP (and for purposes of any SEC or other similar governmental filing purposes), as applicable.

(e)    Landlord and Tenant acknowledge and agree that the Rent is the fair market rent for the use of the Leased Property and was agreed to by Landlord and Tenant on that basis, and the execution and delivery of, and the performance by Tenant of its obligations under, this Lease does not constitute a transfer of all or any part of the Leased Property, but rather the creation of the Leasehold Estate subject to the terms and conditions of this Lease.

(f)    Tenant waives any claim or defense based upon the characterization of this Lease as anything other than a true lease of the Leased Property. Tenant stipulates and agrees (1) not to challenge the validity, enforceability or characterization of this Lease of the Leased Property as a true lease, and (2) not to assert or take or omit to take any action inconsistent with the agreements and understandings set forth in Section  1.2 , Section  3.5 or this Section  6.1 . The expressions of intent, the waivers, the representations and warranties, the covenants, the agreements and the stipulations set forth in this Section  6.1 are a material inducement to Landlord entering into this Lease.

 

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6.2      Ownership of Tenant s Property . Tenant shall, during the entire Term, (a) own (or lease) and maintain on the Leased Property adequate and sufficient Tenant’s Property, and (b) maintain all of such Tenant’s Property in good order, condition and repair, in all cases as shall be necessary and appropriate in order to operate the Leased Property for the Primary Intended Use in material compliance with all applicable licensure and certification requirements and in material compliance with all applicable Legal Requirements, Insurance Requirements and Gaming Regulations. If any of Tenant’s Property requires replacement in order to comply with the foregoing, Tenant shall replace it with similar property of the same or better quality at Tenant’s sole cost and expense. Subject to the foregoing and the other express terms and conditions of this Lease, Tenant may sell, transfer, convey or otherwise dispose of Tenant’s Property in its discretion in the ordinary course of its business and Landlord shall have no rights to such sold, transferred, conveyed or otherwise disposed of Tenant’s Property. In the case of any such Tenant’s Property that is leased (rather than owned) by Tenant, Tenant shall use commercially reasonable efforts to ensure that any agreements entered into after the Commencement Date pursuant to which Tenant leases such Tenant’s Property are assignable to third parties in connection with any transfer by Tenant to a replacement lessee or operator at the end of the Term. To the extent not transferred to a Successor Tenant pursuant to Article XXXVI hereof, Tenant shall remove all of Tenant’s Property from the Leased Property at the end of the Term. Any tangible Tenant’s Property left on the Leased Property at the end of the Term whose ownership was not transferred to a Permitted Leasehold Mortgagee or its designee or assignee that entered into or succeeded to a New Lease pursuant to the terms hereof or to a Successor Tenant pursuant to Article XXXVI hereof shall be deemed abandoned by Tenant and shall become the property of Landlord.

ARTICLE VII

PRESENT CONDITION & PERMITTED USE

7.1      Condition of the Leased Property . Tenant acknowledges receipt and delivery of possession of the Leased Property and confirms that Tenant has examined and otherwise has knowledge of the condition of the Leased Property prior to and as of the execution and delivery of this Lease and has found the same to be satisfactory for its purposes hereunder, it being understood and acknowledged by Tenant that, immediately prior to entering into this Lease, Tenant (or its Affiliate) was the owner of the Leased Property and, accordingly, Tenant is charged with, and deemed to have, full and complete knowledge of all aspects of the condition and state of the Leased Property as of the Commencement Date. Without limitation of the foregoing and regardless of any examination or inspection made by Tenant, and whether or not any patent or latent defect or condition was revealed or discovered thereby, Tenant is leasing the Leased Property “as is” in its present condition. Without limitation of the foregoing, Tenant waives any claim or action against Landlord in respect of the condition of the Leased Property including any defects or adverse conditions not discovered or otherwise known by Tenant as of the Commencement Date. LANDLORD MAKES NO WARRANTY OR REPRESENTATION OF ANY KIND, EXPRESS OR IMPLIED, IN RESPECT OF THE LEASED PROPERTY OR ANY PART THEREOF, INCLUDING AS TO ITS FITNESS FOR USE, DESIGN OR CONDITION FOR ANY PARTICULAR USE OR PURPOSE OR OTHERWISE, OR AS TO THE NATURE OR QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, OR

 

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THE STATUS OF TITLE TO THE LEASED PROPERTY OR THE PHYSICAL CONDITION OR STATE OF REPAIR THEREOF, OR THE ZONING OR OTHER LAWS, ORDINANCES, BUILDING CODES, REGULATIONS, RULES AND ORDERS APPLICABLE THERETO OR TO ANY CAPITAL IMPROVEMENTS WHICH MAY BE NOW OR HEREAFTER CONTEMPLATED, THE IMPOSITIONS LEVIED IN RESPECT OF THE LEASED PROPERTY OR ANY PART THEREOF, OR THE USE THAT MAY BE MADE OF THE LEASED PROPERTY OR ANY PART THEREOF, THE INCOME TO BE DERIVED FROM THE FACILITY OR THE EXPENSE OF OPERATING THE SAME, OR THE EXISTENCE OF ANY HAZARDOUS SUBSTANCE, IT BEING AGREED THAT ALL SUCH RISKS, LATENT OR PATENT, ARE TO BE BORNE SOLELY BY TENANT INCLUDING ALL RESPONSIBILITY AND LIABILITY FOR ANY ENVIRONMENTAL REMEDIATION AND COMPLIANCE WITH ALL ENVIRONMENTAL LAWS. This Section  7.1 shall not be construed to limit Landlord’s express indemnities made hereunder.

7.2      Use of the Leased Property .

(a)    Tenant shall not use (or cause or permit to be used) the Facility, including the Leased Property, or any portion thereof, including any Capital Improvement, for any use other than the Primary Intended Use without the prior written consent of Landlord, which consent Landlord may withhold in its sole discretion. Landlord acknowledges that operation of the Leased Property for its Primary Intended Use generally may require a Gaming License under applicable Gaming Regulations and that without such a license, if applicable, neither Landlord nor Landlord REIT may operate, control or participate in the conduct of the gaming operations at the Facility. Tenant acknowledges that operation of the Facility for its Primary Intended Use generally may require a Gaming License under applicable Gaming Regulations and that without such a license, if applicable, Tenant may not operate, control or participate in the conduct of the gaming operations at the Facility.

(b)    Tenant shall not commit or suffer to be committed any waste with respect to the Facility, including on or to the Leased Property (and, without limitation, to the Capital Improvements) or cause or permit any nuisance thereon or, except as required by law, knowingly take or suffer any action or condition that will diminish in any material respect, the ability of the Leased Property to be used as a Gaming Facility (or otherwise for the Primary Intended Use) after the Expiration Date.

(c)    Tenant shall not, without the prior written consent of Landlord, which shall not be unreasonably withheld, conditioned or delayed, (i) initiate or support any limiting change in the permitted uses of the Leased Property (or to the extent applicable, limiting zoning reclassification of the Leased Property); (ii) seek any variance under existing land use restrictions, laws, rules or regulations (or, to the extent applicable, zoning ordinances) applicable to the Leased Property or the use of the Leased Property in any manner that adversely affects (other than to a de minimis extent) the value or utility of the Leased Property for the Primary Intended Use; (iii) execute or file any subdivision plat or condominium declaration affecting the Leased Property or any portion thereof, or institute, or permit the institution of, proceedings to alter any tax lot comprising the Leased Property or any portion thereof; or (iv) knowingly permit or suffer the Leased Property or any portion thereof to be used by the public or any Person in such manner as might make possible a claim of adverse usage or possession or of any implied

 

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dedication or easement ( provided that the proscription in this clause (iv) is not intended to and shall not restrict Tenant in any way from complying with any obligation it may have under applicable Legal Requirements, including, without limitation, Gaming Regulations, to afford to the public access to the Leased Property or any portion thereof). Without limiting the foregoing, (1) Tenant will not impose or permit the imposition of any restrictive covenants, easements or other encumbrances upon the Leased Property (including, subject to the last paragraph of Section  16.1 , any restriction, covenant, easement or other encumbrance which Tenant may otherwise impose or permit to be imposed pursuant to the provisions of any Permitted Exception Document) without Landlord’s consent, which shall not be unreasonably withheld, conditioned or delayed, provided , that , Landlord is given reasonable opportunity to participate in the process leading to such agreement, and (2) other than any liens or other encumbrances granted to a Fee Mortgagee, Landlord will not enter into agreements that will encumber the Leased Property without Tenant’s consent, which shall not be unreasonably withheld, conditioned or delayed, provided , that , Tenant is given reasonable opportunity to participate in the process leading to such agreement. Landlord agrees it will not withhold consent to utility easements and other similar encumbrances made in the ordinary course of Tenant’s business conducted on the Leased Property in accordance with the Primary Intended Use, provided the same does not adversely affect in any material respect the use or utility of the Leased Property for the Primary Intended Use. Nothing in the foregoing is intended to vitiate or supersede Tenant’s right to enter into Permitted Leasehold Mortgages or Landlord’s right to enter into Fee Mortgages in each case as and to the extent provided herein.

Except to the extent resulting from a Permitted Operation Interruption, Tenant shall cause the Facility to be Continuously Operated during the Term. During any time period that the Facility ceases to be Continuously Operated, solely for purposes of calculating Variable Rent in accordance herewith, the Net Revenue shall be subject to a floor equal to the Net Revenue for the Facility for the calendar year immediately preceding such period that the Facility is not Continuously Operated, prorated for the applicable time period that the Facility is not Continuously Operated. Further, if the Facility ceases to be Continuously Operated for a period of one (1) year, then Landlord shall have the right, in its sole discretion, to terminate this Lease.

(d)    Subject to Article  XII regarding permitted contests, Tenant, at its sole cost and expense, shall promptly (i) comply in all material respects with all Legal Requirements and Insurance Requirements affecting the Facility and the business conducted thereat, including those regarding the use, operation, maintenance, repair and restoration of the Leased Property or any portion thereof (including all Capital Improvements) and Tenant’s Property whether or not compliance therewith may require structural changes in any of the Leased Improvements or interfere with the use and enjoyment of the Leased Property or any portion thereof, and (ii) procure, maintain and comply in all material respects with all Gaming Regulations and Gaming Licenses, and other authorizations required for the use of the Leased Property (including all Capital Improvements) and Tenant’s Property for the applicable Primary Intended Use and any other use of the Leased Property (including Capital Improvements then being made) and Tenant’s Property, and for the proper erection, installation, operation and maintenance of the Leased Property and Tenant’s Property. In an emergency involving an imminent threat to human health and safety or damage to property, or in the event of a breach by Tenant of its obligations under this Section  7.2 which is not cured within any applicable cure period set forth herein,

 

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Landlord or its representatives (and any Fee Mortgagee) may, but shall not be obligated to, enter upon the Leased Property (and, without limitation, all Capital Improvements) (upon reasonable prior written notice to Tenant, except in the case of emergency, and Tenant shall be permitted to have Landlord or its representatives accompanied by a representative of Tenant) and take such reasonable actions and incur such reasonable costs and expenses to effect such compliance as it deems advisable to protect its interest in the Leased Property, and Tenant shall reimburse Landlord for all such reasonable out-of-pocket costs and expenses actually incurred by Landlord in connection with such actions.

(e)    Without limitation of any of the other provisions of this Lease, Tenant shall comply with all Property Documents (i) that are listed on the title polic(y)(ies) described on Schedule 6 attached hereto, or (ii) made after the date hereof in accordance with the terms of this Lease or as may otherwise be agreed to in writing by Tenant.

(f)    Tenant shall, throughout the Term, cause the Facility to be operated, managed, used, maintained and repaired in all material respects, in accordance with the Applicable Standards.

7.3      Ground Leases . Landlord may enter into new ground leases with respect to the Leased Property or any portion thereof (including pursuant to a sale-leaseback transaction) or amend or modify any such ground leases, provided that, notwithstanding anything herein to the contrary, Tenant shall not be obligated to comply with any additional or more onerous obligations under such new ground lease or amendment or modification thereof with which Tenant is not otherwise obligated to comply under this Lease (and, without limiting the generality of the foregoing, Tenant shall not be required to incur any additional monetary obligations (whether for payment of rents under such new ground lease or otherwise) in connection with such new ground lease or amendment or modification thereof) (except to a de minimis extent), unless Tenant approves such additional obligations in its sole and absolute discretion.

7.4      Third-Party Reports . Upon Landlord’s reasonable request from time to time, Tenant shall provide Landlord with copies of any third-party reports obtained by Tenant with respect to the Leased Property, including, without limitation, copies of surveys, environmental reports and property condition reports.

ARTICLE VIII

REPRESENTATIONS AND WARRANTIES

Each Party represents and warrants to the other that as of the Commencement Date: (i) this Lease and all other documents executed, or to be executed, by it in connection herewith have been duly authorized and shall be binding upon it; (ii) it is duly organized, validly existing and in good standing under the laws of the state of its formation and, as applicable, is duly authorized and qualified to perform this Lease within each State in which any Leased Property is located; and (iii) neither this Lease nor any other document executed or to be executed in connection herewith violates the terms of any other agreement of such Party.

 

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ARTICLE IX

MAINTENANCE AND REPAIR

9.1      Tenant Obligations . Subject to the provisions of Sections 10.1 , 10.2 and 10.3 relating to Landlord’s approval of certain Alterations, Capital Improvements and Material Capital Improvements, Tenant, at its expense and without the prior consent of Landlord, shall maintain the Leased Property, and every portion thereof, including all of the Leased Improvements and the structural elements and the plumbing, heating, ventilating, air conditioning, electrical, lighting, sprinkler and other utility systems thereof, all fixtures and all appurtenances to the Leased Property including any and all private roadways, sidewalks and curbs appurtenant to the Leased Property, and Tenant’s Property, in each case in good order and repair whether or not the need for such repairs occurs as a result of Tenant’s use, any prior use, the elements or the age of the Leased Property, and, with reasonable promptness, make all reasonably necessary and appropriate repairs thereto of every kind and nature, including those necessary to ensure continuing compliance with all Legal Requirements (including, without limitation, all Gaming Regulations and Environmental Laws) (to the extent required hereunder), Insurance Requirements, the Ground Leases and Property Documents whether now or hereafter in effect (other than any Ground Leases or Property Documents (or modifications to Ground Leases or Property Documents) entered into after the Commencement Date that impose obligations on Tenant (other than de minimis obligations) to the extent (x) entered into by Landlord without Tenant’s consent pursuant to Section  7.2(c) or (y) Tenant is not required to comply therewith pursuant to Section  7.3 ), and, with respect to any Fee Mortgages, the applicable provisions of such Fee Mortgage Documents as and only to the extent Tenant is required to comply therewith pursuant to Article XXXI hereof, in each case except to the extent otherwise provided in Article XIV or Article XV of this Lease, whether interior or exterior, structural or non-structural, ordinary or extraordinary, foreseen or unforeseen or arising by reason of a condition existing prior to or first arising after the Commencement Date.

9.2      No Landlord Obligations . Landlord shall not under any circumstances be required to (i) build or rebuild any improvements on the Leased Property; (ii) make any repairs, replacements, alterations, restorations or renewals of any nature to the Leased Property, whether ordinary or extraordinary, structural or non-structural, foreseen or unforeseen, or to make any expenditure whatsoever with respect thereto; or (iii) maintain the Leased Property in any way. Tenant hereby waives, to the extent permitted by law, the right to make repairs at the expense of Landlord pursuant to any law in effect at the time of the execution of this Lease or hereafter enacted. This Section  9.2 shall not be construed to limit Landlord’s express indemnities, if any, made hereunder.

9.3      Landlord s Estate . Nothing contained in this Lease and no action or inaction by Landlord shall be construed as (i) constituting the consent or request of Landlord, expressed or implied, to any contractor, subcontractor, laborer, materialman or vendor to or for the performance of any labor or services or the furnishing of any materials or other property for the construction, alteration, addition, repair or demolition of or to the Leased Property, or any part thereof, or any Capital Improvement; or (ii) giving Tenant any right, power or permission to contract for or permit the performance of any labor or services or the furnishing of any materials

 

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or other property in such fashion as would permit the making of any claim against Landlord in respect thereof or to make any agreement that may create, or in any way be the basis for, any right, title, interest, lien, claim or other encumbrance upon the estate of Landlord in the Leased Property, or any portion thereof or upon the estate of Landlord in any Capital Improvement.

9.4      End of Term . Subject to Sections 17.1(f) and 36.1 , Tenant shall, upon the expiration or earlier termination of the Term, vacate and surrender and relinquish in favor of Landlord all rights to the Leased Property (together with all Capital Improvements, including all Tenant Capital Improvements, except to the extent provided in Section  10.4 in respect of Tenant Material Capital Improvements), in each case, in the condition in which such Leased Property was originally received from Landlord and, in the case of Capital Improvements (other than Tenant Material Capital Improvements to the extent provided in Section  10.4 ), when such Capital Improvements were originally introduced to the Facility, except as repaired, rebuilt, restored, altered or added to as permitted or required by the provisions of this Lease and except for ordinary wear and tear and subject to any Casualty Event or Condemnation as provided in Articles XIV and XV .

ARTICLE X

ALTERATIONS

10.1      Alterations, Capital Improvements and Material Capital Improvements .

(a)    Tenant shall not be required to obtain Landlord’s consent or approval to make any Alterations or Capital Improvements (including any Material Capital Improvement) to the Leased Property; provided, however , that all such Alterations and Capital Improvements (i) shall be of equal quality to or better quality than the applicable portions of the existing Facility, as applicable, except to the extent Alterations or Capital Improvements of lesser quality would not, in the reasonable opinion of Tenant, result in any diminution of value of the Leased Property (or applicable portion thereof), (ii) shall not have an adverse effect on the structural integrity of any portion of the Leased Property, and (iii) shall not otherwise result in a diminution of value to the Leased Property (except to a de minimis extent). If any Alteration or Capital Improvement would not or does not meet the standards of the preceding sentence, then such Alteration or Capital Improvement shall be subject to Landlord’s written approval, which written approval shall not be unreasonably withheld, conditioned or delayed. Further, if any Alteration or Capital Improvement (or the aggregate amount of all related Alterations or Capital Improvements) has a total budgeted cost (as reasonably evidenced to Landlord) in excess of Seventy-Five Million and No/100 Dollars ($75,000,000.00) (the “ Alteration Threshold ”), then such Alteration or Capital Improvement (or series of related Alterations or Capital Improvements) shall be subject to the approval of Landlord and, if applicable, subject to Section  31.3 , any Fee Mortgagee, in each case which written approval shall not be unreasonably withheld, conditioned or delayed. Landlord shall have the right to select and engage, at Landlord’s cost and expense, construction consultants to conduct inspections of the Leased Property during the construction of any Material Capital Improvements, provided that (x) such inspections shall be conducted in a manner that does not interfere with such construction or the operation of the Facility (except to a de minimis extent), (y) prior to entering the Leased Property, such consultants shall deliver to Tenant evidence of insurance reasonably satisfactory to Tenant and (z) (irrespective of whether the consultant was engaged by Landlord, Tenant or otherwise) Landlord and Tenant shall be entitled to receive copies of such consultants’ work product and shall have direct access to and communication with such consultants.

 

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(b)    [Intentionally Omitted]

10.2      Landlord Approval of Certain Alterations and Capital Improvements . If Tenant desires to make any Alteration or Capital Improvement for which Landlord’s approval is required pursuant to Section  10.1 above, Tenant shall submit to Landlord in reasonable detail a general description of the proposal, the projected cost of the applicable Work and such plans and specifications, permits, licenses, contracts and other information concerning the proposal as Landlord may reasonably request. Such description shall indicate the use or uses to which such Alteration or Capital Improvement will be put and the impact, if any, on current and forecasted gross revenues and operating income attributable thereto. Landlord may condition any approval of any Alteration or Capital Improvement (including any Material Capital Improvement), to the extent required pursuant to Section  10.1 above, upon any or all of the following terms and conditions, to the extent reasonable under the circumstances:

(a)    the Work shall be effected pursuant to detailed plans and specifications approved by Landlord, which approval shall not be unreasonably withheld, conditioned or delayed;

(b)    the Work shall be conducted under the supervision of a licensed architect or engineer selected by Tenant (the “ Architect ”) and, for purposes of this Section  10.2 only, approved by Landlord, which approval shall not be unreasonably withheld, conditioned or delayed;

(c)    Landlord’s receipt from the general contractor and, if reasonably requested by Landlord, any major subcontractor(s) of a performance and payment bond for the full value of such Work, which such bond shall name Landlord as an additional obligee and otherwise be in form and substance and issued by a Person reasonably satisfactory to Landlord;

(d)    Landlord’s receipt of reasonable evidence of Tenant’s financial ability to complete the Work without materially and adversely affecting its cash flow position or financial viability; and

(e)    such Alteration or Capital Improvement will not result in the Leased Property becoming a “limited use” within the meaning of Revenue Procedure 2001-28 property for purposes of United States federal income taxes.

 

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10.3      Construction Requirements for Alterations and Capital Improvements . For any Alteration or Capital Improvement (excluding room renovations) having a budgeted cost in excess of Fifteen Million and No/100 Dollars ($15,000,000) (and as otherwise expressly required under subsection (g) below), Tenant shall satisfy the following:

(a)    If and to the extent plans and specifications typically would be (or, in accordance with applicable Legal Requirements, are required to be) obtained in connection with a project of similar scope and nature to such Alteration or Capital Improvement, Tenant shall, prior to commencing any Work in respect of the same, provide Landlord copies of such plans and specifications. Tenant shall also supply Landlord with related documentation, information and materials relating to the Property or such Work in Tenant’s possession or control, including, without limitation, surveys, property condition reports and environmental reports, as Landlord may reasonably request from time to time;

(b)    No Work shall be commenced until Tenant shall have procured and paid for all municipal and other governmental permits and authorizations required to be obtained prior to such commencement (if any), including those permits and authorizations required pursuant to any Gaming Regulations (if any), and, upon Tenant’s request, Landlord shall join in the application for such permits or authorizations whenever such action is necessary; provided, however , that (i) any such joinder shall be at no cost or expense to Landlord; and (ii) any plans required to be filed in connection with any such application which require the approval of Landlord as hereinabove provided shall have been so approved by Landlord;

(c)    Such Work shall not, and, if an Architect has been engaged for such Work, the Architect shall certify to Landlord that such Architect is of the opinion that construction will not, impair the structural strength of any component of the Facility or overburden the electrical, water, plumbing, HVAC or other building systems of any such component or otherwise violate applicable building codes or prudent industry practices.

(d)    If an Architect has been engaged for such Work and if plans and specifications have been obtained in connection with such Work, the Architect shall certify to Landlord that such Architect is of the opinion that the plans and specifications conform to, and comply with, in all material respects all applicable building, subdivision and zoning codes, laws, ordinances and regulations imposed by all governmental authorities having jurisdiction over the Leased Property.

(e)    During and following completion of such Work, the parking and other amenities which are located on or at the Leased Property shall remain adequate for the operation of the Facility for its Primary Intended Use and not be less than that which is required by law (including any variances with respect thereto) and any applicable Property Documents; provided, however , with Landlord’s prior consent, which approval shall not be unreasonably withheld, conditioned or delayed, and at no additional expense to Landlord, (i) to the extent sufficient additional parking is not already a part of an Alteration or Capital Improvement, Tenant may construct additional parking on or at the Leased Property; or (ii) Tenant may acquire off-site parking to serve the Leased Property as long as such parking shall be reasonably proximate to, and dedicated to, or otherwise made available to serve, the Leased Property;

(f)    All Work done in connection with such construction shall be done promptly and using materials and resulting in work that is at least as good product and condition as the remaining areas of the Leased Property and in conformity with all Legal Requirements, including, without limitation, any applicable minority or women owned business requirement; and

 

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(g)    If applicable in accordance with customary and prudent industry standards, promptly following the completion of such Work, Tenant shall deliver to Landlord “as built” plans and specifications with respect thereto, certified as accurate by the licensed architect or engineer selected by Tenant to supervise such work, and copies of any new or revised certificates of occupancy or other licenses, permits and authorizations required in connection therewith. In addition, with respect to any Alteration or Capital Improvement having a budgeted cost equal to or less than Fifteen Million and No/100 Dollars ($15,000,000.00), Tenant shall endeavor in good faith to (and upon Landlord’s request will) deliver to Landlord any “as-built” plans and specifications actually obtained by Tenant in connection with such Alteration or Capital Improvement

Notwithstanding anything to the contrary contained herein, at any time during the Term that Tenant is not a Controlled Subsidiary of CEC, this Section  10.3 shall be deemed modified by replacing all references therein to “Fifteen Million and No/100 Dollars ($15,000,000.00)” to “Five Million and No/100 Dollars ($5,000,000.00)”.

10.4      Landlord s Right of First Offer to Fund Material Capital Improvements .

(a)     Landlord’s Right to Submit Landlord’s MCI Financing Proposal . In advance of commencing any Work in connection with any Material Capital Improvement (provided, for purposes of clarification, that preliminary planning, designing, budgeting, evaluating (including environmental and integrity testing and the like) (collectively, “ Preliminary Studies ”), permitting and demolishing in preparation for such Material Capital Improvement shall not be considered “commencing” for purposes hereof), Tenant shall provide written notice (“ Tenant’s MCI Intent Notice ”) of Tenant’s intent to do so, which notice shall be accompanied by (i) a reasonably detailed description of the proposed Material Capital Improvement, (ii) the then-projected cost of construction of the proposed Material Capital Improvement, (iii) copies of the plans and specifications, permits, licenses, contracts and Preliminary Studies concerning the proposed Material Capital Improvement, to the extent then-available, (iv) reasonable evidence that such proposed Material Capital Improvement will, upon completion, comply with all applicable Legal Requirements, and (v) reasonably detailed information regarding the terms upon which Tenant is considering seeking financing therefor, if any. To the extent in Tenant’s possession or control, Tenant shall provide to Landlord any additional information about such proposed Material Capital Improvements which Landlord may reasonably request. Landlord (or, with respect to financing structured as a loan rather than as ownership of the real property by Landlord with a lease back to Tenant, Landlord’s Affiliate) may, but shall be under no obligation to, provide all (but not less than all) of the financing necessary to fund the applicable Material Capital Improvement (along with related fees and expenses, such as title fees, costs of permits, legal fees and other similar transaction costs) by complying with the option exercise requirements set forth below. Within thirty (30) days of receipt of Tenant’s MCI Intent Notice, Landlord shall notify Tenant in writing as to whether Landlord (or, if applicable, its Affiliate) is willing to provide financing for such proposed Material Capital Improvement and, if so, the terms and conditions upon which Landlord (or, if applicable, its Affiliate) is willing to do so in reasonable detail, in the form of a proposed term sheet (such terms and conditions, “ Landlord’s MCI Financing Proposal ”). Upon receipt, Tenant shall have ten (10) days to accept, reject or commence negotiating Landlord’s MCI Financing Proposal.

 

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(b)     If Tenant Accepts Landlord’s MCI Financing Proposal . If Tenant accepts Landlord’s MCI Financing Proposal (either initially or, after negotiation, a modified version thereof) (an “ Accepted MCI Financing Proposal ”) and such financing is actually consummated between Tenant and Landlord (or, if applicable, its Affiliate) as more particularly provided in Section  10.4(f) below (a “ Landlord MCI Financing ”), then, as and when constructed, such Material Capital Improvement shall be deemed part of the Leased Property for all purposes except as specifically provided in Section  6.1(b) hereof (and, without limitation, such Material Capital Improvements shall be surrendered to (and all rights therein shall be relinquished in favor of) Landlord upon the Expiration Date).

(c)     If Landlord Declines to Make Landlord’s MCI Financing Proposal . If Landlord declines or fails to timely submit Landlord’s MCI Financing Proposal, Tenant shall be permitted to either (1) use then-existing available financing or, subject to Article XVII , enter into financing arrangements with any lender, preferred equity holder and/or other third-party financing source (a “ Third -Party MCI Financing ”) for such Material Capital Improvement or (2) use Cash to pay for such Material Capital Improvement, provided , that if Tenant has not used then-existing, or entered into a new, Third-Party MCI Financing (or commenced such Material Capital Improvement utilizing Cash) by the date that is twelve (12) months following delivery of Tenant’s MCI Intent Notice, then, prior to entering into any such Third-Party MCI Financing and/or commencing such Material Capital Improvement, Tenant shall again be required to send Tenant’s MCI Intent Notice seeking financing from Landlord (on the terms contemplated by this Section  10.4 ).

(d)     If Tenant Declines Landlord s MCI Financing Proposal . If Landlord timely submits Landlord’s MCI Financing Proposal and Tenant rejects or fails to accept or commence negotiating Landlord’s MCI Financing Proposal within the applicable 10-day period (or, following commencing negotiating said proposal, Tenant notifies Landlord of Tenant’s decision to cease such discussions), then, subject to the remaining terms of this paragraph, Tenant shall be permitted to either (1) use then-existing, or, subject to Article XVII , enter into a new, Third-Party MCI Financing for such Material Capital Improvement (subject to the following proviso) or (2) use Cash to pay for such Material Capital Improvement, provided , that Tenant may not use then-existing, or enter into a new, Third-Party MCI Financing, except in each case on terms that are, taken as a whole, economically more advantageous to Tenant than those offered under Landlord’s MCI Financing Proposal, provided , further , that in no event shall Tenant be obligated to obtain financing from Landlord to the extent such financing from Landlord would violate or cause a default or breach under any Material Indebtedness of Tenant’s Parent Entity or Tenant, provided , however , that Tenant shall use good faith efforts to avoid, and cause Tenant’s Parent to avoid, agreeing to any contractual obligations that would vitiate Landlord’s right to provide financing for Tenant’s proposed Material Capital Improvement as provided in this Section  10.4 . In determining if financing is economically more advantageous, consideration may be given to, among other items, (x) pricing, amortization, length of term and duration of commitment period of such financing; (y) the cost, availability and terms of any financing sufficient to fund such Material Capital Improvement and other expenditures which are material in relation to the cost of such Material Capital Improvement (if any) which are intended to be funded in connection with the construction of such Material Capital Improvement and which are related to the use and operation of such Material Capital

 

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Improvement and (z) other customary considerations. Tenant shall provide Landlord with reasonable evidence of the terms of any such financing. If Tenant has not used then-existing, or entered into a new, Third-Party MCI Financing (or commenced such Material Capital Improvement utilizing Cash) by the date that is twelve (12) months following receipt of Landlord’s MCI Financing Proposal, then, prior to entering into any such Third-Party MCI Financing and/or commencing such Material Capital Improvement after such twelve (12) month period, Tenant shall again be required to send Tenant’s MCI Intent Notice seeking financing from Landlord (on the terms contemplated by this Section  10.4 ). For purposes of clarification, Tenant may use Cash to finance any applicable Material Capital Improvement (subject to the express terms and conditions hereof, including, without limitation, Tenant’s obligation to provide Tenant’s MCI Intent Notice).

(e)     Ownership of Material Capital Improvements Not Financed by Landlord . If Tenant constructs a Material Capital Improvement utilizing Third-Party MCI Financing or Cash in accordance with Sections 10.4(c) or (d) (such Material Capital Improvement being sometimes referred to in this Lease as a “ Tenant Material Capital Improvement ”), then, (A) as and when constructed, such Material Capital Improvement shall be deemed part of the Leased Property for all purposes except as specifically provided in Section  6.1(b) hereof, (B) upon any termination of this Lease prior to the Stated Expiration Date as a result of a Tenant Event of Default (except in the event a Permitted Leasehold Mortgagee has exercised its right to obtain a New Lease and complies in all respects with Section  17.1(f) and any other applicable provisions of this Lease), such Material Capital Improvements shall be owned by Landlord without any reimbursement by Landlord to Tenant, and, (C) upon the Stated Expiration Date, such Material Capital Improvements shall be transferred to Tenant; provided, however , upon written notice to Tenant at least one hundred eighty (180) days prior to the Stated Expiration Date, Landlord shall have the option to reimburse Tenant for such Tenant Material Capital Improvements in an amount equal to the Fair Market Ownership Value thereof, and, if Landlord elects to reimburse Tenant for such Tenant Material Capital Improvements, any amount due to Tenant for such reimbursement shall be credited against any amounts owed by Tenant to Landlord under this Lease as of the Stated Expiration Date and any remaining portion of such amount shall be paid by Landlord to Tenant on the Stated Expiration Date. If Landlord fails to deliver such written notice electing to reimburse Tenant for such Tenant Material Capital Improvements at least one hundred eighty (180) days prior to the Stated Expiration Date, or otherwise does not consummate such reimbursement at least sixty (60) days prior to the Stated Expiration Date (other than as a result of Tenant’s acts or omissions in violation of this Lease), then Landlord shall be deemed to have elected not to reimburse Tenant for such Tenant Material Capital Improvements. If Landlord elects or is deemed to have elected not to reimburse Tenant for such Tenant Material Capital Improvements in accordance with the foregoing sentence, Tenant shall have the option to either (1) prior to the Stated Expiration Date, remove such Tenant Material Capital Improvements and restore the affected Leased Property to the same or better condition existing prior to such Tenant Material Capital Improvement being constructed, at Tenant’s sole cost and expense, in which event such Tenant Material Capital Improvements shall be owned by Tenant or (2) leave the applicable Tenant Material Capital Improvements at the Leased Property at the Stated Expiration Date, at no cost to Landlord, in which event such Tenant Material Capital Improvements shall be owned by Landlord.

 

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(f)     Landlord MCI Financing . In the event of an Accepted MCI Financing Proposal, Tenant shall provide Landlord with the following prior to any advance of funds under such Landlord MCI Financing:

(i)    any information, certificates, licenses, permits or documents reasonably requested by Landlord which are necessary and obtainable to confirm that Tenant will be able to use the Material Capital Improvements upon completion thereof in accordance with the Primary Intended Use, including all required federal, state or local government licenses and approvals;

(ii)    an officer’s certificate and, if requested, a certificate from Tenant’s Architect providing appropriate backup information, setting forth in reasonable detail the projected or actual costs related to such Material Capital Improvements;

(iii)    except to the extent covered by the amendment referenced in clause  (iv) below, a construction loan and/or funding agreement (and such other related instruments and agreements), in a form reasonably agreed to by Landlord and Tenant, reflecting the terms of the Landlord MCI Financing, setting forth the terms of the Accepted MCI Financing Proposal, and without additional requirements on Tenant (including, without limitation, additional bonding or guaranty requirements) except those which are reasonable and customary and consistent in all respects with this Section  10.4 and the terms of the Accepted MCI Financing Proposal;

(iv)    except to the extent covered by the construction loan and/or funding agreement referenced in clause  (iii) above, an amendment to this Lease, in a form reasonably agreed to by Landlord and Tenant, which may include, among other things, an increase in the Rent (in amounts as agreed upon by the Parties pursuant to the Accepted MCI Financing Proposal), and other provisions as may be necessary or appropriate;

(v)    a deed conveying title to Landlord to any additional Land acquired for the purpose of constructing the Material Capital Improvement, free and clear of any liens or encumbrances except those approved by Landlord, and accompanied by (x) an owner’s policy of title insurance insuring the Fair Market Ownership Value of fee simple or leasehold (as applicable) title to such Land and any improvements thereon, free of any exceptions other than liens and encumbrances that do not materially interfere with the intended use of the Leased Property or are otherwise approved by Landlord, which approval shall not be unreasonably withheld, conditioned or delayed, and (y) an ALTA survey thereof;

(vi)    if Landlord obtains a lender’s policy of title insurance in connection with such Landlord MCI Financing, for each advance, endorsements to any such policy of title insurance reasonably satisfactory in form and substance to Landlord (i) updating the same without any additional exception except those that do not materially affect the value of such land and do not interfere with the intended use of the Leased Property, or as may otherwise be permitted under this Lease, or as may be approved by Landlord, which approval shall not be unreasonably withheld, conditioned or delayed, and (ii) increasing the coverage thereof by an amount equal to the then-advanced cost of the Material Capital Improvement; and

 

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(vii)    such other billing statements, invoices, certificates, endorsements, opinions, site assessments, surveys, resolutions, ratifications, lien releases and waivers and other instruments and information which are reasonable and customary and consistent in all respects with this Section  10.4 and the terms of the Accepted MCI Financing Proposal.

In the event that (1) Tenant is unable, for reasons beyond Tenant’s reasonable control, to satisfy any of the requirements set forth in this Section  10.4(f) (and Landlord is unable or unwilling to waive the same), (2) Landlord and Tenant are unable (despite good faith efforts continuing for at least sixty (60) days after agreement on the Accepted MCI Financing Proposal) to agree on any of the requirements of, or the form of any document required under, this Section  10.4(f) , or (3) Landlord fails or refuses to consummate the Landlord MCI Financing and/or advance funds thereunder, then, notwithstanding anything to the contrary in this Section  10.4 , Tenant shall be entitled to use then-existing, or, subject to Article XVII , enter into a new, Third-Party MCI Financing for such Material Capital Improvement or use Cash to pay for such Material Capital Improvement, without any requirement to send a further Tenant’s MCI Intent Notice to Landlord, provided, that such Material Capital Improvement shall be treated hereunder as a Tenant Material Capital Improvement, unless the circumstances described in clause (1) shall have occurred.

10.5      Minimum Capital Expenditures .

(a)     Minimum Capital Expenditures .

(i)     Initial Minimum Cap Ex Requirement . During the Initial Minimum Cap Ex Period, Tenant shall expend Capital Expenditures in an aggregate amount equal to no less than the Initial Minimum Cap Ex Amount (the “ Initial Minimum Cap Ex Requirement ”), which Capital Expenditures shall include, without limitation, such expenditures necessary to complete the renovation and refurbishment of at least four hundred twenty-nine (429) hotel rooms and four hundred eighty-nine (489) hotel rooms at the Mardi Gras North and Mardi Gras South towers located at the Leased Property, respectively, at a standard of quality similar to the renovation and refurbishment performed by Tenant with respect to the rooms located at the Carnaval Tower.

(ii)     Annual Minimum Building and Improvement Cap Ex Requirement . During each full Lease Year during the Term, commencing with the Lease Year that commences on January 1, 2022, measured as of the last day of each such Lease Year, Tenant shall expend Capital Expenditures with respect to the Leased Property (the “ Annual Minimum Building and Improvement Cap Ex Amount ”) in an aggregate that is equal to at least one percent (1%) of the sum of the Net Revenue from the Facility for the prior Lease Year on Capital Expenditures that constitute installation, restoration, repair, maintenance or replacement of any physical improvements or other physical items with respect to, or for, the Leased Property under this Lease (the “ Annual Minimum Building and Improvement Cap Ex Requirement ”).

 

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(iii)     Acquisitions of Material Property . If any real property having a value greater than Fifty Million and No/100 Dollars ($50,000,000.00) is acquired by Landlord and included in this Lease as part of the Leased Property, then the Minimum Cap Ex Requirement shall be adjusted as may be agreed upon by Landlord and Tenant in connection with such acquisition and the inclusion of such property as Leased Property hereunder.

(iv)     A pplication of Capital Expenditures . For the avoidance of doubt: (i) expenditures with respect to any property that is not included as Leased Property under this Lease shall not constitute “Capital Expenditures” nor count toward the Minimum Cap Ex Requirements and (ii) expenditures in respect of furniture, fixtures and equipment (including gaming equipment) to be installed or located at the Leased Property shall count towards the Initial Minimum Cap Ex Requirement but shall not count towards Annual Minimum Building and Improvement Cap Ex Requirement.

(v)     Unavoidable Delays . In the event an Unavoidable Delay occurs during the Term that delays Tenant’s ability to perform Capital Expenditures prior to the expiration of the applicable period for satisfying the applicable Minimum Cap Ex Requirements, such period during which such Unavoidable Delay occurred shall be extended, on a day-for-day basis, for the same amount of time that such Unavoidable Delay affects Tenant’s ability to perform the Capital Expenditures up to a maximum extension in each instance of up to eighteen (18) months. For the avoidance of doubt, Tenant’s obligation to satisfy the Minimum Cap Ex Requirements during any period during which an Unavoidable Delay did not occur shall not be extended as a result of the occurrence of an Unavoidable Delay during a prior period.

(vi)     Certain Remedies . The Parties acknowledge that Tenant’s agreement to satisfy the Minimum Cap Ex Requirements as required in this Lease is a material inducement to Landlord’s agreement to enter into this Lease and, accordingly, if Tenant fails to expend Capital Expenditures (or deposit funds into the Cap Ex Reserve) as and when required by this Lease and then, further, fails to cure such failure within sixty (60) days of receipt of written notice of such failure from Landlord, then the same shall be a Tenant Event of Default hereunder, and without limitation of any of Landlord’s other rights and remedies, Landlord shall have the right to seek the remedy of specific performance to require Tenant to expend the Required Capital Expenditures (or deposit funds into the Cap Ex Reserve). Furthermore, for the avoidance of doubt, Tenant acknowledges and agrees that the obligation of Tenant to expend the Required Capital Expenditures (or deposit funds into the Cap Ex Reserve) as provided in this Lease in each case constitutes a part of the obligations of Tenant that are guaranteed by the Guarantor and, with respect to Required Capital Expenditures required to be spent during the Term, shall survive termination of this Lease.

(b)     Cap Ex Reserve .

(i)     Deposits in Lieu of Expenditures . Notwithstanding anything to the contrary set forth in this Lease, if Tenant does not expend Capital Expenditures sufficient to satisfy the Minimum Cap Ex Requirements, then, so long as, as of the last date when

 

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such Minimum Cap Ex Requirements may be satisfied hereunder, there are Cap Ex Reserve Funds (as defined below) on deposit in the Cap Ex Reserve (as defined below) in an aggregate amount at least equal to such deficiency, then Tenant shall not be deemed to be in breach or default of its obligations hereunder to satisfy the Minimum Cap Ex Requirements, provided that Tenant shall spend such amounts so deposited in the Cap Ex Reserve within six (6) months after the last date when the Minimum Cap Ex Requirements to which such amounts relate may be satisfied hereunder (subject to extension in the event of an Unavoidable Delay during such six (6) month period, on a day-for-day basis, for the same amount of time that such Unavoidable Delay delays Tenant’s ability to perform the Capital Expenditures). For the avoidance of doubt, any funds disbursed from the Cap Ex Reserve and spent on Capital Expenditures as described in this Section shall be applied to the Minimum Cap Ex Requirements for the period for which such funds were deposited (and shall be deemed to be the funds that have been in the Cap Ex Reserve for the longest period of time) and shall not be applied to the Minimum Cap Ex Requirements for the subsequent period in which they are actually spent.

(ii)     Deposits into Cap Ex Reserve . Tenant may, at its election, at any time, deposit funds (the “ Cap Ex Reserve Funds ”) into an Eligible Account held by Tenant (the “ Cap Ex Reserve ”). If required by Fee Mortgagee, Landlord and Tenant shall enter into a customary and reasonable control agreement for the benefit of Fee Mortgagee and Landlord with respect to the Cap Ex Reserve. Tenant shall not commingle Cap Ex Reserve Funds with other monies held by Tenant or any other party. All interest on Cap Ex Reserve Funds shall be for the benefit of Tenant and added to and become a part of the Cap Ex Reserve and shall be disbursed in the same manner as other monies deposited in the Cap Ex Reserve. Tenant shall be responsible for payment of any federal, state or local income or other tax applicable to the interest earned on the Cap Ex Reserve Funds credited or paid to Tenant.

(iii)     Disbursements from Cap Ex Reserve . Tenant shall be entitled to use Cap Ex Reserve Funds solely for the purpose of paying for (or reimbursing Tenant for) the cost of Capital Expenditures. Landlord shall permit disbursements to Tenant of Cap Ex Reserve Funds from the Cap Ex Reserve to pay for Capital Expenditures or to reimburse Tenant for Capital Expenditures, within ten (10) days following written request from Tenant, which request shall specify the amount of the requested disbursement and a general description of the type of Capital Expenditures to be paid or reimbursed using such Cap Ex Reserve Funds. Tenant shall not make a request for disbursement from the Cap Ex Reserve (x) more frequently than once in any calendar month nor (y) in amounts less than Fifty Thousand and No/100 Dollars ($50,000.00). Any Cap Ex Reserve Funds remaining in the Cap Ex Reserve on satisfaction of the Minimum Cap Ex Requirements for which such Cap Ex Reserve Funds were deposited or on the Expiration Date shall be returned by Landlord to Tenant, provided that Landlord shall have the right to apply Cap Ex Reserve Funds remaining on the Expiration Date against any amounts owed by Tenant to Landlord as of the Expiration Date and/or the sum of any remaining Required Capital Expenditures required to have been incurred prior to the Expiration Date.

 

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(iv)     Security Interest in Cap Ex Reserve Funds . Tenant grants to Landlord a first-priority security interest in the Cap Ex Reserve and all Cap Ex Reserve Funds, as additional security for performance of Tenant’s obligations under this Lease. Landlord shall have the right to collaterally assign the security interest granted to Landlord in the Cap Ex Reserve and Cap Ex Reserve Funds to any Fee Mortgagee. Notwithstanding the foregoing or anything herein to the contrary, (i) Landlord may not foreclose upon the lien on the Cap Ex Reserve and Cap Ex Reserve Funds, and Fee Mortgagee may not apply the Cap Ex Reserve Funds against the Fee Mortgage, in each case prior to the occurrence of the termination of this Lease by Landlord pursuant to Section  16.2(x) hereof, and (ii) any time during which a Tenant Event of Default is continuing, Fee Mortgagee or Landlord may apply Cap Ex Reserve Funds toward the payment of Capital Expenditures incurred by Tenant. Landlord acknowledges that a Permitted Leasehold Mortgagee may have a Lien on the Cap Ex Reserve, which Lien in favor of a Permitted Leasehold Mortgagee is senior in priority to the lien thereon in favor of Landlord.

(c)     Capital Expenditures Report . Within thirty (30) days after the end of each calendar month during the Term, Tenant shall submit to Landlord a report, substantially in the form attached hereto as Exhibit C  setting forth, with respect to such month, on an unaudited, basis, (A) revenues for the Leased Property, and (B) Capital Expenditures with respect to the Leased Property. Landlord shall keep each such report confidential in accordance with Section  41.15 of this Lease.

(d)     Annual Capital Budget . Tenant shall furnish to Landlord, for informational purposes only, a copy of the annual capital budget for the Facility for each Fiscal Year, in each case not later than fifty-five (55) days following the commencement of the Fiscal Year to which such annual capital budget relates. For the avoidance of doubt, without limitation of Tenant’s Capital Expenditure requirements pursuant to Section  10.5(a) , Tenant shall not be required to comply with such annual capital budget and it shall not be a breach or default by Tenant hereunder in the event Tenant deviates from such annual capital budget.

ARTICLE XI

LIENS

Subject to the provisions of Article XII relating to permitted contests and without limitation of the provisions of Section  7.1 relating to among other things Tenant’s acceptance of the Leased Property in its “as is” condition, Tenant will not directly or indirectly create or allow to remain and will promptly discharge at its expense any lien, encumbrance, attachment, title retention agreement or claim upon the Leased Property or any portion thereof or any attachment, levy, claim or encumbrance in respect of the Rent, excluding, however, (i) this Lease; (ii) any matters that existed as of the Commencement Date with respect to the Leased Property or any portion thereof (other than any mechanics’, materialmans’ and other liens that attach to the Leased Property in connection with any work conducted prior to the Commencement Date); (iii) restrictions, liens and other encumbrances which are consented to in writing by Landlord (such consent not to be unreasonably withheld, conditioned or delayed); (iv) liens for Impositions which Tenant is not required to pay hereunder (if any); (v) Subleases permitted by

 

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Article XXII and any other lien or encumbrance expressly permitted under the provisions of this Lease; (vi) liens for Impositions not yet delinquent or being contested in accordance with Article XII , provided that Tenant has provided appropriate reserves to the extent required under GAAP and any foreclosure or similar remedies with respect to such Impositions have not been instituted and no notice as to the institution or commencement thereof has been issued except to the extent such institution or commencement is stayed no later than twenty (20) days after such notice is issued; (vii) liens of mechanics, laborers, materialmen, suppliers or vendors for sums either disputed or not yet due, provided that (1) the payment of such sums shall not be postponed under any related contract for more than sixty (60) days after the completion of the action giving rise to such lien unless being contested in accordance with Article XII and such reserve or other appropriate provisions as shall be required by law or GAAP shall have been made therefor and no foreclosure or similar remedies with respect to such liens has been instituted and no notice as to the institution or commencement thereof have been issued except to the extent such institution or commencement is stayed no later than twenty (20) days after such notice is issued; (2) any such liens are in the process of being contested as permitted by Article XII ; and (3) in the event any foreclosure action is commenced under any such lien, Tenant shall immediately remove, discharge or bond over such lien; (viii) any liens created by Landlord; (ix) liens related to equipment leases or equipment financing for Tenant’s Property which are used or useful in Tenant’s business on the Leased Property or any portion thereof, provided that the payment of any sums due under such equipment leases or equipment financing shall either (1) be paid as and when due in accordance with the terms thereof, or (2) be in the process of being contested as permitted by Article XII (and provided that a lienholder’s removal of any such Tenant’s Property from the Leased Property shall be subject to all applicable provisions of this Lease, and, without limitation, Tenant or such lienholder shall restore the Leased Property from any damage effected by such removal); (x) liens granted as security for the obligations of Tenant and its Affiliates under a Permitted Leasehold Mortgage (and the documents relating thereto); provided, however , in no event shall the foregoing be deemed or construed to permit Tenant to encumber the Leasehold Estate (or a Subtenant to encumber its subleasehold interest) in the Leased Property or any portion thereof (other than, in each case, to a Permitted Leasehold Mortgagee or otherwise to the extent expressly permitted hereunder), without the prior written consent of Landlord, which consent may be granted or withheld in Landlord’s sole discretion; and provided further that upon request Tenant shall be required to provide Landlord with fully executed copies of any and all Permitted Leasehold Mortgages; and (xi) except as otherwise expressly provided in this Lease, easements, rights-of-way, restrictions (including zoning restrictions), covenants, encroachments, protrusions and other similar charges or encumbrances, and minor title deficiencies on or with respect to the Leased Property or any portion thereof, in each case whether now or hereafter in existence, not individually or in the aggregate materially interfering with the conduct of the business on the Leased Property for the Primary Intended Use, taken as a whole. For the avoidance of doubt, the parties acknowledge and agree that Tenant has not granted any liens in favor of Landlord as security for its obligations hereunder except as otherwise expressly provided under this Lease, and nothing contained herein shall be deemed or construed to prohibit the issuance of a lien on the Equity Interests in Tenant (it being agreed that any foreclosure by a lien holder on such interests in Tenant shall be subject to the restrictions on transfers of interests in Tenant and Change of Control set forth in Article  XXII ) or to prohibit Tenant from pledging (A) its Accounts and other Tenant’s Property as collateral (1) in connection with financings of equipment and other purchase money indebtedness or (2) to secure Permitted Leasehold

 

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Mortgages, or (B) its Accounts and other property of Tenant (other than Tenant’s Property); provided that Tenant shall in no event pledge to any Person that is not granted a Permitted Leasehold Mortgage hereunder any of Tenant’s Property to the extent that such Tenant’s Property cannot be removed from the Leased Property without damaging or impairing the Leased Property (other than in a de minimis manner).

ARTICLE XII

PERMITTED CONTESTS

Tenant, upon prior written notice to Landlord (except that no such notice shall be required to be given by Tenant to Landlord with respect to matters not exceeding Five Million and No/100 Dollars ($5,000,000.00)), on its own or in Landlord’s name, at Tenant’s expense, may contest, by appropriate legal proceedings conducted in good faith and with due diligence, the amount, validity or application, in whole or in part, of any licensure or certification decision (including pursuant to any Gaming Regulation), imposition of any disciplinary action, including both monetary and nonmonetary, pursuant to any Gaming Regulation, Imposition, Legal Requirement, Insurance Requirement, lien, attachment, levy, encumbrance, charge or claim; provided , that (i) in the case of an unpaid Imposition, lien, attachment, levy, encumbrance, charge or claim, the commencement and continuation of such proceedings shall suspend the collection thereof from Landlord and from the Leased Property; (ii) neither the Leased Property or any portion thereof, the Rent therefrom nor any part or interest in either thereof would be in any danger of being sold, forfeited, attached or lost pending the outcome of such proceedings; (iii) in the case of a Legal Requirement, neither Landlord nor Tenant would be in any imminent danger of criminal or material civil liability for failure to comply therewith pending the outcome of such proceedings; (iv) in the case of a Legal Requirement, Imposition, lien, encumbrance or charge, Tenant shall deliver to Landlord security in the form of cash, cash equivalents or a Letter of Credit, if and as may be reasonably required by Landlord to insure ultimate payment of the same and to prevent any sale or forfeiture of the Leased Property or any portion thereof or the Rent by reason of such non-payment or noncompliance; (v) in the case of an Insurance Requirement, the coverage required by Article XIII shall be maintained; (vi) upon Landlord’s request, Tenant shall keep Landlord reasonably informed as to the status of the proceedings; and (vii) if such contest be finally resolved against Landlord or Tenant, Tenant shall promptly pay the amount required to be paid, together with all interest and penalties accrued thereon, or comply with the applicable Legal Requirement or Insurance Requirement. Landlord, at Tenant’s expense, shall execute and deliver to Tenant such authorizations and other documents as may reasonably be required in any such contest, and, if reasonably requested by Tenant or if Landlord so desires, Landlord shall join as a party therein. The provisions of this Article XII shall not be construed to permit Tenant to contest the payment of Rent or any other amount (other than Impositions or Additional Charges contested in accordance herewith) payable by Tenant to Landlord hereunder. Tenant shall indemnify, defend, protect and save Landlord harmless from and against any liability, cost or expense of any kind that may be imposed upon Landlord in connection with any such contest and any loss resulting therefrom, except to the extent resulting from actions independently taken by Landlord (other than actions taken by Landlord at Tenant’s direction or with Tenant’s consent).

 

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ARTICLE XIII

INSURANCE

13.1      General Insurance Requirements . During the Term, Tenant shall, at its own cost and expense, maintain the minimum kinds and amounts of insurance described below. Such insurance shall apply to the ownership, maintenance, use and operations related to the Leased Property and all property located in or on the Leased Property (including Capital Improvements and Tenant’s Property). Except for policies insured by Tenant’s captive insurers, all policies shall be written with insurers authorized to do business in all states where Tenant operates and shall maintain A.M Best ratings of not less than “A-” “X” or better in the most recent version of Best’s Key Rating Guide. In the event that any of the insurance companies’ ratings fall below the requirements set forth above, Tenant shall have one hundred eighty (180) days within which to replace such insurance company with an insurance company that qualifies under the requirements set forth above. It is understood that Tenant may utilize so called Surplus lines companies and will adhere to the standard above.

(a)     Property Insurance .

(i)    Property insurance shall be maintained on the Leased Property, Capital Improvements and Tenant’s Property against loss or damage under a policy with coverage not less than that found on Insurance Services Office (ISO) “Causes of Loss – Special Form” and ISO “Building and Personal Property Form” or their equivalent forms (e.g., an “all risk” policy), in a manner consistent with the commercially reasonable practices of similarly situated companies engaged in the same or similar businesses operating in the same or similar locations. Such property insurance policy shall be in an amount not less than the greater of (a) Two Billion and No/100 Dollars ($2,000,000,000.00) and (b) the full replacement cost of the Facility; provided, that Tenant shall have the right (i) to limit maximum insurance coverage for loss or damage by earthquake (including earth movement) to a minimum amount of the projected ground up loss with a 500-year return period (as determined annually by an independent firm using RMS catastrophe modeling software or equivalent, and taking into account all locations insured under this property insurance, including other locations owned, leased or managed by Tenant), and (ii) to limit maximum insurance coverage for loss or damage by named windstorms per occurrence to a minimum amount of the projected ground up loss (including storm surge) with a 500-year return period (as determined annually by an independent firm using RMS catastrophe software or equivalent, and taking into account all locations insured under this property insurance, including other locations owned, leased or managed by Tenant); (iii) to limit maximum insurance coverage for loss or damage by flood to a minimum amount of Two Hundred Fifty Million and No/100 Dollars ($250,000,000.00), to the extent commercially available; provided, further, that in the event the premium cost of any earthquake, flood, named windstorm or terrorism peril (as required by Section  13.1(b) ) coverages are available only for a premium that is more than two and one-half (2.5) times the premium paid by Tenant for the third (3rd) year preceding the date of determination for the insurance policy contemplated by this Section  13.1(a) , then Tenant shall be entitled and required to purchase the maximum amount of

 

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insurance coverage it reasonably deems most efficient and prudent to purchase for such peril and Tenant shall not be required to spend additional funds to purchase additional coverages insuring against such risks; and provided, further, that certain property coverages other than earthquake, flood and named windstorm may be sub-limited as long as each sub-limit is commercially reasonable and prudent as determined by Tenant and to the extent that the amount of such sub-limit is less than the amount of such sub-limit in effect as of the Commencement Date, such sub-limit is approved by Landlord, such approval not to be unreasonably withheld.

(ii)    Such property insurance policy shall include, subject to Section  13.1(a)(i) above: (i) agreed amount coverage and/or a waiver of any co-insurance; (ii) building ordinance coverage (ordinance or law) including loss of the undamaged portions, the cost of demolishing undamaged portions, and the increased cost of rebuilding; and also including, but not limited to, any non-conforming structures or uses; (iii) equipment breakdown coverage (boiler and machinery coverage); (iv) debris removal; and (v) business interruption coverage in an amount not less than two (2) years of Rent and containing an Extended Period of Indemnity endorsement for an additional minimum six months period. Subject to Section  13.1(a)(i) , the property policy shall cover: wind/windstorm, earthquake/earth movement and flood and any sub-limits applicable to wind (e.g. named storms), earthquake and flood are subject to the approval of Landlord and Fee Mortgagee. Such policy shall (i) name Landlord as an additional insured and “loss payee” for its interests in the Leased Property and Rent; (ii) name each Fee Mortgagee and Permitted Leasehold Mortgagee as an additional insured, and (iii) include a New York standard mortgagee clause in favor of each Fee Mortgagee and Permitted Leasehold Mortgagee. Except as otherwise set forth herein, any property insurance loss adjustment settlement associated with the Leased Property shall require the written consent of Landlord, Tenant, and each Fee Mortgagee (to the extent required under the applicable Fee Mortgage Documents) unless the amount of the loss net of the applicable deductible is less than One Hundred Million and No/100 Dollars ($100,000,000.00) in which event no consent shall be required.

(b)     Property Terrorism Insurance . Property Insurance shall be maintained for acts of terrorism covered by the Terrorism Risk Insurance Program Authorization Act of 2015 (TRIPRA) and acts of terrorism and sabotage not certified by TRIPRA, with limits no less than One Billion Five Hundred Million and No/100 Dollars ($1,500,000,000.00) per occurrence for acts of terrorism covered by the Terrorism Risk Insurance Program Authorization Act of 2015 (TRIPRA) and Two Hundred Twenty-Five Million and No/100 Dollars ($225,000,000.00) for acts of terrorism and sabotage not certified by TRIPRA. Both coverages shall apply to property damage and business interruption. The provisions relating to loss payees, additional insureds and mortgagee clauses set forth in Section  13.1(a) above shall also apply to the coverages required by this Section  13.1(b) . If Tenant uses one or more of its captive insurers to provide this insurance coverage, the captive(s) must secure and maintain reinsurance from one or more reinsurers for those amounts which are not insured by the Federal Government, and which are in excess of a commercially reasonable policy deductible. Such reinsurers are subject to the same minimum financial ratings set forth in Section  13.1 . In the event TRIPRA is not extended or renewed, Landlord and Tenant shall mutually agree (in accordance with the procedures set forth in Section  13.6 ) upon replacement insurance requirements applicable to terrorism related risks.

 

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(c)     Flood Insurance . With respect to any portion of the Leased Property that is security under a Fee Mortgage, if at any time the area in which such Leased Property is located is designated a “Special Flood Hazard Area” as designated by the Federal Emergency Management Agency (or any successor agency), Tenant shall obtain separate flood insurance through the National Flood Insurance Program. Such flood insurance may be provided as part of Section  13.1(a) Property Insurance above.

(d)     Workers Compensation and Employers Liability Insurance. Workers compensation insurance as required by applicable state statutes and Employers Liability.

(e)     Commercial General Liability Insurance . For bodily injury, personal injury, advertising injury and property damage on an occurrence form with coverage no less than ISO Form CG 0001 or equivalent. This policy shall include the following coverages: (i) Liquor Liability; (ii) Named Peril/Time Element Pollution, to the extent commercially available to operators of properties similar to the subject Leased Property; (iii) Terrorism Liability; and (iv) a Separation of Insureds Clause.

(f)     Business Auto Liability Insurance . For bodily injury and property damage arising from the ownership, maintenance or use of owned, hired and non-owned vehicles (ISO Form CA 00 01 or equivalent).

(g)     Excess Liability Insurance. Excess Liability coverage shall be maintained over the required Employers Liability, Commercial General Liability and Business Auto Liability policies in an amount not less than Three Hundred Fifty Million and No/100 Dollars ($350,000,000.00) per occurrence and in the aggregate annually (where applicable). The annual aggregate limit applicable to Commercial General Liability shall apply per location. Tenant will use commercially reasonable efforts to obtain coverage as broad as the underlying insurance, including Terrorism Liability coverage, so long as such coverage is available at a commercially reasonable price.

(h)     Pollution Liability Insurance . For claims arising from the discharge, dispersal release or escape or any irritant or contaminant into or upon land, any structure, the atmosphere, watercourse or body of water, including groundwater. This shall include on and off-site clean up and emergency response costs and claims arising from above ground and below ground storage tanks. If this policy is provided on a “claims made” basis (i) the retroactive date shall remain as June 26, 1998 for legal liability; and (ii) coverage shall be maintained for two (2) years after the Term.

13.2      Name of Insureds . Except for the insurance required pursuant to Section 13.1(d) with respect to Workers Compensation and Employers Liability, all insurance provided by Tenant as required by this Article XIII shall include Landlord (including specified Landlord related entities as directed by Landlord) as a named insured or additional insured without restrictions beyond the restrictions that apply to Tenant and may include any Permitted Leasehold Mortgagee as an additional insured. The coverage provided to the additional insureds

 

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by Tenant’s insurance policies must be at least as broad as that provided to the first named insured on each respective policy. For avoidance of doubt, Landlord looks exclusively to Tenant’s insurance policies to protect itself from claims arising from the Leased Property and Capital Improvements. The required insurance policies shall protect Landlord against Landlord’s acts with respect to the Leased Property in the same manner that they protect Tenant against its acts with respect to the Leased Property. Except for the insurance required pursuant to Section  13.1(d) with respect to Workers Compensation and Employers Liability, the required insurance policies shall be endorsed to include others as additional insureds as required by Landlord and/or the Fee Mortgage Documents and/or Permitted Leasehold Mortgagee. The insurance protection afforded to all insureds (whether named insureds or additional insureds) shall be primary and shall not contribute with any insurance or self-insurance programs maintained by such insureds (including deductibles and self-insured retentions).

13.3     Deductibles or Self-Insured Retentions . Tenant may self-insure such risks that are customarily self-insured by companies of established reputation engaged in the same general line of business in the same general area. All increases in deductibles and self-insured retentions (collectively referred to as “Deductibles” in this Article XIII ) that apply to the insurance policies required by this Article XIII are subject to approval by Landlord, with such approval not to be unreasonable withheld, conditioned or delayed. Tenant is solely responsible for all Deductibles related to its insurance policies. The Deductibles Tenant has in effect as of the Commencement Date satisfy the requirements of this Section as of the Commencement Date.

13.4      Waivers of Subrogation . Landlord shall not be liable for any loss or damage insured by the insurance policies required to be maintained under this Article XIII and policies issued by Tenant’s captive insurers (including related Deductibles), it being understood that (i) Tenant shall look solely to its insurance for the recovery of such loss or damage; and (ii) such insurers shall have no rights of subrogation against Landlord. Each insurance policy shall contain a clause or endorsement which waives all rights of subrogation against Landlord, Fee Mortgagees and other entities or individuals as reasonably requested by Landlord.

13.5      Limits of Liability and Blanket Policies . The insured limits of liability maintained by Tenant shall be selected by Tenant in a manner consistent with the commercially reasonable practices of similarly situated tenants engaged in the same or similar businesses operating in the same or similar locations as the applicable Leased Property. The limits of liability Tenant has in effect as of the Commencement Date satisfy the requirements of this Section as of the Commencement Date. The insurance required by this Article XIII may be effected by a policy or policies of blanket insurance and/or by a combination of primary and excess insurance policies (all of which may insure additional properties owned, operated or managed by Tenant or its Affiliates), provided each policy shall be satisfactory to Landlord, acting reasonably, including, the form of the policy, provided such policies comply with the provisions of this Article XIII .

13.6     Future Changes in Insurance Requirements .

(a)    In the event one or more additional locations become Leased Property or Capital Improvements during the Term, whether through acquisition, lease, new construction or other means, Landlord may reasonably amend the insurance requirements set forth in this Article  XIII

 

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to properly address new risks or exposures to loss, in accordance with the procedures set forth in this Section  13.6(a) . For example, for construction projects, different forms of insurance may be required, such as builders risk, and Landlord and Tenant shall mutually agree upon insurance requirements applicable to the construction contractors. Tenant and Landlord shall work together in good faith to exchange information (including proposed construction agreements) and ascertain appropriate insurance requirements prior to Tenant being required to amend its insurance under this Section  13.6(a) ; provided , however , that any revision to insurance shall only be required if the revised insurance would be customarily maintained by similarly situated tenants engaged in the same or similar businesses operating in the same or similar locations as the applicable Leased Property. If Tenant and Landlord are unable to reach a resolution within thirty (30) days of the original notice of requested revision, the arbitration provisions set forth in Section  34.2 shall control.

(b)    In the event that (1) the operations of Tenant change in the future, and Tenant believes adjustments in Deductibles, insured limits or coverages are warranted, (2) Tenant desires to increase one or more Deductibles, reduce limits of liability below those in place as of the Commencement Date or materially reduce coverage, or (3) not more than once during any twelve (12) month period (or more frequently in connection with a financing or refinancing of a Fee Mortgage), Landlord reasonably determines that the insurance carried by Tenant is not, for any reason (whether by reason of the type, coverage, deductibles, insured limits, the reasonable requirements of Fee Mortgagees, or otherwise) commensurate with insurance customarily maintained by similarly situated tenants engaged in the same or similar businesses operating in the same or similar locations, the party seeking the change will advise the other party in writing of the requested insurance revision. Tenant and Landlord shall work together in good faith to determine whether the requested insurance revision shall be made; provided , however , that any revision to insurance shall only be made if the revised insurance would be customarily maintained by similarly situated tenants engaged in the same or similar businesses operating in the same or similar locations as the applicable Leased Property. If Tenant and Landlord are unable to reach a resolution within thirty (30) days of the original notice of requested revision, the arbitration provisions set forth in Section  34.2 shall control. Solely with respect to the insurance required by Section  13.1(g) above, in no event shall the outcome of an insurance revision pursuant to this Section  13.6 require Tenant to carry insurance in an amount which exceeds the product of (i) the amounts set forth in Section  13.1(g) hereof and (ii) the CPI Increase.

13.7      Notice of Cancellation or Non-Renewal . (a) Each required insurance policy shall contain an endorsement requiring thirty (30) days prior written notice to Landlord, Fee Mortgagees and Leasehold Mortgagees of any cancellation or non-renewal. Ten (10) days’ prior written notice shall be required for cancellation for non-payment of premium. Tenant shall secure replacement coverage to comply with the stated insurance requirements and provide new certificates of insurance to Landlord and others as directed by Landlord.

13.8      Copies of Documents . Tenant shall provide (i) binders evidencing renewal coverages no later than the applicable renewal date of each insurance policy required by this Article XIII ; and (ii) copies of all insurance policies required by this Article XIII (including policies issued by Tenant’s captive insurers which are in any way related to the required policies,

 

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including policies insuring Deductibles), within one hundred and twenty days (120) after inception date of each, and if additionally required, within ten (10) days of written request by Landlord. In addition, Tenant will supply documents that are related to the required insurance policies on January 1 of each calendar year during the Term and three (3) years afterwards, and as otherwise requested in writing by Landlord. Such documents shall be in formats reasonably acceptable to Landlord and include, but are not limited to, (i) statements of property value by location, (ii) risk modeling reports (e.g., named storms and earthquake), (iii) actuarial reports, (iv) loss/claims reports, (v) detailed summaries of Tenant’s insurance policies and, as respects Tenant’s captive insurers the most recent audited financial statements (including notes therein) and reinsurance agreements. Landlord shall hold the contents of the documents provided by Tenant as confidential; provided that Landlord shall be entitled to disclose the contents of such documents to its insurance consultants, attorneys, accountants and other agents in connection with the administration and/or enforcement of this Lease, and (ii) to any Fee Mortgagees, Permitted Leasehold Mortgagees and potential lenders and their respective representatives, and (iii) as may be required by applicable laws. Landlord shall utilize commercially reasonable efforts to cause each such person or entity to enter into a written agreement to maintain the confidentiality thereof for the benefit of Landlord and Tenant.

13.9      Certificates of Insurance . Certificates of insurance, evidencing the required insurance, shall be delivered to Landlord on the Commencement Date, annually thereafter, and upon written request by Landlord. If required by any Fee Mortgagee, Tenant shall provide endorsements and written confirmations that all premiums have been paid in full.

13.10      Other Requirements . Tenant shall comply with the following additional provisions:

(a)    Except as provided in Section  13.10(b) , in the event of a catastrophic loss or multiple losses at multiple properties owned or leased directly or indirectly by CEC and that are insured by CEC, then in the case that (i) such catastrophic loss or multiple losses exhaust any per occurrence or aggregate insurance limits under the property or terrorism insurance policies required by this Article XIII , (ii) at least one (1) such property affected by the catastrophic loss(es) is the Facility hereunder, and (iii) none of the other such properties affected by the catastrophic loss(es) is a Subject Facility (as defined below), then the property and terrorism insurance proceeds received in connection with such catastrophic loss(es) shall be allocated amongst the affected properties pro-rata based on the insured values of the impacted properties, with no property receiving an allocation exceeding the loss suffered by such property.

(b)    In the event of a catastrophic loss or multiple losses at multiple properties owned or leased directly or indirectly by CEC and that are insured by CEC, then in the case that at least one (1) such property is the Facility and at least one (1) other such property is a Facility under and as defined in any of the Existing Leases (each, a “ Subject Facility ”), and such catastrophic loss or multiple losses exhaust any per occurrence or aggregate insurance limits under the property or terrorism insurance policies required by this Article XIII, then each Subject Facility shall have first priority to insurance proceeds from the property policy or terrorism policy in connection with such catastrophic loss or multiple losses up to the reasonably anticipated amount of loss with respect to such Subject Facility. Any remaining proceeds shall be allocated among the Facility and any other affected properties covered by such policy of insurance or as provided in Section  13.10(a) above.

 

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(c)    In the event Tenant shall at any time fail, neglect or refuse to insure the Leased Property and Capital Improvements, or is not in full compliance with its obligations under this Article XIII , Landlord may, at its election, procure replacement insurance. In such event, Landlord shall disclose to Tenant the terms of the replacement insurance. Tenant shall reimburse Landlord for the cost of such replacement insurance within thirty (30) days after Landlord pays for the replacement insurance. The cost of such replacement insurance shall be reasonable considering the then-current market.

ARTICLE XIV

CASUALTY

14.1      Property Insurance Proceeds . All proceeds (except business interruption not allocated to rent expenses, if any) payable by reason of any property loss or damage to the Leased Property, or any portion thereof, under any property policy of insurance required to be carried hereunder shall be paid to Fee Mortgagee or to an escrow account held by a third party depositary reasonably acceptable to Landlord, Tenant and, if applicable, the Fee Mortgagee (in each case pursuant to an escrow agreement reasonably acceptable to the Parties and the Fee Mortgagee and intended to implement the terms hereof, and made available to Tenant upon request for the reasonable costs of preservation, stabilization, restoration, reconstruction and repair, as the case may be, of any damage to or destruction of the Leased Property, or any portion thereof; provided, however , that the portion of any such proceeds that are attributable to Tenant’s obligation to pay Rent shall be applied against Rent due by Tenant hereunder; and provided, further, that if the total amount of proceeds payable net of the applicable deductibles is Twenty Million and No/100 Dollars ($20,000,000.00) or less, and, if no Tenant Event of Default has occurred and is continuing, the proceeds shall be paid to Tenant and, subject to the limitations set forth in this Article XIV used for the repair of any damage to or restoration or reconstruction of the Leased Property in accordance with Section  14.2 . For the avoidance of doubt, any insurance proceeds payable by reason of (i) loss or damage to Tenant’s Property and/or Tenant Material Capital Improvements, or (ii) business interruption shall be paid directly to and belong to Tenant. Any excess proceeds of insurance remaining after the completion of the restoration or reconstruction of the Leased Property in accordance herewith shall be provided to Tenant. So long as no Tenant Event of Default is continuing, Tenant shall have the right to prosecute and settle insurance claims, provided that, in connection with insurance claims exceeding Twenty Million and No/100 Dollars ($20,000,000.00), Tenant shall consult with and involve Landlord in the process of adjusting any insurance claims under this Article XIV and any final settlement with the insurance company for claims exceeding Twenty Million and No/100 Dollars ($20,000,000.00) shall be subject to Landlord’s consent, such consent not to be unreasonably withheld, conditioned or delayed.

14.2      Tenant s Obligations Following Casualty .

(a)    In the event of a Casualty Event with respect to the Leased Property or any portion thereof (to the extent the proceeds of insurance in respect thereof are made available to

 

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Tenant as and to the extent required under the applicable escrow agreement), (i) Tenant shall restore such Leased Property (or any applicable portion thereof, excluding, at Tenant’s election, any Tenant Material Capital Improvement, unless such Tenant Material Capital Improvement is integrated into the Facility such that the Facility could not practically or safely be operated without restoring such Tenant Material Capital Improvement, provided that with respect to such Tenant Material Capital Improvement that Tenant is not required to rebuild or restore, Tenant shall repair and thereafter maintain the portions of the Leased Property affected by the loss or damage of such Tenant Capital Improvement or Tenant Material Capital Improvement in a condition commensurate with the quality, appearance and use of the balance of the Facility and satisfying the Facility’s parking requirements) to substantially the same condition as existed immediately before such damage or otherwise in a manner reasonably satisfactory to Landlord, and (ii) the damage caused by the applicable Casualty Event shall not terminate this Lease; provided, however , that if the applicable Casualty Event shall occur not more than two (2) years prior to the then-Stated Expiration Date and the cost to restore the Leased Property (excluding for avoidance of doubt any affected Tenant Material Capital Improvements that Tenant is not required to restore) to the condition immediately preceding the Casualty Event, as determined by a mutually approved contractor or architect, would equal or exceed twenty-five percent (25%) of the Fair Market Ownership Value of the Facility immediately prior to the time of such damage or destruction, then each of Landlord and Tenant shall have the option, exercisable at such Party’s sole and absolute discretion, to terminate this Lease, upon written notice to the other Party hereto delivered to such other Party within thirty (30) days of the determination of the amount of damage and the Fair Market Ownership Value of the Facility and, if such option is exercised by either Landlord or Tenant, this Lease shall terminate and Tenant shall not be required to restore the Facility and any insurance proceeds payable as a result of the damage or destruction shall be payable in accordance with Section  14.2(c) . Notwithstanding anything to the contrary contained herein, if a Casualty Event occurs (and/or if the determination of the amount of damage and/or the thirty (30) day period referred to in the preceding sentence is continuing) at a time when Tenant could send a Renewal Notice (provided, for this purpose, Tenant shall be permitted to send a Renewal Notice under Section  1.4 not more than twenty-four (24) months (rather than not more than eighteen (18) months) prior to the then current Stated Expiration Date), if Tenant has elected or elects to exercise the same at any time following Tenant’s receipt of such notice of termination from Landlord, neither Landlord nor Tenant may terminate this Lease under this Section  14.2(a) .

(b)    If Tenant is required to restore the affected Leased Property and the cost to restore the affected Leased Property exceeds the amount of proceeds received from the insurance required to be carried hereunder (subject to Section  14.2(e) ), then Tenant’s restoration obligations hereunder shall continue unimpaired, and Tenant shall provide Landlord with evidence reasonably acceptable to Landlord that Tenant has (or is reasonably expected to have) available to it any excess amounts needed to restore the Leased Property to the condition required hereunder. Such excess amounts shall be paid by Tenant.

(c)    In the event neither Landlord nor Tenant is required or elects to repair and restore the Leased Property, all insurance proceeds (except business interruption), other than proceeds reasonably attributed to any Tenant Material Capital Improvements (or other property owned by Tenant), which proceeds shall be and remain the property of Tenant, shall be paid to and retained by Landlord (after reimbursement to Tenant for any reasonably-incurred expenses in connection with the subject Casualty Event) free and clear of any claim by or through Tenant except as otherwise specifically provided below in this Article XIV .

 

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(d)    If Tenant fails to complete the restoration of the Facility and gaming operations do not recommence substantially in the same manner as prior to the applicable Casualty Event by the date that is the fourth (4 th ) anniversary of the date of any Casualty Event (subject to extension in the event of an Unavoidable Delay during such four (4) year period, on a day-for-day basis, for the same amount of time that such Unavoidable Delay delays Tenant’s ability to perform such restoration in accordance with this Section  14.2 ), then, without limiting any of Landlord’s rights and remedies otherwise, all remaining insurance proceeds shall be paid to and retained by Landlord free and clear of any claim by or through Tenant, provided, that, so long as no Tenant Event of Default has occurred and is continuing, Landlord agrees to use such remaining proceeds for repair and restoration with respect to such Casualty Event.

(e)    If, and solely to the extent that, the damage resulting from any applicable Casualty Event is not an insured event under the insurance policies required to be maintained by Tenant under this Lease, then Tenant shall not be obligated to restore the Leased Property in respect of the damage from such Casualty Event.

14.3      No Abatement of Rent . Except as expressly provided in this Article XIV , this Lease shall remain in full force and effect and Tenant’s obligation to pay Rent and all Additional Charges required by this Lease shall remain unabated during any period following a Casualty Event.

14.4      Waiver . Tenant waives any statutory rights of termination which may arise by reason of any damage or destruction of the Leased Property but such waiver shall not affect any contractual rights granted to Tenant under this Lease.

14.5      Insurance Proceeds and Fee Mortgagee . Notwithstanding anything herein (including, without limitation, Article XXXI hereof) or in any Fee Mortgage Documents to the contrary, Landlord shall require that any Fee Mortgage Documents (including, without limitation, with respect to the Existing Fee Mortgage) shall permit Tenant to rebuild in accordance with the terms and provisions of this Lease (and any such Fee Mortgage Documents shall expressly provide that Tenant or Landlord, as applicable, is entitled to the applicable insurance proceeds in accordance with the terms and provisions of this Lease).

ARTICLE XV

EMINENT DOMAIN

15.1      Condemnation . Tenant shall promptly give Landlord written notice of the actual or threatened Condemnation or any Condemnation proceeding affecting the Leased Property of which Tenant has knowledge and shall deliver to Landlord copies of any and all papers served in connection with the same.

 

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(a)     Total Taking . If the Facility is subject to a total and permanent Taking, this Lease shall automatically terminate as of the day before the date of such Taking or Condemnation.

(b)     Partial Taking . If a portion (but not all) of the Facility (and, without limitation, any Capital Improvements with respect thereto) is subject to a permanent Taking (“Partial Taking”), this Lease shall remain in effect so long as the Facility is not thereby rendered Unsuitable for its Primary Intended Use, and Rent shall be adjusted in accordance with the Rent Reduction Amount with respect to the subject portion of the Facility; provided, however , that if the remaining portion of the Facility is rendered Unsuitable for Its Primary Intended Use, this Lease shall terminate as of the day before the date of such Taking or Condemnation.

(c)     Restoration . If there is a Partial Taking and this Lease remains in full force and effect, Landlord shall make available to Tenant the Award to be applied first to the restoration of the Facility in accordance with this Lease and, to the extent required hereby, any affected Tenant Material Capital Improvements, and thereafter as provided in Section  15.2 . In such event, subject to receiving such Award, Tenant shall accomplish all necessary restoration in accordance with the following sentence (whether or not the amount of the Award received by Tenant is sufficient) and the Rent shall be adjusted in accordance with the Rent Reduction Amount. Tenant shall restore the Leased Property (excluding any Tenant Material Capital Improvement, unless such Tenant Material Capital Improvement is integrated into the Facility such that the Facility could not practically or safely be operated without restoring such Tenant Material Capital Improvement) as nearly as reasonably possible under the circumstances to a complete architectural unit of the same general character and condition as the Leased Property existing immediately prior to such Taking;

15.2      Award Distribution . Except as set forth below and in Section  15.1(c) hereof, the Award resulting from the Taking shall be paid as follows: (i) first, to Landlord to the extent of the Fair Market Ownership Value of Landlord’s interest in the Leased Property subject to the Taking (excluding any Tenant Material Capital Improvements), (ii) second, to Tenant to the extent of the Fair Market Property Value of Tenant’s Property and Tenant Material Capital Improvements subject to the Taking (but for avoidance of doubt, not including any amount for any unexpired portion of the Term), and (iii) third, any remaining balance shall be paid to Landlord. Notwithstanding the foregoing, Tenant shall be entitled to pursue its own claim with respect to the Taking for Tenant’s lost profits value and moving expenses and, the portion of the Award, if any, allocated to any Tenant Material Capital Improvements and Tenant’s Property, shall be and remain the property of Tenant free of any claim thereto by Landlord.

15.3      Temporary Taking . The taking of the Leased Property, or any part thereof, shall constitute a Taking by Condemnation only when the use and occupancy by the taking authority has continued for longer than one hundred eighty (180) consecutive days. During any shorter period, which shall be a temporary taking, all the provisions of this Lease shall remain in full force and effect and the Award allocable to the Term shall be paid to Tenant.

15.4      Condemnation Awards and Fee Mortgagee . Notwithstanding anything herein (including, without limitation, Article XXXI hereof) or in any Fee Mortgage Documents to the contrary, Landlord shall require that any Fee Mortgage Documents (including, without

 

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limitation, with respect to the Existing Fee Mortgage) shall permit Tenant to rebuild in accordance with the terms and provisions of this Lease (and any such Fee Mortgage Documents shall expressly provide that each of Tenant and Landlord, as applicable, is entitled to the applicable portion of the Award in accordance with the terms and provisions of this Lease).

ARTICLE XVI

DEFAULTS & REMEDIES

16.1      Tenant Events of Default . Any one or more of the following shall constitute a “ Tenant Event of Default ”:

(a)    Tenant shall fail to pay any installment of Rent when due and such failure is not cured within ten (10) days after written notice from Landlord of Tenant’s failure to pay such installment of Rent when due (and such notice of failure from Landlord may be given any time after such installment of Rent is one (1) day late);

(b)    Tenant shall fail to pay any Additional Charge (excluding, for the avoidance of doubt the Minimum Cap Ex Amount) within ten (10) days after written notice from Landlord of Tenant’s failure to pay such Additional Charge when due (and such notice of failure from Landlord may be given any time after such payment of any Additional Charge is one (1) day late);

(c)    Tenant or Guarantor shall:

(i)    file a petition in bankruptcy or a petition to take advantage of any insolvency law or statute under Federal law, specifically including Title 11, United States Code, §§ 101-1532, or analogous state law;

(ii)    make an assignment for the benefit of its creditors; or

(iii)    consent to the appointment of a receiver of itself or of the whole or substantially all of its property;

(iv)    (i) Tenant shall be adjudicated as bankrupt or a court of competent jurisdiction shall enter an order or decree appointing, without the consent of Tenant, a receiver of Tenant or of all or substantially all of Tenant’s property, or approving a petition filed against Tenant seeking reorganization or arrangement of Tenant under Federal law, specifically including Title 11, United States Code, §§ 101-1532, or analogous state law, and such judgment, order or decree shall not be vacated or set aside or stayed within sixty (60) days from the date of the entry thereof;

(v)    Guarantor shall be adjudicated as bankrupt or a court of competent jurisdiction shall enter an order or decree appointing, without the consent of Guarantor, a receiver of Guarantor or of all or substantially all of Guarantor’s property, or approving a petition filed against Guarantor seeking reorganization or arrangement of Guarantor under Federal law, specifically including Title 11, United States Code, §§ 101-1532, or analogous state law, and such judgment, order or decree shall not be vacated or set aside or stayed within ninety (90) days from the date of the entry thereof; or

 

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(d)    entry of an order or decree liquidating or dissolving Tenant or Guarantor, provided that the same shall not constitute a Tenant Event of Default if such order or decree shall be vacated, set aside or stayed within ninety (90) days from the date of the entry thereof,;

(e)    the estate or interest of Tenant in the Leased Property or any part thereof shall be levied upon or attached in any proceeding relating to more than Twenty-Five Million and No/100 Dollars ($25,000,000.00), and the same shall not be vacated, discharged or stayed pending appeal (or paid or bonded or otherwise similarly secured payment) within the later of ninety (90) days after commencement thereof or thirty (30) days after receipt by Tenant of notice thereof from Landlord; provided, however , that such notice shall be in lieu of and not in addition to any notice required under applicable law;

(f)    if Tenant or Guarantor shall fail to pay, bond, escrow or otherwise similarly secure payment of one or more final judgments aggregating in excess of the amount of Seventy-Five Million and No/100 Dollars ($75,000,000.00), which judgments are not discharged or effectively waived or stayed for a period of forty-five (45) consecutive days;

(g)    if Guarantor shall fail to pay any of the Obligations (as defined in the Guaranty) as and when provided in the Guaranty after giving effect to grace or cure periods therein if any;

(h)    any applicable Gaming License or other license material to the Facility’s operation for its Primary Intended Use is at any time terminated or revoked or suspended or placed under a trusteeship (and in each case such termination, revocation, suspension or trusteeship causes cessation of Gaming activity at the Facility) for more than thirty (30) days and such termination, revocation, suspension or trusteeship is not stayed pending appeal and would reasonably be expected to have a material adverse effect on Tenant taken as a whole or on the Facility taken as a whole;

(i)    if a Licensing Event with respect to Tenant under clause (a) of the definition of Licensing Event shall occur and is not resolved in accordance with Section  41.13 within the later of (i) thirty (30) days or (ii) such additional time period as may be permitted by the applicable Gaming Authorities;

(j)    Tenant fails to comply with any Additional Fee Mortgagee Requirements, which default is not cured within the applicable cure period set forth in the Fee Mortgage Documents, if the effect of such default is to cause, or to permit the holder or holders of the applicable Fee Mortgage (or a trustee or agent on behalf of such holder or holders) to cause such Fee Mortgage to become or be declared due and payable (or redeemable) prior to its stated maturity;

(k)    a transfer of Tenant’s interest in this Lease (including pursuant to a Change in Control) shall have occurred without the consent of Landlord to the extent such consent is required under Article XXII ;

 

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(l)    if Tenant shall fail to observe or perform any other term, covenant or condition of this Lease or Guarantor shall fail to observe or perform any term, covenant or condition under the Guaranty (other than a failure of Guarantor as provided in Section  16.1(g) above) and, in each case, such failure is not cured within thirty (30) days after written notice thereof from Landlord, provided, however , if such failure cannot reasonably be cured within such thirty (30) day period and Tenant (or Guarantor, as applicable) shall have commenced to cure such failure within such thirty (30) day period and thereafter diligently proceeds to cure the same, such thirty (30) day period shall be extended for such time as is reasonably necessary for Tenant (or Guarantor, as applicable) in the exercise of due diligence to cure such failure, provided that, with respect to any failure to perform, such cure period shall not exceed one-hundred and eighty (180) days in the aggregate. No Tenant Event of Default (other than a failure to make payment of money) shall be deemed to exist under this Lease during any time the curing thereof is prevented by an Unavoidable Delay, provided that upon the cessation of the Unavoidable Delay, Tenant (or Guarantor, as applicable) remedies the default within the time periods otherwise required hereunder; and

(m)    the occurrence of a Tenant Event of Default pursuant to Section  10.5(a)(vi) .

Notwithstanding anything contained herein to the contrary, (i) Landlord shall deliver all notices required pursuant to Section  16.1 concurrently to Tenant and Guarantor and (ii) a default by Tenant under any Permitted Leasehold Mortgage shall not in and of itself be a Tenant Event of Default hereunder (it being understood that if the circumstances that cause such default independently comprise a default hereunder that continues beyond all applicable notice and cure periods hereunder then such circumstances would cause a Tenant Event of Default hereunder).

Notwithstanding the foregoing, (i) Tenant shall not be in breach of this Lease solely as a result of the exercise by the party (other than Tenant, CRC, CEC or any of their respective Affiliates) to any of the Permitted Exception Documents of such party’s rights thereunder so long as Tenant undertakes commercially reasonable efforts to cause such party to comply or otherwise minimize such breach, and (ii) in the event that Tenant is required, under the express terms of any Permitted Exception Document(s), to take or refrain from taking any action, and taking or refraining from taking such action would result in a default under this Lease, then Tenant shall advise Landlord of the same, and Tenant and Landlord shall reasonably cooperate in order to address the same in a mutually acceptable manner, and so as to minimize any harm or liability to Landlord and to Tenant. For the avoidance of doubt, in no event shall a Permitted Exception Document excuse Tenant from its obligation to pay Rent or Additional Charges.

16.2      Landlord Remedies . Upon the occurrence and during the continuance of a Tenant Event of Default but subject to the provisions of Article XVII , Landlord may, subject to the terms of Section  16.3 below, do any one or more of the following: (x) terminate this Lease by giving Tenant no less than ten (10) days’ notice of such termination and the Term shall terminate and all rights and obligations of Tenant under this Lease shall cease, subject to any provisions that expressly survive the Expiration Date, (y) seek damages as provided in Section  16.3 hereof or (z) except to the extent expressly otherwise provided under this Lease, exercise any other right or remedy hereunder, at law or in equity available to Landlord as a result of any Tenant Event of Default. Tenant shall pay as Additional Charges all costs and expenses incurred by or on behalf

 

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of Landlord, including reasonable and documented attorneys’ fees and expenses, as a result of any Tenant Event of Default hereunder. Subject to Article  XIX and Section  17.1(f) hereof, at any time upon or following the Expiration Date, Tenant shall, if required by Landlord to do so, immediately surrender to Landlord possession of the Leased Property and quit the same and Landlord may enter upon and repossess such Leased Property by reasonable force, summary proceedings, ejectment or otherwise, and may remove Tenant and all other Persons and any of Tenant’s Property therefrom.

(a)    None of (i) the termination of this Lease, (ii) the repossession of the Leased Property, (iii) the failure of Landlord to relet the Leased Property or any portions thereof, (iv) the reletting of all or any portion of the Leased Property, or (v) the inability of Landlord to collect or receive any rentals due upon any such reletting, shall relieve Tenant of its liabilities and obligations hereunder, all of which shall survive any such termination, repossession or reletting. Landlord and Tenant agree that Landlord shall have no obligation to mitigate Landlord’s damages under this Lease.

(b)    If this Lease shall terminate pursuant to Section  16.2(x) or if Landlord shall obtain a court order permitting reentry following the occurrence of a Tenant Event of Default that is continuing, then, in any such event, Landlord or Landlord’s agents and employees may immediately or at any time thereafter reenter the Leased Property to the extent permitted by law (including applicable Gaming Regulations), either by summary dispossess proceedings or by any suitable action or proceeding at law, without being liable to indictment, prosecution or damages therefor, and may repossess the same, and may remove any Person therefrom, to the end that Landlord may have, hold and enjoy the Leased Property. The words “enter,” “reenter,” “entry” and “reentry,” as used herein, are not restricted to their technical legal meanings.

16.3      Damages .

(a)    If Landlord elects to terminate this Lease in writing upon a Tenant Event of Default during the Term, Tenant shall forthwith (x) pay to Landlord all Rent due and payable under this Lease to and including the date of such termination (together with interest thereon at the Overdue Rate from the date the applicable amount was due), and (y) pay on demand all damages to which Landlord shall be entitled at law or in equity, provided, however , Landlord’s damages with regard to unpaid Rent from and after the date of termination shall equal, as liquidated and agreed current damages in respect thereof, the sum of: (A) the worth at the time of award of the amount by which the unpaid Rent that (if the Lease had not been terminated) would have been payable hereunder after termination until the time of award exceeds the amount of such Rent loss that Tenant proves could have been reasonably avoided; plus (B) (x) the Rent which (if the Lease had not been terminated) would have been payable hereunder from the time of award until the then Stated Expiration Date, discounted to present value by applying a discount rate equal to the discount rate of the Federal Reserve Bank of New York at the time of award, plus one percent (1%), less (y) the Rent loss from the time of the award until the then Stated Expiration Date that Tenant proves could be reasonably avoided, discounted to present value by applying a discount rate equal to the discount rate of the Federal Reserve Bank of New York at the time of award, plus one percent (1%). As used in clause (A), the “worth at the time of award” shall be computed by allowing interest at the Overdue Rate from the date the applicable amount was due. As used in clauses (A) and (B), Variable Rent that would have been

 

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payable after termination for the remainder of the Term shall be determined based on: (1) if the date of termination occurs during a Variable Rent Payment Period, the Variable Rent amount payable during such Variable Rent Payment Period (if the Lease had not been terminated), and (2) if the date of termination occurs prior to the commencement of any Variable Rent Payment Period, the Variable Rent that (if the Lease had not been terminated) would be payable after termination for the remainder of the Term, assuming Net Revenue for the balance of the Term equals Net Revenue for the Fiscal Period ending immediately prior to the date of termination (it being understood the foregoing calculation of damages for unpaid Rent applies only to the amount of unpaid Rent damages owed to Landlord pursuant to Tenant’s obligation to pay Rent hereunder and does not prohibit or otherwise shall not limit Landlord from seeking damages for any indemnification or any other obligations of Tenant hereunder, with all such rights of Landlord reserved).

(b)    Notwithstanding anything otherwise set forth herein, if Landlord chooses not to terminate Tenant’s right to possession of the Leased Property (whether or not Landlord terminates this Lease) and has not been paid damages in accordance with Section  16.3(a) , then each installment of Rent and all other sums payable by Tenant to or for the benefit of Landlord under this Lease shall be payable as the same otherwise becomes due and payable, together with, if any such amount is not paid when due, interest at the Overdue Rate from the date when due until paid, and Landlord may enforce, by action or otherwise, any other term or covenant of this Lease (and Landlord may at any time thereafter terminate Tenant’s right to possession of the Leased Property and seek damages under Section  16.3(a) , to the extent not already paid for by Tenant under Section  16.3(a) or this Section  16.3(b) ).

(c)    If, as of the date of any termination of this Lease pursuant to Section  16.2(x) , the Leased Property shall not be in the condition in which Tenant has agreed to surrender the same to Landlord at the expiration or earlier termination of this Lease, then Tenant, shall pay, as damages therefor, the cost (as estimated by an independent contractor reasonably selected by Landlord) of placing the Leased Property in the condition in which Tenant is required to surrender the same hereunder.

16.4      Receiver . Subject to the rights of Permitted Leasehold Mortgagees hereunder, upon the occurrence and continuance of a Tenant Event of Default, and upon commencement of proceedings to enforce the rights of Landlord hereunder, but subject to any limitations of applicable law (including Gaming Regulations), Landlord shall be entitled, as a matter of right, to the appointment of a receiver or receivers acceptable to Landlord of the Leased Property and of the revenues, earnings, income, products and profits thereof, pending the outcome of such proceedings, with such powers as the court making such appointment shall confer.

16.5      Waiver . If Landlord initiates judicial proceedings or if this Lease is terminated by Landlord pursuant to this Article XVI , Tenant waives, to the extent permitted by applicable law, (i) any right of redemption, re-entry or repossession or similar laws for the benefit of Tenant; and (ii) the benefit of any laws now or hereafter in force exempting property from liability for rent or for debt.

 

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16.6      Application of Funds . Any payments received by Landlord under any of the provisions of this Lease during the existence or continuance of any Tenant Event of Default which are made to Landlord rather than Tenant due to the existence of a Tenant Event of Default shall be applied to Tenant’s obligations in the order which Landlord may reasonably determine or as may be prescribed by applicable Legal Requirements.

16.7      Landlord s Right to Cure Tenant s Default . If Tenant shall fail to make any payment or to perform any act required to be made or performed hereunder when due including, without limitation, if Tenant fails to expend any Required Capital Expenditures as required hereunder or fails to complete any work or restoration or replacement of any nature as required hereunder, or if Tenant shall take any action prohibited hereunder, or if Tenant shall breach any representation or warranty comprising Additional Fee Mortgagee Requirements (and Landlord reasonably determines that such breach could be expected to give rise to an event of default or an indemnification obligation of Landlord under the applicable Fee Mortgage), or Tenant fails to comply with any Additional Fee Mortgagee Requirements (other than representations and warranties), in all cases, after the expiration of any cure period provided for herein, Landlord, without waiving or releasing any obligation or default, may, but shall be under no obligation to, (i) make such payment or perform such act for the account and at the expense of Tenant (including, in the event of a breach of any such representation or warranty, taking actions to cause such representation or warranty to be true), and may, to the extent permitted by law, enter upon the Leased Property for such purpose and take all such action thereon as, in Landlord’s reasonable opinion, may be necessary or appropriate therefor, and (ii) subject to the terms of the applicable Fee Mortgage Documents, use funds in any Fee Mortgage Reserve Account for the purposes for which they were deposited in making any such payment or performing such act. All sums so paid by Landlord and all costs and expenses, including reasonable attorneys’ fees and expenses, so incurred, together with interest thereon at the Overdue Rate from the date on which such sums or expenses are paid or incurred by Landlord, shall be paid by Tenant to Landlord on demand as an Additional Charge.

16.8      Miscellaneous .

(a)    Suit or suits for the recovery of damages, or for any other sums payable by Tenant to Landlord pursuant to this Lease, may be brought by Landlord from time to time at Landlord’s election, and nothing herein contained shall be deemed to require Landlord to await the date whereon this Lease and the Term would have expired by limitation had there been no Tenant Event of Default, reentry or termination.

(b)    No failure by either Party to insist upon the strict performance of any agreement, term, covenant or condition of this Lease or to exercise any right or remedy consequent upon a breach thereof, and no acceptance by Landlord of full or partial Rent during the continuance of any such breach, shall constitute a waiver of any such breach or of such agreement, term, covenant or condition. No agreement, term, covenant or condition of this Lease to be performed or complied with by either Party, and no breach thereof, shall be or be deemed to be waived, altered or modified except by a written instrument executed by the Parties. No waiver of any breach shall affect or alter this Lease, but each and every agreement, term, covenant and condition of this Lease shall continue in full force and effect with respect to any other then existing or subsequent breach thereof. In the event Landlord claims in good faith that Tenant has breached any of the agreements, terms, covenants or conditions contained in this Lease, Landlord shall be entitled to seek to enjoin such breach or threatened breach and shall have the right to invoke any rights and remedies allowed at law or in equity or by statute or otherwise as though reentry, summary proceedings or other remedies were not provided for in this Lease.

 

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(c)    Except to the extent otherwise expressly provided in this Lease, each right and remedy of a Party provided for in this Lease shall be cumulative and shall be in addition to every other right or remedy provided for in this Lease.

(d)    Nothing contained in this Article XVI or otherwise shall vitiate or limit Tenant’s obligation to pay Landlord’s attorneys’ fees as and to the extent provided in Article XXXVII hereof, or any indemnification obligations under any express indemnity made by Tenant of Landlord or of any Landlord Indemnified Parties as contained in this Lease.

ARTICLE XVII

TENANT FINANCING

17.1      Permitted Leasehold Mortgagees .

(a)     Tenant May Mortgage the Leasehold Estate . On one or more occasions, without Landlord’s consent, Tenant may mortgage or otherwise encumber Tenant’s estate in and to the Leased Property (the “ Leasehold Estate ”) (or encumber the direct or indirect Equity Interests in Tenant) to one or more Permitted Leasehold Mortgagees under one or more Permitted Leasehold Mortgages and pledge its right, title and interest under this Lease as security for such Permitted Leasehold Mortgages or any related agreement secured thereby, provided, however , (i) in order for a Permitted Leasehold Mortgagee to be entitled to the rights and benefits pertaining to Permitted Leasehold Mortgagees pursuant to this Article XVII , such Permitted Leasehold Mortgagee must hold or benefit from a Permitted Leasehold Mortgage encumbering all of Tenant’s Leasehold Estate granted to Tenant under this Lease (subject to exclusions with respect to items that are not capable of being mortgaged and that, in the aggregate, are de minimis) or one hundred percent (100%) of the direct or indirect Equity Interests in Tenant at any tier of ownership, and (ii) that no Person shall be deemed to be a Permitted Leasehold Mortgagee hereunder unless and until (a) such Person delivers a written agreement to Landlord providing that in the event of a termination of this Lease by Landlord pursuant to Section  16.2(x) hereof, such Permitted Leasehold Mortgagee and any Persons for whom it acts as representative, agent or trustee, will not use or dispose of any Gaming License for use at a location other than at the Facility to which such Gaming License relates as of the date of the closing of a Lease Foreclosure Transaction (or, in the case of any additional facility added to this Lease after such date, as of the date that such additional facility is added to the Lease), (b) the applicable Permitted Leasehold Mortgage shall include an express acknowledgement that any exercise of remedies thereunder that would affect the Leasehold Estate shall be subject and subordinate to the terms of this Lease and (c) that any foreclosure or realization by any Permitted Leasehold Mortgagee pursuant to a Permitted Leasehold Mortgage or upon Tenant’s interest under this Lease or that would result in a transfer of all or any portion of Tenant’s interest in the Leased Property or this Lease shall in any case be subject to the applicable provisions, terms and conditions of Article XXII hereof.

 

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(b)     Notice to Landlord .

(i)    If Tenant shall, on one or more occasions, mortgage Tenant’s Leasehold Estate pursuant to a Permitted Leasehold Mortgage and if the holder of such Permitted Leasehold Mortgage shall provide Landlord with written notice of such Permitted Leasehold Mortgage (which notice with respect to any Permitted Leasehold Mortgage not evidenced by a recorded security instrument, in order to be effective, shall also state (or be accompanied by a notice of Tenant stating) the relative priority of all then-effective Permitted Leasehold Mortgages noticed to Landlord under this Section and shall be consented to in writing by all then-existing Permitted Leasehold Mortgagees) together with a true copy of such Permitted Leasehold Mortgage and the name and address of the Permitted Leasehold Mortgagee, Landlord and Tenant agree that, following receipt of such written notice by Landlord (which notice shall be accompanied by any items required pursuant to Section  17.1(a) above), the provisions of this Section  17.1 shall apply to each such Permitted Leasehold Mortgage. In the event of any assignment of a Permitted Leasehold Mortgage or in the event of a change of address of a Permitted Leasehold Mortgagee or of an assignee of such Permitted Leasehold Mortgage, written notice of such assignment or change of address and of the new name and address shall be provided to Landlord, and the provisions of this Section  17.1 shall continue to apply, provided such assignee is a Permitted Leasehold Mortgagee.

(i)    Landlord shall reasonably promptly following receipt of a communication purporting to constitute the notice provided for by subsection (b)(i) above (and such additional items requested by Landlord pursuant to the first sentence of Section 17.1(b)(iii)) acknowledge by an executed and notarized instrument receipt of such communication as constituting the notice provided for by subsection (b)(i) above and confirming the status of the Permitted Leasehold Mortgagee as such or, in the alternative, notify Tenant and the Permitted Leasehold Mortgagee of the rejection of such communication and any such items as not conforming with the provisions of this Section  17.1 and specify the specific basis of such rejection.

(ii)    After Landlord has received the notice provided for by subsection (b)(i) above, Tenant upon being requested to do so by Landlord, shall with reasonable promptness provide Landlord with copies of the Permitted Leasehold Mortgage, note or other obligations secured by such Permitted Leasehold Mortgage and any other documents pertinent to the Permitted Leasehold Mortgage reasonably requested by Landlord. If requested to do so by Landlord, Tenant shall thereafter also provide Landlord from time to time with a copy of each material amendment or other modification or supplement to such instruments. All recorded documents shall be accompanied by the appropriate recording stamp or other certification of the custodian of the relevant recording office as to their authenticity as true and correct copies of official records and all nonrecorded documents shall be accompanied by a certification by Tenant that such documents are true and correct copies of the originals. From time to time upon being requested to do so by Landlord, Tenant shall also notify Landlord of the date and place of recording and other pertinent recording data with respect to such instruments as have been recorded.

 

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(iii)    Notwithstanding the requirements of this Section  17.1(b) , it is agreed and acknowledged that Tenant’s Initial Financing (and the mortgages, security agreements and/or other loan documents in connection therewith) as of the date of this Lease shall be deemed a Permitted Leasehold Mortgage (with respect to which notice has been properly provided to Landlord pursuant to Section  17.1(b)(i) ) without the requirement that Tenant or Landlord comply with the initial requirements set forth in clauses (i) through (iii) above, (but, for the avoidance of doubt, Tenant’s Initial Financing is not relieved of the requirement that it satisfy the requirements of Section  17.1(a) or the last sentence of Section  17.1(b)(i) ). In addition, for the avoidance of doubt, the Parties confirm that Tenant shall not be relieved of the requirement to comply with the final three (3) sentences of Section 17.1(b)(iii) with respect to Tenant’s Initial Financing or any other financing with a Permitted Leasehold Mortgagee.

(c)     Default Notice to Permitted Leasehold Mortgagee . Landlord, upon providing Tenant any notice of default under this Lease, shall at the same time provide a copy of such notice to every Permitted Leasehold Mortgagee for which notice has been properly provided to Landlord pursuant to Section  17.1(b)(i) hereof. No such notice by Landlord to Tenant shall be deemed to have been duly given unless and until a copy thereof has been sent, in the manner prescribed in Article XXXV of this Lease, to every such Permitted Leasehold Mortgagee for which notice has been properly provided to Landlord pursuant to Section  17.1(b)(i) hereof. From and after the date such notice has been sent to a Permitted Leasehold Mortgagee, such Permitted Leasehold Mortgagee shall have the same period, with respect to its remedying any default or acts or omissions which are the subject matter of such notice or causing the same to be remedied, as is given Tenant after the giving of such notice to Tenant, plus in each instance, the additional periods of time specified in subsections (d) and (e) of this Section  17.1 to remedy or cause to be remedied the defaults or acts or omissions which are the subject matter of such notice specified in any such notice. Landlord shall accept such performance by or at the instigation of such Permitted Leasehold Mortgagee as if the same had been done by Tenant. Tenant authorizes each such Permitted Leasehold Mortgagee (to the extent such action is authorized under the applicable loan documents to which it acts as a lender, noteholder, investor, agent, trustee or representative) to take any such action at such Permitted Leasehold Mortgagee’s option and does hereby authorize entry upon the Leased Property by the Permitted Leasehold Mortgagee for such purpose.

(d)     Right to Terminate Notice to Permitted Leasehold Mortgagee . Anything contained in this Lease to the contrary notwithstanding, if any Tenant Event of Default shall occur which entitles Landlord to terminate this Lease, Landlord shall have no right to terminate this Lease on account of such Tenant Event of Default unless Landlord shall notify every Permitted Leasehold Mortgagee for which notice has been properly provided to Landlord pursuant to Section  17.1(b) hereof that the period of time given Tenant to cure such default or act or omission has lapsed and, accordingly, Landlord has the right to terminate this Lease (“ Right to Terminate Notice ”). The provisions of subsection (e) below of this Section  17.1 shall apply if, during (x) the thirty (30) day period following Landlord’s delivery of the Right to Terminate Notice if such Tenant Event of Default is capable of being cured by the payment of money, or

 

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(y) the ninety (90) day period following Landlord’s delivery of the Right to Terminate Notice, if such Tenant Event of Default is not capable of being cured by the payment of money, any Permitted Leasehold Mortgagee shall:

(i)    notify Landlord of such Permitted Leasehold Mortgagee’s desire to nullify such Right to Terminate Notice;

(ii)    pay or cause to be paid all Rent, Additional Charges, and other payments (A) then due and in arrears as specified in the Right to Terminate Notice to such Permitted Leasehold Mortgagee, and (B) which may become due during such thirty (30) or ninety (90) day (as the case may be) period (as and when the same may become due); and

(iii)    comply with or in good faith, with reasonable diligence and continuity, commence to comply with all nonmonetary requirements of this Lease then in default and reasonably susceptible of being complied with by such Permitted Leasehold Mortgagee (e.g., defaults that are not personal to Tenant hereunder); provided, however , that such Permitted Leasehold Mortgagee shall not be required during such ninety (90) day period to cure or commence to cure any default consisting of Tenant’s failure to satisfy and discharge any lien, charge or encumbrance against Tenant’s interest in this Lease or the Leased Property or any of Tenant’s other assets that is/are (x) junior in priority to the lien of the mortgage or other security documents held by such Permitted Leasehold Mortgagee and (y) would be extinguished by the foreclosure of the Permitted Leasehold Mortgage that is held by such Permitted Leasehold Mortgagee; and

(iv)    during such thirty (30) or ninety (90) day period, the Permitted Leasehold Mortgagee shall respond, with reasonable diligence, to requests for information from Landlord as to the Permitted Leasehold Mortgagee’s (and related lender’s) intent to pay such Rent and other charges and comply with this Lease.

If the applicable default shall be cured pursuant to the terms and within the time periods allowed in this Section  17.1(d) , this Lease shall continue in full force and effect as if Tenant had not defaulted under the Lease. If a Permitted Leasehold Mortgagee shall fail to take all of the actions described in this Section  17.1(d) with respect to a specific Tenant Event of Default for which the Permitted Leasehold Mortgagee was provided notice prior to the deadlines set forth herein, such Permitted Leasehold Mortgagee shall have no further rights under this Section  17.1(d) or Section  17.1(e) with respect to such Event of Default.

(e)     Procedure on Default .

(i)    If Landlord shall elect to terminate this Lease by reason of any Tenant Event of Default that has occurred and is continuing and a Permitted Leasehold Mortgagee shall have proceeded in the manner provided for by subsection (d) of this Section  17.1 , the applicable cure periods available pursuant to Section  17.1(d) above shall continue to be extended so long as during such continuance:

(1)    such Permitted Leasehold Mortgagee shall pay or cause to be paid the Rent, Additional Charges and other monetary obligations of Tenant under this Lease as the same become due, and continue its good faith efforts to perform or cause to be performed all of Tenant’s other obligations under this Lease, excepting (A) obligations of Tenant to

 

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satisfy or otherwise discharge any lien, charge or encumbrance against Tenant’s interest in this Lease or the Leased Property or any of Tenant’s other assets that is/are (x) junior in priority to the lien of the mortgage or other security documents held by such Permitted Leasehold Mortgagee and (y) would be extinguished by the foreclosure of the Permitted Leasehold Mortgage that is held by such Permitted Leasehold Mortgagee and (B) past non-monetary obligations then in default and not reasonably susceptible of being cured by such Permitted Leasehold Mortgagee; and

(2)    subject to and in accordance with Section  22.2(ii) , if not enjoined or stayed pursuant to a bankruptcy or insolvency proceeding or other judicial order, such Permitted Leasehold Mortgagee shall diligently continue to pursue acquiring or selling Tenant’s interest in this Lease and the Leased Property (or, to the extent applicable, the direct or indirect interests in Tenant) by foreclosure of the Permitted Leasehold Mortgage or other appropriate means and diligently prosecute the same to completion.

(ii)    Without limitation of Tenant’s right to deliver a Renewal Notice, it is agreed that a Permitted Leasehold Mortgagee also shall have the right to deliver a Renewal Notice on behalf of Tenant during any period in which such Permitted Leasehold Mortgagee is complying with Section  17.1(d) or 17.1(e) .

(iii)    If a Permitted Leasehold Mortgagee is complying with subsection (e)(i) of this Section  17.1 , upon the acquisition of Tenant’s Leasehold Estate (or, to the extent applicable, the direct or indirect interests in Tenant) herein by such Permitted Leasehold Mortgagee, a Permitted Leasehold Mortgagee Designee or an assignee thereof in accordance with Section  22.2(ii) hereof, this Lease shall continue in full force and effect as if Tenant had not defaulted under this Lease provided that such successor cures all outstanding defaults that can be cured through the payment of money and all other defaults that are reasonably susceptible of being cured as provided in said subsection (e)(i).

(iv)    No Permitted Leasehold Mortgagee shall be deemed to be an assignee or transferee of this Lease or of the Leasehold Estate hereby created by virtue of the Permitted Leasehold Mortgage so as to require such Permitted Leasehold Mortgagee, as such, to assume the performance of any of the terms, covenants or conditions on the part of Tenant to be performed hereunder; but the purchaser at any sale of this Lease (or, to the extent applicable, the purchaser of the direct or indirect interests in Tenant including a Permitted Leasehold Mortgagee if it is the purchaser at foreclosure) and of the Leasehold Estate hereby created in any proceedings for the foreclosure of any Permitted Leasehold Mortgage, or the assignee or transferee of this Lease and of the Leasehold Estate hereby created (or, to the extent applicable, the direct or indirect

 

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interests in Tenant) under any instrument of assignment or transfer in lieu of the foreclosure of any Permitted Leasehold Mortgage, shall be subject to all of the provisions, terms and conditions of this Lease including, without limitation Section  22.2( ii ) hereof (including, without limitation, the Tenant Transferee Requirement).

(v)    Notwithstanding any other provisions of this Lease, any Permitted Leasehold Mortgagee, Permitted Leasehold Mortgagee Designee or other acquirer of the Leasehold Estate of Tenant (or, to the extent applicable, the direct or indirect interests in Tenant) in accordance with the requirements of Section  22.2( ii ) of this Lease pursuant to foreclosure, assignment in lieu of foreclosure or other similar proceedings of this Lease may, upon acquiring Tenant’s Leasehold Estate (or, to the extent applicable, the direct or indirect interests in Tenant), (x) sell and assign interests in the Leasehold Estate (or, to the extent applicable, the direct or indirect interests in Tenant) as and to the extent provided in this Lease, and (y) enter into Permitted Leasehold Mortgages in the same manner as the original Tenant, as and to the extent provided in this Lease, in each case under clause (x) or (y), subject to the terms of this Lease, including Article XVII and Section  22.2 hereof.

(vi)    Notwithstanding any other provisions of this Lease, any sale of this Lease and of the Leasehold Estate hereby created (or, to the extent applicable, the direct or indirect interests in Tenant) in any proceedings for the foreclosure of any Permitted Leasehold Mortgage, or the assignment or transfer of this Lease and of the Leasehold Estate hereby created (or, to the extent applicable, the direct or indirect interests in Tenant) in lieu of the foreclosure of any Permitted Leasehold Mortgage, shall, solely if and to the extent such sale, assignment or transfer complies with the requirements of Section  22.2 hereof, be deemed to be a permitted sale, transfer or assignment of this Lease.

(f)     New Lease . In the event that this Lease is rejected in any bankruptcy, insolvency or dissolution proceeding or is terminated by Landlord following a Tenant Event of Default other than due to a default that is subject to cure by a Permitted Leasehold Mortgagee under Section  17.1(d) and Section  17.1(e) above, Landlord shall provide each Permitted Leasehold Mortgagee with written notice that this Lease has been rejected or terminated (“Notice of Termination”), and, for the avoidance of doubt, upon delivery of such Notice of Termination, no Permitted Leasehold Mortgagee shall have the rights as described in Section  17.1(d) and Section  17.1(e) above, but rather such Permitted Leasehold Mortgagee instead shall have the rights described in this Section  17.1(f) ). Following any such rejection or termination, Landlord agrees to enter into a new lease (“ New Lease ”) of the Leased Property with such Permitted Leasehold Mortgagee or its Permitted Leasehold Mortgagee Designee for the remainder of the term of this Lease, effective as of the date of termination, at the rent and additional rent, and upon the terms, covenants and conditions (including all then-remaining options to renew but excluding requirements which have already been fulfilled) of this Lease, provided:

(i)    such Permitted Leasehold Mortgagee or its Permitted Leasehold Mortgagee Designee shall comply with the terms of Section  22.2(ii) (including clauses (1) through (4) thereof);

 

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(ii)    such Permitted Leasehold Mortgagee or its Permitted Leasehold Mortgagee Designee shall make a binding, written, irrevocable commitment to Landlord for such New Lease within thirty (30) days after the date such Permitted Leasehold Mortgagee receives Landlord’s Notice of Termination of this Lease given pursuant to this Section  17.1(f) ;

(iii)    such Permitted Leasehold Mortgagee or its Permitted Leasehold Mortgagee Designee shall pay or cause to be paid to Landlord at the time of the execution and delivery of such New Lease, any and all sums which would at the time of execution and delivery thereof be due pursuant to this Lease but for such rejection or termination (including, for avoidance of doubt, any amounts that become due prior to and remain unpaid as of the date of the Notice of Termination) and, in addition thereto, all reasonable expenses, including reasonable documented attorney’s fees, which Landlord shall have incurred by reason of such rejection or such termination and the execution and delivery of the New Lease and which have not otherwise been received by Landlord from Tenant or other party in interest under Tenant; and

(iv)    such Permitted Leasehold Mortgagee or its Permitted Leasehold Mortgagee Designee shall agree to remedy any of Tenant’s defaults of which said Permitted Leasehold Mortgagee was notified by Landlord’s Notice of Termination (or in any other written notice of Landlord) and which can be cured through the payment of money or, if such defaults cannot be cured through the payment of money, are reasonably susceptible of being cured by Permitted Leasehold Mortgagee or its Permitted Leasehold Mortgagee Designee.

(g)     New Lease Priorities . If more than one Permitted Leasehold Mortgagee shall request a New Lease pursuant to subsection (f)(i) of this Section  17.1 , Landlord shall enter into such New Lease with the Permitted Leasehold Mortgagee whose mortgage is senior in lien, or with its Permitted Leasehold Mortgagee Designee acting for the benefit of such Permitted Leasehold Mortgagee prior in lien foreclosing on Tenant’s interest in this Lease. Landlord, without liability to Tenant or any Permitted Leasehold Mortgagee with an adverse claim, may rely upon (i) with respect to any Permitted Leasehold Mortgage evidenced by a recorded security instrument, a title insurance policy (or, if elected by Landlord in its sole discretion, a title insurance commitment, certificate of title or other similar instrument) issued by a reputable title insurance company as the basis for determining the appropriate Permitted Leasehold Mortgagee who is entitled to such New Lease or (ii) with respect to any Permitted Leasehold Mortgage not evidenced by a recorded security instrument, the statement with respect to relative priority of Permitted Leasehold Mortgages contained in the applicable notice delivered pursuant to Section  17.1(b)(i) , provided that any such statement that provides that any such Permitted Leasehold Mortgage described in this clause (ii) is senior or prior to any Permitted Leasehold Mortgage evidenced by a recorded security instrument shall only be effective to the extent it is consented to in writing by the Permitted Leasehold Mortgagee in respect of such Permitted Leasehold Mortgage evidenced by a recorded security instrument.

(h)     Permitted Leasehold Mortgagee Need Not Cure Specified Defaults . Nothing herein contained shall require any Permitted Leasehold Mortgagee to cure any Incurable Default in order to comply with the provisions of Sections 17.1(d) and 17.1(e) , or as a condition

 

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of entering into the New Lease provided for by Section  17.1(f) . For the avoidance of doubt, upon such foreclosure and/or the effectuation of such a New Lease in accordance with the provisions, terms and conditions hereof, any such defaults are automatically deemed waived through and until the effective date of such foreclosure or New Lease as to any such Permitted Leasehold Mortgagee or its Permitted Leasehold Mortgagee Designee, as the new tenant hereunder or under the New Lease, as applicable (it being understood that the provisions of this sentence shall not be deemed to relieve such new tenant of its obligations to comply with this Lease or such New Lease (to the extent relating to any Incurable Default or otherwise) from and after the effective date of such foreclosure or New Lease but not retroactively).

(i)     Casualty Loss . A standard mortgagee clause naming each Permitted Leasehold Mortgagee for which notice has been properly provided to Landlord pursuant to Section  17.1(b) hereof may be added to any and all insurance policies required to be carried by Tenant hereunder on condition that (and, in all events, Tenant agrees that) the insurance proceeds are to be applied in the manner specified in this Lease and the Permitted Leasehold Mortgage shall so provide; except that the Permitted Leasehold Mortgage may provide a manner for the disposition of such proceeds, if any, otherwise payable directly to Tenant (but not such proceeds, if any, payable jointly to Landlord and Tenant or to Landlord, to the Fee Mortgagee or to a third-party escrowee) pursuant to the provisions of this Lease.

(j)     Arbitration; Legal Proceedings . Landlord shall give prompt notice to each Permitted Leasehold Mortgagee (for which notice has been properly provided to Landlord pursuant to Section  17.1(b) hereof) of any arbitration (including a determination of Fair Market Ownership Value or Fair Market Rental Value) or legal proceedings between Landlord and Tenant involving obligations under this Lease.

(k)     Notices . Notices from Landlord to the Permitted Leasehold Mortgagee for which notice has been properly provided to Landlord pursuant to Section  17.1(b) hereof shall be provided in the method provided in Article XXXV hereof to the address furnished Landlord pursuant to subsection (b) of this Section  17.1 , and those from the Permitted Leasehold Mortgagee to Landlord shall be mailed to the address designated pursuant to the provisions of Article XXXV hereof. Such notices, demands and requests shall be given in the manner described in this Section  17.1 and in Article XXXV and shall in all respects be governed by the provisions of those sections.

(l)     Limitation of Liability . Notwithstanding any other provision hereof to the contrary, (i) Landlord agrees that any Permitted Leasehold Mortgagee’s liability to Landlord in its capacity as Permitted Leasehold Mortgagee hereunder howsoever arising shall be limited to and enforceable only against such Permitted Leasehold Mortgagee’s interest in the Leasehold Estate and the other collateral granted to such Permitted Leasehold Mortgagee to secure the obligations under the loan secured by the applicable Permitted Leasehold Mortgage, and (ii) each Permitted Leasehold Mortgagee agrees that Landlord’s liability to such Permitted Leasehold Mortgagee hereunder howsoever arising shall be limited to and enforceable only against Landlord’s interest in the Leased Property, and no recourse against Landlord shall be had against any other assets of Landlord whatsoever.

 

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(m)     Sale Procedure . If this Lease has been terminated, the Permitted Leasehold Mortgagee for which notice has been properly provided to Landlord pursuant to Section  17.1(b) hereof with the most senior lien on the Leasehold Estate shall have the right to make the determinations and agreements on behalf of Tenant under Article XXXVI , in each case, in accordance with and subject to the terms and provisions of Article XXXVI .

(n)     Third Party Beneficiary . Each Permitted Leasehold Mortgagee (for so long as such Permitted Leasehold Mortgagee holds a Permitted Leasehold Mortgage) is an intended third-party beneficiary of this Article XVII entitled to enforce the same as if a party to this Lease.

(o)    The fee title to the Leased Property and the Leasehold Estate of Tenant therein created by this Lease shall not merge but shall remain separate and distinct, notwithstanding the acquisition of said fee title and said Leasehold Estate by Landlord or by Tenant or by a third party, by purchase or otherwise.

17.2      Landlord Cooperation with Permitted Leasehold Mortgage . If, in connection with granting any Permitted Leasehold Mortgage or entering into an agreement relating thereto, Tenant shall request in writing (i) reasonable cooperation from Landlord or (ii) reasonable amendments or modifications to this Lease, in each case required to comply with any reasonable request made by Permitted Leasehold Mortgagee, Landlord shall reasonably cooperate with such request, so long as (a) no Tenant Event of Default is continuing, (b) all reasonable documented out-of-pocket costs and expenses incurred by Landlord, including, but not limited to, its reasonable documented attorneys’ fees, shall be paid by Tenant, and (c) any requested action, including any amendments or modification of this Lease, shall not (i) increase Landlord’s monetary obligations under this Lease by more than a de minimis extent, or increase Landlord’s non-monetary obligations under this Lease in any material respect or decrease Tenant’s obligations in any material respect, (ii) diminish Landlord’s rights under this Lease in any material respect, (iii) adversely impact the value of the Leased Property by more than a de minimis extent or otherwise have a more than de minimis adverse effect on the Leased Property, Tenant or Landlord, (iv) adversely impact Landlord’s (or any Affiliate of Landlord’s) tax treatment or position or (v) result in this Lease not constituting a “true lease”, or (vi) result in a default under the Fee Mortgage Documents.

ARTICLE XVIII

TRANSFERS BY LANDLORD

18.1      Sale of the Leased Property . Subject to the balance of this Section  18.1 , Landlord shall not voluntarily sell all or portions of the Leased Property during the Term without the prior written consent of Tenant, which consent may not be unreasonably withheld, conditioned or delayed. Notwithstanding the foregoing, Tenant’s consent shall not be required for (A) any transfer (including any pledge, mortgage, deed of trust, or other grant of lien over the Leased Property) to a Fee Mortgagee contemplated under and in accordance with Article XXXI hereof which may include, without limitation, a transfer by foreclosure brought by the Fee Mortgagee or a transfer by deed in lieu of foreclosure or assignment in lieu of foreclosure or other transaction in lieu of foreclosure (and the first subsequent sale by such Fee Mortgagee), in

 

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each case, other than to a Tenant Competitor (provided, that, (x) at such time that Landlord enters into a Fee Mortgage comprised of an Applicable Landlord Financing, the Fee Mortgagee shall not be a Tenant Competitor and (y) the Fee Mortgage Documents in respect thereof (excluding any financing involving debt securities issued under an indenture pursuant to a registered offering or an offering under Rule 144A of the Securities and Exchange Act, in each case, with indenture trustees) shall provide that (I) no lender, holder or other secured party under such Applicable Landlord Financing may assign its interest under the Applicable Landlord Financing to a Tenant Competitor, (II) (i) the borrower thereunder may authorize the posting to the lenders, holders or other secured parties under the Applicable Landlord Financing, of a list of “disqualified lenders” and any updates thereto from time to time, and (ii) that no lender, holder or other secured party under such Applicable Landlord Financing may participate its interest under the Applicable Landlord Financing to a Tenant Competitor that is set forth on such list (and Landlord hereby agrees to (and to cause its Affiliates to) reasonably promptly submit to the applicable Fee Mortgagee for posting such list (or updates thereto, if applicable) of Tenant Competitors provided to it by Tenant) (and if any such participation to a Tenant Competitor shall be made, Landlord hereby agrees to (and cause its Affiliates to) endeavor to take such actions that it determines in good faith to be reasonably necessary to enforce its (or their) rights under the Fee Mortgage Documents in respect of such participation to a Tenant Competitor), and (III) if any such assignment or participation to a Tenant Competitor shall be made, the Fee Mortgage Documents shall permit Landlord or its Affiliates to (i) in the case of an assignment, repay or otherwise replace such Tenant Competitor such that such Tenant Competitor is no longer a lender, holder, or other secured party under such Applicable Landlord Financing and (ii) prevent such Tenant Competitor from receiving or having access to any information, reports or other materials provided to lenders, holders or other secured parties under such Applicable Landlord Financing or participating in any meetings of lenders, holders or other secured parties under such Applicable Landlord Financing (and the Landlord hereby agrees to (and to cause its Affiliates as may be applicable to) take all actions that are reasonably necessary to enforce its (or their) rights under the foregoing clauses (III)(i) and (ii)), (B) a sale by Landlord of all of the Leased Property (subject to exclusions for assets that may not be transferred and that, in the aggregate, are de minimis) to a single buyer or group of buyers, other than to a Tenant Competitor, (C) a sale/leaseback transaction by Landlord with respect to all or any portion of the Leased Property other than to a Tenant Competitor (provided (x) the overlandlord under the resulting overlease agrees that, in the event of a termination of such overlease, this Lease shall continue in effect as a direct lease between such overlandlord and Tenant and (y) the overlease shall not impose, to more than a de minimis extent, any new, additional or more onerous obligations on Tenant without Tenant’s prior written consent in Tenant’s sole discretion (and without limiting the generality of the foregoing, the overlease shall not impose any additional monetary obligations (whether for payment of rents under such overlease or otherwise) on Tenant), subject to and in accordance with all of the provisions, terms and conditions of this Lease, (D) any sale of a portion of the Leased Property that does not change the identity of the Landlord hereunder, including without limitation a participating interest in Landlord’s interest under this Lease or a sale of Landlord’s reversionary interest in the Leased Property so long as Landlord does not become a Tenant Competitor thereby and remains the only party with authority to bind the landlord under this Lease, or (E) a sale or transfer of the Leased Property or any portion thereof to an Affiliate of Landlord or a joint venture entity in which Landlord or its Affiliate is the managing member or partner (provided such joint venture entity shall not be a Tenant

 

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Competitor). Any sale by Landlord of all or any portion of the Leased Property pursuant to this Section  18.1 shall be subject in each instance to all of the rights of Tenant under this Lease and, to the extent necessary, any purchaser or successor Landlord and/or other controlling persons must be approved by all applicable gaming regulatory agencies to ensure that there is no material impact on the validity of any of the Gaming Licenses or the ability of Tenant to continue to use the Facility for Gaming in substantially the same manner as immediately prior to Landlord’s sale. Without limiting the generality of the foregoing, Landlord shall not sell or transfer any Leased Property, or assign this Lease to, (I) a Tenant Competitor, or (II) any Person that is associated with a Person who has been found “unsuitable”, denied a Gaming License or otherwise precluded from participation in the Gaming Industry by any Gaming Authority where such association would reasonably be expected to adversely affect, any of the Tenant’s or its Affiliates’ Gaming Licenses or Tenant’s or its Affiliates’ then current standing with any Gaming Authority, or (III) any Person that (a) has been the subject of a material governmental or regulatory investigation which resulted in a conviction for criminal activity involving moral turpitude or has been found liable pursuant to a non-appealable judgment in a civil proceeding for attempting to hinder, delay or defraud creditors; (b) has been convicted of, or pled guilty or no contest to, a Patriot Act Offense or is on any Government List; (c) has been the subject of a voluntary or involuntary (to the extent the same has not been discharged) bankruptcy proceeding during the prior five (5) years from the applicable date of determination; or (d) is, or is Controlled by, an Embargoed Person or a person that has been found “unsuitable” for any reason or has had any application for a Gaming License withdrawn “with prejudice” by any applicable Gaming Authority; or (e) is a Tenant Prohibited Person. Any transfer by Landlord under this Article VXIII shall be subject to all applicable Legal Requirements, including any Gaming Regulations, and no such transfer shall be effective until any applicable approvals with respect to Gaming Regulations, if applicable, are obtained.    Tenant shall attorn to and recognize any successor Landlord in connection with any transfer(s) permitted under this Article XVIII as Tenant’s “landlord.” For avoidance of doubt, nothing contained in this Section  18.1 shall be construed to prohibit or limit Landlord REIT or any of Landlord REIT’s direct or indirect subsidiaries from effectuating any merger, amalgamation, sale of assets or other disposition or similar transaction which, in any case, involves the disposition or transfer of all or substantially all of the assets of Landlord REIT, subject however, to Section  18.2 .

18.2      Transfers to Tenant Competitors . Without limiting the provisions of Section  18.1 , in the event that, and so long as, Landlord with respect to the Leased Property becomes or acquires a Tenant Competitor (the transaction by which Landlord becomes or acquires a Tenant Competitor, a “ Tenant Competitor Event ”), then, Landlord shall notify Tenant in writing reasonably promptly following becoming aware that a Tenant Competitor Event has occurred (and Tenant, if it otherwise becomes aware that a Tenant Competitor Event has occurred shall endeavor to provide Landlord with written notice thereof) (any such notice, a “ Tenant Competitor Notice ”), and, notwithstanding anything herein to the contrary, the following shall apply:

(a)    Landlord hereby grants to Tenant an option to purchase (“ Purchase Option ”) the Leased Property at a price equal to the then Fair Market Ownership Value of the Leased Property (valued assuming that the Lease continues for the remainder of the Term and the Lease is extended for each of the remaining extension periods) (such price, the “ Purchase Price ”) and Tenant may, in Tenant’s sole and absolute discretion, exercise such Purchase Option solely upon the following terms and conditions:

(i)    such Purchase Option must be exercised at any time from the date Landlord delivers to Tenant a Tenant Competitor Notice or Tenant otherwise becomes aware that a Tenant Competitor Event has occurred through and until the

 

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date that is sixty (60) days after the date Landlord delivers to Tenant such Tenant Competitor Notice, by Tenant delivering to Landlord written notice of such exercise (the “ Exercise Notice ”); provided, that if Tenant does not timely deliver the Exercise Notice, the option herein granted shall terminate; time being of the essence with respect to the delivering thereof;

(ii)    promptly after delivery of such Exercise Notice, Landlord and Tenant shall determine the Purchase Price in accordance with Section  34.1 ;

(iii)    within ten (10) Business Days after the Purchase Price has been determined pursuant to clause (ii) above, Tenant may elect not to proceed with the purchase of the Leased Property if the Purchase Price as so determined is greater than one hundred five percent (105%) of Tenant’s written appraisal pursuant to Section  34.1(a) (and if Tenant so elects, Tenant shall no longer be entitled to elect the Purchase Option in connection with the applicable Tenant Competitor Event based on which Tenant delivered such Exercise Notice);

(iv)    if the Purchase Option is not revoked by Tenant pursuant to clause (iii) above, then Landlord shall sell the Leased Property to Tenant, and Tenant shall purchase from Landlord, the Leased Property for the Purchase Price; otherwise, if Tenant revokes Tenant’s offer to purchase the Leased Property pursuant to clause (iii) above, the Lease shall continue in full force and effect and subject to clauses (b), (c) and (d) below;

(v)    without limitation of any of the provisions hereof concerning the determination of Fair Market Ownership Value, the Leased Property shall be sold in its then-current, as-is, with all faults conditions and without any representation and warranty, expressed or implied, whatsoever, except the conveyance shall be by a grant, bargain and sale deed (subject to Section  18.2(b) below);

(vi)    as provided in clause (B) of the Fair Market Rental Value definition, the Fair Market Ownership Value of the Leased Property shall be determined with respect to any damaged or destroyed Leased Property as if such Leased Property had not been so damaged or destroyed, and, accordingly, to the extent that a Casualty Event has occurred but the Leased Property is valued as if such Casualty Event did not occur, Tenant shall be entitled to all property insurance proceeds and business interruption insurance with respect to the Leased Property arising from such Casualty Event;

(vii)    the condition of title shall be the same as that shown on the owner’s policy of title insurance as of the date of this Lease, with such additional covenants, conditions, restrictions, easements and other matters that have been approved, or have been created by or through, Tenant or that otherwise arise in accordance with the terms of this Lease or as may otherwise be agreed to in writing by Landlord and Tenant; and

 

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(viii)    the closing of the sale transaction shall occur upon or prior to the date that is twelve (12) months after the date Tenant delivers such Exercise Notice.

(b)    If Tenant exercises such Purchase Option pursuant to clause (a) above, Seller shall be required to remove all Required Removal Exceptions at or prior to closing of the purchase of the Leased Property. As used herein, “ Required Removal Exceptions ” means collectively, (i) all Fee Mortgage Documents that encumber the Leased Property, including mortgages, deeds of trust, deeds to secure debt or other security documents recorded against or otherwise that encumber the Leased Property or any portion thereof and related UCC filings and assignment of leases and rents and other evidence of indebtedness that encumber the Leased Property; and (ii) the following so long as they are (A) not caused by the acts or omissions of Tenant or anyone holding through or under Tenant (or anyone acting for or on behalf of Tenant or anyone holding through or under Tenant) or consented to by Tenant, or (B) permitted under this Lease or (C) not required to be removed, cured or discharged by Tenant under this Lease: liens encumbering the Leased Property that result from the acts or omissions of Landlord.

Notwithstanding anything to the contrary contained in this Lease, Tenant’s Purchase Option pursuant to this Section  18.2 shall be a lien prior in right and senior in priority to Fee Mortgagee’s lien on the Leased Property).

Notwithstanding anything to the contrary contained in this Lease, if Tenant delivers to Landlord an Exercise Notice under Section  18.2(a)(i) , Landlord may (but shall not be obligated to), for a period of ninety (90) days following Landlord’s receipt of such Exercise Notice, unwind, reverse or otherwise nullify the effect of the applicable Tenant Competitor Event based on which Tenant delivered such Exercise Notice, or otherwise take such steps as Landlord may deem appropriate, such that Landlord shall no longer be (or, if applicable, own) a Tenant Competitor. If, following the expiration of such ninety (90) day period, Landlord is not a Tenant Competitor and does not own a Tenant Competitor, then Tenant’s Exercise Notice shall be of no further effect in respect of such Tenant Competitor Event and Tenant shall no longer be entitled to elect the Purchase Option in connection with such Tenant Competitor Event.

(c)    Notwithstanding the Purchase Option provided for in clause (a) above, and without limitation of Section  23.1(c) of this Lease, so long as Landlord becomes or acquires a Tenant Competitor, Tenant shall not be required to deliver the information required to be delivered to such Landlord pursuant to Section  23.1(b) hereof to the extent the same would give such Landlord a “competitive” advantage with respect to markets in which such Landlord and Tenant or CRC or any of their respective Affiliates might be competing at any time (it being understood that such Landlord shall retain audit rights with respect to such information to the extent required to confirm Tenant’s compliance with the terms of this Lease) (and such Landlord shall be permitted to comply with Securities Exchange Commission, Internal Revenue Service and other legal and regulatory requirements with regard to such information) and provided that appropriate measures are in place to ensure that only such Landlord’s auditors (which for this purpose shall be a “big four” firm designated by such Landlord) and attorneys (as reasonably approved by Tenant) (and not Landlord or any Affiliates of such Landlord or any direct or

 

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indirect parent company of such Landlord or any Affiliate of such Landlord) are provided access to such information or (2) to provide information that is subject to the quality assurance immunity or is subject to attorney-client privilege or the attorney work product doctrine.

(d)    Certain of Landlord’s consent or approval rights set forth in this Lease shall be eliminated or modified, as follows:

(i)    Clause (viii) of the definition of Primary Intended Use shall be deleted, and clause (v) of the definition of Primary Intended Use shall be modified to read as follows: “(v) such other ancillary uses, but in all events consistent with the current use of the Leased Property or any portion thereof as of the Commencement Date or with then-prevailing or innovative or state-of-the-art hotel, resort and gaming industry use, and/or”.

(ii)    Without limitation of the other provisions of Section  10.1(a) , the approval of Landlord shall not be required under (1)  Section  10.1(a) for Alterations and Capital Improvements in excess of Seventy-Five Million Dollars ($75,000,000), and (2)  Section  10.2(b) for approval of the Architect thereunder.

(e)    With respect to all consent, approval and decision-making rights granted to such Landlord under the Lease relating to competitively sensitive matters pertaining to the use and operation of the Leased Property and Tenant’s business conducted thereat (other than any right of Landlord to grant waivers and amend or modify any of the terms of this Lease), such Landlord shall establish an independent committee to evaluate, negotiate and approve such matters, independent from and without interference from such Landlord’s management or Board of Directors. Any dispute over whether a particular decision should be determined by such independent committee shall be submitted for resolution by an Expert pursuant to Section  34.2 hereof.

18.3      Specific Performance . Notwithstanding anything to the contrary contained herein, and without limitation of any of Tenant’s other rights and remedies under this Lease, the Parties recognize that if Landlord shall breach its obligations under Section  18.1 , Section  18.2(a) or Section  18.2(b) hereof, damages shall not provide an adequate remedy to Tenant and accordingly, Tenant shall have the right to obtain the remedy of specific performance, including injunctive relief to prevent Landlord from selling the Leased Property or any portion thereof to a Tenant Competitor in violation of the applicable provisions Section  18.1 hereof.

ARTICLE XIX

HOLDING OVER

If Tenant shall for any reason remain in possession of all or any portion of the Leased Property or the Facility after the Expiration Date without the consent, or other than at the request, of Landlord, such possession shall be as a month-to-month tenant during which time Tenant shall pay as Rent each month an amount equal to (a) two hundred percent (200%) of the monthly installment of Rent applicable as of the Expiration Date, and (b) all Additional Charges and all other sums payable by Tenant pursuant to this Lease. During such period of month-to-month

 

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tenancy, Tenant shall be obligated to perform and observe all of the terms, covenants and conditions of this Lease, but shall have no rights hereunder other than the right, to the extent given by law to month-to-month tenancies, to continue its occupancy and use of such portion of the Leased Property associated therewith. Nothing contained herein shall constitute the consent, express or implied, of Landlord to the holding over of Tenant after the Expiration Date. This Article XIX is subject to Tenant’s rights and obligations under Article XXXVI below, and it is understood and agreed that any possession of the Leased Property after the Expiration Date pursuant to such Article XXXVI shall not constitute a hold over subject to this Article XIX .

ARTICLE XX

RISK OF LOSS

The risk of loss or of decrease in the enjoyment and beneficial use of the Leased Property or any part thereof as a consequence of the damage or destruction thereof by fire, the elements, casualties, thefts, riots, wars or otherwise, or in consequence of foreclosures, attachments, levies or executions (other than by Landlord and Persons claiming from, through or under Landlord) during the Term is assumed by Tenant, and except as otherwise expressly provided herein no such event shall entitle Tenant to any abatement of Rent.

ARTICLE XXI

INDEMNIFICATION

21.1      General Indemnification .

(i)    In addition to the other indemnities contained herein, and notwithstanding the existence of any insurance carried by or for the benefit of Landlord or Tenant, and without regard to the policy limits of any such insurance, Tenant shall protect, indemnify, save harmless and defend Landlord and its principals, partners, officers, members, directors, shareholders, employees, managers, agents and servants (collectively, the “ Landlord Indemnified Parties ”; each individually, a “ Landlord Indemnified Party ”), from and against all liabilities, obligations, claims, damages, penalties, causes of action, costs and expenses, including reasonable documented attorneys’, consultants’ and experts’ fees and expenses, imposed upon or incurred by or asserted against the Landlord Indemnified Parties (excluding any indirect, special, punitive or consequential damages as provided in Section  41.3 ) by reason of any of the following (in each case, other than to the extent resulting from Landlord’s gross negligence or willful misconduct or default hereunder or the violation by Landlord of any Legal Requirement imposed against Landlord (including any Gaming Regulations, but excluding any Legal Requirement which Tenant is required to satisfy pursuant to the terms hereof or otherwise)): (i) any accident, injury to or death of Persons or loss of or damage to property occurring on or about the Facility (or any part thereof) or adjoining sidewalks under the control of Tenant or any Subtenant; (ii) any use, misuse, non-use, condition, maintenance or repair by Tenant of the Facility (or any part thereof); (iii) any failure on the part of Tenant to perform or comply with any of the terms of this Lease; (iv) any claim for malpractice, negligence or misconduct committed by Tenant or any

 

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Person on or from any Facility (or any part thereof); (v) the violation by Tenant of any Legal Requirement (including any Gaming Regulations) or Insurance Requirements; (vi) the non-performance of any contractual obligation, express or implied, assumed or undertaken by Tenant with respect to the Facility (or any portion thereof), or any business or other activity carried on in relation to the Facility (or any part thereof) by Tenant; and (vii) any lien or claim that may be asserted against the Facility (or any part thereof) arising from any failure by Tenant to perform its obligations hereunder or under any instrument or agreement affecting the Facility (or any part thereof), and (viii) any matter arising out of Tenant’s (or any Subtenant’s) management, operation, use, or possession of the Facility (including any litigation, suit, proceeding or claim asserted against Landlord). Any amounts which become payable by Tenant under this Article XXI shall be paid within ten (10) Business Days after liability therefor is determined by a final non appealable judgment or settlement or other agreement of the Parties, and if not timely paid shall bear interest at the Overdue Rate from the date of such determination to the date of payment. Tenant, with its counsel and at its sole cost and expense, shall contest, resist and defend any such claim, action or proceeding asserted or instituted against the Landlord Indemnified Parties. For purposes of this Article XXI , any acts or omissions of Tenant or any Subtenant or any Subsidiary, as applicable, or by employees, agents, assignees, contractors, subcontractors or others acting for or on behalf of Tenant or any Subtenant or any Subsidiary, as applicable (whether or not they are negligent, intentional, willful or unlawful), shall be strictly attributable to Tenant.

(ii)    Notwithstanding the existence of any insurance carried by or for the benefit of Landlord or Tenant, and without regard to the policy limits of any such insurance, Landlord shall protect, indemnify, save harmless and defend Tenant and its principals, partners, officers, members, directors, shareholders, employees, managers, agents and servants (collectively, the “ Tenant Indemnified Parties ”; each individually, a “ Tenant Indemnified Party ”) from and against all liabilities, obligations, claims, damages, penalties, causes of action, costs and expenses, including reasonable documented attorneys’, consultants’ and experts’ fees and expenses, imposed upon or incurred by or asserted against Tenant Indemnified Parties (excluding any indirect, special, punitive or consequential damages as provided in Section  41.3 ) by reason of (A) Landlord’s gross negligence or willful misconduct hereunder, other than to the extent resulting from Tenant’s gross negligence or willful misconduct or default hereunder, and (B) the violation by Landlord of any Legal Requirement imposed against Landlord (including any Gaming Regulations, but excluding any Legal Requirement which Tenant is required to satisfy pursuant to the terms hereof or otherwise). Any amounts which become payable by Landlord under this Article XXI shall be paid within ten (10) Business Days after liability therefor is determined by a final non appealable judgment or settlement or other agreement of the Parties, and if not timely paid shall bear interest at the Overdue Rate from the date of such determination to the date of payment. Landlord, with its counsel and at its sole cost and expense, shall contest, resist and defend any such claim, action or proceeding asserted or instituted against Tenant Indemnified Parties. For purposes of this Article XXI , any acts or omissions of Landlord, or by employees, agents, contractors, subcontractors or others acting for or on behalf of Landlord (whether or not they are negligent, intentional, willful or unlawful), shall be strictly attributable to Landlord.

 

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21.2     Encroachments, Restrictions, Mineral Leases, etc.

(i)    If any of the Leased Improvements existing as of the Commencement Date shall, at any time (each of the following, an “ Encroachment ”), encroach upon any property, street or right-of-way, or shall violate any restrictive covenant or other agreement affecting the Leased Property, or any part thereof or any Capital Improvement thereto, or shall impair the rights of others under any easement or right-of-way to which the Leased Property is subject, or impair, limit or interfere with the use of the Leased Property or any Capital Improvement thereto by reason of the exercise of the right of surface entry or any other provision of a lease or reservation of any oil, gas, water or other minerals, then promptly upon the request of Landlord or any Person affected by any such Encroachment, each of Tenant and Landlord, subject to their right to contest the existence of any such Encroachment, shall protect, indemnify, save harmless and defend the other party hereto from and against fifty percent (50%) of all out of pocket losses, liabilities, obligations, claims, damages, penalties, causes of action, costs and expenses (including reasonable attorneys’, consultants’ and experts’ fees and expenses) based on or arising by reason of any such Encroachment; provided, however, with respect to any mechanics’, materialmans’ and other similar statutory liens (excluding any such statutory lien the removal of which is the obligation of a Subtenant pursuant to its Sublease (excluding management agreements)), Tenant shall be one hundred percent (100%) responsible for such losses, liabilities, obligations, claims, damages, penalties, causes of action, costs and expenses (including reasonable attorneys’, consultants’ and experts’ fees and expenses). In the event of an adverse final determination with respect to any such Encroachment, either (a) each of Tenant and Landlord shall be entitled to obtain valid and effective waivers or settlements of all claims, liabilities and damages resulting from each such Encroachment, whether the same shall affect Landlord or Tenant or (b) Tenant at the shared cost and expense of Tenant and Landlord on a 50-50 basis (except for such items as to which Tenant is one hundred percent (100%) responsible as provided in the preceding sentence, in which case Tenant shall be responsible for one hundred percent (100%) of such costs and expenses) shall make such changes in the Leased Improvements, and take such other actions, as Tenant in the good faith exercise of its judgment deems reasonably practicable, to remove or end such Encroachment, including, if necessary, the alteration of any of the Leased Improvements, and in any event take all such actions as may be necessary in order to be able to continue the operation of the Leased Improvements for the Primary Intended Use substantially in the manner and to the extent the Leased Improvements were operated prior to the assertion of such Encroachment. Tenant’s (and Landlord’s) obligations under this Section  21.2 shall be in addition to and shall in no way discharge or diminish any obligation of any insurer under any policy of title or other insurance and, to the extent the recovery thereof is not necessary to compensate Landlord and Tenant for any damages incurred by any such Encroachment, Tenant shall be entitled to fifty percent (50%) of any sums recovered by Landlord under any such policy of title or other insurance up to the maximum amount paid by Tenant under this Section  21.2 and Landlord, upon request by

 

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Tenant, shall assign Landlord’s rights under such policies to Tenant provided such assignment does not adversely affect Landlord’s rights under any such policy. Landlord agrees to use reasonable efforts to seek recovery under any policy of title or other insurance under which Landlord is an insured party for all losses, liabilities, obligations, claims, damages, penalties, causes of action, costs and expenses (including reasonable attorneys’, consultants’ and experts’ fees and expenses) based on or arising by reason of any such Encroachment as set forth in this Section  21.2 ; provided, however, that in no event shall Landlord be obligated to institute any litigation, arbitration or other legal proceedings in connection therewith unless Landlord is reasonably satisfied that Tenant has the financial resources needed to fund such litigation and Tenant and Landlord have agreed upon the terms and conditions on which such funding will be made available by Tenant including, but not limited to, the mutual approval of a litigation budget.

(ii)    If any of the Leased Improvements, by reason of an alteration, improvement, modification or construction, modified or constructed from and after the Commencement Date, shall constitute an Encroachment, then in each case promptly upon the request of Landlord or any Person affected by any such Encroachment, Tenant, subject to its right to contest the existence of any such Encroachment, shall protect, indemnify, save harmless and defend Landlord from and against all out of pocket losses, liabilities, obligations, claims, damages, penalties, causes of action, costs and expenses (including reasonable attorneys’, consultants’ and experts’ fees and expenses) based on or arising by reason of any such Encroachment. In the event of an adverse final determination with respect to any such Encroachment, (x) Landlord shall be entitled to be furnished valid and effective waivers or settlements of all claims, liabilities and damages resulting from each such Encroachment, or (y) Tenant shall make such changes in the Improvements, and take such other actions, as Tenant in the good faith exercise of its judgment deems reasonably practicable, to remove or end such Encroachment, including, if necessary, the alteration of any of the Improvements, and in any event take all such actions as may be necessary in order to be able to continue the operation of the Improvements for the Primary Intended Use substantially in the manner and to the extent the Improvements were operated prior to the assertion of such Encroachment. Landlord’s (and Landlord’s) obligations under this Section  21.2(ii) shall be in addition to and shall in no way discharge or diminish any obligation of any insurer under any policy of title or other insurance.

ARTICLE XXII

TRANSFERS BY TENANT

22.1      Subletting and Assignment . Other than as expressly provided herein (including in respect of Permitted Leasehold Mortgages under Article  XVII , and the permitted Subleases and assignments described in this Article XXII ), Tenant shall not, without Landlord’s prior written consent (which, except as specifically set forth herein, may be withheld in Landlord’s sole and absolute discretion), (x) voluntarily or by operation of law assign (which term includes any transfer, sale, encumbering, pledge or other transfer or hypothecation), in whole or in part, this Lease or Tenant’s Leasehold Estate, (y) let or sublet (or sub-sublet, as applicable) all or any

 

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part of the Leased Property of the Facility, or (z) engage the services of any Person (other than an Affiliate of Tenant) for the management or operation of the Facility (provided that the foregoing shall not restrict a transferee of Tenant from retaining a manager necessary for such transferee’s satisfying the requirement set forth in clause (a)(1) of the definition of “Qualified Transferee”). Tenant acknowledges that Landlord is relying upon the expertise of Tenant in the operation of the Facility hereunder and that Landlord entered into this Lease with the expectation that Tenant would remain in and operate the Facility during the entire Term. Any Change of Control (or, subject to Section  22.2 below, any transfer of direct or indirect interests in Tenant that results in a Change of Control) shall constitute an assignment of Tenant’s interest in this Lease within the meaning of this Article XXII and the provisions requiring consent contained herein shall apply thereto.

22.2      Permitted Assignments and Transfers . Subject to compliance with the provisions of Section  22.4 , as applicable, and Article  XL , Tenant or any successor to Tenant to the extent expressly referenced below, in each case, that has received an assignment of this Lease in accordance with this Article XXII , may:

(i)    with Landlord’s prior written consent, which consent shall not be unreasonably withheld, allow to occur or undergo a Change in Control (including without limitation a transfer or assignment of this Lease to any third party in conjunction with a sale by Tenant of all or substantially all of Tenant’s assets relating to the Facility);

(ii)    without Landlord’s prior consent, (a) subject to and in accordance with Section  17.1 , assign this Lease (and/or permit the assignment of one hundred percent (100%) of the direct or indirect interests in Tenant at any tier of ownership), in whole, but not in part, to a Permitted Leasehold Mortgagee for collateral purposes pursuant to a Permitted Leasehold Mortgage (b) assign this Lease (and/or permit the assignment of one hundred percent (100%) of the direct or indirect interests in Tenant at any tier of ownership) to such Permitted Leasehold Mortgagee or its Permitted Leasehold Mortgagee Designee or any other purchaser at any foreclosure or transaction in lieu of foreclosure, and (c) assign this Lease (and/or one hundred percent (100%) of the direct or indirect interests in Tenant at any tier of ownership) to the first subsequent purchaser thereafter (provided such subsequent purchaser is not Guarantor, any Affiliate of Guarantor or a Prohibited Leasehold Agent), in each case, solely in connection with or following a foreclosure of, or transaction in lieu of foreclosure of, a Permitted Leasehold Mortgage; provided, however , that immediately upon giving effect to any Lease Foreclosure Transaction, (1) the following conditions shall be satisfied (the “ Tenant Transferee Requirement ”): (x) a Qualified Transferee will be the replacement Tenant hereunder or will Control, and own not less than fifty-one percent (51%) of all of the direct and indirect economic and beneficial interests in, Tenant or such replacement Tenant and (y) a replacement lease guarantor that is a Qualified Transferee will have provided a Guaranty of the Lease on terms reasonably satisfactory to Landlord (it being understood that if Tenant is a Qualified Transferee then no such Guaranty shall be required); (2) the transferee and its equity holders will comply with all customary “know your customer” requirements of any Fee Mortgagee and shall have obtained all necessary Gaming Licenses as required under applicable Legal Requirements (including applicable

 

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Gaming Regulations) and all other licenses, approvals and permits required for the transferee to be Tenant under this Lease; (3) a single Person or multiple Affiliated Persons as tenants in common (each of which satisfy the Tenant Transferee Requirement) (provided such Affiliated Persons have executed a joinder to this Lease as the “Tenant” on a joint and several basis, the form and substance of which joinder shall be reasonably satisfactory to Landlord) shall own, directly, all of Tenant’s Leasehold Estate and be Tenant under this Lease; (4) the Foreclosure Successor Tenant shall (i) provide written notice to Landlord at least thirty (30) days prior to the closing of the applicable Lease Foreclosure Transaction, specifying in reasonable detail the nature of such Lease Foreclosure Transaction and such additional information as Landlord may reasonably request in order to determine that the requirements of this Section  22.2(ii) are satisfied, which notice shall be accompanied by proposed forms of the Lease Assumption Agreement, the amendment to this Lease contemplated by the penultimate paragraph of this Section  22.2 , and the forms of proposed replacement Guaranty, (ii) assume (or, in the case of a foreclosure on or transfer of direct or indirect interests in Tenant, cause Tenant to reaffirm) in writing (in a form reasonably acceptable to Landlord) the obligations of Tenant under this Lease, from and after the date of the closing of the Lease Foreclosure Transaction (a “ Lease Assumption Agreement ”), (iii) provide Landlord with a copy of any such Lease Assumption Agreement and all other documents required under this Section  22.2(ii) as executed at such closing promptly following such closing and (iv) provide Landlord with a customary opinion of counsel reasonably satisfactory to Landlord with respect to the execution, authorization, and enforceability and other customary matters;

(iii)    without Landlord’s prior consent, but upon prior written notice to Landlord, assign this Lease (provided that in conjunction therewith Tenant assigns or transfers all of the assets of Tenant (other than assets which in the aggregate are de minims)) in entirety to an Affiliate of Tenant, to Guarantor or an Affiliate of Guarantor, provided, that such assignee becomes party to and assumes (in a form reasonably satisfactory to Landlord) this Lease and Guarantor reaffirms the Guaranty in a manner reasonably acceptable to Landlord;

(iv)    without Landlord’s prior consent, so long as Guarantor continues to own fifty-one percent (51%) of, and Control, Tenant, transfer direct or indirect interests in Tenant or its direct or indirect parent(s) on a nationally-recognized exchange (it being agreed that Tenant shall give no less than fifteen (15) days prior written notice to Landlord of any transaction or series of related transactions which would result in a Change of Control of Guarantor if such Tenant or Guarantor has knowledge at least fifteen (15) days before such transaction, or, otherwise within two (2) Business Days after Tenant becomes aware that such transaction will result in or has resulted in a Change in Control;

(v)    without Landlord’s prior consent, so long as Guarantor continues to own fifty-one percent (51%) of, and Control, Tenant, transfer any direct or indirect interests in Tenant, provided Landlord shall be given prior written notice of any transfer of ten percent (10%) or more (in the aggregate) direct or indirect ownership interest in Tenant of which transfer Tenant or Guarantor has actual prior knowledge other than any such transfer on a nationally recognized exchange;

 

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(vi)    without Landlord’s prior consent, transfer direct or indirect interests in Guarantor or any direct or indirect parent entity of Guarantor, or enter into any merger, consolidation or amalgamation of Guarantor or any direct or indirect parent entity of Guarantor regardless of whether Guarantor or any such direct or indirect parent of Guarantor is the surviving entity and regardless of whether such transaction results in a Change in Control (provided, that in the case of any merger, consolidation or amalgamation involving Guarantor, if Guarantor is not the surviving entity, then the surviving entity shall assume the Guaranty in a manner reasonably satisfactory to Landlord);

(vii)    without Landlord’s prior consent, transfer direct or indirect interests in Tenant or its direct or indirect parent(s) in connection with a transfer of all of the assets of Guarantor (other than assets which in the aggregate are de minimis); provided, that in case of a transfer of all the assets of Guarantor (other than assets which in the aggregate are de minimis), the applicable transferee shall assume (in a form reasonably satisfactory to Landlord), all of Guarantor’s obligations under the Guaranty; and/or

(viii)    without Landlord’s prior consent, assign this Lease or the direct or indirect interests in Tenant to any Person in an assignment other than in connection with a foreclosure action pursuant to clause (ii) above if (1) such Person is a Qualified Transferee, (2) in the case of an assignment of the Lease, such Qualified Transferee agrees in writing to assume the obligations of Tenant under this Lease without amendment or modification other than as provided below, (3) (A) such Qualified Transferee (if other than Tenant), if any, has become a Guarantor and provided a Guaranty on terms reasonably satisfactory to Landlord or, (B)(i) the Parent Entity of such Qualified Transferee has become a Guarantor and provided a Guaranty on terms reasonably satisfactory to Landlord, or (ii) if such Qualified Transferee does not provide a Guaranty from a Parent Entity, such Qualified Transferee has become a Guarantor and provided a Guaranty on terms reasonably satisfactory to Landlord, and (4) the Net Revenue to Rent Ratio with respect to the Facility (determined at the proposed effective time of the assignment) for the then most recently preceding four (4) fiscal quarters for which financial statements are available is at least 1.4:1.

In connection with any transaction permitted pursuant to Section  22.2(ii) , the applicable Successor Foreclosure Tenant and Landlord shall make such amendments and other modifications to this Lease as are reasonably requested by either such party solely as needed to give effect to such transaction and such technical amendments as may be reasonably necessary or appropriate in connection with such transaction including technical changes in the provisions of this Lease regarding delivery of Financial Statements from Tenant and Guarantor to reflect the changed circumstances of Tenant, any interest holders in Tenant or Guarantor ( provided , that , in all events, any such amendments or modifications shall not increase any Party’s obligations under this Lease or diminish any Party’s rights under this Lease; provided, further, it is understood that delivery by any applicable Qualified Transferee under a replacement Guaranty or

 

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parent of a replacement Tenant of Financial Statements and other reporting consistent with the requirements of Article XXIII hereof shall not be deemed to increase Tenant’s obligations or decrease Tenant’s rights under this Lease). After giving effect to any such transaction, unless the context otherwise requires, references to Tenant shall be deemed to refer to the Foreclosure Successor Tenant permitted under this Section  22.2 .

Notwithstanding anything to the contrary herein, any transfer of Tenant’s interest in this Lease or the Leasehold Estate shall be subject to compliance with all Gaming Regulations, including receipt of all applicable Gaming Licenses and shall not result in the loss or violation of any Gaming License for the Leased Property.

22.3      Permitted Sublease Agreements . Notwithstanding the provisions of Section  22.1 , but subject to compliance with the provisions of this Section  22.3 and of Section  22.4 and Article  XL , provided that no Tenant Event of Default shall have occurred and be continuing, Tenant may enter into any Sublease (including sub-subleases, license agreements and other occupancy arrangements, but excluding any Sublease for all or substantially all of the Leased Property) without the consent of Landlord, provided, that, (i) Tenant is not released from any of its obligations under this Lease, (ii) such Sublease is made for bona fide business purposes in the normal course of the Primary Intended Use, and is not designed with the intent to avoid payment of Variable Rent or otherwise avoid any of the requirements or provisions of this Lease, (iii) such transaction is not designed with the intent to frustrate Landlord’s ability to enter into a new Lease of the Leased Property with a third Person following the Expiration Date, (iv) such transaction shall not result in a violation of any Legal Requirements (including Gaming Regulations) relating to the operation of the Facility, including any Gaming Facilities, (v) any Sublease of all or substantially all of the Facility shall be subject to the consent of Landlord and the applicable Fee Mortgagee, and (vi) the Subtenant and any other Affiliates shall have obtained all necessary Gaming Licenses as required under applicable Legal Requirements (including Gaming Regulations) in connection with such Sublease; provided, further, that, notwithstanding anything otherwise set forth herein, the following are expressly permitted without such consent: (A) the Specified Subleases and any renewals or extensions in accordance with their terms, respectively, or non-material modifications thereto and (B) any Subleases to Affiliates of Tenant that are necessary or appropriate for the operation of the Facility, including any Gaming Facilities, in connection with licensing requirements (e.g., gaming, liquor, etc.) (provided the same are expressly subject and subordinate to this Lease); provided, further, however, that, notwithstanding anything otherwise set forth herein, the portion(s) of the Leased Property subject to any Subleases (other than the Specified Subleases and other than Subleases to Affiliates of CRC) shall not be used for Gaming purposes or other core functions or spaces at the Facility (e.g., hotel room areas) (and any such Subleases to persons that are not Affiliates of CRC in respect of Leased Property used or to be used in whole or in part for Gaming purposes or other core functions or spaces (e.g., hotel room areas) shall be subject to Landlord’s prior written consent not to be unreasonably withheld). If reasonably requested by Tenant in respect of a Subtenant (including any sub-sublessee, as applicable) permitted hereunder that is neither a Subsidiary nor an Affiliate of Tenant or Guarantor, with respect to a Material Sublease, Landlord and any such Subtenant (or sub-sublessee, as applicable) shall enter into a subordination, non-disturbance and attornment agreement with respect to such Material Sublease in a form reasonably satisfactory to Landlord, Tenant and the applicable Subtenant (or sub-sublessee, as

 

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applicable) (and if a Fee Mortgage is then in effect, Landlord shall use reasonable efforts to seek to cause the Fee Mortgagee to enter into a subordination, non-disturbance and attornment agreement substantially in the form customarily entered into by such Fee Mortgagee at the time of request with similar subtenants (subject to adjustments and modifications arising out of the specific nature and terms of this Lease and/or the applicable Sublease)). After a Tenant Event of Default has occurred and while it is continuing, Landlord may collect rents from any Subtenant and apply the net amount collected to the Rent, but no such collection shall be deemed (A) a waiver by Landlord of any of the provisions of this Lease, (B) the acceptance by Landlord of such Subtenant as a tenant or (C) a release of Tenant from the future performance of its obligations hereunder. Notwithstanding anything otherwise set forth herein, Landlord shall have no obligation to enter into a subordination, non-disturbance and attornment agreement with any Subtenant with respect to a Sublease, (1) the term of which extends beyond the then Stated Expiration of this Lease, unless the applicable Sublease is on commercially reasonable terms at the time in question taking into consideration, among other things, the identity of the Subtenant, the extent of the Subtenant’s investment into the subleased space, the term of such Sublease and Landlord’s interest in such space (including the resulting impact on Landlord’s ability to lease the Facility on commercially reasonable terms after the Term of this Lease) or (2) that constitutes a management arrangement. Tenant shall furnish Landlord with a copy of each Material Sublease that Tenant enters into promptly following the making thereof (irrespective of whether Landlord’s prior approval was required therefor). In addition, promptly following Landlord’s request therefor, Tenant shall furnish to Landlord (to the extent in Tenant’s possession or under Tenant’s reasonable control) copies of all other Subleases with respect to the Facility specified by Landlord. Without limitation of the foregoing, Tenant acknowledges it has furnished to Landlord a subordination agreement of even date herewith that is binding on all Subtenants that are Subsidiaries or Affiliates of Tenant or Guarantor, pursuant to which subordination agreement, among other things, all such Subtenants have subordinated their respective Subleases to this Lease and all of the provisions, terms and conditions hereof. Further, Tenant hereby represents and warrants to Landlord that as of the effective date of the Lease, there exists no Sublease other than the Specified Subleases.

22.4      Required Subletting and Assignment Provisions . Any Sublease permitted hereunder and entered into after the Commencement Date must provide that:

(i)    the use of the Leased Property (or portion thereof) thereunder shall not conflict with any Legal Requirement or any other provision of this Lease;

(ii)    in the case of a Sublease, in the event of cancellation or termination of this Lease for any reason whatsoever or of the surrender of this Lease (whether voluntary, involuntary or by operation of law) prior to the expiration date of such Sublease, including extensions and renewals granted thereunder without replacement of this Lease by a New Lease pursuant to Section  17.1(f) , then, subject to Article XXXVI , (a) upon the request of Landlord (in Landlord’s discretion), the Subtenant shall make full and complete attornment to Landlord for the balance of the term of the Sublease, which attornment shall be evidenced by an agreement in form and substance reasonably satisfactory to Landlord and which the Subtenant shall execute and deliver within five (5) Business Days after request by Landlord and the Subtenant shall

 

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waive the provisions of any law now or hereafter in effect which may give the Subtenant any right of election to terminate the Sublease or to surrender possession in the event any proceeding is brought by Landlord to terminate this Lease and (b) to the extent such Subtenant (and each subsequent subtenant separately permitted hereunder) is required to attorn to Landlord pursuant to subclause (a) above, the aforementioned attornment agreement shall recognize the right of the subtenant (and such subsequent subtenant) under the applicable Sublease and contain commercially reasonable, customary non-disturbance provisions for the benefit of such subtenant, so long as such Subtenant is not in default thereunder;

(iii)    in the case of a Sublease, in the event the Subtenant receives a written notice from Landlord stating that this Lease has been cancelled, surrendered or terminated and not replaced by a New Lease pursuant to Section  17.1(f) , then the Subtenant shall thereafter be obligated to pay all rentals accruing under said Sublease directly to Landlord (or as Landlord shall so direct); all rentals received from the Subtenant by Landlord shall be credited against the amounts owing by Tenant under this Lease.

(iv)    in the case of a Sublease (other than the Specified Subleases), it shall be subject and subordinate to all of the terms and conditions of this Lease (subject to the terms of any applicable subordination, non-disturbance agreement made pursuant to Section  22.3 );

(v)    no Subtenant shall be permitted to further sublet all or any part of the applicable Leased Property or assign its Sublease except insofar as the same would be permitted if it were a Sublease by Tenant under this Lease (it being understood that any Subtenant under Section  22.3 may pledge and mortgage its subleasehold estate (or allow the pledge of its equity interests) to its lenders or noteholders; and

(vi)    in the case of a Sublease, the Subtenant thereunder will, upon request, furnish to Landlord and each Fee Mortgagee an estoppel certificate of the same type and kind as is required of Tenant pursuant to Section  23.1 (a) hereof (as if such Sublease was this Lease).

Any assignment, transfer or Sublease under this Article XXII shall be subject to all applicable Legal Requirements, including any Gaming Regulations, and no such assignment, transfer or Sublease shall be effective until any applicable approvals with respect to Gaming Regulations, if applicable, are obtained.

22.5      Costs . Tenant shall reimburse Landlord for Landlord’s reasonable out-of-pocket costs and expenses actually incurred in conjunction with the processing and documentation of any assignment, subletting or management arrangement (including in connection with any request for a subordination, non-disturbance and attornment agreement), including reasonable documented attorneys’, architects’, engineers’ or other consultants’ fees whether or not such Sublease, assignment or management agreement is actually consummated.

 

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22.6      No Release of Tenant s Obligations; Exception . No assignment (other than as provided in the final sentence of this Section  22.6 ), subletting or management agreement shall relieve Tenant of its obligation to pay the Rent and to perform all of the other obligations to be performed by Tenant hereunder. The liability of Tenant and any immediate and remote successor in interest of Tenant (by assignment or otherwise), and the due performance of the obligations of this Lease on Tenant’s part to be performed or observed, shall not in any way be discharged, released or impaired by any (i) stipulation which extends the time within which an obligation under this Lease is to be performed, (ii) waiver of the performance of an obligation required under this Lease that is not entered into by Landlord in a writing executed by Landlord and expressly stated to be for the benefit of Tenant or such successor, or (iii) failure to enforce any of the obligations set forth in this Lease. Upon a transfer of this Lease in accordance with, and in compliance in all respects with, Section  22.2(i) , Section  22.2(iii) , or Section  22.2(viii) of this Lease whereby the identity of the “tenant” hereunder is changed (i.e. an assignment of this Lease as opposed to an assignment of the equity interests in Tenant) the then existing Tenant shall be released from any further obligations hereunder other than any obligations and liabilities that are due and payable on the date of such transfer.

22.7      Bookings . Tenant may enter into any Bookings that do not cover periods after the expiration of the term of this Lease without the consent of Landlord. Tenant may enter into any Bookings that cover periods after the expiration of the term of this Lease without the consent of Landlord, provided, that, (i) such transaction is in each case made for bona fide business purposes in the normal course of the Primary Intended Use; (ii) such transaction shall not result in a violation of any Legal Requirements (including Gaming Regulations) relating to the operation of the Facility, (iii) such Bookings are on commercially reasonable terms at the time entered into; and (iv) such transaction is not designed with the intent to frustrate Landlord’s ability to enter into a new lease of the Leased Property or any portion thereof with a third person following the Expiration Date; provided, further, that, notwithstanding anything otherwise set forth herein, any such Bookings in effect as of the Commencement Date are expressly permitted without such consent. Landlord hereby agrees that in the event of a termination or expiration of this Lease, Landlord hereby recognizes and shall keep in effect such Booking on the terms agreed to by Tenant with such Person and shall not disturb such Person’s rights to occupy such portion of the Leased Property in accordance with the terms of such Booking.

ARTICLE XXIII

REPORTING

23.1     Estoppel Certificates and Financial Statements .

(a)     Estoppel Certificate . Each of Landlord and Tenant shall, at any time and from time to time upon receipt of not less than ten (10) Business Days’ prior written request from the other Party, furnish a certificate (an “Estoppel Certificate”) certifying (i) that this Lease is unmodified and in full force and effect, or that this Lease is in full force and effect and, if applicable, setting forth any modifications; (ii) the Rent and Additional Charges payable hereunder and the dates to which the Rent and Additional Charges payable have been paid; (iii) that the address for notices to be sent to the Party furnishing such Estoppel Certificate is as set forth in this Lease (or, if such address for notices has changed, the correct address for notices

 

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to such party); (iv) whether or not, to its actual knowledge, such Party or the other Party is in default in the performance of any covenant, agreement or condition contained in this Lease (together with back-up calculation and information reasonably necessary to support such determination) and, if so, specifying each such default of which such Party may have knowledge; (v) that Tenant is in possession of the Leased Property; and (vi) responses to such other questions or statements of fact as such other Party may reasonably request. Any such Estoppel Certificate may be relied upon by the receiving Party and any current or prospective Fee Mortgagee (and their successors and assigns), Permitted Leasehold Mortgagee, or purchaser of the Leased Property, as applicable.

(b)     Statements . Tenant shall furnish or cause to be furnished the following to Landlord:

(i)    On or before twenty-five (25) days after the end of each calendar month the following items as they pertain to Tenant: (A) an occupancy report for the subject month, including an average daily rate and revenue per available room for the subject month; (B) monthly and year-to-date operating statements prepared for each calendar month, noting gross revenue, net revenue, operating expenses and operating income, and other information reasonably necessary and sufficient to fairly represent the financial position and results of operations of Tenant during such calendar month, and containing a comparison of budgeted income and expenses and the actual income and expenses, and (C) PACE reports, in the form attached hereto as Exhibit  I .

(ii)    As to Tenant:

(a)    annual financial statements audited by Tenant’s Accountant in accordance with GAAP covering such Fiscal Year and containing statement of profit and loss, a balance sheet, and statement of cash flows for Tenant, together with (1) a report thereon by such Accountant which report shall be unqualified as to scope of audit of Tenant and its Subsidiaries and shall provide in substance that (A) such Financial Statements present fairly the consolidated financial position of Tenant and its Subsidiaries as at the dates indicated and the results of their operations and cash flow for the periods indicated in conformity with GAAP and (B) that the audit by such Accountant in connection with such Financial Statements has been made in accordance with GAAP and (2) a certificate, executed by the chief financial officer or treasurer of Tenant certifying that no Tenant Event of Default has occurred or, if a Tenant Event of Default has occurred, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto, all of which shall be provided within ninety (90) days after the end of each Fiscal Year (commencing with the Fiscal Year ending December 31, 2017);

(b)    quarterly unaudited financial statements, consisting of a statement of profit and loss, a balance sheet, and statement of cash flows for Tenant, together with a certificate, executed by the chief financial officer or treasurer of Tenant (A) certifying that no Tenant Event of Default has occurred or, if a Tenant Event of Default has occurred, specifying the nature and extent thereof

 

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and any corrective action taken or proposed to be taken with respect thereto, and (B) certifying that such Financial Statements fairly present, in all material respects, the financial position and results of operations of Tenant and its Subsidiaries on a consolidated basis in accordance with GAAP (subject to normal year-end audit adjustments and the absence of footnotes), all of which shall be provided (x) within sixty (60) days after the end of each of the first three Fiscal Quarters of each Fiscal Year (commencing with the Fiscal Quarter ending March 31, 2018); and

(c)    such additional information and unaudited quarterly financial information concerning the Leased Property and Tenant, which information shall be limited to balance sheets, income statements, and statements of cash flow, as Landlord, PropCo 1, PropCo or Landlord REIT may require for any ongoing filings with or reports to (i) the SEC under both the Securities Act and the Exchange Act, including, but not limited to 10-Q Quarterly Reports, 10-K Annual Reports and registration statements to be filed by Landlord, PropCo 1, PropCo or Landlord REIT during the Term of this Lease, (ii) the Internal Revenue Service (including in respect of Landlord REIT’s qualification as a “real estate investment trust” (within the meaning of Section 856(a) of the Code)) and (iii) any other federal, state or local regulatory agency with jurisdiction over Landlord, PropCo 1, PropCo or Landlord REIT, in each case of clause (i), (ii) and (iii), subject to Section  23.1(c) below.

(iii)    As to Guarantor:

(a)    annual financial statements audited by Guarantor’s Accountant in accordance with GAAP covering such Fiscal Year and containing statement of profit and loss, a balance sheet, and statement of cash flows for Guarantor, together with (1) a report thereon by such Accountant which report shall be unqualified as to scope of audit of Guarantor and its Subsidiaries and shall provide in substance that (A) such Financial Statements present fairly the consolidated financial position of Guarantor and its Subsidiaries as at the dates indicated and the results of their operations and cash flow for the periods indicated in conformity with GAAP and (B) that the audit by such Accountant in connection with such Financial Statements has been made in accordance with GAAP and (2) a certificate, executed by the chief financial officer or treasurer of Guarantor certifying that no Tenant Event of Default has occurred or, if a Tenant Event of Default has occurred, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto, all of which shall be provided within ninety (90) days after the end of each Fiscal Year (commencing with the Fiscal Year ending December 31, 2017);

(b)    quarterly unaudited financial statements, consisting of a statement of profit and loss, a balance sheet, and statement of cash flows for Guarantor, together with a certificate, executed by the chief financial officer or treasurer of Guarantor (A) certifying that no Tenant Event of Default has occurred or, if a Tenant Event of Default has occurred, specifying the nature and extent

 

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thereof and any corrective action taken or proposed to be taken with respect thereto, and (B) certifying that such Financial Statements fairly present, in all material respects, the financial position and results of operations of Guarantor and its Subsidiaries on a consolidated basis in accordance with GAAP (subject to normal year-end audit adjustments and the absence of footnotes), all of which shall be provided (x) within sixty (60) days after the end of each of the first three Fiscal Quarters of each Fiscal Year (commencing with the Fiscal Quarter ending March 31, 2018); and

(c)    such additional information and unaudited quarterly financial information concerning the Leased Property and Tenant, which information shall be limited to balance sheets, income statements, and statements of cash flow, as Landlord, PropCo 1, PropCo or Landlord REIT may require for any ongoing filings with or reports to (i) the SEC under both the Securities Act and the Exchange Act, including, but not limited to 10-Q Quarterly Reports, 10-K Annual Reports and registration statements to be filed by Landlord, PropCo 1, PropCo or Landlord REIT during the Term of this Lease, (ii) the Internal Revenue Service (including in respect of Landlord REIT’s qualification as a “real estate investment trust” (within the meaning of Section 856(a) of the Code)) and (iii) any other federal, state or local regulatory agency with jurisdiction over Landlord, PropCo 1, PropCo or Landlord REIT, in each case of clause (i), (ii) and (iii), subject to Section  23.1(c) below.

(d)    Notwithstanding anything to the contrary contained in this Section 23.1, CRC shall be relieved of its obligations to provide any of the reports in the foregoing clauses so long as (1) CEC (or other parent entity of CRC) reports CEC’s (or such other entity’s) audited financial statements on a consolidated basis and (2) such financial statements are accompanied by consolidating information that explains in reasonable detail the differences between the information relating to CEC (or such other parent entity), on the one hand, and the information relating to CRC and its subsidiaries on a standalone basis, on the other hand, which consolidating information shall be certified by an officer of CRC as having been fairly presented in all material respects.

(iv)    As soon as it is prepared and in no event later than sixty (60) days after the end of each Fiscal Year, a statement of Net Revenue with respect to the prior Lease Year (subject to the additional requirements as provided in Section  3.2 hereof in respect of the periodic determination of the Variable Rent hereunder);

(v)    Prompt Notice to Landlord of any action, proposal or investigation by any agency or entity, or complaint to such agency or entity (any of which is called a “ Proceeding ”), known to Tenant, the result of which Proceeding would reasonably be expected to be to revoke or suspend or terminate or modify in a way adverse to Tenant, or fail to renew or fully continue in effect, (x) any Gaming License, or (y) any other license or certificate or operating authority pursuant to which Tenant carries on any part of the Primary Intended Use of all or any portion of the Leased Property which, in any case under this clause (y) (individually or collectively), would be reasonably expected to cause

 

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a material adverse effect on Tenant or in respect of the Facility (and, without limitation, Tenant shall (A) keep Landlord apprised of (1) the status of any annual or other periodic Gaming License renewals, and (2) the status of non-routine matters before any applicable gaming authorities, and (B) promptly deliver to Landlord copies of any and all non-routine notices received (or sent) by Tenant from (or to) any Gaming Authorities);

(vi)    Within ten (10) Business Days after the end of each calendar month, a schedule containing any additions to or retirements of any fixed assets constituting Leased Property, describing such assets in summary form, their location, historical cost, the amount of depreciation and any improvements thereto, substantially in the form attached hereto as Exhibit D , and such additional customary and reasonable financial information with respect to such fixed assets constituting Leased Property as is reasonably requested by Landlord, it being understood that Tenant may classify any asset additions in accordance with the fixed asset methodology for propco-opco separation used as of the Commencement Date;

(vii)    Within three (3) Business Days of obtaining actual knowledge of the occurrence of a Tenant Event of Default (or of the occurrence of any facts or circumstances which, with the giving of notice or the passage of time would ripen into a Tenant Event of Default and that (individually or collectively would be reasonably expected to result in a material adverse effect on Tenant or in respect of the Facility), a written notice to Landlord regarding the same, which notice shall include a detailed description of the Tenant Event of Default (or such facts or circumstances) and the actions Tenant has taken or shall take, if any, to remedy such Tenant Event of Default (or such facts or circumstances);

(viii)    Such additional customary and reasonable financial information related to the Facility, Tenant, CRC and their Affiliates which shall be limited to balance sheets and income statements, as may be required by any Fee Mortgagee as an Additional Fee Mortgagee Requirement hereunder to the extent required by Section  31.3 (and, without limitation, all information concerning Tenant, CRC and any of their Affiliates, respectively, or the Facility or the business of Tenant conducted thereat required pursuant to the Fee Mortgage Documents, within the applicable timeframes required thereunder);

(ix)    The compliance certificates, as and when required pursuant to Section  4.3 ; and

(x)    The Annual Capital Budget as and when required in Section  10.5 .

(xi)    The monthly revenue and Capital Expenditure reporting required pursuant to Section  10.5(b) ;

(xii)    Together with the monthly reporting required pursuant to the preceding clause (xi), an updated rent roll and a summary of all leasing activity then taking place at the Facility;

 

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(xiii)    Operating budget for each Tenant for each Fiscal Year, which shall be delivered to Landlord no later than fifty-five (55) days following the commencement of the Fiscal Year to which such operating budget relates;

(xiv)    Within five (5) Business Days after request (or as soon thereafter as may be reasonably possible), such further detailed information reasonably available to Tenant with respect to Tenant as may be reasonably requested by Landlord;

(xv)    The quarterly reporting in respect of Bookings required pursuant to Section  22.7 of this Lease;

(xvi)    The reporting/copies of Subleases made by Tenant in accordance with Section  22.3 ;

(xvii)    Any notices or reporting required pursuant to Article XXXII hereof or otherwise pursuant to any other provision of this Lease; and

(xviii)    The monthly reporting required pursuant to Section 4.1 hereof.

The Financial Statements provided pursuant to Section  23.1(b)(iii) shall be prepared in compliance with applicable federal securities laws, including Regulation S-X (and for any prior periods required thereunder), if and to the extent such compliance with federal securities laws, including Regulation S-X (and for any prior periods required thereunder), is required to enable Landlord, PropCo 1, PropCo or Landlord REIT to (x) file such Financial Statements with the SEC if and to the extent that Landlord, PropCo 1, PropCo or Landlord REIT is required to file such Financial Statements with the SEC pursuant to Legal Requirements or (y) include such Financial Statements in an offering document if and to the extent that Landlord, PropCo 1, PropCo or Landlord REIT is reasonably requested or required to include such Financial Statements in any offering document in connection with a financing contemplated by and to the extent required by Section  23.2(b) .

(c)    Notwithstanding the foregoing, Tenant shall not be obligated (1) to provide information or assistance that would give Landlord or its Affiliates a “competitive” advantage with respect to markets in which Landlord REIT and Tenant or CRC might be competing at any time (it being understood that Landlord shall retain audit rights with respect to such information to the extent required to confirm Tenant’s compliance with the terms of this Lease (and Landlord, PropCo 1, PropCo or Landlord REIT shall be permitted to comply with Securities Exchange Commission, Internal Revenue Service and other legal and regulatory requirements with regard to such information) and provided that appropriate measures are in place to ensure that only Landlord’s auditors and attorneys (and not Landlord or Landlord REIT or any other direct or indirect parent company of Landlord) are provided access to such information) or (2) to provide information that is subject to the quality assurance immunity or is subject to attorney-client privilege or the attorney work product doctrine.

(d)    For purposes of this Section  23.1 , the terms “CRC”, “PropCo 1”, “PropCo” and “Landlord REIT” shall mean, in each instance, each of such parties and their respective successors and permitted assigns.

 

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23.2      SEC Filings; Offering Information .

(a)    Tenant specifically agrees that Landlord, PropCo 1, PropCo or Landlord REIT may file with the SEC or incorporate by reference the Financial Statements referred to in Section  23.1(b)(ii) and (iii) (and Financial Statements referred to in Section  23.1(b)(ii) and (iii)  for any prior annual or quarterly periods as required by any Legal Requirements) in Landlord’s, PropCo 1’s PropCo’s or Landlord REIT’s filings made under the Securities Act or the Exchange Act to the extent it is required to do so pursuant to Legal Requirements. In addition, Landlord, PropCo 1, PropCo or Landlord REIT may include, cross-reference or incorporate by reference the Financial Statements (and for any prior annual or quarterly periods as required by any Legal Requirements) and other financial information and such information concerning the operation of the Leased Property (1) which is publicly available or (2) the inclusion of which is approved by Tenant in writing, which approval may not be unreasonably withheld, conditioned or delayed, in offering memoranda or prospectuses or confidential information memoranda, or similar publications or marketing materials, rating agency presentations, investor presentations or disclosure documents in connection with syndications, private placements or public offerings of Landlord’s, PropCo 1’s, PropCo’s or Landlord REIT’s securities or loans. Unless otherwise agreed by Tenant, neither Landlord, PropCo 1, PropCo nor Landlord REIT shall revise or change the wording of information previously publicly disclosed by Tenant and furnished to Landlord, PropCo 1, PropCo or Landlord REIT pursuant to Section  23 or this Section  23.2, and Landlord’s, PropCo 1’s PropCo’s or Landlord REIT’s Form 10-Q or Form 10-K (or amendment or supplemental report filed in connection therewith) shall not disclose the operational results of the Leased Property prior to CRC’s, Tenant’s or its Affiliate’s public disclosure thereof so long as CRC, Tenant or such Affiliate reports such information in a timely manner in compliance with the reporting requirements of the Exchange Act, in any event, no later than ninety (90) days after the end of each Fiscal Year. Landlord agrees to use commercially reasonable efforts to provide a copy of the portion of any public disclosure containing the Financial Statements, or any cross-reference thereto or incorporation by reference thereof (other than cross-references to or incorporation by reference of Financial Statements that were previously publicly filed), or any other financial information or other information concerning the operation of the Leased Property received by Landlord under this Lease, at least two (2) Business Days in advance of any such public disclosure.

(b)    Tenant understands that, from time to time, Landlord, PropCo 1, PropCo or Landlord REIT may conduct one or more financings, which financings may involve the participation of placement agents, underwriters, initial purchasers or other persons deemed underwriters under applicable securities law. In connection with any such financings, Tenant shall, upon the request of Landlord, use commercially reasonable efforts to furnish to Landlord, to the extent reasonably requested or required in connection with any such financings, the information referred to in Section  23.1(b) , as applicable and in each case including for any prior annual or quarterly periods as required by any Legal Requirements, as promptly as reasonably practicable after the request therefor (taking into account, among other things, the timing of any such request and any Legal Requirements applicable to Tenant or CRC at such time). In addition, Tenant shall, upon the request of Landlord, use commercially reasonable efforts to provide Landlord and its Representatives with such management representation letters, comfort letters and consents of applicable certified independent auditors to the inclusion of their reports

 

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in applicable financing disclosure documents as may be reasonably requested or required in connection with the sale or registration of securities by Landlord, PropCo 1, PropCo or Landlord REIT. Landlord shall reimburse Tenant and CRC, their respective Subsidiaries and their respective Representatives as promptly as reasonably practicable after the request therefor, for any reasonable and actual, documented expenses incurred in connection with any cooperation provided pursuant to this Section  23.2(b) (and, unless any non-compliance with this Lease to more than a de minimis extent is revealed, any exercise by Landlord of audit rights pursuant to Section  23.1(c) ) (including, without limitation, reasonable and documented fees and expenses of accountants and attorneys, but excluding, for the avoidance of doubt, any such fees and expenses incurred in the preparation of the Financial Statements). In addition, Landlord shall indemnify and hold harmless Tenant, CEC and CRC, their respective Subsidiaries and their respective Representatives from and against any and all liabilities, losses, damages, claims, costs, expenses, interest, awards, judgments and penalties suffered or incurred by them (collectively, “Losses”) in connection with any cooperation provided pursuant to this Section  23.2(b) , except to the extent (i) such Losses were suffered or incurred as a result of the bad faith, gross negligence or willful misconduct of any such indemnified person or (ii) such Losses were caused by any untrue statement or alleged untrue statement of a material fact contained in any Financial Statements delivered by Tenant to Landlord hereunder, or caused by any omission or alleged omission to state therein a material fact necessary to make the statements therein in the light of the circumstances under which they were made not misleading.

23.3      Landlord Obligations

(c)    Landlord agrees that, upon request of Tenant, it shall from time to time provide such information as may be reasonably requested by Tenant with respect to Landlord’s, PropCo 1’s, PropCo’s and Landlord REIT’s capital structure and/or any financing secured by this Lease or the Leased Property in connection with Tenant’s review of the treatment of this Lease under GAAP.

(d)    Landlord further understands and agrees that, from time to time, Tenant, CEC, CRC or their respective Affiliates may conduct one or more financings, which financings may involve the participation of placement agents, underwriters, initial purchasers or other persons deemed underwriters under applicable securities law. In connection with any such financings, Landlord shall, upon the request of Tenant, use commercially reasonable efforts to furnish to Tenant, to the extent reasonably requested or required in connection with any such financings, the Financial Statements (and for any prior annual or quarterly periods as required by any Legal Requirements), other financial information and cooperation as promptly as reasonably practicable after the request therefor (taking into account, among other things, the timing of any such request and any Legal Requirements applicable to Landlord, PropCo 1, PropCo or Landlord REIT at such time). In addition, Landlord shall, upon the request of Tenant, use commercially reasonable efforts to provide Tenant and its Representatives with such management representation letters, comfort letters and consents of applicable certified independent auditors to the inclusion of their reports in applicable financing disclosure documents as may be reasonably requested or required in connection with the sale or registration of securities by Tenant, CRC or any of their respective Affiliates. Tenant shall reimburse Landlord, PropCo 1, PropCo, Landlord REIT, their respective Subsidiaries and their respective Representatives as promptly as

 

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reasonably practicable after the request therefor, for any reasonable and actual, documented expenses incurred in connection with any cooperation provided pursuant to this Section  23.3(b) (including, in each case, without limitation, reasonable and documented fees and expenses of accountants and attorneys and allocated costs of internal employees but excluding, for the avoidance of doubt, any such fees, expenses and allocated costs incurred in the preparation of the Financial Statements). In addition, Tenant shall indemnify and hold harmless Landlord, PropCo 1, PropCo, Landlord REIT, their respective Subsidiaries and their respective Representatives from and against any and all Losses in connection with any cooperation provided pursuant to this Section  23.3(b) , except to the extent (i) such Losses were suffered or incurred as a result of the bad faith, gross negligence or willful misconduct of any such indemnified person or (ii) such Losses were caused by any untrue statement or alleged untrue statement of a material fact contained in any Financial Statements delivered by Landlord to Tenant hereunder, or caused by any omission or alleged omission to state therein a material fact necessary to make the statements therein in the light of the circumstances under which they were made not misleading.

(e)    The Financial Statements provided pursuant to Section  23.3(b) shall be prepared in compliance with applicable federal securities laws, including Regulation S-X (and for any prior periods required thereunder), if and to the extent such compliance with federal securities laws, including Regulation S-X (and for any prior periods required thereunder), is required to enable Tenant or CRC or their respective Affiliates to (x) file such Financial Statements with the SEC if and to the extent that Tenant or CRC is required to file such Financial Statements with the SEC pursuant to Legal Requirements or (y) include such Financial Statements in an offering document if and to the extent that Tenant or CRC or their respective affiliates is reasonably requested or required to include such Financial Statements in any offering document in connection with a financing contemplated by and to the extent required by Section  23.3(b) .

ARTICLE XXIV

LANDLORD’S RIGHT TO INSPECT

Upon reasonable advance written notice to Tenant, Tenant shall permit Landlord and its authorized representatives (including any Fee Mortgagee and its representatives) to inspect the Leased Property or any portion thereof during reasonable times (or at such time and with such notice as shall be reasonable in the case of an emergency) (and Tenant shall be permitted to have any such representatives of Landlord accompanied by a representative of Tenant). Landlord shall take reasonable care to minimize disturbance of the operations on the applicable portion of the Leased Property.

ARTICLE XXV

NO WAIVER

No delay, omission or failure by Landlord to insist upon the strict performance of any term hereof or to exercise any right, power or remedy hereunder and no acceptance of full or partial payment of Rent during the continuance of any default or Tenant Event of Default shall impair any such right or constitute a waiver of any such breach or of any such term. No waiver of any breach shall affect or alter this Lease, which shall continue in full force and effect with respect to any other then existing or subsequent breach.

 

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ARTICLE XXVI

REMEDIES CUMULATIVE

To the extent permitted by law, each legal, equitable or contractual right, power and remedy of Landlord now or hereafter provided either in this Lease or by statute or otherwise shall be cumulative and concurrent and shall be in addition to every other right, power and remedy and the exercise or beginning of the exercise by Landlord of any one or more of such rights, powers and remedies shall not preclude the simultaneous or subsequent exercise by Landlord of any or all of such other rights, powers and remedies.

ARTICLE XXVII

ACCEPTANCE OF SURRENDER

No surrender to Landlord of this Lease or of the Leased Property or any part thereof, or of any interest therein, shall be valid or effective unless agreed to and accepted in writing by Landlord, and no act by Landlord or any representative or agent of Landlord, other than such a written acceptance by Landlord, shall constitute an acceptance of any such surrender.

ARTICLE XXVIII

NO MERGER

There shall be no merger of this Lease or of the Leasehold Estate created hereby by reason of the fact that the same Person may acquire, own or hold, directly or indirectly, (i) this Lease or the Leasehold Estate created hereby or any interest in this Lease or such Leasehold Estate and (ii) the fee estate in the Leased Property or any portion thereof. If Landlord or any Affiliate of Landlord shall purchase any fee or other interest in the Leased Property or any portion thereof that is superior to the interest of Landlord, then the estate of Landlord and such superior interest shall not merge.

ARTICLE XXIX

INTENTIONALLY OMITTED

ARTICLE XXX

QUIET ENJOYMENT

So long as no Tenant Event of Default shall have occurred and be continuing, Tenant shall peaceably and quietly have, hold and enjoy the Leased Property for the Term, free of any claim or other action by Landlord or anyone claiming by, through or under Landlord, but subject

 

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(i) to the provisions, terms and conditions of this Lease, and (ii) to all liens and encumbrances existing as of the Commencement Date, or thereafter as provided for in this Lease or consented to by Tenant. No failure by Landlord to comply with the foregoing covenant shall give Tenant any right to cancel or terminate this Lease or abate, reduce or make a deduction from or offset against the Rent or any other sum payable under this Lease, or to fail to perform any other obligation of Tenant hereunder. Notwithstanding the foregoing, Tenant shall have the right, by separate and independent action to pursue any claim it may have against Landlord as a result of a breach by Landlord of the covenant of quiet enjoyment contained in this Article XXX .

ARTICLE XXXI

LANDLORD FINANCING

31.1      Landlord s Financing .

(a)    Without the consent of Tenant (but subject to the remainder of this Section  31.1 ), Landlord may from time to time, directly or indirectly, create or otherwise cause to exist any Fee Mortgage upon all of the Leased Property (other than de minimis portions thereof that are not capable of being assigned or transferred) (or upon interests in Landlord which are pledged pursuant to a mezzanine loan or similar financing arrangement). This Lease is and at all times shall be subordinate to any Existing Fee Mortgage and any other Fee Mortgage which may hereafter affect the Leased Property or any portion thereof or interest therein and in each case to all renewals, modifications, consolidations, replacements, restatements and extensions thereof or any parts or portions thereof; provided, however , that the subordination of this Lease and Tenant’s leasehold interest hereunder to any new Fee Mortgage hereafter made, shall be conditioned and occur only upon the execution and delivery to Tenant by the respective Fee Mortgagee of a commercially reasonable subordination, nondisturbance and attornment agreement that is reasonably acceptable to Tenant, which will bind Tenant and such Fee Mortgagee and its successors and assigns as well as any person who acquires any portion of the Leased Property in a foreclosure or similar proceeding or in a transfer in lieu of any such foreclosure or a successor owner of the Leased Property (each, a “Foreclosure Purchaser”) and which shall provide, among other things, that so long as there is no outstanding and continuing Tenant Event of Default under this Lease (or, if there is a continuing Tenant Event of Default, subject to the rights granted to a Permitted Leasehold Mortgagee as expressly set forth in this Lease), the holder of such Fee Mortgage, and any Foreclosure Purchaser shall not disturb Tenant’s leasehold interest or possession of the Leased Property, subject to and in accordance with the terms hereof, and shall give effect to this Lease, including, but not limited to, the provisions of Article XVII which benefit any Permitted Leasehold Mortgagee (as if such Fee Mortgagee or Foreclosure Purchaser were the landlord under this Lease (it being understood that if a Tenant Event of Default has occurred and is continuing at such time, such parties shall be subject to the terms and provisions hereof concerning the exercise of rights and remedies upon such Tenant Event of Default including the provisions of Articles XVI , XVII and XXXVI )). In connection with the foregoing and at the request of Landlord, Tenant shall promptly execute a subordination, nondisturbance and attornment agreement that contains commercially reasonable provisions, terms and conditions and that is reasonably acceptable to Tenant and Landlord, in all events complying with this Section  31.1 . In connection with any subsequent Fee Mortgage, as a condition to the Fee Mortgagee holding any Fee Mortgage Reserve Accounts, Tenant and such Fee Mortgagee shall have entered into a subordination, nondisturbance and attornment agreement as provided in this Section 31.1(a).

 

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(b)    If, in connection with obtaining any Fee Mortgage or entering into any agreement relating thereto, Landlord shall request in writing (i) reasonable cooperation from Tenant or (ii) reasonable amendments or modifications to this Lease, in each case required to comply with any reasonable request made by Fee Mortgagee, Tenant shall reasonably cooperate with such request, so long as (I) no default in any material respect by Landlord beyond applicable cure periods is continuing, (II) all reasonable documented out-of-pocket costs and expenses incurred by Tenant in connection with such cooperation, including, but not limited to, its reasonable documented attorneys’ fees, shall be paid by Landlord and (III) any requested action, including any amendments or modification of this Lease, shall not (a) increase Tenant’s monetary obligations under this Lease by more than a de minimis extent, or increase Tenant’s non-monetary obligations under this Lease in any material respect or decrease Landlord’s obligations in any material respect, (b) diminish Tenant’s rights under this Lease in any material respect, (c) adversely impact the value of the Leased Property by more than a de minimis extent or otherwise have a more than de minimis adverse effect on the Leased Property, Tenant or Landlord, (d) result in this Lease not constituting a “true lease”, or (e) result in a default under any Permitted Leasehold Mortgage. The foregoing is not intended to vitiate or supersede the provisions, terms and conditions of Section  31.1 hereof.

31.2      Attornment . If either (a) Landlord’s interest in the Leased Property or any portion thereof or interest therein is sold, conveyed or terminated upon the exercise of any remedy provided for in any Fee Mortgage Documents (or in lieu of such exercise) or (b) equity interests in Landlord are sold or conveyed upon the exercise of any remedy provided for in any Fee Mortgage Documents (or in lieu of such exercise), or otherwise by operation of law, then, at the request and option of the new owner or superior lessor, as the case may be, Tenant shall attorn to and recognize the new owner or superior lessor as Tenant’s “landlord” under, and on the terms and conditions set forth, in this Lease.

31.3      Compliance with Fee Mortgage Documents .

(a)    Tenant acknowledges that any Fee Mortgage Documents executed by Landlord or any Affiliate of Landlord may impose certain obligations on the “borrower” or other counterparty thereunder to comply with, or cause the operator and/or lessee of the Leased Property to comply with, certain reasonable covenants contained therein, including, without limitation, covenants relating to (i) the alteration, maintenance, repair and restoration of the Leased Property; (ii) maintenance and submission of financial records and accounts of the operation of the Leased Property and financial and other information regarding the operator and/or lessee of the Leased Property and the Leased Property itself and other portions of the Facility; (iii) the procurement of insurance policies with respect to the Leased Property; (iv) removal of liens and encumbrances; (v) subleasing, management and related activities; and (vi) without limiting the foregoing, compliance with all applicable Legal Requirements (including Gaming Regulations) relating to the Leased Property and the operation of the business thereon or therein. From and after the date any Fee Mortgage encumbers the Leased Property (or any portion thereof or interest therein), and Landlord has provided Tenant with true and complete

 

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copies thereof and, if Landlord elects, of any applicable Fee Mortgage Documents (for informational purposes only, but not for Tenant’s approval), accompanied by a written request for Tenant to comply with the Additional Fee Mortgagee Requirements (hereinafter defined) (which request shall expressly reference this Section  31.3 and expressly identify the Fee Mortgage Documents and sections thereof containing the Additional Fee Mortgagee Requirements), and continuing until the first to occur of (1) such Fee Mortgage Documents ceasing to remain in full force and effect by reason of satisfaction in full of the indebtedness thereunder or foreclosure or similar exercise of remedies or otherwise), (2) the Expiration Date, (3) such time as Tenant’s compliance with the Additional Fee Mortgagee Requirements would constitute or give rise to a breach or violation of (x) this Lease, and not otherwise waived by Landlord, (y) Legal Requirements (including Gaming Regulations and Liquor Laws), or (z) any Permitted Leasehold Mortgage (not waived by the applicable Permitted Leasehold Mortgagee), provided, however, with respect to this clause (z), Tenant shall not be relieved of its obligation to comply with (A) the terms of the Additional Fee Mortgagee Requirements in effect as of the Commencement Date (whether embodied in the Existing Fee Mortgage or related Fee Mortgage Documents or in any future Fee Mortgage or related Fee Mortgage Documents containing the applicable corresponding terms), nor (B) any Additional Fee Mortgagee Requirements (other than any Additional Fee Mortgagee Requirements covered under the preceding clause (A)) in effect as of the time when the Permitted Leasehold Mortgage was obtained, and (4) Tenant receives written direction from Landlord, any Fee Mortgagee or any governmental authority requesting or instructing Tenant to cease complying with the Additional Fee Mortgagee Requirements, (provided, prior to ceasing compliance with any Additional Fee Mortgagee Requirements under the preceding clauses (3) and (4), Tenant shall first provide Landlord with prior written notice together with, (x) if acting pursuant to clause (3), reasonably detailed materials evidencing that such compliance constitutes such a breach, and (y) if acting pursuant to clause (4), a copy of the applicable communication(s) from such Fee Mortgagee or governmental authority, as applicable, and Tenant shall in such event only cease compliance with the specific Additional Fee Mortgage Requirements in question under clause (3) or that are covered by the written direction under clause (4), as applicable) (such time period, the “Additional Fee Mortgagee Requirements Period”), Tenant covenants and agrees, at its sole cost and expense and for the express benefit of Landlord (and not, for the avoidance of doubt, any Fee Mortgagee, which shall not be construed to be a third-party beneficiary of this Lease, provided, however, this parenthetical provision is not intended to vitiate Tenant’s obligation to perform any or all of the Additional Fee Mortgagee Requirements directly for the benefit of any Fee Mortgagee as and to the extent agreed to by Tenant in an agreement entered into directly between Tenant and such Fee Mortgagee), to operate the Leased Property (or cause the Leased Property to be operated) in compliance with the Additional Fee Mortgagee Requirements of which it has received written notice. For the avoidance of doubt, notwithstanding anything to the contrary herein, Tenant shall not be required to comply with and shall not have any other obligations with respect to any terms or conditions of, or amendments or modifications to, any Fee Mortgage or other Fee Mortgage Documents that do not constitute Additional Fee Mortgagee Requirements; provided , however , that the foregoing shall not be deemed to release Tenant from its obligations under this Lease that do not derive from the Fee Mortgage Documents, whether or not such obligations are duplicative of those set forth in the Fee Mortgage Documents.

 

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(b)    As used herein, “ Additional Fee Mortgagee Requirements ” means those customary requirements as to the operation of the Leased Property and the business thereon or therein which the Fee Mortgage Documents impose (x) directly upon, or require Landlord (or Landlord’s Affiliate borrower thereunder) to impose upon, the tenant(s) and/or operator(s) of the Leased Property or (y) directly upon Landlord, but which, by reason of the nature of the obligation(s) imposed and the nature of Tenant’s occupancy and operation of the Leased Property and the business conducted thereupon, are not reasonably susceptible of being performed by Landlord and are reasonably susceptible of being performed by Tenant (excluding, for the avoidance of doubt, payment of any indebtedness or other obligations evidenced or secured thereby) and, except with respect to the Existing Fee Mortgage (of which Tenant is deemed to have received written notice) of which Tenant has received written notice; provided , however , that, notwithstanding the foregoing, Additional Fee Mortgagee Requirements shall not include or impose on Tenant (and Tenant will not be subject to) obligations which (a) are not customary for Landlord financings of the type contemplated under the applicable Fee Mortgage Documents, (b) increase Tenant’s monetary obligations under this Lease to more than a de minimis extent (it being agreed that making Rent payments otherwise payable to Landlord into a “lockbox” account designated by a Fee Mortgagee shall not be deemed to increase Tenant’s monetary obligations under the Lease), (c) increase Tenant’s non-monetary obligations under this Lease in any material respect, or (d) diminish Tenant’s rights under this Lease in any material respect (it being agreed that none of the provisions, terms and conditions of the Existing Fee Mortgage Documents violate any of the preceding clauses (a) through (d)).

(c)    Any proposed implementation of any additional financial covenants (i.e., a requirement that Tenant must meet certain specified performance tests of a financial nature, e.g., meeting a threshold EBITDAR, Net Revenue, financial ratio or similar test) that are imposed on Tenant shall not constitute Additional Fee Mortgagee Requirements (it being understood that Landlord may agree to such financial covenants being imposed in any Fee Mortgage Documents so long as such financial covenants will not impose additional obligations on Tenant to comply therewith). For the avoidance of doubt, Additional Fee Mortgagee Requirements may include (to the extent consistent with the foregoing definition of Additional Fee Mortgagee Requirements) requirements of Tenant to:

(ix)    make Rent payments into “lockbox accounts” maintained for the benefit of Fee Mortgagee; and/or

(x)    subject to this Section  31.3 , perform other actions consistent with the obligations described in the first sentence of this Section  31.3

(d)    In the event Tenant breaches its obligations to comply with Additional Fee Mortgagee Requirements as described herein (without regard to any notice or cure period under the Fee Mortgage Documents and without regard to whether a default or event of default has occurred as a result thereof under the Fee Mortgage Documents), Landlord shall have the right, following the failure of Tenant to cure such breach within twenty (20) days from receipt of written notice to Tenant from Landlord of such breach (except to the extent the breach is of a

 

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nature such that it is not practicable for Landlord to provide such prior written notice, in which event Landlord shall provide written notice as soon as practicable), to cure such breach, in which event Tenant shall reimburse Landlord for Landlord’s reasonable costs and expenses incurred in connection with curing such breach.

(e)    To the extent of any conflict between the terms and provisions of any agreement to which Landlord, Tenant and Fee Mortgagee are parties and the terms and provisions of this Section  31.3 , the terms and provisions of such agreement shall govern and control in accordance with its terms.

ARTICLE XXXII

ENVIRONMENTAL COMPLIANCE

32.1      Hazardous Substances . Tenant shall not allow any Hazardous Substance to be located in, on, under or about the Leased Property or any portion thereof or incorporated into the Facility; provided however that Hazardous Substances may be (i) brought, kept, used or disposed of in, on or about the Leased Property in quantities and for purposes similar to those brought, kept, used or disposed of in, on or about similar facilities used for purposes similar to the Primary Intended Use or in connection with the construction of facilities similar to the Leased Property and (ii) disposed of in strict compliance with Legal Requirements (other than Gaming Regulations). Tenant shall not allow the Leased Property or any portion thereof to be used as a waste disposal site or for the manufacturing, handling, storage, distribution or disposal of any Hazardous Substance other than in the ordinary course of the business conducted at the Leased Property and in compliance with applicable Legal Requirements (other than Gaming Regulations).

32.2      Notices . Each of Landlord and Tenant shall provide to the other party, as soon as reasonably practicable but in no event later than fifteen (15) days after Tenant’s or Landlord’s receipt thereof, a copy of any notice, notification or request for information with respect to, (i) any violation of a Legal Requirement (other than Gaming Regulations) relating to, or Release of, Hazardous Substances located in, on, or under the Leased Property or any portion thereof or any adjacent property; (ii) any enforcement, cleanup, removal, or other governmental or regulatory action instituted, completed or threatened in writing with respect to the Leased Property or any portion thereof; (iii) any material claim made or threatened in writing by any Person against Tenant, Landlord or the Leased Property or any portion thereof relating to damage, contribution, cost recovery, compensation, loss, or injury resulting from or claimed to result from any Hazardous Substance; and (iv) any reports made to any federal, state or local environmental agency arising out of or in connection with any Hazardous Substance in, on, under or removed from the Leased Property or any portion thereof, including any written complaints, notices, warnings or assertions of violations in connection therewith

32.3      Remediation . If either Landlord or Tenant become aware of a violation of any Legal Requirement (other than Gaming Regulations) relating to any Hazardous Substance in, on, under or about the Leased Property or any portion thereof or any adjacent property, or if Tenant,

 

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Landlord or the Leased Property or any portion thereof becomes subject to any order of any federal, state or local agency to repair, close, detoxify, decontaminate or otherwise remediate the Leased Property, Landlord or Tenant, as applicable, shall promptly notify the other Party of such event and, at Tenant’s sole cost and expense, Tenant shall cure such violation or effect such repair, closure, detoxification, decontamination or other remediation. If Tenant fails to diligently pursue, implement and complete any such cure, repair, closure, detoxification, decontamination or other remediation, which failure continues after notice and expiration of applicable cure periods, Landlord shall have the right, but not the obligation, to carry out such action and to recover from Tenant all of Landlord’s costs and expenses incurred in connection therewith.

32.4      Indemnity . Tenant shall indemnify, defend, protect, save, hold harmless, and reimburse Landlord for, from and against any and all actual out-of-pocket costs, losses (including, losses of use or economic benefit or diminution in value), liabilities, damages, assessments, lawsuits, deficiencies, demands, claims and expenses (collectively, “ Environmental Costs ”) (whether or not arising out of third-party claims and regardless of whether liability without fault is imposed, or sought to be imposed, on Landlord) incurred in connection with, arising out of, resulting from or incident to, directly or indirectly, in each case before or (except to the extent first discovered after the end of the Term) during (but not if first occurring after) the Term (i) the production, use, generation, storage, treatment, transporting, disposal, discharge, Release or other handling or disposition of any Hazardous Substances from, in, on or under the Leased Property or any portion thereof (collectively, “ Handling ”), including the effects of such Handling of any Hazardous Substances on any Person or property within or outside the boundaries of the Leased Property, (ii) the presence of any Hazardous Substances in, on or under the Leased Property and (iii) the violation of any Environmental Law. “ Environmental Costs ” include interest, costs of response, removal, remedial action, containment, cleanup, investigation, design, engineering and construction, damages (including actual and consequential damages) for personal injuries and for injury to, destruction of or loss of property or natural resources, relocation or replacement costs, penalties, fines, charges or expenses, reasonable attorney’s fees, reasonable expert fees, reasonable consultation fees, and court costs, and all amounts paid in investigating, defending or settling any of the foregoing, as applicable. Tenant’s indemnity hereunder shall survive the termination of this Lease, but in no event shall Tenant’s indemnity apply to Environmental Costs incurred in connection with, arising out of, resulting from or incident to matters first occurring after the later of (x) the end of the Term and (y) the date upon which Tenant shall have vacated the Leased Property and surrendered the same to Landlord, in each case to the extent such matters are not or were not caused by the acts or omissions of Tenant in breach of this Lease.

Without limiting the scope or generality of the foregoing, Tenant expressly agrees that, in the event of a breach by Tenant in its obligations under Sections 32.1 - 32.3 that is not cured within any applicable cure period, Tenant shall reimburse Landlord for any and all reasonable costs and expenses incurred by Landlord in connection with, arising out of, resulting from or incident to (directly or indirectly, before or during (but not if first occurring after) the Term) the following:

(a)    investigating any and all matters relating to the Handling of any Hazardous Substances, in, on, from or under the Leased Property or any portion thereof;

 

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(b)    bringing the Leased Property into compliance with all Legal Requirements, and

(c)    removing, treating, storing, transporting, cleaning-up and/or disposing of any Hazardous Substances used, stored, generated, released or disposed of in, on, from, under or about the Leased Property or off-site other than in the ordinary course of the business conducted at the Leased Property and in compliance with applicable Legal Requirements.

If any claim is made by Landlord for reimbursement for Environmental Costs incurred by it hereunder, Tenant agrees to pay such claim promptly, and in any event to pay such claim within sixty (60) calendar days after receipt by Tenant of written notice thereof and any amount not so paid within such sixty (60) calendar day period shall bear interest at the Overdue Rate from the date due to the date paid in full.

32.5      Environmental Inspections . In the event Landlord has a reasonable basis to believe that Tenant is in breach of its obligations under Sections 32.1 through 32.4 , Landlord shall have the right, from time to time, during normal business hours and upon not less than five (5) Business Days written notice to Tenant (except in the case of an emergency that constitutes an imminent threat to human health or safety or damage to property, in which event Landlord shall undertake reasonable efforts to notify a representative of Tenant as soon as practicable under the circumstances), to conduct an inspection of the Leased Property or any portion thereof (and Tenant shall be permitted to have Landlord or its representatives accompanied by a representative of Tenant) to determine the existence or presence of Hazardous Substances on or about the Leased Property or any portion thereof. In the event Landlord has a reasonable basis to believe that Tenant is in breach of its obligations under Sections 32.1 through 32.4 , Landlord shall have the right to enter and inspect the Leased Property or any portion thereof, conduct any testing, sampling and analyses it reasonably deems necessary and shall have the right to inspect materials brought into the Leased Property or any portion thereof. Landlord may, in its discretion, retain such experts to conduct the inspection, perform the tests referred to herein, and to prepare a written report in connection therewith if Landlord has a reasonable basis to believe that Tenant is in breach of its obligations under Sections  32.1 through 32.4 . All costs and expenses incurred by Landlord under this Section  32.6 shall be the responsibility of Landlord, except solely to the extent Tenant has breached its obligations under Sections  32.1 through 32.5 , in which event such reasonable costs and expenses shall be paid by Tenant to Landlord as provided in Section  32.4 . Failure to conduct an environmental inspection or to detect unfavorable conditions if such inspection is conducted shall in no fashion constitute a release of any liability for environmental conditions subsequently determined to be associated with or to have occurred during Tenant’s tenancy. Tenant shall remain liable for any environmental condition related to or having occurred during its tenancy regardless of when such conditions are discovered and regardless of whether or not Landlord conducts an environmental inspection at the termination of this Lease. The obligations set forth in this Article XXXII shall survive the expiration or earlier termination of this Lease but in no event shall Article XXXII apply to matters first occurring after the later of (x) the end of the Term and (y) the date upon which Tenant shall have vacated the Leased Property and surrendered the same to Landlord, in each case to the extent such matters are not or were not caused by the acts or omissions of Tenant in breach of this Lease.

 

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ARTICLE XXXIII

MEMORANDUM OF LEASE

Landlord and Tenant shall, promptly upon the request of either Party, enter into one or more short form memoranda of this Lease, in form suitable for recording in each county or other applicable location in which the Leased Property is located. Each Party shall bear its own costs in negotiating and finalizing such memoranda, but Tenant shall pay all costs and expenses of recording any such memorandum and shall fully cooperate with Landlord in removing from record any such memorandum upon the Expiration Date.

ARTICLE XXXIV

DISPUTE RESOLUTION

34.1      Expert Valuation Process . Whenever a determination of Fair Market Ownership Value or Fair Market Base Rental Value or Fair Market Rental Value or Fair Market Property Value is required pursuant to any provision of this Lease, and where Landlord and Tenant have not been able to reach agreement on such Fair Market Ownership Value or Fair Market Base Rental Value or Fair Market Rental Value or Fair Market Property Value either (i) with respect to Fair Market Rental Value applicable to a Renewal Term, within three hundred seventy (370) days prior to the commencement date of a Renewal Term or (ii) for all other purposes, after at least fifteen (15) days of good faith negotiations, then either Party shall each have the right to seek, upon written notice to the other Party (the “ Expert Valuation Notice ”), which notice clearly identifies that such Party seeks, to have such Fair Market Ownership Value or Fair Market Base Rental Value or Fair Market Rental Value or Fair Market Property Value determined in accordance with the following Expert Valuation Process:

(a)    Within twenty (20) days of the receiving Party’s receipt of the Expert Valuation Notice, Landlord and Tenant shall provide notice to the other Party of the name, address and other pertinent contact information, and qualifications of its selected appraiser (which appraiser must be an independent qualified MAI appraiser (i.e., a Member of the Appraisal Institute)).

(b)    As soon as practicable following such notice, and in any event within twenty (20) days following their selection, each appraiser shall prepare a written appraisal of Fair Market Ownership Value or Fair Market Base Rental Value or Fair Market Rental Value or Fair Market Property Value (as the case may be) as of the relevant date of valuation, and deliver the same to its respective client. Representatives of the Parties shall then meet and simultaneously exchange copies of such appraisals. Following such exchange, the appraisers shall promptly meet and endeavor to agree upon Fair Market Ownership Value or Fair Market Base Rental Value or Fair Market Rental Value or Fair Market Property Value (as the case may be) based on a written appraisal made by each of them (and given to Landlord by Tenant). If such two appraisers shall agree upon a Fair Market Ownership Value or Fair Market Base Rental Value or Fair Market Rental Value or Fair Market Property Value, as applicable, such agreed amount shall be binding and conclusive upon Landlord and Tenant.

 

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(c)    If such two appraisers are unable to agree upon a Fair Market Ownership Value or Fair Market Base Rental Value or Fair Market Rental Value or Fair Market Property Value (as the case may be) within five (5) Business Days after the exchange of appraisals as aforesaid, then such appraisers shall advise Landlord and Tenant of the same and, within twenty (20) days of the exchange of appraisals, select a third appraiser (which third appraiser, however selected, must be an independent qualified MAI appraiser) to make the determination of Fair Market Ownership Value or Fair Market Base Rental Value or Fair Market Rental Value or Fair Market Property Value. The selection of the third appraiser shall be binding and conclusive upon Landlord and Tenant.

(d)    If such two appraisers shall be unable to agree upon the designation of a third appraiser within the twenty (20) day period referred to in clause (c) above, or if such third appraiser does not make a determination of Fair Market Ownership Value or Fair Market Base Rental Value or Fair Market Rental Value or Fair Market Property Value (as the case may be) within thirty (30) days after his or her selection, then such third appraiser (or a substituted third appraiser, as applicable) shall, at the request of either Party, be appointed by the Appointing Authority and such appointment shall be final and binding on Landlord and Tenant. The determination of Fair Market Ownership Value or Fair Market Base Rental Value or Fair Market Rental Value or Fair Market Property Value (as the case may be) made by the third appraiser appointed pursuant hereto shall be made within twenty (20) days after such appointment.

(e)    If a third appraiser is selected, Fair Market Ownership Value or Fair Market Base Rental Value or Fair Market Rental Value or Fair Market Property Value (as the case may be) shall be the average of (x) the determination of Fair Market Ownership Value or Fair Market Base Rental Value or Fair Market Rental Value or Fair Market Property Value (as the case may be) made by the third appraiser and (y) the determination of Fair Market Ownership Value or Fair Market Base Rental Value or Fair Market Rental Value or Fair Market Property Value (as the case may be) made by the appraiser (selected pursuant to Section  34.1(b) ) whose determination of Fair Market Ownership Value or Fair Market Base Rental Value or Fair Market Rental Value or Fair Market Property Value (as the case may be) is nearest to that of the third appraiser. Such average shall be binding and conclusive upon Landlord and Tenant as being the Fair Market Ownership Value or Fair Market Base Rental Value or Fair Market Rental Value or Fair Market Property Value (as the case may be).

(f)    In determining Fair Market Ownership Value of the Leased Property as a whole, the appraisers shall (in addition to taking into account the criteria set forth in the definition of Fair Market Ownership Value), add (i) the present value of the Rent for the remaining Term, assuming the Term has been extended for all Renewal Terms provided herein (with assumed increases in the CPI to be determined by the appraisers) using a discount rate (which may be determined by an investment banker retained by each appraiser) based on the credit worthiness of Tenant and any guarantor of Tenant’s obligations hereunder and (ii) the present value of the Leased Property as of the end of such Term (having assumed the Term has been extended for all extension periods provided herein). The appraisers shall further assume that no default then exists under the Lease, that Tenant has complied (and will comply) with all provisions of the Lease, and that no default exists under any guaranty of Tenant’s obligations hereunder.

 

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(g)    In determining Fair Market Rental Value, the appraisers shall (in addition to the criteria set forth in the definition thereof) take into account: (i) the age, quality and condition (as required by the Lease) of the Improvements; (ii) that the Leased Property will be leased as a whole or substantially as a whole to a single user; (iii) when determining the Fair Market Rental Value for any Renewal Term, a lease term of five (5) years together with such options to renew as then remains hereunder; (iv) an absolute triple net lease; and (v) such other items that professional real estate appraisers customarily consider.

(h)    [Reserved].

(i)    If, by virtue of any delay, Fair Market Rental Value is not determined by the first (1 st ) day of the applicable Renewal Term, then until Fair Market Rental Value is determined, Tenant shall continue to pay Rent during the succeeding Renewal Term in the same amount which Tenant was obligated to pay prior to the commencement of the Renewal Term. Upon determination of Fair Market Rental Value, Rent shall be calculated retroactive to the commencement of the Renewal Term and Tenant shall either receive a refund from Landlord (in the case of an overpayment) or shall pay any deficiency to Landlord (in the case of an underpayment) within thirty (30) days of the date on which the determination of Fair Market Rental Value becomes binding.

(j)    The cost of the procedure described in this Section  34.1 shall be borne equally by the Parties and the Parties will reasonably coordinate payment; provided, that if Landlord pays such costs, fifty percent (50%) of such costs shall be Additional Charges hereunder and if Tenant pays such costs, fifty percent (50%) of such costs shall be a credit against the next Rent payment hereunder.

34.2      Arbitration . In the event of a dispute with respect to this Lease pursuant to an Arbitration Provision, or in any case when this Lease expressly provides for the settlement or determination of a dispute or question by an Expert pursuant to this Section  34.2 (in any such case, a “ Section  34.2 Dispute ”) such dispute shall be determined in accordance with an arbitration proceeding as set forth in this Section  34.2 .

(a)    Any Section 34.2 Dispute shall be determined by an arbitration panel comprised of three members, each of whom shall be an Expert (the “Arbitration Panel”). No more than one panel member may be with the same firm and no panel member may have an economic interest in the outcome of the arbitration.

The Arbitration Panel shall be selected as set forth in this Section  34.2(b) . If a Section  34.2 Dispute arises and if Landlord and Tenant are not able to resolve such dispute after at least fifteen (15) days of good faith negotiations, then either Party shall each have the right to submit the dispute to the Arbitration Panel, upon written notice to the other Party (the “ Arbitration Notice ”). The Arbitration Notice shall identify one member of the Arbitration Panel who meets the criteria of the above paragraph. Within five (5) Business Days after the receipt of the Arbitration Notice, the Party receiving such Arbitration Notice shall respond in writing identifying one member of the Arbitration Panel who meets the criteria of the above paragraph. Such notices shall include the name, address and other pertinent contact information, and qualifications of its member of the Arbitration Panel. If a Party fails to timely select its

 

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respective panel member, the other Party may notify such Party in writing of such failure, and if such Party fails to select its respective panel member within three (3) Business Days after receipt of such notice, then such other Party may select and identify to such Party such panel member on such Party’s behalf. The third member of the Arbitration Panel will be selected by the two (2) members of the Arbitration Panel who were selected by Landlord and Tenant; provided , that if, within five (5) Business Days after they are identified, they fail to select a third member, or if they are unable to agree on such selection, Landlord and Tenant shall cause the third member of the Arbitration Panel to be appointed by the managing officer of the American Arbitration Association.

(b)    Within ten (10) Business Days after the selection of the Arbitration Panel, Landlord and Tenant each shall submit to the Arbitration Panel a written statement identifying its summary of the issues. Landlord and Tenant may also request an evidentiary hearing on the merits in addition to the submission of written statements. The Arbitration Panel shall make its decision within twenty (20) days after the later of (i) the submission of such written statements, and (ii) the conclusion of any evidentiary hearing on the merits. The Arbitration Panel shall reach its decision by majority vote and shall communicate its decision by written notice to Landlord and Tenant.

(c)    [Reserved]

(d)    The decision by the Arbitration Panel shall be final, binding and conclusive and shall be non-appealable and enforceable in any court having jurisdiction. All hearings and proceedings held by the Arbitration Panel shall take place in New York, New York unless otherwise mutually agreed by the Parties and the Arbitration Panel.

(e)    The resolution procedure described herein shall be governed by the Commercial Rules of the American Arbitration Association and the Procedures for Large, Complex, Commercial Disputes in effect as of the Commencement Date.

(f)    Landlord and Tenant shall bear equally the fees, costs and expenses of the Arbitration Panel in conducting any arbitration described in this Section  34.2 .

ARTICLE XXXV

NOTICES

Any notice, request, demand, consent, approval or other communication required or permitted to be given by either Party hereunder to the other Party shall be in writing and shall be sent by registered or certified mail, postage prepaid and return receipt requested, by hand delivery or express courier service, by email transmission or by an overnight express service to the following address:

 

To Tenant:

Harrah’s Las Vegas, LLC

One Caesars Palace Drive

Las Vegas, NV 89109

Attention: General Counsel

Email: corplaw@caesars.com

  

To Landlord:

Claudine Propco LLC

8329 West Sunset Road, Suite 210

Las Vegas, NV 89113

Attention: General Counsel

Email: corplaw@viciproperties.com

 

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or to such other address as either Party may hereafter designate. Notice shall be deemed to have been given on the date of delivery if such delivery is made on a Business Day, or if not, on the first Business Day after delivery. If delivery is refused, Notice shall be deemed to have been given on the date delivery was first attempted. Notice sent by email shall be deemed given only upon an independent, non-automated confirmation from the recipient acknowledging receipt.

ARTICLE XXXVI

END OF TERM SUCCESSOR ASSET TRANSFER

36.1      Transfer of Tenant s Property and Operational Control of the Facility . Upon the written request (an “ End of Term Asset Transfer Notice ”) of Landlord in connection with the expiration of this Lease on the Stated Expiration Date or the earlier termination of the Term, or of Tenant in connection with a termination of this Lease that occurs (i) on the Stated Expiration Date, or (ii) in the event Landlord exercises its right to terminate this Lease or repossess the Leased Property in accordance with the terms of this Lease and, provided in each of the foregoing clauses (i) or (ii) that Tenant complies with the provisions of Section  36.3 , Tenant shall transfer (or cause to be transferred) upon the expiration of the Term, or as soon thereafter as Landlord shall request, the business operations (which will include a two (2) year transition license for Property Specific IP used at or in connection with the Facility) conducted by Tenant and its Subsidiaries at the Facility (including, for the avoidance of doubt, all Tenant’s Property relating to the Facility but excluding (x) each license, permit, sublease, concession or contract, the transfer of which would constitute a breach or default under or violate such license, permit, sublease, concession or contract and (y) all Intellectual Property (other than Property Specific IP to the extent provided in Section  36.4 ) (collectively, the “ Excluded Items ”) (collectively the “ Successor Assets ”) to a successor lessee or operator (or lessees or operators) of the Facility (collectively, the “ Successor Tenant ”) designated pursuant to Section  36.3 for consideration to be received by Tenant (or its Subsidiaries) from the Successor Tenant in an amount equal to the fair market value of such business operations (which will include a two (2) year transition license for the Property Specific IP used at or in connection with the Facility) conducted at the Facility and Tenant’s Property (including any Tenant Capital Improvements not funded by Landlord in accordance with Section  10.3 and excluding all Excluded Items) (the “ Successor Assets FMV ”) as negotiated and agreed by Tenant and the Successor Tenant; provided, however , that in the event an End of Term Asset Transfer Notice is delivered hereunder, then notwithstanding the expiration or earlier termination of the Term, until such time that Tenant transfers the business operations conducted at the Facility and Tenant’s Property (but excluding the Excluded Items) to a Successor Tenant, Tenant shall (or shall cause its Subsidiaries, if applicable, to) continue to possess and operate the Facility (and Landlord shall permit Tenant to maintain possession of the

 

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Leased Property (including, if necessary, by means of a written extension of this Lease or license agreement or other written agreement) to the extent necessary to operate the Facility) in accordance with the applicable terms of this Lease and the course and manner in which Tenant (or its Subsidiaries) has operated the Facility prior to the end of the Term (including, but not limited to, the payment of Rent hereunder) which shall be calculated as provided in this Lease, except, that for any period following the last day of the calendar month in which the thirty-fifth (35 th ) anniversary of the Commencement Date occurs, the Rent shall be a per annum amount equal to the sum of (A) the amount of the Base Rent hereunder during the Lease Year in which the Expiration Date occurs, multiplied by the Escalator, and increased on each anniversary of the Expiration Date to be equal to the Rent payable for the immediately preceding year, multiplied by the Escalator, plus (B) the amount of the Variable Rent hereunder during the Lease Year in which the Expiration Date occurs (the period described in this proviso, the “Transition Period”). If Tenant and a potential Successor Tenant designated by Landlord cannot agree on the Successor Assets FMV within a reasonable time not to exceed thirty (30) days after receipt of an End of Term Asset Transfer Notice hereunder, then such Successor Assets FMV shall be determined, and Tenant’s transfer of the Successor Assets to a Successor Tenant in consideration for a payment in such amount shall be determined and transferred, in accordance with the provisions of Section  36.1 .

36.2     [Reserved]

36.3      Determination of Successor Lessee and Successor Assets FMV . If not effected pursuant to Section  36.1 , then the determination of the Successor Assets FMV and the transfer of Tenant’s Property (but excluding the Excluded Items) to a Successor Tenant in consideration for the Successor Assets FMV shall be effected by (i)  first , determining in accordance with Section  36.1(a) the rent that Landlord would be entitled to receive from Successor Tenant assuming a lease term of ten (10) years (the “ Successor Tenant Rent ”) pursuant to a lease agreement containing substantially the same terms and conditions of this Lease (other than, in the case of a new lease at the end of the final Renewal Term, the terms of this Article XXXVI , which will not be included in such new lease), (ii) second , identifying and designating in accordance with the terms of Section  36.3 (b) , a pool of qualified potential Successor Tenants (each, a “ Qualified Successor Tenant ”) prepared to lease the Facility at the Successor Tenant Rent and to bid for the business operations conducted at the Facility and Tenant’s Property (but excluding the Excluded Items), and (iii)  third , in accordance with the terms of Section  36.3 (c) , determining the highest price a Qualified Successor Tenant would agree to pay for Tenant’s Property and setting such highest price as the Successor Assets FMV in exchange for which Tenant shall be required to transfer Tenant’s Property (but excluding the Excluded Items) and Landlord will enter into a lease with such Qualified Successor Tenant on substantially the same terms and conditions of this Lease (other than, in the case of a new lease at the end of the final Renewal Term, the terms of this Article XXXVI , which will not be included in such new lease) through the remaining term of this Lease (assuming that this Lease will not have terminated prior to its natural expiration at the end of the final Renewal Term) or ten (10) years, whichever is greater for a rent calculated pursuant to Section  36.3 (a) hereof. Notwithstanding anything in the contrary in this Article XXXVI , the transfer of the Successor Assets will be conditioned upon the approval of the applicable regulatory agencies of the transfer of the Gaming Licenses and any other Gaming assets to the Successor Tenant and/or the issuance of new Gaming Licenses as required by applicable Gaming Regulations and the relevant regulatory agencies both with respect to operating and suitability criteria, as the case may be.

 

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(a)     Determining Successor Tenant Rent . Landlord and Tenant shall first attempt to agree on the amount of Successor Tenant Rent that it will be assumed Landlord will be entitled to receive for a term of ten (10) years and pursuant to a lease containing substantially the same terms and conditions of this Lease (other than, in the case of a new lease at the end of the final Renewal Term, the terms of this Article XXXVI , which will not be included in such new lease). If Landlord and Tenant cannot agree on the Successor Tenant Rent amount within a reasonable time not to exceed sixty (60) days after receipt of an End of Term Asset Transfer Notice hereunder, then the Successor Tenant Rent shall be set as follows:

(i)    for the period preceding the last day of the calendar month in which the thirty-fifth (35 th ) anniversary of the Commencement Date occurs, then the annual Successor Tenant Rent shall be an amount equal to the annual Rent that would have accrued under the terms of this Lease for such period (assuming the Lease will have not been terminated prior to its natural expiration); and

(ii)    for the period following the last day of the calendar month in which the thirty-fifth (35 th ) anniversary of the Commencement Date occurs, then the Successor Tenant Rent shall be calculated in the same manner as Rent is calculated under this Lease (but in no event will the Rent be less than the Rent that would otherwise be payable under this Lease), provided, that for any period following the last day of the calendar month in which the thirty-fifth (35 th ) anniversary of the Commencement Date occurs, the Rent shall be a per annum amount equal to the sum of (A) the amount of the Base Rent hereunder during the Lease Year in which the Expiration Date occurs, multiplied by the Escalator, and increased on each anniversary of the Expiration Date to be equal to the Rent payable for the immediately preceding year, multiplied by the Escalator, plus (B) the amount of the Variable Rent hereunder during the Lease Year in which the Expiration Date occurs, subject to a reset at the end of the first subsequent five year period consistent with the Variable Rent adjustments performed under this Lease at the commencement of each Renewal Period.

(b)     Designating Potential Successor Tenants . Landlord will select one and Tenant will select three (for a total of up to four) potential Qualified Successor Tenants prepared to lease the Facility for the Successor Tenant Rent, each of whom must meet the criteria established for a Qualified Transferee (and none of whom may be Tenant or an Affiliate of Tenant (it being understood and agreed that there shall be no restriction on Landlord or any Affiliate of Landlord from being a potential Qualified Successor Tenant), except in the case of termination of the Lease on the last day of the calendar month in which the thirty-fifth (35 th ) anniversary of the Commencement Date occurs). Landlord and Tenant must designate their proposed Qualified Successor Tenants within ninety (90) days after receipt of an End of Term Asset Transfer Notice hereunder. In the event that Landlord or Tenant fails to designate such party’s allotted number of potential Qualified Successor Tenants, the other party may designate additional potential Qualified Successor Tenants such that the total number of potential Qualified Successor Tenants does not exceed four; provided that, in the event the total number of potential Qualified Successor Tenants is less than four, the transfer process will still proceed as set forth in Section  36.3 (c) below.

 

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(c)     Determining Successor Assets FMV . Tenant will have a three (3) month period to negotiate an acceptable sales price for Tenant’s Property with one of the Qualified Successor Tenants, which three (3) month period will commence immediately upon the conclusion of the steps set forth above in Section  36.3 (b) . If Tenant does not reach an agreement prior to the end of such three (3) month period, Landlord shall conduct an auction for Tenant’s Property among the four potential successor lessees, and Tenant will be required to transfer Tenant’s Property (but excluding the Excluded Assets) to the highest bidder.

36.4      Operation Transfer . Upon designation of a Successor Tenant (pursuant to either Section  36.1 or 36.2 , as the case may be), Tenant shall reasonably cooperate and take all actions reasonably necessary (including providing all reasonable assistance to Successor Tenant) to effectuate the transfer of the Successor Assets and operational control of the Facility to Successor Tenant in an orderly manner so as to minimize to the maximum extent feasible any disruption to the continued orderly operation of the Facility for their respective Primary Intended Use. Concurrently with the transfer of the Successor Assets to Successor Tenant, (i) (other than, in the case of the transfer of the Successor Assets in connection with Landlord’s exercising its right to terminate this Lease or repossess the Leased Property in accordance with the terms of this Lease, such Subleases that Landlord is not obligated to assume) Tenant shall assign (and Successor Tenant shall assume) any then-effective Subleases or other agreements (to the extent such other agreements are assignable) relating to the Leased Property, (ii) Tenant shall vacate and surrender the Leased Property to Landlord and/or Successor Tenant in the condition required under this Lease, and (iii) Tenant shall, and effective as of the Stated Expiration Date or earlier termination of the Term hereby does, transfer and assign to Landlord or any Successor Tenant (as directed by Landlord) a complete copy of all Property Specific Guest Data, in standard CSV format or other format reasonably satisfactory to Landlord, collected or held by, or otherwise in possession or control of, and/or owned by, Affiliated manager and/or Tenant, current as of the transition completion date, following which such transfer and assignment, both the Successor Tenant and Tenant (or Affiliated manager, to the extent such Property Specific Guest Data was owned by affiliated Manager instead of Tenant prior to such transfer) shall each own one hundred percent (100%) of their respective copy of the Property Specific Guest Data, free and clear and without any restrictions whatsoever; provided that use of such transferred and assigned Property Specific Guest Data shall be in compliance with Applicable Law. Notwithstanding the expiration of the Term and anything to the contrary herein, to the extent that this Article XXXVI applies, unless Landlord consents to the contrary, until such time that Tenant transfers the Successor Assets and operational control of the Facility to a Successor Tenant in accordance with the provisions of this Article XXXVI , Tenant shall (or shall cause its Subsidiaries to) continue to (and Landlord shall permit Tenant to maintain possession of the Leased Property to the extent necessary to) operate the Facility in accordance with the applicable terms of this Lease and the course and manner in which Tenant (or its Subsidiaries) has operated the Facility prior to the end of the Term (including, but not limited to, the payment of Rent hereunder). Concurrently with the transfer of the Successor Assets to Successor Tenant, Landlord and Successor Tenant shall execute a new Lease in accordance with the terms as set forth in the final clause of the first sentence of Section  36.3 hereof.

 

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ARTICLE XXXVII

ATTORNEYS’ FEES

If Landlord or Tenant brings an action or other proceeding against the other to enforce or interpret any of the terms, covenants or conditions hereof or any instrument executed pursuant to this Lease, or by reason of any breach or default hereunder or thereunder, the Party substantially prevailing in any such action or proceeding and any appeal thereupon shall be paid all of its costs and reasonable documented outside attorneys’ fees incurred therein. In addition to the foregoing and other provisions of this Lease that specifically require Tenant to reimburse, pay or indemnify against Landlord’s attorneys’ fees, Tenant shall pay, as Additional Charges, all of Landlord’s reasonable documented outside attorneys’ fees incurred in connection with the enforcement of this Lease (except to the extent provided above), including reasonable documented attorneys’ fees incurred in connection with the review, negotiation or documentation of any subletting, assignment, or management arrangement or any consent requested in connection with such enforcement, and the collection of past due Rent.

ARTICLE XXXVIII

BROKERS

Tenant warrants that it has not had any contact or dealings with any Person or real estate broker which would give rise to the payment of any fee or brokerage commission in connection with this Lease, and Tenant shall indemnify, protect, hold harmless and defend Landlord from and against any liability with respect to any fee or brokerage commission arising out of any act or omission of Tenant. Landlord warrants that it has not had any contact or dealings with any Person or real estate broker which would give rise to the payment of any fee or brokerage commission in connection with this Lease, and Landlord shall indemnify, protect, hold harmless and defend Tenant from and against any liability with respect to any fee or brokerage commission arising out of any act or omission of Landlord.

ARTICLE XXXIX

ANTI-TERRORISM REPRESENTATIONS

Each Party hereby represents and warrants to the other Party that neither such representing Party nor, to its knowledge, any persons or entities holding any Controlling legal or beneficial interest whatsoever in it are (i) the target of any sanctions program that is established by Executive Order of the President or published by the Office of Foreign Assets Control, U.S. Department of the Treasury (“ OFAC ”); (ii) designated by the President or OFAC pursuant to the Trading with the Enemy Act, 50 U.S.C. App. § 5, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701-06, the Patriot Act, Public Law 107-56, Executive Order 13224 (September 23, 2001) or any Executive Order of the President issued pursuant to such statutes; or (iii) named on the following list that is published by OFAC: “List of Specially Designated Nationals and Blocked Persons” (collectively, “ Prohibited Persons ”). Each Party hereby represents and warrants to the other Party that no funds tendered to such other Party by such tendering Party under the terms of this Lease are or will be directly or indirectly derived from

 

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activities that may contravene U.S. federal, state or international laws and regulations, including anti-money laundering laws. Neither Party will during the Term of this Lease knowingly engage in any transactions or dealings, or knowingly be otherwise associated with, any Prohibited Persons in connection with the Leased Property.

ARTICLE XL

LANDLORD REIT PROTECTIONS

(a)    The Parties intend that Rent and other amounts paid by Tenant hereunder will qualify as “rents from real property” within the meaning of Section 856(d) of the Code, or any similar or successor provision thereto and this Lease shall be interpreted consistent with this intent.

(b)    Anything contained in this Lease to the contrary notwithstanding, Tenant shall not without Landlord’s advance written consent (which consent shall not be unreasonably withheld) (i) sublet, assign or enter into a management arrangement for the Leased Property on any basis such that the rental or other amounts to be paid by the subtenant, assignee or manager thereunder would be based, in whole or in part, on either (x) the income or profits derived by the business activities of the subtenant, assignee or manager or (y) any other formula such that any portion of any amount received by Landlord could reasonably be expected to cause any portion of the amounts to fail to qualify as “rents from real property” within the meaning of Section 856(d) of the Code, or any similar or successor provision thereto; (ii) furnish or render any services to the subtenant, assignee or manager or manage or operate the Leased Property so subleased, assigned or managed; (iii) sublet, assign or enter into a management arrangement for the Leased Property to any Person (other than a “taxable REIT subsidiary” (within the meaning of Section 856(l) of the Code, or any similar or successor provision thereto) of Landlord REIT) in which Tenant, Landlord or PropCo owns an interest, directly or indirectly (by applying constructive ownership rules set forth in Section 856(d)(5) of the Code, or any similar or successor provision thereto); or (iv) sublet, assign or enter into a management arrangement for the Leased Property in any other manner which could reasonably be expected to cause any portion of the amounts received by Landlord pursuant to this Lease or any Sublease to fail to qualify as “rents from real property” within the meaning of Section 856(d) of the Code, or any similar or successor provision thereto, or which could cause any other income of Landlord to fail to qualify as income described in Section 856(c)(2) of the Code, or any similar or successor provision thereto. As of the end of each Fiscal Quarter during the Term, Tenant shall deliver to Landlord a certification, in the form attached hereto as Exhibit H , stating that Tenant has reviewed its transactions during such Fiscal Quarter and certifying that Tenant is in compliance with the provisions of this Article XL . The requirements of this Article XL shall likewise apply to any further sublease, assignment or management arrangement by any subtenant, assignee or manager.

(c)    Anything contained in this Lease to the contrary notwithstanding, the Parties acknowledge and agree that Landlord, in its sole discretion, may assign this Lease or any interest herein to another Person (including without limitation, a “taxable REIT subsidiary” (within the meaning of Section 856(l) of the Code, or any similar or successor provision thereto)) in order to maintain Landlord REIT’s status as a “real estate investment trust” (within the

 

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meaning of Section 856(a) of the Code, or any similar or successor provision thereto); provided however , Landlord shall be required to (i) comply with any applicable Legal Requirements related to such transfer and (ii) give Tenant notice of any such assignment; and provided further, that any such assignment shall be subject to all of the rights of Tenant hereunder.

(d)    Anything contained in this Lease to the contrary notwithstanding, upon request of Landlord, Tenant shall cooperate with Landlord in good faith and at no cost or expense (other than de minimis cost) to Tenant, and provide such documentation and/or information as may be in Tenant’s possession or under Tenant’s control and otherwise readily available to Tenant as shall be reasonably requested by Landlord in connection with verification of Landlord REIT’s “real estate investment trust” (within the meaning of Section 856(a) of the Code, or any similar or successor provision thereto) compliance requirements. Anything contained in this Lease to the contrary notwithstanding, Tenant shall take such reasonable action as may be requested by Landlord from time to time in order to ensure compliance with the Internal Revenue Service requirement that Rent allocable for purposes of Section 856 of the Code to personal property, if any, at the beginning and end of a calendar year does not exceed fifteen percent (15%) of the total Rent due hereunder as long as such compliance does not (i) increase Tenant’s monetary obligations under this Lease by more than a de minimis extent or (ii) materially increase Tenant’s nonmonetary obligations under this Lease or (iii) materially diminish Tenant’s rights under this Lease.

ARTICLE XLI

MISCELLANEOUS

41.1      Survival . Anything contained in this Lease to the contrary notwithstanding, all claims against, and liabilities, obligations and indemnities of Tenant or Landlord arising or in respect of any period prior to the Expiration Date shall survive the Expiration Date.

41.2      Severability . Subject to Section  1.2 , if any term or provision of this Lease or any application thereof shall be held invalid or unenforceable, the remainder of this Lease and any other application of such term or provision shall not be affected thereby.

41.3      Non-Recourse . Tenant specifically agrees to look solely to the Leased Property for recovery of any judgment from Landlord (and Landlord’s liability hereunder shall be limited solely to its interest in the Leased Property, and no recourse under or in respect of this Lease shall be had against any other assets of Landlord whatsoever). The provision contained in the foregoing sentence is not intended to, and shall not, limit any right that Tenant might otherwise have to obtain injunctive relief against Landlord, or any action not involving the personal liability of Landlord. In no event shall either Party ever be liable to the other Party for any indirect, consequential, lost profits, punitive, exemplary, statutory or treble damages suffered from whatever cause (other than, as to all such forms of damages, (i)  if Landlord has terminated this Lease, any damages with respect to Rent or Additional Charges as provided under Section  16.3(a) hereof, (ii) if Landlord has not terminated this Lease, any damages with respect to Rent or Additional Charges as provided for herein, (iii) any amount of any Required Capital Expenditures not made pursuant to Section  10.5(a)(vi) hereof, (iv) damages as provided under Section 16.3(c) hereof, (v) a claim (including an indemnity claim) for recovery of any such

 

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forms of damages that the claiming party is required by a court of competent jurisdiction to pay to a third party other than to the extent resulting from the claiming party’s gross negligence, willful misconduct or default hereunder, and (vi) to the extent expressly provided under Section  32.4 ), and acknowledge and agree that the rights and remedies in this Lease, and all other rights and remedies at law and in equity, will be adequate in all circumstances for any claims the parties might have with respect to damages. For the avoidance of doubt, (I) any damages of Landlord under or relating to any Fee Mortgage or Fee Mortgage Documents shall be deemed to be consequential damages hereunder, provided, however that, notwithstanding the foregoing clause (I), it is expressly agreed that the following shall constitute direct damages hereunder: (i) amounts payable by Tenant pursuant to Section  16.7 resulting from the breach by Tenant of any Additional Fee Mortgagee Requirements and (ii) out of pocket costs and expenses (including reasonable legal fees) incurred by a Landlord Indemnified Party (or, to the extent required to be reimbursed by a Landlord Indemnified Party under a Fee Mortgage Document, incurred by or on behalf of any other Person) to defend (but not settle or pay any judgment resulting from) any investigative, administrative or judicial proceeding commenced or threatened as a result of a breach by Tenant of any Additional Fee Mortgagee Requirement; provided that, notwithstanding the foregoing, in no event shall Tenant be required to pay any amounts to repay (or that are applied to reduce) the principal amount of any loan or debt secured by or relating to a Fee Mortgage or any interest or fees on any such loan or debt, and (II) any damages of Tenant under or relating to any Permitted Leasehold Mortgage and any related agreements or instruments shall be deemed consequential damages hereunder. It is specifically agreed that no constituent member, partner, owner, director, officer or employee of a Party shall ever be personally liable for any judgment (in respect of obligations under or in connection with this Lease) against, or for the payment of any monetary obligation under or in respect of this Lease, such Party, to the other Party (provided, this sentence shall not limit the obligations of Guarantor expressly set forth in the Guaranty).

41.4      Successors and Assigns . This Lease shall be binding upon Landlord and its permitted successors and assigns and, subject to the provisions of Article XXII , upon Tenant and its successors and assigns.

41.5      Governing Law . (a) THIS LEASE WAS NEGOTIATED IN THE STATE OF NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY. ACCORDINGLY, IN ALL RESPECTS THIS LEASE (AND ANY AGREEMENT FORMED PURSUANT TO THE TERMS HEREOF) SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES OR CONFLICTS OF LAW) AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA, EXCEPT THAT ALL PROVISIONS HEREOF RELATING TO THE CREATION OF THE LEASEHOLD ESTATE AND ALL REMEDIES SET FORTH IN ARTICLE XVI RELATING TO RECOVERY OF POSSESSION OF THE LEASED PROPERTY (SUCH AS AN ACTION FOR UNLAWFUL DETAINER, IN REM ACTION OR OTHER SIMILAR ACTION) SHALL BE CONSTRUED AND ENFORCED ACCORDING TO, AND GOVERNED BY, THE LAWS OF THE STATE OF THE STATE IN WHICH THE FACILITY IS LOCATED.

 

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(a)    EXCEPT FOR (x) DISPUTES SPECIFICALLY PROVIDED IN THIS LEASE TO BE REFERRED TO AN EXPERT VALUATION PROCESS PURSUANT TO SECTION 34.1 OR ARBITRATION PURSUANT TO SECTION 34.2 AND (y) PROCEEDINGS PERTAINING TO THE PROVISIONS HEREOF RELATING TO THE CREATION OF THE LEASEHOLD ESTATE AND THE EXERCISE OF REMEDIES SET FORTH IN ARTICLE XVI RELATING TO RECOVERY OF POSSESSION OF THE LEASED PROPERTY (SUCH AS AN ACTION FOR UNLAWFUL DETAINER, IN REM ACTION OR OTHER SIMILAR ACTION), ALL CLAIMS, DEMANDS, CONTROVERSIES, DISPUTES, ACTIONS OR CAUSES OF ACTION OF ANY NATURE OR CHARACTER ARISING OUT OF OR IN CONNECTION WITH, OR RELATED TO, THIS LEASE, WHETHER LEGAL OR EQUITABLE, KNOWN OR UNKNOWN, CONTINGENT OR OTHERWISE SHALL BE RESOLVED IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND ANY APPELLATE COURTS THERETO, OR IF FEDERAL JURISDICTION IS LACKING, THEN IN NEW YORK STATE SUPREME COURT, NEW YORK COUNTY (COMMERCIAL DIVISION) AND ANY APPELLATE COURTS THERETO. THE PARTIES AGREE THAT SERVICE OF PROCESS FOR PURPOSES OF ANY SUCH LITIGATION OR LEGAL PROCEEDING NEED NOT BE PERSONALLY SERVED OR SERVED WITHIN THE STATE OF NEW YORK, BUT MAY BE SERVED WITH THE SAME EFFECT AS IF THE PARTY IN QUESTION WERE SERVED WITHIN THE STATE OF NEW YORK, BY GIVING NOTICE CONTAINING SUCH SERVICE TO THE INTENDED RECIPIENT (WITH COPIES TO COUNSEL) IN THE MANNER PROVIDED IN ARTICLE XXXV. THIS PROVISION SHALL SURVIVE AND BE BINDING UPON THE PARTIES AFTER THIS LEASE IS NO LONGER IN EFFECT

41.6      Waiver of Trial by Jury . EACH OF LANDLORD AND TENANT ACKNOWLEDGES THAT IT HAS HAD THE ADVICE OF COUNSEL OF ITS CHOICE WITH RESPECT TO ITS RIGHTS TO TRIAL BY JURY UNDER THE CONSTITUTION OF THE UNITED STATES, THE STATE OF NEW YORK AND THE OTHER STATES IN WHICH THE FACILITY IS LOCATED. EACH OF LANDLORD AND TENANT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS LEASE (OR ANY AGREEMENT FORMED PURSUANT TO THE TERMS HEREOF) OR (ii) IN ANY MANNER CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF LANDLORD AND TENANT WITH RESPECT TO THIS LEASE (OR ANY AGREEMENT FORMED PURSUANT TO THE TERMS HEREOF) OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH; OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREINAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; EACH OF LANDLORD AND TENANT HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY A COURT TRIAL WITHOUT A JURY, AND THAT EITHER PARTY MAY FILE A COPY OF THIS SECTION WITH ANY COURT AS CONCLUSIVE EVIDENCE OF THE CONSENT OF EACH SUCH PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.

 

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41.7      Entire Agreement . This Lease (including the Exhibits and Schedules hereto), constitutes the entire and final agreement of the Parties with respect to the subject matter hereof, and may not be changed or modified except by an agreement in writing signed by the Parties. In addition to the foregoing, it is agreed to by the Parties that no modification to this Lease shall be effective without the written consent of (i) any applicable Fee Mortgagee, to the extent that such a modification would adversely affect such Fee Mortgagee and (ii) any applicable Permitted Leasehold Mortgagee, to the extent that such a modification would adversely affect such Permitted Leasehold Mortgagee. Landlord and Tenant hereby agree that all prior or contemporaneous oral understandings, agreements or negotiations relative to the leasing of the Leased Property are merged into and revoked by this Lease.

41.8      Headings . All captions, titles and headings to sections, subsections, paragraphs, exhibits or other divisions of this Lease, and the table of contents, are only for the convenience of the Parties and shall not be construed to have any effect or meaning with respect to the other contents of such sections, subsections, paragraphs, exhibits or other divisions, such other content being controlling as to the agreement among the Parties.

41.9      Counterparts . This Lease may be executed in any number of counterparts, each of which shall be a valid and binding original, but all of which together shall constitute one and the same instrument. This Lease may be effectuated by the exchange of electronic copies of signatures ( e.g. , .pdf), with electronic copies of this executed Lease having the same force and effect as original counterpart signatures hereto for all purposes.

41.10      Interpretation . Both Landlord and Tenant have been represented by counsel and this Lease and every provision hereof has been freely and fairly negotiated. Consequently, all provisions of this Lease shall be interpreted according to their fair meaning and shall not be strictly construed against any party.

41.11     Deemed Consent . Each request for consent or approval under Sections 9.1 , 10.2 , 10.3(e) , 13.1(a) , 13.5 , 14.1 , 22.1 , 22.2 and 22.3 and Article XI of this Lease shall be made in writing to either Tenant or Landlord, as applicable, and shall include all information necessary for Tenant or Landlord, as applicable, to make an informed decision, and shall include the following in capital, bold and block letters: “FIRST NOTICE – THIS IS A REQUEST FOR CONSENT UNDER THAT CERTAIN LEASE ([ ]). THE FOLLOWING REQUEST REQUIRES A RESPONSE WITHIN FIFTEEN (15) BUSINESS DAYS OF RECEIPT.” If the party to whom such a request is sent does not approve or reject the proposed matter within fifteen (15) Business Days of receipt of such notice and all necessary information, the requesting party may request a consent again by delivery of a notice including the following in capital, bold and block letters: “SECOND NOTICE – THIS IS A SECOND REQUEST FOR CONSENT UNDER THAT CERTAIN LEASE ([ ]). THE FOLLOWING REQUEST REQUIRES A RESPONSE WITHIN FIVE (5) BUSINESS DAYS OF RECEIPT.” If the party to whom such a request is sent does not approve or reject the proposed matter within five (5) Business Days of receipt of such notice and all necessary information, the requesting party may request a consent again by delivery of a notice including the following in capital, bold and block letters: “FINAL NOTICE – THIS IS A THIRD REQUEST FOR CONSENT UNDER THAT CERTAIN LEASE ([ ]). THE FOLLOWING REQUEST REQUIRES A RESPONSE WITHIN FIVE (5) BUSINESS DAYS OF RECEIPT. FAILURE TO RESPOND WITHIN

 

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FIVE (5)  BUSINESS DAYS HEREOF WILL BE DEEMED AN APPROVAL OF THE REQUEST.” If the party to whom such a request is sent still does not approve or reject the proposed matter within five (5) Business Days of receipt of such final notice, such party shall be deemed to have approved the proposed matter. Notwithstanding the foregoing, if the Guaranty is in effect at the time any such notice is provided to Tenant hereunder, Tenant shall not be deemed to have approved such proposed matter if such notice was not also addressed and delivered to Guarantor in accordance with the Guaranty.

41.12      Further Assurances . The Parties agree to promptly sign all documents reasonably requested to give effect to the provisions of this Lease. In addition, Landlord agrees to, at Tenant’s sole cost and expense, reasonably cooperate with all applicable Gaming Authorities and Liquor Authorities in connection with the administration of their regulatory jurisdiction over Tenant, Tenant’s direct and indirect parent(s) and their respective Subsidiaries, if any, including the provision of such documents and other information as may be requested by such Gaming Authorities or Liquor Authorities relating to Tenant, Tenant’s direct and indirect parent(s) or any of their respective Subsidiaries, if any, or to this Lease and which are within Landlord’s reasonable control to obtain and provide.

41.13      Gaming Regulations . Notwithstanding anything to the contrary in this Lease, this Lease and any agreement formed pursuant to the terms hereof are subject to all applicable Gaming Regulations and all applicable laws involving the sale, distribution and possession of alcoholic beverages (the “ Liquor Laws ”). Without limiting the foregoing, each of Tenant and Landlord acknowledges that (i) it is subject to being called forward by any applicable Gaming Authority or governmental authority enforcing the Liquor Laws (the “ Liquor Authority ”) with jurisdiction over this Lease or the Facility, in each of their discretion, for licensing or a finding of suitability or to file or provide other information, and (ii) all rights, remedies and powers under this Lease and any agreement formed pursuant to the terms hereof, including with respect to the entry into and ownership and operation of a Gaming Facility, and the possession or control of Gaming equipment, alcoholic beverages or a Gaming License or liquor license, may be exercised only to the extent that the exercise thereof does not violate any applicable provisions of the Gaming Regulations and Liquor Laws and only to the extent that required approvals (including prior approvals) are obtained from the requisite governmental authorities.

Notwithstanding anything to the contrary in this Lease or any agreement formed pursuant to the terms hereof, (subject to Section  41.12 ) each of Tenant, Landlord, and each of Tenant’s or Landlord’s successors and assigns agree to cooperate with each Gaming Authority and each Liquor Authority in connection with the administration of their regulatory jurisdiction over the Parties, including, without limitation, the provision of such documents or other information as may be requested by any such Gaming Authorities and/or Liquor Authorities relating to Tenant, Landlord, Tenant’s or Landlord’s successors and assigns or to this Lease or any agreement formed pursuant to the terms hereof.

If there shall occur a Licensing Event, then the Party with respect to which such Licensing Event occurs shall notify the other Party, as promptly as practicable after becoming aware of such Licensing Event (but in no event later than twenty (20) days after becoming aware of such Licensing Event). In such event, the Party with respect to which such Licensing Event has occurred, shall and shall cause any applicable Affiliates to use commercially reasonable

 

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efforts to resolve such Licensing Event within the time period required by the applicable Gaming Authorities by submitting to investigation by the relevant Gaming Authorities and cooperating with any reasonable requests made by such Gaming Authorities (including filing requested forms and delivering information to the Gaming Authorities). If the Party with respect to which such Licensing Event has occurred cannot otherwise resolve the Licensing Event within the time period required by the applicable Gaming Authorities and any aspect of such Licensing Event is attributable to any Person(s) other than such Party, then such Party shall disassociate with the applicable Persons to resolve the Licensing Event. It shall be a material breach of this Lease by Landlord if a Licensing Event with respect to Landlord shall occur and is not resolved in accordance with this Section  41.13 within the later of (i) thirty (30) days or (ii)  such additional time period as may be permitted by the applicable Gaming Authorities.

41.14       Certain Provisions of Nevada Law . Landlord shall, pursuant to Section 108.2405(1)(b) of the Nevada Revised Statutes (“NRS”), record a written notice of waiver of Landlord’s rights set forth in NRS 108.234 with the office of the recorder of Clark County, Nevada, before the commencement of construction of each work of improvement with respect to the Leased Property by Tenant or caused by Tenant. Pursuant to NRS 108.2405(2), Landlord shall serve such notice by certified mail, return receipt requested, upon the prime contractor of such work of improvement and all other lien claimants who may give the owner a notice of right to lien pursuant to NRS 108.245, within ten (10) days after Landlord’s receipt of a notice of right to lien or ten (10)  days after the date on which the notice of waiver is recorded.

41.15      Confidential Information . Each Party hereby agrees to, and to cause its Representatives to, maintain the confidentiality of all non-public information received pursuant to this Lease; provided that nothing herein shall prevent any Party from disclosing any such non-public information (a) in the case of Landlord, to VICI Properties Inc., a Maryland corporation and any Affiliate thereof, (b) in the case of Tenant, to CRC and any Affiliate thereof, (c) in any legal, judicial or administrative proceeding or other compulsory process or otherwise as required by applicable Legal Requirements (in which case the disclosing Party shall promptly notify the other Parties, in advance, to the extent permitted by law), (d) upon the request or demand of any regulatory authority having jurisdiction over a Party or its affiliates (in which case the disclosing Party shall, other than with respect to routine, periodic inspections by such regulatory authority, promptly notify the other Parties, in advance, to the extent permitted by law), (e) to its Representatives who are informed of the confidential nature of such information and have agreed to keep such information confidential (and the disclosing Party shall be responsible for such Representatives’ compliance therewith), (f) to the extent any such information becomes publicly available other than by reason of disclosure by the disclosing Party or any of its respective Representatives in breach of this Section  41.22 , (g) to the extent that such information is received by such Party from a third party that is not, to such Party’s knowledge, subject to confidentiality obligations owing to the other Parties or any of their respective affiliates or related parties, (h) to the extent that such information is independently developed by such Party or (i) as permitted under the first sentence of Section  23.2(a) . Each of the Parties acknowledges that it and its Representatives may receive material non-public information with respect to the other Party and its Affiliates and that each such Party is aware (and will so advise its Representatives) that federal and state securities laws and other applicable laws may impose restrictions on purchasing, selling, engaging in transactions or otherwise trading in securities of the other Party and its Affiliates with respect to which such Party or its Representatives has received material non-public information so long as such information remains material non-public information.

 

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41.16      Time of Essence . TIME IS OF THE ESSENCE OF THIS LEASE AND EACH PROVISION HEREOF IN WHICH TIME OF PERFORMANCE IS ESTABLISHED.

41.17      Consents, Approvals and Notices .

(a)    All consents and approvals that may be given under this Lease shall, as a condition of their effectiveness, be in writing. The granting of any consent or approval by Landlord or Tenant to the performance of any act by Tenant or Landlord requiring the consent or approval of Landlord or Tenant under any of the terms or provisions of this Lease shall relate only to the specified act or acts thereby consented to or approved and, unless otherwise specified, shall not be deemed a waiver of the necessity for such consent or approval for the same or any similar act in the future, and/or the failure on the part of Landlord or Tenant to object to any such action taken by Tenant or Landlord without the consent or approval of the other Party, shall not be deemed a waiver of their right to require such consent or approval for any further similar act; and Tenant hereby expressly covenants and agrees that as to all matters requiring Landlord’s consent or approval under any of the terms of this Lease, Tenant shall secure such consent or approval for each and every happening of the event requiring such consent or approval, and shall not claim any waiver on the part of Landlord of the requirement to secure such consent or approval.

(b)    Each Party acknowledges that in granting any consents, approvals or authorizations under this Lease, and in providing any advice, assistance, recommendation or direction under this Lease, neither such Party nor any Affiliates thereof guarantees success or a satisfactory result from the subject of such consent, approval, authorization, advice, assistance, recommendation or direction. Accordingly, each Party agrees that neither such Party nor any of its Affiliates shall have any liability whatsoever to any other Party or any third person by reason of: (i) any consent, approval or authorization, or advice, assistance, recommendation or direction, given or withheld; or (ii) any delay or failure to provide any consent, approval or authorization, or advice, assistance, recommendation or direction (except in the event of a breach of a covenant herein not to unreasonably withhold or delay any consent or approval); provided, however , each agrees to act in good faith when dealing with or providing any advice, consent, assistance, recommendation or direction.

(c)    Any notice, report or information required to be delivered by Tenant hereunder may be delivered collectively with any other notices, reports or information required to be delivered by Tenant hereunder as part of a single report, notice or communication. Any such notice, report or information may be delivered to Landlord by Tenant providing a representative of Landlord with access to Tenant’s or its Affiliate’s electronic databases or other information systems containing the applicable information and notice that information has been posted on such database or system.

41.18      Reserved .

 

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41.19      Amendments . This Lease may not be amended except by a written agreement executed by all Parties hereto.

SIGNATURES ON FOLLOWING PAGES

 

139


IN WITNESS WHEREOF, this Lease has been executed by Landlord and Tenant as of the date first written above.

 

LANDLORD:

Claudine Propco LLC,

a Delaware limited liability company

By:     /s/ John Payne
  Name: John Payne
  Title:   President

[Signatures continue on following page]

Signature page to Harrah’s – Net Lease


TENANT:
HARRAH’S LAS VEGAS, LLC,
a Nevada limited liability company
By:   /s/ Eric Hession
Name:   Eric Hession
Title:   Treasurer

[Signatures continue on following page]

Signature page to Harrah’s – Net Lease


The undersigned has executed this Lease solely for the purpose of acknowledging and agreeing to be bound by the penultimate paragraph of Section  1.1 hereof.

 

PROPCO TRS:
Propco TRS LLC
By:   /s/ John Payne
  Name: John Payne
  Title: President

Signature page to Harrah’s – Net Lease


EXHIBIT A

FACILITY


EXHIBIT B

LEGAL DESCRIPTION OF LAND

[SEE ATTACHED]


EXHIBIT C

CAPITAL EXPENDITURES REPORT

[SEE ATTACHED]


EXHIBIT D

FORM OF SCHEDULE CONTAINING ANY ADDITIONS TO OR RETIREMENTS OF

ANY FIXED ASSETS CONSTITUTING LEASED PROPERTY

DISPOSAL REPORT

 

Company
Code

   System
Number
     Ext      Asset
ID
     Asset
Description
     Class      In Svc
Date
     Disposal
Date
     DM      Acquired
Value
     Current
Accum
     Net
Proceeds
     Gain/Loss
Adjustment
     Realized
Gain/Loss
     GL  
                                         
                                         
                                         

ADDITIONS REPORT

 

Project/Job
Number

   System
Number
     GL Asset
Account
     Asset ID      Accounting
Location
    

Asset Description

   PIS Date      Enter Date      Est Life      Acq Value      Current
Accum
 
                             
                             
                             

NOTES


EXHIBIT E

[INTENTIONALLY OMITTED]


EXHIBIT F

FORM OF GUARANTY


EXHIBIT G

INTENTIONALLY OMITTED


EXHIBIT H

FORM OF REIT COMPLIANCE CERTIFICATE

REIT COMPLIANCE CERTIFICATE

Date:                      , 20     

This REIT Compliance Certificate (this “ Certificate ”) is given by Tenant (as defined in that certain Lease (the “ Lease ”) dated as of [                      , 2017], by and among the entities listed on Schedule A attached thereto (collectively, and together with their respective successors and assigns, “ Landlord ”), and Caesars Entertainment Operating Company, Inc., a Delaware corporation, and the entities listed on Schedule B attached thereto (collectively, and together with their respective successors and assigns, “ Tenant ”), pursuant to Article XL of the Lease. Capitalized terms used herein without definition shall have the meanings set forth in the Lease.

By executing this Certificate, Tenant hereby certifies to Landlord that Tenant has reviewed its transactions during the Fiscal Quarter ending [                      ] and for such Fiscal Quarter Tenant is in compliance with the provisions of Article XL of the Lease. Without limiting the generality of the foregoing, Tenant hereby certifies that for such Fiscal Quarter, Tenant has not, without Landlord’s advance written consent:

 

  (i) sublet, assigned or entered into a management arrangement for the Leased Property on any basis such that the rental or other amounts to be paid by the subtenant, assignee or manager thereunder would be based, in whole or in part, on either (x) the income or profits derived by the business activities of the subtenant, assignee or manager or (y) any other formula such that any portion of any amount received by Landlord could reasonably be expected to cause any portion of the amounts to fail to qualify as “rents from real property” within the meaning of Section 856(d) of the Code, or any similar or successor provision thereto;

 

  (ii) furnished or rendered any services to the subtenant, assignee or manager or managed or operated the Leased Property so subleased, assigned or managed;

 

  (iii) sublet or assigned to, or entered into a management arrangement for the Leased Property with any Person (other than a “taxable REIT subsidiary” (within the meaning of Section 856(l) of the Code, or any similar or successor provision thereto) of Landlord REIT) in which Tenant, Landlord or PropCo owns an interest, directly or indirectly (by applying constructive ownership rules set forth in Section 856(d)(5) of the Code, or any similar or successor provision thereto); or

 

  (iv) sublet, assigned or entered into a management arrangement for the Leased Property in any other manner which could reasonably be expected to cause any portion of the amounts received by Landlord pursuant to the Lease or any Sublease to fail to qualify as “rents from real property” within the meaning of Section 856(d) of the Code, or any similar or successor provision thereto, or which could reasonably be expected to cause any other income of Landlord to fail to qualify as income described in Section 856(c)(2) of the Code, or any similar or successor provision thereto.

[Remainder of Page Intentionally Left Blank; Signature Page Follows]


IN WITNESS WHEREOF, this Certificate has been executed by Tenant on          day of                      , 20      .

 

[                      ]
Name:    
Title:    


EXHIBIT I

FORM OF PACE REPORT

[SEE ATTACHED]


SCHEDULE A

LANDLORD ENTITIES


SCHEDULE B

TENANT ENTITIES


SCHEDULE 1

GAMING LICENSES

 

Unique
ID

     Legal Entity
Name
       License
Category
       Type of License        Issuing Agency        State        Description of
License
 
                             
                             


SCHEDULE 2

INTENTIONALLY OMITTED


SCHEDULE 3

[INTENTIONALLY OMITTED]


SCHEDULE 4

SPECIFIED SUBLEASES

 

Contract
ID

     Debtor(s)        Property
Name
       Name of
Operation
       Counterparty        Description        Contract
Date
       File Name  
                                  
                                  


SCHEDULE 5

[INTENTIONALLY OMITTED]


SCHEDULE 6

DESCRIPTION OF TITLE POLIC(Y)(IES)


SCHEDULE 7

PROPERTY SPECIFIC IP

1.    Fulton Street Food Court

Exhibit 10.38

EXECUTION COPY

PUT-CALL RIGHT AGREEMENT

THIS PUT-CALL RIGHT AGREEMENT (this “ Agreement” ) is entered into as of December 22, 2017 (the “ Effective Date” ), by and among CLAUDINE PROPCO LLC, a Delaware limited liability company (“ VICI” ), and VEGAS DEVELOPMENT LAND OWNER LLC, a Delaware limited liability company (“ Parcel 1 Owner” ) and 3535 LV NEWCO, LLC, a Delaware limited liability company (“ Parcel 2 Owner” and with Parcel 1 Owner, collectively “ Owner” ). VICI and Owner are together referred to herein as the “ Parties” , and each individually, a “ Party ”.

RECITALS:

A. Parcel 1 Owner is the owner of certain parcels of real property together with the real property improvements thereon (together with related fixtures and other related property) located in Clark County, Nevada, as more particularly described on Exhibit A-1 attached hereto (collectively, the “ Designated Land Parcel 1 ”).

B. Parcel 2 Owner is the owner of certain parcels of real property together with the real property improvements thereon (together with related fixtures and other related property) located in Clark County, Nevada, as more particularly described on Exhibit A-2 attached hereto (collectively, the “ Designated Land Parcel 2 ” and with the Designated Land Parcel 1, collectively the “ Designated Land” ).

C. On even date herewith, Claudine Property Owner LLC, a Delaware limited liability company (“ HLV Buyer” ), an Affiliate of VICI, acquired from Harrah’s Las Vegas, LLC, a Nevada limited liability company (“ HLV Seller” ), an Affiliate of Owner, all of the membership interests in VICI, the owner of that certain parcel of real property and the buildings and other improvements constructed thereon, and fixtures and certain other property interests related thereto, commonly known as Harrah’s Las Vegas Hotel & Casino, having an address of 3475 South Las Vegas Boulevard, Clark County, Nevada (collectively, the “ HLV Property” ), pursuant to the terms and conditions of that certain Purchase and Sale Agreement, dated as of November 29, 2017 (the “ HLV Property PSA” ).

D. On even date herewith, VICI leased to HLV Seller (also referred to herein as “ HLV Tenant” ) the HLV Property, pursuant to the terms and conditions of that certain Amended and Restated Lease by and between VICI, as landlord, and HLV Tenant, as tenant (as further amended, supplemented or otherwise modified from time to time (other than pursuant to the HLV Lease Amendment), the “ HLV Lease” ).

E. Owner is considering demolishing some or all of the improvements that are located on the Designated Land as of the date hereof and is considering constructing a Convention Center on the Eastside Convention Center Land (as defined below) (the “ Eastside Convention Center” ). The Eastside Convention Center, together with the Eastside Convention Center Land and all buildings, fixtures and improvements located thereon and all real property rights and interests relating thereto are referred to, collectively, as the “ Eastside Convention Center Property” .

 

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F. Subject to the satisfaction of certain conditions and upon the terms set forth herein, the Parties desire for (i) Owner to have the right to require VICI to purchase the Eastside Convention Center Property from Owner, and if VICI does not perform such obligation, for Owner to have the right to acquire the HLV Property from VICI, and (ii) if Owner does not exercise the right to require VICI to purchase the Eastside Convention Center Property from Owner, for VICI to have the right to require Owner to sell the Eastside Convention Center Property to VICI, all on and subject to the terms and conditions set forth in this Agreement.

AGREEMENT:

NOW, THEREFORE, in consideration of Ten and 00/100 Dollars ($10.00) and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

1. Definitions. For purposes of this Agreement, the following terms shall have the following meanings:

Access Provisions” means the following:

(1) VICI, at its cost, may conduct such surveys and non-invasive investigations and inspections of the Eastside Convention Center Property (collectively “ Inspections ”) as VICI elects in its sole discretion and Owner, at reasonable times, shall provide reasonable access to the Eastside Convention Center Property to VICI and VICI’s consultants and other representatives for such purpose. VICI’s right to perform the Inspections shall be subject to and will not unreasonably interfere with or disturb the rights of tenants, guests and customers at the Eastside Convention Center Property and the Inspections shall not unreasonably interfere with Owner’s business operations. VICI and its agents, contractors and consultants shall comply with Owner’s reasonable requests with respect to the Inspections to minimize such interference. VICI will cause each of VICI’s consultants that will be performing such tests and inspections (other than purely visual inspections) to provide (as a condition to performing such Inspections) proof of commercial general liability insurance on an occurrence form with limits of not less than One Million Dollars ($1,000,000.00) per occurrence and Five Million Dollars ($5,000,000.00) aggregate limit bodily injury, death and property damage per occurrence shall be provided to Owner.

(2) In connection with such access, VICI shall be deemed to agree to indemnify and hold harmless Owner from and against any loss that Owner shall incur as the result of the acts of VICI or VICI’s representatives or consultants in conducting physical diligence with respect to the Eastside Convention Center Property, or, in the case of physical damage to the Eastside Convention Center Property resulting from such physical diligence, for the reasonable cost of repairing or restoring the Eastside Convention Center Property to substantially its condition immediately prior to such damage (unless VICI promptly shall cause such damage to be repaired or restored); provided, however, (i) the foregoing indemnity and agreement to hold Owner harmless shall not apply to, and VICI shall not be liable or responsible for, (A) the discovery of any fact or circumstance not caused by VICI or its representatives or consultants (except

 

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to the extent VICI exacerbates such fact or circumstance), (B) any pre-existing condition (except to the extent VICI exacerbates such pre-existing condition), or (C) the negligence or willful misconduct of Owner, any of Owner’s Affiliates or any of their respective agents, employees, consultants or representatives and (ii) in no event shall VICI be liable for any consequential, punitive or special damages; provided that, for the avoidance of doubt, such waiver of consequential, punitive and special damages shall not be deemed a waiver of damages that Owner is required to pay to a party other than Owner or an Affiliate of Owner in respect of consequential, punitive or special damages.

Affiliate” means, with respect to any Person, any other Person that, directly or indirectly, Controls, is Controlled by or is under common Control with such Person. In no event shall Owner or any of its Affiliates, on the one hand, or VICI or any of its Affiliates, on the other hand, be deemed to be an Affiliate of the other Party as a result of this Agreement or other agreements or arrangements between such Parties.

Amended HLV Lease” means the Lease, as amended by the HLV Lease Amendment.

Arbitration Panel” shall have the meaning set forth in Section  6 hereof.

Business Day” means each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which national banks in the City of Las Vegas, Nevada, or in the City of New York, New York are authorized, or obligated, by law or executive order, to close.

Call Right” means VICI’s right to require Owner to sell the Convention Center Property to VICI and simultaneously lease the Convention Center Property back from VICI subject to and in accordance with the terms and conditions of this Agreement.

Call Right HLV Lease Amendment Rent” means the greater of (a) the lesser of (i) the quotient of the Project Costs divided by thirteen (13) and (ii) the amount of annual Rent for the Convention Center that would be required to be paid under the Amended HLV Lease to meet a Combined Rent Coverage Ratio of 1.75:1.00, and (b) Twenty-Five Million and 00/100 Dollars ($25,000,000.00), which is the amount of Rent per annum to be attributable to the Convention Center Property in the event the Call Right is exercised; provided that, for the avoidance of doubt, the Call Right HLV Lease Amendment Rent and the Rent (including Variable Rent, as defined in the HLV Lease) will be calculated without taking into account Net Revenue (as defined in the HLV Lease) produced by the Eastside Convention Center; provided, further, under the Amended HLV Lease, the Call Right HLV Lease Amendment Rent shall increase annually by one percent (1%) of the amount of the Call Right HLV Lease Amendment Rent at the end of each Lease Year following the Lease Year during which the Closing Date occurs.

Call Right Property Package” shall have the meaning set forth in Section  5(b).

Call Right Property Package Request” shall have the meaning set forth in Section  5(b).

 

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Call Right Purchase Price” means the product of (a) thirteen (13) and (b) the Call Right HLV Lease Amendment Rent.

Call Right Rent Coverage Condition” means the Combined Rent Coverage Ratio will be no less than 1.75 to 1.

Capital Expenditures” means the sum of all expenditures actually paid by or on behalf of Owner, on a consolidated basis, to the extent capitalized in accordance with GAAP.

Capital Improvement” means the initial construction of the Convention Center to the extent that the costs of such activity are or would be capitalized in accordance with GAAP.

Closing Date” means the date upon which the Eastside Convention Center Property shall be conveyed to VICI and leased back to Lessee, either pursuant to the Put Right or Call Right, as applicable, in accordance with the terms hereof, or the date upon which the HLV Property shall be conveyed to Owner pursuant to the HLV Repurchase Right, in accordance with the terms hereof.

Combined Rent Coverage Ratio” means the ratio of the sum of EBITDAR of the HLV Tenant solely derived from the HLV Property plus EBITDAR of Owner solely derived from the Eastside Convention Center Property, in each case, for the most recently ended four consecutive Fiscal Quarter period for which Financial Statements are available as of the date of Owner’s exercise of the Put Right or VICI’s exercise of the Call Right, as the case may be (and as calculated based upon such Financial Statements) to the Rent that will be payable under the Amended HLV Lease for same the period commencing on the Closing Date and ending on the first anniversary of the Closing Date (assuming that annual Rent attributable to the Eastside Convention Center Property is the Put Right HLV Lease Amendment Rent or the Call Right HLV Lease Amendment Rent, as the case may be).

Control” (including the correlative meanings of the terms “Controlled by” and “under common Control with”), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, through the ownership of voting securities, partnership interests, other equity interests or otherwise.

Convention Center” shall mean a convention, conference, meeting, exposition and/or exhibition center or similar building or group of related buildings.

Convention Center Construction Conditions ” shall mean with respect to any given Convention Center: (a) such Convention Center shall be the Eastside Convention Center; or (b) such Convention Center shall contain not more than 125,000 usable square feet of convention, conference, meeting, exposition and/or exhibition space. For the

 

4


avoidance of doubt, if any Convention Center containing not more than 125,000 usable square feet is constructed after the date hereof, and such Convention Center is subsequently expanded or combined with another Convention Center that is constructed after the date hereof such that the aggregate usable square footage of convention, conference, exposition, meeting and/or exhibition space in such Convention Center(s) which are operated together exceeds 125,000, then the Convention Center Conditions shall not be deemed to have been satisfied.

Development Interests” shall mean Use Rights that are in the good faith judgment of Owner commercially appropriate for the development or operation of the Eastside Convention Center.

Eastside Convention Center” shall have the meaning set forth in the recitals hereto.

Eastside Convention Center Property” shall have the meaning set forth in the recitals hereto.

Eastside Convention Center Land” means that portion of the Designated Land upon which (i) the Eastside Convention Center and (ii) all parking improvements, sidewalks, landscaped areas and walkways that are constructed primarily to serve, or that are legally required to be constructed (such as to meet mandatory set-back requirements) as a condition to the construction of, the Eastside Convention Center, are located.

EBITDAR” means, for any applicable twelve (12) month period, the consolidated net income or loss of a Person on a consolidated basis for such period, determined in accordance with GAAP, provided, however , that without duplication and in each case to the extent included in calculating net income (calculated in accordance with GAAP): (i) income tax expense shall be excluded; (ii) interest expense shall be excluded; (iii) depreciation and amortization expense shall be excluded; (iv) amortization of intangible assets shall be excluded; (v) write-downs and reserves for non-recurring restructuring-related items (net of recoveries) shall be excluded; (vi) reorganization items shall be excluded; (vii) any impairment charges or asset write-offs, non-cash gains, losses, income and expenses resulting from fair value accounting required by the applicable standard under GAAP and related interpretations, and non-cash charges for deferred tax asset valuation allowances, shall be excluded; (viii) any effect of a change in accounting principles or policies shall be excluded; (ix) any non-cash costs or expense incurred pursuant to any management equity plan or stock option plan or any other management or employee benefit plan or agreement or any stock subscription or shareholder agreement shall be excluded; (x) any nonrecurring gains or losses (less all fees and expenses relating thereto) shall be excluded; (xi) rent expense shall be excluded (provided, for the avoidance of doubt, “rent expense” does not include Additional Charges (as defined in the Amended HLV Lease)); and (xii) the impact of any deferred proceeds resulting from failed sale accounting shall be excluded. In connection with any EBITDAR calculation made pursuant to this Agreement or any determination or calculation made pursuant to this Agreement for which EBITDAR is a necessary

 

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component of such determination or calculation, (i) promptly following request therefor, Owner shall provide VICI with all supporting documentation and backup information with respect thereto as may be reasonably requested by VICI, (ii) such calculation shall be as reasonably agreed upon between Owner and VICI, and (iii) if Owner and VICI do not agree within twenty (20) days of either party seeking to commence discussions, the same may be determined by an Arbitration Panel in accordance with and pursuant to the process set forth in Section  6 hereof (clauses (i) through (iii), collectively, the “ EBITDAR Calculation Procedures” ).

Financial Statements” means, (i) for a Fiscal Year, statements of a Person’s income, stockholders’ equity and comprehensive income and cash flows for such period and the related consolidated balance sheet as at the end of such period, together with the notes thereto, all in reasonable detail and setting forth in comparative form the corresponding figures for the corresponding period in the preceding Fiscal Year and prepared in accordance with GAAP and audited by a “big four” or other nationally recognized accounting firm, and (ii) for a Fiscal Quarter, consolidated statements of a Person’s income, stockholders’ equity and comprehensive income and cash flows for such period and for the period from the beginning of the Fiscal Year to the end of such period and the related consolidated balance sheet as at the end of such period, together with the notes thereto, all in reasonable detail and setting forth in comparative form the corresponding figures for the corresponding period in the preceding Fiscal Year or Fiscal Quarter, as the case may be, and prepared in accordance with GAAP, together with a certificate, executed by the chief financial officer or treasurer of such Person, certifying that such financial statements fairly present, in all material respects, the financial position and results of operations of such Person in accordance with GAAP (subject to normal year-end audit adjustments and the absence of footnotes).

Fiscal Quarter” means, with respect to any Person, for any date of determination, a fiscal quarter for each Fiscal Year of such Person.

Fiscal Year” means the annual period commencing January 1 and terminating December 31 of each year.

GAAP” means generally accepted accounting principles in the United States consistently applied in the preparation of Financial Statements, as in effect from time to time.

Gaming Approval Failure” shall mean the failure to obtain all Requisite Gaming Approvals within the Regulatory Period.

Gaming Authorities” means, collectively, (i) the Nevada Gaming Commission, (ii) the Nevada State Gaming Control Board, (iii) the Clark County Liquor and Gaming Licensing Board, and (iv) any other foreign, federal, state or local governmental entity or authority, or any department, commission, board, bureau, agency, court or instrumentality thereof, regulating gaming activities or related activities.

 

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Gaming Laws” means all applicable constitutions, treaties, laws, regulations and orders and statutes pursuant to which any Gaming Authority possesses regulatory, licensing or permit authority over gaming, gambling or casino activities, including, without limitation, the Nevada Gaming Control Act, as codified in Nevada Revised Statutes Chapter 463, the regulations promulgated thereunder, and the Clark County Code, each as from time to time amended, modified or supplemented, including by succession of comparable successor statutes, and all rules, rulings, orders, ordinances, regulations of any Gaming Authority applicable to the gambling, casino, gaming businesses or activities of the applicable Person or any of its Affiliates in any jurisdiction, as in effect from time to time, including the policies, interpretations and administration thereof by the Gaming Authorities.

Geographical Area” shall mean the geographical area bounded by Valley View Blvd. to the West, Russell Rd. to the South, Koval Ln. to the East and Sahara Ave. to the North.

HLV Lease” shall have the meaning set forth in the recitals hereto.

HLV Lease Amendment” shall mean the second amended and restated HLV Lease, the form of which is attached hereto as Exhibit B , pursuant to which VICI, as landlord, will lease the Eastside Convention Center Property to Lessee, as tenant.

HLV Repurchase Election Period” means the period of one (1) year commencing on the date upon which a Put Right Closing Failure occurs and ending on the day immediately preceding the first anniversary thereof.

HLV Repurchase PSA Modifications” shall mean those terms and conditions set forth on Exhibit D attached hereto.

HLV Repurchase Right” means Owner’s right to require VICI to sell the HLV Property to Owner in accordance with and subject to the terms and conditions of this Agreement.

HLV Repurchase Right Purchase Price” means the amount equal to the product of (x) the Rent due under the HLV Lease for the most recently ended four consecutive Fiscal Quarter period for which Financial Statements are available as of the date of Owner’s election to execute the HLV Repurchase Right, and (y) thirteen (13).

HLV Repurchase Sale Agreement” means a purchase and sale agreement for the purchase and sale of the HLV Property, in materially the same form and on materially the same terms and conditions as the HLV Property PSA, except for the HLV Repurchase PSA Modifications.

Legal Requirements” means all applicable federal, state, county, municipal and other governmental statutes, laws (including securities laws), rules, policies, guidance, codes, orders, regulations, ordinances, permits, licenses, covenants, conditions, restrictions, judgments, decrees and injunctions, whether now or hereafter enacted and in force, as applicable to any Person or to the Eastside Convention Center Property.

 

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Lessee” shall mean HLV Tenant or its successor as Tenant under the HLV Lease, which will be the lessee of the Eastside Convention Center Property pursuant to the HLV Lease Amendment.

Lockout Period” shall mean the period commencing on the Effective Date and ending on the earlier of (a) the end of the VICI Election Period (but only in the event that neither Owner exercised the Put Right nor VICI timely exercises the Call Right pursuant to and in accordance with the terms and provisions of Section  5) , or (b) the termination of this Agreement.

Material Adverse Effect” shall mean any defect in the design or construction of the Eastside Convention Center, any Hazardous Substances (as defined in the Amended HLV Lease) located in, on, under or about the Eastside Convention Center Property or any portion thereof or incorporated therein, any casualty or condemnation with respect to the Eastside Convention Center Property, and/or any violation of any Legal Requirements with respect to the Eastside Convention Center Property that (a) has a material adverse effect on the value of the Eastside Convention Center Property (i.e., will, or are reasonably likely to, individually or in the aggregate, reduce the value of the Eastside Convention Center by more than 15% of the Put Right Purchase Price or Call Right Purchase Price, as applicable), (b) has or would reasonably be expected to have a material adverse effect on Owner’s authority and/or ability to convey title to the Eastside Convention Center Property within the time or otherwise in accordance with the provisions of this Agreement and/or (c) has or would reasonably be expected to have a material adverse effect on the use and/or operation of the Eastside Convention Center Property as a Convention Center, in each case individually or in the aggregate.

No-Build Period” shall mean the period commencing on the Effective Date and ending on the earliest of (a) the end of the Owner Election Period, (b) the date when Owner or an Affiliate of Owner substantially completes construction of an Eastside Convention Center and satisfies all other Put/Call Convention Center Conditions, or (c) the termination of this Agreement.

Owner Election Period ” means the period of time commencing on the first day of the seventh (7 th ) Lease Year (as such term is defined in the HLV Lease) and ending on the last day of the seventh (7 th ) Lease Year under the HLV Lease.

Owner Guarantor” shall mean the Net Lease Guarantor (as such term is defined in the HLV Property PSA).

Owner Guaranty ” shall mean a Guaranty dated as of the Effective Date by Owner Guarantor in favor of VICI.

 

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Owner Licensing Event” means: (a) a communication (whether oral or in writing) by or from any Gaming Authority or other action by any Gaming Authority that indicates that such Gaming Authority is likely to find that the association of any member of the Owner Subject Group with VICI or any of its Affiliates is likely to (i) result in a disciplinary action relating to, or the loss of, inability to reinstate or failure to obtain, any registration, application or license or any other rights or entitlements held or required to be held by VICI or any of its Affiliates under any Gaming Law, or (ii) violate any Gaming Law to which VICI or any of its Affiliates is subject; or (b) any member of the Owner Subject Group is required to be licensed, registered, qualified or found suitable under any Gaming Law, and such Person is not or does not remain so licensed, registered, qualified or found suitable within any applicable timeframes required by the applicable Gaming Authority, or, after becoming so licensed, registered, qualified or found suitable, fails to remain so. For purposes of this definition, an “Affiliate” of VICI includes any Person for which VICI or its Affiliate is providing management services. For the avoidance of doubt, it shall not be an Owner Licensing Event if (x) Owner can resolve or cure the Owner Licensing Event within applicable timeframes (for purposes of illustration and not limitation, by terminating any responsible employee) and (y) Owner acts timely to cure the Owner Licensing Event.

Owner Panel Member” shall have the meaning set forth in Section  6(b).

Owner Subject Group ” means Owner, Owner’s Affiliates and its and their principals, direct or indirect shareholders, officers, directors, agents, employees and other related Persons (including in the case of any trusts or similar Persons, the direct or indirect beneficiaries of such trust or similar Persons), excluding VICI and its Affiliates.

Person” means any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other form of entity.

Project Costs” means an amount equal to the sum of (a) the product of (i) all costs actually incurred (including internally allocated costs) by Owner that are capitalized under GAAP in respect of the development, design and construction of the Eastside Convention Center (including any incidental improvements on the Eastside Convention Center Land such as parking improvements, but in each case, only to the extent they service the Eastside Convention Center), but expressly excluding any amounts attributable to land value or land purchase costs, and (ii) 1.03, plus (b) the product of the number of acres of the Eastside Convention Center Land and Four Million Dollars ($4,000,000.00) per acre, all as (x) evidenced by reasonable supporting documentation and (y) certified to in writing by an officer of Owner.

Put-Call PSA Modifications ” shall mean those terms and conditions set forth on Exhibit C attached hereto.

Put Right” means Owner’s right to require VICI to purchase the Eastside Convention Center Property from Owner and simultaneously lease the Eastside Convention Center Property back to Owner subject to and in accordance with the terms and conditions of this Agreement.

 

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Put Right Election Notice” shall have the meaning set forth in Section  3(b).

Put Right HLV Lease Amendment Rent” means the lesser of (a) the quotient of the Project Costs divided by thirteen (13) and (b) the amount of annual Rent for the Convention Center that would be required to be paid under the Amended HLV Lease to meet a Combined Rent Coverage Ratio of 1.75:1.00, which is the amount of Rent per annum to be attributable to the Eastside Convention Center Property in the event the Put Right is exercised; provided that, for the avoidance of doubt, the Put Right HLV Lease Amendment Rent and the Rent (including Variable Rent, as defined in the HLV Lease) will be calculated without taking into account Net Revenue (as defined in the HLV Lease) produced by the Eastside Convention Center; provided, further, under the Amended HLV Lease, the Put Right HLV Lease Amendment Rent shall increase annually by one percent (1%) of the amount of the Put Right HLV Lease Amendment Rent at the end of each Lease Year following the Lease Year during which the Closing Date occurs.

Put/Call Convention Center Conditions” means each of the following: (1) the Eastside Convention Center shall be constructed; (2) the Eastside Convention Center shall contain at least 250,000 usable square feet of convention, conference, meeting, exposition and/or and exhibition space; (3) Project Costs exceed Two Hundred Fifty Million and 00/100 Dollars ($250,000,000.00), (x) evidenced by reasonable supporting documentation and (y) certified to in writing by an officer of Owner; (4) the Eastside Convention Center shall have been constructed in compliance with all applicable Legal Requirements in all material respects, and good construction practices; and (5) all certificates of occupancy (or its local equivalent), and which may include one or more temporary certificates of occupancy, licenses and approvals necessary for use of the Eastside Convention Center as a convention, conference, office, exhibition and meeting facility shall have been issued by the applicable governmental and/or quasi-governmental authorities and remain in full force and effect.

Put Right Property Package” shall have the meaning set forth in Section  3(b).

Put Right Purchase Price” means the product of the Put Right HLV Lease Amendment Rent and thirteen (13).

Regulatory Approval Supporting Information” means information regarding VICI (and, without limitation, its officers and Affiliates) or Owner (and, without limitation, its officers and Affiliates) that is reasonably requested either by Owner from VICI or by VICI from Owner, as the case may be, in connection with obtaining any Requisite Gaming Approvals that may be required in connection with the transactions contemplated by this Agreement.

 

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Regulatory Period” means the period of time that is two hundred seventy (270) days (or such longer time as may be agreed between Owner and VICI) after the finalization and execution of a Sale Agreement or HLV Repurchase Sale Agreement, as the case may be.

Rent” shall have the meaning set forth in the Amended HLV Lease.

Requisite Gaming Approvals” shall mean any necessary licenses, qualifications and approvals from applicable Gaming Authorities required for the exercise of the Put Right, HLV Repurchase Right or Call Right, as the case may be, and the consummation of the transactions contemplated thereby.

Sale Agreement” means a purchase and sale agreement for the purchase and sale of the Eastside Convention Center Property, in materially the same form and on materially the same terms and conditions as the HLV Property PSA, except for the Put- Call PSA Modifications.

Third Panel Member” shall have the meaning set forth in Section  6(b).

Use Rights ” shall mean any easements, licenses, space leases, parking rights and other similar agreements.

VICI Election Period ” means the period of time commencing on the first day of the tenth (10 th ) Lease Year (as such term is defined in the HLV Lease) and ending on the last day of the tenth (10 th ) Lease Year under the HLV Lease.

VICI Guarantor” shall mean VICI Properties 1 LLC, a Delaware limited liability company.

VICI Guaranty” shall mean a Guaranty dated as of the Effective Date by VICI Guarantor in favor of Owner.

VICI Licensing Event” means: (a) a communication (whether oral or in writing) by or from any Gaming Authority or other action by any Gaming Authority that indicates that such Gaming Authority is likely to find that the association of any member of the VICI Subject Group with Owner or any of its Affiliates is likely to (i) result in a disciplinary action relating to, or the loss of, inability to reinstate or failure to obtain, any registration, application or license or any other rights or entitlements held or required to be held by Owner or any of its Affiliates under any Gaming Law, or (ii) violate any Gaming Law to which Owner or any of its Affiliates is subject; or (b) any member of the VICI Subject Group is required to be licensed, registered, qualified or found suitable under any Gaming Law, and such Person is not or does not remain so licensed, registered, qualified or found suitable within any applicable timeframes required by the applicable Gaming Authority, or, after becoming so licensed, registered, qualified or found suitable, fails to remain so. For purposes of this definition, an “Affiliate” of Owner includes any Person for which Owner or its Affiliate is providing management services. For the

 

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avoidance of doubt, it shall not be a VICI Licensing Event if (x) VICI can resolve or cure the VICI Licensing Event within applicable timeframes (for purposes of illustration and not limitation, by terminating any responsible employee) and (y) VICI acts timely to cure the VICI Licensing Event.

VICI Panel Member” shall have the meaning set forth in Section  6(b).

VICI Subject Group” means VICI, VICI’s Affiliates and its and their principals, direct or indirect shareholders, officers, directors, agents, employees and other related Persons (including in the case of any trusts or similar Persons, the direct or indirect beneficiaries of such trust or similar Persons), excluding Owner and its Affiliates.

2. Convention Center.

(a) Owner and its Affiliates shall have the right, but not the obligation, to construct a Convention Center anywhere in the Geographical Area, provided, however, during the No-Build Period, neither Owner nor any of Owner’s Affiliates shall construct a new Convention Center (as opposed to expansions of existing Convention Centers existing on the date hereof) anywhere in the Geographical Area unless the Convention Center Construction Conditions with respect to such Convention Center are satisfied. For the avoidance of doubt, this Agreement does not restrict Owner or its Affiliates from building any improvements on the Designated Land and does not require Owner and its Affiliates to build any improvements on the Designated Land. From and after the No-Build Period, the Convention Center Construction Conditions shall cease and Owner and its Affiliates shall have the right, but not the obligation, to construct any Convention Center in the Geographical Area without restriction, but subject to and upon the other terms and conditions of this Agreement including, without limitation, VICI’s Call Right. Nothing contained herein shall affect or be deemed to affect the Parties’ and their Affiliates’ respective rights and obligations under: (i) that certain Amended and Restated Right of First Refusal Agreement dated as of October 6, 2017, between Caesars Entertainment Corporation, a Delaware corporation, and VICI Properties L.P., a Delaware limited partnership, as modified by that certain Amended and Restated ROFR (as such term is defined in the HLV Property PSA), or (ii) any of the Existing Leases (as such term is defined in the HLV Lease).

(b) Notwithstanding anything to the contrary contained herein, during the Lockout Period, Owner shall be prohibited from selling, disposing, conveying or otherwise transferring all or any portion of the Eastside Convention Center Land or permitting the sale, disposition, conveyance or other transfer of any direct or indirect membership, partnership or other equity interest in Owner, including, without limitation, pursuant to a lease of the Designated Land and/or the Eastside Convention Center (other than the granting of any Use Rights) (collectively, “ Transfers” ), except such prohibition shall not apply to (i) Transfers to Affiliates of Owner or (ii) Transfers to a Person which is not an Affiliate of Owner that acquires (or whose Affiliate acquires) HLV Tenant’s interest in the HLV Property, including, without limitation, any direct or indirect membership, partnership or other equity interest in HLV Tenant so long as during the Lockout Period, the owner of the Eastside Convention Center Property and the tenant of the HLV Lease shall be the same Person or Affiliates of each other; provided, however, the foregoing does not prohibit Owner from granting a deed of trust on any portion of the Eastside Convention Center Property as security for any indebtedness obtained in a bona fide

 

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third-party financing that is also secured by a deed of trust on HLV Tenant’s interest in the HLV Property in accordance with the terms of the HLV Lease; provided that a memorandum of this Agreement is recorded in the Clark County real estate records pursuant to Section  7(m) prior to the execution of each such deed of trust. Nothing in this Agreement prohibits Parcel 1 Owner and Parcel 2 Owner from merging with each other or transferring the Eastside Convention Center Land or any portion thereof between Parcel 1 Owner and Parcel 2 Owner.

3. Put Right in Favor of Owner.

(a) Put Right . Provided that (1) the Put/Call Convention Center Conditions have been satisfied, (2) the Eastside Convention Center shall have been operating and capable of fully operating at the time the Put Right is exercised, and there shall be Financial Statements for no less than four consecutive Fiscal Quarters, (3) the HLV Lease shall be in full force and effect, no Tenant Event of Default (as defined in the HLV Lease) shall exist, and no event or circumstance, which with the passage of time would result in a Tenant Event of Default (a “ Tenant Default” ), shall exist, (4) neither Owner nor any Affiliate of Owner shall then be in material default hereunder, and (5) there is no Material Adverse Effect, then at any time during the Owner Election Period, Owner shall have the right to exercise the Put Right in accordance with the procedures set forth in this Section  3 (all of the foregoing, collectively, the “ Put Exercise Conditions ”). If any or all of the Put Exercise Conditions are not satisfied, then Owner shall not be entitled to exercise the Put Right.

(b) Requirements of Put Right Property Package . In order to duly and timely exercise the Put Right, subject to satisfaction of the Put Exercise Conditions, Owner shall deliver to VICI a notice (the “ Put Right Election Notice” ) of Owner’s election to exercise the Put Right, which shall include a package of information (the “ Put Right Property Package” ), which shall set forth all material information with respect to the Eastside Convention Center Property and the Put Right including, without limitation, the following:

 

  (i) reasonable evidence that the Put Exercise Conditions have been satisfied;

 

  (ii) the proposed Sale Agreement, in the condition required by this Agreement, which shall include the Put Right Purchase Price and Closing Date;

 

  (iii) the proposed HLV Lease Amendment, in the condition required by this Agreement;

 

  (iv) delivery of the Financial Statements referenced in the definition of Combined Rent Coverage Ratio; and

 

  (v) a reasonably detailed explanation of the computation of the proposed Put Right Purchase Price and the Put Right HLV Lease Amendment Rent; and

 

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  (vi) due diligence materials of a type that would customarily be provided to a purchaser of properties such as the Convention Center Property and produced by reputable third-party companies reasonably acceptable to VICI, including in any event a recent title report, survey, environmental reports, current tax status and any assessments owed, and information regarding any known litigation or judgment (collectively, “ Diligence Materials” ).

Promptly upon VICI’s reasonable request therefor, Owner shall provide to VICI additional information reasonably related to the Put Right Property Package, to the extent such information is reasonably available to Owner. Further, following delivery of the Put Right Election Notice, VICI and its consultants and representatives shall have access to the Eastside Convention Center Property pursuant to, and VICI, and its consultants and representatives, shall comply with, the Access Provisions.

(c) Put Right Deadline . If Owner does not deliver a Put Right Election Notice to VICI in accordance with the provisions of Section  3(b) prior to the expiration of the Owner Election Period, TIME BEING OF THE ESSENCE, the Put Right shall automatically terminate and be deemed null and void.

(d) Dispute Regarding Put Right Property Package; Material Adverse Effect . If a Put Right Election Notice and Put Right Property Package are timely delivered by Owner to VICI but VICI either (1) disagrees with Owner’s computation of the Put Right HLV Lease Amendment Rent and/or the Put Right Purchase Price, (2) has comments or revisions to the draft HLV Lease Amendment or Sale Agreement that are required to cause same to comply with the provisions of this Agreement, (3) believes that a condition exists (evidenced through the Diligence Materials or otherwise) that has a Material Adverse Effect, or (4) believes that any or all of the Put Exercise Conditions have not been satisfied, then VICI shall notify Owner thereof within twenty (20) days of VICI’s receipt of the Put Right Property Package (or, if later, such evidence of an alleged Material Adverse Effect or, Tenant Event of Default or Tenant Default). In such event, Owner and VICI shall negotiate in good faith up to a period of thirty (30) days in an effort to reconcile the applicable issue(s). If Owner and VICI are unable to resolve the subject dispute, then Owner may withdraw the Put Right Election Notice (in which case the Put Right may not be exercised again for a period of six (6) months (but in no event after the end of the Owner Election Period)), and if Owner does not withdraw the Put Right Election Notice, the Parties agree that such dispute shall be resolved pursuant to arbitration in accordance with the procedures set forth in Section  6 hereof.

(e) Finalization of Put Right Documents . If a Put Right Election Notice and Put Right Property Package are timely delivered, and (if applicable) any disputes under Section  3(d) above have been resolved, Owner and VICI shall as soon as reasonably practicable (but in all events within ten (10) days thereafter) enter into the Sale Agreement (with a HLV Lease Amendment attached thereto as an exhibit, which HLV Lease Amendment shall be executed upon the consummation of the closing under the Sale Agreement).

(f) Gaming Approvals . If a Gaming Approval Failure occurs, the Put Right shall automatically terminate and be deemed null and void. Each Party shall use good faith,

 

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commercially reasonable efforts in order to timely obtain the Requisite Gaming Approvals that it must obtain for the Put Right transaction, and the other Party shall use good faith, commercially reasonable efforts in order to assist such Party in its efforts to timely obtain such Requisite Gaming Approvals. If there is a dispute among the Parties as to whether good faith, commercially reasonable efforts were used throughout the Regulatory Period, such dispute shall be resolved in accordance with the procedures set forth in Section  6 hereof, and such matter shall be submitted to arbitration in accordance with the procedures set forth in Section  6 hereof within twenty (20) days after the expiration of the Regulatory Period. Each Party, at no material unreimbursed expense to such Party, agrees to reasonably cooperate with the other Party and use commercially reasonable efforts to provide Regulatory Approval Supporting Information that is reasonably requested by the other Party, in such Party’s efforts to obtain any necessary regulatory approvals (including, if necessary Requisite Gaming Approvals).

(g) Closing . The closing of the Put Right transaction shall occur in accordance with the terms of the Sale Agreement. In the event that a Put Right transaction fails to close for any reason other than Owner’s breach or default under this Agreement or under the Sale Agreement or because of a failure of one or more representations or warranties by Seller under the Sale Agreement to be true and correct in all material respects as of the Closing Date (a “ Rep Condition Failure” ), or due to a Gaming Approval Failure and the Sale Agreement is terminated (any such failure to close for a reason other than such breach or default by Owner, a Rep Condition Failure or Gaming Approval Failure, a “ Put Right Closing Failure” ), Owner shall have the right to exercise the HLV Repurchase Right in accordance with the procedures set forth in Section  4 hereof. Either VICI or Owner shall have the right, to be exercised within twenty (20) days after the date the alleged Put Right Closing Failure occurs, to submit any dispute related to the failure to close to arbitration in accordance with the procedures set forth in Section 6 hereof in order to obtain a determination of the reason for such failure to close. If the Sale Agreement has been executed between the Parties, from and after such execution the terms and conditions of such Sale Agreement shall govern all disputes between the Parties other than the reason for such failure to close rather than the arbitration procedures set forth in Section  6 hereof.

(h) Failure to Execute Sale Agreement Due To VICI’s Breach. Prior to entering into this transaction, Owner and VICI have discussed the fact that substantial damages will be suffered by Owner if VICI shall breach or default in its obligations under this Section 3 to execute a Sale Agreement if and when required under this Section  3 (a “ VICI LD Default” ); accordingly, the Parties agree that a reasonable estimate of Owner’s damages in such event is the amount of $9,000,000 (the “ Owner Liquidated Damages Amount” ). In the event of a VICI LD Default, then, as Owner’s sole and exclusive remedy hereunder, at law, in equity or otherwise (but for the avoidance of doubt, without limiting Owner’s rights to exercise the HLV Repurchase Right in accordance with the procedures set forth in Section  4 hereof) VICI shall pay the Owner Liquidated Damages Amount to Owner as liquidated damages. VICI’s obligation to pay the Owner Liquidated Damages Amount if and when payable hereunder shall survive the termination of this Agreement. In the event of an alleged VICI LD Default, Owner shall provide notice to VICI of same, setting forth in reasonable detail the nature of such VICI LD Default (a “ VICI LD Default Notice” ). VICI shall have the right, to be exercised within twenty (20) days after the date Owner gives a VICI LD Default Notice, to submit any dispute related to such

 

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alleged VICI LD Default to arbitration in accordance with the procedures set forth in Section  6 hereof in order to obtain a determination as to whether a VICI LD Default occurred. In the event the Arbitration Panel’s determination is that a VICI LD Default occurred, VICI shall have a period of twenty (20) days from the date of such determination to cure such default, failure of which shall result in VICI being required to pay the Owner Liquidated Damages Amount.

(i) Termination of Agreement. Upon closing of the Put Right transaction this Agreement shall automatically terminate and be of no further force and effect.

4. HLV Repurchase Right in Favor of Owner.

(a) HLV Repurchase Right . If and only if Owner duly exercises the Put Right in accordance with the terms and conditions of Section  3, but a Put Right transaction fails to close by the outside date by which the closing could occur under the Sale Agreement (as described as the “Closing Date” in Exhibit D ) due to a Put Right Closing Failure, then during the HLV Repurchase Election Period, Owner shall have the right to exercise the HLV Repurchase Right subject to and in accordance with the further terms and provisions of this Section  4. Under no circumstances shall Owner have the right to exercise the HLV Repurchase Right in the event Owner withdraws its Put Right pursuant to the terms and provisions of Section 3(d) (unless Owner subsequently duly exercises its Put Right again within the Owner Election Period and otherwise in accordance with the terms and conditions of Section  3, and thereafter a Put Right transaction again fails to close by the outside date by which the closing could occur under the Sale Agreement due to a Put Right Closing Failure and otherwise in accordance with the terms and conditions of this Agreement).

(b) Requirements of HLV Repurchase Right Property Package Request . As a condition to exercising the HLV Repurchase Right, Owner shall deliver to VICI during the HLV Repurchase Right Election Period a notice of Owner’s intention to exercise the HLV Repurchase Right, and a request for the HLV Repurchase Right Property Package from VICI (collectively, the “ HLV Repurchase Right Property Package Request” ). As promptly as practicable after receipt of the HLV Repurchase Right Property Package Request, but in no event later than the date occurring thirty (30) days after VICI’s receipt of the HLV Repurchase Right Property Package Request, VICI shall provide to Owner a package of information (the “ HLV Repurchase Right Property Package” ), which shall include the following:

 

  (i) the proposed HLV Repurchase Sale Agreement, in the condition required by this Agreement, which shall include the HLV Repurchase Right Purchase Price and Closing Date;

 

  (ii) the computation of the proposed HLV Repurchase Right Purchase Price; and

 

  (iii)

Diligence Materials (if and to the extent VICI has such materials in its possession and Lessee does not already have same at the time the HLV Repurchase Right Property Package Request was received).

 

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Promptly upon Owner’s reasonable request therefor, VICI shall provide to Owner additional information reasonably related to the HLV Repurchase Right, to the extent such information is in its possession and Lessee does not already have same.

(c) Call Right Deadline . If Owner does not deliver a HLV Repurchase Right Property Package Request to VICI in accordance with the provisions of Sections 4(a) and 4(b) prior to the expiration of the HLV Repurchase Election Period, TIME BEING OF THE ESSENCE, the HLV Repurchase Right shall automatically terminate and be deemed null and void.

(d) Dispute Regarding HLV Repurchase Right Property Package . If Owner, after reviewing the HLV Repurchase Right Property Package, either (1) disagrees with VICI’s computation of the HLV Repurchase Right Purchase Price, or (2) has comments or revisions to the draft HLV Repurchase Sale Agreement that are required to cause same to comply with the provisions of this Agreement, Owner shall notify VICI thereof within twenty (20) days of Owner’s receipt of the HLV Repurchase Right Property Package. In such event, Owner and VICI shall negotiate in good faith up to a period of thirty (30) days in an effort to reconcile the applicable issue(s). If Owner and VICI are unable to resolve the subject dispute, such dispute shall be resolved pursuant to arbitration in accordance with the procedures set forth in Section  6 hereof.

(e) Finalization of HLV Repurchase Right Documents . If the HLV Repurchase Right Property Package is timely delivered, and (if applicable) any disputes under Section  4(d) above have been resolved, Owner and VICI shall as soon as reasonably practicable (but in all events within ten (10) days thereafter) enter into the HLV Repurchase Sale Agreement.

(f) Gaming Approvals . If a Gaming Approval Failure occurs, the HLV Repurchase Right shall automatically terminate and be deemed null and void. Each party shall use good faith, commercially reasonable efforts in order to timely obtain the Requisite Gaming Approvals that it must obtain for the HLV Repurchase Right Transaction, and the other party shall use good faith, commercially reasonable efforts in order to assist such party in its efforts to timely obtain such Requisite Gaming Approvals. If there is a dispute among the Parties as to whether good faith, commercially reasonable efforts were used throughout the Regulatory Period, such dispute shall be resolved in accordance with the procedures set forth in Section  6 hereof, and such matter shall be submitted to arbitration in accordance with the procedures set forth in Section  6 hereof within twenty (20) days after the expiration of the Regulatory Period. Each Party, at no material unreimbursed expense to such Party, agrees to reasonably cooperate with the other Party and use commercially reasonable efforts to provide Regulatory Approval Supporting Information that is reasonably requested by the other Party, in such Party’s efforts to obtain any necessary regulatory approvals (including, if necessary Requisite Gaming Approvals).

(g) Closing . The closing of the HLV Repurchase Right transaction shall occur in accordance with the terms of the HLV Repurchase Sale Agreement. In the event that a HLV Repurchase Right transaction fails to close as aforesaid, either VICI or Owner shall have the right, to be exercised within twenty (20) days after the date the alleged failure occurs, to

 

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submit any dispute related to such failure to arbitration in accordance with the procedures set forth in Section  6 hereof; provided, however, that if the HLV Repurchase Sale Agreement has been executed between the Parties, from and after such execution the terms and conditions of such HLV Repurchase Sale Agreement shall govern all disputes between the Parties.

5. Call Right in Favor of VICI.

(a) Call Right . Provided that clauses (1), (2) and (3) (excluding clauses (x) and (y) thereof) of the Put/Call Convention Center Conditions have been satisfied, the Call Right Rent Coverage Condition has been satisfied, the HLV Lease shall be in full force and effect, Landlord (as defined in the HLV Lease) shall not be in material uncured default under the HLV Lease, and VICI is not in material default hereunder (and, for the avoidance of doubt, it shall not be deemed a material default if a VICI LD Default occurred and thereafter VICI paid the Owner Liquidated Damages Amount), then, at any time during the VICI Election Period, VICI shall have the right to exercise the Call Right in accordance with the procedures set forth in this Section  5.

(b) Requirements of Call Right Election Notice and Call Right Property Package Request . As a condition to exercising the Call Right, VICI shall deliver to Owner a notice of VICI’s intention to exercise the Call Right, and a request for the Call Right Property Package from Owner (collectively, the “ Call Right Property Package Request” ). As promptly as practicable after receipt of the Call Right Property Package Request, but in no event later than the date occurring thirty (30) days after Owner’s receipt of the Call Right Property Package Request, Owner shall provide to VICI a package of information (the “ Call Right Property Package ”), which shall set forth all material information with respect to the Eastside Convention Center Property and the Call Right including, without limitation, the following:

 

  (i) reasonable evidence that the Put/Call Convention Center Conditions have been satisfied;

 

  (ii) the proposed Sale Agreement, in the condition required by this Agreement, which shall include the Call Right Purchase Price and Closing Date;

 

  (iii) a determination of whether the Call Right Rent Coverage Condition has been satisfied, together with reasonably detailed supporting documentation and computations used to derive such determination;

 

  (iv) the proposed HLV Lease Amendment, in the condition required by this Agreement;

 

  (v) delivery of the Financial Statements referenced in the definition of Combined Rent Coverage Condition; and

 

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  (vi) a reasonably detailed explanation of the computation of the proposed Call Right Purchase Price and the Call Right HLV Lease Amendment Rent; and

 

  (vii) Diligence Materials.

Promptly upon VICI’s reasonable request therefor, Owner shall provide to VICI additional information reasonably related to the Call Right, to the extent such information is reasonably available to Owner. Further, following delivery of the Call Right Property Package Request VICI and its consultants and representatives shall have access to the Eastside Convention Center Property pursuant to, and VICI, and its consultants and representatives, shall comply with, the Access Provisions.

(c) Call Right Deadline . If VICI does not deliver a Call Right Property Package Request to Owner in accordance with Section  5(b) prior to the expiration of the VICI Election Period, TIME BEING OF THE ESSENCE, this Agreement shall automatically terminate on the expiration of such period.

(d) Failure of Put/Call Convention Center Conditions or Call Right Rent Coverage Condition . If upon VICI’s delivering of the Call Right Property Package Request to Owner, the Put/Call Convention Center Conditions have not been satisfied or the Call Right Rent Coverage Condition is not satisfied (in either case, a “ Call Right Condition Failure” ), then this Agreement shall automatically terminate at the conclusion of the VICI Election Period unless following a Call Right Condition Failure, VICI again exercises its Call Right within the VICI Election Period and at the time of delivering of the Call Right Property Package Request to Owner, clause (1), (2) and (3) (excluding clauses (x) and (y) thereof) of the Put/Call Convention Center Conditions and the Call Right Rent Coverage Condition are then satisfied.

(e) Dispute Regarding Call Right Property Package . If VICI, after reviewing the Call Right Property Package, still wishes to exercise the Call Right but VICI either (1) disagrees with Owner’s computation of the Call Right Purchase Price and/or the Call Right HLV Lease Amendment Rent, or (2) has comments or revisions to the draft HLV Lease Amendment and/or Sale Agreement required to cause the same to comply with the provisions of this Agreement, VICI shall notify Owner thereof within twenty (20) days of VICI’s receipt of the Call Right Property Package. In such event, Owner and VICI shall negotiate in good faith up to a period of thirty (30) days in an effort to reconcile the applicable issue(s). If Owner and VICI are unable to resolve the subject dispute, such dispute shall be resolved pursuant to arbitration in accordance with the procedures set forth in Section  6 hereof. Notwithstanding anything to the contrary contained herein, in the event that: (x) the Call Right Property Package discloses that any of the Put/Call Convention Center Conditions is not satisfied and/or the Call Right Rent Coverage Condition is not satisfied, (y) a Tenant Event of Default or Tenant Default exists, and/or (z) a condition exists or an event occurred (evidenced through the Diligence Materials or otherwise) that has a Material Adverse Effect, then, with respect to clauses (x) or (y), Owner may terminate this Agreement to be effective at the conclusion of the VICI Election Period, subject to the provisions of Section  5(d), and if Owner does not so terminate this Agreement, and with respect to clause (z), VICI shall have the right to retract its exercise of the Call Right by providing notice to Owner thereof within twenty (20) days of VICI’s receipt of the Call Right

 

19


Property Package (or, if later, in the case of any item described in either clauses (y)  or (z) above, twenty (20) days following the occurrence of such event). In such case, this Agreement shall automatically terminate at the conclusion of the VICI Election Period, subject to the provisions of Section  5(d).

(f) Finalization of Call Right Documents . If the Call Right Property Package is timely delivered, and (if applicable) any disputes under Section  5(e) above have been resolved, if VICI still wishes to exercise the Call Right, Owner and VICI shall as soon as reasonably practicable (but in all events within ten (10) days thereafter) enter into the Sale Agreement (with a HLV Lease Amendment attached thereto as an exhibit, which HLV Lease Amendment shall be executed upon the consummation of the closing under the Sale Agreement).

(g) Gaming Approvals . If a Gaming Approval Failure occurs, then this Agreement shall automatically terminate. Each Party shall use good faith, commercially reasonable efforts in order to timely obtain the Requisite Gaming Approvals that it must obtain for the Call Right Transaction, and the other Party shall use good faith, commercially reasonable efforts in order to assist such Party in its efforts to timely obtain such Requisite Gaming Approvals. If there is a dispute among the Parties as to whether good faith, commercially reasonable efforts were used throughout the Regulatory Period, such dispute shall be resolved in accordance with the procedures set forth in Section  6 hereof, and such matter shall be submitted to arbitration in accordance with the procedures set forth in Section  6 hereof within twenty (20) days after the expiration of the Regulatory Period. Each Party, at no material unreimbursed expense to such Party, agrees to reasonably cooperate with the other Party and use commercially reasonable efforts to provide Regulatory Approval Supporting Information that is reasonably requested by the other Party, in such Party’s efforts to obtain any necessary regulatory approvals (including, if necessary Requisite Gaming Approvals).

(h) Closing . The closing of the Call Right transaction shall occur in accordance with the terms of the Sale Agreement. In the event that the Parties fail to execute a Sale Agreement, either VICI or Owner shall have the right, to be exercised within twenty (20) days after the date the alleged failure occurs, to submit any dispute related to such failure to arbitration in accordance with the procedures set forth in Section  6 hereof; provided, however, that if the Sale Agreement has been executed between the Parties, from and after such execution the terms and conditions of such Sale Agreement shall govern all disputes between the Parties.

(i) Failure to Execute Sale Agreement Due To Owner Breach. Prior to entering into this transaction, Owner and VICI have discussed the fact that substantial damages will be suffered by VICI if Owner shall breach or default in its obligations under this Section 5 to execute a Sale Agreement when required under this Section  5 (an “ Owner LD Default ”); accordingly, the Parties agree that a reasonable estimate of VICI’s damages in such event is the amount of $9,000,000 (the “ VICI Liquidated Damages Amount ”). In the event of an Owner LD Default, then, as VICI’s sole and exclusive remedy hereunder, at law, in equity or otherwise, Owner shall pay the VICI Liquidated Damages Amount to VICI as liquidated damages, and thereafter, the Parties shall have no further rights or obligations hereunder except for other obligations which expressly survive the termination of this Agreement. Owner’s obligation to pay the VICI Liquidated Damages Amount if and when payable hereunder shall survive the

 

20


termination of this Agreement. In the event of an alleged Owner LD Default, VICI shall provide notice to Owner of same, setting forth in reasonable detail the nature of such Owner LD Default (an “ Owner LD Default Notice” ). Owner shall have the right, to be exercised within twenty (20) days after the date VICI gives an Owner LD Default Notice, to submit any dispute related to such alleged Owner LD Default to arbitration in accordance with the procedures set forth in Section  6 hereof in order to obtain a determination as to whether an Owner LD Default occurred. In the event the Arbitration Panel’s determination is that an Owner LD Default occurred, Owner shall have a period of twenty (20) days from the date of such determination to cure such default, failure of which shall result in Owner being required to pay the VICI Liquidated Damages Amount.

(j) Financial Statements and Access to Eastside Convention Center Property . At any time and from time to time after the first (1st) day of the ninth (9 th ) Lease Year under the HLV Lease, within thirty (30) days after request therefor by VICI, Owner shall provide: (x) to VICI, Financial Statements for the then most recent period of four consecutive Fiscal Quarters ended at least 90 days prior to such date, and (y) to VICI and its consultants and representatives, access to the Eastside Convention Center Property pursuant to, and VICI, and its consultants and representatives, shall comply with, the Access Provisions.

(k) Termination of Agreement . Upon closing of the Call Right transaction this Agreement shall automatically terminate and be of no further force and effect.

6. Arbitration.

(a) Arbitrator Qualifications . Any dispute required pursuant to the terms and conditions of this Agreement to be resolved by arbitration shall be submitted to and determined by an arbitration panel comprised of three (3) members (the “ Arbitration Panel” ). No more than one (1) panel member may be with the same firm, and no panel member may have an economic interest in the outcome of the arbitration. In addition, each panel member shall have (i) at least ten (10) years of experience as an arbitrator and at least one (1) year of experience in a profession that directly relates to the ownership, operation, financing or leasing of gaming or other hospitality facilities similar to the Eastside Convention Center Property, as applicable, or (ii) at least one (1) year of experience as an arbitrator and at least ten (10) years of experience in a profession that directly relates to the ownership, operation, financing or leasing of gaming or other hospitality facilities similar to the HLV Property or Eastside Convention Center Property, as applicable.

(b) Arbitrator Appointment . The Arbitration Panel shall be selected as set forth in this Section  6(b).      Within fifteen (15) Business Days after the expiration of the applicable date identified in this Agreement, Owner shall select and identify to VICI a panel member meeting the criteria of the above paragraph (the “ Owner Panel Member” ) and VICI shall select and identify to Owner a panel member meeting the criteria of the above paragraph (the “ VICI Panel Member” ). If a Party fails to timely select its respective panel member, the other Party may notify such Party in writing of such failure, and if such Party fails to select its respective panel member within three (3) Business Days after receipt of such notice, then such other Party may select and identify to such Party such panel member on such Party’s behalf. Within ten (10) Business Days after the selection of the Owner Panel Member and the VICI

 

21


Panel Member, the Owner Panel Member and the VICI Panel Member shall jointly select a third panel member meeting the criteria of the above paragraph (the “ Third Panel Member” ). If the Owner Panel Member and the VICI Panel Member fail to timely select the Third Panel Member and such failure continues for more than three (3) Business Days after written notice of such failure is delivered to the Owner Panel Member and VICI Panel Member by either Owner or VICI, then Owner and VICI shall cause the Third Panel Member to be appointed by the managing officer of the American Arbitration Association.

(c) Arbitration Procedure . Within twenty (20) Business Days after the selection of the Arbitration Panel, Owner and VICI each shall submit to the Arbitration Panel a written statement identifying its summary of the issues. Owner and VICI may also request an evidentiary hearing on the merits in addition to the submission of written statements, such request to be made in writing within such twenty (20) Business Day period. The Arbitration Panel shall determine the appropriate terms and conditions of the documents or other matters in question in accordance with this Agreement. The Arbitration Panel shall make its decision within twenty (20) days after the later of (i) the submission of such written statements, and (ii) the conclusion of any evidentiary hearing on the merits (if any). The Arbitration Panel shall reach its decision by majority vote and shall communicate its decision by written notice to Owner and VICI.

(d) Determinations by Arbitration Panel . For the avoidance of doubt, (i) any damages payable hereunder shall be payable only in cash or cash equivalents or, in the discretion of both Parties acting reasonably, equity securities or debt with at least the same value as a cash award or, in the sole discretion of each Party, such other form of consideration as may be agreed between them; and (ii) in making any determination of an issue with respect to Gaming Laws or involving the Gaming Authorities, the Arbitration Panel shall be limited to determining whether the Owner acted in good faith and/or a commercially reasonable manner with respect to this Agreement and its obligations hereunder.

(e) Binding Decision . The decision by the Arbitration Panel shall be final, binding and conclusive and shall be non-appealable and enforceable in any court having jurisdiction. All hearings and proceedings held by the Arbitration Panel shall take place in New York, New York.

(f) Determination Rules . The resolution procedure described herein shall be governed by the Commercial Rules of the American Arbitration Association and the Procedures for Large, Complex, Commercial Disputes in effect as of the date hereof.

(g) Liability for Costs . Owner and VICI shall bear equally the fees, costs and expenses of the Arbitration Panel in conducting any arbitration described in this Section  6.

7. Miscellaneous.

(a) Notices . Any notice, request or other communication to be given by any Party hereunder shall be in writing and shall be sent by registered or certified mail, postage prepaid and return receipt requested, by hand delivery or express courier service, by facsimile

 

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transmission or by an overnight express service to the following address or to such other address as either Party may hereafter designate:

To Owner:    Vegas Development Land Owner LLC

One Caesars Palace Drive

Las Vegas, NV 89109

Attention: General Counsel

Facsimile: (702) 892-2795

Email: corplaw@caesars.com

To VICI:       Claudine Propco LLC

c/o VICI Properties, L.P.

8329 West Sunset Road, Suite 210

Las Vegas, NV 89113

Attention: General Counsel

Fax:

Email: corplaw@viciproperties.com

Notice shall be deemed to have been given on the date of delivery if such delivery is made on a Business Day, or if not, on the first Business Day after delivery. If delivery is refused, notice shall be deemed to have been given on the date delivery was first attempted. Notice sent by facsimile transmission shall be deemed given upon confirmation that such notice was received at the number specified above or in a notice to the sender.

(b) Successors and Assigns . This Agreement shall be binding upon and shall inure to the benefit of Owner and VICI and their respective permitted successors and assigns; provided, however, in all instances this Agreement shall “run with the land” and be binding against any successor of the Parties and each such permitted successor or assign shall be required to execute and notarize a joinder to this Agreement in a form of joinder reasonably acceptable to the Parties hereto, but failure to execute and/or have notarized such joinder shall in no way affect such successor’s or assign’s obligations under this Agreement. Owner shall not have the right to assign its rights or obligations under this Agreement without the prior written consent of VICI; provided, that if after the date hereof HLV Tenant assigns its rights and obligations as “Tenant” under and pursuant to the terms of the HLV Lease to a person or entity that is not an Affiliate of HLV Tenant and Owner, then Owner, concurrently with such assignment by HLV Tenant, shall assign this Agreement to the “Tenant” or to an Affiliate of such “Tenant” under the HLV Lease. VICI shall not have the right to assign its rights or obligations under this Agreement, other than to an Affiliate of VICI; provided, that if after the date hereof VICI assigns its rights and obligations as “Landlord” under and pursuant to the terms of the HLV Lease, then this Agreement shall be automatically assigned and be binding upon and inure to the benefit of such successor that is then the “Landlord” under the HLV Lease. The foregoing shall be subject to the terms and provisions of Section  2(b).

(c) Entire Agreement; Amendment. This Agreement and the exhibits hereto constitute the entire and final agreement of the Parties with respect to the subject matter hereof, and may not be changed or modified except by an agreement in writing signed by the Parties. Owner and VICI hereby agree that all prior or contemporaneous oral understandings, agreements or negotiations relative to the subject matter hereof are merged into and revoked by this Agreement.

 

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(d) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Nevada, which State the Parties agree has a substantial relationship to the Parties and to the underlying transaction embodied hereby. This Agreement is the product of joint drafting by the Parties and shall not be construed against either Party as the drafter hereof.

(e) Venue. With respect to any action relating to this Agreement, Owner and VICI irrevocably submit to the exclusive jurisdiction of the courts of the State of Nevada sitting in Clark County, Nevada and the United States District Court having jurisdiction over Clark County, Nevada, and Owner and VICI each waives: (a) any objection to the laying of venue of any suit or action brought in any such court; (b) any claim that such suit or action has been brought in an inconvenient forum; (c) any claim that the enforcement of this Section is unreasonable, unduly oppressive, and/or unconscionable; and (d) the right to claim that such court lacks jurisdiction over that Party.

(f) Waiver of Jury Trial. EACH PARTY HERETO, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT.

(g) Severability. If any term or provision of this Agreement or any application thereof shall be held invalid or unenforceable, the remainder of this Agreement and any other application of such term or provision shall not be affected thereby.

(h) Third-Party Beneficiaries. This Agreement is solely for the benefit of the parties hereto and is not enforceable by any other persons.

(i) Time of Essence. TIME IS OF THE ESSENCE OF THIS AGREEMENT AND EACH PROVISION HEREOF IN WHICH TIME OF PERFORMANCE IS ESTABLISHED.

(j) Further Assurances. The Parties agree to promptly sign all documents reasonably requested to give effect to the provisions of this Agreement. In addition, VICI agrees to, at Owner’s sole cost and expense, reasonably cooperate with all applicable Gaming Authorities in connection with the administration of their regulatory jurisdiction over the Owner and the transactions contemplated and described herein, including the provision of such documents and other information as may be requested by such Gaming Authorities.

(k) Counterparts; Originals. This Agreement may be executed in any number of counterparts, each of which shall be a valid and binding original, but all of which together shall constitute one and the same instrument. Facsimile or digital copies of this Agreement, including the signature page hereof, shall be deemed originals for all purposes.

 

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(l) Licensing Events; Termination.

(i) If there shall occur a VICI Licensing Event and any aspect of such VICI Licensing Event is attributable to a member of the VICI Subject Group, then Owner or VICI, as applicable, shall notify the other Party thereof as promptly as practicable after becoming aware of such VICI Licensing Event (but in no event later than twenty (20) days after becoming aware of such VICI Licensing Event). In such event, VICI shall use commercially reasonable efforts to resolve and to cause the other members of the VICI Subject Group to use commercially reasonable to in resolve such VICI Licensing Event within the time period required by the applicable Gaming Authorities by submitting to investigation by the relevant Gaming Authorities and cooperating with any reasonable requests made by such Gaming Authorities (including filing requested forms and delivering information to the Gaming Authorities). If, despite these efforts, such VICI Licensing Event cannot be resolved to the satisfaction of the applicable Gaming Authorities within the time period required by such Gaming Authorities, Owner shall have the right, in its discretion, to (1) cause this Agreement to temporarily cease to be in full force and effect, until such time, as any, as the VICI Licensing Event is resolved to the satisfaction of the applicable Gaming Authorities; provided, that if the VICI Election Period, Owner Election Period or HLV Repurchase Election Period would otherwise terminate at a time while the Agreement is not in full force and effect, then the VICI Election Period, Owner Election Period or HLV Repurchase Election Period, as the case may be, shall be extended until the date that is the earlier of (x) one hundred eighty (180) days after the date on which the Parties become aware that the VICI Licensing Event was resolved to the satisfaction of the applicable Gaming Authorities, (y) the date on which each of VICI and Owner reasonably determines that the VICI Licensing Event is not likely to be resolved or otherwise ceases using commercially reasonable efforts to resolve such VICI Licensing Event and (z) the date that is one (1) year following the expiration of the VICI Election Period, Owner Election Period or HLV Repurchase Election Period, as the case may be, or (2) to the extent causing this Agreement to temporarily cease to be in full force and effect in lieu of terminating this Agreement is not sufficient for the applicable Gaming Authorities, notify VICI of its intention to terminate this Agreement, in which case the Agreement shall terminate upon receipt of such notice.

(ii) If there shall occur an Owner Licensing Event and any aspect of such Owner Licensing Event is attributable to a member of the Owner Subject Group, then VICI or Owner, as applicable, shall notify the other Party thereof as promptly as practicable after becoming aware of such Owner Licensing Event (but in no event later than twenty (20) days after becoming aware of such Owner Licensing Event). In such event, Owner shall use commercially reasonable efforts to resolve and to cause the other members of the Owner Subject Group to resolve such Owner Licensing Event within the time period required by the applicable Gaming Authorities by submitting to investigation by the relevant Gaming Authorities and cooperating with any reasonable requests made by such Gaming Authorities (including filing requested forms and delivering information to the Gaming Authorities). If, despite these efforts, such Owner Licensing Event cannot be resolved to the satisfaction of the applicable Gaming Authorities within the time period required by such Gaming Authorities, VICI shall have the right, in its discretion,

 

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to terminate this Agreement; provided, that if the VICI Election Period, Owner Election Period or HLV Repurchase Election Period would otherwise terminate at a time while the Agreement is not in full force and effect, then the VICI Election Period, Owner Election Period or HLV Repurchase Election Period, as the case may be, shall be extended until the date that is the earlier of (x) one hundred eighty (180) days after the date on which the Parties become aware that the Owner Licensing Event was resolved to the satisfaction of the applicable Gaming Authorities, (y) the date on which each of VICI and Owner reasonably determines that the Owner Licensing Event is not likely to be resolved or otherwise ceases using commercially reasonable efforts to resolve such Owner Licensing Event and (z) the date that is one (1) year following the expiration of the VICI Election Period, Owner Election Period or HLV Repurchase Election Period, as the case may be, or (2) to the extent causing this Agreement to temporarily cease to be in full force and effect in lieu of terminating this Agreement is not sufficient for the applicable Gaming Authorities, notify Owner of its intention to terminate this Agreement, in which case the Agreement shall terminate upon receipt of such notice.

(m) Memorandum. Owner and VICI shall, promptly upon the request of either Party, enter into one or more short form memoranda of this Agreement in a form reasonably acceptable to the Parties and in all events in form suitable for recording in the county or other applicable location in which the Eastside Convention Center Property is located and which shall be recorded against the Designated Land and the HLV Property. Each Party shall bear its own costs in negotiating and finalizing such memoranda, but the Parties shall split equally all costs and expenses of recording any such memorandum and shall fully cooperate with Owner in removing from record any such memorandum upon the termination of this Agreement. Notwithstanding anything to the contrary, each of Owner and VICI shall, promptly upon the termination of this Agreement, enter into a termination of memorandum of agreement in recordable form and promptly after execution record such termination of memorandum of agreement.

(n) Guaranties. On the Effective Date, (x) Owner Guarantor shall execute and deliver the Owner Guaranty, which shall in all events be in a form reasonably acceptable to the Parties, and be on materially the same terms as the PSA Seller Guaranty and PSA Buyer Guaranty (as defined in the HLV Property PSA), except that the Owner Guaranty shall be with respect to Owner’s obligations to pay the VICI Liquidated Damages Amount to the extent due pursuant to the terms and conditions of this Agreement and with respect to the performance of Owner’s obligations under Section 2 of this Agreement, and (y) VICI Guarantor shall execute and deliver the VICI Guaranty, which shall in all events be in a form reasonably acceptable to the Parties, and be on materially the same terms as the PSA Seller Guaranty and PSA Buyer Guaranty, except that the VICI Guaranty shall be with respect to VICI’s obligations to pay the Owner Liquidated Damages Amount to the extent due pursuant to the terms and conditions of this Agreement. If the form of the Owner Guaranty and the form of VICI Guaranty have not been agreed to on the Effective Date, then the parties may submit the dispute with regard to the form of the VICI Guaranty and Owner Guaranty to arbitration in accordance with Section 6.

[Remainder of Page Intentionally Left Blank]

 

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IN WITNESS WHEREOF, VICI and Owner have executed this Agreement as of the date first set forth above.

 

VICI:

CLAUDINE PROPCO LLC,

a Delaware limited liability company

By:   /s/ John Payne
Name   John Payne
Title:   President

 

 

Signature Page to Claudine - Put-Call Right Agreement


PARCEL 1 OWNER:

VEGAS DEVELOPMENT LAND OWNER LLC,

a Delaware limited liability company

By:  

EASTSIDE CONVENTION CENTER, LLC,

a Delaware limited liability company

its sole member

  By:  

CAESARS RESORT COLLECTION, LLC,

a Delaware limited liability company

its sole member

    By:   /s/ Eric Hession
    Name:   Eric Hession
    Title:   Chief Financial Officer and Treasurer

 

Signature Page to Claudine - Put-Call Right Agreement


PARCEL 2 OWNER:

3535 LV NEWCO, LLC

a Delaware limited liability company

By:  

/s/ Eric Hession

Name:   Eric Hession
Title:   Chief Financial Officer and Treasurer

 

Signature Page to Claudine - Put-Call Right Agreement


EXHIBIT A-1

Description of the Designated Land Parcel 1

THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE COUNTY OF CLARK, STATE OF NEVADA, AND IS DESCRIBED AS FOLLOWS:

PARCEL 1: (TOWERS) (APN 162-16-410-060)

Lots 16 through 20 in Block Two (2) of Flamingo Estates, as shown by map thereof on file in Book 5 of Plats, page 22, as recorded in the office of the County Recorder of Clark County, Nevada. Together with those portions of Winnick Avenue, Ida Avenue and the alley as vacated by that certain Order of Vacation, recorded February 14, 2012, in Book 20120214 as Document No. 01112, and Re-recorded February 16, 2012, in Book 20120216 as Document No. 01146 and Re-recorded March 23, 2012, in Book 20120323 as Document No. 01850, of Official Records.

PARCEL 2: (TERRACES) (APN 162-16-410-061 and 062)

Lots 21 through 24 in Block Two (2) of Flamingo Estates, as shown by map thereof on file in Book 5 of Plats, page 22, as recorded in the office of the County Recorder of Clark County, Nevada.

Together with those portions of Ida Avenue and the alley as vacated by that certain Order of Vacation, recorded February 14, 2012, in Book 20120214 as Document No. 01112, and Re- recorded February 16, 2012, in Book 20120216 as Document No. 01146 and Re-recorded March 23, 2012, in Book 20120323 as Document No. 01850, of Official Records.

PARCEL 3: (TERRACES FOUR) (APN 162-16-410-064, 065 and 066)

Lots 27 through 32 in Block Two (2) of Flamingo Estates, as shown by map thereof on file in Book 5 of Plats, page 22, as recorded in the office of the County Recorder of Clark County, Nevada. Together with those portions of Ida Avenue and the alley as vacated by that certain Order of Vacation, recorded February 14, 2012, in Book 20120214 as Document No. 01112, and Re-recorded February 16, 2012, in Book 20120216 as Document No. 01146 and Re-recorded March 23, 2012, in Book 20120323 as Document No. 01850, of Official Records.

PARCEL 4: (WINNICK) (APN 162-16-410-080)

Lot 51 in Block Three (3) of Flamingo Estates, as shown by map thereof on file in Book 5 of Plats, page 22, as recorded in the office of the County Recorder of Clark County, Nevada. Together with the West 10 Feet of that certain pedestrian walkway abutting the Easterly line of said Lot by that certain Order of Vacation recorded June 21, 1962, as Document No. 297340, of Official Records.


Together with those portions of Winnick Avenue and the alley as vacated by that certain Order of Vacation, recorded February 14, 2012, in Book 20120214 as Document No. 01112, and Re- recorded February 16, 2012, in Book 20120216 as Document No. 01146 and Re-recorded March 23, 2012, in Book 20120323 as Document No. 01850, of Official Records.

PARCEL 5: (FOUNTAINS) (APN 162-16-410-070, 071, 072, 075, 076, 083 and 084)

Lots 36 through 38, 41, 42 and 56 through 58 in Block Three (3) of Flamingo Estates, as shown by map thereof on file in Book 5 of Plats, page 22, as recorded in the office of the County Recorder of Clark County, Nevada.

Together with those portions of Winnick Avenue, Ida Avenue and the alley as vacated by that certain Order of Vacation, recorded February 14, 2012, in Book 20120214 as Document No. 01112, and Re-recorded February 16, 2012, in Book 20120216 as Document No. 01146 and Re- recorded March 23, 2012, in Book 20120323 as Document No. 01850, of Official Records.

PARCEL 6: (SUITES) (APN 162-16-410-088 and 089)

That portion of the Southwest Quarter (SW  1 4 ) of Section 16, Township 21 South, Range 61 East M.D.M., being a portion of Block Four (4) of Flamingo Estates, as shown by map thereof on file in Book 5 of Plats, page 22, as recorded in the office of the County Recorder of Clark County, Nevada described as follows:

Lots 1 and 2 of that certain Parcel Map on file in File 70 of Parcel Maps, Page 30, recorded September 19, 1991 as Document No. 00581 in Book 910919, of Official Records. in the Office of the County Recorder of Clark County, Nevada.

Together with those portions of Ida Avenue, Audrie Street and the alley as vacated by that certain Order of Vacation, recorded February 14, 2012, in Book 20120214 as Document No. 01112, and Re-recorded February 16, 2012, in Book 20120216 as Document No. 01146 and Re- recorded March 23, 2012, in Book 20120323 as Document No. 01850, of Official Records.

PARCEL 7: (APN 162-16-410-067, 068, 069, 077, 078, 079, 082, 085 and 086)

Lots 33, 34, 35, 43, 44, 45, 46, 47, 48, 49, 50 and 55 in Block Three (3); and Lots 59, 60, 61 and 62 in Block Four (4) of FLAMINGO ESTATES, as shown by map thereof on file in Book 5 of Plats, Page 22 in the Office of the County Recorder of Clark County, Nevada.

Together with those portions of Winnick Road, Ida Avenue and the alley as vacated by that certain Order of Vacation, recorded February 14, 2012, in Book 20120214 as Document No. 01112, and Re-recorded February 16, 2012, in Book 20120216 as Document No. 01146 and Re- recorded March 23, 2012, in Book 20120323 as Document No. 01850, of Official Records.


PARCEL 8: (APN 162-16-410-073)

Lot 39 in Block Three (3) of FLAMINGO ESTATES, as shown by map thereof on file in Book 5 of Plats, Page 22 in the Office of the County Recorder of Clark County, Nevada. TOGETHER WITH that portion of the pedestrian walkway lying Westerly of and adjacent to the West line of said Lot 39, as vacated by said County by that Order of Vacation recorded June 21, 1962 in Book 368 as Document No. 297340, Official Records.

Together with those portions of Ida Avenue and the alley as vacated by that certain Order of Vacation, recorded February 14, 2012, in Book 20120214 as Document No. 01112, and Re- recorded February 16, 2012, in Book 20120216 as Document No. 01146 and Re-recorded March 23, 2012, in Book 20120323 as Document No. 01850, of Official Records.

PARCEL 9: (APN 162-16-410-074)

Lot 40 in Block Three (3) of FLAMINGO ESTATES, as shown by map thereof on file in Book 5 of Plats, Page 22 in the Office of the County Recorder of Clark County, Nevada.

TOGETHER WITH that portion of the pedestrian walkway lying Easterly of and adjacent to the East line of said Lot 40, as vacated by said County by that Order of Vacation recorded June 21, 1962 in Book 368 as Document No. 297340, Official Records.

Together with those portions of Ida Avenue and the alley as vacated by that certain Order of Vacation, recorded February 14, 2012, in Book 20120214 as Document No. 01112, and Re- recorded February 16, 2012, in Book 20120216 as Document No. 01146 and Re-recorded March 23, 2012, in Book 20120323 as Document No. 01850, of Official Records.

PARCEL 10: (APN 162-16-410-081)

Lots 52, 53 and 54 in Block Three (3) of FLAMINGO ESTATES, as shown by map thereof on file in Book 5 of Plats, Page 22 in the Office of the County Recorder of Clark County, Nevada. TOGETHER WITH that certain vacated walkway 10 feet wide adjoining Lot 52 on the West boundary, as disclosed by an Order of Vacation recorded June 21, 1962 in Book 368 as Document No. 297340, Official Records.

Together with those portions of Winnick Road and the alley vacated by that certain Order of Vacation, recorded February 14, 2012, in Book 20120214 as Document No. 01112, and Re- recorded February 16, 2012, in Book 20120216 as Document No. 01146 and Re-recorded March 23, 2012, in Book 20120323 as Document No. 01850, of Official Records.

PARCEL 11: (APN 162-16-410-063)

Lots 25 and 26 in Block Two (2) of FLAMINGO ESTATES, as shown by map thereof on file in Book 5 of Plats, Page 22, in the Office of the County Recorder of Clark County, Nevada. Together with those portions of Ida Avenue and the alley as vacated by that certain Order of Vacation, recorded February 14, 2012, in Book 20120214 as Document No. 01112, and Re- recorded February 16, 2012, in Book 20120216 as Document No. 01146 and Re-recorded March 23, 2012, in Book 20120323 as Document No. 01850, of Official Records.


PARCEL 12: (PLAZA) (APN 162-16-410-087)

Lots 63 and 64 in Block Four (4) of Flamingo Estates, as shown by map thereof on file in Book 5 of Plats, page 22, as recorded in the office of the County Recorder of Clark County, Nevada. Together with that portion of Winnick Avenue as vacated by that certain Order of Vacation, recorded February 14, 2012, in Book 20120214 as Document No. 01112, and Re-recorded February 16, 2012, in Book 20120216 as Document No. 01146 and Re-recorded March 23, 2012, in Book 20120323 as Document No. 01850, of Official Records.

APN: 162-16-410-060 thru 089


EXHIBIT A-2

Description of the Designated Land Parcel 2

THAT PORTION OF THE NORTHEAST QUARTER (NE  1 4 ) OF THE SOUTHWEST QUARTER (SW  1 4 ) OF SECTION 16, TOWNSHIP 21 SOUTH, RANGE 61 EAST, M.D.B. & M., DESCRIBED AS FOLLOWS:

PARCEL TWO (2) AS SHOWN BY PARCEL MAP THEREOF ON FILE IN FILE 57 OF PARCEL MAPS, PAGE 51, IN THE OFFICE OF THE COUNTY RECORDER OF CLARK COUNTY, NEVADA.

APN: 16216301007


EXHIBIT B

Form of HLV Lease Amendment


EXHIBIT C

Put-Call PSA Modifications

Note: Unless otherwise specified in this Exhibit C , defined terms and section references set forth herein are with respect to the Agreement.

 

  The term “Amended and Restated ROFR” set forth in Section 1.1 of the HLV Property PSA and all references and provisions relating thereto shall be deleted.

 

  The term “Closing Date” set forth in Section 1.1 of the HLV Property PSA shall be the date that is 180 days from the delivery by Owner to VICI of the Put Right Election Notice or by VICI to Owner of the Call Right Property Package Request, as the case may be, as the same may be (x) adjourned pursuant to and in accordance with the terms and conditions of the HLV Property PSA, and (y) extended for up to 270 days in order to obtain the Requisite Gaming Approvals.

 

  The term “Closing Period” set forth in Section 1.1 of the HLV Property PSA shall refer to the period of two (2)-day consecutive calendar days concluding on the Closing Date.

 

  The term “Commitment Letter” set forth in Section 1.1 of the HLV Property PSA and all references and provisions relating thereto shall be deleted.

 

  The term “Debt Financing” set forth in Section 1.1 of the HLV Property PSA and all references and provisions relating thereto shall be deleted.

 

  The term “Debt Financing Sources” set forth in Section 1.1 of the HLV Property PSA and all references and provisions relating thereto shall be deleted.

 

  The term “Declaration” set forth in Section 1.1 of the HLV Property PSA and all references and provisions relating thereto shall be deleted.

 

  The term “Environmental Reports” set forth in Section 1.1 of the HLV Property PSA shall be amended to reflect any Phase I, Phase II and similar environmental reports relating to the Property and delivered to VICI as part of the Put Right Property Package.

 

  The term “Estoppel Certificates” set forth in Section 1.1 of the HLV Property PSA and all references and provisions relating thereto shall be deleted.

 

  The term “Financing Failure Event” set forth in Section 1.1 of the HLV Property PSA and all references and provisions relating thereto shall be deleted.

 

  The term “Gaming Equipment” set forth in Section 1.1 of the HLV Property PSA and all references and provisions relating thereto shall be deleted.

 

  The term “Leases” set forth in Section 1.1 of the HLV Property PSA shall be modified by amending and restating item (b) as follows: “any arrangements for licensees for portions of the Property used for conventions, conferences, meetings and exhibitions”.


  The term “Material Contracts” set forth in Section 1.1 of the HLV Property PSA and all references and provisions relating thereto in the HLV Property PSA shall be deleted.

 

  The term “Net Lease” set forth in Section 1.1 of the HLV Property PSA shall refer to the Amended HLV Lease.

 

  The term “Net Lease Guarantor” set forth in Section 1.1 of the HLV Property PSA shall refer to the then “Guarantor” under and as defined in the Amended HLV Lease.

 

  The term “Net Lease Guaranty” set forth in Section 1.1 of the HLV Property PSA shall refer to an amendment to the Net Lease Guaranty being entered into in connection with the HLV Property PSA.

 

  The term “Net Lease Tenant” set forth in Section 1.1 of the HLV Property PSA shall refer to Owner.

 

  The terms “Other Land Buyer”, “Other Land Property”, “Other Land PSA” and “Other Land Seller” set forth in Section 1.1 of the HLV Property PSA and all references and provisions relating thereto (including, without limitation, Sections 6.4(d), 6.5(c), 9.1, 9.2 and 11.19) shall be deleted.

 

  The term “Permitted Exceptions” set forth in Section 1.1 of the HLV Property PSA shall be updated to add a new item (b) as follows: “Use Rights that would not reasonably be expected to have a material adverse effect on the value of the Eastside Convention Center Property and/or use of the Eastside Convention Center as a Convention Center, individually or in the aggregate (i.e., will, or are reasonably likely to, individually or in the aggregate, reduce the value of the Eastside Convention Center by more than 5% of the Purchase Price), and Development Interests.”

 

  The term “Proposed Merger Transaction” set forth in Section 1.1 of the HLV Property PSA and all references and provisions relating thereto shall be deleted.

 

  The term “Purchase Price” set forth in Section 1.1, and defined in Article 2, of the HLV Property PSA shall refer to the Call Right Purchase Price or Put Right Purchase Price, as the case may be.

 

  The term “Purchaser” set forth in Section 1.1 of the HLV Property PSA shall refer to [                                          ].

 

  The term “Required Removal Exceptions” shall be amended to: (1) reduce the threshold amount in clause (iii) of $20,000,000 to $10,000,000, and (2) add a new item (iv) as follows: “any Use Rights, other than Development Interests, that reasonably would be expected to have a material adverse effect on the value of the Eastside Convention Center Property (i.e., will, or are reasonably likely to, individually or in the aggregate, reduce the value of the Eastside Convention Center by more than 5% of the Purchase Price) and/or use of the Eastside Convention Center as a Convention Center, individually or in the aggregate.”


  The term “Seller” set forth in Section 1.1 of the HLV Property PSA shall refer to [                      ].

 

  The term “Seller’s Knowledge” set forth in Section 1.1 of the HLV Property PSA shall be modified to reflect individual(s) reasonably acceptable to the Parties to the Sale Agreement, to the extent necessary.

 

  The term “VICI REIT” set forth in Section 1.1 of the HLV Property PSA and all references and provisions relating thereto shall be deleted.

 

  The seventh sentence of Section 3.1 of the HLV Property PSA shall be amended and restated as follows: “The Closing may be adjourned for up to forty-five (45) days to permit such process to be completed.”

 

  Section 6.1(b) of the HLV Property PSA shall be amended by deleting (i) the phrase “, provided that in no event shall the Closing Date be adjourned beyond December 28, 2017, and in no event will the Closing occur after December 28, 2017” and (ii) the last sentence.

 

  Section 6.2(p) and 6.2(q) shall be deleted.

 

  A new Section 6.4(g) shall be added as follows: “No Tenant Event of Default or Tenant Default (as such terms are defined in the Agreement) shall exist, no event or circumstance shall exist, which with the passage of time would result in a Tenant Event of Default, and neither Owner (as such term is defined in the Agreement) nor any Affiliate of Owner shall then be in material default of the Put-Call Right Agreement.”

 

  A new Section 6.4(h) shall be added as follows: “Buyer and Seller each shall have obtained the Requisite Gaming Approvals, if any.”

 

  A new Section 6.4(i) shall be added as follows: “If a casualty with respect to all or any portion of the Property shall have occurred, Seller shall have cash or cash equivalents and/or insurance in effect (and shall provide to Buyer evidence of same) for the full cost to rebuild the Property to the condition of the Property as it existed immediately prior to such casualty.”

 

  A new Section 6.4(j) shall be added as follows: “Seller shall not be in default of any obligation to pay for any or all of the Project Costs (as such term is defined in the Put-Call Right Agreement) as of the Closing Date (except for any payment of any amount that Seller is contesting reasonably and in good faith) and with respect to any obligation to pay for any or all of the Project Costs that are then due and owing, Seller shall provide to Buyer reasonable evidence that Seller is not in default of such obligation or that Seller’s obligation to pay such Project Costs is being contested reasonably and in good faith.”

 

  A new Section 6.5(f) shall be added as follows: “Buyer and Seller each shall have obtained the Requisite Gaming Approvals, if any.”


  Section 6.6 of the HLV Property PSA shall be amended by deleting the last sentence therefrom.

 

  Section 7.1(a) of the HLV Property PSA shall be amended by deleting clause (iii) thereof and the proviso to such clause (iii).

 

  Section 7.2(f) of the HLV Property PSA shall be amended by deleting the phrase “Harrah’s Las Vegas Hotel & Casino” and inserting in its place the name that the Eastside Convention Center Property is commonly known as of the date of the Sale Agreement.

 

  Section 7.2(m) of the HLV Property PSA shall be amended as follows: (i) the definition of “Financial Information” shall be limited to the Financial Statements (as defined in this Agreement) delivered in connection with a Put Right transaction or Call Right transaction, and (ii) by deleting the phrase “September 30, 2017” and inserting in its place the date of the most recent Financial Statement for the then most recent Fiscal Quarter.

 

  Section 8.7 of the HLV Property PSA shall be amended to refer to the terms of any then- current confidentiality agreement or other agreement similar in intent to the Confidentiality Agreement (as such term is defined in the HLV Property PSA).

 

  Section 8.8 of the HLV Property PSA shall be deleted.

 

  With respect to a Sale Agreement executed pursuant to Section 3 hereof, the following Put-Call PSA Modifications:

 

    Section 9.1 shall be amended and restated in its entirety as follows:

SECTION 9.1 Seller’s Remedies for Buyer Defaults. Prior to entering into this transaction, Buyer and Seller have discussed the fact that substantial damages will be suffered by Seller if Buyer shall default in its obligation to purchase the Property under this Agreement when required hereunder; accordingly, the parties agree that a reasonable estimate of Seller’s damages in such event is the amount of $9,000,000 (the “ Seller Liquidated Damages Amount” ). If Buyer defaults in its obligation to consummate the Closing as and when required under this Agreement, then, Seller shall have the right to elect, as its sole and exclusive remedy, to (x) terminate this Agreement by written notice to Buyer and Buyer shall pay the Seller Liquidated Damages Amount to Seller, and thereafter, the parties shall have no further rights or obligations hereunder except for other obligations which expressly survive the termination of this Agreement, or (y) waive the default or breach and proceed to close the Transaction. On the Effective Date, Buyer Guarantor shall execute and deliver the PSA Buyer Guaranty with respect to Buyer’s obligations under Section  9.1 of this Agreement.

 

    Section 9.2 of the HLV Property PSA shall be deleted.

 

  With respect to a Sale Agreement executed pursuant to Section 5 hereof, the following Put-Call PSA Modifications:

 

    Section 9.1 of the HLV Property PSA shall be deleted.


    Section 9.2 shall be amended and restated in its entirety as follows:

SECTION 9.2 Buyer’s Remedies for Seller Defaults. Prior to entering into this transaction, Buyer and Seller have discussed the fact that substantial damages will be suffered by Buyer if Seller shall default in its obligation to sell the Property under this Agreement when required hereunder; accordingly, the parties agree that a reasonable estimate of Buyer’s damages in such event is the amount of $9,000,000 (the “ Buyer Liquidated Damages Amount” ). If Seller defaults in its obligation to consummate the Closing as and when required under this Agreement, then, Buyer shall have the right to elect, as its sole and exclusive remedy, to (x) terminate this Agreement by written notice to Seller and Seller shall pay the Buyer Liquidated Damages Amount to Buyer, and thereafter, the parties shall have no further rights or obligations hereunder except for other obligations which expressly survive the termination of this Agreement, or (y) waive the default or breach and proceed to close the Transaction. On the Effective Date, Seller Guarantor shall execute and deliver the PSA Seller Guaranty with respect to Seller’s obligations under Section  7.3 and Section  9.2 of this Agreement.

 

  Section 10.1 of the HLV Property PSA shall be amended to amend and restate the second sentence thereof as follows: “If the Property is the subject of a Major Casualty/Condemnation that occurs after the Effective Date, Buyer shall have the right to terminate this Agreement by giving written notice to Seller no later than the date (the “ Casualty Notice Date” ) that is five (5) Business Days after Seller notifies Buyer of such Major Casualty/Condemnation; provided that the commencement of the Closing Period shall be extended, if necessary, to provide sufficient time for Buyer and Seller to close.”

 

  The definition of “Major Casualty/Condemnation” in Section 10.1 of the HLV Property PSA shall be amended and restated as follows: “ Major Casualty/Condemnation” shall mean (i) any casualty, if the portion of the Property that is the subject of such casualty has a value in excess of twelve percent (12%) of the Purchase Price, as reasonably determined by a third party contractor or architect selected by Seller and reasonably acceptable to Buyer, (ii) any condemnation proceedings or eminent domain proceedings if the portion of the Property that is the subject of such condemnation or eminent domain proceedings has a value in excess of five percent (5%) of the Purchase Price, as reasonably determined by a third party contractor or architect selected by Seller and reasonably acceptable to Buyer or (iii) any uninsured casualty which Seller does not agree (as set forth as a written modification of the Net Lease reasonably acceptable to Seller and Buyer executed and delivered on the Closing Date and guaranteed pursuant to the Net Lease Guaranty), in its sole and absolute discretion, to repair or restore in a manner acceptable to Buyer.

 

  Section 11.8 of the HLV Property PSA shall be amended to incorporate then-current notice information for the Parties, to the extent necessary.

 

  Section 11.20 of the HLV Property PSA shall be deleted.

 

  Section 11.21 of the HLV Property PSA shall be deleted.

 

  Exhibit A of the HLV Property PSA shall be updated to include a description of the Eastside Convention Center Land.


  Exhibit E of the HLV Property PSA shall be updated to the extent necessary to reflect the then-current standard non-imputation endorsement issued by the Title Company.

 

  Exhibit H of the HLV Property PSA shall be deleted.

 

  Exhibit I of the HLV Property PSA shall be updated to include a then-current title commitment for the Eastside Convention Center Property issued by the Title Company and accepted by VICI.

 

  Exhibit T of the HLV Property PSA shall be deleted.

 

  Schedule 7.2(g) of the HLV Property PSA shall be updated to include a then-current list of Litigation.

 

  Schedule 7.2(i) of the HLV Property PSA shall be updated to include a then-current list of Leases.

 

  Schedule 7.2(j) of the HLV Property PSA shall be updated to include a then-current list of Material Contracts.

 

  Schedule 7.2(d) of the HLV Property PSA shall be updated to include a then-current list of Third Party Consents.


EXHIBIT D

HLV Repurchase PSA Modifications

Note: Unless otherwise specified in this Exhibit D , defined terms and section references set forth herein are with respect to the Agreement.

 

  The term “Amended and Restated ROFR” set forth in Section 1.1 of the HLV Property PSA and all references and provisions relating thereto shall be deleted.

 

  The term “ Buyer Guarantor” shall be revised to mean Caesars Resort Collection, LLC, a Delaware limited liability company.

 

  The term “Closing Date” set forth in Section 1.1 of the HLV Property PSA shall be the date that is 180 days from the delivery by Owner to VICI of the HLV Repurchase Right Property Package Request, as the same may be (x) adjourned pursuant to and in accordance with the terms and conditions of the HLV Property PSA, and (y) extended for up to 270 days in order to obtain the Requisite Gaming Approvals.

 

  The term “Closing Period” set forth in Section 1.1 of the HLV Property PSA shall refer to the period of two (2)-day consecutive calendar days concluding on the Closing Date.

 

  The term “Commitment Letter” set forth in Section 1.1 of the HLV Property PSA and all references and provisions relating thereto shall be deleted.

 

  The term “Debt Financing” set forth in Section 1.1 of the HLV Property PSA and all references and provisions relating thereto shall be deleted.

 

  The term “Debt Financing Sources” set forth in Section 1.1 of the HLV Property PSA and all references and provisions relating thereto shall be deleted.

 

  The term “Estoppel Certificates” set forth in Section 1.1 of the HLV Property PSA and all references and provisions relating thereto shall be deleted.

 

  The term “Environmental Reports” set forth in Section 1.1 of the HLV Property PSA and all references and provisions relating thereto shall be deleted.

 

  The term “Financing Failure Event” set forth in Section 1.1 of the HLV Property PSA and all references and provisions relating thereto shall be deleted.

 

  The term “Gaming Equipment” set forth in Section 1.1 of the HLV Property PSA and all references and provisions relating thereto shall be deleted.

 

  The terms “Net Lease,” “Net Lease Guarantor” and “Net Lease Guaranty” set forth in Section 1.1 of the HLV Property PSA and all references and provisions relating thereto (including, without limitation, Sections 1.1, 6.1(b), 6.2(e), 7.2(q), 7.3(d), 8.1, 8.2, 10.1, 11.18 and Exhibit D) shall be deleted.


  The terms “Other Land Buyer”, “Other Land Property”, “Other Land PSA” and “Other Land Seller” set forth in Section 1.1 of the HLV Property PSA and all references and provisions relating thereto (including, without limitation, Sections 6.4(d), 6.5(c), 9.1, 9.2 and 11.19) shall be deleted.

 

  The term “Permitted Exceptions” set forth in Section 1.1 of the HLV Property PSA shall be amended by deleting items (e), (f) and (g) therefrom and inserting in its place the phrase “(e) notwithstanding anything to the contrary contained in this Agreement, any other state of facts or title exceptions appearing on the Title Commitment or otherwise that exist for any reason other than as a result of an act of Seller or any of its predecessor Landlords under the Net Lease in violation of the terms of the Net Lease, but only for the period of time from and after the date of this Agreement.

 

  The term “Proposed Merger Transaction” set forth in Section 1.1 of the HLV Property PSA and all references and provisions relating thereto shall be deleted.

 

  The term “Purchase Price” set forth in Section 1.1, and defined in Article 2, of the HLV Property PSA shall refer to the HLV Repurchase Right Purchase Price.

 

  The term “Purchaser” set forth in Section 1.1 of the HLV Property PSA shall refer to [                              ].

 

  The term “Required Renovation Exceptions” set forth in Section 1.1 of the HLV Property PSA shall be modified by including the following phrase at the end of the definition of such term: “, but in each of the foregoing instances, only to the extent the existence of the lien, encumbrance or other matter in question was caused by an act of Seller or any of its predecessor Landlords under the Net Lease in violation of the terms of the Net Lease, but only for the period of time from and after the date of this Agreement.

 

  The term “Seller” set forth in Section 1.1 of the HLV Property PSA shall refer to [                              ].

 

  The term “Seller Guarantor” shall be revised to mean VICI Properties 1 LLC, a Delaware limited liability company.

 

  The term “Seller’s Knowledge” set forth in Section 1.1 of the HLV Property PSA shall be modified to reflect individual(s) reasonably acceptable to the Parties to the HLV Repurchase Sale Agreement, to the extent necessary.

 

  The term “Tenant’s Title Policy” set forth in Section 1.1 of the HLV Property PSA and all references and provisions relating thereto shall be deleted.

 

  The term “VICI REIT” set forth in Section 1.1 of the HLV Property PSA and all references and provisions relating thereto shall be deleted.

 

  The seventh sentence of Section 3.1 of the HLV Property PSA shall be amended and restated as follows: “The Closing may be adjourned for up to forty-five (45) days to permit such process to be completed.”


  Section 4.1 of the HLV Property PSA shall be deleted.

 

  Section 5.2(b) of the HLV Property PSA shall be amended by deleting items (iii) and (iv) and renumbering the existing item (v) as a new item (iii).

 

  Section 6.1(b) of the HLV Property PSA shall be amended by deleting (i) the phrase “, provided that in no event shall the Closing Date be adjourned beyond December 28, 2017, and in no event will the Closing occur after December 28, 2017” and (ii) the last sentence.

 

  Sections 6.2(d), (i), (m), (o) and (s) of the HLV Property PSA shall be deleted.

 

  Section 6.3(c) of the HLV Property PSA shall be deleted.

 

  A new Section 6.4(g) shall be added as follows: “No Tenant Event of Default or Tenant Default (as such terms are defined in the Agreement) shall exist, no event or circumstance shall exist, which with the passage of time would result in a Tenant Event of Default, and neither Owner (as such term is defined in the Agreement) nor any Affiliate of Owner shall then be in material default of the Put-Call Right Agreement.”

 

  A new Section 6.4(h) shall be added as follows: “Buyer and Seller each shall have obtained the Requisite Gaming Approvals, if any.”

 

  A new Section 6.5(f) shall be added as follows: “Buyer and Seller each shall have obtained the Requisite Gaming Approvals, if any.”

 

  Section 6.5(e) of the HLV Property PSA shall be deleted.

 

  Section 6.6 of the HLV Property PSA shall be amended by deleting the last sentence therefrom.

 

  Section 7.1(a) of the HLV Property PSA shall be amended by deleting clause (iii) thereof and the proviso to such clause (iii).

 

  Sections 7.2(e), (f), (h), (i), (j), (k), (l), (m) and (o) of the HLV Property PSA shall be deleted.

 

  Section 7.2(g) of the HLV Property PSA shall be amended and restated as follows: “ Litigation. There is no action, suit, arbitration, unsatisfied order or judgment, governmental investigation or proceeding that is pending, or to Seller’s knowledge threatened in writing, against Seller, New Property Owner or the Membership Interests (other than, in the case of Seller and New Property Owner, claims for personal injury, property damage or worker’s compensation for which Seller’s insurance carrier has not disclaimed liability and in which the amounts claimed do not exceed the applicable insurance policy limits).”

 

  Section 8.2 of the HLV Property PSA shall be deleted.


  Section 8.3 of the HLV Property PSA shall be deleted.

 

  Section 8.7 of the HLV Property PSA shall be amended to refer to the terms of any then- current confidentiality agreement or other agreement similar in intent to the Confidentiality Agreement (as such term is defined in the HLV Property PSA).

 

  Section 8.8 of the HLV Property PSA shall be deleted.

 

  Section 9.1 shall be amended and restated in its entirety as follows: “If Buyer or Seller shall be in breach or default under this Agreement and such breach or default shall continue for five (5) Business Days after notice thereof from the non-breaching party (the “ Non- Breaching Party” ), then, (x) if Buyer is the Non-Breaching Party, Buyer may seek as its sole and exclusive remedy hereunder, at law, in equity or otherwise, to enforce specific performance of the terms of this Agreement, or (y) if Seller is the Non-Breaching Party, then, as Seller’s sole and exclusive remedy hereunder, at law, in equity or otherwise, Buyer shall pay the amount of $9,000,000.00 to Seller as liquidated damages, and Buyer’s obligation to pay such amount as liquidated damages if and when payable hereunder shall survive the termination of this Agreement.”

 

  Section 9.2 of the HLV Property PSA shall be deleted.

 

  Section 10.1 of the HLV Property PSA shall be deleted.

 

  Section 10.2 of the HLV Property PSA shall be amended by deleting the phrase “and this Agreement is not terminated as permitted pursuant to the terms of Section  10.1” therefrom. Section 10.3 of the HLV Property PSA shall be deleted.

 

  Section 11.1 of the HLV Property PSA shall be modified by deleting the phrase “VICI” and inserting in its place the phrase “CEC”.

 

  Section 11.8 of the HLV Property PSA shall be amended to incorporate then-current notice information for the Parties, to the extent necessary.

 

  Section 11.17 of the HLV Property PSA shall be deleted.

 

  Section 11.18 of the HLV Property PSA shall be deleted.

 

  Section 11.20 of the HLV Property PSA shall be deleted.

 

  Section 11.21 of the HLV Property PSA shall be deleted.

 

  Exhibits B, C, D, H, P, T and U of the HLV Property PSA shall be deleted.

 

  Exhibit E of the HLV Property PSA shall be updated to the extent necessary to reflect the then-current standard non-imputation endorsement issued by the Title Company.

 

  Exhibit I of the HLV Property PSA shall be updated to include a then-current title commitment for the Eastside Convention Center Property issued by the Title Company and accepted by VICI.


  Schedule 7.2(d) of the HLV Property PSA shall be updated to include a then-current list of Third Party Consents.

 

  Schedule 7.2(g) of the HLV Property PSA shall be updated to include a then-current list of Litigation.

 

  Schedule 7.2(i) of the HLV Property PSA shall be updated to include a then-current list of Leases.

 

  Schedule 7.2(j) of the HLV Property PSA shall be updated to include a then-current list of Material Contracts.

Exhibit 21.1

Subsidiaries of VICI Properties Inc.

 

Name of Entity

  

State of Incorporation or Organization

Bally’s Atlantic City LLC

  

Delaware

Biloxi Hammond, LLC

  

Delaware

Bluegrass Downs Property Owner LLC

  

Delaware

Caesars Atlantic City LLC

  

Delaware

Cascata LLC

  

Delaware

Chariot Run LLC

  

Delaware

Claudine Propco LLC

  

Delaware

Claudine Property Owner LLC

  

Delaware

CPLV Mezz 1 LLC

  

Delaware

CPLV Mezz 2 LLC

  

Delaware

CPLV Mezz 3 LLC

  

Delaware

CPLV Property Owner LLC

  

Delaware

Grand Bear LLC

  

Delaware

Grand Biloxi LLC

  

Delaware

Harrah’s Bossier City LLC

  

Louisiana

Harrah’s Council Bluffs LLC

  

Delaware

Harrah’s Joliet LandCo LLC

  

Delaware

Harrah’s Lake Tahoe LLC

  

Delaware

Harrah’s Metropolis LLC

  

Delaware

Harrah’s Reno LLC

  

Delaware

Harvey’s Lake Tahoe LLC

  

Delaware

Horseshoe Bossier City Prop LLC

  

Louisiana

Horseshoe Council Bluffs LLC

  

Delaware

Horseshoe Southern Indiana LLC

  

Delaware

Horseshoe Tunica LLC

  

Delaware

Miscellaneous Land LLC

  

Delaware

New Harrah’s North Kansas City LLC

  

Delaware

New Horseshoe Hammond LLC

  

Delaware

New Tunica Roadhouse LLC

  

Delaware

Propco Gulfport LLC

  

Delaware

Propco TRS LLC

  

Delaware

Rio Secco LLC

  

Delaware

Vegas Development LLC

  

Delaware

Vegas Operating Property LLC

  

Delaware

VICI FC Inc.

  

Delaware

VICI Golf LLC

  

Delaware

VICI Properties 1 LLC

  

Delaware

VICI Properties GP LLC

  

Delaware

VICI Properties L.P.

  

Delaware

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the use in this Amendment No.1 to Registration Statement No. 333-221997 of our report dated February 14, 2017, relating to the combined financial statements of Caesars Entertainment Outdoor (previously wholly-owned by Caesars Entertainment Operating Company, Inc. (“CEOC”)) (the “Business”) (which report expresses an unqualified opinion and includes explanatory paragraphs relating to: (i) CEOC and the entities that owned the Business filing for reorganization under Chapter 11 of the United States Bankruptcy Code, (ii) uncertainties that raise substantial doubt about the ability of the Company to continue as a going concern as a result of several issues that had to be resolved before CEOC successfully emerged from bankruptcy, and (iii) that the combined financial statements have been prepared from the separate records maintained by the Business and may not necessarily be indicative of the conditions that would have existed or the results of operations if the Business had been operated as an unaffiliated company) appearing in the Prospectus, which is part of this Registration Statement, and to the reference to us under the heading “Experts” in such Prospectus.

/s/ Deloitte & Touche LLP

Las Vegas, Nevada

January 16, 2018

Exhibit 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the use in this Amendment No.1 to Registration Statement No. 333-221997 of our report dated May 12, 2017, relating to the balance sheet of VICI Properties Inc. (previously wholly-owned by Caesars Entertainment Operating Company, Inc. (“CEOC”)) (the “Company”) (which report expresses an unqualified opinion and includes explanatory paragraphs relating to: (i) CEOC and the entities that owned the Company filing for reorganization under Chapter 11 of the United States Bankruptcy Code, and (ii) uncertainties that raise substantial doubt about the ability of the Company to continue as a going concern as a result of several issues that had to be resolved before CEOC successfully emerged from bankruptcy) appearing in the Prospectus, which is part of this Registration Statement and to the reference to us under the heading “Experts” in such Prospectus.

/s/ Deloitte & Touche LLP

Las Vegas, Nevada

January 16, 2018

Exhibit 23.3

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the use in this Amendment No.1 to Registration Statement No. 333-221997 of our report dated May 12, 2017, relating to the combined statement of investments of real estate assets to be contributed to VICI Properties Inc. and financial statement schedule (which report expresses an unqualified opinion) appearing in the Prospectus, which is part of this Registration Statement and to the reference to us under the heading “Experts” in such Prospectus.

/s/ Deloitte & Touche LLP

Las Vegas, Nevada

January 16, 2018

EXHIBIT 24.2

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints each of Edward B. Pitoniak, John Payne, and Kenneth J. Kuick, or any of them, each acting alone, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for such person and in his name, place and stead, in any and all capacities, to sign this Registration Statement on Form S-11 (including all pre-effective and post-effective amendments and registration statements filed pursuant to Rule 462 under the Securities Act of 1933), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that any such attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

 

Name

  

Title

 

Date

/s/ David Kieske

David Kieske

   Chief Financial Officer   January 2, 2018

 

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