Document:

JOURNAL COMMUNICATIONS, INC.
                                     BY-LAWS

                                   ARTICLE I.
                                  STOCKHOLDERS

          SECTION 1.  Annual Meeting.

          (a)  The annual meeting of stockholders of the company (the "Annual
Meeting") for the election of directors and the transaction of such other
business as may properly come before the meeting shall be held at the offices of
the company in the City of Milwaukee, Wisconsin, or at such other place where
the company has business operations, as the Chairman may designate, on the first
Tuesday of June in each year, unless the directors designate a different date.

          (b)  At an Annual Meeting, only such business shall be conducted, and
only nominations for the election of directors shall be made, as shall have been
properly brought before the meeting in accordance with these By-Laws. To be
properly brought before an Annual Meeting, business or nominations must (i) be
specified in the notice of the meeting (or any supplement thereto) given by or
at the direction of the Board of Directors; (ii) otherwise properly be brought
before the meeting by or at the direction of the Board of Directors; or (iii)
otherwise (A) properly be requested to be brought before the meeting by a
stockholder of record of the company (a "Stockholder") entitled to vote in the
election of directors generally and (B) constitute a proper subject to be
brought before such meeting. For nominations or other business to be properly
requested to be brought before an Annual Meeting by a Stockholder, any
Stockholder who intends to bring any matter before an Annual Meeting and is
entitled to vote on such matter must deliver written notice of such
Stockholder's intent to bring the matter before the Annual Meeting, either by
personal delivery or by United States mail, postage prepaid, to the Secretary of
the company. Such notice must be received by the Secretary by (x) March 15,
1996, in the case of the Annual Meeting scheduled to be held on June 4, 1996, or
(y) 90 days prior to the first anniversary of the immediately preceding Annual
Meeting in the case of any other Annual Meeting; provided, however, that in the
event that the date for which the Annual Meeting is called is advanced by more
than 30 days or delayed by more than 60 days from the date specified in clause
(x) or (y), as the case may be, notice by the Stockholder to be timely must be
so delivered not earlier than the close of business on the 100th day prior to
the date of such Annual Meeting and not later than the close of business on the
later of the 75th day prior to the date of such

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Annual Meeting or the 10th day following the day on which public announcement of
the date of such meeting is first made. In no event shall the announcement of an
adjournment of an Annual Meeting commence a new time period for the giving of a
Stockholder notice as described above.

          (c)  A Stockholder's notice to the Secretary required by this Section
1 shall set forth as to each matter the Stockholder proposes to bring before the
Annual Meeting: (i) in the case of any proposed nomination for election or
re-election as a director, (A) the name, age, business and residence addresses,
and principal occupation or employment of each nominee; (B) a description of all
arrangements or understandings between the Stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the Stockholder; (C) such other
information regarding each nominee proposed by such Stockholder as would be
required to be included in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission; and (D) the written consent of each
nominee to serve as a director of the company if so elected; (ii) in the case of
any other business that such Stockholder proposes to bring before the Annual
Meeting, (A) a brief description of the business to be brought before the
meeting and the reasons for conducting such business at the meeting and (B) any
material interest of the Stockholder in such business; (iii) the name and
address of the Stockholder intending to propose such business; (iv) the number
of shares of stock of the company owned, either personally or in concert with
others, by the Stockholder, and (v) a representation that the Stockholder is a
holder of stock of the company entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to make such nomination or present
such proposal. The company may require any proposed nominee to furnish such
other information as may reasonably be required by the company to determine the
eligibility of such proposed nominee to serve as a director of the company. No
business shall be conducted at an Annual Meeting except in accordance with the
procedures set forth in this Section 1. The chairman of the Annual Meeting
shall, if the facts warrant, determine and declare to the Annual Meeting that a
nomination was not made or business was not properly brought before the meeting
in accordance with the provisions hereof and, if he should so determine, he
shall so declare to the Annual Meeting that any such nomination shall be
disregarded and/or any such business not properly brought before the Annual
Meeting shall not be transacted.

          (d)  Notwithstanding anything in the fourth sentence of Section 1(b)
to the contrary, in the event that the number of directors to be elected to the
Board of Directors is increased and there is no public announcement naming all
of the nominees for director or specifying the size of the increased Board of
Directors made by the company at least 85t days prior to the date specified in
clause (x) or (y), as the case may be, of such sentence, a Stockholder's notice
required by

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Section 1(b) with respect to any nomination of a person for election to the
Board of Directors shall also be considered timely, but only with respect to
nominees for any new positions created by such increase, if it shall be received
by the Secretary of the company not later than the close of business on the 10th
day following the day on which such public announcement is first made by the
company.

          (e)  The chairman of the board, or in his absence such other officer
as may be designated by the Board of Directors, shall be the chairman at an
Annual Meeting. The secretary of the company shall be the secretary at
stockholders' meetings, but in his absence the chairman of the meeting may
appoint a secretary for the meeting. The board of directors may, to the extent
not prohibited by law, adopt by resolution such rules and regulations for the
conduct of the Annual Meeting as it shall deem appropriate. Except to the extent
inconsistent with such rules and regulations as adopted by the Board of
Directors, the chairman of any meeting of stockholders shall have the right and
authority to prescribe such rules, regulations or procedures and to do all acts
as, in the judgment of the chairman, are appropriate for the proper conduct of
the meeting. Such rules, regulations or procedures, whether adopted by the Board
of Directors or prescribed by the chairman of the meeting, may to the extent not
prohibited by law include, without limitation, the following: (i) the
establishment of an agenda or order of business for the meeting; (ii) rules and
procedures for maintaining order at the meeting and the safety of those present;
(iii) limitations on attendance at or participation in the meeting to
Stockholders, their duly authorized and constituted proxies (which shall be
reasonable in number) or such other persons as the chairman of the meeting shall
determine; (iv) restrictions on entry to the meeting after the time fixed for
the commencement thereof; and (v) limitations on the time allotted to questions
or comments by participants.

          SECTION 2.  Special Meetings. A special meeting of stockholders may be
called at any time by the president or by a majority of the Board of Directors.
Upon written request therefore signed by holders of not less than twenty per
cent of the outstanding capital stock of the company, delivered to the president
or secretary of the company, it shall be the duty of the officer receiving such
request to call forthwith a special meeting of stockholders.

          SECTION 3.  Notice of Meetings. It shall be the duty of the secretary
to mail to each stockholder whose name appears on the books of the company,
written notice of every annual meeting and of every special meeting of
stockholders at least ten days before such meeting, and in such notice of any
special meeting to state the business proposed to be transacted thereat. If the
secretary shall refuse, or shall omit within 48 hours after written request so
to do, to give notice of any special meeting, the person or persons (including

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stockholders of the company) calling the same may give such notice, or cause it
to be given, with like effect as though given by the secretary.

          SECTION 4.  Voting. At any meeting of stockholders each stockholder
having the right to vote shall be entitled to vote in person, or by proxy
appointed by an instrument in writing subscribed by such stockholder. Each
stockholder shall have one vote for each share of stock registered in his name
on the books of the company, but no share of stock shall be voted at any
election for directors which shall have been transferred on the books of the
company within fifteen days next preceding such election.

          SECTION 5.  Quorum. At any meeting of stockholders the holders of a
majority of all the shares of the capital stock of the company issued and
outstanding, present in person or represented by proxy, shall constitute a
quorum. If the holders of the amount of stock necessary to constitute a quorum
shall fail to attend in person or by proxy at the time and place fixed for an
annual meeting or fixed by notice as above provided for a special meeting, a
majority in interest of the stockholders present in person or by proxy may
adjourn from time to time without notice other than by announcement at the
meeting, until holders of the amount of stock requisite to constitute a quorum
shall attend. At any such adjourned meeting at which a quorum shall be present
any business may be transacted which might have been transacted at the meeting
as originally noticed.

          SECTION 6.  Voting by Ballot. At any meeting of stockholders, if
demanded by the holders of twenty per cent of the number of shares present in
person or by proxy and entitled to vote thereat, or if ordered by the chairman
of such meeting, the vote upon any election or question shall be taken by
ballot, and the polls shall be opened and closed, the proxies and ballots shall
be received and all questions relating to the qualification of voters, the
validity of proxies and the acceptance or rejection of votes shall be decided by
three inspectors previously appointed by the Board of Directors; but unless so
demanded or ordered no vote need be by ballot and the voting need not be
conducted by inspectors. In case of the failure of the board to appoint
inspectors, or in case an inspector shall fail to attend or serve, the chairman
of the meeting may appoint an inspector to fill each such vacancy to act at such
meeting. All ballots shall be in writing signed by the person casting the same
and shall be delivered to the inspectors. Upon canvassing the ballots the
inspectors shall deliver to the chairman of the meeting their report thereof and
the chairman shall present such report to the meeting.

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                                   ARTICLE II.
                               BOARD OF DIRECTORS

          SECTION 1.  Number, Tenure and Qualifications. The business and
property of the company shall be managed and controlled by the Board of
Directors. The Board of Directors shall consist of such number of members, not
less than three nor more than twenty-nine, as shall be determined by the
directors by resolution and elected by the stockholders at the annual meeting.
The Board of Directors may delegate any of its powers to any committee thereof
or any officer or agent. Each director so elected shall serve until the next
annual meeting of stockholders and until his successor shall have been duly
elected and qualified.

          SECTION 2.  Meetings. Regular meetings of the Board of Directors shall
be held at least quarterly on such dates and at such hour as may be fixed from
time to time by the Board. A special meeting of the Board of Directors shall be
held whenever called by the chairman of the board, or by the president of the
company, or by seven members of the board. All meetings of the Board of
Directors, unless otherwise ordered, shall be held in the directors' room at the
principal office of the company in the City of Milwaukee, Wisconsin.

          SECTION 3.  Notice of Special Meetings. The secretary shall give
written notice of each special meeting by mailing the same at least five days
before the meeting to each member of the board, and such notice shall state the
business proposed to be transacted at the meeting; provided, however, that no
notice of the time, place or purpose of any meeting of the board shall be
required in the case of directors who attend such meeting in person or execute a
written waiver of notice thereof; and it shall not be necessary to give notice
of any adjourned meeting of the Board of Directors. At any meeting attended by
all of the members of the Board of Directors, any and all business may be
transacted notwithstanding the lack of due notice of such meeting. If the
secretary shall refuse, or shall omit within 24 hours after written request so
to do, to give notice of any special meeting, the person or persons calling the
same may give such notice or cause it to be given with like effect as though
given by the secretary.

          SECTION 4.  Quorum. The presence at any meeting of a majority of the
directors then in office shall constitute a quorum for the transaction of
business but a lesser number may adjourn from time to time.

          SECTION 5.  Filling Vacancies. In case of any vacancy in the
membership of the Board of Directors the remaining directors by affirmative vote
of a majority thereof may elect a successor to hold office for the unexpired
portion

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of the term of the director whose place shall be vacant, and until the election
of a successor at the next annual meeting of the stockholders.

          SECTION 6.  Power to Remove Officers. The Board of Directors shall
have power by an affirmative vote of two-thirds of its members to remove from
office any officer of the company, and it shall also have power by a majority
vote of its members to fill any vacancy in any office from whatever cause the
vacancy may arise.

          SECTION 7.  Executive Committee.

          (a)  The Board of Directors shall appoint from their number an
Executive Committee, which shall consist of not less than five (5) nor more than
nine (9) members, as nominated by the chairman of the board. Members of the
Executive Committee shall include one Unitholders Council Representative and may
include persons who are not employees of the Company. The Executive Committee
shall constitute a standing committee of the Board of Directors and shall
exercise the authority of the Board of Directors except that the executive
committee may not: authorize distributions, approve or propose to shareholders
action that must be approved by the shareholders in accordance with the
Wisconsin Business Corporation Law ("WBCL"); fill vacancies on the Board; adopt,
amend or repeal the By-Laws; approve a plan or merger not requiring shareholder
approval; authorize or approve reacquisition of shares, except according to a
method prescribed by the Board; authorize or approve the issuance or sale or
contract for sale of shares; or undertake any action prohibited by the WBCL.

          (b)  Meetings of the Executive Committee shall be held whenever called
by the chairman of the board, president of the company or by any two members of
the executive committee at any time by oral notice, telephone or facsimile
transmission. All meetings of the executive committee, unless otherwise ordered,
shall be held in the directors' room at the principal office of the company in
the City of Milwaukee, Wisconsin. The present at any meeting of a majority of
the members of the executive committee then in office shall constitute a quorum
for the transaction of business but a lesser number may adjourn from time to
time.

          (c)  Each member of the executive committee shall serve until the next
Annual Meeting and until his successor shall have been duly appointed and
qualified. In case of any vacancy in the membership of the executive committee,
the remaining members, by affirmative vote of a majority thereof, may appoint a
successor to hold office for the unexpired portion of the term of the member
whose place shall be vacant, and until his successor shall have been duly
appointed and qualified.

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          SECTION 8.  Audit Committee.

          (a)  The Board of Directors shall appoint from their number an Audit
Committee, which shall consist of not less than three (3) nor more than five (5)
members, as nominated by the chairman of the board. The Audit Committee shall
constitute a standing committee of the Board of Directors and shall: (i)
annually make recommendations to the Board regarding the independent auditors of
the Company; (ii) review with the Company's auditors the plan and scope of their
annual audit and the findings and conclusions thereof; (iii) establish policies
in connection with the Company's procedures for internal auditing, consider the
adequacy of the Company's systems of internal controls and of its accounting
principles, policies and practices and review reports of the internal audit
staff; (iv) annually review and evaluate the independence of the Company's
auditors; (v) review and approve non-audit services rendered by such auditors or
other accounting or auditing firms; (vi) review and approve audit and non-audit
fees of such firms; (vii) review any accounting changes having a major impact on
the financial statements of the Company; (viii) hold such other conferences and
conduct such other reviews or investigations as may be desired by the Audit
Committee or such auditors; and (ix) take any and all actions that the Audit
Committee deems necessary or advisable in connection with the foregoing.

          (b)  Meetings of the Audit Committee shall be held whenever called by
the Chairman of the committee or by the Chairman or President of the Company by
oral notice, telephone or facsimile transmission. All meetings of the Audit
Committee, unless otherwise ordered by the Chairman of the committee, shall be
held in the directors' room at the principal office of the Company in the City
of Milwaukee, Wisconsin. The presence at any meeting of a majority of the
members of the Audit Committee then in office shall constitute a quorum for the
transaction of business.

          (c)  Each member of the Audit Committee shall serve until the next
Annual Meeting and until his successor shall have been duly appointed and
qualified. In case of any vacancy on the Audit Committee, the remaining members
by affirmative vote of a majority thereof may appoint a successor, who shall
hold office for the unexpired portion of the term of the member whose place
shall be vacant and until his successor shall have been duly appointed and
qualified.

          SECTION 9.  Compensation Committee.

          (a)  The Board of Directors shall appoint from their number a
Compensation Committee, which shall consist of three (3) members who are not

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employees of the Company. It is not necessary that a member of the Compensation
Committee be a director of the Company.

          (b)  The Compensation Committee is charged with the board
responsibility for assuring that the officers and key management personnel of
the corporation are effectively compensated in terms of salaries and benefits
which are internally equitable and externally competitive.

          (c)  The Compensation Committee serves at the pleasure of and is
subject to the control and direction of the Board of Directors.

          (d)  The Compensation Committee is expected to:

               (i)   review the compensation packages proposed by the Chairman/
CEO for the President and Senior Vice presidents of Journal Communications, Inc.
and for the President of each subsidiary and make recommendations to the Board
of Directors, and

               (ii)  recommend to the Board of Directors a compensation package
for the Chairman/CEO

          (e)  The Committee shall meet as scheduled by the committee
chairperson. The Committee may meet privately with an independent consultant and
be free to talk directly and independently with any members of management in
discharging its responsibilities.

          The chairperson of the Committee will periodically report the
Committee's findings and conclusions to the Board of Directors.

          The Committee will be assisted by such persons as may be designated by
the Chairman or President.

          (f)  The Committee members shall be indemnified by the corporation
against all reasonable expenses actually and necessarily incurred in connection
with the defense of any litigation to which he or she may have been a party
because he or she was a member of the Compensation Committee, including the
expenses of any suit which is brought, adjudicated, settled or compromised.

          (g)  Committee members shall be compensated for their services.

          (h)  The three (3) initial members of the Committee shall be: David G.
Meissner, James L. Forbes and Roger D. Peirce.

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          (i)  The members of the Compensation Committee shall be elected
annually by the Board of Directors at the annual meeting in June, starting with
the June 1994 meeting.

                                  ARTICLE III.
                                    OFFICERS

          SECTION 1.  Titles and Qualifications. The officers of the company
shall be a chairman of the board, a president, and an executive vice-president
and such number of senior vice-presidents and vice-presidents as may from time
to time be determined by the Board of Directors, a secretary, a treasurer, an
assistant secretary, and an assistant treasurer. The same person may hold more
than one office except that the individual occupying the office of president
shall not be eligible during his tenure of such office to hold the office of
executive or senior vice-president or vice-president. The chairman of the board,
president, executive vice-president, senior vice-presidents and vice-presidents
shall be members of the Board of Directors. The other officers need not be
members of the board.

          SECTION 2.  Election: Term of Office. The officers shall be chosen
annually by the Board of Directors. Each officer subject to the power of removal
vested in the Board of Directors shall hold his office until his successor shall
have been duly chosen and qualified.

          SECTION 3.  Duties of Chairman of Board. The chairman of the board
shall be the chief executive officer of the company. He shall preside at all
meetings of the Board of Directors and stockholders. He shall exercise general
supervision over the affairs of the corporation subject to control by the Board
of Directors, and shall perform such special duties as may be assigned to him
from time to time by the Board of Directors.

          SECTION 4.  Duties of President. The president shall exercise general
supervision over the business and affairs of the company subject to the
authority of the chairman of the board and the Board of Directors, and shall
perform generally the duties which usually appertain to that office, and such
other duties as may be assigned to him by the Board of Directors.

          SECTION 5.  Duties of Executive Vice-President. The Executive
vice-president shall assist the chairman of the Board and the president in
exercising general supervision over the business and affairs of the Company. The
senior vice-president and vice-president shall perform such duties as may be
assigned to them respectively from time to time by the Board of Directors, by
the

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president or by the executive vice-president. In case of absence or disability
of the president, the executive vice-president shall perform the duties and
functions of the president. In case of absence or disability by both the
president and executive vice-president, the senior vice-president designated by
the president or by the chairman of the Board shall perform the duties and
functions of the president.

          SECTION 6.  Duties of Secretary. The principal duties of the secretary
shall be to countersign deeds and conveyances executed by the corporation, affix
the corporate seal thereto and to such other instruments as shall be required or
directed to be sealed, to keep a record of the proceedings of the stockholders
and Board of Directors, to have charge of the stock and stock transfer books of
the company and all other books, records and documents belonging to the
corporation.

          SECTION 7.  Duties of Treasurer. The principal duties of the treasurer
shall be to keep and account for all moneys, credits and property of the
corporation which shall come into his hands, and keep an accurate account of all
moneys received and disbursed and of money and property on hand, and generally
perform the duties which appertain to such office and such other duties as may
be assigned to him from time to time by the Board of Directors.

          SECTION 8.  Duties of Assistant Secretary. The assistant secretary
shall assist the secretary in such manner as the latter may direct, and in case
of the absence or disability of the secretary shall perform all the duties of
the latter.

          SECTION 9.  Duties of Assistant Treasurer. The assistant treasurer
shall assist the treasurer in such manner as the latter may direct, and in the
absence or disability of the treasurer shall perform all of the duties of the
latter.

          SECTION 10. Other Duties. Each of said officers shall also perform
such additional or other duties as shall from time to time be imposed or
required by the Board of Directors or by the By-Laws.

          SECTION 11. Other Officers. The Board of Directors may appoint such
other officers and agents as shall be deemed necessary or expedient, who shall
have such authority and shall perform such duties as from time to time may be
prescribed by the Board of Directors.

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                                 ARTICLE III-A.
                           INDEMNIFICATION OF OFFICERS
                              DIRECTORS, EMPLOYEES
                              AND AGENTS; INSURANCE

          SECTION 1.  Certain Definitions. All terms used in this Article III-A
and not otherwise hereinafter defined in this Article III-A shall have the
meaning set forth in Section 180.0850 of the Wisconsin Business Corporation Law
(the "Statute"). The following terms (including any plural forms thereof) used
in this Article III-A shall be defined as follows:

          (a)  "Affiliate" shall include, without limitation, any Person
(including without limitation an employee benefit plan) that, directly or
indirectly through one or more intermediaries, controls or is controlled by, or
is under common control with, the Corporation.

          (b)  "Authority" shall mean the entity selected by the Director or
Officer or Covered Person to determine his right to indemnification pursuant to
Section 4 of this Article III-A.

          (c)  "Board of Directors" shall mean the entire then elected and
serving Board of Directors of the Corporation, including all members thereof who
are Parties to the subject Proceeding or any related Proceeding.

          (d)  "Breach of Duty" shall mean the Director or Officer or Covered
Person breached or failed to perform his duties to the Corporation and his
breach of or failure to perform those duties is determined, in accordance with
Section 4 of this Article III-A, to constitute misconduct under Section
180.0851(2)(a) l, 2, 3 or 4 of the Statute.

          (e)  "Corporation," as used herein and as defined in the Statute and
incorporated by reference into the definitions of certain other capitalized
terms used herein, shall mean the company, including, without limitation, any
successor corporation or entity to the company by way of merger, consolidation
or acquisition of all or substantially all of the capital stock or assets of the
company.

          (f)  "Covered Person" shall mean any trustee of the Journal Employees'
Stock Trust Agreement, dated May 15, 1937, as amended, and any trustee of any
employee benefit plan of the Corporation.

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          (g)  "Director or Officer" shall have the meaning set forth in the
Statute; provided, that, for purposes of this Article III-A, it shall be
conclusively presumed that any Director or Officer serving as a director,
officer, partner, trustee, member of any governing or decision-making committee,
employee or agent of an Affiliate shall be so serving at the request of the
Corporation.

          (h)  "Disinterested Quorum" shall mean a quorum of the Board of
Directors who are not Parties to the subject Proceeding or any related
Proceeding.

          (i)  "Party" shall have the meaning set forth in the Statute;
provided, that, for purposes of this Article III-A, the term "Party" shall also
include any Director or Officer, Covered Person or employee of the Corporation
who is or was a witness in a Proceeding at a time when he has not otherwise been
formally named a Party thereto.

          (j)  "Person" shall mean any individual, partnership, firm,
corporation, association, trust, unincorporated organization or other entity, as
well as any syndicate or group deemed to be a person under Section 14(d)(2) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act").

          (k)  "Proceeding" shall have the meaning set forth in the Statute;
provided, that, in accordance with Section 180.0859 of the Statute and for
purposes of this Article III-A, the term "Proceeding" shall also include all
Proceedings (i) brought under (in whole or in part) the Securities Act of 1933,
as amended, the Exchange Act, their respective state counterparts, and/or any
rule or regulation promulgated under any of the foregoing; (ii) brought before
an Authority or otherwise to enforce rights hereunder; (iii) any appeal from a
Proceeding; and (iv) any Proceeding in which the Director or Officer or Covered
Person is a plaintiff or petitioner because he is a Director or Officer or
Covered Person; provided, however, that any such Proceeding under this
subsection (iv) must be authorized by a majority vote of a Disinterested Quorum.

          (l)  "Statute" shall mean Sections 180.0850 through 180.0859,
inclusive, of the Wisconsin Business Corporation Law, Chapter 180 of the
Wisconsin Statutes, as the same shall then be in effect, including any
amendments thereto, but, in the case of any such amendment, only to the extent
such amendment permits or requires the Corporation to provide broader
indemnification rights than the Statute permitted or required the Corporation to
provide prior to such amendment.

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          SECTION 2. Mandatory Indemnification of Directors and Officers and
Covered Persons. To the fullest extent permitted or required by the Statute, the
Corporation shall indemnify a Director or Officer or Covered Person against all
Liabilities incurred by or on behalf of such Director or Officer or Covered
Person in connection with a Proceeding in which the Director or Officer or
Covered Person is a Party because he is a Director or Officer or Covered Person.

          SECTION 3. Procedural Requirements.

          (a)  A Director or Officer or Covered Person who seeks indemnification
under Section 2 of this Article III-A shall make a written request therefor to
the Corporation. Subject to subsection (b) of this Section 3, within sixty days
of the Corporation's receipt of such request, the Corporation shall pay or
reimburse the Director or Officer or Covered Person for the entire amount of
Liabilities incurred by the Director or Officer or Covered Person in connection
with the subject Proceeding (net of any Expenses previously advanced pursuant to
Section 5 of this Article III-A).

          (b)  No indemnification shall be required to be paid by the
Corporation pursuant to Section 2 of this Article III-A if, within such
sixty-day period, (i) a Disinterested Quorum, by a majority vote thereof,
determines that the Director or Officer or Covered Person requesting
indemnification engaged in misconduct constituting a Breach of Duty or (ii) a
Disinterested Quorum cannot be obtained.

          (c)  In either case of nonpayment pursuant to subsection (b) of this
Section 3, the Board of Directors shall immediately authorize by resolution that
an Authority, as provided in Section 4 of this Article III-A, determine whether
the conduct of the Director or Officer or Covered Person constituted a Breach of
Duty and, therefore, whether indemnification should be denied hereunder.

          (d)  (i) If the Board of Directors does not authorize an Authority to
determine the Director's or Officer's or Covered Person's right to
indemnification hereunder within such sixty-day period and/or (ii) if
indemnification of the requested amount of Liabilities is paid by the
Corporation, then it shall be conclusively presumed for all purposes that a
Disinterested Quorum has affirmatively determined that the Director or Officer
or Covered Person did not engage in misconduct constituting a Breach of Duty
and, in the case of clause (i) above (but not clause (ii)), indemnification by
the Corporation of the requested amount of Liabilities shall be paid to the
Director or Officer or Covered Person immediately.

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          SECTION 4. Determination of Indemnification.

          (a)  If the Board of Directors authorizes an Authority to determine a
Director's or Officer's or Covered Person's right to indemnification pursuant to
Section 3 of this Article III-A, then the Director or Officer or Covered Person
requesting indemnification shall have the absolute discretionary authority to
select one of the following as such Authority:

               (i)   An independent legal counsel; provided, that such counsel
shall be mutually selected by such Director or Officer or Covered Person and by
a majority vote of a Disinterested Quorum or, if a Disinterested Quorum cannot
be obtained, then by a majority vote of the Board of Directors;

               (ii)  A panel of three arbitrators selected from the panels of
arbitrators of the American Arbitration Association in Wisconsin; provided, that
(A) one arbitrator shall be selected by such Director or Officer or Covered
Person, the second arbitrator shall be selected by a majority vote of a
Disinterested Quorum or, if a Disinterested Quorum cannot be obtained, then by a
majority vote of the Board of Directors, and the third arbitrator shall be
selected by the two previously selected arbitrators, and (B) in all other
respects (other than this Article III-A), such panel shall be governed by the
American Arbitration Association's then existing Commercial Arbitration Rules;
or

               (iii) A court pursuant to and in accordance with Section 180.0854
of the Statute.

          (b)  In any such determination by the selected Authority there shall
exist a rebuttable presumption that the conduct of the Director or Officer or
Covered Person did not constitute a Breach of Duty and that indemnification
against the requested amount of Liabilities is required. The burden of rebutting
such a presumption by clear and convincing evidence shall be on the Corporation
or such other party asserting that such indemnification should not be allowed.

          (c)  The Authority shall make its determination within sixty days of
being selected and shall submit a written opinion of its conclusion
simultaneously to both the Corporation and the Director or Officer or Covered
Person.

                                       14
<PAGE>

          (d)  If the Authority determines that indemnification is required
hereunder, then the Corporation shall pay the entire requested amount of
Liabilities (net of any Expenses previously advanced pursuant to Section 5 of
this Article III-A), including interest thereon at a reasonable rate, as
determined by the Authority, within ten days of receipt of the Authority's
opinion; provided, that, if it is determined by the Authority that a Director or
Officer or Covered Person is entitled to indemnification against Liabilities'
incurred in connection with some claims, issues or matters, but not as to other
claims, issues or matters, involved in the subject Proceeding, the Corporation
shall be required to pay (as set forth above) only the amount of such requested
Liabilities as the Authority shall deem appropriate in light of all of the
circumstances of such Proceeding.

          (e)  The determination by the Authority that indemnification is
required hereunder shall be binding upon the Corporation regardless of any prior
determination that the Director or Officer or Covered Person engaged in a Breach
of Duty.

          (f)  All Expenses incurred in the determination process under this
Section 4 by either the Corporation or the Director or Officer or Covered
Person, including, without limitation, all Expenses of the selected Authority,
shall be paid by the Corporation.

          SECTION 5. Mandatory Allowance of Expenses.

          (a)  The Corporation shall pay or reimburse from time to time or at
any time, within ten days after the receipt of the Director's or Officer's or
Covered Person's written request therefor, the reasonable Expenses of the
Director or Officer of Covered Person as such Expenses are incurred; provided,
the following conditions are satisfied:

               (i)   The Director or Officer of Covered Person furnishes to the
Corporation an executed written certificate affirming his good faith belief that
he has not engaged in misconduct that constitutes a Breach of Duty; and

               (ii)  The Director or Officer or Covered Person furnishes to the
Corporation an unsecured executed written agreement to repay any advances made
under this Section 5 if it is ultimately determined by an Authority that he is
not entitled to be indemnified by the Corporation for such Expenses pursuant to
Section 4 of this Article III-A. (b) If the Director or Officer or Covered
Person must repay any previously advanced Expenses pursuant to this Section 5,
then such Director or Officer or Covered Person shall not be required to pay
interest on such amounts.

                                       15
<PAGE>

          SECTION 6. Indemnification and Allowance of Expenses of Certain
Others.

          (a)  The Board of Directors may, in its sole and absolute discretion
as it deems appropriate, pursuant to a majority vote thereof, indemnify a
director or officer of an Affiliate (who is not otherwise serving as a Director
or Officer or Covered Person) against all Liabilities, and shall advance the
reasonable Expenses, incurred by such director or officer in a Proceeding to the
same extent hereunder as if such director or officer incurred such Liabilities
because he was a Director or Officer or Covered Person, if such director or
officer is a Party thereto because he is or was a director or officer of the
Affiliate.

          (b)  The Corporation shall indemnify an employee who is not a Director
or Officer or Covered Person, to the extent he has been successful on the merits
or otherwise in defense of a Proceeding, for all reasonable Expenses incurred in
the Proceeding if the employee was a Party because he was an employee of the
Corporation.

          (c)  The Board of Directors may, in its sole and absolute discretion
as it deems appropriate, pursuant to a majority vote thereof, indemnify (to the
extent not otherwise provided in subsection (b) of this Section 6) against
Liabilities incurred by, and/or provide for the allowance of reasonable Expenses
of, an employee or authorized agent of the Corporation acting within the scope
of his duties as such and who is not otherwise a Director or Officer or Covered
Person.

          SECTION 7. Insurance. The Corporation may purchase and maintain
insurance on behalf of a Director or Officer or Covered Person or any individual
who is or was an employee or authorized agent of the Corporation against any
Liability asserted against or incurred by such individual in his capacity as
such or arising from his status as such, regardless of whether the Corporation
is required or permitted to indemnify against any such Liability under this
Article III-A.

                                       16
<PAGE>

          SECTION 8. Notice to the Corporation. A Director or Officer, Covered
Person or employee shall promptly notify the Corporation in writing when he has
actual knowledge of a Proceeding that may result in a claim of indemnification
against Liabilities or allowance of Expenses hereunder, but the failure to do so
shall not relieve the Corporation of any liability to the Director or Officer,
Covered Person or employee hereunder unless the Corporation shall have been
irreparably prejudiced by such failure (as determined, in the case of Directors
or Officers or Covered Persons only, by an Authority selected pursuant to
Section 4(a) of this Article III-A.

          SECTION 9. Severability. If any provision of this Article III-A shall
be deemed invalid or inoperative, or if a court of competent jurisdiction
determines that any of the provisions of this Article III-A contravene public
policy, then this Article III-A shall be construed so that the remaining
provisions shall not be affected, but shall remain in full force and effect, and
any such provisions that are invalid or inoperative or that contravene public
policy shall be deemed, without further action or deed by or on behalf of the
Corporation, to be modified, amended and/or limited, but only to the extent
necessary to render the same valid and enforceable; it being understood that it
is the Corporation's intention to provide the Directors and Officers and Covered
Persons with the broadest possible protection against personal liability
allowable under the Statute.

          SECTION 10. Nonexclusivity of Article III-A. The rights of a Director
or Officer, Covered Person or employee (or any other person) granted under this
Article III-A shall not be deemed exclusive of any other rights to
indemnification against Liabilities or allowance of Expenses to which the
Director or Officer, Covered Person or employee (or such other person) may be
entitled under any written agreement, Board of Director resolution, vote of
shareholders of the Corporation or otherwise, including, without limitation,
under the Statute. Nothing contained in this Article III-A shall be deemed to
limit the Corporation's obligations to indemnify against Liabilities or allow
Expenses to a Director or Officer, Covered Person or employee under the Statute.

          SECTION 11. Contractual Nature of Article III-A; Repeal or Limitation
of Rights. This Article III-A shall be deemed to be a contract between the
Corporation and each Director or Officer, Covered Person and employee of the
Corporation, and any repeal or other limitation of this Article III-A or any
repeal or limitation of the Statute or any other applicable law shall not limit
any rights of indemnification against Liabilities or allowance of Expenses then
existing or arising out of events, acts or omissions occurring prior to such
repeal or limitation, including, without limitation, the right to
indemnification against Liabilities or allowance of Expenses for Proceedings
commenced after such repeal

                                       17
<PAGE>

or limitation to enforce this Article III-A with regard to acts, omissions or
events arising prior to such repeal or limitation.

                                   ARTICLE IV.
                                  CAPITAL STOCK

          SECTION (a) Form of Stock Certificates. Certificates for shares of the
stock of the company shall be in such form as shall be approved by the Board of
Directors. They shall be numbered in the order of their issue, and shall be
signed by the president or a vice-president and by the secretary or treasurer,
or an assistant secretary or an assistant treasurer, and the seal of the company
shall be affixed thereto.

          SECTION (b) Regulations. The Board of Directors shall have authority
to make such rules and regulations as it shall deem appropriate concerning the
issue, transfer and registration of certificates evidencing shares of capital
stock of the company, and the issuance of new certificates to replace
certificates lost or destroyed.

          SECTION (c) Transfer of Shares. Shares of the capital stock of the
company shall be transferable only on the books of the company, upon surrender
of the outstanding certificate therefor duly indorsed, by the holder thereof
personally or by written power of attorney.

                                   ARTICLE V.
                                      SEAL

          The seal of the corporation shall be circular in form containing the
name of the company and the words "Milwaukee, Wisconsin" in the circumference,
and the word "Seal" in the center.

                                   ARTICLE VI.
                                   FISCAL YEAR

          The fiscal year of the company shall coincide with the calendar year.

                                  ARTICLE VII.
                                   AMENDMENTS

          Any provision or provisions of these By-Laws may be amended or
repealed at any annual meeting of the stockholders or at any special meeting
called for that purpose by vote of a majority of the outstanding capital stock
of the company.

                                       18<PAGE>

                                                                    Exhibit 10.1
                                                                    ------------

                         AGREEMENT OF PURCHASE AND SALE

                                      AND

                           JOINT ESCROW INSTRUCTIONS

     This Agreement of Purchase and Sale and Joint Escrow Instructions
("Agreement") is made and entered into as of April 17, 2000, by and between
Pinnacle Entertainment, Inc., a Delaware corporation, successor by merger with
Hollywood Park, Inc. ("Seller"), and Casden Properties Inc., a Maryland
corporation ("Buyer"), with reference to the following facts:

     A.  Seller is the owner of certain real property located in the City of
Inglewood (the "City"), County of Los Angeles (the "County"), State of
California, consisting of approximately ninety-seven (97) gross acres (the "Real
Property"), as more particularly described on Exhibit A attached hereto.

     B.  The terms and conditions of this Agreement and the instructions to
Commonwealth Land Title Insurance Company ("Escrow Holder") with regard to the
escrow ("Escrow") created hereto are as set forth below.

     C.  Seller desires to sell the Property to Buyer, and Buyer desires to
purchase the Property from Seller, in accordance with the terms and conditions
contained in this Agreement.

     NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements contained in this Agreement, and other good and valuable
consideration, Seller and Buyer hereby agree as follows:

1.  PURCHASE AND SALE
    -----------------

    1.1.  Agreement to Buy and Sell.  Subject to the terms and conditions set
          -------------------------
forth herein, Seller hereby agrees to sell and convey to Buyer, and Buyer hereby
agrees to acquire and purchase from Seller, the Property; as used herein the
term "Property" shall include (i) the Real Property together with all
improvements and appurtenances thereto, located thereon, together with (ii) all
personal property and fixtures, if any, owned by Seller and used in the
operation of the Real Property or the improvements thereon, and (iii) all of
Seller's right, title, equity and interest, if any, in and to the following: (A)
Seller's mineral, oil, gas and other sub-surface rights and projects, oil
rights, water rights and water stock, if any, related to the Real Property, (B)
any and all sewer rights allocated to the Real Property, (C) all rights of
Seller, if any, in and to any land lying in the bed of any street, road, avenue,
or right-of-way in front of or adjoining the Real Property, (D) all transferable
rights and entitlements of Seller, if any, to development of the Real Property
granted by governmental or quasi-governmental bodies or entities having
jurisdiction or authority over the Real Property, (E) any other appurtenances to
the Real Property and (F) any and all transferable approvals (government or
otherwise) and other transferable rights to the Seller's agreements, covenants
or indemnifications received by Seller from a prior owner or any other third
party
<PAGE>

relating to the Real Property (collectively the "Intangible Property"), to the
extent assignable, all of which shall be assigned to Buyer pursuant to the
Assignment of Intangible Property hereinafter referred to.

    1.2.    Purchase Price.
            --------------

            1.2.1.  Purchase Price.  The Purchase Price for the Property shall
                    --------------
be Six Hundred Fifty Thousand Dollars ($650,000) per gross acre, all cash (the
"Purchase Price"). The actual Purchase Price shall be based on the total acreage
of the Real Property as determined by a survey prepared by a licensed surveyor
selected by Buyer (the "Survey") at Buyer's sole cost and expense. The total
Purchase Price shall be determined by taking the exact land area of the Real
Property as shown on the Survey and multiplying the total acreage by $650,000.
By way of example only, if the total acreage is shown to be ninety-seven (97)
acres on the Survey, then the Purchase Price shall be $63,050,000 (i.e., 97 x
$650,000 = $63,050,000).

            1.2.2.  Initial Deposit.  Within three (3) business days of the
                    ---------------
execution of this Agreement by the parties hereto, Buyer shall deposit or cause
to be deposited with Escrow Holder, in cash, the total sum of One Million
Dollars ($1,000,000) ("Deposit"). The Initial Deposit shall be invested by
Escrow Holder in an interest-bearing account with all interest accruing thereon
to be added to the Initial Deposit and made a part thereof.

            1.2.3.  Additional Deposit.  On the Second Contingency Date (as
                    ------------------
defined in Section 3.1.1(b) hereof), Buyer shall deposit with Escrow Holder, in
cash, an additional One Million Dollars ($1,000,000) ("Additional Deposit"). The
Additional Deposit shall be invested by Escrow Holder in an interest-bearing
account with all interest accruing thereon to be added to the Additional Deposit
and made part thereof. The term "Deposit" shall mean the Initial Deposit until
such time as pursuant to this Section 1.2.3, Buyer is obligated to deposit the
Additional Deposit, and thereafter shall mean both the Initial Deposit and the
Additional Deposit.

            1.2.4.  Deposit Nonrefundable.  The Deposit shall be nonrefundable
                    ---------------------
to Buyer except as otherwise expressly provided herein.

            1.2.5.  Purchase Price Balance.  Provided all of the Conditions
                    ----------------------
Precedent to Buyer's obligation to purchase the Property are timely satisfied,
then, at least one (1) business day prior to the Close of Escrow, Buyer shall
deposit with Escrow Holder in cash the sum of (a) the Purchase Price, less (b)
                                                                      ----
the Deposit (the "Purchase Price Balance"), plus (c) Buyer's Escrow charges and
                                            ----
other cash charges as set forth in Section 2.1.2 below.

2.   ESCROW AND CLOSING
     ------------------

            2.1.1.  Opening of Escrow.  For purposes of this Agreement, the
                    -----------------
Escrow shall be deemed opened on the date Escrow Holder shall have received an
executed counterpart of this Agreement (original, copy or facsimile) from both
Buyer and Seller. Escrow Holder shall promptly notify Buyer and Seller, in
writing, of the date Escrow is opened ("Opening of Escrow"). In addition, Buyer
and Seller agree to execute, deliver and be bound by any reasonable and
customary supplemental escrow instructions of Escrow Holder or other instruments
as may reasonably be required by Escrow Holder in order to

                                      -2-
<PAGE>

consummate the transaction contemplated by this Agreement. Any such supplemental
instructions shall not conflict with, amend or supercede any portions of this
Agreement. If there is any conflict or inconsistency between such supplemental
instructions and this Agreement, this Agreement shall control. The Title Company
shall be responsible for preparing the settlement or closing statement, causing
all documents to be recorded, disbursing all closing proceeds, filing IRS Form
1099-B, Section 1445 Affidavit, acting as a "Reporting Person" for purposes of
satisfying the Reporting Requirements of Section 6045(e) of the United States
Internal Revenue Code, and filing any other similar reporting form relating to
the transactions contemplated by this Agreement.

            2.1.2.  Escrow Fees and Other Charges.  In connection with the Close
                    -----------------------------
of Escrow: (a) Seller shall pay: (i) the cost of a CLTA Policy of Title
Insurance (as defined below), (ii) one-half (1/2) of the Escrow Holder's fees,
(iii) recording fees payable in connection with the recordation of the grant
deed conveying the Property to Buyer (iv) the documentary transfer taxes; and
(b) Buyer shall pay (i) one-half (1/2) of the Escrow Holder's fees, and (ii) if
elected by Buyer, the increased cost of obtaining an ALTA extended coverage
owner's title insurance policy (over and above the CLTA Policy of Title
Insurance that Seller is required to pay for) and the costs of any endorsements
Buyer may elect to obtain, and (c) all other costs related to the transaction
shall be paid by the parties in the manner consistent with common practice in
the County.

    2.2. Closing Date.  Provided all Conditions Precedent to the Close of Escrow
         ------------
have been satisfied (or waived in writing by the party for whose benefit the
condition precedent exists), the Close of Escrow shall occur on the date (the
"Closing Date") which is the earliest to occur of the following:  (a) twelve
(12) months after the Opening of Escrow; or (b) fifteen (15) business days
following Buyer's receipt of the Project Entitlements (as defined below).

            2.2.1.  As used in this Agreement, the "Project Entitlements" shall
include such agreements and entitlements as Buyer in its sole and absolute
discretion deems necessary for its planned residential (and incidental retail)
development of the Property, which may include, without limitation, a vesting
tentative map for the Property, a Conditional Use Permit and a Development
Agreement with the City. All Project Entitlements (including any California
Environmental Quality Act and California Subdivision Map Act requirements
relating thereto) shall be deemed received when (a) the same have been approved
officially by the appropriate City, State or other governmental agencies through
duly authorized resolution, ordinance or administrative or regulatory
determination (or similar action) and all administrative appeals periods related
thereto shall have expired, (b) such Project Entitlements shall not be subject
to any further discretionary approvals of any kind, and (c) if any litigation or
administrative challenge shall have been filed relating thereto, there is a
final non-appealable resolution of any such litigation or challenge affirming
the validity of any such Project Entitlements.

            2.2.2.  As used in this Agreement, the "Close of Escrow" shall mean
the date a Grant Deed, as provided in Section 2.4.2(a) ("Grant Deed"), for the
Property is recorded in the Official Records of the County. The Close of Escrow
shall take place on the Closing Date at the offices of the Escrow Holder. Escrow
Holder is hereby instructed not to

                                      -3-
<PAGE>

show the consideration for the Grant Deed on the face thereof, but rather to
annex a separate certificate thereto after recording.

    2.3. Conditions Precedent to Close of Escrow.
         ---------------------------------------

         2.3.1.  Conditions to Buyer's Obligations.  The Close of Escrow and
                 ---------------------------------
Buyer's obligation to purchase the Property, are subject to the satisfaction of
the following conditions or Buyer's written waiver, in its sole and absolute
discretion, of such conditions on or before the Closing Date. If any such
conditions are not satisfied on or before the Closing Date, Buyer may terminate
this Agreement by written notice to Seller and to Escrow Holder, whereupon
Escrow Holder shall return to Buyer the Deposit immediately.

              a)   As of the Closing, Seller shall have performed all of the
material obligations required to be performed by Seller under this Agreement;

              b)  Seller shall have delivered to Buyer at the Close of Escrow
its written certification that all representations and warranties made by Seller
to Buyer in this Agreement are true and correct in all material respects as of
the Closing Date;

              c)  The Title Company shall be committed to issue to Buyer,
simultaneously with the Close of Escrow, the Title Policy (defined below)
covering the Property subject only to the Permitted Exceptions (defined below);

              d)  From the Effective Date until the Close of Escrow, there shall
not have occurred any material adverse change in the physical condition of the
Property, and no law, moratorium or other governmental order shall have been
passed by the City that would prevent Buyer from developing the Property
pursuant to the Project Entitlements; and

              e)  The Project Entitlements shall have been received by Buyer.

         2.3.2.  Conditions to Seller's Obligations.  The Close of Escrow and
                 ----------------------------------
Seller's obligation to consummate the transactions contemplated by this
Agreement are subject to the satisfaction of the following conditions or
Seller's written waiver, in its sole and absolute discretion, of such conditions
on or before the Closing Date. If any such conditions are not satisfied on or
before the Closing Date, Seller may terminate this Agreement by written notice
to Buyer and to Escrow Holder, whereupon Escrow Holder shall return to Buyer the
Deposit immediately.

              a)   As of the Closing, Buyer shall have performed all of the
material obligations required to be performed by Buyer under this Agreement;

              b)  Buyer shall have delivered to Seller at the Close of Escrow
its written certification that all representations and warranties made by Buyer
to Seller in this Agreement are true and correct in all material respects as of
the Closing Date; and

              c)  The Project Entitlements shall have been received or waived in
writing by Buyer.

                                      -4-
<PAGE>

    2.4.  Closing Documents.  The parties shall deposit the following with
          -----------------
Escrow Holder prior to the Close of Escrow:

          2.4.1.  Buyer shall deposit:

                a)  the Purchase Price Balance;

                b)  Buyer's Escrow and other cash charges required in Section 2.
          1.2; and

                c)  a Preliminary Change of Ownership Statement in form suitable
          for filing with the tax collector for the County; provided, however,
          that the delivery of this instrument shall not be a condition
          precedent to the Close of Escrow nor a default by Buyer.

          2.4.2.  Seller shall deposit:

                a)   a Grant Deed in the form attached hereto as Exhibit B
                                                                 ---------
          conveying fee title to the Property, subject only to the Permitted
          Exceptions, executed by Seller with Seller's signature duly notarized
          accompanied by a separate statement of documentary transfer tax
          ("Statement of Transfer Tax") in substantially the same form as
          attached to the Grant Deed);

                b)  an affidavit or qualifying statement, which satisfies the
          requirements of Paragraph 1445 of the Internal Revenue Code of 1986,
          as amended, and the regulations thereunder, and a Form 590(RE) to
          satisfy the requirements of California Revenue and Taxation Code
          Sections 18662(e) and 18668 (collectively, the "Non-Foreign
          Affidavits");and

                c)  two (2) originals of an assignment and bill of sale of all
          of Seller's right, title and interest, if any, in and to the
          Intangible Property in the form attached hereto as Exhibit C (the
                                                             ---------
          "Assignment of Intangible Property").

          2.4.3.  Additional Documents.  Seller and Buyer shall each deposit
                  --------------------
such other instruments as are reasonably required by Escrow Holder or otherwise
required to proceed to the Close of Escrow and consummate the sale of the
Property, in accordance with the terms of this Agreement, including, without
limitation, an agreement ("Designation Agreement") in the form attached hereto
as Exhibit D designating the Title Company as the Reporting Person for the
   ---------
transaction pursuant to Section 6045(e) of the Internal Revenue Code.

    2.5. Close of Escrow.
         ---------------

         2.5.1.  On the Close of Escrow, Escrow Holder shall (a) record the
Grant Deed in the Office of the County Recorder of the County, (b) pay any
transfer taxes, (c) instruct the County Recorder to return the Grant Deed to
Buyer, (d) deliver to Seller the Purchase Price Balance, less Seller's escrow
and cash charges, and (e) deliver to Buyer the Non-Foreign Affidavits, the
Assignment of Intangible Property and the Title Policy covering the Property
subject only to the Permitted Exceptions.

                                      -5-
<PAGE>

         2.5.2.  Non-delinquent state and county real property taxes and
assessments shall be prorated as of the Close of Escrow on the basis of the most
recent tax information. Said prorations shall be based on a three hundred sixty
(360) day year. If such taxes and assessments are prorated based upon an
estimated amount, the parties shall re-prorate and readjust all such matters in
cash when and as soon as the actual amount becomes known within twenty (20) days
of demand by the party entitled thereto.

         2.5.3.  Upon the Close of Escrow, title to and possession of the
Property shall be conveyed and delivered to Buyer, subject only to the Permitted
Exceptions, free and clear of any rights of parties in possession.

    2.6. Failure to Close; Termination.
         -----------------------------

          2.6.1.  Failure to Close Without Default.  If the Close of Escrow does
                  --------------------------------
not occur on or before the Closing Date for any reason other than Seller's or
Buyer's breach of or default of its respective obligations hereunder, or if this
Agreement is terminated as otherwise set forth herein, then (a) Escrow Holder
shall return the Deposit to Buyer and return to the depositor thereof any other
funds or other materials then in Escrow Holder's possession (including any
portion of the Deposit which is then held by Escrow Holder), (b) the Escrow
shall be terminated and of no force and effect, (c) Buyer and Seller shall each
pay one-half of any Escrow termination fees, (d) Seller shall have no further
obligation to sell to Buyer, and Buyer shall have no further obligation to
purchase, the Property, and (e) this Agreement shall terminate and the parties
shall have no further obligations hereunder except as provided in Section 3.1.3,
3.1.6 and 6 of this Agreement.

          2.6.2.  Buyer's Default.  IF THE SALE OF THE PROPERTY IS NOT
                  ---------------
CONSUMMATED DUE TO A DEFAULT BY BUYER HEREUNDER AND THE SELLER IS NOT THEN IN
DEFAULT HEREUNDER, THEN SELLER SHALL RETAIN THE DEPOSIT AS LIQUIDATED DAMAGES
("LIQUIDATED DAMAGES") AS SELLER'S SOLE AND EXCLUSIVE REMEDY HEREUNDER. BUYER
AND SELLER AGREE IT WOULD BE IMPRACTICAL OR EXTREMELY DIFFICULT TO FIX ACTUAL
DAMAGES IN THE CASE OF BUYER'S DEFAULT, AND THAT THE LIQUIDATED DAMAGES ARE A
REASONABLE ESTIMATE OF SELLER'S DAMAGES IN SUCH EVENT. IN THE EVENT OF A DEFAULT
BY BUYER AS AFORESAID AND THE SELLER IS NOT THEN IN DEFAULT HEREUNDER, THE
ESCROW AGENT, UPON WRITTEN INSTRUCTIONS TO DO SO SHALL IMMEDIATELY DISBURSE THE
DEPOSIT TO SELLER, AND SHALL CANCEL THE ESCROW CREATED PURSUANT HERETO, IN WHICH
EVENT SELLER AND BUYER SHALL BE RELIEVED FROM ALL LIABILITY HEREUNDER EXCEPT AS
OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT. RECEIPT OF SAID LIQUIDATED
DAMAGES SHALL BE SELLER'S SOLE AND EXCLUSIVE REMEDY IN THE EVENT OF A BREACH BY
BUYER AS AFORESAID. SELLER AND BUYER ACKNOWLEDGE THAT THEY HAVE READ AND
UNDERSTAND THE PROVISIONS OF THIS SECTION AND BY THEIR INITIALS IMMEDIATELY
BELOW AGREE TO BE BOUND BY ITS TERMS. IN NO EVENT SHALL SELLER'S ACCEPTANCE OF
THE LIQUIDATED DAMAGES BE A LIMIT OF ANY KIND ON BUYER'S EXPRESS INDEMNITY AND
DEFENSE OBLIGATIONS CONTAINED IN THIS AGREEMENT.

                                      -6-
<PAGE>

     Seller's Initials:  _______        Buyer's Initials:  _______

          2.6.3.  Escrow Fees on Default.  If the failure to close is due to the
                  ----------------------
default of one of the parties, the defaulting party shall bear the sole and full
liability for paying any escrow cancellation fee.

3.   ACTIONS PENDING CLOSE OF ESCROW
     -------------------------------

     3.1. Investigation of the Property.
          -----------------------------

          3.1.1.  Contingency Dates.
                  -----------------

                  a)   Buyer shall have until the date that is thirty (30) days
     following the Opening of Escrow (the "First Contingency Date") to satisfy
     itself in its sole and absolute discretion that the City is likely to grant
     Project Entitlements which would allow Buyer to construct at least thirty
     (30) units per acre on the portion of the Project designated by Buyer for
     multi-family residential. Buyer shall use reasonable, good faith efforts to
     meet individually with the Mayor and each of the council members of the
     City to obtain feedback from said individuals with respect to Buyer's
     proposed development, including without limitation, Buyer's density
     requirements. Buyer shall provide Seller, directly or through counsel, with
     written or verbal reports of said efforts no less than weekly. Buyer's
     failure to meet with the Mayor or any of the council members, or Buyer's
     failure to provide any of such written or verbal reports shall not
     constitute a default by Buyer hereunder and Seller shall have no remedies
     resulting from any such failure by Buyer. Absent preliminary positive
     feedback from the City on or prior to the First Contingency Date, Buyer
     may, by written notice to Seller and Escrow Holder, at Buyer's sole option
     and without any obligation to do so, cancel this Agreement. If Buyer
     cancels this Agreement pursuant to this Section 3.1.1(a), Escrow Holder
     shall return the Deposit to Buyer immediately. If Buyer fails to cancel
     this Agreement for any reason, or no reason, pursuant to this Section
     3.1.1(a), such failure or inaction by Buyer shall not (i) constitute a
     waiver by Buyer of its right to obtain the Project Entitlements as a
     condition to the Closing or (ii) in any way affect Buyer's right to
     terminate this Agreement and receive back its Deposit pursuant to any other
     provision of this Agreement, including without limitation, (a) Section
     2.3.1 for failure of any of the conditions set forth therein, including
     "e)" (i.e. receipt of the Project Entitlements), (b) Section 3.1.1(b),
     resulting from Buyer's dissatisfaction with the Property, and (c) Section
     3.1.4, resulting from Buyer's disapproval of the condition of title to the
     Property.

                  b)  Buyer shall have until the date that is ninety (90) days
     following the Opening of Escrow (the "Second Contingency Date"), to satisfy
     itself in its sole and absolute discretion as to the Property and its
     condition and suitability for Buyer's intended use. On or prior to the
     Second Contingency Date, Buyer may, by written notice to Seller and Escrow
     Holder, at Buyer's sole option and without any obligation to do so, cancel
     this Agreement based upon Buyer's dissatisfaction with the Property. If
     Buyer does not provide notice of cancellation on or prior to the Second
     Contingency Date, Buyer shall be deemed to have approved the Property and

                                      -7-
<PAGE>

     waived this condition to the Close of Escrow. If Buyer cancels this
     Agreement pursuant to this Section 3.1.1(b), Escrow Holder shall return the
     Deposit to Buyer immediately.

          3.1.2.  Delivery of Documents and Materials. Within five (5) business
                  -----------------------------------
days after the Opening of Escrow, Seller shall deliver to Buyer all documents
and materials ("Documents and Materials"), including written notices, reports
and map studies, in Seller's possession respecting the physical and
environmental condition of the Property including, without limitation, copies of
any and all (i) written claims made against Seller or otherwise relating to the
Property, (ii) correspondence and agreements with any governmental agencies
relating to the physical or environmental condition of the Property; and (iii)
the Environmental Documents and Materials listed on Exhibit "E" attached hereto.

          3.1.3.  Access and Testing.  At any time during the term of this
                  ------------------
Agreement, Buyer, its agents and employees shall have the right to enter the
Property, upon prior reasonable notice to Seller, solely for the purposes of
conducting such investigations, inspections and tests of the Property as Buyer
deems necessary or desirable, in Buyer's sole discretion, to evaluate the
Property. Buyer's entry shall not interfere with groundwater remediation
activities currently being conducted on a portion of the Property. All such
reviews, inspections and studies shall be at Buyer's sole cost and expense.
Buyer shall use all due care and consideration, including, without limitation,
attention to safety of persons and property, in connection with all of its
inspections or tests and those on its behalf and shall in all instances comply
and cause others to comply with all applicable laws. Any intrusive or invasive
testing by Buyer, such as a "Phase 2" environmental audit shall be subject to
Seller's approval, not to be unreasonably withheld. If Seller unreasonably
refuses to approve any testing required by Buyer, Buyer may, in addition to any
other remedies Buyer may have by law or under this Agreement (including the
right to specific performance with respect to the exercise of Seller's approval
rights), terminate this Agreement by written notice to Seller, in which event
Section 2.6.1 shall apply, and Buyer shall be entitled to a return of the
Deposit. If Buyer does not purchase the Property, Buyer shall restore the
Property to its condition prior to any intrusive or invasive tests and/or
inspections. Prior to any entry on the Property prior to the Close of Escrow,
Buyer or Buyer's contractor entering onto the Property shall secure and
maintain: (a) a comprehensive general liability and property damage policy in an
amount of not less than One Million Dollars ($1,000,000) which will cover the
activities of Buyer and its agents and consultants on the Property and shall
name Seller as an additional insured thereunder, and (b) workers' compensation
and employer's liability insurance in accordance with the provisions of
California law. Prior to entering the Property, Buyer shall provide a
certificate of insurance to Seller evidencing the insurance required herein.
Buyer hereby agrees to indemnify, protect, defend (with counsel reasonably
satisfactory to Seller) and hold Seller harmless from and against any and all
loss, expense, claim, damage and injury to person or property ("Losses")
resulting directly or indirectly from the acts and/or omissions of Buyer,
Buyer's agents, contractors and/or subcontractors and/or the contractors or
subcontractors of such agents on the Property in connection with the performance
of any investigation or other activities upon the Property as contemplated
herein. Buyer shall take all steps, including filing appropriate bonds if
necessary, to keep the Property free of mechanic's liens as a result of Buyer's
activities under this Section 3.1.3. Buyer's indemnity, defense and other
obligations and covenants of this

                                      -8-
<PAGE>

Section 3.1.3 shall survive any termination of this Agreement or the Closing and
recording of the Deed, as applicable.

          3.1.4.  Title Examination.  Within ten (10) days following the Opening
                  -----------------
of Escrow, Seller shall cause to be delivered to Buyer a title commitment issued
by Commonwealth Land Title Insurance Company ("Title Company") for the Property,
together with copies (as provided by public records) of all exceptions set forth
therein (collectively, the "Commitment"). Buyer may, not later than the Second
Contingency Date give written notice to Escrow Agent and Seller ("Buyer's Title
Notice") disapproving any items shown or identified in said Commitment and
identifying the items disapproved. If Buyer does not timely give notice of
disapproval as aforesaid, then Buyer shall be deemed to have approved all items
on the Commitment. Within fifteen (15) days after Seller's receipt of Buyer's
Title Notice, Seller shall give Buyer written notice ("Seller's Title Notice")
of those disapproved or conditionally approved title matters, if any, which
Seller, in its sole and absolute discretion, covenants and agrees to either
eliminate from the Title Policy as exceptions to title to the Property or to
ameliorate to Buyer's satisfaction by the Closing Date as a condition to the
Close of Escrow for Buyer's benefit. If Seller does not elect to eliminate or
ameliorate to Buyer's satisfaction any disapproved or conditionally approved
title matters, or if Buyer disapproves of Seller's Title Notice, which Buyer may
do in its sole discretion, then Buyer shall have the right, by a writing
delivered to Seller and Escrow Holder within ten (10) business days thereafter,
to (1) waive its prior disapproval, or (2) terminate this Agreement and the
Escrow in which event Buyer shall be entitled to the return of the Deposit and
all other monies previously deposited with Escrow Holder by Buyer, and this
Agreement, the Escrow and the rights and obligations of the parties hereunder
shall terminate, except as otherwise provided in this Agreement. Buyer's failure
to deliver a termination notice shall be deemed a waiver of its prior
disapproval.

          3.1.5.  Title Policy.  It shall be a condition to Buyer's obligations
                  ------------
hereunder that, on the Closing Date, the Title Company be prepared and committed
to issue to Buyer an ALTA Policy of Title Insurance, Form B, 1970 as amended in
1984 (the "Title Policy") in the amount of the Purchase Price, showing fee title
vested in Buyer, subject only to (i) a lien to secure payment of taxes, not
delinquent, (ii) matters affecting the condition of title created by or with the
consent of Buyer or as a result of Buyer's (or any party on behalf of Buyer)
acts or omissions, and (iii) those title matters approved, deemed approved, or
waived by Buyer pursuant to Section 3.1.4 above (all of the foregoing in clauses
(i) through (iii) hereinafter referred to as the "Permitted Exceptions").

          3.1.6.  Processing.  Buyer shall promptly file and diligently process
                  ----------
all applications, plans, maps, agreements, documents, and other instruments
necessary or appropriate for the development of the Property as contemplated by
Buyer including processing for the Project Entitlements. Buyer shall timely pay
all of the fees, deposits and costs thereof, including, but not limited to,
engineers, surveyors, the City, the County and any utility district or company.
In connection therewith, Seller agrees to cooperate with Buyer by executing all
such applications for government permits or approvals affecting the Property
which require Seller's signature within five (5) business days after receipt of
Buyer's written request therefor as long as the Property does not become subject
to any conditions, restrictions or impositions prior to the Closing, Seller does
not bear any expense or liability for that purpose and as long as such
application, permits or approvals are

                                      -9-
<PAGE>

consistent with Buyer's plan for residential and/or retail development of the
Property. If reasonably requested by Buyer, Seller shall appear at public
hearings and meetings concerning the Project Entitlements and express written
and oral support of the Buyer's proposed project. If at any time Buyer
determines, in the exercise of Buyer's reasonable discretion, that Buyer will
not be able to obtain the Project Entitlements under terms and conditions
satisfactory to Buyer, Buyer may terminate this Agreement by written notice to
Seller and Escrow Holder. Upon such termination, the provisions of Section 2.6.1
shall apply.

4.   REPRESENTATIONS, WARRANTIES AND COVENANTS
     -----------------------------------------

     4.1.  Seller's Representations, Warranties.  Seller hereby represents and
           ------------------------------------
warrants as follows, which representations and warranties shall be true and
correct on the Close of Escrow and which shall survive the Close of Escrow for a
period of one (1) year:

           4.1.1.  This Agreement constitutes a valid and binding obligation of
Seller and is enforceable against Seller in accordance with its terms.

           4.1.2.  Seller has full legal power and authority to enter into this
Agreement, and the execution and delivery of all instruments and documents
required hereunder to be obtained or authorized by Seller in order to consummate
this transaction have been or will be obtained and authorized as so required.

           4.1.3.  To Seller's actual knowledge, there are no material actions,
suits, proceedings or governmental investigations pending or threatened against
or affecting the Property.

           4.1.4.  To Seller's actual knowledge, there are no persons or
entities claiming, through Seller, any rights to acquire the Property.

           4.1.5.  No bankruptcy, insolvency, rearrangement, or similar action
or proceeding, whether voluntary or involuntary, is pending or, to Seller's
actual knowledge, threatened against the Seller.

           4.1.6.  Seller is not a "foreign person" within the meaning of the
Internal Revenue Code of 1954, as amended (the "Code"), the transaction
contemplated hereby does not constitute a disposition of a U.S. real property
interest by a foreign person, and at the Close of Escrow no person, including,
without limitation, Buyer and its counsel and the Title Company, will be subject
to the withholding requirements of Section 1445 of the Code.

           4.1.7.  Neither the entering into of this Agreement nor the
consummation of the transaction contemplated hereby will constitute or result in
a violation or breach by Seller of its organizational documents or to Seller's
actual knowledge any contract, other instrument or agreement to which it is a
party, or to which it is subject or by which it or any of its assets or
properties may be bound, except as herein disclosed;

           4.1.8.  The Property is currently unimproved and shall be delivered
to Buyer vacant and free of any leases, tenancies, claims of occupancy or
service agreements

                                      -10-
<PAGE>

of any kind whatsoever other than as set forth in the Commitment or created by,
or consented to, by Buyer;

           4.1.9.  Neither the entering into of this Agreement nor the
consummation of the transaction contemplated hereby will constitute or result in
a violation or breach by Seller of any judgment, order, writ, injunction or
decree issued against or imposed upon it. To Seller's actual knowledge, there is
no action, suit, proceeding or investigation pending or threatened which would
prevent the transaction contemplated by this Agreement or which would become a
cloud on the title to the Property or any portion thereof in any court or before
or by any federal, district, county, or municipal department, commission, board,
bureau, agency or other governmental instrumentality;

           4.1.10.  To Seller's actual knowledge, neither the whole nor any
portion of the Property is subject to pending or threatened condemnation by any
governmental authority;

           4.1.11.  Except as set forth in Section 4.1.13, Seller has received
no written notice of any violations of any federal, district or municipal laws,
ordinances, orders, regulations and requirements affecting the Property or any
portion thereof;

           4.1.12.  Seller has received no written notice of any default or
breach by Seller under any of the covenants, conditions, restrictions,
rights-of-way, or easements affecting the Property or any portion thereof, if
any, and to Seller's actual knowledge no such default or breach now exists;

           4.1.13.  To Seller's actual knowledge, Hazardous Substances have been
released and are present at, under and in the vicinity of the Property. To
Seller's actual knowledge, the documents listed in Exhibit E attached hereto
                                                   ---------
include the environmental studies of the Property in Seller's possession (but
Exhibit E is not a comprehensive list of any such documentation relative to any
---------
adjacent or nearby parcels). For purposes hereof, "Hazardous Substances" means
any hazardous, toxic, infectious or other material, substance, pollutant or
waste defined, designated or listed as such pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act, the Federal Water
Pollution Control Act, the Clean Air Act, the Safe Drinking Water Act, the Solid
Waste Disposal Act, the Atomic Energy Act, the Federal Insecticide, Fungicide
and Rodenticide Act and any similar state or local counterparts thereto, as the
foregoing have or may be amended from time to time. Except as disclosed in this
Section 4.1.13, Seller does not have in its possession any notice that, and has
no actual knowledge that, the Property is in violation of any Federal, State or
local law, ordinance or regulation relating to environmental conditions on,
under or about the Property, including soil and groundwater conditions. Except
as disclosed in this Section 4.1.13, Seller represents and warrants that Seller
has delivered or will deliver to Buyer any and all documents, studies, reports
and notices that it has in its possession pertaining to the environmental
condition of the Property and/or the adjacent property.

     Except as expressly herein otherwise provided, the representations and
warranties of Seller set forth in this Agreement shall be true on and as of the
Close of Escrow as if those representations and warranties were made on and as
of such time, subject to any

                                      -11-
<PAGE>

qualifications thereof made by Seller in a written notice delivered to Buyer
prior to the Close of Escrow ("Seller's New Representation Notice") within ten
(10) days after Seller obtains new knowledge during Escrow or information with
respect thereto that would cause Seller to change such representation or
warranty, which shall be deemed modified ab initio. If Seller's New
Representation Notice contains any disclosure the results of which would have a
material adverse effect on Buyer's intended development of the Property, Buyer
may terminate this Agreement and the provisions of Section 2.6.1 shall apply. As
used in this Agreement, Seller's awareness or Seller's knowledge or actual
knowledge shall mean and refer to the present, actual knowledge of G. Michael
Finnigan without any duty of investigation or inquiry. Buyer's agreement to the
above limitation on knowledge is based on Seller's representation that Seller
believes Mr. Finnigan is the representative of Seller who has the most
comprehensive knowledge of material matters relating to the Property.
Notwithstanding anything to the contrary contained herein, Seller shall not be
in breach of any representation or warranty made in this Agreement if prior to
the Closing, Buyer had actual knowledge that such representation or warranty was
incorrect or untrue, unless Seller's failure to disclose the information making
the representation or warranty incorrect was intentional.

    4.2. Buyer's Representations and Warranties.  Buyer represents and warrants
         --------------------------------------
to Seller as follows, which representations and warranties shall be true and
correct on the Close of Escrow, and shall survive the Close of Escrow:

         4.2.1.  This Agreement constitutes a valid and binding obligation of
Buyer and is enforceable against Buyer in accordance with its terms.

         4.2.2.  The execution and delivery of all instruments and documents
required hereunder to be obtained or authorized by Buyer in order to consummate
this transaction have been or will be obtained and authorized as so required.

         4.2.3.  Buyer agrees to use commercially reasonable efforts to cause
any blasting or major earth moving (not to include surface grading or
landscaping) conducted on the Property in connection with any improvements or
development thereon, to be conducted at such times and in such a manner so as to
mitigate the impact on the business operations of the adjacent property owners.

     Each of the representations and warranties made by Buyer in this Agreement,
or in any Exhibit or on any document or instrument delivered pursuant hereto,
shall be true and correct in all material respects on the date hereof, and shall
be deemed to be made again as of the Close of Escrow, and shall then be true and
correct in all material respects.  The truth and accuracy of each of the
representations and warranties, and the performance of all covenants of Buyer
contained in this Agreement, are conditions precedent to Seller's obligations
under this Agreement.  Buyer shall notify Seller immediately of any facts or
circumstances which are contrary to the foregoing representations and warranties
contained in this Section 4.2.

                                      -12-
<PAGE>

5.   CASUALTY AND CONDEMNATION.  Prior to the Close of Escrow, Seller shall bear
     -------------------------
all risk of loss to the Property, provided that the same are not caused by the
action of Buyer.  If prior to the Close of Escrow the Property is damaged by
casualty or any other cause or taken by any entity by condemnation or with the
power of eminent domain, or if the access thereto is reduced or restricted
thereby (or is the subject of a pending taking which has not yet been
consummated), Seller shall immediately notify Buyer of such fact.  In such
event, Buyer shall have the right, in Buyer's sole discretion, to (a) terminate
this Agreement and the Escrow upon written notice to Seller and Escrow Holder
not later than seven (7) days after receipt of Seller's notice thereof in which
case the provisions of Section 2.6.1 shall apply, or (b) Buyer may proceed to
consummate the transaction provided for herein at Buyer's sole election, in
which event Seller shall assign and turn over, and Buyer shall be entitled to
receive and keep, any and all insurance proceeds or any and all awards made or
to be made in connection with such damage, condemnation or eminent domain, and
the parties shall proceed to the Close of Escrow pursuant to the terms hereof,
without any reduction in the Purchase Price.

6.  BROKERS.  Seller and Buyer each represents and warrants to the other that
    -------
they have not dealt with or been represented by any brokers or finders in
connection with the purchase and sale of the Property.  Buyer and Seller each
agree to indemnify and hold harmless the other against any loss, liability,
damage, cost, claim or expense (including reasonable attorneys' fees) incurred
by reason of any brokerage fee, commission or finder's fee which is payable or
alleged to be payable to any broker or finder the indemnifying party.
Notwithstanding anything to the contrary contained herein, the representations,
warranties, indemnities and agreements contained in this Section 6 shall survive
the Close of Escrow or earlier termination of this Agreement.

7.  AS-IS SALE.  Except as expressly provided in this Agreement, Buyer is
    ----------
purchasing the Property without any warranties, representations or guaranties,
either express or implied, from or on behalf of Seller, including, but in no way
limited to, any warranty of condition, merchantability, habitability or fitness
for a particular use or purpose, marketability, prospects for future development
or compliance with laws, and Buyer hereby expressly waives any implied
warranties or representations relating to the Property or any matter affecting
the Property other than those expressly provided in this Agreement.  Buyer has
heretofore undertaken and will as of the Closing Date have made all such
inquiries and investigations regarding the Property and all matters relating
thereto as Buyer deems necessary or appropriate under the circumstances, without
waiving, except as otherwise provided in this Agreement, its right to rely on
the representations and warranties of Seller expressly set forth in this
Agreement.  All material prepared by third parties and delivered to Buyer by
Seller, the agents of Seller, or any other person acting for or on behalf of
Seller, whether in the form of maps, surveys, reports, studies, and all other
review matters have been furnished by Seller to Buyer solely as a courtesy, and
neither Seller nor its agents has verified the accuracy of such information or
the qualifications of the persons preparing such information.

                                      -13-
<PAGE>

8.  GENERAL PROVISIONS
    ------------------

    8.1.  Counterparts.  This Agreement may be executed in counterparts, each of
          ------------
which shall be deemed an original, but all of which, taken together, shall
constitute one and the same instrument.

    8.2.  Further Assurances.  Each of the parties agrees to execute and deliver
          ------------------
such other instruments and perform such acts, in addition to the matters herein
specified, as may be appropriate or necessary to effectuate the agreements of
the parties, whether the same occurs before or after the Close of Escrow.

    8.3.  Entire Agreement.  This Agreement, together with all Exhibits hereto
          ----------------
and documents referred to herein, to which Seller and Buyer are parties,
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof, and supersede all prior understandings or agreements.
This Agreement may be modified only by a writing signed by both parties. All
exhibits to which reference is made in this Agreement are deemed incorporated in
this Agreement.

    8.4.  Headings.  Headings used in this Agreement are for convenience or
          --------
reference only and are not intended to govern, limit, or aide in the
construction of any term or provision hereof.

    8.5.  Choice of Law.  This Agreement and each and every related document are
          -------------
to be governed by, and construed in accordance with, the laws of the State of
California.

    8.6.  Severability.  If any term, covenant, condition or provision of this
          ------------
Agreement, or the application thereof to any person or circumstance, shall to
any extent be held by a court of competent jurisdiction or rendered by the
adoption of a statute by the State of California or the United States invalid,
void or unenforceable, the remainder of the terms, covenants, conditions or
provisions of this Agreement, or the application thereof to any person or
circumstance, shall remain in full force and effect and shall in no way be
affected, impaired or invalidated thereby.

    8.7.  Waiver of Covenants, Conditions or Remedies.  The waiver by one party
          -------------------------------------------
of the performance of any covenant, condition or promise, or of the time for
performing any at, under this Agreement shall not invalidate this Agreement nor
shall it be considered a waiver by such party of any other covenant, condition
or promise, or of the time for performing any other act required, under this
Agreement. The exercise of any remedy provided in this Agreement shall not be a
waiver of any other remedy provided by law, and the provisions of this Agreement
for any remedy shall not exclude any other remedies unless they are expressly
excluded.

    8.8.  Legal Advice.  Each party has received independent legal advice from
          ------------
its attorneys with respect to the advisability of executing this Agreement and
the meaning of the provisions hereof. The provisions of this Agreement shall be
construed as to the fair meaning and not for or against any party based upon any
attribution of such party as the sole source of the language in question.

                                      -14-
<PAGE>

    8.9.   Time of the Essence.  Time shall be of the essence as to all dates
           -------------------
and times of performance, whether they are contained herein or contained in any
escrow instructions to be executed pursuant to this Agreement, and all escrow
instructions shall contain a provision to this effect.

    8.10.  Relationship of Parties.  The parties agree that their relationship
           -----------------------
is that of seller and buyer, and that nothing contained herein shall constitute
either party the agent or legal representative of the other from any purpose
whatsoever, nor shall this Agreement be deemed to create any form of business
organization between the parties hereto, nor is either party granted the right
or authority to assume or create any obligation or responsibility on behalf of
the other party, nor shall either party be in any way liable for any debt of the
other.

    8.11.  No Obligations to Third Parties.  Except as otherwise expressly
           -------------------------------
provided herein, the execution and delivery of this Agreement shall not be
deemed to confer any rights upon, nor obligate any of the parties hereto, to any
person or entity other than the parties hereto.

    8.12.  Successors and Assigns.  This Agreement shall be binding upon and
           ----------------------
shall inure to the benefit of the respective successors and assigns of the
parties hereto (as permitted pursuant to the provisions of this Agreement).

    8.13.  Attorneys' Fees.  If any party hereto institutes an action or
           ---------------
proceeding for a declaration of the rights of the parties under this Agreement,
for injunctive relief, for an alleged breach or default of, or any other action
arising out of, this Agreement, or the transactions contemplated hereby, or if
any party is in default of its obligations pursuant thereto, whether or not suit
is filed or prosecuted to final judgment, the non-defaulting party or prevailing
party shall be entitled to its actual attorneys' fees and to any court costs
incurred, in addition to any other damages or relief awarded.

    8.14.  Assignment.  Buyer may not assign its rights or delegate its
           ----------
obligations hereunder without the prior written consent of Seller, which consent
shall be in Seller's sole and absolute discretion. Seller's consent shall not be
required to an assignment by Buyer of its rights under this Agreement to (a) any
limited liability company, partnership or other entity in which Buyer has a
significant interest, (b)any operating partnership formed by Buyer, (c) any
special purpose entity in which Buyer or its operating partnership has a
significant interest, or (d) any other entity that is controlled by Buyer or its
operating partnership, or any of their respective affiliates, or in which Buyer,
its operating partnership or any of their respective affiliates has a
significant interest.

    8.15.  Notices.  All notices and demands which either party is required or
           -------
desires to give to the other shall be given in writing by U.S. certified mail,
return receipt requested with appropriate postage paid, by personal delivery, by
facsimile or by private overnight courier service to the address or facsimile
number set forth below for the respective party, provided that if any party
gives notice of a change of name or address or number, notices to that party
shall thereafter be given as demanded in that notice.  All notices and demands
so given shall be effective upon receipt by the party to whom notice or demand
is being given, except that any notice given by certified mail shall be deemed
delivered three (3) days after deposit in the United States mails.

                                      -15-
<PAGE>

     If to Seller:               Pinnacle Entertainment, Inc.
                                 4400 MacArthur Blvd., Suite 380
                                 Newport Beach, CA 92660
                                 Attention: G. Michael Finnigan
                                 Facsimile:  (949) 752-4844

     With a copy to:             Irell & Manella LLP
                                 1800 Avenue of the Stars, Suite 900
                                 Los Angeles, CA 90067
                                 Attention:  Sandra G. Kanengiser
                                 Facsimile:  (310) 203-7199

     If to Buyer:                Casden Properties Inc.
                                 9090 Wilshire Blvd.
                                 Beverly Hills, CA 90211
                                 Attention:  Alan I. Casden, Linda Miller and
                                 Andrew J. Starrels
                                 Facsimile:  (310) 278-2567

     With a copy to:             Manatt, Phelps & Phillips LLP
                                 11355 West Olympic Blvd.
                                 Los Angeles, CA 90064
                                 Attention:  Robert M. Eller, Esq.
                                 Facsimile:  (310) 312-4224

    8.16.  Exculpation.  Notwithstanding anything to the contrary contained
           -----------
herein, no partner of Casden Properties Operating Partnership, L.P. nor
shareholder officer, director or other principal of Casden Properties Inc. or
Seller, nor any officer, director or other principal of any partner of Casden
Properties Operating Partnership, L.P. or shareholder of Casden Properties Inc.,
nor any legal representative, heir, estate, successor or assign of such partner
or shareholder or any other such person, whether disclosed or undisclosed, shall
have any personal liability with respect to the performance of their respective
obligations hereunder.

    8.17.  Confidentiality.  Each party covenants and agrees for the benefit of
           ---------------
the other party to endeavor in good faith and use their commercially reasonable
efforts not to disclose the terms or conditions of this Agreement, including,
without limitation, the Purchase Price to any person other than a Permitted
Person (as hereinafter defined). For purposes of this Agreement, the term
"Permitted Person" shall mean: the officers, directors, members, shareholders
and partners of the party; persons retained by a party to conduct studies or
investigations; auditors, accountants, lenders and attorneys who have
responsibility for participating in the transaction and governmental agencies or
auditors to whom disclosure is required. This Section 8.17, however, shall not
apply to: (i) any information that, at the time of disclosure, is available
and not as a result of a disclosure in breach of this Agreement by a
party or any of its officers, directors, employees or agents; (ii) any
disclosure made by Seller that it believes in good faith is required by Law or
by obligation pursuant to any rules of or listing agreement with any national
securities exchange or the NASDAQ National Market System (iv) any disclosure in
litigation relating to this Agreement or any proceeding in connection therewith.

                                      -16-
<PAGE>

     IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.

                                 "BUYER"

                                 CASDEN PROPERTIES INC.,
                                 a Maryland corporation

                                 By: /s/ Linda Miller
                                     --------------------------------------
                                 Its: Executive Vice President
                                     --------------------------------------

                                 "SELLER"

                                 PINNACLE ENTERTAINMENT, INC.,
                                 a Delaware corporation

                                 By: /s/ G. Michael Finnigan
                                    ---------------------------------------

                                 Its: President & Chief Executive Officer
                                     --------------------------------------

                                 ACKNOWLEDGED AND ACCEPTED:

                                 COMMONWEALTH LAND TITLE
                                 INSURANCE COMPANY

                                 By: /s/
                                     --------------------------------------
                                 Its: Vice President
                                     --------------------------------------

                                      -17-
<PAGE>

                                   EXHIBIT C
                                   ---------

                        ASSIGNMENT OF INTANGIBLE ASSETS

     THIS ASSIGNMENT OF INTANGIBLE ASSETS ("Assignment") is made and entered
into as of ____________ ___, 2000, by and between PINNACLE ENTERTAINMENT, INC.,
a Delaware corporation, successor by merger with Hollywood Park, Inc.
("Assignor"), and CASDEN PROPERTIES INC., a Maryland corporation ("Assignee"),
with reference to the following facts:

     A.  Assignor and Assignee have entered into that certain Agreement of
Purchase and Sale and Joint Escrow Instructions dated as of _______ __, 2000
("Agreement"). Any capitalized terms used herein and not otherwise defined shall
have the meanings ascribed to them in the Agreement.

     B.  Pursuant to the terms and conditions of the Agreement, Assignor desires
to assign to Assignee any and all of Assignor's right, title and interest in,
under and to the Intangible Property but only to the extent that such right,
title and interest of Assignor is assignable without cost or liability to
Assignor.

    NOW THEREFORE, for good and valuable consideration, the receipt of which is
hereby acknowledged, effective as of the Closing Date,

       1.  Assignor hereby assigns and transfers unto Assignee, any and all of
Assignor's right, title, claim and interest in the Intangible Property including
all of Seller's right, title, equity and interest, if any, in and to all
transferable rights and entitlements of Seller, if any, to development of the
Real Property granted by governmental or quasi-governmental bodies or entities
having jurisdiction or authority over the Real Property, and any and all
transferable approvals (government or otherwise) and other transferable rights
to the Seller's agreements, covenants or indemnifications received by Seller
from a prior owner or any other third party relating to the Real Property, to
the extent assignable.

       2.  Assignee accepts the assignment made hereby.

       3.  The provisions of this Assignment shall be binding upon and inure to
the benefit of Assignor and Assignee and their respective successors and
permitted assigns.

       4.  This instrument shall be construed in accordance with, and the rights
of the parties hereunder shall be governed by, the laws of the State of
California.
<PAGE>

          IN WITNESS WHEREOF, Assignor and Assignee have executed this
Assignment of Intangible Assets as of the date first set forth above.

                         ASSIGNOR:

                         PINNACLE ENTERTAINMENT, INC.,
                         a Delaware corporation

                         By: _____________________________
                         Its: _____________________________

                         ASSIGNEE:

                         CASDEN PROPERTIES INC.,
                         a Maryland Corporation

                         By: _______________________________
                         Its: ________________________________
<PAGE>

                                   EXHIBIT D
                                   ---------

                             DESIGNATION AGREEMENT

     This DESIGNATION AGREEMENT (the "Agreement") is entered into this ____ day
of March, 2000 by and among PINNACLE ENTERTAINMENT, INC., a Delaware corporation
("Seller"), CASDEN PROPERTIES INC., a Maryland corporation ("Buyer") and
COMMONWEALTH LAND TITLE INSURANCE COMPANY (the "Company").

                                    RECITALS
                                    --------

     A.  Pursuant to that certain Purchase and Sale Agreement and Escrow
Instructions dated as of March ___, 2000, entered into by and between Seller and
Buyer (the "Purchase Agreement"), Seller has agreed to sell to Buyer, and Buyer
has agreed to buy from Seller, that certain real property located in the City of
Inglewood, California, and described more fully on Exhibit "A" attached hereto
                                                   -----------
(the "Property").  (The purchase and sale of the Property pursuant to the
Purchase Agreement is sometimes referred to below as the "Transaction").

     B.  Section 6045(C) of the United States Internal Revenue Code and the
regulations promulgated thereunder (collectively the "Reporting Requirements")
require an information return to be made to the United States Internal Revenue
Service, and a statement to be furnished to Seller, in connection with the
Transaction.

     C.  Pursuant to the Purchase Agreement, an escrow has been opened with the
Company through which the Transaction will be or is being closed.  The Company
is either (i) the person responsible for closing the Transaction (as described
in the Reporting Requirements), or (ii) the disbursing title or escrow company
that is most significant in terms of gross proceeds disbursed in connection with
the Transaction (as described in the Reporting Requirements).

     D.  Seller, Buyer and the Company desire to designate the Company as the
"Reporting Person" (as defined in the Reporting Requirements) with respect to
the Transaction as permitted by Treas. Reg. Section 1.6045-4(e)(5).

     NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, Seller, Buyers and the Company agree
as follows:

                                      I.
                                   AGREEMENT
                                   ---------

     1.1   The Company is hereby designated as the Reporting Person for the
Transaction. The Company shall perform all duties that are required by the
Reporting Requirements to be performed by the Reporting Person for the
Transaction.

     1.2   The Company hereby requests Seller to furnish to the Company Seller's
correct taxpayer identification numbers. Pursuant to such request, Seller hereby
certifies to the Company, under penalty of perjury, that Seller's correct
taxpayer identification number

                                      A-1
<PAGE>

is 95-3667491. Seller acknowledges that any failure by Seller to provide the
Company with Sellers' correct taxpayer identification numbers may subject Seller
to civil or criminal penalties imposed by law.

     1.3   The names and addresses of the parties hereto are as follows:

                        Seller:        Pinnacle Entertainment, Inc.
                                       4400 MacArthur Blvd.
                                       Suite 380
                                       Newport Beach, California 92660
                                       Attention:  Mr. G. Michael Finnegan
                                       Facsimile No.:  (949) 752-4844

                         Buyer:        Casden Properties Inc.
                                       9090 Wilshire Boulevard
                                       Beverly Hills, California 90211
                                       Attention:  Andrew J. Starrels, Esq.
                                       Facsimile No.:  (310) 271-3270

                 Escrow Company        Commonwealth Land Title Insurance Company
                                       888 West 6th Street
                                       4th Floor
                                       Los Angeles, California 90017
                                       Attention:  Bob Brown, Vice President
                                       re Escrow No. ____________________

     1.4  Each of the parties hereto shall retain this Agreement for a period of
four years following the calendar year during which the date of closing of the
Transaction occurs.

                                      II.
                                   EXECUTION
                                   ---------

     IN WITNESS WHEREOF, the parties have entered into this Agreement as of the
date set forth above.

                                         SELLER:
                                         -------

                                         PINNACLE ENTERTAINMENT, INC.,
                                         a Delaware corporation

DATE:  March ___, 2000                   By:  ________________________________
                                         Name:
                                         Its:

                                      A-2
<PAGE>

                                         BUYER:
                                         ------

                                         CASDEN PROPERTIES INC.,
                                         a Maryland corporation

DATE:  March ___, 2000                   By:___________________________________
                                         Name:  Andrew J. Starrels, Esq.
                                         Title:  Senior Vice President and
                                                 General Counsel

                                         ESCROW COMPANY
                                         --------------

                                         COMMONWEALTH LAND TITLE
                                         INSURANCE COMPANY

                                         By: __________________________________
DATE:  March ___, 2000                   Name:  _______________________________
                                         Title:  ______________________________

                                      A-3

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