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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
/x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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Commission File Number 1-9319 Commission File Number 1-9320
CALIFORNIA JOCKEY CLUB BAY MEADOWS OPERATING COMPANY
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(Exact name of registrant as (Exact name of registrant as
specified in its charter) specified in its charter)
DELAWARE DELAWARE
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(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization)
94-0358820 94-2878485
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(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
2600 South Delaware Street 2600 South Delaware Street
P.O. Box 1117 P.O. Box 5050
San Mateo, California 94403 San Mateo, California 94402
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(Address of principal (Address of principal
executive offices) (Zip Code) executive offices) (Zip Code)
(415) 573-4514 (415) 574-7223
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(Registrant's telephone number, (Registrant's telephone number,
including area code) including area code)
Securities registered pursuant to Section 12 (b) of the Act:
(Title of each class) (Title of each class)
Common Stock, $.01 par value per share Common Stock, $.01 par value per share
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</TABLE>
THIS REPORT INCLUDES A TOTAL OF SEQUENTIALLY NUMBERED PAGES.
EXHIBIT INDEX IS LOCATED ON SEQUENTIALLY NUMBERED PAGE .
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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
/x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
------------------ -------------------
<TABLE>
<S> <C>
Commission File Number 1-9319 Commission File Number 1-9320
CALIFORNIA JOCKEY CLUB BAY MEADOWS OPERATING COMPANY
- ---------------------------------------------- ----------------------------------------------
(Exact name of registrant as (Exact name of registrant as
specified in its charter) specified in its charter)
DELAWARE DELAWARE
- ---------------------------------------------- ----------------------------------------------
(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization)
94-0358820 94-2878485
- ---------------------------------------------- ----------------------------------------------
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
2600 South Delaware Street 2600 South Delaware Street
P.O. Box 1117 P.O. Box 5050
San Mateo, California 94403 San Mateo, California 94402
- ---------------------------------------------- ----------------------------------------------
(Address of principal (Zip Code) (Address of principal (Zip Code)
executive offices) executive offices)
(415) 573-4514 (415) 574-7223
- ---------------------------------------------- ----------------------------------------------
(Registrant's telephone number, (Registrant's telephone number,
including area code) including area code)
Securities registered pursuant to Section 12 (b) of the Act:
(Title of each class) (Title of each class)
Common Stock, $.01 par value per share Common Stock, $.01 par value per share
- ---------------------------------------------- ----------------------------------------------
</TABLE>
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<TABLE>
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American Stock Exchange, Inc. American Stock Exchange, Inc.
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(Name of each exchange on which registered) (Name of each exchange on which registered)
</TABLE>
Securities registered pursuant to Section 12 (g) of the Act:
None
-------------------------------------------
(Title of class)
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
The aggregate market value of the paired voting stock held by non-affiliates of
California Jockey Club as of March 15, 1996, was $75,430,441 based upon a per
share price of $14-5/8. Directors and executive officers are considered
affiliates for purposes of this calculation, but should not necessarily be
deemed affiliates for any other purpose.
The aggregate market value of the paired voting stock held by non-affiliates of
Bay Meadows Operating Company as of March 15, 1996, was $81,252,025 based upon a
per share price of $14-5/8. Directors and executive officers are considered
affiliates for purposes of this calculation, but should not necessarily be
deemed affiliates for any other purpose.
5,763,257 shares of California Jockey Club Common Stock were outstanding as of
March 15, 1996.
5,763,257 shares of Bay Meadows Operating Company Common Stock were outstanding
as of March 15, 1996.
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PART I
ITEM 1. BUSINESS
INTRODUCTION
California Jockey Club ("Cal Jockey") operates as an equity real estate
investment trust under the Internal Revenue Code of 1986, as amended, and is the
owner of Bay Meadows Racecourse (sometimes referred to herein as the
"Racecourse"). Bay Meadows Operating Company ("Bay Meadows") is a gaming and
entertainment company currently conducting horse racing at Bay Meadows
Racecourse in San Mateo, California. The Racecourse abuts the 101 Freeway which
is the main thoroughfare between the cities of San Jose and San Francisco. The
Racecourse is located about halfway between the two cities and is located about
seven miles south of the San Francisco International Airport. Cal Jockey and Bay
Meadows (collectively, the "Companies") are corporations which were incorporated
in 1983. The Companies' predecessor was incorporated in 1932 and commenced
conducting horse racing at the Racecourse in 1934. This document constitutes the
Annual Report on Form 10-K for both Cal Jockey and Bay Meadows.
CALIFORNIA JOCKEY CLUB
Cal Jockey is incorporated under the laws of the State of Delaware. Cal Jockey's
principal executive offices are located at Bay Meadows Racecourse, 2600 South
Delaware Street, P.O. Box 1117, San Mateo, California 94403.
PROPERTIES
Cal Jockey's principal asset is the Racecourse, a horse race track located on
approximately one hundred seventy-five (175) acres of contiguous land in San
Mateo, California. The principal Racecourse facilities include:
- the main 1-mile dirt horse race track with 6 furlongs and 1-1/4 mile
chutes, inside of which is a 7 furlong turf course;
- the track's infield area, on which is situated a 9 hole/3 par golf
course;
- a main structure, which contains a grandstand, a clubhouse and a turf
club;
- a parking area, a portion of which is provided by an easement granted
by the County of San Mateo;
- a barn and stable area situated on approximately thirty-eight (38)
acres and containing approximately one thousand five hundred fifty
(1,550) horse stalls; and
- a 5/8-mile training track oval situated on approximately forty (40)
acres adjacent to the barn and stable area (the "Training Track Area").
In addition, Cal Jockey owns an approximately two (2) acre parcel in close
proximity to the Racecourse on which an indoor tennis club is located and an
approximately one and one-half (1.5) acre parcel that abuts a street known as El
Camino Real and is separated from the 175 acre site by railroad tracks. Such
parcel is
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currently used for parking. Historically, the entire 175 acre site has been used
in conjunction with Thoroughbred racing.
1983 REORGANIZATION
In 1983, the Companies' predecessor was reorganized into two companies, Cal
Jockey (which became the owner of the 175 acre site) and Bay Meadows (which
operates Bay Meadows Racecourse). Cal Jockey is engaged in managing its real
estate holdings, although it does not have active business operations. Cal
Jockey has historically generated revenue through the lease or sale of its
assets. Substantially all of Cal Jockey's revenue has been derived from its
lease with Bay Meadows. See "Lease of Racing Facility." Cal Jockey intends to
continue to meet the requirements for classification as a real estate investment
trust. So long as Cal Jockey qualifies as a real estate investment trust, it is
able to distribute its otherwise taxable income to its stockholders without
incurring a corporate level tax on that income.
POTENTIAL FOR ADDITIONAL INCOME AND OPPORTUNITIES FOR DIVERSIFICATION
Dating back to the early 1970's, California Jockey Club (the predecessor to the
Companies before the 1983 reorganization) and subsequently both the Bay Meadows
and the Cal Jockey Boards of Directors concluded that the 40-acre training track
could be developed for commercial purposes without adversely affecting Bay
Meadow's ability to carry on live Thoroughbred racing. In early 1995, Cal
Jockey was presented with an opportunity to sell approximately 32 acres of the
stable area and shortly thereafter the 40-acre training track. At that time,
both Companies believed that these parcels could be sold without jeopardizing
the Bay Meadows racing operation, assuming appropriate alternative training and
stabling facilities were made available. See Item 1 - "Bay Meadows - Proposed
Sale of Stable Area and Training Track Area." The Cal Jockey Board believes that
there is an opportunity to generate additional income for stockholders by
developing or selling a portion of Cal Jockey's 175 acres. The Board of
Directors of Cal Jockey further believes that developing or selling a portion of
Cal Jockey's 175 acres could add an element of diversification to Cal Jockey's
real estate holdings. The Cal Jockey Board believes that diversification is
prudent because of the negative trends in Thoroughbred racing. Cal Jockey
believes that evidence of these trends includes: (1) the continued decline in
on-track attendance at Bay Meadows, (2) the continued decline in the quantity
and quality of Thoroughbreds nationally and at Bay Meadows and (3) potential
increases in competition from the new Seattle Thoroughbred racing facility
(Emerald Downs), from other forms of legalized gambling and from an increasing
array of professional and amateur sporting events which may compete with horse
racing for the sports and entertainment dollar. Accordingly, Cal Jockey has
been working on the development or sale of a portion of its 175 acres.
PENDING SALES AND NEGOTIATIONS
Last year, the Cal Jockey Board of Directors concluded that it would be in the
best interests of its stockholders to sell a substantial portion of the barn
and stable area (approximately thirty-two (32) acres (the "Stable Area")) and
the Training Track Area (approximately 40 acres), rather than to develop them or
continue to lease them to Bay Meadows. The decisions reflected Cal Jockey's
desire to seek out opportunities for additional income and diversification. In
addition, the Cal Jockey Board was further motivated to make the sales by the
substantial investment that Cal Jockey likely would be required to make to
renovate the existing stable area and to mitigate the current water runoff
problem associated with the continued operation of the existing stable area
(see "Water Treatment System"), if the Stable Area is not sold and continues
to be used for the stabling of horses. Further, Cal Jockey believes that the
increased presence in San Mateo of one of the purchasers (Franklin Resources,
Inc. and its affiliated entities) should enhance the likelihood of obtaining
the necessary entitlements for both transactions. See "The Entitlement
Process." Accordingly, in May 1995 and December 1995 Cal Jockey entered into
agreements to sell the Stable Area and the Training Track Area, respectively.
See "Terms of the Pending Sales of the Training Track and Stable Areas". By
engaging in these transactions, Cal Jockey should be able to achieve
substantial liquidity which could be reinvested in income generating
properties, generating additional income for its stockholders. Alternatively,
all or a portion of the net sales proceeds could be available for a one time
distribution to the stockholders. See "Terms of the Pending Sales of the
Training Track and Stable Areas - Possible Tax Consequences." There can be no
assurances that these sales will be consummated.
In addition to the foregoing pending sales, Cal Jockey has commenced
negotiations with a bookstore chain to enter into a ground lease for an
approximately one and one-half (1.5) acre parcel that abuts a street known as El
Camino Real and is separated from the one-hundred seventy five (175) acre site
by railroad tracks, which parcel is currently used for parking. Cal Jockey has
not yet reached an agreement on the terms of a ground lease for this parcel.
There can be no assurances that the negotiations for a ground lease will be
successfully concluded or that the entitlements and permits from the City of San
Mateo for development and construction, which are expected to be among the
conditions to any ground lease, will be obtained.
Cal Jockey is currently in preliminary negotiations with several restaurant
operators to lease or develop two sites on approximately two (2) acres of the
barn area being retained by Cal Jockey. There can be no assurances that Cal
Jockey will be able to successfully conclude such negotiations or otherwise be
able to obtain the necessary entitlements for such projects.
The Cal Jockey Board of Directors has no present plans to sell the remaining
Racecourse property. In fact, Cal Jockey and Bay Meadows are investigating the
continuation of on-site stabling and training which may require the lease of
additional adjacent property from the County of San Mateo, as well as other
alternative off-site stabling and training arrangements. See "Planning for
Training and Stabling." However, the Cal Jockey Board
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of Directors is committed to maximizing stockholder returns and recognizes that
there may come a time when the remaining Racecourse property might be sold in
order to maximize stockholder returns.
TERMS OF THE PENDING SALES OF THE TRAINING TRACK AND STABLE AREAS
STABLE AREA
On May 31, 1995, Cal Jockey entered into an Agreement of Purchase and Sale with
Property Resources, Inc. ("Property Resources"), a subsidiary of Franklin
Resources, Inc. (as amended, the "Franklin Agreement"), providing for the sale
of the Stable Area. A copy of the Franklin Agreement is attached to this Form
10-K as Exhibit 10.20. Franklin Resources, Inc. and its affiliated entities
employ approximately 2,300 people in the City of San Mateo. The development plan
for the Stable Area contemplates construction of an office complex comprising
approximately nine hundred thousand (900,000) square feet of office space for
use by Franklin Resources, Inc. and its affiliated entities.
The Franklin Agreement contemplates the sale of a majority of the stable area,
comprising approximately 32 acres, for a purchase price of approximately
Twenty-One Million Dollars ($21,000,000). In addition, as described below,
Property Resources is obligated to fund a portion of off-site improvements
required by the City of San Mateo and the State of California in connection with
the entitlements for the development of the property.
The Franklin Agreement provided that, in addition to the purchase price,
Property Resources would bear its proportionate share (fixed at forty-four
percent (44%)) of the off-site improvement costs, up to a maximum payment of One
Million Five Hundred Thousand Dollars ($1,500,000). Cal Jockey was originally
required to bear all other off-site improvement costs, subject to a proviso that
if the aggregate off-site improvement costs were anticipated to exceed Four
Million Dollars ($4,000,000), then Cal Jockey was entitled to terminate the
Franklin Agreement unless Property Resources agreed to bear 44% of the costs in
excess of Four Million Dollars ($4,000,000). Primarily due to substantial
increases in the costs to implement various traffic circulation improvements to
accommodate ingress and egress to both the Stable Area and the Training Track
Area developments, the cost of the off-site improvements is expected to
substantially exceed Four Million Dollars ($4,000,000). Cal Jockey and Property
Resources subsequently agreed that, in addition to the One Million Five Hundred
Thousand Dollars ($1,500,000) payment, Property Resources would (i) pay 44% of
the costs of off-site improvements in excess of Four Million Dollars
($4,000,000) and less than Seven Million Seven Hundred Thousand Dollars
($7,700,000) or (ii) if certain interchange improvements were not approved by
Caltrans (as has been the case), 44% of the costs of off-site improvements in
excess of Four Million Dollars ($4,000,000) and less than Seven Million Seven
Hundred Thousand Dollars ($7,700,000) plus 44% of the additional costs of the
approved interchange improvements. In the event that the costs of all off-site
improvements are reasonably expected to be between Seven Million Seven Hundred
Thousand Dollars ($7,700,000) and Eleven Million Dollars ($11,000,000), then Cal
Jockey is entitled to terminate the Franklin Agreement unless Property Resources
agrees to bear 44% of the costs in excess of Seven Million Seven Hundred
Thousand Dollars ($7,700,000) and less than Eleven Million Dollars
($11,000,000). In the event the aggregate off-site improvement costs plus
certain other improvement costs to be incurred by Cal Jockey are reasonably
expected to exceed Eleven Million Dollars ($11,000,000), then Cal Jockey is
entitled to terminate the Franklin Agreement.
The most recent cost estimates for off-site improvement costs are approximately
Fifteen Million Dollars ($15,000,000). Consequently, Cal Jockey is currently
entitled to terminate the Franklin Agreement. Cal Jockey is negotiating with
Property Resources regarding the resolution of this issue. In addition, the
parties are jointly exploring alternatives which could lead to a reduction in
the off-site improvements costs and/or assistance from the City of San Mateo
in making available favorable methods of
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financing these costs. There can be no assurance that Cal Jockey and Property
Resources will reach a further agreement to avoid termination of the Franklin
Agreement or will be able to reduce the off-site improvement costs to acceptable
levels or will be able to secure favorable financing assistance from the City of
San Mateo.
In addition to the off-site improvements, Cal Jockey has agreed to construct and
maintain a retention pond on the infield of the race track for discharge, among
other things, of storm water runoff from the Stable Area. Property Resources is
obligated to pay Cal Jockey One Hundred Ten Thousand Dollars ($110,000) towards
the cost of construction of such retention pond. If the cost of such
construction is reasonably estimated to exceed Seven Hundred Thousand Dollars
($700,000), then Cal Jockey is entitled to terminate the Franklin Agreement
unless Property Resources agrees to pay thirty-three percent (33%) of the
construction costs in excess of $700,000. It is currently estimated that the
cost of construction of the retention pond will be approximately $900,000.
However, there is no assurance that the actual construction costs will not
exceed this estimate. Consequently, Cal Jockey is currently entitled to
terminate the Franklin Agreement unless Property Resources agrees to pay
thirty-three percent (33%) of the costs in excess of $700,000. Property
Resources has not yet agreed to pay such amount and there can be no assurances
that it will agree to make such additional payments.
Further, Cal Jockey has agreed to reimburse Property Resources for fifty-six
percent (56%) of the costs that Property Resources reasonably incurs in
connection with the construction of a pedestrian path from Saratoga Drive to the
Caltrain Depot. Cal Jockey currently estimates that the total cost of the
construction of the pedestrian path will be approximately $300,000. However,
there is no assurance that the actual construction costs will not exceed this
estimate.
To date Property Resources has deposited Three Hundred Fifty Thousand Dollars
($350,000) into an escrow account as required by the Franklin Agreement. Future
deposits by Property Resources of Five Hundred Thousand Dollars ($500,000) and
Nine Hundred Thousand Dollars ($900,000) are required by the Franklin Agreement
upon satisfaction of certain conditions. The escrowed amounts, plus interest,
are refundable if the conditions to closing by Property Resources are not
satisfied or if Cal Jockey terminates the Franklin Agreement, and serve as
liquidated damages to Cal Jockey if such conditions are satisfied but Property
Resources fails to consummate the purchase of the Stable Area.
It was a condition of closing by Property Resources that it approve the physical
condition and condition of title to the Stable Area, as well as development and
use matters relating to the Stable Area, by a date certain. Absent such
approvals, Property Resources could have terminated the Franklin Agreement
without liability. Such approvals from Property Resources have been received.
However, in conjunction with such approvals, Cal Jockey has until April 30, 1996
to agree to remove certain title exceptions to which Property Resources has
objected. Cal Jockey is presently negotiating with the interested parties to
determine whether it will be able to remove such title exceptions. If Cal Jockey
does not agree to remove, or is unable to remove, all such title exceptions by
the above date, then the Franklin Agreement will terminate unless Property
Resources agrees to waive its objection to the title exceptions. There can be no
assurances that Cal Jockey will be successful in its negotiations or, if it is
not successful, that Property Resources will agree to waive its objections or
will not renegotiate the purchase price. Further, in conjunction with Property
Resources' approval of the physical condition of the Stable Area, Cal Jockey has
agreed to remove in accordance with applicable environmental laws and
regulations prior to the close of escrow at its sole expense a 2,000 gallon
underground diesel storage tank and a 1,000 gallon underground gasoline storage
tank if such tanks are determined to be located on the property being sold.
It is a further condition of Property Resources' obligation to close escrow that
Cal Jockey obtain from the City of San Mateo by December 31, 1996 the necessary
entitlements to proceed with Property Resources' development plans, together
with a development agreement. See "The Entitlement Process." Property Resources
has the right to approve any development restrictions and service mitigation
requirements and/or "in
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lieu" fees or exactions imposed with respect to the proposed development. If
Property Resources does not approve in its reasonable discretion any of such
restrictions, requirements and/or fees or exactions, Property Resources may
terminate the Franklin Agreement.
Under the Franklin Agreement, escrow may not close prior to the end of August
1997 unless the parties agree otherwise. Such closing will not occur unless all
of the above described conditions to closing are either satisfied or waived and
neither party exercises its right to terminate the Franklin Agreement.
TRAINING TRACK AREA
In December of 1995, Cal Jockey entered into an Agreement of Purchase and Sale
(the "Iacocca Agreement") with Lee Iacocca & Associates, Inc. ("Iacocca")
providing for the sale of the Training Track Area. A copy of the Iacocca
Agreement is attached to this Form 10-K as Exhibit 10.19. The development plan
for the Training Track Area contemplates the construction of single-family and
multi-family housing units, a superior first class hotel and neighborhood retail
uses.
The Iacocca Agreement contemplates the sale of the Training Track Area for a
purchase price of Thirty Million Seven Hundred Fifty Thousand Dollars
($30,750,000), subject to adjustment if less than all of the necessary
entitlements are obtained, as discussed below. In addition, as described below,
Iacocca is obligated to fund a portion of the off-site improvements required by
the City of San Mateo and the State of California in connection with the
entitlements for the development of the property. These are the same off-site
improvements as discussed above in "Stable Area." Cal Jockey is obligated to pay
$500,000 as a brokerage commission upon the closing of the sale. Iacocca has
agreed to a 99-year lease at $1.00 per year for a small piece of property on
which the Bay Meadows sign is currently located.
The Iacocca Agreement provides that, in addition to the purchase price, Iacocca
will bear its proportionate share (fixed at fifty-three and thirty-three
one-hundredths percent (53.33%)) of the off-site improvement costs, up to a
maximum payment of Two Million Six Hundred Sixty-Seven Thousand Dollars
($2,667,000). Cal Jockey is required to bear all other off-site improvement
costs, subject to a proviso that if the aggregate off-site improvement costs are
reasonably expected to be in the range of Five Million Dollars ($5,000,000) to
Eight Million Dollars ($8,000,000), then Cal Jockey is entitled to terminate the
Iacocca Agreement unless Iacocca agrees to bear 53.33% of the costs in excess of
Five Million Dollars ($5,000,000). In the event the aggregate off-site
improvement costs are reasonably expected to exceed Eight Million Dollars
($8,000,000), then Cal Jockey is entitled to terminate the Iaccoca Agreement
unless Iacocca agrees to fund all costs in excess of Eight Million Dollars
($8,000,000).
The most recent cost estimates for off-site improvement costs are approximately
Fifteen Million Dollars ($15,000,000). Consequently, Cal Jockey is currently
entitled to terminate the Iacocca Agreement unless Iacocca agrees to fund all
costs in excess of $8,000,000. Cal Jockey expects to negotiate with Iacocca
regarding the resolution of this issue.
To date Iacocca has deposited into an escrow account its promissory note in the
principal amount of $250,000 (with interest accruing at 18% per year) due in
December 1998 as required by the Iacocca Agreement. A future deposit by Iacocca
of a One Million Dollar ($1,000,000) Standby Letter of Credit, in substitution
for the promissory note, is required by Iacocca upon satisfaction of the
condition described in the following paragraph. The Letter of Credit is released
if the conditions to closing by Iacocca are not satisfied or if Cal Jockey
terminates the Iacocca Agreement. The parties have agreed that One Million
Dollars ($1,000,000) shall be the amount of liquidated damages to Cal Jockey if
all conditions to Iaccoca's purchase are satisfied or waived, but Iacocca fails
to consummate the purchase of the Training Track Area.
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The Iacocca Agreement also provides Iacocca with a limited time period to review
the condition of the Training Track Area and the feasibility of the proposed
development, after which Iacocca must deposit the One Million Dollar
($1,000,000) Standby Letter of Credit, as discussed in the prior paragraph, as a
down payment. Iacocca's approval of the condition of the Training Track Area and
the feasibility of the proposed development is a condition of Iacocca's
proceeding with the transaction. This review period was to expire on March 31,
1996, but has been extended to May 31, 1996. There can be no assurances that
Iacocca will approve the condition of the Training Track Area or the feasibility
of the proposed development or will not seek to renegotiate the purchase price.
It is a further condition of Iacocca's obligation to close escrow that Cal
Jockey obtain from the City of San Mateo by December 15, 1998 the necessary
entitlements to proceed with their development plans, together with a
development agreement. See "The Entitlement Process." Both parties have the
right to approve any development restrictions and service mitigation
requirements and/or "in lieu" fees or exactions imposed on the respective party
with respect to the proposed development. If Iacocca does not approve in its
reasonable discretion any of such restrictions, requirements and/or fees or
exactions applicable to it, Iacocca may terminate the Iacocca Agreement. If Cal
Jockey does not approve in its reasonable discretion any of such restrictions,
requirements and/or fees or exactions applicable to it, Iacocca may agree to
bear the cost thereof or Cal Jockey may terminate the Iacocca Agreement.
As discussed above, Iacocca's obligation to acquire the Training Track Area is
subject to Cal Jockey obtaining specific entitlements to develop the property
from the City of San Mateo for various uses including single family homes,
townhomes, condominiums, and apartments as well as a hotel, offices and other
commercial uses. The price is adjusted downward proportionately if less than the
specified entitlements are obtained, but not below the sum of $28,250,000.00. If
less than 91% of the usage and unit density requirements are obtained, Iacocca
can terminate the Iacocca Agreement. See "The Entitlement Process."
Under the Iacocca Agreement the escrow is to close within one-hundred twenty
(120) days after all applicable entitlements are obtained. Such closing would
not occur unless all of the above described conditions to closing have been
satisfied or waived and neither party has exercised its right to terminate the
Iacocca Agreement.
COST OF ENTITLEMENT PROCESS
Through December 31, 1995, Cal Jockey has expended, in connection with the
entitlement process, One Million One Hundred Twelve Thousand Dollars
($1,112,000) for the services of Calthorpe Associates, engineers, lawyers and
other consultants. These amounts have been capitalized and added to the basis in
land.
THE ENTITLEMENT PROCESS
As noted above, Cal Jockey is charged with the responsibility of obtaining the
entitlements for both the Stable Area and the Training Track Area developments.
The development plan being proposed covers both developments as part of one
plan. To assist in obtaining the entitlements, Cal Jockey has retained Calthorpe
Associates, one of the premier land planning firms in northern California.
Calthorpe Associates, together with a team of other consultants, is developing a
specific plan covering both developments. It is anticipated that the final draft
will be submitted to the City of San Mateo by April 30, 1996. The preliminary
environmental impact report for both developments is being prepared and is
expected to be ready for circulation in June of 1996. The entire entitlement
process (including a subdivision map, site development permits and development
agreement) is anticipated to be finalized around the end of March 1997. There
can be no assurances that Cal Jockey will be successful in obtaining the
necessary entitlements to avoid termination of the Franklin Agreement or the
Iacocca Agreement or an adjustment to the purchase price under the Iacocca
Agreement.
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POSSIBLE TAX CONSEQUENCES
Both the Iacocca Agreement and the Franklin Agreement provide that the
purchasers will cooperate with Cal Jockey in structuring the transactions as
tax-deferred exchanges. It is the present intention of Cal Jockey's Board of
Directors to actively seek income-generating properties that would meet the
investment criteria to be established for this purpose by a committee of the Cal
Jockey Board. To the extent the sales proceeds are used to defray its portion
of the traffic circulation and other off-site improvement costs or to construct
new facilities on Cal Jockey's retained property or are retained by Cal Jockey,
they will not qualify for tax-deferred treatment and they will not be available
for distribution to stockholders. However, it is Cal Jockey's present intention
to borrow the funds for such off-site improvements or new facilities, so that
all of the proceeds could qualify for tax-deferred treatment. See "Financing Cal
Jockey's Share of Off-Site Improvement Costs." There can be no assurances that
the transactions will qualify as tax-deferred exchanges or that suitable
properties for exchange will be located and the exchanges can be effectuated
within the relatively short time periods allowed by applicable IRS regulations.
If the sales of the Training Track Area or the Stable Area cannot be qualified
as tax-deferred exchanges, but the proceeds qualify for capital gains
treatment, Cal Jockey can elect to pass through the gain to its stockholders
who would be taxed at applicable capital gains rates. If the proceeds are not
distributed, the gain will be taxed to Cal Jockey at applicable capital gains
rates. Cal Jockey's basis in the land being sold under the Iacocca Agreement
and the Franklin Agreement is estimated at approximately $27,000 per acre. If
the proceeds do not qualify for capital gains treatment, the gain will be
combined with Cal Jockey's other taxable income, ninety-five percent (95%) of
which must be distributed each year in order to maintain Cal Jockey's status as
a real estate investment trust. Whether a distribution will be made, and the
extent to which it will be made, to the stockholders will depend on a number of
factors, including the amount of the sale proceeds, the projected tax liability
to Cal Jockey of retaining the proceeds, the investment alternatives available
to Cal Jockey and the projected needs of its business. However, there can be no
assurance that Cal Jockey will make any such distribution. Similar treatment
would be applicable to State of California taxes.
FINANCING CAL JOCKEY'S SHARE OF OFF-SITE IMPROVEMENT COSTS
In the absence of any agreement by the purchasers under the Iacocca and Franklin
Agreements agreeing to increase the maximum amount of off-site improvement costs
for which they would bear their proportionate share, unless Cal Jockey elects to
terminate either or both of these Agreements, Cal Jockey will be required to
fund any amounts not otherwise funded by Iacocca or Property Resources. Based
upon the current cost estimates, if neither Agreement is terminated, it is
estimated that Cal Jockey's proportionate share of the off-site improvement
costs will be approximately $8,000,000. Due to the inherent uncertainties
involved in these estimates and the early stage of planning and design, there
can be no assurances that these cost estimates will not be further revised, or
that such cost estimate revisions will not be significant. Further, if only one
of the Agreements is terminated, Cal Jockey's share of the off-site improvement
costs is expected to increase significantly. Cal Jockey intends to use
internally generated funds or to borrow whatever sums are required to defray
these costs. However, there is no assurance that Cal Jockey will have sufficient
internally generated funds or will be able to borrow these funds.
PLANNING FOR TRAINING AND STABLING
Recognizing that the proposed sale of the Training Track Area and the Stable
Area may require locating alternative sites to carry out these activities, Cal
Jockey has been exploring, in conjunction with Bay Meadows, numerous properties
in a variety of nearby locales, including property on the eastern border of
Livermore, which might be acquired for development of a new training and
stabling facility. To date, none of these properties has been determined to be
appropriate. Discussions pertaining to one of the most promising properties, the
one on the eastern border of Livermore, were terminated because of opposition to
the site from Bay Meadows and owners and trainers.
As a result, other alternatives are being explored. One alternative would be to
locate the
-10-
<PAGE> 11
training and stabling at existing facilities off-site which might be expanded
and upgraded to accommodate the activities now being carried on at Bay Meadows.
At this time, the present sites under consideration by Cal Jockey and Bay
Meadows are located in Pleasanton (Alameda County Fairgrounds) and San Jose
(Santa Clara County Fairgrounds). It has also been proposed by certain directors
of Cal Jockey that Cal Jockey and Bay Meadows consider alternatives involving
use of Golden Gate Fields' facilities. However, no such alternatives at Golden
Gate Fields are under consideration at the present time. If an off-site
alternative were to be selected, regardless of where the off-site stabling was
located, an on-site stabling area of approximately 200 stalls would be required
to be built for Bay Meadows' daily needs. Cal Jockey has been discussing with
the County of San Mateo a lease of approximately 3 acres of land which, together
with the main track and adjoining parking areas Cal Jockey is retaining, would
permit the construction of 200 new stalls. There can be no assurances that Cal
Jockey will be able to reach agreement with the County of San Mateo for the
lease of such land or that Cal Jockey could secure the necessary permits to
construct the new stalls.
As an alternative to off-site training and stabling, consideration is being
given to a proposal to construct approximately 900 new stalls at Bay Meadows,
some of which might be recessed into the ground in the infield of the main
track with the balance located in a portion of the existing parking area and
the site on which the north end of the existing grandstand is situated. A
tunnel under the race tracks would have to be installed in order to connect the
stable areas. The north end of the existing grandstand would also have to be
removed to create space for some of the new stables and the remaining
grandstand would have to be renovated and reconfigured. A new training track
possibly could be created on the infield inside the present turf course. An
agreement with the County of San Mateo may have to be reached in connection
with the possible construction of a multi-story parking structure and/or new
barns. Finally, a water treatment facility to deal with waste water from the
barns would have to be constructed, possibly including a retention pond in the
infield. This alternative presents a number of complex planning, financing and
construction issues which are now being jointly explored by Bay Meadows and Cal
Jockey. There can be no assurances that this alternative is financially viable
as the engineering work for this alternative has not yet been commenced, nor
can there be assurances that Cal Jockey will be able to secure the necessary
permits or financing or such agreement with the County of San Mateo as
necessary to implement this alternative.
Cal Jockey is continuing to explore the above alternatives and intends to
consider any other viable alternatives. The extent, if any, to which Bay Meadows
will be affected by the sale of either or both of these properties cannot be
determined at the present time because definitive plans for training and
stabling have not been finalized. If, as a result of the sale of either or both
of these properties, there is a decline in rental income from Bay Meadows, Cal
Jockey believes that by reinvesting a sufficient portion of the sale proceeds in
income generating properties, it may be able to more than offset any such
decline in rental income; however, there can be no assurances as to the extent
to which any decline in rental income will be offset.
LEASE OF RACING FACILITY
Cal Jockey leases substantially all of its real property assets to Bay Meadows
under the terms of a master lease. The term of the master lease expired on March
31, 1996. Bay Meadows is continuing to hold over under the terms of the prior
lease. Bay Meadows and Cal Jockey are negotiating the terms of a new lease.
Under the terms of the expired lease, the annual rental was agreed to be the
greater of $3,000,000 or an aggregate amount equal to specified components of
the pari-mutuel handle, the net commissions received for exported races and
imported races and certain sublease income. It is anticipated that Bay Meadows
and Cal Jockey will reach agreement on the terms of a new lease. (See Note 7
of Notes to Financial Statements.)
SEASONAL VARIATIONS IN BUSINESS
Cal Jockey is subject to significant seasonal variations in revenues primarily
due to the fact that the lease revenues are affected by the seasonality of
Thoroughbred racing. See "Lease of Racing Facility." The following table sets
forth certain financial information concerning Cal Jockey for the quarterly
periods indicated:
-11-
<PAGE> 12
<TABLE>
<CAPTION>
QUARTERS ENDED 1995
--------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RACING DAYS)
<S> <C> <C> <C> <C>
Number of live racing days 20 10 27 51
Total revenues $ 903 $ 734 $1,482 $2,122
Costs and expenses 324 351 431 412
------ ------ ------ ------
Net income $ 579 $ 383 $1,051 $1,710
====== ====== ====== ======
Net income per share $ .10 $ .07 $ .18 $ .30
====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
QUARTERS ENDED 1994
--------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RACING DAYS)
<S> <C> <C> <C> <C>
Number of live racing days 21 0 24 68
Total revenues $ 1,083 $ 444 $ 1,300 $ 2,349
Costs and expenses 343 347 325 541
------- ------ ------- -------
Net income $ 740 $ 97 $ 975 $ 1,808
======= ====== ======= =======
Net income per share $ .13 $ .02 $ .17 $ .31
======= ====== ======= =======
</TABLE>
<TABLE>
<CAPTION>
QUARTERS ENDED 1993
----------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RACING DAYS)
<S> <C> <C> <C> <C>
Number of live racing days 20 0 23 61
Total revenues $ 933 $ 415 $ 1,127 $ 1,509
Costs and expenses 1,788 (1) 545 341 329
------- ------ ------- -------
Net income (loss) $ (855) $ (130) $ 786 $ 1,180
======= ====== ======= =======
Net income (loss) per share $ (.15) $ (.02) $ .14 $ .20
======= ====== ======= =======
</TABLE>
(1) See Item 7 ("Management's Discussion and Analysis of Financial Condition and
Results of Operations").
-12-
<PAGE> 13
CAPITAL IMPROVEMENTS
In 1995, capital improvement expenditures were $219,000 which primarily
consisted of electrical, plumbing and flooring improvements related to offices
and dining areas. See "Cost of Entitlement Process."
WATER TREATMENT SYSTEM
The City of San Mateo (the "City"), along with the State of California, has
mandated that water runoff from Bay Meadows' barn area be disconnected from the
municipal sewer collection system. Cal Jockey is cooperating with the City and
State Regional Water Quality Control Board to resolve this situation and has
prepared preliminary reports describing the proposed compliance measures. The
estimated costs of $1,500,000 are expected to be capitalized in property, plant
and equipment. Therefore, such costs have not been accrued in the accompanying
financial statements. Final determinations and approvals have not been received
nor has a timetable for implementation been established.
If the Stable Area is sold as proposed to Property Resources, the problem with
water runoff as it presently exists would be eliminated or mitigated. However,
under the Franklin Agreement, Cal Jockey has agreed to construct and maintain a
retention pond in the infield of the racetrack for runoff from the 32 acres to
be sold to Franklin Resources. See "Terms of the Pending Sales of the Training
Track and Stable Areas." If and when new barns are built on the property
retained by Cal Jockey, it would be necessary to provide for water runoff as
required by the applicable regulatory authorities.
EMPLOYEES
At December 31, 1995, Cal Jockey had one employee.
COMPETITION
Cal Jockey's financial condition and results of operations are affected by the
various competitive factors affecting Bay Meadows. See the information set forth
below under the caption "Bay Meadows Operating Company - Competition."
BAY MEADOWS OPERATING COMPANY
Bay Meadows is organized under the laws of the State of Delaware. Bay Meadows'
principal executive offices are located at Bay Meadows Racecourse, 2600 South
Delaware Street, P.O. Box 5050, San Mateo, California 94402.
Bay Meadows is a gaming and entertainment company engaged primarily in the
business of offering pari-mutuel wagering on Thoroughbred racing. It also
generates revenues from admissions, parking, program sales, the food and
beverage concession at the racetrack, the indoor tennis club located in close
proximity to the racetrack facilities, and a nine hole golf course located in
the infield of the racetrack. Bay Meadows sublets the racetrack facilities to
the San Mateo County Fair for horse racing events (a two week race meet), and to
trade shows and others for various events.
Substantially all of Bay Meadows' and Cal Jockey's revenues and net income are
derived from the Thoroughbred racing activities of Bay Meadows. The revenues and
net income fluctuate, to some extent, based on the number of days live racing
is conducted. Selected comparative figures* for the last four calendar years
are as follows:
<TABLE>
<CAPTION>
1995 1994 1993 1992**
---- ---- ---- ------
(In thousands, except for racing days)
<S> <C> <C> <C> <C>
Number of live racing days 108 113 104 111
Commissions (Revenue derived
from pari-mutuel wagering) $14,916 $14,871 $12,690 $14,128
Total Revenues of Bay Meadows $50,256 $51,187 $44,642 $48,537
Rent Bay Meadows paid to
Cal Jockey $ 4,762 $ 4,777 $3,607 $4,229
Income of Bay Meadows before
Income Tax Provision $ 936 $ 1,140 $ 174 $ (792)
</TABLE>
* In addition to these daily figures, reference should be made to all of the
schedules and financial statements herein contained.
** In November 1992, Mr. Liebau succeeded Mr. James Conn, a director of Cal
Jockey, as President of Bay Meadows.
While average daily on-track attendance (attendance on live racing days)
declined from 4,663 for the 1994-1995 meet to 4,614 for the 1995-1996 meet,
attendance during the 94-day meet concluded on January 21, 1996 increased by
1.3% on the basis of 1994-1995 comparative days, some of which were at Golden
Gate Fields. Attendance on a comparative day basis (1996 vs. 1995) also
increased during the 46-day meet concluded on March 24, 1996. Because Golden
Gate Fields raced most of the time during the aforementioned 46-day period in
1995, reference, through necessity, is made to attendance at Golden Gate Fields
for comparative day purposes. Because of significant differences between Bay
Meadows and Golden Gate Fields, comparative day calculations using the two race
tracks may not be as meaningful as comparative day calculations for Bay Meadows
alone.
Bay Meadows' management believes it is beginning to attract a younger audience
through its "Friday's Alive" promotion in which patrons 30 and under are
admitted to the Grandstand on Friday nights for $1.00 and beer, soda and hot
dogs are also then made available for a $1.00. While Bay Meadows' management is
somewhat optimistic about the trend of on-track attendance, the continued
decline in off-track attendance is worrisome.
In 1995, Bay Meadows presented an average of 8.9 races a day compared to 8.7 in
1994. The average starters per race in 1995 and 1994 were virtually the same,
7.6.
BAY MEADOWS RACE MEET
Bay Meadows conducts a Thoroughbred racing meet each year at Bay Meadows
Racecourse.
-13-
<PAGE> 14
RACING SEASON
Bay Meadows conducted its 1995 - 1996 114-day meet in three mini-meets.
Beginning on March 22, 1995, Bay Meadows conducted 19 days of live racing which
included make-up days from the 1994-1995 meet which were rained out. This spring
meet concluded on April 13, 1995. On August 25, 1995, Bay Meadows also began a
60-day meet which concluded on November 13, 1995. Finally, on December 6, 1995 a
35-day meet was conducted, concluding on January 21, 1996. As an outdoor
activity, horse racing is more susceptible to inclement weather than some other
leisure time activities. This is particularly true when Bay Meadows conducts
racing during the rainy season. During 1995, Bay Meadows lost two days of racing
because of inclement weather.
CALENDAR YEAR
The Bay Meadows 1995 calendar year included 108 race days of which 11 consisted
of race days from the 1994-1995 racing season that took place in January 1995.
Bay Meadows' remaining race days were part of the 1995-1996 racing season which
was made up of three mini-meets. Beginning on March 22, 1995, Bay Meadows
conducted 19 days of live racing which included make-up days from the 1994-1995
meet which were rained out and it concluded on April 13, 1995. On August 25,
1995, Bay Meadows also began a 60-day meet which concluded on November 13, 1995.
Finally, on December 6, 1995 a meet was started that included 18 racing days by
December 31, 1995.
In addition to live racing at the Racecourse, Bay Meadows simulcasts its live
races to 75 hubs in 28 states and two foreign countries. Throughout the year,
Bay Meadows also accepts the audio-visual signal of races conducted throughout
the United States and in Canada, Mexico and Hong Kong.
In order to conduct a Thoroughbred racing meet and to act as a satellite
facility, Bay Meadows is required to secure, on an annual basis, a license from
the California Horse Racing Board ("CHRB"). The issuance of this annual license
to Bay Meadows is essential for it to continue to conduct Thoroughbred race
meets at Bay Meadows Racecourse. Although Bay Meadows has received a license for
the 1996 race meet, there is no assurance that Bay Meadows will continue to
receive this annual license. See "Proposed Sale of Stable Area and Training
Track Area." Bay Meadows has been granted an annual license each year since
1934.
As a condition of the issuance of a racing license, California law requires that
a certain number of racing days be conducted as charity days. The net proceeds
from these charity days, up to a maximum amount of two-tenths of 1 percent of
on-track handle on live races for the meet, are distributed to beneficiaries
through a nonprofit organization approved by the CHRB. Bay Meadows conducted
five charity days during each of the 1995-1996, 1994-1995, and 1993-1994 race
meets. See "Legal Proceedings."
During 1995, Bay Meadows conducted 22 weeks (108 racing days) of Thoroughbred
racing at Bay Meadows Racecourse, which is the maximum number of racing weeks
permitted by law in the Northern California Racing Zone. There is no assurance
that competition for racing weeks will not affect the allocation of racing days
to Bay Meadows in the future.
Bay Meadows has been allocated 101 days for its 1996 race meet. This allocation
will result in 118 days of racing in the 1996 calendar year. The 1996 calendar
year will consist of 101 days for the 1996 race meet and 17 days being
attributable to the 1995-1996 race meet.
-14-
<PAGE> 15
The following table sets forth information relating to racing days, attendance
and pari-mutuel handle for the racing seasons and calendar years indicated.
<TABLE>
<CAPTION>
RACING SEASONS
-----------------------------------------------------------------------
1995-96 1994-95 1993-94 1992-93 1991-92
(IN THOUSANDS, EXCEPT FOR RACING DAYS)
<S> <C> <C> <C> <C> <C>
Number of live racing days 114 103(1) 105 109 118
Total on-track attendance 508 480 534 567 646
Average daily on-track attendance 4.6 4.7 5.1 5.2 5.5
Total intertrack attendance 593 565 719 741 856
Average daily intertrack attendance 5.2 5.5 6.8 6.8 7.3
Total on-track and intertrack attendance 1,101 1,046 1,253 1,308 1,502
Average daily on-track and intertrack attendance 9.7 10.1 11.9 12.0 12.7
On-track pari-mutuel handle (2) $108,587 $101,303 $104,881 $111,245 $135,669
Intertrack/exported pari-mutuel handle (3) $257,019 $249,026 $148,685 $134,129 $158,580
Out-of-state pari-mutuel handle (4) $ 92,387 $ 57,909 $ 40,111 $ 25,276 $ 25,446
Total pari-mutuel handle $457,993 $408,238 $293,677 $270,650 $319,695
Average total daily pari-mutuel handle $ 4,017 $ 3,963 $ 2,797 $ 2,483 $ 2,709
</TABLE>
<TABLE>
<CAPTION>
CALENDAR YEARS
-----------------------------------------------------------------------
1995 1994 1993 1992 1991
(IN THOUSANDS, EXCEPT FOR RACING DAYS)
<S> <C> <C> <C> <C> <C>
Number of live racing days 108(1) 113 104 111 112
Total on-track attendance 489 536 527 588 612
Average daily on-track attendance 4.5 4.7 5.1 5.3 5.5
Total intertrack attendance 568 652 708 777 798
Average daily intertrack attendance 5.3 5.8 6.8 7.0 7.1
Total on-track and intertrack attendance 1,057 1,188 1,236 1,365 1,410
Average daily on-track and intertrack attendance 9.8 10.5 11.9 12.3 12.6
On-track pari-mutuel handle (2) $103,276 $113,131 $101,852 $117,150 $130,684
Intertrack/exported pari-mutuel handle (3) $278,361 $253,794 $140,153 $140,846 $148,662
Out-of-state pari-mutuel handle (4) $ 82,653 $ 62,286 $ 33,051 $ 26,723 $ 23,527
Total pari-mutuel handle $464,290 $429,211 $275,056 $284,719 $302,873
Average total daily pari-mutuel handle $ 4,299 $ 3,797 $ 2,645 $ 2,565 $ 2,704
</TABLE>
(1) Does not include two racing days which were rained out in January 1995.
(2) Includes wagers placed on Bay Meadows' live races, and handle on
imported races wagered at Bay Meadows when Bay Meadows is conducting its
live racing meet.
(3) Includes handle at Bay Meadows' satellite locations when Bay Meadows is
conducting its live racing meet, wagers placed on Bay Meadows' races
placed at intrastate locations, and nonmerged wagers on Bay Meadows'
races placed at interstate locations.
(4) Includes merged wagers on Bay Meadows' races.
PARI-MUTUEL REVENUES
Bay Meadows' annual revenue is mainly derived from the pari-mutuel revenue that
it receives from wagers made by the public during its race meet. Wagers at Bay
Meadows Racecourse are placed under the pari-mutuel wagering system whereby
individual bettors wager against each other in a pool. A racing association
merely acts as the stakeholder for the wagers made by the public and deducts a
commission which is fixed by California law, and which is shared principally by
the State of California, horsemen (in the form of purses to
-15-
<PAGE> 16
horse owners and in various incentive awards) and the racing association which
is conducting the race meet. Bay Meadows, as the race track operator, has no
interest in the order of finish in any given race.
Pari-mutuel revenues are derived from four sources: wagers made at Bay Meadows
and throughout the Northern California Network on races conducted at Bay
Meadows; wagers made through locations in Southern California and out-of-state
locations on races conducted at Bay Meadows; wagers made on the audio-visual
signal of races conducted in Southern California and at out-of-state locations
(imported simulcast races); and satellite commissions generated when Bay Meadows
operates as an off-track wagering facility. Bay Meadows receives the majority of
its pari-mutuel revenues during its live racing meet when it generates
pari-mutuel revenues from Bay Meadows live races, imported races, and exported
races. Bay Meadows operates as a satellite on a year-round basis; however, the
majority of satellite commissions are earned when Bay Meadows is not conducting
a live race meet.
BAY MEADOWS LIVE RACES (NORTHERN CALIFORNIA NETWORK)
Wagering on Bay Meadows' live races includes wagers placed on Bay Meadows' races
at the Bay Meadows Racecourse ("Live On-Track") and at Northern California
satellite locations ("Live Intertrack"). During calendar year 1995, commissions
to Bay Meadows approximated 6.6% of Live On-Track handle and 4.4% of Live
Intertrack handle.
The CHRB has the authority to permit racing associations, or county fairs in
California, to operate as intertrack wagering facilities if specified conditions
are met. At present, intertrack wagering on races conducted at Bay Meadows is
permitted at eleven different race tracks or fair locations considered to be
within the Northern California Network. Under the intertrack wagering system,
patrons at intertrack wagering facilities place wagers on races conducted at Bay
Meadows. The amounts wagered at the intertrack wagering facilities are pooled
with the wagers placed at Bay Meadows to form the pari-mutuel wagering pool on
which Bay Meadows receives a commission set by state law.
The following schedule details the allocation of 1995 pari-mutuel handle for Bay
Meadows' live races:
BAY MEADOWS LIVE RACES
<TABLE>
<CAPTION>
TOTAL
BAY MEADOWS
LIVE RACES
ALLOCATION OF PARI-MUTUEL HANDLE -------------------
(DOLLARS IN THOUSANDS) ON TRACK INTERTRACK DOLLARS PERCENT
<S> <C> <C> <C> <C>
Racing Association (Bay Meadows) $ 4,020 $ 2,911 $ 6,931 5.42%
Municipal racing fees 202 220 422 0.33
State of California 3,606 2,308 5,914 4.62
Incentive awards 284 332 616 0.48
Equine research 61 67 128 0.10
Purses to horse owners 3,730 3,119 6,849 5.35
Simulcast operating expense fund 1,810 1,810 1.42
Satellite promotional fund 348 348 0.27
Vanning and stabling fund 320 320 0.25
Commissions paid to guest tracks 1,334 1,334 1.04
Return to public as winnings 49,358 53,951 103,309 80.72
-------- -------- -------- ------
Total $ 61,261 $ 66,720 $127,981 100.00%
======== ======== ======== ======
</TABLE>
-16-
<PAGE> 17
IMPORTED RACES
Currently, Bay Meadows imports races from Southern California ("Intrastate
Races"), and from out-of-state locations within the United States
("Interstate"). In addition, during 1995, Bay Meadows joined Hollywood Park in
importing certain races from Hong Kong with Bay Meadows acting as the United
States hub (included in Interstate figures in table below). Approximately 90% of
imported handle was derived from Intrastate races, 9% was derived from
out-of-state races, and approximately 1% was derived from Hong Kong races.
Similar to Bay Meadows' live races, imported races are sent from Bay Meadows to
intertrack wagering locations.
Bay Meadows pays a fee to the host track for the right to wager on the imported
race. Imported racing fees, are determined by contract with each host track and
generally ranged from 2.5% to 3.75% of handle during the 1995 calendar year. The
maximum amount payable to a host track for an intrastate race is 2.5% of handle.
The following schedule details the allocation of 1995 pari-mutuel handle for
imported races:
IMPORTED RACES
<TABLE>
<CAPTION>
TOTAL IMPORTED
INTERSTATE INTRASTATE RACES
ALLOCATION OF PARI-MUTUEL HANDLE ---------------------- ---------------------- ---------------------
(DOLLARS IN THOUSANDS) ON TRACK INTERTRACK ON TRACK INTERTRACK DOLLARS PERCENT
<S> <C> <C> <C> <C> <C> <C>
Racing Association (Bay Meadows) $ 218 $ 241 $ 1,981 $ 2,859 $ 5,299 4.60%
Municipal racing fees 15 21 103 185 324 0.28
State of California 273 217 1,096 1,961 3,547 3.08
Incentive awards 25 28 167 299 519 0.45
Equine research 5 6 37 67 115 0.10
Imported racing fees 180 252 935 1,673 3,040 2.64
Purses to horse owners 191 214 1,955 2,812 5,172 4.49
Simulcast operating expense fund 115 885 1,589 2,589 2.24
Satellite promotional fund 27 27 0.02
Vanning and stabling fund 25 157 267 449 0.39
Commissions paid to guest tracks 93 1,121 1,214 1.05
Return to public as winnings 3,714 5,117 30,077 54,088 92,996 80.66
-------- -------- -------- -------- -------- ------
Total $ 4,621 $ 6,356 $ 37,393 $ 66,921 $115,291 100.00%
======== ======== ======== ======== ======== ======
</TABLE>
EXPORTED RACES
Currently, Bay Meadows exports races to intrastate locations, out-of-state
locations within the United States, and two international locations: Canada and
Mexico (included in Interstate figures in table below). Approximately 60% of
handle on exported races was derived from intrastate locations.
Bay Meadows receives an export racing fee which is determined by contract with
each out-of-state guest location. Export racing fees received from out-of-state
guest locations generally ranged from 2.5% to 3.75% of handle for the 1995
calendar year and are statutorily divided among commissions, purses, the State
of California, and incentive awards. During 1995, export fees received from
Southern California race tracks ranged from 1.80% to 2.50% and are statutorily
split between commissions and purses.
-17-
<PAGE> 18
The following schedule details the allocation of 1995 pari-mutuel handle for
exported races:
<TABLE>
<CAPTION>
EXPORTED RACES TOTAL EXPORTED
INTERSTATE RACES
----------------------- -------------------
ALLOCATION OF PARI-MUTUEL HANDLE
(DOLLARS IN THOUSANDS) MERGED NON-MERGED INTRASTATE DOLLARS PERCENT
<S> <C> <C> <C> <C> <C>
Racing Association (Bay Meadows) $ 1,096 $ 77 $ 1,345 $ 2,518 1.14%
State of California 196 14 210 0.10
Incentive awards 68 5 73 0.03
Purses to horse owners 1,096 77 1,345 2,518 1.14
Retained by guest tracks 80,197 6,158 129,343 215,698 97.59
-------- -------- -------- -------- ------
Total $ 82,653 $ 6,331 $132,033 $221,017 100.00%
======== ======== ======== ======== ======
</TABLE>
The following schedule is a summary of the 1995 pari-mutuel schedules detailed
previously in this section:
<TABLE>
<CAPTION>
ALLOCATION OF PARI-MUTUEL HANDLE DOLLARS PERCENT
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Racing Association (Bay Meadows) $ 14,748 3.18%
Municipal racing fees 746 0.16
State of California 9,671 2.08
Incentive awards 1,208 0.26
Equine research 243 0.05
Imported racing fees 3,040 0.65
Purses to horse owners 14,539 3.13
Simulcast operating expense fund 4,399 0.95
Satellite promotional fund 375 0.08
Vanning and stabling fund 769 0.17
Commissions paid to guest tracks 2,548 0.55
Retained by guest tracks (exported races) 215,699 46.46
Return to public as winnings (Bay Meadows pools) 196,305 42.28
-------- ------
Total $464,290 100.00%
======== ======
</TABLE>
BAY MEADOWS - SATELLITE LOCATION
Bay Meadows operates as an intertrack satellite wagering facility throughout the
year; however, the majority of satellite commissions are earned when live races
are not conducted at Bay Meadows. Bay Meadows, during its off season, primarily
serves as an intertrack wagering satellite for Golden Gate Fields in Northern
California, and various fair locations. During 1995, Bay Meadows received
satellite commissions ranging from 1.63% to 2.02%.
-18-
<PAGE> 19
The following schedule details the distribution of Satellite commissions earned
on live races, intrastate races, and interstate races:
<TABLE>
<CAPTION>
COMMISSION
HANDLE COMMISSION PERCENTAGE
<S> <C> <C> <C>
Live races (1) $50,601 $ 1,026 2.02%
Races from Southern California (2) 34,075 569 1.67%
Interstate races (3) 6,584 107 1.63%
------- ------- ----
Total $91,260 $ 1,702 1.87%
======= ======= ====
</TABLE>
(1) Races run at intertrack locations within the Northern California Network.
(2) Races imported from within California to the Northern California Network.
(3) Races imported from outside California to the Northern California Network.
SEASONAL VARIATIONS IN BUSINESS
Bay Meadows' revenues are subject to seasonal variations. Historically, the Bay
Meadows racing meet, from which Bay Meadows derives a major portion of its
revenues, has commenced in August each year and has ended the following January.
(See "Bay Meadows Race Meet" in this section for information on the timing of
the 1995-1996 race meet.) This seasonal variation is indicated by the financial
information for Bay Meadows Operating Company and Subsidiary set forth below for
the quarterly periods indicated.
BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY
<TABLE>
<CAPTION>
QUARTERS ENDED 1995
-----------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RACING DAYS)
<S> <C> <C> <C> <C>
Number of live racing days 20 10 27 51
Total revenues $ 9,587 $ 7,238 $13,058 $20,373
Costs and expenses $ 9,461 $ 7,465 $13,022 $19,372
Net income (loss) $ 68 $ (123) $ 20 $ 512
Net income (loss) per share $ .01 $ .02 $ .01 $ .09
</TABLE>
<TABLE>
<CAPTION>
QUARTERS ENDED 1994
-------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RACING DAYS)
<S> <C> <C> <C> <C>
Number of live racing race days 21 0 24 68
Total revenues $ 9,979 $ 2,421 $11,716 $27,071
Costs and expenses $ 9,774 $ 3,549 $11,621 $25,103
Net income (loss) $ 205 $(1,128) $ 443 $ 1,072
Net income (loss) per share $ .04 $ (.20) $ .08 $ .18
</TABLE>
-19-
<PAGE> 20
<TABLE>
<CAPTION>
QUARTERS ENDED 1993
---------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RACING DAYS)
<S> <C> <C> <C> <C>
Number of live racing days 20 0 23 61
Total revenues $ 9,040 $ 2,347 $ 8,263 $24,992
Costs and expenses $ 9,389 $ 3,628 $ 9,156 $22,295
Net income (loss) $ (349) $(1,281) $ (893) $ 2,697
Net income (loss) per share $ (.06) $ (.22) $ (.16) $ .47
</TABLE>
PROPOSED SALE OF STABLE AREA AND TRAINING TRACK AREA
Cal Jockey has entered into agreements to sell the Stable Area on which most all
of the horses racing at Bay Meadows are stabled and to sell the Training Track
Area, a 40-acre site on which a 5/8 mile training track is now situated. See
"Pending Sales and Negotiations" and "Terms of the Pending Sales of the Training
Track and Stable Areas." Initially, the management of Bay Meadows thought that
the 75-acre Stable Area and Training Track Area could be sold without
jeopardizing Bay Meadows' racing operations assuming appropriate alternative
training and stabling facilities were made available. Besides Bay Meadows'
management being concerned that such facilities have not yet been identified,
management of Bay Meadows underestimated the extent of the negative reaction of
owners and trainers to the sale of the Stable Area. Consequently, Bay Meadows
now believes that the sale of either or both of these parcels may adversely
impact the present operation of the Bay Meadows Racecourse. However, until
definitive plans for alternative stabling and training arrangements are
finalized, the magnitude of the effects on Bay Meadows' operations cannot be
determined.
At the present time, Bay Meadows and Cal Jockey are considering the possibility
of establishing a training and stable area at an off-site location, as well as
the possibility of constructing a stable area on the property being retained by
Cal Jockey, approximately 103 acres, and certain additional property now owned
by the County of San Mateo. There can be no assurance that the property owned by
the County of San Mateo will be made available for use as a stable area or that
such use will be permitted by the applicable regulatory authorities. See
"Planning for Training and Stabling."
If a suitable off-site location is found for the establishment of a training and
stabling area, it will then be necessary to van horses to and from the Bay
Meadows Racecourse. Bay Meadows' management believes that the cost of vanning
horses to and from the off-site location and maintaining a second facility
would represent additional costs of operation. The exact amount of such
additional costs, and other costs associated with operating at two locations,
cannot be determined at this time.
The concept of training and stabling horses at an off-site location has been
vigorously protested by trainers and owners. The Thoroughbred Owners of
California, the organization recognized by the CHRB as representing owners, and
the Horsemen's Benevolent and Protective Association, the organization
recognized by the CHRB as representing trainers, have advised Bay Meadows that
each does not approve of horses being stabled and trained at an off-site
location as a long-term solution. Bay Meadows' inability to stable a
sufficient number of horses at the Bay Meadows Racecourse could result in Bay
Meadows being allocated less favorable racing dates and/or fewer racing days
by the CHRB. Irrespective of the impact these proposed sales will have on Bay
Meadows' allocation of racing days and/or dates, horse trainers' and owners'
concerns with racing and training horses at different locations could
adversely affect the quantity and quality of horses racing at Bay Meadows
Racecourse which, in turn, could adversely affect Bay Meadows' operations.
Bay Meadows' Board of Directors has concluded that it is prudent for any
off-site location to be able to be developed into a full-fledged racing
facility. In this regard, if an off-site location is selected, Bay Meadows'
Board believes it is in the best interest of Bay Meadows for training and racing
to be conducted as soon as reasonably feasible at the same location.
-20-
<PAGE> 21
If horses are stabled and trained at an off-site location, it will be necessary
to construct approximately 200 stalls at the Bay Meadows Racecourse to serve as
transit stalls. The space retained by Cal Jockey for the construction of such
stalls and associated activities has proven to be inadequate. Cal Jockey has
been negotiating with the County of San Mateo to secure additional space needed
for a staging area for use in the loading and unloading of horses from vans.
There is no assurance that the requisite space will be made available by the
County of San Mateo. Additionally, the construction of approximately 200 stalls
is subject to obtaining approvals from the applicable regulatory authorities and
there is no assurance such approvals will be forthcoming.
As to the possibility of building barns on the property being retained by Cal
Jockey, it does not appear possible to build more than 900 stalls on the
property Cal Jockey has retained. This is a reduction of 650 stalls from the
current number of stalls. In order to build approximately 900 stalls, it will be
necessary for a majority, but not all, of those stalls to be constructed in the
infield of the racetrack. Depending upon their design and engineering and
regulatory constraints, the building of barns in the infield could jeopardize
the prevailing, unobstructed sight-lines, thereby impairing the view of a race.
No other racetrack is known to have barns in its infield. In order to build
approximately 900 stalls, it will be necessary to dismantle part of the existing
grandstand. Because of the historical decline in on-track attendance over the
years, the contemplated decrease in the size of the grandstand is not expected
to adversely affect Bay Meadows' operations. The exact cost of dismantling a
portion of the existing grandstand and renovating the remaining portion is
unknown at this time, nor is the exact cost of building approximately 900 stalls
presently known. Also, the building of some of the barns on a portion of the
present parking area will reduce the amount of available parking space and could
adversely impact patronage. The construction of approximately 900 stalls and the
dismantling and renovation of the grandstand is subject to obtaining the
requisite approvals from the applicable regulatory authorities and there is no
assurance such approvals will be forthcoming. As with the possibility of horses
being trained and stabled at an off-site location, reducing the number of stalls
from the 1,550 now on site could result in Bay Meadows being allocated less
favorable racing dates and/or fewer racing days. However, Bay Meadows'
management believes that having approximately 900 stalls would be satisfactory
to avoid any adverse affect on racing days and/or dates, although there can be
no assurances as to this.
If approximately 900 stalls were constructed on the property retained by Cal
Jockey, the present operation of Bay Meadows would still be hampered by the lack
of a training track. Because of the customary amount of rainfall in the area of
the Bay Meadows Racecourse, a training track is a distinct advantage when the
main track is unavailable for training because of wet conditions. The
feasibility of constructing a training track in a portion of the infield of the
existing track is now being studied.
The operation of the Bay Meadows Racecourse could be adversely impacted if the
contemplated sales of the Stable Area and Training Track Area were consummated
prior to suitable arrangements being made for alternative training and stabling.
Given the present uncertainties as to the location of the future training and
stabling sites and the timetable for consummating the planned sales, the
earliest closing date being August, 1997, there can be no assurances that an
off-site training and stabling site will be ready for use, or in the
alternative that the construction of approximately 900 stalls at Bay Meadows
Racecourse will be completed, by the time the existing training track and
stable area are sold. It is possible that construction at the Bay Meadows
Racecourse might require Bay Meadows, for some undetermined period, to conduct
racing at another venue.
Since Bay Meadows does not own the Bay Meadows Racecourse and has limited
capital, it is not in a position either to make the necessary improvements to
the Bay Meadows Racecourse that would enable racing to continue unimpaired at
such location or to secure a site and construct thereon a suitable stabling and
training facility. Bay Meadows is dependent on Cal Jockey to provide the funds
for the necessary improvements to the
-21-
<PAGE> 22
Bay Meadows Racecourse and/or the off-site stabling and training facility. Cal
Jockey has indicated an inclination to fund to the extent practicable any
economically viable alternative. However, because there has been no definitive
proposal upon which Cal Jockey can act, Bay Meadows has not received a firm
commitment from Cal Jockey as to any specific expenditures that Cal Jockey would
make.
LEGISLATION
Because thoroughbred racing is highly regulated by the State of California, the
enactment of new legislation can impact Bay Meadows both in a positive and
negative manner. Because of the myriad of legislative bills ("Bills")
pertaining to gaming and racing introduced each year in the California
Legislature, it is impossible for management to identify which ones will
receive serious consideration, much less be enacted. However, a number of
Bills that have been introduced might impact Bay Meadows.
Among the Bills that would positively impact Bay Meadows is one which provides
that the State License Fee for any calendar year shall be the lesser of the rate
provided under existing California law or the rate of the mean average of the
effective pari-mutuel tax rates of the eight States in the Country with the
largest pari-mutuel handle. The enactment of this Bill would increase the net
revenues of racetracks and increase purses.
A Bill has been introduced that would amend the Incentive Program for
California-bred Thoroughbreds. The author of the Bill believes that its
enactment would stimulate the breeding of Thoroughbreds in California and
thereby eventually increase the horse population at California racetracks.
A Bill has been introduced that prohibits wagering on out-of-state and
out-of-country race cards when those races overlap with any live race in the
State of California. The enactment of this Bill would prohibit Bay Meadows from
importing certain races from Hong Kong and Canada.
There is also considerable concern in the industry that the expansion of Indian
Gaming (untaxed gaming on reservations) might negatively impact horse racing,
and several Bills introduced at both the national and state levels might either
expand or contract the potential of Indian Gaming.
Management expresses no views on the likelihood of any of the aforementioned
Bills becoming law and can give no assurance that legislation harmful to Bay
Meadows will not be introduced or enacted or that legislation favorable to Bay
Meadows will be introduced or enacted.
CONCESSIONAIRE
Bay Meadows Catering ("Catering"), a wholly owned subsidiary of Bay Meadows,
provides food and beverage service at refreshment stands located in the
Grandstand and Clubhouse areas of the racetrack facility pursuant to a
concession granted to it by Bay Meadows. Catering enters into contracts with
racing associations which sublease Bay Meadows Racecourse to provide such food
and beverage service. Catering pays a percentage of its sales to the respective
horse racing associations for this concession during their racing meets.
Since August 1993, Bay Meadows has contracted with Butler Catering, an
independent concessionaire, to provide food and beverage services in the bars
and restaurants located in the Turf Club and Clubhouse of the racetrack
facility. Butler Catering pays Bay Meadows a percentage on certain sales and it
is responsible for all costs and expenses associated with its operation. The
contract with Butler Catering terminated, under its terms, on March 31, 1996.
At the present time there are no discussions under way to renew or extend the
contract.
INDOOR TENNIS CLUB AND GOLF COURSE
Bay Meadows manages and operates the Sundown Tennis Club, an indoor tennis
facility, on approximately 2.4 acres of land in close proximity to the racetrack
facility. This tennis facility consists of a 36,000 square foot building
containing five indoor tennis courts. Bay Meadows also manages and operates a
nine-hole golf course
-22-
<PAGE> 23
in the infield of the racetrack. The real estate and improvements consisting of
the indoor tennis club and the golf course are included in the premises owned by
Cal Jockey and leased to Bay Meadows.
CAPITAL IMPROVEMENTS
Capital improvement expenditures in 1995 were $499,000, consisting primarily of
buildouts relating to the renovation and improvements of several different
areas, such as a Deli and Bar area in the lower Clubhouse and a bar area in the
Turf Club. In addition, a television studio was under construction at year end.
It is estimated that the cost of constructing and equipping the television
studio will approximate One Million Five Hundred Thousand Dollars ($1,500,000).
EMPLOYEES
Bay Meadows employs approximately 200 employees throughout the year and an
additional 350-550 seasonal employees on racing days. Bay Meadows believes it
has good relations with its employees. Most of Bay Meadows' seasonal employees
are members of various unions.
COMPETITION
Racing dates are allocated annually by the CHRB and, to the extent possible, are
allocated in a manner to avoid overlaps in Northern California. Historically,
the dates allocated to Bay Meadows and Golden Gate Fields, the other racing
association in the San Francisco Bay Area, have not overlapped. However, Bay
Meadows has been allocated dates, from time to time, that have resulted in it
conducting racing concurrently with the California State Fair in Sacramento,
California and the Big Fresno Fair in Fresno, California. Over the last two
years, competition for racing dates has increased among Bay Meadows, Golden Gate
Fields and some County Fairs. It can no longer be assumed that a racetrack will
be allocated its historical dates by the CHRB. See "Bay Meadows Race Meet" and
"Proposed Sale of Stable Area and Training Track Area."
While Bay Meadows, when it is conducting live racing, has little direct
competition from other tracks in the San Francisco Bay Area, competition appears
to be developing through telephone betting accounts being offered by off-track
wagering facilities in various states (New York, Connecticut, Pennsylvania,
etc.) and foreign countries. There is some question as to the legality of these
facilities accepting wagers from individuals within California.
To some extent, Bay Meadows competes with off-track wagering facilities in
Northern California for patrons. Because of distance and traffic congestion, a
patron might find wagering at an off-track wagering facility to be more
convenient.
The San Francisco Bay Area annually has numerous professional and amateur
sporting events and other entertainment attractions which compete with Bay
Meadows for the sports and entertainment dollar. Bay Meadows also competes with
other forms of legalized gambling, particularly Indian gaming and others such as
the California State lottery and local card clubs. It is very difficult,
however, to evaluate the competitive impact of these other forms of
entertainment and gambling on the operations of Bay Meadows, other than to say
they are significant.
During the last few years, racetracks throughout the United States have
experienced a decline in their horse population. As a result of this decline,
there has been reduction in the size of the fields competing in races.
Generally, the amount wagered on a given race is impacted by the size of the
field. Bay Meadows competes for horses with other tracks throughout the United
States and, particularly, with tracks in Southern California and
-23-
<PAGE> 24
Arizona. Over the last few years, Bay Meadows has attracted a number of horses
from the State of Washington because of the closure of the Longacres Racecourse.
In 1996, a new track is opening in the State of Washington, Emerald Downs (June
20-November 4, 1996 Thoroughbred racing meet), and it is anticipated that a
number of horses presently in Northern California will move to Washington.
OTHER MATTERS
Bay Meadows filed an application with the City of San Mateo in February 1995 to
permit the establishment of a 50-table Card Club ("Card Club") at Bay Meadows.
In November 1995, the measure permitting the establishment of a Card Club at Bay
Meadows was rejected by the voters of the City of San Mateo. In 1994 and 1995,
Bay Meadows expended $209,000 and $666,000, respectively, in connection with its
unsuccessful attempt to establish the Card Club.
ITEM 2. PROPERTIES
Information with respect to the property owned by Cal Jockey and Bay Meadows is
set forth under Item 1 - "Business" and incorporated herein by reference.
ITEM 3. LEGAL PROCEEDINGS
Bay Meadows and Cal Jockey are, in the ordinary course of business, involved in
litigation and other legal matters. The employment-related law suit, James
Burkes v Bay Meadows Racing Association, Bay Meadows Catering and Bill Caldwell,
was settled in early 1995.
Cal Jockey is party to an administrative proceeding with the City of San Mateo
regarding the treatment of the waste water from the Bay Meadows barn area (See
Item 1 - "California Jockey Club - Water Treatment System").
Bay Meadows Foundation v. Bay Meadows Operating Company and California Jockey
Club
On December 29, 1995, the Bay Meadows Foundation filed a complaint in San Mateo
Superior Court against Cal Jockey and Bay Meadows. The complaint alleges failure
to properly calculate and pay charity proceeds as required by law and includes
causes of action for violation of statute, breach of fiduciary duty and
imposition of a constructive trust and accounting. Specifically, the complaint
alleges that Bay Meadows improperly deducted rent payments made to its
affiliate, Cal Jockey, from the charity net proceeds. The complaint also seeks
punitive damages and attorney's fees. On March 25, 1996, Cal Jockey and Bay
Meadows filed their answer to the complaint. The answer denies the allegations
of the complaint and asserts affirmative defenses against the Bay Meadows
Foundation. Specifically, Cal Jockey and Bay Meadows maintain that the deduction
of rent payments was lawful and consistent with both the administrative
determination made by the California Horse Racing Board ("CHRB") in 1991 that
such rent payments were deductible and the financial reporting instructions
subsequently promulgated by the CHRB. The parties are currently engaged in civil
discovery and Cal Jockey and Bay Meadows plan to vigorously defend themselves
against the lawsuit.
Pauline Madera v. Bay Meadows Operating Company and Morris Webb
On December 20, 1995, Ms. Madera, a current employee of Bay Meadows Catering,
filed a complaint for damages for sexual battery, intentional infliction of
emotional distress, negligent infliction of emotional distress and sexual
harassment in violation of public policy. The complaint seeks unspecified
damages. Mr. Webb is a former employee of Bay Meadows Catering. Defendant
answered and removed the action to federal court. Pursuant to federal rules,
discovery is stayed until May 17, 1996, when the parties will appear in court
for the
-24-
<PAGE> 25
initial case management conference. Neither Ms. Madera nor Mr. Webb were or are
employed in a management or supervisory position by Bay Meadows. Bay Meadows
plans to vigorously defend against the lawsuit.
Management believes that the pending legal actions against either of the
Companies are not expected to have a material impact on the separate or combined
financial statements of the Companies.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Inapplicable.
PART II
ITEM 5. MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The shares of Common Stock of the Companies are paired such that they are
transferable and tradable only in combination as units, each unit consisting of
one share of Common Stock, $.01 par value per share, of Bay Meadows ("BMOC
Common Stock") and one share of Common Stock, $.01 par value per share, of Cal
Jockey ("CJC Common Stock" and, together with the BMOC Common Stock, the "Paired
Common Stock"). These restrictions on transfer are imposed by the bylaws of the
Companies. The pairing is evidenced by "back-to-back" certificates and the
certificates bear a legend referring to the restrictions on transfer imposed by
the bylaws of the Companies. As a result, a stockholder can only purchase or
sell an equal number of shares of both companies. The Paired Common Stock is
traded on the American Stock Exchange, Inc. (symbol CJ). The following table
sets forth, for the fiscal quarters indicated, the high and low sales prices for
the Paired Common Stock, and the cash dividends paid by Cal Jockey on the CJC
Common Stock for the periods indicated. The prices are as reported by the
American Stock Exchange, Inc.
<TABLE>
<CAPTION>
Cash Dividends
Per Share
High Low Paid by Cal Jockey
---- --- ------------------
<S> <C> <C> <C>
Fiscal 1995 Quarter Ended: 17-1/4 13-3/4
March 31, 1995 16-3/4 14-1/2 $.25
June 30, 1995 16-3/8 15-5/8
September 30, 1995 16-3/8 14 $.40
December 31, 1995
Fiscal 1994 Quarter Ended:
March 31, 1994 18-5/8 12-1/2
June 30, 1994 18-7/8 15-1/2 $.15
September 30, 1994 21 15-3/4
December 31, 1994 17 13-5/8 $.45
</TABLE>
As of March 15, 1996, there were approximately 2,640 stockholders of record of
the Paired Common Stock.
Cal Jockey has paid, and intends to continue to pay, regular semi-annual
dividends based on management's estimate of earnings for the entire calendar
year and, if necessary, to pay special dividends after the close of the
-25-
<PAGE> 26
year to effect distribution of at least 95% of its taxable net income (other
than net capital gains), so as to continue to qualify as a real estate
investment trust.
Bay Meadows has not paid cash dividends on the BMOC Common Stock since its
formation and does not expect to pay cash dividends in the foreseeable future.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", the financial statements and related notes thereto.
COMBINED SELECTED FINANCIAL DATA
CALIFORNIA JOCKEY CLUB AND
BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------
1995 1994 1993 1992 1991
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RACING DAYS)
<S> <C> <C> <C> <C> <C>
Number of live racing days 108 113 104 111 112
Operating Data:
Revenues $50,709 $51,575 $44,993 $48,985 $53,293
Net income 4,200 4,212 1,153(1) 2,150 4,399
Net income per share .73 .73 .20(1) .37 .76
Cash dividends per share .65 .60 .30 .60 .80
Balance Sheet Data:
Total assets $37,935 $36,786 $44,993 $33,999 $37,083
</TABLE>
SELECTED FINANCIAL DATA
CALIFORNIA JOCKEY CLUB
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------------------
1995 1994 1993 1992 1991
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RACING DAYS)
<S> <C> <C> <C> <C> <C>
Number of live racing days 108 113 104 111 112
Operating Data:
Revenues $ 5,241 $ 5,176 $ 3,984 $ 4,736 $ 5,794
Net income 3,723 3,620 980(1) 2,854 4,260
Net income per share .65 .63 .17(1) .49 .74
Cash dividends per share .65 .60 .30 .60 .80
Balance Sheet Data:
Total assets $22,147 $22,129 $21,914 $23,950 $25,099
</TABLE>
-26-
<PAGE> 27
CONSOLIDATED SELECTED FINANCIAL DATA
BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------
1995 1994 1993 1992 1991
(IN THOUSANDS, EXCEPT PER SHARE DATA AND RACING DAYS)
<S> <C> <C> <C> <C> <C>
Number of live racing days 108 113 104 111 112
Operating Data:
Revenues $ 50,256 $ 51,187 $ 44,642 $ 48,537 $ 52,607
Net income 477 592 173 (692) 155
Net income per share .08 .10 .03 (.12) .02
Cash dividends per share - - - - -
Balance Sheet Data:
Total assets $ 16,357 $ 16,648 $ 10,821 $ 11,263 $ 13,175
</TABLE>
- --------------
(1) Includes a charge of $1,400,000 recorded as a result of litigation
settlement.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Any forward looking statements contained in the following discussion or
elsewhere in this document involve risks and uncertainties which may cause
actual results to differ materially from those discussed. A wide range of
factors could contribute to those differences, including those discussed in this
document.
GENERAL
The results of operations of Cal Jockey and Bay Meadows are dependent upon the
operations of Bay Meadows Racecourse as a live Thoroughbred racing facility and
as a simulcast wagering facility for other racing associations. The operations
of this facility are the primary source of the Companies' respective revenues
and net income. Cal Jockey's income is almost entirely dependent upon collection
of rent from Bay Meadows pursuant to a master lease.
Bay Meadows' income is primarily dependent upon the success of the Thoroughbred
racing meet it conducts. The total number of Bay Meadows' racing days has
increased from 81 days in 1985 to a high of 114 days in 1990. In the 1995
calendar year, Bay Meadows raced 108 days and it plans to conduct 118 racing
days in the 1996 calendar year. Since the introduction of intertrack wagering in
October 1985, the components of Bay Meadows' revenues have continued to change.
Starting with the 1990-1991 racing meet, several interstate locations were
included in Bay Meadows' pari-mutuel pools. Additionally, the expansion of
intrastate wagering has positively impacted handle on exported races. While all
of these factors have contributed to an increase in the total pari-mutuel handle
from $192,378,000 in 1985, to $464,290,000 in 1995, the profitability of each of
the components of the handle is different. In 1995, the total pari-mutuel handle
was comprised of 45.3% live handle, 22.5% intrastate handle, 2.4% interstate
handle and 29.8% exported signal.
In addition, the related decline in daily average on-track attendance from
approximately 8,700 in 1985 to approximately 4,500 in 1995, has had a material
impact on non-wagering revenue sources (food, beverage and gift shop sales,
admissions, parking fees and program sales). The daily average on-track
attendance for 1995 decreased approximately 4.3% compared to the prior year.
-27-
<PAGE> 28
Under the terms of the master lease agreement, Bay Meadows' percentage rental
payments to Cal Jockey are based on the amount of pari-mutuel handle derived
from wagers on Bay Meadows' live Thoroughbred racing meet and wagers placed at
Bay Meadows Racecourse when it serves as a simulcast wagering facility for other
racing associations (See Item 1 - "California Jockey Club - Lease of Racing
Facilities"). Bay Meadows also collects additional revenue by subleasing the
racecourse facilities to the San Mateo County Fair and others.
CALIFORNIA JOCKEY CLUB
RESULTS OF OPERATIONS: YEAR ENDED DECEMBER 31, 1995 COMPARED WITH YEAR ENDED
DECEMBER 31, 1994
In 1995, total revenues for Cal Jockey increased $65,000 (1%), compared to the
prior year. Rental income derived from the leasing of its racing facility
decreased $34,000 (1%). This decrease was primarily the result of Bay Meadows
racing five fewer days in the calendar year compared to the prior year. Total
interest income increased $106,000 from the prior year, primarily as a result of
a higher average balance of investments.
While total expenses for 1995 decreased $38,000 (2%) compared to 1994, General
and Administrative expense increased $145,000.
RESULTS OF OPERATIONS: YEAR ENDED DECEMBER 31, 1994 COMPARED WITH YEAR ENDED
DECEMBER 31, 1993
In 1994, total revenues for Cal Jockey increased $1,192,000 (30%), compared to
the prior year. Rental income derived from the leasing of its racing facility
increased $1,170,000 (32%). This increase was primarily the result of Bay
Meadows' higher average daily handle, on which the rent is calculated, and Bay
Meadows racing nine more days in the calendar year compared to the prior year.
Total interest income increased $32,000 from the prior year, primarily as a
result of a higher average balance of investments.
Total expenses for 1994 decreased $1,448,000 (48%) compared to 1993. This was
primarily the result of the non-recurrence of a $1,400,000 charge for settlement
of the Bay Meadows Partners dispute taken in 1993. In addition, a loss was
recorded in the amount of $162,000 relating to the disposal of fixed assets.
LIQUIDITY AND CAPITAL RESOURCES
The liquid assets (cash and marketable securities) of Cal Jockey increased to
$9,253,000 at December 31, 1995 from $8,357,000 at December 31, 1994. Cal Jockey
has guaranteed a $6,000,000 line of credit that Bay Meadows has with a bank and
which expires on May 31, 1996, none of which was outstanding as of December 31,
1995. Bay Meadows has agreed to pay California Jockey a fee equal to .25% per
annum of the value of the collateral that secures the line of credit. As of
December 31, 1995, there was no collateral securing the line of credit.
The City of San Mateo (the "City"), along with the State of California, has
mandated that water runoff from Bay Meadows' barn area be disconnected from the
municipal sewer collection system. Cal Jockey is cooperating with the City and
State Regional Water Quality Control Board to resolve this situation; and has
prepared preliminary reports describing the proposed compliance measures. The
estimated costs of $1,500,000 are expected to be capitalized in Property, Plant
and Equipment. Therefore, such costs have not been accrued in the accompanying
financial statements. Final determinations and approvals have not been received
nor has a schedule for implementation been established.
-28-
<PAGE> 29
If the Stable Area is sold as proposed to Property Resources, the problem with
water runoff as it presently exists would be eliminated or mitigated. However,
under the Franklin Agreement, Cal Jockey has agreed to construct and maintain a
retention pond for runoff from the 32 acres to be sold to Property Resources.
See Item 1 -- Cal Jockey -- "Terms of the Pending Sales of the Training Track
and Stable Areas." If and when new barns are built on the property retained by
Cal Jockey, it would be necessary to provide for water runoff as required by
applicable regulatory authorities. The costs to Cal Jockey of these projects are
expected to be capitalized in Property, Plant and Equipment.
Cal Jockey anticipates that funds generated internally and its cash reserves
will be sufficient to meet its liquidity requirements for the foreseeable
future.
INFLATION
Inflation is not expected to materially impact Cal Jockey.
BAY MEADOWS OPERATING COMPANY
RESULTS OF OPERATIONS: YEAR ENDED DECEMBER 31, 1995 COMPARED WITH YEAR ENDED
DECEMBER 31, 1994
Total revenues decreased $931,000 (1.8%) for 1995, compared with the prior year
because of a large decrease in pari-mutuel revenue which is partially offset by
producer fees, rental of racing facility revenues, concession sales and other
income. This decrease was primarily due to Bay Meadows racing five fewer days in
calendar year 1995 as compared with 1994 (108 vs. 113).
Compared to 1994, there was a change in the components of pari-mutuel wagering.
While wagering decreased on-track and off-track in Northern California, wagers
increased at locations in Southern California and out-of-state on races
conducted at Bay Meadows. Wagers made in Southern California on races conducted
at Bay Meadows increased from $100,737,000 in 1994 to $132,033,000 in 1995. Bay
Meadows receives a fee of up to 2.5% of handle on these races and is required to
pay 50% of the fee received to horse owners as purses. In addition, wagers made
at out-of-state locations on races conducted at Bay Meadows increased
$19,100,000 from $69,885,000 in 1994 to $88,985,000 in 1995. Fees on these races
generally range from 2.5% to 3.75% of the handle on these races at the export
location and are statutorily divided among purses, the State of California and
incentive awards.
Management believes fees earned are a better financial barometer than handle
because with the advent of simulcasting, handle has become less meaningful.
Simulcast handle is sometimes counted by more than one track, and handle derived
from out-of-state locations is far less profitable than wagering within
California. Admissions, programs, parking and other racing income decreased
$235,000 due primarily to a decrease in the number of race days.
Total costs and expenses decreased $727,000 (1.5%) for the year ended December
31, 1995, compared with 1994. This was primarily due to decreases in expenses
associated with lower operating revenues, including (i) purses and incentive
awards ($1,038,000), (ii) commissions paid to guest locations ($136,000), and
(iii) racing facility rental ($38,000). General and administrative expenses
decreased $136,000 (4.1%) for the year ended December 31, 1995, compared with
1994. Compared to 1994, direct operating expenses increased by $344,000 in 1995.
In addition, $666,000 in expenses were incurred in connection with the
unsuccessful attempt to establish a Card Club, compared to $209,000 in 1994. A
loss on disposal of fixed assets in the amount of $99,000 was recorded in 1995
due to accelerated replacement of certain fixed assets.
-29-
<PAGE> 30
RESULTS OF OPERATIONS: YEAR ENDED DECEMBER 31, 1994 COMPARED WITH YEAR ENDED
DECEMBER 31, 1993
Total revenues increased $6,545,000 (15%) for 1994 compared with the prior year.
This increase was due to an increase in pari-mutuel revenues ($6,659,000) which
resulted from an increase in handle of $154,155,000. The increase in handle is
due to an increase in the number of racing days in calendar year 1994 as
compared with 1993 (113 vs. 104), the expansion of intrastate wagering, and an
increase in the number of Interstate locations. Exported Intrastate wagers
increased from $7,430,000 in 1993 to $100,737,000 in 1994. Bay Meadows receives
a commission of up to 2.5% of handle on these races and is required to pay 50%
of the commission received to horse owners as purses. In addition, handle on
exported Interstate races increased $31,850,000 (84%) from $37,957,000 in 1993
to $69,807,000 in 1994. Management believes commissions earned are a better
financial barometer than handle because with the advent of simulcasting, handle
has become less meaningful. Simulcast handle is sometimes counted by more than
one track, and handle derived from out-of-state locations is far less profitable
than wagering within California. Commissions on these races generally range from
2.5% to 3.75% of handle on the Bay Meadows race at the export location.
Approximately one-half of this amount must also be paid to horse owners.
Admissions, programs, parking and other racing income increased $199,000 due
primarily to sales of the Daily Racing Form which were previously sold directly
by the publisher at the track. Revenues also increased due to producer fees
($48,000) and rental of racing facility revenues ($279,000) which was offset by
a decrease in concession sales ($526,000) and other income ($173,000). Total
calendar year attendance decreased by 48,000 compared to the prior year.
Total costs and expenses increased $5,579,000 (13%) for the year ended December
31, 1994, compared with 1993. This was primarily due to increases in expenses
associated with higher operating revenues, including (i) purses and incentive
awards ($2,924,000), (ii) commissions paid to guest locations ($253,000), and
(iii) direct operating expenses ($454,000). Racing facility rental increased
$1,100,000 primarily due to increased handle which is the key component for the
Cal Jockey rent calculation. General and administrative expenses increased
$861,000 (20%) for the year ended December 31, 1994, compared with 1993. This
increase was due to severance payments and accruals made to certain employees,
legal costs related to the settlement of a lawsuit with a former employee, and
increased other professional fees. A loss on disposal of fixed assets in the
amount of $503,000 was recorded in 1994 due to accelerated replacement of
certain fixed assets, as well as a charge to record impairment of the grandstand
roof. In addition, $209,000 in expenses were incurred relating to the commencing
of establishing a Card Club.
INFLATION
Inflation is not expected to materially impact Bay Meadows.
LIQUIDITY AND CAPITAL RESOURCES
The liquid assets (cash and cash equivalents) of Bay Meadows decreased to
$6,318,000 at December 31, 1995 from $8,944,000 at December 31, 1994. Bay
Meadows has a bank line of credit of $6,000,000 expiring May 31, 1996. At
December 31, 1995, there were no borrowings.
As of December 31, 1995, Bay Meadows' current liabilities exceeded its current
assets by $2,942,000. The current ratio (current assets to current liabilities)
was .81 to 1 as of December 31, 1995, as compared to .85 to 1 as of December 31,
1994. For the calendar year 1996, Bay Meadows has been allocated ten more
Thoroughbred racing days than the prior year, which is expected to positively
impact revenues and profitability in 1996. However, there is no assurance that
the allocation of additional racing days will result in increased revenues in
1996.
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<PAGE> 31
Bay Meadows is dependent on Cal Jockey's assistance in securing a bank line of
credit for its working capital needs throughout the year. Bay Meadows has
received a $6,000,000 line of credit, primarily by utilizing Cal Jockey's
guarantee. Management believes that Bay Meadows can meet its funding needs for
the foreseeable future through internally generated funds and the utilization of
the line of credit.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by Item 8 has been provided on pages F-1 through F-23
of this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Inapplicable
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
CALIFORNIA JOCKEY CLUB
<TABLE>
<CAPTION>
NAME AGE DIRECTOR PRINCIPAL OCCUPATION AND
SINCE BUSINESS EXPERIENCE
<S> <C> <C> <C>
James P. Conn 58 1983 Managing Director and Chief Investment Officer of Financial Security
Assurance since 1993. Director of Santa Anita Realty Enterprises.
Former President and Chief Executive Officer of Bay Meadows
(Thoroughbred racing) from March 1988 to November 1992. Director of
Gabelli Equity Trust (publicly-held investment company) and Gabelli
Asset Fund since 1988. Director of Gabelli Global Multi-Media Trust
and Gabelli Globel Growth Fund. Director of the former California
Jockey Club from 1969 until its reorganization in March 31, 1983.
President and Chief Executive Officer of Transamerica Investment
Services, Inc. (investments), a subsidiary of Transamerica
Corporation, and Vice President - Investments of Transamerica
(financial services) from October 1975 until March 1988. Chairman and
President of
Transamerica Cash Reserve, Inc. (money market fund) and Chairman and
President of Transamerica Income Shares, Inc. (closed-end bond fund)
from 1980 until 1988.
James M. Harris* 63 1983 President and Treasurer of the Company since 1983. Vice President of
Cazenove, Inc., International Stockbrokers, for more than five years
(until retirement in 1992).
Marylin Kyne Gunderson 73 1983 Private investor for more than five years. Secretary of the Company
from 1985 to 1989.
Richard E. Perazzo 49 1990 Self-employed Certified Public Accountant since 1990. Chief Financial
Officer and Treasurer of Bay Meadows Operating Company from 1983 to
1989. Controller of the former California
</TABLE>
-31-
<PAGE> 32
<TABLE>
<S> <C> <C> <C>
Jockey Club from 1976 to 1983. Director of Bay Meadows Operating
Company from 1983 to 1989.
Brian M. Herrera 42 1992 President, Herrera Cadillac (auto dealership) since October 1991, Real
Estate Developer, Morweg Development (land acquisitions and sales
company), from May 1988 to October 1991.
Kjell H. Qvale* 76 1991 Chairman of the Board and Secretary of Cal Jockey since 1991. Chairman
of the Board of British Motor Car Distributors, Ltd. (an automotive
sales company) since 1948. Chairman of the Board of KJB Development
Corp. (an automobile and investment company) for over 35 years.
Chairman of the Board of First National Bank of Marin. Prior to 1991,
President and Director of Pacific Racing Association d.b.a. Golden
Gate Fields (Thoroughbred racing), over 25 years.
</TABLE>
- --------------
*Executive Officers of Cal Jockey
There is no family relationship among any of Cal Jockey's executive officers,
directors or nominees for director.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires Cal Jockey's
directors and executive officers, and persons who own more than ten percent of a
registered class of its equity securities, to file with the Securities and
Exchange Commission and the American Stock Exchange initial reports of ownership
and reports of changes in ownership of Common Stock and other equity securities
of Cal Jockey. Executive officers, directors and greater than ten-percent
shareholders are required by SEC regulation to furnish Cal Jockey with copies of
all Section 16(a) forms they file.
To Cal Jockey's knowledge, based solely on review of the copies of such reports
furnished to Cal Jockey and written representations that no other reports were
required, during the fiscal year ended December 31, 1995, all Section 16(a)
filing requirements applicable to its executive officers, directors and greater
than ten-percent beneficial owners were complied with.
-32-
<PAGE> 33
\ BAY MEADOWS OPERATING COMPANY
<TABLE>
<CAPTION>
NAME AGE DIRECTOR PRINCIPAL OCCUPATION AND
SINCE BUSINESS EXPERIENCE
<S> <C> <C> <C>
Eugene F. Barsotti, Jr. 58 1983 Vice President - Racing of the Company since March 1995.
Director of Racing of the Company since September 1987.
Assistant Racing Secretary of Bay Meadows Racing Association
and Pacific Racing Association from 1975 until September 1987.
Director of the former California Jockey Club from 1981 until
its reorganization in 1983.
John C. Harris 52 1992 Chairman of the Board since October 1992. Owner and Chief Executive
Officer of Harris Farms, Inc. (a diversified agricultural production
and marketing company). Thoroughbred owner and breeder for over 25
years. Director and current (as of April 1996) and past president of
California Thoroughbred Breeders Association. Member of the Jockey
Club. Chairman of the Board of St. Agnes Medical Center in Fresno,
California.
Lee R. Tucker 64 1990 Secretary of the Company since June 1995. President and Chairman of
the Board of L.M., Inc. (food brokers and investment) since 1980.
Anthony J. Zidich 67 1991 Treasurer of the Company since January 1993. City Treasurer, City of
Daly City, since 1972. Director of the Peninsula Quarter Horse Racing
Association since 1980. Director of the Horseman's Quarter Horse
Racing Association since 1989.
EXECUTIVE OFFICERS OF BAY MEADOWS
F. Jack Liebau* 57 1994 President and Chief Executive Officer of the Company since November
1992 and a Director since January 1994. President and Director of
N.J. Financial Corporation and its affiliated companies since 1985.
Director and current Secretary (as of April 1996) and past president,
California Thoroughbred Breeders Association. Member of the Jockey
Club. 1987-1990 Of Counsel and 1981-1986 Partner, Morgan, Lewis &
Bockius (law firm). 1968-1981, Partner, Adams, Duque & Hazeltine
(law firm).
Frank Trigeiro 57 Vice President - Finance of the Company since March 1995. Earlier
positions were Vice President - Finance of the Maryland Jockey Club;
Chief Financial Officer and Director of the Southern California Racing
Association; Chief Financial Officer of the Northern California
Racing Association; Officer and Director of Racing Management, Inc.;
Controller of the Golden Bear Raceway; and Controller of Calny Food
Services, Inc., a publicly held national fast food company. Mr.
Trigeiro spent eight years in the public accounting profession prior
to the foregoing endeavors.
</TABLE>
- -----------------
*Also a director of Bay Meadows.
-33-
<PAGE> 34
There is no family relationship among any of the Company's executive officers,
directors or nominees for director.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires Bay Meadows'
directors and executive officers, and persons who own more than ten percent of a
registered class of its equity securities, to file with the Securities and
Exchange Commission and the American Stock Exchange initial reports of ownership
and reports of changes in ownership of Common Stock and other equity securities
of Cal Jockey. Executive officers, directors and greater than ten-percent
shareholders are required by SEC regulation to furnish Bay Meadows with copies
of all Section 16(a) forms they file.
To Bay Meadows' knowledge, based solely on review of the copies of such reports
furnished to Bay Meadows and written representations that no other reports were
required, during the fiscal year ended December 31, 1995, all Section 16(a)
filing requirements applicable to its executive officers, directors and greater
than ten-percent beneficial owners were complied with, except that a Statement
of Changes in Beneficial Ownership of Securities (Form 4) covering one
transaction was filed late by Mr. Eugene Barsotti.
ITEM 11. EXECUTIVE COMPENSATION
CALIFORNIA JOCKEY CLUB
Cal Jockey's executive officers serve in such capacities without compensation
for their services. For 1995, members of the Board of Directors received an
annual fee of $14,000 each. During 1995, each director was also provided a food
and beverage allowance of $1,000 for use by the director and his or her guests
in the Directors Room and Turf Club at Bay Meadows Racecourse.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION:
The members of Cal Jockey's Compensation Committee are, and during 1995 were,
James Harris, Richard Perazzo, Brian Herrera and James Conn. Since 1983, Mr.
Harris has served as President and Treasurer of Cal Jockey. From 1976 to 1983,
Mr. Perazzo was Controller to the former California Jockey Club.
BAY MEADOWS OPERATING COMPANY
The following table discloses compensation received for the three fiscal years
ended December 31, 1995, by Bay Meadows' Chief Executive Officer at the end of
1995 and each executive officer of Bay Meadows at the end of 1995 whose
aggregate cash compensation in 1995 exceeded $100,000 (all such executive
officers, including the President and Chief Executive Officer, are collectively
referred to herein as the "Named Executive Officers").
-34-
<PAGE> 35
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------- ---------------------
NAME AND SECURITIES UNDERLYING ALL OTHER
PRINCIPAL SALARY OPTIONS/ COMPENSATION
POSITION YEAR ($) SARS (#) ($)
<S> <C> <C> <C> <C>
F. Jack Liebau 1995 225,000 25,000 11,250(a)
President and CEO 1994 206,250 20,000 15,750(a)
1993 150,000 30,000 9,000(a)
Frank Trigeiro 1995 115,000 8,625(a)
Vice President - Finance
</TABLE>
(a) Contribution to pension plan.
From March 1, 1994 to February 29, 1996, Mr. Liebau was employed by Bay Meadows
pursuant to a written employment agreement. Although Mr. Liebau continues to be
employed substantially in accordance with the terms of that employment
agreement, the term of the written agreement has not been formally extended.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning Options/SARs
granted during 1995 to the Named Executive Officers:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM (a)
- ----------------------------------------------------------------------- ---------------------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS/SARS
OPTIONS/ GRANTED TO EXERCISE OR
SARS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED (#) FISCAL YEAR ($/SHARE) DATE 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
F. Jack Liebau 25,000 100.00% $15.00 1/16/2005 235,835 597,653
</TABLE>
(a) These columns present hypothetical future values of the stock obtainable
upon exercise of the options net of the exercise price, assuming that the
market price of the Paired Common Stock appreciates at a five and ten
percent compound annual rate over the ten-year term of the options. The
five and ten percent rates of stock price appreciation are presented as
examples pursuant to the Proxy Rules and do not necessarily reflect
management's assessment of the Companies' future stock performance. The
potential realizable values presented are not intended to indicate the
value of the options.
-35-
<PAGE> 36
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTIONS/SAR VALUES
The following table summarizes options and SARs exercised during 1995 and
presents the value of unexercised options and SARs held by the Named Executive
Officers at December 31, 1995:
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
SHARES AT FISCAL AT FISCAL
ACQUIRED VALUE YEAR-END (#) YEAR-END ($)
ON EXERCISE REALIZED EXERCISABLE (E)/ EXERCISABLE (E)/
NAME (#) ($) UNEXERCISABLE (U) UNEXERCISABLE (U)
<S> <C> <C> <C> <C>
F. Jack Liebau 0 N/A 50,000 E 112,500 E
25,000 U --
</TABLE>
PENSION PLANS
The table that follows shows the estimated annual benefits payable upon
retirement to non-union employees of Bay Meadows under the California Race Track
Pension Plan. Participants are fully vested after five years of service.
<TABLE>
<CAPTION>
AVERAGE ANNUAL
EARNINGS 5 YEARS 10 YEARS 20 YEARS 30 YEARS 40 YEARS
<S> <C> <C> <C> <C> <C>
$ 50,000 $ 6,250 $ 12,500 $ 25,000 $ 37,500 $ 50,000
100,000 12,500 25,000 50,000 75,000 100,000
150,000 and over 18,750 37,500 75,000 112,500 118,800 (1)
</TABLE>
(1) In accordance with Section 415 Limits - IRS Code.
The compensation covered by the above plan is annual earnings of an employee.
The covered compensation is the same as the compensation reported in the Summary
Compensation Table under the Salary column (up to a maximum of $150,000 per
year). The pension table above sets forth estimated annual retirement benefits,
payable (as a straight-life annuity), assuming retirement at age 65, using the
normal form of benefit under the above plan; the benefits listed are not subject
to any deduction for social security or other offset amounts.
The number of years of credited service at December 31, 1995, for the Named
Executive Officers is as follows: Mr. F. Jack Liebau (three years) and Frank
Trigeiro (one year).
COMPENSATION OF DIRECTORS
For 1995, members of the Board of Directors received an annual fee of $12,000
each. Eugene F. Barsotti, Jr. and F. Jack Liebau, as employees of Bay Meadows,
received no such annual fee. The Directors who are appointed to various
committees serve in such capacities without compensation for their services.
During 1995, each director was also provided a food and beverage allowance of
$1,000 for use by the director and his guests in the Directors Room and Turf
Club at Bay Meadows Racecourse.
-36-
<PAGE> 37
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION:
The members of Bay Meadows' Compensation Committee are Lee R. Tucker (Chairman),
John C. Harris, and Anthony J. Zidich. Since October 1992, Mr. Harris has served
as Bay Meadows' Chairman of the Board.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
CALIFORNIA JOCKEY CLUB
SECURITY OWNERSHIP
The following table sets forth, as of March 15, 1996, the number of shares of
Paired Common Stock owned (i) by each director, (ii) by all directors, executive
officer and beneficial owners of more than five percent (5%) of Paired Common
Stock as a group, and (iii) by all those known by Cal Jockey to be beneficial
owners of more than five percent (5%) of Paired Common Stock, together with the
percentage of stock so owned. Cal Jockey has no executive officers who are not
also directors.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENTAGE
NAMES OF BENEFICIAL OWNER OWNERSHIP (1) OF TOTAL(11)
<S> <C> <C>
James P. Conn 95,160 (2)(3)(4) 1.7%
James M. Harris 17,012 (5) *
Brian M. Herrera 180,000 (6)(7) 3.1%
Marylin Kyne Gunderson 220,200 3.8%
Richard E. Perazzo 8,248 (8) *
Kjell H. Qvale 85,000 1.5%
Gabelli Group 420,100 (9) 7.3%
Directors, executive officers and beneficial owners of
more than 5%, as a group (7 persons) 1,025,720 (10) 17.8%
</TABLE>
- --------------
*Less than one percent (1%) of the outstanding Paired Common Stock.
(1) Unless otherwise indicated in the footnotes and subject to community
property laws where applicable, each named stockholder has sole voting and
investment power with respect to the shares of Paired Common Stock
beneficially owned by such stockholder.
(2) Includes 22,080 shares held by Mr. Conn as trustee, and an additional
18,080 shares held in trust for the benefit of Mr. Conn's children. Mr.
Conn is not a trustee of his children's trust and does not have voting or
investment power over such shares, but does hold a reversionary interest
in the trust.
(3) Includes 20,000 shares issuable upon exercise of outstanding stock options
exercisable within 60 days of March 15, 1996.
(4) Mr. Conn is a Director of Gabelli Equity Trust, which is an affiliate of
the "Gabelli Group" (see Note 9 below). Mr. Conn disclaims beneficial
ownership of the 420,100 shares owned by the Gabelli Group.
(5) Includes 4,000 shares owned by Mr. Harris' mother for which Mr. Harris
holds a power of attorney.
-37-
<PAGE> 38
(6) Includes 90,000 shares held by Mr. Herrera in the testamentary trust of
Mr. Herrera's late father, of which he is the trustee and a beneficiary.
(7) Includes 90,000 shares held in Mr. Herrera's mother's living trust, of
which he is a co-trustee and a beneficiary.
(8) Includes 48 shares registered in Mr. Perazzo's name as custodian for each
of his sons.
(9) A "Schedule 13D" (Amendment No. 2) filing dated July 27, 1994, was made by
the "Gabelli Group". The Gabelli Group is comprised of Gabelli Funds,
Inc., GAMCO Investors, Inc., Gabelli & Company, Inc., Gabelli
International Limited II, Gabelli Performance Partnership, Gabelli
International Limited, and Mario Gabelli. The Schedule 13D filing
indicates that the aggregate number of shares owned by the Gabelli Group
amounts to 420,100 shares. The address of the Gabelli Group is One
Corporate Center, Rye, NY 10580-1435.
(10) Includes 20,000 shares issuable upon exercise of outstanding stock options
exercisable within 60 days of March 15, 1996.
(11) Percentages shown indicate what the total percentage beneficial ownership
of Paired Common Stock would be for each named stockholder if such holder,
but no other stockholder, whether or not named, exercised those of his
stock options that were exercisable on March 15, 1995, or which will
become exercisable 60 days thereafter.
BAY MEADOWS OPERATING COMPANY
SECURITY OWNERSHIP
The following table sets forth, as of March 15, 1996, the number of shares of
Paired Common Stock owned (i) by each director, (ii) by all directors,
executive officers and beneficial owners of more than five percent (5%) of Bay
Meadows Common Stock as a group, and (iii) by all those known by Bay Meadows to
be beneficial owners of more than five percent (5%) of the Paired Common Stock,
together with the percentage of stock so owned.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL PERCENTAGE
NAMES OF BENEFICIAL OWNER OWNERSHIP (1) OF TOTAL(9)
<S> <C> <C>
Eugene F. Barsotti, Jr 49,801 (2)(3) *
John C. Harris 71,245 (4) 1.1%
Lee R. Tucker 7,300 *
Anthony J. Zidich 5,000 *
F. Jack Liebau 68,433 (5)(6) 1.0%
Gabelli Group 420,100 (7) 7.3%
Directors, executive officers and beneficial owners of
more than 5%, as a group (6 persons) 612,663 (8) 13.1%
</TABLE>
- --------------
*Less than one percent (1%) of the outstanding Paired Common Stock.
-38-
<PAGE> 39
(1) Unless otherwise indicated in the footnotes and subject to community
property laws where applicable, each named stockholder has sole voting and
investment power with respect to the shares of Paired Common Stock
beneficially owned by such stockholder.
(2) Includes 43,692 shares held in a revocable trust, 100 shares held in an
Individual Retirement Account for the benefit of his wife, and 176 shares
held in an Individual Retirement Account for the benefit of Mr. Barsotti.
(3) Includes 5,833 shares issuable upon exercise of outstanding stock options
within 60 days of March 15, 1996.
(4) Includes 9,000 shares of Paired Common Stock held by Harris Farms, Inc.,
of which Mr. Harris is the sole shareholder.
(5) Includes 5,100 shares held by a partnership in which Mr. Liebau is a
partner.
(6) Includes 58,333 shares issuable upon exercise of outstanding stock options
exercisable within 60 days of March 15, 1996.
(7) A "Schedule 13D" (Amendment No. 2) filing dated July 28, 1994, was made by
the Gabelli Group. The Gabelli Group is comprised of Gabelli Funds, Inc.,
GAMCO Investors, Inc., Gabelli & Company, Inc., Gabelli International
Limited II, Gabelli Performance Partnership, Gabelli International
Limited, and Mario Gabelli. The Schedule 13D filing indicates that the
aggregate shares owned by the Gabelli Group is 420,100 shares. The address
of the Gabelli Group is One Corporate Center, Rye, NY 10580-1435.
(8) Includes 64,166 shares issuable upon exercise of outstanding stock options
exercisable within 60 days of March 15, 1996.
(9) Percentages shown indicate what the total percentage beneficial ownership
of Paired Common Stock would be for each named stockholder if such holder,
but no other stockholder, whether or not named, exercised those of his
stock options that were exercisable on March 15, 1996, or which will
become exercisable 60 days thereafter.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(See Note 12 of Notes to the Financial Statements - Related Party Transactions.)
-39-
<PAGE> 40
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) (1) Index to Financial Statements.
<TABLE>
<CAPTION>
PAGE IN
DESCRIPTION FORM 10-K
<S> <C>
Report of Independent Auditors F-1
Combined Balance Sheets of California Jockey Club and Bay Meadows Operating
Company and Subsidiary as of December 31, 1995 and 1994 F-2
Separate and Combined Statements of Income of California Jockey Club and
Bay Meadows Operating Company and Subsidiary for the Years Ended
December 31, 1995, 1994 and 1993 F-3, F-4, F-5
Combined Statements of Stockholders' Equity of California Jockey Club and
Bay Meadows Operating Company and Subsidiary for the Years Ended
December 31, 1995, 1994 and 1993 F-6
Combined Statements of Cash Flows of California Jockey Club and Bay Meadows
Operating Company and Subsidiary for the Years Ended December 31, 1995,
1994 and 1993 F-7
Balance Sheets of California Jockey Club as of December 31, 1995 and 1994 F-8
Statements of Stockholders' Equity of California Jockey Club for the Years Ended
December 31, 1995, 1994 and 1993 F-9
Statements of Cash Flows of California Jockey Club for the Years Ended
December 31, 1995, 1994 and 1993 F-10
Consolidated Balance Sheets of Bay Meadows Operating Company and Subsidiary
as of December 31, 1995 and 1994 F-11
Consolidated Statements of Stockholders' Equity of Bay Meadows Operating
Company and Subsidiary for the Years Ended December 31, 1995, 1994 and 1993 F-12
Consolidated Statements of Cash Flows of Bay Meadows Operating Company and
Subsidiary for the Years Ended December 31, 1995, 1994 and 1993 F-13
Notes to Financial Statements F-14 - F-24
</TABLE>
(a) (2) The financial statement schedules listed below are filed with
this report:
None
All other schedules for which provision is made in the applicable rules and
regulations of the Securities and Exchange Commission are omitted because they
are not required under the related instructions or are not applicable or the
required information is shown in the financial statements or notes thereto.
-40-
<PAGE> 41
The exhibits listed in the accompanying Exhibit Index are filed as part of, or
incorporated by reference into, this Annual Report on Form 10-K.
-41-
<PAGE> 42
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrants have duly caused this report to be signed on their
behalf by the undersigned, thereunto duly authorized.
CALIFORNIA JOCKEY CLUB BAY MEADOWS OPERATING COMPANY
By: /s/ James M. Harris By: /s/ F. Jack Liebau
-------------------------- --------------------------------
James M. Harris F. Jack Liebau
President President and
Chief Executive Officer
Date: April 12, 1996 Date: April 12, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrants in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Eugene F. Barsotti, Jr. Director, April 12, 1996
- ------------------------------------- Bay Meadows Operating Company
(Eugene F. Barsotti, Jr.)
/s/ Marylin K. Gunderson Director, April 12, 1996
- ------------------------------------- California Jockey Club
(Marylin K. Gunderson)
/s/ James M. Harris Director, President, Treasurer and Controller, April 12, 1996
- ------------------------------------- California Jockey Club (Principal Executive
(James M. Harris) Officer and Principal Financial Officer and
Principal Accounting Officer)
/s/ John C. Harris Chairman, April 12, 1996
- ------------------------------------- Bay Meadows Operating Company
(John C. Harris)
</TABLE>
-42-
<PAGE> 43
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Brian Herrera Director, April 12, 1996
- ------------------------------------- California Jockey Club
(Brian Herrera)
/s/ F. Jack Liebau Director, April 12, 1996
- ------------------------------------- Bay Meadows Operating Company
(F. Jack Liebau) (Principal Executive Officer)
/s/ Richard E. Perazzo Director, April 12, 1996
- ------------------------------------- California Jockey Club
(Richard E. Perazzo)
/s/ Kjell H. Qvale Chairman, April 12, 1996
- ------------------------------------- California Jockey Club
(Kjell H. Qvale)
/s/ Lee R. Tucker Director, April 12, 1996
- ------------------------------------- Bay Meadows Operating Company
(Lee R. Tucker)
/s/ Frank Trigeiro Vice President - Finance, April 12, 1996
- ------------------------------------- Bay Meadows Operating Company
(Frank Trigeiro) (Principal Accounting Officer and
Principal Financial Officer)
/s/ Anthony J. Zidich Director, April 12, 1996
- ------------------------------------- Bay Meadows Operating Company
(Anthony J. Zidich)
</TABLE>
-43-
<PAGE> 44
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
California Jockey Club
San Mateo, California
and
Board of Directors and Stockholders
Bay Meadows Operating Company
San Mateo, California
We have audited the accompanying balance sheets of California Jockey Club,
consolidated balance sheets of Bay Meadows Operating Company and subsidiary, and
combined balance sheets of California Jockey Club and Bay Meadows Operating
Company and subsidiary (the "Companies") as of December 31, 1995 and 1994, and
the related statements of income, stockholders' equity and cash flows of the
respective entities for the each of the three years in the period ended December
31, 1995. These financial statements are the responsibility of the Companies'
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of California Jockey Club, of Bay Meadows
Operating Company and subsidiary and of the combined Companies at December 31,
1995 and 1994, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1995 in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
March 28, 1996
San Francisco, California
F-1
<PAGE> 45
CALIFORNIA JOCKEY CLUB AND
BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY
<TABLE>
<CAPTION>
COMBINED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
- ----------------------------------------------------------------------------------------------------------------------------
DECEMBER 31,
--------------------
ASSETS 1995 1994
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 7,307 $ 9,356
Securities available for sale (at fair value) 1,187 1,375
Securities held to maturity (at cost, fair value of $7,076 in 1995 and $6,554 in 1994) 7,077 6,570
Amounts held on deposit for Thoroughbred horse owners 3,056 3,003
Accounts receivable (net of allowance for doubtful accounts of $82 in 1995 and $97 in 1994) 2,442 1,351
Prepaid expenses and other current assets 377 188
-------- --------
Total current assets 21,446 21,843
-------- --------
PROPERTY, PLANT AND EQUIPMENT:
Land 2,645 1,542
Racing plant 23,906 23,452
Tennis facility 308 308
Equipment and leasehold improvements 10,088 8,454
-------- --------
Total 36,947 33,756
Accumulated depreciation and amortization (20,759) (19,211)
-------- --------
Property, plant and equipment - net 16,188 14,545
-------- --------
OTHER ASSETS (net of accumulated amortization of
$1,221 in 1995 and $1,083 in 1994) 223 398
-------- --------
DEFERRED INCOME TAXES 78
-------- --------
TOTAL $ 37,935 $ 36,786
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 4,676 $ 3,163
Accrued liabilities 1,530 3,216
Accrued purses 1,014 1,850
Due to Thoroughbred horse owners 3,056 3,003
Income taxes payable 75 372
Uncashed pari-mutuel tickets and vouchers 4,477 2,421
-------- --------
Total current liabilities 14,828 14,025
-------- --------
DEFERRED INCOME TAXES 43
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common Stock (paired shares), $.01 par value: authorized, 10,000,000 shares each;
issued and outstanding: 5,763,257 shares each in 1995 and; 5,753,257 shares each in 1994 116 116
Additional paid in capital 18,385 18,262
Retained earnings 4,817 4,363
Unrealized loss on securities available for sale (211) (23)
-------- --------
Total stockholders' equity 23,107 22,718
-------- --------
TOTAL $ 37,935 $ 36,786
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE> 46
CALIFORNIA JOCKEY CLUB AND
BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY
<TABLE>
<CAPTION>
SEPARATE AND COMBINED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
- -------------------------------------------------------------------------------------------------------------------
BAY MEADOWS
CALIFORNIA OPERATING
JOCKEY COMPANY AND
CLUB SUBSIDIARY ELIMINATIONS COMBINED
<S> <C> <C> <C> <C>
REVENUES:
Pari-mutuel revenue $ 38,955 $ 38,955
Producer fees 704 704
Admissions, programs, parking and other racing income 5,164 5,164
Concession sales 2,492 2,492
Rental of racing facility $ 4,743 1,510 $ (4,743) 1,510
Interest and dividend income 487 190 (45) 632
Other income 11 1,241 1,252
---------- --------- -------- ----------
Total 5,241 50,256 (4,788) 50,709
---------- --------- -------- ----------
COSTS AND EXPENSES:
Purses and incentive awards 15,746 15,746
Commissions paid to guest tracks 2,548 2,548
Direct operating costs 19,403 19,403
Cost of concession sales 856 856
Depreciation and amortization 935 680 1,615
Racing facility rental 4,762 (4,743) 19
Marketing 1,401 1,401
General and administrative expense 583 3,159 (45) 3,697
Loss on disposal of fixed assets 99 99
Card club costs 666 666
---------- --------- -------- ----------
Total 1,518 49,320 (4,788) 46,050
---------- --------- -------- ----------
INCOME BEFORE INCOME TAX PROVISION 3,723 936 4,659
INCOME TAX PROVISION 459 459
---------- --------- -------- ----------
NET INCOME $ 3,723 $ 477 $ - $ 4,200
========== ========= ======== ==========
NET INCOME PER SHARE $.65 $.08 $.73
==== ==== ====
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 5,759,668 5,759,668 5,759,668
========== ========= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 47
CALIFORNIA JOCKEY CLUB AND
BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY
<TABLE>
<CAPTION>
SEPARATE AND COMBINED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------------------------------------------
BAY MEADOWS
CALIFORNIA OPERATING
JOCKEY COMPANY AND
CLUB SUBSIDIARY ELIMINATIONS COMBINED
<S> <C> <C> <C> <C>
REVENUES:
Pari-mutuel revenue $ 40,161 $ 40,161
Producer fees 669 669
Admissions, programs, parking and other racing income 5,399 5,399
Concession sales 2,490 2,490
Rental of racing facility $ 4,777 1,555 $ (4,777) 1,555
Interest and dividend income 381 81 462
Other income 18 832 (11) 839
---------- ---------- -------- ----------
Total 5,176 51,187 (4,788) 51,575
---------- ---------- -------- ----------
COSTS AND EXPENSES:
Purses and incentive awards 16,784 16,784
Commissions paid to guest tracks 2,684 2,684
Direct operating costs 19,059 19,059
Cost of concession sales 715 715
Depreciation and amortization 956 724 1,680
Racing facility rental 4,800 (4,777) 23
Marketing 1,274 1,274
General and administrative expense 438 3,295 (11) 3,722
Loss on disposal of fixed assets 162 503 665
Card club costs 209 209
---------- ---------- -------- ----------
Total 1,556 50,047 (4,788) 46,815
---------- ---------- -------- ----------
INCOME BEFORE INCOME TAX PROVISION 3,620 1,140 4,760
INCOME TAX PROVISION 548 548
---------- ---------- -------- ----------
NET INCOME $ 3,620 $ 592 $ - $ 4,212
========== ========== ======== ==========
NET INCOME PER SHARE $.63 $.10 $.73
==== ==== ====
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 5,753,257 5,753,257 5,753,257
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 48
CALIFORNIA JOCKEY CLUB AND
BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY
<TABLE>
<CAPTION>
SEPARATE AND COMBINED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1993
(In thousands, except share and per share amounts)
- --------------------------------------------------------------------------------------------------------------------------------
Bay Meadows
California Operating
Jockey Company and
Club Subsidiary Eliminations Combined
<S> <C> <C> <C> <C>
REVENUES:
Pari-mutuel revenue $ 33,502 $ 33,502
Producer fees 621 621
Admissions, programs, parking and other racing income 5,200 5,200
Concession sales 3,016 3,016
Rental of racing facility $ 3,607 1,276 $ (3,607) 1,276
Interest and dividend income 349 22 (7) 364
Other income 28 1,005 (19) 1,014
---------- ---------- ---------- ----------
Total 3,984 44,642 (3,633) 44,993
---------- ---------- ---------- ----------
COSTS AND EXPENSES:
Purses and incentive awards 13,860 13,860
Commissions paid to guest tracks 2,431 2,431
Direct operating costs 18,243 18,243
Cost of concession sales 856 856
Depreciation and amortization 976 827 1,803
Racing facility rental 3,700 (3,607) 93
Marketing 1,799 1,799
General and administrative expense 628 2,355 (26) 2,957
Litigation settlement 1,400 1,400
Prior years' non-union pension expense 215 215
Write-off of original captive insurance company investment 182 182
---------- ---------- ---------- ----------
Total 3,004 44,468 (3,633) 43,839
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAX PROVISION 980 174 1,154
INCOME TAX PROVISION 1 1
---------- ---------- ---------- ----------
NET INCOME $ 980 $ 173 $ - $ 1,153
========== ========== ========== ==========
NET INCOME PER SHARE $.17 $.03 $.20
==== ==== ====
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 5,758,257 5,753,257 5,755,757
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 49
CALIFORNIA JOCKEY CLUB AND
BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY
<TABLE>
<CAPTION>
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- -------------------------------------------------------------------------------------------------------------
UNREALIZED
LOSS ON
ADDITIONAL SECURITIES
COMMON PAID IN RETAINED AVAILABLE
STOCK CAPITAL EARNINGS FOR SALE TOTAL
<S> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1993 $ 116 $ 18,262 $ 4,176 $ 22,554
NET INCOME 1,153 1,153
DIVIDENDS, $.30 PER PAIRED SHARE (1,726) (1,726)
-------- --------- ------- --------
BALANCE AT DECEMBER 31, 1993 116 18,262 3,603 21,981
NET INCOME 4,212 4,212
DIVIDENDS, $.60 PER PAIRED SHARE (3,452) (3,452)
UNREALIZED LOSS ON SECURITIES
AVAILABLE FOR SALE $ (23) (23)
-------- --------- ------- ------ --------
BALANCE AT DECEMBER 31, 1994 116 18,262 4,363 (23) 22,718
NET INCOME 4,200 4,200
DIVIDENDS, $.65 PER PAIRED SHARE (3,746) (3,746)
STOCK OPTIONS EXERCISED 123 123
UNREALIZED LOSS ON SECURITIES
AVAILABLE FOR SALE $ (188) (188)
-------- --------- ------- ------ --------
BALANCE AT DECEMBER 31, 1995 $ 116 $ 18,385 $ 4,817 $ (211) $ 23,107
======== ========= ======= ====== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 50
CALIFORNIA JOCKEY CLUB AND
BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY
<TABLE>
<CAPTION>
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------------------------
1995 1994 1993
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 4,200 $ 4,212 $ 1,153
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 1,615 1,680 1,803
Deferred income taxes (121) 43 (84)
Loss on disposal of fixed assets 99 665
Changes in operating assets and liabilities:
Accounts receivable (1,091) 84 (600)
Amounts held on deposit for Thoroughbred horse owners (53) (214) (181)
Income taxes receivable and payable (297) 394 106
Prepaid expenses and other current assets (180) 175 258
Accounts payable 1,513 2,254 (301)
Accrued liabilities (1,686) 260 (781)
Accrued purses (836) 970 663
Due to Thoroughbred horse owners 53 214 181
Uncashed pari-mutuel tickets and vouchers 2,056 839 173
-------- ------- -------
Net cash provided by operating activities 5,272 11,576 2,390
-------- ------- -------
INVESTING ACTIVITIES:
Sale of marketable securities, net 763
Purchase of securities held to maturity (11,005) (1,398)
Maturities of securities held to maturity 10,498 1,250
Purchase of property, plant and equipment (3,191) (2,054) (1,041)
-------- ------- -------
Net cash used in investing activities (3,698) (2,202) (278)
-------- ------- -------
FINANCING ACTIVITIES:
Proceeds from note payable - bank 9,719
Repayment of note payable - bank (1,475) (10,244)
Stock options exercised 123
Dividends on Common Stock (3,746) (3,452) (1,726)
-------- ------- -------
Net cash used in financing activities (3,623) (4,927) (2,251)
-------- ------- -------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (2,049) 4,447 (139)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 9,356 4,909 5,048
-------- ------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 7,307 $ 9,356 $ 4,909
======== ======= ========
NONCASH INVESTING ACTIVITY - Accrued but unpaid purchase
of property, plant and equipment $ 170
=======
OTHER CASH FLOW INFORMATION:
Interest paid $ 53 $ 88 $ 154
Income taxes paid 765 301 4
Income taxes refunded 189 26
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE> 51
CALIFORNIA JOCKEY CLUB
<TABLE>
<CAPTION>
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
- ----------------------------------------------------------------------------------------------------------------------
1995 1994
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 989 $ 412
Securities available for sale (at fair value) 1,187 1,375
Securities held to maturity (at cost, fair value of $7076 in 1995 and $6,554 in 1994) 7,077 6,570
Accounts receivable 7 53
Receivable from Bay Meadows Operating Company 569 1,991
Prepaid expenses 32
-------- --------
Total current assets 9,829 10,433
-------- --------
PROPERTY, PLANT AND EQUIPMENT:
Land 2,645 1,542
Racing plant 23,906 23,452
Tennis facility 308 308
Equipment 456 456
-------- --------
Total 27,315 25,758
Accumulated depreciation (14,997) (14,062)
-------- --------
Property, plant and equipment - net 12,318 11,696
-------- --------
TOTAL $ 22,147 $ 22,129
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 129 $ 95
Accrued liabilities 140 64
-------- --------
Total current liabilities 269 159
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common Stock, $.01 par value, authorized 10,000,000 shares;
issued and outstanding 5,763,257 shares in 1995 and 5,753,257 shares in 1994 58 58
Additional paid in capital 17,597 17,478
Retained earnings 4,434 4,457
Unrealized loss on securities available for sale (211) (23)
-------- --------
Total stockholders' equity 21,878 21,970
-------- --------
TOTAL $ 22,147 $ 22,129
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE> 52
CALIFORNIA JOCKEY CLUB
<TABLE>
<CAPTION>
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------------------------
UNREALIZED
LOSS ON
ADDITIONAL SECURITIES
COMMON PAID IN RETAINED AVAILABLE
STOCK CAPITAL EARNINGS FOR SALE TOTAL
<S> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1993 $ 58 $17,813 $ 5,035 $ 22,906
NET INCOME 980 980
DIVIDENDS, $.30 PER SHARE (1,726) (1,726)
RESCISSION OF SALE OF 20,000 SHARES OF
UNPAIRED COMMON STOCK TO BAY
MEADOWS OPERATING COMPANY (335) (335)
----- ------- ------- --------
BALANCE AT DECEMBER 31, 1993 58 17,478 4,289 21,825
NET INCOME 3,620 3,620
DIVIDENDS, $.60 PER SHARE (3,452) (3,452)
UNREALIZED LOSS ON SECURITIES
AVAILABLE FOR SALE $ (23) (23)
----- ------- ------- ------ --------
BALANCE AT DECEMBER 31, 1994 58 17,478 4,457 (23) 21,970
NET INCOME 3,723 3,723
DIVIDENDS, $.65 PER SHARE (3,746) (3,746)
STOCK OPTIONS EXERCISED 119 119
UNREALIZED LOSS ON SECURITIES
AVAILABLE FOR SALE (188) (188)
----- ------- ------- ------ --------
BALANCE AT DECEMBER 31, 1995 $ 58 $17,597 $ 4,434 $ (211) $ 21,878
===== ======= ======= ====== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-9
<PAGE> 53
CALIFORNIA JOCKEY CLUB
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------------
1995 1994 1993
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 3,723 $ 3,620 $ 980
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 935 956 976
Loss on disposal of fixed assets 162
Changes in operating assets and liabilities:
Accounts receivable 46 49 24
Receivable from Bay Meadows Operating Company 1,422 (1,670) 223
Prepaid expenses and other assets 32 (9)
Accounts payable 34 67 (76)
Accrued liabilities 76 3 (529)
-------- -------- --------
Net cash provided by operating activities 6,268 3,178 1,598
-------- -------- --------
INVESTING ACTIVITIES:
Sale of marketable securities, net 763
Purchase of securities held to maturity (11,005) (1,398)
Maturities of securities held to maturity 10,498 1,250
Purchase of property, plant and equipment (1,557) (945) (587)
-------- -------- --------
Net cash provided by (used in) investing activities (2,064) (1,093) 176
-------- -------- --------
CASH USED IN FINANCING ACTIVITIES:
Stock options exercised 119
Dividends on Common Stock (3,746) (3,452) (1,726)
-------- -------- --------
Net cash used in financing activities (3,627) (3,452) (1,726)
-------- -------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 577 (1,367) 48
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 412 1,779 1,731
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 989 $ 412 $ 1,779
======== ======== ========
NONCASH INVESTING ACTIVITY - Rescission of note receivable
from Bay Meadows Operating Company $ 335
========
NONCASH FINANCING ACTIVITY - Rescission of sale of 20,000 shares
of unpaired Common Stock to Bay Meadows Operating Company $ (335)
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-10
<PAGE> 54
BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
- ----------------------------------------------------------------------------------------------------------------------------
1995 1994
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 6,318 $ 8,944
Amounts held on deposit for Thoroughbred horse owners 3,056 3,003
Accounts receivable (net of allowance for doubtful accounts of $82 in 1995 and $97 in 1994) 2,435 1,298
Prepaid expenses and other current assets 377 156
-------- --------
Total current assets 12,186 13,401
-------- --------
PROPERTY, PLANT AND EQUIPMENT:
Equipment and leasehold improvements 9,631 7,998
Accumulated depreciation and amortization (5,761) (5,149)
-------- --------
Property, plant and equipment - net 3,870 2,849
-------- --------
OTHER ASSETS (net of accumulated amortization of $1,221 in 1995 and $1,083 in 1994) 223 398
-------- --------
DEFERRED INCOME TAXES 78
-------- --------
TOTAL $ 16,357 $ 16,648
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 4,547 $ 3,068
Accrued liabilities 1,390 3,152
Accrued purses 1,014 1,850
Due to Thoroughbred horse owners 3,056 3,003
Payable to California Jockey Club 569 1,991
Income taxes payable 75 372
Uncashed pari-mutuel tickets and vouchers 4,477 2,421
-------- --------
Total current liabilities 15,128 15,857
-------- --------
DEFERRED INCOME TAXES 43
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common Stock .01 par value authorized 10,000,000 shares; issued and outstanding:
5,763,257 shares in 1995 and 5,753,257 shares in 1994 58 58
Additional paid in capital 788 784
Retained earnings (deficit) 383 (94)
-------- --------
Total stockholders' equity 1,229 748
-------- --------
TOTAL $ 16,357 $ 16,648
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-11
<PAGE> 55
BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
- --------------------------------------------------------------------------------------
ADDITIONAL
COMMON PAID IN RETAINED
STOCK CAPITAL EARNINGS TOTAL
<S> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1993 $ 58 $ 784 $ (859) $ (17)
NET INCOME 173 173
------- ------- ------- -------
BALANCE AT DECEMBER 31, 1993 58 784 (686) 156
NET INCOME 592 592
------- ------- ------- -------
BALANCE AT DECEMBER 31, 1994 58 784 (94) 748
STOCK OPTIONS EXERCISED 4 4
NET INCOME 477 477
------- ------- ------- -------
BALANCE AT DECEMBER 31, 1995 $ 58 $ 788 $ 383 $ 1,229
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-12
<PAGE> 56
BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS)
- -------------------------------------------------------------------------------------------------------------------
1995 1994 1993
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 477 $ 592 $ 173
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 680 724 827
Deferred income taxes (121) 43 (84)
Loss on disposal of fixed assets 99 503
Changes in operating assets and liabilities:
Accounts receivable (1,137) 35 (624)
Amounts held on deposit for Thoroughbred horse owners (53) (214) (181)
Income taxes receivable and payable (297) 394 106
Prepaid expenses and other assets (212) 184 258
Accounts payable 1,479 2,187 (225)
Accrued liabilities (1,762) 257 (252)
Accrued purses (836) 970 663
Due to Thoroughbred horse owners 53 214 181
Payable to California Jockey Club (1,422) 1,670 (223)
Uncashed pari-mutuel tickets and vouchers 2,056 839 173
-------- -------- --------
Net cash (used in) provided by operating activities (996) 8,398 792
-------- -------- --------
NET CASH USED IN INVESTING ACTIVITIES - Purchase of
property, plant and equipment (1,634) (1,109) (454)
-------- -------- --------
FINANCING ACTIVITIES:
Proceeds from note payable - bank 9,719
Stock options exercised 4
Repayment of note payable - bank (1,475) (10,244)
-------- -------- --------
Net cash (used in) provided by financing activities 4 (1,475) (525)
-------- -------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,626) 5,814 (187)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 8,944 3,130 3,317
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 6,318 $ 8,944 $ 3,130
======== ======== ========
NONCASH INVESTING ACTIVITY - Rescission of agreement to purchase
20,000 shares of unpaired Common Stock from California Jockey Club $ 335
========
NONCASH FINANCING ACTIVITY - Rescission of note payable to
California Jockey Club $ (335)
========
NONCASH INVESTING ACTIVITY - Accrued but unpaid purchase of
property, plant and equipment $ 170
========
OTHER CASH FLOW INFORMATION:
Interest paid $ 53 $ 88 $ 154
Income taxes paid 765 301 4
Income taxes refunded 189 26
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-13
<PAGE> 57
CALIFORNIA JOCKEY CLUB AND
BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION - California Jockey Club ("Cal Jockey") is a real
estate investment trust which owns the Bay Meadows Racecourse and other
real property located in San Mateo, California. Cal Jockey leases the
racing facility to Bay Meadows Operating Company ("Bay Meadows"). The
shares of Cal Jockey and Bay Meadows are paired one-for-one and can only
be transferred in units. The Combined Financial Statements include the
accounts of both Cal Jockey and Bay Meadows. Bay Meadows is engaged in
operating and subleasing the facility, and operates a portion of the food
and beverage concessions. All significant inter-company transactions and
accounts have been eliminated in consolidation and combination. Certain
prior year amounts have been reclassified to conform to the 1995
presentation.
In order to conduct a Thoroughbred horse racing meet and to act as a
satellite facility, Bay Meadows needs to secure, on an annual basis, a
license from the California Horse Racing Board ("CHRB"). The issuance of
this annual license to Bay Meadows is essential for it to continue to
conduct Thoroughbred horse racing meets at Bay Meadows Racecourse.
Although Bay Meadows has received a license for the 1996 race meet, there
is no assurance that Bay Meadows will continue to receive this annual
license. Bay Meadows has been granted an annual license each year since
1934.
Thoroughbred racing is highly regulated by state law and the number of
weeks available for racing in Northern California is subject to statute.
The statute dictates the number of racing weeks allowed in the Northern
California Racing Zone. There is no assurance that competition for racing
weeks will not affect the allocation of racing weeks to Bay Meadows in the
future.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
PROPERTY, PLANT AND EQUIPMENT - Property is carried at cost. At December
31, 1995, land included $1,953,000 of land held for sale. This amount
includes $1,462,000 in costs incurred to develop the land including zoning
and engineering costs. (See Note 10 - Proposed Land Sales). No assurance
can be gained that activities will ultimately result in the development or
sale of such land. Depreciation and amortization are computed on the
straight-line method over the estimated useful lives of 30 years for plant
and from 3 to 20 years for equipment. Leasehold improvements are amortized
over their useful lives from 3 to 20 years. Expenditures for property
additions and betterments are added to the property accounts, while those
for maintenance and repairs are expensed as incurred.
CASH AND CASH EQUIVALENTS consist of demand deposits held in banks, money
market funds and certificates of deposit with maturities of three months
or less at the date of acquisition.
F-14
<PAGE> 58
SECURITIES AVAILABLE FOR SALE AND SECURITIES HELD TO MATURITY - Effective
January 1, 1994, the Companies adopted Statement of Financial Accounting
Standards No. 115 ("FAS 115"), Accounting for Certain Investments in Debt
and Equity Securities. FAS 115 requires classification of investments into
three categories: held to maturity, trading, and available for sale. The
Companies have no trading securities. Securities which the Company has the
ability and intent to hold to maturity are recorded at cost with any
discount or premium amortized using a method that is not materially
different from the interest method. Securities held to maturity consist of
certificates of deposit and government securities with maturities greater
than three months when acquired.
Securities available for sale are reported at fair value with net
unrealized gains and losses excluded from earnings and reported as a
separate component of stockholders' equity. Securities available for sale
consist of investments in the common stock of a publicly traded Real
Estate Investment Trust. (See Note 12 - Related Party Transactions) There
was no cumulative effect of the change in accounting principle at
adoption, and the effect of the new policy on 1994 income was immaterial.
AMOUNTS HELD ON DEPOSIT FOR THOROUGHBRED HORSE OWNERS - Amounts represent
purses, net of entry fees, collected by Bay Meadows and placed on deposit
for the benefit of certain Thoroughbred owners. These amounts and 55% of
the interest earned thereon, both of which are not available for Bay
Meadows' purposes, are the property of such Thoroughbred owners and are
physically segregated in accordance with the agreement.
OTHER ASSETS principally include amounts capitalized and amortized over an
eight-year useful life relating to the purchase of racing rights.
NEW ACCOUNTING STANDARDS - The Companies are required to adopt Statement
of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation" in 1996. SFAS No. 123 establishes accounting and
disclosure requirements using a fair value based method of accounting for
stock based employee compensation plans. Under SFAS No. 123, the Companies
may either adopt the new fair value based accounting method or continue
the intrinsic value based method and provide pro forma disclosures of net
income and earnings per share as if the accounting provisions of SFAS No.
123 had been adopted. The Companies plan to adopt only the disclosure
requirements of SFAS No. 123, therefore, such adoption will have no effect
on the Companies net earnings or cash flows.
The Company is required to adopt SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of"
in 1996. SFAS No. 121 establishes recognition and measurement criteria for
impairment losses whenever events or changes in circumstances indicate
that the carrying value of assets may not be recoverable. The Companies
does not expect the adoption of SFAS No. 121 to have a material effect on
its financial statements.
2. SECURITIES AVAILABLE FOR SALE
The following table is a summary of securities available for sale at
December 31, 1995 and 1994 (in thousands, except share amount):
<TABLE>
<CAPTION>
1995
--------------------------------------
UNREALIZED UNREALIZED MARKET
COST GAIN LOSS VALUE
<S> <C> <C> <C> <C>
Santa Anita Realty Enterprises (100,000 common shares) $1,398 $(211) $1,187
</TABLE>
F-15
<PAGE> 59
<TABLE>
<CAPTION>
1994
-------------------------------------------
UNREALIZED UNREALIZED MARKET
COST GAIN LOSS VALUE
<S> <C> <C> <C> <C>
Santa Anita Realty Enterprises (100,000 common shares) $1,398 $(23) $1,375
</TABLE>
These securities have no maturity.
3. SECURITIES HELD TO MATURITY
The following table is a summary of securities held to maturity at
December 31, 1995 and 1994 (in thousands):
<TABLE>
<CAPTION>
1995
------------------------------------------
UNREALIZED UNREALIZED MARKET
COST GAIN LOSS VALUE
<S> <C> <C> <C> <C>
Certificates of deposit $ 300 $(1) $ 299
U.S. Treasury obligations 6,777 1 (1) 6,777
------ --- --- ------
Total $7,077 $ 1 $(2) $7,076
====== === === ======
</TABLE>
These securities mature in 1996.
<TABLE>
<CAPTION>
1994
------------------------------------------
UNREALIZED UNREALIZED MARKET
COST GAIN LOSS VALUE
<S> <C> <C> <C> <C>
Certificates of deposit $ 800 $ (5) $ 795
U.S. Treasury obligations 5,770 (11) 5,759
------ ---- ---- ------
Total $6,570 $ -- $(16) $6,554
====== ==== ==== ======
</TABLE>
4. INCOME TAXES
Cal Jockey intends to continue to qualify as a real estate investment
trust as defined in the Internal Revenue Code and, as such, will not be
taxed on that portion of its taxable income which is distributed to
stockholders. Dividends to stockholders are determined by taxable income
which may differ from financial accounting income. Dividends paid during
the years ended December 31, 1995, 1994 and 1993, were taxable as ordinary
income to stockholders.
F-16
<PAGE> 60
The income tax provision of Bay Meadows consists of the following (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1995 1994 1993
<S> <C> <C> <C>
Current:
Federal $ 482 $ 379 $ 70
State 98 126 15
----- ----- -----
Total Current 580 505 85
----- ----- -----
Deferred:
Federal (99) 35 (84)
State (22) 8
----- ----- -----
Total Deferred (121) 43 (84)
----- ----- -----
Total $ 459 $ 548 $ 1
===== ===== =====
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of Bay Meadows' deferred tax liabilities and
assets, are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1995 1994
<S> <C> <C>
Deferred tax assets:
Book over tax depreciation $ 167 $ 157
Book over tax amortization 143
Book expenses not yet deductible 67
Charitable contribution carryovers 4 68
Alternative minimum tax credit carryforwards 46
Other 21 19
----- -----
Total deferred tax assets 402 290
Valuation allowance for deferred tax assets (264) (190)
----- -----
Net deferred tax assets 138 100
Deferred tax liabilities:
Tax over book amortization 10 143
Other 50
----- -----
Total deferred tax liabilities 60 143
----- -----
Net deferred tax asset (liability) $ 78 $ (43)
===== =====
</TABLE>
F-17
<PAGE> 61
The change in the valuation allowance is due to the increase in certain
deferred tax assets in 1995.
The reasons for the difference between total tax expense and the amount
computed by applying the statutory Federal income tax rate of 34% to
income before income taxes, are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1995 1994 1993
<S> <C> <C> <C>
Tax at statutory rate $ 318 $ 388 $ 60
State income taxes, net of Federal tax benefit 57 70 11
Non deductible expenses 189
Impact of rate change on deferred taxes (113)
Increase (decrease) in valuation allowance 74 183 (125)
Other (66) (93) 55
----- ----- -----
Total $ 459 $ 548 $ 1
===== ===== =====
</TABLE>
5. NOTE PAYABLE - BANK
Bay Meadows has a loan agreement with a bank for a $6,000,000 line of
credit with interest charged at the bank's reference rate. The provisions
of the loan agreement contain various covenants pertaining to maintenance
of working capital and net worth of Bay Meadows and Cal Jockey. Cal Jockey
has guaranteed borrowings on this line of credit. At December 31, 1995,
Bay Meadows had no borrowings and had $6,000,000 available on the line of
credit. In connection with the execution of the credit agreement, Cal
Jockey has agreed to provide collateral, and to continue to guarantee the
line of credit. Bay Meadows has agreed to pay Cal Jockey a fee equal to
.25% per annum of the value of the collateral that secures the line of
credit. There was no collateral pledged at December 31, 1995. The line of
credit agreement expires on May 31, 1996.
6. STOCK OPTION PLAN
In May 1988, the stockholders of Bay Meadows approved the 1988 Stock
Option Plan. The stock options have terms not exceeding ten years and
exercise prices not less than the fair market value of the paired shares
on the date the options were granted. The right to exercise the options
vests over a three-year period on an annual basis, with no vesting until
one year from the date of grant. 250,000 shares of the Companies' Common
Stock have been reserved for issuance under the 1988 plan, with 180,000
available for future option grants at December 31, 1995. As additional
consideration for Bay Meadows entering into the 1993 lease (see Note 7),
Cal Jockey has agreed to grant Bay Meadows options to acquire 101,000
unpaired shares, as of December 31, 1995, of Cal Jockey unpaired Common
Stock. Such options can be exercised by Bay Meadows only if and to the
extent any employees of Bay Meadows to whom stock options have been
granted as of December 31, 1995, exercise their respective options. The
purchase price shall be 97% of the stock option price payable by the
employee exercising his or her option and shall be payable only at such
time the option is exercised. If Bay Meadows desires to grant additional
options to its employees under its 1988 Stock Option Plan, Cal Jockey may
grant additional options to Bay Meadows. Bay Meadows has agreed to a
similar reciprocal agreement should Cal Jockey desire to grant stock
options to its employees.
F-18
<PAGE> 62
Stock option transactions under the 1988 plan are as follows:
<TABLE>
<CAPTION>
EXERCISE
SHARES PRICE PER SHARE
<S> <C> <C>
Outstanding as of December 31, 1994 and 1993 51,000 $12.25 to $16.25
Granted 35,000 $15.00 to $16.25
Exercised (10,000) $12.25
Expired (14,000) $12.25 to $15.75
-------
Outstanding as of December 31, 1995 62,000 $12.25 to $16.25
-------
Total Exercisable as of December 31, 1995 27,000 $12.25
=======
</TABLE>
Additionally, options to purchase 50,000 shares at an exercise price
ranging from $10.625 to $16.50 per share have been issued, outside the
1988 plan, to an officer of Bay Meadows and are exercisable at December
31, 1995.
7. RENTAL OF RACING FACILITY
Bay Meadows leases Bay Meadows Racecourse from Cal Jockey. Pursuant to the
terms of the lease agreement, which commenced on April 1, 1993 and expired
on March 31, 1996, Cal Jockey receives the greater of (a) $3,000,000
annually or (b) the sum of 1.5% of the on-track pari-mutuel handle when
there are live races at Bay Meadows, 1% of the pari-mutuel handle wagered
at Northern California satellite wagering facilities receiving races from
Bay Meadows, 1% of the pari-mutuel handle wagered at Bay Meadows when it
is acting as a satellite wagering facility for other host associations
conducting racing in Northern California, 25% of the net commissions from
exported and imported races from Southern California and interstate
locations, and between 60% and 90% of various non-racing sublease rental
income. In addition, Cal Jockey received specified percentages of the
annual pari-mutuel handle in excess of $350,000,000.
Cal Jockey and Bay Meadows have had preliminary discussions regarding the
extension of the lease agreement. It is expected that the lease will be
renewed under generally the same terms.
These lease agreements were amended for the period October 1, 1993 through
December 31, 1993. As a result, Cal Jockey received 1.2% of the on-track
pari-mutuel handle when there were live races at Bay Meadows, .9% on the
inter-track pari-mutuel handle wagered at inter-track locations when there
are live races at Bay Meadows, .9% of the handle when Bay Meadows is
acting as a guest inter-track location and 90% of non-racing sublease
rental income.
Cal Jockey had rental income under these lease agreements, as amended, of
$4,743,000, $4,777,000, and $3,607,000 for the years ended December 31,
1995, 1994 and 1993, respectively.
F-19
<PAGE> 63
Bay Meadows had rental income from subleasing the facility and equipment
to others. Rental income from other racing associations is based upon a
percentage of the pari-mutuel handle of those respective associations.
8. PARI-MUTUEL REVENUES
The following summarizes information concerning the pari-mutuel revenues
(in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1995 1994 1993
<S> <C> <C> <C>
On-track pari-mutuel handle $103,276 $113,131 $101,852
Intertrack/exported pari-mutuel handle 278,361 253,794 140,153
Out-of-state pari-mutuel handle 82,653 62,286 33,051
-------- -------- --------
Total pari-mutuel handle from annual racing meet 464,290 429,211 275,056
-------- -------- --------
Less:
Patrons' winning tickets 196,305 209,051 210,422
Pari-mutuel license fees paid to State of California 9,671 10,543 10,323
Municipal racing fees 746 808 748
Handles paid to interstate pari-mutuel entities 89,395 68,039 11,872
Handles paid to co host tracks under intrastate racing 129,343 100,959 8,645
Equine research, vanning and stabling and Simulcast
promotion fees 1,387 1,526 1,400
-------- -------- --------
Subtotal 37,443 38,285 31,646
Rights fees from exported races 167 388 408
-------- -------- --------
Total pari-mutuel revenues from annual racing meets 37,610 38,673 32,054
Pari-mutuel revenues from intertrack wagering 1,345 1,488 1,448
-------- -------- --------
Total pari-mutuel revenue $ 38,955 $ 40,161 $ 33,502
======== ======== ========
</TABLE>
Components of pari-mutuel revenues from annual racing meet are as follows
(in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1995 1994 1993
<S> <C> <C> <C>
Commission paid to Bay Meadows $14,916 $14,871 $12,690
Simulcast expense reimbursement 4,399 4,334 3,323
Guest tracks commission 2,548 2,684 2,431
Purses and incentive awards 15,747 16,784 13,610
------- ------- -------
Total $37,610 $38,673 $32,054
======= ======= =======
</TABLE>
9. PENSION PLAN
Substantially all employees of Bay Meadows and its subsidiaries are
covered by union or non-union multi-employer defined benefit pension
plans. The allocated portion of non-union plan assets and
F-20
<PAGE> 64
accumulated plan benefits is not determinable. In the aggregate, the
actuarial book value of non-union pension fund assets exceed vested
benefits. Data as to accumulated plan benefits and plan assets for union
plans are not available.
Contributions charged to expense for these plans were as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1995 1994 1993
<S> <C> <C> <C>
Union $ 623 $ 711 $ 794
Non-union 147 253 426
------ ------ ------
Total $ 770 $ 964 $1,220
====== ====== ======
</TABLE>
Prior to 1993, the accrual for non-union pension expense was one year
delayed. Non-union pension expense in 1993 includes $215,000 as a catch-up
accrual for the prior year.
10. PROPOSED LAND SALES
On May 31, 1995, Cal Jockey entered into an Agreement of Purchase and Sale
with Property Resources, Inc. ("Property"), a subsidiary of Franklin
Resources, providing for the sale of approximately 32 acres of Cal Jockey
property which currently supports the barn and stable area ("Stable
Area"). The sale price, $21,000,000, is subject to Property Resources
funding a portion of certain off-site improvements required by the City of
San Mateo and State of California. In connection with the sale, Cal Jockey
has agreed to construct and maintain a retention pond, to construct a
pedestrian path, and to remove a diesel storage tank and a gas storage
tank (if located in the Stable Area) at an estimated cost of approximately
$1,300,000. Property Resources has agreed to fund a portion of the
construction costs related to the pond and the path.
In December 1995, Cal Jockey entered into an Agreement of Purchase and
Sale with Lee Iacocca and Associates, Inc. ("Iacocca") providing for the
sale of the Training Track Area. The sale price is $30,750,000 and is
subject to Iacocca funding a portion of the off-site improvements required
by the City of San Mateo and State of California. This sale is subject to
certain entitlements to be received by Iacocca from the City of San Mateo.
In the absence of these entitlements, the purchase price may be adjusted
downward, but not below $28,250,000.
The consummation of these transactions under the terms of the agreements,
as currently written, will require expenditures for off-site improvements
currently estimated at $15,000,000. Based upon the current cost estimates,
if neither agreement is terminated, it appears that Cal Jockey's
proportionate share of the off-site improvement costs will be
approximately $8,000,000. Due to the inherent uncertainties involved in
these estimates and the early stage of planning and design, it is
reasonably possible that these cost estimates will be further revised, and
such revisions could be significant. Consummation of one or more of these
transactions might require significant changes in operations or additional
property investments by the Companies in order to continue operations of
the racecourse.
Currently, certain provisions of both agreements allow Cal Jockey to
terminate the agreements. Numerous contingencies and conditions remain to
be resolved prior to the ultimate consummation of these transactions, no
earlier than 1997. Accordingly, no assurances can be given that such sales
will be consummated.
F-21
<PAGE> 65
11. COMMITMENTS AND CONTINGENCIES
Bay Meadows has contracted for computer and display equipment and services
through August 1999. Fees are based on the daily average of on-track
pari-mutuel wagers accepted during the racing meet. These fees charged to
expense aggregated $733,000, $816,000, and $750,000 for the years ended
December 31, 1995, 1994 and 1993, respectively.
The City of San Mateo (the "City"), along with the State of California,
has mandated that water runoff from Bay Meadows' barn area be disconnected
from the municipal sewer collection system. Cal Jockey is cooperating with
the City and State Regional Water Quality Control Board to resolve this
situation, and has prepared preliminary reports describing the proposed
compliance measures including construction of supplemental treatment
facilities. Cal Jockey will be financially responsible for the costs
associated with compliance measures which are estimated to cost
approximately $1,500,000. These estimated costs are expected to be
capitalized in property, plant and equipment. Final determinations and
approvals have not been received nor has a schedule for implementation
been established. In addition, this plan might be affected by the proposed
land sales described in Note 10.
Bay Meadows and Cal Jockey are, in the ordinary course of business,
involved in litigation and other legal matters. Such litigation includes
lawsuits brought by The Bay Meadows Foundation and Pauline Madera.
Bay Meadows Foundation v. Bay Meadows Operating Company and California
Jockey Club
On December 29, 1995, the Bay Meadows Foundation filed a complaint in San
Mateo Superior Court against the Cal Jockey and Bay Meadows. The complaint
alleges failure to properly calculate and pay charity proceeds as required
by law and includes causes of action for violation of statute, breach of
fiduciary duty and imposition of a constructive trust and accounting.
Specifically, the complaint alleges that Bay Meadows improperly deducted
rent payments made to its affiliate, Cal Jockey, from the charity net
proceeds. The complaint also seeks punitive damages and attorney's fees.
On March 25, 1996, the Cal Jockey and Bay Meadows filed their answer to
the complaint. The answer denies the allegations of the complaint and
asserts affirmative defenses against the Bay Meadows Foundation.
Specifically, the Cal Jockey and Bay Meadows maintain that the deduction
of rent payments was lawful and consistent with both the administrative
determination made by the California Horse Racing Board ("CHRB") in 1991
that such rent payments were deductible and the financial reporting
instructions subsequently promulgated by the CHRB. The parties are
currently engaged in civil discovery and the Cal Jockey and Bay Meadows
plan to vigorously defend themselves against the lawsuit.
Pauline Madera v. Bay Meadows Operating Company and Morris Webb
On December 20, 1995, Ms. Madera, a current employee of Bay Meadows
Catering, filed a complaint for damages for sexual battery, intentional
infliction of emotional distress, negligent infliction of emotional
distress and sexual harassment in violation of public policy. The
complaint seeks unspecified damages. Mr. Webb is a former employee of Bay
Meadows Catering. Defendant answered and removed the action to federal
court. Pursuant to federal rules, discovery is stayed until May 17, 1996,
when the parties will appear in court for the initial case management
conference. Neither Ms. Madera nor Mr. Webb were or are employed in a
management or supervisory position by Bay Meadows Operating Company. Bay
Meadows plans to vigorously defend themselves against the lawsuit.
Management believes that the pending legal actions against either of the
Companies are not expected to have a material impact on the separate or
combined financial statements of the Companies.
F-22
<PAGE> 66
In the first quarter of 1993, Cal Jockey recorded a charge of $1,400,000
as a result of a settlement related to a previous venture to lease and
develop the Training Track Area.
12. RELATED PARTY TRANSACTIONS
In July 1992, Northern California Off-Track Wagering, Inc. ("N.C.O.T.W.
Inc.") was formed to act as the guest associations' pari-mutuel manager
for satellite wagering, and Bay Meadows became a 25% shareholder in
N.C.O.T.W. Inc. Bay Meadows reimbursed N.C.O.T.W. Inc. $3,742,000,
$3,671,000 and $3,114,000 in 1995, 1994 and 1993, respectively, for
satellite wagering expenses N.C.O.T.W. Inc. incurred on behalf of Bay
Meadows. These expenses are included in Bay Meadows' direct operating
costs. Included in Bay Meadows' accounts payable and accrued liabilities
at December 31, 1995 and 1994, is a payable to N.C.O.T.W. Inc. totaling
$742,000 and $851,000, respectively.
From time to time, Cal Jockey lends funds on a short-term basis to Bay
Meadows to allow Bay Meadows to meet operational needs in the off-season.
As of December 31, 1995, the current balance due to Cal Jockey was
$600,000 which is reflected in the inter-company payable/receivable
account. For the year ended December 31, 1995, Bay Meadows paid Cal Jockey
$45,000 in interest related to these borrowings.
13. FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods were used by Cal Jockey and Bay Meadows in
estimating the fair value of financial instruments:
a. Cash and cash equivalents, amounts held on deposit for Thoroughbred
owners, accounts receivable and accounts payable and accrued
liabilities and securities held to maturity: The carrying amount
reported in the balance sheet approximates their fair values.
b. Securities available for sale: The fair values of securities
available for sale are based on quoted market prices.
c. Securities held to maturity: The fair values for government issued
securities are based on quoted market prices. The fair values for
certificates of deposit are estimated using projected cash flows
present valued at replacement rates currently offered for
instruments with similar characteristics.
F-23
<PAGE> 67
14. QUARTERLY COMBINED RESULTS OF OPERATIONS (UNAUDITED)
The unaudited quarterly combined results of operations for the years
ended December 31, 1995 and 1994, are as follows (in thousands, except
per share amounts and racing days)
<TABLE>
<CAPTION>
QUARTERS ENDED 1995
-----------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
<S> <C> <C> <C> <C>
Number of live racing days 20 10 27 51
Revenues $ 9,687 $ 7,367 $13,144 $20,511
Net income $ 647 $ 260 $ 1,071 $ 2,222
Combined net income
per paired share $ .11 $ .05 $ .19 $ .39
</TABLE>
<TABLE>
<CAPTION>
QUARTERS ENDED 1994
-------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
<S> <C> <C> <C> <C>
Number of live racing days 21 0 24 68
Revenues $10,062 $ 2,516 $11,823 $27,174
Net income (loss) $ 945 $(1,031) $ 1,418 $ 2,880
Net income (loss) per
paired share $ .16 ($ .18) $ .25 $ .50
</TABLE>
******
F-24
<PAGE> 68
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT EXHIBIT SEQUENTIALLY
NUMBER NUMBERED PAGE
<S> <C> <C>
Certificates of Incorporation of the Registrants (incorporated
3.1 herein by reference to Exhibit 3.1 to the Annual Report on Form
10-K for the year ended December 31, 1987 (the "1987 10-K")
(File No. 1-9319 and 1-9320)).
3.2 Agreement of Merger, dated March 24, 1983, between California
Jockey Club and Bay Meadows Realty Enterprises, Inc., Article
II of which changed the name of Bay Meadows Realty
Enterprises, Inc. to California Jockey Club (incorporated
herein by reference to Exhibit 2 to the Registration Statement
of the registrants on Form S-2 as filed with the Securities
and Exchange Commission on November 14, 1986 (the "Initial
Registration Statement") (File No. 1-9319 and 1-9320)).
3.3 Bylaws of California Jockey Club, as amended (incorporated
herein by reference to Exhibit 3.3 to the 1987 10-K and
Exhibit 28.1 to the Quarterly Report on From 10-Q of the
registrants for the quarter ended September 30, 1989 (File No.
1-9319 and 1-9320)).
3.4 Bylaws of Bay Meadows Operating Company (incorporated herein
by reference to Exhibit 3.4 to the 1987 10-K and Exhibit 28.2
to the Quarterly Report on Form 10-Q of the registrants for
the quarter ended September 30, 1989 (File No. 1-9319 and
1-9320)).
3.5 Amendment to Bylaws of Bay Meadows Operating Company
3.6 Amendment to Bylaws of California Jockey Club.
4.1 Pairing Agreement, dated February 15, 1983, between Bay Meadows
perating Company and California Jockey Club (formerly named Bay
Meadows Realty Enterprises, Inc.) (incorporated herein by
reference to Exhibit 4.3 to the Initial Registration Statement
(File No. 1-9319 and 1-9320)).
4.2 Amendment to Pairing Agreement, dated as of February 18, 1988,
between Bay Meadows Operating Company and California Jockey Club
(incorporated herein by reference to Exhibit 4.2 to the 1987
10-K).
10.1 Lease Agreement, dated July 23, 1991, between Bay Meadows
Operating Company and San Mateo County Fair Association
(incorporated herein by reference to Exhibit 10.2 to the 1991
10-K (File No. 1-9319 and 1-9320)).
</TABLE>
<PAGE> 69
<TABLE>
<CAPTION>
EXHIBIT EXHIBIT SEQUENTIALLY
NUMBER NUMBERED PAGE
<S> <C> <C>
10.2 Standby Agreement, dated 1986, among Tanforan Racing Association,
Bay Meadows Operating Company, Bay Meadows Racing Association and
Pacific Racing Association (incorporated herein by reference to
Exhibit 10.7 to Amendment No. 2 to the Registration Statement of
the Companies on Form S-2, as filed with the SEC on December 18,
1986 (File No. 1-9319 and 1-9320)).
10.3 Amended and Restated Joint Venture Agreement between Bay Meadows
Racing Association and Pacific Racing Association with respect to
Simulcast Enterprises (incorporated herein by reference to
Exhibit 10.6 to the 1988 10-K (File No. 1-9319 and 1-9320)).
10.4 Totalisator Services Agreement, dated July 30, 1988, among
Autotote Limited, Bay Meadows Racing Association, and Bay Meadows
Operating Company (incorporated herein by reference to Exhibit
10.7 to the 1988 10-K (File No. 1-9319 and 1-9320)).
10.5 Bay Meadows Operating Company 1988 Stock Option Plan
(incorporated herein by reference to Exhibit 10.11 to the 1987
10-K (File No. 1-9319 and 1-9320)).
10.6 Lease and Agreement ReConduct of Quarter Horse Racing (1990 and
1991 Racing Seasons), dated February 7, 1990, between Bay Meadows
Operating Company and Peninsula Horse Racing Association
(incorporated herein by reference to Exhibit 10.15 to the 1989
10-K (File No. 1-9319 and 1-9320)).
10.7 Lease Agreement, dated May 31, 1992, between Bay Meadows
Operating Company and San Mateo County Exposition and Fair
Association (incorporated herein by reference to Exhibit 10.7 to
the 1992 10-K).
10.8 Letter Agreement, dated March 29, 1993, between California
Jockey Club and Bay Meadows Operating Company for Credit
Enhancement for Line of Credit. Rescission of Sale of 20,000
Shares of Unpaired Cal Jockey Stock and Grant of Option to
Purchase Unpaired Bay Meadows Stock (incorporated herein by
reference to Exhibit 10.10 to the 1992 10-K (File No. 1-9319
and 1-9320)).
10.9 Lease Agreement, dated March 29, 1993, and First Amendment to
Lease dated September 30, 1993, between California Jockey Club
and Bay Meadows Operating Company (incorporated herein by
reference to Exhibit 10.10 to the 1993 10-K (File No. 1-9319 and
1-9320)).
</TABLE>
<PAGE> 70
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER EXHIBIT NUMBERED PAGE
<S> <C> <C>
10.10 Stock Option Agreement, dated June 1, 1993, between Bay Meadows
Operating Company and F. Jack Liebau (incorporated herein by
reference to Exhibit 10.11 to the 1993 10-K (File No. 1-9319 and
1-9320)).
10.11 Settlement Agreement, dated June 15, 1993, between California
Jockey Club, Prometheus Development Co. Inc. and Bay Meadows
Partners (incorporated herein by reference to Exhibit 10.12 to
the 1993 10-K (File No. 1-9319 and 1-9320)).
10.12 Lease Agreement, dated July 16, 1993, between Bay Meadows
Operating Company and San Mateo County Exposition and Fair
Association (incorporated herein by reference to Exhibit 10.13
to the 1993 10-K (File No. 1-9319 and 1-9320)).
10.13 Lease Agreement dated August 12, 1993, between Bay Meadows
Operating Company and D.D.B. Inc. (d.b.a. Butler Catering)
(incorporated herein by reference to Exhibit 10.14 to the 1993
10-K (File No. 1-9319 and 1-9320)).
10.14 Partners Program Agreement, dated August 16, 1993, between
Daily Racing Form, Inc., and Bay Meadows Operating Company
(incorporated herein by reference to Exhibit 10.15 to the 1993
10-K (File No. 1-9319 and 1-9320)).
10.15 Totalisator Services Amendment to the Agreement, dated August
18, 1993, between Autotote Limited, Bay Meadows Racing
Association and Bay Meadows Operating Company (incorporated
herein by reference to Exhibit 10.16 to the 1993 10-K (File
No. 1-9319 and 1-9320)).
10.16 Business Loan Agreement dated August 1, 1994, between Bank of
America National Trust & Savings and Bay Meadows Operating
Company (incorporated herein by reference to Exhibit 10.16 to
the 1994 10-K (File No. 1-9319 and 1-9320)).
10.17 Stock Option Agreement, dated March 1, 1994, between Bay Meadows
Operating Company and F. Jack Liebau (incorporated herein by
reference to Exhibit 10.18 to the 1994 10-K (File No. 1-9319 and
1-9320)).
10.18 Stock Option Agreement dated January 16, 1995 between Bay Meadows
Operating Company and F. Jack Liebau.
10.19 Agreement of Purchase and Sale dated December __, 1995 between
California Jockey Club and Lee Iacocca & Associates, Inc.
</TABLE>
<PAGE> 71
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER EXHIBIT NUMBERED PAGE
<S> <C> <C>
10.20 Agreement of Purchase and Sale dated May 31, 1995, First
Amendment dated June 12, 1995, Second Amendment dated December
__, 1995, Third Amendment dated January 31, 1996 and Fourth
Amendment dated March 18, 1996, between California Jockey Club
and Property Resources, Inc.
22 Subsidiary of the registrants.
23.1 Consent of Deloitte & Touche LLP.
27.1 California Jockey Club and Bay Meadows Operating Company
Financial Data Schedule.
27.2 California Jockey Club Financial Data Schedule.
27.3 Bay Meadows Operating Company Financial Data Schedule.
</TABLE>
<PAGE> 1
EXHIBIT 3.5
AMENDMENT TO THE BYLAWS OF BAY MEADOWS OPERATING COMPANY
Be it resolved that Section 3.2 of Article III of the Company's Bylaws shall be
amended by adding the following sentence at the end of Section 3.2: "The
following qualification for election, appointment and service as a director is
in effect. In order to be nominated for election or appointed to the Board of
Directors, the nominee must be of an age that would not place the nominee at or
above the age of 72 prior to the anticipated end of his or her term."
<PAGE> 1
Exhibit 3.6
AMENDMENT TO BYLAWS OF CALIFORNIA JOCKEY CLUB
RESOLVED, that the following shall be added to Section 2.10 of the Bylaws
of California Jockey Club:
No individual who has reached the age of 72 as of the annual meeting of the
shareholders at which the Directors are elected, commencing with the 1997
annual meeting, shall be eligible thereafter to serve on the Board of
Directors; provided, however, that the Board of Directors, in its discretion
and with respect to any particular individual, may waive the foregoing
requirement for a period of one year with respect to that individual.
<PAGE> 1
Exhibit 10.18
STOCK OPTION AGREEMENT
This Stock Option Agreement (the "Agreement") is made and entered into as
of January 16, 1995, by and between BAY MEADOWS OPERATING COMPANY, a Delaware
corporation (the "Company"), and F. JACK LIEBAU ("Employee"), under the
following circumstances:
A. The shares of common stock of the Company ("Company Stock") and the
shares of common stock of California Jockey Club, a Delaware corporation ("Cal
Jockey") trade as a single unit under a pairing arrangement, and are hereinafter
referred to as shares of "Paired Common Stock." The shares of common stock of
Cal Jockey are hereinafter referred to as shares of "Cal Jockey Stock".
B. The Company has enacted a 1988 Stock Option Plan (the "Plan"), a copy of
which has been delivered to Employee, which provides for the granting of options
to purchase shares of Paired Common Stock to certain officers, key employees and
prospective officers and key employees of the Company.
C. Employee is an employee of the Company. The Stock Option Committee of
the Company (the "Committee") has authorized the granting of this stock option
to Employee, thereby allowing Employee to acquire a proprietary interest in the
Company in order that Employee will have further incentive in connection with
his employment by the Company.
D. It is intended that this option shall be a nonqualified option which
does not constitute an incentive stock option within the meaning of Section 422A
of the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants hereinafter set forth and other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereby agree
as follows:
<PAGE> 2
1. GRANT OF OPTION. The Company hereby grants to Employee, as a separate
incentive in connection with his employment and not in lieu of any salary or
other compensation for his services, an option to purchase, on the terms and
conditions hereinafter set forth, all or any part of an aggregate of 25,000
shares of Paired Common Stock, at the purchase price set forth in paragraph 2 of
this Agreement. The stock option described herein is granted pursuant to the
Plan. This Agreement and such option are in all respects subject to the terms,
conditions and limitations set forth in the Plan.
2. PURCHASE PRICE AND PAYMENT.
a. The purchase price per share of Paired Common Stock (the "Option
Price") shall be $15.00 which is the fair market value per share of Paired
Common Stock as of the close of business on the date of granting of this option.
b. The Option Price shall be paid in cash.
3. EXERCISABILITY. Except as hereinafter provided and subject to the
provisions of paragraphs 6, 7 and 8 of this Agreement, this option may be
exercised as to no more than 8,333 shares covered hereby at any time after
January 16, 1996, may be exercised as to no more than an additional 8,333 shares
covered hereby at any time after January 16, 1997 and may be exercised in full
(to the extent not previously exercised) at any time after January 16, 1998;
provided, however, that this option shall become fully exercisable in the event
of a change in the ownership or effective control of the Company, or in the
event of a change in the ownership of a substantial portion of the assets of the
Company.
4. TERM OF OPTION. Notwithstanding any other provision of this Agreement,
this option is not exercisable after January 16, 2000.
2
<PAGE> 3
5. ADJUSTMENTS UPON RECAPITALIZATION.
a. If the outstanding shares of Company Stock or Cal Jockey Stock are
increased, decreased or changed into, or exchanged for, a different number or
kind of shares or securities of the Company or Cal Jockey through any
reorganization in which the Company or Cal Jockey is the surviving entity,
recapitalization, reclassification, stock split-up, stock dividend, stock
consolidation or otherwise, an appropriate and proportionate adjustment shall be
made changing the number or kind of shares and the exercise price per share
allocated to any unexercised portion of this option. Any such adjustment,
however, shall be made without change in the total price applicable to the
unexercised portion of this option, but with a corresponding adjustment in the
price of each share.
b. Adjustments under this paragraph 5 shall be made by the Committee,
whose determination as to what adjustments shall be made, and the extent
thereof, shall be final, binding and conclusive. No fractional shares of Company
Stock or Cal Jockey Stock shall be issued under this option on account of any
such adjustment.
c. Upon a merger or consolidation which results in the disappearance
of the Company or Cal Jockey or both of them unless exercised pursuant to
paragraph 3, this option shall be assumed by the successor corporation or
corporations. The dissolution or liquidation of both the Company and Cal Jockey
shall cause this option to terminate.
6. TERMINATION OF EMPLOYMENT. If Employee ceases to be employed by the
Company for any reason other than death or permanent or total disability (as
defined in paragraph 7 of this Agreement), Employee shall, unless this option is
sooner terminated pursuant to paragraph 4 of this Agreement, have ninety (90)
days from the date of termination to exercise this option to the extent it is
exercisable immediately prior to the commencement of said period. Unless sooner
terminated pursuant to paragraph 4 of this Agreement, this option shall expire
at the end of such ninety (90) day period to the extent it remains unexercised
at the end of that period.
7. DISABILITY OF EMPLOYEE. If Employee ceases to be employed by the Company
as a result of permanent or total disability (within the meaning of either
Section 22(e)(3) or Section 105(d)(4) of
3
<PAGE> 4
the Code), Employee shall, unless this option is sooner terminated pursuant to
paragraph 4 of this Agreement, have twelve months from the date of termination
of employment to exercise this option to the extent it is exercisable
immediately prior to the commencement of said period. Unless sooner terminated
pursuant to paragraph 4 of this Agreement, this option shall expire at the end
of such twelve-month period to the extent it remains unexercised at the end of
that period.
8. DEATH OF EMPLOYEE. If Employee dies (a) while employed by the Company,
(b) during the twelve-month period described in paragraph 7 of this Agreement,
or (c) during the ninety day period described in paragraph 6 of this Agreement,
then this option shall, unless sooner terminated pursuant to paragraph 4 of this
Agreement, be exercisable during the twelve-month period following Employee's
death by the person or persons to whom Employee's rights under this option shall
pass by will or by the applicable laws of descent and distribution (and not
otherwise, regardless of any community property or other interest therein of the
spouse of Employee or such spouse's successor in interest) to the extent it is
exercisable immediately prior to the commencement of said period. Unless sooner
terminated pursuant to paragraph 4 of this Agreement, this option shall expire
at the end of such twelve-month period to the extent it remains unexercised at
the end of that period.
9. MILITARY LEAVE OR SICK LEAVE. If Employee is on military leave or sick
leave for less than 91 days or is on such leave for a period of more than 91
days under circumstances where his right to reemployment by the Company (or a
related corporation of such corporation, or a corporation or a related
corporation of such corporation issuing or assuming this option in a transaction
to which Section 425(a) of the Code applies) is guaranteed by statute or
contract, his status as an employee for all purposes under this option shall be
deemed to continue throughout the period of military leave or sick leave. If
Employee is on military leave or sick leave for a period in excess of 90 days
and his right to reemployment, as defined above, is not guaranteed either by
statute or by contract, his status as an employee for all purposes of this
option shall be deemed to have terminated on the 91st day of such leave.
10. EXERCISE IN EVENT OF DEATH. To the extent exercisable after Employee's
death, this option shall be exercised only by Employee's transferee, who shall
be the person or persons entitled to this
4
<PAGE> 5
option under Employee's will, or if Employee shall fail to make a testamentary
disposition of this option, his legal representative. Any transferee exercising
this option must furnish the Company with: (a) written notice of his or her
status as transferee, (b) evidence satisfactory to the Company to establish the
validity of the transfer of this option and compliance with any laws or
regulations pertaining to said transfer, and (c) written acceptance of the terms
and conditions of this option as described in this Agreement.
11. RIGHTS AS STOCKHOLDER. Neither Employee nor any person claiming under
or through Employee shall be or have any of the rights or privileges of a
stockholder of the Company or Cal Jockey in respect of any of the shares of
Paired Common Stock issuable upon the exercise of this option, unless and until
a certificate or certificates representing such shares shall have been issued,
recorded on the records of the Company and Cal Jockey or their transfer agent or
registrar, and delivered.
12. EMPLOYMENT RIGHTS. The granting of this option shall not constitute or
be evidence of any agreement or understanding, express or implied, that the
Company will employ Employee for any period of time, in any position or at any
particular rate of compensation.
13. METHOD OF EXERCISE This option shall be exercised by delivering to
the Company a written notice setting forth the number of shares as to which
this option is exercised. Such written notice must be accompanied by payment of
the Option Price for such shares in accordance with paragraph 2 of this
Agreement.
14. NOTICES. Any notice to be given to the Company under the terms of this
Agreement shall be addressed to the Company, in care of its Secretary, at 2600
South Delaware Street, P.O. Box 5050, San Mateo, California 94402-0050, or at
such other address as the Company may hereafter designate in writing. Any notice
to be given to Employee shall be addressed to Employee at the address set forth
beneath Employee's signature at the bottom of this Agreement, or at such other
address as Employee may hereafter designate in writing. Any such notice shall be
deemed to have been duly given if and when enclosed in a properly sealed
envelope, addressed as aforesaid, registered or certified, and deposited,
postage and fees prepaid, with the United States Postal Service.
5
<PAGE> 6
15. OTHER BENEFITS. Nothing herein contained shall affect Employee's right
to participate in and receive benefits under and in accordance with the then
current provisions of any pension, insurance or other employee welfare plan or
program of the Company.
16. RESTRICTIONS ON TRANSFER. This option is not transferable by Employee
other than by will or the laws of descent and distribution applicable upon
Employee's death and is exercisable during Employee's lifetime only by Employee.
Except as set forth in the immediately preceding sentence, this option may not
be transferred, assigned, pledged or hypothecated in any way (whether by
operation of law or otherwise) and shall not be subject to execution, attachment
or any similar process. In the event that an attempted transfer, assignment,
pledge, or hypothecation is made contrary to the provisions of this Agreement,
this option and the rights and privileges conferred hereby shall immediately
terminate without notice.
17. SUCCESSORS AND ASSIGNS. Subject to the limitations on the
transferability of this option contained herein, this Agreement shall be binding
6
<PAGE> 7
upon and inure to the benefit of the heirs, legal representatives, successors
and assigns of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first written above.
BAY MEADOWS OPERATING COMPANY,
the "Company"
By
-------------------------------------
John C. Harris, Chairman
-------------------------------------
F. Jack Liebau,
Employee
-------------------------------------
-------------------------------------
(address)
-------------------------------------
(social security number)
7
<PAGE> 1
Exhibit 10.19
AGREEMENT OF PURCHASE AND SALE
THIS AGREEMENT OF PURCHASE AND SALE (the "Agreement") is made this __
day of December, 1995 (the "Effective Date") by and between CALIFORNIA JOCKEY
CLUB, a Delaware corporation ("Seller"), and LEE IACOCCA & ASSOCIATES, INC., a
Michigan corporation ("Purchaser").
Recitals
A. Seller is the owner of certain real property comprising
approximately one hundred seventy-five (175) acres of improved and unimproved
land, commonly known as the Bay Meadows Race Track, located in the City of San
Mateo, California ("Bay Meadows"), as more particularly described on the site
plan attached hereto as Exhibit "1" (the "Site Plan") and the Preliminary Title
Report of First American Title Insurance Company (order No. 413045-TD), dated as
of August 8, 1995, attached hereto as Exhibit "2." Bay Meadows is subject to an
operating lease with Bay Meadows Operating Company.
B. As delineated on the Site Plan, Bay Meadows is comprised of three
(3) primary components. The first component, delineated as Parcel 1 on the Site
Plan, contains the existing race track facilities, situated on approximately
eighty-two (82) acres, containing a grandstand, a clubhouse with turf club, the
race track and related automobile parking (the "Race Track"). Located adjacent
to the Race Track, and as delineated as Parcel 2 on the Site Plan, are certain
barn and stable area containing approximately thirty-eight (38) acres (the
"Stables Property"). The third component, as delineated as Parcel 3 on the Site
Plan, is a 5/8th mile training track oval and certain adjacent unimproved
property, comprising approximately forty and 57/100 (40.57) acres (the "Subject
Real Property").
C. Seller is developing a plan for the redevelopment of Bay Meadows
(the "Bay Meadows Redevelopment Plan"). The Bay Meadows Redevelopment Plan
contemplates the ultimate development on the Stables Property of approximately
nine hundred thousand (900,000) square feet of office and related facilities and
automobile parking for not less than four thousand (4000) automobiles and the
construction on the Subject Real Property of single-family and multi-family
housing units, a superior first class hotel and neighborhood retail uses.
D. Seller is also the owner of the training track, stables, barns and
other physical improvements situated on the Subject Real Property (the
"Improvements"), and, to the extent they are assignable, any and all (i) right,
title and interest appurtenant to the Subject Real Property, and all right,
title and interest, if any, of Seller in and to the center line of any land
lying in the bed of any dedicated street, road or avenue, opened or proposed,
public or private, in front of or adjoining the Subject Real Property, to the
center line thereof, and all right, title and interest of Seller in and to any
unpaid award for damage to the Subject Real Property by reason of change
-1-
<PAGE> 2
of grade of any Street; (ii) currently effective licenses, permits or similar
documents; and (iii) plans, drawings, specifications, surveys, engineering
reports and other technical descriptions relating to the development
contemplated by the Bay Meadows Redevelopment Plan (the "Contract Rights and
Intangible Assets"). The Subject Real Property and the appurtenant interests,
the Improvements and the Contract Rights and Intangible Assets are hereinafter
collectively referred to as the "Property."
E. The effective date of this Agreement (the "Effective Date") shall be
the date the second of Buyer or Seller executes this Agreement and delivers a
fully executed Agreement to the other party.
F. Seller desires to sell the Property to Buyer and Buyer desires to
purchase and acquire the Property from Seller, all upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, Seller and Buyer hereby agree as follows:
1. PURCHASE OF THE PROPERTY.
Seller shall sell the Property to Buyer and Buyer shall purchase the
Property from Seller upon the terms and conditions hereinafter set forth.
2. PURCHASE PRICE, PAYMENT AND CLOSING.
2.1 Purchase Price. The total purchase price for the Property
(the "Purchase Price") shall be Thirty Million Seven Hundred Fifty Thousand
Dollars ($30,750,000.00), adjusted as provided in Section 3.2.3 of this
Agreement.
2.2 Payment of Purchase Price.
The Purchase Price shall be paid and evidenced as follows:
2.2.1 Buyer has previously deposited to Escrow (as hereinafter
defined) its promissory note in favor of Seller in the principal amount of One
Hundred Thousand Dollars ($100,000.00) (the "Good Faith Deposit"). The Good
Faith Deposit shall be returned to Buyer upon delivery of the Initial Deposit
described below in Section 2.2.2.
2.2.2 Not later than three business (3) days after the
Effective Date, Buyer shall deliver to Escrow (as hereinafter defined in
subsection 2.3.1) (i) its promissory note in favor of Seller in the principal
amount of Two Hundred Fifty Thousand Dollars ($250,000.00) in the form attached
hereto as Exhibit "3," which note shall constitute the "Initial Deposit."
2.2.3 Upon satisfaction of Buyer's conditions to closing as
set forth in Subsection 3.1, Buyer shall within three (3) business days deliver
to Escrow its irrevocable standby letter of credit in favor of Seller in the sum
of One Million Dollars ($1,000,000.00)
-2-
<PAGE> 3
drawn on a national bank having offices in San Francisco or San Mateo County,
California or New York, Chicago or Detroit (the "Additional Deposit"). The
instrument representing the Additional Deposit shall provide that it may be
drawn upon satisfaction of (i) Buyer's conditions to closing, as set forth in
Subsection 3.2, and (ii) Seller's conditions to closing, as set forth in
Subsection 4.1 and shall otherwise be in form and content subject to Seller's
approval, which shall not be unreasonably withheld. Concurrent with delivery of
the Additional Deposit, Title Company shall release from escrow and return to
Buyer marked "Cancelled" the note constituting the Initial Deposit. The Initial
Deposit and the Additional Deposit are sometimes hereinafter referred to as the
Deposit.
IF THE CONDITIONS SET FORTH IN SECTION 3 HAVE BEEN SATISFIED AND SELLER IS NOT
IN MATERIAL BREACH HEREUNDER AND BUYER BREACHES THIS AGREEMENT BY FAILING TO
COMPLETE THE SALE HEREUNDER, THE SUM OF ONE MILLION DOLLARS ($1,000,000.00)
SHALL BE PAID TO SELLER AS LIQUIDATED DAMAGES FOR SUCH BREACH, IT BEING AGREED
THAT SUCH PAYMENT SHALL BE SELLER'S SOLE REMEDY IN THE EVENT OF SUCH DEFAULT AND
THAT SUCH ACTUAL DAMAGES THAT WOULD RESULT FROM SUCH A BREACH ARE UNCERTAIN AND
WOULD BE EXTREMELY DIFFICULT TO FIX AT THIS TIME AND WOULD BE DIFFICULT TO
PROVE. THE PARTIES AGREE THAT THEY HAVE NEGOTIATED THE AMOUNT OF ONE MILLION
DOLLARS ($1,000,000.00) AS BEING THEIR BEST ESTIMATE AT THE DATE HEREOF OF
SELLER'S LOSS IN THE EVENT OF A BREACH BY BUYER. IN ORDER TO ENABLE SELLER TO
COLLECT SAID LIQUIDATED DAMAGES, THE AFORESAID LETTER OF CREDIT SHALL BE TURNED
OVER TO SELLER UPON A BREACH BY BUYER AS DESCRIBED ABOVE.
(Buyer's initials)____ (Seller's initials)_____
2.2.4 The entire Purchase Price shall be deposited by federal
wire transfer or other readily available funds into a bank account designated by
Escrow on or before the Close of Escrow and shall be paid toward the Purchase
Price at the Close of Escrow (as hereinafter defined in subsection 2.1.3).
Concurrent with Close of Escrow the Deposit shall be released and returned to
Buyer.
2.2.5 In addition to the Purchase Price, Buyer shall bear
fifty three and 33/100 percent (53.33%) of the costs of the Off-Site
Improvements (as hereinafter defined in Section 7.3) reasonably and actually
incurred by Seller; provided that in no event shall Buyer's reimbursement
obligation exceed an amount equal to Two Million Six Hundred Sixty Seven
Thousand Dollars ($2,667,000.00). Buyer's obligations hereunder shall be
satisfied either by (i) deposit of funds allocable to the Off-Site Improvements
in escrow with Title Company (the "OffSite Improvements Escrow"), subject to
disbursement as provided in Section 7.3 of this Agreement or (ii) delivery to
Seller on Close of Escrow of security for Buyer's performance of its
obligations, which security shall be in the form of an irrevocable standby
letter of credit or set-aside letter from Buyer's bank and shall otherwise be in
form and content subject to Seller's approval, which shall not be unreasonably
withheld.
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2.3 Escrow, Closing, Title Insurance and Apportionments.
2.3.1 Closing. The closing shall take place at the offices of
First American Title Company, 345 California Street, 24th Floor, San Francisco,
California 94104, Attention: John Cabral ("Title Company") through an escrow
(the "Escrow") which has been opened under Number SP-251186, which Escrow shall
close (the "Close of Escrow") on or before the thirtieth (30th) calendar day
following the completion, satisfaction and/or waiver of the last condition to
Buyer's obligation to acquire the Property as set forth in Subsections 3.2, 3.3
and 3.4, but in no event prior to the sixtieth (60th) calendar day nor later
than the ninetieth (90th) calendar day following the Entitlement Procurement
Date (as hereinafter defined), or on such other date as the parties may agree to
in writing.
2.3.2 Title Report and Title Insurance. Upon the Close of
Escrow, Title Company shall furnish to Buyer, an ALTA owner's policy of title
insurance ("Title Policy") with endorsement numbers 100 (modified), 103.7,
116.1, 116.4 and such other available endorsements as Buyer may reasonably
require, insuring fee title in Buyer subject only to non-delinquent real
property taxes and assessments and such other exceptions as are approved by
Buyer in writing or to which Buyer's objections have been waived. Concurrent
with the opening of Escrow, Seller shall provide Buyer with a current
preliminary title report issued by Title Company (the "Title Report") and copies
of all documents listed as exceptions to title. Buyer shall have until 5:00 P.M.
on the Approval Date(as hereinafter defined) to disapprove any exceptions shown
on the Title Report. Buyer shall not unreasonably disapprove the condition of
title to the Property. Seller shall have no obligation to remove any exception
disapproved by Buyer, except that Seller shall remove any monetary liens other
than current taxes and assessments on or before the Close of Escrow and Seller
shall promptly advise Buyer whether Seller agrees to remove any other exceptions
disapproved by Buyer. If Seller does not agree to remove any other exceptions
disapproved by Buyer, this Agreement shall terminate without further liability
to either party unless Buyer waives its objection within three (3)-business days
following receipt of Seller's notice. Upon such termination, Buyer shall be
entitled to the return of the Deposit. If Seller agrees to remove any exception
objected to by Buyer, Seller shall then have until the date for Close of Escrow
within which to remove such exception. If Seller is unable to remove any
exception objected to by Buyer by the date for Close of Escrow, Buyer may elect,
as Buyer's sole remedies: (a) to terminate this Agreement and receive a return
of the Deposit; or (b) to waive Buyer's objection and close the Escrow. The
Title Policy shall have a liability limit equal to the Purchase Price.
2.3.3 Recordation; Escrow Fees. Seller shall pay the cost of
any revenue, city or county transfer or document transfer tax, recording fees
and sales, use and other transfer taxes. Buyer shall pay the cost of the Title
Policy. Buyer and Seller shall equally share the escrow fee of Title Company.
2.3.4 Apportionment of Taxes. Real property taxes and general
and special assessments shall be apportioned (on the basis of a 365-day year) as
of 12:01 a.m. on the Close of Escrow. If the Close of Escrow shall occur before
the real property tax rate is fixed,
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apportionment of taxes shall be made on the basis of the tax rate for the
preceding year applied to the latest assessed valuation. Any apportionment of
real property taxes necessary because the Subject Real Property comprises only a
portion of a larger tax parcel shall be made on the basis that the ratio of the
Net Acres of the Subject Real Property bears to the Net Acres of such larger tax
parcel. After the real property taxes are finally fixed, Seller and Buyer shall
make a recalculation or the apportionment of same, and either Seller or Buyer,
as the case may be, shall make appropriate payment to the other based on such
recalculation. Seller shall be responsible for and shall promptly pay, any
supplemental taxes which may be assessed against the Property attributable to
the period prior to the Close of Escrow.
3. CONDITIONS TO BUYER'S OBLIGATIONS. Buyer's obligation to acquire the
Property shall be conditioned upon Buyer's approval (in the exercise of Buyer's
sole and absolute discretion, except as otherwise expressly set forth herein) of
all the matters set forth in this Section 3.
3.1 Review of Physical Condition, Development Feasibility and
Seller Documents. Buyer shall approve or disapprove the physical condition of
the Subject Real Property and all matters relating to the development and use
thereof, together with those items set forth in Subsections 3.1.1 through 3.1.5
below on or before March 31, 1996 (the "Approval Date"). If written approval of
any such matters is not given by Buyer on or before the Approval Date, then such
item shall conclusively be deemed disapproved by Buyer. If Buyer shall
disapprove any of the matters set forth in this Subsection 3.1, for any reason
whatsoever, this Agreement shall terminate, whereupon Escrow shall immediately
return the Deposit to Buyer together with any interest earned thereon, and
neither Buyer nor Seller shall have any further rights or obligations to the
other under this Agreement.
3.1.1 Title to the Property as shown in the Title
Report and all exceptions thereto.
3.1.2 Copies of current real property tax bills,
special assessment district agreements, and similar records relating to the
Property.
3.1.3 Copies of any environmental reports,
environmental audits or toxic waste evaluations, Wetlands reports, CC&R's,
protective covenants, architectural, landscape or building requirements, soils
and geological reports and studies, topographical maps and any other reports,
licenses, permits or relevant information in Seller's possession that relate to
the Property and the development thereof as contemplated by the Bay Meadows
Redevelopment Plan.
3.1.4 All documents and correspondence in Seller's
possession respecting zoning, land-use, subdivision, building and construction
laws and regulations restricting or regulating or otherwise affecting the
Property and which specifically relate to the type of development on the
Property contemplated by the Bay Meadows Redevelopment Plan.
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3.1.5 All documents or correspondence relating to
Seller's current plans to master-plan and develop Bay Meadows. Such documents
shall include, but not be limited to, plans, drawings, traffic studies,
preliminary environmental impact reports, economic feasibility studies,
engineering reports, architectural reports and any other relevant information
that relates to the potential development of Bay Meadows; provided, however,
Seller shall not be obligated to furnish information which is the subject of
contractual confidentiality limitations or legal prohibitions but in such cases
shall identify the existence of each item of such information and the general
subject matter thereof.
Seller shall provide Buyer with access to all documents and information
required by this Subsection 3.1 within seven (7) days after the Effective Date.
Buyer may copy such information at its cost and Seller will cooperate with Buyer
in effecting such copying.
3.2 Receipt of Entitlements.
3.2.1 Projected Entitlements. Buyer's obligation to
acquire the Property shall be expressly subject to and conditioned upon Buyer's
receipt of the Entitlements more particularly described in Subsection 7.1 below
(the "Projected Entitlements"), the expiration of all appeal periods under the
City of San Mateo Planning Code and the California Environmental Quality Act and
the execution and delivery by Buyer (or Seller if such development agreement
provides for the assignment thereof to Buyer with respect to the Subject Real
Property) and the City of San Mateo of a development agreement, pursuant to
Sections 65864 et. sec. of the California Government Code, relating to the
development of the Property, in phases over a ten (10) year period, to encompass
seven hundred twelve (712) dwelling units, one hundred forty-six thousand
(146,000) square feet of retail, office and cinema space and a hotel of two
hundred (200) rooms plus associated common areas, all as scheduled in the Land
Use Program dated April 28, 1995 attached hereto as Exhibit "4" prepared by
Calthorpe Associates ("CA") . Any development restrictions and service
mitigation requirements and/or any "in lieu" fees or exactions imposed by the
City of San Mateo (or any other governmental agency with jurisdiction thereof)
on Buyer or Seller in conjunction with the granting of the Entitlements shall be
subject to prior approval of the party required to bear the restriction,
obligation, fee or expense, whether Buyer or Seller, which approval may be
withheld in that party's reasonable discretion. If Buyer does not accept any of
the restrictions or requirements as proposed by the City of San Mateo, Buyer
shall have the right to terminate this Agreement. If Seller does not accept such
restrictions or requirements, Buyer shall have the right to agree to bear the
cost thereof or Seller shall have the right to terminate this Agreement.
Attached hereto as Exhibit "5" is a pro forma schedule (the "Timetable")
delineating the dates upon which Seller is required to have completed each of
the required submittals to the City of San Mateo and the State of California
Department of Transportation necessary to obtain the Entitlements, the dates
upon which all necessary public hearings before the City of San Mateo Planning
Commission and City Council will have occurred and the dates such other related
matters will be accomplished in order for the Entitlements to be in place on or
before December 15, 1998 (the "Entitlement Procurement Date"). From and after
the Effective Date of this Agreement through the Entitlement Procurement Date,
Buyer and Seller shall meet and reach agreement on any amendment to the
Timetable, which shall be incorporated
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into this Agreement by way of an amendment hereto. Seller shall deliver to Buyer
copies of all applications and other related documents as filed with the City of
San Mateo and/or the State of California, and copies of all correspondence and
other notices received by Seller in connection with the proposed Bay Meadows
Redevelopment Plan. If Seller advises Buyer, or if Buyer reasonably determines,
that Seller is or will be unable to obtain the Entitlements by the Entitlement
Procurement Date, or if Seller fails to complete any required action by the
dates set forth in the Timetable, and Buyer reasonably determines that such
failure reasonably means that Seller will be unable to obtain the Entitlements
by the Entitlement Procurement Dates Buyer shall have the right to terminate
this Agreement upon written notice to Seller.
3.2.2 Adjusted Entitlements. Seller shall be deemed
to have satisfied the condition to Buyer's performance set forth in Subsection
3.2.1 if Seller obtains entitlements for development of the Subject Property
which permit not less that 91% of the usage and unit density contained in the
Projected Entitlements. For purposes of this agreement, such percentage shall be
applied to each category of dwelling unit set out in the CA Land Use Program,
i.e. Single-Family, Mixed Single Family, Townhomes and Condo/Apartments (with
the units in such combined category allocated 53% to Condominiums and 47% to
Apartments), as well as to the number of square feet of Retail/Commercial
development permitted and the number of rooms in the proposed Hotel on the
following basis:
(a) Each of the components of the Land
Use Program shall be allocated a
value of the total Land Use Program
as follows:
(i) 45 ft. Single Family: 7%
(ii) Mixed Single Family: 7%
(iii) Townhomes: 10%
(iv) Condominiums: 24%
(v) Apartments: 22%
(vi) Anchor Retail: 6%
(vii) Ancillary Retail: 4%
(viii) Hotel: 11%
(ix) Cinema: 4%
(x) Office: 5%
(b) Increases or reduction in the
Projected Entitlements shall be
computed for each subcategory on a
prorata percentage basis and the
total shall be added to determine
the overall aggregate reduction
applicable to the Projected
Entitlements, subject to the
following limitations:
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<PAGE> 8
(i) Any aggregate net reduction
of the unit allocations
specified on the CA Land
Use Program for categories
(i) through (iv) listed in
section 3.2.2(a) by more
than nine percent (9%)
shall be deemed to
constitute a reduction of
the overall Projected
Entitlements by more than
the allowed nine percent
(9%).
(ii) Any aggregate net reduction
of the allocations
specified on the CA Land
Use Program for any of
categories (vi) through (x)
listed in section 3.2.2(a)
hereof by more than five
percent (5%) shall be
deemed to constitute a
reduction of the overall
Projected Entitlements by
more than the allowed nine
percent (9%).
(c) By way of example only, Exhibit "6"
to this Agreement contains various
scenarios of adjustments to the
Projected Entitlements which will
and will not be deemed to constitute
reductions which exceed the allowed
91% figure.
Entitlements which are obtained within the permitted range described herein
shall be termed "Adjusted Entitlements."
3.2.3 In the event the Adjusted Entitlements are
within the 91% limit set forth in subsection 3.2.2, as computed thereby, then
Buyer's condition to closing shall be deemed to be satisfied; provided, however,
that there shall be an adjustment of the Purchase Price by a like percentage.
The Purchase Price determined on the basis of such adjustment shall be the
Adjusted Purchase Price and shall substitute for the Purchase Price set forth in
section 2.1 of this Agreement. Notwithstanding the foregoing, however, in no
event shall the Adjusted Purchase Price be less than Twenty Eight Million Two
Hundred Fifty Thousand Dollars ($28,250,000.00).
3.3 Survey Approval. On or before the Entitlement Procurement
Date, Seller shall provide to Buyer, at Seller's sole cost and expense, a survey
of the Subject Real Property (the "Survey") certified to both Buyer and the
Title Company by a licensed surveyor acceptable to both for the purpose of
establishing the boundaries of the Subject Real Property, issuing extended
coverage (ALTA) title insurance and establishing the total number of net acres
covered by the Property determined to the nearest one one-hundredth (1/100th) of
an acre. Seller shall not be obligated to undertake any work in connection with
such survey which exceeds that required to create the parcel map which
subdivides the Subject Real Property from Bay Meadows. Buyer shall have ten (10)
business days in which to review and approve the Survey, which approval shall
not be unreasonably withheld. If Buyer reasonably disapproves any such matters
as shown on the Survey, Seller shall advise Buyer within five (5) business days
of receipt of Buyer's disapproval whether Seller undertakes to cause such Survey
matters to be corrected
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<PAGE> 9
on or before the Close of Escrow. If Seller does not so advise Buyer, Buyer
shall have the option to (i) waive its objection or (ii) notify Seller of its
election to terminate this Agreement, in which event Buyer shall receive the
return of the Deposit.
3.4 Closing Conditions. Buyer shall not be obligated to
complete its purchase of the Property if Buyer determines, in the exercise of
its reasonable discretion, that there has been a material adverse change in the
information provided by Seller or obtained by Buyer, pursuant to this Section 3
relating to the physical condition of the Subject Real Property or Buyer's
rights to construct improvements consistent with the Projected or Adjusted
Entitlements, between the date of Buyer' s approval thereof and the Close of
Escrow.
4. CONDITIONS TO SELLER'S OBLIGATIONS. Seller's obligation to close
Escrow shall be conditioned on all matters set forth in this Section 4.
4.1 Buyer's Performance. Performance by Buyer of all Buyer's
obligations hereunder, including delivery of the Additional Deposit according to
the terms of Section 2.2.3.
4.2 Parcel Map. The recordation of a final parcel or
subdivision map creating the Subject Real Property as a legal parcel in
accordance with the California Subdivision Map Act; provided, however, that
Seller shall be obligated to use its best good faith efforts to proceed to
obtain and record such a map in accordance with the other provisions of this
Agreement relating to Entitlements.
5. CLOSING.
5.1 Documents to Be Deposited Into Escrow by Seller. Within
five (5) days before the Close of Escrow, Seller shall deposit into Escrow: (a)
an executed grant deed (the "Deed") conveying the Subject Real Property to
Buyer, in the form attached hereto as Exhibit "7," (b) an executed assignment of
intangible assets (the "Assignment of Intangible Assets") in the form attached
hereto as Exhibit "8," (c) an executed Certificate of Non-Foreign Person in the
form attached hereto as Exhibit "9," and (d) an executed Seller's State Tax
Withholding Certificate in the form attached hereto as Exhibit "10."
5.2 Documents and Sums to Be Deposited Into Escrow by Buyer.
On or before the Close of Escrow, Buyer shall deposit into Escrow such funds as
are necessary to complete payment of the Purchase Price, to fund Buyer' s
contribution to the cost of the Off-Site Improvements as reasonably estimated by
Seller consistent with Section 7.3 and to pay Buyer's portion of the closing
costs.
5.3 Close of Escrow. On the Close of Escrow Title Company
shall:
5.3.1 Cause the Deed to be recorded in San Mateo
County, California.
5.3.2 Deliver to Seller the:
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(a) Cash proceeds of the purchase and
sale (including the amount of
Buyer's contribution to the cost of
the Off-Site Improvements, if a cash
deposit);
(b) Security relating to Buyer's
obligations to fund the cost of the
Off-Site Improvements, if security
is being provided pursuant to
Section 2.2.5 of this Agreement.
5.3.3 Deliver to Buyer the:
(a) Title Policy;
(b) Executed Certificate of Non-Foreign
Person;
(c) Executed Seller's State Tax
Withholding Certificate; and
(d) Executed Assignment of Intangible
Assets.
5.3.4 Forward to Buyer and Seller, in duplicate, an
accounting of all funds received and disbursed and copies of all executed and
recorded or filed documents deposited into Escrow, with such recording and
filing date endorsed thereon
6. ADDITIONAL MATTERS.
6.1 Possession. Buyer shall take possession of the Property as
of the Close of Escrow, free and clear of any leasehold or other possessory
interest of Bay Meadows Operating Company, Seller or any third party except a
leasehold interest in favor of Seller relating to a parcel of land approximately
twenty (20) feet in width and twenty five (25) feet in length (the "Sign
Parcel") on which is located the large sign fronting on Highway 101 identifying
the Bay Meadows Racetrack (the "Sign"). During the period between the date of
this Agreement and the Approval Date, the parties shall negotiate the terms and
conditions of a ground lease (the "Sign Lease") covering the Sign Parcel, which
terms and conditions shall include the following:
6.1.1 Term of ninety-nine (99) years;
6.1.2 Seller shall have the right to terminate the
Sign Lease at any time on sixty (60) days notice to Buyer;
6.1.3 The term of the Sign Lease shall end ninety
(90) days after the later to occur of (a) cessation of live horse racing or (b)
cessation of "simulcast" horse racing at the Bay Meadows Race Track;
6.1.4 Rent during the term of the Sign Lease shall be
One Dollar ($1.00) per year;
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6.1.5 Seller and its employees and agents shall have
access over the Property for purposes of ingress and egress to and from the Sign
Parcel along the easterly boundary of the Subject Real Property. In the event
the Sign Parcel is segregated by a sound control wall from the rest of the
Subject Real Property, a door providing access to the Sign Parcel from the
Subject Real Property shall be provided.
6.1.6 To the extent the Sign projects into the
Subject Real Property's airspace beyond the airspace boundaries of the Sign
Parcel, the Sign Lease shall incorporate such airspace easements as are
necessary to fully encompass the area occupied by the Sign.
6.1.7 Seller shall bear all expenses for real and
personal property taxes applicable to the parcel subject to the Sign Lease,
adequate liability and property damage insurance, repairs and maintenance and
repair of the Sign, it being agreed that the Sign Lease is to be "triple net;"
6.1.8 Buyer and its successors and assigns shall be
named as additional insureds in all personal injury and property damage
insurance policies maintained by Seller or its successor lessees relating to the
Sign or the Sign Parcel; and
6.1.9 The Sign may be used exclusively to advertise
and promote live or simulcast horse racing at the Bay Meadows Race Track.
6.2 Indemnity. Seller shall indemnify and defend Buyer against
and hold Buyer harmless from all claims, demands, causes of action and suits for
personal injury, property damage and breach of contract arising out of Seller's
ownership and/or operation of the Property prior to the Close of Escrow, but
exclusive of any such claims, demands, causes of action and which may arise in
connection with the Entitlement procurement process or with respect to any toxic
or hazardous substance. Buyer shall indemnify and defend Seller against and hold
Seller harmless from any claims, demands, causes of action and suits for
personal injury, property damage and breach of contract arising out of Buyer's
ownership or operation of the Property subsequent to the Close of Escrow but
exclusive of claims relating to or arising from any toxic or hazardous substance
present in the Subject Property at Close of Escrow.
6.3 Access Maintenance. Seller shall, between the date hereof
and the Close of Escrow, allow Buyer, its agents, contractors and attorneys
complete access to the Subject Real Property for purposes of inspecting the same
or any part thereof, including conducting soil tests and engineering feasibility
studies, at such reasonable times as Buyer may schedule with Seller taking into
consideration the needs and requirements of those horses which utilize the
Subject Real Property. To the extent reasonably practical, Buyer shall
coordinate its schedule of on-site investigations with Seller to coincide with
such periods of time in which the fewest number of horses are present upon the
Subject Real Property. Buyer shall indemnify and defend Seller against and hold
Seller harmless from any claims, demands, causes of actions and suits arising
out of Buyer's inspection of or other activities on the Property; provided,
however, that in no event shall Buyer be required to indemnify Seller against
any claims for damage or injury to any
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<PAGE> 12
such horses, unless Buyer its agents or contractors have acted negligently or
wilfully or otherwise failed to exercise due care in the exercise of Buyer's
access and inspection rights. Buyer shall maintain public liability and property
damage insurance with limits of not less than $1 million applicable to the risks
which Buyer is indemnifying Seller hereunder, which policy or policies shall
name Seller as an additional insured and provide for notice to Seller not less
than fifteen (15) days prior to cancellation. Until the Close of Escrow, Seller
shall keep and maintain the Property in its current condition. If Buyer
determines to not complete its acquisition of the Property, then Buyer shall
promptly, at its sole cost and expense, but without any recourse or warranty
with respect to the same, provide to Seller copies of all studies and reports
prepared for Buyer in connection with the investigation of the Property.
6.4 Delivery of Documents and Information. From and after
Seller's initial delivery of such documents and correspondence to Buyer in
accordance with Subsections 3.1.5 and 3.1.6, Seller shall timely provide to
Buyer, on an ongoing basis, all additional documents and correspondence coming
into Seller's possession relating to the development of the Property as
contemplated by the Bay Meadows Redevelopment Plan or the procurement of the
Entitlements which are prepared for or received by Seller through the date of
the Close of Escrow.
6.5 Buyer's Review Rights. During the course of Seller's
development and finalization of the Bay Meadows Redevelopment Plan for submittal
to the City of San Mateo, Seller shall advise and consult with Buyer regarding
the progress thereof and shall provide Buyer with copies of all
Entitlement-related submittals to the City of San Mateo or other agencies.
Further, Seller shall give due consideration to any suggestions specifically
relating to the Entitlements for the Subject Real Property and Seller shall not
request or agree to any material changes to the proposed Bay Meadows Specific
Plan, dated ________, 1995, prepared by Calthorp Associates, without Buyer's
prior written consent, which consent shall not be unreasonably withheld. Buyer
acknowledges its awareness of the fact that Seller has agreed to certain land
use restrictions and approval rights with Property Resources, Inc., with whom
Seller has entered into an agreement to sell the Stables Property.
6.6 As-Is Purchase. Except as otherwise specifically stated in
this Agreement, Seller hereby specifically disclaims any warranty, guaranty or
representation, oral or written, past, present or future, of, as to, or
concerning (i) the nature and condition of the Property, including, but not by
way of limitation, the water, soil, geology, environmental conditions (including
the presence or absence of any hazardous or toxic materials), and the
suitability thereof for any and all activities and uses which Buyer may elect to
conduct thereon; (ii) the nature and extent of any right-of-way, lease,
possessory interest, lien, encumbrance, license, reservation, condition or
otherwise; and (iii) the compliance of the Property or its operation with any
laws, ordinances or regulations of any government or other body. The sale of the
Property as provided for herein is made on an "AS IS" basis, and Buyer expressly
acknowledges that, in consideration of the agreements of Seller herein, and
except as otherwise expressly specified herein, SELLER MAKES NO WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, OR ARISING BY OPERATION OF LAW, INCLUDING,
BUT IN NO WAY LIMITED TO, ANY
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<PAGE> 13
WARRANTY OF CONDITION, HABITABILITY, MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OF THE PROPERTY.
6.7 Release. With the exception of: (i) a default or breach of
any representation or warranty of Seller specifically set forth in this
Agreement, (ii) any claims arising out of Seller's fraud or (iii) any claims for
contribution pursuant to the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, or any other similar environmental
statute, rule or decision arising from the condition of or materials present on
the Property prior to Close of Escrow, Buyer, for itself and its agents,
affiliates, successors and assigns, hereby releases Seller, its agents,
affiliates, successors and assigns from, and waives any right to proceed against
Seller for, any and all costs, expense, claim, liabilities and demands
(including reasonable attorneys' fees) at law or in equity, whether known or
unknown, arising out of the physical, environmental, economic, legal or other
condition of the Property (collectively referred to hereinafter as "Claims")
which Buyer has or may have in the future. Without limiting the foregoing, Buyer
hereby specifically waives the provisions of Section 1542 of the California
Civil Code which provide:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH
THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS
FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR."
Buyer hereby specifically acknowledges that Buyer has
carefully reviewed this subsection, and discussed its import with legal counsel,
is fully aware of its consequences, and that the provisions of this subsection
are a material part of this Agreement.
7. COVENANTS OF SELLER.
7.1 General Plan Amendment Zoning Approvals and Subdivision.
Seller shall use its reasonable best good faith efforts to obtain from the City
of San Mateo, as soon as reasonably possible following the Effective Date, but
in any event on or before the Entitlement Procurement Date, all necessary
approvals (the "Entitlements") creating the Subject Real Property as a legal
parcel in accordance with the terms of the Subdivision Map Act and creating the
invested nonappealable right in Buyer to develop on the Subject Real Property
the mix of residential, retail and hotel uses shown on the CA Land Use Program.
Except as otherwise set forth below, Seller shall be solely responsible for all
costs and expenses associated with obtaining the Entitlements. The Entitlements
shall include:
7.1.1 An amendment to the City of San Mateo General
Plan;
7.1.2 Final Certification of Seller's Environmental
Impact Report;
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7.1.3 The rezoning of the Subject Real Property;
7.1.4 Approval of a final parcel or subdivision map;
7.1.5 Approval of the Specific Area Plan;
7.1.6 Execution of a Development Agreement; and
7.1.7 Issuance of a Site Development Permit.
Buyer and Seller understand and acknowledge that, in connection with
Seller's application to the City of San Mateo for the Entitlements, there must
be included information concerning the location, massing, shape and height of
the improvements Buyer proposes to construct on the Subject Real Property,
Buyer's parking and circulation plan must be described and the application must
also include descriptive information concerning the exterior elevations and
architectural standards for Buyer's proposed buildings. Buyer and Seller agree
that Seller's architect and planner, CA, may be retained by Buyer, at Buyer's
sole cost and expense, to develop, on Buyer's behalf, for submittal as part of
Seller's Entitlement application, all of the foregoing. In the alternative,
Buyer may retain another architect, who shall cooperate with CA in providing the
foregoing. From and after the Effective Date of this Agreement, Buyer (and its
architect, if one has been retained) shall periodically meet with CA to
coordinate CA's development of the Specific Plan as it relates to the Subject
Real Property. That portion of the Specific Area Plan relating to the Subject
Real Property shall be subject to Buyer's approval, which approval Buyer may
withhold in its sole and absolute discretion. If Buyer and Seller cannot reach
agreement on the content of the Specific Area Plan relating to the Property
prior to the end of the period described in Section 3.1 of this Agreement,
either party shall have the option to terminate its rights and obligations under
this Agreement, provided, however, that if Seller exercises such election, Buyer
shall have the option to purchase the Property under the terms and conditions
set forth in Section 7.2 of this Agreement.
7.2 Rejection of Entitlement Efforts. If, following rejections
of its applications for approval of the Projected Entitlements by the City of
San Mateo following hearings on the merits before the San Mateo Planning
Commission and City Council, Seller reasonably and in good faith concludes that
obtaining at least the Adjusted Entitlements is unlikely, then Seller may upon
ninety (90) days prior written notice (the "Termination Notice") terminate all
its obligations under this Agreement, in which case the Deposit shall be
returned in full to Buyer, together with any interest earned; provided, however,
that Seller may not give a Termination Notice to Buyer prior to a date one (1)
year from the Effective Date. Notwithstanding the foregoing, upon receipt of
Seller's Termination Notice and prior to ninety (90) days elapsing, Buyer shall
have the option to purchase the Property for a price of Twenty Eight Million Two
Hundred Fifty Thousand Dollars ($28,250,000.00). Close of Escrow for such
purchase shall occur within thirty (30) days of recording of a final parcel or
subdivision map establishing the Subject Real Property as a separate legal
parcel.
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<PAGE> 15
7.3 Off-Site Improvements.
7.3.1 Seller shall be responsible, at its sole cost
and expense (but subject to Buyer's payment obligation as set forth in
Subsection 2.2.5), to construct all off-site improvements which are required by
the City of San Mateo and the State of California (the "Off-Site Improvements")
as a condition to the grant of the Entitlements.
7.3.2 If Buyer's expected share of costs relating the
Off-Site Improvements is deposited at Close of Escrow in the Off-Site
Improvements Escrow, such funds shall be disbursed solely to pay the percentage
of costs charged by third party contractors for design and/or construction work
relating to the Off-Site Improvements established in subsection 2.2.5, including
costs of engineering and design of the Off-Site Improvements as well as costs of
permits, fees and other charges and expenses incurred in connection therewith
and the costs of creation of a pathway (including costs of paving, lighting and
landscaping) leading from the Subject Real Property through the Stables Property
and connecting to the adjacent Southern Pacific railroad station to facilitate
ingress and egress from the east side of the railroad tracks. Unless Buyer
otherwise specifically agrees, each disbursement from the Off-Site Improvements
Escrow shall be subject to (i) verification that the work for which the
disbursement is made has been completed and (ii) concurrent payment by or on
behalf of Seller of the balance of any specific charge to which a disbursement
relates. In the event Buyer has provided security for performance of its
obligations to pay for Off-Site Improvements, Buyer shall make payments
therefore within fifteen (15) days of satisfaction of the foregoing conditions
(i) and (ii).
7.3.3 If the cost of the Off-Site Improvements is
reasonably anticipated to exceed the amount of Five Million Dollars
($5,000,000.00) but be less than Eight Million Dollars ($8,000,000.00) (as
evidenced by an estimate, reasonably acceptable to Buyer, prepared by Seller's
civil engineer and delivered to Buyer), then Seller, upon not less than fifteen
(15) days prior written notice to Buyer, shall have the right to terminate this
Agreement unless Buyer agrees to fund its pro rata fifty three and one-third
percent (53.33%) share of such additional costs. If the cost of the Off-Site
Improvements is reasonably anticipated to exceed the amount of Eight Million
Dollars ($8,000,000.00) (as evidenced by an estimate, reasonably acceptable to
Buyer, prepared by Seller's civil engineer and delivered to Buyer), then Seller,
upon not less than fifteen (15) days prior written notice to Buyer, shall have
the right to terminate this Agreement unless Buyer agrees to fund all of such
costs in excess of the $8,000,000.00 amount.
7.3.4 Prior to letting any contract for work relating
to the Off-Site Improvements for which Buyer is required to provide
reimbursement under this Agreement, Seller shall consult with Buyer about the
proposed cost of such work. Buyer shall have thirty (30) days from the date
Seller advises of the cost of any contract relating to the Off-Site Improvements
to seek alternative, lower cost bids from responsible licensed and bondable
contractors having no less than five (5) years experience performing work of the
type being bid and to provide such lower cost bids to Seller. If Seller does not
accept the lower cost bid provided by Buyer, then Buyer shall not be obligated
to reimburse Seller for any cost to perform the work on the Off-Site
Improvements which exceeds the amount which would have been charged by the
contractor whose bid was obtained by Buyer. Seller's time to complete the Off-
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<PAGE> 16
Site Improvements as provided in subsection 7.3.4 below shall be extended to
account for any delay resulting from Buyer's solicitation of lower cost bids
pursuant to this subsection 7.3.3.
7.3.5 Seller covenants and agrees to complete all
such Off-Site Improvements (other than any required off-ramp from Highway 101
(the "Off-Ramp")) not later than two hundred fortieth (240th) calendar day
following the Close of Escrow (subject to (a) the exercise by Seller of not more
than three (3) thirty (30) day extensions upon prior written notice to Buyer;
provided Seller is expeditiously and in good faith prosecuting completion or the
offSite Improvements), and (b) the effect of any events of Force Majeure (as
hereinafter defined). For purposes of this Subsection 7.3.3, the term "Force
Majeure" shall mean a delay or impediment ln completing the Off-Site
Improvements caused by reason of strikes, lockouts, labor troubles, governmental
action or inaction, inability to procure materials, failure of power, riots,
insurrection, war, fire, casualty, earthquake, acts of God or other reason of a
like nature not the fault of Seller. Seller shall immediately advise Buyer in
writing if Seller asserts the occurrence of an event or Force Majeure. If Seller
is delayed in completing such Off-Site Improvements for reasons other than Force
Majeure, Buyer shall not have a remedy for monetary damages against Seller
unless such delay materially adversely affects Buyer's development timetable. In
addition, Seller covenants and agrees to complete the Off-Ramp not later than
the first (1st) anniversary of the Close of Escrow, subject to any delay
resulting from the effect of any events of Force Majeure. If any of the Off-Site
Improvements (including the Off-Ramp) are not completed as of the Close of
Escrow, then Seller shall post with Buyer security in an amount equal to one
hundred twenty five percent (125%) of the reasonably estimated cost to complete
the Off-Site Improvements which will not be borne by Buyer, which security shall
be in the form of an irrevocable standby letter of credit, set-aside letter from
Seller's bank or surety bond; provided, however, that if, as a condition to the
grant of the Entitlements, the City of San Mateo and/or the State of California
requires that Seller post with such governmental authority adequate security
assuring the completion of all of the required Off-Site Improvements, then
Seller shall not be required to post any such additional Security with Buyer.
7.3.6 For purposes of this Agreement, the Off-Site
Improvements shall be deemed to be completed when the Off-Site Improvements are
accepted by the City of San Mateo or the State of California. Seller shall be
solely responsible for the cost of, and Buyer shall have no contribution
obligation with respect to, any warranty required with respect to the Off-Site
Improvements by the City of San Mateo and/or the State of California.
7.4 Covenant of Cooperation. Seller hereby covenants to
reasonably cooperate with Buyer, both prior to and after the Close of Escrow, in
connection with Buyer's implementation of its proposed development plans. Seller
shall reasonably cooperate with Buyer in facilitating Buyer's construction
activities on the Subject Real Property, and shall grant to Buyer any easements
for access, drainage or utility purposes which are reasonably necessary or
required in connection with Buyer's proposed development; provided that the same
do not, and would not, materially adversely affect Seller's present or proposed
operation, development or value of the Race Track or the Stables Property.
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<PAGE> 17
8. TITLE AND WARRANTIES.
8.1 Seller's Warranties. Seller hereby warrants as follows:
8.1.1 Seller has full power and authority to enter
into and perform this Agreement in accordance with its terms.
8.1.2 To the best of Seller's current actual
knowledge, Seller has disclosed to Buyer all material facts and conditions
regarding the Property and the development thereof.
8.1.3 There are not presently pending or threatened
any special assessment proceedings or condemnation actions against the Property.
8.1.4 Seller is not a "foreign person" within the
meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986, as amended.
8.1.5 There are no legal claims or actions, pending
or initiated, which affect the Property, including, but not limited to,
mechanics liens or actions in eminent domain, except as disclosed in writing to
Buyer.
8.1.6 To the best of Seller's current actual
knowledge, none of the Property shall constitute Wetlands, subjecting the
Property to the jurisdiction of the United States Army Corps of Engineers or the
Environmental Protection Agency pursuant to Section 404 of the Clean Water Act.
8.1.7 To the best of Seller's current actual
knowledge, as reflected in the reports listed on Exhibit "11" attached hereto
and other than with respect to any such contamination incident to the use of the
Subject Real Property in association with the operation or a horse racing
facility and except as may otherwise become apparent in the course of Buyer's
environmental due diligence, (i) no toxic or hazardous chemicals, waste or
substances of any kind whatsoever have been spilled, disposed of, or stored on,
under or at the Property, whether by accident, burying, drainage, or storage in
containers, tanks or holding areas, or by any other means whatsoever; and (ii)
the Property has never been used as a dump or landfill. Seller's warranties
above shall survive the Close of Escrow.
8.1.8 Seller will immediately disclose to Buyer any
information of which Seller has or acquires knowledge which affects or could
affect the continuing accuracy of the foregoing warranties prior to Close of
Escrow.
8.2 Buyer's Warranties. Buyer hereby warrants that Buyer has
full power and authority to enter into and perform this Agreement in accordance
with its terms.
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<PAGE> 18
9. ASSIGNMENT.
Except as otherwise provided herein, Buyer shall have no right, power,
or authority to assign this Agreement or any portion hereof or to delegate any
duties or obligations arising hereunder, either voluntarily, involuntarily or by
operation of law except as set forth in this Section 9. Buyer shall have the
absolute right, power and authority to assign this Agreement and all rights
hereunder to any entity, including corporation, joint venture, partnership or
limited liability company in which Buyer or Lee Iacocca personally or
beneficially has an ownership interest.
10. BROKERAGE COMMISSIONS.
Buyer and Seller each acknowledge and agree that the sole real estate
broker employed by either of them is The Tischer Company, a California
corporation ("Broker"). At close of escrow Broker shall be entitled to receive a
commission of Five Hundred Thousand Dollars ($500,000.00) which shall be paid in
cash by Seller from the Purchase Price. There are no additional or further real
estate brokerage commissions payable in connection with this transaction. Buyer
shall indemnify and hold Seller harmless from and against any and all other
claims or demands with respect to any fees or other compensation asserted as a
result of Buyer's actions in connection with this Agreement except those
expressly provided in this Section 10. Seller shall indemnify and hold Buyer
harmless from and against any and all claims or demands with respect to any fees
or other compensation asserted as a result of Seller's actions in connection
with this Agreement.
11. NOTICES.
All written notices and demands which either party may serve on the
other may, as an alternative to personal service, be served by registered or
certified mail or by Federal Express or other delivery service guaranteeing
overnight delivery. Any such notice or demand so served shall be deposited in
the United States mail with postage fully prepaid (or to such overnight delivery
service prepaid) and addressed to the party at the address specified below.
Service of any notice or demand by mail shall be deemed complete on the day of
actual delivery as shown by the addressee's registry or certification receipt.
Seller: California Jockey Club
2600 South Delaware Street
P.O. Box 5050
San Mateo, CA 94402
Attn: Kjell H. Qvale, Chairman of the Board
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<PAGE> 19
Copy to: California Jockey Club
2600 South Delaware Street
P.O. Box 5050
San Mateo, CA 94402
Attn: Raymond C. Kuratek
Copy to: Carr, McClellan, Ingersoll, Thompson & Horn
216 Park Road
P.O. Box 513
Burlingame, CA 94011
Attention: Norman I. Book, Esq.
Buyer: Lee Iacocca & Associates, Inc.
800 West Long Lake Road, Suite 200
Bloomfield Hills, MI 48302
Copy to: G. William Tischer
P.O. Box 644
Belvedere, CA 94920
Copy to: Weller & Drucker
Embarcadero Center West
275 Battery Street, 27th Floor
San Francisco, CA 94111
Attention: Louis S. Weller
12. EXCHANGE.
12.1 Seller's Option. Subject to the terms and provisions of
this Section 12, Seller may consummate the sale of the Property to Buyer as part
of a like-kind exchange pursuant to Section 1031 of the Internal Revenue Code of
1986, as amended (the "Code"). If Seller so elects, Seller shall advise Buyer of
the date by written notice to Buyer received on or before the Close of Escrow
(the "Exchange Notice").
12.2 Covenant of Cooperation. If Seller timely delivers to
Buyer an Exchange Notice, Buyer shall reasonably cooperate with Seller in
connection with the consummation of a 1031 tax deferred exchange; provided,
however, such cooperation shall not include the acquisition of any real property
other than the Subject Property.
13. CONDEMNATION.
In the event that, prior to the Close of Escrow, any governmental
entity shall commence any action of eminent domain to take any material portion
of the Property such that Buyer would no longer be able to utilize the Subject
Real Property for the development of the project
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<PAGE> 20
contemplated by the Projected or Adjusted Entitlements, Buyer shall have the
option either to (i) elect not to acquire the Property, in which case this
Agreement shall be terminated and the Deposit shall be returned to Buyer, or
(ii) complete the acquisition of the Property, in which case Buyer shall be
entitled to the proceeds of such taking.
14. GENERAL PROVISIONS.
14.1 Headings. The title and headings of the various sections
hereof are intended for means of reference and are not intended to place any
construction on the provisions hereof.
14.2 Invalidity. If any provision of this Agreement shall be
invalid or unenforceable the remaining provisions shall not be affected thereby,
and every provision hereof shall be valid and enforceable to the fullest extent
permitted by law.
14.3 Mediation and Arbitration. In the event any controversy
arises as to the interpretation or enforcement of this Agreement, the parties
shall attempt to utilize mediation by a neutral third party mediator to resolve
such dispute. In the event the parties are unable to resolve the dispute through
mediation, it shall be submitted to arbitration pursuant to and in accordance
with the provisions of the California Code of Civil Procedure governing
arbitration (CCP Section 1280, et seq.). Unless the parties otherwise agree, on
application of any party to a dispute a single neutral arbitrator shall be
selected by the Presiding Judge of the Superior Court of San Mateo County,
California. The arbitration shall be conducted in San Francisco, California. The
parties shall be entitled to conduct depositions of such witnesses as each may
choose and each party shall be entitled to obtain documents from the other
pursuant to reasonable discovery supervised by the arbitrator and subject to the
arbitrator's determination as to scope. The arbitrator shall be entitled to
grant injunctive and equitable as well as legal relief and shall be required to
include findings of fact and conclusions of law with any award. The costs of
arbitration shall be borne by the losing party or in such proportion as the
arbitrator shall decide.
(Buyer's initials)____ (Seller's initials)_____
14.4 Attorneys' Fees. In the event of any arbitration or
litigation between the parties hereto to enforce any or the provisions of this
Agreement, the unsuccessful party to such litigation agrees to pay to the
successful party all costs and expenses, including reasonable attorneys' fees
incurred by the successful party, all of which may be included as part of the
judgment rendered in such litigation.
14.5 Entire Agreement. The terms of this Agreement are
intended by the parties as a final expression of their agreement and may not be
contradicted by evidence of any prior or contemporaneous agreement. The parties
further intend that this Agreement constitute the exclusive statement of its
terms and that no extrinsic evidence whatsoever may be introduced in any
judicial proceedings involving this Agreement. No provision of this Agreement
may be amended except by an agreement in writing signed by the parties hereto or
their respective
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<PAGE> 21
successors in interest. This Agreement shall be governed by and construed in
accordance with the laws of the State of California
14.6 Successors. This Agreement shall be binding upon and
inure to the benefit of the heirs, executors, administrators, successors and
assigns of the Parties hereto.
14.7 Time of the Essence. Time is of the essence in this
Agreement.
14.8 Buyer's Remedies. If Seller defaults in the performance
of its covenants under this Agreement, including, but not limited to, its
obligation to convey the Property to Buyer at the Close of Escrow, then, in
addition to receiving the return of the Deposit, Buyer shall have the right to
pursue all of its legal or equitable remedies, including the remedy of specific
performance.
14.9 Confidentiality. Buyer and Seller agree that all
negotiations shall remain confidential and that, except as otherwise required by
law, no press or other publicity release or disclosure of the terms hereof shall
be made by either of them without the prior written consent of the other.
14.10 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original as
against any party whose signature appears thereon, and all of which shall
together constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts hereof, individually or taken together,
bear the signatures of all of the parties hereto.
IN WITNESS WHEREOF, THE PARTIES HAVE EXECUTED THIS AGREEMENT AS OF THE DATE
FIRST STATED ABOVE.
CALIFORNIA JOCKEY CLUB
a Delaware corporation
By:______________________________
Its:______________________________
LEE IACOCCA & ASSOCIATES, INC.
a Michigan corporation
By:______________________________
Its:______________________________
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<PAGE> 22
LIST OF EXHIBITS TO PURCHASE AGREEMENT
1. Site Plan
2. First American Preliminary Title Report
3. Form of $250,000 Note for Initial Deposit
4. Calthorpe 4/28/95 Land Use Program
5. Pro Forma Timetable of Entitlement Processing
6. Examples of Adjusted Entitlement Calculations
7. Form of Deed
8. Form of Assignment of Intangible Assets
9. U.S. FIRPTA Certificate
10. California FIRPTA Certificate
11. List of Environmental Inspection Reports
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<PAGE> 1
Exhibit 10.20
AGREEMENT OF PURCHASE AND SALE
SELLER: CALIFORNIA JOCKEY CLUB
BUYER: PROPERTY RESOURCES, INC.
May 31, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
I. PURCHASE OF THE PROPERTY...................................................................... 2
II. PURCHASE PRICE, PAYMENT AND CLOSING........................................................... 2
2.01. Purchase Price.............................................................. 2
2.02. Payment of Purchase Price................................................... 3
2.03. Escrow, Closing, Title Insurance and
Apportionments.............................................................. 4
III. CONDITIONS TO BUYER'S OBLIGATIONS............................................................. 6
3.01. Review of Physical Condition of the Subject
Real Property and Seller Documents.......................................... 6
3.02. Receipt of Entitlements..................................................... 7
3.03. Completion of Off-Sites..................................................... 8
3.04. Survey Approval............................................................. 8
3.05. Access Easement............................................................. 8
3.06. CalTrans Approval........................................................... 9
3.07. Closing Conditions.......................................................... 9
IV. CONDITIONS TO SELLER'S OBLIGATIONS............................................................ 9
4.01. Training Facility........................................................... 9
4.02. Closing Conditions.......................................................... 9
V. CLOSING....................................................................................... 10
5.01. Documents to Be Deposited Into Escrow by
Seller...................................................................... 10
5.02. Documents and Sums to Be Deposited Into Escrow
by Buyer.................................................................... 10
5.03. Close of Escrow............................................................. 10
VI. ADDITIONAL MATTERS............................................................................ 10
6.01. Possession.................................................................. 10
6.02. Indemnity................................................................... 11
6.03. Access; Maintenance......................................................... 11
6.04. Buy-Back Approval........................................................... 11
6.05. Delivery of Documents and Information....................................... 12
6.06. Buyer's Approval Rights..................................................... 12
VII. COVENANTS OF SELLER........................................................................... 13
7.01. General Plan Amendment, Zoning Approvals and
Subdivisions................................................................ 13
7.02. Off-Site Improvements....................................................... 14
7.03. Covenant of Cooperation..................................................... 15
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
VIII. TITLE AND WARRANTIES................................................................. 15
8.01. Seller's Warranties......................................................... 15
8.02. Buyer's Warranties.......................................................... 16
IX. ASSIGNMENT.................................................................................... 16
X. BROKERAGE COMMISSIONS......................................................................... 16
XI. NOTICES....................................................................................... 17
XII. EXCHANGE...................................................................................... 17
12.01. Seller's Option............................................................. 17
12.02. Covenant of Cooperation..................................................... 18
12.03. Conditions to Buyer's Covenant of
Cooperation................................................................. 18
12.04. Acquisition and Construction................................................ 18
12.05. Loan........................................................................ 19
12.06. Seller's Acknowledgement, Waiver and Release................................ 19
12.07. Buyer's Disclaimer.......................................................... 20
12.08. Exchange Closing............................................................ 20
XIII. CONDEMNATION......................................................................... 21
XIV. GENERAL PROVISIONS............................................................................ 21
14.01. Headings.................................................................... 21
14.02. Invalidity.................................................................. 21
14.03. Attorneys' Fees............................................................. 21
14.04. Entire Agreement............................................................ 21
14.05. Successors.................................................................. 22
14.06. Time of the Essence......................................................... 22
14.07. Acceptance.................................................................. 22
14.08. Buyer's Remedies............................................................ 22
14.09. Confidentiality............................................................. 22
</TABLE>
<PAGE> 4
AGREEMENT OF PURCHASE AND SALE
THIS AGREEMENT OF PURCHASE AND SALE (the "Agreement") is made
this 31st day of May, 1995 (the "Effective Date") by and between CALIFORNIA
JOCKEY CLUB, a Delaware corporation ("Seller"), and PROPERTY RESOURCES, INC., a
California corporation ("Buyer").
Recitals
Seller is the owner of certain real property comprising
approximately one hundred seventy-five (175) acres of improved and unimproved
land, commonly known as the Bay Meadows Race Track, located in the City of San
Mateo, California ("Bay Meadows"), as more particularly described on the site
plan attached hereto as Exhibit "1" (the "Site Plan") and the Preliminary Title
Report of First American Title Company (Order No. 408066A-TD), dated as of
November 3, 1994, attached hereto as Exhibit "2." Bay Meadows is subject to an
operating lease with Bay Meadows Operating Company.
As delineated on the Site Plan, Bay Meadows is comprised of
three (3) primary components. The first component, delineated as Parcel 1 on the
Site Plan, contains the existing race track facilities, situated on
approximately eighty-two (82) acres, containing a grandstand, a clubhouse with
turf club, the race track and related automobile parking (the "Race Track").
Located adjacent to the Race Track, and as delineated as Parcel 2 on the Site
Plan, are certain barn and stable areas containing approximately thirty-three
(33) acres (the "Subject Real Property"). The precise number of Net Acres of the
Subject Real Property will be determined by the Survey as provided in Section
3.04 herein. The third component, as delineated as Parcel 3 on the Site Plan, is
a 5/8th mile training track oval and certain adjacent unimproved property,
comprising approximately forty (40) acres ("Parcel 3").
Seller is developing a plan for the redevelopment of Bay
Meadows (the "Bay Meadows Redevelopment Plan"). The Bay Meadows Redevelopment
Plan contemplates the ultimate development on the Subject Real Property of
approximately nine hundred thousand (900,000) square feet of office and related
facilities and automobile parking for not less than four thousand five hundred
(4,500) automobiles and the construction on Parcel 3 of single-family and
multi-family housing units, a Superior First Class hotel and neighborhood retail
uses. In addition, there will also be located on Parcel 3 a small barn area to
be used for the temporary boarding of those horses competing in meets at the
Race Track.
Seller is also the owner of the barns and other physical
improvements situated on the Subject Real Property (the "Improvements"), and, to
the extent they are assignable, any and
<PAGE> 5
all (i) right, title and interest appurtenant to the Subject Real Property, and
all right, title and interest, if any, of Seller in and to any land lying in the
bed of any street, road or avenue, opened or proposed, public or private, in
front of or adjoining the Subject Real Property, to the center line thereof, and
all right, title and interest of Seller in and to any unpaid award for damage to
the Subject Real Property by reason of change of grade of any street; (ii)
licenses, permits or similar documents; and (iii) plans, drawings,
specifications, surveys, engineering reports and other technical descriptions
(the "Contract Rights and Intangible Assets"). The Subject Real Property and the
appurtenant interests, the Improvements and the Contract Rights and Intangible
Assets are hereinafter collectively referred to as the "Property." The effective
date of this Agreement (the "Effective Date") shall be the date the second of
Buyer or Seller executes this Agreement and delivers a fully executed Agreement
to the other party.
Seller desires to sell the Property to Buyer and Buyer desires
to purchase and acquire the Property from Seller, all upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, Seller and Buyer hereby agree as follows:
I. PURCHASE OF THE PROPERTY.
Seller shall sell the Property to Buyer and Buyer shall
purchase the Property from Seller upon the terms and conditions hereinafter set
forth.
II. PURCHASE PRICE, PAYMENT AND CLOSING.
2.01. Purchase Price.
(a) The total purchase price for the Property (the
"Purchase Price") shall be in an amount equal to the product of (i) Six Hundred
Fifty-Three Thousand Four Hundred Dollars ($653,400.00); and (ii) the number of
Net Acres (as hereinafter defined) in the Subject Real Property.
(b) The exact number of Net Acres of the Subject Real
Property shall be established by the survey described in Section 3.04. The
Purchase Price shall then be computed by multiplying the Net Acres by the per
acre Purchase Price. The survey shall certify the acreage to the nearest one
one-hundredth (1/100th) of an acre and shall include the entire Subject Real
Property exclusive of any portion thereof which may be located within boundaries
of any presently existing public streets or any public streets required to be
constructed by the City of San Mateo as a condition to the grant of the
Entitlements for Parcel 3 and the Subject Real Property (including, by way of
example, the
2
<PAGE> 6
proposed four (4) lane extension of Saratoga Avenue (the "Saratoga Extension")),
railway, rights-of-way (exclusive of above or below ground utility easements and
utility rights-of-way), flood control, or drainage channels which exist by
easement or any other manner (the "Net Acres"); provided, however, that there
shall be no deduction from the determination of Net Acres of any public or
private streets required on the Subject Real Property in connection with the
City of San Mateo's approval of Buyer's specific development plans for the
Subject Real Property.
2.02. Payment of Purchase Price. The Purchase Price shall be
paid and evidenced as follows:
(a) Not later than three (3) days after the Effective Date,
Buyer shall deliver to Escrow (as hereinafter defined) the sum of Fifty Thousand
Dollars ($50,000.00) (the "Initial Deposit") by check. The Initial Deposit shall
be paid into an interest-bearing money market account, which interest shall
accrue for the benefit of Buyer up to the Close of Escrow (as hereinafter
defined). Upon satisfaction of (i) Buyer's conditions to closing, as set forth
in Section 3.01, and (ii) Seller's condition to closing, as set forth in Section
4.01, Buyer shall promptly deliver to Escrow the sum of Three Hundred Thousand
Dollars ($300,000.00) (the "First Additional Deposit"), which shall be added to
the Initial Deposit. Upon satisfaction of Buyer's conditions to closing, as set
forth in Section 3.02, Buyer shall promptly deliver to Escrow the sum of Five
Hundred Thousand Dollars ($500,000.00) (the "Second Additional Deposit") which
shall be added to the Initial Deposit and the First Additional Deposit. Upon
satisfaction of Buyer's final conditions to closing as set forth in Sections
3.03 and 3.06, Buyer shall promptly deliver to Escrow the sum of Nine Hundred
Thousand Dollars ($900,000) (the "Third Additional Deposit"), which shall be
added to the Initial Deposit, the First Additional Deposit and the Second
Additional Deposit. The Initial Deposit, the First Additional Deposit, the
Second Additional Deposit and the Third Additional Deposit are hereinafter
collectively referred to as the Deposit. On the Close of Escrow, the Deposit
shall be released to Seller and credited against the amount of the Purchase
Price payable by Buyer.
IF THE CONDITIONS SET FORTH IN ARTICLE III HAVE BEEN SATISFIED
AND SELLER IS NOT IN BREACH HEREUNDER AND BUYER BREACHES THIS
AGREEMENT BY FAILING TO COMPLETE THE SALE HEREUNDER, THE THEN
DEPOSIT SHALL BE PAID TO SELLER AS LIQUIDATED DAMAGES FOR SUCH
BREACH, IT BEING AGREED THAT SUCH PAYMENT SHALL BE SELLER'S
SOLE REMEDY IN THE EVENT OF SUCH DEFAULT AND THAT SUCH ACTUAL
DAMAGES THAT WOULD RESULT FROM SUCH A BREACH ARE UNCERTAIN AND
WOULD BE EXTREMELY DIFFICULT TO FIX AT
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THIS TIME AND WOULD BE DIFFICULT TO PROVE. THE PARTIES AGREE
THAT THEY HAVE NEGOTIATED THE AMOUNT OF SUCH DEPOSIT AS BEING
THEIR BEST ESTIMATE AT THE DATE HEREOF OF SELLER'S LOSS IN THE
EVENT OF BREACH BY BUYER.
/s/ ? /s/ ?
-------------------- --------------------
(Seller's Initials) (Buyer's Initials)
(b) The balance of the Purchase Price (that is, the Purchase
Price less the Deposit together with any interest accrued thereon) shall be
deposited by federal wire transfer or other readily available funds into a bank
account designated by Escrow (as hereinafter defined) on or before the Close of
Escrow and shall be paid toward the Purchase Price at the Close of Escrow.
(c) In addition to the Purchase Price, Buyer shall reimburse
Seller for forty-four percent (44%) of the costs of the Off-Site Improvements
(as hereinafter defined) reasonably and actually incurred by Seller; provided
that in no event shall Buyer's reimbursement obligation exceed an amount equal
to One Million Five Hundred Thousand Dollars ($1,500,000.00).
2.03. Escrow, Closing, Title Insurance and Apportionments. The
closing shall take place at the offices of Stewart Title of California, 180
Montgomery Street, Suite 840, San Francisco, California 94104, Attention:
Richard M. Blumenthal ("Title Company") through an escrow (the "Escrow") to be
opened within three (3) days after the Effective Date, which Escrow shall close
(the "Close of Escrow") on or before the thirtieth (30th) calendar day following
the completion, satisfaction and/or waiver of the last condition to Buyer's
obligation to acquire the Property as set forth in Sections 3.02, 3.03, 3.04 and
3.06, but in no event prior to the two hundred fortieth (240th) calendar day
following the Entitlement Procurement Date (as hereinafter defined), or on such
other date as the parties may agree to in writing. If Seller elects, in
accordance with Article XII below, to effect the transfer of the Property to
Buyer as part of a tax-free exchange, then the Close of Escrow shall be the
later to occur of (a) thirty (30) days following the completion, satisfaction
and/or waiver of the last condition to Buyer's obligation to acquire the
Property as set forth in Sections 3.02, 3.03, 3.04 and 3.06, and (b) five (5)
business days following the date of substantial completion of construction of
the Training Facility (as hereinafter defined).
(a) Title Insurance. Upon the Close of Escrow, Title Company
shall furnish to Buyer, an ALTA owner's policy of title insurance ("Title
Policy") with endorsement numbers 100 (modified), 103.7, 116.1, 116.4 and such
other available endorsements as Buyer may reasonably require, insuring fee title
in Buyer subject only to non-delinquent real property taxes and assessments and
such
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other exceptions as are approved by Buyer in writing. As soon as possible after
the opening of Escrow, Seller shall provide Buyer with a current preliminary
title report issued by Title Company (the "Title Report") and copies of all
documents listed as exceptions to title. Buyer shall have until 5:00 P.M. on the
Approval Date (as hereinafter defined) to disapprove any exceptions shown on the
Title Report. Buyer shall not unreasonably disapprove the condition of title to
the Property. Seller shall have no obligation to remove any exception
disapproved by Buyer, except that Seller shall remove any monetary liens other
than current taxes and assessments on or before the Close of Escrow and Seller
shall promptly advise Buyer whether Seller agrees to remove any other exceptions
disapproved by Buyer. If Seller does not agree to remove any other exceptions
disapproved by Buyer, this Agreement shall terminate without further liability
to either party unless Buyer waives its objection within three (3)-business days
following receipt of Seller's notice. Upon such termination, Buyer shall be
entitled to the return of the Deposit. If Seller agrees to remove any exception
objected to by Buyer, Seller shall then have until the date for Close of Escrow
within which to remove such exception. If Seller is unable to remove any
exception objected to by Buyer by the date for Close of Escrow, Buyer may elect:
(a) to terminate this Agreement and receive a return of the Deposit; or (b) to
waive Buyer's objection and close the Escrow. The Title Policy shall have a
liability limit equal to the Purchase Price.
(b) Recordation; Escrow Fees. Seller and Buyer shall share
equally the cost of the Title Policy, the escrow fees of Title Company, any
revenue, city or county transfer or document transfer tax, recording fees and
sales, use and other transfer taxes.
(c) Apportionment of Taxes. Real property taxes and general
and special assessments shall be apportioned (on the basis of a 365-day year) as
of 12:01 a.m. on the Close of Escrow. If the Close of Escrow shall occur before
the real property tax rate is fixed, apportionment of taxes shall be made on the
basis of the tax rate for the preceding year applied to the latest assessed
valuation. Any apportionment of real property taxes necessary because the
Subject Real Property comprises only a portion of a larger tax parcel shall be
made on the basis that the ratio of the Net Acres of the Subject Real Property
bears to the Net Acres of such larger tax parcel. After the real property taxes
are finally fixed, Seller and Buyer shall make a recalculation of the
apportionment of same, and either Seller or Buyer, as the case may be, shall
make appropriate payment to the other based on such recalculation. Seller shall
be responsible for and shall promptly pay, any supplemental taxes which may be
assessed against the Property attributable to the period prior to the Close of
Escrow.
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<PAGE> 9
III. CONDITIONS TO BUYER'S OBLIGATIONS. Buyer's obligation to
acquire the Property shall be conditioned upon Buyer's approval (in the exercise
of Buyer's sole and absolute discretion, except as otherwise expressly set forth
herein) of all the matters set forth in this Article III.
3.01. Review of Physical Condition of the Subject Real
Property and Seller Documents. Buyer shall approve or disapprove the physical
condition of the Subject Real Property and all matters relating to the
development and use thereof, together with those items set forth in Subsections
(a) through (f) below on or before that date which is ninety (90) calendar days
after receipt by Buyer of the last of such items (the "Approval Date"). If
written approval of any such matters is not given by Buyer on or before the
Approval Date, then such item shall conclusively be deemed disapproved by Buyer.
If Buyer shall disapprove any of the matters set forth in this Section 3.01, for
any reason whatsoever, this Agreement shall terminate, whereupon Escrow shall
immediately return the Deposit to Buyer together with any interest earned
thereon, and neither Buyer nor Seller shall have any further rights or
obligations to the other under this Agreement.
(a) Title to the Property as shown in the Title Report and all
exceptions thereto.
(b) Copies of real property tax bills, special assessment
district agreements, and similar records relating to the Property.
(c) Copies of any environmental reports, environmental audits
or toxic waste evaluations, wetlands reports, CC&R's, protective covenants,
architectural, landscape or building requirements, soils and geological reports
and studies, topographical maps and any other reports, licenses, permits or
relevant information in Seller's possession that relate to the Property and the
development thereof.
(d) All documents and correspondence in Seller's possession
respecting zoning, land-use, subdivision, building and construction laws and
regulations restricting or regulating or otherwise affecting the Property.
(e) All documents or correspondence relating to Seller's
current plans to master-plan and develop Bay Meadows. Such documents shall
include, but not be limited to, plans, drawings, traffic studies, preliminary
environmental impact reports, economic feasibility studies, engineering reports,
architectural reports and any other relevant information that relates to the
potential development of Bay Meadows.
(f) All documents or correspondence relating to the purchase
and development of the new Training Facility, currently
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<PAGE> 10
anticipated to be in the Livermore, California area, as more particularly
described in Article XII below. Such documents shall include, but not be limited
to, plans, drawings, traffic studies, preliminary environmental impact reports,
economic feasibility studies, engineering reports, architectural reports and any
other relevant information that relates to the potential development of the new
Training Facility.
Seller shall provide to Buyer all documents and information
required by this Section 3.01 within seven (7) days after the Effective Date.
3.02. Receipt of Entitlements. Buyer's obligation to acquire
the Property shall be expressly subject to and conditioned upon Buyer's receipt
of the Entitlements more particularly described in Section 7.01 below (and the
expiration of all appeal periods under the City of San Mateo Planning Code and
the California Environmental Quality Act) and the execution and delivery by
Buyer (or Seller if such development agreement provides for the assignment
thereof to Buyer with respect to the Subject Real Property) and the City of San
Mateo of a development agreement, pursuant to Sections 65864 et. seq. of the
California Government Code, relating to the development of the Property, in
phases, to encompass nine hundred thousand (900,000) square feet of net leasable
area and parking for not less than four thousand five hundred (4,500)
automobiles, over a ten (10) year period. Any development restrictions and
service mitigation requirements and/or any "in lieu" fees or exactions imposed
by the City of San Mateo (or any other governmental agency with jurisdiction
thereof) in conjunction with the granting of the Entitlements shall be subject
to Buyer's prior approval, which approval may be withheld in Buyer's reasonable
discretion. If Buyer does not accept any of the restrictions or requirements as
proposed by the City of San Mateo, Buyer shall have the right to terminate this
Agreement. Attached hereto as Exhibit "3" is a pro forma schedule (the
"Timetable") delineating the dates upon which Seller is required to have
completed each of the required submittals to the City of San Mateo and the State
of California Department of Transportation necessary to obtain the Entitlements,
the dates upon which all necessary public hearings before the City of San Mateo
Planning Commission and City Council will have occurred and the dates such other
related matters will be accomplished in order for the Entitlements to be in
place on or before November 30, 1996 (the "Entitlement Procurement Date"). From
and after the Effective Date of this Agreement through the Approval Date, Buyer
and Seller shall meet and reach agreement on an agreed upon Timetable, which
shall be incorporated into this Agreement by way of an amendment hereto. If
despite the parties' good faith reasonable efforts the parties are unable to
finalize the Timetable on or before the Approval Date, this Agreement shall
terminate and Buyer shall receive the return of the Deposit. Seller shall
deliver to Buyer copies of all applications and other related documents as filed
with the City of
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<PAGE> 11
San Mateo and/or the State of California, and copies of all correspondence and
other notices received by Seller in connection with the proposed Bay Meadows
Redevelopment Plan. If Seller advises Buyer, or if Buyer reasonably determines,
that Seller is or will be unable to obtain the Entitlements by the Entitlement
Procurement Date, or if Seller fails to complete any required action by the
dates set forth in the Timetable, and Buyer reasonably determines that such
failure reasonably means that Seller will be unable to obtain the Entitlements
by the Entitlement Procurement Date, Buyer shall have the right to terminate
this Agreement upon written notice to Seller.
3.03. Completion of Off-Sites. If the completion thereof is a
condition precedent to Buyer's obtaining necessary building permits from the
City of San Mateo, then Seller shall have substantially completed, to the
reasonable satisfaction of Buyer and the City of San Mateo and the State of
California, as applicable, all Off-Site Improvements (as hereinafter defined)
other than the completion of the proposed off-ramp from Highway 101 (the
"Off-Ramp"); unless completion of the Off-Ramp is also a condition to the
issuance of a building permit to Buyer or a condition to Buyer's right to use
and occupancy of the improvements to be constructed by Buyer on the Subject Real
Property. On or before the Entitlement Procurement Date, Seller shall deliver to
Buyer evidence reasonably satisfactory to Buyer of the source and availability
of funds for completion of the Off-Site Improvements.
3.04. Survey Approval. On or before the Entitlement
Procurement Date, Seller shall provide to Buyer, at Seller's sole cost and
expense, a survey of the Subject Real Property (the "Survey") by a licensed
surveyor acceptable to and certified to both Buyer and the Title Company for the
purpose of establishing the boundaries of the Subject Real Property, issuing
extended coverage (ALTA) title insurance and establishing the total number of
net acres covered by the Property determined to the nearest one one-hundredth
(1/100th) of an acre (the "Net Acres"). Buyer shall have ten (10) business days
in which to review and approve the Survey, which approval shall not be
unreasonably withheld. If Buyer reasonably disapproves any such matters as shown
on the Survey, Seller shall advise Buyer within five (5) business days of
receipt of Buyer's disapproval whether Seller undertakes to cause such Survey
matters to be corrected on or before the Close of Escrow. If Seller does not so
advise Buyer, this Agreement shall terminate and Buyer shall receive the return
of the Deposit.
3.05. Access Easement. Seller shall have granted to Buyer,
concurrently with Seller's transfer of title to the Property, in form and
content reasonably acceptable to Buyer, an up to twenty (20) foot wide
pedestrian non-exclusive easement over a portion of the Race Track along the
southern boundary thereof, affording a means of public ingress and egress from
the Hillsdale
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Avenue CalTrans railway depot (the "Depot") to the Subject Real Property.
3.06. CalTrans Approval. Buyer shall have received, on or
before the three hundredth (300th) calendar day following the Effective Date,
all necessary consents or approvals from the State of California Department of
Transportation, affording a public right of access to the Depot from the east
side thereof. Buyer shall be responsible, at its sole cost and expense, for the
performance of all work necessary to prosecute and obtain such approvals.
3.07. Closing Conditions. Buyer shall not be obligated to
complete its purchase of the Property if Buyer determines, in the exercise of
its reasonable discretion, that there has been a material adverse change in the
information provided by Seller or obtained by Buyer, pursuant to this Article
III, between the date of Buyer's approval thereof and the Close of Escrow.
IV. CONDITIONS TO SELLER'S OBLIGATIONS.
4.01. Training Facility. Seller's obligation to convey the
Property shall be expressly subject to and conditioned upon Seller's
determination, in its sole and absolute discretion, of the availability and
feasibility of an alternative site upon which to relocate Seller's race horse
training facility. If, within one hundred twenty (120) calendar days following
the Effective Date, Seller advises Buyer that Seller has determined that it will
not be able to relocate its horse training operation, then this Agreement shall
terminate, and Seller and Buyer shall be released from any further duties,
obligations or liabilities hereunder, except that (a) Seller shall immediately
advise Title Company to return the Initial Deposit to Buyer, (b) Seller shall be
responsible for any Escrow cancellation fees, and (c) Seller shall reimburse
Buyer, within thirty (30) days of receipt of an invoice therefor, for all
reasonable costs and expenses incurred by Buyer in connection with the
negotiation and preparation of this Agreement and Buyer's investigation of the
suitability of the Subject Real Property, including, but not limited to, the
fees and expenses of Greene, Radovsky, Maloney & Share, Calthorpe Associates and
such other engineers and consultants as Buyer may have retained.
4.02. Closing Conditions. Seller's obligation to close Escrow
shall be conditioned upon performance by Buyer of all Buyer's obligations
hereunder and the recordation of a final subdivision map creating the Subject
Real Property as a legal parcel in accordance with the California Subdivision
Map Act.
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<PAGE> 13
V. CLOSING.
5.01. Documents to Be Deposited Into Escrow by Seller. Within
five (5) days before the Close of Escrow, Seller shall deposit into Escrow: (a)
an executed grant deed (the "Deed") conveying the Real Property to Buyer, in the
form attached hereto as Exhibit "4," (c) an executed assignment of intangible
assets (the "Assignment of Intangible Assets") in the form attached hereto as
Exhibit "5," (d) an executed Certificate of Non-Foreign Person in the form
attached hereto as Exhibit "6," and (f) an executed Seller's State Tax
Withholding Certificate in the form attached hereto as Exhibit "7."
5.02. Documents and Sums to Be Deposited Into Escrow by Buyer.
On or before the Close of Escrow, Buyer shall deposit into Escrow such funds as
are necessary to complete payment of the Purchase Price, to fund Buyer's
contribution to the cost of the Off-Site Improvements and to pay Buyer's portion
of the closing costs.
5.03. Close of Escrow. On the Close of Escrow, Escrow shall:
(a) Cause the Deed and the Declaration of Restrictions to be
recorded in San Mateo County, California.
(b) Deliver the cash proceeds of the purchase and sale
(including the amount of Buyer's contribution to the cost of the Off-Site
Improvements) to Seller.
(c) Deliver to Buyer the:
(i) Executed Bill of Sale;
(ii) Title Policy;
(iii) Executed Certificate of Non-Foreign Person;
(iv) Executed Seller's State Tax Withholding
Certificate; and
(v) Executed Assignment of Intangible Assets.
(d) Forward to Buyer and Seller, in duplicate, an accounting
of all funds received and disbursed and copies of all executed and recorded or
filed documents deposited into Escrow, with such recording and filing date
endorsed thereon.
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VI. ADDITIONAL MATTERS.
6.01. Possession. Buyer shall take possession of the Property
as of the Close of Escrow, free and clean of any leasehold or other possessory
interest of Bay Meadows Operating Company.
6.02. Indemnity. Seller shall indemnify and defend Buyer
against and hold Buyer harmless from all claims, demands, causes of action and
suits for personal injury, property damage and breach of contract arising out of
Seller's ownership and/or operation of the Property prior to the Close of
Escrow, but exclusive of any such claims, demands, causes of action and suits
which may arise in connection with the Entitlement procurement process. Buyer
shall indemnify and defend Seller against and hold Seller harmless from any
claims, demands, causes of action and suits for personal injury, property damage
and breach of contract arising out of Buyer's ownership and/or operation of the
Property subsequent to the Close of Escrow.
6.03. Access; Maintenance. Seller shall, between the date
hereof and the Close of Escrow, allow Buyer, its agents, contractors and
attorneys access to the Subject Real Property for purposes of inspecting the
same or any part thereof, including conducting soils tests and engineering
feasibility studies, at such reasonable times as Buyer may schedule with Seller
taking into consideration the needs and requirements of those horses which are
boarded on the Subject Real Property or adjacent thereto. To the extent
reasonably practical, Buyer shall coordinate its schedule of on-site
investigations with Seller to coincide with such periods of time in which the
fewest number of horses are present at the Subject Real Property. Buyer shall
indemnify and defend Seller against and hold Seller harmless from any claims,
demands, causes of actions and suits arising out of Buyer's inspection of the
Property; provided, however, that in no event shall Buyer be required to
indemnify Seller against any claims for damage or injury to any such horses,
unless Buyer, its agents or contractors have acted negligently or willfully or
otherwise failed to exercise due care in the exercise of Buyer's access and
inspection rights. Until the Close of Escrow, Seller shall keep and maintain the
Property in its current condition. If Buyer determines to not complete its
acquisition of the Property, then Buyer shall promptly, at its sole cost and
expense, but without any recourse or warranty with respect to the same, provide
to Seller copies of all studies and reports prepared for Buyer in connection
with the investigation of the Property.
6.04. Buy-Back Approval. If, during the period commencing on
the Close of Escrow and ending on the fifth (5th) anniversary of the Close of
Escrow, Seller advises Buyer that Seller desires to reacquire a portion of the
Subject Real Property for purposes of the construction of a public road
originating at the Off-Ramp, meandering toward the southern boundary of the
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Subject Real Property, and connecting into Delaware Street at its terminus at
the Race Track parking lot after passing through the Race Track in the general
location of the easement described in Section 3.05, then, provided (a) none of
Buyer's Entitlements are affected thereby, (b) the precise location of the road
is reasonably acceptable to Buyer, and (c) subject to the provisions of the
California Subdivision Map Act, Buyer shall convey the required property to
Seller in consideration of the payment by Seller of an amount equal to the
product of Sixteen Dollars ($16.00) and the square footage of the property to be
reconveyed. Seller shall be responsible for all costs associated with such
retransfer, including recording fees, transfer taxes, title insurance premiums
and escrow charges.
6.05. Delivery of Documents and Information. From and after
Seller's initial delivery of such documents and correspondence to Buyer in
accordance with Section 3.01(e) and Section 3.01(f), Seller shall timely provide
to Buyer, on an on-going basis, all additional documents and correspondence
relating to the Property, the procurement of the Entitlements and the Training
Facility which are prepared for or received by Seller through the date of the
Close of Escrow.
6.06. Buyer's Approval Rights. During the course of Seller's
development and finalization of the Bay Meadows Redevelopment Plan for submittal
to the City of San Mateo, Seller shall advise and consult with Buyer, shall
incorporate, to the extent it is reasonable to do so, Buyer's specific
suggestions with respect thereto, and shall not make any Entitlement-related
submittals to the City of San Mateo without first obtaining Buyer's written
approval, which approval shall not be unreasonably withheld, as such approvals
relate solely to Parcel 3. All matters respecting Seller's development of Parcel
3, including the size, shape and massing of improvements, the materials and
colors utilized in the construction thereof and the proposed uses of such
improvements shall be subject to Buyer's prior written approval, which approval
shall not be unreasonably withheld. In no event shall Seller construct on Parcel
3 more than fifty thousand (50,000) square feet of office space. In connection
therewith, Seller covenants and agrees that as part of Seller's application for
the Entitlements, Parcel 3 shall be rezoned to include a hotel containing not
less than two hundred (200) guest rooms and including conference and catering
capabilities. In addition, Seller agrees to use commercially reasonable efforts
to cause the development, ownership and operation on Parcel 3, in a manner
consistent with the Entitlements, of a "Superior First Class" hotel (such as, by
way of illustration only, hotels of such class (as defined in the "Official
Hotel Guide Classification System," as promulgated by the Official Hotel Guide)
operated by Hyatt, Marriott, Westin or Hilton); provided that nothing set forth
herein shall be deemed to require Seller to utilize any "flag" affiliated
operator in connection therewith. If despite Seller's commercially
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reasonable efforts, Seller is unable to cause the development of a hotel on
Parcel 3, Seller shall have no liability to Buyer.
VII. COVENANTS OF SELLER.
7.01. General Plan Amendment, Zoning Approvals and
Subdivisions. Seller shall use its best efforts to obtain from the City of San
Mateo, as soon as reasonably possible following the Effective Date, but in any
event on or before the Entitlement Procurement Date, all necessary approvals
(the "Entitlements"), creating the Subject Real Property as a legal parcel in
accordance with the terms of the Subdivision Map Act and creating the vested
nonappealable right in Buyer to develop on the Subject Real Property Buyer's
proposed headquarters campus facility, aggregating nine hundred thousand
(900,000) square feet of office and related buildings (and affording Buyer the
right to utilize four (4) story buildings), together with automobile parking for
not less than four thousand five hundred (4,500) cars. Except as otherwise set
forth below, Seller shall be solely responsible for all costs and expenses
associated with obtaining the Entitlements. The Entitlements shall include:
(a) An amendment to the City of San Mateo General Plan;
(b) Final Certification of Seller's Environmental Impact
Report;
(c) The rezoning of the Subject Real Property;
(d) Approval of a final subdivision map;
(e) Approval of the Specific Area Plan;
(f) Execution of a Development Agreement; and
(g) Issuance of a Site Development Permit.
Buyer and Seller understand and acknowledge that, in
connection with Seller's application to the City of San Mateo for the
Entitlements, there must be included information concerning the location,
massing, shape and height of the improvements Buyer proposes to construct on the
Subject Real Property, Buyer's parking and circulation plan must be described,
and the application must also include descriptive information concerning the
exterior elevations and architectural standards for Buyer's proposed buildings.
Buyer and Seller agree that Seller's architect and planner, Calthorpe Associates
("CA"), shall also be retained by Buyer, at Buyer's sole cost and expense, to
develop, on Buyer's behalf, for submittal as part of Seller's Entitlement
application, all of the foregoing. From and after the Effective Date of this
Agreement, Buyer shall periodically meet with CA to coordinate CA's development
of the Specific Plan as it relates to the Subject Real
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<PAGE> 17
Property. Seller hereby consents to Buyer's utilization of CA to perform the
role above described. That portion of the Specific Area Plan relating to the
Subject Real Property shall be subject to Buyer's approval, which approval Buyer
may withhold in its sole and absolute discretion.
7.02. Off-Site Improvements. Seller shall be responsible, at
its sole cost and expense (but subject to Buyer's reimbursement obligation as
set forth in Subsection 2.02(c)), to construct all off-site improvements which
are required by the City of San Mateo and the State of California (the "Off-Site
Improvements") as a condition to the grant of the Entitlements; provided,
however, that if the cost of the Off-Site Improvements is reasonably anticipated
to exceed the amount of Four Million Dollars ($4,000,000.00) (as evidenced by an
estimate, reasonably acceptable to Buyer, prepared by Seller's civil engineer
and delivered to Buyer), then Seller, upon not less than fifteen (15) days prior
written notice to Buyer, shall have the right to terminate this Agreement unless
Buyer agrees to fund its pro rata share of such additional costs. Seller
covenants and agrees to complete all such Off-Site Improvements (other than the
Off-Ramp) not later than the two hundred fortieth (240th) calendar day following
the date of the grant of the Entitlements (subject to (a) the exercise by Seller
of not more than three (3) thirty (30) day extensions upon prior written notice
to Buyer; provided Seller is expeditiously and in good faith prosecuting
completion of the Off-Site Improvements), and (b) the effect of any events of
Force Majeure (as hereinafter defined). For purposes of this Section 7.02, the
term "Force Majeure" shall mean a delay or impediment in completing the Off-Site
Improvements caused by reason of strikes, lockouts, labor troubles, inability to
procure materials, failure of power, riots, insurrection, war, fire, casualty,
earthquake, acts of God or other reason of a like nature not the fault of
Seller. Seller shall immediately advise Buyer in writing if Seller asserts the
occurrence of an event of Force Majeure. If Seller is delayed in completing such
Off-Site Improvements for reasons other than Force Majeure, Buyer shall not have
a remedy for monetary damages against Seller unless such delay materially
adversely affects Buyer's development timetable. In addition, Seller covenants
and agrees to complete the Off-Ramp not later than the first (1st) anniversary
of the Close of Escrow. If any of the Off-Site Improvements (including the
Off-Ramp) are not completed as of the Close of Escrow, then Seller shall post
with Buyer security in an amount equal to one hundred fifty percent (150%) of
the reasonably estimated cost to complete the Off-Site Improvements, which
security shall be in the form of an irrevocable standby letter of credit,
set-aside letter from Seller's bank or surety bond; provided, however, that if,
as a condition to the grant of the Entitlements, the City of San Mateo and/or
the State of California requires that Seller post with such governmental
authority adequate security assuring the completion of all of the required
Off-Site Improvements, then Seller shall not be required
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<PAGE> 18
to post any such additional security with Buyer. For purposes of this Agreement,
such Off-Site Improvements shall be deemed to be completed when such Off-Site
Improvements are accepted by the City of San Mateo or the State of California.
Seller shall be solely responsible for the cost of, and Buyer shall have no
contribution obligation with respect to, any warranty required with respect to
the Off-Site Improvements by the City of San Mateo and/or the State of
California.
7.03. Covenant of Cooperation. Seller hereby covenants to
reasonably cooperate with Buyer, both prior to and after the Close of Escrow, in
connection with Buyer's implementation of its proposed development plans. Buyer
hereby covenants to reasonably cooperate with Seller, both prior to and after
the Close of Escrow, in connection with Seller's implementation of its proposed
development plans for Parcel 3. Seller shall reasonably cooperate with Buyer in
facilitating Buyer's construction activities on the Subject Real Property, and
shall grant to Buyer any easements for access, drainage or utility purposes
which are reasonably necessary or required in connection with Buyer's proposed
development; provided that the same do not, and would not, materially adversely
affect Seller's present or proposed operation or development of Parcel 3 or the
Race Track. Seller shall not, in any manner whatsoever, express any public
comment in opposition to Buyer's proposed development plans. In addition,
provided the development of Parcel 3 is reasonably consistent with that
contemplated by this Agreement, Buyer shall not, in any manner whatsoever,
express any public comment in opposition to Seller's development thereof.
VIII. TITLE AND WARRANTIES.
8.01. Seller's Warranties. Seller hereby warrants as follows:
(a) Seller has full power and authority to enter into and
perform this Agreement in accordance with its terms.
(b) To the best of Seller's current actual knowledge, Seller
has disclosed to Buyer all material facts and conditions regarding the Property
and the development thereof.
(c) There are not presently pending or threatened any special
assessment proceedings or condemnation actions against the Property.
(d) Seller is not a "foreign person" within the meaning of
Section 1445(f)(3) of the Internal Revenue Code of 1986, as amended.
(e) There are no legal claims or actions, pending or
initiated, which affect the Property, including, but not limited
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<PAGE> 19
to, mechanics liens or actions in eminent domain, except as disclosed in writing
to Buyer.
(f) To the best of Seller's current actual knowledge, none of
the Property shall constitute Wetlands, subjecting the Property to the
jurisdiction of the United States Army Corps of Engineers or the Environmental
Protection Agency pursuant to Section 404 of the Clean Water Act.
(g) To the best of Seller's current actual knowledge, after
due inquiry, and other than with respect to any such contamination incident to
the use of the Subject Real Property in association with the operation of a
horse racing facility and except as may otherwise become apparent in the course
of Buyer's environmental due diligence, (i) no toxic or hazardous chemicals,
waste or substances of any kind whatsoever have been spilled, disposed of, or
stored on, under or at the Property, whether by accident, burying, drainage, or
storage in containers, tanks or holding areas, or by any other means whatsoever;
and (ii) the Property has never been used as a dump or landfill.
Seller's warranties above shall survive the Close of Escrow.
8.02. Buyer's Warranties. Buyer hereby warrants that Buyer has
full power and authority to enter into and perform this Agreement in accordance
with its terms.
IX. ASSIGNMENT.
Except as otherwise provided herein, Buyer shall have no
right, power, or authority to assign this Agreement or any portion hereof or to
delegate any duties or obligations arising hereunder, either voluntarily,
involuntarily or by operation of law except as set forth in this Article VI.
Buyer shall have the absolute right, power and authority to assign this
Agreement and all rights hereunder to any entity owned or controlled by Franklin
Resources, Inc., a Delaware corporation.
X. BROKERAGE COMMISSIONS.
Buyer and Seller each acknowledge and agree that there are no
real estate brokerage commissions payable in connection with this transaction.
Buyer shall indemnify and hold Seller harmless from and against any and all
other claims or demands with respect to any fees or other compensation asserted
as a result of Buyer's actions in connection with this Agreement. Seller shall
indemnify and hold Buyer harmless from and against any and all claims or demands
with respect to any fees or other compensation asserted as a result of Seller's
actions in connection with this Agreement.
16
<PAGE> 20
XI. NOTICES.
All written notices and demands which either party may serve
on the other may, as an alternative to personal service, be served by registered
or certified mail or by Federal Express or other delivery service guaranteeing
overnight delivery. Any such notice or demand so served shall be deposited in
the United States mail with postage fully prepaid (or to such overnight delivery
service prepaid) and addressed to the party at the address specified below.
Service of any notice or demand by mail shall be deemed complete on the day of
actual delivery as shown by the addressee's registry or certification receipt.
Seller: California Jockey Club
2600 South Delaware Street
P.O. Box 5050
San Mateo, CA 94402
Attn: Kjell H. Qvale
Chairman of the Board
Copy to: California Jockey Club
2600 South Delaware Street
P.O. Box 5050
San Mateo, CA 94402
Attn: Raymond C. Kuratek
Copy to: Gibson, Dunn & Crutcher
One Montgomery Street
Telesis Tower
San Francisco, CA 94104
Attention: Fred L. Pillon
Buyer: Property Resources, Inc.
1800 Gateway Drive, 3rd Floor
San Mateo, CA 94403
Attention: Michael J. McCulloch
Copy to: Greene, Radovsky, Maloney & Share
Spear Street Tower, Suite 4200
One Market
San Francisco, CA 94105
Attention: Thomas M. Feldstein
XII. EXCHANGE.
12.01. Seller's Option. Subject to the terms and provisions of
this Article XII, Seller may consummate the sale of the Property to Buyer as
part of a like-kind exchange pursuant to Section 1031 of the Internal Revenue
Code of 1986, as amended (the "Code"). If Seller so elects, which election shall
be irrevocable, Seller shall advise Buyer of the same by written notice to Buyer
17
<PAGE> 21
received on or before the Entitlement Procurement Date (the "Exchange Notice").
12.02. Covenant of Cooperation. If Seller timely delivers to
Buyer an Exchange Notice, Buyer shall reasonably cooperate with Seller in
connection with the consummation of a 1031 tax deferred exchange, which
cooperation may include the acquisition of the underlying real property, and the
design and development of a race horse training facility to be located on a
suitable area of land as designated by Seller (collectively, the "Training
Facility"). If such exchange is consummated on the Close of Escrow, Buyer shall
transfer and convey to Seller the Training Facility, and Seller shall transfer
and convey the Property to Buyer. If the exchange contemplated by this Article
XII fails to occur due to the failure of Buyer's conditions as set forth in
Section 12.03, then Seller shall timely complete the sale of the Property to
Buyer on the terms and provisions of this Agreement.
12.03. Conditions to Buyer's Covenant of Cooperation.
(a) On or before Entitlement Procurement Date, Seller shall
have identified the site for the Training Facility and delivered to Buyer a
fully negotiated purchase and sale agreement respecting the underlying real
property, in executable form;
(b) Seller, with the reasonable cooperation of Buyer, shall
have obtained all necessary regulatory approvals for the construction and
operation of the Training Facility;
(c) Prior to the date the City of San Mateo grants the
Entitlements, Seller shall deliver to Buyer detailed plans and specifications
prepared for Seller by engineers and/or architects licensed in the State of
California and reasonably acceptable to Buyer, delineating all site and physical
improvements necessary for the completion of the Training Facility (the "Working
Drawings"); and
(d) Seller shall deliver to Buyer evidence reasonably
satisfactory to Buyer of the source and availability of funds for loan to Buyer
to complete the acquisition and construction of the Training Facility in
accordance with Section 12.05 below.
12.04. Acquisition and Construction. Upon receipt of an
Exchange Notice and as soon as reasonably practical following Seller's receipt
of the Entitlements, Buyer shall, at Buyer's sole cost and expense, but subject
to Seller's timely satisfaction of its obligations under Subsection 12.05,
acquire the real property in Livermore designated by Seller to be so acquired
and cause the general contractor retained by Buyer to commence to construct and
thereafter to diligently continue to completion the Training Facility
substantially in accordance with the Working Drawings, together with any changes
thereto as may be required by any
18
<PAGE> 22
applicable governmental entity (as reasonably approved by Seller) or as are
necessary to address unforseen field conditions; provided, however, that the
general contractor may deviate from the Working Drawings with the consent of
Seller (which consent shall not be unreasonably withheld or unduly delayed). The
general contractor retained by Buyer shall be as reasonably approved by Seller,
and the terms and provisions of the Construction Contract shall be subject to
Seller's prior written approval, which approval shall not be unreasonably
withheld. The Construction Contract shall provide for a guaranteed maximum
price, shall require the delivery of payment and performance bonds and shall
require the general contractor to keep and maintain course of construction
insurance. The Construction Contract shall provide that the general contractor's
warranty set forth therein shall be assigned to Seller upon the Close of Escrow.
12.05. Loan. All sums which are necessary or required in
connection with the acquisition, design and construction of the Training
Facility shall be advanced by Seller to Buyer pursuant to the terms of a
non-recourse demand (which demand may not be made prior to the date of the Close
of Escrow) promissory note, (the "Note"), which Note shall be secured by a deed
of trust to be recorded against the Training Facility (the "Deed of Trust"). On
or before the Approval Date, Buyer and Seller shall agree to the form of the
Note and Deed of Trust (together with any ancillary documents necessary to
document the loan contemplated by this Section 12.05). As soon as reasonably
possible following the Effective Date, Buyer shall deliver to Seller, for
Seller's review, Buyer's proposed Note and Deed of Trust. In addition, the Note
shall accrue interest in an amount equal to the "Applicable Federal Rate"
("AFR") for short-term loans made as of the Close of Escrow, as such AFR is
published by the Internal Revenue Service. At the Close of Escrow, Buyer shall
repay the outstanding principal balance of the Note, together with all accrued,
but unpaid, interest, up to an amount not to exceed the sum of the Purchase
Price and Buyer's proportionate share of the cost of the Off-Site Improvements.
If for any reason other than an insurable loss or as a result of the gross
negligence or willful misconduct of Buyer, its employees or agents, the cost of
planning, designing and constructing the Training Facility exceeds the amount of
the Purchase Price, then, within fifteen (15) business days of written notice
from Buyer, Seller shall lend to Buyer the amount of such excess pursuant to the
terms and provisions of a second non-recourse demand (which demand may not be
made prior to the date of the Close of Escrow) promissory note (the "Second
Note"), secured by a subordinate deed of trust recorded against the Training
Facility, which Second Note shall be assumed by Seller upon the acquisition of
the Training Facility. The Second Note shall also accrue interest at the AFR.
12.06. Seller's Acknowledgement, Waiver and Release. Seller
hereby agrees and acknowledges that Buyer has agreed to
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<PAGE> 23
construct the Training Facility solely as an accommodation to Seller and in
order to facilitate the exchange transaction contemplated hereby. In
consideration therewith, and to the fullest extent provided by law, and except
where caused solely by the gross negligence or willful misconduct of Buyer, its
employees and agents, Seller, on behalf of its officers, directors,
shareholders, successors and assigns, hereby forever waives and releases Buyer,
Franklin Resources, Inc., and their respective officers, directors, employees
and agents, from and against any and all losses, costs, damages, liabilities or
expenses (including reasonable attorneys' fees and costs of suit) arising from
or in connection with the acquisition, design and construction of the Training
Facility. In connection with the foregoing, Seller expressly waives the
provisions of Section 1542 of the California Civil Code, which provides:
A general release does not extend to claims which the creditor
does not know or suspect to exist in his favor at the time of
executing the release, which if known by him must have
materially affected his settlement with the debtor.
12.07. Buyer's Disclaimer. Buyer makes no representation or
warranty to Seller concerning the qualification of the contemplated transaction
as a like-kind exchange under Section 1031 of the Code. Buyer shall have no
liability to Seller if the transaction contemplated by Article XII of this
Agreement fails to qualify as such an exchange.
12.08. Exchange Closing. If Seller elects to dispose of the
Property in exchange for the Training Facility by means of the transactions
described in this Article XII, Seller shall convey to Buyer, and Buyer shall
accept from Seller, all of the Property, and in exchange therefore, Buyer shall
convey to Seller, and Seller shall accept from Buyer, the Training Facility.
Prior to the date scheduled for the Close of Escrow, each party hereto shall
deposit into the separate escrow for such exchange closing all sums, instruments
and escrow instructions required of such party hereunder to consummate the
exchange in a timely manner in accordance with the provisions of this Agreement;
such escrow instructions shall irrevocably and unconditionally direct the Escrow
Holder to effectuate such closing. At such exchange closing, title to the
Training Facility shall be subject only to the defects of title to which the
Training Facility was subject when acquired by Buyer and delivery of title to
the Property and to the Training Facility in the condition of title specified in
this Subsection 12.08 shall be conclusively (but not exclusively) established by
the willingness of Escrow Holder to deliver, at such exchange closing, its
standard ALTA form of title insurance policy showing title to the Property to be
vested in Buyer in the condition of title specified in Subsection 2.03(a), and
its ALTA
20
<PAGE> 24
form of policy showing title to the Training Facility to be vested in Seller
subject only to the defects of title to which the Training Facility was subject
when acquired by Buyer and the lien of the deed of trust securing the Second
Note, if applicable. Buyer shall receive a credit for all costs, fees and
expenses incurred by Buyer in connection with the subject exchange, which costs,
fees and expenses shall include, without limitation, transfer taxes, recording
fees, title insurance costs, real estate commissions, survey costs and
attorneys' fees. By participating in the subject exchange, the total costs, fees
and expenses incurred by Buyer shall not exceed those costs, fees and expenses
which Buyer would be required to pay under this Agreement if Buyer were to
purchase the entire Property for the cash portion of the Purchase Price.
XIII. CONDEMNATION.
In the event that, prior to the Close of Escrow, any
governmental entity shall commence any action of eminent domain to take any
material portion of the Property, Buyer shall have the option either to (i)
elect not to acquire the Property, such that Buyer would no longer be able to
utilize the Subject Real Property for the development of up to nine hundred
thousand (900,000) rentable square feet of improvements and parking for four
thousand five hundred (4,500) automobiles, in which case this Agreement shall be
terminated, or (ii) complete the acquisition of the Property, in which case
Buyer shall be entitled to the proceeds of such taking.
XIV. GENERAL PROVISIONS.
14.01. Headings. The title and headings of the various
sections hereof are intended for means of reference and are not intended to
place any construction on the provisions hereof.
14.02. Invalidity. If any provision of this Agreement shall be
invalid or unenforceable the remaining provisions shall not be affected thereby,
and every provision hereof shall be valid and enforceable to the fullest extent
permitted by law.
14.03. Attorneys' Fees. In the event of any litigation between
the parties hereto to enforce any of the provisions of this Agreement, the
unsuccessful party to such litigation agrees to pay to the successful party all
costs and expenses, including reasonable attorneys' fees incurred by the
successful party, all of which may be included as part of the judgment rendered
in such litigation.
14.04. Entire Agreement. The terms of this Agreement are
intended by the parties as a final expression of their agreement and may not be
contradicted by evidence of any prior or contemporaneous agreement. The parties
further intend that this
21
<PAGE> 25
Agreement constitute the exclusive statement of its terms and that no extrinsic
evidence whatsoever may be introduced in any judicial proceedings involving this
Agreement. No provision of this Agreement may be amended except by an agreement
in writing signed by the parties hereto or their respective successors in
interest. This Agreement shall be governed by and construed in accordance with
the laws of the State of California.
14.05. Successors. This Agreement shall be binding upon and
inure to the benefit of the heirs, executors, administrators, successors and
assigns of the parties hereto.
14.06. Time of the Essence. Time is of the essence in this
Agreement.
14.07. Acceptance. If this Agreement is not accepted by Seller
and two executed copies delivered to Buyer on or before 5:00 p.m. on the fifth
(5th) day after delivery of signed copies of this Agreement to Seller by Buyer,
this Agreement shall be null and void.
14.08. Buyer's Remedies. If Seller defaults in the performance
of its covenants under this Agreement, including, but not limited to, its
obligation to convey the Property to Buyer at the Close of Escrow, then, in
addition to receiving the return of the Deposit, Buyer shall have the right to
pursue all of its legal or equitable remedies, including the remedy of specific
performance.
14.09. Confidentiality. Buyer and Seller agree that all
negotiations shall remain confidential and that, except as otherwise required by
law, no press or other publicity release or
22
<PAGE> 26
communication to the general public concerning the proposed purchase and sale
transaction contemplated herein will be issued without the other party's
approval.
IN WITNESS WHEREOF, the parties hereto have made this
Agreement on the day and year first above written.
SELLER:
CALIFORNIA JOCKEY CLUB,
a Delaware corporation
By:/s/Kjell W. Qvale
--------------------------------
Its Chairman
-----------------------------
BUYER:
PROPERTY RESOURCES, INC.,
a California corporation
By:/s/Michael J. McCulloch
--------------------------------
Its Executive Vice President
-----------------------------
ACKNOWLEDGEMENT
The undersigned hereby consents to the execution and delivery
by California Jockey Club and covenants and agrees to take all actions which are
necessary or required to allow the Subject Real Property to be conveyed to
Property Resources, Inc. at the Close of Escrow, free and clear of any leasehold
interests or other rights of possession of Bay Meadows Operating Company.
BAY MEADOWS OPERATING COMPANY,
a Delaware corporation
By: /s/F. Jack Liebau
-------------------------------
F. Jack Liebau
President and Chief Executive
Officer
Date: , 1995
-----------------------
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<PAGE> 27
SCHEDULE OF EXHIBITS
Exhibit "1" Site Plan
Exhibit "2" Preliminary Title Report
Exhibit "3" Entitlements Timetable
Exhibit "4" Grant Deed
Exhibit "5" Assignment of Intangible Assets
Exhibit "6" Certificate of Non-Foreign Person
Exhibit "7" Seller's State Tax Withholding Certificate
<PAGE> 28
EXHIBIT "3"
ENTITLEMENTS TIMETABLE
- - Complete Conceptual Site On or before May 15, 1995
Plan and submit to Buyer
for approval
- - Buyer approves Conceptual On or before May 15, 1995
Site Plan
- - Seller makes application to ________________________, 1995
the State of California
Department of
Transportation for
approval to construct a
new southbound off-ramp
to Highway 101
- - Complete planning and On or before September 29, 1995
design for submittal of
Entitlement
application/submit
application
- - City determines On or before October 31, 1995
application is complete
- - City selects EIR On or before November 30, 1995
consultant
- - EIR consultant prepares On or before March 29, 1996
draft EIR
- - Complete public review of Sixty (60) days following completion,
draft EIR but in no event later than May 31, 1996
- - EIR consultant responds Ninety (90) days following end of public
to public comment and comment period, but in no event later
prepares final EIR than August 30, 1996
- - Planning Commission Sixty (60) days following receipt of
approves grant of final EIR, but in no event later than
Entitlements October 31, 1996
3-1
<PAGE> 29
- - City Council approves Thirty (30) days following Planning
grant of Entitlements and Commission decision, but in no event
files a notice of later than November 29, 1996
determination indicating
the certification of the
EIR
- - CalTrans approves off- November 29, 1996
ramp
- - Expiration of CEQA appeal Thirty (30) days following filing of
period Notice of Determination, but in no event
later than December 31, 1996
3-2
<PAGE> 30
EXHIBIT "4"
ORDER NO.
ESCROW NO.
LOAN NO.
WHEN RECORDED MAIL TO:
Greene, Radovsky, Maloney,
& Share
Spear St. Tower, Ste. 4200
One Market
San Francisco, CA 94105
Attn: Thomas M. Feldstein,
Esq.
SPACE ABOVE THIS LINE FOR RECORDER'S USE
- --------------------------------------------------------------------------------
MAIL TAX STATEMENTS TO: DOCUMENTARY TRANSFER TAX $_______________
___ Computed on the consideration or value of
property conveyed;
Property Resources, Inc. OR
1800 Gateway Drive, 3rd Fl. ___ Computed on the consideration or value less
San Mateo, CA 94403 liens or encumbrances remaining at time of
sale.
_______________________________________________
Signature of Declarant or Agent determining
tax. Firm Name
- --------------------------------------------------------------------------------
CORPORATION GRANT DEED
- --------------------------------------------------------------------------------
FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged,
CALIFORNIA JOCKEY CLUB
a corporation organized under the laws of the State of Delaware, does hereby
GRANT to
PROPERTY RESOURCES, INC., a California corporation
the real property in the City of San Mateo, County of San Mateo, State of
California, described as:
See Exhibit "A" attached hereto.
Dated CALIFORNIA JOCKEY CLUB, a Delaware
corporation
State of ___________________)
)ss By ________________________________
County of __________________) , President
By ________________________________
, Secretary
On _______________, _____, before me,___________________ (here insert
name and title (e.g., Notary Public) of the officer), personally appeared and
personally known to me (or proved to me on the basis of satisfactory evidence)
to be the persons whose names are subscribed to the within instrument and
acknowledged to me that they executed the same in their authorized capacities,
and that by their signatures on the instrument the persons, or the entity on
behalf of which the persons acted, executed the instrument.
WITNESS my hand and official seal
Signature_____________________________________
MAIL TAX STATEMENTS AS DIRECTED ABOVE
<PAGE> 31
EXHIBIT "5"
ASSIGNMENT
In consideration of the terms and provisions of that certain
Agreement of Purchase and Sale dated _______________, 1995 (the "Agreement"),
the undersigned hereby sells, transfers and assigns unto
________________________________________________, a _______________________, the
following assigned property:
(a) all contracts or agreements, including but not limited to,
maintenance contracts, personnel contracts or utility contracts;
(b) warranties, guaranties, indemnities and claims (including
specifically, without limitation, for workmanship, materials and performance)
and which exist or may hereafter exist against any contractor, subcontractor,
manufacturer or supplier or laborer or other services relating thereto; and
(c) plans, drawings, specifications and other property owned
or held by the undersigned which, in any way, relates to the operation of, or
the improvements situated on, the real property described in the Agreement.
The undersigned does for itself and its heirs, executors and
administrators, covenant and agree to warrant and defend the title to the
assigned property against the just and lawful claims and demands of all persons
whomsoever.
CALIFORNIA JOCKEY CLUB,
a Delaware corporation
Date: _____________, 199__ By: ____________________________
Its ________________________
5-1
<PAGE> 32
EXHIBIT "6"
CERTIFICATE OF NONFOREIGN PERSON
CALIFORNIA JOCKEY CLUB is the transferor of certain real
property located in the City of San Mateo, County of San Mateo, State of
California, and more particularly described in Exhibit A attached hereto (the
"Property").
Section 1445 of the Internal Revenue Code of 1986 as amended
(the "Internal Revenue Code"), provides that a transferee of a U.S. real
property interest must withhold tax if the transferor is a foreign person. To
inform the transferee that withholding of tax will not be required in connection
with the disposition of the Property pursuant to that certain Agreement of
Purchase and Sale, dated ___________________, 1995, by and between Property
Resources, Inc., a California corporation ("PRI"), and California Jockey Club, a
Delaware corporation ("CJC"), the undersigned certifies the following on behalf
of CJC:
1. CJC is not a foreign individual, foreign corporation,
foreign partnership, or foreign estate, as those terms are defined in the
Internal Revenue Code and the regulations promulgated thereunder;
2. CJC' U.S. employer identification number is 94-0358820; and
3. CJC's address is 2600 South Delaware Street, P.O. Box 1117,
San Mateo, California 94403.
It is understood that this certificate may be disclosed to the
Internal Revenue Service and that any false statement contained herein could be
punished by fine, imprisonment, or both.
Under penalties of perjury I declare that I have examined the
foregoing certification and, to the best of my knowledge and belief, it is true,
correct and complete, and I further declare that I have authority to sign this
document on behalf of Wards.
CALIFORNIA JOCKEY CLUB,
a Delaware corporation
Date: _____________, 199__ By: ____________________________
Its ________________________
6-1
<PAGE> 33
EXHIBIT "7"
SELLER'S STATE TAX WITHHOLDING CERTIFICATE
To inform ______________________, a _____________________
("Transferee"), on behalf of CALIFORNIA JOCKEY CLUB, a Delaware corporation
("Transferor"), the undersigned hereby certifies that withholding of tax under
Sections 18805, 18815 and 26131 of the California Revenue and Taxation Code
(collectively, the "Act") will not be required by Transferee:
CHECK ALL APPLICABLE ITEMS:
/ / 1. Transferor is a resident of California. Transferor's
last known address is _________________________________
______________________________________________________.
/ / 2. Transferor is a corporation qualified to do business in
California.
/ / 3. Transferor is a partnership as determined in accordance
with Subchapter K of Chapter 1 of Subtitle A of the
Internal Revenue Code.
/ / 4. Transferor has received a homeowner's property tax
exemption for the Property.
/ / 5. Transferor is a bank acting as a trustee other than a
trustee of a deed of trust.
If none of the above apply, the undersigned certifies that
Transferor has filed Form 597-A with the California Franchise Tax Board ("FTB")
for the purpose of obtaining a Certificate from the FTB that Transferor is not
required to pay to the FTB the amount of tax otherwise required to be withheld
and paid under the Act, or is required only to pay a reduced amount of such tax.
Transferor understands that this Certificate may be disclosed
to the California Franchise Tax Board by Transferee and that any false statement
contained herein could be punished by fine, imprisonment, or both.
The Transferor hereby agrees to indemnify, defend and hold the
Transferee harmless from and against any and all obligations, liabilities,
claims, losses, actions, causes of action, rights, demands, damages, costs and
expenses of every kind, nature or character whatsoever (including, without
limitation,
7-1
<PAGE> 34
actual attorneys' costs and fees and court costs) incurred by the Transferee as
a result of: (i) the Transferor's failure to pay California State income tax
which the Transferor is required to pay under applicable California law; or (ii)
any false or misleading statement contained herein.
Under penalty of perjury I declare that I have examined this
Certificate and to the best of my knowledge and belief it is true, correct and
complete, and I further declare, in my individual capacity, that I have
authority to sign this document on behalf of Transferor.
CALIFORNIA JOCKEY CLUB,
a Delaware corporation
Date: _____________, 199__ By: ____________________________
Its ________________________
7-2
<PAGE> 35
FIRST AMENDMENT TO AGREEMENT OF PURCHASE AND SALE
THIS FIRST AMENDMENT TO AGREEMENT OF PURCHASE AND SALE (the
"First Amendment") is made as of this ____ day of June, 1995, by and between
CALIFORNIA JOCKEY CLUB, a Delaware corporation ("Seller"), and PROPERTY
RESOURCES, INC., a California corporation ("Buyer").
RECITALS:
Effective as of May 31, 1995, Buyer and Seller entered into
that certain Agreement of Purchase and Sale (the "Purchase Agreement"), under
the terms of which Buyer agreed to acquire, and Seller agreed to convey, certain
real property located in San Mateo, California, as more particularly described
in the Purchase Agreement. Buyer and Seller now desire to amend the Purchase
Agreement in several respects.
NOW, THEREFORE, Buyer and Seller hereby agree as follows:
1. All defined terms as used in this First Amendment shall
have the same meaning as set forth in the Purchase Agreement, unless otherwise
specifically set forth herein.
2. Article 4 of the Agreement is hereby amended by the
addition of Section 4.03, to read as follows:
4.03. Receipt of Entitlements for Parcel 3.
Seller's obligation shall be expressly subject to and
conditioned upon Seller's receipt of the Entitlements for
Parcel 3 more particularly described in Section 7.01 below
(and the expiration of all appeal periods under the City of
San Mateo Planning Code and the California Environmental
Quality Act) and the execution and delivery by Seller and the
City of San Mateo of a development agreement, pursuant to
Sections 65864 et. seq. of the California Government Code,
relating to the development of the Property, in phases, over a
ten (10) year period. Any development restrictions and service
mitigation requirements and/or any "in lieu" fees or exactions
imposed by the City of San Mateo (or any other governmental
agency with jurisdiction thereof) in conjunction with the
granting of the Entitlements for Parcel 3 shall be subject to
Seller's prior approval, which approval may be withheld in
Seller's
<PAGE> 36
reasonable discretion. If Seller does not accept any of the
restrictions or requirements as proposed by the City of San
Mateo, Seller shall have the right to terminate this
Agreement.
3. Subsection 5.03(a) of the Purchase Agreement is hereby
amended in its entirety to read as follows: "Cause the Deed to be recorded in
San Mateo County, California."
4. Section 7.01 of the Purchase Agreement is hereby amended
by the insertion of the following after the first sentence thereof:
The Entitlements shall also include the right to develop on
Parcel 3 the improvements more particularly described on
Exhibit "A" attached hereto.
5. Article 11 of the Purchase Agreement is hereby amended by
the addition, as a Seller's Notice addressee, of the following:
Copy to: Carr, McClellan, Ingersoll,
Thompson & Horn
216 Park Road
Burlingame, CA 94010
Attn: Norman I. Book, Jr.
6. Section 12.02 of the Purchase Agreement is hereby amended
in its entirety to read as follows:
12.02. Covenant of Cooperation. If Seller
timely delivers to Buyer an Exchange Notice, Buyer shall
reasonably cooperate with Seller in connection with the
consummation of a 1031 tax deferred exchange, which
cooperation may include the acquisition of the underlying real
property, and the design and development of a race horse
training facility to be located on a suitable area of land as
designated by Seller (collectively, the "Training Facility").
All costs reasonably incurred by Buyer in connection with the
acquisition, design and construction of the Training Facility
are hereinafter referred to as the "Exchange Value." If such
exchange is consummated on the Close of Escrow, Buyer shall
transfer and convey to Seller the Training Facility, and
Seller shall transfer and convey the Property to Buyer. If the
Purchase Price for the Property exceeds the
2
<PAGE> 37
Exchange Value, Buyer shall pay to Seller in cash at the Close
of Escrow the amount of such difference. If the exchange
contemplated by this Article XII fails to occur due to the
failure of Buyer's conditions as set forth in Section 12.03,
then Seller shall timely complete the sale of the Property to
Buyer on the terms and provisions of this Agreement.
7. Section 12.04 of the Purchase Agreement is hereby amended
by the deletion of the words "and as soon as reasonably practical following
Seller's receipt of the Entitlements" between the word "Notice" and the word
"Buyer in the second and third lines thereof and by the deletion of the words
"in Livermore" between the word "property" and the word "designated" in the
sixth line thereof.
8. The first sentence of Section 12.05 of the Purchase
Agreement is hereby amended in its entirety to read as follows:
All sums which are necessary or required in connection with
the acquisition, design and construction of the Training
Facility shall be advanced by Seller to Buyer pursuant to the
terms of a non-recourse demand promissory note (the "Note")
(which demand may not be made prior to either the date of the
Close of Escrow or the earlier termination of this Agreement),
which Note shall be secured by a deed of trust to be recorded
against the Training Facility (the "Deed of Trust").
9. The third sentence of Section 12.05 of the Purchase
Agreement is hereby amended in its entirety to read as follows:
As soon as reasonably possible following the Effective Date,
Seller shall deliver to Buyer, for Buyer's review, Seller's
proposed form of Note, Deed of Trust and other related loan
documentation.
10. Section 12.08 of the Purchase Agreement is hereby amended
by the addition of the following after the first sentence thereof:
As set forth in Section 12.02, if the Purchase Price for the
Property exceeds the Exchange Value, Buyer shall pay to
Seller, in cash at the Close of Escrow, the amount of such
difference.
3
<PAGE> 38
11. Article 12 of the Purchase Agreement is hereby amended by
the addition of Section 12.09, to read as follows:
Section 12.09. Negation of Agency,
Partnership or Joint Venture. Nothing contained in this
Agreement is intended, nor shall be construed, to establish an
agency, partnership or joint venture between Seller and Buyer.
12. In all other respects, the Purchase Agreement remains
unchanged and in full force and effect.
IN WITNESS WHEREOF, Buyer and Seller have each executed this
First Amendment to Purchase Agreement as of the day and year set forth above.
SELLER: BUYER:
CALIFORNIA JOCKEY CLUB, PROPERTY RESOURCES, INC.,
a Delaware corporation California corporation
By: By: /s/ Michael J. McCulloch
------------------------------ ------------------------------
Its Its Executive Vice President
-------------------------- --------------------------
4
<PAGE> 39
SECOND AMENDMENT TO AGREEMENT OF PURCHASE AND SALE
THIS SECOND AMENDMENT TO AGREEMENT OF PURCHASE AND SALE (the
"Second Amendment") is made as of this ________ day of December, 1995, by and
between CALIFORNIA JOCKEY CLUB, a Delaware corporation ("Seller"), and PROPERTY
RESOURCES, INC., a California corporation ("Buyer").
RECITALS:
Effective as of May 31, 1995, Buyer and Seller entered into
that certain Agreement of Purchase and Sale (the "Purchase Agreement"), under
the terms of which Buyer agreed to acquire, and Seller agreed to convey, certain
real property located in San Mateo, California, as more particularly described
in the Purchase Agreement. On June 21, 1995, Buyer and Seller entered into that
certain First Amendment to Agreement of Purchase and Sale (the "First
Amendment"). Buyer and Seller now desire to amend the Purchase Agreement in
several respects.
NOW, THEREFORE, Buyer and Seller hereby agree as follows:
1. All defined terms as used in this Second Amendment shall
have the same meanings as set forth in the Purchase Agreement, unless otherwise
specifically set forth herein.
2. Subsection 2.02(c) of the Purchase Agreement is hereby
amended in its entirety to read as follows:
(c) In addition to the Purchase Price, Buyer shall,
subject to the terms, provisions and limitations as set forth
in Section 7.02, reimburse Seller for forty-four percent (44%)
of the costs of the Off-Site Improvements (as hereinafter
defined) reasonably and actually incurred by Seller.
3. The second sentence of Section 2.03 of the Purchase
Agreement is hereby amended in its entirety to read as follows:
If Seller elects, in accordance with Article XII
below, to effect the transfer of the Property to Buyer as part
of a tax-free exchange of the Training Facility (as
hereinafter defined in Article XII), then the Close of Escrow
shall be the later to occur of (a) thirty (30) days following
the completion, satisfaction and/or waiver of the last
condition to Buyer's obligation to acquire the
<PAGE> 40
Property as set forth in Sections 3.02, 3.03, 3.04 and 3.06,
and (b) five (5) business days following the date of
substantial completion of construction of the Training
Facility.
4. Buyer hereby approves the condition of title to the Subject
Real Property (together with the legal description of the Subject Real Property
as described therein) as set forth on the Pro Forma Title Insurance Policy of
Title Company (the "Pro Forma") in the form attached hereto as Exhibit "A,"
subject to the following:
(a) Buyer's review and approval of an ALTA survey of
the Property in accordance with Section 3.04 of the Purchase Agreement;
(b) Items 2, 3 and 4 of Schedule B (Part I) to the
Pro Forma shall be eliminated from the Title Policy to be delivered to Buyer at
the Close of Escrow;
(c) Seller shall cause the elimination of Item 3 of
Schedule B (Part II);
(d) Seller shall cause Pacific Gas and Electric
Company to release of record the overhead electrical easements as described in
Item 10 of Schedule B (Part II); and
(e) Seller shall cause either the elimination of
Items 4, 5, 6 and 7 of Schedule B (Part II) or the issuance by Title Company of
affirmative insurance with respect thereto.
In accordance with Section 2.03(a) of the Purchase Agreement,
Seller shall advise Buyer, in writing, on or before January 31, 1996, whether
Seller agrees to remove the exceptions referenced in clauses (c), (d) and (e)
above.
5. Subject to the performance by Seller of its obligations
pursuant to Section 17 of this Second Amendment, Buyer hereby approves the
conditions to Buyer's obligation to acquire the Property as set forth in Section
3.01 of the Purchase Agreement. Concurrently with Buyer's execution of this
Second Amendment, Buyer shall deliver to Title Company the First Additional
Deposit in the sum of Three Hundred Thousand Dollars ($300,000).
6. Section 3.02 of the Purchase Agreement is hereby amended to
provide that the Entitlements Timetable shall be in the form attached hereto as
Exhibit "B," which Entitlements Timetable is hereby incorporated into the
Purchase Agreement by this reference.
7. Section 3.03 of the Purchase Agreement is hereby amended by
the addition of the following to the beginning of the
2
<PAGE> 41
first sentence: "Except as otherwise expressly set forth in Section 7.02,".
8. Section 3.06 of the Purchase Agreement is hereby amended in
its entirety to read as follows:
Buyer shall have received, on or before March 26,
1996, all necessary consents or approvals from the Joint
Powers Board, affording a public right of access to the Depot
from the east side thereof. Buyer shall be responsible, at its
sole cost and expense, for the performance of all work
necessary to prosecute and obtain such approvals.
9. Seller hereby confirms the waiver of the condition to
Seller's obligation to sell the Property as set forth in Section
4.01 of the Purchase Agreement.
10. Section 6.04 of the Purchase Agreement is hereby amended
to provide that:
(a) Seller's buyback rights may, at Seller's
election, be exercised by (i) the purchase of a fee interest, (ii) the grant by
Buyer of an easement over such right-of-way, or (iii) the dedication of such
right-of-way to the City of San Mateo; but in any event Seller shall pay Buyer
an amount equal to the product of Sixteen Dollars ($16.00), and the square
footage of the property subject to such purchase, grant of easement or
dedication;
(b) the width of the property subject to such
repurchase right, easement or dedication shall in no event be less than that
necessary to construct a four (4) lane public road with a landscaped median to
City of San Mateo standards; and
(c) such roadway shall be configured to retain the
pedestrian path.
11. The second sentence of Section 6.06 of the Purchase
Agreement is hereby deleted in its entirety.
12. The definition of the term "Entitlements" as set forth in
Section 7.01 of the Purchase Agreement is hereby amended to read as follows:
(a) Amendments to the City of San Mateo General
Plan;
(b) Final Certification of Seller's Environmental
Impact Report;
3
<PAGE> 42
(c) The rezoning of the Subject Real Property from
Agricultural and Residential Multi-Family to
zoning districts which allow mixed-use
development;
(d) Approval of a final subdivision map;
(e) Approval of the Bay Meadows Specific Plan;
(f) Execution of a Development Agreement;
(g) Issuance of a Site Development Permit; and
(h) Approval of the U.S. 101/Hillsdale Boulevard
inter-change off-site improvements.
13. Section 7.01 of the Purchase Agreement is hereby further
amended by the insertion of the following after the first sentence thereof:
The Entitlements shall also include the right to
develop on Parcel 3 the improvements more particularly
described on Exhibit "C" attached to the Second Amendment.
14. (a) Section 7.02 of the Purchase Agreement is
hereby amended to provide that the term
"Off-Site Improvements" shall mean and refer
to those costs delineated on that certain
"Project Shared Costs -- Preliminary
Estimate," dated October 12, 1995, as prepared
by Brian Kangas Foulk;
(b) For purposes of this Agreement, the term "Cost
of the Off-Site Improvements" shall include
engineering and other associated costs
reasonably and actually incurred in connection
with the design and construction of the
Off-Site Improvements.
(c) Section 7.02 of the Purchase Agreement is
hereby amended to provide that Buyer shall pay
Seller at the Close of Escrow for forty-four
percent (44%) of that portion of the cost of
the Off-Site Improvements which exceed Four
Million Dollars ($4,000,000.00) but are not
more than Seven Million Seven Hundred Thousand
Dollars ($7,700,000); provided that if
Caltrans does not approve "Scheme 3B" (as such
alternative is more particularly described on
Exhibit "D" attached hereto) as the preferred
interchange situation, then, in addition to
the
4
<PAGE> 43
foregoing, Buyer shall be responsible for
forty-four percent (44%) of the amount, if
any, by which the cost of the Off-Site
Improvements exceeds Seven Million Seven
Hundred Thousand Dollars ($7,700,000.00) as
the result of the cost of the approved
interchange improvements exceeding the cost of
"Scheme 38." If (a) the cost of the Off-Site
Improvements is reasonably anticipated to
exceed the amount of Seven Million Seven
Hundred Thousand Dollars ($7,700,000), but not
exceed Eleven Million Dollars ($11,000,000)
(as evidenced by an estimate, reasonably
acceptable to Buyer, prepared by Seller's
civil engineer and delivered to Buyer), then
Seller, upon not less than fifteen (15) days
prior written notice to Buyer, shall have the
right to terminate this Agreement unless Buyer
agrees to fund forty-four percent (44%) of
such additional costs; and (b) the sum of the
cost of (i) the Off-Site Improvements, (ii)
the Retention Basin (as hereinafter defined),
and (iii) Seller's share of the costs
described in Subsection 14(e) below, is
reasonably anticipated to exceed the amount of
Eleven Million Dollars ($11,000,000.00) (as
evidenced by an estimate, reasonably
acceptable to Buyer, prepared by Seller's
civil engineer and delivered to Buyer), then
Seller, upon written notice to Buyer, shall
have the right to terminate the Agreement.
(d) In addition, Seller hereby represents,
warrants and covenants to Buyer (which
representation, warranty and covenant shall
survive the Close of Escrow), that in no event
shall the sum of the reimbursements received
from Buyer pursuant to Section 2.02(c) and
Section 7.02 of the Purchase Agreement for the
costs of the Off-Site Improvements together
with any comparable sums paid to Seller by the
purchaser(s) of Parcel 3, exceed one hundred
percent (100%) of the cost of the Off-Site
Improvements.
(e) Seller shall promptly reimburse Buyer for
fifty-six percent (56%) of the costs
reasonably and actually incurred by Buyer in
connection with (a) the construction of the
proposed pedestrian path (including, but not
limited to, the cost of paving, lighting and
landscaping) from Saratoga Drive to the Depot;
and (b) construction of necessary improvements
to the
5
<PAGE> 44
Depot to facilitate ingress and egress thereto
from the east side of the railroad tracks.
Seller's Deed to Buyer for the Subject Real
Property may contain a reservation for an
easement over such pedestrian path appurtenant
to the Race Track and Parcel 3.
(f) Seller and Buyer hereby further agree that,
notwithstanding the parties' agreement as set
forth herein with respect to the allocation of
responsibility for the cost of the Off-Site
Improvements, any fee credits or offsets
received from the City of San Mateo
(including, but not limited to, any credits
against the City's Transportation Improvements
Fee) shall be apportioned between the Subject
Real Property and Parcel 3 in a manner
reasonably intended to eliminate the
applicable fee burden on both properties;
accordingly, Buyer shall be entitled to
utilize fifty-six and 63/100 percent (56.63%)
of any available Transportation Improvements
fee credit. Where the development on either
property does not generate any fee burden, any
fee credit or offset received from the City of
San Mateo shall be retained and utilized
solely by the property subject to any such
fee.
(g) The fifth sentence of Section 7.02 of the
Purchase Agreement is hereby amended in its
entirety to read as follows: "In addition,
Seller covenants and agrees to complete the
Off-Ramp not later than the first (1st)
anniversary of the Close of Escrow, subject to
the effect of any event of Force Majeure."
15. The third sentence of Section 12.02 of the Purchase
Agreement is hereby amended in its entirety to read as follows:
If the exchange contemplated by either Section 12.01
through 12.08 or Section 12.09 fails to occur for any reason
other than the breach or default of Buyer, then Seller shall
timely complete the sale of the Property to Buyer on the terms
and provisions of this Agreement.
16. Article XII of the Purchase Agreement is hereby further
amended by the addition of Section 12.09, to read as follows:
6
<PAGE> 45
12.09. Further Exchange Rights. If Seller does not
elect, pursuant to Sections 12.01 through 12.08, to effect an
exchange of the Property for the Training Facility, then
Seller may nonetheless consummate the sale of the Property as
part of a like-kind exchange pursuant to Section 1031 of the
Internal Revenue Code. If Seller requests, Buyer shall
reasonably cooperate with Seller by purchasing Seller's
designated exchange property and conveying it to Seller in
exchange for the Property and executing additional documents
as reasonably required to consummate the exchange. The
exchange may occur simultaneously with conveyance of the
Property, or Seller may request Buyer's cooperation for a
"delayed exchange" whereby purchase money due Seller under
this Agreement will be held by a third party in a manner
specifically designated by Seller for later use to purchase
Seller's designated exchange property. To accomplish this
goal, in either case, Buyer shall execute such additional
documents as reasonably requested, provided:
a. There shall be no delay in the date scheduled for
the Close of Escrow;
b. Seller shall not be released if the exchange fails
for any reason, and Seller shall remain obligated to sell the
Property;
c. Seller shall reimburse Buyer for any additional
attorneys' fees and costs incurred by Buyer as a result of the
exchange or attempted exchange;
d. Buyer need not assume any additional liabilities
or obligations as a result of the exchange or attempted
exchange or be required to acquire title to any such property;
e. Seller shall indemnify, defend with counsel of
Buyer's choice, and hold Buyer harmless from all expense,
loss, damage and claims, including Buyer's attorneys' fees, if
necessary, arising from the exchange by Seller.
17. Article XIV of the Purchase Agreement is hereby amended by
the addition of Section 14.10, to read as follows:
7
<PAGE> 46
14.10. Storage Tank Removal. As more particularly
described on Exhibit "E" attached hereto, located on or
immediately adjacent to a portion of the Subject Real Property
are two (2) underground storage tanks (the "Storage Tanks").
One of the Storage Tanks is a two thousand (2,000) gallon tank
used for the storage of diesel fuel. The other Storage Tank is
a one thousand (1,000) gallon tank used for the storage of
gasoline. If it is determined that the Storage Tanks lie,
either in whole or in part, on the Subject Real Property, then
as soon as reasonably possible following the Entitlement
Procurement Date, but in any event on or before the Close of
Escrow, Seller (at its sole cost and expense) shall cause the
removal of the Storage Tanks, and the closure of that portion
of the Property previously occupied by such Storage Tanks
(such closure to be evidenced by the receipt of a closure
letter from the County of San Mateo), which removal and
closure Seller shall diligently prosecute to completion in
accordance with all applicable laws; provided that, if the
only condition left to be satisfied prior to issuance by the
County of San Mateo of a letter confirming such closure is the
completion of a ground water monitoring program, then Buyer
shall proceed to complete the Close of Escrow and Seller, at
its sole cost and expense, shall diligently prosecute such
monitoring program to completion and deliver to Buyer as soon
as reasonably possible such closure letter. Buyer's obligation
to compete the acquisition of the Property is expressly
subject to, and conditioned upon, Seller's delivery to Buyer
of such letters or other documentary evidence as Buyer may
reasonably require, substantiating that Seller has completed
the removal of the Storage Tanks (and all lines and related
facilities used in connection therewith) in compliance with
all applicable laws and has remedied any contamination
associated therewith. Seller shall protect, indemnify and hold
Buyer, its directors, officers, employees and agents, and any
successors to Buyer's interest in the Property (collectively,
the "Indemnitees") harmless from and against any and all
actual or potential claims, proceedings, lawsuits,
8
<PAGE> 47
liabilities, damages, losses, fines, penalties, judgments,
awards, costs and expenses (including, without limitation,
reasonable attorneys' fees and costs and expenses of
investigation) which arise out of or relate in any way to
Seller's use and removal of the Storage Tanks. The covenants
and agreements contained in this Section 14.10 shall survive
the Close of Escrow.
18. Article XIV of the Purchase Agreement is hereby amended by
the addition of Section 14.11, to read as follows:
14.11. Storm Drainage Easement. At the Close of
Escrow, Seller shall deliver to Buyer, a perpetual storm
drainage easement, in recordable form and otherwise in a form
and content reasonably acceptable to Seller and Buyer,
permitting Buyer, its successors and assigns, to discharge
Buyer's storm water run-off into a holding pond located on the
Race Track (the "Retention Basin"). Subject to the terms and
provisions of Section 7.02 of this Agreement, Seller shall be
responsible, at its sole cost and expense, for the
construction and maintenance of the Retention Basin, as are
necessary to afford appropriate drainage for the Subject Real
Property upon the occurrence of a "Twenty-Five Year" storm,
provided that at the Close of Escrow, Buyer shall pay to
Seller an amount equal to One Hundred Ten Thousand Dollars
($110,000.00) as Buyer's sole contribution to the cost of
construction of the Retention Basin; provided further that if
the cost of the Retention Basin is reasonably anticipated to
exceed the amount of Seven Hundred Thousand Dollars
($700,000.00) (as evidenced by an estimate reasonably
acceptable to Buyer, prepared by Seller's civil engineer and
delivered to Buyer), then Seller, upon not less than fifteen
(15) days prior written notice to Buyer, shall have the right
to terminate this Agreement unless Buyer agrees to fund
thirty-three percent (33%) of such additional costs. For the
purposes of this Section 14.11, the costs of construction of
the Retention Basin shall not include any imputed land costs,
but shall include all construction, engineering and other
associated costs and the cost of installation of necessary
pumps, lines, or pipes and associated equipment originating at
9
<PAGE> 48
the property line of the Subject Real Property and terminating
at such Retention Basin. Seller shall also be responsible for
the installation, maintenance and repair of the necessary
lines or pipes and associated equipment originating at the
property line of the Subject Real Property and terminating at
such Retention Basin.
19. In all other respects, the Purchase Agreement, as amended
by the terms of the First Amendment, remains unchanged and in full force and
effect.
IN WITNESS WHEREOF, Buyer and Seller have executed this Second
Amendment to Agreement of Purchase and Sale as of the date set forth above.
SELLER: BUYER:
CALIFORNIA JOCKEY CLUB, PROPERTY RESOURCES, INC.,
a Delaware corporation a California corporation
By: /s/ Kjell W. Qvale By: /s/ Michael J. McCulloch
--------------------------- ----------------------------
Michael J. McCulloch
Its: Chairman Its: Executive Vice President
---------------------------
10
<PAGE> 49
EXHIBIT "B"
ENTITLEMENTS TIMETABLE
- - Complete Conceptual Site Accomplished
Plan and submit to Buyer
for approval
- - Buyer approves Conceptual Accomplished
Site Plan
- - City makes application to December 31, 1995
the State of California
Department of
Transportation for
approval to construct a
new southbound off-ramp
to Highway 101
- - Complete planning and Accomplished
design for submittal of
Entitlement
application/submit
application
- - City determines On or before December 6, 1995
application is complete
- - City selects EIR Accomplished
consultant
- - EIR consultant prepares On or before March 29, 1996
draft EIR
- - Complete public review of Sixty (60) days following completion,
draft EIR but in no event later than May 31, 1996
- - EIR consultant responds Ninety (90) days following end of public
to public comment and comment period, but in no event later
prepares final EIR than August 30, 1996
- - Planning Commission Sixty (60) days following receipt of
approves grant of final EIR, but in no event later than
Entitlements October 31, 1996
B-1
<PAGE> 50
- - City Council approves Thirty (30) days following Planning
grant of Entitlements and Commission decision, but in no event
files a notice of later than November 29, 1996
determination indicating
the certification of the
EIR
- - CalTrans approves off- November 29, 1996
ramp
- - Expiration of CEQA appeal Thirty (30) days following filing of
period Notice of Determination, but in no event
later than December 31, 1996
B-2
<PAGE> 51
THIRD AMENDMENT TO AGREEMENT OF PURCHASE AND SALE
THIS THIRD AMENDMENT TO AGREEMENT OF PURCHASE AND SALE (the
"Third Amendment") is made as of this 31st day of January, 1996, by and between
CALIFORNIA JOCKEY CLUB, a Delaware corporation ("Seller"), and PROPERTY
RESOURCES, INC., a California corporation ("Buyer").
RECITALS:
Effective as of May 31, 1995, Buyer and Seller entered into
that certain Agreement of Purchase and Sale (the "Purchase Agreement"), under
the terms of which Buyer agreed to acquire, and Seller agreed to convey, certain
real property located in San Mateo, California, as more particularly described
in the Purchase Agreement. On June 12, 1995, Buyer and Seller entered into that
certain First Amendment to Agreement of Purchase and Sale (the "First
Amendment"). On December ____, 1995, Buyer and Seller entered into that certain
Second Amendment to Agreement of Purchase and Sale (the "Second Amendment").
Buyer and Seller now desire to amend the Purchase Agreement in several respects.
NOW, THEREFORE, Buyer and Seller hereby agree as follows:
1. All defined terms as used in this Third Amendment shall
have the same meanings as set forth in the Purchase Agreement, unless otherwise
expressly set forth herein.
2. The last sentence of Section 4 of the Second Amendment is
hereby amended in its entirety to read as follows:
In accordance with Section 2.03(a) of the Purchase Agreement,
Seller shall advise Buyer, in writing, on or before February
29, 1996, whether Seller agrees to remove the exceptions
referenced in clauses (c), (d) and (e) above.
3. The Entitlements Timetable, as set forth as Exhibit "B" to
the Second Amendment, is hereby amended to provide that the date the City
determines that the Specific Plan application is complete shall be on or before
April 19, 1996.
<PAGE> 52
4. In all other respects, the Purchase Agreement, as amended
by the terms of the First Amendment and the Second Amendment, remains unchanged
and in full force and effect.
IN WITNESS WHEREOF, Buyer and Seller have executed this Third
Amendment to Agreement of Purchase and Sale as of the date set forth above.
SELLER: BUYER:
CALIFORNIA JOCKEY CLUB, a PROPERTY RESOURCES, INC., a
Delaware corporation California corporation
By: By:
--------------------------------- ------------------------
Kjell Qvale Michael J. McCulloch
Its Chairman of the Board Its Executive Vice
President
<PAGE> 53
FOURTH AMENDMENT TO AGREEMENT OF PURCHASE AND SALE
THIS FOURTH AMENDMENT TO AGREEMENT OF PURCHASE AND SALE (the "Fourth
Amendment"), is made as of this 18th day of March, 1996, by and between
CALIFORNIA JOCKEY CLUB, a Delaware corporation ("Seller"), and PROPERTY
RESOURCES, INC., a California corporation ("Buyer").
RECITALS:
Effective as of May 31, 1995, Buyer and Seller entered into that certain
Agreement of Purchase and Sale (the "Purchase Agreement"), under the terms of
which Buyer agreed to acquire, Seller agreed to convey, certain real property
located in San Mateo, California, as more particularly described in the
Purchase Agreement. On June 12, 1995, Buyer and Seller entered into that
certain First Amendment to Agreement of Purchase and Sale (the "First
Amendment"). ON December <EM>, 1995, Buyer and Seller entered into that certain
Second Amendment to Agreement of Purchase and Sale (the "Second Amendment"). On
January 31, 1996, Buyer and Seller entered into that certain Third Amendment to
Agreement of Purchase and Sale (the "Third Amendment"). Buyer and Seller now
desire to amend the Purchase Agreement in several respects.
NOW, THEREFORE, Buyer and Seller hereby agree as follows:
1. All defined terms as used in this Fourth Amendment shall have the same
meanings as set forth in the Purchase Agreement, unless otherwise expressly set
forth herein.
2. The last sentence of Section 4 of the Second Amendment is hereby amended
in its entirety to read as follows:
In accordance with Section 2.03(a) of the
Purchase Agreement, Seller shall advise Buyer,
in writing, on or before April 30, 1996, whether
Seller agrees to remove the exceptions referenced
in clauses (c), (d) and (e) above.
<PAGE> 54
3. In all other respects, the Purchase Agreement, as amended by the terms
of the First Amendment, the Second Amendment and the Third Amendment remains
unchanged and in full force and effect.
IN WITNESS WHEREOF, Buyer and Seller have executed this Fourth Amendment to
Agreement of Purchase and Sale as of the date set forth above.
SELLER: BUYER:
CALIFORNIA JOCKY CLUB, a PROPERTY RESOURCES, INC., a
Delaware corporation Delaware corporation
By: Kjell Ovale By: Michael J. McCulloch
--------------------------- ----------------------------
Kjell Ovale Michael J. McCulloch
Its Chairman of the Board Its Executive Vice President
<PAGE> 1
EXHIBIT 22
SUBSIDIARY OF THE REGISTRANTS
Bay Meadows Catering, a California corporation, is the only subsidiary of Bay
Meadows Operating Company.
California Jockey Club has no subsidiaries.
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
33-20315 of California Jockey Club and of Bay Meadows Operating Company on Form
S-8 of our report dated March 28, 1996, appearing in this Annual Report on Form
10-K of California Jockey Club and of Bay Meadows Operating Company for the year
ended December 31, 1995.
DELOITTE & TOUCHE LLP
April 9, 1996
San Francisco, California
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEET AND INCOME STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH 1995 10K.
</LEGEND>
<CIK> 0000016343
<NAME> CALIFORNIA JOCKEY CLUB AND BAY MEADOWS OPERATING COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 7,307
<SECURITIES> 8,264
<RECEIVABLES> 2,442
<ALLOWANCES> 82
<INVENTORY> 0
<CURRENT-ASSETS> 21,446
<PP&E> 36,947
<DEPRECIATION> (20,759)
<TOTAL-ASSETS> 37,935
<CURRENT-LIABILITIES> 14,828
<BONDS> 0
<COMMON> 116
0
0
<OTHER-SE> 22,991
<TOTAL-LIABILITY-AND-EQUITY> 37,935
<SALES> 2,492
<TOTAL-REVENUES> 50,709
<CGS> 856
<TOTAL-COSTS> 46,050
<OTHER-EXPENSES> 0
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