UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
---------------
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
Commission File Number 33-67738
SAM HOUSTON RACE PARK, LTD.
(Exact name of Registrant as Specified in its Charter)
TEXAS 76-0313877
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification Number)
organization)
ONE SAM HOUSTON PLACE 77064
7575 NORTH SAM HOUSTON PARKWAY (Zip Code)
WEST
HOUSTON, TEXAS
(Address of Principal
Executive Offices)
Registrant's telephone number, including area code: (281) 807-8700
Indicate by check mark whether the Registrant (1) has 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 Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes /X/ No / /
- ---------------<PAGE>
INDEX
PAGE
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at September 30, 1997 and December 31, 1996 3
Consolidated Statements of Operations for the three and nine months
ended September 30, 1997 and 1996 4
Consolidated Statements of Cash Flows for the nine months ended
September 30, 1997 and 1996 5
Condensed Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 10
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 6. Exhibits and Reports on Form 8-K 14
Signature S-1<PAGE>
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS)
<TABLE>
September December
30, 31,
1997 1996
---------- ----------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,665 $ 2,634
Restricted cash 2,969 3,559
Accounts receivable, net of allowance for
doubtful accounts of $286 and $276,
respectively 586 1,031
Prepaid expenses and other current assets 436 573
---------- ----------
Total current assets 6,656 7,797
---------- ----------
Property and equipment, net 25,672 26,140
---------- ----------
$ 32,328 $ 33,937
========== ==========
LIABILITIES AND PARTNERS' DEFICIT
Current liabilities:
Accounts payable $ 1,400 $ 1,545
Property taxes payable 906 1,194
Other liabilities 1,164 1,363
Amounts due to horsemen 1,961 2,273
Current portion of notes payable 21 81
---------- ----------
Total current liabilities 5,452 6,456
---------- ----------
Long term liabilities:
Notes payable 31,665 27,162
Deferred management fees 1,632 978
---------- ----------
Total liabilities 38,749 34,596
---------- ----------
Commitments and contingencies (Notes 1 and 6)
Partners' deficit (6,421) (659)
---------- ----------
$ 32,328 $ 33,937
========== ==========
</TABLE>
The accompanying condensed notes are an intergral part of these financial
statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
Three Months Nine Months
Ended Ended
September 30, September 30,
----------------- -----------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Pari-mutuel commissions, net $ 3,045 $ 2,844 $10,420 $ 9,414
Food and beverage sales 1,041 916 2,628 2,548
Admissions, parking and other 1,021 1,058 2,578 3,124
-------- -------- -------- --------
5,107 4,818 15,626 15,086
-------- -------- -------- --------
Costs and expenses:
Cost of pari-mutuel operations 525 469 1,387 1,309
Cost of food and beverage 483 422 1,148 1,118
operations
Other operating 598 647 1,808 1,890
Salaries and wages 2,261 2,173 6,267 6,312
Management and other 518 511 1,742 1,567
professional fees
Marketing and advertising 519 495 1,513 1,633
Utilities 313 341 870 992
Property taxes 323 316 888 949
Depreciation and amortization 228 226 689 657
General and administrative 193 234 590 721
-------- -------- -------- --------
5,961 5,834 16,902 17,148
-------- -------- -------- --------
Loss before reorganization items
and other income (expense) (854) (1,016) (1,276) (2,062)
Reorganization expenses - (41) - (85)
-------- -------- -------- --------
Loss from operations (854) (1,057) (1,276) (2,147)
Other income (expense):
Interest income 41 61 138 164
Interest expense (1,598) (1,286) (4,624) (3,723)
-------- -------- -------- --------
(1,557) (1,225) (4,486) (3,559)
-------- -------- -------- --------
Net loss $(2,411) $(2,282) $(5,762) $(5,706)
======== ======== ======== ========
</TABLE>
The accompanying condensed notes are an intergral part of these financial
statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
Nine Months Ended
September 30,
--------------
1997 1996
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (5,762) $ (5,706)
Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation and amortization 689 657
Amortization of discounts on long-term debt 1,166 436
Decrease in restricted cash 590 748
Decrease in accounts receivable 445 326
(Increase) decrease in prepaid expenses and 166 (543)
other
Increase (decrease) in accounts payable (145) 71
Increase in deferred management fees 654 559
Increase in accrued interest 3,351 3,226
Decrease in amounts due to horsemen (312) (504)
Increase (decrease) in other liabilities (487) 205
Reorganization items:
Decrease in accrued reorganization costs - (526)
--------- ---------
Net cash provided by (used for) operating 355 (1,051)
activities --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to buildings and equipment (250) (402)
--------- ---------
Net cash used for investing activities (250) (402)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable, net (74) (62)
--------- ---------
Net cash used for financing activities (74) (62)
--------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 31 (1,515)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,634 4,434
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,665 $ 2,919
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Reorganization items paid:
Professional fees $ - $ 611
</TABLE>
The accompanying condensed notes are an integral part of these financial
statements. <PAGE>
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS)
1. BASIS OF PRESENTATION AND FUTURE CASH REQUIREMENTS AND IMPACT OF
RECENT LEGISLATION
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts
of Sam Houston Race Park, Ltd. (the "Partnership"), a Texas limited
partnership, and its wholly owned subsidiary, New SHRP Capital Corp. ("New
Capital"). The Partnership operates a pari-mutuel horse racing facility
(the "Race Park"). The managing general partner of the Partnership is SHRP
General Partner, Inc. (the "Managing General Partner"), a wholly owned
subsidiary of MAXXAM Inc. ("MAXXAM"). The Partnership is also comprised of
an additional general partner, SHRP Equity, Inc. (the "Additional General
Partner") and limited partner interests. As of September 30, 1997, wholly
owned subsidiaries of MAXXAM held, directly or indirectly, a 23.7% general
partner interest (including a 22.7% interest by virtue of its ownership of
68.2% of the common stock of the Additional General Partner) and a 64.8%
limited partner interest in the Partnership.
The information contained herein is condensed from that which would
appear in the annual financial statements; accordingly, the consolidated
financial statements included herein should be reviewed in conjunction with
the consolidated financial statements and related notes thereto contained
in the Annual Report on Form 10-K filed by the Partnership with the
Securities and Exchange Commission for the fiscal year ended December 31,
1996 (the "Form 10-K"). Any capitalized terms used but not defined herein
have the same meaning given to them in the Form 10-K. Accounting
measurements at interim dates inherently involve greater reliance on
estimates than at year end. The results of operations for the interim
periods presented are not necessarily indicative of the results which can
be expected for the entire year. All significant intercompany transactions
have been eliminated in consolidation. The accompanying financial
information is unaudited; however, the information includes all adjustments
of a normal recurring nature which are, in the opinion of management,
necessary to present fairly the consolidated financial position of the
Partnership at September 30, 1997, the consolidated results of its
operations for the three and nine months ended September 30, 1997 and 1996,
and its consolidated cash flows for the nine months ended September 30,
1997 and 1996.
FUTURE CASH REQUIREMENTS AND IMPACT OF RECENT LEGISLATION
Although the Partnership has sustained substantial operating losses
since it began operations in April 1994, the reorganization of the
Partnership's principal indebtedness resulting in the issuance of the 11%
Senior Secured Extendible Notes (the "Extendible Notes") in exchange for
the 11-3/4% Senior Secured Notes (the "Original Notes") significantly
improved the Partnership's liquidity by providing for the deferral of cash
interest payments until certain conditions are met. Additionally, the
payment of management fees is deferred until two consecutive interest
payments on the Extendible Notes have been paid in cash. The Partnership
continues to project a loss from operations for the foreseeable future. At
September 30, 1997, the Partnership had cash and cash equivalents of $2,665
and a $1,700 line of credit which management believes will be adequate to
fund the operating activities of the Partnership for at least the next
year.
Management is continuing to undertake marketing efforts to increase
attendance and pari-mutuel handle at the Race Park in order to generate
additional income. Also, in accordance with the strategy established
during the reorganization of the Partnership, management undertook
significant legislative efforts attempting to legalize additional forms of
gaming at the Race Park in order to increase revenues. However, the 1997
Texas Legislature did not consider legislation permitting any additional
form of gaming at Class 1 horse racing facilities. Legislation authorizing
additional forms of gaming cannot be presented until the Texas legislature
convenes again in January of 1999. The Partnership has not decided on its
future course of action with respect to legislative initiatives, and there
can be no assurance that gaming legislation favorable to the Partnership
will be enacted in the future.
During the 1997 session of the Texas Legislature, the Texas Racing Act
was amended to, among other things, increase the pari-mutuel wagering tax
on guest simulcasting from 1% to 1.25%. The legislation also authorized
cross-breed simulcasting between horse tracks and greyhound tracks at Texas
pari-mutuel facilities. These provisions became effective on September 1,
1997. The Partnership estimates that the increased wagering tax on guest
simulcasting will decrease net pari-mutuel commissions by approximately
$200 per year based on the current level of guest wagering. While the
long-term net impact of cross-breed simulcasting cannot be determined with
certainty, the Partnership believes that it may have a negative overall
impact on the Partnership's share of pari-mutuel commissions generated from
on-track wagering due to the presence of a greyhound track in the greater
Houston market area that will now be able to directly compete with the
Partnership for horse racing customers. Additionally, the legislation
includes provisions to increase the purse allocation from guest
simulcasting and to eliminate the pari-mutuel wagering tax on the first
$100,000 wagered on live racing. These provisions are not effective until
January 1, 1999. The Partnership estimates that when these additional
provisions become effective, the Partnership's net pari-mutuel commissions
will decrease by approximately $1,000 annually based on current levels of
wagering.
To the extent the remaining cash and line of credit are not sufficient
to support the cash flow requirements of the Partnership, alternative
sources of funding will be necessary. Although 68.2% of the Extendible
Notes are owned by MAXXAM, the Partnership is still required to retire the
Extendible Notes and related accrued interest on September 1, 2001, unless
the applicable extension provisions apply. To the extent the Partnership
is unable to generate sufficient cash flows from operations to meet these
additional obligations or the Partnership is unable to refinance the
Extendible Notes, alternative sources of funding will be necessary. There
can be no assurance that the Partnership will be able to refinance the
Extendible Notes or that alternative sources of funding will be available
to the Partnership, if needed.
2. RESTRICTED CASH
The Partnership's restricted cash, as shown on the accompanying
consolidated balance sheet at September 30, 1997 and December 31, 1996,
includes deposits held for the benefit of horsemen for purses, stakes and
awards and amounts reserved for the payment of property taxes.
3. PARI-MUTUEL OPERATIONS
The Race Park offers pari-mutuel wagering on live thoroughbred or
quarter horse racing during meets and simulcast racing throughout the year.
The Race Park earns revenues on live racing and on simulcasting racing as
both a guest and host track. Under the Racing Act, the Partnership's net
commission revenue on live racing is a designated portion of the pari-
mutuel handle. The Race Park receives broadcasts of live racing from other
racetracks under various guest simulcasting agreements and provides
broadcasts of live racing conducted at the Race Park to other wagering
outlets under various host simulcasting agreements. Under these
agreements, the Partnership receives pari-mutuel commissions of varying
percentages of simulcast pari-mutuel handle.
A summary of the pari-mutuel operations for the three and nine months
ended September 30, 1997 and 1996 is as follows:
<TABLE>
Three Months Nine Months
Ended Ended
September 30, September 30,
----------------- -----------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Number of live race days 47 38 125
102
Live handle $ 5,938 $ 5,200 $17,099 $ 18,528
Guest simulcasting handle 23,035 22,267 70,251 66,684
Host simulcasting handle 14,577 8,022 105,914 67,685
-------- -------- -------- --------
$43,550 $ 35,489 $193,264 $152,897
======== ======== ======== ========
Net commissions from live $ 696 $ 609 $ 2,020 $ 2,190
racing
Net commissions from guest 2,072 2,085 6,277 6,140
simulcasting
Net commissions from host 277 150 2,123 1,084
simulcasting -------- -------- -------- --------
$ 3,045 $ 2,844 $10,420 $ 9,414
======== ======== ======== ========
</TABLE>
<PAGE>
4. NOTES PAYABLE
Notes payable consist of the following:
<TABLE>
September December
30, 31,
1997 1996
----------- -----------
(Unaudited)
<S> <C> <C>
11% Senior Secured Extendible Notes due
September 1, 2001 (net of unamortized
discount of $15,383 in 1997 and $16,549 in
1996) $ 29,003 $ 25,770
Accrued interest to be paid in-kind 2,441 1,157
----------- -----------
31,444 26,927
Unsecured promissory notes 208 240
Equipment leases 11 53
Payable to Limited Partners 23 23
----------- -----------
Total 31,686 27,243
Less current portion (21) (81)
----------- -----------
$ 31,665 $ 27,162
=========== ===========
</TABLE>
The Partnership is amortizing the difference between the aggregate
principal amount of the Extendible Notes and their estimated fair value as
of the implementation of the reorganization of the Partnership as
additional interest expense using the effective interest method.
The Extendible Notes are non-recourse to the partners; however, they are
secured by virtually all of the Partnership's property, including rents,
revenues, profits and income from the operation of the Race Park. In
addition, the Class 1 racing license for the Race Park is subject to a
negative pledge in favor of the trustee for the Extendible Notes.
5. RELATED PARTY TRANSACTIONS
Management and other professional fees include $188 for the three months
ended September 30, 1997 and 1996, respectively, and $563 for the nine
months ended September 30, 1997 and 1996, respectively, in management fees
due to the Managing General Partner. Payment of management fees is
deferred until two consecutive interest payments on the Extendible Notes
have been paid in cash; accordingly, these fees have been shown on the
accompanying consolidated balance sheet as deferred management fees under
long-term liabilities.
The Partnership incurred service fees and related costs of $92 and $159
for the three months ended September 30, 1997 and 1996, respectively, and
$343 and $504 for the nine months ended September 30, 1997 and 1996,
respectively, related to the costs incurred for services provided by MAXXAM
and certain of its subsidiaries. The Partnership also incurred fees of $12
and $32 during the three months ended September 30, 1997 and 1996,
respectively, and $147 and $100 for the nine months ended September 30,
1997 and 1996, respectively, for legal and other consulting services
performed by other affiliates.
6. CONTINGENCIES
The Partnership is involved in claims and litigation arising in the
ordinary course of business. While uncertainties are inherent in the final
outcome of such matters and it is presently impossible to determine the
actual costs that ultimately may be incurred, management believes that the
resolution of such uncertainties and the incurrence of such costs should
not have a material adverse effect upon the Partnership's consolidated
financial position, results of operations or liquidity.
Also, see Note 1 for a discussion of the future cash requirements of the
Partnership.<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
THE RESULTS OF OPERATIONS
The following should be read in conjunction with the unaudited
consolidated financial statements contained elsewhere herein and in the
Form 10-K. Any capitalized terms used but not defined herein have the same
meaning given to them in the Form 10-K.
This section contains statements which constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform
Act of 1995. Such statements can be identified by the use of forward-
looking terminology such as "believes," "expects," "may," "estimates,"
"will," "should," "plans" or "anticipates" or the negative thereof or other
variations thereof or comparable terminology, or by discussions of
strategy. Readers are cautioned that any such forward-looking statements
are not guarantees of future performance and involve significant risks and
uncertainties, and that actual results may vary materially from those in
the forward-looking statements as a result of various factors. These
factors include the effectiveness of management's strategies and decisions,
general economic and business conditions, new or modified statutory or
regulatory requirements, and changing prices and market conditions. This
section and the Partnership's Form 10-K identify other factors that could
cause such differences. No assurance can be given that these are all of
the factors that could cause actual results to vary materially from the
forward-looking statements.
RESULTS OF OPERATIONS
Results of operations between periods are generally not comparable due
to the timing, varying lengths and types of racing meets held; accordingly,
results of operations for interim periods are not necessarily indicative of
the results which can be expected for the entire year.
The following table presents selected attendance and wagering
information for the three and nine months ended September 30, 1997 and
1996:
<TABLE>
Three Months Nine Months
Ended Ended
September 30, September 30,
----------------- -----------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Number of live race days 47 38 125 102
Number of simulcast only days 45 54 148 172
Average daily attendance - live 3,666 3,972 3,149 3,772
race days
Average daily attendance - 574 678 669 725
simulcast days
Average live and guest per
capita gross wager - live
race days $ 124 $ 118 $ 147 $ 138
Average guest per capita gross
wager - simulcast days 299 265 300 257
(Amounts in thousands)
Live handle $ 5,938 $ 5,200 $ 17,099 $ 18,528
Guest simulcasting handle 23,035 22,267 70,251 66,684
Host simulcasting handle 14,577 8,022 105,914 67,685
-------- -------- -------- --------
$43,550 $ 35,489 $193,264 $152,897
======== ======== ======== ========
Net commissions from live $ 696 $ 609 $ 2,020 $ 2,190
racing
Net commissions from guest 2,072 2,085 6,277 6,140
simulcasting
Net commissions from host 277 150 2,123 1,084
simulcasting -------- -------- -------- --------
Total net pari-mutuel $ 3,045 $ 2,844 $ 10,420 $ 9,414
commissions ======== ======== ======== ========
</TABLE>
Revenues. The Partnership's principal source of revenue is from pari-
mutuel commissions generated on live races and simulcast races as both a
guest and host track. The increase in the number of live race days during
the three months ended September 30, 1997 resulted in an increase in live
handle and commissions and host simulcasting handle and commissions
compared to the three months ended September 30, 1996. The average daily
attendance on live race days decreased during the three month period
compared to the same three month period in 1996. The 1997 results include
live racing on Thursdays through Sundays, whereas the 1996 results include
live racing on Friday through Sunday only. Live racing on Thursdays
generates lower average daily attendance than weekend race days. In
addition, net pari-mutuel commissions from host simulcasting increased due
to an increase in the number of race tracks and off-track wagering
facilities receiving the Partnership's Quarter Horse simulcast signal and
the new host fee arrangement which became effective January 1, 1997 under
the contract between the Partnership and the recognized horsemen's
organization. Although guest simulcasting handle increased slightly during
the three months ended September 30, 1997 compared to the three months
ended September 30, 1996, net pari-mutuel commissions decreased slightly as
a percentage of guest handle due to an increase in the allocation to purses
held for future winning horsemen in accordance with the contract between
the Partnership and the recognized horsemen's organization which became
effective on January 1, 1997 and an increase in the pari-mutuel wagering
tax from 1% to 1.25% which became effective September 1, 1997.
During the nine months ended September 30, 1997, net pari-mutuel
commissions from live racing decreased compared to the nine months ended
September 30, 1996 primarily due to lower average daily attendance and a
decrease in the live per capita wager on live race days. The decrease in
average daily attendance was partially due to unusually heavy rainfall
during the spring Thoroughbred meet, which negatively impacted attendance
on live race days and the addition of Wednesday racing during the spring
Thoroughbred meet and Thursday racing during the summer Quarter Horse meet,
both of which generate lower average daily attendance than weekend race
days. Net pari-mutuel commissions from host simulcasting increased by 91%
during the nine months ended September 30, 1997 as compared to the nine
months ended September 30, 1996 due to a number of factors, including an
increase in the number of live race days during the nine month period, an
increase in the number of race tracks and off-track facilities receiving
the Partnership's simulcast signal and the new host fee arrangement
explained above. Net pari-mutuel commissions from guest simulcasting
increased in total for the nine month period ended September 30, 1997
compared to the nine month period ended September 30, 1996, however, net
pari-mutuel commissions from guest simulcasting as a percentage of guest
handle decreased slightly due to the increase in the allocation to purses
discussed above and the increase in the pari-mutuel wagering tax.
Food and beverage revenues increased during the three and nine months
ended September 30, 1997 compared to the same periods of 1996 due to an
increase in the number of live race days. Other revenues for the three
months ended September 30, 1997 were comparable to those for the three
months ended September 30, 1996. Other revenues for the nine months ended
September 30, 1997 decreased from those of the comparable period as
revenues from additional race days were offset by a decrease in revenues
from the sales of luxury suites and sponsorships.
Loss from Operations. The loss from operations for the three and nine
months ended September 30, 1997 was an improvement from that of the
comparable periods of 1996 due to an increase in revenues, primarily from
net pari-mutuel commissions discussed above. Costs and expenses for the
three months ended September 30, 1997 increased from those of the
comparable period in 1996 due to the nine additional race days during the
period. Costs and expenses for the nine month period decreased as
management continued to focus on reducing expenditures associated with
operating the Race Park. Management and other professional fees for the
nine months ended September 30, 1997 were above those of the comparable
period of 1996 due to the costs associated with the legislative efforts
discussed below and in Note 1 to the Consolidated Financial Statements.
Net loss. Net loss reflects the loss from operations as described
above, interest income and interest expense, including amortization of the
discount on the Extendible Notes. Interest expense increased during the
three and nine month periods ended September 30, 1997 as compared to the
prior periods due to the continuing increase in the balance of Entendible
Notes as accrued interest is paid in-kind with additional Extendible Notes.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1997, the Partnership had cash and cash equivalents of
$2.7 million compared to $2.6 million at December 31, 1996. At September
30, 1997, the Partnership also had restricted cash of $3.0 million compared
to $3.6 million at December 31, 1996. The decline in restricted cash is
due to the annual payment of property taxes in the first quarter along with
the payment of amounts due to horsemen for purses, stakes and awards
related to the spring thoroughbred meet and summer quarter horse meet. The
balance of Extendible Notes has increased during the nine months ended
September 30, 1997 due to the issuance of additional Extendible Notes as
payment in-kind for accrued interest and the amortization of the discount
on the Extendible Notes as described in Note 4 to the Consolidated
Financial Statements included in Item 1.
See Note 1 to the Consolidated Financial Statements for a discussion of
the future cash requirements of the Partnership.
LEGISLATIVE RESULTS
During the 1997 legislative session, the Texas Racing Act was amended
to, among other things, change the structure of the Texas Racing Commission
(the "TRC"), increase the regulatory and enforcement powers of the TRC and
increase the pari-mutuel wagering tax on guest simulcasting from 1% to
1.25%. The Partnership estimates that the increased wagering tax on guest
simulcasting which became effective on September 1, 1997, will decrease net
pari-mutuel commissions by approximately $200,000 per year based on the
current level of guest wagering. The legislation also included provisions
to increase the purse allocation from guest simulcasting and to eliminate
the pari-mutuel wagering tax on the first $100 million wagered on live
racing. These provisions are effective as of January 1, 1999. The
Partnership estimates that when all of the provisions listed above become
effective, the Partnership's net pari-mutuel commissions will decrease by
approximately $1 million annually based on current levels of wagering.
Additionally, the bill authorized cross-breed simulcasting at Texas
pari-mutuel facilities, which will allow greyhound tracks to display and
accept wagers on races at horse tracks and horse tracks to display and
accept wagers on races at greyhound tracks. This provision became effective
on September 1, 1997 and the greyhound track located in the greater Houston
market area began displaying and accepting wagers on horse races.
Management is currently evaluating the economic impact of providing
broadcasts of live racing conducted at the Race Park to one or more in-
state greyhound tracks. While the long-term net impact of cross-breed
simulcasting cannot be determined with certainty, the Partnership believes
that it may have a negative overall impact on the Partnership's share of
pari-mutuel commissions generated from on-track wagering as the greyhound
track in the greater Houston market area will now be able to directly
compete with the Partnership for horse racing customers. Under the
commission sharing agreement stipulated in the Texas Racing Act, the Race
Park receives a fee of 1.5% of handle on horse races accepted at the
greyhound track. Management is continuing to undertake efforts to
negotiate a more favorable commission sharing agreement with the greyhound
track. In addition, the Race Park has initiated a lawsuit in federal
court, as described in Part II., Item 1., "Legal Proceedings" attempting
to prevent implementation of these cross-breed simulcasting provisions. To
date, the Race Park has not begun simulcasting greyhound races pending the
results of an appeal of the federal lawsuit and continuing negotiations
with the greyhound track.
During the 1997 Texas legislative session, legislation was introduced in
the House and Senate that would have allowed card games (i.e. poker and
blackjack) at Class 1 horse racing facilities. This legislation was
supported by the Partnership; however, neither this legislation nor any
other gaming legislation had the widespread support of the pari-mutuel
horse racing industry. While the Partnership undertook a significant
lobbying effort, the legislation did not receive a committee hearing.
Moreover, the Texas Legislature did not consider legislation permitting any
other form of gaming at Class 1 horse racing facilities. Legislation
authorizing additional forms of gaming cannot be presented until the Texas
legislature convenes again in January of 1999. The Partnership has not
decided on its future course of action with respect to legislative
initiatives, and there can be no assurance that gaming legislation will be
enacted in the future or, if gaming legislation is enacted, that it will be
favorable to the Partnership.<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On August 19, 1997, the Partnership filed an action, entitled Sam
Houston Race Park, Ltd. v. Dan Morales, et al., Civil Action No. H-97-2817,
seeking a declaratory judgment against the Texas Racing Commission in the
United States District Court for the Southern District of Texas, Houston
Division. This lawsuit asserts that the Federal Interstate Horse Racing
Act preempts the cross-breed simulcasting provisions included in the
amendments to the Texas Racing Act recently enacted by the Texas
Legislature. The Partnership requested a preliminary injunction to prevent
the greyhound track in the greater Houston market area from displaying and
accepting wagers on horse races. This request was denied by the court. On
October 10, 1997, the Partnership filed its notice of appeal of the denial
with the United States Court of Appeals for the Fifth Circuit.
The Partnership is involved in various claims, lawsuits and other
proceedings. While uncertainties are inherent in the final outcome of such
matters and it is presently impossible to determine the actual costs that
ultimately may be incurred, management believes that the resolution of such
uncertainties and the incurrence of such costs should not have a material
adverse effect on the Partnership's consolidated financial position,
results of operations or liquidity.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS:
10.1 Totalisator Services Agreement dated September 8, 1997
between the Partnership and Autotote Systems, Inc.
B. REPORTS ON FORM 8-K:
None. <PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, who has
signed this report on behalf of the Registrant and as the principal
financial and accounting officer of the Registrant.
SAM HOUSTON RACE PARK, LTD.
Date: November 13, 1997 By: /S/ MICHAEL J. VITEK
----------------------------------
Michael J. Vitek
Vice President of Accounting<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's consolidated balance sheet and consolidated statement of operations
and is qualified in its entirety by reference to such consolidated financial
statements together with the related footnotes thereto.
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 2665
<SECURITIES> 0
<RECEIVABLES> 872
<ALLOWANCES> 286
<INVENTORY> 0
<CURRENT-ASSETS> 6656
<PP&E> 25672
<DEPRECIATION> 0
<TOTAL-ASSETS> 32328
<CURRENT-LIABILITIES> 5452
<BONDS> 31665
0
0
<COMMON> 0
<OTHER-SE> (6421)
<TOTAL-LIABILITY-AND-EQUITY> 32328
<SALES> 0
<TOTAL-REVENUES> 5107
<CGS> 0
<TOTAL-COSTS> 5961
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1598
<INCOME-PRETAX> (2411)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2411)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2411)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
AUTOTOTE SERVICES AGREEMENT
INDEX
Section Page
1 - Furnishing of System(s) and Service(s) 1
2 - Owner Responsibilities 1
3 - Installation 1
4 - Price(s) and Payment 2
5 - Term 2
6 - Special Termination 2
7 - Warranty 3
8 - Patent Infringement 3
9 - Force Majeure 4
10 - Ownership Right and Confidential Information 4
11 - Limitation of Liability 4
12 - Indemnity 5
13 - Default 5
14 - Arbitration and Remedies 6
15 - Responsibilities 7
16 - Entire Agreement 7
17 - Waiver 7
18 - Assignment 7
19 - Notice 7
20 - Removal of Equipment 8
21 - Governing Law 8
EXHIBITS
A - Owner Activity EX-1
B - System(s) EX-2
B-1 - Line Printer Reports EX-5
C - Autotote Maintenance Obligations EX-6
D - Owner Responsibilities EX-7
E - Installation EX-12
F - Price Structure EX-13
F-1 - ITW and DTI Services EX-14
F-2 - Permanent Installation Materials Provided by EX-15
G - Certain Liabilities EX-16
<PAGE>
SERVICES AGREEMENT
Agreement dated September 8, 1997, by and between Autotote
Systems, Inc., a Delaware corporation ( Autotote ) and Sam
Houston Race Park, Ltd. ( Owner ).
WHEREAS, Owner operates a facility known as Sam Houston Race
Park, Houston, Texas (the Facility ) for the conduct on its
premises of the activity specified in Exhibit A and requires
certain services of Autotote in connection with the establishment
and operation of services that are described in this Agreement
( Services ) at the Facility; and
WHEREAS, AUTOTOTE desires to furnish certain equipment
( Equipment ), labor and the software ( Software ) required to
perform the Services called for by this Agreement (collectively
the System ), all as described in Exhibit B.
NOW, THEREFORE, in consideration of the premises and the
mutual convenants hereinafter set forth, the parties hereto agree
as follows:
SECTION 1 FURNISHING OF SYSTEM AND SERVICES
(a) Subject to the terms and conditions of this Agreement,
Autotote agrees to operate and maintain the System at the
Facility on all days on which licensed racing/simulcasting is
being conducted at the Facility during the term of this
Agreement. Owner agrees to exclusively employ Autotote to
perform the Services during the term of this Agreement. The
parties may agree to install portions of the System at other
locations and such locations shall be deemed included within
Facility ; such agreement shall not be unreasonably withheld by
either party.
(b) In connection with such Services, Autotote agrees to
maintain the System at the Facility, including furnishing the
items described in Exhibit B.
(c) All rights, title and ownership interest in and to the
System shall at all times remain with Autotote and the System
shall remain in the possession and under the direct control of
Autotote. Owner grants Autotote unimpeded access to any System
at any time and shall permit the removal by Autotote of the
portable parts of the System when not required to provide
Services at the Facility.
(d) Autotote shall be responsible for compliance with all of
its obligations set forth on Exhibit C attached hereto and made a
part hereof.
SECTION 2 OWNER RESPONSIBILITIES. Owner shall be
responsible for the items described in Exhibit D.<PAGE>
SECTION 3 INSTALLATION. Owner agrees to perform in a good
and workmanlike manner all of the acts required to be performed
by Owner as set forth in the applicable provisions of and
exhibits to this Agreement. Autotote acknowledges Owner s
performance of this section, with respect to the installation
prior to the date hereof.
SECTION 4 PRICE(S) AND PAYMENT.
(a) Owner agrees to pay Autotote as provided in Exhibit F.
(b) Any charges for work done by Autotote under any section of
this Agreement, or for additional material or equipment supplied
by Autotote in accordance with order(s) of Owner or his agent,
shall be considered as amounts due to Autotote from Owner in
accordance with Exhibit F.
(c) If it becomes necessary for Autotote to undertake work or
activities, or purchase or install equipment or materials, which
herein are made the obligations of Owner, in order to insure
Autotote s proper performance of the Agreement, then any costs
incurred by Autotote as a result of such work, activities,
purchases, or installations shall be considered as amounts due to
Autotote from Owner in accordance with Exhibit F.
(d) Autotote may refuse to provide Services hereunder for so
long as any failure of Owner to pay bonafide amounts due
hereunder continues for (10) days after Owner receives notice
from Autotote that amounts due have not been paid, and Autotote
may terminate this Agreement and be relieved and discharged from
any and all further responsibility, liability or obligation
hereunder.
SECTION 5 TERM. This Agreement shall be in full force and
effect as of January 1, 1998 and for a period of seven (7) years
ending December 31, 2004, unless sooner terminated as provided
herein.
If, during the term of this Agreement, Owner gains the
legislative authority to conduct video gaming at the Facility,
Autotote will forward a proposal to include Probe XLC video
gaming terminals. If the proposal were to be accepted by Owner
in its sole discretion, the remaining term of the Agreement would
be allowed to expire upon commencement of a new Agreement that
includes the Probe XLC equipment.
SECTION 6 SPECIAL TERMINATION. In the event that wagering
at the facility shall be prohibited or become illegal by statute
or court decision or by action of cognizant governmental agency,
the period of this Agreement shall be deemed to have terminated
as of the date of such prohibition or cessation of such legal
wagering, but without prejudice to the rights of either party up
to the date of termination; provided, however, that in the event
the prohibition or cessation of legal wagering is removed and<PAGE>
racing on the abovementioned premises becomes legal, this
Agreement shall be returned to force intact, subject to
availability of personnel and equipment, for the unused balance
of the term of the Agreement. Upon termination, Autotote shall
have the right to remove its personnel, materials and equipment
from the Facility.
After a period of two (2) years after the effective date of this
Agreement, Owner may elect to cease its pari-mutuel operations at
the Facility without incurring liquidated damages pursuant to
Section 13 (c), provided, however, that in the event pari-mutuel
operation is resumed, this Agreement shall be returned to force
intact, subject to availability of personnel and equipment, for
the unused balance of the term of this Agreement.
SECTION 7 WARRANTY
(a) Autotote warrants that the System delivered and
installed hereunder shall be suitable for betting in accordance
with provisions for the Texas Racing Act and rules and
regulations of the Texas Racing Commission and that it will
operate efficiently and without interruption on all wagering days
for the term of this Agreement; provided, however, that there
shall not be deemed to be a breach of the foregoing guarantee and
warranty if wagering is interrupted for less than thirty (30)
minutes on any racing day, or if any interruption in the function
of any component part or unit of the System takes place which
does not prevent the efficient operation of wagering on any
wagering day, or if not more than ten percent (10%) of the ticket
issuing machines fail to operate at any time on any wagering day,
or if the failure of the System to operate efficiently or without
interruption shall be due to or result from one or more of the
causes enumerated in Section 9 hereof, or the wilfull misconduct
or gross negligence of Owner its agents or employees, or of any
third party, or for any other cause not within the control of
Autotote and/or its employees. Notwithstanding the above, if
more than 5 such interruptions occur per calendar year during the
term of the contract, the default provisions of Section 13 shall
herein apply.
(b) THE WARRANTIES AND REMEDIES SET FORTH IN THIS AGREEMENT
SHALL EXTEND ONLY TO OWNER, ARE THE SOLE AND EXCLUSIVE WARRANTIES
AND REMEDIES AVAILABLE TO OWNER, APPLY TO ALL EQUIPMENT AND
SOFTWARE FURNISHED THEREUNDER AND ARE EXPRESSLY MADE IN LIEU OF
ALL OTHER WARRANTIES, EXPRESS, IMPLIED, OR STATUTORY, INCLUDING,
WITHOUT LIMITATION, THE WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE
(c) Liquidated damage obligations of Autotote constitute the
sole and exclusive remedy of Owner concerning performance by
Autotote or the System or any part thereof relating to the
Services, and are specified in Exhibit G.
SECTION 8 PATENT INFRINGEMENT<PAGE>
(a) Autotote agrees to defend at its own cost and expense
all patent claims or patent litigation (including any claim for
damages or royalties which may be made or instituted against
Owner, or to which Owner may be a party), based upon or by reason
of the installation and operation of the System, uncombined with
any equipment or device not furnished by Autotote, and to
indemnify and save Owner harmless against any damages or
liability incurred or sustained by Owner by reason of any such
claim or litigation. Owner shall notify Autotote promptly in
writing of any claim of infringement for which Autotote is
responsible, shall cooperate with Autotote in every reasonable
way to facilitate the defense of any such claim and shall allow
Autotote to have sole control of the defense of any such claim,
suit or cause of action and all negotiations for the settlement
or compromise thereof. Should any System part thereof become or
in Autotote s opinion be likely to become the subject of a claim
for infringement, Autotote shall at its own expense and option,
either procure for Owner the right to continue using such System
or replace the same with a non-infringing system or modify the
System so that it becomes non-infringing or require the System s
return; provided, however, if Equipment is replaced or modified
such replacements or modifications shall result in equally
suitable substitute equipment. This Section shall survive
cancellation or termination of this Agreement.
(b) THE FOREGOING STATES THE SOLE AND EXCLUSIVE LIABILITY OF
THE PARTIES HERETO FOR INFRINGEMENT OR THE LIKE OF PATENTS,
TRADEMARKS AND COPYRIGHTS, WHETHER DIRECT OR CONTRIBUTORY, AND IS
IN LIEU OF ALL WARRANTIES, EXPRESS, IMPLIED OR STATUTORY IN
REGARD THERETO, INCLUDING WITHOUT LIMITATION, THE WARRANTY
AGAINST INFRINGEMENT SPECIFIED IN THE UNIFORM COMMERCIAL CODE.
SECTION 9 FORCE MAJEURE. Non-performance of any of the
obligations of Autotote or Owner (other than payment obligations)
hereunder due to delays from any cause beyond their respective
control which could not by reasonable diligence have been
avoided, including any act of governmental authority, act of God,
accident such as fire, or explosion, strike or other labor
difficulties, riot, failure of transportation facilities,
shortage of fuel or other material shortage, shall be excusable
delay and shall not be a breach of this Agreement. Neither Owner
nor Autotote shall be liable to the other for any additional cost
as a result of any such delay.
SECTION 10 OWNERSHIP RIGHTS AND CONFIDENTIAL
INFORMATION. All information, know-how, equipment, programming,
software, trademarks, trade secrets, plans, drawings,
specifications and documentation of Autotote, and all other
property of Autotote, real or personal, tangible or intangible,
of any nature whatsoever, used or developed in the course of the
performance of this Agreement, including, without limitation, the
Equipment and Software furnished with the System, shall be and
remain the sole property of Autotote and neither Owner nor any<PAGE>
other party shall have any interest therein. Owner and Autotote
shall in all respects honor and maintain the confidentiality of
any confidential or proprietary information as may be disclosed
by one party to the other, and shall not use or disclose to
others any such information, except for purposes of performing
this Agreement. For purposes of this section, Autotote shall
include its respective subsidiaries and affiliates. Confidential
Information shall not include information in the public domain,
rightfully acquired from a third party, already known or
independently developed without breach of this Agreement.
SECTION 11 LIMITATION OF LIABILITY. EXCEPT AS
SPECIFICALLY PROVIDED FOR HEREIN, IN NO EVENT SHALL AUTOTOTE BE
LIABLE FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES. IN NO EVENT
SHALL AUTOTOTE S LIABILITY HEREUNDER FOR BREACH OF ANY PROVISION
OF THIS AGREEMENT (OTHER THAN WARRANTY AGAINST PATENT
INFRINGEMENT), EXCEED THE SPECIFIC LIQUIDATED DAMAGE AMOUNT
PROVIDED IN THIS AGREEMENT PLUS ANY SPECIFIC OBLIGATIONS PROVIDED
IN THIS AGREEMENT TO INDEMNIFY FOR THIRD PARTY CLAIMS.
SECTION 12 INDEMNITY
(a) Autotote shall indemnify and hold Owner harmless against
any loss, liability, costs or expenses (including reasonable
attorney s fees) arising out of or related to claims and suits
for damages to person or property which may be instituted against
Owner, or to which Owner may be made a party, arising out of or
by reason of the Services provided herein by Autotote, including
actions by Autotote, its agents, servants and employees.
Autotote shall have the right to exercise full control of all
negotiations and litigation in connection therewith, including
selection of counsel, and shall not be liable for any costs or
expenses incurred by Owner without Autotote s prior written
approval, nor shall Autotote be responsible for any claim or
litigation based on equipment not furnished by Autotote as part
of its Services hereunder.
(B) Owner will indemnify and hold Autotote harmless against
any loss, liability, costs or expenses (including reasonable
attorney s fees) arising out of or related to claims or suits for
damages to persons or property resulting from the operation of
the wagering by agents and employees of Owner. Owner shall have
the right to exercise full control of all negotiations and
litigation in connection therewith, including selection of
counsel and shall not be liable for any costs or expenses
incurred by Autotote without Owner s prior written approval.
SECTION 13 DEFAULT.
(a) In the event that Autotote shall default in the
performance of any provision of this Agreement on its part to be
performed (except a breach by Autotote of the provisions of
Section 7 and Section 2 of Exhibit G hereof as to which the<PAGE>
provisions of said paragraphs shall apply) and such default shall
not be cured within a period of twenty (20) days after written
notice shall have been received by Autotote specifying such
default, then Owner may terminate this Agreement by delivering to
Autotote written notice of such termination; and in the event of
any such termination Autotote, at its expense, shall remove its
personnel, materials and equipment from the Facility.
(b) In the event that Owner shall default in the performance
of any provisions of this Agreement on its part to be performed
(except a breach by Owner of the provisions of Section 3 of
Exhibit G hereof as to which the provisions of said paragraphs
shall apply) and such default shall not be cured within a period
of twenty (20) days after notice shall have been given by
Autotote to Owner specifying such default, then Autotote may
terminate this Agreement by delivering to Owner written notice of
such termination; and in the event of any such termination
Autotote shall remove its personnel, materials and equipment from
the Facility, and the cost of such removal shall be paid for by
Owner.
(c) If any of the said sums of money due Autotote under this
Agreement are not promptly and fully paid when the same
individually or severally become due and payable and after
written notice from Autotote and the expiration of Owner s twenty
(20) day cure period, or if (except if Owner continues to pay
under the terms of this Agreement) Owner becomes insolvent,
ceases to do business as a going concern, a petition in
bankruptcy or for arrangement or reorganization be filed by or
against Owner, the materials or equipment provided by Autotote be
attached at no fault of Autotote, or a receiver be appointed for
Owner, and as a result thereof Autotote elects to terminate this
Agreement pursuant to Section 13 (b) then the aggregate sum of
the minimum annual amount specified in Section 3 of Exhibit F
remaining to be paid for the first two (2) years of the term of
this Agreement up to a maximum of Two Hundred Thousand dollars
($200,000) as liquidated damages, shall become due and payable
forthwith, or thereafter at the option of Autotote, as fully and
completely as if the said amounts were originally stipulated as
due prior to such time, anything in this Agreement herein to the
contrary notwithstanding. The sum of Two Hundred Thousand
dollars ($200,000) in liquidated damages as aforementioned shall
be reduced by $8,333.33 for each month, up to a total of twenty
four (24) months, Owner has conducted racing and used the System.
In any of said events Autotote is authorized and empowered to
enter the premises of Owner or other place where Autotote s
materials and equipment may be and resume possession of the same
without notice or demand or without legal process, such notice
and demand being expressly waived, and Autotote may at its
option, by suit or otherwise, enforce payment of all due
obligations, plus interest and reasonable attorney s fees, and no
suit or legal proceedings with respect thereto shall be deemed
any waiver of said rights of Autotote to exercise possession of
said property as herein provided.<PAGE>
(d) Notwithstanding anything to the contrary contained in
this Agreement, if the Totalisator System (i) does not function
so as to comply with provisions of the Texas Racing Act and rules
and regulations of the Texas Racing Commission, or (ii) does not
provide the services and functions required for satisfactory
operations for a comparable Class 1" racing facility, then in
such event Owner may terminate this Agreement within twenty (20)
days after written notice is delivered to Autotote and Autotote
has failed to cure such default. However, once notice has been
given as to a particular default under this paragraph, no notice
will be required for a similar default in the future, and Owner
will be entitled to terminate without further notice. In the
event of any termination, Autotote, at its expense, shall remove
its personnel, materials and equipment from the Facility.
Notwithstanding the above, no termination shall occur hereunder
unless Autotote shall have been given twenty (20) days to effect
a cure as provided for in section 13(a).
SECTION 14 ARBITRATION AND REMEDIES.
(a) Any controversy or claim not settled by the parties
arising out of or relating to this contract, or the breach
thereof, shall be settled by arbitration in accordance with the
Rules of the American Arbitration Association, and judgment upon
the award rendered by the Arbitration(s) may be entered in any
Court having jurisdiction there.
(b) The remedies expressly provided in this Agreement for
breach thereof by Autotote or Owner shall constitute the sole and
exclusive remedies to the aggrieved party, and all other remedies
which might be otherwise available under the law of any
jurisdiction are hereby waived by both Autotote and Owner.
SECTION 15 RESPONSIBILITIES. All persons employed by
each party and assigned to perform work specified by this
Agreement shall be employees or representatives of each party at
all times and not of the other party, and shall be under the
supervision and control of their respective company. Each party
shall obey and abide by all social security, workman s
compensation, and unemployment laws which shall be applicable to
the persons performing the work hereunder.
SECTION 16 ENTIRE AGREEMENT. This Agreement, including
the Exhibits annexed hereto, contains the entire agreement
between Autotote and Owner, and no prior written or oral
representations, inducements, agreements, promises or
understandings altering, modifying, taking from or adding to its
terms and conditions shall have any force or effect; and no
waiver or modification hereof shall be effective unless the same
is in writing and validly executed by the party to be charged
Each of the parties hereby confirms that it is not placing any
reliance on any convenant, representation or warranty of the
other party, whether oral or in writing, express or implied,<PAGE>
except those herein set forth.
SECTION 17 WAIVER. The Waiver by either party of any
right hereunder shall not be deemed a waiver of any other right
hereunder.
SECTION 18 ASSIGNMENT. Neither party shall, without the
prior written consent of the other party (which consent shall not
be unreasonably withheld) assign this Agreement or delegate its
duties hereunder in whole or part; provided, however, Owner
agrees to any assignment Autotote may make for the purpose of
obtaining financing with a prime institution on the strength of
this Agreement and Autotote hereby agrees that Owner, without
negating its liability, may assign to any entity or person who
shall acquire or succeed to ownership of the license granted to
Owner by the Texas Racing Commission to own and operate the
Facility, including any non-profit entity into which Owner may
merge. All of the terms and conditions of this Agreement shall
be binding upon and inure to the benefit of any transferee,
successor or permitted assign of either party hereto.
SECTION 19 NOTICE. All notices to be given to Autotote
shall be sent through the United Postal Service by Registered or
Certified mail, return receipt requested, to Autotote at 100
Bellevue Rd., P.O. Box 6009, Newark, Delaware 19714 or to such
address as Autotote shall specify in writing to Owner. All
notices to be given to Owner shall be sent through the United
States Postal Services or Certified mail, return receipt
requested, to Owner at Sam Houston Race Park, Ltd., 5847 San
Felipe, Suite 2600, Houston, Texas 77057, with a copy to P.O. Box
2323, Houston, Texas 77252-2323, attention Robert L. Bork, Senior
Vice President and General Manager, or to such other address as
Owner shall specify in writing to Autotote.
SECTION 20 REMOVAL OF EQUIPMENT. Upon termination of
this Agreement as hereinbefore provided, or upon expiration
hereof, Autotote, at its own expense, may remove from the
premises of Owner, the System and appurtenant portable and
permanent equipment and materials furnished by Autotote.
SECTION 21 GOVERNING LAW. This Agreement shall be
governed by the internal laws of the State of system
installation.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
SAM HOUSTON RACE PARK , LTD. AUTOTOTE SYSTEMS,
INC.
( OWNER ) ( AUTOTOTE )<PAGE>
By: /s/ Robert L. Bork By: /s/ Gerald Lawrence
------------------ -------------------------
Robert L. Bork, Senior VP and GM Gerald Lawrence,President
<PAGE>
EXHIBIT A
OWNER ACTIVITY
Activity of Owner: Pari-Mutuel Wagering
Services shall commence no sooner than (1) hour prior to
scheduled post time for the first race, live and or simulcasting
and shall be exclusively limited (unless otherwise agreed) to a
maximum of eighteen (18) hours per day, seven days a week (such
betting period being defined as Performance ).
EXHIBIT B
SYSTEM(S)
The System shall calculate odds, wagers and pay-offs of
wagers at the Facility and the display of such information.
Autotote shall be under no obligation to furnish equipment or
services in excess of the quantities specified in this Agreement,
unless and until an agreement in writing is executed by the
parties providing for such additional equipment.<PAGE>
The System shall consist of:
Autotrak II Sell/Cash Totalisator System consisting of:
Digital VAX Computers
Disk Units
Mag Tape Units
Board Control Units
Color Video Channels
High Speed Line Printers
Consoles
Logging Printers
Tote Control Desk
Communication Controller for Terminals
Up to 130 Smart Probe Sell/Cash Terminals, 25 Sams in a Can
and 75 SAM head modules (with requisite smart or dumb Probe
Terminals)(with Brander and Bet Slip Reader in all
terminals)
Lampboxs and associated equipment required for present
infield display board for the live racing season only
(including auxiliary odds boards )
Magnetic Tape Storage Cabinet w/set of Magnetic Tapes to
store History of Performances for One Full Season, or other
time period required by the Texas Racing Commission
Motorola Beeper System with Beepers
Autotrak II Sell/Cash software
Uninterrupted Power Supply (UPS) for Computer Room
50 VDC 100 Amp Motor Generators
AUTOTOTE RESERVES THE RIGHT TO SUBSTITUTE EQUIVALENT FUNCTION
COMPONENTS IN PLACE OF ANY OF THE ABOVE ITEMS.<PAGE>
The System shall have the following minimum capabilities:
1. The central totalisator system shall accurately total
the amounts wagered in all pools in Autotote s standard U.S. on-
track/ITW/OTB pari-mutuel wagering program. It shall provide a
record of all such totals and be capable of transmitting to the
appropriate display board at regular intervals the data presently
prescribed for display on such board. The system shall be
capable of performing the following functions:
A) Accepting wagers on a maximum of sixteen (16) runners per
live/simulcast race in each of the pools referred to in paragraph
1 above and posting said numbers, results and prices to the
fieldboard.
B) Accepting wagers in any integral multiple of $1 to a
maximum of $1,000.
C) Accepting and storing wagers on each race and pool held
or operated at the site from the time of opening of pari-mutuel
wagering at the site on the day such race or pool is held or
operated, and ending at the time of closing of pari-mutuel
wagering for such race or pool. Also, accepting and storing
wagers for any one future race or performance on specified pools
up until the time of closing of wagering for such future race or
performance.
D) Providing those reports listed in Exhibit B-1 attached
hereto.
E) Providing for an accounting of outstanding live tickets
as an integral part of the system during the racing season in
which such outstanding tickets were purchased. At the conclusion
of such racing season, Autotote shall deliver to OWNER such
listing of outstanding tickets listing serial number, date of
purchases, bet details and value of each such ticket.
F) Canceling any ticket prior to the close of wagering of
the race for which the ticket was purchased, and reducing the
appropriate pool or pools by the amount(s) so wagered.
G) Provide for the display of live wagering information on
the fieldboard.
H) Making available up to six (6) channels of color video
output to racetrack closed-circuit TV supplier for use over such
network.<PAGE>
EXHIBIT B-1"
LINE PRINTER REPORTS
The following reports are provided:
CYCLIC REPORTS (Totals, Odds, Probable Pays)
REFUNDS REPORT
RESULTS AND DIVIDENDS REPORTS
PRICE CALCULATION REPORTS
WILL-PAYS REPORTS
TELLER BANK BALANCE REPORT
FINAL TELLER BALANCE REPORTS (with Overs and Shorts)
WINDOW BALANCE REPORTS
WINDOW ALLOCATION REPORTS
PERFORMANCE POOL TOTALS REPORT
PERFORMANCE SALES SUMMARY REPORT
SALES SUMMARY REPORTS (by Pool)
IRS REPORT
CASHED TICKETS REPORT
UNCASHED TICKETS REPORT
CASHING SUMMARY REPORTS (All Cashing Activity)
PERFORMANCE PARAMETERS REPORT
BETTING ACTIVITY BREAKDOWN BY BET TYPE AND TICKET COUNT
WINDOW TRANSACTION REPORTS
HISTORY REPORTS
Supplied if Applicable:
ADVANCE POOL TOTALS REPORTS
PURGED TICKETS REPORT (Overage unpaid winners)
FUTURE DAY POOLS REPORT
FUTURE DAY BETTING SUMMARY REPORT
Teller Histories will be supplied on request for up to an average
of three (3) tellers per performance. Charges will be billed for
Autotote s labor for all Teller Histories in excess of that
amount.<PAGE>
EXHIBIT C
AUTOTOTE MAINTENANCE OBLIGATIONS
(a) Maintaining in an efficient operating condition during the
term of this Agreement, all frames, switches, accessories, wires,
interconnecting cables and other portable equipment necessary for
the operation of the System which are to be supplied by Autotote
(provided, that failure of any one or more of these items shall
not be construed as a failure of the System, nor shall Autotote
have any liability because of such failure except as provided in
item 2 of Exhibit G).
(b) Should additions to the services be necessary after the
initial permanent installation of the System Autotote shall
furnish all necessary DC and signal installation materials and
equipment required for the electrical installation of the Tote
room, the selling lines and in the public display board, the cost
of such materials shall be borne by Owner at competitive prices
in effect at the time of delivery.
(c) To provide, at Autotote s expense, the necessary high speed
printer paper and logging teleprinter paper as may be required
for use with the System. Betting slips and other stationary
supplies as may be required for use with totalisator system shall
be for Owner s account at the competitive prices in effect at the
time of delivery.
(d) To notify Owner of new or improved services perfected by
Autotote and to implement changes in the services provided
hereunder to reflect such of the new or improved services as
Owner may desire, provided that Owner shall pay for all such
modifications and changes provided by Autotote at the cost no
greater than that offered Autotote s largest customers, in
addition to the sums payable under Exhibit F.
(e) To furnish and maintain at the Facility on each wagering day
the personnel necessary for Autotote to perform the Services,
including operating the central controls and maintaining the
System in efficient operating condition, as described in Exhibit
A and A-1.
(f) To maintain adequate fire insurance, theft, vandalism and
riot insurance coverage on the System and on all ancillary
materials and equipment which are required by Autotote in order
to perform the services, and which are the property of Autotote.
(g) To carry workers Compensation insurance on its own employees.
To carry public liability insurance in an amount of $10,000,000
coverage on its own equipment and the System and name Owner as
additional insured. Autotote will provide Owner with a
certificate of insurance identifying Owner.
(h) To furnish all necessary ticket paper for the Sell/Cash<PAGE>
terminals.<PAGE>
EXHIBIT D
OWNER RESPONSIBILITIES
(a) Owner, in accordance with instructions furnished by Autotote,
shall provide:
(i) The security Owner deems necessary to protect the physical
safety of the System against injury from any cause whatsoever
(including, but not limited to, trespass, damage, interference by
other persons or cannibalism).
(ii) Adequate electrical power for the proper operation of the
System. For this purpose incoming power lines having sufficient
capacity shall be brought from the local utility to the Tote
room, the selling lines, and the display board, and distributed
and terminated at locations as specified by Autotote.
(iii) A Tote room of sufficient size to house and permit the
maintenance of the central control equipment in a secure manner
with an efficient layout, free from dampness and reasonably free
from dust, with necessary air conditioning, suitable lighting and
with adequate entrances capable of being secured so to limit
access to such control room.
(iv) Teller windows having ticket counters of sufficient size and
structural strength to accommodate Autotote s ticket issuing
machines in areas reasonably free from dust and dirt.
(v) A fieldboard structure sufficiently secure and with adequate
ventilation, interior lighting and AC electric power to permit
the accommodation and satisfactory operation of fieldboard
display equipment.
(vi) Adequate and appropriate facilities, under the exclusive
control of and reasonably satisfactory to Autotote for proper
maintenance of its materials and equipment and for the safe and
secure storage of ticket paper and other supplies.
(vii) Adequate and appropriate rest rooms, convenient free
parking, and other facilities for Autotote s personnel on a par
with facilities provided for other similar level personnel
employed by Owner at the Facility.
(b) After the initial permanent System installation, Owner will
furnish, at its expense, all necessary labor required for
requested additions to the installation of the System agreed to
by Owner, which labor includes the laying, pulling, connecting
and terminating of all necessary cables, terminals, switches,
junction boxes, and other similar material, as required in the
Tote room, display boards, ticket selling lines, judges and/or
stewards locations, mutuel manager and head banker locations,
which services shall be performed in accordance with Autotote s
specifications, provided if the changes are required because the
System is not performing to the standards provided in this <PAGE>
Agreement, Autotote shall pay those costs.
(c) Owner shall accept shipment of, store, and care for at its
risk, sufficient terminal printer ribbons and Ticket materials
furnished by Autotote for one Season. Owner agrees to pay for
any special Ticket paper that it requests Autotote to provide,
and shall accept the same in Autotote s then current minimum
quantities and at Autotote s then current prices.
(d) Owner shall ensure that its employees who are engaged in the
cashing of tickets conform to the procedures prescribed by
Autotote and to exercise reasonable care in the examination and
determination of the genuineness of tickets presented for
cashing.
(e) Owner shall notify Autotote in writing of the racing days
allotted to it by the appropriate governmental authority each
year during the term of this Agreement at least sixty (60) days
prior to the start of such racing days and will not change,
without good cause such dates including the number of
performances, including matinees (two (2) performances on one (1)
day) if applicable, and the beginning and closing dates of any
performances. Autotote shall have the right to remove any of its
personnel, materials and equipment at anytime during the term of
this Agreement when wagering is not scheduled at the Facility
and is not expected to resume for more than twenty one (21) days,
but no removal shall in any way effect Autotote s obligation,
subject to sixty (60) days written notice except as provided
herein, to return the necessary materials and equipment and
reinstitute the Services for operation on all wagering days at
the facility, provided such wagering days fall within the
beginning and closing dates of any performances as previously
notified and herein specified. If during any scheduled racing
period wagering does not, for any reason other than a default by
Autotote, commence as scheduled, or having commenced, is
interrupted and is expected to continue for more than twenty one
(21) days, Autotote shall have the right to remove its personnel,
materials and equipment from the Facility. In such case Autotote
shall be obligated to reinstate the Services at the Facility so
as not to delay the commencement of wagering after receipt by
Autotote of written notice that wagering is to commence or resume
and the original closing date of the performances may at Owner s
option, be extended by the number of performances that wagering
did not take place in accordance with the original schedule.
(f) Owner shall cooperate in every way with Autotote in the
installation and operation of the System and to make available to
Autotote such facilities as may be required to perform the
necessary System testing operations, provided that the same not
intercede with normal operations.
(g) Owner shall render such investigative assistance to Autotote
as Autotote may reasonably request in connection with discovering
the source of counterfeit Tickets.<PAGE>
<PAGE>
(h) Owner shall make, at its own expense, such additions or
alterations to its own premises as may be necessary for the
installation and operation of the System and reasonably agreed to
by Owner. If the proposed modification is not made, Autotote
shall not be liable to Owner for any damages as a result of the
failure to make such modification. Owner shall pay all costs of
any alterations in or additions to the Facility or the permanent
equipment (other than equipment to be furnished by Autotote)
installed at, or renovations to, the Facility that are reasonably
required in order to permit the installation of the System, and
for any necessary replacement of cables therefore purchased, or
required to be furnished pursuant to this Agreement, unless
replacement is necessitated by the negligence or misconduct of
Autotote, by Owner. Owner shall provide Autotote with written
notice of the desired alterations, additions or replacements not
less than ninety (90) days prior to the date said alterations,
additions or replacements are to be completed. Such
alternations, additions or replacements shall not exceed the
capacity of the System. In carrying out its undertaking
hereunder, Owner may be required to provide new structures or
housing for the materials and equipment utilized by Autotote in
performing the Services hereunder, or to alter its existing
structures or housing for such purpose. In such event, it will
furnish at its expense, all materials and labor required for such
structures or housing in accordance with specifications supplied
by Autotote, including opening and closing walls, floors or
ceilings, clean-up and disposition of refuse, and repair of any
damage to buildings, grounds, track, plantings, etc. caused by
installation, provided such damage was not caused by negligence
of Autotote.
(i) During the term of this Agreement, Owner, at its own cost and
expense, shall procure and keep in force all permits and licenses
required by law that are necessary in order to permit it to
conduct licensed events at the Facility and to discharge its
obligations under this Agreement and shall comply with all
applicable laws and regulations.
(j) Owner will keep proper records and books of accounts and make
true and complete entries therein of all appropriate information
relating to the operation of wagering at the Facility.
(k) Owner will pay the cost of any alterations in or additions to
the Services, including programming changes, as may hereafter be
desired by Owner, and such alterations, if practicable, will be
made by Autotote promptly after receipt from Owner of its written
request therefor and at a cost no greater than that offered
Autotote s largest customers.
(l) Owner will furnish, at its own expense, an adequate staff of
paper changers, tellers, mutuel personnel and any other personnel
as are required in connection with the operation of the wagering
at the Facility, except for the personnel to be furnished by
Autotote. Owner s paper changers, tellers, mutuel personnel and<PAGE>
any other personnel will operate the terminals strictly in
accordance with Autotote s instructions, will account as required
to Autotote s Manager at the Facility for all rolls of ticket
paper and will not otherwise attempt to handle or operate the
System.
(m) Owner will afford Autotote and its duly authorized agents or
representatives access at all reasonable times to the buildings
and premises at the Facility and will permit Autotote and such
agents or representatives to inspect during each wagering day and
at all other reasonable times the record sheets. Books of
account and other relevant information kept by Owner with respect
to the operation of wagering at the Facility and will furnish
Autotote with duplicate copies of all sheets required by it to
verify the operation of the wagering, including the mutuel s
recapitulation sheets, ticket summary sheets and any other
pertinent records, which shall be kept confidential by Autotote.
(n) Owner will not use the System for any purpose other than as
specified in this Agreement and will not permit any part of the
System to be removed from the Facility by persons other than
agents or employees of Autotote.
(o) Owner will, at its expense, furnish electricians to maintain
and service the electric power facilities required to be
furnished by Owner as provided in subsection (a)(ii).
(p) Owner will take, at its expense, all necessary measures to
keep the System materials and equipment kept by Autotote at the
Facility free from any restraint, levy, execution or seizure or
other process of law arising from any acts or omissions of Owner
or its agents(s) or representative(s) which would in any way
impair the title of Autotote to such System, materials and
equipment or possession or repossession thereof when permitted
under this Agreement. At Autotote s request, it will provide
Autotote with a waiver of landlord s lien.
(q) Owner will comply with all rules, laws, ordinances and lawful
requirements of every government, county, state or municipality,
department, bureau or board which may arise out of or in
connection with the possession, use and/or operation of wagering
at the Facility including fire insurance underwriters
requirements. Owner shall also furnish, at its expense, the
safety devices needed to comply with such requirements.
(r) Owner will maintain and furnish to Autotote a list of persons
authorized to have access to any room or structure housing any
part of the System, which list shall specify the particular
position to which each such person is assigned and the place or
location of employment, the persons to which each such person is<PAGE>
assigned and the place or location of employment, the persons on
such list being subject to the approval of Autotote, which
approval shall not be unreasonably withheld. It will not permit
access to the Tote room or fieldboard by any unauthorized
persons and Autotote shall cooperate. Owner and Autotote each
agrees to indemnify the other for damagesor loss to Autotote
caused as a result of access to the secured areas having been
given by Owner or its employees or agents or Autotote or its
employees or agents.<PAGE>
(s) Owner agrees to assist Autotote in establishing a System hub
at Sam Houston Race Park and to cooperate and provide assistance
to tracks and OTBs remotely connected to the hub, including, but
not limited to, sharing communications costs, providing the
downloading of simulcast and live program information, training
personnel and providing access to host racetracks through Sam
Houston Race Park simulcast contracts.
(t) Owner releases Autotote from any obligations to purchase box
seats at Sam Houston Race Park.
(u) Owner agrees to release fifteen (15) smart Probes from the
amounts committed to by Autotote on Exhibit B. Autotote agrees
to resupply said terminals to Owner for use on Kentucky Derby
Day, Breeder s Cup Day, the Fourth of July, the Texas Day of
Champions, Connally Cup Day and Mystery Voucher Day. The parties
agree to review terminal inventory annually to adjust said
inventory as attendance and wagering levels warrant.
<PAGE>
EXHIBIT E
INSTALLATION
INTENTIONALLY LEFT BLANK<PAGE>
EXHIBIT F
PRICE STRUCTURE
1. Owner agrees to pay
(a) .0045 of up to $100 million of all gross monies wagered
annually;
(b) .0040 of all gross monies above $100 million wagered
annually;
(c) In the event the annual handle is less than $100 million
in any year during the term of this Agreement, Owner will
pay to Autotote a fee of .0050 of all gross monies wagered
in the following year. If during this following year the
gross monies wagered is less than $100 million, Owner will
pay to Autotote a fee of .0050 of all gross monies wagered
in the following year and for every successive year during
the term of this Agreement during which the previous year
the gross monies wagered is less than $100 million. If in
such successive year the gross monies wagered exceeds $100
million, the fee will return to that described in (a) and
(b) above for the year following.
(d) Fifteen dollars ($15) per week for each SAM head module
or Sam in a Can with a minimum of 100 such terminals or such
greater amout as requested by Owner. Each additional SAM
head or Sam in a Can will also be Fifteen dollars ($15) per
week.
2. Autotote will provide Intertrack-Wagering ( ITW ), Direct
Track Interface ( DTI ) and interface services to Owner as
further described in Exhibit F-1.
3. All amounts due shall be payable weekly without deduction not
later than Friday of the following week. If all amounts are not
paid within fourteen (14) days after the due date, interest at
the rate of one and one half percent (1 1/2%) per month or to the
extent allowed by law if less, starting from the day immediately
following the due date shall be imposed on such amounts. Said
default interest rate shall apply with respect to all amounts due
under the Agreement.
4. Autotote agrees that if any other Autotote customer within
the State of Texas obtains an agreement for a Totalisator System
that is more favorable in either price or conditions than is
provided Owner under this Agreement, Autotote will amend this
Agreement to meet the best of those prices or conditions
effective immediately.<PAGE>
EXHIBIT F-1
ITW AND DTI SERVICES
a. Inter-Track Wagering (ITW) For Racing at
Facility (Host Racetrack).
Autotote will provide ITW services to Owner for ITW common
pool pari-mutuel wagering on races conducted at Owner s
Facility. For this DTI service Autotote is to be paid
.00125 of all monies accepted in Autotote s Totalisator
system through DTI from out of state guest or other in state
guest racetracks, such amount to be invoiced to and paid by
guest racetracks (except any other track sharing the hub
with Owner). In no manner is Sam Houston to be liable for
said fees described in this section.
B. Direct Track Interface (DTI) From Owner s Racetrack
(Guest Racetrack) For Pari-mutuel Wagering on Racing at
Remote Racetracks.
Autotote shall provide totalisator services utilizing its
computer programs, equipment and personnel for pari-mutuel
wagering conducted at Owner s racetrack on races conducted
at remote racetracks. For this service Owner agrees to pay
to Autotote .00125 of all monies wagered at Sam Houston Race
Park on other Autotote remote racetracks, except any other
track sharing the hub with Owner. This fee (.00125) is in
addition to the Performance rate described in Exhibit F.<PAGE>
EXHIBIT F-2
LIST OF INITIAL PERMANENT INSTALLATION EQUIPMENT PROVIDED
BY AUTOTOTE FOR INITIAL TOTALISATOR INSTALLATION
INTENTIONALLY LEFT BLANK
EXHIBIT G
CERTAIN LIABILITIES
1. Autotote shall reimburse Owner for all amounts which
Owner shall be required to disburse by reasons of errors
made by Autotote or its employees or its equipment other
than as provided for in Section 7(a) of the Agreement and
Section 2 of Exhibit G, provided however that in arriving at
the amount, if any, to be reimbursed, Autotote shall receive
credit for all like overages and, provided further that<PAGE>
Autotote shall not be required to make a reimbursement if
any error is due to gross negligence or wilfull misconduct
of Owner or any of its employees, the State or any of its
employees, or acts of other parties for whom Autotote is not
responsible, and provided further that Autotote shall not be
required to reimburse Owner for any errors regardless of
cause in pools in which winning tickets in a prior division
of the pool are exchanged for tickets in a subsequent
division of that pool. The limitation of liability
contained in Section 2 hereof, applies to this section.
2. If the failure of the System to operate efficiently or
without interruption shall be due to any acts other than
those enumerated or referred to by reference in Section 7 of
the Agreement, or other than as a result of the failure of
Owner to perform its obligations hereunder, then Owner shall
be entitled to liquidated damages in an amount to be
calculated as follows: five percent (5%) of the difference
between the amount of money handled on the day of such
interruption and the amount of money handled on a comparable
day during the current race meeting; in the event there is
no comparable day in the current race meeting, then the
amount to be paid by Autotote to Owner shall be five percent
(5%) of the difference between the amount of money handled
on a comparable race day of the season immediately
preceding. In no event shall Autotote be obligated to pay
to Owner a sum exceeding:
(i) One Hundred Thousand dollars ($100,000) in respect
of any live/simulcasting racing day, or
(ii) Five Hundred Thousand dollars ($500,000) in
respect of any year during the term of this Agreement.
If Owner enforces a claim for damages it will be entitled to
receive interest from fourteen (14) days after the due date
at two (2%) per month or the highest lawful rate of
interest, whichever is the lower amount and reasonable
attorney fees.<PAGE>
3. If at any time during the term of this Agreement, any
kind of a tax, license, duty, commission or fee shall be
imposed upon or levied or assessed against Autotote by any
governmental or other authority, or on the installation, use
or the Services provided under this Agreement, or the
receipt of monies hereunder, Owner agrees to pay to Autotote
an amount equivalent thereto, together with any penalties or
interest assessed thereon, such payment to be made by Owner
as and when such tax or fee is assessed. If Owner fails to
pay any such amounts as aforesaid, then Owner shall be
charged interest at the rate of one and one half percent (1
1/2%) per month or to the extent allowed by law if less,
starting from the day after the due date, and Autotote may,
by fourteen (14) days prior written notice to Owner,
terminate this Agreement and be relieved and discharged from
any and all further responsibility, liability, or
obligations hereunder. In the event Autotote terminates
the Agreement as provided herein, Owner shall remain liable
as aforesaid for payment of such tax or fee, and any penalty
or interest accrued thereon, or if Autotote fails to contest
the validity of any such tax or fee after written demand by
Owner, Owner, at its expense, may contest the validity
thereof in the name of Autotote. Nothing herein contained
shall make Owner responsible for federal, state or municipal
income taxes of Autotote by reason of the receipt of
payments hereunder, franchise fees or state and local
property taxes applicable to Autotote equipment at Owner s
Facility. If, by reason of its use of the Services provided
by Autotote under this Agreement, Owner is assessed or has
imposed or levied upon it any tax or fee by any governmental
authority, Owner agrees to pay such taxes or fees directly
to the appropriate taxing authority and also agree to
provide to Autotote, from time to time as required by
Autotote, documentation as proof that such taxes or fees
have been paid.
4. Autotote shall not be liable either directly,
indirectly or consequentially for any counterfeit, altered,
or illegally printed tickets, unless Autotote or its agents
are negligent in accepting same. Autotote shall be liable,
however, for all amounts as branded by the Sell/Cash
Terminals on any counterfeit, altered, or illegally printed
tickets on which the branded serial number digits are
identical to those of such tickets. However, Autotote shall
not be liable for such counterfeit, altered, or illegally
printed tickets arising out of wilfull misconduct or
negligence by Owner or its employees or agents, or by
wilfull misconduct or negligent failure of Owner to provide
proper security.<PAGE>
