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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999 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 organization) Identification Number)
ONE SAM HOUSTON PLACE 77064
7575 NORTH SAM HOUSTON PARKWAY WEST (Zip Code)
HOUSTON, TEXAS
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (281) 807-8700
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Securities registered pursuant to Section 12(b) of the Act:
None.
Securities registered pursuant to Section 12(g) of the Act:
None.
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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 | |
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TABLE OF CONTENTS
PART I
Item 1. Business
General
Industry Overview
Racing Schedules
Sources of Revenue
Purses and Horsemen's Agreements
Marketing and Business Development
Competition
Seasonality of Racing
Employees
Regulation and Taxation
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matter to a Vote of Security Holders
PART II
Item 5. Stockholder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Report of Independent Certified Public Accountants
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Partners' Deficit
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
PART III
Item 10. Directors and Executive Officers
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
PART IV
Item 14. Exhibits, Financial Statements Schedules, and Reports on Form 8-K
SAM HOUSTON RACE PARK, LTD.
PART I
ITEM 1. BUSINESS
GENERAL
Sam Houston Race Park, Ltd., a Texas limited partnership (the
"PARTNERSHIP"), owns and operates Sam Houston Race Park, a Class 1 horse racing
facility located within the greater Houston metropolitan area (the "RACE PARK").
The Race Park offers pari-mutuel wagering on live thoroughbred and quarter horse
racing and on horse and greyhound races simulcast from other racetracks. 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 December 31, 1999, various wholly owned subsidiaries of MAXXAM
held, directly or indirectly, an aggregate of 98.9% of the equity in the
Partnership and 99.0% of the Partnership's 11% Senior Secured Extendible Notes
(the "EXTENDIBLE NOTES").
This Annual Report on Form 10-K contains statements which constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements appear in the sections to this
Item entitled "Sources of Revenue-Simulcasting," "--Marketing and Business
Development," "--Competition" and "--Regulation and Taxation-Regulations on
Simulcasting" and "--Taxation." These statements also appear in a number of
other places (see Item 3. "Legal Proceedings," Item 5. "Stockholder Matters" and
Item 7. "Management's Discussion and Analysis of Financial Condition and Results
of Operations--Results of Operations," and "--Liquidity and Capital Resources").
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 thereon 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
report identifies 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.
INDUSTRY OVERVIEW
Pari-mutuel wagering is pooled wagering, under which bettors wager against
each other, not the racetrack. Wagering pools are regular wagering pools,
multiple two wagering pools and multiple three or more wagering pools. Examples
of regular wagers include win (a wager on a specific horse to finish first),
place (a wager on a specific horse to finish first or second) and show (a wager
on a specific horse to finish first, second or third). Examples of multiple two
wagers include daily double (a wager in which the bettor selects the horses that
will win two separate races), quinella (a wager in which the bettor selects the
horses that will finish first and second, in any order) and exacta (a wager in
which the bettor selects the horses that will finish first and second, in the
correct order). Examples of multiple three or more wagers include trifecta (a
wager in which the bettor selects the horses that will finish first, second and
third, in order), superfecta (a wager in which the bettor selects the horses
that will finish first, second, third and fourth, in order), and the pick three
(a wager in which the bettor selects the winner of three consecutive races). A
computerized totalisator system is used to total the amounts wagered and
calculate the payouts for each pool based on the amounts wagered on various
horses and on the possible outcomes.
Pari-mutuel wagering is conducted in a majority of states in the United
States and all provinces in Canada. The industry includes racetracks which
conduct thoroughbred, quarter horse, harness and greyhound racing and off-track
wagering facilities which receive simulcast broadcasts from various racetracks
but do not conduct live racing. Off-track wagering is regulated by the
individual states in the United States and is not legal in Texas and certain
other states. Simulcasting is the process by which live races held at one racing
facility are broadcast simultaneously to other locations at which additional
wagers may be placed on the race being broadcast. Guest simulcasting is the
process whereby the Race Park receives broadcasts from other racetracks. Host
simulcasting is the process whereby other racetracks receive broadcasts from the
Race Park. Simulcasting is regulated by individual states in the United States
and is authorized in Texas but is not currently authorized in all states.
For every dollar wagered at the Race Park, a percentage, as defined by
state law, is returned to the winning bettors, and the remaining percentage,
referred to as the "takeout," is collected by the racetrack. As discussed in
more detail below, a percentage of the takeout is reserved for purses to be paid
to the owners of future winning horses or greyhounds, as fees and taxes to the
state of Texas and as contributions to organizations whose purpose is the
furtherance of horse breeding in Texas. The takeout remaining after these
deductions is retained by the racetrack and constitutes the racetrack's primary
source of revenue. The Partnership's Consolidated Financial Statements and Notes
thereto appearing in Item 8 contain additional information regarding the
Partnership's revenues and costs of pari-mutuel operations.
RACING SCHEDULES
The Race Park currently conducts live thoroughbred or quarter horse racing
four days a week during meets and conducts simulcasting seven days a week year
round. The Texas Racing Commission (the "RACING COMMISSION") must approve the
number of live race days that may be offered at the Race Park each year. The
number and scheduling of race days at the Race Park depends upon a number of
factors, including scheduling of live race days at other Texas Class 1 horse
racing facilities. Under the Rules of Racing for the state of Texas (the "RULES
OF RACING"), Class 1 racetracks may not have overlapping live race schedules for
the same breed of horse with other Class 1 racetracks unless each track with
overlapping schedules consents. The Racing Commission has licensed two other
Class 1 horse racetracks: Retama Park near San Antonio and Lone Star Park at
Grand Prairie near Dallas.
The Race Park conducted 134 days of live racing during 1999, consisting of
90 days of thoroughbred racing and 44 days of quarter horse racing. For the 2000
calendar year, the Race Park has obtained approval to conduct live racing on 136
days consisting of (i) 57 days of thoroughbred racing beginning on January 1,
2000 and concluding on April 9, 2000, (ii) 45 days of quarter horse racing
beginning on June 30, 2000 and concluding on September 10, 2000 and (iii) 34
days of thoroughbred racing beginning on November 2, 2000 and concluding on
December 30, 2000. The Race Park has not yet determined what race dates it will
request in 2001 and years thereafter. The Race Park also expects to continue
offering simulcast wagering 364 days a year.
SOURCES OF REVENUE
Wagering on Live Races
The Texas Racing Act (the "RACING ACT") provides for the takeout
percentage on live races depending on the type of wager. The total takeouts are
approximately 18%, 21% and 25% from regular wagering pools, multiple two
wagering pools and multiple three or more wagering pools, respectively. The
Racing Act also provides that a minimum of 7% of all live regular wagering pools
and live multiple two wagering pools and a minimum of 8.5% of all live multiple
three wagering pools be reserved for purses to be paid to the owners of future
winning horses. Furthermore, through December 31, 1998, the state of Texas
received 1% of the first $100 million wagered on live racing at each racetrack
each year (plus higher percentages for wagering over $100 million). Subsequent
to December 31, 1998, this tax was eliminated on the first $100 million wagered.
Finally, 1% of live multiple wagering pools is required to be set aside for
Texas horse breeding programs. During 1999, the Race Park retained, on the first
$100 million wagered on live horse racing, 11% of regular wagers, 13% of wagers
involving two horses and 15.5% of wagers involving three or more horses after
giving effect to the foregoing payments. The betting patterns experienced by the
Race Park during its operating history have averaged approximately 38%, 28% and
34% of dollars wagered in the regular, multiple two and multiple three or more
wagering pools, respectively.
Simulcasting
The Race Park currently offers guest simulcast wagering on horse races
seven days a week throughout the year and intends to continue doing so. As of
March 1, 2000, the Race Park had agreements with approximately 50 racetracks
pursuant to which it, at various times, receives simulcast signals. The maximum
takeout percentages on guest simulcast racing broadcasts from Texas racetracks
are the same as those for live racing. The takeout percentages on guest
simulcast racing broadcasts from out-of-state tracks are established by each
state but are generally within a few percentage points of the takeout
percentages in Texas. The Race Park sets aside amounts from each wagering pool
for purses to be paid to the owners of future winning horses in varying amounts.
See "Purses and Horsemen's Agreements" below. Furthermore, as of September 1,
1997, the Racing Act required the allocation of 1.25% of all simulcast wagering
pools for the state of Texas, 0.25% for the state of Texas for funds previously
appropriated to administer and enforce the Racing Act, and 1% of all simulcast
multiple wagering pools for Texas horse breeding programs. As of January 1,
1999, the allocation to the state of Texas was reduced by .25% to 1.0%.
Effective July 9, 1999, the 0.25% to the state of Texas was eliminated. The Race
Park also pays broadcasting racetracks a fee which averages approximately 3% of
the amount wagered by its patrons on the broadcast races. After giving effect to
the foregoing, the Race Park receives net commissions normally ranging from 6%
to 10% on guest simulcast betting at the Race Park.
The Race Park also began offering guest simulcast wagering on greyhound
races during March 1998 under cross-breed simulcasting provisions contained in
the amendments to the Racing Act enacted during the 1997 legislative session
(the "1997 AMENDMENTS"). Wagering on greyhound signals accounted for 19.4% of
the guest wagering handle and 15.3% of total net-pari mutuel commissions for
1999.
The maximum takeout percentages on cross-breed simulcast racing broadcast
from Texas racetracks and out-of-state racetracks are approximately equal to
those percentages used for horse racing described above. Under the 1997
Amendments, 5.5% of each wagering pool was set aside for greyhound purses.
Effective January 11, 2000, the rate for interstate greyhound wagering pools was
reduced by 0.5% to 5.0% for greyhound purses and an additional 1% was allocated
to horse purses. In addition, the 1997 Amendments required the allocation of
1.5% of all simulcast wagering pools for the state of Texas, 0.25% for the state
of Texas for funds previously appropriated to administer and enforce the Racing
Act and 1% of all simulcast multiple wagering pools for Texas greyhound breeding
programs. As of January 1, 1999, the 1.5% allocation for the state of Texas was
reduced to 1.25%. Effective July 9, 1999, the 0.25% to the state of Texas was
eliminated. Also, the Race Park receives 1.5% of wagering on out-of-state horse
racing placed at the greyhound track located in the greater Houston metropolitan
area ("GULF GREYHOUND"). The Race Park is required to pay 1.5% of amounts
wagered on out-of-state greyhound tracks to Gulf Greyhound. Broadcasting race
tracks are paid a fee by the Race Park that normally ranges from 2.5% to 3.0% of
amounts wagered. After giving effect to the foregoing, the Race Park expects to
receive net commissions normally ranging from 8% to 14% on cross-breed simulcast
wagering at the Race Park.
The Race Park receives commissions from host simulcasting averaging
approximately 3% of the amount wagered at the receiving track on the Race Park's
races. A portion of this fee is reserved for purses to be paid to the owners of
future winning horses, as described in "Purses and Horsemen's Agreements" below.
The Race Park also receives 4.5% of the amount wagered at greyhound tracks
located in Texas on races conducted at the Race Park which is to be reserved for
purses. Through September 30, 2000, the Race Park also receives 80% of the purse
funds generated from interstate wagering on horse racing at greyhound tracks
located in Texas under a ruling by the Texas Racing Commission. Such ruling may
remain in effect or be revised for periods subsequent to September 30, 2000. As
of March 1, 2000, the Race Park had agreements with approximately 246 racetracks
and off-track wagering outlets pursuant to which the Race Park, at various
times, broadcasts its races.
Simulcasting is an important component of the Race Park's revenues. Guest
simulcasting and host simulcasting accounted for approximately 60% and 22%, 64%
and 20%, and 63% and 20%, respectively, of the Race Park's net commission
revenues during the years ended December 31, 1999, 1998 and 1997, respectively.
Food and Beverage Sales
Food and beverage sales are another major source of revenue and include
catering, restaurant and concession sales. A broad selection of food is
available to the patrons of the Race Park, from table dining at the clubhouse
level to food court fare at various concession stands throughout the Race Park.
Other Revenues
Other major sources of revenue include admission, program and parking fees
as well as sponsorship agreements and sales of finish line boxes, tables and
luxury suites. An admission fee is charged for entry to the Race Park. Preferred
and valet parking are available for a fee during live racing. The Race Park also
sells programs for live and simulcast racing, various editions of The Daily
Racing Form and "tip" sheets. The clubhouse level contains finish line boxes,
finish line reserved tables and reserved seating available for sale on a daily
or seasonal basis. Luxury suites are also available for rental on a long-term or
daily basis. The clubhouse level also contains the Jockey Club which has a
capacity of approximately 300 people. Individual and corporate memberships to
the Jockey Club are available for sale.
PURSES AND HORSEMEN'S AGREEMENTS
Under the Rules of Racing, the Racing Commission has recognized the Texas
Horsemen's Partnership, L.L.P. (the "THP") as the official horsemen's
organization for the state of Texas. The recognized horsemen's organization is
responsible for negotiating with the Partnership on behalf of all horsemen at
the Race Park regarding, among other things, the distribution of purses and
guest and host simulcasting agreements. The THP is comprised of two partners,
the Texas Thoroughbred HBPA, Inc. (representing owners of thoroughbred horses)
and the Texas Horsemen's Benevolent and Protective Association (representing
owners of quarter horses). The Partnership has entered into agreements with each
partner (the "THP AGREEMENTS"), which expire on December 31, 2001. Under the
terms of the contracts, during 1997, the Race Park reserved 30% of the takeout
from guest simulcasting and 30% of the commissions received from host
simulcasting for purses to be paid to the owners of future winning horses. The
percentage reserved for purses increased to 31% during 1998. In accordance with
the 1997 Amendments, the amount reserved for purses from guest simulcasting was
mandated by law as of January 1, 1999. The amounts specified in the amended
Racing Act approximate 7% of all regular and multiple two horse live wagering
pools and 8.5% of all multiple three horse live wagering pools. The amounts
specified to be set aside from the takeout from guest simulcast pools is 38.8%
of all regular wagering pools; 33.3% of all multiple two wagering pools, and 34%
of all multiple three or more wagering pools. The percentage reserved for purses
from host simulcasting increased from 31% to 32.5% of commissions received in
1999, 34.5% in 2000 and will increase to 37.0% in 2001, in accordance with the
THP Agreements and Texas Racing Commission rules. Both contracts specify that
all guest and host simulcasting agreements are approved by the horsemen although
horsemen may withdraw this approval only for matters involving the integrity or
best interests of racing.
In accordance with industry practice, the Race Park establishes purses in
advance of each live race meeting, based on projected purse funds available and
purse funds projected to be generated during the meet. These established purses
are reviewed and/or adjusted monthly and are published in a condition book which
generally covers fifteen days of racing. Horsemen then enter their horses in the
proposed races based on the conditions of the race, including the purse offered.
At any given time, purses generated from wagering may be higher or lower than
the amounts included in the projections used to complete the condition book.
Therefore, during a live race meet, purses may be over or under paid. Under the
terms of the THP Agreements, the Partnership has the ability to manage the level
of purses paid so that purses paid are approximately equal to purses generated
from wagering within a certain period of time; however, there can be no
assurance that any adjustments necessary will be sufficient. When purses paid
exceed purses generated within a certain period of time, the excess payments
become an additional expense to be paid by the Partnership. During 1994, the
Partnership paid purses in excess of purse funds generated of approximately $4.0
million. Under various amendments to the agreement in effect during 1994, the
Partnership has recovered $1.7 million of these purse overpayments, of which
$0.7 million was recouped in December 1999. The agreement between the
Partnership and the Texas Thoroughbred HBPA, Inc. also provides for the
Partnership to recover an additional $0.6 million in 2000. The Partnership will
record any future recoveries only as they are earned and received.
During the years ended December 31, 1999, 1998 and 1997, the Race Park has
paid purses and breeders awards of approximately $13.0 million, $11.1 million
and $9.4 million, respectively. The average daily thoroughbred purse paid
increased from $65,000 to $107,000 during the three-year period. The average
daily quarter horse purse paid increased from $54,000 to $70,000 during the
three-year period.
MARKETING AND BUSINESS DEVELOPMENT
Management of the Race Park believes that the majority of the patrons for
the Race Park reside within a 20 mile radius of the Race Park, which includes
the greater Houston metropolitan area, and that a secondary market of occasional
patrons can be developed outside the 20 mile radius but within a 50 mile radius
of the Race Park. Management recognizes the challenge of introducing pari-mutuel
wagering to customers in the greater Houston metropolitan area and has
established the following marketing goals to increase attendance and the
wagering handle: (i) promote the excitement of horse racing and wagering, (ii)
support and expand the existing group of core bettors, (iii) attract new fans
currently unfamiliar with horse racing, and (iv) pursue a program of fan
education to teach these new fans how to wager. Management uses a number of
marketing programs to have potential customers consider the Race Park as an
entertainment alternative. These programs are designed to bring people to the
Race Park for specific promotional events with a view of turning infrequent
visitors into occasional visitors and more frequent visitors into regular
visitors. Other marketing programs have been developed to appeal to simulcasting
customers and the more serious horseplayers.
Management utilizes a variety of marketing techniques in support of these
objectives including: (i) maintaining a public relations program to distribute
news, information, features, handicapping tips and results in local and national
broadcast and print media, (ii) maintaining an advertising presence in the
market, primarily through newspaper, television and radio campaigns, (iii)
coordinating promotional efforts in cooperation with sponsors, suppliers and
vendors, (iv) developing a strong group sales program, to appeal to large
corporate, civic and affinity groups, (v) holding specialized promotions and
on-going programs that are designed to attract unique demographic and/or
cultural groups, (vi) providing support for Houston area community events, (vii)
focusing attention on customer service and refinements to the Race Park's
facilities, (viii) holding handicapping seminars and tournaments both to educate
fans and promote the excitement of wagering, and (ix) producing direct mail both
to introduce the track to new groups and communicate with existing customers.
Racetracks in certain states have begun offering alternative forms of
gaming, such as slot machines and video lottery machines, in order to increase
both revenues and purses, thereby strengthening both the operations and the
racing programs. In 1999, the Race Park invested significant effort and monies
lobbying the Texas legislature to authorize additional forms of gaming at
racetracks in Texas; however these efforts were not successful. Management
intends to continue to invest in efforts to change existing legislation for the
benefit of pari-mutuel license holders in the next legislative session, which
begins in early 2001. There can be no assurance that these efforts will result
in legislative changes.
Approximately 90 of the Race Park's 300 acres of land remain undeveloped.
Management continues to research and study the economic viability of proposals
for the commercial development of this property. Currently under construction,
within existing facilities, is a state-of-the-art, Las Vegas style race book
where patrons can relax and wager on races simulcast from horse and greyhound
tracks from across the country and overseas. Future development plans could
include the construction and operation of businesses such as restaurants, night
clubs, retail shops, hotels or other types of entertainment facilities.
On January 24, 2000, SHRP Valley LLC, a limited liability company
wholly-owned by the Partnership, purchased all of the issued and outstanding
capital stock of Ladbroke Racing Texas Corporation ("LADBROKE") for $2.35
million in cash. Ladbroke owned a greyhound racetrack in Harlingen, Texas.
Ladbroke's name was subsequently changed to Valley Race Park Inc. Race Park
management re-opened the facility on March 17, 2000 and plans to conduct year
round horse and greyhound simulcasting and a three to four month season of live
greyhound racing beginning in December 2000.
COMPETITION
The Partnership faces competition from a variety of wagering and gaming
sources, including Gulf Greyhound, the Texas State Lottery, numerous charity
operated bingo facilities located in the Houston area and Louisiana casinos
located approximately 125 to 150 miles from Houston.
Although the Race Park competes with Gulf Greyhound for pari-mutuel
wagering dollars, prior to September 1, 1997, the Race Park had the exclusive
right to simulcast horse racing in the greater Houston metropolitan area. During
1997, the Texas Legislature authorized cross-breed simulcasting between horse
tracks and greyhound tracks at Texas pari-mutuel facilities. This now allows
greyhound tracks to display and accept wagers on races broadcast from horse
tracks and horse tracks to display and accept wagers on races broadcast from
greyhound tracks. Gulf Greyhound began simulcasting horse races as of September
1, 1997 when the legislation became effective. Therefore, the Race Park now
competes with Gulf Greyhound for horse racing customers in the Houston market.
Management believes that although the competition from Gulf Greyhound has
negatively impacted and will continue to negatively impact commissions generated
from wagering on horse racing, these negative impacts have been and will
continue to be more than offset by the additional commissions generated from
wagering on simulcast greyhound racing.
The Race Park also competes for wagering dollars with the Texas State
Lottery and charity operated bingo facilities. Both the lottery and bingo are
relatively easy games to learn versus the more complex nature of handicapping
and wagering on horse racing, which places the Race Park at a competitive
disadvantage to these forms of wagering. The Race Park attempts to mitigate
these factors by providing various fan education programs for customers.
The Race Park also competes for wagering dollars with casinos located in
the state of Louisiana. Publicly available information indicates that the
majority of the customers at riverboat casinos located in Lake Charles,
Louisiana come from Houston. Management believes that the location of the Race
Park, within a one hour drive of the majority of the population of Houston, is a
competitive advantage for the Race Park over the casinos, which are located two
hours away for most Houston residents. However, as with the Lottery and bingo,
many casino gaming opportunities are easier to learn than horse racing.
The Race Park also competes for customers with other forms of
entertainment, including the Houston Livestock Show and Rodeo, held annually in
February and March, and a wide range of live and televised professional,
collegiate and high school sporting events that are available in the Houston
area. The Race Park could, in the future, also compete with other forms of
gambling in Texas, including casino gambling or other forms of gaming on Indian
reservations.
Races broadcast from the Race Park compete for wagering dollars and
commissions with races simulcast from other racetracks throughout the United
States and around the world. The ability of the Race Park to compete with other
racetracks for these wagering dollars is dependent on several factors, including
the quality and quantity of horses and the timing of live meets. The quality and
quantity of the Race Park's horses is dependent on the Race Park's ability to
pay purses at a high enough level to attract the highest quality of horses in a
sufficient quantity to fill the races conducted by the Race Park. Races
broadcast from the Race Park compete with races broadcast from other racetracks
where the quality of horses is often higher than the quality of horses racing at
the Race Park. However, management believes that the increase in simulcasting
activity, which has resulted in increased purses paid, has been improving the
quality of the racing program conducted at the Race Park over the past three
years. The mild winter conditions in the Houston area also assists the Race Park
in attracting horses as it ensures uninterrupted training and racing for
horsemen compared to racetracks in the Midwest and East Coast regions, which may
be closed temporarily due to inclement weather. By conducting thoroughbred
racing during the winter season, the Race Park also faces less competition for
simulcast wagering dollars at locations across the country as fewer racetracks
conduct live racing during this time of year. Thus, during the winter season,
the Race Park has a competitive advantage in attracting higher quality horses
which increases the ability of the Race Park to expand the simulcast handle
wagered on its thoroughbred races.
The Race Park has annually conducted a summer quarter horse meet. Although
quarter horse racing does not command the same level of wagering across the
United States as thoroughbred racing, the Race Park has been able to export its
quarter horse racing signal to approximately 98 racetracks and off-track
facilities around the country. This is primarily due to the fact that the level
of quarter horse purses paid puts the Race Park among the top five quarter horse
racetracks in the United States. This level of purse payments enables the Race
Park to attract high quality quarter horses.
The Race Park conducts its live racing for all thoroughbred and quarter
horse races in the evenings. As the majority of racetracks in the United States
conduct racing during the day, management believes that night racing
significantly increases the ability of the Race Park to export its racing signal
to simulcasting facilities at racetracks and off-track locations. Also, the
nighttime performances have historically drawn higher attendance at the Race
Park than daytime performances.
Another competitive factor faced by the Race Park includes the allocation
of a sufficient number of live race days by the Racing Commission. While the
Class 1 racetracks in Texas are each entitled to approximately 17 weeks of live
racing per breed (thoroughbred and quarter horse), many factors are considered
in the actual granting of race days. Input is solicited by the Racing Commission
from the racetracks, racehorse owners and trainers, and horse breeding
organizations. Management works closely with all of the individuals and groups
involved in order to try to obtain a schedule that contains an optimal number of
live race days and that is in the best economic interest of the Race Park.
SEASONALITY OF RACING
Handle and commissions from live racing and host simulcasting are affected
by the breed of horse running at the Race Park. Generally, commissions generated
from thoroughbred racing are higher than commissions generated from quarter
horse racing. Approximately 80% of the Race Park's net pari-mutuel commissions
from live racing and host simulcasting are derived from thoroughbred racing.
Increased commissions from thoroughbred racing are primarily due to two factors,
the overall popularity of thoroughbred races and the timing of the Race Park's
thoroughbred meets. Also, as discussed above, the Race Park conducts a winter
thoroughbred meet during which the Race Park is able to broadcast its racing
signal to a large number of facilities. Races broadcast during the summer
quarter horse meet must compete with much stronger thoroughbred signals from
around the country.
Guest simulcast wagering at the Race Park is also affected by the
seasonality of racing throughout the United States. The Triple Crown races in
May and June and the Breeders' Cup program in the fall, in addition to the high
quality racing programs held at United States racetracks throughout the spring,
summer and early fall, help to increase guest wagering and attendance during
those time periods. As a result, the Partnership's net pari-mutuel commissions
from guest simulcast wagering on horse racing have been highest in the second
quarter of the year.
Thoroughbred and Quarter horse racing are conducted in all types of
weather; however, racing may be canceled due to extreme local weather
conditions. Although the Race Park has rarely been forced to cancel live racing,
inclement weather does negatively effect the level of attendance at the Race
Park.
EMPLOYEES
As of March 1, 2000, the Race Park had approximately 120 year-round
full-time employees, approximately 70 year-round part-time employees and, due to
the seasonal nature of the business, up to approximately 500 seasonal employees.
The number of seasonal employees utilized depends principally on whether or not
the Race Park is conducting live racing and varies based upon attendance levels.
Certain individuals employed by MAXXAM and its wholly owned subsidiaries
provide management, legal, financial, corporate development and other services
to the Partnership from time to time. These affiliates are reimbursed for their
estimated actual costs incurred in providing these services to the Partnership.
The Race Park continuously monitors its staffing levels and its use of services
provided by MAXXAM employees.
REGULATION AND TAXATION
Texas Racing Act
Under the Racing Act, horse racetracks are classified as Class 1, Class 2,
Class 3 or Class 4 racetracks. A Class 1 racetrack must operate in a county with
a population of at least 750,000. Only three Class 1 racetracks may be licensed
in the state of Texas. The Racing Commission does not limit the number of Class
2 racetracks that may be licensed and operated in Texas or where those
racetracks may be located. A Class 2 racetrack is entitled to conduct 60 days of
live racing in a calendar year. Class 3 and Class 4 racetracks are generally
operated by county fairs for short periods of time.
Ownership and operation of horse racetracks in Texas are subject to
significant regulation as set forth in the Racing Act and as administered by the
Racing Commission. The Racing Act provides, among other things, for the
allocation of each wagering pool among betting participants, the state of Texas,
purses, special equine programs and racetracks. The Racing Act also empowers the
Racing Commission to license and regulate substantially all aspects of horse
racing in the state. The Racing Commission, among other things, licenses all
employees and workers at a racetrack (including jockeys, trainers and
veterinarians); regulates the transfer of ownership interests; allocates live
race days; approves race programs; regulates the conduct of races; oversees the
administration of drugs to horses; sets specifications for the racing surfaces,
animal facilities, employee quarters and public areas of racetracks; regulates
the types of wagers on horse races and approves all material contracts with
racetracks, including management agreements, simulcast agreements, totalisator
contracts and concessionaire agreements. The ability of the Race Park to conduct
live racing and pari-mutuel wagering is dependent on continued governmental
approval of these activities as legalized forms of gaming.
Restrictions on Ownership
The Racing Act requires that a majority of the ownership interests of a
license holder be held at all times by persons who are United States citizens
and who have been continuous residents of the state of Texas for the preceding
ten years. Additionally, it is illegal under the Racing Act for any person to
own a 5% or greater interest in more than two racetrack licenses in the state of
Texas (both horse tracks and greyhound tracks are grouped together for this
purpose). The Race Park's license (the "LICENSE") is not transferable but is
subject to a negative pledge (as security for the Partnership's Extendible
Notes). In the event of a foreclosure by the Trustee for the Extendible Notes
(the "TRUSTEE") or the holders of Extendible Notes (the "NOTEHOLDERS") following
an event of default, a number of restrictions and procedural requirements apply
to any proposed or subsequent transfer or use of the License. The Racing Act
generally requires pre-approval by the Racing Commission of all transfers or
issuances of "pecuniary interests" in the holder of a racetrack license.
Interests in the Partnership constitute "pecuniary interests" and generally any
transfer of an interest in the Partnership would require the prior approval of
the Racing Commission.
Regulations on Simulcasting
The Race Park is authorized to conduct guest and host simulcasting under
the Racing Act and the Federal Interstate Horseracing Act of 1978. In Texas,
simulcast broadcasts may only be sent to licensed racetracks, as the Racing Act
does not provide for off-track wagering. All simulcast contracts must be
approved by the Racing Commission. In accordance with the Rules of Racing, all
guest and host simulcasting contracts must also be approved by the horsemen.
Generally, such approval would only be withheld for matters considered to be
detrimental to the integrity or best interests of racing. However, since the
Race Park is unable to conduct simulcast wagering without the approval of the
Racing Commission and the horsemen, the revocation or non-renewal of the
approval of either the Racing Commission or the horsemen could have a material
adverse effect on the Race Park's consolidated financial position, results of
operations or liquidity.
Class 1 and Class 2 horse tracks must take signals from Texas Class 1
horse tracks when such signals are made available to them, in preference to
signals from other tracks. Class 1 racetracks are not required to take simulcast
signals from Class 2 racetracks. Under the Racing Act, a Texas horse track that
offers wagering on greyhounds must take all signals available from Texas
greyhound tracks in preference to out-of-state greyhound signals. Likewise, a
Texas greyhound track that offers wagering on horses, must take all signals made
available from Texas horse tracks in preference to out-of-state horse signals.
Taxation
The Partnership is subject to significant taxes and fees from state and
local agencies. These taxes and fees may be increased at any time as the
prospect of significant additional revenue is one of the primary reasons that
taxing jurisdictions allow legalized gaming. From time to time, various taxing
jurisdictions, including the Texas Legislature, have proposed and enacted
changes in the laws and the administration of such laws affecting the taxes and
fees paid by the Race Park. Prior to September 1, 1997, the Partnership was
required to set aside 0.25% of each simulcast wagering pool for the Texas
Commission on Alcohol and Drug Abuse. Under amendments to the Racing Act enacted
during 1997, this 0.25% was designated to repay the state of Texas for funds
previously appropriated to administer and enforce the Racing Act. This tax was
eliminated during 1999 when all amounts due to the State of Texas, including
interest, were repaid. Also, in accordance with amendments to the Racing Act
enacted during 1997, the pari-mutuel wagering tax on guest simulcast wagering on
horse racing was increased from 1% to 1.25% and the tax on guest wagering on
greyhound racing was reduced from 1.5% to 1.25%. As of January 1, 1999, the
allocation to the state of Texas was reduced by 0.25% to 1%. Also, as of January
1, 1999, the 1% pari-mutuel wagering tax due to the state of Texas from live
racing was eliminated on the first $100 million wagered. There can be no
assurance that further changes to the taxes and fees assessed on the Race Park
will not be made or that such charges will not have a material adverse effect on
the Race Park's consolidated financial position, results of operations or
liquidity.
Other Regulations
The Race Park is required to file certain reports with the Internal
Revenue Service regarding certain cash transactions and certain wagering
winnings by patrons. The Race Park is also subject to a variety of environmental
and other laws and regulations, including laws and regulations dealing with
animal waste management and wetlands. The Race Park is subject to other federal,
state and local regulations and, on a periodic basis, must obtain various
licenses and permits. The Race Park also has an agreement with a company related
to the sale of alcoholic beverages. The Race Park derives significant revenues
from the sale of alcoholic beverages. The interruption or failure of this
company to maintain valid permits and licenses to sell alcoholic beverages could
have a material adverse effect on the Race Park's consolidated financial
position, results of operations or liquidity.
ITEM 2. PROPERTIES
The Race Park is located on approximately 300 acres of land (the "SITE")
owned by the Partnership. The Site is located in Harris County approximately 18
miles from downtown Houston and approximately 15 miles from Bush
Intercontinental Airport. The Site currently includes approximately 90 acres of
undeveloped land. The Race Park fronts Sam Houston Parkway, a major tollway,
providing ready access to residents of the greater Houston metropolitan area.
The Race Park's buildings and grounds have an aggregate capacity of
approximately 18,000 patrons and 10,000 cars. The Grandstand building at the
Race Park is an air-conditioned, fully-enclosed structure of approximately
196,700 square-feet with a variety of viewing and simulcasting facilities on
three levels. The Grandstand has seating for 6,000 patrons and is designed to
accommodate approximately 10,000 total patrons. There are numerous television
monitors, an electronic message board, video walls, video replay libraries and
odds information boards throughout the Grandstand to increase the flow of
information to bettors. Simulcast races are shown on designated television
monitors. Each Grandstand level has numerous pari-mutuel betting windows,
automated betting machines and concession areas. Currently under construction in
an area at the north end of the Grandstand is a state-of-the-art, Las
Vegas-style race book which, when completed, will feature a bar and lounge,
concessions, a video wall and individual simulcasting carrels for private
simulcast wagering. To be called "The Players' Lounge," the race book is
scheduled to be completed in late March 2000 at a cost of approximately $1
million.
In addition to the Grandstand, there are three additional areas from which
patrons can watch the races: the standee ramp or apron between the Grandstand
and the racing ovals; the 30,000 square foot enclosed, air-conditioned simulcast
pavilion which is located immediately north of the Grandstand; and the infield
area of the racetrack. The simulcast pavilion is typically the only portion of
the Race Park that is open to the public on days that only simulcasting is being
conducted. The simulcast pavilion was renovated during 1998. These other areas
have concession stands and pari-mutuel facilities nearby. A tunnel provides
access to the infield.
The Race Park has two racing ovals - a one and one-quarter mile dirt track
and a one and one-eighth mile turf course. Each racing oval features
straightaways or "chutes" to accommodate varying race lengths. The surface of
the tracks and the rails have been designed to lessen the risk of injuries to
horses and jockeys and are generally considered to be of high quality. The
backside contains 16 barns capable of housing a total of approximately 1,200
horses. Each barn contains stalls for onsite stabling, tack rooms, hay and feed
storage areas, grooms' quarters, wash racks and four outdoor walkers. The Race
Park also has a stakes barn for visiting horses, a receiving barn, a holding
barn and an isolation facility. An equine veterinary facility is also located at
the Race Park.
In January 2000, the Race Park acquired Valley Race Park ("VALLEY"), a
greyhound racetrack located in Harlingen, Texas. Valley is situated on
approximately 80 acres of land. Valley has a 1/4 mile oval greyhound racing
track, approximately 91,000 square feet of buildings and a seating capacity of
approximately 2,000. There are approximately 15 acres of paved parking with a
2,500 car capacity and eighteen kennels on the property which can house 1,080
greyhounds. Valley originally opened in 1990, but has been closed since
September 1995. Race Park management re-opened the facility for year
round horse and greyhound simulcasting on March 17, 2000 and plans to conduct a
three to four month season of live greyhound racing beginning in December 2000.
Under the indenture governing the Partnership's Extendible Notes (the
"INDENTURE"), substantially all of the Partnership's assets, including the
Partnership's properties, are pledged as collateral on the Extendible Notes. The
racing license held by the Partnership is also subject to a negative pledge for
the benefit of the holders of the Extendible Notes.
ITEM 3. LEGAL PROCEEDINGS
This section contains statements which constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. See Item 1. "Business--General" for cautionary information with respect
to such forward-looking statements.
1995 Plan of Reorganization
On April 17, 1995, SHRP, Ltd. and two affiliates (the "DEBTORS") filed
voluntary petitions to reorganize under the provisions of Chapter 11 of the
United States Bankruptcy Code. On September 22, 1995, the Bankruptcy Court
entered an order confirming the Debtors' plan of reorganization (the "PLAN").
All transactions called for by the Plan were completed on October 6, 1995 (the
"EFFECTIVE DATE") and the case was closed on December 19, 1996. The Plan called
for, among other things, a reduction in the Partnership's long-term debt, a
significant cash infusion, contribution of additional property and a
reorganization of the Partnership.
Under the terms of the Plan, the Extendible Notes were issued in exchange
for the Partnership's 11 3/4% Senior Secured Notes (the "ORIGINAL NOTES"). The
Extendible Notes had an initial aggregate principal amount of $37.5 million,
mature on September 1, 2001 and bear interest at the rate of 11% per annum. The
maturity date of the Extendible Notes may be extended to September 1, 2003 (with
an increase in the rate of interest to 13% per annum) if the Texas legislature
passes significant gaming legislation (as defined) between January 1, 2001 and
August 15, 2001. Interest on the Extendible Notes accrues in-kind and is not
payable in cash until a certain level of cash flow from operations has been
achieved. Once cash interest payments commence, interest payments may not
thereafter be paid in-kind. The Indenture limits the Partnership's ability to
incur additional indebtedness and liens, to engage in transactions with
affiliates, to make investments and to make distributions, although the
Indenture does allow the Partnership to become involved in certain gaming,
entertainment and other ventures.
On the Effective Date, a new investor group (the "NEW INVESTOR GROUP")
made a capital contribution of cash in the aggregate amount of $5.9 million.
Additionally, a wholly owned subsidiary of MAXXAM contributed an approximately
87 acre tract of adjoining land having a fair market value of $2.3 million. Each
member of the New Investor Group also provided its pro rata share of a $1.7
million line of credit. This line of credit would be used to fund future cash
flow requirements should the cash infusion be insufficient.
The Plan provided for the elimination of all existing partnership
interests. The Partnership has issued 33.3% of the equity in the Partnership to
certain holders of allowed unsecured bankruptcy claims (the "CREDITOR EQUITY"),
a majority of which relates to the unsecured deficiency claims attributable to
the Original Notes. The Creditor Equity is held in the form of common stock in
the Additional General Partner. On the Effective Date, the New Investor Group
received 66.7% of the equity in the Partnership. The Managing General Partner
was issued a 1% interest in the Partnership in exchange for contributing its pro
rata share of the investment made by the New Investor Group. See Note 3 to the
Partnership's Consolidated Financial Statements appearing in Item 8 for further
information concerning the bankruptcy proceedings.
From time to time, the Partnership is involved in various other claims,
lawsuits and other proceedings relating to a variety of matters. While
uncertainties are inherent in the final outcome of such matters and while 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. STOCKHOLDER MATTERS
This section contains statements which constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. See Item 1. "Business--General" for cautionary information with respect
to such forward-looking statements.
There is no established public trading market for the Partnership's
ownership interests. The Partnership has eight limited partners in addition to
the two general partners. The Partnership interests are not transferable without
the consent of the Managing General Partner. Under the Indenture, distributions
are restricted except for amounts necessary to pay taxes on income of the
Partnership allocated to a partner. The Partnership has not made distributions
to its partners since the commencement of operations and it is doubtful that the
Partnership will be able to make any distributions to its partners for at least
the foreseeable future. See Item 7. "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Item 8. "Financial Statements
and Supplementary Data."
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data of the Partnership for each of the years in
the five-year period ended December 31, 1999 presented below, should be read in
conjunction with Item 7. " Management's Discussion and Analysis of Financial
Condition and Results of Operations" and with the Partnership's Consolidated
Financial Statements and Notes thereto appearing in Item 8.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ -----------
(IN THOUSANDS OF DOLLARS, EXCEPT FOR ATTENDANCE)
<S> <C> <C> <C> <C> <C>
Summary of Operations:
Revenues................................. $ 27,331 $ 24,195 $ 20,027 $ 20,752 $ 19,679
Costs and expenses (1) (2)............... (24,478) (23,345) (22,250) (23,342) (24,144)
Income (loss) before depreciation and
amortization (2)......................... 3,969 1,826 (1,295) (1,704) (2,193)
Income (loss) before reorganization
items................................. 2,853 850 (2,223) (2,590) (4,465)
Reorganization items (3)................. - - - (83) (48,915)
Income (loss) from operations (3)........ 2,853 850 (2,223) (2,673) (53,380)
Extraordinary item (4)(5)................ (215) - - - 63,780
Net income (loss)........................ (6,799) (6,858) (8,406) (7,622) 5,608
Balance Sheet Data (at end of period):
Current assets........................... $ 12,837 $ 9,957 $ 9,030 $ 7,797 $ 8,384
Total assets (3)......................... 37,855 35,489 34,534 33,937 34,956
Current liabilities...................... 7,155 7,505 8,345 6,456 5,645
Notes payable (including notes to
affiliates), less current portion (4)(5) 49,548 41,081 33,393 27,162 22,171
Partner's equity (deficit)............... (22,722) (15,923) (9,065) (659) 6,963
Distributions paid to partners.............. $ - $ - $ - $ - $ -
Other Data:
Total attendance......................... 718,037 665,576 608,120 684,122 665,981
Live handle.............................. $ 25,056 $ 22,352 $ 20,175 $ 25,620 $ 27,983
Guest handle............................. 120,433 112,139 93,543 88,579 82,381
Host handle.............................. 208,987 162,965 128,252 109,648 51,451
Net pari-mutuel commissions.............. 18,097 16,180 13,276 12,917 10,566
<FN>
(1) Includes depreciation expense of $1,116, $976, $928, $886, and $2,272 for
1999, 1998, 1997, 1996 and 1995, respectively.
(2) Includes accrued management fees of $750 for 1999, 1998, 1997 and 1996,
and $183 for 1995, which cannot be paid until two consecutive interest
payments on the Extendible Notes have been paid in cash.
(3) Reorganization items recorded to implement the Plan. Adjustment of assets
to fair value represents the reduction of property and equipment and other
assets to their estimated recoverable amounts and reorganization expenses
represent the professional fees and expenses necessary to implement the
Plan.
(4) Extraordinary gain on discharge of liabilities recorded in 1995 in
connection with the Plan represents the gain recognized due to the
discharge of current liabilities and long-term debt.
(5) Extraordinary loss on extinguishment of debt in 1999 in connection with
the purchase and retirement of $1.2 million face value of Extendible Notes
in December 1999.
</FN>
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following should be read in conjunction with the Partnership's
Consolidated Financial Statements and Notes thereto appearing in Item 8.
This section contains statements which constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. See Item 1. "Business--General" for cautionary information with respect
to such forward-looking statements.
INCOME (LOSS) FROM OPERATIONS
The following table presents selected operational information for the
years ended December 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Number of live race days.......................................................... 134 129 143
Simulcast only days............................................................... 230 235 221
Average daily attendance - live race days......................................... 3,794 3,610 3,176
Average daily attendance - simulcast only days.................................... 912 849 694
Average live per capita wager..................................................... $ 49 $ 48 $ 44
Average combined live and guest per capita wager - live race days................. 158 161 145
Average guest per capita wager - simulcast only days.............................. 310 298 310
(Amounts in millions)
Live handle....................................................................... $ 25.1 $ 22.4 $ 20.2
Guest simulcasting handle - horses................................................ 97.1 95.9 93.5
Guest simulcasting handle - greyhounds ........................................... 23.3 16.2 -
Host simulcasting handle.......................................................... 208.9 163.0 128.3
Net pari-mutuel commissions:
Live........................................................................... $ 3.3 $ 2.7 $2.4
Guest - horses................................................................. 8.1 8.3 8.3
Guest - greyhounds............................................................. 2.7 2.0 -
Host........................................................................... 4.0 3.2 2.6
--------- --------- ---------
Total net pari-mutuel commissions................................................. $ 18.1 $ 16.2 $ 13.3
========= ========= =========
</TABLE>
Revenues. The Partnership's principal source of revenues is net
pari-mutuel commissions earned on live thoroughbred and quarter horse racing and
on simulcast racing as both a guest and host track. During periods between live
racing dates, the Partnership's principal source of revenues is from wagering by
Race Park patrons on simulcasts of horse and greyhound racing being conducted at
other tracks. Other sources of revenue are food and beverage sales, admission
and parking fees, corporate sponsorships and advertising, club memberships,
suite rentals and other miscellaneous items.
Total revenues for the years ended December 31, 1999, 1998, and 1997 were
$27.3, $24.2, and $20.0 million, respectively. Handle and commissions generated
from both guest and host simulcasting and live racing have continued to increase
over the three year period. The increase in handle and commissions from live
racing during 1999 as compared to 1998 levels was primarily due to the
elimination of the 1% tax on live handle that was being paid to the state of
Texas in 1998, the addition of five live race days in 1999 over 1998, and a 5%
increase in average daily attendance on live race days. In 1999, the
Partnership's share of net pari-mutuel commissions from live racing increased by
1%, or approximately $250,000, due to the elimination of the wagering tax on the
first $100 million wagered on live racing. The 5% increase in average daily
attendance on live race days can be attributed to a more aggressive marketing
campaign in 1999 versus 1998. The increase in handle and commissions from live
racing during 1998 as compared to 1997 levels was primarily due to higher
average daily attendance and an increase in the live per capita wager. The
increase in average daily attendance was partially due to the deletion of
Wednesday racing during the spring thoroughbred meet, which generates lower
average daily attendance than weekend race days.
The Race Park began offering guest simulcast wagering on greyhound races
during March 1998 under cross-breed simulcasting provisions contained in the
1997 Amendments. Overall, guest simulcasting handle increased by 7.4% during
1999 as compared to 1998. Most of the increase is due to simulcasting on
greyhound races, which increased by 44% from 1998 to 1999 due to having a full
year of greyhound simulcasting in 1999. Guest simulcasting horse handle
increased by 1.3% during 1999 as compared to 1998; however, net pari-mutuel
commissions from guest horse simulcasting decreased by 2.4% for the same time
period. This decrease in the ratio of net pari-mutuel commissions to handle is
due to incremental, annual increases in the allocation to purses in accordance
with the THP Agreements and the 1997 Amendments which became effective in 1997
and extended through 1999. Crossbreed simulcasting, whereby horse tracks are
allowed to carry and wager on simulcast signals of greyhound races and greyhound
tracks are allowed to carry and wager on simulcast signals of horse races, is
the primary factor for the increase in guest simulcasting commissions during
1999 and 1998. From 1997 to 1998, net pari-mutuel commissions from guest
simulcasting increased by 24% due to the introduction of crossbreed simulcasting
which began with one signal in March 1998 and grew to several signals beginning
in July 1998 and continuing thereafter. The 2.6% increase in guest horse handle
from 1997 to 1998 was substantially offset by the increased pari-mutuel wagering
tax and by increases in the allocation of takeout to purses.
Net pari-mutuel commissions from host simulcasting increased by 25% from
1998 to 1999 due to increases in wagering at the majority of the racetracks and
off-track wagering facilities receiving the Race Park's simulcast signal. Net
pari-mutuel commissions from host simulcasting increased by 23% from 1997 to
1998 primarily due to an increase in the number of racetracks and off-track
facilities receiving the Partnership's simulcast signal and a beneficial change
in the commission allocation to purses from host wagering. Management expects
average daily host handle to continue to increase during 2000; however,
commissions from host simulcasting as a percentage of handle will decrease, as
they did in 1999, due to an increase in the allocation to purses discussed in
Item 1 under "Purses and Horsemen's Agreements."
Revenues generated from food and beverage sales during the year ended
December 31, 1999 increased from 1998 levels by 12% primarily due to the
addition of five live race days and the increase in average daily attendance on
both live and simulcast only race days. Revenues generated from admission and
parking fees, program sales and other miscellaneous sources have also increased
during 1999 compared to 1998 primarily due to the addition of five live race
days and the increased average daily attendance. During 1998 these revenues
increased compared to 1997 primarily due to increased average daily attendance.
Income (Loss) From Operations. For the year ended December 31, 1999, the
Partnership reported income from operations of $2,853,000 which is $2 million
higher than the same period in 1998. This improvement is the result of the
substantial increase in revenues discussed above as well as the Partnership's
continued efforts to reduce and control operating costs and expenses. In
particular, the cost of pari-mutuel operations and other operating costs, as
well as utilities expense and state and local taxes, all remained virtually
unchanged or decreased for the year ended December 31, 1999 versus 1998.
Overall, revenues increased approximately 13% during 1999 compared to 1998 while
costs and expenses increased by only 5%.
The improvement in 1998 operating income from 1997 operating loss is due
to the continued decrease in operating costs and expenses, especially salaries
and wages, management and other professional fees and marketing and advertising.
Salaries and wages remained virtually unchanged in 1998 over 1997 primarily due
to a reduction in staffing in several operating departments and positions that
went unfilled during the year. Management and other professional fees decreased
in 1998 versus 1997 due to the Texas state legislature not being in session
during 1998. Marketing and advertising remained virtually unchanged in 1998 over
1997 as the advertising program maintained approximately the same level as in
1997. These decreases were offset by an increase in costs of operations, which
increased in proportion to revenues.
Other Income (Expense). Other income (expense) reflects interest earned
net of interest expense, including amortization of the original issue and the
re-issue discounts on the Original Notes and the Extendible Notes. Interest
expense has continued to increase over the three year period due to the
increasing balance of the Extendible Notes related to the payment in-kind of
accrued interest and the amortization of the discount on the Extendible Notes.
Interest expense has also increased as a result of the increasing balance of
management fees payable to MAXXAM for which payment is deferred until two
consecutive payments have been made on the Extendible Notes.
Extraordinary item. The extraordinary item represents the loss on the
retirement of $1,160,000 face value of Extendible Notes in December 1999.
Net Loss. Net loss reflects the loss after other income (expense) and
extraordinary items. Other income (expense) and extraordinary items are
described above.
LIQUIDITY AND CAPITAL RESOURCES
The net cash provided by operating activities during 1999 of $4.7 million
was $2.7 million more than in 1998 and $4.2 million more than in 1997. Cash
provided by operating activities improved during 1999 compared to 1998 and 1997
primarily due to the increase in income from operations discussed above.
Restricted cash consists of deposits held for the benefit of horsemen and
funds held for the payment of property taxes. The decrease in restricted cash
from December 31, 1998 to December 31, 1999 is due to a decrease in the funds
held for the payment of property taxes from 1998 to 1999.
The Partnership had cash and cash equivalents of $6.7 million and a $1.7
million line of credit at December 31, 1999 available to fund the operating
activities of the Partnership. Also, the Partnership is able to defer cash
interest payments on the Extendible Notes until certain conditions are met and
to defer the payment of management fees until two consecutive interest payments
on the Extendible Notes have been paid in cash. The deferral of these items has
significantly improved the liquidity of the Partnership.
The Partnership is continuing its marketing efforts to increase attendance
and pari-mutuel handle at the Race Park in order to generate operating income.
Also, management intends to continue to initiate legislative efforts to legalize
additional forms of gaming at the Race Park in order to increase revenues.
Further, management is analyzing various proposals to develop new forms of
businesses at the Race Park in an effort to raise new sources of income and to
draw additional attendance to the Race Park. To that end, management has
committed a substantial amount of its cash primarily to two new ventures during
2000, both of which were discussed in Item 1 above. Approximately $3 million, of
which $2.35 million was invested in January 2000, will be invested in the
purchase and start-up operations of Valley Race Park, a greyhound track in
Harlingen, Texas which the Race Park acquired in January 2000. In addition, the
Race Park is in the process of spending approximately $1 million on the
construction of a state-of-the-art, Las Vegas-style race book in its existing
facilities. Management believes that both of these investments will generate
additional income for the Race Park, nonetheless, there can be no assurance that
any of these efforts will be successful.
The Extendible Notes, together with accrued interest, must be retired in
September 2001, unless the applicable extension provisions apply. To the extent
the Partnership is unable to repay or refinance the Extendible Notes,
alternative sources of funding will be necessary. Although 99.0% of the
Extendible Notes are owned by MAXXAM, there can be no assurance that the
Partnership will be able to repay or refinance the Extendible Notes or that
alternative sources of funding will be available to the Partnership, if needed.
YEAR 2000
The Partnership has successfully made the transition to the year 2000 with
no interruptions of business activity from any of its data processing systems or
its embedded technology. The Partnership had implemented programs to assess the
impact of the year 2000 date change on its software and related technologies.
Testing and modifications of the Partnership's critical information systems were
completed prior to December 31, 1999. In some cases, it was cost effective to
purchase and implement new systems. The total cost of remediation to the
Partnership was less than $100,000. System modification costs were expensed as
incurred. Costs associated with new systems were capitalized and are being
amortized over the estimated useful lives of the systems.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
All of the Partnership's debt obligations at December 31, 1999 were fixed
rate obligations. Management, therefore, does not believe that the Partnership
has any material market risk from its debt obligations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Partners of Sam Houston
Race Park, Ltd.
We have audited the accompanying consolidated balance sheets of Sam
Houston Race Park, Ltd. (a Texas limited partnership referred to herein as the
"PARTNERSHIP") as of December 31, 1999 and 1998 and the related consolidated
statements of operations, partners' deficit and cash flows for each of the three
years in the period ended December 31, 1999. These financial statements are the
responsibility of the Partnership's 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, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the
Partnership as of December 31, 1999 and 1998, and the results of its operations
and cash flows for each of the three years in the period ended December 31, 1999
in conformity with generally accepted accounting principles.
BDO SEIDMAN, LLP
March 3, 2000, except for Note 11 for which the date is March 22, 2000
Houston, Texas
CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1999 1998
------------ ------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents.......................................................... $ 6,690 $ 3,764
Restricted cash ................................................................... 3,533 3,608
Accounts receivable, net of allowance for doubtful accounts of
$86 and $51, respectively....................................................... 2,102 2,126
Prepaid expenses and other current assets.......................................... 512 459
----------- ------------
Total current assets............................................................ 12,837 9,957
----------- ------------
Property and equipment, net of accumulated depreciation of $4,108 and $2,996,
respectively.................................................................... 25,018 25,532
----------- ------------
$ 37,855 $ 35,489
=========== ============
LIABILITIES AND PARTNERS' DEFICIT
Current liabilities:
Accounts payable................................................................... $ 2,236 $ 2,232
Property taxes payable............................................................. 999 1,040
Other liabilities.................................................................. 1,641 1,938
Amounts due to horsemen............................................................ 2,279 2,295
----------- ------------
Total current liabilities....................................................... 7,155 7,505
----------- ------------
Long term liabilities:
Notes payable...................................................................... 49,548 41,081
Deferred management fees........................................................... 3,874 2,826
------------ ------------
Total liabilities............................................................... 60,577 51,412
------------ ------------
Commitments and contingencies (Notes 1 and 10)
Partners' deficit..................................................................... (22,722) (15,923)
------------ -------------
$ 37,855 $ 35,489
=========== ============
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Pari-mutuel commissions, net........................................ $ 18,097 $ 16,180 $ 13,276
Food and beverage sales............................................. 4,605 4,110 3,366
Admissions, parking and other....................................... 3,969 3,905 3,385
Purse Recovery...................................................... 660 - -
------------ ----------- ------------
27,331 24,195 20,027
------------ ----------- ------------
Costs and expenses:
Cost of pari-mutuel operations...................................... 1,852 1,846 1,756
Cost of food and beverage operations................................ 2,203 1,971 1,531
Other operating .................................................... 2,893 3,029 2,433
Salaries and wages.................................................. 8,927 8,349 8,314
Management and other professional fees.............................. 1,755 1,660 2,266
Marketing and advertising........................................... 2,491 1,968 1,946
Utilities........................................................... 1,200 1,261 1,143
State and local taxes............................................... 1,082 1,293 1,113
Depreciation and amortization....................................... 1,116 976 928
General and administrative.......................................... 959 992 820
----------- ----------- ------------
24,478 23,345 22,250
----------- ----------- ------------
Income (loss) from operations ......................................... 2,853 850 (2,223)
Other income (expense):
Interest income..................................................... 339 207 214
Interest expense.................................................... (9,776) (7,915) (6,397)
------------ ------------ -------------
(9,437) (7,708) (6,183)
------------ ------------ -------------
Loss before extraordinary item......................................... (6,584) (6,858) (8,406)
Extraordinary item-loss on extinguishment of debt...................... (215) - -
----------- ----------- ------------
Net loss............................................................... $ (6,799) $ (6,858) $ (8,406)
=========== =========== ============
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
CONSOLIDATED STATEMENTS OF PARTNERS' DEFICIT
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
MANAGING ADDITIONAL
GENERAL GENERAL LIMITED
PARTNER PARTNER PARTNERS TOTAL
----------- --------- ---------- -----------
<S> <C> <C> <C> <C>
Balance at January 1, 1997...................................... $ (659) $ - $ - $ (659)
Net loss..................................................... (8,406) - - (8,406)
----------- --------- ---------- ----------
Balance at December 31, 1997.................................... (9,065) - - (9,065)
Net loss..................................................... (6,858) - - (6,858)
----------- --------- ---------- -----------
Balance at December 31, 1998.................................... (15,923) - - (15,923)
Net loss..................................................... (6,799) - - (6,799)
----------- --------- ---------- -----------
Balance at December 31, 1999.................................... $ (22,722) $ - $ - $ (22,722)
=========== ========= ========== ===========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------
1999 1998 1997
------------ ------------ ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................................................ $ (6,799) $ (6,858) $ (8,406)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization.................................... 1,116 976 928
Amortization of discounts on long-term debt...................... 3,423 2,258 1,360
Increase in accrued interest..................................... 6,037 5,442 4,886
Provision for losses on accounts receivable...................... 35 22 7
Extraordinary item - loss on extinguishment of debt.............. 215 - -
(Increase) decrease in restricted cash.......................... 75 1,233 (1,282)
Increase in accounts receivable.................................. (11) (1,015) (109)
(Increase) decrease in prepaid expenses and other................ (53) (164) 249
Increase in accounts payable..................................... 4 128 559
Increase in due to affiliates.................................... 1,048 965 883
Increase (decrease) in other liabilities......................... (338) 267 142
Increase (decrease) in amounts due to horsemen................... (16) (1,235) 1,257
------------ ------------ ----------
Net cash provided by operating activities...................... 4,736 2,019 474
------------ ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment................................. (602) (971) (296)
------------ ------------ -----------
Net cash used in investing activities.......................... (602) (971) (296)
------------ ------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable........................................... (1,208) (12) (84)
------------ ------------ -----------
Net cash used in financing activities.......................... (1,208) (12) (84)
------------ ------------ -----------
INCREASE IN CASH AND CASH EQUIVALENTS.................................. 2,926 1,036 94
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR......................... 3,764 2,728 2,634
------------ ----------- ----------
CASH AND CASH EQUIVALENTS AT END OF YEAR............................... $ 6,690 $ 3,764 $ 2,728
============ =========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid, net of amounts capitalized........................... $ 12 $ 13 $ 8
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES
See Notes 3, 6 and 8
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS OF DOLLARS)
1. BASIS OF PRESENTATION AND ORGANIZATION, USE OF ESTIMATES AND
FUTURE CASH REQUIREMENTS
BASIS OF PRESENTATION AND ORGANIZATION
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 was formed on June 17, 1990 to apply to the Texas Racing Commission
(the "RACING COMMISSION") for a license to acquire, construct and operate a
pari-mutuel horse racing facility in Harris County, Texas (the "RACE PARK"), in
accordance with the Texas Racing Act (the "RACING ACT").
The Partnership was organized under the laws of the state of Texas and
will terminate on December 31, 2090 unless it is earlier dissolved pursuant to
the Texas Revised Limited Partnership Act or any provision of its Third Amended
and Restated Limited Partnership Agreement (the "AMENDED PARTNERSHIP
AGREEMENT"). 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 December 31, 1999, wholly owned subsidiaries of
MAXXAM held, directly or indirectly, an aggregate 98.9% interest in the
Partnership consisting of a 34.1% general partner interest (including a 33.1%
interest by virtue of its ownership of 99.5% of the common stock of the
Additional General Partner) and a 64.8% limited partner interest.
Certain reclassifications of prior period information were made in order
to conform with the current presentations. All significant intercompany
transactions have been eliminated in consolidation.
USE OF ESTIMATES
The preparation of financial statements in accordance with generally
accepted accounting principles requires the use of estimates and assumptions
that affect (i) the reported amounts of assets and liabilities, (ii) disclosure
of contingent assets and liabilities known to exist as of the date the financial
statements are published, and (iii) the reported amount of revenues and expenses
recognized during each period presented. The Partnership reviews all significant
estimates affecting its consolidated financial statements on a recurring basis
and records the effect of any necessary adjustments prior to their publication.
Adjustments made with respect to the use of estimates often relate to improved
information that was not previously available. Uncertainties with respect to
such estimates and assumptions are inherent in the preparation of the
Partnership's consolidated financial statements; accordingly, it is possible
that the subsequent resolution of the liquidity issues, described in "Future
Cash Requirements" below, could differ in material respects from current
estimates. The results of an adverse resolution of such uncertainty could have a
material effect on the reported amounts of the Partnership's consolidated assets
and liabilities.
FUTURE CASH REQUIREMENTS
The Partnership generated income from operations of $2,853 in 1999. In
addition, the Partnership had cash and cash equivalents of $6,690 and a $1,700
line of credit at December 31, 1999 available to fund the operating activities
of the Partnership. Also, the Partnership is able to defer cash interest
payments on the Extendible Notes until September 1, 2001 or until certain
conditions are met, and to defer the payment of management fees until two
consecutive interest payments on the Extendible Notes have been paid in cash.
The deferral of these items has significantly improved the liquidity of the
Partnership.
The Partnership is continuing its marketing efforts to increase attendance
and pari-mutuel handle at the Race Park in order to generate operating income.
Also, management intends to continue to initiate legislative efforts to legalize
additional forms of gaming at the Race Park in order to increase revenues.
Further, management is analyzing various proposals to develop new forms of
businesses at the Race Park in an effort to raise new sources of income and to
draw additional attendance to the Race Park. To that end, management has
committed a substantial amount of its cash primarily to two new ventures during
2000. Approximately $3,000, of which $2,350 was invested in January 2000, will
be invested in the purchase and start-up operations of Valley Race Park, a
greyhound track in Harlingen, Texas which the Race Park acquired in January
2000. In addition, the Race Park is in the process of spending approximately
$1,000 on the construction of a state-of-the-art, Las Vegas-style race book in
its existing facilities. Management believes that both of these investments will
generate additional income for the Race Park, although, there can be no
assurance that any of these efforts will be successful.
The Extendible Notes, together with accrued interest, must be retired in
September 2001, unless the applicable extension provisions apply. To the extent
the Partnership is unable to repay or refinance the Extendible Notes,
alternative sources of funding will be necessary. Although 99.0% of the
Extendible Notes are owned by MAXXAM, there can be no assurance that the
Partnership will be able to repay or refinance the Extendible Notes or that
alternative sources of funding will be available to the Partnership, if needed.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Restricted Cash
The Partnership's restricted cash, as shown on the accompanying
consolidated balance sheets at December 31, 1999 and 1998, includes amounts
designated for the payment of the items listed in the following table:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1999 1998
------------ -------------
<S> <C> <C>
Deposits held for the benefit of horsemen............................................. $ 2,336 $ 2,320
Property taxes and other.............................................................. 1,197 1,288
------------ -------------
$ 3,533 $ 3,608
============ =============
</TABLE>
Cash Equivalents and Concentration of Credit Risk
Cash equivalents consist of highly liquid money market instruments with
original maturities of three months or less. A substantial portion of the
Partnership's cash equivalents ($5,764 at December 31, 1999) was invested in
various short-term investment grade securities. The Partnership also holds other
amounts in banks and other financial institutions wherein some of the balances
exceed federally insured deposit levels. In the event of nonperformance by such
financial institutions, the Partnership's exposure to credit loss is represented
by the amounts deposited plus any unpaid accrued interest thereon minus the
federally insured deposit limitation. The Partnership mitigates its
concentration of credit risk with respect to the funds in such accounts by
maintaining them at high credit quality financial institutions and monitoring
the credit ratings of such institutions.
Property and Equipment
Property and equipment were written down to estimated fair value as
reflected in the sixth amended consolidated plan of reorganization ("the PLAN")
as of October 6, 1995 ("the EFFECTIVE DATE"). Additions to property and
equipment subsequent to the Effective Date are stated at cost. Prior to the
Effective Date, property and equipment were stated at cost. Depreciation is
computed principally utilizing the straight-line method at rates based upon the
estimated useful lives of the various classes of assets. In accordance with the
Statement of Financial Accounting Standards No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of,"
the Partnership reviews long-lived assets, which include property and equipment,
for impairment whenever events or changes in circumstances indicate the carrying
amounts of the Partnership's assets may not be fully recoverable. No adjustments
for impairment were recorded in 1999, 1998 or 1997.
Notes Payable
Notes payable includes accrued interest on the Extendible Notes which is
allowed to be paid in-kind until a certain level of cash flow from operations
has been achieved.
Other Liabilities
Other liabilities include net liabilities for unclaimed winning
pari-mutuel tickets. Unclaimed winning tickets are valid for sixty days after
the end of the year in which they are generated. Once the tickets are no longer
valid, the remaining amounts held to pay unclaimed winning tickets, net of
allowable reimbursements, are transferred to the Texas Racing Commission.
The Partnership receives advance payments with respect to private suite
and box rentals, Jockey Club memberships and corporate sponsorship agreements.
The payments are recorded as deferred revenue and are recognized as income over
the term of the respective agreements.
Purses and Awards
The Racing Act, certain other agreements, and the rules promulgated by the
Racing Commission stipulate percentages of the pari-mutuel handle which must be
used for the payment of purses and awards depending upon the type of wagers
placed. The term "pari-mutuel handle" means the aggregate amounts wagered.
Purses are established nearly one month in advance, based on expected
pari-mutuel handle and published in a condition book which generally covers
fifteen days of live racing. Horsemen then enter their horses in proposed races
based upon the conditions of the race being entered, including the purses being
offered. In certain circumstances, the Partnership may pay purses and awards in
excess of the amounts provided by the pari-mutuel handle. The Partnership may
adjust the amounts to be paid for future races during the course of a given meet
in order to minimize or eliminate any differences between the amounts provided
by the pari-mutuel handle and the actual amounts of purses and awards paid. The
agreement between the Partnership and the Texas Thoroughbred HBPA, Inc. (the
"TTHBPA") also allows the Partnership to recoup various amounts of the previous
purse overpayments from certain future meets. The TTHBPA is a partner of the
Texas Horsemen's Partnership, L.L.P. (the "THP"), the official horsemen's
organization currently recognized by the Racing Commission. The Partnership
expenses all purse overpayments when they occur. Recoveries of these amounts are
recorded as revenue as they are earned and received.
Income Taxes
The Partnership has not made any provisions for income taxes in its
Consolidated Statement of Operations as they are the responsibility of its
partners. The carrying value of the Partnership's net assets for financial
statement purposes was less than the carrying value for income tax reporting
purposes by approximately $16,393 at December 31, 1999. The difference primarily
results from (i) the adjustment of long-term assets to estimated fair value for
financial statement purposes but not for income tax purposes and (ii) the
capitalization of costs for income tax purposes that were expensed for financial
reporting purposes, a substantial portion of which relates to costs incurred
during the start-up period and the reorganization pursuant to the Plan described
in Note 3.
Fair Value of Financial Instruments
The carrying amounts of the Partnership's cash and cash equivalents
(including restricted and designated cash) and other notes payable approximate
their fair value. The Extendible Notes had a face value of $56,852 and $52,120,
and a carrying amount of $47,782 and $39,436 as of December 31, 1999 and 1998,
respectively. The market value for the Extendible Notes, based on the infrequent
trades that occurred over the last two years, ranges from approximately $39,000
to $57,000.
3. 1995 PLAN OF REORGANIZATION
Plan of Reorganization
On April 17, 1995, the Partnership, SHRP Capital Corp. and SHRP
Acquisition, Inc., the Partnership's largest limited partner, filed for
reorganization under Chapter 11 of the United States Bankruptcy Code. On
September 22, 1995, the United States Bankruptcy Court for the Southern District
of Texas, Houston Division entered an order confirming the Plan. The
transactions called for by the Plan were completed on the Effective Date and the
case was closed on December 19, 1996.
Under the terms of the Plan, the Extendible Notes were issued in exchange
for the Partnership's 11 3/4% Senior Secured Notes (the "ORIGINAL NOTES"). The
Original Notes had an aggregate principal amount of $75,000, would have matured
on July 15, 1999 and bore interest at the rate of 11 3/4% per annum. The
Extendible Notes had an initial aggregate principal amount of $37,500, mature on
September 1, 2001 and bear interest at the rate of 11% per annum. Interest on
the Extendible Notes accrues in-kind and is not payable in cash until a certain
level of cash flow from operations has been achieved. See Note 6 for further
information concerning the terms of the Extendible Notes.
On the Effective Date, a new investor group (the "NEW INVESTOR GROUP")
made a capital contribution of cash and other consideration described below.
Each member of the New Investor Group also provided its pro rata share of the
$1,700 line of credit. This line of credit would be used to fund future cash
flow requirements should the cash infusion prove to be insufficient. Each member
of the New Investor Group has secured such investor's portion of the line of
credit with cash held in an escrow account (other than MAXXAM's wholly owned
subsidiaries, whose portion of the line of credit is secured by the guaranty of
MAXXAM). Borrowings on the line of credit would bear interest at 11% per annum
and would be subordinate to the Extendible Notes.
4. PROPERTY AND EQUIPMENT
The major classes of property and equipment are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
ESTIMATED --------------------------
USEFUL LIVES 1999 1998
-------------- ------------ ------------
<S> <C> <C> <C>
Buildings.............................................................. 5 - 30 years $ 15,096 $ 15,075
Equipment, furniture and fixtures...................................... 3 - 15 years 2,888 2,428
Race track and other land improvements................................. 5 - 30 years 3,120 3,049
Other.................................................................. 2 - 3 years 79 33
Land................................................................... 7,943 7,943
----------- ------------
29,126 28,528
Less accumulated depreciation and amortization......................... (4,108) (2,996)
----------- ------------
$ 25,018 $ 25,532
============ ============
</TABLE>
Depreciation expense for the years ended December 31, 1999, 1998 and 1997
was $1,116, $976, and $928, respectively.
5. RACING OPERATIONS
The Partnership conducted 134, 129, and 143 days of live racing during
1999, 1998, and 1997, respectively. Under the Racing Act, the Partnership's
commission revenue 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. The Race Park also provides broadcasts of live
racing conducted at the Race Park to other racetracks under various host
simulcasting agreements. Under these contracts, the Partnership receives
pari-mutuel commissions of varying percentages of simulcast pari-mutuel handles.
A summary of the pari-mutuel handle, commissions and deductions for the
years ended December 31, 1999, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Live handle............................................................ $ 25,056 $ 22,352 $ 20,175
Return to public....................................................... (19,586) (17,506) (15,830)
Purses and breeders awards............................................. (2,035) (1,801) (1,608)
State taxes and fees................................................... - (224) (202)
Breakage............................................................... (160) (148) (150)
------------ ----------- ------------
Net commissions from live racing....................................... 3,275 2,673 2,385
----------- ----------- ------------
Guest handle........................................................... 120,433 112,139 93,543
Return to public....................................................... (94,636) (88,471) (74,252)
Purses and breeders awards............................................. (8,940) (7,765) (6,237)
Host fee............................................................... (4,025) (3,537) (2,982)
State taxes and fees................................................... (1,425) (1,545) (1,246)
Breakage............................................................... (587) (509) (526)
------------ ----------- ------------
Net commissions from guest simulcasting................................ 10,820 10,312 8,300
------------ ----------- ------------
Host handle............................................................ 208,987 162,965 128,252
Receiving track expenses............................................... (202,960) (158,308) (124,096)
Purses and breeders awards............................................. (2,025) (1,462) (1,565)
------------ ----------- ------------
Net commission from host simulcasting.................................. 4,002 3,195 2,591
------------ ----------- ------------
Total pari-mutuel commissions, net..................................... $ 18,097 $ 16,180 $ 13,276
============ =========== ============
</TABLE>
Non-statutory Purse Funding
On January 10, 2000, the Race Park entered into a new agreement with the
TTHBPA. This new agreement, like the one it replaced, provided for the recovery
of purse overpayments of $660 in 1999, and provides for the recovery of $631
during the year ended December 31, 2000. The Partnership records such recoveries
only as they are earned and received.
6. NOTES PAYABLE
Notes payable consist of the following:
<TABLE>
<CAPTION>
DECEMBER, 31
--------------------------
1999 1998
----------- ------------
<S> <C> <C>
11% Senior Secured Extendible Notes due September 1, 2001 (net of 39,436
unamortized discount of $9,070 and $12,684 as of December 31, 1999 and
1998, respectively)................................................................ $ 47,782 $
Accrued interest to be paid in-kind................................................... 1,561 1,433
----------- ------------
49,343 40,869
Unsecured promissory notes............................................................ 190 197
Payable to Limited Partners........................................................... 23 23
----------- ------------
Total........................................................................... 49,556 41,089
Less current portion, included in Other Liabilities................................... (8) (8)
----------- ------------
$ 49,548 $ 41,081
=========== ============
</TABLE>
The Extendible Notes had an initial aggregate principal amount of $37,500,
mature on September 1, 2001, bear interest at the rate of 11% per annum and are
secured by substantially all the assets of the Partnership. The maturity date of
the Extendible Notes may be extended to September 1, 2003 (with an increase in
the rate of interest to 13% per annum) if the Texas legislature passes
significant gaming legislation (as defined) between January 1, 2001 and August
15, 2001. The indenture governing the Extendible Notes (the "INDENTURE") limits
the Partnership's ability to incur indebtedness and liens, to engage in
transactions with affiliates, to make investments and to make distributions,
although the Indenture does allow the Partnership to become involved in certain
gaming, entertainment and other ventures.
The Partnership is amortizing the difference between the aggregate
principal amount of the Extendible Notes and their estimated fair value as
additional interest expense using the effective interest method.
Interest on the Extendible Notes accrues in-kind and is not payable in
cash until a certain level of cash flow from operations has been achieved. Once
cash interest payments commence, interest payments may not thereafter be paid
in-kind. The Partnership issued $5,891 and $5,292 of Extendible Notes during the
years ended December 31, 1999 and 1998, respectively, as payment in-kind for
accrued interest. Interest payments are due on the Extendible Notes on April 1
and October 1 of each year until the Extendible Notes mature.
In December, 1999, the Partnership purchased and retired $1,160 face value
of Extendible Notes together with the related accrued interest. The transaction
resulted in a loss of approximately $215 and is shown on the accompanying
statement of operations as an extraordinary item.
The Partnership has entered into an unsecured promissory note. The note
bears interest at 6 1/2% per annum and is due and payable in thirty equal annual
installments to the Harris County Toll Road Authority, operator of the Sam
Houston Parkway. This note represents one-half of the costs incurred to
construct the entrance and exit ramps adjacent to the Race Park. Payments of
approximately $8 plus accrued interest are due annually on April 30 through the
year 2024.
The New Investor Group has provided the Partnership with a $1,700 line of
credit. This line of credit would be used to fund future cash flow requirements
should the Partnership require it. Each member of the New Investor Group, other
than MAXXAM wholly owned subsidiaries, has secured their portion of the line of
credit with cash in the amount of $23, which is held in an escrow account. The
portion of the line of credit provided by wholly owned subsidiaries of MAXXAM is
secured by the guarantee of MAXXAM. Borrowings on the line of credit would bear
interest at 11% per annum and would be subordinate to the Extendible Notes. The
cash collateral for the line of credit is reflected as restricted cash in the
balance sheet.
The scheduled maturities for the Partnership's notes payable outstanding
at December 31, 1999 are as follows: December 31, 2000 - $8; 2001 - $58,443;
2002 - $8; 2003 - $8; 2004 - $8; thereafter $152. In the event the Partnership
continues to issue additional Extendible Notes as payment in-kind for accrued
interest, the total amount due on the Extendible Notes at maturity in September
2001 will be $69,494.
7. PARTNERS' DEFICIT
The Partnership is currently comprised of the Managing General Partner,
the Additional General Partner and eight limited partners.
The profits and losses of the Partnership are allocated to the partners in
accordance with their percentage interests, after giving effect to certain
special allocations. However, all net losses (other than nonrecourse deductions)
in excess of the positive capital account balance of any limited partner or the
Additional General Partner are to be allocated to the Managing General Partner.
Income is to be specially allocated to restore a partner's deficit capital
account prior to allocating net profits based on the partner's percentage
interest.
In the event of a capital call by the Partnership to fund operating
losses, holders of the Extendible Notes may contribute Extendible Notes in lieu
of cash in order to maintain their equity position in the Partnership. So long
as the Extendible Notes are outstanding, the Board of Directors of the
Additional General Partner are entitled to designate at least one-third of the
directors of the Managing General Partner (the "AGP DIRECTORS"), subject to the
reasonable approval of the owner of the Managing General Partner. Certain
significant events (e.g. mergers, consolidations, the sale of all or the
substantial portion of the Partnership's assets, reorganizations, incurrence of
debt in excess of $5,000 and voluntary acts of insolvency) require the approval
of a majority of all of the directors, including a majority of the AGP Directors
voting as a separate class.
8. MANAGEMENT AGREEMENTS
As of the Effective Date, the Managing General Partner began managing the
Partnership and the Race Park in accordance with the Amended Partnership
Agreement. Annual management fees are the greater of (a) $750 or (b) an
incentive fee equal to .65% of all gross revenues (as defined). Management fees
are deferred until two consecutive semi-annual cash interest payments have been
made to the holders of the Extendible Notes. Unpaid management fees accrue
interest at the rate of 11% per annum. All such management fees are subordinated
to the Extendible Notes. As of December 31, 1999 and 1998, the Partnership has
accrued $3,874 and $2,826 of management fees, including interest of $697 and
$399, respectively, due to the Managing General Partner.
9. RELATED PARTY TRANSACTIONS
Management and other professional fees for the years ended December 31,
1999, 1998 and 1997 include $495, $425 and $488 related to costs incurred for
services provided by MAXXAM and certain of its subsidiaries. Included in
accounts payable at December 31, 1999 and 1998, were obligations to MAXXAM for
such costs of $0 and $45, respectively.
Management and other professional fees for the years ended December 31,
1999, 1998 and 1997 include $22, $32 and $147 of costs incurred by an affiliate
for legal services and to coordinate legislative and other developmental efforts
of the Partnership. Additionally, the Partnership engages affiliates for legal
and other consulting services in the normal course of business. During the years
ended December 31, 1999, 1998 and 1997, the Partnership incurred fees of $62,
$54 and $70, respectively, with respect to these services.
10. COMMITMENTS AND CONTINGENCIES
The Partnership has entered into noncancellable service and operating
lease agreements with several vendors to provide services in addition to
agreements for the use of equipment. Certain of these agreements call for
contingent rentals based upon a variety of factors, the most significant of
which are the number of live racing days and specified percentages of amounts
wagered. Future minimum lease and commitment payments under such noncancellable
service and lease agreements, having a remaining term in excess of one year at
December 31, 1999, are as follows: years ending December 31, 2000 - $576; 2001 -
$288; 2002 - $288; 2003 - $190; 2004 - $90; thereafter $2. The Partnership
incurred approximately $484, $462, and $1,384, including contingent fees and
rentals, for the years ended December 31, 1999, 1998 and 1997, respectively, for
such services and operating lease obligations.
Beginning January 1, 2000, the Partnership became a participant in a
self-insured group health program of MAXXAM. Under the program, there are both
an individual and an aggregate stop-loss limit.
The Partnership is involved in claims and litigation arising in the
ordinary course of business. While there are uncertainties inherent in the
ultimate outcome of such matters and it is impossible to presently determine the
ultimate costs that may be incurred, management believes that the outcome of
such matters should not have a material adverse effect upon the Partnership's
consolidated financial position, results of operation or liquidity.
11. SUBSEQUENT EVENT
On January 6, 2000, the Race Park, through its wholly-owned subsidiary,
SHRP Valley LLC., entered into a stock purchase agreement with Ladbroke Racing
Corporation to purchase 100% of the issued and outstanding capital stock of
Ladbroke Racing Texas Corporation ("LADBROKE") for $2.35 million in cash.
Ladbroke owned a greyhound racetrack located in Harlingen, Texas. Ladbroke's
name was subsequently changed to Valley Race Park Inc. The transaction received
the approval of the Texas Racing Commission on January 19, 2000 and was
completed on January 24, 2000. Race Park management re-opened the facility on
March 17, 2000 and plans to conduct year around horse and dog simulcasting
and a three to four month season of live greyhound racing at the track beginning
in December 2000.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information, as of March 1, 2000,
with respect to the executive officers of the Partnership and the directors of
the Managing General Partner.
<TABLE>
<CAPTION>
THE PARTNERSHIP
NAME AGE POSITION
- ------------------------------- ------------- ---------------------------------------------------
<S> <C> <C>
James D. Noteware 47 President (1)
Robert L. Bork 61 Senior Vice President and General Manager (2)
Ann M. McGovern 39 Vice President of Operations
Michael J. Vitek 37 Vice President of Finance
C. Bryan Pettigrew III 31 Vice President of Marketing (4)
James H. Paulin 56 Vice President
<CAPTION>
THE MANAGING GENERAL PARTNER
NAME AGE POSITION
- ------------------------------- ------------- ---------------------------------------------------
<S> <C> <C>
Charles E. Hurwitz 59 Chairman of the Board
D. Kent Anderson 58 Director (3)
J. Kent Friedman 56 Director
James D. Noteware 47 Director
Paul N. Schwartz 53 Director
<FN>
- ---------------------------
(1) Mr. Noteware is not an employee of the Partnership, the Race Park or the
Managing General Partner.
(2) Principal executive officer of the Partnership
(3) Until such time as the Extendible Notes are repaid, the Additional General
Partner is entitled to designate at least one-third of the directors of
the Managing General Partner (the "AGP DIRECTORS"). D. Kent Anderson
currently serves as an AGP Director, with one vacancy existing.
(4) Mr. Pettigrew submitted his resignation effective March 31, 2000.
</FN>
</TABLE>
James D. Noteware has served as President of the Partnership since August
1994. Mr. Noteware has also served as a Director and President of the Managing
General Partner since October 1995 and April 1996, respectively. Mr. Noteware
previously served as interim General Manager of the Partnership from November
1994 through October 1995. Mr. Noteware has served as a Director and Chief
Executive Officer of MAXXAM Property Company ("MPC"), a wholly owned subsidiary
of MAXXAM, since January 1993 and was elected Chairman of the Board in September
1999. From January 1993 until September 1999, Mr. Noteware also served MPC as
its President. From November 1990 through December 1992, Mr. Noteware was
Chairman, President and Chief Executive Officer of Phoenix Consulting, Inc., a
real estate management and consulting company. Mr. Noteware served as a national
director in the Real Estate Advisory Services Department of Price Waterhouse
from April 1991 through January 1993. Prior to November 1990, Mr. Noteware
served as National Director in the Real Estate Advisory Services Department at
Laventhol & Horwath.
Robert L. Bork has served as Senior Vice President and General Manager of
the Partnership since October 1995. Mr. Bork previously served four years as
Vice President-General Manager and Chief Operating Officer of Arlington
International Racecourse, Inc. in Arlington Heights, Illinois. Prior to such
time, Mr. Bork served as Vice President-General Manager of Philadelphia Park in
Benslem, Pennsylvania and Garden State Park in Cherry Hill, New Jersey. Mr. Bork
is a director and Secretary of the Thoroughbred Racing Association of America, a
director of the Thoroughbred Racing Protective Bureau, Chairman of the
Thoroughbred Racing Association Technology Committee and a director of the
Cy-Fair Chamber of Commerce.
Ann M. McGovern has served as Vice President of Operations of the
Partnership since September 1994. Ms. McGovern previously served for 11 years
with the Racing Division of the Edward J. De Bartolo Corporation, most recently
as Director of Operations at Remington Park in Oklahoma City, Oklahoma from
April 1991 to October 1994 and prior to that as the Assistant Director of
Operations since 1988.
Michael J. Vitek has served as Vice President of Finance of the
Partnership since November 1999. He served as Vice President of Accounting of
the Partnership from November 1994 to November 1999. Mr. Vitek previously served
from April 1994 to November 1994 as Vice President, Finance and Chief Financial
Officer of Hysan Corporation, a chemical manufacturing and distribution company
and a subsidiary of Wedge Group, Inc., a private investment company. Mr. Vitek
previously served as Corporate Controller of Wedge Group, Inc. from October 1991
to March 1994. He previously served for six years with the public accounting
firm of KPMG Peat Marwick, most recently as a Senior Manager.
C. Bryan Pettigrew III has served as Vice President of Marketing of the
Partnership since November 1999. Mr. Pettigrew served as Director of Marketing
for the Partnership from June 1995 until November 1999. Prior to that, Mr.
Pettigrew was Director of Promotions at Remington Park in Oklahoma City,
Oklahoma since 1989.
James H. Paulin, Jr.has served as Vice President of the Partnership since
November 1993. Mr. Paulin served as Secretary-Treasurer of Federated Development
Company ("FEDERATED") from May 1983 to December 1998, and Secretary of Federated
from March 1977 to December 1998. Federated is a Texas corporation primarily
engaged in the management of real estate investments and, through its position
as a significant stockholder of MAXXAM, in the businesses conducted by MAXXAM.
Charles E. Hurwitz has served as a Director and the Chairman of the Board
of the Managing General Partner since May 1993 and October 1995, respectively.
He served as President of the Managing General Partner from May 1993 until April
1996. Mr. Hurwitz has served as a member of the Board of Directors and the
Executive Committee of MAXXAM since August 1978 and was elected as Chairman of
the Board and Chief Executive Officer of MAXXAM in March 1980. Mr. Hurwitz also
served MAXXAM as President from January 1993 to January 1998. Mr. Hurwitz has
served as a director of Kaiser Aluminum Corporation ("KAISER"), a majority-owned
subsidiary of MAXXAM, since October 1988, and as a director of Kaiser Aluminum &
Chemical Corporation ("KACC"), a fully integrated aluminum producer that is a
subsidiary of Kaiser, since November 1988. Mr. Hurwitz is Chairman of the Board,
Chief Executive Officer and President of MAXXAM Group Inc. ("MGI"), a wholly
owned subsidiary of MAXXAM which is engaged in forest products operations, and
MGI's parent, MAXXAM Group Holdings Inc. ("MGHI"). Mr. Hurwitz has been, since
January 1974, Chairman of the Board and Chief Executive Officer of Federated.
D. Kent Anderson is a Director of the Managing General Partner per the
designation of the Additional General Partner. Mr. Anderson has been the
Executive Banking Officer of Compass Bank since its April 1996 merger with Post
Oak Bank. From 1991 until the merger, Mr. Anderson was Chairman of the Board and
Chief Executive Officer of Post Oak Bank. From 1988 through October 1991, Mr.
Anderson held several executive positions, including Chairman of the Board, with
First Interstate Bank of Texas, N.A. Mr. Anderson is currently a Trustee and
member of the Board of Governors of Rice University. He has served on several
State of Texas committees and on the Board of the Greater Houston Partnership,
the Texas Chamber of Commerce, and the Texas Research League.
J. Kent Friedman is a Director of the Managing General Partner per the
designation of the Additional General Partner. Mr. Friedman was appointed
General Counsel of MAXXAM in December 1999. He served as Acting General Counsel
of MAXXAM from March 1998 until his appointment as General Counsel. Mr. Friedman
was a partner of Mayor, Day, Caldwell & Keeton, L.L.P., a Houston law firm, from
1982 through December 1999. Prior to such time Mr. Friedman was a partner at
Butler & Binion, also a Houston law firm. Since December 1999, Mr. Friedman also
serves as Senior Vice President and General Counsel of Kaiser and KACC and as a
manager on the Board of Managers of Scotia Pacific Company LLC, an indirect
subsidiary of MGI engaged in forest products operations.
Paul N. Schwartz is a Director and Vice President of the Managing General
Partner. Mr. Schwartz was named a Director, President and Chief Operating
Officer of MAXXAM in January 1998. Mr. Schwartz has served as Chief Financial
Officer of MAXXAM since January 1995. From January 1995 to January 1998 he also
served as Executive Vice President of MAXXAM. Prior to that he served as Senior
Vice President-Corporate Development of MAXXAM from June 1987 to January 1995,
as Vice President-Corporate Development from July 1985 to June 1987 and as Vice
President since 1982. Mr. Schwartz also serves as a Director and a Vice
President and Chief Financial Officer of MGHI and MGI and as a Vice President
and a manager on the Board of Managers of Scotia Pacific Company LLC, an
indirect subsidiary of MGI engaged in forest products operations.
Directors of the Managing General Partner are elected annually to serve
for one year and until their successors are duly elected, qualified, and
approved by the Racing Commission. Each director of the Managing General Partner
is required to be approved by the Racing Commission. The current directors of
the Managing General Partner have received the approval of the Racing
Commission.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth compensation information, cash and
non-cash, for each of the Partnership's last three completed fiscal years with
respect to (a) all individuals serving as the Partnership's chief executive
officer during the last fiscal year, and (b) the other most highly compensated
executive officers of the Partnership (other than the current chief executive
officer) who were serving as executive officers of the Partnership at the end of
1999 and who received over $100,000 in aggregate salary and bonus in respect of
1999.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
---------------------------------------------
(A) (B) (C) (D) (E) (F)
(1)
OTHER ANNUAL ALL OTHER
SALARY BONUS COMPENSATION(1) COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($)
- ----------------------------- ------- -------------- ------------ --------------- ------------
<S> <C> <C> <C> <C> <C>
Robert L. Bork (2) 1999 225,000 88,333 - -
Senior Vice President and 1998 216,320 63,333 - -
General Manager 1997 208,000 35,000 - -
Ann McGovern 1999 125,000 38,333 - -
Vice President of 1998 119,000 28,333 - -
Operations 1997 114,400 15,000 - -
Michael J. Vitek 1999 115,000 38,333 - -
Vice President of 1998 107,000 28,333 - -
Finance 1997 93,600 15,000 - -
<FN>
- ---------------------------
(1) Excludes perquisites and other personal benefits because the aggregate
amount of such compensation is the lesser of either $50,000 or 10% of
the total of annual salary and bonus reported for the named executive
officer.
(2) Mr. Bork served as chief executive officer of the Partnership during 1997,
1998 and 1999. Mr. Bork commenced his employment with the Partnership on
October 25, 1995.
</FN>
</TABLE>
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Agreements have been entered into with each of Messrs. Bork and Vitek and
Ms. McGovern regarding their employment. Mr. Bork's agreement provides for a
base annual salary of $200,000 and a bonus of $25,000 on the first anniversary
date of his employment. The agreement further provides that commencing the
second year of employment he will participate in an incentive compensation plan
of the Partnership. Mr. Bork's agreement also provided for payment of certain
relocation expenses. The incentive compensation plan referred to above was
provided for in general terms pursuant to the Plan; however, no specific details
have been proposed or formulated to date with respect to such an incentive plan.
Ms. McGovern's agreement provides for a base annual salary of $110,000 per year,
a discretionary bonus of $10,000 in the first year of employment and the payment
of certain relocation expenses. The agreement also indicated that Ms. McGovern
would be considered for inclusion in the prior employee incentive program of the
Partnership. Mr. Vitek's agreement provides for a base annual salary of $90,000
and a discretionary bonus of $15,000 after the first year of employment.
On December 30, 1998, Messrs. Bork and Vitek, along with Ms. McGovern,
were each awarded a one-time bonus with respect to the Partnership's 1998
operating results. Each of these bonuses is payable in three equal annual
installments, with the first two of such installments having been received by
each of the executives on December 31, 1998 and December 31, 1999, respectively,
and with the remaining installment of like amount being due and payable on
December 31, 2000. Each of the executives will receive the remaining installment
of the bonus so long as he or she continues to be employed by the Partnership as
of the respective payment dates.
COMPENSATION OF DIRECTORS AND POLICY COMMITTEE MEMBERS
Messrs. Anderson and Friedman received $25,000 per year through December
31, 1999, plus reimbursement of expenses, as compensation for their services.
The other directors of the Managing General Partner are reimbursed for their
expenses but are not otherwise compensated by the Partnership for their services
as such (including, beginning in 2000, Mr. Friedman as he has joined MAXXAM as
General Counsel).
COMPENSATION COMMITTEE REPORT
SHRP General Partner, Inc. is the managing general partner of the
Partnership, and the names appearing below are all of the directors of SHRP
General Partner, Inc. The Board of Directors of SHRP General Partner, Inc. (the
"BOARD") acts with respect to compensation matters, as a compensation committee
has not been appointed.
The executive officers named in the Summary Compensation Table have been
retained and are compensated in accordance with their respective individual
employment letter agreements. In reaching those agreements, the customary levels
and types of pay prevalent for such positions in the horse racing industry were
considered and served as guidelines. The individual salary histories and
previous experience of the executives were also considered as was the timing
within which the Partnership needed to replace previously discharged executives.
Other than participation in a group health insurance program, which is partially
employer-provided, and 401(k) matching of 4% of qualifying compensation, the
only non-salary direct compensation being provided to such executives are
incentive bonuses. Executives may be considered for a discretionary bonus on an
annual basis. The President of the Partnership outlines functions and goals for
each executive officer and formulates bonus levels for executive officers (with
the advice and consent of the Board in certain instances).
D. Kent Anderson
J. Kent Friedman
Charles E. Hurwitz
James D. Noteware
Paul N. Schwartz
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
THE PARTNERSHIP
The following table sets forth the beneficial ownership of partnership
interests in the Partnership as of March 1, 2000 of (i) each person known by the
Partnership to beneficially own five percent or more of the outstanding
partnership interests, (ii) each director of the Managing General Partner who
owns a partnership interest, and (iii) all directors and officers of the
Managing General Partner and the Partnership as a group. Except as otherwise
indicated below, each of the persons named in the table has sole voting and
investment power with respect to the partnership interest shown as beneficially
owned by him.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AGGREGATE
BENEFICIAL OWNER TYPE OF INTEREST PARTNERSHIP INTEREST
- ----------------------------------------- ---------------------------------- --------------------------
<S> <C> <C>
New SHRP Acquisition, Inc. (1) Limited Partner 64.8%
SHRP Equity, Inc. (2) Additional General Partner 33.3%
<FN>
(1) MAXXAM owns all of the issued and outstanding shares of common stock of
New SHRP Acquisition, Inc. Mr. Charles E. Hurwitz and affiliates of
Federated Development Company ("FEDERATED") collectively own 99.2% and
39.9% of MAXXAM's Class A preferred stock and common stock, respectively
(resulting in a combined voting control of approximately 69.8%). Mr.
Hurwitz is the Chairman of the Board and Chief Executive Officer of MAXXAM
and Chairman and Chief Executive Officer of Federated. Federated is wholly
owned by Mr. Hurwitz, members of his immediate family and trusts for the
benefit thereof.
(2) The outstanding shares of stock of SHRP Equity, Inc. were issued to the
holders of allowed unsecured claims in connection with the bankruptcy
proceedings of the Partnership. Wholly owned subsidiaries of MAXXAM,
beneficially own 99.5% of the issued and outstanding stock of SHRP
Equity, Inc. which equates to a 33.1% interest in the Partnership.
</FN>
</TABLE>
THE MANAGING GENERAL PARTNER
Sam Houston Entertainment Corp., a wholly owned subsidiary of MAXXAM, owns
all of the common stock of the Managing General Partner.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain individuals employed by MAXXAM and its wholly owned subsidiaries
provide management, legal, financial, corporate development and other services
to the Partnership from time to time. These affiliates are reimbursed for their
estimated actual costs incurred in providing services to the Partnership. As of
March 1, 2000, MAXXAM and its subsidiaries have received an aggregate of
$495,334 in respect of such services performed in 1999.
J. Kent Friedman, former AGP Director, was a partner of a law firm through
December 1999 that provided services to the Partnership. In addition, such law
firm has represented MAXXAM in various matters not related to the Partnership.
The Partnership had an agreement with Mr. Friedman's law firm to coordinate
legislative efforts. As of March 1, 2000, Mr. Friedman's former law firm has
received an aggregate of $37,335 in respect of such services performed in 1999.
See also Notes 8 and 9 to the Consolidated Financial Statements appearing in
Item 8.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) INDEX TO FINANCIAL STATEMENTS
1. FINANCIAL STATEMENTS (APPEARING IN ITEM 8):
Report of Independent Certified Public Accountants
Consolidated balance sheets at December 31, 1999 and 1998
Consolidated statements of operations for the three years
ended December 31, 1999
Consolidated statements of partners' deficit for the three years ended
December 31, 1999
Consolidated statements of cash flows for the three years ended
December 31, 1999
Notes to consolidated financial statements
2. FINANCIAL STATEMENT SCHEDULES:
All schedules are inapplicable or the required information is included
in the financial statements or the notes thereto.
(B) REPORTS ON FORM 8-K
None.
(C) EXHIBITS
Reference is made to the Index of Exhibits immediately preceding the
exhibits hereto (beginning on page 44) which index is incorporated
herein by reference.
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.
SAM HOUSTON RACE PARK, LTD.
Date: March 22, 2000
By: /S/ MICHAEL J. VITEK
Michael J. Vitek,
Vice President of Finance
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
Registrant and in the capacities and on the dates indicated.
Date: March 22, 2000
By: /S/ ROBERT L. BORK
Robert L. Bork General Manager
(Principal Executive Officer)
Date: March 22, 2000
By: /S/ MICHAEL J. VITEK
Michael J. Vitek,
Vice President of Finance
(Principal Financial and
Accounting Officer)
SAM HOUSTON RACE PARK, LTD.
By: SHRP General Partner, Inc.
its Managing General Partner
Date: March 22, 2000
By: /S/ CHARLES E. HURWITZ
Charles E. Hurwitz,
Chairman of the Board
Date: March 22, 2000
By: /S/ PAUL N. SCHWARTZ
Paul N. Schwartz, Director
Date: March 22, 2000
By: /S/ JAMES D. NOTEWARE
James D. Noteware, Director
Date: March 22, 2000
By: /S/ D. KENT ANDERSON
D. Kent Anderson, Director
Date: March 22, 2000
By: /S/ J. KENT FRIEDMAN
J. Kent Friedman, Director
<TABLE>
<CAPTION>
Exhibit
Number Description
- -------------- ----------------------------------------------------------------
<S> <C>
3.1 Third Amended and Restated Limited Partnership Agreement of
Sam Houston Race Park, Ltd. dated October 6, 1995 (incorporated
herein by reference to Exhibit 3.1 to the Partnership's Form
10-Q dated September 30, 1995)
4.1 Amended and Restated Indenture dated October 6, 1995 by and
among the Partnership, New SHRP Capital Corp., SHRP General
Partner, Inc. and First Bank National Association, Trustee,
including the related form of Note (incorporated herein by
reference to Exhibit 4.1 to the Partnership's Form 10-Q dated
September 30, 1995)
4.2 Amended and Restated Deed of Trust, Assignment, Security
Agreement and Financing Statement dated October 6, 1995 among
the Partnership, Richard Prokosch, as Trustee, and First Bank
National Association, as Mortgagee (incorporated herein by
reference to Exhibit 4.2 to the Partnership's Form 10-Q dated
September 30, 1995)
4.3 Deed of Trust, Assignment, Security Agreement and Financing
Statement dated October 6, 1995 among the Partnership, Richard
Prokosch, as Trustee, and First Bank National Association, as
Mortgagee (incorporated herein by reference to Exhibit 4.3 to
the Partnership's Form 10-Q dated September 30, 1995)
4.4 Amended and Restated License Negative Pledge dated October 6,
1995 executed by the Partnership in favor of Trustee
(incorporated herein by reference to Exhibit 4.4 to the
Partnership's Form 10-Q dated September 30, 1995)
4.5 Amended and Restated Real Estate Tax Escrow and Security
Agreement dated July 1, 1997 among the Partnership, Trustee and
Southwest Bank of Texas
9 Voting Agreement dated October 6, 1995 among SHRP General
Partner, Inc., Sam Houston Entertainment Corp., SHRP Equity,
Inc. and MAXXAM Inc. (incorporated herein by reference to
Exhibit 9 to the Partnership's Form 10-Q dated September 30,
1995)
10.1 Form of Line of Credit Agreement dated October 6, 1995 between
the Partnership and certain lenders (the "LINE OF CREDIT
AGREEMENT") (incorporated herein by reference to Exhibit 10.1
to the Partnership's Form 10-Q dated September 30, 1995)
10.2 Form of Cash Escrow Agreement with respect to the Line of
Credit Agreement (incorporated herein by reference to Exhibit
10.2 to the Partnership's Form 10-Q dated September 30, 1995)
10.3 Guaranty of MAXXAM Inc. dated October 6, 1995 in favor of the
Partnership with respect to the obligations of SHRP General
Partner, Inc. under the Line of Credit Agreement (incorporated
herein by reference to Exhibit 10.3 to the Partnership's Form
10-Q dated September 30, 1995)
10.4 Registration Rights Agreement dated October 6, 1995 among the
Partnership, SHRP Equity, Inc. and First Bank National
Association (incorporated herein by reference to Exhibit 10.5
to the Partnership's Form 10-Q dated September 30, 1995)
10.5 Instrument of Adherence of MAXXAM Inc. dated October 6, 1995
(incorporated herein by reference to Exhibit 10.7 to the
Partnership's Form 10-Q dated September 30, 1995)
10.6 Instrument of Adherence of Charles E. Hurwitz dated October 6,
1995 (incorporated herein by reference to Exhibit 10.8 to the
Partnership's Form 10-Q dated September 30, 1995)
10.7 Horsemen's Agreement dated November 26, 1996 between Texas
Thoroughbred HBPA, Inc. and the Partnership (incorporated
herein by reference to Exhibit 10.13 to the Partnership's Form
10-K dated December 31, 1996)
10.8 Addendum dated December 1, 1997 to Horsemen's Agreement between
the Texas Thoroughbred HBPA, Inc. and the Partnership
10.9 Horsemen's Agreement dated March 6, 1997 between the Texas
Horsemen's Benevolent and Protective Association and
the Partnership
10.10 Addendum dated December 1, 1997 to Horsemen's Agreement between
the Texas Horsemen's Benevolent and Protective Association and
the Partnership
10.11 Totalisator Services Agreement dated September 8, 1997 between
Autotote Systems, Inc. and the Partnership (incorporated herein
by reference to Exhibit 10.1 to the Partnership's Form 10-Q for
the quarter ended September 30, 1997)
10.12 Promissory Note dated December 13, 1994 by the Partnership in
favor of Harris County, Texas (incorporated herein by reference
to Exhibit 10.41 to the Partnership's Form 10-K for the year
ended December 31, 1994)
10.13 Satellite Transmission Agreement dated February 24, 1998 between
Autotote Communications Services, Inc. and the Partnership
10.14 Agreement dated December 30, 1993 between the Partnership and
International Sound Corporation (incorporated herein by
reference to Exhibit 10.45 to the Partnership's Form 10-K for
the year ended December 31, 1994)
10.15 Amendment to Agreement dated December 30, 1993 between the
Partnership and International Sound Corporation (incorporated
herein by reference to Exhibit 10.1 to the Partnership's
Form 10-Q dated June 30, 1997)
10.16 Alcoholic Beverage Concession Agreement dated September 19, 1996
between 97, Inc. and the Partnership (incorporated herein by
reference to the Partnership's Form 10-K dated December 31,
1996)
*10.17 Horsemen's Agreement dated January 11, 2000 between Texas
Thoroughbred HBPA, Inc. and the Partnership (incorporated here
by reference to Exhibit 10.17 to the Partnership's Form 10-K
for the year ended December 31, 1999)
*10.18 Totalisator Services Agreement dated February 1, 2000 between
Autotote Systems, Inc. and the Partnership (incorporated herein
by reference to Exhibit 10.18 to the Partnership's Form 10-K
for the year ended December 31, 1999)
*10.19 Stock Purchase Agreement dated January 6, 2000 between Ladbroke
Racing Corporation and the Partnership (incorporated herein by
reference to Exhibit 10.19 to the Partnership's Form 10-K for
the year ended December 31, 1999)
Executive Compensation Plans and Arrangements
---------------------------------------------
10.20 Employment Agreement, dated November 24, 1992 between MAXXAM
Property Company and James D. Noteware (incorporated herein by
reference to Exhibit 10.33 to the Partnership's Form 10-K for
the year ended December 31, 1994)
10.21 Letter Agreement, dated August 19, 1994 between the Partnership
and Ann M. McGovern (incorporated herein by reference to
Exhibit 10.34 to the Partnership's Form 10-K for the year ended
December 31, 1994)
10.22 Letter Agreement, dated November 11, 1994 between the
Partnership and Michael J. Vitek (incorporated herein by
reference to Exhibit 10.35 to the Partnership's Form 10-K for
the year ended December 31, 1994)
10.23 Agreement between the Partnership and Robert L. Bork
(incorporated herein by reference to Exhibit 10.10 to the
Partnership's Form 10-Q dated September 30, 1995)
Other
-----
*27 Financial Data Schedule
<FN>
- ---------------------------
* Included with this filing.
</FN>
</TABLE>
AGREEMENT
BETWEEN TEXAS THOROUGHBRED HBPA, INC.
AND SAM HOUSTON RACE PARK, LTD.
This agreement (the "Agreement"), effective upon signature by all
parties and as of the date last signed below (the "Effective Date"), represents
the understandings and agreements by and between Sam Houston Race Park, Ltd.,
5847 San Felipe, Suite 2600, Houston, Texas 77057, a racing association
(hereinafter "SHRP"), which holds the license to operate a Class 1 horse
racetrack, Sam Houston Race Park at 7575 N. Sam Houston Parkway West, Houston,
Texas 77064 (the "Racetrack"), and the Texas Thoroughbred HBPA, Inc., a Texas
non-profit corporation, Post Office Box 142533, Austin, Texas 78714 (hereinafter
the "Association").
WHEREAS, SHRP acknowledges that it is the appropriate entity recognized
and/or authorized by the Texas Racing Commission (i) to conduct thoroughbred
race meetings at Sam Houston Race Park, (ii) to exclusively negotiate, contract
and deliver contracts applicable to thoroughbred race meetings to the
officially-recognized horsemen's organization for all pari-mutuel horse race
meetings held in the state of Texas, and (iii) to comply with the regulatory
requirements of the Texas Racing Commission;
WHEREAS, the Texas Racing Commission has formally recognized the Texas
Horsemen's Partnership, L.L.P. (herein the "Partnership") as the officially
recognized horsemen's organization for all pari-mutuel horse race meetings held
in the state of Texas;
WHEREAS, the Association is a member of the Partnership and has the
exclusive right to negotiate, execute and deliver contracts applicable to
thoroughbred race meetings in Texas;
WHEREAS, the Association is the designated "horsemen's group," as that
term is defined in the Interstate Horse Racing Act, for purposes of negotiating,
executing and delivering contracts with racing associations in Texas relating to
thoroughbred racing and interstate simulcast wagering;
WHEREAS, SHRP and the Association entered into that certain Horsemen's
Agreement between the Association and SHRP, effective January 1, 1997, which was
subsequently amended by an Addendum, effective December 1, 1997, respectively
(herein collectively referred to as the "Prior Agreement");
WHEREAS, SHRP and the Association agree that they are each interested
in: (i) the advancement, maintenance, promotion and improvement of thoroughbred
racing in the state of Texas; (ii) the generation and retention of goodwill of
the public toward horse racing; (iii) the conduct of horse racing in the state
of Texas and at the Racetrack on the highest possible plane of integrity through
the establishment and maintenance of high standards of fairness, honesty and
accountability; and (iv) the orderly commencement and conduct of horse racing at
the Racetrack without disruption, interference or distraction; and
WHEREAS, the parties now desire to enter into a new agreement which
will set forth terms and conditions relating to, among other subjects, (i) the
appropriate allocation and distribution between the parties of funds generated
from: live thoroughbred racing at the Racetrack, simulcasting of horse racing
[including both interstate and intrastate, and both import (guest) and export
(host) simulcasting] and cross-species racing, if any, off-track wagering, if
any, account wagering, if any, and additional forms of gaming conducted at the
Racetrack, if any; and (ii) matters affecting the relationship between SHRP and
thoroughbred horsemen and backstretch personnel.
NOW, THEREFORE, the parties hereto agree to the following terms and
conditions:
SECTION 1. DEFINITIONS. As used in this Agreement:
1.1 "Act" shall mean the Texas Racing Act, as amended;
1.2 "Additional Forms of Gaming" shall mean any form of legalized
gambling that may be authorized to be conducted at the Racetrack by applicable
law and/or the Commission, including but not limited to, bingo, card games,
video poker machines, slot machines, lottery and/or casino games of any nature;
1.3 "Association" shall mean Texas Thoroughbred HBPA, Inc., a
Texas non-profit corporation;
1.4 "Backstretch Personnel" shall mean all licensed personnel
employed by a Trainer or Owner/Trainer actively engaged in Thoroughbred Racing
at SHRP;
1.5 "Commission" means the Texas Racing Commission, its executive
secretary, staff and employees;
1.6 "Cross-Species Greyhound Simulcasting" or "Cross-Species
Greyhound Simulcast" shall mean the telecast or transmission of live audio and
visual signals of a greyhound race, transmitted from a greyhound Sending Track
to the Racetrack, for the purpose of wagering conducted on the race at the
Racetrack, including any import (guest) simulcasting of greyhound races, whether
interstate or intrastate, at the Racetrack or at SHRP's off-track wagering
facilities, and including account wagering, if any, authorized by this
Agreement, the Act and the Rules;
1.7 "Cross Species Simulcast Signal" shall mean a simulcast signal
of a horse race at a greyhound racetrack facility or a simulcast signal of a
greyhound race at a horse racetrack facility;
1.8 "Custodial Agreement" shall mean the Thoroughbred Owner's
Purse Account Custodial Agreement between SHRP and the Partnership (or the
Officially-Recognized Horsemen's Organization for the exclusive benefit of
Thoroughbred Horsemen, as applicable) governing the daily operation and
management of all Purse-Allocated Monies in the Purse Account in the form
attached hereto as Exhibit "A" and more specifically described in Section 4.3 of
this Agreement;
1.9 "Horse," "horse" or "horsemen" shall mean matters pertaining
collectively to thoroughbred, quarter horse and all other equine breeds and
horsemen engaged in pari-mutuel racing recognized by the Commission;
1.10 "Horsemen's Accounts" or "Horsemen's Bookkeeper Accounts"
shall mean the separate trust fund accounts, more specifically described in
Section 5 hereof, maintained by the Partnership (or the Officially-Recognized
Horsemen's Organization for the exclusive benefit of Thoroughbred Horsemen, as
applicable) or a Texas non-profit corporation organized by the Partnership (or
the Officially-Recognized Horsemen's Organization for the exclusive benefit of
Thoroughbred Horsemen, as applicable) at one or more federally-insured
depositories (or privately-insured depositories approved by the Commission) into
which SHRP shall deposit such funds from the Purse Account or other sources as
necessary to fulfill SHRP's contractual commitment to fund Purses Earned by
Thoroughbred Owners and purses earned by owners of other breeds from live racing
at the Racetrack as provided by this Agreement, the Act and the Rules;
1.11 "Horsemen's Bookkeeper" shall mean the individual or
individuals responsible for handling the Horsemen's Account at the Racetrack
during a Thoroughbred Race Meeting;
1.12 "Licensed" shall mean licensed by the Commission under the
Act, unless otherwise specified;
1.13 "Officially-Recognized Horsemen's Organization" shall mean the
entity officially recognized by the Commission pursuant to the Act and Rules as
the representative horsemen's organization for all horse Owners and Trainers on
matters relating to the conduct of pari-mutuel live horse racing, Simulcasting
and Cross-Species Greyhound Simulcasting at, to or from Texas horse racetracks;
or alternatively, such successor entity recognized by the Commission as the sole
representative horsemen's organization for Thoroughbred Horsemen and
Thoroughbred Racing Interests on such matters;
1.14 "Owner" or "Thoroughbred Owner" shall mean a person who is
licensed as an owner in Texas (or is granted reciprocity pursuant to the Rules)
and owns more than a nominal interest (at least a five percent interest or more)
in one or more Thoroughbred Horses that are engaged in Thoroughbred Racing in
Texas or who owns more than a nominal interest (at least a five percent interest
or more) in a corporation or other entity which owns one or more Thoroughbred
Horses engaged in Thoroughbred Racing in Texas;
1.15 "Owner/Trainer" shall mean a person who is licensed as an
owner/trainer in Texas, and otherwise satisfies the definition of "Owner"
and/or "Trainer" herein;
1.16 "Partnership" means the Texas Horsemen's Partnership, L.L.P.,
a Texas limited liability partnership, which currently is the
Officially-Recognized Horsemen's Organization in the state of Texas;
1.17 "Purse Account" shall mean the trust fund account, legal title
to which is vested in the Partnership (or the Officially-Recognized Horsemen's
Organization for the exclusive benefit of Thoroughbred Horsemen as applicable),
more specifically described in Section 4 hereof, and maintained by SHRP and the
Partnership (or the Officially-Recognized Horsemen's Organization for the
exclusive benefit of Thoroughbred Horsemen, as applicable) pursuant to the terms
of the Custodial Agreement for Thoroughbred Horsemen at one or more
federally-insured depositories (or privately-insured depositories approved by
the Commission) into which all Purse-Allocated Monies generated or set aside by
SHRP from any live, Simulcast and Cross-Species Greyhound Simulcast wagering
pools, as applicable, and Additional Forms of Gaming, if any, for the benefit of
Thoroughbred Horsemen are required to be deposited on a timely basis by SHRP as
provided by this Agreement, the Act and the Rules, and from which disbursements
are authorized for the funding of Purses Earned, payment of the expenses of the
Partnership (or the Officially-Recognized Horsemen's Organization, as
applicable), or such other disbursements as provided by contract between the
Association and SHRP and permitted by the Act and the Rules;
1.18 "Purse Allocation" or "Purse-Allocated Monies" shall mean all
funds generated at the Racetrack from (i) the daily live handle which is
allocable to purses for Owners of Thoroughbred Horses under the terms of this
Agreement, the Act and the Rules; (ii) revenues from Simulcasting and
Cross-Species Greyhound Simulcasting, off-track wagering at SHRP's off-track
wagering facilities, if any, and account wagering, if any, which revenues are
allocable to purses for Owners of Thoroughbred Horses under the terms of this
Agreement, the Act, the Rules, other applicable agreements or the determination
of the Commission, and any agreements with greyhound Racing Associations or
greyhound breed organizations concerning funds derived from Simulcasting and
Cross-Species Greyhound Simulcasting; and (iii) revenues which are allocable to
purses for Owners of Thoroughbred Horses from Additional Forms of Gaming, if
any, conducted at the Racetrack during the term of this Agreement. Such funds,
net of the portion thereof deducted and paid to the Partnership (or the
Officially-Recognized Horsemen's Organization, as applicable) pursuant to
Section 7 hereof, shall be timely deposited by SHRP in the Purse Account in
accordance with the provisions of this Agreement, the Act and the Rules;
1.19 "Purses Earned" shall mean those funds earned by Owners of
Thoroughbred Horses from live Thoroughbred Racing at the Racetrack, maintained
by the Partnership (or the Officially-Recognized Horsemen's organization for the
exclusive benefit of Thoroughbred Horsemen, as applicable) in the Horsemen's
Accounts, and disbursed to Owners of Thoroughbred Horses or others from
Horsemen's Accounts in accordance with the provisions of this Agreement, the Act
and the Rules;
1.20 "Racetrack" means Sam Houston Race Park, a Texas Class 1 horse
racetrack owned and operated by SHRP;
1.21 "Racetrack Associations" shall mean persons or entities
licensed by the Commission under the Act to conduct horse race meetings or
greyhound race meetings, as applicable, with pari-mutuel wagering in the
state of Texas;
1.22 "Receiving Location" means a licensed Racetrack Association in
this state that has been allocated live and simulcast race dates or a facility
not located in this state that is authorized to conduct wagering under the law
of the jurisdiction in which located;
1.23 "Rules" shall mean the rules or regulations promulgated by the
Commission governing all pari-mutuel racing in Texas;
1.24 "SHRP" means Sam Houston Race Park, Ltd., a horse Racing
Association which holds the license to operate a Class 1 horse racetrack at Sam
Houston Race Park in Houston, Texas;
1.25 "Sending Track" means any licensed track for racing in this
state or out-of-state from which a race is transmitted;
1.26 "Simulcasting" or "Simulcast" shall mean the telecast or other
transmission of live audio and visual signals of a horse race, transmitted from
a horse Sending Track to a Receiving Location, for the purpose of wagering
conducted on the race at the Receiving Location, including any import (guest) or
export (host) simulcasting of horse races, whether interstate or intrastate, at,
to or from the Racetrack or at SHRP's off-track wagering facilities, and
including account wagering, if any, authorized by this Agreement, the Act and
the Rules;
1.27 "Thoroughbred Horse" shall mean a thoroughbred racehorse
registered by The Jockey Club which is two (2) years of age or older (under
applicable rules of racing of any racing jurisdiction), which is not retired
from thoroughbred racing and is not retired to breeding, either as a brood mare
or stallion;
1.28 "Thoroughbred Horsemen" is a term used collectively herein to
refer to Thoroughbred Owners, Trainers and Owner/Trainers engaged in
Thoroughbred Racing;
1.29 "Thoroughbred Racing" shall mean Thoroughbred Horse racing at
Thoroughbred Race Meetings or at mixed meetings in the state of Texas;
1.30 "Thoroughbred Horsemen's Racing Interests" shall mean matters
pertaining to Thoroughbred Horsemen engaged in Thoroughbred Racing, as
distinguished from matters pertaining to non-thoroughbreds;
1.31 "Thoroughbred Race Meeting or Meet" shall mean those
consecutive weeks approved for live Thoroughbred Racing by the Commission during
which SHRP is authorized to conduct a live racing program on specified days
during those weeks, together with Simulcasting and Cross-Species Greyhound
Simulcasting conducted during that period, and shall include a reasonable period
of time not to exceed 30 days before the commencement of such meet and after
the ending of such meet to effectuate the purposes of this Agreement;
1.32 "Track Representative" shall mean the Association's on-track
representative dealing with routine administrative matters affecting
Thoroughbred Horsemen, including benevolence requests, at the Racetrack during a
Thoroughbred Race Meeting; and
1.33 "Trainer" shall mean a person who is licensed as a trainer in
Texas, and has one or more Thoroughbred Horses under his direct supervision and
control for racing purposes in Texas and is engaged in Thoroughbred Racing.
SECTION 2. TERM OF AGREEMENT.
2.1 This Agreement supersedes and replaces the Prior Agreement,
except that the obligation of the Association under Section 11 of the Prior
Agreement and carried forward in Section 12.5 of this Agreement shall survive
the termination of the Prior Agreement and this Agreement. This Agreement shall
be in effect and binding upon the parties and their successors and authorized
assigns for all Thoroughbred Racing, Thoroughbred Race Meetings, Simulcasting
and Cross-Species Greyhound Simulcasting relating to SHRP commencing from and
after the Effective Date of this Agreement and extending through December 31,
2001, unless earlier terminated in writing (i) by mutual agreement of the
parties, (ii) by either party on the basis of a material breach by the other
party or (iii) pursuant to Section 2.2 hereof.
2.2 Should Additional Forms of Gaming be conducted at the
Racetrack during the term of this Agreement, both parties agree that a portion
of the incremental revenue derived from the gaming proceeds of any such venture
conducted at SHRP will go to the Thoroughbred Purse Allocation at SHRP. The
division of such proceeds shall be subject to negotiation between the
Association and SHRP and any applicable law, the Act and the Rules. Should the
Association and SHRP fail to reach agreement on the division of such proceeds
prior to (i) the effective date of any legislation which legalizes the
Additional Forms of Gaming or (ii) implementation of any Additional Form of
Gaming, then the Association, at its election, may terminate this Agreement, in
which case the parties agree that this Agreement shall become null and void the
day prior to the effective date of the legislation or implementation of such
Additional Form of Gaming. However, if legislation permitting Additional Forms
of Gaming becomes effective in less than 90 days from its enactment, this
Agreement shall continue in full force and effective until the 90th day
following such enactment, provided SHRP otherwise is not in material breach of
the Agreement, at which date this Agreement shall become null and void.
2.3 If not otherwise terminated by operation of Section 2.1 or 2.2
hereof, prior to the expiration date of this Agreement, representatives of SHRP
and the Association will meet to attempt in good faith to negotiate a successor
agreement. Absent a successor agreement, this Agreement shall continue to govern
the relationship between the parties after the expiration date, unless
terminated by any party hereto, provided that such termination shall be upon
thirty (30) days written notice.
SECTION 3. EXCLUSIVE REPRESENTATIVE.
3.1 The parties recognize that the Association is authorized by the
Partnership to represent Thoroughbred Horsemen and Thoroughbred Horsemen's
Racing Interests in the state of Texas. SHRP recognizes the Partnership (or
alternatively, such successor entity recognized by the Commission as the sole
representative horsemen's organization for Thoroughbred Horsemen and
Thoroughbred Horsemen's Racing Interests), acting through the Association, as
the exclusive and sole representative of Thoroughbred Horsemen during the term
of this Agreement, and SHRP further agrees that with respect to all matters
pertaining to Thoroughbred Racing, Thoroughbred Race Meetings, Simulcasting,
Cross-Species Greyhound Simulcasting, agreements with greyhound Racing
Associations or greyhound breed organizations concerning funds derived from
Simulcasting and Cross-Species Greyhound Simulcasting, if any, SHRP's off-track
wagering facilities, if any, account wagering, if any, and Additional Forms of
Gaming conducted at the Racetrack, if any, as the same shall affect Thoroughbred
Horsemen and Thoroughbred Horsemen's Racing Interests, the Association shall be
the appropriate and sole party in interest to act on behalf of the Partnership
(or alternatively, such successor entity recognized by the Commission as the
sole representative horsemen's organization for Thoroughbred Horsemen and
Thoroughbred Horsemen's Racing Interests) to represent the interests of
Thoroughbred Horsemen and Thoroughbred Horsemen's Racing Interests,
notwithstanding Section 3.13 of the Act. The Association believes that it
represents a majority of the Owners and Trainers starting Thoroughbred Horses in
races during the conduct of any Thoroughbred Racing at the Racetrack during the
term of this Agreement.
3.2 The Association agrees that during the term of this Agreement,
the Association will not utilize nor counsel or encourage Thoroughbred Horsemen
to strike, embargo, boycott or employ similar tactics in dealing with SHRP on
matters concerning or affecting Thoroughbred Horsemen and their relationship to
SHRP and management of the Racetrack; provided, however that nothing herein
shall be deemed to limit or control the conduct of Thoroughbred Horsemen from
individually entering or not entering a Thoroughbred Horse at his discretion in
any Thoroughbred Race Meeting or race.
3.3 SHRP agrees to provide at no charge to Association and its
representatives with adequate office space for the Association's Track
Representative and the Horsemen's Bookkeeper at the Racetrack near the racing
office reasonably accessible to the Thoroughbred Horsemen. All furniture,
telephone and other office expenses necessary for the maintenance of such office
shall be the sole responsibility of the Association and/or the Partnership (or
the Officially-Recognized Horsemen's Organization, as applicable). The
Association and/or the Partnership (or the Officially-Recognized Horsemen's
Organization, as applicable) shall have the right to control access to such
office space during Thoroughbred Race Meetings during the term of this
Agreement, subject to the Act, the Rules, and rules and reasonable security
procedures of SHRP in effect from time to time at the Racetrack.
3.4 The Association agrees that it will encourage Thoroughbred
Horsemen and Backstretch Personnel to abide by rules enacted by SHRP with
respect to conduct and appearance on the Racetrack premises provided such rules
are reasonable and customary within the horse racing industry.
3.5 The Association agrees that it will encourage Thoroughbred
Horsemen and their employees when at the barns, dorms and on other premises of
the Racetrack to properly care for the premises and the improvements thereon, to
comply with applicable laws, SHRP's "pollution prevention program," including
the removal of manure and trash and the placement of same in assigned
containers, and to comply with the Rules, including Commission or Texas
Department of Public Safety rules with respect to drug and alcohol use while on
the premises of the Racetrack.
3.6 The Association shall be entitled to review SHRP's form of
stall application ("Stall Application") in advance of the next Thoroughbred Race
Meeting following the Effective Date of this Agreement (and prior to each
subsequent Thoroughbred Race Meeting) and, if approved by the Association, will
act consistent with the terms thereof, subject to Section 6.1 and 6.2 hereof,
and will encourage all Thoroughbred Owners and Trainers assigned stalls at SHRP
to honor and abide by the terms of such Stall Application.
3.7 The Association hereby consents to SHRP televising,
broadcasting, preserving on film, replaying or rebroadcasting Thoroughbred
Racing at the Racetrack during the term of this Agreement and using the images
of Association members, employees and staff, provided that such televising,
broadcasting, preserving on film, replaying or rebroadcasting is for promotional
purposes only and is not for any use involving any form of gaming or wagering.
The consent of the Association herein shall not be deemed an agreement for any
Simulcasting or Cross-Species Greyhound Simulcasting. SHRP will disclose to the
Association upon request any direct revenue SHRP receives from any broadcast,
rights or distribution fees generated from live or taped Thoroughbred Racing at
the Racetrack during the term of this Agreement.
3.8 The Association agrees that it will encourage Thoroughbred
Horsemen and Backstretch Personnel to pay any financial obligations owed to
SHRP, including, but not limited to, NSF checks. The Association agrees that it
will continue to assist SHRP with the collection of amounts owed by Thoroughbred
Horsemen and Backstretch Personnel for checks returned to SHRP for insufficient
funds.
SECTION 4. ALLOCATION AND DISTRIBUTION OF PURSE MONIES.
4.1 SHRP shall allocate for Thoroughbred Horsemen's purses an
amount not less than seven percent (7%) of the live regular wagering pool or
live multiple two wagering pool and not less than 8.5% of the live multiple
three wagering pool from all Thoroughbred Racing at the Racetrack during the
term of this Agreement, as provided in Section 6.08(b)(1) of the Act and the
Rules. The amount of the daily handle at any live Thoroughbred Race Meeting at
the Racetrack to be allocated to purses may be increased by the written
agreement of the parties hereto. The Purse-Allocated Monies generated at the
Racetrack from Simulcasting and Cross-Species Greyhound Simulcasting during the
term of this Agreement shall be distributed as set forth in Sections 4, 5, 7 and
12 of this Agreement, subject to Section 6.08(b)(2) of the Act and Section
321.233 of the Rules, as applicable. Other deductions from the Purse Account
shall be allocated in accordance with Sections 6.08 and 6.091 of the Act and any
other applicable provisions of the Act and Rules.
4.2 All Purse-Allocated Monies allocated to the Purse Account
arising from either live race wagering, Simulcast and Cross-Species Greyhound
Simulcast wagering, as applicable, SHRP's off-track wagering facilities, if any,
account wagering, if any, and Additional Forms of Gaming conducted at the
Racetrack, if any, are hereby designated as trust funds held in a fiduciary
capacity for the benefit of Thoroughbred Owners who have earned or may earn
purses from Thoroughbred Racing at the Racetrack or who may otherwise become
entitled to receive purses under this Agreement, any amendment thereto or by
operation of law. SHRP is hereby deemed to be the custodial trustee of the
Purse Account, subject to the terms of the Custodial Agreement, the Act, the
provisions of Section 309.297(a) of the Rules and this Agreement. All interest
earned on such account, less reasonable and customary bank and other service
charges, shall be paid monthly to the Partnership (or the Officially-Recognized
Horsemen's Organization for the exclusive benefit of Thoroughbred Horsemen, as
applicable) or as provided in the Custodial Agreement.
4.3 All Purse-Allocated Monies generated during each week of
Thoroughbred Racing, Simulcasting and Cross-Species Greyhound Simulcasting at
the Racetrack shall be segregated and deposited to the Purse Account not later
than three business days after the end of the week in which the Purse-Allocated
Monies are generated. Upon request of the Association, SHRP shall provide weekly
deposit records verifying appropriate transfers and deposits pertaining to the
Purse Account and/or Horsemen's Accounts. At all times and prior to deposit,
they are deemed to be trust funds, legal title to which is vested in the
Partnership (or the Officially-Recognized Horsemen's Organization for the
exclusive benefit of Thoroughbred Horsemen, as applicable) to be disbursed as
provided in the Act and Section 4.5 below. The Purse Account shall be
established under the taxpayer identification number of the Association or the
Partnership as directed by the Association. Upon the execution of this
Agreement, the parties hereto shall also execute the Thoroughbred Owners' Purse
Account Custodial Agreement (the "Custodial Agreement"), a copy of which is
attached hereto as Exhibit "A" and made a part hereof for all purposes. The
daily operation and management of the Purse Account shall be subject to the
Custodial Agreement between SHRP and the Partnership (or the
Officially-Recognized Horsemen's Organization for the exclusive benefit of
Thoroughbred Horsemen, as applicable). The Custodial Agreement may be amended
and revised from time to time as deemed necessary by the parties.
4.4 The Association (or the Officially-Recognized Horsemen's
Organization for the exclusive benefit of Thoroughbred Horsemen, as applicable)
agrees not to support the request of any other horse racing association to
receive an interstate simulcast signal within an area determined by SHRP and the
Association to cause detriment with respect to revenues which are allocable to
purses at SHRP for Owners of Thoroughbred Horses.
4.5 Periodic disbursements may be made from Purse-Allocated Monies
in the Purse Account only pursuant to the Custodial Agreement, the Act and the
Rules (i) to fund the Horsemen's Accounts for Purses Earned by Owners of
Thoroughbred Horses from live Thoroughbred Racing at the Racetrack, (ii) to fund
expenses of the Partnership (or the Officially-Recognized Horsemen's
Organization, as applicable), and (iii) for other disbursements as provided by
this Agreement or written amendments thereto, including National Thoroughbred
Racing Association ("NTRA") horsemen's dues. The Association and the Partnership
expressly authorize SHRP to make periodic disbursements from the Purse Account
for funding of the Association's annual membership dues to the NTRA. Any
fiduciary duty on the part of SHRP with respect to any Purse-Allocated Monies
shall be deemed fully discharged and satisfied upon transfer of such
Purse-Allocated Monies to the Horsemen's Accounts. The Partnership (or the
Officially Recognized Horsemen's Organization, for the exclusive benefit of
Thoroughbred Horsemen, as applicable) shall be fully responsible for the
maintenance and distribution of any Purse-Allocated Monies so transferred,
including without limitation employing and posting any required bond for a
Horsemen's Bookkeeper as contemplated by Section 309.297 and 313.61 of the
Rules.
4.6 No part of any Purse-Allocated Monies shall be subject to any
surcharge, promotion fee, advertising fee, expense, charge or deduction pursuant
to Section 3.13 or 6.08(b)(4) of the Act by SHRP for any reason whatsoever
without the prior written consent of the Partnership (or the alternatively, such
successor entity recognized by the Commission as the sole representative
horsemen's organization for Thoroughbred Horsemen and Thoroughbred Horsemen's
Racing Interests); provided, however, that SHRP shall be authorized to make the
deductions from the Purse Account and the Purse-Allocated Monies specified in
the Agreement. Provided SHRP is not in material default of any of the provisions
of this Agreement, no Purse-Allocated Monies generated at SHRP shall be
transferred to any other Racetrack Association without the prior written consent
of SHRP, except as required by the Act, the Rules or the Commission.
4.7 Each week during the term of this Agreement, SHRP will provide
complete written financial information to the Association regarding daily
pari-mutuel live, Simulcast and Cross-Species Greyhound Simulcast handle;
average daily live, Simulcast and Cross-Species Greyhound Simulcast handle to
date; stakes percentages; purse percentages; complete daily payout sheet; and
such other financial information reasonably requested by the Association
relating to SHRP and the Racetrack. In addition, SHRP, on a contemporaneous
basis, shall provide the Association with all financial reports pertaining to
the Purse Account provided to and/or required by the Commission, as well as any
notices or reports pertaining to the Purse Account from the Commission. In
addition, SHRP shall account at least once every 30-day period during the term
of this Agreement to the Association for all Purse-Allocated Monies as deposited
to the Purse Account and Horsemen's Accounts. The books of account for the
Purse-Allocated Monies and Purse Account shall be open to inspection by a
designated representative of the Association at reasonable times and upon
reasonable notice. Reasonable notice is defined as not less than 72 hours prior
to inspection, unless the 72-hour period falls on a weekend or holiday in which
case reasonable notice would include not less than two full business days, or
unless the Association receives notification from SHRP and/or the Commission
pursuant to Section 3.22 of the Act that the Commission reasonably believes that
SHRP has failed to maintain the proper account of money in the Purse Account in
which case an immediate right to inspection shall exist. The Association shall
have the right to audit such books and records upon reasonable notice at the
expense of the Association. In the event a discrepancy is discovered by audit,
which requires an increase in the amount to be deposited by SHRP to the Purse
Account of at least seven and one-half percent (7.5%) of the amount on deposit
in the Purse Account prior to the audit, SHRP shall reimburse the Association
for the actual expense of such audit. It is further agreed that the maximum
liability for reimbursement of audit expense shall not be more than Five
Thousand Dollars ($5,000.00).
4.8 If the Purse Allocation that has been deposited to the
Horsemen's Account for Purses Earned as provided for herein is insufficient to
fulfill SHRP's contractual commitment to the Thoroughbred Owners for Purses
Earned for live races conducted at the Racetrack, then in such event SHRP shall
timely deposit to the Horsemen's Accounts such funds as are necessary to fulfill
SHRP's contractual commitment to the Thoroughbred Owners (commonly called an
"Overpayment"). For purposes of this Agreement, "Overpayment" shall mean the
amount of money paid by SHRP to Thoroughbred Owners for Purses Earned in excess
of available funds representing the Purse Allocation which was deposited to the
Purse Account during and at the conclusion of a Thoroughbred Race Meeting at the
Racetrack; and "Underpayment" shall mean the amount of unpaid monies remaining
from available funds representing the Purse Allocation which was deposited in
the Purse Account during and at the conclusion of a Thoroughbred Race Meeting at
the Racetrack. Subject to the provisions of Section 4.9 herein, any funds owed
to SHRP as a result of an Overpayment shall be repaid to SHRP from the funds
representing the Purse Allocation until such Overpayment shall have been fully
paid.
4.9 During the first 45 calendar days after the end of each
scheduled live Thoroughbred Race Meeting at the Racetrack (the "Initial
Period"), SHRP shall be entitled to recover any Overpayment from the Purse
Allocation without regard to the limitations described in this Section 4.9. As
used herein, the "Overpayment Date" shall mean the close of business on the 45th
calendar day after the end of each scheduled live Thoroughbred Race Meeting at
the Racetrack and the "Overpayment Amount" shall mean an amount equal to five
times the average daily purse distribution for such Thoroughbred Race Meeting.
To the extent the Overpayment on the Overpayment Date exceeds the Overpayment
Amount, such amount over the Overpayment Amount shall not be recovered by SHRP
from the Purse Allocation, except in the event the Overpayment is in excess of
the Overpayment Amount as a result of SHRP being unable to conduct live
Thoroughbred Racing at the Racetrack or an approved Simulcasting program at the
Racetrack as a result of "force majeure," in which case the Initial Period shall
be extended by the number of days affected by such condition of force majeure
and the Overpayment Date shall be the last day of such extended Initial Period.
Force majeure shall be defined as acts beyond the reasonable control of SHRP
that prevent the conduct of live Thoroughbred Racing at the Racetrack or an
approved Simulcasting program at the Racetrack, including, by way of
illustration and not in limitation, destruction of the premises, civil strife,
hurricane, strikes, or other such event. Force Majeure shall not include SHRP's
voluntary reduction or diminution in live Thoroughbred Racing dates at the
Racetrack for fiscal reasons. If the Overpayment is less than the Overpayment
Amount on the Overpayment Date, the amount of such Overpayment shall be repaid
to SHRP from the funds representing the Purse Allocation as such funds become
available until such Overpayment is fully paid.
4.10 Should an Underpayment exist in the Purse Account in excess of
$300,000 at the end of any live Thoroughbred Race Meeting, the total
Underpayment amount shall be paid retroactively on a pro rata basis within 30
days after the close of such Thoroughbred Race Meeting to the Thoroughbred
Owners having Thoroughbred Horses that ran in the Meet that earned overnight
money finishing first through fifth, inclusively (60% for first-20% for
second-11% for third-6% for fourth-3% for fifth), unless SHRP and the
Association enter into a written agreement to carry forward to the next live
Thoroughbred Race Meeting at the Racetrack all or a portion of the Underpayment.
To the extent that the Underpayment is less than $300,000, such funds on deposit
in the Purse Account shall be carried forward to the next live Thoroughbred Race
Meeting at the Racetrack unless the Association and SHRP agree in writing to a
distribution of all or a portion of such Underpayment to Thoroughbred Owners as
provided herein.
4.11 At least 60 days prior to the start of each live Thoroughbred
Race Meeting, SHRP shall estimate the projected handle and other sources of
Purse Allocation utilizing the best information available that is deemed by SHRP
and the Association to be reliable. Such information shall timely be provided to
the Association, and SHRP agrees to consult with the Association in determining
the daily allocation for distribution of Purse-Allocated Monies projected to be
available during the next scheduled live Thoroughbred Race Meeting.
4.12 During the term of this Agreement, the parties agree that of
the total Purse Allocation to Thoroughbred Owners' purses less deductions for
expenses of the Partnership (or the Officially-Recognized Horsemen's
Organization, as applicable) for any Thoroughbred Race Meeting, not more than
twenty-five percent (25%) of such Purse-Allocated Monies shall be used for
payment in stakes races provided, however, that any race which is designated as
a stakes race with a purse allocation above the Racetrack's highest published
overnight race and is the minimum requirement for black type for Thoroughbred
Horses shall not be charged against the stakes allocation as set forth herein.
Not more than fifteen percent (15%) of the total stakes allocation funds shall
be used to supplement any single stakes race without the written consent of the
Association. It is understood between the parties that the amount allocated for
stakes races is subject to adjustment if SHRP decreases purses during a
Thoroughbred Race Meeting as specified in Section 4.15 herein.
4.13 SHRP shall provide to the Association its projected stakes
program at last 30 days prior to the publication of the stakes condition book
for each live Thoroughbred Race Meeting during the term of this Agreement. The
allocation of funds for stakes races shall be consistent with the provisions of
Section 4.12 above. The stakes schedule shall represent the total amount of
guaranteed and/or added money to be distributed from the Purse-Allocated Monies
for stakes races and other prepayment races shall be subject to the provisions
of Section 309.298 of the Rules.
4.14 In the case of a sponsored stakes race or other prepayment race
administered by a person or organization other than SHRP, the funds provided
from a source outside SHRP shall be deposited in the Purse Account prior to the
running of the race. In the event such race/races have either eliminations or
trials, the total amount due from sources other than SHRP shall be deposited
prior to the running of any eliminations or trials in connection with the race
event. In the event sponsor money is not deposited prior to the running of the
race, SHRP shall notify the Association. SHRP shall assume no liability with
respect to sponsorship-contributed purse funds. It is further agreed that all
money generated from nomination and entry fees from races sponsored and
conducted by SHRP with guaranteed purses will be used first to cover the
guaranteed purse amount. In the event the fees collected are insufficient to
meet the guaranteed purse requirement, the balance may be deducted from the
funds allocated to stakes races for that Thoroughbred Racing Meet. However, if
the funds collected are in excess of the amount required to meet the purse
requirement, the balance shall be credited to the Purse Account.
4.15 In the event the amount generated for the Purse Account is
significantly higher or lower than amounts projected, SHRP may adjust the purse
schedule in an attempt to bring the amount generated for purses in line with the
amount of purses paid to Thoroughbred Owners. In the event a decrease in purses
is necessary, SHRP shall adjust overnight purses on a pro rata basis of the
original purse distribution schedule, unless otherwise agreed by the
Association, which agreement shall not be unreasonably withheld. SHRP agrees
that it will reduce the annual allocation for stakes races if necessary to meet
the proportionate allocation of overnight purses to stakes purses as set forth
in Section 4.12 herein. Prior to implementing a purse decrease, SHRP shall meet
with an authorized representative of the Association to discuss the reasons for
such decrease and the projected amount of the decrease. SHRP shall deliver to
the Association such documents as may be reasonably requested to justify the
necessity of such purse decrease.
4.16 SHRP shall make available Purses Earned as required by the Act
and Rules.
SECTION 5. HORSEMEN'S BOOKKEEPER.
The Partnership (or the Officially Recognized Horsemen's Organization
for the exclusive benefit of Thoroughbred Horsemen, as applicable) has organized
(or will organize) a Texas non-profit corporation which shall maintain separate
accounts known as the Horsemen's Accounts, subject to and in accordance with
Sections 309.297 and 313.61 of the Rules, this Agreement and any other
agreements between the parties relating to the management of the Horsemen's
Accounts (to the extent not inconsistent with the Rules).
SECTION 6. STALL APPLICATIONS, ENTRY FORMS AND CONDITION BOOKS.
6.1. Agreements, including, but not limited to, Stall Applications,
entry forms and condition books between SHRP and Thoroughbred Horsemen regarding
the stabling of horses, the racing of horses, the training of horses or other
activities at the Racetrack owned by SHRP, and conditions of racing established
by SHRP, shall not contain provisions which absolve, indemnify or hold SHRP
harmless from liability, or limit liability for injury or loss to person or
property (including horses) at the Racetrack caused by negligence of SHRP or its
agents or employees. In the event of any inconsistency between these provisions
and the Act and Rules, the Act and Rules shall control. Further, these
provisions shall be deemed to be amended to the extent of, and to be in
compliance with, any amendment to the Rules.
6.2. At least 30 days prior to delivery of the form of Stall
Application to Thoroughbred Horsemen, SHRP shall deliver to the Association for
review and approval a copy of the form of Stall Application that SHRP intends to
use during any live Thoroughbred Racing Meet, which shall be in substantially
the same form and contain the same or similar terms and conditions as set forth
in the form of Stall Application attached hereto as Exhibit "B", and made a part
hereof for all purposes. The Association will encourage all Thoroughbred
Horsemen assigned stalls at the Racetrack to honor and abide by the terms of the
Stall Application. However, the review by the Association of the terms of the
Stall Application does not constitute a release or waiver under the terms of the
Stall Application of any claims, causes of action or rights that the Association
or any Thoroughbred Horseman may have against SHRP and/or the Racetrack for
damages caused by any act, omissions or negligence of SHRP and/or management,
employees or agents of the Racetrack.
6.3 At least 60 days prior to the start of each Thoroughbred Race
Meeting, the racing secretary of the Racetrack shall submit to the Association
(or the Association's designated Racetrack Backside Committee) for its review
and comment an advance proof of the first proposed condition book setting forth
the purse level and conditions for each class and category of races to be
conducted during the first racing period of the Thoroughbred Racing Meet. The
first condition book will be furnished along with the first distribution of
Stall Applications to Thoroughbred Horsemen. Advance proofs of subsequent
condition books for the current Thoroughbred Race Meeting shall be submitted to
the Association (or the Association's designated Racetrack Backside Committee)
for its review and comment at least six (6) days prior to publication. Any
recommendations shall be presented to the racing secretary within 72 hours of
receipt of the proof of the condition book by the Association (or the
Association's designated Racetrack Backside Committee). The condition books
shall be subject to Section 6.1 and 6.2 herein.
6.4 SHRP shall strive to ensure that the races written in the
condition book fit the needs of horses in the geographic area, including but not
limited to those stabled on grounds.
6.5 The racing secretary, or his/her designee, shall make every
effort reasonable to contact the authorized agent of any horse eligible for a
stakes or futurity race on the day of entry to that particular race or for that
particular race. The racing secretary or his/her designee shall provide the
Horsemen's Bookkeeper with a list of all eligible horses for any stakes or
futurity race, along with Owners and Trainers of those horses, on the morning of
entry for their respective race. The parties recognize that the ultimate
responsibility for entries lies with the Owner and Trainer.
6.6 Upon cancellation of any race in the condition book, the number
of horses and names of the Trainers which were entered in such race shall be
posted, or announced in the SHRP racing office, before each day's draw following
the cancellation.
6.7 Prior to adopting any "house rules" affecting Thoroughbred
Horsemen, the racing secretary shall consult with the Association (or the
Association's designated Racetrack Backside Committee), and solicit their input.
6.8 No race shall be called off before 10:00 a.m. on the day of
entry. Final run-down must be given 15 minutes prior to closing.
6.9 All Thoroughbred allowance races in the condition book that
receive seven (7) entries of different interests or more must be used.
SECTION 7. OFFICIALLY-RECOGNIZED HORSEMEN'S ORGANIZATION'S
EXPENSES AND BENEVOLENCE.
The Association and SHRP agree that, beginning on the Effective Date of
this Agreement, and continuing until such time as different percentages or
amounts may be agreed upon by the parties to this Agreement, funding of the
Partnership's (or the Officially-Recognized Horsemen's Organization, as
applicable) expenses and benevolence shall be provided by deducting from the
Purse Allocation and paying to the Partnership (or the Officially-Recognized
Horsemen's Organization, as applicable) on a monthly basis (within ten days for
the preceding month's purse revenues) an amount equal to 3% (.03) of all
Purse-Allocated Monies generated from live, Simulcast and Cross-Species
Greyhound Simulcast wagering, agreements with greyhound Racing Associations or
greyhound breed organizations concerning funds derived from Simulcasting and
Cross-Species Greyhound Simulcasting, if any, SHRP's off-track wagering
facilities, if any, account wagering, if any, and/or Additional Forms of Gaming
conducted at the Racetrack, if any, during the term of this Agreement. Any
interest or other investment income derived from the Purse-Allocated Monies on
deposit in the Purse Account less reasonable and customary bank and other
service charges shall be paid to the Partnership (or the Officially-Recognized
Horsemen's Organization, as applicable) at least monthly, or as provided under
the terms of the Custodial Agreement. The Partnership (or the Officially-
Recognized Horsemen's Organization, as applicable) hereby indemnifies SHRP
against any claim by an Owner, whether a member of the Association or not, as a
result of payments made pursuant to this Section 7.
SECTION 8. OPENING AND CONDITION OF RACETRACK FACILITIES.
8.1 SHRP will open its Racetrack facilities for stabling and
training at least fifteen (15) days prior to the beginning date of each
scheduled live Thoroughbred Race Meeting during the term of this Agreement for
use by Thoroughbred Horsemen and Backstretch Personnel. From the time backside
facilities (kitchen, grooms' living quarters, barns, main track, horse walkers,
etc.) are opened, the Racetrack will be maintained six (6) days a week (except
for holiday weeks) by SHRP so that it is in racing condition for use by
Thoroughbred Horsemen and Backstretch Personnel. The barn area and grooms'
living quarters at the Racetrack will remain open for use by Thoroughbred
Horsemen and Backstretch Personnel five (5) business days after each
Thoroughbred Race Meeting is concluded.
8.2 SHRP agrees to provide and maintain sanitary bathrooms, washers
and dryers, and a kitchen in the Racetrack stable area or the area immediately
adjacent thereto for use by Thoroughbred Horsemen and Backstretch Personnel. The
Racetrack kitchen will maintain hours of operation consistent with race day
schedules and backside training hours.
8.3 SHRP agrees to provide adequate grooms' living quarters for
Licensed grooms employed by Trainers during any Thoroughbred Race Meeting on the
following basis:
(i) at least one accommodation for each 8-10 stalls
allotted to a Trainer, to be determined on a Meet by
Meet basis;
(ii) equivalent facilities for men and women; and
(iii) equipped with windows that open, air conditioning,
heating, hot and cold water, and showers, toilets and
sinks.
8.4 SHRP shall furnish a warning horn or system for use by the
clockers during training hours in order to advise horsemen training on the SHRP
track of loose horses or other dangerous conditions.
8.5 SHRP shall maintain the Racetrack facility in a condition as
required by the Act and Rules for Thoroughbred Horsemen, Backstretch Personnel
and horses. SHRP shall furnish the Association all notices from the Commission
and proposals for corrective action by SHRP pursuant to Section 6.061 of the Act
of any finding by the Commission of inappropriate or unsafe conditions existing
at the Racetrack facility.
SECTION 9. UNIFORM SCRATCH RULE.
The scratch rules will be published in each condition book. Scratch
rules will not be changed with less than seven (7) days advance notice to
Thoroughbred Horsemen without the written agreement of the Association.
SECTION 10. INVESTIGATIONS AND SEARCHES.
SHRP agrees that SHRP personnel will not conduct any investigation or
searches of the person, property, living quarters and/or vehicles of any
Thoroughbred Horsemen, Backstretch Personnel and/or their agents or their
property without (i) the attendance of an Association representative or a
designated Thoroughbred Horsemen's representative and (ii) the supervision of
officials of the Commission, the Texas Department of Public Safety or other
governmental agencies having jurisdiction over such matters, except in an
emergency situation which constitutes a threat to the security of the premises,
a threat to life or limb of a person or animal, or a threat to the integrity of
racing. Any such search or seizure shall be conducted strictly in accordance
with published, posted rules, regulations and policy of the Racetrack in a
reasonable manner and pursuant to law. SHRP shall not object to any Thoroughbred
Horseman or Backstretch Personnel that is required to go before the stewards as
a result of such an investigation, search or seizure requesting the attendance
of an Association representative.
SECTION 11. RACE CANCELLATION.
11.1 SHRP shall use the conditions published in the condition book
prior to using any races written as substitutes or extras whenever possible in
setting the card for each day's racing program.
11.2 Cancellation of a stakes race shall be accomplished with as
much notice by SHRP to the entrants and the Association as reasonably possible.
SECTION 12. SIMULCASTS.
12.1(a) All Simulcasting (of horse races), deductions from applicable
simulcast pools for Purse Accounts and distributions from deductions from
applicable simulcast pools to Purse Accounts at the Racetrack shall be governed
by the Act, the Rules, the Interstate Horse Racing Act and the provisions of
this Agreement. All Cross-Species Greyhound Simulcasting (of greyhound races),
deductions from applicable simulcast pools for Purse Accounts and distributions
from deductions from applicable simulcast pools shall be governed by the Act,
the Rules and the provisions of this Agreement.
12.1(b) The Association hereby conditionally approves all import
(guest) and export (host) Simulcasting of horse races, whether interstate or
intrastate, at, to or from the Racetrack, subject to withdrawal of approval of
individual horse simulcast signals or horse simulcast signals collectively, for
(i) a material breach of this Agreement by SHRP, (ii) non-compliance by SHRP
with the provisions of Section 12.1 (d) and (e) of this Agreement, (iii) matters
involving the integrity of racing, or (iv) non-compliance with the Interstate
Horse Racing Act, the Act, the Rules, or other provisions of this Agreement
pertaining to Simulcasting of horse races, provided SHRP conducts at least 60
live Thoroughbred racing programs as a part of its Thoroughbred Race Meetings
during a calendar year or such lower number of days as the Commission allocates
to SHRP if SHRP applies for at least 60 live Thoroughbred racing dates for its
Thoroughbred Race Meetings for such year. Furthermore, the Association reserves
the right to grant or deny approval of any and all specific requests to export
the SHRP Thoroughbred Simulcast signal to any Receiving Location.
12.1(c) The Association hereby also conditionally approves import
(guest) Cross-Species Greyhound Simulcasting, whether interstate or intrastate,
at the Racetrack, subject to withdrawal of approval of individual imported
greyhound simulcast signals or imported greyhound simulcast signals
collectively, for (i) a material breach of this Agreement by SHRP, (ii)
non-payment to horse purses of the amounts specified in Section 12.6 of this
Agreement, (iii) non-compliance by SHRP with the provisions of Section 12.1 (d)
and (e) of this Agreement, (iv) matters involving the integrity of racing, or
(v) non-compliance with the Act, the Rules or other provisions of this Agreement
pertaining to Cross-Species Greyhound Simulcasting of greyhound races, provided
SHRP conducts the minimum number of live Thoroughbred racing programs specified
in Section 12.1 (b) of this Agreement, and further provided that SHRP at all
times gives preference in number to the simulcasting of imported horse races
over the simulcasting of imported greyhound races at the Racetrack and SHRP's
off-track wagering facilities, if any.
12.1(d) With respect to any Simulcasting or Cross-Species Greyhound
Simulcasting relating to SHRP, upon request, SHRP shall provide copies of all
agreements between SHRP and Sending Tracks and Receiving Locations relating to
requests for Simulcasting and Cross-Species Greyhound Simulcasting pursuant to
Sections 321.203 and 321.204 of the Rules for the Association's review and
approval, including information relating to financial compensation for SHRP and
Thoroughbred Horsemen participating in live Thoroughbred Race Meetings conducted
by SHRP, as may be reasonably requested by the Association. In addition, SHRP
shall provide the Association, upon request, signed copies of all Simulcasting
and Cross-Species Greyhound Simulcasting contracts executed by SHRP as soon as
practicable after the execution by all parties thereof.
12.1(e) It is the understanding and agreement of the parties that the
Association shall have the right to approve or deny each Simulcast or
Cross-Species Greyhound Simulcast request and/or contract submitted by SHRP to
the Commission for approval pursuant to Sections 321.203 and 321.204 of the
Rules and nothing herein is intended to bestow blanket approval for future
Simulcasting or Cross-Species Greyhound Simulcasting at the Racetrack.
12.2(a) Subject to Section 6.08 of the Act and other provisions of the
Act, which shall control to the extent the following amounts shall vary
therefrom, SHRP shall set aside for purses from import horse applicable
simulcast pools (and import greyhound applicable simulcast pools to the extent
determined to be applicable by the Commission under the Act and the Rules) not
less than the following amounts from the takeout of the Sending Track:
(i) 38.8% of the regular wagering pool;
(ii) 33.3% of the multiple two wagering pool; and
(iii) 34% of the multiple three wagering pool.
The funds derived from an imported horse simulcast (and Cross-Species Greyhound
Simulcast, if applicable) race that are allocated to Thoroughbred purses
pursuant to this Agreement, other applicable agreements or the determination of
the Commission shall be deposited to the Purse Account as provided in Section
4.3 and shall be distributed during the 12-month period immediately following
the imported horse simulcast (and Cross-Species Greyhound Simulcast, if
applicable) as provided in this Agreement.
12.2(b) Subject to Section 321.233 of the Rules and other provisions of
the Act, which shall control to the extent the following amounts shall vary
therefrom, SHRP shall set aside for purses from commissions derived from the
export of SHRP's simulcast signal to any Receiving Location, including to any
horse or to any greyhound racetrack, not less than the following amounts:
(i) for an exported horse simulcast race conducted in
2000, 34.5%, and
(ii) for an exported horse simulcast race conducted in
2001, 37.0%.
The funds derived from the export of SHRP's Simulcast signal to any Receiving
Location, including to any horse or to any greyhound racetrack, that are
allocated to Thoroughbred purses pursuant to this Agreement, other applicable
agreements or the determination of the Commission shall be deposited to the
Purse Account as provided in Section 4.3 and shall be distributed during the
12-month period immediately following the Simulcast as provided in this
Agreement.
12.3 No rebroadcasting of a Simulcast signal or Cross-Species
Simulcast Signal received by SHRP shall be allowed without the express written
agreement of the Association nor shall SHRP permit any location receiving its
signal to rebroadcast or distribute that signal as it relates to wagering
without the written consent of the Association.
12.4 The funds derived by SHRP from a Simulcast and Cross-Species
Greyhound Simulcast that are dedicated to purses shall be allocated among the
various breeds of horses in the manner prescribed by the written joint amendment
to this Agreement executed by the Association, the Texas Horsemen's and
Benevolent Protective Association, Inc., the Texas Thoroughbred Association,
Inc., the Texas Quarter Horse Association and the Texas Arabian Breeders
Association, dated October 22, 1998, and effective through December 31, 2001,
and incorporated herein for all pertinent purposes, provided this Agreement and
a corresponding agreement with the Texas Horsemen's Benevolent and Protective
Association are in effect. In the absence of such a written joint amendment to
this Agreement, the allocation among the various breeds of horses shall be
determined by SHRP, subject to Rule 321.234 and the Act. The funds derived by
SHRP from a Simulcast that are dedicated to the Texas Bred Incentive Program
shall be allocated among the various breeds of horses by the Commission, subject
to Rule 321.234 and the Act.
12.5 As provided for under Section 11 of the Prior Agreement and
carried forward in this Agreement, it is hereby agreed that SHRP is entitled to
recover (to the extent already not recouped) from the Thoroughbred Horsemen's
Purse Allocation previous overpayment amounts according to the following
schedule:
December 31, 1999 . . . . . . . . . . . . $ 660,000.00
December 28, 2000 . . . . . . . . . . . $ 631,000.00
-------------
Balance Due . . . . . . . . . . . . $1,291,000.00
Recovered to Date . . . . . . . . . . . 309,000.00
-------------
Total Recoupment . . . . . . . . . $1,600,000.00
12.6 All Cross-Species Greyhound Simulcasting at the Racetrack, if
any, shall be governed by the Act, the Rules, and the provisions of this
Agreement. Unless another agreement approved by the Commission is reached
between the Association, SHRP, other applicable greyhound Racetrack
Associations, including Gulf Greyhound, and other applicable greyhound breed
organizations during the term of this Agreement, an amount not less than one
percent (1%) of the total handle on all Cross-Species Greyhound Simulcast
wagering at the Racetrack shall be paid to horse purses at the Racetrack on a
monthly basis commencing January 11, 2000 and extending through December 31,
2000, in addition to the statutory allocations provided in Section 6.091 of the
Act; and an amount not less than one and one-half percent (1 1/2%) of the total
handle on all Cross-Species Greyhound Simulcast wagering at the Recetrack shall
be paid to horse purses at the Racetrack on a monthly basis, commencing
January 1, 2001, and extending through December 31, 2001, in addition to the
statuatory allocations provided in Section 6.091 of the Act. Any funds from
Cross-Species Greyhound Simulcasting attributable to the Thoroughbred Horsemen's
Purse Allocation shall be deposited timely in the Purse Account for the benefit
of Thoroughbred Horsemen. In the event that SHRP receives a Cross-Species
Simulcast Signal at the Racetrack, and an agreement is reached between the
Association and other applicable greyhound Racing Associations and/or other
applicable greyhound breed organizations concerning funds derived from
Simulcasting and/or Cross-Species Greyhound Simulcasting that varies any
statutory percentage or amount of purse monies payable to the official state
breed registry for greyhounds resulting in additional monies payable to
Thoroughbred Horsemen, then such monies also shall be deposited timely in the
Purse Account for the benefit of Thoroughbred Horsemen.
SECTION 13. RECOGNITION OF COMMITTEES.
SHRP shall recognize, consult with and cooperate with any committees
established by the Association for the purposes of addressing matters at the
Racetrack affecting Thoroughbred Horsemen and Backstretch Personnel, including
but not limited to (i) a Racetrack Backside Committee, (ii) a Racetrack
Benevolence Committee and (iii) a Racetrack Condition Book Committee, if any.
SHRP shall not recognize any other person or entity other than such Association
committees as the official spokesman for Thoroughbred Horsemen at the Racetrack
on such matters.
SECTION 14. HORSEMEN'S SEATING AREA.
SHRP shall provide free of charge to Thoroughbred Horsemen not less
than 27 seats located in reasonable proximity to the Winner's Circle for use by
Thoroughbred Horsemen and their employees. Said seats shall be clearly
designated and policed by SHRP for Thoroughbred Horsemen only.
SECTION 15. GUEST PASSES.
SHRP shall provide, free of charge, six (6) daily guest passes to the
grandstand for guests of those Thoroughbred Horsemen who are licensed and have
horses running at SHRP during the Thoroughbred Racing Meet. Thoroughbred
Horsemen will sign for these passes and accept responsibility for those guests,
subject to the rules and regulations of the Commission and SHRP.
SECTION 16. CHAPLAIN SERVICES.
SHRP and the Association acknowledge that it is traditional and
customary for horsemen and the racetracks to pay equal amounts to help support
the Chaplain's services at each Texas racetrack. Currently horsemen and other
Class 1 racetracks in Texas are each donating equal amounts per month for such
services. SHRP and the Association (through the Texas Horsemen's Assistance
Fund, Inc.) agree to each pay the amount mutually agreed upon for such services,
or additional amounts required for such services. This contribution shall be in
addition to any special events or "Charity Days" scheduled to benefit the
Chaplaincy program. All sums due pursuant to this provision shall be paid timely
each month to the Race Track Chaplaincy of Texas by the parties. The amount of
each party's monthly contribution may be changed from time to time by written
agreement of the parties hereto.
SECTION 17. FIRST AID STATION.
SHRP agrees to provide emergency first aid to all backstretch personnel
and ambulance service in accordance with Commission regulations. Such treatment
shall be subject to a release and waiver of liability from the treated party and
without any liability to either SHRP or the Association.
SECTION 18. ADDRESSING OF PROBLEMS.
The Association (or a Racetrack Backside Committee designated by the
Association) and SHRP shall address all material concerns of the Thoroughbred
Horsemen relating to any matters affecting or concerning the Thoroughbred
Horsemen and Backstretch Personnel and their relationship with SHRP and
management of the Racetrack. Any matters relating to the relationship of the
Thoroughbred Horsemen and SHRP, including any Thoroughbred Horsemen's concerns
regarding either the operation of the Racetrack or its management, or any
alleged breach of this Agreement, shall be brought to the attention of the other
party in writing as soon as practicable and the parties shall make a reasonable
effort to amicably and equitably adjust and resolve any problems or other
matters which may arise between the parties.
SECTION 19. AMENDMENTS.
The terms and conditions of this Agreement may be modified or amended
only by mutual consent of the parties in writing, signed by a duly authorized
representative of SHRP and a duly authorized representative of the Association
(or the Officially-Recognized Horsemen's Organization, as applicable).
SECTION 20. COMMISSION APPROVAL.
The terms and conditions of this Agreement shall be subject to approval
in accordance with the appropriate procedures of the Commission. If the terms
and conditions of this Agreement are inconsistent with the Act or the Rules,
either current or as amended, the Act or Rules, as applicable, will control
unless both parties to this Agreement agree to renegotiate any provisions which
are determined to be inconsistent with the Act or Rules.
SECTION 21. INSURANCE.
21.1 There is presently in existence a Fire and Disaster Insurance
Plan under the auspices of the National HBPA, whereby insurance is provided by a
reputable insurance company selected by the National HBPA, which, with certain
limitations, protects the owners of horses against the loss of their racehorses,
tack, etc., due to fire or disaster. Racing Associations assist in providing
financing for this program, and, for the purpose of determining the amount of
contribution, are grouped into categories on the basis of handle. SHRP, as
signatory to this Agreement, agrees to participate in a proportionate share of
the annual premium for the National HBPA Fire and Disaster Program in effect
during the term of this Agreement.
21.2 Furthermore, SHRP acknowledges its mutual interest with the
Association in ensuring that jockeys who ride at the Racetrack's races are fit
and able, and SHRP therefore agrees during the term of this Agreement to make
all payments to the Jockeys Guild, Inc. required to be made by that certain
agreement by and between the Jockeys Guild, Inc. and the Thoroughbred Racing
Association, effective January 1, 2000.
SECTION 22. NON-DISCRIMINATION.
SHRP and the Association expressly agree that neither of them will
discriminate for or against any person because of such person's race, color,
creed, origin, sex, religious preference or affiliation. The parties expressly
agree that there shall be no acts, direct, indirect or subtle, that in any
manner can be interpreted as retaliation or retribution against any person for
any affiliation, statement, position or action of the Association, other than as
may be expressly permitted by law.
SECTION 23. GENDER REFERENCES.
The parties agree that any reference herein to "horsemen" includes
horsewomen as well and all masculine references and pronouns used herein include
the female equivalent. The masculine references are used merely in order to
reflect language used in the industry and currently incorporated into the
governing document of the Association and the Act and Rules.
SECTION 24. BINDING.
This Agreement shall be binding on and inure to the benefit of SHRP,
the Association and the Partnership (or the Officially-Recognized Horsemen's
Organization, as applicable), and each of their successors and authorized
assigns. Neither party shall assign this Agreement nor any rights, duties or
obligations thereunder to a third party without the express written consent of
the other party, which consent shall not be unreasonably withheld. In addition,
neither party shall utilize related entities in order to frustrate the
performance of any right, duty or obligation under this Agreement.
SECTION 25. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
SECTION 26. TEXAS LAW.
This Agreement shall be governed by, construed and enforced in
accordance with the laws of the state of Texas. The parties agree that Travis
County, Texas will be the venue of any dispute and will have jurisdiction over
all parties.
SECTION 27. ATTORNEY'S FEES.
If any legal action or other proceeding is brought for the enforcement
or interpretation of this Agreement or any Exhibit hereto or because of an
alleged dispute, breach, default or misrepresentation in connection with or
related to this Agreement or any Exhibit hereto, the successful or prevailing
party shall be entitled to recover reasonable attorneys' fees and other costs in
connection with that action or proceeding, in addition to any other relief to
which it or they may be entitled.
SECTION 28. WAIVER.
The waiver by any party of a breach of any provision of this Agreement
or any Exhibit hereto by the other parties shall not operate or be construed as
a waiver of any subsequent breach by such other party.
SECTION 29. NOTICES.
All notices, requests and other communications hereunder shall be
deemed to be duly given if sent by U.S. mail, postage prepaid, addressed to the
other parties at the addresses as set forth herein below:
To SHRP: SAM HOUSTON RACE PARK, LTD.
7575 N. SAM HOUSTON PARKWAY WEST
HOUSTON, TEXAS 77064
ATTN: ROBERT L. BORK, SENIOR VICE PRESIDENT
AND GENERAL MANAGER
To the Association: TEXAS THOROUGHBRED HBPA, INC.
P.O. BOX 14533
AUSTIN, TEXAS 78714
ATTN: PRESIDENT
FACSIMILE: (512) 467-9790
To the Partnership: TEXAS HORSEMEN'S PARTNERSHIP, L.L.P.
6633 HIGHWAY 290 EAST, SUITE 100
AUSTIN, TEXAS 78723
ATTN: EXECUTIVE DIRECTOR
FACSIMILE: (512) 467-9790
SECTION 30. COMPLETE AGREEMENT.
This Agreement, including the Exhibits hereto, contains the entire
agreement of the parties relating to the subject matter hereof. This Agreement
and its terms may not be changed orally, but only by an agreement in writing
signed by the parties against whom enforcement of any waiver, change,
modification, extension or discharge is sought.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers.
TEXAS THOROUGHBRED HBPA, INC.
Dated: January 11, 2000 By: /S/ JOHN ROARK
John Roark, President
SAM HOUSTON RACE PARK, LTD.
Dated: January 11, 2000 By: /S/ ROBERT L. BORK
Robert L. Bork,
Senior Vice President and
General Manager
SERVICES AGREEMENT
Agreement dated February 1, 2000, 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.
SECTION 2 OWNER RESPONSIBILITIES. Owner shall be responsible for
the items described in Exhibit D.
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 its 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 ten (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 February 1, 2000 and for a period of five (5) years ending January 30,
2005, 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 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 of the Texas Racing
Act and rules and regulations of the Texas Racing Comission 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 five (5) such interruptions occur per calendar year during
the term of this Agreement, the default provisions of Section 13 herein shall
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, TRADEMARK AND COPYRIGHT INFRINGEMENT
(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 other party shall have any interest therein. Owner and Autotote
shall in all respects honor and maintain the confidentiality of such
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 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 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.
(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 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 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 such 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, 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 succed 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
Service 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 Robet 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 and
construed in accordance with the 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")
BY: /S/ ROBERT L. BORK BY: /S/ BROOKS PIERCE
ROBERT L. BORK, SENIOR VP AND GM BROOKS PIERCE, PRESIDENT, ASI
EXHIBIT A
OWNER ACTIVITY
AUTOTOTE SERVICE HOURS AND PERSONNEL
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.
The System shall consist of:
Autotrak II Sell/Cash Totalisator System consisting of:
Digital VAX Computers
Disk Units
Mag Tape Units
High Speed Line Printers
Board Control Units
Color Video Channels
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)
Lampboxes and associated equipment required for present infoeld 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
Autotrak II Sell/Cash software
Uninterrupted Power Supply (UPS) unit for Computer Room
Motorola Beeper System with Beepers
50 VDC 100 Amp Motor Generators
*Live racing season only
AUTOTOTE RESERVES THE RIGHT TO SUBSTITUTE EQUIVALENT FUNCTION COMPONENTS IN
PLACE OF ANY OF THE ABOVE ITEMS.
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.
I) Provide update information for the following video display units:
(1) Executive Information Console - The Executive Information
Console is an additional control console provided to allow a
racetrack's management the ability to obtain the most current
information and statistics about the currently running
performance. This console can be used to report a variety of
types of information, such as total money wagered during the
performance or betting totals of a specified race, that may be
relevant to the racetrack management.
2. TERMINALS
A) Each terminal shall be capable of:
(1) Printing and issuing standard length tickets for all pools
and denominations as described in paragraph 1.a.
(2) Reading, transmitting to and receiving from the central
totalisator data for betting slips and cashing winning tickets
and branding on such winning tickets their total value and an
integral portion of their unique serial number.
(3) Accommodating up to four compound wagers on each standard
length ticket issued.
(4) Providing status indicators and error messages to terminal
operators.
(5) Providing special terminal functions to the terminal
operators which allow them to report to the system draws or
returns of cash and final cash balance at end of performance,
inquire of the system current cash position and convert their
terminal to calculator mode.
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.
EXHIBIT C
AUTOTOTE MAINTENANCE OBLIGATIONS
(A) EXCEPT AS HEREIN PROVIDED, AUTOTOTE SHALL BE UNDER NO OBLIGATION TO FURNISH
SERVICES TO OWNER IN EXCESS OF THOSE SPECIFIED HEREIN, NOR SHALL OWNER BE
ENTITLED TO ADDITIONAL SERVICES UNLESS A SUPPLEMENTARY AGREEMENT IS ENTERED INTO
BETWEEN AUTOTOTE AND OWNER, PROVIDING FOR THE DESIRED ADDITIONS, UPON TERMS
ACCEPTABLE TO AUTOTOTE AND OWNER.
(b) 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
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).
(c) 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.
(d) 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.
(e) 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.
(f) To furnish and maintain on each wagering day, at its expense, 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.
(g) 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, which are the property of
Autotote.
(h) 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
Owner with a certificate of insurance inentifying Owner as a named insured.
(i) To furnish all necessary ticket paper for the Sell/Cash terminals.
EXHIBIT D
OWNER RESPONSIBILITIES
(a) Owner, in accordance with instructions furnished by Autotote, shall provide:
(i) The security needed to ensure the physical safety of the System against
injury from any cause whatsoever, excluding Force Majeure events, (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 and 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 accomodation 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
Agreement, Autotote shall pay thise 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
any time 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 to not delay the comencement 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
request in connection with discovering the source of counterfeit Tickets.
(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 reasonable 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
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
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 by any unauthorized
persons and Autotote shall cooperate. Owner and Autotote each agrees to
indemnify the other for damages or 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
(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 comunications 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 obligation 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 invetory as attendance and
wagering levels warrant.
EXHIBIT E
INSTALLATION
INTENTIONALLY LEFT BLANK
EXHIBIT F
PRICE STRUCTURE
1. Owner agrees to pay
(a) .0045 of all gross monies wagered annually;
(b) .0400 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 $10 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 greater amount 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.
EXHIBIT F-1
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
ITW 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 handle rate described in Exhibit F.
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 Autotote shall not be required to make a reimbursement if
any error is due to the 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 percent (2%) per month or the
highest lawful rate of interest, whichever is the lower amount and reasonable
attorney fees.
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.
AUTOTOTE SERVICES AGREEMENT
INDEX
SECTION
1 - Furnishing of System(s) and Service(s)
2 - Owner Responsibilities
3 - Installation
4 - Price(s) and Payment
5 - Term
6 - Special Termination
7 - Warranty
8 - Patent Infringement
9 - Force Majeure
10 - Ownership Right and Confidential Information
11 - Limitation of Liability
12 - Indemnity
13 - Default
14 - Arbitration and Remedies
15 - Responsibilities
16 - Entire Agreement
17 - Waiver
18 - Assignment
19 - Notice
20 - Removal of Equipment
21 - Governing Law
EXHIBITS
A- Owner Activity EX-1
B - System(s) EX-2
B-1 - Line Printer Reports EX-5
C - Autotote Maintenance Obligation s 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 Autotote EX-15
G - Certain Liabilities EX-16
STOCK PURCHASE AGREEMENT
BETWEEN
LADBROKE RACING CORPORATION
("SELLER")
AND
SAM HOUSTON RACE PARK, LTD.
("PURCHASER")
DATED
JANUARY 6, 2000
TABLE OF CONTENTS
ARTICLE I. TRANSFER OF THE SHARES AND PURCHASE PRICE
1.1 PURCHASE AND SALE OF THE SHARES
1.2 DELIVERY OF CERTIFICATES
1.3 EARNEST MONEY
ARTICLE II. THE CLOSING
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLER
3.1 ORGANIZATION
3.2 NECESSARY ACTIONS; BINDING EFFECT
3.3 NO CONFLICTS
3.4 CONSENTS AND APPROVALS
3.5 CAPITALIZATION
3.6 TITLE TO THE SHARES
3.7 FINANCIAL STATEMENTS
3.8 ABSENCE OF UNDISCLOSED LIABILITIES
3.9 ABSENCE OF CERTAIN CHANGES
3.10 TAXES
3.11 TITLE TO REAL PROPERTY
3.12 TITLE TO PERSONAL PROPERTY
3.13 REPRESENTATIONS REGARDING THE PROPERTY AND PERSONAL PROPERTY
3.14 ADDITIONAL AGREEMENTS
3.15 SCHEDULES
3.16 LITIGATION
3.17 ENFORCEABILITY OF AGREEMENT
3.18 NO DEFAULTS
3.19 LIABILITIES
3.20 INSURANCE
3.21 CORPORATE RECORDS
3.22 ACCURACY OF REPRESENTATIONS, WARRANTIES AND COVENANTS
3.23 LEGAL COMPLIANCE
3.24 KNOWLEDGE
3.25 MATERIALITY
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PURCHASER
4.1 ORGANIZATION AND GOOD STANDING
4.2 NECESSARY ACTIONS; BINDING EFFECT
4.3 CERTAIN PROCEEDINGS
4.4 NO CONFLICTS
4.5 DISCLOSURE
4.6 CONSENTS AND APPROVALS
4.7 INVESTMENT INTENT
4.8 KNOWLEDGE
ARTICLE V. TAX MATTERS
5.1 SECTION 338(H)(10)
ARTICLE VI. COVENANTS OF PURCHASER AND SELLER
6.1 SELLER'S COVENANTS
6.2 PURCHASER'S COVENANTS
ARTICLE VII. CONDITIONS TO OBLIGATIONS OF PURCHASER
7.1 REPRESENTATIONS AND WARRANTIES TRUE AND CORRECT
7.2 OPINION OF SELLER AND THE COMPANY
7.3 ABSTRACTOR'S CERTIFICATE
7.4 ENVIRONMENTAL AGREEMENT
7.5 COMMISSION APPROVAL
7.6 DELIVERY OF PROPERTY
ARTICLE VIII. CONDITIONS TO OBLIGATIONS OF SELLER
8.1 REPRESENTATIONS AND WARRANTIES TRUE AND CORRECT
8.2 DELIVERY OF PURCHASE PRICE FOR THE SHARES
8.3 DISMISSAL OF SUIT
8.4 ENVIRONMENTAL AGREEMENT
8.5 LICENSING FEE
8.6 COMPANY NAME
ARTICLE IX. APPROVAL
ARTICLE X. TERMINATION AND ABANDONMENT
10.1 METHODS OF TERMINATION
10.2 PROCEDURE UPON TERMINATION
ARTICLE XI. MISCELLANEOUS
11.1 NOTICES
11.2 EXPENSES AND FINDERS FEE
11.3 INDEMNIFICATION OF PURCHASER
11.4 INDEMNIFICATION OF SELLER
11.5 DEFENSE OF CLAIMS; NOTICE
11.6 EXPIRATION OF INDEMNIFICATION
11.7 EXCLUSIVE REMEDY
11.8 BUSINESS PRACTICES
11.9 CONFIDENTIALITY
11.10 ENTIRE AGREEMENT
11.11 PARTIES BOUND
11.12 GOVERNING LAW
11.13 SEVERABILITY
11.14 MULTIPLE COUNTERPARTS
11.15 FURTHER ASSURANCES
11.16 ATTORNEYS' FEES
11.17 GENDER AND NUMBER
11.18 CAPTIONS
11.19 WAIVER
11.20 AMENDMENT
11.21 EFFECTIVE DATE
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is made and entered
into this 6th day of January 2000, between LADBROKE RACING CORPORATION, a
Delaware corporation ("Seller"), and SAM HOUSTON RACE PARK, LTD., a Texas
limited partnership ("Purchaser"). Seller and Purchaser are sometimes herein
referred to individually as "Party" or collectively as "Parties."
Seller owns, in the aggregate, One Thousand (1,000) shares of the
common stock of Ladbroke Racing Texas Corporation, a Texas corporation (the
"Company"), consisting of all of the issued and outstanding shares of capital
stock of the Company (the "Shares") and desires to sell to Purchaser, and
Purchaser desires to purchase from Seller the Shares on the terms and conditions
in this Agreement.
THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Seller and Purchaser hereby covenant and agree as
follows:
ARTICLE I. TRANSFER OF THE SHARES AND PURCHASE PRICE
I.1 PURCHASE AND SALE OF THE SHARES. On the terms and subject to the
conditions in this Agreement, and based upon the representations, warranties and
agreements contained in this Agreement, Seller agrees to sell, transfer and
assign the Shares to Purchaser or its designee and Purchaser or its designee
agrees to purchase the Shares from Seller in exchange for a total purchase price
of TWO MILLION THREE HUNDRED FIFTY THOUSAND DOLLARS ($2,350,000.00) payable in
cash at the Closing, reduced by the amount of any condemnation awards paid as a
result of a taking of any part of the Property (defined in this Agreement), any
insurance proceeds paid to the Company for unrepaired damage to the Property (to
the extent such proceeds are not retained by the Company and delivered to
Purchaser at Closing), costs to be paid by Seller as provided in this Agreement
and applicable prorations (the "Purchase Price").
I.2 DELIVERY OF CERTIFICATES. In exchange for delivery by Purchaser to
Seller of the Purchase Price payable in cash at the Closing, Seller will deliver
to Purchaser (i) stock certificates representing the Shares, endorsed in blank,
and accompanied by stock powers duly endorsed in blank, and (ii) executed
letters of any persons employed by the Company or any business entity affiliated
with or owned or controlled by the Company, resigning their position as an
officer, director and/or employee of the Company.
I.3 EARNEST MONEY. In order to secure Purchaser's performance of this
Agreement, within three (3) business days after the execution of this Agreement,
Purchaser shall deposit with Winstead Sechrest & Minick P.C.. ("Escrow Agent")
the sum of FIFTY THOUSAND DOLLARS ($50,000.00) as earnest money ("Earnest
Money"). The Earnest Money shall be placed in an interest bearing account with a
federally insured banking institution mutually acceptable to Purchaser and
Seller, and all interest earned thereon shall be part of the Earnest Money and
shall be paid to the Party to whom the Earnest Money is payable as hereinafter
provided. Except as and to the extent otherwise expressly provided in this
Agreement, all Earnest Money shall be refundable to Purchaser in the event any
condition to Closing is not satisfied prior to Closing, or in the event of
Seller's wrongful failure or refusal to close. If the transactions contemplated
hereby are consummated, the Earnest Money shall be applied against the Purchase
Price at Closing. If the transactions are not consummated, the Earnest Money
shall be held and delivered by the Escrow Agent as provided in this Agreement.
ARTICLE II. THE CLOSING
The Closing of the Sale of the Stock. The Closing of the sale of the
Shares shall occur at the offices of Purchaser, 5847 San Felipe, Suite 2600,
Houston, Texas, at 1:00 p.m. on the third business day following the approval of
this Agreement by the Texas Racing Commission (the "Commission") or such earlier
date as mutually agreed upon by Seller and Purchaser (the "Closing").
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser that, as of the date of
execution of this Agreement and up to and including the date of the Closing
(which representations and warranties shall survive the Closing, regardless of
what investigations, if any, Purchaser shall have made thereof prior to Closing)
as follows:
III.1 ORGANIZATION. Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Texas and is not required to be qualified, and is
not qualified, to do business in any jurisdiction other than Texas.
III.2 NECESSARY ACTIONS; BINDING EFFECT. To Seller's knowledge, Seller
has taken all corporate action necessary to authorize its execution and delivery
of, and the performance of its obligations under, this Agreement. This Agreement
constitutes a valid obligation of Seller that is legally binding on and
enforceable against Seller in accordance with its terms, except as such
Enforceability may be limited by (i) bankruptcy, insolvency, moratorium or other
similar laws affecting creditors' rights, and (ii) general principles of equity
relating to the availability of equitable remedies (regardless of whether the
Agreement is sought to be enforced in a proceeding at law or in equity).
III.3 NO CONFLICTS. To Seller's knowledge, neither the execution and
delivery of this Agreement by Seller or the performance by Seller of its
obligations hereunder nor the consummation of the transactions contemplated
hereby, will result in any of the following: (a) a default or an event that,
with notice or lapse of time, or both, would constitute a default, breach or
violation of any provision of the Articles of Incorporation or Bylaws of Seller;
or (b) a violation or breach of any writ, injunction or decree of any court or
governmental instrumentality applicable to Seller or by which any of its
properties is bound or any laws or regulations applicable to Seller, where the
violation would have a material adverse effect on Seller.
III.4 CONSENTS AND APPROVALS. To Seller's knowledge, except for the
approval of the Commission as provided in Article IX, no consent, approval,
order or authorization of, or registration, declaration or filing with, any
person or entity or any court, administrative agency or commission or other
governmental authority or instrumentality is required by or with respect to
Seller in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.
III.5 CAPITALIZATION. The authorized capital stock of the Company
consists solely of 10,000 shares of common stock, no par value, of which 1,000
shares of that common stock (which constitutes the number of outstanding shares)
are issued and outstanding. There are in existence no subscriptions, preemptive
rights, calls, options, warrants, agreements, understandings, commitments or
rights of first refusal or similar rights or any other agreements to which
Seller is a party or by which Seller is bound relating to the issuance,
redemption, transfer, purchase or sale of any of the Shares, or of any other
securities of the Company convertible into capital stock or other securities of
the Company.
III.6 TITLE TO THE SHARES. The Shares are owned of record and
beneficially by Seller as listed on Schedule 8 attached hereto and Seller holds
good, valid and indefeasible title to the Shares, free and clear of all liens,
encumbrances, pledges, charges, claims, restrictions, rights of first refusal,
voting trusts, voting agreements, buy/sell agreements, preemptive rights,
proxies or other interests of any nature of any person. Seller possesses full
authority and legal right to sell, transfer and assign legal and beneficial
ownership of its interest in the Company, free and clear of all liens,
encumbrances, pledges, charges, claims, restrictions, rights of first refusal,
voting trusts, voting agreements, buy/sell agreements, preemptive rights,
proxies or other interests of any nature of any person. Upon transfer of the
Shares at the Closing, the transferee will own the entire legal and beneficial
interest in the Company, free and clear of all liens, claims and encumbrances of
any kind, and subject to no legal or equitable restrictions of any kind.
III.7 FINANCIAL STATEMENTS. Seller has delivered to Purchaser copies of
the financial statements described on Schedule 9 to this Agreement (the
"Financial Statements"), or will deliver the Financial Statements as required on
Schedule 9 within the time frame specified on Schedule 9, all of which are true,
correct and complete and have been prepared in accordance with generally
accepted accounting principles consistently followed throughout the periods
covered thereby, and presenting fairly the financial condition of the Company as
of those dates and the results of operations for those periods.
III.8 ABSENCE OF UNDISCLOSED LIABILITIES. Except to the extent
reflected or reserved against in the most recent Financial Statement set forth
in Schedule 9, the Company, has no liabilities of any nature, whether accrued,
absolute, contingent, or otherwise, including, without limitation, tax
liabilities due or to become due, and whether incurred in respect of or measured
by its income or arising out of transactions entered into, or any state of facts
existing. Seller represents and warrants that it does not know or have
reasonable grounds to know of any basis for the assertion against the Company,
as of the date of this Agreement, of any liability of any nature or in any
amount not fully reflected or reserved against in the Financial Statements.
III.9 ABSENCE OF CERTAIN CHANGES. Since the date of the most recent
Financial Statement set forth on Schedule 9, there has not been any change in
the Company's financial condition, assets, liabilities, or business, other than
changes in the ordinary course of business, none of which has been materially
adverse. There has not been any damage, destruction, or loss to the Property,
whether or not covered by insurance, materially and adversely affecting the
Property or the business conducted on, or to be conducted on, the Property or
which would prevent Purchaser from commencing, in the normal course of business,
operations of its business at the facilities on the Property. Notwithstanding
the foregoing, if (i) the Property has been damaged, (ii) such damage will not
cost in excess of $50,000 to repair, and (iii) such damage is fully covered by
insurance, Purchaser shall have no right to terminate this Agreement if Seller
assigns to Purchaser at Closing the proceeds of any insurance policy covering
such damages and pays to Purchaser at Closing the full amount of the deductible
under that policy (but in no event an amount in excess of the amount to repair
the damage), if any, unless such damage or destruction would prevent or delay
Purchaser from commencing, in the normal course of business, its operations at
the facilities on the property. If within one hundred eighty (180) days
subsequent to Closing Purchaser is unable to collect the full amount of the
damages from the insurance company (without any obligation to incur cost or file
a lawsuit to collect such amounts) Seller shall immediately pay to Purchaser the
unpaid portion of the damages. In the event Seller pays to Purchaser the unpaid
portion of the damages, Purchaser shall concurrently reassign the insurance
proceeds to Seller. There has not been (i) any declaration, or setting aside, or
payment of any dividend or other distribution in respect of the Shares (whether
in cash or in kind), or any direct or indirect redemption, purchase, or other
acquisition of any of the Shares; (ii) any increase in the compensation payable
or to become payable by the Company to any of its officers, employees, or
agents, or any bonus payment or arrangement made to or with any of them; or
(iii) any labor trouble, or any event or condition of any character, adversely
affecting the Company's business or prospects.
III.10 TAXES.
(a) All Federal, state, local, territorial and foreign tax
returns, reports, declarations, information statements and estimates
(collectively, "Returns") have been timely filed for the Company for
all periods which are required to be filed by it and the Company has
paid all Taxes shown as payable by the Company on those Returns when
and as required by law. For purposes of this Agreement, the term
"Taxes" includes, without limitation, all taxes however denominated,
including any interest, penalties and other additions to tax including
income, real and personal property, payroll, employee withholding,
unemployment insurance, social security, sales, use, ad valorem,
excise, franchise, gross receipts, business license, occupation,
pari-mutuel, stamp, environmental, transfer, workers' compensation,
Pension Benefit Guaranty Corporation premiums and other governmental
charges. All Returns required to be filed by the Company were true,
correct and complete.
(b) No Returns are currently under any examination by the
Internal Revenue Service ("IRS"), or any state, local or municipal tax
authority having jurisdiction thereof, and, to the best knowledge of
Seller, no items of revenue, cost or expense have been treated in a
manner inconsistent with the prior years' Returns of the Company and/or
any employee benefit plan of the Company which is not accordance with
the provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), Treasury Regulations, and/or related state authorities which
could result in additional Tax to the Company. Any additional Tax
liability asserted by the IRS or by the State of Texas or other taxing
authority as a result of any examinations has been paid unless
contested and disclosed to Purchaser in writing.
(c) The provisions for Taxes, if shown on the Financial
Statements, are adequate to cover the liabilities of the Company for
all Taxes to the date thereof. All withholding taxes or other Taxes the
Company is obligated to collect have been withheld or collected.
(d) At the Closing there will be no liens on any of the assets
of the Company including, without limitation, the Property with respect
to Taxes, other than liens for Taxes not yet due and payable or for
Taxes that the Company is contesting in good faith through appropriate
proceedings and for which appropriate reserves have been established.
(e) The Company has never been a member of an affiliated group
filing consolidated returns other than a group for which the Company is
currently a member. Neither the Company nor any member of the Company's
group does business in or derived income from any state, local,
territorial or foreign taxing jurisdiction other than those for which
all Returns have been furnished to Purchaser.
(f) There is no tax audit in process, pending or threatened
(either in writing or verbally, formally or informally). No tax
deficiencies exist or have been asserted or expect to be asserted with
respect to the Company or the Property and no notice has been delivered
or is expected to be delivered stating that the Company or the Property
has not filed a Return or paid any Taxes required to be filed or paid
by it. No waiver or extension of any statute of limitations is in
effect with respect to Taxes or Returns of the Company. The Company has
disclosed on its federal income tax returns all positions taken in
those returns that could give rise to substantial understatement
penalty within the meaning of Section 6662 of the Code.
(g) The Company is currently a party to a tax sharing
agreement and covenants to cancel such agreement prior to the Closing
Date; the Company has not assumed the liability of any other person
under contract.
(h) The Company is not a party to any safe harbor lease within
the meaning of Section 168(f)(8) of the Code. The Company is not and
has not been a United States real property holding corporation within
the meaning of Section 897(c)(2) of the Code and Seller is not subject
to withholding tax on the sale of the stock of the Company by reason of
Section 1445 of the Code. Neither Seller nor the Company is a foreign
person (as that term is defined in Section 1445 of the Code). Seller
and the Company have not agreed, nor are they required to make any
adjustment under Section 481(a) of the Code by reason of a change in
accounting method or otherwise.
III.11 TITLE TO REAL PROPERTY. The Company owns fee simple title to
real property described on Exhibit "A" to this Agreement (the "Property") free
and clear of any liens, claims, charges, options or other encumbrances, subject
only to the matters that are listed on Exhibit "B" to this Agreement. Seller
hereby warrants and defends title to the Property.
III.12 TITLE TO PERSONAL PROPERTY. The Company has good and marketable
title to all personal property described on Exhibit "A-1" to this Agreement and
all other equipment and personal property located in, on or used in connection
with the Property (the "Personal Property"), free and clear of any liens,
claims, charges, options or other encumbrances. There are no financing
statements filed or signed which list the Company as debtor and no agreements
exist authorizing or permitting any person to sign or file any such statements.
Seller hereby warrants and defends the title to the Personal Property.
III.13 REPRESENTATIONS REGARDING THE PROPERTY AND PERSONAL PROPERTY.
Seller makes the following representations to Purchaser regarding the Property
and the Personal Property:
(a) Claims. Other than the lease agreement set forth on
Schedule 10, the Property and the Personal Property are not subject to
any prior lease or claims of parties in possession or claims for unpaid
labor or materials.
(b) Condemnation. There is no pending or threatened
condemnation action or agreement in lieu thereof which affects the
Property. There are no monetary liens or encumbrances (except the
Permitted Exceptions) upon the Property or the Personal Property.
(c) Zoning. Seller has no knowledge of any fact, action or
proceeding, whether actual, pending or threatened, which could result
in the modification or termination of the present zoning classification
of the Property, or the termination of full, free and adequate access
to and from the Property from all adjoining public highways and roads.
(d) Improvements. To Seller's knowledge, the existing
improvements and utilities on the Property are in full compliance with
all applicable building, health and zoning laws and ordinances,
including, without limitation, the Americans with Disabilities Act and
the Texas Architectural Barriers Act. To Seller's knowledge, there is
no latent or material structural defects in the Property.
(e) Notices. Seller has not received any notice from any
governmental authority having jurisdiction over the Property requiring
or specifying any work to be done on or to the Property.
(f) Interference With Use. Seller has no knowledge of any
existing, threatened or contemplated actions, circumstances or
conditions (including, but not limited to subsurface conditions) which
would materially interfere with the use of the Property for the
purposes for which it is intended to be used.
(g) Taxes. All ad valorem real and personal property taxes,
excise taxes, income taxes and sales and use taxes applicable to the
Property and the Personal Property have been paid in full, except for
taxes not yet due and payable.
(h) Books and Records. All books, records, financial statements
and other such information provided by Seller to Purchaser are true
and correct.
(i) Fitness. Seller makes no warranty of fitness, express or
implied, as to the Personal Property. Except as noted on Exhibit A-1,
Seller has no actual knowledge as to the fitness of any of the Personal
Property, and undertakes no obligation to investigate such Personal
Property.
III.14 ADDITIONAL AGREEMENTS. Except as specifically described and
disclosed in this Agreement, the Company is not a party to any written or oral:
(a) sales, agency distribution or advertising contract; (b) contract with a
labor organization; (c) continuing contract for the future purchase of services,
materials, supplies, or equipment in excess of the requirements of its business
now booked or for normal operating inventories; (d) lease under which it is a
lessor or lessee; (e) pension, profit sharing, retirement, bonus,
hospitalization, insurance or similar plans or practices, formal or informal, in
effect with respect to its employees or others; (f) contract or agreement of any
other nature with any current or former officer, director, shareholder, or
employee of the Company, including any related party to such person; (g) power
of attorney; or (h) contract or commitment not elsewhere disclosed in this
Agreement; provided, however that if any contract or commitment exists which has
not been disclosed herein, Seller shall terminate such contract or commitment
prior to or at Closing.
III.15 SCHEDULES. Seller hereby represents that the following schedules
attached to this Agreement are true and correct in all material respects:
Schedule 1. Schedule 1 contains a list and description of all
franchises, business licenses, permits, certificates or any evidence or
governmental approvals which are held by the Company or any of their
employees for the benefit of the Company (and any pending applications
for any of the foregoing).
Schedule 2. Schedule 2 contains a list and description of all
litigation and arbitration, which to Seller's knowledge the Company has
been named a party during the five (5) years preceding the date of this
Agreement, and a list and brief description of all pending or
threatened litigation or administrative or governmental proceedings to
which the Company may become a party, or by which its assets,
operations, or franchises may be affected.
Schedule 3. Schedule 3 contains a list and description of
Company's pension, profit sharing, retirement or other obligations
relating to former employees of the Company. Upon request by Purchaser,
Seller agrees to furnish Purchaser with copies of such items. As of the
date of this Agreement, the Company has no employees.
Schedule 4. Schedule 4 contains a list of all bank accounts,
including current balances, safe deposit boxes, and securities owned by
the Company and investments of the Company and amounts thereof,
accompanied by a list of names of all persons authorized to draw
thereon or to have access thereto.
Schedule 5. Schedule 5 contains a list of all trademarks,
service marks, trade names, copyrights, trade secrets, and similar
rights, names, assumed names, or marks or any other intangible assets
used by the Company.
Schedule 6. Schedule 6 contains a list of any and all reports
filed by the Company with any federal, state or local administrative or
governmental agency, including without limitation, the Commission, the
Texas Alcoholic Beverage Commission, the Bureau of Alcohol, Tobacco and
Firearms, the Environmental Protection Agency and the Occupational
Safety and Health Administration, and a copy of any communications
received by the Company from such agencies.
Schedule 7. Schedule 7 contains a list of any and all Returns
(including, but not limited to, Returns of any employee benefit plan of
the Company) of the Company, including all schedules and attachments
thereto, for the immediately preceding five (5) years. Copies of all
such Returns have been delivered to Purchaser prior to Closing.
Schedule 8. Schedule 8 sets forth the name and jurisdiction of
incorporation of the Company, the number of Shares of authorized,
issued and outstanding capital stock of each class of capital stock of
the Company and the record and beneficial owner of all of the
outstanding shares of capital stock of the Company (free and clear of
any restrictions on transfer, taxes, security interests, options,
warrants, purchase rights, contracts, commitments, equities, claims,
and demands. All of the issued and outstanding shares of capital stock
of the Company have been duly authorized and are validly issued, fully
paid, and nonassessable.
Schedule 9. Schedule 9 contains a list of all of the financial
statements relating to the Company that have been delivered to
Purchaser.
Schedule 10. Schedule 10 contains a list of written agreements
to which the Company is a party.
Schedule 11. Schedule 11 sets forth the allocation of the
Purchase Price among the assets of the Company that are deemed to have
been acquired pursuant to Section 338(h)(10) of the Code or state law
equivalent.
Schedule 12. Schedule 12 contains a list of liens to be
released.
The information furnished by Seller to Purchaser in accordance with
this Section 3.15 was prepared by Seller after diligent investigation, and
Seller knows of nothing which would result in any adverse change in that
information.
III.16 LITIGATION. To Seller's knowledge, except as set forth in
Schedule 2, there are no actions, suits, proceedings, or investigations pending
or threatened against or affecting the Company or the Property, at law or in
equity or before or by any federal, state, municipal or other governmental
department, commission, board, agency or instrumentality. To Seller's knowledge,
the Company is not in default with respect to any writ, injunction or decree of
any court or federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality. To Seller's knowledge, the
Company is not a party to or subject to any judgment, order or decree entered in
any action or proceeding brought by any governmental agency or any other party
against the Company, enjoining it in respect of, or the effect of which is to
limit, restrict, regulate or prohibit, any business practice or the conduct of
business or the acquisition of any property. To Seller's knowledge, there are no
actions, suits, proceedings or claims pending or threatened against Seller with
respect to or in any manner affecting the ownership of the Shares, or where any
unfavorable ruling, decision or finding would render unlawful or otherwise
adversely affect the consummation of the transactions contemplated by this
Agreement.
III.17 ENFORCEABILITY OF AGREEMENT. Seller has all requisite power,
authority and capacity to enter into this Agreement and to perform its
obligations under this Agreement. This Agreement constitutes a valid and legally
binding obligation of Seller, enforceable in accordance with its terms. Neither
the execution and delivery of this Agreement nor the performance of this
Agreement will constitute or result in the breach of any term, condition or
provision of, or constitute a default under, any material agreement or other
instrument to which Seller or the Company is a party, or under any law,
regulation, judgment or order binding upon Seller or the Company, or result in
the creation of any lien, charge or encumbrance against the Shares.
III.18 NO DEFAULTS. The Company has performed all obligations required
to be performed by it to date and is not in default, in any material respect,
under any of the agreements, contracts, or other documents to which it is a
party, nor has there occurred any event that with notice or the lapse of time or
both would constitute a material default under such agreements, contracts or
other documents. Neither Seller nor the Company is a party to any contract or
agreement affecting the Shares which is nonassignable, prevents or places
restrictions on Seller's ability to sell the Shares or which will be adversely
affected by the sale of the Shares.
III.19 LIABILITIES. There are no liabilities of the Company of any
kind, whether or not accrued or contingent and whether or not determined or
determinable, other than liabilities disclosed to Purchaser in this Agreement.
III.20 INSURANCE. All of the insurance policies carried for the benefit
of the Company are in full force and effect and Seller and the Company have no
knowledge of any threat by an insurance carrier to terminate any of the
insurance policies now held for the benefit of the Company or increase any
premiums in respect thereof, nor has the Company failed to comply with any
material conditions contained in those policies. The Company is insured with
respect to loss or damage to buildings, equipment and inventory, public
liability, products liability, and all other risks normally insured against by
companies similarly situated.
III.21 CORPORATE RECORDS. True and correct copies of the Articles of
Incorporation and any amendments thereto and the Bylaws of the Company or any
predecessor to the Company have been delivered to Purchaser prior to the
execution of this Agreement. The corporate minute books of the Company will be
brought current as of the date of this Agreement and will be delivered to the
transferee of the Shares. The minute books will contain the minutes of all of
the meetings of the directors and shareholders of the Company which have been
held. In addition, the minute books accurately reflect the current officers and
directors of the Company.
III.22 ACCURACY OF REPRESENTATIONS, WARRANTIES AND COVENANTS. To
Seller's knowledge, no representation, warranty or covenant made by Seller in or
pursuant to this Agreement contains or will at the Closing contain any untrue
statement of a material fact or omits or will omit to state any material fact
necessary to make such representation, warranty or statement not misleading, in
light of the circumstances in which it was made.
III.23 LEGAL COMPLIANCE. The Company has complied with all applicable
laws (including rules, regulations, codes, plans, injunctions, judgments,
orders, decrees, rulings, and charges thereunder) of federal, state, local, and
foreign governments (and all agencies thereof), and to Seller's knowledge, no
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against any of them alleging any
failure to so comply.
III.24 KNOWLEDGE. For purposes of determining under this Article III
whether Seller and/or the Company knows of any facts, events, conditions or
circumstances relating to the subject matter of the representations and
warranties contained in this Article III, Seller and/or the Company shall be
deemed to have knowledge of the facts, events, conditions and circumstances
actually known on or before the date hereof by any of the following officers of
Seller and the Company: John M. Swiatek, William McLaughlin, George P. Harbison
or Glenn R. Zeringue.
III.25 MATERIALITY. To the extent Seller is not in material breach of
any of the representations and warranties set forth in Sections 3.8 and 3.19,
Purchaser shall not be entitled to terminate this Agreement, provided that
Seller cures such breach at or before Closing, or provides reasonably adequate
assurances that the curative measures will be accomplished in a commercially
reasonable period of time. Material, as defined in this Section 3.25 shall mean
damages not to exceed $50,000.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
IV.1 ORGANIZATION AND GOOD STANDING. Purchaser is a limited partnership
duly organized, validly existing and in good standing under the laws of the
State of Texas. Purchaser is duly qualified to do business and is in good
standing in the State of Texas. Purchaser has the requisite partnership power
and authority to carry on its business as now being conducted and to execute and
deliver and perform its obligations under this Agreement.
IV.2 NECESSARY ACTIONS; BINDING EFFECT. To Purchaser's knowledge,
Purchaser has taken all partnership action necessary to authorize its execution
and delivery of, and the performance of its obligations under, this Agreement.
This Agreement constitutes a valid obligation of Purchaser that is legally
binding on and enforceable against Purchaser in accordance with its terms,
except as such enforceability may be limited by (i) bankruptcy, insolvency,
moratorium or other similar laws affecting creditors' rights, and (ii) general
principles of equity relating to the availability of equitable remedies
(regardless of whether the Agreement is sought to be enforced in a proceeding at
law or in equity).
IV.3 CERTAIN PROCEEDINGS. To Purchaser's knowledge, there is no pending
proceeding that has been commenced against Purchaser and that challenges, or may
have the effect of preventing, delaying, making illegal, or otherwise
interfering with, any of the contemplated transactions. To Purchaser's
knowledge, no such proceeding has been threatened.
IV.4 NO CONFLICTS. To Purchaser's knowledge, neither the execution and
delivery of this Agreement by Purchaser or the performance by Purchaser of its
obligations hereunder nor the consummation of the transactions contemplated
hereby, will result in any of the following: (a) a default or an event that,
with notice or lapse of time, or both, would constitute a default, breach or
violation of any provision of the Articles of Incorporation or Bylaws of
Purchaser; or (b) a violation or breach of any writ, injunction or decree of any
court or governmental instrumentality applicable to Purchaser or by which any of
its properties is bound or any laws or regulations applicable to Purchaser,
where the violation would have a material adverse effect on Purchaser.
IV.5 DISCLOSURE. To Purchaser's knowledge, none of the representations
or warranties of Purchaser contained herein or in any certificate furnished or
to be furnished pursuant hereto, contains any statement of a material fact that
was untrue when made or omits to state any material fact necessary to make the
statements of fact contained herein or therein not misleading in any material
respect.
IV.6 CONSENTS AND APPROVALS. To Purchaser's knowledge, except for the
approval of the Commission as provided in Article IX, no consent, approval,
order or authorization of, or registration, declaration or filing with, any
person or entity or any court, administrative agency or commission or other
governmental authority or instrumentality is required by or with respect to
Purchaser in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.
IV.7 INVESTMENT INTENT. Purchaser is acquiring the Shares for its own
account and not with a view to their distribution within the meaning of Section
2(11) of Securities Act of 1933, as amended (the "Securities Act").
IV.8 KNOWLEDGE. For purposes of determining under this Article IV
whether Purchaser knows of any facts, events, conditions or circumstances
relating to the subject matter of the representations and warranties contained
in this Article IV, Purchaser shall be deemed to have knowledge of the facts,
events, conditions and circumstances actually known on or before the date hereof
by any of the following officers of Purchaser: Robert L. Bork and Michael J.
Vitek.
ARTICLE V. TAX MATTERS
V.1 SECTION 338(H)(10).
(a) Election. Upon the request of Seller, Seller and Purchaser
shall make a joint election under Section 338(h)(10) of the Code with
respect to the purchase of the Shares and under any similar provisions
of state law. Seller represents that its sale of the Shares is eligible
for, and Purchaser represents that it is qualified to make, such
election. Seller and Purchaser agree to prepare and file IRS Form 8023,
required schedules thereto, and any similar state forms in a timely
fashion in accordance with the rules under Section 338 of the Code or
under a similar provision of state law, as the case may be. If any
changes are required in these forms subsequent to their filing, the
parties will promptly agree on such changes.
(b) Allocation of Purchase Price. If the election contemplated
in Section 5.1(a) hereof is made, Seller and Purchaser agree that
Schedule 11 accurately reflects the parties' allocation of the Purchase
Price among the assets of the Company that are deemed to have been
acquired pursuant to Section 338(h)(10) of the Code or state law
equivalent. Purchaser and Seller shall use the asset values determined
from such allocation for purposes of all reports and returns with
respect to Taxes, including IRS Form 8594 or any equivalent statement.
(c) Amendments. Purchaser agrees that it shall not make any
amendment to any federal income Tax Return of the Company for any
period ending before Closing (or to any state Tax return that computes
a tax liability by reference to amounts shown on the Company's federal
income Tax Return for any such period) without the written consent of
Seller.
(d) Taxes Relating to Election. Seller shall pay any and
all Taxes arising from or relating to an election made under Section
338(h)(10) of the Code.
ARTICLE VI. COVENANTS OF PURCHASER AND SELLER
VI.1 SELLER'S COVENANTS. Seller covenants and agrees that between
the date of this Agreement and the Closing:
(a) Actions. Neither Seller nor the Company shall take any
action which would cause any conditions precedent to any obligations
under this Agreement not to be fulfilled, including, without
limitation, taking, causing to be taken, or permitting to be taken or
to exist any action, condition or thing which would cause the
representations and warranties made by Seller in Article III above not
to be materially true, correct and accurate as of the Closing.
(b) Filings. Seller shall promptly file or submit and
diligently prosecute any and all applications or notices with public
authorities, federal, state or local, domestic or foreign, and all
other requests for approvals to any private persons or entities, the
filing or granting of which is necessary for the consummation of the
sale of the Shares in accordance with this Agreement to the extent
Seller is obligated hereunder.
(c) No Liens. Seller and the Company shall not mortgage,
pledge or subject to lien, charge, security agreement or any
encumbrance, the Shares or any interest therein or the Property, or
sell, lease, transfer or dispose of the Property or any of the Shares
or any interest therein.
(d) Preparation of Returns and Payment of Taxes. Seller shall
cause the Company to prepare and timely file all Returns of the Company
and amendments thereto required to be filed by them for tax periods
which end on or before the Closing Date. Purchaser shall have a
reasonable opportunity to review all Returns and amendments thereto.
Seller shall cause the Company to pay and discharge all Taxes against
it or any of its properties or assets, and all liabilities at any time
existing, before they become delinquent and before penalties accrue,
except to the extent and as long as: (a) they are being contested in
good faith and by appropriate proceedings pursued diligently and in a
manner so as not to cause any material adverse effect upon the
condition (financial or otherwise) or operations of the Company; and
(b) the Company shall have set aside on its books reserves (segregated
to the extent required by sound accounting practice) in the amount of
the demanded principal imposition (together with interest and penalties
relating thereto, if any).
(e) Access to Records. Between the date of this Agreement and
the Closing Date, Seller shall give Purchaser and its authorized
representatives full access to all properties, books, records and
Returns of or relating to the Company and the Company's assets, whether
in possession of Seller or third-party professional advisors or
representatives in order that Purchaser may have full opportunity to
make such investigations as it shall desire to make of the affairs of
the Company. Seller shall ensure that all third-party advisors and
representatives of Seller, including without limitation accountants and
attorneys, fully cooperate and be available to Purchaser in connection
with such investigation.
(f) Certification of Non-Foreign Status. Seller shall furnish
to Purchaser on or before the Closing Date a certification of Seller's
non-foreign status as set forth in Treasury Regulation 1.1445-2(b).
(g) Payment of Taxes; Prorations. Seller shall pay all taxes
as they come due relating to the Property and the Personal Property.
Upon the Closing Date, any unpaid real estate taxes and assessments for
the current calendar year, personal property taxes, utility charges,
and other normal and recurring costs and expenses attributable to the
Property and Personal Property shall be prorated between the parties as
of the Closing Date. Taxes for any period less than a year shall be
prorated on a daily basis. Purchaser shall be given a credit against
the Purchase Price in an amount equal to Seller's portion of the
prorated taxes.
(h) Conditions Precedent. Seller shall take all reasonable
steps which are within its power to cause to be fulfilled those of the
conditions precedent to Purchaser's obligations to consummate the
transactions contemplated hereby which are dependent upon the actions
of Seller.
VI.2 PURCHASER'S COVENANTS. As promptly as practicable after the date
of the execution of this Agreement, Purchaser will make all filings required by
legal requirements to consummate the contemplated transactions to the extent
Purchaser is obligated hereunder. Between the date of this Agreement and the
Closing Date, Purchaser will cooperate with Seller with respect to all filings
that Seller is required to make in connection with the contemplated
transactions.
ARTICLE VII. CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser to consummate the transactions
contemplated hereby shall be subject to the following conditions:
VII.1 REPRESENTATIONS AND WARRANTIES TRUE AND CORRECT. At the Closing,
all material representations and warranties of Seller contained herein shall
have been true on the date hereof and shall be true and correct as of the
Closing as if made for the first time as of the Closing; and Seller shall have
performed all obligations and complied with all covenants required by this
Agreement to be performed or complied with by Seller prior to the Closing.
Purchaser shall have been furnished with a certificate, signed by Seller and
dated as of the Closing, to the foregoing effect.
VII.2 OPINION OF SELLER AND THE COMPANY. Seller shall have delivered to
Purchaser an opinion of counsel to both Seller and the Company, dated the
Closing Date, that the Company's corporate existence, good standing, and
authorized and issued stock are as stated in Article III, that Seller has the
authorization and power to transfer the Shares, that the form of the release of
the liens set forth on Schedule 12 is in the form sufficient to release said
liens, is enforceable and that such releases have been validly executed and
delivered.
VII.3 ABSTRACTOR'S CERTIFICATE. Seller shall deliver to Purchaser on or
before the Closing Date an Abstractor's Certificate containing the following
exceptions, and none other: (1) standby fees and taxes for the year of the
Closing and subsequent years; and (2) other matters as shown on Exhibit "B"
attached to this Agreement (collectively the "Permitted Exceptions").
VII.4 ENVIRONMENTAL AGREEMENT. Seller shall deliver to Purchaser the
Environmental Agreement attached to this Agreement as Exhibit "C"
("Environmental Agreement") executed by Seller.
VII.5 COMMISSION APPROVAL. The Commission shall have given the
approval required in Article IX.
VII.6 DELIVERY OF PROPERTY. At the Closing, Seller shall deliver to
Purchaser all Personal Property, including without limitation, books, records
and Returns of the Company, and all keys and combinations to all locks in the
improvements.
ARTICLE VIII. CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller to consummate the transactions contemplated
hereby shall be subject to the following conditions:
VIII.1 REPRESENTATIONS AND WARRANTIES TRUE AND CORRECT. At the Closing,
all material representations and warranties of Purchaser contained herein shall
have been true on the date hereof and shall be true and correct as of the
Closing as if made for the first time as of the Closing; and Purchaser shall
have performed all obligations and complied with all covenants required by this
Agreement to be performed or complied with by Purchaser prior to the Closing.
Seller shall have been furnished with a certificate, signed by Purchaser and
dated as of the Closing, to the foregoing effect.
VIII.2 DELIVERY OF PURCHASE PRICE FOR THE SHARES. The Purchase Price
shall be delivered to Seller in cash, or cash equivalent, at the Closing.
VIII.3 DISMISSAL OF SUIT. Purchaser shall deliver to Seller an agreed
order of dismissal with prejudice of the civil action entitled SHRP Valley,
LLC v. Ladbroke Racing Corporation, et. al., cause no. 99-11-4702-D filed in
the 103rd Judicial District Court in Cameron County, Texas.
VIII.4 ENVIRONMENTAL AGREEMENT. Purchaser shall deliver to Seller the
Environmental Agreement executed by Purchaser.
VIII.5 LICENSING FEE. Seller shall pay prior to Closing the unpaid
portion of the annual payment due for inactive greyhound racetracks to the
Commission on the Company's Greyhound Racing License attached as Exhibit "D" to
this Agreement (the "License") for the licensing period from and after January
1, 2000, such liability not to exceed the aggregate sum of $18,750; provided
that Purchaser shall have full liability for any fees due the Commission on
account of any change in the status of the License from its current inactive
status.
VIII.6 COMPANY NAME. Prior to or contemporaneously with Closing, the
Company shall be renamed to a name approved by Purchaser, but such new name
shall not include "Ladbroke" or "Ladbrokes".
ARTICLE IX. APPROVAL
Seller and Purchaser shall each use their best efforts to obtain
approval of this Agreement by the Commission and the issuance by the Commission
of a resolution evidencing its determination that Purchaser is authorized to
exercise all of the rights under the License, that the License is in full force
and effect such that Purchaser shall be entitled, as the transferee of the
Shares, to continue all operations authorized under the License as a dog racing
facility. In the event this approval is not obtained, either Party may terminate
this Agreement within fifteen (15) days after receiving written notice that the
approval cannot be obtained.
ARTICLE X. TERMINATION AND ABANDONMENT
X.1 METHODS OF TERMINATION. This Agreement may be terminated and the
purchase and sale of the Shares herein contemplated may be abandoned at any time
but not later than the Closing Date:
(a) By mutual written consent of Seller and Purchaser;
(b) By either Purchaser or Seller if a material breach of any
provision of this Agreement has been committed by the other Party and
such breach has not been waived or cured within a period of ten (10)
days after receipt of written notice of such material breach; provided,
however, if such breach is not capable of being cured within a ten (10)
day period, and further provided that the Party in breach shall have
commenced all reasonable steps to cure such breach, the cure period
shall be extended as reasonably necessary to allow the Party to cure
such breach, but not more than thirty (30) days without the written
consent of both Parties hereto; or
(c) By any Party, if the Closing has not occurred by March 31,
2000; provided, that the Party so terminating is not in breach of any
of its material obligations under this Agreement.
X.2 PROCEDURE UPON TERMINATION.
(a) In the event of termination and abandonment by Purchaser
or by Seller, or both, pursuant to Section 10.1 hereof, written notice
thereof shall forthwith be given to the other Party or Parties and to
the Escrow Agent. If this Agreement is terminated as provided herein:
(i) Each Party will redeliver all documents,
workpapers and other material of any other Party relating to
the transactions contemplated hereby, whether so obtained
before or after the execution hereof, to the Party furnishing
the same;
(ii) The Parties shall be relieved of any obligation
to sell or purchase the Shares, but none of the Parties shall
be relieved of any liability for any material breach or
default under this Agreement.
(b) If this Agreement is validly terminated by Seller in
accordance with Section 10.1(b), Seller shall be entitled either (i) to
the Earnest Money as liquidated damages; or (ii) to enforce specific
performance of this Agreement by Purchaser. Purchaser shall be entitled
to the Earnest Money if this Agreement is validly terminated in
accordance with Sections 10.1(a), 10.1(c), or by Purchaser in
accordance with Section 10.1(b). If this Agreement is validly
terminated by Purchaser in accordance with Section 10.1(b), Purchaser
shall be entitled to exercise all remedies available to it at law or in
equity or enforce specific performance of the Agreement.
ARTICLE XI. MISCELLANEOUS
XI.1 NOTICES. Any notice, request, instruction or other document to be
given under this Agreement after the date hereof by any Party hereto to any
other Party hereto shall be in writing and shall be delivered personally against
a written receipt therefor, or sent by registered or certified mail, postage
prepaid, return receipt requested, and addressed to the proper Party at the
addresses shown below, or at such other address or person as any Party may
hereafter designate by written notice to the other Party in accordance herewith.
The date of mailing of any notice in accordance with this paragraph shall be
deemed to be the date of such notice and notice shall be effective from such
date.
PURCHASER: Sam Houston Race Park, Ltd.
P.O. Box 2323
7575 N. Sam Houston Parkway West
Houston, Texas 77252-2323
Attn: Robert L. Bork
with copy to: David Suson
MAXXAM, Inc.
5847 San Felipe, Suite 2600
Houston, Texas 77007
SELLER: Ladbroke Racing Corporation
375 Southpointe Boulevard
Suite 150
Canonsburg, Pennsylvania 15317
Attn: John M. Swiatek
with copy to: Winstead Sechrest & Minick, P.C.
100 Congress Avenue
Suite 800
Austin, Texas 78701
Attn: Timothy E. Young
XI.2 EXPENSES AND FINDERS FEE. Seller and Purchaser shall each bear
their own expenses incurred in connection with this Agreement and with the
performance of their obligations under this Agreement. Seller and Purchaser each
represent to each other that no third person has brought the parties together or
is otherwise entitled to compensation in connection with this transaction.
Accordingly, each of the parties hereto shall indemnify the other for any
liability to any broker, finder or other third party for any fees in connection
with the transaction contemplated in this Agreement resulting from that Party's
actions in connection with this Agreement.
XI.3 INDEMNIFICATION OF PURCHASER. Effective as of the Closing Date and
notwithstanding any investigation of the assets, properties, books, records and
business of the Company made by or an behalf of Purchaser prior to the Closing,
Seller hereby indemnifies Purchaser and shall hold Purchaser harmless from and
against all damages, losses, claims, liabilities and expenses, including
attorneys' fees, caused by or arising out of (i) all liabilities of the Company
of any nature, including, without limitation, any claims or demands of a
tortuous nature, whether accrued, absolute, contingent, or otherwise known or
unknown which arose in whole or in part prior to and including the Closing Date,
including, without limitation, any tax liabilities accrued in respect of, or
measured by the Company's income up to and including the Closing Date, or
arising out of transactions entered into, or any state of facts arising, prior
to and including the Closing Date; (ii) all liabilities of, or claims against,
the Company or the Property arising out of the conduct of the Company's business
prior to and including the Closing Date; (iii) any damage or deficiency
resulting from any misrepresentation, breach of warranty, nonfulfillment of any
agreement on the part of Seller and/or the Company under this Agreement, or from
any misrepresentation in or omission from any certificate or other instrument
furnished or to be furnished to Purchaser hereunder; (iv) failure of the
representations, warranties and covenants given by Seller in this Agreement to
be true and correct; and (v) all actions, suits, proceedings, demands,
assessments, judgments, costs, and expenses incident to any of the foregoing,
including the Company's gross negligence or intentional misconduct relating to
the License or operations of the racing facility on the Property.
Notwithstanding the foregoing and the provisions of Section 11.7, any
indemnification relating to environmental issues shall be controlled solely by
the Environmental Agreement. The total aggregate liability of Seller for all
claims that may arise under Section 11.3 and under the Environmental Agreement
will not exceed $2,350,000.
XI.4 INDEMNIFICATION OF SELLER. Effective as of the Closing Date,
Purchaser hereby indemnifies Seller and shall hold Seller harmless from and
against all damages, losses, claims, liabilities and expenses, including
attorneys' fees, caused by or arising out of (i) all liabilities of the Company
of any nature, including, without limitation, any claims or demands of a
tortuous nature, whether accrued, absolute, contingent, or otherwise known or
unknown which arise in whole or in part from and after the Closing Date,
including, without limitation, any tax liabilities accrued in respect of, or
measured by the Company's income from and after the Closing Date, or arising out
of transactions entered into, or any state of facts arising, from and after the
Closing Date; (ii) all liabilities of, or claims against, the Company or the
Property arising out of the conduct of the Company's business from and after the
Closing Date; (iii) any damage or deficiency resulting from any
misrepresentation, breach of warranty, nonfulfillment of any agreement on the
part of Purchaser under this Agreement, or from any misrepresentation in or
omission from any certificate or other instrument furnished or to be furnished
to Seller hereunder; (iv) failure of the representations, warranties and
covenants given by Purchaser in this Agreement to be true and correct; and (v)
all actions, suits, proceedings, demands, assessments, judgments, costs and
expenses incident to any of the foregoing. The total aggregate liability of
Purchaser for all claims that may arise under Section 11.4 will not exceed
$500,000.
XI.5 DEFENSE OF CLAIMS; NOTICE. Promptly after receipt by an
indemnified Party under Sections 11.3 or 11.4 of notice of commencement of any
action, such indemnified Party will, if a claim in respect thereof is to be made
by the indemnified Party against the indemnifying Party under Sections 11.3 or
11.4, notify the indemnifying Party in writing of the commencement thereof; but
the failure so to notify the indemnifying Party (i) will not relieve it from any
liability under Sections 11.3 or 11.4 unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the
indemnifying Party of substantial rights and defenses, and (ii) will not, in any
event, relieve the indemnifying Party from any obligations to any indemnified
Party other than the indemnification obligations provided in Sections 11.3 or
11.4. The indemnifying Party shall appoint counsel of the indemnifying Party's
choice at the indemnifying Party's expense to represent the indemnified Party in
any action for which indemnification is sought; provided, however, that such
counsel shall be reasonably satisfactory to the indemnified Party.
Notwithstanding the foregoing, the indemnified Party shall have the right to
employ separate counsel and the indemnifying Party shall bear the reasonable
fees, costs and expenses of such separate counsel if (i) the use of counsel
chosen by the indemnifying Party to represent the indemnified Party would
present such counsel with a conflict of interest, (ii) the actual or potential
defendants in, or targets of, any such action include both the indemnified Party
and the indemnifying Party, and the indemnified Party shall have reasonably
concluded that there may be legal defenses available to it which are different
from or additional to those available to the indemnifying Party, (iii) the
indemnifying Party will not have employed counsel reasonably satisfactory to the
indemnified Party to represent the indemnified Party within a reasonable time
after notice of the institution of such action, or (iv) the indemnifying Party
shall authorize the indemnified Party to employ separate counsel at the expense
of the indemnifying Party. The indemnifying Party shall have full control of
such defense and proceedings, including any compromise or settlement thereof.
The indemnified Party shall reasonably cooperate with the indemnifying Party and
its counsel in defending such claims. Notwithstanding the foregoing, an
indemnifying Party shall not, without the prior written consent of the
indemnified Party, settle or compromise or consent to the entry of any judgment
with respect to any pending or threatened claim, action, suit or proceeding, in
respect of which indemnification may be sought hereunder (whether or not the
indemnified Party is an actual or potential party to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of the indemnified Party from all liability arising out of such claim, action,
suit or proceeding. The provisions of this Section 11.5 shall survive any
termination or expiration of this Agreement, whether by lapse of time or
otherwise, and shall be binding upon the Parties hereto and their respective
successors and assigns.
XI.6 EXPIRATION OF INDEMNIFICATION. The Parties' indemnification
obligations as set for in Sections 11.3 and 11.4 shall be coterminous with the
indemnity obligations of the Parties as set forth in the Environmental Agreement
and shall automatically expire as set forth therein.
XI.7 EXCLUSIVE REMEDY. Except for claims arising as a result of fraud
or other intentional misconduct, the indemnification provisions of Sections 11.3
and 11.4 set forth the exclusive remedy under this Agreement for claims arising
thereunder. Each of the Parties hereby waives, to the fullest extent it may
lawfully do so, any other rights, causes of action, or remedies or damages that
it might assert against the other in connection with this Agreement and the
transaction contemplated hereby.
XI.8 BUSINESS PRACTICES. Nothing in this Agreement including good faith
obligations shall be construed to require Seller or any of its affiliates to
change or modify current business practices of Seller and/or its affiliates.
XI.9 CONFIDENTIALITY.
(a) From the date hereof until the third anniversary of the
later to occur of the Closing Date or the termination of this
Agreement, each of Purchaser, the Company, and Seller will refrain, and
will cause its respective officers, directors, employees, agents, and
other representatives to refrain, from disclosing to any other person
any confidential documents or confidential information concerning any
other Party hereto acquired by it in connection with this Agreement or
concerning the transactions contemplated hereby unless (i) such
disclosure is compelled by judicial or administrative process or by
other requirements of law (including, without limitation, in connection
with obtaining necessary insurance regulatory approvals or to
authorities regulating racing and gaming activities) and notice of such
disclosure is furnished to such other Party hereto; (ii) any Party
hereto deems it advisable (upon advice of such Party's legal counsel)
to disclose any such documents or information in connection with the
requirements of any securities law; or (iii) such documents or
information can be shown to have been (A) previously available to the
Party hereto receiving such documents or information on a
non-confidential basis, provided that the source of such information
was not known by such Party, after reasonable investigation, to be
bound by any obligation of confidentiality to any Party with respect to
such material, (B) generally available to the public through no fault
of such receiving Party, or (C) later acquired by such receiving Party
on a non-confidential basis, provided that the source of such
information was not known by such Party, after reasonable
investigation, to be bound by any obligation of confidentiality to the
Party with respect to such material.
(b) The Parties hereto acknowledge and agree that (i) a breach
of any of the terms or provisions of this Section 11.9 would cause
irreparable damage to the non-breaching Party for which adequate remedy
at law is not available; and (ii) the non-breaching Party will be
entitled as a matter of right to obtain, without posting any bond
whatsoever, an injunction, restraining order, or other equitable relief
to restrain any threatened or further breach of this Section 11.9.
(c) In the event this Agreement is terminated and does not
proceed to a Closing, then upon the written request of the other Party,
each Party will promptly return to the other Party or destroy any
confidential information in its possession and certify in writing to
such other Party that it has done so.
XI.10 ENTIRE AGREEMENT. This Agreement, by and between Seller and
Purchaser, constitutes the entire agreement and understanding between the
parties hereto and supersedes all prior agreements, arrangements and
understandings relating to the subject matter hereof.
XI.11 PARTIES BOUND. The terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective heirs, legal
representatives, successors and assigns of the parties hereto. Nothing in this
Agreement, express or implied, is intended to confer upon any person, other than
the parties hereto, and their respective successors and assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
XI.12 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas, and is performable by the
parties in Cameron County, Texas.
XI.13 SEVERABILITY. Should any phrase, clause, sentence or section of
this Agreement be judicially declared to be invalid, unenforceable or void, such
decision will not have the effect of invalidating or voiding the remainder of
this Agreement, and such part of this Agreement will be deemed to have been
stricken and the remainder of this Agreement will have the same force and effect
as if such part or parts had never been included herein.
XI.14 MULTIPLE COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one and the same instrument.
XI.15 FURTHER ASSURANCES. Upon Purchaser's request at any time and
without further consideration, Seller agrees to execute and deliver such
additional instruments of transfer and to take such other action as Purchaser
reasonably may require to more effectively transfer to and vest in Purchaser the
full and complete ownership of the Shares as contemplated herein.
XI.16 ATTORNEYS' FEES. If it shall be necessary for any Party herein to
employ an attorney to enforce their rights pursuant to this Agreement because of
default of any other Party, the defaulting Party shall reimburse the
nondefaulting Party for reasonable attorneys' fees.
XI.17 GENDER AND NUMBER. Words of any gender used in this Agreement
shall be held and construed to include any other gender, and words in the
singular number shall be held to include the plural and vice versa, unless the
context otherwise requires.
XI.18 CAPTIONS. The captions used in connection with the Paragraphs of
this Agreement are for convenience only and shall not be deemed to enlarge,
limit or otherwise modify the meaning of the language of this Agreement.
XI.19 WAIVER. No waiver by the parties hereto of any default or breach
of any term, condition or covenant of this Agreement shall be deemed to be a
waiver of any other breach of the same or any other term, condition, or covenant
contained herein.
XI.20 AMENDMENT. No amendment, modification, or alteration of the terms
hereof shall be binding unless the same be in writing, dated subsequent to the
date hereof and duly executed by the parties hereto.
XI.21 EFFECTIVE DATE. All time limits provided for herein which are
measured by the number of days "from the date hereof" or "from the date of
execution of this Agreement" (rather than being designated by specific date)
shall run from the date of this Agreement as first set forth above, which date
is sometimes referred to herein as the "effective date" or the "date of
execution."
PURCHASER: SELLER:
SAM HOUSTON RACE PARK, LTD. LADBROKE RACING CORPORATION
By: SHRP General Partner, Inc.,
Its Managing General Partner
By: /S/ JAMES D. NOTEWARE /S/ JOHN M. SWIATEK
Name: James D. Noteware John M. Swiatek,
As its: President President
JOINDER
Ladbroke Hotels U.S.A. Corporation, a Delaware corporation
("Guarantor"), hereby enters into this Agreement for the limited purpose of
providing security for the obligations of Seller hereunder.
Guarantor hereby unconditionally guarantees the payment obligations of
Seller pursuant to this Agreement, including Seller's indemnification
obligations and obligations under the representations and warranties of the
Agreement. Guarantor represents and warrants that, as of the date of execution
of this Agreement and up to and including the date of the Closing that it is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Guarantor has the requisite corporate power and
authority to carry on its business as now being conducted and to execute and
deliver and perform its obligations under this Agreement. To Guarantor's
knowledge, Guarantor has taken all corporate action necessary to authorize its
execution and delivery of, and the performance of its obligations under, this
Agreement. This Agreement constitutes a valid obligation of Guarantor that is
legally binding on and enforceable against Guarantor in accordance with its
terms, except as such enforceability may be limited by (i) bankruptcy,
insolvency, moratorium or other similar laws affecting creditors' rights, and
(ii) general principles of equity relating to the availability of equitable
remedies (regardless of whether the Agreement is sought to be enforced in a
proceeding at law or in equity).
To Guarantor's knowledge, there is no pending proceeding that has been
commenced against Guarantor and that challenges, or may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
contemplated transactions. To Guarantor's knowledge, no such proceeding has been
threatened.
To Guarantor's knowledge, neither the execution and delivery of this
Agreement by Guarantor or the performance by Guarantor of its obligations
hereunder nor the consummation of the transactions contemplated hereby, will
result in any of the following: (i) a default or an event that, with notice or
lapse of time, or both, would constitute a default, breach or violation of any
provision of the Articles of Incorporation or Bylaws of Guarantor; or (ii) a
violation or breach of any writ, injunction or decree of any court or
governmental instrumentality applicable to Guarantor or by which any of its
properties is bound or any laws or regulations applicable to Guarantor, where
the violation would have a material adverse effect on Guarantor.
GUARANTOR:
LADBROKE HOTELS U.S.A. CORPORATION
/S/ PAUL LIERMAN
Paul Lierman
Vice President & Secretary
EXHIBIT "A"
PROPERTY DESCRIPTION
EXHIBIT "A-1"
PERSONAL PROPERTY
EXHIBIT "B"
PERMITTED EXCEPTIONS
EXHIBIT "C"
ENVIRONMENTAL AGREEMENT
EXHIBIT "D"
GREYHOUND RACING LICENSE
SCHEDULE 1
FRANCHISES, LICENSES, PERMITS ETC.
1. The Applications of Valley Racing Association and Lone Star Greyhound
Park, Inc. for a Pari-Mutuel Greyhound Race Track License for Cameron
County, Texas and Order by the Texas Racing Commission granting license
to Valley Racing Association on July 11, 1989.
SCHEDULE 2
LITIGATION AND ARBITRATION
1. Cause No. 99-11-4702-D, SHRP Valley, LLC v. Ladbroke Racing
Corporation, Ladbroke Racing Texas Corporation, Ladbroke Racing
Management Texas Corporation, Valley Racing Association, and Valley
Group, Inc., In the District Court of Cameron County, Texas, 103rd
Judicial District. SHRP Valley LLC ("SHRP") sought a temporary
restraining order and preliminary and permanent injunction against
Ladbroke Racing Corporation, Ladbroke Racing Texas Corporation
("LRTC"), Ladbroke Racing Management Texas Corporation, Valley Racing
Association, and Valley Group, Inc. to stop their efforts to sell the
stock of LRTC to any entity other than SHRP. This case is active.
2. Cause No. H95-0635, Hamstein Music Company, Jay Livingston Music, Frank
Music Corp., Gladys Music, Jerry Leiber Music, Mike Stoller Music, and
Polygram International Publishing, Inc. v. Valley Racing Association,
Valley Group, Inc., Ladbroke Racing Texas Corporation, Thomas E.
Winters, Fausto Yturria, Jr., Gary W. Calfee, John Long and John Ford,
In the United States District Court for the Southern District of Texas,
Houston Division. Valley Racing Association, Valley Group, Inc.,
Ladbroke Racing Texas Corporation, Thomas E. Winters, Fausto Yturria,
Gary Calfee, John Long and John Ford were collectively sued by Authors
and Publishers ("ASCAP") et. al. relative to music being played at the
track without the appropriate programming license and payment of the
applicable fees. The case was settled on about November 1996 by payment
of $33,000 to ASCAP in exchange for full and final releases and
dismissal of the case with prejudice.
3. Cause No. 94-09089, Texas Greyhound Association v. Texas Racing
Commission, Corpus Christi Greyhound Racetrack, Valley Greyhound Park,
A.L. Mangham, Jr., Deorsey E. McGruder, Jr., Patricia Pangburn, John
Sharp and Ronald D. Krist, In the District Court of Travis County,
Texas, 345th Judicial District. The Texas Racing Commission, Valley
Racing Association, Corpus Christi Greyhound Racetrack, A.L. Mangham,
Jr., Deorsey E. McGruder, Jr., Patricia Pangburn, John Sharp and Ronald
Krist were collectively sued by The Texas Greyhound Association, which
was seeking a declaratory judgment on minimum purse amounts for
simulcast races. The case was dismissed for want of prosecution in
August of 1997.
4. Cause No. 93-11-6403-D, Pascual Moblia v. Valley Greyhound Park, a/k/a
Valley Racing Association, Fausto Yturria, individually and as an owner
of Valley Greyhound Park, a/k/a Valley Racing Association, Terry
Ashcraft individually and as an employee of Valley Greyhound Park,
a/k/a Valley Racing Association, and William McLaughlin individually
and as an employee of Valley Greyhound Park, a/k/a Valley Racing,
Association, In the District Court of Cameron County, Texas, 103rd
Judicial District. This case was settled.
5. TxRC Docket No. 98-R4-04, In the Matter of Valley Racing Association,
Before the Texas Racing Commission. The Texas Racing Commission
initiated an administrative action in October 1998 for revocation of
license due to unpaid fees. This action was dismissed in November 1998
after payment of the fees.
SCHEDULE 3
OBLIGATIONS TO FORMER EMPLOYEES
None.
SCHEDULE 4
BANK ACCOUNTS
None.
SCHEDULE 5
TRADEMARKS, COPYRIGHTS ASSUMED NAMES, ETC.
None.
SCHEDULE 6
GOVERNMENT REPORTS
None.
SCHEDULE 7
TAX RETURNS
1. Valley Racing Association Joint Venture Form 1065 U.S. Partnership
Return of Income, 1992.
2. Valley Racing Association Joint Venture Form 1065 U.S. Partnership
Return of Income, 1993.
3. Valley Racing Association Joint Venture Form 1065 U.S. Partnership
Return of Income, 1994.
4. Ladbroke Racing Texas, Inc. Form 1120 U.S. Corporation Income Tax
Return 1995.
5. Ladbroke Racing Texas, Inc. Form 1120 U.S. Corporation Income Tax
Return 1996.
6. Ladbroke Racing Texas, Inc. Form 1120 U.S. Corporation Income Tax
Return 1997.
7. Ladbroke Racing Texas, Inc. Form 1120 U.S. Corporation Income Tax
Return 1998.
8. Ladbroke Racing Texas, Inc. Form 1120 U.S. Corporation Income Tax
Return, 1999(to be provided when filed)
9. Ladbroke Racing Texas Corporation Texas Corporation Franchise Tax
Report, 1995.
10. Ladbroke Racing Texas, Inc. Texas Corporation Franchise Tax Report,
1996.
11. Ladbroke Racing Texas Corporation Texas Corporation Franchise Tax
Report, 1997.
12. Ladbroke Racing Texas Corporation Texas Annual Franchise Information
Report, 1998.
13. Ladbroke Racing Texas Corporation Texas Annual Franchise Information
Report, 1999.
14. Valley Racing Association Form 941 Employer's Quarterly Federal Tax
Return, 1995.
15. Valley Racing Association Form 945 Annual Return of Withheld Federal
Income Tax, 1995.
16. Valley Racing Association Form 945 Annual Return of Withheld Federal
Income Tax, 1996.
SCHEDULE 8
STOCK INFORMATION
Name of Owner: Ladbroke Racing Texas Corporation
State of Incorporation: Texas
Class of Stock: Common
No. of Shares of Stock Issued: 1,000
No. of Shares of Stock Outstanding: 0
No. of Shares of Stock Authorized: 10,000
Name of Stock Holder(s): Ladbroke Racing Corporation
SCHEDULE 9
FINANCIAL STATEMENTS
1. Valley Racing Association Financial Statements and Report of
Independent Certified Public Accountants, December 31, 1994 and 1993.
2. Valley Racing Association Financial Statements and Report of
Independent Certified Public Accountants, December 31, 1993 and 1992.
3. Valley Racing Association Financial Statements and Report of
Independent Certified Public Accountants, December 31, 1992 and 1991.
4. Ladbroke Racing Texas Corporation Internal Financial Statement for
Calendar Year 1995.*
5. Ladbroke Racing Texas Corporation Internal Financial Statement for
Calendar Year 1996.*
6. Ladbroke Racing Texas Corporation Internal Financial Statement for
Calendar Year 1997.*
7. Ladbroke Racing Texas Corporation Internal Financial Statement for
Calendar Year 1998.*
8. Ladbroke Racing Texas Corporation Internal Financial Statement for
Calendar Year 1999.**
[FN]
* To be delivered within five (5) days of closing.
** To be delivered within five (5) days of Closing and to show no
liability other than liabilities to be paid at or prior to Closing by
Seller.
</FN>
SCHEDULE 10
WRITTEN AGREEMENTS
1. Lease Agreement, between Valley Racing Association and SHRP Valley LLC,
effective as of March 3, 1999.
2. Management Agreement, entered into by and between Valley Racing
Association and SHRP Valley LLC, on March 3, 1999.
3. Pledge Agreement, made by Ladbroke Racing Corporation to SHRP Valley
LLC, dated March 3, 1999.
SCHEDULE 11
ALLOCATION OF PURCHASE PRICE AMONG THE ASSETS
SCHEDULE 12
LIENS TO BE RELEASED
1. Deed of Trust dated April 11, 1991, recorded in Volume 1517, Page 99 of
the Official Records of Cameron County, Texas, executed by Valley
Racing Association, a Texas joint venture, to Ted A. Hodges, Trustee,
and all terms, conditions and stipulations contained therein, including
any additional indebtedness secured thereby, securing one promissory
note of even date therewith in the principal amount of $15,135,000.00,
payable to Allied Irish Banks FLC.
2. Said lien has been extended and/or modified by instrument recorded in
Volume 2859, Page 170 of the Official Records of Cameron County, Texas.
3. Said lien has been extended and/or modified by instrument recorded in
Volume 2997, Page 160 of the Official Records of Cameron County, Texas.
4. Deed of Trust dated June 27, 1991, recorded in Volume 1611, Page 99 of
the Official Records of Cameron County, Texas, executed by Valley
Racing Association, a Texas joint venture, to Steven M. Bowers,
Trustee, and all terms, conditions and stipulations contained therein,
including any additional indebtedness secured thereby, securing two
promissory notes of even date therewith in the principal amounts of
$1,000,000.00 and $350,000.00, payable to Ladbroke Racing Corporation.
<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>
<CIK> 0000911082
<NAME> Sam Houston Race Park, Ltd.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 6,690
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<CURRENT-ASSETS> 12,837
<PP&E> 29,126
<DEPRECIATION> 4,108
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<BONDS> 49,548
0
0
<COMMON> 0
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<TOTAL-LIABILITY-AND-EQUITY> 37,855
<SALES> 0
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<CGS> 0
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<INTEREST-EXPENSE> 9,776
<INCOME-PRETAX> (6,584)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,584)
<DISCONTINUED> 0
<EXTRAORDINARY> (215)
<CHANGES> 0
<NET-INCOME> (6,799)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
