-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Kt944rLENxZ9Q6fjBrkBPswidBnLoEjiMItg92nruAUYQv4GgetF02hEzUWLmKpf XJY8bv7y+/aM//Q6rPWRzw== 0000950149-96-001908.txt : 19961118 0000950149-96-001908.hdr.sgml : 19961118 ACCESSION NUMBER: 0000950149-96-001908 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 20 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: CALIFORNIA JOCKEY CLUB CENTRAL INDEX KEY: 0000016343 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-RACING, INCLUDING TRACK OPERATION [7948] IRS NUMBER: 940358820 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09319 FILM NUMBER: 96666753 BUSINESS ADDRESS: STREET 1: 2600 S DELAWARE ST STREET 2: P O BOX 1117 CITY: SAN MATEO STATE: CA ZIP: 94402 BUSINESS PHONE: 4155734514 MAIL ADDRESS: STREET 1: 2600 S DELAWARE ST CITY: SAN MATEO STATE: CA ZIP: 94402 10-Q 1 FORM 10-Q FOR PERIOD ENDED SEPTEMBER 30, 1996 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] JOINT QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from to ----------- ----------- Commission File Number 1-9319 Commission File Number 1-9320 CALIFORNIA JOCKEY CLUB BAY MEADOWS OPERATING COMPANY - --------------------------------------------------------- ----------------------------------------------------------- (Exact name of registrant as specified in its charter) (Exact name of registrant as specified in its charter) Delaware 94-0358820 Delaware 94-2878485 - --------------------------------------------------------- ----------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) incorporation or organization) Identification No.) 94-0358820 94-2878485 - --------------------------------------------------------- ----------------------------------------------------------- (I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.) 2600 S. Delaware Street, San Mateo, California 94403 2600 S. Delaware Street, San Mateo, California 94402 - --------------------------------------------------------- ----------------------------------------------------------- (Address of principal executive offices) (Zip Code) (Address of principal executive offices) (Zip Code) (415) 573-4514 (415) 574-7223 - --------------------------------------------------------- ----------------------------------------------------------- (Registrant's telephone number, including area code) (Registrant's telephone number, including area code) Not Applicable Not Applicable - --------------------------------------------------------- ----------------------------------------------------------- (Former name, former address and former fiscal year, if (Former name, former address and former fiscal year, if changed since last report) changed since last report)
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 . --- --- The number of shares outstanding of each registrant's classes of common stock, par value $.01 per share, as of the close of business on November 8, 1996, was as follows:
Registrant Number of Shares ---------- ---------------- California Jockey Club 5,763,257 Bay Meadows Operating Company 5,763,257
- 1 - 2 PART I: FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CALIFORNIA JOCKEY CLUB AND BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY SEPARATE AND COMBINED STATEMENTS OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 1996 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) (UNAUDITED) - --------------------------------------------------------------------------------
BAY MEADOWS CALIFORNIA OPERATING JOCKEY COMPANY AND CLUB SUBSIDIARY ELIMINATIONS COMBINED REVENUES: Pari-mutuel revenue $ 32,241 $ 32,241 Producer fees 537 537 Admissions, programs, parking and other racing income 3,847 3,847 Concession sales 2,205 2,205 Rental of racing facility $ 3,835 1,299 $ (3,835) 1,299 Interest and dividend income 362 125 (4) 483 Other income 8 1,154 1,162 ----------- ----------- ----------- ----------- Total 4,205 41,408 (3,839) 41,774 ----------- ----------- ----------- ----------- COSTS AND EXPENSES: Purses and incentive awards 13,189 13,189 Commissions paid to guest tracks 2,104 2,104 Direct operating costs 15,596 15,596 Cost of concession sales 729 729 Depreciation and amortization 694 629 1,323 Racing facility rental 3,853 (3,853) 18 Marketing 1,150 1,150 General and administrative expense 756 2,010 (4) 2,762 Legal 1,291 364 1,655 Loss on disposal of fixed assets 149 149 ----------- ----------- ----------- ----------- Total 2,741 39,773 (3,839) 38,675 ----------- ----------- ----------- ----------- INCOME BEFORE TAXES 1,464 1,635 3,099 INCOME TAX PROVISION 638 637 ----------- ----------- ----------- ----------- NET INCOME $ 1,464 $ 997 $ -- $ 2,461 =========== =========== =========== =========== PER SHARE AMOUNTS: NET INCOME $ .25 $ .17 $ .42 =========== =========== =========== DIVIDEND $ .40 $ .40 =========== =========== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 5,763,257 5,763,257 5,763,257 =========== =========== ===========
See Notes to Financial Statements. - 2 - 3 CALIFORNIA JOCKEY CLUB AND BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY SEPARATE AND COMBINED STATEMENTS OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 1995 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) (UNAUDITED) - --------------------------------------------------------------------------------
BAY MEADOWS CALIFORNIA OPERATING JOCKEY COMPANY AND CLUB SUBSIDIARY ELIMINATIONS COMBINED REVENUES: Pari-mutuel revenue $ 21,753 $ 21,753 Producer fees 424 424 Admissions, programs, parking and other racing income 3,530 3,530 Concession sales 1,749 1,749 Rental of racing facility $ 2,757 1,233 $ (2,757) 1,233 Interest and dividend income 355 129 (36) 448 Other income 7 1,065 (11) 1,061 ----------- ----------- ----------- ----------- Total 3,119 29,883 (2,804) 30,198 ----------- ----------- ----------- ----------- COSTS AND EXPENSES: Purses and incentive awards 8,453 8,453 Commissions paid to guest tracks 1,385 1,385 Direct operating costs 12,747 12,747 Cost of concession sales 580 580 Depreciation and amortization 710 485 1,195 Racing facility rental 2,768 (2,757) 11 Marketing 874 874 General and administrative expense 215 1,837 (47) 2,005 Card club costs 97 615 712 Legal 84 204 288 ----------- ----------- ----------- ----------- Total 1,106 29,948 (2,804) 28,250 ----------- ----------- ----------- ----------- INCOME (LOSS) BEFORE TAXES 2,013 (65) 1,948 INCOME TAX BENEFIT 30 30 ----------- ----------- ----------- ----------- NET INCOME (LOSS) $ 2,013 $ (35) $ -- $ 1,978 =========== =========== =========== =========== PER SHARE AMOUNTS: NET INCOME (LOSS) $ .35 $ (.01) $ .34 =========== =========== =========== DIVIDEND $ .25 $ .25 =========== =========== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 5,758,458 5,758,458 5,758,458 =========== =========== ===========
See Notes to Financial Statements. - 3 - 4 CALIFORNIA JOCKEY CLUB AND BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY SEPARATE AND COMBINED STATEMENTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 1996 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) (UNAUDITED) - --------------------------------------------------------------------------------
BAY MEADOWS CALIFORNIA OPERATING JOCKEY COMPANY AND CLUB SUBSIDIARY ELIMINATIONS COMBINED REVENUES: Pari-mutuel revenue $ 8,707 $ 8,707 Producer fees 139 139 Admissions, programs, parking and other racing income 1,116 1,116 Concession sales 987 987 Rental of racing facility $ 1,225 869 $ (1,225) 869 Interest and dividend income 112 32 144 Other income 3 230 233 ----------- ----------- ----------- ----------- Total 1,340 12,080 (1,225) 12,195 ----------- ----------- ----------- ----------- COSTS AND EXPENSES: Purses and incentive awards 3,550 3,550 Commissions paid to guest tracks 505 505 Direct operating costs 5,022 5,022 Cost of concession sales 361 361 Depreciation and amortization 235 296 531 Racing facility rental 1,231 (1,225) 6 Marketing 414 414 General and administrative expense 515 689 1,204 Legal 1,100 53 1,153 Loss on disposal of fixed assets 149 149 ----------- ----------- ----------- ----------- Total 1,850 12,270 (1,225) 12,895 ----------- ----------- ----------- ----------- LOSS BEFORE TAXES (510) (190) (700) INCOME TAX BENEFIT 92 92 ----------- ----------- ----------- ----------- NET LOSS $ (510) $ (98) $ -- $ (608) =========== =========== =========== =========== NET LOSS PER SHARE $ (.09) $ (.02) $ (.11) =========== =========== =========== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 5,763,257 5,763,257 5,763,257 =========== =========== ===========
See Notes to Financial Statements. - 4 - 5 CALIFORNIA JOCKEY CLUB AND BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY SEPARATE AND COMBINED STATEMENTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 1995 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) (UNAUDITED) - --------------------------------------------------------------------------------
BAY MEADOWS CALIFORNIA OPERATING JOCKEY COMPANY AND CLUB SUBSIDIARY ELIMINATIONS COMBINED REVENUES: Pari-mutuel revenue $ 9,839 $ 9,839 Producer fees 215 215 Admissions, programs, parking and other racing income 1,257 1,257 Concession sales 801 801 Rental of racing facility $ 1,353 608 $ (1,353) 608 Interest and dividend income 126 47 (36) 137 Other income 3 291 (7) 287 ----------- ----------- ----------- ----------- Total 1,482 13,058 (1,396) 13,144 ----------- ----------- ----------- ----------- COSTS AND EXPENSES: Purses and incentive awards 3,879 3,879 Commissions paid to guest tracks 610 610 Direct operating costs 5,168 5,168 Cost of concession sales 274 274 Depreciation and amortization 229 167 396 Racing facility rental 1,359 (1,353) 6 Marketing 422 422 General and administrative expense 67 700 (43) 724 Card Club costs 86 451 537 Legal 49 (8) 41 ----------- ----------- ----------- ----------- Total 431 13,022 (1,396) 12,057 ----------- ----------- ----------- ----------- INCOME BEFORE TAXES 1,051 36 1,087 INCOME TAX PROVISION 16 16 ----------- ----------- ----------- ----------- NET INCOME $ 1,051 $ 20 $ -- $ 1,071 =========== =========== =========== =========== NET INCOME PER SHARE $ .18 $ .01 $ .19 =========== =========== =========== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 5,763,257 5,763,257 5,763,257 =========== =========== ===========
See Notes to Financial Statements. - 5 - 6 CALIFORNIA JOCKEY CLUB AND BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY COMBINED BALANCE SHEETS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) - --------------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31, 1996 1995 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 10,533 $ 7,307 Securities available for sale (at fair value) 1,825 1,187 Securities held to maturity (at cost) 4,933 7,077 Amounts held on deposit for Thoroughbred horse owners 2,070 3,056 Accounts receivable (net of allowance for doubtful accounts of $77 in 1996 and $82 in 1995) 870 2,442 Prepaid expenses 874 377 -------- -------- Total current assets 21,105 21,446 -------- -------- PROPERTY, PLANT AND EQUIPMENT: Land 691 691 Land held for sale 2,930 1,954 Racing plant 23,972 23,906 Tennis facility 308 308 Equipment and leasehold improvements 11,461 10,088 -------- -------- Total 39,362 36,947 Accumulated depreciation and amortization (21,967) (20,759) -------- -------- Property, plant and equipment - net 17,395 16,188 -------- -------- OTHER ASSETS (net of accumulated amortization of $1,260 in 1996 and $1,221 in 1995) 113 223 -------- -------- DEFERRED INCOME TAXES 81 78 -------- -------- TOTAL ASSETS $ 38,694 $ 37,935 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 3,179 $ 4,676 Accrued liabilities 1,308 1,530 Accrued purses 483 1,014 Due to Thoroughbred horse owners 2,070 3,056 Income taxes payable 623 75 Note Payable 4,000 Uncashed pari-mutuel tickets and vouchers 3,130 4,477 -------- -------- Total current liabilities 14,793 14,828 -------- -------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Common Stock, $.01 par value, authorized 10,000,000 shares; issued and outstanding 5,763,257 shares 116 116 Additional paid in capital 18,385 18,385 Retained earnings 4,973 4,817 Unrealized gain (loss) on securities available for sale 427 (211) -------- -------- Total stockholders' equity 23,901 23,107 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 38,694 $ 37,935 ======== ========
See Notes to Financial Statements. - 6 - 7 CALIFORNIA JOCKEY CLUB AND BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY COMBINED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (IN THOUSANDS) (UNAUDITED) - --------------------------------------------------------------------------------
1996 1995 OPERATING ACTIVITIES: Net income $ 2,461 $ 1,978 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 1,323 1,195 Loss on disposal of fixed assets 149 Changes in operating assets and liabilities: Accounts receivable 1,572 352 Amounts held on deposit for Thoroughbred horse owners 986 529 Income taxes receivable and payable 545 (340) Prepaid expenses and other current assets (501) (711) Accounts payable (1,497) (919) Accrued liabilities (222) 399 Accrued purses (531) (721) Due to Thoroughbred horse owners (986) (529) Uncashed pari-mutuel tickets and vouchers (1,347) 475 -------- -------- Net cash provided by operating activities 1,952 1,708 -------- -------- INVESTING ACTIVITIES: Purchase of securities held to maturity (9,931) (10,430) Maturities of securities held to maturity 12,075 13,191 Purchase of property, plant and equipment (2,565) (2,142) -------- -------- Net cash (used in) provided by investing activities (421) 619 -------- -------- FINANCING ACTIVITIES: Proceeds from note payable - bank 4,000 Dividends (2,305) (1,441) Stock options exercised 123 -------- -------- Net cash provided by (used in) financing activities 1,695 (1,318) -------- -------- INCREASE IN CASH AND CASH EQUIVALENTS 3,226 1,009 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 7,307 9,356 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 10,533 $ 10,365 ======== ========
See Notes to Financial Statements. - 7 - 8 CALIFORNIA JOCKEY CLUB AND BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY SEPARATE AND COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY NINE MONTHS ENDED SEPTEMBER 30, 1996 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) (UNAUDITED) - --------------------------------------------------------------------------------
BAY MEADOWS CALIFORNIA OPERATING JOCKEY COMPANY AND CLUB SUBSIDIARY ELIMINATIONS COMBINED Balance at January 1, 1996 $ 21,878 $ 1,229 $ 23,107 Net income 1,464 997 2,461 Dividends ($.40/share) (2,305) (2,305) Unrealized gain on securities available for sale 638 638 -------- -------- -------- Balance at September 30, 1996 $ 21,675 $ 2,226 $ 23,901 ======== ======== ========
See Notes to Financial Statements. - 8 - 9 CALIFORNIA JOCKEY CLUB AND BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY SEPARATE AND COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY NINE MONTHS ENDED SEPTEMBER 30, 1995 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) (UNAUDITED) - --------------------------------------------------------------------------------
BAY MEADOWS CALIFORNIA OPERATING JOCKEY COMPANY AND CLUB SUBSIDIARY ELIMINATIONS COMBINED Balance at January 1, 1995 $ 21,970 $ 748 $ 22,718 Net income (loss) 2,013 (35) 1,978 Dividends ($.25/share) (1,441) Stock options exercised 119 4 123 Unrealized gain on securities available for sale (25) -------- -------- -------- Balance at September 30, 1995 $ 22,636 $ 717 $ 23,353 ======== ======== ========
See Notes to Financial Statements. - 9 - 10 CALIFORNIA JOCKEY CLUB BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AMOUNTS) (UNAUDITED) - --------------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31, 1996 1995 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 1,378 $ 989 Securities available for sale (at fair value) 1,825 1,187 Securities held to maturity (at cost) 6,933 7,077 Accounts receivable 9 7 Receivable from Bay Meadows Operating Company 1,369 569 -------- -------- Total current assets 9,514 9,829 -------- -------- PROPERTY, PLANT AND EQUIPMENT: Land 691 691 Land held for sale 2,930 1,954 Racing plant 23,971 23,906 Tennis facility 308 308 Equipment 456 456 -------- -------- Total 28,357 27,315 Accumulated depreciation (15,691) (14,997) -------- -------- Property, plant and equipment - net 12,666 12,318 -------- -------- TOTAL ASSETS $ 22,180 $ 22,147 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 179 $ 129 Accrued liabilities 326 140 -------- -------- Total current liabilities 505 269 -------- -------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Common Stock, $.01 par value, authorized 10,000,000 shares; issued and outstanding 5,763,257 shares 58 58 Additional paid in capital 17,597 17,597 Retained earnings 3,593 4,434 Unrealized gain (loss) on securities available for sale 427 (211) -------- -------- Total stockholders' equity 21,675 21,878 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 22,180 $ 22,147 ======== ========
See Notes to Financial Statements. - 10 - 11 CALIFORNIA JOCKEY CLUB STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (IN THOUSANDS) (UNAUDITED) - --------------------------------------------------------------------------------
1996 1995 OPERATING ACTIVITIES: Net income $ 1,464 $ 2,013 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 694 710 Changes in operating assets and liabilities: Accounts receivable (2) 48 Receivable from Bay Meadows Operating Company (800) (3,041) Prepaid expenses and other assets 26 Accounts payable 50 56 Accrued liabilities 186 42 -------- -------- Net cash provided by (used in) operating activities 1,592 (146) -------- -------- INVESTING ACTIVITIES: Purchase of securities held to maturity (9,931) (10,430) Maturities of securities held to maturity 12,075 13,191 Purchase of property, plant and equipment (1,042) (682) -------- -------- Net cash provided by investing activities 1,102 2,079 -------- -------- FINANCING ACTIVITIES: Dividends (2,305) (1,441) Stock options exercised 119 -------- -------- Net cash used in financing activities (2,305) (1,322) -------- -------- INCREASE IN CASH AND CASH EQUIVALENTS 389 611 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 989 412 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,378 $ 1,023 ======== ========
See Notes to Financial Statements. - 11 - 12 BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) (UNAUDITED) - --------------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31, 1996 1995 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 9,155 $ 6,318 Amounts held on deposit for Thoroughbred horse owners 2,070 3,056 Accounts receivable (net of allowance for doubtful accounts of $77 in 1996 and $82 in 1995) 861 2,435 Prepaid expenses and other current assets 874 377 -------- -------- Total current assets 12,960 12,186 -------- -------- PROPERTY, PLANT AND EQUIPMENT: Equipment and leasehold improvements 11,005 9,631 Accumulated depreciation and amortization (6,276) (5,761) -------- -------- Property, plant and equipment - net 4,729 3,870 -------- -------- OTHER ASSETS (net of accumulated amortization of $1,260 in 1996 and $1,221 in 1995) 113 223 -------- -------- DEFERRED INCOME TAXES 81 78 -------- -------- TOTAL ASSETS $ 17,883 $ 16,357 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 3,000 $ 4,547 Accrued liabilities 982 1,390 Accrued purses 483 1,014 Due to Thoroughbred horse owners 2,070 3,056 Payable to California Jockey Club 1,369 569 Income taxes payable 623 75 Note payable 4,000 Uncashed pari-mutuel tickets and vouchers 3,130 4,477 -------- -------- Total current liabilities 15,657 15,128 -------- -------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Common Stock .01 par value authorized 10,000,000 shares; issued and outstanding: 5,763,257 shares 58 58 Additional paid in capital 788 788 Retained earnings 1,380 383 -------- -------- Total stockholders' equity 2,226 1,229 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 17,883 $ 16,357 ======== ========
See Notes to Financial Statements. - 12 - 13 BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (IN THOUSANDS) (UNAUDITED) - --------------------------------------------------------------------------------
1996 1995 OPERATING ACTIVITIES: Net income (loss) $ 997 $ (35) Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 629 485 Loss on disposal of fixed assets 149 Changes in operating assets and liabilities: Accounts receivable 1,574 304 Amounts held on deposit for Thoroughbred horse owners 986 529 Income taxes receivable and payable 545 (340) Prepaid expenses and other assets (501) (737) Accounts payable (1,547) (975) Accrued liabilities (408) 357 Accrued purses (531) (721) Due to Thoroughbred horse owners (986) (529) Payable to California Jockey Club 800 3,041 Uncashed pari-mutuel tickets and vouchers (1,347) 475 ------- ------- Net cash provided by operating activities 360 1,854 ------- ------- NET CASH USED IN INVESTING ACTIVITIES - Purchase of property, plant and equipment (1,523) (1,460) ------- ------- FINANCING ACTIVITIES: Proceeds from note payable - bank 4,000 Stock option exercised 4 ------- ------- Net cash provided by financing activities 4,000 4 ------- ------- INCREASE IN CASH AND CASH EQUIVALENTS 2,837 398 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 6,318 8,944 ------- ------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 9,155 9,342 ======= =====
See Notes to Financial Statements. - 13 - 14 CALIFORNIA JOCKEY CLUB AND BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying unaudited financial statements include condensed unaudited financial statements of California Jockey Club ("Cal Jockey") and Bay Meadows Operating Company ("Bay Meadows") on a combined basis and for each company individually. All significant affiliate and intercompany balances and transactions have been eliminated on the combined financial statements. The accompanying condensed unaudited financial statements should be read in conjunction with the companies' 1995 Annual Report. Net income per share is computed as net income divided by weighted average shares outstanding. Certain prior year amounts have been reclassified to conform to the 1996 presentation. In the opinion of management, all adjustments (consisting of only recurring adjustments) considered necessary for a fair presentation of the financial condition and results of operations for Cal Jockey and Bay Meadows individually, have been included in the financial statements. The results of operations for the nine months ended September 30, 1996, are not indicative of the results that may be expected for the year ending December 31, 1996, because of the seasonal nature of the operations. 2. PROPERTY, PLANT AND EQUIPMENT At September 30, 1996, land held for sale includes $2,439,000 in costs incurred to develop the land including zoning and engineering costs. No assurance can be given that such activities will ultimately result in the development or sale of such land. 3. COMMITMENTS AND CONTINGENCIES On August 18, 1996, Cal Jockey entered into an agreement with Hudson Bay Partners, LLP relating to the proposed reorganization and $300.0 million financing transaction. Under the terms of this agreement, Cal Jockey is required to pay Hudson Bay a termination fee in the amount of $2.9 million in the event the Cal Jockey Board of Directors receives a higher unsolicited offer which it accepts. This agreement has been terminated. 4. SUBSEQUENT EVENTS On October 31, 1996 Cal Jockey and Bay Meadows entered into a binding acquisition agreement with Patriot American Hospitality, Inc. ("Patriot American"). The acquisition agreement was approved unanimously by the Boards of Patriot American, Cal Jockey, and Bay Meadows and is subject to approval by the shareholders of Patriot and the paired shareholders of Cal Jockey and Bay Meadows. Pursuant to the acquisition agreement, the shareholders of Cal Jockey and Bay Meadows will have the option to receive, for each of their paired shares, either $33.00 in cash or .9635 shares of common stock of Patriot American as reconstituted following the merger. Pursuant to the acquisition agreement, Patriot American has advanced $2.9 million to Cal Jockey for payment of the breakup fee due upon termination of the prior formation agreement with Hudson Bay Partners, LLP. Patriot American will be entitled to receive a $5 million termination fee, and the repayment of the $2.9 million advance for the Hudson Bay termination fee in the event the Cal Jockey and Bay Meadows boards of directors receive a higher unsolicited offer which they accept. 5. NOTES TO FINANCIAL STATEMENTS Due to a disagreement between Cal Jockey and Bay Meadows as to the applicable rent owed with respect to the racecourse properties, the parties have agreed to reflect the accrued rent at a rate equivalent to the prior year. In the event the parties reach agreement on the applicable rent owed, the accrued rent may be adjusted accordingly. See also Discussion under Item 5, Status of the Master Lease. - 14 - 15 ITEM 2. MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General Bay Meadows has been allocated 115 live racing days for the year ending December 31, 1996 versus 108 live racing days for calendar year 1995. Of these days, Bay Meadows conducted 91 days of live racing in the nine months ended September 30, 1996 versus 57 days in the same period in 1995. Historically, Bay Meadows and California Jockey Club have derived a major portion of their revenues from the live racing meet. Accordingly, revenues and operating profits are expected to be lower in the fourth quarter for 1996 as compared to the fourth quarter of 1995. California Jockey Club Results of Operations: Nine Months Ended September 30, 1996 Compared with Nine Months Ended September 30, 1995 Total revenues for Cal Jockey increased $1,086,000 (35%) for the nine months ended September 30, 1996, compared to the same period in the prior year. Rental income derived from the leasing of its racing facility is based on pari-mutuel wagering at Bay Meadows and increased $1,078,000 as a result of 34 more racing days in the first nine months of 1996 than in the same period in 1995. Expenses for the nine months ended September 30, 1996, increased $1,635,000 (148%), primarily as a result of legal fees incurred in 1996. Legal fees increased from $84,000 for the nine months ended September 30, 1995 to $1,291,000 for the nine months ended September 30, 1996. Such fees include $616,000 incurred in legal services related to a proxy contest with dissident shareholders and $220,000 in legal services related to a potential transaction with Hudson Bay Partners, LLP, such transaction which has been terminated. General and administrative expenses increased primarily due to the proxy contest and annual meeting. Results of Operations: Quarter Ended September 30, 1996 Compared with Quarter Ended September 30, 1995 Total revenues for Cal Jockey decreased $142,000 (10%) for the quarter ended September 30, 1996, compared to the same quarter of the prior year. Rental income derived from the leasing of its racing facility decreased $128,000 (9%). The rental income decrease was primarily the result of 25 days of live racing in the current quarter compared with 27 live racing days in the third quarter of 1995. Expenses for the quarter ended September 30, 1996, increased $1,419,000 (329%), compared to the same quarter of the prior year primarily due to legal fees related to a proxy contest with dissident shareholders and the potential transaction with Hudson Bay Partners, LLP, such transaction which has been terminated. Liquidity and Capital Resources The liquid assets (cash and marketable securities) of Cal Jockey decreased to $8,136,000 at September 30, 1996, from $9,253,000 at December 31, 1995. This decrease was primarily the result of the payment of legal fees incurred in 1996 and offset by the increase in the fair market value of the securities available for sale. Cal Jockey anticipates that funds generated internally and its cash reserves will be sufficient to meet its liquidity requirements for the foreseeable future. - 15 - 16 Bay Meadows Operating Company and Subsidiary Results of Operations: Nine Months Ended September 30, 1996 Compared with Nine Months Ended September 30, 1995 Total revenues for Bay Meadows increased $11,525,000 (39%) for the nine months ended September 30, 1996 compared with the same period in 1995. This was due to an increase in pari-mutuel revenues of $10,488,000. Pari-mutuel revenues increased due primarily to an additional 34 more live racing days in the first nine months of 1996 compared to the same period in 1995. Other revenues were positively impacted by the same factors which affected pari-mutuel revenues. Admissions, program, parking and other racing income increased $317,000, and concession sales increased $456,000. Total costs and expenses increased $9,825,000 (33%) for the nine months ended September 30, 1996, compared with the same period in the prior year. This was due to increases in expenses associated with higher operating revenues, including (i) purses and incentive awards ($4,736,000), (ii) commissions paid to guest locations ($719,000), (iii) direct operating costs ($2,849,000) and (iv) racing facility rental ($1,085,000). Results of Operations: Quarter Ended September 30, 1996 Compared with Quarter Ended September 30, 1995 Total revenues for Bay Meadows decreased $978,000 (7%) for the quarter ended September 30, 1996 compared with the same quarter in 1995. This decrease is primarily due to the two fewer racing days. Total costs and expenses decreased $752,000 (6%) for the three months ended September 30, 1996, compared with the same period in the prior year. This was primarily due to decreases in expenses associated with lower operating revenues, including (I) purses and incentive awards ($329,000), (ii) commissions paid to guest locations ($105,000), and (iii) direct operating expenses ($146,000). Liquidity and Capital Resources The liquid assets (cash and cash equivalents) of Bay Meadows increased to $9,155,000 at September 30, 1996, from $6,318,000 at December 31, 1995. Bay Meadows is dependent on Cal Jockey's assistance in securing a bank line of credit for its working capital needs throughout the year. Bay Meadows received a signed commitment to extend its $6,000,000 bank line of credit through June 1, 1998. As of September 30, 1996 there were $4,000,000 of borrowings outstanding under this bank line of credit. On October 10, 1996, Cal Jockey revoked its guarantee as to further borrowings by Bay Meadows under the line of credit. The bank subsequently notified Bay Meadows that, as a result, it would not be permitted to draw down any further amounts under the line of credit. Despite its inability to draw down further amounts under the line of credit, Bay Meadows believes that it has sufficient cash and investment resources such that Cal Jockey's revocation of its guarantee with regard to future borrowings has not had an adverse effect on Bay Meadows' operations and will not adversely affect Bay Meadows' operations in the forseeable future. Bay Meadows is, however, dependent on Cal Jockey's assistance in securing a bank line of credit for its working capital needs throughout the year. Bay Meadows anticipates that it may be required to borrow or seek an alternative source of additional funds to ensure liquidity after that date if its inability to draw on the letter of credit continues through June 1, 1997. As of September 30, 1996, Bay Meadows' current liabilities exceeded its current assets by $2,697,000. The current ratio (current assets to current liabilities) was .83 to 1 at September 30, 1996, compared to .81 to 1 at December 31, 1995. - 16 - 17 PART II: OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS California Jockey Club v. Bay Meadows Operating Company, et al On August 13, 1996, Cal Jockey filed a complaint in the United States District Court for the Northern California District of California against Bay Meadows and its President, Mr. Liebau as well as the California Jockey Club Shareholders Committee (the "Shareholders Committee"), a group of stockholders supporting a slate of nominees to the Board of Directors of Cal Jockey in opposition to those nominated by Cal Jockey management. The complaint alleged violations of the federal securities laws by reason of the defendants' failure to make required filings and disclosures in connection with the Shareholders Committee's efforts elect directors in opposition to those of Cal Jockey's management. The complaint sought to compel the defendants to make the required disclosures and to enjoin them from soliciting or voting proxies. Cal Jockey sought expedited discovery, which was denied on August 21, 1996. By agreement of the parties, the time for the defendants to answer or otherwise move with respect to the complaint has been extended indefinitely. On November 7, 1996, Cal Jockey, with the consent of Bay Meadows, requested that the case be placed on inactive status through an order of administrative closure and stay. Bay Meadows believes this suit is without merit. Property Resources, Inc. v. Bay Meadows Operating Company, et al. On August 16, 1996, Property Resources, Inc. ("PRI"), a subsidiary of Franklin Fund, Inc., sued Bay Meadows, all of its directors, and others, for intentional interference with PRI's contract with Cal Jockey for the sale of real property on which Bay Meadows' stables are located. PRI sought a temporary restraining order, which would have prevented Bay Meadows and its management from talking to its stockholders, Cal Jockey, San Mateo city officials, or the press about a wide range of topics, including on-site stabling of horses at Bay Meadows. On August 15, 1996, the San Mateo County Superior Court denied PRI's request for the temporary restraining order. On November 7, 1996, the San Mateo Superior dismissed PRI's remaining claims with leave to amend. Bay Meadows believes this suit is without merit. Patty Miss Kelly v. Bay Meadows Operating Company and Frank Trigeiro, et al. The plaintiff, a former accounts receivable clerk, has filed suit against Bay Meadows in the Federal District Court alleging gender and age discrimination. The plaintiff was terminated by Bay Meadows after her position was eliminated as part of a restructuring of the accounting department. In her suit, the plaintiff seeks unspecified damages. Bay Meadows believes that this suit is without merit and does not believe that it will have a material adverse impact on Bay Meadows' results of operations. - 17 - 18 ITEM 2. CHANGES IN SECURITIES None ITEM 3. DEFAULTS UPON SENIOR SECURITIES None ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) On August 30, 1996, California Jockey Club ("Cal Jockey") held its Annual Stockholders Meeting. The results of the annual meeting was as follows: Election of Directors: Cal Jockey's stockholders elected the following individuals to serve as directors for an additional term as follows: James P. Conn 4,129,640 David M. Gjerdrum 5,287,900 James M. Harris 4,129,640 Kjell H. Qvale 4,129,640 Ronald J. Volkman 5,304,618 Appointment of Auditors: Cal Jockey's stockholders ratified the appointment of Deloitte & Touche, LLP as Cal Jockey's independent auditors for the 1996 fiscal year as follows: FOR 4,362,660 Votes AGAINST 108,153 Votes ABSTAIN 187,914 Votes Mandatory Retirement Age Stockholder Proposal: Cal Jockey's stockholders rejected a stockholder proposal to establish a mandatory retirement age of 72 for the board of directors as follows: FOR 1,855,147 Votes AGAINST 2,704,353 Votes ABSTAIN 69,226 Votes (b) On August 30, 1996, Bay Meadows Operating Company ("Bay Meadows") held a Special Meeting of Stockholders. At that meeting, the Stockholders approved resolutions authorizing the Bay Meadows Board of Directors to continue to conduct Bay Meadows' racing operations in a way substantially similar to the manner in which they are presently conducted and to pursue the expeditious development of stabling for 900 horses on or contiguous to the Bay Meadows Racecourse. The resolutions were approved by Bay Meadows' stockholders as follows: FOR 2,889,104 Votes 71.87% AGAINST 1,046,457 Votes 26.03% ABSTAIN 84,593 Votes 2.10% - 18 - 19 As previously reported, Bay Meadows held its 1996 Annual Meeting of Stockholders (the "Annual Meeting") on July 12, 1996 at which the Bay Meadows stockholders (1) elected five directors to serve until the 1997 Annual Meeting or until their successors have been elected and qualified and (2) ratified the Bay Meadows Board of Directors' selection of Deloitte & Touche, LLP as independent public accountants for Bay Meadows for the 1996 fiscal year. The nominees and the number of votes each received were as follows: Nominee Votes Received ------------------------------------------------- Eugene F. Barsotti, Jr. 3,293,451 John C. Harris 3,229,861 F. Jack Liebau 3,271,398 Lee R. Tucker 3,173,617 Anthony J. Zidich 3,184,079 Greg S. Gunderson 3,917,302 The five nominees receiving the highest number of votes, Messrs. Barsotti, Gunderson, Harris, Liebau and Zidich, were elected as directors. A total of 547,805 shares abstained from voting on the election of directors. The Bay Meadows stockholders ratified the appointment of Deloitte & Touche, LLP with 3,702,423 shares voting for the ratification, 55,573 voting against and 65,076 abstaining. On August 6, 1996, the Bay Meadows Board of Directors expanded the size of the Board from five to six and appointed Mr. Tucker to the newly created vacancy. ITEM 5. OTHER INFORMATION California Jockey Club The Franklin Agreement On May 31, 1995, Cal Jockey entered into an Agreement of Purchase and Sale with Property Resources, Inc. ("Property Resources"), a subsidiary of Franklin Resources, Inc. (the "Franklin Agreement"), providing for the sale of thirty-three acres of the barn and stable area (the "Stable Area"). On August 18, 1996 the Franklin Agreement was amended. A copy of the Sixth Amendment is attached to this Form 10-Q as Exhibit 20.01 and is incorporated herein by reference. (The Fifth Agreement, entered into after the Form 10-K filing for the year ending December 31, 1995, dealt with extensions of time for Cal Jockey to resolve various title matters. A copy of the Fifth Amendment is attached to this Form 10-Q as Exhibit 20.02 and is incorporated herein by reference). The Sixth Amendment effected a number of changes to the provisions governing off-site improvements and City of San Mateo approvals (the "Entitlements"). In terms of the off-site improvements, certain provisions now make clear that Property Resources' obligation to contribute to the costs of off-site improvements is included in the purchase price. Moreover, Cal Jockey may assign the construction contracts for the off-site improvements to Property Resources as of the close of escrow in which event - 19 - 20 the purchase price will be adjusted to reflect the off-off-site improvements which have been completed at that time. If Cal Jockey exercises this option it must provide security for its obligation to pay its share of the off-site improvement costs. In any event, Property Resources will pay 44% of the cost of the off-site improvements with the exception of the retention ponds, as to which Property Resources agrees to pay $100,000 of the first $700,000, and 33% of the costs over $700,000. Under the Sixth Amendment, the parties no longer have any right to terminate the Franklin Agreement based upon the cost of the off-site improvements. Turning to the Entitlements provision, the Entitlements timetable has been adjusted to reflect current estimates of the time required to obtain the Entitlements. Assuming all other conditions precedent are satisfied or waived, escrow is to close 330 days following the date on which Cal Jockey obtains the Entitlements. Additional conditions precedent to Property Resources' obligation to close escrow include the City of San Mateo issuing grading, foundation and/or building permits to Property Resources notwithstanding that the off-site improvements are not completed, and issuing certificates of occupancy to Property Resources for not less than 660,000 square feet of office space notwithstanding that construction of the off-ramp from Highway 101 may not be completed. The remaining important changes effected by the amendment are the elimination of the cap at 50,000 square feet on Cal Jockey's permitted office space construction in the 40 acre training track area (the "Training Track Area"), and the provision for an alternative Land Use Program. In addition, as long as the Entitlements procurement date is not delayed, Property Resources consents to the construction of one or more barns containing up to 210 stalls in the race track area. The Iacocca Agreement In December of 1995, Cal Jockey entered into an Agreement of Purchase and Sale with Lee Iacocca & Associates, Inc. (as amended, the "Iacocca Agreement") providing for the sale of the "Training Track Area." Effective June 28, 1996, such agreement was amended. ("Third Amendment"). A copy of the Third Amendment is attached to this Form 10-Q as Exhibit 20.03 and is incorporated herein by reference. (Two prior amendments dealt with extensions of the purchaser's due diligence period and acknowledgment that neither party had any claims against the other. These amendments are attached to this Form 10-Q as Exhibits 20.04 and 20.05 and are incorporated herein by reference). In the Third Amendment, Lee Iacocca & Associates, Inc. assigned its rights under the prior agreement to Airdial Company LLC, a newly formed limited liability company ("Airdial"), the members of which include some of the principals involved with Lee Iacocca & Associates, Inc. Many of the changes effected by the Third Amendment relate to off-site improvements and Entitlements. The provisions describing the purchase price now make clear that Airdial's obligation to share in the cost of the off-site improvements is included as part of the purchase price. Airdial agrees to pay 53.33% of the off-site improvements with the exception of the retention ponds, as to which Airdial agrees to pay $156,000 of the first $700,000 and 39.6% of any costs exceeding $700,000. Under the Third Amendment, the parties no longer have any right to terminate the Iacocca Agreement based upon the cost of the off-site improvements. Cal Jockey now has the right to assign to Airdial the payment obligations from the off-site improvement contracts or instead to delegate the improvement contracts themselves to Airdial, as of the close of - 20 - 21 escrow. If Cal Jockey chooses to do the latter, it must provide security for its share of the off-site improvements cost. In either event the purchase price is adjusted to reflect the off-site improvements which have been completed as of the close of escrow. If Cal Jockey elects not to assign the contracts to either Airdial or Property Resources, Airdial may itself elect to assume the obligation to complete the off-site improvements, which would trigger Cal Jockey's obligation to provide security. In terms of Entitlements, the Third Amendment eliminates provisions requiring a purchase price adjustment based on Cal Jockey failing to obtain all of the Entitlements. However, if the Entitlements are not obtained by December 31, 1997, either party may terminate the Iacocca Agreement provided that Airdial can avoid such termination by agreeing to close escrow on or before March 31, 1998 and, unless Cal Jockey or the purchaser of the Stable Area is proceeding with the development of the Stable Area, agreeing to pay for all of the costs of the off-site improvements necessary to develop the Stable Area. The amendment also includes new conditions precedent to Airdial's obligation to close escrow. One such condition precedent is the completion of those off-site improvements required by the City of San Mateo for the issuance of a building permit. In addition, the City of San Mateo must not add conditions prior to issuing a building permit other than the normal nondiscretionary conditions such as permit fees and submission of construction drawings. Finally, Airdial's obligation to close escrow is not triggered if the estimated cost to Airdial of constructing improvements for the Training Track Area does exceed $9.0 million, and is not triggered unless Airdial obtains a tentative subdivision map of the Training Track Area on terms and conditions acceptable to Airdial in its reasonable discretion. In terms of the remaining important changes effected by the amendment, the $1.0 million credit will now be deposited in two stages, $500,000 after the 60-day due diligence period and the balance within three days after Cal Jockey obtains the Entitlements. Finally, Cal Jockey now reserves the option to surcharge the Training Track Area, or in the alternative, to delegate this responsibility to Airdial. In the latter case, Cal Jockey would lend Airdial 100% of the costs of surcharging the Training Track Area, secured by a deed of trust on the surcharge materials, plans, specifications, and other intangible rights therein. The loan would bear interest at 2% above the prime rate and would be due and payable upon the close of escrow. Indemnification Agreements On August 18, 1996, in the interest of attracting and retaining qualified directors and officers, Cal Jockey entered into Indemnification Agreements with directors James P. Conn, Marylin K. Gunderson, James M. Harris, Brian M. Herrara, Richard E. Perazzo, and Kjell H. Qvale (the "Indemnitees"). Under the Indemnification Agreements (a form of which is attached to this Form 10-Q as Exhibit 10.14 and is incorporated herein by reference), Cal Jockey agrees to idemnify the Indemnitees to the fullest extent permitted by law against all expenses, judgments, penalties, fines and amounts paid in settlement in any legal proceeding related to the fact that they are or were a director or officer of Cal Jockey. Public Storage Inc. Agreement On July 18, 1996, Cal Jockey entered into an agreement to sell the property of the Sundown Tennis Club to Public Storage Inc. for $2.2 million. Public Storage Inc. intends to convert the land into mini-storage units. The sale of the property is subject to City of San Mateo approval. Accordingly, no assurances can be given that such sale will be consummated. Bay Meadows Operating Company Severance Agreements On August 30, 1996, in the interest of encouraging the continuous employment of key management personnel, Bay Meadows entered Severance Agreements with certain officers including F. Jack Liebau, President; Eugene F. Barsotti, Jr., Vice President - Racing; Sharon Kelly, Vice President - Marketing; Michael Scalzo, Vice President - Operations; Frank Trigeiro, Chief Financial Officer and Vice President - Finance; and Nathaniel Wess, Vice President. These agreements, which expire on December 31, 1997, become effective if there is a Change in Control of Bay Meadows followed by a termination by the officer of his or her employment for Good Reason. In that event, officers other than Mr. Liebau and Mr. Barsotti become entitled to a lump sum payment equal to the sum of the officer's current annual base salary plus the officer's bonus received during the previous 12 months or during 1996, whichever is greater; Mr. Liebau and Mr. Barsotti are instead entitled to twice the sum of their current annual base salary plus the bonus received during the previous 12 months or during 1996, whichever is greater. The Severance Agreements also provide that Bay Meadows will, at each officer's option, either continue to make contributions to the officer's retirement plan through January 1, 1998 or pay to the officer a lump - 21 - 22 sum equal to the actuarial equivalent of the additional retirement pension to which the officer would have been entitled had the officer continued service under such retirement plan for an additional two years. Indemnification Agreements On August 30, 1996, in the interest of attracting and retaining qualified and experienced directors and officers, Bay Meadows entered Indemnity Agreements with directors Eugene F. Barsotti, Jr., Greg S. Gunderson, John C. Harris, F. Jack Liebau, Lee Tucker and Anthony J. Zidich and Chief Financial Officer Frank Trigeiro (the "Indemnitees"). Under the Indemnity Agreements, Bay Meadows agrees to indemnify the Indemnitees to the fullest extent permitted by law against judgments and legal expenses relating to lawsuits or claims brought against any of them and relating to the fact that they are or were directors or officers of Bay Meadows. The Indemnity Agreements also provide that Bay Meadows' indemnification obligations will be secured by a standby letter of credit in the amount of $1,000,000 naming each of the Indemnitees as beneficiaries. Status of the Master Lease The Master Lease Agreement pursuant to which Bay Meadows leases the Racecourse Properties from Cal Jockey expired on March 31, 1996. Prior to the expiration of the lease, Cal Jockey and Bay Meadows had discussions regarding the extension of the Master Lease Agreement. The companies now have conflicting views concerning the status of the Master Lease Agreement's extension. Cal Jockey believes, based on the absence of an executed lease and applicable laws, among other things, that no lease exists and that Bay Meadows is a tenant at will. Bay Meadows believes, based partly on its understanding of certain corporate action taken by Cal Jockey and statements of Cal Jockey's President and Chairman, that the Master Lease Agreement has been extended for an additional three years with an increase in rent but otherwise substantially on the same terms as the previous lease. Notwithstanding this position, Bay Meadows is not accruing rent at the higher rate in view of Cal Jockey's position. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits EXHIBIT EXHIBIT NUMBER - ------- ------------------------------------------------------------------ 10.1 Severance Agreement between Bay Meadows Operating Company and Eugene F. Barsotti, Jr. dated August 30, 1996. 10.2 Severance Agreement between Bay Meadows Operating Company and Sharon Kelly dated August 30, 1996. 10.3 Severance Agreement between Bay Meadows Operating Company and F. Jack Liebau dated August 30, 1996. 10.4 Severance Agreement between Bay Meadows Operating Company and Michael Scalzo dated August 30, 1996. 10.5 Severance Agreement between Bay Meadows Operating Company and Frank Trigeiro dated August 30, 1996. 10.6 Severance Agreement between Bay Meadows Operating Company and Nathaniel Wess dated August 30, 1996. 10.7 Indemnification Agreement between Bay Meadows Operating Company and Eugene F. Barsotti, Jr. dated August 30, 1996. 10.8 Indemnification Agreement between Bay Meadows Operating Company and Greg S. Gunderson dated August 30, 1996. 10.9 Indemnification Agreement between Bay Meadows Operating Company and F. Jack Liebau dated August 30, 1996. 10.10 Indemnification Agreement between Bay Meadows Operating Company and John C. Harris dated August 30, 1996. 10.11 Indemnification Agreement between Bay Meadows Operating Company and Lee Tucker dated August 30, 1996. 10.12 Indemnification Agreement between Bay Meadows Operating Company and Anthony J. Zidich dated August 30, 1996. 10.13 Indemnification Agreement between Bay Meadows Operating Company and Frank Trigeiro dated August 30, 1996. 10.14 Form of California Jockey Club Indemnification Agreement. 20.1 Sixth Amendment to Agreement of Purchase and Sale dated August 18, 1996, amending the Agreement of Purchase and Sale dated May 31, 1995 between California Jockey Club and Franklin Resources, Inc. 20.2 Fifth Amendment to Agreement of Purchase and Sale dated April __, 1996, amending the Agreement of Purchase and Sale dated May 31, 1995 between California Jockey Club and Franklin Resources, Inc. 20.3 Amendment No. 3 to Agreement of Purchase and Sale dated June 28, 1996, amending the Agreement of Purchase and Sale dated December 21, 1995 between California Jockey Club and Lee Iacocca & Associates, Inc. 20.4 Amendment No. 2 to Agreement of Purchase and Sale dated May 31, 1996, amending the Agreement of Purchase and Sale dated December 21, 1995 between California Jockey Club and Lee Iacocca & Associates, Inc. 20.5 Amendment No. 1 to Agreement of Purchase and Sale dated March 5, 1996, amending the Agreement of Purchase and Sale dated December 21, 1995 between California Jockey Club and Lee Iacocca & Associates, Inc. - 22 - 23 (b) Reports on Form 8-K On August 8, 1996, Cal Jockey filed a report on Form 8-K disclosing pursuant to Item 5 the decision of two Cal Jockey directors, Marylin K. Gunderson and Richard E. Perazzo, not to stand for re-election. On August 22, 1996, Cal Jockey filed a report on Form 8-K disclosing pursuant to Item 5 (i) Cal Jockey's legal complaint against Bay Meadows, which was filed on August 13, 1996, and (ii) a potential transaction with Hudson Bay Partners, L.P. On October 31, 1996, Cal Jockey and Bay Meadows filed a report on Form 8-K disclosing pursuant to Item 5 an acquisition agreement with Patriot American Hospitality, Inc. - 23 - 24 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrants have duly caused this report to be signed on their behalf by the undersigned, thereunto duly authorized. DATED: November 13, 1996 CALIFORNIA JOCKEY CLUB /s/ James M. Harris ------------------------------------------- James M. Harris President, Treasurer and Controller (Principal Executive and Financial Officer) BAY MEADOWS OPERATING COMPANY /s/ F. Jack Liebau ------------------------------------------- F. Jack Liebau President and Chief Executive Officer (Principal Executive Officer) - 24 - 25 EXHIBIT EXHIBIT INDEX NUMBER - ------- ------------------------------------------------------------------ 10.1 Severance Agreement between Bay Meadows Operating Company and Eugene F. Barsotti, Jr. dated August 30, 1996. 10.2 Severance Agreement between Bay Meadows Operating Company and Sharon Kelly dated August 30, 1996. 10.3 Severance Agreement between Bay Meadows Operating Company and F. Jack Liebau dated August 30, 1996. 10.4 Severance Agreement between Bay Meadows Operating Company and Michael Scalzo dated August 30, 1996. 10.5 Severance Agreement between Bay Meadows Operating Company and Frank Trigeiro dated August 30, 1996. 10.6 Severance Agreement between Bay Meadows Operating Company and Nathaniel Wess dated August 30, 1996. 10.7 Indemnification Agreement between Bay Meadows Operating Company and Eugene F. Barsotti, Jr. dated August 30, 1996. 10.8 Indemnification Agreement between Bay Meadows Operating Company and Greg S. Gunderson dated August 30, 1996. 10.9 Indemnification Agreement between Bay Meadows Operating Company and F. Jack Liebau dated August 30, 1996. 10.10 Indemnification Agreement between Bay Meadows Operating Company and John C. Harris dated August 30, 1996. 10.11 Indemnification Agreement between Bay Meadows Operating Company and Lee Tucker dated August 30, 1996. 10.12 Indemnification Agreement between Bay Meadows Operating Company and Anthony J. Zidich dated August 30, 1996. 10.13 Indemnification Agreement between Bay Meadows Operating Company and Frank Trigeiro dated August 30, 1996. 10.14 Form of California Jockey Club Indemnification Agreement. 20.1 Sixth Amendment to Agreement of Purchase and Sale dated August 18, 1996, amending the Agreement of Purchase and Sale dated May 31, 1995 between California Jockey Club and Franklin Resources, Inc. 20.2 Fifth Amendment to Agreement of Purchase and Sale dated April __, 1996, amending the Agreement of Purchase and Sale dated May 31, 1995 between - 25 - 26 California Jockey Club and Franklin Resources, Inc. 20.3 Amendment No. 3 to Agreement of Purchase and Sale dated June 28, 1996, amending the Agreement of Purchase and Sale dated December 21, 1995 between California Jockey Club and Lee Iacocca & Associates, Inc. 20.4 Amendment No. 2 to Agreement of Purchase and Sale dated May 31, 1996, amending the Agreement of Purchase and Sale dated December 21, 1995 between California Jockey Club and Lee Iacocca & Associates, Inc. 20.5 Amendment No. 1 to Agreement of Purchase and Sale dated March 5, 1996, amending the Agreement of Purchase and Sale dated December 21, 1995 between California Jockey Club and Lee Iacocca & Associates, Inc. - 26 - EX-10.1 2 SEVERANCE AGRMT/EUGENE F. BARSOTTI, JR. 8/30/96 1 Exhibit 10.1 BAY MEADOWS OPERATING COMPANY Board of Directors August 30, 1996 Eugene F. Barsotti, Jr. Vice President - Racing Bay Meadows Operating Company 2600 S. Delaware Street San Mateo, California 94402 Dear Mr. Barsotti: Bay Meadows Operating Company (the "Company") considers it essential to the best interests of the Company and its shareholders to encourage the continuous employment of key management personnel. In this connection, the Board of Directors of the Company (the "Board") recognizes that, as is the case with many publicly held corporations, the possibility of a change in control may exist and that such possibility, and the uncertainty and questions which it may raise among management may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders. Accordingly, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company's top management, including yourself, to their assigned duties without distraction in the face of the potentially disturbing circumstances arising from the possibility of a disposition or other change in the structure of the Company. To persuade you to remain in the employ of the Company and in consideration of your agreement stated in Section 5, the Company agrees with you as follows: 1. Term and Operation of Agreement. This Agreement shall commence on the date hereof and shall continue in effect through December 31, 1997; provided, however, that commencing on January 1, 1998 and each January 1 thereafter, the term of this Agreement shall automatically be extended for one additional year unless, not later than June 30 of the preceding year, the Company shall have given notice that it does not wish to extend this Agreement; and provided further, that notwithstanding any such notice by the Company not to extend, this Agreement shall continue in effect for a period of twenty-four (24) months beyond the term provided herein if a "Change in Control" (as defined in Section 2) shall have occurred during such term. 2 2. Change in Control. For purposes of this Agreement, a "Change in Control" shall mean any one or more of the following: (i) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the Voting Securities of the Company outstanding immediately prior to such a merger or consolidation continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 90% of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; (ii) the stockholders of the Company approve a plan of complete liquidation of the Company, an agreement for the sale or disposition by the Company (in one transaction or a series of transactions) of all or substantially all the Company's assets, or a plan pursuant to which (in one transaction or a series of transactions) all or substantially all the Company's assets shall be transferred to a person (defined, for purposes of this Section 2, as such term is used in Sections 13(d) and 14(d) of the Securities and Exchange Act of 1934, as amended) not wholly owned by the Company (including but not limited to a plan pursuant to which all or substantially all of the Company's assets shall be transferred to a partnership not entirely owned by the Company); (iii) any person holds or comes to hold directly or indirectly 20% or more of the voting power entitled to elect the Company's directors, whether through "beneficial ownership" (defined, for purposes of this Section 2, as defined in Rule 13d-3 under such Act) of the Company's securities or otherwise, provided that the following acquisitions shall not constitute a Change in Control: (a) any acquisition directly from the Company (excluding an acquisition by virtue of the exercise of a conversion privilege), (b) any acquisition by the Company, or (c) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company; (iv) individuals who, as of the date hereof, constitute the Board of Directors (the "Incumbent Board") cease for any reasons to constitute at least a majority of the Board; provided, however, than any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then compromising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; 2 3 (v) the Company's Board of Directors shall authorize any action which if consummated would constitute a Change in Control; (vi) the Company shall enter into an agreement the consummation of which would result in the occurrence of a Change in Control; or (vii) the Company shall publicly announce an intention to take or to consider taking actions which if consummated would constitute a Change in Control. 3. Termination In Connection With or After Change in Control. (a) General. If, during the term of this Agreement, your employment terminates in connection with or after a Change in Control, you shall be entitled to the benefits provided in Section 4(c) unless such termination is (i) because of your death or Retirement, (ii) by the Company for Cause or Disability or (iii) by you other than for Good Reason. (b) Disability; Retirement. Termination by the Company of your employment based on "Disability" shall mean termination because of your absence from your duties with the Company on a full-time basis on account of physical or mental health conditions continued after the period for which you are entitled to continued employment under the Company's disability policy as in effect on the date hereof, unless within 30 days after Notice of Termination (as hereinafter defined) is given following such absence you shall have returned to the full-time performance of your duties. (Any termination on account of disability will be subject to your rights and benefits under such plan, and no purported Notice of Termination contrary to such plan will be deemed to commence the running of the 30-day period referred to in the preceding sentence or be considered a termination for Disability for any purpose.) Termination by the Company or you of your employment based on "Retirement" shall mean termination in accordance with the Company's retirement policy in effect on the date hereof, including (at your election, as set forth in writing) early retirement, generally applicable to its salaried employees or in accordance with any retirement arrangement established with your written consent with respect to you. (c) Cause. Termination by the Company of your employment for "Cause" shall mean termination upon (i) the willful and continued failure by you to substantially perform your duties with the Company (other than any such failure resulting from your incapacity due to physical or mental illness or any such actual or anticipated failure resulting from your termination for Good Reason), after a demand for substantial performance is delivered to you by the Board which specifically identifies the manner in which the Board believes that you have not substantially performed your duties, or (ii) the willful engaging by you in conduct which is demonstrably and materially injurious to the Company, monetarily or otherwise. 3 4 For purposes of this paragraph, no act, or failure to act, on your part shall be considered "willful" unless done, or omitted to be done, by you in bad faith and without reasonable belief that your action or omission was in the best interest of the Company. Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to you a copy of resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for the purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of conduct set forth above in Section 3(c)(i) or (ii) and specifying the particulars thereof in detail. (d) Good Reason. You shall be entitled to terminate your employment for Good Reason. For purposes of this Agreement, "Good Reason" shall mean any of the following, unless you have given your express written consent thereto: (i) the assignment to you of any duties inconsistent with your then-existing position, duties and status with the Company; a substantial alteration in the nature or status of your then-existing responsibilities; the failure to provide you with substantially the same perquisites which you then had, including but not limited to your office and appropriate support services; or a change in your then-existing titles or offices, or any removal of you from or any failure to re-elect you to any of such positions; (ii) a reduction by the Company in your base salary as in effect on the date of this Agreement or as the same may be increased from time to time; (iii) the Company's either requiring you to be based anywhere other than the San Mateo area where your office is located at the date of this Agreement, except for required travel on the Company's business to an extent substantially consistent with your present business travel obligations, or the Company's transferring or merging its racing operations to or with those at Golden Gate Fields; (iv) the failure by the Company to continue in effect any benefit, pension or compensation plan, savings and profit sharing plan, life insurance plan, medical insurance plan or health-and-accident plan (including, without limitation, the California Race Track Pension Plan) in which you are participating, or in which you are entitled to participate, at the date hereof (or plans providing you with substantially similar benefits); the taking of any action by the Company which would adversely affect your participation in or materially reduce your benefits under any of such plans or deprive you of any material fringe benefit enjoyed by you, or to which you are entitled, at the date of this Agreement; or the failure by the Company to provide you with the number of paid vacation days to which you are entitled in accordance with the Company's vacation policy in effect on the date hereof; (v) the failure by the Company to obtain the written assumption of this Agreement by any successor as contemplated in Section 6; 4 5 (vi) any purported termination of your employment by the Company which does not satisfy the requirements of this Agreement; and for purposes of this Agreement, no such purported termination shall be effective; or (vii) if the Change in Control is one described in Sections 2(iv) through (v), you shall give Notice of Termination within 9 months after the effectiveness of such Change in Control stating that you have determined, in your sole discretion, to terminate your employment. Your right to terminate your employment pursuant to this Section 3(d) shall not be affected by your incapacity due to physical or mental illness. (e) Notice of Termination. Any purported termination by the Company pursuant to Section 3(b) or (c) or by you pursuant to Section 3(d) shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 7. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated. (f) Date of Termination. "Date of Termination" shall mean (A) if your employment is terminated for Disability, 30 days after Notice of Termination is given (provided that you shall not have returned to the performance of your duties on a full-time basis during such 30-day period), and (B) if your employment is terminated pursuant to Section 3(c) or (d) or for any other reason, the date specified in the Notice of Termination (which, in the case of a termination pursuant to Section 3(c) shall not be less than 30 days, and in the case of a termination pursuant to Section 3(d) shall not be more than 60 days, from the date such Notice of Termination is given); provided that if within 30 days after any Notice of Termination is given the party receiving such Notice of Termination notified the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, by a binding and final arbitration award or by a final judgment, order or a decree of a court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected); and provided further that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. Notwithstanding the pendency of any such dispute, the Company will continue to pay you your full compensation in effect when the notice of dispute was given (including, but not limited to, base salary, bonus and incentive compensation), and continue you as a participant in all compensation, benefit and insurance plans in which you were participating when the notice of dispute was given, until the dispute is finally resolved in accordance with this Section 3(f). Amounts paid under this Section 3(f) are in addition to all other amounts due under this Agreement and shall not be offset against or reduce any other amounts due under this Agreement. 5 6 4. Compensation Upon Termination or During Disability. (a) During any period that you fail to perform your duties hereunder as a result of incapacity due to physical or mental illness, you shall continue to receive benefits not less than those payable under the Company's disability plans in effect on the date hereof. (b) If your employment shall be terminated for Cause, the Company shall pay you your full base salary, and accrued vacation and personal holidays, through the Date of Termination at the rate in effect at the time Notice of Termination is given and the Company shall have no further obligation to you under this Agreement. (c) The benefits referred to in Section 3(a) are as follows: (i) the Company shall pay you your full base salary, and accrued vacation and personal holidays through the Date of Termination at the highest rate in effect at any time during the 12 months immediately preceding the occurrence of the circumstances giving rise to the Notice of Termination given in respect thereof; (ii) in lieu of any further salary payments to you for periods subsequent to the Date of Termination, the Company shall pay as severance pay to you, not later than the fifth day following the Date of Termination, a lump sum severance payment equal to two times the sum of (A) your annual base salary (including, without limitation, any portion you elected to defer to a plan maintained by the Company or otherwise) at the highest rate in effect at any time during the 12 months immediately preceding the occurrence of the circumstances giving rise to the Notice of Termination given in respect thereof, and (B) the amount of any bonus and other incentive compensation of any kind paid to you (x) during the 12 months immediately preceding that in which the Date of Termination occurs, or (y) in calendar year 1996, whichever is higher; (iii) in addition to the retirement benefits to which you are entitled under any pension or retirement plan, the Company shall, as directed by you, either (A) continue to designate you as an employee under the plan through January 1, 1998 and through such date make contributions to the plan based on your annual base salary at the highest rate in effect at any time during the 12 months immediately preceding the occurrence of the circumstances giving rise to the Notice of Termination given in respect thereof, or (B) pay to you in one sum in cash not later than the fifth day following the Date of Termination, an amount equal to the actuarial equivalent to the excess of (x) over (y), where (x) equals the retirement pension (determined as a straight life annuity) to which you would have been entitled under the terms of the plan (without regard to (1) any limitation on the amount used in the calculation of the regular pension thereunder, (2) any offset thereunder for severance allowances payable hereunder or (3) any amendment to the plan made subsequent to a Change in Control, which amendment adversely affects in any manner the computation of retirement benefits under the applicable plans), determined as if you were fully vested thereunder and had accumulated (after any termination pursuant to Section 3) two additional years of continuous service thereunder at your highest rate of earnings (as defined in the plan) during the year immediately 6 7 preceding the occurrence of the circumstances giving rise to the Notice of Termination given in respect thereof; and where (y) equals the retirement pension (determined as a straight life annuity) to which you are entitled pursuant to the provisions of such plans; and to the extent pension and retirement benefits with respect to prior service is not vested, the amount to be so paid shall be increased by an amount equal to the current actuarial value such benefits would have if they were vested; and for purposes of this Section 4(c)(iii), "actuarial equivalent" shall be determined using the same methods and assumptions utilized under the Company's retirement plans and programs immediately prior to the Change in Control; (iv) the Company will permit you, by giving notice within 15 days after the Date of Termination, to purchase the Company car assigned to you, if any, for the lower of book value or low Blue Book; (v) the Company shall also pay to you all legal fees and expenses incurred by you as a result of such termination (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement); and (vi) unless you are terminated for Cause, the Company shall maintain or cause to be maintained in full force and effect, for your continued benefit, for a period of two years, all health and welfare benefit plans, including but not limited to life insurance, health insurance, dental insurance, executive financial planning, tax return preparation and executive health benefits in which you participated or were entitled to participate immediately prior to the Date of Termination, provided that your continued participation is possible under the general terms and provisions of such plans and programs. In the event that your participation in any such plan or program is barred, the Company shall arrange to provide you with benefits substantially similar to those which you are entitled to receive under such plans and programs. At the end of such 2-year period, you will be entitled to take advantage of any conversion privileges applicable to the benefits available under any such plans or programs. Benefits under this Section 4(c)(vi) all terminate if, during such 2-year period and at your sole option, you become employed on a full-time basis. (d) You shall not be required to mitigate the amount of any payment provided for in this Section 4 by seeking other employment or otherwise, nor shall the amount of any payment provided for in this Section 4 be reduced by any compensation earned by you as the result of employment by another employer after the Date of Termination, or otherwise. 5. Employment. Subject to your rights under Section 3(d), you agree to remain in the employ of the Company until the earlier of (i) December 31, 1997 or (ii) six (6) months after the occurrence of a Change in Control described in Section 2(v), 2(vi) or 2(vii). 7 8 6. Successors; Binding Agreement. (a) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to the Company, by agreement in form and substance satisfactory to you, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. (Notwithstanding the foregoing, if the succession constitutes a Change in Control, then the provisions hereof applicable in the event of a Change in Control shall apply with respect to the succession). Failure of the Company to obtain such agreement prior to the effectiveness of any succession shall be a breach of this Agreement and shall entitle you to compensation from the Company in the amount and on the same terms as you would be entitled hereunder if you terminated your employment for Good Reason, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this Section 6 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law, or otherwise. (b) This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributes, devisees and legatees. If you should die while any amount would be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, to your estate. 7. Notice. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States Registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notices to the Company shall be directed to the attention of the Board with a copy to the Secretary of the Company, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. 8. Miscellaneous. No provision of this Agreement may be modified waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by you and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the time or at any prior or subsequent time. No agreements or representations, oral or otherwise, expressed or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California. 8 9 9. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 10. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 11. Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in San Francisco, California, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction; provided, however, that you shall be entitled to seek specific performance of your right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement. If this letter correctly sets forth our agreement on the subject matter hereof, kindly sign and return to the Company the enclosed copy of this letter which will then constitute our agreement on this subject. Sincerely yours, /s/ John C. Harris John C. Harris Chairman of the Board of Directors Agreed to as of the date hereof: /s/ Eugene F. Barsotti, Jr. - ------------------------------ Eugene F. Barsotti, Jr. 9 EX-10.2 3 SEVERANCE AGRMT/SHARON KELLY DATED 8/30/96 1 Exhibit 10.2 BAY MEADOWS OPERATING COMPANY Board of Directors August 30, 1996 Sharon Kelly Vice President - Marketing Bay Meadows Operating Company 2600 S. Delaware Street San Mateo, California 94402 Dear Ms. Kelly: Bay Meadows Operating Company (the "Company") considers it essential to the best interests of the Company and its shareholders to encourage the continuous employment of key management personnel. In this connection, the Board of Directors of the Company (the "Board") recognizes that, as is the case with many publicly held corporations, the possibility of a change in control may exist and that such possibility, and the uncertainty and questions which it may raise among management may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders. Accordingly, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company's top management, including yourself, to their assigned duties without distraction in the face of the potentially disturbing circumstances arising from the possibility of a disposition or other change in the structure of the Company. To persuade you to remain in the employ of the Company and in consideration of your agreement stated in Section 5, the Company agrees with you as follows: 1. Term and Operation of Agreement. This Agreement shall commence on the date hereof and shall continue in effect through December 31, 1997; provided, however, that commencing on January 1, 1998 and each January 1 thereafter, the term of this Agreement shall automatically be extended for one additional year unless, not later than June 30 of the preceding year, the Company shall have given notice that it does not wish to extend this Agreement; and provided further, that notwithstanding any such notice by the Company not to extend, this Agreement shall continue in effect for a period of twenty-four (24) months beyond the term provided herein if a "Change in Control" (as defined in Section 2) shall have occurred during such term. 2 2. Change in Control. For purposes of this Agreement, a "Change in Control" shall mean any one or more of the following: (i) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the Voting Securities of the Company outstanding immediately prior to such a merger or consolidation continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 90% of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; (ii) the stockholders of the Company approve a plan of complete liquidation of the Company, an agreement for the sale or disposition by the Company (in one transaction or a series of transactions) of all or substantially all the Company's assets, or a plan pursuant to which (in one transaction or a series of transactions) all or substantially all the Company's assets shall be transferred to a person (defined, for purposes of this Section 2, as such term is used in Sections 13(d) and 14(d) of the Securities and Exchange Act of 1934, as amended) not wholly owned by the Company (including but not limited to a plan pursuant to which all or substantially all of the Company's assets shall be transferred to a partnership not entirely owned by the Company); (iii) any person holds or comes to hold directly or indirectly 20% or more of the voting power entitled to elect the Company's directors, whether through "beneficial ownership" (defined, for purposes of this Section 2, as defined in Rule 13d-3 under such Act) of the Company's securities or otherwise, provided that the following acquisitions shall not constitute a Change in Control: (a) any acquisition directly from the Company (excluding an acquisition by virtue of the exercise of a conversion privilege), (b) any acquisition by the Company, or (c) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company; (iv) individuals who, as of the date hereof, constitute the Board of Directors (the "Incumbent Board") cease for any reasons to constitute at least a majority of the Board; provided, however, than any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then compromising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; 2 3 (v) the Company's Board of Directors shall authorize any action which if consummated would constitute a Change in Control; (vi) the Company shall enter into an agreement the consummation of which would result in the occurrence of a Change in Control; or (vii) the Company shall publicly announce an intention to take or to consider taking actions which if consummated would constitute a Change in Control. 3. Termination In Connection With or After Change in Control. (a) General. If, during the term of this Agreement, your employment terminates in connection with or after a Change in Control, you shall be entitled to the benefits provided in Section 4(c) unless such termination is (i) because of your death or Retirement, (ii) by the Company for Cause or Disability or (iii) by you other than for Good Reason. (b) Disability; Retirement. Termination by the Company of your employment based on "Disability" shall mean termination because of your absence from your duties with the Company on a full-time basis on account of physical or mental health conditions continued after the period for which you are entitled to continued employment under the Company's disability policy as in effect on the date hereof, unless within 30 days after Notice of Termination (as hereinafter defined) is given following such absence you shall have returned to the full-time performance of your duties. (Any termination on account of disability will be subject to your rights and benefits under such plan, and no purported Notice of Termination contrary to such plan will be deemed to commence the running of the 30-day period referred to in the preceding sentence or be considered a termination for Disability for any purpose.) Termination by the Company or you of your employment based on "Retirement" shall mean termination in accordance with the Company's retirement policy in effect on the date hereof, including (at your election, as set forth in writing) early retirement, generally applicable to its salaried employees or in accordance with any retirement arrangement established with your written consent with respect to you. (c) Cause. Termination by the Company of your employment for "Cause" shall mean termination upon (i) the willful and continued failure by you to substantially perform your duties with the Company (other than any such failure resulting from your incapacity due to physical or mental illness or any such actual or anticipated failure resulting from your termination for Good Reason), after a demand for substantial performance is delivered to you by the Board which specifically identifies the manner in which the Board believes that you have not substantially performed your duties, or (ii) the willful engaging by you in conduct which is demonstrably and materially injurious to the Company, monetarily or otherwise. 3 4 For purposes of this paragraph, no act, or failure to act, on your part shall be considered "willful" unless done, or omitted to be done, by you in bad faith and without reasonable belief that your action or omission was in the best interest of the Company. Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to you a copy of resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for the purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of conduct set forth above in Section 3(c)(i) or (ii) and specifying the particulars thereof in detail. (d) Good Reason. You shall be entitled to terminate your employment for Good Reason. For purposes of this Agreement, "Good Reason" shall mean any of the following, unless you have given your express written consent thereto: (i) the assignment to you of any duties inconsistent with your then-existing position, duties and status with the Company; a substantial alteration in the nature or status of your then-existing responsibilities; the failure to provide you with substantially the same perquisites which you then had, including but not limited to your office and appropriate support services; or a change in your then-existing titles or offices, or any removal of you from or any failure to re-elect you to any of such positions; (ii) a reduction by the Company in your base salary as in effect on the date of this Agreement or as the same may be increased from time to time; (iii) the Company's either requiring you to be based anywhere other than the San Mateo area where your office is located at the date of this Agreement, except for required travel on the Company's business to an extent substantially consistent with your present business travel obligations, or the Company's transferring or merging its racing operations to or with those at Golden Gate Fields; (iv) the failure by the Company to continue in effect any benefit, pension or compensation plan, savings and profit sharing plan, life insurance plan, medical insurance plan or health-and-accident plan (including, without limitation, the California Race Track Pension Plan) in which you are participating, or in which you are entitled to participate, at the date hereof (or plans providing you with substantially similar benefits); the taking of any action by the Company which would adversely affect your participation in or materially reduce your benefits under any of such plans or deprive you of any material fringe benefit enjoyed by you, or to which you are entitled, at the date of this Agreement; or the failure by the Company to provide you with the number of paid vacation days to which you are entitled in accordance with the Company's vacation policy in effect on the date hereof; (v) the failure by the Company to obtain the written assumption of this Agreement by any successor as contemplated in Section 6; 4 5 (vi) any purported termination of your employment by the Company which does not satisfy the requirements of this Agreement; and for purposes of this Agreement, no such purported termination shall be effective; or (vii) if the Change in Control is one described in Sections 2(iv) through (v), you shall give Notice of Termination within 9 months after the effectiveness of such Change in Control stating that you have determined, in your sole discretion, to terminate your employment. Your right to terminate your employment pursuant to this Section 3(d) shall not be affected by your incapacity due to physical or mental illness. (e) Notice of Termination. Any purported termination by the Company pursuant to Section 3(b) or (c) or by you pursuant to Section 3(d) shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 7. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated. (f) Date of Termination. "Date of Termination" shall mean (A) if your employment is terminated for Disability, 30 days after Notice of Termination is given (provided that you shall not have returned to the performance of your duties on a full-time basis during such 30-day period), and (B) if your employment is terminated pursuant to Section 3(c) or (d) or for any other reason, the date specified in the Notice of Termination (which, in the case of a termination pursuant to Section 3(c) shall not be less than 30 days, and in the case of a termination pursuant to Section 3(d) shall not be more than 60 days, from the date such Notice of Termination is given); provided that if within 30 days after any Notice of Termination is given the party receiving such Notice of Termination notified the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, by a binding and final arbitration award or by a final judgment, order or a decree of a court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected); and provided further that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. Notwithstanding the pendency of any such dispute, the Company will continue to pay you your full compensation in effect when the notice of dispute was given (including, but not limited to, base salary, bonus and incentive compensation), and continue you as a participant in all compensation, benefit and insurance plans in which you were participating when the notice of dispute was given, until the dispute is finally resolved in accordance with this Section 3(f). Amounts paid under this Section 3(f) are in addition to all other amounts due under this Agreement and shall not be offset against or reduce any other amounts due under this Agreement. 5 6 4. Compensation Upon Termination or During Disability. (a) During any period that you fail to perform your duties hereunder as a result of incapacity due to physical or mental illness, you shall continue to receive benefits not less than those payable under the Company's disability plans in effect on the date hereof. (b) If your employment shall be terminated for Cause, the Company shall pay you your full base salary, and accrued vacation and personal holidays, through the Date of Termination at the rate in effect at the time Notice of Termination is given and the Company shall have no further obligation to you under this Agreement. (c) The benefits referred to in Section 3(a) are as follows: (i) the Company shall pay you your full base salary, and accrued vacation and personal holidays through the Date of Termination at the highest rate in effect at any time during the 12 months immediately preceding the occurrence of the circumstances giving rise to the Notice of Termination given in respect thereof; (ii) in lieu of any further salary payments to you for periods subsequent to the Date of Termination, the Company shall pay as severance pay to you, not later than the fifth day following the Date of Termination, a lump sum severance payment equal to the sum of (A) your annual base salary (including, without limitation, any portion you elected to defer to a plan maintained by the Company or otherwise) at the highest rate in effect at any time during the 12 months immediately preceding the occurrence of the circumstances giving rise to the Notice of Termination given in respect thereof, and (B) the amount of any bonus and other incentive compensation of any kind paid to you (x) during the 12 months immediately preceding that in which the Date of Termination occurs, or (y) in calendar year 1996, whichever is higher; (iii) in addition to the retirement benefits to which you are entitled under any pension or retirement plan, the Company shall, as directed by you, either (A) continue to designate you as an employee under the plan through January 1, 1998 and through such date make contributions to the plan based on your annual base salary at the highest rate in effect at any time during the 12 months immediately preceding the occurrence of the circumstances giving rise to the Notice of Termination given in respect thereof, or (B) pay to you in one sum in cash not later than the fifth day following the Date of Termination, an amount equal to the actuarial equivalent to the excess of (x) over (y), where (x) equals the retirement pension (determined as a straight life annuity) to which you would have been entitled under the terms of the plan (without regard to (1) any limitation on the amount used in the calculation of the regular pension thereunder, (2) any offset thereunder for severance allowances payable hereunder or (3) any amendment to the plan made subsequent to a Change in Control, which amendment adversely affects in any manner the computation of retirement benefits under the applicable plans), determined as if you were fully vested thereunder and had accumulated (after any termination pursuant to Section 3) two additional years of continuous service thereunder at your highest rate of earnings (as defined in the plan) during the year immediately 6 7 preceding the occurrence of the circumstances giving rise to the Notice of Termination given in respect thereof; and where (y) equals the retirement pension (determined as a straight life annuity) to which you are entitled pursuant to the provisions of such plans; and to the extent pension and retirement benefits with respect to prior service is not vested, the amount to be so paid shall be increased by an amount equal to the current actuarial value such benefits would have if they were vested; and for purposes of this Section 4(c)(iii), "actuarial equivalent" shall be determined using the same methods and assumptions utilized under the Company's retirement plans and programs immediately prior to the Change in Control; (iv) the Company will permit you, by giving notice within 15 days after the Date of Termination, to purchase the Company car assigned to you, if any, for the lower of book value or low Blue Book; (v) the Company shall also pay to you all legal fees and expenses incurred by you as a result of such termination (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement); and (vi) unless you are terminated for Cause, the Company shall maintain or cause to be maintained in full force and effect, for your continued benefit, for a period of two years, all health and welfare benefit plans, including but not limited to life insurance, health insurance, dental insurance, executive financial planning, tax return preparation and executive health benefits in which you participated or were entitled to participate immediately prior to the Date of Termination, provided that your continued participation is possible under the general terms and provisions of such plans and programs. In the event that your participation in any such plan or program is barred, the Company shall arrange to provide you with benefits substantially similar to those which you are entitled to receive under such plans and programs. At the end of such 2-year period, you will be entitled to take advantage of any conversion privileges applicable to the benefits available under any such plans or programs. Benefits under this Section 4(c)(vi) all terminate if, during such 2-year period and at your sole option, you become employed on a full-time basis. (d) You shall not be required to mitigate the amount of any payment provided for in this Section 4 by seeking other employment or otherwise, nor shall the amount of any payment provided for in this Section 4 be reduced by any compensation earned by you as the result of employment by another employer after the Date of Termination, or otherwise. 5. Employment. Subject to your rights under Section 3(d), you agree to remain in the employ of the Company until the earlier of (i) December 31, 1997 or (ii) six (6) months after the occurrence of a Change in Control described in Section 2(v), 2(vi) or 2(vii). 7 8 6. Successors; Binding Agreement. (a) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to the Company, by agreement in form and substance satisfactory to you, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. (Notwithstanding the foregoing, if the succession constitutes a Change in Control, then the provisions hereof applicable in the event of a Change in Control shall apply with respect to the succession). Failure of the Company to obtain such agreement prior to the effectiveness of any succession shall be a breach of this Agreement and shall entitle you to compensation from the Company in the amount and on the same terms as you would be entitled hereunder if you terminated your employment for Good Reason, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this Section 6 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law, or otherwise. (b) This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributes, devisees and legatees. If you should die while any amount would be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, to your estate. 7. Notice. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States Registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notices to the Company shall be directed to the attention of the Board with a copy to the Secretary of the Company, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. 8. Miscellaneous. No provision of this Agreement may be modified waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by you and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the time or at any prior or subsequent time. No agreements or representations, oral or otherwise, expressed or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California. 8 9 9. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 10. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 11. Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in San Francisco, California, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction; provided, however, that you shall be entitled to seek specific performance of your right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement. If this letter correctly sets forth our agreement on the subject matter hereof, kindly sign and return to the Company the enclosed copy of this letter which will then constitute our agreement on this subject. Sincerely yours, /s/ John C. Harris John C. Harris Chairman of the Board of Directors Agreed to as of the date hereof: /s/ Sharon Kelly - ------------------------------ Sharon Kelly 9 EX-10.3 4 SEVERANCE AGRMT/JACK LIEBAU DATED 8/30-/96 1 Exhibit 10.3 BAY MEADOWS OPERATING COMPANY Board of Directors August 30, 1996 F. Jack Liebau. President Bay Meadows Operating Company 2600 S. Delaware Street San Mateo, California 94402 Dear Mr. Liebau: Bay Meadows Operating Company (the "Company") considers it essential to the best interests of the Company and its shareholders to encourage the continuous employment of key management personnel. In this connection, the Board of Directors of the Company (the "Board") recognizes that, as is the case with many publicly held corporations, the possibility of a change in control may exist and that such possibility, and the uncertainty and questions which it may raise among management may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders. Accordingly, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company's top management, including yourself, to their assigned duties without distraction in the face of the potentially disturbing circumstances arising from the possibility of a disposition or other change in the structure of the Company. To persuade you to remain in the employ of the Company and in consideration of your agreement stated in Section 5, the Company agrees with you as follows: 1. Term and Operation of Agreement. This Agreement shall commence on the date hereof and shall continue in effect through December 31, 1997; provided, however, that commencing on January 1, 1998 and each January 1 thereafter, the term of this Agreement shall automatically be extended for one additional year unless, not later than June 30 of the preceding year, the Company shall have given notice that it does not wish to extend this Agreement; and provided further, that notwithstanding any such notice by the Company not to extend, this Agreement shall continue in effect for a period of twenty-four (24) months beyond the term provided herein if a "Change in Control" (as defined in Section 2) shall have occurred during such term. 2 2. Change in Control. For purposes of this Agreement, a "Change in Control" shall mean any one or more of the following: (i) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the Voting Securities of the Company outstanding immediately prior to such a merger or consolidation continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 90% of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; (ii) the stockholders of the Company approve a plan of complete liquidation of the Company, an agreement for the sale or disposition by the Company (in one transaction or a series of transactions) of all or substantially all the Company's assets, or a plan pursuant to which (in one transaction or a series of transactions) all or substantially all the Company's assets shall be transferred to a person (defined, for purposes of this Section 2, as such term is used in Sections 13(d) and 14(d) of the Securities and Exchange Act of 1934, as amended) not wholly owned by the Company (including but not limited to a plan pursuant to which all or substantially all of the Company's assets shall be transferred to a partnership not entirely owned by the Company); (iii) any person holds or comes to hold directly or indirectly 20% or more of the voting power entitled to elect the Company's directors, whether through "beneficial ownership" (defined, for purposes of this Section 2, as defined in Rule 13d-3 under such Act) of the Company's securities or otherwise, provided that the following acquisitions shall not constitute a Change in Control: (a) any acquisition directly from the Company (excluding an acquisition by virtue of the exercise of a conversion privilege), (b) any acquisition by the Company, or (c) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company; (iv) individuals who, as of the date hereof, constitute the Board of Directors (the "Incumbent Board") cease for any reasons to constitute at least a majority of the Board; provided, however, than any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then compromising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; 2 3 (v) the Company's Board of Directors shall authorize any action which if consummated would constitute a Change in Control; (vi) the Company shall enter into an agreement the consummation of which would result in the occurrence of a Change in Control; or (vii) the Company shall publicly announce an intention to take or to consider taking actions which if consummated would constitute a Change in Control. 3. Termination In Connection With or After Change in Control. (a) General. If, during the term of this Agreement, your employment terminates in connection with or after a Change in Control, you shall be entitled to the benefits provided in Section 4(c) unless such termination is (i) because of your death or Retirement, (ii) by the Company for Cause or Disability or (iii) by you other than for Good Reason. (b) Disability; Retirement. Termination by the Company of your employment based on "Disability" shall mean termination because of your absence from your duties with the Company on a full-time basis on account of physical or mental health conditions continued after the period for which you are entitled to continued employment under the Company's disability policy as in effect on the date hereof, unless within 30 days after Notice of Termination (as hereinafter defined) is given following such absence you shall have returned to the full-time performance of your duties. (Any termination on account of disability will be subject to your rights and benefits under such plan, and no purported Notice of Termination contrary to such plan will be deemed to commence the running of the 30-day period referred to in the preceding sentence or be considered a termination for Disability for any purpose.) Termination by the Company or you of your employment based on "Retirement" shall mean termination in accordance with the Company's retirement policy in effect on the date hereof, including (at your election, as set forth in writing) early retirement, generally applicable to its salaried employees or in accordance with any retirement arrangement established with your written consent with respect to you. (c) Cause. Termination by the Company of your employment for "Cause" shall mean termination upon (i) the willful and continued failure by you to substantially perform your duties with the Company (other than any such failure resulting from your incapacity due to physical or mental illness or any such actual or anticipated failure resulting from your termination for Good Reason), after a demand for substantial performance is delivered to you by the Board which specifically identifies the manner in which the Board believes that you have not substantially performed your duties, or (ii) the willful engaging by you in conduct which is demonstrably and materially injurious to the Company, monetarily or otherwise. 3 4 For purposes of this paragraph, no act, or failure to act, on your part shall be considered "willful" unless done, or omitted to be done, by you in bad faith and without reasonable belief that your action or omission was in the best interest of the Company. Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to you a copy of resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for the purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of conduct set forth above in Section 3(c)(i) or (ii) and specifying the particulars thereof in detail. (d) Good Reason. You shall be entitled to terminate your employment for Good Reason. For purposes of this Agreement, "Good Reason" shall mean any of the following, unless you have given your express written consent thereto: (i) the assignment to you of any duties inconsistent with your then-existing position, duties and status with the Company; a substantial alteration in the nature or status of your then-existing responsibilities; the failure to provide you with substantially the same perquisites which you then had, including but not limited to your office and appropriate support services; or a change in your then-existing titles or offices, or any removal of you from or any failure to re-elect you to any of such positions; (ii) a reduction by the Company in your base salary as in effect on the date of this Agreement or as the same may be increased from time to time; (iii) the Company's either requiring you to be based anywhere other than the San Mateo area where your office is located at the date of this Agreement, except for required travel on the Company's business to an extent substantially consistent with your present business travel obligations, or the Company's transferring or merging its racing operations to or with those at Golden Gate Fields; (iv) the failure by the Company to continue in effect any benefit, pension or compensation plan, savings and profit sharing plan, life insurance plan, medical insurance plan or health-and-accident plan (including, without limitation, the California Race Track Pension Plan) in which you are participating, or in which you are entitled to participate, at the date hereof (or plans providing you with substantially similar benefits); the taking of any action by the Company which would adversely affect your participation in or materially reduce your benefits under any of such plans or deprive you of any material fringe benefit enjoyed by you, or to which you are entitled, at the date of this Agreement; or the failure by the Company to provide you with the number of paid vacation days to which you are entitled in accordance with the Company's vacation policy in effect on the date hereof; (v) the failure by the Company to obtain the written assumption of this Agreement by any successor as contemplated in Section 6; 4 5 (vi) any purported termination of your employment by the Company which does not satisfy the requirements of this Agreement; and for purposes of this Agreement, no such purported termination shall be effective; or (vii) if the Change in Control is one described in Sections 2(iv) through (v), you shall give Notice of Termination within 9 months after the effectiveness of such Change in Control stating that you have determined, in your sole discretion, to terminate your employment. Your right to terminate your employment pursuant to this Section 3(d) shall not be affected by your incapacity due to physical or mental illness. (e) Notice of Termination. Any purported termination by the Company pursuant to Section 3(b) or (c) or by you pursuant to Section 3(d) shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 7. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated. (f) Date of Termination. "Date of Termination" shall mean (A) if your employment is terminated for Disability, 30 days after Notice of Termination is given (provided that you shall not have returned to the performance of your duties on a full-time basis during such 30-day period), and (B) if your employment is terminated pursuant to Section 3(c) or (d) or for any other reason, the date specified in the Notice of Termination (which, in the case of a termination pursuant to Section 3(c) shall not be less than 30 days, and in the case of a termination pursuant to Section 3(d) shall not be more than 60 days, from the date such Notice of Termination is given); provided that if within 30 days after any Notice of Termination is given the party receiving such Notice of Termination notified the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, by a binding and final arbitration award or by a final judgment, order or a decree of a court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected); and provided further that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. Notwithstanding the pendency of any such dispute, the Company will continue to pay you your full compensation in effect when the notice of dispute was given (including, but not limited to, base salary, bonus and incentive compensation), and continue you as a participant in all compensation, benefit and insurance plans in which you were participating when the notice of dispute was given, until the dispute is finally resolved in accordance with this Section 3(f). Amounts paid under this Section 3(f) are in addition to all other amounts due under this Agreement and shall not be offset against or reduce any other amounts due under this Agreement. 5 6 4. Compensation Upon Termination or During Disability. (a) During any period that you fail to perform your duties hereunder as a result of incapacity due to physical or mental illness, you shall continue to receive benefits not less than those payable under the Company's disability plans in effect on the date hereof. (b) If your employment shall be terminated for Cause, the Company shall pay you your full base salary, and accrued vacation and personal holidays, through the Date of Termination at the rate in effect at the time Notice of Termination is given and the Company shall have no further obligation to you under this Agreement. (c) The benefits referred to in Section 3(a) are as follows: (i) the Company shall pay you your full base salary, and accrued vacation and personal holidays through the Date of Termination at the highest rate in effect at any time during the 12 months immediately preceding the occurrence of the circumstances giving rise to the Notice of Termination given in respect thereof; (ii) in lieu of any further salary payments to you for periods subsequent to the Date of Termination, the Company shall pay as severance pay to you, not later than the fifth day following the Date of Termination, a lump sum severance payment equal to two times the sum of (A) your annual base salary (including, without limitation, any portion you elected to defer to a plan maintained by the Company or otherwise) at the highest rate in effect at any time during the 12 months immediately preceding the occurrence of the circumstances giving rise to the Notice of Termination given in respect thereof, and (B) the amount of any bonus and other incentive compensation of any kind paid to you (x) during the 12 months immediately preceding that in which the Date of Termination occurs, or (y) in calendar year 1996, whichever is higher; (iii) in addition to the retirement benefits to which you are entitled under any pension or retirement plan, the Company shall, as directed by you, either (A) continue to designate you as an employee under the plan through January 1, 1998 and through such date make contributions to the plan based on your annual base salary at the highest rate in effect at any time during the 12 months immediately preceding the occurrence of the circumstances giving rise to the Notice of Termination given in respect thereof, or (B) pay to you in one sum in cash not later than the fifth day following the Date of Termination, an amount equal to the actuarial equivalent to the excess of (x) over (y), where (x) equals the retirement pension (determined as a straight life annuity) to which you would have been entitled under the terms of the plan (without regard to (1) any limitation on the amount used in the calculation of the regular pension thereunder, (2) any offset thereunder for severance allowances payable hereunder or (3) any amendment to the plan made subsequent to a Change in Control, which amendment adversely affects in any manner the computation of retirement benefits under the applicable plans), determined as if you were fully vested thereunder and had accumulated (after any termination pursuant to Section 3) two additional years of continuous service thereunder at your highest rate of earnings (as defined in the plan) during the year immediately 6 7 preceding the occurrence of the circumstances giving rise to the Notice of Termination given in respect thereof; and where (y) equals the retirement pension (determined as a straight life annuity) to which you are entitled pursuant to the provisions of such plans; and to the extent pension and retirement benefits with respect to prior service is not vested, the amount to be so paid shall be increased by an amount equal to the current actuarial value such benefits would have if they were vested; and for purposes of this Section 4(c)(iii), "actuarial equivalent" shall be determined using the same methods and assumptions utilized under the Company's retirement plans and programs immediately prior to the Change in Control; (iv) the Company will permit you, by giving notice within 15 days after the Date of Termination, to purchase the Company car assigned to you, if any, for the lower of book value or low Blue Book; (v) the Company shall also pay to you all legal fees and expenses incurred by you as a result of such termination (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement); and (vi) unless you are terminated for Cause, the Company shall maintain or cause to be maintained in full force and effect, for your continued benefit, for a period of two years, all health and welfare benefit plans, including but not limited to life insurance, health insurance, dental insurance, executive financial planning, tax return preparation and executive health benefits in which you participated or were entitled to participate immediately prior to the Date of Termination, provided that your continued participation is possible under the general terms and provisions of such plans and programs. In the event that your participation in any such plan or program is barred, the Company shall arrange to provide you with benefits substantially similar to those which you are entitled to receive under such plans and programs. At the end of such 2-year period, you will be entitled to take advantage of any conversion privileges applicable to the benefits available under any such plans or programs. Benefits under this Section 4(c)(vi) all terminate if, during such 2-year period and at your sole option, you become employed on a full-time basis. (d) You shall not be required to mitigate the amount of any payment provided for in this Section 4 by seeking other employment or otherwise, nor shall the amount of any payment provided for in this Section 4 be reduced by any compensation earned by you as the result of employment by another employer after the Date of Termination, or otherwise. 5. Employment. Subject to your rights under Section 3(d), you agree to remain in the employ of the Company until the earlier of (i) December 31, 1997 or (ii) six (6) months after the occurrence of a Change in Control described in Section 2(v), 2(vi) or 2(vii). 7 8 6. Successors; Binding Agreement. (a) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to the Company, by agreement in form and substance satisfactory to you, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. (Notwithstanding the foregoing, if the succession constitutes a Change in Control, then the provisions hereof applicable in the event of a Change in Control shall apply with respect to the succession). Failure of the Company to obtain such agreement prior to the effectiveness of any succession shall be a breach of this Agreement and shall entitle you to compensation from the Company in the amount and on the same terms as you would be entitled hereunder if you terminated your employment for Good Reason, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this Section 6 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law, or otherwise. (b) This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributes, devisees and legatees. If you should die while any amount would be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, to your estate. 7. Notice. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States Registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notices to the Company shall be directed to the attention of the Board with a copy to the Secretary of the Company, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. 8. Miscellaneous. No provision of this Agreement may be modified waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by you and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the time or at any prior or subsequent time. No agreements or representations, oral or otherwise, expressed or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California. 8 9 9. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 10. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 11. Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in San Francisco, California, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction; provided, however, that you shall be entitled to seek specific performance of your right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement. If this letter correctly sets forth our agreement on the subject matter hereof, kindly sign and return to the Company the enclosed copy of this letter which will then constitute our agreement on this subject. Sincerely yours, /s/ John C. Harris John C. Harris Chairman of the Board of Directors Agreed to as of the date hereof: /s/ F. Jack Liebau - ------------------------------ F. Jack Liebau 9 EX-10.4 5 SEVERANCE AGRMT/MICHAEL SCALZO DATED 8/30/96 1 Exhibit 10.4 BAY MEADOWS OPERATING COMPANY Board of Directors August 30, 1996 Michael Scalzo Vice President - Operations Bay Meadows Operating Company 2600 S. Delaware Street San Mateo, California 94402 Dear Mr. Scalzo: Bay Meadows Operating Company (the "Company") considers it essential to the best interests of the Company and its shareholders to encourage the continuous employment of key management personnel. In this connection, the Board of Directors of the Company (the "Board") recognizes that, as is the case with many publicly held corporations, the possibility of a change in control may exist and that such possibility, and the uncertainty and questions which it may raise among management may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders. Accordingly, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company's top management, including yourself, to their assigned duties without distraction in the face of the potentially disturbing circumstances arising from the possibility of a disposition or other change in the structure of the Company. To persuade you to remain in the employ of the Company and in consideration of your agreement stated in Section 5, the Company agrees with you as follows: 1. Term and Operation of Agreement. This Agreement shall commence on the date hereof and shall continue in effect through December 31, 1997; provided, however, that commencing on January 1, 1998 and each January 1 thereafter, the term of this Agreement shall automatically be extended for one additional year unless, not later than June 30 of the preceding year, the Company shall have given notice that it does not wish to extend this Agreement; and provided further, that notwithstanding any such notice by the Company not to extend, this Agreement shall continue in effect for a period of twenty-four (24) months beyond the term provided herein if a "Change in Control" (as defined in Section 2) shall have occurred during such term. 2 2. Change in Control. For purposes of this Agreement, a "Change in Control" shall mean any one or more of the following: (i) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the Voting Securities of the Company outstanding immediately prior to such a merger or consolidation continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 90% of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; (ii) the stockholders of the Company approve a plan of complete liquidation of the Company, an agreement for the sale or disposition by the Company (in one transaction or a series of transactions) of all or substantially all the Company's assets, or a plan pursuant to which (in one transaction or a series of transactions) all or substantially all the Company's assets shall be transferred to a person (defined, for purposes of this Section 2, as such term is used in Sections 13(d) and 14(d) of the Securities and Exchange Act of 1934, as amended) not wholly owned by the Company (including but not limited to a plan pursuant to which all or substantially all of the Company's assets shall be transferred to a partnership not entirely owned by the Company); (iii) any person holds or comes to hold directly or indirectly 20% or more of the voting power entitled to elect the Company's directors, whether through "beneficial ownership" (defined, for purposes of this Section 2, as defined in Rule 13d-3 under such Act) of the Company's securities or otherwise, provided that the following acquisitions shall not constitute a Change in Control: (a) any acquisition directly from the Company (excluding an acquisition by virtue of the exercise of a conversion privilege), (b) any acquisition by the Company, or (c) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company; (iv) individuals who, as of the date hereof, constitute the Board of Directors (the "Incumbent Board") cease for any reasons to constitute at least a majority of the Board; provided, however, than any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then compromising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; 2 3 (v) the Company's Board of Directors shall authorize any action which if consummated would constitute a Change in Control; (vi) the Company shall enter into an agreement the consummation of which would result in the occurrence of a Change in Control; or (vii) the Company shall publicly announce an intention to take or to consider taking actions which if consummated would constitute a Change in Control. 3. Termination In Connection With or After Change in Control. (a) General. If, during the term of this Agreement, your employment terminates in connection with or after a Change in Control, you shall be entitled to the benefits provided in Section 4(c) unless such termination is (i) because of your death or Retirement, (ii) by the Company for Cause or Disability or (iii) by you other than for Good Reason. (b) Disability; Retirement. Termination by the Company of your employment based on "Disability" shall mean termination because of your absence from your duties with the Company on a full-time basis on account of physical or mental health conditions continued after the period for which you are entitled to continued employment under the Company's disability policy as in effect on the date hereof, unless within 30 days after Notice of Termination (as hereinafter defined) is given following such absence you shall have returned to the full-time performance of your duties. (Any termination on account of disability will be subject to your rights and benefits under such plan, and no purported Notice of Termination contrary to such plan will be deemed to commence the running of the 30-day period referred to in the preceding sentence or be considered a termination for Disability for any purpose.) Termination by the Company or you of your employment based on "Retirement" shall mean termination in accordance with the Company's retirement policy in effect on the date hereof, including (at your election, as set forth in writing) early retirement, generally applicable to its salaried employees or in accordance with any retirement arrangement established with your written consent with respect to you. (c) Cause. Termination by the Company of your employment for "Cause" shall mean termination upon (i) the willful and continued failure by you to substantially perform your duties with the Company (other than any such failure resulting from your incapacity due to physical or mental illness or any such actual or anticipated failure resulting from your termination for Good Reason), after a demand for substantial performance is delivered to you by the Board which specifically identifies the manner in which the Board believes that you have not substantially performed your duties, or (ii) the willful engaging by you in conduct which is demonstrably and materially injurious to the Company, monetarily or otherwise. 3 4 For purposes of this paragraph, no act, or failure to act, on your part shall be considered "willful" unless done, or omitted to be done, by you in bad faith and without reasonable belief that your action or omission was in the best interest of the Company. Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to you a copy of resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for the purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of conduct set forth above in Section 3(c)(i) or (ii) and specifying the particulars thereof in detail. (d) Good Reason. You shall be entitled to terminate your employment for Good Reason. For purposes of this Agreement, "Good Reason" shall mean any of the following, unless you have given your express written consent thereto: (i) the assignment to you of any duties inconsistent with your then-existing position, duties and status with the Company; a substantial alteration in the nature or status of your then-existing responsibilities; the failure to provide you with substantially the same perquisites which you then had, including but not limited to your office and appropriate support services; or a change in your then-existing titles or offices, or any removal of you from or any failure to re-elect you to any of such positions; (ii) a reduction by the Company in your base salary as in effect on the date of this Agreement or as the same may be increased from time to time; (iii) the Company's either requiring you to be based anywhere other than the San Mateo area where your office is located at the date of this Agreement, except for required travel on the Company's business to an extent substantially consistent with your present business travel obligations, or the Company's transferring or merging its racing operations to or with those at Golden Gate Fields; (iv) the failure by the Company to continue in effect any benefit, pension or compensation plan, savings and profit sharing plan, life insurance plan, medical insurance plan or health-and-accident plan (including, without limitation, the California Race Track Pension Plan) in which you are participating, or in which you are entitled to participate, at the date hereof (or plans providing you with substantially similar benefits); the taking of any action by the Company which would adversely affect your participation in or materially reduce your benefits under any of such plans or deprive you of any material fringe benefit enjoyed by you, or to which you are entitled, at the date of this Agreement; or the failure by the Company to provide you with the number of paid vacation days to which you are entitled in accordance with the Company's vacation policy in effect on the date hereof; (v) the failure by the Company to obtain the written assumption of this Agreement by any successor as contemplated in Section 6; 4 5 (vi) any purported termination of your employment by the Company which does not satisfy the requirements of this Agreement; and for purposes of this Agreement, no such purported termination shall be effective; or (vii) if the Change in Control is one described in Sections 2(iv) through (v), you shall give Notice of Termination within 9 months after the effectiveness of such Change in Control stating that you have determined, in your sole discretion, to terminate your employment. Your right to terminate your employment pursuant to this Section 3(d) shall not be affected by your incapacity due to physical or mental illness. (e) Notice of Termination. Any purported termination by the Company pursuant to Section 3(b) or (c) or by you pursuant to Section 3(d) shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 7. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated. (f) Date of Termination. "Date of Termination" shall mean (A) if your employment is terminated for Disability, 30 days after Notice of Termination is given (provided that you shall not have returned to the performance of your duties on a full-time basis during such 30-day period), and (B) if your employment is terminated pursuant to Section 3(c) or (d) or for any other reason, the date specified in the Notice of Termination (which, in the case of a termination pursuant to Section 3(c) shall not be less than 30 days, and in the case of a termination pursuant to Section 3(d) shall not be more than 60 days, from the date such Notice of Termination is given); provided that if within 30 days after any Notice of Termination is given the party receiving such Notice of Termination notified the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, by a binding and final arbitration award or by a final judgment, order or a decree of a court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected); and provided further that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. Notwithstanding the pendency of any such dispute, the Company will continue to pay you your full compensation in effect when the notice of dispute was given (including, but not limited to, base salary, bonus and incentive compensation), and continue you as a participant in all compensation, benefit and insurance plans in which you were participating when the notice of dispute was given, until the dispute is finally resolved in accordance with this Section 3(f). Amounts paid under this Section 3(f) are in addition to all other amounts due under this Agreement and shall not be offset against or reduce any other amounts due under this Agreement. 5 6 4. Compensation Upon Termination or During Disability. (a) During any period that you fail to perform your duties hereunder as a result of incapacity due to physical or mental illness, you shall continue to receive benefits not less than those payable under the Company's disability plans in effect on the date hereof. (b) If your employment shall be terminated for Cause, the Company shall pay you your full base salary, and accrued vacation and personal holidays, through the Date of Termination at the rate in effect at the time Notice of Termination is given and the Company shall have no further obligation to you under this Agreement. (c) The benefits referred to in Section 3(a) are as follows: (i) the Company shall pay you your full base salary, and accrued vacation and personal holidays through the Date of Termination at the highest rate in effect at any time during the 12 months immediately preceding the occurrence of the circumstances giving rise to the Notice of Termination given in respect thereof; (ii) in lieu of any further salary payments to you for periods subsequent to the Date of Termination, the Company shall pay as severance pay to you, not later than the fifth day following the Date of Termination, a lump sum severance payment equal to the sum of (A) your annual base salary (including, without limitation, any portion you elected to defer to a plan maintained by the Company or otherwise) at the highest rate in effect at any time during the 12 months immediately preceding the occurrence of the circumstances giving rise to the Notice of Termination given in respect thereof, and (B) the amount of any bonus and other incentive compensation of any kind paid to you (x) during the 12 months immediately preceding that in which the Date of Termination occurs, or (y) in calendar year 1996, whichever is higher; (iii) in addition to the retirement benefits to which you are entitled under any pension or retirement plan, the Company shall, as directed by you, either (A) continue to designate you as an employee under the plan through January 1, 1998 and through such date make contributions to the plan based on your annual base salary at the highest rate in effect at any time during the 12 months immediately preceding the occurrence of the circumstances giving rise to the Notice of Termination given in respect thereof, or (B) pay to you in one sum in cash not later than the fifth day following the Date of Termination, an amount equal to the actuarial equivalent to the excess of (x) over (y), where (x) equals the retirement pension (determined as a straight life annuity) to which you would have been entitled under the terms of the plan (without regard to (1) any limitation on the amount used in the calculation of the regular pension thereunder, (2) any offset thereunder for severance allowances payable hereunder or (3) any amendment to the plan made subsequent to a Change in Control, which amendment adversely affects in any manner the computation of retirement benefits under the applicable plans), determined as if you were fully vested thereunder and had accumulated (after any termination pursuant to Section 3) two additional years of continuous service thereunder at your highest rate of earnings (as defined in the plan) during the year immediately 6 7 preceding the occurrence of the circumstances giving rise to the Notice of Termination given in respect thereof; and where (y) equals the retirement pension (determined as a straight life annuity) to which you are entitled pursuant to the provisions of such plans; and to the extent pension and retirement benefits with respect to prior service is not vested, the amount to be so paid shall be increased by an amount equal to the current actuarial value such benefits would have if they were vested; and for purposes of this Section 4(c)(iii), "actuarial equivalent" shall be determined using the same methods and assumptions utilized under the Company's retirement plans and programs immediately prior to the Change in Control; (iv) the Company will permit you, by giving notice within 15 days after the Date of Termination, to purchase the Company car assigned to you, if any, for the lower of book value or low Blue Book; (v) the Company shall also pay to you all legal fees and expenses incurred by you as a result of such termination (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement); and (vi) unless you are terminated for Cause, the Company shall maintain or cause to be maintained in full force and effect, for your continued benefit, for a period of two years, all health and welfare benefit plans, including but not limited to life insurance, health insurance, dental insurance, executive financial planning, tax return preparation and executive health benefits in which you participated or were entitled to participate immediately prior to the Date of Termination, provided that your continued participation is possible under the general terms and provisions of such plans and programs. In the event that your participation in any such plan or program is barred, the Company shall arrange to provide you with benefits substantially similar to those which you are entitled to receive under such plans and programs. At the end of such 2-year period, you will be entitled to take advantage of any conversion privileges applicable to the benefits available under any such plans or programs. Benefits under this Section 4(c)(vi) all terminate if, during such 2-year period and at your sole option, you become employed on a full-time basis. (d) You shall not be required to mitigate the amount of any payment provided for in this Section 4 by seeking other employment or otherwise, nor shall the amount of any payment provided for in this Section 4 be reduced by any compensation earned by you as the result of employment by another employer after the Date of Termination, or otherwise. 5. Employment. Subject to your rights under Section 3(d), you agree to remain in the employ of the Company until the earlier of (i) December 31, 1997 or (ii) six (6) months after the occurrence of a Change in Control described in Section 2(v), 2(vi) or 2(vii). 7 8 6. Successors; Binding Agreement. (a) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to the Company, by agreement in form and substance satisfactory to you, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. (Notwithstanding the foregoing, if the succession constitutes a Change in Control, then the provisions hereof applicable in the event of a Change in Control shall apply with respect to the succession). Failure of the Company to obtain such agreement prior to the effectiveness of any succession shall be a breach of this Agreement and shall entitle you to compensation from the Company in the amount and on the same terms as you would be entitled hereunder if you terminated your employment for Good Reason, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this Section 6 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law, or otherwise. (b) This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributes, devisees and legatees. If you should die while any amount would be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, to your estate. 7. Notice. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States Registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notices to the Company shall be directed to the attention of the Board with a copy to the Secretary of the Company, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. 8. Miscellaneous. No provision of this Agreement may be modified waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by you and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the time or at any prior or subsequent time. No agreements or representations, oral or otherwise, expressed or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California. 8 9 9. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 10. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 11. Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in San Francisco, California, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction; provided, however, that you shall be entitled to seek specific performance of your right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement. If this letter correctly sets forth our agreement on the subject matter hereof, kindly sign and return to the Company the enclosed copy of this letter which will then constitute our agreement on this subject. Sincerely yours, /s/ John C. Harris John C. Harris Chairman of the Board of Directors Agreed to as of the date hereof: /s/ Michael Scalzo - ------------------------------ Michael Scalzo 9 EX-10.5 6 SEVERANCE AGRMT/FRANK TRIGEIRO DATED 8/30/96 1 Exhibit 10.5 BAY MEADOWS OPERATING COMPANY Board of Directors August 30, 1996 Frank Trigeiro Chief Financial Officer and Vice President- Finance Bay Meadows Operating Company 2600 S. Delaware Street San Mateo, California 94402 Dear Mr. Trigeiro: Bay Meadows Operating Company (the "Company") considers it essential to the best interests of the Company and its shareholders to encourage the continuous employment of key management personnel. In this connection, the Board of Directors of the Company (the "Board") recognizes that, as is the case with many publicly held corporations, the possibility of a change in control may exist and that such possibility, and the uncertainty and questions which it may raise among management may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders. Accordingly, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company's top management, including yourself, to their assigned duties without distraction in the face of the potentially disturbing circumstances arising from the possibility of a disposition or other change in the structure of the Company. To persuade you to remain in the employ of the Company and in consideration of your agreement stated in Section 5, the Company agrees with you as follows: 1. Term and Operation of Agreement. This Agreement shall commence on the date hereof and shall continue in effect through December 31, 1997; provided, however, that commencing on January 1, 1998 and each January 1 thereafter, the term of this Agreement shall automatically be extended for one additional year unless, not later than June 30 of the preceding year, the Company shall have given notice that it does not wish to extend this Agreement; and provided further, that notwithstanding any such notice by the Company not to extend, this Agreement shall continue in effect for a period of twenty-four (24) months beyond the term provided herein if a "Change in Control" (as defined in Section 2) shall have occurred during such term. 2 2. Change in Control. For purposes of this Agreement, a "Change in Control" shall mean any one or more of the following: (i) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the Voting Securities of the Company outstanding immediately prior to such a merger or consolidation continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 90% of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; (ii) the stockholders of the Company approve a plan of complete liquidation of the Company, an agreement for the sale or disposition by the Company (in one transaction or a series of transactions) of all or substantially all the Company's assets, or a plan pursuant to which (in one transaction or a series of transactions) all or substantially all the Company's assets shall be transferred to a person (defined, for purposes of this Section 2, as such term is used in Sections 13(d) and 14(d) of the Securities and Exchange Act of 1934, as amended) not wholly owned by the Company (including but not limited to a plan pursuant to which all or substantially all of the Company's assets shall be transferred to a partnership not entirely owned by the Company); (iii) any person holds or comes to hold directly or indirectly 20% or more of the voting power entitled to elect the Company's directors, whether through "beneficial ownership" (defined, for purposes of this Section 2, as defined in Rule 13d-3 under such Act) of the Company's securities or otherwise, provided that the following acquisitions shall not constitute a Change in Control: (a) any acquisition directly from the Company (excluding an acquisition by virtue of the exercise of a conversion privilege), (b) any acquisition by the Company, or (c) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company; (iv) individuals who, as of the date hereof, constitute the Board of Directors (the "Incumbent Board") cease for any reasons to constitute at least a majority of the Board; provided, however, than any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then compromising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; 2 3 (v) the Company's Board of Directors shall authorize any action which if consummated would constitute a Change in Control; (vi) the Company shall enter into an agreement the consummation of which would result in the occurrence of a Change in Control; or (vii) the Company shall publicly announce an intention to take or to consider taking actions which if consummated would constitute a Change in Control. 3. Termination In Connection With or After Change in Control. (a) General. If, during the term of this Agreement, your employment terminates in connection with or after a Change in Control, you shall be entitled to the benefits provided in Section 4(c) unless such termination is (i) because of your death or Retirement, (ii) by the Company for Cause or Disability or (iii) by you other than for Good Reason. (b) Disability; Retirement. Termination by the Company of your employment based on "Disability" shall mean termination because of your absence from your duties with the Company on a full-time basis on account of physical or mental health conditions continued after the period for which you are entitled to continued employment under the Company's disability policy as in effect on the date hereof, unless within 30 days after Notice of Termination (as hereinafter defined) is given following such absence you shall have returned to the full-time performance of your duties. (Any termination on account of disability will be subject to your rights and benefits under such plan, and no purported Notice of Termination contrary to such plan will be deemed to commence the running of the 30-day period referred to in the preceding sentence or be considered a termination for Disability for any purpose.) Termination by the Company or you of your employment based on "Retirement" shall mean termination in accordance with the Company's retirement policy in effect on the date hereof, including (at your election, as set forth in writing) early retirement, generally applicable to its salaried employees or in accordance with any retirement arrangement established with your written consent with respect to you. (c) Cause. Termination by the Company of your employment for "Cause" shall mean termination upon (i) the willful and continued failure by you to substantially perform your duties with the Company (other than any such failure resulting from your incapacity due to physical or mental illness or any such actual or anticipated failure resulting from your termination for Good Reason), after a demand for substantial performance is delivered to you by the Board which specifically identifies the manner in which the Board believes that you have not substantially performed your duties, or (ii) the willful engaging by you in conduct which is demonstrably and materially injurious to the Company, monetarily or otherwise. 3 4 For purposes of this paragraph, no act, or failure to act, on your part shall be considered "willful" unless done, or omitted to be done, by you in bad faith and without reasonable belief that your action or omission was in the best interest of the Company. Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to you a copy of resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for the purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of conduct set forth above in Section 3(c)(i) or (ii) and specifying the particulars thereof in detail. (d) Good Reason. You shall be entitled to terminate your employment for Good Reason. For purposes of this Agreement, "Good Reason" shall mean any of the following, unless you have given your express written consent thereto: (i) the assignment to you of any duties inconsistent with your then-existing position, duties and status with the Company; a substantial alteration in the nature or status of your then-existing responsibilities; the failure to provide you with substantially the same perquisites which you then had, including but not limited to your office and appropriate support services; or a change in your then-existing titles or offices, or any removal of you from or any failure to re-elect you to any of such positions; (ii) a reduction by the Company in your base salary as in effect on the date of this Agreement or as the same may be increased from time to time; (iii) the Company's either requiring you to be based anywhere other than the San Mateo area where your office is located at the date of this Agreement, except for required travel on the Company's business to an extent substantially consistent with your present business travel obligations, or the Company's transferring or merging its racing operations to or with those at Golden Gate Fields; (iv) the failure by the Company to continue in effect any benefit, pension or compensation plan, savings and profit sharing plan, life insurance plan, medical insurance plan or health-and-accident plan (including, without limitation, the California Race Track Pension Plan) in which you are participating, or in which you are entitled to participate, at the date hereof (or plans providing you with substantially similar benefits); the taking of any action by the Company which would adversely affect your participation in or materially reduce your benefits under any of such plans or deprive you of any material fringe benefit enjoyed by you, or to which you are entitled, at the date of this Agreement; or the failure by the Company to provide you with the number of paid vacation days to which you are entitled in accordance with the Company's vacation policy in effect on the date hereof; (v) the failure by the Company to obtain the written assumption of this Agreement by any successor as contemplated in Section 6; 4 5 (vi) any purported termination of your employment by the Company which does not satisfy the requirements of this Agreement; and for purposes of this Agreement, no such purported termination shall be effective; or (vii) if the Change in Control is one described in Sections 2(iv) through (v), you shall give Notice of Termination within 9 months after the effectiveness of such Change in Control stating that you have determined, in your sole discretion, to terminate your employment. Your right to terminate your employment pursuant to this Section 3(d) shall not be affected by your incapacity due to physical or mental illness. (e) Notice of Termination. Any purported termination by the Company pursuant to Section 3(b) or (c) or by you pursuant to Section 3(d) shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 7. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated. (f) Date of Termination. "Date of Termination" shall mean (A) if your employment is terminated for Disability, 30 days after Notice of Termination is given (provided that you shall not have returned to the performance of your duties on a full-time basis during such 30-day period), and (B) if your employment is terminated pursuant to Section 3(c) or (d) or for any other reason, the date specified in the Notice of Termination (which, in the case of a termination pursuant to Section 3(c) shall not be less than 30 days, and in the case of a termination pursuant to Section 3(d) shall not be more than 60 days, from the date such Notice of Termination is given); provided that if within 30 days after any Notice of Termination is given the party receiving such Notice of Termination notified the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, by a binding and final arbitration award or by a final judgment, order or a decree of a court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected); and provided further that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. Notwithstanding the pendency of any such dispute, the Company will continue to pay you your full compensation in effect when the notice of dispute was given (including, but not limited to, base salary, bonus and incentive compensation), and continue you as a participant in all compensation, benefit and insurance plans in which you were participating when the notice of dispute was given, until the dispute is finally resolved in accordance with this Section 3(f). Amounts paid under this Section 3(f) are in addition to all other amounts due under this Agreement and shall not be offset against or reduce any other amounts due under this Agreement. 5 6 4. Compensation Upon Termination or During Disability. (a) During any period that you fail to perform your duties hereunder as a result of incapacity due to physical or mental illness, you shall continue to receive benefits not less than those payable under the Company's disability plans in effect on the date hereof. (b) If your employment shall be terminated for Cause, the Company shall pay you your full base salary, and accrued vacation and personal holidays, through the Date of Termination at the rate in effect at the time Notice of Termination is given and the Company shall have no further obligation to you under this Agreement. (c) The benefits referred to in Section 3(a) are as follows: (i) the Company shall pay you your full base salary, and accrued vacation and personal holidays through the Date of Termination at the highest rate in effect at any time during the 12 months immediately preceding the occurrence of the circumstances giving rise to the Notice of Termination given in respect thereof; (ii) in lieu of any further salary payments to you for periods subsequent to the Date of Termination, the Company shall pay as severance pay to you, not later than the fifth day following the Date of Termination, a lump sum severance payment equal to the sum of (A) your annual base salary (including, without limitation, any portion you elected to defer to a plan maintained by the Company or otherwise) at the highest rate in effect at any time during the 12 months immediately preceding the occurrence of the circumstances giving rise to the Notice of Termination given in respect thereof, and (B) the amount of any bonus and other incentive compensation of any kind paid to you (x) during the 12 months immediately preceding that in which the Date of Termination occurs, or (y) in calendar year 1996, whichever is higher; (iii) in addition to the retirement benefits to which you are entitled under any pension or retirement plan, the Company shall, as directed by you, either (A) continue to designate you as an employee under the plan through January 1, 1998 and through such date make contributions to the plan based on your annual base salary at the highest rate in effect at any time during the 12 months immediately preceding the occurrence of the circumstances giving rise to the Notice of Termination given in respect thereof, or (B) pay to you in one sum in cash not later than the fifth day following the Date of Termination, an amount equal to the actuarial equivalent to the excess of (x) over (y), where (x) equals the retirement pension (determined as a straight life annuity) to which you would have been entitled under the terms of the plan (without regard to (1) any limitation on the amount used in the calculation of the regular pension thereunder, (2) any offset thereunder for severance allowances payable hereunder or (3) any amendment to the plan made subsequent to a Change in Control, which amendment adversely affects in any manner the computation of retirement benefits under the applicable plans), determined as if you were fully vested thereunder and had accumulated (after any termination pursuant to Section 3) two additional years of continuous service thereunder at your highest rate of earnings (as defined in the plan) during the year immediately 6 7 preceding the occurrence of the circumstances giving rise to the Notice of Termination given in respect thereof; and where (y) equals the retirement pension (determined as a straight life annuity) to which you are entitled pursuant to the provisions of such plans; and to the extent pension and retirement benefits with respect to prior service is not vested, the amount to be so paid shall be increased by an amount equal to the current actuarial value such benefits would have if they were vested; and for purposes of this Section 4(c)(iii), "actuarial equivalent" shall be determined using the same methods and assumptions utilized under the Company's retirement plans and programs immediately prior to the Change in Control; (iv) the Company will permit you, by giving notice within 15 days after the Date of Termination, to purchase the Company car assigned to you, if any, for the lower of book value or low Blue Book; (v) the Company shall also pay to you all legal fees and expenses incurred by you as a result of such termination (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement); and (vi) unless you are terminated for Cause, the Company shall maintain or cause to be maintained in full force and effect, for your continued benefit, for a period of two years, all health and welfare benefit plans, including but not limited to life insurance, health insurance, dental insurance, executive financial planning, tax return preparation and executive health benefits in which you participated or were entitled to participate immediately prior to the Date of Termination, provided that your continued participation is possible under the general terms and provisions of such plans and programs. In the event that your participation in any such plan or program is barred, the Company shall arrange to provide you with benefits substantially similar to those which you are entitled to receive under such plans and programs. At the end of such 2-year period, you will be entitled to take advantage of any conversion privileges applicable to the benefits available under any such plans or programs. Benefits under this Section 4(c)(vi) all terminate if, during such 2-year period and at your sole option, you become employed on a full-time basis. (d) You shall not be required to mitigate the amount of any payment provided for in this Section 4 by seeking other employment or otherwise, nor shall the amount of any payment provided for in this Section 4 be reduced by any compensation earned by you as the result of employment by another employer after the Date of Termination, or otherwise. 5. Employment. Subject to your rights under Section 3(d), you agree to remain in the employ of the Company until the earlier of (i) December 31, 1997 or (ii) six (6) months after the occurrence of a Change in Control described in Section 2(v), 2(vi) or 2(vii). 7 8 6. Successors; Binding Agreement. (a) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to the Company, by agreement in form and substance satisfactory to you, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. (Notwithstanding the foregoing, if the succession constitutes a Change in Control, then the provisions hereof applicable in the event of a Change in Control shall apply with respect to the succession). Failure of the Company to obtain such agreement prior to the effectiveness of any succession shall be a breach of this Agreement and shall entitle you to compensation from the Company in the amount and on the same terms as you would be entitled hereunder if you terminated your employment for Good Reason, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this Section 6 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law, or otherwise. (b) This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributes, devisees and legatees. If you should die while any amount would be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, to your estate. 7. Notice. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States Registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notices to the Company shall be directed to the attention of the Board with a copy to the Secretary of the Company, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. 8. Miscellaneous. No provision of this Agreement may be modified waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by you and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the time or at any prior or subsequent time. No agreements or representations, oral or otherwise, expressed or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California. 8 9 9. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 10. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 11. Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in San Francisco, California, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction; provided, however, that you shall be entitled to seek specific performance of your right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement. If this letter correctly sets forth our agreement on the subject matter hereof, kindly sign and return to the Company the enclosed copy of this letter which will then constitute our agreement on this subject. Sincerely yours, /s/ John C. Harris John C. Harris Chairman of the Board of Directors Agreed to as of the date hereof: /s/ Frank Trigeiro - ------------------------------ Frank Trigeiro 9 EX-10.6 7 SEVERANCE AGRMT/NATHANIEL WESS DATED 8/30/96 1 Exhibit 10.6 BAY MEADOWS OPERATING COMPANY Board of Directors August 30, 1996 Nathaniel Wess Vice President Bay Meadows Operating Company 2600 S. Delaware Street San Mateo, California 94402 Dear Mr. Wess: Bay Meadows Operating Company (the "Company") considers it essential to the best interests of the Company and its shareholders to encourage the continuous employment of key management personnel. In this connection, the Board of Directors of the Company (the "Board") recognizes that, as is the case with many publicly held corporations, the possibility of a change in control may exist and that such possibility, and the uncertainty and questions which it may raise among management may result in the departure or distraction of management personnel to the detriment of the Company and its stockholders. Accordingly, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company's top management, including yourself, to their assigned duties without distraction in the face of the potentially disturbing circumstances arising from the possibility of a disposition or other change in the structure of the Company. To persuade you to remain in the employ of the Company and in consideration of your agreement stated in Section 5, the Company agrees with you as follows: 1. Term and Operation of Agreement. This Agreement shall commence on the date hereof and shall continue in effect through December 31, 1997; provided, however, that commencing on January 1, 1998 and each January 1 thereafter, the term of this Agreement shall automatically be extended for one additional year unless, not later than June 30 of the preceding year, the Company shall have given notice that it does not wish to extend this Agreement; and provided further, that notwithstanding any such notice by the Company not to extend, this Agreement shall continue in effect for a period of twenty-four (24) months beyond the term provided herein if a "Change in Control" (as defined in Section 2) shall have occurred during such term. 2 2. Change in Control. For purposes of this Agreement, a "Change in Control" shall mean any one or more of the following: (i) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the Voting Securities of the Company outstanding immediately prior to such a merger or consolidation continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 90% of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; (ii) the stockholders of the Company approve a plan of complete liquidation of the Company, an agreement for the sale or disposition by the Company (in one transaction or a series of transactions) of all or substantially all the Company's assets, or a plan pursuant to which (in one transaction or a series of transactions) all or substantially all the Company's assets shall be transferred to a person (defined, for purposes of this Section 2, as such term is used in Sections 13(d) and 14(d) of the Securities and Exchange Act of 1934, as amended) not wholly owned by the Company (including but not limited to a plan pursuant to which all or substantially all of the Company's assets shall be transferred to a partnership not entirely owned by the Company); (iii) any person holds or comes to hold directly or indirectly 20% or more of the voting power entitled to elect the Company's directors, whether through "beneficial ownership" (defined, for purposes of this Section 2, as defined in Rule 13d-3 under such Act) of the Company's securities or otherwise, provided that the following acquisitions shall not constitute a Change in Control: (a) any acquisition directly from the Company (excluding an acquisition by virtue of the exercise of a conversion privilege), (b) any acquisition by the Company, or (c) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company; (iv) individuals who, as of the date hereof, constitute the Board of Directors (the "Incumbent Board") cease for any reasons to constitute at least a majority of the Board; provided, however, than any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then compromising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; 2 3 (v) the Company's Board of Directors shall authorize any action which if consummated would constitute a Change in Control; (vi) the Company shall enter into an agreement the consummation of which would result in the occurrence of a Change in Control; or (vii) the Company shall publicly announce an intention to take or to consider taking actions which if consummated would constitute a Change in Control. 3. Termination In Connection With or After Change in Control. (a) General. If, during the term of this Agreement, your employment terminates in connection with or after a Change in Control, you shall be entitled to the benefits provided in Section 4(c) unless such termination is (i) because of your death or Retirement, (ii) by the Company for Cause or Disability or (iii) by you other than for Good Reason. (b) Disability; Retirement. Termination by the Company of your employment based on "Disability" shall mean termination because of your absence from your duties with the Company on a full-time basis on account of physical or mental health conditions continued after the period for which you are entitled to continued employment under the Company's disability policy as in effect on the date hereof, unless within 30 days after Notice of Termination (as hereinafter defined) is given following such absence you shall have returned to the full-time performance of your duties. (Any termination on account of disability will be subject to your rights and benefits under such plan, and no purported Notice of Termination contrary to such plan will be deemed to commence the running of the 30-day period referred to in the preceding sentence or be considered a termination for Disability for any purpose.) Termination by the Company or you of your employment based on "Retirement" shall mean termination in accordance with the Company's retirement policy in effect on the date hereof, including (at your election, as set forth in writing) early retirement, generally applicable to its salaried employees or in accordance with any retirement arrangement established with your written consent with respect to you. (c) Cause. Termination by the Company of your employment for "Cause" shall mean termination upon (i) the willful and continued failure by you to substantially perform your duties with the Company (other than any such failure resulting from your incapacity due to physical or mental illness or any such actual or anticipated failure resulting from your termination for Good Reason), after a demand for substantial performance is delivered to you by the Board which specifically identifies the manner in which the Board believes that you have not substantially performed your duties, or (ii) the willful engaging by you in conduct which is demonstrably and materially injurious to the Company, monetarily or otherwise. 3 4 For purposes of this paragraph, no act, or failure to act, on your part shall be considered "willful" unless done, or omitted to be done, by you in bad faith and without reasonable belief that your action or omission was in the best interest of the Company. Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to you a copy of resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for the purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of conduct set forth above in Section 3(c)(i) or (ii) and specifying the particulars thereof in detail. (d) Good Reason. You shall be entitled to terminate your employment for Good Reason. For purposes of this Agreement, "Good Reason" shall mean any of the following, unless you have given your express written consent thereto: (i) the assignment to you of any duties inconsistent with your then-existing position, duties and status with the Company; a substantial alteration in the nature or status of your then-existing responsibilities; the failure to provide you with substantially the same perquisites which you then had, including but not limited to your office and appropriate support services; or a change in your then-existing titles or offices, or any removal of you from or any failure to re-elect you to any of such positions; (ii) a reduction by the Company in your base salary as in effect on the date of this Agreement or as the same may be increased from time to time; (iii) the Company's either requiring you to be based anywhere other than the San Mateo area where your office is located at the date of this Agreement, except for required travel on the Company's business to an extent substantially consistent with your present business travel obligations, or the Company's transferring or merging its racing operations to or with those at Golden Gate Fields; (iv) the failure by the Company to continue in effect any benefit, pension or compensation plan, savings and profit sharing plan, life insurance plan, medical insurance plan or health-and-accident plan (including, without limitation, the California Race Track Pension Plan) in which you are participating, or in which you are entitled to participate, at the date hereof (or plans providing you with substantially similar benefits); the taking of any action by the Company which would adversely affect your participation in or materially reduce your benefits under any of such plans or deprive you of any material fringe benefit enjoyed by you, or to which you are entitled, at the date of this Agreement; or the failure by the Company to provide you with the number of paid vacation days to which you are entitled in accordance with the Company's vacation policy in effect on the date hereof; (v) the failure by the Company to obtain the written assumption of this Agreement by any successor as contemplated in Section 6; 4 5 (vi) any purported termination of your employment by the Company which does not satisfy the requirements of this Agreement; and for purposes of this Agreement, no such purported termination shall be effective; or (vii) if the Change in Control is one described in Sections 2(iv) through (v), you shall give Notice of Termination within 9 months after the effectiveness of such Change in Control stating that you have determined, in your sole discretion, to terminate your employment. Your right to terminate your employment pursuant to this Section 3(d) shall not be affected by your incapacity due to physical or mental illness. (e) Notice of Termination. Any purported termination by the Company pursuant to Section 3(b) or (c) or by you pursuant to Section 3(d) shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 7. For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated. (f) Date of Termination. "Date of Termination" shall mean (A) if your employment is terminated for Disability, 30 days after Notice of Termination is given (provided that you shall not have returned to the performance of your duties on a full-time basis during such 30-day period), and (B) if your employment is terminated pursuant to Section 3(c) or (d) or for any other reason, the date specified in the Notice of Termination (which, in the case of a termination pursuant to Section 3(c) shall not be less than 30 days, and in the case of a termination pursuant to Section 3(d) shall not be more than 60 days, from the date such Notice of Termination is given); provided that if within 30 days after any Notice of Termination is given the party receiving such Notice of Termination notified the other party that a dispute exists concerning the termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, by a binding and final arbitration award or by a final judgment, order or a decree of a court of competent jurisdiction (the time for appeal therefrom having expired and no appeal having been perfected); and provided further that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. Notwithstanding the pendency of any such dispute, the Company will continue to pay you your full compensation in effect when the notice of dispute was given (including, but not limited to, base salary, bonus and incentive compensation), and continue you as a participant in all compensation, benefit and insurance plans in which you were participating when the notice of dispute was given, until the dispute is finally resolved in accordance with this Section 3(f). Amounts paid under this Section 3(f) are in addition to all other amounts due under this Agreement and shall not be offset against or reduce any other amounts due under this Agreement. 5 6 4. Compensation Upon Termination or During Disability. (a) During any period that you fail to perform your duties hereunder as a result of incapacity due to physical or mental illness, you shall continue to receive benefits not less than those payable under the Company's disability plans in effect on the date hereof. (b) If your employment shall be terminated for Cause, the Company shall pay you your full base salary, and accrued vacation and personal holidays, through the Date of Termination at the rate in effect at the time Notice of Termination is given and the Company shall have no further obligation to you under this Agreement. (c) The benefits referred to in Section 3(a) are as follows: (i) the Company shall pay you your full base salary, and accrued vacation and personal holidays through the Date of Termination at the highest rate in effect at any time during the 12 months immediately preceding the occurrence of the circumstances giving rise to the Notice of Termination given in respect thereof; (ii) in lieu of any further salary payments to you for periods subsequent to the Date of Termination, the Company shall pay as severance pay to you, not later than the fifth day following the Date of Termination, a lump sum severance payment equal to the sum of (A) your annual base salary (including, without limitation, any portion you elected to defer to a plan maintained by the Company or otherwise) at the highest rate in effect at any time during the 12 months immediately preceding the occurrence of the circumstances giving rise to the Notice of Termination given in respect thereof, and (B) the amount of any bonus and other incentive compensation of any kind paid to you (x) during the 12 months immediately preceding that in which the Date of Termination occurs, or (y) in calendar year 1996, whichever is higher; (iii) in addition to the retirement benefits to which you are entitled under any pension or retirement plan, the Company shall, as directed by you, either (A) continue to designate you as an employee under the plan through January 1, 1998 and through such date make contributions to the plan based on your annual base salary at the highest rate in effect at any time during the 12 months immediately preceding the occurrence of the circumstances giving rise to the Notice of Termination given in respect thereof, or (B) pay to you in one sum in cash not later than the fifth day following the Date of Termination, an amount equal to the actuarial equivalent to the excess of (x) over (y), where (x) equals the retirement pension (determined as a straight life annuity) to which you would have been entitled under the terms of the plan (without regard to (1) any limitation on the amount used in the calculation of the regular pension thereunder, (2) any offset thereunder for severance allowances payable hereunder or (3) any amendment to the plan made subsequent to a Change in Control, which amendment adversely affects in any manner the computation of retirement benefits under the applicable plans), determined as if you were fully vested thereunder and had accumulated (after any termination pursuant to Section 3) two additional years of continuous service thereunder at your highest rate of earnings (as defined in the plan) during the year immediately 6 7 preceding the occurrence of the circumstances giving rise to the Notice of Termination given in respect thereof; and where (y) equals the retirement pension (determined as a straight life annuity) to which you are entitled pursuant to the provisions of such plans; and to the extent pension and retirement benefits with respect to prior service is not vested, the amount to be so paid shall be increased by an amount equal to the current actuarial value such benefits would have if they were vested; and for purposes of this Section 4(c)(iii), "actuarial equivalent" shall be determined using the same methods and assumptions utilized under the Company's retirement plans and programs immediately prior to the Change in Control; (iv) the Company will permit you, by giving notice within 15 days after the Date of Termination, to purchase the Company car assigned to you, if any, for the lower of book value or low Blue Book; (v) the Company shall also pay to you all legal fees and expenses incurred by you as a result of such termination (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement); and (vi) unless you are terminated for Cause, the Company shall maintain or cause to be maintained in full force and effect, for your continued benefit, for a period of two years, all health and welfare benefit plans, including but not limited to life insurance, health insurance, dental insurance, executive financial planning, tax return preparation and executive health benefits in which you participated or were entitled to participate immediately prior to the Date of Termination, provided that your continued participation is possible under the general terms and provisions of such plans and programs. In the event that your participation in any such plan or program is barred, the Company shall arrange to provide you with benefits substantially similar to those which you are entitled to receive under such plans and programs. At the end of such 2-year period, you will be entitled to take advantage of any conversion privileges applicable to the benefits available under any such plans or programs. Benefits under this Section 4(c)(vi) all terminate if, during such 2-year period and at your sole option, you become employed on a full-time basis. (d) You shall not be required to mitigate the amount of any payment provided for in this Section 4 by seeking other employment or otherwise, nor shall the amount of any payment provided for in this Section 4 be reduced by any compensation earned by you as the result of employment by another employer after the Date of Termination, or otherwise. 5. Employment. Subject to your rights under Section 3(d), you agree to remain in the employ of the Company until the earlier of (i) December 31, 1997 or (ii) six (6) months after the occurrence of a Change in Control described in Section 2(v), 2(vi) or 2(vii). 7 8 6. Successors; Binding Agreement. (a) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to the Company, by agreement in form and substance satisfactory to you, to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. (Notwithstanding the foregoing, if the succession constitutes a Change in Control, then the provisions hereof applicable in the event of a Change in Control shall apply with respect to the succession). Failure of the Company to obtain such agreement prior to the effectiveness of any succession shall be a breach of this Agreement and shall entitle you to compensation from the Company in the amount and on the same terms as you would be entitled hereunder if you terminated your employment for Good Reason, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which executes and delivers the agreement provided for in this Section 6 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law, or otherwise. (b) This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributes, devisees and legatees. If you should die while any amount would be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, to your estate. 7. Notice. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States Registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notices to the Company shall be directed to the attention of the Board with a copy to the Secretary of the Company, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. 8. Miscellaneous. No provision of this Agreement may be modified waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by you and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the time or at any prior or subsequent time. No agreements or representations, oral or otherwise, expressed or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California. 8 9 9. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 10. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 11. Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in San Francisco, California, in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator's award in any court having jurisdiction; provided, however, that you shall be entitled to seek specific performance of your right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement. If this letter correctly sets forth our agreement on the subject matter hereof, kindly sign and return to the Company the enclosed copy of this letter which will then constitute our agreement on this subject. Sincerely yours, /s/ John C. Harris John C. Harris Chairman of the Board of Directors Agreed to as of the date hereof: /s/ Nathaniel Wess - ------------------------------ Nathaniel Wess 9 EX-10.7 8 INDEMNIFICATION AGRMT/EUGENE F. BARSOTTI 8/30/96 1 Exhibit 10.7 INDEMNIFICATION AGREEMENT This agreement, effective as of August 30, 1996 is between Bay Meadows Operating Company, a Delaware corporation (the "Company"), and Eugene F. Barsotti, Jr. ("Indemnitee"). Whereas, it is essential to the Company to retain and attract as directors and officers the most capable persons available; and Whereas, Indemnitee is a director and an officer of the Company; and Whereas, both the Company and Indemnitee recognize the increased risk of litigation and other claims being asserted against directors and officers of public companies; and Whereas, in recognition of Indemnitee's need for substantial protection against personal liability in order to maintain Indemnitee's continued service to the Company in an effective manner and to provide Indemnitee with specific contractual assurance that the protection will be available to Indemnitee, the Company desires to provide in this Agreement for the indemnification of and the advance of expenses to Indemnitee to the full extent (whether partial or complete) permitted by law, as set forth in this Agreement and, to the extent officers' and directors' liability insurance is maintained by the Company, to provide for the continued coverage of Indemnitee under the Company's officers' and directors' liability insurance policies; Now, therefore, in consideration of the covenants contained in this Agreement and of Indemnitee's continuing service to the Company, and intending to be legally bound, the parties agree as follows: ARTICLE I - DEFINITIONS (a) Change in Control: shall be deemed to have occurred if (i) any person (defined, for purposes of this Article I, as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing 10% or more of the total voting power represented by the Company's then outstanding Voting Securities, or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director whose election by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least two thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board of Directors, or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger 2 or consolidation which would result in the Voting Securities of the Company outstanding immediately prior to such a merger or consolidation continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 90% of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (iv) the stockholders of the Company approve a plan of complete liquidation of the Company, an agreement for the sale or disposition by the Company (in one transaction or a series of transactions) of all or substantially all the Company's assets, or a plan pursuant to which (in one transaction or a series of transactions) all or substantially all the Company's assets shall be transferred to a person not wholly owned by the Company (including but not limited to a plan pursuant to which all or substantially all of the Company's assets shall be transferred to a partnership in which the Company has an interest). (b) Claim: any threatened, pending or completed action suit, investigation or proceeding, and any appeal, whether civil, criminal, administrative or investigative and/or any inquiry or investigation, whether conducted by the Company or any other party that Indemnitee in good faith believes might lead to the institution of any such action. (c) Expenses: include, without limitation, attorneys' fees and all other costs, expenses, and obligations paid or incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness in or participate in any Claim relating to any Indemnifiable Event. (d) Indemnifiable Event: any event, occurrence or circumstance related to the fact that Indemnitee is or was a director or officer of the Company, was acting as a trustee or agent of the Company at its request, or by reason of anything done or not done by Indemnitee in any such capacity. (e) Reviewing Party: any appropriate person or body consisting of a member or members of the Company's Board of Directors including the Special Independent Counsel referred to in Article III (or, to the fullest extent permitted by law, any other person or body appointed by the Board), who is not a party to the particular claim for which Indemnitee is seeking indemnification. (f) Voting Securities: any securities of the Company which vote generally in the election of directors. ARTICLE II - AGREEMENT TO INDEMNIFY (a) In the event Indemnitee was, is or becomes a party to or witness or other participant in, or is threatened to be made a party to or witness or other participant in, a Claim by reason of (or arising in part out of) an Indemnifiable Event, the Company shall indemnify Indemnitee to the fullest extent permitted by the Delaware General Corporation Law, as soon as practicable but in any event no later than thirty days after written demand is presented to the Company, against any and all expenses, judgments, fines and penalties relating to or arising out of such Claim and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, fines, penalties or amounts paid in settlement) of such Claim. The failure of Indemnitee to formally notify the Company of an Indemnifiable Event or Claim within a reasonable amount of time shall not be deemed a waiver of Indemnitee's rights under 2 3 this Agreement if the Company has actual knowledge of such Indemnifiable Event or Claim. Notwithstanding anything in this Agreement to the contrary, prior to a Change in Control Indemnitee shall not be entitled to indemnification pursuant to this Agreement in connection with any Claim initiated by Indemnitee against the Company or any director or officer of the Company unless the Company has joined in or consented to the initiation of such Claim. If so requested by Indemnitee, the Company shall advance (within five business days of such request) any and all Expenses to Indemnitee (an "Expense Advance"). (b) Notwithstanding the foregoing, (i) the obligations of the Company under Article II(a) shall be subject to the condition that any Reviewing Party shall not have determined (in a written opinion, in any case in which the Special Independent Counsel referred to in Article III is involved) that Indemnitee would not be permitted to be indemnified under applicable law, and (ii) the obligation of the Company to make an Expense Advance pursuant to Article II(a) shall be subject to the condition that if, when and to the extent that any Reviewing Party determines that Indemnitee would not be permitted to be so indemnified under applicable law, the Company shall be entitled to be reimbursed by Indemnitee (who hereby undertakes to reimburse the Company in such a case) for all such amounts paid; provided, however, that if Indemnitee commences, or has commenced, legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee should be indemnified under applicable law, any determination made by a Reviewing Party that Indemnitee would not be permitted to be indemnified under applicable law shall not be binding and Indemnitee shall not be required to reimburse the Company for any Expense Advance until a final judicial determination is made (as to which all rights of appeal have been exhausted or lapsed). If there has not been a Change in Control, a Reviewing Party shall be selected by the Board of Directors, and if there has been such a Change in Control, a Reviewing Party shall be Special Independent Counsel referred to in Article III. If there has been no appointment or no determination by a Reviewing Party or if a Reviewing Party determines that Indemnitee substantively would not be permitted to be indemnified in whole or in part under applicable law, Indemnitee shall have the right to commence litigation in any court in California or Delaware having subject matter jurisdiction and in which venue is proper seeking an initial determination by the court or challenging any such determination by the court or challenging any such determination by the Reviewing Party, including the legal or factual basis, and the Company consents to service of process and to appear in any such proceeding. Any determination by the Reviewing Party otherwise shall be conclusive and binding on the Company and Indemnitee. (c) Notwithstanding the foregoing and as a condition to making Expense Advances to Indemnitee for legal fees, the Company shall, in its sole discretion, select the attorney or attorneys to represent and defend Indemnitee unless (i) the Company fails to fulfill its obligations make Expense Advances; (ii) the Company, in its sole discretion, agrees to permit Indemnitee to select his or her own attorney or attorneys; or (iii) a conflict of interest arises between the Company and Indemnitee, in which case Indemnitee shall select his or her own attorney, subject to the Company's reasonable approval. ARTICLE III - CHANGE IN CONTROL The Company agrees that if there is a Change in Control of the Company (other than a Change in Control which has been approved by a majority of the Company's Board of Directors who were directors immediately prior to such Change in Control), then with respect to all matters 3 4 thereafter arising concerning the rights of Indemnitee to indemnity payments and Expense Advances under this Agreement or any other agreement, the Company's Articles of Incorporation, or the Company's Bylaws in effect relating to Claims for Indemnifiable Events, the Company shall seek legal advice only from "Special Independent Counsel" selected by Indemnitee and approved by the Company (which approval shall not be unreasonably withheld), and who has not otherwise performed services for the Company or Indemnitee within the last five years (other than in connection with such matters). Such Special Independent Counsel, among other things, shall render its written opinion to the Company and Indemnitee as to whether and to what extent the Indemnitee would be permitted to be indemnified under applicable law. The Company agrees to pay the reasonable fees of the Special Independent Counsel referred to above and may fully indemnify such Special Independent Counsel against any and all expenses (including attorneys' fees), claims, liabilities and damages arising out of or relating to this Agreement. ARTICLE IV - ESTABLISHMENT OF LETTER OF CREDIT The Company's obligations to make indemnity payments and Expense Advances to Indemnitee under this Agreement shall be secured by a letter of credit in the amount of $1,000,000 which shall also secure the Company's indemnity payment and expense advance obligations to Greg S. Gunderson, John C. Harris, F. Jack Liebau, Lee Tucker and Anthony J. Zidich (along with Indemnitee, the "Current Directors") and Frank Trigeiro, each of whom, along with Indemnitee, shall be named a beneficiary of the letter of credit. Such letter of credit shall be established no later than ten (10) days after the date of this Agreement and shall remain in place for an initial period of one year or, if less, until any four of the Current Directors, one of which may but need not be the Indemnitee, at their sole election, consent to the termination of such letter of credit. If, after the initial or any subsequent period, such letter of credit is not renewed for a subsequent period, any four of the Current Directors shall have the right to draw the full amount thereof to hold as cash collateral securing the obligations under this Agreement. The letter of credit shall additionally provide that draws may be made by any four of the Current Directors, one of which may but need not be the Indemnitee, upon their certification that (a) Indemnitee is entitled to indemnity or Expenses Advances under this Agreement, (b) Indemnitee has demanded the amount being drawn from the Company in writing, and (c) the Company has not paid the full amount within the time required by this Agreement. Recourse to the letter of credit shall be in addition to, and not in lieu of, any manner otherwise available for enforcement of this Agreement and nothing in this Article shall relieve the Company of any of its obligations under this Agreement. ARTICLE V - ADDITIONAL EXPENSES To the fullest extent permitted by law, the Company shall indemnify Indemnitee against any and all Expenses (including attorneys' fees) and, if requested by Indemnitee, shall (within five business days of such request) advance such Expenses to Indemnitee, which are incurred by Indemnitee in connection with any Claim asserted against or action brought by Indemnitee for (i) indemnification or advance payment of Expenses by the Company under this Agreement or any other agreement, the Company's Bylaws or Articles of Incorporation now or hereafter in effect relating to Claims for Indemnifiable Events and/or (ii) recovery under any directors' and officers' liability insurance policies maintained by the Company, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, Expense advance or insurance recovery, as the case may be. 4 5 ARTICLE VI - PARTIAL INDEMNITY AND CONTRIBUTION (a) If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the Expenses, judgments, fines, penalties and amounts paid in settlement of a Claim but not, however, for all of the total amount, the Company shall nevertheless indemnify Indemnitee for the portion to which Indemnitee is entitled. Moreover, notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits or otherwise in defense of any or all Claims relating in whole or in part to an Indemnifiable Event or in defense of any issue or matter, including dismissal without prejudice, Indemnitee shall be indemnified against all Expenses incurred in connection with those defenses. In connection with any determination by the Reviewing Party or otherwise as to whether Indemnitee is entitled to be indemnified, the burden of proof shall be on the Company to establish that Indemnitee is not so entitled. (b) In the event that the Company is not obligated to make indemnity payments and Expense Advances under this Agreement, the Company's Bylaws or the Delaware General Corporation Law, contribution as between the Company and Indemnitee toward any judgment or settlement relating to a Claim by reason of (or arising in part out of) an Indemnification Event shall be based upon the relative benefits to and faults of each of the parties involved. ARTICLE VII - NO PRESUMPTIONS For purposes of this Agreement, to the fullest extent permitted by law, the termination of any Claim, action, suit or proceeding, by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law. ARTICLE VIII - NONEXCLUSIVITY The rights of the Indemnitee hereunder shall be in addition to any other rights Indemnitee may have under the Company's Articles of Incorporation, Bylaws, the Delaware General Corporation Law or otherwise. To the extent that a change in the Delaware General Corporation Law (whether by statute or judicial decision) permits greater indemnification by agreement than would be afforded currently under the Company's Articles of Incorporation or Bylaws or this Agreement, to the fullest extent permitted by law it is the intent of the parties to that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change immediately upon the occurrence of such change without further action by the Company or Indemnitee. ARTICLE IX - INSURANCE To the extent the Company maintains an insurance policy or policies providing directors' and officers' liability insurance, Indemnitee shall be covered by such policy or policies, in accordance with its or their terms, to the maximum extent of the coverage available for any director or officer of the Company. The Company agrees to make demand on such policies or all of such policies which may be applicable in the event it may also have an indemnification obligation under this Agreement. 5 6 ARTICLE X - LIMITATIONS PERIOD No legal action shall be brought and no cause of action shall be asserted by or in the right of the Company or any affiliate of the Company against Indemnitee, Indemnitee's spouse, heirs, executors or personal or legal representatives after the expiration of two years from the date of accrual of such cause of action, and any claim or cause of action of the Company or its affiliate shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such two year period; provided, however, that if any shorter period of limitations is otherwise applicable to any such cause of action such shorter period shall govern. ARTICLE XI - AMENDMENTS No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions (whether or not similar) nor shall such waiver constitute a continuing waiver. ARTICLE XII - SUBROGATION The Company shall not be liable under this Agreement to make any payment in connection with any Claim made against Indemnitee to the extent Indemnitee has otherwise actually received payment (under any insurance policy, Bylaw or otherwise) of the amounts otherwise indemnifiable. ARTICLE XIII - BINDING EFFECT This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties and their respective successors, assigns, including any direct or indirect successors by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company, spouses, heirs, and personal and legal representatives. The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to the Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. This Agreement shall continue in effect regardless of whether Indemnitee continues to serve as an officer or director of the Company or continues to act as a trustee or agent of the Company at its request. ARTICLE XIV - SEVERABILITY The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any provision within a single section, paragraph or sentence) are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable in any respect, and the validity and enforceability of any such provision in every other respect and of the remaining provisions shall not be in any way impaired, and shall remain enforceable to the fullest extent permitted by law. 6 7 ARTICLE XV - NOTICES All notices, requests, demands, and other communications shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed: If to Indemnitee, to: ----------------------------- ----------------------------- ----------------------------- If to Company, to: Bay Meadows Operating Company 2600 South Delaware Street San Mateo, CA 94402 Attn: President or to such other address as may have been furnished to the Indemnitee by the Company or to the Company by the Indemnitee, as the case may be. ARTICLE XVI - GOVERNING LAW This Agreement shall be governed by and construed and enforced in accordance with the laws of California applicable to contracts made and to be performed in such State without giving effect to the principles of conflicts of laws. In Witness Whereof, the parties have duly executed and delivered this Agreement this 30th day of August, 1996. BAY MEADOWS OPERATING COMPANY By: -------------------------------- Title: ----------------------------- INDEMNITEE /s/ Eugene F. Barsotti, Jr. ----------------------------------- Eugene F. Barsotti, Jr. 7 EX-10.8 9 INDEMNIFICATION AGRMT/GREG S. GUNDERSON 8/30/96 1 Exhibit 10.8 INDEMNIFICATION AGREEMENT This agreement, effective as of August 30, 1996 is between Bay Meadows Operating Company, a Delaware corporation (the "Company"), and Greg S. Gunderson ("Indemnitee"). Whereas, it is essential to the Company to retain and attract as directors the most capable persons available; and Whereas, Indemnitee is a director of the Company; and Whereas, both the Company and Indemnitee recognize the increased risk of litigation and other claims being asserted against directors and officers of public companies; and Whereas, in recognition of Indemnitee's need for substantial protection against personal liability in order to maintain Indemnitee's continued service to the Company in an effective manner and to provide Indemnitee with specific contractual assurance that the protection will be available to Indemnitee, the Company desires to provide in this Agreement for the indemnification of and the advance of expenses to Indemnitee to the full extent (whether partial or complete) permitted by law, as set forth in this Agreement and, to the extent officers' and directors' liability insurance is maintained by the Company, to provide for the continued coverage of Indemnitee under the Company's officers' and directors' liability insurance policies; Now, therefore, in consideration of the covenants contained in this Agreement and of Indemnitee's continuing service to the Company, and intending to be legally bound, the parties agree as follows: ARTICLE I - DEFINITIONS (a) Change in Control: shall be deemed to have occurred if (i) any person (defined, for purposes of this Article I, as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing 10% or more of the total voting power represented by the Company's then outstanding Voting Securities, or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director whose election by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least two thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board of Directors, or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger 2 or consolidation which would result in the Voting Securities of the Company outstanding immediately prior to such a merger or consolidation continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 90% of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (iv) the stockholders of the Company approve a plan of complete liquidation of the Company, an agreement for the sale or disposition by the Company (in one transaction or a series of transactions) of all or substantially all the Company's assets, or a plan pursuant to which (in one transaction or a series of transactions) all or substantially all the Company's assets shall be transferred to a person not wholly owned by the Company (including but not limited to a plan pursuant to which all or substantially all of the Company's assets shall be transferred to a partnership in which the Company has an interest). (b) Claim: any threatened, pending or completed action suit, investigation or proceeding, and any appeal, whether civil, criminal, administrative or investigative and/or any inquiry or investigation, whether conducted by the Company or any other party that Indemnitee in good faith believes might lead to the institution of any such action. (c) Expenses: include, without limitation, attorneys' fees and all other costs, expenses, and obligations paid or incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness in or participate in any Claim relating to any Indemnifiable Event. (d) Indemnifiable Event: any event, occurrence or circumstance related to the fact that Indemnitee is or was a director or officer of the Company, was acting as a trustee or agent of the Company at its request, or by reason of anything done or not done by Indemnitee in any such capacity. (e) Reviewing Party: any appropriate person or body consisting of a member or members of the Company's Board of Directors including the Special Independent Counsel referred to in Article III (or, to the fullest extent permitted by law, any other person or body appointed by the Board), who is not a party to the particular claim for which Indemnitee is seeking indemnification. (f) Voting Securities: any securities of the Company which vote generally in the election of directors. ARTICLE II - AGREEMENT TO INDEMNIFY (a) In the event Indemnitee was, is or becomes a party to or witness or other participant in, or is threatened to be made a party to or witness or other participant in, a Claim by reason of (or arising in part out of) an Indemnifiable Event, the Company shall indemnify Indemnitee to the fullest extent permitted by the Delaware General Corporation Law, as soon as practicable but in any event no later than thirty days after written demand is presented to the Company, against any and all expenses, judgments, fines and penalties relating to or arising out of such Claim and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, fines, penalties or amounts paid in settlement) of such Claim. The failure of Indemnitee to formally notify the Company of an Indemnifiable Event or Claim within a reasonable amount of time shall not be deemed a waiver of Indemnitee's rights under 2 3 this Agreement if the Company has actual knowledge of such Indemnifiable Event or Claim. Notwithstanding anything in this Agreement to the contrary, prior to a Change in Control Indemnitee shall not be entitled to indemnification pursuant to this Agreement in connection with any Claim initiated by Indemnitee against the Company or any director or officer of the Company unless the Company has joined in or consented to the initiation of such Claim. If so requested by Indemnitee, the Company shall advance (within five business days of such request) any and all Expenses to Indemnitee (an "Expense Advance"). (b) Notwithstanding the foregoing, (i) the obligations of the Company under Article II(a) shall be subject to the condition that any Reviewing Party shall not have determined (in a written opinion, in any case in which the Special Independent Counsel referred to in Article III is involved) that Indemnitee would not be permitted to be indemnified under applicable law, and (ii) the obligation of the Company to make an Expense Advance pursuant to Article II(a) shall be subject to the condition that if, when and to the extent that any Reviewing Party determines that Indemnitee would not be permitted to be so indemnified under applicable law, the Company shall be entitled to be reimbursed by Indemnitee (who hereby undertakes to reimburse the Company in such a case) for all such amounts paid; provided, however, that if Indemnitee commences, or has commenced, legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee should be indemnified under applicable law, any determination made by a Reviewing Party that Indemnitee would not be permitted to be indemnified under applicable law shall not be binding and Indemnitee shall not be required to reimburse the Company for any Expense Advance until a final judicial determination is made (as to which all rights of appeal have been exhausted or lapsed). If there has not been a Change in Control, a Reviewing Party shall be selected by the Board of Directors, and if there has been such a Change in Control, a Reviewing Party shall be Special Independent Counsel referred to in Article III. If there has been no appointment or no determination by a Reviewing Party or if a Reviewing Party determines that Indemnitee substantively would not be permitted to be indemnified in whole or in part under applicable law, Indemnitee shall have the right to commence litigation in any court in California or Delaware having subject matter jurisdiction and in which venue is proper seeking an initial determination by the court or challenging any such determination by the court or challenging any such determination by the Reviewing Party, including the legal or factual basis, and the Company consents to service of process and to appear in any such proceeding. Any determination by the Reviewing Party otherwise shall be conclusive and binding on the Company and Indemnitee. (c) Notwithstanding the foregoing and as a condition to making Expense Advances to Indemnitee for legal fees, the Company shall, in its sole discretion, select the attorney or attorneys to represent and defend Indemnitee unless (i) the Company fails to fulfill its obligations make Expense Advances; (ii) the Company, in its sole discretion, agrees to permit Indemnitee to select his or her own attorney or attorneys; or (iii) a conflict of interest arises between the Company and Indemnitee, in which case Indemnitee shall select his or her own attorney, subject to the Company's reasonable approval. ARTICLE III - CHANGE IN CONTROL The Company agrees that if there is a Change in Control of the Company (other than a Change in Control which has been approved by a majority of the Company's Board of Directors who were directors immediately prior to such Change in Control), then with respect to all matters 3 4 thereafter arising concerning the rights of Indemnitee to indemnity payments and Expense Advances under this Agreement or any other agreement, the Company's Articles of Incorporation, or the Company's Bylaws in effect relating to Claims for Indemnifiable Events, the Company shall seek legal advice only from "Special Independent Counsel" selected by Indemnitee and approved by the Company (which approval shall not be unreasonably withheld), and who has not otherwise performed services for the Company or Indemnitee within the last five years (other than in connection with such matters). Such Special Independent Counsel, among other things, shall render its written opinion to the Company and Indemnitee as to whether and to what extent the Indemnitee would be permitted to be indemnified under applicable law. The Company agrees to pay the reasonable fees of the Special Independent Counsel referred to above and may fully indemnify such Special Independent Counsel against any and all expenses (including attorneys' fees), claims, liabilities and damages arising out of or relating to this Agreement. ARTICLE IV - ESTABLISHMENT OF LETTER OF CREDIT The Company's obligations to make indemnity payments and Expense Advances to Indemnitee under this Agreement shall be secured by a letter of credit in the amount of $1,000,000 which shall also secure the Company's indemnity payment and expense advance obligations to Eugene F. Barsotti, Jr., John C. Harris, F. Jack Liebau, Lee Tucker and Anthony J. Zidich (along with Indemnitee, the "Current Directors") and Frank Trigeiro, each of whom, along with Indemnitee, shall be named a beneficiary of the letter of credit. Such letter of credit shall be established no later than ten (10) days after the date of this Agreement and shall remain in place for an initial period of one year or, if less, until any four of the Current Directors, one of which may but need not be the Indemnitee, at their sole election, consent to the termination of such letter of credit. If, after the initial or any subsequent period, such letter of credit is not renewed for a subsequent period, any four of the Current Directors shall have the right to draw the full amount thereof to hold as cash collateral securing the obligations under this Agreement. The letter of credit shall additionally provide that draws may be made by any four of the Current Directors, one of which may but need not be the Indemnitee, upon their certification that (a) Indemnitee is entitled to indemnity or Expenses Advances under this Agreement, (b) Indemnitee has demanded the amount being drawn from the Company in writing, and (c) the Company has not paid the full amount within the time required by this Agreement. Recourse to the letter of credit shall be in addition to, and not in lieu of, any manner otherwise available for enforcement of this Agreement and nothing in this Article shall relieve the Company of any of its obligations under this Agreement. ARTICLE V - ADDITIONAL EXPENSES To the fullest extent permitted by law, the Company shall indemnify Indemnitee against any and all Expenses (including attorneys' fees) and, if requested by Indemnitee, shall (within five business days of such request) advance such Expenses to Indemnitee, which are incurred by Indemnitee in connection with any Claim asserted against or action brought by Indemnitee for (i) indemnification or advance payment of Expenses by the Company under this Agreement or any other agreement, the Company's Bylaws or Articles of Incorporation now or hereafter in effect relating to Claims for Indemnifiable Events and/or (ii) recovery under any directors' and officers' liability insurance policies maintained by the Company, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, Expense advance or insurance recovery, as the case may be. 4 5 ARTICLE VI - PARTIAL INDEMNITY AND CONTRIBUTION (a) If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the Expenses, judgments, fines, penalties and amounts paid in settlement of a Claim but not, however, for all of the total amount, the Company shall nevertheless indemnify Indemnitee for the portion to which Indemnitee is entitled. Moreover, notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits or otherwise in defense of any or all Claims relating in whole or in part to an Indemnifiable Event or in defense of any issue or matter, including dismissal without prejudice, Indemnitee shall be indemnified against all Expenses incurred in connection with those defenses. In connection with any determination by the Reviewing Party or otherwise as to whether Indemnitee is entitled to be indemnified, the burden of proof shall be on the Company to establish that Indemnitee is not so entitled. (b) In the event that the Company is not obligated to make indemnity payments and Expense Advances under this Agreement, the Company's Bylaws or the Delaware General Corporation Law, contribution as between the Company and Indemnitee toward any judgment or settlement relating to a Claim by reason of (or arising in part out of) an Indemnification Event shall be based upon the relative benefits to and faults of each of the parties involved. ARTICLE VII - NO PRESUMPTIONS For purposes of this Agreement, to the fullest extent permitted by law, the termination of any Claim, action, suit or proceeding, by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law. ARTICLE VIII - NONEXCLUSIVITY The rights of the Indemnitee hereunder shall be in addition to any other rights Indemnitee may have under the Company's Articles of Incorporation, Bylaws, the Delaware General Corporation Law or otherwise. To the extent that a change in the Delaware General Corporation Law (whether by statute or judicial decision) permits greater indemnification by agreement than would be afforded currently under the Company's Articles of Incorporation or Bylaws or this Agreement, to the fullest extent permitted by law it is the intent of the parties to that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change immediately upon the occurrence of such change without further action by the Company or Indemnitee. ARTICLE IX - INSURANCE To the extent the Company maintains an insurance policy or policies providing directors' and officers' liability insurance, Indemnitee shall be covered by such policy or policies, in accordance with its or their terms, to the maximum extent of the coverage available for any director or officer of the Company. The Company agrees to make demand on such policies or all of such policies which may be applicable in the event it may also have an indemnification obligation under this Agreement. 5 6 ARTICLE X - LIMITATIONS PERIOD No legal action shall be brought and no cause of action shall be asserted by or in the right of the Company or any affiliate of the Company against Indemnitee, Indemnitee's spouse, heirs, executors or personal or legal representatives after the expiration of two years from the date of accrual of such cause of action, and any claim or cause of action of the Company or its affiliate shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such two year period; provided, however, that if any shorter period of limitations is otherwise applicable to any such cause of action such shorter period shall govern. ARTICLE XI - AMENDMENTS No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions (whether or not similar) nor shall such waiver constitute a continuing waiver. ARTICLE XII - SUBROGATION The Company shall not be liable under this Agreement to make any payment in connection with any Claim made against Indemnitee to the extent Indemnitee has otherwise actually received payment (under any insurance policy, Bylaw or otherwise) of the amounts otherwise indemnifiable. ARTICLE XIII - BINDING EFFECT This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties and their respective successors, assigns, including any direct or indirect successors by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company, spouses, heirs, and personal and legal representatives. The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to the Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. This Agreement shall continue in effect regardless of whether Indemnitee continues to serve as an officer or director of the Company or continues to act as a trustee or agent of the Company at its request. ARTICLE XIV - SEVERABILITY The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any provision within a single section, paragraph or sentence) are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable in any respect, and the validity and enforceability of any such provision in every other respect and of the remaining provisions shall not be in any way impaired, and shall remain enforceable to the fullest extent permitted by law. 6 7 ARTICLE XV - NOTICES All notices, requests, demands, and other communications shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed: If to Indemnitee, to: ----------------------------- ----------------------------- ----------------------------- If to Company, to: Bay Meadows Operating Company 2600 South Delaware Street San Mateo, CA 94402 Attn: President or to such other address as may have been furnished to the Indemnitee by the Company or to the Company by the Indemnitee, as the case may be. ARTICLE XVI - GOVERNING LAW This Agreement shall be governed by and construed and enforced in accordance with the laws of California applicable to contracts made and to be performed in such State without giving effect to the principles of conflicts of laws. In Witness Whereof, the parties have duly executed and delivered this Agreement this 30th day of August, 1996. BAY MEADOWS OPERATING COMPANY By: -------------------------------- Title: ----------------------------- INDEMNITEE /s/ Greg S. Gunderson ----------------------------------- Greg S. Gunderson 7 EX-10.9 10 INDEMNIFICATION AGRMT/F. JACK LIEBAU DATED 8/30/96 1 Exhibit 10.9 INDEMNIFICATION AGREEMENT This agreement, effective as of August 30, 1996 is between Bay Meadows Operating Company, a Delaware corporation (the "Company"), and F. Jack Liebau ("Indemnitee"). Whereas, it is essential to the Company to retain and attract as directors and officers the most capable persons available; and Whereas, Indemnitee is a director and an officer of the Company; and Whereas, both the Company and Indemnitee recognize the increased risk of litigation and other claims being asserted against directors and officers of public companies; and Whereas, in recognition of Indemnitee's need for substantial protection against personal liability in order to maintain Indemnitee's continued service to the Company in an effective manner and to provide Indemnitee with specific contractual assurance that the protection will be available to Indemnitee, the Company desires to provide in this Agreement for the indemnification of and the advance of expenses to Indemnitee to the full extent (whether partial or complete) permitted by law, as set forth in this Agreement and, to the extent officers' and directors' liability insurance is maintained by the Company, to provide for the continued coverage of Indemnitee under the Company's officers' and directors' liability insurance policies; Now, therefore, in consideration of the covenants contained in this Agreement and of Indemnitee's continuing service to the Company, and intending to be legally bound, the parties agree as follows: ARTICLE I - DEFINITIONS (a) Change in Control: shall be deemed to have occurred if (i) any person (defined, for purposes of this Article I, as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing 10% or more of the total voting power represented by the Company's then outstanding Voting Securities, or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director whose election by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least two thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board of Directors, or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger 2 or consolidation which would result in the Voting Securities of the Company outstanding immediately prior to such a merger or consolidation continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 90% of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (iv) the stockholders of the Company approve a plan of complete liquidation of the Company, an agreement for the sale or disposition by the Company (in one transaction or a series of transactions) of all or substantially all the Company's assets, or a plan pursuant to which (in one transaction or a series of transactions) all or substantially all the Company's assets shall be transferred to a person not wholly owned by the Company (including but not limited to a plan pursuant to which all or substantially all of the Company's assets shall be transferred to a partnership in which the Company has an interest). (b) Claim: any threatened, pending or completed action suit, investigation or proceeding, and any appeal, whether civil, criminal, administrative or investigative and/or any inquiry or investigation, whether conducted by the Company or any other party that Indemnitee in good faith believes might lead to the institution of any such action. (c) Expenses: include, without limitation, attorneys' fees and all other costs, expenses, and obligations paid or incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness in or participate in any Claim relating to any Indemnifiable Event. (d) Indemnifiable Event: any event, occurrence or circumstance related to the fact that Indemnitee is or was a director or officer of the Company, was acting as a trustee or agent of the Company at its request, or by reason of anything done or not done by Indemnitee in any such capacity. (e) Reviewing Party: any appropriate person or body consisting of a member or members of the Company's Board of Directors including the Special Independent Counsel referred to in Article III (or, to the fullest extent permitted by law, any other person or body appointed by the Board), who is not a party to the particular claim for which Indemnitee is seeking indemnification. (f) Voting Securities: any securities of the Company which vote generally in the election of directors. ARTICLE II - AGREEMENT TO INDEMNIFY (a) In the event Indemnitee was, is or becomes a party to or witness or other participant in, or is threatened to be made a party to or witness or other participant in, a Claim by reason of (or arising in part out of) an Indemnifiable Event, the Company shall indemnify Indemnitee to the fullest extent permitted by the Delaware General Corporation Law, as soon as practicable but in any event no later than thirty days after written demand is presented to the Company, against any and all expenses, judgments, fines and penalties relating to or arising out of such Claim and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, fines, penalties or amounts paid in settlement) of such Claim. The failure of Indemnitee to formally notify the Company of an Indemnifiable Event or Claim within a reasonable amount of time shall not be deemed a waiver of Indemnitee's rights under 2 3 this Agreement if the Company has actual knowledge of such Indemnifiable Event or Claim. Notwithstanding anything in this Agreement to the contrary, prior to a Change in Control Indemnitee shall not be entitled to indemnification pursuant to this Agreement in connection with any Claim initiated by Indemnitee against the Company or any director or officer of the Company unless the Company has joined in or consented to the initiation of such Claim. If so requested by Indemnitee, the Company shall advance (within five business days of such request) any and all Expenses to Indemnitee (an "Expense Advance"). (b) Notwithstanding the foregoing, (i) the obligations of the Company under Article II(a) shall be subject to the condition that any Reviewing Party shall not have determined (in a written opinion, in any case in which the Special Independent Counsel referred to in Article III is involved) that Indemnitee would not be permitted to be indemnified under applicable law, and (ii) the obligation of the Company to make an Expense Advance pursuant to Article II(a) shall be subject to the condition that if, when and to the extent that any Reviewing Party determines that Indemnitee would not be permitted to be so indemnified under applicable law, the Company shall be entitled to be reimbursed by Indemnitee (who hereby undertakes to reimburse the Company in such a case) for all such amounts paid; provided, however, that if Indemnitee commences, or has commenced, legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee should be indemnified under applicable law, any determination made by a Reviewing Party that Indemnitee would not be permitted to be indemnified under applicable law shall not be binding and Indemnitee shall not be required to reimburse the Company for any Expense Advance until a final judicial determination is made (as to which all rights of appeal have been exhausted or lapsed). If there has not been a Change in Control, a Reviewing Party shall be selected by the Board of Directors, and if there has been such a Change in Control, a Reviewing Party shall be Special Independent Counsel referred to in Article III. If there has been no appointment or no determination by a Reviewing Party or if a Reviewing Party determines that Indemnitee substantively would not be permitted to be indemnified in whole or in part under applicable law, Indemnitee shall have the right to commence litigation in any court in California or Delaware having subject matter jurisdiction and in which venue is proper seeking an initial determination by the court or challenging any such determination by the court or challenging any such determination by the Reviewing Party, including the legal or factual basis, and the Company consents to service of process and to appear in any such proceeding. Any determination by the Reviewing Party otherwise shall be conclusive and binding on the Company and Indemnitee. (c) Notwithstanding the foregoing and as a condition to making Expense Advances to Indemnitee for legal fees, the Company shall, in its sole discretion, select the attorney or attorneys to represent and defend Indemnitee unless (i) the Company fails to fulfill its obligations make Expense Advances; (ii) the Company, in its sole discretion, agrees to permit Indemnitee to select his or her own attorney or attorneys; or (iii) a conflict of interest arises between the Company and Indemnitee, in which case Indemnitee shall select his or her own attorney, subject to the Company's reasonable approval. ARTICLE III - CHANGE IN CONTROL The Company agrees that if there is a Change in Control of the Company (other than a Change in Control which has been approved by a majority of the Company's Board of Directors who were directors immediately prior to such Change in Control), then with respect to all matters 3 4 thereafter arising concerning the rights of Indemnitee to indemnity payments and Expense Advances under this Agreement or any other agreement, the Company's Articles of Incorporation, or the Company's Bylaws in effect relating to Claims for Indemnifiable Events, the Company shall seek legal advice only from "Special Independent Counsel" selected by Indemnitee and approved by the Company (which approval shall not be unreasonably withheld), and who has not otherwise performed services for the Company or Indemnitee within the last five years (other than in connection with such matters). Such Special Independent Counsel, among other things, shall render its written opinion to the Company and Indemnitee as to whether and to what extent the Indemnitee would be permitted to be indemnified under applicable law. The Company agrees to pay the reasonable fees of the Special Independent Counsel referred to above and may fully indemnify such Special Independent Counsel against any and all expenses (including attorneys' fees), claims, liabilities and damages arising out of or relating to this Agreement. ARTICLE IV - ESTABLISHMENT OF LETTER OF CREDIT The Company's obligations to make indemnity payments and Expense Advances to Indemnitee under this Agreement shall be secured by a letter of credit in the amount of $1,000,000 which shall also secure the Company's indemnity payment and expense advance obligations to Eugene F. Barsotti, Jr., Greg S. Gunderson, John C. Harris, Lee Tucker and Anthony J. Zidich (along with Indemnitee, the "Current Directors") and Frank Trigeiro, each of whom, along with Indemnitee, shall be named a beneficiary of the letter of credit. Such letter of credit shall be established no later than ten (10) days after the date of this Agreement and shall remain in place for an initial period of one year or, if less, until any four of the Current Directors, one of which may but need not be the Indemnitee, at their sole election, consent to the termination of such letter of credit. If, after the initial or any subsequent period, such letter of credit is not renewed for a subsequent period, any four of the Current Directors shall have the right to draw the full amount thereof to hold as cash collateral securing the obligations under this Agreement. The letter of credit shall additionally provide that draws may be made by any four of the Current Directors, one of which may but need not be the Indemnitee, upon their certification that (a) Indemnitee is entitled to indemnity or Expenses Advances under this Agreement, (b) Indemnitee has demanded the amount being drawn from the Company in writing, and (c) the Company has not paid the full amount within the time required by this Agreement. Recourse to the letter of credit shall be in addition to, and not in lieu of, any manner otherwise available for enforcement of this Agreement and nothing in this Article shall relieve the Company of any of its obligations under this Agreement. ARTICLE V - ADDITIONAL EXPENSES To the fullest extent permitted by law, the Company shall indemnify Indemnitee against any and all Expenses (including attorneys' fees) and, if requested by Indemnitee, shall (within five business days of such request) advance such Expenses to Indemnitee, which are incurred by Indemnitee in connection with any Claim asserted against or action brought by Indemnitee for (i) indemnification or advance payment of Expenses by the Company under this Agreement or any other agreement, the Company's Bylaws or Articles of Incorporation now or hereafter in effect relating to Claims for Indemnifiable Events and/or (ii) recovery under any directors' and officers' liability insurance policies maintained by the Company, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, Expense advance or insurance recovery, as the case may be. 4 5 ARTICLE VI - PARTIAL INDEMNITY AND CONTRIBUTION (a) If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the Expenses, judgments, fines, penalties and amounts paid in settlement of a Claim but not, however, for all of the total amount, the Company shall nevertheless indemnify Indemnitee for the portion to which Indemnitee is entitled. Moreover, notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits or otherwise in defense of any or all Claims relating in whole or in part to an Indemnifiable Event or in defense of any issue or matter, including dismissal without prejudice, Indemnitee shall be indemnified against all Expenses incurred in connection with those defenses. In connection with any determination by the Reviewing Party or otherwise as to whether Indemnitee is entitled to be indemnified, the burden of proof shall be on the Company to establish that Indemnitee is not so entitled. (b) In the event that the Company is not obligated to make indemnity payments and Expense Advances under this Agreement, the Company's Bylaws or the Delaware General Corporation Law, contribution as between the Company and Indemnitee toward any judgment or settlement relating to a Claim by reason of (or arising in part out of) an Indemnification Event shall be based upon the relative benefits to and faults of each of the parties involved. ARTICLE VII - NO PRESUMPTIONS For purposes of this Agreement, to the fullest extent permitted by law, the termination of any Claim, action, suit or proceeding, by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law. ARTICLE VIII - NONEXCLUSIVITY The rights of the Indemnitee hereunder shall be in addition to any other rights Indemnitee may have under the Company's Articles of Incorporation, Bylaws, the Delaware General Corporation Law or otherwise. To the extent that a change in the Delaware General Corporation Law (whether by statute or judicial decision) permits greater indemnification by agreement than would be afforded currently under the Company's Articles of Incorporation or Bylaws or this Agreement, to the fullest extent permitted by law it is the intent of the parties to that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change immediately upon the occurrence of such change without further action by the Company or Indemnitee. ARTICLE IX - INSURANCE To the extent the Company maintains an insurance policy or policies providing directors' and officers' liability insurance, Indemnitee shall be covered by such policy or policies, in accordance with its or their terms, to the maximum extent of the coverage available for any director or officer of the Company. The Company agrees to make demand on such policies or all of such policies which may be applicable in the event it may also have an indemnification obligation under this Agreement. 5 6 ARTICLE X - LIMITATIONS PERIOD No legal action shall be brought and no cause of action shall be asserted by or in the right of the Company or any affiliate of the Company against Indemnitee, Indemnitee's spouse, heirs, executors or personal or legal representatives after the expiration of two years from the date of accrual of such cause of action, and any claim or cause of action of the Company or its affiliate shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such two year period; provided, however, that if any shorter period of limitations is otherwise applicable to any such cause of action such shorter period shall govern. ARTICLE XI - AMENDMENTS No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions (whether or not similar) nor shall such waiver constitute a continuing waiver. ARTICLE XII - SUBROGATION The Company shall not be liable under this Agreement to make any payment in connection with any Claim made against Indemnitee to the extent Indemnitee has otherwise actually received payment (under any insurance policy, Bylaw or otherwise) of the amounts otherwise indemnifiable. ARTICLE XIII - BINDING EFFECT This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties and their respective successors, assigns, including any direct or indirect successors by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company, spouses, heirs, and personal and legal representatives. The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to the Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. This Agreement shall continue in effect regardless of whether Indemnitee continues to serve as an officer or director of the Company or continues to act as a trustee or agent of the Company at its request. ARTICLE XIV - SEVERABILITY The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any provision within a single section, paragraph or sentence) are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable in any respect, and the validity and enforceability of any such provision in every other respect and of the remaining provisions shall not be in any way impaired, and shall remain enforceable to the fullest extent permitted by law. 6 7 ARTICLE XV - NOTICES All notices, requests, demands, and other communications shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed: If to Indemnitee, to: ----------------------------- ----------------------------- ----------------------------- If to Company, to: Bay Meadows Operating Company 2600 South Delaware Street San Mateo, CA 94402 Attn: President or to such other address as may have been furnished to the Indemnitee by the Company or to the Company by the Indemnitee, as the case may be. ARTICLE XVI - GOVERNING LAW This Agreement shall be governed by and construed and enforced in accordance with the laws of California applicable to contracts made and to be performed in such State without giving effect to the principles of conflicts of laws. In Witness Whereof, the parties have duly executed and delivered this Agreement this 30th day of August, 1996. BAY MEADOWS OPERATING COMPANY By: -------------------------------- Title: ----------------------------- INDEMNITEE /s/ F. Jack Liebau ----------------------------------- F. Jack Liebau 7 EX-10.10 11 INDEMNIFICATION AGRMT/JOHN C. HARRIS 8/30/96 1 Exhibit 10.10 INDEMNIFICATION AGREEMENT This agreement, effective as of August 30, 1996 is between Bay Meadows Operating Company, a Delaware corporation (the "Company"), and John C. Harris ("Indemnitee"). Whereas, it is essential to the Company to retain and attract as directors and officers the most capable persons available; and Whereas, Indemnitee is a director and an officer of the Company; and Whereas, both the Company and Indemnitee recognize the increased risk of litigation and other claims being asserted against directors and officers of public companies; and Whereas, in recognition of Indemnitee's need for substantial protection against personal liability in order to maintain Indemnitee's continued service to the Company in an effective manner and to provide Indemnitee with specific contractual assurance that the protection will be available to Indemnitee, the Company desires to provide in this Agreement for the indemnification of and the advance of expenses to Indemnitee to the full extent (whether partial or complete) permitted by law, as set forth in this Agreement and, to the extent officers' and directors' liability insurance is maintained by the Company, to provide for the continued coverage of Indemnitee under the Company's officers' and directors' liability insurance policies; Now, therefore, in consideration of the covenants contained in this Agreement and of Indemnitee's continuing service to the Company, and intending to be legally bound, the parties agree as follows: ARTICLE I - DEFINITIONS (a) Change in Control: shall be deemed to have occurred if (i) any person (defined, for purposes of this Article I, as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing 10% or more of the total voting power represented by the Company's then outstanding Voting Securities, or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director whose election by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least two thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board of Directors, or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger 2 or consolidation which would result in the Voting Securities of the Company outstanding immediately prior to such a merger or consolidation continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 90% of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (iv) the stockholders of the Company approve a plan of complete liquidation of the Company, an agreement for the sale or disposition by the Company (in one transaction or a series of transactions) of all or substantially all the Company's assets, or a plan pursuant to which (in one transaction or a series of transactions) all or substantially all the Company's assets shall be transferred to a person not wholly owned by the Company (including but not limited to a plan pursuant to which all or substantially all of the Company's assets shall be transferred to a partnership in which the Company has an interest). (b) Claim: any threatened, pending or completed action suit, investigation or proceeding, and any appeal, whether civil, criminal, administrative or investigative and/or any inquiry or investigation, whether conducted by the Company or any other party that Indemnitee in good faith believes might lead to the institution of any such action. (c) Expenses: include, without limitation, attorneys' fees and all other costs, expenses, and obligations paid or incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness in or participate in any Claim relating to any Indemnifiable Event. (d) Indemnifiable Event: any event, occurrence or circumstance related to the fact that Indemnitee is or was a director or officer of the Company, was acting as a trustee or agent of the Company at its request, or by reason of anything done or not done by Indemnitee in any such capacity. (e) Reviewing Party: any appropriate person or body consisting of a member or members of the Company's Board of Directors including the Special Independent Counsel referred to in Article III (or, to the fullest extent permitted by law, any other person or body appointed by the Board), who is not a party to the particular claim for which Indemnitee is seeking indemnification. (f) Voting Securities: any securities of the Company which vote generally in the election of directors. ARTICLE II - AGREEMENT TO INDEMNIFY (a) In the event Indemnitee was, is or becomes a party to or witness or other participant in, or is threatened to be made a party to or witness or other participant in, a Claim by reason of (or arising in part out of) an Indemnifiable Event, the Company shall indemnify Indemnitee to the fullest extent permitted by the Delaware General Corporation Law, as soon as practicable but in any event no later than thirty days after written demand is presented to the Company, against any and all expenses, judgments, fines and penalties relating to or arising out of such Claim and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, fines, penalties or amounts paid in settlement) of such Claim. The failure of Indemnitee to formally notify the Company of an Indemnifiable Event or Claim within a reasonable amount of time shall not be deemed a waiver of Indemnitee's rights under 2 3 this Agreement if the Company has actual knowledge of such Indemnifiable Event or Claim. Notwithstanding anything in this Agreement to the contrary, prior to a Change in Control Indemnitee shall not be entitled to indemnification pursuant to this Agreement in connection with any Claim initiated by Indemnitee against the Company or any director or officer of the Company unless the Company has joined in or consented to the initiation of such Claim. If so requested by Indemnitee, the Company shall advance (within five business days of such request) any and all Expenses to Indemnitee (an "Expense Advance"). (b) Notwithstanding the foregoing, (i) the obligations of the Company under Article II(a) shall be subject to the condition that any Reviewing Party shall not have determined (in a written opinion, in any case in which the Special Independent Counsel referred to in Article III is involved) that Indemnitee would not be permitted to be indemnified under applicable law, and (ii) the obligation of the Company to make an Expense Advance pursuant to Article II(a) shall be subject to the condition that if, when and to the extent that any Reviewing Party determines that Indemnitee would not be permitted to be so indemnified under applicable law, the Company shall be entitled to be reimbursed by Indemnitee (who hereby undertakes to reimburse the Company in such a case) for all such amounts paid; provided, however, that if Indemnitee commences, or has commenced, legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee should be indemnified under applicable law, any determination made by a Reviewing Party that Indemnitee would not be permitted to be indemnified under applicable law shall not be binding and Indemnitee shall not be required to reimburse the Company for any Expense Advance until a final judicial determination is made (as to which all rights of appeal have been exhausted or lapsed). If there has not been a Change in Control, a Reviewing Party shall be selected by the Board of Directors, and if there has been such a Change in Control, a Reviewing Party shall be Special Independent Counsel referred to in Article III. If there has been no appointment or no determination by a Reviewing Party or if a Reviewing Party determines that Indemnitee substantively would not be permitted to be indemnified in whole or in part under applicable law, Indemnitee shall have the right to commence litigation in any court in California or Delaware having subject matter jurisdiction and in which venue is proper seeking an initial determination by the court or challenging any such determination by the court or challenging any such determination by the Reviewing Party, including the legal or factual basis, and the Company consents to service of process and to appear in any such proceeding. Any determination by the Reviewing Party otherwise shall be conclusive and binding on the Company and Indemnitee. (c) Notwithstanding the foregoing and as a condition to making Expense Advances to Indemnitee for legal fees, the Company shall, in its sole discretion, select the attorney or attorneys to represent and defend Indemnitee unless (i) the Company fails to fulfill its obligations make Expense Advances; (ii) the Company, in its sole discretion, agrees to permit Indemnitee to select his or her own attorney or attorneys; or (iii) a conflict of interest arises between the Company and Indemnitee, in which case Indemnitee shall select his or her own attorney, subject to the Company's reasonable approval. ARTICLE III - CHANGE IN CONTROL The Company agrees that if there is a Change in Control of the Company (other than a Change in Control which has been approved by a majority of the Company's Board of Directors who were directors immediately prior to such Change in Control), then with respect to all matters 3 4 thereafter arising concerning the rights of Indemnitee to indemnity payments and Expense Advances under this Agreement or any other agreement, the Company's Articles of Incorporation, or the Company's Bylaws in effect relating to Claims for Indemnifiable Events, the Company shall seek legal advice only from "Special Independent Counsel" selected by Indemnitee and approved by the Company (which approval shall not be unreasonably withheld), and who has not otherwise performed services for the Company or Indemnitee within the last five years (other than in connection with such matters). Such Special Independent Counsel, among other things, shall render its written opinion to the Company and Indemnitee as to whether and to what extent the Indemnitee would be permitted to be indemnified under applicable law. The Company agrees to pay the reasonable fees of the Special Independent Counsel referred to above and may fully indemnify such Special Independent Counsel against any and all expenses (including attorneys' fees), claims, liabilities and damages arising out of or relating to this Agreement. ARTICLE IV - ESTABLISHMENT OF LETTER OF CREDIT The Company's obligations to make indemnity payments and Expense Advances to Indemnitee under this Agreement shall be secured by a letter of credit in the amount of $1,000,000 which shall also secure the Company's indemnity payment and expense advance obligations to Eugene F. Barsotti, Jr., Greg S. Gunderson, F. Jack Liebau, Lee Tucker and Anthony J. Zidich (along with Indemnitee, the "Current Directors") and Frank Trigeiro, each of whom, along with Indemnitee, shall be named a beneficiary of the letter of credit. Such letter of credit shall be established no later than ten (10) days after the date of this Agreement and shall remain in place for an initial period of one year or, if less, until any four of the Current Directors, one of which may but need not be the Indemnitee, at their sole election, consent to the termination of such letter of credit. If, after the initial or any subsequent period, such letter of credit is not renewed for a subsequent period, any four of the Current Directors shall have the right to draw the full amount thereof to hold as cash collateral securing the obligations under this Agreement. The letter of credit shall additionally provide that draws may be made by any four of the Current Directors, one of which may but need not be the Indemnitee, upon their certification that (a) Indemnitee is entitled to indemnity or Expenses Advances under this Agreement, (b) Indemnitee has demanded the amount being drawn from the Company in writing, and (c) the Company has not paid the full amount within the time required by this Agreement. Recourse to the letter of credit shall be in addition to, and not in lieu of, any manner otherwise available for enforcement of this Agreement and nothing in this Article shall relieve the Company of any of its obligations under this Agreement. ARTICLE V - ADDITIONAL EXPENSES To the fullest extent permitted by law, the Company shall indemnify Indemnitee against any and all Expenses (including attorneys' fees) and, if requested by Indemnitee, shall (within five business days of such request) advance such Expenses to Indemnitee, which are incurred by Indemnitee in connection with any Claim asserted against or action brought by Indemnitee for (i) indemnification or advance payment of Expenses by the Company under this Agreement or any other agreement, the Company's Bylaws or Articles of Incorporation now or hereafter in effect relating to Claims for Indemnifiable Events and/or (ii) recovery under any directors' and officers' liability insurance policies maintained by the Company, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, Expense advance or insurance recovery, as the case may be. 4 5 ARTICLE VI - PARTIAL INDEMNITY AND CONTRIBUTION (a) If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the Expenses, judgments, fines, penalties and amounts paid in settlement of a Claim but not, however, for all of the total amount, the Company shall nevertheless indemnify Indemnitee for the portion to which Indemnitee is entitled. Moreover, notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits or otherwise in defense of any or all Claims relating in whole or in part to an Indemnifiable Event or in defense of any issue or matter, including dismissal without prejudice, Indemnitee shall be indemnified against all Expenses incurred in connection with those defenses. In connection with any determination by the Reviewing Party or otherwise as to whether Indemnitee is entitled to be indemnified, the burden of proof shall be on the Company to establish that Indemnitee is not so entitled. (b) In the event that the Company is not obligated to make indemnity payments and Expense Advances under this Agreement, the Company's Bylaws or the Delaware General Corporation Law, contribution as between the Company and Indemnitee toward any judgment or settlement relating to a Claim by reason of (or arising in part out of) an Indemnification Event shall be based upon the relative benefits to and faults of each of the parties involved. ARTICLE VII - NO PRESUMPTIONS For purposes of this Agreement, to the fullest extent permitted by law, the termination of any Claim, action, suit or proceeding, by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law. ARTICLE VIII - NONEXCLUSIVITY The rights of the Indemnitee hereunder shall be in addition to any other rights Indemnitee may have under the Company's Articles of Incorporation, Bylaws, the Delaware General Corporation Law or otherwise. To the extent that a change in the Delaware General Corporation Law (whether by statute or judicial decision) permits greater indemnification by agreement than would be afforded currently under the Company's Articles of Incorporation or Bylaws or this Agreement, to the fullest extent permitted by law it is the intent of the parties to that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change immediately upon the occurrence of such change without further action by the Company or Indemnitee. ARTICLE IX - INSURANCE To the extent the Company maintains an insurance policy or policies providing directors' and officers' liability insurance, Indemnitee shall be covered by such policy or policies, in accordance with its or their terms, to the maximum extent of the coverage available for any director or officer of the Company. The Company agrees to make demand on such policies or all of such policies which may be applicable in the event it may also have an indemnification obligation under this Agreement. 5 6 ARTICLE X - LIMITATIONS PERIOD No legal action shall be brought and no cause of action shall be asserted by or in the right of the Company or any affiliate of the Company against Indemnitee, Indemnitee's spouse, heirs, executors or personal or legal representatives after the expiration of two years from the date of accrual of such cause of action, and any claim or cause of action of the Company or its affiliate shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such two year period; provided, however, that if any shorter period of limitations is otherwise applicable to any such cause of action such shorter period shall govern. ARTICLE XI - AMENDMENTS No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions (whether or not similar) nor shall such waiver constitute a continuing waiver. ARTICLE XII - SUBROGATION The Company shall not be liable under this Agreement to make any payment in connection with any Claim made against Indemnitee to the extent Indemnitee has otherwise actually received payment (under any insurance policy, Bylaw or otherwise) of the amounts otherwise indemnifiable. ARTICLE XIII - BINDING EFFECT This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties and their respective successors, assigns, including any direct or indirect successors by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company, spouses, heirs, and personal and legal representatives. The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to the Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. This Agreement shall continue in effect regardless of whether Indemnitee continues to serve as an officer or director of the Company or continues to act as a trustee or agent of the Company at its request. ARTICLE XIV - SEVERABILITY The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any provision within a single section, paragraph or sentence) are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable in any respect, and the validity and enforceability of any such provision in every other respect and of the remaining provisions shall not be in any way impaired, and shall remain enforceable to the fullest extent permitted by law. 6 7 ARTICLE XV - NOTICES All notices, requests, demands, and other communications shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed: If to Indemnitee, to: ----------------------------- ----------------------------- ----------------------------- If to Company, to: Bay Meadows Operating Company 2600 South Delaware Street San Mateo, CA 94402 Attn: President or to such other address as may have been furnished to the Indemnitee by the Company or to the Company by the Indemnitee, as the case may be. ARTICLE XVI - GOVERNING LAW This Agreement shall be governed by and construed and enforced in accordance with the laws of California applicable to contracts made and to be performed in such State without giving effect to the principles of conflicts of laws. In Witness Whereof, the parties have duly executed and delivered this Agreement this 30th day of August, 1996. BAY MEADOWS OPERATING COMPANY By: -------------------------------- Title: ----------------------------- INDEMNITEE /s/ John C. Harris ----------------------------------- John C. Harris 7 EX-10.11 12 INDEMNIFAICATION AGRMT/LEE TUCKER DATED 8/30/96 1 Exhibit 10.11 INDEMNIFICATION AGREEMENT This agreement, effective as of August 30, 1996 is between Bay Meadows Operating Company, a Delaware corporation (the "Company"), and Lee Tucker ("Indemnitee"). Whereas, it is essential to the Company to retain and attract as directors and officers the most capable persons available; and Whereas, Indemnitee is a director and an officer of the Company; and Whereas, both the Company and Indemnitee recognize the increased risk of litigation and other claims being asserted against directors and officers of public companies; and Whereas, in recognition of Indemnitee's need for substantial protection against personal liability in order to maintain Indemnitee's continued service to the Company in an effective manner and to provide Indemnitee with specific contractual assurance that the protection will be available to Indemnitee, the Company desires to provide in this Agreement for the indemnification of and the advance of expenses to Indemnitee to the full extent (whether partial or complete) permitted by law, as set forth in this Agreement and, to the extent officers' and directors' liability insurance is maintained by the Company, to provide for the continued coverage of Indemnitee under the Company's officers' and directors' liability insurance policies; Now, therefore, in consideration of the covenants contained in this Agreement and of Indemnitee's continuing service to the Company, and intending to be legally bound, the parties agree as follows: ARTICLE I - DEFINITIONS (a) Change in Control: shall be deemed to have occurred if (i) any person (defined, for purposes of this Article I, as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing 10% or more of the total voting power represented by the Company's then outstanding Voting Securities, or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director whose election by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least two thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board of Directors, or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger 2 or consolidation which would result in the Voting Securities of the Company outstanding immediately prior to such a merger or consolidation continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 90% of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (iv) the stockholders of the Company approve a plan of complete liquidation of the Company, an agreement for the sale or disposition by the Company (in one transaction or a series of transactions) of all or substantially all the Company's assets, or a plan pursuant to which (in one transaction or a series of transactions) all or substantially all the Company's assets shall be transferred to a person not wholly owned by the Company (including but not limited to a plan pursuant to which all or substantially all of the Company's assets shall be transferred to a partnership in which the Company has an interest). (b) Claim: any threatened, pending or completed action suit, investigation or proceeding, and any appeal, whether civil, criminal, administrative or investigative and/or any inquiry or investigation, whether conducted by the Company or any other party that Indemnitee in good faith believes might lead to the institution of any such action. (c) Expenses: include, without limitation, attorneys' fees and all other costs, expenses, and obligations paid or incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness in or participate in any Claim relating to any Indemnifiable Event. (d) Indemnifiable Event: any event, occurrence or circumstance related to the fact that Indemnitee is or was a director or officer of the Company, was acting as a trustee or agent of the Company at its request, or by reason of anything done or not done by Indemnitee in any such capacity. (e) Reviewing Party: any appropriate person or body consisting of a member or members of the Company's Board of Directors including the Special Independent Counsel referred to in Article III (or, to the fullest extent permitted by law, any other person or body appointed by the Board), who is not a party to the particular claim for which Indemnitee is seeking indemnification. (f) Voting Securities: any securities of the Company which vote generally in the election of directors. ARTICLE II - AGREEMENT TO INDEMNIFY (a) In the event Indemnitee was, is or becomes a party to or witness or other participant in, or is threatened to be made a party to or witness or other participant in, a Claim by reason of (or arising in part out of) an Indemnifiable Event, the Company shall indemnify Indemnitee to the fullest extent permitted by the Delaware General Corporation Law, as soon as practicable but in any event no later than thirty days after written demand is presented to the Company, against any and all expenses, judgments, fines and penalties relating to or arising out of such Claim and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, fines, penalties or amounts paid in settlement) of such Claim. The failure of Indemnitee to formally notify the Company of an Indemnifiable Event or Claim within a reasonable amount of time shall not be deemed a waiver of Indemnitee's rights under 2 3 this Agreement if the Company has actual knowledge of such Indemnifiable Event or Claim. Notwithstanding anything in this Agreement to the contrary, prior to a Change in Control Indemnitee shall not be entitled to indemnification pursuant to this Agreement in connection with any Claim initiated by Indemnitee against the Company or any director or officer of the Company unless the Company has joined in or consented to the initiation of such Claim. If so requested by Indemnitee, the Company shall advance (within five business days of such request) any and all Expenses to Indemnitee (an "Expense Advance"). (b) Notwithstanding the foregoing, (i) the obligations of the Company under Article II(a) shall be subject to the condition that any Reviewing Party shall not have determined (in a written opinion, in any case in which the Special Independent Counsel referred to in Article III is involved) that Indemnitee would not be permitted to be indemnified under applicable law, and (ii) the obligation of the Company to make an Expense Advance pursuant to Article II(a) shall be subject to the condition that if, when and to the extent that any Reviewing Party determines that Indemnitee would not be permitted to be so indemnified under applicable law, the Company shall be entitled to be reimbursed by Indemnitee (who hereby undertakes to reimburse the Company in such a case) for all such amounts paid; provided, however, that if Indemnitee commences, or has commenced, legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee should be indemnified under applicable law, any determination made by a Reviewing Party that Indemnitee would not be permitted to be indemnified under applicable law shall not be binding and Indemnitee shall not be required to reimburse the Company for any Expense Advance until a final judicial determination is made (as to which all rights of appeal have been exhausted or lapsed). If there has not been a Change in Control, a Reviewing Party shall be selected by the Board of Directors, and if there has been such a Change in Control, a Reviewing Party shall be Special Independent Counsel referred to in Article III. If there has been no appointment or no determination by a Reviewing Party or if a Reviewing Party determines that Indemnitee substantively would not be permitted to be indemnified in whole or in part under applicable law, Indemnitee shall have the right to commence litigation in any court in California or Delaware having subject matter jurisdiction and in which venue is proper seeking an initial determination by the court or challenging any such determination by the court or challenging any such determination by the Reviewing Party, including the legal or factual basis, and the Company consents to service of process and to appear in any such proceeding. Any determination by the Reviewing Party otherwise shall be conclusive and binding on the Company and Indemnitee. (c) Notwithstanding the foregoing and as a condition to making Expense Advances to Indemnitee for legal fees, the Company shall, in its sole discretion, select the attorney or attorneys to represent and defend Indemnitee unless (i) the Company fails to fulfill its obligations make Expense Advances; (ii) the Company, in its sole discretion, agrees to permit Indemnitee to select his or her own attorney or attorneys; or (iii) a conflict of interest arises between the Company and Indemnitee, in which case Indemnitee shall select his or her own attorney, subject to the Company's reasonable approval. ARTICLE III - CHANGE IN CONTROL The Company agrees that if there is a Change in Control of the Company (other than a Change in Control which has been approved by a majority of the Company's Board of Directors who were directors immediately prior to such Change in Control), then with respect to all matters 3 4 thereafter arising concerning the rights of Indemnitee to indemnity payments and Expense Advances under this Agreement or any other agreement, the Company's Articles of Incorporation, or the Company's Bylaws in effect relating to Claims for Indemnifiable Events, the Company shall seek legal advice only from "Special Independent Counsel" selected by Indemnitee and approved by the Company (which approval shall not be unreasonably withheld), and who has not otherwise performed services for the Company or Indemnitee within the last five years (other than in connection with such matters). Such Special Independent Counsel, among other things, shall render its written opinion to the Company and Indemnitee as to whether and to what extent the Indemnitee would be permitted to be indemnified under applicable law. The Company agrees to pay the reasonable fees of the Special Independent Counsel referred to above and may fully indemnify such Special Independent Counsel against any and all expenses (including attorneys' fees), claims, liabilities and damages arising out of or relating to this Agreement. ARTICLE IV - ESTABLISHMENT OF LETTER OF CREDIT The Company's obligations to make indemnity payments and Expense Advances to Indemnitee under this Agreement shall be secured by a letter of credit in the amount of $1,000,000 which shall also secure the Company's indemnity payment and expense advance obligations to Eugene F. Barsotti, Jr., Greg S. Gunderson, John C. Harris, F. Jack Liebau and Anthony J. Zidich (along with Indemnitee, the "Current Directors") and Frank Trigeiro, each of whom, along with Indemnitee, shall be named a beneficiary of the letter of credit. Such letter of credit shall be established no later than ten (10) days after the date of this Agreement and shall remain in place for an initial period of one year or, if less, until any four of the Current Directors, one of which may but need not be the Indemnitee, at their sole election, consent to the termination of such letter of credit. If, after the initial or any subsequent period, such letter of credit is not renewed for a subsequent period, any four of the Current Directors shall have the right to draw the full amount thereof to hold as cash collateral securing the obligations under this Agreement. The letter of credit shall additionally provide that draws may be made by any four of the Current Directors, one of which may but need not be the Indemnitee, upon their certification that (a) Indemnitee is entitled to indemnity or Expenses Advances under this Agreement, (b) Indemnitee has demanded the amount being drawn from the Company in writing, and (c) the Company has not paid the full amount within the time required by this Agreement. Recourse to the letter of credit shall be in addition to, and not in lieu of, any manner otherwise available for enforcement of this Agreement and nothing in this Article shall relieve the Company of any of its obligations under this Agreement. ARTICLE V - ADDITIONAL EXPENSES To the fullest extent permitted by law, the Company shall indemnify Indemnitee against any and all Expenses (including attorneys' fees) and, if requested by Indemnitee, shall (within five business days of such request) advance such Expenses to Indemnitee, which are incurred by Indemnitee in connection with any Claim asserted against or action brought by Indemnitee for (i) indemnification or advance payment of Expenses by the Company under this Agreement or any other agreement, the Company's Bylaws or Articles of Incorporation now or hereafter in effect relating to Claims for Indemnifiable Events and/or (ii) recovery under any directors' and officers' liability insurance policies maintained by the Company, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, Expense advance or insurance recovery, as the case may be. 4 5 ARTICLE VI - PARTIAL INDEMNITY AND CONTRIBUTION (a) If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the Expenses, judgments, fines, penalties and amounts paid in settlement of a Claim but not, however, for all of the total amount, the Company shall nevertheless indemnify Indemnitee for the portion to which Indemnitee is entitled. Moreover, notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits or otherwise in defense of any or all Claims relating in whole or in part to an Indemnifiable Event or in defense of any issue or matter, including dismissal without prejudice, Indemnitee shall be indemnified against all Expenses incurred in connection with those defenses. In connection with any determination by the Reviewing Party or otherwise as to whether Indemnitee is entitled to be indemnified, the burden of proof shall be on the Company to establish that Indemnitee is not so entitled. (b) In the event that the Company is not obligated to make indemnity payments and Expense Advances under this Agreement, the Company's Bylaws or the Delaware General Corporation Law, contribution as between the Company and Indemnitee toward any judgment or settlement relating to a Claim by reason of (or arising in part out of) an Indemnification Event shall be based upon the relative benefits to and faults of each of the parties involved. ARTICLE VII - NO PRESUMPTIONS For purposes of this Agreement, to the fullest extent permitted by law, the termination of any Claim, action, suit or proceeding, by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law. ARTICLE VIII - NONEXCLUSIVITY The rights of the Indemnitee hereunder shall be in addition to any other rights Indemnitee may have under the Company's Articles of Incorporation, Bylaws, the Delaware General Corporation Law or otherwise. To the extent that a change in the Delaware General Corporation Law (whether by statute or judicial decision) permits greater indemnification by agreement than would be afforded currently under the Company's Articles of Incorporation or Bylaws or this Agreement, to the fullest extent permitted by law it is the intent of the parties to that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change immediately upon the occurrence of such change without further action by the Company or Indemnitee. ARTICLE IX - INSURANCE To the extent the Company maintains an insurance policy or policies providing directors' and officers' liability insurance, Indemnitee shall be covered by such policy or policies, in accordance with its or their terms, to the maximum extent of the coverage available for any director or officer of the Company. The Company agrees to make demand on such policies or all of such policies which may be applicable in the event it may also have an indemnification obligation under this Agreement. 5 6 ARTICLE X - LIMITATIONS PERIOD No legal action shall be brought and no cause of action shall be asserted by or in the right of the Company or any affiliate of the Company against Indemnitee, Indemnitee's spouse, heirs, executors or personal or legal representatives after the expiration of two years from the date of accrual of such cause of action, and any claim or cause of action of the Company or its affiliate shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such two year period; provided, however, that if any shorter period of limitations is otherwise applicable to any such cause of action such shorter period shall govern. ARTICLE XI - AMENDMENTS No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions (whether or not similar) nor shall such waiver constitute a continuing waiver. ARTICLE XII - SUBROGATION The Company shall not be liable under this Agreement to make any payment in connection with any Claim made against Indemnitee to the extent Indemnitee has otherwise actually received payment (under any insurance policy, Bylaw or otherwise) of the amounts otherwise indemnifiable. ARTICLE XIII - BINDING EFFECT This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties and their respective successors, assigns, including any direct or indirect successors by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company, spouses, heirs, and personal and legal representatives. The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to the Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. This Agreement shall continue in effect regardless of whether Indemnitee continues to serve as an officer or director of the Company or continues to act as a trustee or agent of the Company at its request. ARTICLE XIV - SEVERABILITY The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any provision within a single section, paragraph or sentence) are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable in any respect, and the validity and enforceability of any such provision in every other respect and of the remaining provisions shall not be in any way impaired, and shall remain enforceable to the fullest extent permitted by law. 6 7 ARTICLE XV - NOTICES All notices, requests, demands, and other communications shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed: If to Indemnitee, to: ----------------------------- ----------------------------- ----------------------------- If to Company, to: Bay Meadows Operating Company 2600 South Delaware Street San Mateo, CA 94402 Attn: President or to such other address as may have been furnished to the Indemnitee by the Company or to the Company by the Indemnitee, as the case may be. ARTICLE XVI - GOVERNING LAW This Agreement shall be governed by and construed and enforced in accordance with the laws of California applicable to contracts made and to be performed in such State without giving effect to the principles of conflicts of laws. In Witness Whereof, the parties have duly executed and delivered this Agreement this 30th day of August, 1996. BAY MEADOWS OPERATING COMPANY By: -------------------------------- Title: ----------------------------- INDEMNITEE /s/ Lee Tucker ----------------------------------- Lee Tucker 7 EX-10.12 13 INDEMNIFICATION AGRMT/ANTHONY J. ZIDICH 8/30/96 1 Exhibit 10.12 INDEMNIFICATION AGREEMENT This agreement, effective as of August 30, 1996 is between Bay Meadows Operating Company, a Delaware corporation (the "Company"), and Anthony J. Zidich ("Indemnitee"). Whereas, it is essential to the Company to retain and attract as directors the most capable persons available; and Whereas, Indemnitee is a director of the Company; and Whereas, both the Company and Indemnitee recognize the increased risk of litigation and other claims being asserted against directors and officers of public companies; and Whereas, in recognition of Indemnitee's need for substantial protection against personal liability in order to maintain Indemnitee's continued service to the Company in an effective manner and to provide Indemnitee with specific contractual assurance that the protection will be available to Indemnitee, the Company desires to provide in this Agreement for the indemnification of and the advance of expenses to Indemnitee to the full extent (whether partial or complete) permitted by law, as set forth in this Agreement and, to the extent officers' and directors' liability insurance is maintained by the Company, to provide for the continued coverage of Indemnitee under the Company's officers' and directors' liability insurance policies; Now, therefore, in consideration of the covenants contained in this Agreement and of Indemnitee's continuing service to the Company, and intending to be legally bound, the parties agree as follows: ARTICLE I - DEFINITIONS (a) Change in Control: shall be deemed to have occurred if (i) any person (defined, for purposes of this Article I, as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing 10% or more of the total voting power represented by the Company's then outstanding Voting Securities, or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director whose election by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least two thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board of Directors, or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger 2 or consolidation which would result in the Voting Securities of the Company outstanding immediately prior to such a merger or consolidation continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 90% of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (iv) the stockholders of the Company approve a plan of complete liquidation of the Company, an agreement for the sale or disposition by the Company (in one transaction or a series of transactions) of all or substantially all the Company's assets, or a plan pursuant to which (in one transaction or a series of transactions) all or substantially all the Company's assets shall be transferred to a person not wholly owned by the Company (including but not limited to a plan pursuant to which all or substantially all of the Company's assets shall be transferred to a partnership in which the Company has an interest). (b) Claim: any threatened, pending or completed action suit, investigation or proceeding, and any appeal, whether civil, criminal, administrative or investigative and/or any inquiry or investigation, whether conducted by the Company or any other party that Indemnitee in good faith believes might lead to the institution of any such action. (c) Expenses: include, without limitation, attorneys' fees and all other costs, expenses, and obligations paid or incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness in or participate in any Claim relating to any Indemnifiable Event. (d) Indemnifiable Event: any event, occurrence or circumstance related to the fact that Indemnitee is or was a director or officer of the Company, was acting as a trustee or agent of the Company at its request, or by reason of anything done or not done by Indemnitee in any such capacity. (e) Reviewing Party: any appropriate person or body consisting of a member or members of the Company's Board of Directors including the Special Independent Counsel referred to in Article III (or, to the fullest extent permitted by law, any other person or body appointed by the Board), who is not a party to the particular claim for which Indemnitee is seeking indemnification. (f) Voting Securities: any securities of the Company which vote generally in the election of directors. ARTICLE II - AGREEMENT TO INDEMNIFY (a) In the event Indemnitee was, is or becomes a party to or witness or other participant in, or is threatened to be made a party to or witness or other participant in, a Claim by reason of (or arising in part out of) an Indemnifiable Event, the Company shall indemnify Indemnitee to the fullest extent permitted by the Delaware General Corporation Law, as soon as practicable but in any event no later than thirty days after written demand is presented to the Company, against any and all expenses, judgments, fines and penalties relating to or arising out of such Claim and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, fines, penalties or amounts paid in settlement) of such Claim. The failure of Indemnitee to formally notify the Company of an Indemnifiable Event or Claim within a reasonable amount of time shall not be deemed a waiver of Indemnitee's rights under 2 3 this Agreement if the Company has actual knowledge of such Indemnifiable Event or Claim. Notwithstanding anything in this Agreement to the contrary, prior to a Change in Control Indemnitee shall not be entitled to indemnification pursuant to this Agreement in connection with any Claim initiated by Indemnitee against the Company or any director or officer of the Company unless the Company has joined in or consented to the initiation of such Claim. If so requested by Indemnitee, the Company shall advance (within five business days of such request) any and all Expenses to Indemnitee (an "Expense Advance"). (b) Notwithstanding the foregoing, (i) the obligations of the Company under Article II(a) shall be subject to the condition that any Reviewing Party shall not have determined (in a written opinion, in any case in which the Special Independent Counsel referred to in Article III is involved) that Indemnitee would not be permitted to be indemnified under applicable law, and (ii) the obligation of the Company to make an Expense Advance pursuant to Article II(a) shall be subject to the condition that if, when and to the extent that any Reviewing Party determines that Indemnitee would not be permitted to be so indemnified under applicable law, the Company shall be entitled to be reimbursed by Indemnitee (who hereby undertakes to reimburse the Company in such a case) for all such amounts paid; provided, however, that if Indemnitee commences, or has commenced, legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee should be indemnified under applicable law, any determination made by a Reviewing Party that Indemnitee would not be permitted to be indemnified under applicable law shall not be binding and Indemnitee shall not be required to reimburse the Company for any Expense Advance until a final judicial determination is made (as to which all rights of appeal have been exhausted or lapsed). If there has not been a Change in Control, a Reviewing Party shall be selected by the Board of Directors, and if there has been such a Change in Control, a Reviewing Party shall be Special Independent Counsel referred to in Article III. If there has been no appointment or no determination by a Reviewing Party or if a Reviewing Party determines that Indemnitee substantively would not be permitted to be indemnified in whole or in part under applicable law, Indemnitee shall have the right to commence litigation in any court in California or Delaware having subject matter jurisdiction and in which venue is proper seeking an initial determination by the court or challenging any such determination by the court or challenging any such determination by the Reviewing Party, including the legal or factual basis, and the Company consents to service of process and to appear in any such proceeding. Any determination by the Reviewing Party otherwise shall be conclusive and binding on the Company and Indemnitee. (c) Notwithstanding the foregoing and as a condition to making Expense Advances to Indemnitee for legal fees, the Company shall, in its sole discretion, select the attorney or attorneys to represent and defend Indemnitee unless (i) the Company fails to fulfill its obligations make Expense Advances; (ii) the Company, in its sole discretion, agrees to permit Indemnitee to select his or her own attorney or attorneys; or (iii) a conflict of interest arises between the Company and Indemnitee, in which case Indemnitee shall select his or her own attorney, subject to the Company's reasonable approval. ARTICLE III - CHANGE IN CONTROL The Company agrees that if there is a Change in Control of the Company (other than a Change in Control which has been approved by a majority of the Company's Board of Directors who were directors immediately prior to such Change in Control), then with respect to all matters 3 4 thereafter arising concerning the rights of Indemnitee to indemnity payments and Expense Advances under this Agreement or any other agreement, the Company's Articles of Incorporation, or the Company's Bylaws in effect relating to Claims for Indemnifiable Events, the Company shall seek legal advice only from "Special Independent Counsel" selected by Indemnitee and approved by the Company (which approval shall not be unreasonably withheld), and who has not otherwise performed services for the Company or Indemnitee within the last five years (other than in connection with such matters). Such Special Independent Counsel, among other things, shall render its written opinion to the Company and Indemnitee as to whether and to what extent the Indemnitee would be permitted to be indemnified under applicable law. The Company agrees to pay the reasonable fees of the Special Independent Counsel referred to above and may fully indemnify such Special Independent Counsel against any and all expenses (including attorneys' fees), claims, liabilities and damages arising out of or relating to this Agreement. ARTICLE IV - ESTABLISHMENT OF LETTER OF CREDIT The Company's obligations to make indemnity payments and Expense Advances to Indemnitee under this Agreement shall be secured by a letter of credit in the amount of $1,000,000 which shall also secure the Company's indemnity payment and expense advance obligations to Eugene F. Barsotti, Jr., Greg S. Gunderson, John C. Harris, F. Jack Liebau, Lee Tucker and (along with Indemnitee, the "Current Directors") and Frank Trigeiro, each of whom, along with Indemnitee, shall be named a beneficiary of the letter of credit. Such letter of credit shall be established no later than ten (10) days after the date of this Agreement and shall remain in place for an initial period of one year or, if less, until any four of the Current Directors, one of which may but need not be the Indemnitee, at their sole election, consent to the termination of such letter of credit. If, after the initial or any subsequent period, such letter of credit is not renewed for a subsequent period, any four of the Current Directors shall have the right to draw the full amount thereof to hold as cash collateral securing the obligations under this Agreement. The letter of credit shall additionally provide that draws may be made by any four of the Current Directors, one of which may but need not be the Indemnitee, upon their certification that (a) Indemnitee is entitled to indemnity or Expenses Advances under this Agreement, (b) Indemnitee has demanded the amount being drawn from the Company in writing, and (c) the Company has not paid the full amount within the time required by this Agreement. Recourse to the letter of credit shall be in addition to, and not in lieu of, any manner otherwise available for enforcement of this Agreement and nothing in this Article shall relieve the Company of any of its obligations under this Agreement. ARTICLE V - ADDITIONAL EXPENSES To the fullest extent permitted by law, the Company shall indemnify Indemnitee against any and all Expenses (including attorneys' fees) and, if requested by Indemnitee, shall (within five business days of such request) advance such Expenses to Indemnitee, which are incurred by Indemnitee in connection with any Claim asserted against or action brought by Indemnitee for (i) indemnification or advance payment of Expenses by the Company under this Agreement or any other agreement, the Company's Bylaws or Articles of Incorporation now or hereafter in effect relating to Claims for Indemnifiable Events and/or (ii) recovery under any directors' and officers' liability insurance policies maintained by the Company, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, Expense advance or insurance recovery, as the case may be. 4 5 ARTICLE VI - PARTIAL INDEMNITY AND CONTRIBUTION (a) If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the Expenses, judgments, fines, penalties and amounts paid in settlement of a Claim but not, however, for all of the total amount, the Company shall nevertheless indemnify Indemnitee for the portion to which Indemnitee is entitled. Moreover, notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits or otherwise in defense of any or all Claims relating in whole or in part to an Indemnifiable Event or in defense of any issue or matter, including dismissal without prejudice, Indemnitee shall be indemnified against all Expenses incurred in connection with those defenses. In connection with any determination by the Reviewing Party or otherwise as to whether Indemnitee is entitled to be indemnified, the burden of proof shall be on the Company to establish that Indemnitee is not so entitled. (b) In the event that the Company is not obligated to make indemnity payments and Expense Advances under this Agreement, the Company's Bylaws or the Delaware General Corporation Law, contribution as between the Company and Indemnitee toward any judgment or settlement relating to a Claim by reason of (or arising in part out of) an Indemnification Event shall be based upon the relative benefits to and faults of each of the parties involved. ARTICLE VII - NO PRESUMPTIONS For purposes of this Agreement, to the fullest extent permitted by law, the termination of any Claim, action, suit or proceeding, by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law. ARTICLE VIII - NONEXCLUSIVITY The rights of the Indemnitee hereunder shall be in addition to any other rights Indemnitee may have under the Company's Articles of Incorporation, Bylaws, the Delaware General Corporation Law or otherwise. To the extent that a change in the Delaware General Corporation Law (whether by statute or judicial decision) permits greater indemnification by agreement than would be afforded currently under the Company's Articles of Incorporation or Bylaws or this Agreement, to the fullest extent permitted by law it is the intent of the parties to that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change immediately upon the occurrence of such change without further action by the Company or Indemnitee. ARTICLE IX - INSURANCE To the extent the Company maintains an insurance policy or policies providing directors' and officers' liability insurance, Indemnitee shall be covered by such policy or policies, in accordance with its or their terms, to the maximum extent of the coverage available for any director or officer of the Company. The Company agrees to make demand on such policies or all of such policies which may be applicable in the event it may also have an indemnification obligation under this Agreement. 5 6 ARTICLE X - LIMITATIONS PERIOD No legal action shall be brought and no cause of action shall be asserted by or in the right of the Company or any affiliate of the Company against Indemnitee, Indemnitee's spouse, heirs, executors or personal or legal representatives after the expiration of two years from the date of accrual of such cause of action, and any claim or cause of action of the Company or its affiliate shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such two year period; provided, however, that if any shorter period of limitations is otherwise applicable to any such cause of action such shorter period shall govern. ARTICLE XI - AMENDMENTS No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions (whether or not similar) nor shall such waiver constitute a continuing waiver. ARTICLE XII - SUBROGATION The Company shall not be liable under this Agreement to make any payment in connection with any Claim made against Indemnitee to the extent Indemnitee has otherwise actually received payment (under any insurance policy, Bylaw or otherwise) of the amounts otherwise indemnifiable. ARTICLE XIII - BINDING EFFECT This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties and their respective successors, assigns, including any direct or indirect successors by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company, spouses, heirs, and personal and legal representatives. The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to the Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. This Agreement shall continue in effect regardless of whether Indemnitee continues to serve as an officer or director of the Company or continues to act as a trustee or agent of the Company at its request. ARTICLE XIV - SEVERABILITY The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any provision within a single section, paragraph or sentence) are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable in any respect, and the validity and enforceability of any such provision in every other respect and of the remaining provisions shall not be in any way impaired, and shall remain enforceable to the fullest extent permitted by law. 6 7 ARTICLE XV - NOTICES All notices, requests, demands, and other communications shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed: If to Indemnitee, to: ----------------------------- ----------------------------- ----------------------------- If to Company, to: Bay Meadows Operating Company 2600 South Delaware Street San Mateo, CA 94402 Attn: President or to such other address as may have been furnished to the Indemnitee by the Company or to the Company by the Indemnitee, as the case may be. ARTICLE XVI - GOVERNING LAW This Agreement shall be governed by and construed and enforced in accordance with the laws of California applicable to contracts made and to be performed in such State without giving effect to the principles of conflicts of laws. In Witness Whereof, the parties have duly executed and delivered this Agreement this 30th day of August, 1996. BAY MEADOWS OPERATING COMPANY By: -------------------------------- Title: ----------------------------- INDEMNITEE /s/ Anthony J. Zidich ----------------------------------- Anthony J. Zidich 7 EX-10.13 14 INDEMNIFICATION AGRMT/FRANK TRIGERIO 8/30/96 1 Exhibit 10.13 INDEMNIFICATION AGREEMENT This agreement, effective as of August 30, 1996 is between Bay Meadows Operating Company, a Delaware corporation (the "Company"), and Frank Trigeiro ("Indemnitee"). Whereas, it is essential to the Company to retain and attract as directors and officers the most capable persons available; and Whereas, Indemnitee is a an officer of the Company; and Whereas, both the Company and Indemnitee recognize the increased risk of litigation and other claims being asserted against directors and officers of public companies; and Whereas, in recognition of Indemnitee's need for substantial protection against personal liability in order to maintain Indemnitee's continued service to the Company in an effective manner and to provide Indemnitee with specific contractual assurance that the protection will be available to Indemnitee, the Company desires to provide in this Agreement for the indemnification of and the advance of expenses to Indemnitee to the full extent (whether partial or complete) permitted by law, as set forth in this Agreement and, to the extent officers' and directors' liability insurance is maintained by the Company, to provide for the continued coverage of Indemnitee under the Company's officers' and directors' liability insurance policies; Now, therefore, in consideration of the covenants contained in this Agreement and of Indemnitee's continuing service to the Company, and intending to be legally bound, the parties agree as follows: ARTICLE I - DEFINITIONS (a) Change in Control: shall be deemed to have occurred if (i) any person (defined, for purposes of this Article I, as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing 10% or more of the total voting power represented by the Company's then outstanding Voting Securities, or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Company and any new director whose election by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least two thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority of the Board of Directors, or (iii) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger 2 or consolidation which would result in the Voting Securities of the Company outstanding immediately prior to such a merger or consolidation continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity) at least 90% of the total voting power represented by the Voting Securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (iv) the stockholders of the Company approve a plan of complete liquidation of the Company, an agreement for the sale or disposition by the Company (in one transaction or a series of transactions) of all or substantially all the Company's assets, or a plan pursuant to which (in one transaction or a series of transactions) all or substantially all the Company's assets shall be transferred to a person not wholly owned by the Company (including but not limited to a plan pursuant to which all or substantially all of the Company's assets shall be transferred to a partnership in which the Company has an interest). (b) Claim: any threatened, pending or completed action suit, investigation or proceeding, and any appeal, whether civil, criminal, administrative or investigative and/or any inquiry or investigation, whether conducted by the Company or any other party that Indemnitee in good faith believes might lead to the institution of any such action. (c) Expenses: include, without limitation, attorneys' fees and all other costs, expenses, and obligations paid or incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to defend, be a witness in or participate in any Claim relating to any Indemnifiable Event. (d) Indemnifiable Event: any event, occurrence or circumstance related to the fact that Indemnitee is or was a director or officer of the Company, was acting as a trustee or agent of the Company at its request, or by reason of anything done or not done by Indemnitee in any such capacity. (e) Reviewing Party: any appropriate person or body consisting of a member or members of the Company's Board of Directors including the Special Independent Counsel referred to in Article III (or, to the fullest extent permitted by law, any other person or body appointed by the Board), who is not a party to the particular claim for which Indemnitee is seeking indemnification. (f) Voting Securities: any securities of the Company which vote generally in the election of directors. ARTICLE II - AGREEMENT TO INDEMNIFY (a) In the event Indemnitee was, is or becomes a party to or witness or other participant in, or is threatened to be made a party to or witness or other participant in, a Claim by reason of (or arising in part out of) an Indemnifiable Event, the Company shall indemnify Indemnitee to the fullest extent permitted by the Delaware General Corporation Law, as soon as practicable but in any event no later than thirty days after written demand is presented to the Company, against any and all expenses, judgments, fines and penalties relating to or arising out of such Claim and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, fines, penalties or amounts paid in settlement) of such Claim. The failure of Indemnitee to formally notify the Company of an Indemnifiable Event or Claim within a reasonable amount of time shall not be deemed a waiver of Indemnitee's rights under 2 3 this Agreement if the Company has actual knowledge of such Indemnifiable Event or Claim. Notwithstanding anything in this Agreement to the contrary, prior to a Change in Control Indemnitee shall not be entitled to indemnification pursuant to this Agreement in connection with any Claim initiated by Indemnitee against the Company or any director or officer of the Company unless the Company has joined in or consented to the initiation of such Claim. If so requested by Indemnitee, the Company shall advance (within five business days of such request) any and all Expenses to Indemnitee (an "Expense Advance"). (b) Notwithstanding the foregoing, (i) the obligations of the Company under Article II(a) shall be subject to the condition that any Reviewing Party shall not have determined (in a written opinion, in any case in which the Special Independent Counsel referred to in Article III is involved) that Indemnitee would not be permitted to be indemnified under applicable law, and (ii) the obligation of the Company to make an Expense Advance pursuant to Article II(a) shall be subject to the condition that if, when and to the extent that any Reviewing Party determines that Indemnitee would not be permitted to be so indemnified under applicable law, the Company shall be entitled to be reimbursed by Indemnitee (who hereby undertakes to reimburse the Company in such a case) for all such amounts paid; provided, however, that if Indemnitee commences, or has commenced, legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee should be indemnified under applicable law, any determination made by a Reviewing Party that Indemnitee would not be permitted to be indemnified under applicable law shall not be binding and Indemnitee shall not be required to reimburse the Company for any Expense Advance until a final judicial determination is made (as to which all rights of appeal have been exhausted or lapsed). If there has not been a Change in Control, a Reviewing Party shall be selected by the Board of Directors, and if there has been such a Change in Control, a Reviewing Party shall be Special Independent Counsel referred to in Article III. If there has been no appointment or no determination by a Reviewing Party or if a Reviewing Party determines that Indemnitee substantively would not be permitted to be indemnified in whole or in part under applicable law, Indemnitee shall have the right to commence litigation in any court in California or Delaware having subject matter jurisdiction and in which venue is proper seeking an initial determination by the court or challenging any such determination by the court or challenging any such determination by the Reviewing Party, including the legal or factual basis, and the Company consents to service of process and to appear in any such proceeding. Any determination by the Reviewing Party otherwise shall be conclusive and binding on the Company and Indemnitee. (c) Notwithstanding the foregoing and as a condition to making Expense Advances to Indemnitee for legal fees, the Company shall, in its sole discretion, select the attorney or attorneys to represent and defend Indemnitee unless (i) the Company fails to fulfill its obligations make Expense Advances; (ii) the Company, in its sole discretion, agrees to permit Indemnitee to select his or her own attorney or attorneys; or (iii) a conflict of interest arises between the Company and Indemnitee, in which case Indemnitee shall select his or her own attorney, subject to the Company's reasonable approval. ARTICLE III - CHANGE IN CONTROL The Company agrees that if there is a Change in Control of the Company (other than a Change in Control which has been approved by a majority of the Company's Board of Directors who were directors immediately prior to such Change in Control), then with respect to all matters 3 4 thereafter arising concerning the rights of Indemnitee to indemnity payments and Expense Advances under this Agreement or any other agreement, the Company's Articles of Incorporation, or the Company's Bylaws in effect relating to Claims for Indemnifiable Events, the Company shall seek legal advice only from "Special Independent Counsel" selected by Indemnitee and approved by the Company (which approval shall not be unreasonably withheld), and who has not otherwise performed services for the Company or Indemnitee within the last five years (other than in connection with such matters). Such Special Independent Counsel, among other things, shall render its written opinion to the Company and Indemnitee as to whether and to what extent the Indemnitee would be permitted to be indemnified under applicable law. The Company agrees to pay the reasonable fees of the Special Independent Counsel referred to above and may fully indemnify such Special Independent Counsel against any and all expenses (including attorneys' fees), claims, liabilities and damages arising out of or relating to this Agreement. ARTICLE IV - ESTABLISHMENT OF LETTER OF CREDIT The Company's obligations to make indemnity payments and Expense Advances to Indemnitee under this Agreement shall be secured by a letter of credit in the amount of $1,000,000 which shall also secure the Company's indemnity payment and expense advance obligations to Eugene F. Barsotti, Jr., Greg S. Gunderson, John C. Harris, F. Jack Liebau, Lee Tucker and Anthony J. Zidich (the "Current Directors") and Frank Trigeiro, each of whom, along with Indemnitee, shall be named a beneficiary of the letter of credit. Such letter of credit shall be established no later than ten (10) days after the date of this Agreement and shall remain in place for an initial period of one year or, if less, until any four of the Current Directors, one of which may but need not be the Indemnitee, at their sole election, consent to the termination of such letter of credit. If, after the initial or any subsequent period, such letter of credit is not renewed for a subsequent period, any four of the Current Directors shall have the right to draw the full amount thereof to hold as cash collateral securing the obligations under this Agreement. The letter of credit shall additionally provide that draws may be made by any four of the Current Directors, one of which may but need not be the Indemnitee, upon their certification that (a) Indemnitee is entitled to indemnity or Expenses Advances under this Agreement, (b) Indemnitee has demanded the amount being drawn from the Company in writing, and (c) the Company has not paid the full amount within the time required by this Agreement. Recourse to the letter of credit shall be in addition to, and not in lieu of, any manner otherwise available for enforcement of this Agreement and nothing in this Article shall relieve the Company of any of its obligations under this Agreement. ARTICLE V - ADDITIONAL EXPENSES To the fullest extent permitted by law, the Company shall indemnify Indemnitee against any and all Expenses (including attorneys' fees) and, if requested by Indemnitee, shall (within five business days of such request) advance such Expenses to Indemnitee, which are incurred by Indemnitee in connection with any Claim asserted against or action brought by Indemnitee for (i) indemnification or advance payment of Expenses by the Company under this Agreement or any other agreement, the Company's Bylaws or Articles of Incorporation now or hereafter in effect relating to Claims for Indemnifiable Events and/or (ii) recovery under any directors' and officers' liability insurance policies maintained by the Company, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, Expense advance or insurance recovery, as the case may be. 4 5 ARTICLE VI - PARTIAL INDEMNITY AND CONTRIBUTION (a) If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the Expenses, judgments, fines, penalties and amounts paid in settlement of a Claim but not, however, for all of the total amount, the Company shall nevertheless indemnify Indemnitee for the portion to which Indemnitee is entitled. Moreover, notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits or otherwise in defense of any or all Claims relating in whole or in part to an Indemnifiable Event or in defense of any issue or matter, including dismissal without prejudice, Indemnitee shall be indemnified against all Expenses incurred in connection with those defenses. In connection with any determination by the Reviewing Party or otherwise as to whether Indemnitee is entitled to be indemnified, the burden of proof shall be on the Company to establish that Indemnitee is not so entitled. (b) In the event that the Company is not obligated to make indemnity payments and Expense Advances under this Agreement, the Company's Bylaws or the Delaware General Corporation Law, contribution as between the Company and Indemnitee toward any judgment or settlement relating to a Claim by reason of (or arising in part out of) an Indemnification Event shall be based upon the relative benefits to and faults of each of the parties involved. ARTICLE VII - NO PRESUMPTIONS For purposes of this Agreement, to the fullest extent permitted by law, the termination of any Claim, action, suit or proceeding, by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere, or its equivalent, shall not create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law. ARTICLE VIII - NONEXCLUSIVITY The rights of the Indemnitee hereunder shall be in addition to any other rights Indemnitee may have under the Company's Articles of Incorporation, Bylaws, the Delaware General Corporation Law or otherwise. To the extent that a change in the Delaware General Corporation Law (whether by statute or judicial decision) permits greater indemnification by agreement than would be afforded currently under the Company's Articles of Incorporation or Bylaws or this Agreement, to the fullest extent permitted by law it is the intent of the parties to that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change immediately upon the occurrence of such change without further action by the Company or Indemnitee. ARTICLE IX - INSURANCE To the extent the Company maintains an insurance policy or policies providing directors' and officers' liability insurance, Indemnitee shall be covered by such policy or policies, in accordance with its or their terms, to the maximum extent of the coverage available for any director or officer of the Company. The Company agrees to make demand on such policies or all of such policies which may be applicable in the event it may also have an indemnification obligation under this Agreement. 5 6 ARTICLE X - LIMITATIONS PERIOD No legal action shall be brought and no cause of action shall be asserted by or in the right of the Company or any affiliate of the Company against Indemnitee, Indemnitee's spouse, heirs, executors or personal or legal representatives after the expiration of two years from the date of accrual of such cause of action, and any claim or cause of action of the Company or its affiliate shall be extinguished and deemed released unless asserted by the timely filing of a legal action within such two year period; provided, however, that if any shorter period of limitations is otherwise applicable to any such cause of action such shorter period shall govern. ARTICLE XI - AMENDMENTS No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions (whether or not similar) nor shall such waiver constitute a continuing waiver. ARTICLE XII - SUBROGATION The Company shall not be liable under this Agreement to make any payment in connection with any Claim made against Indemnitee to the extent Indemnitee has otherwise actually received payment (under any insurance policy, Bylaw or otherwise) of the amounts otherwise indemnifiable. ARTICLE XIII - BINDING EFFECT This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties and their respective successors, assigns, including any direct or indirect successors by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company, spouses, heirs, and personal and legal representatives. The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to the Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. This Agreement shall continue in effect regardless of whether Indemnitee continues to serve as an officer or director of the Company or continues to act as a trustee or agent of the Company at its request. ARTICLE XIV - SEVERABILITY The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any provision within a single section, paragraph or sentence) are held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable in any respect, and the validity and enforceability of any such provision in every other respect and of the remaining provisions shall not be in any way impaired, and shall remain enforceable to the fullest extent permitted by law. 6 7 ARTICLE XV - NOTICES All notices, requests, demands, and other communications shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed: If to Indemnitee, to: ----------------------------- ----------------------------- ----------------------------- If to Company, to: Bay Meadows Operating Company 2600 South Delaware Street San Mateo, CA 94402 Attn: President or to such other address as may have been furnished to the Indemnitee by the Company or to the Company by the Indemnitee, as the case may be. ARTICLE XVI - GOVERNING LAW This Agreement shall be governed by and construed and enforced in accordance with the laws of California applicable to contracts made and to be performed in such State without giving effect to the principles of conflicts of laws. In Witness Whereof, the parties have duly executed and delivered this Agreement this 30th day of August, 1996. BAY MEADOWS OPERATING COMPANY By: -------------------------------- Title: ----------------------------- INDEMNITEE /s/ F. Jack Liebau ----------------------------------- F. Jack Liebau 7 EX-10.14 15 FORM OF CALIFORNIA JOCKEY INDEMNIFICATION AGRMT 1 Exhibit 10.14 AGREEMENT This Agreement, made and entered into this 18 day of August, 1996 ("Agreement"), by and between California Jockey Club, a Delaware corporation ("Company"), and __________________ ("Indemnitee"): WHEREAS, highly competent persons have become more reluctant to serve publicly-held corporations as directors or in other capacities unless they are provided with adequate protection through insurance or adequate indemnification against inordinate risks of claims and actions against them arising out of their service to and activities on behalf of the corporation; and WHEREAS, the Board of Directors of the Company (the "Board") has determined that, in order to attract and retain qualified individuals, the Company will attempt to maintain on an ongoing basis, at its sole expense, liability insurance to protect persons serving the Company and its subsidiaries from certain liabilities. Although the furnishing of such insurance has been a customary and widespread practice among United States-based corporations and other business enterprises, the Company believes that, given current market conditions and trends, such insurance may be available to it in the future only at higher premiums and with more exclusions. At the same time, directors, officers, and other persons in service to corporations or business enterprises are being increasingly subjected to expensive and time-consuming litigation relating to, among other things, matters that traditionally would have been brought only against the Company or business enterprise itself; and WHEREAS, the uncertainties relating to such insurance and to indemnification have increased the difficulty of attracting and retaining such persons; and WHEREAS, the Board has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of the Company's stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future; and WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified; and WHEREAS, this Agreement is a supplement to and in furtherance of the Bylaws of the Company and any resolutions adopted pursuant thereto, and shall not be deemed a substitute therefore, nor to diminish or abrogate any rights of Indemnitee thereunder; and WHEREAS, the By-laws and the Delaware director indemnification statute each is nonexclusive, and therefore 2 contemplates that contracts may be entered into with respect to indemnification of directors, officers and employees; and WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified; and WHEREAS, Indemnitee is willing to serve, continue to serve and to take on additional service for or on behalf of the Company on the condition that he be so indemnified; NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows: Section 1. Services by Indemnitee. Indemnitee agrees to serve as a director of the Company. Indemnitee may at any time and for any reason resign from such position (subject to any other contractual obligation or any obligation imposed by operation of law), in which event the Company shall have no obligation under this Agreement to continue Indemnitee in such position. This Agreement shall not be deemed an employment contract between the Company (or any of its subsidiaries) and Indemnitee. Indemnitee specifically acknowledges that Indemnitee's employment with the Company (or any of its subsidiaries), if any, is at will, and the Indemnitee may be discharged at any time for any reason, with or without cause, except as may be otherwise provided in any written employment contract between Indemnitee and the Company (or any of its subsidiaries), other applicable formal severance policies duly adopted by the Board, or, with respect to service as a director of the Company, by the Company's Certificate of Incorporation, By-laws, and the General Corporation Law of the State of Delaware. The foregoing notwithstanding, this Agreement shall continue in force after Indemnitee has ceased to serve as a director of the Company. Section 2. Indemnification - General. The Company shall indemnify, and advance Expenses (as hereinafter defined) to, Indemnitee (a) as provided in this Agreement and (b) (subject to the provisions of this Agreement) to the fullest extent permitted by applicable law in effect on the date hereof and as amended from time to time. The rights of Indemnitee provided under the preceding sentence shall include, but shall not be limited to, the rights set forth in the other Sections of this Agreement. Section 3. Proceedings Other Than Proceedings by or in the Right of the Company. Indemnitee shall be entitled to the rights of indemnification provided in this Section 3 if, by reason of his Corporate Status (as hereinafter defined), he is, or is threatened to be made, a party to or a participant in any threatened, pending, or completed Proceeding (as hereinafter defined), other than a Proceeding by or in the right of the Company. Pursuant to this Section 3, Indemnitee shall be -2- 3 indemnified against all Expenses, judgments, penalties, fines and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, penalties, fines and amounts paid in settlement) actually and reasonably incurred by him or on his behalf in connection with such Proceeding or any claim, issue or matter therein, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal Proceeding, had no reasonable cause to believe his conduct was unlawful. Section 4. Proceedings by or in the Right of the Company. Indemnitee shall be entitled to the rights of indemnification provided in this Section 4 if, by reason of his Corporate Status, he is, or is threatened to be made, a party to or a participant in any threatened, pending or completed Proceeding brought by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section , Indemnitee shall be indemnified against all Expenses (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses) actually and reasonably incurred by him or on his behalf in connection with such Proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company; provided, however, that, if applicable law so provides, no indemnification against such Expenses shall be made in respect of any claim, issue or matter in such Proceeding as to which Indemnitee shall have been adjudged to be liable to the Company unless and to the extent that the Court of Chancery of the State of Delaware, or the court in which such Proceeding shall have been brought or is pending, shall determine that such indemnification may be made. Section 5. Partial Indemnification. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a party to (or a participant in) and is successful, on the merits or otherwise, in defense of any Proceeding, he shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith. If Indemnitee is not wholly successful in defense of such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee against all Expenses actually and reasonably incurred by him or on his behalf in connection with each successfully resolved claim, issue or matter. For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter. If Indemnitee is entitled under any provision of this agreement to indemnification by the Company for some or a portion of the Expenses, judgments, penalties, fines and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, penalties, fines and amounts paid in settlement) actually and reasonably incurred by him or on his behalf in connection with such Proceeding or any claim, issue or matter therein, but not, however, for the total -3- 4 amount thereof, the Company shall nevertheless indemnify Indemnitee for the portion to which Indemnitee is entitled. Section 6. Indemnification for Additional Expenses. (a) The Company shall indemnify Indemnitee against any and all Expenses and, if requested by Indemnitee, shall (within seven (7) business days of such request) advance such Expenses to Indemnitee, which are incurred by Indemnitee in connection with any action brought by Indemnitee for (i) indemnification or advance payment of Expenses by the Company under this Agreement or any other agreement or by-law of the Company now or hereafter in effect; or (ii) recovery under any directors' and officers' liability insurance policies maintained by the Company, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advance expense payment or insurance recovery, as the case may be. (b) Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is, by reason of his Corporate Status, a witness in any Proceeding to which Indemnitee is not a party, he shall be indemnified against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith. Section 7. Advancement of Expenses. The Company shall advance all reasonable Expenses incurred by or on behalf of Indemnitee in connection with any Proceeding within seven (7) days after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee and shall include or be preceded or accompanied by an undertaking by or on behalf of Indemnitee to repay any Expenses advanced if it shall ultimately be determined that Indemnitee is not entitled to be indemnified against such Expenses. Notwithstanding the foregoing, the obligation of the Company to advance Expenses pursuant to this Section 7 shall be subject to the condition that, if, when and to the extent that the Company determines that Indemnitee would not be permitted to be indemnified under applicable law, the Company shall be entitled to be reimbursed, within thirty (30) days of such determination, by Indemnitee (who hereby agrees to reimburse the Company) for all such amounts theretofore paid; provided, however, that if Indemnitee has commenced or thereafter commences legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee should be indemnified under applicable law, any determination made by the Company that Indemnitee would not be permitted to be indemnified under applicable law shall not be binding and Indemnitee shall not be required to reimburse the Company for any advance of Expenses until a final judicial determination is made with respect thereto (as to which all rights of appeal therefrom have been exhausted or lapsed). Section 8. Procedure for Determination of Entitlement to Indemnification. -4- 5 (a) To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board in writing that Indemnitee has requested indemnification. (b) Upon written request by Indemnitee for indemnification pursuant to the first sentence of Section 8(a) hereof, a determination, if required by applicable law, with respect to Indemnitee's entitlement thereto shall be made in the specific case: (i) if a Change in Control (as hereinafter defined) shall have occurred, by Independent Counsel (as hereinafter defined) in a written opinion to the Board of Directors, a copy of which shall be delivered to Indemnitee; or (ii) if a Change of Control shall not have occurred, (A) by a majority vote of the Disinterested Directors (as hereinafter defined), even though less than a quorum of the Board, or (B) if there are no such Disinterested Directors or, if such Disinterested Directors so direct, by Independent Counsel in a written opinion to the Board, a copy of which shall be delivered to Indemnitee or (C) if so directed by the Board, by the stockholders of the Company; and, if it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within seven (7) days after such determination. Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee's entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any costs or expenses (including attorneys' fees and disbursements) incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee's entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom. (c) In the event the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 8(b) hereof, the Independent Counsel shall be selected as provided in this Section 8(c). If a Change of Control shall not have occurred, the Independent Counsel shall be selected by the Board of Directors, and the Company shall give written notice to Indemnitee advising him of the identity of the Independent Counsel so selected. If a Change of Control shall have occurred, the Independent Counsel shall be selected by Indemnitee (unless Indemnitee shall request that such selection be made by the Board of Directors, in which event the preceding sentence shall apply), and Indemnitee shall give written notice to the Company advising it of the identity of the Independent Counsel so selected. In either event, Indemnitee or the Company, as the case may be, may, within 10 days after such written notice of selection shall have -5- 6 been given, deliver to the Company or to Indemnitee, as the case may be, a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of "Independent Counsel" as defined in Section 17 of this Agreement, and the objection shall set forth with particularity the factual basis of such assertion. If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or a court has determined that such objection is without merit. If, within 20 days after submission by Indemnitee of a written request for indemnification pursuant to Section 8(a) hereof, no Independent Counsel shall have been selected and not objected to, either the Company or Indemnitee may petition the Court of Chancery of the State of Delaware for resolution of any objection which shall have been made by the Company or Indemnitee to the other's selection of Independent Counsel and/or for the appointment as Independent Counsel of a person selected by the Court or by such other person as the Court shall designate, and the person with respect to whom all objections are so resolved or the person so appointed shall act as Independent Counsel under Section 8(b) hereof. The Company shall pay any and all reasonable fees and expenses of Independent Counsel incurred by such Independent Counsel in connection with acting pursuant to Section 8(b) hereof, and the Company shall pay all reasonable fees and expenses incident to the procedures of this Section 8(c), regardless of the manner in which such Independent Counsel was selected or appointed. Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 10(a)(iii) of this Agreement, Independent Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing). (d) The Company shall not be required to obtain the consent of the Indemnitee to the settlement of any Proceeding which the Company has undertaken to defend if the Company assumes full and sole responsibility for such settlement and the settlement grants the Indemnitee a complete and unqualified release in respect of the potential liability. The Company shall not be liable for any amount paid by the Indemnitee in settlement of any Proceeding that is not defended by the Company, unless the Company has consented to such settlement, which consent shall not be unreasonably withheld. Section 9. Presumptions and Effect of Certain Proceedings. (a) In making a determination with respect to entitlement to indemnification or the advancement of expenses hereunder, the person or persons or entity making such determination shall presume that Indemnitee is entitled to indemnification or advancement of expenses under this Agreement if Indemnitee has submitted a request for indemnification or the advancement of expenses in accordance with Section 8(a) of this Agreement, and the Company shall have the burden of proof to overcome that presumption in connection with the making by any person, persons or entity of any determination contrary to that presumption. Neither the failure of the Company (including its -6- 7 board of directors or independent legal counsel) to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company (including its board of directors or independent legal counsel) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct. (b) If the person, persons or entity empowered or selected under Section 8 of this Agreement to determine whether Indemnitee is entitled to indemnification shall not have made a determination within sixty (60) days after receipt by the Company of the request therefor, the requisite determination of entitlement to indemnification shall be deemed to have been made and Indemnitee shall be entitled to such indemnification, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee's statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law; provided, however, that such 60-day period may be extended for a reasonable time, not to exceed an additional thirty (30) days, if the person, persons or entity making the determination with respect to entitlement to indemnification in good faith requires such additional time for the obtaining or evaluating of documentation and/or information relating thereto; and provided, further, that the foregoing provisions of this Section 9(b) shall not apply (i) if the determination of entitlement to indemnification is to be made by the stockholders pursuant to Section 8(b) of this Agreement and if (A) within fifteen (15) days after receipt by the Company of the request for such determination the Board of Directors has resolved to submit such determination to the stockholders for their consideration at an annual meeting thereof to be held within seventy five (75) days after such receipt and such determination is made thereat, or (B) a special meeting of stockholders is called within fifteen (15) days after such receipt for the purpose of making such determination, such meeting is held for such purpose within sixty (60) days after having been so called and such determination is made thereat, or (ii) if the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 8(b) of this Agreement. (c) The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his conduct was unlawful. -7- 8 (d) Reliance as Safe Harbor. For purposes of any determination of Good Faith, Indemnitee shall be deemed to have acted in Good Faith if Indemnitee's action is based on the records or books of account of the Company or relevant enterprise, including financial statements, or on information supplied to Indemnitee by the officers of the Company or relevant enterprise in the course of their duties, or on the advice of legal counsel for the Company or relevant enterprise or on information or records given or reports made to the Company or relevant enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Company or relevant enterprise. The provisions of this Section 9(d) shall not be deemed to be exclusive or to limit in any way the other circumstances in which the Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement. (e) Actions of Others. The knowledge and/or actions, or failure to act, of any director, officer, agent or employee of the Company or relevant enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement. Section 10. Remedies of Indemnitee. (a) In the event that (i) a determination is made pursuant to Section 8 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 7 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 8(b) of this Agreement within 90 days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to Section 5 or 6 of this Agreement within ten (10) days after receipt by the Company of a written request therefor, or (v) payment of indemnification is not made within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification, Indemnitee shall be entitled to an adjudication by the Court of Chancery of the State of Delaware of his entitlement to such indemnification or advancement of Expenses. Alternatively, Indemnitee, at his option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 10(a); provided, however, that the foregoing clause shall not apply in respect of a proceeding brought by Indemnitee to enforce his rights under Section 5 of this Agreement. (b) In the event that a determination shall have been made pursuant to Section 8(b) of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 10 shall be conducted in all respects as a de novo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of -8- 9 that adverse determination. If a Change of Control shall have occurred, in any judicial proceeding or arbitration commenced pursuant to this Section 10, the Company shall have the burden of proving that Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be. (c) If a determination shall have been made pursuant to Section 8(b) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 10, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee's statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law. (d) In the event that Indemnitee, pursuant to this Section 10, seeks a judicial adjudication of or an award in arbitration to enforce his rights under, or to recover damages for breach of, this Agreement, Indemnitee shall be entitled to recover from the Company, and shall be indemnified by the Company against, any and all expenses (of the types described in the definition of Expenses in Section 17 of this Agreement) actually and reasonably incurred by him in such judicial adjudication or arbitration, but only if he prevails therein. If it shall be determined in said judicial adjudication or arbitration that Indemnitee is entitled to receive part but not all of the indemnification or advancement of expenses sought, the expenses incurred by Indemnitee in connection with such judicial adjudication or arbitration shall be appropriately prorated. The Company shall indemnify Indemnitee against any and all Expenses and, if requested by Indemnitee, shall (within ten (10) days after receipt by the Company of a written request therefor) advance such expenses to Indemnitee, which are incurred by Indemnitee in connection with any action brought by Indemnitee for indemnification or advance of Expenses from the Company under this Agreement or under any directors' and officers' liability insurance policies maintained by the Company, regardless of whether Indemnitee ultimately is determined to be entitled to such indemnification, advancement of Expenses or insurance recovery, as the case may be. (e) The Company shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 10 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement. Section 11. Non-Exclusivity; Survival of Rights; Insurance; Subrogation. (a) The rights of indemnification and to receive advancement of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Certificate of Incorporation, the By-Laws, any agreement, a vote of stockholders -9- 10 or a resolution of directors, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in the General Corporation Law of the State of Delaware, whether by statute or judicial decision, permits greater indemnification or advancement of Expenses than would be afforded currently under the Company's By-Laws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy. (b) To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, or agents of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person serves at the request of the Company, Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, officer, employee or agent under such policy or policies. (c) In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights. (d) The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise. (e) The Company's obligation to indemnify or advance expenses hereunder to Indemnitee who is or was serving at the request of the Company as a director, officer, employee or agent of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise shall be reduced by any amount Indemnitee has actually received as indemnification or advancement of expenses from such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise. Section 12. Duration of Agreement. This Agreement shall continue until and terminate upon the later of: (a) 10 years after the date that Indemnitee shall have ceased to serve as a director of the Company or of any other corporation, partnership, -10- 11 joint venture, trust, employee benefit plan or other enterprise which Indemnitee served at the request of the Company; or (b) the final termination of any Proceeding then pending in respect of which Indemnitee is granted rights of indemnification or advancement of expenses hereunder and of any proceeding commenced by Indemnitee pursuant to Section 10 of this Agreement relating thereto. This Agreement shall be binding upon the Company and its successors and assigns and shall inure to the benefit of Indemnitee and his heirs, executors and administrators. Section 13. Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; (b) such provision or provisions shall be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any Section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby. Section 14. Exception to Right of Indemnification or Advancement of Expenses. Except as provided in Section 6(a) of this Agreement, Indemnitee shall not be entitled to indemnification or advancement of Expenses under this Agreement with respect to any Proceeding brought by Indemnitee (other than a Proceeding by Indemnitee to enforce his rights under this Agreement), or any claim therein prior to a Change in Control, unless the bringing of such Proceeding or making of such claim shall have been approved by the Board of Directors. Section 15. Identical Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement. Section 16. Headings. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof. Section 17. Definitions. For purposes of this Agreement: (a) "Change in Control" means a change in control of the Company occurring after the Effective Date of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any similar -11- 12 item on any similar schedule or form) promulgated under the Securities Exchange Act of 1934 (the "Act"), whether or not the Company is then subject to such reporting requirement; provided, however, that, without limitation, such a Change in Control shall be deemed to have occurred if after the Effective Date (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities without the prior approval of at least two-thirds of the members of the Board in office immediately prior to such person attaining such percentage interest; (ii) there occurs a proxy contest, or the Company is a party to a merger, consolidation, sale of assets, plan of liquidation or other reorganization not approved by at least two-thirds of the members of the Board then in office, as a consequence of which members of the Board in office immediately prior to such transaction or event constitute less than a majority of the Board thereafter; or (iii) during any period of two consecutive years, other than as a result of an event described in clause (a)(ii) of this Section 17, individuals who at the beginning of such period constituted the Board (including for this purpose any new director whose election or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period) cease for any reason to constitute at least a majority of the Board. (b) "Corporate Status" describes the status of a person who is or was a director, officer, employee, fiduciary or agent of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person is or was serving at the request of the Company. (c) "Disinterested Director" means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee. (d) "Effective Date" means August 18, 1996. (e) "Expenses" shall include all reasonable attorneys' fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, a Proceeding. (f) "Independent Counsel" means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party, or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the -12- 13 term "Independent Counsel" shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee's rights under this Agreement. The Company agrees to pay the reasonable fees of the Independent Counsel referred to above and to fully indemnify such counsel against any and all Expenses, claims, liabilities and damages arising out of or relating to this Agreement or its engagement pursuant hereto. (g) "Proceeding" includes any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought by or in the right of the Corporation or otherwise and whether civil, criminal, administrative or investigative, in which Indemnitee was, is, may be or will be involved as a party or otherwise, by reason of the fact that Indemnitee is or was a director or officer of the Company, by reason of any action taken by him or of any inaction on his part while acting as director or officer of the Company, or by reason of the fact that he is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise; in each case whether or not he is acting or serving in any such capacity at the time any liability or expense is incurred for which indemnification or advancement of expenses can be provided under this Agreement; except one initiated by an Indemnitee pursuant to Section 10 of this Agreement to enforce his rights under this Agreement. Section 18. Enforcement. (a) The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce Indemnitee to serve as a director and officer of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving as a director and officer of the Company. (b) This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof. Section 19. Modification and Waiver. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. Section 20. Notice by Indemnitee. Indemnitee agrees promptly to notify the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or -13- 14 matter which may be subject to indemnification or advancement of Expenses covered hereunder. The failure of Indemnitee to so notify the Company shall not relieve the Company of any obligation which it may have to the Indemnitee under this Agreement or otherwise. Section 21. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed: (a) If to Indemnitee to: [name and address of Indemnitee] (b) If to the Company to: California Jockey Club 2600 South Delaware Street San Mateo, California 94403 or to such other address as may have been furnished to Indemnitee by the Company or to the Company by Indemnitee, as the case may be. Section 22. Contribution. To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (ii) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s). Section 23. Governing Law; Submission to Jurisdiction; Appointment of Agent for Service of Process. This Agreement and the legal relations among the parties shall be governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. Except with respect to any arbitration commenced by Indemnitee pursuant to Section 10(a) of this Agreement, the Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Chancery Court of the State of Delaware (the "Delaware Court"), and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive -14- 15 jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) appoint, to the extent such party is not a resident of the State of Delaware, irrevocably RL&F Service Corp., One Rodney Square, 10th Floor, 10th and King Streets, Wilmington, Delaware 19801 as its agent in the State of Delaware as such party's agent for acceptance of legal process in connection with any such action or proceeding against such party with the same legal force and validity as if served upon such party personally within the State of Delaware, (iv) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court, and (v) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court has been brought in an improper or otherwise inconvenient forum. Section 24. Miscellaneous. Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. COMPANY By _______________________________ INDEMNITEE __________________________________ Address: -15- EX-20.1 16 SIXTH AMEND. TO AGRMT OF PURCHASE DATED 8/18/96 1 EXHIBIT 20.01 SIXTH AMENDMENT TO AGREEMENT OF PURCHASE AND SALE THIS SIXTH AMENDMENT TO AGREEMENT OF PURCHASE AND SALE (the "Sixth Amendment") is made as of this 18th day of August, 1996, by and between CALIFORNIA JOCKEY CLUB, a Delaware corporation ("Seller"), and PROPERTY RESOURCES, INC., a California corporation ("Buyer"). RECITALS: Effective as of May 31, 1995, Buyer and Seller entered into that certain Agreement of Purchase and Sale (the "Purchase Agreement"), under the terms of which Buyer agreed to acquire, and Seller agreed to convey, certain real property located in San Mateo, California, as more particularly described in the Purchase Agreement. On June 21, 1995, Buyer and Seller entered into that certain First Amendment to Agreement of Purchase and Sale (the "First Amendment"). On December __, 1995, Buyer and Seller entered into that certain Second Amendment to Agreement of Purchase and Sale (the "Second Amendment"). On January 31, 1996, Buyer and Seller entered into that certain Third Amendment to Agreement of Purchase and Sale (the "Third Amendment"). On March 18, 1996, Buyer and Seller entered into that certain Fourth Amendment to Agreement of Purchase and Sale (the "Fourth Amendment"). On April ____, 1996, Buyer and Seller entered into that certain Fifth Amendment to Agreement of Purchase and Sale (the "Fifth Amendment"). Buyer and Seller now desire to further amend the Purchase Agreement in several respects. NOW, THEREFORE, Buyer and Seller hereby agree as follows: 1. All defined terms as used in this Sixth Amendment shall have the same meanings as set forth in the Purchase Agreement, unless otherwise specifically set forth herein. 2. Section 2.01(a) of the Purchase Agreement is hereby amended in its entirety to read as follows: The total purchase price for the Property (the "Purchase Price") shall be in an amount equal to the sum of (i) the product of (A) Six Hundred Fifty-Three Thousand Four Hundred Dollars ($653,400.00); and (B) the number of Net Acres (as hereinafter defined) in the Subject Real Property; and (ii) Four Million Nine Hundred Fifty Thousand Dollars ($4,950,000.00). 3. Section 2.02(c) of the Purchase Agreement is hereby amended in its entirety to read as follows: In addition, the Purchase Price payable at the Close of Escrow shall be further increased or decreased (as the case may be) subject to the terms, provisions and limitations as set forth in Section 7.02, by forty-four percent (44%) of the difference between (i) the actual cost of the Off-Site Improvements (as hereinafter defined) as set forth on Seller's fixed price contracts for such Off-Site Improvements; and (ii) Eleven Million Dollars ($11,000,000.00) (the "Base Amount"). The cost of the Off-Site Improvements shall include engineering and other associated costs reasonably and actually incurred in connection with the design and construction of the Off-Site Improvements. 2 4. The first paragraph of Section 2.03 of the Agreement is hereby amended as follows: The Close of Escrow shall occur on the three hundred thirtieth (330th) calendar day following the date the Entitlements are granted by the City of San Mateo as provided in Section 3.02 below; provided that Buyer's obligation to close Escrow is expressly subject to and conditioned upon: (a) Buyer's receipt of satisfactory evidence that Seller has posted the requisite security as described in Section 7.02; (b) the City of San Mateo has confirmed in conjunction with the grant of the Entitlements that it will issue grading, foundation and/or building permits to Buyer notwithstanding that the Off-Site Improvements are not completed (the "Permit Confirmation"); (c) the City of San Mateo has confirmed in conjunction with the grant of the Entitlements that it will issue Certificates of Occupancy to Buyer for not less than six hundred sixty thousand (660,000) square feet of office space notwithstanding that construction of the Off-Ramp may not be completed (the "Occupancy Confirmation"); and (d) Seller has complied with all of the other terms and provisions of this Agreement. If Seller elects, in accordance with Article XII below, to effect the transfer of the Property to Buyer as part of a tax-free exchange of the Training Facility (as hereinafter defined in Article XII), then the Close of Escrow shall occur on the later of (x) the three hundred thirtieth (330th) calendar day following the date the Entitlements are granted by the City of San Mateo as provided in Section 3.02 below, and (y) five (5) business days following the date of substantial completion of construction of the Training Facility; provided that Buyer's obligation to close Escrow is expressly subject to and conditioned upon: (1) Buyer's receipt of satisfactory evidence that Seller has posted the requisite security as described in Section 7.02; (2) Buyer's receipt of the Permit Confirmation; (3) Buyer's receipt of the Occupancy Confirmation; and (4) Seller's compliance with all of the other terms and provisions of this Agreement. In either case, if Buyer has not received either the Permit Confirmation or the Occupancy Confirmation by the date Close of Escrow would otherwise occur, Buyer shall either waive receipt of same or terminate this Agreement. 2 3 5. In accordance with Section 2.03(a) of the Purchase Agreement, Seller hereby agrees to cause to be removed, on or before the Close of Escrow, Item 4 as shown on Schedule B (Part II) of the Pro Forma. Buyer hereby waives its objection to Item 10 as shown on Schedule B (Part II) of the Pro Forma. In addition, Seller shall advise Buyer in writing, on or before August 31, 1996, whether Seller agrees to remove Items 5, 6 and 7 as shown on Schedule B (Part II) of the Pro Forma. 6. Section 3.02 of the Purchase Agreement (as amended by Section 6 of the Second Amendment) is hereby amended to provide that the Entitlements Timetable shall be in the form attached hereto as Exhibit "A", which Entitlements Timetable is hereby incorporated into the Purchase Agreement by this reference. Section 3.02 of the Purchase Agreement is hereby further amended to provide that the Entitlement Procurement Date shall mean March 17, 1997. 7. Section 6.06 of the Purchase Agreement is hereby amended by the deletion of the third (3rd) sentence thereof. 8. Section 7.01 of the Purchase Agreement is hereby amended to provide that, so long as the Entitlements Procurement Date is not delayed, Buyer hereby consents to (a) Seller's prosecution of the Alternative Land Use Program for Parcel 3 as set forth on Exhibit "B" attached hereto; and (b) the construction of one (1) or more barns containing up to two hundred ten (210) stalls on the Race Track. 9. Section 3.06 of the Purchase Agreement is hereby deleted in its entirety. 10. Section 7.02 of the Purchase Agreement is hereby amended in its entirety to read as follows: 7.02. Off-Site Improvements. Seller shall be responsible, at its sole cost and expense, to construct all Off-Site Improvements which are required by the City of San Mateo and the State of California as a condition to the grant of the Entitlements. Seller covenants and agrees to complete all such Off-Site Improvements (other than the Off-Ramp, but including the Retention Basin as described in Section 14.11 of the Agreement) not later than the second (2nd) anniversary of the date of the grant of the Entitlements (subject to the effect of any events of Force Majeure (as hereinafter defined). Seller shall commence the surcharging of Saratoga Drive (and shall diligently prosecute such surcharging to completion) not later than thirty (30) calendar days following the grant of the Entitlements. Until such time as the Off-Site Improvements are complete, Buyer shall have the right to utilize all available traffic capacity/trip generation allocable to the Subject Real Property and to Parcel 3. For purposes of this Section 7.02, the term "Force Majeure" shall mean a delay or impediment in completing the Off-Site Improvements caused by reason of strikes, lockouts, labor troubles, inability to procure materials, failure of power, riots, insurrection, war, fire, casualty, earthquake, acts of God or other reason of a like nature not the fault of Seller. Seller shall immediately advise Buyer in writing if Seller asserts the occurrence of an event of Force Majeure. If Seller is delayed in completing such Off-Site Improvements for reasons other than Force Majeure, Buyer shall not have a remedy for monetary damages against Seller unless such delay materially adversely affects Buyer's development timetable. In addition, Seller covenants and agrees to complete the Off-Ramp not later than December 31, 1999, subject to the effect of any event of Force Majeure. If any of the Off-Site Improvements (including the Off-Ramp and the Retention Basin) are not completed as of the Close of Escrow, then 3 4 Seller shall post with Buyer security in an amount equal to one hundred twenty-five percent (125%) of the reasonably estimated cost to complete the Off-Site Improvements, which security shall be in the form of an irrevocable standby letter of credit, set-aside letter from Seller's bank or surety bond; provided, however, that if, as a condition to the grant of the Entitlements, the City of San Mateo and/or the State of California requires that Seller post with such governmental authority adequate security assuring the completion of all of the required Off-Site Improvements, then Seller shall not be required to post any such additional security with Buyer. For purposes of this Agreement, such Off-Site Improvements shall be deemed to be completed when such Off-Site Improvements are accepted by the City of San Mateo or the State of California. Seller shall be solely responsible for the cost of, and Buyer shall have no contribution obligation with respect to, any warranty required with respect to the Off-Site Improvements by the City of San Mateo and/or the State of California. (a) In addition, Seller hereby represents, warrants and covenants to Buyer (which representation, warranty and covenant shall survive the Close of Escrow), that in no event shall the sum of the payments made by Buyer pursuant to Section 2.02(c) of the Purchase Agreement together with any comparable sums paid to Seller by the purchaser(s) of Parcel 3, exceed one hundred percent (100%) of the cost of the Off-Site Improvements. 4 5 (b) The Off-Site Improvements shall include construction of the proposed pedestrian path (including, but not limited to, the cost of paving, lighting and landscaping) from Saratoga Drive to the southwesterly boundary line of the Race Track. Seller's Deed to Buyer for the Subject Real Property may contain a reservation for an easement over such pedestrian path appurtenant to the Race Track and Parcel 3. (c) Seller and Buyer hereby further agree that, notwithstanding the parties' agreement as set forth herein with respect to the allocation of responsibility for the cost of the Off-Site Improvements, any fee credits or offsets received from the City of San Mateo (including, but not limited to, any credits against the City's Transportation Improvements Fee) shall be apportioned between the Subject Real Property and Parcel 3 in a manner reasonably intended to eliminate the applicable fee burden on both properties. Where the development on either property does not generate any fee burden, any fee credit or offset received from the City of San Mateo shall be retained and utilized solely by the property subject to any such fee. (d) If the City of San Mateo, the County of San Mateo, the State of California or any other third party (exclusive of any purchaser of Parcel 3) makes a financial contribution toward the cost of the Off-Site Improvements such that the net cost to Seller of the Off-Site Improvements is less than the Base Amount, Buyer shall be entitled to receive a credit against the Purchase Price in an amount equal to forty-four percent (44%) of the difference between the Base Amount and the net cost to Seller of the Off-Site Improvements. Seller, at its option, may assign the construction contracts for the Off-Site Improvements (collectively, the "Improvement Contracts") to Buyer, as of the Close of Escrow, in which event Buyer shall assume the obligation to complete the Off-Site Improvements and the Purchase Price, rather than being increased or decreased as provided in Section 2.02(c), shall be adjusted as follows: (i) The percentage of work completed under the Improvement Contracts shall be determined reasonably and in good faith by Seller and Buyer and multiplied by forty-four percent (44%) of the fixed prices set forth therein (the "Contract Sum"), said product being referred to herein as the "Partial Completion Value"; 5 6 (ii) The Purchase Price shall be increased by the amount, if any, by which the Partial Completion Value exceeds Four Million Nine Hundred Fifty Thousand Dollars ($4,950,000.00) or decreased by the amount, if any, by which Four Million Nine Hundred Fifty Thousand Dollars ($4,950,000.00) exceeds the Partial Completion Value. Concurrently with the Close of Escrow, Seller shall pay the balance of the Partial Completion Value to the contractors performing the Improvement Contracts (the "Improvement Contractors"). Thereafter, except as provided below, as payments are called for under the Improvement Contracts, Buyer shall pay forty-four percent (44%) thereof to the Improvement Contractors and Seller shall pay the remaining fifty-six percent (56%). As security for Seller's obligation to fund the remaining fifty-six percent (56%) of the Contract Sum (the "Unfunded Balance"), concurrently with the Close of Escrow, Seller shall, at its election, do one of the following: (1) deposit with an independent third party reasonably acceptable to Buyer an amount equal to the Unfunded Balance; (2) deliver to Buyer security in an amount equal to the Unfunded Balance, which security shall be in the form of an irrevocable standby letter of credit or set-aside letter from Seller's bank; or (3) accept from Buyer in partial satisfaction of the Purchase Price a promissory note (the "Note") from Buyer (as secured by a deed of trust recorded against the Subject Real Property) in an amount equal to the Unfunded Balance, accruing interest at the then Applicable Federal Rate and with the entire unpaid balance of principal and accrued interest due and payable on the earlier to occur of (A) the second anniversary of the Close of Escrow; and (B) payment by Seller in full of the Unfunded Balance. The Note shall provide that Buyer may off-set against any sums due Seller thereunder any reimbursements by Seller of the Unfunded Balance which are not timely paid to Buyer, and shall otherwise contain customary terms and provisions. Seller may delegate its payment obligation to the Improvement Contractors with respect to Parcel 3 to the party then in contract with Seller to purchase Parcel 3 (the "Parcel 3 Purchaser"), in which event following the Close of Escrow and such delegation, as payments are called for under the Improvement Contracts, Buyer shall pay forty-four percent (44%) thereof, the Parcel 3 Purchaser shall pay fifty-three and 33/100 percent (53.33%) thereof, and Seller shall pay the balance; provided that in no event shall such delegation relieve Seller of its liability for the performance of such payment obligations. 6 7 Buyer shall have the right to approve the Improvement Contracts, which approval not to be unreasonably withheld; provided that in no event shall Buyer be obligated to assume non-fixed price contracts. 11. Section 14.11 of the Purchase Agreement (as added thereto by Section 18 of the Second Amendment) is hereby amended in its entirety to read as follows: 14.11. Storm Drainage Easement. At the Close of Escrow, Seller shall deliver to Buyer, a perpetual storm drainage easement, in recordable form and otherwise in a form and content reasonably acceptable to Seller and Buyer, permitting Buyer, its successors and assigns, to discharge Buyer's storm water run-off into a holding pond located on the Race Track (the "Retention Basin"). Seller shall be responsible, at its sole cost and expense, for the construction and maintenance of the Retention Basin, as are necessary to afford appropriate drainage for the Subject Real Property upon the occurrence of a "Twenty-Five Year" storm; provided that if the cost of the Retention Basin exceeds the amount of Seven Hundred Thousand Dollars ($700,000.00) (as evidenced by an estimate reasonably acceptable to Buyer, prepared by Seller's civil engineer and delivered to Buyer), then Buyer shall fund thirty-three percent (33%) of such additional costs. For the purposes of this Section 14.11, the costs of construction of the Retention Basin shall not include any imputed land costs, but shall include all construction, engineering and other associated costs and the cost of installation of necessary pumps, lines, or pipes and associated equipment originating at the property line of the Subject Real Property and terminating at such Retention Basin. Seller shall also be responsible for the installation, maintenance and repair of the necessary lines or pipes and associated equipment originating at the property line of the Subject Real Property and terminating at such Retention Basin. 7 8 12. In all other respects, the Purchase Agreement, as amended by the terms of the First Amendment, the Second Amendment, the Third Amendment, the Fourth Amendment and the Fifth Amendment remains unchanged and in full force and effect. IN WITNESS WHEREOF, Buyer and Seller have executed this Sixth Amendment to Agreement of Purchase and Sale as of the date set forth above. SELLER: BUYER: CALIFORNIA JOCKEY CLUB, PROPERTY RESOURCES, INC., a Delaware corporation a California corporation By: /s/ Kjell H. Qvale By: /s/ Michael J. McCulloch ---------------------- -------------------------- Its: Chairman Michael J. McCulloch --------------------- Its: Executive Vice President 8 9 EXHIBIT "A" ENTITLEMENTS TIMETABLE o Complete Conceptual Site Plan and submit to Accomplished Buyer for approval o Buyer approves Conceptual Site Plan Accomplished o City makes application to the State of Accomplished California Department of Transportation for approval to construct a new southbound off-ramp to Highway 101 o Complete planning and design for submittal of Accomplished Entitlement application/submit application o City determines application is complete Accomplished o City selects EIR consultant Accomplished o EIR consultant prepares draft EIR On or before September 23, 1996 o Complete public review of draft EIR November 11, 1996 o EIR consultant responds to public comment and Ninety (90) days following end of prepares final EIR public comment period, but in no event later than December 15, 1996 o Planning Commission approves grant of Sixty (60) days following receipt of Entitlements final EIR, but in no event later than February 15, 1997 o City Council approves grant of Entitlements and Thirty (30) days following Planning files a notice of determination indicating the Commission decision, but in no event certification of the EIR later than March 17, 1997 o CALTRANS grants final approval to PSR/PR for March 17, 1997 Off-Ramp o Expiration of CEQA appeal period Thirty (30) days following filing of Notice of Determination, but in no event later than April 17, 1997
A-1 EX-20.2 17 FIFTH AMEND. TO AGRMT OF PURCHASE DATED 4/96 1 EXHIBIT 20.02 FIFTH AMENDMENT TO AGREEMENT OF PURCHASE AND SALE THIS FIFTH AMENDMENT TO AGREEMENT OF PURCHASE AND SALE (the "Fifth Amendment") is made as of this _____ day of April, 1996, by and between CALIFORNIA JOCKEY CLUB, a Delaware corporation ("Seller"), and PROPERTY RESOURCES, INC., a California corporation ("Buyer"). RECITALS: Effective as of May 31, 1995, Buyer and Seller entered into that certain Agreement of Purchase and Sale (the "Purchase Agreement"), under the terms of which Buyer agreed to acquire, and Seller agreed to convey, certain real property located in San Mateo, California, as more particularly described in the Purchase Agreement. On June 12, 1995, Buyer and Seller entered into that certain First Amendment to Agreement of Purchase and Sale (the "First Amendment"). On December ____, 1995, Buyer and Seller entered into that certain Second Amendment to Agreement of Purchase and Sale (the "Second Amendment"). On January 31, 1996, Buyer and Seller entered into that certain Third Amendment to Agreement of Purchase and Sale (the "Third Amendment"). On March 18, 1996, Buyer and Seller entered into that certain Fourth Amendment to Agreement of Purchase and Sale (the "Fourth Amendment"). Buyer and Seller now desire to amend the Purchase Agreement in several respects. NOW, THEREFORE, Buyer and Seller hereby agree as follows: 1. All defined terms as used in this Fifth Amendment shall have the same meanings as set forth in the Purchase Agreement, unless otherwise expressly set forth herein. 2. The last sentence of Section 4 of the Second Amendment is hereby amended in its entirety to read as follows: In accordance with Section 2.03(a) of the Purchase Agreement, Seller shall advise Buyer, in writing, on or before May 31, 1996, whether Seller agrees to remove the exceptions referenced in clauses (c), (d) and (e) above. 2 3. In all other respects, the Purchase Agreement, as amended by the terms of the First Amendment, the Second Amendment, the Third Amendment and the Fourth Amendment remains unchanged and in full force and effect. IN WITNESS WHEREOF, Buyer and Seller have executed this Fifth Amendment to Agreement of Purchase and Sale as of the date set forth above. SELLER: BUYER: CALIFORNIA JOCKEY CLUB, a Delaware PROPERTY RESOURCES, INC., corporation a California corporation By: /s/ Kjell H. Qvale By: /s/ Michael J. McCulloch ________________________ _________________________ Kjell Qvale Michael J. McCulloch Its Chairman of the Board Its Executive Vice President EX-20.3 18 AMEND NO. 3 TO AGRMT OF PURCHASE DATED 6/28/96 1 EXHIBIT 20.03 AMENDMENT NO. 3 TO AGREEMENT OF PURCHASE AND SALE This Amendment made and entered into effective June 28, 1996, by and between California Jockey Club, a Delaware Corporation, ("Seller") and Airdial Company, LLC, a California limited liability company, ("Purchaser or Buyer") as assignee of Lee Iacocca & Associates, Inc., a Michigan Corporation ("Associates") bears the following recitals: A. On or about December 15, 1995, Seller and Associates entered into an Agreement of Purchase and Sale covering approximately 40 acres located at the Bay Meadows Race Track in San Mateo, California ("the Subject Property"). B. Said Agreement of Purchase and Sale has previously been amended by amendments dated respectively March 5, 1996 and May 31, 1996. Said agreement, as amended, is referred to herein as the "Purchase Agreement." C. Associates has assigned its rights and obligations under the Purchase Agreement to Purchaser, and Seller has consented to such assignment. D. The initial members of Purchaser are Lee Iacocca, Allen Paulson, William McComas and William Barrett. E. Capitalized terms shall have the same meaning herein as in the Purchase Agreement. F. The parties now desire to further amend the purchase Agreement as herein after set forth. Now therefore the parties hereto agree as follows: 1. Section 2.1 is hereby amended in its entirety to read as follows: "2.1 Purchase Price: the total purchase price for the Subject Property (the "Purchase Price") shall be $36,615,000.00; provided that the Purchase Price shall be increased or decreased, as the case may be, by 53.33% of the difference between (i) the actual cost of the Off-Site Improvements (as hereinafter defined) as set forth on Seller's fixed price contracts for such Off-Site Improvements (the "Improvement Contracts"); and (ii) $11,000,000.00, subject however to the provisions of Sections 2.2.5 and 7.3 below. 1 2 2. Section 2.2.3 is hereby amended in its entirety to read as follows: "2.2.3 Upon satisfaction of Buyer's conditions to closing as set forth in Subsection 3.1, Buyer shall within three (3) business days delver to Escrow its irrevocable standby letter of credit in favor of Seller in the sum of Five Hundred Thousand ($500,000.00) drawn on a national bank having offices in San Francisco or San Mateo County, California or New York, Chicago or Detroit (the "First Additional Deposit"). Within three (3) days after Seller obtains the Entitlements Buyer shall deliver to Escrow a second such letter of credit also in the sum of Five Hundred Thousand Dollars ($500,000.00) (the "Second Additional Deposit"). The instruments representing the Additional Deposit and the Second Additional Deposit (collectively, the "Additional Deposits") shall provide that they may be drawn upon satisfaction or waiver of (i) Buyer's conditions to closing, as set forth in Section 3 and (ii) Seller's conditions to closing, as set forth in Subsection 4.1 and shall otherwise be in form and content subject to Seller's approval, which shall not be unreasonably withheld. Concurrent with delivery of the Additional Deposit, Title Company shall release from escrow and return to Buyer marked "Cancelled" the note constituting the Initial Deposit. The Initial Deposit and the Additional Deposits are sometimes hereinafter collectively referred to as the Deposit. IF THE CONDITIONS SET FORTH IN SECTION 3 HAVE BEEN SATISFIED AND SELLER IS NOT IN MATERIAL BREACH HEREUNDER AND BUYER BREACHES THIS AGREEMENT BY FAILING TO COMPLETE THE SALE HEREUNDER, THE SUM OF ONE MILLION DOLLARS ($1,000,000.00) SHALL BE PAID TO SELLER AS LIQUIDATED DAMAGES FOR SUCH BREACH, IT BEING AGREED 2 3 THAT SUCH PAYMENT SHALL BE SELLER'S SOLE REMEDY IN THE EVENT OF SUCH DEFAULT AND THAT SUCH ACTUAL DAMAGES THAT WOULD RESULT FROM SUCH A BREACH ARE UNCERTAIN AND WOULD BE EXTREMELY DIFFICULT TO FIX AT THIS TIME AND WOULD BE DIFFICULT TO PROVE. THE PARTIES AGREE THAT THEY HAVE NEGOTIATED THE AMOUNT OF ONE MILLION DOLLARS ($1,000,000.00) AS BEING THEIR BEST ESTIMATE AT THE DATE HEREOF OF SELLER'S LOSS IN THE EVENT OF A BREACH BY BUYER. IN ORDER TO ENABLE SELLER TO COLLECT SAID LIQUIDATED DAMAGES, THE AFORESAID LETTERS OF CREDIT SHALL BE TURNED OVER TO SELLER UPON A BREACH BY BUYER AS DESCRIBED ABOVE. (Buyer's initials) WB (Seller's initials) KHQ --------- --------- 3. Section 2.2.5 is hereby amended in its entirety to read as follows: "2.2.5 Seller, at its option, may assign the Improvement Contracts to its purchaser of substantially all of the Stables Property (the "Stables Purchaser") and at any time thereafter (provided escrow has closed hereunder) delegate to Purchaser Seller's payment obligation to the Improvement Contractors with respect to the Subject Property. In such event the Purchase Price, rather than being increased or decreased as provided in Section 2.1, shall be adjusted as follows: (i) The percentage of work completed or work completed under the Improvement Contracts shall be determined reasonably and in good faith by Seller and Purchaser and multiplied by (53.33%) of the fixed prices set forth therein (the "Contract Sum"), said produce being referred to herein as the "Partial Completion Value"; (ii) The Purchase Price shall be increased by the amount, if any, by which the partial Completion Value exceeds Five Million Eight Hundred Sixty-Five Thousand Dollars ($5,865.000.00) or decreased by the amount, if any, by which Five Million Eight Hundred Sixty-five Thousand Dollars ($5,865,000.00) exceeds the Partial Completion Value. Following such delegation, Subsection 7.3.4 shall no longer apply and, except as provided in Section 7.3.7 below, as payments are called for under the Improvement Contracts, the Stables Purchaser and/or Seller shall pay forty-four (44%) thereof, Purchaser shall pay fifty-three and 33/100 percent (53.33%) thereof, and Seller shall pay the balance, provided that such assignment and delegation shall not relieve Seller 3 4 of its obligation to Purchaser to construct the Off-Site Improvements and Seller shall become secondarily liable to Purchaser with respect to such obligation. Purchaser shall provide security for such payment obligation either in the form of an irrevocable standby letter of credit or set-aside letter from Purchaser's bank and shall otherwise be in form and content subject to Seller's approval, which shall not be unreasonably withheld." 4. The following sentence is added to Section 2.3.1: "Notwithstanding the foregoing, (a) either party may extend the close of escrow to a date which is 60 days following commencement of construction of the Off-Ramp, by notice to the other party and (b) Purchaser may extend close of escrow to a date when Seller has completed or caused to be completed all soil compaction and surcharging which is required in order for Seller to construct or cause to be constructed the Off-Site Improvements which are described in Section 7.3 of this Agreement." Further Purchaser shall not be required to close escrow prior to the completion of those Off-Site Improvements which the City requires to be completed before the issuance of a building permit to Purchaser. 5. The term "Approval Date" as used in Section 3.1 and thereafter in the Agreement is modified to mean the date November 22, 1996. 6. Section 3.2.1 is hereby amended as follows: a. Exhibit "4-A" and Exhibit "4-B, each attached hereto and made a part hereof by this reference, are substituted for Exhibit "4" as alternative Land Use Programs to which the Entitlements may relate. Conditions relating to the Entitlements shall be satisfied if Entitlements conforming to either of the Programs are obtained. If the Entitlements are not obtained by December 31, 1997, either party may terminate this Agreement; provided that Purchaser can avoid such termination by: (i) agreeing to close escrow on or before March 31, 1998 and (ii) unless Seller or the Stables Purchaser is proceeding with the development of the Stables Property, agreeing to be responsible for constructing and paying for one hundred percent (100%) of the Off-Site Improvements necessary for the development of the Subject Property. b. The word "Programs" is substituted for the word "Program" in line 11. c. Exhibit "5-A," attached hereto and incorporated herein by this reference, is hereby substituted for Exhibit "5". 4 5 d. For purposes of determining when approval of the Entitlements and the Tentative Map (as defined in paragraph 14 below) are obtained, the term "expiration of all appeal periods" relating to approvals shall also include lapse of the applicable period, provided such period does not exceed ninety (90) days, for holding a referendum of the Development Agreement without any referendum having been brought and lapse of the statute of limitations period, provided such period does not exceed ninety (90) days, for any action challenging the validity of any of the Entitlements. 7. Sections 3.2.2 and 3.2.3 are hereby deleted, and the word "Adjusted" is deleted wherever it appears in the Purchase Agreement before the word "Entitlements." 8. A new section 3.5 is added to the Purchase Agreement as follows: "3.5 Building Permit Conditions. Once the Entitlements have been obtained, other than the normal non-discretionary conditions for building imposed by the City of San Mateo (e.g. permit fees and submission of construction drawings, etc.) there shall be no other restrictions, discretionary approvals, conditions or impositions on the ability of Purchaser to obtain building permits for the improvements 5 6 contemplated by the Land Use Plan to which the Entitlements relate and contemplated by Purchaser's tentative subdivision map for the Subject Real property. This condition must either be satisfied or waived by Purchaser within one hundred and eighty (180) days after the Entitlements have been obtained. 9. A new section 3.6 is added to the Purchase Agreement as follows: "3.6 Cost of On-Site Improvements. Purchaser's obligation to purchase the Property is subject to the condition that the reasonably anticipated cost of Purchaser's costs for infrastructure improvements to or for the Subject Real Property contemplated by and related to the Land Use Programs to which the Entitlements and the Tentative Map relate, including, without limitation, both "hard" and "soft" costs (but excluding any interest charges on borrowed funds) for soil compaction and "surcharging," streets, utility connections, underground utilities and other costs for improvements required in order to sell finished lots (as evidenced by an estimate prepared by a mutually acceptable civil engineer) and exactions, charges, building permit fees and in lieu fees imposed as a condition to approval of subdivision of the Subject Real Property, shall not exceed Nine Million Dollars ($9,000,000.00)." This condition must be satisfied or waived by Purchaser within the same time period provided for satisfaction or waiver of the condition set forth in section 3.5 above. 10. A new Section 3.7 is added to the Purchase Agreement as follows: "3.7 Termination. In the event Purchaser's obligations under this Agreement are terminated due to the failure of any condition precedent described in this Section 3 or otherwise under this Agreement except Purchaser's default, Purchaser shall be entitled to return of the Deposit." 6 7 11. Regarding Section 6.5 of the Purchase Agreement, Purchaser hereby approves the Bay Meadows Specific Plan dated June 7, 1996, prepared by Calthorp Associates, Economic & Planning Systems, Brian Kangas Foulk and Kenkay Associates. 12. Section 6.7 of the Purchase Agreement is hereby amended by adding the words "or covenant" following the word "representation" in the second line of such section. 13. Notwithstanding anything contained in Section 7.1 of the Purchase Agreement (Section 7.1.4 referring to the map described in Section 4.2), Purchaser shall have the responsibility to obtain such tentative subdivision map for the subdivision of the Subject Real Property as desired by Purchaser (the "Tentative Map"). Purchaser shall obtain Seller's approval for the configuration of the parcels to be created by the Tentative Map and any material conditions of approval, which approval shall not be unreasonably withheld. Seller shall cooperate with Purchaser, at no expense to Seller, in connection with all applications and submissions for such map or maps, and shall, upon request of Purchaser, promptly execute and deliver any applications, documents or submissions required by local subdivision authorities to be executed by an owner of property in connection with application for a subdivision by a buyer thereof during the executory period of the Purchase Agreement. Purchaser shall process the Tentative Map in parallel with Seller's processing of the Entitlements such that obtaining approval of the Tentative Map will not delay Close of Escrow. Obtaining the Tentative Map on terms and conditions acceptable to Purchaser, in its reasonable discretion, by the date on which Seller obtains the Entitlements, and expiration of all appeals and challenge periods therefore (provided such period do not exceed ninety (90) days) without appeal or legal challenge, but in no event later than December 31, 1997, shall be a condition precedent to Purchaser's obligation to purchase the Property. 7 8 14. Section 7.3.2 is hereby amended in its entirety to read as follows: "Purchaser's share of the cost of Off-Site Improvements, to be deposited at Close of Escrow shall be solely to pay the percentage of costs charged by third party contractors for design and/or construction work relating to the Off-Site Improvements pursuant to subsection 2.2.5, including costs of engineering and design of the Off-Site Improvements as well as costs of permits, fees and other charges and expenses incurred in connection therewith and the costs of creating a pathway (including, but not limited to, costs of paving, lighting and landscaping) leading from Saratoga Drive through the Stables Property to the Southwesterly boundary line of the Race Track and the cost of constructing a retention basin on the Race Track, such path and retention basin being considered Off-Site Improvements for purposes of this Agreement. Purchaser's responsibility with respect to the retention basin is to pay $156,000.00 of the first $700,000.00 in costs, and if the cost exceeds $700,000.00 to pay 39.6% of the excess. Unless Purchaser otherwise specifically agrees, disbursement upon Close of Escrow shall be subject to (i) verification that the work for which the disbursement is made has been completed and appropriate mechanic's lien releases have been obtained as to payment for work performed which entitles the parties performing such work to file mechanic's liens against the Subject Property, (ii) prior or concurrent payment by or on behalf of Seller or the Stables Purchaser of the balance of any specific charge to which a disbursement relates. 15. 7.3.3 is hereby deleted and Section 7.3.5 is hereby amended by substituting the words "the second (2nd) anniversary of the date of the grant of the Entitlements" for the words "two hundred fortieth (240th) calendar day following the Close of Escrow" and by substituting the words "December 31, 1999" for the words "the first (1st) anniversary of the Close of Escrow." 8 9 16. A new Section 7.3.7 is added to the Purchase Agreement as follows: "7.3.7 Purchaser's Construction of Off-Site Improvements. Provided the Improvement Contracts have not previously been assigned to the Stables Purchaser, then Seller may elect, by delivery of written notice to Purchaser at least thirty (30) days prior to the Close of Escrow to delegate construction of the Off-Site Improvements to Purchaser, at Purchaser's expense, effective as of the Close of Escrow or in the absence of such election by Seller, Purchaser may elect to assume the obligation to construct the Off-Site Improvements effective as of the Close of Escrow, by delivery of written notice to Seller on or before the Close of Escrow, in either event subject to the approval of the Stables Purchaser. Notwithstanding the foregoing Purchaser may not elect to assume the obligation to construct the off-Site Improvements unless at such time the managers of Purchaser are either William Barrett or a corporation controlled by him, as the sole manager, or William Barrett and William McComas or a corporation controlled by them. In the event of such delegation by Seller or assumption by Purchaser the Purchase Price, rather than being increased or decreased as provided in Section 2.1, shall be adjusted as provided in Section 2.2.5. Thereafter, as payments are called for under the Improvement Contracts, Seller and the Stables Purchaser shall pay forty-four percent (44%) thereof, Seller shall pay two and sixty-seven percent (2.67%) and Purchaser shall pay the balance. Seller and the Stables Purchaser shall make their payments within fifteen (15) days of invoice from Purchaser accompanied by supporting documentation that such costs have been incurred. As security for its obligations under this Section 7.3.7, Seller, at its election, shall do one of the following: 9 10 (1) deposit with an independent third party reasonably acceptable to Purchaser an amount equal to 46.67% of the unpaid balance of the Improvement Contracts (the "Unfunded Balance"); (2) deliver to Purchaser an irrevocable standby letter of credit or set-aside letter from Seller's bank in the amount of the Unfunded Balance; (3) deliver to Purchaser a deed of trust against real property owned by Seller with an equity, as reasonably determined by Purchaser, not less than 125% of the Unfunded Balance. 17. The following sentence shall be added to Section 7.4: "Purchaser shall cooperate with Seller in connection with Seller's plan to move dirt back and forth between the Stables Property and the Subject Property for the purpose of surcharging areas which are to be the subject of Off-Site Improvements." 18. A new Section 7.5 shall be added to the Purchase Agreement as follows: 7.5. Surcharge Purchaser acknowledges that it will be economically advantageous to Seller to surcharge the Subject Property whether or not escrow closes hereunder. Accordingly, prior to the Close of Escrow, Seller may elect to surcharge the Subject Property and in the event escrow does in fact close, Purchaser shall reimburse Seller for its out of pocket costs in accomplishing the surcharge, as an addition to the Purchase Price. Purchaser shall have no obligation to reimburse Seller for such costs if escrow does not close as the result of the termination of this Agreement. The surcharge shall be accomplished in a manner consistent with the Entitlements, but at Seller's election may be done before or after the Entitlements are obtained. 10 11 Alternatively, Seller may delegate to Purchaser the responsibility to accomplish the surcharging, in which event Seller shall lend Purchaser one hundred percent (100%) of the estimated cost thereof, subject to the following: 7.5.1 The loan shall be evidenced by Purchaser's non-recourse promissory note bearing interest at two percent (2%) above Bank of America's prime rate and shall be due on Close of Escrow. In the event escrow fails to close due to termination of this Agreement, then the promissory note shall be cancelled in exchange for a release from Purchaser relinquishing any claim to the surcharge. 7.5.2 The loan shall be secured by a deed of trust and such other security instrument as Seller shall reasonably request pledging all of Purchaser's right, title and interest in the Surcharge materials and all plans, specifications, contractors warranties and other intangible rights therein; provided, however, that Purchaser makes no representation or warranty as to the nature or extent of Purchaser's title to such items prior to Close of Escrow; 7.5.3 The contractor shall be reasonably approved by Seller and shall post a lien-free and performance bond in form and content reasonably approved by Seller and Purchaser shall make timely payments to the contractor so as to avoid the filing of mechanics liens against the Subject Property; 7.5.4 The loan proceeds shall be disbursed pursuant to a format generally followed by institutional construction lenders so as to insure that the proceeds are in fact utilized to defray the costs of construction; 7.5.5 Purchaser's work shall not unreasonably interfere with the development of the Stables Property or construction of the Off-Site Improvements; 7.5.6 Seller shall be given prior written notice of the commencement of work so that it can post applicable notices of non- responsibility." 11 12 19. Seller acknowledges Purchaser's intention to enter into contracts or arrangements with prospective purchasers of portions of the Subject Real Property which would be created upon its subdivision and confirms that such contracts or arrangements shall not be deemed to be violations of Section 9 of the Purchase Agreement; provided, however, that Purchaser and Seller acknowledge that in connection with this Agreement Seller shall not be required to deal with any parties other than Purchaser and its members nor shall Seller be obligated to convey the Subject Real Property other than in a single conveyance to Purchaser or its permitted assignee. 20. Purchaser agrees to modify the Purchase Agreement as necessary to enable Seller to comply with the requirements of the Internal Revenue Code pertaining to real estate investment trusts, provided that any such modification shall not have a material adverse effects on Purchaser's rights and duties hereunder. 21. Purchaser warrants and represents that the managers of Purchaser are either William Barrett, or a corporation controlled by him, as the sole manager or William Barrett and William McComas or a corporation controlled by them. Until Close of Escrow any change in the manager shall be subject to Seller's prior approval. 22. Subject to the foregoing amendments, the Purchase Agreement remains in full force and effect. 23. This Amendment may be executed in counterpart, consistent with Section 14.10 of the Purchase Agreement. 12 13 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth above. SELLER: CALIFORNIA JOCKEY CLUB, a Delaware Corporation By: /s/ Kjell H. Qvale _____________________________ PURCHASER: AIRDIAL COMPANY, LLC a California limited liability company By: /s/ W.E. Barrett ______________________________ ASSOCIATES: LEE IACOCCA & ASSOCIATES, INC. a Michigan Corporation By: ______________________________ 13 EX-20.4 19 AMEND NO. 2 TO AGRMT TO PURCHASE DATED 5/31/96 1 EXHIBIT 20.04 AMENDMENT NO. 2 TO AGREEMENT OF PURCHASE AND SALE THIS AMENDMENT NO. 2 TO AGREEMENT OF PURCHASE AND SALE is made as of May 31, 1996 by and between CALIFORNIA JOCKEY CLUB, a Delaware corporation ("Seller") and LEE IACOCCA & ASSOCIATES, INC., a Michigan corporation ("Purchaser"). A. Seller and Purchaser have entered into an Agreement of Purchase and Sale (the "Agreement") dated December 21, 1995 relating to certain real property located in San Mateo, California and commonly known as the Bay Meadows Training Track (the "Subject Real Property"), which is a part of property owned by Seller and referred to in the Agreement as "Bay Meadows." B. Seller and Purchaser entered into Amendment No. 1 to the Agreement as of March 5, 1996 which extended Purchaser's time to conduct its due diligence until May 31, 1996. C. In light of various factors which have come to the parties' attention relating to the cost of off-site improvements necessary for development of the Subject Real Property, Purchaser has requested and Seller is willing to grant additional time for Purchaser to conduct its due diligence. NOW THEREFORE, the parties agree as follows: 1. The Approval Date, as defined in Section 3.1 of the Agreement is amended to be June 28, 1996. 2. This Amendment No. 2 may be signed in counterparts, each of which shall constitute an original as against any party whose signature appears thereon and all of which shall constitute one and the same instrument. 3. All other terms and conditions of the Agreement shall remain unchanged. 4. As of the date of this Amendment No. 2, neither party has any claims against the other arising out of or relating to the Agreement. CALIFORNIA JOCKEY CLUB LEE IACOCCA & ASSOCIATES, INC. By:_________________________ By:_________________________ Its:_________________________ Its:_________________________ EX-20.5 20 AMEND NO. 1 TO AGRMT OF PURCHASE DATED 3/5/96 1 EXHIBIT 20.05 AMENDMENT NO. 1 TO AGREEMENT OF PURCHASE AND SALE THIS AMENDMENT NO. 1 TO AGREEMENT OF PURCHASE AND SALE is made as of March 5, 1996 by and between CALIFORNIA JOCKEY CLUB, a Delaware corporation ("Seller") and LEE IACOCCA & ASSOCIATES, INC., a Michigan corporation ("Purchaser"). A. Seller and Purchaser have entered into an Agreement of Purchase and Sale (the "Agreement") dated December 21, 1995 relating to certain real property located in San Mateo, California and commonly known as the Bay Meadows Training Track (the "Subject Real Property"), which is a part of property owned by Seller and referred to in the Agreement as "Bay Meadows." B. Purchaser has requested and Seller is willing to grant additional time for Purchaser to conduct its due diligence. NOW THEREFORE, the parties agree as follows: 1. The Approval Date, as defined in Section 3.1 of the Agreement is amended to be May 31, 1996. 2. All other terms and conditions of the Agreement shall remain unchanged. CALIFORNIA JOCKEY CLUB LEE IACOCCA & ASSOCIATES, INC. By:_________________________ By:_________________________ Its:_________________________ Its:_________________________ -----END PRIVACY-ENHANCED MESSAGE-----