<PAGE>   1
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                                    FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

(Mark One)

[x]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
        EXCHANGE ACT OF 1934

        For the fiscal year ended December 31, 1996

                                       OR

[ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
        EXCHANGE ACT OF 1934

        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               (Exact name of registrant as
     specified in its charter)                   specified in its charter)

             DELAWARE                                   DELAWARE
---------------------------------        ---------------------------------------
  (State or other jurisdiction of           (State or other jurisdiction of
  incorporation or organization)             incorporation or organization)

            94-0358820                                 94-2878485
------------------------------------       -------------------------------------
(I.R.S. Employer Identification No.)       (I.R.S. Employer Identification No.)

2600 South Delaware Street                 2600 South Delaware Street
P.O. Box 1117                              P.O. Box 5050
San Mateo, California     94403            San Mateo, California         94402
------------------------------------       -------------------------------------
(Address of principal                      (Address of principal
executive offices)        (Zip Code)       executive offices)         (Zip Code)

      (415) 573-4514                                  (415) 574-7223
------------------------------------       -------------------------------------
  (Registrant's telephone number,             (Registrant's telephone number,
       including area code)                         including area code)

Securities registered pursuant to Section 12 (b) of the Act:

    (Title of each class) (Title of each class) Common Stock, $.01 par value per
share Common Stock, $.01 par value per share
--------------------------------------    --------------------------------------


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                                      -1-
<PAGE>   2
================================================================================

                                    FORM 10-K

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

(Mark One)

[x]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
        EXCHANGE ACT OF 1934

        For the fiscal year ended December 31, 1996

                                       OR

[ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
        EXCHANGE ACT OF 1934

        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               (Exact name of registrant as
     specified in its charter)                   specified in its charter)

             DELAWARE                                   DELAWARE
---------------------------------        ---------------------------------------
  (State or other jurisdiction of           (State or other jurisdiction of
  incorporation or organization)             incorporation or organization)

            94-0358820                                 94-2878485
------------------------------------       -------------------------------------
(I.R.S. Employer Identification No.)       (I.R.S. Employer Identification No.)

2600 South Delaware Street                 2600 South Delaware Street
P.O. Box 1117                              P.O. Box 5050
San Mateo, California     94403            San Mateo, California         94402
------------------------------------       -------------------------------------
(Address of principal                      (Address of principal
executive offices)        (Zip Code)       executive offices)         (Zip Code)

      (415) 573-4514                                  (415) 574-7223
------------------------------------       -------------------------------------
  (Registrant's telephone number,             (Registrant's telephone number,
       including area code)                         including area code)

Securities registered pursuant to Section 12 (b) of the Act:

    (Title of each class) (Title of each class) Common Stock, $.01 par value per
share Common Stock, $.01 par value per share
--------------------------------------    --------------------------------------


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                                      -2-
<PAGE>   3


     American Stock Exchange, Inc.            American Stock Exchange, Inc.
--------------------------------------    --------------------------------------
    (Name of each exchange on which           (Name of each exchange on which
              registered)                               registered)

Securities registered pursuant to Section 12 (g) of the Act:

                                      None
           ----------------------------------------------------------
                                (Title of class)

Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

The aggregate market value of the paired voting stock held by non-affiliates of
California Jockey Club as of March 17, 1997, was $256,736,810 based upon a per
share price of $46.00. Directors and executive officers are considered
affiliates for purposes of this calculation, but should not necessarily be
deemed affiliates for any other purpose.

The aggregate market value of the paired voting stock held by non-affiliates of
Bay Meadows Operating Company as of March 17, 1997, was $251,494,650 based upon
a per share price of $46.00. Directors and executive officers are considered
affiliates for purposes of this calculation, but should not necessarily be
deemed affiliates for any other purpose.

5,763,257 shares of California Jockey Club Common Stock were outstanding as of
March 17, 1997.

5,763,257 shares of Bay Meadows Operating Company Common Stock were outstanding
as of March 17, 1997.



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                                      -3-



<PAGE>   4

                                     PART I

ITEM 1.  BUSINESS

The information set forth in "Business" below includes "forward-looking
statements" within the meaning of Section 21E of the Securities and Exchange
Act of 1934, as amended, and is subject to the safe harbor created by that
section. Readers are cautioned not to place undue reliance on these
forward-looking statements and to note that they speak only as of the date
hereof. Factors that realistically could cause actual results to differ
materially from those set forth in the forward-looking statements include the
following: nonconsummation of the merger agreement with Patriot American
Hospitality, Inc. ("Patriot"), nonconsummation of the Franklin Agreement or the
Iacocca Agreement (as hereinafter defined), failure to secure the necessary
governmental approvals to construct new stalls at the Bay Meadows Racecourse,
and the risk factors set forth in "Risk Factors" in Item 7.

INTRODUCTION

California Jockey Club ("Cal Jockey") operates as an equity real estate
investment trust under the Internal Revenue Code of 1986, as amended, and is the
owner of the Bay Meadows Racecourse (sometimes referred to herein as the
"Racecourse"). Bay Meadows Operating Company ("Bay Meadows") is a gaming and
entertainment company currently conducting horse racing at Bay Meadows
Racecourse in San Mateo, California. The Racecourse abuts the 101 Freeway which
is the main thoroughfare between the cities of San Jose and San Francisco. The
Racecourse is located about halfway between the two cities and is located about
seven miles south of the San Francisco International Airport. Cal Jockey and Bay
Meadows (collectively, the "Companies") are corporations which were incorporated
in 1983. The Companies' predecessor was incorporated in 1932 and began
conducting horse racing at the Racecourse in 1934. This document constitutes the
Annual Report on Form 10-K for both Cal Jockey and Bay Meadows.

Since 1983, Cal Jockey's shares of common stock, par value $.01 per share ("Cal
Jockey Common Stock"), have been paired and trade together with the shares of
common stock, par value $.01 per share ("Bay Meadows Common Stock"), of Bay
Meadows (the "Paired Shares") as a single unit on the American Stock Exchange
(the "AMEX") (symbol "CJ") pursuant to a stock pairing arrangement. The terms
of this pairing arrangement are set forth in the Pairing Agreement, dated as of
February 17, 1983 and amended from time to time thereafter, by and between Cal
Jockey and Bay Meadows (the "Pairing Agreement"). The pairing is evidenced by
"back-to-back" certificates and the certificates bear a legend referring to the
restrictions on transfer imposed by the bylaws of the Companies. As a result, a
stockholder can only purchase or sell an equal number of shares of both
companies.

THE PATRIOT TRANSACTION

On October 31, 1996, Cal Jockey and Bay Meadows entered into a merger agreement
with Patriot American Hospitality, Inc. ("Patriot").  The merger agreement was
approved unanimously by the Boards of Patriot, Cal Jockey and Bay Meadows and
is subject to approval by the shareholders of each of Patriot, Cal Jockey and
Bay Meadows.

Pursuant to the merger agreement, Patriot will merge with and into Cal Jockey,
with Cal Jockey being the surviving company.  The shareholders of Cal Jockey
and Bay Meadows will have the option either to tender each of their paired
shares for $33.00 in cash or to retain their paired shares, which will remain
outstanding after the merger and will represent the same number of paired
shares of the Companies' common stock.

MERGER AGREEMENT. On October 31, 1996, Patriot, Cal Jockey and Bay Meadows
entered into a binding business combination agreement (the "October 31, 1996
Agreement") pursuant to which the parties agreed, subject to stockholder
approval and other conditions, to engage in a business transaction. The parties,
together with Patriot American Hospitality Partnership, L.P., a limited
partnership (the "Patriot Partnership"), thereafter entered into an Agreement
and Plan of Merger, dated as of February 24, 1997 (the "Merger Agreement"),
which by its terms supersedes the October 31, 1996 Agreement and more fully
details the transactions to be consummated by the parties.

Pursuant to the Merger Agreement, Patriot will merge with and into Cal Jockey
(the "Merger"), with Cal Jockey being the surviving company. In connection with
the Merger, Cal Jockey's name will be changed to "Patriot American Hospitality,
Inc." ("New Patriot REIT") and Bay Meadows' name will be changed to "Patriot
American Hospitality Operating Company" ("New Patriot Operating Company").
Patriot stockholders will be entitled to receive for each share of common stock,
no par value per share, of Patriot ("Patriot Common Stock") held by them at the
effective time of the Merger, as adjusted as a result of the two-for-one split
of Patriot stock announced in February 1997, 0.519 shares of common stock, par
value $.01 per share, of New Patriot REIT ("New Patriot REIT Common Stock") and
0.519 shares of common stock, par value $.01 per share, of New Patriot Operating
Company ("New Patriot Operating Company Common Stock") (subject to certain REIT
qualification requirements), which shares will be paired and transferable only
as a single unit. In addition, each outstanding Paired Share which is not
tendered pursuant to the joint self tender offer of Cal Jockey and Bay Meadows
(as described below), will remain outstanding after the Merger and will, without
any action on the part of the stockholders of Cal Jockey and Bay Meadows,
represent the same number of paired shares of New Patriot REIT Common Stock and
New Patriot Operating Company Common Stock.

In connection with the Merger, Bay Meadows will form an operating partnership
(the "New Patriot Operating Partnership") into which Bay Meadows will contribute
its assets in exchange for limited partnership units of the New Patriot
Operating Partnership, and Cal Jockey will contribute certain of its assets to
the Patriot Partnership in exchange for limited partnership units of the Patriot
Partnership. Upon completion of the Merger and the transactions contemplated by
the Merger Agreement (the "Related Transactions"), substantially all of the
operations of New Patriot REIT and New Patriot Operating Company will be
conducted through their respective operating partnerships. The Board of
Directors of each of Patriot, Cal Jockey and Bay Meadows has approved the
October 31, 1996 Agreement, the Merger Agreement and the Related

                                      -4-
<PAGE>   5

Transactions, including, without limitation, the Merger, the Subscription (as
hereinafter defined), the issuance of up to approximately 30,500,000 shares of
Cal Jockey Common Stock and 30,500,000 shares of Bay Meadows Common Stock, the
contribution of the assets of Bay Meadows to the New Patriot Operating
Partnership and the contribution of certain of the assets of Cal Jockey to the
Patriot Partnership.

THE SUBSCRIPTION. By operation of the Merger, each issued and outstanding share
of Patriot Common Stock will be converted into the right to receive 0.519
shares of New Patriot REIT Common Stock subject to certain REIT qualification
requirements described below. The Patriot Partnership will, in connection with
the Merger, subscribe (the "Subscription") for shares of Bay Meadows Common
Stock (which in connection with the Merger will become New Patriot Operating
Company Common Stock) (the "Subscribed Shares") in an amount equal to the number
of shares of New Patriot REIT Common Stock that will be issued to Patriot
stockholders in the Merger. Immediately prior to the Merger, the Patriot
Partnership will fund the Subscription and Patriot and the Patriot Partnership
will designate the Patriot stockholders as the recipients of the Subscribed
Shares, in compliance with the Pairing Agreement, on the basis of 0.519
Subscribed Shares for each share of Patriot Common Stock outstanding at the
Effective Time, subject to certain REIT qualification requirements described
below. The result of the Merger and the Subscription will be that Patriot
stockholders will have the right to receive 0.519 shares of New Patriot REIT
Common Stock and 0.519 shares of New Patriot Operating Company Common Stock,
subject to certain REIT qualification requirements described below, for each
share of Patriot Common Stock held by them at the Effective Time, which shares
of New Patriot REIT Common Stock and New Patriot Operating Company Common Stock
will be paired and transferable only as a single unit.

So that New Patriot REIT will continue to qualify and maintain REIT status, the
Amended and Restated Certificates of Incorporation of New Patriot REIT and New
Patriot Operating Company (the "Restated Charters") will provide that no person
or entity may own, or be deemed to own by virtue of certain attribution rules of
the Code, in excess of 9.8% (the "Ownership Limit") of the total outstanding
shares of any class or series of New Patriot REIT Common Stock and New Patriot
Operating Company Common Stock or preferred stock of New Patriot REIT or New
Patriot Operating Company. If any holder of Patriot Common Stock would receive
in the Merger and the Subscription a number of paired shares of New Patriot REIT
Common Stock and New Patriot Operating Company Common Stock which would cause
such holder or any other person or entity to own, or be deemed to own, paired
shares of New Patriot REIT Common Stock and New Patriot Operating Company Common
Stock in excess of the Ownership Limit, then such holder shall acquire no right
or interest in such number of paired shares of New Patriot REIT Common Stock and
New Patriot Operating Company Common Stock that would cause such holder or any
other person or entity to exceed the Ownership Limit, but such holder shall, in
lieu of receiving those paired shares which would cause the Ownership Limit to
be exceeded (the "Excess Paired Shares"), have the right to be paid by New
Patriot REIT an amount in cash for such Excess Paired Shares equal to the
product of the fair market value per Excess Paired Share multiplied by the
number of such Excess Paired Shares.

THE SELF TENDER OFFER. In connection with the Merger, Cal Jockey and Bay Meadows
will commence a joint self tender offer (the "Offer") to purchase for cash at a
combined price of $33.00 per Paired Share up to that percentage of the issued
and outstanding Paired Shares of Cal Jockey Common Stock and Bay Meadows Common
Stock such that upon consummation of the Merger the stockholders of Cal Jockey
and Bay Meadows prior to the Merger will own at least 1.0% of the paired shares
of New Patriot REIT Common Stock and New Patriot Operating Company Common Stock.
The obligation of Cal Jockey and Bay Meadows to accept for payment and pay for
their respective portion of the Paired Shares validly tendered and not withdrawn
pursuant to the Offer will be subject to the satisfaction or waiver of the
conditions to the Merger Agreement and the Merger becoming effective pursuant to
the General Corporation Law of the State of Delaware and the Virginia Stock
Corporation Act. The purpose of the Offer is to permit the holders of Paired
Shares of Cal Jockey Common Stock and Bay Meadows Common Stock to receive cash
in the amount of $33.00 per Paired Share if such holders do not wish to become
holders of the paired shares of New Patriot REIT Common Stock and New Patriot
Operating Company Common Stock after the Merger. On the fifth business day
following the date Cal Jockey and Bay Meadows publicly announce that all

                                      -5-
<PAGE>   6

of the conditions to the Merger Agreement have been satisfied or waived, the
Offer will expire and the acceptance for payment of the validly tendered Paired
Shares shall be conditioned only upon the Merger becoming effective. In the
event the Merger Agreement is terminated in accordance with its terms, the Offer
will simultaneously terminate. On March 17, 1997, the closing price of the
Paired Shares on the AMEX was $46.00.

FINANCING THE OFFER. Patriot will provide Cal Jockey and Bay Meadows with the
funds necessary to satisfy their payment obligations under the Offer by
borrowing the necessary amounts under its financing sources.

CONDITIONS TO THE MERGER AND THE OFFER. Consummation of the Merger and the
Offer is subject to various conditions (which must be satisfied or waived),
including: (i) approval of a proposal to adopt the Merger Agreement and the
Related Transactions, by the holders of two-thirds of the outstanding shares of
Patriot Common Stock, by the holders of a majority of the outstanding shares of
Cal Jockey Common Stock and by the holders of a majority of the outstanding
shares of Bay Meadows Common Stock; (ii) approval of a proposal to amend and
restate the Certificate of Incorporation of Cal Jockey and the Bylaws of Cal
Jockey by the holders of a majority of the outstanding shares of Cal Jockey
Common Stock; and (iii) approval of a proposal to amend and restate the
Certificate of Incorporation of Bay Meadows and the Bylaws of Bay Meadows by
the holders of a majority of the outstanding shares of Bay Meadows Common
Stock. These proposals are currently expected to be voted on at special
meetings to be held by the parties in May or June 1997. Although each of the
aforementioned proposals will be voted on separately, because each of the
proposals is a condition to closing, if any of the proposals is not adopted,
the parties will not be required to consummate the Offer, the Merger or any of
the Related Transactions. Prior to consummation of the Merger, Cal Jockey will
distribute to its stockholders a dividend in the amount of $0.10 per Paired
Share plus the amount per Paired Share equal to the proceeds generated from the
sale of Cal Jockey's 100,000 shares of Santa Anita Realty Enterprises, Inc.
stock, less the original purchase price for this stock, divided by the number of
Paired Shares outstanding. There can be no assurances that the proposal
conditions or other conditions to consummation of the Merger will be satisfied
or waived.

SALE TO PAINEWEBBER. Patriot and PaineWebber Incorporated ("PaineWebber") have
agreed in principle that following the close of the Merger, an affiliate of
PaineWebber will purchase substantially all of the land of Cal Jockey,
including the land subject to the Franklin Agreement and Iacocca Agreement, for
a purchase price of $83 million. New Patriot REIT would retain ownership of the
improvements located on the land. Simultaneously with the consummation of such
purchase, the PaineWebber affiliate and New Patriot REIT would enter into a
ground lease covering that portion of land on which the Racecourse is situated
for a term of seven years. New Patriot REIT would then sublease the Racecourse
land and related improvements to New Patriot Operating Company.


CALIFORNIA JOCKEY CLUB

Cal Jockey is incorporated under the laws of the State of Delaware. Cal Jockey's
principal executive offices are located at 2600 South Delaware Street, P.O. Box
1117, San Mateo, California 94403.

PROPERTIES

Cal Jockey's principal asset is the Racecourse, a horse race track located on
approximately 175 acres of contiguous land in San Mateo, California. The
principal Racecourse facilities include:

-    the main one-mile dirt horse race track with six furlongs and 1-1/4 mile
     chutes, inside of which is a seven furlong turf course;

-    the track's infield area, on which is situated a nine hole par three golf
     course;

-    a main structure, which contains a grandstand, a clubhouse and a premier
     seating and dining club (the "Turf Club"), all of which can accommodate
     approximately 25,000 people for racing events;

-    a parking area, which can accommodate approximately 10,000 automobiles, a
     portion of which is provided by an easement granted by the County of San
     Mateo;

-    a barn and stable area situated on approximately 38 acres and containing
     approximately 1,550 horse stalls; and


                                      -6-
<PAGE>   7

-    a 5/8-mile training track oval situated on approximately 40 acres adjacent
     to the barn and stable area (the "Training Track Area").

In addition, Cal Jockey owns an approximately 2 acre parcel in close proximity
to the Racecourse on which an indoor tennis club is located (the "Tennis Club
Parcel") and an approximately 1-1/2 acre parcel that abuts a street known as El
Camino Real and is separated from the 175 acre site by railroad tracks.
Historically, the entire 175 acre site has been used in conjunction with
Thoroughbred racing.

1983 REORGANIZATION

In 1983, the Companies' predecessor was reorganized into two companies, Cal
Jockey (which became the owner of the 175 acre site) and Bay Meadows (which
operates Bay Meadows Racecourse). Cal Jockey is engaged in managing its real
estate holdings, although it does not have active business operations. Cal
Jockey has historically generated revenue through the lease or sale of its
assets. Substantially all of Cal Jockey's revenue has been derived from its
lease with Bay Meadows. See "Lease of Racing Facility." Cal Jockey intends to
continue to meet the requirements for classification as a real estate investment
trust. So long as Cal Jockey qualifies as a real estate investment trust, it is
able to distribute its otherwise taxable income to its stockholders without
incurring a corporate level tax on that income.

POTENTIAL FOR ADDITIONAL INCOME

Dating back to the early 1970's, California Jockey Club (the predecessor to the
Companies before the 1983 reorganization) and subsequently both the Bay Meadows
and the Cal Jockey Boards of Directors concluded that the Training Track Area
could be developed for commercial purposes without adversely affecting Bay
Meadows' ability to carry on live Thoroughbred racing. The Cal Jockey Board of
Directors continues to believe that there is an opportunity to generate
additional income for stockholders by leasing or selling a portion of Cal
Jockey's 175 acres. The Cal Jockey Board of Directors believes that exploring
alternative means of generating stockholder income is prudent because of
negative trends in Thoroughbred racing. Evidence of these trends includes: (1)
the continued decline of on-track attendance at Bay Meadows, (2) the continued
decline in the quantity and quality of Thoroughbreds nationally and at Bay
Meadows, and (3) increased competition in the form of the new Seattle
Thoroughbred racing facility (Emerald Downs), other types of legalized gambling
and a widening array of professional and amateur sporting events. Accordingly,
Cal Jockey has engaged in the leasing and sale of a portion of its 175 acres.

PENDING SALES AND NEGOTIATIONS

In 1995, the Cal Jockey Board of Directors concluded that it would be in the
best interests of its stockholders to sell a substantial portion (approximately
32 acres) of the barn and stable area (the "Stable Area") and the Training
Track Area, rather than to develop them or continue to lease them to Bay
Meadows. The decisions reflected Cal Jockey's desire to seek out opportunities
for additional income. In addition, the Cal Jockey Board of Directors was
motivated by the substantial investment that Cal Jockey likely would be
required to make to renovate the existing Racecourse barns and to mitigate the
current water runoff problem associated with the continued operation of the
existing Racecourse barns (see "Water Treatment System") if the Stable Area is
not sold and continues to be used for the stabling of horses. Further, Cal
Jockey believes that the increased presence in San Mateo of the purchaser of
the Stable Area (Property Resources, Inc. and its affiliated entities) should
enhance the likelihood of obtaining the necessary Entitlements (as hereinafter
defined) for both transactions. See "The Entitlement Process." Accordingly, in
May 1995 and December 1995 Cal Jockey entered into agreements to sell the
Stable Area and the Training Track Area, respectively. See "Terms of the
Pending Sales of the Training Track and Stable Areas." By engaging in these
transactions, which it entered into prior to the Merger Agreement, Cal Jockey
seeks to achieve substantial liquidity which can be reinvested in income
generating properties, generating additional income for its stockholders. There
can be no assurances that these sales will be consummated.

                                      -7-
<PAGE>   8

In July 1996, Cal Jockey entered into an Agreement of Purchase and Sale with
Public Storage, Inc. (the "Public Storage Agreement") to sell the Tennis Club
Parcel for approximately $2,200,000. Public Storage, Inc. intends to convert
the land into mini-storage units. The sale of the Tennis Club Parcel is subject
to various contingencies including approval by the City of San Mateo of a
rezoning of the property and, therefore, no assurance can be given that such
sale will be consummated.

In November 1996, Cal Jockey entered into a non-subordinated ground lease (the
"Borders Lease") with Borders, Inc. ("Borders"), a bookstore chain. The Borders
Lease covers 2.3 acres of land formerly used by Bay Meadows as a parking lot and
land adjacent to the parking lot. The San Mateo Planning Commission voted to
approve the development of a Borders bookstore on the site on October 14, 1996.
The initial term of the Borders Lease is for 20 years with a fixed net annual
rent of $278,500 for years 1 through 10, $362,050 for years 11 through 15 and
$416,350 for years 16 through 20. The Borders Lease has eight five-year renewal
options with an annual Consumer Price Index adjustment beginning in the fifth
option term.

Cal Jockey is about to enter into an agreement with the County of San Mateo,
(the "County"), which owns certain adjoining property commonly known as the San
Mateo Expo Center (the "Expo Center"). Under the agreement, the County will
relinquish certain easements (or a portion thereof) that encumber a portion of
the property being improved as a four lane public street, one of the primary
off-site improvements required as a condition to obtaining the Entitlements (as
defined below). In consideration of the County relinquishing these easement
rights, Cal Jockey shall cause a portion of the County's parking lot at the
Expo Center to be paved and shall relinquish a portion of Cal Jockey's parking
easement that encumbers the Expo Center property. Cal Jockey will also (i)
agree to allow Expo Center personnel to use the Delaware Street entrance to Bay
Meadows, as well as any entrance from Saratoga Drive into Bay Meadows to
accommodate Expo Center traffic and parking and (ii) accede to various County
requests regarding parking fees.

TERMS OF THE PENDING SALES OF THE TRAINING TRACK AND STABLE AREAS

STABLE AREA. On May 31, 1995, Cal Jockey entered into an Agreement of Purchase
and Sale with Property Resources, Inc. ("Property Resources"), a subsidiary of
Franklin Resources, Inc., (as amended, the "Franklin Agreement"), providing for
the sale of the Stable Area. 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 (as defined below).

The Franklin Agreement contemplates the sale of the Stable Area for a purchase
price of approximately $21,000,000. In addition, Property Resources is obligated
to fund 44% of the cost of various off-site improvements required by the City of
San Mateo and the State of California in connection with the entitlements for
the development of the property (the "Entitlements"). Property Resources intends
to develop the Stable Area with an office complex for use by Franklin Resources,
Inc. and its affiliated entities.

The transaction is subject to a number of conditions precedent including that of
Cal Jockey obtaining from the City of San Mateo all necessary permits to develop
the office complex. To date, Property Resources has deposited $350,000 into an
escrow account as required by the Franklin Agreement. Future deposits are
required upon satisfaction of certain conditions. The escrowed amounts, plus
interest, are refundable if the conditions to closing by Property Resources are
not satisfied, and will serve as liquidated damages to Cal Jockey if such
conditions are satisfied but Property Resources fails to consummate the purchase
of the Stable Area.

TRAINING TRACK AREA. In December 1995, Cal Jockey entered into an Agreement of
Purchase and Sale (as amended, the "Iacocca Agreement") with Lee Iacocca &
Associates, Inc. ("Iacocca") providing for the sale of the Training Track Area.
In the Third Amendment, effective June 28, 1996, Iacocca 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 Iacocca.

The development plan for the Training Track Area calls for the construction of
single-family and multi-family housing units, a superior first class hotel and
neighborhood retail uses. The Iacocca Agreement contemplates the sale of the
Training Track Area to Airdial for a purchase price of $30,750,000, subject to
adjustment if certain of the Entitlements are not obtained. In addition, Airdial
is obligated to fund 53% of the off-site improvements required by the City of
San Mateo and the State of California in connection with the Entitlements for
the development of the property. See "--Stable Area."

To date, Airdial has delivered to escrow an irrevocable standby letter of credit
in favor of Cal Jockey in the sum of $500,000. Within three days after Cal
Jockey obtains the Entitlements, Airdial is obligated to deliver to escrow a
second such letter of credit also in the amount of $500,000. These letters of
credit are released if the conditions to


                                      -8-
<PAGE>   9

closing are not satisfied. The parties further agreed that $1,000,000 shall be
the amount of liquidated damages to Cal Jockey if all conditions to Airdial's
purchase are satisfied or waived, but Airdial fails to consummate the purchase
of the Training Track Area.

Closing of the transaction is subject to a number of conditions precedent
including Cal Jockey obtaining from the City of San Mateo the necessary
Entitlements to proceed with development plans, together with a development
agreement. If the conditions are satisfied or waived, it is contemplated that
escrow would close in Fall 1998.

THE ENTITLEMENT PROCESS. As noted above, Cal Jockey is charged with the
responsibility of obtaining the Entitlements for both the Stable Area and the
Training Track Area developments. The development plan being proposed covers
both developments as part of one plan. To assist in obtaining the Entitlements,
Cal Jockey has retained Calthorpe Associates, one of the premier land planning
firms in Northern California. Calthorpe Associates, together with a team of
other consultants, is developing a specific plan covering both developments. The
public comment period closed on November 25, 1996 and the final Environmental
Impact Report ("EIR") and specific plan has been prepared. It is anticipated
that the San Mateo Planning Commission and the City Council will vote on final
certification of the EIR and approval of the specific plan at a meeting
currently scheduled for late April 1997. However, there can be no assurances
that Cal Jockey will be successful in obtaining the necessary Entitlements to
avoid termination of the Franklin Agreement or the Iacocca Agreement.

COST OF ENTITLEMENT PROCESS. Through December 31, 1996, Cal Jockey has expended,
in connection with the Entitlement process, $2,242,000 for the services of
Calthorpe Associates, engineers, lawyers and other consultants. These amounts
have been capitalized and added to the basis in land.

POSSIBLE TAX CONSEQUENCES. Both the Franklin Agreement and the Iacocca Agreement
provide that the purchasers will cooperate with Cal Jockey in structuring the
transactions as tax-deferred exchanges. It is the present intention of Cal
Jockey's Board of Directors to seek income-generating properties that would meet
the investment criteria to be established for this purpose by a committee of the
Cal Jockey Board of Directors. To the extent the sales proceeds are used to
defray Cal Jockey's portion of the traffic circulation and other off-site
improvement costs or to construct new facilities on Cal Jockey's retained
property or are retained by Cal Jockey, the sales

                                      -9-


<PAGE>   10

proceeds will not qualify for tax-deferred treatment and will not be available
for distribution to stockholders. However, it is Cal Jockey's present intention
to borrow the funds for such off-site improvements or new facilities, so that
all of the proceeds could qualify for tax-deferred treatment. There can be no
assurances that the transactions will qualify as tax-deferred exchanges or that
suitable properties for exchange will be located and the exchanges can be
effectuated within the relatively short time periods allowed by applicable IRS
regulations. If the sales of the Training Track Area or the Stable Area cannot
be qualified as tax-deferred exchanges, but the proceeds qualify for capital
gains treatment, Cal Jockey can elect to pass through the gain to its
stockholders who would be taxed at applicable capital gains rates. If the
proceeds are not distributed but they qualify for capital gains treatment, the
gain will be taxed to Cal Jockey at applicable capital gains rates. Cal Jockey's
basis in the land being sold under the Iacocca Agreement and the Franklin
Agreement is estimated at approximately $27,000 per acre.

FINANCING CAL JOCKEY'S SHARE OF OFF-SITE IMPROVEMENT COSTS

Based upon the current cost estimates, if neither the Franklin Agreement nor the
Iacocca Agreement is terminated, it appears that Cal Jockey's proportionate
share of the off-site improvement costs will be approximately $330,000. Due to
the inherent uncertainties involved in these estimates, there can be no
assurances that these cost estimates will not be further revised or such
revisions may not be significant. Cal Jockey intends to use internally generated
funds or to borrow whatever sums are required to defray these costs. However,
there is no assurance that Cal Jockey will have sufficient internally generated
funds or will be able to borrow these funds.

PLANNING FOR TRAINING AND STABLING

Recognizing that the proposed sale of the Training Track Area and the Stable
Area might require locating off-site areas to carry out these activities, Cal
Jockey explored, with Bay Meadows, numerous properties in a variety of nearby
locales. None of these jointly investigated properties has proved to be
appropriate.

An alternative under consideration is a proposal to construct 954 new stalls at
Bay Meadows, some of which might be recessed into the ground on the northern end
of the infield of the main track with the balance located in a portion of the
existing parking area just north of the existing grandstand. A tunnel under the
race tracks would have to be constructed in order to connect the stable areas.
This alternative presents a number of complex planning, financing and
construction issues. No approval of such a proposal has been given by Cal Jockey
or the City of San Mateo, and any approval by Cal Jockey would be contingent on
the results of economic, environmental and other feasibility studies. There can
be no assurances that the necessary permits or financing will be secured or
agreement with the City of San Mateo will be reached as necessary to implement
this alternative.

LEASE OF RACING FACILITY

Bay Meadows leases Bay Meadows Racecourse from Cal Jockey. Pursuant to the
terms of the lease agreement, which commenced on April 1, 1993 and expired on
March 31, 1996, Cal Jockey received the greater of (a) $3,000,000 annually or
(b) the sum of 1.5% of the on-track pari-mutuel handle when there were live
races at Bay Meadows, 1% of the pari-mutuel handle wagered at Northern
California satellite wagering facilities receiving races from Bay Meadows, 1%
of the pari-mutuel handle wagered at Bay Meadows when it was acting as a
satellite wagering facility for other host associations conducting racing in
Northern California, 25% of the net commissions from exported and improted
races from Southern California and interstate locations, and between 60% and
90% of various non-racing sublease rental income. In addition, Cal Jockey also
received a specified percentage of the annual pari-mutuel handle in excess of
$350,000,000.

The Master Lease Agreement pursuant to which Bay Meadows leased the Racecourse
Properties from Cal Jockey expired on March 31, 1996. Cal Jockey and Bay
Meadows have had discussions regarding the extension of the Master Lease
Agreement. The companies now have conflicting views concerning the existence of
any Master Lease Agreement extension. Cal Jockey believes that no lease exists
and that Bay Meadows is a tenant at will paying rent at the rate in the prior
Master Lease Agreement. Bay Meadows believes that the Master Lease Agreement has
been extended for an additional three years with a ten percent increase in rent
but otherwise substantially on the same terms as the previous lease. Bay Meadows
has, however, continued to pay rent at a rental rate equivalent to that
contained in the expired lease agreement through the first quarter of 1997. No
amounts of additional rent , in any, have been accrued at December 31, 1996. In
the event that the Companies reach a reconciliation on any lease extension,
retroactive changes in the rental amounts, in any, will be recorded in the
period that such reconciliation occurs. No assurances can be given concerning
the possible effects that the ultimate resolution of this matter will have on
the future operations of the Companies.


                                      -10-
<PAGE>   11

SEASONAL VARIATIONS IN BUSINESS

Cal Jockey is subject to significant seasonal variations in revenues primarily
due to the fact that the lease revenues are affected by the seasonality of
Thoroughbred racing. See "Lease of Racing Facility" and "BAY MEADOWS OPERATING
COMPANY -- Bay Meadows' Horse Racing Season." The following table sets forth
certain financial information concerning Cal Jockey for the quarterly periods
indicated:


                             CALIFORNIA JOCKEY CLUB


<TABLE>
<CAPTION>
                                             QUARTERS ENDED 1996
                        --------------------------------------------------------
                                MARCH 31,  JUNE 30,  SEPTEMBER 30,  DECEMBER 31,
                        (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RACING DAYS)
<S>                              <C>         <C>         <C>         <C>
Number of live racing days            63           0          25          27

Total revenues                   $ 2,338     $   527     $ 1,340     $ 1,207
Costs and expenses                   407         484       1,850(1)    3,887(1)
                                 -------     -------     -------     -------

Net income (loss)                $ 1,931     $    43     $  (510)    $(2,680)
                                 =======     =======     =======     =======

Net income (loss) per share      $   .34     $   .01     $  (.09)      $(.47)
                                 =======     =======     =======     =======
</TABLE>

(1) Includes merger related costs of $3,504,000 and legal fees of $1,124,000.



<TABLE>
<CAPTION>
                                             QUARTERS ENDED 1995
                        --------------------------------------------------------
                                MARCH 31,  JUNE 30,  SEPTEMBER 30,  DECEMBER 31,
                        (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RACING DAYS)
<S>                              <C>         <C>         <C>         <C>
Number of live racing days          20           10           27           51

Total revenues                  $  903       $  734       $1,482       $2,122
Costs and expenses                 324          351          431          412
                                ------       ------       ------       ------
Net income                      $  579       $  383       $1,051       $1,710
                                ======       ======       ======       ======

Net income per share            $  .10       $  .07       $  .18       $  .30
                                ======       ======       ======       ======

</TABLE>




                                      -11-
<PAGE>   12

<TABLE>
<CAPTION>
                                             QUARTERS ENDED 1994
                        --------------------------------------------------------
                                MARCH 31,  JUNE 30,  SEPTEMBER 30,  DECEMBER 31,
                        (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND RACING DAYS)
<S>                           <C>         <C>         <C>         <C>
Number of live racing days          21            0           24           68

Total revenues                  $1,083       $  444       $1,300       $2,349
Costs and expenses                 343          347          325          541
                                ------       ------       ------       ------
Net income                      $  740       $   97       $  975       $1,808
                                ======       ======       ======       ======
Net income per share            $  .13       $  .02       $  .17       $  .31
                                ======       ======       ======       ======
</TABLE>



CAPITAL IMPROVEMENTS

In 1996, capital improvement expenditures were $271,000 which primarily
consisted of electrical, plumbing and flooring improvements related to offices
and dining areas.

WATER TREATMENT SYSTEM

The City of San Mateo (the "City"), along with the State of California, has
mandated that water runoff from Bay Meadows' barn area be disconnected from the
municipal sewer collection system. Cal Jockey is cooperating with the City and
State Regional Water Quality Control Board to resolve this situation. If the
Stable Area is sold as proposed to Property Resources, the problem with water
runoff as it presently exists is expected to be eliminated. If the Franklin
Agreement were terminated or the proposal for new barn construction failed to
be approved, the costs associated with resolving the matter are estimated to be
approximately $1,500,000.

EMPLOYEES

At December 31, 1996, Cal Jockey had three employees.

COMPETITION

Cal Jockey's financial condition and results of operations are affected by the
various competitive factors affecting Bay Meadows. See the information set forth
below under the caption "BAY MEADOWS OPERATING COMPANY -- Competition."



BAY MEADOWS OPERATING COMPANY

Bay Meadows is organized under the laws of the State of Delaware. Bay Meadows'
principal executive offices are located at Bay Meadows Racecourse, 2600 South
Delaware Street, P.O. Box 5050, San Mateo, California 94402.

Bay Meadows is a gaming and entertainment company currently engaged primarily in
the business of conducting and offering pari-mutuel wagering on Thoroughbred
racing at the Racecourse. Additionally, Bay Meadows acts as an off-track
satellite wagering facility, allowing patrons to wager on horse races at other
tracks even when live Thoroughbred racing is not being conducted at the
Racecourse. In addition to live Thoroughbred racing at the Racecourse, Bay
Meadows simulcasts its live horse races to as many as 31 sites in California and
450 sites in the remainder of the world. Also, Bay Meadows accepts simulcasts of
horse races conducted throughout the United States, Canada, Mexico, Australia
and Hong Kong. Bay Meadows generates revenues from commissions on pari-mutuel
wagering, admissions, parking, program sales and the food and beverage
concessions at the Racecourse.

                                      -12-

<PAGE>   13

Substantially all of Bay Meadows' revenues are derived from the Thoroughbred
racing activities conducted at Bay Meadows. Annual revenues and net income have
historically fluctuated based to a large extent on the number of days during any
given year that live horse racing is conducted at the Racecourse. Selected
comparative figures for the last four calendar years are as follows:

<TABLE>
<CAPTION>
                                             1996             1995           1994            1993            1992
                                                        (IN THOUSANDS, EXCEPT FOR HORSE RACING DAYS)
<S>                                        <C>             <C>             <C>             <C>             <C>
Number of live horse racing days                115             108             113             104             111

Commissions (revenue derived from
  pari-mutuel wagering)                    $ 15,880        $ 14,916        $ 14,871        $ 12,690        $ 14,128

Total revenues of Bay Meadows              $ 53,472        $ 50,256        $ 51,187        $ 44,642        $ 48,537

Bay Meadows rent paid to Cal Jockey        $  4,918        $  4,762        $  4,777        $  3,607        $  4,229

Income of Bay Meadows before
  income tax provision                     $    715        $    936        $  1,140        $    174        $   (792)
</TABLE>

Bay Meadows also generates revenues from subletting the racetrack facilities to
the San Mateo County Fair for horse racing events (historically, a two week
horse race meet), as well as to trade shows and others for various events and
from operating an indoor tennis club near the racetrack facilities and a nine
hole golf course located on the infield of the racetrack. See "Effects of Other
Cal Jockey Transactions."

BAY MEADOWS' HORSE RACING SEASON

California law permits a racing association in the Northern California Racing
Zone (such as Bay Meadows) to conduct no more than 22 weeks of live horse
racing each year. In calendar years 1996 and 1995, Bay Meadows conducted 115
and 108 live horse racing days, respectively. The CHRB has granted Bay Meadows
102 racing days for the calendar year 1997 horse racing season, allocated
during the periods from early January through late March and late August
through mid-November. However, until relatively recently, Bay Meadows' horse
racing season historically ran from late August through late January. In such
years the number of horse racing days in a calendar year included horse racing
days for two different horse racing seasons.

The following table sets forth information relating to live horse racing days
and the attendance and pari-mutuel handle for the calendar years indicated.


                                      -13-
<PAGE>   14
<TABLE>
<CAPTION>
                                                                                CALENDAR YEARS
                                                  ----------------------------------------------------------------------------
                                                        1996            1995             1994           1993           1992
                                                                 (IN THOUSANDS, EXCEPT FOR HORSE RACING DAYS)
<S>                                                  <C>              <C>            <C>             <C>             <C>
Number of live horse racing days                             115             108(1)          113             104            111
Total on-track attendance                                    511             489             536             527            588
Average daily on-track attendance                            4.4             4.5             4.7             5.1            5.3
Total intertrack attendance                                  595             568             652             708            777
Average daily intertrack attendance                          5.2             5.3             5.8             6.8            7.0
Total on-track and intertrack attendance                   1,106           1,057           1,188           1,236          1,365
Average daily on-track and intertrack attendance             9.6             9.8            10.5            11.9           12.3
Live - on-track pari-mutuel handle                   $    60,159      $   61,261(1)   $   75,889     $    90,126     $   112,664
Live - N. CA network pari-mutuel handle              $    69,188      $   66,720(1)   $   82,482     $   109,347     $   125,099
Live - exported pari-mutuel handle                   $   253,323      $  214,686(1)   $  163,452(2)  $    42,364(2)  $    31,021
Live - imported pari-mutuel handle                   $   122,942      $  115,293(1)   $  100,218     $    24,479     $    10,256
Non-merged handle                                    $     8,267      $    6,330(1)   $    7,170     $     8,740     $     5,679
Total pari-mutuel handle                             $   513,879      $  464,290      $  429,211     $   275,056     $   284,719
</TABLE>


  (1)  Does not include two racing days which were rained out in January 1995.

  (2)  The increase between calendar years 1993 and 1994 was due in large part
       to a change in California law which permitted wagers on Bay Meadows'
       horse races to be places at off-track locations in Southern California.

PARI-MUTUEL REVENUES

All wagering at Bay Meadows is pari-mutuel, meaning that individuals wager
against each other and not against the operator of the facility. Bay Meadows, as
the horse race track operator, has no interest in the results of any horse race.
Bay Meadows places the wagers into a pool and deducts both its commission and a
variety of statutory deductions from the wagers, the amount of which is fixed by
the State of California.

In California, other horse racing associations, certain fairs and certain
Indian Reservations operate as off-track wagering facilities. Off-track
wagering on horse races conducted at Bay Meadows is permitted at 31 locations
in California, 14 of which comprise the Northern California Off-Track Network
("Live-N. CA Network").

Legislation has been enacted in certain states permitting the transmission of
pari-mutuel wagers across state lines. This format permits patrons wagering in
those states on horse races at Bay Meadows to participate in the same
pari-mutuel pool as Bay Meadows patrons and patrons at other California
satellite locations. Off-track wagering on Bay Meadows' live horse races is
conducted in as many as 31 sites in California and up to 450 sites throughout
the rest of the world.

During Bay Meadows' live meets, pari-mutuel revenues and respective commission
rates are derived from four sources: (i) wagers made at Bay Meadows on horse
races at Bay Meadows ("Live-On-Track") (5.4%-6.9%); (ii) wagers made throughout
the Live-N. CA Network on horse races at Bay Meadows (3.3%-4.9%); (iii) wagers
made throughout locations in Southern California and at out-of-state locations
on horse races conducted at Bay Meadows ("Live-Export") (1.3%-1.5%); and (iv)
wagers made at Bay Meadows and throughout the Live-N. CA Network on horse races
conducted in Southern California and at out-of-state locations ("Live-Import")
(2.6%-5.2%). Additionally, during its live horse race meet, Bay Meadows
receives fees from certain out-of-state locations that accept wagers on Bay
Meadows' horse races which are not included in Bay Meadows' pari-mutuel pool
("Nonmerged Fees"). During the remainder of the year when Bay Meadows is not
conducting live horse racing, Bay Meadows receives satellite fees generated
through its operation as an off-track wagering facility ("Satellite Fees").


                                      -14-
<PAGE>   15

The following table sets forth Bay Meadows' revenue derived from pari-mutuel
handle (net of statutory payments) for the calendar years indicated:

<TABLE>
<CAPTION>
                                                       CALENDAR YEARS
                            ----------------------------------------------------------------------
                                   1996           1995            1994        1993        1992
                                        (IN THOUSANDS, EXCEPT FOR HORSE RACING DAYS)
<S>                           <C>           <C>           <C>            <C>        <C>
Live race days                        115           108             113        104          111

Revenue:
Live - On-Track               $     3,921   $     4,020   $       5,002  $   5,956  $     7,426
Live - N. CA Network          $     3,061   $     2,911   $       3,223  $   4,751  $     5,417
Live - Exported               $     2,974   $     2,441   $       1,950  $     859  $       498
Live - Imported               $     5,751   $     5,299   $       4,407  $   1,072  $       293
Nonmerged Fees                $       287   $        77   $         101  $      52  $        51
Satellite Fees                $     1,694   $     1,702   $       1,488  $   1,448  $     1,586
</TABLE>


SEASONAL VARIATIONS IN BUSINESS

Bay Meadows' revenues are subject to seasonal variations as a result of the
allocation of racing days by the CHRB. Historically, the Bay Meadows racing meet
commenced in August each year and ended the following January. However, the 1995
horse racing season was comprised of three smaller meets held during the months
of March-April, August-November and December 1995-January 1996. The 1996 horse
racing season was comprised of two smaller meets held during late January
through late March and late August through early November. For 1997, Bay
Meadows' season has been divided into two meets, one from late January through
late March and the second from late August through mid-November. See
"--Regulation." Seasonal variations are reflected in the financial information
for Bay Meadows Operating Company and its subsidiary, Bay Meadows Catering, set
forth below for the quarterly periods indicated.

                  BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY

<TABLE>
<CAPTION>
                                                        QUARTERS ENDED 1996
                                  ----------------------------------------------------------
                                    MARCH 31,     JUNE 30,    SEPTEMBER 30,   DECEMBER 31,
                                       (IN THOUSANDS, EXCEPT PER SHARE DATA AND RACING DAYS)
<S>                                 <C>         <C>            <C>           <C>
Number of live racing days                 63           0            25             27

Total revenues                      $  26,692   $   2,636      $ 12,080      $  12,064

Costs and expenses                  $  23,557   $   3,946      $ 12,270      $  12,984

Net income (loss)                   $   1,877   $    (782)     $    (98)     $    (542)

Net income (loss) per share         $     .33   $    (.14)     $   (.02)     $    (.09)
</TABLE>



                                      -15-
<PAGE>   16
<TABLE>
<CAPTION>
                                                              QUARTERS ENDED 1995
                                     -----------------------------------------------------------------------
                                        MARCH 31,       JUNE 30,        SEPTEMBER 30,        DECEMBER 31,
                                             (IN THOUSANDS, EXCEPT PER SHARE DATA AND RACING DAYS)
<S>                                     <C>            <C>               <C>                  <C>
Number of live racing days                        20             10               27                   51

Total revenues                          $      9,587   $      7,238      $    13,058          $    20,373

Costs and expenses                      $      9,461   $      7,465      $    13,022          $    19,372

Net income (loss)                       $         68   $       (123)     $        20          $       512

Net income (loss) per share             $        .01   $        .02      $       .01          $       .09
</TABLE>


<TABLE>
<CAPTION>
                                                                 QUARTERS ENDED 1994
                                        ----------------------------------------------------------------------
                                          MARCH 31,      JUNE 30,        SEPTEMBER 30,         DECEMBER 31,
                                                (IN THOUSANDS, EXCEPT PER SHARE DATA AND RACING DAYS)
<S>                                      <C>           <C>               <C>                <C>
Number of live racing race days                  21               0               24                 68

Total revenues                           $    9,979    $      2,421      $    11,716        $    27,071

Costs and expenses                       $    9,774    $      3,549      $    11,621        $    25,103

Net income (loss)                        $      205    $     (1,128)     $       443        $     1,072

Net income (loss) per share              $      .04    $       (.20)     $       .08        $       .18
</TABLE>


REGULATION

Horse racing is highly regulated in California. As a result, Bay Meadows faces
an increasing number of limitations on how it conducts its Thoroughbred racing
operations. The scheduling, length and conduct of meets and the distribution of
the pari-mutuel purse is determined by California Law and the CHRB. The CHRB is
charged with regulating horse racing and wagering at horse racing meets in
California. The CHRB is also charged with the responsibility of licensing horse
racing associations on an annual basis to conduct horse racing meets.

To conduct a Thoroughbred racing meet and to act as a satellite facility, Bay
Meadows is required to secure, on an annual basis, a license from the CHRB.
Although Bay Meadows has been granted an annual license each year since 1934,
including one for the 1997 horse racing season, no assurance can be given that
Bay Meadows will continue to receive this annual license.

As a condition of the issuance of the annual license, California law requires
that a certain number of horse racing days be conducted as charity days. The net
proceeds from these charity days, up to a maximum amount of 0.2% of on-track
handle on live horse races for the meet, are distributed to beneficiaries
through a nonprofit organization approved by the CHRB.

The CHRB is also responsible for allocating horse racing days to horse racing
associations; Bay Meadows can only conduct live Thoroughbred horse racing on
days allocated to it by the CHRB. No assurance can be given that competition for
horse racing days will not affect the allocation of horse racing days to Bay
Meadows in the future. See "--Competition."

Following consummation of the Merger, New Patriot Operating Company will
have to file an amendment to Bay Meadows' CHRB 1997 application for its 1997
license reflecting the corporate restructuring that will occur in the Merger.
In informal discussions,

                                      -16-
<PAGE>   17

representatives of the CHRB have indicated that it would not object to such an
amendment to the 1997 application. No assurances can be given, however, that the
CHRB will not object to such an amendment when it is filed.

LEGISLATION

Because Thoroughbred racing is highly regulated by the State of California, the
enactment of new legislation can impact Bay Meadows in both positive and
negative ways. In 1996, a new law was passed by the California Legislature
reducing the effective license fee payable by Bay Meadows from 3.83% to 3.52%
commencing January 1, 1997.

Because of the myriad legislative bills relating to gaming and horse racing
introduced each year in the California Legislature, it is impossible for Bay
Meadows to identify which will receive serious consideration, much less be
enacted. Accordingly, Bay Meadows is unable to predict the impact which future
legislation may have on its operations.

There is, however, considerable concern in the horse racing industry about
potential legislation which may result in the expansion of gaming, particularly
gambling on Indian reservations, and which would likely would negatively impact
horse racing.

COMPETITION

Horse racing dates are allocated annually by the CHRB and, to the extent
possible, are allocated in a manner to avoid overlaps in Northern California.
Historically, the dates allocated to Bay Meadows have not overlapped with those
of Golden Gate Fields, the only other horse racing association in the San
Francisco Bay Area. However, Bay Meadows has been allocated dates, from time to
time, that have resulted in it conducting racing concurrently in Northern
California with the California State Fair in Sacramento, California and the Big
Fresno Fair in Fresno, California. Over the last two years, competition for
horse racing dates has increased among Bay Meadows, Golden Gate Fields and some
county fairs. It can no longer be assumed that the CHRB will grant a racetrack
its historic racing dates or that dates granted will not overlap with those
granted to other racing on operations in Northern California.

Although Bay Meadows has little direct competition from other tracks in the San
Francisco Bay Area when Bay Meadows is conducting live horse racing, competition
is developing through businesses in various states or foreign countries
accepting wagers on races at Bay Meadows placed by telephone or via the
Internet. Bay Meadows is not able to estimate the magnitude of telephone or
Internet wagering or the impact such wagering will have on its results of
operations or financial condition.

To some extent, Bay Meadows also competes for patrons with off-track wagering
facilities in Northern California. Because of distance and traffic congestion, a
patron might find wagering at an off-track wagering facility to be more
convenient.

The San Francisco Bay Area annually has numerous professional and amateur
sporting events and other entertainment attractions which compete with Bay
Meadows for the sports and entertainment dollar. Bay Meadows also competes with
other forms of legalized gambling, particularly Indian gaming, and other forms
such as the California State lottery and local card clubs. It is very difficult,
however, to evaluate the competitive impact of these other forms of
entertainment and gambling other than to say they are significant.




                                      -17-
<PAGE>   18

During the last few years, racetracks throughout the United States have
experienced a decline in their horse population. As a result of this decline,
there has been a reduction in the size of the fields competing in horse races.
Generally, the amount wagered on a given race is impacted by the size of the
field. Bay Meadows competes for horses with other tracks throughout the United
States and, particularly, with tracks in Southern California, Arizona and
Washington.

PROPOSED SALES OF STABLE AREA AND TRAINING TRACK AREA

As discussed above (see "--CALIFORNIA JOCKEY CLUB--Pending Sales and
Negotiations"), Cal Jockey has entered into an agreement to sell substantially
all of the Stable Area where most of the horses racing at Bay Meadows are
stabled during Bay Meadows' meets. Cal Jockey has also entered into an agreement
to sell the adjoining Training Track Area, on which a 5/8 mile training track is
now situated. Since the sales of the Stable Area and the Training Track Area
were announced, Bay Meadows and Cal Jockey have been investigating and
considering various alternative stabling arrangements.(See "--CALIFORNIA JOCKEY
CLUB--Planning for Training and Stabling.")

Bay Meadows has publicly proposed a plan for the construction of 954 stalls on
the property being retained by Cal Jockey. Patriot, which has agreed to a
business combination agreement with Cal Jockey and Bay Meadows (see "--The
Patriot Transaction") has indicated its support for such plan. Property
Resources, the purchaser of the Stable Area has indicated its support for such
plan, has agreed to amend the Franklin Agreement as part of the implementation
of the plan and has indicated its intent to permit Bay Meadows to continue to
use 1,100 existing stalls in the Stable Area through March 1998. No approval to
this plan has been given by Cal Jockey, with any approval contingent on the
results of economic, environmental and other feasibility studies. Implementation
of the plan is subject to a number of conditions including the arrangement of
financing acceptable to Patriot and the receipt of the requisite governmental
approvals.

EFFECTS OF OTHER CAL JOCKEY TRANSACTIONS

Cal Jockey recently entered an agreement with Borders for the long-term ground
lease of a parking lot adjacent to the Bay Meadows Racecourse. As a result of
this transaction, Bay Meadows has lost a number of convenient parking spaces for
its patrons and an important pedestrian access to its facility. However, there
are an excess number of parking spaces available at Bay Meadows, the remaining
spaces may not be as convenient for certain patrons and there can be no
assurance that the parking revenue currently being generated will not be
adversely affected.

Bay Meadows manages and operates the Sundown Tennis Club, an indoor tennis
facility on land in close proximity to the Racecourse. On July 18, 1996, Cal
Jockey entered an agreement to sell the Tennis Club Parcel.(See "--CALIFORNIA
JOCKEY CLUB--Pending Sales and Negotiations.") For the twelve months ended
December 31, 1996, Bay Meadows' operating income associated with the Sundown
Tennis facility was $70,000.

Bay Meadows also manages and operates a nine-hole golf course in the infield of
the racetrack. The recent opening of a golf facility in close proximity to Bay
Meadows has had an adverse impact on the results of operations of the Bay
Meadows' golf course. Further, Bay Meadows' golf course will be eliminated if
new stables are built as planned. For the twelve months ended December 31, 1996,
Bay Meadows' operating income associated with the golf course was $95,000.

CONCESSIONAIRE

Bay Meadows Catering ("Catering"), a wholly owned subsidiary of Bay Meadows,
provides food and beverage services at the Turf Club and at refreshment stands
located in the Grandstand and Clubhouse areas of the racetrack facility.
Catering also enters into contracts with racing associations and groups which
sublease Bay Meadows Racecourse to provide such food and beverage service.



                                     -18-

<PAGE>   19
CAPITAL IMPROVEMENTS

For the twelve month period ending December 31, 1996, Bay Meadows expended
$1,285,000 in capital improvements consisting primarily of costs relating to
construction of a television studio, control room and associated equipment,
enterprise networking system and a POS system.

EMPLOYEES

Bay Meadows employs approximately 200 employees throughout the year and an
additional 350-550 seasonal employees on horse racing days. Substantially all of
Bay Meadows' employees, other than the administrative staff, are members of
various unions. Bay Meadows believes it has good relations with its employees
and their unions.


ITEM 2.  PROPERTIES

Information with respect to the property owned by Cal Jockey and Bay Meadows is
set forth under Item 1 - "Business" and incorporated herein by reference.

ITEM 3.  LEGAL PROCEEDINGS

Bay Meadows and Cal Jockey are, in the ordinary course of business, involved in
litigation and other legal matters. In addition, Bay Meadows and/or Cal Jockey
is a party to the following legal proceedings.

Volkman et al. v. California Jockey Club et al.

On or about July 3, 1996, plaintiff stockholders filed a petition for writ of
mandate in San Mateo County Superior Court against Cal Jockey and its directors,
seeking an order directing Cal Jockey to hold its annual meeting of stockholders
earlier than the date set by Cal Jockey. A judgment so directing Cal Jockey was
entered, and the meeting was held on August 30, 1996. Cal Jockey does not intend
to appeal, and has settled the matter in its entirety with payment of certain
fees and expenses incurred by the plaintiffs.

California Jockey Club v. Bay Meadows Operating Company et al.

On August 13, 1996, Cal Jockey filed a complaint in United States District Court
for the Northern California District of California against Bay Meadows, its
President (F. Jack Liebau), and the members of the California Jockey Club
Shareholders Committee, a group of stockholders supporting a slate of nominees
to the Cal Jockey Board of Directors in opposition to those nominated by Cal
Jockey's management. The complaint alleged violations of federal securities law
by reason of defendants' failure to make required filings and disclosures in
connection with the Cal Jockey proxy contest. The complaint sought to compel
defendants to make the required disclosures and to enjoin them from soliciting
or voting proxies. 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.

Bay Meadows Foundation v. Bay Meadows Operating Company and California Jockey
Club

On December 29, 1995, the Bay Meadows Foundation filed a complaint in San Mateo
Superior Court against Cal Jockey and Bay Meadows. The complaint alleges failure
to properly calculate and pay charity proceeds as required by law and includes
causes of action for violation of statute, breach of fiduciary duty and
imposition of a constructive trust and accounting. Specifically, the complaint
alleges that Bay Meadows improperly deducted rent payments made to its
affiliate, Cal Jockey, from the charity net proceeds. The complaint also seeks
punitive damages and attorney's fees. On March 25, 1996, Cal Jockey and Bay
Meadows filed their answer to the complaint. The answer denies the allegations
of the complaint and asserts


                                      -19-
<PAGE>   20

affirmative defenses against the Bay Meadows Foundation. Specifically, Cal
Jockey and Bay Meadows maintain that the deduction of rent payments was lawful
and consistent with both the administrative determination made by the California
Horse Racing Board ("CHRB") in 1991 that such rent payments were deductible
under the financial reporting instructions subsequently promulgated by the CHRB.
The parties are currently engaged in civil discovery and Cal Jockey and Bay
Meadows plan to vigorously defend themselves against the lawsuit.

Pati Misskelley v. Bay Meadows Operating Company and Frank Trigeiro et al.

On June 4, 1996, the plaintiff, a former accounts receivable clerk, filed suit
against Bay Meadows and certain of its employees in the United States District
Court for the Northern District of California, 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.

Property Resources, Inc. v. Bay Meadows, Operating Company, et al.

On August 16, 1996, Property Resources, Inc. ("PRI"), a subsidiary of Franklin
Fund, Inc., filed suit in the San Mateo County Superior Court against Bay
Meadows, 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 communicating with 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 Court denied PRI's request for the temporary restraining order. On
November 7, 1996, the San Mateo Superior Court dismissed PRI's remaining claims
with leave to amend. The parties subsequently settled this matter with the
agreement that the parties would pay their respective legal fees and costs, and
the lawsuit was subsequently dismissed on February 10, 1997.

Pauline Madera v. Bay Meadows Operating Company and Morris Webb

On December 20, 1995, Ms. Madera, an employee of Bay Meadows Catering filed a
complaint in San Mateo County Superior Court seeking unspecified damages for
sexual battery, intentional infliction of emotional distress, negligent
infliction of emotional distress and sexual harassment. Neither Ms. Madera nor
Mr. Webb were employed in a management or supervisory position by Bay Meadows.
Bay Meadows has settled this matter.

Management of the Companies believe that the pending legal actions against
either of the Companies will not have a material impact on the separate or
combined financial statements of the Companies, taken as a whole.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

              Not applicable.

                                     PART II


ITEM 5.  MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The following table sets forth, for the fiscal quarters indicated, the high
and low sales prices for the Paired Common Stock, and the cash dividends paid
by Cal Jockey on the CJC Common Stock for the periods indicated. The prices are
as reported by the AMEX.

<TABLE>
<CAPTION>
                                                              Cash Dividends
                                                                Per Share
                                   High          Low        Paid by Cal Jockey
                                   ----          ---        ------------------
<S>                            <C>           <C>            <C>
Fiscal 1996 Quarter Ended:
   March 31, 1996                14-3/4        14-5/8
   June 30, 1996                 17-3/8        17-1/8              $.40
   September 30, 1996            20-1/8        19-3/4
   December 31, 1996             40-7/8        40-3/8
</TABLE>



                                      -20-
<PAGE>   21
<TABLE>
<CAPTION>
                                                              Cash Dividends
                                                                Per Share
                                   High          Low        Paid by Cal Jockey
                                   ----          ---        ------------------
<S>                            <C>           <C>            <C>
Fiscal 1995 Quarter Ended:
   March 31, 1995                17-1/4        13-3/4
   June 30, 1995                 16-3/4        14-1/2              $.25
   September 30, 1995            16-3/8        15-5/8
   December 31, 1995             16-3/8        14                  $.40
</TABLE>

As of March 17, 1997, there were approximately 2,640 stockholders of record of
the Cal Jockey Common Stock and approximately 2,640 stockholders of record of
the Bay Meadows Common Stock. On March 17, 1997, the closing price of the
Paired common stock as reported on AMEX was $46.00.

Cal Jockey has paid, and intends to continue to pay, regular semi-annual
dividends (except for fourth quarter 1996) based on management's estimate of
earnings for the entire calendar year and, if necessary, to pay special
dividends after the close of the year to effect distribution of at least 95% of
its taxable net income (other than net capital gains), so as to continue to
qualify as a real estate investment trust.

Bay Meadows has not paid cash dividends on the Bay Meadows Common Stock since
its formation and does not expect to pay cash dividends in the foreseeable
future.

ITEM 6.  SELECTED FINANCIAL DATA

The selected financial data set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the financial statements and related notes thereto.

                        COMBINED SELECTED FINANCIAL DATA

                           CALIFORNIA JOCKEY CLUB AND
                  BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY

<TABLE>
<CAPTION>
                                                                               YEARS ENDED DECEMBER 31,
                                              ----------------------------------------------------------------------------------
                                                     1996                1995            1994            1993               1992
                                                                 (IN THOUSANDS, EXCEPT PER SHARE DATA AND RACING DAYS)
<S>                                              <C>                 <C>             <C>             <C>                <C>
Number of live racing days                            115                 108             113             104                111
Operating Data:
  Revenues                                       $ 53,932            $ 50,709        $ 51,575        $ 44,993           $ 48,985
  Net income (loss)                                  (791)(2)           4,200           4,212           1,153(1)           2,150
  Net income (loss) per share                        (.13)(2)             .73             .73             .20(1)             .37
  Cash dividends per share                            .40                 .65             .60             .30                .60
Balance Sheet Data:
  Total assets                                   $ 27,676            $ 37,935        $ 36,786        $ 44,993           $ 33,999
</TABLE>
----------
  (1) Includes a charge of $1,400,000 recorded as a result of litigation
      settlement.
  (2) Includes merger related costs of $3,995,000 and legal fees of $1,549,000.



                                      -21-
<PAGE>   22


                             SELECTED FINANCIAL DATA

                             CALIFORNIA JOCKEY CLUB

<TABLE>
<CAPTION>
                                                                                   YEARS ENDED DECEMBER 31,
                                          ----------------------------------------------------------------------------------
                                                1996             1995               1994              1993              1992
                                                            (IN THOUSANDS, EXCEPT PER SHARE DATA AND RACING DAYS)
<S>                                             <C>              <C>             <C>             <C>                <C>
Number of live racing days                           115              108             113             104                111
Operating Data:
  Revenues                                      $  5,412         $  5,241        $  5,176        $  3,984           $  4,736
  Net income (loss)                               (1,216)(2)        3,723           3,620             980 (1)          2,854
  Net income (loss) per share                       (.21)(2)          .65             .63             .17 (1)            .49
  Cash dividends per share                           .40              .65             .60             .30                .60
Balance Sheet Data:
  Total assets                                    23,374         $ 22,147        $ 22,129        $ 21,914           $ 23,950
</TABLE>
----------
  (1)   Includes a charge of $1,400,000 recorded as a result of litigation
        settlement.
  (2)   Includes merger related costs of $3,504,000 and legal fees of
        $1,124,000.



                      CONSOLIDATED SELECTED FINANCIAL DATA

                  BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY


<TABLE>
<CAPTION>
                                                               YEARS ENDED DECEMBER 31,
                                  ----------------------------------------------------------------------------------
                                      1996             1995             1994             1993             1992
                                                (IN THOUSANDS, EXCEPT PER SHARE DATA AND RACING DAYS)
<S>                               <C>              <C>              <C>              <C>              <C>
Number of live racing days             115              108              113              104              111
Operating Data:
  Revenues                        $ 53,472         $ 50,256         $ 51,187         $ 44,642         $ 48,537
  Net income                           455              477              592              173             (692)
  Net income per share                 .08              .08              .10              .03             (.12)
  Cash dividends per share            --               --               --               --               --
Balance Sheet Data:
  Total assets                    $  6,634         $ 16,357         $ 16,648         $ 10,821         $ 11,263
</TABLE>


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

The following discussion and analysis provides information that management
believes is relevant to an assessment and understanding of the Companies'
financial condition and results of operations.  The discussion should be read in
connection with Item 8 - " Financial Statements and Supplementary Data."

The information set forth in "Management's Discussion and Analysis of Financial
Condition and Results of Operations" below includes "forward-looking statements"
within the meaning of Section 21E of the Securities and Exchange Act of 1934, as
amended, and is subject to the safe harbor created by that section.  Readers are
cautioned not to place undue reliance on these forward-looking statements and to
note that they speak only as of the date hereof.  Factors that realistically
could cause actual results to differ materially from those in the
forward-looking statements are set forth below and include the following:
nonconsummation of the Merger Agreement, the Franklin Agreement or the Iacocca
Agreement, failure to secure the necessary governmental approvals to construct
new stalls at the Racecourse, as well as the risk factors set forth in this Item
7.

                            -22-
<PAGE>   23

GENERAL

The results of operations of Cal Jockey and Bay Meadows are dependent upon the
operations of Bay Meadows Racecourse as a live Thoroughbred racing facility and
as a simulcast wagering facility for other racing associations. The operations
of this facility are the primary source of the Companies' respective revenues
and net income. Cal Jockey's income is almost entirely dependent upon collection
of rent from Bay Meadows pursuant to a master lease.

Bay Meadows' income is primarily dependent upon the success of the Thoroughbred
racing meet it conducts. The total number of Bay Meadows' racing days has
increased from 81 days in 1985 to a high of 115 days in 1996. Bay Meadows plans
to conduct 104 racing days in the 1997 calendar year. Since the introduction of
intertrack wagering in October 1985, the components of Bay Meadows' revenues
have continued to change. Starting with the 1990-1991 racing meet, several
interstate locations were included in Bay Meadows' pari-mutuel pools.
Additionally, the expansion of intrastate wagering has positively impacted the
handle on exported races. While all of these factors have contributed to an
increase in the total pari-mutuel handle from $192,378,000 in 1985 to
$513,880,000 in 1996, the profitability of each of the components of the handle
is different. In 1996, the total pari-mutuel handle was comprised of (i) wagers
made at Bay Meadows on horse races at Bay Meadows (11.7%), (ii) wagers made
throughout the Northern California Off-track Network on horse races at Bay
Meadows (13.5%), (iii) wagers made throughout locations in Southern California
and at out-of-state locations on horse races conducted at Bay Meadows (50.9%);
and (iv) wagers made at Bay Meadows and throughout the Northern California
Off-Track Network on horse races conducted in Southern California and at
out-of-state locations (23.9%). (See "BAY MEADOWS OPERATING COMPANY--Pari-Mutuel
Revenues").

In addition, the related decline in daily average on-track attendance from
approximately 8,700 in 1985 to approximately 4,400 in 1996 has had a material
impact on non-wagering revenue sources (food, beverage and gift shop sales,
admissions, parking fees and program sales). The daily average on-track
attendance for 1996 decreased approximately 2% compared to the prior year.

Under the terms of the master lease agreement, Bay Meadows' percentage rental
payments to Cal Jockey are based on the amount of pari-mutuel handle derived
from wagers on Bay Meadows' live Thoroughbred racing meet and wagers placed at
Bay Meadows Racecourse when it serves as a simulcast wagering facility for other
racing associations (See Item 1 - "CALIFORNIA JOCKEY CLUB -- Lease of Racing
Facilities"). Bay Meadows also collects additional revenue by subleasing the
racecourse facilities to the San Mateo County Fair and others.

On October 31, 1996, Cal Jockey and Bay Meadows entered into a business
combination agreement with Patriot American Hospitality, Inc. ("Patriot"). The
agreement was approved unanimously by the Boards of Patriot, Cal Jockey and Bay
Meadows and is subject to approval by the shareholders of each of Patriot, Cal
Jockey and Bay Meadows. The parties, together with Patriot American Hospitality
Parnership, L.P., a limited partnership (the "Patriot Partnership"), thereafter
entered into an Agreement and Plan of Merger, dated as of February 24, 1997
(the "Merger Agreement"), which by its terms supersedes the October 31, 1996
Agreement and more fully details the transactions to be consummated by the
parties.

Pursuant to the Merger Agreement, Patriot will merge with and into Cal Jockey,
with Cal Jockey being the surviving company. In connection with the Merger, Cal
Jockey's name will be changed to "Patriot American Hospitality, Inc." ("New
Patriot REIT") and Bay Meadows' name will be changed to "Patriot American
Hospitality Operating Company" ("New Patriot Operating Company"). The
shareholders of Cal Jockey and Bay Meadows will have the option either to
tender each of their paired shares for $33.00 in cash or to retain their paired
shares, which will then remain outstanding after the Merger and will represent
the same number of paired shares of New Patriot REIT common stock and New
Patriot Operating Company common stock. (See Item 1 --"BUSINESS--THE PATRIOT
TRANSACTION").

Patriot loaned $2,900,000 to Cal Jockey for payment of the breakup fee due upon
termination of the prior merger agreement with Hudson Bay Partners, LP ("Hudson
Bay"). Patriot will be entitled to receive a $5,000,000 termination fee, and
the repayment of the $2,900,000 loan for the Hudson Bay termination fee in the
event the Cal Jockey and Bay Meadows boards of directors receive a higher
unsolicited offer which the accept. All merger related costs have been expensed
as incurred. Such amounts include the breakup fee, legal and accounting costs
related to the transaction.

                            CALIFORNIA JOCKEY CLUB

RESULTS OF OPERATIONS: YEAR ENDED DECEMBER 31, 1996 COMPARED WITH YEAR ENDED
DECEMBER 31, 1995

In 1996, total revenues for Cal Jockey increased $171,000 (3%), compared to the
prior year. Rental income derived from the leasing of its racing facility is
based on pari-mutuel wagering at Bay Meadows and increased $175,000 (4%) as a
result of seven more racing days in 1996 than in 1995. Total interest income
decreased $3,000 from the prior year, primarily as a result of a lower average
balance of investments.

Expenses for the year ended December 31, 1996, increased $5,110,000 (337%),
primarily as a result of costs related to acquisition proposals and Cal
Jockey's proxy contest. Legal fees increased from $80,000 for the year ended
December 31, 1995 to $1,124,000 for the year ended December 31, 1996. The
increase in legal fees are similarly attributed to the proxy contest. General
and administrative costs increased $565,000 primarily due to the proxy
contest.



                                      -23-
<PAGE>   24

RESULTS OF OPERATIONS: YEAR ENDED DECEMBER 31, 1995 COMPARED WITH YEAR ENDED
DECEMBER 31, 1994

In 1995, total revenues for Cal Jockey increased $65,000 (1%), compared to the
prior year. Rental income derived from the leasing of its racing facility
decreased $34,000 (1%). This decrease was primarily the result of Bay Meadows
racing five fewer days in 1996 compared to the prior year. Total
interest income increased $106,000 from the prior year, primarily as a result of
a higher average balance of investments.

While total expenses for 1995 decreased $38,000 (2%) compared to 1994, General
and Administrative expense increased $145,000. The 33% increase in general and
administrative expenses is due to Cal Jockey's employment of a real estate
manager, as of September 1, 1994, and the overhead associated with having an
employee.

LIQUIDITY AND CAPITAL RESOURCES

During 1996, Cal Jockey's primary sources of capital were from proceeds of
maturing securities and a note payable.  Net cash used in operating activities
was $1,655,000, consisting primarily of a net loss excluding depreciation, and
$1,763,000 increase in receivables from Bay Meadows, offset by an increase of
$424,000 in accounts payable and accrued liabilities.  The net loss for 1996
was primarily due to merger related costs, and increases in legal expense and
general and administrative costs.  Receivables from Bay Meadows increased due
primarily to amounts related to the rental of the race facility.  Net cash
provided by investing activities was $1,210,000, consisting of net proceeds of
$2,614,000 on maturities of securities held to maturity, offset by purchases of
$1,404,000 of property plant and equipment.  Net cash provided by financing
activities was $594,000, consisting of proceeds of $2,900,000 from a note
payable with Patriot in connection with the merger agreement, offset by
$2,306,000 paid in dividends on common stock.

Cash and cash equivalents increased by $149,000 during 1996 from $989,000 at the
end of 1995 to $1,138,000 at the end of 1996. The note payable to Patriot bears
interest of 5% per annum and principal and accrued interest on the note payable
to Patriot American is due the earlier of June 30, 1997 or termination of the
Merger Agreement.  Cal Jockey's financial condition and results of operations
are affected by Thoroughbred racing.  This is due to the fact that the lease
revenues are dependent on Bay Meadows operations. During 1996, there were seven
more race days than 1995 (115 v. 108).  In 1997, Bay Meadows has been allocated
11 less Thoroughbred racing days than in 1996. This is expected to negatively
impact revenues and profitability for 1997.

Cal Jockey anticipates that funds generated internally and its cash reserves
will be sufficient to meet its liquidity requirements for the foreseeable
future.

INFLATION

Inflation is not expected to materially impact Cal Jockey.

                          BAY MEADOWS OPERATING COMPANY

RESULTS OF OPERATIONS: YEAR ENDED DECEMBER 31, 1996 COMPARED WITH YEAR ENDED
DECEMBER 31, 1995

Total revenues increased $3,216,000 (6%) for 1996, compared with 1995. This
was primarily due to an increase in pari-mutuel revenues of $2,521,000.
Pari-mutuel revenues increased due primarily to an additional seven more live
racing days in 1996 than 1995 (115 vs. 108).

Concession revenues increased $546,000, and admissions, programs, parking and
other racing income increased $64,000, having been positively impacted by the
same factors which affected pari-mutuel revenues.

During 1996, there were charges in the components of pari-mutuel wagering. Live
on-track wagering decreased 2% while live off-track racing in Northern
California increased 4%. Wagers made on Southern California on races conducted
at Bay Meadows increased from $132,033,000 in 1995 to $144,361,260 (9%). Bay
Meadows receives a fee of 2.5% of handle on these races and is required to pay
50% of the fee received to horse owners as purses. In addition, wagers made at
out-of-state locations on races conducted at Bay Meadows increased $28,246,000
from $88,985,000 in 1995 to $117,231,000 in 1996. Fees on these races generally
range from 2.5% to 3.75% of the handle on these races at the export locations
and are statutorily divided among purses, the State of California and incentive
awards.

                                      -24-
<PAGE>   25

Management believes revenues earned are a better financial barometer than
handle. Handle derived from out-of-state locations is far less profitable than
wagering within California. Admissions, programs, parking and other racing
revenue increased from $5,164,000 in 1995 to $5,228,000 in 1996.

Total costs and expenses increased $3,437,000 (7%) for the year ended
December 31, 1996, compared with the prior year. This was primarily due to
increases in expenses associated with higher operating revenues, including (i)
purses and incentive awards ($1,308,000), (ii) direct operating costs
($1,547,000) and (iii) racing facility rental ($181,000). Additionally, legal
expenses of $425,000 were incurred related to litigation commenced by Cal
Jockey with respect to its proxy contest and other legal matters. Another
$491,000 of expenses were incurred related to the proposed merger transactions.

RESULTS OF OPERATIONS: YEAR ENDED DECEMBER 31, 1995 COMPARED WITH YEAR ENDED
DECEMBER 31, 1994

Total revenues decreased $931,000 (2%) for 1995, compared with the prior year
because of a large decrease in pari-mutuel revenue which was partially offset by
producer fees, rental of racing facility revenues, concession sales and other
income. This decrease was primarily due to Bay Meadows racing five fewer days in
calendar year 1995 as compared to 1994 (108 vs. 113).

Compared to 1994, there was a change in the components of pari-mutuel wagering.
While wagering decreased on-track and off-track in Northern California, wagers
increased at locations in Southern California and out-of-state on races
conducted at Bay Meadows. Wagers made in Southern California on races conducted
at Bay Meadows increased from $100,737,000 in 1994 to $132,033,000 in 1995. Bay
Meadows receives a fee of up to 2.5% of handle on these races and is required to
pay 50% of the fee received to horse owners as purses. In addition, wagers made
at out-of-state locations on races conducted at Bay Meadows increased
$19,100,000 from $69,885,000 in 1994 to $88,985,000 in 1995. Fees on these races
generally range from 2.5% to 3.75% of the handle on these races at the export
location and are statutorily divided among purses, the State of California and
incentive awards.

Management believes fees earned are a better financial barometer than handle
because, with the advent of simulcasting, handle has become less meaningful.
Simulcast handle is sometimes counted by more than one track, and handle derived
from out-of-state locations is far less profitable than wagering within
California. Admissions, programs, parking and other racing income decreased
$235,000 due primarily to a decrease in the number of race days.

Total costs and expenses decreased $727,000 (2%) for the year ended December
31, 1995, compared with 1994. This was primarily due to decreases in expenses
associated with lower operating revenues, including (i) purses and incentive
awards ($1,038,000), (ii) commissions paid to guest locations ($136,000), and
(iii) racing facility rental ($38,000). General and administrative expenses
decreased $136,000 (4%) for the year ended December 31, 1995, compared with
1994. Compared to 1994, direct operating expenses increased by $344,000 in 1995.
In addition, $666,000 in expenses were incurred in connection with the
unsuccessful attempt to establish a Card Club, compared to $209,000 in 1994. A
loss on disposal of fixed assets in the amount of $99,000 was recorded in 1995
due to accelerated replacement of certain fixed assets.

INFLATION

Inflation is not expected to materially impact Bay Meadows.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents decreased to $889,000 at December 31, 1996 from
$6,318,000 at December 31, 1995.  Net cash used in operating activities was
$4,144,000, consisting primarily of a $3,319,000 decrease in accounts payable
and accrued liabilities, a $1,014,000 decrease in accrued purses, a $3,056,000
decrease in amounts due to Thoroughbred horse owners, and a $4,477,000 decrease
in uncashed pari-mutual tickets and vouchers, offset by a $1,944,000 decrease
in accounts receivable, a $3,056,000 decrease of amounts held on deposit for
Thoroughbred horse owners, and a $1,763,000 increase amounts payable to Cal
Jockey.  The net cash used in operating activities were primarily due to the
timing of live race days in 1996 as compared to 1995.  At December 31, 1995,
Bay Meadows was racing live, whereas at December 31, 1996 the race meet had
concluded over a month earlier, therefore allowing for all assets and
liabilities to be settled prior the year end.  Net cash used in investing
activities was $1,285,000 for the purchase of property, plant and equipment.
Net cash from financing activities was zero, consisting of $4,000,000 in
proceeds and subsequent repayment of a note payable.

                                      -25-
<PAGE>   26


As of December 31, 1996, Bay Meadows' current liabilities exceeded its current
assets by $3,048,000. The current ratio (current assets to current liabilities)
was .38 to 1 as of December 31, 1996, as compared to .81 to 1 as of December 31,
1995. This was primarily due to the changes in the 1996 racing calendar. For the
calendar year 1997, Bay Meadows has been allocated eleven less Thoroughbred
racing days than in the prior year, which is expected to negatively impact
revenues and profitability in 1997.

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 from Cal Jockey to guaranty a $2,500,000 bank line of credit.
Bay Meadows obtained this bank line of credit on March 10, 1997, and it is
available through February 1, 1998. Bay Meadows anticipates that it may be
required to borrow or seek an alternative source of funds to ensure liquidity
after that date if the Merger is not consummated.

RISK FACTORS

REAL ESTATE INVESTMENT RISKS

General Risks

Cal Jockey's investments will be subject to varying degrees of risk generally
incident to the ownership of real property. The underlying value of Cal
Jockey's real estate investments and Cal Jockey's income and ability to make
distributions to its stockholders will be dependent upon the ability of Cal
Jockey to manange its real property in a manner sufficient to maintain or
increase revenues and to generate sufficient income in excess of operating
expenses.  Income from investments may be adversely affected by changes in
national economic conditions, changes in local market conditions due to changes
in general or local economic conditions and neighborhood characteristics,
changes in interest rates, the impact of present or future environmental
legislation and compliance with environmental laws, the ongoing need for
capital improvements, changes in real estate tax rates and other operating
expenses, adverse changes in govermental rules and fiscal policies, adverse
changes in zoning laws, civil unrest, acts of God, including earthquakes and
other natural disasters (which may result in uninsured losses), acts of war and
other factors which are beyond  the control of Cal Jockey.

Value and Illiquidity of Real Estate

Real estate investments are relatively illiquid. The ability of Cal Jockey to
vary its portfolio in response to changes in economic and other conditions will
therefore be limited. If Cal Jockey must sell an investment, there can be no
assurance that Cal Jockey will be able to dispose of it in the time period it
desires or that the sales price of any investment will recoup or exceed the
amount of Cal Jockey's investment.

Property Taxes

Cal Jockey's and Bay Meadow's racing facilities are subject to real property
taxes. The real property taxes on the racing facilities in which Cal Jockey
invests may increase or decrease as property tax rates change and as the value
of the properties are assessed or reassessed by taxing authorities. If property
taxes increase as a result of such reappraisals or reassessments, Cal Jockey's
ability to make expected distributions to its stockholders could be adversely
affected.

POTENTIAL RISKS RELATED TO ENTITLEMENTS FOR FRANKLIN AGREEMENT AND IACOCCA
AGREEMENT.

As a condition to consummation of the land sale transactions contemplated by
the Franklin Agreement and the Iacocca Agreement, Cal Jockey is required to
secure certain planning, land use, and zoning Entitlements from the City of San
Mateo allowing the development of the subject properties. Cal Jockey also is
required to obtain final certification of an EIR analyzing the environmental
effects (such as impacts on traffic flow, air quality, and growth inducement)
of certain of the Entitlements. The City of San Mateo has scheduled a series of
Planning Commission and City Council meetings to evaluate the Entitlements and
the EIR, culminating in a final City Council meeting currently expected to be
held on Tuesday, April 22, 1997 at which meeting the City Council is expected
to make a final decision as to the certification of the EIR with a decision as
to approval of the Entitlements shortly thereafter. Although Cal Jockey
anticipates approval of the Entitlements and certification of the EIR, it is
possible that the schedule for the final decision could be delayed and it also
is possible that the Entitlements and/or EIR could be rejected or subject to
significant or changed conditions of approval. Any such delay, rejection, or
addition of significant or changed conditions could have an effect on the
obligations of Property Resources and Airdial to consummate the purchase of the
Stable Area and the Training Track Area. In addition, both the Franklin
Agreement and the Iacocca Agreement require as a condition to the buyers'
obligations to consummate the sale transactions, that Cal Jockey secure a
Development Agreement vesting the rights of Property Resources and Airdial to
develop the property subject to set conditions and fees. While a draft of such
agreement has been submitted to the City of San Mateo, city officials have not
yet indicated whether the city will agree to execute such an agreement. Such a
failure of the city to agree to a Development Agreement could give rise to
rights of termination of the Franklin Agreement and the Iacocca Agreement by
Property Resources and Airdial, respectively.

REIT TAX RISKS

Dependence on Qualification as a REIT

Cal Jockey operates in a manner designed to permit it to qualify as a REIT for
federal income tax purposes, but no assurance can be given that Cal Jockey will
be able to continue to operate in a manner so as to qualify or remain so
qualified. Qualification as a REIT involves the application of highly technical
and complex Code provisions for which there are only limited judicial or
administrative interpretations. Qualification as a REIT also involves the
determination of various factual matters and circumstances not entirely within
Cal Jockey's control. In addition, no assurance can be given that new
legislation, new regulations, administrative interpretations or court decisions
will not change the tax laws with respect to qualification as a REIT or the
federal income tax consequences of such qualification. Cal Jockey, however, is
not aware of any currently pending tax legislation that would adversely affect
the ability of Cal Jockey to continue to qualify as a REIT.

If Cal Jockey were to fail to qualify as a REIT, Cal Jockey would be subject to
federal income tax (including any applicable alternative minimum tax) on its
taxable income at corporate rates. In addition, unless entitled to relief under
certain statutory provisions, Cal Jockey also would be disqualified from
treatment as a REIT for the four taxable years following the year during which
qualification is lost. This treatment would reduce the net earnings of Cal
Jockey available for distribution to stockholders because of the additional tax
liability to Cal Jockey for the year or years involved. In addition,
distributions would no longer be required to be made.

HORSE RACING INDUSTRY RISKS

Regulation of Gaming Operations

Bay Meadows' pari-mutuel wagering operations are contingent upon the continued
governmental acceptance of such operations as forms of legalized gambling. As a
form of gambling, pari-mutuel wagering is subject to extensive licensing and
regulatory control by the CHRB and other California authorities. These
regulatory authorities have broad powers with respect to the licensing of
gaming operations, and may revoke, suspend, condition or limit the gaming
operations of Bay Meadows. Any such change in regulations may have a material
adverse effect on Bay Meadows' financial condition and results of operations.

Stable Area

Bay Meadows' operations are conducted at the Racecourse. Cal Jockey has agreed
to sell the Stable Area of the Racecourse pursuant to the Franklin Agreement.
The purchaser of the Stable Area has indicated its intention to tear down the
existing stables on or about March 1998. Bay Meadows has publicly proposed a
plan for the construction of 954 on-site stalls replacing the stalls to be torn
down and Patriot has indicated its support for this plan. The cost for the
construction of such stalls is estimated to be between $8 million to $10
million. There can be no assurance that Bay Meadows will obtain in a timely
fashion the necessary governmental approvals to construct such stalls before
March 1998. If such replacement stalls are not built as contemplated, Bay
Meadows' financial condition and results of operations may be adversely
affected. Further, any prolonged suspension of operations at the facility due
to destruction of or material damage to the facility or for other reasons could
have a material adverse effect on Bay Meadows' financial condition and results
of operations. Bay Meadows intends to maintain property and business
interruptions insurance to protect against such types of disruption, but there
can be no assurance that the proceeds of such insurance would be adequate to
repair or rebuild its facilities in such event or to compensate Bay Meadows
for losses incurred during the period of any such disruption.

Dependence on Relationship with Owners and Trainers Associations

Bay Meadows' Thoroughbred horse racing operations requires it to maintain good
working relationships with the Thoroughbred Owners of California (the "Owners
Association"), the organization recognized by the CHRB as representing owners
of Thoroughbreds participating in horse racing meets at the Racecourse, and the
California Horsemen's Benevolent and Protective Association (the "Trainers
Association"), the organization recognized by the CHRB as representing
trainers. If Bay Meadows is unable to continue its present relationships with
the Owners Association or the Trainers Association or finds itself unable to
attract a sufficient number of horses to its live horse race meets, such events
could have a material adverse effect on Bay Meadows' financial condition and
results of operations.

Competition

Thoroughbred horse racing, and gaming generally, are competitive industries. Bay
Meadows competes in regional markets with other horse race courses, off-track
betting, state-run lotteries and Indian reservation gaming. Many of these
competitors have resources that exceed those of Bay Meadows. Bay Meadows also
competes locally with other sporting and entertainment businesses. Approval of
legislation legalizing casinos and other forms of gaming or expansion of gaming
at Indian reservations could increase competition for Bay Meadows in the future
and could have a material adverse effect on Bay Meadows' financial condition and
results of operations. Also, Bay Meadows may face increasing competition from
businesses accepting wagers by telephone and via the Internet.

Declines in On-Track Attendance

Many race tracks across the nation, including the Racecourse, are experiencing
declines in on-track attendance. There can be no assurance that Bay Meadows
will not experience further declines in on-track attendance, which declines
could have a material adverse effect on its results of operations.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required by Item 8 has been provided on pages F-1 through F-27
of this Annual Report on Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not applicable

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

<TABLE>
<CAPTION>
                             CALIFORNIA JOCKEY CLUB

          NAME            AGE    DIRECTOR                          PRINCIPAL OCCUPATION AND
                                   FROM                              BUSINESS EXPERIENCE
<S>                       <C>      <C>      <C>
James P. Conn             59       1983-    Managing Director and Chief Investment Officer of Financial Security
                                 present    Assurance since 1993.  Director of Santa Anita Realty Enterprises.
                                            Former President and Chief Executive Officer of Bay Meadows
                                            (Thoroughbred racing) from March 1988 to November 1992.  Director of
                                            Gabelli Equity Trust (publicly-held investment company) and Gabelli
                                            Asset Fund since 1988.  Director of Gabelli Global Multi-Media Trust
                                            and Gabelli Global Growth Fund.  Director of the former California
                                            Jockey Club from 1969 until its reorganization on March 31, 1983.

David M. Gjerdrum         51       1996-    President of KERMA, Inc. an electronic marketing and system consulting
                                 present    firm, since 1991.

James M. Harris*          64       1983-    President and Treasurer of the Company since 1983, and Secretary since
                                 present    September 1996.  Vice President of Cazenove, Inc., International
                                            Stockbrokers, for more than five years (until retirement in 1992).
                                            Director of the former California Jockey Club from 1969 until its
</TABLE>


                                      -26-
<PAGE>   27
<TABLE>
<S>                       <C>      <C>      <C>
                                            reorganization on March 31, 1983.

Brian M. Herrera          43       1992-    President, Herrera Cadillac (auto dealership) since October 1991.
                                   1996

Marylin Kyne Gunderson    74       1983-    Private investor for more than five years. Secretary of the Company
                                   1996     from 1985 to 1989.

Richard E. Perazzo        50       1990-    Self-employed Certified Public Accountant since 1990. Chief Financial
                                   1996     Officer and Treasurer of Bay Meadows Operating Company from 1983 to
                                            1989. Controller of the former California Jockey Club from 1976 to
                                            1983. Director of Bay Meadows Operating Company from 1983 to 1989.

Kjell H. Qvale*           77       1991-    Chairman of the Board of Cal Jockey since 1991, and Secretary from
                                  present   1991 through September 1996. Chairman of the Board of British Motor
                                            Car Distributors, Ltd. (an automotive sales company) since 1948.
                                            Chairman of the Board of KJB Development Corp. (an automobile and
                                            investment company) for over 35 years. Chairman of the Board of
                                            First National Bank of Marin.  Prior to 1991, President and
                                            Director of Pacific Racing Association d.b.a. Golden Gate Fields
                                            (Thoroughbred racing), over 2 years.

Ronald J. Volkman         59       1996-    Chairman of the Board and President of ATX, Inc., a real estate
                                  present   development company, since 1991.  Chairman of the Board of Dallas
                                            Pump Service & Supply Co. Inc. and Four Seasons Travel Inc. since 1991.
</TABLE>
--------------
*Executive Officers of Cal Jockey

There is no family relationship among any of Cal Jockey's executive officers,
directors or nominees for director.

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Securities Exchange Act of 1934 requires Cal Jockey's
directors and executive officers, and persons who own more than ten percent of a
registered class of its equity securities, to file with the Securities and
Exchange Commission and the American Stock Exchange initial reports of ownership
and reports of changes in ownership of Common Stock and other equity securities
of Cal Jockey. Executive officers, directors and greater than ten-percent
shareholders are required by SEC regulation to furnish Cal Jockey with copies of
all Section 16(a) forms they file.

To Cal Jockey's knowledge, based solely on review of the copies of such reports
furnished to Cal Jockey and written representations that no other reports were
required, during the fiscal year ended December 31, 1996, all executive
officers, directors and greater than ten-percent beneficial owners complied with
any applicable Section 16(a) filing requirements.


                                      -27-
<PAGE>   28


<TABLE>
<CAPTION>
                          BAY MEADOWS OPERATING COMPANY

         NAME            AGE     DIRECTOR                          PRINCIPAL OCCUPATION AND
                                   SINCE                              BUSINESS EXPERIENCE
<S>                      <C>       <C>      <C>
Eugene F.                59        1983     Vice President - Racing of the Bay Meadows since March 1995.  Director
Barsotti, Jr.                               of Racing of the Company since September 1987.  Assistant Racing
                                            Secretary of Bay Meadows Racing Association and Pacific Racing
                                            Association from 1975 until September 1987. Director of the former
                                            California Jockey Club from 1981 until its reorganization in 1983.

F. Scott Gross           50        1996     President and COO of Primus Management, Inc., company specializing in
                                            acquisition, development and finance and operation of hospitals.
                                            President and CEO of National Medical Enterprises (health care
                                            company) from 1984 to 1987.  Operates J & L Thoroughbred Racing Stable.

Greg S. Gunderson        46        1996     District Sales and Marketing for TCI of California.  General Manager
                                            and CEO of Portland Meadows Racetrack from 1989 to 1992.  Director of
                                            Bay Meadows 1983 - 1988.  Director of Marketing for Bay Meadows from
                                            1977 to 1988 and Operations Manager from 1974 to 1976.

John C. Harris           53        1992     Chairman of the Board since October 1992.  Owner and Chief Executive
                                            Officer of Harris Farms, Inc., a diversified agricultural production
                                            and marketing company.  Thoroughbred owner and breeder for over 25
                                            years.  Director and past president of California Thoroughbred
                                            Breeders Association.  Member of the Jockey Club.

Lee R. Tucker            65        1990     Secretary of the Bay Meadows since June 1995.  President and Chairman
                                            of the Board of L.M., Inc. (food brokers and investment) since 1980.

Anthony J. Zidich        68        1991     Treasurer of the Bay Meadows since January 1993.  City Treasurer, City
                                            of Daly City, since 1972.  Director of the Peninsula Quarter Horse
                                            Racing Association since 1980.  Director of the Horseman's Quarter
                                            Horse Racing Association since 1989.

                                                               EXECUTIVE OFFICERS OF BAY MEADOWS

F. Jack Liebau*          58        1994     President and Chief Executive Officer of the Bay Meadows since
                                            November 1992 and a Director since January 1994.  Director and past
                                            president, California Thoroughbred Breeders Association.  Member of
                                            the Jockey Club.  From 1987-1996, President and Director of N.J.
                                            Financial Corporation and its affiliated companies.  From 1985 -1995
                                            Of Counsel, and from 1981-1986, Partner, Morgan, Lewis & Bockius (law
                                            firm).  From 1968-1981, Partner, Adams, Duque & Hazeltine (law firm).
</TABLE>


                                      -28-
<PAGE>   29
<TABLE>
<S>                      <C>                <C>
Frank Trigeiro           58                 Vice President - Finance of the Bay Meadows since March 1995. Vice
                                            President - Finance of the Maryland Jockey Club from 1986 to 1994;
                                            Chief Financial Officer and Director of the Southern California Racing
                                            Association, 1979 to 1983;  Chief Financial Officer of the Northern
                                            California Racing Association, 1979 to 1983; Officer and Director of
                                            Racing Management, Inc., 1979 to 1983; Controller of the Golden Bear
                                            Raceway, 1975 to 1983; and Controller of Calny Food Services, Inc., a
                                            publicly held national fast food company.  Mr. Trigeiro spent eight
                                            years in the public accounting profession prior to the foregoing
                                            endeavors.
</TABLE>
-----------------
*Also a director of Bay Meadows.

There is no family relationship among any of the Company's executive officers,
directors or nominees for director.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

Section 16(a) of the Securities Exchange Act of 1934 requires Bay Meadows'
directors and executive officers, and persons who own more than ten percent of a
registered class of its equity securities, to file with the Securities and
Exchange Commission and the American Stock Exchange initial reports of ownership
and reports of changes in ownership of Common Stock and other equity securities
of Cal Jockey. Executive officers, directors and greater than ten-percent
shareholders are required by SEC regulation to furnish Bay Meadows with copies
of all Section 16(a) forms they file.

To Bay Meadows' knowledge, based solely on review of the copies of such reports
furnished to Bay Meadows and written representations that no other reports were
required, during the fiscal year ended December 31, 1996, all Section 16(a)
filing requirements applicable to its executive officers, directors and greater
than ten-percent beneficial owners were complied with.

ITEM 11.  EXECUTIVE COMPENSATION

                             CALIFORNIA JOCKEY CLUB

Cal Jockey's executive officers serve in such capacities without compensation
for their services. For 1996, members of the Board of Directors received a fee
of $14,000 for twelve months of service, adjusted pro rata to reflect actual
months served. During 1996, each director was also provided a food and beverage
allowance of $1,000 for use by the director and his or her guests in the
Directors Room and Turf Club at Bay Meadows Racecourse. The Directors who are
appointed to various committees serve in such capacities without
compensation for their services.

The members of Cal Jockey's Audit Committee are James Conn, David Gjerdrum and
James Harris. The functions of the Audit Committee are to review the annual
financial statements with the Company's independent public accountants prior to
publication, to review their work, approve any non-audit services performed by
them, and to make annual recommendations to the Board of Directors for the
appointment of independent public accountants for the ensuing year.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION:

Cal Jockey does not compensate its executive officers for their services.
Accordingly, there is no Compensation Committee and no report on executive
compensation included in this Annual Report.

                          BAY MEADOWS OPERATING COMPANY

The following table discloses compensation earned for each of the three fiscal
years ended December 31, 1994-1996, by Bay Meadows' Chief Executive Officer at
the end of 1996 and each executive officer of Bay Meadows at the end of


                                      -29-
<PAGE>   30

1996 whose aggregate cash compensation in 1996 exceeded $100,000 (all such
executive officers, including the President and Chief Executive Officer, are
collectively referred to herein as the "Named Executive Officers").

<TABLE>
<CAPTION>
                           SUMMARY COMPENSATION TABLE

                                                                                 LONG-TERM
                                                                               COMPENSATION
                                   ANNUAL COMPENSATION                            AWARDS
                              -----------------------------               ------------------------
                                                                           SECURITIES UNDERLYING
     NAME AND PRINCIPAL                                                           OPTIONS/              ALL OTHER
          POSITION                            SALARY           BONUS              SARS (#)             COMPENSATION
                              YEAR              ($)             ($)                                        ($)
<S>                           <C>         <C>                                      <C>                   <C>
F. Jack Liebau                1996        258,900(a)(b)        35,000              20,000(e)             11,250(c)
President and CEO             1995        225,000(a)           50,000(d)           25,000                11,250(c)
                              1994        206,250(a)           50,000(d)           20,000                15,750(c)

Frank Trigeiro                1996        125,900(b)            5,000               7,500(e)              8,750(c)
Vice President-Finance        1995        115,000               7,500                                     8,625(c)
</TABLE>

(a)  From March 1, 1994 to February 29, 1996, Mr. Liebau was employed by Bay
     Meadows pursuant to a written employment agreement. Although Mr. Liebau
     continues to be employed substantially in accordance with the terms of that
     employment agreement, the term of the written agreement has not been
     formally extended.

(b)  During 1996, Messrs. Liebau and Trigeiro were each provided living
     accomodations by Bay Meadows valued at $25,300 and $12,600, respectively.
     Each of the named executive officers also has the use of an automobile
     owned by Bay Meadows.

(c)  Contribution to pension plan.

(d)  Bonus attributable to services rendered during the indicated year, and paid
     in 1996.

(e)  The information regarding stock options granted during 1996 included in
     Note 7 of the Notes to the Financial Statements--STOCK OPTION PLAN is
     incorporated herein by reference.

                      OPTION/SAR GRANTS IN LAST FISCAL YEAR

The following table sets forth certain information concerning Options/SARs
granted during 1996 to the Named Executive Officers:

<TABLE>
<CAPTION>
                                                                                           POTENTIAL REALIZABLE
                                                                                             VALUE AT ASSUMED
                                                                                          ANNUAL RATES OF STOCK
                                                                                            PRICE APPRECIATION
                                  INDIVIDUAL GRANTS                                        FOR OPTION TERM (a)
-------------------------------------------------------------------------------------- -----------------------------
                               NUMBER OF
                              SECURITIES     % OF TOTAL
                              UNDERLYING    OPTIONS/SARS
                               OPTIONS/      GRANTED TO    EXERCISE OR
                                 SARS       EMPLOYEES IN   BASE PRICE    EXPIRATION
            NAME              GRANTED (#)   FISCAL YEAR     ($/SHARE)       DATE           5% ($)       10% ($)

<S>                             <C>             <C>           <C>         <C>             <C>           <C>
F. Jack Liebau                  20,000(b)       38.10%        $14.75      3/2/2001        185,524       470,154

Frank Trigeiro                   7,500(b)       14.29%        $14.75     3/29/2001        169,571       176,308
</TABLE>

(a) These columns present hypothetical future values of the stock obtainable
    upon exercise of the options net of the exercise price, assuming that the
    market price of the Paired Common Stock appreciates at a five and ten
    percent compound annual rate over the ten-year term of the options. The five
    and ten percent rates of stock price appreciation are presented as examples
    pursuant to the Proxy Rules and do not necessarily reflect managment's
    assessment of the Companies' future stock performance. The potential
    realizable values presented are not intended to indicate the value of the
    options.

(b) The information regarding stock options granted during 1996 included in
    Note 7 of the Notes to the Financial Statements--STOCK OPTION PLAN is
    incorporated herein by reference.

                                      -30-
<PAGE>   31
            AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR AND
                       FISCAL YEAR-END OPTIONS/SAR VALUES

The following table summarizes options and SARs exercised during 1996 and
presents the value of unexercised options and SARs held by the Named Executive
Officers at December 31, 1996:
<TABLE>
<CAPTION>
                                                                                                                     VALUE OF
                                                                                           NUMBER OF               UNEXERCISED
                                                                                          UNEXERCISED              IN-THE-MONEY
                                                                                         OPTIONS/SARS              OPTIONS/SARS
                                                 SHARES                                    AT FISCAL                AT FISCAL
                                                ACQUIRED              VALUE              YEAR-END (#)              YEAR-END ($)
                                              ON EXERCISE           REALIZED           EXERCISABLE (E)/          EXERCISABLE (E)/
                   NAME                           (#)                  ($)             UNEXERCISABLE (U)        UNEXERCISABLE (U)

<S>                                                <C>                <C>                 <C>                   <C>
F. Jack Liebau                                     0                   N/A                 86,667   E            2,264,175    E
                                                                                            8,333   U (a)            --       U
Frank Trigeiro                                     0                   N/A                  7,500   E            195,938      E
</TABLE>


(a) The stock option agreement underlying these options provides that vesting
    of these options will accelerate upon a change in control of Bay Meadows.
    Accordingly, the options will become exercisable when the Merger is
    consummated.

                                  PENSION PLANS

The table that follows shows the estimated annual benefits payable upon
retirement to non-union employees of Bay Meadows under the California Race Track
Pension Plan. Participants are fully vested after five years of service.

<TABLE>
<CAPTION>
               AVERAGE ANNUAL
                    EARNINGS        5 YEARS          10 YEARS         20 YEARS          30 YEARS           40 YEARS
<C>                                  <C>              <C>              <C>               <C>                <C>
$ 50,000                             $ 6,250          $ 12,500         $ 25,000          $ 37,500           $ 50,000
 100,000                              12,500            25,000           50,000            75,000            100,000
 150,000 and over                     18,750            37,500           75,000           112,500            118,800 (a)
</TABLE>


(a)   In accordance with Section 415 Limits - IRS Code.

The compensation covered by the above plan is annual earnings of an employee.
The covered compensation is the same as the compensation reported in the Summary
Compensation Table under the Salary column (up to a maximum of $150,000 per
year). The pension table above sets forth estimated annual retirement benefits,
payable (as a straight-life annuity), assuming retirement at age 65, using the
normal form of benefit under the above plan; the benefits listed are not subject
to any deduction for social security or other offset amounts.



                                      -31-
<PAGE>   32

The number of years of credited service at December 31, 1996, for the Named
Executive Officers is as follows: Mr. F. Jack Liebau (four years) and Frank
Trigeiro (two years).

There were no Long-Term Incentive Plan Awards granted or options repriced during
1996.

                            COMPENSATION OF DIRECTORS

For 1996, members of the Board of Directors received an annual fee of $12,000
each. Eugene F. Barsotti, Jr. and F. Jack Liebau, as employees of Bay Meadows,
received no such annual fee. The Directors who are appointed to various
committees serve in such capacities without compensation for their services.
During 1996, each director was also provided a food and beverage allowance of
$1,000 for use by the director and his guests in the Directors Room and Turf
Club at Bay Meadows Racecourse.

CHANGES IN CONTROL ARRANGEMENTS

Bay Meadows has in effect severance agreements with certain members of senior
management, including Messrs. Liebau and Trigeiro. These agreements, which were
entered on August 30, 1996, each provide that if, following a change in control
of Bay Meadows, the respective employee's employment is terminated prior to
January 1, 1998, or within 24 months following a change in control of Bay
Meadows prior to January 1998, he or she will be entitled to receive (i) payment
of full base salary from the date of notice of termination to the date of
termination (but no less than 30 days) at the highest rate in effective during
the 12 months immediately preceding the notice of termination, (ii) a lump sum
payment equal to the amount of his or her annual base salary at the highest rate
in effective during the 12 months immediately preceding notice of termination
and the amount of any bonuses or other incentive compensation paid during the 12
months immediately preceding notice of termination or calendar year 1996,
whichever is greater (or, with respect to Mr. Liebau, two times the sum of such
amounts), (iii) at his or her option, either continued contributions to his or
her retirement plan through January 1, 1998 or a lump sum equal to the actuarial
equivalent of the additional retirement pension to which he or she would have
been entitled had he or she continued service under such plan for an additional
two years, (iv) the right to purchase any Bay Meadows automobile assigned to him
or her for book value, (v) payment of all legal fees and expenses incurred as a
result of the termination and (vi) continued coverage under Bay Meadows' health
care and welfare benefit plans for two years.

STOCK PERFORMANCE GRAPH

The following graph shows a comparison of cumulative returns during the five
year period ended December 31, 1996, of the Paired Common Stock (BMOC/CJC),
Standard and Poor's 500 Composite Index (S&P 500 Index), and the National
Association of Real Estate Investment Trust's all REIT Index:

                                      -32-
<PAGE>   33

                            [STOCK PERFORMANCE GRAPH]

<TABLE>
<CAPTION>
                             1990  1991  1992  1993  1994  1995  1996
                             ----  ----  ----  ----  ----  ----  ----
          <S>               <C>   <C>   <C>   <C>   <C>   <C>   <C>
           BMOC/CJC          100   106   100   116   139   148   423

           S & P 500 Index   100   131   140   155   157   218   268

           All REIT Index    100   136   155   186   192   221   299
</TABLE>


The stock performance graph assumes that the original investment in the Paired
Common Stock and the amount invested in the two indexes was $100 on December 31,
1990, and that all dividends during the period were reinvested.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION:

The members of Bay Meadows' Compensation Committee are Lee R. Tucker (Chairman),
John C. Harris, and Anthony J. Zidich. Since October 1992, Mr. Harris has served
as Bay Meadows' Chairman of the Board.

COMPENSATION COMMITTEE REPORT

The Compensation Committee is composed of three outside directors and is
responsible for annually reviewing the compensation paid to all of the officers
of the Bay Meadows. The Compensation Committee develops recommendations with
respect to the Board of Directors for adoption and/or modification.

The Compensation Committee seeks to provide the Bay Meadows' executive officers
with reasonable and sufficient compensation to attract and retain experienced
individuals as executive officers. The Bay Meadows' executive officers are
primarily compensated through their salaries, although Bay Meadows has a stock
option plan. Bay Meadows does not have any formal bonus plan or restricted stock
plan.

In exercising its judgment as to the appropriate compensation to be paid to each
executive officer, the Compensation Committee reviews annually the experience
and performance of each executive officer as well as the Bay Meadows' overall
performance. There is, however, no specific quantifiable relationship between
Bay Meadows performance and the compensation levels for executive officer. The
Compensation Committee also

                                      -33-
<PAGE>   34

considers the compensation packages at other publicly-traded companies which run
Thoroughbred racing meets. As part of its review in 1996, the Compensation
Committee considered the results of a compensation study performed by outside
consultants at the request of the Compensation Committee. In comparing the Bay
Meadows' salaries to those paid by other companies, the Compensation Committee
takes into account the small number of executive officers at Bay Meadows, the
responsibilities resulting from Bay Meadows being publicly held and the limited
forms of compensation it uses. The Compensation Committee also takes into
account prior salary adjustments, as well as the relative salary levels of Bay
Meadows' executive officers.

Mr. Liebau was appointed as President and Chief Executive Officer of the Company
in November 1992. In view of the factors considered by the Compensation
Committee which are discussed above, Mr. Liebau's base compensation was
increased from $225,000 to $265,000 in 1996. Specifically, in setting Mr.
Liebau's salary last year, the Committee took into account a number of factors
including the results of the compensation study performed by the outside
consultants, salaries paid by other gaming companies, Bay Meadows and Mr.
Liebau's performances, Mr. Liebau's prior experience as a lawyer and corporate
executive, his knowledge of the Thoroughbred industry and the amount of time he
was spending in fulfilling his duties as President and CEO.

                             Compensation Committee

                             Lee R. Tucker, Chairman
                             John C. Harris, Member
                            Anthony J. Zidich, Member


STOCK OPTION COMMITTEE REPORT

The Company has a stock option plan, and from time to time options have been
awarded to executive officers and other employees. The stock option plan is a
part of the compensation package for executive officers and stock options can
augment an employee's salary.

On March 29, 1996, Mr. Liebau was granted stock options to purchase up to 20,000
shares of BMOC Common Stock at the March 29, 1996 market price of $14.75. On
March 29, 1996 Mr. Trigeiro was granted stock options to purchase up to 7,500
shares of BMOC Common Stock at the March 29, 1996 market price of $14.75. The
levels of the option grants were based on the judgment of the Board taking into
account the Company's overall performance, the recipient's compensation level,
the levels of prior option grants to the Company's executive officers and key
employees and the levels of prior option grants to the Company's former
officers. Other grants of options were made to various key employees during
1996.

                             Stock Option Committee

                             Lee R. Tucker, Chairman
                             John C. Harris, Member
                            Anthony J. Zidich, Member


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

                             CALIFORNIA JOCKEY CLUB
                               SECURITY OWNERSHIP


The following table sets forth, as of March 17, 1997, the number of shares of
Paired Common Stock owned (i) by each director, (ii) by all directors and
executive officers as a group, and (iii) by all those known by Cal Jockey to be

                                     -34-
<PAGE>   35

beneficial owners of more than five percent (5%) of Paired Common Stock,
together with the percentage of stock so owned. Cal Jockey has no executive
officers who are not also directors.

<TABLE>
<CAPTION>
                                          AMOUNT AND NATURE
                                            OF BENEFICIAL           PERCENTAGE
         NAMES OF BENEFICIAL OWNER (1)      OWNERSHIP (2)           OF TOTAL (7)
<S>                                           <C>      <C>               <C>
James P. Conn                                 55,000   (3)               1.0 %
David M. Gjerdrum                             24,010   (4)                *
James M. Harris                               17,012   (5)                *
Kjell H. Qvale                                85,000                     1.5 %
Ronald J. Volkman                              1,000                      *
FMR Corporation                              421,500   (6)               7.3 %
All directors and executive officers
  as a group (5 persons)                     182,022                     3.2 %
</TABLE>

--------------
*Less than one percent (1%) of the outstanding Paired Common Stock.

(1)   The address of all persons, other than FMR Corporation is 2600 S. Delaware
      Street, P.O. Box 1117, San Mateo, CA 94403. The address of FMR Corporation
      is 82 Devonshire Street, Boston, MA 02109.

(2)   Unless otherwise indicated in the footnotes and subject to community
      property laws where applicable, each named stockholder has sole voting and
      investment power with respect to the shares of Paired Common Stock
      beneficially owned by such stockholder.

(3)   Includes 20,000 shares issuable upon exercise of outstanding stock options
      exercisable within 60 days of March 17, 1997.

(4)   Includes 24,000 shares held in a testamentary trust of which Mr. Gjerdrum
      is a residual beneficiary and pursuant to which he will receive
      approximately 8,000 shares upon the demise of his mother.

(5)   Includes 4,000 shares owned by Mr. Harris' mother for which Mr. Harris
      holds a power of attorney.

(6)   A Schedule 13G filing dated February 10, 1997 was made by FMR
      Corporation. The Schedule 13G indicates that FMR Corporation is a parent
      holding company with sole voting power over 28,800 shares and sole
      dispositive power over 421,500 shares.

(7)   Percentages shown indicate what the total percentage beneficial ownership
      of Paired Common Stock would be for each named stockholder if such holder,
      but no other stockholder, whether or not named, exercised those of his or
      her stock options that were exercisable on March 17, 1997, or which will
      become exercisable 60 days thereafter.

CHANGES IN CONTROL

On October 31, 1996, Patriot American Hospitality, Inc. ("Patriot"), Cal Jockey
and Bay Meadows entered into a binding business combination agreement (the
"October 31, 1996 Agreement") pursuant to which the parties agreed to engage in
a business combination transaction. The parties, together with Patriot American
Hospitality Partnership, L.P., thereafter entered into an Agreement and Plan of
Merger, dated as of February 24, 1997 (the "Merger Agreement"), which by its
terms supersedes the October 31, 1996 Agreement and more fully details the


                                      -35-
<PAGE>   36

transactions to be consummated by the parties. The Merger Agreement
contemplates that Patriot will merge with and into Cal Jockey, with Cal Jockey
being the surviving company. For a more complete description of the Patriot
transaction, see "Item 1. Business--The Patriot Transaction" hereto, which is
incorporated herein by reference.

                          BAY MEADOWS OPERATING COMPANY
                               SECURITY OWNERSHIP

The following table sets forth, as of March 17, 1997, the number of shares of
Paired Common Stock owned (i) by each director, (ii) by all directors and
executive officers as a group, and (iii) by all those known by Bay Meadows to
be beneficial owners of more than five percent (5%) of the Paired Common Stock,
together with the percentage of stock so owned.

<TABLE>
<CAPTION>
                                      AMOUNT AND NATURE
                                        OF BENEFICIAL             PERCENTAGE
     NAMES OF BENEFICIAL OWNER (1)        OWNERSHIP (2)         OF TOTAL(10)
<S>                                           <C>               <C>
Eugene F. Barsotti, Jr                        55,634   (3)(4)        *
F. Scott Gross                                 3,000                 *
Greg S. Gunderson                             49,636                 *
John C. Harris                                71,245   (5)           1.1 %
Lee R. Tucker                                  7,300                 *
Anthony J. Zidich                              5,000                 *
F. Jack Liebau                                96,667   (6)           1.0 %
Frank Trigeiro                                 7,500   (7)           *
FMR Corporation                              421,500   (8)           7.3 %
All Directors and executive officers
   as a group (8 persons)                    295,982   (9)           5.1 %
</TABLE>


--------------
*Less than one percent (1%) of the outstanding Paired Common Stock.

(1)   The address of all persons, other than FMR Corporation is c/o Bay Meadows
      Operating Company, 2600 South Delaware Street, San Mateo, CA 94402. The
      address of FMR Corporation is 82 Devonshire Street, Boston, MA 02109.

(2)   Unless otherwise indicated in the footnotes and subject to community
      property laws where applicable, each named stockholder has sole voting and
      investment power with respect to the shares of Paired Common Stock
      beneficially owned by such stockholder.

(3)   Includes 43,692 shares held in a revocable trust, 100 shares held in an
      Individual Retirement Account for the benefit of his wife, and 176 shares
      held in an Individual Retirement Account for the benefit of Mr. Barsotti.

(4)   Includes 11,666 shares issuable upon exercise of outstanding stock options
      within 60 days of March 17, 1997.

(5)   Includes 9,000 shares of Paired Common Stock held by Harris Farms, Inc.,
      of which Mr. Harris is the sole shareholder.

(6)   Includes 86,667 shares issuable upon exercise of outstanding stock options
      exercisable within 60 days of March 17, 1997.

                                      -36-
<PAGE>   37


(7)   Includes 7,500 shares issuable upon exercise of outstanding stock options
      exercisable within 60 days of March 17, 1997.

(8)   A Schedule 13G filing dated February 10,1997 was made by FMR
      Corporation. The Schedule 13G indicates that FMR Corporation is a parent
      holding company with sole voting power over 28,800 shares and sole
      dispositive power over 421,500 shares.

(9)   Includes 94,167 shares issuable upon exercise of outstanding stock options
      exercisable within 60 days of March 17, 1997.

(10)  Percentages shown indicate what the total percentage beneficial ownership
      of Paired Common Stock would be for each named stockholder if such holder,
      but no other stockholder, whether or not named, exercised those of his
      stock options that were exercisable on March 17, 1997, or which will
      become exercisable 60 days thereafter.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information regarding certain relationships and related transactions is
included in Note 13 of Notes to the Financial Statements - Related Party
Transactions and incorporated herein by reference.

                                      -37-
<PAGE>   38


ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

         (a) (1) Index to Financial Statements.
<TABLE>
<CAPTION>
                                                                                                       PAGE IN
                         DESCRIPTION                                                                  FORM 10-K
<S>                                                                                               <C>
Independent Auditors' Report                                                                             F-1

Combined Balance Sheets of California Jockey Club and Bay Meadows Operating
   Company and Subsidiary as of December 31, 1996 and 1995                                               F-2

Separate and Combined Statements of Income (Loss) of California Jockey Club and
   Bay Meadows Operating Company and Subsidiary for the Years Ended
   December 31, 1996, 1995, and 1994                                                                F-3, F-4, F-5

Combined Statements of Stockholders' Equity of California Jockey Club and
   Bay Meadows Operating Company and Subsidiary for the Years Ended
   December 31, 1996, 1995 and 1994                                                                      F-6

Combined Statements of Cash Flows of California Jockey Club and Bay Meadows
   Operating Company and Subsidiary for the Years Ended December 31, 1996,
   1995 and 1994                                                                                         F-7

Balance Sheets of California Jockey Club as of December 31, 1996 and 1995                                F-8

Statements of Stockholders' Equity of California Jockey Club for the Years Ended
   December 31, 1996, 1995 and 1994                                                                      F-9

Statements of Cash Flows of California Jockey Club for the Years Ended
   December 31, 1996, 1995 and 1994                                                                     F-10

Consolidated Balance Sheets of Bay Meadows Operating Company and Subsidiary
   as of December 31, 1996 and 1995                                                                     F-11

Consolidated Statements of Stockholders' Equity of Bay Meadows Operating
   Company and Subsidiary for the Years Ended December 31, 1996, 1995 and 1994                          F-12

Consolidated Statements of Cash Flows of Bay Meadows Operating Company and
   Subsidiary for the Years Ended December 31, 1996, 1995 and 1994                                      F-13

Notes to Financial Statements                                                                        F-14 - F-27
</TABLE>

         (a) (2) Financial Statement Schedule. The financial statement schedules
listed below are filed with this report:


All schedules for which provision is made in the applicable rules and
regulations of the Securities and Exchange Commission are omitted because they
are not required under the related instructions or are not applicable or the
required information is shown in the financial statements or notes thereto.






                                      -38-
<PAGE>   39

(a)(3) Exhibits

The exhibits listed in the accompanying Exhibit Index are filed as part of, or
incorporated by reference into, this Annual Report on Form 10-K.


                                      -39-
<PAGE>   40



                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrants have duly caused this report to be signed on their
behalf by the undersigned, thereunto duly authorized.

CALIFORNIA JOCKEY CLUB                             BAY MEADOWS OPERATING COMPANY


By:  /s/  James M. Harris                      By:  /s/  F. Jack Liebau
    -------------------------------               ------------------------------
           James M. Harris                              F. Jack Liebau
  President, Treasurer and Secretary                    President and
                                                   Chief Executive Officer

Date:  March 31, 1997                          Date:    March 31, 1997


                                               By:   /s/  Frank Trigeiro
                                                  ------------------------------
                                                         Frank Trigeiro
                                                     Vice President - Finance

                                               Date:    March 31, 1997


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrants in
the capacities and on the dates indicated.

             SIGNATURE                 TITLE                           DATE

/s/ Eugene F. Barsotti, Jr.      Director,                        March 31, 1997
------------------------------
     (Eugene F. Barsotti, Jr.)   Bay Meadows Operating Company

/s/  James P. Conn               Director,                        March 31, 1997
------------------------------
          (James P. Conn)        California Jockey Club

/s/  David M. Gjerdrum           Director,                        March 31, 1997
------------------------------
        (David M. Gjerdrum)      California Jockey Club

/s/  Greg S. Gunderson           Director,                        March 31, 1997
------------------------------
        (Greg S. Gunderson)      Bay Meadows Operating Company


                                      -40-
<PAGE>   41






<TABLE>
<CAPTION>

      SIGNATURE                                    TITLE                   DATE
<S>                        <C>                                            <C>
/s/  James M. Harris        Director, President, Treasurer and Secretary,  March 31, 1997
--------------------------
         (James M. Harris)  California Jockey Club (Principal Executive
                            Officer and Principal Financial Officer and
                            Financial Accounting Officer)

/s/  F. Jack Liebau         Director,                                      March 31, 1997
--------------------------
          (F. Jack Liebau)  Bay Meadows Operating Company (Principal
                            Executive Officer

/s/  Kjell H. Qvale         Chairman,                                      March 31, 1997
--------------------------
          (Kjell H. Qvale)  California Jockey Club

/s/  Lee R. Tucker          Director,                                      March 31, 1997
--------------------------
          (Lee R. Tucker)   Bay Meadows Operating Company

/s/  Ronald J. Volkman      Director,                                      March 31, 1997
--------------------------
       (Ronald J. Volkman)  California Jockey Club

/s/  Anthony J. Zidich      Director,                                      March 31, 1997
--------------------------
       (Anthony J. Zidich)  Bay Meadows Operating Company

</TABLE>



                                      -41-

<PAGE>   42



INDEPENDENT AUDITORS' REPORT


Board of Directors and Stockholders
California Jockey Club
San Mateo, California
           and
Board of Directors and Stockholders
Bay Meadows Operating Company
San Mateo, California

We have audited the accompanying balance sheets of California Jockey Club,
consolidated balance sheets of Bay Meadows Operating Company and subsidiary,
and combined balance sheets of California Jockey Club and Bay Meadows Operating
Company and subsidiary (the "Companies") as of December 31, 1996 and 1995, and
the related statements of income (loss), stockholders' equity and cash flows of
the respective entities for the each of the three years in the period ended
December 31, 1996. These financial statements are the responsibility of the
Companies' management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of California Jockey Club, of Bay Meadows
Operating Company and subsidiary and of the combined Companies at December 31,
1996 and 1995, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1996 in conformity
with generally accepted accounting principles.

As discussed in Note 2, the Companies have entered into a proposed merger
agreement with Patriot American Hospitality, Inc. ("Patriot"). The proposed
merger is subject to the approval by the shareholders of Patriot and the paired
shareholders of the Companies. Also, as discussed in Notes 7 and 8, certain
disputes between the Companies have not been resolved concerning stock options
for Cal Jockey Stock which Bay Meadows asserts were granted during 1996 and the
Master Lease Agreement between the Companies, which Bay Meadows asserts has
been extended.

DELOITTE & TOUCHE LLP

March 28, 1997
San Francisco, California

                                      F-1
<PAGE>   43


CALIFORNIA JOCKEY CLUB AND
BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY
<TABLE>
<CAPTION>
COMBINED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
(In thousands, except share and per share amounts)
-----------------------------------------------------------------------------------------------------------------------------

                                                                                                          DECEMBER 31,
                                                                                                  --------------------------
ASSETS                                                                                                1996           1995
<S>                                                                                               <C>             <C>
CURRENT ASSETS:
  Cash and cash equivalents                                                                       $    2,027      $    7,307
  Securities available for sale (at fair value)                                                        2,612           1,187
  Securities held to maturity (at cost, fair value of $4,479 in 1996 and $7,076 in 1995)               4,463           7,077
  Amounts held on deposit for Thoroughbred horse owners                                                                3,056
  Accounts receivable (net of allowance for doubtful accounts of $77 in 1996 and $82 in 1995)            527           2,442
  Prepaid expenses and other current assets                                                              525             377
                                                                                                  ----------      ----------
          Total current assets                                                                        10,154          21,446
                                                                                                  ----------      ----------
PROPERTY, PLANT AND EQUIPMENT:
  Land                                                                                                   691             691
  Land held for sale                                                                                   3,083           1,954
  Racing plant                                                                                        24,177          23,906
  Tennis facility held for sale                                                                          308             308
  Equipment and leasehold improvements                                                                11,032          10,088
                                                                                                  ----------      ----------
          Total                                                                                       39,291          36,947
  Accumulated depreciation and amortization                                                          (22,092)        (20,759)
                                                                                                  ----------      ----------
          Property, plant and equipment - net                                                         17,199          16,188
                                                                                                  ----------      ----------

OTHER ASSETS (net of accumulated amortization of
   $1,374 in 1996 and $1,221 in 1995)                                                                     96             223
                                                                                                  ----------      ----------
DEFERRED INCOME TAXES                                                                                    227              78
                                                                                                  ----------      ----------
TOTAL                                                                                              $  27,676       $  37,935
                                                                                                  ==========      ==========
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable                                                                                $    1,328      $    4,676
  Accrued liabilities                                                                                  1,983           1,530
  Note payable                                                                                         2,900
  Accrued purses                                                                                                       1,014
  Due to Thoroughbred horse owners                                                                                     3,056
  Income taxes payable                                                                                                    75
  Uncashed pari-mutuel tickets and vouchers                                                                            4,477
                                                                                                  ----------      ----------
          Total current liabilities                                                                    6,211          14,828
                                                                                                  ----------      ----------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
  Common Stock (paired shares), $.01 par value:  authorized, 10,000,000 shares each;
    issued and outstanding:  5,763,257 shares each in 1996 and 1995                                      116             116
  Additional paid in capital                                                                          18,385          18,385
  Retained earnings                                                                                    1,750           4,817
  Unrealized gain (loss) on securities available for sale                                              1,214            (211)
                                                                                                  ----------      ----------
          Total stockholders' equity                                                                  21,465          23,107
                                                                                                  ----------      ----------
TOTAL                                                                                              $  27,676       $  37,935
                                                                                                  ==========      ==========
</TABLE>


The accompanying notes are an integral part of these financial statements.

                                      F-2
<PAGE>   44


CALIFORNIA JOCKEY CLUB AND
BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY
<TABLE>
<CAPTION>
SEPARATE AND COMBINED STATEMENTS OF INCOME (LOSS)
YEAR ENDED DECEMBER 31, 1996
(In thousands, except share and per share amounts)
-----------------------------------------------------------------------------------------------------------------------------------

                                                                                BAY MEADOWS
                                                              CALIFORNIA         OPERATING
                                                                JOCKEY          COMPANY AND
                                                                 CLUB            SUBSIDIARY         ELIMINATIONS       COMBINED
<S>                                                            <C>              <C>                <C>                <C>
REVENUES:
  Pari-mutuel revenue                                                             $  41,476                            $  41,476
  Producer fees                                                                         683                                  683
  Admissions, programs, parking and other racing income                               5,228                                5,228
  Concession sales                                                                    3,038                                3,038
  Rental of racing facility                                   $   4,918               1,521        $  (4,918)              1,521
  Interest and dividend income                                      484                 182               (8)                658
  Other income                                                       10               1,344              (26)              1,328
                                                              ---------           ---------        ---------           ---------
          Total                                                   5,412              53,472           (4,952)             53,932
                                                              ---------           ---------        ---------           ---------
COSTS AND EXPENSES:
  Purses and incentive awards                                                        17,054                               17,054
  Commissions paid to guest tracks                                                    2,614                                2,614
  Direct operating costs                                                             20,950                               20,950
  Cost of concession sales                                                              926                                  926
  Depreciation and amortization                                     932                 754                                1,686
  Racing facility rental                                                              4,943           (4,918)                 25
  Marketing                                                                           1,436                                1,436
  General and administrative expense                              1,068               3,019              (34)              4,053
  Loss on disposal of fixed assets                                                      145                                  145
  Merger related costs                                            3,504                 491                                3,995
  Legal expense                                                   1,124                 425                                1,549
                                                              ---------           ---------        ---------           ---------
          Total                                                   6,628              52,757           (4,952)             54,433
                                                              ---------           ---------        ---------           ---------
INCOME (LOSS) BEFORE INCOME TAX PROVISION                        (1,216)                715                                 (501)

INCOME TAX PROVISION                                                                    260                                  260
                                                              ---------           ---------        ---------           ---------

NET INCOME (LOSS)                                             $  (1,216)           $    455            $  -             $   (761)
                                                              =========           =========        =========           =========

NET INCOME (LOSS) PER SHARE                                       $(.21)               $.08                                $(.13)
                                                              =========           =========                            =========
WEIGHTED AVERAGE NUMBER OF COMMON
  SHARES OUTSTANDING                                          5,763,257           5,763,257                            5,763,257
                                                              =========           =========                            =========
</TABLE>

The accompanying notes are an integral part of these financial statements.




                                      F-3
<PAGE>   45


CALIFORNIA JOCKEY CLUB AND
BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY
<TABLE>
<CAPTION>
SEPARATE AND COMBINED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1995
(In thousands, except share and per share amounts)
-------------------------------------------------------------------------------------------------------------------------

                                                                                BAY MEADOWS
                                                              CALIFORNIA         OPERATING
                                                                JOCKEY          COMPANY AND
                                                                 CLUB           SUBSIDIARY   ELIMINATIONS       COMBINED
<S>                                                            <C>           <C>             <C>               <C>
REVENUES:
  Pari-mutuel revenue                                                        $   38,955                        $   38,955
  Producer fees                                                                     704                               704
  Admissions, programs, parking and other racing income                           5,164                             5,164
  Concession sales                                                                2,492                             2,492
  Rental of racing facility                                    $   4,743          1,510      $  (4,743)             1,510
  Interest and dividend income                                       487            190                               677
  Other income                                                        11          1,241            (45)             1,207
                                                               ---------     ----------      ---------         ----------
          Total                                                    5,241         50,256         (4,788)            50,709
                                                               ---------     ----------      ---------         ----------
COSTS AND EXPENSES:
  Purses and incentive awards                                                    15,746                            15,746
  Commissions paid to guest tracks                                                2,548                             2,548
  Direct operating costs                                                         19,403                            19,403
  Cost of concession sales                                                          856                               856
  Depreciation and amortization                                      935            680                             1,615
  Racing facility rental                                                          4,762         (4,743)                19
  Marketing                                                                       1,401                             1,401
  General and administrative expense                                 503          2,896            (45)             3,354
  Loss on disposal of fixed assets                                                   99                                99
  Card club costs                                                                   666                               666
  Legal expense                                                       80            263                               343
                                                               ---------     ----------      ---------         ----------
          Total                                                    1,518         49,320         (4,788)            46,050
                                                               ---------     ----------      ---------         ----------

INCOME BEFORE INCOME TAX PROVISION                                 3,723            936                             4,659

INCOME TAX PROVISION                                                                459                               459
                                                               ---------     ----------      ---------         ----------
NET INCOME                                                   $     3,723    $       477         $   -       $       4,200
                                                               =========     ==========      =========         ==========
NET INCOME PER SHARE                                                $.65           $.08                              $.73
                                                               =========     ==========                        ==========
WEIGHTED AVERAGE NUMBER OF COMMON
  SHARES OUTSTANDING                                           5,759,668      5,759,668                         5,759,668
                                                               =========     ==========                        ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.

                                      F-4
<PAGE>   46
CALIFORNIA JOCKEY CLUB AND
BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY

SEPARATE AND COMBINED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1994
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                              BAY MEADOWS
                                                               CALIFORNIA      OPERATING
                                                                 JOCKEY       COMPANY AND
                                                                  CLUB         SUBSIDIARY     ELIMINATIONS      COMBINED

<S>                                                             <C>             <C>             <C>             <C>
REVENUES:
  Pari-mutuel revenue                                                           $  40,161                       $  40,161
  Producer fees                                                                       669                             669
  Admissions, programs, parking and other racing income                             5,399                           5,399
  Concession sales                                                                  2,490                           2,490
  Rental of racing facility                                     $   4,777           1,555       $(4,777)            1,555
  Interest and dividend income                                        381              81                             462
  Other income                                                         18             832           (11)              839
                                                                ---------       ---------       -------         ---------
        Total                                                       5,176          51,187        (4,788)           51,575
                                                                ---------       ---------       -------         ---------
COSTS AND EXPENSES:
  Purses and incentive awards                                                      16,784                          16,784
  Commissions paid to guest tracks                                                  2,684                           2,684
  Direct operating costs                                                           19,059                          19,059
  Cost of concession sales                                                            715                             715
  Depreciation and amortization                                       956             724                           1,680
  Racing facility rental                                                            4,800        (4,777)               23
  Marketing                                                                         1,274                           1,274
  General and administrative expense                                  397           2,945           (11)            3,331
  Loss on disposal of fixed assets                                    162             503                             665
  Card club costs                                                                     209                             209
  Legal expense                                                        41             350                             391
                                                                ---------       ---------       -------         ---------
        Total                                                       1,556          50,047        (4,788)           46,815
                                                                ---------       ---------       -------         ---------

INCOME BEFORE INCOME TAX PROVISION                                  3,620           1,140                           4,760

INCOME TAX PROVISION                                                                  548                             548
                                                                ---------       ---------       -------         ---------
NET INCOME                                                      $   3,620       $     592       $  --           $   4,212
                                                                =========       =========       =======         =========
NET INCOME PER SHARE                                                 $.63            $.10                            $.73
                                                                     ====            ====                            ====
WEIGHTED AVERAGE NUMBER OF COMMON
  SHARES OUTSTANDING                                            5,753,257       5,753,257                       5,753,257
                                                                =========       =========                       =========
</TABLE>

The accompanying notes are an integral part of these financial statements.



                                      F-5
<PAGE>   47



CALIFORNIA JOCKEY CLUB AND
BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY
<TABLE>
<CAPTION>
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(In thousands, except per share amounts)
-------------------------------------------------------------------------------------------------------------------------
                                                                                            UNREALIZED
                                                                                          GAIN (LOSS) ON
                                                           ADDITIONAL                       SECURITIES
                                             COMMON          PAID IN         RETAINED        AVAILABLE
                                              STOCK          CAPITAL         EARNINGS        FOR SALE           TOTAL
<S>                                          <C>           <C>              <C>               <C>            <C>
BALANCE AT JANUARY 1, 1994                     $   116        $  18,262        $  3,603                         $  21,981

NET INCOME                                                                        4,212                             4,212

DIVIDENDS, $.60 PER PAIRED SHARE                                                 (3,452)                           (3,452)

UNREALIZED LOSS ON SECURITIES
  AVAILABLE FOR SALE                                                                         $       (23)             (23)
                                               -------        ---------        --------       ----------        ---------

BALANCE AT DECEMBER 31, 1994                       116           18,262           4,363              (23)          22,718

NET INCOME                                                                        4,200                             4,200

DIVIDENDS, $.65 PER PAIRED SHARE                                                 (3,746)                           (3,746)

STOCK OPTIONS EXERCISED                                             123                                               123

UNREALIZED LOSS ON SECURITIES
  AVAILABLE FOR SALE                                                                          $     (188)            (188)
                                               -------        ---------        --------       ----------        ---------

BALANCE AT DECEMBER 31, 1995                       116           18,385           4,817             (211)          23,107

NET LOSS                                                                           (761)                             (761)

DIVIDENDS, $.40 PER PAIRED SHARE                                                 (2,306)                           (2,306)

UNREALIZED GAIN ON SECURITIES
  AVAILABLE FOR SALE                                                                               1,425            1,425
                                               -------        ---------        --------       ----------        ---------
BALANCE AT DECEMBER 31, 1996                   $   116        $  18,385        $  1,750       $    1,214        $  21,465
                                               =======        =========        ========       ==========        =========
</TABLE>

The accompanying notes are an integral part of these financial statements.

                                      F-6
<PAGE>   48



CALIFORNIA JOCKEY CLUB AND
BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY
<TABLE>
<CAPTION>
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS)
------------------------------------------------------------------------------------------------------------------------
                                                                                     1996          1995           1994
<S>                                                                              <C>           <C>            <C>
OPERATING ACTIVITIES:
  Net income (loss)                                                                 $  (761)     $  4,200       $  4,212
  Adjustments to reconcile net income (loss) to net cash provided by (used in)
    operating activities:
    Depreciation and amortization                                                     1,686         1,615          1,680
    Deferred income taxes                                                              (149)         (121)            43
    Loss on disposal of fixed assets                                                    145            99            665
    Changes in operating assets and liabilities:
      Accounts receivable                                                             1,915        (1,091)            84
      Amounts held on deposit for Thoroughbred horse owners                           3,056           (53)          (214)
      Income taxes receivable and payable                                               (75)         (297)           394
      Prepaid expenses and other current assets                                        (174)         (180)           175
      Accounts payable                                                               (3,348)        1,513          2,254
      Accrued liabilities                                                               453        (1,686)           260
      Accrued purses                                                                 (1,014)         (836)           970
      Due to Thoroughbred horse owners                                               (3,056)           53            214
      Uncashed pari-mutuel tickets and vouchers                                      (4,477)        2,056            839
                                                                                    -------       -------         ------

          Net cash provided by (used in) operating activities                        (5,799)        5,272         11,576
                                                                                    -------       -------         ------
INVESTING ACTIVITIES:
  Purchase of securities held to maturity                                           (13,461)      (11,005)        (1,398)
  Maturities of securities held to maturity                                          16,075        10,498          1,250
  Purchase of property, plant and equipment                                          (2,689)       (3,191)        (2,054)
                                                                                    -------       -------         ------

          Net cash used in investing activities                                         (75)       (3,698)        (2,202)
                                                                                    -------       -------         ------
FINANCING ACTIVITIES:
  Proceeds from notes payable                                                         6,900
  Repayment of notes payable                                                         (4,000)                      (1,475)
  Stock options exercised                                                                             123
  Dividends on Common Stock                                                          (2,306)       (3,746)        (3,452)
                                                                                    -------       -------         ------
          Net cash provided by (used in) financing activities                           594        (3,623)        (4,927)
                                                                                    -------       -------         ------

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                     (5,280)       (2,049)         4,447

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                        7,307         9,356          4,909
                                                                                    -------       -------         ------
CASH AND CASH EQUIVALENTS AT END OF YEAR                                            $ 2,027      $  7,307       $  9,356
                                                                                    =======       =======         ======

NONCASH INVESTING ACTIVITY - Accrued but unpaid purchase
  of property, plant and equipment                                                                              $    170
                                                                                                                ========

OTHER CASH FLOW INFORMATION:
  Interest paid                                                                     $   118      $    53       $      88
  Income taxes paid                                                                     955           65             301
  Income taxes refunded                                                                 236                          189
</TABLE>

The accompanying notes are an integral part of these financial statements.



                                      F-7
<PAGE>   49

CALIFORNIA JOCKEY CLUB
<TABLE>
<CAPTION>
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
-------------------------------------------------------------------------------------------------------------
                                                                                           1996          1995
ASSETS
<S>                                                                                   <C>          <C>
CURRENT ASSETS:
  Cash and cash equivalents                                                           $   1,138    $      989
  Securities available for sale (at fair value)                                           2,612         1,187
  Securities held to maturity (at cost, fair value of $4,479 in 1996
   and $7,076 in 1995)                                                                    4,463         7,077
  Accounts receivable                                                                        36             7
  Receivable from Bay Meadows Operating Company                                           2,332           569
  Prepaid expenses                                                                            3
                                                                                       --------     ---------

          Total current assets                                                           10,584         9,829
                                                                                       --------     ---------
PROPERTY, PLANT AND EQUIPMENT:
  Land                                                                                      691           691
  Land held for sale                                                                      3,083         1,954
  Racing plant                                                                           24,177        23,906
  Tennis facility                                                                           308           308
  Equipment                                                                                 460           456
                                                                                       --------     ---------

          Total                                                                          28,719        27,315

  Accumulated depreciation                                                              (15,929)      (14,997)
                                                                                       --------     ---------

          Property, plant and equipment - net                                            12,790        12,318
                                                                                       --------     ---------

TOTAL                                                                                  $ 23,374     $  22,147
                                                                                       ========     =========


LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable                                                                    $     184    $      129
  Accrued liabilities                                                                       509           140
  Note payable                                                                            2,900
                                                                                       --------     ---------

          Total current liabilities                                                       3,593           269
                                                                                       ========     =========
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
  Common Stock, $.01 par value, authorized 10,000,000 shares;
    issued and outstanding 5,763,257 shares in 1996 and 5,763,257 shares in 1995             58            58
  Additional paid in capital                                                             17,597        17,597
  Retained earnings                                                                         912         4,434
  Unrealized gain (loss) on securities available for sale                                 1,214          (211)
                                                                                       --------     ---------

          Total stockholders' equity                                                     19,781        21,878
                                                                                       --------     ---------

TOTAL                                                                                 $  23,374     $  22,147
                                                                                       ========     =========
</TABLE>

The accompanying notes are an integral part of these financial statements.



                                      F-8
<PAGE>   50

CALIFORNIA JOCKEY CLUB
<TABLE>
<CAPTION>
STATEMENTS OF STOCKHOLDERS' EQUITY
 YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
---------------------------------------------------------------------------------------------------------
                                                                                  UNREALIZED
                                                                                GAIN (LOSS) ON
                                                  ADDITIONAL                      SECURITIES
                                   COMMON          PAID IN          RETAINED      AVAILABLE
                                    STOCK          CAPITAL          EARNINGS       FOR SALE       TOTAL
<S>                                 <C>         <C>             <C>              <C>          <C>
BALANCE AT JANUARY 1, 1994          $ 58        $   17,478       $   4,289                    $   21,825

NET INCOME                                                           3,620                         3,620

DIVIDENDS, $.60 PER SHARE                                           (3,452)                       (3,452)

UNREALIZED LOSS ON SECURITIES
  AVAILABLE FOR SALE                                                             $    (23)           (23)
                                --------        ----------      ----------      ---------     ----------

BALANCE AT DECEMBER 31, 1994          58            17,478           4,457            (23)        21,970

NET INCOME                                                           3,723                         3,723

DIVIDENDS, $.65 PER SHARE                                           (3,746)                       (3,746)

STOCK OPTIONS EXERCISED                                119                                           119

UNREALIZED LOSS ON SECURITIES
  AVAILABLE FOR SALE                                                             $   (188)          (188)
                                --------        ----------      ----------      ---------     ----------

BALANCE AT DECEMBER 31, 1995          58            17,597           4,434           (211)        21,878

NET LOSS                                                            (1,216)                       (1,216)

DIVIDENDS, $.40 PER SHARE                                           (2,306)                       (2,306)

UNREALIZED GAIN ON SECURITIES
  AVAILABLE FOR SALE                                                                1,425          1,425
                                --------        ----------      ----------      ---------     ----------
BALANCE AT DECEMBER 31, 1996        $ 58        $   17,597      $      912       $  1,214       $ 19,781
                                ========        ==========      ==========      =========     ==========
</TABLE>


The accompanying notes are an integral part of these financial statements.

                                      F-9
<PAGE>   51
CALIFORNIA JOCKEY CLUB
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(In thousands)
------------------------------------------------------------------------------------------------------------------------------------
                                                                                          1996             1995              1994
<S>                                                                                    <C>               <C>               <C>
OPERATING ACTIVITIES:
  Net income (loss)                                                                    $ (1,216)         $  3,723          $  3,620
  Adjustments to reconcile net income (loss) to net cash
    provided by (used in) operating activities:
    Depreciation                                                                            932               935               956
    Loss on disposal of fixed assets                                                                                            162
    Changes in operating assets and liabilities:
      Accounts receivable                                                                   (29)               46                49
      Receivable from Bay Meadows Operating Company                                      (1,763)            1,422            (1,670)
      Prepaid expenses and other assets                                                      (3)               32                (9)
      Accounts payable                                                                       55                34                67
      Accrued liabilities                                                                   369                76                 3
                                                                                       --------          --------          --------

          Net cash provided by (used in) operating activities                            (1,655)            6,268             3,178
                                                                                       --------          --------          --------

INVESTING ACTIVITIES:
  Purchase of securities held to maturity                                               (13,461)          (11,005)           (1,398)
  Maturities of securities held to maturity                                              16,075            10,498             1,250
  Purchase of property, plant and equipment                                              (1,404)           (1,557)             (945)
                                                                                       --------          --------          --------
          Net cash provided by (used in) investing activities                             1,210            (2,064)           (1,093)
                                                                                       --------          --------          --------
FINANCING ACTIVITIES:
  Proceeds of note payable                                                                2,900
  Stock options exercised                                                                                     119
  Dividends on common stock                                                              (2,306)           (3,746)           (3,452)
                                                                                       --------          --------          --------
          Net cash provided by (used in) financing activities                               594            (3,627)           (3,452)
                                                                                       --------          --------          --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                            149               577            (1,367)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                              989               412             1,779
                                                                                       --------          --------          --------
CASH AND CASH EQUIVALENTS AT END OF YEAR                                               $  1,138          $    989          $    412
                                                                                       ========          ========          ========
</TABLE>

The accompanying notes are an integral part of these financial statements.

                                      F-10
<PAGE>   52
BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
(In thousands, except share and per share amounts)
------------------------------------------------------------------------------------------------------------------------------------

                                                                                                                1996          1995
ASSETS
<S>                                                                                                         <C>            <C>
CURRENT ASSETS:
  Cash and cash equivalents                                                                                 $    889       $  6,318
  Amounts held on deposit for Thoroughbred horse owners                                                                       3,056
  Accounts receivable (net of allowance for doubtful accounts of $77 in 1996 and $82 in 1995)                    491          2,435
  Prepaid expenses and other current assets                                                                      522            377
                                                                                                            --------       --------

          Total current assets                                                                                 1,902         12,186
                                                                                                            --------       --------
PROPERTY, PLANT AND EQUIPMENT:
  Equipment and leasehold improvements                                                                        10,572          9,631
  Accumulated depreciation and amortization                                                                   (6,163)        (5,761)
                                                                                                            --------       --------

          Property, plant and equipment - net                                                                  4,409          3,870
                                                                                                            --------       --------
OTHER ASSETS (net of accumulated amortization of $1,374 in 1996 and $1,221 in 1995)                               96            223
                                                                                                            --------       --------
DEFERRED INCOME TAXES                                                                                            227             78
                                                                                                            --------       --------
TOTAL                                                                                                       $  6,634       $ 16,357
                                                                                                            ========       ========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable                                                                                          $  1,144       $  4,547
  Accrued liabilities                                                                                          1,474          1,390
  Accrued purses                                                                                                              1,014
  Due to Thoroughbred horse owners                                                                                            3,056
  Payable to California Jockey Club                                                                            2,332            569
  Income taxes payable                                                                                                           75
  Uncashed pari-mutuel tickets and vouchers                                                                                   4,477
                                                                                                            --------       --------

          Total current liabilities                                                                            4,950         15,128
                                                                                                            --------       --------
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
Common Stock .01 par value authorized 10,000,000 shares; issued and outstanding:
  5,763,257 shares in 1996 and 1995                                                                               58             58
  Additional paid in capital                                                                                     788            788
  Retained earnings                                                                                              838            383
                                                                                                            --------       --------

          Total stockholders' equity                                                                           1,684          1,229
                                                                                                            --------       --------

TOTAL                                                                                                       $  6,634       $ 16,357
                                                                                                            ========       ========
</TABLE>

The accompanying notes are an integral part of these financial statements.

                                      F-11
<PAGE>   53


BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(In thousands, except per share amounts)
-------------------------------------------------------------------------------

                                                 ADDITIONAL
                                        COMMON     PAID IN     RETAINED
                                         STOCK      CAPITAL     EARNINGS  TOTAL

<S>                                     <C>        <C>        <C>         <C>
BALANCE AT JANUARY 1, 1994              $   58     $  784     $ (686)     $  156

NET INCOME                                                       592         592
                                        ------     ------     ------      ------


BALANCE AT DECEMBER 31, 1994                58        784        (94)        748

STOCK OPTIONS EXERCISED                                 4                      4

NET INCOME                                                       477         477
                                        ------     ------     ------      ------

BALANCE AT DECEMBER 31, 1995                58        788        383       1,229

NET INCOME                                                       455         455
                                        ------     ------     ------      ------

BALANCE AT DECEMBER 31, 1996            $   58     $  788     $  838      $1,684
                                        ======     ======     ======      ======
</TABLE>

The accompanying notes are an integral part of these financial statements.

                                      F-12
<PAGE>   54
BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(In thousands)
-------------------------------------------------------------------------------------------------------
                                                                         1996         1995         1994
<S>                                                                 <C>          <C>          <C>
OPERATING ACTIVITIES:
  Net income                                                        $     455    $     477    $     592
  Adjustments to reconcile net income to net cash
    provided by (used in) operating activities:
    Depreciation and amortization                                         754          680          724
    Deferred income taxes                                                (149)        (121)          43
    Loss on disposal of fixed assets                                      145           99          503
    Changes in operating assets and liabilities:
      Accounts receivable                                               1,944       (1,137)          35
      Amounts held on deposit for Thoroughbred horse owners             3,056          (53)        (214)
      Income taxes receivable and payable                                 (75)        (297)         394
      Prepaid expenses and other assets                                  (171)        (212)         184
      Accounts payable                                                 (3,403)       1,479        2,187
      Accrued liabilities                                                  84       (1,762)         257
      Accrued purses                                                   (1,014)        (836)         970
      Due to Thoroughbred horse owners                                 (3,056)          53          214
      Payable to California Jockey Club                                 1,763       (1,422)       1,670
      Uncashed pari-mutuel tickets and vouchers                        (4,477)       2,056          839
                                                                    ---------    ---------    ---------

          Net cash (used in) provided by operating activities          (4,144)        (996)       8,398
                                                                    ---------    ---------    ---------
INVESTING ACTIVITIES
  Purchase of property, plant and equipment                            (1,285)      (1,634)      (1,109)
                                                                    ---------    ---------    ---------
FINANCING ACTIVITIES:
  Proceeds from note payable                                            4,000
  Repayment of note payable                                            (4,000)                   (1,475)
  Stock options exercised                                                                4
                                                                    ---------    ---------    ---------
          Net cash (used in) provided by financing activities           -                4       (1,475)
                                                                    ---------    ---------    ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                       (5,429)      (2,626)       5,814

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                          6,318        8,944        3,130
                                                                    ---------    ---------    ---------

CASH AND CASH EQUIVALENTS AT END OF YEAR                            $     889     $  6,318     $  8,944
                                                                    ---------    ---------    ---------


NONCASH INVESTING ACTIVITY - Accrued but unpaid purchase of
  property, plant and equipment                                                               $     170
                                                                                              ---------

OTHER CASH FLOW INFORMATION:
  Interest paid                                                     $     118    $      53    $      88
  Income taxes paid                                                       955          765          301
  Income taxes refunded                                                   236                       189
</TABLE>

The accompanying notes are an integral part of these financial statements.


                                      F-13
<PAGE>   55


CALIFORNIA JOCKEY CLUB AND
BAY MEADOWS OPERATING COMPANY AND SUBSIDIARY

NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
--------------------------------------------------------------------------------


1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      BASIS OF PRESENTATION - California Jockey Club ("Cal Jockey") is a real
      estate investment trust which owns the Bay Meadows Racecourse and other
      real property located in San Mateo, California. Cal Jockey leases the
      racing facility to Bay Meadows Operating Company ("Bay Meadows"). The
      shares of Cal Jockey and Bay Meadows are paired one-for-one and can only
      be transferred in units. The Combined Financial Statements include the
      accounts of both Cal Jockey and Bay Meadows. Bay Meadows is engaged in
      operating and subleasing the facility, and operates a portion of the food
      and beverage concessions. All significant inter-company transactions and
      accounts have been eliminated in consolidation and combination. Certain
      prior year amounts have been reclassified to conform to the 1996
      presentation. The Companies' fiscal year ends December 31. At December 31,
      1995 and 1994 Bay Meadows was conducting a Thoroughbred horse racing meet.
      At December 31, 1996 the Thoroughbred horse racing meet had been
      completed. Accordingly, certain assets and liabilities related to the
      racing meet had been settled as of December 31, 1996.

      In order to conduct a Thoroughbred horse racing meet and to act as a
      satellite facility, Bay Meadows needs to secure, on an annual basis, a
      license from the California Horse Racing Board ("CHRB"). The issuance of
      this annual license to Bay Meadows is essential for it to continue to
      conduct Thoroughbred horse racing meets at Bay Meadows Racecourse.
      Although Bay Meadows has received a license for the 1997 race meet, there
      is no assurance that Bay Meadows will continue to receive this annual
      license. Bay Meadows has been granted an annual license each year since
      1934.

      Thoroughbred racing is highly regulated by state law and the number of
      weeks available for racing in Northern California is subject to statute.
      The statute dictates the number of racing weeks allowed in the Northern
      California Racing Zone. There is no assurance that competition for racing
      weeks will not affect the allocation of racing weeks to Bay Meadows in the
      future.

      USE OF ESTIMATES - The preparation of financial statements in conformity
      with generally accepted accounting principles requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the
      date of the financial statements and the reported amounts of revenues and
      expenses during the reporting period. Actual results could differ from
      those estimates.

      PROPERTY, PLANT AND EQUIPMENT - Property is carried at cost. At December
      31, 1996, land and land held for sale was $3,774,000. Land held for sale
      includes $2,242,000 in costs incurred to develop the land including zoning
      and engineering costs. Additionally, the tennis facility held for sale is
      subject to an agreement to sell the property to Public Storage, Inc. for
      approximately $2,200,000. (See Note 11 - Proposed Land Sales). No
      assurance can be gained that activities will ultimately result in the
      development or sale of such land. Depreciation and amortization are
      computed on the straight-line method over the estimated useful lives of 30
      years for plant and from 3 to 20 years for equipment. Leasehold
      improvements are amortized over their useful lives from 3 to 20 years.
      Expenditures for property additions and betterments are added to the
      property accounts, while those for maintenance and repairs are expensed as
      incurred.

                                      F-14
<PAGE>   56
      On January 1, 1996, the Companies adopted SFAS No. 121, "Accounting for
      the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed
      Of". SFAS No. 121 establishes recognition and measurement criteria for
      impairment losses whenever events or changes in circumstances indicate
      that the carrying value of assets may not be recoverable. Prior to the
      adoption of SFAS No. 121, assets were assessed for impairment based on
      their replacement costs or market value, or the undiscounted future cash
      flows expected to be generated by the assets. Additionally, assets are
      assessed for impairment when they are taken out of service or replaced.
      Such replacements resulted in write-downs for the Companies of $145,000,
      $99,000 and $665,000 in 1996, 1995 and 1994, respectively. Because the
      impairment criteria required under SFAS No. 121 are substantially similar
      to those previously used by the Companies, the adoption of SFAS No. 121
      did not have a material effect on the financial statements.

      CASH AND CASH EQUIVALENTS - consist of demand deposits held in banks,
      money market funds and certificates of deposit with maturities of three
      months or less at the date of acquisition.

      REVENUE - Bay Meadows records Pari-mutuel revenues and Admissions, parking
      and other racing income associated with Thoroughbred horse racing at Bay
      Meadows Racetrack daily based upon cash received. Costs and expenses
      associated with Thoroughbred horse racing revenues, including purses and
      incentive awards, commissions paid to guest tracks, and direct operating
      costs are charged against income in those periods in which they
      Thoroughbred horse racing revenues are recognized. Other costs and
      expenses are recognized as they are incurred throughout the year.

      LEGAL EXPENSES - Legal expenses include all attorney fees incurred by the
      Companies with the exception of fees incurred in conjunction with the
      proposed merger agreement (see Note 2 - Proposed Merger Agreement). Such
      amounts are included in Merger Related Costs.

      SECURITIES AVAILABLE FOR SALE AND SECURITIES HELD TO MATURITY - The
      Companies classify investments into three categories: held to maturity,
      trading, and available for sale. The Companies have no trading securities.
      Securities which the Company has the ability and intent to hold to
      maturity are recorded at cost with any discount or premium amortized using
      a method that is not materially different from the interest method.
      Securities held to maturity consist of certificates of deposit and
      government securities with maturities greater than three months when
      acquired.

      Securities available for sale are reported at fair value with net
      unrealized gains and losses excluded from earnings and reported as a
      separate component of stockholders' equity. Securities available for sale
      consist of investments in the common stock of a publicly traded Real
      Estate Investment Trust (See Note 13 - Related Party Transactions).

      AMOUNTS HELD ON DEPOSIT FOR THOROUGHBRED HORSE OWNERS - Amounts represent
      purses, net of entry fees, collected by Bay Meadows and placed on deposit
      for the benefit of certain Thoroughbred owners, while Bay Meadows conducts
      its racing meet. These amounts and 55% of the interest earned thereon,
      both of which are not available for Bay Meadows' purposes, are the
      property of such Thoroughbred owners and are physically segregated in
      accordance with the agreement.

      OTHER ASSETS - principally include amounts capitalized and amortized over
      an eight-year useful life relating to the purchase of racing rights.

      STOCK-BASED COMPENSATION - The Companies account for stock-based awards to
      employees using the intrinsic value method in accordance with APB No. 25,
      Accounting for Stock Issued to Employees. The Companies have adopted the
      disclosure requirements of SFAS No. 123 "Accounting for Stock Based
      Compensation" (See Note 7 - Stock Option Plan).

      EARNINGS PER SHARE - Earnings per share have been computed by dividing net
      earnings by the weighted average number of common shares outstanding.



                                      F-15
<PAGE>   57



2.    PROPOSED MERGER AGREEMENT

      On October 31, 1996, Cal Jockey and Bay Meadows entered into a
      merger agreement with Patriot American Hospitality, Inc. ("Patriot").
      The acquisition agreement was approved unanimously by the Boards of
      Patriot, Cal Jockey, and Bay Meadows and is subject to approval by the
      shareholders of each of Patriot, Cal Jockey and Bay Meadows. The parties,
      together with Patriot American Hospitality Partnership, L.P., a limited
      partnership (the "Patriot Partnership"), thereafter entered into an
      Agreement and Plan of Merger, dated as of February 24, 1997 (the "Merger
      Agreement"), which by its terms supersedes the October 31, 1996 Agreement
      and more fully details the transactions to be consummated by the parties.

      Pursuant to the Merger Agreement, Patriot will merge with and into Cal
      Jockey, with Cal Jockey being the surviving company. In connection with
      the Merger, Cal Jockey's name will be changed to "Patriot American
      Hospitality, Inc." ("New Patriot REIT") and Bay Meadows' name will be
      changed to "Patriot American Hospitality Operating Company" ("New Patriot
      Operating Company"). The shareholders of Cal Jockey and Bay Meadows will
      have the option either to tender each of their paired shares for $33.00 in
      cash or to retain their paired shares, which will then remain outstanding
      after the Merger and will represent the same number of paired shares of
      New Patriot REIT Common Stock and New Patriot Operating Company Common
      Stock.

      Patriot and PaineWebber Incorporated ("PaineWebber") have agreed in
      principle that following the close of the Merger, an affiliate of
      PaineWebber will purchase substantially all of the land owned by Cal
      Jockey, including the land subject to the Franklin Agreement and the
      Iacocca Agreement, for a purchase price of $83,000,000. New Patriot REIT
      would retain ownership of the improvements located on the land.
      Simultaneously with the consummation of such purchase, the PaineWebber
      affiliate and New Patriot REIT would enter into a ground lease covering
      that portion of land on which the Racecourse is situated. New Patriot REIT
      would then sublease the Racecourse land and related improvements to New
      Patriot Operating Company.

      In connection with the Proposed PaineWebber Land Sale, New Patriot REIT
      would assign all of its rights and benefits under existing leases,
      contracts, permits and entitlements to the PaineWebber affiliate, and the
      PaineWebber affiliate would assume all of New Patriot REIT's development,
      lease and contract obligations.

      Pursuant to the Merger Agreement, Patriot loaned $2,900,000 to Cal Jockey
      (see Note 6) for payment of the breakup fee due upon termination of the
      prior merger agreement with Hudson Bay Partners, LP ("Hudson Bay").
      Patriot will be entitled to receive a $5,000,000 termination fee and the
      repayment of the $2,900,000 loan for the Hudson Bay termination fee in the
      event the Cal Jockey and Bay Meadows Boards of Directors receive and
      accept a higher unsolicited offer. All merger related costs have been
      expensed as incurred. Such amounts include the aforementioned breakup fee
      as well as legal and accounting costs related to the proposed merger
      agreements. These costs are shown as merger related costs for purposes of
      disclosure on the separate and combined statements of income (loss).

3.    SECURITIES AVAILABLE FOR SALE

      The following table is a summary of securities available for sale at
      December 31, 1996 and 1995 (in thousands, except share amount):


<TABLE>
<CAPTION>
                                                                            1996
                                                         ------------------------------------------
                                                               UNREALIZED    UNREALIZED      MARKET
                                                         COST     GAIN          LOSS          VALUE
<S>                                                     <C>      <C>        <C>             <C>
Santa Anita Realty Enterprises (100,000 common shares) $1,398  $1,214                       $2,612
</TABLE>




                                      F-16
<PAGE>   58


<TABLE>
<CAPTION>
                                                                            1995
                                                         ------------------------------------------
                                                               UNREALIZED    UNREALIZED      MARKET
                                                         COST     GAIN          LOSS          VALUE
<S>                                                     <C>      <C>        <C>             <C>

Santa Anita Realty Enterprises (100,000 common shares)  $1,398              $   (211)   $   1,187
</TABLE>

         These securities have no maturity.

4.    SECURITIES HELD TO MATURITY

      The following table is a summary of securities held to maturity at
      December 31, 1996 and 1995 (in thousands):
<TABLE>
<CAPTION>
                                                                            1996
                                                         ------------------------------------------
                                                               UNREALIZED    UNREALIZED      MARKET
                                                         COST     GAIN          LOSS          VALUE
<S>                                                     <C>      <C>        <C>             <C>

Certificates of deposit                               $    500                            $    500
U.S. Treasury obligations                                3,963   $    16          --         3,979
                                                      --------   --------    --------     --------
Total                                                 $  4,463   $    16          --      $  4,479
                                                      ========   ========    ========     ========
</TABLE>

        These securities mature in 1997.


<TABLE>
<CAPTION>
                                                                            1995
                                                         ------------------------------------------
                                                               UNREALIZED    UNREALIZED      MARKET
                                                         COST     GAIN          LOSS          VALUE
<S>                                                     <C>      <C>        <C>             <C>

Certificates of deposit                                $    300               $     (1)    $    299
U.S. Treasury obligations                                 6,777   $      1          (1)       6,777
                                                       --------   --------    --------     --------
Total                                                  $  7,077   $      1    $     (2)    $  7,076
                                                       ========   ========    ========     ========
</TABLE>


      These securities matured in 1996.



5.    INCOME TAXES

      Cal Jockey intends to continue to qualify as a real estate investment
      trust as defined in the Internal Revenue Code and, as such, will not be
      taxed on that portion of its taxable income which is distributed to
      stockholders. Dividends to stockholders are determined by taxable income
      which may differ from financial accounting income. Dividends paid during
      the years ended December 31, 1996, 1995 and 1994, were taxable as ordinary
      income to stockholders.

                                      F-17
<PAGE>   59

      The income tax provision of Bay Meadows consists of the following (in
thousands):

<TABLE>
<CAPTION>
                                                       YEAR ENDED DECEMBER 31,
                                                    ----------------------------
                                                    1996        1995        1994
<S>                                                  <C>        <C>        <C>
Current:
  Federal                                            $ 311      $ 482      $ 379
  State                                                 98         98        126
                                                     -----      -----      -----
          Total Current                                409        580        505
                                                     -----      -----      -----
Deferred:
  Federal                                              (79)       (99)        35
  State                                                (70)       (22)         8
                                                     -----      -----      -----
          Total Deferred                              (149)      (121)        43
                                                     -----      -----      -----
Total                                                $ 260      $ 459      $ 548
                                                     =====      =====      =====
</TABLE>

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
Bay Meadows' deferred tax liabilities and assets, are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                                 ---------------
                                                                  1996     1995
<S>                                                              <C>      <C>
Deferred tax assets:
  Book over tax depreciation                                     $ 107    $ 167
  Book over tax amortization                                       164      143
  Book expenses not yet deductible                                 171       67
  Other                                                             37       25
                                                                 -----    -----
          Total deferred tax assets                                479      402

Valuation allowance for deferred tax assets                       (120)    (264)
                                                                 -----    -----

          Net deferred tax assets                                  359      138
                                                                 -----    -----
Deferred tax liabilities:
  Tax over book amortization                                                 10
  Other                                                            132       50
                                                                 -----    -----
         Total deferred tax liabilities                            132       60
                                                                 -----    -----

Net deferred tax asset                                           $ 227    $  78
                                                                 =====    =====
</TABLE>




The change in the valuation allowance is due to a reassessment of various
deferred tax assets as a result of continued earnings at Bay Meadows.

                                      F-18
<PAGE>   60
The reasons for the difference between total tax expense and the amount
computed by applying the statutory Federal income tax rate of 34% to income
before income taxes, are as follows (in thousands):

<TABLE>
<CAPTION>
                                                       YEAR ENDED DECEMBER 31,
                                                    ----------------------------
                                                    1996        1995      1994
<S>                                                  <C>        <C>     <C>
Tax at statutory rate                               $ 243      $ 318    $ 388
State income taxes, net of Federal tax benefit         43         57       70
Non deductible expenses                                61        189
Impact of rate change on deferred taxes                10       (113)
Increase (decrease) in valuation allowance           (144)        74      183
Other                                                  47        (66)     (93)
                                                    -----      -----    -----

Total                                               $ 260      $ 459    $ 548
                                                    =====      =====    =====
</TABLE>


6.    NOTES PAYABLE

      Pursuant to the Merger Agreement (see Note 2), Patriot provided Cal
      Jockey with a $2,900,000 million loan to be used in settlement of a
      termination fee to Hudson Bay as required by the agreement with Hudson
      Bay. At December 31, 1996, the note payable to Patriot is $2,900,000
      million bearing interest of 5% per annum. Principal and accrued interest
      is due the earlier of June 30, 1997 or termination of the Merger
      Agreement.

      On March 10, 1997, Bay Meadows signed a loan agreement with a bank for a
      $2,500,000 line of credit with interest at the bank's reference rate. In
      connection with the execution of the credit agreement, Cal Jockey has
      agreed to provide collateral, and to continue to guarantee the line of
      credit. Bay Meadows has agreed to pay Cal Jockey a fee equal to .25% per
      annum of the value of the collateral that secures the line of credit. The
      line of credit agreement expires on February 1, 1998. During 1996 Bay
      Meadows had a similar line of credit in which Bay Meadows drew
      $4,000,000. That line of credit was canceled and repaid in full on
      October 29, 1996.

7.    STOCK OPTION PLAN

      In May 1988, the stockholders of Bay Meadows approved the 1988 Stock
      Option Plan. The stock options have terms not exceeding ten years and
      exercise prices not less than the fair market value of the paired shares
      on the date the options were granted. Generally the right to exercise the
      options either vests immediately or over a three-year period on an annual
      basis, with the vesting date determined at the time of grant. The stock
      options are issued pursuant to option agreements providing that all
      options will become vested upon a change in control of Bay Meadows.
      Accordingly, all options will become exercisable when the Merger is
      consummated. 250,000 shares of the Companies' Common Stock have been
      reserved for issuance under the 1988 plan, with 180,000 available for
      future option grants at December 31, 1996. As additional consideration
      for Bay Meadows entering into the 1993 lease (see Note 8), Cal Jockey
      agreed to grant Bay Meadows options to acquire 51,000 unpaired shares of
      Cal Jockey unpaired Common Stock. Such options can be exercised by Bay
      Meadows only if and to the extent any employees of Bay Meadows to whom
      stock options have been granted as of December 31, 1992, exercise their
      respective options. The purchase price shall be 97% of the stock option
      price payable by the employee exercising his or her option and shall be
      payable only at such time the option is exercised.

      During 1993 and 1994 Bay Meadows issued options, outside the 1988 Plan,
      to purchase 50,000 shares at a weighted average exercise price of $12.98
      per share to an officer of Bay Meadows that are exercisable at December
      31, 1996.

                                      F-19
<PAGE>   61

If Bay Meadows desires to grant additional options to its employees, Cal Jockey
may grant additional options to Bay Meadows. Bay Meadows has agreed to a similar
reciprocal agreement should Cal Jockey desire to grant stock options to its
employees. As of December 31, 1996, Cal Jockey has granted options to Bay
Meadows of which 107,500 are outstanding.

Bay Meadows has granted options for 162,000 paired shares to persons who are or
were Bay Meadows Officers and Employees. Bay Meadows maintains that Cal Jockey
has agreed to and is obligated to provide stock options to Bay Meadows for the
purchase of 162,000 shares of Cal Jockey stock to match the options granted by
Bay Meadows. Cal Jockey has acknowledged agreement to provide options to
purchase 107,500 shares of Cal Jockey stock to back up the option grants by Bay
Meadows. The difference relates to options for paired shares which Bay Meadows
granted to certain Bay Meadows Officers and Employees in 1996. In order to show
the greatest possible dilution, the above disclosures assume that the options
were granted by both Companies. However, there has been no resolution of this
difference and no determination has been made as to the possible effects, which
could be material, of the ultimate resolution of this uncertainty on the
accompanying financial statements if is determined that the options for all or
a portion of the difference were not granted in 1996 by Cal Jockey.
Accordingly, no amounts have been recorded as of December 31, 1996 for any
additional compensation expense or contingent liabilities that might result
from the ultimate resolution of this matter.

Option activity under the Plan is as follows:
<TABLE>
<CAPTION>
                                                                     WEIGHTED
                                                          NUMBER     AVERAGE
                                                            OF       EXERCISE
                                                          SHARES      PRICE
<S>                                                      <C>         <C>
Outstanding, January 1 and December 31, 1994 (24,668
exercisable at a weighted average price of $12.25)        51,000      12.59
Granted (Weighted average fair value of $4.10)            35,000      15.36
Exercised                                                (10,000)     12.25
Canceled                                                 (14,000)     13.50
                                                         -------
Outstanding, December 31, 1995 (27,000 exercisable
at a weighted average price of $12.25)                    62,000      14.00
Granted (weighted average fair value of $3.53)            54,500      14.75
Canceled                                                  (4,500)     14.47
                                                         -------
Outstanding, December 31, 1996 (90,332 exercisable       112,000      14.35
at a weighted average price of $14.12)                   =======
</TABLE>


The Companies' apply APB 25 and related interpretations in accounting for
its plan. Accordingly, no compensation cost has been recognized for the
plan. Had compensation cost for the plan been determined based on the fair
value at the grant dates for awards under the plan consistent with the
method prescribed by SFAS 123, the Companies' combined net income (loss)
and net income (loss) per share would have been reduced to the pro forma
amounts indicated below:

<TABLE>
<CAPTION>
                                                      YEAR ENDED DECEMBER 31,
                                                        1996            1995
                                                        ----            ----
<S>                                                   <C>            <C>
Combined net income (loss) as reported                $  (761)       $  4,200
Pro forma combined net income (loss)                     (903)          4,175
Combined net income (loss) per share as reported      $ (0.13)      $    0.73
Pro forma combined net income (loss) per share          (0.16)           0.72
</TABLE>


For these disclosure purposes, the fair value of each option grant is estimated
on the date of grant using the Black-Scholes option-pricing model with the
following weighted-average assumptions used for grants in 1996 and 1995
respectively; dividend yield of 3.31% (1996) and 3.18% (1995); expected
volatility of 25.86% for both years; expected lives of five years for both
years; and risk-free interest rates of 6.08% (1996) and 7.47% (1995).

                                     F-20
<PAGE>   62


8.    RENTAL OF RACING FACILITY

      Bay Meadows leases Bay Meadows Racecourse from Cal Jockey. Pursuant to the
      terms of the lease agreement, which commenced on April 1, 1993 and expired
      on March 31, 1996, Cal Jockey received the greater of (a) $3,000,000
      annually or (b) the sum of 1.5% of the on-track pari-mutuel handle when
      there were live races at Bay Meadows, 1% of the pari-mutuel handle wagered
      at Northern California satellite wagering facilities receiving races from
      Bay Meadows, 1% of the pari-mutuel handle wagered at Bay Meadows when it
      was acting as a satellite wagering facility for other host associations
      conducting racing in Northern California, 25% of the net commissions from
      exported and imported races from Southern California and interstate
      locations, and between 60% and 90% of various non-racing sublease rental
      income. In addition, Cal Jockey also received a specified percentage of
      the annual pari-mutuel handle in excess of $350,000,000.

      The Master Lease Agreement pursuant to which Bay Meadows leased the
      Racecourse Properties from Cal Jockey expired on March 31, 1996. Cal
      Jockey and Bay Meadows have had discussions regarding the extension of
      the Master Lease Agreement. The companies now have conflicting views
      concerning the existence of any Master Lease Agreement extension. Cal
      Jockey believes that no lease exists and that Bay Meadows is a tenant at
      will paying rent at the rate in the prior Master Lease Agreement. Bay
      Meadows believes that the Master Lease Agreement has been extended for an
      additional three years with a ten percent increase in rent but otherwise
      substantiallly on the same terms as the previous lease. Bay Meadows has,
      however, continued to pay rent at a rental rate equivalent to that
      contained in the expired lease agreement through the first quarter of
      1997. No amounts for additional rent, if any, have been accrued at
      December 31, 1996. In the event that the Companies reach a reconciliation
      on any lease extension, retroactive changes in the rental amounts, if
      any, will be recorded in the period that such reconciliation occurs. No
      assurances can be given concerning the possible effects that the ultimate
      resolution of this matter will have on the future operations of the
      Companies.

      Cal Jockey had rental income from Bay Meadows of $4,918,000, $4,743,000,
      and $4,777,000 for the years ended December 31, 1996, 1995 and 1994,
      respectively.

      Bay Meadows had rental income from subleasing the facility and equipment
      to others. Rental income from other racing associations is based upon a
      percentage of the pari-mutuel handle of those respective associations.

                                      F-21
<PAGE>   63
9.    PARI-MUTUEL REVENUES

      The following summarizes information concerning the pari-mutuel revenues
(in thousands):


<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31,
                                                          -----------------------------
                                                            1996      1995      1994

<S>                                                       <C>       <C>       <C>
On-track pari-mutuel handle                               $104,440  $103,276  $113,131
Intertrack/exported pari-mutuel handle                     300,477   278,361   253,794
Out-of-state pari-mutuel handle                            108,963    82,653    62,286
                                                          --------  --------  --------
Total pari-mutuel handle from annual racing meet           513,880   464,290   429,211
                                                          --------  --------  --------
Less:
  Patrons' winning tickets                                 204,637   196,305   209,051
  Pari-mutuel license fees paid to State of California       9,977     9,671    10,543
  Municipal racing fees                                        748       746       808
  Handles paid to interstate pari-mutuel entities          113,624    89,395    68,039
  Handles paid to co host tracks under intrastate racing   143,979   129,343   100,959
  Equine research, vanning and stabling and Simulcast
    promotion fees                                           1,405     1,387     1,526
                                                          --------  --------  --------

           Subtotal                                         39,510    37,443    38,285
Rights fees from exported races                                272       167       388
                                                          --------  --------  --------

Total pari-mutuel revenues from annual racing meets         39,782    37,610    38,673
Pari-mutuel revenues from intertrack wagering                1,694     1,345     1,488
                                                          --------  --------  --------

Total pari-mutuel revenue                                 $ 41,476  $ 38,955  $ 40,161
                                                          ========  ========  ========
</TABLE>

      Components of pari-mutuel revenues from annual racing meet are as follows
(in thousands):

<TABLE>
<CAPTION>
                                                    YEAR ENDED DECEMBER 31,
                                                 -------------------------------
                                                  1996        1995        1994
<S>                                              <C>         <C>         <C>
Commission paid to Bay Meadows                   $15,880     $14,916     $14,871
Simulcast expense reimbursement                    4,234       4,399       4,334
Guest tracks commission                            2,614       2,548       2,684
Purses and incentive awards                       17,054      15,747      16,784
                                                 -------     -------     -------
Total                                            $39,782     $37,610     $38,673
                                                 =======     =======     =======
</TABLE>



10.   PENSION PLAN

      Substantially all employees of Bay Meadows and its subsidiaries are
      covered by union or non-union multi-employer defined benefit pension
      plans. The allocated portion of non-union plan assets and accumulated plan
      benefits is not determinable. In the aggregate, the actuarial book value
      of non-union pension fund assets exceed vested benefits. Data as to
      accumulated plan benefits and plan assets for union plans are not
      available.


                                      F-22
<PAGE>   64

      Contributions charged to expense for these plans were as follows (in
thousands):

                                                  YEAR ENDED DECEMBER 31,
                                            -----------------------------------
                                            1996            1995          1994

Union                                        $791           $623           $711
Non-union                                     179            147            253
                                             ----           ----           ----
Total                                        $970           $770           $964
                                             ====           ====           ====



      Upon the first anniversary of their employment, nonunion employees of Bay
      Meadows are eligible to participate in the California Race Track Pension
      Plan (the "CTRP Plan"), a defined benefit multiemployer pension plan,
      provided the employee is at least 21 years of age. An employee's benefits
      under the CRTP Plan are based on the employee's salary and length of
      service with Bay Meadows and other employers participating in the CRTP
      Plan. Accordingly, the amount of Bay Meadows contributions to the CRTP
      Plan may be expected to vary depending on the number of nonunion employees
      and their seniority.

11.   PROPOSED LAND SALES

      On May 31, 1995, Cal Jockey entered into an Agreement of Purchase and Sale
      with Property Resources, Inc. ("Property Resources"), a subsidiary of
      Franklin Resources, Inc., (as amended, the "Franklin Agreement"),
      providing for the sale of approximately 32 acres of Cal Jockey property
      which currently supports the barn and stable area ("Stable Area"). The
      Franklin Agreement contemplates the sale of the Stable Area for a purchase
      price of approximately $21,000,000. Property Resources is obligated to
      fund 44% of the cost of various off-site improvements required by the City
      of San Mateo and the State of California in connection with the
      entitlements for the development of the property (the "Entitlements").
      The transaction is subject to a number of conditions precedent including
      that of Cal Jockey obtaining from the City of San Mateo all necessary
      permits to develop the office complex.

      In December 1995, Cal Jockey entered into an Agreement of Purchase and
      Sale (as amended, the "Iacocca Agreement") with Lee Iacocca & Associates,
      Inc. ("Iacocca") providing for the sale of the Training Track Area.
      Effective June 28, 1996, Iacocca 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 Iacocca. The Iacocca Agreement contemplates the sale of the
      Training Track Area to Airdial for a purchase price of $30,750,000. In
      addition, Airdial is obligated to fund 53% of the off-site improvements
      required by the City of San Mateo and the State of California in
      connection with the entitlements for the development of the property.

      Closing of the transactions are subject to a number of conditions
      precedent including Cal Jockey obtaining from the City of San Mateo the
      necessary Entitlements to proceed with development plans, together with a
      development agreement. If the conditions are satisfied or waived, it is
      contemplated that the Franklin Agreement escrow will close 330 days
      following the date on which Cal Jockey obtains the Entitlements and the
      Iacocca Agreement escrow will close in Fall 1998. Through December 31,
      1996, Cal Jockey has expended, in connection with the entitlement process,
      $2,242,000 for the services of Calthorpe Associates, engineers, lawyers,
      and other consultants. These amounts have been capitalized and added to
      the basis in land. Such amounts are classified as Land Held for Sale.

                                      F-23
<PAGE>   65

      There can be no assurances that Cal Jockey will be successful in obtaining
      the necessary Entitlements to avoid termination of the Franklin Agreement
      or the Iacocca Agreement or an adjustment to the purchase price under the
      Iacocca Agreement.

      In July 1996, Cal Jockey entered into an Agreement of Purchase and Sale
      with Public Storage, Inc, (the "Public Storage Agreement") to sell the
      Tennis Club Parcel for approximately $2,200,000. Public Storage, Inc.
      intends to convert the land into mini-storage units. The sale of the
      Tennis Club Parcel is subject to various contingencies including approval
      by the City of San Mateo of a rezoning of the property and, therefore, no
      assurance can be given that such sale will be consummated.

      In November 1996, Cal Jockey entered into a non-subordinated ground lease
      (the "Borders Lease") with Borders, Inc. ("Borders"), a bookstore chain.
      The Borders lease covers 2.3 acres of land formerly used by Bay Meadows as
      a parking lot and land adjacent to the parking lot. The San Mateo Planning
      Commission voted to approve the development of a Borders bookstore on the
      site on October 14, 1996. The initial term of the Borders Lease is for 20
      years with a fixed net annual rent of $279,000 for years 1 through 10,
      $362,000 for years 11 through 15, and $416,000 for years 16 through 20.
      The Borders Lease has eight five year renewal options with an annual
      Consumer Price Index adjustment beginning in the fifth option term. The
      land adjacent to the parking lot was purchased by Cal Jockey on January
      24, 1997 for $1,300,000.

12.   COMMITMENTS AND CONTINGENCIES

      Bay Meadows has contracted for computer and display equipment and services
      through August 1999. Fees are based on the daily average of on-track
      pari-mutuel wagers accepted during the racing meet. These fees charged to
      expense aggregated $766,000, $733,000, and $816,000 for the years ended
      December 31, 1996, 1995 and 1994, respectively.

      The City of San Mateo (the "City"), along with the State of California,
      has mandated that water runoff from Bay Meadows' barn area be disconnected
      from the municipal sewer collection system. Cal Jockey is cooperating with
      the City and State Regional Water Quality Control Board to resolve this
      situation, and has prepared preliminary reports describing the proposed
      compliance measures including construction of supplemental treatment
      facilities. If the Stable Area is sold as proposed under the Franklin
      Agreement, the water run-off problem is expected to be eliminated. If the
      Franklin Agreement were terminated and the new barn construction not
      consummated, Cal Jockey would be financially responsible for the costs
      associated with compliance measures, which are estimated to cost
      approximately $1,500,000. These estimated costs are expected to be
      capitalized in property, plant and equipment. Final determinations and
      approvals have not been received nor has a schedule for implementation
      been established. In addition, this plan might be affected by the proposed
      land sales described in Note 11.

      On August 30, 1996, in the interest of encouraging the continuous
      employment of key management personnel, Bay Meadows entered into 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




                                      F-24
<PAGE>   66
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 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.

Bay Meadows and Cal Jockey are, in the ordinary course of business, involved in
litigation and other legal matters. Such litigation includes lawsuits as
follows:

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, F. Jack Liebau and the numbers of the California Jockey Club
Shareholders Committee, a group of stockholders supporting a slate of nominees
to the Cal Jockey Board of Directors 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 proxy contest. The complaint sought to compel
defendants to make the required disclosures and to enjoin them from soliciting
or voting proxies. 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.

Bay Meadows Foundation v. Bay Meadows Operating Company and California Jockey
Club

On December 29, 1995, the Bay Meadows Foundation filed a complaint in San Mateo
Superior Court against the Cal Jockey and Bay Meadows. The complaint alleges
failure to properly calculate and pay charity proceeds as required by law and
includes causes of action for violation of statute, breach of fiduciary duty and
imposition of a constructive trust and accounting. Specifically, the complaint
alleges that Bay Meadows improperly deducted rent payments made to its
affiliate, Cal Jockey, from the charity net proceeds. The complaint also seeks
punitive damages and attorney's fees. On March 25, 1996, the Cal Jockey and Bay
Meadows filed their answer to the complaint. The answer denies the allegations
of the complaint and asserts affirmative defenses against the Bay Meadows
Foundation. Specifically, the Cal Jockey and Bay Meadows maintain that the
deduction of rent payments was lawful and consistent with both the
administrative determination made by the California Horse Racing Board ("CHRB")
in 1991 that such rent payments were deductible and the financial reporting
instructions subsequently promulgated by the CHRB. The parties are currently
engaged in civil discovery and the Cal Jockey and Bay Meadows plan to vigorously
defend themselves against the lawsuit.

                                      F-25
<PAGE>   67

      Each of Bay Meadows and Cal Jockey management believes that other pending
      legal actions against their respective Companies will not have a material
      impact on the separate and combined financial statements, taken as
      a whole.

13.   RELATED PARTY TRANSACTIONS

      In July 1992, Northern California Off-Track Wagering, Inc. ("N.C.O.T.W.
      Inc.") was formed to act as the guest associations' pari-mutuel manager
      for satellite wagering, and Bay Meadows became a 25% shareholder in
      N.C.O.T.W. Inc. Bay Meadows reimbursed N.C.O.T.W. Inc. $4,235,000,
      $3,742,000 and $3,671,000 in 1996, 1995 and 1994, respectively, for
      satellite wagering expenses N.C.O.T.W. Inc. incurred on behalf of Bay
      Meadows. These expenses are included in Bay Meadows' direct operating
      costs. Included in Bay Meadows' accounts receivable at December 31, 1996
      is a receivable from N.C.O.T.W. Inc. for $81,000. At December 31, 1995,
      included in Bay Meadows' accounts payable and accrued liabilities was a
      payable to N.C.O.T.W. Inc. of $742,000.

      From time to time, Cal Jockey lends funds on a short-term basis to Bay
      Meadows to allow Bay Meadows to meet operational needs in the off-season.
      There were no borrowings as of December 31, 1996. As of December 31, 1995,
      the balance due to Cal Jockey was $600,000 which was reflected in
      the inter-company payable/receivable account. For the years ended December
      31, 1996 and 1995, Bay Meadows paid Cal Jockey $8,000 and $45,000 in
      interest related to these borrowings.

      Because a director of Cal Jockey is also a director of Santa Anita Realty
      Enterprises, trading restrictions applicable to such director may be
      imputed to Cal Jockey. Consequently, there may be periods of time when Cal
      Jockey's investment in Santa Anita Realty Enterprises is illiquid.

      During 1996, Bay Meadows made purchases from Harris Ranch Beef Company in
      the amount of $72,000. John C. Harris is Owner and Chief Executive Officer
      of Harris Ranch Beef Company and is also a director of Bay Meadows
      Operating Company.

14.   FAIR VALUES OF FINANCIAL INSTRUMENTS

      The following methods were used by Cal Jockey and Bay Meadows in
      estimating the fair value of financial instruments:

     a.    Cash and cash equivalents, amounts held on deposit for Thoroughbred
           owners, accounts receivable and accounts payable and accrued
           liabilities and securities held to maturity: The carrying amount
           reported in the balance sheet approximates their fair values.

     b.    Securities available for sale: The fair values of securities
           available for sale are based on quoted market prices.

                                      F-26
<PAGE>   68

     c.    Securities held to maturity: The fair values for government issued
           securities are based on quoted market prices. The fair values for
           certificates of deposit are estimated using projected cash flows
           present valued at replacement rates currently offered for instruments
           with similar characteristics.

15.   QUARTERLY COMBINED RESULTS OF OPERATIONS (UNAUDITED)

      The unaudited quarterly combined results of operations for the years ended
      December 31, 1996 and 1995, are as follows (in thousands, except per share
      amounts and racing days).
<TABLE>
<CAPTION>
                                             QUARTERS ENDED 1996
                                 -----------------------------------------------
                                 MARCH 31,  JUNE 30,   SEPTEMBER 30,  DECEMBER 31,

<S>                             <C>         <C>         <C>             <C>
Number of live racing days          46           0         25             27

Revenues                        $ 26,814    $  2,765     $ 12,195      $ 12,158

Combined net income (loss)      $  3,808    $   (739)    $   (608)     $ (3,222)(1)
Combined net income (loss)
  per paired share                  $.66       ($.13)       ($.11)        ($.55)(1)
</TABLE>


      (1) Includes merger related costs of $3,995 and legal fees of $1,549.

<TABLE>
<CAPTION>
                                            QUARTERS ENDED 1995
                            ----------------------------------------------------
                             MARCH 31,  JUNE 30,  SEPTEMBER 30,  DECEMBER 31,
<S>                              <C>          <C>        <C>           <C>
Number of live racing days       20           10         27            51

Revenues                    $ 9,687      $ 7,367    $13,144       $20,511

Combined net income         $   647      $   260    $ 1,071       $ 2,222

Combined net income
  per paired share          $   .11      $   .05    $   .19       $   .39

</TABLE>

                                     ******

                                      F-27
<PAGE>   69

                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT                                   EXHIBIT                                       SEQUENTIALLY
NUMBER                                                                                 NUMBERED PAGE
<S>     <C>                                                                         <C>
 2.1      Ageement and Plan of Merger dated February 24, 1997, among Patriot
          American Hospitality, Inc., Patriot American Hospitality Partnership,
          L.P., California Jockey Club and Bay Meadows Operating Company
          (incorporated herein by reference to Exhibit 2.1 to the 8-K dated
          February 24, 1997 (filed March 3, 1997) (File No. 1-9319 and
          1-9320).

 3.1      Certificates of Incorporation of the Registrants
          (incorporated herein by reference to Exhibit 3.1 to the Annual Report
          on Form 10-K for the year ended December 31, 1987 (the "1987 10-K")
          (File No. 1-9319 and 1-9320)).

 3.2      Agreement of Merger, dated March 24, 1983, between California
          Jockey Club and Bay Meadows Realty Enterprises, Inc., Article
          II of which changed the name of Bay Meadows Realty Enterprises,
          Inc. to California Jockey Club (incorporated herein by
          reference to Exhibit 2 to the Registration Statement of the
          registrants on Form S-2 as filed with the Securities and
          Exchange Commission on November 14, 1986 (the "Initial
          Registration Statement") (File No. 1-9319 and 1-9320)).

 3.3      Bylaws of California Jockey Club, as amended (incorporated herein by
          reference to Exhibit 3.3 to the 1987 10-K and Exhibit 28.1 to the
          Quarterly Report on Form 10-Q of the registrants for the quarter ended
          September 30, 1989  (File No. 1-9319 and 1-9320)).

 3.4      Bylaws of Bay Meadows Operating Company (incorporated herein by
          reference to Exhibit 3.4 to the 1987 10-K and Exhibit 28.2 to the
          Quarterly Report on Form 10-Q of the registrants for the quarter ended
          September 30, 1989  (File No. 1-9319 and 1-9320)).

 3.5      Amendment to Bylaws of Bay Meadows Operating Company (incorporated
          herein by reference to Exhibit 3.5 of the 1995 10-K (File No. 1-9319
          and 1-9320)).

 3.6      Amendment to Bylaws of California Jockey Club (incorporated herein by
          reference to Exhibit 3.6 to the 1995 10-K (File No. 1-9319
          and 1-9320)).

 4.1      Pairing Agreement, dated February 15, 1983, between Bay Meadows
          Operating Company and California Jockey Club (formerly named Bay
          Meadows Realty Enterprises, Inc.) (incorporated herein by reference to
          Exhibit 4.3 to the Initial Registration Statement  (File No. 1-9319
          and 1-9320)).

 4.2      Amendment to Pairing Agreement, dated as of February 18, 1988,
          between Bay Meadows Operating Company and California Jockey
          Club (incorporated herein by reference to Exhibit 4.2 to the
          1987 10-K).

10.1      Lease Agreement, dated July 23, 1991, between Bay Meadows
          Operating Company and San Mateo County Fair Association
          (incorporated herein by reference to Exhibit 10.2 to the 1991 10-K
          (File No. 1-9319 and 1-9320)).
</TABLE>


<PAGE>   70
<TABLE>
<CAPTION>
EXHIBIT                                   EXHIBIT                                       SEQUENTIALLY
NUMBER                                                                                 NUMBERED PAGE
<S>     <C>                                                                         <C>
10.2      Standby Agreement, dated 1986, among Tanforan Racing
          Association, Bay Meadows Operating Company, Bay Meadows Racing
          Association and Pacific Racing Association (incorporated herein
          by reference to Exhibit 10.7 to Amendment No. 2 to the
          Registration Statement of the Companies on Form S-2, as filed
          with the SEC on December 18, 1986 (File No. 1-9319 and
          1-9320)).


10.3      Amended and Restated Joint Venture Agreement between Bay
          Meadows Racing Association and Pacific Racing Association with
          respect to Simulcast Enterprises (incorporated herein by reference to
          Exhibit 10.6 to the 1988 10-K  (File No. 1-9319 and 1-9320)).

10.4      Totalisator Services Agreement, dated July 30, 1988, among
          Autotote Limited, Bay Meadows Racing Association, and Bay
          Meadows Operating Company (incorporated herein by reference to
          Exhibit 10.7 to the 1988 10-K (File No. 1-9319 and 1-9320)).

10.5      Bay Meadows Operating Company 1988 Stock Option Plan
          (incorporated herein by reference to Exhibit 10.11 to the 1987 10-K
          (File No. 1-9319 and 1-9320)).

10.6      Lease and Agreement ReConduct of Quarter Horse Racing (1990 and
          1991 Racing Seasons), dated February 7, 1990, between Bay
          Meadows Operating Company and Peninsula Horse Racing
          Association (incorporated herein by reference to Exhibit 10.15
          to the 1989 10-K (File No. 1-9319 and 1-9320)).

10.7      Lease Agreement, dated May 31, 1992, between Bay Meadows
          Operating Company and San Mateo County Exposition and Fair
          Association (incorporated herein by reference to Exhibit 10.7 to the
          1992 10-K).

10.8      Letter Agreement, dated March 29, 1993, between California
          Jockey Club and Bay Meadows Operating Company for Credit
          Enhancement for Line of Credit. Rescission of Sale of 20,000
          Shares of Unpaired Cal Jockey Stock and Grant of Option to
          Purchase Unpaired Bay Meadows Stock (incorporated herein by
          reference to Exhibit 10.10 to the 1992 10-K (File No. 1-9319
          and 1-9320)).

10.9      Lease Agreement, dated March 29, 1993, and First Amendment to
          Lease dated September 30, 1993, between California Jockey Club
          and Bay Meadows Operating Company (incorporated herein by
          reference to Exhibit 10.10 to the 1993 10-K (File No. 1-9319
          and 1-9320)).
</TABLE>
<PAGE>   71
<TABLE>
<CAPTION>
EXHIBIT                                                                                 SEQUENTIALLY
NUMBER                                    EXHIBIT                                      NUMBERED PAGE
<S>     <C>                                                                         <C>
10.10     Stock Option Agreement, dated June 1, 1993, between Bay Meadows
          Operating Company and F. Jack Liebau (incorporated herein by
          reference to Exhibit 10.11 to the 1993 10-K (File No. 1-9319
          and 1-9320)).

10.11     Settlement Agreement, dated June 15, 1993, between California
          Jockey Club, Prometheus Development Co. Inc. and Bay Meadows
          Partners (incorporated herein by reference to Exhibit 10.12 to the
          1993 10-K  (File No. 1-9319 and 1-9320)).

10.12     Lease Agreement, dated July 16, 1993, between Bay Meadows
          Operating Company and San Mateo County Exposition and Fair
          Association (incorporated herein by reference to Exhibit 10.13
          to the 1993 10-K (File No. 1-9319 and 1-9320)).

10.13     Lease Agreement dated August 12, 1993, between Bay Meadows
          Operating Company and D.D.B. Inc. (d.b.a. Butler Catering)
          (incorporated herein by reference to Exhibit 10.14 to the 1993 10-K
          (File No. 1-9319 and 1-9320)).

10.14     Partners Program Agreement, dated August 16, 1993, between
          Daily Racing Form, Inc., and Bay Meadows Operating Company
          (incorporated herein by reference to Exhibit 10.15 to the 1993
          10-K (File No. 1-9319 and 1-9320)).

10.15     Totalisator Services Amendment to the Agreement, dated August
          18, 1993, between Autotote Limited, Bay Meadows Racing
          Association and Bay Meadows Operating Company (incorporated
          herein by reference to Exhibit 10.16 to the 1993 10-K (File No.
          1-9319 and 1-9320)).

10.16     Business Loan Agreement dated August 1, 1994, between Bank of
          America National Trust & Savings and Bay Meadows Operating
          Company (incorporated herein by reference to Exhibit 10.16 to
          the 1994 10-K (File No. 1-9319 and 1-9320)).

10.17     Stock Option Agreement, dated March 1, 1994, between Bay
          Meadows Operating Company and F. Jack Liebau (incorporated herein
          by reference to Exhibit 10.18 to the 1994 10-K (File No. 1-9319 and
          1-9320)).

10.18     Stock Option Agreement dated January 16, 1995 between Bay
          Meadows Operating Company and F. Jack Liebau (incorporated herein by
          reference to Exhibit 10.18 to the 1995 10-K (File No. 1-9319 and
          1-9320)).

10.19     Agreement of Purchase and Sale dated December 21, 1995 between
          California Jockey Club and Lee Iacocca & Associates, Inc.
          (incorporated herein by reference to Exhibit 10.19 to the 1995 10-K
          (File No. 1-9319 and 1-9320)).
</TABLE>
<PAGE>   72
<TABLE>
<CAPTION>
EXHIBIT                                                                                 SEQUENTIALLY
NUMBER                                    EXHIBIT                                      NUMBERED PAGE
<S>     <C>                                                                         <C>
10.20     Agreement of Purchase and Sale dated May 31, 1995, First
          Amendment dated June 12, 1995, Second Amendment dated December
          __, 1995, Third Amendment dated January 31, 1996,and Fourth Amendment
          dated March 18, 1996, between California Jockey Club and
          Property Resources, Inc. ( incorporated herein by reference to Exhibit
          10.20 to the 1995 10-K (File No. 1-9319 and 1-9320)).

10.21     Fifth Amendment to Agreement of Purchase and Sale dated April__, 1996
          between California Jockey Club and Property Resources, Inc.
          (incorporated herein by reference to Exhibit 20.2 to the Quarterly
          Report on Form 10-Q of the registrants for the quarter ended
          September 30, 1996 (File No. 1-9319 and 1-9320)).

10.22     Sixth Amendment to Agreement of Purchase and Sale dated August
          18,1996, between California Jockey Club and Property Resources, Inc.
          (incorporated herein by reference to Exhibit 20.1 to the Quarterly
          Report on Form 10-Q of the registrants for the quarter ended September
          30, 1996 (File No. 1-9319 and 1-9320)).

10.23     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.
          (incorporated herein by reference to Exhibit 20.3 to Quarterly Report
          on Form 10-Q of the reistrants for the quarter ended September 30,
          1996 (File No.1-9319 and 1-9320)).

10.24     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.
          (incorporated herein by reference to Exhibit 20.4 to the Quarterly
          Report on Form 10-Q of the registrants for the quarter ended
          September 30, 1996 (File No. 1-9319 and 1-9320)).

10.25     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.
          (incorporated herein by reference to Exhibit 20.5 to the Quarterly
          Report on Form 10-Q of the registrants for the quarter ended September
          30, 1996 ( File No. 1-9319 and 1-9320)).

10.26     Form of California Jockey Club Indemnification Agreement
          (incorporated herein by reference to Exhibit 10.14 to the Quarterly
          Report on Form 10-Q for the registrants for the quarter ended
          September 30, 1996 (File No. 1-9319 and 1-9320)).

10.27     Agreement for Purchase and Sale of Real Property and Joint Escrow
          Instructions dated July 18, 1996, between California Jockey Club and
          Public Storage, Inc.

10.28     Amendment to Agreement for Purchase and Sale of Real Property and
          Joint Escrow Instructions dated as of January 31, 1997, between
          California Jockey Club and Public Storage, Inc.

10.29     Ground Lease dated November 22, 1996, between California Jockey Club
          and Borders, Inc.

10.30     Severance Agreement between Bay Meadows Operating Company and Eugene
          F. Barstotti, Jr. dated August 30, 1996 (incorporated herein by
          reference to Exhibit 10.1 to the Report on Form 10-Q for the of the
          registrants for the quarter ended September 30, 1996 (File No.
          1-9319 and 1-9320)).

10.31     Severance Agreement between Bay Meadows Operating Company and Sharon
          Kelly dated Ausgust 30, 1996 (incorporated herein by reference to
          Exhibit 10.2 to the Report on Form 10-Q for the of the registrants
          for the quarter ended September 30, 1996 (File No. 1-9319 and
          1-9320)).

10.32     Severance Agreement between Bay Meadows Operating Company and F. Jack
          Liebau dated August 30, 1996 (incorporated by reference to Exhibit
          10.3 to the Report on Form 10-Q for the of the registrants for the
          quarter ended September 30, 1996 (File No. 1-9319 and 1-9320)).

10.33     Severance Agreement between Bay Meadows Operating Company and Michael
          Scalzo dated August 30, 1996 (incorporated herein by reference to
          Exhibit 10.4 to the Report on Form 10-Q for the of the registrants
          for the quarter ended September 30, 1996 (File No. 1-9319 and
          1-9320)).

10.34     Severance Agreement between Bay Meadows Operating Company and Frank
          Trigeiro dated August 30, 1996 (incorporated herein by reference to
          Exhibit 10.5 to the Report on Form 10-Q for the of the registrants
          for the quarter ended September 30, 1996 (File No. 1-9319 and
          1-9320)).

10.35     Severance Agreement between Bay Meadows Operating Company and
          Nathaniel Wess dated August 30, 1996 (incorporated herein by
          reference to Exhibit 10.6 to the Report on Form 10-Q for the of the
          registrants for the quarter ended September 30, 1996 (File No.
          1-9319 and 1-9320)).

10.36     Indemnification Agreement between Bay Meadows Operating Company and
          Eugene F. Barsotti, Jr. dated August 30, 1996 (incorporated herein by
          reference to Exhibit 10.7 to the Report on Form 10-Q for the of the
          registrants for the quarter ended September 30, 1996 (File No.
          1-9319 and 1-9320)).

10.37     Indemnification Agreement between Bay Meadows Operating Company and
          Greg S. Gunderson dated August 30, 1996 (incorporated herein by
          reference to Exhibit 10.8 to the Report on Form 10-Q for the of the
          registrants for the quarter ended September 30, 1996 (File No. 1-9319
          and 1-9320)).

10.38     Indemnification Agreement between Bay Meadow Operating Company and F.
          Jack Liebau dated August 30, 1996 (incorporated herein by refernece
          to Exhibit 10.9 to the Report on Form 10-Q for the of the registrants
          for the quarter ended September 30, 1996 (File No. 1-9319 and
          1-9320)).

10.39     Indemnification Agreement between Bay Meadows Operating Company and
          John C. Harris dated August 30, 1996 (incorporated herein by
          refernece to Exhibit 10.10 to the Report on Form 10-Q for the of the
          registrants for the quarter ended September 30, 1996 (File No.
          1-9319 and 1-9320)).

10.40     Indemnification Agreement between Bay Meadows Operating Company and
          Lee R. Tucker dated August 30, 1996 (incorporated herein by reference
          to Exhibit 10.11 to the Report on Form 10-Q for the of the
          registrants for the quarter ended September 30, 1996 (File No.
          1-9319 and 1-9320)).

10.41     Indemnification Agreement between Bay Meadows Operating Company and
          Anthony J. Zidich dated August 30, 1996 (incorporated herein by
          reference to Exhibit 10.12 to the Report on Form 10-Q for the of the
          registrants for the quarter ended September 30, 1996 (File No.
          1-9313 and 1-9320)).

10.42     Indemnification Agreement between Bay Meadows Operating Company and
          Frank Trigeiro dated August 30, 1996 (incorporated herein by
          reference to Exhibit 10.13 to the Report on Form 10-Q for the of the
          registrants for the quarter ended September 30, 1996 (File No. 1-9313
          and 1-9320)).

22.1      Subsidiary of the registrants.

23.1      Consent of Deloitte & Touche LLP.

27.1      Combined Financial Data Schedule.

27.2      Bay Meadows Operating Company Financial Data Schedule.

27.3      California Jockey Club Financial Data Schedule.
</TABLE>