<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10 - Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
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 0-9109 Commission file number 0-9110
SANTA ANITA REALTY ENTERPRISES, INC. SANTA ANITA OPERATING COMPANY
- - ---------------------------------------- ---------------------------------------
(Exact name of registrant as specified (Exact name of registrant as specified
in its charter) in its charter)
Delaware Delaware
- - ---------------------------------------- ---------------------------------------
(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization)
95-3520818 95-3419438
- - ---------------------------------------- ---------------------------------------
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
301 West Huntington Drive, 285 West Huntington Drive,
Suite 405 P.O. Box 60014
Arcadia, California 91007 Arcadia, California 91066-6014
- - ---------------------------------------- ---------------------------------------
(Address of principal executive (Address of principal executive
offices including zip code) offices including zip code)
(818) 574-5550 (818) 574-7223
- - ---------------------------------------- ---------------------------------------
(Registrant's telephone number, (Registrant's telephone number,
including area code) including area code)
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
----- -----
The number of shares outstanding of each of the issuers' classes of common
stock, as of the close of business on October 31, 1994 were:
Santa Anita Realty Enterprises, Inc. 11,256,353
Santa Anita Operating Company 11,143,853
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC. AND
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
Form 10-Q
Index
Page No.
PART I. FINANCIAL INFORMATION 3
Balance Sheets - September 30, 1994 and December 31, 1993 for
Santa Anita Realty Enterprises, Inc. 4
Santa Anita Operating Company and Subsidiaries 5
Santa Anita Realty Enterprises, Inc. and Santa
Anita Operating Company and Subsidiaries Combined 6
Statements of Operations - three months ended
September 30, 1994 and 1993 for
Santa Anita Realty Enterprises, Inc. 7
Santa Anita Operating Company and Subsidiaries 7
Santa Anita Realty Enterprises, Inc. and Santa
Anita Operating Company and Subsidiaries Combined 7
Statements of Operations - nine months ended
September 30, 1994 and 1993 for
Santa Anita Realty Enterprises, Inc. 8
Santa Anita Operating Company and Subsidiaries 8
Santa Anita Realty Enterprises, Inc. and Santa
Anita Operating Company and Subsidiaries Combined 8
Statements of Cash Flows - nine months ended
September 30, 1994 and 1993 for
Santa Anita Realty Enterprises, Inc. 9
Santa Anita Operating Company and Subsidiaries 10
Santa Anita Realty Enterprises, Inc. and Santa
Anita Operating Company and Subsidiaries Combined 11
Notes to Financial Statements 12
Managements' Discussion and Analysis of Financial
Condition and Results of Operations 17
PART II. OTHER INFORMATION 22
SIGNATURES 23
2
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC. AND
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
Form 10-Q
For the Nine Months Ended September 30, 1994
(Unaudited)
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The accompanying balance sheets as of September 30, 1994 and December 31, 1993
of Santa Anita Realty Enterprises, Inc. ("Realty"), Santa Anita Operating
Company and Subsidiaries ("Operating Company"), and Realty and Operating Company
combined, the statements of operations for the three and nine months ended
September 30, 1994 and 1993, and the related statements of cash flows for the
nine months ended September 30, 1994 and 1993, were prepared by Realty and
Operating Company and are unaudited. In the opinion of the management of each
company, the accompanying financial statements include all adjustments deemed
necessary for a fair presentation.
The following financial statements should be read in conjunction with the
accompanying notes.
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
September 30, December 31,
1994 1993
---------------- ----------------
ASSETS
<S> <C> <C>
Real estate assets
Santa Anita Racetrack, less accumulated depreciation of
$19,270,000 and $18,670,000, respectively $7,125,000 $6,997,000
Commercial properties, less accumulated depreciation of
$36,745,000 and $42,503,000, respectively 131,234,000 221,876,000
Investments in unconsolidated joint ventures 1,985,000 3,616,000
Real estate loans and advances receivable 23,015,000 22,084,000
---------------- ----------------
163,359,000 254,573,000
Cash 13,235,000 7,633,000
Accounts receivable 3,141,000 4,305,000
Prepaid expenses and other assets 11,259,000 4,705,000
Due from Operating Company 1,311,000 469,000
---------------- ----------------
$192,305,000 $271,685,000
================= ================
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Real estate loans payable $83,095,000 $106,731,000
Other loans payable 30,879,000 77,913,000
Accounts payable 1,802,000 3,678,000
Other liabilities 10,686,000 15,346,000
Dividends payable 2,251,000 3,788,000
---------------- ----------------
128,713,000 207,456,000
---------------- ----------------
Minority interest in consolidated joint ventures (4,455,000) (4,590,000)
Shareholders' equity
Preferred stock; $.10 par value; authorized 6,000,000
shares; none issued -- --
Common stock, $.10 par value; authorized 19,000,000
shares; issued and outstanding 11,256,353 shares 1,125,000 1,125,000
Additional paid-in capital 117,084,000 117,084,000
Retained earnings (deficit) (50,162,000) (49,390,000)
---------------- ----------------
68,047,000 68,819,000
---------------- ----------------
$192,305,000 $271,685,000
================ ================
</TABLE>
See accompanying notes. 4
<PAGE>
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
September 30, December 31,
1994 1993
--------------- ---------------
ASSETS
<S> <C> <C>
Current assets
Cash $81,000 $9,695,000
Short-term investments, at cost (approximates market) 5,470,000 4,693,000
Accounts receivable 1,084,000 2,789,000
Prepaid expenses and other assets 589,000 1,434,000
--------------- ---------------
Total current assets 7,224,000 18,611,000
--------------- ---------------
Investment in common stock of Realty 2,122,000 2,179,000
Property, plant and equipment, at cost
Machinery and other equipment 21,929,000 21,943,000
Leasehold improvements 22,551,000 20,976,000
--------------- ---------------
44,480,000 42,919,000
Less accumulated depreciation (23,307,000) (21,088,000)
--------------- ---------------
21,173,000 21,831,000
--------------- ---------------
$30,519,000 $42,621,000
=============== ===============
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities
Accounts payable $432,000 $10,070,000
Other liabilities 10,307,000 10,117,000
Other loans payable 776,000 726,000
--------------- ---------------
Total current liabilities 11,515,000 20,913,000
--------------- ---------------
Other loans payable 1,940,000 2,528,000
Deferred revenues 818,000 2,872,000
Due to Realty 1,311,000 469,000
Deferred income taxes 3,550,000 3,565,000
--------------- ---------------
19,134,000 30,347,000
--------------- ---------------
Shareholders' equity
Preferred stock; $.10 par value; authorized 6,000,000
shares; none issued - -
Common stock, $.10 par value; authorized 19,000,000
shares; issued and outstanding 11,143,853 and
11,140,853 shares, respectively 1,114,000 1,114,000
Additional paid-in capital 20,596,000 20,592,000
Retained earnings (deficit) (10,325,000) (9,432,000)
--------------- ---------------
11,385,000 12,274,000
--------------- ---------------
$30,519,000 $42,621,000
=============== ===============
</TABLE>
See accompanying notes. 5
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC. AND
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
September 30, December 31,
1994 1993
------------- ------------
ASSETS
<S> <C> <C>
Real estate assets
Santa Anita Racetrack, less accumulated depreciation of
$19,270,000 and $18,670,000, respectively $7,125,000 $6,997,000
Commercial properties, less accumulated depreciation of
$35,193,000 and $41,079,000, respectively (Note 6) 126,318,000 216,832,000
Investments in unconsolidated joint ventures 1,985,000 3,616,000
Real estate loans and advances receivable 23,015,000 22,084,000
----------- -----------
158,443,000 249,529,000
Cash 13,316,000 17,328,000
Short-term investments, at cost (approximates market) 5,470,000 4,693,000
Accounts receivable 4,225,000 7,094,000
Prepaid expenses and other assets 13,502,000 7,493,000
Property, plant and equipment, at cost, less accumulated
depreciation of $23,307,000 and $21,088,000, respectively 21,173,000 22,129,000
----------- -----------
$216,129,000 $308,266,000
=========== ===========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Real estate loans payable $83,095,000 $106,731,000
Other loans payable 33,595,000 81,167,000
Accounts payable 2,234,000 13,748,000
Other liabilities 20,993,000 25,463,000
Dividends payable 2,251,000 3,788,000
Deferred revenues 818,000 2,872,000
Deferred income taxes 3,550,000 3,565,000
----------- -----------
146,536,000 237,334,000
----------- -----------
Minority interest in consolidated joint ventures (4,455,000) (4,590,000)
Shareholders' equity
Preferred stock; $.10 par value; authorized 6,000,000
shares; none issued - -
Common stock, $.10 par value; authorized 19,000,000
shares; issued and outstanding 11,143,853 and
11,140,853 shares, respectively 2,227,000 2,227,000
Additional paid-in capital 134,615,000 134,554,000
Retained earnings (deficit) (62,794,000) (61,259,000)
----------- -----------
74,048,000 75,522,000
----------- -----------
$216,129,000 $308,266,000
=========== ===========
</TABLE>
See accompanying notes. 6
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC. AND
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
STATEMENTS OF OPERATIONS (Unaudited)
(000's Omitted Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended September 30, 1994 Three Months Ended September 30, 1993
---------------------------------------------- -----------------------------------------------
Operating Adjustments Operating Adjustments
Company & and Company & and
Realty Subsidiaries Eliminations Combined Realty Subsidiaries Eliminations Combined
---------------------------------------------- ------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues
Horse racing $4,392 $4,392 $4,013 $4,013
Food and beverage 1,081 1,081 1,207 1,207
Rental property $5,913 5,913 $9,941 $50 (a) 9,991
Interest and other 631 126 (22)(b) 735 511 114 (79)(b) 546
---------------------- -------- ---------------------- --------
6,544 5,599 12,121 10,452 5,334 15,757
---------------------- -------- ---------------------- --------
Costs and expenses
Direct horse racing operating costs 4,365 4,365 4,052 4,052
Food and beverage cost of sales 228 228 450 450
Rental property operating expenses 2,256 2,256 4,090 4,090
Depreciation and amortization 1,192 157 (42)(c) 1,307 1,906 136 (42)(c) 2,000
General and administrative 832 719 1,551 729 885 1,614
Interest 2,326 120 2,446 3,100 119 3,219
Losses from unconsolidated
joint ventures 445 445 443 443
Minority interest in earnings
of consolidated joint ventures 389 389 59 59
Rental expense to Realty (50) 50 (a)
---------------------- -------- ---------------------- --------
7,440 5,589 12,987 10,327 5,592 15,927
---------------------- -------- ---------------------- --------
Income (loss) before
income taxes (896) 10 (866) 125 (258) (170)
Benefit for income taxes
---------------------- -------- ---------------------- --------
Net income (loss) ($896) $10 ($866) $125 ($258) ($170)
====================== ======== ====================== ========
Weighted average number of
common shares outstanding 11,256 11,144 11,144 11,256 11,141 11,141
====================== ======== ====================== ========
Net income (loss) per
common share $(0.08) $0.00 $(0.08) $0.01 $(0.02) $(0.02)
====================== ======== ====================== ========
Dividends declared per
common share $0.20 $0.20 $.34 $.34
======== ======== ======== ========
</TABLE>
(a) to eliminate inter-entity rent
(b) to eliminate inter-entity dividends
(c) to eliminate depreciation resulting from inter-entity sales
See accompanying notes. 7
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC. AND
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
STATEMENTS OF OPERATIONS (Unaudited)
(000's Omitted Except Per Share Amounts)
<TABLE>
<CAPTION>
Nine Months Ended September 30, 1994 Nine Months Ended September 30, 1993
---------------------------------------------- -----------------------------------------------
Operating Adjustments Operating Adjustments
Company & and Company & and
Realty Subsidiaries Eliminations Combined Realty Subsidiaries Eliminations Combined
---------------------------------------------- ------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues
Horse racing $47,306 $47,306 $43,605 $43,605
Food and beverage 7,547 7,547 7,973 7,973
Rental property $29,932 ($10,563)(a) 19,369 $37,654 ($8,780)(a) 28,874
Interest and other 1,417 506 (101)(b) 1,822 4,496 462 (118)(b) 4,840
---------------------- -------- ---------------------- --------
31,349 55,359 76,044 42,150 52,040 85,292
---------------------- -------- ---------------------- --------
Costs and expenses
Direct horse racing operating costs 35,022 35,022 34,121 34,121
Food and beverage cost of sales 2,239 2,239 2,272 2,272
Rental property operating expenses 6,904 6,904 11,233 11,233
Depreciation and amortization 4,672 2,355 (128)(c) 6,899 6,542 2,309 (128)(c) 8,723
General and administrative 2,622 5,737 8,359 2,375 5,986 8,361
Interest 7,105 338 7,443 9,727 396 10,123
Losses from unconsolidated
joint ventures 1,340 1,340 1,328 1,328
Minority interest in earnings of
consolidated joint ventures 1,148 1,148 113 113
Rental expense to Realty 10,563 (10,563)(a) 8,780 (8,780)(a)
---------------------- -------- ---------------------- --------
23,791 56,254 69,354 31,318 53,864 76,274
---------------------- -------- ---------------------- --------
Income (loss) before
income taxes 7,558 (895) 6,690 10,832 (1,824) 9,018
Benefit for income taxes (2,523) (2,523)
---------------------- -------- ---------------------- --------
Net income (loss) $7,558 ($895) $6,690 $13,355 ($1,824) $11,541
====================== ======== ====================== ========
Weighted average number of
common shares outstanding 11,256 11,143 11,143 11,256 11,141 11,141
====================== ======== ====================== ========
Net income (loss) per
common share $.67 $(.08) $.60 $1.19 $(.16) $1.04
====================== ======== ====================== ========
Dividends declared per
common share $.74 $.74 $1.02 $1.02
======== ======== ======== ========
</TABLE>
(a) to eliminate inter-entity rent
(b) to eliminate inter-entity dividends
(c) to eliminate depreciation resulting from inter-entity sales
See accompanying notes. 8
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30,
<TABLE>
<CAPTION>
(Unaudited)
--------------------------
1994 1993
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 7,558,000 $13,355,000
Adjustments to reconcile net income to net cash provided
by operating activities
Depreciation and amortization 4,672,000 6,542,000
Minority interest in earnings of consolidated
joint ventures 1,148,000 113,000
Equity in losses of unconsolidated
joint ventures 1,421,000 1,328,000
Net decrease (increase) in certain other assets 1,995,000 (2,937,000)
Net (decrease) increase in certain other liabilities (1,586,000) 10,307,000
----------- -----------
Net cash provided by operating activities 15,208,000 28,708,000
----------- -----------
Cash flows from investing activities:
Proceeds from disposition of Multifamily and Industrial
Operations 44,425,000 -
Origination of loans and advances receivable (1,150,000) (514,000)
Payments received on loans receivable - 3,721,000
Additions and improvements to real estate assets (11,644,000) (27,282,000)
Investment in unconsolidated joint venture 305,000 -
----------- -----------
Net cash provided by (used in) investing activities 31,936,000 (24,075,000)
----------- -----------
Cash flows from financing activities:
Proceeds from real estate loans payable 21,077,000 -
Proceeds from other loans payable - 16,218,000
Repayment of real estate loans payable (423,000) (715,000)
Repayment of other loans payable (47,034,000) -
Net increase in due from Operating Company (842,000) (1,895,000)
Net decrease in certain other liabilities (3,441,000)
Dividends paid (9,866,000) (11,481,000)
Distributions to minority interest in
consolidated joint ventures, net (1,013,000) (871,000)
----------- -----------
Net cash (used in) provided by financing activities (41,542,000) 1,256,000
----------- -----------
Net increase in cash and cash equivalents 5,602,000 5,889,000
Cash and cash equivalents at beginning of year 7,633,000 1,671,000
----------- -----------
Cash and cash equivalents at September 30 $13,235,000 $7,560,000
=========== ===========
</TABLE>
See accompanying notes. 9
<PAGE>
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30,
<TABLE>
<CAPTION>
(Unaudited)
--------------------------
1994 1993
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($895,000) ($1,824,000)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization 2,355,000 2,309,000
Deferred income taxes (15,000) 29,000
Net decrease in certain other assets 2,550,000 470,000
Net decrease in certain other liabilities (11,500,000) (4,715,000)
----------- -----------
Net cash used in operating activities (7,505,000) (3,731,000)
----------- -----------
Cash flows from investing activities:
Additions to property, plant and equipment (1,697,000) (1,132,000)
Sale of Realty stock 57,000 -
----------- -----------
Net cash used in investing activities (1,640,000) (1,132,000)
----------- -----------
Cash flows from financing activities:
Repayment of other loans payable (538,000) (492,000)
Net increase in due to Realty 842,000 1,895,000
Proceeds from stock issued in connection with
exercise of stock options 4,000 -
----------- -----------
Net cash provided by financing activities 308,000 1,403,000
----------- -----------
Net increase in cash and cash equivalents (8,837,000) (3,460,000)
Cash and cash equivalents at beginning of year 14,388,000 9,976,000
----------- -----------
Cash and cash equivalents at September 30 $5,551,000 $6,516,000
=========== ===========
</TABLE>
See accompanying notes. 10
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC. AND
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
COMBINED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30,
<TABLE>
<CAPTION>
(Unaudited)
--------------------------
1994 1993
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $6,690,000 $11,541,000
Adjustments to reconcile net income to net cash provided
by operating activities
Depreciation and amortization 6,899,000 8,723,000
Minority interest in earnings of consolidated
joint ventures 1,148,000 113,000
Equity in losses of unconsolidated
joint ventures 1,421,000 1,328,000
Deferred income taxes (15,000) 29,000
Net decrease (increase) in certain other assets 4,545,000 (2,467,000)
Net (decrease) increase in certain other liabilities (13,086,000) 5,592,000
----------- -----------
Net cash provided by operating activities 7,602,000 24,859,000
----------- -----------
Cash flows from investing activities:
Proceeds from disposition of Multifamily and Industrial
Operations 44,425,000 -
Origination of loans and advances receivable (1,150,000) (514,000)
Payments received on loans receivable - 3,721,000
Additions to property, plant and equipment (1,697,000) (1,132,000)
Additions and improvements to real estate assets (11,644,000) (27,282,000)
Investment in unconsolidated joint venture 305,000 -
----------- -----------
Net cash provided by (used in) investing activities 30,239,000 (25,207,000)
----------- -----------
Cash flows from financing activities:
Proceeds from real estate loans payable 21,077,000 -
Proceeds from other loans payable - 16,218,000
Repayment of real estate loans payable (423,000) (715,000)
Repayment of other loans payable (47,572,000) (492,000)
Distributions to minority interest in
consolidated joint ventures, net (1,013,000) (871,000)
Dividends paid (9,765,000) (11,363,000)
Net (decrease) increase in certain other liabilities (3,441,000) -
Proceeds from stock issued in connection with
exercise of stock options 61,000 -
----------- -----------
Net cash (used in) provided by financing activities (41,076,000) 2,777,000
----------- -----------
Net increase in cash and cash equivalents (3,235,000) 2,429,000
Cash and cash equivalents at beginning of year 22,021,000 11,647,000
----------- -----------
Cash and cash equivalents at September 30 $18,786,000 $14,076,000
=========== ===========
</TABLE>
See accompanying notes. 11
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC. AND
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - September 30, 1994
Note (1) Operating Company has adopted an accounting practice whereby the
revenues associated with thoroughbred horse racing at Santa Anita
Racetrack are reported as they are earned. Costs and expenses
associated with thoroughbred horse racing revenues are charged against
income in those interim periods in which the thoroughbred horse racing
revenues are recognized. Other costs and expenses are recognized as
they actually occur throughout the year.
Note (2) Realty's investment in unconsolidated joint ventures include
investments in the following commercial real estate ventures:
Name Ownership Project
------------------ -------------- -----------------
Joppa Associates 33-1/3% Retail
H-T Associates 50% Regional Mall
Unaudited combined condensed financial statement information for
unconsolidated joint ventures as of September 30, 1994 and December
31, 1993, and for the nine months ended September 30, is as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
---------------- ----------------
<S> <C> <C>
Assets $213,042,000 $212,979,000
================ ================
Liabilities
Advances from Realty $9,312,000 $8,375,000
Other 202,650,000 200,735,000
---------------- ----------------
$211,962,000 $209,110,000
================ ================
Partners' equity
Realty $1,985,000 $3,616,000
Others (905,000) 253,000
---------------- ----------------
$1,080,000 $3,869,000
================ ================
<CAPTION>
Nine Months Ended September 30,
1994 1993
---------------- ----------------
<S> <C> <C>
Revenues $15,890,000 $14,498,000
================ ================
Net loss
Realty ($1,340,000) ($1,328,000)
Others (961,000) (806,000)
---------------- ----------------
($2,301,000) ($2,134,000)
================ ================
</TABLE>
Note (3) The disposition of Realty's Multifamily and Industrial Operations as
described in note 4 involve the transfer of the following noncash
items:
Real estate assets $98,305,000
Other assets $475,000
Real estate loans payable $44,290,000
Other liabilities $302,000
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Note (4) Disposition of Multifamily and Industrial Operations
In November 1993, Realty entered into a Purchase and Sale Agreement to
sell its multifamily and industrial operations to Pacific Gulf
Properties Inc. ("Pacific"), in conjunction with Pacific's proposed
public offering of common stock and debentures.
On February 18, 1994, Realty completed the first part of this
transaction by selling to Pacific ten multifamily properties,
containing 2,654 apartment units, located in Southern California, the
Pacific Northwest, and Texas and three industrial properties,
containing an aggregate of 185,000 leasable square feet of industrial
space, located in the State of Washington (the "Transferred
Properties"). Realty's corporate headquarters building and related
assets were also acquired by Pacific.
In consideration of the sale of the Transferred Properties, Realty
received approximately $44.4 million in cash and 150,000 shares of the
common stock of Pacific. In addition, Realty was relieved of about
$44.3 million of mortgage debt on the Transferred Properties.
Effective October 1, 1994, Realty completed the second part of the
transaction, the sale of its interest in Baldwin Industrial Park to
Pacific. As a result, effective October 31, 1994, Pacific delivered to
Realty an additional 634,419 shares of Pacific common stock as
consideration for the transaction and corporate headquarters and other
net assets.
The following unaudited pro forma condensed balance sheet of Realty is
presented as if the Baldwin Industrial Park transaction had occurred
on September 30, 1994. The unaudited pro forma condensed balance sheet
is not necessarily indicative of what the actual financial position of
Realty would have been at September 30, 1994 nor does it purport to
represent the future financial position of Realty.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Note (4) Disposition of Multifamily and Industrial Operations (continued)
<TABLE>
<CAPTION>
September 30, 1994
------------------------------------------------------
Realty Realty
Historical Pro Forma
Cost Basis Adjustments (a) (Unaudited)
----------------- ---------------- ----------------
<S> <C> <C> <C>
Real estate assets
Santa Anita Racetrack, net $7,125,000 - $7,125,000
Commercial properties, net 131,234,000 (8,726,000) 122,508,000
Investments in unconsolidated
joint ventures 1,985,000 - 1,985,000
Real estate loans and
advances receivable 23,015,000 - 23,015,000
----------------- ---------------- ----------------
163,359,000 (8,726,000) 154,633,000
----------------- ---------------- ----------------
Cash 13,235,000 (1,565,000) 11,670,000
Other assets (b)(c) 15,711,000 3,140,000 18,851,000
----------------- ---------------- ----------------
$192,305,000 ($7,151,000) $185,154,000
================= ================ ================
Real estate loans payable $83,095,000 ($9,415,000) $73,680,000
Other loans payable 30,879,000 - 30,879,000
Other liabilities 14,739,000 (245,000) 14,494,000
----------------- ---------------- ----------------
128,713,000 (9,660,000) 119,053,000
----------------- ---------------- ----------------
Minority interest in consolidated
joint ventures (4,455,000) 2,509,000 (1,946,000)
Shareholders' equity 68,047,000 - 68,047,000
----------------- ---------------- ----------------
$192,305,000 ($7,151,000) $185,154,000
================= ================ ================
</TABLE>
The accompanying notes are an integral part of this pro forma
balance sheet.
Notes:
-----
(a) Reflects the disposition of the assets and liabilities of
the Baldwin Industrial Park as if the transaction had
occurred on September 30, 1994.
(b) The historical balance at September 30, 1994 includes
Realty's investment in Pacific stock of $2,738,000 and a
receivable from Pacific of $1,187,000 relating to the
consideration for Realty's corporate headquarters and net
other assets related to the Transferred Properties. The
pro forma balance at September 30, 1994 includes Realty's
investment in Pacific stock of $12,825,000.
(c) As a result of the February 18, 1994 sale to Pacific,
Realty has an investment in the common shares of Pacific
totaling $2,738,000. As a result of the completion of
Realty's disposition of Baldwin Industrial Park to Pacific
as of October 1, 1994 and as consideration for the
corporate headquarters building and certain other assets
related to the Transferred Properties, Realty will receive
additional Pacific stock totaling $10,087,000.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Note (4) Disposition of Multifamily and Industrial Operations (continued)
The following unaudited pro forma statements of operations of Realty
are presented as if both parts of the transaction had occurred as of
the beginning of the period presented. The unaudited pro forma
statements of operations are not necessarily indicative of what the
actual results of operations would have been if the entire transaction
had been consummated as of the beginning of the period presented nor
do they purport to represent the results of operations of Realty for
any future period.
<TABLE>
<CAPTION>
For the Nine Months Ended September 30, 1994
----------------------------------------------------
Realty Realty
Historical Pro Forma
Cost Basis Adjustments (1) (Unaudited)
--------------- --------------- ---------------
<S> <C> <C> <C>
Revenues
Rental property $29,932,000 ($4,952,000) $24,980,000
Interest and other (2) 1,417,000 475,000 1,892,000
--------------- --------------- ---------------
31,349,000 (4,477,000) 26,872,000
--------------- --------------- ---------------
Costs and expenses
Rental property operating
expenses 6,904,000 (1,738,000) 5,166,000
Depreciation and amortization 4,672,000 (808,000) 3,864,000
General and administrative 2,622,000 (255,000) 2,367,000
Interest and other (3) 7,105,000 (1,607,000) 5,498,000
Losses from unconsolidated
joint ventures 1,340,000 - 1,340,000
Minority interest in earnings of
consolidated joint ventures (4) 1,148,000 (521,000) 627,000
--------------- --------------- ---------------
23,791,000 (4,929,000) 18,862,000
--------------- --------------- ---------------
Net income $7,558,000 $452,000 $8,010,000
=============== =============== ===============
<CAPTION>
For the Nine Months Ended September 30, 1993
----------------------------------------------------
Realty Realty
Historical Pro Forma
Cost Basis Adjustments (1) (Unaudited)
--------------- --------------- ---------------
<S> <C> <C> <C>
Revenues
Rental property $37,654,000 ($14,844,000) $22,810,000
Interest and other (2) 4,496,000 573,000 5,069,000
--------------- --------------- ---------------
42,150,000 (14,271,000) 27,879,000
--------------- --------------- ---------------
Costs and expenses
Rental property operating
expenses 11,233,000 (6,041,000) 5,192,000
Depreciation and amortization 6,542,000 (2,512,000) 4,030,000
General and administrative 2,375,000 (995,000) 1,380,000
Interest and other (3) 9,727,000 (5,433,000) 4,294,000
Losses from unconsolidated
joint ventures 1,328,000 - 1,328,000
Minority interest in earnings of
consolidated joint
ventures (4) 113,000 449,000 562,000
--------------- --------------- ---------------
31,318,000 (14,532,000) 16,786,000
Income before income taxes 10,832,000 261,000 11,093,000
Benefit for income taxes (2,523,000) - (2,523,000)
--------------- --------------- ---------------
Net income $13,355,000 $261,000 $13,616,000
================ =============== ===============
</TABLE>
The accompanying notes are an integral part of this pro forma
statement of operations.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Note (4) Disposition of Multifamily and Industrial Operations (continued)
Notes:
------
(1) Reflects the operations of the Multifamily and Industrial
Operations directly identifiable with, and allocations of
other costs and expenses related to, the Multifamily and
Industrial Operations transferred by Realty to Pacific, and
the operations of Baldwin Industrial Park, for the respective
nine months ended September 30.
(2) Estimated quarterly distributions to be received on Realty's
investment in Pacific ($.39 per common share) less the amount
of such distributions estimated to represent the return of
capital ($.14 per common share).
(3) Elimination of interest expense on real estate and other
loans payable repaid or assumed by Pacific.
(4) Elimination of minority interest in earnings of joint
ventures resulting from Realty's acquisition of the
Partnership interests and subsequent transfer to Pacific.
16
<PAGE>
Item 2. Managements' Discussion and Analysis of Financial Condition and Results
of Operations
SANTA ANITA REALTY ENTERPRISES, INC.
The following narrative discusses Realty's results of operations for the three
months and nine months ended September 30, 1994 and 1993, together with
liquidity and capital resources as of September 30, 1994.
Results of Operations
Realty's revenues are derived principally from the rental of real property and
interest on investments. Total revenues for the three months ended September
30, 1994 were $6,544,000, compared with $10,452,000 for the similar period in
1993, a decrease of 37.4%. Total revenues for the nine months ended September
30, 1994 were $31,349,000, compared with $42,150,000 for the nine months ended
September 30, 1993, a decrease of 25.6%. The lower 1994 revenues primarily were
due to Realty selling its multifamily and industrial operations to Pacific Gulf
Properties Inc. ("Pacific"), formerly a wholly-owned subsidiary, in February
1994, and to nonrecurring interest earned on a California Franchise Tax Board
refund received in 1993. The sale to Pacific is discussed in Note 4 and the
nonrecurring interest is discussed below.
The single most significant source of rental revenue is the lease of Santa Anita
Racetrack. Since there was no live racing at the Racetrack during the three
months ended September 30, 1994 and 1993, there were no rental revenues from the
Racetrack for these periods. Racetrack rental revenues for the nine months
ended September 30, 1994 were $10,852,000, an increase of 15.9% from revenues of
$9,363,000 in the same period in 1993. The increase in rental revenue resulted
from more race days in 1994. The lease with LATC for Santa Anita Racetrack,
which was scheduled to expire December 31, 1994, has been amended and extended
for an additional five years. The adjusted rental rates will result in reduced
revenues to Realty. The new lease provides that Realty will continue to receive
1.5% of the on-track handle on live races at Santa Anita; however, the rental
rate on simulcasting commissions was reduced from 40% to 26.5%.
Rental revenues from other real estate investments for the three months ended
September 30, 1994, were $5,913,000, a decrease of 40.5% from revenues of
$9,941,000 in the same period in 1993. Rental revenues from other real estate
investments for the nine months ended September 30, 1994 were $19,080,000, a
decrease of 32.6% from revenues of $28,291,000 in the same 1993 period. The
1994 decrease is due primarily to the February 1994 sale by Realty of its
multifamily and industrial operations.
Interest and other income was $631,000 for the three months ended September 30,
1994, compared with $511,000 in the same period in 1993. Interest and other
income was $1,417,000 for the nine months ended September 30, 1994, compared
with $4,496,000 in the same 1993 period. The decrease is primarily attributable
to interest income of $3,211,000 in the nine months ended September 30, 1993,
related to a tax settlement with the California Franchise Tax Board. The
settlement was for tax years prior to 1980 relating to Realty's predecessor. In
addition to interest earned on the settlement, income tax benefits were
$2,523,000 in the 1993 nine month period.
Costs and expenses were $7,440,000 for the three months ended September 30,
1994, a decrease of 28.0%, from $10,327,000 in the year ago quarter. Costs and
expenses of $23,791,000 for the nine months ended September 30, 1994, decreased
24.0% from $31,318,000 in the 1993 nine month period. The decreases were
primarily due to the disposition of the multifamily and industrial operations
and were partially offset by increases in interest expense attributable to
continuing operations. The increases in interest expense were due to a steady
increase in interest rates throughout 1994 and an increase in borrowing levels
in the 1993 fourth quarter.
Realty incurred a net loss of $896,000 for the three months ended September 30,
1994 compared with net income of $125,000 in the year ago quarter This decrease
primarily was due to an increase in interest expense and a decrease in earnings
of consolidated joint ventures, both attributable to continuing
17
<PAGE>
Item 2. Managements' Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
operations, and to the disposition of the multifamily and industrial operations.
Net income for the 1994 nine months was $7,558,000, compared with $7,621,000 a
year ago, excluding nonrecurring items. Including the nonrecurring tax
settlement and related interest income of $5,734,000 with the California
Franchise Tax Board, earnings were $13,355,000 in the nine months. Other factors
contributing to the decrease in 1994 were an increase in interest expense and a
decrease in consolidated joint venture earnings, both attributable to continuing
operations, and the disposition of the multifamily and industrial operations.
Liquidity and Capital Resources
Realty has funds available from a combination of short-and long-term sources.
Short-term sources include cash and short-term investments of $13,235,000 at
September 30, 1994. In connection with the sale of properties to Pacific,
Realty paid down its lines of credit by $44,425,000 and transferred to Pacific
$44,290,000 of indebtedness associated with the apartment and industrial
properties sold.
On November 9, 1994, Realty entered into a new $30,000,000 one-year credit
facility with a commercial bank which, along with other available cash reserves,
was used to repay $30,879,000 of outstanding obligations to other lenders.
Borrowings under the one-year credit facility will be due one year from the date
of funding but no later than November 30, 1995 and will bear interest, at
Realty's option, at the prime rate, at LIBOR plus 1%, or at the certificate of
deposit rate plus 1%.
Realty is near completion of the refinancing of the $10,000,000 mortgage loan on
its Medical Office Building with the existing lender. The new $8,900,000
mortgage loan, due 2001, will bear interest at 9.25%, provide for a twenty-five
year amortization period and require Realty to pay down the existing loan by
$1.1 million. Realty anticipates that this refinancing will be completed in
November 1994.
Realty is also currently finalizing mortgage loans on each of its six
neighborhood shopping center properties. Realty anticipates that the mortgage
loans will total approximately $15,800,000, have an initial variable interest
rate of 8.25%, have a 20 year amortization period, and be due in 10 years.
Realty anticipates that these mortgage loans will close in November 1994.
Realty is currently negotiating a new long-term credit facility which would
provide an amount sufficient to refinance Realty's new one-year credit facility
and an additional line of credit to be used for general corporate purposes. In
management's opinion, Realty will generate sufficient liquidity from other
sources during the negotiation of the new long-term credit facility to provide
for its operating needs.
During the 1994 second quarter, the Board of Directors established a revised
annual dividend rate of $.80 per share, effective with the quarterly dividend of
$.20 per share paid on July 22, 1994. Previously the annual dividend rate was
$1.36 per share. The revised annual rate is expected to reduce annual dividends
by $6,300,000.
Realty had $23,015,000 of long-term receivables at September 30, 1994 with
maturities ranging from 1994 to 2002. For the nine months ended September 30,
1994, long-term receivables earned interest income of $1,329,000.
In the opinion of management, as of September 30, 1994, Realty's real estate
investments had market value substantially in excess of the historical costs and
indebtedness related to such real estate investments. Management believes that
this provides significant additional borrowing capacity.
18
<PAGE>
Item 2. Managements' Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
Operating Company is engaged in thoroughbred horse racing through its wholly-
owned subsidiary, Los Angeles Turf Club, Incorporated ("LATC"), which leases the
Santa Anita Racetrack ("Santa Anita") from Realty.
The following narrative discusses Operating Company's results of operations for
the three and nine months ended September 30, 1994 and 1993, together with
liquidity and capital resources as of September 30, 1994.
Results of Operations -- Third Quarter 1994 Compared with Third Quarter 1993
Operating Company derives its revenues primarily from thoroughbred horse racing
activities. For the three months ended September 30, Santa Anita Racetrack
operated 20 days in 1994 and 21 days in 1993 as a satellite wagering facility
for Hollywood Park. Total attendance and wagering as a satellite wagering
facility were down 12.5% and 8.7%, respectively, in the third quarter of 1994
compared with the year ago quarter. Average daily attendance and average
wagering were down 8.1% and 4.2%, respectively, for the third quarter of 1994
compared with the year ago quarter.
Also, in the third quarter ended September 30, Santa Anita Racetrack operated 43
days in 1994 and 42 days in 1993 as a satellite wagering facility for Del Mar.
Total attendance and wagering as a satellite wagering facility were down 4.8%
and 5.1%, respectively, in the third quarter of 1994 compared with the year ago
quarter. Average daily attendance and average wagering, however, were down 7.0%
and 7.3%, respectively, for the third quarter of 1994 compared with the year ago
quarter.
Total revenues in the third quarter of 1994 were $5,599,000, up 5.0% from
revenues of $5,334,000 for the comparable year ago period. Total revenues
increased in the third quarter of 1994 compared with the year ago quarter due to
an increase of $400,000 over the comparable period last year in the supplemental
rent from Oak Tree Racing Association for its year ended May 31, 1994. Oak Tree
subleases Santa Anita Racetrack from LATC for a base rent tied to wagering
activity plus supplemental rent representing Oak Tree's adjusted profits above
an agreed upon level. Direct horse racing operating costs in the third quarter
of 1994 were $4,365,000, up 7.7% from $4,052,000 for the comparable year ago
period due to the accounting practice of allocating costs and expenses
associated with revenues in interim periods. See Note 1 of Notes to Financial
Statements.
Food and beverage revenues and cost of sales were lower in the third quarter of
1994 compared with the year ago period due to the lower level of attendance. As
a percentage of sales, cost of sales decreased to 21.1% in the third quarter of
1994 compared with 37.3% in the comparable quarter of 1993 due to price
increases in the third quarter of 1994.
General and administrative expenses were $719,000 in the third quarter of 1994,
down 18.8% from the $885,000 from the comparable year ago period, primarily due
to lower professional fees. Interest expense remained virtually unchanged at
$120,000 in the third quarter of 1994 and $119,000 in the comparable quarter of
1993.
Operating Company reported a net profit of $10,000 or $.00 per share in the
third quarter of 1994 compared with a net loss of $258,000 or $.02 per share in
the third quarter of 1993 primarily due to the revenue and expense items
previously discussed.
19
<PAGE>
Item 2. Managements' Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Results of Operations -- Year to Date 1994 Compared with Year to Date 1993
For the nine months ended September 30, live thoroughbred horse racing at Santa
Anita Racetrack totaled 85 days in 1994 compared with 78 days in 1993. Total on-
track attendance at the live racing events in the first nine months of 1994 was
up 3.2% from the comparable year ago period while average daily attendance
declined 5.3%. Total wagering at the live racing events increased 30.9% and
average daily wagering increased 20.1% in the first nine months of 1994 compared
with the same period last year. On-track wagering increased 6.3%, inter-track
wagering increased 17.3% and interstate wagering increased 94.1% in the first
nine months of 1994 compared with the same period last year.
Also, for the nine months ended September 30, Santa Anita Racetrack operated 111
days in 1994 and 115 days in 1993 as a satellite wagering facility for Hollywood
Park and Del Mar. Total attendance and wagering as a satellite wagering
facility were down 9.1% and 7.9%, respectively, in the first nine months of 1994
compared with the same period last year. Average daily attendance and average
wagering were down 5.8% and 4.5%, respectively, for the first nine months of
1994 compared with the same period last year.
Total revenues and direct horse racing operating costs were higher in the first
nine months of 1994 compared with the same period last year due to more race
days and higher attendance and wagering at live racing events. Total revenues
in the first nine months of 1994 were $55,359,000, up 6.4% from $52,040,000 for
the comparable year ago period. Direct horse racing operating costs in the
first nine months of 1994 were $35,022,000, up 2.6% from $34,121,000 for the
comparable year ago period.
Food and beverage revenues were lower in the first nine months of 1994 compared
with the year ago period due to lower per capita spending while cost of sales
was higher for the same comparable periods. As a percentage of sales, cost of
sales increased to 29.7% in the first nine months of 1994 compared with 28.5% in
the first nine months of 1993.
General and administrative expenses were $5,737,000 in the first nine months of
1994, down 4.2% from the $5,986,000 from the comparable year ago period due to
the one time charge of $974,000 in the prior year for the post retirement
benefits payable as a result of the death of the former Chairman of the Board of
Operating Company. Interest expense decreased to $338,000 in the first nine
months of 1994 from $396,000 in the first nine months of 1993. Rental expense
to Realty was $10,563,000 for the first nine months of 1994 compared with
$8,780,000 reported in the first nine months of 1993. The increase in rental
expense of 20.3% reflects the overall increase in racing days and wagering.
Due to the revenue and expense items previously discussed, Operating Company
reported a net loss of $895,000 or $.08 per share for the nine months ended
September 30, 1994, compared with a net loss of $1,824,000 or $.16 per share for
the comparable period in 1993.
Seasonality
Operating Company's operations are subject to seasonal fluctuations. Operating
Company recognizes the majority of its revenues in the first quarter due to live
racing activity at Santa Anita. Therefore, the results of operations for
interim periods are not necessarily indicative of the results that may be
expected for the full year.
Liquidity and Capital Resources
At September 30, 1994, Operating Company's sources of liquidity included cash
and short-term investments of $5,551,000 and an unsecured line of credit with
Realty of $10,000,000, of which approximately $3,000,000 was utilized in
connection with a guarantee of a capital lease. Operating
20
<PAGE>
Item 2. Managements' Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Company's ability to utilize Realty's line of credit is dependent upon Realty's
liquidity and capital resources. (See Item 2. "Managements' Discussion and
Analysis of Financial Condition and Results of Operations - Santa Anita Realty
Enterprises, Inc. - Liquidity and Capital Resources"). For the three and nine
months ended September 30, 1994, short-term investments earned interest income
of $126,000 and $506,000, respectively.
The cash balances and related interest income from short-term investments
reflect seasonal variations associated with the Santa Anita meet. During the
meet, large cash balances and short-term investments are maintained by LATC,
including amounts to be disbursed for payment of license fees payable to the
state, purses payable to horse owners and un-cashed winning pari-mutuel tickets
payable to the public.
21
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC. and
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
FORM 10-Q
For the Quarter Ended September 30, 1994
PART II OTHER INFORMATION
Item 3. Defaults upon Senior Securities
At September 30, 1994, Realty was not in compliance with certain
financial covenants contained in its credit agreements, although
Realty's lenders waived such noncompliance through November 14, 1994.
The debt to these lenders was repaid on November 10, 1994. Realty is in
compliance with its new credit facility. See Managements' Discussion
and Analysis of Financial Condition and Results of Operations - Santa
Anita Realty Enterprises, Inc. - Liquidity and Capital Resources.
Item 6. Exhibits and Reports on Form 8-K
(a) The following documents are filed as part of this report:
<TABLE>
<CAPTION>
Sequential
Exhibit Numbering
Number Page No.
------- ----------
<S> <C>
10.1 Schedule of omitted documents and differences in material
details regarding Severence Agreements of Certain
Officers of Santa Anita Realty Enterprises, Inc. and Santa
Anita Operating Company
10.2 Closing Agreement, dated as of October 1, 1994, by and
between Santa Anita Realty Enterprises, Inc. and Pacific
Gulf Properties, Inc.
10.3 Amended and Restated Lease, dated as of November 9,
1994, by and between Santa Anita Realty Enterprises, Inc.
and Los Angeles Turf Club, Incorporated
10.4 Credit Agreement between Santa Anita Realty Enterprises,
Inc. and First Interstate Bank of California, dated as of
November 9, 1994
27(a) Financial Data Schedule of Santa Anita Realty Enterprises, Inc.
27(b) Financial Data Schedule of Santa Anita Operating Company
</TABLE>
(b) Reports on Form 8-K. There were no reports on Form 8-K filed during the
quarter ended September 30, 1994.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Operating
Company and Realty have duly caused this report to be signed on their behalf by
the undersigned thereunto duly authorized.
SANTA ANITA REALTY ENTERPRISES, INC. SANTA ANITA OPERATING COMPANY
By \Sherwood C. Chillingworth By \Stephen F. Keller
----------------------------------- ------------------------------------
Sherwood C. Chillingworth Stephen F. Keller
Vice Chairman of the Board and Chairman of the Board, President
Chief Executive Officer and Chief Executive Officer
(Principal Executive Officer) (Principal Executive Officer)
Dated: November 14, 1994 Dated: November 14, 1994
-------------------- --------------------
By \Brian L. Fleming By \Richard D. Brumbaugh
----------------------------------- ------------------------------------
Brian L. Fleming Richard D. Brumbaugh
Executive Vice President and Vice President-Finance and
Chief Financial Officer Chief Financial Officer
(Principal Financial and Accounting (Principal Financial and Accounting
Officer) Officer)
Dated: November 14, 1994 Dated: November 14, 1994
-------------------- --------------------
September 30, 1994
Form 10-Q
23
<PAGE>
EXHIBIT 10.1
Schedule of Omitted Documents
and Material Details Regarding
Severance Agreements of Certain Officers
of Santa Anita Realty Enterprises, Inc.
and Santa Anita Operating Company
The persons listed below have entered into substantially identical forms of
Severance Agreements, effective as of the dates listed opposite their names.
The form of Severance Agreement is incorporated by reference to Exhibit 10.22 to
the Joint Annual Report on Form 10-K of Santa Anita Realty Enterprises, Inc. and
Santa Anita Operating Company for the year ended December 31, 1992.
Stephen F. Keller October 1, 1992
Clifford C. Goodrich October 1, 1992
Thomas S. Robbins October 1, 1992
Richard D. Brumbaugh October 1, 1992
Sherwood C. Chillingworth May 11, 1994
Christopher T. Stirling May 11, 1994
Brian L. Fleming May 11, 1994
<PAGE>
EXHIBIT 10.2
CLOSING AGREEMENT
-----------------
This CLOSING AGREEMENT (the "Agreement") is made and entered into as
---------
of October 1, 1994 by and between PACIFIC GULF PROPERTIES INC., a Maryland
corporation ("Pacific Gulf"), and SANTA ANITA REALTY ENTERPRISES, INC., a
------------
Delaware corporation ("SARE"), with reference to the following:
----
A. Pacific Gulf and SARE are the parties to that certain Purchase and
Sale Agreement, dated as of November 15, 1993 (the "Purchase Agreement"),
------------------
pursuant to which SARE agreed to sell and Pacific Gulf agreed to purchase, among
other things, SARE's interest in Baldwin Industrial Properties, Ltd., a
California limited partnership (the "Partnership").
-----------
B. On September 30, 1994, Pacific Gulf acquired all of the general
and limited partner interests in the Partnership not owned by SARE pursuant to
that certain Master Agreement among the parties hereto and certain other parties
(the "Master Agreement").
----------------
C. Pacific Gulf and SARE now desire to close the purchase by Pacific
Gulf of SARE's interest in the Partnership, and to agree upon certain other
matters in connection therewith, all as more fully set forth herein.
NOW, THEREFORE, in consideration of the foregoing recitals, which are
true and correct, and the promises, covenants, and agreements herein set forth,
the parties hereto hereby agree as follows:
1. Purchase and Sale of the Baldwin Interest.
-----------------------------------------
(a) Assignment. At the "Closing" (as hereinafter defined), SARE will
---------- -------
sell, assign, transfer, convey, and deliver, and Pacific Gulf will thus
purchase, acquire, and own, good and marketable title to all of the rights,
titles, claims, interests, and causes of action of SARE in or relating to the
Partnership, as set forth in the Partnership Agreement or otherwise existing at
law or in equity, including all rights, titles, claims, interests, and the like
as a partner, claimant, creditor, or otherwise of the Partnership (collectively,
the "SARE Interest"), free and clear of any liens, claims, encumbrances, or
-------------
restrictions, except as specifically set forth in the Partnership Agreement. At
the Closing, the parties will execute and deliver the assignment attached hereto
as Exhibit "A" (the "Assignment"), and thereupon SARE shall cease to be a
----------- ----------
partner in the Partnership and Pacific Gulf shall become a partner in its place
and stead.
(b) Payment of the Baldwin Price. The parties hereby agree that the
----------------------------
full and final amount payable for the SARE Interest is Eight Million Nine
Hundred Thousand Dollars ($8,900,000) (the "Baldwin Price"). Such sum shall not
-------------
be adjusted or modified in any manner, notwithstanding anything to the contrary
contained in the Purchase Agreement,
<PAGE>
including Paragraph 10.6 thereof. Said sum shall be paid by delivery
--------------
to SARE of 559,748 shares of Pacific Gulf $.01 par value common stock (the
"Baldwin Price Shares"), with said Shares registered in SARE's name. Such
- - ---------------------
delivery shall satisfy in full Pacific Gulf's obligation on account of the
Baldwin Price.
2. Payment of the Nonrental Asset Purchase Price. SARE has
---------------------------------------------
heretofore sold and delivered the "Nonrental Assets" (as such term is defined in
----------------
the Purchase Agreement -- and such definition shall apply herein) to Pacific
Gulf under the terms of the Purchase Agreement. Pacific Gulf is indebted to
SARE for the "Nonrental Asset Purchase Price" (as such term is defined in the
------------------------------
Purchase Agreement -- and such definition shall apply herein). The parties
hereby agree that the full and final amount of the Nonrental Asset Purchase
Price payable for the Nonrental Assets is One Million One-Hundred Eighty-Seven
Thousand, Two Hundred Sixty-Eight and 91/100 Dollars ($1,187,268.91). Such sum
shall not be adjusted or modified in any manner, notwithstanding anything to the
contrary contained in the Purchase Agreement, including Paragraph 2.2 thereof.
-------------
Said sum shall be paid by delivery to SARE of 74,671 shares of Pacific Gulf $.01
par value common stock (the "Nonrental Asset Shares"), with said Shares
----------------------
registered in SARE's name. Such delivery shall satisfy in full Pacific Gulf's
obligation on account of the Nonrental Asset Purchase Price.
3. Issuance and Delivery of Shares. At the Closing, Pacific Gulf
-------------------------------
will issue and deliver to SARE good and marketable title to the Baldwin Price
Shares and the Nonrental Asset Shares free and clear of any liens, claims,
encumbrances, or restrictions except as set forth in the Purchase Agreement or
this Agreement or applicable under law. The share certificates delivered on
account of the Baldwin Price Shares and the Nonrental Asset Shares shall bear
the legend required by Paragraph 6.5(a) of the Purchase Agreement, and all
----------------
shares represented thereby shall be subject to the restrictions set forth in the
Purchase Agreement, including Article VII thereof; provided, however, the
-----------
parties hereby agree that Paragraph 7.2 of the Purchase Agreement is hereby
-------------
amended so that all references therein to fourteen (14) days are hereby changed
to be five (5) business days, and in all other respects said Section shall
remain in force and effect as set forth in the Purchase Agreement. The parties
agree that the share certificates for the aforementioned Shares shall be dated
as of October 31, 1994, and that SARE's rights as a shareholder on account
thereof, including any rights to receive dividends, shall commence from and
after that date (as such, SARE shall not be entitled to any dividend on account
of the cash dividend declared by Pacific Gulf for record shareholders on October
15, 1994). Additionally, it is agreed that the rights and obligations of SARE
and Pacific Gulf pursuant to that certain "Registration Rights Agreement" (as
-----------------------------
such term is defined in the Purchase Agreement) shall remain unaltered,
unaffected, and unmodified by this Agreement, and shall apply to the Baldwin
Price Shares and the Nonrental Asset Shares.
Pacific Gulf represents and warrants that the issuance of the Baldwin
Price Shares and the Nonrental Asset Shares has been duly authorized by all
necessary corporate action of Pacific Gulf, and that the shares, upon delivery
at the Closing, will be duly and
- 2 -
<PAGE>
validly issued, fully paid and non-assessable, and the issuance thereof will not
be subject to preemptive or other similar rights.
In addition, at the Closing, Pacific Gulf shall deliver to SARE a
check payable to SARE in the amount of $255,209.
4. Delivery of Letters of Credit. At the Closing, SARE shall deliver
-----------------------------
and turn over to Pacific Gulf, undrawn, both letters of credit referred to in
Paragraph 10.2(c) of the Purchase Agreement, and thereupon such letters of
- - -----------------
credit shall be canceled.
5. Certificate of SARE. At the Closing, SARE will execute and
-------------------
deliver to Pacific Gulf the certificate attached hereto as Exhibit "B" (the
-----------
"Certificate") as required pursuant to Paragraph 10.5(b)(4) of the Purchase
- - ------------ --------------------
Agreement, subject to the modification of Paragraph 10.7(c) of the Purchase
-----------------
Agreement set forth in Paragraph 12 hereof.
------------
6. Title Policies. At the Closing, SARE shall deliver, in lieu of
--------------
the "title policy" (as defined in Paragraph 10.5(b)(3) of the Purchase
------------ --------------------
Agreement), a binder from Chicago Title Company (the "Title Company") committing
-------------
the Title Company to issue, within two year of the Effective Date, to the
Partnership, Pacific Gulf, or such other entity designated by either, the title
policy as described in Paragraph 10.5(b)(3) of the Purchase Agreement with
--------------------
respect to the real property presently owned by the Partnership and the "Willman
-------
Property" (as such term is defined in the Paragraph 10.3(b) of the Purchase
- - -------- -----------------
Agreement). The cost of such binder shall be borne by SARE, except for any
endorsements requested by Pacific Gulf the cost of which shall be borne by
Pacific Gulf.
7. Reimbursement of Certain Expenses. At the Closing, SARE shall
---------------------------------
reimburse to Pacific Gulf, by delivery to Pacific Gulf of a check in such
amount, the sum of Fifty Thousand Dollars ($50,000), representing partial
reimbursement to Pacific Gulf of legal, accounting and certain other expenses
incurred in Pacific Gulf's dealings with Baldwin Associates, Ltd., W.T. Grant,
and Wm. P. Willman & Associates relating to the purchase of their interests in
the Partnership. The remainder of the expenses incurred by Pacific Gulf in
connection with the foregoing shall be the responsibility of Pacific Gulf.
8. Cooperation of SARE. Following the Closing, SARE shall cooperate
-------------------
with Pacific Gulf in the arbitrations (the "Arbitrations") among Pacific Gulf,
------------
SARE, W.T. Grant, Baldwin Associates, Ltd., and Wm. P. Willman & Associates
pertaining to the purchase price for the interests sold by W.T. Grant, Baldwin
Associates, Ltd., and Wm. P. Willman & Associates to Pacific Gulf on September
30, 1994 and certain other matters under the Partnership Agreement. Such
cooperation shall consist of promptly providing, at Pacific Gulf's request
(which shall include reasonable advance notice), contracts, agreements,
correspondence, memos, reports, statements, and other documents, papers, and
things in SARE's possession or under its control, and promptly authorizing and
directing, at Pacific
- 3 -
<PAGE>
Gulf's request, officers, directors, employees, and/or agents and
representatives of SARE to meet with and provide all available information to
Pacific Gulf and its agents and representatives with regard to any matters
relevant to the subject matter of the Arbitrations. Expenses incurred by SARE
in connection with the foregoing shall be borne by SARE.
SARE shall also remain a party in the Arbitrations until otherwise
requested by Pacific Gulf. SARE shall be represented by its own independent
legal counsel. The reasonable legal fees and expenses incurred by SARE as a
result thereof shall be reimbursed by Pacific Gulf on a monthly basis, provided
that Pacific Gulf shall not be obligated to reimburse more than Two Thousand
Dollars ($2,000) in such expenses (noncumulatively) in any calendar month,
except as provided hereinbelow. It is the intent of the parties that the
primary prosecution and defense of the Arbitrations on account of the interests
which are relevant to Pacific Gulf and SARE will be handled by Pacific Gulf's
legal counsel in its capacity as legal counsel for Pacific Gulf, and that SARE's
legal counsel only will monitor the proceedings in the Arbitrations without
active participation therein, unless otherwise requested by Pacific Gulf. The
cost of such monitoring and activity by SARE and its counsel shall be borne by
SARE, subject to the reimbursement hereinabove provided. If, however, Pacific
Gulf requests active participation from SARE and its legal counsel in the
Arbitrations (active participation shall include attendance at the Arbitration
hearings), SARE shall be obligated to do so only upon Pacific Gulf's agreement
to reimburse SARE for actual legal fees and expenses therefor in amounts to be
agreed upon by Pacific Gulf.
9. Turnover of Books and Records. At the Closing, or within thirty
-----------------------------
(30) days thereafter, SARE shall deliver and turn over to Pacific Gulf any and
all originals of books, records, ledgers, journals, financial statements,
invoices, receipts, contracts, and any and all other documents, papers, records,
or things in its possession or under its control which belong or relate to the
Partnership or the business, affairs, operations, or properties thereof;
provided, however, the foregoing shall not include the originals or copies of
the documents, contracts, and other papers relating to the transactions being
consummated under this Agreement or the Purchase Agreement; and, provided,
further, that the foregoing shall not include any documents which are subject to
SARE's attorney/client privilege.
10. Purchase Agreement and Master Agreement. Nothing herein is
---------------------------------------
intended to in any way modify, amend, change, or alter any of the terms,
provisions, or conditions of the Purchase Agreement or the Master Agreement, or
the rights, claims, causes of action, defenses, and the like of any of the
parties under the terms and provisions thereof, except as expressly provided
herein.
11. Representations and Warranties. In addition to the
------------------------------
representations and warranties the parties have made to each other in the
Purchase Agreement, and not in modification or lieu thereof, the parties hereby
represent and warrant to one another as follows:
- 4 -
<PAGE>
(a) Incorporation and Existence. Each party hereto is duly
---------------------------
incorporated, validly existing and in good standing under the laws of the state
of its incorporation, is in good standing and authorized to transact business in
the State of California, and has the requisite authority to enter into and
perform this Agreement.
(b) Power, Authority, Binding Effect. The execution, delivery and
--------------------------------
performance of this Agreement by each party have been duly and validly
authorized by all necessary corporate action of such party, and this Agreement
has been duly executed and delivered by each party. This Agreement constitutes
a legal, valid and binding agreement of the respective parties, enforceable
against such respective parties in accordance with its terms, except as may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
laws or equitable principles relating to or limiting the rights of creditors
generally. The respective persons executing this Agreement on behalf of the
respective parties have the right, power, legal capacity, and authority to
execute and deliver same and all other documents that may be executed or
delivered in connection with this Agreement on behalf of the party for whom they
are so executing and delivering.
(c) Violation or Breach. None of the execution, delivery or
-------------------
performance of this Agreement does or will, with or without the giving of
notice, the lapse of time, or both, violate, conflict with, or constitute a
material default under any term, provision or condition of (1) the
organizational documents of a party hereto or of any material agreement to which
a party hereto is a party or by which it is bound, (2) any judgment, decree,
order, statute, injunction, law, rule, or regulation of any nature by which the
respective party is bound, or by which any property or asset of such party is
bound or affected; nor will such execution, delivery or performance of this
Agreement by a party hereto result in the creation of any lien or other
encumbrance upon the assets or properties of such party.
(d) Consents and Approvals. The respective parties have obtained the
----------------------
consent and approval of all governmental authorities and third parties where
such is required in connection with the transactions contemplated hereunder by
the respective parties, and have given the appropriate notices to all
governmental authorities and third parties entitled to receive such by reason of
the transactions contemplated herein.
(e) Performance. The respective parties shall take such acts, seek
-----------
such consents and authorizations, and do such things as are within their power
and control to enable such parties to close the transactions contemplated
hereunder.
- 5 -
<PAGE>
12. Modification of Paragraph 10.7(c). Paragraph 10.7(c) of the
---------------------------------
Purchase Agreement is hereby deleted in its entirety, and the following is
substituted therefor:
"(c) For the purposes of the representations and warranties made
pursuant to this Section 10.7, the term "Seller's knowledge" means the
actual knowledge of (1) Glenn L. Carpenter, Donald G. Herrman and
Robert A. Dewey as of the Closing Date, and (2) the Chief Executive
Officer and Chief Financial Officer as of the Baldwin Closing Date.
With respect to the representations and warranties made pursuant to
this Section 10.7 which are not conditioned on "Seller's knowledge",
such representations and warranties shall be deemed (i) made on the
Closing Date based on the facts and circumstances as they existed as
of the Closing Date, and also made on the Baldwin Closing Date on the
basis of the "Seller's knowledge" as defined in clause (2) of the
foregoing sentence based on the facts and circumstances as they exist
as of the Baldwin Closing Date. To the extent that Glenn L.
Carpenter, Donald G. Herrman or Robert A. Dewey shall have any actual
knowledge, on the Baldwin Closing Date, that any representations or
warranties deemed made by the Seller pursuant to the foregoing are
materially inaccurate on such date, Pacific Gulf shall disclose such
in writing to Seller prior to the Baldwin Closing Date."
13. Cancellation of Management Agreement. Automatically upon the
------------------------------------
Closing, without the need for any further notice or demand by any party, the
duties, responsibilities, and obligations of Pacific Gulf under that certain
Management Agreement among Pacific Gulf and SARE, dated as of February 17, 1994
(the "Management Agreement"), shall terminate, and thereafter Pacific Gulf shall
--------------------
have no further duties, responsibilities, or obligations under the Management
Agreement. All monies owing, and any assets or properties held by a party for
the benefit of another party, as of the Closing, shall be paid and returned, as
the case may be, at the Closing or promptly thereafter.
14. Closing. The "Closing" hereunder shall occur at 10:00 a.m., Los
------- -------
Angeles time, on November 11, 1994 at the Los Angeles offices of Cox, Castle &
Nicholson, or at such other time and place as the parties may mutually agree
upon in writing. At the Closing, Pacific Gulf shall deliver certificates for
the Baldwin Price Shares and the Nonrental Asset Shares registered in the name
of SARE, SARE shall deliver the check for the reimbursements agreed upon
hereunder and the title policy commitments called for hereunder, the parties
shall execute and deliver the Assignment, and the parties shall deliver such
further documents and do such further things as are called for under this
Agreement or otherwise
- 6 -
<PAGE>
necessary or desirable to consummate the transactions herein contemplated. If
for any reason the Closing does not occur by the close of business on November
30, 1994 due to the fault or breach of a party in its promises, obligations, or
representations hereunder, then the non-breaching party, in its sole discretion,
shall be entitled to terminate the transactions contemplated under this
Agreement and/or seek recovery at law and in equity for any damages suffered as
a result of the fault or breach of the breaching party; or, the non-breaching
party shall be entitled to seek enforcement of and performance under this
Agreement, together with damages resulting from the fault or breach of the
breaching party.
15. Miscellaneous.
-------------
(a) Notices. Except as otherwise provided in this Agreement, all
-------
notices, requests, demands, and other communications required or permitted to be
given under this Agreement shall be in writing and shall be either (i) mailed to
the party to whom such notice, request, demand, or other communication is to be
given, by United States Mail with all postage prepaid (in which case such
notice, request, demand, or other communication shall be deemed to have been
duly given on the second business day following the date of deposit of same in
such Mails), (ii) mailed by Federal Express or other next-day mail service (in
which case such notice, request, demand, or other communication shall be deemed
to have been duly given on the next business day following the date of delivery
to the respective mail service), (iii) sent by telephone facsimile to the
facsimile number set forth hereinbelow, in which case such notice, request,
demand, or other communication shall be deemed to have been duly given one (1)
business day following either telephonic or electronic confirmation that such
facsimile was received by the party to whom it was sent (but in each case
provided that written copy is also sent to the recipient by United States Mails,
or (iv) personally delivered to such party (in which case such notice, request,
demand, or other communication shall be deemed to have been duly given one (1)
business day after personal delivery), in each case to the following address:
If to Pacific Gulf:
Pacific Gulf Properties, Inc.
363 San Miguel Drive, Suite 100
Newport Beach, California 92660
Attn: Mr. Glenn L. Carpenter
(fax) 714/721-2713
- 7 -
<PAGE>
with a copy to:
Cox, Castle & Nicholson
2049 Century Park East, 28th Floor
Los Angeles, CA 90067
Attn: Samuel H. Gruenbaum, Esq.
(fax) 310/277-7889
If to SARE:
Santa Anita Realty Enterprises, Inc.
285 West Huntington Drive
P.O. Box 60014
Arcadia, California 91066-6014
Attn: Mr. Sherwood C. Chillingsworth
(fax) 818/447-2940
with copies to:
Santa Anita Operating Co.
285 West Huntington Drive
P.O. Box 60014
Arcadia, California 91066-6014
Attn: Kathryn J. McMahon, Esq.
(fax) 818/446-9565
Sheppard, Mullin, Richter & Hampton
333 South Hope Street, 48th Floor
Los Angeles, California 90071
Attn: Robert B. Flaig, Esq.
(fax) 213/620-1398
Any party, by giving written notice to the others in the manner
provided above, may change such party's address or facsimile number for purposes
of this Paragraph.
(b) Expenses. Except as otherwise provided herein, each of the
--------
parties shall pay all costs and expenses incurred or to be incurred by it in
negotiating and preparing this Agreement and carrying out the transactions
contemplated by this Agreement.
(c) Third Parties. No rights shall inure to any third party from
-------------
the obligations, representations, or covenants of the parties herein, except as
expressly so provided.
- 8 -
<PAGE>
(d) Effectiveness. Any provision (or part thereof) of this
-------------
Agreement which is prohibited or unenforceable in any jurisdiction or under any
circumstance shall as to such jurisdiction or circumstance be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction or under any other circumstance.
(e) Attorneys' Fees and Costs. In the event of any action at law
-------------------------
or in equity or other proceeding between the parties hereto to enforce or to
interpret any of the provisions hereof, or relating to the subject matter
hereof, including any arbitration procedure as herein described, the
unsuccessful party or parties shall pay to the prevailing party or parties all
costs and expenses, including actual attorneys' fees, incurred therein by such
prevailing party or parties; and, if such prevailing party or parties shall
recover judgment in any such action or proceeding, such costs, expenses and
attorneys' fees may be included in and as part of such judgment. Such fees,
costs and expenses shall include post-judgment fees, costs and expenses incurred
on appeal or in collection of any judgment, which shall not merge into or be
barred by any judgment.
(f) Governing Law. This Agreement shall be construed,
-------------
interpreted, and enforced under and in accordance with, and governed by, the
laws of the State of California applicable to agreements wholly made and to be
performed in such State.
(g) Exhibits. All exhibits attached hereto and referred to herein
--------
are hereby incorporated herein by reference and made a part hereof as though
fully set forth herein at length.
(h) Effect of Headings. The titles or headings of the various
------------------
paragraphs hereof are intended solely for convenience of reference and are not
intended and shall not be deemed to modify, explain or place any construction
upon any of the provisions of this Agreement.
(i) Counterparts. This Agreement may be executed in one or more
------------
counterparts by the parties hereto. All counterparts shall be construed
together and shall constitute one and the same agreement.
(j) Other Representations; Survival; Modification of the Purchase
-------------------------------------------------------------
Agreement. The covenants, obligations, representations, and undertakings of the
- - ---------
parties herein, in the Purchase Agreement, and in any agreements entered into at
the Closing are the sole and only consideration for this Agreement. No
representations, promises or inducements have been made to the undersigned
parties, or any of them, other than those which appear in this Agreement, the
Purchase Agreement, or the other agreements hereinabove referred to. Except as
otherwise provided elsewhere in this Agreement, this Agreement, including the
documents and instruments referred to hereinabove and elsewhere herein, and
the Exhibits
- 9 -
<PAGE>
attached hereto, together with the Purchase Agreement, embody the entire
agreement and understanding of the parties hereto with respect to the
transactions contemplated hereby. The representations and warranties made by the
parties one to the other in this Agreement shall survive the Closing and the
deliveries made hereunder.
(k) Arbitration. Any dispute or disagreement between the parties
-----------
hereto with respect to any term or provision of this Agreement, the subject
matter hereof, or the interpretation or enforcement hereof shall be resolved
pursuant to binding arbitration in the same manner and subject to the same
provisions as are set forth in Article VIII of the Purchase Agreement.
------------
(l) Legal Representation and Construction. Each party hereto has
-------------------------------------
been represented by legal counsel in connection with the negotiation and
drafting of this Agreement. The parties acknowledge that each party and its
counsel have reviewed and revised this Agreement, and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement.
(m) Agreement to Perform Necessary Acts. Each party hereto here
-----------------------------------
by agrees to perform any further acts and execute and deliver any further
documents which may be reasonably necessary or otherwise reasonably required in
order to carry out and perform the transactions contemplated under this
Agreement.
(n) Number and Gender. Words in the singular shall include the
-----------------
plural, and words in a particular gender shall include either or both additional
genders, when the context in which such words are used indicates that such is
the intent.
(o) Successors and Assigns. All of the terms and provisions
----------------------
contained herein shall inure to the benefit of and shall be binding upon the
parties hereto and their respective heirs, personal representatives, successors
and assigns; however, none of the parties hereto may delegate any of their
obligations or duties hereunder, in whole or in part, without the prior written
consent of all of the remaining parties hereto, which consent may be granted or
withheld in the sole and absolute discretion of the respective parties.
- 10 -
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
PACIFIC GULF PROPERTIES INC., a Maryland
corporation
By:
--------------------------
Its:
-----------------------
SANTA ANITA REALTY ENTERPRISES, INC., a
Delaware corporation
By:
----------------------------
Its:
------------------------
- 11 -
<PAGE>
AMENDED AND RESTATED LEASE
--------------------------
THIS AMENDED AND RESTATED LEASE (this "Lease"), is made as of this
ninth day of November, 1994, by and between SANTA ANITA REALTY ENTERPRISES,
INC., a Delaware corporation (hereinafter referred to as "Lessor"), and LOS
ANGELES TURF CLUB, INCORPORATED, a California corporation (hereinafter referred
to as "Lessee"), and amends and restates that certain Lease made as of January
1, 1980 by and between Lessor and Lessee, as amended to the date hereof (as so
amended, the "Original Lease");
W I T N E S E T H:
-----------------
That for and in consideration of the mutual covenants and agreements
herein contained, Lessor does hereby lease and demise to Lessee, and Lessee does
hereby take and rent from Lessor, that certain parcel of real property (as
described on Exhibit A hereto) and appurtenant structures situated in the City
of Arcadia, County of Los Angeles, State of California, known as "Santa Anita
Park," including, without limitation, the racing strip, grandstands, buildings
and all improvements (other than improvements made pursuant to Section 9(b)
below) situated thereon (said parcel of real property, as so improved, being
hereinafter referred to as the "demised premises"):
<PAGE>
TO HAVE AND TO HOLD the demised premises for the term and at the
rental hereinafter provided and upon the terms, conditions and agreements
hereinafter set forth.
1. Term. The term of this Lease shall commence as of January 1,
----
1980 and shall end on the 31st day of December, 1999, unless sooner terminated
as provided herein.
2. Rental. Lessee agrees to pay Lessor, as
------
rental ("On Track Rental") for the demised premises, an amount equal to 1.5% of
all pari-mutuel wagering (the "handle") that occurs at the demised premises with
respect to live thoroughbred races conducted at the demised premises. In
addition, Lessee agrees to pay Lessor, as an additional rental (i) an amount
("Simulcast Rental") equal to 26.50% of the gross revenues allocable to Lessee
by law or agreement with respect to off track wagers attributable to the
simultaneous broadcast of thoroughbred horse racing from Santa Anita Park to any
location outside of Santa Anita Park ("Simulcast Facility"), including, without
limitation, at any satellite wagering facility located at a fair, race track, or
other site in the State of California as contemplated by Sections 19605,
19605.1, 19605.2, 19605.51 and 19605.6 of the California Business and
Professions Code and at locations situated outside of the State of California or
the United States; provided, however, that when wagers made or placed at a
Simulcast Facility are included in Lessee's pari-mutuel pool, the Simulcast
Rental attributable to any thoroughbred horse racing broadcast
2
<PAGE>
shall not exceed 1.5% of the handle generated by such Simulcast Facility with
respect to such broadcast, and (ii) an amount ("Satellite Rental") equal to
26.50% of the gross revenues allocable to Lessee by law or agreement with
respect to wagers at the demised premises when Lessee operates as a satellite
facility ("Satellite Facility") receiving the simultaneous broadcast of
thoroughbred horse racing from any location outside of Santa Anita Park. Said
rental shall be payable during the term hereof monthly on the last business day
of each month (a "Payment Date") in an amount equal to the amount of On Track
Rental, if any, Simulcast Rental, if any, and Satellite Rental, if any
attributable to the month immediately prior to the month in which the applicable
Payment Date occurs, provided that the Payment Date for December of any year
--------
shall be the thirty-first day of such month and the Payment Date for January of
any year shall be the last business day of March in that same year. Said rental
shall be in addition to all other amounts (including, without limitation,
property taxes, insurance premiums and costs of maintenance) required to be paid
by Lessee pursuant to the terms of this Lease.
3. Acceptance of Premises. Lessee is familiar with the physical
----------------------
condition of the demised premises and accepts them in their present condition
without any representation or warranty by Lessor as to the condition, use or
operation thereof.
3
<PAGE>
4. Use of Premises. Lessee is hereby permitted to use and occupy
---------------
the demised premises for the purpose of (i) conducting horse racing meets and
other events either incidental or related to the conduct of horse racing meets,
including, without limitation, civic and public relations-oriented activities
such as horse shows, banquets, dances, film and television production and
similar activities which do not involve significant permanent changes to the
demised premises, (ii) operating as a Satellite Facility and other events either
incidental or related to the operation of a Satellite Facility, including,
without limitation, civic and public relations-oriented activities such as horse
shows, banquets, dances, film and television production and similar activities
which do not involve significant permanent changes to the demised premises, and
(iii) conducting not more than 7 other entertainment events and events
incidental or related thereto. Lessee shall not use or permit any person to use
the demised premises or any part thereof for any purpose or use in violation of
the laws of the United States or of the State of California or any political
subdivision thereof.
5. Property Taxes. Lessee agrees to pay, as additional rental for
--------------
the demised premises, all property taxes levied upon the demised premises during
the term of this Lease. All of such payments shall be made by Lessee before
delinquency. Any property taxes relating to the fiscal period of the taxing
authority, a part of which period is included within the term of
4
<PAGE>
this Lease, and a part of which is included in a period of time after the
termination of the term of this Lease, shall be adjusted as between Lessor and
Lessee as of the termination of this Lease, so that Lessor shall pay that
portion of such property taxes which that part of such fiscal period included in
the period of time after the termination of this Lease bears to such fiscal
period, and Lessee shall pay the remainder thereof. With respect to any
assessment for public improvements or benefits which by law is payable, or at
the option of the taxpayer may be paid, in installments, Lessor shall pay the
installments thereof which become due and payable subsequent to the termination
of the term of this Lease, and Lessee shall pay those installments which become
due and payable during the term of this Lease. Any such assessment which
becomes due and payable in the year of termination of this Lease shall be
prorated as between Lessor and Lessee in the same manner as taxes and other
assessments.
Lessee shall have the right to contest the amount or validity of any
property taxes which it is required to pay under the terms of this Lease, and
for that purpose shall have the right, at its sole cost, risk and expense, to
institute such proceeding or proceedings in the name of Lessor as Lessee may
deem necessary, holding Lessor and the demised premises harmless from the
consequences thereof. Any refund of any property taxes (including interest and
penalties) which has been paid by Lessee, shall belong to Lessee, and Lessor
agrees promptly to pay the
5
<PAGE>
same to Lessee in the event refund thereof is initially made to Lessor.
The term "property taxes" as used herein shall mean and include all
taxes, assessments and other governmental charges, general and special, ordinary
and extraordinary, of any kind and nature whatsoever, applicable to the demised
premises or any part thereof, including but not limited to assessments for
public improvements or benefits which shall during the term of this Lease be
laid, assessed, levied, imposed upon or become due and payable and a lien upon
the demised premises or any part thereof but excluding franchise, estate,
inheritance, succession, capital levy, transfer, income or excess profits taxes
imposed upon Lessor. With respect to any assessment which may be levied against
or upon the demised premises and which under the laws then in force may be
evidenced by improvement or other bonds, or may be paid in annual installments,
Lessee shall be required to pay each year only the amount of such annual
installment or portion thereof as Lessor shall be required to pay during such
year (with appropriate proration for any partial year) and shall have no
obligation to continue such payments after the termination of this Lease.
6. Utilities. Lessee shall pay all charges for water, gas,
---------
electricity, telephone service and other utilities used, consumed or furnished
on or to the demised premises during the term of this Lease.
6
<PAGE>
7. Repairs and Maintenance. Lessee shall, at its sole cost and
-----------------------
expense, maintain the demised premises (including, without limitation, the
grandstands, stables, buildings, roadways, parking areas, fences and other
improvements now or at any time hereafter comprising a part thereof) in good
condition and repair throughout the term of this Lease, and Lessor shall be
under no obligation to maintain or repair the demised premises. In the event of
any damage or destruction to the demised premises, or any part thereof, this
Lease shall continue in full force and effect. Lessee shall promptly, at its
sole cost and expense, make and perform all such repairs, changes, maintenance
and improvements in or upon the demised premises as may be necessary to restore,
repair and rebuild the same and to keep the same in an attractive, neat and
orderly condition. Lessee shall commence the work of restoration, repair and
rebuilding as soon as reasonably possible after the occurrence of any damage or
destruction to the demised premises, or any part thereof, and shall thereafter
prosecute such work diligently to completion. If any such damage or destruction
is attributable to factors against which Lessee is insured, the proceeds of such
insurance shall be applied to such restoration, rebuilding or repair; the
obligations of Lessee hereunder shall not, however, be limited in any way by the
proceeds of such insurance, if any. Upon the termination of this Lease, Lessee
covenants and agrees to surrender and deliver up the demised premises in the
same condition and repair as they are now, ordinary wear and tear and
7
<PAGE>
alterations, additions and changes made pursuant to Paragraph 9 hereof excepted.
8. Indemnity and Insurance. (a) Lessee agrees with Lessor that
-----------------------
Lessor shall not be liable for any damage or injury to persons or property
during the term of this Lease from any cause whatsoever by reason of the use,
occupation and enjoyment of the demised premises by Lessee or any person
thereon, and that Lessee will indemnify and hold harmless Lessor from all
liability whatsoever on account of any such damage or injury, whether or not
caused by the negligence or breach of an obligation by Lessee or any person
holding under Lessee.
(b) Lessee shall, at its sole cost and expense, maintain
(i) Such fire and extended coverage insurance in full force and
effect throughout the term of this Lease in such amounts and forms as are
consistent with prudent business practices for a business of the nature
conducted by the Lessee, considering the replacement cost of the
grandstands, stables, buildings and other improvements comprising a part of
the demised premises, their location and exposure to risk; Lessee shall be
entitled to receive all proceeds from such insurance policy or policies.
8
<PAGE>
(ii) General public liability insurance against claims for bodily
injury, death or property damage occurring upon, in or about the demised
premises, such insurance to afford protection to the limit of Fifty Million
Dollars ($50,000,000) in respect of injury and/or death and/or property
damage, for the mutual benefit of Lessor and Lessee.
(iii) Such business interruption insurance and insurance covering
loss of rents as is consistent with prudent business practices for a
business of the nature conducted by the Lessee.
Lessor and Lessee agree that all fire and extended coverage insurance
policies carried by them covering the demised premises or any property located
thereon shall contain a clause permitting the insured to waive the insurance
carrier's right of subrogation against any third person arising out of the
occurrence of any casualty insured against. Lessor and Lessee hereby waive any
such right of subrogation against the other party hereto, and Lessor and Lessee
each agree that in the event of any damage to the demised premises by fire or
perils named in the extended coverage endorsement to real or personal property
of either the Lessor or Lessee neither shall have or exercise any right of
recovery against the other.
9
<PAGE>
(c) Lessee shall cause to be issued to Lessor proper certificates of
insurance evidencing Lessee's compliance with the foregoing covenants of Lessee
with respect to insurance. Each of said certificates shall state that all right
of subrogation is waived against Lessor and that no cancellation or material
change in the insurance evidenced by the particular certificate shall be made
unless thirty (30) days' advance notice of such cancellation or material change
shall have been given to Lessor. Lessor and the holder of any assignment of the
Lessor's interest in this Lease or a first mortgage or a deed of trust on the
demised premises shall be named as additional insureds as their interests may
appear on all insurance policies required to be maintained by Lessee under this
Paragraph 8.
9. Alterations. (a) Lessor shall, during the term of this Lease,
-----------
reimburse Lessee for all costs of such reasonable alterations, additions, and
changes, structural or otherwise, in and to the grandstands, stables, buildings,
roadways, parking areas, fences and other structures then located on the demised
premises (collectively, the "Improvements") as Lessee may find necessary or
convenient for its purposes, provided that Lessor shall be under no obligation
to reimburse Lessee for any such Improvements to the demised premises unless
Lessor has consented to the making of such Improvements prior to any expenditure
by Lessee for such Improvements, and provided further that such alterations,
additions, and changes constitute real estate assets as defined in Subchapter M
of the Internal Revenue Code. The
10
<PAGE>
title to, and the ownership of, any buildings, structures, and other
improvements erected on the demised premises, the cost of which is reimbursed by
Lessor shall vest in Lessor. Such improvements shall become part of the demised
premises.
(b) During the term of this Lease, Lessor may develop, at Lessor's
cost, up to 50 acres of the demised premises for any purpose provided that (i)
Lessor shall give Lessee at least 120 days prior written notice of such
development and (ii) such development shall not unreasonably interfere with
Lessee's horse racing and Satellite Facility operations.
10. Mechanic's Liens. Lessee agrees that it will pay or cause to be
----------------
paid all costs for work done by it or caused to be done by it on the demised
premises of a character which will or may result in liens on Lessor's
reversionary estate therein, and Lessee will keep the demised premises free and
clear of all mechanic's liens and other liens on account of work done for Lessee
or persons claiming under Lessee. Lessee agrees to and shall indemnify and save
Lessor free and harmless against all liabilities, damages or costs on account of
liens and claims of lien of laborers or materialmen or others for work performed
or materials or supplies furnished for Lessee or persons claiming under it;
provided, however, that Lessee shall have the right to contest the validity or
amount of any such lien or claimed lien, provided Lessee shall give such
reasonable security to Lessor as may be demanded by Lessor to insure payment
therefor and prevent
11
<PAGE>
any sale, foreclosure, or forfeiture of the demised premises by reason of such
nonpayment; and provided further that such reasonable security shall not exceed
one and one-half times the amount of such lien or claimed lien.
Notwithstanding the foregoing, the imposition of a lien on the demised
premises in connection with the Lessee's performance of its obligations or
rights under Paragraph 7 or Paragraph 9 hereof will not constitute an event of
default under Paragraph 13 hereof, provided that a bond in the amount of such
lien is acquired by Lessee in favor of Lessor, or other security satisfactory to
Lessor is provided and adequate measures are taken to avoid any sale of,
foreclosure upon or forfeiture of the demised premises as a result of the
imposition of such lien.
11. Eminent Domain. If the whole or any part of the demised premises
--------------
be taken or condemned under the exercise by any competent authority of the power
of eminent domain for any public or quasi-public use or purpose, then and in
that event:
(a) The entire award for such taking or condemnation shall be paid to
and retained by Lessor for its own use and benefit, except that any part of
the award made on account of damage to the portion of the demised premises,
if any, not taken by condemnation shall be used by Lessor, to the extent
necessary, for the restoration and reconstruction of
12
<PAGE>
the remainder of the demised premises as set forth in subparagraph (c)(ii)
hereinbelow.
(b) If fifty percent (50%) or more of the parking area comprising a
part of the demised premises shall be so taken, or if any portion of the
demised premises (other than the parking area) essential for the conduct of
horse racing meets on the demised premises shall be so taken, then and in
either such event Lessee shall have the option to terminate this Lease by
written notice to Lessor delivered at any time prior to thirty (30) days
after Lessee's possession of the area so condemned has been taken by or on
behalf of the condemning authority. Upon such termination each of the
parties hereto shall be relieved of any further performance hereunder for
the period from and after such termination.
(c) In the event that only a portion of the demised premises are so
taken, the following provisions shall apply if this Lease is not terminated
as provided in paragraph (b) hereof:
(i) The term of this Lease and each of the provisions hereof
(except as hereinafter provided) shall continue in full force and
effect as to so much of the demised premises as are not so taken;
13
<PAGE>
(ii) Subject to due allowance and reasonable delays occasioned by
strikes or scarcity of building materials or labor, or any other cause
beyond Lessor's control, Lessor shall proceed with reasonable
diligence to restore and reconstruct the demised premises to a
complete unit in order that the remaining unit when completed shall be
substantially the same in character as the demised premises prior to
said taking; and
(iii) Upon such taking, the annual rent hereinabove specified
shall be renegotiated by Lessor and Lessee in good faith with a view
toward an equitable adjustment of such rent in light of the changed
nature of the demised premises.
No provision of this Lease shall be deemed to be a waiver of any right
of either Lessor or Lessee against any condemning authority for damages or other
compensation by reason of such condemnation.
12. Assignment and Subletting. (a) Lessee may, at any time during
-------------------------
the term of this Lease, sublet the whole or any part of the demised premises for
any use permitted in this Lease, but Lessee shall remain liable and responsible
to Lessor under this Lease in the event of any such subletting of the demised
premises.
14
<PAGE>
(b) Lessee shall not encumber or hypothecate its leasehold estate, or
any interest therein or part thereof, without prior written consent of Lessor.
(c) Lessor shall not be restricted by any provision hereof from
assigning all or any part of its interest in the demised premises to any person,
firm, association or corporation; provided that any such assignee shall agree to
be bound by the provisions of this Lease. Lessee hereby attorns and agrees to
attorn to any person, firm or corporation purchasing or otherwise acquiring the
fee estate in the demised premises or the Lessor's interest in this Lease at any
sale or other proceeding pursuant to the exercise of any rights, powers or
remedies under any Deed of Trust and Assignment of Rents executed by the Lessor
in favor of any institutional lender or by reason of the exercise of any rights,
powers or remedies under any Assignment of Lease executed by Lessor in favor of
any institutional lender covering this Lease, it being intended hereby that if
this Lease would otherwise terminate, cut off or otherwise be defeated by reason
of any acts or actions by the owner or holder of such Deed of Trust and
Assignment of Rents or Assignment of Lease then, at the option of such person,
firm or corporation so purchasing or otherwise acquiring the fee estate in the
demised premises or Lessor's interest under this Lease, this Lease shall
continue in full force and effect.
15
<PAGE>
13. Defaults by Lessee. In the event that
------------------
(a) Lessee shall fail to pay any installment of rental or any other
money required hereby to be paid by Lessee to Lessor or for the account of
Lessor when the same shall become due, and such default shall continue for
a period of five (5) days; or
(b) Lessee shall default in the performance of any obligation
required to be performed by Lessee (other than the payment of rental or any
other money required hereby to be paid by Lessee to, or for the account of,
Lessor) and shall fail, for a period of ten (10) days after written notice
from Lessor specifying such default, to take appropriate steps for the
purpose of curing such default or shall thereafter fail to prosecute the
curing of such default diligently and in good faith; or
(c) Lessee shall be adjudicated bankrupt, or a petition by or against
Lessee for an adjustment of its obligations under the Federal Bankruptcy
Code or any other existing or future statute shall be approved, or Lessee
shall make a general assignment of its property for the benefit of its
creditors;
then and in each such case Lessor may at its option terminate this Lease upon
written notice to Lessee.
16
<PAGE>
14. Rights of Inspection; Maintenance of Books, Records and Accounts.
----------------------------------------------------------------
Lessor or its representatives shall have the right to go upon and inspect the
demised premises at all reasonable times. Lessee shall keep full, complete and
proper books, records and accounts of the handle derived from or arising out of
the conduct of horse racing meets at the demised premises for a period of 36
months following each year. Lessor and its agents and employees shall have the
right at any and all times, during regular business hours, to audit, examine and
inspect all of the books and records of Lessee, including any tax reports
pertaining to the business of the Lessee conducted in, upon or from the demised
premises, for the purpose of investigating and verifying the accuracy of any
statement of handle.
15. Change in Pari-Mutuel Wagering. In the event the percentage of
------------------------------
gross pari-mutuel handle, Simulcast Rental or Satellite Rental allocable to the
tracks is changed by reason of any governmental action, or in the event any
technological or other development (including, by way of example, but not
limited to, the authorization of in-home or telephonic wagering) alters the
nature of pari-mutuel wagering at Santa Anita Park or wagering at locations
which receive a simultaneous broadcast of thoroughbred horse racing held at
Santa Anita Park, then Lessor and Lessee shall renegotiate the rental provisions
of this Lease in good faith with a view toward an equitable adjustment of such
rental in light of the changed circumstances.
17
<PAGE>
16. Cessation of Racing. If at any time the Board of Directors of
-------------------
Lessor shall determine, in its complete, unfettered discretion, that Santa Anita
Park shall be permanently closed to thoroughbred horse racing, Lessor shall have
the option to terminate this Lease upon written notice to Lessee.
17. Recovery of Costs. In the event that any action or proceeding
-----------------
shall be brought for the purpose of determining or enforcing the rights of
either party hereunder, the party prevailing in such action shall be entitled to
recover from the other party all costs reasonably incurred by the prevailing
party in connection with such action or proceeding, including a reasonable
attorney's fee to be determined by the court.
18. Waiver. No waiver by Lessor of the breach or default in the
------
performance of any of the covenants, conditions or agreements of this Lease by
Lessee shall be construed to be a waiver of any succeeding breach of the same or
other covenants, conditions or agreements hereof, and no delay or omission of
Lessor in exercising any right or power or remedy hereunder in the event of the
default of Lessee shall be construed as a waiver thereof or acquiescence
therein, nor shall the acceptance of any payment made in a manner or at a time
other than as herein provided be construed as a waiver of or variation in the
terms of this Lease.
18
<PAGE>
19. Notices. All written notices to Lessor or Lessee shall be deemed
-------
to have been properly given if given by courier, United States express mail or
United States registered mail, postage prepaid, addressed to such party at such
address as shall have been given by such party by written notice to the other.
20. Successors. The covenants and agreements herein contained shall
----------
inure to the benefit of and be binding upon Lessor and Lessee and their
respective successors and assigns.
21. Effectiveness. This Amended and Restated Lease (other than the
-------------
provisions of Section 2 hereof which shall become effective on January 1, 1995)
shall become effective as of the date hereof upon the execution hereof by each
of the parties hereto. Prior to January 1, 1995, all terms and conditions of
Section 2 of the Original Lease shall remain in full force and effect.
19
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Lease in
duplicate the day and year first above written.
SANTA ANITA REALTY ENTERPRISES, INC.
By _________________________________
(SEAL) Lessor
LOS ANGELES TURF CLUB, INCORPORATED
By _________________________________
(SEAL) Lessee
20
<PAGE>
STATE OF CALIFORNIA )
COUNTY OF __________________ )
On ___________, 19___, before me, ____________________, a Notary
Public in and for said State, personally appeared
________________________________________________________________, personally
known to me (or proved to me on the basis of satisfactory evidence) to be the
person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
Signature ________________________________ (Seal)
21
<PAGE>
STATE OF CALIFORNIA )
COUNTY OF __________________ )
On ___________, 19___, before me, ____________________, a Notary Public in
and for said State, personally appeared
________________________________________________________________, personally
known to me (or proved to me on the basis of satisfactory evidence) to be the
person(s) whose name(s) is/are subscribed to the within instrument and
acknowledged to me that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s), or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and official seal.
Signature ________________________________ (Seal)
22
<PAGE>
EXHIBIT 10.4
CREDIT AGREEMENT
This Credit Agreement dated as of ___________, 19__ is entered into
among SANTA ANITA REALTY ENTERPRISES, INC., a Delaware corporation (the
"Borrower") and FIRST INTERSTATE BANK OF CALIFORNIA, a California banking
corporation (the "Bank"). The Borrower and the Bank agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Defined Terms. As used in this Agreement, the
-------------
following terms have the following meanings:
"Agreement": This Credit Agreement, as amended, supplemented or
---------
modified from time to time.
"Assessment Rate": For any period, the net annual assessment rate
---------------
estimated by the Bank to be payable by it to the Federal Deposit Insurance
Corporation or any successor ("FDIC"), for FDIC's insuring time deposits made in
Dollars at offices of the Bank in the United States.
"Assignment of Lease": That certain Assignment of Rents, Leases,
-------------------
Income and Profits, in form acceptable to Bank, by which Borrower assigns to
Bank, among other things, all of Borrower's rents, issues and profits in the
Lease.
"Bank": As set forth in the introductory paragraph of this Agreement.
----
"Base Rate": With respect to each Interest Period pertaining to CD
---------
Rate Loans, the rate of interest determined by the Bank to be the prevailing
rate per annum (rounded upward to the nearest 1/100 of 1%) bid at the time the
Bank quotes the rate to the Borrower on the first day of such Interest Period by
at least one certificate of deposit dealer of recognized standing selected by
the Bank for the purchase at face value from the Bank of its certificates of
deposit in an amount equal to or comparable to the CD Rate Loan to which such
Interest Period
<PAGE>
applies and having a maturity equal to or comparable to such Interest Period.
"Borrower": As set forth in the introductory paragraph of this
--------
Agreement.
"Borrowing": As defined in Section 2.01.
---------
"Business Day": A day other than a Saturday, Sunday or a day on which
------------
commercial banks in California are authorized or required by law to close.
"CD Rate": A rate per annum equal to the following:
-------
Base Rate + Assessment Rate
---------------------------------------
1.00 - Reserve Percentage
The rate per annum shall be a rate quoted by the Bank's central money desk to
the Bank's lending office.
"CD Rate Loans": Loans hereunder at such time as they accrue interest
-------------
at a rate based upon the CD Rate.
"Capital Lease": As applied to any Person, any lease of any property
-------------
(whether real, personal or mixed) by that Person as lessee which would, in
accordance with GAAP, be required to be accounted for as a capital lease on the
balance sheet of that Person.
"Commitment": The Bank's obligation to make Loans to the Borrower
----------
pursuant to Article II in the amount or amounts referred to therein.
"Consolidated Cash Flow": In respect of any period, the net income
----------------------
from operations during such period of the Borrower and its consolidated
Subsidiaries plus (a) all non-cash items (including, without limitation,
depreciation, depletion, amortization, deferred taxes and amortization of debt
discount) deducted in calculating net income of the Borrower and its
consolidated Subsidiaries during such period, (b) interest payments on all long
term debt net of related tax benefits, and (c) lease payments net of related tax
benefits of the Borrower and its consolidated Subsidiaries during such period,
all as determined in accordance with GAAP.
2
<PAGE>
"Consolidated Current Assets": At any date of determination, the
---------------------------
total assets of the Borrower and its Subsidiaries on a consolidated basis which
may properly be classified as current assets in conformity with GAAP.
"Consolidated Current Liabilities": At any date of determination, the
--------------------------------
Consolidated Liabilities which may properly be classified as current liabilities
in conformity with GAAP.
"Consolidated Liabilities": At any date of determination, the total
------------------------
liabilities of the Borrower and its Subsidiaries on a consolidated basis
determined in accordance with GAAP (including, without limitation, (1) any
balance sheet liability with respect to a Pension Plan recognized pursuant to
Financial Accounting Standards Board Statements 87 or 88 and (2) any withdrawal
liability under Section 4201 of ERISA with respect to a withdrawal from a
Multiemployer Plan, as such liability may be set forth in a notice of withdrawal
liability under Section 4219 (and as adjusted from time to time subsequent to
the date of such notice)).
"Consolidated Tangible Net Worth": At any date of determination, the
-------------------------------
sum of the capital stock and additional paid-in capital plus retained earnings
(or minus accumulated deficit) of the Borrower and its consolidated Subsidiaries
minus intangible assets (including, without limitation, franchises, patents,
patent applications, trademarks, brand names, goodwill and research and
development expenses), on a consolidated basis determined in conformity with
GAAP.
"Consolidated Working Capital": At any date of determination, the
----------------------------
Consolidated Current Assets minus the Consolidated Current Liabilities.
"Debt": As applied to any Person, (i) all indebtedness for borrowed
----
money, (ii) that portion of obligations with respect to Capital Leases which is
properly classified as a liability on a balance sheet in conformity with GAAP,
(iii) notes payable and drafts accepted representing extensions of credit
whether or not representing obligations for borrowed money, (iv) any obligation
owed for all or any part of the deferred purchase price of property or services
which purchase price is (y) due more than six months from the date of incurrence
of the obligation in respect thereof, or (z) evidenced by a note or similar
written instrument, and (v) all indebtedness secured by any Lien on any
3
<PAGE>
property or asset owned or held by that Person regardless of whether the
indebtedness secured thereby shall have been assumed by that Person or is
non-recourse to the credit of that person.
"Debt Service": In respect of any period, the sum, without
------------
duplication, of the Borrower's consolidated (a) interest expense (including,
that attributable to Capital Leases in accordance with GAAP) net of related tax
benefits, (b) lease payments net of related tax benefits, (c) dividends on
preferred stock, and (d) the amortization of Debt, including that portion of
rental payments with respect to Capital Leases which is or should be applied as
a reduction to the principal of such Capital Leases in accordance with GAAP.
"Dollars and $": Dollars in lawful currency of the United States of
-------------
America.
"Employee Benefit Plan": Any Pension Plan, any employee welfare
---------------------
benefit plan, or any other employee benefit plan which is described in Section
3(3) of ERISA and which is maintained for employees of the Borrower or any ERISA
affiliate of the Borrower.
"ERISA": The Employee Retirement Income Security Act of 1974, as
-----
amended from time to time and any successor statute.
"ERISA Affiliate": As applied to any Person, any trade or business
---------------
(whether or not incorporated) which is a member of a group of which that
Person is a member and which is under common control within the meaning of
Section 414(b) and (c) of the Internal Revenue Code.
"GAAP": Generally accepted accounting principles set forth in the
----
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession.
"Interest Payment Date": As to any Prime Rate Loan until payment in
---------------------
full, the Maturity Date and the last day of each month commencing on the first
of such days to occur after a Prime Rate Loan is made. As to any CD Rate Loan
or LIBO Rate Loan with an Interest Period of 30 days or one month, as the case
may be,
4
<PAGE>
or less, the last day of such Interest Period and the Maturity Date, and
as to any CD Rate Loan or LIBO Rate Loan with an Interest Period in excess of 30
days or one month, as the case may be, (i) the last day of each month following
the beginning of such Interest Period, (ii) the last day of such Interest Period
and (iii) the Maturity Date.
"Interest Period":
---------------
With respect to any CD Rate Loan:
(i) initially, the period commencing on, as the case may be, the
Borrowing or conversion date with respect to such CD Rate Loan and ending
30, 60 or 90 days thereafter, as selected by the Borrower in its notice of
Borrowing as provided in Section 2.01(b) or its notice of conversion as
provided in Section 2.04; and
(ii) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such CD Rate Loan and ending 30, 60
or 90 days thereafter, as selected by the Borrower in its notice of
continuation as provided in Section 2.04;
With respect to any LIBO Rate Loan:
(i) initially, the period commencing on, as the case may be, the
Borrowing or conversion date with respect to such LIBO Rate Loan and ending
one, two or three months thereafter as selected by the Borrower in its
notice of Borrowing as provided in Section 2.01(b) or its notice of
conversion as provided in Section 2.04; and
(ii) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such LIBO Rate Loan and ending one,
two or three months thereafter as selected by the Borrower in its notice of
continuation as provided in Section 2.04;
provided, that all of the foregoing provisions relating to Interest Periods are
- - --------
subject to the following:
(a) if any Interest Period for a CD Rate Loan would otherwise end on a
day which is not a Business Day, that Interest
5
<PAGE>
Period shall be extended to end on the next succeeding Business Day;
(b) if any Interest Period for a LIBO Rate Loan would otherwise end on
a day which is not a LIBO Business Day, that Interest Period shall be extended
to the next succeeding LIBO Business Day unless the result of such extension
would be to carry such Interest Period into another calendar month in which
event such Interest Period shall end on the immediately preceding LIBO Business
Day;
(c) the Borrower may not select an Interest Period with respect to any
portion of principal of a CD Rate Loan or a LIBO Rate Loan which extends beyond
a date on which the Borrower is required to make a scheduled payment of that
portion of principal; and
(d) there shall be no more than six Interest Periods (including all CD
Rate Loans and LIBO Rate Loans or a combination thereof) outstanding at any
time.
"Internal Revenue Code": The Internal Revenue Code of 1986, as
---------------------
amended to the date hereof and from time to time hereafter.
"Lease": That lease by and between Borrower, as lessor, and Los
-----
Angeles Turf Club, Incorporated, a California corporation, as lessee, dated
January 1, 1980, as amended and restated as of November 9, 1994.
"LIBO Business Day": A day which is a Business Day and on which
-----------------
dealings in Dollar deposits may be carried out in the London interbank market.
"LIBO Rate": For each Interest Period (i) the rate of interest
---------
determined by the Bank at which deposits for the relevant Interest Period would
be offered to the Bank in the approximate amount of the relevant LIBO Rate Loan
in the London interbank market upon request of the Bank at 11:00 A.M. (London
time) on the day which is two LIBO Business Days prior to the first day of such
Interest Period, divided by (ii) a number equal to 1.00 minus the aggregate (but
without duplication) of the rates (expressed as a decimal fraction) of reserve
requirements in effect on the day which is two LIBO Business Days prior to the
beginning of such Interest Period (including, without limitation,
6
<PAGE>
basic, supplemental, marginal and emergency reserves under any regulations of
the Board of Governors of the Federal Reserve System or other governmental
authority having jurisdiction with respect thereto, as in effect at the time the
Bank quotes the rate to the Borrower) for Eurocurrency funding of domestic
assets (currently referred to as "Eurocurrency liabilities" in Regulation D of
such Board) which are required to be maintained by a member bank of such System
(such rate to be adjusted to the next higher 1/16 of 1%).
"LIBO Rate Loans": Loans hereunder at such time as they accrue
---------------
interest at a rate based upon the LIBO Rate.
"Lien": Any lien, mortgage, deed of trust, pledge, security interest,
----
charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof, and any agreement to give
any security interest).
"Loans": Loans made to the Borrower pursuant to Section 2.01.
-----
"Loan Documents": This Agreement, the Note(s) and the Assignment of
--------------
Lease, and such other documents required by the Bank in connection with this
Agreement and/or the credit extended hereunder.
"Maturity Date": The earlier to occur of: (i) one year after the
-------------
date of the Note, or (ii) November 30, 1995.
"Multiemployer Plan": A "multiemployer plan" as defined in Section
------------------
4001(a)(3) of ERISA which is maintained for employees of the Borrower or any
ERISA Affiliate of the Borrower.
"Note" and "Notes": The Revolving Note(s).
---- -----
"Operating Company": Santa Anita Operating Company, a Delaware
-----------------
corporation.
"Pension Plan": Any employee plan which is subject to Section 412 of
------------
the Internal Revenue Code and which is maintained for employees of the Borrower
or any ERISA Affiliate of the Borrower, other than a Multiemployer Plan.
7
<PAGE>
"Person": An individual, partnership, corporation, business trust,
------
joint stock company, trust, unincorporated association, joint venture,
governmental authority or other entity of whatever nature.
"Potential Event of Default": A condition or event which, after
--------------------------
notice or lapse of time or both, would constitute an Event of Default if that
condition or event were not cured or removed within any applicable grace or cure
period.
"Prime Rate": The index rate of interest established from time to
----------
time by the Bank in connection with the pricing of certain of its loans. The
Bank may make loans priced at, above or below the Prime Rate. Information
concerning the Prime Rate may be obtained from the Bank.
"Prime Rate Loans": Loans hereunder at such time as they accrue
----------------
interest at a rate based upon the Prime Rate.
"Regulation G, T, U and X": Regulations G, T, U and X, respectively,
------------------------
promulgated by the Board of Governors of the Federal Reserve System, as amended
from time to time, and any successors thereto.
"Reserve Percentage": For any day, the percentage (expressed as a
------------------
decimal) which is in effect on such day as prescribed by the Board of Governors
of the Federal Reserve System (or any successor) under Regulation D or any
similar regulation, for determining the reserve requirement for the Bank in
respect of new nonpersonal time deposits in dollars having a maturity comparable
to the relevant Interest Period for any CD Rate Loan and in an amount of
$100,000 or more.
"Revolving Commitment": The amount of $30,000,000, as such amount may
--------------------
be reduced pursuant to Section 2.01(d).
"Revolving Loans": As defined in Section 2.01(a).
---------------
"Revolving Note": As defined in Section 2.01(e).
--------------
"S.E.C.": The United States Securities and Exchange Commission and
------
any successor institution or body which performs the functions or substantially
all of the functions thereof.
8
<PAGE>
"Subsidiary": A corporation of which shares of stock having ordinary
----------
voting power (other than stock having such power only by reason of the happening
of a contingency) to elect a majority of the board of directors or other
managers of such corporation are at the time owned, directly, or indirectly
through one or more intermediaries, or both, by the Borrower.
"Termination Event": (i) a "Reportable Event" described in Section
-----------------
4043 of ERISA and the regulations issued thereunder (other than a "Reportable
Event" not subject to the provision for 30-day notice to the Pension Benefit
Guaranty Corporation under such regulations), or (ii) the withdrawal of the
Borrower or any of its ERISA Affiliates from a Pension Plan during a plan year
in which it was a "substantial employer" as defined in Section 4001(1)(2) or
4068(f) of ERISA, or (iii) the filing of a notice of intent to terminate a
Pension Plan or the treatment of a Pension Plan amendment as a termination under
Section 4041 of ERISA, or (iv) the institution of proceedings to terminate a
Pension Plan by the Pension Benefit Guaranty Corporation, (v) any other event or
condition which might constitute grounds under ERISA for the termination of, or
the appointment of a trustee to administer, any Pension Plan, or (vi) the
imposition of a lien pursuant to Section 412(n) of the Internal Revenue Code.
SECTION 1.02. Other Definitional Provisions.
-----------------------------
(a) All terms defined in this Agreement shall have the defined
meanings when used in the Notes or any certificate or other document made or
delivered pursuant hereto.
(b) As used herein and in the Notes, and any certificate or other
document made or delivered pursuant hereto, accounting terms not defined in
subsection 1.01, and accounting terms partly defined in subsection 1.01 to the
extent not defined, shall have the respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and section, subsection,
schedule and exhibit references are to this Agreement unless otherwise
specified.
9
<PAGE>
(d) So long as the Borrower does not have any Subsidiaries, references
to a Subsidiary or Subsidiaries in this Agreement shall be deemed to be deleted.
ARTICLE II
THE LOANS
SECTION 2.01. The Revolving Loans.
-------------------
(a) The Revolving Commitment. The Bank agrees, on the terms and
------------------------
conditions hereinafter set forth, to make loans ("Revolving Loans") to the
Borrower from time to time during the period from the date hereof to and
including the Maturity Date in an aggregate amount not to exceed the Revolving
Commitment, as such amount may be reduced pursuant to Section 2.01(d). Each
borrowing under this Section (a "Borrowing") consisting of a CD Rate Loan or a
LIBO Rate Loan shall be in a minimum amount of $500,000 or an integral multiple
of $100,000 above such amount, and Prime Rate Loans may be in any amount.
Within the limits of the Revolving Commitment and prior to the Maturity Date,
the Borrower may borrow, repay pursuant to Section 2.02(b) and reborrow under
this Section.
(b) Making the Revolving Loans. The Borrower may borrow under the
--------------------------
Revolving Commitment on any Business Day if the Borrowing is to consist of a
Prime Rate Loan or CD Rate Loan and on any LIBO Business Day if the Borrowing is
to consist of a LIBO Rate Loan, provided that the Borrower shall give the Bank
irrevocable notice (which notice must be received by the Bank prior to 11:00
A.M., Los Angeles time) (i) three LIBO Business Days prior to the requested
Borrowing date in the case of a LIBO Rate Loan, and (ii) on or before the
requested Borrowing date in the case of a Prime Rate Loan or a CD Rate Loan,
specifying (A) the amount of the proposed Borrowing, (B) the requested date of
the Borrowing, (C) whether the Borrowing is to consist of a CD Rate Loan, a LIBO
Rate Loan or a Prime Rate Loan, and (D) if the Loan is to be a LIBO Rate Loan or
a CD Rate Loan, the length of the Interest Period therefor. Upon satisfaction of
the applicable conditions set forth in Article IV, the proceeds of all such
Loans will then be made available to the Borrower by the Bank by crediting the
account of the Borrower on the books of the Bank, or as otherwise directed by
the Borrower.
10
<PAGE>
The notice of Borrowing may be given orally (including telephonically)
or in writing (including telex or facsimile transmission) and any conflict
regarding a notice or between an oral notice and a written notice applicable to
the same Borrowing shall be conclusively determined by the Bank's books and
records. The Bank's failure to receive any written notice of a particular
Borrowing shall not relieve the Borrower of its obligations to repay the
Borrowing made and to pay interest thereon. The Bank shall not incur any
liability to the Borrower in acting upon any notice of Borrowing which the Bank
believes in good faith to have been given by a Person duly authorized to borrow
on behalf of the Borrower.
(c) Commitment Fee. The Bank hereby acknowledges that the Borrower
--------------
has paid to the Bank a non-refundable commitment fee on the Revolving Commitment
in the amount of $83,750.00.
(d) Reduction of the Revolving Commitment. The Borrower shall have
-------------------------------------
the right, upon at least two Business Days' notice to the Bank, to terminate in
whole or reduce in part the unused portion of the Revolving Commitment, without
premium or penalty, provided that each partial reduction shall be in the
aggregate amount of $100,000 or an integral multiple thereof and that such
reduction shall not reduce the Revolving Commitment to an amount less than the
amount outstanding hereunder on the effective date of the reduction. Such
notice shall be irrevocable and such reduction shall not be reinstated.
(e) Revolving Note. The Loans made by the Bank pursuant hereto shall
--------------
be evidenced by a promissory note of the Borrower, substantially in the form of
Exhibit A, with appropriate insertions (the "Revolving Note"), payable to the
order of the Bank and representing the obligation of the Borrower to pay the
aggregate unpaid principal amount of all Revolving Loans made by the Bank, with
interest thereon as prescribed in Section 2.03. The Bank is hereby authorized
to record in its books and records and on any schedule annexed to the Revolving
Note, the date and amount of each Revolving Loan made by the Bank, and the date
and amount of each payment of principal thereof, and in the case of CD Rate
Loans and LIBO Rate Loans, the Interest Period and interest rate with respect
thereto, and any such recordation shall constitute prima facie evidence of the
----- -----
accuracy of the information so recorded; provided that failure by the Bank to
effect such recordation shall not affect the Borrower's obligations hereunder.
Prior to the transfer of a
11
<PAGE>
Revolving Note, the Bank shall record such information on any schedule annexed
to and forming a part of such Revolving Note.
SECTION 2.02. Repayment.
---------
(a) Mandatory Repayments. The aggregate principal amount of the
--------------------
Revolving Loans outstanding on the Maturity Date, together with accrued interest
thereon, shall be due and payable in full on the Maturity Date. If at any time
the aggregate outstanding Borrowings exceed the Revolving Commitment then in
effect, the Borrower shall immediately repay the excess to the Bank.
(b) Optional Payment. The Borrower may at its option pay the Loans,
----------------
in whole or in part, on any Business Day from time to time, provided the Bank
shall have received from the Borrower notice of any such payment at least one
Business Day prior to the date of the proposed payment if such date is not the
last day of the then current Interest Period for each Loan being paid, in each
case specifying the date and the amount of payment. For Prime Rate Loans, each
day shall be defined as and constitute an "Interest Period." Partial payments
hereunder shall be in an aggregate principal amount of not less than the lesser
of (a) $50,000 or any whole multiple thereof and (b) the outstanding balance of
the Loan being paid.
SECTION 2.03. Interest Rate and Payment Dates.
-------------------------------
(a) Payment of Interest. Interest with respect to each Loan shall be
-------------------
payable in arrears on each Interest Payment Date for such Loan. In no event
shall interest on a Loan exceed the maximum rate permitted by applicable law.
(b) Prime Rate Loans. Revolving Loans which are Prime Rate Loans
----------------
shall bear interest on the unpaid principal amount thereof at a rate per annum
equal to the Prime Rate.
(c) CD Rate Loans. Revolving Loans which are CD Rate Loans shall bear
-------------
interest for each Interest Period with respect thereto on the unpaid principal
amount thereof at a rate per annum equal to the CD Rate determined for such
Interest Period plus (i) from the date hereof through the Maturity Date, one
percent (1%).
12
<PAGE>
(d) LIBO Rate Loans. Revolving Loans which are LIBO Rate Loans shall
---------------
bear interest for each Interest Period with respect thereto on the unpaid
principal amount thereof at a rate per annum equal to the LIBO Rate determined
for such Interest Period in accordance with the terms hereof plus, from the date
hereof through the Maturity Date, one percent (1%).
SECTION 2.04. Continuation and Conversion Options. The Borrower may
-----------------------------------
elect from time to time to convert its outstand ing Loans from Loans bearing
interest at a rate determined by reference to one basis to Loans bearing
interest at a rate determined by reference to an alternative basis by giving the
Bank (i) irrevocable notice of an election to convert Loans to Loans other than
LIBO Rate Loans and (ii) at least three LIBO Business Days' prior irrevocable
notice of an election to convert Loans to LIBO Rate Loans, provided that any
conversion of Loans other than Prime Rate Loans shall only be made on the last
day of an Interest Period with respect thereto, provided further that no Loan
may be converted to a Loan other than a Prime Rate Loan so long as an Event of
Default or Potential Event of Default has occurred and is continuing. The
Borrower may elect from time to time to continue its outstanding Loans other
than Prime Rate Loans upon the expiration of the Interest Period(s) applicable
thereto by giving to the Bank irrevocable notice of continuation of such a Loan
other than a LIBO Rate Loan and at least three LIBO Business Days' prior
irrevocable notice of continuation of a LIBO Rate Loan, provided that no Loan
may be continued as a Loan other than a Prime Rate Loan so long as an Event of
Default or Potential Event of Default has occurred and is continuing. Each
notice electing to convert or continue a Loan shall specify: (i) the proposed
conversion/continuation date; (ii) the amount of the Loan to be
converted/continued; (iii) the nature of the proposed continuation/conversion;
and (iv) in the case of a conversion to, or continuation of a Loan other than a
Prime Rate Loan, the requested Interest Period, and shall certify that no Event
of Default or Potential Event of Default has occurred and is continuing. On the
date on which such conversion or continuation is being made the Bank shall take
such action as is necessary to effect such conversion or continuation. In the
event that no notice of continuation or conversion is received by the Bank with
respect to outstanding Loans other than Prime Rate Loans, upon expiration of the
Interest Period(s) applicable thereto, such Loans shall convert to Prime Rate
Loans. Subject to the limitations set forth in this Section and in the
definition of Interest Period, all or any part of outstanding
13
<PAGE>
Loans may be converted or continued as provided herein, provided that partial
conversions or continuations with respect to Loans other than Prime Rate Loans
shall be in an aggregate minimum amount of $500,000 and integral multiples of
$100,000.
SECTION 2.05 Security for Loans. As security for the payment and
------------------
performance of its obligations hereunder, the Borrower hereby grants to the Bank
a security interest in all of the Borrower's right, title and interest in an to
the collateral described in any security agreement or financing statement
executed by the Borrower in favor of the Bank, including without limitation that
certain Assignment of Lease attached hereto as Exhibit B.
ARTICLE III
GENERAL PROVISIONS CONCERNING THE LOANS
SECTION 3.01. Use of Proceeds. The proceeds of the Loans hereunder
---------------
shall be used by the Borrower for refinancing existing working capital debt and
for general corporate purposes.
SECTION 3.02. Post Maturity Interest. Notwithstanding anything to
----------------------
the contrary contained in Section 2.03, if all or a portion of the principal
amount of any of the Loans made hereunder or any interest accrued thereon shall
not be paid when due (whether at the stated maturity, by acceleration or
otherwise), any such overdue amount shall bear interest at a rate per annum
which is equal to the greater of (a) two percent (2%) above the highest rate
which would otherwise be applicable pursuant to Section 2.03 and (b) three
percent (3%) above the Prime Rate, from the date of such nonpayment until paid
in full (after as well as before judgment), payable on demand. In addition,
such Loan, if a Loan other than a Prime Rate Loan, shall be converted to a Prime
Rate Loan at the end of the then current Interest Period therefor.
SECTION 3.03. Computation of Interest and Fees.
--------------------------------
(a) Calculations. Interest in respect of the Prime Rate Loans shall
------------
be calculated on the basis of a 360 day year for the actual days elapsed. Any
change in the interest rate on a Prime Rate Loan resulting from a change in the
Prime Rate shall
14
<PAGE>
become effective as of the opening of business on the day on which such change
in the Prime Rate shall become effective. CD Rate Loans and LIBO Rate Loans
shall be calculated on the basis of a 360 day year for the actual days elapsed.
(b) Determination by Bank. Each determination of an interest rate or
---------------------
fee by the Bank pursuant to any provision of this Agreement shall be conclusive
and binding on the Borrower in the absence of manifest error.
SECTION 3.04. Payments. The Borrower shall make each payment of
--------
principal, interest and fees hereunder and under the Notes, without setoff or
counterclaim, not later than 2:00 P.M. (Los Angeles time) on the day when due in
lawful money of the United States of America to the Bank at the office of the
Bank designated from time to time in immediately available funds.
SECTION 3.05. Payment on Non-Business Days. Whenever any payment to
----------------------------
be made hereunder or under the Notes shall be stated to be due on a day which is
not a Business Day, such payment may be made on the next succeeding Business
Day, and with respect to payments of principal, interest thereon shall be
payable at the then applicable rate during such extension.
SECTION 3.06. Reduced Return. If the Bank shall have determined that
--------------
any applicable law, regulation, rule or regulatory requirement (collectively in
this Section 3.06 "Requirement") regarding capital adequacy, or any change
therein, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Bank with any
request or directive regarding capital adequacy (whether or not having the force
of law) of any such authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on the Bank's capital as a
consequence of its Commitments and obligations hereunder to a level below that
which would have been achieved but for such Requirement, change or compliance
(taking into consideration the Bank's policies with respect to capital adequacy)
by an amount deemed by the Bank to be material (which amount shall be determined
by the Bank's reasonable allocation of the aggregate of such reductions
resulting from such events), then from time to time, within five (5) Business
Days after demand by the Bank, the Borrower shall pay to the Bank such
15
<PAGE>
additional amount or amounts as will compensate the Bank for such reduction.
SECTION 3.07.(a) Indemnities. Whether or not the transactions
-----------
contemplated hereby shall be consummated, the Borrower agrees to indemnify, pay
and hold the Bank, and the shareholders, officers, directors, employees and
agents of the Bank, harmless from and against any and all claims, liabilities,
losses, damages, costs and expenses (whether or not any of the foregoing
indemnified Persons is a party to any litigation), including, without
limitation, reasonable attorneys' fees and costs (including, without limitation,
the reasonable estimate of the allocated cost of in-house legal counsel and
staff) and costs of investigation, document production, attendance at a
deposition, or other discovery, with respect to or arising out of any proposed
acquisition by the Borrower or any of its Subsidiaries of any Person or any
securities (including a self-tender), this Agreement or any use of proceeds
hereunder, or any claim, demand, action or cause of action being asserted
against the Borrower or any of its Subsidiaries (collectively, the "Indemnified
Liabilities"), provided that the Borrower shall have no obligation hereunder
with respect to Indemnified Liabilities arising from the gross negligence or
willful misconduct of any such indemnified Persons. If any claim is made, or
any action, suit or proceeding is brought, against any Person indemnified
pursuant to this Section, the indemnified Person shall notify the Borrower of
such claim or of the commencement of such action, suit or proceeding, and the
Borrower will assume the defense of such action, suit or proceeding, employing
counsel selected by the Borrower and reasonably satisfactory to the indemnified
Person, and pay the fees and expenses of such counsel. This covenant shall
survive termination of this Agreement and payment of the outstanding Notes.
(b) Funding Losses. The Borrower agrees to indemnify the Bank and to
--------------
hold the Bank harmless from any loss or expense including, but not limited to,
any such loss or expense arising from interest or fees payable by the Bank to
lenders of funds obtained by it in order to maintain its CD Rate Loans or LIBO
Rate Loans hereunder, which the Bank may sustain or incur as a consequence of
(i) default by the Borrower in payment of the principal amount of or interest on
the CD Rate Loans or LIBO Rate Loans of the Bank, (ii) default by the Borrower
in making a conversion or continuation after the Borrower has given a notice
16
<PAGE>
thereof, (iii) default by the Borrower in making any payment after the Borrower
has given a notice of payment or (iv) the Borrower making any payment of a CD
Rate Loan or a LIBO Rate Loan on a day other than the last day of the Interest
Period for such Loan. For purposes of this Section and Section 3.10, it shall be
assumed that the Bank had funded or would have funded 100%, as the case may be,
of each CD Rate Loan by the acceptance of a non-personal time deposit for a
corresponding amount and term or of each LIBO Rate Loans in the London interbank
market for a corresponding amount and term. In the event of a payment set forth
in (iv) above, the amount payable to the Bank shall be reduced by an amount
equal to a reinvestment interest rate one sixteenth of one percent (.0625%) less
than the rate of interest generally available to the Bank at the time of the
payment for a period of time approximately equal to the period remaining on the
then applicable Interest Period and for an amount approximately equal to the
amount of the payment. The determination of such amount by the Bank shall be
presumed correct in the absence of manifest error. This covenant shall survive
termination of this Agreement and payment of the outstanding Notes.
SECTION 3.08. Funding Sources. Nothing in this Agreement shall be
---------------
deemed to obligate the Bank to obtain the funds for any Loan in any particular
place or manner or to constitute a representation by the Bank that it has
obtained or will obtain the funds for any Loan in any particular place or
manner.
SECTION 3.09. Inability to Determine Interest Rate. In the event
------------------------------------
that the Bank shall have determined (which determination shall be conclusive and
binding upon the Borrower) that by reason of circumstances affecting the
domestic certificate of deposit market or the interbank LIBOR market, as the
case may be, adequate and reasonable means do not exist for ascertaining the CD
Rate or the LIBO Rate applicable pursuant to Section 2.03 for any Interest
Period with respect to a CD Rate Loan or LIBO Rate Loan that will result from a
requested CD Rate Loan or LIBO Rate Loan or that such rate of interest does not
adequately cover the cost of funding such Loan, the Bank shall forthwith give
notice of such determination to the Borrower not later than 1:00 P.M., Los
Angeles time, on the requested Borrowing date, the requested conversion date or
the last day of an Interest Period of a Loan which was to have been continued as
a CD Rate Loan or LIBO Rate Loan. If such notice is given and has not been
withdrawn (i) any requested CD Rate Loan or LIBO
17
<PAGE>
Rate Loan, as the case may be, shall be made as a Prime Rate Loan, or, at the
Borrower's option, such Loan shall not be made, (ii) any Loan that was to have
been converted to a CD Rate Loan or a LIBO Rate Loan, as the case may be, shall
be continued as, or converted into, a Prime Rate Loan and (iii) any outstanding
CD Rate Loan or LIBO Rate Loan, as the case may be, shall be converted, on the
last day of the then current interest Period with respect thereto, to a Prime
Rate Loan. Until such notice has been withdrawn by the Bank, no further CD Rate
Loans or LIBO Rate Loans, as the case may be, shall be made and the Borrower
shall not have the right to convert a Loan to a CD Rate Loan or a LIBO Rate
Loan. The Bank will review the circumstances affecting the domestic certificate
of deposit market and the interbank LIBO market from time to time and the Bank
will withdraw such notice at such time as it shall determine that the
circumstances giving rise to said notice no longer exist.
SECTION 3.10. Requirements of Law. In the event that any law,
-------------------
regulation or directive or any change therein or in the interpretation or
application thereof or compliance by the Bank with any request or directive
(whether or not having the force of law) from any central bank or other
governmental authority, agency or instrumentality:
(a) does or shall subject the Bank to any tax of any kind whatsoever
with respect to this Agreement, any Note or any Loan made hereunder, or change
the basis of taxation of payments to the Bank of principal, commitment fee,
interest or any other amount payable hereunder (except for changes in the rate
of tax on the overall net income of the Bank);
(b) does or shall impose, modify or hold applicable any reserve,
assessment rate, special deposit, compulsory loan or other requirement
(collectively in this Section 3.10 "Require ments") against assets held by, or
deposits or other liabilities in or for the account of, advances or loans by, or
other credit extended by, or any other acquisition of funds by, or other credit
extended by, or any other acquisition of funds by, any office of the Bank which
Requirements are not otherwise included in the determination of any CD Rate or
LIBO Rate at the last Borrowing, conversion or continuation date of a Loan;
(c) does or shall impose, modify or hold applicable any of the
Requirements against Commitments to extend credit;
18
<PAGE>
(d) does or shall impose on the Bank any other condition;
and the result of any of the foregoing is to increase the cost to the Bank of
making, renewing or maintaining its Revolving Commitment, CD Rate Loans or the
LIBO Rate Loans or to reduce any amount receivable thereunder (which increase or
reduction shall be determined by the Bank's reasonable allocation of the
aggregate of such cost increases or reduced amounts receivable resulting from
such events), then, in any such case, the Borrower shall pay to the Bank, within
three Business Days of its demand, any additional amounts necessary to
compensate the Bank for such additional cost or reduced amount receivable as
determined by the Bank with respect to this Agreement. If the Bank becomes
entitled to claim any additional amounts pursuant to this subsection, it shall
notify the Borrower of the event by reason of which it has become so entitled. A
statement incorporating the calculation as to any additional amounts payable
pursuant to the foregoing sentence submitted by the Bank to the Borrower shall
be conclusive in the absence of manifest error.
SECTION 3.11. Illegality. Notwithstanding any other provisions
----------
herein, if any law, regulation, treaty or directive or any change therein or in
the interpretation or application thereof, shall make it unlawful, impossible or
impracticable for the Bank to make or maintain LIBO Rate Loans as contemplated
by this Agreement, (a) the commitment of the Bank hereunder to make LIBO Rate
Loans or convert Prime Rate Loans or CD Rate Loans to LIBO Rate Loans shall
forthwith be cancelled and (b) the Bank's Loans then outstanding as LIBO Rate
Loans, if any, shall be converted automatically to Prime Rate Loans on the next
succeeding Interest Payment Date or within such earlier period as allowed by
law. The Borrower hereby agrees to pay the Bank, within three Business Days of
its demand, any additional amounts necessary to compensate the Bank for any
costs incurred by the Bank in making any conversion in accordance with this
Section, including, but not limited to, any interest or fees payable by the Bank
to lenders of funds obtained by it in order to make or maintain its LIBO Rate
Loans hereunder (the Bank's notice of such costs, as certified to the Borrower
to be conclusive absent manifest error).
ARTICLE IV
19
<PAGE>
CONDITIONS OF LENDING
SECTION 4.01. Conditions Precedent to Initial Loans. The obligation
-------------------------------------
of the Bank to make its initial Loan is subject to the conditions precedent
that:
(a) The Bank shall have received on or before the day of the initial
Borrowing the following, each dated such day (except for the document referred
to in clause (ii)), in form and substance satisfactory to the Bank:
(i) The Note(s) issued by the Borrower to the order of the Bank;
(ii) Copies of the Articles, Certificate of Incorporation,
partnership agreement or other organizational document of the Borrower,
certified as of a recent date by the Secretary of State of its state of
formation or incorporation;
(iii) Copies of the Bylaws, if any, of the Borrower, certified
by the Secretary or an Assistant Secretary of the Borrower;
(iv) Copies of resolutions of the Board of Directors or other
authorizing documents of the Borrower, in form and substance satisfactory to the
Bank, approving the Loan Documents and the Borrowings hereunder;
(v) An incumbency certificate executed by the Secretary or an
Assistant Secretary of the Borrower or equivalent document, certifying the names
and signatures of the officers of the Borrower or other Persons authorized to
sign the Loan Documents and the other documents to be delivered hereunder;
(vi) Executed copies of all Loan Documents;
(vii) A favorable opinion of counsel to the Borrower, in the
form of Exhibit C hereto, and as to such other matters as the Bank may
reasonably request;
(viii) Executed copies of the Assignment of Lease together
with: (w) all appropriate resolutions, incumbency certificates and other
authorizing documents as the Bank may request; (y) evidence satisfactory to
the Bank that all other filings, recordings, and other actions the Bank deems
necessary
20
<PAGE>
or advisable to establish, preserve and perfect the Liens granted to the Bank in
real or personal property shall have been made or obtained; and
(b) All corporate and legal proceedings and all instruments and
documents in connection with the transactions contemplated by this Agreement
shall be reasonably satisfactory in content, form and substance to the Bank and
its counsel, and the Bank and such counsel shall have received any and all
further information and documents which the Bank or such counsel may reasonably
have requested in connection therewith, such documents where appropriate to be
certified by proper corporate or governmental authorities.
SECTION 4.02. Conditions Precedent to Each Borrowing. The obligation
--------------------------------------
of the Bank to make a Loan on the occasion of each Borrowing (including the
initial Borrowing) shall be subject to the further conditions precedent that on
the date of such Borrowing (a) the following statements shall be true and the
Bank shall have received the notice required by Section 2.01(b), which notice
shall be deemed to be a certification by the Borrower that:
(i) The representations and warranties contained in Section
5.01 are correct on and as of the date of such Borrowing as though
made on and as of such date,
(ii) No event has occurred and is continuing, or would result
from such Borrowing, which constitutes an Event of Default or
Potential Event of Default, and
(iii) All Loan Documents are in full force and effect,
and (b) the Bank shall have received such other approvals, opinions or documents
as the Bank may reasonably request.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.01. Representations and Warranties. The Borrower
------------------------------
represents and warrants as follows:
21
<PAGE>
(a) Organization. The Borrower is duly organized, validly existing
------------
and in good standing under the laws of the state of its formation. The Borrower
is also duly authorized, qualified and licensed in all applicable jurisdictions,
and under all applicable laws, regulations, ordinances or orders of public
authorities, to carry on its business in the locations and in the manner
presently conducted, except where the failure to so qualify or be licensed will
not result in a material adverse effect on Borrower's financial condition.
(b) Authorization. The execution, delivery and performance by the
-------------
Borrower of the Loan Documents, and the making of Borrowings hereunder, are
within the Borrower's corporate or partnership powers, as the case may be, have
been duly authorized by all necessary corporate or partnership action, as the
case may be, and do not contravene (i) the Borrower's charter, by-laws or other
organizational document or (ii) any law or regulation (including Regulations G,
T, U and X) or any contractual restriction binding on or affecting the Borrower.
(c) Governmental Consents. No authorization or approval or other
---------------------
action by, and no notice to or filing with, any governmental authority or
regulatory body (except filings required under the Loan Documents to perfect
security interests granted to the Bank and routine reports required pursuant to
the Securities Exchange Act of 1934, as amended, which reports will be made in
the ordinary course of business) is required for the due execution, delivery and
performance by the Borrower of the Loan Documents.
(d) Validity. The Loan Documents are the binding obligations of the
--------
Borrower or other executing Person, if any, enforceable in accordance with their
respective terms; except in each case as such enforceability may be limited by
bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar
laws of general application and equitable principles relating to or affecting
creditors' rights.
(e) Financial Condition. The balance sheets of the Borrower and its
-------------------
consolidated Subsidiaries as at December 31, 1993, and for the nine (9) months
ended September 30, 1994, and the related statements of operations and cash
flows of the Borrower and its consolidated Subsidiaries for the fiscal year and
fiscal quarter then ended, copies of which have been furnished to the Bank,
fairly present the financial condition of
22
<PAGE>
the Borrower and its consolidated Subsidiaries as at such dates and the results
of the operations of the Borrower and its consolidated Subsidiaries for the
respective periods ended on such dates, all in accordance with GAAP,
consistently applied, and since September 30, 1994, there has been no material
adverse change in the business, operations, properties, assets or condition
(financial or otherwise) of the Borrower and its Subsidiaries, taken as a whole.
(f) Litigation. Except as set forth on Schedule 5.01(f) hereto, there
----------
is no pending or threatened action or proceeding affecting the Borrower or any
of its Subsidiaries before any court, governmental agency or arbitrator, which
may materially adversely affect the consolidated financial condition or
operations of the Borrower or which may have a material adverse effect on the
Borrower's ability to perform its obligations under the Loan Documents, having
regard for its other financial obligations.
(g) Employee Benefit Plans. The Borrower and each of its ERISA
----------------------
Affiliates is in compliance in all material respects with any applicable
provisions of ERISA and the regulations and published interpretations thereunder
with respect to all Employee Benefit Plans. No Termination Event has occurred
or is reasonably expected to occur with respect to any Pension Plan that could
result in a material liability to the Borrower. The excess of the actuarial
present value of all benefit liabilities under all Pension Plans (excluding in
such computation Pension Plans with assets greater than benefit liabilities)
over the fair market value of the assets allocable to such benefit liabilities
are not greater than five percent (5%) of Consolidated Tangible Net Worth. For
purposes of the preceding sentence, the terms "actuarial present value" and
"benefit liabilities" shall have the meanings specified in Section 4001 of
ERISA.
(h) Disclosure. No representation or warranty of the Borrower
----------
contained in this Agreement or any other document, certificate or written
statement furnished to the Bank by or on behalf of the Borrower for use in
connection with the transactions contemplated by this Agreement contains any
untrue statement of a material fact or omits to state a material fact (known to
the Borrower in the case of any document not furnished by it) necessary in order
to make the statements contained herein or therein not misleading. There is no
fact known to the Borrower (other than matters of a general economic nature)
which
23
<PAGE>
materially adversely affects the business, operations, property, assets or
condition (financial or otherwise) of the Borrower and its Subsidiaries, taken
as a whole, which has not been disclosed herein or in such other documents,
certificates and statements furnished to the Bank for use in connection with
the transactions contemplated hereby.
(i) Margin Stock. The aggregate value of all margin stock (as defined
------------
in Regulation U) directly or indirectly owned by the Borrower and its
Subsidiaries is less than 25% of the aggregate value of the Borrower's assets.
(j) Environmental Matters. Except as set forth in Schedule 5.01(j)
---------------------
hereto, neither the Borrower nor any Subsidiary, nor any of their respective
officers, employees, representatives or agents, nor, to the best of their
knowledge, any other person, has treated, stored, processed, discharged,
spilled, or otherwise disposed of any substance defined as hazardous or toxic by
any applicable federal, state or local law, rule, regulation, order or
directive, or any waste or by-product thereof, at any real property or any other
facility owned, leased or used by the Borrower or any Subsidiary, in violation
of any applicable statutes, regulations, ordinances or directives of any
governmental authority or court, which violations may result in liability to the
Borrower or any Subsidiary or any of their respective officers, employees,
representatives, agents or shareholders in an amount exceeding $100,000 for all
such violations; and the unresolved violations set forth in said Schedule will
not result in liability to the Borrower or any Subsidiary or any of their
respective officers, employees, representatives, agents or shareholders in an
amount exceeding $100,000 for all such unresolved violations. Except as set
forth in said Schedule, no employee or other person has ever made a claim or
demand against the Borrower or any Subsidiary based on alleged damage to health
caused by any such hazardous or toxic substance or by any waste or by-product
thereof; and the unsatisfied claims or demands against the Borrower or any
Subsidiary set forth in said Schedule will not result in uninsured liability to
the Borrower or any Subsidiary or any of their respective officers, employees,
representatives, agents or shareholders in an amount exceeding $100,000 for all
such unsatisfied claims or demands. Except as set forth in said Schedule,
neither the Borrower nor any Subsidiary has been charged by any governmental
authority with improperly using, handling, storing, discharging or disposing of
any such hazardous
24
<PAGE>
or toxic substance or waste or by-product thereof or with causing or
permitting any pollution of any body of water; and the outstanding charges set
forth in said Schedule will not result in liability to the Borrower or any
Subsidiary or any of their respective officers, employees, representatives,
agents or shareholders in an amount exceeding $100,000 for all such outstanding
charges.
(k) Employee Matters. There is no strike or work stoppage in
----------------
existence or threatened involving the Borrower or its Subsidiaries that may
materially adversely affect the consolidated financial condition or operations
of the Borrower or that may have a material adverse effect on the Borrower's
ability to perform its obligations under the Loan Documents, having regard for
its other financial obligations.
ARTICLE VI
COVENANTS
SECTION 6.01. Affirmative Covenants. So long as any Note shall
---------------------
remain unpaid or the Bank shall have any Commitment hereunder, the Borrower
will, unless the Bank shall otherwise consent in writing:
(a) Financial Information. Furnish, or cause to be furnished, to
---------------------
the Bank:
(i) as soon as available, but in any event within 120 days after
the end of each fiscal year of the Borrower, a copy of the Borrower's
consolidated balance sheet of itself and its consolidated Subsidiaries as at the
end of each fiscal year and the related consolidated statements of operations
(or comparable statement) employed in the business and cash flows for such year,
setting forth in each case in comparative form the figures for the previous
year, accompanied by an unqualified report and opinion thereon of Kenneth
Leventhal & Company, or other independent certified public accountants
acceptable to the Bank;
(ii) as soon as available, but in any event within 45 days
after the end of each fiscal quarter, the Borrower's unaudited consolidated
balance sheet of itself and its consolidated Subsidiaries as at the end of such
25
<PAGE>
period and the related unaudited consolidated statements of operations (or
comparable statement) and cash flows for such period and year to date, setting
forth in each case in comparative form the figures as at the end of the previous
fiscal year as to the balance sheet and the figures for the previous
corresponding period as to the other statements, certified by a duly authorized
officer of the Borrower as being fairly stated in all material respects subject
to year end adjustments;
(iii) as soon as available, but in any event within 120 days after
the end of each fiscal year of the Operating Company, a copy of the Operating
Company's balance sheet as at the end of each fiscal year and the related
statements of operations (or comparable statement) employed in the business and
cash flows for such year, setting forth in each case in comparative form the
figures for the previous year, accompanied by an unqualified report and opinion
thereon of Kenneth Leventhal & Company, or other independent certified public
accountants acceptable to the Bank;
(iv) as soon as available, but in any event within 45 days after the
end of each fiscal quarter, the Operating Company's unaudited balance sheet as
at the end of such period and the related unaudited statements of operations (or
comparable statement) and cash flows for such period and year to date, setting
forth in each case in comparative form the figures as at the end of the previous
fiscal year as to the balance sheet and the figures for the previous
corresponding period as to the other statements, certified by a duly authorized
officer of the Operating Company as being fairly stated in all material respects
subject to year end adjustments;
(v) together with each delivery of financial statements of the
Borrower and its Subsidiaries pursuant to subdivisions (i) and (ii) above, (A)
an officers' certificate stating that the signers have reviewed the terms of the
Loan Documents and have made, or caused to be made under their supervision, a
review in reasonable detail of the transactions and condition of the Borrower
and its Subsidiaries during the accounting period covered by such financial
statements and that such review has not disclosed the existence during or at the
end of such accounting
26
<PAGE>
period, and that the signers do not have knowledge of the existence as at
the date of the officers' certificate, of any condition or event which
constitutes an Event of Default or Potential Event of Default, or, if any
such condition or event existed or exists, specifying the nature and period
of existence thereof and what action the Borrower has taken, is taking and
proposes to take with respect thereto; and (B) a Compliance Certificate in
the form of Exhibit D hereto demonstrating in reasonable detail compliance
during and at the end of such accounting periods with the restrictions
contained in Sections 6.02(a), (b), (c), (d), (e) and (f);
(vi) as soon as available, copies of all reports which the Borrower
sends to any of its security holders, and copies of all reports and
registration statements which the Borrower or any Subsidiary files with the
S.E.C. or any national securities exchange;
(vii) as soon as practicable, and in any event within 45 days after
the end of each fiscal quarter, commencing with the quarter ending December
31, 1994, projected consolidated balance sheets and statements of operations
(or comparable statements) and cash flows of the Borrower, its Subsidiaries,
and for Operating Company, all in form and detail acceptable to the Bank;
and
all such financial statements to be complete and correct in all material
respects and to be prepared in reasonable detail acceptable to the Bank and in
accordance with GAAP applied consistently throughout the periods reflected
therein (except as approved by such accountants and disclosed therein);
(b) Notices and Information. Deliver to the Bank:
-----------------------
(i) promptly upon any officer of the Borrower obtaining knowledge
(a) of any condition or event which constitutes an Event of Default or
Potential Event of Default under this Agreement or any of the Loan
Documents, or under any other material agreement or indenture entered into
by Borrower or Operating Company, (b) that any Person has given any notice
to the Borrower or any Subsidiary of the Borrower or taken any other action
with respect to a claimed default or event or condition of the type referred
to in Section 7.01(e), (c) of the institution of any litigation involving an
alleged liability (including
27
<PAGE>
possible forfeiture of property) of the Borrower or any of its
Subsidiaries equal to or greater than $50,000 or any adverse
determination in any litigation involving a potential liability of
the Borrower or any of its Subsidiaries equal to or greater than $50,000, or
(d) of any matter which has resulted in or might result in a material
adverse change in the business, operations, properties, assets or condition
(financial or otherwise) of the Borrower and its Subsidiaries, taken as a
whole, or Operating Company, an officers' certificate specifying the nature
and period of existence of any such condition or event, or specifying the
notice given or action taken by such holder or Person and the nature of such
claimed default, Event of Default, Potential Event of Default, event or
condition, and what action the Borrower or Operating Company has taken, is
taking and proposes to take with respect thereto;
(ii) promptly upon becoming aware of the occurrence of or forthcoming
occurrence of any (a) Termination Event, or (b) non-exempt "prohibited
transaction," as such term is defined in Section 4975 of the Internal
Revenue Code or Section 406 of ERISA, in connection with any Employee
Benefit Plan or any trust created thereunder, a written notice specifying
the nature thereof, what action the Borrower has taken, is taking or
proposes to take with respect thereto, and, when known, any action taken or
threatened by the Internal Revenue Service, the Department of Labor, or the
Pension Benefit Guaranty Corporation with respect thereto;
(iii) with reasonable promptness copies of (a) all notices received
by the Borrower or any of its ERISA Affiliates of the Pension Benefit
Guaranty Corporation's intent to terminate any Pension Plan or to have a
trustee appointed to administer any Pension Plan; (b) each Schedule B
(Actuarial Information) to the annual report (Form 5500 Series) filed by the
Borrower or any of its ERISA Affiliates with the Internal Revenue Service
with respect to each Pension Plan; and (c) all notices received by the
Borrower or any of its ERISA Affiliates from a Multiemployer Plan sponsor
concerning the imposition or amount of withdrawal liability pursuant to
Section 4202 of ERISA;
(iv) promptly, and in any event within 30 days after receipt
thereof, a copy of any notice, summons,
28
<PAGE>
citation, directive, letter or other form of communication from any
governmental authority or court in any way concerning any action or
omission on the part of the Borrower or any of its Subsidiaries in
connection with any substance defined as toxic or hazardous by any
applicable federal, state or local law, rule, regulation, order or
directive or any waste or by-product thereof, or concerning the filing of a
lien upon, against or in connection with the Borrower, its Subsidiaries, or
any of their leased or owned real or personal property, in connection with
a Hazardous Substance Superfund or a Post-Closure Liability Fund as
maintained pursuant to (S)9507 of the Internal Revenue Code; and
(v) promptly, and in any event within 10 days after request, such
other information and data with respect to the Borrower or any of its
Subsidiaries as from time to time may be reasonably requested by the Bank.
(c) Corporate Existence, Etc. At all times preserve and keep in full
-------------------------
force and effect its and its Subsidiaries' corporate existence and rights and
franchises material to its business and those of each of its Subsidiaries;
provided, however, that the corporate existence of any such Subsidiary may be
terminated if such termination is in the best interest of the Borrower and is
not materially disadvantageous to the holder of any Note.
(d) Payment of Taxes and Claims. Pay, and cause each of its
---------------------------
Subsidiaries to pay, all taxes, assessments and other governmental charges
imposed upon it or any of its properties or assets or in respect of any of its
franchises, business, income or property before any penalty or interest accrues
thereon, and all claims (including, without limitation, claims for labor,
services, materials and supplies) for sums which have become due and payable and
which by law have or may become a lien upon any of its properties or assets,
prior to the time when any penalty or fine shall be incurred with respect
thereto; provided that no such charge or claim need be paid if being contested
in good faith by appropriate proceedings promptly instituted and diligently
conducted and if such reserve or other appropriate provision, if any, as shall
be required in conformity with GAAP shall have been made therefor.
(e) Maintenance of Properties; Insurance.
------------------------------------
29
<PAGE>
(i) Maintain or cause to be maintained in good repair, working order
and condition all material properties used or useful in the business of the
Borrower and its Subsidiaries and from time to time will make or cause to be
made all appropriate repairs, renewals and replacements thereof; and
(ii) maintain or cause to be maintained, with financially sound and
reputable insurers, insurance with respect to its properties and business and
the properties and business of its Subsidiaries against loss or damage of the
kinds customarily insured against by corporations of established reputation
engaged in the same or similar businesses and similarly situated, of such types
and in such amounts as are customarily carried under similar circumstances by
such other corporations. The Borrower will comply with any other insurance
requirement set forth in any other Loan Document.
(f) Inspection. Permit any authorized representatives designated by
----------
the Bank to visit and inspect any of the properties of the Borrower or any of
its Subsidiaries, including its and their financial and accounting records, and
to make copies and take extracts therefrom, and to discuss its and their
affairs, finances and accounts with its and their officers and independent
public accountants, all at such reasonable times during normal business hours
and as often as may be reasonably requested.
(g) Compliance with Laws, Etc., Exercise, and cause each of its
---------------------------
Subsidiaries to exercise, all due diligence in order to comply with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority, including, without limitation, all environmental laws,
rules, regulations and orders, noncompliance with which would materially
adversely affect the business, properties, assets, operations or condition
(financial or otherwise) of the Borrower and its Subsidiaries, taken as a whole.
SECTION 6.02. Negative Covenants. So long as any Note shall remain
------------------
unpaid or the Bank shall have any Commitment hereunder, the Borrower will not,
without the written consent of the Bank:
(a) Liquidity. Permit the sum of its cash and marketable securities
---------
at any time to be less than $5,000,000.
30
<PAGE>
(b) Leverage Ratio. Permit the ratio of Consolidated Liabilities to
--------------
Consolidated Tangible Net Worth at any time to be more than 2.15:1.00.
(c) Interest Coverage Ratio. As at the end of any fiscal quarter of
-----------------------
the Borrower, permit the ratio of (i) the Borrower's earnings before income
taxes, plus depreciation and amortization expenses, plus interest expense for
the four quarters ending on any date of determination, to (ii) interest expense
for such four quarters, to be less than 2:1.00.
(d) Consolidated Tangible Net Worth. Permit Consolidated Tangible
-------------------------------
Net Worth at any time to be less than $60,000,000.
(e) Liens, Etc. Create or suffer to exist, or permit any of its
----------
Subsidiaries to create or suffer to exist, any Lien upon or with respect to any
of its properties, whether now owned or hereafter acquired, or assign, or permit
any of its Subsidiaries to assign, any right to receive income, in each case to
secure any Debt of any Person other than (i) Liens in favor of the Bank; (ii)
Liens reflected on the financial statements referred to in Section 5.01(e)
hereof and other Liens existing on the date hereof and set forth in Schedule
6.02(e) hereto; and (iii) purchase money Liens upon or in any property acquired
or held by the Borrower or any Subsidiary in the ordinary course of business to
secure the purchase price of such property or to secure indebtedness incurred
solely for the purpose of financing the acquisition of such property.
(f) Debt. Create or suffer to exist, or permit any of its
----
Subsidiaries to create or suffer to exist, any Debt, other than (i) Debt
reflected on the Borrower's financial statements referred to in Section 5.01(e)
hereof and other Debt existing on the date hereof and set forth on Schedule
6.02(f) hereto; (ii) Debt owed to the Bank; (iii) Debt relating to liens
permitted under Section 6.02(e)(iii); and (iv) Debt of a Subsidiary to another
Subsidiary or to the Borrower incurred in the ordinary course of business.
(g) Lease Obligations. Create or suffer to exist, or permit any of
-----------------
its Subsidiaries to create or suffer to exist, any obligations for the payment
of rental for any property under leases or agreements to lease (other than
Capital Leases) which would cause the direct or contingent liabilities of the
Borrower
31
<PAGE>
and its Subsidiaries, on a consolidated basis, in respect of all such
obligations to exceed $500,000 payable in any fiscal year of the Borrower.
(h) Dividends, Etc. Declare or pay any dividends, purchase or
--------------
otherwise acquire for value its capital stock now or hereafter outstanding, or
make an distribution of assets to its stockholders as such, or permit any of its
Subsidiaries to purchase or otherwise acquire for value any stock of the
Borrower, except that the Borrower may (i) declare and deliver dividends and
distributions payable in capital stock of the Borrower, and (ii) declare or pay
cash dividends to its stockholders in an aggregate amount not to exceed, in any
twelve (12) month period commencing on or after July 1, 1994, the lesser of: (i)
the amount determined by multiplying $0.80 per share times the number of all of
Borrower's outstanding shares, or (ii) $9,200,000.
(i) Consolidation, Merger. Consolidate with or merge into any other
---------------------
corporation or entity except that any corporation or entity may consolidate with
or merge into the Borrower, provided that the Borrower shall be the surviving
entity of such merger or consolidation, and provided further, that immediately
after the consummation or such consolidation or merger there shall exist no
condition or event which constitutes an Event of Default or a Potential Event
of Default.
(j) Loans, Investments, Secondary Liabilities. Make or permit to
-----------------------------------------
remain outstanding, or permit any Subsidiary to make or permit to remain
outstanding, any loan or advance to, or guarantee, induce or otherwise become
contingently liable, directly or indirectly, in connection with the obligations,
stock or dividends of, or own, purchase or acquire any stock, obligations,
securities or assets of or any other interest in, or make any capital
contribution to, any other Person, except that the Borrower and its Subsidiaries
may:
(i) own, purchase or acquire certificates of deposit issued by the
Bank, commercial paper rated Moody's P-1, municipal bonds rated Moody's
AA or better, direct obligations of the United States of America or its
agencies, and obligations guaranteed by the United States of America;
(ii) acquire and own stock, obligations or securities received from
customers in connection with debts
32
<PAGE>
created in the ordinary course of business owing to the Borrower or a
Subsidiary;
(iii) continue to own the existing capital stock of the Borrower's
Subsidiaries and partnership and joint venture interests owned on the
date hereof;
(iv) endorse negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business;
(v) allow the Borrower's Subsidiaries to make or permit to remain
outstanding advances from the Borrower's Subsidiaries to the Borrower;
(vi) permit to remain outstanding guarantees reflected on
Borrower's financial statements referred to in Section 5.01(g) hereof;
and
(vii) loan or advance to, or guarantee obligations of, or
purchase or acquire stock, partnership or joint venture interests, or
assets of any Person (and permit to remain outstanding thereafter), so
long as the total amount of such loan, advance or guarantee, or total
amount of consideration paid or to be paid for such stock, partnership or
joint venture interests, or assets does not exceed fifteen percent (15%)
of Borrower's tangible net worth, at the time of such purchase,
acquisition, loan, advance or guarantee.
(k) Asset Sales. Convey, sell, lease, transfer or otherwise dispose
-----------
of, or permit any Subsidiary to convey, sell, lease, transfer or otherwise
dispose of, in one transaction or a series of transactions, all or any part of
its or its Subsidiary's business, property or fixed assets outside the ordinary
course of business, whether now owned or hereafter acquired, except that the
Borrower and its Subsidiaries may convey, sell, lease, transfer or otherwise
dispose of business, property or fixed assets for consideration which in the
aggregate does not exceed $1,000,000 per year; and (ii) shares of the common
stock of Pacific Gulf Properties, Inc. ("PGPI") as now owned or as may be
hereafter acquired by Borrower pursuant to the provisions of that certain
Purchase and Sale Agreement dated November 15, 1993, by and between Borrower and
PGPI.
33
<PAGE>
(l) Hostile Tender Offers. Make any offer to purchase or acquire, or
---------------------
consummate a purchase or acquisition of, 5% or more of the capital stock of any
publicly held corporation or other publicly held business entity unless the
------
board of directors of such corporation or business entity has notified the
Borrower that it invites or does not oppose such offer or purchase.
(m) Margin Stock. Utilize any part of the proceeds of any Loans to
------------
purchase or carry any margin stock (as defined in Regulation U) or to extend
credit to others for the purpose of purchasing margin stock.
(n) Management. Cause, suffer or permit Stephen Keller to cease
----------
serving as its Chairman, Sherwood Chillingworth to cease serving as its Chief
Executive Officer, Christopher Stirling to cease serving as its President, or
Brian L. Fleming to cease serving as its Chief Financial Officer.
ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.01. Events of Default. If any of the following events
-----------------
("Events of Default") shall occur and be continuing:
(a) The Borrower shall fail to pay any installment of the principal
when due, or shall fail to pay any installment of interest or other amount
payable hereunder within three (3) Business Days of the date when due; or
(b) Any representation or warranty made by the Borrower herein or by
the Borrower (or any of its officers) in connection with the Loan Documents
shall prove to have been incorrect in any material respect when made; or
(c) The Borrower shall fail to perform or observe any term, covenant
or agreement contained in Section 6.01(b), (c), (d), (e)(ii), (g) or 6.02 hereof
on its part to be performed or observed; or
(d) The Borrower shall fail to perform or observe any term, covenant
or agreement contained in this Agreement other
34
<PAGE>
than those referred to in Subsections 7.01(a), (b) and (c) above on its part
to be performed or observed and any such failure shall remain unremedied for
thirty (30) days after the Borrower knows of such failure; or
(e) The Borrower or any of its Subsidiaries shall default in the
performance of or compliance with any term contained in any Loan Document other
than this Agreement and such default shall not have been remedied or waived
within any applicable grace period; or
(f) The Borrower or any of its Subsidiaries shall (A) fail to pay any
principal of, or premium or interest on, any Debt, the aggregate outstanding
principal amount of which is at least $50,000 (excluding Debt evidenced by the
Notes), when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) and such failure shall continue after the
applicable grace period, if any, specified in the agreement or instrument
relating to such Debt, or (B) fail to perform or observe any term, covenant or
condition on its part to be performed or observed under any agreement or
instrument relating to any such Debt, when required to be performed or observed,
and such failure shall continue after the applicable grace period, if any,
specified in such agreement or instrument; or
(g) (i) The Borrower, any of its Subsidiaries or Operating Company
shall commence any case, proceeding or other action (A) under any existing or
future law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have an order for
relief entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or its
debts, or (B) seeking appointment of a receiver, trustee, custodian or other
similar official for it or for all or any substantial part of its assets, or the
Borrower, any of its Subsidiaries or Operating Company shall make a general
assignment for the benefit of its creditors; or (ii) there shall be commenced
against the Borrower, any of its Subsidiaries or Operating Company any case,
proceeding or other action of a nature referred to in clause (i) above which (A)
results in the entry of an order for relief or any such adjudication or
appointment or (B) remains undismissed, undischarged or unbonded for a period of
sixty (60) days; or
35
<PAGE>
(iii) there shall be commenced against the Borrower, any of its Subsidiaries or
Operating Company any case, proceeding or other action seeking issuance of a
warrant of attachment, execution, distraint or similar process against all or
any substantial part of its assets which results in the entry of an order for
any such relief which shall not have been vacated, discharged, or stayed or
bonded pending appeal within sixty (60) days from the entry thereof; or (iv) the
Borrower, any of its Subsidiaries or Operating Company shall take any action in
furtherance of, or indicating its consent to, approval of, or acquiescence in,
any of the acts set forth in clause (i), (ii) and (iii) above; or (v) the
Borrower, any of its Subsidiaries or Operating Company shall generally not, or
shall be unable to, or shall admit in writing its inability to, pay its debts as
they become due; or
(h) One or more judgments or decrees shall be entered against the
Borrower or any of its Subsidiaries involving in the aggregate a liability (not
paid or fully covered by insurance) equal to or greater than $100,000 and all
such judgments or decrees shall not have been vacated, discharged, or stayed or
bonded pending appeal within thirty (30) days from the entry thereof; or
(i) Any guaranty, if any, for any reason other than satisfaction in
full of all obligations of the Borrower under the Loan Documents, ceases to be
in full force and effect or is declared null and void, or any guarantor denies
that it has any further liability under such guaranty or gives notice to such
effect; or
(j) (i) The Borrower or any of its ERISA Affiliates fails to make
full payment when due of all amounts which, under the provisions of any Pension
Plan or Section 412 of the Internal Revenue Code, the Borrower or any of its
ERISA Affiliates is required to pay as contributions thereto;
(ii) any accumulated funding deficiency occurs or exists,
whether or not waived, with respect to any Pension Plan;
(iii) the excess of the actuarial present value of all benefit
liabilities under all Pension Plans over the fair market value of the assets of
such Pension Plans (excluding in such computation Pension Plans with assets
greater than benefit liabilities) allocable to such benefit liabilities are
greater than five percent (5%) of Consolidated Tangible Net Worth;
36
<PAGE>
(iv) the Borrower or any of its ERISA Affiliates enters into any
transaction which has as its principal purpose the evasion of liability under
Subtitle D of Title IV of ERISA;
(v) (A) Any Pension Plan maintained by the Borrower or any of
its ERISA Affiliates shall be terminated within the meaning of Title IV of
ERISA, or (B) a trustee shall be appointed by an appropriate United States
district court to administer any Pension Plan, or (C) the Pension Benefit
Guaranty Corporation (or any successor thereto) shall institute proceedings to
terminate any Pension Plan or to appoint a trustee to administer any Pension
Plan, or (D) the Borrower or any of its ERISA Affiliates shall withdraw (under
Section 4063 of ERISA) from a Pension Plan, if as of the date of the event
listed in subclauses (A)-(D) above or any subsequent date, either the Borrower
or its ERISA Affiliates has any liability in excess of $100,000 (such liability
to include, without limitation, any liability to the Pension Benefit Guaranty
Corporation, or any successor thereto, or to any other party under Sections
4062, 4063 or 4064 of ERISA or any other provision of law) resulting from or
otherwise associated with the events listed in subclauses (A)-(D) above;
(vi) As used in this subsection 7.01(j) the term "accumulated
funding deficiency" has the meaning specified in Section 412 of the Internal
Revenue Code, and the terms "actuarial present value" and "benefit liabilities"
have the meanings specified in Section 4001 of ERISA; or
(k) There shall be instituted against the Borrower or any Subsidiary,
or against any guarantor, any proceeding for which forfeiture of any property is
a potential penalty;
(l) Borrower fails to perform or observe any of the covenants, terms,
provisions, conditions, agreements or obligations under any other agreements,
indenture, document, note or other instrument (including, but not limited to the
generality of the foregoing, other indebtedness owing to Bank) executed by
Borrower, and such failure has a material adverse effect on the business or
condition (financial or otherwise) of Borrower;
(m) Any governmental agency or any court of competent jurisdiction at
the instance of any governmental agency institutes any proceeding for which
forfeiture of any property, (the aggregate fair market value of which, at the
time any such
37
<PAGE>
proceedings are instituted, is in excess of $1,000,000), is a potential
penalty, or assumes custody or control of the whole or any substantial
position of the properties or assets of Borrower or Operating Company and is not
dismissed within 30 days thereafter;
(n) Any money judgment, writ or warrant of attachment, or similar
process is entered or filed against Borrower or any of its properties or other
similar assets and is not vacated, bonded, or stayed within the earlier of (a) a
period of 15 days or (b) before 5 days prior to the date of any proposed sale
thereunder;
(o) Borrower voluntarily suspends the transaction of business for
more than 15 consecutive days in any 12 month period after the effective date of
this Agreement;
(p) The Los Angeles Turf Club, Incorporated, a California
corporation: (i) fails to make payments as required under the Lease when due
(including any periods of grace) or (ii) declares such Lease invalid;
(q) Borrower terminates, modifies or in any other manner amends the
Lease without the prior express written consent of Bank; or
(r) This Agreement, at any time while any amounts payable hereunder
remains unpaid, ceases to be in full force and effect, or is declared null and
void, or the validity or enforceability thereof is contested or any party
thereto denies that it has any or further liability or obligation under the Loan
Documents.
Then, (i) upon the occurrence of any Event of Default described in
clause (g) above, the Commitment shall immediately terminate and all Loans
hereunder with accrued interest thereon, and all other amounts owing under the
Loan Documents shall automatically become due and payable, and (ii) upon the
occurrence of any other Event of Default, the Bank may, by notice to the
Borrower, declare the Commitment to be terminated forthwith, whereupon the
Commitment shall immediately terminate; and, by notice to the Borrower, declare
the Loans hereunder, with accrued interest thereon, and all other amounts owing
under the Loan Documents to be due and payable forthwith, whereupon the same
shall immediately become due and payable. Except as
38
<PAGE>
expressly provided above in this Section, presentment, demand, protest and all
other notices of any kind are hereby expressly waived. Notwithstanding any other
provision of this Agreement, including Section 8.02, notices to the Borrower
under this Section may be communicated orally (including by telephone) or in
writing (including telex or facsimile transmissions).
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver of any
---------------
provision of the Loan Documents nor consent to any departure by the Borrower
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Bank, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
SECTION 8.02. Notices, Etc. Except as otherwise set forth in this
------------
Agreement, all notices and other communications provided for hereunder shall be
in writing (including telegraphic, telex or facsimile communication) and mailed
or telegraphed or telexed or sent by facsimile or delivered, if to the Borrower,
at its address set forth on the signature page hereof; and if to the Bank, at
its address set forth on the signature page hereof; or, as to each party, at
such other address as shall be designated by such party in a written notice to
the other parties. All such notices and communications shall be effective when
deposited in the mails, delivered to the telegraph company, sent by telex or
sent by facsimile, respectively, except that notices and communications to the
Bank pursuant to Article II or VII shall not be effective until received by the
Bank.
SECTION 8.03. Right of Setoff; Deposit Accounts. Upon and after the
---------------------------------
occurrence of any Event of Default, the Bank is hereby authorized by the
Borrower, at any time and from time to time, without notice, (a) to set off
against, and to appropriate and apply to the payment of, the obligations and
liabilities of the Borrower under the Loan Documents (whether matured or
unmatured, fixed or contingent or liquidated or unliquidated) any and all
amounts owing by the Bank to the Borrower (whether
39
<PAGE>
payable in Dollars or any other currency, whether matured or unmatured, and, in
the case of deposits, whether general or special, time or demand and however
evidenced) and (b) pending any such action, to the extent necessary, to hold
such amounts as collateral to secure such obligations and liabilities and to
return as unpaid for insufficient funds any and all checks and other items drawn
against any deposits so held as the Bank in its sole discretion may elect. The
Borrower hereby grants to the Bank a security interest in all deposits and
accounts maintained with the Bank and with any other financial institution. The
Bank is authorized to debit any account maintained with it by the Borrower for
any amount of principal, interest or fees which are then due and owing to the
Bank.
SECTION 8.04. No Waiver; Remedies. No failure on the part of the
-------------------
Bank to exercise, and no delay in exercising, any right under any of the Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any right under any of the Loan Documents preclude any other or
further exercise thereof or the exercise of any other right. The remedies
herein provided are cumulative and not exclusive of any remedies provided by
law.
SECTION 8.05. Costs and Expenses. The Borrower agrees to pay on
------------------
demand all costs and expenses of the Bank (including attorney's fees and the
reasonable estimate of the allocated cost of in-house counsel and staff) in
connection with the preparation, amendment, modification, enforcement
(including, without limitation, in appellate, bankruptcy, insolvency,
liquidation, reorganization, moratorium or other similar proceedings) or
restructuring of the Loan Documents.
SECTION 8.06. Participations. The Bank may sell, assign, transfer,
--------------
negotiate or grant participations to other financial institutions in all or part
of the obligations of the Borrower outstanding under the Loan Documents,
provided that any such sale, assignment, transfer, negotiation or participation
shall be in compliance with the applicable federal and state securities laws;
and provided further that any assignee or transferee agrees to be bound by the
terms and conditions of this Agreement. The Bank may, in connection with any
actual or proposed assignment or participation, disclose to the actual or
proposed assignee or participant, any information relating to the Borrower or
any of its Subsidiaries.
40
<PAGE>
SECTION 8.07. Effectiveness; Binding Effect; Governing Law. This
------------------------------- -------------
Agreement shall become effective when it shall have been executed by the
Borrower and the Bank and thereafter shall be binding upon and inure to the
benefit of the Borrower, the Bank and their respective successors and assigns,
except that the Borrower shall not have the right to assign its rights hereunder
or any interest herein without the prior written consent of the Bank. THIS
AGREEMENT AND THE NOTE(S) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF CALIFORNIA WITHOUT GIVING EFFECT TO ITS CHOICE OF
LAW DOCTRINE.
SECTION 8.08. Consent to Jurisdiction; Venue. Agent for Service of
------------------------------ ----- --------------
Process. All judicial proceedings brought against the Borrower with respect to
- - -------
this Agreement and the Loan Documents may be brought in any state or federal
court of competent jurisdiction in the County of Los Angeles in the State of
California, and by execution and delivery of this Agreement, the Borrower
accepts for itself and in connection with its properties, generally and
unconditionally, the nonexclusive jurisdiction of the aforesaid courts, and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with this Agreement. The Borrower irrevocably waives any right it may have to
assert the doctrine of forum non conveniens or to object to venue to the extent
----- --------------
any proceeding is brought in accordance with this Section. A copy of any such
process so served shall be mailed by registered mail to the Borrower at its
address provided in the applicable signature page hereto, except that unless
otherwise provided by applicable law, any failure to mail such copy shall not
affect the validity of service of process. If any agent appointed by the
Borrower refuses to accept service, the Borrower hereby agrees that service upon
it by mail shall constitute sufficient notice. Nothing herein shall affect the
right to serve process in any other manner permitted by law or shall limit the
right of the Bank to bring proceedings against the Borrower in courts of any
jurisdiction.
SECTION 8.09. Entire Agreement. This Agreement with Exhibits and
----------------
Schedules and the other Loan Documents embody the entire agreement and
understanding between the parties hereto and supersedes all prior agreements and
understandings relating to the subject matter hereof.
SECTION 8.10. Separability of Provisions. In case any one or more of
--------------------------
the provisions contained in this Agreement should
41
<PAGE>
be invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein shall not in
any way be affected or impaired thereby.
SECTION 8.11. Execution in Counterparts. This Agreement may be
-------------------------
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
SECTION 8.12. Bank Representation. The Bank will make each loan
-------------------
hereunder for its own account in the ordinary course of its business; provided
that the disposition of any Note(s) shall at all times be within the Bank's
exclusive control subject to Section 8.06 hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
FIRST INTERSTATE BANK Attention: Jutta Graham
OF CALIFORNIA
By: ________________________
Title: _____________________
By: ________________________
Title: _____________________
Address:
- - -------
1000 East Garvey Avenue, South
Suite 360
West Covina, CA 91790
Attention: Jutta Graham
42
<PAGE>
SANTA ANITA REALTY
ENTERPRISES, INC.
By: ________________________
Title: _____________________
Address:
- - -------
301 West Huntington Drive
Suite 405
Arcadia, CA 91066
Attention: Chief Financial
Officer
43
<PAGE>
LIST OF EXHIBITS
----------------
Exhibit A -- Promissory Note
Exhibit B -- Assignment of Leases
Exhibit C -- Opinion of Borrowers Counsel
Exhibit D -- Compliance Certificate
LIST OF SCHEDULES
-----------------
5.01(j) -- Environmental Matters
6.02(e) -- Liens, Etc.
6.02(f) -- Debt
44
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SANTA ANITA
REALTY ENTERPRISES, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0000314661
<NAME> SANTA ANITA REALTY ENTERPRISES, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> $13,235,000
<SECURITIES> 0
<RECEIVABLES> $3,141,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> $194,374,000
<DEPRECIATION> ($56,015,000)
<TOTAL-ASSETS> $192,305,000
<CURRENT-LIABILITIES> 0
<BONDS> $83,095,000
<COMMON> $1,125,000
0
0
<OTHER-SE> $66,922,000
<TOTAL-LIABILITY-AND-EQUITY> $192,305,000
<SALES> 0
<TOTAL-REVENUES> $31,349,000
<CGS> 0
<TOTAL-COSTS> $6,904,000
<OTHER-EXPENSES> $9,782,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> $7,105,000
<INCOME-PRETAX> $7,558,000
<INCOME-TAX> 0
<INCOME-CONTINUING> $7,558,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> $7,558,000
<EPS-PRIMARY> $0.67
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SANTA ANITA
OPERATING COMPANY AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0000313749
<NAME> SANTA ANITA OPERATING COMPANY
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> $81,000
<SECURITIES> $5,470,000
<RECEIVABLES> $1,084,000
<ALLOWANCES> 0
<INVENTORY> $367,000
<CURRENT-ASSETS> $7,224,000
<PP&E> $44,480,000
<DEPRECIATION> ($23,307,000)
<TOTAL-ASSETS> $30,519,000
<CURRENT-LIABILITIES> $11,515,000
<BONDS> $2,716,000
<COMMON> $1,114,000
0
0
<OTHER-SE> $10,271,000
<TOTAL-LIABILITY-AND-EQUITY> $30,519,000
<SALES> 0
<TOTAL-REVENUES> $55,359,000
<CGS> 0
<TOTAL-COSTS> $47,824,000
<OTHER-EXPENSES> $8,092,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> $338,000
<INCOME-PRETAX> ($895,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> ($895,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> ($895,000)
<EPS-PRIMARY> ($0.08)
<EPS-DILUTED> 0
</TABLE>
