<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] JOINT ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1993
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (NO FEE REQUIRED)
For the transition period from _________________ to _________________
Commission File Number 0-9109 Commission File Number 0-9110
SANTA ANITA REALTY ENTERPRISES, INC. SANTA ANITA OPERATING COMPANY
- ---------------------------------------- --------------------------------------
(Exact name of registrant (Exact name of registrant
as specified in its charter) as specified in its charter)
DELAWARE DELAWARE
- ---------------------------------------- --------------------------------------
(State or other jurisdiction (State or other jurisdiction
of incorporation or organization) of incorporation or organization)
95-3520818 95-3419438
- ---------------------------------------- --------------------------------------
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
285 West Huntington Drive,
363 San Miguel Drive, Suite 100 P.O. Box 60014
Newport Beach, California 92660-7803 Arcadia, California 91066-6014
- ---------------------------------------- --------------------------------------
(Address of principal executive (Address of principal executive
offices including ZIP code) offices including ZIP code)
(714) 721-2700 (818) 574-7223
- ---------------------------------------- --------------------------------------
(Registrant's telephone number, (Registrant's telephone number,
including area code) including area code)
Securities registered pursuant to Section 12(b) of the Act:
Santa Anita Realty Enterprises, Inc. Santa Anita Operating Company
Common Stock $.10 par value Common Stock $.10 par value
- ---------------------------------------- --------------------------------------
(Title of class) (Title of class)
New York Stock Exchange New York Stock Exchange
- ---------------------------------------- --------------------------------------
(Name of each exchange (Name of each exchange
on which registered) on which registered)
Santa Anita Realty Enterprises, Inc.
Preferred Stock Purchase Rights
- ----------------------------------------
(Title of class)
New York Stock Exchange
- ----------------------------------------
(Name of each exchange
on which registered)
Securities registered pursuant to Section 12(g) of the Act:
None None
- ---------------------------------------- --------------------------------------
(Title of each class) (Title of each class)
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the paired voting stock of Santa Anita Realty
Enterprises, Inc. and of Santa Anita Operating Company held by nonaffiliates on
March 8, 1994 was $186,886,000.
Indicate the number of shares outstanding of each of the Issuer's classes of
common stock, as of the close of business on March 8, 1994:
Santa Anita Realty Enterprises, Inc. Common Stock 11,256,353
Santa Anita Operating Company Common Stock 11,140,853
DOCUMENTS INCORPORATED BY REFERENCE
The following document is incorporated by reference in Part III of this Joint
Annual Report on Form 10-K:
Joint proxy statement for the annual meetings of shareholders of Santa Anita
Realty Enterprises, Inc. and Santa Anita Operating Company to be held on May 3,
1994.
<PAGE>
TABLE OF CONTENTS
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<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I 3
Item 1. Business 3
Introduction 3
Realty 3
Pacific Gulf Properties Inc. 3
Summary Financial Information 5
Real Estate Investments and Policies 6
Santa Anita Racetrack 7
Regional Malls 8
Santa Anita Fashion Park 8
Towson Town Center 9
Shopping Centers 10
Office Buildings 10
Land 10
Apartments 10
Industrial 11
Management of Properties 11
Competitive and Other Conditions 12
Employees 12
Seasonal Variations in Business 13
Operating Company 14
Santa Anita Racetrack 14
Pari-Mutuel Wagering 18
On-Track Wagering 18
Satellite Wagering - California 19
Satellite Wagering - Interstate 19
Simulcasting 19
Canterbury Downs 19
Competitive and Other Conditions 20
Dependence on Limited Number of Customers 20
Employee and Labor Relations 20
Seasonal Variations in Business 21
Income Tax Matters 22
Item 2. Properties 27
Item 3. Legal Proceedings 28
Item 4. Submission of Matters to a Vote of Security Holders 28
Item 4a. Executive Officers of Realty and Operating Company 28
PART II 29
Item 5. Market for the Registrants' Common Equity and Related
Shareholder Matters 29
Item 6. Selected Financial Data 30
Item 7. Managements' Discussion and Analysis of Financial
Condition and Results of Operations 34
Item 8. Financial Statements and Supplementary Data 39
Item 9. Disagreements on Accounting and Financial Disclosure 39
PART III 40
PART IV 40
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K 40
SIGNATURES 41
INDEX TO FINANCIAL STATEMENTS 43
INDEX TO FINANCIAL STATEMENT SCHEDULES 44
EXHIBIT INDEX 109
</TABLE>
2
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC.
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
PART I
ITEM 1. BUSINESS
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INTRODUCTION
Santa Anita Realty Enterprises, Inc. ("Realty") and Santa Anita Operating
Company ("Operating Company") are two separate companies, the stocks of which
trade as a single unit under a stock-pairing arrangement on the New York Stock
Exchange. Realty and Operating Company were each incorporated in 1979 and are
the successors of a corporation originally organized in 1934 to conduct
thoroughbred horse racing in Southern California. As used herein, the terms
"Realty" and "Operating Company" include wholly owned subsidiaries of Realty
and Operating Company, respectively, unless the context requires otherwise.
This document constitutes the annual report on Form 10-K for both Realty and
Operating Company.
REALTY
Realty is incorporated under the laws of the State of Delaware. Realty's
principal executive offices are located at 363 San Miguel Drive, Suite 100,
Newport Beach, California 92660-7805.
Realty operates as a real estate investment trust ("REIT") under the
provisions of the Internal Revenue Code of 1986 (the "Code"). As such, Realty
is principally engaged in investing in and holding real property, including
Santa Anita Racetrack, 622,000 square feet of industrial space, the real estate
underlying the Santa Anita Fashion Park shopping center ("Fashion Park"), a 50
percent interest in the operation of Fashion Park and a 32.5 percent interest in
Towson Town Center (major regional shopping centers), and a number of
neighborhood shopping centers and office buildings. Until February 18, 1994,
Realty also owned 2,654 apartment units and an additional 185,000 square feet of
industrial space. Realty is a self-administered equity REIT.
PACIFIC GULF PROPERTIES INC.
In June 1993, Realty's Board of Directors approved management's
recommendation to recapitalize certain assets of Realty. Pursuant to this
recapitalization, 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. The transaction was structured into two parts: (1)
Realty would sell all of its apartments and industrial properties to Pacific
with the exception of Realty's interest in the Baldwin Industrial Park joint
venture; and (2) Pacific would enter into a binding agreement to buy Realty's
interest in Baldwin Industrial Park.
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. The sale of the Transferred Properties followed the
public offerings of common stock and convertible subordinated debentures by
Pacific.
Pursuant to the Purchase and Sale Agreement, Pacific agreed to buy Realty's
interest in Baldwin Industrial Park subject to satisfaction of certain
conditions, for a minimum price of $8.9 million payable in additional shares of
Pacific common stock, with the final price dependent upon completion of
negotiations with other owners of Baldwin Industrial Park and an appraisal
process. Management believes the sale of Realty's interest in Baldwin
Industrial Park will be completed in the second half of 1994. Pacific is
required to issue to Realty non-refundable letters of credit totaling up to $2.5
million by March 31, 1994 to secure its obligation to
3
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ITEM 1. BUSINESS (CONTINUED)
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acquire Realty's interest in Baldwin Industrial Park and pay for the corporate
headquarters building and other assets related to the Transferred Properties.
In consideration of the sale of the Transferred Properties, Realty received
approximately $44.4 million in cash and 149,900 shares of the common stock of
Pacific. In addition, Realty was relieved of approximately $44.3 million of
mortgage debt on the Transferred Properties. Realty will also receive, at the
time the acquisition of Baldwin Industrial Park is completed, up to $1.2 million
in additional common stock of Pacific as consideration for its corporate
headquarters and other net assets related to the Transferred Properties.
The two parts of the above transaction will result in a loss of
$10,974,000. This loss has been reflected in the Realty and Realty and
Operating Company combined statements of operations for the year ended December
31, 1993. If the Baldwin Industrial Park portion of the transaction described
above does not occur, an additional loss of approximately $5,900,000 will be
recognized by Realty in 1994. (See "Notes to Financial Statements - Note 2 -
Disposition of Multifamily and Industrial Properties Subsequent to Year End.")
In connection with the sale, the executive officers, various managers and
most other employees of Realty resigned and became officers and employees of
Pacific on February 18, 1994.
Realty and Pacific have also entered into a one-year management agreement
whereby Pacific has agreed to provide management services to Realty. Finally,
with respect to the common stock of Pacific owned by Realty, Pacific has entered
into a registration rights agreement with Realty which, under certain
circumstances, allows Realty to require the registration of the Pacific stock it
owns.
As a result of the February 18, 1994 sale to Pacific, Realty owns
approximately 3.6% of Pacific's outstanding common shares. Upon completion of
Pacific's acquisition of Baldwin Industrial Park assuming a price per share
equal to $18.25 (the public offering price of Pacific's common shares) and the
minimum price for Realty's interest in Baldwin Industrial Park and the corporate
headquarters building and certain other assets related to the Transferred
Properties, Realty will own approximately 14.9% of Pacific's outstanding common
shares. The February 18, 1994 sale also accomplished the following objectives:
(1) the transaction de-leveraged Realty by paying down its lines of credit by
$44.4 million and transferring certain debt in the amount of $44.3 million
related to the apartment and industrial properties to Pacific; (2) Realty's
existing shareholders' interest in Santa Anita Racetrack and Fashion Park was
not diluted; and (3) Realty shareholders will participate in the potential
growth of Pacific through Realty's ownership position.
4
<PAGE>
Item 1. Business (continued)
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SUMMARY FINANCIAL INFORMATION
The following table sets forth certain unaudited financial information with
respect to Realty:
<TABLE>
<CAPTION>
SUMMARY OF FINANCIAL INFORMATION
YEAR ENDED DECEMBER 31
(IN THOUSANDS, EXCEPT PER SHARE FIGURES)
-----------------------------------------------------
1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues $55,578 $50,291 $45,408 $44,101 $41,594
Net income 2,619(a) 10,211 9,699 13,861 14,290
Funds from operations (b) 18,647(c) 19,167 17,273 19,113 20,500
Per share:
Net income .23 .91 .86 1.23 1.35
Dividends paid 1.36 1.36 2.08 2.08 2.08
Dividends declared 1.36 1.36 1.90 2.08 2.08
Weighted average shares
outstanding 11,256 11,256 11,257 11,224 10,582
</TABLE>
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(a) See Item 1. "Business - Realty - Pacific Gulf Properties."
(b) Calculated in accordance with the definition of funds from operations as
defined by the National Association of Real Estate Investment Trusts
("NAREIT"), except 1993 which excludes $5,734,000 received from the
California Franchise Tax Board related to the settlement of certain state
tax issues. Net income (computed in accordance with generally accepted
accounting principles), excluding gains (losses) from debt restructuring and
sales of property, plus depreciation and amortization, and after adjustments
for unconsolidated partnerships and joint ventures. Adjustments for
unconsolidated joint ventures were calculated by adding distributions from
unconsolidated joint ventures net of equity in the earnings (losses) of the
venture and excluding distributions associated with the sale of property by
the venture.
(c) Pro forma funds from operations for the year ended December 31, 1993, after
giving effect to the Pacific transaction, was $16,151,000.
5
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ITEM 1. BUSINESS (CONTINUED)
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REAL ESTATE INVESTMENTS AND POLICIES
Realty's portfolio of real estate investments is outlined below.
Information with respect to the real estate investments subject to the Pacific
transaction are separately listed:
SUMMARY OF REAL ESTATE INVESTMENTS
AS OF DECEMBER 31, 1993
<TABLE>
<CAPTION>
NET BOOK
PERCENT LEASABLE PERCENT VALUE (B) ENCUMBRANCES (C)
LEASED AREA (A) OWNERSHIP (IN THOUSANDS) (IN THOUSANDS)
-------- ---------- ------------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
REALTY
RACING FACILITY:
Santa Anita Racetrack 100% 312 acres 100.0% $ 6,997 $ -
REGIONAL MALLS:
California
Fashion Park 92 900,000 50.0 42,552 25,314 (d)
Land underlying Fashion Park 100 73 acres 100.0 102 4,100
Maryland
Towson Town Center (e) 91 980,000 32.5 (f) 175,555 164,641
Joppa Associates (g) - 240,000 33.3 28,834 16,495
SHOPPING CENTERS:
California
Yorba Linda 91 66,000 100.0 7,881 -
Orange 100 21,000 100.0 4,633 -
Encinitas 83 79,000 100.0 11,158 -
Arizona, Phoenix
Tatum and Thunderbird 98 25,000 100.0 3,735 -
28th and Indian School 100 31,000 100.0 2,141 870
67th and Indian School 79 74,000 100.0 5,699 -
OFFICE BUILDINGS:
California
Civic Center Plaza Towers 79 166,000 100.0 16,976 11,822
Upland 94 37,000 100.0 4,629 -
Medical Office Building 81 72,000 100.0 12,989 10,000
LAND:
California
Temecula N/A 24 acres 50.0 (h) 1,788 857
PACIFIC
APARTMENTS:
California
Santa Ana 85 406 units 100.0 26,428 -
Washington
Everett 95 504 units 100.0 22,496 15,625
Burien 96 380 units 100.0 16,447 12,900
Oregon
Beaverton 95 279 units 100.0 11,295 8,042
Texas
San Antonio 96 224 units 100.0 4,958 -
San Antonio 94 327 units 100.0 4,951 -
Houston 94 278 units 100.0 7,542 2,997
Austin 96 256 units 100.0 6,772 -
OFFICE BUILDING:
California
Newport Beach (i) 7,000 100.0 1,019 -
INDUSTRIAL:
California
Baldwin Park 90 622,000 50.0 (f)(j) 8,988 9,454
Washington
Seattle 95 185,000 100.0 7,314 4,751
ALLOWANCE FOR LOSS ON DISPOSITION OF (10,974)
MULTIFAMILY AND INDUSTRIAL OPERATIONS --------
$107,236
========
</TABLE>
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(a) Square feet except as indicated.
(b) Net book value (total cost of project less accumulated depreciation) at
December 31, 1993. Amounts represent 100% of project net book value.
(c) Amounts represent 100% of project encumbrances.
(d) Subsequent to December 31, 1993, the loan was refinanced (see Item 1.
"Business - Realty - Regional Malls - Santa Anita Fashion Park").
(e) A major shopping center which was expanded into a 980,000 square foot
regional mall. Expanded mall area opened in October 1991. Additional anchor
tenant opened in fall of 1992.
(f) Realty is entitled to receive a preferred return on its equity investment.
(g) A retail building adjacent to the Towson Town Center project that is
expected to become part of the regional mall described in (e) above.
(h) Pacific has an option to acquire this property (see Item 1. "Business -
Realty - Land").
(i) Corporate offices of Realty and Pacific.
(j) Pacific has agreed to acquire this property during 1994 (see Item 1.
"Business - Realty - Pacific Gulf Properties").
6
<PAGE>
ITEM 1. BUSINESS (CONTINUED)
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The following table presents information with respect to Realty's wholly
owned and consolidated joint venture projects, other than Santa Anita Racetrack,
by type as of December 31, 1993. Information with respect to the projects
subject to the Pacific transaction is separately listed. Information on the
consolidated joint venture projects represents 100% of the projects' leasable
area and net operating income.
<TABLE>
<CAPTION>
SQUARE FOOTAGE
-------------------------
PERCENT NET OPERATING
LEASABLE AREA OF TOTAL INCOME (a)
--------------- -------- --------------
<S> <C> <C> <C>
Realty
Regional mall 900,000 (b) 21 $ 6,116,000
Shopping centers 296,000 7 2,741,000
Office buildings 275,000 6 2,721,000
Pacific
Apartments (c) 2,080,000 48 8,139,000
Industrial (d) 807,000 18 3,463,000
Office building 7,000 - 27,000
--------- --- -----------
Total 4,365,000 100 $23,207,000
========= === ===========
</TABLE>
- ----------------------
(a) Rental property revenues less rental property operating expenses for all
wholly owned properties and consolidated joint venture properties.
(b) Does not include square footage in Towson Town Center (980,000 square
feet) or Joppa Associates (240,000 square feet), or land underlying
Fashion Park of 73 acres.
(c) Net operating income includes only actual number of months of activity for
each project.
(d) Includes - property Pacific has agreed to acquire during 1994 (see Item 1.
"Business - Realty - Pacific Gulf Properties").
The disposition of the multifamily and industrial operations to Pacific is
consistent with Realty's plan to focus its efforts on the Santa Anita Racetrack
and related property in Arcadia. Realty's current investment policy is to focus
its efforts on the Santa Anita Racetrack and related property in Arcadia.
Realty's investment policies are subject to ongoing review by its Board of
Directors and may be changed in the future depending on various factors,
including the general climate for real estate investments.
SANTA ANITA RACETRACK
Santa Anita Racetrack, which is leased by Realty to the Los Angeles Turf
Club, Incorporated ("LATC"), a subsidiary of Operating Company, is located on
approximately 312 acres, 14 miles northeast of downtown Los Angeles, adjacent to
major transportation routes. LATC conducts one of the largest thoroughbred
horse racing meets in the United States in terms of both average daily
attendance and average daily pari-mutuel wagering.
The Santa Anita Racetrack was opened for thoroughbred horse racing in 1934
by a group of investors led by Dr. Charles H. Strub. The Santa Anita Meet has
been held at Santa Anita Racetrack each year since its founding except for three
years during World War II. Over the years, the racetrack facilities have been
expanded. At present, the physical plant consists of a large grandstand
structure, stalls for approximately 2,000 horses, and a parking area covering
approximately 128 acres which can accommodate approximately 20,000 automobiles.
The grandstand facilities include clubhouse and Turf Club accommodations, a
general admission
7
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Item 1. Business (continued)
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area, and food and beverage facilities, which range from fast food stands to
restaurants, both at outdoor terrace tables and indoor dining areas. The
grandstand has seating capacity for 25,000 as well as standing room for
additional patrons. The structure also contains Operating Company's executive
and administrative offices. The grounds surrounding the grandstand are
extensively landscaped and contain a European-style paddock and infield
accommodations, including picnic facilities for special groups and the general
public.
The lease rental payable to Realty by LATC is 1.5% of total live on-track
wagering at Santa Anita Racetrack, including live on-track wagering during the
meet conducted by the Oak Tree Racing Association ("Oak Tree"). In addition,
Realty receives 40% of LATC's revenues from satellite wagering (not to exceed
1.5% of such wagering) and the simulcasting of races originating from Santa
Anita Racetrack after mandated payments to the State, to horse owners and to
breeders. Accordingly, the rental income which Realty receives from Santa Anita
Racetrack is directly affected by and dependent upon the racing activities and
the wagering by patrons (see Item 1. "Business -- Operating Company -- Santa
Anita Racetrack").
Based upon the rental formula for the year ended December 31, 1993, Realty
received approximately $11.6 million in rental income from horse racing. The
lease expires in December 1994 at which time it is expected to be renewed on
terms to be renegotiated by Realty and LATC which, in light of Operating
Company's declining profitability, may result in reduced revenue to Realty (see
Item 1. "Business -- Operating Company" and Item 6. "Selected Financial Data -
- - Operating Company").
The following table shows rental earned by Realty under the LATC lease for the
last five years:
<TABLE>
<CAPTION>
RACING MEETS ENDED IN
(IN THOUSANDS, EXCEPT FOR RACING DAYS)
----------------------------------------------------
1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Combined racing days 114 121 120 117 122
======= ======= ======= ======= =======
Santa Anita Meet $ 9,233 $10,955 $ 9,928 $10,436 $10,283
Oak Tree Meet and Charity
Days (a) 2,401 1,728 1,889 2,069 2,863
------- ------- ------- ------- -------
Total $11,634 $12,683 $11,817 $12,505 $13,146
======= ======= ======= ======= =======
</TABLE>
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(a) Oak Tree races five weeks in even-numbered years and six weeks in odd-
numbered years.
For a further description of the Santa Anita Meet and the Oak Tree Meet,
see Item 1. "Business -- Operating Company -- Santa Anita Racetrack."
REGIONAL MALLS
SANTA ANITA FASHION PARK
Santa Anita Fashion Park is a completely enclosed, climate-controlled
regional mall located adjacent to Santa Anita Racetrack with approximately
900,000 square feet of leasable area. Fashion Park is owned and operated by a
partnership, Anita Associates, of which Realty is a 50% limited partner. The
general partner of Anita Associates is Hahn-UPI, which in turn is a limited
partnership of which The Hahn Company, a developer of shopping centers, is the
general partner.
Fashion Park is currently undergoing an expansion which is anticipated to
be completed in the fall of 1994. In addition to the existing major tenants,
Robinsons/May, J.C. Penney and Broadway, a new 146,000 square foot Nordstrom
store is being added. During 1993, the Robinsons/May store was expanded by
8
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Item 1. Business (continued)
- ----------------
approximately 40,000 square feet. In 1994, an additional 45,000 square feet of
mall stores will be completed with the Nordstrom expansion. During 1993, a food
court of approximately 13,000 square feet was completed and opened.
In January 1994, the partnership refinanced its existing debt by entering
into a loan agreement with an insurance company whereby a maximum of $62,355,000
may be borrowed, bearing interest at 9%, with repayment over ten years. On
January 25, 1994, $46,577,193 of the total loan amount was drawn.
There are currently 116 tenants operating mall stores with original lease
terms varying up to 10 years. New leases are generally seven to ten years with
clauses providing for escalation of the basic rent every three years.
Typically, leases with mall tenants are structured to provide Anita Associates
with overage rents upon attainment by the tenant of certain sales levels, which
are specified under the individual leases of the various stores. Overage rents
represent a fixed percentage of the gross sales of a tenant less its base rent.
Realty has leased the land underlying Fashion Park to Anita Associates and
to the major tenants of Fashion Park until 2037, with two additional ten-year
option periods and one additional five-year option period. The ground rent is
$527,000 annually until 1996 when the annual rent will increase to $794,000
through 2007. During the remaining 30-year term and the three additional option
periods, the annual ground rent may be increased up to 25% based upon the
appraised value of the land. Under the provisions of the ground leases, Anita
Associates is responsible for real estate taxes and other operating expenses.
Robinsons/May, J. C. Penney and The Broadway pay their own real estate taxes.
The following table contains certain information pertaining to the mall
stores in Fashion Park (excluding major tenants):
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------
1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Number of mall tenants 116 107(a) 134 139 141
======== ======== ======== ======== ========
Average annual rental rates per square
foot including overage rents $16.42 $16.98 $15.80 $14.99 $14.70
-------- -------- -------- -------- --------
</TABLE>
- -------------------
(a) Decline due primarily to certain leases not being renewed in anticipation
of the expansion discussed above.
The land underlying Fashion Park is security for a loan maturing in 2009
with a balance at December 31, 1993 of $4,100,000. Payments on this
indebtedness, which is without recourse to Realty, are approximately $473,000
annually. The security to the lender also includes an assignment of the ground
rents received by Realty and a collateral assignment of the ground leases.
TOWSON TOWN CENTER
Towson Town Center located in Towson, Maryland, is a 563,000 square foot
(excluding major tenants) regional mall which opened in 1991. Realty is a 50%
partner with The Hahn Company in H-T Associates, a joint venture which owns a
65% interest in a partnership which owns the Towson Town Center. Realty has
invested a total of $7.5 million in H-T Associates. The major tenants at Towson
Town Center are Nordstrom and Hecht's department stores.
There are 183 other tenants operating mall stores with original lease terms
varying up to 15 years. The average annual rental rate per square foot including
overage rents was $28.23 per square foot for the operating mall stores. The mall
tenant leases generally provide for escalation of the basic rent every three
years and are structured to provide Towson Town Center with overage rents upon
attainment by the tenant of certain sales levels, which are specified under the
individual leases of the various stores. Overage rents represent a fixed
percentage of the gross sales of a tenant less its base rent.
9
<PAGE>
ITEM 1. BUSINESS (CONTINUED)
- -----------------
Realty is a joint and several guarantor of loans used to expand the Towson
Town Center and a department store and land adjacent to the Towson Town Center
in the amount of $82,630,000. In 1993 the guarantee amount was reduced by
$93,337,000. Annually, the guarantors may request a reduction in the amount of
the guaranty based on the economic performance of the regional mall (see "Notes
to Financial Statements -- Note 3 -- Investments in Joint Ventures").
SHOPPING CENTERS
Realty owns a portfolio of six neighborhood shopping centers. The shopping
centers typically consist of a major supermarket, retail store or drugstore as a
major tenant and often include a variety or general merchandise store and
smaller service store tenants. The major tenant in two centers owns its building
and the underlying land, while in the four other centers, the land or
improvements are leased to the major tenant. Leases on the properties range from
two to ten years in duration, but typically are from three to five years. They
are generally triple net leases (tenant pays all operating costs, insurance and
property taxes) and provide for future rental increases. At December 31, 1993,
the average occupancy of the three shopping centers located in California was
88% and the average occupancy of the three shopping centers located in Arizona
was 90%.
OFFICE BUILDINGS
Realty owns interests in four office buildings located in Arcadia, Santa
Ana, Upland and Newport Beach, California. The office buildings in Santa Ana and
Upland are for general office use, the building in Arcadia is a medical office
building and the building in Newport Beach was occupied by Realty in March 1993
and was sold to Pacific on February 18, 1994. Office leases are typically for a
period of five to ten years and are offered on a full-service gross basis. In
addition, tenants are given a tenant improvement allowance and rental
concessions in the form of additional tenant improvement allowances or free
rent. At December 31, 1993, the occupancy of the office buildings, was 82%.
Effective as of December 31, 1993, Realty acquired the minority partnership
interest in the office building located in Santa Ana. The partnership interest
was acquired in consideration for the cancellation of certain receivables from
the minority partner, payment of $250,000 and the assumption of the minority
partner's capital account.
LAND
Realty is a 50% partner in French Valley Ventures, a partnership which
acquired 24 acres of unimproved land located in Temecula, California. The
partnership is actively seeking the necessary entitlements on the property and
is reviewing the possibility of developing an industrial project on the site.
Subsequent to year-end, Realty granted to Pacific an option to acquire this
partnership interest in the undeveloped parcel of land for $1,957,000. The
option is exercisable beginning March 1, 1994 and expires December 31, 1994.
APARTMENTS
On July 1, 1993, Realty acquired a 256-unit apartment complex located in
Austin, Texas, which was subsequently sold to Pacific. Realty acquired the
project for $6,750,000. At December 31, 1993 the complex was 96% leased.
During 1993, prior to the sale of its apartments to Pacific, Realty
acquired the minority partnership interests in Applewood Village Partners and
SAREFIM, partnerships which owned 406 and 504 units, respectively, from the
minority partners. The partnership interests were acquired in consideration for
cash, the cancellation of certain receivables from the minority partners and the
assumption of the minority partners' share of the excess of partnership
liabilities over assets.
10
<PAGE>
ITEM 1. BUSINESS (CONTINUED)
- ----------------
INDUSTRIAL
BALDWIN INDUSTRIAL PARK
Realty is a 50% limited partner in a partnership formed to develop an
industrial park on a 45-acre parcel of land in Baldwin Park, California. The
land is leased from one of the partners for a period of 55 years. The
industrial park is comprised of a total of approximately 622,000 square feet of
office and industrial space in a complex of buildings ranging in size from
25,000 to 65,000 square feet. The park is currently 90% leased to tenants which
include Gerber's Foods, Federal Express and Home Savings of America ("Home").
Home, the current lessee of a ten-acre parcel in the industrial park and of a
55,656 square foot building in the industrial park, has options to purchase both
the ten-acre parcel and the building and land underlying the building under the
terms of its leases. Home has exercised its options under both agreements.
Under the partnership agreement, Realty is entitled to receive 80% of the
cash flow from the partnership in order to provide Realty with a cumulative
return of 12% per annum on its invested capital. To the extent there is
sufficient cash flow for Realty to receive its 12% cumulative return, the
remaining partners are entitled to 80% of the excess cash flow to provide them
with a cumulative annual return equal to that received by Realty. Additional
cash flow is to be divided equally between Realty and the remaining partners.
The partnership exercised an option to buy the land underlying the Home
parcel in 1991 and has the option to acquire the remaining parcels in 1994. If
the partnership does not exercise any portion of its option to acquire the land,
Realty then has the right to exercise that portion of the option under the same
terms as the partnership. In addition to the above-mentioned partnership
option, Realty has an option to purchase the partnership interests of the other
partners in 1994 at the fair market value of the interests in 1994.
Subsequent to year-end, Realty agreed to sell its interest in the
partnership and assigned its option to purchase the partnership interest of the
other partners to Pacific. (See Item 1. "Business - Realty-Pacific Gulf
Properties Inc." and "Notes to Financial Statements - Note 2 - Disposition of
Multifamily and Industrial Operations Subsequent to Year End"). Pacific has
exercised this option to purchase the partnership interest of the other
partners.
SEATTLE INDUSTRIAL BUILDINGS
During 1993, prior to the sale of its industrial properties to Pacific,
Realty acquired the minority partnership interest in SARESAM Ventures, a
partnership which owned 185,000 square feet of industrial buildings located in
the Seattle, Washington area. The partnership interest was acquired in
consideration for the cancellation of certain receivables from the minority
partners and the assumption of the minority partners' share of the excess of
partnership liabilities over assets.
MANAGEMENT OF PROPERTIES
Realty manages its shopping centers (other than the regional malls) and
office buildings directly. Based on a normal property management fee charged by
outside managers, Realty believes it realizes an economic benefit as well as the
benefits of direct control by managing the properties directly.
11
<PAGE>
ITEM 1. BUSINESS (CONTINUED)
- ----------------
COMPETITIVE AND OTHER CONDITIONS
The industrial buildings, regional shopping malls, shopping centers and
office buildings owned by Realty encounter significant competition from similar
or larger industrial buildings, regional shopping malls, shopping centers and
office buildings developed and owned by other companies.
Realty's income from its real estate assets is also affected by general
economic conditions. The current recession has adversely affected vacancy rates
in office buildings and industrial parks generally. The current recession and
other competitive conditions have also affected the rent payable by LATC (see
Item 1. "Business -- Operating Company -- Competitive and Other Conditions").
Continuation of the recession could adversely impact vacancy rates, the nature
of Realty's tenants, the rents Realty is able to obtain from its tenants and its
financial results.
Some of Realty's properties are located in Southern California, which is an
area prone to earthquakes. To date, none of Realty's projects have sustained any
significant damage as a result of earthquakes. However, there can be no
assurance that any potential earthquakes will not damage Realty's properties or
negatively impact the financial position or results of Realty.
EMPLOYEES
At December 31, 1993, Realty employed 58 persons on a full-time basis. In
connection with the sale to Pacific, the executive officers, various managers
and most other employees of Realty resigned and became officers and employees of
Pacific on February 18, 1994. Realty has entered into a one-year management
agreement with Pacific to assure an orderly transaction, and, as of March 16,
1994, appointed a new Chief Executive Officer (see Item 4a. "Executive Officers
of Realty and Operating Company"). Realty believes that relations with its
employees are satisfactory.
12
<PAGE>
Item 1. Business (continued)
SEASONAL VARIATIONS IN BUSINESS
Realty is subject to significant seasonal variation in revenues due
primarily to the seasonality of thoroughbred horse racing. The following table
presents unaudited quarterly results of operations for Realty during 1993 and
1992:
<TABLE>
<CAPTION>
Quarters Ended
1993
(in thousands, except per share figures)
----------------------------------------------
March June Sept. Dec.
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
Total revenues $18,876 $12,822 $10,452 $ 13,428
Costs and expenses 7,123 7,241 7,227 10,440
Interest and other 3,277 3,350 3,100 2,750
Loss on disposition of multifamily and
industrial operations - - - 10,974
------- ------- ------- --------
Income (loss) before income taxes 8,476 2,231 125 (10,736)
Benefit for income taxes (1,458) (1,065) - -
------- ------- ------- --------
Net income (loss) $ 9,934 $ 3,296 $ 125 $(10,736)
======= ======= ======= ========
Net income (loss) per common share $.88 $ .29 $ .01 $ (.95)
======= ======= ======= ========
<CAPTION>
Quarters Ended
1992
(in thousands, except per share figures)
---------------------------------------------
March June Sept. Dec.
------- ------ ------- ----------
<S> <C> <C> <C> <C>
Total revenues $16,544 $11 ,243 $ 9,501 $ 13,003
Costs and expenses 6,488 6,299 6,845 8,117
Interest expense and other 2,967 3,113 3,874 2,377
------- ------- ------- --------
Net income (loss) $ 7,089 $ 1,831 $(1,218) $ 2,509
======= ======= ======= ========
Net income (loss) per common share $.63 $ .16 $ (.11) $ .23
======= ======= ======= ========
</TABLE>
13
<PAGE>
ITEM 1. BUSINESS (CONTINUED)
- ----------------
Operating Company
Santa Anita Operating Company ("Operating Company") is organized under the
laws of the State of Delaware. Operating Company's principal executive offices
are located at Santa Anita Racetrack, 285 West Huntington Drive, Post Office Box
60014, Arcadia, California 91066-6014.
Operating Company is engaged in thoroughbred horse racing. The thoroughbred
horse racing operation is conducted by a subsidiary of Operating Company, Los
Angeles Turf Club, Incorporated ("LATC"), which leases Santa Anita Racetrack
from Realty. The lease expires in December 1994 when its terms will be
renegotiated (see Item 1. "Business -- Realty -- Santa Anita Racetrack").
SANTA ANITA RACETRACK
LATC conducts an annual 17-week thoroughbred horse racing meet which
commences immediately after Christmas and continues through mid-April. LATC
conducts one of the largest thoroughbred racing meets in the United States in
terms of both average daily attendance and average daily pari-mutuel wagering.
LATC leases the racetrack from Realty for the full year under a master
lease for a fee of 1.5% of the total live on-track wagering at Santa Anita
Racetrack, which includes the Oak Tree meet. In addition, LATC pays to Realty
40% of its revenues from satellite wagering (not to exceed 1.5% of such
wagering) and the simulcasting of races originating from Santa Anita Racetrack
after mandated payments to the State, to horse owners and to breeders. When LATC
operates as a satellite for Hollywood Park Racetrack ("Hollywood Park") and Del
Mar Racetrack ("Del Mar"), LATC does not pay any additional rent to Realty. LATC
has sublet the racetrack to Oak Tree to conduct its annual thoroughbred horse
racing meet (31 days in 1993), which commences in late September or early
October. Oak Tree races five weeks in even-numbered years and six weeks in odd-
numbered years.
Under a sublease which expires in 2000, Oak Tree makes annual rental
payments to LATC equal to 1.5% of the total live on-track pari-mutuel wagering
from its racing meet and 25% of its satellite and simulcast revenues after
mandated payments to the State, to horse owners and to breeders. LATC pays to
Realty 40% of all satellite and simulcast revenues received from Oak Tree.
Because the rental received from Oak Tree's on-track pari-mutuel wagering is
identical to the rental paid to Realty, LATC does not reflect these amounts in
its financial statements. In addition, Oak Tree reimburses LATC an amount equal
to 0.8% of its on-track pari-mutuel wagering for certain expenses of operating
Santa Anita Racetrack on behalf of Oak Tree. LATC also receives supplemental
rent representing Oak Tree's adjusted profits above an agreed-upon level and
will rebate rent to Oak Tree if Oak Tree's adjusted profits fall below such
level (see Item 1. "Business -- Operating Company -- Santa Anita Racetrack --
Pari-Mutuel Wagering").
The number of racing days at the Santa Anita meet declined from 90 in 1989
to 83 in 1993. Total pari-mutuel wagering on the Santa Anita meet decreased
from $654.1 million in 1989 to $613.5 million in 1993. For all years prior to
1989, all of Santa Anita pari-mutuel wagering was conducted on-track. In 1989,
$122.1 million of the total amount wagered was wagered at satellite locations
with $532.0 million being wagered on-track. In 1993, $362.8 million of the total
amount wagered was wagered at satellite locations with $250.7 million being
wagered on-track.
Total attendance was 2.9 million in 1989, of which 621,000 was at satellite
locations. By 1993, on-track attendance had declined to 1.2 million, down from
1.5 million in 1992. Although 1,332,126 and 1,576,763 patrons attended
satellite locations during the Santa Anita meets in 1993 and 1992, respectively,
LATC does not share in the revenues from admissions, parking and food and
beverage sales at the satellite locations.
14
<PAGE>
Item 1. Business (continued)
- ----------------------------
The following tables summarize key operating statistics for the 1989-1993
Santa Anita meets and the 1989-1993 Oak Tree meets, together with the attendance
and wagering statistics relating to the transmission of the Del Mar and
Hollywood Park signals to Santa Anita Racetrack.
<TABLE>
<CAPTION>
Racing Meets Ended in
----------------------------------------------------------
1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
LIVE RACING
- -----------
SANTA ANITA MEET:
Number of racing day 83 94 88 90 90
== == == == ==
Attendance
On-track 1,215,208 1,531,538 2,014,618 2,157,583 2,291,700
Satellite locations 1,332,126 1,576,763 666,611 707,675 620,734
---------- ---------- ---------- ---------- ----------
Total 2,547,334 3,108,301 2,681,229 2,865,258 2,912,434
========== ========== ========== ========== ==========
Average daily (a) 30,698 33,067 30,524 31,915 32,360
========== ========== ========== ========== ==========
Wagering ($000) (b)
On-track $ 250,729 $ 323,223 $ 470,471 $ 519,443 $ 531,977
Satellite locations (c) 267,346 315,851 133,791 144,303 122,101
Interstate locations (d) 95,411 68,689 39,445 - -
---------- ---------- ---------- ---------- ----------
Total $ 613,486 $ 707,763 $ 643,707 $ 663,746 $ 654,078
========== ========== ========== ========== ==========
Average daily (a) $ 7,767 $ 7,716 $ 7,366 $ 7,391 $ 7,268
========== ========== ========== ========== ==========
OAK TREE MEET:
Number of racing days (e) 31 27 32 27 32
== == == == ==
Attendance (c)
On-track 499,617 425,774 506,833 590,743 700,891
Satellite locations 444,932 390,088 454,264 171,177 199,607
---------- ---------- ---------- ---------- ----------
Total 944,549 815,862 961,097 761,920 900,498
========== ========== ========== ========== ==========
Average daily (a) 30,598 30,389 30,417 28,219 28,475
========== ========== ========== ========== ==========
Wagering ($000) (b)(c)
On-track $ 99,789 $ 79,162 $ 102,740 $ 133,644 $ 160,523
Satellite locations 86,427 75,714 88,699 33,555 38,599
Interstate locations (d) 58,467 20,198 17,445 6,878 -
---------- ---------- ---------- ---------- ----------
Total $ 244,683 $ 175,074 $ 208,884 $ 174,077 $ 199,122
========== ========== ========== ========== ==========
Average daily (a) $ 8,567 $ 6,676 $ 6,767 $ 6,620 $ 6,268
========== ========== ========== ========== ==========
</TABLE>
- ------------------
(a) Total handle or total attendance divided by the number of race days will
produce a different average daily result due to the fact that satellite
locations may not have operated from the beginning of the Santa Anita meet,
therefore, average daily attendance and wagering is calculated based upon
the number of days each satellite location is open.
(b) Includes simulcast wagering on races originating at other racetracks.
(c) Satellite wagering expanded to include Hollywood Park and Los Alamitos
effective with the 1991 Oak Tree meet.
(d) Interstate wagering (common pooling) began in October 1990.
(e) Oak Tree races five weeks in even-numbered years and six weeks in odd-
numbered years.
15
<PAGE>
<TABLE>
<CAPTION>
Racing Meets Ended in
-----------------------------------------------------
1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
AS A SATELLITE
- ---------------------------
SANTA ANITA AS SATELLITE
FOR DEL MAR RACETRACK:
Number of racing days 42 43 43 43 43
== == == == ==
Attendance
Total 223,599 242,947 273,333 271,525 279,163
======== ======== ======== ======== ========
Average daily 5,324 5,650 6,357 6,315 6,492
======== ======== ======== ======== ========
Wagering ($000)
Total $ 54,928 $ 55,435 $ 66,068 $ 68,807 $ 72,648
======== ======== ======== ======== ========
Average daily $ 1,308 $ 1,289 $ 1,536 $ 1,600 $ 1,689
======== ======== ======== ======== ========
SANTA ANITA AS SATELLITE
FOR HOLLYWOOD PARK (a):
Number of racing days 99 101 32
== === ==
Attendance
Total 505,239 515,510 154,233
======== ======== ========
Average daily 5,103 5,104 4,820
======== ======== ========
Wagering ($000)
Total $112,623 $114,858 $ 36,233
======== ======== ========
Average daily $ 1,138 $ 1,137 $ 1,132
======== ======== ========
</TABLE>
- -------------------
(a) Began in November 1991.
Management anticipates that the general trend of increases in off-track
wagering will continue and the decrease experienced in on-track attendance and
on-track wagering will also continue albeit at a slower rate.
16
<PAGE>
During the last five years, 54% of the annual revenues of LATC resulted
from pari-mutuel and other wagering commissions. The remaining revenues resulted
from admissions, parking, food and beverage sales, sale of programs and interest
and other income.
The following table sets forth certain unaudited financial information with
respect to LATC:
<TABLE>
<CAPTION>
Year Ended December 31,
(in thousands)
-------------------------------------------------------------
1993 1992 1991 1990 1989
-------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
REVENUES:
Pari-mutuel and other wagering
commissions:
On-track $15,327 $18,031 $25,277 $29,256 $29,368
Satellite origination 11,106 13,158 5,501 5,577 4,391
Simulcasting 3,120 2,738 2,284 1,416 1,208
Satellite for Del Mar and
Hollywood Park 3,391 3,422 2,005 1,376 1,453
Admission-related 27,833 28,923 30,262 28,630 29,625
Interest and other 326 1,075 2,655 3,684 1,464
------- ------- ------- ------- -------
Total revenues 61,103 67,347 67,984 69,939 67,509
------- ------- ------- ------- -------
COSTS AND EXPENSES:
Direct operating costs 44,436 48,551 48,648 48,863 46,872
Plant rental 9,233 10,955 9,928 10,436 10,283
Other 7,879 8,678 7,544 7,771 6,683
------- ------- ------- ------- -------
Total costs and expenses 61,548 68,184 66,120 67,070 63,838
------- ------- ------- ------- -------
Income (loss) before taxes $ (445) $ (837) $ 1,864 $ 2,869 $ 3,671
======= ======= ======= ======= =======
</TABLE>
The mix of revenues has changed significantly from 1989 to 1993 primarily
as a result of the introduction of satellite wagering on races originating at
Santa Anita Racetrack, operating as a satellite location for Del Mar and
Hollywood Park, changes in average daily pari-mutuel wagering, selective price
increases, the introduction of additional exotic wagering opportunities on which
the retention amount is higher than on conventional wagering and a new lease
with Oak Tree, all of which have largely offset declines in commissions from on-
track wagering. In addition, LATC recognized $400,000 in 1990 and $1,000,000 in
1991 from the 1990 sale of the Canterbury Downs management consulting contract.
Also, interest income has fluctuated as a function of cash balances available
for investments and changing interest rates.
LATC's total expenses decreased from $63.8 million in 1989 to $61.5 million
in 1993. The majority of these expenses are pari-mutuel wagering or attendance-
related, the result of operating as a satellite location for Del Mar and
Hollywood Park and the aggregate effect of a new lease with Oak Tree. In 1991,
costs and expenses included $1.1 million in earthquake damage. From 1991 to
1992, total costs and expenses increased by $2,064,000 primarily due to the fact
that LATC operated as a satellite location for the first time for Hollywood
Park's spring thoroughbred meet, the engagement of outside consultants in the
amount of $660,000 to review the company's operations, and additional rent paid
to Realty in the amount of $1,027,000. From 1992 to 1993, total costs and
expenses decreased primarily due to fewer race days and lower on-track
attendance and wagering.
17
<PAGE>
ITEM 1. BUSINESS (CONTINUED)
- ----------------
For further information regarding operating results, see Item 7.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Santa Anita Operating Company."
PARI-MUTUEL WAGERING
Pari-mutuel means literally a mutual wager, or wagering by individuals
against each other. The racetrack acts as the broker for the wagers made by the
public and deducts a "take-out" or gross commission which is fixed by the State
and shared with the State, the racetrack operator, the horse owners and
breeders, and the municipality in which the racetrack is located. The racetrack
operator has no interest in which horse wins a given race.
As a condition of the issuance of a racing license, California law requires
that a certain number of racing days be conducted as charity days. The net
proceeds from these charity days are distributed to beneficiaries through a
nonprofit organization approved by the California Horse Racing Board (the "Horse
Racing Board"). LATC is required to conduct five charity days.
ON-TRACK WAGERING
The State has vested administrative authority for racing and wagering at
horse racing meets with the Horse Racing Board. The Horse Racing Board, which
consists of seven members appointed by the governor of the State, is charged
with the responsibility of regulating the form of wagering, the length and
conduct of meets and the distribution of the pari-mutuel wagering within the
limits set by the California legislature. The Horse Racing Board is also charged
with the responsibility of licensing horse racing associations on an annual
basis to conduct horse racing meets and of licensing directors, officers and
persons employed by the associations to operate such meets.
California law specifies the percentage distribution of pari-mutuel
wagering with the percentage varying based upon the total wagering for the meet,
breed of horse and type of wager. The following table sets forth the allocation
of the total pari-mutuel wagering, on- and off-track, by percentage and dollar
amount during the 1992-93 Santa Anita meet:
<TABLE>
<CAPTION>
DISTRIBUTION OF PARI-MUTUEL WAGERING
--------------------------------------
DOLLAR
AMOUNT
PERCENTAGE (IN THOUSANDS)
---------- --------------
<S> <C> <C>
Return to Wagerers 81.05% $497,224
State of California 4.37 26,809
Track Commissions 4.71 28,877
Horse Owners and Breeders 4.74 29,087
Satellite Operator and Location Fees 4.85 29,780
Others .28 1,709
------ --------
100.00% $613,486
====== ========
</TABLE>
18
<PAGE>
ITEM 1. BUSINESS (CONTINUED)
- ----------------
SATELLITE WAGERING - CALIFORNIA
LATC and Oak Tree send televised racing signals to other southern
California racetracks, wagering facilities on Indian reservation land in
California and non-racing fair sites in central and southern California. Pari-
mutuel wagering at a satellite facility is included in the pari-mutuel pools at
the host racing associations. LATC's and Oak Tree's share of the satellite
wagering was approximately 4.3% of the satellite pari-mutuel wagering on races
originating at Santa Anita Racetrack.
In the fall of 1993, California law permitted LATC and Oak Tree to send and
receive televised racing signals on races with purses exceeding $20,000 to and
from northern California racetracks and nonracing fairs. In 1993, Bay Meadows,
San Mateo, California became an additional satellite location during the Santa
Anita meet. LATC's commission on the northern California satellite wagering was
about 3.3%.
LATC has been advised that other Indian tribes are planning satellite
wagering facilities on reservation land in southern California. Any other
facilities opened by an Indian tribe must obtain approval from the State and
must enter into an agreement with the racing associations with respect to the
pari-mutuel operations.
During the Hollywood Park and Del Mar meets, LATC and other Southern
California racing associations and fairs operate as satellite facilities. In
addition to retaining 2% of the pari-mutuel wagering at Santa Anita Racetrack as
its commission, LATC receives income from admissions, parking and food and
beverage sales. In 1993, Santa Anita Racetrack operated 141 days as a satellite
for Hollywood Park and Del Mar.
SATELLITE WAGERING - INTERSTATE
Legislation has been enacted in certain states permitting the transmission
of pari-mutuel wagers across state lines. This format permits patrons wagering
in those states on races held at Santa Anita Racetrack to participate in the
same pari-mutuel pool payouts available to LATC's on-track patrons and Southern
California satellite patrons. LATC currently participates in satellite wagering
with numerous sites in Nevada, and additional locations in Alabama, Arizona,
Colorado, Connecticut, Delaware, Florida, Idaho, Iowa, Kansas, Louisiana,
Maryland, Massachusetts, Montana, Nebraska, New Hampshire, New Jersey, New York,
North Dakota, Oregon, Pennsylvania, Rhode Island, Texas, Washington and West
Virginia and receives a negotiated percentage of the pari-mutuel wagering at
such sites.
Interstate satellite wagering started in 1991 with total pari-mutuel
wagering of $39,445,000 which increased to $95,411,000 for 1993. LATC's share of
the commissions from interstate satellite wagering was $1,811,000 for 1993.
SIMULCASTING
In 1993, LATC and Oak Tree transmitted their live racing signals
(simulcast) to numerous locations in the United States, Mexico and Canada.
LATC's share of the commissions for transmitting its racing signal, was
$1,280,000 in 1993 and $1,416,000 in 1992. During the Oak Tree meet, LATC
receives 25% of Oak Tree's share of simulcasting revenues. LATC is pursuing the
opportunity to transmit its signal to other locations.
CANTERBURY DOWNS
In 1984, LATC entered into a management consulting contract with Minnesota
Racetrack, Inc. ("MRI"). MRI developed and owned a horse racing facility,
Canterbury Downs, in the Minneapolis area of Minnesota, which opened in June
1985. In 1990, LATC sold its interest in the management consulting contract with
Canterbury Downs and recognized $400,000 as income. In 1991, LATC recognized an
additional $1,000,000 as income.
19
<PAGE>
ITEM 1. BUSINESS (CONTINUED)
- ----------------
COMPETITIVE AND OTHER CONDITIONS
The southern California area offers a wide range of leisure time spectator
activities, including professional and college teams which participate in all
major sports. LATC and Oak Tree compete with such sporting events for their
share of the leisure time market and with other numerous leisure time activities
available to the community, some of which are broadcast on television.
As an outdoor activity, horse racing is more susceptible to inclement
weather than some other leisure time activities. This is particularly true of
the Santa Anita meet which is held during the winter. Prior to the 1992-1993
meet, LATC had never lost a race due to inclement weather. During the 1992-1993
meet, LATC lost two full days and two partial days of racing because of
inclement weather. A local Arcadia ordinance presently limits live horse racing
to daylight hours but allows the importation of a horse racing broadcast signal
one evening per week.
The Horse Racing Board has annually licensed LATC and Oak Tree to conduct
racing meets at Santa Anita Racetrack. At present, the Horse Racing Board has
not licensed other thoroughbred racetracks in Southern California to conduct
racing during these meets. Since 1972, however, night harness racing and night
quarterhorse meets have been conducted at other racetracks in Southern
California during portions of these meets. LATC and Oak Tree could be adversely
affected by legislative or Horse Racing Board action which would increase the
number of competitive racing days, reduce the number of racing days available to
LATC and Oak Tree, or authorize other forms of wagering.
The California State Lottery Act of 1984, which provides for the
establishment of a state-operated lottery, was implemented in 1985. In the
opinion of management, the State lottery has had an adverse impact and will
continue to have an adverse impact on total attendance and pari-mutuel wagering
at Santa Anita Racetrack (see Item 1 "Business -- Operating Company -- Santa
Anita Racetrack"). Although it is unaware of any empirical studies, management
believes that the State lottery has had and will continue to have an adverse
impact on many other businesses in the State of California.
In the future, legislation could be enacted to allow casino gaming or other
forms of gaming which are competitive with pari-mutuel wagering at Santa Anita
Park. Under federal law, certain types of gaming are lawful on Indian lands if
conducted in conformance with a Tribal-State compact, which the applicable state
must negotiate with an Indian tribe in good faith. Certain Indian tribes
seeking to establish gaming in California have instituted litigation against the
State of California to compel the State to permit them to do so. In 1993, one
court held that California has a public policy prohibiting casino gaming and
need not negotiate a compact with respect to casino gaming. However, the court
also held that certain other forms of gaming were the proper subject of a
compact. Other courts are not bound by that decision and may hold differently.
If the Indian tribes are successful in establishing casino gaming or other forms
of gaming in California, such gaming could have an adverse impact on LATC.
DEPENDENCE ON LIMITED NUMBER OF CUSTOMERS
No material part of Operating Company's business is dependent upon a single
customer or a few customers; therefore, the loss of any one customer would not
have a materially adverse effect on the business of Operating Company.
EMPLOYEE AND LABOR RELATIONS
During the year ended December 31, 1993, LATC regularly employed
approximately 1,600 employees. Substantially all are employed on a seasonal
basis in connection with live thoroughbred horse racing or satellite meets at
Santa Anita Racetrack. During the relatively short periods when live or
satellite racing meets at Santa Anita Racetrack are not being conducted, LATC
maintains a staff of approximately 260 employees, most of
20
<PAGE>
whom are engaged in maintaining or improving the physical facilities at Santa
Anita Racetrack or are engaged in preparing for the next live or satellite meet.
All of LATC's employees, except for approximately 70 full-time management
and clerical employees, are covered by collective bargaining agreements with
labor unions. A majority of the current labor agreements covering racetrack
employees will expire in April 1995 after the Santa Anita meet.
SEASONAL VARIATIONS IN BUSINESS
Operating Company is also subject to significant seasonal variation. LATC
conducts an annual meet commencing immediately after Christmas and continuing
through mid-April. This seasonal variation is indicated by the following
unaudited quarterly results of operations for Operating Company during 1993 and
1992:
<TABLE>
<CAPTION>
Quarters Ended
1993
(in thousands, except per share figures)
----------------------------------------------
March June Sept. Dec.
------- ------- ------- -------
<S> <C> <C> <C> <C>
Total revenues $33,164 $13,542 $ 5,334 $ 9,307
Costs and expenses 33,633 14,362 5,473 9,618
Interest 145 132 119 97
------- ------- ------- -------
Net loss $ (614) $ (952) $ (258) $ (408)
======= ======= ======= =======
Net loss per common share $ (.06) $ (.09) $ (.02) $ (.04)
======= ======= ======= =======
Quarters Ended
1992 (Restated)
(in thousands, except per share figures)
------------------------------------------
March June Sept. Dec.
------- ------- ------- -------
Total revenues $37,030 $16,407 $ 5,576 $ 8,641
Costs and expenses 34,797 17,437 6,954 11,411
Interest 45 44 45 60
------- ------- ------- -------
Income (loss) before income taxes 2,188 (1,074) (1,423) (2,830)
Provision (benefit) for income taxes 209 (105) (133) (214)
------- ------- ------- -------
$ 1,979 $ (969) $(1,290) $(2,616)
Net income (loss) ======= ======= ======= =======
Net income (loss) per common share $ .18 $ (.09) $ (.12) $ (.23)
======= ======= ======= =======
</TABLE>
In 1993, revenues and cost of sales from food and beverage operations have
been reflected as a separate component in Operating Company's and Combined
Realty and Operating Company's statement of operations. In prior years these
operations were in horse racing revenues. All prior year and interim financial
statements and disclosures for Operating Company and Combined Realty and
Operating Company have been restated to reflect this reclassification.
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.
21
<PAGE>
ITEM 1. BUSINESS (CONTINUED)
- ----------------
INCOME TAX MATTERS
In the opinion of management, Realty has operated in a manner which has
qualified it as a REIT under Sections 856 through 860 of the Code. Realty
intends to continue to operate in a manner which will allow it to qualify as a
REIT under the Code. Under these sections, a corporation that is principally
engaged in the business of investing in real estate and that, in any taxable
year, meets certain requirements that qualify it as a REIT generally is not
subject to federal income tax on its taxable income and gains that it
distributes to its shareholders. Income and gains that are not so distributed
will be taxed to a REIT at regular corporate rates. In addition, a REIT is
subject to certain taxes on net income from "foreclosure property" as defined in
the Code, income from the sale of property held primarily for sale to customers
in the ordinary course of business and excessive unqualified income.
REIT REQUIREMENTS
To qualify for tax treatment as a REIT under the Code, Realty at a minimum
must meet the following requirements:
(1) At least 95% of Realty's gross income each taxable year (excluding
gains from the sale of property other than foreclosure property held
primarily for sale to customers in the ordinary course of its trade or
business) must be derived from:
(a) rents from real property;
(b) gain from the sale or disposition of real property that is
not held primarily for sale to customers in the ordinary course of
business;
(c) interest on obligations secured by mortgages on real
property (with certain minor exceptions);
(d) dividends or other distributions from, or gains from the
sale of, shares of qualified REITs that are not held primarily for sale to
customers in the ordinary course of business;
(e) abatements and refunds of real property taxes;
(f) income and gain derived from foreclosure property;
(g) most types of commitment fees related to either real
property or mortgage loans;
(h) gains from sales or dispositions of real estate assets
that are not "prohibited transactions" under the Code;
(i) income attributable to stock or debt instruments acquired
with the proceeds from the sale of stock or certain debt obligations ("new
capital") of Realty received during a one-year period beginning on the day
such proceeds were received ("qualified temporary investment income");
(j) dividends;
(k) interest on obligations other than those secured by
mortgages on properties; and
(l) gains from sales or dispositions of securities not held
primarily for sale to customers in the ordinary course of business.
22
<PAGE>
ITEM 1. BUSINESS (CONTINUED)
- ----------------
In addition, at least 75% of Realty's gross income each taxable year
(excluding gains from the sale of property other than foreclosure property
held primarily for sale to customers in the ordinary course of its trade or
business) must be derived from items (a) through (i) above. For purposes
of these requirements, the term "rents from real property" is defined in
the Code to include charges for services customarily furnished or rendered
in connection with the rental of real property, whether or not such charges
are separately stated, and rent attributable to incidental personal
property that is leased under, or in connection with, a lease of real
property, provided that the rent attributable to such personal property for
the taxable year does not exceed 15% of the total rent for the taxable year
attributable to both the real and personal property leased under such
lease. The term "rents from real property" is also defined to exclude: (i)
any amount received or accrued with respect to real property, if the
determination of such amount depends in whole or in part on the income or
profits derived by any person from the property (except that any amount so
received or accrued shall not be excluded from "rents from real property"
solely by reason of being determined on the basis of a fixed percentage of
receipts or sales); (ii) any amount received or accrued, directly or
indirectly, from any person or corporation if ownership of a 10% or greater
interest in the stock, assets or net profits of such person or corporation
is attributed to Realty; (iii) any amount received or accrued from property
that Realty manages or operates or for which Realty furnishes services to
the tenants, which would constitute unrelated trade or business income if
received by certain tax-exempt entities, either itself or through another
person who is not an "independent contractor" (as defined in the Code) from
whom Realty does not derive or receive income; and (iv) any amount received
or accrued from property with respect to which Realty furnishes (whether or
not through an independent contractor) services not customarily rendered to
tenants in properties of a similar class in the geographic market in which
the property is located.
If Realty should fail to satisfy the foregoing income tests but
otherwise satisfies the requirements for taxation as a REIT and if such
failure is held to be due to reasonable cause and not willful neglect and
if certain other requirements are met, then Realty would continue to
qualify as a REIT but would be subject to a 100% tax on the excessive
unqualified income reduced by an approximation of the expenses incurred in
earning that income.
(2) Less than 30% of Realty's gross income during any taxable year can
be derived from the sale or disposition of: (i) stock or securities held
for less than one year; (ii) property held primarily for sale to customers
in the ordinary course of business (other than foreclosure property); and
(iii) real property (including interests in mortgages on each property)
held for less than four years (other than foreclosure property and gains
arising from involuntary conversions).
(3) At the end of each calendar quarter, at least 75% of the value of
Realty's total assets must consist of real estate assets (real property,
interests in real property, interests in mortgages on real property, shares
in qualified real estate investment trusts and stock or debt instruments
attributable to the temporary investment of new capital), cash and cash
items (including receivables) and government securities. With respect to
securities that are not included in the 75% asset class, Realty may not at
the end of any calendar quarter own either (i) securities representing more
than 10% of the outstanding voting securities of any one issuer or (ii)
securities of any one issuer having a value that is more than 5% of the
value of Realty's total assets. Realty's share of income earned or assets
held by a partnership in which Realty is a partner will be characterized by
Realty in the same manner as they are characterized by the partnership for
purposes of the assets and income requirements described in this paragraph
(3) and in paragraphs (1) and (2) above.
(4) The shares of Realty must be "transferable" and beneficial
ownership of them must be held by 100 or more persons during at least 335
days of each taxable year (or a proportionate part of a short taxable
year). More than 50% of the outstanding stock may not be owned, directly or
indirectly, actually or constructively, by or for five or fewer
"individuals" at any time during the last half of any taxable year. For the
purpose of such determination, shares owned directly or indirectly by or
for a
23
<PAGE>
ITEM 1. BUSINESS (CONTINUED)
- ----------------
corporation, partnership, estate or trust are considered as being owned
proportionately by its shareholders, partners or beneficiaries; an
individual is considered as owning shares directly or indirectly owned by
or for members of his family; and the holder of an option to acquire shares
is considered as owning such shares. In addition, because of the lessor-
lessee relationship between Realty and LATC, no person may own, actually or
constructively, 10% or more of the outstanding voting power or total number
of shares of stock of the two companies. The bylaws of Operating Company
and Realty preclude any transfer of shares which would cause the ownership
of shares not to be in conformity with the above requirements. Each year
Realty must demand written statements from the record holders of designated
percentages of its shares disclosing the actual owners of the shares and
must maintain, within the Internal Revenue District in which it is required
to file its federal income tax return, permanent records showing the
information it has thus received as to the actual ownership of such shares
and a list of those persons failing or refusing to comply with such demand.
(5) Realty must distribute to its shareholders dividends in an amount at
least equal to the sum of 95% of its "real estate investment trust taxable
income" before deduction of dividends paid (i.e., taxable income less any
net capital gain and less any net income from foreclosure property or from
property held primarily for sale to customers, and subject to certain other
adjustments provided in the Code); plus (i) 95% of the excess of the net
income from foreclosure property over the tax imposed on such income by the
Code; less (ii) a portion of certain noncash items of Realty that are
required to be included in income, such as the amounts includable in gross
income under Section 467 of the Code (relating to certain payments for use
of property or services). The distribution requirement is reduced by the
amount by which the sum of such noncash items exceeds 5% of real estate
investment trust taxable income. Such undistributed amount remains subject
to tax at the tax rate then otherwise applicable to corporate taxpayers.
During 1993, Realty has, or will be deemed to have, distributed at least
95% of its real estate investment trust taxable income as adjusted.
For this purpose, certain dividends paid by Realty after the
close of the taxable year may be considered as having been paid during the
taxable year. However, if Realty does not actually distribute each year at
least the sum of (i) 85% of its real estate investment taxable income, (ii)
95% of its capital gain net income and (iii) any undistributed taxable
income from prior periods, then the amount by which such sums exceed the
actual distributions during the taxable year will be subject to a 4% excise
tax.
If a determination (by a court or by the Internal Revenue
Service) requires an adjustment to Realty's taxable income that results in
a failure to meet the percentage distribution requirements (e.g., a
determination that increases the amount of Realty's real estate investment
taxable income), Realty may, by following the "deficiency dividend"
procedure of the Code, cure the failure to meet the annual percentage
distribution requirement by distributing a dividend within 90 days after
the determination, even though this deficiency dividend is not distributed
to the shareholders in the same taxable year as that in which income was
earned. Realty will, however, be liable for interest based on the amount of
the deficiency dividend.
(6) The directors of Realty must have authority over the management of
Realty, the conduct of its affairs and, with certain limitations, the
management and disposition of Realty's property.
(7) Realty must have the calendar year as its annual accounting period.
(8) Realty must satisfy certain procedural requirements.
TAXATION OF REALTY AS A REIT
In any year in which Realty qualifies under the requirements summarized
above, it generally will not be taxed on that portion of its ordinary income or
net capital gain that is distributed to shareholders, other than net income from
foreclosure property, excess unqualified income and gains from property held
primarily for sale.
24
<PAGE>
ITEM 1. BUSINESS (CONTINUED)
- ----------------
Realty will be taxed at applicable corporate rates on any undistributed taxable
income or net capital gain and will not be entitled to carry back any net
operating losses. It also will be taxed at the highest rate of tax applicable to
corporations on any net income from foreclosure property and, subject to the
safe harbor described below, at the rate of 100% on any income derived from the
sale or other disposition of property, other than foreclosure property, held
primarily for sale. In computing its net operating losses and the income subject
to these latter taxes, Realty will not be allowed a deduction for dividends paid
or received.
Although Realty will also be subject to a 100% tax on the gain derived from
the sale of property (other than foreclosure property) held primarily for sale,
a safe harbor is provided such that gains from the sale of real property are
excluded from this 100% tax for a given year if each of the following conditions
is satisfied:
(a) the property has been held by Realty for at least four years;
(b) total capital expenditures with respect to the property during
the four-year period preceding the date of sale do not exceed 30% of the
net selling price of the property;
(c) either (i) Realty does not make more than seven sales of
properties (other than foreclosure property) during the taxable year or
(ii) the aggregate adjusted bases (as determined for purposes of computing
earnings and profits) of property (other than foreclosure property) sold by
Realty during the taxable year do not exceed 10% of the aggregate adjusted
bases (as so determined) of all of the assets of Realty as of the beginning
of the taxable year;
(d) if the property has not been acquired through foreclosure or
lease termination, the property has been held by Realty for the production
of rental income for at least four years; and
(e) if the requirement of paragraph (c)(i) is not satisfied,
substantially all of the marketing and development expenditures with
respect to the sold properties were made through independent contractors
from whom Realty does not derive or receive any income.
TERMINATION OR REVOCATION OF REIT STATUS
If, in any taxable year after it has filed an election with the Internal
Revenue Service to be treated as a REIT, Realty fails to so qualify, Realty's
election will be terminated, and Realty will not be permitted to file a new
election to obtain such tax treatment until the fifth taxable year following the
termination. However, if Realty's failure to qualify was due to reasonable cause
and not due to willful neglect and if certain other requirements are met, Realty
would be permitted to file a new election to be treated as a REIT for the year
following the termination. If Realty voluntarily revokes its election for any
year, it will not be eligible to file a new election until the fifth taxable
year following such revocation.
If Realty fails to qualify for taxation as a REIT in any taxable year and
the above relief provisions do not apply, then Realty would be subject to tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. Distributions to shareholders of Realty with respect
to any year in which Realty failed to qualify would not be deductible by Realty
nor would they be required to be made. In such event, distributions to
shareholders, to the extent out of current or accumulated earnings and profits,
would be taxed as ordinary income and subject to certain limitations of the
Code, eligible for the dividends-received deduction for corporations (see
"Taxation of Realty's Shareholders"). Failure to qualify could result in Realty
incurring substantial indebtedness (to the extent borrowings are feasible) or
disposing of substantial investments, in order to pay the resulting taxes or, in
the discretion of Realty, to maintain the level of Realty's distributions to its
shareholders.
25
<PAGE>
ITEM 1. BUSINESS (CONTINUED)
- ----------------
TAXATION OF REALTY'S SHAREHOLDERS
So long as Realty qualifies for taxation as a REIT, distributions made to
its shareholders out of current or accumulated earnings and profits (or deemed
to be from current or accumulated earnings or profits), other than capital gain
dividends (discussed below), will be dividends taxable as ordinary income.
Distributions to shareholders of a REIT are not eligible for the dividends-
received deduction for a corporation. Dividends to shareholders that are
properly designated by Realty as capital gain dividends generally will be
treated as long-term capital gain (to the extent they do not exceed Realty's
actual net capital gain for the taxable year) regardless of how long a
shareholder has owned his or her shares. However, corporate shareholders may be
required to treat up to 20% of certain capital gain dividends as ordinary
income. In general, any gain or loss realized upon a taxable disposition of
shares will be treated as long-term capital gain or loss if the shares have been
held for more than twelve months and otherwise as short-term capital gain or
loss. However, if a shareholder receives a long-term capital gain dividend and
such shareholder has held his or her stock for six months or less, any loss
realized on the subsequent sale of the shares will, to the extent of the gain,
be treated as long-term capital loss. Certain constructive ownership rules apply
to determine the holding period.
In the event that Realty distributes cash generated by its activities which
exceeds its net earnings, and provided there are no undistributed current or
accumulated earnings and profits and the distribution does not qualify as a
"deficiency dividend," such distributions will constitute a return of capital to
the extent they do not exceed a shareholder's tax basis for the shareholder's
shares and will be tax free to the shareholder. In such event, the tax basis of
the shares held by each shareholder must be reduced correspondingly by the
amount of such distributions. If such distributions exceed the tax basis of the
shares of a shareholder, the shareholder will recognize capital gain in an
amount equal to such excess, provided the shareholder holds the shares as a
capital asset. Shareholders may not include on their own returns any of
Realty's ordinary or capital losses. Realty will notify each shareholder after
the close of its taxable year as to the portions of the distributions that
constitute ordinary income, return of capital and capital gain. For this
purpose, any dividends declared in October, November or December of a year,
which are payable to shareholders of record on any day of such a month, shall be
treated as if they had been paid and received on December 31 of such year,
provided such dividends are actually paid in January of the following year.
Shareholders are required to include on their own returns any ordinary dividends
in the taxable year in which such dividends are received.
If in any taxable year Realty does not qualify as a REIT, it will be taxed
as a corporation, and distributions to its shareholders will neither be required
to be made nor will they be deductible by Realty in computing its taxable
income, with the result that the assets of Realty and the amounts available for
distribution to shareholders would be reduced to the extent of any tax payable.
Disqualification as a REIT could occur even though Realty had previously
distributed to its shareholders all of its income for such year, or years, in
which it did not qualify as a REIT. In such circumstances, distributions, to the
extent made out of Realty's current or accumulated earnings and profits, would
be taxable to the shareholders as dividends, but, subject to certain limitations
of the Code, would be eligible for the dividends-received deduction for
corporations.
TAX-EXEMPT INVESTORS
The Internal Revenue Service has ruled that amounts distributed by a REIT
to a tax-exempt employee's pension trust do not constitute ''unrelated trade or
business income" and should therefore be nontaxable to such trust. This ruling
does not apply to the extent the tax-exempt investor has borrowed to acquire
shares of the REIT's stock. Moreover, the application of this ruling is subject
to additional limitations that are beyond the scope of this disclosure.
26
<PAGE>
ITEM 1. BUSINESS (CONTINUED)
- ----------------
STATE AND TERRITORIAL TAXES
The state or territorial income tax treatment of Realty and its
shareholders may not conform to the federal income tax treatment above. As a
result, prospective shareholders should consult their own tax advisors for an
explanation of the effect of state and territorial tax laws on their investment
in Realty.
FOREIGN INVESTORS
The preceding discussion does not address the federal income tax
consequences to foreign investors of an investment in Realty. Foreign investors
should consult their own tax advisors concerning the federal income tax
considerations to them of the ownership of shares in Realty.
BACKUP WITHHOLDING
The Code imposes a modified form of "backup withholding" for payments of
interest and dividends. This withholding applies only if a shareholder, among
other things: (i) fails to furnish Realty with a properly certified taxpayer
identification number; (ii) furnishes Realty with an incorrect taxpayer
identification number; (iii) fails to report properly interest or dividends from
any source or; (iv) under certain circumstances, fails to provide Realty or his
or her securities broker with a certified statement, under penalty of perjury,
that he or she is not subject to backup withholding. The backup withholding rate
is 31% of "reportable payments" which include dividends. Shareholders should
consult their tax advisors as to the procedure for ensuring that Realty
distributions to them will not be subject to backup withholding.
TAXATION OF OPERATING COMPANY
Operating Company pays ordinary corporate income taxes on its taxable
income. Any income, net of taxes, will be available for retention in Operating
Company's business or for distribution to shareholders as dividends. Any
dividends distributed by Operating Company will be subject to tax at ordinary
rates and generally will be eligible for the dividends received deduction for
corporate shareholders to the extent of Operating Company's current or
accumulated earnings and profits. Distributions in excess of current or
accumulated earnings and profits are treated first, as a return of investment
and then, to the extent that such distribution excludes a shareholder's
investment, as gain from the sale or exchange of such shares. However, there is
no tax provision which requires Operating Company to distribute any of its
after-tax earnings and Operating Company does not expect to pay cash dividends
in the foreseeable future.
FUTURE LEGISLATION
It should be noted that future legislation could be enacted or regulations
promulgated, the nature and likelihood of which cannot be predicted, that might
change in whole or in part, the income tax consequences summarized herein and
reduce or eliminate the advantages which may be derived from the ownership of
paired common stock.
The foregoing is a summary of some of the more significant provisions of
the Code as it relates to REITs and is qualified in its entirety by reference to
the Code and regulations promulgated thereunder.
ITEM 2. PROPERTIES
- -------------------
Information concerning property owned by Realty and Operating Company may
be found under Item 1. "Business."
27
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
- -------------------------
Certain claims, suits and complaints arising in the ordinary course of
business have been filed or were pending against Realty and/or Operating Company
and its subsidiaries at December 31, 1993. In the opinion of the managements of
Realty and Operating Company, all such matters are adequately covered by
insurance or, if not so covered, are without merit or are of such kind, or
involve such amounts, as would not have a significant effect on the financial
position or results of operations of Realty and Operating Company if disposed of
unfavorably.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -----------------------------------------------------------
Not applicable.
ITEM 4A. EXECUTIVE OFFICERS OF REALTY AND OPERATING COMPANY
- -----------------------------------------------------------
(a) The names, ages and business experience of Realty's executive
officers during the past five years are set forth below:
<TABLE>
<CAPTION>
NAME AND AGE BUSINESS EXPERIENCE DURING
------------ THE PAST FIVE YEARS
-----------------------------------------------
<S> <C>
Sherwood C. Chillingworth, 67 Vice Chairman of the Board and Chief Executive
Officer since March 16, 1994; Executive Vice
President, Oak Tree Racing Association January
1993-present; Vice President and General
Counsel, Oak Tree Racing Association April 1992-
December 1992; President, Chillingworth
Corporation 1975-1992.
Glennon E. King, 50 Acting Chief Financial Officer since March
16,1994; Acting Chief Executive Officer February
18-March 15, 1994; Vice President-Finance of
Operating Company 1982-1993; Controller of
Operating Company 1973-1993.
</TABLE>
Each executive officer of Realty is appointed by the Board of Directors
annually and holds office until his successor is duly appointed.
(b) The names, ages and business experience of Operating Company's
executive officers during the past five years are set forth below:
<TABLE>
<CAPTION>
NAME AND AGE BUSINESS EXPERIENCE DURING
------------ THE PAST FIVE YEARS
-----------------------------------------------
<S> <C>
Stephen F. Keller, 55 President and Chief Executive Officer since
February 1993; President and Chief Operating
Officer 1991-February 1993; Attorney, Fulbright
& Jaworski, of counsel, 1991; Attorney, Lillick
& McHose, 1962-1990; Vice Chairman, Seidler
Amdec Securities, Inc. 1988-1990.
Clifford C. Goodrich, 51 Vice President since 1989; President, LATC since
1989; Executive Vice President and General
Manager, LATC, 1989; Vice President and
Assistant General Manager, LATC, 1980-1988.
Alexander W. Ingle, 51 Vice President since 1986; Secretary/Treasurer
since 1979.
Richard D. Brumbaugh, 47 Vice President - Finance since March 1, 1994;
Controller, LATC, since 1985; Assistant
Controller, LATC 1972-1985.
</TABLE>
Each executive officer of Operating Company is appointed by the Board of
Directors annually and holds office until a successor is duly appointed.
28
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANTS' COMMON EQUITY AND RELATED SHAREHOLDER
- --------------------------------------------------------------------------
MATTERS
- -------
The paired Common Stock of Realty and Operating Company is traded on the
New York Stock Exchange as Santa Anita Realty Enterprises under the symbol SAR.
The following table sets forth the high and low closing prices for the paired
Common Stock on the New York Stock Exchange Composite Tape and the cash
dividends declared by Realty for the periods indicated. Operating Company has
not declared cash dividends.
<TABLE>
<CAPTION>
CASH
DIVIDENDS
HIGH LOW DECLARED
----- ----- -----------
<S> <C> <C> <C>
1992
1st Quarter $20-7/8 $17-1/2 $ .34
2nd Quarter 18-5/8 16-7/8 .34
3rd Quarter 18-1/2 17-1/2 .34
4th Quarter 18-3/4 17-1/8 .34
-------
$ 1.36(a)
=======
1993
1st Quarter $21-5/8 $17-1/2 $ .34
2nd Quarter 20-3/8 16 .34
3rd Quarter 19-1/8 16-5/8 .34
4th Quarter 19-1/2 17-3/8 .34
-------
$ 1.36(b)
=======
1994
1st Quarter (through March 8) $18-1/8 $16-3/4 $ .34
=======
</TABLE>
- ----------
(a) $.56 of the dividends paid per share during 1992 represented a return
of capital.
(b) $.56 of the dividends paid per share during 1993 represented a return
of capital.
A regular quarterly dividend of $.34 per share is payable on April 8, 1994
to shareholders of record on March 8, 1994. The closing price of the paired
Common Stock on the New York Stock Exchange Composite Tape on March 8, 1994 was
$17- 5/8 per share. As of March 8, 1994, there were approximately 22,000
holders of the paired Common Stock, including the beneficial owners of shares
held in nominee accounts.
Realty intends to pay regular quarterly dividends based upon a percentage
of management's estimate of funds from operations for the entire year and, if
necessary, to pay special dividends after the close of the year to effect
distribution of at least 95% of its taxable income (other than net capital
gains) (see item 1. "Business -- Income Tax Matters -- REIT Requirements").
In order to retain earnings to finance its capital improvement program and
for the growth of its business, Operating Company has not paid cash dividends
since its formation and does not expect to pay cash dividends in the foreseeable
future.
29
<PAGE>
ITEM 5. MARKET FOR THE REGISTRANTS' COMMON EQUITY AND RELATED SHAREHOLDER
- --------------------------------------------------------------------------
MATTERS (CONTINUED)
- -------
The statement on the face of this annual report on Form 10-K regarding the
aggregate market value of paired voting stock of Realty and Operating Company
held by nonaffiliates is based on the assumption that all directors and officers
of Realty and Operating Company were, for purposes of this calculation only (and
not for any other purpose), affiliates of Realty or Operating Company.
ITEM 6. SELECTED FINANCIAL DATA
- --------------------------------
The financial data set forth on the following pages includes the
information for Realty and Operating Company combined and separate for the five-
year period ended December 31, 1993.
The separate results of operations and separate net income (loss) per share
of Realty and Operating Company cannot usually be added together to total the
combined results of operations and net income per share because of adjustments
and eliminations arising from inter-entity transactions.
The following data should be read in conjunction with the information set
forth elsewhere herein regarding income tax matters (see item 1. "Business --
Income Tax Matters").
The statements of operations of Realty and Operating Company combined and
separate for each of the five years ended December 31, 1993 have been audited by
Kenneth Leventhal & Company, independent certified public accountants. The
selected financial data should be read in conjunction with the other financial
statements and related notes thereto included elsewhere in this Joint Annual
Report.
30
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA (CONTINUED)
- --------------------------------
<TABLE>
<CAPTION>
REALTY AND OPERATING COMPANY COMBINED
Year Ended December 31,
(in thousands, except per share figures)
---------------------------------------------------------
1993 1992 1991 1990 1989
-------- -------- -------- -------- ---------
<C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Total revenues $107,535 $107,002 $103,814 $103,928 $ 98,855
Costs and expenses 109,657 99,783 93,861 88,131 82,070
-------- -------- -------- -------- --------
Income (loss) before income taxes (2,122) 7,219 9,953 15,797 16,785
Provision (benefit) for income taxes (2,523) (158) 37 206 -
-------- -------- -------- -------- --------
Net income $ 401 $ 7,377 $ 9,916 $ 15,591 $ 16,785
======== ======== ======== ======== ========
Net income per common share $ .04 $ .66 $ .89 $ 1.41 $ 1.61
======== ======== ======== ======== ========
Dividends paid by Realty per common share $ 1.36 $ 1.36 $ 2.08 $ 2.08 $ 2.08
======== ======== ======== ======== ========
Dividends declared by Realty per common share $ 1.36 $ 1.36 $ 1.90 $ 2.08 $ 2.08
======== ======== ======== ======== ========
Weighted average shares outstanding 11,141 11,141 11,141 11,092 10,426
======== ======== ======== ======== ========
BALANCE SHEET DATA:
Total assets $308,266 $288,931 $263,646 $255,987 $260,366
======== ======== ======== ======== ========
Loans payable $187,898 $168,505 $136,718 $113,491 $114,489
======== ======== ======== ======== ========
Shareholders' equity $ 75,522 $ 90,274 $ 98,051 $109,461 $113,332
======== ======== ======== ======== ========
</TABLE>
31
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA (CONTINUED)
- -------------------------------
<TABLE>
<CAPTION>
SANTA ANITA REALTY ENTERPRISES, INC.
YEAR ENDED DECEMBER 31,
(IN THOUSANDS, EXCEPT PER SHARE FIGURES)
------------------------------------------------------------------
1993 1992 1991 1990 1989
---------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues
Rental property $ 38,953 $ 35,290 $ 30,882 $ 28,093 $ 22,253
Rental income from Operating Company (a) 11,634 12,683 11,817 12,505 13,146
Interest and other 4,991 2,318 2,709 3,503 6,195
-------- -------- -------- -------- --------
Total revenues 55,578 50,291 45,408 44,101 41,594
-------- -------- -------- -------- --------
Costs and expenses
Rental property operating expense 16,522 13,533 12,039 10,636 7,616
Depreciation and amortization 8,795 8,156 7,418 6,563 5,875
General and administrative 4,244 4,156 4,292 3,952 3,002
Interest and other 12,477 12,331 11,991 10,497 10,655
Losses (earnings) from
unconsolidated joint ventures 1,993 1,446 83 (1,311) (115)
Minority interest in earnings
(losses) of consolidated joint ventures 477 458 (114) (97) 271
Loss on disposition of
multifamily and industrial operations 10,974 - - - -
-------- -------- -------- -------- --------
Total costs and expenses 55,482 40,080 35,709 30,240 27,304
-------- -------- -------- -------- --------
Income before income taxes 96 10,211 9,699 13,861 14,290
Benefit for income taxes (2,523) - - - -
-------- -------- -------- -------- --------
Net income $ 2,619 $ 10,211 $ 9,699 $ 13,861 $ 14,290
======== ======== ======== ======== ========
Net income per common share $.23 $.91 $.86 $1.23 $1.35
======== ======== ======== ======== ========
Dividends paid per common share $1.36 $1.36 $2.08 $2.08 $2.08
======== ======== ======== ======== ========
Dividends declared per common share $1.36 $1.36 $1.90 $2.08 $2.08
======== ======== ======== ======== ========
Weighted average shares outstanding 11,256 11,256 11,257 11,224 10,582
======== ======== ======== ======== ========
BALANCE SHEET DATA:
Total assets $271,685 $254,254 $229,736 $219,400 $229,445
======== ======== ======== ======== ========
Loans payable $184,644 $164,587 $136,718 $113,491 $114,489
======== ======== ======== ======== ========
Shareholders' equity $ 68,819 $ 81,509 $ 86,608 $ 98,447 $105,808
======== ======== ======== ======== ========
</TABLE>
- ----------
(a) includes LATC, Oak Tree and charity days
32
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA (CONTINUED)
- --------------------------------
<TABLE>
<CAPTION>
SANTA ANITA OPERATING COMPANY
YEAR ENDED DECEMBER 31,
(IN THOUSANDS,EXCEPT PER SHARE FIGURES)
------------------------------------------------------
1993 1992 1991 1990 1989
--------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenues
Horse racing $49,081 $53,683 $51,521 $52,562 $52,345
Food and beverage 11,695 12,589 13,808 13,693 13,700
Interest and other 571 1,382 3,224 4,329 1,953
------- ------- ------- ------- -------
Total revenues 61,347 67,654 68,553 70,584 67,998
------- ------- ------- ------- -------
Costs and expenses
Direct operating costs 40,981 45,089 45,093 45,351 43,325
Food and beverage cost
of sales 3,411 3,462 3,555 3,512 3,547
Depreciation and amortization 2,768 2,732 2,634 2,403 2,058
General and administrative 6,693 8,361 6,868 6,683 5,834
Interest 493 194 179 119 203
Rental expense to Realty 9,233 10,955 9,928 10,436 10,283
------- ------- ------- ------- -------
Total costs and expenses 63,579 70,793 68,257 68,504 65,250
------- ------- ------- ------- -------
Income (loss) before income taxes (2,232) (3,139) 296 2,080 2,748
Provision (benefit) for income taxes - (243) 37 206 -
------- ------- ------- ------- -------
Net income (loss) $(2,232) $(2,896) $ 259 $ 1,874 $ 2,748
======= ======= ======= ======= =======
Net earnings (loss)
per common share $ (.20) $ (.26) $ .02 $ .17 $ .26
======= ======= ======= ======= =======
Dividends declared
per common share $ - $ - $ - $ - $ -
======== ======== ======== ======== ========
BALANCE SHEET DATA:
Total assets $42,621 $39,458 $39,828 $42,752 $38,497
======= ======= ======= ======= =======
Loans payable $ 3,254 $ 3,918 $ - $ - $ -
======= ======= ======== ======== ========
Shareholders' equity $12,274 $14,506 $17,402 $17,150 $14,591
======= ======= ======= ======= =======
</TABLE>
33
<PAGE>
ITEM 7. 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 years ended December 31, 1993, 1992 and 1991, together with the liquidity
and capital resources as of December 31, 1993.
RESULTS OF OPERATIONS -- 1993 COMPARED WITH 1992
Realty's revenues are derived principally from the rental of real
property and interest on investments. Total revenues for the year ended
December 31, 1993 were $55,578,000 compared with $50,291,000 reported for the
year ended December 31, 1992, a 10.5% increase. The higher 1993 revenues
were primarily due to increases in rental revenue from real estate properties
along with the interest earned on the California Franchise Tax Board refund
discussed below.
Rental revenue from real estate properties accounted for $50,587,000
of the total revenues for the year ended December 31, 1993, a 5.4% increase
from the $47,973,000 recorded for 1992.
The most significant source of rental revenue is the lease of Santa
Anita Racetrack. Revenues for the year ended December 31, 1993 were
$11,634,000, a decrease of 8.3% from the $12,683,000 reported for the year
ended December 31, 1992. The decrease in rental income resulted from a
decline in average daily wagering and fewer race days. Management believes
that the decline is attributable to a weak California economy and the
continued negative effect of inter-track wagering on the on-track attendance
and wagering. The lease with LATC for Santa Anita Racetrack expires in 1994.
It is anticipated by management that the lease will be renewed on terms
which, in light of Operating Company's declining profitability, may result in
reduced revenue to Realty (see Item 1. "Business - Operating Company" and
Item 6. "Selected Financial Data - Operating Company").
Rental revenues from other real estate investments for the year ended
December 31, 1993 were $38,953,000, an increase of 10.4% from those reported
in 1992 of $35,290,000. The 1993 increases are due primarily to additional
revenues from a new multifamily property acquisition in 1993 and the full
year inclusion of several multifamily properties acquired in 1992.
Interest and other income increased 115.3% to $4,991,000 for the year
ended December 31, 1993 from $2,318,000 reported for 1992. The increase is
primarily attributable to $3,211,000 of interest income in 1993 on a tax
settlement from the California Franchise Tax Board. The settlement was for
tax years prior to 1980 related to Realty's predecessor. In addition to the
interest earned on the settlement, Realty recorded a $2,523,000 income tax
benefit.
Costs and expenses of $55,482,000 for the year ended December 31,
1993 increased 38.4% from those reported for 1992 of $40,080,000. The
increase is primarily due to the loss on the disposition of the multifamily
and industrial operations to Pacific and increases in depreciation and rental
property operating expenses associated with the acquisitions of real estate
projects noted above.
In June 1993, Realty's Board of Directors approved management's
recommendation to recapitalize certain assets of Realty. Pursuant to this
recapitalization, 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 its proposed public offering
of common stock. The transaction was scheduled to be completed in two parts:
(1) Realty would sell all of its apartments and industrial properties to
Pacific with the exception of Realty's interest in the Baldwin Industrial
Park joint venture; and (2) Pacific would enter into a binding agreement to
buy Realty's interest in Baldwin Industrial Park.
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
34
<PAGE>
ITEM 7. MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
-----------------------------------------------------------------------
RESULTS OF OPERATIONS (continued)
---------------------
space, located in the State of Washington (the "Transferred Properties").
Realty's corporate headquarters building and related assets were also
acquired by Pacific. The sale of the Transferred Properties followed the
public offerings of common stock and convertible subordinated debentures by
Pacific.
Pursuant to the Purchase and Sale Agreement, Pacific agreed to buy
Realty's interest in Baldwin Industrial Park subject to satisfaction of
certain conditions, for a minimum price of $8.9 million payable in additional
shares of Pacific common stock with the final price dependent upon completion
of negotiations with other owners of Baldwin Industrial Park and an appraisal
process. Management believes the sale of Realty's interest in Baldwin
Industrial Park will be completed in the second half of 1994. Pacific is
required to issue to Realty non-refundable letters of credit totaling up to
$2.5 million by March 31, 1994 to secure its obligation to acquire Realty's
interest in Baldwin Industrial Park and pay for the corporate headquarters
building and other assets related to the Transferred Properties.
In consideration of the sale of the Transferred Properties, Realty
received approximately $44.4 million in cash and 149,900 shares of the common
stock of Pacific. In addition, Realty was relieved of approximately $44.3
million of mortgage debt on the Transferred Properties. Realty will also
receive, at the time the acquisition of Baldwin Industrial Park is completed,
up to $1.2 million in additional common stock of Pacific as consideration for
its corporate headquarters and other net assets related to the Transferred
Properties.
The two parts of the above transaction will result in a loss of
$10,974,000. This loss has been reflected in the Realty and Realty and
Operating Company combined statements of operations for the year ended
December 31, 1993. If the Baldwin Industrial Park portion of the transaction
described above does not occur, an additional loss of approximately
$5,900,000 will be recognized by Realty in 1994. (See "Notes to Financial
Statements - Note 2 - Disposition of Multifamily and Industrial Properties
Subsequent to Year End.")
In connection with the sale, the executive officers, various managers
and most other employees of Realty resigned and became officers and employees
of Pacific on February 18, 1994.
Realty and Pacific have also entered into a one-year management
agreement whereby Pacific has agreed to provide management services to
Realty. Finally, with respect to the common stock of Pacific owned by
Realty, Pacific has entered into a registration rights agreement with Realty
which, under certain circumstances, allows Realty to require the registration
of the Pacific stock it owns.
Net income for the year ended December 31, 1993 was $2,619,000, a
decrease of 74.4% compared with the $10,211,000 reported in 1992 due to the
factors described above.
RESULTS OF OPERATIONS -- 1992 COMPARED WITH 1991
Realty's revenues were derived principally from the rental of real
property. Total revenues for the year ended December 31, 1992 were
$50,291,000 compared with $45,408,000 reported for the year ended December
31, 1991, a 10.8% increase.
Rental revenue from real estate properties amounted to $47,973,000
for the year ended December 31, 1992, up 12.4% from the year-earlier level of
$42,699,000.
In 1992, the most significant source of rental revenue was the lease
with Santa Anita Racetrack. Revenues for 1992 rose to $12,683,000, up 7.3%
from $11,817,000 reported in 1991. The increase resulted from an increase in
total wagering at Santa Anita Racetrack due to six additional racing days
during 1992 and increases in out-of-state simulcast revenues.
Rental revenues from other real estate investments for 1992 increased
to $35,290,000, up 14.3% from $30,882,000 in 1991. This increase was due
primarily to additional revenues from new property
35
<PAGE>
ITEM 7. MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
-----------------------------------------------------------------------
RESULTS OF OPERATIONS (continued)
---------------------
acquisitions, the receipt of previously reserved past due rents and increased
revenues from Santa Anita Fashion Park.
Interest and other income declined 14.4% to $2,318,000 in 1992 from
$2,709,000 in 1991. The decrease is due to reduced funds held for investment
and lower interest rates on funds held for investment, offset in part by the
sale of a neighborhood shopping center in Phoenix, Arizona, net of a loss on
a lease agreement, which generated a net gain of $646,000 (net of cost of
$4,475,000). Realty reported a gain of $177,000 (net of cost of $223,000) in
1991 from the sale of a small land parcel in Southern California.
Costs and expenses increased 12.2 percent to $40,080,000 in 1992, up
from $35,709,000 in 1991. The increase is due primarily to higher levels of
depreciation, interest and rental property operating expenses associated with
the acquisition of 1,109 new apartment units, and the expensing in 1992 of
$580,000 of nonrecurring charges for the engagement of consultants to review
the operations of the Realty and to assist in preparing a long range
strategic plan. Realty reported a loss of $1,446,000 from the Towson Town
Center unconsolidated joint venture primarily due to depreciation (the
project was under construction in the prior periods).
Net income for the year ended December 31, 1992 increased 5.3% to
$10,211,000 compared with income of $9,699,000 reported in 1991 due to the
factors described above.
LIQUIDITY AND CAPITAL RESOURCES
Realty had liquidity available from a combination of short- and long-
term sources. Short-term sources included cash of $7,633,000 at December
31, 1993.
In connection with the sale of properties to Pacific, Realty paid
down its lines of credit by $44.4 million and transferred to Pacific $44.3
million of indebtedness associated with the multifamily and industrial
properties. As of December 31, 1993, Realty was not in compliance with
certain covenants contained in its credit agreements. The banks have waived
such noncompliance through April 30, 1994 conditioned, among other things, on
no additional borrowings under the credit agreements (at December 31, 1993,
$78,361,000 loans and letters of credit were outstanding under these
agreements). Realty is in the process of renegotiating these credit
agreements. Management is of the opinion that Realty has sufficient
liquidity from other sources to assure that its operations will not be
adversely affected pending this renegotiation.
Realty had approximately $13,591,000 of long-term receivables at
December 31, 1993, with maturities ranging from 1994 to 2002. For the year
ended December 31, 1993, long-term receivables earned interest income of
$996,000.
In the opinion of management, as of December 31, 1993 Realty's real
estate investments had a 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.
IMPACT OF INFLATION
Realty's management believes that, for the foreseeable future,
revenues and income from Santa Anita Racetrack, Fashion Park and its other
real estate should not be adversely affected in a material way by
inflationary pressures. Leases at Fashion Park include clauses enabling
Realty to participate in tenants' future increases and gross revenues.
Tenant leases on many other properties include provisions which tie the lease
payments to the Consumer Price Index or include step-up provisions.
36
<PAGE>
ITEM 7. MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- -----------------------------------------------------------------------
RESULTS OF OPERATIONS (continued)
- ---------------------
SANTA ANITA OPERATING COMPANY
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 years ended December 31, 1993, 1992 and 1991 together with liquidity and
capital resources as of December 31, 1993.
RESULTS OF OPERATIONS -- 1993 COMPARED WITH 1992
Operating Company derives its revenues from thoroughbred horse racing
activities. Total revenues were $61,347,000 in 1993, down 9.3% from $67,654,000
in 1992. In 1993, live thoroughbred horse racing at Santa Anita Racetrack
totaled 83 days compared with 94 days in 1992. Total and average daily on-
track attendance at the live racing events in 1993 were down 20.4% and 9.8%,
respectively, from 1992. Total wagering at the live racing events was down
10.6% while average daily wagering increased 1.2% in 1993 compared with 1992.
On-track wagering and inter-track wagering declined 20.2% and 13.6%,
respectively, while interstate wagering increased 43.8% in 1993 compared with
1992.
In addition to a weak California economy and the continued negative effect
of inter-track wagering on the on-track attendance and wagering, management
believes the declines in average daily attendance and wagering were the result
of inclement weather (in excess of 41 inches of rain, three times normal) during
much of the 1992-1993 race meet, which caused the cancellation of two full race
days and two partial race days in January.
Also, Santa Anita Racetrack operated 42 days in 1993 and 43 days in 1992 as
a satellite wagering facility for Del Mar and 99 days in 1993 and 101 days in
1992 as a satellite wagering facility for Hollywood Park. Total attendance and
wagering as a satellite wagering facility were down 3.5% and 2.5%, respectively,
in 1993 compared with 1992. Average daily attendance and wagering were down
1.4% and 0.4%, respectively, in 1993 compared with 1992.
Horse racing revenues and direct operating costs declined in 1993 compared
with 1992 due to fewer race days, lower attendance and lower wagering at both
the live racing events and as a satellite wagering facility. Horse racing
revenues in 1993 were $49,081,000 down 8.6% from $53,683,000 in 1992. Direct
horse racing operating costs in 1993 were $40,981,000, down 9.1% from
$45,089,000 in 1992.
Food and beverage revenues and cost of sales were also lower in 1993
compared with 1992 due to the factors described above. As a percentage of
sales, cost of sales increased to 29.2% in 1993 compared with 27.5% in 1992.
General and administrative expenses were $6,693,000 in 1993, down 19.9%
from $8,361,000 in 1992 due to administrative staff reductions in 1993 and to
the costs related to the engagement of outside consultants in the prior year to
review the Operating Company's operations. Partially offsetting the declines in
general and administrative expenses, however, was the one-time charge of
$759,000 in 1993 for the post-retirement benefits payable as a result of the
death of the former Chairman of the Board of Operating Company.
Interest expense increased to $493,000 in 1993 from $194,000 in 1992 due to
a higher level of debt at LATC.
Rental expense to Realty was $9,233,000 in 1993 compared with $10,955,000
in 1992. The decrease in rental expense of $1,722,000 reflects the decline in
wagering.
37
<PAGE>
ITEM 7. MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- -----------------------------------------------------------------------
RESULTS OF OPERATIONS (continued)
- ---------------------
Due to the revenue and expense items previously discussed, Operating
Company reported a net loss of $2,232,000 or $.20 per share in 1993 compared
with a net loss of $2,896,000 or $.26 per share in 1992.
RESULTS OF OPERATIONS -- 1992 COMPARED WITH 1991
In 1992, the expansion of intertrack wagering within Los Angeles and Orange
Counties caused intertrack revenues to increase $7,657,000 while on-track
revenues decreased $7,246,000. On-track attendance-related revenues declined as
a result of a 24.0% drop in on-track attendance at the 1991-1992 Santa Anita
race meet and a decline in on-track wagering of $147,248,000, or 31.3 percent at
the same meet. The on-track attendance and wagering decreases were, in part,
caused by the continuing economic recession in Southern California. These
changes, combined with a decline in interest income of $1,842,000 as a result of
declining interest rates, primarily account for the total decline of $899,000 in
total revenues to $67,654,000 for the year ended December 31, 1992.
The decline in revenues from live racing events was partially offset by an
increase in revenue by Santa Anita Racetrack operating as a satellite location,
selected price increases and increased interstate simulcasting revenues. Santa
Anita Racetrack operated as a satellite location for Hollywood Park for an
additional 69 days in 1992.
Direct operating costs related to horse racing operations were $45,089,000
in 1992, virtually equal with $45,093,000 reported in 1991, in spite of the fact
Santa Anita Racetrack operated as a satellite location for Hollywood Park for an
additional 69 days.
General and administrative expenses were $8,361,000 for 1992, an increase
of $1,493,000 or 21.7 percent, compared with the $6,868,000 in 1991. The
increase resulted primarily from the expanded satellite racing season at Santa
Anita Racetrack and the engagement of outside consultants ($660,000) to review
the company's operations, including cost efficiencies, and to identify
opportunities to enhance revenue.
Depreciation and amortization expenses were $2,732,000 for 1992, an
increase of $98,000 or 3.7 percent, compared with $2,634,000 reported for 1991.
These non-cash charges resulted from the ongoing capital improvement program at
Santa Anita Racetrack.
Total rent paid to Realty was $10,955,000 for the year ended December 31,
1992, compared with $9,928,000 in 1991. The increase of $1,027,000 reflects
increases in interstate simulcast revenues offset by decreases in the on-track
and intertrack wagering.
Due to the revenue and expense items previously discussed, Operating
Company reported a net loss of $2,896,000 or $.26 per share in 1992 compared
with net income of $259,000 or $.02 per share in 1991.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1993, Operating Company's sources of liquidity included
cash and short-term investments of $14,388,000 and an unsecured line of credit
with Realty of $10,000,000, of which approximately $3,500,000 was utilized in
connection with a guarantee of a capital lease. Operating Company's ability to
utilize Realty's line of credit is dependent upon Realty's liquidity and capital
resources. As a result of Realty's noncompliance with certain covenants
contained within its credit agreements, Realty is currently unable to borrow
additional moneys under its lines of credit. Accordingly, borrowings by Realty
under these agreements would not provide a source of liquidity for Operating
Company. Realty is in the process of renegotiating its credit agreements. (See
Item 7. "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Realty - Liquidity and Capital Resources"). For the
year ended December 31, 1993, short-term investments earned interest income of
$326,000.
38
<PAGE>
ITEM 7. MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- -----------------------------------------------------------------------
RESULTS OF OPERATIONS (continued)
- ---------------------
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 uncashed winning pari-mutuel tickets
payable to the public.
IMPACT OF INFLATION
LATC's expenses are heavily labor-intensive with labor rates being covered
by negotiated contracts with labor unions. Labor contracts with the pari-
mutuel, service and operational employees were successfully renegotiated in
April 1992. These new contracts expire in 1995. Management continues to
address cost containment and labor productivity in all areas.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ----------------------------------------------------
See Index to Financial Statements for a listing of the financial statements
and supplementary data filed with this report.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
- -------------------------------------------------------------
Not applicable.
39
<PAGE>
PART III
Pursuant to General Instruction G(3) to Form 10-K, the information called
for by this part of Form 10-K is incorporated herein by reference to the
registrants' definitive joint proxy statement to be filed, pursuant to
Regulation 14A, with the Securities and Exchange Commission not later than 120
days after the end of the year ended December 31, 1993.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- -------------------------------------------------------------------------
(a) The following documents are filed as part of this report:
1. Financial Statements
See Index to Financial Statements
2. Financial Statement Schedules
See Index to Financial Statement Schedules
3. Exhibits
See Exhibit Index
(b) Reports on Form 8-K. No reports on Form 8-K have been filed
during the last quarter of the fiscal year ended December 31, 1993.
40
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Realty and Operating Company 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: /s/ SHERWOOD C. CHILLINGWORTH By: /s/ 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)
March 29, 1994 March 29, 1994
---------------------------- ----------------------------
Date Date
By: /s/ GLENNON E. KING /s/ RICHARD D. BRUMBAUGH
---------------------------- ----------------------------
Glennon E. King Richard D. Brumbaugh
Acting Chief Financial Officer Vice President-Finance
(Principal Financial and (Principal Financial and
Accounting Officer) Accounting Officer)
March 29, 1994 March 29, 1994
---------------------------- -----------------------------
Date Date
41
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrants and in the capacity and on the date indicated.
<TABLE>
<C> <S>
/s/ STEPHEN F. KELLER Chairman of the Board and Director of Realty, President, Chief
- ------------------------ Executive Officer (Principal Executive Officer), and Director
Stephen F. Keller of Operating Company
/s/ WILLIAM C. BAKER Director of Operating Company and Director of Realty
- ------------------------
William C. Baker
/s/ RICHARD S. COHEN Director of Operating Company and Director of Realty
- ------------------------
Richard S. Cohen
/s/ ARTHUR LEE CROWE Director of Operating Company and Director of Realty
- ------------------------
Arthur Lee Crowe
/s/ CLIFFORD C. GOODRICH Vice President and Director of Operating Company and Director
- ------------------------ of Realty
Clifford C. Goodrich
/s/ ROBERT H. GRANT Director of Operating Company and Director of Realty
- ------------------------
Robert H. Grant
/s/ TAYLOR B. GRANT Director of Realty
- ------------------------
Taylor B. Grant
/s/ LINDA K. MENNIS Director of Operating Company
- ------------------------
Linda K. Mennis
/s/ ROBERT E. MORGAN Director of Operating Company and Director of Realty
- ------------------------
Robert E. Morgan
/s/ THOMAS P. MULLANEY Director of Operating Company and Director of Realty
- ------------------------
Thomas P. Mullaney
/s/ CHARLES H. STRUB II Director of Realty
- ------------------------
Charles H. Strub II
/s/ JOHN M. STRUB Director of Operating Company
- ------------------------
John M. Strub
/s/ ROBERT H. STRUB Director of Realty
- ------------------------
Robert H. Strub
</TABLE>
Date: March 29, 1994
---------------
42
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC. AND
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INDEPENDENT AUDITORS' REPORT 45
SANTA ANITA REALTY ENTERPRISES, INC.
Consolidated Balance Sheets as of December 31,1993 and 1992 46
Consolidated Statements of Operations for the years ended
December 31, 1993, 1992 and 1991 47
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1993, 1992 and 1991 48
Consolidated Statements of Cash Flows for the years ended
December 31, 1993, 1992 and 1991 49
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets as of December 31, 1993 and 1992 50
Consolidated Statements of Operations for the years ended
December 31, 1993, 1992 and 1991 51
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1993, 1992 and 1991 52
Consolidated Statements of Cash Flows for the years ended
December 31, 1993, 1992 and 1991 53
SANTA ANITA REALTY ENTERPRISES, INC. AND SANTA ANITA OPERATING
COMPANY AND SUBSIDIARIES COMBINED
Combined Balance Sheets as of December 31, 1993 and 1992 54
Combined Statements of Operations for the years ended
December 31, 1993, 1992 and 1991 55
Combined Statements of Shareholders' Equity for the years ended
December 31, 1993, 1992 and 1991 56
Combined Statements of Cash Flows for the years ended
December 31, 1993, 1992 and 1991 57
NOTES TO FINANCIAL STATEMENTS 58
H-T ASSOCIATES
Independent Auditors' Reports 96
--Current Year Auditor
--Predecessor Auditors
Financial Statements and Notes 99
</TABLE>
43
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC. AND
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENT SCHEDULES
The schedules listed below relate to Realty and Operating Company as indicated:
<TABLE>
<CAPTION>
SCHEDULES FOR
---------------------------
SCHEDULE OPERATING
- --------- REALTY COMPANY
------------ ------------
(REFERENCE IS TO PAGE NUMBER)
<S> <C> <C> <C>
I Marketable Securities - Other Investments as of
December 31, 1993 Omitted 84
II Amounts Receivable from Related Parties and
Underwriters, Promoters and Employees Other Than
Related Parties for the years ended December 31,
1993, 1992 and 1991 85 87
V Property, Plant and Equipment for the years ended
December 31, 1993, 1992 and 1991 Omitted 89
VI Accumulated Depreciation, Depletion and Amortization
of Property, Plant and Equipment for the years ended
December 31, 1993, 1992 and 1991 Omitted 90
VIII Valuation and Qualifying Accounts as of December 31,
1993 91 Omitted
X Supplementary Income Statement Information for the years
ended December 31, 1993, 1992 and 1991 92 93
XI Real Estate and Accumulated Depreciation as of
December 31, 1993 94 Omitted
</TABLE>
Schedules not listed above have been omitted because either the conditions under
which they are required are absent, not applicable, or the required information
is included in the financial statements and related notes thereto.
44
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
Santa Anita Realty Enterprises, Inc. and
Santa Anita Operating Company
We have audited the financial statements and the related financial statement
schedules, listed on pages 42 and 43 of:
(a) Santa Anita Realty Enterprises, Inc.;
(b) Santa Anita Operating Company and Subsidiaries; and
(c) Santa Anita Realty Enterprises, Inc. and Santa Anita Operating Company
and Subsidiaries Combined.
These financial statements and financial statement schedules are the
responsibility of the companies' management. Our responsibility is to express an
opinion on these financial statements and financial statement schedules based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the above-listed entities at
December 31, 1993 and 1992 and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1993, in
conformity with generally accepted accounting principles. Further, it is our
opinion that the financial statement schedules referred to above present fairly,
in all material respects, the information set forth therein.
KENNETH LEVENTHAL & COMPANY
Newport Beach, California
March 1, 1994
45
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1993 AND 1992
ASSETS
<TABLE>
<CAPTION>
1993 1992
------------- --------------
<S> <C> <C>
Real estate assets
Santa Anita Racetrack, less accumulated depreciation of
$18,670,000 and $18,006,000, respectively
(Schedule XI) $ 6,997,000 $ 8,349,000
Commercial properties, less accumulated depreciation
of $42,503,000 and $41,032,000, respectively (Notes 2,
3, 8 and Schedule XI) 221,876,000 206,677,000
Investments in unconsolidated joint ventures (Note 3) 3,616,000 5,925,000
Real estate loans and advances receivable (Note 4) 22,084,000 24,855,000
------------ ------------
254,573,000 245,806,000
Cash (Note 5) 7,633,000 1,671,000
Accounts receivable 4,305,000 2,716,000
Due from a former officer and a former officer of Operating
Company (Note 11 and Schedule II) 81,000 184,000
Prepaid expenses and other assets 4,624,000 4,836,000
Due from (to) Operating Company 469,000 (959,000)
------------ ------------
$271,685,000 $254,254,000
============ ============
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
Real estate loans payable (Note 5 and Schedule XI) $106,731,000 $107,655,000
Other loans payable (Note 5) 77,913,000 56,932,000
Accounts payable 3,678,000 2,301,000
Other liabilities (Notes 6 and 9) 15,346,000 4,820,000
Dividends payable 3,788,000 3,788,000
------------ ------------
207,456,000 175,496,000
------------ ------------
Minority interest in consolidated joint ventures (Note 3) (4,590,000) (2,751,000)
Commitments and contingencies (Note 8)
Shareholders' equity (Note 10)
Preferred stock, $.10 par value; authorized 6,000,000
shares; none issued - -
Common stock, $.10 par value; authorized 19,000,000
and 40,000,000 shares, respectively; issued and
outstanding 11,256,353 and 11,256,353 shares,
respectively 1,125,000 1,125,000
Additional paid-in capital 117,084,000 117,084,000
Retained earnings (deficit) (49,390,000) (36,700,000)
------------ ------------
68,819,000 81,509,000
------------ ------------
$271,685,000 $254,254,000
============ ============
</TABLE>
See accompanying notes.
46
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
1993 1992 1991
------------- ------------ -------------
<S> <C> <C> <C>
Revenues
Rental property (Note 8) $38,953,000 $35,290,000 $30,882,000
Rental income from Operating Company
(Note 11) 11,634,000 12,683,000 11,817,000
Interest and other (Note 7) 4,991,000 2,318,000 2,709,000
----------- ----------- -----------
55,578,000 50,291,000 45,408,000
----------- ----------- -----------
Costs and expenses
Rental property operating expenses 16,522,000 13,533,000 12,039,000
Depreciation and amortization 8,795,000 8,156,000 7,418,000
General and administrative 4,244,000 4,156,000 4,292,000
Interest and other (Note 5) 12,477,000 12,331,000 11,991,000
Losses from unconsolidated joint ventures
(Note 3) 1,993,000 1,446,000 83,000
Minority interest in earnings (losses) of
consolidated joint ventures (Note 3) 477,000 458,000 (114,000)
Loss on disposition of multifamily and
industrial operations (Note 2) 10,974,000 - -
----------- ----------- -----------
55,482,000 40,080,000 35,709,000
----------- ----------- -----------
Income before income taxes 96,000 10,211,000 9,699,000
Benefit for income taxes (Note 7) (2,523,000) - -
----------- ----------- -----------
Net income $ 2,619,000 $10,211,000 $ 9,699,000
=========== =========== ===========
Weighted average number of common shares
outstanding 11,256,353 11,256,413 11,256,520
=========== =========== ===========
Net income per common share $.23 $.91 $.86
=========== =========== ===========
Dividends declared per common share $1.36 $1.36 $1.90
=========== =========== ===========
</TABLE>
See accompanying notes.
47
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED
------------------------- PAID-IN EARNINGS
SHARES AMOUNT CAPITAL (DEFICIT) TOTAL
---------- ------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Balance,
December 31, 1990 11,256,586 $1,125,000 $117,233,000 $(19,911,000) $ 98,447,000
Dividend reinvestment
plan, net (Note 1) (121) - (148,000) - (148,000)
Dividends declared
on common stock - - - (21,390,000) (21,390,000)
Net income - - - 9,699,000 9,699,000
---------- ---------- ------------ ------------ ------------
Balance,
December 31, 1991 11,256,465 1,125,000 117,085,000 (31,602,000) 86,608,000
Dividend reinvestment
plan, net (Note 1) (112) - (1,000) - (1,000)
Dividends declared
on common stock - - - (15,309,000) (15,309,000)
Net income - - - 10,211,000 10,211,000
---------- ---------- ------------ ------------ ------------
Balance,
December 31, 1992 11,256,353 1,125,000 117,084,000 (36,700,000) 81,509,000
Dividends declared
on common stock - - - (15,309,000) (15,309,000)
Net income - - - 2,619,000 2,619,000
---------- ---------- ------------ ------------ ------------
Balance,
December 31, 1993 11,256,353 $1,125,000 $117,084,000 $(49,390,000) $ 68,819,000
========== ========== ============ ============ ============
</TABLE>
48
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
1993 1992 1991
------------ ------------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 2,619,000 $ 10,211,000 $ 9,699,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 8,795,000 8,156,000 7,418,000
Net gain on sale of real estate - (646,000) (177,000)
Loss on disposition of multifamily and
industrial operations 10,974,000 - -
Minority interest in earnings (losses) of
consolidated joint ventures 477,000 458,000 (114,000)
Equity in losses of unconsolidated joint
ventures 1,993,000 1,446,000 83,000
Distributions from unconsolidated joint
ventures - - 250,000
Net decrease (increase) in certain other
assets (1,455,000) 18,000 191,000
Net increase in certain other liabilities 2,268,000 602,000 805,000
------------ ------------ ------------
Net cash provided by operating activities 25,671,000 20,245,000 18,155,000
------------ ------------ ------------
Cash flows from investing activities:
Proceeds from sales of real estate - 5,425,000 400,000
Payments received on loans and advances
receivable 4,076,000 1,152,000 362,000
Origination of loans and advances receivable (1,305,000) (9,345,000) (3,176,000)
Additions and improvements to real estate assets (33,424,000) (35,588,000) (24,544,000)
Investments in unconsolidated joint ventures (1,100,000) (664,000) (5,950,000)
Capital distributions from unconsolidated joint
ventures 1,405,000 664,000 -
------------ ------------ ------------
Net cash used in investing activities (30,348,000) (38,356,000) (32,908,000)
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from real estate loans payable - 11,191,000 13,789,000
Proceeds from other loans payable 20,981,000 22,832,000 34,100,000
Repayment of real estate loans payable (924,000) (6,154,000) (24,865,000)
Net increase (decrease) in due from Operating
Company (1,428,000) 1,000,000 (12,000)
Net increase in certain other liabilities 9,635,000 728,000 1,409,000
Dividends paid (15,309,000) (15,309,000) (23,416,000)
Distributions to minority interest in consolidated
joint ventures, net (2,316,000) (81,000) (1,086,000)
Proceeds from stock issued in connection with
exercise of stock options and dividend
reinvestment plan, net - (1,000) (148,000)
------------ ------------ ------------
Net cash provided by (used in) financing activities 10,639,000 14,206,000 (229,000)
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents 5,962,000 (3,905,000) (14,982,000)
Cash and cash equivalents at beginning of year 1,671,000 5,576,000 20,558,000
------------ ------------ ------------
Cash and cash equivalents at end of year $ 7,633,000 $ 1,671,000 $ 5,576,000
============ ============ ============
</TABLE>
See accompanying notes.
49
<PAGE>
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1993 AND 1992
ASSETS
<TABLE>
<CAPTION>
1993 1992
------------- -------------
<S> <C> <C>
Current Assets
Cash $ 9,695,000 $ 6,226,000
Short-term investments, at cost (approximates market)
(Schedule I) 4,693,000 3,750,000
Accounts receivable 2,789,000 1,657,000
Due from officers and a former officer (Note 11 and Schedule II) 393,000 890,000
Prepaid expenses and other assets 1,041,000 1,607,000
------------ ------------
Total current assets 18,611,000 14,130,000
------------ ------------
Investment in common stock of Realty 2,179,000 2,179,000
Property, plant and equipment, at cost (Note 5 and Schedule V)
Machinery and other equipment 21,943,000 21,524,000
Leasehold improvements 20,976,000 19,968,000
------------ ------------
42,919,000 41,492,000
Less accumulated depreciation (Schedule VI) (21,088,000) (18,343,000)
------------ ------------
21,831,000 23,149,000
------------ ------------
$ 42,621,000 $ 39,458,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 10,070,000 $ 7,455,000
Other liabilities (Notes 6 and 9) 10,117,000 7,735,000
Other loans payable (Note 5) 726,000 663,000
Due to (from) Realty 469,000 (959,000)
------------ ------------
Total current liabilities 21,382,000 14,894,000
------------ ------------
Other loans payable (Note 5) 2,528,000 3,255,000
Deferred revenues 2,872,000 3,130,000
Deferred income taxes (Note 7) 3,565,000 3,673,000
------------ ------------
30,347,000 24,952,000
------------ ------------
Commitments and contingencies (Note 8)
Shareholders' Equity (Note 10)
Preferred stock, $.10 par value; authorized 6,000,000 shares;
none issued - -
Common stock, $.10 par value; authorized 19,000,000 and
40,000,000 shares, respectively; issued and outstanding
11,140,853 and 11,140,853 shares, respectively 1,114,000 1,114,000
Additional paid-in capital 20,592,000 20,592,000
Retained earnings (deficit) (9,432,000) (7,200,000)
------------ ------------
12,274,000 14,506,000
------------ ------------
$ 42,621,000 $ 39,458,000
============ ============
</TABLE>
See accompanying notes.
50
<PAGE>
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31 ,1993, 1992 AND 1991
<TABLE>
<CAPTION>
1993 1992 1991
------------- ------------- ------------
<S> <C> <C> <C>
Revenues
Horse racing (Note 2) $49,081,000 $53,683,000 $51,521,000
Food and beverage 11,695,000 12,589,000 13,808,000
Interest and other 571,000 1,382,000 3,224,000
----------- ----------- -----------
61,347,000 67,654,000 68,553,000
----------- ----------- -----------
Costs and expenses
Direct horse racing operating costs 40,981,000 45,089,000 45,093,000
Food and beverage cost of sales 3,411,000 3,462,000 3,555,000
Depreciation and amortization (Schedule VI) 2,768,000 2,732,000 2,634,000
General and administrative 6,693,000 8,361,000 6,868,000
Interest (Note 5) 493,000 194,000 179,000
Rental expense to Realty (Note 11) 9,233,000 10,955,000 9,928,000
----------- ----------- -----------
63,579,000 70,793,000 68,257,000
----------- ----------- -----------
Income (loss) before income taxes (2,232,000) (3,139,000) 296,000
Provision (benefit) for income taxes (Note 7) - (243,000) 37,000
----------- ----------- -----------
Net income (loss) $(2,232,000) $(2,896,000) $ 259,000
=========== =========== ===========
Weighted average number of common shares
outstanding 11,140,853 11,140,913 11,141,020
=========== =========== ===========
Net income (loss) per common share $(.20) $(.26) $.02
=========== =========== ===========
</TABLE>
See accompanying notes.
51
<PAGE>
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED
--------------------------- PAID-IN EARNINGS
SHARES AMOUNT CAPITAL (DEFICIT) TOTAL
------------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance,
December 31, 1990 11,141,086 $1,114,000 $20,594,000 $(4,558,000) $17,150,000
Dividend reinvestment
plan, net (Note 1) (121) - (2,000) (5,000) (7,000)
Net income - - - 259,000 259,000
---------- ---------- ----------- ----------- -----------
Balance,
December 31, 1991 11,140,965 1,114,000 20,592,000 (4,304,000) 17,402,000
Dividend reinvestment
plan, net (Note 1) (112) - - - -
Net loss - - - (2,896,000) (2,896,000)
---------- ---------- ----------- ----------- -----------
Balance,
December 31, 1992 11,140,853 1,114,000 20,592,000 (7,200,000) 14,506,000
Net loss - - - (2,232,000) (2,232,000)
---------- ---------- ----------- ----------- -----------
Balance,
December 31, 1993 11,140,853 $1,114,000 $20,592,000 $(9,432,000) $12,274,000
========== ========== =========== =========== ===========
</TABLE>
See accompanying notes.
52
<PAGE>
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
1993 1992 1991
------------- ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $(2,232,000) $(2,896,000) $ 259,000
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating
activities:
Depreciation and amortization 2,768,000 2,732,000 2,634,000
Deferred income taxes (108,000) (141,000) (31,000)
Net (increase) decrease in certain
other assets (69,000) 931,000 (1,334,000)
Net increase (decrease) in certain
other liabilities 4,739,000 708,000 (3,123,000)
----------- ----------- -----------
Net cash provided by (used in) operating
activities 5,098,000 1,334,000 (1,595,000)
----------- ----------- -----------
Cash flows from investing activities:
Additions to property, plant and equipment, net (1,450,000) (6,030,000) (3,348,000)
----------- ----------- -----------
Net cash used in investing activities (1,450,000) (6,030,000) (3,348,000)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from other loans payable - 4,000,000 -
Repayment of other loans payable (664,000) (82,000) -
Net (increase) decrease in due from Realty 1,428,000 (1,000,000) 12,000
----------- ----------- -----------
Net cash provided by financing activities 764,000 2,918,000 12,000
----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents 4,412,000 (1,778,000) (4,931,000)
Cash and cash equivalents at beginning of year 9,976,000 11,754,000 16,685,000
----------- ----------- -----------
Cash and cash equivalents at end of year $14,388,000 $ 9,976,000 $11,754,000
=========== =========== ===========
</TABLE>
See accompanying notes.
53
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC. AND
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
COMBINED BALANCE SHEETS
DECEMBER 31, 1993 AND 1992
ASSETS
<TABLE>
<CAPTION>
1993 1992
--------------- ---------------
<S> <C> <C>
Real estate assets
Santa Anita Racetrack, less accumulated depreciation of $18,670,000 and $18,006,000,
respectively $ 6,997,000 $ 8,349,000
Commercial properties, less accumulated depreciation of $41,079,000 and $39,779,000,
respectively (Notes 2, 3 and 8) 216,832,000 201,462,000
Investments in unconsolidated joint ventures (Note 3) 3,616,000 5,925,000
Real estate loans and advances receivable (Note 4) 22,084,000 24,855,000
------------ ------------
249,529,000 240,591,000
Cash (Note 5) 17,328,000 7,897,000
Short-term investments, at cost (approximates market) 4,693,000 3,750,000
Accounts receivable 7,094,000 4,373,000
Due from officers and former officers (Note 11) 474,000 1,074,000
Prepaid expenses and other assets 7,019,000 8,097,000
Property, plant and equipment, at cost, less accumulated
depreciation of $21,088,000 and $18,343,000, respectively (Note 5) 22,129,000 23,149,000
------------ ------------
$308,266,000 $288,931,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Real estate loans payable (Note 5) $106,731,000 $107,655,000
Other loans payable (Note 5) 81,167,000 60,850,000
Accounts payable 13,748,000 9,757,000
Other liabilities (Notes 6 and 9) 25,463,000 12,555,000
Dividends payable 3,788,000 3,788,000
Deferred revenues 2,872,000 3,130,000
Deferred income taxes (Note 7) 3,565,000 3,673,000
------------ ------------
237,334,000 201,408,000
------------ ------------
Minority interest in consolidated joint ventures (Note 3) (4,590,000) (2,751,000)
Commitments and contingencies (Note 8)
Shareholders' equity (Note 10)
Preferred stock $.10 par value; authorized 6,000,000 shares
none issued - -
Common stock, $.10 par value; authorized 19,000,000 and
40,000,000 shares, respectively; issued and outstanding 11,140,853 and 11,140,853 shares,
respectively 2,227,000 2,227,000
Additional paid-in capital 134,554,000 134,554,000
Retained earnings (deficit) (61,259,000) (46,507,000)
------------ ------------
75,522,000 90,274,000
------------ ------------
$308,266,000 $288,931,000
============ ============
</TABLE>
See accompanying notes.
54
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC. AND
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
COMBINED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
1993 1992 1991
------------- ------------- -------------
<S> <C> <C> <C>
Revenues
Horse racing (Note 2) $ 49,081,000 $ 53,683,000 $ 51,521,000
Rental property (Note 8) 41,354,000 37,018,000 32,771,000
Food and beverage 11,695,000 12,589,000 13,808,000
Interest and other (Note 7) 5,405,000 3,712,000 5,714,000
------------ ------------ ------------
107,535,000 107,002,000 103,814,000
------------ ------------ ------------
Costs and expenses
Direct horse racing operating costs 40,981,000 45,089,000 45,093,000
Rental property operating expenses 16,522,000 13,533,000 12,039,000
Food and beverage cost of sales 3,411,000 3,462,000 3,555,000
Depreciation and amortization 11,392,000 10,753,000 9,875,000
General and administrative 10,937,000 12,517,000 11,160,000
Interest and other (Note 5) 12,970,000 12,525,000 12,170,000
Losses from unconsolidated joint
ventures (Note 3) 1,993,000 1,446,000 83,000
Minority interest in earnings (losses) of
consolidated joint ventures (Note 3) 477,000 458,000 (114,000)
Loss on disposition of multifamily and
industrial operations (Note 2) 10,974,000 - -
------------ ------------ ------------
109,657,000 99,783,000 93,861,000
------------ ------------ ------------
Income (loss) before income taxes (2,122,000) 7,219,000 9,953,000
Provision (benefit) for income taxes (Note 7) (2,523,000) (158,000) 37,000
------------ ------------ ------------
Net income $ 401,000 $ 7,377,000 $ 9,916,000
============ ============ ============
Weighted average number of common shares
outstanding 11,140,853 11,140,913 11,141,020
============ ============ ============
Net income per common share $.04 $.66 $.89
==== ==== ====
Dividends declared per common share $1.36 $1.36 $1.90
===== ===== =====
</TABLE>
See accompanying notes.
55
<PAGE>
SANTA ANITA REALTY ENTERPRISES INC. AND
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
COMBINED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED
------------------------- PAID-IN EARNINGS
SHARES AMOUNT CAPITAL (DEFICIT) TOTAL
------------------------- -------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Combined balance,
December 31, 1990 11,141,086 $2,227,000 $134,705,000 $(27,471,000) $109,461,000
Dividends declared
on common stock - - - (21,176,000) (21,176,000)
Dividend reinvestment
plan, net (Note 1) (121) - (150,000) - (150,000)
Net income - - - 9,916,000 9,916,000
---------- ---------- ------------ ------------ ------------
Combined balance,
December 31, 1991 11,140,965 2,227,000 134,555,000 (38,731,000) 98,051,000
Dividends declared
on common stock - - - (15,153,000) (15,153,000)
Dividend reinvestment
plan, net (Note 1) (112) - (1,000) - (1,000)
Net income - - - 7,377,000 7,377,000
---------- ---------- ------------ ------------ ------------
Combined balance,
December 31, 1992 11,140,853 2,227,000 134,554,000 (46,507,000) 90,274,000
Dividends declared
on common stock - - - (15,153,000) (15,153,000)
Net income - - - 401,000 401,000
---------- ---------- ------------ ------------ ------------
Combined balance,
December 31, 1993 11,140,853 $2,227,000 $134,554,000 $(61,259,000) $ 75,522,000
========== ========== ============ ============ ============
</TABLE>
See accompanying notes.
56
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC. AND
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
1993 1992 1991
------------- ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 401,000 $ 7,377,000 $ 9,916,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 11,392,000 10,753,000 9,875,000
Net gain on sale of real estate - (646,000) (177,000)
Loss on disposition of multifamily
and industrial operations 10,974,000 - -
Deferred income taxes (108,000) (141,000) (31,000)
Minority interest in earnings (losses)
of consolidated joint ventures 477,000 458,000 (114,000)
Equity in losses of unconsolidated joint
ventures 1,993,000 1,446,000 83,000
Distributions from unconsolidated
joint ventures - - 250,000
Net decrease (increase) in certain
other assets (1,523,000) 1,866,000 (1,143,000)
Net increase (decrease) in certain other
liabilities 7,007,000 310,000 (2,316,000)
------------ ------------ ------------
Net cash provided by operating activities 30,613,000 21,423,000 16,343,000
------------ ------------ ------------
Cash flows from investing activities:
Proceeds from sales of real estate - 5,425,000 400,000
Payments received on loans and advances
receivable 4,076,000 1,152,000 362,000
Origination of loans and advances receivable (1,305,000) (9,345,000) (3,176,000)
Additions and improvements to real estate assets (33,424,000) (35,588,000) (24,544,000)
Additions to property, plant and equipment (1,450,000) (6,030,000) (3,348,000)
Investments in unconsolidated joint ventures (1,100,000) (664,000) (5,950,000)
Capital distributions from unconsolidated
joint ventures 1,405,000 664,000 -
------------ ------------ ------------
Net cash used in investing activities (31,798,000) (44,386,000) (36,256,000)
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from real estate loans payable - 11,191,000 13,789,000
Proceeds from other loans payable 20,981,000 26,832,000 34,100,000
Repayment of real estate loans payable (924,000) (6,154,000) (24,865,000)
Repayment of other loans payable (664,000) (82,000) -
Distributions to minority interest in consolidated
joint ventures, net (2,316,000) (81,000) (1,086,000)
Net increase in certain other liabilities 9,635,000 728,000 1,409,000
Dividends paid (15,153,000) (15,153,000) (23,197,000)
Proceeds from stock issued in connection with
exercise of stock options and dividend
reinvestment plan, net - (1,000) (150,000)
------------ ------------ ------------
Net cash provided by financing activities 11,559,000 17,280,000 -
------------ ------------ ------------
Net increase (decrease) in cash and cash
equivalents 10,374,000 (5,683,000) (19,913,000)
Cash and cash equivalents at beginning of year 11,647,000 17,330,000 37,243,000
------------ ------------ ------------
Cash and cash equivalents at end of year $ 22,021,000 $ 11,647,000 $ 17,330,000
============ ============ ============
</TABLE>
See accompanying notes.
57
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC. AND
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31 , 1993, 1992 AND 1991
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
Santa Anita Realty Enterprises, Inc. ("Realty") and Santa Anita Operating
Company and Subsidiaries ("Operating Company") are two separate companies, the
stock of which trades as a single unit under a stock-pairing arrangement on the
New York Stock Exchange. Realty and Operating Company were each incorporated in
1979 and are the successors of a corporation originally organized in 1934 to
conduct thoroughbred horse racing in Southern California.
Realty is principally engaged in holding and investing in retail,
commercial, industrial and multifamily real property located primarily in the
western United States. Subsequent to year-end Realty disposed of its
multifamily and industrial properties (Note 2). Realty operates as a real
estate investment trust ("REIT") under the Internal Revenue Code of 1986 and,
accordingly, pays no income taxes on earnings distributed to shareholders.
Operating Company is engaged in thoroughbred horse racing. The thoroughbred
horse racing operation is conducted by a subsidiary of Operating Company, Los
Angeles Turf Club, Incorporated ("LATC"), which leases the Santa Anita Racetrack
from Realty.
Separate and combined financial statements have been presented for Realty
and Operating Company. Realty and Combined Realty and Operating Company use an
unclassified balance sheet presentation.
The separate results of operations and the separate net income per share of
Realty and Operating Company cannot usually be added together to total the
combined results of operations and net income per share because of adjustments
and eliminations arising from inter-entity transactions. All significant
intercompany and inter-entity balances and transactions have been eliminated in
consolidation and combination.
REAL ESTATE ASSETS
Investment properties are carried at cost and consist of land, buildings,
and related improvements. Depreciation is provided on a straight-line basis over
the estimated useful lives of the properties, ranging primarily from 15 to 40
years.
INVESTMENTS IN JOINT VENTURES
All joint ventures in which Realty exercises significant control and has a
50% or greater ownership interest are consolidated. The ownership interests of
outside partners in Realty's consolidated joint ventures are reflected as
minority interest (excess of liabilities over assets) on the balance sheets for
Realty and Combined Realty and Operating Company.
Investments in unconsolidated joint ventures are accounted for using the
equity method of accounting.
58
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH AND CASH EQUIVALENTS
Highly liquid short-term investments, with maturities of three months or
less, at the date of acquisition, are considered cash equivalents.
PROPERTY, PLANT AND EQUIPMENT
Depreciation of property, plant and equipment and the capital lease
obligation is provided primarily on the straight-line method generally over the
following estimated useful lives:
Building and improvements 25 to 45 years
Machinery and other equipment 5 to 15 years
Leasehold improvements 5 to 32 years
Expenditures which materially increase property lives are capitalized. The
cost of maintenance and repairs is charged to expense as incurred. When
depreciable property is retired or disposed of, the related cost and accumulated
depreciation is removed from the accounts and any gain or loss is reflected in
current operations.
INCOME TAXES
Realty and Operating Company adopted SFAS No. 109, "Accounting for Income
Taxes," effective January 1, 1993. The new standard of accounting replaces SFAS
No. 96 which the company adopted in 1988. The cumulative effect of adopting
Statement 109 was immaterial for the year ended December 31, 1993.
DEFERRED REVENUES
Operating Company's deferred revenues consist of prepaid admission tickets
and parking, which are recognized as income ratably over the period of the
related race meets. Also, deferred revenue includes prepaid rent from Oak Tree
which is recognized over the remaining term of the lease.
SHAREHOLDERS' EQUITY
The outstanding shares of Realty common stock and Operating Company common
stock are only transferable and tradable in combination as a paired unit
consisting of one share of Realty common stock and one share of Operating
Company common stock.
OPERATING COMPANY'S REVENUES AND COSTS
Operating Company has adopted an accounting policy 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 periods in which the thoroughbred
horse racing revenues are recognized. Other costs and expenses are recognized as
they actually occur throughout the year. The rental fee paid by Operating
Company to Realty is recognized by both Realty and Operating Company as it is
earned.
59
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RENTAL PROPERTY REVENUES
Rental property revenues are recorded on a straight-line basis over the
related lease term. As a result, deferred rent is created when rental income is
recognized during free rent periods of a lease. The deferred rent is included in
prepaid expenses and other assets, evaluated for collectibility and amortized
over the remaining term of the lease.
HORSE RACING REVENUES AND DIRECT OPERATING COSTS
Operating Company's horse racing revenues and direct operating costs are
shown net of state and local taxes, stakes, purses and awards.
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject Realty and Operating
Company to concentrations of credit risk are primarily cash investments and
receivables. Realty and Operating Company place their cash investments in
investment grade short-term instruments and limit the amount of credit exposure
to any one commercial issuer. Concentrations of credit risk with respect to
accounts receivable are limited due to the number of retail, commercial and
residential tenants, and Santa Anita catering patrons. Real estate receivables
are secured by first trust deeds on commercial real estate located in Southern
California, and Phoenix, Arizona. Advances to unconsolidated joint ventures are
unsecured and due from partnerships in which Realty is a 50% or less general
partner.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
Realty is an issuer of financial instruments with off-balance sheet risk in
the normal course of business which exposes Realty to credit risks. These
financial instruments include commitments to extend credit, financial guarantees
and letters of credit.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Management has estimated the fair value of its financial instruments using
available market information and appropriate valuation methodologies.
Considerable judgment is required in interpreting market data to develop
estimates of fair value. Accordingly, the estimated values for Realty and
Operating Company as of December 31, 1993 are not necessarily indicative of the
amounts that could be realized in current market exchanges.
For those financial instruments for which it is practicable to estimate
value, management has determined that the carrying amounts of Realty's and
Operating Company's financial instruments approximate their fair value as of
December 31,1993.
DIVIDEND REINVESTMENT PLAN
In November 1992 Realty and Operating Company terminated their dividend
reinvestment and stock purchase plan (the "Plan") which had enabled shareholders
to reinvest dividends and purchase shares of Realty and Operating Company stock.
Since October 1990, shares issued under the terms of the Plan had been purchased
in the open market. Prior to that date, new shares had been issued.
60
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
COMMON STOCK AND NET INCOME (LOSS) PER COMMON SHARE
Net income (loss) per common share is computed based upon the weighted
average number of common shares outstanding during each period for each company.
Stock options have not been included in the computation since they have no
material dilutive effect.
Operating Company holds shares of Realty's common stock which are unpaired
pursuant to a stock option plan approved by the shareholders. The shares held
totaled 115,500 as of December 31, 1993, 1992 and 1991, respectively. These
shares affect the calculation of Realty's net income per common share but are
eliminated in the combined calculation of net income per common share.
RECLASSIFICATIONS
Certain prior year amounts have been restated to conform to current year
presentation.
NOTE 2 - DISPOSITION OF MULTIFAMILY AND INDUSTRIAL PROPERTIES SUBSEQUENT TO YEAR
END
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. The transaction was structured into two parts: (1)
Realty would sell all of its apartments and industrial properties to Pacific
with the exception of Realty's interest in the Baldwin Industrial Park joint
venture; and (2) Pacific would enter into a binding agreement to buy Realty's
interest in Baldwin Industrial Park.
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. The sale of the Transferred Properties followed the
public offerings of common stock and convertible subordinated debentures by
Pacific.
Pursuant to the Purchase and Sale Agreement, Pacific agreed to buy Realty's
interest in Baldwin Industrial Park subject to satisfaction of certain
conditions, for a minimum price of $8.9 million payable in additional shares of
Pacific common stock, with the final price dependent upon completion of
negotiations with the other owners of Baldwin Industrial Park and an appraisal
process. Management believes the sale of Realty's interest in Baldwin
Industrial Park will be completed in the second half of 1994. Pacific is
required to issue to Realty non-refundable letters of credit totaling $2.5
million by March 31, 1994 to secure its obligation to acquire Realty's interest
in Baldwin Industrial Park and pay for the corporate headquarters building and
other assets related to the Transferred Properties.
In consideration of the sale of the Transferred Properties, Realty received
approximately $44.4 million in cash and 149,900 shares of the common stock of
Pacific. In addition, Realty was relieved of approximately $44.3 million of
mortgage debt on the Transferred Properties. Realty will also receive, at the
time the acquisition of Baldwin Industrial Park is completed, up to $1.2 million
in additional common stock of Pacific as consideration for its corporate
headquarters and other net assets related to the Transferred Properties.
61
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 - DISPOSITION OF MULTIFAMILY AND INDUSTRIAL OPERATIONS SUBSEQUENT TO YEAR
END (CONTINUED)
The two parts of the above transaction will result in a loss of
$10,974,000. This loss has been reflected in the Realty and Realty and
Operating Company combined statements of operations for the year ended
December 31, 1993. If the Baldwin Industrial Park portion of the transaction
described above does not occur, an additional loss will be recognized by Realty
in 1994. The loss could approximate $5,900,000, depending upon whether the $2.5
million in letters of credit are drawn.
Realty and Pacific have also entered into a one-year management agreement
whereby Pacific has agreed to provide management services to Realty. Finally,
with respect to the common stock of Pacific owned by Realty, Pacific has entered
into a registration rights agreement with Realty which, under certain
circumstances, allows Realty to require the registration of the Pacific stock it
owns.
The following unaudited pro forma condensed balance sheets of Realty and
Realty and Operating Company combined are presented as if both parts of the
transaction had occurred on December 31, 1993. The unaudited pro forma
condensed balance sheets are not necessarily indicative of what the actual
financial position of Realty or Realty and Operating Company combined would have
been at December 31, 1993 nor do they purport to represent the future financial
position of Realty or Realty and Operating Company combined.
<TABLE>
<CAPTION>
December 31, 1993
-------------------------------------------------
Realty Realty
Historical Pro Forma
Cost Basis Adjustments (a) (Unaudited)
-------------- ---------------- --------------
<S> <C> <C> <C>
Real estate assets
Santa Anita Racetrack, net $ 6,997,000 $ - $ 6,997,000
Commercial properties, net 221,876,000 (107,593,000) 114,283,000
Investments in unconsolidated joint
ventures 3,616,000 - 3,616,000
Real estate loans and advances
receivable 22,084,000 - 22,084,000
------------ ------------- ------------
254,573,000 (107,593,000) 146,980,000
------------ ------------- ------------
Cash 7,633,000 (703,000) 6,930,000
Other assets 9,479,000 (1,387,000) 8,092,000
Investment in Pacific Gulf Properties Inc. (b) - 12,802,000 12,802,000
------------ ------------- ------------
$271,685,000 $ (96,881,000) $174,804,000
============ ============= ============
Real estate loans payable $106,731,000 $ (53,769,000) $ 52,962,000
Other loans payable 77,913,000 (44,425,000) 33,488,000
Other liabilities 22,812,000 (1,719,000) 21,093,000
------------ ------------- ------------
207,456,000 (99,913,000) 107,543,000
------------ ------------- ------------
Minority interest in consolidated
joint ventures (4,590,000) 3,032,000 (1,558,000)
Shareholders' equity 68,819,000 - 68,819,000
------------ ------------- ------------
$271,685,000 $ (96,881,000) $174,804,000
============ ============= ============
</TABLE>
The accompanying notes are an integral part of this pro forma balance sheet.
62
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 - DISPOSITION OF MULTIFAMILY AND INDUSTRIAL OPERATIONS SUBSEQUENT TO YEAR
END (CONTINUED)
<TABLE>
<CAPTION>
December 31, 1993
-------------------------------------------------
Combined Combined
Historical Pro Forma
Cost Basis Adjustments (a) (Unaudited)
-------------- ---------------- --------------
<S> <C> <C> <C>
Real estate assets
Santa Anita Racetrack, net $ 6,997,000 $ - $ 6,997,000
Commercial properties, net 216,832,000 (107,593,000) 109,239,000
Investments in unconsolidated joint
ventures 3,616,000 - 3,616,000
Real estate loans and advances
receivable 22,084,000 - 22,084,000
------------ ------------- ------------
249,529,000 (107,593,000) 141,936,000
------------ ------------- ------------
Cash and short-term investments 22,021,000 (703,000) 21,318,000
Other assets 36,716,000 (1,387,000) 35,329,000
Investment in Pacific Gulf Properties Inc. (b) - 12,802,000 12,802,000
------------ ------------- ------------
$308,266,000 $ (96,881,000) $211,385,000
============ ============= ============
Real estate loans payable $106,731,000 $ (53,769,000) $ 52,962,000
Other loans payable 81,167,000 (44,425,000) 36,742,000
Other liabilities 49,436,000 (1,719,000) 47,717,000
------------ ------------- ------------
237,334,000 (99,913,000) 137,421,000
------------ ------------- ------------
Minority interest in consolidated
joint ventures (4,590,000) 3,032,000 (1,558,000)
Shareholders' equity 75,522,000 - 75,522,000
------------ ------------- ------------
$308,266,000 $ (96,881,000) $211,385,000
============ ============= ============
</TABLE>
Notes:
- ------
(a) Reflects the disposition of the assets and liabilities of the Multifamily
and Industrial Operations as if both parts of the transaction had occurred
on December 31, 1993. The amounts reflected represent the assets and
liabilities directly identifiable with the Multifamily and Industrial
Operations transferred by Realty to Pacific.
(b) As a result of the February 18, 1994 sale to Pacific, Realty will have an
investment in the common shares of Pacific totaling $2,738,000. Upon
completion of Realty's disposition of Baldwin Industrial Park, assuming a
price per share equal to $18.25 (the initial public offering price of
Pacific's common shares) and the minimum price for Realty's interest in
Baldwin Industrial Park and the corporate headquarters building and certain
other assets related to the Transferred Properties, Realty will receive
additional Pacific stock totaling approximately $10,064,000.
63
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 - DISPOSITION OF MULTIFAMILY AND INDUSTRIAL OPERATIONS SUBSEQUENT TO YEAR
END (CONTINUED)
The following unaudited pro forma statements of operation of Realty and Realty
and Operating Company combined are presented as if both parts of the transaction
had occurred on January 1, 1993. The unaudited pro forma statements of
operation are not necessarily indicative of what the actual results of
operations would have been if the transaction had been consummated on January 1,
1993 nor do they purport to represent the results of operations of Realty or
Realty and Operating Company combined for any future period.
<TABLE>
<CAPTION>
For the Year Ended December 31, 1993
-----------------------------------------------
Realty Realty
Historical Pro Forma
Cost Basis Adjustments (1) (Unaudited)
------------- --------------- -------------
<S> <C> <C> <C>
Revenues
Rental property $38,953,000 $(20,007,000) $18,946,000
Rental income from Operating Company 11,634,000 - 11,634,000
Interest and other (2) 4,991,000 695,000 5,686,000
----------- ------------ -----------
55,578,000 (19,312,000) 36,266,000
----------- ------------ -----------
Costs and expenses
Rental property operating expenses 16,522,000 (8,562,000) 7,960,000
Depreciation and amortization 8,795,000 (3,264,000) 5,531,000
General and administrative 4,244,000 (1,538,000) 2,706,000
Interest and other (3) 12,477,000 (7,005,000) 5,472,000
Losses from unconsolidated joint ventures 1,993,000 - 1,993,000
Minority interest in earnings of
consolidated joint ventures (4) 477,000 289,000 766,000
Loss on disposition of multifamily and
industrial operations 10,974,000 - 10,974,000
----------- ------------ -----------
55,482,000 (20,080,000) 35,402,000
----------- ------------ -----------
Income before income tax benefit 96,000 768,000 864,000
Income tax benefit (2,523,000) - (2,523,000)
----------- ------------ -----------
Net income $ 2,619,000 $ 768,000 $ 3,387,000
=========== ============ ===========
</TABLE>
The accompanying notes are an integral part of this pro forma statement of
operations.
64
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 - DISPOSITION OF MULTIFAMILY AND INDUSTRIAL OPERATIONS SUBSEQUENT TO YEAR
END (CONTINUED)
<TABLE>
<CAPTION>
For the Year Ended December 31, 1993
-----------------------------------------------
Combined Combined
Historical Pro Forma
Cost Basis Adjustments (1) (Unaudited)
------------- --------------- -------------
<S> <C> <C> <C>
Revenues
Horse racing $ 49,081,000 $ - $49,081,000
Rental property 41,354,000 (20,007,000) 21,347,000
Food and beverage 11,695,000 - 11,695,000
Interest and other (2) 5,405,000 695,000 6,100,000
------------ ------------ -----------
107,535,000 (19,312,000) 88,223,000
------------ ------------ -----------
Costs and expenses
Direct horse racing operating costs 40,981,000 - 40,981,000
Rental property operating expenses 16,522,000 (8,562,000) 7,960,000
Food and beverage cost of sales 3,411,000 - 3,411,000
Depreciation and amortization 11,392,000 (3,264,000) 8,128,000
General and administrative 10,937,000 (1,538,000) 9,399,000
Interest and other (3) 12,970,000 (7,005,000) 5,965,000
Losses from unconsolidated joint ventures 1,993,000 - 1,993,000
Minority interest in earnings of
consolidated joint ventures (4) 477,000 289,000 766,000
Loss on disposition of multifamily and
industrial operations 10,974,000 - 10,974,000
------------ ------------ -----------
109,657,000 (20,080,000) 89,577,000
------------ ------------ -----------
Income (loss) before income tax benefit (2,122,000) 768,000 (1,354,000)
Income tax benefit (2,523,000) - (2,523,000)
------------ ------------ -----------
Net income $ 401,000 $ 768,000 $ 1,169,000
============ ============ ===========
</TABLE>
Notes:
- ------
(1) Reflects the operations for the year ended December 31, 1993 of the
Multifamily and Industrial Operations directly identifiable with, and
allocations of other costs and expenses related to, the Multifamily and
Industrial Operations being transferred by Realty to Pacific.
(2) Estimated annual distributions to be received on Realty's investment in
Pacific ($1.56 per common share) less the amount of such distributions
estimated to represent the return of capital ($.56 per common share).
(3) Elimination of interest expense on real estate and other loans payable
repaid or assumed by Pacific.
(4) Elimination of the minority interest in earnings of joint ventures resulting
from Realty's acquisition of the Partnership interests and subsequent
transfer to Pacific.
65
<PAGE>
NOTES TO FINANCIAL STATEMENTS (continued)
Note 3 - Investments in Joint Ventures
Realty's real estate properties include investments in the following
consolidated real estate joint ventures:
<TABLE>
<CAPTION>
OWNERSHIP
NAME PERCENTAGE PROJECT
- ---- ---------- ---------------
<S> <C> <C>
Anita Associates 50% Regional mall
Baldwin Industrial Properties 50% Industrial park
French Valley Partners 50% Industrial land
</TABLE>
The financial condition and operations of the above-listed joint
ventures are consolidated with the financial statements of Realty and Combined
Realty and Operating Company.
Combined condensed financial information for consolidated joint
ventures as of December 31, 1993, 1992 and 1991 and for the years then ended is
as follows:
<TABLE>
<CAPTION>
1993 1992 1991
------------- -------------- --------------
<S> <C> <C> <C>
Real estate assets $74,570,000 $115,778,000 $115,366,000
=========== ============ ============
Liabilities $71,532,000 $ 89,741,000 $ 90,693,000
=========== ============ ============
Partners' equity (deficit)
Realty $ 7,628,000 $ 28,788,000 $ 27,801,000
Others (4,590,000) (2,751,000) (3,128,000)
----------- ------------ ------------
$ 3,038,000 $ 26,037,000 $ 24,673,000
=========== ============ ============
Revenues $21,992,000 $ 23,912,000 $ 23,668,000
=========== ============ ============
Net income (loss)
Realty $ 2,113,000 $ 2,727,000 $ 2,202,000
Others 477,000 458,000 (114,000)
----------- ------------ ------------
$ 2,590,000 $ 3,185,000 $ 2,088,000
=========== ============ ============
</TABLE>
66
<PAGE>
NOTE 3 - INVESTMENTS IN JOINT VENTURES (CONTINUED)
During 1993, Realty acquired the partnership interests of its minority
partners in the following joint ventures: SARESAM, SAREFIM, Applewood Village
Partners and Hubanita. The partnership interests were acquired in consideration
for cash, the cancellation of certain receivables from the minority partners and
the assumption of the minority partners' capital account and payment of $250,000
related to Hubanita. The financial statements of Realty and Combined Realty and
Operating Company reflect the acquisition of the minority interests.
Realty's investments in unconsolidated joint ventures include investments in
the following commercial real estate ventures:
<TABLE>
<CAPTION>
OWNERSHIP
NAME PERCENTAGE PROJECT
- ----------------- ----------- -------------
<S> <C> <C>
33-1/3% Retail
Joppa Associates
H-T Associates 50% Regional mall
</TABLE>
Unaudited combined condensed financial statement information for
unconsolidated joint ventures as of December 31, 1993, 1992 and 1991 and for the
years then ended is as follows:
<TABLE>
<CAPTION>
1993 1992 1991
-------------- -------------- --------------
<S> <C> <C> <C>
Real estate assets $212,979,000 $216,137,000 $206,184,000
============ ============ ============
Liabilities
Advances from Realty $ 8,375,000 $ 7,030,000 $ 6,215,000
Other 200,735,000 197,971,000 185,642,000
------------ ------------ ------------
$209,110,000 $205,001,000 $191,857,000
============ ============ ============
Partners' equity
Realty $ 3,616,000 $ 5,925,000 $ 7,390,000
Others 253,000 5,211,000 6,937,000
------------ ------------ ------------
$ 3,869,000 $ 11,136,000 $ 14,327,000
============ ============ ============
Revenues $ 19,991,000 $ 15,666,000 $ 7,501,000
============ ============ ============
Net loss
Realty $ (1,993,000) $ (1,446,000) $ (83,000)
Others (1,263,000) (418,000) (581,000)
------------ ------------ ------------
$ (3,256,000) $ (1,864,000) $ (664,000)
============ ============ ============
</TABLE>
67
<PAGE>
NOTE 3 - INVESTMENTS IN JOINT VENTURES (CONTINUED)
Realty is a joint and several guarantor of loans issued to expand the Towson
Town Center located in Towson, Maryland (owned 65% by H-T Associates) and a
department store and land (owned 100% by Joppa Associates) adjacent to Towson
Town Center in the amount of $82,630,000. The maximum loan balance to which the
guarantees relate is $188,500,000. Realty's two partners in the ventures have
also each executed repayment guarantees, although one of the partners has a
limited repayment guaranty. Annually, the guarantors may request a reduction in
the amount of the guaranty based on the economic performance of the regional
mall.
NOTE 4 - REAL ESTATE LOANS AND ADVANCES RECEIVABLE
Realty's real estate loans and advances receivable as of December 31, 1993 and
1992 consist of the following:
<TABLE>
<CAPTION>
1993 1992
------------ ------------
<S> <C> <C>
6.5% to 8.5% notes receivable secured by trust deeds on
commercial real estate due through 2002 $13,824,000 $17,825,000
Unsecured advances to unconsolidated joint ventures, bearing
interest at prime plus 2%, interest and principal due on
demand 8,260,000 7,030,000
----------- -----------
$22,084,000 $24,855,000
=========== ===========
</TABLE>
Contractual principal repayments on real estate loans and advances
receivable as of December 31, 1993 are due as follows:
<TABLE>
<CAPTION>
<S> <C>
1994 $8,494,000
1995 243,000
1996 1,736,000
1997 6,614,000
1998 212,000
Thereafter 4,785,000
</TABLE>
The prime rate was 6.0% during 1993 and at December 31, 1993.
68
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5 - LOANS PAYABLE
Realty's real estate loans payable related to real estate as of December
31, 1993 and 1992 consist of the following:
<TABLE>
<CAPTION>
1993 1992
------------- -------------
<S> <C> <C>
Realty
9.75% note, secured by real estate assets, interest only,
due in 1994 $ 10,000,000 $ 10,000,000
8.5% note, secured by land with assignment of ground lease
and rent as collateral, due in installments through 2009 4,100,000 4,218,000
10.375% notes, secured by real estate assets, due
in installments through 2008 870,000 896,000
10% note, secured by real estate assets, interest only, due in
1994 857,000 857,000
9.375% note, secured by real estate assets, interest only,
due in 1998 11,822,000 11,932,000
8.5% notes, secured by real estate assets, due in installments
through 2011 15,269,000 15,647,000
10% note, secured by real estate assets, due in installments
through 1998 10,044,000 10,140,000
------------ ------------
52,962,000 53,690,000
------------ ------------
Loans subject to the Pacific transaction
9.5% note, secured by real estate assets, interest only,
due in 1999 8,625,000 8,625,000
10.5% notes, secured by real estate assets, due in installments
through 1996 4,751,000 4,758,000
9.5% note, secured by real estate assets, interest only through
1995, installments through 2000 7,000,000 7,000,000
9.25% note, secured by real estate assets, interest only,
due in 1996 12,900,000 12,900,000
8.25% note, secured by real estate assets, interest only,
due in 1997 8,042,000 8,128,000
8% - 10% note, secured by real estate assets, due in
installments through 1998 2,997,000 3,052,000
11.1% note, secured by real estate assets, interest only,
due in 1996 889,000 889,000
11.2% note, secured by real estate assets, due in installments
through 1995 8,565,000 8,613,000
------------ ------------
53,769,000 53,965,000
------------ ------------
$106,731,000 $107,655,000
============ ============
</TABLE>
69
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5 - LOANS PAYABLE (CONTINUED)
Realty's other loans payable as of December 31, 1993 and 1992 consist of the
following:
<TABLE>
<CAPTION>
1993 1992
---- ----
<S> <C> <C>
Realty
Unsecured notes, subject to lines
of credit agreements, interest
only, due on various dates
through 1996 $33,488,000 $22,782,000
Other loans payable subject to the
Pacific transaction
Unsecured notes, subject to
lines of credit agreements,
interest only, due on various
dates through 1996 44,425,000 34,150,000
----------- -----------
$77,913,000 $56,932,000
=========== ===========
Principal payments due on real estate and other loans payable as of
December 31,1993 are as follows:
<S> <C>
1994 $55,230,000
1995 9,609,000
1996 54,155,000
1997 8,979,000
1998 24,396,000
Thereafter 32,275,000
</TABLE>
As of December 31, 1993, Realty was not in compliance with certain
covenants contained in its credit agreements. The banks have waived such
noncompliance through April 30, 1994 conditioned, among other things, on no
additional borrowings under the credit agreements. Realty is in the process of
renegotiating these credit agreements. Management is of the opinion that Realty
has sufficient liquidity from other sources to assure that its operations will
not be adversely affected pending this renegotiation.
Under the terms of these agreements, Realty may borrow funds, at Realty's
option, based upon prime rates, LIBOR (London Interbank Offered Rate) based
rates or Certificate of Deposit rates. At December 31, 1993, all funds are
borrowed on prime or LIBOR-based rates. LIBOR-based rates ranged from 2.80% to
3.84% and the prime rate was 6.0% at December 31, 1993.
The revolving lines of credit require certain compensating balances. Under
the lines of credit agreements, the compensating balance requirements at
December 31, 1993, which represent cash balances that are not available for
withdrawal, amounted to $1,000,000. In addition, Realty is required to pay
annual commitment fees ranging from 0.15% to 0.25% on the unused portion of
these lines of credit.
Operating Company entered into a sale-leaseback transaction related to the
financing of certain television, video monitoring and production equipment under
a five-year lease expiring in December 1997. This financing arrangement is
accounted for as a capital lease. Accordingly, the equipment and related lease
obligation are reflected as machinery and other equipment and other loans
payable, respectively, on Operating Company's and Realty and Operating Company's
combined balance sheets. Realty has guaranteed $3,500,000 of the lease
obligation.
70
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 5 - LOANS PAYABLE (CONTINUED)
The assets recorded under this capital lease are:
<TABLE>
<CAPTION>
1993 1992
------------ ------------
<S> <C> <C>
Equipment leased under capital lease $4,000,000 $4,000,000
Accumulated amortization (513,000) (128,000)
---------- ----------
$3,487,000 $3,872,000
========== ==========
</TABLE>
Total future minimum lease payments under this capital lease and the
present value of the minimum lease payments as of December 31, 1993 consist of
the following:
For the year ending December 31,
<TABLE>
<CAPTION>
<S> <C>
1994 $ 989,000
1995 989,000
1996 989,000
1997 907,000
-----------
3,874,000
Less amount representing interest (620,000)
-----------
Present value of minimum lease payments $ 3,254,000
===========
Current portion $ 726,000
Long-term portion 2,528,000
-----------
$ 3,254,000
===========
</TABLE>
Interest costs for the years ended December 31, 1993, 1992 and 1991 are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1993
------------------------------------------
OPERATING
REALTY COMPANY COMBINED
------ -------- --------
<S> <C> <C> <C>
Total incurred $13,959,000 $493,000 $14,452,000
Capitalized (1,482,000) - (1,482,000)
----------- -------- -----------
Total interest expense $12,477,000 $493,000 $12,970,000
=========== ======== ===========
Total interest paid $12,463,000 $493,000 $12,956,000
=========== ======== ===========
</TABLE>
71
<PAGE>
NOTES TO FINANCIAL STATEMENTS (COINTINUED)
NOTE 5 - LOANS PAYABLE (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1992
-----------------------------------------
OPERATING
REALTY COMPANY COMBINED
------------- --------- -------------
<S> <C> <C> <C>
Total incurred $13,000,000 $194,000 $13,194,000
Capitalized (669,000) - (669,000)
----------- -------- -----------
Total interest expense $12,331,000 $194,000 $12,525,000
=========== ======== ===========
Total interest paid $12,670,000 $194,000 $12,864,000
=========== ======== ===========
<CAPTION>
DECEMBER 31, 1991
---------------------------------------
OPERATING
REALTY COMPANY COMBINED
----------- --------- -----------
Total incurred $12,265,000 $179,000 $12,444,000
Capitalized (274,000) - (274,000)
----------- -------- -----------
Total interest expense $11,991,000 $179,000 $12,170,000
=========== ======== ===========
Total interest paid $11,891,000 $179,000 $12,070,000
=========== ======== ===========
</TABLE>
NOTE 6 - OTHER LIABILITIES
Other liabilities as of December 31, 1993 and 1992 consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1993
------------------------------------------
OPERATING
REALTY COMPANY COMBINED
------------ ------------ -----------
<S> <C> <C> <C>
Accrued salaries $ - $ 765,000 $ 765,000
Deferred compensation (Note 9) 1,075,000 3,682,000 4,757,000
Accrued interest 554,000 - 554,000
State license fees - 1,500,000 1,500,000
Other 678,000 4,170,000 4,848,000
Advances payable 11,997,000 - 11,997,000
Accrued liabilities subject to the
Pacific transaction 1,042,000 - 1,042,000
----------- ----------- -----------
$15,346,000 $10,117,000 $25,463,000
=========== =========== ===========
</TABLE>
72
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 6 - OTHER LIABILITIES (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1992
----------------------------------------
OPERATING
REALTY COMPANY COMBINED
----------- ----------- ------------
<S> <C> <C> <C>
Accrued salaries $ 4,000 $ 750,000 $ 754,000
Deferred compensation (Note 9) 589,000 2,405,000 2,994,000
Accrued interest 540,000 - 540,000
State license fees - 752,000 752,000
Other 474,000 3,828,000 4,302,000
Advances payable 2,362,000 - 2,362,000
Accrued liabilities subject to the Pacific
transaction 851,000 - 851,000
---------- ---------- -----------
$4,820,000 $7,735,000 $12,555,000
========== ========== ===========
</TABLE>
Advances payable represent amounts due to Realty's other partner in Anita
Associates. The amount is expected to be repaid from the proceeds of the
refinancing of Anita Associates' existing debt. The advances bear interest at
10% and are unsecured.
NOTE 7 - INCOME TAXES
As a REIT, Realty is taxed only on undistributed REIT income. During each
of the years ended December 31, 1993, 1992 and 1991, Realty distributed at least
95% of its REIT taxable earnings to its shareholders. For the years ended
December 31, 1993, 1992 and 1991, 41.2%, 41.2% and 52.9%, respectively, of the
dividends distributed to shareholders represented a return of capital. None of
the dividends distributed to shareholders during 1993, 1992 and 1991 represented
capital gains.
The composition of Combined Realty and Operating Company's income tax
provision (benefit) and income taxes paid for the years ended December 31, 1993,
1992 and 1991 is as follows:
<TABLE>
<CAPTION>
1993 1992 1991
------------- ----------- ---------
<S> <C> <C> <C>
Current state provision (benefit) $(2,415,000) $ (17,000) $ 6,000
Deferred provision (benefit) (108,000) (141,000) 31,000
----------- --------- --------
$(2,523,000) $(158,000) $ 37,000
=========== ========= ========
Income taxes paid $ 313,000 $ 5,000 $148,000
=========== ========= ========
</TABLE>
73
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 7 - INCOME TAXES (CONTINUED)
Deferred income taxes arise from temporary differences in the recognition
of certain items of revenues and expenses for financial statement and tax
reporting purposes. The sources of temporary differences and their related tax
effect for the years ended December 31, 1993, 1992 and 1991 are as follows:
<TABLE>
<CAPTION>
1993 1992 1991
------------ ----------- -----------
<S> <C> <C> <C>
Accelerated depreciation and amortization
methods utilized for tax reporting purposes $ 109,000 $ (92,000) $(102,000)
Reinstatement (reduction) of deferred taxes
due to tax net operating loss carryovers 1,733,000 173,000 (228,000)
State income tax provision (benefit) deductible
when paid for federal income tax purposes (485,000) (191,000) 86,000
Income previously included for tax purposes,
includable for book purposes currently - 34,000 340,000
Income resulting from settlement of state
unitary tax issues (1,426,000) - -
Other, net (39,000) (65,000) (65,000)
----------- --------- ---------
$ (108,000) $(141,000) $ 31,000
=========== ========= =========
</TABLE>
A reconciliation of Combined Realty and Operating Company's total income
tax provision for the years ended December 31, 1993, 1992 and 1991 to the
statutory federal corporate income tax rate of 34% follows:
<TABLE>
<CAPTION>
1993 1992 1991
------------- ------------- ----------
<S> <C> <C> <C>
Computed "expected" tax provision $ (759,000) $(1,067,000) $100,000
State income taxes, net of federal income taxes 34,000 (271,000) 29,000
Nondeductible political contributions 28,000 49,000 30,000
Increase in cash surrender value of life
insurance (269,000) (28,000) (60,000)
Establishment (utilization) of book net operating
loss carryforwards 982,000 1,169,000 (28,000)
Other, net (16,000) (10,000) (34,000)
Settlement of state unitary tax issues (2,523,000) - -
----------- ----------- --------
$(2,523,000) $ (158,000) $ 37,000
=========== =========== ========
</TABLE>
74
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 7 - INCOME TAXES (CONTINUED)
The deferred tax assets (liabilities) as of December 31, 1993 and 1992
consist of the following:
<TABLE>
<CAPTION>
1993 1992
------------- -------------
<S> <C> <C>
Deferred tax assets
Income previously included for tax purposes, not includable for
book purposes $ 32,000 $ 32,000
Difference between tax and book depreciation and amortization 26,000 (7,000)
----------- -----------
58,000 25,000
----------- -----------
Deferred tax liabilities
State income tax provisions deductible when paid for federal tax
purposes (3,307,000) (3,478,000)
Compensation deductible for tax purposes when paid (291,000) (172,000)
Other (25,000) (48,000)
----------- -----------
(3,623,000) (3,698,000)
----------- -----------
Net liability for deferred income taxes $(3,565,000) $(3,673,000)
=========== ===========
</TABLE>
In prior years, Realty had filed claims with the California Franchise Tax
Board for refunds with respect to the 1970 through 1979 tax years; LATC was
assessed California franchise tax and interest for the years 1980 through 1982;
and, Operating Company was assessed additional franchise tax for the years 1983
through 1985. In 1993, a refund of interest and taxes in the amount of
$6,082,000 was received from the California Franchise Tax Board in the
settlement of the above claims. Realty has recognized $3,211,000 of interest
income, net of expenses of $120,000 and an income tax benefit in the amount of
$2,523,000. Operating Company has recorded additional deferred taxes payable in
the amount of $228,000.
The Franchise Tax Board has audited the 1986 through 1988 tax years of
Operating Company. Operating Company has protested these proposed assessments.
The additional assessment has been accrued by Operating Company.
In February 1994, the Franchise Tax Board initiated an audit of Operating
Company's 1989 through 1991 tax years.
At December 31, 1993, for federal income tax purposes, Operating Company's
net operating loss carryforward is approximately $6,504,000 which substantially
expires in 2004.
75
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 8 - COMMITMENTS AND CONTINGENCIES
Realty's wholly owned and consolidated real estate investments consist of
Santa Anita Racetrack, Fashion Park (a regional mall), various neighborhood
shopping centers, industrial parks, apartment complexes and office buildings.
The racetrack is leased to LATC (Note 11); the land underlying Fashion Park has
been ground leased for 65 years; each of the various neighborhood shopping
centers has been leased to non-anchor tenants with terms ranging from three to
five years; and, the office buildings have been leased with terms generally
ranging from two to ten years.
The minimum future lease payments to be received from Realty's wholly owned
and consolidated real estate investments (excluding rentals relating to the
Santa Anita Racetrack which are paid by LATC to Realty) for the five years
ending December 31, are as follows:
<TABLE>
<CAPTION>
<S> <C>
1994 $14,990,000
1995 12,853,000
1996 11,229,000
1997 9,598,000
1998 8,247,000
</TABLE>
Substantially all of the retail leases provide for additional contingent
rentals based upon the gross income of the tenants in excess of stipulated
minimums. Realty's share of these contingent rentals totaled $258,000 in 1993,
$337,000 in 1992 and $362,000 in 1991.
Realty leases the Santa Anita Racetrack to Operating Company's subsidiary,
LATC. The lease provides for a rental fee of 1.5% of the total gross on-track
pari-mutuel wagering generated at the racetrack. The lease, which is subject to
renewal, expires in 1994. Realty also receives 40% of LATC's revenues from
satellite wagering and the simulcasting of races originating from the Santa
Anita Racetrack after mandated payments to the State of California and to horse
owners. The lease amounts are eliminated in combination.
Realty has entered into several general and limited partnerships to own and
operate real estate. As of December 31, 1993, Realty has committed to invest an
additional $307,000 in these partnerships.
Realty has obtained a standby letter of credit totaling $448,000 related to
financing on a real estate investment.
In 1992, Realty and Operating Company entered into severance agreements
with certain officers. Under certain circumstances, the severance agreements
provide for a lump sum payment if there is a "change in control" of the
entities. No provision under these severance agreements has been accrued or
funded.
Certain other claims, suits and complaints arising in the ordinary course
of business have been filed or are pending against Realty and Operating
Company. In the opinion of management, all such matters are adequately covered
by insurance or, if not so covered, are without merit or are of such kind or
involve such amounts as would not have a significant effect on the financial
position or results of operations if disposed of unfavorably.
76
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 9 - STOCK OPTION PROGRAM AND EMPLOYEE DEFINED BENEFIT PLANS
STOCK OPTION PROGRAM
During 1984, Realty reserved 400,000 shares of common stock for sale under
its Stock Incentive Plan. During 1984, Operating Company also reserved 400,000
shares for sale under its Stock Option Program. Each company also reserved
400,000 shares for issuance under the other company's plan. During 1993,
Operating Company reserved an additional 222,820 shares for sale. The shares
are to be issued either as Incentive Stock Options or Non-Qualified Stock
Options.
The options, which are contingent upon continuous employment, are
exercisable at any time once vested, for up to three years after the date of
retirement or death and for up to 90 days after resignation. For both Realty and
Operating Company, Incentive Stock Options and Non-Qualified Stock Options
expire in 1995 through 2003.
Information with respect to shares under option as of December 31, 1993,
1992 and 1991 is as follows:
<TABLE>
<CAPTION>
REALTY OPERATING COMPANY
----------------------------------------- ---------------------------
AVAILABLE AVAILABLE
SHARES FOR SHARES FOR
SUBJECT TO FUTURE SUBJECT TO FUTURE
OPTION (A) PRICE GRANT OPTION PRICE GRANT
----------- --------------- --------- ----------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding
December 31, 1991 67,506 $24.75 - $29.00 321,000 160,000 $24.75 - $29.55 155,500
Granted 47,000 $ 17.63 158,500 $ 17.63
Exercised - -
Canceled - (3,000) $ 29.00
Outstanding
December 31, 1992 114,506 $17.63 - $29.00 274,000 315,500 $17.63 - $29.55 -
Granted - 111,000 $ 17.38
Exercised - -
Canceled - (74,400) $17.63 - $29.00
Outstanding
December 31, 1993 114,506 $17.63 - $29.00 274,000 130,100 $17.38 - $29.55 186,220
</TABLE>
(a) In connection with the disposition of the multifamily and industrial
operations (Note 2), the executive officers of Realty resigned effective
February 18, 1994. In accordance with the stock option program, the
nonvested portion of their stock options terminated on February 18, 1994.
The nonvested stock options totaled 41,200 as of December 31, 1993. The
unexercised vested portion of their stock options still outstanding 90
days subsequent to the resignation date will be terminated on that date.
As of December 31, 1993 the vested portion of their stock options totaled
33,800.
Certain officers and/or directors of Realty and Operating Company have
exercised stock options. At the time of the exercise, the individuals signed
notes for the purchase price of the stock (Note 11).
At the time of exercise of Realty options, employees also have to buy
directly from Operating Company shares of Operating Company stock at its fair
market value per share to pair with Realty shares.
77
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 9 - STOCK OPTION PROGRAM AND EMPLOYEE DEFINED BENEFIT PLANS (CONTINUED)
In addition, Operating Company is required to purchase Realty shares to
pair with the Operating Company shares being purchased by its employees. In
1984, Operating Company purchased 200,000 shares of Realty stock for this
purpose.
RETIREMENT INCOME PLAN
Realty and Operating Company have a defined benefit retirement plan for
year-round employees who are at least 21 years of age with one or more years of
service and who are not covered by collective bargaining agreements. Plan assets
consist of investments in a life insurance group annuity contract. Plan benefits
are based primarily on years of service and qualifying compensation during the
final years of employment. Funding requirements comply with federal requirements
that are imposed by law.
The net periodic pension cost for 1993 for Realty and Operating Company was
$104,000 and $367,000 respectively; for 1992 was $109,000 and $339,000,
respectively; and for 1991 was $87,000 and $300,000, respectively. The
provisions include amortization of past service cost over 30 years. Based upon
an actuarial valuation date of January 1, 1993, the present value of accumulated
plan benefits (calculated using a rate of return of 8.5%) at December 31, 1993
was $6,280,000, and the plan's net assets available for benefits were
$5,607,000.
The combined net periodic pension cost for the years ended December 31,
1993, 1992 and 1991 for the retirement income plan included the following
components:
<TABLE>
<CAPTION>
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
Service cost $ 288,000 $ 286,000 $ 278,000
Interest cost on projected benefit obligation 569,000 550,000 500,000
Expected return on plan assets (464,000) (466,000) (469,000)
Amortization of unrecognized prior service
cost and unrecognized net obligation 78,000 78,000 78,000
--------- --------- ---------
Net periodic pension cost $ 471,000 $ 448,000 $ 387,000
========= ========= =========
</TABLE>
78
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 9 - STOCK OPTION PROGRAM AND EMPLOYEE DEFINED BENEFIT PLANS (CONTINUED)
The following table sets forth the funded status of Realty's and
Operating Company's retirement income plan and amounts recognized in the balance
sheets at December 31, 1993 and 1992:
<TABLE>
<CAPTION>
1993 1992
---------- -----------
<S> <C> <C>
Actuarial present value of accumulated benefit
obligations at January 1:
Vested $ 5,897,000 $ 5,676,000
Nonvested 383,000 46,000
----------- -----------
6,280,000 5,722,000
Additional amounts related to projected
compensation levels at January 1 937,000 1,272,000
----------- -----------
Total actuarial projected benefit obligations
for service rendered 7,217,000 6,994,000
Plan assets at fair value at January 1 5,607,000 5,367,000
----------- -----------
Projected benefit obligations in excess
of plan assets (1,610,000) (1,627,000)
Unrecognized net actuarial loss from
difference in actual experience from
that assumed 540,000 571,000
Unrecognized prior service cost 251,000 269,000
Initial unrecognized transition obligation
being recognized over 15 years 545,000 606,000
----------- -----------
Accrued pension liability $ (274,000) $ (181,000)
=========== ===========
</TABLE>
Assumptions used in determining the funded status of the retirement income
plan are as follows:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Weighted average discount rate 7.5% 8.5% 8.5%
Weighted average rate of increase in
compensation levels 6.0% 6.0% 6.0%
Expected long-term rate of return on
plan assets 8.5% 9.0% 9.5%
</TABLE>
79
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 9 - STOCK OPTION PROGRAM AND EMPLOYEE DEFINED BENEFIT PLANS (CONTINUED)
DEFERRED COMPENSATION PLAN
Realty and Operating Company have defined benefit deferred compensation
agreements which provide selected management employees with a fixed benefit at
retirement. Plan benefits are based primarily on years of service and qualifying
compensation during the final years of employment.
The net periodic pension cost for 1993 for Realty and Operating Company was
$263,000 and $860,000, respectively; for 1992 was $93,000 and $243,000,
respectively; and for 1991 was $98,000 and $233,000 respectively. During 1993,
Realty and Operating Company recorded a combined $961,000 of pension expense,
net of $793,000 of life insurance proceeds as a nonrecurring charge to the plan
resulting from the death of an officer. It is the policy of Realty and
Operating Company to fund only amounts sufficient to cover current deferred
compensation benefits payable to retirees. The present value of unfunded
benefits at December 31, 1993, based upon an actuarial valuation date of January
1, 1993, was $4,280,000 (calculated using a rate of return of 10%) and Realty's
and Operating Company's combined accrued liability totaled $3,792,000.
Net periodic pension cost for the years ended December 31, 1993, 1992 and
1991 for the deferred compensation plan included the following components:
<TABLE>
<CAPTION>
1993 1992 1991
------------ ---------- ----------
<S> <C> <C> <C>
Service costs $ 152,000 $ 199,000 $ 189,000
Interest cost on projected benefit obligation 404,000 409,000 384,000
Nonrecurring charge resulting from the death
of an officer 961,000 - -
Expected return on plan assets (394,000) (354,000) (324,000)
Amortization of unrecognized prior service
cost and unrecognized net obligation - 82,000 82,000
---------- --------- ---------
Net periodic pension cost $1,123,000 $ 336,000 $ 331,000
========== ========= =========
</TABLE>
80
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 9 - STOCK OPTION PROGRAM AND EMPLOYEE DEFINED BENEFIT PLANS (CONTINUED)
The following table sets forth the funded status of Realty's and
Operating Company's deferred compensation plan and amounts recognized in the
balance sheets at December 31, 1993 and 1992:
<TABLE>
<CAPTION>
1993 1992
------------- ------------
<S> <C> <C>
Actuarial present value of accumulated benefit obligations
at January 1:
Vested $3,481,000 $3,537,000
Nonvested 93,000 84,000
---------- ----------
3,574,000 3,621,000
Additional amounts related to projected compensation
levels at January 1 706,000 697,000
---------- ----------
Total actuarial projected benefit obligations for service rendered 4,280,000 4,318,000
Plan accrued liability at January 1 3,792,000 3,412,000
---------- ----------
Projected benefit obligations in excess of plan accrued liability (488,000) (906,000)
Initial unrecognized transition obligation being recognized over
six years - 82,000
---------- ----------
Accrued pension liability $ (488,000) $ (824,000)
========== ==========
</TABLE>
Assumptions used in determining the funded status of the deferred
compensation plan are as follows:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Weighted average discount rate 10% 10% 10%
Weighted average rate of increase in compensation levels 6% 6% 6%
Long-term rate of return 10% 10% 10%
</TABLE>
NOTE 10 - SHAREHOLDER RIGHTS PLAN
In June 1989, the Board of Directors of Realty adopted a shareholder
rights plan and declared the distribution of one right for each outstanding
share of common stock. The distribution was made in August 1989. Each right
entitles the holder to purchase from Realty, initially, one one-hundredth of a
share of junior participating preferred stock at a price of $100 per share,
subject to adjustment. The rights are attached to all outstanding common shares,
and no separate rights certificates will be distributed. The rights are not
exercisable or transferable apart from the common stock until the earlier of ten
business days following a public announcement that a person or group has
acquired beneficial ownership of 10% or more of Realty's general voting power or
ten business days following the commencement of, or announcement of the
intention to commence, a tender or exchange offer that would result in a person
or group beneficially owning 10% or more of Realty's general voting power.
Upon the occurrence of certain other events related to changes in the
ownership of Realty's outstanding common stock or business combinations
involving a holder of more than 10% of Realty's general voting power, each
holder of a right would be entitled to purchase shares of Realty's common stock,
or an acquiring corporation's common stock, having a market value of two times
the exercise price of the right.
81
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 10 - SHAREHOLDER RIGHTS PLAN (CONTINUED)
During such time as the stock-pairing arrangement between Realty and
Operating Company shall remain in effect, Operating Company will issue, on a
share-for-share basis, Operating Company common shares, or, as the case may be,
Operating Company junior participating preferred shares to each person receiving
Realty common shares or preferred shares upon exercise or in exchange for one or
more rights.
Realty is entitled to redeem the rights in whole, but not in part, at a
price of $.001 per right prior to the earlier of the expiration of the rights in
August 1999 or the close of business ten days after the announcement that a 10%
position has been acquired.
NOTE 11 - RELATED PARTY TRANSACTIONS
LATC leases the Santa Anita Racetrack from Realty. Rent is based upon
1.5% of the aggregate live on-track wagering and 40% of LATC's revenues received
from simulcast and satellite wagering on races originating at Santa Anita
Racetrack. For the years ended December 31, 1993, 1992 and 1991, LATC paid
Realty (including charity days) $11,634,000, $12,683,000 and $11,817,000,
respectively, in rent, of which $9,233,000, $10,955,000 and $9,928,000,
respectively, were attributable to the Santa Anita meets (exclusive of charity
days), with the remainder being attributable to the Oak Tree meets and charity
days. The lease arrangement between LATC and Realty requires LATC to assume
costs attributable to taxes, maintenance and insurance.
Both Realty and Operating Company have notes receivable from certain
officers, former officers and/or former directors resulting from their exercise
of stock options (Note 9). Notes receivable from officers, former officers
and/or former directors as of December 31, 1993 and 1992, for Realty were
$81,000 and $184,000, respectively, and for Operating Company were $393,000 and
$ 890,000, respectively.
NOTE 12 - COMBINED QUARTERLY FINANCIAL INFORMATION - UNAUDITED
Condensed combined unaudited quarterly results of operations for Combined
Realty and Operating Company are as follows:
<TABLE>
<CAPTION>
NET INCOME
NET INCOME PER
QUARTER ENDED REVENUES (LOSS) COMMON SHARE
- ------------- ---------- -------------- ------------
<S> <C> <C> <C>
1993
December 31 $22,243,000 $(11,140,000) $(1.00)
=========== ============ ======
September 30 $15,757,000 $ (170,000) $ (.02)
=========== ============ ======
June 30 $24,447,000 $ 2,387,000 $ .21
=========== ============ ======
March 31 $45,088,000 $ 9,324,000 $ .84
=========== ============ ======
1992 (Restated)
December 31 $21,270,000 $ (60,000) $ (.01)
=========== ============ ======
September 30 $15,003,000 $ (2,502,000) $ (.22)
=========== ============ ======
June 30 $24,966,000 $ 866,000 $ .08
=========== ============ ======
March 31 $45,763,000 $ 9,073,000 $ .81
=========== ============ ======
1991 (Restated)
December 31 $21,921,000 $ 2,241,000 $ .20
=========== ============ ======
September 30 $13,472,000 $ (1,527,000) $ (.14)
=========== ============ ======
June 30 $19,079,000 $ (236,000) $ (.02)
=========== ============ ======
March 31 $49,342,000 $ 9,438,000 $ .85
=========== ============ ======
</TABLE>
82
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 12 - COMBINED QUARTERLY FINANCIAL INFORMATION - UNAUDITED (CONTINUED)
In 1993, revenues and cost of sales from food and beverage operations
have been reflected as a separate component in Operating Company's and Combined
Realty and Operating Company's statements of operations. In prior years these
operations were reflected in horse racing revenues. All prior year and interim
financial statements and disclosures for Operating Company and Combined Realty
and Operating Company have been restated to reflect this reclassification.
Operating Company 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.
The total of the amounts shown above as quarterly net income per common
share may differ from the amount shown on the Combined Statements of Operations
because the annual computation is made separately and is based upon the average
number of shares outstanding for the year.
Realty and Operating Company are subject to significant seasonal
variations in revenues and net income (loss) due primarily to the seasonality of
thoroughbred horse racing.
83
<PAGE>
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
SCHEDULE I - MARKETABLE SECURITIES - OTHER INVESTMENTS
<TABLE>
<CAPTION>
DECEMBER 31, 1993
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COL. A COL. B COL. C COL. D COL. E
------ ------ ------ ------ ------
AMOUNT AT
WHICH EACH
PORTFOLIO OF
EQUITY SECURITY
NUMBER OF ISSUES AND EACH
SHARES OR UNITS -- MARKET VALUE OF OTHER SECURITY
PRINCIPAL EACH ISSUE AT ISSUE CARRIED IN
NAME OF ISSUER AND TITLE AMOUNT OF COST BALANCE SHEET THE BALANCE
OF EACH ISSUE BONDS AND NOTES OF EACH ISSUE DATE SHEET
- ---------------------------------- ------------------ -------------- --------------- ----------------
Commercial paper (a) $4,693,000 $4,693,000 $4,693,000 $4,693,000
- -------------------
(a) Federal Home Loan $2,546,000
Transamerica Finance Corporation 1,249,000
So. California Edison 898,000
----------
$4,693,000
==========
</TABLE>
84
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC.
SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED
PARTIES AND UNDERWRITERS, PROMOTERS, AND
EMPLOYEES OTHER THAN RELATED PARTIES
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
------ ------ ------ ------ ------
BALANCE AT
DEDUCTIONS END OF PERIOD
BALANCE AT ------------------------ -------------------------
BEGINNING OF AMOUNTS AMOUNTS
NAME OF DEBTOR PERIOD ADDITIONS COLLECTED WRITTEN OFF CURRENT NOT CURRENT
-------------- ------------ --------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1993
R. B. McKinley, a Director of Operating Company
and Director of Realty (a) (b) $ 88,000 $ - $ 88,000 $ - $ - $ -
R.B. McKinley, a Director of Operating Company
and Director of Realty (c) 96,000 - 15,000 - 81,000 -
-------- --------- -------- ----------- -------- -------
$184,000 $ - $103,000 $ - $ 81,000 $ -
======== ========= ======== =========== ======== =======
1992
R. B. McKinley, a Director of Operating Company
and a Director of Realty (a) $103,000 $ - $ 15,000 $ - $ 88,000 $ -
R.B. McKinley, a Director of Operating Company
and a Director of Realty (c) 109,000 - 13,000 - 14,000 82,000
R.P. Strub, Vice Chairman of the Board of
Directors of Realty, Chairman of the Board of
Directors and Chief Executive Office of
Operating Company (d) 78,000 - 78,000 - - -
-------- --------- -------- ----------- -------- -------
$290,000 $ - $106,000 $ - $102,000 $82,000
======== ========= ======== =========== ======== =======
</TABLE>
- --------------
(a) Note receivable at the prime rate, adjusted annually, payable in five
annual installments through 1993, arising from the exercise of stock
options of Realty.
(b) Resigned effective December 27, 1993.
(c) Note receivable at the prime rate, adjusted annually, payable in five
annual installments through 1994, arising from the exercise of stock
options of Realty.
(d) Note receivable at 7% interest, payable in five annual installments through
1992, arising from the exercise of stock options of Realty.
85
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC.
SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED
PARTIES AND UNDERWRITERS, PROMOTERS, AND
EMPLOYEES OTHER THAN RELATED PARTIES
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
------ ------ ------ ------- ------
BALANCE AT
DEDUCTIONS END OF PERIOD
BALANCE AT ------------------------ -------------------------
BEGINNING OF AMOUNTS AMOUNTS
NAME OF DEBTOR PERIOD ADDITIONS COLLECTED WRITTEN OFF CURRENT NOT CURRENT
-------------- ------------ --------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1991
R. B McKinley, a Director of Operating Company
and Chairman of the Board of Directors and
Chief Executive Officer of Realty (a) $133,000 $ - $30,000 - $ 15,000 $ 88,000
R.B. McKinley, a Director of Operating Company
and Chairman of the Board of Directors and
Chief Executive Officer of Realty (b) 122,000 - 13,000 - 13,000 96,000
R.P. Strub, Vice Chairman of the Board of
Directors of Realty, Chairman of the Board of
Directors and Chief Executive Officer of
Operating Company (c) 91,000 - 13,000 - 78,000 -
-------- --------- ------- --------- -------- --------
$346,000 $ - $56,000 $ - $106,000 $184,000
======== ========= ======= ========= ======== ========
</TABLE>
- --------------
(a) Note receivable at the prime rate, adjusted annually, payable in five
annual installments through 1993, arising from the exercise of stock
options of Realty.
(b) Note receivable at the prime rate, adjusted annually, payable in five
annual installments through 1994, arising from the exercise of stock
options of Realty.
(c) Note receivable at 7% interest, payable in five annual installments through
1992, arising from the exercise of stock options of Realty.
86
<PAGE>
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED
PARTIES AND UNDERWRITERS, PROMOTERS, AND
EMPLOYEES OTHER THAN RELATED PARTIES
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
------- --------- ------ -------- ------
BALANCE AT
DEDUCTIONS END OF PERIOD
BALANCE AT ------------------------ -------------------------
BEGINNING OF AMOUNTS AMOUNTS
NAME OF DEBTOR PERIOD ADDITIONS COLLECTED WRITTEN OFF CURRENT NOT CURRENT
-------------- ------------ --------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1993
C. Goodrich, Director and Vice President of
Operating Company and President of a
subsidiary of Operating Company (a) $ 100,000 $ 6,000 $ 18,000 $ - $ 13,000 $ 75,000
A.W. Ingle, an officer of Operating
Company (b) 89,000 4,000 93,000 - - -
R.P. Strub, Vice Chairman of the Board of
Directors of Realty and Chairman of the
Board of Directors and Chief Executive
Officer of Operating Company (c) 701,000 42,000 438,000 - 60,000(d) 245,000
---------- ------- -------- ---------- -------- --------
$ 890,000 $52,000 $549,000 $ - $ 73,000 $320,000
========== ======= ======== ========== ======== ========
1992
C. Goodrich, Director and Vice President of
Operating Company and President of a
subsidiary of Operating Company (a) $ 141,000 $11,000 $ 52,000 $ - $ 13,000 $ 87,000
A.W. Ingle, an officer of Operating
Company (b) 102,000 7,000 20,000 - 89,000 -
R.P. Strub, Vice Chairman of the Board of
Directors of Realty and Chairman of the
Board of Directors and Chief Executive
Officer of Operating Company (a) 843,000 48,000 190,000 - 92,000 609,000
---------- ------- -------- ---------- -------- --------
$1,086,000 $66,000 $262,000 $ - $194,000 $696,000
========== ======= ======== ========== ======== ========
</TABLE>
- --------------
(a) Note receivable at the prime rate, adjusted annually, payable in five annual
installments through 1995, arising from the exercise of stock options of
Operating Company.
(b) Note receivable at the prime rate, adjusted annually, payable in five annual
installments through 1993, arising from the exercise of stock options of
Operating Company.
(c) Decreased May 5, 1993.
(d) The balance of Mr. Strub's note will be reduced at the rate of $5,000 per
month by his widow, Mrs. Elizabeth Strub, who has personally guaranteed the
note. Additionally, irrevocable escrow instructions have been executed by
the trustee of Mr. Strub's estate wherein escrow proceeds arising from the
sale of a single family residence will be applied to the outstanding
balance.
87
<PAGE>
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED
PARTIES AND UNDERWRITERS, PROMOTERS, AND
EMPLOYEES OTHER THAN RELATED PARTIES
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
------ ------ ------ ------ ------
BALANCE AT
DEDUCTIONS END OF PERIOD
BALANCE AT ------------------------ -------------------------
BEGINNING OF AMOUNTS AMOUNTS
NAME OF DEBTOR PERIOD ADDITIONS COLLECTED WRITTEN OFF CURRENT NOT CURRENT
-------------- ------------ --------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1991
C. Goodrich, Director and Vice President of
Operating Company and President of a
subsidiary of Operating Company (a) (b) $ 159,000 $ 14,000 $ 32,000 $ - $ 43,000 $ 98,000
A.W. Ingle, an officer of Operating Company (c) 120,000 10,000 28,000 - 14,000 88,000
R.P. Strub, Vice Chairman of the Board of
Directors of Realty and Chairman of the Board
of Directors and Chief Executive Officer of
Operating Company (b) (d) 942,000 80,000 179,000 - 147,000 696,000
---------- -------- -------- ----------- -------- --------
$1,221,000 $104,000 $239,000 $ - $204,000 $882,000
========== ======== ======== =========== ======== ========
</TABLE>
- --------------
(a) Note receivable at the prime rate, adjusted annually, payable in five annual
installments through 1992, arising from the exercise of stock options of
Operating Company.
(b) Note receivable at the prime rate, adjusted annually, payable in five annual
installments through 1995, arising from the exercise of stock options of
Operating Company.
(c) Note receivable at the prime rate, adjusted annually, payable in five annual
installments through 1993, arising from the exercise of stock options of
Operating Company.
(d) Note receivable at 7% interest, payable in five annual installments through
1992, arising from the exercise of stock options of Operating Company.
88
<PAGE>
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING OF ADDITIONS END OF
CLASSIFICATION PERIOD AT COST RETIREMENTS PERIOD
- --------------------------------------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
For the year ended December 31, 1993
Machinery and other equipment $21,524,000 $ 442,000 $ 23,000 $21,943,000
Leasehold improvements 19,968,000 1,008,000 - 20,976,000
----------- ---------- -------- -----------
$41,492,000 $1,450,000 $ 23,000 $42,919,000
=========== ========== ======== ===========
For the year ended December 31, 1992
Machinery and other equipment $15,046,000 $6,527,000 $ 49,000 $21,524,000
Leasehold improvements 20,679,000 170,000 881,000 19,968,000
----------- ---------- -------- -----------
$35,725,000 $6,697,000 $930,000 $41,492,000
=========== ========== ======== ===========
For the year ended December 31, 1991
Machinery and other equipment $13,107,000 $1,943,000 $ 4,000 $15,046,000
Leasehold improvements 19,274,000 1,405,000 - 20,679,000
----------- ---------- -------- -----------
$32,381,000 $3,348,000 $ 4,000 $35,725,000
=========== ========== ======== ===========
</TABLE>
89
<PAGE>
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION
AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE AT
BEGINNING OF COSTS AND END OF
DESCRIPTION PERIOD EXPENSES RETIREMENTS PERIOD
- --------------------------------------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
For the year ended December 31, 1993
Machinery and other equipment $11,054,000 $1,588,000 $ 23,000 $12,619,000
Leasehold improvements 7,289,000 1,180,000 - 8,469,000
----------- ---------- -------- -----------
$18,343,000 $2,768,000 $ 23,000 $21,088,000
=========== ========== ======== ===========
For the year ended December 31, 1992
Machinery and other equipment $ 9,700,000 $1,390,000 $ 36,000 $11,054,000
Leasehold improvements 6,174,000 1,342,000 227,000 7,289,000
----------- ---------- -------- -----------
$15,874,000 $2,732,000 $263,000 $18,343,000
=========== ========== ======== ===========
For the year ended December 31, 1991
Machinery and other equipment $ 8,443,000 $1,261,000 $ 4,000 $ 9,700,000
Leasehold improvements 4,801,000 1,373,000 - 6,174,000
----------- ---------- -------- -----------
$13,244,000 $2,634,000 $ 4,000 $15,874,000
=========== ========== ======== ===========
</TABLE>
90
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC.
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
DECEMBER 31, 1993
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E
------- ------ ------ ------ ------
Additions
Balance at -----------------------------------
Beginning Charged to Charged to Balance at
Descriptions of Period Costs and Expenses Other Accounts Deductions End of Period
- --------------------------------------- ---------- ------------------ -------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Deducted from commercial properties:
Allowance for loss on
disposition of multifamily
and industrial operations $ - $ 10,974,000 $ - $ - $ 10,974,000
========== ================= ============== ========== =============
</TABLE>
91
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC.
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
COL. A COL. B
------ ------
CHARGED TO COSTS AND EXPENSES
---------------------------------------
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
Property Taxes $2,331,000 $2,742,000 $2,271,000
========== ========== ==========
</TABLE>
92
<PAGE>
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
<TABLE>
<CAPTION>
COL. A COL. B
------- ------
CHARGED TO COSTS AND EXPENSES
---------------------------------------
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
Maintenance and repairs $2,344,000 $2,566,000 $2,325,000
========== ========== ==========
Advertising costs $2,631,000 $3,400,000 $3,955,000
========== ========== ==========
Property taxes $ 692,000 $ 687,000 $1,210,000
========== ========== ==========
</TABLE>
93
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC.
SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1993
<TABLE>
<CAPTION>
COSTS CAPITALIZED
INITIAL COSTS TO COMPANY SUBSEQUENT TO ACQUISITION
----------------------------- -----------------------------
BUILDINGS AND BUILDINGS AND
DESCRIPTION ENCUMBRANCE LAND IMPROVEMENTS LAND IMPROVEMENTS
- ----------------------------- ------------ ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
REALTY
RACING FACILITY
Santa Anita Racetrack (a) $ - $ 549,000 $ 15,150,000 $2,665,000 $ 7,303,000
REGIONAL MALLS
California
Fashion Park (a)(c) 25,313,000 17,688,000 36,929,000
Land underlying
Fashion Park 4,100,000 102,000
SHOPPING CENTERS
California
Yorba Linda 2,038,000 6,162,000 1,689,000
Orange 1,800,000 3,275,000 246,000
Encinitas 2,842,000 8,954,000 479,000
Phoenix, Arizona
Tatum &
Thunderbird 728,000 1,672,000 233,000 1,800,000
28th and Indian
School 870,000 807,000 1,793,000 140,000
67th and Indian
School 1,751,000 3,396,000 1,553,000
OFFICE BUILDINGS
California
Santa Ana 11,822,000 6,670,000 16,130,000 200,000 661,000
Upland 1,560,000 3,440,000 193,000 1,077,000
Arcadia 10,000,000 9,122,000 6,989,000
LAND
California
Temecula 857,000 1,208,000 580,000
------------ ----------- ------------- ---------- ------------
52,962,000 20,055,000 86,782,000 3,871,000 58,866,000
------------ ----------- ------------- ---------- ------------
SUBJECT TO THE PACIFIC
TRANSACTION
Apartments
California
Santa Ana 7,089,000 16,861,000 1,339,000 5,031,000
Santa Ana 345,000
Washington
Everett 15,625,000 7,709,000 14,541,000 84,000 2,269,000
Burien 12,900,000 2,945,000 14,203,000 385,000
Oregon
Beaverton 8,042,000 1,127,000 9,048,000 1,540,000
Texas
San Antonio 950,000 3,750,000 425,000
San Antonio 1,465,000 3,035,000 593,000
Houston 2,997,000 2,005,000 4,645,000 1,025,000
Austin 1,359,000 5,472,000 19,000
California
Vista, Ontario,
Rancho Cucamonga 12,000
OFFICE BUILDING
California
Newport Beach 211,000 531,000 329,000
INDUSTRIAL
Washington
Seattle 4,751,000 2,349,000 4,700,000 26,000 1,117,000
California
Baldwin Park
(c) (d) (e) 9,454,000 10,000,000 999,000 1,913,000
ALLOWANCE FOR LOSS ON
DISPOSITION OF
MULTIFAMILY AND INDUSTRIAL
OPERATIONS (10,974,000)
------------ ----------- ------------- ---------- ------------
53,769,000 27,209,000 87,143,000 2,448,000 3,672,000
------------ ----------- ------------- ---------- ------------
$106,731,000 $47,264,000 $173,925,000 $6,319,000 $ 62,538,000
============ =========== ============ ========== ============
<CAPTION>
GROSS AMOUNT OF WHICH CARRIED
AT CLOSE OF PERIOD
------------------------------------------------
BUILDINGS AND ACCUMULATED
DESCRIPTION LAND IMPROVEMENTS TOTAL DEPRECIATION
- ----------------------------- ------------ -------------- ------------ -----------------
<S> <C> <C> <C> <C>
REALTY
RACING FACILITY
Santa Anita Racetrack (a) $ 3,214,000 $ 22,453,000 $ 25,667,000 $18,670,000
REGIONAL MALLS
California
Fashion Park (a)(c) 54,617,000 54,617,000 12,065,000
Land underlying
Fashion Park 102,000 102,000
SHOPPING CENTERS
California
Yorba Linda 2,038,000 7,851,000 9,889,000 2,008,000
Orange 1,800,000 3,521,000 5,321,000 688,000
Encinitas 2,842,000 9,433,000 12,275,000 1,117,000
Phoenix, Arizona
Tatum &
Thunderbird 961,000 3,472,000 4,433,000 698,000
28th and Indian
School 807,000 1,933,000 2,740,000 599,000
67th and Indian
School 1,751,000 4,949,000 6,700,000 1,001,000
OFFICE BUILDINGS
California
Santa Ana 6,870,000 16,791,000 23,661,000 6,685,000
Upland 1,753,000 4,517,000 6,270,000 1,641,000
Arcadia 16,111,000 16,111,000 3,122,000
LAND
California
Temecula 1,788,000 1,788,000
----------- ------------ ------------ -----------
23,926,000 145,648,000 169,574,000 48,294,000
----------- ------------ ------------ -----------
SUBJECT TO THE PACIFIC
TRANSACTION
Apartments
California
Santa Ana 8,428,000 21,892,000 30,320,000 3,892,000
Santa Ana 345,000 345,000
Washington
Everett 7,793,000 16,810,000 24,603,000 2,107,000
Burien 2,945,000 14,588,000 17,533,000 1,087,000
Oregon
Beaverton 1,127,000 10,588,000 11,715,000 420,000
Texas
San Antonio 950,000 4,175,000 5,125,000 167,000
San Antonio 1,465,000 3,628,000 5,093,000 142,000
Houston 2,005,000 5,670,000 7,675,000 132,000
Austin 1,359,000 5,491,000 6,850,000 78,000
California
Vista, Ontario,
Rancho Cucamonga 12,000 12,000
OFFICE BUILDING
California
Newport Beach 211,000 860,000 1,071,000 52,000
INDUSTRIAL
Washington
Seattle 2,375,000 5,817,000 8,192,000 878,000
California
Baldwin Park
(c) (d) (e) 999,000 11,913,000 12,912,000 3,924,000
ALLOWANCE FOR LOSS ON
DISPOSITION OF
MULTIFAMILY AND INDUSTRIAL
OPERATIONS (10,974,000) (10,974,000)
----------- ------------ ------------ -----------
29,657,000 90,815,000 120,472,000 12,879,000
----------- ------------ ------------ -----------
$53,583,000 $236,463,000 $290,046,000 (f) $61,173,000 (g)
=========== ============ ============ ===========
<CAPTION>
LIFE ON WHICH
DEPRECIATION IN
LATEST INCOME
DATE OF DATE STATEMENT IS
DESCRIPTION CONSTRUCTION ACQUIRED COMPUTED
- ----------------------------- ------------------------- ------------- ---------------------------------
<S> <C> <C> <C>
REALTY
RACING FACILITY
Santa Anita Racetrack (a) 1934 1934 5-35 Years (b)
REGIONAL MALLS
California
Fashion Park (a)(c) 1974 1974 40 Years
Land underlying
Fashion Park 1934
SHOPPING CENTERS
California
Yorba Linda 1985 1985 3-40 Years
Orange 1986 1985 3-40 Years
Encinitas 1985 1985 3-40 Years
Phoenix, Arizona
Tatum &
Thunderbird 1981 1983 3-40 Years
28th and Indian
School 1979 1983 3-40 Years (b)
67th and Indian
School 1968 1986 3-40 Years
OFFICE BUILDINGS
California
Santa Ana 1980 1984 5-40 Years
Upland 1982 1984 5-35 Years
Arcadia 1986 1987 5-45 Years
LAND
California
Temecula 1989
SUBJECT TO THE PACIFIC
TRANSACTION
Apartments
California
Santa Ana 1972 1986 40 Years
Santa Ana 1990
Washington
Everett 1988, 1986 1989 35 Years
Burien 1987 1991 40 Years
Oregon
Beaverton 1990 1992 40 Years
Texas
San Antonio 1983 1992 40 Years
San Antonio 1979 1992 40 Years
Houston 1978 1992 40 Years
Austin 1986 1993 40 Years
California
Vista, Ontario,
Rancho Cucamonga 1990, 1991, 1990
OFFICE BUILDING
California
Newport Beach 1970 1992 5-40 Years
INDUSTRIAL
Washington
Seattle 1986, 1981 1990 3-31 Years
California
Baldwin Park
(c) (d) (e) 1986 1981 5-30 Years
ALLOWANCE FOR LOSS ON
DISPOSITION OF
MULTIFAMILY AND INDUSTRIAL
OPERATIONS
</TABLE>
The accompanying notes are an integral part of this schedule.
94
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC.
SCHEDULE XI - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1993 (CONTINUED)
- ------------
Notes
(a) Initial costs December 31, 1979 book value
(b) Component depreciation used
(c) All dollar figures represent 100% of amounts attributable to the property
(d) Initial costs December 31, 1987 book value
(e) Property subject to Pacific transaction (Note 2)
<TABLE>
<CAPTION>
1993 1992 1991
-------------- -------------- --------------
<S> <C> <C> <C>
(f) Balance at beginning of period $274,064,000 $242,812,000 $218,726,000
Additions - capital expenditures 33,424,000 35,588,000 24,544,000
Disposals (6,468,000) (4,336,000) (400,000)
Allowance for loss on disposition of
multifamily and industrial
operations (10,974,000) - -
Other - - (58,000)
------------ ------------ ------------
Balance at end of period $290,046,000 $274,064,000 $242,812,000
============ ============ ============
(g) Balance at beginning of period $ 59,038,000 $ 50,811,000 $ 44,009,000
Additions - depreciation expense 8,795,000 8,156,000 7,418,000
Disposals (6,660,000) 71,000 (616,000)
------------ ------------ ------------
Balance at end of period $ 61,173,000 $ 59,038,000 $ 50,811,000
============ ============ ============
</TABLE>
95
<PAGE>
INDEPENDENT AUDITORS' REPORT
-----------------------------
To the Partners
H-T Associates
We have audited the accompanying consolidated balance sheet of H-T Associates (a
Maryland general partnership) and subsidiary (a Maryland general partnership) as
of December 31, 1993, and the related consolidated statements of operations,
partners' capital and cash flows for the year then ended. These consolidated
financial statements are the responsibility of H-T Associates' management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of H-T Associates and
subsidiary as of December 31, 1993, and the results of their operations and
their cash flows for the year then ended in conformity with generally accepted
accounting principles.
KPMG PEAT MARWICK
San Diego, California
February 11, 1994
96
<PAGE>
INDEPENDENT AUDITORS' REPORT
-----------------------------
To the Partners
H-T Associates
San Diego, California
We have audited the accompanying consolidated balance sheet of H-T Associates (a
Maryland general partnership) and subsidiary (a Maryland general partnership) as
of December 31, 1992, and the related consolidated statements of operations,
partners' capital and cash flows for the year then ended. These financial
statements are the responsibility of H-T Associates' management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1992 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
H-T Associates and subsidiary as of December 31, 1992, and the results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
KENNETH LEVENTHAL & COMPANY
Newport Beach, California
January 28, 1993
97
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Partners
H-T Associates
San Diego, California
We have audited the accompanying consolidated statements of operations,
partners' capital and cash flows of H-T Associates (a Maryland general
partnership) and subsidiary (a Maryland general partnership) for the year ended
December 31, 1991. These financial statements are the responsibility of H-T
Associates' management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such 1991 consolidated financial statements present fairly, in
all material respects, the results of operations and cash flows of H-T
Associates and subsidiary for the year ended December 31, 1991, in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE
San Diego, California
February 3, 1992
98
<PAGE>
H-T ASSOCIATES
(a Maryland general partnership)
AND SUBSIDIARY
(a Maryland general partnership)
CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<CAPTION>
ASSETS December 31
------ -------------------------------
1993 1992
-------------- --------------
<S> <C> <C>
SHOPPING CENTER PROPERTY (Note B):
Land $ 11,726,213 $ 11,726,213
Buildings and improvements 177,052,996 175,971,397
Deferred charges 2,415,529 1,968,632
------------ ------------
191,194,738 189,666,242
Less accumulated depreciation and amortization (15,639,380) (9,294,339)
------------ ------------
175,555,358 180,371,903
CASH 2,871,962 3,745,506
ACCOUNTS RECEIVABLE, less allowance for doubtful
accounts of $1,000,277 (1993) and $656,080 (1992) 773,051 927,441
NOTES RECEIVABLE 390,561 567,828
CONSTRUCTION COSTS RECEIVABLE FROM TENANTS 90,606 141,732
DEFERRED RENT RECEIVABLE 2,542,881 1,356,860
PREPAID EXPENSES AND OTHER ASSETS 1,397,663 2,477,513
------------ ------------
$183,622,082 $189,588,783
============ ============
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
NOTES PAYABLE (Note B) $164,641,000 $159,473,000
ADVANCES FROM PARTNERS (Note D)
Ernest W. Hahn, Inc. 4,021,196 3,746,479
Santa Anita Realty Enterprises, Inc. 4,016,083 3,750,247
ACCOUNTS PAYABLE TO
Ernest W. Hahn, Inc. 119,847 148,657
Tenants 82,679 109,660
Others 970,791 1,009,324
Accrued construction costs - 20,000
------------ ------------
173,851,596 168,257,367
COMMITMENTS (Note C)
MINORITY INTEREST 5,932,847 12,021,673
PARTNERS' CAPITAL (Note E) 3,837,639 9,309,743
------------ ------------
$183,622,082 $189,588,783
============ ============
</TABLE>
See notes to consolidated financial statements.
99
<PAGE>
H-T ASSOCIATES
--------------
(a Maryland general partnership)
AND SUBSIDIARY
(a Maryland general partnership)
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------
1993 1992 1991
------------- ------------- -------------
<S> <C> <C> <C>
REVENUES:
Minimum rent (Note C) $14,198,970 $10,561,845 $ 4,068,533
Overage rent (Note C) 366,600 213,501 339,161
Recoveries from tenants (Note C) 4,845,865 4,688,655 1,699,943
Other income 579,235 456,634 102,414
----------- ----------- -----------
19,990,670 15,920,635 6,210,051
----------- ----------- -----------
EXPENSES:
Operating expenses 3,691,166 3,586,645 1,727,378
Property taxes 1,212,191 1,112,832 456,240
Office and management 795,641 674,366 414,929
Promotion 134,078 178,196 58,067
Professional services 79,410 154,154 39,429
Other expenses 652,589 386,396 242,865
----------- ----------- -----------
6,565,075 6,092,589 2,938,908
----------- ----------- -----------
INCOME FROM OPERATIONS 13,425,595 9,828,046 3,271,143
----------- ----------- -----------
NON-OPERATING REVENUE:
Interest income 233,305 185,833 147,854
----------- ----------- -----------
NON-OPERATING EXPENSES:
Interest expense (Notes B and D) 11,923,884 8,487,995 2,607,650
Depreciation and amortization 6,350,407 4,107,219 1,692,761
Write-off of assets 39,186 - -
----------- ----------- -----------
18,313,477 12,595,214 4,300,411
----------- ----------- -----------
LOSS BEFORE MINORITY INTEREST (4,654,577) (2,581,335) (881,414)
MINORITY INTEREST 1,382,472 700,534 (299,341)
----------- ----------- -----------
NET LOSS $(3,272,105) $(1,880,801) $(1,180,755)
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
100
<PAGE>
H-T ASSOCIATES
--------------
(a Maryland general partnership)
AND SUBSIDIARY
(a Maryland general partnership)
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
--------------------------------------------
YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
--------------------------------------------
<TABLE>
<CAPTION>
Santa Anita
Realty
Ernest W. Enterprises,
Hahn, Inc. Inc. Total
------------ ------------- -------------
<S> <C> <C> <C>
$ 7,099,837 $ 7,099,838 $14,199,675
BALANCE, December 31, 1990
(590,377) (590,378) (1,180,755)
Net loss
Cash distributions (Note E) (250,000) (250,000) (500,000)
----------- ----------- -----------
BALANCE, December 31, 1991 6,259,460 6,259,460 12,518,920
Net loss (940,401) (940,400) (1,880,801)
Cash distributions (Note E) (664,188) (664,188) (1,328,376)
----------- ----------- -----------
BALANCE, December 31, 1992 4,654,871 4,654,872 9,309,743
Net loss (1,636,052) (1,636,053) (3,272,105)
Cash distributions (Note E) (1,100,000) (1,099,999) (2,199,999)
----------- ----------- -----------
BALANCE, December 31, 1993 $ 1,918,819 $ 1,918,820 $ 3,837,639
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
101
<PAGE>
H-T ASSOCIATES
--------------
(a Maryland general partnership)
AND SUBSIDIARY
(a Maryland general partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31
---------------------------------------------
1993 1992 1991
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(3,272,105) $(1,880,801) $ (1,180,755)
Adjustments to reconcile net loss
to net cash provided by (used
in) operating activities:
Depreciation and amortization 6,350,407 4,107,219 1,692,761
Provision for doubtful accounts
receivable 531,345 291,976 110,087
Write-down of assets 39,186 - -
Minority interest (1,382,472) (700,534) 299,341
Changes in assets and liabilities:
Accounts receivable (376,955) 443,023 (1,225,524)
Notes receivable 177,267 (401,520) (107,873)
Deferred rent receivable (1,186,021) (804,426) (197,036)
Prepaid expenses and other assets 1,079,850 (1,594,283) (601,312)
Accounts payable to:
Ernest W. Hahn, Inc. (28,810) (421,392) 459,677
Tenants (26,981) 84,020 16,358
Others (38,533) (386,854) 685,047
----------- ----------- ------------
Net cash provided by (used in)
operating activities 1,866,178 (1,263,572) (49,229)
----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property under
development - - (53,275,972)
Additions to shopping center
property (1,573,048) (9,271,754) (439,080)
Decrease (increase) in construction
costs receivable from tenants 51,126 688,235 (828,105)
Decrease in accrued construction
costs (20,000) (741,522) (7,103,494)
----------- ----------- ------------
Net cash used in investing activities (1,541,922) (9,325,041) (61,646,651)
----------- ----------- ------------
(continued)
</TABLE>
See notes to consolidated financial statements.
102
<PAGE>
H-T ASSOCIATES
(a Maryland general partnership)
AND SUBSIDIARY
(a Maryland general partnership)
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
(Continued)
<TABLE>
<CAPTION>
Years Ended December 31
----------------------------------------
1993 1992 1991
--------- ---------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable 5,168,000 16,889,993 60,600,757
Advances from partners 540,553 812,078 2,094,719
Repayment of partner advances - (1,876,657) -
Distributions to minority interest (4,706,354) (3,626,011) (269,232)
Distributions to partners (2,199,999) (1,328,376) (500,000)
----------- ---------- ----------
Net cash provided by (used in) financing
activities (1,197,800) 10,871,027 61,926,244
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH (873,544) 282,414 230,364
CASH, BEGINNING OF YEAR 3,745,506 3,463,092 3,232,728
----------- ----------- -----------
CASH, END OF YEAR $ 2,871,962 $ 3,745,506 $ 3,463,092
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
------------------------------------------------
Interest paid (net of amounts
capitalized) $10,443,161 $10,474,729 $ 1,612,772
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES
--------------------------------------------------------
During 1993, the following non-cash activity occurred:
Reduction in
Reduction Accumulated
in Depreciation
Property and Amortization
--------- ----------------
<S> <C> <C>
Write-down of assets:
Buildings and improvements $36,452 $4,556
Deferred charges 8,100 810
------- ------
Total $44,552 $5,366
======= ======
</TABLE>
See notes to consolidated financial statements.
103
<PAGE>
H-T ASSOCIATES
--------------
(a Maryland general partnership)
AND SUBSIDIARY
(a Maryland general partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
DECEMBER 31, 1993, 1992 AND 1991
--------------------------------
A. Organization and Accounting Policies:
------------------------------------
H-T Associates (the "Partnership") is a Maryland general partnership
formed on July 28, 1987. Its primary asset is a 65% ownership in
Towson Town Center Associates ("TTCA"), formed to develop and operate
a regional shopping center near Baltimore, Maryland. The general
partners of the Partnership are Ernest W. Hahn, Inc. and Santa Anita
Realty Enterprises, Inc. The Partnership is to continue until
December 31, 2087, unless terminated earlier. Profits and losses are
shared as follows:
Ernest W. Hahn, Inc. ("Hahn") 50%
Santa Anita Realty Enterprises, Inc.
("Santa Anita") 50%
The consolidated financial statements of the Partnership include the
accounts of the Partnership and TTCA. TTCA is a Maryland general
partnership comprised of the Partnership and DeChiaro Associates
("DeChiaro") as 65% and 35% general partners, respectively. All
significant intercompany balances and transactions have been
eliminated.
Certain reclassifications of prior year amounts have been made in
order to conform with the current year presentation.
The Partnership's accounting policies are as follows:
1. Shopping center property is recorded at cost and includes direct
construction costs, interest, construction loan fees, property
taxes and related costs capitalized during the construction
period, as these amounts are expected to be recovered from
operations.
2. The costs of shopping center buildings and improvements, less a
5% salvage value, are depreciated using the straight-line method
over the estimated useful life of 40 years.
3. Direct costs of obtaining leases and permanent financing are
deferred and are being amortized over the lease and loan periods,
respectively.
4. Maintenance and repairs are charged to operations as incurred.
5. Expenditures for betterments are capitalized and
depreciated over the remaining depreciable life of the
property.
6. Costs incurred in connection with early termination of a tenant
lease are amortized over the life of the lease with the
replacement tenant. To the extent payments received from an
incoming tenant do not represent future rentals or cost
recoveries for tenant improvements, they are recorded as income
when received.
104
<PAGE>
H-T ASSOCIATES
--------------
(a Maryland general partnership)
AND SUBSIDIARY
(a Maryland general partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
A. Organization and Accounting Policies: (continued)
------------------------------------
7. Taxable income or loss of the Partnership is reported by, and
is the responsibility of, the respective partners. Accordingly,
the Partnership makes no provision for income taxes.
8. The Partnership recognizes scheduled rent increases on a
straight-line basis. Accordingly, a deferred receivable for rents
which are to be received in subsequent years is reflected in the
accompanying consolidated balance sheets.
9. The differential to be paid or received under interest rate swap
agreements is accrued as interest rates change, and is recognized
over the life of the agreements (Note B).
B. Notes payable:
-------------
In 1990, TTCA entered into a building loan agreement with a commercial
bank, secured by an indemnity deed of trust encumbering the property.
In connection with the loan, Hahn and Santa Anita executed a repayment
guaranty of $66,135,000 each and DeChiaro executed a limited repayment
guaranty of $4,513,000. TTCA can borrow up to $170,000,000. The
principal balance of the loan is due May 1999. The agreement provides
that TTCA can: (1) obtain funds at the then current prime rate of the
commercial bank; (2) obtain funds based on the then current London
Interbank Offered Rate ("LIBOR") plus a spread (as defined); or, (3)
obtain funds through the issuance of commercial paper at rates based
upon the interest rates offered in the commercial paper market plus
letter of credit fees. For the years ended December 31, 1993 and
1992, all funds were obtained under the commercial paper option for a
total outstanding balance of $164,641,000 and $159,473,000,
respectively. Interest is payable monthly. The variable interest
rate in effect on the outstanding balance as of December 31, 1993 and
1992 was 3.2% and 3.7%, respectively.
TTCA has also entered into interest rate swap agreements to reduce the
impact of changes in interest rates on its loan. As of December 31,
1993 and 1992, TTCA had two interest rate swap agreements outstanding
with a commercial bank which have a total notional principal amount of
$82,000,000.
The agreements provide for TTCA to pay fixed rates of interest of 9.3%
and 8.8% on swaps of $45,000,000 and $37,000,000, respectively, and to
receive floating interest based on 30 day commercial paper rates. The
effective variable rate of interest on the swap agreements as of
December 31, 1993 is 3.2%. The interest rate swap agreements mature
at the time the building loan matures. TTCA is exposed to credit loss
in the event of nonperformance by the commercial bank with the
interest rate swap agreements.
The net effective interest rates on amounts outstanding under the
building loan agreement at December 31, 1993, 1992 and 1991, after
giving effect to the interest rate swaps, was 6.9%, 6.4% and 8.3%,
respectively.
105
<PAGE>
H-T ASSOCIATES
(a Maryland general partnership)
AND SUBSIDIARY
(a Maryland general partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
B. Notes payable: (continued)
-------------
The differential between the amounts paid and received under the
interest rate contract is included as either an addition to, or a
reduction in, interest incurred. Total interest incurred was
$11,383,329, $11,420,746, and $10,419,887 of which $0, $3,491,669 and
$8,515,010 was capitalized, for the years ended December 31, 1993,
1992, and 1991, respectively.
C. Commitments:
------------
Partnership as Lessor:
---------------------
TTCA leases space to tenants in the shopping center for which it
charges minimum rents and receives reimbursement for real estate
taxes and certain other operating expenses. The terms of the
leases range from 5 to 30 years and generally provide for additional
overage rents during any year that tenants' gross sales exceed stated
amounts.
Future minimum rental revenues to be received under leases
in force at December 31, 1993 are as follows:
<TABLE>
<CAPTION>
Year ending
December 31 Amount
--------------- -------------
<S> <C>
1994 $ 13,985,642
1995 14,089,510
1996 14,055,103
1997 13,712,487
1998 13,683,948
Thereafter 60,989,803
------------
$130,516,493
============
</TABLE>
Property Under Development:
---------------------------
During 1991, TTCA completed a major expansion and renovation of the
previously existing shopping center. Pursuant to the Development
Manager's Agreement between TTCA and Hahn, Hahn is to receive an
estimated $5.1 million as compensation for managing the development of
the project. Of this amount $5,080,619, $5,041,792 and $4,682,015
were incurred as of December 31, 1993, 1992 and 1991, respectively.
106
<PAGE>
H-T ASSOCIATES
--------------
(a Maryland general partnersip)
AND SUBSIDIARY
(A Maryland general partnership)
D. Advances from Partners:
----------------------
Hahn and Santa Anita have both made advances to the Partnership to
finance certain construction funding requirements and other cash flow
needs. These advances bear interest at 1% above the prime rate and
they are required to be repaid prior to any distributions to the
partners, other than distributions of Net Cash Flow from Operations
(Note E). Interest incurred on the advances totaled $540,555,
$558,918 and $702,773 for the years ended December 31, 1993, 1992 and
1991, respectively. The prime rate was 6.0%, 6.0% and 6.5% at
December 31, 1993, 1992 and 1991, respectively.
E. Partnership Distributions:
-------------------------
Distributions of Net Cash flow from Operations of the Partnership (as
defined by the Amended and Restated Partnership Agreement) are subject
to certain priorities. The period from inception of the Partnership
through October 16, 1991 (the Grand Opening Date of the shopping
center) is referred to as the Initial Term. During the Initial Term,
both partners were entitled to a cumulative, compounded return (at
the Prime Rate, as defined) on their capital contributions. A
$500,000 distribution was made during the Initial Term. The "Primary
Term" follows the Initial Term, and ends when cash flow for a
consecutive 12-month period exceeds the sum of $1,192,000 plus any
unpaid cumulative returns. During the "Primary Term," Santa Anita
receives a cumulative return of $447,000 for the first year, $521,500
for the second year, and $596,000 for each year thereafter. Hahn
receives non-cumulative returns of the same amounts. Following the
Primary Term, distributions of Net Cash Flow from Operations are made
to the partners in accordance with their percentage interests.
F. Related Party Transactions:
--------------------------
Hahn and its wholly owned subsidiary, Hahn Property Management
Corporation ("HMPC"), provide property management, leasing and various
legal services to TTCA. A summary of costs and fees incurred by Hahn
and HMPC by TTCA during 1993, 1992 and 1991 is presented below:
<TABLE>
<CAPTION>
Years ended December 31
---------------------------------------
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
Payroll and related benefits $1,444,592 $1,608,788 $1,405,067
Management fee 545,964 410,277 156,291
Professional service 33,071 15,644 79,095
Leasing commissions 399,345 532,818 782,378
Legal 111,043 87,456 117,736
Development fee (Note C) 38,827 359,777 2,082,740
</TABLE>
107
<PAGE>
H-T ASSOCIATES
--------------
(a Maryland general partnership)
AND SUBSIDIARY
(a Maryland general partnership)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
------------------------------------------------------
F. Related Party Transactions: (continued)
--------------------------
Related Property:
-----------------
Certain property adjacent to TTCA's regional shopping center is owned
by Joppa Associates ("Joppa"). The partners of TTCA are also the
partners of Joppa. TTCA has benefitted from Joppa's ownership of the
adjacent property. The partners consider the two properties one
project.
G. Disclosures About the Fair Value of Financial Instruments:
---------------------------------------------------------
In the opinion of management, the carrying amounts of TTCA's financial
instruments approximate fair value except:
Interest Rate Swaps (Note B):
----------------------------
The fair value of interest rate swaps (used for hedging purposes)
is the estimated amount that TTCA would pay to terminate the swap
agreements at the reporting date, taking into account current interest
rates and the current credit worthiness of the swap counterparties.
The fair value of the interest rate swaps is a net payable of
$13,593,031.
108
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number
- -------
<C> <S>
3.1 Certificate of Incorporation of Santa Anita Realty Enterprises, Inc., as
amended through October 1993.
3.2 Certificate of Incorporation of Santa Anita Operating Company, as amended
through October 1993.
3.3 Bylaws of Santa Anita Realty Enterprises, Inc., as amended through
February 1994.
3.4 Bylaws of Santa Anita Operating Company, as amended through February
1994.
4.1 Pairing Agreement by and between Santa Anita Realty Enterprises, Inc.
and Santa Anita Operating Company, dated as of December 20, 1979
(incorporated by reference to Exhibit 5 to Registration Statement on Form
8-A of Santa Anita Operating Company filed February 5, 1980).
4.2 Rights Agreement, dated June 15, 1989, among Santa Anita Realty
Enterprises, Inc., Santa Anita Operating Company, and Union Bank, as
Rights Agent (incorporated by reference to Exhibit 2.1 to Registration
Statement on Form 8-A of Santa Anita Realty Enterprises, Inc. filed
June 19, 1989).
4.3 Amended and Restated Credit Agreement, dated November 14, 1989,
between Wells Fargo Bank, N.A. and Santa Anita Realty Enterprises, Inc.
(incorporated by reference to Exhibit 4.4 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, 1989).
4.4 Revolving Credit and Term Note Agreement, dated November 21, 1989,
between The Bank of California, N.A. and Santa Anita Realty Enterprises,
Inc. (incorporated by reference to Exhibit 4.5 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, 1989).
4.5 Revolving Credit Agreement, dated October 29, 1991, between Santa Anita
Realty Enterprises, Inc. and Union Bank (incorporated by reference to
Exhibit 3.2 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, 1991). Each other outstanding long-term indebtedness of
Santa Anita Realty Enterprises, Inc. and each outstanding long-term
indebtedness of Santa Anita Operating Company and its subsidiaries does
not exceed 10% of the total assets of Santa Anita Realty Enterprises, Inc.
or Santa Anita Operating Company and its subsidiaries on a consolidated
basis, as the case may be. Each such company agrees to furnish copies of
such instruments to the Securities and Exchange Commission upon
request.
4.6 Letter Agreement, dated March 25, 1994, between Wells Fargo Bank, N.A. and
Santa Anita Realty Enterprises, Inc.
4.7 Letter Agreement, dated March 25, 1994, between The Bank of California, N.A.
and Santa Anita Realty Enterprises, Inc.
4.8 Letter Agreement, dated March 25, 1994, between Union Bank and Santa Anita
Realty Enterprises, Inc.
</TABLE>
109
<PAGE>
EXHIBIT INDEX (CONTINUED)
<TABLE>
<CAPTION>
Exhibit
Number
- -------
<C> <S>
10.1 Anita Associates Articles of Limited Partnership dated as of April 6, 1972
(incorporated by reference to Exhibit 6(c) to Registration Statement No.
2-65894).
10.2 First Amendment to Articles of Limited Partnership of Anita Associates,
dated December 26, 1979 (incorporated by reference to Exhibit 10.13 to
Registration Statement No. 2-72866).
10.3 Form of Compensation Agreement of certain officers of Santa Anita Realty
Enterprises, Inc. and Santa Anita Operating Company (incorporated by
reference to Exhibit 10.3 to Registration Statement No. 33-27011).
10.4 Form of Salary Reduction and Deferral Agreement of certain officers of
Santa Anita Realty Enterprises, Inc. and Santa Anita Operating Company
(incorporated by reference to Exhibit 10.4 to Registration Statement No. 33-
27011).
10.5 Ground lease between Santa Anita Realty Enterprises, Inc. and Anita
Associates, dated as of April 6, 1972 (incorporated by reference to Exhibit
10.5 to 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).
10.6 Second Amendment to ground lease between Santa Anita Realty
Enterprises, Inc., and Anita Associates dated as of December 29, 1993.
10.7 Lease between Los Angeles Turf Club, Incorporated and Santa Anita
Realty Enterprises, Inc., dated as of January 1, 1980 (incorporated by
reference to Exhibit 10.12 to Registration Statement No. 2-72866).
10.8 Lease Amendment between Santa Anita Realty Enterprises, Inc. and Los
Angeles Turf Club, Incorporated, dated as of December 31, 1987, to the
Lease between Los Angeles Turf Club, Incorporated and Santa Anita
Realty Enterprises, Inc., dated as of January 1, 1980 (incorporated by
reference to Exhibit 10.8 to Registration Statement No. 33-27011).
10.9 Lease Amendment between Santa Anita Realty Enterprises, Inc. and Los
Angeles Turf Club, Incorporated, dated as of December 26, 1989, to the
Lease between Los Angeles Turf Club, Incorporated and Santa Anita
Realty Enterprises, Inc., dated as of January 1, 1980 (incorporated by
reference to Exhibit 10.8 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, 1989).
10.10 Santa Anita Realty Enterprises, Inc. 1984 Stock Option Plan (as amended
and restated September 22,1988) (incorporated by reference to Exhibit 4.2
to Registration Statement No. 2-95228).
</TABLE>
110
<PAGE>
EXHIBIT INDEX (CONTINUED)
<TABLE>
<CAPTION>
Exhibit
Number
- --------
<C> <S>
10.11 Amendment 1993-1 to Santa Anita Realty Enterprises, Inc. 1984 Stock
Option Program.
10.12 Santa Anita Operating Company 1984 Stock Option Program (as amended
and restated September 22, 1988) (incorporated by reference to Exhibit 4.3
to Registration Statement No. 2-95228).
10.13 Amendment 1993-1 to Santa Anita Operating Company 1984 Stock Option
Program (incorporated by reference to Exhibit 4.3 to Registration Statement
on Form S-8 No. 33-51843).
10.14 First Amended Certificate and Agreement of Limited Partnership of Baldwin
Industrial Properties, Ltd., dated November 2, 1981 (incorporated by
reference to Exhibit 10.12 to 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).
10.15 Limited Partnership Agreement, dated as of March 16, 1988, among
Southern California Off Track Wagering Incorporated and the limited
partners listed therein (incorporated by reference to Exhibit 10.17 to
Registration Statement No. 33-27011).
10.16 Amended and Restated Partnership Agreement of H-T Associates, dated as
of July 28, 1987, between Ernest W. Hahn, Inc. and Santa Anita Realty
Enterprises, Inc. (incorporated by reference to Exhibit 10.18 to Registration
Statement No. 33-27011).
10.17 Amended and Restated Agreement of Joppa Associates, dated as of April
14, 1988, between Ernest W. Hahn, Inc., Santa Anita Realty Enterprises,
Inc. and Dechiaro Associates, a Maryland general partnership (incorporated
by reference to Exhibit 10.19 to Registration Statement No. 33-27011).
10.18 Amendment dated November 1, 1989, to Partnership Agreement of H-T
Associates (incorporated by reference to Exhibit 10.21 of 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, 1989).
10.19 Partnership Agreement of French Valley Ventures dated November 1989,
between Santa Anita Realty Enterprises, Inc. and William J. Rousey, Jr.
(incorporated by reference to Exhibit 10.23 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, 1989).
</TABLE>
111
<PAGE>
EXHIBIT INDEX (CONTINUED)
<TABLE>
<CAPTION>
Exhibit
Number
- --------
<C> <S>
10.20 Indenture of Lease by and between Los Angeles Turf Club, Incorporated
and Oak Tree Racing Association, dated as of January 1, 1990
(incorporated by reference to Exhibit 10.21 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, 1990).
10.21 Form of Severance Agreement of Certain Officers of Santa Anita Realty
Enterprises, Inc. and Santa Anita Operating Company (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).
10.22 Purchase and Sale Agreement, dated as of November 15, 1993, between
Santa Anita Realty Enterprises, Inc., and Pacific Gulf Properties Inc.
(incorporated by reference to Exhibit 1 to the Current Report on Form
8-K of Santa Anita Realty Enterprises, Inc., dated February 18,
1994) .
10.23 Management Agreement, dated as of February 17, 1994, between Santa
Anita Realty Enterprises, Inc., and Pacific Gulf Properties Inc.
10.24 Registration Rights Agreement, dated as of February 1, 1994, between
Santa Anita Realty Enterprises, Inc. and Pacific Gulf Properties Inc.
10.25 Employment Agreement between Santa Anita Realty Enterprises, Inc. and
Sherwood C. Chillingworth, dated as of March 16, 1994.
22 Subsidiaries of Santa Anita Operating Company (incorporated by
reference to Exhibit 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).
23.1 Consent of Kenneth Leventhal & Company (to be incorporated by
reference into the Prospectus contained in Registration Statement No.
2-95228 and the Prospectus contained in Registration Statement No.
33-51843).
23.2 Consent of Deloitte & Touche (to be incorporated by reference into the
Prospectus contained in Registration Statement No. 2-95228 and the
Prospectus contained in Registration Statement No. 33-51843).
23.3 Consent of KPMG Peat Marwick (to be incorporated by reference into the
Prospectus contained in Registration Statement No. 2-95228 and the
Prospectus contained in Registration Statement No. 33-51843).
</TABLE>
112
<PAGE>
Exhibit 3.1
-----------
CERTIFICATE OF INCORPORATION
OF
SANTA ANITA REALTY ENTERPRISES, INC.
FIRST. Name. The name of the Corporation is Santa Anita Realty
Enterprises, Inc.
SECOND. Registered Office. The address of its registered office in the
State of Delaware is No. 100 West 10th Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD. Purposes. The nature of the business or purposes to be conducted or
promoted is:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware and to do all
things and exercise all powers, rights and privileges which a business
corporation may now or hereafter be organized or authorized to do or to
exercise under the laws of the State of Delaware.
FOURTH. Capitalization. The total number of shares of all classes of stock
which the Corporation shall have authority to issue is 13,000,000, of which
10,000,000 shares of the par value of $.10 each are to be of a class designated
Common Stock and 3,000,000 of the par value of $.10 each are to be of a class
designated Preferred Stock.
The shares of Preferred Stock may be issued from time to time in one or
more series. The Board of Directors of the Corporation is hereby authorized to
fix or alter the dividend rights, dividend rate, conversion rights, voting
rights, rights and terms of redemption (including sinking fund provisions), the
redemption price or prices, and the liquidation preferences of any wholly
unissued series of Preferred Stock and the number of shares constituting any
such series and the designation thereof, or all or any of them; and to increase
or decrease the number of shares of any series subsequent to the issue of shares
of that series, but not below the number of shares of such series then
outstanding. In case the number of shares of any designated series shall be
decreased, shares in the amount of the decrease shall resume the status of
authorized but undesignated shares of Preferred Stock.
FIFTH. Incorporator. The name and mailing address of the incorporator is
as follows:
NAME MAILING ADDRESS
--------
Royce B. McKinley Santa Anita Consolidated, Inc.
One Wilshire Building
Los Angeles, California 90017
SIXTH. By-laws. The original by-laws of the Corporation shall be adopted
by the incorporator. Thereafter, in furtherance and not in limitation of the
powers conferred by statute, the Board of Directors is expressly authorized,
without stockholder approval, to make, alter or repeal the by-laws of the
Corporation.
SEVENTH. Right to Amend Certificate of Incorporation. The Corporation
reserves the right to amend, alter, change or repeal any provision contained in
this certificate of incorporation, in the manner now or hereafter prescribed by
statute, and all rights conferred upon stockholders herein are granted subject
to this reservation.
EIGHTH. Cumulative Voting.
(a) Every stockholder complying with subdivision (b) hereof and
entitled to vote at any election of directors may cumulate such
stockholder's votes and give one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of votes to
which the stockholder's shares are normally entitled, or distribute the
stockholder's votes on the same principal among as many candidates as the
shareholder thinks fit.
<PAGE>
(b) No stockholder shall be entitled to cumulate votes (i.e., cast for
any candidate a number of votes greater than the number of votes which such
stockholder normally is entitled to cast) unless such candidate or
candidates' names have been placed in nomination prior to the voting and
the stockholder has given notice at the meeting prior to the voting of the
stockholder's intention to cumulate the stockholder's votes. If any one
stockholder has given such notice, all stockholders may cumulate their
votes for candidates in nomination.
(c) In any election of directors, the candidates receiving the highest
number of votes of the shares entitled to be voted for them up to the
number of directors to be elected by such shares are elected.
THE UNDERSIGNED, being the sole incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, does make this certificate, hereby declaring and certifying
that this is his act and deed and the facts herein stated are true and
accordingly has hereunto set his hand this 16th day of August, 1979.
By /s/ ROYCE B. MCKINLEY
------------------------------
Royce B. McKinley
<PAGE>
CITY OF LOS ANGELES )
) SS.
STATE OF CALIFORNIA )
BE IT REMEMBERED, that on this 16th day of August, 1979, personally came
before me Huldah C. Withers, a Notary Public in and for the State of California,
Royce B. McKinley, the party to the foregoing Certificate of Incorporation,
known to me personally to be such, and acknowledged the said Certificate to be
his act and deed and that the facts stated therein are true.
GIVEN under my hand and seal of office the day and year aforesaid.
/s/ HULDAH C. WITHERS
---------------------------
Notary Public
[SEAL ]
- ---------------------------------------
[GREAT SEAL OF THE STATE OF CALIFORNIA]
OFFICIAL SEAL
HULDAH C. WITHERS
NOTARY PUBLIC CALIFORNIA
LOS ANGELES COUNTY
My comm. expires JUL 16, 1982
- ---------------------------------------
<PAGE>
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION
OF
SANTA ANITA REALTY ENTERPRISES, INC.
We, the undersigned, being the duly elected President and Chief Executive
Officer and Secretary of Santa Anita Realty Enterprises, Inc. (the "Company"), a
corporation organized under the laws of the State of Delaware, to hereby
certify:
FIRST, that by unanimous written consent of the Board of Directors of the
Company acting without a meeting and effective as of April 15, 1981, the Board
approved a proposed amendment to the Certificate of Incorporation of the Company
by approving the following recitals and resolutions:
WHEREAS, Article FOURTH of this corporation's Certificate of
Incorporation currently authorizes the issuance of 10,000,000 shares of
this corporation's Common Stock, $.10 par value, and 3,000,000 shares of
this corporation's Preferred Stock, $.10 par value; and
WHEREAS, as of March 18, 1981, 5,629,192 shares of Common Stock were
issued and outstanding, 30,000 shares of Common Stock were reserved for
issuance pursuant to this corporation's Employee Stock Option Plan and
10,000 shares of Common Stock were reserved for issuance pursuant to
options granted under the Santa Anita Operating Company ("Operating
Company") Employee Stock Option Plan; and
WHEREAS, this Board of Directors deems it advisable and in the best
interests of this corporation to increase the authorized number of shares
of Common
1
<PAGE>
Stock and Preferred Stock in order to have the flexibility to issue
additional shares when appropriate to strengthen the corporation.
NOW, THEREFORE, BE IT RESOLVED, that the proposed amendment to
this corporation's Certificate of Incorporation described under "Approval
of Amendment to Certificate of Incorporation" in the April 3, 1981 draft of
this corporation's proxy statement in connection with 1981 Annual Meeting
of Shareholders (the "Draft Proxy Statement") is hereby approved.
RESOLVED, FURTHER, that the officers of this corporation, and
each of them, are hereby authorized and directed to take whatever steps are
necessary to present the proposed amendment to shareholders for their
approval at the 1981 Annual Meeting of Shareholders.
RESOLVED, FURTHER, that if the shareholders approve the proposed
amendment, the officers of this corporation, and each of them, are hereby
authorized and directed to file with the Secretary of State of the State of
Delaware a certificate setting forth the amendment and certifying that it
has been duly adopted in accordance with Delaware Law.
SECOND: That the following is a true and correct excerpt from the
section entitled "Approval of Amendment to Certificate of Incorporation" in the
April 3, 1981 draft of the Company's proxy statement in connection with the 1981
Annual Meeting of Shareholders, which section was incorporated by reference into
the foregoing resolutions:
"As amended, the first paragraph of Article FOURTH of the
Company's Certificate of Incorporation would read as follows:
2
<PAGE>
'FOURTH: Capitalization. The total number of shares of all
classes of stock which the Corporation shall have authority to issue
is 26,000,000, of which 20,000,000 shares of the par value of $.10
each are to be of a class designated Common Stock and 6,000,000 of the
par value of $.10 each are to be of a class designated Preferred
Stock.'
The remaining paragraph of Article FOURTH would be unchanged."
THIRD: That at the Annual Meeting of Shareholders held May 28, 1981,
and pursuant to notice duly given, the holders of a majority of the outstanding
shares of the Company's Common Stock voted in favor of the proposed amendment.
FOURTH: That this certificate is filed pursuant to Section 242 of the
Delaware General Corporation Law, as amended.
Executed this 29th day of May, 1981.
SANTA ANITA REALTY ENTERPRISES, INC.
By /s/ ROYCE B. MCKINLEY
----------------------------
Royce B. McKinley
President and Chief
Executive Officer
ATTEST:
/s/ GLENN L. CARPENTER
- ----------------------
Glenn L. Carpenter
Secretary
3
<PAGE>
STATE OF CALIFORNIA )
) SS.
COUNTY OF ORANGE )
On this 29 day of May 1981, personally appeared before me Royce B.
---
McKinley and Glenn L. Carpenter, known to me to be President and Chief Executive
Officer and Secretary, respectively, of Santa Anita Realty Enterprises, Inc., a
Delaware corporation, and executed the within Instrument on behalf of the
corporation therein named.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ PAMELA L. LAIPPLE
---------------------------------------
Notary Public in and for said State
Pamela L. Laipple
(SEAL)
- ---------------------------------------
[GREAT SEAL OF THE STATE OF CALIFORNIA]
OFFICIAL SEAL
PAMELA L. LAIPPLE
NOTARY PUBLIC - CALIFORNIA
PRINCIPAL OFFICE IN
ORANGE COUNTY
My Commission Expires Aug. 9, 1982
- ---------------------------------------
4
<PAGE>
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION
OF
SANTA ANITA REALTY ENTERPRISES, INC.
We, the undersigned, being the duly elected President and Chief
Executive Officer and Secretary of Santa Anita Realty Enterprises, Inc. (the
"Company"), a corporation organized under the laws of the State of Delaware, do
hereby certify:
FIRST: That by unanimous vote of the Board of Directors of the
Company at a special meeting held on March 17, 1986, the Board approved the
amendment of the Certificate of Incorporation of the Company by the addition of
Articles Ninth, Tenth and Eleventh. The Board approved the following amendments
to the Certificate of Incorporation of the Company:
NINTH:
Part 1. Vote Required for Certain Business Combinations
- -------------------------------------------------------
1.1. Higher Vote for Certain Business Combinations. In addition to any
affirmative vote required by law or any other Article of this Certificate of
Incorporation, and except as otherwise expressly provided in Part 2 of this
Article Ninth:
(a) any merger or consolidation of the Corporation or any Subsidiary
with (i) any Interested Stockholder or
<PAGE>
(ii) any other corporation (whether or not itself an Interested
Stockholder) which is, or after such merger or consolidation would be, an
Affiliate or Associate of an Interested Stockholder; or
(b) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with any
Interested Stockholder or any Affiliate or Associate of any Interested
Stockholder of any assets of the Corporation or any Subsidiary having an
aggregate Fair Market Value of $5,000,000 or more; or
(c) the issuance or transfer by the Corporation or any Subsidiary (in
one transaction or a series of transactions) of any securities of the
Corporation or any Subsidiary to any Interested Stockholder or any
Affiliate or Associate of any Interested Stockholder in exchange for cash,
securities or other property (or a combination thereof) having an aggregate
Fair Market Value of $5,000,000 or more, other than the issuance of
securities by the Corporation or any Subsidiary upon the conversion of
convertible securities of the Corporation or any Subsidiary into stock of
the Corporation or any Subsidiary; or
(d) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an Interested
Stockholder or any Affiliate or Associate of any Interested Stockholder; or
(e) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any other
transaction (whether or not with or into or otherwise involving an
Interested Stockholder) which has the effect, directly or indirectly, of
increasing the proportionate share of the outstanding shares of any class
of equity or convertible securities of the Corporation or any Subsidiary
which is directly or indirectly owned by any Interested Stockholder or any
Affiliate or Associate of any Interested Stockholder;
shall require the affirmative vote of the holders of at least (a) 80% of the
combined voting power of the then outstanding shares of stock of all classes and
series of the Corporation entitled to vote in the election of directors (the
"Voting Stock"), and (b) a majority of the combined voting power of the then
outstanding shares of Voting Stock held by persons who are Disinterested
Stockholders, provided, however, that the majority vote requirement of this
----------
clause (b) shall not be
2
<PAGE>
applicable if the Business Combination is approved by the affirmative vote of
the holders of not less than 90% of combined voting power of the then
outstanding shares of Voting Stock. The foregoing affirmative vote requirements
are here-inafter referred to as the "Special Vote Requirement." The Special Vote
Requirement shall be applicable notwithstanding the fact that no vote may be
required, or that a lesser percentage may be specified, by law or in any
agreement with any national securities exchange or otherwise.
1.2. Definition of "Business Combination." The term "Business
Combination" as used in this Article Ninth shall mean any transaction which is
referred to in any one or more of clauses (a) through (e) of Section 1.1.
Part 2. When Special Vote Requirement Is Not Applicable
- -------------------------------------------------------
The provisions of Part 1 of this Article Ninth shall not be applicable
to any particular Business Combination, and such Business Combination shall
require only such affirmative vote as is required by law and any other Article
of this Certificate of Incorporation, if all of the conditions specified in
either of the following Sections 2.1 and 2.2 are met:
2.1. Approval by Continuing Directors. The Business Combination shall
have been approved by a majority of the Continuing Directors.
2.2. Price and Procedural Requirements. All of the following
conditions shall have been met:
(a) The aggregate amount of the cash and the Fair Market Value, as of
the date of the consummation of the Business Combination, of consideration
other than cash to be received per share by holders of Common Stock in such
Business Combination shall be at least equal to the higher of (i) the
highest price paid for any share of Common Stock by any person who is an
Interested Stockholder within the two-year period immediately prior to the
time of the first public announcement of the proposed Business Combination
(the "Announcement Date") or in the transaction in which such person became
an Interested Stockholder, whichever price is the higher; or (ii) the Fair
Market Value per share of the Corporation's Common Stock on the
Announcement Date or on the date on which the Interested Stockholder became
an Interested Stockholder (the "Determination Date"), whichever is higher.
The price paid for any share of Common Stock shall be the amount of cash
plus the Fair Market Value of any other consideration to be received
therefor, determined at the time of payment thereof.
3
<PAGE>
(b) The aggregate amount of the cash and the Fair Market Value, as of
the date of the consummation of the Business Combination, of consideration
other than cash to be received in such Business Combination by holders of
securities of the Corporation other than Common Stock shall be at least
equal to the higher of (i) if applicable, the highest preferential amount
to which the holders of such securities are entitled in the event of any
voluntary liquidation, dissolution or winding up of the Corporation, (ii)
the highest price paid for any of such securities by any person who is an
Interested Stockholder within the two-year period immediately prior to the
Announcement Date or in the transaction in which such person became an
Interested Stockholder, whichever price is higher, (iii) the Fair Market
Value of such securities on the Announcement Date or the Determination
Date, whichever is higher, or (iv) if such securities are convertible into
or exchangeable for shares of Common Stock, the amount per share of such
Common Stock determined pursuant to the foregoing paragraph (a) reduced by
any amount payable by the holders of such securities in accordance with the
terms of such securities, per share, upon such conversion or exchange,
multiplied by the total number of shares of Common Stock into which or for
which such securities are convertible or exchangeable.
(c) The consideration to be received by holders of a particular class
of outstanding Voting Stock (including Common Stock) shall be in cash or in
the same forms the Interested Stockholder has previously paid for shares of
such class of Voting Stock. If the Interested Stockholder has paid for
shares of any class of Voting Stock with varying forms of consideration,
the form of consideration for such class of Voting Stock shall be either
cash or the form of consideration used to acquire the largest number of
shares of such class of Voting Stock previously acquired by it.
(d) After such Interested Stockholder has become an Interested
Stockholder and prior to the consummation of such Business Combination: (i)
there shall have been (1) no reduction in the annual rate of dividends paid
on the Common Stock (except as necessary to reflect any subdivision of the
Common Stock), except as approved by a majority of the Continuing
Directors, and (2) an increase in such annual rate of dividends necessary
to reflect any reclassification (including any reverse stock split),
recapitalization, reorganization or any similar transaction which has the
effect of reducing the number of outstanding shares of the Common Stock,
unless the failure so to increase such annual rate is approved
4
<PAGE>
by a majority of the Continuing Directors; and (ii) such Interested
Stockholder shall have not become the beneficial owner of any additional
shares of Voting Stock except as part of the transaction which results in
such Interested Stockholder becoming an Interested Stockholder.
(e) After such Interested Stockholder has become an Interested
Stockholder, such Interested Stockholder shall not have received the
benefit, directly or indirectly (except proportionately as a stockholder),
of any loans, advances, guarantees, pledges or other financial assistance
or any tax credits or other tax advantages provided by the Corporation,
whether in anticipation of or in connection with such Business Combination
or otherwise.
(f) A proxy or information statement describing the proposed Business
Combination and complying with the requirements of the Securities Exchange
Act of 1934 and the rules and regulations thereunder (or any subsequent
provisions replacing such Act, rules or regulations) shall be mailed to all
stockholders of the Corporation at least 30 days prior to the consummation
of such Business Combination (whether or not such proxy or information
statement is required to be mailed pursuant to such Act or subsequent
provisions).
Part 3. Certain Definitions
- ---------------------------
For the purposes of this Article Ninth:
3.1. A "person" shall mean any individual, firm, corporation,
partnership, trust or other entity.
3.2. "Interested Stockholder" shall mean any person (other than the
Corporation or any Subsidiary) who or which:
(a) is the beneficial owner, directly or indirectly, of more than 10%
of the combined voting power of the then outstanding Voting Stock; or
(b) is an Affiliate of the Corporation and at any time within the two-
year period immediately prior to the date in question was the beneficial
owner, directly or indirectly, of 10% or more of the combined voting power
of the then outstanding Voting Stock; or
(c) is an assignee of or has otherwise succeeded to any shares of
Voting Stock which were at any time within the two-year period immediately
prior to the date
5
<PAGE>
in question beneficially owned by any Interested Stockholder, if such
assignment or succession shall have occurred in the course of a transaction
or series of transactions not involving a public offering within the
meaning of the Securities Act of 1933.
3.3. A person shall be a "beneficial owner" of any Voting Stock:
(a) which such person or any of its Affiliates or Associates
beneficially owns, directly or indirectly; or
(b) which such person or any of its Affiliates or Associates has (i)
the right to acquire (whether such right is exercisable immediately or only
after the passage of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (ii) the right to vote or to direct
the vote pursuant to any agreement, arrangement or understanding; or
(c) which are beneficially owned, directly or indirectly, by any other
person with which such person or any of its Affiliates has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting
or disposing of any shares of Voting Stock.
3.4. For the purposes of determining whether a person is an Interested
Stockholder pursuant to Section 3.2, the number of shares of Voting Stock deemed
to be outstanding shall include shares deemed owned through application of
Section 3.3 but shall not include any other shares of Voting Stock which may be
issuable to other persons pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights, warrants or options, or
otherwise.
3.5. "Affiliate" or "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as in effect on January 1, 1984.
3.6. "Subsidiary" means any corporation of which more than a majority
of any class of equity security is owned, directly or indirectly, by the
Corporation; provided, however, that for purposes of the definition of
Interested Stockholder set forth in Section 3.2, the term "Subsidiary" shall
mean only a corporation of which a majority of each class of equity security is
owned by the Corporation, by a Subsidiary, or by the Corporation and one or more
Subsidiaries.
6
<PAGE>
3.7. "Continuing Director" means any member of the Board of Directors
of the Corporation who is unaffiliated with, and not a nominee of, the
Interested Stockholder and was a member of the Board of Directors prior to the
time that the Interested Stockholder became an Interested Stockholder and any
successor of a Continuing Director who is unaffiliated with, and not a nominee
of, the Interested Stockholder and who is recommended to succeed a Continuing
Director by a majority of Continuing Directors then on the Board of Directors.
3.8. "Disinterested Stockholder" means a holder of Voting Stock who is
not an Interested Stockholder or an Affiliate or Associate of an Interested
Stockholder and whose shares are not deemed owned by an Interested Stockholder
through application of Section 3.3.
3.9. "Fair Market Value" means: (a) in the case of stock, the highest
closing sale price during the 30-day period immediately preceding the date in
question of a share of such stock on the Composite Tape for New York Stock
Exchange-Listed Stocks, or, if such stock is not quoted on the Composite Tape,
on the New York Stock Exchange, or, if such stock is not listed on such
Exchange, on the principal United States securities exchange registered under
the Securities Exchange Act of 1934 on which such stock is listed, or, if such
stock is not listed on any such exchange, the highest closing bid quotation with
respect to a share of such stock during the 30-day period preceding the date in
question on the National Association of Securities Dealers, Inc. Automated
Quotations System or any system then in use, or if no such quotations are
available, the Fair Market Value on the date in question of a share of such
stock as determined by a majority of the Continuing Directors in good faith; and
(b) in the case of stock of any class of securities not traded on any securities
exchange or in the over-the-counter market or in the case of property other than
cash or stock, the Fair Market Value of such securities or property on the date
in question as determined by a majority of the Continuing Directors in good
faith. If the stock is paired for purposes of trading with that of any other
corporation, the Fair Market Value of the paired stock shall be determined
pursuant to the pairing or other agreement which provides for the determination
of the relative values of the stock of the Corporation and the stock of such
other corporation, after determining the Fair Market Value of the paired stock
as set forth above.
3.10. In the event of any Business Combination in which the
Corporation survives, the phrase "consideration to be received" as used in
Sections 2.2(a), (b) and (c) shall include the shares of Common Stock and/or the
shares of any other class of outstanding Voting Stock retained by the holders of
such shares.
7
<PAGE>
Part 4. Directors' Duty to Determine Certain Facts
- --------------------------------------------------
The majority of the Continuing Directors of the Corporation shall have
the power and duty to determine for the purpose of this Article Ninth, on the
basis of information known to them after reasonable inquiry, all facts necessary
to determine the applicability of the various provisions of this Article Ninth,
including (A) whether a person is an Interested Stockholder, (B) the number of
shares of Voting Stock beneficially owned by any person, (C) whether a person is
an Affiliate or Associate of another, (D) whether the requirements of Section
2.2 have been met with respect to any Business Combination, and (E) whether the
assets which are the subject of any Business Combination have, or the
consideration to be received for the issuance or transfer of securities by the
Corporation or any Subsidiary in any Business Combination has, an aggregate Fair
Market Value of $5,000,000 or more; and the good faith determination of a
majority of the Continuing Directors shall be conclusive and binding for all
purposes of this Article Ninth.
Part 5. No Effect on Fiduciary Obligations of Interested Stockholders
- ---------------------------------------------------------------------
Nothing contained in this Article Ninth shall be construed to relieve
any Interested Stockholder from any fiduciary obligation imposed by law.
Part 6. Amendment, Repeal, Inconsistent Provisions
- --------------------------------------------------
Notwithstanding any other provisions of law or of this Certificate of
Incorporation or the by-laws of the Corporation which might otherwise permit a
lesser vote or no vote, but in addition to any affirmative vote of the holders
of any particular class or series of securities which may be required by law or
by this Certificate of Incorporation, any proposal to amend or repeal, or adopt
any provisions inconsistent with, this Article Ninth of this Certificate of
Incorporation shall require for approval the affirmative vote of at least (a)
80% of the combined voting power of the then outstanding shares of Voting Stock
and (b) a majority of the combined voting power of the then outstanding shares
of Voting Stock held by persons who are Disinterested Stockholders, provided
that the majority vote requirement of this clause (b) shall not be applicable if
the proposal is approved by the affirmative vote of not less than 90% of the
combined voting power of the then outstanding shares of Voting Stock.
TENTH:
(a) The number of directors shall be as provided in the by-laws. The
Board of Directors shall be divided into
8
<PAGE>
three classes, designated Class I, Class II and Class III, such classes to
be as nearly equal in number as possible and to have the number provided in
the by-laws. At the annual meeting of stockholders in 1986, directors of
Class I shall be elected to hold office for a term expiring at the next
succeeding annual meeting, directors of Class II shall be elected to hold
office for a term expiring at the second succeeding annual meeting, and
directors of Class III shall be elected to hold office for a term expiring
at the third succeeding annual meeting. Thereafter at each annual meeting
of stockholders, directors shall be chosen for a term of three years to
succeed those whose terms then expire and shall hold office until the third
following annual meeting of stockholders and until the election of their
respective successors. Any vacancy on the Board of Directors, whether
arising through death, resignation or removal of a director or through an
increase in the number of directors of any class, shall be filled by a
majority vote of all the remaining directors. The term of office of any
director elected to fill such a vacancy shall expire at the expiration of
the term of office of directors of the class in which the vacancy occurred.
Notwithstanding any other provision of this Article, and except as
otherwise required by law, whenever the holders of any one or more series
of Preferred Stock or other securities of the Corporation shall have the
right, voting separately as a class, to elect one or more directors of the
Corporation, the term of office, the filling of vacancies and other
features of such directorships shall be governed by the terms of this
Certificate of Incorporation applicable thereto, and unless the terms of
this Certificate of Incorporation expressly provide otherwise, such
directorships shall be in addition to the number of directors provided in
the by-laws and such directors shall not be classified pursuant to this
Article.
(b) Any action required or permitted to be taken by holders of stock
of the Corporation must be taken at a meeting of such holders and may not
be taken by consent in writing. The by-laws of the Corporation may be
amended by the stockholders only by the affirmative vote of at least 80% of
the voting power of the Corporation. Notwithstanding any other provision of
law or of this Certificate of Incorporation or the by-laws of the
Corporation which might otherwise permit a lesser vote or no vote, but in
addition to any affirmative vote of the holders of any particular class or
series of securities which may be required by law or by this Certificate of
Incorporation, any proposal to amend or repeal, or adopt any provisions
inconsistent with, this Article Tenth shall require for approval the
affirmative vote of at least 80% of the voting power of the Corporation.
9
<PAGE>
ELEVENTH:
The Board of Directors shall base the response of this Corporation to
any proposed Business Combination on the Board of Directors' evaluation of what
is in the best interest of this Corporation. In evaluating what is in the best
interest of this Corporation, the Board of Directors shall consider:
(a) The best interest of the shareholders. For this purpose, the Board
shall consider among other factors, not only the consideration offered in
the proposed Business Combination in relation to the then current market
price of this Corporation's stock, but also in relation to the then current
value of this Corporation in a freely negotiated transaction and in
relation to the Board of Directors' then estimate of the future value of
this Corporation as an independent entity; and
(b) Such other factors as the Board of Directors determines to be
relevant, including, among other factors, the social, legal and economic
effects on the communities in which this Corporation and its subsidiaries
operate and are located.
SECOND: That the above-referenced amendments to the Certificate of
Incorporation were set forth in the Company's proxy statement dated March 26,
1986 in connection with the Company's Annual Meeting of Shareholders.
THIRD: That at the Annual Meeting of Shareholders held May 13,
1986, and pursuant to notice duly given, the holders of a majority of the
outstanding shares of the Company's Common Stock voted in favor of the above-
referenced amendments.
10
<PAGE>
FOURTH: That this certificate is filed pursuant to Section 242 of
the Delaware Corporation Law, as amended.
Executed this 19th day of May, 1986.
SANTA ANITA REALTY ENTERPRISES, INC.
By /s/ ROYCE B. MCKINLEY
-----------------------------
Royce B. McKinley
President and Chief Executive
Officer
ATTEST:
/s/ GLENN L. CARPENTER
- ----------------------
Glenn L. Carpenter
Secretary
11
<PAGE>
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION
OF
SANTA ANITA REALTY ENTERPRISES, INC.
We, the undersigned, being the duly elected President and Chief
Executive Officer and Secretary of Santa Anita Realty Enterprises, Inc. (the
"Company"), a corporation organized under the laws of the State of Delaware, do
hereby certify:
FIRST: That by unanimous vote of the Board of Directors of the
Company at a regular, quarterly meeting held on February 26, 1987, the Board
approved an amendment of the Certificate of Incorporation of the Company by the
addition of Article Twelfth thereto, which reads as follows:
TWELFTH:
To the fullest extent permitted by the General Corporation Law of the State
of Delaware as the same exists or may hereafter be amended, a director of the
corporation shall not be liable to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as director.
Any repeal or modification of this Article shall not result in any
liability for a director with respect to any action or omission occurring prior
to such repeal or modification.
1
<PAGE>
SECOND: That the above-referenced amendment to the Certificate of
Incorporation was set forth in the Company's proxy statement dated March 31,
1987 in connection with the Company's Annual Meeting of Shareholders.
THIRD: That at the Annual Meeting of Shareholders held May 19,
1987, and pursuant to notice duly given, the holders of a majority of the
outstanding shares of the Company's Common Stock voted in favor of the above-
referenced amendment.
FOURTH: That this certificate is filed pursuant to Section 242 of
the Delaware Corporation Law, as amended.
Executed this 5th day of June, 1987.
SANTA ANITA REALTY ENTERPRISES, INC.
By /s/ ROYCE B. MCKINLEY
-------------------------------------
Royce B. McKinley
President and Chief Executive Officer
ATTEST:
/s/ GLENN L. CARPENTER
- ----------------------
Glenn L. Carpenter
Secretary
2
<PAGE>
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION
OF
SANTA ANITA REALTY ENTERPRISES, INC.
We, the undersigned, being the duly elected Chairman of the Board of
Directors and Chief Executive Officer, and President and Secretary of Santa
Anita Realty Enterprises, Inc. (the "Company"), a corporation organized and
existing under the laws of the State of Delaware, do hereby certify:
FIRST, That by unanimous written consent of the Board of Directors of
the Company acting without a meeting and effective as of March 9, 1990, the
Board of Directors approved a proposed amendment of the Certificate of
Incorporation of the Company, declaring said amendment to be advisable and
authorizing the proposed amendment to be presented to the stockholders of the
Company at the next annual meeting of stockholders for their consideration. The
resolution setting for the proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of the Corporation
be amended in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware by amending the first paragraph of
Article FOURTH thereof to read as follows:
"FOURTH: Capitalization: The total number of shares of all
classes of stock which the Corporation shall have the authority to
issue is 46,000,000, of which 40,000,000 shares of the par value of
$0.10 each are to be of a class designated Common Stock and 6,000,000
of the par value of $0.10 each are to be of a class designated
Preferred Stock."
<PAGE>
SECOND: That at the Annual Meeting of Shareholders held May 3,
1990, and pursuant to notice duly given, the holders of a majority of the
outstanding shares of the Company's Common Stock voted in favor of the
above-referenced amendment.
THIRD: That the above-referenced amendment was duly adopted in
accordance with the provisions of Section 242 of the Delaware General
Corporation Law, as amended.
IN WITNESS WHEREOF, this Certificate of Amendment of Certificate
of Incorporation has been executed on behalf of Santa Anita Realty
Enterprises, Inc. by its duly authorized officers this 3rd day of May,
1990.
SANTA ANITA REALTY ENTERPRISES, INC.
By /s/ ROYCE B. MCKINLEY
-------------------------------------
Royce B. McKinley
Chairman of the Board of Directors
and Chief Executive Officer
ATTEST:
/s/ GLENN L. CARPENTER
----------------------
Glenn L. Carpenter
President and Secretary
2
<PAGE>
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION
OF
SANTA ANITA REALTY ENTERPRISES, INC.
We, the undersigned, being the duly elected President and Secretary of
Santa Anita Realty Enterprises, Inc. (the "Company"), a corporation organized
and existing under the laws of the State of Delaware, do hereby certify:
FIRST, That at a meeting held on February 11, 1993, the Board of Directors
of the Company approved a proposed amendment of the Certificate of Incorporation
of the Company, declaring said amendment to be advisable and authorizing the
proposed amendment to be presented to the stockholders of the Company at the
next annual meeting of stockholders for their consideration. The resolution
setting forth the proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of the Corporation be
amended in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware by amending the first paragraph of
Article FOURTH thereof to read as follows:
"FOURTH: Capitalization: The total number of shares of all classes of stock
which the Corporation shall have the authority to issue is 25,000,000 of which
19,000,000 shares of the par value of $0.10 each are to be of a class designated
Common Stock and 6,000,000 of the par value of $0.10 each are to be of a class
designated Preferred Stock."
<PAGE>
SECOND, That at the Annual Meeting of Shareholders held May 4, 1993, and
pursuant to notice duly given, the holders of a majority of the outstanding
shares of the Company's Common Stock voted in favor of the above-referenced
amendment.
THIRD, That the above-referenced amendment was duly adopted in accordance
with the provisions of Section 242 of the Delaware General Corporation Law, as
amended.
IN WITNESS WHEREOF, this Certificate of Amendment of Certificate of
Incorporation has been executed on behalf of Santa Anita Realty Enterprises,
Inc. by its duly authorized officers this 28th day of May, 1993.
SANTA ANITA REALTY ENTERPRISES, INC.
By /s/ GLENN L. CARPENTER
-------------------------------
Glenn L. Carpenter
President
ATTEST:
/s/ DONALD G. HERRMAN
- ------------------------
Donald G. Herrman
Secretary
<PAGE>
Exhibit 3.2
-----------
CERTIFICATE OF INCORPORATION
OF
SANTA ANITA OPERATING COMPANY
FIRST: Name. The name of the Corporation is Santa Anita Operating
Company.
SECOND: Registered Office. The address of its registered office in the
State of Delaware is No. 100 West 10th Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD: Purposes. The nature of the business or purposes to be conducted or
promoted is:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware and to do all
things and exercise all powers, rights and privileges which a business
corporation may now or hereafter be organized or authorized to do or to
exercise under the laws of the State of Delaware.
FOURTH: Capitalization. The total number of shares of all classes of stock
which the Corporation shall have authority to issue is 13,000,000, of which
10,000,000 shares of the par value of $.10 each are to be of a class designated
Common Stock and 3,000,000 of the par value of $.10 each are to be of a class
designated Preferred Stock.
The shares of Preferred Stock may be issued from time to time in one or
more series. The Board of Directors of the Corporation is hereby authorized to
fix or alter the dividend rights, dividend rate, conversion rights, voting
rights, rights and terms of redemption (including sinking fund provisions), the
redemption price or prices, and the liquidation preferences of any wholly
unissued series of Preferred Stock and the number of shares constituting any
such series and the designation thereof, or all or any of them; and to increase
or decrease the number of shares of any series subsequent to the issue of shares
of that series, but not below the number of shares of such series then
outstanding. In case the number of shares of any designated series shall be
decreased, shares in the amount of the decrease shall resume the status of
authorized but undesignated shares of Preferred Stock.
FIFTH: Incorporator. The name and mailing address of the incorporator is
as follows:
Name Mailing Address
---- ---------------
Royce B. McKinley Santa Anita Consolidated, Inc.
One Wilshire Building
Los Angeles, California 90017
SIXTH. By-laws. The original by-laws of the Corporation shall be adopted
by the incorporator. Thereafter, in furtherance and not in limitation of the
powers conferred by statute, the Board of Directors is expressly authorized,
without stockholder approval, to make, alter or repeal the by-laws of the
Corporation.
SEVENTH. Right to Amend Certificate of Incorporation. The Corporation
reserves the right to amend, alter, change or repeal any provision contained in
this certificate of incorporation, in the manner now or hereafter prescribed by
statute, and all rights conferred upon stockholders herein are granted subject
to this reservation.
EIGHTH. Cumulative Voting.
(a) Every stockholder complying with subdivision (b) hereof and
entitled to vote at any election of directors may cumulate such
stockholder's votes and give one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of votes to
which the stockholder's shares are normally entitled, or distribute the
stockholder's votes on the same principle among as many candidates as the
stockholder thinks fit.
<PAGE>
(b) No stockholder shall be entitled to cumulate votes (i.e., cast for
any candidate a number of votes greater than the number of votes which such
stockholder normally is entitled to cast) unless such candidate or
candidates' names have been placed in nomination prior to the voting and
the stockholder has given notice at the meeting prior to the voting of the
stockholder's intention to cumulate the stockholder's votes. If any one
stockholder has given such notice, all stockholders may cumulate their
votes for candidates in nomination.
(c) In any election of directors, the candidates receiving the highest
number of votes of the shares entitled to be voted for them up to the
number of directors to be elected by such shares are elected.
THE UNDERSIGNED, being the sole incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, does make this certificate, hereby declaring and certifying
that this is his act and deed and the facts herein stated are true and
accordingly has hereunto set his hand this 16th day of August, 1979.
By /s/ ROYCE B. MCKINLEY
----------------------
Royce B. McKinley
<PAGE>
CITY OF LOS ANGELES
STATE OF CALIFORNIA SS.
BE IT REMEMBERED, that on this 16th day of August, 1979, personally came
before me Huldah C. Withers, a Notary Public in and for the State of California,
Royce B. McKinley, the party to the foregoing Certificate of Incorporation,
known to me personally to be such, and acknowledged the said Certificate to be
his act and deed and that the facts stated therein are true.
GIVEN under my hand and seal of office the day and year aforesaid.
/s/ HULDAH C. WITHERS
---------------------
Notary Public
[SEAL]
- ---------------------------------------
[GREAT SEAL OF THE STATE OF CALIFORNIA]
OFFICIAL SEAL
HULDAH C. WITHERS
NOTARY PUBLIC - CALIFORNIA
LOS ANGELES COUNTY
My comm. expires JUL 16, 1982
- ---------------------------------------
<PAGE>
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION
OF
SANTA ANITA OPERATING COMPANY
We, the undersigned, being the duly elected President and Chief
Executive Officer and Secretary of Santa Anita Operating Company (the
"Company"), a corporation organized under the laws of the State of Delaware, to
hereby certify:
FIRST, that by unanimous written consent of the Board of Directors of
the Company acting without a meeting and effective as of April 15, 1981, the
Board approved a proposed amendment to the Certificate of Incorporation of the
Company by approving the following recitals and resolutions:
WHEREAS, Article FOURTH of this corporation's Certificate of
Incorporation currently authorizes the issuance of 10,000,000 shares of
this corporation's Common Stock, $.10 par value, and 3,000,000 shares of
this corporation's Preferred Stock, $.10 par value; and
WHEREAS, as of March 18, 1981, 5,629,192 shares of Common Stock
were issued and outstanding, 10,000 shares of Common Stock were reserved
for issuance pursuant to this corporation's Employee Stock Option Plan and
30,000 shares of Common Stock were reserved for issuance pursuant to
options granted under the Santa Anita Realty Enterprises, Inc. ("Realty")
Employee Stock Option Plan; and
WHEREAS, this Board of Directors deems it advisable and in the
best interests of this corporation to increase the authorized number of
shares of Common
1
<PAGE>
Stock and Preferred Stock in order to have the flexibility to issue
additional shares when appropriate to strengthen the corporation.
NOW, THEREFORE, BE IT RESOLVED, that the proposed amendment to
this corporation's Certificate of Incorporation described under "Approval
of Amendment to Certificate of Incorporation" in the April 3, 1981 draft of
this corporation's proxy statement in connection with 1981 Annual Meeting
of Shareholders (the "Draft Proxy Statement") is hereby approved.
RESOLVED, FURTHER, that the officers of this corporation, and
each of them, are hereby authorized and directed to take whatever steps are
necessary to present the proposed amendment to shareholders for their
approval at the 1981 Annual Meeting of Shareholders.
RESOLVED, FURTHER, that if the shareholders approve the proposed
amendment, the officers of this corporation, and each of them, are hereby
authorized and directed to file with the Secretary of State of the State of
Delaware a certificate setting forth the amendment and certifying that it
has been duly adopted in accordance with Delaware Law.
SECOND: That the following is a true and correct excerpt from the
section entitled "Approval of Amendment to Certificate of Incorporation" in the
April 3, 1981 draft of the Company's proxy statement in connection with the 1981
Annual Meeting of Shareholders, which section was incorporated by reference into
the foregoing resolutions:
"As amended, the first paragraph of Article FOURTH of the
Company's Certificate of Incorporation would read as follows:
2
<PAGE>
'FOURTH: Capitalization. The total number of shares of all
classes of stock which the Corporation shall have authority to issue
is 26,000,000, of which 20,000,000 shares of the par value of $.10
each are to be of a class designated Common Stock and 6,000,000 of the
par value of $.10 each are to be of a class designated Preferred
Stock.'
The remaining paragraph of Article FOURTH would be unchanged."
THIRD: That at the Annual Meeting of Shareholders held May 28, 1981,
and pursuant to notice duly given, the holders of a majority of the outstanding
shares of the Company's Common Stock voted in favor of the proposed amendment.
FOURTH: That this certificate is filed pursuant to Section 242 of the
Delaware General Corporation Law, as amended.
Executed this 29 day of May, 1981.
SANTA ANITA OPERATING COMPANY
By /s/ ROBERT P. STRUB
---------------------
Robert P. Strub
President and Chief
Executive Officer
ATTEST:
/s/ ALEXANDER W. INGLE
- ----------------------
Alexander W. Ingle,
Secretary
3
<PAGE>
STATE OF CALIFORNIA )
) SS.
COUNTY OF LOS ANGELES )
On this 29th day of May 1981, personally appeared before me Robert P.
----
Strub and Alexander W. Ingle, known to me to be President and Chief Executive
Officer and Secretary, respectively, of Santa Anita Operating Company, a
Delaware corporation, and executed the within Instrument on behalf of the
corporation therein named.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my
official seal the day and year in this certificate first above written.
/s/ SUSIE S. NAVARRO
-----------------------------------
Notary Public in and for said State
[SEAL]
- ---------------------------------------
[GREAT SEAL OF THE STATE OF CALIFORNIA]
OFFICIAL SEAL
SUSIE S. NAVARRO
NOTARY PUBLIC - CALIFORNIA
PRINCIPAL OFFICE IN
LOS ANGELES COUNTY
My Commission Expires June 1, 1984
- ---------------------------------------
4
<PAGE>
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION
OF
SANTA ANITA OPERATING COMPANY
We, the undersigned, being the duly elected President and Chief
Executive Officer and Secretary of Santa Anita Operating Company (the
"Company"), a corporation organized under the laws of the State of Delaware, do
hereby certify:
FIRST: That by unanimous vote of the Board of Directors of the
Company at a special meeting held on March 17, 1986, the Board approved the
amendment of the Certificate of Incorporation of the Company by the addition of
Articles Ninth, Tenth and Eleventh. The Board approved the following amendments
to the Certificate of Incorporation of the Company:
NINTH:
Part 1. Vote Required for Certain Business Combinations
- -------------------------------------------------------
1.1. Higher Vote for Certain Business Combinations. In addition to any
affirmative vote required by law or any other Article of this Certificate of
Incorporation, and except as otherwise expressly provided in Part 2 of this
Article Ninth:
(a) any merger or consolidation of the Corporation or any Subsidiary
with (i) any Interested Stockholder or (ii) any other corporation (whether
or not itself an Interested Stockholder) which is, or after such merger
<PAGE>
or consolidation would be, an Affiliate or Associate of an Interested
Stockholder; or
(b) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with any
Interested Stockholder or any Affiliate or Associate of any Interested
Stockholder of any assets of the Corporation or any Subsidiary having an
aggregate Fair Market Value of $5,000,000 or more; or
(c) the issuance or transfer by the Corporation or any Subsidiary (in
one transaction or a series of transactions) of any securities of the
Corporation or any Subsidiary to any Interested Stockholder or any
Affiliate or Associate of any Interested Stockholder in exchange for cash,
securities or other property (or a combination thereof) having an aggregate
Fair Market Value of $5,000,000 or more, other than the issuance of
securities by the Corporation or any Subsidiary upon the conversion of
convertible securities of the Corporation or any Subsidiary into stock of
the Corporation or any Subsidiary; or
(d) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an Interested
Stockholder or any Affiliate or Associate of any Interested Stockholder; or
(e) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any other
transaction (whether or not with or into or otherwise involving an
Interested Stockholder) which has the effect, directly or indirectly, of
increasing the proportionate share of the outstanding shares of any class
of equity or convertible securities of the Corporation or any Subsidiary
which is directly or indirectly owned by any Interested Stockholder or any
Affiliate or Associate of any Interested Stockholder;
shall require the affirmative vote of the holders of at least (a) 80% of the
combined voting power of the then outstanding shares of stock of all classes
and series of the Corporation entitled to vote in the election of directors (the
"Voting Stock"), and (b) a majority of the combined voting power of the then
outstanding shares of Voting Stock held by persons who are Disinterested
Stockholders, provided, however, that the majority vote requirement of this
----------
clause (b) shall not be applicable if the Business Combination is approved by
the affirmative vote of the holders of not less than 90% of
2
<PAGE>
combined voting power of the then outstanding shares of Voting Stock. The
foregoing affirmative vote requirements are hereinafter referred to as the
"Special Vote Requirement." The Special Vote Requirement shall be applicable
notwithstanding the fact that no vote may be required, or that a lesser
percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
1.2. Definition of "Business Combination." The term "Business
Combination" as used in this Article Ninth shall mean any transaction which is
referred to in any one or more of clauses (a) through (e) of Section 1.1.
Part 2. When Special Vote Requirement Is Not Applicable
- -------------------------------------------------------
The provisions of Part 1 of this Article Ninth shall not be applicable
to any particular Business Combination, and such Business Combination shall
require only such affirmative vote as is required by law and any other Article
of this Certificate of Incorporation, if all of the conditions specified in
either of the following Sections 2.1 and 2.2 are met:
2.1. Approval by Continuing Directors. The Business Combination shall
have been approved by a majority of the Continuing Directors.
2.2. Price and Procedural Requirements. All of the following
conditions shall have been met:
(a) The aggregate amount of the cash and the Fair Market Value, as of
the date of the consummation of the Business Combination, of consideration
other than cash to be received per share by holders of Common Stock in such
Business Combination shall be at least equal to the higher of (i) the
highest price paid for any share of Common Stock by any person who is an
Interested Stockholder within the two-year period immediately prior to the
time of the first public announcement of the proposed Business Combination
(the "Announcement Date") or in the transaction in which such person became
an Interested Stockholder, whichever price is the higher or (ii) the Fair
Market Value per share of the Corporation's Common Stock on the
Announcement Date or on the date on which the Interested Stockholder became
an Interested Stockholder (the "Determination Date"), whichever is higher.
The price paid for any share of Common Stock shall be the amount of cash
plus the Fair Market Value of any other consideration to be received
therefor, determined at the time of payment thereof.
3
<PAGE>
(b) The aggregate amount of the cash and the Fair Market Value, as of the
date of the consummation of the Business Combination, of consideration other
than cash to be received in such Business Combination by holders of securities
of the Corporation other than Common Stock shall be at least equal to the higher
of (i) if applicable, the highest preferential amount to which the holders of
such securities are entitled in the event of any voluntary liquidation,
dissolution or winding up of the Corporation, (ii) the highest price paid for
any of such securities by any person who is an Interested Stockholder within the
two-year period immediately prior to the Announcement Date or in the transaction
in which such person became an Interested Stockholder, whichever price is
higher, (iii) the Fair Market Value of such securities on the Announcement Date
or the Determination Date, whichever is higher, or (iv) if such securities are
convertible into or exchangeable for shares of Common Stock, the amount per
share of such Common Stock determined pursuant to the foregoing paragraph (a)
reduced by any amount payable by the holders of such securities in accordance
with the terms of such securities, per share, upon such conversion or exchange,
multiplied by the total number of shares of Common Stock into which or for which
such securities are convertible or exchangeable.
(c) The consideration to be received by holders of a particular class of
outstanding Voting Stock (including Common Stock) shall be in cash or in the
same forms the Interested Stockholder has previously paid for shares of such
class of Voting Stock. If the Interested Stockholder has paid for shares of any
class of Voting Stock with varying forms of consideration, the form of
consideration for such class of Voting Stock shall be either cash or the form of
consideration used to acquire the largest number of shares of such class of
Voting Stock previously acquired by it.
(d) After such Interested Stockholder has become an Interested Stockholder
and prior to the consummation of such Business Combination: (i) there shall have
been (1) no reduction in the annual rate of dividends paid on the Common Stock
(except as necessary to reflect any subdivision of the Common Stock), except as
approved by a majority of the Continuing Directors, and (2) an increase in such
annual rate of dividends necessary to reflect any reclassification (including
any reverse stock split), recapitalization, reorganization or any similar
transaction which has the effect of reducing the number of outstanding shares of
the Common Stock, unless the failure so to increase such annual rate is approved
4
<PAGE>
by a majority of the Continuing Directors; and (ii) such Interested
Stockholder shall have not become the beneficial owner of any additional
shares of Voting Stock except as part of the transaction which results in
such Interested Stockholder becoming an Interested Stockholder.
(e) After such Interested Stockholder has become an Interested
Stockholder, such Interested Stockholder shall not have received the
benefit, directly or indirectly (except proportionately as a stockholder),
of any loans, advances, guarantees, pledges or other financial assistance
or any tax credits or other tax advantages provided by the Corporation,
whether in anticipation of or in connection with such Business Combination
or otherwise.
(f) A proxy or information statement describing the proposed Business
Combination and complying with the requirements of the Securities Exchange
Act of 1934 and the rules and regulations thereunder (or any subsequent
provisions replacing such Act, rules or regulations) shall be mailed to all
stockholders of the Corporation at least 30 days prior to the consummation
of such Business Combination (whether or not such proxy or information
statement is required to be mailed pursuant to such Act or subsequent
provisions).
Part 3. Certain Definitions
- ---------------------------
For the purposes of this Article Ninth:
3.1. A "person" shall mean any individual, firm, corporation,
partnership, trust or other entity.
3.2. "Interested Stockholder" shall mean any person (other than the
Corporation or any Subsidiary) who or which:
(a) is the beneficial owner, directly or indirectly, of more than 10%
of the combined voting power of the then outstanding Voting Stock; or
(b) is an Affiliate of the Corporation and at any time within the two-
year period immediately prior to the date in question was the beneficial
owner, directly or indirectly, of 10% or more of the combined voting power
of the then outstanding Voting Stock; or
(c) is an assignee of or has otherwise succeeded to any shares of
Voting Stock which were at any time within the two-year period immediately
prior to the date
5
<PAGE>
in question beneficially owned by any Interested Stockholder, if such
assignment or succession shall have occurred in the course of a transaction
or series of transactions not involving a public offering within the
meaning of the Securities Act of 1933.
3.3. A person shall be a "beneficial owner" of any Voting Stock:
(a) which such person or any of its Affiliates or Associates
beneficially owns, directly or indirectly; or
(b) which such person or any of its Affiliates or Associates has (i)
the right to acquire (whether such right is exercisable immediately or only
after the passage of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (ii) the right to vote or to direct
the vote pursuant to any agreement, arrangement or understanding; or
(c) which are beneficially owned, directly or indirectly, by any other
person with which such person or any of its Affiliates has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting
or disposing of any shares of Voting Stock.
3.4. For the purposes of determining whether a person is an Interested
Stockholder pursuant to Section 3.2, the number of shares of Voting Stock deemed
to be outstanding shal1 include shares deemed owned through application of
Section 3.3 but shall not include any other shares of Voting Stock which may be
issuable to other persons pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights, warrants or options, or
otherwise.
3.5. "Affiliate" or "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as in effect on January 1, 1984.
3.6. "Subsidiary" means any corporation of which more than a majority
of any class of equity security is owned, directly or indirectly, by the
Corporation; provided, however, that for purposes of the definition of
Interested Stockholder set forth in Section 3.2, the term "Subsidiary" shall
mean only a corporation of which a majority of each class of equity security is
owned by the Corporation, by a Subsidiary, or by the Corporation and one or more
Subsidiaries.
6
<PAGE>
3.7. "Continuing Director" means any member of the Board of Directors
of the Corporation who is unaffiliated with, and not a nominee of, the
Interested Stockholder and was a member of the Board of Directors prior to the
time that the Interested Stockholder became an Interested Stockholder and any
successor of a Continuing Director who is unaffiliated with, and not a nominee
of, the Interested Stockholder and who is recommended to succeed a Continuing
Director by a majority of Continuing Directors then on the Board of Directors.
3.8. "Disinterested Stockholder" means a holder of Voting Stock who is
not an Interested Stockholder or an Affiliate or Associate of an Interested
Stockholder and whose shares are not deemed owned by an Interested Stockholder
through application of Section 3.3.
3.9. "Fair Market Value" means: (a) in the case of stock, the highest
closing sale price during the 30-day period immediately preceding the date in
question of a share of such stock on the Composite Tape for New York Stock
Exchange-Listed Stocks, or, if such stock is not quoted on the Composite Tape,
on the New York Stock Exchange, or, if such stock is not listed on such
Exchange, on the principal United States securities exchange registered under
the Securities Exchange Act of 1934 on which such stock is listed, or, if such
stock is not listed on any such exchange, the highest closing bid quotation with
respect to a share of such stock during the 30-day period preceding the date in
question on the National Association of Securities Dealers, Inc. Automated
Quotations System or any system then in use, or if no such quotations are
available, the Fair Market Value on the date in question of a share of such
stock as determined by a majority of the Continuing Directors in good faith; and
(b) in the case of stock of any class of securities not traded on any securities
exchange or in the over-the-counter market or in the case of property other than
cash or stock, the Fair Market Value of such securities or property on the date
in question as determined by a majority of the Continuing Directors in good
faith. If the stock is paired for purposes of trading with that of any other
corporation, the Fair Market Value of the paired stock shall be determined
pursuant to the pairing or other agreement which provides for the determination
of the relative values of the stock of the Corporation and the stock of such
other corporation, after determining the Fair Market Value of the paired stock
as set forth above.
3.10. In the event of any Business Combination in which the
Corporation survives, the phrase "consideration to be received" as used in
Sections 2.2(a), (b) and (c) shall include the shares of Common Stock and/or the
shares of any other class of outstanding Voting Stock retained by the holders of
such shares.
7
<PAGE>
Part 4. Directors' Duty to Determine Certain Facts
- --------------------------------------------------
The majority of the Continuing Directors of the Corporation shall have
the power and duty to determine for the purpose of this Article Ninth, on the
basis of information known to them after reasonable inquiry, all facts
necessary to determine the applicability of the various provisions of this
Article Ninth, including (A) whether a person is an Interested Stockholder, (B)
the number of shares of Voting Stock beneficially owned by any person, (C)
whether a person is an Affiliate or Associate of another, (D) whether the
requirements of Section 2.2 have been met with respect to any Business
Combination, and (E) whether the assets which are the subject of any Business
Combination have, or the consideration to be received for the issuance or
transfer of securities by the Corporation or any Subsidiary in any Business
Combination has, an aggregate Fair Market Value of $5,000,000 or more; and the
good faith determination of a majority of the Continuing Directors shall be
conclusive and binding for all purposes of this Article Ninth.
Part 5. No Effect on Fiduciary Obligations of Interested Stockholders
- ---------------------------------------------------------------------
Nothing contained in this Article Ninth shall be construed to relieve
any Interested Stockholder from any fiduciary obligation imposed by law.
Part 6. Amendment, Repeal, Inconsistent Provisions
- --------------------------------------------------
Notwithstanding any other provisions of law or of this Certificate of
Incorporation or the by-laws of the Corporation which might otherwise permit a
lesser vote or no vote, but in addition to any affirmative vote of the holders
of any particular class or series of securities which may be required by law or
by this Certificate of Incorporation, any proposal to amend or repeal, or adopt
any provisions inconsistent with, this Article Ninth of this Certificate of
Incorporation shall require for approval the affirmative vote of at least (a)
80% of the combined voting power of the then outstanding shares of Voting Stock
and (b) a majority of the combined voting power of the then outstanding shares
of Voting Stock held by persons who are Disinterested Stockholders, provided
that the majority vote requirement of this clause (b) shall not be applicable if
the proposal is approved by the affirmative vote of not less than 90% of the
combined voting power of the then outstanding shares of Voting Stock.
TENTH:
(a) The number of directors shall be as provided in the by-laws. The
Board of Directors shall be divided into
8
<PAGE>
three classes, designated Class I, Class II and Class III, such classes to be as
nearly equal in number as possible and to have the number provided in the by-
laws. At the annual meeting of stockholders in 1986, directors of Class I shall
be elected to hold office for a term expiring at the next succeeding annual
meeting, directors of Class II shall be elected to hold office for a term
expiring at the second succeeding annual meeting, and directors of Class III
shall be elected to hold office for a term expiring at the third succeeding
annual meeting. Thereafter at each annual meeting of stockholders, directors
shall be chosen for a term of three years to succeed those whose terms then
expire and shall hold office until the third following annual meeting of
stockholders and until the election of their respective successors. Any vacancy
on the Board of Directors, whether arising through death, resignation or removal
of a director or through an increase in the number of directors of any class,
shall be filled by a majority vote of all the remaining directors. The term of
office of any director elected to fill such a vacancy shall expire at the
expiration of the term of office of directors of the class in which the vacancy
occurred. Notwithstanding any other provision of this Article, and except as
otherwise required by law, whenever the holders of any one or more series of
Preferred Stock or other securities of the Corporation shall have the right,
voting separately as a class, to elect one or more directors of the Corporation,
the term of office, the filling of vacancies and other features of such
directorships shall be governed by the terms of this Certificate of
Incorporation applicable thereto, and unless the terms of this Certificate of
Incorporation expressly provide otherwise, such directorships shall be in
addition to the number of directors provided in the by-laws and such directors
shall not be classified pursuant to this Article.
(b) Any action required or permitted to be taken by holders of stock
of the Corporation must be taken at a meeting of such holders and may not be
taken by consent in writing. The by-laws of the Corporation may be amended by
the stockholders only by the affirmative vote of at least 80% of the voting
power of the Corporation. Notwithstanding any other provision of law or of this
Certificate of Incorporation or the by-laws of the Corporation which might
otherwise permit a lesser vote or no vote, but in addition to any affirmative
vote of the holders of any particular class or series of securities which may be
required by law or by this Certificate of Incorporation, any proposal to amend
or repeal, or adopt any provisions inconsistent with, this Article Tenth shall
require for approval the affirmative vote of at least 80% of the voting power of
the Corporation.
9
<PAGE>
ELEVENTH:
The Board of Directors shall base the response of this Corporation to
any proposed Business Combination on the Board of Directors' evaluation of
what is in the best interest of this Corporation. In evaluating what is in the
best interest of this Corporation, the Board of Directors shall consider:
(a) The best interest of the shareholders. For this purpose, the Board
shall consider among other factors, not only the consideration offered in
the proposed Business Combination in relation to the then current market
price of this Corporation's stock, but also in relation to the then current
value of this Corporation in a freely negotiated transaction and in
relation to the Board of Directors' then estimate of the future value of
this Corporation as an independent entity; and
(b) Such other factors as the Board of Directors determines to be
relevant, including, among other factors, the social, legal and economic
effects on the communities in which this Corporation and its subsidiaries
operate and are located.
SECOND: That the above-referenced amendments to the Certificate of
Incorporation were set forth in the Company's proxy statement dated March 26,
1986 in connection with the Company's Annual Meeting of Shareholders.
THIRD: That at the Annual Meeting of Shareholders held May 13,
1986, and pursuant to notice duly given, the holders of a majority of the
outstanding shares of the Company's Common Stock voted in favor of the above-
referenced amendments.
10
<PAGE>
FOURTH: That this certificate is filed pursuant to Section 242
of the Delaware Corporation Law, as amended.
Executed this 13th day of May, 1986.
SANTA ANITA OPERATING COMPANY
By /s/ ROBERT P. STRUB
-------------------------------------
Robert P. Strub
President and Chief Executive Officer
ATTEST:
/s/ ALEXANDER W. INGLE
- ----------------------
Alexander W. Ingle
Secretary
11
<PAGE>
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION
OF
SANTA ANITA OPERATING COMPANY
We, the undersigned, being the duly elected President and Chief
Executive Officer and Secretary of Santa Anita Operating Company (the
"Company"), a corporation organized under the laws of the State of Delaware, do
hereby certify:
FIRST: That by unanimous vote of the Board of Directors of the
Company at a regular, quarterly meeting held on February 26, 1987, the Board
approved an amendment of the Certificate of Incorporation of the Company by the
addition of Article Twelfth thereto, which reads as follows:
TWELFTH:
To the fullest extent permitted by the General Corporation Law of the State
of Delaware as the same exists or may hereafter be amended, a director of the
corporation shall not be liable to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as director.
Any repeal or modification of this Article shall not result in any
liability for a director with respect to any action or omission occurring prior
to such repeal or modification.
1
<PAGE>
SECOND: That the above-referenced amendment to the Certificate of
Incorporation was set forth in the Company's proxy statement dated March 31,
1987 in connection with the Company's Annual Meeting of Shareholders.
THIRD: That at the Annual Meeting of Shareholders held May 19,
1987, and pursuant to notice duly given, the holders of a majority of the
outstanding shares of the Company's Common Stock voted in favor of the above-
referenced amendment.
FOURTH: That this certificate is filed pursuant to Section 242 of
the Delaware Corporation Law, as amended.
Executed this 31st day of May, 1987.
SANTA ANITA OPERATING COMPANY
By /s/ ROBERT P. STRUB
-------------------------------------
Robert P. Strub
President and Chief Executive Officer
ATTEST:
/s/ ALEXANDER W. INGLE
- ----------------------
Alexander W. Ingle
Secretary
2
<PAGE>
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION
OF
SANTA ANITA OPERATING COMPANY
We, the undersigned, being the duly elected President and Chief
Executive Officer, and Vice President and Secretary of Santa Anita Operating
Company (the "Company"), a corporation organized and existing under the laws of
the State of Delaware, do hereby certify:
FIRST, That by unanimous written consent of the Board of Directors of
the Company acting without a meeting and effective as of March 9, 1990, the
Board of Directors approved a proposed amendment of the Certificate of
Incorporation of the Company, declaring said amendment to be advisable and
authorizing the proposed amendment to be presented to the stockholders of the
Company at the next annual meeting of stockholders for their consideration. The
resolution setting forth the proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of the Corporation be
amended in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware by amending the first paragraph of
Article FOURTH thereof to read as follows:
"FOURTH: Capitalization: The total number of shares of all
classes of stock which the Corporation shall have the authority to
issue is 46,000,000, of which 40,000,000 shares of the par value of
$0.10 each are to be of a class designated Common Stock and 6,000,000
of the par value of $0.10 each are to be of a class designated
Preferred Stock."
<PAGE>
SECOND: That at the Annual Meeting of Shareholders held May 3, 1990, and
pursuant to notice duly given, the holders of a majority of the outstanding
shares of the Company's Common Stock voted in favor of the above-referenced
amendment.
THIRD: That the above-referenced amendment was duly adopted in accordance
with the provisions of Section 242 of the Delaware General Corporation Law, as
amended.
IN WITNESS WHEREOF, this Certificate of Amendment of Incorporation has
been executed on behalf of Santa Anita Operating Company by its duly authorized
officers this 3rd day of May, 1990.
---
SANTA ANITA OPERATING COMPANY
By /s/ ROBERT P. STRUB
---------------------
Robert P. Strub
President and Chief
Executive Officer
ATTEST:
/s/ ALEXANDER W. INGLE
- ----------------------
Alexander W. Ingle
Vice President and Secretary
<PAGE>
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION
OF
SANTA ANITA OPERATING COMPANY
We, the undersigned, being the duly elected President and Chief Executive
Officer and Secretary and Treasurer of Santa Anita Operating Company (the
"Company"), a corporation organized and existing under the laws of the State of
Delaware, do hereby certify:
FIRST, That at a meeting held on February 11, 1993, the Board of Directors
of the Company approved a proposed amendment of the Certificate of Incorporation
of the Company, declaring said amendment to be advisable and authorizing the
proposed amendment to be presented to the stockholders of the Company at the
next annual meeting of stockholders for their consideration. The resolution
setting forth the proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of the Corporation be
amended in accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware by amending the first paragraph of
Article FOURTH thereof to read as follows:
"FOURTH: Capitalization: The total number of shares of all classes of stock
which the Corporation shall have the authority to issue is 25,000,000 of which
19,000,000 shares of the par value of $0.10 each are to be of a class designated
Common Stock and 6,000,000 of the par value of $0.10 each are to be of a class
designated Preferred Stock."
<PAGE>
SECOND, That at the Annual Meeting of Shareholders held May 4, 1993, and
pursuant to notice duly given, the holders of a majority of the outstanding
shares of the Company's Common Stock voted in favor of the above-referenced
amendment.
THIRD, That the above-referenced amendment was duly adopted in accordance
with the provisions of Section 242 of the Delaware General Corporation Law, as
amended.
IN WITNESS WHEREOF, this Certificate of Amendment of Certificate of
Incorporation has been executed on behalf of Santa Anita Operating Company by
its duly authorized officers this first day of June, 1993.
SANTA ANITA OPERATING COMPANY
By /s/ STEPHEN F. KELLER
-----------------------------
Stephen F. Keller
President and Chief
Executive Officer
ATTEST:
/s/ ALEXANDER W. INGLE
- -------------------------
Alexander W. Ingle
Secretary and Treasurer
<PAGE>
EXHIBIT 3.3
-----------
REVISED 2-10-94
---------------
BY-LAWS
OF
SANTA ANITA REALTY ENTERPRISES, INC.
(a Delaware corporation)
ARTICLE I
Offices
Section 1.1. Registered Office. The registered office shall be in
-----------------
the City of Wilmington, County of New Castle, State of Delaware.
Section 1.2. Other Offices. The Corporation may also have offices at
-------------
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
Business Purpose and Investment Policy
Section 2.1. Corporation Taxed as Real Estate Investment Trust. The
-------------------------------------------------
Corporation shall conduct its business in such a manner as to be qualified to be
taxed as a real estate investment trust under Sections 856-858 of the
<PAGE>
Internal Revenue Code of 1954, as heretofore or hereafter amended.
Section 2.2. Investment Policy. It is the general purpose of the
-----------------
Corporation that the assets of the Corporation be invested principally in real
property and interests in real estate.
ARTICLE III
Meetings of Stockholders
Section 3.1. Place. All meetings of the stockholders for the
-----
election of directors shall be held at such place either within or without the
State of Delaware as shall be designated from time to time by the Board of
Directors and stated in the notice of the meeting. Meetings of stockholders for
any other purpose may be held at such time or place, within or without the State
of Delaware, as shall be stated in the notice of the meeting or in a duly
executed waiver of notice thereof.
Section 3.2. Annual Meetings. The annual meetings of stockholders
---------------
shall be held on the third Thursday in May of each year at 10 o'clock A.M. of
said day, the first such meeting to be held on the third Thursday in May 1981;
provided, however, that should said day fall upon a
-2-
<PAGE>
legal holiday, then any such annual meeting of stockholders shall be held at the
same time and place on the next day thereafter ensuing which is a full business
day. At such meetings directors shall be elected, reports of the affairs of the
Corporation shall be considered, and any other business may be transacted which
is within the powers of the stockholders. If for any annual meeting the Board
of Directors shall fix a different day or hour, such action shall be deemed an
amendment of this Section 3.2 effective until the adjournment of that annual
meeting sine die.
---- ---
Written notice of each annual meeting shall be given to each
stockholder entitled to vote, either personally or by mail or other means of
written communication, charges prepaid, addressed to such stockholder at his
address appearing on the books of the Corporation or given by him to the
Corporation for the purpose of notice. If a stockholder gives no address,
notice shall be deemed to have been given him if sent by mail or other means of
written communication addressed to the place where the principal office of the
Corporation is situated, or if published at least once in some newspaper of
general circulation in the county in which said office is located. All such
notices shall be sent to each stockholder entitled thereto not less than ten nor
more than sixty days before each annual meeting. Such notices shall specify the
place, the day and the hour of such meeting and shall state
-3-
<PAGE>
such other matters if any, as may be expressly required by statute.
Section 3.3. Special Meetings. Special meetings of the stockholders,
----------------
for any purpose or purposes whatsoever, may be called at any time by the Board
of Directors. Except in special cases where other express provision is made by
statute, notice of such special meetings shall be given in the same manner as
for annual meetings of stockholders. Notices of any special meeting shall
specify, in addition to the place, day and hour of such meeting, the general
nature of the business to be transacted.
Section 3.4. List of Stockholders. The officer who has charge of the
--------------------
stock ledger of the Corporation shall prepare and make, at least ten days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, and showing the address of
each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the
-4-
<PAGE>
time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Section 3.5. Quorum. The holders of a majority of the stock issued
------
and outstanding and entitled to vote thereat, present in person or represented
by proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute. If, however,
such quorum shall not be present or represented at any meeting of stockholders,
the stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented any business may be transacted which might have been transacted at
the meeting as originally noticed. If the adjournment is for more than thirty
days or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.
Section 3.6. Questions Before Meeting. When a quorum is present at
------------------------
any meeting, the vote of the holders of a majority of the stock having voting
power present in person or represented by proxy shall decide any question
brought before such meeting unless the question is one upon
-5-
<PAGE>
which by express provision of the statutes, of these By-laws or of the
Certificate of Incorporation, a different vote is required, in which case such
express provision shall govern and control the decision of such question.
Section 3.7. Action Without Meeting. Any action required or
----------------------
permitted to be taken by holders of stock of the Corporation must be taken at a
meeting of such holders and may not be taken by consent in writing.
Section 3.8. Waiver of Notice. Whenever notice is required to be
----------------
given under the Delaware Corporation Law or the Certificate of Incorporation or
the By-laws, a written waiver, signed by the person entitled to notice, whether
before or after the time stated therein, shall be deemed equivalent to notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the person attends a meeting for the express purpose of
objecting at the beginning of the meeting to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
stockholders, directors, or members of a committee of directors need be
specified in any written waiver of notice unless so required by the Certificate
of Incorporation.
-6-
<PAGE>
ARTICLE IV
Directors
Section 4.1. Size of Board. The Board of Directors shall consist of
-------------
eleven members, or as many as shall be determined from time to time by
resolution of the Board.
Section 4.2. Election of Directors. The directors shall be divided
---------------------
into three classes, designated Class I, Class II, and Class III, such classes to
be as nearly equal in number as possible. At the annual meeting of stockholders
in 1986, directors of Class I shall be elected to hold office for a term
expiring at the next succeeding annual meeting, directors of Class II shall be
elected to hold office for a term expiring at the second succeeding annual
meeting, and directors of Class III shall be elected to hold office for a term
expiring at the third succeeding annual meeting. Thereafter at each annual
meeting of stockholders, directors shall be chosen for a term of three years to
succeed those whose terms then expire and shall hold office until the third
following annual meeting of stockholders and until the election of their
respective successors. Directors need not be stockholders.
Section 4.3. Vacancies. Vacancies and newly created directorships
---------
resulting from any increase in the
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authorized number of directors may be filled by a majority of the directors then
in office, though less than a quorum, or by a sole remaining director, and the
directors so chosen shall hold office for the unexpired term of the vacant
directorship, or, in the case of any increase in the number of directors, as
designated by the directors then in office, consistent with the provisions of
Section 4.2. If there are no directors in office, then an election of directors
may be held in the manner provided by statute. If, at the time of filling any
vacancy or any newly created directorship the directors then in office shall
constitute less than a majority of the whole Board (as constituted immediately
prior to any such increase), the Court of Chancery may, upon application of any
stockholder or stockholders holding at least ten percent of the total number of
the shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in office.
No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of his term of office.
Section 4.4. Powers. The business of the Corporation shall be
------
managed by its Board of Directors which
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may exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute or by the Certificate of Incorporation or by these
By-laws directed or required to be exercised or done by the stockholders.
Section 4.5. Meetings. The Board of Directors of the Corporation may
--------
hold meetings, both regular and special, either within or without the State of
Delaware.
Section 4.6. First Meeting. The first meeting of each newly elected
-------------
Board of Directors shall be held immediately following the annual meeting of
stockholders at which such directors are elected and no notice of such meeting
shall be necessary to the newly elected directors in order legally to constitute
the meeting, provided a quorum shall be present; or the meeting may be held at
such time and place as shall be specified in a notice given as hereinafter
provided for special meetings of the Board of Directors, or as shall be
specified in a written waiver signed by all of the directors.
Section 4.7. Regular Meetings. Regular meetings of the Board may be
----------------
held without notice at such time and at such place as shall from time to time be
determined by the Board.
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Section 4.8. Special Meetings. Special meetings of the Board may be
----------------
called by the Secretary at the request of the Chairman of the Board or President
on two business days' notice to each director, either personally or by mail, by
telegram or by telephone; special meetings shall be called by the President or
Secretary in like manner and on like notice on the written request of two
directors.
Section 4.9. Quorum. At all meetings of the Board a majority of the
------
total number of directors shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by statute or by the Certificate of
Incorporation. If a quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 4.10. Conference Telephone. Unless otherwise restricted by
--------------------
the Certificate of Incorporation or these By-laws, members of the Board of
Directors (or any committee designated by the Board) may participate in a
meeting of the Board or committee by means of conference telephone or similar
communications equipment by means of
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which all persons participating in the meeting can hear each other.
Section 4.11. Unanimous Consent. Unless otherwise restricted by the
-----------------
Certificate of Incorporation or these By-laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board or committee.
Section 4.12. Committees. The Board of Directors may, by resolution
----------
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of two or more of the directors of the Corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. Any such committee, to the extent provided in the resolution, shall
have and may exercise the power of the Board of Directors in the management of
the business and affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it; provided, however,
that in the absence or disqualification of any member of such committee or
committees, the member or members thereof present at any
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meeting and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the Board of Directors to act
at the meeting in the place of any such absent or disqualified member.
Section 4.13. Minutes. Each committee shall keep regular minutes of
-------
its meetings and report the same to the Board of Directors when required.
Section 4.14. Fees and Compensation. Directors and members of
---------------------
committees may receive such compensation, if any, for their services, and such
reimbursement for expenses, as may be fixed or determined by resolution of the
Board.
ARTICLE V
Notices
Section 5.1. Methods of Notice. Whenever, under the provisions of
-----------------
the Laws of the State of Delaware or of the Certificate of Incorporation or of
these By-laws, notice is required to be given to any director or stockholder, it
shall not be construed to mean personal notice, but notice may be given in
writing, by mail, addressed to such director or stockholder, at his address as
it appears on the records of the Corporation, with postage thereon prepaid, and
such
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notice shall be deemed to be given at the time when the same shall be deposited
in the United States mail. Notice to directors may also be given by telegram or
telephone.
Section 5.2. Waiver. Whenever any notice is required to be given
------
under the provisions of the statutes or of the Certificates of Incorporation or
of these By-laws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
ARTICLE VI
Officers
Section 6.1. Officers. The Officers of the Corporation shall be a
--------
President, a Vice President, a Secretary and a Treasurer. The Corporation may
also have, at the discretion of the Board of Directors, one or more additional
Vice Presidents, one or more Assistant Secretaries, one or more Assistant
Treasurers, and such other officers as may be appointed in accordance with the
provisions of Section 6.3 and Section 6.5 of this Article. The Board of
Directors may also choose, in its discretion, a Chairman of the Board and one or
more Vice Chairmen of the Board. The positions of Chairman of the Board and
Vice
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Chairman of the Board shall not constitute officers of the Corporation. One
person may hold two or more offices.
Section 6.2. Election. The officers of the Corporation, except such
--------
officers as may be appointed in accordance with the provisions of Section 6.3 or
Section 6.5 of this Article, shall be chosen annually by the Board of Directors,
and each shall hold his office until he shall resign or shall be removed or
otherwise disqualified to serve, or his successor shall be elected and
qualified.
Section 6.3. Subordinate Officers, etc. The Board of Directors may
--------------------------
appoint, and may empower the President to appoint, such other officers as the
business of the Corporation may require, each of whom shall hold office for such
period, have such authority and perform such duties as are provided in the By-
laws or as the Board of Directors may from time to time determine.
Section 6.4. Removal and Resignation. Any officer may be removed,
-----------------------
either with or without cause, by the Board of Directors, at any regular or
special meeting thereof, or, except in the case of an officer chosen by the
Board of Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors.
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Any officer may resign at any time by giving written notice to the
Board of Directors or to the President, or to the Secretary of the Corporation.
Any such resignation shall take effect at the date of the receipt of such notice
or at any later time specified therein; and, unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
Section 6.5. Vacancies. A vacancy in any office because of death,
---------
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in the By-laws for regular appointments to such office.
Section 6.6. Salaries. The salaries and other compensation of all
--------
officers of the Corporation shall be fixed by the Board of Directors.
Section 6.7. Chairman of the Board. The Chairman of the Board shall,
---------------------
if present, preside at all meetings of the Board of Directors.
Section 6.7A. Vice Chairman of the Board. In the absence of the
--------------------------
Chairman of the Board, the Vice Chairman of the Board designated by the Board of
Directors shall preside at all meetings of the Board of Directors.
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Section 6.8. President. The President shall be the Chief Executive
---------
Officer of the Corporation and shall, subject to the control of the Board of
Directors, have general supervision, direction and control of the business and
officers of the Corporation. He shall preside at all meetings of the
stockholders and, in the absence of the Chairman of the Board and the Vice
Chairman of the Board, or if there be none, at all meetings of the Board of
Directors. He shall be ex-officio a member of all the standing committees,
including the Executive Committee, if any, and shall have the general powers and
duties of management usually vested in the office of the president of a
corporation, and shall have such other powers and duties as may be prescribed by
the Board of Directors or the By-laws.
Section 6.9. Vice President. In the absence or disability of the
--------------
President, the Vice Presidents in order of their rank as fixed by the Board of
Directors or, if not ranked, the Vice President designated by the Board of
Directors, shall perform all the duties of the President, and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
President. The Vice Presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Directors or the By-laws.
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<PAGE>
Section 6.10. Secretary. The Secretary shall keep or cause to be
---------
kept, at the principal office or such other place as the Board of Directors may
order, a book of minutes of all meetings of directors and stockholders, with the
time and place of holding, whether regular or special, and, if special, how
authorized, the notice thereof given, the names of those present at directors'
meetings, the number of shares present or represented at stockholders meetings,
and the proceedings thereof. The Secretary shall keep, or cause to be kept, at
the principal office or at the office of the Corporation's transfer agent, a
share register, or a duplicate share register, showing the names of the
stockholders and their addresses, the number and class of shares held by each,
the number and date of certificates issued for the same, and the number and date
of cancellation of every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all the
meetings of the stockholders and of the Board of Directors required by the By-
laws or bylaw to be given, and he shall keep the seal of the Corporation in safe
custody, and shall have such other powers and perform such other duties as may
be prescribed by the Board of Directors or by the By-laws.
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Section 6.11. Treasurer. The Treasurer shall keep and maintain, or
---------
cause to be kept and maintained, adequate and correct accounts of the properties
and business transactions of the Corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, surplus and
shares. Any surplus, including earned surplus, paid-in surplus and surplus
arising from a reduction of stated capital, shall be classified according to
source and shown in a separate account. The books of account shall at all
reasonable times be open to inspection by any director.
The Treasurer shall deposit all moneys and other valuables in the name
and to the credit of the Corporation with such depositories as may be designated
by the Board of Directors. He shall disburse the funds of the Corporation as
may be ordered by the Board of Directors, shall render to the President and
directors, whenever they request it, an account of all of his transactions as
Treasurer and of the financial condition of the Corporation, and shall have such
other powers and perform such other duties as may be prescribed by the Board of
Directors or the By-laws.
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ARTICLE VII
Stock and Stock Certificates
Section 7.1. Right to Certificate. Every holder of stock in the
--------------------
Corporation shall be entitled to have a certificate, signed by or in the name of
the Corporation, by the Chairman of the Board of Directors or the President or a
Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary
or an Assistant Secretary of the Corporation, certifying the number of shares
owned by him in the Corporation.
Section 7.2. Statements Setting Forth Rights. If the Corporation
-------------------------------
shall be authorized to issue more than one class of stock or more than one
series of any class, the designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and rights
shall be set forth in full or summarized on the face or back of the certificate
which the Corporation shall issue to represent such class or series of stock,
provided that, except as otherwise provided in Section 202 of the Corporation
Law of Delaware, in lieu of the foregoing requirements, there may be set forth
on the face or back of the certificate which the Corporation shall issue to
represent such class or series of stock, a statement that the Corporation will
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furnish without charge to each stockholder who so requests the designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations and
restrictions of such preferences and rights.
Section 7.3. Facsimile Signatures. Any of or all the signatures on
--------------------
the certificate may be a facsimile. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent, or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent, or registrar at the date
of issue.
Section 7.4. Lost Certificates. Except as hereinafter in this
-----------------
section provided, no new certificate for shares shall be issued in lieu of an
old one unless the latter is surrendered and cancelled at the same time. The
Board of Directors may, however, in case any certificate for shares is lost,
stolen, mutilated or destroyed, authorize the issuance of a new certificate in
lieu thereof, upon such terms and conditions, including reasonable
indemnification of the Corporation, as the Board shall determine.
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<PAGE>
Section 7.5. Transfers of Stock.
------------------
(a) Subject to paragraphs (b), (c) and (d) of this Section 7.5, upon
surrender to any transfer agent of the Corporation of a certificate for shares
of the Corporation duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
Corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
(b) Subject to the provisions of subparagraph (vi) of this paragraph
(b), beginning at the time that (A) the merger of Santa Anita Consolidated, Inc.
("Santa Anita") into the Corporation and (B) the payment by the Corporation of
the dividend in kind of the shares of Santa Anita Operating Company, a Delaware
corporation ("Operating Company"), shall have both occurred (hereinafter called
the "effective time of the restriction"), and continuing thereafter until such
time as the limitation on transfer provided for in the Pairing Agreement between
the Corporation and Operating Company shall be terminated in the manner therein
provided:
(i) The shares of common stock of the Corporation shall not be
transferable, and shall not be transferred on the books of the Corporation,
unless
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(1) a simultaneous transfer is made by the same transferor to the same
transferee, or (2) such transferor has previously arranged with Operating
Company for the transfer to the transferee, of a like number of common
shares of Operating Company and such shares are paired with one another.
(ii) Except for certificates representing shares of common stock
of this Corporation referred to in subparagraph (vi) below, each
certificate evidencing ownership of shares of common stock of this
Corporation (including certificates issued by Santa Anita) issued and not
cancelled prior to the effective time of the restriction shall be deemed to
evidence a like number of shares of common stock of Operating Company.
(iii) Except for certificates representing common stock of this
Corporation referred to in subparagraph (vi) below, any registered holder
of a certificate evidencing ownership of shares of common stock of the
Corporation (including certificates issued by Santa Anita) issued prior to
the effective time of the restriction may, upon request and presentation of
said certificate to the Corporation's transfer agent, obtain in
substitution therefor a certificate or certificates registered in such
holder's name evidencing the same number of shares of common stock of
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the Corporation and a like number of common shares of Operating Company.
(iv) A conspicuous legend shall be placed on the face of each
certificate evidencing ownership of shares of common stock of the
Corporation issued after the effective time of the restriction, referring
to the restrictions on transfer set forth in the Corporation's By-laws.
(v) For purposes of this paragraph (b) only, the terms "common
stock" and "common shares" shall include preferred stock which is
convertible into shares of common stock.
(vi) Notwithstanding the other provisions of this paragraph (b),
any stockholder whose ownership of Operating Company common stock at the
effective time of the restriction would be deemed, after application of the
attribution rules of the Internal Revenue Code of 1954 (the "Code"), to
result in the Corporation owning, directly or indirectly, more than 9.25%
of the Operating Company common stock will not be subject to the
restrictions imposed by this paragraph (b) to the extent that such
ownership would cause the Corporation, directly or indirectly, to be deemed
to own, after application of the attribution rules of the Code, more
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than 9.25% of the total number of the outstanding shares of Operating
Company, provided that (1) a sufficient amount of Operating Company common
stock (or the right to receive such common stock) which would otherwise be
paired with common stock of the Corporation is sold to a transferee so that
the Corporation, directly or indirectly, after application of the
attribution rules of the Code, will not own in excess of 9.25% of the
outstanding Operating Company common stock, (2) all holders of the unpaired
shares enter into an agreement, satisfactory to the Boards of Directors of
the Corporation, Operating Company and Santa Anita, providing that such
shares not be transferable by sale or any other means, without arranging
for such shares to be paired with an equal number of shares of Operating
Company, unless such sale is made to the Corporation or Operating Company,
and (3) such stockholder executes a waiver of any claims he or she may have
arising out of the close business relationship between the Corporation and
Operating Company and claims arising out of conflicts of interest inherent
in such business relationship. The other provisions of this paragraph (b)
shall apply to all shares of the Corporation otherwise held by any
stockholder unless they are specifically exempted by this subparagraph
(vi).
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(c) If the Board of Directors shall at any time and in good faith be
of the opinion that direct or indirect ownership of shares of either common
stock or preferred stock, or both, of the Corporation has or may become
concentrated to an extent which would cause this Corporation to fail to qualify
or be disqualified as a real estate investment trust by virtue of Section
856(a)(5) and (6) of the Code, or similar provisions of successor statutes, the
Board of Directors shall have the power (i) by lot or other means deemed
equitable by them to call for purchase from any stockholder of the Corporation
such number of shares sufficient in the opinion of the Board of Directors to
maintain or bring the direct or indirect ownership of shares of stock of the
Corporation into conformity with the requirements of said Section 856(a)(5) and
(6) and (ii) to refuse to register the transfer of shares of stock to any person
whose acquisition of such shares would, in the opinion of the Board of
Directors, result in the Corporation being unable to conform to the requirements
of said Section 856(a)(5) and (6). The purchase price for the shares of stock
purchased pursuant hereto shall be equal to the fair market value of such shares
as reflected in the closing price for such shares on the principal stock
exchange on which such shares are listed or, if such shares are not listed, then
the last bid quotation for shares of stock as of the close of business on the
date fixed by the Board of Directors for such purchase or, if no quotation for
the
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shares is available, as determined in good faith by the Board of Directors.
From and after the date fixed for purchase by the Board of Directors, the holder
of any shares so called for purchase shall cease to be entitled to dividends,
voting rights and other benefits with respect to such shares, excepting only the
right to payment of the purchase price fixed as aforesaid. In order to further
assure that ownership of the shares of stock does not become so concentrated,
any transfer of shares that would prevent the Corporation from continuing to be
qualified as a real estate investment trust by virtue of the application of
Section 856(a)(5) and (6) of the Code shall be void ab initio and the intended
-- ------
transferee of such shares shall be deemed never to have had an interest therein.
If the foregoing provision is determined to be void or invalid by virtue of any
legal decision, statute, rule or regulation, then the transferee of such shares
shall be deemed to have acted as agent on behalf of the Corporation in acquiring
such shares and to hold such shares on behalf of the Corporation. For purposes
of determining whether the Corporation is in compliance with Section 856(a)(5)
and (6), Section 542(a)2) and Section 544 of the Code, or similar provisions of
successor statutes, shall be applied.
(d) In addition to the requirements of subparagraph (c) above, if the
Board of Directors shall at any time and in good faith be of the opinion that
direct or
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indirect ownership of shares of either common stock or preferred stock, or both,
of the Corporation has or may become concentrated to an extent which would cause
any rent to be paid to this Corporation to fail to qualify or be disqualified as
rent from real property by virtue of Section 856(d)(2)(B) of the Code, or
similar provisions of successor statutes, the Board of Directors shall have the
power (i) by lot or other means deemed equitable by them to call for purchase
from any stockholder of the Corporation such number of shares sufficient in the
opinion of the Board of Directors to maintain or bring the direct or indirect
ownership of shares of stock of the Corporation into conformity with the
requirements of Section 856(d)(2)(B) and (ii) to refuse to register the transfer
of shares of stock to any person whose acquisition of such shares would, in the
opinion of the Board of Directors, result in this Corporation being unable to
conform to the requirements of said Section 856(d)(2)(B). The purchase price
for the shares of stock purchased pursuant hereto shall be equal to the fair
market value of such shares as reflected in the closing price for such shares on
the principal stock exchange on which such shares are listed, or if such shares
are not listed, then the last bid quotation for shares of stock, as of the close
of business on the date fixed by the Board of Directors for such purchase or, if
no quotation for the shares is available, as determined in good faith by the
Board of Directors. From and after the date fixed for
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purchase by the Board of Directors, the holder of any shares so called for
purchase shall cease to be entitled to dividends, voting rights and other
benefits with respect to such shares, excepting only the right to payment of the
purchase price fixed as aforesaid. In order to further assure that ownership of
the shares of stock does not become so concentrated, any transfer of shares that
would prevent this Corporation from continuing to be qualified as a real estate
investment trust by virtue of the application of Section 856(d)(2)(B) of the
Code shall be void ab initio and the intended transferee of such shares shall be
-- ------
deemed never to have had an interest therein. If the foregoing provision is
determined to be void or invalid by virtue of any legal decision, statute, rule
or regulation, then the transferee of such shares shall be deemed to have acted
as agent on behalf of the Corporation in acquiring such shares and to hold such
shares on behalf of the Corporation. For purposes of determining whether this
Corporation is in compliance with Section 856(d)(2)(B), Section 856(d)(5) of the
Code, or similar provisions of successor statutes, shall be applied.
(e) The stockholders of the Corporation shall upon demand disclose to
the Board of Directors in writing such information with respect to their direct
and indirect ownership of the stock of the Corporation as the Board of Directors
deems necessary to determine whether the Corporation satisfies the provisions of
Section 856(a)(5)
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and (6) and 856(d) of the Code and the regulations thereunder as the same shall
be from time to time amended, or to comply with the requirements of any other
taxing authority.
Section 7.6. Form of Consideration. In purchasing such shares from
---------------------
any shareholder in accordance with the foregoing provisions, the Corporation may
pay consideration in the form of cash or, at the option of the Board of
Directors, in the form of subordinated indebtedness of the Corporation. The
principal amount of such subordinated indebtedness shall be equal to the
purchase price of the shares (less amounts paid in cash, if any) and it shall
have such other terms as may be determined by the Board of Directors at the time
of issuance.
Section 7.7. Record Date. In order that the Corporation may
-----------
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereto, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action. A
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determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
Section 7.8. Registered Stockholders. The Corporation shall be
-----------------------
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares to receive dividends, and to vote as such owner, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
Section 7.9. Transfer Agents and Registrars. The Board of Directors
------------------------------
may appoint one or more corporate transfer agents and registrars.
Section 7.10. Dividends. Dividends upon the capital stock of the
---------
Corporation may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock.
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Section 7.11. Reserves. Before payment of any dividend, there may be
--------
set aside out of any funds of the Corporation available for dividends such sum
or sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the directors shall think conducive to the interest of
the Corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
ARTICLE VIII
Indemnification and Insurance
Section 8.1. Right to Indemnification. Each person who was or is a
------------------------
party or is threatened to be made a party to or is involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director or officer
of the Corporation or is or was serving at the request of the Corporation as a
director, officer, employer or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding
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is alleged action or inaction in an official capacity or in any other capacity
while serving as a director, officer, employee or agent, shall be indemnified
and held harmless by the Corporation to the fullest extent permitted by the laws
of Delaware, as the same exist or may hereafter be amended, against all costs,
charges, expenses, liabilities and losses (including attorneys' fees, judgments,
fines, ERISA excise taxes or penalties and amounts paid or to be paid in
settlement) reasonably incurred or suffered by such person in connection
therewith, and such indemnification shall continue as to a person who has ceased
to be a director, officer, employee or agent and shall inure to the benefit of
his or her heirs, executors and administrators; provided, however, that, except
as provided in Section 8.2 hereof, the Corporation shall indemnify any such
person seeking indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation. The right to
indemnification conferred in this Article shall be a contract right and shall
include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition; provided,
however, that, if the Delaware General Corporation Law requires, the payment of
such expenses incurred by a director or officer in his or her capacity as a
director or officer (and not in any other capacity in which service was or is
rendered by such person
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while a director or officer, including, without limitation, service to an
employee benefit plan) in advance of the final disposition of a proceeding,
shall be made only upon delivery to the Corporation of an undertaking, by or on
behalf of such director or officer, to repay all amounts so advanced if it shall
ultimately be determined that such director or officer is not entitled to be
indemnified under this Section or otherwise. The Corporation may, by action of
its Board of Directors, provide indemnification to employees and agents of the
Corporation with the same scope and effect as the foregoing indemnification of
directors and officers.
Section 8.2. Right of Claimant to Bring Suit. If a claim under
-------------------------------
Section 8.1 of this Article is not paid in full by the Corporation within thirty
days after a written claim has been received by the Corporation, the claimant
may at any time thereafter bring suit against the Corporation to recover the
unpaid amount of the claim and, if successful in whole or in part, the claimant
shall be entitled to be paid also the expense of prosecuting such claim. It
shall be a defense to any such action (other than an action brought to enforce a
claim for expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any is required, has been
tendered to the Corporation) that the claimant has failed to meet a standard of
conduct which makes it permissible under
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Delaware law for the Corporation to indemnify the claimant for the amount
claimed. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is permissible in the circumstances because he or she has met such
standard of conduct, nor an actual determination by the Corporation (including
its Board of Directors, independent legal counsel, or its stockholders) that the
claimant has not met such standard of conduct, shall be a defense to the action
or create a presumption that the claimant has failed to meet such standard of
conduct.
Section 8.3. Non-Exclusivity of Rights. The right to indemnification
-------------------------
and the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Article shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of the Certificate of Incorporation, by-law, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 8.4. Insurance. The Corporation may maintain insurance, at
---------
its expense, to protect itself and any director, officer, employee or agent of
the Corporation or another corporation, partnership, joint venture, trust or
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other enterprise against any such expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under Delaware law.
Section 8.5. Expenses as a Witness. To the extent that any director,
---------------------
officer, employee or agent of the Corporation is by reason of such position, or
a position with another entity at the request of the Corporation, a witness in
any action, suit or proceeding, he or she shall be indemnified against all costs
and expenses actually and reasonably incurred by him or her or on his or her
behalf in connection therewith.
Section 8.6. Indemnity Agreements. The Corporation may enter into
--------------------
agreements with any director, officer, employee or agent of the Corporation
providing for indemnification to the full extent permitted by Delaware law.
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ARTICLE IX
General Provisions
Section 9.1. Annual Reports. Not later than one hundred twenty (120)
--------------
days after the close of each fiscal year of the Corporation, the Board of
Directors shall mail a report of the business and operation of the Corporation
during such fiscal year to the stockholders. The report shall be in such form
and have such content as the Board deems proper. This report shall include a
balance sheet and a statement of income and surplus and a statement of changes
in financial position of the Corporation. Such financial statements shall be
accompanied by the report of an independent certified public accountant thereon.
Section 9.2. Quarterly Reports. Within 90 days after the close of
-----------------
each of the first three quarters of each fiscal year of the Corporation, the
Board of Directors shall send interim reports to the stockholders, having such
form and content as the Board of Directors deems proper.
Section 9.3. Fiscal Year. The fiscal year of the Corporation shall be
-----------
fixed by resolution of the Board of Directors.
Section 9.4. Seal. The corporate seal shall have inscribed thereon
----
the name of the Corporation, the year of
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its organization and the words "Corporate Seal, Delaware". The seal may be used
by causing it or a facsimile thereof to be impressed or affixed or reproduced or
otherwise.
Section 9.5. Checks, Drafts, etc. All checks, drafts or other orders
-------------------
for payment of money, notes or other evidences of indebtedness, issued in the
name of or payable to the Corporation, shall be signed or endorsed by such
person or persons and in such manner as, from time to time, shall be determined
by resolution of the Board of Directors.
Section 9.6. Representation of Shares of Other Corporations. The
----------------------------------------------
President or any Vice President and the Secretary or Assistant Secretary of this
Corporation are authorized to vote, represent and exercise on behalf of this
Corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this Corporation. The authority herein
granted to said officers to vote or represent on behalf of this Corporation any
and all shares held by this Corporation in any other corporation or corporations
may be exercised either by such officers in person or by any other person
authorized so to do by proxy or power of attorney duly executed by said
officers.
Section 9.7. Employee Stock Purchase Plans. The Corporation may,
-----------------------------
upon terms and conditions herein
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authorized, provide and carry out an employee stock purchase plan or plans
providing for the issue and sale, or for the granting of options for the
purchase, of its unissued shares, or of issued shares purchased or to be
purchased or acquired, to employees of the Corporation or of any subsidiary or
to a trustee on their behalf. Such plan may provide for such consideration as
may be fixed therein, for the payment of such shares in installments or at one
time and for aiding any such employees in paying for such shares by compensation
for services or by loans from the Corporation or otherwise. Any such plan
before becoming effective must be approved or authorized by the Board of
Directors of the Corporation.
Such plan may include, among other things, provisions determining or
providing for the determination by the Board of Directors, or any committee
thereof designated by the Board of Directors, of: (a) eligibility of employees
(including officers and directors) to participate therein, (b) the number and
class of shares which may be subscribed for or for which options may be granted
under the plan, (c) the time and method of payment therefor, (d) the price or
prices at which such shares shall be issued or sold, (e) whether or not title to
the shares shall be reserved to the Corporation until full payment therefor, (f)
the effect of the death of an employee participating in the plan or termination
of his employment, including whether there shall
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be any option or obligation on the part of the Corporation to repurchase the
shares thereupon, (g) restrictions, if any, upon the transfer of the shares, and
the time limits and termination of the plan, (h) termination, continuation or
adjustments of the rights of participating employees upon the happening of
specified contingencies, including increase or decrease in the number of issued
shares of the class covered by the plan without receipt of consideration by the
Corporation or any exchange of shares of such class for stock or securities of
another corporation pursuant to a reorganization or merger, consolidation or
dissolution of the Corporation, (i) amendment, termination, interpretation and
administration of such plan by the Board of Directors or any committee thereof
designated by the Board of Directors, and (j) any other matters, not repugnant
to law, as may be included in the plan as approved or authorized by the Board of
Directors or any such committee.
ARTICLE X
Amendments
Section 10.1. Power of Stockholders. New By-laws may be adopted or
---------------------
these By-laws may be amended or repealed by the stockholders only by the
affirmative vote of at least 80% of the voting power of the Corporation, except
as otherwise provided by law. Any proposal to amend or repeal,
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or adopt any provisions inconsistent with, Article Tenth of the Certificate of
Incorporation shall require for approval the affirmative vote of at least 80% of
the voting power of the Corporation.
Section 10.2. Power of Directors. Subject to the right of
------------------
stockholders as provided in Section 10.1 of this Article X to adopt, amend or
repeal By-laws, By-laws may be adopted, amended or repealed by the Board of
Directors; provided, however, that Section 7.5 of these By-laws may not be
amended or repealed except with approval of the holders of 80% of the
outstanding common stock of the Corporation.
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EXHIBIT 3.4
-----------
REVISED 2-10-94
---------------
BY-LAWS
OF
SANTA ANITA OPERATING COMPANY
(a Delaware corporation)
ARTICLE I
Offices
Section 1.1. Registered Office. The registered office shall be in
-----------------
the City of Wilmington, County of New Castle, State of Delaware.
Section 1.2. Other Offices. The Corporation may also have offices at
-------------
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation
may require.
ARTICLE II
Meetings of Stockholders
Section 2.1. Place. All meetings of the stockholders for the
-----
election of directors shall be held at such place either within or without the
State of Delaware as shall be designated from time to time by the Board of
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Directors and stated in the notice of the meeting. Meetings of stockholders for
any other purpose may be held at such time or place, within or without the State
of Delaware, as shall be stated in the notice of the meeting or in a duly
executed waiver of notice thereof.
Section 2.2. Annual Meetings. The annual meetings of stockholders
---------------
shall be held on the third Thursday in May of each year at 10 o'clock A.M. of
said day, the first such meeting to be held on the third Thursday in May 1981;
provided, however, that should said day fall upon a legal holiday, then any such
annual meeting of stockholders shall be held at the same time and place on the
next day thereafter ensuing which is a full business day. At such meetings
directors shall be elected, reports of the affairs of the Corporation shall be
considered, and any other business may be transacted which is within the powers
of the stockholders. If for any annual meeting the Board of Directors shall
fix a different day or hour, such action shall be deemed an amendment of this
Section 2.2 effective until the adjournment of that annual meeting sine die.
---- ---
Written notice of each annual meeting shall be given to each
stockholder entitled to vote, either personally or by mail or other means of
written communication, charges prepaid, addressed to such stockholder at his
address appearing on the books of the Corporation or
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given by him to the Corporation for the purpose of notice. If a stockholder
gives no address, notice shall be deemed to have been given him if sent by mail
or other means of written communication addressed to the place where the
principal office of the Corporation is situated, or if published at least once
in some newspaper of general circulation in the county in which said office is
located. All such notices shall be sent to each stockholder entitled thereto
not less than ten nor more than sixty days before each annual meeting. Such
notices shall specify the place, the day and the hour of such meeting and shall
state such other matters if any, as may be expressly required by statute.
Section 2.3. Special Meetings. Special meetings of the stockholders,
----------------
for any purpose or purposes whatsoever, may be called at any time by the Board
of Directors. Except in special cases where other express provision is made by
statute, notice of such special meetings shall be given in the same manner as
for annual meetings of stockholders. Notices of any special meeting shall
specify, in addition to the place, day and hour of such meeting, the general
nature of the business to be transacted.
Section 2.4. List of Stockholders. The officer who has charge of the
--------------------
stock ledger of the Corporation shall prepare and make, at least ten days before
every meeting of
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stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least ten days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or, if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any stockholder
who is present.
Section 2.5. Quorum. The holders of a majority of the stock issued
------
and outstanding and entitled to vote thereat, present in person or represented
by proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute. If, however,
such quorum shall not be present or represented at any meeting of stockholders,
the stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented any business may be transacted which might have been transacted at
the meeting as originally noticed. If
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the adjournment is for more than thirty days or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
Section 2.6. Questions Before Meeting. When a quorum is present at
------------------------
any meeting, the vote of the holders of a majority of the stock having voting
power present in person or represented by proxy shall decide any question
brought before such meeting unless the question is one upon which by express
provision of the statutes, of these By-laws or of the Certificate of
Incorporation, a different vote is required, in which case such express
provision shall govern and control the decision of such question.
Section 2.7. Action Without Meeting. Any action required or
----------------------
permitted to be taken by holders of stock of the Corporation must be taken at a
meeting of such holders and may not be taken by consent in writing.
Section 2.8. Waiver of Notice. Whenever notice is required to be
----------------
given under the Delaware Corporation Law or the Certificate of Incorporation or
the By-laws, a written waiver, signed by the person entitled to notice, whether
before or after the time stated therein, shall be deemed equivalent to notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting,
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except when the person attends a meeting for the express purpose of objecting at
the beginning of the meeting to the transaction of any business because the
meeting is not lawfully called or convened. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting of the
stockholders, directors, or members of a committee of directors need be
specified in any written waiver of notice unless so required by the Certificate
of Incorporation.
ARTICLE III
Directors
Section 3.1. Size of Board. The Board of Directors shall consist of
-------------
ten members, or as many as shall be determined from time to time by resolution
of the Board.
Section 3.2. Election of Directors. The directors shall be divided
---------------------
into three classes, designated Class I, Class II, and Class III, such classes to
be as nearly equal in number as possible. At the annual meeting of stockholders
in 1986, directors of Class I shall be elected to hold office for a term
expiring at the next succeeding annual meeting, directors of Class II shall be
elected to hold office for a term expiring at the second succeeding annual
meeting, and directors of Class III shall
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be elected to hold office for a term expiring at the third succeeding annual
meeting. Thereafter at each annual meeting of stockholders, directors shall be
chosen for a term of three years to succeed those whose terms then expire and
shall hold office until the third following annual meeting of stockholders and
until the election of their respective successors. Directors need not be
stockholders.
Section 3.3. Vacancies. Vacancies and newly created directorships
---------
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director, and the directors so chosen shall hold office for the
unexpired term of the vacant directorship, or, in the case of any increase in
the number of directors, as designated by the directors then in office,
consistent with the provisions of Section 3.2. If there are no directors in
office, then an election of directors may be held in the manner provided by
statute. If, at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole Board (as constituted immediately prior to any such increase), the
Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any
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such vacancies or newly created directorships, or to replace the directors
chosen by the directors then in office.
No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of his term of office.
Section 3.4. Powers. The business of the Corporation shall be
------
managed by its Board of Directors which may exercise all such powers of the
Corporation and do all such lawful acts and things as are not by statute or by
the Certificate of Incorporation or by these By-laws directed or required to be
exercised or done by the stockholders.
Section 3.5. Meetings. The Board of Directors of the Corporation may
--------
hold meetings, both regular and special, either within or without the State of
Delaware.
Section 3.6. First Meeting. The first meeting of each newly elected
-------------
Board of Directors shall be held immediately following the annual meeting of
stockholders at which such directors are elected and no notice of such meeting
shall be necessary to the newly elected directors in order legally to constitute
the meeting, provided a quorum shall be present; or the meeting may be held at
such time and place as shall be specified in a notice given as hereinafter
provided for special meetings of the Board of Directors, or
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as shall be specified in a written waiver signed by all of the directors.
Section 3.7. Regular Meetings. Regular meetings of the Board may be
----------------
held without notice at such time and at such place as shall from time to time be
determined by the Board.
Section 3.8. Special Meetings. Special meetings of the Board may be
----------------
called by the Secretary at the request of the Chairman of the Board or President
on two business days' notice to each director, either personally or by mail, by
telegram or by telephone; special meetings shall be called by the Chairman of
the Board or Secretary in like manner and on like notice on the written request
of two directors.
Section 3.9. Quorum. At all meetings of the Board a majority of the
------
total number of directors shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by statute or by the Certificate of
Incorporation. If a quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than
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announcement at the meeting, until a quorum shall be present.
Section 3.10. Conference Telephone. Unless otherwise restricted by
--------------------
the Certificate of Incorporation or these By-laws, members of the Board of
Directors (or any committee designated by the Board) may participate in a
meeting of the Board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other.
Section 3.11. Unanimous Consent. Unless otherwise restricted by the
-----------------
Certificate of Incorporation or these By-laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board or committee.
Section 3.12. Committees. The Board of Directors may, by resolution
----------
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of two or more of the directors of the Corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or
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disqualified member at any meeting of the committee. Any such committee, to the
extent provided in the resolution, shall have and may exercise the power of the
Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it; provided, however, that in the absence or
disqualification of any member of such committee or committees, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any such absent or
disqualified member.
Section 3.13. Minutes. Each committee shall keep regular minutes of
-------
its meetings and report the same to the Board of Directors when required.
Section 3.14. Fees and Compensation. Directors and members of
---------------------
committees may receive such compensation, if any, for their services, and such
reimbursement for expenses, as may be fixed or determined by resolution of the
Board.
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ARTICLE IV
Notices
Section 4.1. Methods of Notice. Whenever, under the provisions of
-----------------
the Laws of the State of Delaware or of the Certificate of Incorporation or of
these By-laws, notice is required to be given to any director or stockholder, it
shall not be construed to mean personal notice, but notice may be given in
writing, by mail, addressed to such director or stockholder, at his address as
it appears on the records of the Corporation, with postage thereon prepaid, and
such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. Notice to directors may also be given by
telegram or telephone.
Section 4.2. Waiver. Whenever any notice is required to be given
------
under the provisions of the statutes or of the Certificate of Incorporation or
of these By-laws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
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ARTICLE V
Officers
Section 5.1. Officers. The Officers of the Corporation shall be a
--------
Chairman of the Board, a President, a Secretary and a Treasurer. The
Corporation may also have, at the discretion of the Board of Directors, one or
more Vice Presidents, one or more Assistant Secretaries, one or more Assistant
Treasurers, and such other officers as may be appointed in accordance with the
provisions of Section 5.3 and Section 5.5 of this Article. The Board of
Directors may also choose, at its discretion, one or more Vice Chairmen of the
Board, who shall not constitute officers of the Corporation. One person may
hold two or more offices.
Section 5.2. Election. The officers of the Corporation, except such
--------
officers as may be appointed in accordance with the provisions of Section 5.3 or
Section 5.5 of this Article, shall be chosen annually by the Board of Directors,
and each shall hold his office until he shall resign or shall be removed or
otherwise disqualified to serve, or his successor shall be elected and
qualified.
Section 5.3. Subordinate Officers, etc. The Board of Directors may
--------------------------
appoint, and may empower the Chairman of the Board to appoint, such other
officers as the business of the Corporation may require, each of whom shall hold
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office for such period, have such authority and perform such duties as are
provided in the By-laws or as the Board of Directors may from time to time
determine.
Section 5.4. Removal and Resignation. Any officer may be removed,
-----------------------
either with or without cause, by the Board of Directors, at any regular or
special meeting thereof, or, except in the case of an officer chosen by the
Board of Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
Board of Directors or to the Chairman of the Board, or to the Secretary of the
Corporation. Any such resignation shall take effect at the date of the receipt
of such notice or at any later time specified therein; and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 5.5. Vacancies. A vacancy in any office because of death,
---------
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in the By-laws for regular appointments to such office.
Section 5.6. Salaries. The salaries and other compensation of all
--------
officers of the Corporation shall be fixed by the Board of Directors.
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Section 5.7. Chairman of the Board. The Chairman of the Board shall
---------------------
preside at all meetings of the stockholders and all meetings of the Board of
Directors. He shall be an ex-officio member of all standing committees,
including the Executive Committee, if any, and shall have such other powers and
duties as may be prescribed by the Board of Directors or the By-laws.
Section 5.7A. Vice Chairman of the Board. In the absence of the
--------------------------
Chairman of the Board, the Vice Chairman of the Board designated by the Board of
Directors shall preside at meetings of the Board of Directors.
Section 5.8. President. The President shall be the Chief Executive
---------
Officer of the Corporation and shall, subject to the control of the Board of
Directors, have general supervision, direction and control of the Corporation.
He shall be an ex-officio member of all standing committees, including the
Executive Committee, if any, shall have the general powers and duties of
management usually vested in the office of the chief executive officer of a
corporation, and shall have such other powers and perform such other duties as
from time to time may be prescribed for him by the Board of Directors or the By-
laws.
Section 5.9. Vice President. In the absence or disability of the
--------------
Chairman of the Board and the President,
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the Vice Presidents in order of their rank as fixed by the Board of Directors
or, if not ranked, the Vice President designated by the Board of Directors,
shall perform all the duties of the Chairman of the Board and the President, and
when so acting shall have all the powers of, and be subject to all the
restrictions upon, the Chairman of the Board and the President. The Vice
Presidents shall have such other powers and perform such other duties as from
time to time may be prescribed for them respectively by the Board of Directors
or the By-laws.
Section 5.10. Secretary. The Secretary shall keep or cause to be
---------
kept, at the principal office or such other place as the Board of Directors may
order, a book of minutes of all meetings of directors and stockholders, with the
time and place of holding, whether regular or special, and, if special, how
authorized, the notice thereof given, the names of those present at directors'
meetings, the number of shares present or represented at stockholders' meetings,
and the proceedings thereof. The Secretary shall keep, or cause to be kept, at
the principal office or at the office of the Corporation's transfer agent, a
share register, or a duplicate share register, showing the names of the
stockholders and their addresses, the number and class of shares held by each,
the number and date of certificates issued for the same, and the number and date
of cancellation of every certificate surrendered for cancellation.
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The Secretary shall give, or cause to be given, notice of all the
meetings of the stockholders and of the Board of Directors required by the By-
laws or by law to be given, and he shall keep the seal of the Corporation in
safe custody, and shall have such other powers and perform such other duties as
may be prescribed by the Board of Directors or by the By-laws.
Section 5.11. Treasurer. The Treasurer shall keep and maintain, or
---------
cause to be kept and maintained, adequate and correct accounts of the properties
and business transactions of the Corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, surplus and
shares. Any surplus, including earned surplus, paid-in surplus and surplus
arising from a reduction of stated capital, shall be classified according to
source and shown in a separate account. The books of account shall at all
reasonable times be open to inspection by any director.
The Treasurer shall deposit all moneys and other valuables in the name
and to the credit of the Corporation with such depositories as may be designated
by the Board of Directors. He shall disburse the funds of the Corporation as
may be ordered by the Board of Directors, shall render to the Chairman of the
Board and directors, whenever they request it, an account of all of his
transactions as
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Treasurer and of the financial condition of the Corporation, and shall have such
other powers and perform such other duties as may be prescribed by the Board of
Directors or the By-laws.
ARTICLE VI
Stock and Stock Certificates
Section 6.1. Right to Certificate. Every holder of stock in the
--------------------
Corporation shall be entitled to have a certificate, signed by or in the name of
the Corporation, by the Chairman of the Board of Directors or the President or a
Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary
or an Assistant Secretary of the Corporation, certifying the number of shares
owned by him in the Corporation.
Section 6.2. Statements Setting Forth Rights. If the Corporation
-------------------------------
shall be authorized to issue more than one class of stock or more than one
series of any class, the designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and rights
shall be set forth in full or summarized on the face or back of the certificate
which the Corporation shall issue to represent
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such class or series of stock, provided that,except as otherwise provided in
Section 202 of the Corporation Law of Delaware, in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate
which the Corporation shall issue to represent such class or series of stock, a
statement that the Corporation will furnish without charge to each stockholder
who so requests the designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations and restrictions of such preferences and rights.
Section 6.3 Facsimile Signatures. Any of or all the signatures on
--------------------
the certificate may be a facsimile. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent, or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent, or registrar at the date
of issue.
Section 6.4. Lost Certificates. Except as hereinafter in this
-----------------
section provided, no new certificate for shares shall be issued in lieu of an
old one unless the latter is surrendered and cancelled at the same time. The
Board of Directors may, however, in case any certificate for
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<PAGE>
shares is lost, stolen, mutilated or destroyed, authorize the issuance of a new
certificate in lieu thereof, upon such terms and conditions, including
reasonable indemnification of the Corporation, as the Board shall determine.
Section 6.5 Transfers of Stock.
------------------
(a) Subject to paragraphs (b), (c) and (d) of this Section 6.5, upon
surrender to any transfer agent of the Corporation of a certificate for shares
of the Corporation duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
Corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
(b) Beginning at the time that (A) the merger of Santa Anita
Consolidated, Inc. ("Santa Anita") into Santa Anita Realty Enterprises, Inc., a
Delaware corporation ("Realty"), and (B) the payment by Realty of the dividend
in kind of the shares of the Corporation (the "Distribution") shall have both
occurred (hereinafter called the "effective time of the restriction"), and
continuing thereafter until such time as the limitation on transfer provided for
in the Pairing Agreement between Realty and the Corporation shall be terminated
in the manner therein provided:
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<PAGE>
(i) The shares of common stock of the Corporation shall not be
transferable, and shall not be transferred on the books of the Corporation,
unless (1) a simultaneous transfer is made by the same transferor to the same
transferee, or (2) such transferor has previously arranged with Realty for the
transfer to the transferee, of a like number of shares of common stock of Realty
and such shares are paired with one another.
(ii) Except for certificates representing shares of common stock of
Realty referred to in subparagraph (vi) below, each certificate evidencing
ownership of shares of common stock of Realty (including certificates issued by
Santa Anita) issued and not cancelled prior to the effective time of the
restriction shall be deemed to evidence a like number of shares of common stock
of the Corporation.
(iii) Except for certificates representing common stock of Realty
referred to in subparagraph (vi) below, any registered holder of a certificate
evidencing ownership of shares of common stock of Realty (including certificates
issued by Santa Anita) issued prior to the effective time of the restriction
may, upon request and presentation of said certificate to the Corporation's
transfer agent, obtain in substitution therefor a certificate or certificates
registered in such holder's name evidencing the same number of
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<PAGE>
common shares of the Corporation and a like number of shares of common stock of
Realty.
(iv) A conspicuous legend shall be placed on the face of each
certificate evidencing ownership of shares of common stock of the Corporation
issued after the effective time of the restrictions, referring to the
restrictions on transfer set forth in the Corporation's By-laws.
(v) For purposes of this paragraph (b) only, the terms "common stock"
and "common shares" shall include preferred stock which is convertible into
shares of common stock.
(vi) Notwithstanding the other provisions of this paragraph (b), any
stockholder whose ownership of the common stock of the Corporation at the
effective time of the restriction would be deemed, after application of the
attribution rules of the Internal Revenue Code of 1954 (the "Code"), to result
in Realty owning, directly or indirectly, more than 9.25% of the common stock of
the Corporation will not be subject to the restrictions imposed by this
paragraph (b) to the extent that such ownership would cause Realty, directly or
indirectly, to be deemed to own, after application of the attribution rules of
the Code, more than 9.25% of the total number of the outstanding shares of the
Corporation, provided that (1) a sufficient amount of the common
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<PAGE>
stock of the Corporation (or the right to receive such common stock) which would
otherwise be paired with stock of Realty is sold to third parties so that
Realty, directly or indirectly, after application of the attribution rules of
the Code, will not own in excess of 9.25% of the common stock of the
Corporation, (2) all holders of the unpaired shares enter into an agreement,
satisfactory to the Boards of Directors of Realty, the Corporation and Santa
Anita, providing that such shares not be transferable by sale or any other
means, without arranging for such shares to be paired with an equal number of
shares of Realty, unless such sale is made to the Corporation or Realty and (3)
such stockholder and any transferee of such stockholder executes a waiver of any
claims he or she may have arising out of the close business relationship between
the Corporation and Realty and claims arising out of conflicts of interest
inherent in such business relationship. The other provisions of this paragraph
(b) shall apply to all shares of the Corporation otherwise held by any
stockholder unless they are specifically exempted by this subparagraph (vi).
(c) If the Board of Directors shall at any time and in good faith be
of the opinion that direct or indirect ownership of shares of either common
stock or preferred stock, or both, of the Corporation has or may become
concentrated to an extent which would cause Realty to fail to qualify or be
disqualified as a real estate investment trust
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<PAGE>
by virtue of Section 856(a)(5) and (6) of the Code, or similar provisions of
successor statutes, pertaining to the qualification of Realty as a real estate
investment trust, the Board of Directors shall have the power (i) by lot or
other means deemed equitable by them to call for purchase from any stockholder
of the Corporation such number of shares sufficient in the opinion of the Board
of Directors to maintain or bring the direct or indirect ownership of shares of
stock of the Corporation into conformity with the requirements of said Section
856(a)(5) and (6) pertaining to Realty and (ii) to refuse to register the
transfer of shares of stock to any person whose acquisition of such shares
would, in the opinion of the Board of Directors, result in Realty being unable
to conform to the requirements of said Section 856(a)(5) and (6). The purchase
price for the shares of stock purchased pursuant hereto shall be equal to the
fair market value of such shares as reflected in the closing price for such
shares on the principal stock exchange on which such shares are listed or, if
such shares are not listed, then the last bid quotation for shares of stock as
of the close of business on the date fixed by the Board of Directors for such
purchase or, if no quotation for the shares is available, as determined in good
faith by the Board of Directors. From and after the date fixed for purchase by
the Board of Directors, the holder of any shares so called for purchase shall
cease to be entitled to dividends, voting rights and other benefits with respect
to
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<PAGE>
such shares excepting only the right to payment of the purchase price fixed as
aforesaid. In order to further assure that ownership of the shares of stock
does not become so concentrated, any transfer of shares that would prevent
Realty from continuing to be qualified as a real estate investment trust by
virtue of the application of Section 856(a)(5) and (6) of the Code shall be void
ab initio and the intended transferee of such shares shall be deemed never to
- -- ------
have had an interest therein. If the foregoing provision is determined to be
void or invalid by virtue of any legal decision, statute, rule or regulation,
then the transferee of such shares shall be deemed to have acted as agent on
behalf of the Corporation in acquiring such shares and to hold such shares on
behalf of the Corporation. For purposes of determining whether the Corporation
is in compliance with Section 856(a)(5) and (6), Section 542(a)(2) and Section
544 of the Code, or similar provisions of successor statutes, shall be applied.
(d) In addition to the requirements of subparagraph (c) above, if
the Board of Directors shall at any time and in good faith be of the opinion
that direct or indirect ownership of shares of either common stock or preferred
stock, or both, of the Corporation has or may become concentrated to an extent
which would cause any rent to be paid to Realty to fail to qualify or be
disqualified as rent from real property by virtue of Section 856(d)(2)(B) of the
Code,
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<PAGE>
or similar provisions of successor statutes, pertaining to the qualification of
Realty as a real estate investment trust, the Board of Directors shall have the
power (i) by lot or other means deemed equitable by them to call for purchase
from any stockholder of the Corporation such number of shares sufficient in the
opinion of the Board of Directors to maintain or bring the direct or indirect
ownership of shares of stock of the Corporation into conformity with the
requirements of Section 856(d)(2)(B) pertaining to Realty and (ii) to refuse to
register the transfer of shares of stock to any person whose acquisition of such
shares would, in the opinion of the Board of Directors, result in Realty being
unable to conform to the requirements of said Section 856(d)(2)(B). The
purchase price for the shares of stock purchased pursuant hereto shall be equal
to the fair market value of such shares as reflected in the closing price for
such shares on the principal stock exchange on which such shares are listed, or
if such shares are not listed, then the last bid quotation for shares of stock,
as of the close of business on the date fixed by the Board of Directors for such
purchase or, if no quotation for the shares is available, as determined in good
faith by the Board of Directors. From and after the date fixed for purchase by
the Board of Directors, the holders of any shares so called for purchase shall
cease to be entitled to dividends, voting rights and other benefits with respect
to such shares, excepting only the right to payment of the
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<PAGE>
purchase price fixed as aforesaid. In order to further assure that ownership of
the shares of stock does not become so concentrated, any transfer of shares that
would prevent Realty from continuing to be qualified as a real estate investment
trust by virtue of the application of Section 856(d)(2)(B) of the Code shall be
void ab initio and the intended transferee of such shares shall be deemed never
-- ------
to have had an interest therein. If the foregoing provision is determined to be
void or invalid by virtue of any legal decision, statute, rule or regulation,
then the transferee of such shares shall be deemed to have acted as agent on
behalf of the Corporation in acquiring such shares and to hold such shares on
behalf of the Corporation. For purposes of determining whether this Corporation
is in compliance with Section 856(d)(2)(B), Section 856(d)(5) of the Code, or
similar provisions of successor statutes, shall be applied.
(e) The stockholders of the Corporation shall upon demand disclose to
the Board of Directors in writing such information with respect to their direct
and indirect ownership of the stock of the Corporation as the Board of Directors
deems necessary to determine whether Realty satisfies the provisions of Section
856(a)(5) and (6) and 856(d) of the Code and the regulations thereunder as the
same shall be from time to time amended, or to comply with the requirements of
any other taxing authority.
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<PAGE>
Section 6.6. Form of Consideration. In purchasing such shares from
---------------------
any shareholder in accordance with the foregoing provisions, the Corporation may
pay consideration in the form of cash or, at the option of the Board of
Directors, in the form of subordinated indebtedness of the Corporation. The
principal amount of such subordinated indebtedness shall be equal to the
purchase price of the shares (less amounts paid in cash, if any) and it shall
have such other terms as may be determined by the Board of Directors at the time
of issuance.
Section 6.7. Record Date. In order that the Corporation may
-----------
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereto, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action. A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
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<PAGE>
Section 6.8. Registered Stockholders. The Corporation shall be
-----------------------
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares to receive dividends, and to vote as such owner, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
Section 6.9. Transfer Agents and Registrars. The Board of Directors
------------------------------
may appoint one or more corporate transfer agents and registrars.
Section 6.10. Dividends. Dividends upon the capital stock of the
---------
Corporation may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock.
Section 6.11. Reserves. Before payment of any dividend, there may be
--------
set aside out of any funds of the Corporation available for dividends such sum
or sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose
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<PAGE>
as the directors shall think conducive to the interest of the Corporation, and
the directors may modify or abolish any such reserve in the manner in which it
was created.
ARTICLE VII
Indemnification and Insurance
Section 7.1. Right to Indemnification. Each person who was or is a
------------------------
party or is threatened to be made a party to or is involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a director or officer
of the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged action
or inaction in an official capacity or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent permitted by the laws of Delaware, as the
same exist or may hereafter be amended, against all costs, charges, expenses,
liabilities and losses (including attorneys' fees, judgments, fines, ERISA
excise
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<PAGE>
taxes or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith, and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of his or her heirs,
executors and administrators; provided, however, that, except as provided in
Section 7.2 hereof, the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part thereof) was authorized by the
Board of Directors of the Corporation. The right to indemnification conferred
in this Article shall be a contract right and shall include the right to be paid
by the Corporation the expenses incurred in defending any such proceeding in
advance of its final disposition; provided, however, that, if the Delaware
General Corporation Law requires, the payment of such expenses incurred by a
director or officer (and not in any other capacity in which service was or is
rendered by such person while a director or officer, including, without
limitation, service to an employee benefit plan) in advance of the final
disposition of a proceeding, shall be made only upon delivery to the Corporation
of an undertaking, by or on behalf of such director or officer, to repay all
amounts so advanced if it shall ultimately be determined that such director or
officer is not entitled to be indemnified under this Section or otherwise. The
Corporation may, by action
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<PAGE>
of its Board of Directors, provide indemnification to employees and agents of
the Corporation with the same scope and effect as the foregoing indemnification
of directors and officers.
Section 7.2. Right of Claimant to Bring Suit. If a claim under
-------------------------------
Section 7.1 of this Article is not paid in full by the Corporation within thirty
days after a written claim has been received by the Corporation, the claimant
may at any time thereafter bring suit against the Corporation to recover the
unpaid amount of the claim and, if successful in whole or in part, the claimant
shall be entitled to be paid also the expense of prosecuting such claim. It
shall be a defense to any such action (other than an action brought to enforce a
claim for expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any is required, has been
tendered to the Corporation) that the claimant has failed to meet a standard of
conduct which makes it permissible under Delaware law for the Corporation to
indemnify the claimant for the amount claimed. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel, or
its stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is permissible in the circumstances
because he or she has met such standard of conduct, nor an actual determination
by the Corporation (including its Board
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<PAGE>
of Directors, independent legal counsel, or its stockholders) that the claimant
has not met such standard of conduct, shall be a defense to the action or create
a presumption that the claimant has failed to meet such standard of conduct.
Section 7.3. Non-Exclusivity of Rights. The right to indemnification
-------------------------
and the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Article shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of the Certificate of Incorporation, by-law, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 7.4. Insurance. The Corporation may maintain insurance, at
---------
its expense, to protect itself and any director, officer, employee or agent of
the Corporation or another corporation, partnership, joint venture, trust or
other enterprise against any such expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under Delaware law.
Section 7.5. Expenses as a Witness. To the extent that any director,
---------------------
officer, employee or agent of the Corporation is by reason of such position, or
a position
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<PAGE>
with another entity at the request of the Corporation, a witness in any action,
suit or proceeding, he or she shall be indemnified against all costs and
expenses actually and reasonably incurred by him or her or on his or her behalf
in connection therewith.
Section 7.6. Indemnity Agreements. The Corporation may enter into
--------------------
agreements with any director, officer, employee or agent of the Corporation
providing for indemnification to the full extent permitted by Delaware law.
ARTICLE VIII
General Provisions
Section 8.1. Annual Reports. Not later than one hundred twenty (120)
--------------
days after the close of each fiscal year of the Corporation, the Board of
Directors shall mail a report of the business and operation of the Corporation
during such fiscal year to the stockholders. The report shall be in such form
and have such content as the Board deems proper. This report shall include a
balance sheet and a statement of income and surplus and a statement of changes
in financial position of the Corporation. Such financial statements shall be
accompanied by the report of an independent certified public accountant
thereon.
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<PAGE>
Section 8.2. Quarterly Reports. Within 90 days after the close of
-----------------
each of the first three quarters of each fiscal year of the Corporation, the
Board of Directors shall send interim reports to the stockholders, having such
form and content as the Board of Directors deems proper.
Section 8.3. Fiscal Year. The fiscal year of the Corporation shall be
-----------
fixed by resolution of the Board of Directors.
Section 8.4. Seal. The corporate seal shall have inscribed thereon
----
the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
Section 8.5. Checks, Drafts, etc. All checks, drafts or other orders
--------------------
for payment of money, notes or other evidences of indebtedness, issued in the
name of or payable to the Corporation, shall be signed or endorsed by such
person or persons and in such manner as, from time to time, shall be determined
by resolution of the Board of Directors.
Section 8.6. Representation of Shares of Other Corporations. The
----------------------------------------------
Chairman of the Board, the President or any Vice President and the Secretary or
Assistant Secretary of this Corporation are authorized to vote, represent and
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<PAGE>
exercise on behalf of this Corporation all rights incident to any and all shares
of any other corporation or corporations standing in the name of this
Corporation. The authority herein granted to said officers to vote or
represent on behalf of this Corporation any and all shares held by this
Corporation in any other corporation or corporations may be exercised either by
such officers in person or by any other person authorized so to do by proxy or
power of attorney duly executed by said officers.
Section 8.7. Employee Stock Purchase Plans. The Corporation may,
-----------------------------
upon terms and conditions herein authorized, provide and carry out an employee
stock purchase plan or plans providing for the issue and sale, or for the
granting of options for the purchase, of its unissued shares, or of issued
shares purchased or to be purchased or acquired, to employees of the Corporation
or of any subsidiary or to a trustee on their behalf. Such plan may provide for
such consideration as may be fixed therein, for the payment of such shares in
installments or at one time and for aiding any such employees in paying for such
shares by compensation for services or by loans from the Corporation or
otherwise. Any such plan before becoming effective must be approved or
authorized by the Board of Directors of the Corporation.
Such plan may include, among other things, provisions determining or
providing for the determination by the
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<PAGE>
Board of Directors, or any committee thereof designated by the Board of
Directors, of: (a) eligibility of employees (including officers and directors)
to participate therein, (b) the number and class of shares which may be
subscribed for or for which options may be granted under the plan, (c) the time
and method of payment therefor, (d) the price or prices at which such shares
shall be issued or sold, (e) whether or not title to the shares shall be
reserved to the Corporation until full payment therefor, (f) the effect of the
death of an employee participating in the plan or termination of his employment,
including whether there shall be any option or obligation on the part of the
Corporation to repurchase the shares thereupon, (g) restrictions, if any, upon
the transfer of the shares, and the time limits and termination of the plan, (h)
termination, continuation or adjustments of the rights of participating
employees upon the happening of specified contingencies, including increase or
decrease in the number of issued shares of the class covered by the plan without
receipt of consideration by the Corporation or any exchange of shares of such
class for stock or securities of another corporation pursuant to a
reorganization or merger, consolidation or dissolution of the Corporation, (i)
amendment, termination, interpretation and administration of such plan by the
Board of Directors or any committee thereof designated by the Board of
Directors, and (j) any other matters, not repugnant to law, as may be
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<PAGE>
included in the plan as approved or authorized by the Board of Directors or any
such committee.
ARTICLE IX
Amendments
Section 9.1. Power of Stockholders. New By-laws may be adopted or
---------------------
these By-laws may be amended or repealed by the stockholders only by the
affirmative vote of at least 80% of the voting power of the Corporation, except
as otherwise provided by law. Any proposal to amend or repeal, or adopt any
provisions inconsistent with, Article Tenth of the Certificate of Incorporation
shall require for approval the affirmative vote of at least 80% of the voting
power of the Corporation.
Section 9.2. Power of Directors. Subject to the right of
------------------
stockholders as provided in Section 9.1 of this Article IX to adopt, amend or
repeal By-laws, By-laws may be adopted, amended or repealed by the Board of
Directors; provided, however, that Section 6.5 of these By-laws may not be
amended or repealed except with the approval of the holders of 80% of the
outstanding common stock of the Corporation.
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<PAGE>
EXHIBIT 4.6
-----------
March 25, 1994
Santa Anita Realty Enterprises, Inc.
363 San Miguel Drive
Newport Beach, California 92660
Attn: Sherwood Chillingworth
Gentlemen:
Reference is made to that certain Amended and Restated Credit
Agreement, dated as of November 14, 1989, between us (the "Credit Agreement").
Capitalized terms used herein without definition shall have the meanings
ascribed to them in the Credit Agreement.
Section 7.10 of the Credit Agreement prohibits you from creating,
incurring, assuming or suffering to exist any Indebtedness in excess of the
lesser of $80,000,000 and six times Net Worth, subject to certain exclusions.
Section 7.12 of the Credit Agreement requires you at all times to
maintain a Net Worth of not less than $90 million plus 90% of the net proceeds
of any issue or sale of your equity securities and other additions to capital,
other than pursuant to your dividend reinvestment plan or any stock option plan
or other employee benefit plan.
Section 7.13 of the Credit Agreement requires you to maintain a ratio
of Indebtedness to Net Worth of not greater than 2.25 to 1.00.
Section 7.14 of the Credit Agreement requires you to ensure that your
Adjusted Net Income for the twelve months period ending on each fiscal quarter
exceeds twice your total interest expense.
You have advised us that you were not in compliance with the foregoing
financial covenants at December 31, 1993 and will not be in compliance at March
31, 1994. As a result of the foregoing noncompliance, you are also in breach of
certain covenants set forth in the Revolving Credit Agreement, dated October 29,
1991, between you and Union Bank (the "Union Bank Credit Agreement"), and the
Revolving Credit and Term Loan Agreement, dated as of November 21, 1989, as
amended, between you and The Bank of California, N.A. (the "Bank of California
Credit Agreement"), respectively. You have therefore requested that the Bank
waive any Events of Default or Unmatured Events of
<PAGE>
Default arising under Sections 8.1(c) and 8.1(e) of the Credit Agreement as a
result of the foregoing noncompliance and defaults.
Subject to the terms and conditions hereof, the undersigned Bank
hereby waives through April 30, 1994 the Events of Default and Unmatured Events
of Default arising under Sections 8.1(c) and 8.l(e) of the Credit Agreement as a
result of your noncompliance with the financial covenants set forth in Sections
7.10, 7.12, 7.13 and 7.14 of the Credit Agreement at December 31, 1993 and March
31, 1994 and the defaults under the Union Bank Credit Agreement and the Bank of
California Credit Agreement if and only if the following conditions are timely
--------------
satisfied in full:
(a) Immediately upon your receipt thereof, the final disbursement of
loan proceeds, in an amount not less than $10 million, received by you and/or
Anita Associates from the Teachers Insurance and Annuity Association of America
pursuant to its Loan Commitment, dated June 11, 1993, will be paid over to Union
Bank, Wells Fargo Bank, National Association, and The Bank of California, N.A.
(collectively, the "Banks") in the percentages set forth below to permanently
reduce your outstanding indebtedness to the Banks under the Credit Agreement,
the Union Bank Credit Agreement and the Bank of California Credit Agreement,
respectively (collectively, the "Bank Agreements"):
Union Bank 44.05%
Wells Fargo Bank 18.35%
Bank of California 37.60%
(b) On or before April 15, 1994, you will deliver to us a legal
opinion of O'Melveny & Myers to the effect that the sale by you of your multi-
family and industrial properties to Pacific Gulf Properties, Inc. was duly
authorized by your Board of Directors.
(c) Notwithstanding any provision to the contrary in any of the Bank
Agreements, the Commitment (as defined in each of the Bank Agreements) of each
of the Banks under the Bank Agreements will be reduced effective as of the date
hereof to an amount equal to the outstanding principal balance under the Credit
Agreement (including the amount of any outstanding letter of credit), and shall
be automatically further reduced by the amount of any payment or prepayment of
principal or any reduction in the amount of any outstanding letter of credit on
the date of such payment, prepayment or reduction, and the outstanding principal
balance, together with all accrued and unpaid interest, under each of the Bank
Agreements, will be due and payable in full on November 14, 1994. You
understand,
2
<PAGE>
however, that the two outstanding letters of credit issued by us will still
expire on the expiration dates set forth in such letters of credit.
(d) From and after the date hereof, the basic interest rate per annum
under the Credit Agreement will be increased to the Applicable LIBO Rate plus
300 basis points or the Prime Rate plus 150 basis points, at your option. The
default interest rate shall remain unchanged.
(e) No later than April 15, 1994, you will provide the Bank with a
repayment plan in writing detailing how you propose to repay your outstanding
obligations to the Bank.
(f) You hereby covenant and agree to pay to the Banks in the
percentages set forth in paragraph (a) above, from and after the date hereof,
(i) any and all proceeds from the financing or refinancing or sale, condemnation
or other disposition of any of your assets, including, without limitation,
partnership interests (net of usual and customary closing costs and amounts
necessary to pay preexisting indebtedness secured by any specific asset sold,
condemned or otherwise disposed of, if any), and (ii) any and all cash proceeds
received by you from the financing or refinancing or sale, condemnation or other
disposition of any assets owned by any partnership of which you are a partner or
received by you in connection with the formation of any new partnership or joint
venture, which cash proceeds will be applied to permanently reduce your
outstanding indebtedness to the Banks under the Bank Agreements.
(g) If, as and when requested by us from time to time hereafter, you
will promptly grant us security interests in and liens on such of your real and
personal property (except the real or personal property known as the Santa Anita
Racetrack and the Santa Anita Fashion Park located in Arcadia, California (the
"Arcadia Properties") and the Towson Town Center Associates property located in
Towson, Maryland) as may be specified by us in writing; provided, however, that
the undersigned agrees not to lien any of your assets prior to April 30, 1994
unless an Event of Default, other than the Events of Default and Unmatured
Events of Default waived hereby, occurs on or before such date; and provided
further that if any payment or additional material financial Event of Default
occurs at any time after the date hereof, other than the expiration of the
waiver period and the Events of Default and the Unmatured Events of Default
waived hereby, you will promptly grant us a security interest in and lien on the
Arcadia Properties if requested by us.
3
<PAGE>
If, however, no Event of Default occurs after the date hereof, but
during the course of our negotiations with you with respect to restructuring
your outstanding indebtedness to us under the Credit Agreement, we determine
that additional collateral is required to secure the restructured obligations,
you will negotiate with us in good faith regarding granting us a lien on the
Arcadia Properties. (We acknowledge that this is only an agreement to negotiate
and that any liens on the Arcadia Properties would be subject to the approval of
your Board of Directors.) You therefore agree that you will not sell, assign or
otherwise transfer the Arcadia Properties, or any partial interest therein, to
any other Person without our prior written consent. You hereby also agree that
the provisions of Section 7.11 of the Credit Agreement shall henceforth apply to
all of your assets. The failure of any condition hereunder shall be deemed an
Event of Default.
Any and all security interests and liens granted to us will secure the
payment and performance of your obligations under the Credit Agreement and will
be granted pursuant to security documentation in form and substance acceptable
to us in our sole and absolute discretion, and the costs associated with the
preparation of such security documentation and perfection of the liens created
thereby shall be paid by you. You also agree that we and our agents and
representatives may commence appraising your California and Arizona shopping
center properties at your expense immediately following execution hereof. The
results of such appraisals will be made available to you following your
reimbursement of the cost of such appraisals; and
(h) From and after the date hereof, the Bank is authorized to charge
your Account No.4643068844 with the Bank in order to cause timely payment to be
----------
made to the Bank of all principal, interest, fees, expenses and charges due
under the Credit Agreement if not paid when due.
You hereby agree that the Credit Agreement is hereby ratified and
confirmed in all respects, that all of the terms and conditions thereof, except
as otherwise waived hereby, shall remain in full force and effect and that you
have no defenses, offsets or claims whatsoever in respect thereto. You further
agree that the waiver to be effected pursuant hereto shall be limited to the
specific provisions waived hereunder for the specific period of time provided
herein and the specific events and facts surrounding such waiver, and that such
waiver shall not be deemed to constitute a consent to, a waiver of or a
departure from any other provision of the Credit Agreement or any other
agreement, document or instrument executed and delivered in connection
therewith, all of which are to remain in full
4
<PAGE>
force and effect. We understand, however, that after our review of the repayment
plan you are to submit to us on or before April 15, 1994, provided no additional
Event of Default or Unmatured Event of Default occurs prior to April 30, 1994,
an extension of the waiver period on the same terms and conditions stated herein
may be necessary in order to complete the restructuring of your outstanding
indebtedness to us under the Credit Agreement and the documentation thereof. You
understand, however, that any such extension is subject to approval by all of
the Banks at that time.
If the foregoing correctly sets forth your understanding of our
agreement, please indicate your acceptance below whereupon this letter shall
constitute an agreement between us in accordance with its terms.
Very truly yours,
Wells Fargo Bank, National
Association, a national banking
association
By: /s/ KEVIN GILHOOLY
-----------------------------
Its: Vice President
----------------------------
By:
----------------------------
Its:
----------------------------
AGREED TO AND ACCEPTED
AS OF MARCH 25, 1994:
Santa Anita Realty Enterprises, Inc.,
a Delaware corporation
By: /s/ S.C. CHILLINGWORTH
----------------------
Its: Vice Chairman
-------------------
5
<PAGE>
EXHIBIT 4.7
------------
March 25, 1994
Santa Anita Realty Enterprises, Inc.
363 San Miguel Drive
Newport Beach, California 92660
Attn: Sherwood Chillingworth
Gentlemen:
Reference is made to that certain Revolving Credit and Term Note
Agreement, dated as of November 21, 1989, as amended, between us (the "Credit
Agreement"). Capitalized terms used herein without definition shall have the
meanings ascribed to them in the Credit Agreement.
Section 7.10 of the Credit Agreement prohibits you from creating,
incurring, assuming or suffering to exist any Indebtedness in excess of the
lesser of $80,000,000 or six times Net Income, subject to certain exclusions.
Section 7.12 of the Credit Agreement requires you to maintain a Net
Worth of not less than $80 million plus 90% of the net proceeds of any issue or
sale of your equity securities and other additions to capital, other than
pursuant to your dividend reinvestment plan or any stock option plan or other
employee benefit plan.
Section 7.13 of the Credit Agreement requires you to maintain a ratio
of Indebtedness to Net Worth of not greater than 2.25 to 1.00.
Section 7.14 of the Credit Agreement requires you to ensure that your
Adjusted Net Income for the twelve months period ending on each fiscal quarter
exceeds twice your total interest expense.
You have advised us that you were not in compliance with the foregoing
financial covenants at December 31, 1993 and will not be in compliance at March
31, 1994. As a result of the foregoing noncompliance, you are also in breach of
certain covenants set forth in the Amended and Restated Credit Agreement, dated
as of November 14, 1989, between you and Wells Fargo Bank (the "Wells Fargo
Credit Agreement"), and the Revolving Credit Agreement, dated October 29, 1991,
between you and Union Bank (the "Union Bank Credit Agreement"), respectively.
You have therefore requested that the Bank waive any Events of Default or
Unmatured Events of Default arising under Sections 8.1(c)
<PAGE>
and 8.1(e) of the Credit Agreement as a result of the foregoing noncompliance
and defaults.
Subject to the terms and conditions hereof, the undersigned Bank
hereby waives through April 30, 1994 the Events of Default and Unmatured Events
of Default arising under Sections 8.1(c) and 8.1(e) of the Credit Agreement as a
result of your noncompliance with the financial covenants set forth in Sections
7.10, 7.12, 7.13 and 7.14 of the Credit Agreement at December 31, 1993 and March
31, 1994 and the defaults under the Wells Fargo Credit Agreement and the Union
Bank Credit Agreement if and only if the following conditions are timely
--------------
satisfied in full:
(a) Immediately upon your receipt thereof, the final disbursement of
loan proceeds, in an amount not less than $10 million, received by you and/or
Anita Associates from the Teachers Insurance and Annuity Association of America
pursuant to its Loan Commitment, dated June 11, 1993, will be paid over to Union
Bank, Wells Fargo Bank, National Association, and The Bank of California, N.A.
(collectively, the "Banks") in the percentages set forth below to permanently
reduce your outstanding indebtedness to the Banks under the Credit Agreement,
the Wells Fargo Credit Agreement and the Union Bank Credit Agreement,
respectively (collectively, the "Bank Agreements"):
Union Bank 44.05%
Wells Fargo Bank 18.35%
Bank of California 37.60%
(b) On or before April 15, 1994, you will deliver to us a legal
opinion of O'Melveny & Myers to the effect that the sale by you of your multi-
family and industrial properties to Pacific Gulf Properties, Inc. was duly
authorized by your Board of Directors.
(c) Notwithstanding any provision to the contrary in any of the Bank
Agreements, the Commitment (as defined in each of the Bank Agreements) of each
of the Banks under the Bank Agreements will be reduced effective as of the date
hereof to an amount equal to the outstanding principal balance under the Credit
Agreement (including the amount of any outstanding letter of credit), and shall
be automatically further reduced by the amount of any payment or prepayment of
principal or any reduction in the amount of any outstanding letter of credit on
the date of such payment, prepayment or reduction, and the outstanding principal
balance, together with all accrued and unpaid interest, under each of the Bank
Agreements, will be due and payable in full on November 14, 1994. You
understand, however, that the two outstanding letters of credit issued
2
<PAGE>
by Wells Fargo Bank will still expire on the expiration dates set forth in such
letters of credit.
(d) From and after the date hereof, the basic interest rate per annum
under the Credit Agreement will be increased to the Applicable LIBO Rate plus
300 basis points or the Prime Rate plus 150 basis points, at your option. The
default interest rate shall remain as set forth in Section 4.5 of the Credit
Agreement.
(e) No later than April 15, 1994, you will provide the Bank with a
repayment plan in writing detailing how you propose to repay your outstanding
obligations to the Bank.
(f) You hereby covenant and agree to pay to the Banks in the
percentages set forth in paragraph (a) above, from and after the date hereof,
(i) any and all cash proceeds from the financing or refinancing or sale,
condemnation or other disposition of any of your assets, including, without
limitation, partnership interests (net of usual and customary closing costs and
amounts necessary to pay preexisting indebtedness secured by any specific asset
sold, condemned or otherwise disposed of, if any), and (ii) any and all cash
proceeds received by you from the financing or refinancing or sale, condemnation
or other disposition of any assets owned by any partnership of which you are a
partner or received by you in connection with the formation of any new
partnership or joint venture, which cash proceeds will be applied to permanently
reduce your outstanding indebtedness to the Banks under the Bank Agreements.
(g) If, as and when requested by us from time to time hereafter, you
will promptly grant us security interests in and liens on such of your real and
personal property (except the real or personal property known as the Santa Anita
Racetrack and the Santa Anita Fashion Park located in Arcadia, California (the
"Arcadia Properties") and the Towson Town Center Associates property located
in Towson, Maryland) as may be specified by us in writing; provided, however,
that the undersigned agrees not to lien any of your assets prior to April 30,
1994 unless an Event of Default, other than the Events of Default and Unmatured
Events of Default waived hereby, occurs on or before such date; and provided
further that if any payment or additional material financial Event of Default
occurs at any time after the date hereof, other than the expiration of the
waiver period and the Events of Default and the Unmatured Events of Default
waived hereby, you will promptly grant us a security interest in and lien on the
Arcadia Properties if requested by us.
3
<PAGE>
If, however, no Event of Default occurs after the date hereof, but
during the course of our negotiations with you with respect to restructuring
your outstanding indebtedness to us under the Credit Agreement, we determine
that additional collateral is required to secure the restructured obligations,
you will negotiate with us in good faith regarding granting us a lien on the
Arcadia Properties. (We acknowledge that this is only an agreement to negotiate
and that any liens on the Arcadia Properties would be subject to the approval of
your Board of Directors.) You therefore agree that you will not sell, assign or
otherwise transfer the Arcadia Properties, or any partial interest therein, to
any other Person without our prior written consent. You hereby also agree that
the provisions of Section 7.11 of the Credit Agreement shall henceforth apply to
all of your assets. The failure of any condition hereunder shall be deemed an
Event of Default.
Any and all security interests and liens granted to us will secure the
payment and performance of your obligations under the Credit Agreement and will
be granted pursuant to security documentation in form and substance acceptable
to us in our sole and absolute discretion, and the costs associated with the
preparation of such security documentation and perfection of the liens created
thereby shall be paid by you. You also agree that we and our agents and
representatives may commence appraising your California and Arizona shopping
center properties at your expense immediately following execution hereof. The
results of such appraisals will be made available to you following your
reimbursement of the cost of such appraisals; and
(h) From and after the date hereof, the Bank is authorized to charge
your Account No.069-042676 with the Bank in order to cause timely payment to
----------
be made to the Bank of all principal, interest, fees, expenses and charges due
under the Credit Agreement if not paid when due.
You hereby agree that the Credit Agreement is hereby ratified and
confirmed in all respects, that all of the terms and conditions thereof, except
as otherwise waived hereby, shall remain in full force and effect and that you
have no defenses, offsets or claims whatsoever in respect thereto. You further
agree that the waiver to be effected pursuant hereto shall be limited to the
specific provisions waived hereunder for the specific period of time provided
herein and the specific events and facts surrounding such waiver, and that such
waiver shall not be deemed to constitute a consent to, a waiver of or a
departure from any other provision of the Credit Agreement or any other
agreement, document or instrument executed and delivered in connection
therewith, all of which are to remain in full
4
<PAGE>
force and effect. We understand, however, that after our review of the repayment
plan you are to submit to us on or before April 15, 1994, provided no additional
Event of Default or Unmatured Event of Default occurs prior to April 30, 1994,
an extension of the waiver period on the same terms and conditions stated herein
may be necessary in order to complete the restructuring of your outstanding
indebtedness to us under the Credit Agreement and the documentation thereof. You
understand, however, that any such extension is subject to approval by all of
the Banks at that time.
If the foregoing correctly sets forth your understanding of our
agreement, please indicate your acceptance below whereupon this letter shall
constitute an agreement between us in accordance with its terms.
Very truly yours,
The Bank of California, N. A.,
a national banking association
By: /s/ W.B. BARLEY
---------------------------
Its: Vice President
--------------------------
By:
---------------------------
Its:
--------------------------
AGREED TO AND ACCEPTED
AS OF MARCH 25, 1994:
Santa Anita Realty Enterprises, Inc.,
a Delaware corporation
By: /s/ S. C. CHILLINGWORTH
--------------------------------
Its: Vice Chairman
----------------------------
5
<PAGE>
EXHIBIT 4.8
-----------
March 25, 1994
Santa Anita Realty Enterprises, Inc.
363 San Miguel Drive
Newport Beach, California 92660
Attn: Sherwood Chillingworth
Gentlemen:
Reference is made to that certain Revolving Credit Agreement, dated
October 29, 1991, between us (the "Credit Agreement"). Capitalized terms used
herein without definition shall have the meanings ascribed to them in the Credit
Agreement.
Section 7.10 of the Credit Agreement prohibits you from creating,
incurring, assuming or suffering to exist any unsecured Indebtedness in excess
of the lesser of $95,000,000 or eight times Net Income, calculated on an
Unconsolidated Basis, subject to certain exclusions.
Section 7.12 of the Credit Agreement requires you at all times, on a
Consolidated Basis and on an Unconsolidated Basis, to maintain a Net Worth of
not less than $80 million plus 90% of the net proceeds of any issue or sale of
your equity securities and other additions to capital, other than pursuant to
your dividend reinvestment plan or any stock option plan or other employee
benefit plan.
Section 7.13 of the Credit Agreement requires you at all times to
maintain a ratio of Indebtedness to Net Worth of not greater than 2.00 to 1.00,
all calculated on an Unconsolidated Basis.
Section 7.14 of the Credit Agreement requires you to ensure that your
Adjusted Net Income for the twelve months period ending on each fiscal quarter
exceeds twice your total interest expense, all calculated on an Unconsolidated
Basis.
You have advised us that you were not in compliance with the foregoing
financial covenants at December 31, 1993 and will not be in compliance at March
31, 1994. As a result of the foregoing noncompliance, you are also in breach of
certain covenants set forth in the Amended and Restated Credit Agreement, dated
as of November 14, 1989, between you and Wells Fargo Bank (the "Wells Fargo
Credit Agreement"), and the Revolving Credit and Term Loan Agreement, dated as
of November 21, 1989, as amended, between you and The Bank of California, N.A.
(the "Bank of
<PAGE>
California Credit Agreement"), respectively. You have therefore requested that
the Bank waive any Events of Default or Unmatured Events of Default arising
under Sections 8.1(c) and 8.1(e) of the Credit Agreement as a result of the
foregoing noncompliance and defaults.
Subject to the terms and conditions hereof, the undersigned Bank
hereby waives through April 30, 1994 the Events of Default and Unmatured Events
of Default arising under Sections 8.l(c) and 8.1(e) of the Credit Agreement as a
result of your noncompliance with the financial covenants set forth in Sections
7.10, 7.12, 7.13 and 7.14 of the Credit Agreement at December 31, 1993 and March
31, 1994 and the defaults under the Wells Fargo Credit Agreement and the Bank of
California Credit Agreement if and only if the following conditions are timely
-----------
satisfied in full:
(a) Immediately upon your receipt thereof, the final disbursement of
loan proceeds, in an amount not less than $10 million, received by you and/or
Anita Associates from the Teachers Insurance and Annuity Association of America
pursuant to its Loan Commitment, dated June 11, 1993, will be paid over to Union
Bank, Wells Fargo Bank, National Association, and The Bank of California, N.A.
(collectively, the "Banks") in the percentages set forth below to permanently
reduce your outstanding indebtedness to the Banks under the Credit Agreement,
the Wells Fargo Credit Agreement and the Bank of California Credit Agreement,
respectively (collectively, the "Bank Agreements"):
Union Bank 44.05%
Wells Fargo Bank 18.35%
Bank of California 37.60%
(b) On or before April 15, 1994, you will deliver to us a legal
opinion of O'Melveny & Myers to the effect that the sale by you of your multi-
family and industrial properties to Pacific Gulf Properties, Inc. was duly
authorized by your Board of Directors.
(c) Notwithstanding any provision to the contrary in any of the Bank
Agreements, the Commitment (as defined in each of the Bank Agreements) of each
of the Banks under the Bank Agreements will be reduced effective as of the date
hereof to an amount equal to the outstanding principal balance under the Credit
Agreement (including the amount of any outstanding letter of credit), and shall
be automatically further reduced by the amount of any payment or prepayment of
principal or any reduction in the amount of any outstanding letter of credit on
the date of such payment, prepayment or reduction, and the outstanding principal
balance, together with all accrued and unpaid
2
<PAGE>
interest, under each of the Bank Agreements, will be due and payable in full on
November 14, 1994. You understand, however, that the two outstanding letters of
credit issued by Wells Fargo Bank will still expire on the expiration dates set
forth in such letters of credit.
(d) From and after the date hereof, the basic interest rate per annum
under the Credit Agreement will be increased to the Applicable LIBO Rate plus
300 basis points or the Reference Rate plus 150 basis points, at your option.
The default interest rate shall remain at the Reference Rate plus 200 basis
points.
(e) No later than April 15, 1994, you will provide the Bank with a
repayment plan in writing detailing how you propose to repay your outstanding
obligations to the Bank.
(f) You hereby covenant and agree to pay to the Banks in the
percentages set forth in paragraph (a) above, from and after the date hereof,
(i) any and all cash proceeds from the financing or refinancing or sale,
condemnation or other disposition of any of your assets, including, without
limitation, partnership interests (net of usual and customary closing costs and
amounts necessary to pay preexisting indebtedness secured by any specific asset
sold, condemned or otherwise disposed of, if any), and (ii) any and all cash
proceeds received by you from the financing or refinancing or sale, condemnation
or other disposition of any assets owned by any partnership of which you are a
partner or received by you in connection with the formation of any new
partnership or joint venture, which cash proceeds will be applied to permanently
reduce your outstanding indebtedness to the Banks under the Bank Agreements.
(g) If, as and when requested by us from time to time hereafter, you
will promptly grant us security interests in and liens on such of your real and
personal property (except the real or personal property known as the Santa Anita
Racetrack and the Santa Anita Fashion Park located in Arcadia, California (the
"Arcadia Properties") and the Towson Town Center Associates property located in
Towson, Maryland) as may be specified by us in writing; provided, however, that
the undersigned agrees not to lien any of your assets prior to April 30, 1994
unless an Event of Default, other than the Events of Default and Unmatured
Events of Default waived hereby, occurs on or before such date; and provided
further that if any payment or additional material financial Event of Default
occurs at any time after the date hereof, other than the expiration of the
waiver period and the Events of Default and the Unmatured Events of Default
waived hereby, you will promptly grant us a security
3
<PAGE>
interest in and lien on the Arcadia Properties if requested by us.
If, however, no Event of Default occurs after the date hereof, but
during the course of our negotiations with you with respect to restructuring
your outstanding indebtedness to us under the Credit Agreement, we determine
that additional collateral is required to secure the restructured obligations,
you will negotiate with us in good faith regarding granting us a lien on the
Arcadia Properties. (We acknowledge that this is only an agreement to negotiate
and that any liens on the Arcadia Properties would be subject to the approval of
your Board of Directors.) You therefore agree that you will not sell, assign or
otherwise transfer the Arcadia Properties, or any partial interest therein, to
any other Person without our prior written consent. You hereby also agree that
the provisions of Section 7.11 of the Credit Agreement shall henceforth apply to
all of your assets. The failure of any condition hereunder shall be deemed an
Event of Default.
Any and all security interests and liens granted to us will secure the
payment and performance of your obligations under the Credit Agreement and will
be granted pursuant to security documentation in form and substance acceptable
to us in our sole and absolute discretion, and the costs associated with the
preparation of such security documentation and perfection of the liens created
thereby shall be paid by you. You also agree that we and our agents and
representatives may commence appraising your California and Arizona shopping
center properties at your expense immediately following execution hereof. The
results of such appraisals will be made available to you following your
reimbursement of the cost of such appraisals.
(h) From and after the date hereof, the Bank is authorized to charge
your Account No.450274597 with the Bank in order to cause timely payment to be
---------
made to the Bank of all principal, interest, fees, expenses and charges due
under the Credit Agreement if not paid when due.
You hereby agree that the Credit Agreement is hereby ratified and
confirmed in all respects, that all of the terms and conditions thereof, except
as otherwise waived hereby, shall remain in full force and effect and that you
have no defenses, offsets or claims whatsoever in respect thereto. You further
agree that the waiver to be effected pursuant hereto shall be limited to the
specific provisions waived hereunder for the specific period of time provided
herein and the specific events and facts surrounding such waiver, and that such
waiver shall not be deemed to constitute a consent to, a waiver of or a
departure from any
4
<PAGE>
other provision of the Credit Agreement or any other agreement, document or
instrument executed and delivered in connection therewith, all of which are to
remain in full force and effect. We understand, however, that after our review
of the repayment plan you are to submit to us on or before April 15, 1994,
provided no additional Event of Default or Unmatured Event of Default occurs
prior to April 30, 1994, an extension of the waiver period on the same terms and
conditions stated herein may be necessary in order to complete the restructuring
of your outstanding indebtedness to us under the Credit Agreement and the
documentation thereof. You understand, however, that any such extension is
subject to approval by all of the Banks at that time.
If the foregoing correctly sets forth your understanding of our
agreement, please indicate your acceptance below whereupon this letter shall
constitute an agreement between us in accordance with its terms.
Very truly yours,
Union Bank, a California banking
corporation
By: /s/ TIMOTHY S. CARNEY
-------------------------------
Its: Assistant Vice President
------------------------------
By: /s/ EVERETT ORRICK
-------------------------------
Its: Vice President
-------------------------------
AGREED TO AND ACCEPTED
AS OF MARCH 25, 1994:
Santa Anita Realty Enterprises, Inc.,
a Delaware corporation
By: /s/ S.C. CHILLINGWORTH
---------------------------
Its: Vice Chairman
---------------------------
5
<PAGE>
[DEVELOPER]
SECOND AMENDMENT TO GROUND LEASE I
THIS SECOND AMENDMENT TO GROUND LEASE I ("SECOND AMENDMENT TO GROUND
LEASE I") is made and entered into as of December 29, 1993, by and between
SANTA ANITA REALTY ENTERPRISES, INC., a Delaware corporation ("LANDLORD"),
and ANITA ASSOCIATES, a California limited partnership in which the general
partner is Hahn-UPI, a California limited partnership ("TENANT").
W I T N E S S E T H:
WHEREAS, Landlord's predecessor-in-interest, Santa Anita Consolidated,
Inc., a California corporation, and Tenant entered into (i) that certain Ground
Lease I dated as of April 6, 1972, as amended and restated as of January 15,
1974, an Amended Short Form of Lease I of which was recorded on January 25,
1974, in Book M4581, Page 864, as Document No. 472 in the Official Records
("OFFICIAL RECORDS") of Los Angeles County, California (collectively, "ORIGINAL
GROUND LEASE I") , and (ii) that certain Amendment to Ground Lease I dated as of
January 19, 1978, a Second Amended Short Form of Lease I of which was recorded
on January 19, 1978 as Instrument No. 78-71476 in the Official Records
(collectively, "FIRST AMENDMENT TO GROUND LEASE I"); and
WHEREAS, the Original Ground Lease I as amended by the First Amendment
to Ground Lease I are collectively referred to herein as "GROUND LEASE I"; and
WHEREAS, Landlord and Tenant desire to amend said Ground Lease I as
more particularly hereinafter set forth;
NOW, THEREFORE, for and in consideration of the covenants and
agreements hereinafter set forth, and the mutual covenants and agreements
contained in that certain Ground Lease I hereinabove referred to, Landlord and
Tenant do hereby amend said Ground Lease I as follows:
1. The definition of "Leased Premises" on page 1 of the First
Amendment to Ground Lease I is hereby deleted and the following definition of
"Leased Premises" is substituted therefor:
<PAGE>
"'Leased Premises' - That certain land situated in the City of
Arcadia, County of Los Angeles, State of California, described as Parcels
No. 1, 2 and 4 of Parcel Map No. 23862, more particularly described on
Exhibit B hereto, and shown as "Developer Tract" on Page B1 of Exhibit B to
REA; together with and subject to, respectively, certain easements more
particularly set forth on Exhibit D hereto."
2. The definition of "Major Department Store" on page 3 of the
Original Ground Lease I, is amended as follows:
(i) The reference to "J.W. Robinson" is deleted and substituted
in lieu thereof is "The May Department Stores Company", and (ii) added at
the end of such definition is "Nordstrom, Inc.".
3. The definition of "Parcel No." on page 2 of the First Amendment
to Ground Lease I is hereby deleted and the following definition of Parcel No."
is hereby substituted therefor:
"'Parcel No.' - Shall mean the applicable parcel shown on Page B2
of Exhibit B to the REA."
4. The definition of "REA" on page 2 of the First Amendment to
Ground Lease I is hereby deleted and the following definition of "REA" is hereby
substituted therefor:
"'REA' - Shall mean that certain Construction, Operation and
Reciprocal Easement Agreement dated as of January 25, 1974 and recorded on
January 25, 1974 as Document No. 482 in the Official Records of Los Angeles
County, California ("Official Records"), as amended by (i) Amendment No. 1
to Construction, Operation and Reciprocal Easement Agreement dated as of
January 19, 1978 and recorded on January 19, 1978 as Instrument No. 78-
71491 in the Official Records, (ii) Amendment No. 2 to Construction,
Operation and Reciprocal Easement Agreement dated as of August 16, 1989
and recorded on October 26, 1989 as Instrument No. 89-1725066 in the
Official Records, and (iii) Amendment No. 3 to
2
<PAGE>
Construction, Operation and Reciprocal Easement Agreement dated of even
date herewith and to be recorded in the Official Records."
5. The definition of "Shopping Center" on page 2 of the First
Amendment to Ground Lease I is hereby deleted and the following definition of
"Shopping Center" is hereby substituted therefor:
"'Shopping Center' - The improvements constructed, or to be
constructed, on that certain real property more particularly described on
Exhibit "F" hereto, consisting of retail stores contained within an
enclosed air-conditioned two-story mall and containing not less than four
(4) Major Department Stores and 1,000,000 square feet of retail commercial
space including said department stores."
6. Section 1.02 on pages 2 and 3 of the First Amendment to Ground
Lease I is hereby deleted and the following Section 1.02 is hereby substituted
therefor:
"1.02. On April 6, 1972, Landlord and Tenant entered into a
Ground Lease covering Parcels 1 to 3 as shown on Lot Split No. L-74-2 filed
in the office of the City Engineer of the City of Arcadia. A Short Form
Memorandum of said Lease was recorded on April 10, 1972 as Instrument No.
2974 in Book No. M4038, Page 967, Official Records of Los Angeles County
and re-recorded on September 14, 1973 as Instrument No. 824 in Book M4467,
Page 69, Official Records. Tenant thereafter commenced construction of the
Shopping Center. In order to facilitate the leasing and the construction
of improvements on portions of the Shopping Center, Landlord and Tenant
have agreed to divide a portion of the Shopping Center property into four
parcels and to enter into a separate, but substantially identical, amended
lease as to each of the four parcels (the 'Separate Leases'). The four
parcels are generally described as the Developer Parcel, the Broadway
Parcel, the Penney
3
<PAGE>
Parcel, and the Robinson's Parcel. Tenant will sublease a portion of the
Developer Parcel to Nordstrom, Inc., which portion of the Developer Parcel
is generally described as the Nordstrom Parcel.
This amended and restated Lease covers one of the four
aforedescribed separate parcels leased under the Separate Leases. The
Tenant's obligation under each of the four Separate Leases shall be as
stated in said Separate Lease as to the premises leased thereunder.
Notwithstanding anything contained in this Lease, wherever in this Lease
Tenant is obligated to perform or cause to be performed any act or
obligation or to prohibit or cause to be prohibited any act or occurrence
on any portion of the Shopping Center not leased to Tenant under this
Lease, Tenant's obligation for such performance or prohibition, as the case
may be, shall be for the diligent and best efforts and enforcement in good
faith of such rights, if any, to perform, prohibit or cause performance or
prohibition, as the case may be, as are granted to Tenant in the REA with
respect to such other portions of the Shopping Center."
7. The following new Section 2.03A is hereby added to Ground Lease I
immediately after Section 2.03 on page 7 of the Original Ground Lease I:
"2.03.A. 0ption Period. Landlord hereby grants Tenant three
-------------
(3) successive options ('First 'Option', 'Second Option' and 'Third
Option', respectively) to extend the term of this Lease on the same terms
and conditions as set forth in this Lease, but at the rent set forth in
Section 3.03 below for the Option Period (as that term is defined in this
Section 2.03.A.). The First Option shall be for an additional term of ten
(10) years commencing upon the expiration of the Third Period ('First
Extension') and shall be exercised only by written notice ('Option Notice')
delivered to Landlord at least six (6) months,
4
<PAGE>
but not more than twelve (12) months, prior to the expiration of the Third
Period. The Second Option shall be for an additional term of ten (10) years
commencing upon the expiration of the First Extension ('Second Extension')
and shall be exercised only by Option Notice delivered to Landlord at least
six (6) months, but not more than twelve (12) months, before the expiration
of the First Extension. The Third Option shall be for an additional term of
five (5) years commencing upon the expiration of the Second Extension and
shall be exercised only by Option Notice delivered to Landlord at least six
(6) months, but not more than twelve (12) months, before the expiration of
the Second Extension. The term 'Option', as used herein, shall refer to the
First Option, the Second Option and/or the Third Option, as shall be
appropriate for the context in which such word appears; and, the term
'Option Period', as used herein, shall refer to the First Extension, the
Second Extension and/or the Third Extension, as shall be appropriate for
the context in which such word appears. If Tenant does not timely deliver
an Option Notice within the time period set forth herein, all then
unexercised Options shall lapse and Tenant shall have no further right to
extend the term of this Lease. Tenant shall have no further right to extend
the term of this Lease beyond the Third Extension. It is an express
condition precedent to the exercise of any Option by Tenant that at the
time of the exercise of the Option and at all times subsequent to such
exercise but prior to, and upon the date of, the commencement of the First
Extension, the Second Extension, or the Third Extension, as the case may
be, Tenant shall not be in default (beyond the expiration of the applicable
cure period provided for in this Lease) under any of the provisions of this
Lease."
5
<PAGE>
8. Section 3.03 on page 4 of the First Amendment to Ground Lease I is
hereby deleted and the following Section 3.03 is hereby substituted therefor:
"3.03. Third Period and Option Period.
-------------------------------
(i) During the first nineteen (19) years of the Third Period of
this Lease (i.e., from October 20, 1974 to October 19, 1993), Tenant agrees
to pay to Landlord as rent in lawful money of the United States, the sum of
$219,859.31 per year, in equal monthly installments of $18,321.61;
(ii) During the twentieth (20th), twenty-first (21st) and twenty-
second (22nd) year of the Third Period of this Lease (i.e., from October
20, 1993 until October 19, 1996), Tenant agrees to pay to Landlord as rent
in lawful money of the United States, the sum of $269,859.31 per year, in
equal monthly installments of $22,488.28;
(iii) During the twenty-third (23rd) through thirty-third (33rd)
year, inclusive, of the Third Period of this Lease (i.e., from October 20,
1996 until October 19, 2007), Tenant agrees to pay to Landlord as rent in
lawful money of the United States, the sum of $537,254.89 per year, in
equal monthly installments of $44,771.24; and
(iv) The rental payment for the last thirty (30) years of the
Third Period (i.e., from October 20, 2007 until October 19, 2037) and all
of the Option Period shall be the amounts calculated and established
pursuant to Section 3.08 hereof.
All rental payments to be made by Tenant hereunder shall be paid in
advance on the first day of each month during the Third Period or the Option
Period, as the case may be, and shall be made in addition to all other payments
required to be made hereunder by Tenant."
9. Article XVII of the First Amendment to Ground Lease I is amended by
adding thereto a new Section 17.03 as follows:
6
<PAGE>
"17.03. Concurrently with the execution of this Second Amendment
to Ground Lease I, Tenant is entering into a Ground Sublease Agreement
('Nordstrom Sublease') with Nordstrom, Inc., a Washington corporation
('Nordstrom'). Tenant is subleasing to Nordstrom a portion of the Leased
Premises and Nordstrom is to construct thereon a retail department store.
Subject to Landlord approving the Nordstrom Sublease, Landlord agrees that,
upon the request of Tenant or Nordstrom, it will enter into a Non
Disturbance Agreement with Tenant and Nordstrom in the form of that
attached hereto as Exhibit "E-l" attached hereto and by this reference made
a part hereof."
10. Exhibit "A" of Ground Lease I (attached as an exhibit to the First
Amendment to Ground Lease I) is hereby deleted in its entirety.
11. Exhibit "B" of Ground Lease I (attached as an exhibit to the First
Amendment to Ground Lease I) is hereby deleted and Exhibit "B" attached hereto
and made a part hereof is hereby substituted therefor.
12. Exhibit "C" of Ground Lease I (attached as an exhibit to the First
Amendment to Ground Lease I) is hereby deleted in its entirety.
13. Exhibit "D-l" of Ground Lease I (attached as an exhibit to the
First Amendment to Ground Lease I) is hereby deleted and Exhibit "D-1"
attached hereto and made a part hereof is hereby substituted therefor.
14. There shall be added to Ground Lease I Exhibit "E-1" and Exhibit
"F", each attached hereto and made a part hereof by this reference.
15. Except as herein modified, Ground Lease I shall remain in full
force and effect and nothing in this Second Amendment to Ground Lease I shall be
deemed to waive or modify the provisions of Ground Lease I.
16. In the event of a conflict or controversy between the terms and
provisions of this Second Amendment to Ground Lease I and the terms and
provisions of Ground Lease I, the terms and
7
<PAGE>
provisions of this Second Amendment to Ground Lease I shall control.
17. The provisions of this Second Amendment to Ground Lease I shall
bind and inure to the benefit of parties hereto and their respective heirs,
representatives, successors and assigns of the parties hereto.
18. This Second Amendment to Ground Lease I may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, this Second Amendment to Ground Lease I is entered
into by the parties hereto as of the date first above written.
LANDLORD: SANTA ANITA REALTY
ENTERPRISES, INC.,
a Delaware corporation
By: /s/ GLENN L. CARPENTER
-----------------------------
Its: President
-----------------------------
By: /s/ DONALD G. HERRMAN
-----------------------------
Its: Vice President
-----------------------------
TENANT: ANITA ASSOCIATES,
a California limited partnership
By: HAHN-UPI,
a California limited
partnership, its General Partner
By: ERNEST W. HAHN, INC.,
a California corporation dba "The
Hahn Company", its General Partner
By:/s/ WILLIAM H.W. DOYLE
-------------------------------
Its: Senior Vice President
-------------------------------
By: /s/ MAYNARD RICE
-------------------------------
Its: Vice President
-------------------------------
8
<PAGE>
EXHIBIT B
LEGAL DESCRIPTION OF LEASED PREMISES
PARCELS 1,2 AND 4 OF PARCEL MAP NO. 23862, IN THE CITY OF ARCADIA, COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA, AS SHOWN ON THE MAP FILED IN BOOK 261, PAGES 91
THROUGH 95 INCLUSIVE OF PARCEL MAPS IN THE OFFICE OF THE RECORDER OF LOS ANGELES
COUNTY.
B-1
<PAGE>
EXHIBIT D-1
LEGAL DESCRIPTION OF
DOMINANT TENEMENT A
[LEASED PREMISES]
PARCELS 1,2 AND 4 OF PARCEL MAP NO. 23862, IN THE CITY OF ARCADIA, COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA, AS SHOWN ON THE MAP FILED IN BOOK 261, PAGES 91
THROUGH 95 INCLUSIVE OF PARCEL MAPS IN THE OFFICE OF THE RECORDER OF LOS ANGELES
COUNTY.
D-1-1
<PAGE>
EXHIBIT "E-1"
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
This Subordination, Non-Disturbance and Attornment Agreement (the
"AGREEMENT") is made and entered into as of this _____ day of _________________,
19___, by and between NORDSTROM, INC., a Washington corporation (the
"SUBTENANT"), SANTA ANITA REALTY ENTERPRISES, INC., a Delaware corporation (the
"OWNER") and ANITA ASSOCIATES, a California limited partnership (the
"LANDLORD").
WITNESSETH:
----------
WHEREAS, Landlord and Subtenant entered into that certain sublease
(the "SUBLEASE") of even date herewith for the sublease of that certain premises
(the PREMISES") located in the City of Arcadia, County of Los Angeles, State of
California, as more particularly described in Exhibit "A" attached hereto and
incorporated herein by this reference; and
WHEREAS, Owner is the fee owner of the Premises and leases the
Premises to the Landlord pursuant to that certain Ground Lease I dated as of
April 6, 1972, as amended and restated as of January 15, 1974, and as further
amended by Amendment to Ground Lease I dated as of January 19, 1978, and Second
Amendment to Ground Lease I of even date herewith (collectively the "MASTER
LEASE"); and
WHEREAS, the parties desire to acknowledge Subtenant's interest in the
Premises pursuant to the terms and conditions contained in the Sublease for the
full balance of the term and any extension provided for therein (the "TERM")
except as it may be terminated under the Sublease; and
WHEREAS, Landlord has covenanted and agreed that it, as Landlord,
shall not disturb the Subtenant's quiet possession of the Premises by virtue of
its Master Lease from the Owner.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the parties hereto
hereby agree as follows:
1. SUBORDINATION, RECOGNITION AND NON-DISTURBANCE. The parties agree
----------------------------------------------
that the Sublease is and shall continue hereafter to be subject and subordinate
to the Master Lease and to all modifications, extensions and renewals thereof.
In the event of the termination of the Master Lease by re-entry, notice,
conditional limitation, surrender, summary proceedings, or other action or
proceeding or otherwise, or, in the event the Master Lease shall terminate or
expire for any reason, before the expiration of the Term of the Sublease, and if
the Sublease shall, immediately prior to such surrender, termination or
expiration, be in full force and effect, and the Subtenant is not then in
default in any of the terms thereof, then, and in any of said events, (A)
Subtenant shall not be made a party in any action or proceeding to remove or
evict the Landlord nor shall Subtenant be evicted or removed or its possession
or right of possession be disturbed or in any way interfered with, (B) the
Sublease shall continue in full force and effect as a direct lease from Owner to
Subtenant under the terms and provisions of the Sublease and Owner agrees to
recognize Subtenant's leasehold rights contained in the Sublease,
notwithstanding any contrary provision in the Master Lease, and (C) Owner agrees
to assume and perform all the obligations on the part of Landlord to be
performed under the Sublease from and after the date Owner succeeds to the
interest of Landlord under the Sublease except that in no event shall the Owner
(x) be obligated to perform or cause to be performed any of the covenants,
E-1
<PAGE>
agreements or other undertakings of the Landlord contained in the Sublease with
respect to completion of construction at the Shopping Center and/or the opening
of certain improvements thereon wheresoever such covenants, agreements and
undertakings appear (including, but not limited to, those contained in Articles
VI and VII of the Sublease), (y) be liable to pay all or any portion of the
"Subtenant's Reimbursement" (as that term is defined in Article VIII-D of
Sublease), and/or (z) be liable to pay all or any portion of the "Direct
Construction Costs" (as that term is defined in Article XXVIII of the Sublease)
that Subtenant may be entitled to receive if it exercises its right to terminate
the Sublease pursuant to such Article XXVIII. In addition, notwithstanding
anything to the contrary contained herein, the Owner shall not be (i) liable for
any act, omission or accrued liability of any prior landlord (including, without
limitation, Landlord), (ii) subject to any offsets or defenses which the
Subtenant might have against any prior landlord, (iii) bound by any amendment or
modification of the Sublease made without the prior written consent of Owner, or
(iv) bound by any rent or other payments which the Subtenant might have paid to
any prior landlord more than thirty (30) days in advance.
2. ATTORNMENT. In the event the Master Lease shall terminate or expire
----------
for any reason before the expiration of the Term of the Sublease and the Owner
succeeds to the interest of the landlord under the Sublease as provided in
paragraph 1 above, the Subtenant shall be bound to the Owner under all of the
terms of the Sublease for the remaining balance of the Term thereof, with the
same force and effect as if the Owner were the landlord under the Sublease, and
the Subtenant hereby attorns to the Owner as its landlord, such attornment to be
effective and self-operative, without the execution of any further instrument on
the part of any of the parties hereto, immediately upon the Owner succeeding to
the interest of the Landlord under the Sublease.
3. CONDEMNATION AWARDS AND INSURANCE PROCEEDS. Notwithstanding
------------------------------------------
anything to the contrary contained the Sublease, all condemnation awards and
insurance proceeds paid or payable with respect to the Leased Premises and/or to
the Landlord Tract (as defined in the Sublease) shall be applied and paid in the
manner set forth in the Master Lease. In the event Subtenant or anyone holding
under or through Subtenant shall become entitled to any portion of any
condemnation awards and/or insurance proceeds pursuant to the Sublease, such
awards and/or proceeds, together with any additional sums to which any such
person, its legal representatives, successors or assigns shall become entitled
in connection therewith, shall be deducted entirely from the share of Landlord
in each and every instance and Owner's share of such awards and/or proceeds (as
determined pursuant to the provisions of the Master Lease) shall not in any way
or in any instance be affected or decreased thereby.
4. BINDING EFFECT. The rights and obligations hereunder of the
--------------
Subtenant and the Owner shall bind and inure to the benefit of their respective
successors and assigns.
5. NOTICES. All notices between the parties hereto shall be given in
-------
writing and sent byregistered or certified mail, postage prepaid, return
receipt requested, addressed as follows:
Subtenant: Nordstrom, Inc.
1506 Westlake
Seattle, Washington 98101
Attention: Real Estate
Notices
Owner: Santa Anita Realty Enterprises, Inc.
363 San Miguel Drive, Suite 100
Newport Beach, California 92660
Attention: President
E-2
<PAGE>
Landlord: Anita Associates
c/o Ernest W. Hahn, Inc.
4350 La Jolla Village Drive,
Suite 700
San Diego, California 92122-1233
Attention: Legal Department-
Santa Anita Fashion Park
Any party may change its address for notice given above, or require that
additional copies be given by sending written notice of such change or
requirement to the other parties in the manner provided for herein.
6. GOVERNING LAW. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of California.
7. AGREEMENT RUNS WITH THE LAND. This Agreement and the covenants
-----------------------------
herein contained are intended to run with Premises.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
"Subtenant"
NORDSTROM, INC. a Washington corporation
By:
-------------------------------------
Its:
-------------------------------
"Owner"
SANTA ANITA REALTY ENTERPRISES, INC.,
a Delaware corporation
By:
-------------------------------------
Its:
-------------------------------
By:
-------------------------------------
Its:
-------------------------------
"Landlord"
ANITA ASSOCIATES, a California
limited partnership
By: HAHN-UPI, a California
limited partnership, its
general partner
By: ERNEST W. HAHN, INC,, a
California corporation dba "The Hahn
Company," as general partner
By:
---------------------------------
Its:
-------------------------
By:
---------------------------------
Its:
-------------------------
E-3
<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)
E-4
<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(lee), 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)
E-5
<PAGE>
EXHIBIT A
Legal Description of Nordstrom Tract
------------------------------------
PARCEL 2 OF PARCEL MAP NO. 23862, IN THE CITY OF ARCADIA, COUNTY OF LOS ANGELES,
STATE OF CALIFORNIA, AS SHOWN ON THE MAP FILED IN BOOK 261, PAGES 91 THROUGH 95
--- -- --
INCLUSIVE OF PARCEL MAPS IN THE OFFICE OF THE RECORDER OF LOS ANGELES COUNTY.
E-6
<PAGE>
EXHIBIT F
LEGAL DESCRIPTION OF SHOPPING CENTER TRACT
PARCELS 1 THROUGH 4, INCLUSIVE, OF PARCEL MAP NO. 23862, IN THE CITY OF ARCADIA,
COUNTY OF LOS ANGELES, STATE OF CALIFORNIA, AS SHOWN ON THE MAP FILED IN BOOK
261, PAGES 91 THROUGH 95 INCLUSIVE OF PARCEL MAPS IN THE OFFICE OF THE RECORDER
- --- -- --
OF LOS ANGELES COUNTY
AND
PARCELS 2 AND 3 OF PARCEL MAP NO. 6374, IN THE CITY OF ARCADIA, COUNTY OF LOS
ANGELES, STATE OF CALIFORNIA, AS SHOWN ON THE MAP FILED IN BOOK 89, PAGES 76 AND
77 OF PARCEL MAPS IN THE OFFICE OF THE RECORDER OF LOS ANGELES COUNTY.
EXCEPTING THEREFROM THAT PORTION OF LAND DESCRIBED IN DEEDS TO THE CITY OF
ARCADIA RECORDED APRIL 26, 1993 AS INSTRUMENT NOS. 93-768461, 93-768462,
93-768463, 93-768464 AND 93-768465 OF OFFICIAL RECORDS IN THE OFFICE OF THE
RECORDER OF LOS ANGELES COUNTY.
F-1
<PAGE>
EXHIBIT 10.10
-------------
AMENDMENT 1993-1
TO THE
SANTA ANITA REALTY ENTERPRISES, INC.
1984 STOCK OPTION PROGRAM
(AMENDED AND RESTATED EFFECTIVE AS OF SEPTEMBER 22, 1988)
WHEREAS, Santa Anita Realty Enterprises, Inc. (the "Company") desires to
amend the above-referenced Plan to extend the expiration date of the Plan.
NOW, THEREFORE, the Plan is amended as follows:
1. Effective as of February 11, 1993, Section 3.10 is amended to read
as follows:
"3.10 Expiration.
----------
Unless previously terminated by the Board of Directors, this Plan shall
expire at the close of business on May 3, 1995, and no Option shall be granted
under it thereafter, but such expiration shall not affect any Option theretofore
granted."
IN WITNESS WHEREOF, the Company has caused this Amendment to be executed
on its behalf by a duly authorized officer.
SANTA ANITA REALTY ENTERPRISES, INC.
/s/DONALD G. HERRMAN
------------------------------------
By: Donald G. Herrman
Title: Secretary
<PAGE>
EXHIBIT 10.23
-------------
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (the "AGREEMENT") is made and entered into as of
February 17, 1994, by and between SANTA ANITA REALTY ENTERPRISES, INC., a
Delaware corporation ("OWNER"), and PACIFIC GULF PROPERTIES INC., a Maryland
corporation ("MANAGER").
RECITALS
A. Owner is the owner of the real properties, together with all
improvements now or hereafter constructed thereon, described on EXHIBIT A
attached hereto (individually, a "PROPERTY" and, collectively, the
"PROPERTIES").
B. Immediately prior to the formation of Manager and the transfer by
Owner to Manager of ownership of certain properties, certain of the executive
and other staff of Manager were employed by Owner and, in such capacity, were
engaged in the management and operation of the Properties.
C. Certain personnel in the employ of Owner engaged in the management of
the Properties will remain in Owner's employ.
D. Certain of the Properties are managed by unrelated joint venture
partners of Owner pursuant to the terms of the partnership or joint venture
agreements with such parties.
E. To assist Owner in the transition of management and operation of the
Properties, Manager has agreed to provide certain interim management functions
in connection with the Properties on behalf of Owner, including maintaining the
books and records of Owner and supervising Owner's Employees in connection with
management and operation of the Properties, upon the terms and conditions set
forth herein.
NOW THEREFORE, Owner and Manager agree as follows:
ARTICLE 1
AGENCY
Owner hereby appoints Manager as the manager of the Properties, and Manager
hereby accepts such appointment, upon the terms set forth herein. This
appointment is subject and subordinate to any existing management agreements
with any unrelated third party for any of the Properties (an "EXISTING
MANAGER"). The parties agree that certain employees of Owner currently engaged
in management of the Properties shall remain employees of Owner, and shall
remain engaged in their respective capacities, but shall be subject to the
supervision and direction of Manager. These employees are identified on EXHIBIT
C attached hereto (the "OWNER'S EMPLOYEES").
ARTICLE 2
TERM OF AGREEMENT
The term of this Agreement (the "TERM") shall commence on February 18, 1994
(the "COMMENCEMENT DATE") and shall continue for a period of one (1) year
thereafter, unless sooner terminated as provided in Article 3 below.
ARTICLE 3
TERMINATION
3.1 TERMINATION FOLLOWING SALE OF A PROPERTY. In the event Owner
sells, conveys, exchanges or otherwise transfers a Property, Owner may elect to
terminate this Agreement as to such
<PAGE>
Property by written notice to Manager, with such termination to be effective
concurrently with such transfer. The termination of this Agreement pursuant to
this Section 3.1 with respect to any Property shall not alter the effectiveness
of this Agreement with respect to any other Property.
3.2 TERMINATION WITH NOTICE. Owner shall have the right to terminate
this Agreement for any reason during the term hereof upon thirty (30) days prior
written notice to Manager.
3.3 TERMINATION OF PARTICULAR DUTIES. Owner shall have the right to
terminate this Agreement as to any of the particular duties of Manager set forth
herein upon ten (10) days prior written notice to Manager. The termination of
any particular duties of Manager under this Agreement pursuant to this Section
3.3 shall not alter the effectiveness of this Agreement with respect to any
other duties of Manager set forth herein.
3.4 FINAL ACCOUNTING. Upon termination of this Agreement with
respect to any Property, Manager shall deliver to Owner:
(a) a final accounting, setting forth the balance of income and
expenses of such Property as of the date of termination, to be delivered within
thirty (30) days after such termination;
(b) any balance of funds of Owner or tenants applicable to such
Property which are in the possession or control of Manager, to be delivered upon
the effective date of such termination; and
(c) all records, contracts, leases, receipts for deposits, unpaid
bills, keys, paid invoices, tenant correspondence files and other papers or
documents which pertain to such Property which are in the possession or control
of Manager, to be delivered no later than the date of such termination. Manager
may, at its expense, retain copies of any of the foregoing documents (excluding
keys) for its records.
3.5 CONTINUED OBLIGATIONS OF OWNER. Upon the termination of this
Agreement with respect to any Property for any reason, Owner shall remain
obligated to Manager for any unpaid Fees earned by Manager pursuant to Section
10.1 through the date of termination, which Fees shall be paid to Manager within
twenty (20) days after the effective date of such termination.
ARTICLE 4
BUDGETS, ACCOUNTING AND REPORTING
4.1 BUDGET. A budget for each Property and for all combined
operations of Owner for the period commencing on the Commencement Date and
ending on December 31, 1994, has been previously prepared by Manager and
approved by Owner. With respect to the calendar year beginning on January 1,
1995, Manager shall assist Owner in the preparation of a proposed budget for
each Property for the promotion, operation, repair and maintenance of such
Property and for all combined operations of Owner for the forthcoming year
commencing on January 1 and ending on December 31 (the "APPROVED BUDGET"). Each
proposed budget shall include a current year forecast of operating revenues and
expenses for each applicable Property and for all combined operations of Owner.
Owner may, from time to time, upon written notice to Manager, modify the
discretionary components of any Approved Budget.
4.2 OPERATION IN ACCORDANCE WITH BUDGET. Manager shall use its best
efforts to assist Owner in the operation of the Properties so that the actual
costs of maintaining and operating each Property do not exceed the amounts
agreed upon in the Approved Budget. Any material change to an Approved Budget
which are within Manager's reasonable control shall be subject to the prior
written approval of Owner in its sole discretion. All expenses must be charged
to the proper account on an
2
<PAGE>
Approved Budget and no expense may be classified or reclassified for the purpose
of avoiding an excess in the annual budgeted amount of any accounting category.
Manager shall not, without the prior written approval of Owner (a) disburse any
amounts attributable to items not reflected in an Approved Budget, except in the
case of an emergency situation threatening imminent injury to persons, damage to
property or interruption of essential services to tenants, or (b) make any
expenditure which will cause either a total Approved Budget to be exceeded or
the amounts allocated to the any individual category in such Approved Budget to
be exceeded.
4.3 BOOKS OF ACCOUNT. Manager shall establish and maintain adequate
and separate books and records for each Property with entries supported by
supporting documentation sufficient to allow Owner to ascertain their accuracy.
Unless otherwise directed by Owner, such books and records shall be maintained
by Manager and made available to Owner at any time upon request of Owner.
Manager shall maintain and safeguard such books and records at Manager's office
or at such other location as may be approved by Owner.
4.4 FINANCIAL REPORTS.
(a) MONTHLY PROPERTY REPORTS. Manager shall prepare and deliver to
Owner no later than the thirtieth (30th) day following each calendar month, in
customary form, a statement of income and expenses for each Property for the
preceding month, prepared on a cash basis and accompanied by supporting
summaries of adjusting journal entities, bank reconciliations applicable to the
most recent statements prepared by the banks handling the funds of such
Property, an analysis of prepaid rent, if any, for such Property and such other
financial statements or reports as Owner may reasonably require. Manager shall
notify Owner, on a monthly basis, of all rental arrearages that in its judgment
are properly written off as uncollectible.
(b) MONTHLY CORPORATE REPORTS. Manager shall prepare and deliver to
Owner no later than the thirtieth (30th) day following each calendar month, in
customary form, a statement of profit and loss and a balance sheet for all
Owner's operations for the preceding month, prepared on an accrual basis in
accordance with generally accepted accounting principles.
(c) ANNUAL REPORTS. Manager shall prepare and deliver to Owner no
later than May 1, 1994, in customary form, a statement of profit and loss and a
balance sheet for all Owner's operations for the preceding year, prepared on an
accrual basis in accordance with generally accepted accounting principles. In
addition, no later than April 1, 1994, Manager shall prepare customary work
sheets and schedules for use by Owner's independent auditors in the preparation
of the annual audited financial statements of Owner.
(d) CORPORATE FILINGS. Manager shall assist Owner in the preparation
of all filings required under applicable federal and state securities laws in
connection with Owner's operations, including Owner's annual 10-K and quarterly
10-Q reports, in such time as to ensure the timely and complete filing of such
reports and information.
(e) EXTENSION OF TIME. The time for performance by Manager of any
duty imposed by this Section 4.4 shall be extended for any period of time
attributable to delay in obtaining required information or reports from any of
the Existing Managers.
4.5 SUPPORTING DOCUMENTATION. As additional supporting documentation
for the financial statements and reports required under Section 4.4, to the
extent maintained by Manager at Owner's request, if requested by Owner, Manager
shall make available to Owner with respect to each Property, (a) all bank
statements and bank deposit slips; (b) detailed cash receipts and disbursement
records; (c) detailed trial balance for receivables and payables and billed and
unbilled revenue items; (d) paid
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invoices; (e) appropriate details of accrued expenses and property records; and
(f) information necessary for preparation of Owner's tax returns, including a
description and statement of amounts expended in connection with repairs,
capital improvements, taxes, leases and professional fees. In all events,
Manager shall provide to Owner supporting documentation for time charges of
Manager's employees engaged in providing services under this Agreement.
4.6 TAX RETURNS OF OWNER. Manager shall assist Owner in the
preparation of all federal and state income tax returns required in connection
with Owner's operations.
ARTICLE 5
OWNER'S RIGHT TO AUDIT
5.1 RIGHT TO AUDIT. Owner, or its designees, may examine all books,
records and files maintained by Manager in connection with the Properties, if
any. Owner may perform any audit or investigation relating to Manager's
activities in connection with the Properties.
ARTICLE 6
LEASING AND SALES ACTIVITIES
6.1 MANAGER'S LEASING AND SALES OBLIGATIONS. To the extent such
activities are not properly within the purview and responsibility of an Existing
Manager for a Property, Manager shall supervise the efforts of Owner's Employees
to lease or, as Owner may from time to time direct, sell each of the Properties.
Except for the Fee set forth in Section 10.1, Manager shall receive no leasing
or sales fee or commission. Manager's obligations in connection with leasing
and sales of the Properties, to the extent such activities are not properly
within the purview and responsibility of an Existing Manager for a Property,
shall include the following:
(a) Manager shall assist Owner in the hiring of third party brokers
or leasing agents to undertake the rental of all rental space within the
Properties which are vacant during the term of this Agreement.
(b) Manager shall supervise and assist Owner's Employees in
connection with negotiation of renewals of leases with existing tenants in any
of the Properties.
(c) In leasing any portion of any Property, Manager shall utilize
only a standard lease form approved by Owner for such type of property, with no
material modifications thereto, and shall submit recommended leases to Owner for
execution, accompanied by a summary of all material deviations from the approved
standard form of lease for the Property. Manager shall require each prospective
tenant to submit financial information sufficient to allow Manager to verify the
ability of such prospective tenant to perform its obligations under its lease.
(d) Manager shall from time to time, but not less often than once per
calendar quarter, submit to Owner, for its approval, recommended rental rates
for each Property. Owner shall, at its option, give written notice of its
approval of such recommendations or of such other rental rates which Owner
desires to establish for any Property or Properties. The failure by Owner to
notify Manager, in writing, of its approval or disapproval of such recommended
rental rates shall be deemed to be Owner's approval thereof. In no event shall
Manager deviate from the rental rates established by Owner for the Properties,
unless approved by Owner.
(e) Manager shall assist Owner in selling all or any portion of any
Property as directed by Owner, including the hiring of third party brokers or
sales agents in connection with such proposed sales. Manager shall assist or,
if requested by Owner, act as Owner's representative, in
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negotiating the terms of such sale; provided, however, that the final terms of
any such sale, and the form of the purchase agreement, shall be subject to
Owner's approval and execution.
ARTICLE 7
MANAGEMENT OF PROPERTIES
7.1 DUTIES OF MANAGER; STANDARDS. To the extent such activities are
not properly within the purview and responsibility of an Existing Manager for a
Property, Manager shall supervise Owner's Employees in the management and
maintenance of the Properties in an efficient and professional manner consistent
with the standards currently in effect for such Property and in accordance with
recognized standards of the property management industry and in compliance with
such standards and practices as are prevalent in the geographic area where the
applicable Property is located, having due regard for the age and physical
condition of such Property. In addition, Manager shall review and advise Owner
in respect of management, leasing and operation of each Property managed by an
Existing Manager, including review and analysis of reports prepared by such
Existing Manager.
7.2 COLLECTION OF INCOME. Manager shall collect and identify, or
assist Owner's Employees in the collection and identification of, all rental
income and other income due Owner from services provided to tenants or the
public, including the use of parking, storage, and vending or any other
machines. All funds received by Manager for or on behalf of Owner shall be
deposited in a bank designated by Owner in the applicable Revenue Account.
7.3 PROPERTY MAINTENANCE. Manager shall supervise Owner's Employees
to ensure the making of all ordinary repairs and alterations of the Properties,
subject to and within the limitations of the Approved Budget for the applicable
Property.
7.4 CAPITAL IMPROVEMENTS. Manager shall supervise Owner's Employees
in connection with all capital improvements to the Properties pursuant to plans
and specifications approved by Owner, as are included in the applicable Approved
Budget or are otherwise approved by Owner, as well as all remodeling and
refurbishing of tenant premises as approved by Owner in connection with the
requirements of tenant leases. Manager shall make recommendations, select
contractors and follow such bid procedures as are required by Owner in writing
from time to time and shall supervise all such work to obtain compliance with
contract requirements and applicable law.
7.5 MAINTENANCE. Manager shall supervise Owner's Employees to ensure
that all required utility services and other operation, landscaping and
maintenance services are provided to the Properties. Manager shall supervise
Owner's Employees to ensure the purchase and maintenance at or for each Property
of all necessary supplies. Owner shall be credited with any rebates, refunds,
allowances and discounts allowed to Manager in connection with the purchase of
such supplies and services.
7.6 SERVICE CONTRACTS. All contracts for services or supplies in
connection with any of the Properties shall be reviewed and recommended for
execution by Manager, and shall include a provision for early termination in the
event of a sale or exchange of a Property by Owner. Manager shall advise Owner
if any recommended contract which would cause the total Approved Budget or the
amounts allocated to major categories to exceed the limits set forth in the
Approved Budget. If directed by Owner, Manager shall execute such contracts on
behalf of Owner as its attorney-in-fact.
7.7 PAYMENT OF EXPENSES. If requested by Owner, Manager shall pay
from the applicable Operating Account all operating expenses of the Properties,
and all bills for payments due under mortgages and ground leases with respect to
each Property, all real estate, personal property and improvement taxes and
assessments due with respect to each Property and insurance premiums for
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insurance coverage carried by Owner with respect to each Property. Owner shall
be responsible for prosecuting the appeal of any property tax assessment for any
Property and the payment of all costs incurred in connection therewith;
provided, however, that if requested by Owner, Manager shall assist Owner in
connection with any such appeal. Notwithstanding the foregoing, Manager's
responsibilities under this Section 7.7 shall not extend to matters requiring
any expenditure of funds unless such funds are provided by Owner.
7.8 NOTICES. Subject to the other provisions of this Agreement, at
Owner's expense, Manager shall use its best efforts to advise Owner of all
actions required to comply with all Federal, State and municipal laws,
ordinances, regulations and orders related to the leasing, use, operation,
repair and maintenance of the Properties, including state or federal fair
housing laws, rules and regulations, and the rules, regulations or orders of the
applicable local Board of Fire Underwriters or other similar body. Manager
shall, if requested by Owner, direct and supervise the prompt cure of any
violation of any such law, ordinance, rule, regulation or order, at Owner's
expense. Manager shall furnish to Owner, upon receipt by Manager, each notice
or order affecting a Property, including any notice from any taxing or other
governmental authority and notice of violation of any requirement or order
issued by any Board of Fire Underwriters or other similar body against a
Property or Owner, any notice of default or otherwise from the holder of any
mortgage or deed of trust on, or any notice of renewal, termination or
cancellation of any insurance policy for, a Property. Notwithstanding the
foregoing, Manager's responsibilities under this Section 7.8 shall not extend to
matters requiring the expenditure of funds unless such funds are provided by
Owner.
7.9 PERMITS AND LICENSES. Manager shall, at Owner's expense, arrange
for the obtaining and renewal of all business licenses affecting the Properties.
7.10 CONSULTANTS. Manager shall, at Owner's expense, engage counsel
and cause such legal proceedings to be instituted and prosecuted in an
expeditious manner as may be necessary to enforce payment of rent and compliance
with leases with respect to, or to dispossess tenants from, any Property.
Manager shall use legal counsel approved by Owner to institute such actions and
all settlement negotiations.
7.11 FINANCING OF PROPERTIES. Manager hereby agrees, as directed by
Owner, to act as Owner's representative in negotiations with financial
institutions and other lenders in connection with the acquisition, negotiation
and administration of financing for any Property. Manager agrees that, with
respect to the Medical Office Building identified on EXHIBIT A, the foregoing
activities by Manager shall be at no cost to Owner. Manager further agrees to
assist Owner in any negotiation of renewals, extensions or new bank lines of
credit for Owner's operations.
7.12 ARCADIA PROPERTY. If requested by Owner, Manager shall assist
Owner in the preparation and analysis of a plan of development for the Property
(the "Arcadia Property") set forth on EXHIBIT B hereto.
ARTICLE 8
BANK ACCOUNTS
8.1 REVENUE ACCOUNT. Manager shall deposit all income and other
funds collected by Manager, if any, from the operation of the Properties in a
special bank account established by Owner (the "REVENUE ACCOUNT") in the name of
Owner or as Owner may designate. Manager shall have no authority to withdraw
funds from the Revenue Account.
8.2 OPERATING ACCOUNT. Owner shall establish a bank account with
respect to each or all of the Properties, which account (the "OPERATING
ACCOUNT") shall be used for the payment of all costs and
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expenses of Owner in connection with the Properties. Manager shall have the
authority to withdraw funds from the Operating Account to fulfill its
obligations under this Agreement, but shall otherwise have no right, title or
interest in such funds. Following written notification from Manager of projected
cash requirements for the respective Property, Owner shall maintain in the
Operating Account an amount sufficient to pay all budgeted expenses for each
month in a timely manner. Manager shall pay from the Operating Account the
operating expenses of the respective Property and any other required payments
applicable to such Property, as set forth in this Agreement.
8.4 SECURITY DEPOSIT ACCOUNT. If applicable law requires a
segregated account for tenant security deposits, Manager shall advise Owner who
shall open with respect to the Properties a separate interest bearing account
(the "DEPOSIT ACCOUNT") in Owner's name at a bank selected by Owner. Manager
shall deposit all security deposits which it receives on behalf of Owner, if
any, in such Deposit Account in accordance with applicable law. Manager shall
maintain for Owner detailed records of all security deposits for each Property.
8.5 CHANGE OF BANKS. Owner may change a depository bank or any
depository arrangements.
ARTICLE 9
INSURANCE
9.1 INSURANCE. Manager shall assist and advise Owner with respect to
obtaining all insurance required hereunder. All insurance described under this
Article 9 shall be maintained with insurance carriers licensed and approved to
do business in the state in which the applicable Property is located, having a
general policyholders' rating of not less than an "A" and financial rating of
not less than "X" in the most current Best's Insurance Report. In no event
shall such insurance be terminated or allowed to lapse prior to termination of
this Agreement or such longer period as may be specified herein, unless such
terminated or lapsed insurance is immediately replaced by substitute insurance
meeting the requirements of this Article 9. Each policy shall be subject to
approval by Owner.
9.2 REQUIRED POLICIES.
(a) WORKERS' COMPENSATION INSURANCE. Workers' Compensation
Insurance, including Employer's Liability, at a minimum limit approved by Owner,
for all Owner's Employees. Such insurance shall be in accordance with the
requirements of the applicable State Workers' Compensation Insurance Laws in
effect from time to time.
(b) COMPREHENSIVE GENERAL LIABILITY INSURANCE. Comprehensive General
Liability Insurance on an "occurrence" basis, with acceptable deductibles, with
a combined single limit for bodily injury and property damage approved by Owner,
covering Operations, Independent Contractors, Products and Completed Operations,
Contractual Liability, Broad Form Property Damage, Severability of Interest and
Cross Liability clauses, Personal Injury for Groups of Offenses A, B, and C with
exclusion (c) deleted, and Explosion, Collapse and Underground hazards (X,C,U).
The limits of liability of the insurance coverage specified in this Section
9.2(b) may be provided by any combination of primary and excess liability
insurance policies. The Comprehensive General Liability Insurance shall, on a
primary basis, name Manager as an additional insured for claims.
(c) AUTOMOBILE LIABILITY INSURANCE. Owned, hired and non-owned
automobile liability insurance covering all use of all automobiles, trucks and
other motor vehicles utilized by Owner, with a combined single limit for bodily
injury and property damage approved by Owner in each such policy.
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(d) COMPREHENSIVE CRIME INSURANCE. If requested by Owner, either a
policy of comprehensive crime insurance or a fidelity bond in an amount not less
than Fifty Thousand Dollars ($50,000) per occurrence for any of Manager's
employees and Owner's Employees who may handle funds or property in connection
with any of the Properties to provide coverage to protect Owner.
(e) ALL RISK INSURANCE. "All Risk" Insurance covering loss or damage
to the Properties, with such deductibles as Owner shall determine in its sole
discretion. arising out of Owner's negligence.
9.3 COMPLIANCE WITH REPORTING PROCEDURES. Manager shall comply with
Owner's accident reporting procedures, which may be modified from time to time
upon written notice to Manager; shall notify Owner immediately upon learning of
any loss, damage or injury occurring on any Property; and shall not take any
action (such as an admission of liability) which might bar Owner from obtaining
any protection afforded by any insurance policy of Owner or which might
prejudice Owner in defending a claim based on any loss, damage or injury.
Manager shall cooperate with Owner in the disposition of claims, including
furnishing all available information to Owner and Owner's insurers.
9.4 WAIVER OF SUBROGATION. Owner and Manager hereby waive all rights
against each other for damages caused by fire and other perils and risks to the
extent covered by policies of insurance required to be maintained hereunder.
9.5 INSURED. Each policy of insurance required hereunder shall
include the following definition of the named insured: "Santa Anita Realty
Enterprises, Inc., a Delaware corporation, and its officers, directors, agents,
servants, employees, divisions, subsidiaries, partners, shareholders and
affiliated companies, as named insureds." In addition, each policy of insurance
required hereunder shall include as a co-insured party Manager and its officers,
directors, agents, servants, employees, divisions, subsidiaries, partners,
shareholders and affiliated companies.
9.6 COSTS OF INSURANCE. The cost of all insurance required to be
carried by this Agreement shall be borne by Owner and any premiums for such
insurance paid by Manager, if any, shall be reimbursed by Owner to Manager
promptly upon demand. The premiums for Worker's Compensation Insurance
attributable to and covering Manager's officers, directors or personnel shall be
borne by Manager.
9.7 CLAIMS PROCEDURES. In the event an incident occurs or any legal
action or other claim (a "THIRD PARTY CLAIM") is asserted by a third party
against Owner as the result of an alleged injury or loss sustained on the
Properties during the term hereof, Manager shall, promptly after receipt of
actual knowledge of such Third Party Claim, investigate same and submit a report
to Owner in accordance with Owner's accident reporting procedures. All costs of
the investigation, settlement and defense of any claim, and any judgments and
other costs related to any such claim shall be borne by Owner, to the extent not
borne by the insurer.
9.8 INSURANCE AUDIT; REFUNDS. Any insurance dividends earned or
returned premiums applicable to the policies required to be carried hereunder at
Owner's expense shall be refunded by Manager to Owner immediately upon receipt
thereof.
ARTICLE 10
COMPENSATION OF MANAGER
10.1 FEES. Manager shall be paid monthly during the term hereof a
fee (the "Management Fee") equal to the hourly rate of each of Manager's
employees multiplied by the number of hours spent by such employees in
connection with the performance of Manager's duties hereunder during said month,
except to the extent expressly provided otherwise in this Agreement. The
applicable hourly rates are
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set forth on EXHIBIT D attached hereto. Manager's monthly reports shall identify
by Property the time spent by each of Manager's employees in performing its
duties under this Agreement.
10.2 PAYMENT. The Fee payable pursuant to Section 10.1 shall be
calculated and paid monthly and such amounts shall be shown in Manager's
submission of its monthly accounting to Owner. Manager is hereby authorized to
debit the Fee directly from the Operating Account. In the event there shall not
be sufficient funds in a respective Operating Account to pay the Fee, Owner
shall promptly pay to Manager, upon submission of Manager's monthly accounting,
any such amounts due to Manager.
10.3 FEE LIMITATION. Notwithstanding any provision to the contrary
contained in this Agreement, in the event that the loss incurred by Owner in
connection with the sale of certain real properties to Manager pursuant to the
terms of that certain Purchase and Sale Agreement dated as of November 15, 1993
(the "Purchase and Sale Agreement"), including the Baldwin Loss, exceeds Eleven
Million Dollars ($11,000,000), Manager shall have no right to receive any
compensation under the terms of this Agreement until such time as the Management
Fees due hereunder equal the amount by which the loss exceeds Eleven Million
Dollars (the "EXCESS LOSS"), and the Management Fees shall be payable only to
the extent that they exceed the amount of the Excess Loss. If Management Fees
are paid pursuant to this Article 10 prior to the time that the Excess Loss is
finally determined, Manager shall return any such Management Fees to the extent
the Excess Loss as determined exceeds the amount of any unpaid Management Fees.
For purposes of this Section 10.3, Baldwin Loss means a loss incurred by Owner
in connection with the sale of certain real properties to Manager pursuant to
the Purchase and Sale Agreement resulting from the failure of the Baldwin
Closing Date (as such term is defined in the Purchase and Sale Agreement) to
occur, but only if the conditions to such Baldwin Closing Date have been
satisfied, or, if they have not been satisfied, the failure to satisfy any such
condition is due to a material breach of a representation, warranty or covenant
under the Purchase and Sale Agreement by Manager.
ARTICLE 11
PAYMENT OF EXPENSES
11.1 NON-REIMBURSABLE COSTS. The following expenses or costs
incurred by or on behalf of Manager in connection with the management and
leasing of any Property shall be at the sole cost and expense of Manager and
shall not be reimbursed by Owner:
(a) cost of electronic data processing hardware and software,
including repair and maintenance expenses related thereto, located at Manager's
office and used for preparation of reports, information and returns to be
prepared by Manager under the terms of this Agreement; and
(b) cost of electronic data processing provided by computer service
companies for preparation of reports, information and returns to be prepared by
Manager under the terms of this Agreement.
ARTICLE 12
GENERAL PROVISIONS
12.1 INDEPENDENT CONTRACTOR. It is expressly understood and agreed
that Manager will act as an independent contractor in the performance of its
duties and responsibilities set forth in this Agreement. No provisions
hereunder shall be intended to create a partnership or a joint venture between
Owner and Manager with respect to any Property or otherwise, and neither party
shall have the power to bind or obligate the other party, except as expressly
set forth in this Agreement.
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12.2 INDEMNIFICATION. Owner hereby agrees to indemnify, defend and
hold Manager and its officers, directors, agents, servants, employees,
divisions, subsidiaries, partners, shareholders and affiliated companies
(collectively, the "INDEMNIFIED PARTIES") harmless from and against all damage,
loss, liability, claim or expense incurred by reason of the performance of
Manager's obligations and duties under and in accordance with the terms and
conditions of this Agreement.
Owner further agrees to indemnify, defend and hold the Indemnified
Parties harmless from and against all damage, loss, liability, claim or expense
arising out of or incurred by the Indemnified Parties as a result of (i) the
past, present or future presence of any Hazardous Substance on, under or above
the Property, whether by means of a release of Hazardous Substance upon the
Property or the migration of Hazardous Substances from adjacent properties, and
(ii) any violation of any law, rule or regulation, whether now existing or
hereafter established relating to Hazardous Substances or the environment, and
relating to the Property or the activities carried out upon the Property.
"HAZARDOUS SUBSTANCES" shall mean any chemical, substance, material, object,
condition, waste, living organism, or combination thereof which is or may be
hazardous to human health or safety or to the environment due to its
ignitability, corrosivity, reactivity, explosivity, toxicity, carcinogenicity,
radioactivity, mutagenicity, infectiousness, reproductive toxicity, or other
harmful or potentially harmful properties or effects, including, without
limitation, petroleum and petroleum products, asbestos, radon, polychlorinated
biphenyls, and all other chemicals, substances, materials, objects, conditions,
wastes, living organisms, or combinations thereof which are now listed, defined
or regulated in any manner by any law, rule or regulation protecting health or
the environment and based upon, directly or indirectly, such properties or
effects.
12.3 NOTICES. All notices, demands and reports provided for in this
Agreement shall be in writing and shall be personally served or sent by
certified mail, postage prepaid and return receipt requested, to the parties at
their respective addresses for notice set forth following their signatures to
this Agreement or to such other address as either may provide to the other by
written notice. For purposes of this Agreement, notices will be deemed to have
been "given" upon personal delivery thereof or three (3) business days after
having been deposited in the United States mail, postage prepaid and properly
addressed.
12.4 BROKERS. Manager shall cooperate with any leasing or sales
broker retained by Owner to permit the broker to exhibit the subject Property
during reasonable business hours. At Owner's request, Manager's duties shall
also include, but shall not be limited to, using diligent efforts to obtain, at
Owner's expense, tenant estoppel certificates from tenants within such Property.
12.5 ATTORNEYS' FEES. In any judicial action between the parties to
enforce any of the provisions of this Agreement or any right of any party under
this Agreement, regardless of whether such action or proceeding is prosecuted to
judgment and in addition to any other remedy, the unsuccessful party shall pay
to the prevailing party all costs and expenses, including reasonable attorneys'
fees (including fees and charges attributable to legal assistants or other non-
attorney personnel performing services under the supervision of an attorney),
incurred by the prevailing party.
12.6 ASSIGNMENT. Manager may not voluntarily or involuntarily,
directly or indirectly, sell, assign, hypothecate, pledge or otherwise transfer
or dispose of all or any portion of its interest in this Agreement to any third
party without the prior written consent of Owner, which may be withheld in
Owner's sole and absolute discretion. Any such attempted sale, assignment,
hypothecation, pledge or other transfer without such consent shall be void.
12.7 AMENDMENTS. All amendments to this Agreement shall be in writing
and executed by Owner and Manager.
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12.8 ENTIRE AGREEMENT. This Agreement and the Exhibits attached
hereto and made a part hereof comprise the entire agreement of the parties with
respect to the transaction described herein.
12.9 GOVERNING LAW. This Agreement is executed and shall be governed
by and construed in accordance with the laws of the State of California.
12.10 THIRD-PARTY DISPUTES. Should any claim, demand, action or
other legal proceeding arising out of matters covered by this Agreement be made
or instituted by any third party against a party to this Agreement, the other
party to this Agreement shall furnish such information and reasonable assistance
in defending such proceeding as may be reasonably requested by the party against
whom such proceeding is brought. The requesting party shall pay the reasonable
and customary expenses incurred by the other party in complying with any such
request.
12.11 CONFLICTS. Manager shall at all times disclose to Owner
conflicts of interest relating to the performance by Manager of its duties,
responsibilities and actions pursuant to this Agreement. Without limiting the
generality of the foregoing, Manager shall disclose any affiliation of Manager
with any vendor rendering services or supplying materials to any Property. Any
contract with such a vendor shall be entered into on an arms-length basis and
for fair market value. Manager shall disclose to Owner any conflict-of-interest
in connection with Manager's negotiations with prospective tenants or vendors of
any Property.
12.12 GIFTS. Manager agrees not to accept any "gift" from vendors
employed in connection with any Property, other than gratuities of nominal value
received in the ordinary course of business. Manager shall not, on Owner's
behalf or in connection with the services being rendered under this Agreement,
provide any "gift" to or otherwise entertain any "public official" or any other
person required under California law to file a Statement of Economic Interest.
The term "public official" means every member, officer, employee or consultant
of a state or local agency. The term "gift", as used herein, includes any
service or merchandise of any kind, discounts on merchandise or services, meals
and other entertainment expenses and all other transfers of cash or any other
item of value. Under no circumstances shall Owner be deemed to have waived the
provisions of this Section as to a specific gift unless the waiver is in writing
and signed by two (2) authorized officers of Owner.
12.13 CONFIDENTIALITY. Manager shall hold confidential any
information which Manager receives in connection with the performance of its
obligations hereunder and which concerns Owner or its operations or business and
shall not disclose all or any portion of such information to any third party,
except for such disclosures as are necessary to perform Manager's obligations
hereunder or are required by law, any governmental agency or by any proposed
lender or mortgagee of any Property.
12.14 SUBORDINATION TO MORTGAGES. Manager acknowledges and agrees that
it has no right, title or interest in any Property, and its rights hereunder are
expressly subordinate to the right, title and interest of the holder of any
mortgage or deed of trust encumbering any such Property, whether the lien of
such mortgage or deed of trust attaches to such Property before or after the
execution or effectiveness of this Agreement. Manager agrees to acknowledge any
assignment by Owner of the Property Income to any lender as security for a loan
by such lender to Owner. In the event that any Property is transferred as a
result of a foreclosure of any mortgage or deed of trust covering such Property
or pursuant to a deed in lieu of foreclosure, Manager may, at its sole option,
at any time thereafter, terminate this Agreement by written notice of
termination to the then owner of such Property.
12.15 HAZARDOUS SUBSTANCES.
(a) To the extent such activities are not properly within the purview
and responsibility of an Existing Manager for a Property, Manager shall take all
steps necessary or appropriate to supervise
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Owner's Employees to: (i) ensure that spills or dumping of Hazardous Substances
that occur on any Property are reported to agencies and cleaned up in accordance
with applicable regulatory requirements; (ii) inform Owner immediately of any
spills or dumping of Hazardous Substances that occur on any Property; and (iii)
establish and maintain a recordkeeping system for information concerning
Hazardous Substances on any Property.
(b) In the event Manager discovers the existence of any Hazardous
Substances on any Property, Manager shall immediately notify Owner. Manager
shall immediately notify Owner of any notice received by Manager from any
governmental authority of any actual or threatened violation of any applicable
laws, regulations or ordinances governing the use, storage or disposal of any
Hazardous Substances and shall assist with Owner in responding to such notice
and correcting or contesting any alleged violation.
(c) If the presence, use or on-site or off-site disposal or transport
of Hazardous Waste on, to, under, from or about such Property results in any
spills or releases any injury to any person, or any injury or damage to such
Property, or if Manager, Owner, or any governmental entity reasonably suspects
that any such spills, injury or damage has occurred or is likely to occur,
Manager shall promptly: (i) notify Owner; (ii) if such spill, injury or damage
has occurred, assist Owner to obtain all permits and approvals necessary to
remove such Hazardous Waste or otherwise remedy any suspected problem; (iii) if
such spill, injury or damage has occurred, assist Owner in supervising the
removal of such Hazardous Substances and remedy any associated problems by
appropriate consultants or contractors, in accordance with applicable legal
requirements and good business practices; and (iv) if such spill, injury or
damage is likely to occur, assist Owner in taking all measures reasonably
necessary to prevent such spill, injury or damage.
(d) Manager shall have no authority or control to make decisions on
behalf of Owner concerning (i) the use of Hazardous Substances upon the
Property, (ii) the disposal of Hazardous Substances generated upon the Property
or that become located upon the Property, or (iii) the clean-up and abatement of
Hazardous Substances from the Property. All decisions concerning the foregoing
activities shall be made by Owner and any assistance that Manager provides to
Owner in implementing such decisions shall be solely administrative in nature.
12.16 PROPOSITION 65 COMPLIANCE. Manager shall supervise Owner's
Employees to assist Owner in complying with the terms of Section 25249.5 et seq.
of the California Health and Safety Code and all rules and regulations
promulgated pursuant thereto, as such statute, rules and regulations may
hereafter be amended ( "PROPOSITION 65"). Manager shall, promptly upon receipt
of knowledge thereof, notify Owner of the existence on the site of any Property
of any "hazardous substance" (as defined under Proposition 65), notice of the
existence of which has not been given to tenants of such Property.
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IN WITNESS WHEREOF, Owner and Manager have executed this Management
Agreement as of the day and year first above written.
MANAGER:
PACIFIC GULF PROPERTIES INC.,
a Maryland corporation
By: /s/ GLENN L. CARPENTER
------------------------
Glenn L. Carpenter
President
Address for Notice:
363 San Miguel Drive
Suite 100
Newport Beach, CA 92660-7805
Attn: Glenn L. Carpenter
OWNER:
SANTA ANITA REALTY ENTERPRISES, INC., a Delaware corporation
By: /s/ GLENN L. CARPENTER
----------------------------
Glenn L. Carpenter
Its: President
Address for Notice:
285 West Huntington Drive
Post Office Box 808
Arcadia, CA 91066-0808
Attn: Stephen F. Keller
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EXHIBIT A
DESCRIPTION OF THE PROPERTIES
REGIONAL SHOPPING CENTERS:
Santa Anita Fashion Park Property (approximately 73 acres) is leased to a
Acadia, California partnership (Anita Associates) in which Owner
holds a fifty percent (50%) limited partnership
interest. A 1,200,000 sq. ft. regional shopping
center was developed by and is managed by The
Hahn Company, on behalf of Hahn-UPI, the managing
partner of the partnership. The landlord's
interest in the ground lease is held by Owner.
Towson Town Center Property consists of a 950,000 sq. ft. regional
Towson, Maryland shopping center developed by a partnership (H-T
Associates) with The Hahn Company, in which Owner
holds a thirty-two and one-half percent (32.5%)
interest. The shopping center is managed by The
Hahn Company, as managing partner of the
partnership.
Joppa Associates Property is a 240,000 sq. ft. retail building
adjacent to the Towson Town Center. The Property
is owned by a partnership (Joppa Associates) with
The Hahn Company in which Owner holds a one-third
(33.33%) interest. The property is managed by The
Hahn Company, as managing partner of the
partnership.
SHOPPING CENTERS:
Yorba Linda, California Property consists of a 66,000 sq. ft.
neighborhood shopping center owned and managed by
Owner.
Orange, California Property consists of a 21,000 sq. ft.
neighborhood shopping center owned and managed by
Owner.
Encinitas, California Property consists of a 79,000 sq. ft.
neighborhood shopping center owned and managed by
Owner.
Phoenix, Arizona Property consists of a 25,000 sq. ft.
Tatum and Thunderbird neighborhood shopping center owned and managed
by Owner.
Phoenix, Arizona Property consists of a 31,000 sq. ft.
28th and Indian School neighborhood shopping center owned and managed
by Owner.
Phoenix, Arizona Property consists of a 74,000 sq. ft.
67th and Indian School neighborhood shopping center owned and managed
by Owner.
OFFICE BUILDINGS:
Santa Ana, California Property consists of a 166,000 sq. ft. office
Civic Center Plaza building owned by Owner.
Towers
A-1
<PAGE>
Upland, California Property consists of a 37,000 sq. ft. office
building owned by Owner.
Medical Office Building Property consists of a 72,000 sq. ft. medical
office building owned by Owner.
INDUSTRIAL PARK:
Baldwin Industrial Park Property consists of 623,000 sq. ft. of leasable
Baldwin Park, California industrial space owned by Baldwin Industrial
Properties, Ltd., a limited partnership in which
Owner has a 50% interest. (Which property is
currently managed by William T. Grant
Corporation, the managing general partner of the
limited partnership.)
A-2
<PAGE>
EXHIBIT B
ARCADIA PROPERTY
Those portions of Lots 1 and 5 of Tract 949 in the City of Arcadia, County of
Los Angeles, State of California as shown on map recorded in Book 17, Page 13 of
Maps, in the Office of the County Recorder of said County described as follows:
Beginning at the Southeast corner of Parcel Map No. 4625, as shown on map
recorded in Book 51, Page 50 of Parcel Maps in the Office of said County
Recorder, being a point on the North line of Huntington Drive, 195.00 feet in
width; thence along the Easterly and Northeasterly Boundary of said Parcel Map
as follows: North 3 degrees 53 minutes 00 seconds East 475.68 feet to the
beginning of a tangent curve concave to the East through a central angle of 15
degrees 31 minutes 48 seconds an arc distance of 325.26 feet; thence tangent to
said curve North 19 degrees 24 minutes 48 seconds East 534.43 feet to the
beginning of a tangent curve concave to the West and having a radius of 350.00
feet; thence Northerly and Northwesterly along said curve through a central
angle of 71 degrees 22 minutes 48 seconds an arc distance of 436.03 feet; thence
tangent to said curve North 51 degrees 58 minutes 00 seconds West 873.36 feet;
thence continuing along said boundary of Parcel Map No. 4626 North 66 degrees 58
minutes 00 seconds West 154.55 feet and North 51 degrees 58 minutes 00 seconds
West 437.83 feet to the most Northerly corner of said Parcel Map, being a point
on the Southeasterly line of Baldwin Avenue, 100.00 feet in width; thence
Northeasterly along said Southeasterly line of Baldwin Avenue, as it now exists,
to the intersection with the Westerly prolongation of the Southerly boundary
line of Tract No. 15318 as shown on map recorded in Book 427 pages 34 and 35 of
said maps, shown thereon as having a bearing of North 88 degrees 57 minutes 33
seconds: East; thence North 88 degrees 57 minutes 33 seconds East along said
Southerly boundary line to the angle point in the Southerly line of Lot 38 of
said Tract No. 15318; thence continuing along the boundary line of said Tract
No. 15318, and the Southerly boundary line of Tract No. 14940 as shown on map
recorded in Book 350, Pages 48 to 50 inclusive of said maps North 68 degrees 46
minutes 53" East 2265.62 feet to the most Easterly corner of Lot 81 of said
Tract No. 14940, being a point on the Southwesterly line of COLORADO PLACE;
thence South 30 degrees 33 minutes 16 seconds East 2171.20 feet along said
Southwest line of COLORADO PLACE, 80.00 feet in width, as it now exists, to the
beginning of a tangent curve therein, concave to the Northeast and having a
radius of 756.78 feet; thence Southeasterly along said curve 554.82 feet to the
intersection with the curved Northwesterly line of Huntington Drive, 80.00 feet
in width, said curve being concave to the Southeast having a radius of 995.37
feet; thence Southwesterly along said curve 607.48 feet, thence Southwesterly
along the Northwesterly line of said Huntington Drive, as it now exists, 2843.30
feet to the beginning of a tangent curve therein concave to the Northwest and
having a radius of 925.20 feet; thence Southwesterly and Westerly along said
curve 883.99 feet; thence Westerly along the Northerly line of said Huntington
Drive, as it now exists to the point of beginning.
Excepting therefrom Parcel 1 of Parcel Map No. 15852 as per map filed in Book
179, Pages 93 and 94 of Parcel Maps, records of said County.
ALSO EXCEPTING THEREFROM THE FOLLOWING PROPERTY (THE "DELETED PARCEL"):
ALL THAT PORTION OF LOT 5 OF TRACT NO. 949, IN THE CITY OF ARCADIA, COUNTY OF
LOS ANGELES, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 17, PAGE 13 OF
MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, DESCRIBED AS FOLLOWS:
COMMENCING AT THE SOUTHEASTERLY CORNER OF PARCEL 4 OF PARCEL MAP NO. 6374, AS
PER MAP FILED IN BOOK 89 PAGE 77 OF PARCEL MAPS, SAID CORNER ALSO LYING ON THE
NORTHERLY RIGHT-OF-WAY LINE OF HUNTINGTON DRIVE, 195.00 FEET IN WIDTH; THENCE
NORTHERLY ALONG THE EASTERLY LINE OF SAID PARCEL 4 OF PARCEL MAP 6374, NORTH 03
DEGREES 53 MINUTES 00 SECONDS EAST 150.00 FEET TO THE TRUE POINT OF BEGINNING.
B-1
<PAGE>
THENCE CONTINUING NORTHERLY ALONG SAID EASTERLY LINE, NORTH 03 DEGREES 53
MINUTES 00 SECONDS EAST 242.38 FEET; THENCE DEPARTING FROM SAID EASTERLY LINE
NORTH 41 DEGREES 26 MINUTES 00 SECONDS EAST 40.33 FEET; THENCE NORTH 11 DEGREES
26 MINUTES 00 SECONDS EAST 355.84 FEET; THENCE NORTH 78 DEGREES 34 MINUTES 00
SECONDS WEST 32.04 FEET TO A POINT ON THE EASTERLY LINE OF SAID PARCEL 4 AND THE
BEGINNING OF A NON-TANGENT CURVE CONCAVE EASTERLY, HAVING A RADIUS OF 1200.00
FEET, FROM WHICH THE RADIAL LINE AT THE BEGINNING POINT BEARS NORTH 71 DEGREES
21 MINUTES 40 SECONDS WEST; THENCE NORTHERLY ALONG THE EASTERLY BOUNDARY OF
PARCELS 3 AND 4 OF SAID PARCEL MAP NO. 6374, THE FOLLOWING COURSES: ALONG THE
ARC OF SAID CURVE THROUGH A CENTRAL ANGLE OF 00 DEGREES 46 MINUTES 28 SECONDS,
AN ARC DISTANCE OF 16.22 FEET TO A TANGENT LINE, NORTH 19 DEGREES 24 MINUTES 48
SECONDS EAST 534.43 FEET TO THE BEGINNING OF A TANGENT CURVE CONCAVE
SOUTHWESTERLY, HAVING A RADIUS OF 350.00 FEET, NORTHWESTERLY ALONG SAID CURVE,
THROUGH A CENTRAL ANGLE OF 71 DEGREES 22 MINUTES 48 SECONDS, AN ARC DISTANCE OF
436.04 FEET TO A TANGENT LINE, AND NORTH 51 DEGREES 58 MINUTES 00 SECONDS WEST
106.76 FEET; THENCE LEAVING SAID EASTERLY LINE OF PARCEL 3 OF PARCEL MAP 6374,
SOUTH 78 DEGREES 34 MINUTES 00 SECONDS EAST 104.85 FEET TO THE BEGINNING OF A
TANGENT CURVE CONCAVE SOUTHWESTERLY, HAVING A RADIUS OF 350.00 FEET; THENCE
SOUTHEASTERLY ALONG SAID CURVE, THROUGH A CENTRAL ANGLE OF 90 DEGREES 00 MINUTES
00 SECONDS, AN ARC DISTANCE OF 549.78 FEET TO A TANGENT LINE; THENCE SOUTH 11
DEGREES 26 NORTH 00 SECONDS WEST 1186.97 FEET TO THE BEGINNING OF A TANGENT
CURVE CONCAVE NORTHWESTERLY, HAVING A RADIUS OF 25.00 FEET; THENCE SOUTHWESTERLY
ALONG SAID CURVE, THROUGH A CENTRAL ANGLE OF 82 DEGREES 26 MINUTES 00 SECONDS,
AN ARC DISTANCE OF 35.97 FEET TO A TANGENT LINE; THENCE NORTH 86 DEGREES 08
MINUTES 00 SECONDS WEST 181.99 FEET TO THE TRUE POINT OF BEGINNING. AN AREA
CONSISTING OF APPROXIMATELY 7.2 ACRES, MORE OR LESS.
UPON RECORDATION OF P.M. 23862, THE DELETED PARCEL WILL BE KNOWN AS:
PARCEL 4 OF PARCEL MAP 23862, IN THE CITY OF ARCADIA, COUNTY OF LOS ANGELES,
STATE OF CALIFORNIA.
Subject to Easements of Record.
B-2
<PAGE>
EXHIBIT C
OWNER'S EMPLOYEES
<TABLE>
<S> <C>
John Goodwin - Property Manager - Shopping Centers
Julie Jones - Clerk Administration - Shopping Centers
Kyle McDonald - Property Manager - Office Buildings
Lina Wu - Property Accountant
Stan Pearson - Head Building Engineer - Office Buildings
Robert Ritchie - Building Engineer - Office Buildings
</TABLE>
C-1
<PAGE>
EXHIBIT D
MANAGER'S EMPLOYEES AND HOURLY RATES
<TABLE>
<S> <C>
Glenn L. Carpenter........ $175.00
Donald G. Herrman......... 87.00
Robert A. Dewey........... 61.00
Cecelia A. Consiglio...... 42.00
Wynne M. Fox.............. 28.00
Pamela L. Laipple......... 42.00
Jason J. Saito............ 37.00
Deborah D. Scott.......... 23.00
Cindy L. Smith............ 36.00
Mary Ann Spurbeck......... 29.00
</TABLE>
D-1
<PAGE>
EXHIBIT 10.24
-------------
REGISTRATION RIGHTS AGREEMENT
by and between
PACIFIC GULF PROPERTIES INC.
and
SANTA ANITA REALTY ENTERPRISES, INC.
___________________________________________
Dated: As of February 1, 1994
___________________________________________
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<C> <S> <C>
ARTICLE I
CERTAIN DEFINITIONS.......................... 1
1.1 Agreement............................................................. 1
1.2 Business Day.......................................................... 1
1.3 Company............................................................... 1
1.4 Current Per Share Market Price........................................ 1
1.5 Company Offering...................................................... 2
1.6 Eligible Securities................................................... 2
1.7 Information Blackout.................................................. 2
1.8 Investor.............................................................. 2
1.9 Lock-up Period........................................................ 2
1.10 Other Securities...................................................... 2
1.11 Person................................................................ 3
1.12 Purchase and Sale Agreement........................................... 3
1.13 Registration Expenses................................................. 3
1.14 Sales Blackout Period................................................. 3
1.15 SEC................................................................... 3
1.16 Securities Act........................................................ 4
ARTICLE II
EFFECTIVENESS OF REGISTRATION RIGHTS................. 4
2.1 Effectiveness of Registration Rights.................................. 4
ARTICLE III
REGISTRATION RIGHTS.......................... 4
3.1 Requested Registration and Notice..................................... 4
3.2 Incidental Registration and Notice.................................... 6
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
3.3 Registration Expenses........................................ 7
ARTICLE IV
REGISTRATION PROCEDURES........................ 7
4.1 Registration and Qualification............................... 7
4.2 Underwriting................................................. 9
4.3 Blackout Periods............................................. 9
4.4 Qualification for Rule 144 Sales............................. 10
ARTICLE V
PREPARATION; REASONABLE INVESTIGATION................. 10
5.1 Preparation; Reasonable Investigation............................ 10
ARTICLE VI
INDEMNIFICATION AND CONTRIBUTION................... 11
6.1 Indemnification and Contribution................................. 11
ARTICLE VII
TRANSFER OF REGISTRATION RIGHTS.................... 12
7.1 Transfer of Registration Rights.................................. 12
ARTICLE VIII
MISCELLANEOUS............................ 12
8.1 Captions..................................................... 12
8.2 Severability................................................. 12
8.3 Governing Law................................................ 12
8.4 Modification and Amendment................................... 12
8.5 Counterparts................................................. 13
8.6 Entire Agreement............................................. 13
8.7 Notices...................................................... 13
SIGNATURES............................................................ 13
</TABLE>
ii
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT is made as of the 1st day of
February, 1994 by and between PACIFIC GULF PROPERTIES INC., a Maryland
corporation ("COMPANY"), and SANTA ANITA REALTY ENTERPRISES, INC., a Delaware
corporation ("INVESTOR").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, Company is acquiring certain assets of Investor in exchange
for unregistered shares of its common stock, par value $.01 per share, and
certain other consideration, pursuant to that certain Purchase and Sale
Agreement, dated as of November 15, 1993, by and between Company and Investor
(the "PURCHASE AND SALE AGREEMENT"); and
WHEREAS, Company intends to issue shares of its common stock in an
initial public offering; and
WHEREAS, pursuant to the Purchase and Sale Agreement, Company has
agreed to provide Investor with certain registration rights as set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and
undertakings contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, and subject to and
on the terms and conditions herein set forth, the parties hereto agree as
follows:
ARTICLE I
CERTAIN DEFINITIONS.
1.1 "Agreement" means this Registration Rights Agreement, as
---------
originally executed and as amended, modified, supplemented or restated from time
to time, as the context requires.
1.2 "Business Day" means any day on which the New York Stock Exchange
------------
is open for trading.
1.3 "Company" means Pacific Golf Properties Inc., a Maryland
-------
corporation.
1.4 "Current Per Share Market Price" means at any date of
------------------------------
determination (i) the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading
<PAGE>
on the principal national securities exchange on which the common stock of
Company is listed or admitted to trading or (ii) if the common stock of Company
is not listed or admitted to trading on any national securities exchange, the
last quoted price, or if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotations System.
1.5 "Company Offering" has the meaning set forth in Section 3.1(e).
----------------
1.6 "Eligible Securities" means all or any portion of the
-------------------
unregistered shares of common stock, par value $.01 per share, of Company
acquired by Investor pursuant to the Purchase and Sale Agreement, and any shares
of the common stock of Company issued with respect thereto.
As to any proposed offer or sale of Eligible Securities, such
securities shall cease to be Eligible Securities with respect to such proposed
offer or sale when (i) a registration statement with respect to the sale of such
securities shall have become effective under the Securities Act, (ii) such
securities are permitted to be distributed pursuant to Rule 144(k) (or any
successor provision to such Rule) under the Securities Act or are otherwise
freely transferable to the public without registration pursuant to Section 4(1)
of the Securities Act to be confirmed in a written opinion of counsel to Company
addressed to Investor, or (iii) such securities shall have been otherwise
transferred pursuant to an applicable exemption under the Securities Act, new
certificates for such securities not bearing a legend restricting further
transfer under the Securities Act shall have been delivered by Company and such
securities shall be freely transferrable to the public without registration
under the Securities Act.
1.7 "Information Blackout" has the meaning set forth in
--------------------
Section 4.3(a).
1.8 "Investor" means Santa Anita Realty Enterprises, Inc., a Delaware
-------
corporation.
1.9 "Lock-up Period" means the period during which, by agreement with
--------------
Alex Brown & Sons, Incorporated, Prudential Securities Incorporated and Crowell
Weedon & Co., as representatives of the several underwriters, Investor has
agreed not to sell its shares, which period expires on February 9, 1995, unless
earlier terminated by such representives.
1.10 "Other Securities" has the meaning set forth in Section 3.2.
----------------
2
<PAGE>
1.11 "Person" means an individual, a partnership (general or limited),
------
corporation, joint venture, business trust, cooperative, association or other
form of business organization, whether or not regarded as a legal entity under
applicable law, a trust (inter vivos or testamentary), an estate of a deceased,
insane or incompetent person, a quasi-governmental entity, a government or any
agency, authority, political subdivision or other instrumentality thereof, or
any other entity.
1.12 "Purchase and Sale Agreement" has the meaning set forth in the
---------------------------
introductory statements to this Agreement.
1.13 "Registration Expenses" means all expenses incident to Company's
---------------------
performance of or compliance with the registration requirements set forth in
this Agreement including, without limitation, the following: (i) the fees,
disbursements and expenses of Company's counsel and accountants in connection
with the registration of Eligible Securities; (ii) all expenses in connection
with the preparation, printing and filing of the registration statement, any
preliminary prospectus or final prospectus, any other offering document and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the underwriters and dealers; (iii) the cost of printing or
duplicating any agreement(s) among underwriters, underwriting agreement(s) and
blue sky or legal investment memoranda, any selling agreements and any other
documents in connection with the offering, sale or delivery of Eligible
Securities; (iv) all expenses in connection with the qualification of Eligible
Securities for offering and sale under state securities laws, including the fees
and disbursements of counsel for the underwriters in connection with such
qualification and in connection with any blue sky and legal investment surveys;
(v) the filing fees incident to securing any required review by the National
Association of Securities Dealers, Inc. of the terms of the sale of Eligible
Securities; and (vi) fees and expenses incurred in connection with the listing
of Eligible Securities on each securities exchange on which securities of the
same class are then listed, provided, however, that Registration Expenses with
--------
respect to any registration pursuant to this Agreement shall not include
underwriting discounts or commissions attributable to Eligible Securities,
transfer taxes applicable to Eligible Securities, amounts payable pursuant to
Section 6.1(b), or except as specifically described above in clause (iv), any
fees or expenses of counsel, if any, to Investor or counsel, if any, to
underwriters, or any expenses of any underwriter.
1.14 "Sales Blackout Period" has the meaning set forth in
---------------------
Section 4.3(a)(ii).
1.15 "SEC" means the Securities and Exchange Commission.
---
3
<PAGE>
1.16 "Securities Act" means the Securities Act of 1933, as amended,
--------------
and the rules and regulations of the SEC thereunder, all as the same shall be in
effect at the relevant time.
ARTICLE II
EFFECTIVENESS OF REGISTRATION RIGHTS
------------------------------------
2.1 Effectiveness of Registration Rights. This Agreement shall
------------------------------------
become effective on the date the Lock-up Period expires or is terminated. The
rights granted Investor herein are subject to Article VII of the Purchase and
Sale Agreement dated as of November 15, 1993 by and between Company and
Investor.
ARTICLE III
REGISTRATION RIGHTS
-------------------
3.1 Requested Registration and Notice. Upon written notice from
---------------------------------
Investor requesting that Company effect the registration under the Securities
Act of all or part of the Eligible Securities held by such Investor, which
notice shall specify the number of Eligible Securities intended to be disposed
of by Investor and the intended method or methods of disposition of such
Eligible Securities, Company will use all reasonable efforts to effect (at the
earliest possible date) the registration, under the Securities Act, of such
Eligible Securities for disposition in accordance with the intended method or
methods of disposition stated in such request, provided that:
--------
(a) if Company shall have previously effected a registration with
respect to Eligible Securities pursuant to this Section 3.1, Company shall
not be required to effect any further registration hereto until a period of
three hundred sixty (360) days shall have elapsed from the lapsing of
effectiveness of the most recent such previous registration;
(b) Company shall have the right to include in any registration
statement filed pursuant to the request of Investor securities of Company
being sold for the account of Company;
(c) Company will not be required to effect any registration pursuant
to this Section 3.1 if the aggregate proposed public offering price of the
Eligible Securities, calculated by multiplying the number of shares of
Eligible Securities proposed to be offered in such offering by the Current
Per Share Market Price on the date of such notice, intended to be disposed
of by Investor thereby is less than (i) $5,000,000, or (ii), if the
acquistion by Company of the limited partnership interests owned by
Investor in Baldwin
4
<PAGE>
Industrial Properties, Ltd., a California limited partnership, pursuant to
the Purchase and Sale Agreement does not occur by November 30, 1994 and
Investor is disposing of its interest in all Eligible Securities owned
beneficially by it, $2,500,000;
(d) Company will not be required to effect more than three
registrations pursuant to this Section 3.1 (counting for these purposes
only registrations which have been declared or ordered effective, and which
have not been cancelled pursuant to Section 4.3(b));
(e) if, upon receipt of a registration request pursuant to this
Section 3.1, Company is advised in writing (with a copy to Investor) by an
investment banking firm selected by Company (and approved by Investor) to
act as lead underwriter in connection with a public offering of securities
by Company that, in such firm's opinion, a registration at the time and on
the terms requested would materially adversely affect such public offering
of securities by Company (other than an offering in connection with
employee benefit and similar plans) (a "COMPANY OFFERING") that had been
contemplated by Company prior to the notice by Investor requesting
registration, Company shall not be required to effect a registration
pursuant to this Section 3.1 until the earliest of (i) three months after
the completion of such Company Offering, (ii) the termination of any "black
out" period, if any, required by the underwriters to be applicable to
Investor in connection with such Company Offering and agreed to in writing
by Investor, (iii) promptly after abandonment of such Company Offering or
(iv) four months after the date of such written notice from Investor
requesting registration;
(f) if, while a registration request is pending pursuant to Section
3.1, Company determines in the good faith judgment of the Board of
Directors of Company, with the advice of counsel, that the filing of a
registration statement would require the disclosure of non-public material
information the disclosure of which would have a material adverse effect on
Company or would otherwise adversely affect a material financing,
acquisition, disposition, merger or other comparable transaction, Company
shall deliver a certificate to such effect signed by its President or any
Vice President to Investor and Company shall not be required to effect a
registration pursuant to this Section 3.1 until the earlier of (i) the date
upon which such material information is disclosed to the public or ceases
to be material or (ii) 60 days after Company makes such good faith
determination; and
(g) No registration of Eligible Securities under this Section 3.1
shall relieve Company of its obligation (if any)
5
<PAGE>
to effect registrations of Eligible Securities pursuant to Section 3.2.
3.2 Incidental Registration and Notice. If Company proposes to
----------------------------------
register any shares of common stock or other securities issued by it having
terms substantially similar to Eligible Securities ("OTHER SECURITIES") for
public sale under the Securities Act (whether proposed to be offered for sale by
Company or by any other Person) on a form and in a manner which would permit
registration of Eligible Securities for sale to the public under the Securities
Act, it will give prompt written notice to Investor of its intention to do so,
and upon the written request of Investor delivered to Company within fifteen
(15) Business Days after the giving of any such notice (which request shall
specify the number of Eligible Securities intended to be disposed of by
Investor), Company will use all reasonable efforts to effect, in connection with
the registration of the Other Securities, the registration under the Securities
Act of all Eligible Securities which Company has been so requested to register
by Investor, to the extent required to permit the disposition (in accordance
with the intended method or methods thereof as aforesaid) of Eligible Securities
so to be registered, provided that:
--------
(a) if, at any time after giving such written notice of its intention
to register any Other Securities and prior to the effective date of the
registration statement filed in connection with such registration, Company
shall determine for any reason not to register the Other Securities,
Company may, at its election, give written notice of such determination to
Investor and thereupon Company shall be relieved of its obligation to
register such Eligible Securities in connection with the registration of
such Other Securities (but not from its obligation to pay Registration
Expenses to the extent incurred in connection therewith as provided in
Section 3.3);
(b) Company will not be required to effect any registration pursuant
to this Section 3.2 if Company shall have been advised in writing (with a
copy to Investor) by a nationally recognized independent investment banking
firm selected by Company to act as lead underwriter in connection with the
public offering of securities by Company that, in such firm's opinion, a
registration at that time would materially and adversely affect Company's
own scheduled offering; and
(c) Company shall not be required to effect any registration of
Eligible Securities under this Section 3.2 incidental to the registration
of any of its securities in connection with mergers, acquisitions, exchange
offers, subscription offers, dividend reinvestment plans or stock options
or other employee benefit plans.
6
<PAGE>
3.3 Registration Expenses. Company (as between Company and Investor)
---------------------
shall be responsible for the payment of all Registration Expenses in connection
with any registration pursuant to this Article 3.
ARTICLE IV
REGISTRATION PROCEDURES.
4.1 Registration and Qualification. If and whenever Company is
------------------------------
required to use all reasonable efforts to effect the registration of any
Eligible Securities under the Securities Act as provided in Article 3, Company
will as promptly as is practicable:
(a) prepare, file and use all reasonable efforts to cause to become
effective a registration statement under the Securities Act regarding the
Eligible Securities to be offered;
(b) prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith
as may be necessary to keep such registration statement effective and to
comply with the provisions of the Securities Act with respect to the
disposition of all Eligible Securities until the earlier of such time as
all of such Eligible Securities have been disposed of in accordance with
the intended methods of disposition by Investor set forth in such
registration statement or the expiration of nine months after such
registration statement becomes effective;
(c) furnish to Investor and to any underwriter of such Eligible
Securities such number of conformed copies of such registration statement
and of each such amendment and supplement thereto (in each case including
all exhibits), such number of copies of the prospectus included in such
registration statement (including each preliminary prospectus and any
summary prospectus), in conformity with the requirements of the Securities
Act, such documents incorporated by reference in such registration
statement or prospectus, and such other documents as Investor or such
underwriter may reasonably request;
(d) use all reasonable efforts to register or qualify all Eligible
Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as Investor or any
underwriter of such Eligible Securities shall reasonably request, and do
any and all other acts and things which may be reasonably requested by
Investor or any underwriter to consummate the disposition in such
jurisdictions of the Eligible Securities covered by such registration
statement, except Company shall not for
7
<PAGE>
any such purpose be required to qualify generally to do business as a
foreign corporation in any jurisdiction wherein it is not so qualified, or
to subject itself to taxation in any jurisdiction where it is not then
subject to taxation, or to consent to general service of process in any
jurisdiction where it is not then subject to service of process;
(e) use all reasonable efforts to list the Eligible Securities on
each national securities exchange on which the common stock of Company is
then listed (if such Eligible Securities have not been previously listed),
if the listing of such securities is then permitted under the rules of such
exchange;
(f) (i) in the case of an underwritten offering, furnish to the
underwriters, addressed to them, an opinion of counsel for Company, dated
the date of the closing under the underwriting agreement, and (ii) use all
reasonable efforts to furnish to Investor, a "comfort letter" signed by the
independent public accountants who have certified Company's financial
statements included in such registration statement, addressed to them, each
such document covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in the
case of such accountants' letter, with respect to events subsequent to the
date of such financial statements, as are customarily covered in opinions
of issuer's counsel and in accountants' letters delivered to underwriters
in underwritten public offerings of securities; and
(g) at any time when a prospectus relating to a registration pursuant
to Article 3 hereof is required to be delivered under the Securities Act,
immediately notify Investor of the happening of any event as a result of
which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and at the request of Investor prepare and furnish to
Investor as many copies of a supplement to or an amendment of such
prospectus as Investor may request so that, as thereafter delivered to the
purchasers of such Eligible Securities, such prospectus shall not include
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
Company may require Investor to furnish Company such information regarding
Investor and the distribution of such securities as
8
<PAGE>
Company may from time to time reasonably request in writing and as shall be
required by law or by the SEC in connection with any registration.
4.2 Underwriting. (a) In the event that any registration pursuant
------------
to Section 3.2 hereof shall involve, in whole or in part, an underwritten
offering, Company may require Eligible Securities requested to be
registered pursuant to Section 3.2 to be included in such underwriting on
the same terms and conditions as shall be applicable to any Other
Securities being sold through underwriters under such registration.
Notwithstanding the foregoing, Investor may elect, in writing at least one
day prior to the effective date of the registration statement filed in
connection with such registration, not to register Investor's Eligible
Securities in connection with such registration.
(b) If requested by the underwriters for any underwritten offering of
Eligible Securities pursuant to a registration requested hereunder, Company
will enter into and perform its obligations under an underwriting agreement
with such underwriters for such offering, such agreement to contain such
representations and warranties by Company and such other terms and
provisions as are customarily contained in underwriting agreements with
respect to secondary distributions, including, without limitation,
indemnities and contribution to the effect and to the extent provided in
Article 6 hereof and the provision of opinions of counsel and accountants'
letters to the effect and to the extent provided in Section 4.1(f).
(c) Investor shall be a party to any such underwriting agreement and
the representations and warranties by, and the other agreements on the part
of, Company to and for the benefit of such underwriters shall also be made
to and for the benefit of Investor. Such agreement shall also contain such
representations and warranties by Investor and such other terms and
provisions as are customarily contained in underwriting agreements with
respect to secondary distributions, including, without limitation,
indemnities and contribution to the effect and to the extent provided in
Article 6.
4.3 Blackout Periods. (a) At any time when a registration statement
----------------
effected pursuant to Section 3.1 relating to Eligible Securities is
effective, upon written notice from Company to Investor that Company
determines in the good faith judgment of the Board of Directors of Company,
with the advice of counsel, that Investor's sale of Eligible Securities
pursuant to the registration statement would require disclosure of non-
public material information the disclosure of which would have a material
adverse effect
9
<PAGE>
on Company (an "INFORMATION BLACKOUT"), Investor shall suspend sales of
Eligible Securities pursuant to such registration statement until the
earlier of:
(i) (A) the date upon which such material information is disclosed to
the public or ceases to be material or (B) 60 days after Company makes
such good faith determination, and
(ii) such time as Company notifies Investor that sales pursuant to
such registration statement may be resumed (the number of days from
such suspension of sales by Investor until the day when such sales may
be resumed hereunder is hereinafter called a "SALES BLACKOUT PERIOD").
(b) Any delivery by Company of notice of an Information Blackout
during the ninety (90) days immediately following effectiveness of any
registration statement effected pursuant to Section 3.1 hereof shall give
Investor the right, by written notice to Company within twenty (20)
Business Days after the end of such blackout period, to cancel such
registration and obtain one additional registration right under Sections
3.1(a) and 3.1(d).
(c) If there is an Information Blackout and the Investor does not
exercise its cancellation right, if any, pursuant to (b) above, or, if such
cancellation right is not available, the time period set forth in Section
4.1(b) shall be extended for a number of days equal to the number of days
in the Sales Blackout Period.
4.4 Qualification for Rule 144 Sales. Company will take all actions
--------------------------------
reasonably necessary to comply with the filing requirements described in Rule
144(c)(1) so as to enable Investor to sell Eligible Securities without
registration under the Securities Act and, upon the written request of Investor,
Company will deliver to Investor a written statement as to whether it has
complied with such filing requirements.
ARTICLE V
PREPARATION; REASONABLE INVESTIGATION.
-------------------------------------
5.1 Preparation; Reasonable Investigation. In connection with the
-------------------------------------
preparation and filing of each registration statement registering Eligible
Securities under the Securities Act, Company will give Investor and the
underwriters, if any, and their respective counsel and accountants, drafts of
such registration statement for their review and comment prior to filing and
such reasonable and customary access to its books and records and such
opportunities to discuss the business of Company with its officers and the
independent public accountants who have
10
<PAGE>
certified its financial statements as shall be necessary, in the opinion of
Investor and such underwriters or their respective counsel, to conduct a
reasonable investigation within the meaning of the Securities Act.
ARTICLE VI
INDEMNIFICATION AND CONTRIBUTION.
--------------------------------
6.1 Indemnification and Contribution. (a) In the event of any
--------------------------------
registration of Eligible Securities hereunder, Company will enter into customary
indemnification arrangements to indemnify and hold harmless Investor, its
directors and officers, and each Person who controls any of such Persons, each
Person who participates as an underwriter in the offering or sale of such
securities, and each Person, if any, who controls such seller or any such
underwriter within the meaning of the Securities Act against any losses, claims,
damages, liabilities and expenses, joint or several, to which such Person may be
subject under the Securities Act or otherwise insofar as such losses, claims,
damages, liabilities or expenses (or actions or proceedings in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in any registration statement under
which such securities were registered under the Securities Act, any preliminary
prospectus or final prospectus included therein, or any amendment or supplement
thereto, or any document incorporated by reference therein, or (ii) any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and Company
will promptly reimburse each such Person for any legal or any other expenses
reasonably incurred by such Person in connection with investigating or defending
any such loss, claim, damage, liability, action or proceeding; provided that
--------
Company shall not be liable in any such case to the extent that any such loss,
claim, damage, liability (or action or proceeding in respect thereof) or
expenses arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
any such preliminary prospectus or final prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to Company by
Investor expressly for use in the registration statement. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of Investor or any such Person and shall survive the transfer of such
securities by Investor. Company also shall agree to make provision for
contribution as shall be reasonably requested by Investor or any underwriters in
circumstances where such indemnity is held unenforceable.
(b) Investor, by virtue of exercising its registration rights
hereunder, agrees and undertakes to enter into customary indemnification
arrangements to indemnify and hold harmless (in
11
<PAGE>
the same manner and to the same extent as set forth in clause (a) of this
Article VI) Company, each director of Company, each officer of Company who shall
sign such registration statement, each Person who participates as an underwriter
in the offering or sale of such securities and each person, if any, who controls
Company or any such underwriter within the meaning of the Securities Act, with
respect to any statement in or omission from such registration statement, any
preliminary prospectus or final prospectus included therein, or any amendment or
supplement thereto, but only to the extent that such statement or omission was
made in reliance upon and in conformity with written information furnished by
Investor to Company expressly for use in the registration statement. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of Company or any such director, officer or controlling
Person and shall survive the transfer of the registered securities by Investor
and the expiration of this Agreement. Investor also shall agree to make
provision for contribution as shall be reasonably requested by Company or any
underwriters in circumstances where such indemnity is held unenforceable.
ARTICLE VII
TRANSFER OF REGISTRATION RIGHTS.
-------------------------------
7.1 Transfer of Registration Rights. Investor may not transfer the
------------------------------- ---
registration rights granted hereunder to any other Person.
ARTICLE VIII
MISCELLANEOUS
-------------
8.1 Captions. The captions or headings in this Agreement are for
--------
convenience and reference only, and in no way define, describe, extend or limit
the scope or intent of this Agreement.
8.2 Severability. If any clause, provision or section of this
------------
Agreement shall be invalid or unenforceable, the invalidity or unenforceability
of such clause, provision or section shall not affect the enforceability
validity of any of the remaining clauses, provisions or sections hereof to the
extent permitted by applicable law.
8.3 Governing Law. This Agreement shall be construed and enforced in
-------------
accordance with the internal laws of the State of California, without reference
to its rules as to conflicts or choice of laws.
8.4 Modification and Amendment. This Agreement may not be changed,
--------------------------
modified, discharged or amended, except by an instrument signed by all of the
parties hereto.
12
<PAGE>
8.5 Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be an original, but all of which together shall constitute
one and the same instrument.
8.6 Entire Agreement. This Agreement constitutes the entire
----------------
agreement and understanding among the parties and supersedes any prior
understandings and/or written or oral agreements among them respecting the
subject matter herein.
8.7 Notices. All notices, requests, demands, consents and other
-------
communications required or permitted to be given pursuant to this Agreement
shall be in writing and delivered by hand, by overnight courier delivery service
or by certified mail, return receipt requested, postage prepaid. Notices to
Investor shall be made to the address listed on the stock transfer records of
Company. Notices to Company shall be made to the address for Company specified
on the signature page hereof, or to such other address as shall be designated by
Company in a written notice to Investor complying as to delivery with the terms
of this Section 8.7.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused this Agreement to be executed as of the day and year first above written.
PACIFIC GULF PROPERTIES INC.
By: /s/ GLENN L. CARPENTER
----------------------------------
Name: Glenn L. Carpenter
Title: President
Address: 363 San Miguel Drive, Suite 100
Newport Beach, California 92660
Attention: Chief Executive Officer
SANTA ANITA REALTY ENTERPRISES, INC.
By: /s/ GLENN L. CARPENTER
-----------------------------------
Name: Glenn L. Carpenter
Title: President
Address: 285 W. Huntington Drive
Arcadia, California 91006
Attention: Chief Executive Officer
13
<PAGE>
EXHIBIT 10.25
-------------
Employment Agreement
--------------------
This Employment Agreement (the "Agreement") is entered into by and
between Santa Anita Realty Enterprises, Inc. (the "Company") and Sherwood C.
Chillingworth (the "Executive"), as of the 16th day of March 1994.
I. RECITALS
--------
WHEREAS, the Company desires to employ the Executive as its Chief
Executive Officer;
WHEREAS, the Company desires that the Company's Chief Executive
Officer be elected to the Company's Board of Directors and serve as Vice
Chairman of the Company's Board of Directors; and
WHEREAS, the Company will use its best efforts to see that the
Executive is elected to the Company's Board of Directors and is further
appointed Vice Chairman of the Company's Board of Directors; and
NOW, THEREFORE, the Company and the Executive desire to set forth in
this Agreement the terms and conditions of the Executive's employment with the
Company.
1
<PAGE>
II. EFFECTIVENESS OF AGREEMENT.
--------------------------
This Agreement shall be effective upon the approval of the
Compensation Committee for the Company. The Company shall notify the Executive
promptly in writing following such approval.
III. EMPLOYMENT.
----------
The Company hereby employs the Executive and the Executive hereby
accepts such employment, upon the terms and conditions hereinafter set forth,
from March 16, 1994, to and including June 30, 1996.
IV. DUTIES.
------
A. The Executive shall serve during the course of his employment as
Chief Executive Officer of the Company, and shall have such other duties and
responsibilities as are customarily required of such officer and as the Board of
Directors of the Company shall determine from time to time.
B. The Executive agrees to devote substantially two thirds of his
time, energy and ability to the business of the Company. Nothing herein shall
prevent the Executive, upon written approval of the Board of Directors of the
Company, from serving as a director or trustee of other corporations or
2
<PAGE>
businesses which are not in competition with the business of the Company or in
competition with any present or future affiliate of the Company.
C. The Company acknowledges and agrees that, in addition to the
Executive's duties to the Company, the Executive shall have duties and
responsibilities to the Oaktree Racing Association, to which the Company agrees
the Executive may devote substantially one third of his time, energy and
ability.
D. Nothing herein shall prevent the Executive from investing in real
estate for his own account or from becoming a partner or a stockholder in any
corporation, partnership or other venture not in competition with the business
of the Company or in competition with any present or future affiliate of the
Company.
E. For the term of this Agreement, the Executive shall report to the
Board of Directors of the Company or its designee.
V. COMPENSATION.
------------
A. Base Salary. The Company shall pay the Executive a base salary at the
-----------
rate of $160,000 per year. Such salary shall be earned monthly and shall be
payable in periodic
3
<PAGE>
installments no less frequently than monthly in accordance with the Company's
customary practices. Amounts payable shall be reduced by standard withholding
and other authorized deductions. The Company will review the Executive's
salary at least annually. The Company may in its discretion increase the
Executive's salary but may not reduce it during the period of this Agreement.
B. Stock Options. The effectiveness of this Agreement is contingent upon
-------------
the Executive's being granted certain stock options by the Compensation
Committee for the Company on the date that it approves this Agreement, which
options shall have the characteristics described below. Pursuant to the terms
of the Company's 1984 Stock Option Program (the "Plan"), effective as of the
date hereof, the Compensation Committee shall grant on behalf of the Company to
the Executive options to purchase 30,000 shares of the Company's common stock
(the "Options"). The Options shall be issued at a price equal to the fair
market value of the Company's common stock on the date of the grant of such
Options by the Compensation Committee. The Options agreement shall also provide
that, if the Executive's employment is terminated by death or Disability, by the
Company for other than Cause, or by the Executive for Good Reason, the Options
not previously vested shall automatically vest as of the date of termination and
the Executive shall have the right, for a period of 90 days following the date
of termination, to exercise the Options.
4
<PAGE>
The Company shall notify the Executive promptly in writing of the approval of
the options by the Compensation Committee for the Company.
C. Annual Bonus, Incentive, Savings and Retirement Plans. The Executive
-----------------------------------------------------
shall be entitled to participate in all annual bonus, incentive, savings and
retirement plans, practices, policies and programs applicable generally to other
peer executives of the Company. In determining bonus and incentive awards, the
Compensation Committee will consider the Executive's success in accomplishing
goals with respect to the Company which have been discussed in hiring the
Executive. These goals include, but are not limited to:
a. stabilizing the corporate operation;
b. staffing;
c. executing a move of Company headquarters from Santa Ana to
Arcadia, California;
d. success in improving the balance sheet and profit and loss
statement for the Company; and
e. success in planning development projects for properties
owned by the Company, in obtaining governmental approvals
and in achieving progress in obtaining government approvals
relevant to their success.
5
<PAGE>
D. Vehicle Allowance. The Executive shall be entitled to be paid a
-----------------
vehicle allowance in the amount of $600 per month (subject to any required
withholding), payable in accordance with the Company's customary practices.
E. Club Membership Dues Allowance. The Executive shall be entitled to be
------------------------------
paid a club membership dues allowance in the amount of $250 per month (subject
to any required withholding), payable in accordance with the Company's customary
practices.
F. Welfare Benefit Plans. The Executive and/or his family, as the case
---------------------
may be, shall be eligible for participation in and shall receive all benefits
under welfare benefit plans, practices, policies and programs provided by the
Company (including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs) to the extent applicable generally
to other peer executives of the Company.
G. Expenses. The Executive shall be entitled to receive prompt
--------
reimbursement for all reasonable employment expenses incurred by him in
accordance with the policies, practices and procedures as in effect generally
with respect to other peer executives of the Company.
6
<PAGE>
H. Fringe Benefits. The Executive shall be entitled to fringe benefits
---------------
in accordance with the plans, practices, programs and policies as in effect
generally with respect to other peer executives of the Company.
I. Vacation. The Executive shall be entitled to paid vacation in
--------
accordance with the plans, policies, programs and practices as in effect
generally with respect to other peer executives of the Company.
VI. TERMINATION.
-----------
A. Death or Disability. (i) Death. The Executive's employment shall
------------------- -----
terminate automatically upon the Executive's death. (ii) Disability. If the
----------
Company determines in good faith that the Disability of the Executive has
occurred (pursuant to the definition of Disability set forth below), it may give
to the Executive written notice in accordance with Section XVI of its intention
to terminate the Executive's employment. In such event, the Executive's
employment with the Company shall terminate effective on the day of receipt of
such notice by the Executive. For purposes of this Agreement, "Disability"
shall mean the absence of the Executive from his duties with the Company on the
basis provided in this agreement for a period of 3 months as a result of
incapacity due to mental or physical illness which is determined to be total and
permanent by a physician selected by the Company or
7
<PAGE>
its insurers and acceptable to the Executive or his legal representative (such
agreement as to acceptability not to be withheld unreasonably). "Incapacity" as
used herein shall be limited only to such Disability which substantially
prevents Company from availing itself of the services of the Executive.
B. Cause. The Company may terminate the Executive's employment for
-----
Cause. For purposes of this Agreement, "Cause" shall mean that the Company,
acting in good faith based upon the information then known to the Company, after
due inquiry, and upon reasonable grounds, determines that the Executive (i)
shall have been convicted of a felony, or a misdemeanor, which misdemeanor
materially impairs the Executive's ability to perform his duties, or (ii) has
acted or failed to act in connection with his employment in such manner as would
constitute gross negligence or willful misconduct.
C. Other than Cause or Death or Disability. The Company may terminate
---------------------------------------
the Executive's employment at any time, with or without Cause, upon 90 days'
written notice.
D. Obligations of the Company Upon Termination.
-------------------------------------------
1. Death or Disability. If the Executive's employment is terminated
-------------------
by reason of the Executive's Death or Disability, this Agreement shall terminate
without further obligations to the Executive or his legal representatives
8
<PAGE>
under this Agreement, other than for (a) payment of the sum of (i) the
Executive's annual base salary through the date of termination to the extent not
theretofore paid, (ii) reasonable employment expenses, vehicle allowances and
club membership dues allowances, as provided herein, through the date of
termination to the extent not theretofore paid and (iii) any accrued vacation
pay to the extent not theretofore paid (the sum of the amounts described in
clauses (i), (ii) and (iii) shall be hereinafter referred to as the "Accrued
Obligations"), which shall be paid to the Executive or his estate or
beneficiary, as applicable, in a lump sum in cash within 30 days of the date of
termination and (b) payment to the Executive or his estate or beneficiary, as
applicable, any amounts due pursuant to the terms of any applicable welfare or
pension benefit plans.
2. Cause. If the Executive's employment is terminated by the
-----
Company for Cause, this Agreement shall terminate without further obligations to
the Executive other than for the timely payment of Accrued Obligations and any
amounts due pursuant to the terms of any applicable welfare or pension benefit
plans. If it is subsequently determined that the Company did not have cause for
termination under this Section VI-D-2, then the Company's decision to terminate
shall be deemed to have been made under Section VI-D-3 and the amounts payable
thereunder shall be the only amounts the Executive may
9
<PAGE>
receive for his termination, rather than the amounts payable pursuant to this
Section VI-D-2.
3. Other than Cause or Death or Disability. If the Company
---------------------------------------
terminates the Executive's employment for other than Cause or Death or
Disability, this Agreement shall terminate without further obligations to the
Executive other than (a) the timely payment of Accrued Obligations, (b) payment
of any amounts due pursuant to the terms of any applicable welfare or pension
benefit plans and (c) payment to the Executive of a lump sum equal to 112% of
his current annual salary rate, less standard withholdings and other authorized
deductions (the lump sum equal to 112% of current annual salary shall be
referred to herein as the "112% Obligation"). The 112% Obligation shall be
reduced to an amount not less than zero by any cash lump sum severance payment
received by the Executive pursuant to any severance agreement between the
Executive and the Company.
4. Voluntary Termination for Good Reason. If the Executive
-------------------------------------
voluntarily terminates his employment with the Company for Good Reason, this
Agreement shall terminate in the same manner as if the Company terminated the
Executive's employment for other than Cause under Section VI-D-3. For purposes
of this Section VI-D-4, "Good Reason" shall mean the occurrence of one of the
following events without the Executive's consent:
10
<PAGE>
a. Any action by the Company which results in a material
diminution in the Executive's position, authority, duties or responsibilities,
including for this purpose any material change in the Executive's employment
location, and excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the Executive;
b. Any reduction in the Executive's base compensation not agreed
to by the Executive, which reduction shall be deemed to occur if there is (1) a
reduction in the Executive's base salary or (2) a material reduction in the
Executive's ability to participate in employee benefit plans, receive expense
reimbursements, receive other fringe benefits, receive office and support staff,
or receive paid vacation, provided that: (1) an isolated, insubstantial, and
inadvertent failure not occurring in bad faith and which is promptly remedied
after notice by the Executive shall not be deemed a violation of this paragraph;
and (2) a reduction in one element of the Executive's total compensation shall
not be deemed a violation of this paragraph if a counterbalancing increase in
another element of the Executive's total compensation occurs (the determination
of whether the increase is counterbalancing shall be determined by the Executive
in good faith).
11
<PAGE>
E. Exclusive Remedy. By signing the Agreement, the Executive agrees that
----------------
the payments to which the Executive may become entitled under this Agreement are
in lieu of any other payments to which the Executive might be entitled and that
the Company's discharge of its obligations under this Agreement shall constitute
full satisfaction of any and all claims of any nature whatsoever that the
Executive might otherwise possess against the Company and its subsidiaries,
except (1) such claims as are specifically provided for in the terms of any
generally applicable employee benefit or executive compensation plans evidenced
by written agreements or (2) any claims for personal injuries (other than claims
that are based on or relate to a contention that Company has wrongfully
discharged the Executive).
VII. ARBITRATION.
-----------
Any controversy or claim arising out of or relating to this Agreement, its
enforcement or interpretation, or because of an alleged breach, default, or
misrepresentation in connection with any of its provisions, shall be submitted
to arbitration, to be held in Los Angeles County, California in accordance with
California Civil Procedure Code, Title 9, (S)(S) 1280-1298.8. The arbitrator
shall be selected jointly by the parties or by Judicial Arbitration & Mediation
Services, Inc. ("JAMS"). Each party to the arbitration shall bear its own
attorneys' fees and costs relating to such arbitration.
12
<PAGE>
VIII. CONFIDENTIAL INFORMATION.
------------------------
The Executive shall hold in a fiduciary capacity for the benefit of the
Company all secret or confidential information, knowledge or data relating to
the Company or any of its affiliated companies, and their respective businesses,
which shall have been obtained by the Executive during his employment by the
Company or any of its affiliated companies and which shall not be or become
public knowledge (other than by acts by the Executive or his representatives in
violation of this Agreement). After termination of the Executive's employment
with the Company, he shall not, without the prior written consent of the
Company, or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and those designated by it.
IX. SUCCESSORS.
----------
A. This Agreement is personal to the Executive and shall not, without the
prior written consent of the Company, be assignable by the Executive.
B. This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns and any such successor or assignee shall
be deemed substituted for the Company under the terms of this Agreement for all
13
<PAGE>
purposes. As used herein, "successor" and "assignee" shall include any person,
firm, corporation or other business entity which at any time, whether by
purchase, merger or otherwise, directly or indirectly acquires the stock of the
Company or to which the Company assigns this Agreement by operation of law or
otherwise.
X. WAIVER.
------
No waiver of any breach of any term or provision of this Agreement shall be
construed to be, nor shall be, a waiver of any other breach of this Agreement.
No waiver shall be binding unless in writing and signed by the party waiving the
breach.
XI. MODIFICATION.
------------
This Agreement may not be amended or modified other than by a written
agreement executed by the Executive and the Board of Directors of the Company.
XII. SAVINGS CLAUSE.
--------------
If any provision of this Agreement or the application thereof is held
invalid, the invalidity shall not affect other provisions or applications of the
Agreement which can be given effect without the invalid provisions or
applications and to
14
<PAGE>
this end the provisions of this Agreement are declared to be severable.
XIII. COMPLETE AGREEMENT.
------------------
This instrument constitutes and contains the entire agreement and
understanding concerning the Executive's employment and the other subject
matters addressed herein between the parties, and supersedes and replaces all
prior negotiations and all agreements proposed or otherwise, whether written or
oral, concerning the subject matters hereof. This is an integrated document.
XIV. GOVERNING LAW.
-------------
This Agreement shall be deemed to have been executed and delivered within
the State of California, and the rights and obligations of the parties hereunder
shall be construed and enforced in accordance with, and governed by, by the laws
of the State of California without regard to principles of conflict of laws.
XV. CONSTRUCTION.
------------
Each party has cooperated in the drafting and preparation of this
Agreement. Hence, in any construction to be made of this Agreement, the same
shall not be construed against any
15
<PAGE>
party on the basis that the party was the drafter. The captions of this
Agreement are not part of the provisions hereof and shall have no force or
effect.
XVI. COMMUNICATIONS.
--------------
All notices, requests, demands and other communications hereunder shall be
in writing and shall be deemed to have been duly given if delivered or if mailed
by registered or certified mail, postage prepaid, addressed to the Executive at
2490 Cumberland Road, San Marino, California 91108 or addressed to the Company
at 285 Huntington Drive, Arcadia, California 91007. Either party may change the
address at which notice shall be given by written notice given in the above
manner.
XVII. EXECUTION.
---------
This Agreement is being executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument. Photographic copies of such signed counterparts may be
used in lieu of the originals for any purpose.
16
<PAGE>
XVIII. LEGAL COUNSEL.
-------------
The Executive and the Company recognize that this is a legally binding
contract and acknowledge and agree that they
17
<PAGE>
have had the opportunity to consult with legal counsel of their choice.
In witness whereof, the parties hereto have executed this Agreement as of
the date first above written.
SANTA ANITA REALTY
ENTERPRISES, INC. SHERWOOD C. CHILLINGWORTH
/s/ SHERWOOD C. CHILLINGWORTH
By /s/ STEPHEN F. KELLER
----------------------------------- ---------------------------------
Its Chairman
-----------------------------------
18
<PAGE>
EXHIBIT 23.1-1
--------------
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference of our report dated March 1, 1994
accompanying the financial statements and schedules of:
(a) Santa Anita Realty Enterprises, Inc.:
(b) Santa Anita Operating Company and Subsidiaries; and
(c) Santa Anita Realty Enterprises, Inc. and Santa Anita Operating Company and
Subsidiaries Combined.
appearing in the above-listed entities' Annual Report on Form 10-K for the year
ended December 31, 1993, in the Prospectus contained in Post-Effective Amendment
No. 3 to Joint Registration Statement on Form S-8 (No. 2-95226) and
Registration Statement on Form S-8 (No. 33-51843).
KENNETH LEVENTHAL & COMPANY
Newport Beach,California
March 28, 1994
<PAGE>
EXHIBIT 23.1-2
--------------
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Joint Registration Statement
on Form S-8 (No. 2-96228), as amended through Post-Effective Amendment No. 3 and
Registration Statement on Form S-8 (No. 33-51843) and in the Prospectus, related
thereto, of Santa Anita Realty Enterprises, Inc. and Santa Anita Operating
Company of our report dated January 28, 1993, accompanying the 1992 consolidated
financial statements of H-T Associates and Subsidiary appearing in 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, 1993.
KENNETH LEVENTHAL & COMPANY
Newport Beach, California
March 28, 1994
<PAGE>
EXHIBIT 23.2
------------
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Joint Registration Statement
on Form S-8 (No. 2-93238), as amended through Post-Effective Amendment No. 3 and
Registration Statement on Form S-8 (No. 33-51843) and in the Prospectus related
thereto, of Santa Anita Realty Enterprises, Inc. and Santa Anita Operating
Company of our report dated February 3, 1992 accompanying the 1991 consolidated
statements of operations, partners' capital and cash flows of H-T Associates and
Subsidiary appearing in 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, 1993.
DELOITTE & TOUCHE
San Diego, California
March 25, 1994
<PAGE>
EXHIBIT 23.3
------------
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Santa Anita Realty Enterprise, Inc.
and
Santa Anita Operating Company:
We consent to incorporation by reference in the Joint Registration Statement
(No. 2-95228) on Form S-8, as amended through Post-Effective Amendment No. 3 and
Registration Statement on Form S-8 (No. 33-51843) and in the Prospectus, related
thereto, of Santa Anita Realty Enterprises, Inc. and Santa Anita Operating
Company of our report dated February 11, 1994, related to the consolidated
balance sheet of H-T Associates and subsidiary as of December 31, 1993, and the
related consolidated statements of operations, partners' capital and cash flows
for the year ended, which report appears in the December 31, 1993 Joint Annual
Report on Form 10-K of Santa Anita Realty Enterprises, Inc. and Santa Anita
Operating Company.
KPMG PEAT MARWICK
San Diego, California
March 28, 1994
