<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10 - Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to____________
Commission file number 0-9109 Commission file number 0-9110
SANTA ANITA REALTY ENTERPRISES, INC. SANTA ANITA OPERATING COMPANY
- - -------------------------------------- -----------------------------------
(Exact name of registrant as specified (Exact name of registrant as
in its charter) specified in its charter)
Delaware Delaware
- - --------------------------------------- -----------------------------------
(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization)
95-3520818 95-3419438
- - --------------------------------------- -----------------------------------
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
301 West Huntington Drive, 285 West Huntington Drive,
Suite 405 P.O.Box 60014
Arcadia, California 91007 Arcadia, California 91066-6014
- - -------------------------------------- -----------------------------------
(Address of principal executive (Address of principal executive
offices including zip code) offices including zip code)
(818) 574-5550 (818) 574-7223
- - ------------------------------------- -----------------------------------
(Registrant's telephone number, (Registrant's telephone number,
including area code) including area code)
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X No
------ -----
The number of shares outstanding of each of the issuers' classes of common
stock, as of the close of business on August 3, 1994 were:
Santa Anita Realty Enterprises, Inc. 11,256,353
Santa Anita Operating Company 11,143,853
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC. AND
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
Form 10-Q
Index
Page No.
PART I. FINANCIAL INFORMATION 3
Balance Sheets - June 30, 1994 and December 31, 1993 for
Santa Anita Realty Enterprises, Inc. 4
Santa Anita Operating Company and Subsidiaries 5
Santa Anita Realty Enterprises, Inc. and Santa
Anita Operating Company and Subsidiaries Combined 6
Statements of Operations - three months ended
June 30, 1994 and 1993 for
Santa Anita Realty Enterprises, Inc. 7
Santa Anita Operating Company and Subsidiaries 7
Santa Anita Realty Enterprises, Inc. and Santa
Anita Operating Company and Subsidiaries Combined 7
Statements of Operations - six months ended
June 30, 1994 and 1993 for
Santa Anita Realty Enterprises, Inc. 8
Santa Anita Operating Company and Subsidiaries 8
Santa Anita Realty Enterprises, Inc. and Santa
Anita Operating Company and Subsidiaries Combined 8
Statements of Cash Flows - six months ended
June 30, 1994 and 1993 for
Santa Anita Realty Enterprises, Inc. 9
Santa Anita Operating Company and Subsidiaries 11
Santa Anita Realty Enterprises, Inc. and Santa
Anita Operating Company and Subsidiaries Combined 12
Notes to Financial Statements 14
Managements' Discussion and Analysis of Financial
Condition and Results of Operations 19
PART II. OTHER INFORMATION 25
SIGNATURES 27
EXHIBIT INDEX 28
2
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC. AND
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
Form 10-Q
For the Six Months Ended June 30, 1994
(Unaudited)
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The accompanying balance sheets as of June 30, 1994 and December 31, 1993 of
Realty, Santa Anita Operating Company and Subsidiaries ("Operating Company"),
and Realty and Operating Company combined, the statements of operations for the
three and six months ended June 30, 1994 and 1993, and the related statements
of cash flows for the six months ended June 30, 1994 and 1993, were prepared by
Realty and Operating Company and are unaudited. In the opinion of the
management of each company, the accompanying financial statements include all
adjustments deemed necessary for a fair presentation.
The following financial statements should be read in conjunction with the
accompanying notes.
3
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
June 30, December 31,
1994 1993
-------------- -------------
<S> <C> <C>
ASSETS
Real estate assets
Santa Anita Racetrack, less accumulated depreciation of
$19,270,000 and $18,670,000, respectively $ 7,119,000 $ 6,997,000
Commercial properties, less accumulated depreciation of
$35,580,000 and $42,503,000, respectively (Note 6) 131,251,000 221,876,000
Investments in unconsolidated joint ventures (Note 1) 2,543,000 3,616,000
Real estate loans and advances receivable 22,706,000 22,084,000
--------------- -------------
163,619,000 254,573,000
Cash 15,991,000 7,633,000
Accounts receivable 2,926,000 4,305,000
Prepaid expenses and other assets (Note 6) 10,956,000 4,705,000
Due from Operating Company 4,730,000 469,000
--------------- -------------
$ 198,222,000 $ 271,685,000
=============== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Real estate loans payable (Note 6) $ 83,312,000 $ 106,731,000
Other loans payable (Note 6) 33,488,000 77,913,000
Accounts payable 2,335,000 3,678,000
Other liabilities 10,322,000 15,346,000
Dividends payable 2,251,000 3,788,000
--------------- -------------
131,708,000 207,456,000
--------------- -------------
Minority interest in consolidated joint ventures (4,680,000) (4,590,000)
Shareholders' equity
Preferred stock; $.10 par value; authorized 6,000,000
shares; none issued - -
Common stock, $.10 par value; authorized 19,000,000
shares; issued and outstanding 11,256,353 shares 1,125,000 1,125,000
Additional paid-in capital 117,084,000 117,084,000
Retained earnings (deficit) (47,015,000) (49,390,000)
--------------- -------------
71,194,000 68,819,000
--------------- -------------
$ 198,222,000 $ 271,685,000
=============== =============
</TABLE>
See accompanying notes.
4
<PAGE>
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
June 30, December 31,
1994 1993
-------------- -------------
<S> <C> <C>
ASSETS
Current assets
Cash $288,000 $9,695,000
Short-term investments, at cost (approximates market) 16,854,000 4,693,000
Accounts receivable 2,390,000 2,789,000
Prepaid expenses and other assets 253,000 1,434,000
------------ ------------
Total current assets 19,785,000 18,611,000
------------ ------------
Investment in common stock of Realty 2,122,000 2,179,000
Property, plant and equipment, at cost
Machinery and other equipment 22,335,000 21,943,000
Leasehold improvements 21,238,000 20,976,000
------------ ------------
43,573,000 42,919,000
Less accumulated depreciation (23,229,000) (21,088,000)
------------ ------------
20,344,000 21,831,000
------------ ------------
$42,251,000 $42,621,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $5,363,000 $10,070,000
Other liabilities 13,348,000 10,117,000
Other loans payable 759,000 726,000
------------ ------------
Total current liabilities 19,470,000 20,913,000
------------ ------------
Other loans payable 2,141,000 2,528,000
Deferred revenues 971,000 2,872,000
Due to Realty 4,730,000 469,000
Deferred income taxes 3,565,000 3,565,000
------------ ------------
30,877,000 30,347,000
------------ ------------
Shareholders' equity
Preferred stock; $.10 par value; authorized 6,000,000
shares; none issued - -
Common stock, $.10 par value; authorized 19,000,000
shares; issued and outstanding 11,143,853 and
11,140,853 shares, respectively 1,114,000 1,114,000
Additional paid-in capital 20,596,000 20,592,000
Retained earnings (deficit) (10,336,000) (9,432,000)
------------ ------------
11,374,000 12,274,000
------------ ------------
$42,251,000 $42,621,000
============ ============
</TABLE>
See accompanying notes.
5
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC. AND
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
June 30, December 31,
1994 1993
------------ ------------
<S> <C> <C>
ASSETS
Real estate assets
Santa Anita Racetrack, less accumulated depreciation of
$19,270,000 and $18,670,000, respectively $ 7,119,000 $ 6,997,000
Commercial properties, less accumulated depreciation of
$34,070,000 and $41,079,000, respectively (Note 6) 126,293,000 216,832,000
Investments in unconsolidated joint ventures (Note 1) 2,543,000 3,616,000
Real estate loans and advances receivable 22,706,000 22,084,000
------------ ------------
158,661,000 249,529,000
Cash 16,279,000 17,328,000
Short-term investments, at cost (approximates market) 16,854,000 4,693,000
Accounts receivable 5,316,000 7,094,000
Prepaid expenses and other assets (Note 6) 12,863,000 7,493,000
Property, plant and equipment, at cost, less accumulated
depreciation of $23,229,000 and $21,088,000, respectively 20,344,000 22,129,000
------------ ------------
$230,317,000 $308,266,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Real estate loans payable (Note 6) $ 83,312,000 $106,731,000
Other loans payable (Note 6) 36,388,000 81,167,000
Accounts payable 7,698,000 13,748,000
Other liabilities 23,670,000 25,463,000
Dividends payable 2,251,000 3,788,000
Deferred revenues 971,000 2,872,000
Deferred income taxes 3,565,000 3,565,000
------------ ------------
157,855,000 237,334,000
------------ ------------
Minority interest in consolidated joint ventures (4,680,000) (4,590,000)
Shareholders' equity
Preferred stock; $.10 par value; authorized 6,000,000
shares; none issued - -
Common stock, $.10 par value; authorized 19,000,000
shares; issued and outstanding 11,143,853 and
11,140,853 shares, respectively 2,227,000 2,227,000
Additional paid-in capital 134,615,000 134,554,000
Retained earnings (deficit) (59,700,000) (61,259,000)
------------ ------------
77,142,000 75,522,000
------------ ------------
$230,317,000 $308,266,000
============ ============
</TABLE>
See accompanying notes.
6
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC. AND
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
STATEMENTS OF OPERATIONS (Unaudited)
(000's Omitted Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended June 30, 1994 Three Months Ended June 30, 1993
----------------------------------------- -------------------------------------------
Operating Adjustments Operating Adjustments
Company & and Company & and
Realty Subsidiaries Elimination Combined Realty Subsidiaries Elimination Combined
----------------------------------------- --------------------------------------------
(Restated)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues (Note 2)
Horse racing (Note 5) $12,675 $12,675 $10,516 $10,516
Food and beverage 2,367 2,367 2,298 2,298
Rental property (Note 6) $8,586 ($3,060)(a) 5,526 $11,504 ($1,917)(a) 9,587
Interest and other 416 252 (40)(b) 628 1,318 211 1,529
------------------ ------- ------------------ -------
9,002 15,294 21,196 12,822 13,025 23,930
------------------ ------- ------------------ -------
Costs and expenses (Note 2)
Direct horse racing operating costs 9,740 9,740 8,595 8,595
Food and beverage cost of sales 816 816 593 593
Rental property operating expenses
(Note 6) 1,530 1,530 3,725 3,725
Depreciation and amortization
(Note 6) 1,534 552 (43)(c) 2,043 2,246 609 (43)(c) 2,812
General and administrative
(Note 6) 766 1,958 2,724 780 2,648 3,428
Interest (Note 6) 1,839 112 1,951 3,350 132 3,482
Losses from unconsolidated
joint ventures 444 444 442 442
Minority interest in earnings
of consolidated joint ventures
(Note 6) 499 499 48 48
Rental expense to Realty 3,060 (3,060)(a) 1,917 (1,917)(a)
------------------ ------- ------------------ -------
6,612 16,238 19,747 10,591 14,494 23,125
------------------ ------- ------------------ -------
Income (loss) before
income taxes 2,390 (944) 1,449 2,231 (1,469) 805
Benefit for income taxes (1,065) (1,065)
------------------ ------- ------------------ -------
Net income (loss) (Notes 3 & 5) $2,390 ($944) $1,449 $3,296 ($1,469) $1,870
================== ======= ================== =======
Weighted average number of
common shares outstanding 11,256 11,144 11,144 11,256 11,141 11,141
================== ======= ================== =======
Net income (loss) per
common share (Notes 3 & 5) $.21 $(.08) $.13 $.29 $(.13) $.17
================== ======= ================== =======
Dividends declared per
common share (Note 4) $0.20 $0.20 $.34 $.34
======= ======= ======= =======
</TABLE>
(a) to eliminate inter-entity rent
(b) to eliminate inter-entity dividends
(c) to eliminate depreciation resulting from inter-entity sales
See accompanying notes.
7
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC. AND
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
STATEMENTS OF OPERATIONS (Unaudited)
(000's Omitted Except Per Share Amounts)
<TABLE>
<CAPTION>
Six Months Ended June 30, 1994 Six Months Ended June 30, 1993
-------------------------------------------- ------------------------------------------
Operating Adjustments Operating Adjustments
Company & and Company & and
Realty Subsidiaries Elimination Combined Realty Subsidiaries Elimination Combined
-------------------------------------------- ------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues (Note 2)
Horse racing $42,914 $42,914 $39,592 $39,592
Food and beverage 6,466 6,466 6,766 6,766
Rental property (Note 6) $24,019 ($10,563)(a) 13,456 $27,713 ($8,830)(a) 18,883
Interest and other 786 380 (79)(b) 1,087 3,985 348 (39)(b) 4,294
------------------ ------- ---------------- -------
24,805 49,760 63,923 31,698 46,706 69,535
------------------ ------- ---------------- -------
Costs and expenses (Note 2)
Direct horse racing operating costs 30,657 30,657 29,208 29,208
Food and beverage cost of sales 2,011 2,011 1,822 1,822
Rental property operating expenses
(Note 6) 4,648 4,648 7,143 7,143
Depreciation and amortization
(Note 6) 3,480 2,198 (86)(c) 5,592 4,636 2,173 (86)(c) 6,723
General and administrative
(Note 6) 1,790 5,018 6,808 1,646 5,962 7,608
Interest (Note 6) 4,779 218 4,997 6,627 277 6,904
Losses from unconsolidated
joint ventures 895 895 885 885
Minority interest in earnings of
consolidated joint ventures
(Note 6) 759 759 54 54
Rental expense to Realty 10,563 (10,563)(a) 8,830 (8,830)(a)
------------------- ------- ---------------- -------
16,351 50,665 56,367 20,991 48,272 60,347
------------------- ------- ---------------- -------
Income (loss) before
income taxes 8,454 (905) 7,556 10,707 (1,566) 9,188
Benefit for income taxes (2,523) (2,523)
------------------- ------- ---------------- -------
Net income (loss) (Note 3) $8,454 ($905) $7,556 $13,230 ($1,566) $11,711
=================== ======= ================ =======
Weighted average number of
common shares outstanding 11,256 11,142 11,142 11,256 11,141 11,141
=================== ======= ================ =======
Net income (loss) per
common share (Note 3) $.75 $(.08) $.68 $1.18 $(.14) $1.05
=================== ======= ================ =======
Dividends declared per
common share (Note 4) $0.54 $0.54 $.68 $.68
======= ======= ======= =======
</TABLE>
(a) to eliminate inter-entity rent
(b) to eliminate inter-entity dividends
(c) to eliminate depreciation resulting from inter-entity sales
See accompanying notes.
8
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30,
<TABLE>
<CAPTION>
(Unaudited)
----------------------------
1994 1993
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $8,454,000 $13,230,000
Adjustments to reconcile net income to net cash provided
by operating activities
Depreciation and amortization 3,480,000 4,636,000
Minority interest in earnings of consolidated
joint ventures 759,000 54,000
Equity in losses of unconsolidated
joint ventures 895,000 885,000
Net decrease (increase) in certain other assets 2,672,000 (4,850,000)
Net (decrease) increase in certain other liabilities (1,288,000) 3,094,000
------------ -----------
Net cash provided by operating activities 14,972,000 17,049,000
------------ -----------
Cash flows from investing activities:
Proceeds from disposition of Multifamily and Industrial
Operations 44,425,000 -
Origination of loans and advances receivable (841,000) (514,000)
Payments received on loans receivable - 147,000
Additions and improvements to real estate assets (10,490,000) (12,735,000)
Investment in unconsolidated joint venture 192,000 -
------------ -----------
Net cash provided by (used in) investing activities 33,286,000 (13,102,000)
------------ -----------
Cash flows from financing activities:
Proceeds from real estate loans payable 21,077,000 -
Proceeds from other loans payable - 9,527,000
Repayment of real estate loans payable (206,000) (479,000)
Repayment of other loans payable (44,425,000) -
Net increase in due from Operating Company (4,261,000) (5,071,000)
Net (decrease) increase in certain other liabilities (3,620,000) 2,379,000
Dividends paid (7,615,000) (7,654,000)
Distributions to minority interest in
consolidated joint ventures, net (850,000) (846,000)
------------ -----------
Net cash used in financing activities (39,900,000) (2,144,000)
------------ -----------
Net increase in cash and cash equivalents 8,358,000 1,803,000
Cash and cash equivalents at beginning of year 7,633,000 1,671,000
------------ -----------
Cash and cash equivalents at June 30 $ 15,991,000 $ 3,474,000
============ ===========
</TABLE>
See accompanying notes.
9
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the Six Months Ended June 30, 1994
Supplemental disclosure of noncash investing and financing activities:
The disposition of the Multifamily and Industrial Operations as described in
the notes to the financial statements involve the transfer of the following
noncash items:
Real estate assets $98,305,000
Other assets $475,000
Real estate loans payable $44,290,000
Other liabilities $302,000
See accompanying notes.
10
<PAGE>
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30,
<TABLE>
<CAPTION>
(Unaudited)
---------------------------
1994 1993
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($905,000) ($1,566,000)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization 2,198,000 2,173,000
Deferred income taxes - 223,000
Net decrease (increase) in certain other assets 1,526,000 (1,339,000)
Net decrease in certain other liabilities (3,379,000) (886,000)
----------- ------------
Net cash used in operating activities (560,000) (1,395,000)
----------- ------------
Cash flows from investing activities:
Additions to property, plant and equipment (654,000) (1,132,000)
Sale of Realty stock 57,000 -
----------- ------------
Net cash used in investing activities (597,000) (1,132,000)
----------- ------------
Cash flows from financing activities:
Repayment of other loans payable (354,000) (325,000)
Net increase in due to Realty 4,261,000 5,071,000
Proceeds from stock issued in connection with
exercise of stock options 4,000 -
----------- ------------
Net cash provided by financing activities 3,911,000 4,746,000
----------- ------------
Net increase in cash and cash equivalents 2,754,000 2,219,000
Cash and cash equivalents at beginning of year 14,388,000 9,976,000
----------- ------------
Cash and cash equivalents at June 30 $17,142,000 $12,195,000
=========== ===========
</TABLE>
See accompanying notes.
11
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC. AND
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
COMBINED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30,
<TABLE>
<CAPTION>
(Unaudited)
---------------------------
1994 1993
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $7,556,000 $11,711,000
Adjustments to reconcile net income to net cash provided
by operating activities
Depreciation and amortization 5,592,000 6,723,000
Minority interest in earnings of consolidated
joint ventures 759,000 54,000
Equity in losses of unconsolidated
joint ventures 895,000 885,000
Deferred income taxes - 223,000
Net decrease (increase) in certain other assets 4,198,000 (6,189,000)
Net (decrease) increase in certain other liabilities (4,667,000) 4,587,000
----------- ------------
Net cash provided by operating activities 14,333,000 17,994,000
----------- ------------
Cash flows from investing activities:
Proceeds from disposition of Multifamily and Industrial
Operations 44,425,000 -
Origination of loans and advances receivable (841,000) (514,000)
Payments received on loans receivable - 147,000
Additions to property, plant and equipment (654,000) (1,132,000)
Additions and improvements to real estate assets (10,490,000) (12,735,000)
Investment in unconsolidated joint venture 192,000 -
----------- ------------
Net cash provided by (used in) investing activities 32,632,000 (14,234,000)
----------- ------------
Cash flows from financing activities:
Proceeds from real estate loans payable 21,077,000 -
Proceeds from other loans payable - 9,527,000
Repayment of real estate loans payable (206,000) (479,000)
Repayment of other loans payable (44,779,000) (325,000)
Distributions to minority interest in
consolidated joint ventures, net (850,000) (846,000)
Dividends paid (7,536,000) (7,615,000)
Net (decrease) increase in certain other liabilities (3,620,000) -
Proceeds from stock issued in connection with
exercise of stock options 61,000 -
----------- ------------
Net cash (used in) provided by financing activities (35,853,000) 262,000
----------- ------------
Net increase in cash and cash equivalents 11,112,000 4,022,000
Cash and cash equivalents at beginning of year 22,021,000 11,647,000
----------- ------------
Cash and cash equivalents at June 30 $33,133,000 $15,669,000
=========== ===========
</TABLE>
See accompanying notes.
12
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC. AND
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
COMBINED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1994
Supplemental disclosure of noncash investing and financing activities:
The disposition of the Multifamily and Industrial Operations as described in
the notes to the financial statements involve the transfer of the following
noncash items:
Real estate assets $98,305,000
Other assets $475,000
Real estate loans payable $44,290,000
Other liabilities $302,000
See accompanying notes.
13
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC. AND
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS - June 30, 1994
Note (1) Realty's investment in unconsolidated joint ventures include
investments in the following commercial real estate ventures:
Name Ownership Project
---------------- ------------ -----------------
Joppa Associates 33-1/3% Retail
H-T Associates 50% Regional Mall
Unaudited combined condensed financial statement information for
unconsolidated joint ventures as of June 30, 1994 and December 31,
1993, and for the six months ended June 30, is as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
------------ ------------
<S> <C> <C>
Assets $211,935,000 $212,979,000
============ ============
Liabilities
Advances from Realty $8,934,000 $8,375,000
Other 196,158,000 200,735,000
------------ ------------
$205,092,000 $209,110,000
============ ============
Partners' equity
Realty $2,543,000 $3,616,000
Others (702,000) 253,000
------------ ------------
$1,841,000 $3,869,000
============ ============
<CAPTION>
Six Months Ended June 30,
1994 1993
------------ ------------
<S> <C> <C>
Revenues $10,557,000 $9,375,000
============ ============
Net loss
Realty ($895,000) ($885,000)
Others (644,000) (579,000)
------------- ------------
($1,539,000) ($1,464,000)
============= ============
</TABLE>
Note (2) Operating Company has adopted an accounting practice whereby the
revenues associated with thoroughbred horse racing at Santa Anita
Racetrack are reported as they are earned. Costs and expenses
associated with thoroughbred horse racing revenues are charged against
income in those interim periods in which the thoroughbred horse racing
revenues are recognized. Other costs and expenses are recognized as
they actually occur throughout the year.
Note (3) The separate results of operations and the separate earnings per share
of the two companies cannot usually be added together to total the
combined results of operations and earnings per share because of
adjustments and elimination's arising from interentity transactions.
Note (4) Realty conducts its operations as regards to dividend and other
requirements in order to qualify as a REIT on a quarterly basis. Realty
regularly tests its financial results for compliance with REIT
statutes.
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Note (5) Operating Company's year-ago results for the second quarter have been
restated to exclude a retroactive reduction in the fees due to the
State of California. As a result of this restatement, the first quarter
of 1993 now reflects a $517,000 increase in wagering revenues and net
income, and the second quarter of 1993 now reflects a $517,000 decrease
in wagering revenues and net income.
Note (6) Disposition of Multifamily and Industrial Operations
In November 1993, Realty entered into a Purchase and Sale Agreement to
sell its multifamily and industrial operations to Pacific Gulf
Properties Inc. ("Pacific"), in conjunction with Pacific's proposed
public offering of common stock and debentures. 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.
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. Pacific has issued to
Realty letters of credit totaling $2.5 million 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.
As a result of the $10,974,000 loss recorded on the transaction in the
fourth quarter of 1993, the sale of the Transferred Properties to
Pacific on February 18, 1994 resulted in no gain or loss being
recognized on the transaction in 1994. 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
sale of its interest in 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. 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 as much as
$5,900,000 depending upon whether the full $2.5 million in letters of
credit are drawn.
15
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Note (6) Disposition of Multifamily and Industrial Operations (continued)
The following unaudited pro forma condensed balance sheet of Realty is
presented as if the Baldwin Industrial Park transaction had occurred on
June 30, 1994. The unaudited pro forma condensed balance sheet is not
necessarily indicative of what the actual financial position of Realty
would have been at June 30, 1994 nor does it purport to represent the
future financial position of Realty.
<TABLE>
<CAPTION>
June 30, 1994
----------------------------------------------------------
Realty Realty
Historical Pro Forma
Cost Basis Adjustments (unaudited)
-------------- ------------ ------------
<S> <C> <C> <C>
Real estate assets
Santa Anita Racetrack, net $ 7,119,000 - $ 7,119,000
Commercial properties, net 131,251,000 (8,830,000) 122,421,000
Investments in unconsolidated
joint ventures 2,543,000 - 2,543,000
Real estate loans and
advances receivable 22,706,000 - 22,706,000
-------------- ------------ ------------
163,619,000 (8,830,000) 154,789,000
-------------- ------------ ------------
Cash 15,991,000 (1,194,000) 14,797,000
Other assets (b)(c) 18,612,000 2,936,000 21,548,000
-------------- ------------ ------------
$198,222,000 $(7,088,000) $191,134,000
============== ============ ============
Real estate loans payable $ 83,312,000 $(9,428,000) $ 73,884,000
Other loans payable 33,488,000 - 33,488,000
Other liabilities 14,908,000 (342,000) 14,566,000
-------------- ------------ ------------
131,708,000 (9,770,000) 121,938,000
-------------- ------------ ------------
Minority interest in consolidated
joint ventures (4,680,000) 2,682,000 (1,998,000)
Shareholders' equity 71,194,000 - 71,194,000
-------------- ------------ ------------
$198,222,000 $(7,088,000) $191,134,000
============== ============ ============
</TABLE>
The accompanying notes are an integral part of this pro forma balance sheet.
16
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Note (6) Disposition of Multifamily and Industrial Operations (continued)
Notes:
------
(a) Reflects the disposition of the assets and liabilities of the
Baldwin Industrial Park as if the transaction had occurred on June
30, 1994.
(b) The historical balance at June 30, 1994 includes Realty's
investment in Pacific stock of $2,738,000 and a receivable from
Pacific of $1,200,000 relating to the consideration for Realty's
corporate headquarters and net other assets related to the
Transferred Properties. The pro forma balance at June 30, 1994
includes Realty's investment in Pacific stock of $12,802,000.
(c) As a result of the February 18, 1994 sale to Pacific, Realty has an
investment in the common shares of Pacific totaling $2,738,000.
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.
The following unaudited pro forma statements of operations of Realty
are presented as if both parts of the transaction had occurred as of
the beginning of the period presented. The unaudited pro forma
statements of operations are not necessarily indicative of what the
actual results of operations would have been if the entire transaction
had been consummated as of the beginning of the period presented nor do
they purport to represent the results of operations of Realty for any
future period .
<TABLE>
<CAPTION>
For the Six Months Ended June 30, 1994
---------------------------------------------------------
Realty Realty
Historical Pro Forma
Cost Basis Adjustments (1) (Unaudited)
----------- --------------- ------------
<S> <C> <C> <C>
Revenues
Rental property $24,019,000 $(4,067,000) $19,952,000
Interest and other (2) 786,000 309,000 1,095,000
------------ ----------- -----------
24,805,000 (3,758,000) 21,047,000
------------ ----------- -----------
Costs and expenses
Rental property operating
expenses 4,648,000 (1,630,000) 3,018,000
Depreciation and amortization 3,480,000 (672,000) 2,808,000
General and administrative 1,790,000 (225,000) 1,565,000
Interest and other (3) 4,779,000 (1,344,000) 3,435,000
Losses from unconsolidated
joint ventures 895,000 - 895,000
Minority interest in earnings of
consolidated joint ventures (4) 759,000 (348,000) 411,000
------------ ----------- -----------
16,351,000 (4,219,000) 12,132,000
------------ ----------- -----------
Net income $ 8,454,000 $ 461,000 $ 8,915,000
============ =========== ===========
</TABLE>
The accompanying notes are an integral part of this
pro forma statement of operations.
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Continued)
Note (6) Disposition of Multifamily and Industrial Operations (continued)
<TABLE>
<CAPTION>
For the Six Months Ended June 30, 1993
---------------------------------------------------------
Realty Realty
Historical Pro Forma
Cost Basis Adjustments (1) (Unaudited)
----------- --------------- ------------
<S> <C> <C> <C>
Revenues
Rental property $27,713,000 $(9,589,000) $18,124,000
Interest and other (2) 3,985,000 338,000 4,323,000
------------ ----------- -----------
31,698,000 (9,251,000) 22,447,000
------------ ----------- -----------
Costs and expenses
Rental property operating
expenses 7,143,000 (3,858,000) 3,285,000
Depreciation and amortization 4,636,000 (1,706,000) 2,930,000
General and administrative 1,646,000 (681,000) 965,000
Interest and other (3) 6,627,000 (3,601,000) 3,026,000
Losses from unconsolidated
joint ventures 885,000 - 885,000
Minority interest in earnings of
consolidated joint ventures (4) 54,000 294,000 348,000
------------ ----------- -----------
20,991,000 (9,552,000) 11,439,000
------------ ----------- -----------
Income before income taxes 10,707,000 301,000 11,008,000
Benefit for income taxes (2,523,000) - (2,523,000)
------------ ----------- -----------
Net income $13,230,000 $ 301,000 $13,531,000
============ =========== ===========
</TABLE>
The accompanying notes are an integral part of this
pro forma statement of operations.
Notes:
------
(1) Reflects the operations of the Multifamily and Industrial
Operations directly identifiable with, and allocations of other
costs and expenses related to, the Multifamily and Industrial
Operations transferred by Realty to Pacific, and the operations of
Baldwin Industrial Park, for the respective six months ended June
30.
(2) Estimated quarterly distributions to be received on Realty's
investment in Pacific ($.39 per common share) less the amount of
such distributions estimated to represent the return of capital
($.14 per common share).
(3) Elimination of interest expense on real estate and other loans
payable repaid or assumed by Pacific.
(4) Elimination of minority interest in earnings of joint ventures
resulting from Realty's acquisition of the Partnership interests
and subsequent transfer to Pacific.
18
<PAGE>
Item 2. Managements' Discussion and Analysis of Financial Condition and Results
of Operations
SANTA ANITA REALTY ENTERPRISES, INC.
The following narrative discusses Realty's results of operations for the three
months and six months ended June 30, 1994 and 1993, together with liquidity and
capital resources as of June 30, 1994.
RESULTS OF OPERATIONS
Realty's revenues are derived principally from the rental of real property and
interest on investments. Total revenues for the three months ended June 30,
1994 were $9,002,000, compared with $12,822,000 for the similar period in 1993,
a decrease of 29.8%. Total revenues for the six months ended June 30, 1994 were
$24,805,000, compared with $31,698,000 for the six months ended June 30, 1993, a
decrease of 21.7%. The lower 1994 revenues were primarily due to Realty selling
its multifamily and industrial operations to Pacific Gulf Properties Inc.
("Pacific"), formerly a wholly-owned subsidiary, in February, 1994 and to
nonrecurring interest earned on a California Franchise Tax Board refund received
in 1993. The sale to Pacific is discussed in Note 6 and the nonrecurring
interest is discussed below.
The single most significant source of rental revenue is the lease of Santa Anita
Racetrack. Such revenues for the quarter ended June 30, 1994 were $3,060,000,
an increase of 39.5% from revenues of $2,195,000 in the year ago quarter.
Revenues for the six months ended June 30, 1994 were $10,852,000, an increase of
15.9% from revenues of $9,363,000 in the same period in 1993. The increase in
rental revenue resulted from more race days in 1994. The lease with LATC for
Santa Anita Racetrack expires in December, 1994. It is anticipated by
management that the lease will be renewed on terms which may result in reduced
revenue to Realty.
Rental revenues from other real estate investments for the three months ended
June 30, 1994 were $5,526,000, a decrease of 40.6% from revenues of $9,309,000
in the same period in 1993. Rental revenues from other real estate investments
for the six months ended June 30, 1994 were $13,167,000, a decrease of 26.7%
from revenues of $18,350,000 in the same 1993 period. The 1994 decrease is due
primarily to the February 1994 sale by Realty of its multifamily and industrial
operations.
Interest and other income was $416,000 for the three months ended June 30, 1994,
compared with $1,318,000 in the same period in 1993. Interest and other income
was $786,000 for the six months ended June 30, 1994, compared with $3,985,000 in
the same 1993 period. The decrease is primarily attributable to interest income
of $927,000 and $3,211,000 in the three month and six month periods ended June
30, 1993, related to a tax settlement with 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, income tax benefits were
$1,065,000 and $2,523,000 in the 1993 three month and six month periods.
19
<PAGE>
Item 2. Managements' Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Costs and expenses were $6,612,000 for the three months ended June 30, 1994, a
decrease of 37.6%, from $10,591,000 in the year ago quarter. Costs and expenses
of $16,351,000 for the six months ended June 30, 1994, decreased 22.1% from
$20,991,000 in the 1993 six month period. The decreases are primarily due to
the disposition of the multifamily and industrial operations which were
partially offset by minor increases in general and administrative expenses
associated with the sale noted above.
Net income for the three months ended June 30, 1994 was $2,390,000 compared with
$3,296,000 in the year ago quarter. Net income for the 1994 six months was
$8,454,000 compared with $13,230,000 a year ago. The decreases were primarily
due to interest income and income tax benefits in 1993 related to the California
Franchise Tax Board settlement which were partially offset by the increase in
rental revenues from Santa Anita Racetrack in 1994. The sale of the multifamily
and industrial operations in February 1994 had an insignificant impact on net
income for the three months and six months ended June 30, 1994 compared with the
same periods in 1993.
LIQUIDITY AND CAPITAL RESOURCES
Realty had liquidity available from a combination of short-and long-term
sources. Short-term sources include cash and short-term investments of
$15,991,000 at June 30, 1994.
In connection with the sale of properties to Pacific, Realty paid down its lines
of credit by $44,290,000 and transferred to Pacific $44,425,000 of indebtedness
associated with the apartment and industrial properties sold.
As of December 31, 1993, March 31, 1994 and June 30, 1994, Realty was not in
compliance with certain covenants contained in its existing credit agreements.
A waiver from Realty's existing lenders of such noncompliance expired on April
30, 1994. Realty is in the process of negotiating an extension of such waiver
that will, through November 14, 1994, waive all existing noncompliance. It is
anticipated that such waiver will contain certain terms and conditions,
including a continuation of a prohibition against additional borrowings under
Realty's existing credit agreements and a requirement to repay all outstanding
obligations under those credit agreements by November 14, 1994. Although there
can be no assurance that Realty's existing lenders will grant such extended
waiver, management believes that such waiver will be executed in the near
future. In addition, Realty has received a commitment from a new lender to
provide interim financing, if required, of up to $33,500,000 to be used to repay
the outstanding obligations under the existing credit agreements (currently
$33,488,000). Realty is also currently negotiating a new long term credit
facility with such new lender which would provide an amount sufficient to
refinance Realty's existing credit agreement obligations (or, if applicable, the
obligations under such new lender's interim financing) and an additional line of
credit to be used for general corporate purposes. In management's opinion,
Realty will generate sufficient liquidity from other sources during the
negotiation of its new long term credit facility to provide for its operating
needs.
On June 2, 1994, the Board of Directors established a revised annual dividend
rate of $0.80 per share, effective with the next quarterly dividend of $0.20 per
share payable on July 22, 1994. Previously the annual dividend rate had been
$1.36 per share. The revised annual rate is expected to reduce annual dividends
by $6,300,000.
20
<PAGE>
Item 2. Managements' Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Realty had $22,706,000 of long-term receivables at June 30, 1994 with maturities
ranging from 1994 to 2002. For the six months ended June 30, 1994, long-term
receivables earned interest income of $786,000.
In the opinion of management, as of June 30, 1994, Realty's real estate
investments had market value substantially in excess of the historical costs
and indebtedness related to such real estate investments. Management believes
that this provides significant additional borrowing capacity.
21
<PAGE>
Item 2. Managements' Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
Operating Company is engaged in thoroughbred horse racing through its wholly-
owned subsidiary, Los Angeles Turf Club, Incorporated ("LATC"), which leases the
Santa Anita Racetrack ("Santa Anita") from Realty.
The following narrative discusses Operating Company's results of operations for
the three and six months ended June 30, 1994 and 1993, together with liquidity
and capital resources as of June 30, 1994.
RESULTS OF OPERATIONS -- SECOND QUARTER 1994 COMPARED WITH SECOND QUARTER 1993
Operating Company derives its revenues primarily from thoroughbred horse racing
activities. For the three months ended June 30, live thoroughbred horse racing
at Santa Anita Racetrack totaled 19 days in 1994 compared with 14 days in 1993.
On-track attendance in the second quarter of 1994 was up 28.6% from the
comparable year ago period while average daily attendance declined 5.2%. Total
wagering and average daily wagering increased 64.3% and 21.1%, respectively, in
the second quarter of 1994 compared with the year ago quarter. On-track
wagering, inter-track wagering and interstate wagering increased 28.4%, 53.0%
and 148.2%, respectively, in the second quarter of 1994 compared with the year
ago quarter, primarily attributable to an increase in racing days for the second
quarter of 1994 compared with the year ago quarter. The increase in interstate
wagering is primarily attributable to an increase in the number of interstate
wagering locations.
Also, in the second quarter ended June 30, Santa Anita Racetrack operated 48
days in 1994 and 52 days in 1993 as a satellite wagering facility for Hollywood
Park. Total attendance and wagering as a satellite wagering facility were down
11.1% and 10.0%, respectively, in the second quarter of 1994 compared with the
year ago quarter. Average daily attendance and average wagering were down 3.7%
and 2.4%, respectively, for the second quarter of 1994 compared with the year
ago quarter.
Total revenues and direct operating costs increased in the second quarter of
1994 compared with the year ago quarter due to an increase in race days and
wagering at Santa Anita. Total revenues in the second quarter of 1994 were
$15,294,000, up 17.4% from the restated revenues of $13,025,000 for the
comparable year ago period. Direct horse racing operating costs in the second
quarter of 1994 were $9,740,000, up 13.3% from $8,595,000 for the comparable
year ago period.
Food and beverage revenues and cost of sales were also higher in the second
quarter of 1994 compared with the comparable year ago period due to the increase
in race days. As a percentage of sales, cost of sales increased to 34.5% in the
second quarter of 1994 compared with 25.8% in the second quarter of 1993.
General and administrative expenses were $1,958,000 in the second quarter of
1994, down 26.1% from the $2,648,000 from the comparable year ago period, due to
the one-time charge of $974,000 in the prior year for the post retirement
benefits payable as a result of the death of the former Chairman of the Board of
Operating Company.
22
<PAGE>
Item 2. Managements' Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Interest expense decreased to $112,000 in the second quarter of 1994 from
$132,000 in the second quarter of 1993. Rental expense to Realty was $3,060,000
for the second quarter of 1994 compared with $1,917,000 reported in the second
quarter of 1993. The increase in rental expense of 59.6% reflects the overall
increase in racing days and wagering.
Operating Company reported a net loss of $944,000 or $.08 per share in the
second quarter of 1994 compared with a restated net loss of $1,469,000 or $.13
per share in the second quarter of 1993 primarily due to the revenue and expense
items previously discussed.
RESULTS OF OPERATIONS -- YEAR TO DATE 1994 COMPARED WITH YEAR TO DATE 1993
For the six months ended June 30, live thoroughbred horse racing at Santa Anita
Racetrack totaled 85 days in 1994 compared with 78 days in 1993. Total on-track
attendance at the live racing events in the first six months of 1994 was up 3.2%
from the comparable year ago period while average daily attendance declined
5.3%. Total wagering at the live racing events increased 30.9% and average
daily wagering increased 20.1% in the first six months of 1994 compared with the
same period last year. On-track wagering increased 6.3%, inter-track wagering
increased 17.3% and interstate wagering increased 94.10% in the first half 1994
compared with the same period last year.
Also, for the six months ended June 30, Santa Anita Racetrack operated 48 days
in 1994 and 52 days in 1993 as a satellite wagering facility for Hollywood Park.
Total attendance and wagering as a satellite wagering facility were down 11.1%
and 10.0%, respectively, in the first half of 1994 compared with the same period
last year. Average daily attendance and average wagering were down 3.7% and
2.4%, respectively, for the first half of 1994 compared with the same period
last year.
Total revenues and direct horse racing operating costs were higher in the first
six months of 1994 compared with the same period last year due to more race
days, higher attendance and wagering at the live racing event. Total revenues
in the first six months of 1994 were $49,760,000, up 6.5% from $46,706,000 for
the comparable year ago period. Direct horse racing operating costs in the
first six months of 1994 were $30,657,000, up 5.0% from $29,208,000 for the
comparable year ago period.
Food and beverage revenues were lower in the first six months of 1994 compared
with the comparable year ago period due to lower per capita spending while cost
of sales was higher for the same comparable periods. As a percentage of sales,
cost of sales increased to 31.1% in the first six months of 1994 compared with
26.9% in the first six months of 1993.
General and administrative expenses were $5,018,000 in the first six months of
1994, down 15.8% from the $5,962,000 from the comparable year ago period due to
the one-time charge of $974,000 in the prior year for the post retirement
benefits payable as a result of the death of the former Chairman of the Board of
Operating Company. Interest expense decreased to $218,000 in the first six
months of 1994 from $277,000 in the first six months of 1993. Rental expense to
Realty was $10,563,000 for the first six months of 1994 compared with $8,830,000
reported in the first six months of 1993. The increase in rental expense of
19.6% reflects the overall increase in racing days and wagering.
23
<PAGE>
Item 2. 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 $905,000 or $.08 per share for the six months ended June
30, 1994, compared with a net loss of $1,566,000 or $.14 per share for the
comparable period in 1993.
SEASONALITY
Operating Company's operations are subject to seasonal fluctuations. Operating
Company recognizes the majority of its revenues in the first quarter due to live
racing activity at Santa Anita. Therefore, the results of operations for
interim periods are not necessarily indicative of the results that may be
expected for the full year.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1994, Operating Company's sources of liquidity included cash and
short-term investments of $17,142,000 and an unsecured line of credit with
Realty of $10,000,000, of which approximately $2,900,000 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 re-negotiating its credit agreements.
(See Item 2. "Managements' Discussion and Analysis of Financial Condition and
Results of Operations - Realty - Liquidity and Capital Resources"). For the
three and six months ended June 30, 1994, short-term investments earned interest
income of $203,000 and $296,000, respectively.
The cash balances and related interest income from short-term investments
reflect seasonal variations associated with the Santa Anita meet. During the
meet, large cash balances and short-term investments are maintained by LATC,
including amounts to be disbursed for payment of license fees payable to the
state, purses payable to horse owners and un-cashed winning pari-mutuel tickets
payable to the public.
24
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC. and
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
FORM 10-Q
For the Quarter Ended June 30, 1994
PART II OTHER INFORMATION
Item 3. Defaults upon Senior Securities
As described in Managements' Discussion and Analysis of Financial
Condition and Results of Operations Santa Anita Realty
Enterprises, Inc. - Liquidity and Capital Resources, as of
December 31, 1993, March 31, 1994 and June 30, 1994, Realty was
not in compliance with certain covenants contained in its existing
credit agreements. A waiver from Realty's existing lenders of such
noncompliance expired on April 30, 1994. Realty is in the process
of negotiating an extension of such waiver that will, through
November 14, 1994, waive all existing noncompliance. Although
there can be no assurance that Realty's existing lenders will
grant such extended waiver, Management believes that such waiver
will be executed in the near future. The indebtedness consists of
approximately $33.5 million of revolving credit debt owed to three
commercial banks. In addition, Realty has received a commitment
from a new lender to provide interim financing, if required, to be
used to repay such indebtedness. Realty is also currently
negotiating a new long term credit facility with such new lender
which would provide an amount sufficient to refinance Realty's
existing credit agreement obligations (or, if applicable, the
obligations under such new lender's interim financing) and an
additional line of credit to be used for general corporate
purposes.
Item 4. Submission of Matters to a Vote of Security Holders
On May 3, 1994, the annual meetings of shareholders of Santa Anita
Operating Company and Santa Anita Realty Enterprises, Inc. were
held. At the Operating Company meeting, William C. Baker, Clifford
C. Goodrich and Stephen F. Keller were elected as directors; and
at the Realty meeting, William C. Baker, Clifford C. Goodrich,
Stephen F. Keller and Charles H. Strub II were elected as
directors.
The votes for, votes to withhold authority and broker nonvotes
with respect to each director so elected were as follows:
<TABLE>
<CAPTION>
Votes to
Votes For Withhold Authority Broker Nonvotes
----------- ------------------ ---------------
<S> <C> <C> <C>
Operating Company
-----------------
William C. Baker 9,162,628 175,280 1,802,945
Clifford C. Goodrich 9,154,368 183,540 1,802,945
Stephen F. Keller 9,137,144 200,764 1,802,945
Operating Company
-----------------
William C. Baker 9,278,367 175,041 1,802,945
Clifford C. Goodrich 9,267,405 186,003 1,802,945
Stephen F. Keller 9,272,180 181,228 1,802,945
Charles H. Strub II 9,226,345 227,063 1,802,945
</TABLE>
25
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) The following documents are filed as part of this report:
1. Exhibits
See Exhibit Index
(b) Reports on Form 8-K. There were no reports on Form 8-K
filed during the quarter ended June 30, 1994.
26
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Operating
Company and Realty have duly caused this report to be signed on their behalf by
the undersigned thereunto duly authorized.
SANTA ANITA REALTY ENTERPRISES, INC. SANTA ANITA OPERATING COMPANY
By /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)
Dated: August 12, 1994 Dated: August 12, 1994
------------------- -------------------
By /s/ Brian L. Fleming By /s/ Richard D. Brumbaugh
---------------------------------- ----------------------------------
Brian L. Fleming Richard D. Brumbaugh
Executive Vice President and Vice President-Finance and
Chief Financial Officer Chief Financial Officer
(Principal Financial and Accounting (Principal Financial and Accounting
Officer) Officer)
Dated: August 12, 1994 Dated: August 12, 1994
------------------- -------------------
June 30, 1994
Form 10-Q
27
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Sequential
Exhibit Numbering
Number Page No.
<C> <S>
10.1 Employment Agreement between Santa Anita Operating
Company, Los Angeles Turf Club and Clifford C. Goodrich dated
as of January 1, 1994.
10.2 Employment Agreement between Santa Anita Operating
Company and Stephen F. Keller dated as of January 1, 1994.
10.3 Employment Agreement between Santa Anita Realty
Enterprises, Inc. and Christopher T. Stirling dated as of
March 25, 1994.
10.4 Employment Agreement between Santa Anita Realty
Enterprises, Inc. and Brian Fleming dated as of May 9, 1994.
</TABLE>
28
<PAGE>
EXHIBIT 10.1
Employment Agreement
--------------------
This Employment Agreement (the "Agreement") is entered into by and between
Santa Anita Operating Company (the "Company"), Los Angeles Turf Club ("LATC")
and Clifford C. Goodrich (the "Executive"), as of the 1st day of January 1994.
I. RECITALS
--------
WHEREAS, the Company desires to employ the Executive as its Vice-President;
and
WHEREAS, LATC desires to employ the Executive as its President and Chief
Operating Officer;
NOW, THEREFORE, the Company, LATC and the Executive desire to set forth in
this Agreement the terms and conditions of the Executive's continued employment
with the Company and LATC.
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.
1
<PAGE>
III. EMPLOYMENT.
----------
The Company and LATC hereby employ the Executive and the Executive hereby
accepts such employment, upon the terms and conditions hereinafter set forth,
from January 1, 1994, to and including December 31, 1996. This Agreement is
subject to renewal as set forth in Section VII below.
IV. DUTIES.
------
A. The Executive shall serve during the course of his employment as Vice-
President of the Company and President and Chief Operating Officer of LATC, and
shall have such 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 all of his time, energy
and ability to the business of the Company and LATC. 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
businesses which are not in competition with the business of the Company or in
competition with any present or future affiliate of the Company.
2
<PAGE>
C. 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.
D. For the term of this Agreement, the Executive shall report to the
Chief Executive Officer of the Company or his designee.
V. COMPENSATION.
------------
A. The Company shall pay the Executive a base salary at the rate of
$230,000 per year. Such salary shall be earned monthly and shall be payable in
periodic 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 Company agrees to recommend to the Compensation
-------------
Committee the consideration from time to time of the grant of additional stock
options to the Executive in
3
<PAGE>
an amount appropriate for an employee in the Executive's position.
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.
D. Vehicle. The Company shall lease a vehicle for the Executive's use.
-------
E. Club Membership Dues Allowance. The Company shall reimburse the
------------------------------
Executive promptly for all reasonable club membership dues incurred by him for
membership in one club in the Los Angeles area in support of his role in
promoting the best interests of the Company.
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.
4
<PAGE>
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.
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. The Executive's employment shall terminate automatically upon
-----
the Executive's death.
B. 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 XVII of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
5
<PAGE>
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 six 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 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.
C. 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 (i) that the Executive has
been convicted of a felony or (ii) that the Executive has acted or failed to act
in connection with his employment in such manner as would constitute gross
negligence or willful misconduct.
D. Other than Cause or Death or Disability. The Company may terminate
---------------------------------------
the Executive's employment for reasons other than Death, Disability or Cause
upon 90 days' written notice.
6
<PAGE>
E. 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 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 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 or Voluntary Termination. If the Executive's employment is
------------------------------
terminated by the Company for Cause or Executive voluntarily terminates
employment (except for a "Good Reason" described in Section VI-E-4 below), this
Agreement shall terminate without further obligations to the
7
<PAGE>
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-E-2, then the Company's decision to terminate
shall be deemed to have been made under Section VI-E-3 and the amounts payable
thereunder shall be the only amounts the Executive may receive for his
termination, rather than the amounts payable pursuant to this Section VI-E-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
the base salary which would be payable to Executive during the remaining term of
this Agreement (assuming that base salary would remain unchanged from the salary
rate in effect on the Executive's date of termination).
For the purpose of calculating the obligation described in Section VI-
E-3(c) above, the remaining term of this Agreement shall always be treated as at
least 18 months.
8
<PAGE>
The obligation described in Section VI-E-3(c) shall be reduced to an amount not
less than zero by any cash lump sum severance payment received by the Executive
pursuant to the Severance Agreement dated October 1, 1992 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 under Section VI-E-3 for a reason other than Cause. For
purposes of this Section VI-E-4, "Good Reason" shall mean the occurrence of one
of the following events without the Executive's consent:
a. Any action by the Company or LATC which results in a material
diminution in the Executive's position, authority, duties or responsibilities to
the Company or LATC, 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 or LATC 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 (i) a
reduction in the Executive's base salary or (2) a material reduction in the
9
<PAGE>
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).
5. No Mitigation. If this Agreement terminates under Section VI-E-
-------------
2, VI-E-3 or VI-E-4 hereof, the obligations of the Company to the Executive
under this Agreement will not be mitigated by any other employment secured by
the Executive.
6. Withholding. Amounts payable under this Section VI-E shall be
-----------
reduced by any standard withholding and other authorized deductions.
F. 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
10
<PAGE>
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. RENEWAL.
-------
Subject to the provisions of Section VI-E-3, on the last day of each
calendar year, beginning on December 31, 1996, this Agreement shall be
automatically renewed for one additional year unless the Executive or the
Company gives notice to the other, in writing, at least 6 months prior to the
expiration of this Agreement, or any renewal or extension thereof, of its desire
to terminate this Agreement or modify its terms.
VIII. 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
11
<PAGE>
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 attorney's fees and
costs relating to such arbitration. In the event that the Executive disputes
the Company's determination that Cause has existed for his termination of
employment, the Company shall only be considered as having terminated the
Executive for Cause if the arbitrator concludes that Cause existed for
Executive's termination and issues specific findings to that effect.
IX. 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
12
<PAGE>
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.
X. 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
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.
XI. 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
13
<PAGE>
binding unless in writing and signed by the party waiving the breach.
XII. 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.
XIII. 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 this end the provisions of this Agreement are declared to be
severable.
XIV. 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.
14
<PAGE>
XV. 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.
XVI. 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 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.
XVII. 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
430 Vaquero Road, Arcadia, CA 91007, addressed to the Company at 285 West
Huntington Drive, Arcadia, CA 91007, or addressed to LATC at 285 West Huntington
Drive, Arcadia, CA 91007. Any
15
<PAGE>
party may change the address at which notice shall be given by written notice
given in the above manner.
XVIII. 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.
XIX. LEGAL COUNSEL.
-------------
The Executive, LATC and the Company recognize that this is a legally
binding contract and acknowledge and agree that they
16
<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 OPERATING COMPANY CLIFFORD C. GOODRICH
By /S/ STEPHEN F. KELLER /S/ CLIFFORD C. GOODRICH
________________________ _________________________
Its Chairman
______________________
LOS ANGELES TURF CLUB
By /S/ MICHAEL J. MANNING
________________________
Its Vice President
_______________________
17
<PAGE>
EXHIBIT 10.2
Employment Agreement
--------------------
This Employment Agreement (the "Agreement") is entered into by and between
Santa Anita Operating Company (the "Company") and Stephen F. Keller (the
"Executive"), as of the 1st day of January 1994.
I. RECITALS
--------
WHEREAS, the Company desires to employ the Executive as its Chief Executive
Officer and;
NOW, THEREFORE, the Company and the Executive desire to set forth in this
Agreement the terms and conditions of the Executive's continued employment with
the Company.
II. EMPLOYMENT.
----------
The Company hereby employs the Executive and the Executive hereby accepts
such employment, upon the terms and conditions hereinafter set forth, from
January 1, 1994, to and including December 31, 1996. This Agreement is subject
to renewal as set forth in Section VI below.
1
<PAGE>
III. DUTIES.
------
A. The Executive shall serve during the course of his employment as Chief
Executive Officer of the Company, and shall have such 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. During his tenure
as the Chief Executive Officer, the Company's headquarters shall be in Southern
California and Executive shall discharge his duties through services primarily
performed in the Southern California area.
B. The Executive agrees to devote substantially all of his time, energy
and ability to the business of the Company. Nothing herein shall prevent the
Executive, upon approval of the Board of Directors of the Company, from serving
as a director or trustee of other corporations or 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. 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.
2
<PAGE>
D. For the term of this Agreement, the Executive shall report to the
Board of Directors of the Company or its designee.
IV. COMPENSATION.
------------
A. The Company shall pay the Executive a base salary at the rate of
$375,000 per year. Such salary shall be earned semimonthly and shall be payable
in periodic installments no less frequently than semimonthly 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 time he serves
as Chief Executive Officer of the Company.
B. Stock Options. The Company agrees to recommend to the Compensation
-------------
Committee the consideration from time to time of the grant of additional stock
options to the Executive in an amount appropriate for an employee in the
Executive's position.
C. Annual Bonus, Incentive, Savings and Retirement Plans. The Executive
-----------------------------------------------------
shall be entitled to participate in all annual bonus, incentive, savings and
retirement plans,
3
<PAGE>
practices, policies and programs applicable generally to other peer executives
of the Company.
D. Vehicle. The Company shall lease a vehicle for the Executive's use.
-------
E. Club Membership Dues. The Company shall reimburse the Executive
--------------------
promptly for all reasonable club membership dues incurred by him in support of
his role in promoting the best interests of the Company.
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.
H. Fringe Benefits. The Executive shall be entitled to fringe benefits
---------------
in accordance with the plans, practices,
4
<PAGE>
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.
J. Financial Planning. The Executive shall be entitled to be paid an
------------------
allowance of $10,000 every two years (subject to required withholding) for
financial planning expenses.
V. TERMINATION.
-----------
A. Death. The Executive's employment shall terminate automatically upon
-----
the Executive's death.
B. 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
5
<PAGE>
the Company on the basis provided in this agreement for a period of six 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 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.
C. 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, determines (i) that the Executive has been convicted of a felony or
(ii) that the Executive has acted or failed to act in connection with his
employment in such manner as would constitute gross negligence or willful
misconduct.
D. Other than Death or Disability or Cause. The Company may terminate
---------------------------------------
the Executive's employment for reasons other than Death, Disability or Cause
upon 60 days written notice.
6
<PAGE>
E. 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 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 expenses, club membership
dues and financial planning expenses, 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 amounts 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 (including, but not limited to, any amounts due under the
Executive's Deferred Compensation Agreement with the Company).
2. Cause or Voluntary Termination. If the Executive's employment is
------------------------------
terminated by the Company for Cause or the Executive voluntarily terminates
employment (except for
7
<PAGE>
a "Good Reason" described in Section V-E-4 below), 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 V-E-2,
then the Company's decision to terminate shall be deemed to have been made under
Section V-E-3 and the amounts payable thereunder shall be the only amounts the
Executive may receive for his termination.
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 the sum of
112% of the base salary which would be payable to Executive during the remaining
term of this Agreement (assuming that base salary would remain unchanged from
the salary rate in effect on the Executive's date of termination). In addition,
for the purpose of calculating the amount due under the Executive's Deferred
Compensation Agreement, the Executive shall be treated as having the greater of
his actual period of tenure or 5 years of service.
8
<PAGE>
For the purpose of calculating the obligation described in Section V-
E-3(c) above, the remaining term of this Agreement shall always be treated as at
least 18 months. The obligation described in Section V-E-3(c) shall be reduced,
however, by any cash lump sum severance payment received by the Executive
pursuant to the Severance Agreement between the Executive and the Company dated
October 1, 1992.
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 under Section V-E-3 for a reason other than Cause. For
purposes of this Section V-E-4, "Good Reason" shall mean the occurrence of one
of the following events without the Executive's consent:
a. Any action by the Company which results in a material
diminution in the Executive's position, authority, duties or responsibilities to
the Company, 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, as the case may be, 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
9
<PAGE>
shall be deemed to occur if there is a reduction in (1) the Executive's base
salary or (2) 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).
5. No Mitigation. If this Agreement terminates under Section V-E-2,
-------------
V-E-3 or V-E-4 hereof, the obligations of the Company to the Executive under
this Agreement will not be mitigated by any other employment secured by the
Executive.
6. Withholding. Amounts payable under this Section V-E shall be
-----------
reduced by any standard withholdings and other authorized deductions.
F. 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
10
<PAGE>
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).
VI. RENEWAL.
-------
Subject to the provisions of Section V-E-3, on the last day of each
calendar year, beginning on December 31, 1996, this Agreement shall be
automatically renewed for one additional year unless the Executive or the
Company gives notice to the other, in writing, at least 6 months prior to the
expiration of this Agreement, or any renewal or extension thereof, of its desire
to terminate this Agreement or modify its terms.
11
<PAGE>
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. In the event that the
Executive disputes the Company's determination that Cause has existed for his
termination of employment, the Company shall only be considered as having
terminated the Executive for Cause if the arbitrator concludes that Cause
existed for Executive's termination and issues specific findings to that effect.
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
12
<PAGE>
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
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.
13
<PAGE>
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 this end the provisions of this Agreement are declared to be
severable.
14
<PAGE>
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 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.
15
<PAGE>
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
101 S. Las Palmas Ave, Los Angeles, Ca 90004, or addressed to the Company at 285
W. Huntington Drive, Arcadia, Ca 91007. Any 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.
XVIII. LEGAL COUNSEL.
-------------
The Executive and the Company recognize that this is a legally binding
contract and acknowledge and agree that they have had the opportunity to consult
with legal counsel of their choice. The Company shall reimburse the Executive
16
<PAGE>
promptly for all reasonable attorney fees incurred by the Executive in
connection with the negotiation and review of this Agreement.
In witness whereof, the parties hereto have executed this Agreement as of
the date first above written.
SANTA ANITA OPERATING COMPANY STEPHEN F. KELLER
By /S/ CLIFFORD C. GOODRICH /S/ STEPHEN F. KELLER
------------------------ _________________________
Its Vice President
_______________________
17
<PAGE>
EXHIBIT 10.3
Employment Agreement
--------------------
This Employment Agreement (the "Agreement") is entered into by and between
Santa Anita Realty Enterprises, Inc. (the "Company") and Christopher T. Stirling
(the "Executive"), on the 25th day of March 1994.
I. RECITALS.
---------
WHEREAS, the Company desires to employ thExecutive as its President and
Chief Operating Officer; 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.
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
1
<PAGE>
conditions hereinafter set forth, from April 18, 1994, to and including June 30,
1996.
IV. DUTIES.
------
A. The Executive shall serve during the course of his employment as
President and Chief Operating 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 all 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 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. 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.
2
<PAGE>
D. 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 $150,000 per year. Such salary shall be earned monthly and shall be
payable in periodic 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 20,000 shares of the Company's common stock
(the "Options"). The Options shall be issued at a price equal to
3
<PAGE>
the fair market value of the Company's common stock on the date the Executive's
employment commences under this Agreement. 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. 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;
4
<PAGE>
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.
D. Vehicle Allowance. The Executive shall be entitled to be paid a
-----------------
vehicle allowance in the amount of $500 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 an allowance for actual club membership dues, up to $300 per month (subject
to any required withholding), payable in accordance with the Company's customary
practices. The Executive shall also be entitled to be paid a one-time allowance
for Jonathan Club initiation dues, up to $6,500 (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
5
<PAGE>
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.
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
6
<PAGE>
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 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
7
<PAGE>
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 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 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
8
<PAGE>
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 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, or if the Company terminates this Agreement prior to the
commencement of Executive's employment, 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
9
<PAGE>
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:
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,
10
<PAGE>
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).
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).
11
<PAGE>
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.
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
12
<PAGE>
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
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.
13
<PAGE>
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 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.
14
<PAGE>
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 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
2794 Fleur Drive, San Marino, California 91108 or addressed to the Company at
285 West Huntington Drive, Arcadia, California
15
<PAGE>
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.
XVIII. LEGAL COUNSEL.
-------------
The Executive and the Company recognize that this is a legally binding
contract and acknowledge and agree that they
16
<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 CHRISTOPHER T. STIRLING
ENTERPRISES, INC.
By /s/ STEPHEN F. KELLER /s/ CHRISTOPHER T. STIRLING
________________________ ___________________________
Its Chairman
_______________________
17
<PAGE>
EXHIBIT 10.4
Employment Agreement
--------------------
This Employment Agreement (the "Agreement") is entered into by and
between Santa Anita Realty Enterprises, Inc. (the "Company") and Brian Fleming
(the "Executive"), as of the 9th day of May 1994.
I. RECITALS
--------
WHEREAS, the Company desires to employ the
Executive as its Executive Vice President and Chief Financial Officer;
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.
II. EFFECTIVENESS OF AGREEMENT.
--------------------------
This Agreement shall be effective upon execution by the Executive and
the Chief Executive Officer of the Company.
III. EMPLOYMENT.
----------
The Company hereby employs the Executive and the Executive hereby
accepts such employment, upon the terms and conditions hereinafter set forth,
from May 9, 1994, to and including June 30, 1996.
1
<PAGE>
IV. DUTIES.
------
A. The Executive shall serve during the course of his employment as
Executive Vice President and Chief Financial Officer of the Company, and shall
have such other duties and responsibilities as are customarily required of such
officer and as the Chief Executive Officer of the Company shall determine from
time to time.
B. The Executive agrees to devote substantially all 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 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. 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.
2
<PAGE>
D. For the term of this Agreement, the Executive shall report to the Chief
Executive Officer of the Company or his designee.
V. COMPENSATION.
------------
A. Base Salary. From May 9, 1994, to and including July 15, 1995, the
-----------
Company shall pay the Executive a base salary at the rate of $150,000 per year.
From July 16, 1995, to and including June 30, 1996, the Company shall pay the
Executive a base salary at the rate of $195,000 per year. Such salary shall be
earned monthly and shall be payable in periodic 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. Commencing in December 1995, 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"),
3
<PAGE>
effective as of the date hereof, the Compensation Committee shall grant on
behalf of the Company to the Executive options to purchase 25,000 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. 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.
D. Guaranteed Bonus. On December 31, 1995, if the Executive is then
----------------
employed by the Company under the terms of this Agreement, the Executive shall
become entitled to be paid a one-time bonus in the amount of $30,000 (subject to
any
4
<PAGE>
required withholding), payable in accordance with the Company's customary
practices.
E. 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.
F. Club Membership Dues Allowance. The Executive shall be entitled to be
------------------------------
paid an allowance for actual club membership dues at the Jonathan Club (subject
to any required withholding), payable in accordance with the Company's customary
practices. In addition, business related expenses at the club for which dues
are paid shall be reimbursed.
G. 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.
5
<PAGE>
H. 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.
I. 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.
J. 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. The Executive's employment shall terminate automatically upon
-----
the Executive's death.
B. 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
6
<PAGE>
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 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.
C. 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) has
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.
D. Other than Cause or Death or Disability. The Company may terminate
---------------------------------------
the Executive's employment for reasons
7
<PAGE>
other than Death, Disability or Cause upon 90 days' written notice.
E. 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 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 or Voluntary Termination. If the Executive's employment is
------------------------------
terminated by the Company for Cause
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or the Executive voluntarily terminates employment (except for a "Good Reason"
described in Section VI-E-4 below), this Agreement shall terminate without
further obligations to the Executive other than for the timely payment of the
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-E-2, then the
Company's decision to terminate shall be deemed to have been made under Section
VI-E-3 and the amounts payable thereunder shall be the only amounts the
Executive may receive for his termination, rather than the amounts payable
pursuant to this Section
VI-E-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 the 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
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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 under Section VI-E-3 for a reason other than Cause. For
purposes of this Section VI-E-4, "Good Reason" shall mean the occurrence of one
of the following events without the Executive's consent:
a. Any action by the Company which results in a material diminution
in the Executive's position, authority, duties or responsibilities to the
Company, 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
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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).
5. Withholding. Amounts payable under this Section VI-E shall be
-----------
reduced by any standard withholding and other authorized deductions.
F. Exclusive Remedy. By signing this 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
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on or relate to a contention that the 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
attorney's fees and costs relating to such arbitration.
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
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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
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.
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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 this end the provisions of this Agreement are declared to be
severable.
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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, 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 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.
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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
4460 Wilshire Boulevard, # 704, Los Angeles, California 90010, 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.
XVIII. LEGAL COUNSEL.
-------------
The Executive and the Company recognize that this is a legally binding
contract and acknowledge and agree that they
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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. BRIAN FLEMING
/s/ Sherwood C. Chillingworth /s/ Brian Fleming
By _____________________________ _________________________
CFO
Its _______________________
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