<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
[ ] 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 SANTA ANITA OPERATING
ENTERPRISES, INC. COMPANY
- ------------------------------------ --------------------------------------
(Exact name of registrant as (Exact name of registrant as
specified in its charter) specified in its charter)
Delaware Delaware
- ------------------------------------ --------------------------------------
(State or other jurisdiction (State or other jurisdiction
of incorporation or of incorporation or
organization) organization)
95-3520818 95-3419438
- ------------------------------------ --------------------------------------
(I.R.S. Employer (I.R.S. Employer
Identification No.) Identification No.)
301 West Huntington Drive,
Suite 405 285 West Huntington Drive
Arcadia, California 91007 Arcadia, California 91007
- ------------------------------------ --------------------------------------
(Address of principal (Address of principal
executive 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 November 3, 1995 were:
Santa Anita Realty Enterprises, Inc. 11,383,000
Santa Anita Operating Company 11,270,500
1
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC. AND
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C>
PART I. FINANCIAL INFORMATION 3
THE SANTA ANITA COMPANIES
Combined Balance Sheets as of September 30, 1995 and
December 31, 1994 4
Combined Statements of Operations for the three months
and nine months ended September 30, 1995 and 1994 5
Combined Statements of Cash Flows for the nine months
ended September 30, 1995 and 1994 6
SANTA ANITA REALTY ENTERPRISES, INC.
Consolidated Balance Sheets as of September 30, 1995
and December 31, 1994 7
Consolidated Statements of Operations for the three
months and nine months ended September 30, 1995
and 1994 8
Consolidated Statements of Cash Flows for the nine
months ended September 30, 1995 and 1994 9
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets as of September 30, 1995
and December 31, 1994 10
Consolidated Statements of Operations for the three
months and nine months ended September 30, 1995
and 1994 11
Consolidated Statements of Cash Flows for the nine
months ended September 30, 1995 and 1994 12
NOTES TO FINANCIAL STATEMENTS 13
MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 16
PART II. OTHER INFORMATION 22
SIGNATURES 23
</TABLE>
2
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC. AND
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
FORM 10-Q
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying balance sheets as of September 30, 1995 and December 31,
1994 of The Santa Anita Companies (the "Companies"), Santa Anita Realty
Enterprises, Inc. ("Realty") and Santa Anita Operating Company and
Subsidiaries ("Operating Company"), the statements of operations for the three
months and nine months ended September 30, 1995 and 1994, and the related
statements of cash flows for the nine months ended September 30, 1995 and
1994, were prepared by management and, except for the balance sheets as of
December 31, 1994, are unaudited. In the opinion of management, the
accompanying financial statements include all adjustments, including normal
recurring items, considered necessary for a fair presentation.
The following financial statements should be read in conjunction with the
accompanying notes and the Joint Annual Report on Form 10-K of Realty and
Operating Company for the year ended December 31, 1994.
3
<PAGE>
THE SANTA ANITA COMPANIES
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- -------------
<S> <C> <C>
(Unaudited)
ASSETS
Real estate assets
Santa Anita Racetrack, less
accumulated depreciation
of $20,043,000 and $19,431,000 $ 8,438,000 $ 8,304,000
Commercial properties, less
accumulated depreciation of
$37,184,000 and $32,247,00 94,489,000 116,780,000
Investments in and advances
to unconsolidated joint
ventures 3,875,000 10,654,000
Real estate loans receivable 12,068,000 13,635,000
------------ ------------
118,870,000 149,373,000
Cash 2,798,000 12,674,000
Short-term investments, at cost
(approximates market) 7,487,000 5,600,000
Accounts receivable 4,589,000 4,656,000
Prepaid expenses and other assets 5,084,000 6,054,000
Investment in Pacific Gulf
Properties Inc. 12,168,000 12,825,000
Property, plant and equipment, less
accumulated depreciation of
$25,981,000 and $23,093,000 19,824,000 19,466,000
----------- ------------
$170,820,000 $210,648,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Real estate loans payable $101,490,000 $102,472,000
Bank loans payable 13,640,000 9,829,000
Accounts payable 6,229,000 13,179,000
Other liabilities 15,177,000 12,750,000
Dividends payable 2,277,000 2,251,000
Deferred revenues 801,000 2,427,000
Deferred income taxes 3,565,000 3,565,000
------------ ------------
143,179,000 146,473,000
Minority interest in consolidated
joint ventures (3,260,000) (3,268,000)
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 11,270,500
and 11,143,853 shares 2,253,000 2,227,000
Additional paid-in capital 136,552,000 134,615,000
Unearned compensation expense (1,494,000) -
Retained earnings (deficit) (106,410,000) (69,399,000)
------------ ------------
30,901,000 67,443,000
------------ ------------
$170,820,000 $210,648,000
============ ============
</TABLE>
See accompanying notes.
4
<PAGE>
THE SANTA ANITA COMPANIES
COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------- --------------------------------
1995 1994 1995 1994
---------------- --------------- ---------------- -------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues
Horse racing $ 6,125,000 $ 5,473,000 $ 56,677,000 $54,853,000
Rental property 5,789,000 5,913,000 15,924,000 19,369,000
Interest and other 669,000 735,000 2,121,000 1,822,000
------------ ----------- ------------ -----------
12,583,000 12,121,000 74,722,000 76,044,000
------------ ----------- ------------ -----------
Costs and expenses
Horse racing operating costs 4,944,000 4,970,000 37,976,000 38,597,000
Rental property operating expenses 2,350,000 2,256,000 5,758,000 6,904,000
Depreciation and amortization 1,495,000 1,307,000 7,123,000 6,899,000
General and administrative 1,915,000 1,174,000 7,500,000 7,023,000
Interest and other 2,489,000 2,446,000 7,518,000 7,443,000
Costs of equity offering - - 750,000 -
Card club option write-off 2,000,000 - 2,000,000 -
Program for disposition of non-core
real estate assets 34,500,000 - 34,500,000 -
Losses from unconsolidated
joint ventures 569,000 445,000 1,760,000 1,340,000
Minority interest in earnings of
consolidated joint ventures 76,000 389,000 110,000 1,148,000
------------ ----------- ------------ -----------
50,338,000 12,987,000 104,995,000 69,354,000
------------ ----------- ------------ -----------
Net income (loss) $(37,755,000) $ (866,000) $(30,273,000) $ 6,690,000
============ =========== ============ ===========
Weighted average number of common
shares outstanding 11,270,500 11,143,853 11,194,883 11,142,428
============ =========== ============ ===========
Net income (loss) per common share $(3.35) $(.08) $(2.70) $.60
============ =========== ============ ===========
Dividends declared per common share $.20 $.20 $.60 $.74
============ =========== ============ ===========
</TABLE>
See accompanying notes.
5
<PAGE>
THE SANTA ANITA COMPANIES
COMBINED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
-------------- -------------
<S> <C> <C>
(Unaudited)
Cash flows from operating activities:
Net income (loss) $(30,273,000) $ 6,690,000
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 7,123,000 6,899,000
Minority interest in earnings of
consolidated joint ventures 110,000 1,148,000
Equity in losses of unconsolidated
joint ventures 1,760,000 1,340,000
Equity in earnings from
investment in
Pacific Gulf Properties Inc. (261,000) (86,000)
Amortization of unearned
compensation expense 469,000 -
Card club option write-off 2,000,000 -
Program for disposition of
non-core real estate assets 34,500,000
Net decrease in certain other
assets 1,355,000 4,262,000
Net decrease in certain other
liabilities (10,152,000) (13,101,000)
------------ ------------
Net cash provided by operating
activities 6,631,000 7,152,000
------------ ------------
Cash flows from investing activities:
Proceeds from disposition of
multifamily and industrial operations - 44,425,000
Payments received on loans receivable 94,000 272,000
Origination of loans receivable (27,000) (15,000)
Additions and improvements to real
estate assets (3,226,000) (11,644,000)
Additions to property, plant and
equipment (3,246,000) (1,697,000)
Additions to certain other assets (4,055,000) -
Dividends received from Pacific Gulf
Properties Inc. 918,000 86,000
Investments in and advances to
unconsolidated joint ventures (1,960,000) (1,287,000)
Capital distributions from
unconsolidated joint ventures 1,129,000 549,000
------------ ------------
Net cash (used in) provided by
investing activities (10,373,000) 30,689,000
------------ ------------
Cash flows from financing activities:
Proceeds from real estate loans
payable - 21,077,000
Proceeds from bank loans payable 4,400,000 -
Repayment of real estate loans payable (982,000) (423,000)
Repayment of bank loans payable (589,000) (47,572,000)
Net decrease in certain other
liabilities (275,000) (3,441,000)
Dividends paid (6,712,000) (9,765,000)
Distributions to minority interest
in consolidated joint ventures, net (102,000) (1,013,000)
Issuance of stock from restricted
stock awards and stock options 13,000 61,000
------------ ------------
Net cash used in financing activities (4,247,000) (41,076,000)
------------ ------------
Net decrease in cash and cash
equivalents (7,989,000) (3,235,000)
Cash and cash equivalents at
beginning of year 18,274,000 22,021,000
------------ ------------
Cash and cash equivalents at
September 30, $ 10,285,000 $ 18,786,000
============ ============
</TABLE>
See accompanying notes.
6
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
-------------- --------------
(Unaudited)
<S> <C> <C>
ASSETS
Real estate assets
Santa Anita Racetrack, less
accumulated depreciation
of $20,043,000 and $19,431,000 $ 8,438,000 $ 8,304,000
Commercial properties, less
accumulated depreciation
of $37,605,000 and $33,842,000 97,570,000 121,653,000
Investments in and advances to
unconsolidated joint ventures 3,875,000 10,654,000
Real estate loans receivable 12,068,000 13,635,000
------------ ------------
121,951,000 154,246,000
Cash 2,787,000 5,431,000
Short-term investments, at cost
(approximates market) 2,801,000 -
Accounts receivable 3,149,000 2,274,000
Prepaid expenses and other assets 4,737,000 3,357,000
Investment in Pacific Gulf Properties 12,168,000 12,825,000
Inc. ------------ ------------
$147,593,000 $178,133,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Real estate loans payable $101,490,000 $102,472,000
Bank loans payable 11,700,000 7,300,000
Accounts payable 2,181,000 2,379,000
Other liabilities 6,099,000 2,159,000
Dividends payable 2,277,000 2,251,000
Due to Operating Company 863,000 1,056,000
------------ ------------
124,610,000 117,617,000
Minority interest in consolidated joint
ventures (3,260,000) (3,268,000)
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
11,383,000 and 11,256,353 shares 1,138,000 1,125,000
Additional paid-in capital 118,881,000 117,084,000
Retained earnings (deficit) (93,776,000) (54,425,000)
------------ ------------
26,243,000 63,784,000
------------ ------------
$147,593,000 $178,133,000
============ ============
</TABLE>
See accompanying notes.
7
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------- --------------------------------
1995 1994 1995 1994
----------------- -------------- ---------------- -------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues
Rent from Racetrack $ 375,000 $ - $ 9,227,000 $10,852,000
Shopping centers 4,739,000 3,958,000 12,628,000 10,927,000
Office buildings 1,050,000 1,107,000 3,075,000 3,237,000
Apartments and industrial - 848,000 - 4,916,000
Interest and other 603,000 631,000 1,699,000 1,417,000
------------ ----------- ------------ -----------
6,767,000 6,544,000 26,629,000 31,349,000
------------ ----------- ------------ -----------
Costs and expenses
Shopping centers 1,868,000 1,670,000 4,551,000 3,990,000
Office buildings 482,000 491,000 1,207,000 1,329,000
Apartments and industrial - 95,000 - 1,585,000
Depreciation and amortization 1,305,000 1,192,000 4,364,000 4,672,000
General and administrative 1,229,000 832,000 2,725,000 2,622,000
Interest and other 2,407,000 2,326,000 7,258,000 7,105,000
Costs of equity offering - - 700,000 -
Card club option write-off 2,000,000 - 2,000,000 -
Program for disposition of non-core
real estate assets 34,500,000 - 34,500,000 -
Losses from unconsolidated joint
ventures 569,000 445,000 1,760,000 1,340,000
Minority interest in earnings of
consolidated joint ventures 76,000 389,000 110,000 1,148,000
------------ ----------- ------------ -----------
44,436,000 7,440,000 59,175,000 23,791,000
------------ ----------- ------------ -----------
Net income (loss) $(37,669,000) $ (896,000) $(32,546,000) $ 7,558,000
============ =========== ============ ===========
Weighted average number of common
shares outstanding 11,383,000 11,256,353 11,307,383 11,256,353
============ =========== ============ ===========
Net income (loss) per common share $ (3.31) $ (.08) $ (2.88) $ .67
============ =========== ============ ===========
Dividends declared per common share $ .20 $ .20 $ .60 $ .74
============ =========== ============ ===========
</TABLE>
See accompanying notes.
8
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(32,546,000) $ 7,558,000
Adjustments to reconcile net income to net
cash provided by operating activities: 4,364,000 4,672,000
Depreciation and amortization
Minority interest in earnings of
consolidated joint ventures 110,000 1,148,000
Equity in losses of unconsolidated joint ventures 1,760,000 1,340,000
Equity in earnings from investment in
Pacific Gulf Properties Inc. (261,000) (86,000)
Card club option write-off 2,000,000 -
Program for disposition of non-core real estate assets 34,500,000 -
Net (increase) decrease in certain other assets (274,000) 1,712,000
Net decrease in certain other liabilities (248,000) (1,586,000)
------------ ------------
Net cash provided by operating activities 9,405,000 14,758,000
------------ ------------
Cash flows from investing activities:
Proceeds from disposition of multifamily and - 44,425,000
industrial operations
Payments received on loans receivable 94,000 272,000
Origination of loans receivable (27,000) (15,000)
Additions and improvements to real estate assets (3,226,000) (11,644,000)
Additions to certain other assets (4,055,000) -
Investments in and advances to unconsolidated joint ventures (1,960,000) (1,287,000)
Capital distributions from unconsolidated joint ventures 1,129,000 549,000
Dividends received from Pacific Gulf Properties Inc. 918,000 86,000
------------ ------------
Net cash (used in) provided by investing activities (7,127,000) 32,386,000
------------ ------------
Cash flows from financing activities:
Proceeds from real estate loans payable - 21,077,000
Proceeds from bank loans payable 4,400,000 -
Repayment of real estate loans payable (982,000) (423,000)
Repayment of bank loans payable - (47,034,000)
Increase (decrease) in due to Operating Company 1,604,000 (842,000)
Net decrease in certain other liabilities (275,000) (3,441,000)
Dividends paid (6,779,000) (9,866,000)
Issuance of common stock from restricted stock awards 13,000 -
Distributions to minority interest in
consolidated joint ventures, net (102,000) (1,013,000)
------------ ------------
Net cash used in financing activities (2,121,000) (41,542,000)
------------ ------------
Net increase in cash and cash equivalents 157,000 5,602,000
Cash at beginning of year 5,431,000 7,633,000
------------ ------------
Cash and cash equivalents at September 30, $ 5,588,000 $ 13,235,000
============ ============
</TABLE>
See accompanying notes.
9
<PAGE>
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
-------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash $ 11,000 $ 7,243,000
Short-term investments, at cost
(approximates market) 4,686,000 5,600,000
Accounts receivable 1,440,000 2,382,000
Prepaid expenses and other assets 356,000 1,043,000
------------ ------------
Total current assets 6,493,000 16,268,000
Investment in common stock of Realty 2,122,000 2,122,000
Property, plant and equipment, less
accumulated depreciation of $25,981,000
and $23,093,000 19,824,000 19,466,000
Due from Realty 863,000 1,056,000
------------ ------------
$ 29,302,000 $ 38,912,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 4,048,000 $ 10,800,000
Other liabilities 9,078,000 10,591,000
Bank loans payable 849,000 794,000
------------ ------------
Total current liabilities 13,975,000 22,185,000
Bank loans payable 1,091,000 1,735,000
Deferred revenues 801,000 2,427,000
Deferred income taxes 3,565,000 3,565,000
------------ ------------
19,432,000 29,912,000
------------ ------------
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
11,270,500 and 11,143,853 shares 1,127,000 1,114,000
Additional paid-in capital 20,736,000 20,596,000
Unearned compensation expense (1,494,000) -
Retained earnings (deficit) (10,499,000) (12,710,000)
------------ ------------
9,870,000 9,000,000
------------ ------------
$ 29,302,000 $ 38,912,000
============ ============
</TABLE>
See accompanying notes.
10
<PAGE>
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------- --------------------------------
1995 1994 1995 1994
---------------- -------------- -------------- ---------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues
Wagering commissions $ 3,003,000 $ 2,301,000 $37,449,000 $34,987,000
Admission related 3,122,000 3,172,000 19,228,000 19,866,000
Interest and other 136,000 126,000 537,000 506,000
----------- ----------- ----------- -----------
6,261,000 5,599,000 57,214,000 55,359,000
----------- ----------- ----------- -----------
Costs and expenses
Horse racing operating costs 4,944,000 4,970,000 37,976,000 38,597,000
Depreciation and amortization 233,000 157,000 2,888,000 2,355,000
General and administrative 686,000 342,000 4,775,000 4,401,000
Interest 130,000 120,000 308,000 338,000
Costs of equity offering - - 50,000 -
Rental expense to Realty 375,000 - 9,006,000 10,563,000
----------- ----------- ----------- -----------
6,368,000 5,589,000 55,003,000 56,254,000
----------- ----------- ----------- -----------
Net income (loss) $ (107,000) $ 10,000 $ 2,211,000 $ (895,000)
=========== =========== =========== ===========
Weighted average number of common
shares outstanding 11,270,500 11,143,853 11,194,883 11,142,428
=========== =========== =========== ===========
Net income (loss) per common share $ (.01) $ - $ .20 $ (.08)
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
11
<PAGE>
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------------ -------------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 2,211,000 $ (895,000)
Adjustments to reconcile net income (loss) to net
cash used in operating activities: 2,888,000 2,355,000
Depreciation and amortization
Amortization of unearned compensation expense 469,000 -
Net decrease in certain other assets 1,629,000 2,550,000
Net decrease in certain other liabilities (9,904,000) (11,515,000)
----------- ------------
Net cash used in operating activities (2,707,000) (7,505,000)
----------- ------------
Cash flows from investing activities:
Additions to property, plant and equipment (3,246,000) (1,697,000)
Decrease in investment in common stock of Realty - 57,000
----------- ------------
Net cash used in investing activities (3,246,000) (1,640,000)
----------- ------------
Cash flows from financing activities:
Repayment of bank loans payable (589,000) (538,000)
(Increase) decrease in due from Realty (1,604,000) 842,000
Issuance of stock from stock options - 4,000
----------- ------------
Net cash (used in) provided by financing activities (2,193,000) 308,000
----------- ------------
Net decrease in cash and cash equivalents (8,146,000) (8,837,000)
Cash and cash equivalents at beginning of year 12,843,000 14,388,000
----------- ------------
Cash and cash equivalents at September 30, $ 4,697,000 $ 5,551,000
=========== ============
</TABLE>
See accompanying notes.
12
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC. AND
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - INTERIM PERIOD ACCOUNTING POLICY
Operating Company records daily revenues associated with thoroughbred
horse racing at Santa Anita Racetrack as they are received and season admissions
are recorded ratably over the racing season. Costs and expenses associated with
thoroughbred horse racing revenues are charged against income in those interim
periods in which the thoroughbred horse racing revenues are recognized. Other
costs and expenses are recognized as they actually occur throughout the year.
The rental fee paid by Operating Company to Realty is recognized by both Realty
and Operating Company as it is earned. Certain prior period amounts have been
reclassified to conform to current period presentation.
In the opinion of management, all adjustments (including normal recurring
items) considered necessary for the fair presentation of the Companies'
financial position, results of operations and cash flows have been included.
NOTE 2 - INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES
Realty's investments in unconsolidated joint ventures include investments
in the following commercial real estate ventures at September 30, 1995:
<TABLE>
<CAPTION>
NAME OWNERSHIP PROJECT
------------------- ----------- -------------
<S> <C> <C>
Joppa Associates 33-1/3% Retail
H-T Associates 50% Regional Mall
</TABLE>
Realty owns a 50% interest in H-T Associates, whose only asset is a 65%
ownership interest in a regional mall, effectively giving Realty a 32.5%
ownership interest.
Combined condensed financial statement information for unconsolidated
joint ventures as of September 30, 1995 and December 31, 1994, and for the nine
months ended September 30, 1995 and 1994, is as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
-------------- -------------
(Unaudited)
<S> <C> <C>
Real estate assets $203,768,000 $207,775,000
============ ============
Liabilities
Secured real estate loans $181,136,000 $181,136,000
Other 4,561,000 5,548,000
------------ ------------
$185,697,000 $186,684,000
============ ============
Partners' equity
Realty $ 9,725,000 $ 10,654,000
Others 8,346,000 10,437,000
------------ ------------
$ 18,071,000 $ 21,091,000
============ ============
</TABLE>
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 - INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES (CONTINUED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
1995 1994
--------------- ---------------
(Unaudited)
<S> <C> <C>
Revenues $16,464,000 $15,890,000
=========== ===========
Net Loss
Realty $(1,760,000) $(1,340,000)
Others (2,170,000) (961,000)
----------- -----------
$(3,930,000) $(2,301,000)
=========== ===========
</TABLE>
NOTE 3 - INVESTMENT IN PACIFIC GULF PROPERTIES INC.
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 public offering of common stock and
debentures.
In February 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 leaseable square feet
of industrial space, located in the State of Washington (the "Transferred
Properties"). Realty's corporate headquarters building and related assets were
also acquired by Pacific.
In consideration of the sale of the Transferred Properties, Realty received
$44,425,00 in cash and 150,000 shares of the common stock of Pacific. In
addition, Realty was relieved of $44,290,000 of mortgage debt on the Transferred
Properties.
In October 1994, Realty completed the second part of the transaction, the
sale of its interest in Baldwin Industrial Park to Pacific and Pacific delivered
to Realty an additional 634,419 shares of Pacific common stock as consideration
for the second part of the transaction and the corporate headquarters and other
net assets. As a result of the sale, Baldwin Industrial Park ceased to be a
consolidated joint venture which resulted in a reduction in mortgage debt of
$9,415,000.
The above transactions resulted in a loss of $10,974,000, which was
reflected in the Realty and Combined Realty and Operating Company statements of
operations for the year ended December 31, 1993.
As of September 30, 1995, Realty owned 16.3% of Pacific's common stock and
accounted for its investment by the equity method of accounting. The closing
price of Pacific's common stock on the American Stock Exchange, on September 29,
1995 was $16.25 per share.
Financial information relating to Pacific, which is a separate public
company, is available from the Securities and Exchange Commission (Commission
file number 1-12546).
14
<PAGE>
NOTE 4 - DISPOSITION OF NON-CORE REAL ESTATE ASSETS
During the quarter ended September 30, 1995, Realty adopted a plan to
dispose of its non-core real estate assets and, accordingly, reduced the book
value of these assets to their estimated realizable values, resulting in a one-
time charge of $34,500,000. The disposition plan will be undertaken in an
orderly manner and was influenced by Realty's increased focus on the development
of its Arcadia property. The assets to be disposed of have an adjusted carrying
value of $32,690,000 and consist of six neighborhood shopping centers located in
Southern California and Arizona; commercial office buildings in Santa Ana and
Upland, California; and an investment in Joppa Associates, a partnership which
owns a vacant retail facility and undeveloped land adjacent to the Towson Town
Center regional shopping center in Maryland. Also included in the one-time
charge was a $1,500,000 reserve against an under collateralized note receivable
which was required to state the receivable at net realizable value. Included in
the results of operations for the nine months ended September 30, 1995 is a loss
of $848,000 relating to the non-core real estate assets.
NOTE 5 - CARD CLUB WRITE-OFFS
On August 5, 1995, the management of Bell Jackpot Casino, which was not
affiliated with Realty, citing intense competition from larger and more
established nearby card clubs, closed the Bell Jackpot Casino, in Bell,
California. As a result of this action, during the 1995 third quarter, Realty
wrote-off the $2,000,000 it paid for an option to acquire a 50% interest in
the operation of the casino. Additionally, in the 1995 third quarter, Realty
charged $480,000 of development costs for the proposed Irwindale Palace
Casino, in Irwindale, California, to general and administrative expense.
Realty discontinued its involvement in the card club following the defeat of
an October 24, 1995 Irwindale ballot measure to permit card clubs in
Irwindale.
NOTE 6 - SUBSEQUENT EVENT
On November 6, 1995, Realty completed an early and reduced payoff of
$11,600,000 of secured debt on the Civic Center Office Building, in Santa Ana,
California. The early payoff of $7,500,000 was based on mutual agreement with
the lender and will result in an extraordinary gain on the early extingushment
of debt in the 1995 fourth quarter of $4,100,000.
15
<PAGE>
ITEM 2. MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
THE SANTA ANITA COMPANIES
The Companies' results of operations for the three months and nine months
ended September 30, 1995 reflect several non-recurring charges. Management
believes that income before non-recurring items provides a supplemental measure
of the results of operations of the Companies during these periods. Income
before non-recurring items reconciles to net income as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------- ---------------------------
1995 1994 1995 1994
------------ --------- ------------ ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Income (loss) before non-recurring
items $ (1,255,000) $(866,000) $ 7,409,000 $6,690,000
Non-recurring items:
Costs of equity offering - - (750,000) -
Card club option write-off (2,000,000) - (2,000,000) -
Program for disposition of
non-core real estate assets (34,500,000) - (34,500,000) -
Write-down of turf course - - (432,000) -
------------ --------- ------------ ----------
Net income (loss) as reported $(37,755,000) $(866,000) $(30,273,000) $6,690,000
============ ========= ============ ==========
Net income (loss) per common share
Before non-recurring items $ (.11) $ (.08) $ .66 $ .60
============ ========= ============ ==========
As reported $ (3.35) $ (.08) $ (2.70) $ .60
============ ========= ============ ==========
</TABLE>
SANTA ANITA REALTY ENTERPRISES, INC.
Realty is principally engaged in investing and holding real property.
The following narrative discusses Realty's results of operations for the
third quarter and the nine months ended September 30, 1995 and 1994, together
with liquidity and capital resources as of September 30, 1995.
RESULTS OF OPERATIONS - THIRD QUARTER 1995 COMPARED WITH THIRD QUARTER 1994
Realty's revenues are derived principally from the rental of real property.
Total revenues for the three months ended September 30, 1995 were $6,767,000
compared with $6,544,000 for the three months ended September 30, 1994, an
increase of 3.4%. The higher 1995 revenues were due primarily to an increase in
Racetrack rental revenues and rental revenues from other properties, partially
offset by lower revenues due to Realty selling its multifamily and industrial
operations to Pacific Gulf Properties Inc. ("Pacific"), formerly a wholly-owned
subsidiary, in 1994.
For the full year, the single most significant source of rental revenue is
the lease of Santa Anita Racetrack. Racetrack rental revenues for the 1995 third
quarter were $375,000, compared with no revenues in 1994. The increase in rental
revenues resulted primarily from new lease terms with LATC, whereby Realty now
receives rental revenues from satellite wagering on races originating at certain
other racetracks. The lease with LATC for the Santa Anita Racetrack expired in
December 1994 and was amended and extended for an additional five years. Under
the new lease terms, Realty receives 1.5% of on-track wagering on live races at
Santa Anita Racetrack and 26.5% of wagering commissions from satellite wagering
on races originating at Santa Anita Racetrack and on races originating from
certain other racetracks. Under the old
16
<PAGE>
ITEM 2. MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. (CONTINUED)
SANTA ANITA REALTY ENTERPRISES, INC. (Continued)
RESULTS OF OPERATIONS - THIRD QUARTER 1995 COMPARED WITH THIRD QUARTER 1994
(Continued)
lease, Realty received the same 1.5% of on-track wagering on live races at Santa
Anita Racetrack and 40% of wagering commissions from satellite wagering only on
races originating at Santa Anita Racetrack. During the 1995 and 1994 third
quarters there was no live racing at Santa Anita Racetrack.
Rental revenues from other real estate investments for the 1995 third
quarter were $5,789,000, a decrease of 2.1% from revenues of $5,913,000 in the
1994 third quarter. The decrease in 1995 was due to the 1994 sale of Realty's
multifamily and industrial operations, partially offset by a 14.3% increase in
rental revenues from other properties.
Costs and expenses for 1995, excluding non-recurring items totaling
$36,500,000, were $7,936,000, an increase of 6.7% over costs and expenses of
$7,440,000 in 1994. The increase was primarily due to the write-off of card club
development costs of $480,000 in 1995
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED WITH
NINE MONTHS ENDED SEPTEMBER 30, 1994
Total revenues for the nine months ended September 30, 1995 were
$26,629,000, compared with $31,349,000 for the nine months ended September 30,
1994, a decrease of 15.1%. The lower 1995 revenues were due primarily to Realty
selling its multifamily and industrial operations to Pacific Gulf Properties
Inc., formerly a wholly-owned subsidiary, in 1994 and to a decrease in racetrack
rental revenues.
Racetrack rental revenues for 1995 were $9,227,000, a decrease of 15.0% from
revenues of $10,852,000 in 1994. The decrease in rental revenues resulted
primarily from new lease terms with LATC and one fewer racing day in 1995,
partially offset by an increase in average daily wagering.
Rental revenues from other real estate investments for the 1995 nine months
were $15,703,000 a decrease of 17.7% from revenues of $19,080,000 in the 1994
period. The decrease in 1995 was due to the 1994 sale of Realty's multifamily
and industrial operations, partially offset by a 10.9% increase in rental
revenues from other properties.
Costs and expenses for 1995, excluding non-recurring items totaling
$37,200,000, were $21,975,000, a decrease of 7.6% from costs and expenses of
$23,791,000 in 1994. The decrease resulted primarily from the sale of Realty's
multifamily and industrial operations and a decrease in minority interest in
earnings of consolidated joint ventures.
LIQUIDITY AND CAPITAL RESOURCES
Realty has funds available from a combination of short- and long-term
sources. Short-term sources included cash and short-term investments of
$5,588,000 at September 30, 1995.
The net increase in cash and cash equivalents for the nine months ended
September 30, 1995 was $157,000 compared with an increase in cash and
equivalents of $5,602,000 in the 1994 nine months. The decline in the increase
in cash and equivalents of $5,445,000 was attributable to a decrease of
$5,353,000 in cash provided by operating activities, and a decrease of
$39,513,000 in cash provided by investing activities, offset by a decrease of
$39,421,000 in cash used in financing activities.
17
<PAGE>
ITEM 2. MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. (CONTINUED)
SANTA ANITA REALTY ENTERPRISES, INC. (Continued)
LIQUIDITY AND CAPITAL RESOURCES (Continued)
The decrease in cash provided by operating activities of $5,353,000 in 1995 was
primarily due to a decrease in apartment and industrial operating income of
$3,331,000, due to the sale of the multifamily and industrial operations in
1994, a decrease in racetrack rental revenues of $1,625,000 in 1995, due to new
lease terms with LATC and $700,000 of equity offering costs and $480,000 of
Irwindale development costs charged to 1995 operating earnings. These
decreases in cash provided were partially offset by an increase in shopping
center operating income of $1,140,000 in 1995.
The decrease in cash provided by investing activities of $39,513,000 in 1995
is primarily due to proceeds from the disposition of the multifamily and
industrial operations of $44,425,000 in 1994 and an increase in additions to
other assets of $4,055,000 in 1995, primarily the purchase of the option on the
Bell Casino and expenditures associated with the development of the Santa Anita
Entertainment Center. These decreases in cash provided were partially offset by
a decrease in real estate additions of $8,418,000 in 1995, primarily due to
completion of the Fashion Park expansion in the fall of 1994 and to the increase
in dividends received from Pacific Gulf Properties Inc., of $832,000 in 1995.
The decrease in cash used in financing activities of $39,421,000 in 1995 is
primarily due to the repayment of bank loans payable of $47,034,000 in 1994,
primarily from proceeds from the disposition of the multifamily and industrial
operations. Other decreases in cash used included additional borrowings of
$4,400,000 in 1995 under the revolving credit agreement, a decrease in certain
other liabilities of $3,166,000 in 1995, primarily the repayment of Fashion Park
partnership advances, a decrease in dividends paid of $3,087,000 in 1995 and an
increase in intercompany payables of $2,446,000 in 1995. These decreases in cash
used were partially offset by proceeds from real estate loans payable of
$21,077,000 in 1994 related to the construction loan on the Fashion Park
expansion.
At September 30, 1995, Realty's investment in Pacific common stock
totaled 784,419 shares, was carried at $12,168,000 and had a current annual
dividend rate of $1.56 per share.
At September 30, 1995, Realty had borrowed $9,200,000 under it s
$30,000,000 one-year credit facility with a commercial bank. Borrowings bear
interest at Realty's option, at the prime rate, at LIBOR plus 1%, or at the six-
month certificate of deposit rate plus 1%. At September 30, 1995, Realty was
not in compliance with certain covenants of the credit facility due to the
adjustment for the program for disposition of non-core real estate assets. The
credit facility, scheduled to expire in November, has been extended one month to
December 11, 1995. Realty is currently negotiating a new revolving credit
facility.
During the quarter ended September 30, 1995, Realty adopted a plan to
dispose of non-core real estate assets as part of a long-term program to build
shareholder value though the development of its prime Arcadia property. The
disposition program, to be undertaken in an orderly manner, is expected to
produce improved cash flow and net income, as well as, upon completion, reduce
total debt by approximately $37 million. Reflecting the planned sale of these
non-core properties, Realty has taken in the third quarter ended September 30,
1995, a one-time non-cash charge of $34,500,000 or $3.06 per share. The charge
reduces the book value of these assets, all of which were acquired during the
1980s, to estimated realizable value. Realty's core real estate assets,
principally located at Santa Anita Park in Arcadia, are included in its
financial statements at historic book values which are significantly below
current values.
18
<PAGE>
ITEM 2. MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS. (CONTINUED)
SANTA ANITA REALTY ENTERPRISES, INC. (Continued)
LIQUIDITY AND CAPITAL RESOURCES (Continued)
The non-core properties being disposed include: six neighborhood
shopping centers located in Southern California and Arizona; commercial office
buildings in Santa Ana and Upland, California; and a partnership interest in
Joppa Associates, which owns a vacant retail building and a parcel of
undeveloped land adjacent to the Towson Town Center in Maryland. Realty will
retain its 32.5% interest in the Towson Town Center regional shopping mall.
On November 6, 1995, Realty completed an early and reduced payoff of
$11,600,000 of secured debt on the Civic Center Office Building, in Santa Ana,
California. The early payoff of $7,500,000 was based on mutual agreement with
the lender and will result in an extraordinary gain on the early extingushment
of debt in the 1995 fourth quarter of $4,100,000.
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 third quarter and nine months ended September 30, 1995 and
1994 together with liquidity and capital resources as of September 30, 1995.
RESULTS OF OPERATIONS - THIRD QUARTER 1995 COMPARED WITH THIRD QUARTER 1994
Horse racing revenues increased by 11.9% growing from $5,473,000 in the
third quarter of 1994 to $6,125,000 in the third quarter of 1995 due to an
increase in the supplemental rent from Oaktree Racing Association for its year
ended May 31, 1995.
In the third quarter ended September 30, Santa Anita Racetrack operated 20
days in 1995 and 1994 as a satellite wagering facility for Hollywood Park. Total
and average daily attendance as a satellite wagering facility were up 1.2%, in
the third quarter of 1995 compared with the year ago period. Total and average
daily wagering were up 1.4%, for the third quarter of 1995 compared with the
year ago period.
Also, in the third quarter ended September 30, Santa Anita Racetrack
operated 43 days in 1995 and 1994 as a satellite wagering facility for Del Mar.
Total and average daily attendance as a satellite wagering facility were down
5.7%, in the third quarter of 1995 compared with the year ago period. Total and
average daily wagering were down 1.0%, for the third quarter of 1995 compared
with the year ago period.
Horse racing operating costs were $4,944,000 (or 80.7% of horse racing
revenues) in the third quarter of 1995 versus $4,970,000 (or 90.8% of horse
racing revenues) in the comparable period in 1994.
Depreciation expense in the third quarter of 1995 was $233,000 up 48.4% from
$157,000 in 1994. General and administrative expenses were $686,000 in the third
quarter of 1995, up 100% from $342,000 in the comparable year ago period,
primarily due to the non cash charge resulting from the amortization of unearned
compensation expense. Interest increased to $130,000 in the third quarter of
1995 from $120,000 in 1994.
19
<PAGE>
ITEM 2. MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES (Continued)
RESULTS OF OPERATIONS - THIRD QUARTER 1995 COMPARED WITH THIRD QUARTER 1994
(Continued)
Rental expense to Realty was $375,000 for the third quarter of 1995 compared
with no expense in 1994. The rental expense increase reflects the new lease
terms with Realty. Under the new lease terms, LATC pays to Realty 1.5% of the
on-track wagering on live races at Santa Anita Racetrack and 26.5% of its
wagering commissions from all satellite wagering. The old lease required LATC to
pay Realty the same 1.5% of the on-track wagering on live races at Santa Anita
Racetrack but required 40% its wagering commissions from satellite wagering
during the live race meets.
Due to the revenue and expense items previously discussed, Operating
Company reported a net loss of $107,000 or $(.01) per share for the three months
ended September 30, 1995, compared with net income of $10,000 or $.00 per share
for the comparable period in 1994.
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED WITH
NINE MONTHS ENDED SEPTEMBER 30, 1994
Horse racing revenues increased by 3.3%, growing from $54,853,000 in the
first nine months of 1994 to $56,677,000 in the first nine months of 1995 due to
an increase in total wagering, partially offset by revenue declines from fewer
race days and lower on-track attendance. Total wagering from all sources in the
first nine months of 1995 increased 7.2% and average daily wagering increased
8.9%.
Total wagering and average daily wagering from live racing events during the
first nine months of 1995 increased 8.3% and 10.9% compared with the same period
last year. These increases were attributable to increased wagering at Southern
California satellite locations (up 5.9%), at Northern California locations (up
153.0%) and at out-of-state locations (up 8.3%). However, on-track wagering
decreased 9.4%, total on-track attendance at live racing events decreased 9.1%
and average daily attendance decreased 6.9% during the same period. Management
believes that these declines resulted from inclement weather during much of the
first quarter, which caused the cancellation of three full race days in January
(although the races lost in two of the canceled race days were "made up" by
running an additional race on certain other race days) as well as the general
trend toward satellite wagering. Live thoroughbred horse racing at Santa Anita
Racetrack totaled 83 days in the first nine months of 1995 compared with 85 days
in the first nine months of 1994.
Also, for the nine months ended September 30, Santa Anita Racetrack operated
110 days in 1995 and 111 days in 1994 as a satellite wagering facility for
Hollywood Park and Del Mar. Total and average daily attendance as a satellite
wagering facility were down 3.7% and 2.8% in the first nine months of 1995
compared with the year ago period. Total and average daily wagering were up 1.1%
and 2.0%, in the first nine months of 1995 compared with the year ago period.
Horse racing operating costs were $37,976,000 (or 67.0% of horse racing
revenues) in the first nine months of 1995 versus $38,597,000 (or 70.4% of horse
racing revenues) in the comparable period in 1994. The decrease in horse racing
operating costs, both on an absolute dollar basis and as a percentage of horse
racing revenues, resulted from fewer race days in 1995.
Depreciation expense in the first nine months of 1995 was $2,888,000 in
1995, up 22.6% from $2,355,000 in 1994. The $533,000 increase in depreciation
expense was due primarily to the accelerated depreciation charge on the Santa
Anita Racetrack turf course, which was replaced in the second quarter of 1995.
General and administrative expenses were $4,775,000 in the first nine months of
1995, up 8.5% from $4,401,000 in the comparable year ago period. Interest
expense decreased to $308,000 in the first nine months of 1995 from $338,000 in
1994.
20
<PAGE>
ITEM 2. MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES (Continued)
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED WITH
NINE MONTHS ENDED SEPTEMBER 30, 1994 (Continued)
Rental expense to Realty was $9,006,000 for the first nine months of 1995
compared with $10,563,000 reported in 1994. The decrease in rental expense of
14.7% reflects the new lease terms with Realty. Under the new lease terms, LATC
pays to Realty 1.5% of the on-track wagering on live races at Santa Anita
Racetrack and 26.5% of its wagering commissions from all satellite wagering. The
old lease required LATC to pay Realty the same 1.5% of the on-track wagering on
live races at Santa Anita Racetrack but required 40% of its wagering commissions
from satellite wagering during the live race meets.
Due to the revenue and expense items previously discussed, Operating
Company reported net income of $2,211,000 or $.20 per share for the nine months
ended September 30, 1995, compared with a net loss of $895,000 or $.08 per share
for the comparable period in 1994.
SEASONALITY
Operating Company's operations are subject to seasonal fluctuations.
Operating Company recognizes the majority of its revenues in the first quarter
due to live racing activity at Santa Anita. Therefore, the results of
operations for interim periods are not necessarily indicative of the results
that may be expected for the full year.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1995, Operating Company's sources of liquidity included
cash and short-term investments of $4,697,000 and an unsecured line of credit
with Realty of $10,000,000, of which $1,940,000 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. (See
Item 2. "Managements' Discussion and Analysis of Financial Condition and Results
of Operations - Santa Anita Realty Enterprises, Inc. - Liquidity and Capital
Resources"). For the three and nine months ended September 30, 1995, short-term
investments earned interest income of $112,000 and $466,000.
The cash balances and related interest income from short-term investments
reflect seasonal variations associated with the Santa Anita meet. During the
meet, large cash balances and short-term investments are maintained by LATC,
including amounts to be disbursed for payment of license fees payable to the
state, purses payable to horse owners and uncashed winning pari-mutuel tickets
payable to the public.
Operating Company generated $4,798,000 more cash from operations for the
nine months ended September 30, 1995 than for the comparable period last year.
Net cash used in operating activities was $2,707,000 for the first nine months
of 1995 versus $7,505,000 in the comparable period in 1994. The increase in cash
from operations was primarily due to increased revenues and lower operating
expenses associated with horse racing operations and the non cash charge
resulting form the amortization of unearned compensation expense.
Net cash used in investment activities was $3,246,000 for the first nine
months of 1995 versus $1,640,000 in the comparable period in 1994. The
$1,606,000 increase in cash used in investment activities was attributable to a
higher level of capital improvements at Santa Anita Racetrack.
The change from cash provided by financing activities in 1994 of $308,000 to
cash used in financing activities in 1995 of $2,193,000 was primarily due to
borrowings from Realty to finance common stock purchases used for restricted
stock awards.
21
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC. AND
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDING SEPTEMBER 30, 1995
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this report:
Exhibit
Number
-------
3.3 Bylaws of Santa Anita Realty Enterprises, Inc., as amended
through October 1995
3.4 Bylaws of Santa Anita Operating Company, as amended through
October 1995
27(a) Financial Data Schedule for Santa Anita Realty Enterprises, Inc.
27(b) Financial Data Schedule for Santa Anita Operating Company
(b) Reports on Form 8-K. There were no reports on Form 8-K filed during the
quarter ended September 30, 1995.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Realty and Operating Company have duly caused this report
to be signed on their behalf by the undersigned, thereunto duly authorized.
SANTA ANITA REALTY ENTERPRISES, INC. SANTA ANITA OPERATING COMPANY
By: SHERWOOD C. CHILLINGWORTH By: STEPHEN F. KELLER
----------------------------- ---------------------------------
Sherwood C. Chillingworth Stephen F. Keller
Vice Chairman of the Board Chairman of the Board, President
and Chief Executive Officer and Chief Executive Officer
(Principal Executive Officer) (Principal Executive Officer)
Date: November 9, 1995 Date: November 9, 1995
By: BRIAN L. FLEMING By: RICHARD D. BRUMBAUGH
----------------------------- ---------------------------------
Brian L. Fleming Richard D. Brumbaugh
Executive Vice President and Vice President-Finance and
Chief Financial Officer Chief Financial Officer
(Principal Financial and (Principal Financial and
Accounting Officer) Accounting Officer)
Date: November 9, 1995 Date: November 9, 1995
23
<PAGE>
EXHIBIT 3.3
REVISED 10-24-95
----------------
BY-LAWS
OF
SANTA ANITA REALTY ENTERPRISES, INC.
(a Delaware corporation)
ARTICLE I
Offices
Section 1.1. Registered Office. The registered office shall be in the
-----------------
City of Wilmington, County of New Castle, State of Delaware.
Section 1.2. Other Offices. The Corporation may also have offices at such
-------------
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
Business Purpose and Investment Policy
Section 2.1. Corporation Taxed as Real Estate Investment Trust. The
-------------------------------------------------
Corporation shall conduct its business in such a manner as to be qualified to be
taxed as
1
<PAGE>
a real estate investment trust under Sections 856-858 of the Internal Revenue
Code of 1954, as heretofore or hereafter amended.
Section 2.2. Investment Policy. It is the general purpose of the
-----------------
Corporation that the assets of the Corporation be invested principally in real
property and interests in real estate.
ARTICLE III
Meetings of Stockholders
Section 3.1. Place. All meetings of the stock-holders for the election of
-----
directors shall be held at such place either within or without the State of
Delaware as shall be designated from time to time by the Board of Directors and
stated in the notice of the meeting. Meetings of stockholders for any other
purpose may be held at such time or place, within or without the State of
Delaware, as shall be stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
Section 3.2. Annual Meetings. The annual meetings of stockholders shall
---------------
be held on the third Thursday in May of each year at 10 o'clock A.M. of said
day, the first such meeting to be held on the third Thursday in May
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1981; provided, however, that should said day fall upon a legal holiday, then
any such annual meeting of stockholders shall be held at the same time and place
on the next day thereafter ensuing which is a full business day. At such
meetings directors shall be elected, reports of the affairs of the Corporation
shall be considered, and any other business may be transacted which is within
the powers of the stockholders. If for any annual meeting the Board of
Directors shall fix a different day or hour, such action shall be deemed an
amendment of this Section 3.2 effective until the adjournment of that annual
meeting sine die.
---- ---
Written notice of each annual meeting shall be given to each stockholder
entitled to vote, either personally or by mail or other means of written
communication, charges prepaid, addressed to such stockholder at his address
appearing on the books of the Corporation or given by him to the Corporation for
the purpose of notice. If a stockholder gives no address, notice shall be
deemed to have been given him if sent by mail or other means of written
communication addressed to the place where the principal office of the
Corporation is situated, or if published at least once in some newspaper of
general circulation in the county in which said office is located. All such
notices shall be sent to each stockholder entitled thereto not less than ten nor
more than sixty days before each annual meeting. Such notices shall specify the
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place, the day and the hour of such meeting and shall state such other matters
if any, as may be expressly required by statute.
Section 3.3. Special Meetings. Special meetings of the stockholders, for
----------------
any purpose or purposes whatsoever, may be called at any time by the Board of
Directors. Except in special cases where other express provision is made by
statute, notice of such special meetings shall be given in the same manner as
for annual meetings of stockholders. Notices of any special meeting shall
specify, in addition to the place, day and hour of such meeting, the general
nature of the business to be transacted.
Section 3.4. Business To Be Brought Before Meetings. In order to be
---------------------------------------
properly brought before any meeting of stockholders held pursuant to this
Article III, business (including the election of directors) must be (a)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors, (b) otherwise properly brought before
the meeting by or at the direction of the Board of Directors, or (c) otherwise
properly brought before the meeting by a stockholder. In order for any such
business to be properly brought before the meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the Secretary of
the Corporation. In order to be timely, a
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stockholder's notice must be received at the principal executive offices of the
Corporation not less than 60 days nor more than 90 days prior to the meeting;
provided, however, that in the event that a meeting is called for a date other
than that specified in the By-laws, and less than 75 days' prior public
disclosure of such date is given, notice by the stockholder in order to be
timely must be received by the Secretary of the Corporation not later than the
close of business on the fifteenth (15th) calendar day following the day on
which such public disclosure of the date of the meeting was made. If a
stockholder intends to nominate a candidate or candidates for director at any
meeting of stockholders, such stockholder's notice to the Secretary shall set
forth the name, age, address and principal occupation of each such nominee and
the amount and type of the Corporation's stock held by each such nominee,
together with any additional information reasonably necessary to determine the
eligibility of each such nominee and any information required to be disclosed in
the solicitation of proxies in respect of each such nominee by Schedule 14A, as
amended from time to time, or other applicable Rules and Regulations of the
Securities and Exchange Commission. The notice to the Secretary shall also set
forth the name, address and the amount and type of beneficial ownership of the
Corporation's stock by the stockholder intending to nominate the candidate or
candidates identified in the notice to the Secretary. Any
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stockholder desiring to bring any other business before any annual meeting of
stockholders shall set forth in such stockholder's notice to the Secretary (i) a
brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the meeting, (ii) the
name and record address of the stockholder proposing such business, (iii) the
class and number of shares of the Corporation's stock that are beneficially
owned by such stockholder, and (iv) any material interest of such stockholder in
such business. In order to be properly brought before any special meeting of
stockholders (other than any special meeting held for the purpose of electing
directors), business must be specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors.
Notwithstanding anything in the By-laws to the contrary, no business
(including the election of directors) shall be conducted at the meeting except
in accordance with the procedures set forth in this Section 3.4; provided
however, that nothing in this Section 3.4 shall preclude or be deemed or
construed to preclude discussion by any stockholder of any business properly
brought before the annual meeting of stockholders.
The Chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that business
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was not properly brought before the meeting in accordance with the provisions of
this Section 3.4, and if he should so determine, he shall so declare to the
meeting and any such business not properly brought before the meeting shall not
be transacted.
Section 3.5. List of Stockholders. The officer who has charge of the
--------------------
stock ledger of the Corporation shall prepare and make, at least ten days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, and showing the address of
each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
Section 3.6. Quorum. The holders of a majority of the stock issued and
------
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by
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statute. If, however, such quorum shall not be present or represented at any
meeting of stockholders, the stockholders entitled to vote thereat, present in
person or represented by proxy, shall have power to adjourn the meeting from
time to time, without notice other than announcement at the meeting, until a
quorum shall be present or represented. At such adjourned meeting at which a
quorum shall be present or represented any business may be transacted which
might have been transacted at the meeting as originally noticed. If the
adjournment is for more than thirty days or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting.
Section 3.7. Questions Before Meeting. When a quorum is present at any
------------------------
meeting, the vote of the holders of a majority of the stock having voting power
present in person or represented by proxy shall decide any question brought
before such meeting unless the question is one upon which by express provision
of the statutes, of these By-laws or of the Certificate of Incorporation, a
different vote is required, in which case such express provision shall govern
and control the decision of such question.
Section 3.8. Action Without Meeting. Any action required or permitted to
----------------------
be taken by holders of stock of the
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Corporation must be taken at a meeting of such holders and may not be taken by
consent in writing.
Section 3.9. Waiver of Notice. Whenever notice is required to be given
----------------
under the Delaware Corporation Law or the Certificate of Incorporation or the
By-laws, a written waiver, signed by the person entitled to notice, whether
before or after the time stated therein, shall be deemed equivalent to notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the person attends a meeting for the express purpose of
objecting at the beginning of the meeting to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
stockholders, directors, or members of a committee of directors need be
specified in any written waiver of notice unless so required by the Certificate
of Incorporation.
ARTICLE IV
Directors
Section 4.1. Size of Board. The Board of Directors shall consist of ten
-------------
members, or as many as shall be determined from time to time by resolution of
the Board.
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Section 4.2. Election of Directors. The directors shall be divided into
---------------------
three classes, designated Class I, Class II, and Class III, such classes to be
as nearly equal in number as possible. At the annual meeting of stockholders in
1986, directors of Class I shall be elected to hold office for a term expiring
at the next succeeding annual meeting, directors of Class II shall be elected to
hold office for a term expiring at the second succeeding annual meeting, and
directors of Class III shall be elected to hold office for a term expiring at
the third succeeding annual meeting. Thereafter at each annual meeting of
stockholders, directors shall be chosen for a term of three years to succeed
those whose terms then expire and shall hold office until the third following
annual meeting of stockholders and until the election of their respective
successors. Directors need not be stockholders.
Section 4.3. Vacancies. Vacancies and newly created directorships
---------
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director, and the directors so chosen shall hold office for the
unexpired term of the vacant directorship, or, in the case of any increase in
the number of directors, as designated by the directors then in office,
consistent with the provisions of Section 4.2. If there are no directors in
office, then an election of directors may be
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held in the manner provided by statute. If, at the time of filling any vacancy
or any newly created directorship the directors then in office shall constitute
less than a majority of the whole Board (as constituted immediately prior to any
such increase), the Court of Chancery may, upon application of any stockholder
or stockholders holding at least ten percent of the total number of the shares
at the time outstanding having the right to vote for such directors, summarily
order an election to be held to fill any such vacancies or newly created
directorships, or to replace the directors chosen by the directors then in
office.
No reduction of the authorized number of directors shall have the effect of
removing any director prior to the expiration of his term of office.
Section 4.4. Powers. The business of the Corporation shall be managed by
------
its Board of Directors which may exercise all such powers of the Corporation and
do all such lawful acts and things as are not by statute or by the Certificate
of Incorporation or by these By-laws directed or required to be exercised or
done by the stockholders.
Section 4.5. Meetings. The Board of Directors of the Corporation may hold
--------
meetings, both regular and special, either within or without the State of
Delaware.
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Section 4.6. First Meeting. The first meeting of each newly elected Board
-------------
of Directors shall be held immediately following the annual meeting of
stockholders at which such directors are elected and no notice of such meeting
shall be necessary to the newly elected directors in order legally to constitute
the meeting, provided a quorum shall be present; or the meeting may be held at
such time and place as shall be specified in a notice given as hereinafter
provided for special meetings of the Board of Directors, or as shall be
specified in a written waiver signed by all of the directors.
Section 4.7. Regular Meetings. Regular meetings of the Board may be held
----------------
without notice at such time and at such place as shall from time to time be
determined by the Board.
Section 4.8. Special Meetings. Special meetings of the Board may be
----------------
called by the Secretary at the request of the Chairman of the Board or President
on two business days' notice to each director, either personally or by mail, by
telegram or by telephone; special meetings shall be called by the President or
Secretary in like manner and on like notice on the written request of two
directors.
Section 4.9. Quorum. At all meetings of the Board a majority of the total
------
number of directors shall
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constitute a quorum for the transaction of business and the act of a majority of
the directors present at any meeting at which there is a quorum shall be the act
of the Board of Directors, except as may be otherwise specifically provided by
statute or by the Certificate of Incorporation. If a quorum shall not be
present at any meeting of the Board of Directors, the directors present thereat
may adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present.
Section 4.10. Conference Telephone. Unless otherwise restricted by the
--------------------
Certificate of Incorporation or these By-laws, members of the Board of Directors
(or any committee designated by the Board) may participate in a meeting of the
Board or committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other.
Section 4.11. Unanimous Consent. Unless otherwise restricted by the
-----------------
Certificate of Incorporation or these By-laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board or committee, as the
case may be, consent thereto
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in writing, and the writing or writings are filed with the minutes of
proceedings of the Board or committee.
Section 4.12. Committees. The Board of Directors may, by resolution
----------
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of two or more of the directors of the Corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. Any such committee, to the extent provided in the resolution, shall
have and may exercise the power of the Board of Directors in the management of
the business and affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it; provided, however,
that in the absence or disqualification of any member of such committee or
committees, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.
Section 4.13. Minutes. Each committee shall keep regular minutes of its
-------
meetings and report the same to the Board of Directors when required.
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Section 4.14. Fees and Compensation. Directors and members of committees
---------------------
may receive such compensation, if any, for their services, and such
reimbursement for expenses, as may be fixed or determined by resolution of the
Board.
ARTICLE V
Notices
Section 5.1. Methods of Notice. Whenever, under the provisions of the
-----------------
Laws of the State of Delaware or of the Certificate of Incorporation or of these
By-laws, notice is required to be given to any director or stockholder, it shall
not be construed to mean personal notice, but notice may be given in writing, by
mail, addressed to such director or stockholder, at his address as it appears on
the records of the Corporation, with postage thereon prepaid, and such notice
shall be deemed to be given at the time when the same shall be deposited in the
United States mail. Notice to directors may also be given by telegram or
telephone.
Section 5.2. Waiver. Whenever any notice is required to be given under
------
the provisions of the statutes or of the Certificates of Incorporation or of
these By-laws, a waiver thereof in writing, signed by the person or persons
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entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
ARTICLE VI
Officers
Section 6.1. Officers. The Officers of the Corporation shall be a
--------
President, a Vice President, a Secretary and a Treasurer. The Corporation may
also have, at the discretion of the Board of Directors, one or more additional
Vice Presidents, one or more Assistant Secretaries, one or more Assistant
Treasurers, and such other officers as may be appointed in accordance with the
provisions of Section 6.3 and Section 6.5 of this Article. The Board of
Directors may also choose, in its discretion, a Chairman of the Board and one or
more Vice Chairmen of the Board. The positions of Chairman of the Board and
Vice Chairman of the Board shall not constitute officers of the Corporation. One
person may hold two or more offices.
Section 6.2. Election. The officers of the Corporation, except such
--------
officers as may be appointed in accordance with the provisions of Section 6.3 or
Section 6.5 of this Article, shall be chosen annually by the Board of Directors,
and each shall hold his office until he shall
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<PAGE>
resign or shall be removed or otherwise disqualified to serve, or his successor
shall be elected and qualified.
Section 6.3. Subordinate Officers, etc. The Board of Directors may
--------------------------
appoint, and may empower the President to appoint, such other officers as the
business of the Corporation may require, each of whom shall hold office for such
period, have such authority and perform such duties as are provided in the By-
laws or as the Board of Directors may from time to time determine.
Section 6.4. Removal and Resignation. Any officer may be removed, either
-----------------------
with or without cause, by the Board of Directors, at any regular or special
meeting thereof, or, except in the case of an officer chosen by the Board of
Directors, by any officer upon whom such power of removal may be conferred by
the Board of Directors.
Any officer may resign at any time by giving written notice to the Board of
Directors or to the President, or to the Secretary of the Corporation. Any such
resignation shall take effect at the date of the receipt of such notice or at
any later time specified therein; and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
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Section 6.5. Vacancies. A vacancy in any office because of death,
---------
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in the By-laws for regular appointments to such office.
Section 6.6. Salaries. The salaries and other compensation of all
--------
officers of the Corporation shall be fixed by the Board of Directors.
Section 6.7. Chairman of the Board. The Chairman of the Board shall, if
---------------------
present, preside at all meetings of the Board of Directors.
Section 6.7A. Vice Chairman of the Board. In the absence of the Chairman
--------------------------
of the Board, the Vice Chairman of the Board designated by the Board of
Directors shall preside at all meetings of the Board of Directors.
Section 6.8. President. The President shall be the Chief Executive
---------
Officer of the Corporation and shall, subject to the control of the Board of
Directors, have general supervision, direction and control of the business and
officers of the Corporation. He shall preside at all meetings of the
stockholders and, in the absence of the Chairman of the Board and the Vice
Chairman of the Board, or if there be none, at all meetings of the Board of
Directors. He shall be ex-officio a member of all the standing
18
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committees, including the Executive Committee, if any, and shall have the
general powers and duties of management usually vested in the office of the
president of a corporation, and shall have such other powers and duties as may
be prescribed by the Board of Directors or the By-laws.
Section 6.9. Vice President. In the absence or disability of the
--------------
President, the Vice Presidents in order of their rank as fixed by the Board of
Directors or, if not ranked, the Vice President designated by the Board of
Directors, shall perform all the duties of the President, and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
President. The Vice Presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Directors or the By-laws.
Section 6.10. Secretary. The Secretary shall keep or cause to be kept, at
---------
the principal office or such other place as the Board of Directors may order, a
book of minutes of all meetings of directors and stockholders, with the time and
place of holding, whether regular or special, and, if special, how authorized,
the notice thereof given, the names of those present at directors' meetings, the
number of shares present or represented at stockholders meetings, and the
proceedings thereof. The Secretary shall keep, or cause to be kept, at the
principal office or at the
19
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office of the Corporation's transfer agent, a share register, or a duplicate
share register, showing the names of the stockholders and their addresses, the
number and class of shares held by each, the number and date of certificates
issued for the same, and the number and date of cancellation of every
certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all the meetings
of the stockholders and of the Board of Directors required by the By-laws or
bylaw to be given, and he shall keep the seal of the Corporation in safe
custody, and shall have such other powers and perform such other duties as may
be prescribed by the Board of Directors or by the By-laws.
Section 6.11. Treasurer. The Treasurer shall keep and maintain, or cause
---------
to be kept and maintained, adequate and correct accounts of the properties and
business transactions of the Corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, surplus and
shares. Any surplus, including earned surplus, paid-in surplus and surplus
arising from a reduction of stated capital, shall be classified according to
source and shown in a separate account. The books of account shall at all
reasonable times be open to inspection by any director.
20
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The Treasurer shall deposit all moneys and other valuables in the name and
to the credit of the Corporation with such depositories as may be designated by
the Board of Directors. He shall disburse the funds of the Corporation as may
be ordered by the Board of Directors, shall render to the President and
directors, whenever they request it, an account of all of his transactions as
Treasurer and of the financial condition of the Corporation, and shall have such
other powers and perform such other duties as may be prescribed by the Board of
Directors or the By-laws.
ARTICLE VII
Stock and Stock Certificates
Section 7.1. Right to Certificate. Every holder of stock in the
--------------------
Corporation shall be entitled to have a certificate, signed by or in the name of
the Corporation, by the Chairman of the Board of Directors or the President or a
Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary
or an Assistant Secretary of the Corporation, certifying the number of shares
owned by him in the Corporation.
Section 7.2. Statements Setting Forth Rights. If the Corporation shall be
-------------------------------
authorized to issue more than one class of stock or more than one series of any
class, the
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designations, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and rights shall be set forth in
full or summarized on the face or back of the certificate which the Corporation
shall issue to represent such class or series of stock, provided that, except as
otherwise provided in Section 202 of the Corporation Law of Delaware, in lieu of
the foregoing requirements, there may be set forth on the face or back of the
certificate which the Corporation shall issue to represent such class or series
of stock, a statement that the Corporation will furnish without charge to each
stockholder who so requests the designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations and restrictions of such preferences
and rights.
Section 7.3. Facsimile Signatures. Any of or all the signatures on the
--------------------
certificate may be a facsimile. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent, or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent, or registrar at the date
of issue.
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Section 7.4. Lost Certificates. Except as hereinafter in this section
-----------------
provided, no new certificate for shares shall be issued in lieu of an old one
unless the latter is surrendered and cancelled at the same time. The Board of
Directors may, however, in case any certificate for shares is lost, stolen,
mutilated or destroyed, authorize the issuance of a new certificate in lieu
thereof, upon such terms and conditions, including reasonable indemnification of
the Corporation, as the Board shall determine.
Section 7.5. Transfers of Stock.
------------------
(a) Subject to paragraphs (b), (c) and (d) of this Section 7.5, upon
surrender to any transfer agent of the Corporation of a certificate for shares
of the Corporation duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
Corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
(b) Subject to the provisions of subparagraph (vi) of this paragraph (b),
beginning at the time that (A) the merger of Santa Anita Consolidated, Inc.
("Santa Anita") into the Corporation and (B) the payment by the Corporation of
the dividend in kind of the shares of Santa Anita Operating Company, a Delaware
corporation ("Operating
23
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Company"), shall have both occurred (hereinafter called the "effective time of
the restriction"), and continuing thereafter until such time as the limitation
on transfer provided for in the Pairing Agreement between the Corporation and
Operating Company shall be terminated in the manner therein provided:
(i) The shares of common stock of the Corporation shall not be
transferable, and shall not be transferred on the books of the Corporation,
unless (1) a simultaneous transfer is made by the same transferor to the
same transferee, or (2) such transferor has previously arranged with
Operating Company for the transfer to the transferee, of a like number of
common shares of Operating Company and such shares are paired with one
another.
(ii) Except for certificates representing shares of common stock
of this Corporation referred to in subparagraph (vi) below, each
certificate evidencing ownership of shares of common stock of this
Corporation (including certificates issued by Santa Anita) issued and not
cancelled prior to the effective time of the restriction shall be deemed to
evidence a like number of shares of common stock of Operating Company.
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(iii) Except for certificates representing common stock of this
Corporation referred to in subparagraph (vi) below, any registered holder
of a certificate evidencing ownership of shares of common stock of the
Corporation (including certificates issued by Santa Anita) issued prior to
the effective time of the restriction may, upon request and presentation of
said certificate to the Corporation's transfer agent, obtain in
substitution therefor a certificate or certificates registered in such
holder's name evidencing the same number of shares of common stock of the
Corporation and a like number of common shares of Operating Company.
(iv) A conspicuous legend shall be placed on the face of each
certificate evidencing ownership of shares of common stock of the
Corporation issued after the effective time of the restriction, referring
to the restrictions on transfer set forth in the Corporation's By-laws.
(v) For purposes of this paragraph (b) only, the terms "common
stock" and "common shares" shall include preferred stock which is
convertible into shares of common stock.
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(vi) Notwithstanding the other provisions of this paragraph (b),
any stockholder whose ownership of Operating Company common stock at the
effective time of the restriction would be deemed, after application of the
attribution rules of the Internal Revenue Code of 1954 (the "Code"), to
result in the Corporation owning, directly or indirectly, more than 9.25%
of the Operating Company common stock will not be subject to the
restrictions imposed by this paragraph (b) to the extent that such
ownership would cause the Corporation, directly or indirectly, to be deemed
to own, after application of the attribution rules of the Code, more than
9.25% of the total number of the outstanding shares of Operating Company,
provided that (1) a sufficient amount of Operating Company common stock (or
the right to receive such common stock) which would otherwise be paired
with common stock of the Corporation is sold to a transferee so that the
Corporation, directly or indirectly, after application of the attribution
rules of the Code, will not own in excess of 9.25% of the outstanding
Operating Company common stock, (2) all holders of the unpaired shares
enter into an agreement, satisfactory to the Boards of Directors of the
Corporation, Operating Company and Santa Anita, providing that such shares
not be transferable by sale or any other means, without arranging for such
shares to be paired with an equal
26
<PAGE>
number of shares of Operating Company, unless such sale is made to the
Corporation or Operating Company, and (3) such stockholder executes a
waiver of any claims he or she may have arising out of the close business
relationship between the Corporation and Operating Company and claims
arising out of conflicts of interest inherent in such business
relationship. The other provisions of this paragraph (b) shall apply to
all shares of the Corporation otherwise held by any stockholder unless they
are specifically exempted by this subparagraph (vi).
(c) If the Board of Directors shall at any time and in good faith be
of the opinion that direct or indirect ownership of shares of either common
stock or preferred stock, or both, of the Corporation has or may become
concentrated to an extent which would cause this Corporation to fail to qualify
or be disqualified as a real estate investment trust by virtue of Section
856(a)(5) and (6) of the Code, or similar provisions of successor statutes, the
Board of Directors shall have the power (i) by lot or other means deemed
equitable by them to call for purchase from any stockholder of the Corporation
such number of shares sufficient in the opinion of the Board of Directors to
maintain or bring the direct or indirect ownership of shares of stock of the
Corporation into conformity with the requirements of said Section 856(a)(5) and
(6) and (ii) to
27
<PAGE>
refuse to register the transfer of shares of stock to any person whose
acquisition of such shares would, in the opinion of the Board of Directors,
result in the Corporation being unable to conform to the requirements of said
Section 856(a)(5) and (6). The purchase price for the shares of stock purchased
pursuant hereto shall be equal to the fair market value of such shares as
reflected in the closing price for such shares on the principal stock exchange
on which such shares are listed or, if such shares are not listed, then the last
bid quotation for shares of stock as of the close of business on the date fixed
by the Board of Directors for such purchase or, if no quotation for the shares
is available, as determined in good faith by the Board of Directors. From and
after the date fixed for purchase by the Board of Directors, the holder of any
shares so called for purchase shall cease to be entitled to dividends, voting
rights and other benefits with respect to such shares, excepting only the right
to payment of the purchase price fixed as aforesaid. In order to further assure
that ownership of the shares of stock does not become so concentrated, any
transfer of shares that would prevent the Corporation from continuing to be
qualified as a real estate investment trust by virtue of the application of
Section 856(a)(5) and (6) of the Code shall be void ab initio and the intended
-- ------
transferee of such shares shall be deemed never to have had an interest therein.
If the foregoing provision is determined to be void or invalid by
28
<PAGE>
virtue of any legal decision, statute, rule or regulation, then the transferee
of such shares shall be deemed to have acted as agent on behalf of the
Corporation in acquiring such shares and to hold such shares on behalf of the
Corporation. For purposes of determining whether the Corporation is in
compliance with Section 856(a)(5) and (6), Section 542(a)2) and Section 544 of
the Code, or similar provisions of successor statutes, shall be applied.
(d) In addition to the requirements of subparagraph (c) above, if the
Board of Directors shall at any time and in good faith be of the opinion that
direct or indirect ownership of shares of either common stock or preferred
stock, or both, of the Corporation has or may become concentrated to an extent
which would cause any rent to be paid to this Corporation to fail to qualify or
be disqualified as rent from real property by virtue of Section 856(d)(2)(B) of
the Code, or similar provisions of successor statutes, the Board of Directors
shall have the power (i) by lot or other means deemed equitable by them to call
for purchase from any stockholder of the Corporation such number of shares
sufficient in the opinion of the Board of Directors to maintain or bring the
direct or indirect ownership of shares of stock of the Corporation into
conformity with the requirements of Section 856(d)(2)(B) and (ii) to refuse to
register the transfer of shares of stock to any person whose acquisition of such
shares would, in the
29
<PAGE>
opinion of the Board of Directors, result in this Corporation being unable to
conform to the requirements of said Section 856(d)(2)(B). The purchase price
for the shares of stock purchased pursuant hereto shall be equal to the fair
market value of such shares as reflected in the closing price for such shares on
the principal stock exchange on which such shares are listed, or if such shares
are not listed, then the last bid quotation for shares of stock, as of the close
of business on the date fixed by the Board of Directors for such purchase or, if
no quotation for the shares is available, as determined in good faith by the
Board of Directors. From and after the date fixed for purchase by the Board of
Directors, the holder of any shares so called for purchase shall cease to be
entitled to dividends, voting rights and other benefits with respect to such
shares, excepting only the right to payment of the purchase price fixed as
aforesaid. In order to further assure that ownership of the shares of stock
does not become so concentrated, any transfer of shares that would prevent this
Corporation from continuing to be qualified as a real estate investment trust by
virtue of the application of Section 856(d)(2)(B) of the Code shall be void ab
--
initio and the intended transferee of such shares shall be deemed never to have
- ------
had an interest therein. If the foregoing provision is determined to be void or
invalid by virtue of any legal decision, statute, rule or regulation, then the
transferee of such shares shall be deemed to have acted as agent on
30
<PAGE>
behalf of the Corporation in acquiring such shares and to hold such shares on
behalf of the Corporation. For purposes of determining whether this Corporation
is in compliance with Section 856(d)(2)(B), Section 856(d)(5) of the Code, or
similar provisions of successor statutes, shall be applied.
(e) The stockholders of the Corporation shall upon demand disclose to
the Board of Directors in writing such information with respect to their direct
and indirect ownership of the stock of the Corporation as the Board of Directors
deems necessary to determine whether the Corporation satisfies the provisions of
Section 856(a)(5) and (6) and 856(d) of the Code and the regulations thereunder
as the same shall be from time to time amended, or to comply with the
requirements of any other taxing authority.
Section 7.6. Form of Consideration. In purchasing such shares from
---------------------
any shareholder in accordance with the foregoing provisions, the Corporation may
pay consideration in the form of cash or, at the option of the Board of
Directors, in the form of subordinated indebtedness of the Corporation. The
principal amount of such subordinated indebtedness shall be equal to the
purchase price of the shares (less amounts paid in cash, if any) and it shall
have such other terms as may be determined by the Board of Directors at the time
of issuance.
31
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Section 7.7. Record Date. In order that the Corporation may
-----------
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereto, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action. A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
Section 7.8. Registered Stockholders. The Corporation shall be
-----------------------
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares to receive dividends, and to vote as such owner, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
32
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Section 7.9. Transfer Agents and Registrars. The Board of Directors
------------------------------
may appoint one or more corporate transfer agents and registrars.
Section 7.10. Dividends. Dividends upon the capital stock of the
---------
Corporation may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock.
Section 7.11. Reserves. Before payment of any dividend, there may be
--------
set aside out of any funds of the Corporation available for dividends such sum
or sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the directors shall think conducive to the interest of
the Corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
ARTICLE VIII
Indemnification and Insurance
Section 8.1. Right to Indemnification. Each person who was or is a
------------------------
party or is threatened to be made a party to or is involved in any action, suit
or proceeding,
33
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whether civil, criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she, or a person of whom he or
she is the legal representative, is or was a director or officer of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employer or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged action
or inaction in an official capacity or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent permitted by the laws of Delaware, as the
same exist or may hereafter be amended, against all costs, charges, expenses,
liabilities and losses (including attorneys' fees, judgments, fines, ERISA
excise taxes or penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by such person in connection therewith, and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of his or her heirs,
executors and administrators; provided, however, that, except as provided in
Section 8.2 hereof, the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part thereof) was authorized by the
Board of Directors
34
<PAGE>
of the Corporation. The right to indemnification conferred in this Article
shall be a contract right and shall include the right to be paid by the
Corporation the expenses incurred in defending any such proceeding in advance of
its final disposition; provided, however, that, if the Delaware General
Corporation Law requires, the payment of such expenses incurred by a director or
officer in his or her capacity as a director or officer (and not in any other
capacity in which service was or is rendered by such person while a director or
officer, including, without limitation, service to an employee benefit plan) in
advance of the final disposition of a proceeding, shall be made only upon
delivery to the Corporation of an undertaking, by or on behalf of such director
or officer, to repay all amounts so advanced if it shall ultimately be
determined that such director or officer is not entitled to be indemnified under
this Section or otherwise. The Corporation may, by action of its Board of
Directors, provide indemnification to employees and agents of the Corporation
with the same scope and effect as the foregoing indemnification of directors and
officers.
Section 8.2. Right of Claimant to Bring Suit. If a claim under
-------------------------------
Section 8.1 of this Article is not paid in full by the Corporation within thirty
days after a written claim has been received by the Corporation, the claimant
may at any time thereafter bring suit against the Corporation to
35
<PAGE>
recover the unpaid amount of the claim and, if successful in whole or in part,
the claimant shall be entitled to be paid also the expense of prosecuting such
claim. It shall be a defense to any such action (other than an action brought
to enforce a claim for expenses incurred in defending any proceeding in advance
of its final disposition where the required undertaking, if any is required, has
been tendered to the Corporation) that the claimant has failed to meet a
standard of conduct which makes it permissible under Delaware law for the
Corporation to indemnify the claimant for the amount claimed. Neither the
failure of the Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is permissible
in the circumstances because he or she has met such standard of conduct, nor an
actual determination by the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) that the claimant has not met
such standard of conduct, shall be a defense to the action or create a
presumption that the claimant has failed to meet such standard of conduct.
Section 8.3. Non-Exclusivity of Rights. The right to indemnification
-------------------------
and the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Article shall not be exclusive
36
<PAGE>
of any other right which any person may have or hereafter acquire under any
statute, provision of the Certificate of Incorporation, by-law, agreement, vote
of stockholders or disinterested directors or otherwise.
Section 8.4. Insurance. The Corporation may maintain insurance, at
---------
its expense, to protect itself and any director, officer, employee or agent of
the Corporation or another corporation, partnership, joint venture, trust or
other enterprise against any such expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under Delaware law.
Section 8.5. Expenses as a Witness. To the extent that any director,
---------------------
officer, employee or agent of the Corporation is by reason of such position, or
a position with another entity at the request of the Corporation, a witness in
any action, suit or proceeding, he or she shall be indemnified against all costs
and expenses actually and reasonably incurred by him or her or on his or her
behalf in connection therewith.
Section 8.6. Indemnity Agreements. The Corporation may enter into
--------------------
agreements with any director, officer, employee or agent of the Corporation
providing for
37
<PAGE>
indemnification to the full extent permitted by Delaware law.
ARTICLE IX
General Provisions
Section 9.1. Annual Reports. Not later than one hundred twenty
--------------
(120) days after the close of each fiscal year of the Corporation, the Board of
Directors shall mail a report of the business and operation of the Corporation
during such fiscal year to the stockholders. The report shall be in such form
and have such content as the Board deems proper. This report shall include a
balance sheet and a statement of income and surplus and a statement of changes
in financial position of the Corporation. Such financial statements shall be
accompanied by the report of an independent certified public accountant thereon.
Section 9.2. Quarterly Reports. Within 90 days after the close of
-----------------
each of the first three quarters of each fiscal year of the Corporation, the
Board of Directors shall send interim reports to the stockholders, having such
form and content as the Board of Directors deems proper.
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<PAGE>
Section 9.3. Fiscal Year. The fiscal year of the Corporation shall
-----------
be fixed by resolution of the Board of Directors.
Section 9.4. Seal. The corporate seal shall have inscribed thereon
----
the name of the Corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
Section 9.5. Checks, Drafts, etc. All checks, drafts or other orders
-------------------
for payment of money, notes or other evidences of indebtedness, issued in the
name of or payable to the Corporation, shall be signed or endorsed by such
person or persons and in such manner as, from time to time, shall be determined
by resolution of the Board of Directors.
Section 9.6. Representation of Shares of Other Corporations. The
----------------------------------------------
President or any Vice President and the Secretary or Assistant Secretary of this
Corporation are authorized to vote, represent and exercise on behalf of this
Corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this Corporation. The authority herein
granted to said officers to vote or represent on behalf of this Corporation any
and all shares held by this Corporation in any other corporation or corporations
may be exercised either by such
39
<PAGE>
officers in person or by any other person authorized so to do by proxy or power
of attorney duly executed by said officers.
Section 9.7. Employee Stock Purchase Plans. The Corporation may,
-----------------------------
upon terms and conditions herein authorized, provide and carry out an employee
stock purchase plan or plans providing for the issue and sale, or for the
granting of options for the purchase, of its unissued shares, or of issued
shares purchased or to be purchased or acquired, to employees of the Corporation
or of any subsidiary or to a trustee on their behalf. Such plan may provide for
such consideration as may be fixed therein, for the payment of such shares in
installments or at one time and for aiding any such employees in paying for such
shares by compensation for services or by loans from the Corporation or
otherwise. Any such plan before becoming effective must be approved or
authorized by the Board of Directors of the Corporation.
Such plan may include, among other things, provisions determining or
providing for the determination by the Board of Directors, or any committee
thereof designated by the Board of Directors, of: (a) eligibility of employees
(including officers and directors) to participate therein, (b) the number and
class of shares which may be subscribed for or for which options may be granted
under the plan,
40
<PAGE>
(c) the time and method of payment therefor, (d) the price or prices at which
such shares shall be issued or sold, (e) whether or not title to the shares
shall be reserved to the Corporation until full payment therefor, (f) the effect
of the death of an employee participating in the plan or termination of his
employment, including whether there shall be any option or obligation on the
part of the Corporation to repurchase the shares thereupon, (g) restrictions, if
any, upon the transfer of the shares, and the time limits and termination of the
plan, (h) termination, continuation or adjustments of the rights of
participating employees upon the happening of specified contingencies, including
increase or decrease in the number of issued shares of the class covered by the
plan without receipt of consideration by the Corporation or any exchange of
shares of such class for stock or securities of another corporation pursuant to
a reorganization or merger, consolidation or dissolution of the Corporation, (i)
amendment, termination, interpretation and administration of such plan by the
Board of Directors or any committee thereof designated by the Board of
Directors, and (j) any other matters, not repugnant to law, as may be included
in the plan as approved or authorized by the Board of Directors or any such
committee.
41
<PAGE>
ARTICLE X
Amendments
Section 10.1. Power of Stockholders. New By-laws may be adopted or
---------------------
these By-laws may be amended or repealed by the stockholders only by the
affirmative vote of at least 80% of the voting power of the Corporation, except
as otherwise provided by law. Any proposal to amend or repeal, or adopt any
provisions inconsistent with, Article Tenth of the Certificate of Incorporation
shall require for approval the affirmative vote of at least 80% of the voting
power of the Corporation.
Section 10.2. Power of Directors. Subject to the right of
------------------
stockholders as provided in Section 10.1 of this Article X to adopt, amend or
repeal By-laws, By-laws may be adopted, amended or repealed by the Board of
Directors; provided, however, that Section 7.5 of these By-laws may not be
amended or repealed except with approval of the holders of 80% of the
outstanding common stock of the Corporation.
42
<PAGE>
EXHIBIT 3.4
REVISED 10-24-95
----------------
BY-LAWS
OF
SANTA ANITA OPERATING COMPANY
(a Delaware corporation)
ARTICLE I
Offices
Section 1.1. Registered Office. The registered office shall be in the
-----------------
City of Wilmington, County of New Castle, State of Delaware.
Section 1.2. Other Offices. The Corporation may also have offices at such
-------------
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
Meetings of Stockholders
Section 2.1. Place. All meetings of the stockholders for the election of
-----
directors shall be held at such place either within or without the State of
Delaware as
1
<PAGE>
shall be designated from time to time by the Board of Directors and stated in
the notice of the meeting. Meetings of stockholders for any other purpose may
be held at such time or place, within or without the State of Delaware, as shall
be stated in the notice of the meeting or in a duly executed waiver of notice
thereof.
Section 2.2. Annual Meetings. The annual meetings of stockholders shall
---------------
be held on the third Thursday in May of each year at 10 o'clock A.M. of said
day, the first such meeting to be held on the third Thursday in May 1981;
provided, however, that should said day fall upon a legal holiday, then any such
annual meeting of stockholders shall be held at the same time and place on the
next day thereafter ensuing which is a full business day. At such meetings
directors shall be elected, reports of the affairs of the Corporation shall be
considered, and any other business may be transacted which is within the powers
of the stockholders. If for any annual meeting the Board of Directors shall fix
a different day or hour, such action shall be deemed an amendment of this
Section 2.2 effective until the adjournment of that annual meeting sine die.
---- ---
Written notice of each annual meeting shall be given to each stockholder
entitled to vote, either personally or by mail or other means of written
communication, charges prepaid, addressed to such stockholder at
2
<PAGE>
his address appearing on the books of the Corporation or given by him to the
Corporation for the purpose of notice. If a stockholder gives no address,
notice shall be deemed to have been given him if sent by mail or other means of
written communication addressed to the place where the principal office of the
Corporation is situated, or if published at least once in some newspaper of
general circulation in the county in which said office is located. All such
notices shall be sent to each stockholder entitled thereto not less than ten nor
more than sixty days before each annual meeting. Such notices shall specify the
place, the day and the hour of such meeting and shall state such other matters
if any, as may be expressly required by statute.
Section 2.3. Special Meetings. Special meetings of the stockholders, for
----------------
any purpose or purposes whatsoever, may be called at any time by the Board of
Directors. Except in special cases where other express provision is made by
statute, notice of such special meetings shall be given in the same manner as
for annual meetings of stockholders. Notices of any special meeting shall
specify, in addition to the place, day and hour of such meeting, the general
nature of the business to be transacted.
Section 2.4. Business To Be Brought Before Meeting. In order to be
-------------------------------------
properly brought before any meeting
3
<PAGE>
of stockholders held pursuant to this Article II, business (including the
election of directors) must be (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors, (b)
otherwise properly brought before the meeting by or at the direction of the
Board of Directors, or (c) otherwise properly brought before the meeting by a
stockholder. In order for any such business to be properly brought before the
meeting by a stockholder, the stockholder must have given timely notice thereof
in writing to the Secretary of the Corporation. In order to be timely, a
stockholder's notice must be received at the principal executive offices of the
Corporation not less than 60 days nor more than 90 days prior to the meeting;
provided, however, that in the event that a meeting is called for a date other
than that specified in the By-laws, and less than 75 days' prior public
disclosure of such date is given, notice by the stockholder in order to be
timely must be received by the Secretary of the Corporation not later than the
close of business on the fifteenth (15) calendar day following the day on which
such public disclosure of the date of the meeting was made. If a stockholder
intends to nominate a candidate or candidates for director at any meeting of
stockholders, such stockholder's notice to the Secretary shall set forth the
name, age, address and principal occupation of each such nominee and the amount
and type of the Corporation's stock held by each such nominee, together
4
<PAGE>
with any additional information reasonably necessary to determine the
eligibility of each such nominee and any information required to be disclosed in
the solicitation of proxies in respect of each such nominee by Schedule 14A, as
amended from time to time, or other applicable Rules and Regulations of the
Securities and Exchange Commission. The notice to the Secretary shall also set
forth the name, address and the amount and type of beneficial ownership of the
Corporation's stock by the stockholder intending to nominate the candidate or
candidates identified in the notice to the Secretary. Any stockholder desiring
to bring any other business before any annual meeting of stockholders shall set
forth in such stockholder's notice to the Secretary (i) a brief description of
the business desired to be brought before the annual meeting and the reasons for
conducting such business at the meeting, (ii) the name and record address of the
stockholder proposing such business, (iii) the class and number of shares of the
Corporation's stock that are beneficially owned by such stockholder, and (iv)
any material interest of such stockholder in such business. In order to be
properly brought before any special meeting of stockholders (other than any
special meeting held for the purpose of electing directors), business must be
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board of Directors.
5
<PAGE>
Notwithstanding anything in the By-laws to the contrary, no business
(including the election of directors) shall be conducted at the meeting except
in accordance with the procedures set forth in this Section 2.4; provided,
however, that nothing in this Section 2.4 shall preclude or be deemed or
construed to preclude discussion by any stockholder of any business properly
brought before the annual meeting of stockholders.
The Chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the meeting
in accordance with the provisions of this Section 2.4, and if he should so
determine, he shall so declare to the meeting and any such business not properly
brought before the meeting shall not be transacted.
Section 2.5. List of Stockholders. The officer who has charge of the
--------------------
stock ledger of the Corporation shall prepare and make, at least ten days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, and showing the address of
each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a place
within the city where the meeting is to be held,
6
<PAGE>
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
Section 2.6. Quorum. The holders of a majority of the stock issued and
------
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute. If, however,
such quorum shall not be present or represented at any meeting of stockholders,
the stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented any business may be transacted which might have been transacted at
the meeting as originally noticed. If the adjournment is for more than thirty
days or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.
Section 2.7. Questions Before Meeting. When a quorum is present at any
------------------------
meeting, the vote of the holders of
7
<PAGE>
a majority of the stock having voting power present in person or represented by
proxy shall decide any question brought before such meeting unless the question
is one upon which by express provision of the statutes, of these By-laws or of
the Certificate of Incorporation, a different vote is required, in which case
such express provision shall govern and control the decision of such question.
Section 2.8. Action Without Meeting. Any action required or permitted to
----------------------
be taken by holders of stock of the Corporation must be taken at a meeting of
such holders and may not be taken by consent in writing.
Section 2.9. Waiver of Notice. Whenever notice is required to be given
----------------
under the Delaware Corporation Law or the Certificate of Incorporation or the
By-laws, a written waiver, signed by the person entitled to notice, whether
before or after the time stated therein, shall be deemed equivalent to notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the person attends a meeting for the express purpose of
objecting at the beginning of the meeting to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
stockholders, directors, or members of a committee of directors need be
specified in any written
8
<PAGE>
waiver of notice unless so required by the Certificate of Incorporation.
ARTICLE III
Directors
Section 3.1. Size of Board. The Board of Directors shall consist of nine
-------------
members, or as many as shall be determined from time to time by resolution of
the Board.
Section 3.2. Election of Directors. The directors shall be divided into
---------------------
three classes, designated Class I, Class II, and Class III, such classes to be
as nearly equal in number as possible. At the annual meeting of stockholders in
1986, directors of Class I shall be elected to hold office for a term expiring
at the next succeeding annual meeting, directors of Class II shall be elected to
hold office for a term expiring at the second succeeding annual meeting, and
directors of Class III shall be elected to hold office for a term expiring at
the third succeeding annual meeting. Thereafter at each annual meeting of
stockholders, directors shall be chosen for a term of three years to succeed
those whose terms then expire and shall hold office until the third following
annual meeting of stockholders and until the election of their respective
successors. Directors need not be stockholders.
9
<PAGE>
Section 3.3. Vacancies. Vacancies and newly created directorships
---------
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director, and the directors so chosen shall hold office for the
unexpired term of the vacant directorship, or, in the case of any increase in
the number of directors, as designated by the directors then in office,
consistent with the provisions of Section 3.2. If there are no directors in
office, then an election of directors may be held in the manner provided by
statute. If, at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole Board (as constituted immediately prior to any such increase), the
Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office.
No reduction of the authorized number of directors shall have the effect of
removing any director prior to the expiration of his term of office.
10
<PAGE>
Section 3.4. Powers. The business of the Corporation shall be managed by
------
its Board of Directors which may exercise all such powers of the Corporation and
do all such lawful acts and things as are not by statute or by the Certificate
of Incorporation or by these By-laws directed or required to be exercised or
done by the stockholders.
Section 3.5. Meetings. The Board of Directors of the Corporation may hold
--------
meetings, both regular and special, either within or without the State of
Delaware.
Section 3.6. First Meeting. The first meeting of each newly elected Board
-------------
of Directors shall be held immediately following the annual meeting of
stockholders at which such directors are elected and no notice of such meeting
shall be necessary to the newly elected directors in order legally to constitute
the meeting, provided a quorum shall be present; or the meeting may be held at
such time and place as shall be specified in a notice given as hereinafter
provided for special meetings of the Board of Directors, or as shall be
specified in a written waiver signed by all of the directors.
Section 3.7. Regular Meetings. Regular meetings of the Board may be held
----------------
without notice at such time and at such place as shall from time to time be
determined by the Board.
11
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Section 3.8. Special Meetings. Special meetings of the Board may be
----------------
called by the Secretary at the request of the Chairman of the Board or President
on two business days' notice to each director, either personally or by mail, by
telegram or by telephone; special meetings shall be called by the Chairman of
the Board or Secretary in like manner and on like notice on the written request
of two directors.
Section 3.9. Quorum. At all meetings of the Board a majority of the total
------
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the Board of Directors, except as may be
otherwise specifically provided by statute or by the Certificate of
Incorporation. If a quorum shall not be present at any meeting of the Board of
Directors, the directors present thereat may adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present.
Section 3.10. Conference Telephone. Unless otherwise restricted by the
--------------------
Certificate of Incorporation or these By-laws, members of the Board of Directors
(or any committee designated by the Board) may participate in a meeting of the
Board or committee by means of conference
12
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telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other.
Section 3.11. Unanimous Consent. Unless otherwise restricted by the
-----------------
Certificate of Incorporation or these By-laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board or committee.
Section 3.12. Committees. The Board of Directors may, by resolution
----------
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of two or more of the directors of the Corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. Any such committee, to the extent provided in the resolution, shall
have and may exercise the power of the Board of Directors in the management of
the business and affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it; provided, however,
that in the absence or disqualification of any member of such committee or
committees, the member or
13
<PAGE>
members thereof present at any meeting and not disqualified from voting, whether
or not he or they constitute a quorum, may unanimously appoint another member of
the Board of Directors to act at the meeting in the place of any such absent or
disqualified member.
Section 3.13. Minutes. Each committee shall keep regular minutes of its
-------
meetings and report the same to the Board of Directors when required.
Section 3.14. Fees and Compensation. Directors and members of committees
---------------------
may receive such compensation, if any, for their services, and such
reimbursement for expenses, as may be fixed or determined by resolution of the
Board.
ARTICLE IV
Notices
Section 4.1. Methods of Notice. Whenever, under the provisions of the
-----------------
Laws of the State of Delaware or of the Certificate of Incorporation or of these
By-laws, notice is required to be given to any director or stockholder, it shall
not be construed to mean personal notice, but notice may be given in writing, by
mail, addressed to such director or stockholder, at his address as it appears on
the records
14
<PAGE>
of the Corporation, with postage thereon prepaid, and such notice shall be
deemed to be given at the time when the same shall be deposited in the United
States mail. Notice to directors may also be given by telegram or telephone.
Section 4.2. Waiver. Whenever any notice is required to be given under
------
the provisions of the statutes or of the Certificate of Incorporation or of
these By-laws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
ARTICLE V
Officers
Section 5.1. Officers. The Officers of the Corporation shall be a
--------
Chairman of the Board, a President, a Secretary and a Treasurer. The
Corporation may also have, at the discretion of the Board of Directors, one or
more Vice Presidents, one or more Assistant Secretaries, one or more Assistant
Treasurers, and such other officers as may be appointed in accordance with the
provisions of Section 5.3 and Section 5.5 of this Article. The Board of
Directors may also choose, at its discretion, one or more Vice Chairmen of the
Board, who shall not constitute officers of the Corporation. One person may
hold two or more offices.
15
<PAGE>
Section 5.2. Election. The officers of the Corporation, except such
--------
officers as may be appointed in accordance with the provisions of Section 5.3 or
Section 5.5 of this Article, shall be chosen annually by the Board of Directors,
and each shall hold his office until he shall resign or shall be removed or
otherwise disqualified to serve, or his successor shall be elected and
qualified.
Section 5.3. Subordinate Officers, etc. The Board of Directors may
--------------------------
appoint, and may empower the Chairman of the Board to appoint, such other
officers as the business of the Corporation may require, each of whom shall hold
office for such period, have such authority and perform such duties as are
provided in the By-laws or as the Board of Directors may from time to time
determine.
Section 5.4. Removal and Resignation. Any officer may be removed, either
-----------------------
with or without cause, by the Board of Directors, at any regular or special
meeting thereof, or, except in the case of an officer chosen by the Board of
Directors, by any officer upon whom such power of removal may be conferred by
the Board of Directors.
Any officer may resign at any time by giving written notice to the Board of
Directors or to the Chairman of the Board, or to the Secretary of the
Corporation. Any such resignation shall take effect at the date of the receipt
of
16
<PAGE>
such notice or at any later time specified therein; and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
Section 5.5. Vacancies. A vacancy in any office because of death,
---------
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in the By-laws for regular appointments to such office.
Section 5.6. Salaries. The salaries and other compensation of all
--------
officers of the Corporation shall be fixed by the Board of Directors.
Section 5.7. Chairman of the Board. The Chairman of the Board shall
---------------------
preside at all meetings of the stockholders and all meetings of the Board of
Directors. He shall be an ex-officio member of all standing committees,
including the Executive Committee, if any, and shall have such other powers and
duties as may be prescribed by the Board of Directors or the By-laws.
Section 5.7A. Vice Chairman of the Board. In the absence of the Chairman
--------------------------
of the Board, the Vice Chairman of the Board designated by the Board of
Directors shall preside at meetings of the Board of Directors.
17
<PAGE>
Section 5.8. President. The President shall be the Chief Executive
---------
Officer of the Corporation and shall, subject to the control of the Board of
Directors, have general supervision, direction and control of the Corporation.
He shall be an ex-officio member of all standing committees, including the
Executive Committee, if any, shall have the general powers and duties of
management usually vested in the office of the chief executive officer of a
corporation, and shall have such other powers and perform such other duties as
from time to time may be prescribed for him by the Board of Directors or the By-
laws.
Section 5.9. Vice President. In the absence or disability of the Chairman
--------------
of the Board and the President, the Vice Presidents in order of their rank as
fixed by the Board of Directors or, if not ranked, the Vice President designated
by the Board of Directors, shall perform all the duties of the Chairman of the
Board and the President, and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the Chairman of the Board and the
President. The Vice Presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Directors or the By-laws.
Section 5.10. Secretary. The Secretary shall keep or cause to be kept, at
---------
the principal office or such
18
<PAGE>
other place as the Board of Directors may order, a book of minutes of all
meetings of directors and stockholders, with the time and place of holding,
whether regular or special, and, if special, how authorized, the notice thereof
given, the names of those present at directors' meetings, the number of shares
present or represented at stockholders' meetings, and the proceedings thereof.
The Secretary shall keep, or cause to be kept, at the principal office or at the
office of the Corporation's transfer agent, a share register, or a duplicate
share register, showing the names of the stockholders and their addresses, the
number and class of shares held by each, the number and date of certificates
issued for the same, and the number and date of cancellation of every
certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all the meetings
of the stockholders and of the Board of Directors required by the By-laws or by
law to be given, and he shall keep the seal of the Corporation in safe custody,
and shall have such other powers and perform such other duties as may be
prescribed by the Board of Directors or by the By-laws.
Section 5.11. Treasurer. The Treasurer shall keep and maintain, or cause
---------
to be kept and maintained, adequate and correct accounts of the properties and
business transactions of the Corporation, including accounts of its
19
<PAGE>
assets, liabilities, receipts, disbursements, gains, losses, capital, surplus
and shares. Any surplus, including earned surplus, paid-in surplus and surplus
arising from a reduction of stated capital, shall be classified according to
source and shown in a separate account. The books of account shall at all
reasonable times be open to inspection by any director.
The Treasurer shall deposit all moneys and other valuables in the name and
to the credit of the Corporation with such depositories as may be designated by
the Board of Directors. He shall disburse the funds of the Corporation as may
be ordered by the Board of Directors, shall render to the Chairman of the Board
and directors, whenever they request it, an account of all of his transactions
as Treasurer and of the financial condition of the Corporation, and shall have
such other powers and perform such other duties as may be prescribed by the
Board of Directors or the By-laws.
ARTICLE VI
Stock and Stock Certificates
Section 6.1. Right to Certificate. Every holder of stock in the
--------------------
Corporation shall be entitled to have a certificate, signed by or in the name of
the Corporation, by
20
<PAGE>
the Chairman of the Board of Directors or the President or a Vice President, and
by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant
Secretary of the Corporation, certifying the number of shares owned by him in
the Corporation.
Section 6.2. Statements Setting Forth Rights. If the Corporation shall be
-------------------------------
authorized to issue more than one class of stock or more than one series of any
class, the designations, preferences and relative, participating, optional or
other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and rights shall
be set forth in full or summarized on the face or back of the certificate which
the Corporation shall issue to represent such class or series of stock, provided
that,except as otherwise provided in Section 202 of the Corporation Law of
Delaware, in lieu of the foregoing requirements, there may be set forth on the
face or back of the certificate which the Corporation shall issue to represent
such class or series of stock, a statement that the Corporation will furnish
without charge to each stockholder who so requests the designations, preferences
and relative, participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations and restrictions of
such preferences and rights.
21
<PAGE>
Section 6.3 Facsimile Signatures. Any of or all the signatures on the
--------------------
certificate may be a facsimile. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent, or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent, or registrar at the date
of issue.
Section 6.4. Lost Certificates. Except as hereinafter in this section
-----------------
provided, no new certificate for shares shall be issued in lieu of an old one
unless the latter is surrendered and cancelled at the same time. The Board of
Directors may, however, in case any certificate for shares is lost, stolen,
mutilated or destroyed, authorize the issuance of a new certificate in lieu
thereof, upon such terms and conditions, including reasonable indemnification of
the Corporation, as the Board shall determine.
Section 6.5 Transfers of Stock.
------------------
(a) Subject to paragraphs (b), (c) and (d) of this Section 6.5, upon
surrender to any transfer agent of the Corporation of a certificate for shares
of the Corporation duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be
22
<PAGE>
the duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
(b) Beginning at the time that (A) the merger of Santa Anita Consolidated,
Inc. ("Santa Anita") into Santa Anita Realty Enterprises, Inc., a Delaware
corporation ("Realty"), and (B) the payment by Realty of the dividend in kind of
the shares of the Corporation (the "Distribution") shall have both occurred
(hereinafter called the "effective time of the restriction"), and continuing
thereafter until such time as the limitation on transfer provided for in the
Pairing Agreement between Realty and the Corporation shall be terminated in the
manner therein provided:
(i) The shares of common stock of the Corporation shall not be
transferable, and shall not be transferred on the books of the Corporation,
unless (1) a simultaneous transfer is made by the same transferor to the same
transferee, or (2) such transferor has previously arranged with Realty for the
transfer to the transferee, of a like number of shares of common stock of Realty
and such shares are paired with one another.
(ii) Except for certificates representing shares of common stock of Realty
referred to in subparagraph (vi) below, each certificate evidencing ownership of
shares of
23
<PAGE>
common stock of Realty (including certificates issued by Santa Anita) issued and
not cancelled prior to the effective time of the restriction shall be deemed to
evidence a like number of shares of common stock of the Corporation.
(iii) Except for certificates representing common stock of Realty referred
to in subparagraph (vi) below, any registered holder of a certificate evidencing
ownership of shares of common stock of Realty (including certificates issued by
Santa Anita) issued prior to the effective time of the restriction may, upon
request and presentation of said certificate to the Corporation's transfer
agent, obtain in substitution therefor a certificate or certificates registered
in such holder's name evidencing the same number of common shares of the
Corporation and a like number of shares of common stock of Realty.
(iv) A conspicuous legend shall be placed on the face of each certificate
evidencing ownership of shares of common stock of the Corporation issued after
the effective time of the restrictions, referring to the restrictions on
transfer set forth in the Corporation's By-laws.
(v) For purposes of this paragraph (b) only, the terms "common stock" and
"common shares" shall include preferred stock which is convertible into shares
of common stock.
24
<PAGE>
(vi) Notwithstanding the other provisions of this paragraph (b), any
stockholder whose ownership of the common stock of the Corporation at the
effective time of the restriction would be deemed, after application of the
attribution rules of the Internal Revenue Code of 1954 (the "Code"), to result
in Realty owning, directly or indirectly, more than 9.25% of the common stock of
the Corporation will not be subject to the restrictions imposed by this
paragraph (b) to the extent that such ownership would cause Realty, directly or
indirectly, to be deemed to own, after application of the attribution rules of
the Code, more than 9.25% of the total number of the outstanding shares of the
Corporation, provided that (1) a sufficient amount of the common stock of the
Corporation (or the right to receive such common stock) which would otherwise be
paired with stock of Realty is sold to third parties so that Realty, directly or
indirectly, after application of the attribution rules of the Code, will not own
in excess of 9.25% of the common stock of the Corporation, (2) all holders of
the unpaired shares enter into an agreement, satisfactory to the Boards of
Directors of Realty, the Corporation and Santa Anita, providing that such shares
not be transferable by sale or any other means, without arranging for such
shares to be paired with an equal number of shares of Realty, unless such sale
is made to the Corporation or Realty and (3) such stockholder and any transferee
of such stockholder executes a waiver of any claims he or she may have arising
out of the
25
<PAGE>
close business relationship between the Corporation and Realty and claims
arising out of conflicts of interest inherent in such business relationship.
The other provisions of this paragraph (b) shall apply to all shares of the
Corporation otherwise held by any stockholder unless they are specifically
exempted by this subparagraph (vi).
(c) If the Board of Directors shall at any time and in good faith be of
the opinion that direct or indirect ownership of shares of either common stock
or preferred stock, or both, of the Corporation has or may become concentrated
to an extent which would cause Realty to fail to qualify or be disqualified as a
real estate investment trust by virtue of Section 856(a)(5) and (6) of the Code,
or similar provisions of successor statutes, pertaining to the qualification of
Realty as a real estate investment trust, the Board of Directors shall have the
power (i) by lot or other means deemed equitable by them to call for purchase
from any stockholder of the Corporation such number of shares sufficient in the
opinion of the Board of Directors to maintain or bring the direct or indirect
ownership of shares of stock of the Corporation into conformity with the
requirements of said Section 856(a)(5) and (6) pertaining to Realty and (ii) to
refuse to register the transfer of shares of stock to any person whose
acquisition of such shares would, in the opinion of the Board of Directors,
result in Realty being unable to conform to the requirements of said
26
<PAGE>
Section 856(a)(5) and (6). The purchase price for the shares of stock purchased
pursuant hereto shall be equal to the fair market value of such shares as
reflected in the closing price for such shares on the principal stock exchange
on which such shares are listed or, if such shares are not listed, then the last
bid quotation for shares of stock as of the close of business on the date fixed
by the Board of Directors for such purchase or, if no quotation for the shares
is available, as determined in good faith by the Board of Directors. From and
after the date fixed for purchase by the Board of Directors, the holder of any
shares so called for purchase shall cease to be entitled to dividends, voting
rights and other benefits with respect to such shares excepting only the right
to payment of the purchase price fixed as aforesaid. In order to further assure
that ownership of the shares of stock does not become so concentrated, any
transfer of shares that would prevent Realty from continuing to be qualified as
a real estate investment trust by virtue of the application of Section 856(a)(5)
and (6) of the Code shall be void ab initio and the intended transferee of such
-- ------
shares shall be deemed never to have had an interest therein. If the foregoing
provision is determined to be void or invalid by virtue of any legal decision,
statute, rule or regulation, then the transferee of such shares shall be deemed
to have acted as agent on behalf of the Corporation in acquiring such shares and
to hold such shares on behalf of the Corporation. For purposes
27
<PAGE>
of determining whether the Corporation is in compliance with Section 856(a)(5)
and (6), Section 542(a)(2) and Section 544 of the Code, or similar provisions of
successor statutes, shall be applied.
(d) In addition to the requirements of subparagraph (c) above, if the
Board of Directors shall at any time and in good faith be of the opinion that
direct or indirect ownership of shares of either common stock or preferred
stock, or both, of the Corporation has or may become concentrated to an extent
which would cause any rent to be paid to Realty to fail to qualify or be
disqualified as rent from real property by virtue of Section 856(d)(2)(B) of the
Code, or similar provisions of successor statutes, pertaining to the
qualification of Realty as a real estate investment trust, the Board of
Directors shall have the power (i) by lot or other means deemed equitable by
them to call for purchase from any stockholder of the Corporation such number of
shares sufficient in the opinion of the Board of Directors to maintain or bring
the direct or indirect ownership of shares of stock of the Corporation into
conformity with the requirements of Section 856(d)(2)(B) pertaining to Realty
and (ii) to refuse to register the transfer of shares of stock to any person
whose acquisition of such shares would, in the opinion of the Board of
Directors, result in Realty being unable to conform to the requirements of said
Section 856(d)(2)(B). The purchase price for the shares of
28
<PAGE>
stock purchased pursuant hereto shall be equal to the fair market value of such
shares as reflected in the closing price for such shares on the principal stock
exchange on which such shares are listed, or if such shares are not listed, then
the last bid quotation for shares of stock, as of the close of business on the
date fixed by the Board of Directors for such purchase or, if no quotation for
the shares is available, as determined in good faith by the Board of Directors.
From and after the date fixed for purchase by the Board of Directors, the
holders of any shares so called for purchase shall cease to be entitled to
dividends, voting rights and other benefits with respect to such shares,
excepting only the right to payment of the purchase price fixed as aforesaid.
In order to further assure that ownership of the shares of stock does not become
so concentrated, any transfer of shares that would prevent Realty from
continuing to be qualified as a real estate investment trust by virtue of the
application of Section 856(d)(2)(B) of the Code shall be void ab initio and the
-- ------
intended transferee of such shares shall be deemed never to have had an interest
therein. If the foregoing provision is determined to be void or invalid by
virtue of any legal decision, statute, rule or regulation, then the transferee
of such shares shall be deemed to have acted as agent on behalf of the
Corporation in acquiring such shares and to hold such shares on behalf of the
Corporation. For purposes of determining whether this Corporation is in
compliance
29
<PAGE>
with Section 856(d)(2)(B), Section 856(d)(5) of the Code, or similar provisions
of successor statutes, shall be applied.
(e) The stockholders of the Corporation shall upon demand disclose to the
Board of Directors in writing such information with respect to their direct and
indirect ownership of the stock of the Corporation as the Board of Directors
deems necessary to determine whether Realty satisfies the provisions of Section
856(a)(5) and (6) and 856(d) of the Code and the regulations thereunder as the
same shall be from time to time amended, or to comply with the requirements of
any other taxing authority.
Section 6.6. Form of Consideration. In purchasing such shares from any
---------------------
shareholder in accordance with the foregoing provisions, the Corporation may pay
consideration in the form of cash or, at the option of the Board of Directors,
in the form of subordinated indebtedness of the Corporation. The principal
amount of such subordinated indebtedness shall be equal to the purchase price of
the shares (less amounts paid in cash, if any) and it shall have such other
terms as may be determined by the Board of Directors at the time of issuance.
Section 6.7. Record Date. In order that the Corporation may determine the
-----------
stockholders entitled to notice of or to vote at any meeting of stockholders or
any
30
<PAGE>
adjournment thereto, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
Section 6.8. Registered Stockholders. The Corporation shall be entitled
-----------------------
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall not
be bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person, whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of Delaware.
Section 6.9. Transfer Agents and Registrars. The Board of Directors may
------------------------------
appoint one or more corporate transfer agents and registrars.
31
<PAGE>
Section 6.10. Dividends. Dividends upon the capital stock of the
---------
Corporation may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock.
Section 6.11. Reserves. Before payment of any dividend, there may be set
--------
aside out of any funds of the Corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the directors shall think conducive to the interest of
the Corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
ARTICLE VII
Indemnification and Insurance
Section 7.1. Right to Indemnification. Each person who was or is a party
------------------------
or is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal represen-
32
<PAGE>
tative, is or was a director or officer of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action or inaction in an official
capacity or in any other capacity while serving as a director, officer, employee
or agent, shall be indemnified and held harmless by the Corporation to the
fullest extent permitted by the laws of Delaware, as the same exist or may
hereafter be amended, against all costs, charges, expenses, liabilities and
losses (including attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid or to be paid in settlement) reasonably incurred or
suffered by such person in connection therewith, and such indemnification shall
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of his or her heirs, executors and
administrators; provided, however, that, except as provided in Section 7.2
hereof, the Corporation shall indemnify any such person seeking indemnification
in connection with a proceeding (or part thereof) initiated by such person only
if such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation. The right to indemnification conferred in this Article shall
be a contract right and shall include the right to be paid by the Corporation
the expenses
33
<PAGE>
incurred in defending any such proceeding in advance of its final disposition;
provided, however, that, if the Delaware General Corporation Law requires, the
payment of such expenses incurred by a director or officer (and not in any other
capacity in which service was or is rendered by such person while a director or
officer, including, without limitation, service to an employee benefit plan) in
advance of the final disposition of a proceeding, shall be made only upon
delivery to the Corporation of an undertaking, by or on behalf of such director
or officer, to repay all amounts so advanced if it shall ultimately be
determined that such director or officer is not entitled to be indemnified under
this Section or otherwise. The Corporation may, by action of its Board of
Directors, provide indemnification to employees and agents of the Corporation
with the same scope and effect as the foregoing indemnification of directors and
officers.
Section 7.2. Right of Claimant to Bring Suit. If a claim under Section
-------------------------------
7.1 of this Article is not paid in full by the Corporation within thirty days
after a written claim has been received by the Corporation, the claimant may at
any time thereafter bring suit against the Corporation to recover the unpaid
amount of the claim and, if successful in whole or in part, the claimant shall
be entitled to be paid also the expense of prosecuting such claim. It shall be
a defense to any such action (other than an action brought to
34
<PAGE>
enforce a claim for expenses incurred in defending any proceeding in advance of
its final disposition where the required undertaking, if any is required, has
been tendered to the Corporation) that the claimant has failed to meet a
standard of conduct which makes it permissible under Delaware law for the
Corporation to indemnify the claimant for the amount claimed. Neither the
failure of the Corporation (including its Board of Directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is permissible
in the circumstances because he or she has met such standard of conduct, nor an
actual determination by the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) that the claimant has not met
such standard of conduct, shall be a defense to the action or create a
presumption that the claimant has failed to meet such standard of conduct.
Section 7.3. Non-Exclusivity of Rights. The right to indemnification and
-------------------------
the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Article shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of the Certificate of Incorporation, by-law, agreement, vote of
stockholders or disinterested directors or otherwise.
35
<PAGE>
Section 7.4. Insurance. The Corporation may maintain insurance, at its
---------
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any such expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under Delaware law.
Section 7.5. Expenses as a Witness. To the extent that any director,
---------------------
officer, employee or agent of the Corporation is by reason of such position, or
a position with another entity at the request of the Corporation, a witness in
any action, suit or proceeding, he or she shall be indemnified against all costs
and expenses actually and reasonably incurred by him or her or on his or her
behalf in connection therewith.
Section 7.6. Indemnity Agreements. The Corporation may enter into
--------------------
agreements with any director, officer, employee or agent of the Corporation
providing for indemnification to the full extent permitted by Delaware law.
36
<PAGE>
ARTICLE VIII
General Provisions
Section 8.1. Annual Reports. Not later than one hundred twenty (120) days
--------------
after the close of each fiscal year of the Corporation, the Board of Directors
shall mail a report of the business and operation of the Corporation during such
fiscal year to the stockholders. The report shall be in such form and have such
content as the Board deems proper. This report shall include a balance sheet
and a statement of income and surplus and a statement of changes in financial
position of the Corporation. Such financial statements shall be accompanied by
the report of an independent certified public accountant thereon.
Section 8.2. Quarterly Reports. Within 90 days after the close of each of
-----------------
the first three quarters of each fiscal year of the Corporation, the Board of
Directors shall send interim reports to the stockholders, having such form and
content as the Board of Directors deems proper.
Section 8.3. Fiscal Year. The fiscal year of the Corporation shall be
-----------
fixed by resolution of the Board of Directors.
37
<PAGE>
Section 8.4. Seal. The corporate seal shall have inscribed thereon the
----
name of the Corporation, the year of its organization and the words "Corporate
Seal, Delaware". The seal may be used by causing it or a facsimile thereof to
be impressed or affixed or reproduced or otherwise.
Section 8.5. Checks, Drafts, etc. All checks, drafts or other orders for
--------------------
payment of money, notes or other evidences of indebtedness, issued in the name
of or payable to the Corporation, shall be signed or endorsed by such person or
persons and in such manner as, from time to time, shall be determined by
resolution of the Board of Directors.
Section 8.6. Representation of Shares of Other Corporations. The Chairman
----------------------------------------------
of the Board, the President or any Vice President and the Secretary or Assistant
Secretary of this Corporation are authorized to vote, represent and exercise on
behalf of this Corporation all rights incident to any and all shares of any
other corporation or corporations standing in the name of this Corporation. The
authority herein granted to said officers to vote or represent on behalf of this
Corporation any and all shares held by this Corporation in any other corporation
or corporations may be exercised either by such officers in person or by any
other person authorized so to do by proxy or power of attorney duly executed by
said officers.
38
<PAGE>
Section 8.7. Employee Stock Purchase Plans. The Corporation may, upon
-----------------------------
terms and conditions herein authorized, provide and carry out an employee stock
purchase plan or plans providing for the issue and sale, or for the granting of
options for the purchase, of its unissued shares, or of issued shares purchased
or to be purchased or acquired, to employees of the Corporation or of any
subsidiary or to a trustee on their behalf. Such plan may provide for such
consideration as may be fixed therein, for the payment of such shares in
installments or at one time and for aiding any such employees in paying for such
shares by compensation for services or by loans from the Corporation or
otherwise. Any such plan before becoming effective must be approved or
authorized by the Board of Directors of the Corporation.
Such plan may include, among other things, provisions determining or
providing for the determination by the Board of Directors, or any committee
thereof designated by the Board of Directors, of: (a) eligibility of employees
(including officers and directors) to participate therein, (b) the number and
class of shares which may be subscribed for or for which options may be granted
under the plan, (c) the time and method of payment therefor, (d) the price or
prices at which such shares shall be issued or sold, (e) whether or not title to
the shares shall be reserved to the Corporation until full payment therefor, (f)
the effect of the death of an employee participating in the plan or
39
<PAGE>
termination of his employment, including whether there shall be any option or
obligation on the part of the Corporation to repurchase the shares thereupon,
(g) restrictions, if any, upon the transfer of the shares, and the time limits
and termination of the plan, (h) termination, continuation or adjustments of the
rights of participating employees upon the happening of specified contingencies,
including increase or decrease in the number of issued shares of the class
covered by the plan without receipt of consideration by the Corporation or any
exchange of shares of such class for stock or securities of another corporation
pursuant to a reorganization or merger, consolidation or dissolution of the
Corporation, (i) amendment, termination, interpretation and administration of
such plan by the Board of Directors or any committee thereof designated by the
Board of Directors, and (j) any other matters, not repugnant to law, as may be
included in the plan as approved or authorized by the Board of Directors or any
such committee.
ARTICLE IX
Amendments
Section 9.1. Power of Stockholders. New By-laws may be adopted or these
---------------------
By-laws may be amended or repealed by the stockholders only by the affirmative
vote of at least 80% of the voting power of the Corporation, except as
40
<PAGE>
otherwise provided by law. Any proposal to amend or repeal, or adopt any
provisions inconsistent with, Article Tenth of the Certificate of Incorporation
shall require for approval the affirmative vote of at least 80% of the voting
power of the Corporation.
Section 9.2. Power of Directors. Subject to the right of stockholders as
------------------
provided in Section 9.1 of this Article IX to adopt, amend or repeal By-laws,
By-laws may be adopted, amended or repealed by the Board of Directors; provided,
however, that Section 6.5 of these By-laws may not be amended or repealed except
with the approval of the holders of 80% of the outstanding common stock of the
Corporation.
41
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SANTA ANITA
REALTY ENTERPRISES, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<NAME> SANTA ANITA REALTY ENTERPRISES, INC.
<CIK> 0000314661
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 2,787,000
<SECURITIES> 2,801,000
<RECEIVABLES> 2,843,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 163,656,000
<DEPRECIATION> (57,648,000)
<TOTAL-ASSETS> 147,593,000
<CURRENT-LIABILITIES> 0
<BONDS> 101,490,000
<COMMON> 1,138,000
0
0
<OTHER-SE> 25,105,000
<TOTAL-LIABILITY-AND-EQUITY> 147,593,000
<SALES> 0
<TOTAL-REVENUES> 26,629,000
<CGS> 0
<TOTAL-COSTS> 5,758,000
<OTHER-EXPENSES> 46,159,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,258,000
<INCOME-PRETAX> (32,546,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (32,546,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (32,546,000)
<EPS-PRIMARY> (2.88)
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SANTA ANITA
OPERATING COMPANY AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<NAME> SANTA ANITA OPERATING COMPANY
<CIK> 0000313749
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 11,000
<SECURITIES> 4,686,000
<RECEIVABLES> 1,440,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,493,000
<PP&E> 45,805,000
<DEPRECIATION> (25,981,000)
<TOTAL-ASSETS> 29,302,000
<CURRENT-LIABILITIES> 13,975,000
<BONDS> 1,940,000
<COMMON> 1,127,000
0
0
<OTHER-SE> 8,743,000
<TOTAL-LIABILITY-AND-EQUITY> 29,302,000
<SALES> 0
<TOTAL-REVENUES> 57,214,000
<CGS> 0
<TOTAL-COSTS> 46,982,000
<OTHER-EXPENSES> 7,713,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 308,000
<INCOME-PRETAX> 2,211,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,211,000
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,211,000
<EPS-PRIMARY> 0.20
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