<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 March 31, 1996
[ ] 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
specified in its charter) as specified in its charter)
Delaware Delaware
- ----------------------------- -------------------------------
(State or other jurisdiction (State or other jurisdiction of
of incorporation or organization) incorporation or 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 executive (Address of principal executive
offices including zip code) offices including zip code)
(818) 574-5550 (818) 574-7223
- ----------------------------- -------------------------------
(Registrant's telephone (Registrant's telephone
number, including area code) number, 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 May 3, 1996 were:
Santa Anita Realty Enterprises, Inc. 11,383,000
Santa Anita Operating Company 11,270,500
<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 March 31, 1996 and
December 31, 1995 4
Combined Statements of Operations for the three months ended
March 31, 1996 and 1995 5
Combined Statements of Cash Flows for the three months ended
March 31, 1996 and 1995 6
SANTA ANITA REALTY ENTERPRISES, INC.
Consolidated Balance Sheets as of March 31, 1996 and
December 31, 1995 7
Consolidated Statements of Operations for the three months ended
March 31, 1996 and 1995 8
Consolidated Statements of Cash Flows for the three months ended
March 31, 1996 and 1995 9
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets as of March 31, 1996 and
December 31, 1995 10
Consolidated Statements of Operations for the three months ended
March 31, 1996 and 1995 11
Consolidated Statements of Cash Flows for the three months ended
March 31, 1996 and 1995 12
NOTES TO FINANCIAL STATEMENTS 13
MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 16
PART II. OTHER INFORMATION 20
SIGNATURES 21
</TABLE>
2
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC. AND
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
FORM 10-Q
FOR THE THREE MONTHS ENDED MARCH 31, 1996
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying balance sheets as of March 31, 1996 and December 31,
1995 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 ended
March 31, 1996 and 1995, and the related statements of cash flows for the three
months ended March 31, 1996 and 1995, were prepared by management and, except
for the balance sheet as of December 31, 1995, 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, 1995.
3
<PAGE>
THE SANTA ANITA COMPANIES
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
Real estate assets
Santa Anita Racetrack, less accumulated depreciation
of $20,723,000 and $20,216,000 $ 8,523,000 $ 9,030,000
Commercial properties, less accumulated depreciation
of $3,809,000 and $3,631,000 10,181,000 10,342,000
Commercial properties to be sold, less accumulated
depreciation of $16,737,000 27,669,000 27,337,000
Investments in and advances to unconsolidated joint
ventures 2,854,000 3,166,000
Real estate loans receivable 10,877,000 10,954,000
------------ ------------
60,104,000 60,829,000
Cash 7,131,000 11,355,000
Short-term investments, at cost (approximates market) 16,147,000 2,522,000
Accounts receivable 6,169,000 3,771,000
Prepaid expenses and other assets 7,006,000 6,494,000
Investment in Pacific Gulf Properties Inc. 14,512,000 12,967,000
Property, plant and equipment, less accumulated
depreciation of $26,725,000 and $24,968,000 17,915,000 19,233,000
------------ ------------
$ 128,984,000 $ 117,171,000
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Real estate loans payable $ 28,263,000 $ 28,389,000
Bank loans payable 17,525,000 22,685,000
Accounts payable 22,516,000 11,208,000
Other liabilities 17,948,000 16,967,000
Income taxes - 326,000
Dividends payable - 2,277,000
Deferred revenues 2,174,000 2,379,000
Deferred income taxes 1,317,000 1,239,000
------------- -------------
89,743,000 85,470,000
------------- -------------
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 shares 2,253,000 2,253,000
Additional paid-in capital 136,552,000 136,552,000
Unrealized investment holding gain 1,544,000 -
Unearned compensation expense (1,032,000) (1,209,000)
Retained earnings (deficit) (100,076,000) (105,895,000)
------------- -------------
39,241,000 31,701,000
------------- -------------
$ 128,984,000 $ 117,171,000
============= =============
</TABLE>
See accompanying notes.
4
<PAGE>
THE SANTA ANITA COMPANIES
COMBINED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
----------- -----------
(Restated)
<S> <C> <C>
Revenues
Horse racing $38,081,000 $36,841,000
Rental property 2,016,000 2,130,000
Interest and other 689,000 598,000
----------- -----------
40,786,000 39,569,000
----------- -----------
Costs and expenses
Horse racing operating costs 24,890,000 23,664,000
Rental property operating expenses 690,000 592,000
Depreciation and amortization 2,475,000 3,261,000
General and administrative 3,367,000 3,459,000
Interest and other 951,000 1,211,000
Losses from unconsolidated joint
ventures 339,000 602,000
----------- -----------
32,712,000 32,789,000
----------- -----------
Net income $ 8,074,000 $ 6,780,000
=========== ===========
Weighted average number of common shares
outstanding 11,270,500 11,143,853
=========== ===========
Net income per common share $ .72 $ .61
=========== ===========
Dividends declared per common share $ .20 $ .20
=========== ===========
</TABLE>
See accompanying notes.
5
<PAGE>
THE SANTA ANITA COMPANIES
COMBINED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
----------- -----------
(Restated)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 8,074,000 $ 6,780,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 2,475,000 3,261,000
Amortization of unearned compensation expense 177,000 -
Equity in losses of unconsolidated joint ventures 339,000 602,000
Equity in earnings from investment in
Pacific Gulf Properties Inc. - (186,000)
Deferred income taxes (316,000) 68,000
Net decrease in certain other assets (2,019,000) (19,000)
Net decrease in certain other liabilities 12,127,000 9,175,000
----------- -----------
Net cash provided by operating activities 20,857,000 19,681,000
----------- -----------
Cash flows from investing activities:
Payments received on loans receivable 77,000 51,000
Additions and improvements to real estate assets (349,000) (544,000)
Additions to property, plant and equipment (438,000) (842,000)
Additions to certain other assets (924,000) (2,335,000)
Dividends received from Pacific Gulf Properties Inc. in 1995 - 306,000
Investments in and advances to unconsolidated joint ventures (369,000) (740,000)
Capital distributions from unconsolidated joint ventures 341,000 577,000
----------- -----------
Net cash used in investing activities (1,662,000) (3,527,000)
----------- -----------
Cash flows from financing activities:
Proceeds from bank loans payable - 4,300,000
Repayment of real estate loans payable (126,000) (145,000)
Repayment of bank loans payable (5,160,000) (192,000)
Dividends paid (4,508,000) (4,458,000)
----------- -----------
Net cash used in financing activities (9,794,000) (495,000)
----------- -----------
Net decrease in cash and cash equivalents 9,401,000 15,659,000
Cash and cash equivalents at beginning of year 13,877,000 15,094,000
----------- -----------
Cash and cash equivalents at March 31, $23,278,000 $30,753,000
=========== ===========
</TABLE>
See accompanying notes.
6
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Real estate assets
Santa Anita Racetrack, less accumulated depreciation
of $20,723,000 and $20,216,000 $ 8,523,000 $ 9,030,000
Commercial properties, less accumulated depreciation
of $4,261,000 and $4,068,000 12,871,000 13,047,000
Commercial properties to be sold, less accumulated
depreciation of $18,085,000 27,984,000 27,652,000
Investments in and advances to unconsolidated joint ventures 2,854,000 3,166,000
Real estate loans receivable 10,877,000 10,954,000
------------ ------------
63,109,000 63,849,000
Cash 591,000 167,000
Accounts receivable 768,000 658,000
Prepaid expenses and other assets 6,568,000 5,726,000
Investment in Pacific Gulf Properties Inc. 14,512,000 12,967,000
------------ ------------
$ 85,548,000 $ 83,367,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Real estate loans payable $ 28,263,000 $ 28,389,000
Bank loans payable 16,000,000 20,950,000
Accounts payable 966,000 420,000
Other liabilities 4,974,000 5,274,000
Dividends payable - 2,277,000
Due to Operating Company 4,713,000 415,000
------------ ------------
54,916,000 57,725,000
------------ ------------
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 shares 1,138,000 1,138,000
Additional paid-in capital 118,881,000 118,881,000
Unrealized investment holding gain 1,544,000 -
Retained earnings (deficit) (90,931,000) (94,377,000)
------------ ------------
30,632,000 25,642,000
------------ ------------
$ 85,548,000 $ 83,367,000
============ ============
</TABLE>
See accompanying notes.
7
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
----------- -----------
(Restated)
<S> <C> <C>
Revenues
Rent from Racetrack $ 6,715,000 $ 6,478,000
Shopping Centers 1,013,000 1,112,000
Office Buildings 1,003,000 1,018,000
Interest and other 591,000 458,000
----------- -----------
9,322,000 9,066,000
----------- -----------
Costs and expenses
Shopping centers 277,000 241,000
Office buildings 413,000 351,000
Depreciation and amortization 733,000 1,202,000
General and administrative 893,000 759,000
Interest and other 944,000 1,120,000
Losses from unconsolidated joint ventures 339,000 602,000
----------- -----------
3,599,000 4,275,000
----------- -----------
Net income $ 5,723,000 $ 4,791,000
=========== ===========
Weighted average number of common shares
outstanding 11,383,000 11,256,353
=========== ===========
Net income (loss) per common share $ .50 $ .43
=========== ===========
Dividends declared per common share $ .20 $ .20
=========== ===========
</TABLE>
See accompanying notes.
8
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
------------ -----------
(Restated)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 5,723,000 $ 4,791,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 733,000 1,202,000
Equity in losses of unconsolidated joint ventures 339,000 602,000
Equity in earnings from investment in
Pacific Gulf Properties Inc. - (186,000)
Net increase in certain other assets (61,000) (239,000)
Net increase (decrease) in certain other liabilities 245,000 (530,000)
----------- -----------
Net cash provided by operating activities 6,979,000 5,640,000
----------- -----------
Cash flows from investing activities:
Payments received on loans receivable 77,000 51,000
Additions and improvements to real estate assets (349,000) (544,000)
Additions to certain other assets (924,000) (2,335,000)
Investments in and advances to unconsolidated
joint ventures (369,000) (740,000)
Capital distributions from unconsolidated
joint ventures 341,000 577,000
Dividends received from Pacific Gulf Properties Inc. in 1995 - 306,000
----------- -----------
Net cash used in investing activities (1,224,000) (2,685,000)
----------- -----------
Cash flows from financing activities:
Proceeds from bank loans payable - 4,300,000
Repayment of real estate loans payable (126,000) (145,000)
Repayment of bank loans payable (4,950,000) -
Increase (decrease) in due to Operating Company 4,298,000 (2,254,000)
Dividends paid (4,553,000) (4,503,000)
----------- -----------
Net cash used in financing activities (5,331,000) (2,602,000)
----------- -----------
Net increase in cash and cash equivalents 424,000 353,000
Cash at beginning of year 167,000 2,251,000
----------- -----------
Cash and cash equivalents at March 31, $ 591,000 $ 2,604,000
=========== ===========
</TABLE>
See accompanying notes.
9
<PAGE>
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash $ 6,540,000 $11,188,000
Short-term investments, at cost (approximates market) 16,147,000 2,522,000
Accounts receivable 5,401,000 3,113,000
Prepaid expenses and other assets 447,000 777,000
Due from Realty 4,713,000 415,000
----------- -----------
Total current assets 33,248,000 18,015,000
Investment in common stock of Realty 2,122,000 2,122,000
Property, plant and equipment, less accumulated
depreciation of $26,725,000 and $24,968,000 17,915,000 19,233,000
----------- -----------
$53,285,000 $39,370,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $21,550,000 $10,788,000
Other liabilities 12,974,000 11,693,000
Bank loans payable 888,000 868,000
Income taxes - 326,000
----------- -----------
Total current liabilities 35,412,000 23,675,000
Bank loans payable 637,000 867,000
Deferred revenues 2,174,000 2,379,000
Deferred income taxes 1,317,000 1,239,000
----------- -----------
39,540,000 28,160,000
----------- -----------
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 shares 1,127,000 1,127,000
Additional paid-in capital 20,736,000 20,736,000
Unearned compensation expense (1,032,000) (1,209,000)
Retained earnings (deficit) (7,086,000) (9,444,000)
----------- -----------
13,745,000 11,210,000
----------- -----------
$53,285,000 $39,370,000
=========== ===========
</TABLE>
See accompanying notes.
10
<PAGE>
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Revenues
Wagering commissions $27,354,000 $26,384,000
Admission related 10,727,000 10,457,000
Interest and other 186,000 162,000
----------- -----------
38,267,000 37,003,000
----------- -----------
Costs and expenses
Horse racing operating costs 24,890,000 23,664,000
Depreciation and amortization 1,757,000 2,102,000
General and administrative 2,474,000 2,700,000
Interest 73,000 91,000
Rental expense to Realty 6,715,000 6,478,000
----------- -----------
35,909,000 35,035,000
----------- -----------
Net income $ 2,358,000 $ 1,968,000
=========== ===========
Weighted average number of common shares
outstanding 11,270,500 11,143,853
=========== ===========
Net income (loss) per common share $ .21 $ .18
=========== ===========
</TABLE>
See accompanying notes.
11
<PAGE>
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,358,000 $ 1,968,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,757,000 2,102,000
Amortization of unearned compensation expense 177,000 -
Deferred income taxes (316,000) 68,000
Net decrease in certain other assets (1,958,000) 220,000
Net decrease in certain other liabilities 11,905,000 9,728,000
----------- -----------
Net cash provided by operating activities 13,923,000 14,086,000
----------- -----------
Cash flows from investing activities:
Additions to property, plant and equipment (438,000) (842,000)
----------- -----------
Cash flows from financing activities:
Repayment of bank loans payable (210,000) (192,000)
(Increase) decrease in due from Realty (4,298,000) 2,254,000
----------- -----------
Net cash (used in) provided by financing
activities (4,508,000) 2,062,000
----------- -----------
Net decrease in cash and cash equivalents 8,977,000 15,306,000
Cash and cash equivalents at beginning of year 13,710,000 12,843,000
----------- -----------
Cash and cash equivalents at March 31, $22,687,000 $28,149,000
=========== ===========
</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 operating revenues associated with
thoroughbred horse racing at Santa Anita Racetrack on a daily basis, except for
season admissions which 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 financial
position, results of operations and cash flows have been included.
NOTE 2 - DISPOSITION OF NON-CORE REAL ESTATE ASSETS
Effective January 1, 1996, Realty adopted Financial Accounting
Standard ("FAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of". FAS No. 121 requires that
impairment losses be recorded on long-lived assets used in operations when
events or changes in circumstances indicate that the undiscounted cash flows to
be generated by these assets are less than their carrying amount. FAS No. 121
also requires that long-lived assets to be disposed of be reported at the lower
of their carrying amount or fair value, less cost to sell.
During 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 nonrecurring charge of $38,500,000.
In accordance with FAS No. 121, no depreciation was recorded in the three months
ended March 31, 1996 relating to the non-core real estate assets. The three
months ended March 31, 1996, includes income of $340,000 relating to the non-
core real estate assets.
NOTE 3 - INVESTMENT IN PACIFIC GULF PROPERTIES INC.
As of March 31, 1996 and December 31, 1995, Realty owned 784,419
shares of Pacific Gulf Properties Inc. ("Pacific") common stock and, effective
January 1, 1996, accounted for its investment under the cost method of
accounting. Previously, Realty accounted for its investment under the equity
method of accounting. Realty changed its method of accounting since it
determined it did not have the ability to exercise significant influence. The
closing price of Pacific's common stock, on the American Stock Exchange, on the
last trading day in March 1996 was $18.50 per share, resulting in an unrealized
holding gain of $1,544,000, which has been excluded from earnings and reported
as a separate component of shareholders' equity.
On February 2, 1996, Realty notified Pacific of Realty's intent to
sell the Pacific shares in an orderly manner pursuant to privately negotiated or
open market transactions. Realty also exercised its right to have Pacific
register such shares pursuant to a Registration Rights Agreement dated as of
February 1, 1994.
On March 28, 1996, Pacific filed a shelf registration statement with
the Securities and Exchange Commission covering the proposed offering of up to
$125 million of common and preferred shares including the 784,419 shares owned
by Realty. The registration statement has not yet become effective.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 4 - INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES
Realty's investments in unconsolidated joint ventures include
investments in the following commercial real estate ventures at March 31, 1996:
<TABLE>
<CAPTION>
NAME OWNERSHIP PROJECT
---- ---------- -------
<S> <C> <C>
Anita Associates 50% Regional mall
H-T Associates 50% Regional mall
Joppa Associates 33-1/3% Retail
</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.
During the 1995 fourth quarter, Realty reevaluated its consolidation
policy with respect to 50% owned joint ventures that had been previously
consolidated. Realty determined that it did not have sufficient involvement in
these joint ventures to warrant consolidation and reported these joint ventures
on the equity method at December 31, 1995. All prior period financial statements
and disclosures have been restated to conform to this presentation. The
restatement had no effect on reported net income for the three months ended
March 31, 1995 or shareholder' equity as of March 31, 1995, but did have the
effect of reducing Realty's assets and liabilities by $60,982,000 at March 31,
1995, and of reducing Realty's revenues and expenses by $2,851,000 for the three
months ended March 31, 1995.
Combined condensed financial statement information for unconsolidated
joint ventures as of March 31, 1996 and December 31, 1995, and for the three
months ended March 31, 1996 and 1995, is as follows (unaudited except for
financial statement information as of December 31, 1995):
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
------------ -------------
<S> <C> <C>
Real estate assets $262,947,000 $ 258,952,000
============ =============
Liabilities
Secured real estate loans $242,135,000 $242,332,000
Other 5,881,000 5,515,000
------------ -------------
$248,016,000 $ 247,847,000
============ =============
Partners' equity
Realty $ 7,673,000 $ 6,157,000
Others 7,258,000 4,948,000
------------ -------------
$14,931,000 $ 11,105,000
============ =============
THREE MONTHS ENDED MARCH 31,
1996 1995
------------ -----------
(Restated)
Revenues $ 9,022,000 $ 8,350,000
============ =============
Net Loss
Realty $ (339,000) $ (602,000)
Others (847,000) (1,261,000)
------------ -------------
$ (1,186,000) $ (1,863,000)
============ =============
</TABLE>
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5 - RECENT DEVELOPMENTS
On April 29, 1996, Realty withdrew its Specific Plan for the
development of an Entertainment Center on underutilized land at the Santa Anita
Racetrack, due to the unfavorable conditions that were likely to be imposed on
the Specific Plan by the City of Arcadia. Realty is continuing to evaluate
alternative initiatives with respect to development of the property. At March
31, 1996, "Prepaid Expenses and Other Assets" in the Realty Balance Sheet
includes $4,254,000 of Entertainment Center development costs associated with
entitlement, planning and leasing activities.
15
<PAGE>
ITEM 2. MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
SANTA ANITA REALTY ENTERPRISES, INC.
The following narrative discusses Realty's results of operations for
the three months ended March 31, 1996 and 1995, together with liquidity and
capital resources as of March 31, 1996.
RESULTS OF OPERATIONS - FIRST QUARTER 1996 COMPARED WITH FIRST QUARTER
1995
Realty's revenues are derived principally from the rental of real
property. Total revenues for the three months ended March 31, 1996 were
$9,322,000 compared with $9,066,000 for the three months ended March 31, 1995 an
increase of 2.8%. The higher 1996 revenues were due primarily to an increase in
Santa Anita Racetrack rental revenues.
The most significant source of rental revenue is the lease of Santa
Anita Racetrack. Racetrack rental revenues for 1996 were $6,715,000, an increase
of 3.7% from revenues of $6,478,000 in 1995 The increase in rental revenues
resulted primarily from an increase in the number of race days.
Costs and expenses for 1996 were $3,599,000, a decrease of 15.8% from
costs and expenses of $4,275,000 in 1995. The decrease resulted primarily from
decreases in depreciation and amortization expense of $469,000, interest and
other expense of $176,000 and loss from unconsolidated joint ventures of
$263,000. The decrease in depreciation and amortization expense was due to no
depreciation expense being taken on the assets held for sale, which treatment is
in accordance with FAS No. 121. The decrease in interest expense is due to the
payoff of the mortgage loan on the Santa Ana office building in November 1995.
The decrease in loss from unconsolidated joint ventures was due primarily to
increased tenant rental income and decreased interest expense.
LIQUIDITY AND CAPITAL RESOURCES
Realty has funds available from a combination of short- and long-term
sources. Short-term sources included cash of $591,000 at March 31, 1996.
The increase in cash for the three months ended March 31, 1996 was
$424,000, compared with an increase in cash of $353,000 for the three months
ended March 31, 1995. The comparative increase in cash of $71,000 was
attributable to an increase of $1,339,000 in cash provided by operating
activities and a decrease of $1,461,000 in cash used in investing activities,
partially offset by an increase of $2,729,000 in cash used in financing
activities.
The increase in cash provided by operating activities of $1,025,000
was due primarily to an increase in Santa Anita Racetrack rental revenues of
$237,000, due to an increase in the number of race days and to an increase in
other liabilities, primarily accounts payable and accrued liabilities, of
$245,000 in 1996 compared with a decrease in other liabilities, primarily
accounts payable and accrued liabilities, of $775,000 in 1995.
The decrease in cash used in investing activities of $1,775,000 in
1996 was due primarily to a decrease of $1,411,000 in additions to certain other
assets, primarily the purchase of the option on the Bell casino in 1995,
partially offset by an increase in expenditures associated with development of
the Santa Anita Entertainment Center, to a decrease of $195,000 in capital
expenditures on real estate assets, and to a decrease of $135,000 in investments
in unconsolidated joint ventures net of distributions to unconsolidated joint
ventures.
16
<PAGE>
ITEM 2. MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The increase in cash used in financing activities of $2,729,000 in
1996 was due primarily to repayment of borrowings under the revolving credit
agreement of $4,950,000 in 1996, compared with additional borrowings under the
revolving credit agreement of $4,300,000 in 1995 and to an increase in
intercompany payable of $4,298,000 in 1996, compared with a decrease of
$2,254,000 in 1995.
Realty's investment in Pacific common stock was carried at $14,512,000
at March 31, 1996. Pacific currently pays an annual dividend of $1.60 per share
which would result in annual dividend payments to Realty of $1,255,000.
In January 1996, Realty's revolving credit agreement with a commercial
bank was extended to June 30, 1996 and available borrowings were reduced to
$20,000,000. At March 31, 1996, Realty had borrowed $16,000,000 under this
facility. 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%. Realty
is in discussions with the commercial bank and expects the credit agreement to
be extended through December 31, 1996. Realty's Racetrack rental revenues have
been pledged as collateral under the credit agreement.
The revolving credit agreement contains a restriction on the payment
of dividends to the lesser of $.80 per share or $9,200,000 in any twelve-month
period. Realty's current dividend policy is in compliance with this dividend
restriction. Additionally, at March 31, 1996, Realty was in compliance with the
other financial ratio and maintenance restrictions.
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
The following narrative discusses Operating Company's results of
operations for the three months ended March 31, 1996 and 1995 together with
liquidity and capital resources as of March 31, 1996.
RESULTS OF OPERATIONS - FIRST QUARTER 1996 COMPARED WITH FIRST QUARTER
1995
Operating Company derives its revenues from thoroughbred horse racing
activities. Horse racing revenues in the first quarter of 1996 were $38,081,000,
up 3.4% from $36,841,000 in 1995, primarily due to an increase in the number of
race days.
In the first quarter of 1996, live thoroughbred horse racing at Santa
Anita Racetrack totaled 66 days compared with 64 days in the same period last
year. Total and average daily on-track attendance at the live racing events in
the first quarter of 1996 were down 2.2% and 5.1% from the comparable year ago
period. Total and average daily wagering in the first quarter of 1996 were up
8.5% and 5.1% compared with the same period last year. In the first quarter of
1996 compared with the same period last year: total on-track wagering increased
by 0.1% while average daily wagering decreased 3.0%; total wagering at Southern
California satellite locations increased 0.2% while average daily wagering
decreased 2.8%; total and average daily wagering at out-of-state locations
increased 36.8% and 32.7%; and total and average daily wagering at Northern
California locations decreased 2.4% and 5.4%.
Management anticipates that the movement from on-track attendance and
wagering to off-site is likely to continue. The growth rate in off-site wagering
is dependent primarily upon such factors as Operating Company's ability to
access new markets and the removal of various legal barriers which inhibit entry
into such markets.
17
<PAGE>
ITEM 2. MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS - FIRST QUARTER 1996 COMPARED WITH FIRST QUARTER
1995 (CONTINUED)
Horse racing operating costs in the first quarter of 1996 were
$24,890,000 (or 65.4% of horse racing revenues) compared with $23,664,000 (or
64.2% of horse racing revenues) in the same period last year. The operating
margin decline in the first quarter of 1996 compared with the same period last
year was primarily due to a refinement of Operating Company's method of
determining annual fixed costs and charging those costs and expenses against
income when thoroughbred horse racing revenues are recognized.
Depreciation expense in the first quarter of 1996 was $1,757,000,
$345,000 lower than the $2,102,000 in the comparable period last year. The 1995
depreciation expense includes an accelerated depreciation charge of $432,000 on
the Santa Anita Racetrack turf course, which was replaced in April 1995.
General and administrative expenses were $2,474,000 in the first
quarter of 1996, a decrease of 8.4% from the $2,700,000 in the comparable period
last year due to lower administrative expenses associated with thoroughbred
horse racing in 1996. Interest expense decreased to $73,000 in the first quarter
of 1996 from $91,000 in the first quarter of 1995.
Rental expense to Realty was $6,715,000 in the first quarter of 1996
compared with $6,478,000 in the same period last year. The increase in rental
expense of 3.7% was due to the increase in total wagering. Under the lease terms
between LATC and Realty, 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.
Due to the revenue and expense items previously discussed, Operating
Company reported net income in the first quarter of 1996 of $2,358,000 or $.21
per share, compared with net income of $1,968,000 or $.18 per share for the same
period in 1995.
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 March 31, 1996, Operating Company's sources of liquidity included
cash and short-term investments of $22,687,000, together with a verbal
commitment of Realty to provide up to $10,000,000 in short-term borrowings. In
addition, Realty has guaranteed an Operating Company capital lease of
$1,525,000. 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 months ended March 31, 1996, short-term investments
earned interest income of $162,000.
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 un-cashed winning pari-mutuel
tickets payable to the public.
Operating Company generated $163,000 less cash from operations in the
first quarter of 1996 compared with the same period last year. Net cash provided
by operating activities was $13,923,000 in 1996 compared with $14,086,000 in
1995. The decrease in cash from operations was primarily due to the payment of
California Franchise Taxes and the non cash charge resulting from the
amortization of unearned compensation expenses partially offset by the increase
in net income.
18
<PAGE>
ITEM 2. MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
Net cash used in investment activities was $438,000 in the first
quarter of 1996 compared with $842,000 in the same period last year. The
$404,000 decrease in cash used in investment activities was attributable to a
lower level of capital improvements at Santa Anita Racetrack.
Net cash used in financing activities was $4,508,000 in the first
quarter of 1996 compared with net cash provided by financing activities of
$2,062,000 in the same period last year. In the first quarter of 1996, Operating
Company prepaid its rental payments due to Realty.
19
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC. AND
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1996
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this report:
<TABLE>
<CAPTION>
Exhibit
Number
-------
<S> <C>
10-1 Letter dated March 28, 1996 amending Employment Agreement of Stephen
F. Keller
10-2 Letter dated March 29, 1996 amending Employment Agreement of Sherwood
C. Chillingworth
10-3 Employment Agreement between Santa Anita Realty Enterprises, Inc. and
William C. Baker dated as of April 1, 1996
10-4 Nonstatutory Stock Option Agreement between Santa Anita Realty
Enterprises, Inc. and William C. Baker dated as of April 1, 1996
(incorporated by reference to the appendix to the revised definitive
Joint Proxy Statement of Santa Anita Operating Company and Santa Anita
Realty Enterprises, Inc., dated April 8, 1996)
10-5 Nonstatutory Stock Option Agreement between Santa Anita Realty
Enterprises, Inc. and William C. Baker dated as of April 1, 1996
(incorporated by reference to the appendix to the revised definitive
Joint Proxy Statement of Santa Anita Operating Company and Santa Anita
Realty Enterprises, Inc., dated April 8, 1996)
10-6 Resignation and General Release Agreement between Santa Anita Realty
Enterprises, Inc. and Frederick B. Cordova, III dated April 30, 1996
27(a) Financial Data Schedule for Santa Anita Realty Enterprises, Inc.
27(b) Financial Data Schedule for Santa Anita Operating Company
</TABLE>
(b) Reports on Form 8-K. There were no reports on Form 8-K filed during
the quarter ended March 31, 1996.
20
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Realty and Operating Company have duly caused this report
to be signed on their behalf by the undersigned, thereunto duly authorized.
SANTA ANITA REALTY ENTERPRISES, INC. SANTA ANITA OPERATING COMPANY
By: /s/ WILLIAM C. BAKER By: /s/ STEPHEN F. KELLER
------------------------------- -------------------------------
William C. Baker Stephen F. Keller
Chairman of the Board and Chairman of the Board, President
Chief Executive Officer and Chief Executive Officer
(Principal Executive Officer) (Principal Executive Officer)
Date: May 10, 1996 Date: May 10, 1996
By: /s/ BRIAN L. FLEMING By: /s/ RICHARD D. BRUMBAUGH
------------------------------- -------------------------------
Brian L. Fleming Richard D. Brumbaugh
Executive Vice President and Vice President-Finance and
Chief Financial Officer Chief Financial Officer
(Principal Financial and (Principal Financial and
Accounting Officer) Accounting Officer)
Date: May 10, 1996 Date: May 10, 1996
21
<PAGE>
EXHIBIT 10.1
[LOGO OF SANTA ANITA]
SANTA ANITA OPERATING COMPANY
SANTA ANITA REALTY ENTERPRISES, INC.
285 West Huntington Drive
P.O. Box 60014
Arcadia, California 91066-6014
Telephone: (818) 574-7223
FAX: (818) 446-9565
STEPHEN F. KELLER
Chairman of the Boards
March 28, 1996
Mr. Thomas P. Mullaney
General Partner
Matthews, Mullaney & Co.
9454 Wilshire Blvd., Suite 900
Beverly Hills, CA 90212
Re: My Employment Agreement
Dear Tom:
This letter confirms certain understandings with respect to the impact
under my Employment Agreement of the reorganization that is currently taking
place with respect to the compensation and duties of certain executive officers
of Santa Anita Operating Company and Santa Anita Realty Enterprises, Inc.
I consent to the reduction in my base compensation that is proposed as part
of this reorganization. Accordingly, I agree that the reduction does not
constitute "Good Reason" for termination within the meaning of Section V.E.4 of
my Employment Agreement. I further agree that any actions that make up the
reorganization (including the creation of two essentially co-equal chief
executive officers) shall not be considered to constitute a material diminution
in my position, authority, duties, or responsibilities to the Santa Anita
Companies (including Operating Company), so that any such actions do not
constitute "Good Reason" within the meaning of Section V.E.4 of my Employment
Agreement.
Notwithstanding the preceding paragraph, Operating Company will agree that,
for the purpose of computing any severance payment that I may become entitled to
under Section V.E.3 of my Employment Agreement, my base compensation shall be
treated as $400,000.
Finally, this letter confirms my understanding that the Compensation
Committee will restructure the annual incentive program that is now available to
me so that the maximum bonus opportunity will be 100% of base compensation,
rather than 50% of base compensation. This restructuring will apply to my bonus
opportunity for 1996.
<PAGE>
[LOGO OF SANTA ANITA]
Mr. Thomas P. Mullaney
March 28, 1996
Page Two
Finally, although I will remain as a director of Realty, this letter
constitutes my resignation as Chairman of the Board of Directors of Santa Anita
Realty Enterprises, Inc.
If this letter meets with your understanding, I suggest it be placed on the
agenda for the next Compensation Committee meeting and, provided that the
Compensation Committee agrees with the arrangements in this letter, they be
brought before the Board of Directors for approval. If the Board then approves
this letter, Operating Company would indicate its agreement by signing and
retaining a copy of this letter to me.
Very truly yours,
/s/ Stephen F. Keller
Stephen F. Keller
SFK:br
APPROVED:
SANTA ANITA OPERATING COMPANY
/s/ Thomas P. Mullaney
- ---------------------------------------
Title: Chairman Compensation Committee
-------------------------------
<PAGE>
EXHIBIT 10.2
[LOGO OF SANTA ANITA]
SANTA ANITA REALTY ENTERPRISES, INC.
A Real Estate Investment Trust
March 29, 1996
Mr. William C. Baker
Chairman and Chief Executive Officer
Santa Anita Realty Enterprises, Inc.
301 West Huntington Drive
Suite 405
Arcadia, California 91007
RE: My Employment Agreement
-----------------------
Dear Bill:
This letter confirms certain understandings with respect to the impact
under my Employment Agreement of the reorganization that is now taking place
with respect to the duties of certain executive officers of Santa Anita Realty
Enterprises, Inc. As part of this reorganization, I consent to the change in my
title from Chief Executive Officer of Santa Anita Realty to Executive Vice-
President of Realty. I will continue to serve as Vice Chairman of the Board. I
further understand that one of your first responsibilities, as the incoming
Chief Executive Officer of Realty, will be to review the division of
responsibilities among the Realty officers. Accordingly, I understand that
during the remaining term of my Employment Agreement (that is, until June 30,
1996) various changes in my duties or responsibilities may take place as part of
this process.
This letter is intended to confirm my agreement that none of the
actions described in the preceding paragraph will constitute my constructive
termination under the Employment Agreement. Moreover, although these events
constitute "Good Reason" within the meaning of Section VI.D.4 of my Employment
Agreement, I hereby waive any right, if I terminate during the term of my
Employment Agreement, to treat my
301 W. Huntington Drive, Suite 405 * P.O. BOX 60025 * Arcadia, CA 91066
Telephone: (818) 574-5550 * FAX: (818) 574-5997
<PAGE>
[LOGO OF SANTA ANITA]
Mr. William C. Baker
Page Two
March 29, 1996
termination as one for "Good Reason" because of any change in my position,
authority, duties, or responsibilities.
In preparing this letter, I am aware of the fact that you and the
other directors of Realty are relying upon the waivers contained in this letter
as part of the process that is now taking place to restructure certain
responsibilities affecting the operation of Santa Anita Realty Enterprises,
Inc.
Very truly yours,
/s/ Sherwood C. Chillingworth
Sherwood C. Chillingworth
SCC:dc
<PAGE>
EXHIBIT 10.3
Employment Agreement
--------------------
This Employment Agreement (the "Agreement") is entered into by and between
Santa Anita Realty Enterprises, Inc. (the "Company") and William C. Baker (the
"Executive"), as of the 1st day of April 1996.
I. RECITALS.
--------
WHEREAS, the Executive serves on the Company's Board of Directors; and
WHEREAS, the Company desires to employ the Executive as its Chief Executive
Officer; and
WHEREAS, the Company desires that the Company's Chief Executive Officer
serve as Chairman of the Company's Board of Directors; and
WHEREAS, the Board of Directors has elected the Executive Chairman of the
Company's Board of Directors.
NOW, THEREFORE, the Company and the Executive desire to set forth in this
Agreement the terms and conditions of the Executive's employment with the
Company.
II. EMPLOYMENT.
----------
The Company hereby employs the Executive and the Executive hereby accepts
such employment, upon the terms and conditions hereinafter set forth, from April
1, 1996, to and including March 31, 1998. This Agreement is subject to renewal
as set forth in Section VI below.
III. DUTIES.
------
A. The Executive shall serve during the course of his employment as Chief
Executive Officer of the Company, and shall have such duties and
responsibilities as are customarily required of such officer and as the Board of
Directors of the Company shall determine from time to time. During his tenure as
the Chief Executive Officer, the Company's headquarters shall be in Southern
California and Executive shall discharge his duties through services primarily
performed in the Southern California area.
B. The Executive agrees to devote substantially all of his time, energy
and ability to the business of the Company. Nothing herein shall prevent the
Executive, upon approval of
1
<PAGE>
the Board of Directors of the Company, from serving as a director or trustee of
other corporations or businesses which are not in competition with the business
of the Company or in competition with any present or future affiliate of the
Company.
C. Nothing herein shall prevent the Executive from investing in real
estate for his own account or from becoming a partner or a stockholder in any
corporation, partnership or other venture not in competition with the business
of the Company or in competition with any present or future affiliate of the
Company.
D. For the term of this Agreement, the Executive shall report to the
Board of Directors of the Company or its designee.
IV. COMPENSATION.
------------
A. The Company shall pay the Executive a base salary at the rate of
$300,000 per year. Such salary shall be earned semimonthly and shall be payable
in periodic installments no less frequently than semimonthly in accordance with
the Company's customary practices. Amounts payable shall be reduced by standard
withholding and other authorized deductions. The Company will review the
Executive's salary at least annually. The Company may in its discretion increase
the Executive's salary but may not reduce it during the time he serves as Chief
Executive Officer of the Company.
B. Stock Options. The effectiveness of this Agreement is contingent upon
-------------
the Executive's being granted certain stock options, effective April 1, 1996,
which agreements are attached hereto as Exhibits A, B, and C. The grant of these
options is, in part, contingent upon shareholder approval. The Company shall
notify the Executive promptly in writing of the shareholders' approval of the
options.
C. Annual Bonus, Incentive, Savings and Retirement Plans. The Executive
-----------------------------------------------------
shall be entitled to participate in all annual bonus, incentive, savings and
retirement plans, practices, policies and programs applicable generally to other
peer executives of the Company. At the end of each calendar year during the term
of this Agreement, the Executive may, in the Board of Directors' sole
discretion, earn an annual bonus in an amount up to 100% of the Executive's
annual salary for such calendar year. For calendar year 1996, the Executive's
bonus, if any, shall be prorated in proportion to the Executive's period of
service with the Company. In determining bonus and incentive awards, the Board
of Directors will consider the Executive's success in accomplishing goals
2
<PAGE>
with respect to the Company which have been established by the Compensation
Committee in consultation with the Executive.
D. Vehicle. The Company shall lease a vehicle for the Executive's use. In
-------
lieu thereof, the Company may pay the Executive a reasonable vehicle allowance
or lease a vehicle from the Executive for his use (subject to any required
withholding) in accordance with the Company's customary practices.
E. Club Membership Dues. The Company shall reimburse the Executive
--------------------
promptly for all reasonable club membership dues incurred by him in support of
his role in promoting the best interests of the Company.
F. Welfare Benefit Plans. The Executive and/or his family, as the case may
---------------------
be, shall be eligible for participation in and shall receive all benefits under
welfare benefit plans, practices, policies and programs provided by the Company
(including, without limitation, medical, prescription, dental, disability,
salary continuance, employee life, group life, accidental death and travel
accident insurance plans and programs) to the extent applicable generally to
other peer executives of the Company.
G. Expenses. The Executive shall be entitled to receive prompt
--------
reimbursement for all reasonable employment expenses incurred by him.
H. Fringe Benefits. The Executive shall be entitled to fringe benefits
---------------
in accordance with the plans, practices, programs and policies as in effect
generally with respect to other peer executives of the Company.
I. Vacation. The Executive shall be entitled to paid vacation in
--------
accordance with the plans, policies, programs and practices as in effect
generally with respect to other peer executives of the Company.
J. Supplemental Executive Retirement Benefits. The Executive shall be
------------------------------------------
entitled to be paid additional retirement benefits which, when added to his
benefits under the Santa Anita Realty Enterprises, Inc. and Santa Anita
Operating Company Retirement Income Plan (the "Retirement Plan"), will provide
total benefits equal to what he would have received if the Retirement Plan were
changed in the following respects:
1. All of the Executive's base salary shall
be counted, including base salary in
excess of the limits imposed by Section
401(a)(17) of the Internal Revenue Code of
1986, as amended (the "Code"), and further
including base salary deferred under the
Santa Anita Realty Enterprises, Inc. and
3
<PAGE>
Santa Anita Operating Company Thrift Plan,
or any other deferred compensation plan of
the Company.
2. All benefits shall immediately vest upon
completion of 2 years of service.
3. All benefits shall immediately vest if the
Executive's employment terminates, unless the
Executive's employment is terminated by the
Company for Cause or the Executive voluntarily
terminates employment without Good Reason.
All benefits payable pursuant to this Section IV-J shall be paid to the
Executive in the same form and at the same time(s) as elected under the
Retirement Plan. If Executive terminates at a time when he is entitled to
benefits under this subsection but not vested under the Retirement Plan,
benefits shall be paid at termination in the normal form provided under the
Retirement Plan (unless, at least one year prior to termination, Executive has
elected to receive the benefits in an alternative form permitted under the
Retirement Plan), and such benefits shall be subject to any applicable actuarial
adjustment provided in the Retirement Plan for early retirement or form of
benefit. The Executive and his spouse, Beneficiaries, heirs and successors under
this Section IV-J shall have solely those rights of an unsecured creditor of the
Company. The Company further agrees that it shall reexamine the issue of
supplemental retirement benefits during calendar year 1997.
V. TERMINATION.
-----------
A. Death. The Executive's employment shall terminate automatically upon
-----
the Executive's death.
B. Disability. If the Company determines in good faith that the
----------
Disability of the Executive has occurred (pursuant to the definition of
Disability set forth below), it may give to the Executive written notice in
accordance with Section XVI of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective on the day of receipt of such notice by the Executive. For
purposes of this Agreement, "Disability" shall mean the absence of the Executive
from his duties with the Company for a period of six months as a result of
incapacity due to mental or physical illness which is determined to be total and
permanent by a physician selected by the Company or its insurers and acceptable
to the Executive or his legal representative (such agreement as to acceptability
not to be withheld unreasonably). "Incapacity" as used herein shall be limited
only to such Disability which substantially prevents Company from availing
itself of the services of the Executive.
4
<PAGE>
C. Cause. The Company may terminate the Executive's employment for
-----
Cause. For purposes of this Agreement, "Cause" shall mean that the Company,
acting in good faith based upon the information then known to the Company, after
due inquiry, determines (i) that the Executive has been convicted of a felony or
(ii) that the Executive has acted or failed to act in connection with his
employment in such manner as would constitute gross negligence or willful
misconduct.
D. Other than Death or Disability or Cause. The Company may terminate
---------------------------------------
the Executive's employment for reasons other than Death, Disability or Cause
upon 60 days written notice. The 60 day notice requirement of this Section V-D
shall be deemed satisfied if the Company gives the Executive notice of its
desire to terminate this Agreement under Section VI hereof.
E. Obligations of the Company Upon Termination.
-------------------------------------------
1. Death or Disability. If the Executive's employment is terminated
-------------------
by reason of the Executive's Death or Disability, this Agreement shall terminate
without further obligations to the Executive or his legal representatives under
this Agreement, other than for (a) payment of the sum of (i) the Executive's
annual base salary through the date of termination to the extent not theretofore
paid and (ii) reasonable employment expenses, vehicle expenses, and club
membership dues as provided herein, through the date of termination to the
extent not theretofore paid (the sum of the amounts described in clauses (i) and
(ii) shall be hereinafter referred to as the "Accrued Obligations"), which
amounts shall be paid to the Executive or his estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the date of termination and
(b) payment to the Executive or his estate or beneficiary, as applicable, of any
amounts due pursuant to the terms of any applicable welfare or pension benefit
plans (including, but not limited to, any amounts due as Supplemental Executive
Retirement Benefits under Section IV-J of this Agreement).
2. Cause or Voluntary Termination. If the Executive's employment is
------------------------------
terminated by the Company for Cause or the Executive voluntarily terminates
employment (except for a "Good Reason" described in Section V-E-4 below), this
Agreement shall terminate without further obligations to the Executive other
than for the timely payment of Accrued Obligations and any amounts due pursuant
to the terms of any applicable welfare or pension benefit plans. If it is
subsequently determined that the Company did not have Cause for termination
under this Section V-E-2, then the Company's decision to terminate shall be
deemed to have been made under Section V-E-3 and the amounts payable thereunder
shall be the only amounts the Executive may receive for his termination.
5
<PAGE>
3. Other than Cause or Death or Disability. If the Company terminates
---------------------------------------
the Executive's employment during the term of this Agreement (including
renewals) for other than Cause or Death or Disability, this Agreement shall
terminate without further obligations to the Executive other than (a) the timely
payment of Accrued Obligations, (b) payment of any amounts due pursuant to the
terms of any applicable welfare or pension benefit plans and (c) payment to the
Executive of a lump sum equal to the product of 112% times 18 months of the
Executive's base salary, calculated using the base salary rate in effect under
this Agreement on the Executive's date of termination.
The obligation described in Section V-E-3(c) shall be reduced, however,
by any cash lump sum severance payment received by the Executive pursuant to the
Severance Agreement between the Executive and the Company dated April 1, 1996.
4. Voluntary Termination for Good Reason. If the Executive voluntarily
-------------------------------------
terminates his employment with the Company during the term of this Agreement
(including renewals) for Good Reason, this Agreement shall terminate in the same
manner as if the Company terminated the Executive's employment under Section
V-E-3 for a reason other than Cause. For purposes of this Section V-E-4, "Good
Reason" shall mean the occurrence of one of the following events without the
Executive's consent:
a. Any action by the Company which results in a material
diminution in the Executive's position, authority, duties or responsibilities to
the Company, including for this purpose any material change in the Executive's
employment location, and excluding for this purpose an isolated, insubstantial
and inadvertent action not taken in bad faith and which is remedied by the
Company, as the case may be, promptly after receipt of notice thereof given by
the Executive;
b. Any reduction in the Executive's base compensation not agreed
to by the Executive, which reduction shall be deemed to occur if there is a
reduction in (1) the Executive's base salary or (2) the Executive's ability to
participate in employee benefit plans, receive expense reimbursements, receive
other fringe benefits, receive office and support staff, or receive paid
vacation, provided that: (1) an isolated, insubstantial, and inadvertent failure
not occurring in bad faith and which is promptly remedied after notice by the
Executive shall not be deemed a violation of this paragraph and (2) a reduction
in one element of the Executive's total compensation shall not be deemed a
violation of this paragraph if a counterbalancing increase in another element of
the Executive's total compensation occurs (the determination of whether the
increase is counterbalancing shall be determined by the Executive in good
faith).
6
<PAGE>
5. No Mitigation. If this Agreement terminates under Section V-E-2,
-------------
V-E-3 or V-E-4 hereof, the obligations of the Company to the Executive under
this Agreement will not be mitigated by any other employment secured by the
Executive.
6. Withholding. Amounts payable under this Section V-E shall be
-----------
reduced by any standard withholdings and other authorized deductions.
F. Exclusive Remedy. By signing the Agreement, the Executive agrees that
----------------
the payments to which the Executive may become entitled under this Agreement are
in lieu of any other payments to which the Executive might be entitled and that
the Company's discharge of its obligations under this Agreement shall constitute
full satisfaction of any and all claims of any nature whatsoever that the
Executive might otherwise possess against the Company and its subsidiaries,
except (1) such claims as are specifically provided for in the terms of any
generally applicable employee benefit or executive compensation plans evidenced
by written agreements or (2) any claims for personal injuries (other than claims
that are based on or relate to a contention that Company has wrongfully
discharged the Executive).
VI. RENEWAL.
-------
Subject to the provisions of Section V-E-3, on the last day of March each
calendar year, beginning on March 31, 1998, this Agreement shall be
automatically renewed for one additional 12 month period unless the Executive or
the Company gives notice to the other, in writing, at least 6 months prior to
the expiration of this Agreement, or any renewal or extension thereof, of its
desire to terminate this Agreement or modify its terms. Once this Agreement
expires, this Agreement shall have no application to the terms and conditions of
any employment by Executive subsequent to such expiration or the termination of
such employment.
VII. ARBITRATION.
-----------
Any controversy or claim arising out of or relating to this Agreement, its
enforcement or interpretation, or because of an alleged breach, default, or
misrepresentation in connection with any of its provisions, shall be submitted
to arbitration, to be held in Los Angeles County, California in accordance with
California Civil Procedure Code, Title 9, SS 1280-1298.8. The arbitrator shall
be selected jointly by the parties or by Judicial Arbitration & Mediation
Services, Inc. ("JAMS"). Each party to the arbitration shall bear its own
attorneys' fees and costs relating to such arbitration. In the event that the
Executive disputes the Company's
7
<PAGE>
determination that Cause has existed for his termination of employment, the
Company shall only be considered as having terminated the Executive for Cause if
the arbitrator concludes that Cause existed for Executive's termination and
issues specific findings to that effect.
VIII. CONFIDENTIAL INFORMATION.
------------------------
The Executive shall hold in a fiduciary capacity for the benefit of the
Company all secret or confidential information, knowledge or data relating to
the Company or any of its affiliated companies, and their respective businesses,
which shall have been obtained by the Executive during his employment by the
Company or any of its affiliated companies and which shall not be or become
public knowledge (other than by acts by the Executive or his representatives in
violation of this Agreement). After termination of the Executive's employment
with the Company, he shall not, without the prior written consent of the
Company, or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the
Company and those designated by it.
IX. SUCCESSORS.
----------
A. This Agreement is personal to the Executive and shall not, without
the prior written consent of the Company, be assignable by the Executive.
B. This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns and any such successor or assignee shall
be deemed substituted for the Company under the terms of this Agreement for all
purposes. As used herein, "successor" and "assignee" shall include any person,
firm, corporation or other business entity which at any time, whether by
purchase, merger or otherwise, directly or indirectly acquires the stock of the
Company or to which the Company assigns this Agreement by operation of law or
otherwise.
X. WAIVER.
------
No waiver of any breach of any term or provision of this Agreement shall be
construed to be, nor shall be, a waiver of any other breach of this Agreement.
No waiver shall be binding unless in writing and signed by the party waiving the
breach.
8
<PAGE>
XI. MODIFICATION.
------------
This Agreement may not be amended or modified other than by a written
agreement executed by the Executive and the Board of Directors of the Company.
XII. SAVINGS CLAUSE.
--------------
If any provision of this Agreement or the application thereof is held
invalid, the invalidity shall not affect other provisions or applications of the
Agreement which can be given effect without the invalid provisions or
applications and to this end the provisions of this Agreement are declared to be
severable.
XIII. COMPLETE AGREEMENT.
------------------
This instrument constitutes and contains the entire agreement and
understanding concerning the Executive's employment and the other subject
matters addressed herein between the parties, and supersedes and replaces all
prior negotiations and all agreements proposed or otherwise, whether written or
oral, concerning the subject matters hereof. This is an integrated document.
XIV. GOVERNING LAW.
-------------
This Agreement shall be deemed to have been executed and delivered within
the State of California, and the rights and obligations of the parties hereunder
shall be construed and enforced in accordance with, and governed by, by the laws
of the State of California without regard to principles of conflict of laws.
XV. CONSTRUCTION.
------------
Each party has cooperated in the drafting and preparation of this
Agreement. Hence, in any construction to be made of this Agreement, the same
shall not be construed against any party on the basis that the party was the
drafter. The captions of this Agreement are not part of the provisions hereof
and shall have no force or effect.
XVI. COMMUNICATIONS.
--------------
All notices, requests, demands and other communications hereunder shall be
in writing and shall be deemed to have been duly given if delivered or if mailed
by registered or certified mail, postage prepaid, addressed to the Executive at
9
<PAGE>
3 Lochmoor Lane, Newport Beach, CA 92660, or addressed to the Company at 285 W.
Huntington Drive, Arcadia, CA 91007. Any party may change the address at which
notice shall be given by written notice given in the above manner.
XVII. EXECUTION.
---------
This Agreement is being executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument. Photographic copies of such signed counterparts may be used
in lieu of the originals for any purpose.
XVIII. LEGAL COUNSEL.
-------------
The Executive and the Company recognize that this is a legally binding
contract and acknowledge and agree that they have had the opportunity to
consult with legal counsel of their choice. The Company shall reimburse the
Executive promptly for all reasonable attorney fees incurred by the Executive in
connection with the negotiation and review of this Agreement.
In witness whereof, the parties hereto have executed this Agreement as of
the date first above written.
SANTA ANITA REALTY ENTERPRISES, INC.
By: /s/ Thomas P. Mullaney
--------------------------------------
Thomas P. Mullaney
Chairman of the Compensation Committee
WILLIAM C. BAKER
/s/ William C. Baker
--------------------------------------
10
<PAGE>
EXHIBIT 10.4
SANTA ANITA REALTY ENTERPRISES, INC.
NONSTATUTORY STOCK OPTION AGREEMENT
THIS AGREEMENT (the "Agreement") is dated as of the 1st day of April,
1996, by and between Santa Anita Realty Enterprises, Inc., a Delaware
corporation (the "Company") and William C. Baker (the "Optionee") .
W I T N E S S E T H:
WHEREAS, on March 29, 1996, the Company's Board of Directors has granted
to the Optionee, effective as of April 1, 1996, (the "Award Date") a
nonstatutory option (the "Option") to purchase all or any part of an aggregate
of 200,000 shares of common stock (the "Aggregate Grant"), $0.10 par value, of
the Company (the "Common Stock"), upon the terms and conditions set forth
herein, the grant of which options are contingent upon the Company's
shareholders' approval.
NOW, THEREFORE, in consideration of the mutual promises and covenants
made herein and the mutual benefits to be derived herefrom, the parties hereto
agree as follows:
1. Defined Terms. The Option hereunder is not being issued pursuant to
-------------
the Company's 1995 Share Award Plan (the "1995 Plan"). However, for ease of
reference capitalized terms used herein and not otherwise defined herein shall
have the meaning assigned to such terms in the Company's 1995 Share Award Plan.
2. Grant of Option. The Company has granted to the Optionee as a
---------------
matter of separate inducement and agreement in connection with his or her
employment, and not in lieu of any salary or other compensation for his or her
services, the right and option to purchase, on the terms and conditions
hereinafter set forth, all or any part of the Aggregate Grant at a price of
$14.04 per share, exercisable from time to time subject to the provisions of
this Agreement prior to the close of business on a date not later than the day
before the tenth anniversary of the Award Date (the "Expiration Date"). Such
price is at least 100% of the Fair Market Value of the Common Stock on the Award
Date.
3. Exercisability of Option.
------------------------
(a) The Option may be exercised for 100% of the Aggregate Grant (1) on
or after the 60th consecutive business day after the Award Date that the Fair
Market Value of a Paired Share is $27.50 or more, provided such 60th day occurs
before April 1, 2001; (2) immediately prior to a reorganization that is
consummated before April 1, 2001 in which the Company is not the surviving
entity and the shareholders of the Company are to receive consideration worth
$27.50 or more per Paired Share; or (3) immediately prior to a sale by the
shareholders that occurs
<PAGE>
before April 1, 2001 of substantially all of the Paired Shares at a price of
$27.50 or more per share of Paired Share. Unless one of these three events
occurs by April 1, 2001, the Option shall expire on April 1, 2001.
(b) To the extent the Optionee does not in any year purchase all or
any part of the shares to which the Employee is entitled, the Optionee has the
right cumulatively thereafter to purchase any shares not so purchased and such
right shall continue until the Option terminates or expires. Fractional share
interests shall be disregarded, but may be cumulated. No fewer than 10 shares
may be purchased at any one time, unless the number purchased is the total
number at the time available for purchase under the Option. Notwithstanding
anything to the contrary contained in this Agreement, if the Option becomes
exercisable, in all events the Optionee or the Optionee's Beneficiary shall be
entitled to a period of no less than 90 days to exercise the Option.
(c) If there shall occur any extraordinary dividend or other
extraordinary distribution in respect of the Paired Share (whether in the form
of cash, Common Stock, Operating Stock, other securities, or other property), or
any reclassification, recapitalization, stock split (including a stock split in
the form of a stock dividend), reverse stock split, reorganization, merger,
combination, consolidation, split-up, spin-off, combination, repurchase, or
exchange of Common Stock, Operating Stock or other securities of the
corporation, or there shall occur any similar extraordinary corporate
transaction, then the Committee shall, in such manner and to such extent (if
any) as it deems appropriate and equitable, proportionately adjust the
performance standard of this Section 3.
4. Issuance of Santa Anita Operating Company Stock.
-----------------------------------------------
(a) The Option shall not be exercisable unless the Optionee submits
evidence satisfactory to the Company that a number of shares of Operating Stock
equal to the number of shares of Common Stock to be received upon exercise of
all or a portion of the Option will, and are able to, be purchased by or are
available to the Optionee, such that upon exercise the Optionee will receive or
hold an equal number of shares of Common Stock and Operating Stock. The Optionee
shall purchase the unpaired shares of Operating Stock at their Fair Market Value
at the time the Option is exercised, which value shall be determined pursuant to
the Pairing Agreement between the Company and Santa Anita Operating Company then
in effect. The Optionee shall be required to pair such unpaired shares of
Operating Stock with the Optionee's shares of Common Stock.
(b) In connection with the Optionee's purchase of Operating Stock in
accordance with clause (a), the Company shall
2
<PAGE>
pay to the Optionee as additional compensation an amount equal to the excess, if
any of (1) the purchase price of such Operating Stock over (2) the Fair Market
Value of such Operating Stock on the Award Date. Payment of such amount, less
any applicable withholding, shall be made to the Optionee no later than 10
business days after the date of purchase of such Operating Stock and exercise of
the Option.
5. Method of Exercise of Option and Payment of Purchase Price. Subject
----------------------------------------------------------
to such further limitations and rules or procedures as the Committee may from
time to time establish, the exercise of all or any portion of the Option shall
be by means of written notice of exercise delivered to the Company, specifying
the number of whole shares with respect to which the Option is being exercised,
together with any written statements required by Section 13 of this Agreement
and payment of the purchase price according to the following terms:
(a) in cash, electronic funds transfer or by check payable to the
order of the Company;
(b) by notice and third party payment in such manner as may be
authorized by the Committee;
(c) subject to the Committee's ability in its absolute discretion to
deny such request and upon receipt of all necessary regulatory approvals, the
Optionee may request that the Optionee deliver in payment of a portion or all of
the purchase price, other already-owned shares of Common Stock (whether obtained
through the exercise of Options or otherwise), which shares of Common Stock
shall be valued at the then Fair Market Value. The Committee's consent is
required prior to the Optionee's use, pursuant to this clause, of Common Stock
which he has held less than six months. If the Committee permits delivery of
Common Stock to pay the purchase price, the Common Stock held six months or more
may be used without consent of the Committee; or
(d) subject to the Committee's ability in its absolute discretion to
deny such request, the Optionee may request that shares of Common Stock that
would otherwise be deliverable with a Fair Market Value equal to the purchase
price of the Common Stock being purchased be withheld in payment of the purchase
price.
(e) The Optionee shall in all cases be required to purchase the
number of unpaired shares of Operating Stock such that the Optionee will receive
or hold, upon exercising the Option, an equal number of shares of Common Stock
as Operating Stock, which shares shall then be paired by the Optionee.
3
<PAGE>
6. Continuance of Employment. Nothing contained in this Agreement
-------------------------
shall confer upon the Optionee any right to continue in the employ of the
Company or interfere in any way with the rights of the Company, which are hereby
expressly reserved, to reduce the Optionee's compensation from the rate in
existence at any time or to terminate the Optionee's employment for any reason.
The preceding sentence is subject, however, to the terms of any employment
agreement between Optionee and the Company.
7. Effect of Termination of Relationship.
-------------------------------------
(a) The Option is exercisable by Optionee (or, in the event of
Optionee's death, his Beneficiary) for a period ending on the later of March 31,
2001 or 90 days after the end of the period described in Section 3(a)(1). On or
after the expiration of the period described in the preceding sentence, the
Option shall only be exercisable if Optionee is then employed by the Company. In
no event may the Option be exercised by anyone, however, unless the vesting
condition in Section 3(a) is satisfied and exercise occurs before the Expiration
Date.
(b) If Optionee is employed by an entity which ceases to be a
Subsidiary, such event shall be deemed for purposes of this Section 7 to be a
termination of employment described in subsection (a) in respect of Optionee.
(c) Absence from work caused by military service or authorized sick
leave shall not be considered as a termination of employment for purposes of
this Section.
8. Non-Assignability of Option. Subject to the provisions of Section 7
---------------------------
above, the Option and the rights and privileges conferred hereby are not
transferable or assignable and may not be offered, sold, pledged, hypothecated
or otherwise disposed of in any way (whether by operation of law or otherwise)
and shall not be subject to execution, attachment, garnishment, levy or similar
process. The Option may be exercised only by (i) the Optionee, during the
Optionee's lifetime, or (ii) to the extent provided by Section 7, by his
transferees by will or under the laws of descent and distribution, or (iii) by a
person designated pursuant to a QDRO. In the event that the spouse of the
Optionee shall have acquired a community property interest in the Option, the
Optionee or such transferees may exercise it on behalf of the spouse of the
Optionee or such spouse's successor in interest.
9. Adjustment and Termination of Option Under Certain Circumstances.
----------------------------------------------------------------
(a) If the outstanding shares of Common Stock or the outstanding shares
of Operating Company Stock are changed into or exchanged for cash, other
property or a different number or kind
4
<PAGE>
of shares or securities of the Company or of Operating Company, as the case may
be, or if additional shares or new or different securities are distributed with
respect to the outstanding shares of Common Stock or the outstanding shares of
Operating Company Stock, through a reorganization or merger in which the Company
or Operating Company, as the case may be, is the surviving entity, or through a
combination, consolidation, recapitalization, reclassification, stock split,
stock dividend, reverse stock split, stock consolidation, dividend or
distribution of cash or property to the shareholders of the Company or of
Operating Company, or if there shall occur any other extraordinary corporate
transaction or event in respect of the Common Stock or the Operating Company
Stock or a sale of substantially all the assets of the Company or of Operating
Company as an entirety which in the judgment of the Committee materially affects
the Common Stock or the Operating Company Stock, then the Committee shall, in
such manner and to such extent (if any) as it deems appropriate and equitable
(1) proportionately adjust any or all of (A) the number and kind of shares of
Common Stock that may be delivered under this Agreement or (B) the exercise
price per share under this Agreement; or (2) in the case of an
extraordinary dividend or other distribution, merger, reorganization,
consolidation, combination, sale of assets, split up, exchange, or spin off,
make provision for a cash payment or for the substitution or exchange of the
Agreement or the cash, securities or property deliverable to the holder of the
Agreement based upon the distribution or consideration payable to holders of
Common Stock or to holders of Operating Company Stock upon or in respect of such
event. In any of such events, the Committee may take such action sufficiently
prior to such event if necessary to permit the Optionee to realize the benefits
intended to be conveyed with respect to the underlying shares in the same manner
as is available to shareholders generally.
(b) Section 6.2(c) of the 1995 Plan is incorporated by reference. As
permitted by Section 6.2(c) of the 1995 Plan, the Option shall terminate upon
the occurrence of certain corporate reorganizations in which the Company is not
the survivor.
10. Notices. Any notice to be given under the terms of this Agreement
-------
shall be in writing and addressed to the Secretary of the Company at its
principal office, and any notice to be given to the Optionee shall be addressed
to him or her at the address given beneath the Optionee's signature hereto or at
such other address as either party may hereafter designate in writing to the
other party. Any such notice shall be deemed to have been duly given
when enclosed in a properly sealed envelope addressed as aforesaid, registered
or certified, and deposited (postage and registry or certification fee prepaid)
in a post office or branch post office regularly maintained by the United States
Government.
11. Shareholder Approval. The Option and all rights of Optionee
--------------------
thereunder are contingent upon and subject to
5
<PAGE>
shareholder approval of this Agreement. The Optionee acknowledges that the
Option and all rights of Optionee hereunder are contingent upon shareholder
approval.
12. Option is Plan. To the extent that Common Stock is issued under this
--------------
Agreement, this Agreement shall be regarded as a stock option plan adopted by
the Company. To the extent that Optionee purchases Operating Stock from Santa
Anita Operating Company (the "Operating Company") in connection with the
issuance of Common Stock under this Agreement, the purchase of such shares of
Operating Stock shall be treated as occurring pursuant to a separate stock
option plan of Operating Company.
13. Compliance with Laws. The granting and vesting of the Option under this
--------------------
Agreement and the offer, issuance and delivery of Paired Shares (or Common
Stock) pursuant to this Option are subject to compliance with all applicable
federal and state laws, rules and regulations (including, but not limited to,
state and federal securities laws (including, but not limited to, registration
and qualification requirements thereunder) and federal margin requirements) and
to such approvals by any listing, regulatory or governmental authority as may,
in the opinion of counsel for the Company, be necessary or advisable in
connection therewith. Any securities delivered under this Agreement shall be
subject to such restrictions, and the Optionee shall, if requested by the
Company, provide such assurances and representations to the Company as the
Company may deem necessary or desirable to assure compliance with all applicable
legal requirements.
6
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
on its behalf by a duly authorized officer and the Optionee has hereunto set his
or her hand as of the day and year first above written.
SANTA ANITA REALTY ENTERPRISES, INC.
By: /s/ Thomas P. Mullaney
--------------------------------------
Thomas P. Mullaney
Chairman of the Compensation Committee
OPTIONEE
/s/ William C. Baker
-------------------------------------------
(Signature)
William C. Baker
-------------------------------------------
(Print Name)
3 Lochmoor Lane
-------------------------------------------
(Address)
Newport Beach, CA 92660
-------------------------------------------
(City, State, Zip Code)
###-##-####
-------------------------------------------
(Social Security Number)
7
<PAGE>
CONSENT OF SPOUSE
-----------------
In consideration of the execution of the foregoing Nonstatutory Stock
Option Agreement by Santa Anita Realty Enterprises, Inc., I, Janice H. Baker,
---------------
the spouse of the Optionee herein named, do hereby join with my spouse in
executing the foregoing Nonstatutory Stock Option Agreement and do hereby agree
to be bound by all of the terms and provisions thereof.
Date: 4-1-96 /s/ Janice H. Baker
------------ -----------------------
Signature of Spouse
8
<PAGE>
EXHIBIT 10.5
SANTA ANITA REALTY ENTERPRISES, INC.
NONSTATUTORY STOCK OPTION AGREEMENT
THIS AGREEMENT (the "Agreement") is dated as of the 1st day of April,
1996, by and between Santa Anita Realty Enterprises, Inc., a Delaware
corporation (the "Company") and William C. Baker (the "Optionee").
W I T N E S S E T H:
WHEREAS, on March 29, 1996, the Company's Board of Directors has granted
to the Optionee, effective as of April 1, 1996, (the "Award Date") a
nonstatutory option (the "Option") to purchase all or any part of an aggregate
of 135,756 shares of common stock (the "Aggregate Grant"), $0.10 par value, of
the Company (the "Common Stock"), upon the terms and conditions set forth
herein, the grant of which options are contingent upon the Company's
shareholders' approval.
NOW, THEREFORE, in consideration of the mutual promises and covenants
made herein and the mutual benefits to be derived herefrom, the parties hereto
agree as follows:
1. Defined Terms. The Option hereunder is not being issued pursuant to
-------------
the Company's 1995 Share Award Plan (the "1995 Plan"). However, for ease of
reference capitalized terms used herein and not otherwise defined herein shall
have the meaning assigned to such terms in the Company's 1995 Share Award Plan.
2. Grant of Option. The Company has granted to the Optionee as a
---------------
matter of separate inducement and agreement in connection with his or her
employment, and not in lieu of any salary or other compensation for his or her
services, the right and option to purchase, on the terms and conditions
hereinafter set forth, all or any part of the Aggregate Grant at a price of
$14.04 per share, exercisable from time to time subject to the provisions of
this Agreement prior to the close of business on a date not later than the day
before the tenth anniversary of the Award Date (the "Expiration Date"). Such
price is at least 100% of the Fair Market Value of the Common Stock on the Award
Date.
3. Exercisability of Option. The Option may be exercised from time
------------------------
to time and for the number of shares as follows: 50% of the Aggregate Grant on
the first anniversary of the Award Date and an additional 50% of the Aggregate
Grant on the second anniversary of the Award Date.
Notwithstanding the foregoing, if, during the term of this Agreement, the
Optionee dies or incurs a Total Disability, or if the Optionee's employment is
terminated without Cause, or if the Optionee voluntarily terminates employment
for Good Reason, each outstanding Option granted to the Optionee shall
<PAGE>
become exercisable, and the total number of shares subject thereto shall be
purchasable immediately. As used herein, the terms "Cause" and "Good Reason"
shall have the meaning assigned to them in the employment agreement between
Optionee and the Company.
To the extent the Optionee does not in any year purchase all or any part
of the shares to which the Employee is entitled, the Optionee has the right
cumulatively thereafter to purchase any shares not so purchased and such right
shall continue until the Option terminates or expires. Fractional share
interests shall be disregarded, but may be cumulated. No fewer than 10 shares
may be purchased at any one time, unless the number purchased is the total
number at the time available for purchase under the Option.
4. Change in Control Event.
-----------------------
(a) Notwithstanding any provisions in this Agreement to the contrary,
each outstanding Option granted to the Optionee shall become exercisable, and
the total number of shares subject thereto shall be purchasable immediately,
upon a "Change in Control Event" (as that term is defined in the Company's 1995
Share Award Plan).
(b) Notwithstanding subsection (a), the exercise date of Options
granted hereunder shall not be accelerated to the extent that the Committee
determines that such acceleration would cause the deduction limitations of
Section 280G of the Code to come into effect. In the event that all of an
Optionee's Options are not accelerated, the Optionee may request independent
verification of the Committee's calculations with respect to the application of
Section 280G. In such case, the Committee will provide to the Optionee within 15
business days after such a request an opinion from a nationally recognized
accounting firm selected by Optionee (the "Accounting Firm"). The opinion shall
state the Accounting Firm's opinion that any decrease in the acceleration of
Options hereunder is necessary to avoid the limits of Section 280G and shall
contain supporting calculations. The cost of such opinion shall be paid for by
the Company.
(c) This Section 4 shall be effective from April 1, 1996 through
September 30, 1997 and may not be amended or terminated during such period
except pursuant to an instrument in writings executed by all of the parties
hereto. Notwithstanding the preceding sentence, the Board of Directors of the
Company may, in its sole discretion and for any reason, provide written notice
of termination or amendment (effective as of the then applicable expiration
date, but not with respect to a Change in Control Event occurring on or before
such expiration date) to Optionee no later than six months before the expiration
date of this Section 4. If written notice is not so provided, this Section 4
shall be automatically extended for a period of 60
2
<PAGE>
months past the expiration date. This Section 4 shall continue to be
automatically extended for an additional 60 months at the end of such 60-month
period and each succeeding 60-month period unless notice is given in the manner
described in this Section 4.
5. Issuance of Santa Anita Operating Company Stock.
-----------------------------------------------
(a) The Option shall not be exercisable unless the Optionee submits
evidence satisfactory to the Company that a number of shares of the common stock
of Santa Anita Operating Company ("Operating Stock") equal to the number of
shares of Common Stock to be received upon exercise of all or a portion of the
Option will, and are able to, be purchased by or are available to the Optionee,
such that upon exercise the Optionee will receive or hold an equal number of
shares of Common Stock and Operating Stock. The Optionee shall purchase the
unpaired shares of Operating Stock at their Fair Market Value at the time the
Option is exercised, which value shall be determined pursuant to the Pairing
Agreement between the Company and Santa Anita Operating Company then in effect.
The Optionee shall be required to pair such unpaired shares of Operating Stock
with the Optionee's shares of Common Stock.
(b) In connection with the Optionee's purchase of Operating Stock in
accordance with clause (a), the Company shall pay to the Optionee as additional
compensation an amount equal to the excess, if any of (1) the purchase price of
such Operating Stock over (2) the Fair Market Value of such Operating Stock on
the Award Date. Payment of such amount, less any applicable withholding, shall
be made to the Optionee no later than 10 business days after the date of
purchase of such Operating Stock and exercise of the Option.
6. Method of Exercise of Option and Payment of Purchase Price. Subject
----------------------------------------------------------
to such further limitations and rules or procedures as the Committee may from
time to time establish, the exercise of all or any portion of the Option shall
be by means of written notice of exercise delivered to the Company, specifying
the number of whole shares with respect to which the Option is being exercised,
together with any written statements required by Section 14 of this Agreement
and payment of the purchase price according to the following terms:
(a) in cash, electronic funds transfer or by check payable to the
order of the Company;
(b) by notice and third party payment in such manner as may be
authorized by the Committee;
(c) subject to the Committee's ability in its absolute discretion to
deny such request and upon receipt of all necessary regulatory approvals, the
Optionee may request that the Optionee deliver in payment of a portion or all
of the purchase
3
<PAGE>
price, other already-owned shares of Common Stock (whether obtained through the
exercise of Options or otherwise), which shares of Common Stock shall be valued
at the then Fair Market Value. The Committee's consent is required prior to the
Optionee's use, pursuant to this clause, of Common Stock which he has held less
than six months. If the Committee permits delivery of Common Stock to pay the
purchase price, the Common Stock held six months or more may be used without
consent of the Committee; or
(d) subject to the Committee's ability in its absolute discretion to
deny such request, the Optionee may request that shares of Common Stock that
would otherwise be deliverable with a Fair Market Value equal to the purchase
price of the Common Stock being purchased be withheld in payment of the purchase
price.
(e) The Optionee shall in all cases be required to purchase the number
of unpaired shares of Operating Stock such that the Optionee will receive or
hold, upon exercising the Option, an equal number of shares of Common Stock as
Operating Stock, which shares shall then be paired by the Optionee.
7. Continuance of Employment. Nothing contained in this Agreement
-------------------------
shall confer upon the Optionee any right to continue in the employ of the
Company or interfere in any way with the rights of the Company, which are hereby
expressly reserved, to reduce the Optionee's compensation from the rate in
existence at any time or to terminate the Optionee's employment for any reason.
The preceding sentence is subject, however, to the terms of any employment
agreement between the Optionee and the Company.
8. Effect of Termination of Relationship.
-------------------------------------
(a) To the extent the Option is exercisable on the date the Optionee
ceases to be employed by the Company, the Option shall be exercisable by
Optionee (or, in the event of Optionee's death, his Beneficiary) for a period
ending March 31, 2001. On or after April 1, 2001, the Option shall only be
exercisable if Optionee is then employed by the Company. In no event, however,
may the Option be exercised after the Expiration Date.
(b) If Optionee is employed by an entity which ceases to be a
Subsidiary, such event shall be deemed for purposes of this Section 8 to be a
termination of employment described in subsection (a) in respect of Optionee.
(c) Absence from work caused by military service or authorized sick
leave shall not be considered as a termination of employment for purposes of
this Section.
4
<PAGE>
9. Non-Assignability of Option. Subject to the provisions of Section 8
---------------------------
above, the Option and the rights and privileges conferred hereby are not
transferable or assignable and may not be offered, sold, pledged, hypothecated
or otherwise disposed of in any way (whether by operation of law or otherwise)
and shall not be subject to execution, attachment, garnishment, levy or similar
process. Except as provided by this Agreement, the Option may be exercised only
by (i) the Optionee, during the Optionee's lifetime, or (ii) to the extent
provided by Section 8, by his transferees by will or under the laws of descent
and distribution, or (iii) by a person designated pursuant to a QDRO. In the
event that the spouse of the Optionee shall have acquired a community property
interest in the Option, the Optionee or such transferees may exercise it on
behalf of the spouse of the Optionee or such spouse's successor in interest.
10. Adjustment and Termination of Option Under Certain Circumstances.
----------------------------------------------------------------
(a) If the outstanding shares of Common Stock or the outstanding
shares of Operating Company Stock are changed into or exchanged for cash, other
property or a different number or kind of shares or securities of the Company or
of Operating Company, as the case may be, or if additional shares or new or
different securities are distributed with respect to the outstanding shares of
Common Stock or the outstanding shares of Operating Company Stock, through a
reorganization or merger in which the Company or Operating Company, as the case
may be, is the surviving entity, or through a combination, consolidation,
recapitalization, reclassification, stock split, stock dividend, reverse stock
split, stock consolidation, dividend or distribution of cash or property to the
shareholders of the Company or of Operating Company, or if there shall occur any
other extraordinary corporate transaction or event in respect of the Common
Stock or the Operating Company Stock or a sale of substantially all the assets
of the Company or of Operating Company as an entirety which in the judgment of
the Committee materially affects the Common Stock or the Operating Company
Stock, then the Committee shall, in such manner and to such extent (if any) as
it deems appropriate and equitable (1) proportionately adjust any or all of (A)
the number and kind of shares of Common Stock that may be delivered under this
Agreement or (B) the exercise price per share under this Agreement; or (2) in
the case of an extraordinary dividend or other distribution, merger,
reorganization, consolidation, combination, sale of assets, split up, exchange,
or spin off, make provision for a cash payment or for the substitution or
exchange of the Agreement or the cash, securities or property deliverable to the
holder of the Agreement based upon the distribution or consideration payable to
holders of Common Stock or to holders of Operating Company Stock upon or in
respect of such event. In any of such events, the Committee may take such action
sufficiently prior to such event if necessary to permit the Optionee to realize
the
5
<PAGE>
benefits intended to be conveyed with respect to the underlying shares in the
same manner as is available to shareholders generally.
(b) Section 6.2(c) of the 1995 Plan is incorporated by reference. As
permitted by Section 6.2(c) of the 1995 Plan, the Option shall terminate upon
the occurrence of certain corporate reorganizations in which the Company is not
the survivor.
11. Notices. Any notice to be given under the terms of this Agreement
-------
shall be in writing and addressed to the Secretary of the Company at its
principal office, and any notice to be given to the Optionee shall be addressed
to him or her at the address given beneath the Optionee's signature hereto or at
such other address as either party may hereafter designate in writing to the
other party. Any such notice shall be deemed to have been duly given when
enclosed in a properly sealed envelope addressed as aforesaid, registered or
certified, and deposited (postage and registry or certification fee prepaid) in
a post office or branch post office regularly maintained by the United States
Government.
12. Shareholder Approval. The Option and all rights of Optionee
--------------------
thereunder are contingent upon and subject to shareholder approval of this
Agreement. The Optionee acknowledges that the Option and all rights of the
Optionee hereunder are contingent upon shareholder approval.
13. Option is Plan. To the extent that Common Stock is issued under this
--------------
Agreement, this Agreement shall be regarded as a stock option plan adopted by
the Company. To the extent that Optionee purchases Operating Stock from Santa
Anita Operating Company ("Operating Company") in connection with the issuance of
Common Stock under this Agreement, the purchase of such shares of
6
<PAGE>
Operating Stock shall be treated as occurring pursuant to a separate stock
option plan of Operating Company.
14. Compliance with Laws. The granting and vesting of the Option under
--------------------
this Agreement and the offer, issuance and delivery of Paired Shares (or Common
Stock) pursuant to this Option are subject to compliance with all applicable
federal and state laws, rules and regulations (including, but not limited to,
state and federal securities laws (including, but not limited to, registration
and qualification requirements thereunder) and federal margin requirements) and
to such approvals by any listing, regulatory or governmental authority as may,
in the opinion of counsel for the Company, be necessary or advisable in
connection therewith. Any securities delivered under this Agreement shall be
subject to such restrictions, and the Optionee shall, if requested by the
Company, provide such assurances and representations to the Company as the
Company may deem necessary or desirable to assure compliance with all applicable
legal requirements.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
on its behalf by a duly authorized officer and the Optionee has hereunto set his
or her hand as of the day and year first above written.
SANTA ANITA REALTY ENTERPRISES, INC.
By: /s/ Thomas P. Mullaney
-------------------------------------
Thomas P. Mullaney
Chairman of the Compensation Committee
OPTIONEE
/s/ William C. Baker
------------------------------------------
(Signature)
William C. Baker
-------------------------------------------
(Print Name)
3 Lochmoor Lane
-------------------------------------------
(Address)
Newport Beach, CA 92660
-------------------------------------------
(City, State, Zip Code)
###-##-####
-------------------------------------------
(Social Security Number)
7
<PAGE>
CONSENT OF SPOUSE
-----------------
In consideration of the execution of the foregoing Nonstatutory Stock
Option Agreement by Santa Anita Realty Enterprises, Inc., I, Janice H. Baker,
---------------
the spouse of the Optionee herein named, do hereby join with my spouse in
executing the foregoing Nonstatutory Stock Option Agreement and do hereby agree
to be bound by all of the terms and provisions thereof.
Date: 4-1-96 /s/ Janice H. Baker
------------ ------------------------
Signature of Spouse
8
<PAGE>
EXHIBIT 10.6
RESIGNATION AND GENERAL RELEASE AGREEMENT
-----------------------------------------
In consideration of the covenants undertaken and releases contained in this
Resignation and General Release Agreement (the "Agreement"), Frederick B.
Cordova, III ("Employee") and Santa Anita Realty Enterprises, Inc. ("SARE"),
agree as follows:
Employee hereby resigns, effective April 30, 1996, from his position as
Vice President of SARE. Employee shall cease to accrue any vacation or other
employee payments or benefits beyond April 30, 1996. SARE shall pay to Employee
on or before April 30, 1996, his accrued but unpaid salary through April 30,
1996, his accrued and unused vacation to April 30, 1996 (which SARE and Employee
agree is two weeks) and $5,000 as severance and reimbursement of costs
associated with Employee's resignation. Employee shall have the option to
convert and continue his health insurance after April 30, 1996, as may be
required or authorized by law under the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA"). In addition, as additional severance, SARE
shall pay or provide the following to Employee: (1) for each of the calendar
months of May 1996, June 1996 and July 1996, SARE shall pay to Employee
$8,666.67, payable semimonthly in accordance with SARE's customary practices for
payment of payroll to employees; (2) for each of the months of August 1996,
September 1996 and October 1996, SARE shall pay to Employee $8,666.67, payable
semimonthly in accordance with SARE's customary practices for payment of payroll
to employees, provided, however, that such payments pursuant to this subclause
(2) shall cease in the event Employee has accepted employment with another
entity in which case the obligations under this subclause (2) shall terminate
effective with such acceptance of employment; (3) for each of the calendar
months during which a payment is due to Employee by SARE pursuant to subclause
(1) or (2) above, SARE shall pay to Employee an expense allowance of $1,200; (4)
for each of the calendar months during which a payment is due to Employee by
SARE pursuant to subclause (1) or (2) above, SARE shall pay no more than $830 to
SARE's insurance provider for Employee's costs for medical and dental insurance
premiums pursuant to Employee's election for coverage under COBRA; (5) for each
of the calendar months during which a payment is due to Employee by SARE
pursuant to subclause (1) or (2) above, SARE shall provide for Employee's use, a
laptop computer, a compatible printer and a pager; and (6) for each of the
calendar months during which a payment is due to Employee by SARE pursuant to
subclause (1) or (2) above, SARE shall arrange for a SARE employee to answer
Employee's telephone extension and direct personal callers to a dedicated voice
mail line, which dedicated voice mail line Employee will be able to access from
outside of SARE
1
<PAGE>
premises. All amounts payable to Employee shall be subject to standard
withholding and Employee authorized deductions. In the event the obligations
arising under subclause (2) above are terminated prior to the last day of a
payment period, compensation and reimbursement due to Employee shall be prorated
for the portion of the payment period in which the obligations under subclause
(2) were in effect. In addition, Employee may maintain funds in his account in
the SARE Thrift Plan in accordance with the terms of the Thrift Plan which
provide for a period of retention for up to one year from Employee's date of
termination of employment with SARE. Notwithstanding that Employee's resignation
is effective April 30, 1996, SARE and Employee have agreed that Employee shall
remove his personal items from SARE's offices by April 26, 1996 and shall have
no further obligation to, and shall not, be present in such offices after April
26, 1996. Employee agrees to return the equipment provided pursuant to subclause
(5) within ten days of the termination of SARE's obligations to provide such
equipment. Each of SARE and Employee agrees and acknowledges that the payments
made by SARE pursuant to subclause (4) above are made in the good faith belief
that such payments are excluded from income for federal and/or state tax
purposes and, consequently, are not taxable income; in the event that any
taxation authority rules otherwise with respect to the payments made by SARE,
Employee hereby agrees to indemnify and hold harmless SARE and its successors
and employees from and against any taxes, penalties and interest required to be
paid by such taxation authority.
Except for those obligations created by or arising out of this Agreement,
Employee hereby acknowledges full and complete satisfaction of, and releases and
discharges and covenants not to sue SARE, its divisions, subsidiaries, parent,
affiliated corporations, past and present, and each of them, as well as their
directors, officers, shareholders, representatives, assignees, successors,
agents and employees, past and present, and each of them, (individually and
collectively, "SARE Releasees") from and with respect to any and all claims,
wages, agreements, obligations, demands and causes of action, known or unknown,
suspected or unsuspected, arising out of or in any way connected with his
employment relationship with, or his separation or resignation from, SARE,
including, without limiting the generality of the foregoing, any claim for
severance pay, bonus or similar benefit, sick leave, pension, retirement,
vacation pay, life insurance, health or medical insurance or any other fringe
benefit, workers' compensation or disability, or any other occurrences, acts or
omissions whatever, known or unknown, suspected or unsuspected, resulting from
any act or omission by or on the part of SARE Releasees committed or omitted
prior to the date of this Agreement, including, without limiting the generality
of the foregoing, any claim under Title VII of the Civil Rights Act of 1964, the
Age Discrimination in Employment Act, the
2
<PAGE>
Americans with Disabilities Act, the California Fair Employment and Housing Act
or any other federal, state or local law, regulation or ordinance, provided,
however, this release does not affect any rights Employee may have in any 401
(k) plan or any other retirement benefit accruing from Employee's employment
with SARE.
Except for those obligations created by or arising out of this Agreement,
SARE hereby acknowledges full and complete satisfaction of, and releases and
discharges and covenants not to sue Employee and his representatives, assignees,
successors, and agents, past and present, and each of them, (individually and
collectively, "Employee Releasees") from and with respect to any and all claims,
wages, agreements, obligations, demands and causes of action, known or unknown,
suspected or unsuspected, arising out of or in any way connected with his
employment relationship with, or his separation or resignation from, SARE,
including, without limiting the generality of the foregoing, any claim for
severance pay, bonus or similar benefit, sick leave, pension, retirement,
vacation pay, life insurance, health or medical insurance or any other fringe
benefit, workers' compensation or disability, or any other occurrences, acts or
omissions whatever, known or unknown, suspected or unsuspected, resulting from
any act or omission by or on the part of Employee Releasees committed or omitted
prior to the date of this Agreement, including, without limiting the generality
of the foregoing, any claim under Title VII of the Civil Rights Act of 1964, the
Age Discrimination in Employment Act, the Americans with Disabilities Act, the
California Fair Employment and Housing Act or any other federal, state or local
law, regulation or ordinance, provided, however, this release does not affect
any rights SARE may have with respect to (a) criminal actions by Employee, (b)
actions taken by Employee which were not taken in good faith and in a manner he
reasonably believed to be in the best interests of SARE or its shareholders or
(c) claims which are based upon facts which give rise to a recovery by SARE
under any applicable policies of insurance solely as a result of acts or
omissions by Employee and as to which the insurer has a right to subrogation
against Employee. SARE acknowledges that it currently has no actual knowledge of
any claims described in subclause (c) above or of any facts which may give rise
to such claims.
Employee acknowledges that, by reason of his position with SARE, he has
been given access to lists of customers, vendors, prices, business plans and
similar confidential or proprietary materials, or information respecting SARE's
business affairs. Employee represents that he will hold all such information
confidential and will continue to do so, and that he will not use such
information and relationships for any business (which term herein includes a
partnership, firm, corporation or any other entity) without the prior
3
<PAGE>
written consent of SARE. Employee shall return to SARE and shall not make or
copy in any form or manner lists of customers, prices, business plans and
similar confidential and proprietary materials or information. Employee
additionally agrees to cooperate fully and to take all such additional actions
as may be necessary to retrieve such information from all files and/or computer
hard drives or floppy disks. Notwithstanding the foregoing, Employee shall be
entitled to keep, use and/or disclose all information contained in his "Rolodex"
which he used while employed by SARE as well as those certain documents listed
on Exhibit A attached hereto and made a part hereof for purposes of securing any
future employment.
This Agreement is intended to be effective as a bar to every claim, demand
and cause of action stated above. Employee and SARE each acknowledges that he or
it may hereafter discover claims or facts in addition to or different from those
which he or it now knows or believes to exist with respect to the subject
matter of this Agreement and which, if known or suspected at the time of
executing this Agreement, may have materially affected the terms of this
Agreement. Nevertheless, Employee and SARE each hereby expressly waives any
rights and benefits conferred by Section 1542 of the California Civil Code,
------------ ---------------------
which provides that, "A GENERAL RELEASE DOES NOT EXTEND TO A CLAIM WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING
THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT
WITH THE DEBTOR."
Employee and SARE each agrees that the terms and conditions of this
Agreement shall remain confidential as between the parties and he or it, as the
case may be, shall not disclose them to any other person except as is required
by law or pursuant to a valid court order. In addition, Employee and SARE may
disclose the terms and conditions of this Agreement to his or its respective
legal, accounting and tax advisers and SARE may disclose such to any employee on
a "need to know basis". Without limiting the generality of the foregoing, each
of Employee and SARE agrees not to respond to or in any way participate in or
contribute to any public discussion, notice or other publicity concerning, or in
any way relating to, execution of this Agreement or the events (including any
negotiations) which led to its execution. Without limiting the generality of the
foregoing and except as permitted by the foregoing, each of Employee and SARE
specifically agrees that he or it shall not disclose information regarding this
Agreement to any current or former employee of SARE Releasees. Employee and SARE
each hereby agrees that disclosure by him or it of any of the terms and
conditions of the Agreement in violation of the foregoing shall constitute and
be treated as a material breach of this Agreement. Notwithstanding the foregoing
or any other provision of
4
<PAGE>
this Agreement, SARE agrees to furnish promptly upon request by Employee, from
time to time, letters of reference in the form attached hereto as Exhibit B
addressed to such prospective employers as Employee may designate and personally
signed by an officer of SARE with the title of Executive Vice President or
higher.
Notwithstanding any other provision of this Agreement, SARE agrees
that following April 30, 1996, Employee shall continue to have all rights to
indemnification to the maximum extent permitted by Article VIII of SARE's By-
laws.
This instrument constitutes and contains the entire agreement and
understanding concerning Employee's employment, voluntary resignation from the
same and the other subject matters addressed herein between the parties, and
supersedes and replaces all prior negotiations and all agreements proposed or
otherwise, whether written or oral, concerning the subject matters hereof. This
is an integrated document.
If any provision of this Agreement or its application is held invalid, the
invalidity shall not affect other provisions or applications of the Agreement
which can be given effect without the invalid provisions or application and,
therefore, the provisions of this Agreement are declared to be severable.
The undersigned have read and understand the consequences of this
Agreement and voluntarily sign it. The undersigned declare under penalty of
perjury that the foregoing is true and correct.
EXECUTED as of the dates set forth below in Los Angeles County, California.
SANTA ANITA REALTY ENTERPRISES, INC. EMPLOYEE
By /s/ Brian L. Fleming /s/ Frederick B. Cordova, III
------------------------------------ ------------------------------
Brian L. Fleming Frederick B. Cordova, III
Executive Vice President
301 W. Huntington Drive, Suite 405 1960 Lombardy Drive
Arcadia, Calif. 91007 La Canada, Calif. 91011
Date: 4/30, 1996 Date: April 30, 1996
---- --------
5
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SANTA ANITA
REALTY ENTERPRISES, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000314661
<NAME> SANTA ANITA REALTY ENTERPRISES
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 591,000
<SECURITIES> 0
<RECEIVABLES> 843,000
<ALLOWANCES> (388,000)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 92,447,000
<DEPRECIATION> (43,069,000)
<TOTAL-ASSETS> 85,548,000
<CURRENT-LIABILITIES> 0
<BONDS> 28,263,000
0
0
<COMMON> 1,138,000
<OTHER-SE> 29,494,000
<TOTAL-LIABILITY-AND-EQUITY> 85,548,000
<SALES> 0
<TOTAL-REVENUES> 9,322,000
<CGS> 0
<TOTAL-COSTS> 690,000
<OTHER-EXPENSES> 1,965,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 944,000
<INCOME-PRETAX> 5,723,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 5,723,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,723,000
<EPS-PRIMARY> 0.50
<EPS-DILUTED> 0.00
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SANTA ANITA
OPERATING COMPANY AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000313749
<NAME> SANTA ANITA OPERATING COMPANY
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 6,540,000
<SECURITIES> 16,147,000
<RECEIVABLES> 5,401,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 33,248,000
<PP&E> 44,640,000
<DEPRECIATION> (26,725,000)
<TOTAL-ASSETS> 53,825,000
<CURRENT-LIABILITIES> 35,412,000
<BONDS> 1,525,000
0
0
<COMMON> 1,127,000
<OTHER-SE> 12,618,000
<TOTAL-LIABILITY-AND-EQUITY> 53,825,000
<SALES> 0
<TOTAL-REVENUES> 38,267,000
<CGS> 0
<TOTAL-COSTS> 31,605,000
<OTHER-EXPENSES> 4,231,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 73,000
<INCOME-PRETAX> 2,358,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,358,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,358,000
<EPS-PRIMARY> 0.21
<EPS-DILUTED> 0.00
</TABLE>
