<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 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 ENTERPRISES, INC. SANTA ANITA OPERATING COMPANY
- ------------------------------------ ------------------------------------
(Exact name of registrant as (Exact name of registrant as
specified in its charter) specified in its charter)
Delaware Delaware
- ------------------------------------ ------------------------------------
(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization)
95-3520818 95-3419438
- ------------------------------------ ------------------------------------
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
301 West Huntington Drive, 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 number, (Registrant's telephone number,
including area code) including area code)
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. Yes X No
---- ----
The number of shares outstanding of each of the issuers' classes of common
stock, as of the close of business on August 7, 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> <C>
PART I. FINANCIAL INFORMATION 3
THE SANTA ANITA COMPANIES
Combined Balance Sheets as of June 30, 1996 and
December 31, 1995 4
Combined Statements of Operations for the three months
and six months ended June 30, 1996 and 1995 5
Combined Statements of Cash Flows for the six months
ended June 30, 1996 and 1995 6
SANTA ANITA REALTY ENTERPRISES, INC.
Consolidated Balance Sheets as of June 30, 1996 and
December 31, 1995 7
Consolidated Statements of Operations for the three
months and six months ended June 30, 1996 and 1995 8
Consolidated Statements of Cash Flows for the six months
ended June 30, 1996 and 1995 9
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets as of June 30, 1996 and
December 31, 1995 10
Consolidated Statements of Operations for the three
months and six months ended June 30, 1996 and 1995 11
Consolidated Statements of Cash Flows for the six months
ended June 30, 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 21
SIGNATURES 23
</TABLE>
2
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC. AND
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
FORM 10-Q
FOR THE SIX MONTHS ENDED ENDED JUNE 30, 1996
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying balance sheets as of June 30, 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 and six months
ended June 30, 1996 and 1995, and the related statements of cash flows for the
six months ended June 30, 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>
JUNE 30, DECEMBER 31,
1996 1995
------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
Real estate assets
Santa Anita Racetrack, less accumulated
depreciation of $20,877,000 and $20,216,000 $ 8,369,000 $ 9,030,000
Commercial properties, less accumulated
depreciation of $3,987,000 and $3,631,000 10,010,000 10,342,000
Commercial properties to be sold, less
accumulated depreciation of $13,467,000 and
$16,737,000 21,022,000 27,337,000
Investments in and advances to unconsolidated
joint ventures 1,802,000 3,166,000
Real estate loans receivable 10,814,000 10,954,000
------------- -------------
52,017,000 60,829,000
Cash 193,000 11,355,000
Short-term investments, at cost (approximates
market) 9,468,000 2,522,000
Accounts receivable 4,766,000 3,771,000
Prepaid expenses and other assets 7,612,000 6,494,000
Investment in Pacific Gulf Properties Inc. - 12,967,000
Property, plant and equipment, less accumulated
depreciation of $27,341,000 and $24,968,000 17,728,000 19,233,000
------------- -------------
$ 91,784,000 $ 117,171,000
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Real estate loans payable $ 22,295,000 $ 28,389,000
Bank loans payable 3,611,000 22,685,000
Accounts payable 6,278,000 11,208,000
Other liabilities 16,901,000 16,990,000
Income taxes - 326,000
Dividends payable 2,254,000 2,254,000
Deferred revenues 2,198,000 2,379,000
Deferred income taxes 1,229,000 1,239,000
------------- -------------
54,766,000 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
Unearned compensation expense (854,000) (1,209,000)
Retained earnings (deficit) (100,933,000) (105,895,000)
------------- -------------
37,018,000 31,701,000
------------- -------------
$ 91,784,000 $ 117,171,000
============= =============
</TABLE>
See accompanying notes.
4
<PAGE>
THE SANTA ANITA COMPANIES
COMBINED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
-------------------------- --------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
(Restated) (Restated)
<S> <C> <C> <C> <C>
Revenues
Horse racing $13,891,000 $15,333,000 $51,972,000 $52,174,000
Rental property 1,971,000 2,125,000 3,987,000 4,255,000
Interest and other 384,000 512,000 1,073,000 1,110,000
----------- ----------- ----------- -----------
16,246,000 17,970,000 57,032,000 57,539,000
----------- ----------- ----------- -----------
Costs and expenses
Horse racing operating costs 10,309,000 10,769,000 35,199,000 34,433,000
Rental property operating expenses 682,000 643,000 1,372,000 1,235,000
Depreciation and amortization 982,000 1,441,000 3,457,000 4,702,000
General and administrative 1,925,000 2,126,000 5,292,000 5,585,000
Interest and other 753,000 1,205,000 1,704,000 2,416,000
Costs of equity offering - 750,000 - 750,000
Losses from unconsolidated
joint ventures 199,000 334,000 538,000 936,000
----------- ----------- ----------- -----------
14,850,000 17,268,000 47,562,000 50,057,000
----------- ----------- ----------- -----------
Net income $ 1,396,000 $ 702,000 $ 9,470,000 $ 7,482,000
=========== =========== =========== ===========
Weighted average number of common
shares outstanding 11,270,500 11,168,904 11,270,500 11,156,448
=========== =========== =========== ===========
Net income per common share $ .12 $ .06 $ .84 $ .67
=========== =========== =========== ===========
Dividends declared per common share $ .20 $ .20 $ .40 $ .40
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
5
<PAGE>
THE SANTA ANITA COMPANIES
COMBINED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
------------ -----------
(Restated)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 9,470,000 $ 7,482,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,457,000 4,702,000
Amortization of unearned compensation
expense 355,000 377,000
Equity in losses of unconsolidated joint
ventures 538,000 936,000
Equity in earnings from investment in
Pacific Gulf Properties Inc. - (177,000)
Deferred income taxes (404,000) 68,000
Net increase in certain other assets (591,000) (1,624,000)
Net decrease in certain other liabilities (5,132,000) (5,568,000)
------------ -----------
Net cash provided by operating activities 7,693,000 6,196,000
------------ -----------
Cash flows from investing activities:
Payments received on loans receivable 143,000 385,000
Additions and improvements to real estate
assets (717,000) (992,000)
Additions to property, plant and equipment (868,000) (1,965,000)
Additions to certain other assets (1,859,000) (3,225,000)
Investments in and advances to unconsolidated
joint ventures (734,000) (1,831,000)
Capital distributions from unconsolidated
joint ventures 1,560,000 1,603,000
Sale of Pacific Gulf Properties Inc. common
stock 12,139,000 -
Sale of Phoenix properties 8,103,000 -
Dividends received from Pacific
Gulf Properties Inc. in 1995 - 612,000
------------ -----------
Net cash provided by (used in)
investing activities 17,767,000 (5,413,000)
------------ -----------
Cash flows from financing activities:
Proceeds from bank loans payable - 4,300,000
Repayment of real estate loans payable (6,094,000) (293,000)
Repayment of bank loans payable (19,074,000) (388,000)
Dividends paid (4,508,000) (4,458,000)
Issuance of common stock from
restricted stock awards - 13,000
------------ -----------
Net cash used in financing activities (29,676,000) (826,000)
------------ -----------
Net decrease in cash and cash equivalents (4,216,000) (43,000)
Cash and cash equivalents at beginning of year 13,877,000 15,094,000
------------ -----------
Cash and cash equivalents at June 30, $ 9,661,000 $15,051,000
============ ===========
</TABLE>
See accompanying notes.
6
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
(Unaudited)
ASSETS
Real estate assets
Santa Anita Racetrack, less accumulated
depreciation of $20,877,000 and
$20,216,000 $ 8,369,000 $ 9,030,000
Commercial properties, less accumulated
depreciation of $4,454,000 and $4,068,000 12,685,000 13,047,000
Commercial properties to be sold, less
accumulated depreciation of $14,815,000
and $18,085,000 21,337,000 27,652,000
Investments in and advances to
unconsolidated joint ventures 1,802,000 3,166,000
Real estate loans receivable 10,814,000 10,954,000
------------ ------------
55,007,000 63,849,000
Cash 125,000 167,000
Accounts receivable 434,000 658,000
Prepaid expenses and other assets 7,500,000 5,726,000
Investment in Pacific Gulf Properties Inc. - 12,967,000
------------ ------------
$ 63,066,000 $ 83,367,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Real estate loans payable $ 22,295,000 $ 28,389,000
Bank loans payable 2,300,000 20,950,000
Accounts payable 425,000 420,000
Other liabilities 4,637,000 5,274,000
Dividends payable 2,277,000 2,277,000
Due to Operating Company 2,995,000 415,000
------------ ------------
34,929,000 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
Retained earnings (deficit) (91,882,000) (94,377,000)
------------ ------------
28,137,000 25,642,000
------------ ------------
$ 63,066,000 $ 83,367,000
============ ============
</TABLE>
See accompanying notes.
7
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
---------------------------- --------------------------
1996 1995 1996 1995
------------ ------------- ----------- ------------
(Restated) (Restated)
<S> <C> <C> <C> <C>
Revenues
Rent from Racetrack $ 1,992,000 $ 2,374,000 $ 8,707,000 $ 8,852,000
Shopping centers 936,000 1,118,000 1,949,000 2,230,000
Office buildings 1,035,000 1,007,000 2,038,000 2,025,000
Interest and other 277,000 296,000 868,000 754,000
----------- ----------- ----------- -----------
4,240,000 4,795,000 13,562,000 13,861,000
----------- ----------- ----------- -----------
Costs and expenses
Shopping centers 254,000 269,000 531,000 510,000
Office buildings 428,000 374,000 841,000 725,000
Depreciation and amortization 381,000 931,000 1,114,000 2,133,000
General and administrative 897,000 737,000 1,790,000 1,496,000
Interest and other 756,000 1,118,000 1,700,000 2,238,000
Costs of equity offering - 700,000 - 700,000
Losses from unconsolidated joint
ventures 199,000 334,000 538,000 936,000
----------- ----------- ----------- -----------
2,915,000 4,463,000 6,514,000 8,738,000
----------- ----------- ----------- -----------
Net income $ 1,325,000 $ 332,000 $ 7,048,000 $ 5,123,000
=========== =========== =========== ===========
Weighted average number of common
shares outstanding 11,383,000 11,281,404 11,383,000 11,268,948
=========== =========== =========== ===========
Net income per common share $ .12 $ .03 $ .62 $ .45
=========== =========== =========== ===========
Dividends declared per common share $ .20 $ .20 $ .40 $ .40
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
8
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
------------ -----------
(Restated)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 7,048,000 $ 5,123,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,114,000 2,133,000
Equity in losses of unconsolidated joint
ventures 538,000 936,000
Equity in earnings from investment in
Pacific Gulf Properties Inc. - (177,000)
Net increase in certain other assets (28,000) (440,000)
Net (decrease) increase in certain other
liabilities (632,000) 246,000
------------ -----------
Net cash provided by operating activities 8,040,000 7,821,000
------------ -----------
Cash flows from investing activities:
Payments received on loans receivable 143,000 385,000
Additions and improvements to real estate assets (717,000) (992,000)
Additions to certain other assets (1,859,000) (3,225,000)
Investments in and advances to unconsolidated
joint ventures (734,000) (1,831,000)
Capital distributions from unconsolidated joint
ventures 1,560,000 1,603,000
Sale of Pacific Gulf Properties Inc. common
stock 12,139,000 -
Sale of Phoenix properties 8,103,000 -
Dividends received from Pacific Gulf Properties
Inc. in 1995 - 612,000
------------ -----------
Net cash provided by (used in) investing
activities 18,635,000 (3,448,000)
------------ -----------
Cash flows from financing activities:
Proceeds from bank loans payable - 4,300,000
Repayment of real estate loans payable (6,094,000) (293,000)
Repayment of bank loans payable (18,650,000) -
Increase (decrease) in due to Operating Company 2,580,000 (1,310,000)
Dividends paid (4,553,000) (4,503,000)
Issuance of common stock from restricted stock
awards - 13,000
------------ -----------
Net cash used in financing activities (26,717,000) (1,793,000)
------------ -----------
Net (decrease) increase in cash and cash
equivalents (42,000) 2,580,000
Cash at beginning of year 167,000 2,251,000
------------ -----------
Cash and cash equivalents at June 30, $ 125,000 $ 4,831,000
============ ===========
</TABLE>
See accompanying notes.
9
<PAGE>
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
(Unaudited)
ASSETS
Current assets
Cash $ 68,000 $11,188,000
Short-term investments, at cost
(approximates market) 9,468,000 2,522,000
Accounts receivable 4,332,000 3,113,000
Prepaid expenses and other assets 121,000 777,000
Due from Realty 2,995,000 415,000
----------- -----------
Total current assets 16,984,000 18,015,000
Investment in common stock of Realty 2,122,000 2,122,000
Property, plant and equipment, less
accumulated depreciation of $27,341,000
and $24,968,000 17,728,000 19,233,000
----------- -----------
$36,834,000 $39,370,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 5,853,000 $10,788,000
Other liabilities 12,241,000 11,693,000
Bank loans payable 908,000 868,000
Income taxes - 326,000
----------- -----------
Total current liabilities 19,002,000 23,675,000
Bank loans payable 403,000 867,000
Deferred revenues 2,198,000 2,379,000
Deferred income taxes 1,229,000 1,239,000
----------- -----------
22,832,000 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 (854,000) (1,209,000)
Retained earnings (deficit) (7,007,000) (9,444,000)
----------- -----------
14,002,000 11,210,000
----------- -----------
$36,834,000 $39,370,000
=========== ===========
</TABLE>
See accompanying notes.
10
<PAGE>
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- ---------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues
Wagering commissions $ 8,257,000 $ 9,366,000 $35,611,000 $35,750,000
Admission related 5,634,000 5,967,000 16,361,000 16,424,000
Interest and other 202,000 239,000 388,000 401,000
----------- ----------- ----------- -----------
14,093,000 15,572,000 52,360,000 52,575,000
----------- ----------- ----------- -----------
Costs and expenses
Horse racing operating costs 10,309,000 10,769,000 35,199,000 34,433,000
Depreciation and amortization 616,000 553,000 2,373,000 2,655,000
General and administrative 1,028,000 1,439,000 3,502,000 4,139,000
Interest 69,000 87,000 142,000 178,000
Rental expense to Realty 1,992,000 2,374,000 8,707,000 8,852,000
----------- ----------- ----------- -----------
14,014,000 15,222,000 49,923,000 50,257,000
----------- ----------- ----------- -----------
Net income $ 79,000 $ 350,000 $ 2,437,000 $ 2,318,000
=========== =========== =========== ===========
Weighted average number of common
shares outstanding 11,270,500 11,168,904 11,270,500 11,156,448
=========== =========== =========== ===========
Net income per common share $ .01 $ .03 $ .22 $ .21
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
11
<PAGE>
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
------------ -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,437,000 $ 2,318,000
Adjustments to reconcile net income
to net cash used in operating
activities:
Depreciation and amortization 2,373,000 2,655,000
Amortization of unearned
compensation expense 355,000 377,000
Deferred income taxes (404,000) 68,000
Net increase in certain other
assets (563,000) (1,184,000)
Net decrease in certain other
liabilities (4,500,000) (5,814,000)
----------- -----------
Net cash used in operating activities (302,000) (1,580,000)
----------- -----------
Cash flows from investing activities:
Additions to property, plant and
equipment (868,000) (1,965,000)
----------- -----------
Cash flows from financing activities:
Repayment of bank loans payable (424,000) (388,000)
(Increase) decrease in due from Realty (2,580,000) 1,310,000
----------- -----------
Net cash (used in) provided by
financing activities (3,004,000) 922,000
----------- -----------
Net decrease in cash and cash
equivalents (4,174,000) (2,623,000)
Cash and cash equivalents at beginning
of year 13,710,000 12,843,000
----------- -----------
Cash and cash equivalents at June 30, $ 9,536,000 $10,220,000
=========== ===========
</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 six months
ended June 30, 1996, relating to the non-core real estate assets. The six months
ended June 30, 1996 includes income of $745,000 relating to the non-core real
estate assets.
On June 3, 1996, Realty completed the sale of the three neighborhood
shopping centers located in Phoenix, Arizona, for $8,103,000, net of commissions
and fees. No gain or loss was recorded on the sale.
NOTE 3 - INVESTMENT IN PACIFIC GULF PROPERTIES INC.
As of 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.
On May 30, 1996, Realty sold its shares of Pacific common stock pursuant
to the terms of an underwritten, registered public offering, at a gross selling
price of $16.375 per share. No gain or loss was recorded on the transaction.
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 June 30, 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 six months ended
June 30, 1995 or shareholders' equity as of June 30, 1995, but did have the
effect of reducing Realty's assets and liabilities by $59,649,000 at June 30,
1995, and of reducing Realty's revenues and expenses by $5,781,000 for the six
months ended June 30, 1995.
Combined condensed financial statement information for unconsolidated
joint ventures as of June 30, 1996 and December 31, 1995, and for the six months
ended June 30, 1996 and 1995, is as follows (unaudited except for financial
statement information as of December 31, 1995):
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
-------------- --------------
<S> <C> <C>
Real estate assets $259,297,000 $258,952,000
============ ============
Liabilities
Secured real estate loans $241,933,000 $242,332,000
Other 5,284,000 5,515,000
------------ ------------
$247,217,000 $247,847,000
============ ============
Partners' equity
Realty $ 6,599,000 $ 6,157,000
Others 5,481,000 4,948,000
------------ ------------
$ 12,080,000 $ 11,105,000
============ ============
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1996 1995
------------ ------------
(Restated)
Revenues $ 18,224,000 $ 16,717,000
============ ============
Net Loss
Realty $ (538,000) $ (936,000)
Others (1,455,000) (1,958,000)
------------ ------------
$ (1,993,000) $ (2,894,000)
============ ============
</TABLE>
14
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5 - SANTA ANITA ENTERTAINMENT CENTER
In April 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 June 30, 1996,
"Prepaid Expenses and Other Assets" in the Realty Balance Sheet includes
$5,175,000 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
second quarter and six months ended June 30, 1996 and 1995, together with
liquidity and capital resources as of June 30, 1996.
RESULTS OF OPERATIONS - SECOND QUARTER 1996 COMPARED WITH SECOND
QUARTER 1995
Realty's revenues are derived principally from the rental of real property.
Total revenues for the three months ended June 30, 1996 were $4,240,000,
compared with $4,795,000 for the three months ended June 30, 1995, a decrease of
11.6%. The lower 1996 revenues were due primarily to a decrease in Santa Anita
Racetrack rental revenues and a decrease in rental revenues from the other real
estate investments.
The most significant source of rental revenue is the lease of Santa Anita
Racetrack. Racetrack rental revenues for 1996 were $1,992,000, a decrease of
16.1% from revenues of $2,374,000 in 1995. The decrease in rental revenues was
due to the decrease in total wagering resulting from fewer race days.
Rental revenues from other real estate investments in 1996 were $1,971,000,
a decrease of 7.2% from revenues of $2,125,000 in 1995. The decrease in 1996
was due primarily to the sale of the three neighborhood shopping centers located
in Phoenix, Arizona, effective June 3, 1996.
Costs and expenses for 1996 were $2,915,000, a decrease of 22.5% from costs
and expenses of $3,763,000 in 1995 (excluding the costs of an equity offering
which was withdrawn). The decrease resulted primarily from decreases in
depreciation and amortization expense of $550,000 and interest and other expense
of $362,000.
The decrease in depreciation and amortization expense was due to no
depreciation expense being taken in 1996 on the assets held for sale, which
treatment is in accordance with FAS No. 121. The decrease in interest and other
expense is due to payoff of the mortgage loan on the Santa Anita office building
in November 1995, payoff of the mortgage loans on the three Phoenix shopping
centers, effective June 3, 1996, and pay down of borrowings under the revolving
credit agreement in May 1996, utilizing proceeds from the sale of Pacific common
stock.
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1996 COMPARED WITH
SIX MONTHS ENDED JUNE 30, 1995
Total revenues for the six months ended June 30, 1996 were $13,562,000,
compared with $13,861,000 for the six months ended June 30, 1995, a decrease of
2.2%. The lower 1996 revenues were due primarily to a decrease in Santa Anita
Racetrack rental revenues and a decrease in rental revenues from the real estate
investments.
Racetrack rental revenues for 1996 were $8,707,000, a decrease of 1.6% from
revenues of $8,852,000 in 1995. The decrease in rental revenues was due to the
decrease in on-track and California satellite wagering partially offset by the
increase in out-of-state wagering.
Rental revenues from other real estate investments in 1996 were $3,987,000,
a decrease of 6.3% from revenues of $4,255,000 in 1995. The decrease in 1996
was due primarily to the sale of the three neighborhood shopping centers located
in Phoenix, Arizona, effective June 3, 1996.
Costs and expenses for 1996 were $6,514,000, a decrease of 19.0% from costs
and expenses of $8,038,000 in 1995 (excluding the costs of an equity offering
which was withdrawn). The decrease resulted primarily from decreases in
depreciation and amortization expense of $1,019,000 and interest and other
expense of $538,000.
16
<PAGE>
ITEM 2. MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1996 COMPARED WITH
SIX MONTHS ENDED JUNE 30, 1995 (CONTINUED)
The decrease in depreciation and amortization expense was due to no
depreciation expense being taken in 1996 on the assets held for sale, which
treatment is in accordance with FAS No.121. The decrease in interest expense is
due to payoff of the mortgage loan on the Santa Anita office building in
November 1995, payoff of the mortgage loans on the three Phoenix shopping
centers, effective June 3, 1996, and pay down of borrowings under the revolving
credit agreement in May 1996, utilizing proceeds from the sale of Pacific common
stock.
LIQUIDITY AND CAPITAL RESOURCES
Realty has funds available from a combination of short- and long-term
sources. Short-term sources included cash of $125,000 at June 30, 1996.
The decrease in cash for the six months ended June 30, 1996 was $42,000,
compared with an increase of cash of $2,580,000 for the six months ended June
30, 1995. The comparative decrease in cash of $2,622,000 was attributable to an
increase of $219,000 in cash provided by operating activities and an increase of
$22,083,000 in cash provided by investing activities, partially offset by an
increase of $24,924,000 in cash used in financing activities.
The increase in cash provided by operating activities of $219,000 was due
primarily to equity offering costs of $700,000 in 1995 and to a decrease in
other assets, primarily accounts receivable and prepaid expenses, of $28,000 in
1996 compared with a decrease in other assets, primarily accounts receivable and
prepaid expenses, of $440,000 in 1995. These increases in cash provided were
partially offset by a decrease in other liabilities, primarily accounts payable
and accrued liabilities, of $632,000 in 1996, compared with an increase in other
liabilities, primarily accounts payable and accrued liabilities, of $246,000 in
1995.
The increase in cash provided by investing activities of $22,083,000 in 1996
was due primarily to cash received on the sale of Pacific common stock of
$12,139,000 and on the sale of the Phoenix properties of $8,103,000, to a
decrease of $1,366,000 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, and to a decrease of $1,097,000 in investments in and
advances to unconsolidated joint ventures. These increases in cash provided
were partially offset by dividends of $612,000 received from Pacific in 1995.
The increase in cash used in financing activities of $24,924,000 in 1996 was
due primarily to repayment of borrowings under the revolving credit agreement of
$18,650,000 in 1996, compared with additional borrowings under the revolving
credit agreement of $4,300,000 in 1995, and to an increase in repayment of
mortgage loans payables of $5,801,000. These increases in cash used were
partially offset by an increase in intercompany payables of $2,580,000 in 1996,
compared with a decrease of $1,310,000 in 1995.
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. In June 1996, the revolving credit agreement was further extended
to February 1, 1997. At June 30, 1996, Realty had borrowed $2,300,000 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%.
Effective July 1, 1996, the interest rate spread on LIBOR and certificate of
deposit based borrowings was increased to 1 1/4%. Realty's Racetrack rental
revenues have been pledged as collateral under the credit agreement.
17
<PAGE>
ITEM 2. MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The revolving credit agreement contains a restriction on the payment of
dividends, in any twelve-months period, to the greater of $.80 per share or the
minimum amount necessary to maintain Realty's status as a real estate investment
trust or to avoid the imposition of federal income tax or excise tax. Realty's
current dividend policy is in compliance with this dividend restriction.
Additionally, at June 30, 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 second quarter and six months ended June 30, 1996 and 1995, together
with liquidity and capital resources as of June 30, 1996.
RESULTS OF OPERATIONS - SECOND QUARTER 1996 COMPARED WITH SECOND
QUARTER 1995
Operating Company derives its revenues from thoroughbred horse racing
activities. Horse racing revenues in the second quarter of 1996 were
$13,891,000, down 9.4% from $15,333,000 in 1995, primarily due to a decrease in
the number of race days, on-track attendance and total wagering.
In the second quarter of 1996, live thoroughbred horse racing at Santa Anita
Racetrack totaled 16 days compared with 19 days in the same period last year.
Total and average daily on-track attendance at the live racing events in the
second quarter of 1996 were down 15.9% and .1% from the comparable year ago
period. Total wagering in the second quarter of 1996 was down 8.0% while
average daily wagering was up 9.2% compared with the same period last year. The
major components of the wagering mix changed in the second quarter of 1996
compared with the same period last year as follows: total and average daily on-
track wagering decreased 18.2% and 2.8%; total and average daily wagering at
Southern California satellite locations decreased 19.6% and 4.5%; total and
average daily wagering at out-of-state locations increased 30.5% and 54.9%; and
total wagering at Northern California locations decreased 15.6% while average
daily wagering increased .2%
Also, in the second quarter ended June 30, Santa Anita Racetrack operated 51
days in 1996 and 48 days in 1995 as a satellite wagering facility for Hollywood
Park. Total attendance as a satellite wagering facility was up 2.1% while
average daily attendance was down 3.9% compared with the year ago period. Total
wagering was up 2.9% while average daily wagering was down 3.2% for the second
quarter of 1996 compared with the same period last year.
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.
Horse racing operating costs in the second quarter of 1996 were $10,309,000
(or 74.2% of horse racing revenues) compared with $10,769,000 (or 70.2% of horse
racing revenues) in the same period last year. The operating margin decline in
the second 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 second quarter of 1996 was $616,000, or $63,000
lower than the $553,000 in the comparable period last year. General and
administrative expenses were $1,028,000 in the second quarter of 1996, a
decrease of 28.5% from the $1,439,000 in the comparable period last year due to
lower shareholder related expenses and administrative salaries. Interest
expense decreased to $69,000 in the second quarter of 1996 from $87,000 in the
second quarter of 1995.
18
<PAGE>
ITEM 2. MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS - SECOND QUARTER 1996 COMPARED WITH SECOND
QUARTER 1995 (CONTINUED)
Rental expense to Realty was $1,992,000 in the second quarter of 1996
compared with $2,374,000 in the same period last year. The decrease in rental
expense of 16.1% was due to the decrease in total wagering resulting from fewer
race days. 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 second quarter of 1996 of $79,000 or $.01 per share,
compared with net income of $350,000 or $.03 per share for the same period in
1995.
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1996 COMPARED WITH
SIX MONTHS ENDED JUNE 30, 1995
Horse racing revenues in the first six months of 1996 were $51,972,000, down
.4% from $52,174,000 in 1995, primarily due to fewer live race days and lower
on-track attendance and wagering.
In the first six months of 1996, live thoroughbred horse racing at Santa
Anita Racetrack totaled 82 days compared with 83 days in the same period last
year. Total average daily on-track attendance at the live racing events in the
first six months of 1996 were down 5.5% and 4.3% from the comparable year ago
period. Total and average daily wagering in the first six months of 1996 were
up 4.6% and 5.8% compared with the same period last year. The major components
of the wagering mix changed in the first six months of 1996 compared with the
same period last year as follows: total and average daily on-track wagering
decreased 4.4% and 3.3%; total and average daily wagering at Southern California
satellite locations decreased 4.5% and 3.3%; total and average daily wagering
at out-of-state locations increased 35.4% and 37.1%; and total and average
wagering at Northern California locations decreased 5.4% and 4.2%.
Also, in the first six months of the year, Santa Anita Racetrack operated 51
days in 1996 and 48 days in 1995 as a satellite wagering facility for Hollywood
Park. Total attendance as a satellite wagering facility was up 2.1% while
average daily attendance was down 3.9% compared with the year ago period. Total
wagering was up 2.9% while average daily wagering was down 3.2% for the second
quarter of 1996 compared with the same period last year.
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.
Horse racing operating costs in the first six months of 1996 were
$35,199,000 (or 67.7% of horse racing revenues) compared with $34,433,000 (or
66.0% of horse racing revenues) in the same period last year. The operating
margin decline in the first six months 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 six months of 1996 was $2,373,000, or
$282,000 lower than the $2,655,000 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 $3,502,000 in the first six months of
1996, a decrease of 15.4% from the $4,139,000 in the comparable period last
year due to lower shareholder related expenses and administrative salaries.
Interest expense decreased to $142,000 in the first six months of 1996 from
$178,000 in the first six months of 1995.
19
<PAGE>
ITEM 2. MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1996 COMPARED WITH
SIX MONTHS ENDED JUNE 30, 1995 (CONTINUED)
Rental expense to Realty was $8,707,000 in the first six months of 1996
compared with $8,852,000 in the same period last year. The decrease in rental
expense of 1.6% was due to the decrease in on-track and California satellite
wagering partially offset by the increase in out-of-state 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 six months of 1996 of $2,437,000 or $.22 per
share, compared with net income of $2,318,000 or $.21 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 June 30, 1996, Operating Company's sources of liquidity included cash and
short-term investments of $9,536,000, together with a verbal commitment from
Realty to provide up to $10,000,000 in short-term borrowings. In addition,
Realty has guaranteed an Operating Company capital lease of $1,311,000.
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 six
months ended June 30, 1996, short-term investments earned interest income of
$340,000.
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 $1,551,000 less cash from operations in the
first six months of 1996 compared with the same period last year. Net cash used
by operating activities was $302,000 in 1996 compared with $1,580,000 in 1995.
The increase in cash from operating activities was primarily due to the accrual
of liabilities partially offset by the payment of California Franchise Taxes.
Net cash used in investment activities was $868,000 in the first six months
of 1996 compared with $1,965,000 in the same period last year. The $1,097,000
decrease in cash used in investment activities was attributable to a lower level
of capital improvements at Santa Anita Racetrack in 1996.
Net cash used in financing activities was $3,004,000 in the first six months
of 1996 compared with net cash provided by financing activities of $922,000 in
the same period last year. In the first six months of 1996, Operating Company
prepaid their rental payments due to Realty.
20
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC. AND
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1996
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 7, 1996, the annual meetings of shareholders of Santa Anita Realty
Enterprises, Inc. and Santa Anita Operating Company were held. At the Realty
meeting, the shareholders elected the five nominees for director and approved
the option awards to Realty's Chairman and Chief Executive Officer. At the
Operating Company meeting, the shareholders elected the five nominees for
director. The votes were cast as follows:
<TABLE>
<CAPTION>
REALTY FOR AGAINST ABSTENTION
- ------ --------- --------- ----------
<S> <C> <C> <C>
Option Awards 6,848,697 2,960,787 141,923
REALTY DIRECTORS FOR WITHHELD
- ---------------- --------- ---------
Thomas J. Barrack, Jr. 9,029,314 922,092
Richard S. Cohen 7,850,274 2,101,132
Arthur Lee Crowe 8,272,665 1,678,741
Taylor B. Grant 8,845,036 1,106,373
J. Terrence Lanni 9,058,898 892,508
OPERATING COMPANY DIRECTORS
- ---------------------------
Thomas J. Barrack, Jr. 9,061,761 889,645
Richard S. Cohen 7,850,170 2,101,236
Arthur Lee Crowe 8,271,872 1,679,534
Taylor B. Grant 8,848,743 1,102,663
J. Terrence Lanni 8,678,898 1,272,508
</TABLE>
21
<PAGE>
PART II. OTHER INFORMATION (CONTINUED)
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>
3.1 By-Laws of Santa Anita Operating Company, as amended through
May 1996.
4.1 Third Amendment dated as of July 1, 1996, to Credit Agreement
dated as of November 9, 1994 between First Interstate Bank of
California and Santa Anita Realty Enterprises, Inc.
10.1 Resignation and General Release Agreement between Santa Anita
Realty Enterprises, Inc. and Christopher T. Stirling dated
April 23, 1996.
10.2 Consulting Agreement between Santa Anita Realty Enterprises,
Inc. and Christopher T. Stirling dated April 23, 1996.
10.3 Amendment No. 1 to Employment Agreement between Santa Anita
Realty Enterprises, Inc. and Brian L. Fleming as of May 7,
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 June 30, 1996.
22
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Realty and Operating Company have duly caused this report
to be signed on their behalf by the undersigned, thereunto duly authorized.
SANTA ANITA REALTY ENTERPRISES, INC. SANTA ANITA OPERATING COMPANY
By: /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: August 9, 1996 Date: August 9, 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: August 9, 1996 Date: August 9, 1996
23
<PAGE>
EXHIBIT 3.1
REVISED 5/7/96
--------------
BY-LAWS
OF
SANTA ANITA OPERATING COMPANY
(a Delaware corporation)
ARTICLE I
Offices
Section 1.1. Registered Office. The registered office shall be in the
-----------------
City of Wilmington, County of New Castle, State of Delaware.
Section 1.2. Other Offices. The Corporation may also have offices at such
-------------
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
1
<PAGE>
ARTICLE II
Meetings of Stockholders
Section 2.1. Place. All meetings of the stock-holders for the election of
-----
directors shall be held at such place either within or without the State of
Delaware as shall be designated from time to time by the Board of Directors and
stated in the notice of the meeting. Meetings of stockholders for any other
purpose may be held at such time or place, within or without the State of
Delaware, as shall be stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
Section 2.2. Annual Meetings. The annual meetings of stockholders shall
---------------
be held on the third Thursday in May of each year at 10 o'clock A.M. of said
day, the first such meeting to be held on the third Thursday in May 1981;
provided, however, that should said day fall upon a legal holiday, then any such
annual meeting of stockholders shall be held at the same time and place on the
next day thereafter ensuing which is a full business day. At such
2
<PAGE>
meetings directors shall be elected, reports of the affairs of the Corporation
shall be considered, and any other business may be transacted which is within
the powers of the stockholders. If for any annual meeting the Board of Directors
shall fix a different day or hour, such action shall be deemed an amendment of
this Section 2.2 effective until the adjournment of that annual meeting sine
----
die.
- ---
Written notice of each annual meeting shall be given to each stockholder
entitled to vote, either personally or by mail or other means of written
communication, charges prepaid, addressed to such stockholder at
his address appearing on the books of the Corporation or given by him to the
Corporation for the purpose of notice. If a stockholder gives no address,
notice shall be deemed to have been given him if sent by mail or other means of
written communication addressed to the place where the principal office of the
Corporation is situated, or if published at least once in some newspaper of
general circulation in the county in which said office is located. All such
notices shall be sent to each stockholder entitled
3
<PAGE>
thereto not less than ten nor more than sixty days before each annual meeting.
Such notices shall specify the place, the day and the hour of such meeting and
shall state such other matters if any, as may be expressly required by statute.
Section 2.3. Special Meetings. Special meetings of the stockholders, for
----------------
any purpose or purposes whatsoever, may be called at any time by the Board of
Directors. Except in special cases where other express provision is made by
statute, notice of such special meetings shall be given in the same manner as
for annual meetings of stockholders. Notices of any special meeting shall
specify, in addition to the place, day and hour of such meeting, the general
nature of the business to be transacted.
Section 2.4. Business To Be Brought Before Meeting. In order to be
-------------------------------------
properly brought before any meeting of stockholders held pursuant to this
Article II, business (including the election of directors) must be (a) specified
in the notice of meeting (or any supplement thereto) given
4
<PAGE>
by or at the direction of the Board of Directors, (b) otherwise properly brought
before the meeting by or at the direction of the Board of Directors, or (c)
otherwise properly brought before the meeting by a stockholder. In order for any
such business to be properly brought before the meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the Secretary of
the Corporation. In order to be timely, a stockholder's notice must be received
at the principal executive offices of the Corporation not less than 60 days nor
more than 90 days prior to the meeting; provided, however, that in the event
that a meeting is called for a date other than that specified in the By-laws,
and less than 75 days' prior public disclosure of such date is given, notice by
the stockholder in order to be timely must be received by the Secretary of the
Corporation not later than the close of business on the fifteenth (15) calendar
day following the day on which such public disclosure of the date of the meeting
was made. If a stockholder intends to nominate a candidate or candidates for
director at any meeting of stockholders, such stockholder's notice to the
Secretary
5
<PAGE>
shall set forth the name, age, address and principal occupation of each such
nominee and the amount and type of the Corporation's stock held by each such
nominee, together with any additional information reasonably necessary to
determine the eligibility of each such nominee and any information required to
be disclosed in the solicitation of proxies in respect of each such nominee by
Schedule 14A, as amended from time to time, or other applicable Rules and
Regulations of the Securities and Exchange Commission. The notice to the
Secretary shall also set forth the name, address and the amount and type of
beneficial ownership of the Corporation's stock of the stockholder intending to
nominate the candidate or candidates identified in the notice to the Secretary.
Any stockholder desiring to bring any other business before any annual meeting
of stockholders shall set forth in such stockholder's notice to the Secretary
(i) a brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the meeting, (ii) the
name and record address of the stockholder proposing such business, (iii) the
class and number of shares of the Corporation's
6
<PAGE>
stock that are beneficially owned by such stockholder, and (iv) any material
interest of such stockholder in such business. In order to be properly brought
before any special meeting of stockholders (other than any special meeting held
for the purpose of electing directors), business must be specified in the notice
of meeting (or any supplement thereto) given by or at the direction of the Board
of Directors.
Notwithstanding anything in the By-laws to the contrary, no business
(including the election of directors) shall be conducted at the meeting except
in accordance with the procedures set forth in this Section 2.4; provided,
however, that nothing in this Section 2.4 shall preclude or be deemed or
construed to preclude discussion by any stockholder of any business properly
brought before the annual meeting of stockholders.
The Chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the meeting
in accordance with the provisions of this Section 2.4, and if he should so
7
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determine, he shall so declare to the meeting and any such business not properly
brought before the meeting shall not be transacted.
Section 2.5. List of Stockholders. The officer who has charge of the
--------------------
stock ledger of the Corporation shall prepare and make, at least ten days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, and showing the address of
each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten days prior to the meeting, either at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
8
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Section 2.6. Quorum. The holders of a majority of the stock issued and
------
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute. If, however,
such quorum shall not be present or represented at any meeting of stockholders,
the stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented any business may be transacted which might have been transacted at
the meeting as originally noticed. If the adjournment is for more than thirty
days or if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting.
Section 2.7. Questions Before Meeting. When a quorum is present at any
------------------------
meeting, the vote of the holders of
9
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a majority of the stock having voting power present in person or represented by
proxy shall decide any question brought before such meeting unless the question
is one upon which by express provision of the statutes, of these By-laws or of
the Certificate of Incorporation, a different vote is required, in which case
such express provision shall govern and control the decision of such question.
Section 2.8. Action Without Meeting. Any action required or permitted to
----------------------
be taken by holders of stock of the Corporation must be taken at a meeting of
such holders and may not be taken by consent in writing.
Section 2.9. Waiver of Notice. Whenever notice is required to be given
----------------
under the Delaware Corporation Law or the Certificate of Incorporation or the
By-laws, a written waiver, signed by the person entitled to notice, whether
before or after the time stated therein, shall be deemed equivalent to notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the person attends a meeting for the express
10
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purpose of objecting at the beginning of the meeting to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders, directors, or members of a committee of directors need be
specified in any written waiver of notice unless so required by the Certificate
of Incorporation.
ARTICLE III
Directors
Section 3.1. Size of Board. The Board of Directors shall consist of twelve
-------------
members, or as many as shall be determined from time to time by resolution of
the Board.
Section 3.2. Election of Directors. The directors shall be divided into
---------------------
three classes, designated Class I, Class II, and Class III, such classes to be
as nearly equal in number as possible. At the annual meeting
11
<PAGE>
of stockholders in 1986, directors of Class I shall be elected to hold office
for a term expiring at the next succeeding annual meeting, directors of Class II
shall be elected to hold office for a term expiring at the second succeeding
annual meeting, and directors of Class III shall be elected to hold office for a
term expiring at the third succeeding annual meeting. Thereafter at each annual
meeting of stockholders, directors shall be chosen for a term of three years to
succeed those whose terms then expire and shall hold office until the third
following annual meeting of stockholders and until the election of their
respective successors. Directors need not be stockholders.
Section 3.3. Vacancies. Vacancies and newly created directorships
---------
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director, and the directors so chosen shall hold office for the
unexpired term of the vacant directorship, or, in the case of any increase in
the number of directors, as designated by the directors then in office,
12
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consistent with the provisions of Section 3.2. If there are no directors in
office, then an election of directors may be held in the manner provided by
statute. If, at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole Board (as constituted immediately prior to any such increase), the
Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office.
No reduction of the authorized number of directors shall have the effect of
removing any director prior to the expiration of his term of office.
Section 3.4. Powers. The business of the Corporation shall be managed by
------
its Board of Directors which may exercise all such powers of the Corporation and
do all such
13
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lawful acts and things as are not by statute or by the Certificate of
Incorporation or by these By-laws directed or required to be exercised or done
by the stockholders.
Section 3.5. Meetings. The Board of Directors of the Corporation may hold
--------
meetings, both regular and special, either within or without the State of
Delaware.
Section 3.6. First Meeting. The first meeting of each newly elected Board
-------------
of Directors shall be held immediately following the annual meeting of
stockholders at which such directors are elected and no notice of such meeting
shall be necessary to the newly elected directors in order legally to constitute
the meeting, provided a quorum shall be present; or the meeting may be held at
such time and place as shall be specified in a notice given as hereinafter
provided for special meetings of the Board of Directors, or as shall be
specified in a written waiver signed by all of the directors.
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Section 3.7. Regular Meetings. Regular meetings of the Board may be held
----------------
without notice at such time and at such place as shall from time to time be
determined by the Board.
Section 3.8. Special Meetings. Special meetings of the Board may be
----------------
called by the Secretary at the request of the Chairman of the Board or President
on two business days' notice to each director, either personally or by mail, by
telegram or by telephone; special meetings shall be called by the Chairman of
the Board or Secretary in like manner and on like notice on the written request
of two directors.
Section 3.9. Quorum. At all meetings of the Board a majority of the total
------
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the Board of Directors, except as may be
otherwise specifically provided by statute or by the Certificate of
Incorporation. If a
15
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quorum shall not be present at any meeting of the Board of Directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 3.10. Conference Telephone. Unless otherwise restricted by the
--------------------
Certificate of Incorporation or these By-laws, members of the Board of Directors
(or any committee designated by the Board) may participate in a meeting of the
Board or committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other.
Section 3.11. Unanimous Consent. Unless otherwise restricted by the
-----------------
Certificate of Incorporation or these By-laws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board or committee, as the
case may be, consent thereto
16
<PAGE>
in writing, and the writing or writings are filed with the minutes of
proceedings of the Board or committee.
Section 3.12. Committees. The Board of Directors may, by resolution
----------
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of two or more of the directors of the Corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. Any such committee, to the extent provided in the resolution, shall
have and may exercise the power of the Board of Directors in the management of
the business and affairs of the Corporation, and may authorize the seal of the
Corporation to be affixed to all papers which may require it; provided, however,
that in the absence or disqualification of any member of such committee or
committees, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of
17
<PAGE>
Directors to act at the meeting in the place of any such absent or disqualified
member.
Section 3.13. Minutes. Each committee shall keep regular minutes of its
-------
meetings and report the same to the Board of Directors when required.
Section 3.14. Fees and Compensation. Directors and members of committees
---------------------
may receive such compensation, if any, for their services, and such
reimbursement for expenses, as may be fixed or determined by resolution of the
Board.
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ARTICLE IV
Notices
Section 4.1. Methods of Notice. Whenever, under the provisions of the
-----------------
Laws of the State of Delaware or of the Certificate of Incorporation or of these
By-laws, notice is required to be given to any director or stockholder, it shall
not be construed to mean personal notice, but notice may be given in writing, by
mail, addressed to such director or stockholder, at his address as it appears on
the records of the Corporation, with postage thereon prepaid, and such notice
shall be deemed to be given at the time when the same shall be deposited in the
United States mail. Notice to directors may also be given by telegram or
telephone.
Section 4.2. Waiver. Whenever any notice is required to be given under
------
the provisions of the statutes or of the Certificate of Incorporation or of
these By-laws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
19
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ARTICLE V
Officers
Section 5.1. Officers. The Officers of the Corporation shall be a
--------
Chairman of the Board, a President, a Secretary and a Treasurer. The
Corporation may also have, at the discretion of the Board of Directors, one or
more Vice Presidents, one or more Assistant Secretaries, one or more Assistant
Treasurers, and such other officers as may be appointed in accordance with the
provisions of Section 5.3 and Section 5.5 of this Article. The Board of
Directors may also choose, at its discretion, one or more Vice Chairmen of the
Board, who shall not constitute officers of the Corporation. One person may
hold two or more offices.
Section 5.2. Election. The officers of the Corporation, except such
--------
officers as may be appointed in accordance with the provisions of Section 5.3 or
Section 5.5 of this Article, shall be chosen annually by the Board of
20
<PAGE>
Directors, and each shall hold his office until he shall resign or shall be
removed or otherwise disqualified to serve, or his successor shall be elected
and qualified.
Section 5.3. Subordinate Officers, etc. The Board of Directors may
--------------------------
appoint, and may empower the Chairman of the Board to appoint, such other
officers as the business of the Corporation may require, each of whom shall hold
office for such period, have such authority and perform such duties as are
provided in the By-laws or as the Board of Directors may from time to time
determine.
Section 5.4. Removal and Resignation. Any officer may be removed, either
-----------------------
with or without cause, by the Board of Directors, at any regular or special
meeting thereof, or, except in the case of an officer chosen by the Board of
Directors, by any officer upon whom such power of removal may be conferred by
the Board of Directors.
Any officer may resign at any time by giving written notice to the Board of
Directors or to the Chairman of
21
<PAGE>
the Board, or to the Secretary of the Corporation. Any such resignation shall
take effect at the date of the receipt of such notice or at any later time
specified therein; and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
Section 5.5. Vacancies. A vacancy in any office because of death,
---------
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in the By-laws for regular appointments to such office.
Section 5.6. Salaries. The salaries and other compensation of all
--------
officers of the Corporation shall be fixed by the Board of Directors.
Section 5.7. Chairman of the Board. The Chairman of the Board shall
---------------------
preside at all meetings of the stockholders and all meetings of the Board of
Directors. He shall be an ex-officio member of all standing committees,
including the Executive Committee, if any, and shall have
22
<PAGE>
such other powers and duties as may be prescribed by the Board of Directors or
the By-laws.
Section 5.7A. Vice Chairman of the Board. In the absence of the Chairman
--------------------------
of the Board, the Vice Chairman of the Board designated by the Board of
Directors shall preside at meetings of the Board of Directors.
Section 5.8. President. The President shall be the Chief Executive
---------
Officer of the Corporation and shall, subject to the control of the Board of
Directors, have general supervision, direction and control of the Corporation.
He shall be an ex-officio member of all standing committees, including the
Executive Committee, if any, shall have the general powers and duties of
management usually vested in the office of the chief executive officer of a
corporation, and shall have such other powers and perform such other duties as
from time to time may be prescribed for him by the Board of Directors or the
By-laws.
23
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Section 5.9. Vice President. In the absence or disability of the Chairman
--------------
of the Board and the President, the Vice Presidents in order of their rank as
fixed by the Board of Directors or, if not ranked, the Vice President designated
by the Board of Directors, shall perform all the duties of the Chairman of the
Board and the President, and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the Chairman of the Board and the
President. The Vice Presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Directors or the By-laws.
Section 5.10. Secretary. The Secretary shall keep or cause to be kept, at
---------
the principal office or such other place as the Board of Directors may order, a
book of minutes of all meetings of directors and stockholders, with the time and
place of holding, whether regular or special, and, if special, how authorized,
the notice thereof given, the names of those present at directors' meetings, the
number of shares present or represented at stockholders'
24
<PAGE>
meetings, and the proceedings thereof. The Secretary shall keep, or cause to be
kept, at the principal office or at the office of the Corporation's transfer
agent, a share register, or a duplicate share register, showing the names of the
stockholders and their addresses, the number and class of shares held by each,
the number and date of certificates issued for the same, and the number and date
of cancellation of every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all the meetings
of the stockholders and of the Board of Directors required by the By-laws or by
law to be given, and he shall keep the seal of the Corporation in safe custody,
and shall have such other powers and perform such other duties as may be
prescribed by the Board of Directors or by the By-laws.
Section 5.11. Treasurer. The Treasurer shall keep and maintain, or cause
---------
to be kept and maintained, adequate and correct accounts of the properties and
business transactions of the Corporation, including accounts of its
25
<PAGE>
assets, liabilities, receipts, disbursements, gains, losses, capital, surplus
and shares. Any surplus, including earned surplus, paid-in surplus and surplus
arising from a reduction of stated capital, shall be classified according to
source and shown in a separate account. The books of account shall at all
reasonable times be open to inspection by any director.
The Treasurer shall deposit all moneys and other valuables in the name and
to the credit of the Corporation with such depositories as may be designated by
the Board of Directors. He shall disburse the funds of the Corporation as may
be ordered by the Board of Directors, shall render to the Chairman of the Board
and directors, whenever they request it, an account of all of his transactions
as Treasurer and of the financial condition of the Corporation, and shall have
such other powers and perform such other duties as may be prescribed by the
Board of Directors or the By-laws.
26
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ARTICLE VI
Stock and Stock Certificates
Section 6.1. Right to Certificate. Every holder of stock in the
--------------------
Corporation shall be entitled to have a certificate, signed by or in the name of
the Corporation, by the Chairman of the Board of Directors or the President or a
Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary
or an Assistant Secretary of the Corporation, certifying the number of shares
owned by him in the Corporation.
Section 6.2. Statements Setting Forth Rights. If the Corporation shall be
-------------------------------
authorized to issue more than one class of stock or more than one series of any
class, the designations, preferences and relative, participating, optional or
other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and rights shall
be set forth in full or summarized on the face or back of the certificate which
the Corporation shall issue to represent
27
<PAGE>
such class or series of stock, provided that, except as otherwise provided in
Section 202 of the Corporation Law of Delaware, in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate
which the Corporation shall issue to represent such class or series of stock, a
statement that the Corporation will furnish without charge to each stockholder
who so requests the designations, preferences and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations and restrictions of such preferences and rights.
Section 6.3. Facsimile Signatures. Any of or all the signatures on the
--------------------
certificate may be a facsimile. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent, or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent, or registrar at the date
of issue.
28
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Section 6.4. Lost Certificates. Except as hereinafter in this section
-----------------
provided, no new certificate for shares shall be issued in lieu of an old one
unless the latter is surrendered and cancelled at the same time. The Board of
Directors may, however, in case any certificate for shares is lost, stolen,
mutilated or destroyed, authorize the issuance of a new certificate in lieu
thereof, upon such terms and conditions, including reasonable indemnification of
the Corporation, as the Board shall determine.
Section 6.5. Transfers of Stock.
------------------
(a) Subject to paragraphs (b), (c) and (d) of this Section 6.5, upon
surrender to any transfer agent of the Corporation of a certificate for shares
of the Corporation duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
Corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
29
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(b) Beginning at the time that (A) the merger of Santa Anita Consolidated,
Inc. ("Santa Anita") into Santa Anita Realty Enterprises, Inc., a Delaware
corporation ("Realty"), and (B) the payment by Realty of the dividend in kind of
the shares of the Corporation (the "Distribution") shall have both occurred
(hereinafter called the "effective time of the restriction"), and continuing
thereafter until such time as the limitation on transfer provided for in the
Pairing Agreement between Realty and the Corporation shall be terminated in the
manner therein provided:
(i) The shares of common stock of the Corporation shall not be
transferable, and shall not be transferred on the books of the Corporation,
unless (1) a simultaneous transfer is made by the same transferor to the same
transferee, or (2) such transferor has previously arranged with Realty for the
transfer to the transferee, of a like number of shares of common stock of Realty
and such shares are paired with one another.
30
<PAGE>
(ii) Except for certificates representing shares of common stock of Realty
referred to in subparagraph (vi) below, each certificate evidencing ownership of
shares of common stock of Realty (including certificates issued by Santa Anita)
issued and not cancelled prior to the effective time of the restriction shall be
deemed to evidence a like number of shares of common stock of the Corporation.
(iii) Except for certificates representing common stock of Realty referred
to in subparagraph (vi) below, any registered holder of a certificate evidencing
ownership of shares of common stock of Realty (including certificates issued by
Santa Anita) issued prior to the effective time of the restriction may, upon
request and presentation of said certificate to the Corporation's transfer
agent, obtain in substitution therefor a certificate or certificates registered
in such holder's name evidencing the same number of common shares of the
Corporation and a like number of shares of common stock of Realty.
31
<PAGE>
(iv) A conspicuous legend shall be placed on the face of each certificate
evidencing ownership of shares of common stock of the Corporation issued after
the effective time of the restrictions, referring to the restrictions on
transfer set forth in the Corporation's By-laws.
(v) For purposes of this paragraph (b) only, the terms "common stock" and
"common shares" shall include preferred stock which is convertible into shares
of common stock.
(vi) Notwithstanding the other provisions of this paragraph (b), any
stockholder whose ownership of the common stock of the Corporation at the
effective time of the restriction would be deemed, after application of the
attribution rules of the Internal Revenue Code of 1954 (the "Code"), to result
in Realty owning, directly or indirectly, more than 9.25% of the common stock of
the Corporation will not be subject to the restrictions imposed by this
paragraph (b) to the extent that such ownership would cause Realty, directly or
indirectly, to be deemed to own, after application
32
<PAGE>
of the attribution rules of the Code, more than 9.25% of the total number of the
outstanding shares of the Corporation, provided that (1) a sufficient amount of
the common stock of the Corporation (or the right to receive such common stock)
which would otherwise be paired with stock of Realty is sold to third parties so
that Realty, directly or indirectly, after application of the attribution rules
of the Code, will not own in excess of 9.25% of the common stock of the
Corporation, (2) all holders of the unpaired shares enter into an agreement,
satisfactory to the Boards of Directors of Realty, the Corporation and Santa
Anita, providing that such shares not be transferable by sale or any other
means, without arranging for such shares to be paired with an equal number of
shares of Realty, unless such sale is made to the Corporation or Realty and (3)
such stockholder and any transferee of such stockholder executes a waiver of any
claims he or she may have arising out of the close business relationship between
the Corporation and Realty and claims arising out of conflicts of interest
inherent in such business relationship. The other provisions of this paragraph
(b) shall apply to all shares of the
33
<PAGE>
Corporation otherwise held by any stockholder unless they are specifically
exempted by this subparagraph (vi).
(c) If the Board of Directors shall at any time and in good faith be of
the opinion that direct or indirect ownership of shares of either common stock
or preferred stock, or both, of the Corporation has or may become concentrated
to an extent which would cause Realty to fail to qualify or be disqualified as a
real estate investment trust by virtue of Section 856(a)(5) and (6) of the Code,
or similar provisions of successor statutes, pertaining to the qualification of
Realty as a real estate investment trust, the Board of Directors shall have the
power (i) by lot or other means deemed equitable by them to call for purchase
from any stockholder of the Corporation such number of shares sufficient in the
opinion of the Board of Directors to maintain or bring the direct or indirect
ownership of shares of stock of the Corporation into conformity with the
requirements of said Section 856(a)(5) and (6) pertaining to Realty and (ii) to
refuse to register the transfer of shares of stock to any person whose
acquisition of such shares
34
<PAGE>
would, in the opinion of the Board of Directors, result in Realty being unable
to conform to the requirements of said Section 856(a)(5) and (6). The purchase
price for the shares of stock purchased pursuant hereto shall be equal to the
fair market value of such shares as reflected in the closing price for such
shares on the principal stock exchange on which such shares are listed or, if
such shares are not listed, then the last bid quotation for shares of stock as
of the close of business on the date fixed by the Board of Directors for such
purchase or, if no quotation for the shares is available, as determined in good
faith by the Board of Directors. From and after the date fixed for purchase by
the Board of Directors, the holder of any shares so called for purchase shall
cease to be entitled to dividends, voting rights and other benefits with respect
to such shares excepting only the right to payment of the purchase price fixed
as aforesaid. In order to further assure that ownership of the shares of stock
does not become so concentrated, any transfer of shares that would prevent
Realty from continuing to be qualified as a real estate investment trust by
virtue of the application of Section
35
<PAGE>
856(a)(5) and (6) of the Code shall be void ab initio and the intended
transferee of such shares shall be deemed never to have had an interest therein.
If the foregoing provision is determined to be void or invalid by virtue of any
legal decision, statute, rule or regulation, then the transferee of such shares
shall be deemed to have acted as agent on behalf of the Corporation in acquiring
such shares and to hold such shares on behalf of the Corporation. For purposes
of determining whether the Corporation is in compliance with Section 856(a)(5)
and (6), Section 542(a)(2) and Section 544 of the Code, or similar provisions of
successor statutes, shall be applied.
(d) In addition to the requirements of subparagraph (c) above, if the
Board of Directors shall at any time and in good faith be of the opinion that
direct or indirect ownership of shares of either common stock or preferred
stock, or both, of the Corporation has or may become concentrated to an extent
which would cause any rent to be paid to Realty to fail to qualify or be
disqualified as rent from real property by virtue of Section 856(d)(2)(B) of the
Code,
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<PAGE>
or similar provisions of successor statutes, pertaining to the qualification of
Realty as a real estate investment trust, the Board of Directors shall have the
power (i) by lot or other means deemed equitable by them to call for purchase
from any stockholder of the Corporation such number of shares sufficient in the
opinion of the Board of Directors to maintain or bring the direct or indirect
ownership of shares of stock of the Corporation into conformity with the
requirements of Section 856(d)(2)(B) pertaining to Realty and (ii) to refuse to
register the transfer of shares of stock to any person whose acquisition of such
shares would, in the opinion of the Board of Directors, result in Realty being
unable to conform to the requirements of said Section 856(d)(2)(B). The purchase
price for the shares of stock purchased pursuant hereto shall be equal to the
fair market value of such shares as reflected in the closing price for such
shares on the principal stock exchange on which such shares are listed, or if
such shares are not listed, then the last bid quotation for shares of stock, as
of the close of business on the date fixed by the Board of Directors for such
purchase or, if no quotation for the
37
<PAGE>
shares is available, as determined in good faith by the Board of Directors. From
and after the date fixed for purchase by the Board of Directors, the holders of
any shares so called for purchase shall cease to be entitled to dividends,
voting rights and other benefits with respect to such shares, excepting only the
right to payment of the purchase price fixed as aforesaid. In order to further
assure that ownership of the shares of stock does not become so concentrated,
any transfer of shares that would prevent Realty from continuing to be qualified
as a real estate investment trust by virtue of the application of Section
856(d)(2)(B) of the Code shall be void ab initio and the intended transferee of
---------
such shares shall be deemed never to have had an interest therein. If the
foregoing provision is determined to be void or invalid by virtue of any legal
decision, statute, rule or regulation, then the transferee of such shares shall
be deemed to have acted as agent on behalf of the Corporation in acquiring such
shares and to hold such shares on behalf of the Corporation. For purposes of
determining whether this Corporation is in compliance
38
<PAGE>
with Section 856(d)(2)(B), Section 856(d)(5) of the Code, or similar provisions
of successor statutes, shall be applied.
(e) The stockholders of the Corporation shall upon demand disclose to the
Board of Directors in writing such information with respect to their direct and
indirect ownership of the stock of the Corporation as the Board of Directors
deems necessary to determine whether Realty satisfies the provisions of Section
856(a)(5) and (6) and 856(d) of the Code and the regulations thereunder as the
same shall be from time to time amended, or to comply with the requirements of
any other taxing authority.
Section 6.6. Form of Consideration. In purchasing such shares from any
---------------------
shareholder in accordance with the foregoing provisions, the Corporation may pay
consideration in the form of cash or, at the option of the Board of Directors,
in the form of subordinated indebtedness of the Corporation. The principal
amount of such subordinated indebtedness shall be equal to the purchase price of
the shares (less amounts paid in cash, if any) and it shall have such
39
<PAGE>
other terms as may be determined by the Board of Directors at the time of
issuance.
Section 6.7. Record Date. In order that the Corporation may determine the
-----------
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereto, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
40
<PAGE>
Section 6.8. Registered Stockholders. The Corporation shall be entitled
-----------------------
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall not
be bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person, whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of Delaware.
Section 6.9. Transfer Agents and Registrars. The Board of Directors may
------------------------------
appoint one or more corporate transfer agents and registrars.
Section 6.10. Dividends. Dividends upon the capital stock of the
---------
Corporation may be declared by the Board of Directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock.
41
<PAGE>
Section 6.11. Reserves. Before payment of any dividend, there may be set
--------
aside out of any funds of the Corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the directors shall think conducive to the interest of
the Corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
ARTICLE VII
Indemnification and Insurance
Section 7.1. Right to Indemnification. Each person who was or is a party
------------------------
or is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal represen-
42
<PAGE>
tative, is or was a director or officer of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action or inaction in an official
capacity or in any other capacity while serving as a director, officer, employee
or agent, shall be indemnified and held harmless by the Corporation to the
fullest extent permitted by the laws of Delaware, as the same exist or may
hereafter be amended, against all costs, charges, expenses, liabilities and
losses (including attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid or to be paid in settlement) reasonably incurred or
suffered by such person in connection therewith, and such indemnification shall
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of his or her heirs, executors and
administrators; provided, however, that, except as provided in Section 7.2
hereof, the Corporation shall indemnify any such person seeking
43
<PAGE>
indemnification in connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part thereof) was authorized by the
Board of Directors of the Corporation. The right to indemnification conferred in
this Article shall be a contract right and shall include the right to be paid by
the Corporation the expenses incurred in defending any such proceeding in
advance of its final disposition; provided, however, that, if the Delaware
General Corporation Law requires, the payment of such expenses incurred by a
director or officer (and not in any other capacity in which service was or is
rendered by such person while a director or officer, including, without
limitation, service to an employee benefit plan) in advance of the final
disposition of a proceeding, shall be made only upon delivery to the Corporation
of an undertaking, by or on behalf of such director or officer, to repay all
amounts so advanced if it shall ultimately be determined that such director or
officer is not entitled to be indemnified under this Section or otherwise. The
Corporation may, by action of its Board of Directors, provide indemnification to
employees and agents of the Corporation with the same scope
44
<PAGE>
and effect as the foregoing indemnification of directors and officers.
Section 7.2. Right of Claimant to Bring Suit. If a claim under Section
-------------------------------
7.1 of this Article is not paid in full by the Corporation within thirty days
after a written claim has been received by the Corporation, the claimant may at
any time thereafter bring suit against the Corporation to recover the unpaid
amount of the claim and, if successful in whole or in part, the claimant shall
be entitled to be paid also the expense of prosecuting such claim. It shall be
a defense to any such action (other than an action brought to enforce a claim
for expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any is required, has been
tendered to the Corporation) that the claimant has failed to meet a standard of
conduct which makes it permissible under Delaware law for the Corporation to
indemnify the claimant for the amount claimed. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination
45
<PAGE>
prior to the commencement of such action that indemnification of the claimant is
permissible in the circumstances because he or she has met such standard of
conduct, nor an actual determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders) that the claimant has
not met such standard of conduct, shall be a defense to the action or create a
presumption that the claimant has failed to meet such standard of conduct.
Section 7.3. Non-Exclusivity of Rights. The right to indemnification and
-------------------------
the payment of expenses incurred in defending a proceeding in advance of its
final disposition conferred in this Article shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of the Certificate of Incorporation, by-law, agreement, vote of
stockholders or disinterested directors or otherwise.
Section 7.4. Insurance. The Corporation may maintain insurance, at its
---------
expense, to protect itself and
46
<PAGE>
any director, officer, employee or agent of the Corporation or another
corporation, partnership, joint venture, trust or other enterprise against any
such expense, liability or loss, whether or not the Corporation would have the
power to indemnify such person against such expense, liability or loss under
Delaware law.
Section 7.5. Expenses as a Witness. To the extent that any director,
---------------------
officer, employee or agent of the Corporation is by reason of such position, or
a position with another entity at the request of the Corporation, a witness in
any action, suit or proceeding, he or she shall be indemnified against all costs
and expenses actually and reasonably incurred by him or her or on his or her
behalf in connection therewith.
Section 7.6. Indemnity Agreements. The Corporation may enter into
--------------------
agreements with any director, officer, employee or agent of the Corporation
providing for indemnification to the full extent permitted by Delaware law.
47
<PAGE>
ARTICLE VIII
General Provisions
Section 8.1. Annual Reports. Not later than one hundred twenty (120) days
--------------
after the close of each fiscal year of the Corporation, the Board of Directors
shall mail a report of the business and operation of the Corporation during such
fiscal year to the stockholders. The report shall be in such form and have such
content as the Board deems proper. This report shall include a balance sheet
and a statement of income and surplus and a statement of changes in financial
position of the Corporation. Such financial statements shall be accompanied by
the report of an independent certified public accountant thereon.
Section 8.2. Quarterly Reports. Within 90 days after the close of each of
-----------------
the first three quarters of each fiscal year of the Corporation, the Board of
Directors shall send interim reports to the stockholders, having such form and
content as the Board of Directors deems proper.
48
<PAGE>
Section 8.3. Fiscal Year. The fiscal year of the Corporation shall be
-----------
fixed by resolution of the Board of Directors.
Section 8.4. Seal. The corporate seal shall have inscribed thereon the
----
name of the Corporation, the year of its organization and the words "Corporate
Seal, Delaware". The seal may be used by causing it or a facsimile thereof to
be impressed or affixed or reproduced or otherwise.
Section 8.5. Checks, Drafts, etc. All checks, drafts or other orders for
--------------------
payment of money, notes or other evidences of indebtedness, issued in the name
of or payable to the Corporation, shall be signed or endorsed by such person or
persons and in such manner as, from time to time, shall be determined by
resolution of the Board of Directors.
Section 8.6. Representation of Shares of Other Corporations. The Chairman
----------------------------------------------
of the Board, the President or any Vice President and the Secretary or Assistant
Secretary
49
<PAGE>
of this Corporation are authorized to vote, represent and exercise on behalf of
this Corporation all rights incident to any and all shares of any other
corporation or corporations standing in the name of this Corporation. The
authority herein granted to said officers to vote or represent on behalf of this
Corporation any and all shares held by this Corporation in any other corporation
or corporations may be exercised either by such officers in person or by any
other person authorized so to do by proxy or power of attorney duly executed by
said officers.
Section 8.7. Employee Stock Purchase Plans. The Corporation may, upon
-----------------------------
terms and conditions herein authorized, provide and carry out an employee stock
purchase plan or plans providing for the issue and sale, or for the granting of
options for the purchase, of its unissued shares, or of issued shares purchased
or to be purchased or acquired, to employees of the Corporation or of any
subsidiary or to a trustee on their behalf. Such plan may provide for such
consideration as may be fixed therein, for the payment of such shares in
installments or at one time and for aiding
50
<PAGE>
any such employees in paying for such shares by compensation for services or by
loans from the Corporation or otherwise. Any such plan before becoming effective
must be approved or authorized by the Board of Directors of the Corporation.
Such plan may include, among other things, provisions determining or
providing for the determination by the Board of Directors, or any committee
thereof designated by the Board of Directors, of: (a) eligibility of employees
(including officers and directors) to participate therein, (b) the number and
class of shares which may be subscribed for or for which options may be granted
under the plan, (c) the time and method of payment therefor, (d) the price or
prices at which such shares shall be issued or sold, (e) whether or not title to
the shares shall be reserved to the Corporation until full payment therefor, (f)
the effect of the death of an employee participating in the plan or termination
of his employment, including whether there shall be any option or obligation on
the part of the Corporation to repurchase the shares thereupon, (g)
restrictions, if any, upon the transfer of the shares, and the time limits
51
<PAGE>
and termination of the plan, (h) termination, continuation or adjustments of the
rights of participating employees upon the happening of specified contingencies,
including increase or decrease in the number of issued shares of the class
covered by the plan without receipt of consideration by the Corporation or any
exchange of shares of such class for stock or securities of another corporation
pursuant to a reorganization or merger, consolidation or dissolution of the
Corporation, (i) amendment, termination, interpretation and administration of
such plan by the Board of Directors or any committee thereof designated by the
Board of Directors, and (j) any other matters, not repugnant to law, as may be
included in the plan as approved or authorized by the Board of Directors or any
such committee.
52
<PAGE>
ARTICLE IX
Amendments
Section 9.1. Power of Stockholders. New By-laws may be adopted or these
---------------------
By-laws may be amended or repealed by the stockholders only by the affirmative
vote of at least 80% of the voting power of the Corporation, except as
otherwise provided by law. Any proposal to amend or repeal, or adopt any
provisions inconsistent with, Article Tenth of the Certificate of Incorporation
shall require for approval the affirmative vote of at least 80% of the voting
power of the Corporation.
Section 9.2. Power of Directors. Subject to the right of stockholders as
------------------
provided in Section 9.1 of this Article IX to adopt, amend or repeal By-laws,
By-laws may be adopted, amended or repealed by the Board of Directors; provided,
however, that Section 6.5 of these By-laws may not be amended or repealed except
with the approval of the holders of 80% of the outstanding common stock of the
Corporation.
53
<PAGE>
EXHIBIT 4.1
THIRD AMENDMENT TO CREDIT AGREEMENT
AND SECOND AMENDMENT TO PROMISSORY NOTE
THIS THIRD AGREEMENT TO CREDIT AGREEMENT AND SECOND AMENDMENT TO PROMISSORY
NOTE (this "Amendment") is entered into as of July 1, 1996, by and between Santa
Anita Realty Enterprises, Inc., a Delaware corporation ("Borrower"), and WELLS
FARGO BANK, NATIONAL ASSOCIATION, SUCCESSOR-BY-MERGER TO FIRST INTERSTATE BANK
OF CALIFORNIA ("Bank").
RECITALS
--------
WHEREAS, Borrower presently is indebted to Bank pursuant to the terms and
conditions of that certain Credit Agreement between Borrower and Bank dated as
of November 9, 1994, as such agreement may be amended from time to time ("Credit
Agreement").
WHEREAS, to evidence the Revolving Loans thereunder, Borrower executed a
promissory note payable to the order of Bank's predecessor in interest, First
Interstate Bank of California, which was amended by that certain Change in Terms
Agreement, dated January 26, 1996 (the "Note Amendment") (said promissory note
and the Note Amendment are collectively referred to herein as the "Note").
WHEREAS, Bank and Borrower have agreed to certain changes in the terms and
conditions set forth in the Credit Agreement and the Note and have agreed to
amend the Credit Agreement and the Note to reflect said changes.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto
<PAGE>
agree that the Credit Agreement and the Note shall be amended as follows:
1. All references to "June 30, 1996" as the maturity date of the Note are
hereby changed to "February 1, 1997."
2. The first paragraph of the Note is hereby deleted in its entirety and
the following substituted therefor:
"FOR VALUE RECEIVED, Santa Anita Realty Enterprises, Inc., a
Delaware corporation (the "Borrower"), promises to pay to the order of
WELLS FARGO BANK, NATIONAL ASSOCIATION (the "Bank") on the Maturity
Date (as defined in the Credit Agreement referred to below) the
principal amount of Twenty Million Dollars ($20,000,000), or if less,
the aggregate amount of Revolving Loans (as defined in the Credit
Agreement referred to below) made by the Bank to the Borrower pursuant
to the Credit Agreement referred to below outstanding on the Maturity
Date."
3. The place for payment of principal and interest in respect of the
Note, as designated in the third paragraph of the Note, is hereby changed to the
following location: Wells Fargo Bank, National Association, Flair Industrial
Park RCBO, 9000 Flair Drive, Suite 100, El Monte, CA 91731.
4. The term "Maturity Date," as defined in Section 1.01 of the Credit
Agreement is hereby deleted in its entirety and the following substituted
therefor:
"Maturity Date": February 1, 1997."
-------------
5. The term "Revolving Commitment," as defined in Section 1.01 of the
Credit Agreement is hereby deleted in its entirety and the following substituted
therefor:
"Revolving Commitment": For the period of time from and including
--------------------
June 30, 1996, through and including February 1, 1997, the amount of
$20,000,000, as such amount may be reduced pursuant to Section
2.01(d)."
-2-
<PAGE>
6. The reference to "one percent (1%)" in Section 2.03(c) of the Credit
Agreement is hereby deleted and replaced with the following: "one and one-fourth
percent (1-1/4%)."
7. The reference to "one percent (1%)" in Section 2.03(d) of the Credit
Agreement is hereby deleted and replaced with the following: "one and one-fourth
percent (1-1/4%)."
8. Section 3.01 of the Credit Agreement is hereby deleted in its entirety
and the following substituted therefor:
"SECTION 3.01. Use of Proceeds. The proceeds of the Loans
---------------
hereunder shall be used by the Borrower to fund working capital
imbalances arising from timing differences between the receipt of
rental payments and the payment of current obligations, and other
general corporate purposes."
9. Section 6.02(b) of the Credit Agreement is hereby deleted in its
entirety and the following substituted therefor:
"(b) Leverage Ratio. Permit the ratio of Consolidated Liabilities
--------------
to Consolidated Tangible Net Worth at any time to be more than
1.85:1.00."
10. In Section 6.02(d) of the Credit Agreement, the number "$26,000,000"
is hereby deleted and replaced with the number "$20,000,000."
11. Section 6.02(n) of the Credit Agreement is hereby deleted in its
entirety with no substitution therefor.
12. Borrower hereby represents and warrants to Bank that as of the date of
this Amendment, Borrower operates and is qualified to operate as a real estate
investment trust under the provisions of the Internal Revenue Code of 1986, as
amended ("Code"), and Borrower has complied with any and all conditions and
-3-
<PAGE>
requirements to maintain its status as a REIT under the Code. This
representation and warranty is hereby added to the Credit Agreement as a
representation and warranty under Article V of the Credit Agreement.
13. For purposes of Section 8.02 of the Credit Agreement, the Bank's
address for all notices and other communications provided for under the Credit
Agreement shall be the following:
Wells Fargo Bank, N.A.
Flair Industrial Park RCBO
9000 Flair Drive, Suite 100
El Monte, CA 91371
14. The parties acknowledge and agree that, notwithstanding the incorrect
reference to the Borrower as a California corporation (rather than a Delaware
corporation) in that certain Second Amendment to the Credit Agreement (the
"Second Amendment"), the actual party to the Second Amendment is the Borrower,
which hereby ratifies the Second Amendment, subject to the further amendments
hereunder.
15. Borrower shall make, execute, endorse, acknowledge, file and/or
deliver from time to time such further instruments, agreements and other
assurances, and take such further steps, as are reasonably appropriate or
advisable to effectuate the purpose of the parties' agreement set forth herein,
including, without limitation, any instruments or agreements that Bank deems
appropriate for recording in the Recorder's Office of Los Angeles County.
-4-
<PAGE>
16. This Amendment shall not be binding upon Bank until Borrower shall
have paid to Bank a commitment fee in the amount of $29,861 and the full amount
of all costs and expenses, including reasonable attorney's fees (to include
outside counsel fees and all allocated costs of Bank's in-house counsel),
incurred by Bank in connection with this Amendment.
17. Except as specifically provided herein, all terms and conditions of
the Credit Agreement and the Note remain in full force and effect, without
waiver or modification. All terms defined in the Credit Agreement shall have the
same meaning when used in this Amendment. This Amendment, the Credit Agreement
and the Note shall be read together, as one document.
18. Borrower hereby remakes all representations and warranties contained
in the Credit Agreement and reaffirms all covenants set forth therein. Borrower
further represents and warrants that as of the date of this Amendment there
exists no Event of Default as defined in the Credit Agreement, nor any
condition, act or event which with the giving of notice or the passage of time
or both would constitute any such Event of Default.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the day and year first written above.
SANTA ANITA REALTY WELLS FARGO BANK,
ENTERPRISES, INC., NATIONAL ASSOCIATION,
a Delaware corporation SUCCESSOR-BY-MERGER TO
FIRST INTERSTATE BANK
OF CALIFORNIA
By: /s/ Brian L. Fleming By: /s/ Jutta S. Graham
------------------------------- -------------------------------
Title: Executive Vice President and Jutta S. Graham
Chief Financial Officer Vice President
----------------------------
By:
-------------------------------
Title:
----------------------------
-6-
<PAGE>
EXHIBIT 10.1
RESIGNATION AND GENERAL RELEASE AGREEMENT
-----------------------------------------
In consideration of the covenants undertaken and releases contained in
this Resignation and General Release Agreement (the "Agreement"), Christopher T.
Stirling ("Employee") and Santa Anita Realty Enterprises, Inc. ("SARE"), agree
as follows:
Employee hereby resigns, effective June 30, 1996 (which is the
expiration date of his Employment Agreement with SARE dated March 25, 1994),
from his position as President and Chief Operating Officer of SARE. SARE shall
pay to Employee on or before June 30, 1996, his accrued but unused vacation to
June 30, 1996 which SARE and Employee agree is two weeks. Employee shall cease
to accrue any vacation or other payments or benefits beyond June 30, 1996.
Employee shall have the option to convert and continue his health insurance
after June 30, 1996, as may be required or authorized by law under the
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"). SARE shall
provide Employee with outplacement services of his choice, the cost of which
shall not exceed 15% of Employee's 1996 salary. In addition, SARE will transfer
to Employee the personal computer, printer and peripheral computer equipment of
SARE's which is currently located in Employee's home. By separate consulting
agreement ("Consulting Agreement"), SARE and Employee have agreed to enter into
a consulting relationship, the terms of which shall be governed solely by the
Consulting Agreement. For each of the calendar months during which the
Consulting Agreement is in effect, SARE shall pay to SARE's insurance provider
Employee's costs for medical and dental insurance premiums pursuant to
Employee's election for coverage under COBRA. Each of SARE and Employee agrees
and acknowledges that the payments made by SARE pursuant to the preceding
sentence 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. In the
event such payments are contested by any taxation authority, SARE shall
cooperate with Employee in Employee's response thereto. Notwithstanding that
Employee's resignation is effective June 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.
Except for those obligations created by or arising out of this
Agreement or the Consulting Agreement, Employee hereby acknowledges full and
1
<PAGE>
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, "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 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 Employee may have in any 401(k) plan or any
other retirement benefit accruing from Employee's employment with SARE.
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 has held 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 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.
This Agreement is intended to be effective as a bar to every claim,
demand and cause of action stated above. Employee acknowledges that he may
hereafter discover claims or facts in addition to or different from those which
Employee 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 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
2
<PAGE>
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 expressly acknowledges and agrees that, by entering into this
Agreement, he is waiving any and all rights or claims that he may have arising
under the Age Discrimination in Employment Act of 1967, as amended, which have
arisen on or before the date of execution of this Agreement. Employee will be
provided ample time and opportunity to consider the terms of this Agreement and
to consult with an attorney if he chooses to do so. Employee expressly
acknowledges and agrees that, in return for this Agreement, he will receive
compensation beyond that which he was already entitled to receive before
entering into this Agreement. If Employee agrees to all the provisions of this
Agreement, he shall return the executed original of this Agreement to SARE.
Employee shall have twenty-one (21) days from the date he receives this
Agreement in which to consider and sign this Agreement. Employee has been
informed that either Employee or SARE may revoke this Agreement in its entirety
during the seven days following execution by Employee. Any revocation of this
Agreement must be in writing and hand delivered during the revocation period.
Employee agrees that the terms and conditions of this Agreement shall
remain confidential as between the parties and he shall not disclose them to any
other person. Without limiting the generality of the foregoing, Employee will
not 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, Employee
specifically agrees that he shall not disclose information regarding this
Agreement to any current or former employee of Releasees. Employee hereby
agrees that disclosure by him 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.
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. Employee agrees to keep the terms of this Agreement confidential.
3
<PAGE>
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/ /s/
-------------------------------- -----------------------------------
William C. Baker Christopher T. Stirling
Chief Executive Officer
Date: April 23, 1996 Date: April 23, 1996
4
<PAGE>
ENDORSEMENT
I, Christopher T. Stirling, hereby acknowledge that I was given 21
days to consider the foregoing Agreement and voluntarily chose to sign the
Agreement prior to the expiration of the 21-day period.
I declare under penalty of perjury under the laws of the State of
California that the foregoing is true and correct.
EXECUTED this 23rd day of April , 1996, at Arcadia, California.
/s/ Christopher T. Stirling
------------------------------
5
<PAGE>
EXHIBIT 10.2
CONSULTING AGREEMENT
--------------------
This Consulting Agreement ("Agreement") is entered into as of April 26,
1996, by and between Santa Anita Realty Enterprises, Inc., a Delaware
corporation ("Company"), and Christopher T. Stirling ("Consultant").
RECITALS
--------
A. Company desires to retain Consultant, solely on the terms and
conditions contained herein, to perform certain consulting services for Company.
B. Consultant desires to provide his services as a consultant to Company
solely on the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and upon the terms and conditions
hereinafter set forth, Company and Consultant agree as follows:
1. Retention as Consultant. Consultant is hereby retained by Company as a
-----------------------
consultant to Company. During the term of this Agreement, Consultant shall make
himself available to the officers of Company for general consultation and shall
perform such specific consulting services as Company may request concerning
general business matters of Company. In performing the duties required
hereunder, Consultant shall be an independent contractor and shall not be an
employee or agent of Company. Consultant shall have no right or authority to
bind or contract for Company, and except as otherwise approved by Company,
Company shall not be responsible for any debts or obligations incurred by
Consultant or any employee, agent or representative of Consultant in the
performance of this Agreement.
2. Term of Agreement. The term of this Agreement shall commence on July
-----------------
1, 1996 and shall terminate on December 31, 1996, provided, however, that this
Agreement shall terminate prior to December 31, 1996 in the event Consultant
accepts full-time employment with another entity, in which case this Agreement
shall terminate effective with such acceptance of employment.
3. Compensation. For the services to be rendered hereunder, Company shall
------------
pay to Consultant $10,000 per calendar month, payable in arrears on the 25th day
of each month, with the first payment due July 25, 1996. During the term of
this Agreement, Company shall also provide for Consultant's full-time use, a
Company automobile. In the event this Agreement is terminated prior to the last
day of a calendar month, compensation and reimbursement due
1
<PAGE>
to Consultant shall be prorated for the portion of the month in which this
Agreement was in effect.
4. Confidentiality. Company has in the past supplied, while Consultant
---------------
was employed by Company, and may in the future supply to Consultant during the
term of this Agreement certain trade secrets and confidential information.
Consultant agrees to limit his use of such material to what is necessary to
perform the services under this Agreement and to abide by any restrictions
imposed by Company on the use of such material. Consultant shall not, directly
or indirectly, communicate, divulge, disclose, reveal, report, publish or
transfer, to any person or entity, or use to the detriment of Company or use for
the benefit of Consultant or any other person or entity, or misuse in any way,
any confidential information or trade secrets of Company, without the prior
written consent of an officer of the Company. Consultant shall take such
precautions as shall be reasonably calculated to keep strictly confidential such
confidential information and trade secrets and to prevent the unauthorized
disclosure thereof. Consultant further agrees that upon termination of this
Agreement for any reason, Consultant shall return such confidential information
and trade secrets and any copies thereof to Company. After termination of this
Agreement, Consultant shall not utilize or divulge in any way such confidential
information and trade secrets. Consultant's obligations under this Section 4
shall continue beyond the expiration or termination of this Agreement.
5. Modification of Agreement. No waiver or modification of this Agreement
-------------------------
or of any covenant, condition or limitation herein contained shall be valid
unless in writing and duly executed by the party to be charged therewith, and no
evidence of any waiver or modification shall be offered or received in evidence
in any proceeding, arbitration or litigation between the parties arising out of
or affecting this Agreement, or the rights or obligations of the parties
hereunder, unless such waiver or modification is in writing, duly executed as
aforesaid. Failure of either party to exercise or otherwise act with respect to
any of its rights hereunder in the event of a breach of any of the terms or
conditions hereof by the other party shall not be construed as a waiver of such
breach, nor prevent such party from thereafter enforcing strict compliance with
any and all of the terms and conditions hereof.
6. Notice. Any notice or other communication required or permitted
------
hereunder shall be in writing and shall be delivered personally, telegraphed,
telexed, sent by facsimile transmission or sent by certified mail, return
receipt requested, and shall be deemed given when so delivered personally,
telegraphed, telexed or sent by facsimile transmission or two (2)
2
<PAGE>
days after deposit in the U.S. mail when sent by certified mail, return receipt
requested, as follows:
If to Company to: Santa Anita Realty Enterprises, Inc.
301 West Huntington Drive, Suite 405
Arcadia, California 91007
Attention: Brian L. Fleming
Facsimile: 818/574-0634
If to
Consultant to: Christopher T. Stirling
2794 Fleur Drive
San Marino, California 91108
or to such other addresses or persons as to which or whom the parties hereto
give written notice in accordance with this Paragraph 6.
7. Choice of Law. This Agreement shall be governed by and construed and
-------------
interpreted according to the laws of the State of California.
8. Assignment. This Agreement is personal as to Consultant and therefore
----------
the rights and obligations of Consultant under this Agreement shall not be
assigned or transferred by Consultant.
9. Counterparts. This Agreement may be executed in several counterparts
------------
and all documents so executed shall constitute one agreement, binding on all of
the parties hereto, notwithstanding that all of the parties are not signatory to
the original or the same counterpart.
10. Integration; Construction. This Agreement shall comprise the complete
-------------------------
and integrated agreement of Company and Consultant and shall supersede all prior
agreements, written or oral, on the subject matter hereof. This Agreement has
been drafted with the joint participation of Company and Consultant and shall be
construed to be neither against nor in favor of Company or Consultant in
accordance with the fair meaning thereof.
11. Attorneys' Fees. In the event that either party shall bring an action
---------------
in connection with the performance, breach, or interpretation hereof, then the
prevailing party in such action as determined by the court having jurisdiction,
shall be entitled to recover from the losing party in such action as determined
by the court having jurisdiction, all reasonable costs and expenses of such
litigation, including attorneys' fees, court costs, costs of investigation and
other costs reasonably related to such litigation, in such amount as may be
determined in the discretion of the court having jurisdiction.
3
<PAGE>
12. Successors. The rights and obligations of Company hereunder shall
----------
inure to the benefit of and be binding upon its successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
date and year first above written.
"Company"
Santa Anita Realty Enterprises, Inc.
By: /s/
---------------------------------
William C. Baker
Chief Executive Officer
"Consultant"
/s/
-------------------------------------
Christopher T. Stirling
4
<PAGE>
EXHIBIT 10.3
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT
This Amendment No. 1 to Employment Agreement is entered into by and between
Santa Anita Realty Enterprise, Inc. ( the "Company") and Brian L. Fleming (the
"Executive") as of the 7th day of May, 1996.
Recitals
--------
A. Company and Executive have previously entered into that certain
Employment Agreement dated as of May 9, 1994 (the "Employment Agreement"), which
sets forth the terms and conditions of the Executive's employment with the
Company.
B. Company and Executive now desire to amend the Employment Agreement as
hereinafter set forth.
Agreement
---------
1. Section III of the Employment Agreement is hereby amended and restated
in its entirety as follows:
III. EMPLOYMENT.
-----------
The Company hereby employs the Executive and the Executive hereby
accepts such employment, upon the terms and conditions hereinafter set
forth, from May 9, 1994, to and including December 31, 1997. This
Agreement is subject to renewal as set forth in Section XIX of this
Agreement.
2. Section XIX is hereby added to the Employment Agreement, as follows:
XIX. RENEWAL.
--------
Subject to the provisions of Section VI-E-3, on the last day of
December each calendar year, beginning on December 31, 1996, this
Agreement shall be automatically renewed for one additional year
unless the Executive or the Company gives notice to the other, in
writing, at least six (6) months prior to the expiration of this
Agreement,
<PAGE>
or any renewal or extension thereof, of its desire to terminate this
Agreement or modify its terms.
3. Section XVI of the Employment Agreement is hereby amended to
change the address for delivery of notice to the Company to 301 West Huntington
Drive, Suite 405, Arcadia, California 91007.
4. Except as otherwise amended hereby by this Amendment No. 1 to
Employment Agreement, all terms and conditions of the Employment Agreement shall
be unchanged from those set forth in the Employment Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
No. 1 to Employment Agreement as of the date first above written.
"Company"
SANTA ANITA REALTY ENTERPRISES, INC.
By: /s/
-------------------------------------
William C. Baker
Chairman of the Board and Chief
Executive Officer
"Executive"
/s/
----------------------------------------
Brian L. Fleming
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<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.
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<CIK> 0000314661
<NAME> SANTA ANITA REALTY ENTERPRISES
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 125,000
<SECURITIES> 0
<RECEIVABLES> 582,000
<ALLOWANCES> (148,000)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 82,537,000
<DEPRECIATION> (40,146,000)
<TOTAL-ASSETS> 63,066,000
<CURRENT-LIABILITIES> 0
<BONDS> 22,295,000
0
0
<COMMON> 1,138,000
<OTHER-SE> 26,999,000
<TOTAL-LIABILITY-AND-EQUITY> 63,066,000
<SALES> 0
<TOTAL-REVENUES> 13,562,000
<CGS> 0
<TOTAL-COSTS> 1,372,000
<OTHER-EXPENSES> 3,442,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,700,000
<INCOME-PRETAX> 7,048,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 7,048,000
<DISCONTINUED> 0
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<CHANGES> 0
<NET-INCOME> 7,048,000
<EPS-PRIMARY> 0.62
<EPS-DILUTED> 0.00
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<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> JUN-30-1996
<CASH> 68,000
<SECURITIES> 9,468,000
<RECEIVABLES> 4,332,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 16,984,000
<PP&E> 45,069,000
<DEPRECIATION> (27,341,000)
<TOTAL-ASSETS> 36,834,000
<CURRENT-LIABILITIES> 19,002,000
<BONDS> 1,311,000
0
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<COMMON> 1,127,000
<OTHER-SE> 12,875,000
<TOTAL-LIABILITY-AND-EQUITY> 36,834,000
<SALES> 0
<TOTAL-REVENUES> 52,360,000
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