SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) August 16, 1996
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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 (State or other jurisdiction
of incorporation) of incorporation)
95-3520818 95-3419438
(IRS Employer Identification No.) (IRS Employer Identification No.)
0-9109 0-9110
(Commission File Number) (Commission File Number)
301 West Huntington Drive, Suite 405 285 West Huntington Drive
Arcadia, CA 91066-6014 Arcadia, CA 91066-6014
(Address of principal executive offices (Address of principal executive offices
including zip code) including zip code)
(818) 574-5550 (818) 574-7223
(Registrant's telephone number (Registrant's telephone number
including area code) including area code)
(Former name or former address, (Former name or former address,
if changed since last report) if changed since last report)
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ITEM 5. OTHER EVENTS
A. MANAGEMENT CHANGES. Effective August 16, 1996,
Stephen F. Keller resigned his positions as Chairman, President
and Chief Executive Officer of Santa Anita Operating Company
("Operating"), as director of Santa Anita Realty Enterprises,
Inc. ("Realty") and as director of Operating, and Sherwood C.
Chillingworth retired from his positions as Executive Vice
President and Vice Chairman of Realty and resigned as director of
Realty. On August 30, 1996, Richard D. Brumbaugh resigned his
positions as Vice President-Finance and Chief Financial Officer
of Operating. The Operating Board of Directors has appointed
William C. Baker to the positions of Chairman, President and
Chief Executive Officer of Operating (in addition to his current
position as Chairman of Realty). Mr. Baker resigned his
positions as President and Chief Executive Officer of Realty.
The Realty Board of Directors has named Brian L. Fleming,
Executive Vice President and Chief Financial Officer of Realty,
to the additional positions of acting President and Chief
Executive Officer and director of Realty. Realty and Operating
will accrue approximately $1 million as a charge against earnings
in the third quarter, reflecting payments to Messrs. Keller,
Chillingworth and Brumbaugh under existing employment and
severance agreements.
B. TRANSACTION WITH COLONY INVESTORS II, L.P. On
August 17, 1996, Realty, Operating and Colony Investors II, L.P.
("Colony") executed a Formation Agreement, which was amended and
restated as of September 5, 1996 (as so amended and restated, the
"Formation Agreement").
FORMATION AGREEMENT. The Formation Agreement
contemplates a number of transactions. Such transactions include
(i) the immediate sale of 112,700 newly issued shares of paired
common stock and 867,343 newly issued paired shares of Series A
Redeemable Preferred Stock (described below) of Realty and
Operating to Colony for cash, at a purchase price of $12.975 per
paired share; and (ii) subject to stockholder approval, (a) the
contribution by Realty to a newly formed limited liability
company (the "Realty JV") of substantially all of the properties
and assets of Realty, subject to substantially all of the
liabilities of Realty, in exchange for a 59.8% interest in the
Realty JV at the time Colony's investment is completed, (b) the
contribution by Operating and its subsidiaries to a newly formed
limited liability company (the "Operating JV") of substantially
all of their properties and operating assets, subject to
substantially all of their liabilities, in exchange for a 59.8%
interest in the Operating JV at the time Colony's investment is
completed, and (c) the contribution by Colony to the Realty JV
and the Operating JV of approximately $125 million in cash (which
contribution will be made from time to time no later than October
1, 1998), in exchange for the remaining 40.2% interests in each
of the Realty JV and the Operating JV (the "JVs").
The sale of the shares of paired common stock and the
shares of paired preferred stock was consummated on September 5,
1996. If the required stockholder approval is obtained, and
certain other conditions, including the obtaining of regulatory
approvals, are satisfied, the transactions described in clause
(ii) above are expected to be consummated by the end of 1996.
Pursuant to an Exchange Rights Agreement to be executed
by the parties, the units of the JVs to be issued to Colony will
be exchangeable, together but not separately, for, at the option
of Realty and Operating, either (i) shares of the paired common
stock of Realty and Operating equivalent to the percentage
ownership of the JVs represented by the units tendered, or (ii)
cash equal to the market value of such paired shares. Any tender
of units of the JVs will be subject to the provisions of the
Exchange Rights Agreement that prohibit any issuance of shares
that would cause Colony or any other holder to beneficially own
shares of the paired common stock and paired preferred stock of
Realty in excess of 8% in number, value or voting power,
whichever is most restrictive.
Pursuant to a Registration Rights Agreement to be
executed by the parties, Realty and Operating will grant Colony
registration rights with respect to the common shares purchased
by Colony under the Formation Agreement or any common shares
received by Colony upon exchange of units in the JVs or exchange
of the paired preferred stock.
The Formation Agreement provides that Colony will, so
long as Colony maintains a combined equity interest in Realty,
Operating and the JVs of at least 10%, have a participation right
to purchase or subscribe for its pro rata share of any additional
shares of the paired common stock to be issued or sold by either
of Realty or Operating, other than shares issued pursuant to
benefit plans, upon the exercise of stock options and upon
exchange of the shares of paired preferred stock.
Pursuant to the Formation Agreement, Colony will be
entitled to designate three directors of each of Realty and
Operating, who will take office effective upon the closing of the
transactions contemplated by the Formation Agreement. For four
years after the closing of the transactions contemplated by the
Formation Agreement, Colony will be entitled to nominate a
minimum of three directors (but not more than 45% of the
directors) for election to each of the Realty and Operating
Boards of Directors, subject to Colony maintaining a combined
equity interest in Realty, Operating and the JVs in excess of
10%. Realty and Operating have agreed that a Colony designated
director will be a member of each board committee and that Realty
and Operating will support the Colony nominees in any election by
the stockholders. Realty and Operating will reduce the size of
their respective Boards of Directors to no more than eleven by
December 31, 1997.
The JVs will each be governed by a five-member Member
Board. Colony will designate two members to each such Member
Board, Realty will designate the other three members of the
Realty JV Member Board, and Operating will designate the other
three members of the Operating JV Member Board. For each of the
JVs, the affirmative votes of four out of the five members of the
Member Board will be required for certain major decisions.
Pursuant to Standstill Agreements to be executed by the
parties, for three years from the closing of the transactions
contemplated in the Formation Agreement, Colony will not acquire
paired shares of Realty and Operating or units of the JVs in
excess of 45% of the combined equity interests of such entities,
and Colony will not otherwise participate in the acquisition or
transfer of control of Realty or Operating.
Pursuant to a Services Agreement to be executed by the
parties, Colony Capital, Inc., an affiliate of Colony, will
provide certain investment and advisory services as well as the
services of certain of its personnel to Realty, Operating and the
JVs for customary, market-based fees.
Assuming the consummation of the transactions described
above, and subject to certain limitations, Colony and its
affiliates have agreed not to invest in any real estate ownership
intensive businesses in the United States whose principal
activities relate to horse racing, golf courses, amusement parks,
family entertainment centers or gaming, unless such investment
opportunity has first been presented to and rejected by the
Member Boards of the JVs.
Thomas J. Barrack, Jr., the Chief Executive Officer of
Colony Capital, Inc., a private real estate investment firm that
manages Colony, is a director of both Operating and Realty. On
the Closing Date, Kelvin L. Davis, Executive Vice President of
Colony Capital, Inc., will be appointed the President and Chief
Executive Officer of Realty and William C. Baker will continue to
serve as the Chairman, President and Chief Executive Officer of
Operating and as the Chairman of Realty.
Realty and Operating have agreed that if the Formation
Agreement is terminated under certain circumstances, Realty and
Operating will pay Colony a termination fee of $4 million and
will reimburse Colony's expenses related to the Formation
Agreement up to $500,000.
SERIES A PREFERRED STOCK. The Certificates of
Designations with respect to the Series A Redeemable Preferred
Stock of Realty and Operating specify the following: the
preferred stock of Realty and Operating are "paired" with one
another and the holders are entitled to participate in any
dividends paid to the same extent as the holders of the paired
common stock of Realty and Operating, as applicable. Holders of
the preferred stock are entitled to vote together with the
holders of the paired common stock on all matters presented to
the holders of the paired common stock, other than the election
of directors, except as otherwise required by law. The
affirmative vote of 66-2/3% of the shares of the preferred stock
is required for certain matters adversely affecting the preferred
stock. Shares of preferred stock of each of Realty and Operating
have a liquidation preference of $0.01 per share, plus all unpaid
dividends.
The holders of the preferred stock may require
redemption thereof at any time, at a redemption price per share
equal to the average market price of the paired common stock for
the 30 trading days prior to the date such shares are surrendered
for redemption. In lieu of such redemption, Realty and Operating
have agreed, if appropriate stockholder approvals are received,
to deliver shares of paired common stock to the redeeming holders
on a share-for-share basis. If Realty and Operating fail to
obtain stockholder approval of the exchange of the preferred
stock for paired common stock, Realty and Operating may deliver
promissory notes, due in six months, for any portion of the
redemption price in excess of the original purchase price.
Realty and Operating will have 30 days after the date of the
redemption notice to deliver the consideration to the holders of
preferred stock surrendered for redemption. Realty and Operating
may require the exchange of the preferred stock at any time for
an equal number of shares of paired common stock, provided that
the requisite stockholder approvals have been obtained. After
September 4, 1999, if the transactions contemplated by the
Formation Agreement have not been approved by the stockholders or
if Colony's combined equity interest in Realty, Operating and the
JVs is reduced to below 10%, shares of paired preferred stock are
redeemable at the option of Realty and Operating for cash at a
redemption price per share equal to the current market price of
the shares of paired common stock as of the date Realty and
Operating call such shares for redemption, plus an amount equal
to any unpaid dividends. Realty and Operating will have five
business days after the date of the redemption notice to deliver
the redemption consideration.
Colony has agreed pursuant to the Formation Agreement
not to require redemption of the preferred stock until the
earliest of (i) the receipt by Colony of a notice from Realty and
Operating that their Boards of Directors have determined that
another transaction could provide greater value to the
stockholders of Realty and Operating, as provided in the
Formation Agreement, (ii) the closing of the transactions
contemplated by the Formation Agreement, or (iii) the termination
of the Formation Agreement.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrants 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: __ BRIAN L. FLEMING ____ By: __ WILLIAM C. BAKER ____
Brian L. Fleming William C. Baker
Acting President and Chief Chairman of the Board, President
Executive Officer and Chief Executive Officer
Date: September 6, 1996 Date: September 6, 1996
