<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 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 specified (Exact name of registrant as
in its charter) specified in its charter)
Delaware Delaware
- -------------------------------------- ------------------------------------
(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization)
95-3520818 95-3419438
- -------------------------------------- ------------------------------------
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
301 West Huntington Drive, 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 November 5, 1996 were:
Santa Anita Realty Enterprises, Inc. 11,497,700
Santa Anita Operating Company 11,385,200
<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 September 30, 1996 and 4
December 31, 1995
Combined Statements of Operations for the three months 5
and nine months ended September 30, 1996 and 1995
Combined Statements of Cash Flows for the nine months 6
ended September 30, 1996 and 1995
SANTA ANITA REALTY ENTERPRISES, INC.
Consolidated Balance Sheets as of September 30, 1996 and 7
December 31, 1995
Consolidated Statements of Operations for the three 8
months and nine months ended September 30, 1996 and
1995
Consolidated Statements of Cash Flows for the nine 9
months ended September 30, 1996 and 1995
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets as of September 30, 1996 and 10
December 31, 1995
Consolidated Statements of Operations for the three 11
months and nine months ended September 30, 1996 and
1995
Consolidated Statements of Cash Flows for the nine 12
months ended September 30, 1996 and 1995
NOTES TO FINANCIAL STATEMENTS 13
MANAGEMENTS' DISCUSSION AND ANALYSIS OF 16
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
PART II. OTHER INFORMATION 22
SIGNATURES 25
</TABLE>
2
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC. AND
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
FORM 10-Q
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying balance sheets as of September 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
nine months ended September 30, 1996 and 1995, and the related statements of
cash flows for the nine months ended September 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>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
Real estate assets
Santa Anita Racetrack, less
accumulated depreciation
of $20,905,000 and $20,216,000 $ 9,344,000 $ 9,030,000
Commercial properties, less
accumulated depreciation
of $4,164,000 and $3,631,000 9,871,000 10,342,000
Commercial properties to be sold,
less accumulated depreciation
of $3,947,000 and $16,737,000 13,167,000 27,337,000
Investments in and advances to
unconsolidated joint ventures 1,370,000 3,166,000
Real estate loans receivable 10,795,000 10,954,000
----------- ------------
44,547,000 60,829,000
Cash and cash equivalents 17,951,000 13,877,000
Accounts receivable 2,479,000 3,771,000
Prepaid expenses and other assets 9,487,000 6,494,000
Investment in Pacific Gulf Properties Inc. - 12,967,000
Property, plant and equipment, less
accumulated depreciation of
$27,579,000 and $24,968,000 19,586,000 19,233,000
----------- ------------
$94,050,000 $117,171,000
=========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Real estate loans payable $ 22,188,000 $ 28,389,000
Bank loans payable 1,091,000 22,685,000
Accounts payable 6,051,000 11,208,000
Other liabilities 14,334,000 16,990,000
Income taxes - 326,000
Dividends payable 2,451,000 2,254,000
Deferred revenues 1,103,000 2,379,000
Deferred income taxes 1,229,000 1,239,000
------------- -------------
48,447,000 85,470,000
------------- -------------
Shareholders' equity
Preferred stock, $.10 par value;
authorized 6,000,000 shares; 867,343
shares designated as Series A
Redeemable Preferred Stock, 867,343
shares issued and outstanding 174,000 -
Common stock, $.10 par value;
authorized 19,000,000 shares;
issued and outstanding 11,385,200
and 11,270,500 shares 2,277,000 2,253,000
Additional paid-in capital 149,104,000 136,552,000
Unearned compensation expense (676,000) (1,209,000)
Retained earnings (deficit) (105,276,000) (105,895,000)
------------- -------------
45,603,000 31,701,000
------------- -------------
$ 94,050,000 $ 117,171,000
</TABLE> ============= =============
See accompanying notes.
4
<PAGE>
THE SANTA ANITA COMPANIES
COMBINED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------- --------------------------------
1996 1995 1996 1995
--------------- ---------------- -------------- ---------------
(Restated) (Restated)
<S> <C> <C> <C> <C>
Revenues
Horse racing $ 6,418,000 $ 6,133,000 $58,390,000 $ 58,307,000
Rental property 1,638,000 2,218,000 5,625,000 6,473,000
Interest and other 384,000 482,000 1,457,000 1,592,000
----------- ------------ ----------- ------------
8,440,000 8,833,000 65,472,000 66,372,000
----------- ------------ ----------- ------------
Costs and expenses
Horse racing operating costs 5,384,000 4,952,000 40,583,000 39,385,000
Rental property operating
expenses 627,000 686,000 1,999,000 1,921,000
Depreciation and amortization 447,000 1,001,000 3,904,000 5,703,000
General and administrative 2,895,000 1,915,000 8,187,000 7,500,000
Interest and other 527,000 1,156,000 2,231,000 3,572,000
Losses from unconsolidated
joint ventures 451,000 378,000 989,000 1,314,000
Costs of equity offering - - - 750,000
Card club option write-off - 2,000,000 - 2,000,000
Program for disposition of
non-core real estate assets - 34,500,000 - 34,500,000
----------- ------------ ----------- ------------
10,331,000 46,588,000 57,893,000 96,645,000
----------- ------------ ----------- ------------
Net income (loss) $(1,891,000) $(37,755,000) $ 7,579,000 $(30,273,000)
=========== ============ =========== ============
Weighted average common shares and
common share equivalents outstanding 11,547,556 11,270,500 11,363,526 11,194,883
=========== ============ =========== ============
Net income (loss) per common share and
common share equivalent $ (.16) $ (3.35) $ .67 $ (2.70)
=========== ============ =========== ============
Dividends declared per common share
and common share equivalent $ .20 $ .20 $ .60 $ .60
=========== ============ =========== ============
</TABLE>
See accompanying notes.
5
<PAGE>
THE SANTA ANITA COMPANIES
COMBINED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
------------- --------------
(Restated)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 7,579,000 $(30,273,000)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 3,904,000 5,703,000
Amortization of unearned compensation expense 533,000 469,000
Equity in losses of unconsolidated joint ventures 989,000 1,314,000
Equity in earnings from investment in
Pacific Gulf Properties Inc. - (261,000)
Card club option write-off - 2,000,000
Program for disposition of non-core real estate assets - 34,500,000
Deferred income taxes (404,000) 68,000
Net (decrease) increase in certain other assets (121,000) 1,140,000
Net decrease in certain other liabilities (9,021,000) (10,157,000)
------------ ------------
Net cash provided by operating activities 3,459,000 4,503,000
------------ ------------
Cash flows from investing activities:
Payments received on loans receivable 175,000 343,000
Additions and improvements to real estate assets (1,864,000) (2,028,000)
Additions to property, plant and equipment (2,964,000) (3,246,000)
Additions to certain other assets (2,306,000) (4,055,000)
Investments in and advances to unconsolidated joint ventures (1,111,000) (2,280,000)
Capital distributions from unconsolidated joint ventures 1,918,000 1,887,000
Sale of Pacific Gulf Properties Inc. common stock 12,139,000 -
Sale of non-core real estate assets 16,436,000 -
Dividends received from Pacific Gulf Properties Inc. in 1995 - 918,000
------------ ------------
Net cash provided by (used in) operating activities 22,423,000 (8,461,000)
------------ ------------
Cash flows from financing activities:
Proceeds from bank loans payable - 4,400,000
Repayment of real estate loans payable (6,201,000) (444,000)
Repayment of bank loans payable (21,594,000) (589,000)
Dividends paid (6,763,000) (6,712,000)
Issuance of common and preferred stock 12,716,000 -
Exercise of stock options 34,000 -
Issuance of common stock from restricted stock awards - 13,000
------------ ------------
Net cash used in financing activities (21,808,000) (3,332,000)
------------ ------------
Net increase (decrease) in cash and cash equivalents 4,074,000 (7,290,000)
Cash and cash equivalents at beginning of year 13,877,000 15,094,000
------------ ------------
Cash and cash equivalents at September 30, $ 17,951,000 $ 7,804,000
============ ============
</TABLE>
See accompanying notes.
6
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
-------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
Real estate assets
Santa Anita Racetrack, less
accumulated depreciation
of $20,905,000 and $20,216,000 $ 9,344,000 $ 9,030,000
Commercial properties, less
accumulated depreciation
of $4,646,000 and $4,068,000 12,531,000 13,047,000
Commercial properties to be sold,
less accumulated depreciation
of $5,295,000 and $18,085,000 13,482,000 27,652,000
Investments in and advances to
unconsolidated joint ventures 1,370,000 3,166,000
Real estate loans receivable 10,795,000 10,954,000
------------ ------------
47,522,000 63,849,000
Cash and cash equivalents 15,330,000 167,000
Accounts receivable 405,000 658,000
Prepaid expenses and other assets 9,086,000 5,726,000
Investment in Pacific Gulf Properties Inc. - 12,967,000
------------ ------------
$ 72,343,000 $ 83,367,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Real estate loans payable $ 22,188,000 $ 28,389,000
Bank loans payable - 20,950,000
Accounts payable 744,000 420,000
Other liabilities 5,222,000 5,274,000
Dividends payable 2,473,000 2,277,000
Due to Operating Company 5,197,000 415,000
------------ ------------
35,824,000 57,725,000
------------ ------------
Shareholders' equity
Preferred stock, $.10 par value;
authorized 6,000,000 shares; 867,343
shares designated as Series A
Redeemable Preferred Stock, 867,343
shares issued and outstanding 87,000 -
Common stock, $.10 par value;
authorized 19,000,000 shares;
issued and outstanding 11,497,700
and 11,383,000 shares 1,150,000 1,138,000
Additional paid-in capital 130,343,000 118,881,000
Retained earnings (deficit) (95,061,000) (94,377,000)
------------ ------------
36,519,000 25,642,000
------------ ------------
$ 72,343,000 $ 83,367,000
============ ============
</TABLE>
See accompanying notes.
7
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------- --------------------------------
1996 1995 1996 1995
-------------- ----------------- ------------- ----------------
(Restated) (Restated)
<S> <C> <C> <C> <C>
Revenues
Rent from Racetrack $ 427,000 $ 375,000 $ 9,134,000 $ 9,227,000
Shopping centers 689,000 1,168,000 2,638,000 3,398,000
Office buildings 949,000 1,050,000 2,987,000 3,075,000
Interest and other 314,000 416,000 1,182,000 1,170,000
----------- ------------ ----------- ------------
2,379,000 3,009,000 15,941,000 16,870,000
----------- ------------ ----------- ------------
Costs and expenses
Shopping centers 173,000 204,000 704,000 714,000
Office buildings 454,000 482,000 1,295,000 1,207,000
Depreciation and amortization 224,000 811,000 1,338,000 2,944,000
General and administrative 1,280,000 1,229,000 3,070,000 2,725,000
Interest and other 502,000 1,074,000 2,202,000 3,312,000
Losses from unconsolidated joint
ventures 451,000 378,000 989,000 1,314,000
Costs of equity offering - - - 700,000
Card club option write-off - 2,000,000 - 2,000,000
Program for disposition of
non-core real estate assets - 34,500,000 - 34,500,000
----------- ------------ ----------- ------------
3,084,000 40,678,000 9,598,000 49,416,000
----------- ------------ ----------- ------------
Net income (loss) $ (705,000) $(37,669,000) $ 6,343,000 $(32,546,000)
=========== ============ =========== ============
Weighted average common shares and
common share equivalents
outstanding 11,660,056 11,383,000 11,476,026 11,307,383
=========== ============ =========== ============
Net income (loss) per common share
and common share equivalent $ (.06) $ (3.31) $ .55 $ (2.88)
=========== ============ =========== ============
Dividends declared per common share
and common share equivalent $ .20 $ .20 $ .60 $ .60
=========== ============ =========== ============
</TABLE>
See accompanying notes.
8
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
--------------- --------------
(Restated)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 6,343,000 $(32,546,000)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 1,338,000 2,944,000
Equity in losses of unconsolidated joint ventures 989,000 1,314,000
Equity in earnings from investment in
Pacific Gulf Properties Inc. - (261,000)
Card club option write-off - 2,000,000
Program for disposition of non-core real estate assets - 34,500,000
Net increase in certain other assets (1,527,000) (489,000)
Net increase (decrease) in certain other liabilities 271,000 (185,000)
------------ ------------
Net cash provided by operating activities 7,414,000 7,277,000
------------ ------------
Cash flows from investing activities:
Payments received on loans receivable 175,000 343,000
Additions and improvements to real estate assets (1,864,000) (2,028,000)
Additions to certain other assets (2,306,000) (4,055,000)
Investments in and advances to unconsolidated joint ventures (1,111,000) (2,280,000)
Capital distributions from unconsolidated joint ventures 1,918,000 1,887,000
Sale of Pacific Gulf Properties Inc. common stock 12,139,000 -
Sale of non-core real estate assets 16,436,000 -
Dividends received from Pacific Gulf Properties Inc. in 1995 - 918,000
------------ ------------
Net cash provided by (used in) investing activities 25,387,000 (5,215,000)
------------ ------------
Cash flows from financing activities:
Proceeds from bank loans payable - 4,400,000
Repayment of real estate loans payable (6,201,000) (444,000)
Repayment of bank loans payable (20,950,000) -
Increase in due to Operating Company 4,782,000 1,604,000
Dividends paid (6,830,000) (6,779,000)
Issuance of common and preferred stock 11,530,000 -
Exercise of stock options 31,000 -
Issuance of common stock from restricted stock awards - 13,000
------------ ------------
Net cash used in financing activities (17,638,000) (1,206,000)
------------ ------------
Net increase in cash and cash equivalents 15,163,000 856,000
Cash at beginning of year 167,000 2,251,000
------------ ------------
Cash and cash equivalents at September 30, $ 15,330,000 $ 3,107,000
============ ============
</TABLE>
See accompanying notes.
9
<PAGE>
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
-------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 2,621,000 $13,710,000
Accounts receivable 2,074,000 3,113,000
Prepaid expenses and other assets 410,000 777,000
Due from Realty 5,197,000 415,000
----------- -----------
Total current assets 10,302,000 18,015,000
Investment in common stock of Realty 2,122,000 2,122,000
Property, plant and equipment, less
accumulated depreciation of 19,586,000 19,233,000
$27,579,000 and $24,968,000 ----------- -----------
$32,010,000 $39,370,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 5,307,000 $10,788,000
Other liabilities 9,090,000 11,693,000
Bank loans payable 928,000 868,000
Income taxes - 326,000
----------- -----------
Total current liabilities 15,325,000 23,675,000
Bank loans payable 163,000 867,000
Deferred revenues 1,103,000 2,379,000
Deferred income taxes 1,229,000 1,239,000
----------- -----------
17,820,000 28,160,000
----------- -----------
Shareholders' equity
Preferred stock, $.10 par value;
authorized 6,000,000 shares; 867,343
shares designated as Series A
Redeemable Preferred Stock, 867,343
shares issued and outstanding 87,000 -
Common stock, $.10 par value;
authorized 19,000,000 shares;
issued and outstanding 11,385,200
and 11,270,500 shares 1,139,000 1,127,000
Additional paid-in capital 21,826,000 20,736,000
Unearned compensation expense (676,000) (1,209,000)
Retained earnings (deficit) (8,186,000) (9,444,000)
----------- -----------
14,190,000 11,210,000
----------- -----------
$32,010,000 $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 SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------- -------------------------------
1996 1995 1996 1995
---------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues
Wagering commissions $ 3,398,000 $ 3,010,000 $39,009,000 $38,760,000
Admission related 3,020,000 3,123,000 19,381,000 19,547,000
Interest and other 131,000 136,000 519,000 537,000
----------- ----------- ----------- -----------
6,549,000 6,269,000 58,909,000 58,844,000
----------- ----------- ----------- -----------
Costs and expenses
Horse racing operating costs 5,384,000 4,952,000 40,583,000 39,385,000
Depreciation and amortization 238,000 233,000 2,611,000 2,888,000
General and administrative 1,615,000 686,000 5,117,000 4,825,000
Interest 64,000 130,000 206,000 308,000
Rental expense to Realty 427,000 375,000 9,134,000 9,227,000
----------- ----------- ----------- -----------
7,728,000 6,376,000 57,651,000 56,633,000
----------- ----------- ----------- -----------
Net income (loss) $(1,179,000) $ (107,000) $ 1,258,000 $ 2,211,000
=========== =========== =========== ===========
Weighted average common shares and
common share equivalents outstanding 11,547,556 11,270,500 11,363,526 11,194,883
=========== =========== =========== ===========
Net income (loss) per common share
and common share equivalent $ (.10) $ (.01) $ .11 $ .20
=========== =========== =========== ===========
</TABLE>
See accompanying notes.
11
<PAGE>
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,258,000 $ 2,211,000
Adjustments to reconcile net income
to net cash used in operating
activities:
Depreciation and amortization 2,611,000 2,888,000
Amortization of unearned
compensation expense 533,000 469,000
Deferred income taxes (404,000) 68,000
Net decrease in certain other
assets 1,406,000 1,629,000
Net decrease in certain other
liabilities (9,292,000) (9,972,000)
------------ -----------
Net cash used in operating activities (3,888,000) (2,707,000)
------------ -----------
Cash flows from investing activities:
Additions to property, plant and
equipment (2,964,000) (3,246,000)
------------ -----------
Cash flows from financing activities:
Repayment of bank loans payable (644,000) (589,000)
Increase in due from Realty (4,782,000) (1,604,000)
Issuance of common and preferred stock 1,186,000 -
Exercise of stock options 3,000 -
------------ -----------
Net cash used in financing activities (4,237,000) (2,193,000)
------------ -----------
Net decrease in cash and cash
equivalents (11,089,000) (8,146,000)
Cash and cash equivalents at beginning
of year 13,710,000 12,843,000
------------ -----------
Cash and cash equivalents at September 30, $ 2,621,000 $ 4,697,000
============ ===========
</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
($34,500,000 of which was recorded in the three months ended September 30,
1995). In accordance with FAS No. 121, no depreciation was recorded in the
three and nine months ended September 30, 1996, relating to the non-core real
estate assets. The three and nine months ended September 30, 1996 includes
income of $222,000 and $967,000 relating to the non-core real estate assets.
In June 1996, Realty completed the sale of the three neighborhood shopping
centers located in Phoenix, Arizona, for $8,103,000, net of commissions and
fees. In August 1996, Realty completed the sale of the office building located
in Upland, California, for $1,419,000, net of commissions and fees. In
September 1996, Realty completed the sale of the office building located in
Santa Ana, California, for $6,914,000 net of commissions and fees. No gain or
loss was recorded on these sales.
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.
In May 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. The loss on sale of Pacific common stock of $850,000 was
offset by adjustment of the reserve for disposition of non-core real estate
assets.
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 September 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 nine months ended
September 30, 1995 or shareholders' equity as of September 30, 1995, but did
have the effect of reducing Realty's assets and liabilities by $59,854,000 at
September 30, 1995, and of reducing Realty's revenues and expenses by
$9,423,000 for the nine months ended September 30, 1995.
Combined condensed financial statement information for unconsolidated
joint ventures as of September 30, 1996 and December 31, 1995, and for the nine
months ended September 30, 1996 and 1995, is as follows (unaudited except for
financial statement information as of December 31, 1995):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
--------------- ---------------
<S> <C> <C>
Real estate assets $259,043,000 $258,952,000
============ ============
Liabilities
Secured real estate loans $241,727,000 $242,332,000
Other 4,715,000 5,515,000
------------ ------------
$246,442,000 $247,847,000
============ ============
Partners' equity
Realty $ 6,148,000 $ 6,157,000
Others 6,453,000 4,948,000
------------ ------------
$ 12,601,000 $ 11,105,000
============ ============
NINE MONTHS ENDED SEPTEMBER 30,
1996 1995
------------ ------------
(Restated)
Revenues $ 27,850,000 $ 26,268,000
============ ============
Net Loss
Realty $ (989,000) $ (1,314,000)
Others (2,469,000) (2,816,000)
------------ ------------
$ (3,458,000) $ (4,130,000)
============ ============
</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 September 30, 1996, "Prepaid
Expenses and Other Assets" in the Realty Balance Sheet includes $5,621,000 of
Entertainment Center development costs associated with entitlement, planning and
leasing activities.
NOTE 6 - TRANSACTION WITH COLONY INVESTORS II, L.P.
On August 19, 1996, the Companies announced a major transaction with Colony
Investors II, L.P. ("Colony"), a $625 million, Los Angeles based real estate
investment company administered by Colony Capital, Inc., which will invest, over
time, a total of $138 million. The transaction is subject to shareholder
approval.
As an initial step of the investment, on September 5, 1996, Colony acquired
112,700 newly issued shares of paired common stock and 867,343 newly issued
paired shares of Series A Redeemable Preferred Stock of Realty and Operating
Company for $12.7 million, resulting in an ownership interest in the Companies
of 8%.
Upon shareholder approval of the transaction, Realty and Operating Company
will contribute substantially all of their assets into newly formed limited
liability company subsidiaries (LLCs) in exchange for LLC units and Colony will
contribute $125.6 million of cash (which contribution will be made from time to
time, but by no later than October 1, 1998) in exchange for LLC units,
representing an interest in the LLCs of up to 40.2%. LLC units will be
exchangeable for, at the option of the Companies, paired shares of common stock
on a one-for-one basis, the equivalent in cash or a combination of the two.
Substantially all future business activities of Realty and Operating Company
will be conducted through the LLCs as operating entities.
In the event shareholder approval of the exchange of preferred shares for
common shares is not obtained, Colony will have the option of exchanging its
paired preferred shares for cash and a six-month note at the then current
trading price of paired share common stock, including payment of any unpaid
dividends.
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
third quarter and nine months ended September 30, 1996 and 1995, together with
liquidity and capital resources as of September 30, 1996.
RESULTS OF OPERATIONS - THIRD QUARTER 1996 COMPARED WITH THIRD QUARTER 1995
Realty's revenues are derived principally from the rental of real property.
Total revenues for the three months ended September 30, 1996 were $2,379,000,
compared with $3,009,000 for the three months ended September 30, 1995, a
decrease of 20.9%. The lower 1996 revenues were due primarily to a decrease in
rental revenues from shopping center and office building real estate
investments.
Rental revenues from shopping center and office building real estate
investments in 1996 were $1,638,000, a decrease of 26.1% from revenues of
$2,218,000 in 1995. The decrease in 1996 was due primarily to the sale of the
three neighborhood shopping centers located in Phoenix, Arizona, on June 3,
1996, and the office buildings located in Upland, California, on August 13,
1996, and in Santa Ana, California, on September 27, 1996.
Costs and expenses for 1996 were $2,855,000, excluding executive severance of
$229,000 included in general and administrative expense, a decrease of 31.7%
from costs and expenses of $4,178,000 in 1995, excluding unusual items totaling
$36,500,000. The decrease resulted primarily from decreases in depreciation and
amortization expense of $587,000 and interest and other expense of $572,000.
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 expense
is due primarily to payoff of the mortgage loan on the Santa Ana office building
in November 1995, payoff of the mortgage loans on the three Phoenix shopping
centers in May 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 - NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH
NINE MONTHS ENDED SEPTEMBER 30, 1995
Total revenues for the nine months ended September 30, 1996 were $15,941,000,
compared with $16,870,000 for the nine months ended September 30, 1995, a
decrease of 5.5%. The lower 1996 revenues were due primarily to a decrease in
rental revenues from shopping center and office building real estate
investments.
The most significant source of rental revenue is the lease of Santa Anita
Racetrack. Racetrack rental revenues for 1996 were $9,134,000, a decrease of
1.0% from revenues of $9,227,000 in 1995. The decrease in rental revenues was
due to a decrease in on-track and California satellite wagering, partially
offset by an increase in total wagering which resulted from an increase in the
number of days Santa Anita Racetrack operated as a satellite wagering facility.
Rental revenues from shopping center and office building real estate
investments in 1996 were $5,625,000, a decrease of 13.1% from revenues of
$6,473,000 in 1995. The decrease in 1996 was due primarily to the sale of the
three neighborhood shopping centers located in Phoenix, Arizona, on June 3,
1996, and the office buildings located in Upland, California, on August 13,
1996, and in Santa Ana, California, on September 27, 1996.
Costs and expenses for 1996 were $9,369,000, excluding executive severance of
$229,000 included in general and administrative expense, a decrease of 23.3%
from costs and expenses of $12,216,000 in 1995, excluding unusual items totaling
$37,200,000. The decrease resulted primarily from decreases in depreciation and
amortization expense of $1,606,000, and interest and other expense of
$1,110,000.
16
<PAGE>
ITEM 2. MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH
NINE MONTHS ENDED SEPTEMBER 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 in May 1996, and paydown 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 and cash equivalents of $15,330,000 at
September 30, 1996.
The increase in cash and cash equivalents for the nine months ended September
30, 1996 was $15,163,000, compared with an increase in cash and cash equivalents
of $856,000 for the nine months ended September 30, 1995. The comparative
increase in cash and cash equivalents of $14,307,000 was attributable to an
increase of $137,000 in cash provided by operating activities and an increase of
$30,602,000 in cash provided by investing activities, partially offset by an
increase of $16,432,000 in cash used in financing activities.
The increase in cash provided by operating activities of $137,000 was due
primarily to a decrease in interest expense of $1,110,000, equity offering costs
of $700,000 in 1995, and an increase in other liabilities, primarily accounts
payable and accrued liabilities, of $271,000 in 1996, compared with a decrease
in other liabilities, primarily accounts payable and accrued liabilities, of
$185,000 in 1995. These increases in cash provided were partially offset by a
decrease in shopping center and office building operating income of $926,000,
due to sale of non-core real estate assets, and an increase in other assets,
primarily accounts receivable and prepaid expenses, of $1,527,000 in 1996
compared with an increase in other assets, primarily accounts receivable and
prepaid expenses, of $489,000 in 1995.
The increase in cash provided by investing activities of $30,602,000 in 1996
was due primarily to cash received on the sale of Pacific common stock of
$12,139,000 and on the sale of non-core real estate assets of $16,436,000, a
decrease of $1,749,000 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 a decrease of $1,169,000 in investments in and
advances to unconsoldiated joint ventures. The increases in cash provided were
partially offset by dividends of $918,000 received from Pacific in 1995.
The increase in cash used in financing activities of $16,432,000 in 1996 was
due primarily to repayment of borrowings under the revolving credit agreement of
$20,950,000 in 1996, compared with additional borrowings under the revolving
credit agreement of $4,400,000 in 1995 and to an increase in repayment of
mortgage loans payable of $5,757,000. These increases in cash used were
partially offset by the issuance of common and preferred stock of $11,530,000 in
connection with the Colony transaction and by an increase in intercompany
payables of $3,178,000.
In January 1996, Realty's revolving credit agreement with a commercial bank
was extended to June 30, 1996 and available borrowings were reduced to
$20,000,000. In June 1996, the revolving credit agreement was further extended
to February 1, 1997. At September 30, 1996, there were no outstanding
borrowings 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-month 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 September 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 three and nine months ended September 30, 1996 and 1995 together with
liquidity and capital resources as of September 30, 1996.
RESULTS OF OPERATIONS -- THIRD QUARTER 1996 COMPARED WITH THIRD QUARTER 1995
Operating Company derives its revenues from thoroughbred horse racing
activities. Horse racing revenues in the third quarter of 1996 were $6,418,000,
up 4.6% from $6,133,000 in 1995, primarily due to Santa Anita acting as a
satellite wagering facility for the Los Angeles County Fair Association race
meeting at Fairplex Park in Pomona, California ("Fairplex").
In the third quarter ended September 30, Santa Anita Racetrack operated 16
days in 1996 and 20 days in 1995 as a satellite wagering facility for Hollywood
Park. Total attendance as a satellite wagering facility was down 31.5% while
average daily attendance was down 14.4% compared with the year ago period.
Total wagering was down 24.9% while average daily wagering was down 6.2% for the
third quarter of 1996 compared with the same period last year.
Also, in the third quarter ended September 30, Santa Anita Racetrack operated
43 days in 1996 and 43 days in 1995 as a satellite wagering facility for Del
Mar. Total and average daily attendance as a satellite wagering facility were
down 6.2%, in the third quarter of 1996 compared with the year ago period.
Total and average daily wagering were up 0.3%, for the third quarter of 1996
compared with the year ago period.
In addition, in the third quarter ended September 30, Santa Anita Racetrack
operated 19 days in 1996 as a satellite wagering facility for Fairplex. Total
attendance as a satellite wagering facility was 44,753. Total wagering was
$12,309,000. As this is the first year Santa Anita Racetrack has operated as a
satellite wagering facility for Fairplex, there are no comparable amounts for
the year ago period.
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 third quarter of 1996 were $5,384,000 (or
83.9% of horse racing revenues) compared with $4,952,000 (or 80.7% of horse
racing revenues) in the same period last year. The operating margin decline in
the third quarter of 1996 compared with the same period last year was primarily
due to management's decision to enhance the appearance of Santa Anita Racetrack
by performing additional repair and maintenance projects.
18
<PAGE>
ITEM 2. MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS -- THIRD QUARTER 1996 COMPARED WITH THIRD QUARTER 1995
(CONTINUED)
Depreciation expense in the third quarter of 1996 was $238,000, or $5,000
higher than the $233,000 in the comparable period last year. General and
administrative expenses were $764,000 (excluding $851,000 in executive
severance) in the third quarter of 1996, an increase of 11.4% from the $686,000
in the comparable period last year due to increased shareholder related expenses
and insurance costs for the quarter. Interest expense decreased to $64,000 in
the third quarter of 1996 from $130,000 in the third quarter of 1995.
Rental expense to Realty was $427,000 in the third quarter of 1996 compared
with $375,000 in the same period last year. The 13.9% increase in rental
expense was primarily due to the increase in total wagering which resulted from
an increase in the number of race days Santa Anita Racetrack operated as a
satellite wagering facility. 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.
RESULTS OF OPERATIONS -- NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH
THE NINE MONTHS ENDED SEPTEMBER 30, 1995
Horse racing revenues in the first nine months of 1996 were $58,390,000, up
0.1% from $58,307,000 in 1995, primarily due to an increase in sublease revenues
and an increase in the number of days Santa Anita Racetrack operated as a
satellite wagering facility, partially offset by fewer live race days and lower
on-track attendance and wagering.
In the first nine 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 and average daily on-track attendance at the live racing events in
the first nine months of 1996 were down 5.5% and 4.3% from the comparable year
ago period. Total and average daily wagering in the first nine 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 nine months of 1996 compared
with 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 nine months of the year, Santa Anita Racetrack operated
129 days in 1996 and 111 days in 1995 as a satellite wagering facility for
Hollywood Park, Del Mar and Fairplex. Total attendance as a satellite wagering
facility was up 2.4% while average daily attendance was down 12.6% compared with
the year ago period. Total wagering was up 6.9% while average daily wagering was
down 8.9% for the first nine months 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.
19
<PAGE>
ITEM 2. MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS -- NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED WITH
THE NINE MONTHS ENDED SEPTEMBER 30, 1995 (CONTINUED)
Horse racing operating costs in the first nine months of 1996 were
$40,583,000 (or 69.5% of horse racing revenues) compared with $39,385,000 (or
67.5% of horse racing revenues) in the same period last year. The operating
margin decline in the first nine months of 1996 compared with the same period
last year was due to management's decision to enhance the appearance of Santa
Anita Racetrack by performing additional repair and maintenance projects and 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 nine months of 1996 was $2,611,000, or
$277,000 lower than the $2,888,000 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 $4,266,000 (excluding $851,000 of
executive severance) in the first nine months of 1996, a decrease of 11.6% from
$4,825,000 in the comparable period last year due to lower shareholder related
expenses and administrative salaries. Interest expense decreased to $206,000 in
the first nine months of 1996 from $308,000 in the first nine months of 1995.
Rental expense to Realty was $9,134,000 in the first nine months of 1996
compared with $9,227,000 in the same period last year. The decrease in rental
expense of 1.0% was due to a decrease in on-track and California satellite
wagering, partially offset by an increase in total wagering which resulted from
an increase in the number of days Santa Anita Racetrack operated as a satellite
wagering facility. 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.
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 Racetrack. Therefore, the results of
operations for interim periods are not necessarily indicative of the results
that may be expected for the full year.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996, Operating Company's sources of liquidity included cash
and cash equivalents of $2,621,000, together with a verbal commitment from
Realty to provide up to $10,000,000 in short-term borrowings. As a part of this
commitment, Realty has guaranteed an Operating Company capital lease of
$1,091,000. 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 nine months ending September 30, 1996, short-term
investments earned interest income of $448,000.
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.
20
<PAGE>
ITEM 2. MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
Operating Company generated $1,181,000 less cash from operations in the first
nine months of 1996 compared with the same period last year. Net cash used by
operating activities was $3,888,000 in 1996 compared with $2,707,000 in 1995.
The decrease in cash from operations was primarily due to decreased revenues and
the payment of California Franchise Taxes.
Net cash used in investment activities was $2,964,000 in the first nine months
of 1996 compared with $3,246,000 in the same period last year. The $282,000
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 $4,237,000 in the first nine months
of 1996 compared with net cash used in financing activities of $2,193,000 in
the same period last year. The $2,044,000 increase in cash used in financing
activities was attributable to the Operating Company prepayment of rent due to
Realty, partially offset by the issuance of common and preferred stock of
$1,186,000 in connection with the Colony transaction.
21
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC. AND
SANTA ANITA OPERATING COMPANY AND SUBSIDIARIES
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1996
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On September 16, 1996, a purported class action complaint was filed by
Crandon Capital Partners in the Chancery Court for New Castle County, Delaware,
naming as defendants Santa Anita Operating Company, Santa Anita Realty
Enterprises, Inc. (collectively, "The Companies") certain of The Companies'
officers and directors and Colony Capital, Inc. On October 10, 1996, the
complaint was amended and as amended, alleges that the terms of an announced
proposed transaction with an affiliate of Colony Capital, Inc. ("Colony
Transaction") are unfair and inadequate and that the individually named
defendants have breached their fiduciary duties by failing to maximize value and
provide an auction or market check of the Colony Transaction and by proceeding
with the Colony Transaction. The complaint further alleges that Colony has
knowingly aided and abetted the breaches of fiduciary duty. The suit seeks
certification of the class, a preliminary and permanent injunction of the Colony
Transaction, rescission of the Colony Transaction or an award of unspecified
damages and an award of costs and expenses.
On October 10, 1996, a purported class action complaint was filed by William
Steiner in the Court of Chancery for New Castle County, Delaware, naming as
defendants The Companies, certain of their officers and directors and Colony
Capital, Inc. The complaint alleges breaches of fiduciary duties by the
individually named defendants as a result of the proposed Colony Transaction by
failing to undertake an evaluation of all offers to acquire or control The
Companies, including an auction or market check and by failing to negotiate with
all bidders. The complaint further alleges that Colony has knowingly aided and
abetted the breaches of fiduciary duty. The suit seeks certification of the
class, a preliminary and permanent injunction of the Colony Transaction,
directives to discharge fiduciary duties, rescission of the Colony Transaction
or an award of unspecified damages, directive to account for defendant profits
and purported class damages and an award of costs and expenses.
On October 17, 1996, a purported class action complaint was filed by Barbara
J. Gignac in the Superior Court for Los Angeles County, California, naming as
defendants The Companies, certain of their officers and directors and Colony
Capital, Inc. The complaint alleges breaches of fiduciary duties by the
individually named defendants, as a result of the proposed Colony Transaction,
for not conducting an auction for control of The Companies, not negotiating with
other bidders, not making adequate and truthful disclosures and not acting
independently. The suit seeks certification of the class, a preliminary and
permanent injunction of the Colony Transaction, directives to the defendants to
issue corrective disclosures and discharge fiduciary duties, a preliminary and
permanent injunction of breaching fiduciary duties, compensatory damages of an
unspecified amount, costs and expenses and punitive damages.
The defendants believe the allegations in the complaints are without merit
and intend to contest vigorously the claims asserted against them in these
lawsuits.
22
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this report:
Exhibit
Number
-------
2 Form of Amended and Restated Formation Agreement dated as of
October 24, 1996 among Santa Anita Realty Enterprises, Inc.,
Santa Anita Operating Company and Colony Investors II, L.P.
(incorporated by reference to Exhibit 2 of the Current Report on
Form 8-K of Santa Anita Realty Enterprises, Inc. and Santa Anita
Operating Company, dated October 24, 1996).
4.1 Certificate of Designations of Series A Redeemable Preferred
Stock of Santa Anita Realty Enterprises, Inc. (incorporated by
reference to Exhibit N to Exhibit 2 of the Current Report of
Form 8-K of Santa Anita Realty Enterprises, Inc. and Santa Anita
Operating Company, dated October 24, 1996).
4.2 Certificate of Designations of Series A Redeemable Preferred
Stock of Santa Anita Operating Company (incorporated by
reference to Exhibit O to Exhibit 2 of the Current Report on
Form 8-K of Santa Anita Realty Enterprises, Inc. and Santa
Operating Company, dated October 24, 1996).
10.1 Resignation and General Release Agreement dated August 16, 1996
between Santa Anita Operating Company and Stephen F. Keller.
10.2 Resignation and General Release Agreement dated August 16, 1996
between Santa Anita Realty Enterprises, Inc. and Sherwood C.
Chillingworth.
10.3 Resignation and General Release Agreement dated August 30, 1996
between Santa Anita Operating Company, Santa Anita Realty
Enterprises, Inc. and Richard D. Brumbaugh.
10.4 Agreement to Terminate Employment Agreement and Severance
Agreement dated as of August 16, 1996 between Santa Anita Realty
Enterprises, Inc. and William C. Baker.
10.5 Employment Agreement dated as of August 16, 1996 between Santa
Anita Operating Company and William C. Baker.
10.6 Stock Option Agreement dated as of August 18, 1996 between Santa
Anita Operating Company and William C. Baker.
10.7 Nonstatutory Stock Option Agreement dated as of August 18, 1996
between Santa Anita Operating Company and William C. Baker.
27(a) Financial Data Schedule for Santa Anita Realty Enterprises, Inc.
27(b) Financial Data Schedule for Santa Anita Operating Company.
23
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (CONTINUED).
(b) Reports on Form 8-K.
The following reports on Form 8-K have been filed by Santa Anita Realty
Enterprises, Inc. and Santa Anita Operating Company:
(i) Current Report, dated August 16, 1996, reporting "Other Events"
pursuant to Item 5 of Form 8-K.
(ii) Current Report, dated October 24, 1996, reporting "Other Events"
pursuant to Item 5 of Form 8-K.
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<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, SANTA ANITA OPERATING COMPANY
INC.
By: /s/Brian L. Fleming By: /s/William C. Baker
---------------------------- ---------------------------
Brian L. Fleming William C. Baker
Acting President and Chairman of the Board and
Chief Executive Officer and Chief Executive Officer
Executive Vice President and (Principal Executive Officer)
Chief Financial Officer
(Principal Executive and
Financial Officer)
Date: November 7, 1996 Date: November 7, 1996
By: /s/Roger C. Allen By: /s/Elizabeth P. Haug
--------------------- -------------------------
Roger C. Allen Elizabeth P. Haug
Controller Controller
(Principal Accounting (Principal Financial and
Officer) Accounting Officer)
Date: November 7, 1996 Date: November 7, 1996
25
<PAGE>
EXHIBIT 10.1
RESIGNATION AND GENERAL RELEASE AGREEMENT
-----------------------------------------
This Resignation and General Release Agreement ("Agreement"), made
this 16th day of August 1996, by and between Stephen F. Keller ("Keller"), an
individual, and Santa Anita Operating Company, a corporation ("Company"), is a
resignation agreement which includes a general release of claims.
In consideration of the covenants undertaken and the releases
contained in this Agreement, Keller and Company agree as follows:
1. Keller shall voluntarily resign from his position as Chief
Executive Officer of Company and its subsidiaries and as a member of the Board
of Directors of Company and Santa Anita Realty Enterprises, Inc. ("Realty") by
executing Exhibit A attached hereto, such resignation to be effective August 16,
1996. Keller further agrees that he resigns as an employee of the Company by
executing Exhibit A attached hereto, such resignation to be effective August 31,
1996.
2. Company and Keller agree to the following actions in full
discharge of any and all of its obligations to Keller (except to the extent such
obligations are carried out under this agreement, either directly or by
incorporation by reference), including, without limitation, the Employment
Agreement dated as of January 1, 1994, the Severance Agreement dated as of
October 1, 1992, the Exchange Agreement dated as of December 15, 1994, the
Restricted Stock Agreement dated as of April 1, 1995, and all awards provided
pursuant to the Company's 1995 Share Award Plan or the Company's 1984 Stock
Option Program (and any amendments to said agreements):
a. Company shall pay to Keller a cash lump sum equal to
$672,000 within 8 days after the execution of this Agreement, provided that
Keller does not revoke this Agreement pursuant to Section 8(d) hereof. Except
for the payment of any Accrued Obligations under Section V-E-1(a)(i), (ii), and
(iii) of the Employment Agreement between the Company and Keller and any amounts
due pursuant to the terms of any generally applicable welfare and pension
benefit plans, the Company shall have no other obligations to Keller under the
Employment Agreement. Within seven days after the date of execution of this
Agreement, Company agrees to provide Keller a list of the obligations described
in the preceding sentence.
b. If a Change in Control (as defined in the Severance
Agreement between Keller and the Company) occurs prior to May 17, 1997, then the
Company shall pay Keller (or to Keller's beneficiary if Keller is not then
alive), within 30 days after such Change in Control occurs, a cash lump sum
equal to $190,500 if the Change in Control occurs in 1996 or $148,333 if the
Change in Control occurs in 1997 (these amounts represent the excess of the
amount set forth in Section 6 of the Severance Agreement over $672,000) and
shall provide Keller with the additional benefits set
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<PAGE>
forth in Section 7 of the Severance Agreement (effective as of the Change in
Control). The payment and benefits described in the preceding sentence shall in
each case be subject to the limitations set forth in Section 8 of the Severance
Agreement and reduced to the extent required by Section 8. For the purpose of
Section 8, Keller's resignation shall be considered to be contingent on the
Change in Control.
c. With respect to the Restricted Stock Agreement between the
Company, Keller and the Keller Family Trust, the Company agrees that 43,161
Paired Shares are free from the restrictions set forth in the Restricted Stock
Agreement. Subject to appropriate action by the Company's Compensation
Committee, Company agrees that, with respect to the remaining 43,161 Paired
Shares, Keller's employment shall be treated as continuing through May 16, 1997
(thus deferring any right of the Company to repurchase the Paired Shares), and
the Restricted Period shall only expire (so that the Keller Family Trust becomes
vested in the shares), subject to the provisions of Section 11(b) of the
Restricted Stock Agreement, if one of the following events occurs prior to May
17, 1997: (1) Keller's death, (2) Keller's Total Disability, or (3) a Change in
Control Event (as defined in the Company's 1995 Share Award Plan). Capitalized
terms set forth in this subsection c. which are not defined herein shall be
defined in accordance with the Restricted Stock Agreement.
d. The parties agree that Keller's rights with respect to all
134,000 of his stock options shall be limited to those of an employee who
voluntarily terminates employment on August 31, 1996, so that his vested
interest in such options shall be limited to his vested percentage on that date
and he shall have until November 30, 1996 to exercise said options. Subject to
appropriate action by the Company's Compensation Committee, all such options,
both vested and nonvested, shall remain outstanding after November 30, 1996,
provided that the options that are not vested as of August 16, 1996 shall not be
exercisable unless a Change in Control Event (as defined in the Company's 1995
Share Award Plan) occurs prior to May 17, 1997. If a Change in Control Event
occurs prior to May 17, 1997, subject to all applicable limitations relating to
Section 280G of the Internal Revenue Code set forth in the Company's 1995 Share
Award Plan or the Company's 1984 Stock Option Program or any related award
agreements, Keller (or his beneficiary, if Keller is not then alive) shall
become 100% vested with respect to all 134,000 stock options previously granted
to Keller in which Keller is not already vested and shall have three months
after such event to exercise all 134,000 options; at the end of such three month
period, all such options shall expire. If a Change in Control Event does not
occur prior to May 17, 1997, all such options shall expire. Keller acknowledges
that the foregoing provisions are made in part in consideration for the waiver
provided pursuant to Section 8. hereof.
e. On August 17, 1997 a Formation Agreement was executed among
the Company, Santa Anita Realty Enterprises, Inc., and Colony Investors II, L.P.
Company agrees that (i) the
2
<PAGE>
transactions contemplated by the Formation Agreement signed on that date
constitute a Change in Control for the purpose of Section 2b, c, and d, (ii) it
is the Company's current interpretation of the regulations proposed under
Section 280G of the Internal Revenue Code that the transactions contemplated by
the Formation Agreement do not constitute a change in control within the meaning
of Section 280G, and (iii), if the parties to the Formation Agreement agree to
extend the date for closing the transactions contemplated by the Formation
Agreement, the May 16 deadline for determining whether a Change in Control has
occurred for the purposes of this Agreement shall be replaced by any later
deadline agreed to with respect to the transactions set forth in the Formation
Agreement. The possible extended deadline described in the preceding sentence
shall only apply, however, for the purpose of determining whether the
transactions described in the Formation Agreement have occurred within the time
limits set forth in this Agreement for determining whether a Change in Control
has occurred, so that the May 16, 1997 deadline shall continue to apply with
respect to determining whether a Change in Control has occurred with respect to
other possible transactions.
f. The Company shall reimburse Mr. Keller's attorneys up to
$7500 for attorney's fees incurred in connection with his termination of
employment, subject to appropriate documentation.
g. The Company would welcome Keller's use of the Directors
Room, such presence to be in accordance with the Company's policy with respect
to retired directors and the rules and regulations pertaining to all directors.
h. Keller agrees that the payments made pursuant to the
foregoing provisions of this Section 2. shall not be treated as compensation for
purposes of the Company's Retirement Income Plan or Thrift Plan for Employees
and the Company agrees that Keller is 100% vested in the Retirement Income Plan
and the Thrift Plan. Except as expressly noted above, Keller agrees that his
date of termination shall be August 31, 1996 for purposes of such plans, and all
other incentive plans, practices, policies and programs applicable to other
executives or employees of the Company, as well as any other benefits provided
pursuant to the terms of his Employment Agreement or any other agreement with
the Company.
i. To the extent Keller participates in the medical plan made
available by the Company and he is not employed in another position in which he
has available the services of a secretary, the Company agrees to provide
secretarial services that Keller can utilize to prepare and submit claims on
behalf of Keller and his dependents under the medical plan.
3. Keller and Company agree to release to the press, on the date of
execution of this Agreement, the release set forth in Exhibit B attached hereto.
3
<PAGE>
4. Keller shall return to Company and shall not take or copy in any
form or manner lists of customers, prices, engineering plans, and similar
confidential and proprietary materials or information.
5. Company expressly denies any violation of any of its policies,
procedures, state or federal laws or regulations. Accordingly, while this
Agreement resolves all issues between Company and Keller relating to any alleged
violation of Company policies or procedures or any state or federal law or
regulation, this Agreement does not constitute an adjudication or finding on the
merits and it is not, and shall not be construed as, an admission by Company of
any violation of its policies, procedures, state or federal laws or regulations.
Moreover, neither this Agreement nor anything in this Agreement shall be
construed to be or shall be admissible in any proceeding as evidence of or an
admission by Company of any violation of its policies, procedures, state or
federal laws or regulations. This Agreement may be introduced, however, in any
proceeding to enforce the Agreement. Such introduction shall be pursuant to an
order protecting its confidentiality.
6. Except for those obligations created by or arising out of this
Agreement for which receipt or satisfaction has not been acknowledged herein,
Keller on behalf of himself, his descendants, dependents, heirs, executors,
administrators, assigns, and successors, and each of them, hereby covenants not
to sue and fully releases and discharges Company, Realty and their subsidiaries
and affiliates, past and present, and each of them, as well as each of their
trustees, directors, officers, agents, attorneys, insurers, employees,
stockholders, representatives, assigns, and successors, past and present, and
each of them, hereinafter together and collectively referred to as "Releasees,"
with respect to and from any and all claims, wages, demands, rights, liens,
agreements, contracts, covenants, actions, suits, causes of action, obligations,
debts, costs, expenses, attorneys' fees, damages, judgments, orders and
liabilities of whatever kind or nature in law, equity or otherwise, whether now
known or unknown, suspected or unsuspected, and whether or not concealed or
hidden, which he now owns or holds or he has at any time heretofore owned or
held or may in the future hold as against said Releasees, arising out of or in
any way connected with his employment or other relationships with Company and
Realty, or his voluntary resignation from employment or any other transactions,
occurrences, acts or omissions or any loss, damage or injury whatever, known or
unknown, suspected or unsuspected, resulting from any act or omission by or on
the part of said Releasees, or any of them, 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
Family and Medical Leave Act of 1993, the California Fair Employment and Housing
Act, the California Family Rights Act, or any claim for severance pay, bonus,
sick leave, holiday pay, vacation pay, life insurance, health or medical
insurance or any other fringe benefit, workers' compensation or
4
<PAGE>
disability. Notwithstanding the language of the release contained in the prior
sentences of this paragraph, it is agreed that Mr. Keller is not releasing the
rights that Keller is entitled to as a director of Realty and Operating Company
and its subsidiaries for indemnification or insurance coverage with respect to
Keller's actions taken as a director of such companies.
Except for those obligations created by or arising out of this
Agreement, and except as provided below, Company hereby acknowledges full and
complete satisfaction of and releases and discharges, and covenants not to sue,
Keller from and with respect to any and all claims, agreements, obligations,
losses, damages, injuries, demands and causes of action, known or unknown,
suspected or unsuspected, arising out of or in any way connected with Keller's
employment relationship with or termination from Company, or any other
occurrences, actions, omissions or claims whatever, known or unknown, suspected
or unsuspected, which Company now owns or holds or has at any time heretofore
owned or held as against Keller, provided, however, that such release of Keller
-------- -------
shall not extend to any claims, known or unknown, suspected or unsuspected,
against Keller which arise out of facts which are finally adjudged by a court of
competent jurisdiction to be a willful breach of fiduciary duty or a crime under
any federal, state, or local statute, law, ordinance or regulation, or which are
based upon facts which give rise to a recovery by Company under any applicable
policies of insurance solely as a result of actions or omissions by Keller and
as to which the insurer has a right to subrogation against Keller.
7. It is the intention of Keller and Company in executing this
instrument that the same shall be effective as a bar to each and every claim,
demand and cause of action hereinabove specified. In furtherance of this
intention, Keller and Company expressly waive any and all rights and benefits
conferred upon them by the provisions of SECTION 1542 OF THE CALIFORNIA CIVIL
CODE and expressly consent that this Agreement shall be given full force and
effect according to each and all of its express terms and provisions, including
those related to unknown and unsuspected claims, demands and causes of action,
if any, as well as those relating to any other claims, demands and causes of
action hereinabove specified. SECTION 1542 provides:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR."
Keller and Company acknowledge that they may hereafter discover claims or facts
in addition to or different from those which Keller and Company now know or
believe 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 this settlement. Nevertheless, Keller and Company hereby
waive any right, claim or cause of action that might arise as a result of such
different or additional claims or facts. Keller and
5
<PAGE>
Company acknowledge that they understand the significance and consequence of
such release and such specific waiver of SECTION 1542. Notwithstanding the
preceding provisions of this section 7, this section shall not apply to (i)
those categories of actual or potential claims by the Company that have not been
released under section 6 or (ii) the right to insurance and indemnity as a
director that Keller is not releasing pursuant to section 6.
8. Keller 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. Keller
further expressly acknowledges and agrees that:
a. In return for this Agreement, he will receive compensation
beyond that which he was already entitled to receive before entering into this
Agreement;
b. He was orally advised by Company and is hereby advised in
writing by this Agreement to consult with an attorney before signing this
Agreement;
c. He was given a copy of this Agreement on August 16, 1996,
and informed that he has twenty-one (21) days within which to consider the
Agreement;
d. He was informed that he has seven (7) days following the
date of execution of the Agreement in which to revoke the Agreement; and
9. Keller acknowledges that by reason of his position with Company
he has been given access to lists of customers, prices, engineering plans, and
similar confidential or proprietary materials or information respecting
Company's business affairs. Keller 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 Company.
10. Keller 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 except for his attorneys and tax advisors and his spouse.
Without limiting the generality of the foregoing, Keller 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, Keller specifically agrees
that he shall not disclose information regarding this Agreement to any current
or former employee of Releasees. Keller hereby agrees that disclosure by him of
any of the terms and conditions of the Agreement in violation of
6
<PAGE>
the foregoing shall constitute and be treated as a material breach of this
Agreement.
Company agrees that its officers shall keep confidential the terms and
conditions of this Agreement among the officers and directors of the Company and
said officers shall undertake their best efforts to ensure that the directors
keep the terms and conditions of this Agreement confidential, except to the
extent that disclosures are required by federal securities or other laws or the
disclosure of the terms and conditions of this Agreement to consultants and
advisors of the Company and employees of the Company other than the officers is
necessary or appropriate.
11. Keller warrants and represents that Keller has not heretofore
assigned or transferred to any person not a party to this Agreement any released
matter or any part or portion thereof and Keller shall defend, indemnify and
hold harmless Company from and against any claim (including the payment of
attorneys' fees and costs actually incurred whether or not litigation is
commenced) based on or in connection with or arising out of any such assignment
or transfer made, purported or claimed.
12. Keller and Company acknowledge that any employment or contractual
relationship between them terminated on August 31, 1996, and that they have no
further employment or contractual relationship except as may arise out of this
Agreement and that Keller waives any right or claim to reinstatement as an
employee of Company.
13. All payments hereunder shall be reduced by federal and state
income tax withholding and other applicable withholding taxes. Keller agrees
that Keller shall be exclusively liable for the payment of all federal and state
taxes which may be due as the result of the consideration received from the
settlement of disputed claims as set forth herein and Keller hereby represents
that Keller shall make payments on such taxes at the time and in the amount
required of Keller.
14. This instrument constitutes and contains the entire agreement and
understanding concerning Keller'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. This agreement may be modified only by a writing
signed by the parties.
15. Either Keller or Company may revoke this Agreement in its
entirety during the seven days following execution of the Agreement by Keller.
Any revocation of the Agreement must be in writing and hand delivered during the
revocation period. This Agreement will become effective and enforceable seven
days following execution by Keller, unless it is revoked during the seven-day
period.
7
<PAGE>
16. If any provision of this Agreement or the application thereof is
held invalid, the invalidity shall not affect other provisions or applications
of the Agreement which can be given effect without the invalid provisions or
applications and to this end the provisions of this Agreement are declared to be
severable.
17. This Agreement shall be deemed to have been executed and
delivered within the State of California, and the rights and obligations of the
parties hereunder shall be construed and enforced in accordance with, and
governed by, the laws of the State of California without regard to principles of
conflict of laws.
18. Each party has cooperated in the drafting and preparation of this
Agreement. Hence, in any construction to be made of this Agreement, the same
shall not be construed against any party on the basis that the party was the
drafter.
19. This Agreement may be executed in counterparts, and each
counterpart, when executed, shall have the efficacy of a signed original.
Photographic copies of such signed counterparts may be used in lieu of the
originals for any purpose.
20. Any dispute or controversy between Keller, on the one hand, and
Company (or any other Releasee), on the other hand, in any way arising out of,
related to, or connected with this Agreement or the subject matter thereof, or
otherwise in any way arising out of, related to, or connected with Keller's
employment with Company or the termination of Keller's employment with Company,
shall be resolved through final and binding arbitration in Los Angeles,
California, pursuant to California Civil Procedure Code (S)(S) 1282-1284.2, with
the exception of Sections 1283 and 1283.05, before a mutually agreed upon
arbitrator. In the event of such arbitration, the prevailing party shall be
entitled to recover all reasonable costs and expenses incurred by such party in
connection therewith, including attorneys' fees. The nonprevailing party shall
also be solely responsible for all costs of the arbitration, including, but not
limited to, the arbitrator's fees, court reporter fees, and any and all other
administrative costs of the arbitration, and promptly shall reimburse the
prevailing party for any portion of such costs previously paid by the prevailing
party. Any dispute as to the reasonableness of costs and expenses shall be
determined by the arbitrator.
Except as may be necessary to enter judgment upon the award or to the
extent required by applicable law, all claims, defenses and proceedings
(including, without limiting the generality of the foregoing, the existence of
the controversy and the fact that there is an arbitration proceeding) shall be
treated in a confidential manner by the arbitrator, the parties and their
counsel, and each of their agents, and employees and all others acting on behalf
of or in concert with them. Without limiting the generality of the foregoing,
no one shall divulge to any third party or person not directly involved in the
arbitration the contents of the pleadings, papers, orders, hearings, trials, or
awards in the arbitration, except as may be necessary to enter
8
<PAGE>
judgment upon an award as required by applicable law. Any court proceedings
relating to the arbitration hereunder, including, without limiting the
generality of the foregoing, to prevent or compel arbitration or to confirm,
correct, vacate or otherwise enforce an arbitration award, shall be filed under
seal with the court, to the extent permitted by law.
21. No waiver of any breach of any term or provision of this
Agreement shall be construed to be, or shall be, a waiver of any other breach of
this Agreement. No waiver shall be binding unless in writing and signed by the
party waiving the breach.
22. In entering this Agreement, the parties represent that they have
relied upon the advice of their attorneys, who are attorneys of their own
choice, and that the terms of this Agreement have been completely read and
explained to them by their attorneys, and that those terms are fully understood
and voluntarily accepted by them.
23. After execution of this Agreement, Company may, but is not
required to, present for approval to the Workers' Compensation Appeals Board an
appropriate stipulation or compromise and release extinguishing any and all
rights or claims Keller may have under applicable workers' compensation
provisions.
24. All parties agree to cooperate fully and to execute any and all
supplementary documents and to take all additional actions that may be necessary
or appropriate to give full force to the basic terms and intent of this
Agreement and which are not inconsistent with its terms.
I have read the foregoing Agreement and I accept and agree to the
provisions it contains and hereby execute it voluntarily with full
understanding of its consequences.
9
<PAGE>
I declare under penalty of perjury under the laws of the State of
California that the foregoing is true and correct.
EXECUTED this _____ day of _____________ 1996, at _____
_______________ County, California.
__________________________________
Stephen F. Keller
KELLER FAMILY TRUST
By: ______________________________
Stephen F. Keller, Trustee
10
<PAGE>
EXECUTED this _____ day of _____________ 1996, at ________________
County, California.
SANTA ANITA OPERATING COMPANY
By ___________________________
Approved as to content and form:
O'MELVENY & MYERS LLP
________________________________
________________________________
By _____________________________
________________________
Attorneys for _______________
________________________________
11
<PAGE>
ENDORSEMENT
-----------
I, Stephen F. Keller, 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 ____ day of ______________ 1996, at
_____________________ County, California.
_______________________________
Stephen F. Keller
<PAGE>
EXHIBIT A
---------
<PAGE>
To Santa Anita Operating Company and
Santa Anita Realty Enterprises, Inc.:
This is to advise you that effective August 16, 1996, I hereby voluntarily
resign my positions as President and Chief Executive Officer of Santa Anita
Operating Company and my positions as an officer of any of its subsidiaries, and
that, effective August 16, 1996, I resign from the Board of Directors of Santa
Anita Operating Company and Santa Anita Realty Enterprises, Inc. I further
advise you that I resign, effective August 31, 1996, as an employee of the
Company and its subsidiaries.
Sincerely yours,
____________________________
Stephen F. Keller
<PAGE>
EXHIBIT B
---------
PORTIONS OF PRESS RELEASE PERTAINING TO THE
RESIGNATIONS OF MR. KELLER AND MR. CHILLINGWORTH
Having fulfilled his primary objective of repositioning Santa Anita for
long-term growth, Stephen F. Keller, Chairman and Chief Executive Officer of
Santa Anita Operating Company, has decided to leave the Company, and so has
resigned his seats on the Boards of Directors of Realty and Operating Company.
It was also announced today that Sherwood C. Chillingworth, Executive Vice
President and Vice Chair of Realty, has retired from the Company and,
accordingly, has resigned his position as a director of Realty.
<PAGE>
EXHIBIT 10.2
RESIGNATION AND GENERAL RELEASE AGREEMENT
-----------------------------------------
This Resignation and General Release Agreement ("Agree ment"), made
this 16th day of August 1996, by and between Sherwood C. Chillingworth
("Chillingworth"), an individual, and Santa Anita Realty Enterprises, Inc. a
corporation ("Company"), is a resigna tion agreement which includes a general
release of claims.
In consideration of the covenants undertaken and the releases
contained in this Agreement, Chillingworth and Company agree as follows:
1. Chillingworth shall voluntarily resign from his position as
Executive Vice President of Company and as a member of the Board of Directors of
Company by executing Exhibit A attached hereto, such resignation to be effective
August 16, 1996. Chillingworth further agrees that he resigns as an employee of
the Company by executing Exhibit A attached hereto, such resignation to be
effective August 31, 1996.
2. Company and Chillingworth agree to the following actions in full
discharge of any and all of its obligations to Chillingworth, including, without
limitation, the expired Employ ment Agreement dated as of March 16, 1994, the
Severance Agreement dated as of May 11, 1994, and all awards provided pursuant
to the Company's 1995 Share Award Plan or the Company's 1984 Stock Option
Program (and any amendments to said agreements):
a. Company shall pay to Chillingworth a cash lump sum equal to
$206,080 within 10 days after the execution of this Agreement, provided that
Chillingworth does not revoke this Agree ment pursuant to Section 7(d) hereof.
Except for (i) the payment of any Accrued Obligations under Section VI-D-1(a)(i)
and (ii) of the Employment Agreement between the Company and Chillingworth and
(ii) any amounts due pursuant to the terms of any generally appli cable welfare
and pension benefit plans, the Company shall have no obligations to
Chillingworth with respect to items described in the Employment Agreement.
Within fourteen days after the date of execution of this Agreement, Company
agrees to provide Chilling worth a list of the obligations described in the
preceding sentence.
b. If a Change in Control (as defined in the Severance
Agreement between Chillingworth and the Company) occurs prior to May 16, 1997,
then the Company shall pay Chillingworth (or to the beneficiary designated by
Chillingworth if he has died prior to May 16, 1997 or, if there is no
beneficiary, his estate) , within 30 days after such Change in Control occurs, a
cash lump sum equal to $328,920 if the Change in Control occurs in 1996 or
<PAGE>
$303,920 if the Change in Control occurs in 1997 (these amounts represent the
excess of the amount set forth in Section 6 of the Severance Agreement over
$206,080) and shall provide Chillingworth with the additional benefits set forth
in Section 7 of the Sever ance Agreement (effective as of the Change in
Control). The payment and benefits described in the preceding sentence shall in
each case be subject to the limitations set forth in Section 8 of the Severance
Agreement and reduced to the extent required by Section 8. For the purpose of
Section 8, Chillingworth's resigna tion shall be considered to be contingent on
the Change in Control.
c. The parties agree that Chillingworth's rights with respect
to all 54,000 of his stock options shall be limited to those of an employee who
retires on August 31, 1996, so that his vested interest in such options shall be
limited to his vested percentage on that date and he shall have until August 31,
1999 to exercise said options. Subject to appropriate action by the Company's
Compensation Committee, all nonvested options shall remain outstanding after
August 31, 1996, provided that they shall not be exercisable unless a Change in
Control Event (as defined in the Company's 1995 Share Award Plan) occurs prior
to May 16, 1997. If a Change in Control Event occurs prior to May 16, 1997,
subject to all applicable limitations relating to Section 280G of the Internal
Revenue Code set forth in the Company's 1995 Share Award Plan or the Company's
1984 Stock Option Program or any related award agreements, Chillingworth shall
become 100% vested with respect to all 54,000 stock options previously granted
to him in which he is not already vested and he shall have until August 31, 1999
to exercise all 54,000 options; on August 31, 1999, all such options shall
expire. If a Change in Control Event does not occur prior to May 16, 1997, all
nonvested options shall expire. Chillingworth acknowledges that the foregoing
provisions are made in part in consideration for the waiver provided pursuant to
Section 7 hereof.
d. With respect to the lease agreement between the Company and
Chillingworth regarding the Company's cottage, the Company agrees that it shall
not exercise its right to terminate said lease because of the fact that
Chillingworth will no longer be an employee after August 31, 1996.
Chillingworth acknowledges that the Company is not waiving its rights to
terminate, or take any other action under, the lease pursuant to any other
provision of said lease.
e. On August 17, 1997 a Formation Agreement was executed among
the Company, Santa Anita Operating Company and Colony Investors II, L.P.
Company agrees that (i) the transactions contemplated by the Formation Agreement
signed on that date constitute a Change in Control for the purpose of Section 2b
and c, (ii) it is the Company's current interpretation of the regulations
proposed under Section 280G of the Internal Revenue Code that the transactions
contemplated by the Formation Agreement do not constitute a change in control
within the meaning of Section 280G,
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<PAGE>
and (iii), if the parties to the Formation Agreement agree to extend the date
for closing the transactions contemplated by the Formation Agreement, the May 16
deadline for determining whether a Change in Control has occurred for the
purposes of this Agreement shall be replaced by any later deadline agreed to
with respect to the transactions set forth in the Formation Agreement. The
possible extended deadline described in the preceding sentence shall only apply,
however, for the purpose of determining whether the transactions described in
the Formation Agreement have occurred within the time limits set forth in this
Agreement for determining whether a Change in Control has occurred, so that the
May 16, 1997 deadline shall continue to apply with respect to determining
whether a Change in Control has occurred with respect to other possible
transactions.
f. The Company would welcome Chillingworth's use of the
Directors Room, such presence to be in accordance with the Company's policy with
respect to retired directors and the rules and regulations pertaining to all
directors.
g. Chillingworth agrees that the cash payments made pursuant to
the foregoing provisions of this Section 2 shall not be treated as compensation
for purposes of the Company's Retirement Income Plan or Thrift Plan for
Employees. Except as expressly noted above, Chillingworth agrees that his date
of termination shall be August 31, 1996 for purposes of such plans, and all
other incentive plans, practices, policies and programs applicable to other
executives or employees of the Company, as well as any other benefits provided
pursuant to the terms of his Employment Agreement or any other agreement with
the Company.
e. To the extent Chillingworth participates in the medical plan
made available by the Company and he is not employed in another position in
which he has available the services of a secretary, the Company agrees to
provide secretarial services that Chillingworth can utilize to prepare and
submit claims on behalf of Chillingworth and his dependents under the medical
plan.
3. Chillingworth shall return to Company and shall not take or copy
in any form or manner lists of customers, prices, engineering plans, and similar
confidential and proprietary materials or information.
4. Company expressly denies any violation of any of its policies,
procedures, state or federal laws or regulations. Accordingly, while this
Agreement resolves all issues between Company and Chillingworth relating to any
alleged violation of Company policies or procedures or any state or federal law
or regulation, this Agreement does not constitute an adjudication or finding on
the merits and it is not, and shall not be construed as, an admission by Company
of any violation of its policies, proce dures, state or federal laws or
regulations. Moreover, neither
3
<PAGE>
this Agreement nor anything in this Agreement shall be construed to be or shall
be admissible in any proceeding as evidence of or an admission by Company of any
violation of its policies, procedures, state or federal laws or regulations.
This Agreement may be intro duced, however, in any proceeding to enforce the
Agreement. Such introduction shall be pursuant to an order protecting its
confiden tiality.
5. Except for those obligations created by or arising out of this
Agreement for which receipt or satisfaction has not been acknowledged herein,
Chillingworth on behalf of himself, his descendants, dependents, heirs,
executors, administrators, assigns, and successors, and each of them, hereby
covenants not to sue and fully releases and discharges Company and its
subsidiaries and affiliates, past and present, and each of them, as well as each
of its trustees, directors, officers, agents, attorneys, insurers, employees,
stockholders, representatives, assigns, and successors, past and present, and
each of them, hereinafter together and col lectively referred to as "Releasees,"
with respect to and from any and all claims, wages, demands, rights, liens,
agreements, con tracts, covenants, actions, suits, causes of action,
obligations, debts, costs, expenses, attorneys' fees, damages, judgments, orders
and liabilities of whatever kind or nature in law, equity or otherwise, whether
now known or unknown, suspected or unsuspected, and whether or not concealed or
hidden, which he now owns or holds or he has at any time heretofore owned or
held or may in the future hold as against said Releasees, arising out of or in
any way connected with his employment or other relationships with Company, or
his voluntary resignation from employment or any other transac tions,
occurrences, acts or omissions or any loss, damage or injury whatever, known or
unknown, suspected or unsuspected, resulting from any act or omission by or on
the part of said Releasees, or any of them, 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
Family and Medical Leave Act of 1993, the California Fair Employment and Housing
Act, the California Family Rights Act, or any claim for severance pay, bonus,
sick leave, holiday pay, vacation pay, life insurance, health or medical
insurance or any other fringe benefit, workers' compensation or disability.
Notwithstanding the language of the release contained in the prior sentences of
this paragraph, it is agreed that Mr. Chillingworth is not releasing the rights
that Chillingworth is entitled to as a director of the Company for
indemnification or insurance coverage with respect to Chilling-worth's actions
taken as a director of the Company.
Except for those obligations created by or arising out of this
Agreement, and except as provided below, Company hereby acknowledges full and
complete satisfaction of and releases and discharges, and covenants not to sue,
Chillingworth from and with respect to any and all claims, agreements,
obligations, losses,
4
<PAGE>
damages, injuries, demands and causes of action, known or unknown, suspected or
unsuspected, arising out of or in any way connected with Chillingworth's
employment relationship with or termination from Company, or any other
occurrences, actions, omissions or claims whatever, known or unknown, suspected
or unsuspected, which Company now owns or holds or has at any time heretofore
owned or held as against Chillingworth, provided, however, that such release of
-------- -------
Chillingworth shall not extend to any claims, known or unknown, suspected or
unsuspected, against Chillingworth which arise out of facts which are finally
adjudged by a court of competent jurisdic tion to be a willful breach of
fiduciary duty or a crime under any federal, state, or local statute, law,
ordinance or regulation, or which are based upon facts which give rise to a
recovery by Company under any applicable policies of insurance solely as a
result of actions or omissions by Chillingworth and as to which the insurer has
a right to subrogation against Chillingworth.
6. It is the intention of Company in executing this instrument that
the same shall be effective as a bar to each and every claim, demand and cause
of action hereinabove specified. In furtherance of this intention,
Chillingworth hereby expressly waives any and all rights and benefits conferred
upon him by the provisions of SECTION 1542 OF THE CALIFORNIA CIVIL CODE and ex
pressly consents that this Agreement shall be given full force and effect
according to each and all of its express terms and provi sions, including those
related to unknown and unsuspected claims, demands and causes of action, if any,
as well as those relating to any other claims, demands and causes of action
hereinabove specified. SECTION 1542 provides:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR."
Chillingworth and Company acknowledge that they may hereafter discover claims or
facts in addition to or different from those which Chillingworth and Company now
know or believe 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 this settlement. Nevertheless, Chillingworth and
Company hereby waive any right, claim or cause of action that might arise as a
result of such different or additional claims or facts. Chillingworth and
Company acknowledge that they understand the significance and consequence of
such release and such specific waiver of SECTION 1542. Notwithstanding the
preceding provisions of this section 6,this section shall not apply to (i) those
categories of actual or potential claims by the Company that have not been
released under section 5 or (ii) the right to insurance and indemnity as a
director that Chillingworth is not releasing pursuant to section 5.
5
<PAGE>
7. Chillingworth 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 Discrimina tion in Employment Act of 1967, as amended,
which have arisen on or before the date of execution of this Agreement.
Chillingworth further expressly acknowledges and agrees that:
a. In return for this Agreement, he will receive compensation
beyond that which he was already entitled to receive before entering into this
Agreement;
b. He was orally advised by Company and is hereby advised in
writing by this Agreement to consult with an attorney before signing this
Agreement;
c. He was given a copy of this Agreement on August 16, 1996,
and informed that he has twenty-one (21) days within which to consider the
Agreement;
d. He was informed that he has seven (7) days following the
date of execution of the Agreement in which to revoke the Agreement; and
8. Chillingworth acknowledges that by reason of his position with
Company he has been given access to lists of customers, prices, engineering
plans, and similar confidential or proprietary materials or information
respecting Company's business affairs. Chillingworth 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 Company.
9. Chillingworth 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 except for his attorneys and tax advisors.
Without limiting the generality of the foregoing, Chillingworth 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 forego ing, Chillingworth specifically
agrees that he shall not disclose information regarding this Agreement to any
current or former employee of Releasees. Chillingworth 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.
Company agrees that its officers shall keep confidential the terms and
conditions of this Agreement among the officers and directors of the Company and
said officers shall undertake their best efforts to ensure that the directors
keep the terms and
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<PAGE>
conditions of this Agreement confidential, except to the extent that disclosures
are required by federal securities or other laws or the disclosure of the terms
and conditions of this Agreement to consultants and advisors of the Company and
employees of the Company other than the officers is necessary or appropriate.
10. Chillingworth warrants and represents that Chilling worth has not
heretofore assigned or transferred to any person not a party to this Agreement
any released matter or any part or portion thereof and Chillingworth shall
defend, indemnify and hold harmless Company from and against any claim
(including the payment of attorneys' fees and costs actually incurred whether or
not litigation is commenced) based on or in connection with or arising out of
any such assignment or transfer made, purported or claimed.
11. Chillingworth and Company acknowledge that any employment or
contractual relationship between them will terminate on August 31, 1996, and
that they will have no further employment or contractual relationship except as
may arise out of this Agreement and that Chillingworth waives any right or claim
to reinstatement as an employee of Company.
12. All payments hereunder shall be reduced by federal and state
income tax withholding and other applicable withholding taxes. Chillingworth
agrees that Chillingworth shall be exclusive ly liable for the payment of all
federal and state taxes which may be due as the result of the consideration
received from the settlement of disputed claims as set forth herein and
Chillingworth hereby represents that Chillingworth shall make payments on such
taxes at the time and in the amount required of Chillingworth. In addition,
Chillingworth hereby agrees fully to defend, indemnify and hold harmless
Releasees and each of them from payment of taxes, interest and/or penalties that
are required of them by any government agency at any time as the result of
payment of the consideration set forth herein.
13. This instrument constitutes and contains the entire agreement and
understanding concerning Chillingworth'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. This agreement may be modified only by a writing
signed by the parties.
14. Chillingworth may revoke this Agreement in its entirety during
the seven days following execution of the Agreement by Chillingworth. Any
revocation of the Agreement must be in writing and hand delivered during the
revocation period. This Agreement will become effective and enforceable seven
days following execution by Chillingworth, unless it is revoked during the
seven-day period.
7
<PAGE>
15. If any provision of this Agreement or the applica tion thereof is
held invalid, the invalidity shall not affect other provisions or applications
of the Agreement which can be given effect without the invalid provisions or
applications and to this end the provisions of this Agreement are declared to be
severable.
16. This Agreement shall be deemed to have been executed and
delivered within the State of California, and the rights and obligations of the
parties hereunder shall be construed and enforced in accordance with, and
governed by, the laws of the State of California without regard to principles of
conflict of laws.
17. Each party has cooperated in the drafting and preparation of this
Agreement. Hence, in any construction to be made of this Agreement, the same
shall not be construed against any party on the basis that the party was the
drafter.
18. This Agreement may be executed in counterparts, and each
counterpart, when executed, shall have the efficacy of a signed original.
Photographic copies of such signed counterparts may be used in lieu of the
originals for any purpose.
19. Any dispute or controversy between Chillingworth, on the one
hand, and Company (or any other Releasee), on the other hand, in any way arising
out of, related to, or connected with this Agreement or the subject matter
thereof, or otherwise in any way arising out of, related to, or connected with
Chillingworth's employment with Company or the termination of Chillingworth's
employment with Company, shall be resolved through final and binding arbitration
in Los Angeles, California, pursuant to California Civil Procedure Code (S)(S)
1282-1284.2, with the exception of Sections 1283 and 1283.05, before a mutually
agreed upon arbitrator. In the event of such arbitration, the prevailing party
shall be entitled to recover all reasonable costs and expenses incurred by such
party in connection therewith, including attor neys' fees. The nonprevailing
party shall also be solely responsi ble for all costs of the arbitration,
including, but not limited to, the arbitrator's fees, court reporter fees, and
any and all other administrative costs of the arbitration, and promptly shall
reimburse the prevailing party for any portion of such costs previously paid by
the prevailing party. Any dispute as to the reasonableness of costs and
expenses shall be determined by the arbitrator.
Except as may be necessary to enter judgment upon the award or to the
extent required by applicable law, all claims, defenses and proceedings
(including, without limiting the generali ty of the foregoing, the existence of
the controversy and the fact that there is an arbitration proceeding) shall be
treated in a confidential manner by the arbitrator, the parties and their
counsel, and each of their agents, and employees and all others acting on behalf
of or in concert with them. Without limiting the generality of the foregoing,
no one shall divulge to any third
8
<PAGE>
party or person not directly involved in the arbitration the contents of the
pleadings, papers, orders, hearings, trials, or awards in the arbitration,
except as may be necessary to enter judgment upon an award as required by
applicable law. Any court proceedings relating to the arbitration hereunder,
including, without limiting the generality of the foregoing, to prevent or
compel arbitration or to confirm, correct, vacate or otherwise enforce an
arbitration award, shall be filed under seal with the court, to the extent
permitted by law.
20. No waiver of any breach of any term or provision of this
Agreement shall be construed to be, or shall be, a waiver of any other breach of
this Agreement. No waiver shall be binding unless in writing and signed by the
party waiving the breach.
21. In entering this Agreement, the parties represent that they have
relied upon the advice of their attorneys, who are attorneys of their own
choice, and that the terms of this Agreement have been completely read and
explained to them by their attorneys, and that those terms are fully understood
and voluntarily accepted by them.
22. After execution of this Agreement, Company may, but is not
required to, present for approval to the Workers' Compensa tion Appeals Board an
appropriate stipulation or compromise and release extinguishing any and all
rights or claims Chillingworth may have under applicable workers' compensation
provisions.
23. All parties agree to cooperate fully and to execute any and all
supplementary documents and to take all additional actions that may be necessary
or appropriate to give full force to the basic terms and intent of this
Agreement and which are not inconsistent with its terms.
I have read the foregoing Agreement and I accept and agree to the
provisions it contains and hereby execute it volun tarily with full
understanding of its consequences.
9
<PAGE>
I declare under penalty of perjury under the laws of the State of
California that the foregoing is true and correct.
EXECUTED this _____ day of _____________ 1996, at ________________
County, California.
______________________________________
Sherwood C. Chillingworth
EXECUTED this _____ day of _____________ 1996, at ________________
County, California.
SANTA ANITA REALTY
ENTERPRISES, INC.
By ___________________________
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ENDORSEMENT
-----------
I, Sherwood C. Chillingworth, hereby acknowledge that I was given 21
days to consider the foregoing Agreement and volun tarily 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 ____ day of ______________ 1996, at
_____________________ County, California.
___________________________________
Sherwood C. Chillingworth
<PAGE>
EXHIBIT A
---------
<PAGE>
Dear Santa Anita Realty Enterprises, Inc.:
This is to advise you that effective August 16, 1996, I hereby
voluntarily resign my position as Executive Vice President of Santa Anita Realty
Enterprises, Inc. and that, effective August 16, 1996, I resign from the Board
of Directors of Santa Anita Realty Enterprises, Inc. This is to further advise
you that although I will continue as an employee of Santa Anita Realty
Enterprises, Inc. until August 31, 1996, I hereby resign from all employment
with Santa Anita Realty Enterprises, Inc., effective August 31, 1996.
Sincerely yours,
_________________________________
Sherwood C. Chillingworth
<PAGE>
EXHIBIT 10.3
RESIGNATION AND GENERAL RELEASE AGREEMENT
-----------------------------------------
This Resignation and General Release Agreement ("Agreement"), made
this 30th day of August 1996, by and between Richard D. Brumbaugh ("Brumbaugh"),
an individual, Santa Anita Operating Company, a corporation ("Company") and
Santa Anita Realty Enter prises, Inc. ("Realty"), is a resignation agreement
which includes a general release of claims.
In consideration of the covenants undertaken and the releases
contained in this Agreement, Brumbaugh, Company and Realty agree as follows:
1. Brumbaugh shall voluntarily resign from his position as Vice
President - Finance and Chief Financial Officer of Company and as an officer or
a member of the Board of Directors of Company's subsidiaries by executing
Exhibit A attached hereto, such resignation to be effective August 30, 1996.
Brumbaugh further agrees that he resigns as an employee of the Company by
executing Exhibit A attached hereto, such resignation to be effective August 31,
1996.
2. Company and Brumbaugh agree to the following actions in full
discharge of any and all of its obligations to Brumbaugh (except to the extent
such obligations are carried out under this agreement, either directly or by
incorporation by reference), including, without limitation, the Severance
Agreement dated as of October 1, 1992, and all awards provided pursuant to the
Company's 1995 Share Award Plan or the Company's 1984 Stock Option Program (and
any amendments to said agreements):
a. Company shall pay to Brumbaugh a cash lump sum equal to
$141,000 within 8 days after the execution of this Agreement, provided that
Brumbaugh does not revoke this Agreement pursuant to Section 7(d) hereof, and
shall pay him 30 days of vacation pay within seventy-two hours of execution of
this Agreement. Company shall also pay an amount not to exceed $18,900 for
outplacement services of an executive outplacement firm of Brumbaugh's choice or
for other documented expenses reasonably incurred by Brumbaugh in pursuit of
reemployment, which amount equals 15% of his annual base salary. Mr. Brumbaugh
may opt, however, to apply up to $2,000 of this amount to the payment of
properly documented attorney's fees as described in Section 2.f, in which case
the Company shall pay such amount directly to Brum baugh's attorneys and shall
reduce the amount available for reemployment expenses by a corresponding amount.
Except for (i) the payment of Brumbaugh's annual base salary and reasonable
employment expenses through the date of termination to the extent not heretofore
paid, (ii) the payment of any amounts due pursuant to the terms of any generally
applicable welfare and pension benefit plans (other than the Company's vacation
pay plan) and (iii) any obligations provided for hereinafter in this Agreement,
the Company shall have no other obligations to Brumbaugh.
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b. Notwithstanding any provisions to the contrary in the
Severance Agreement between Brumbaugh and the Company, if a Change in Control
(as defined in such Severance Agreement) occurs prior to May 17, 1997, then the
Company shall pay Brumbaugh (or to Brumbaugh's beneficiary if Brumbaugh is not
then alive), within 30 days after such Change in Control occurs, a cash lump sum
equal to $219,833 if the Change in Control occurs in 1996 or $207,333 if the
Change in Control occurs in 1997 (these amounts represent the excess of the
amount set forth in Section 6 of the Severance Agreement over $141,000) and
shall provide Brumbaugh with the additional benefits set forth in Section 7 of
the Severance Agreement (effective as of the Change in Control). The payment and
benefits described in the preceding sentence shall in each case be subject to
the limitations set forth in Section 8 of the Severance Agreement and reduced to
the extent required by Section 8. For the purpose of Section 8, Brumbaugh's
resignation shall be considered to be contingent on the Change in Control.
c. The parties agree that Brumbaugh's rights with respect to all
25,000 of his stock options shall be limited to those of an employee who
voluntarily terminates employment on August 31, 1996, so that his vested
interest in such options shall be limited to his vested percentage on that date
and he shall have until November 30, 1996 to exercise said options, unless such
options are extended by the Company's Compensation Committee as hereinafter set
forth. Subject to appropriate action by the Company's Compensation Committee,
all such options, both vested and nonvested, shall remain outstanding after
November 30, 1996 (unless earlier exercised by Brumbaugh), provided that the
options that are not vested as of August 31, 1996 shall not be exercisable
unless a Change in Control Event (as defined in the Company's 1995 Share Award
Plan) occurs prior to May 17, 1997. If a Change in Control Event occurs prior to
May 17, 1997, subject to all applicable limitations relating to Section 280G of
the Internal Revenue Code set forth in the Company's 1995 Share Award Plan or
the Company's 1984 Stock Option Program or any related award agreements,
Brumbaugh (or his beneficiary, if Brumbaugh is not then alive) shall become 100%
vested with respect to all 25,000 stock options previously granted to Brumbaugh
in which Brumbaugh is not already vested and shall have three months after such
Change in Control Event to exercise all 25,000 options; at the end of such three
month period, all such options shall expire. If a Change in Control Event does
not occur prior to May 17, 1997, all such options shall expire. Brumbaugh
acknowledges that the foregoing provisions are made in part in consideration for
the waiver provided pursuant to Section 7 hereof.
d. On August 17, 1996 a Formation Agreement was executed among
the Company, Realty, and Colony Investors II, L.P. ("Colony"). Company agrees
that (i) the transactions contemplated by the Formation Agreement signed on that
date, constitute a Change in Control for the purpose of Section 2b and c, (ii)
it is the Company's current interpretation of the regulations proposed under
Section 280G of the Internal Revenue Code that the transactions contemplated by
the Formation Agreement do not constitute a change in control within the meaning
of Section 280G, and (iii), if the
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parties to the Formation Agreement agree to extend the date for closing the
transactions contemplated by the Formation Agreement, the May 17 deadline for
determining whether a Change in Control has occurred for the purposes of this
Agreement shall be replaced by any later deadline agreed to with respect to the
transactions set forth in the Formation Agreement. The possible extended
deadline described in the preceding sentence shall only apply, however, for the
purpose of determining whether the transactions described in the Formation
Agreement have occurred within the time limits set forth in this Agreement for
determining whether a Change in Control has occurred, so that the May 17, 1997
deadline shall continue to apply with respect to determining whether a Change in
Control has occurred with respect to other possible transactions. For purposes
of this Section 2.d, the term "Formation Agreement" refers to the Formation
Agreement executed on August 17, 1996 and any amendment thereto or further
agreement whereby Colony acquires an interest in the Company or Realty in a
transaction substantially similar to that described in the August 17, 1996
agreement.
e. Brumbaugh agrees that the payments made pursuant to the
foregoing provisions of this Section 2 shall not be treated as compensation for
purposes of the Company's Retirement Income Plan or Thrift Plan for Employees.
Brumbaugh agrees that his date of termination shall be August 31, 1996 for
purposes of such plans, and all other incentive plans, practices, policies and
programs applicable to other executives or employees of the Company, as well as
any other benefits provided pursuant to the terms of any other agreement with
the Company.
f. The Company shall reimburse Mr. Brumbaugh's attorneys up to
$2,000 for attorney's fees incurred in connection with his termination of
employment, subject to appropriate documentation. At Brumbaugh's option this
amount may be supplemented by an amount up to $2,000 by reducing, by a
corresponding amount, the $18,900 available for payment of reemployment
expenses, as described in Section 2.a.
3. Brumbaugh shall return to Company and shall not take or copy in
any form or manner lists of customers, prices, engineering plans, and similar
confidential and proprietary materials or information.
4. Company expressly denies any violation of any of its policies,
procedures, state or federal laws or regulations. Accordingly, while this
Agreement resolves all issues between Company and Brumbaugh relating to any
alleged violation of Company policies or procedures or any state or federal law
or regulation, this Agreement does not constitute an adjudication or finding on
the merits and it is not, and shall not be construed as, an admission by Company
of any violation of its policies, procedures, state or federal laws or
regulations. Moreover, neither this Agreement nor anything in this Agreement
shall be construed to be or shall be admissible in any proceeding as evidence of
or an admission by Company of any violation of its policies, procedures, state
or federal laws or regulations. This Agreement may be intro duced, however, in
any proceeding to enforce the Agreement. Such
3
<PAGE>
introduction shall be pursuant to an order protecting its confidentiality.
5. Except for those obligations created by or arising out of this
Agreement for which receipt or satisfaction has not been acknowledged herein,
Brumbaugh on behalf of himself, his descendants, dependents, heirs, executors,
administrators, assigns, and successors, and each of them, hereby covenants not
to sue and fully releases and discharges Company, Realty and their subsidiaries
and affiliates, past and present, and each of them, as well as each of their
trustees, directors, officers, agents, attorneys, insurers, employees,
stockholders, representatives, assigns, and successors, past and present, and
each of them, hereinafter together and collectively referred to as "Releasees,"
with respect to and from any and all claims, wages, demands, rights, liens,
agreements, contracts, covenants, actions, suits, causes of action, obligations,
debts, costs, expenses, attorneys' fees, damages, judgments, orders and
liabilities of whatever kind or nature in law, equity or otherwise, whether now
known or unknown, suspected or unsuspected, and whether or not concealed or
hidden, which he now owns or holds or he has at any time heretofore owned or
held or may in the future hold as against said Releasees, arising out of or in
any way connected with his employment or other relationships with Company and
Realty, or his voluntary resignation from employment or any other transactions,
occurrences, acts or omissions or any loss, damage or injury whatever, known or
unknown, suspected or unsuspected, resulting from any act or omission by or on
the part of said Releasees, or any of them, 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
Family and Medical Leave Act of 1993, the California Fair Employment and Housing
Act, the California Family Rights Act, or any claim for severance pay, bonus,
sick leave, holiday pay, vacation pay, life insurance, health or medical
insurance or any other fringe benefit, workers' compensation or disability.
Except for those obligations created by or arising out of this
Agreement, and except as provided below, Company and Realty hereby acknowledge
full and complete satisfaction of and release and discharge, and covenant not to
sue, Brumbaugh from and with respect to any and all claims, agreements,
obligations, losses, damages, injuries, demands and causes of action, known or
unknown, suspected or unsuspected, arising out of or in any way connected with
Brumbaugh's employment relationship with or termination from Company or Realty,
or any other occurrences, actions, omissions or claims whatever, known or
unknown, suspected or unsuspected, which Company or Realty now own or hold or
have at any time heretofore owned or held as against Brumbaugh, provided,
--------
however, that such release of Brumbaugh shall not extend to any claims, known or
- -------
unknown, suspected or unsuspected, against Brumbaugh which arise out of facts
which are finally adjudged by a court of competent jurisdiction to be a willful
breach of fiduciary duty or a crime under any federal, state, or local statute,
law, ordinance or regulation, or which are based upon facts which give rise to a
4
<PAGE>
recovery by Company or Realty under any applicable policies of insurance solely
as a result of a breach of a fiduciary duty or a crime by Brumbaugh and as to
which the insurer has a right to subrogation against Brumbaugh.
6. It is the intention of Brumbaugh, Company and Realty in executing
this instrument that the same shall be effective as a bar to each and every
claim, demand and cause of action hereinabove specified. In furtherance of this
intention, Brumbaugh, Company and Realty expressly waive any and all rights and
benefits conferred upon them by the provisions of SECTION 1542 OF THE CALIFORNIA
CIVIL CODE and expressly consent that this Agreement shall be given full force
and effect according to each and all of its express terms and provisions,
including those related to unknown and unsuspected claims, demands and causes of
action, if any, as well as those relating to any other claims, demands and
causes of action hereinabove specified. SECTION 1542 provides:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR."
Brumbaugh, Company and Realty acknowledge that they may hereafter discover
claims or facts in addition to or different from those which Brumbaugh, Company
and Realty now know or believe 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 this settlement. Nevertheless,
Brumbaugh, Company and Realty hereby waive any right, claim or cause of action
that might arise as a result of such different or additional claims or facts.
Brumbaugh, Company and Realty acknowledge that they understand the significance
and consequence of such release and such specific waiver of SECTION 1542.
Notwithstanding the preceding provisions of this section 6, this section shall
not apply to those categories of actual or potential claims by the Company or
Realty that have not been released under section 5.
7. Brumbaugh 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.
Brumbaugh further expressly acknowledges and agrees that:
a. In return for this Agreement, he will receive compensation
beyond that which he was already entitled to receive before entering into this
Agreement;
b. He was orally advised by Company and is hereby advised in
writing by this Agreement to consult with an attorney before signing this
Agreement;
5
<PAGE>
c. He was given a copy of this Agreement on August 23, 1996, and
informed that he has twenty-one (21) days within which to consider the
Agreement;
d. He was informed that he has seven (7) days following the
date of execution of the Agreement in which to revoke the Agreement; and
8. Brumbaugh acknowledges that by reason of his position with
Company he has been given access to lists of customers, prices, engineering
plans, and similar confidential or proprietary materials or information
respecting Company's business affairs. Brumbaugh represents that he has held all
such informa tion 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 Company.
9. Brumbaugh 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 except for his attorneys and tax advisors and his spouse.
Without limiting the generality of the foregoing, Brumbaugh 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 negotia tions) which led to its
execution. Without limiting the generality of the foregoing, Brumbaugh
specifically agrees that he shall not disclose information regarding this
Agreement to any current or former employee of Releasees. Brumbaugh 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.
Company agrees that its officers shall keep confidential the
terms and conditions of this Agreement among the officers and directors of the
Company and said officers shall undertake their best efforts to ensure that the
directors keep the terms and conditions of this Agreement confidential, except
to the extent that disclosures are required by federal securities or other laws
or the disclosure of the terms and conditions of this Agreement to consultants
and advisors of the Company and employees of the Company other than the officers
is necessary or appropriate.
10. Brumbaugh warrants and represents that Brumbaugh has not
heretofore assigned or transferred to any person not a party to this Agreement
any released matter or any part or portion thereof and Brumbaugh shall defend,
indemnify and hold harmless Company from and against any claim (including the
payment of attorneys' fees and costs actually incurred whether or not litigation
is commenced) based on or in connection with or arising out of any such
assignment or transfer made, purported or claimed.
11. Brumbaugh and Company acknowledge that any employ ment or
contractual relationship between them terminated on August 31, 1996, and that
they have no further employment or contractual
6
<PAGE>
relationship except as may arise out of this Agreement and that Brumbaugh waives
any right or claim to reinstatement as an employee of Company and will not seek
employment in the future with Company or any Releasee.
12. All payments hereunder shall be reduced by federal and state
income tax withholding and other applicable withholding taxes. Brumbaugh agrees
that Brumbaugh shall be exclusively liable for the payment of all federal and
state taxes which may be due as the result of the consideration received from
the settlement of disputed claims as set forth herein and Brumbaugh hereby
represents that Brumbaugh shall make payments on such taxes at the time and in
the amount required of Brumbaugh.
13. This instrument constitutes and contains the entire agreement and
understanding concerning Brumbaugh'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. This agreement may be modified only by a writing
signed by the parties.
14. Brumbaugh may revoke this Agreement in its entirety during the
seven days following execution of the Agreement by Brumbaugh. Any revocation of
the Agreement must be in writing and hand delivered to Kathryn J. McMahon, Esq.
at 285 West Huntington Drive, Arcadia, CA 91007 during the revocation period.
This Agreement will become effective and enforceable seven days following
execution by Brumbaugh, unless it is revoked during the seven-day period.
15. If any provision of this Agreement or the application thereof is
held invalid, the invalidity shall not affect other provisions or applications
of the Agreement which can be given effect without the invalid provisions or
applications and to this end the provisions of this Agreement are declared to be
severable.
16. This Agreement shall be deemed to have been executed and
delivered within the State of California, and the rights and obligations of the
parties hereunder shall be construed and enforced in accordance with, and
governed by, the laws of the State of California without regard to principles of
conflict of laws.
17. Each party has cooperated in the drafting and preparation of this
Agreement. Hence, in any construction to be made of this Agreement, the same
shall not be construed against any party on the basis that the party was the
drafter.
18. This Agreement may be executed in counterparts, and each
counterpart, when executed, shall have the efficacy of a signed original.
Photographic copies of such signed counterparts may be used in lieu of the
originals for any purpose.
19. Any dispute or controversy between Brumbaugh, on the one hand,
and Company (or any other Releasee), on the other hand,
7
<PAGE>
in any way arising out of, related to, or connected with this Agreement or the
subject matter thereof, or otherwise in any way arising out of, related to, or
connected with Brumbaugh's employ ment with Company or the termination of
Brumbaugh's employment with Company, shall be resolved through final and binding
arbitration in Los Angeles, California, pursuant to California Civil Procedure
Code (S)(S) 1282-1284.2, before a mutually agreed upon arbitrator. In the event
of such arbitration, the prevailing party shall be entitled to recover all
reasonable costs and expenses incurred by such party in connection therewith,
including attorneys' fees. The nonprevailing party shall also be solely
responsible for all costs of the arbitration, including, but not limited to, the
arbitrator's fees, court reporter fees, and any and all other administrative
costs of the arbitration, and promptly shall reimburse the prevailing party for
any portion of such costs previously paid by the prevailing party. Any dispute
as to the reasonableness of costs and expenses shall be determined by the
arbitrator.
Except as may be necessary to enter judgment upon the award or to
the extent required by applicable law, all claims, defenses and proceedings
(including, without limiting the generality of the foregoing, the existence of
the controversy and the fact that there is an arbitration proceeding) shall be
treated in a confidential manner by the arbitrator, the parties and their
counsel, and each of their agents, and employees and all others acting on behalf
of or in concert with them. Without limiting the generality of the foregoing, no
one shall divulge to any third party or person not directly involved in the
arbitration the contents of the pleadings, papers, orders, hearings, trials, or
awards in the arbitration, except as may be necessary to enter judgment upon an
award as required by applicable law. Any court proceedings relating to the
arbitration hereunder, including, without limiting the generality of the
foregoing, to prevent or compel arbitration or to confirm, correct, vacate or
otherwise enforce an arbitration award, shall be filed under seal with the
court, to the extent permitted by law.
20. No waiver of any breach of any term or provision of this
Agreement shall be construed to be, or shall be, a waiver of any other breach of
this Agreement. No waiver shall be binding unless in writing and signed by the
party waiving the breach.
21. In entering this Agreement, the parties represent that they have
relied upon the advice of their attorneys, who are attorneys of their own
choice, and that the terms of this Agreement have been completely read and
explained to them by their attorneys, and that those terms are fully understood
and voluntarily accepted by them.
22. After execution of this Agreement, Company may, but is not
required to, present for approval to the Workers' Compensation Appeals Board an
appropriate stipulation or compromise and release extinguishing any and all
rights or claims Brumbaugh may have under applicable workers' compensation
provisions.
8
<PAGE>
23. All parties agree to cooperate fully and to execute any and all
supplementary documents and to take all additional actions that may be necessary
or appropriate to give full force to the basic terms and intent of this
Agreement and which are not inconsistent with its terms.
I have read the foregoing Agreement and I accept and agree to the
provisions it contains and hereby execute it voluntarily with full
understanding of its consequences.
9
<PAGE>
EXECUTED this _____ day of _____________ 1996, at _____
_______________ County, California.
__________________________________
Richard D. Brumbaugh
10
<PAGE>
EXECUTED this _____ day of _____________ 1996, at ________________
County, California.
SANTA ANITA OPERATING COMPANY
By ___________________________
EXECUTED this _____ day of _____________ 1996, at ________________
County, California.
SANTA ANITA REALTY ENTERPRISES, INC.
By ___________________________
11
<PAGE>
ENDORSEMENT
-----------
I, Richard D. Brumbaugh, 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 ____ day of ______________ 1996, at
_____________________ County, California.
_______________________________
Richard D. Brumbaugh
<PAGE>
EXHIBIT A
---------
<PAGE>
To Santa Anita Operating Company
This is to advise you that effective August 30, 1996, I hereby voluntarily
resign my position as Vice President-Finance and Chief Financial Officer with
Santa Anita Operating Company and that, effective August 30, 1996, I resign as
an officer of and from the Board of Directors of Company's subsidiaries. This is
to further advise you that although I will continue as an employee of Santa
Anita Operating Company until August 31, 1996, I hereby resign from all
employment with Santa Anita Operating Company and its subsidiaries, effective
August 31, 1996. I agree that I will not seek reemployment with Santa Anita
Operating Company or its subsidiaries.
Sincerely yours,
____________________________
Richard D. Brumbaugh
<PAGE>
EXHIBIT 10.4
Agreement to Terminate Employment Agreement
-------------------------------------------
and Severance Agreement
-----------------------
This Agreement is entered into by and between Santa Anita Realty
Enterprises, Inc. (the "Company") and William C. Baker (the "Executive") as of
the 16th day of August, 1996.
1. RECITALS
--------
WHEREAS, the Executive and the Company entered into an Employment Agreement
on April 1, 1996 (the "Employment Agreement"), pursuant to which the Executive
has served as Chief Executive Officer of the Company from April 1, 1996 to the
present;
WHEREAS, the Executive and the Company entered into a Severance Agreement,
effective April 1, 1996 (the "Severance Agreement"); and
WHEREAS, the Executive and the Company have agreed to terminate employment,
effective as of the close of business on August 16, 1996.
NOW, THEREFORE, the Executive and the Company agree as follows:
2. Agreement
---------
(a) The Employment Agreement is hereby terminated, effective as of the
close of business on August 16, 1996.
(b) Both parties acknowledge and agree that any and all remuneration,
compensation or benefit provided for in the Employment Agreement has been
satisfied in full, and that the Executive and the Company have no remaining
obligations, past or future, to the other party under such Employment Agreement,
other than (1) the Company's obligation to make a timely payment of Accrued
Obligations (as such term is defined in Section V-E-1 of the Employment
Agreement) and any amounts due pursuant to the terms of any applicable welfare
or pension benefit plans and (2) the Executive's continuing obligation under
Section VIII of the Employment Agreement not to communicate or divulge any
secret or confidential information, knowledge or data relating to the Company or
any of its affiliated companies to anyone other than the Company and those
designated by it, except with the prior written consent of the Company or as may
otherwise be required by law or legal process. Executive agrees that no
benefits are payable under Section IV-J of the Employment Agreement.
(c) The Severance Agreement is terminated August 16, 1996 and Executive is
entitled to no benefits thereunder.
<PAGE>
(d) Both parties acknowledge and agree that this instrument constitutes and
contains the entire agreement and understanding concerning the Executive's
employment with the Company, 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.
IN WITNESS WHEREOF, the parties hereto have executed this Termination as of
the date first above written.
SANTA ANITA REALTY ENTERPRISES, INC.
By:_________________________________
WILLIAM C. BAKER
_______________________________
<PAGE>
EXHIBIT 10.5
Employment Agreement
--------------------
This Employment Agreement (the "Agreement") is entered into by and between
Santa Anita Operating Company (the "Company") and William C. Baker (the
"Executive"), as of the 16th day of August 1996.
1. RECITALS
--------
WHEREAS, the Executive has served as Chief Executive Officer of Santa Anita
Realty Enterprises, Inc. ("Realty") pursuant to an Employment Agreement executed
by the Executive and Realty as of April 1, 1996 (the "Realty Employment
Agreement"); and
WHEREAS, the Executive and Realty have agreed to terminate the Realty
Employment Agreement, effective as of the close of business on August 16, 1996;
and
WHEREAS, the Company now desires to employ the Executive as its Chief
Executive Officer; and
WHEREAS, the Executive serves on the Company's Board of Directors; and
WHEREAS, the Company desires that the Company's Chief Executive Officer
serve as Chairman of the Company's Board of Directors; and
WHEREAS, the Board of Directors has elected the Executive Chairman of the
Company's Board of Directors.
NOW, THEREFORE, the Company and the Executive desire to set forth in this
Agreement the terms and conditions of the Executive's employment with the
Company.
2. EMPLOYMENT WITH COMPANY AND TERMINATION OF EMPLOYMENT WITH REALTY.
-----------------------------------------------------------------
(a) The Company hereby employs the Executive and the Executive hereby
accepts such employment, upon the terms and conditions hereinafter set forth,
from August 16, 1996, to and including March 31, 1998. This Agreement is
subject to renewal as set forth in Section 6 below.
(b) Both parties acknowledge and agree that any and all remuneration,
compensation or benefit provided for in the Realty Employment Agreement has been
satisfied in full, and that the Executive, the Company and Realty have no
remaining obligations, past or future, to any other party under such
<PAGE>
Employment Agreement, other than (1) Realty's obligation to make a timely
payment of Accrued Obligations (as such term is defined in Section 5(e)(1) of
this Agreement) and any amounts due pursuant to the terms of any applicable
welfare or pension benefit plans and (2) the Executive's continuing obligation
under Section VIII of the Realty Employment Agreement not to communicate or
divulge any secret or confidential information, knowledge or data relating to
Realty or any of its affiliated companies to anyone other than Realty and those
designated by it, except with the prior written consent of Realty or as may
otherwise be required by law or legal process. Executive agrees that no
benefits are payable pursuant to Section IV-J of the Realty Employment
Agreement. The parties further acknowledge and agree that this Employment
Agreement between the Executive and the Company terminates, replaces and
supersedes the Realty Employment Agreement in its entirety.
3. DUTIES.
------
(a) The Executive shall serve during the course of his employment as Chief
Executive Officer of the Company, and shall have such duties and
responsibilities as are customarily required of such officer and as the Board of
Directors of the Company shall determine from time to time. During his tenure
as the Chief Executive Officer, the Company's headquarters shall be in Southern
California and Executive shall discharge his duties through services primarily
performed in the Southern California area.
(b) The Executive agrees to devote substantially all of his time, energy
and ability to the business of the Company. Nothing herein shall prevent the
Executive, upon approval of the Board of Directors of the Company, from serving
as a director or trustee of other corporations or businesses which are not in
competition with the business of the Company or in competition with any present
or future affiliate of the Company.
(c) Nothing herein shall prevent the Executive from investing in real
estate for his own account or from becoming a partner or a stockholder in any
corporation, partnership or other venture not in competition with the business
of the Company or in competition with any present or future affiliate of the
Company.
(d) For the term of this Agreement, the Executive shall report to the Board
of Directors of the Company or its designee.
2
<PAGE>
4. COMPENSATION.
------------
(a) The Company shall pay the Executive a base salary at the rate of
$300,000 per year. Such salary shall be earned semimonthly and shall be payable
in periodic installments no less frequently than semimonthly in accordance with
the Company's customary practices. Amounts payable shall be reduced by standard
withholding and other authorized deduc tions. The Company will review the
Executive's salary at least annually. The Company may in its discretion
increase the Executive's salary but may not reduce it during the time he serves
as Chief Executive Officer of the Company.
(b) Stock Options. The effectiveness of this Agreement is contingent upon
-------------
the Executive's being granted certain stock options, effective August 18, 1996,
which agreements are attached hereto as Exhibits A, B, C, D, E, and F.
(c) Annual Bonus, Incentive, Savings and Retirement Plans. The Executive
-----------------------------------------------------
shall be entitled to participate in all annual bonus, incentive, savings and
retirement plans, practices, policies and programs applicable generally to other
peer executives of the Company. At the end of each calendar year during the
term of this Agreement, the Executive may, in the Board of Directors' sole
discretion, earn an annual bonus in an amount up to 100% of the Executive's
annual salary for such calendar year. For calendar year 1996, the Executive's
bonus, if any, shall be prorated in proportion to the sum of the Executive's
total period of service with the Company and Realty. In determining bonus and
incentive awards, the Board of Directors will consider the Executive's success
in accomplishing goals with respect to the Company which have been established
by the Compensation Committee in consultation with the Executive.
(d) Vehicle. The Company shall lease a vehicle for the Executive's use.
-------
In lieu thereof, the Company may pay the Executive a reasonable vehicle
allowance or lease a vehicle from the Executive for his use (subject to any
required withholding) in accordance with the Company's customary practices.
(e) Club Membership Dues. The Company shall reimburse the Executive
--------------------
promptly for all reasonable club membership dues incurred by him in support of
his role in promoting the best interests of the Company.
(f) Welfare Benefit Plans. The Executive and/or his family, as the case
---------------------
may be, shall be eligible for participa tion in and shall receive all benefits
under welfare benefit plans, practices, policies and programs provided by the
Company (including, without limitation, medical, prescription,
3
<PAGE>
dental, disability, salary continuance, employee life, group life, accidental
death and travel accident insurance plans and programs) to the extent applicable
generally to other peer executives of the Company.
(g) Expenses. The Executive shall be entitled to receive prompt
--------
reimbursement for all reasonable employment expenses incurred by him.
(h) Fringe Benefits. The Executive shall be entitled to fringe benefits in
---------------
accordance with the plans, practices, programs and policies as in effect
generally with respect to other peer executives of the Company.
(i) Vacation. The Executive shall be entitled to paid
--------
vacation in accordance with the plans, policies, programs and practices as in
effect generally with respect to other peer executives of the Company.
(j) Supplemental Executive Retirement Benefits. The Executive shall be
------------------------------------------
entitled to be paid additional retirement benefits which, when added to his
benefits under the Santa Anita Realty Enterprises, Inc. and Santa Anita
Operating Company Retirement Income Plan (the "Retirement Plan"), will provide
total benefits equal to what he would have received if the Retirement Plan were
changed in the following respects:
(1) All of the Executive's base salary shall be counted, including
base salary in excess of the limits imposed by Section 401(a)(17)
of the Internal Revenue Code of 1986, as amended (the "Code"),
and further including base salary deferred under the Santa Anita
Realty Enterprises, Inc. and Santa Anita Operating Company Thrift
Plan, or any other deferred compensation plan of the Company.
(2) All benefits shall immediately vest if the Executive remains
employed through March 31, 1998.
(3) All benefits shall immediately vest if the Executive's employment
terminates, unless the Executive's employment is terminated by
the Company for Cause or the Executive voluntarily terminates
employment without Good Reason.
For the purpose of this Section 4(j), Executive's employment will be deemed to
have commenced April 1, 1996. All benefits payable pursuant to this Section
4(j) shall be paid to the Executive in the same form and at the same time(s) as
elected under the Retirement Plan. If Executive terminates at a time when he is
entitled to benefits under this subsection but not vested under the Retirement
Plan, benefits shall be paid at termination in the normal form provided under
the Retirement
4
<PAGE>
Plan (unless, at least one year prior to termination, Executive has elected to
receive the benefits in an alternative form permitted under the Retirement
Plan), and such benefits shall be subject to any applicable actuarial adjustment
provided in the Retirement Plan for early retirement or form of benefit. The
Executive and his spouse, Beneficiaries, heirs and successors under this Section
4(j) shall have solely those rights of an unsecured creditor of the Company.
The Company further agrees that it shall reexamine the issue of supplemental
retirement benefits during calendar year 1997.
5. TERMINATION.
-----------
(a) Death. The Executive's employment shall terminate automatically upon
-----
the Executive's death.
(b) Disability. If the Company determines in good faith that the
----------
Disability of the Executive has occurred (pursuant to the definition of
Disability set forth below), it may give to the Executive written notice in
accordance with Section 16 of its intention to terminate the Executive's
employment. In such event, the Executive's employment with the Company shall
terminate effective on the day of receipt of such notice by the Executive. For
purposes of this Agreement, "Disability" shall mean the absence of the Executive
from his duties with the Company for a period of six months as a result of
incapacity due to mental or physical illness which is determined to be total and
permanent by a physician selected by the Company or its insurers and acceptable
to the Executive or his legal representative (such agreement as to acceptability
not to be withheld unreasonably). "Incapacity" as used herein shall be limited
only to such Disability which substantially prevents Company from availing
itself of the services of the Executive.
(c) Cause. The Company may terminate the Executive's employment for Cause.
-----
For purposes of this Agreement, "Cause" shall mean that the Company, acting in
good faith based upon the information then known to the Company, after due
inquiry, determines (1) that the Executive has been convicted of a felony or (2)
that the Executive has acted or failed to act in connection with his employment
in such manner as would constitute gross negligence or willful misconduct.
(d) Other than Death or Disability or Cause. The Company may terminate the
---------------------------------------
Executive's employment for reasons other than Death, Disability or Cause upon 60
days written notice. The 60 day notice requirement of this Section 5(d) shall
be deemed satisfied if the Company gives the Executive
5
<PAGE>
notice of its desire to terminate this Agreement under Section 6 hereof.
(e) Obligations of the Company Upon Termination.
-------------------------------------------
(1) Death or Disability. If the Executive's employment is terminated
-------------------
by reason of the Executive's Death or Disability, this Agreement shall terminate
without further obligations to the Executive or his legal representatives under
this Agreement, other than for (A) payment of the sum of (i) the Executive's
annual base salary through the date of termination to the extent not theretofore
paid and (ii) reasonable employment expenses, vehicle expenses, and club
membership dues as provided herein, through the date of termination to the
extent not theretofore paid (the sum of the amounts described in clauses (i) and
(ii) shall be hereinafter referred to as the "Accrued Obligations"), which
amounts shall be paid to the Executive or his estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the date of termination and
(B) payment to the Executive or his estate or beneficiary, as applicable, of any
amounts due pursuant to the terms of any applicable welfare or pension benefit
plans (including, but not limited to, any amounts due as Supplemental Executive
Retirement Benefits under Section 4(j) of this Agreement).
(2) Cause or Voluntary Termination. If the Executive's employment is
------------------------------
terminated by the Company for Cause or the Executive voluntarily terminates
employment (except for a "Good Reason" described in Section 5(e)(4) below), this
Agreement shall terminate without further obligations to the Executive other
than for the timely payment of Accrued Obligations and any amounts due pursuant
to the terms of any applicable welfare or pension benefit plans. If it is
subsequently determined that the Company did not have Cause for termination
under this Section 5(e)(2), then the Company's decision to terminate shall be
deemed to have been made under Section 5(e)(3) and the amounts payable
thereunder shall be the only amounts the Executive may receive for his
termination.
(3) Other than Cause or Death or Disability. If the Company
---------------------------------------
terminates the Executive's employment during the term of this Agreement
(including renewals) for other than Cause or Death or Disability, this Agreement
shall terminate without further obligations to the Executive other than (A) the
timely payment of Accrued Obligations, (B) payment of any amounts due pursuant
to the terms of any applicable welfare or pension benefit plans and (C) payment
to the Executive of a lump sum equal to the product of 112% times 18 months of
the Executive's base salary, calculated using the base salary rate in effect
under this Agreement on the Executive's date of
6
<PAGE>
termination. The obligation described in this paragraph shall be reduced,
however, by any cash lump sum severance payment received by the Executive
pursuant to the Severance Agreement between the Executive and the Company dated
August 16, 1996.
(4) Voluntary Termination for Good Reason. If the Executive
-------------------------------------
voluntarily terminates his employment with the Company during the term of this
Agreement (including renewals) for Good Reason, this Agreement shall terminate
in the same manner as if the Company terminated the Executive's employment under
Section 5(e)(3) for a reason other than Cause. For purposes of this Section
5(e)(4), "Good Reason" shall mean the occurrence of one of the following events
without the Executive's consent:
(A) Any action by the Company which results in a material
diminution in the Executive's position, authority, duties or responsibilities to
the Company, including for this purpose any material change in the Executive's
employment location, and excluding for this purpose an isolated, insubstantial
and inadvertent action not taken in bad faith and which is remedied by the
Company, as the case may be, promptly after receipt of notice thereof given by
the Executive;
(B) Any reduction in the Executive's base compensation not agreed
to by the Executive, which reduction shall be deemed to occur if there is a
reduction in (i) the Executive's base salary or (ii) the Executive's ability to
participate in employee benefit plans, receive expense reimbursements, receive
other fringe benefits, receive office and support staff, or receive paid
vacation, provided that: (i) an isolated, insubstantial, and inadvertent failure
not occurring in bad faith and which is promptly remedied after notice by the
Executive shall not be deemed a violation of this paragraph and (ii) a reduction
in one element of the Executive's total compensation shall not be deemed a
violation of this paragraph if a counterbalancing increase in another element of
the Executive's total compensation occurs (the determination of whether the
increase is counterbalancing shall be determined by the Executive in good
faith).
(5) No Mitigation. If this Agreement terminates under Section
-------------
5(e)(2), 5(e)(3) or 5(e)(4) hereof, the obligations of the Company to the
Executive under this Agreement will not be mitigated by any other employment
secured by the Executive.
(6) Withholding. Amounts payable under this Section 5(e) shall be
-----------
reduced by any standard withholdings and other authorized deductions.
(f) Exclusive Remedy. By signing the Agreement, the Executive agrees that
----------------
the payments to which the Executive may
7
<PAGE>
become entitled under this Agreement are in lieu of any other payments to which
the Executive might be entitled and that the Company's discharge of its
obligations under this Agreement shall constitute full satisfaction of any and
all claims of any nature whatsoever that the Executive might otherwise possess
against the Company and its subsidiaries, except (A) such claims as are
specifically provided for in the terms of any generally applicable employee
benefit or executive compensation plans evidenced by written agreements, (B) the
Executive's rights, if any, under his Severance Agreement, or (C) any claims for
personal injuries (other than claims that are based on or relate to a contention
that Company has wrongfully discharged the Executive).
6. RENEWAL.
-------
Subject to the provisions of Section 5(e)(3), on the last day of March each
calendar year, beginning on March 31, 1998, this Agreement shall be
automatically renewed for one additional 12 month period unless the Executive or
the Company gives notice to the other, in writing, at least 6 months prior to
the expiration of this Agreement, or any renewal or extension thereof, of its
desire to terminate this Agreement or modify its terms. Once this Agreement
expires, this Agreement shall have no application to the terms and conditions of
any employment by Executive subsequent to such expiration or the termination of
such employment.
7. ARBITRATION.
-----------
Any controversy or claim arising out of or relating to this Agreement, its
enforcement or interpretation, or because of an alleged breach, default, or
misrepresentation in connection with any of its provisions, shall be submitted
to arbitration, to be held in Los Angeles County, California in accordance with
California Civil Procedure Code, Title 9, (S)(S) 1280-1298.8. The arbitrator
shall be selected jointly by the parties or by Judicial Arbitration & Mediation
Services, Inc. ("JAMS"). Each party to the arbitration shall bear its own
attorneys' fees and costs relating to such arbitration. In the event that the
Executive disputes the Company's determination that Cause has existed for his
termination of employment, the Company shall only be considered as having
terminated the Executive for Cause if the arbitrator concludes that Cause
existed for Executive's termination and issues specific findings to that effect.
8
<PAGE>
8. CONFIDENTIAL INFORMATION.
------------------------
The Executive shall hold in a fiduciary capacity for the benefit of the
Company all secret or confidential information, knowledge or data relating to
the Company or any of its affiliated companies, and their respective businesses,
which shall have been obtained by the Executive during his employment by the
Company or any of its affiliated companies and which shall not be or become
public knowledge (other than by acts by the Executive or his representatives in
violation of this Agreement). After termination of the Executive's employment
with the Company, he shall not, without the prior written consent of the
Company, or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and those designated by it.
9. SUCCESSORS.
----------
(a) This Agreement is personal to the Executive and shall not, without the
prior written consent of the Company, be assignable by the Executive.
(b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns and any such successor or assignee shall
be deemed substituted for the Company under the terms of this Agreement for all
purposes. As used herein, "successor" and "assignee" shall include any person,
firm, corporation or other business entity which at any time, whether by
purchase, merger or otherwise, directly or indirectly acquires the stock of the
Company or to which the Company assigns this Agreement by operation of law or
otherwise.
10. WAIVER.
------
No waiver of any breach of any term or provision of this Agreement shall be
construed to be, nor shall be, a waiver of any other breach of this Agreement.
No waiver shall be binding unless in writing and signed by the party waiving the
breach.
11. MODIFICATION.
------------
This Agreement may not be amended or modified other than by a written
agreement executed by the Executive and the Board of Directors of the Company.
9
<PAGE>
12. SAVINGS CLAUSE.
--------------
If any provision of this Agreement or the application thereof is held
invalid, the invalidity shall not affect other provisions or applications of the
Agreement which can be given effect without the invalid provisions or
applications and to this end the provisions of this Agreement are declared to be
severable.
13. COMPLETE AGREEMENT.
------------------
This instrument constitutes and contains the entire agreement and
understanding concerning the Executive's employment and the other subject
matters addressed herein between the parties, and supersedes and replaces all
prior negotiations and all agreements proposed or otherwise, whether written or
oral, concerning the subject matters hereof. This is an integrated document.
14. GOVERNING LAW.
-------------
This Agreement shall be deemed to have been executed and delivered within
the State of California, and the rights and obligations of the parties hereunder
shall be construed and enforced in accordance with, and governed by, by the laws
of the State of California without regard to principles of conflict of laws.
15. CONSTRUCTION.
------------
Each party has cooperated in the drafting and preparation of this
Agreement. Hence, in any construction to be made of this Agreement, the same
shall not be construed against any party on the basis that the party was the
drafter. The captions of this Agreement are not part of the provisions hereof
and shall have no force or effect.
16. COMMUNICATIONS.
--------------
All notices, requests, demands and other communications hereunder shall be
in writing and shall be deemed to have been duly given if delivered or if mailed
by registered or certified mail, postage prepaid, addressed to the Executive at
3 Lochmoor Lane, Newport Beach, CA 92660, or addressed to the Company at 285 W.
Huntington Drive, Arcadia, CA 91007. Any party may change the address at which
notice shall be given by written notice given in the above manner.
10
<PAGE>
17. EXECUTION.
---------
This Agreement is being executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument. Photographic copies of such signed counterparts may be
used in lieu of the originals for any purpose.
18. LEGAL COUNSEL.
-------------
The Executive and the Company recognize that this is a legally binding
contract and acknowledge and agree that they have had the opportunity to consult
with legal counsel of their choice. The Company shall reimburse the Executive
promptly for all reasonable attorney fees incurred by the Executive in
connection with the negotiation and review of this Agreement.
In witness whereof, the parties hereto have executed this Agreement as of
the date first above written.
SANTA ANITA OPERATING COMPANY
By: _________________________________________
Kathryn J. McMahon
General Counsel
WILLIAM C. BAKER
_____________________________________
11
<PAGE>
EXHIBIT 10.6
SANTA ANITA OPERATING COMPANY
STOCK OPTION AGREEMENT
THIS AGREEMENT (the "Agreement") is dated as of the 18th day of August,
1996, by and between Santa Anita Operating Company, a Delaware corporation (the
"Company") and William C. Baker (the "Optionee").
W I T N E S S E T H:
WHEREAS, on March 29, 1996, the Board of Directors of Santa Anita Realty
Enterprises, Inc. ("Realty") granted to the Optionee, effective as of April 1,
1996, a nonstatutory stock option (the "Prior Option") to purchase all or any
part of an aggregate of 200,000 shares of common stock (the "Prior Grant"),
$0.10 par value, of Realty; and
WHEREAS, on April 1, 1996 Optionee and Realty entered into a
Nonstatutory Stock Option Agreement (the "Prior Stock Option Agreement"),
governing the terms and conditions of the Prior Grant; and
WHEREAS, effective August 16, 1996, Optionee resigned as the Chief
Executive Officer of Realty and became the Chief Executive Officer of the
Company; and
WHEREAS, on August 18, 1996, pursuant to the Company's 1995 Share Award
Plan (the "Plan") the Company's Board of Directors has granted to the Optionee,
effective as of August 18, 1996, (the "Award Date") a nonstatutory option (the
"Option") to purchase all or any part of an aggregate of 200,000 shares of
common stock (the "Aggregate Grant"), $0.10 par value, of the Company (the
"Operating Common Stock"), upon the terms and conditions set forth herein; and
WHEREAS, Optionee has agreed to surrender the Prior Options and to
terminate the Prior Stock Option Agreement in consideration for entering into
this Stock Option Agreement with the Company;
NOW, THEREFORE, in consideration of the mutual promises and covenants
made herein and the mutual benefits to be derived herefrom, the parties hereto
agree as follows:
1. Defined Terms. Capitalized terms used herein and not otherwise
-------------
defined herein shall have the meaning assigned to such terms in the Plan.
2. Grant of Option. The Company has granted to the Optionee as a
---------------
matter of separate inducement and agreement in connection with his or her
employment, and not in lieu of any salary or other compensation for his or her
services, the right
<PAGE>
and option to purchase, on the terms and conditions hereinafter set forth, all
or any part of the Aggregate Grant at a price of $1.21 per share, exercisable
from time to time subject to the provisions of this Agreement prior to the close
of business on a date not later than March 31, 2006 (the "Expiration Date").
Such price equals the value established by the Committee for purposes of
granting options under the Plan and is at least 100% of the Fair Market Value of
the Operating Common Stock on the Award Date. It is the intent of the Company
that, to the maximum extent permitted by law, this Option constitute an
incentive stock option within the meaning of Section 422 of the Code.
3. Exercisability of Option.
------------------------
(a) The Option may be exercised for 100% of the Aggregate Grant (1) on
or after the 60th consecutive business day after the Award Date that the Fair
Market Value of a Paired Share is $27.50 or more, provided such 60th day occurs
before April 1, 2001; (2) immediately prior to a reorganization that is
consummated before April 1, 2001 in which the Company is not the surviving
entity and the shareholders of the Company are to receive consideration worth
$27.50 or more per Paired Share; or (3) immediately prior to a sale by the
shareholders that occurs before April 1, 2001 of substantially all of the Paired
Shares at a price of $27.50 or more per share of Paired Share. Unless one of
these three events occurs by April 1, 2001, the Option shall expire on April 1,
2001.
(b) To the extent the Optionee does not in any year purchase all or
any part of the shares to which the Employee is entitled, the Optionee has the
right cumulatively thereafter to purchase any shares not so purchased and such
right shall continue until the Option terminates or expires. Fractional share
interests shall be disregarded, but may be cumulated. No fewer than 10 shares
may be purchased at any one time, unless the number purchased is the total
number at the time available for purchase under the Option. Notwithstanding
anything to the contrary contained in this Agreement, if the Option becomes
exercisable, in all events the Optionee or the Optionee's Beneficiary shall be
entitled to a period of no less than 90 days to exercise the Option.
(c) If there shall occur any extraordinary dividend or other
extraordinary distribution in respect of the Paired Share (whether in the form
of cash, common stock of Realty (the "Realty Common Stock"), Operating Common
Stock, other securities, or other property), or any reclassification,
recapitalization, stock split (including a stock split in the form of a stock
dividend), reverse stock split, reorganization, merger, combination,
consolidation, split-up, spin-off, combination, repurchase, or exchange of
Realty Common Stock, Operating Common Stock or other securities of the
corporation, or there shall occur any similar extraordinary corporate
transaction, then the
2
<PAGE>
Committee shall, in such manner and to such extent (if any) as it deems
appropriate and equitable, proportionately adjust the performance standard of
this Section 3.
4. Concurrent Grant and Exercise of Options. The grant and exercise
----------------------------------------
of any Option under the Plan is subject to the following:
(a) Concurrently with the granting of the Option to purchase Operating
Common Stock pursuant to the Plan, an option to purchase 200,000 shares, $.10
par value, of Realty Common Stock has been granted to the Optionee pursuant to
an agreement between the Optionee and the Company.
(b) The Option shall not be exercisable unless the Optionee submits
evidence satisfactory to the Company that a number of shares of Realty Common
Stock equal to the number of shares of Operating Common Stock to be received
upon exercise of all or a portion of the Option will, and are able to, be
purchased by or are available to the Optionee, such that upon exercise the
Optionee will receive or hold an equal number of shares of Realty Common Stock
and Operating Common Stock. The Optionee shall be required to pair such
unpaired shares of Realty Common Stock with the Optionee's shares of Operating
Common Stock.
5. Limitation on Exercise of Option. In the event the Optionee is
--------------------------------
granted incentive stock options (whether under this Award Agreement or any other
incentive stock option agreement) and the aggregate fair market value
(determined as of the respective dates of grant of such options) of Operating
Common Stock with respect to which such options are first exercisable in any
calendar year exceeds $100,000, the most recently granted options shall be
treated as nonqualified stock options to the extent of the excess. In addition,
in the case of simultaneously granted options, the Company may, in the manner
and to the extent permitted by law, designate which shares are to be treated as
stock acquired pursuant to the exercise of an incentive stock option. Pursuant
to two separate Incentive Stock Option Agreements executed concurrently
herewith, the Company has granted Optionee an option to purchase 135,756 shares
of Operating Common Stock and an option to purchase 14,244 shares of Operating
Common Stock (the "Parallel Options"). The Company has designated the shares of
Operating Common Stock acquired pursuant to the Parallel Options as stock
acquired pursuant to the exercise of an incentive stock option. Accordingly, to
the extent that the aggregate fair market value of the Operating Common Stock
with respect to which the Option and the Parallel Options are first exercisable
in any calendar year does not exceed $100,000, the shares of Operating Common
Stock acquired pursuant to the Option will be treated as stock acquired pursuant
to an incentive stock option. To the extent that the aggregate fair market
value described in the preceding sentence exceeds
3
<PAGE>
$100,000, the shares of Operating Common Stock acquired pursuant to the Option
will be treated as stock acquired pursuant to a nonstatutory stock option.
6. Method of Exercise of Option and Payment of Purchase Price.
----------------------------------------------------------
Subject to such further limitations and rules or procedures as the Committee may
from time to time establish, the exercise of all or any portion of the Option
shall be by means of written notice of exercise delivered to the Company,
specifying the number of whole shares with respect to which the Option is being
exercised, together with any written statements required by Section 6.4 of the
Plan (regarding compliance with applicable law) and payment of the purchase
price according to the following terms:
(a) in cash, electronic funds transfer or by check payable to the
order of the Company;
(b) by notice and third party payment in such manner as may be
authorized by the Committee;
(c) subject to the Committee's ability in its absolute discretion
to deny such request and upon receipt of all necessary regulatory approvals, the
Optionee may request that the Optionee deliver in payment of a portion or all of
the purchase price, other already-owned shares of Operating Common Stock
(whether obtained through the exercise of Options or otherwise), which shares of
Operating Common Stock shall be valued at the then Fair Market Value. The
Committee's consent is required prior to the Optionee's use, pursuant to this
clause, of Operating Common Stock which he has held less than six months. If the
Committee permits delivery of Operating Common Stock to pay the purchase price,
the Operating Common Stock held six months or more may be used without consent
of the Committee; or
(d) subject to the Committee's ability in its absolute discretion
to deny such request, the Optionee may request that shares of Operating Common
Stock that would otherwise be deliverable with a Fair Market Value equal to the
purchase price of the Operating Common Stock being purchased be withheld in
payment of the purchase price.
(e) The Optionee shall in all cases be required to exercise an
option to obtain the same number of unpaired shares of Realty Common Stock as
the number of shares of Operating Common Stock obtained through exercise of the
Option, and shall be required to pair the shares of Realty Common Stock with the
shares or Operating Common Stock.
7. Continuance of Employment. Nothing contained in this Agreement
-------------------------
shall confer upon the Optionee any right to continue in the employ of the
Company or interfere in any way with the rights of the Company, which are hereby
expressly
4
<PAGE>
reserved, to reduce the Optionee's compensation from the rate in existence at
any time or to terminate the Optionee's employment for any reason. The
preceding sentence is subject, however, to the terms of any employment agreement
between Optionee and the Company.
8. Effect of Termination of Relationship.
-------------------------------------
(a) The Option is exercisable by Optionee (or, in the event of
Optionee's death, his Beneficiary) for a period ending on the later of March 31,
2001 or 90 days after the end of the period described in Section 3(a)(1). On or
after the expiration of the period described in the preceding sentence, the
Option shall only be exercisable if Optionee is then employed by the Company.
In no event may the Option be exercised by anyone, however, unless the vesting
condition in Section 3(a) is satisfied and exercise occurs before the Expiration
Date.
(b) If Optionee is employed by an entity which ceases to be a
Subsidiary, such event shall be deemed for purposes of this Section 8 to be a
termination of employment described in subsection (a) in respect of Optionee.
(c) Absence from work caused by military service or authorized sick
leave shall not be considered as a termination of employment for purposes of
this Section.
(d) Notwithstanding the preceding, in the event that all or a portion
of the Option is exercised after the periods permitted by or pursuant to Section
422 of the Code regarding incentive stock options, the portion of the Option
which is then exercised shall be treated as a nonqualified stock option.
9. Non-Assignability of Option. Subject to the provisions of Section
---------------------------
8 above, the Option and the rights and privileges conferred hereby are not
transferable or assignable and may not be offered, sold, pledged, hypothecated
or otherwise disposed of in any way (whether by operation of law or otherwise)
and shall not be subject to execution, attachment, garnishment, levy or similar
process. The Option may be exercised only by (i) the Optionee, during the
Optionee's lifetime, or (ii) to the extent provided by Section 8, by his
transferees by will or under the laws of descent and distribution, or (iii) by a
person designated pursuant to a QDRO. In the event that the spouse of the
Optionee shall have acquired a community property interest in the Option, the
Optionee or such transferees may exercise it on behalf of the spouse of the
Optionee or such spouse's successor in interest.
10. Termination of Option Under Certain Circumstances. Section 6.2(c)
-------------------------------------------------
of the Plan is incorporated by reference. As permitted by Section 6.2(c) of the
Plan, the Option shall
5
<PAGE>
terminate upon the occurrence of certain corporate reorganizations in which the
Company is not the survivor.
11. Notices. Any notice to be given under the terms of this Agreement
-------
shall be in writing and addressed to the Secretary of the Company at its
principal office, and any notice to be given to the Optionee shall be addressed
to him or her at the address given beneath the Optionee's signature hereto or at
such other address as either party may hereafter designate in writing to the
other party. Any such notice shall be deemed to have been duly given when
enclosed in a properly sealed envelope addressed as aforesaid, registered or
certified, and deposited (postage and registry or certification fee prepaid) in
a post office or branch post office regularly maintained by the United States
Government.
12. 1995 Share Award Plan. The Option and all rights of Optionee
---------------------
thereunder are subject to, and the Optionee agrees to be bound by, all of the
terms and conditions of the provisions of the Plan, incorporated herein by this
reference, to the extent such provisions are applicable to options granted to
Eligible Employees. The Optionee acknowledges receipt of a copy of the Plan,
which is made a part hereof by this reference, and agrees to be bound by the
terms thereof. Unless otherwise expressly provided in other Sections of this
Agreement, provisions of the Plan that confer discretionary authority on the
Committee do not (and shall not be deemed to) create any rights in the Optionee
unless such rights are expressly set forth herein or are otherwise in the sole
discretion of the Committee so conferred by appropriate action of the Committee
under the Plan after the date hereof.
13. Notice of Disposition. In addition to giving the notification
---------------------
required by Section 11, the Optionee agrees to notify the Company of any sale or
other disposition of any shares of Operating Common Stock received upon exercise
of the Option if such sale or disposition occurs within two years after the
Award Date or within one year after the date of exercise of the Option.
14. Surrender of Prior Option. By executing this Agreement, Optionee
-------------------------
surrenders the Prior Option and terminates the Prior Stock Option Agreement.
Optionee acknowledges and agrees that neither Realty nor the Company has any
remaining obligations to Optionee under, and that Optionee has no remaining
rights, past or future, under, the Prior Stock Option Agreement.
6
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
on its behalf by a duly authorized officer and the Optionee has hereunto set his
or her hand as of the day and year first above written.
SANTA ANITA OPERATING COMPANY
By: /s/ Kathryn J. McMahon
--------------------------
Kathryn J. McMahon
General Counsel
OPTIONEE
___________________________________
(Signature)
___________________________________
(Print Name)
___________________________________
(Address)
___________________________________
(City, State, Zip Code)
___________________________________
(Social Security Number)
7
<PAGE>
CONSENT OF SPOUSE
-----------------
In consideration of the execution of the foregoing Stock Option
Agreement by Santa Anita Operating Company, I, _________________ the spouse of
the Optionee herein named, do hereby join with my spouse in executing the
foregoing Stock Option Agreement and do hereby agree to be bound by all of the
terms and provisions thereof.
Date: _________________ ________________________________
Signature of Spouse
8
<PAGE>
EXHIBIT 10.7
SANTA ANITA OPERATING COMPANY
NONSTATUTORY STOCK OPTION AGREEMENT
THIS AGREEMENT (the "Agreement") is dated as of the 18th day of August,
1996, by and between Santa Anita Operating Company, a Delaware corporation (the
"Company") and William C. Baker (the "Optionee").
W I T N E S S E T H:
WHEREAS, on March 29, 1996, the Board of Directors of Santa Anita Realty
Enterprises, Inc. ("Realty") granted to the Optionee, effective as of April 1,
1996, a nonstatutory stock option (the "Prior Option") to purchase all or any
part of an aggregate of 200,000 shares of common stock (the "Prior Grant"),
$0.10 par value, of Realty; and
WHEREAS, on April 1, 1996 Optionee and Realty entered into a
Nonstatutory Stock Option Agreement (the "Prior Stock Option Agreement"),
governing the terms and conditions of the Prior Grant; and
WHEREAS, effective August 16, 1996, Optionee resigned as the Chief
Executive Officer of Realty and became the Chief Executive Officer of the
Company; and
WHEREAS, on August 18, 1996, pursuant to the Company's 1995 Share Award
Plan (the "Plan") the Company's Board of Directors has granted to the Optionee,
effective as of August 18, 1996, (the "Award Date") a nonstatutory option (the
"Option") to purchase all or any part of an aggregate of 200,000 shares of
common stock (the "Aggregate Grant"), $0.10 par value, of Realty (the "Realty
Common Stock"), upon the terms and conditions set forth herein; and
WHEREAS, Optionee has agreed to surrender the Prior Options and to
terminate the Prior Stock Option Agreement in consideration for entering into
this Nonstatutory Stock Option Agreement with the Company;
NOW, THEREFORE, in consideration of the mutual promises and covenants
made herein and the mutual benefits to be derived herefrom, the parties hereto
agree as follows:
1. Defined Terms. Capitalized terms used herein and not otherwise
-------------
defined herein shall have the meaning assigned to such terms in the Plan.
2. Grant of Option. The Company has granted to the Optionee as a
---------------
matter of separate inducement and agreement in connection with his or her
employment, and not in lieu of any salary or other compensation for his or her
services, the right
<PAGE>
and option to purchase, on the terms and conditions hereinafter set forth, all
or any part of the Aggregate Grant at a price of $14.04 per share, exercisable
from time to time subject to the provisions of this Agreement prior to the close
of business on a date not later than March 31, 2006 (the "Expiration Date").
Such price equals the value established by the Committee for purposes of
granting options under the Plan and is at least 100% of the Fair Market Value of
the Realty Common Stock on the Award Date.
3. Exercisability of Option.
------------------------
(a) The Option may be exercised for 100% of the Aggregate Grant (1) on
or after the 60th consecutive business day after the Award Date that the Fair
Market Value of a Paired Share is $27.50 or more, provided such 60th day occurs
before April 1, 2001; (2) immediately prior to a reorganization that is
consummated before April 1, 2001 in which the Company is not the surviving
entity and the shareholders of the Company are to receive consideration worth
$27.50 or more per Paired Share; or (3) immediately prior to a sale by the
shareholders that occurs before April 1, 2001 of substantially all of the Paired
Shares at a price of $27.50 or more per share of Paired Share. Unless one of
these three events occurs by April 1, 2001, the Option shall expire on April 1,
2001.
(b) To the extent the Optionee does not in any year purchase all or
any part of the shares to which the Employee is entitled, the Optionee has the
right cumulatively thereafter to purchase any shares not so purchased and such
right shall continue until the Option terminates or expires. Fractional share
interests shall be disregarded, but may be cumulated. No fewer than 10 shares
may be purchased at any one time, unless the number purchased is the total
number at the time available for purchase under the Option. Notwithstanding
anything to the contrary contained in this Agreement, if the Option becomes
exercisable, in all events the Optionee or the Optionee's Beneficiary shall be
entitled to a period of no less than 90 days to exercise the Option.
(c) If there shall occur any extraordinary dividend or other
extraordinary distribution in respect of the Paired Share (whether in the form
of cash, Realty Common Stock, common stock of the Company ("Operating Common
Stock"), other securities, or other property), or any reclassification,
recapitalization, stock split (including a stock split in the form of a stock
dividend), reverse stock split, reorganization, merger, combination,
consolidation, split-up, spin-off, combination, repurchase, or exchange of
Realty Common Stock, Operating Common Stock or other securities of the
corporation, or there shall occur any similar extraordinary corporate
transaction, then the Committee shall, in such manner and to such extent (if
any) as it deems appropriate and equitable,
2
<PAGE>
proportionately adjust the performance standard of this Section 3.
4. Concurrent Grant and Exercise of Options. The grant and exercise
----------------------------------------
of any Option under the Plan is subject to the following:
(a) Concurrently with the granting of the Option to purchase Realty
Common Stock pursuant to the Plan, an option to purchase 200,000 shares, $.10
par value, of Operating Common Stock has been granted to the Optionee pursuant
to an agreement between the Optionee and the Company.
(b) The Option shall not be exercisable unless the Optionee submits
evidence satisfactory to the Company that a number of shares of Operating Common
Stock equal to the number of shares of Realty Common Stock to be received upon
exercise of all or a portion of the Option will, and are able to, be purchased
by or are available to the Optionee, such that upon exercise the Optionee will
receive or hold an equal number of shares of Operating Common Stock and Realty
Common Stock. The Optionee shall be required to pair such unpaired shares of
Operating Common Stock with the Optionee's shares of Realty Common Stock.
5. Method of Exercise of Option and Payment of Purchase Price.
----------------------------------------------------------
Subject to such further limitations and rules or procedures as the Committee may
from time to time establish, the exercise of all or any portion of the Option
shall be by means of written notice of exercise delivered to the Company,
specifying the number of whole shares with respect to which the Option is being
exercised, together with any written statements required by Section 6.4 of the
Plan (regarding compliance with applicable law) and payment of the purchase
price according to the following terms:
(a) in cash, electronic funds transfer or by check payable to the
order of the Company;
(b) by notice and third party payment in such manner as may be
authorized by the Committee;
(c) subject to the Committee's ability in its absolute discretion to
deny such request and upon receipt of all necessary regulatory approvals, the
Optionee may request that the Optionee deliver in payment of a portion or all of
the purchase price, other already-owned shares of Realty Common Stock (whether
obtained through the exercise of Options or otherwise), which shares of Realty
Common Stock shall be valued at the then Fair Market Value. The Committee's
consent is required prior to the Optionee's use, pursuant to this clause, of
Realty Common Stock which he has held less than six months. If the Committee
permits delivery of Realty Common Stock to pay the purchase price, the
3
<PAGE>
Realty Common Stock held six months or more may be used without consent of the
Committee; or
(d) subject to the Committee's ability in its absolute discretion to
deny such request, the Optionee may request that shares of Realty Common Stock
that would otherwise be deliverable with a Fair Market Value equal to the
purchase price of the Realty Common Stock being purchased be withheld in payment
of the purchase price.
(e) The Optionee shall in all cases be required to exercise an option
to obtain the same number of unpaired shares of Operating Common Stock as the
number of shares of Realty Common Stock obtained through exercise of the Option,
and shall be required to pair the shares of Operating Common Stock with the
shares or Realty Common Stock.
6. Continuance of Employment. Nothing contained in this Agreement
-------------------------
shall confer upon the Optionee any right to continue in the employ of the
Company or interfere in any way with the rights of the Company, which are hereby
expressly reserved, to reduce the Optionee's compensation from the rate in
existence at any time or to terminate the Optionee's employment for any reason.
The preceding sentence is subject, however, to the terms of any employment
agreement between Optionee and the Company.
7. Effect of Termination of Relationship.
-------------------------------------
(a) The Option is exercisable by Optionee (or, in the event of
Optionee's death, his Beneficiary) for a period ending on the later of March 31,
2001 or 90 days after the end of the period described in Section 3(a)(1). On or
after the expiration of the period described in the preceding sentence, the
Option shall only be exercisable if Optionee is then employed by the Company.
In no event may the Option be exercised by anyone, however, unless the vesting
condition in Section 3(a) is satisfied and exercise occurs before the Expiration
Date.
(b) If Optionee is employed by an entity which ceases to be a
Subsidiary, such event shall be deemed for purposes of this Section 7 to be a
termination of employment described in subsection (a) in respect of Optionee.
(c) Absence from work caused by military service or authorized sick
leave shall not be considered as a termination of employment for purposes of
this Section.
8. Non-Assignability of Option. Subject to the provisions of Section
---------------------------
7 above, the Option and the rights and privileges conferred hereby are not
transferable or assignable and may not be offered, sold, pledged, hypothecated
or otherwise disposed of in any way (whether by operation of law or otherwise)
4
<PAGE>
and shall not be subject to execution, attachment, garnishment, levy or similar
process. The Option may be exercised only by (i) the Optionee, during the
Optionee's lifetime, or (ii) to the extent provided by Section 7, by his
transferees by will or under the laws of descent and distribution, or (iii) by a
person designated pursuant to a QDRO. In the event that the spouse of the
Optionee shall have acquired a community property interest in the Option, the
Optionee or such transferees may exercise it on behalf of the spouse of the
Optionee or such spouse's successor in interest.
9. Termination of Option Under Certain Circumstances. Section 6.2(c)
-------------------------------------------------
of the Plan is incorporated by reference. As permitted by Section 6.2(c) of the
Plan, the Option shall terminate upon the occurrence of certain corporate
reorganizations in which the Company is not the survivor.
10. Notices. Any notice to be given under the terms of this Agreement
-------
shall be in writing and addressed to the Secretary of the Company at its
principal office, and any notice to be given to the Optionee shall be addressed
to him or her at the address given beneath the Optionee's signature hereto or at
such other address as either party may hereafter designate in writing to the
other party. Any such notice shall be deemed to have been duly given when
enclosed in a properly sealed envelope addressed as aforesaid, registered or
certified, and deposited (postage and registry or certification fee prepaid) in
a post office or branch post office regularly maintained by the United States
Government.
11. 1995 Share Award Plan. The Option and all rights of Optionee
---------------------
thereunder are subject to, and the Optionee agrees to be bound by, all of the
terms and conditions of the provisions of the Plan, incorporated herein by this
reference, to the extent such provisions are applicable to options granted to
Eligible Employees. The Optionee acknowledges receipt of a copy of the Plan,
which is made a part hereof by this reference, and agrees to be bound by the
terms thereof. Unless otherwise expressly provided in other Sections of this
Agreement, provisions of the Plan that confer discretionary authority on the
Committee do not (and shall not be deemed to) create any rights in the Optionee
unless such rights are expressly set forth herein or are otherwise in the sole
discretion of the Committee so conferred by appropriate action of the Committee
under the Plan after the date hereof.
12. Surrender of Prior Option. By executing this Agreement, Optionee
-------------------------
surrenders the Prior Option and terminates the Prior Stock Option Agreement.
Optionee acknowledges and agrees that neither Realty nor the Company has any
remaining obligations to Optionee under, and that Optionee has no remaining
rights, past or future, under, the Prior Stock Option Agreement.
5
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
on its behalf by a duly authorized officer and the Optionee has hereunto set his
or her hand as of the day and year first above written.
SANTA ANITA OPERATING COMPANY
By: /s/Kathryn J. McMahon
________________________
Kathryn J. McMahon
General Counsel
OPTIONEE
_______________________________
(Signature)
_______________________________
(Print Name)
_______________________________
(Address)
_______________________________
(City, State, Zip Code)
_______________________________
(Social Security Number)
6
<PAGE>
CONSENT OF SPOUSE
-----------------
In consideration of the execution of the foregoing Nonstatutory Stock
Option Agreement by Santa Anita Operating Company, I, _________________ the
spouse of the Optionee herein named, do hereby join with my spouse in executing
the foregoing Nonstatutory Stock Option Agreement and do hereby agree to be
bound by all of the terms and provisions thereof.
Date: _________________ ________________________________
Signature of Spouse
7
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SANTA ANITA
REALTY ENTERPRISES, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0000314661
<NAME> SANTA ANITA REALTY ENTERPRISES, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 15,330,000
<SECURITIES> 0
<RECEIVABLES> 564,000
<ALLOWANCES> (159,000)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 66,203,000
<DEPRECIATION> (30,846,000)
<TOTAL-ASSETS> 72,343,000
<CURRENT-LIABILITIES> 0
<BONDS> 22,188,000
0
87,000
<COMMON> 1,150,000
<OTHER-SE> 35,282,000
<TOTAL-LIABILITY-AND-EQUITY> 72,343,000
<SALES> 0
<TOTAL-REVENUES> 15,941,000
<CGS> 0
<TOTAL-COSTS> 1,999,000
<OTHER-EXPENSES> 5,397,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,202,000
<INCOME-PRETAX> 6,343,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 6,343,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,343,000
<EPS-PRIMARY> 0.55
<EPS-DILUTED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SANTA ANITA
OPERATING COMPANY AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0000313749
<NAME> SANTA ANITA OPERATING COMPANY
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 2,621,000
<SECURITIES> 0
<RECEIVABLES> 2,074,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,302,000
<PP&E> 47,165,000
<DEPRECIATION> (27,579,000)
<TOTAL-ASSETS> 32,010,000
<CURRENT-LIABILITIES> 15,325,000
<BONDS> 1,091,000
0
87,000
<COMMON> 1,139,000
<OTHER-SE> 12,964,000
<TOTAL-LIABILITY-AND-EQUITY> 32,010,000
<SALES> 0
<TOTAL-REVENUES> 58,909,000
<CGS> 0
<TOTAL-COSTS> 49,717,000
<OTHER-EXPENSES> 7,728,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 206,000
<INCOME-PRETAX> 1,258,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,258,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,258,000
<EPS-PRIMARY> 0.11
<EPS-DILUTED> 0
</TABLE>
