UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A-1
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
OR
[ ] 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 1-8692
PACIFIC GATEWAY PROPERTIES, INC.
(Exact name of Registrant as specified in its charter)
NEW YORK 04-2816560
(State or other jurisdiction of (IRS Employer
incorporation or organization ) Identification No.)
One Rincon Center
101 Spear Street, Suite 215
San Francisco, California 94105
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 543-8600
Securities registered pursuant to Section 12 (b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, $1.00 par value American Stock Exchange
per share
Securities registered pursuant to Section 12 (g) of the Act: None
Indicate by check mark whether the Registrant (1) has 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
Registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (p.229.405) of this chapter) is not contained herein,
and will not be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K [X].
State the aggregate market value of the voting stock held by non-affiliates
of the Registrant as of March 15, 1996: Common Stock, Par Value $1.00--
$10,461,352.
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of March 15, 1996: Common Stock, Par Value
$1.00 --3,892,596 shares.
<PAGE>
Part III
Item 10. Directors and Executive Officers of the Registrant
The Board of Directors of the Registrant consists of seven directors.
Each director serves until the next Annual Meeting of Shareholders and until
his successor is chosen and qualified. The following table sets forth
information regarding directors of the Registrant.
Name and Age: Principal Occupation for the Past Five Years
H. Todd Cobey, Jr. (53) Director of the Registrant since May 1995;
President of Cobey, Jacobs and Gordon, Inc.,
a registered investment management firm.
Lawrence B. Helzel (48) Director of the Registrant since May 1995;
Member, Pacific Stock Exchange, Inc. (Self
employed market maker, options floor);
co-founder Buylar Investments, Inc., a
real estate investment company.
Marshall A. Jacobs (76) Director of the Registrant since February 1984;
since January 1992, of counsel to the law firm
of Jacobs Persinger & Parker; prior thereto,
senior partner in the firm.
Raymond V. Marino (37) Director, President and CEO of the Registrant since
January 1996; since August 1992, Vice President of
the Registrant; prior thereto, Vice President
of Finance and Controller, Hunting Gate Investments,
Inc., a real estate investment & management company.
David E. Post (39) Director of the Registrant since May 1993; since
January 1995, Principal of Hanson Investment
Management Company; prior thereto, President, CSI
Capital Management; President, Alternative Capital
Corporation; President, HS Partners, Inc.
(a subsidiary of HS Resources, Inc.)
Martin S. Roher (46) Director of the Registrant since May 1995; general
partner and managing partner of MSR Capital
Partners, a limited partnership engaged in
securities investments.
John V. Winfield (49) Director of the Registrant since May 1995; Chairman
of the Board,President and CEO of The InterGroup
Corporation, a diversified real estate company
Set forth below is certain information concerning persons who are executive
officers of the Registrant. Each executive officer holds office until the
first meeting of directors following the annual meeting of shareholders and
until his successor is duly chosen and qualified.
Executive Officers:
Raymond V. Marino (37) Director, President and CEO of the Registrant
since January 1996; since August 1992, Vice
President of the Registrant; prior thereto, Vice
President of Finance and Controller, Hunting Gate
Investments, Inc., a real estate investment &
management company.
Christopher M. Watson (37) Executive Vice President of the Registrant
since January 1996; since September 1992,
Vice President of the Registrant; prior
thereto, Vice President, Coldwell Banker
Commercial Real Estate Services, Inc., a
real estate management company.
Andrew T. Gorayeb (32) Vice President of the Registrant since January 1996;
since December 1994, Director of Finance of the
Registrant; prior thereto, Managing Director,
General Electric Capital, Commercial Real Estate
Financing & Services
Gary W. Furney (44) Vice President of the Registrant since January
1996; since February 1995,Controller of the
Registrant; prior thereto, Vice President
Finance and Administration, Maxim Property
Management; Controller, Landsing Pacific
Fund
Except as set forth below, none of the directors is a director of
any company which is subject to the reporting requirements of the
Securities Exchange Act of 1934 or which is a registered investment
company under the Investment Company Act of 1940.
Name Director of
H. Todd Cobey, Jr. Cobey, Jacobson & Gordon, Inc.
John V. Winfield The InterGroup
Corporation
<PAGE>
Item 11. Executive Compensation
EXECUTIVE COMPENSATION
The Summary Compensation Table below sets forth individual compensation
information for each of the Registrant's last three fiscal years of the
Chief Executive Officer ("CEO") and other most highly paid executive officers
who were serving as such at the end of the Registrant's fiscal year ended
December 31, 1995, and whose total annual salary and bonus
for such fiscal year exceeded $100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Awards
Annual Compensation Stock All Other
Name and Principal Position Year Salary Bonus Options Compensation(2)
<S> <C> <C> <C> <C> <C>
Roger D. Snell 1995 $250,000 --- --- ---
President and CEO (1) 1994 $250,000 $ 75,000 20,500 ---
1993 $179,000 $147,500 --- ---
Raymond V. Marino (3) 1995 $ 95,000 $ 30,000 --- $2,850
Vice President 1994 $ 91,553 $ 25,000 6,175 ---
1993 $ 80,000 $ 15,000 --- ---
Christopher M. Watson (4) 1995 $ 70,000 $ 30,000 --- $22,459
Vice President 1994 $ 70,000 $ 30,000 6,175 $82,007
1993 $ 60,000 $ 30,000 --- $45,714
</TABLE>
(1) Mr. Snell resigned as a Director, President and CEO of the Registrant in
December 1995.
(2) Other compensation in the form of personal benefits to the named person have
been omitted because it does not exceed the lesser of $50,000 or 10% of the
total annual salary and bonus to each.
(3) Mr. Marino became a Director, President and CEO in January 1996. Mr. Marino
had been a Vice President of the Registrant since August 1992. His other
compensation in 1995 is a simplified employee pension contribution.
(4) Mr. Watson joined the Registrant as a Vice President in September 1992
and became Executive Vice President in January 1996. His other compensation
consisted of lease commissions of $17,359 in 1995, $79,007 in 1994 and
$42,714 in 1993 and an auto allowance of $3,000 in each year, and $2,100 for
a simplified employee pension contribution in 1995.
Option Tables
There were no options granted to the CEO or other executive officers named
in the Summary Compensation table during the last fiscal year ended December 31,
1995, and the CEO and other executive officers did not exercise any options in
the fiscal year ended December 31, 1995.
<PAGE>
The following table sets forth the fiscal year-end option values with
respect to the CEO and each of the other executive officers named in the Summary
Compensation Table.
<TABLE>
<CAPTION>
Fiscal Year End Option Values
Values of
Number of Unexercised-In
Unexercised the-Money
Options at Options at
12/31/95# 12/31/95 $ (1)
Exercisable/ Exerciseable
Name Unexercisable Unexercisable
<S> <C> <C>
Roger D. Snell 120,500/ --/--
Raymond V. Marin 10,235/10,940 --/--
Christopher M. Watson 10,235/10,940 --/--
</TABLE>
(1) The closing price for the Registrant's Common Stock on December 31, 1995,
was $2.875 per share. The exercise price of all exercisable and unexercisable
options held by Messrs. Snell, Marino and Watson were equal to or in excess of
such fair market value.
Employment Contract With Executive. The Registrant entered into an Employment
Agreement dated as of March 21, 1996, with Raymond V. Marino, the CEO and
President of the Registrant. Pursuant to such Agreement, Mr. Marino's annual
base salary is $150,000. He is eligible to receive a bonus as determined by
the Board of Directors. The term of the employment agreement is one year
commencing January 2, 1996, to January 1, 1997, which will automatically
be extended for additional one-year terms until terminated by either party
at the end of any year by written notice of termination not later than
October 1 of any such year or "for cause" as defined in the Agreement.
If the Registrant terminates Mr. Marino's employment under the Employment
Agreement on such written notice, Mr. Marino will be entitled to receive and
will be paid the balance of his base salary until the end of the year plus
his base salary for an additional period of 18 months, and will be
entitled to receive a bonus equal to the average of his annual bonuses
earned with respect to the immediately preceding two full calendar years of
his employment. In that case, Mr. Marino will also have the right to
exercise all vested options which have been granted to him, for a period of
12 months from the date of termination. In addition, if the Registrant
terminates the Employment Agreement without cause other than pursuant to
the aforementioned written notice of termination, Mr. Marino will also be
entitled to receive the termination compensation described above, but the
vesting period of any options granted Mr. Marino will accelerate and become
exercisable and all vested options will also be exercisable for a period of
12 months from the date of termination.
In the event of a termination of Mr. Marino's employment at his election within
12 months following a "change of control" of the Registrant, Mr. Marino will
be entitled to receive the termination compensation described above, including
the acceleration of the vesting of his options,but the period for exercising
any options will be a period of three months from the date of termination of
his employment. If following "change in control", Mr. Marino agrees to
remain employed under different terms of employment than those contained in
his Employment Agreement,he will be entitled to be paid in addition to his
compensation under the new employment arrangement his base salary for the
remainder of the year.
"Change in control" shall be deemed to have occurred if (i) in a single
transaction or series of transactions a transfer of ownership of the
Registrant's common stock occurs as a result of which the shareholders
immediately prior to such transaction or series of transactions no longer
control, directly or indirectly, 50% of the voting stock of the Registrant, or
(ii) the Registrant merges or consolidates with another corporation (other
than a subsidiary of the Registrant) or the Registrant sells all or
substantially all of its assets and at least 50% of the voting stock of the
surviving or purchasing entity is not controlled, directly or indirectly, by the
shareholders who were shareholders of the Registrant immediately prior to
such transaction or (iii) the composition of the Board of Directors changes
such that a majority of the Board are no longer persons who were serving as
directors of the Registrant on January 1, 1996.
Pursuant to the Employment Agreement, the Registrant awarded options to
Mr. Marino to acquire 100,000 shares of common stock of the Registrant at an
exercise price of $2.5625 per share subject to approval of the 1996 Stock
Option Plan at the 1996 Annual Meeting of shareholders. 40,000 of such
shares vested at the grant date and, except as described above, the balance
vest 20,000 on January 1, 1997, and 20,000 on each of December 31, 1997, and
December 31, 1998. In the event the 1996 Stock Option Plan is not approved,
Mr. Marino will be entitled to a cash payment in the event of a sale or
merger or similar transaction or sale of 50% or more of the stock of the
Registrant, or the full or partial liquidation of the Registrant. The cash
payment will be an amount equal to the cash payment per share or value per
share of any other consideration received by the Shareholders of the Registrant
in excess of $2.5625 per share multiplied by 100,000.
Certain Transactions. Effective December 31, 1995, Roger D. Snell resigned
as President, Chief Executive Officer and a Director of the Registrant.
Pursuant to an agreement dated as of December 31, 1995, between the
Registrant and Mr. Snell it was agreed that Mr. Snell would act as a
consultant throughout 1996 to investigate various courses of action to try to
improve shareholder value including a possible merger or sale of the
Registrant. The Registrant agreed to pay Mr. Snell a salary of $100,000
payable in six monthly installments beginning in January 1996, as well as
additional compensation on a formula tied to the value to be received by
shareholders in a merger or sale transaction as to which there was a "meeting
of the minds" before December 31, 1996, regardless of who is reponsible
for the transaction. If such "meeting of the minds" occurs after June
30, 1996, but on or before December 31, 1996, such additional compensation
will be reduced by one third. In addition, Mr. Snell was entitled to a
$25,000 bonus if the Registrant's Florida shopping center was sold in 1996.
In April 1996, the Registrant's Florida shopping center was sold and
Mr. Snell was paid the bonus. The Registrant also agreed to accelerate the
vesting of Mr.Snell's incentive stock options to December 31, 1995,
and to extend the period for Mr. Snell to exercise those options to
December 31, 1996.
Compensation Committee Interlocks and Insider Participation. At the
Annual Meeting of shareholders of the Registrant held on May 9, 1995, the
number of Directors was increased from five to seven. Four of the seven
Directors who were elected at that time had not previously served
as Directors of the Registrant. At the Organizational Meeting of the
Board of Directors held on May 9, 1995, following such Annual Meeting,
the Directors determined to establish a Compensation Committee, and three
non-employee directors, Messrs, Jacobs, Roher and Winfield, were designated
as its members. Mr. Jacobs was appointed as Chairman of the Compensation
Committee. Mr.Snell was a director and the President and Chief Executive
Officer of the Registrant until December 31, 1995. Mr. Jacobs is Of Counsel
to the law firm of Jacobs Persinger & Parker. Such law firm performed services
for the Registrant during fiscal 1995 and the Registrant proposes to retain
such firm in fiscal 1996.
Directors who are not officers of the Registrant, except Marshall A.
Jacobs, receive an annual fee of $7,500, and supplemental fees of $750 for
each meeting of the Board or a committee thereof attended, and $375 for each
telephone meeting, plus out-of-pocket expenses incurred in connection with
services rendered to the Registrant and travel and lodging for each Board
meeting.
Item 12. Security Ownership of Certain Beneficial Owners and Management
CERTAIN BENEFICIAL HOLDERS
The following table sets forth certain information concerning the
ownership, as of March 1, 1996, of the Common Stock of the Registrant by
persons who to the knowledge of the Board of Directors own beneficially
more than 5% of the outstanding common stock of the Registrant.
<TABLE>
<CAPTION>
Amount and Nature of Beneficial
Ownership of Common Stock
Sole Shared
Voting and Voting and
Investment Investment % of
Name Address Power Power Aggregate Class(1)
<S> <C> <C> <C> <C>
Citicorp Real Estate, Inc. One Sansome 1,000,000 --- 1,000,000(2) 20.4%
a subsidiary of Citibank, Suite 2830
N.A. San Francisco,
CA 94104
H.Todd Cobey, Jr. 10 Liberty Square 65,500 391,800 457,300(3) 11.8%
Boston, MA 02109
Perry Goldberg Specks & Goldberg 208,600 145,300 353,900(4) 9.1%
10 S. Wacker Drive
Suite 3600
Chicago, IL 60606
Harris Assoc L.P. 2 North LaSalle --- 235,250 235,250(5) 6%
Suite 500
Chicago, IL 60602
The InterGroup
Corporation 2121 Ave of the Stars 385,000 --- 385,000(6) 9.9%
Suite 2020
Los Angeles, CA 90067
MSR Capital
Partners One Embarcadero Center 250,000 --- 250,000(7) 6.4%
Suite 2330
San Francisco, CA 94111
David E. Post Hanson Investment 318,850 --- 318,850(8) 8.2%
Management Company
4000 Civic Center Drive
Suite 200
San Rafael, CA 94903
</TABLE>
(1) Beneficial ownership is the direct or indirect ownership of Common Stock
of the Registrant including the right to control the vote or investment
of or acquire such Common Stock within the meaning of Rule 13d-3 under
the Securities Exchange Act of 1934.
(2) Based on information contained in Schedule 13D for Citicorp Real Estate,
Inc. ("CREI"), dated December 30, 1993. The Registrant issued to
CREI warrants to acquire an aggregate of 2,000,000 shares of the Common
Stock. On January 31, 1995, 350,000, and as of September 30, 1995,
an additional 650,000, of the 2,000,000 warrants were cancelled as a
result of certain debt repayments in accordance with the terms of the
loan agreement with CREI. Warrants with respect to 1,000,000 shares
are presently exercisable and, if such warrants were exercised, CREI
would become owner of approximately 20.4% of the outstanding shares of
Common Stock of the Registrant. CREI has no present power to vote or
direct the voting of any shares since no warrants have been exercised.
If the warrants were exercised by CREI, CREI would have the sole power
to vote or direct the voting of such shares.
(3) Based on information contained in Amendment No. 3 to Schedule 13D for
H. Todd Cobey,Jr., dated December 30, 1994. Mr. Cobey is the direct
or indirect beneficial owner of 457,300 shares of the Common Stock of
the Registrant. Mr. Cobey has sole dispositive and voting power with
respect to 65,500 shares of common stock owned by him personally;
shared voting and shared dispositive power with respect to 190,900
shares of common stock owned by Ellis Fund Limited Partnership, a
Massachusetts limited partnership; and shared dispositive power and
no voting power with respect to 200,900 shares of Common
Stock for which Cobey, Jacobson & Gordon, Inc., a Massachusetts
corporation, acts in an investment advisory capacity. Mr. Cobey is an
investment advisor with, and President of,Cobey, Jacobson & Gordon, Inc.
Mr. Cobey is also a partner in CTG Associates, a Massachusetts
partnership, which is the sole general partner of Ellis Fund Limited
Partnership. Mr. Cobey is a Director of the Registrant.
(4) Based on information contained in Amendment No. 3 to Schedule 13D of
Perry Goldberg,
dated May 23, 1995. Mr. Goldberg beneficially owns 353,900 shares of
the Common Stock. Mr. Goldberg has sole voting and sole dispositive
power with respect to 208,600 shares; and shared voting power and shared
dispositive power with respect to 145,300 shares, 144,100 shares of which are
owned of record by Specks & Goldberg Ltd. Profit Sharing Plan and Trust, for
which Mr. Goldberg is a trustee, and 1,200 shares of which are owned of record
by his wife, Margaret Goldberg. In addition, Mr. Goldberg disclaims beneficial
ownership of 9,400 shares owned by his adult daughters, but as to which Mr.
Goldberg may be deemed to be the beneficial owner, and to have voting and/or
dispositive power.
(5) Based on information contained in Schedule 13G of Harris Associates L.P.,
a Delaware limited partnership, dated February 14, 1995: Harris Associates
L.P. has shared power to vote 235,250 shares of common stock of the Registrant.
Harris Associates L.P. has sole dispositive power with respect to 155,250
shares and shared dispositive power with respect to 80,000 shares. Harris
Associates Inc., a Delaware corporation, is the general partner of Harris
Associates L.P.
(6) Based on information contained in Amendment No. 2 to Schedule 13D for
The InterGroup Corporation dated June 20, 1995: The InterGroup Corporation
has sole voting and sole dispositive power with respect to 385,000 shares.
The InterGroup Corporation is a Delaware corporation. John V. Winfield,
a Director of the Registrant, is Chairman of the Board, President and CEO of
the InterGroup Corporation.
(7) Based on information contained in Amendment No. 2 to Schedule 13D for
MSR Capital Partners, dated May 9, 1995: MSR Capital Partners has sole
voting and sole dispositive power with respect to 250,000 shares. MSR Capital
Partners is a California limited partnership. The general partner of MSR
Capital Partners is Mr. Martin S. Roher, a Director of the Registrant.
(8) Based on information contained in Amendment No. 1 to Schedule 13D of
David E. Post, dated December 15, 1990. Includes 102,900 shares held by
MiJen L.P. 1 of which David Post is the general partner. The remaining
215,950 shares are held by three trusts and two Individual Retirement Accounts
for which David E. Post acts as investment adviser. Mr. Post is a Director
of the Registrant.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of March 1, 1996, certain information
regarding the beneficial ownership or right to acquire beneficial ownership
of the common stock of the Registrant of each director, each executive officer
and all directors and executive officers as a group.
<TABLE>
<CAPTION>
Amount and Nature of Beneficial Ownership of Common Stock (1)
Sole Shared
Voting and Voting and
Investment Investment % of
Name and Age Power Power Aggregate Class
Directors:
H. Todd Cobey, Jr.
<S> <C> <C> <C> <C> <C>
(53) 65,500 391,800 457,300 (2) 11.8%
Lawrence B. Helzel
(48) 22,500 -- 22,500 *
Marshall A. Jacobs
(76) 200 --- 200 *
Raymond V. Marino
(37) 10,235 --- 10,235 (3) *
David E. Post
(39) 318,850 --- 318,850 (2) 8.2%
Martin S. Roher
(46) 250,000 --- 250,000 (2) 6.5%
John V. Winfield
(49) 385,000 --- 385,000 (2) 9.9%
Other Executive
Officers:
Chris M. Watson
(37) 10,235 --- 10,235 (3) *
Andrew T. Gorayeb
(32) 2,000 --- 2,000 (3) *
Gary W. Furney
(44) --- --- --- ---
All present
directors and
executive 1,064,520 391,800 1,456,320 37.4%
officers as
a group
(10 persons)
</TABLE>
* Less than one percent
(1) Beneficial ownership is the direct or indirect ownership of Common
Stock of the Registrant including the right to control the vote or investment
of or acquire such Common Stock within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934.
(2) Additional information concerning the nature of the beneficial ownership
of such shares by Messrs. Cobey, Post, Roher and Winfield is set forth in the
table under the caption "CERTAIN BENEFICIAL HOLDERS" and notes (3), (8), (7)
and (6), respectively to such table above.
(3) Represents 10,235, 10,235, and 2,000 shares of Common Stock issuable
under presently exercisable stock options granted under the 1984 Incentive
Stock Option Plan as of December 31, 1995, for Raymond V. Marino, Christopher
M. Watson, and Andrew T. Gorayeb, respectively.
Item 13. Certain Relationships and Related Transactions
See Item 11 concerning the severance agreement between Registrant and
Roger Snell.
Mr. Jacobs is Of Counsel to the law firm of Jacobs Persinger & Parker. Such
law firm performed services for the Registrant during fiscal 1995 and the
Registrant proposes to retain such firm in fiscal 1996.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)3. Exhibits
10. Agreement dated December 31, 1995, between Registrant and Roger Snell
(management contract).
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this amendment to the
report to be signed on its behalf by the undersigned, thereunto duly authorized.
PACIFIC GATEWAY PROPERTIES,INC.
(Registrant)
By: Raymond V. Marino
Raymond V. Marino
President and Chief Executive
Officer
Dated: April 26, 1996
<PAGE>
EXHIBIT 10
AGREEMENT
Agreement made as of December 31, 1995 between Roger Snell ("Snell") and
Pacific Gateway Properties, Inc. ("PGP").
WHEREAS, Snell has advised PGP that for career and economic reasons, he
will resign as an officer and director of PGP effective as of close of business
on December 31, 1995, and PGP has agreed to engage Snell as a consultant
thereafter during 1996 as set forth below.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Snell will tender his written resignation as an officer and director of
PGP effective as of December 31, 1995.
2. Snell will act as a consultant to PGP throughout 1996 and will receive
compensation therefor as set forth in the following paragraphs:
Cash Compensation
$100,000 payable in six (6) consecutive equal monthly installments
commencing in January 1996; and a bonus of $25,000 upon the closing of the
sale of PGP's West Palm Beach shopping center, provided such closing occurs
on or before December 31, 1996 at a sales price acceptable to the PGP Board of
Directors.
Expenses
Snell will be reimbursed for up to $5,000 of expenses in connection with
his services as a consultant without prior approval of the Board of Directors.
After $5,000 has been expended, any one of the San Francisco-based
Directors of PGP must approve, in writing, additional expenses. All claims
for expenses must be supported by appropriate receipts, vouchers or other
suitable documentation. Snell will also be reimbursed for reasonable
attorneys' fees and costs in connection with the negotiation, preparation and
execution and delivery of this Agreement in an amount not to exceed $2,500.
Secretarial Help and Office Space
Snell will receive secretarial help as he may require to carry out his
duties and office space and a voice mail box as may be available at the
location which, from time to time, shall be PGP corporate headquarters.
Benefits
Snell and his dependants will be maintained at the expense of PGP
throughout 1996 (and, to the extent permissable under the terms of the
plans, thereafter, but at Snell's expense) on medical and health benefits
plans maintained by PGP unless PGP is sold, merged or a tender offer is
accomplished for a majority of the outstanding stock of PGP. All of Snell's
incentive stock options outstanding as of December 31, 1995, whether fully
vested or not, will be exercisable by Snell through December 31, 1996. The
records of PGP indicate that Snell holds options to purchase 100,000 shares
of common stock of PGP at a price of $3.625 per share and 20,500 shares of
common stock of PGP at a price of $3.688 per share.
Merger or Sale
Snell will devote such time in 1996 as he deems necessary to seek a
buyer for the outstanding shares of PGP, a merger for PGP with another entity
or any other form of corporate consolidation. If there is a "meeting of the
minds" evidenced by some written document duly signed by both parties such as
a letter of intent or a memorandum of understanding on or before June 30, 1996,
Snell will be entitled to receive additional compensation as follows:
a. For any bonafide offer that is brought to PGP and accepted by
it, Snell will receive $100,000.
b. If the offer has a value to the stockholders of PGP of more
than $4.50 per share, in addition to the $100,000 payment,
Snell will receive an additional $1,000 for each $.01 in
additional share price, up to a price of $5.50 per share.
c. If the offer has a value to the stockholders of PGP of more
than $5.50 per share, in addition to the sums listed above,
Snell will receive an additional $1,500 for each $.01 in
additional share price, up to a price of $6.50 per share.
d. If the offer has a value to the stockholders of PGP of more
than $6.50 per share, in addition to the sums listed above,
Snell will receive an additional $2,000 for each $.01 in
additional share price above the amount, with no maximum.
If such a "meeting of the minds" occurs after June 30, 1996 but on or
before December 31, 1996, then Snell will be entitled to receive two-thirds of
the additional compensation as set forth in subparagrphs a through d above.
Snell will be entitled to receive the additional compensation referred
to above whether or not he had anything to do with the events leading up to
the "meeting of the minds". Snell will not be entitled to be paid the
additional compensation unless and until the transaction is consummated, and
PGP shall not be obligated to consider any proposed transaction and shall
be entitled to terminate or abandon any transaction under consideration in
its sole discretion, with or without any cause or reason, whether before
or after the "meeting of the minds" without in any way being
obligated to pay any such additional compensation.
3. All material documents which Snell may present to third parties in
connection with his services as a consultant, including all documents
containing financial information, must be approved beforehand by the Audit
Committee.
4. If Snell presents any offer to PGP which the Board of Directors accepts,
the good faith judgement of the Board of Directors of PGP as to the value
of the offer to the stockholders of PGP will be conclusive and binding
upon
Snell, provided that if the consideration payable in the transaction
includes any security which is traded on NASDAQ or any national securities
exchange, the value of that security will be the average of its reported
market closing prices over the five most recent days prior to the date
the transaction
was consummated on which the security traded; however, if Snell does not
agree with such value and wishes to contest it, an arbitration may be
commenced by Snell in San Francisco, California pursuant to the commercial
arbitration rules of the American Arbitration Association in effect at that
time. The party which loses the arbitration, in the judgement of the
arbitrators, will pay all of the costs of such arbitration.
5. Snell will consult and meet with officers and directors at corporate
headquarters upon reasonable notice as requested, but not more than twice
weekly and not more than eight (8) hours in any week.
6. PGP agrees to permit Snell to continue to use such of its equipment as
he is now using whether owned or leased, through the period of his consultancy.
7. Concurrently with the execution and delivery of the Agreement each party
has executed and delivered to the other a general release against
liabilities arising out of Snell's employment by PGP or the termination
thereof, excepting only the obligations under this Agreement.
8. Snell acknowledges that he has been advised with respect to this Agreement
by an attorney of his choice and that he fully understands the consequences
of this Agreement.
9. This Agreement has been made in California and California law applies to
it.
If any part is found to be invalid, all remaining parts of the Agreement
will remain in effect.
10. PGP represents that (i) this Agreement has been made duly authorized by
all necessary corporate action of PGP; and (ii) the Compensation
Committee of the Board of Directors of PGP, being the committee which
administers PGP's Incentive Stock Option Plan, has duly taken all
necessary action to accelerate the vesting and to extend the expiration
dates of Snell's incentive stock options, as called for by Section 2
hereof.
S/Roger D. Snell
Roger D. Snell
PACIFIC GATEWAY PROPERTIES, INC.
By: S/Raymond V. Marino
Title: Vice President
