<PAGE>
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, 1996
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 (IRS Employer
of incorporation or organization) Identification No.)
930 MONTGOMERY ST. - 4TH FLOOR
SAN FRANCISCO, CALIFORNIA 94133
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 398-4800
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
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 (Section 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 [ ].
State the aggregate market value of the voting stock held by non-affiliates
of the Registrant as of March 18, 1997: COMMON STOCK, PAR VALUE
$1.00--$10,303,496.
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock as of March 18, 1997: COMMON STOCK, PAR VALUE
$1.00-3,892,596 SHARES.
<PAGE>
PART III
OF
ANNUAL REPORT ON FORM 10-K
OF
PACIFIC GATEWAY PROPERTIES, INC.
FOR THE YEAR ENDED DECEMBER 31, 1996
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table sets forth certain information as of May 19, 1997
concerning the directors and executive officers of Pacific Gateway Properties,
Inc. (the "Company").
Lawrence B. Helzel Age 49; director of the Company since May 1995; since
prior to 1992, member, Pacific Stock Exchange, Inc.
(Self employed market maker, options floor); co-founder
Buylar Investments, Inc., a real estate investment
company.(A)
Marshall A. Jacobs Age 78; director of the Company since February 1984;
since January 1992, Of Counsel to the law firm of
Jacobs Persinger & Parker, prior thereto, senior
partner in the firm.(B)
Christopher L. Jarratt Age 35; director of the Company since May 1997; since
prior to 1992, President, Jarratt Associates, Inc., a
company engaged in commercial mortgage banking and
commercial real estate investment activities and since
September 1996, Chief Executive Officer of Third
Capital, LLC, a company engaged in various real estate
investment and advisory activities.
Raymond V. Marino Age 38; director of the Company since March 1996 and
President and Chief Executive Officer since January
1996; prior thereto from August 1992, Vice President of
the Company; prior thereto since prior to 1992, Vice
President of Finance and Controller, Hunting Gate
Investments, Inc., a real estate investment and
management company.
Richard M. Osborne Age 51; director and Chairman of the Board of Directors
of the Company since May 1997; since prior to 1992
President and Chief Executive Officer of OsAir, Inc., a
manufacturer of industrial gases for pipeline delivery
and a real property developer; director of Brandywine
Realty Trust and Great Lakes Bank.
- - --------------------------------
(A) Member of the Audit Committee.
(B) Member of the Compensation Committee
(CONTINUED)
2
<PAGE>
David E. Post Age 40; director of the Company since May 1993; since
January 1995, Principal of Hanson Investment Management
Company; prior thereto since prior to 1992, President,
CSI Capital Management; President, Alternative Capital
Corporation; President, HS Partners, Inc. (a subsidiary
of HS Resources, Inc.)(A)
Martin S. Roher Age 47; director of the Company since May 1995; since
prior to 1992, general partner and managing partner of
MSR Capital Partners, a limited partnership engaged in
securities investments.(B)
Christopher M. Watson Age 37; Executive Vice President of the Company since
January 1996; prior thereto from September 1992, Vice
President of the Company; prior thereto since prior to
1992, Vice President, Coldwell Banker Commercial Real
Estate Services, Inc., a real estate services company.
Andrew T. Gorayeb Age 32; Vice President of the Company since January
1996; prior thereto from December 1994, Director of
Finance of the Company; prior thereto since prior to
1992, Managing Director, General Electric Capital
Corporation Commercial Real Estate Financing and
Service.
- - --------------------------------
(A) Member of the Audit Committee.
(B) Member of the Compensation Committee
Directors hold office until the next Annual Meeting of Shareholders.
Officers hold their positions at the pleasure of the Board of Directors.
Richard M. Osborne who may be deemed to beneficially own 38.8% of the
outstanding Common Stock of the Company (see Item 12) was elected a director and
Chairman of the Board at the directors meeting held May 16, 1997. By agreement
dated as of March 12, 1997, Mr. Osborne agreed to use his best efforts to
nominate Mr. Jarratt as a director of the Company and Mr. Jarratt was also
elected a director at the May 16, 1997 meeting.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based upon reports it has received and other information, the Company
believes that all of its security holders, directors and officers who were
required to file reports of beneficial ownership of the Company's Common Stock
under Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
in respect of 1996 and prior periods have done so and their filings for 1996
were on a timely basis except that: David E. Post who first became a director
in 1993 has not filed his initial report or any reports of changes of ownership;
Raymond V. Marino, President and a director and Christopher M. Watson and Andrew
T. Gorayeb, officers, were late in reporting the stock options granted to them
in 1996 which were described in the Company's proxy statement for the Special in
Lieu of Annual Meeting of Shareholders held October 29, 1996; Felecia Vernon -
Chancey, who was an officer from June 1996 until March 1997, was late in filing
her initial report; Lawrence B. Helzel was late in filing one report of three
purchases in 1996 of an aggregate of 3,500 shares of Common Stock; and Citicorp
Real Estate, Inc., although having reported its 1993 acquisition from the
Company of warrants to purchase Common Stock on Exchange Act Schedule 13D, has
not reported its deemed beneficial ownership of in excess of 10% of the
Company's Common Stock as required by the regulations under Section 16(a) of the
Exchange Act.
ITEM 11. EXECUTIVE COMPENSATION.
The Summary Compensation Table below sets forth individual
compensation information for each
3
<PAGE>
of the Company'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 Company's fiscal year ended December 31, 1996, and whose total annual
salary and bonus for such fiscal year exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
----------------------- ------------
Stock All Other
Name and Principal Position Year Salary Bonus Options Compensation(1)
- - --------------------------- ---- ------ ----- ------- ---------------
<S> <C> <C> <C> <C> <C>
Raymond V. Marino (2) 1996 $150,000 $50,000 100,000 $ --
President and CEO 1995 95,000 30,000 -- 2,850
1994 91,553 25,000 6,175 --
Christopher M. Watson (3) 1996 100,000 30,000 35,000 34,906
Executive Vice President 1995 70,000 30,000 -- 22,459
1994 70,000 30,000 6,175 82,007
Andrew T. Gorayeb (4) 1996 80,000 49,000 15,000 --
Vice President-Finance 1995 70,000 20,000 -- --
1994 8,750 2,500 10,000 --
- - -----------------------------------
</TABLE>
(1) Other compensation in the form of personal benefits to the named persons
has been omitted because it does not exceed the lesser of $50,000 or 10% of the
total annual salary and bonus to each.
(2) Mr. Marino became President and CEO as of January 1996. Mr. Marino had
been a Vice President of the Company since August 1992. His other compensation
in 1995 is a simplified employee pension contribution.
(3) Mr. Watson joined the Company as a Vice President in September 1992 and
became Executive Vice President as of January 1996. His other compensation
consisted of lease commissions of $31,906 in 1996, $17,359 in 1995 and $79,007
in 1994 and an auto allowance of $3,000 in each year, and $2,100 for a
simplified employee pension contribution in 1995.
(4) Mr. Gorayeb joined the Company as Director of Finance in November 1994 and
became Vice President - Finance as of January 1, 1996.
OPTION TABLES
The following table contains information concerning the 1996 grants by
the Company to the three executive officers named above of options to purchase
Common Stock of the Company.
4
<PAGE>
OPTION GRANTS IN 1996
Individual Grants
-----------------
% of Total
Number of Options Grant
Securities Granted to Exercise Date
Underlying Employees or Base Present
Options in Fiscal Price Expiration Value (2)
Name Granted (1) Year ($/sh) Date ($)
- - -------------------- ----------- ---------- ------- ---------- ---------
Raymond V. Marino 100,000 66 2/3 2.56 3/21/06 168,000
Christopher M. Watson 35,000 23 1/3 2.56 3/21/06 58,800
Andrew T. Gorayeb 15,000 10 2.56 3/21/06 25,200
- - -------------------
(1) The options were granted on March 21, 1996 at the fair market value on that
date, under the Company's 1996 Stock Option Plan, subject to shareholder
approval which was obtained in November 1996 when the Plan was approved by
the shareholders. Mr. Marino's options were immediately exercisable as to
40,000 shares with the balance becoming exercisable in 20,000 shares
increments on January 1, 1997, December 31, 1997 and December 31, 1998.
The other options become exercisable in five equal annual installments
commencing with the first anniversary of the grant date.
(2) The grant date values were derived applying the Black-Scholes option
pricing model using the following assumptions: expected dividend yield-0%;
expected volatility - 43.4%; risk free interest rate - 6.29%; and expected
life - 10 years. No prediction of the future performance of the Company's
Common Stock is intended by this presentation. The actual value which an
officer may receive from his option will depend on the relationship between
the market price for the Common Stock at the time the option is exercised
and the option exercise price.
The following table sets forth the values at the end of 1996 of the
options to purchase Common Stock of the Company held by the three officers named
above. None of these officers exercised any options in 1996.
FISCAL YEAR END OPTION VALUES
Value of
Number of Unexercised In-
Unexercised the-Money
Options at Options at
12/31/96 12/31/96 $(1)
------------- ------------------
Exercisable/ Exercisable/
Name Unexercisable Unexercisable
- - ---- ------------- -------------
Raymond V. Marino 54,470/66,705 29,000/41,625
Christopher M. Watson 14,470/41,705 3,375/24,906
Andrew T. Gorayeb 4,000/21,000 -- /10,313
5
<PAGE>
- - -----------------------------
(1) The closing sale price for the Company's Common Stock on December 31, 1996
as reported on the American Stock Exchange consolidated reporting system
was $3.25 per share.
EMPLOYMENT CONTRACT WITH EXECUTIVE. Raymond V. Marino was employed by
the Company in 1996 under an employment agreement which was renewed on slightly
modified terms to apply to future years and pursuant to which Mr. Marino is to
be the chief executive officer, president and a director of the Company, at an
annual base salary of $150,000 plus a bonus determined by the Board of
Directors. The current employment agreement is for an initial term of two years
commencing January 2, 1997, and will automatically be extended for additional
one-year terms unless either party elects not to extend the term. If the
Company makes the election, Mr. Marino will be entitled (i) to receive his base
salary for a period of 24 months following expiration and a bonus equal to the
average of any annual bonuses he may have earned with respect to the immediately
preceding two full calendar years of his employment or, if greater, the bonus,
if any, Mr. Marino has received in respect of his 1996 employment, and (ii) to
exercise all vested options which have been granted to him for a period of 12
months from the date of expiration. If the Company otherwise terminates the
employment agreement without cause or if Mr. Marino terminates the employment
agreement because of a reduction in his responsibilities or compensation or a
change in his employment location, Mr. Marino will be entitled to receive the
termination compensation described above and the vesting period of any unvested
options granted to Mr. Marino will accelerate and such options and all
previously vested options will 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 in control of the Company
(as defined in the employment agreement), he 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 three
months from termination. 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 his then current employment term.
Each of Mr. Watson and Mr. Gorayeb has a severance arrangement with
the Company under which he is entitled to receive one year's base salary if the
Company terminates his employment within one year following a change in its
control.
Directors who are not officers of the Company 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
Company and travel and lodging for each board meeting.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. Marshall
A. Jacobs, a director of the Company, is Of Counsel to the law firm of Jacobs
Persinger & Parker. Such law firm has performed services for the Company for
which it was paid $214,700 in 1996 and is performing services for the Company in
1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table set forth certain information concerning the
beneficial ownership of shares of Common Stock of the Company by persons who the
Company knows to own beneficially more than 5% of the outstanding Common Stock
and by directors and executive officers of the Company.
Shares Percent
Beneficially of
Owned(1) Class
------------ -------
Citicorp Real Estate, Inc. 1,000,000 (2) 20.4
a subsidiary of Citibank, N.A.
725 S. Figueroa Street
4th Floor
Los Angeles, CA 90017
6
<PAGE>
(CONTINUED)
Shares Percent
Beneficially of
Owned(1) Class
------------ ------
Richard M. Osborne Trust, 1,510,000 (3) 38.8
Turkey Vulture Fund XIII, Ltd.
and Liberty Self Stor, Ltd.
7001 Center Street
Mentor, OH 44060
Third Capital, LLC 200,000 (4) 5.1
314 Church Street
Nashville, TN 37201
DIRECTORS AND EXECUTIVE
OFFICERS
-------------------------------
David E. Post (5) 306,907 7.8
Hanson Investment Management
Company
4000 Civic Center Drive
Suite 200
San Rafael, CA 94903
Lawrence B. Helzel 40,000 *
Marshall A. Jacobs 200 *
Christopher L. Jarratt 200,000 (4) 5.1
Raymond V. Marino 74,900 (6) 1.9
Richard M. Osborne 1,510,000 (3) 38.8
Martin S. Roher 175,000 (7) 4.5
Christopher M. Watson 22,705 (6) *
Andrew T. Gorayeb 7,000 (6) *
All directors and executive
officers (9 persons)
as a group 2,136,712 (8) 53.5
- - -------------------------
*Less than 1%
(1) Beneficial ownership is the direct or indirect ownership of Common Stock of
the Company 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. Unless otherwise indicated each
beneficial owner has sole voting and investment power with respect to the
shares shown and reported ownership is as of May 19, 1997.
(2) Based on information contained in Schedule 13D for Citicorp Real Estate,
Inc., dated December 30, 1993. Represents shares of Common Stock issuable
upon exercise of presently exercisable warrants.
7
<PAGE>
(3) According to information provided in Amendment No. 1 to Schedule 13D dated
April 28, 1997 filed by the Richard M. Osborne Trust (the "Trust"), Turkey
Vulture Fund XIII, Ltd. (the "Fund") and Liberty Self Stor, Ltd.
("Liberty") as a group, the Trust beneficially owns 815,600 shares (21.0%),
the Fund beneficially owns 264,800 shares (6.8%) and Liberty beneficially
owns 429,600 shares (11.0%). Richard M. Osborne as sole trustee of the
Trust, sole manager of the Fund and sole managing member of Liberty may be
deemed to beneficially own all of said 1,510,000 shares.
(4) Based upon information provided in Schedule 13D dated May 19, 1997 filed by
Third Capital, LLC. Represents shares of Common Stock issuable upon
exercise of presently exercisable warrants issued to Third Capital LLC by
the Richard M. Osborne Trust. Christopher L. Jarratt is Chief Executive
Officer of Third Capital, LLC and may be deemed to beneficially own said
securities.
(5) According to information provided to the Company including the Schedule 13D
dated November 14, 1990 and Amendment No. 1 thereto dated January 18, 1991
filed by David E. Post and a number of other persons who may be deemed to
be a group, such persons beneficially own an aggregate of 306,907 shares of
Common Stock including 64,222 shares (1.6% of the outstanding shares) owned
by a limited partnership of which Mr. Post is the general partner. Mr.
Post may be deemed to share voting and investment power with respect to the
shares owned by the limited partnership. Mr. Post is an investment adviser
to the other members of the group but holds no voting or investment power
over their 242,682 shares.
(6) Represents shares issuable upon exercise of options to purchase Common
Stock which were exercisable at May 19, 1997 or which may become
exercisable within 60 days thereafter.
(7) The shares are owned by MSR Capital Partners. Mr. Roher is the sole
general partner of MSR Capital Partners and may be considered to
beneficially own such shares.
(8) Includes 64,222 shares as to which voting or investment power is shared.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
See Item 11 for information concerning the relationship between the
Company and the law firm of Jacobs Persinger & Parker, to which Marshall A.
Jacobs, a director of the Company, is Of Counsel.
8
<PAGE>
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 be signed
by the undersigned thereunto duly authorized.
PACIFIC GATEWAY PROPERTIES, INC.
(Registrant)
By: Raymond V. Marino
---------------------------------
Raymond V. Marino, President and
Chief Executive Officer
June 5, 1997
---------------------------------
Date
9
