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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1998
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.)
930 MONTGOMERY STREET, SUITE 400
SAN FRANCISCO, CALIFORNIA 94133
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(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
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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 (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 2, 1999: Common Stock, Par Value
$1.00--$11,054,462.
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of March 2, 1999: Common Stock, Par Value $1.00
- --3,933,536 shares.
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PART III
OF
ANNUAL REPORT ON FORM 10-K
OF
PACIFIC GATEWAY PROPERTIES, INC.
FOR THE YEAR ENDED DECEMBER 31, 1998
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table sets forth certain information as of March 31, 1999
concerning the directors and executive officers of Pacific Gateway Properties,
Inc. (the "Company").
Steven A. Calabrese Age 38; Director of the Company since June 1997;
since prior to 1994, Managing Partner of
Calabrese, Racek and Markos, Inc., CRM
Construction Inc. and CRM Environmental Services,
Inc., firms which specialize in evaluations,
management, construction and environmental
assessment services for commercial and industrial
real estate; owner and manager of a real estate
portfolio; Director of Meridian Point Realty Trust
'83. (A)
Mark D. Grossi Age 45; Director of the Company since June 1997,
Executive Vice President and Director of Charter
One Financial, Inc., a savings and loan holding
company, and Executive Vice President and Chief
Retail Banking Officer of its subsidiary, Charter
One Bank; since prior to 1994, holder of various
senior executive positions with Charter One Bank
and its predecessor; Director of JB Oxford
Holdings, Inc.; Director of Meridian Point Realty
Trust '83. (A)
Lawrence B. Helzel Age 50; Director of the Company since May 1995;
since prior to 1994, member, Pacific Stock
Exchange, Inc. (self employed market maker,
options floor); co-founder Buylar Investment,
Inc., a real estate investment company; director
of Mission West Properties. (A)
Christopher L. Jarratt Age 37; Director of the Company since May 1997;
since prior to 1994, President, Jarratt
Associates, Inc., a company engaged in investment
activities and since September 1996, Chief
Executive Officer of Third Capital, LLC, a company
engaged in various investment and advisory
activities; Chairman, Director and Chief Executive
Officer of JB Oxford Holdings, Inc.
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Raymond V. Marino Age 40; Director of the Company since March 1996
and President and Chief Executive Officer since
January 1996; prior thereto from August 1994, Vice
President of the Company; prior thereto, Vice
President of Finance and Controller, Hunting Gate
Investments, Inc., a real estate investment and
management company.
Richard M. Osborne Age 52; Director and Chairman of the Board of
Directors of the Company since May 1997; since
prior to 1994, President and Chief Executive
Officer of OsAir, Inc., a manufacturer of
industrial gases for pipeline delivery and a real
property developer; Director of USP Real Estate
Investment Trust; Director of GLB Bancorp, Inc.;
Director of Ceres Group, Inc.; Director, Chairman
of the Board and Chief Executive Officer of
Meridian Point Realty Trust '83; Director of NuMED
Home Health Care, Inc. (B)
Martin S. Roher Age 49; Director of the Company since May 1995;
since prior to 1994, General Partner and Managing
Partner of MSR Capital Partners, a limited
partnership engaged in securities investments. (B)
Stephen J. LoPresti Age 38; Vice President of the Company since
November 1997; prior thereto, consultant for Ernst
& Young Kennth Leventhal Real Estate Group; prior
thereto, principal and founder of LoPresti &
Associates.
- -----------------------------
(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 discretion of the Board of Directors.
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 1998 and prior periods have done so and their filings for 1998
were on a timely basis, except that Steven A. Calabrese was late in filing one
report of one purchase in 1998 of an aggregate of 7,300 shares of Common Stock.
ITEM 11. EXECUTIVE COMPENSATION
The Summary Compensation Table below sets forth individual compensation
information for each of the Company's last three fiscal years of the Chief
Executive Officer ("CEO") and other most highly paid executive officers who
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were serving as such at the end of the Company's fiscal year ended December
31, 1998, 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) 1998 175,000 75,000 20,000 $4,800
President and CEO 1997 150,000 25,000 -- 4,800
1996 150,000 50,000 100,000 --
Stephen J. LoPresti (3) 1998 100,000 30,000 5,000 $2,850
Vice President-Finance 1997 90,000 -- 30,000
1996 -- -- -- --
</TABLE>
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(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
represents an employer discretionary contribution to his 401(k) plan.
(3) Mr. LoPresti joined the Company in November 1997 as Vice President -
Finance. His other compensation represents an employer discretionary
contribution to his 401(k) plan.
OPTION TABLES
The following table sets forth information regarding grants of stock
options by the Company during the fiscal year ended December 31, 1998, to the
executive officers named in the Summary Compensation Table above.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
Number of % of Total Potential Realized
Securities Options Market Value at Assumed
Underlying Granted to Price On Annual Rates
Options Employee in Exercise Date of Expiration of Stock Price
Name Granted Fiscal Year Price Grant Date Appreciation (2)
- ---- ------- ----------- ----- ----- ---- ----------------
5% 10%
-- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Raymond V. Marino 20,000(1) 44% $ 6.06 $ 6.06 03/16/08 $ 76,253 $193,241
Stephen J. LoPresti 5,000 11% $ 6.69 $ 6.69 10/29/08 $ 21,029 $ 53,291
</TABLE>
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(1) Options are exercisable in two equal installments on January 1,
1999 and December 31, 1999, and become fully exercisable upon a
change in control or termination of Mr. Marino's employment
without cause.
(2) Assumed value at the end of ten year period pursuant to SEC
mandated calculations, although these percentages do not
necessarily reflect expected appreciation or actual period of
holding by executive.
The following table sets forth the values at the end of 1998 of
the options to purchase Common Stock of the Company held by the two
officers named above.
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of
Shares of
Common Stock Values of
Underlying Unexercised In-
Unexercised the-Money
Options at Options at
12/31/98 12/31/98 $ (1)
-------- --------------
Exercisable/ Exercisable/
Name Unexercisable Unexercisable
---- ------------- -------------
<S> <C> <C>
Raymond V. Marino 119,940/21,235 458,230/11,521
Stephen J. LoPresti 6,000/29,000 46,875/37,500
</TABLE>
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(1) The closing sale price for the Company's Common Stock on December
31, 1998, as reported on the American Stock Exchange consolidated
reporting system was $6.50 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 of, 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
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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 a 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. In March 1998, the Board of
Directors amended Mr. Marino's employement agreement and extended the term of
his employment agreement through January 1, 2000 and increased his base
salary, effective January 1, 1998, to $175,000.
Mr. LoPresti 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 control.
Directors who are not officers of the Company receive an annual fee of
$7,500 (except for the Chairman, who receives an annual fee of $25,000
effective January 1, 1999) 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. Mr.
Marshall Jacobs, a former director of the Company, is Of Counsel to the law
firm of Jacobs Persinger & Parker. Such law firm has performed services for
the Company. Mr. Jacobs retired from the Board of Directors in August 1998.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The responsibilities of the Compensation Committee include making
recommendations to the Board concerning the compensation package of the Chief
Executive Officer and reviewing his recommendations concerning compensation
of other Company officers. The Committee also administers the Company's
stock option plans.
The Committee favors the fairly typical structure of a compensation
package for executive officers comprised of a base salary, short-term
incentive compensation in the form of an annual bonus and long-term incentive
compensation through the grant of Common Stock purchase options. The Company
is relatively small with only two executive officers and the levels of
compensation for them have been fixed largely based upon perceptions of
compensation levels of comparable personnel in the San Francisco Bay Area.
CHIEF EXECUTIVE OFFICER COMPENSATION. In March 1998, the Company
reached an agreement with Mr. Marino concerning his employment as Chief
Executive Officer retroactive to January 1998 in recognition of the positive
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performance of the Company and extended the agreement on a slightly modified
basis through January 1, 2000. The terms of the agreement as now in effect
are described above under the caption "EMPLOYMENT CONTRACT WITH EXECUTIVE".
Mr. Marino's base salary and option grant were established through arm's
length negotiations at levels which were believed, without independent study,
to be comparable to what would have been available to Mr. Marino at a company
similar to the Company.
Mr. Marino's bonus in 1998 ($75,000, which was 43% of his base salary)
was based upon the Board's assessment of his efforts including, but not
limited to, the following:
Overseeing the repositioning of the West Valley Executive Park, ongoing
lease up of the Company's vacant space, further reductions in operating
costs and corporate overhead, successfully negotiating the repurchase of
outstanding warrants for 1,000,000 shares of the Company's common stock
with a strike price of $2.875 for $1,000,000 (or $1.00 per share).
The Company does not have a formal bonus plan.
Section 162(m) of the Internal Revenue Code of 1986 (the "Code"),
enacted in 1993, generally disallows a tax deduction to public companies for
compensation over $1,000,000 paid to each of the Company's chief executive
officer and the four other most highly compensated executive officers.
Because of the range of compensation paid by the Company to its executive
officer, the Compensation committee has not established any policy regarding
annual compensation to such executive officers in excess of $1,000,000.
THE COMPENSATION COMMITTEE
Richard M. Osborne, Chairman
Martin S. Roher
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PACIFIC GATEWAY PROPERIES, INC. (PGP)
PERFORMANCE GRAPH
Comparison of Five Year Cumulative Total Return*
Among PGP, Dow Jones Global Market Index-US and Dow Jones Real
Estate Investment Index-US
Fiscal Year Ending December 31st
<TABLE>
<CAPTION>
- --------------------------------------- -------- -------- -------- -------- -------- --------
1993 1994 1995 1996 1997 1998
- --------------------------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Pacific Gateway Properties, Inc. $100 $107 $77 $87 $128 $173
- --------------------------------------- -------- -------- -------- -------- -------- --------
Dow Jones Equity Market Index $100 $101 $139 $171 $229 $294
- --------------------------------------- -------- -------- -------- -------- -------- --------
Dow Jones Real Estate Market Index $100 $95 $118 $158 $189 $147
- --------------------------------------- -------- -------- -------- -------- -------- --------
</TABLE>
Assumes $100 invested on 12/31/94 in PGP
Common Stock, the Dow Jones Global Market Index-US
*Total return assumes reinvestment of dividends
** Fiscal year ending December 31.
The above graph compares the performance of the Company with that of the
Dow Jones Global Market Index-US and the Dow Jones Real Estate Investment
Index-US.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information concerning the
beneficial ownership 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.
<TABLE>
<CAPTION>
Shares Percent
Beneficially of
Owned (1) Class
------------- -------
<S> <C> <C>
GEM Value Fund/PGP LLC 401,700(2) 9.2
900 North Michigan Avenue
Suite 1900
Chicago, Illinois 60611
Richard M. Osborne Trust 1,576,938(3) 36.1
Turkey Vulture Fund XIII, Ltd.
and Liberty Self Store, Ltd.
7001 Center Street
Mentor, Ohio 44060
Mark D. Grossi 264,800 6.1
Third Capital, LLC 200,000(4) 4.6
314 Church Street
Nashville, TN 37201
DIRECTORS AND EXECUTIVE
OFFICERS
- --------------------------
Steven A. Calabrese 47,100(5) 1.1
Mark D. Grossi 264,800 6.1
Lawrence B. Helzel 50,800 1.2
Christopher L. Jarratt 200,000(4) 4.6
Stephen J. LoPresti 6,000 *
Raymond V. Marino 130,370(6) 3.0
Richard M. Osborne 1,576,938(3) 36.1
Martin S. Roher 175,000(7) 4.0
All directors, nominees and
executive officers (8 persons)
as a group 2,251,008 51.5%
</TABLE>
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* Less than 1%
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(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 March 31, 1999.
(2) Consists of 300,000 shares of Series 1 Convertible Preferred Stock and
101,700 shares of Common Stock.
(3) According to the information provided in Amendment No. 1 to Schedule 13D
dated April 28, 1997 and Amendment No. 2 to Schedule 13D dated September 2,
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, and other information provided to the Company, the Trust
beneficially owns 100 shares, the Fund beneficially owns 305,432 shares and
Liberty beneficially owns 1,271,406 shares. 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 1,576,938 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 Captial, LLC and may be deemed to beneficially own said
securities.
(5) Represents 34,900 shares held by CCAG Limited, a family limited partnership
("CCAG"); 6,500 shares beneficially owned by Mr. Calabrese's wife as to
which shares Mr. Calabrese disclaims beneficial ownership; and 5,700 shares
held by Mr. Calabrese as custodian for his children. Mr. Calabrese is
managing partner of CCAG and may be deemed to beneficially own said shares.
(6) Represents shares issuable upon exercise of options to purchase Common
Stock which were exercisable at March 31,1999 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.
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 Mr. Jacobs, a former
director of the Company, is Of Counsel.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15() 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: /s/Raymond V. Marino
-----------------------------------
Raymond V. Marino, President and
Chief Executive Officer
April 28, 1999
----------------------
Date
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