<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the regitrant [_]
Check the appropriate box:
[_]Preliminary proxy statement
[X]Definitive proxy statement
[_]Definitive additional materials
[_]Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Santa Anita Operating Company Santa Anita Realty Enterprises, Inc.
- ------------------------------- ------------------------------------
(Name of Registrant as (Name of Registrant as
Specified in Its Charter) Specified in Its Charter)
Santa Anita Operating Company Santa Anita Realty Enterprises, Inc.
- ------------------------------- ------------------------------------
(Name of Person(s) Filing (Name of Person(s) Filing
Proxy Statement) Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X]$250 per Exchange Act Rule 0-11(c)(l)(ii), 14a-6(i)(l), or 14a-6(j)(2).
[_]$500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[_]Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1)Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2)Aggregate number of securities to which transactions applies:
- --------------------------------------------------------------------------------
(3)Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:
- --------------------------------------------------------------------------------
(4)Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
[_]Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1)Amount previously paid:
- --------------------------------------------------------------------------------
(2)Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3)Filing party:
- --------------------------------------------------------------------------------
(4)Date filed:
- --------------------------------------------------------------------------------
<PAGE>
[LOGO OF SANTA ANITA CO.]
THE SANTA ANITA COMPANIES
SANTA ANITA OPERATING COMPANY SANTA ANITA REALTY ENTERPRISES, INC.
P.O. BOX 60014 363 SAN MIGUEL DRIVE, SUITE 100
ARCADIA, CALIFORNIA 91066-6014 NEWPORT BEACH, CALIFORNIA 92660
NOTICE OF ANNUAL MEETINGS OF SHAREHOLDERS
TUESDAY, MAY 3, 1994
TO THE SHAREHOLDERS OF SANTA ANITA OPERATING COMPANY AND SANTA ANITA REALTY
ENTERPRISES, INC.
The Annual Meetings of Shareholders of SANTA ANITA OPERATING COMPANY
("OPERATING COMPANY") and SANTA ANITA REALTY ENTERPRISES, INC. ("REALTY") will
be held in the Club House of Santa Anita Park, 285 West Huntington Drive,
Arcadia, California, on Tuesday, May 3, 1994 at 10:00 A.M. and 10:30 A.M.,
respectively, for the following purposes:
1. To elect three Directors of Operating Company for terms to expire in
1997.
2. To elect four Directors of Realty for terms to expire in 1997.
Only shareholders of record on the books of Operating Company and Realty as
of the close of business on March 8, 1994 will be entitled to vote at the
meeting.
ALEXANDER W. INGLE JOHN GOODWIN
Secretary Assistant Secretary
Santa Anita Operating Company Santa Anita Realty Enterprises, Inc.
Arcadia, California Newport Beach, California
April 6, 1994 April 6, 1994
PROXIES ARE BEING SOLICITED BY THE RESPECTIVE BOARDS OF DIRECTORS OF
OPERATING COMPANY AND REALTY. TO ASSURE REPRESENTATION OF YOUR SHARES AT THE
ANNUAL MEETINGS OF BOTH COMPANIES, YOU MUST MARK AND RETURN THE ENCLOSED PROXY
CARD.
<PAGE>
SANTA ANITA OPERATING COMPANY SANTA ANITA REALTY ENTERPRISES, INC.
P.O. BOX 60014 363 SAN MIGUEL DRIVE, SUITE 100
ARCADIA, CALIFORNIA 91066-6014 NEWPORT BEACH, CALIFORNIA 92660
----------------
JOINT PROXY STATEMENT
----------------
ANNUAL MEETINGS OF SHAREHOLDERS
TUESDAY, MAY 3, 1994
----------------
SOLICITATION OF PROXIES
Your proxy in the form enclosed is solicited by the respective Boards of
Directors of Santa Anita Operating Company ("Operating Company") and Santa
Anita Realty Enterprises, Inc. ("Realty") (sometimes referred to as a "Company"
and collectively as "The Companies") for use at the Annual Meetings of
Shareholders of The Companies to be held in the Club House of Santa Anita Park,
285 West Huntington Drive, Arcadia, California on May 3, 1994 at 10:00 A.M. and
10:30 A.M., respectively. Your proxy may be revoked by you at any time prior to
its use by filing with the Secretary of the appropriate Company a written
revocation or a duly executed proxy bearing a later date, or by attending the
meeting and voting in person. The shares represented by the proxies received
will be voted at the meeting in the manner described thereon or, if no
direction is indicated (as in a situation where voting for directors is
conducted by cumulative voting), the shares will be voted in accordance with
the recommendations of the respective Boards of Directors. The solicitations of
the proxies are being made on behalf of the respective Boards of Directors of
The Companies. The cost of soliciting proxies will be borne by The Companies.
Solicitations will be made primarily by mail, but regular employees of The
Companies, without additional remuneration, may solicit proxies by telephone,
telegram and personal interview. This proxy statement and the accompanying
notice and form of proxy are being mailed to The Companies' shareholders on or
about April 6, 1994.
THE PAIRING
The outstanding shares of common stock, $.10 par value, of Operating Company
("Operating Stock"), are "paired" with the outstanding shares of common stock,
$.10 par value, of Realty ("Realty Stock"), so that they are transferable and
tradeable only in combination as units, each unit consisting of one share of
Operating Stock and one share of Realty Stock ("Paired Common Stock"). The
pairing is evidenced by "back-to-back" stock certificates and the certificates
bear a legend referring to the restrictions on transfer imposed by the by-laws
of each Company.
Operating Company and Realty emerged from the reorganization of Santa Anita
Consolidated, Inc. ("SAC") on December 31, 1979.
PROXIES ARE BEING SOLICITED BY THE RESPECTIVE BOARDS OF DIRECTORS OF
OPERATING COMPANY AND REALTY. TO ASSURE REPRESENTATION OF YOUR SHARES AT THE
ANNUAL MEETINGS OF BOTH COMPANIES, YOU MUST MARK AND RETURN THE ENCLOSED PROXY
CARD.
1
<PAGE>
OUTSTANDING STOCK, VOTING RIGHTS AND VOTING TABULATION
Only shareholders of record on the books of The Companies as of the close of
business on March 8, 1994 (the "Record Date") will be entitled to vote at the
meeting. On that date there were issued and outstanding 11,140,853 shares of
Operating Stock and 11,256,353 shares of Realty Stock, with each share
entitled to one vote.* To The Companies' knowledge no person owns 5% or more
of any class of The Companies' outstanding voting securities.
With respect to the election of directors, a shareholder will be entitled to
cumulate votes, i.e., cast for any one or more candidates a number of votes
greater than the number of the shareholder's shares, if the name or names of
such candidate or candidates have been placed in nomination prior to the
voting and the shareholder has given notice at the meeting, prior to the
voting, of the shareholder's intention to cumulate the shareholder's votes. If
any one shareholder has given such notice, all shareholders may cumulate their
votes for the candidates in nomination. If voting for directors is conducted
by cumulative voting, each share will be entitled to a number of votes equal
to the number of directors to be elected, which votes may be cast for a single
candidate or may be distributed among two or more candidates in such
proportion as the shareholder may determine. If voting is not conducted by
cumulative voting, each share will be entitled to one vote and the holders of
a majority of the shares voting at the meeting will be able to elect all of
the directors if they choose to do so and, in such event, the other
shareholders will not be able to elect any director or directors.
Votes cast by proxy or in person at the Annual Meetings will be counted by
the persons appointed by The Companies to act as election inspectors for the
Annual Meetings. The election inspectors will treat shares represented by
proxies that reflect abstentions as shares that are present and entitled to
vote for purposes of determining the presence of a quorum, and as having
voting power for purposes of determining the outcome of any question submitted
to the shareholders for a vote at the Annual Meetings. Abstentions, however,
do not constitute a vote "for" or "against" any matter and thus will be
disregarded in the calculation of "votes cast."
The election inspectors will treat "broker non-votes" (i.e., shares held by
brokers or nominees as to which instructions have not been received from the
beneficial owners or persons entitled to vote that the broker or nominee does
not have discretionary power to vote on a particular matter), if any are
received by The Companies, as shares that are present and entitled to vote for
purposes of determining the presence of a quorum. However, for purposes of
determining the outcome of any matter as to which the broker has physically
indicated on the proxy that it does not have discretionary authority to vote,
those shares will be treated as not present and not empowered to vote with
respect to that matter (even though those shares are considered entitled to
vote for quorum purposes and may be empowered to vote on other matters).
Any unmarked proxies, including those submitted by brokers or nominees, will
be voted as indicated in the accompanying proxy card and as summarized in this
Joint Proxy Statement.
- --------
* There are 115,500 more shares of Realty Stock outstanding than shares of
Operating Stock. The additional shares of Realty Stock were purchased by
Operating Company to be paired with authorized but unissued shares of
Operating Stock upon the exercise of outstanding stock options.
2
<PAGE>
ELECTION OF DIRECTORS
The respective directors of The Companies are divided into three classes.
Each class has a term of three years and the terms are staggered so that only
one class of directors for each Company is elected annually. The nominees
standing for re-election in 1994 for each Company together with the directors
whose terms do not expire are listed on the following pages. Election of each
of the nominees will require the affirmative vote of a majority of the stock
having voting power present in person or represented by proxy at each of the
Annual Meetings (assuming the presence of a quorum).
It is intended that the proxies received will be voted for the election of
the nominees named below. Although it is not contemplated that any nominee will
decline or be unable to serve as a director, in the event any nominee will be
unable to serve, or for good cause will not serve, the proxies will be voted by
the proxy holders in their discretion for another person.
Unless otherwise instructed, the proxy holders will vote to elect the three
nominees for Operating Company and four nominees for Realty to terms expiring
in 1997. William C. Baker, Clifford C. Goodrich and Stephen F. Keller are Class
II Directors and are nominees for Directors of both Operating Company and
Realty. Charles H. Strub, II is a Class II Director and is a nominee for Realty
only.
THE BOARD OF DIRECTORS OF OPERATING COMPANY RECOMMENDS THAT THE SHAREHOLDERS
VOTE "FOR" THE ELECTION OF THE THREE NOMINEES FOR THE BOARD OF DIRECTORS OF
OPERATING COMPANY AND THE BOARD OF DIRECTORS OF REALTY RECOMMENDS THAT THE
SHAREHOLDERS VOTE "FOR" THE ELECTION OF THE FOUR NOMINEES FOR THE BOARD OF
DIRECTORS OF REALTY NAMED IN THIS PROXY STATEMENT.
INFORMATION REGARDING NOMINEES AND CONTINUING DIRECTORS
The tabulation below lists the nominees for election as directors and shows
certain information concerning each such nominee, including the number of
paired shares of Operating Stock and Realty Stock beneficially owned directly
or indirectly by such nominee on March 8, 1994. The tabulation also provides
such information for continuing directors whose terms of office do not expire
in 1994.
NOMINEES FOR DIRECTORS FOR TERMS WHICH EXPIRE IN 1997
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
PRINCIPAL BUSINESS BENEFICIAL
EXPERIENCE OWNERSHIP PERCENT OF
DURING PAST 5 YEARS AND OF COMMON OUTSTANDING
CLASS OF ALL POSITIONS WITH THE DIRECTOR STOCK OF COMMON
DIRECTOR DIRECTOR COMPANIES AGE SINCE(1) EACH COMPANY STOCK
- -------- -------- ----------------------- --- -------- ------------ -----------
BOTH OPERATING
COMPANY AND
REALTY
- --------------
<S> <C> <C> <C> <C> <C> <C>
William C. Baker II President, Red Robin 60 1991 6,400 *
International, Inc.,
since 1993; Investor
1988-1993; Chief
Executive Officer,
Del Taco, Inc.,
1976-1988; Director,
Callaway Golf
Company; Bank of Newport;
Storage Equities, Inc.
(public storage)
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
PRINCIPAL BUSINESS BENEFICIAL
EXPERIENCE OWNERSHIP PERCENT OF
DURING PAST 5 YEARS AND OF COMMON OUTSTANDING
CLASS OF ALL POSITIONS WITH THE DIRECTOR STOCK OF COMMON
DIRECTOR DIRECTOR COMPANIES AGE SINCE(1) EACH COMPANY STOCK
- -------- -------- ----------------------- --- -------- ------------ -----------
BOTH OPERATING
COMPANY AND
REALTY
- --------------
<S> <C> <C> <C> <C> <C> <C>
Clifford C. Goodrich II Vice President, Operating 51 1989 18,673(2) *
Company since 1989;
President and General
Manager, Los Angeles Turf
Club, Incorporated
("LATC"), a wholly-owned
subsidiary of Operating
Company, since 1989;
Assistant General Manager,
LATC 1980-1989
Stephen F. Keller II Chairman and Chief 55 1991 32,591(3) *
Executive Officer,
Operating Company since
1993; Chairman, Realty
since 1992; President,
Operating Company since
1991; Attorney, Fulbright
& Jaworski 1991; Vice
Chairman, Seidler Amdec
Securities, Inc., 1988-
1990; Attorney, Lillick &
McHose, 1962-1990;
Director, Leslie's
Poolmart, Inc. (swimming
pool supplies); Member of
Board of Trustees, The
Northwestern Mutual Life
Insurance Company
<CAPTION>
REALTY
ONLY
- ------
<S> <C> <C> <C> <C> <C> <C>
Charles H. Strub II Owner, CHS Realty Company 52 1988 82,543(4) *
(commercial brokerage,
development and
investment)
</TABLE>
4
<PAGE>
CONTINUING DIRECTORS FOR TERMS WHICH EXPIRE IN 1995
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
PRINCIPAL BUSINESS BENEFICIAL
EXPERIENCE OWNERSHIP PERCENT OF
DURING PAST 5 YEARS AND OF COMMON OUTSTANDING
CLASS OF ALL POSITIONS WITH THE DIRECTOR STOCK OF COMMON
DIRECTOR DIRECTOR COMPANIES AGE SINCE(1) EACH COMPANY STOCK
- -------- -------- ----------------------- --- -------- ------------ -----------
BOTH OPERATING
COMPANY AND
REALTY
- --------------
<S> <C> <C> <C> <C> <C> <C>
Robert H. Grant III President, Grant 73 1970 387,622(5) 3.4%
Investment Corp. (real
estate investments and
development).
Robert E. Morgan III Retired; former President, 74 1975 1,590 *
Coldwell Banker First
Newport Corporation (real
estate services); former
President, Coldwell Banker
Real Estate Finance
Services (real estate
services); Director,
Standard-Pacific Corp.
(real estate); Pacific
Gulf Properties Inc.
Thomas P. Mullaney III General Partner, Matthews, 61 1989 1,000 *
Mullaney & Co. (private
investment partnership)
since 1991; General
Partner, Kidd, Kamm & Co.
(private invest-
ment partnership) 1986-
1991; Director, Ducommun
Incorporated
(manufacturing); U.S.
Borax.
</TABLE>
CONTINUING DIRECTORS FOR TERMS WHICH EXPIRE IN 1996
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
PRINCIPAL BUSINESS BENEFICIAL
EXPERIENCE OWNERSHIP PERCENT OF
DURING PAST 5 YEARS AND OF COMMON OUTSTANDING
CLASS OF ALL POSITIONS WITH THE DIRECTOR STOCK OF COMMON
DIRECTOR DIRECTOR COMPANIES AGE SINCE(1) EACH COMPANY STOCK
- -------- -------- ----------------------- --- -------- ------------ -----------
BOTH OPERATING
COMPANY AND
REALTY
- --------------
<S> <C> <C> <C> <C> <C> <C>
Richard S. Cohen I Attorney, Law Offices of 58 1967 5,445(6) *
Richard S. Cohen and
Donna Frost Cohen
Arthur Lee Crowe I Investor; Vice Chairman, 70 1960 159,871(4) 1.4
Realty and Operating
Company since 1988
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
PRINCIPAL BUSINESS BENEFICIAL
EXPERIENCE OWNERSHIP PERCENT OF
DURING PAST 5 YEARS AND OF COMMON OUTSTANDING
CLASS OF ALL POSITIONS WITH THE DIRECTOR STOCK OF COMMON
DIRECTOR DIRECTOR COMPANIES AGE SINCE(1) EACH COMPANY STOCK
- -------- -------- ----------------------- --- -------- ------------ -----------
OPERATING
COMPANY ONLY
- --------------
<S> <C> <C> <C> <C> <C> <C>
Linda K. Mennis I Attorney 41 1989 1,195(4) *
John M. Strub I Vice President, Mechan- 37 1986 3,122(4) *
ic's National Bank since
1991; graduate student
1989-1991; President,
Lexington Securities
1988-1989
<CAPTION>
REALTY ONLY
- -----------
<S> <C> <C> <C> <C> <C> <C>
Taylor B. Grant I Chief Executive Officer, 44 1988 81(5) *
Optima Asset Management
Services (Management Con-
sulting) since 1992;
President, Grant Building
Company 1988-1992 (real
estate)
Robert H. Strub I Vice President, Valley 39 1986 3,152(4) *
Sand and Gravel (well
pack and filter medium)
since 1992; Graduate stu-
dent 1992; Manager, W.R.
Lind, Inc. (engineering)
1988-1992
</TABLE>
- --------
* Less than one percent (1%) of the outstanding Common Stock. At March 8, 1994
there were 11,140,853 shares of Operating Stock outstanding and 11,256,353
shares of Realty Stock outstanding.
(1) Includes years served as a director of SAC.
(2) Includes 16,000 shares which Mr. Goodrich has a fully-vested option to
acquire and 1,673 shares allocated to Mr. Goodrich in the Thrift Plan.
(3) Includes 25,400 shares which Mr. Keller has a fully-vested option to
acquire and 191 shares allocated to Mr. Keller in the Thrift Plan.
(4) Messrs. Charles H. Strub, II, John M. Strub and Robert H. Strub are nephews
of Mr. Crowe. Mrs. Mennis is the niece of Mr. Crowe.
(5) Taylor B. Grant is the son of Robert H. Grant.
(6) Reflected in the table is Mr. Cohen's 50% beneficial interest in a trust
which holds 10,000 shares of Common Stock.
6
<PAGE>
INFORMATION REGARDING THE BOARDS OF DIRECTORS FOR SANTA ANITA OPERATING
COMPANY AND SANTA ANITA REALTY ENTERPRISES, INC.
Each of the Boards of Directors has created and delegated certain authority
to its Executive Committee, an Audit Committee, a Compensation Committee, and
Nominating Committee.
The Executive Committees of Operating Company and Realty both consist of
Stephen F. Keller (Chairman), Arthur Lee Crowe (Vice Chairman), Robert H.
Grant (Vice Chairman), Richard S. Cohen, and Robert E. Morgan. The Executive
Committees have and may exercise all of the power of the Boards of Directors
in the management of the business and affairs of Operating Company and Realty,
subject to certain limitations imposed by Delaware law and, in the case of
Realty's Executive Committee, to the further limitation that it may not
approve equity real estate investments by Realty in excess of $7,500,000. The
Executive Committee of Operating Company met one time and the Executive
Committee of Realty met on two occasions during the year ended December 31,
1993.
The Audit Committees of Operating Company and Realty both consist of Arthur
Lee Crowe (Chairman) and Robert E. Morgan. In addition, John Strub serves on
Operating Company's Audit Committee and Charles H. Strub, II and Taylor B.
Grant serve on Realty's Audit Committee. The Audit Committees perform numerous
functions, including recommending the engagement of an independent accounting
firm to the respective Boards of Directors, meeting with the independent
accounting firm to discuss the scope and conduct of its annual audit, and the
institution of generally accepted accounting principles. In addition, the
Committees make inquiries about and discuss policies and procedures with
respect to principles of business conduct, financial and accounting controls,
compliance with the Foreign Corrupt Practices Act of 1977, areas of special
concern and other related matters. The Audit Committees also review with
management the methodology and key assumptions supporting The Companies'
respective annual operating budgets and business plans. The Audit Committees
of both Operating Company and Realty met on three occasions during the year
ended December 31, 1993.
The Compensation Committees of Operating Company and Realty both consist of
Thomas P. Mullaney (Chairman), William C. Baker and Arthur Lee Crowe. In
addition, Linda K. Mennis serves on Operating Company's Compensation Committee
and Robert H. Strub serves on Realty's Compensation Committee. Each of the
Compensation Committees annually reviews the performance and effectiveness of
the Chief Executive Officer and recommends annual compensation levels for the
Chief Executive Officer to the Board of Directors. Each of the Committees also
sets the compensation of all other executive officers, approves all grants of
stock options and administers The Companies' respective stock option programs,
pension plans and other executive and employee compensation, retirement and
benefit plans. The Compensation Committees for Operating Company and Realty
each met five times during the year ended December 31, 1993.
The Nominating Committees of Operating Company and Realty both consist of
Richard S. Cohen (Chairman), Arthur Lee Crowe, Robert H. Grant, Stephen F.
Keller and Thomas P. Mullaney. Each of the Nominating Committees establishes
criteria for Board membership, selects candidates for nomination as members of
the Board, recommends the number of directors, conducts annual reviews of the
qualifications and effectiveness of incumbent directors and makes
recommendations on the election of officers. Each of the Committees also
reviews and recommends director compensation, reviews questions of corporate
governance and reviews and makes recommendations with respect to any conflicts
of interest that may affect directors or executive officers. The Nominating
Committees will consider candidates for appointment to the Boards of Directors
recommended by The Companies' shareholders. Such recommendations should be
made
7
<PAGE>
in writing, addressed to the appropriate Nominating Committee, and forwarded to
the attention of the Secretary of either Operating Company or Realty. The
Nominating Committees of Operating Company and Realty met four times during the
year ended December 31, 1993.
The Boards of Directors of Operating Company and Realty each established an
Ad Hoc Committee on Governance to make recommendations to the Boards of
Directors on: the appropriate size of the Boards of Directors; the number,
authority, responsibilities and memberships of the committees of the Boards; a
review process for Director performance; and other related matters on
governance. The Committees were dissolved on August 4, 1993, after having
accomplished their respective missions.
On December 16, 1993, the Boards of Directors of Operating Company and Realty
each approved dissolution of their respective Strategic Planning Committees
upon completion of each committee's agenda.
Additionally, the Boards of Directors of Operating Company and Realty
approved consolidation of the activities of the former Pension and Thrift Plan
Committees of each Company into the Compensation Committee for each Company.
During the year ended December 31, 1993, all of the directors attended at
least 75%, in the aggregate, of the meetings of the Boards of Directors and
Committees of both Operating Company and Realty of which they were members, for
the periods in which they were members. During the past year, the Board of
Directors of Operating Company met seven times and the Board of Directors of
Realty met nine times.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires, among others,
the directors and officers of The Companies to file with the Securities and
Exchange Commission and the New York Stock Exchange initial reports of
ownership and reports of changes of ownership of common stock of The Companies.
Such officers and directors are required by Securities and Exchange Commission
regulation to furnish The Companies with copies of all Section 16(a) forms they
file.
To The Companies' knowledge, based solely on a review of the copies of such
reports furnished to The Companies and written representations that no other
reports were required, during the fiscal year ended December 31, 1993, all
Section 16(a) filing requirements applicable to each of its officers and
directors were complied with.
EXECUTIVE OFFICERS
MANAGEMENT CHANGES
There have been several changes in senior management of Realty and Operating
Company since January 1, 1993.
Operating Company
Robert P. Strub, Chairman of the Board of Operating Company and its former,
long-time President and Chief Executive Officer, died on May 5, 1993. Stephen
F. Keller, President and (since February 1993) Chief Executive Officer of
Operating Company, succeeded Mr. Strub as Chairman of the Board on June 17,
1993. Effective at the close of business on December 31, 1993, Glennon E. King,
Vice President--Finance of Operating Company, resigned. He was replaced by
Richard D. Brumbaugh, age 47, who has served as Assistant Controller of
Operating Company since 1980.
8
<PAGE>
Realty
In 1993 Realty commenced a reorganization whereby its industrial park and
multifamily properties would be contributed to a wholly-owned subsidiary,
Pacific Gulf Properties Inc. ("Pacific Gulf"), which would concurrently sell
securities to the public. This transaction, which was completed on February 18,
1994, resulted in Glenn L. Carpenter, President and Chief Executive Officer,
Donald G. Herrman, Vice President--Finance, Secretary and Treasurer, and Lonnie
P. Nadal, Vice President--Acquisitions, resigning as officers of Realty to
become senior management of Pacific Gulf. Effective February 18, 1994, Glennon
E. King, the former Vice President--Finance and Controller of Operating
Company, was named acting Chief Executive Officer of Realty. On March 15, 1994,
Mr. King resigned as acting Chief Executive Officer and was appointed acting
Chief Financial Officer of Realty. Effective March 16, 1994, Sherwood C.
Chillingworth, age 67, was appointed Chief Executive Officer of Realty. Mr.
Chillingworth has been the Executive Vice President of Oak Tree Racing
Association (lessee of Santa Anita Park) since 1992, and from 1973 to 1992 was
Chief Executive Officer of Chillingworth Corporation, which developed
commercial and industrial projects, condominiums and land development for
single family residences throughout the country. It is anticipated that Mr.
Chillingworth will continue to serve as Executive Vice President of Oak Tree
Racing Association while serving as Chief Executive Officer of Realty. It is
further contemplated that Mr. Chillingworth will be appointed a director of
Realty and will serve as Vice Chairman of the Board of Directors of Realty at
some time in the near future.
Realty has also appointed Christopher T. Stirling, age 39, as President and
Chief Operating Officer, effective April 18, 1994. Mr. Stirling has been
employed by Homart Development Company, a real estate development subsidiary of
Sears Roebuck & Company since 1985, and most recently as Vice President of the
Office and Multi-Use Division where his primary responsibilities have included
asset management, client relations, acquisitions, development, construction and
leasing activities.
CERTAIN INFORMATION
The following tables set forth the names, ages and positions of the executive
officers of Operating Company and Realty who were in office on December 31,
1993, the date each became an officer of either Operating Company, Realty or
SAC, and the number of shares of The Companies' common stock beneficially
owned, directly or indirectly, by each of them at March 8, 1994. Similar
information is set forth regarding Mr. Strub. As of March 8, 1994, all
directors and officers of Operating Company as a group (12 persons, including
Mr. Strub's estate) owned 5.8% of the outstanding shares of Operating Company
and all directors and officers of Realty as a group (11 persons, including Mr.
Strub's estate) owned 6.1% of the outstanding shares of Realty Stock. Executive
officers are appointed annually and hold office until a successor is duly
elected and qualified.
OPERATING COMPANY
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
OWNED AT
OFFICER MARCH 8,
NAME AGE POSITION SINCE(1) 1994(2)
- ---- --- -------- -------- -----------
<S> <C> <C> <C> <C>
Robert P. Strub(3) -- Chairman; Chairman and 1960 34,400(4)
Chief Executive Officer of LATC
Stephen F. Keller 55 Chairman; President and Chief Executive
Officer 1991 32,591(5)
Clifford C. Goodrich 51 Vice President; President and 1982 18,673(6)
General Manager of LATC
Glennon E. King 50 Vice President--Finance and Controller 1979 24,966(7)
Alexander W. Ingle 51 Vice President; Secretary/Treasurer 1976 23,354(8)
Thomas S. Robbins 40 Vice President Racing 1990 8,582(9)
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
OWNED AT
OFFICER MARCH 8,
NAME AGE POSITION SINCE(1) 1994(2)
- ---- --- -------- -------- -----------
<S> <C> <C> <C> <C>
Glenn L. Carpenter 51 President and Chief Executive Officer 1979 28,229(10)
Donald G. Herrman 37 Vice President and Treasurer 1985 8,611(11)
Lonnie P. Nadal 38 Vice President--Acquisitions 1992 1,056(12)
</TABLE>
- --------
(1) Includes years served as an officer of SAC.
(2) The percentages of shares beneficially owned by any executive officer do
not exceed 1% of the Common Stock so owned.
(3) Mr. Strub died on May 5, 1993.
(4) Represents 34,400 shares which Mr. Strub's estate has fully vested options
to acquire.
(5) Includes 25,400 shares which Mr. Keller has fully-vested options to
acquire and 191 shares allocated to Mr. Keller in the Thrift Plan.
(6) Includes 16,000 shares which Mr. Goodrich has fully-vested options to
acquire and 1,673 shares allocated to Mr. Goodrich in the Thrift Plan.
(7) Includes 18,000 shares which Mr. King has fully-vested options to acquire
and 6,966 shares allocated to Mr. King in the Thrift Plan.
(8) Includes 10,800 shares which Mr. Ingle has fully-vested options to acquire
and 8,054 shares allocated to Mr. Ingle in the Thrift Plan.
(9) Includes 6,400 shares which Mr. Robbins has fully vested options to
acquire and 2,182 shares allocated to Mr. Robbins in the Thrift Plan.
(10) Includes 25,600 shares which Mr. Carpenter has fully-vested options to
acquire and 2,629 shares allocated to Mr. Carpenter in the Thrift Plan.
(11) Includes 7,200 shares which Mr. Herrman has fully-vested options to
acquire and 1,411 shares allocated to Mr. Herrman in the Thrift Plan.
(12) Includes 1,000 shares which Mr. Nadal has fully-vested options to aquire
and 56 shares are allocated to Mr. Nadal in the Thrift Plan.
Biographical information concerning Messrs. Keller and Goodrich is given
under the caption "Election of Directors."
Mr. King resigned as Vice President--Finance of Operating Company, effective
December 31, 1993. He served as Controller of Operating Company from 1979-1993
and as Vice President--Finance from 1982 to 1993. He was employed by SAC from
1974 to 1979. Effective February 18, 1994, Mr. King was appointed acting Chief
Executive Officer of Realty. On March 15, 1994, Mr. King resigned as acting
Chief Executive Officer and was appointed acting Chief Financial Officer of
Realty.
Mr. Ingle has served as Secretary/Treasurer of Operating Company since 1979
and as Vice President since 1986. He was employed by SAC from 1970 to 1979.
Mr. Robbins served as Racing Secretary of LATC from 1985-1990. He has served
as Vice President--Racing of Operating Company since 1990.
10
<PAGE>
EXECUTIVE COMPENSATION
OPERATING COMPANY
The following table sets forth information concerning the annual and long-
term compensation for services in all capacities to Operating Company for the
years ended December 31, 1993, 1992 and 1991 of those persons who served as
Chief Executive Officer during 1993, together with the other four most highly
compensated executive officers of Operating Company (see Executive Officers--
Management Changes).
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM ALL OTHER
ANNUAL COMPENSATION(1) COMPENSATION COMPENSATION(2)
---------------------- --------------------- ---------------
NAME AND SECURITIES UNDERLYING
PRINCIPAL POSITION SALARY BONUS OPTIONS(#)
------------------ ------ ----- ---------------------
<S> <C> <C> <C> <C> <C>
Robert P. Strub, Chairman and Chief 1993 $141,026 $ -- -- --
Executive Officer(3) 1992 395,833 100,000 52,000 --
1991 378,333 50,000 --
Stephen F. Keller, President, 1993 $347,917 $50,000 22,000 $2,299
and Chief Executive Officer(4) 1992 264,167 100,000 37,000 4,162
1991 126,167 37,500 45,000 --
Clifford C. Goodrich, 1993 $221,667 $30,000 15,000 --
Vice President 1992 211,667 52,500 20,000 --
1991 201,667 35,000 -- --
Glennon E. King, Vice President, 1993 $146,500 $ -- 4,000 --
Chief Financial Officer(5) 1992 141,083 37,500 15,000 $1,074
1991 134,167 25,000 -- --
Thomas S. Robbins, 1993 $147,500 $15,000 6,500 $2,262
Vice President--Racing 1992 141,083 11,250 5,000 4,327
1991 134,167 7,500 -- 5,272
Alexander W. Ingle, Secretary, Treasurer 1993 $135,500 $ -- 4,000 $2,078
Vice President 1992 130,000 22,500 14,000 3,988
1991 123,167 15,000 -- 4,273
</TABLE>
- --------
(1) Operating Company provides automobiles and club memberships to certain key
employees, including certain officers listed above, the value of which is
not included in the table above and which in any case did not exceed 10% of
the annual salary and bonus of any individual for the years indicated.
(2) Amounts shown are those expensed for financial reporting purposes under the
Thrift Plan. See "Other Benefit Plans for Operating Company and Realty" for
a description of the Thrift Plan and payments made to Mr. Strub under the
Retirement Income Plan.
(3) Mr. Strub served as chairman until his death on May 5, 1993.
(4) Mr. Keller joined Operating Company in July, 1991 and was named Chief
Executive Officer on February 11, 1993 and Chairman on June 17, 1993.
(5) Mr. King resigned effective at the close of business on December 31, 1993.
In his severance arrangement, he will receive the equivalent of 44 weeks of
salary, a 3 months acceleration of vesting on his deferred compensation
agreement and certain office equipment. Additionally, Mr. King entered into
a consulting arrangement that extended to March 11, 1994 pursuant to which
he rendered consulting services to Operating Company on an as needed basis.
On February 18, 1994, Mr. King was appointed acting Chief Executive Officer
of Realty. On March 15, 1994 Mr. King resigned as acting Chief Executive
Officer and was appointed acting Chief Financial Officer of Realty.
11
<PAGE>
STOCK OPTIONS. The following table sets forth the individual grants to the
named executive officers during 1993, the percentage that each grant represents
of the total options granted to employees during 1993, the exercise price, the
expiration date, and the potential realizable value of each of the options
(assuming either a 5% or 10% annualized rate of appreciation from the date of
grant).
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
NUMBER OF SHARES % OF TOTAL PRICE APPRECIATION
OF PAIRED OPTIONS GRANTED TO EXERCISE FOR OPTION TERM(1)
COMMON STOCK UNDERLYING EMPLOYEES IN PRICE EXPIRATION ---------------------
OPTIONS GRANTED FISCAL YEAR ($/SH) DATE 5% 10%
----------------------- ------------------ -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Robert P. Strub......... -- -- -- -- $ -- $ --
Stephen F. Keller....... 22,000 20.0% $17.38 9/1/2003 240,887 607,952
Clifford C. Goodrich.... 15,000 13.6% $17.38 9/1/2003 164,241 414,513
Glennon E. King......... 4,000 3.6% $17.38 9/1/2003 43,798 110,537
Thomas S. Robbins....... 6,500 5.9% $17.38 9/1/2003 71,171 179,622
Alexander W. Ingle...... 4,000 3.6% $17.38 9/1/2003 43,798 110,537
</TABLE>
- --------
(1) These amounts in these columns are based upon assumed rates of appreciation
over the option term which are prescribed by applicable SEC regulations.
Actual gains, if any, on stock option exercises are dependent on the future
performance of the Operating Company's paired Common Stock, overall market
conditions and the optionholder's continued employment through the
applicable vesting periods.
Options granted in 1993 are exercisable starting 12 months after the grant
date, with 20% of the shares covered thereby becoming exercisable at that time
and with an additional 20% of the option shares becoming exercisable on each
successive anniversary date, with full vesting occurring on the fifth
anniversary date. Each of the options was granted under the Operating Company's
Option Program with an exercise price of 100% of the fair market value of
Paired Common Stock on the date of grant.
The exercise price of an option may be paid, in full or in part, by
delivering shares of Paired Common Stock to Operating Company or by requesting
that Operating Company withhold a number of shares of Paired Common Stock with
a fair market value equal to the option exercise price from the amount
otherwise issuable upon exercise. In addition, Operating Company may loan to an
option holder funds sufficient to exercise all or a portion of the options
granted, such loans to be made at the absolute discretion of the Board of
Directors. Each loan would be evidenced by a note, bearing interest at the then
prime rate of interest charged by Bank of America NT & SA, subject to annual
adjustments, with full recourse to the option holder, and payable over a five
years with 10% annual minimum annual installments. In addition, Operating
Company may also loan an option holder funds sufficient to pay tax liability.
Upon a Change in Control, all unexpired options granted become immediately
exercisable except to the extent that the Compensation Committee determines
that an acceleration of the exercise date would cause the deduction limits of
Section 280G of the Internal Revenue Code to come into effect. A Change in
Control is generally defined as a 20% change in ownership of Operating Company
or the replacement of the majority of the members of the incumbent Board of
Directors (excluding replacement directors nominated by the incumbent Board of
Directors), subject to certain exceptions.
12
<PAGE>
None of the named officers exercised any stock options during 1993 or held
"in-the-money" options at the end of the fiscal year. The following table sets
forth the number of unexercised options held as of December 31, 1993 (broken
down between exercisable and unexercisable options):
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
PAIRED COMMON STOCK
UNDERLYING UNEXERCISED
OPTIONS AT
DECEMBER 31, 1993
-------------------------
NAME EXERCISABLE UNEXERCISABLE
---- ----------- -------------
<S> <C> <C>
Robert P. Strub(1).............................. 34,400 --
Stephen F. Keller............................... 25,400 78,600
Clifford C. Goodrich............................ 16,000 34,000
Glennon E. King................................. 18,000 --
Thomas S. Robbins............................... 6,400 11,100
Alexander W. Ingle.............................. 10,800 17,200
</TABLE>
- --------
(1) Mr. Strub died on May 5, 1993.
INDEBTEDNESS OF MANAGEMENT. In 1987, Mr. Ingle exercised stock options
whereby he purchased 6,000 shares of paired Operating Stock and Realty Stock at
$3.00 and $21.75 per share, respectively, by delivering cash in an amount equal
to the aggregate par value of the shares and executing a promissory note in
payment of the balance of the purchase price, payable in six annual
installments at an initial annual interest rate of 9.25%. The promissory notes
delivered to Operating Company also included amounts advanced to cover income
tax liabilities occasioned by the stock option exercise. In 1990, Mr. Robert P.
Strub and Mr. Goodrich each exercised stock options whereby they purchased
35,000 shares and 5,000 shares of paired Operating Stock and Realty Stock at
$3.30 and $21.75 per share, respectively, for Mr. Robert P. Strub and $3.00 and
$21.75 per share, respectively, for Mr. Goodrich, by delivering cash in an
amount equal to the aggregate par value of the shares and executing a
promissory note in payment of the balance of the purchase price, payable in
five annual installments at initial annual interest rates of 10.5% and 10.0%,
respectively. The promissory notes delivered to Operating Company also included
amounts advanced to cover income tax liabilities occasioned by the stock option
exercise. On April 11, 1993, Operating Company advanced Mr. Robert P. Strub
$25,000 for the purpose of covering personal expenses. The funds were repaid on
July 13, 1993 with interest at 6 percent. The following table reflects
information relating to these transactions with Operating Company and Realty.
The $305,641 balance of Mr. Strub's note will be reduced at the rate of
$5,000 per month by his widow, Mrs. Elizabeth Strub, who has personally
guaranteed the Note. Additionally, irrevocable escrow instructions have been
executed by the trustee of Mr. Strub's estate wherein escrow proceeds arising
from the sale of a single family residence will be applied to the outstanding
balance.
<TABLE>
<CAPTION>
INTEREST RATE
IN EFFECT AT
DATE OF TYPE OF HIGH BALANCE BALANCE AT DECEMBER 31,
INDIVIDUAL INCURRENCE INDEBTEDNESS DURING 1993 DECEMBER 31, 1993 1993
- ---------- ---------- ----------------- ------------ ----------------- -------------
<S> <C> <C> <C> <C> <C>
R.P. Strub 5-16-90 stock option loan $695,800 $305,641 6.0%
R.P. Strub 4-11-93 cash advance 25,000 -- 6.0%
C.C. Goodrich 8-3-90 stock option loan 98,200 85,925 6.0%
A.W. Ingle 10-20-87 stock option loan 88,380 -- 6.0%
</TABLE>
13
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
FOR SANTA ANITA OPERATING COMPANY
To: The Board of Directors
The Compensation Committee ("Committee"), a committee composed entirely of
Directors who have never served as officers of Santa Anita Operating Company
("Operating Company"), determines and administers the compensation of the
officers of Operating Company.
The duties of the Committee include evaluation of the performance of
management, consideration of management succession, the setting of compensation
levels of members of senior management other than the Chief Executive Officer,
whose compensation the Committee recommends to the Board for its action, and
related matters. In addition, the Committee reviews various compensation,
pension and benefit plans of Operating Company, including its stock option plan
and deferred compensation agreements for certain senior officers.
The Committee believes that a portion of annual compensation of each officer
should be related to the performance of Operating Company as well as the
individual's contribution to Operating Company. This places a portion of the
annual compensation "at risk". In particular, in 1993, the Committee assessed
the individual's contributions to the Company's cost reduction program.
The Committee's deliberations include a review of the reasonableness of
compensation paid compared with the compensation paid by comparable companies
in the thoroughbred horse racing business. However, because of the unique
nature of the horse racing business, the Committee members also review salary
data for companies in the wholesale/retail industry whose revenues are
comparable to the gross wagering levels generated by Operating Company.
Additionally, the Committee reviews general compensation surveys provided by
compensation consulting firms to assure that the base salaries and total cash
compensation levels for the Company's executives are competitive with the
previously referenced companies.
Mr. Keller's salary as Chief Executive Officer of Operating Company was
established at $350,000 for the 12 months commencing November 1, 1992, by the
Board of Directors in December, 1992, based upon the recommendation of the
Compensation Committee. In December, 1993 the Committee assessed, among other
things, Mr. Keller's leadership during the transition following Mr. Strub's
death, and his effectiveness during implementation of the cost reduction
program and recommended, and the Board approved, a salary increase to $375,000
for Mr. Keller for the 12 months commencing November 1, 1993. This figure
places Mr. Keller near the mid-point of the previously referenced companies.
The primary input to the Committee with respect to the bonus plan for
officers consists of recommendations by the Chief Executive Officer of
Operating Company, except in the case of any bonus paid to the Chief Executive
Officer, which is determined by the Board of Directors based upon the
recommendation of the Committee. Operating Company has maintained an annual
bonus plan under which bonuses may be payable to executive officers. These
bonuses are predicated on a subjective evaluation of both the performance of
the executive officer and the performance of Operating Company or, to the
extent appropriate, the performance of both Realty and Operating Company.
Operating Company's bonus plan distribution for 1993 represented eight percent
of the executive officers' salaries, compared with 27% in 1992.
The Committee's determination of Mr. Keller's bonus was based on its
subjective assessment of Mr. Keller's contributions to the performance of
Operating Company during 1993. Mr. Keller received a 1993 bonus of $50,000.
14
<PAGE>
Those senior officers of Operating Company that received options received
them based on their level of responsibility and relative position in Operating
Company. The Committee also considers current stock ownership and outstanding
stock options as factors in determining stock option grants. In the aggregate,
the executive officers received 46 percent of the options granted to employees
of Operating Company in 1993, with the remaining 54 percent being granted to
the key supervisory personnel.
Mr. Keller received an option grant of 22,000 shares of common stock which
represented 20 percent of the total grants made to Operating Company officers
and key supervisory personnel in 1993. Historically, the Chief Executive
Officer of Operating Company has received between 20 and 40 percent of the
total options granted since 1985.
To the extent readily determinable, and as one of the factors in its
consideration of compensation matters, the Committee considers the anticipated
tax treatment to Operating Company and to the executives of various payments
and benefits. Some types of compensation payments and their deductibility
depend upon the timing of an executive's vesting or exercise of previously
granted rights. Further interpretations of and changes in the tax laws and
other factors beyond the Committee's control also affect the deductibility of
compensation. For these and other reasons, the Committee will not necessarily
and in all circumstances limit executive compensation to that deductible under
Section 162(m) of the Internal Revenue Code. The Committee will consider
various alternatives to preserving the deductibility of compensation payments
and benefits to the extent reasonably practicable and to the extent consistent
with its other compensation objectives.
Compensation Committee
Thomas P. Mullaney Arthur Lee Crowe
William C. Baker Linda K. Mennis
April 6, 1994
15
<PAGE>
REALTY
The following table sets forth information concerning the annual and long-
term compensation for services in all capacities to Realty for the years ended
December 31, 1993, 1992 and 1991 of the person serving as Chief Executive
Officer during 1993, together with the only other executive officers of Realty.
Messrs. Carpenter, Herrman and Nadal resigned on February 18, 1994 to join
Pacific Gulf (see Executive Officers--Management Changes).
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM ALL OTHER
ANNUAL COMPENSATION(1) COMPENSATION COMPENSATION(2)
---------------------- --------------------- ---------------
NAME AND SECURITIES UNDERLYING
PRINCIPAL POSITION SALARY BONUS OPTIONS(#)
------------------ ------ ----- ---------------------
<S> <C> <C> <C> <C> <C>
Glenn L. Carpenter, President and
Chief Executive Officer 1993 $258,780 $30,000 -- $2,299
1992 226,667 60,000 30,000 --
1991 205,333 40,000 -- 6,500
Donald G. Herrman,
Vice President, Chief Financial
Officer 1993 $113,501 $15,000 -- $1,687
1992 105,833 12,750 12,000 3,221
1991 100,833 8,500 -- 4,601
Lonnie P. Nadal,
Vice President, Acquisitions(3) 1993 $105,945 $ 5,000 -- $1,603
1992 100,750 12,000 5,000 --
1991 32,140 -- -- --
</TABLE>
- --------
(1) Realty provides automobiles and club memberships to certain key employees,
including certain officers listed above, the value of which is not included
in the table above and which in any case does not exceed 10% of the annual
salary and bonus of any individual.
(2) Amounts shown are those expensed for financial reporting purposes under the
Thrift Plan. See "Other Benefit Plans for Operating Company and Realty" for
a description of the Thrift Plan.
(3) Mr. Nadal joined Realty in August, 1991.
STOCK OPTIONS. Realty did not grant any stock options in 1993.
16
<PAGE>
None of the named officers, all of whom resigned effective February 18, 1994,
exercised options during 1993 or held "in-the-money" options at the end of the
fiscal year. The following table sets forth the number of unexercised options
held as of December 31, 1993 (broken down between exercisable and unexercisable
options).
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
PAIRED
COMMON STOCK UNDERLYING
UNEXERCISED OPTION AT
DECEMBER 31, 1993
-------------------------
NAME(1) EXERCISABLE UNEXERCISABLE
------- ----------- -------------
<S> <C> <C>
Glenn L. Carpenter.............................. 25,600 26,400
Donald G. Herrman............................... 7,200 10,800
Lonnie P. Nadal................................. 1,000 4,000
</TABLE>
INDEBTEDNESS OF MANAGEMENT. On December 31, 1988 and on October 10, 1989, Mr.
Royce McKinley, a former officer of Realty and a former director of Operating
Company and Realty, exercised stock options to acquire shares of Realty by
paying cash in an amount equal to the par value of the shares and delivering
promissory notes for the balance of the option exercise price, payable in five
annual installments at an initial annual interest rate of 10.5%. The highest
amount owed by Mr. McKinley during the year to Realty was $183,539. At December
31, 1993, the amount owed by Mr. McKinley to Realty was $81,256. The interest
rate in effect during 1993 on the amount owed was 6.0%.
17
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
FOR SANTA ANITA REALTY ENTERPRISES, INC.
To: The Board of Directors
The Compensation Committee ("Committee"), a committee composed entirely of
Directors who have never served as officers of Santa Anita Realty Enterprises,
Inc. ("Realty"), determines and administers the compensation of Realty.
The duties of the Committee include evaluation of the performance of
management, consideration of management succession, the setting of compensation
levels of members of senior management other than the Chief Executive Officer,
whose compensation the Committee recommends to the Board for its action, and
related matters. In addition, the Committee reviews various compensation,
pension and benefit plans of Realty, including its stock option plan and
deferred compensation agreements for certain senior officers.
The Committee believes that a portion of the annual compensation of each
officer should be related to the performance of Realty, in addition to the
individual's contributions to Realty. In particular, in 1993, the Committee
assessed the individual's contribution to the goal of "deleveraging" Realty as
demonstrated by the Pacific Gulf transaction. This policy places a portion of
the annual compensation "at risk."
The Committee's deliberations include a review of the reasonableness of
compensation paid, compared with the compensation paid by companies in the peer
group identified in connection with the performance graph contained in this
proxy statement. The Committee members also review general compensation surveys
provided by compensation consulting firms to assure that the base salaries and
total compensation levels for the company's executives fall within the mid-
range of competitive practice when compared with companies of a comparable
market capitalization and asset base in the peer group.
Mr. Carpenter's salary as Chief Executive Officer of Realty was established
at $260,000 for the 12 months commencing November 1, 1992 by the Board of
Directors in December, 1992, based upon the recommendation of the Committee. In
making this recommendation, the Committee reviewed the salaries of the Chief
Executive Officers of several of the real estate investment trusts contained in
the peer group identified in connection with the performance graph contained in
this proxy statement. In particular, the Committee looked at salaries paid to
officers in the peer group and determined that remuneration should be at the
mid-range. Based upon this analysis, the Compensation Committee recommended
that Mr. Carpenter's salary for the 12 months beginning November 1, 1993, be
established at $280,000, which recommendation was accepted by the Board of
Directors.
Realty has an annual bonus plan which is predicated on a subjective
assessment of both the performance of the executive officer and the performance
of Realty. The bonus distributions, if any, are the sum of the recommendations
of the Chairman of the Board and the Chief Executive Officer of Realty, except
in the case of any bonus distribution to the Chief Executive Officer, which is
determined by the Board of Directors based upon the recommendation of the
Committee. The Committee took into account the executive officers'
contributions to Realty's recurring income for the 1993 year and the
restructuring of Realty. Realty's bonus plan distribution for 1993 represented
10 percent of the executive officers' salaries, compared with 20 percent in
1992.
Mr. Carpenter's bonus of $30,000 was determined after evaluating Realty's
1993 recurring income compared with 1992 and his efforts in connection with the
Pacific Gulf transaction.
18
<PAGE>
The Committee considered and did not grant stock options during 1993 in
anticipation of management's leaving Realty and joining Pacific Gulf upon
completion of the Pacific Gulf stock offering.
To the extent readily determinable, and as one of the factors in its
consideration of compensation matters, the Committee considers the anticipated
tax treatment to Realty and to the executives of various payments and benefits.
Some types of compensation payments and their deductibility depend upon the
timing of an executive's vesting or exercise of previously granted rights.
Further interpretations of and changes in the tax laws and other factors beyond
the Committee's control also affect the deductibility of compensation. For
these and other reasons, the Committee will not necessarily and in all
circumstances limit executive compensation to that deductible under Section
162(m) of the Internal Revenue Code. The Committee will consider various
alternatives to preserving the deductibility of compensation payments and
benefits to the extent reasonably practicable and to the extent consistent with
its other compensation objectives.
Compensation Committee
Thomas P. Mullaney Arthur Lee Crowe
William C. Baker Robert H. Strub
April 6, 1994
19
<PAGE>
PERFORMANCE GRAPH
SHAREOWNER RETURN PERFORMANCE
The following graph shows a five-year comparison of total returns for The
Companies, the S&P 500 Composite Index and National Association of Real Estate
Investment Trust's All REIT Index.
[paste up graph]
<TABLE>
<CAPTION>
1988 1989 1990 1991 1992 1993
---- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Santa Anita Companies........................ 100 96.4 74.2 68.3 73.6 78.5
All REIT Index............................... 100 98.2 81.2 110.1 123.5 146.3
S&P 500...................................... 100 131.5 127.3 166.2 179.0 196.8
</TABLE>
20
<PAGE>
OTHER BENEFIT PLANS
FOR OPERATING COMPANY AND REALTY
DEFERRED COMPENSATION ARRANGEMENTS. In 1993, Operating Company and Realty had
in effect deferred compensation arrangements with certain officers, including
Messrs. Keller, Goodrich, Ingle and King (Operating Company) and Mr. Carpenter
(Realty), whereby they are entitled, (if they have 10 years of service), to a
monthly benefit payable for 15 years, starting at the later of age 55 or
retirement, equal to 50% (plus 2% for each year of service in excess of 25
years) of their last monthly salary less a monthly benefit payable under the
Retirement Income Plan (except in situations in which a participating officer
dies while employed by Operating Company or Realty, in which case there is no
such offset). Mr. King resigned from Operating Company effective at the close
of business on December 31, 1993. Mr. King's arrangement became fully vested on
December 31, 1993 (see Executive Compensation--Operating Company, Note 5).
Mr. Carpenter resigned from Realty effective February 18, 1994. Mr. Carpenter's
arrangement was assumed by Pacific Gulf on February 18, 1994. Vesting is 50%
after 5 years of service, increasing to 100% after 10 years of service.
Annualized examples of these benefits, commencing at age 65, are set forth
below. The examples assume retirement as of December 31, 1993 after assumed
years of service.
<TABLE>
<CAPTION>
BENEFITS BASED ON YEARS OF SERVICE
-----------------------------------
BASE SALARY 10 YEARS 20 YEARS 30 YEARS 40 YEARS
----------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
$125,000................................. $ 38,977 $ 15,084 $ 1,846 $ 369
150,000................................. 46,477 17,584 1,846 4,359
175,000................................. 53,977 20,084 1,846 24,359
200,000................................. 61,477 22,584 4,359 44,359
225,000................................. 68,977 25,084 19,359 64,359
250,000................................. 79,309 33,248 34,359 84,359
275,000................................. 91,809 45,748 49,359 104,359
300,000................................. 104,309 58,248 64,359 124,359
325,000................................. 116,809 70,748 79,359 144,359
350,000................................. 129,309 83,248 94,359 164,359
375,000................................. 141,809 95,748 109,359 184,359
400,000................................. 154,309 108,248 124,359 204,359
425,000................................. 166,809 120,748 139,359 224,359
450,000................................. 179,309 133,248 154,359 244,359
</TABLE>
These arrangements provide additional benefits if a "Qualifying Termination"
of the officer occurs within three years after a "Change in Control." In this
event, the officer will be treated as having an additional five years of
service under the arrangement. A Change in Control is generally defined as a
20% change in the ownership of the applicable Company, or the replacement of
the majority of the members of the incumbent Board of Directors (excluding
replacement directors nominated by the incumbent Board of Directors), subject
to certain exceptions. A "Qualifying Termination" occurs if an officer is
either involuntarily terminated without cause or voluntarily terminates for
good reason. Both a significant modification of the executive's duties and a
reduction of the executive's total compensation may constitute good reason.
Section 280G of the Internal Revenue Code ("Section 280G") provides that
payments occasioned by a change in control may not be deducted by the employer
(and may be subject to 20% excise tax when received by the employee) if total
payments exceed certain limits. These additional benefits shall not be made to
the extent that they, when aggregated with other payments, would cause the
limits of Section 280G to be exceeded.
21
<PAGE>
RETIREMENT INCOME PLAN. Operating Company and Realty have a joint defined
benefit Retirement Income Plan that is non-contributory. Benefits are
determined regardless of position under a formula applied uniformly to all
employees of Operating Company and its participating subsidiaries, and Realty
(except as otherwise required under Internal Revenue Code "top-heavy" rules
relating to "key" employees), and depend upon the employee's length of service,
and the five year highest average salary up to $235,840, less certain Social
Security benefits.
Employees are eligible to participate in the plan after attaining age 21 and
completing one year of service. The plan currently provides for 100% vesting of
an employee's interest after five years of service (except to the extent faster
vesting is required under Internal Revenue Code "top-heavy" rules). However, in
the event of a Change in Control, the plan provides for immediate 100% vesting.
The following table illustrates the estimated annual retirement benefit
payable under the plan starting at age 65, after reduction for certain social
security benefits, for participants with compensation and credited years of
service shown. The benefits shown assume retirement at age 65 as of December
31, 1993 subject to the maximum annual benefit of $115,641 shown below. This
maximum annual amount is actuarially increased for participants who retire
after age 65.
<TABLE>
<CAPTION>
BENEFITS BASED ON YEARS OF SERVICE
-----------------------------------
BASE SALARY 10 YEARS 20 YEARS 30 YEARS 40 YEARS
----------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
$100,000................................. $ 18,523 $ 37,416 $ 58,154 $ 79,631
125,000................................. 23,523 47,416 73,154 99,631
150,000................................. 28,523 57,416 88,154 115,641
175,000................................. 33,523 67,416 103,154 115,641
200,000................................. 38,523 77,416 115,641 115,641
225,000................................. 43,523 87,416 115,641 115,641
250,000................................. 45,691 91,752 115,641 115,641
275,000................................. 45,691 91,752 115,641 115,641
300,000................................. 45,691 91,752 115,641 115,641
325,000................................. 45,691 91,752 115,641 115,641
350,000................................. 45,691 91,752 115,641 115,641
375,000................................. 45,691 91,752 115,641 115,641
400,000................................. 45,691 91,752 115,641 115,641
425,000................................. 45,691 91,752 115,641 115,641
450,000................................. 45,691 91,752 115,641 115,641
</TABLE>
The officers and their salaries covered under these plans as of December 31,
1993 and their years of service for purposes of these plans are as follows:
<TABLE>
<CAPTION>
YEARS RETIREMENT DEFERRED
ANNUAL OF INCOME COMPENSATION
NAME COMPANY SALARY SERVICE PLAN AGREEMENT
- ---- --------- ------- ------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Strub (1)..................... Operating 400,000 48 Yes Yes
Keller........................ Operating 375,000 3 Yes Yes
Goodrich...................... Operating 230,000 13 Yes Yes
King.......................... Operating 146,500 19 Yes Yes
Robbins....................... Operating 152,500 10 Yes No
Ingle......................... Operating 138,000 24 Yes Yes
Carpenter..................... Realty 280,000 23 Yes Yes
Herrman....................... Realty 116,000 8 Yes No
Nadal......................... Realty 109,000 2 Yes No
</TABLE>
- --------
(1) As a result of Mr. Strub's death in 1993, his widow, Mrs. Elizabeth Strub,
is receiving income benefits under both plans.
22
<PAGE>
Mr. King terminated employment with Operating Company at the end of 1993.
Messrs. Carpenter, Herrman and Nadal resigned from Realty effective February
18, 1994 at which time their benefit arrangements were assumed by Pacific
Gulf.
THRIFT PLAN. Operating Company and Realty have a joint Thrift Plan under
which employees may elect to contribute up to 21% of their annual compensation
on a combination before-and-after tax basis, excluding bonuses. A percentage
of these contributions by the employee is matched by either Operating Company
or Realty with total matching contributions not exceeding a maximum of 6% of
the contributing employee's annual compensation. Matching contributions are in
the form of cash, which is used by the trustee to purchase paired shares of
Operating Stock and Realty Stock. Employee contributions are invested in a
fixed income fund or an equity fund, or a combination of fixed income and
equity funds, according to the employee's choices. The plan provides for 20%
vesting of company contribution after two years of service, increasing to 100%
vesting after six years of service. However, upon a Change in Control, the
plan provides for immediate 100% vesting.
DIRECTORS' COMPENSATION. Each director retiring subsequent to 1960 and
serving Realty, Operating Company or SAC as an outside director for at least
ten years is remunerated at the annual rate of $480 times his or her number of
years of service. This annual payment is payable for five years. During 1993
seven former directors with years of service ranging from thirteen to thirty
participated in the plan. Payments made under the plan in 1993 totaled
$91,200.
In 1993, each active director who was not an employee of Operating Company
or Realty received a $7,500 annual fee plus $400 for each meeting of the Board
of Directors and each committee meeting attended and, in the case of Operating
Company, for each separate subsidiary board meeting attended. In addition,
Directors Taylor Grant and Charles Strub, II received $5,000 each in
conjunction with services rendered on a special committee of the Board of
Realty which reviewed the Pacific Gulf transaction.
SEVERANCE AGREEMENTS. Operating Company has in effect Severance Agreements
with certain officers, including Messrs. Keller, Goodrich, Ingle and Robbins.
Similar severance agreements with Realty for Messrs. Carpenter and Herrman
expired with their resignations as officers of Realty on February 18, 1994.
These agreements, which have a term of five years, become effective if there
is a Change in Control followed by a Qualifying Termination of the named
executive within three years. In that event, the executive becomes entitled to
a lump sum payment equal to 2 1/2 times the sum of (1) the executive's current
annual base salary rate plus (2) the executive's average bonuses over the
three calendar years preceding the Change in Control. In addition, the
executive may continue to participate in the Company's medical and dental
plans for three years if the executive pays the applicable premium. The
Severance Agreements provide that no payments shall be made to the extent such
payments, together with other payments by the Company, would cause the limits
of Section 280G to be exceeded.
EMPLOYMENT AGREEMENTS
Mr. Chillingworth has an agreement for employment with Realty effective
March 16, 1994 and expiring on June 30, 1996 (subject to earlier termination
under the circumstances described below). The agreement provides that Mr.
Chillingworth shall serve as Chief Executive Officer of Realty and shall
devote substantially two-thirds of his time and energy to the business of
Realty. Mr. Chillingworth is entitled under the agreement to devote up to one-
third of his time and energy to the business of Oaktree Racing Association, of
which he currently serves as Executive Vice President. The agreement also
contemplates that Mr. Chillingworth will be appointed as a director of Realty
and serve as Vice Chairman of the Board of Realty at some time in the future.
23
<PAGE>
The agreement provides for various benefits to Mr. Chillingworth, including a
current annual base salary of $160,000, which is subject to periodic review and
increase, but not decrease. Mr. Chillingworth is also entitled under the
agreement to various fringe benefits and perquisites (such as car and club
membership allowances) and to participate in all annual bonus, incentive,
savings and retirement, welfare and vacation plans, programs and policies
applicable generally to other peer executives of Realty. In determining bonus
and incentive awards, the agreement provides that the Compensation Committee
will consider Mr. Chillingworth's success in accomplishing certain specified
strategic, financial and personal goals. As a condition of the agreement, Mr.
Chillingworth also was granted (pursuant to the terms of Realty's 1984 Stock
Option Program) options to purchase 30,000 shares of Realty's common stock at
$20.25, which was the fair market value of the common stock on the date of
grant.
The agreement automatically terminates in the event of Mr. Chillingworth's
death or "disability" (as defined in the agreement). Realty may also terminate
Mr. Chillingworth's employment under the agreement at any time, with or without
"cause" (as defined in the agreement), upon 90 days written notice. The
agreement provides for various payments to Mr. Chillingworth or his estate or
beneficiaries, as applicable, in the event of termination of his employment. In
the event of termination for death or disability, Mr. Chillingworth or his
estate or beneficiaries would be entitled to receive within 30 days of such
termination a lump sum payment equal to his accrued but unpaid (i) salary, (ii)
reasonable employment expenses and fringe benefit allowances, and (iii)
vacation pay (collectively, "Accrued Obligations"). Under such circumstances,
Mr. Chillingworth or his estate or beneficiaries would also receive payment of
any amounts due pursuant to the terms of any applicable welfare or pension
benefit plans. Upon termination for cause, Mr. Chillingworth would be entitled
to receive timely payments of his Accrued Obligations and any amounts due
pursuant to the terms of any applicable welfare or pension benefit plans. If
Realty terminates Mr. Chillingworth's employment other than for cause or death
or disability, or if Mr. Chillingworth voluntarily terminates his employment
for "good reason" (as defined in the agreement), then he is entitled to receive
(a) timely payments of his Accrued Obligations, (b) payments of any amounts due
pursuant to the terms of any applicable welfare or pension benefit plans, and
(c) a payment equal to 112% of his then current annual base salary, subject to
offset for any cash lump sum payment he may receive pursuant to any severance
agreement with Realty. In the event Mr. Chillingworth's employment is
terminated for any reason other than cause, any of the stock options granted to
Mr. Chillingworth as a condition of the agreement which have not yet vested
will vest automatically and be exercisable for a period of 90 days following
such termination.
Mr. Stirling has an agreement for employment with Realty to serve as
President and Chief Operating Officer commencing on April 18, 1994 and expiring
on June 30, 1996 (subject to earlier termination under the circumstances
described below). The other terms of Mr. Stirling's agreement are similar to
those described above for Mr. Chillingworth, except that (a) Mr. Stirling has
agreed to devote substantially all of his time and energy to the business of
Realty, (b) Mr. Stirling is entitled to receive a current annual base salary of
$150,000, which is subject to periodic review and increase, but not decrease,
and (c) as a condition of the agreement, Mr. Stirling is entitled to receive
(pursuant to the terms of Realty's 1984 Stock Option Program) options to
purchase 20,000 shares of Realty's common stock at the fair market value of the
common stock on April 18, 1994.
24
<PAGE>
RELATED PARTY TRANSACTION
Mr. Chillingworth, the recently appointed Chief Executive Officer of Realty,
also serves as Executive Vice President of Oak Tree Racing Association ("Oak
Tree"). Oak Tree subleases Santa Anita Racetrack from LATC, a wholly owned
subsidiary of Operating Company, for the purpose of conducting a thoroughbred
horse racing meet lasting between five and six weeks each year. Under the
current sublease, which has been in place since January 1990 and expires in
2000, Oak Tree made rental payments of $2,401,000 to LATC during 1993.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of each Company customarily selects an independent
accounting firm to examine each Company's financial statements shortly before
the close of each fiscal year and, accordingly, Kenneth Leventhal & Company has
been selected at this time for the 1994 audit. The firm of Kenneth Leventhal &
Company examined each Company's financial statements for the year ended
December 31, 1993, and a member of that firm will be present at each Company's
Annual Meeting of Shareholders with the opportunity to make a statement and to
answer questions by the shareholders.
OTHER MATTERS
Managements of each Company know of no business other than that mentioned
above to be transacted at the Annual Meetings, but if other matters do properly
come before the meeting, it is the intention of the persons named in the
enclosed proxy to vote in regard thereto in accordance with their judgment, and
discretionary authority to do so to the fullest extent permitted by applicable
law is included in the proxy.
PROPOSALS FOR NEXT ANNUAL MEETINGS
Any proposal which a shareholder intends to present at the next Annual
Meetings of Shareholders, to be held in May, 1995, must be received at the
principal executive offices of the Company to which such proposal relates by
December 7, 1994, if such proposal is to be considered for inclusion in such
Company's Proxy Statement and form of proxy relating to that meeting.
ANNUAL REPORT (FORM 10-K)
The Companies undertake, on written request, to provide each shareholder,
without charge, a copy of The Companies' annual report on Form 10-K for the
year ended December 31, 1993 as filed with the Securities and Exchange
Commission, including the financial statements, schedules, and exhibits to such
report. Requests should be addressed to Santa Anita Operating Company, P.O. Box
808, Arcadia, California 91066-0808, Attention: Alexander W. Ingle or Santa
Anita Realty Enterprises, Inc., 363 San Miguel Drive, Suite 100, Newport Beach,
California 92660, Attention: John Goodwin.
Alexander W. Ingle John Goodwin
Secretary Assistant Secretary
Santa Anita Operating Company Santa Anita Realty Enterprises, Inc.
25
<PAGE>
[LOGO OF SANTA ANITA COMPANY]
SANTA ANITA PROXY SANTA ANITA REALTY
OPERATING COMPANY ENTERPRISES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE RESPECTIVE BOARDS OF DIRECTORS.
The undersigned hereby appoints Richard S. Cohen, Arthur Lee Crowe and
Stephen F. Keller as Proxies, each with the power to appoint his substitute, and
hereby authorizes each of them to represent and vote as designated below, all
the shares of Common Stock of Santa Anita Operating Company and Santa Anita
Realty Enterprises, Inc. held of record by the undersigned on March 8, 1994, at
the annual meetings of shareholders to be held on May 3, 1994 or any adjournment
thereof.
PLEASE MARK, SIGN, DATE AND MAIL THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side.)
<PAGE>
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
1. ELECTION OF DIRECTORS FOR SANTA ANITA OPERATING
COMPANY--
Nominees: William C. Baker, Clifford C. Goodrich,
Stephen F. Keller
FOR WITHHOLD FOR ALL (Except Nominee(s) written below)
[__] [__] [__]
_______________________________________________________
2. ELECTION OF DIRECTORS FOR SANTA ANITA REALTY
ENTERPRISES, INC.--
Nominees: William C. Baker, Clifford C. Goodrich,
Stephen F. Keller, Charles H. Strub, II
FOR WITHHOLD FOR ALL (Except Nominee(s) written below)
[__] [__] [__]
_______________________________________________________
In their discretion, the proxies are authorized to vote upon such other business
that may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR THE ELECTION OF THE NOMINEES LISTED ON THIS CARD.
Dated:_____________________________, 1994
Signature ______________________________________________________________________
Signature if held jointly ______________________________________________________
Please sign exactly as your name appears. When shares are held by joint tenants,
both should sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If a corporation, please sign in full
corporation name, by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person.
