<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
SANTA ANITA OPERATING COMPANY SANTA ANITA REALTY ENTERPRISES, INC.
- --------------------------------------- ---------------------------------------
(Name of Registrant as Specified In Its (Name of Registrant as Specified In Its
Charter) Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $250 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $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 transaction applies:
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
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 THE SANTA ANITA COMPANIES
SANTA ANITA OPERATING COMPANY SANTA ANITA REALTY ENTERPRISES, INC.
285 WEST HUNTINGTON DRIVE 301 WEST HUNTINGTON DRIVE, SUITE 405
P.O. BOX 60014 P.O. BOX 60025
ARCADIA, CALIFORNIA 91066-6014 ARCADIA, CALIFORNIA 91066-6025
NOTICE OF ANNUAL MEETINGS OF SHAREHOLDERS
TUESDAY, MAY 7, 1996
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 7, 1996 at 10:00 A.M. and 10:30 A.M.,
respectively, for the following purposes:
1. To elect four Directors of Operating Company for terms to expire in 1999
and one Director for a term to expire in 1997;
2. To elect four Directors of Realty for terms to expire in 1999 and one
Director for a term to expire in 1997;
3. To approve two agreements providing for the grant to the Chairman and
Chief Executive Officer of Realty of options to purchase shares of Realty
Common Stock; and
4. To transact such other business as may properly come before the Annual
Meetings and any adjournments thereof.
Only shareholders of record on the books of Operating Company and Realty as
of the close of business on March 13, 1996 will be entitled to vote at the
Annual Meetings.
[SIGNATURE] [SIGNATURE]
/s/ KATHRYN J. McMAHON /s/ BRIAN L. FLEMING
KATHRYN J. McMAHON BRIAN L. FLEMING
Secretary Secretary
Santa Anita Operating Company Santa Anita Realty Enterprises, Inc.
Arcadia, California Arcadia, California
April 8, 1996 April 8, 1996
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.
285 WEST HUNTINGTON DRIVE 301 WEST HUNTINGTON DRIVE, SUITE 405
P.O. BOX 60014 P.O. BOX 60025
ARCADIA, CALIFORNIA 91066-6014 ARCADIA, CALIFORNIA 91066-6025
------------------------
JOINT PROXY STATEMENT
---------------------
ANNUAL MEETINGS OF SHAREHOLDERS
TUESDAY, MAY 7, 1996
------------------------
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 separately 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 7, 1996 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 Annual Meetings 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. In addition, Georgeson & Company has been
engaged by The Companies to assist in the solicitation of proxies. The Companies
expect to pay Georgeson a fee of $6,000 plus expenses. This Joint Proxy
Statement and the accompanying notice and form of proxy are being mailed to The
Companies' shareholders on or about April 8, 1996.
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
tradable 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.
<PAGE>
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.
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 13, 1996 (the "Record Date") will be entitled to vote at the
Annual Meetings. On that date, there were issued and outstanding 11,270,500
shares of Operating Stock and 11,383,000 shares of Realty Stock, with each share
entitled to one vote. (There are 112,500 more shares of Realty Stock outstanding
than shares of Operating Stock as a result of the purchase of such shares by
Operating Company to be paired with authorized but unissued shares of Operating
Stock in connection with awards under Operating Company's employee benefit
plans.)
To The Companies' knowledge, the only beneficial owners of more than five
percent of The Companies' voting stock are Gabelli Funds, Inc. and its
affiliated entities and persons. The address of such shareholders is One
Corporate Center, Rye, New York 10580-1434. As disclosed in Amendment No. 4 to
Schedule 13D dated December 6, 1995, as of December 4, 1995, these shareholders
collectively owned 1,175,000 shares representing 10.4% of Operating Stock and
10.3% of Realty Stock.
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 Annual Meetings, 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 Annual Meetings 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
any 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
2
<PAGE>
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.
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 each
year, only one class of directors for each Company is elected. Mr. Grant
currently is a Realty Class I director. To better apportion the directors in
classes of approximately equal size (as required under each of The Companies'
by-laws), the Board of Directors of Realty has nominated Mr. Grant for election
as a Class II director. In addition, the Board of Directors of Operating Company
has nominated Mr. Grant as a Class II director of Operating Company.
The nominees standing for re-election in 1996 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).
Unless otherwise instructed, the proxy holders will vote to elect the four
nominees of Operating Company and the four nominees of Realty to terms expiring
in 1999 and to elect the one nominee of Operating Company and the one nominee of
Realty to a term expiring in 1997. 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.
THE BOARD OF DIRECTORS OF OPERATING COMPANY RECOMMENDS THAT THE SHAREHOLDERS
VOTE "FOR" THE ELECTION OF THE FIVE 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 FIVE NOMINEES FOR THE BOARD OF
DIRECTORS OF REALTY NAMED IN THIS JOINT PROXY STATEMENT.
INFORMATION REGARDING NOMINEES AND CONTINUING DIRECTORS
The tabulation on the next pages lists the nominees for election as
directors and shows certain information concerning each such nominee, including
the number of shares of Paired Common Stock beneficially owned directly or
indirectly by such nominee on March 13, 1996. The tabulation also provides such
information for continuing directors whose terms of office do not expire in
1996.
3
<PAGE>
NOMINEE FOR DIRECTOR FOR A TERM WHICH EXPIRES IN 1997
CLASS II
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL
OWNERSHIP OF PERCENT OF
PRINCIPAL BUSINESS EXPERIENCE COMMON STOCK OUTSTANDING
DURING PAST 5 YEARS AND ALL DIRECTOR OF EACH COMMON
DIRECTOR POSITIONS WITH THE COMPANIES AGE SINCE(1) COMPANY STOCK
- ------------------------- -------------------------------------------------------- --- -------- ------------ -----------
<S> <C> <C> <C> <C> <C>
BOTH OPERATING COMPANY
AND REALTY
Taylor B. Grant Investor; Receiver -- Superior Court, State of 46 1988 141(2) *
California since 1993; Chief Executive Officer, Optima
Asset Management Services (property management)
1992-1993; President, Grant Building Company 1984-1992
(real estate development)
</TABLE>
NOMINEES FOR DIRECTORS FOR TERMS WHICH EXPIRE IN 1999
CLASS I
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL
OWNERSHIP OF PERCENT OF
PRINCIPAL BUSINESS EXPERIENCE COMMON STOCK OUTSTANDING
DURING PAST 5 YEARS AND ALL DIRECTOR OF EACH COMMON
DIRECTOR POSITIONS WITH THE COMPANIES AGE SINCE(1) COMPANY STOCK
- ------------------------- -------------------------------------------------------- --- -------- ------------ -----------
<S> <C> <C> <C> <C> <C>
BOTH OPERATING COMPANY
AND REALTY
Thomas J. Barrack, Jr. Chief Executive Officer, Colony Capital, Inc. and Colony 49 1995 6,500(3) *
Advisors, Inc. (real estate investment) since 1991;
Partner, Robert M. Bass Group, Inc.(now Keystone, Inc.,
real estate investment) 1987-1991; Director, Continental
Airlines, Inc.
Richard S. Cohen Attorney, Law Offices of Richard S. Cohen and Donna 60 1967 10,443(4) *
Frost Cohen since 1991; President, Four Seas
Restaurants, Inc. (restaurant franchisee) since 1988
Arthur Lee Crowe Investor; Vice Chairman, Realty and Operating Company 72 1960 342,910(5) 3.0%
since 1988
J. Terrence Lanni Chairman and Chief Executive Officer, MGM Grand Inc. 53 1995 10,000 *
(hotel/ casino) since 1995; President and Chief
Operating Officer, Caesars World Inc. 1981-1995
</TABLE>
4
<PAGE>
CONTINUING DIRECTORS FOR TERMS WHICH EXPIRE IN 1998
CLASS III
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL
OWNERSHIP OF PERCENT OF
PRINCIPAL BUSINESS EXPERIENCE COMMON STOCK OUTSTANDING
DURING PAST 5 YEARS AND ALL DIRECTOR OF EACH COMMON
DIRECTOR POSITIONS WITH THE COMPANIES AGE SINCE(1) COMPANY STOCK
- ------------------------- -------------------------------------------------------- --- -------- ------------ -----------
<S> <C> <C> <C> <C> <C>
BOTH OPERATING COMPANY
AND REALTY
James P. Conn Managing Director and Chief Investment Officer, 58 1995 102,300(6) *
Financial Security Assurance, Inc. (insurance) since
1992; President and Chief Executive Officer, Bay Meadows
Operating Company (horse racing) 1988-1992; Director,
California Jockey Club (REIT); Trustee, Gabelli Equity
Trust and Gabelli Global Multimedia Trust (investment
companies)
John C. Cushman, III President and Chief Executive Officer, Cushman Realty 55 1996 155,000 1.4%
Corporation since 1978; Director, National Golf
Properties, Inc. (golf course management)
Thomas P. Mullaney General Partner, Matthews, Mullaney & Co. (private 63 1989 1,000 *
investment partnership) since 1991; Director, Ducommun
Incorporated (manufacturing)
William D. Schulte Investor; former Vice Chairman, KPMG Peat Marwick LLP; 63 1994 1,000 *
Director, H.F. Ahmanson & Company (thrift) and Vastar
Resources, Inc. (energy)
REALTY ONLY
Sherwood C. Chillingworth Executive Vice President, Realty since 1996; Vice 69 1994 15,000(7) *
Chairman, Realty since 1994; Chief Executive Officer,
Realty 1994-1996; Executive Vice President, Oak Tree
Racing Association since 1993; Vice President and
General Counsel, Oak Tree Racing Association 1992;
President, Chillingworth Corporation (real estate
development) 1975-1992.
</TABLE>
5
<PAGE>
CONTINUING DIRECTORS FOR TERMS WHICH EXPIRE IN 1997
CLASS II
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL
OWNERSHIP OF PERCENT OF
PRINCIPAL BUSINESS EXPERIENCE COMMON STOCK OUTSTANDING
DURING PAST 5 YEARS AND ALL DIRECTOR OF EACH COMMON
DIRECTOR POSITIONS WITH THE COMPANIES AGE SINCE(1) COMPANY STOCK
- ------------------------- -------------------------------------------------------- --- -------- ------------ -----------
<S> <C> <C> <C> <C> <C>
BOTH OPERATING COMPANY
AND REALTY
William C. Baker Chairman and Chief Executive Officer, Realty since 1996; 62 1991 6,400 *
Chairman, Carolina Restaurant Enterprises, Inc.
(restaurant franchisee) since 1992; Chairman, Coast
Newport Properties (real estate broker) since 1989;
President, Red Robin International, Inc., 1993-1995;
Director, Callaway Golf Company and Public Storage, Inc.
Stephen F. Keller Chairman, Chief Executive Officer and President, 57 1991 165,283(8) 1.5%
Operating Company since 1993; Chairman, Realty
1991-1996; President, Operating Company since 1991;
Attorney, Fulbright & Jaworski 1991; Member of Board of
Trustees, The Northwestern Mutual Life Insurance Company
OPERATING COMPANY ONLY
Clifford C. Goodrich Executive Vice President, Operating Company since 1995; 53 1989 79,198(9) *
President and General Manager, Los Angeles Turf Club,
Incorporated, a wholly-owned subsidiary of Operating
Company, since 1989; Vice President, Operating Company,
1989-1995
</TABLE>
- ------------------------
* Less than one percent (1%) of the outstanding Common Stock.
(1) Includes years served as a director of SAC.
(2) Represents shares owned by Mr. Grant's children in which Mr. Grant disclaims
beneficial interest.
(3) These shares are held indirectly in a trust for which Mr. Barrack acts as
trustee.
6
<PAGE>
(4) Includes 5,443 shares held indirectly by trusts for which Mr. Cohen acts as
trustee and 5,000 shares held in trust for the benefit of Mr. Cohen's adult
sister for which Mr. Cohen has voting power.
(5) Includes 159,871 shares beneficially owned by Mr. Crowe's spouse and 183,039
shares held in trust for the benefit of non-immediate family members and a
charitable organization for which Mr. Crowe's spouse has voting power.
(6) Includes 100,000 shares owned by California Jockey Club ("CJC") of which Mr.
Conn is a director and 1.7% shareholder. Mr. Conn disclaims any pecuniary
interest in these shares other than as a shareholder of CJC but, by virtue
of his position on the Board of CJC, shares the power to participate in
decisions regarding the voting and disposition of such shares.
(7) Represents 15,000 shares which Mr. Chillingworth has a fully-vested option
to acquire.
(8) Includes 86,322 shares of restricted stock which provide for restrictions on
transfer prior to vesting and are subject to forfeiture in certain
circumstances, 71,000 shares which Mr. Keller has a fully-vested option to
acquire, 961 fully-vested shares allocated to Mr. Keller in the Thrift Plan
and 7,000 shares held indirectly in a trust for which Mr. Keller acts as
trustee.
(9) Includes 36,000 shares which Mr. Goodrich has a fully-vested option to
acquire, 32,260 shares of restricted stock which provide for restrictions on
transfer prior to vesting and are subject to forfeiture in certain
circumstances and 1,873 fully-vested shares allocated to Mr. Goodrich in the
Thrift Plan.
Mr. Chillingworth filed a voluntary petition under Chapter 7 of the
Bankruptcy Code in February 1994 in connection with loans made by a commercial
bank to a real estate development corporation of which he was the principal
stockholder and where such loans were personally guaranteed by Mr.
Chillingworth. Mr. Chillingworth obtained a discharge from the bankruptcy
proceeding in June 1994.
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 an Executive Committee, an Audit Committee, a Compensation Committee, and a
Nominating Committee.
The Executive Committees of Operating Company and Realty both consist of
Stephen F. Keller (Chairman), Thomas J. Barrack, Jr., J. Terrence Lanni and
Thomas P. Mullaney. 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 two times during the year ended
December 31, 1995.
The Audit Committees of Operating Company and Realty both consist of William
D. Schulte (Chairman), Richard S. Cohen, J. Terrence Lanni and, effective with
his election in November 1995, James P. Conn. William C. Baker also served on
the Audit Committees until March 29, 1996 (the last business day prior to the
effective date of his appointment as Chairman and Chief Executive Officer of
7
<PAGE>
Realty). 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, 1995.
The Compensation Committees of Operating Company and Realty both consist of
Thomas P. Mullaney (Chairman), Thomas J. Barrack, Jr. and Arthur Lee Crowe.
William C. Baker also served on the Compensation Committees until March 29, 1996
(the last business day prior to the effective date of his appointment as
Chairman and Chief Executive Officer of Realty). 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 Committee for Operating Company met six times and the
Compensation Committee for Realty met five times during the year ended December
31, 1995.
The Nominating Committees of Operating Company and Realty both consist of
Richard S. Cohen (Chairman), Arthur Lee Crowe, Stephen F. Keller and William D.
Schulte. 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
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 of both Operating Company and Realty met on
two occasions during the year ended December 31, 1995.
The Nominating Committees will consider candidates for appointment to the
Boards of Directors recommended by The Companies' shareholders. Such
recommendations should be made in writing, addressed to the appropriate
Nominating Committee, and forwarded to the attention of the Secretary of either
Operating Company or Realty, as applicable. However, the selection of nominees
of the Board is solely within the discretion of each of The Companies' Board of
Directors. The Companies' respective by-laws include advance notice and other
requirements regarding nominations of persons at a shareholders' meeting other
than by the Board of Directors. A copy of the by-laws for either Operating
Company or Realty may be obtained by written request addressed to the attention
of the Secretary of Operating Company or Realty at the applicable address set
forth on the first page of this Joint Proxy Statement.
8
<PAGE>
During the year ended December 31, 1995, 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, each of the Boards
of Directors of Operating Company and 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 the directors
and officers of The Companies to file with the Securities and Exchange
Commission ("SEC") 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 SEC 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, 1995, each of
its officers and directors complied with all applicable Section 16(a) filing
requirements except for Tom D. Austin and Frederick B. Cordova of Realty, each
of whom filed the Form 3 Initial Statement of Beneficial Ownership of Securities
ten days late.
PROPOSAL TO APPROVE OPTION AWARD AGREEMENTS FOR THE CHAIRMAN AND CHIEF EXECUTIVE
OFFICER OF SANTA ANITA REALTY ENTERPRISES, INC.
At the Annual Meetings, shareholders will be asked to approve two option
award agreements (the "Option Agreements") granting options to purchase shares
of Realty Stock (the "Options") to William C. Baker, the recently-named Chairman
and Chief Executive Officer of Realty. The Option Agreements, and the grant of
the Options pursuant thereto, have been approved by the Compensation Committee
of Realty (the "Committee") and by Realty's Board of Directors (with Mr. Baker
abstaining from such action), subject to the receipt of shareholder approval at
the Annual Meetings. If approved by shareholders, the Option Agreements will be
effective as of April 1, 1996 (the "Award Date").
The Option Agreements are intended to qualify as "plans" for purposes of
Rule 16b-3 under the Securities Exchange Act of 1934, as amended, and Section
162(m) of the Internal Revenue Code (the "Code"). The following summary of the
Option Agreements is qualified in its entirety by the full text of each of the
Option Agreements, copies of which will be furnished to shareholders without
charge upon written request to the Shareholder Relations Office of The Companies
at P.O. Box 60014, Arcadia, California 91066-6014.
9
<PAGE>
GENERAL DESCRIPTION OF THE OPTION AGREEMENTS
The following table sets forth certain information with respect to the
Options proposed to be awarded to Mr. Baker under the Option Agreements:
BENEFITS UNDER
OPTION AWARD AGREEMENTS
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
REALTY STOCK
UNDERLYING EXERCISE
OPTIONS TO PRICE EXPIRATION
NAME AND POSITION BE GRANTED(1) ($/SH)(2) DATE
- ---------------------------------------------- ------------- ----------- ----------
<S> <C> <C> <C>
William C. Baker, Chairman and 200,000 $ 14.04 03/31/06
Chief Executive Officer, Realty 135,756 $ 14.04 03/31/06
</TABLE>
- ------------------------
(1) Number of shares reported excludes 14,244 shares of Realty Stock subject to
an option awarded to Mr. Baker on April 1, 1996 pursuant to the Realty 1995
Share Award Plan.
(2) Exercise price is equal to 100% of the fair market value of a share of
Realty Stock on the Award Date, as estimated by the Committee pursuant to
the terms of the Pairing Agreement between Operating Company and Realty.
Such estimate was determined on the basis of a closing price of $15.25 for a
share of Paired Common Stock on the Award Date, as reported on the New York
Stock Exchange Composite Tape. The gains, if any, to be realized by Mr.
Baker upon exercise of any portion of the Options are dependent on the
future performance of the Paired Common Stock, overall market conditions and
the satisfaction of the various conditions to vesting and exercise of the
Options as described below.
PERFORMANCE-VESTING OPTIONS. The first of the Option Agreements provides
for an award to Mr. Baker of Options to purchase 200,000 shares of Realty Stock
(the "Performance-Vesting Options"). The Performance-Vesting Options will become
exercisable only in the following circumstances: (i) if the price of a share of
Paired Common Stock reaches or exceeds $27.50 for a period of sixty consecutive
business days before April 1, 2001; (ii) immediately prior to a reorganization
that is consummated before April 1, 2001 in which Realty is not the surviving
entity and the shareholders of Realty receive consideration worth at least
$27.50 per share of Paired Common Stock; or (iii) immediately prior to a sale by
the shareholders that occurs before April 1, 2001 of substantially all of the
shares of Paired Common Stock at a price of $27.50 or more per share of Paired
Common Stock. The Performance-Vesting Options expire on April 1, 2001 unless one
of these specified events occurs by such date. The closing price of a share of
Paired Common Stock, as reported on the New York Stock Exchange Composite Tape
on April 3, 1996, was $15.00.
The stock price performance standard of $27.50 per share of Paired Common
Stock is subject to proportional adjustment by the Committee in such manner and
to such extent as it deems equitable in the event of any extraordinary dividend
or other extraordinary distribution in respect of the Paired Common Stock, any
reclassification, recapitalization, stock split, stock dividend, reverse stock
split, reorganization, merger, combination, consolidation, split-up or spin-off
of Realty, any repurchase or exchange of Realty Stock, Operating Stock or other
securities of the Companies, or any similar extraordinary corporate
transactions.
10
<PAGE>
TIME-VESTING OPTIONS. The second of the Option Agreements provides for an
award to Mr. Baker of Options to purchase 135,756 shares of Realty Stock (the
"Time-Vesting Options"). Fifty percent of the Time-Vesting Options become
exercisable on the first anniversary of the Award Date, and the remaining fifty
percent become exercisable on the second anniversary of the Award Date.
METHOD OF EXERCISE. Full payment for shares purchased upon the exercise of
either the Performance-Vesting or the Time-Vesting Options shall be made at the
time of such exercise by one or a combination of the following methods (such
methods other than the methods specified in clause (i) being subject to the
Committee's approval): (i) cash, electronic funds transfer or check, (ii) third
party payment, (iii) the delivery of shares of Realty Stock already owned by Mr.
Baker, or (iv) requesting that Realty reduce the number of shares of Realty
Stock otherwise issuable upon exercise by a number of shares of Realty Stock
with a fair market value equal to the Option exercise price. In addition, to
comply with the Pairing Agreement between Realty and Operating Company (the
"Pairing Agreement"), the Option Agreements require Mr. Baker, at the time he
exercises an Option, to purchase from Operating Company a number of unpaired
shares of Operating Stock equal to the number of shares of Realty Stock acquired
pursuant to the exercise of the Option. The shares of Operating Stock are
required to be purchased from Operating Company at their fair market value on
the date of exercise of the Option, as determined pursuant to the terms of the
Pairing Agreement. However, in connection with any such purchase of Operating
Stock by Mr. Baker, Realty has agreed to pay to Mr. Baker an amount which is
equal to the excess, if any, of the purchase price paid by Mr. Baker for such
Operating Stock over the fair market value of such Operating Stock on the Award
Date.
TRANSFERABILITY. The Options are not transferable by Mr. Baker other than
by will or the laws of descent and distribution or pursuant to a qualified
domestic relations order. Shares of Realty Stock issuable upon exercise of an
Option will be paid only to Mr. Baker (during his lifetime) or to Mr. Baker's
beneficiaries. However, to the extent permitted by law, the Committee may
establish procedures for payments to third parties or "cashless exercises" with
unaffiliated third parties who provide financing or otherwise facilitate the
exercise of awards consistent with applicable legal standards.
ACCELERATION. The vesting schedule for the Performance-Vesting Options is
not subject to acceleration. The Time-Vesting Options become immediately
exercisable if Mr. Baker is discharged without cause, resigns for good reason,
dies or becomes totally disabled, or upon the occurrence of a Change in Control
Event (except to the extent the Committee determines that an acceleration of the
exercise date upon a Change in Control Event would cause the deduction limits of
Section 280G of the Code to come into effect). The provision allowing for
acceleration of the vesting date for the Time-Vesting Options upon the
occurrence of a Change in Control Event is effective only through September 30,
1997, but is subject to automatic and successive 60-month extensions unless the
Board of Directors of Realty delivers six-months advance written notice to Mr.
Baker of termination of such provision. Under the applicable Option Agreement, a
"Change in Control Event" is generally defined as a 20% change in ownership of
Realty, the replacement of a majority of the members of the incumbent Board of
Directors of Realty (excluding replacement directors nominated by the incumbent
Board of Directors) or the liquidation or dissolution of Realty, subject to
certain exceptions.
TERMINATION OF EMPLOYMENT. To the extent that any of the Options are or
become exercisable, they may be exercised until March 31, 2001 (or, in the case
of the Performance-Vesting Options, the later of March 31, 2001 or 90 days after
the 60th consecutive business day on which the Paired
11
<PAGE>
Common Stock has attained a price of at least $27.50 per share) regardless of
the status of Mr. Baker's employment with Realty. On or after April 1, 2001 (or,
in the case of the Performance-Vesting Options, the later of April 1, 2001 or
the expiration of the 90-day period referred to in the preceding sentence), the
Options which have vested may be exercised only if Mr. Baker is then employed by
Realty. In all events, both Option Agreements expire on March 31, 2006.
FEDERAL INCOME TAX CONSEQUENCES OF THE OPTION AGREEMENTS
The following discussion summarizes the federal income tax consequences of
the Option Agreements under federal law as in effect as of April 1, 1996, which
is subject to change. State and local tax consequences are beyond the scope of
this summary.
STOCK OPTIONS. No taxable income will be realized by Mr. Baker upon the
grant of the Options pursuant to the Option Agreements. Upon exercise of an
Option, Mr. Baker will realize ordinary income in the amount of the excess of
the fair market value of the shares of Realty Stock on the date of exercise over
the Option price. At that time, Realty will be entitled to a corresponding
deduction in the amount of the ordinary income recognized by Mr. Baker and will
also realize gain on the excess of the fair market value of the Realty Stock
over its basis. Upon subsequent dispositions of the shares of Paired Common
Stock, Mr. Baker will realize short-term or long-term capital gain or loss,
depending on the period of time that the shares of Paired Common Stock are held
and the selling price. Realty will not be entitled to any further deduction at
that time.
ACCELERATED PAYMENTS. If Mr. Baker's Options become immediately exercisable
and such immediate exercisability is considered, within the meaning of Section
280G of the Code, to be contingent on an event that constitutes a change in
ownership or control of Realty or the sale of a substantial portion of Realty's
assets, the additional economic value, if any, attributable to the acceleration
may be deemed a "parachute payment" under Section 280G of the Code. The
additional value will be deemed a parachute payment if such value, when combined
with the value of other payments which are deemed to result from the change in
control, equals or exceeds a threshold amount equal to 300% of Mr. Baker's
average annual taxable compensation over the five calendar years preceding the
year in which the change in control occurs. In such case, the excess of the
total parachute payments over Mr. Baker's average annual taxable compensation
will be subject to a 20% non-deductible excise tax in addition to any income tax
payable. Realty will not be entitled to a deduction for that portion of any
parachute payment which is subject to the excise tax.
RECOMMENDATION OF THE BOARD OF DIRECTORS "FOR" THE PROPOSAL
The Board of Directors believes that the approval of the Option Agreements
will promote the interests of The Companies and their shareholders by more
closely linking the compensation of the Chief Executive Officer of Realty with
the financial performance of The Companies as a whole. Approval of the Option
Agreements requires the affirmative vote of holders of the majority of the
shares having voting power present or represented by proxy at the Annual
Meetings, provided that the votes cast with respect to the proposal represent
over 50% of the shares entitled to vote on the proposal.
THE BOARD OF DIRECTORS (WITH MR. BAKER ABSTAINING) HAS APPROVED THE OPTION
AGREEMENTS AND RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE PROPOSAL. Proxies
solicited by the Board of Directors will be so voted unless a shareholder
specifies otherwise in the proxy.
12
<PAGE>
EXECUTIVE OFFICERS
MANAGEMENT CHANGES
Effective April 1, 1996, William C. Baker was appointed as Chairman and
Chief Executive Officer of Realty, succeeding Stephen F. Keller in the position
of Chairman and Sherwood C. Chillingworth in the position of Chief Executive
Officer. Mr. Keller remains the Chairman and Chief Executive Officer of
Operating Company, and Mr. Chillingworth remains Vice Chairman of Realty and
holds the additional position of Executive Vice President of Realty.
CERTAIN INFORMATION
The following tables set forth the number of shares of The Companies' common
stock beneficially owned, directly or indirectly, by each of the named executive
officers, all directors and officers of Operating Company as a group and all
directors and officers of Realty as a group at March 13, 1996.
OPERATING COMPANY
<TABLE>
<CAPTION>
NUMBER OF SHARES OF PERCENT OF SHARES OF
NAME COMMON STOCK(1)(2) COMMON STOCK(1)(2)
------------------------------------------------------- ----------- -----------
<S> <C> <C>
Stephen F. Keller(3)................................... 165,283 1.5%
Clifford C. Goodrich(4)................................ 79,198 *
Thomas S. Robbins...................................... 13,400 *
Michael J. Manning(5).................................. 7,700 *
Richard D. Brumbaugh................................... 13,975 *
All directors and executive officers as a group (16
persons)(3)(4)(6)..................................... 921,209 8.1%
</TABLE>
REALTY
<TABLE>
<CAPTION>
NUMBER OF SHARES OF PERCENT OF SHARES OF
NAME COMMON STOCK(1)(2) COMMON STOCK(1)(2)
------------------------------------------------------- ----------- -----------
<S> <C> <C>
Sherwood C. Chillingworth.............................. 15,000 *
Brian L. Fleming....................................... 12,000 *
Christopher T. Stirling................................ 10,000 *
Tom D. Austin.......................................... 1,400 *
Frederick B. Cordova................................... 1,300 *
All directors and executive officers as a group (16
persons)(6)........................................... 840,677 7.4%
</TABLE>
- ------------------------
(1) Includes shares subject to options exercisable within 60 days of the date of
this statement, as follows: Keller -- 71,000; Goodrich -- 36,000; Robbins --
10,200; Manning -- 7,700; Brumbaugh -- 10,100; all directors and executive
officers of Operating Company as a group -- 140,800; Chillingworth --
15,000; Fleming -- 12,000; Stirling -- 10,000; Austin -- 1,000; Cordova --
1,000; and all directors and executive officers of Realty as a group --
39,000.
(2) Includes fully-vested shares allocated to the named officer's accounts in
The Companies' Thrift Plan as follows: Keller -- 961; Goodrich -- 1,873;
Robbins -- 3,200; Brumbaugh -- 3,875; and all directors and executive
officers of Operating Company as a group -- 9,909.
(3) Includes 7,000 shares held indirectly in a trust for which Mr. Keller acts
as trustee. Includes 86,322 shares of restricted stock which provide for
restrictions on transfer prior to vesting and are subject to forfeiture in
certain circumstances.
13
<PAGE>
(4) Includes 32,260 shares of restricted stock which provide for restrictions on
transfer prior to vesting and are subject to forfeiture in certain
circumstances.
(5) Mr. Manning is Vice President and Assistant General Manager of Los Angeles
Turf Club, Incorporated ("LATC"), a wholly-owned subsidiary of Operating
Company.
(6) For information concerning the voting and investment powers held by
non-employee directors, see share ownership information presented under the
caption "Election of Directors."
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, 1995, 1994 and 1993 of the Chief Executive Officer,
together with the other four most highly compensated executive officers of
Operating Company earning in excess of $100,000 in salary and bonus in 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ALL OTHER
ANNUAL COMPENSATION(1) COMPENSATION(2)
--------------------------------- LONG TERM ----------------
COMPENSATION
--------------------------
SECURITIES
RESTRICTED UNDERLYING
STOCK AWARDS OPTIONS
NAME AND PRINCIPAL POSITION SALARY BONUS ($) (#)
- -------------------------------------- ----------- --------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Stephen F. Keller, President 1995 $ 400,000 $ 0 -- 10,000 --
and Chief Executive Officer 1994 379,167 85,000 (3) 20,000 $ 9,448
1993 347,917 50,000 -- 22,000 2,299
Clifford C. Goodrich 1995 $ 242,000 $ 50,000 -- 9,000 --
Executive Vice President 1994 231,667 40,000 (3) 15,000 --
1993 221,667 30,000 -- 15,000 --
Thomas S. Robbins 1995 $ 161,333 $ 23,000 -- 5,000 --
Vice President -- Racing 1994 153,750 20,000 -- 8,000 $ 9,433
1993 147,500 15,000 -- 6,500 2,262
Michael J. Manning 1995 $ 151,333 $ 30,000 -- 7,000 --
Vice President -- LATC (4)
Richard D. Brumbaugh 1995 $ 121,000 $ 20,000 -- 5,000 --
Vice President -- Finance and 1994 110,542 20,000 -- 5,000 $ 6,754
Chief Financial Officer(5)
</TABLE>
- ------------------------
(1) Operating Company provides automobiles, club memberships and other
perquisites to certain key employees, including the officers listed above,
the value of which is not included in the table above and which in no case
exceeded 10% of the annual salary and bonus of any individual for the years
indicated.
14
<PAGE>
(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) Pursuant to Exchange Agreements entered into as of December 15, 1994 with
each of Messrs. Keller and Goodrich (which were subject to receiving
shareholder approval of the Operating Company 1995 Share Award Plan at the
Annual Meeting), Operating Company awarded 86,322 shares of Restricted Stock
("Restricted Shares") to Mr. Keller and 40,325 Restricted Shares to Mr.
Goodrich under Operating Company's 1995 Share Award Plan in exchange for
each of such officers agreement to release all of his rights and benefits
under previous deferred compensation arrangements with Operating Company
("DCA's"). On the date of the awards (December 15, 1994), the closing market
price of a share of Paired Common Stock was $14.125 as reflected on the New
York Stock Exchange Composite Tape. The number of Restricted Shares subject
to each award was calculated on the basis of various assumptions (including,
without limitation, assumptions regarding salary increases, post-retirement
interest, dividend and tax rates, and stock price appreciation) to provide
each of Messrs. Keller and Goodrich (as of their normal retirement dates)
with approximately the equivalent value of the benefits anticipated under
their existing DCA's.
The Restricted Shares are subject to certain restrictions on transfer, which
expire as follows: In the case of Mr. Keller, the restrictions expire with
respect to 50% of the Restricted Shares on July 1, 1996 and with respect to
an additional 10% of such shares on July 1 of each year thereafter, with all
such restrictions terminating July 1, 2001. In the case of Mr. Goodrich, the
restrictions on such transfers expired with respect to 20% of the Restricted
Shares on May 2, 1995, expire with respect to an additional 40% of such
shares on July 1, 1996 and with respect to an additional 10% of such shares
on July 1 of each year thereafter with all such restrictions terminating on
July 1, 2000. The restrictions on transfer may terminate earlier upon the
occurrence of certain events including termination of employment for "cause"
or "good reason" as defined in the Restricted Stock Agreements. Restrictions
also terminate on death or total disability of the executive officer. Upon a
termination of employment prior to the lapse of restrictions, Operating
Company has the right to acquire all Restricted Shares which are subject to
the restrictions without consideration. At year-end 1995, the Restricted
Shares were worth $1,408,162 at the then current market value (including
$1,025,074, with respect to 86,322 Restricted Shares held by Mr. Keller and
$383,088 with respect to 32,260 Restricted Shares held by Mr. Goodrich)
without giving effect to the diminution of value attributable to the
restrictions on such shares. Dividends are paid on the Restricted Shares at
the same rate payable on all other shares of Paired Common Stock.
(4) Mr. Manning, Vice President of Los Angeles Turf Club, Incorporated, a
wholly-owned subsidiary of Operating Company, has been considered an
executive officer of Operating Company since 1995.
(5) Mr. Brumbaugh became an executive officer of Operating Company on March 1,
1994. Previous to that, he served as Controller.
15
<PAGE>
STOCK OPTIONS. The following table sets forth the individual grants to the
named executive officers during 1995, the percentage that each grant represents
of the total options granted to employees during 1995, the exercise price, the
expiration date, and the potential realizable value of each of the options
(assuming either a 5% or 10% annualized rate of appreciation from the date of
grant).
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED
SHARES OF ANNUAL RATES OF STOCK
PAIRED PRICE APPRECIATION
COMMON STOCK % OF TOTAL FOR
UNDERLYING OPTIONS GRANTED EXERCISE OPTION TERM(1)
OPTIONS TO EMPLOYEES IN PRICE EXPIRATION ---------------------
GRANTED FISCAL YEAR ($/SH) DATE 5% 10%
------------ ---------------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Stephen F. Keller............................ 10,000 12.8% $12.625 12/12/05 $ 79,398 $ 201,210
Clifford C. Goodrich......................... 9,000 11.5% $12.625 12/12/05 $ 71,458 $ 181,089
Thomas S. Robbins............................ 5,000 6.4% $12.625 12/12/05 $ 39,699 $ 100,605
Michael J. Manning........................... 7,000 9.0% $12.625 12/12/05 $ 55,578 $ 140,847
Richard D. Brumbaugh......................... 5,000 6.4% $12.625 12/12/05 $ 39,699 $ 100,605
</TABLE>
- ------------------------
(1) The 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 Paired Common Stock, overall market conditions and the
option holder's continued employment through the applicable vesting periods.
Options granted in 1995 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 Operating Company's 1995
Share Award Plan ("Operating Award Plan") 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 Compensation Committee
("Committee"). Each loan would be evidenced by a note, bearing interest at a
rate determined by the Committee but not less than the applicable imputed
interest rate specified by the Internal Revenue Code, 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. The Committee retains discretion, subject
to limits in the Operating Award Plan, to modify the terms of outstanding
options and to re-price options. Upon a Change in Control, all unexpired options
granted become immediately exercisable except to the extent that the 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
16
<PAGE>
effect. A Change in Control is generally defined as a 20% change in ownership of
Operating Company or the replacement of a majority of the members of the
incumbent Board of Directors of Operating Company (excluding replacement
directors nominated by the incumbent Board of Directors), subject to certain
exceptions.
None of the named officers exercised any stock options during 1995 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, 1995 (broken
down between exercisable and unexercisable options):
FISCAL YEAR-END OPTION HOLDINGS
<TABLE>
<CAPTION>
NUMBER OF SHARES OF PAIRED
COMMON STOCK UNDERLYING
UNEXERCISED OPTIONS AT
DECEMBER 31, 1995
---------------------------
NAME EXERCISABLE UNEXERCISABLE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
Stephen F. Keller................................ 71,000 63,000
Clifford C. Goodrich............................. 36,000 38,000
Thomas S. Robbins................................ 10,200 17,300
Michael J. Manning............................... 7,700 21,300
Richard D. Brumbaugh............................. 10,100 14,900
</TABLE>
INDEBTEDNESS OF MANAGEMENT. In 1990, Mr. Goodrich, Executive Vice President
and Director of Operating Company, exercised stock options whereby he purchased
5,000 shares of Paired Common 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 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. The highest amount owed by Mr. Goodrich during 1995 to
Operating Company was $73,650. At February 28, 1996, the amount owed by Mr.
Goodrich to Operating Company was $61,375. The interest rate in effect during
1995 on the amount owed was 8.75%.
17
<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. During 1995, the members of the Committee
consisted of Messrs. Mullaney, Baker, Barrack and Crowe. Mr. Baker resigned from
the Committee effective March 29, 1996, the last business day prior to the
effective date of his appointment as Chairman and Chief Executive Officer of
Realty.
The duties of the Committee include evaluation of the performance of
management, the review and 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 and administers various compensation, pension
and benefit plans of Operating Company, including its stock option and share
award plans.
The Committee seeks to ensure that the compensation programs for executive
officers of Operating Company are effective in attracting, retaining and
motivating key executives responsible for the success of the corporation. This
requires that the overall compensation program be competitive with the
compensation offered by similar companies in the relevant geographical market.
The Committee believes that a portion of the annual compensation of each officer
should be related to the performance of Operating Company as well as the
individual's contribution to Operating Company so that a portion of the
officer's annual compensation is "at risk." The Committee believes that this
practice provides incentive to maximize individual and corporate performance.
In determining whether Operating Company's executive compensation program is
competitive, the Committee looks to the service industry in general and racing
concerns and real estate investment trusts in particular, some of which are
included in the All-REIT Index included in the performance graph appearing
elsewhere in this Joint Proxy Statement. It has defined the relevant
geographical market as such companies located in California for more senior
executives and to those located in the Los Angeles area for other executives.
Finally, based on Operating Company's and Realty's combined revenues, assets and
employees, the Committee compares its compensation program with those of service
companies in the relevant geographical market with revenues of $200 million to
$350 million, assets of $200 million to $400 million and 1,000 to 2,000
employees.
The executive compensation program is composed of three elements. The first
element is a base salary which approximates competitive median salary levels.
The second component is an annual incentive opportunity in the form of a cash
bonus which, together with the base salary, is targeted to provide total annual
direct cash compensation at the 60th to 75th percentile of the marketplace. The
- ------------------------
* THE REPORT OF THE COMPENSATION COMMITTEE SHALL NOT BE DEEMED TO BE
INCORPORATED BY REFERENCE BY ANY GENERAL STATEMENT INCORPORATING BY REFERENCE
THIS JOINT PROXY STATEMENT INTO ANY FILINGS OF THE COMPANIES PURSUANT TO THE
SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,
EXCEPT TO THE EXTENT THE COMPANIES SPECIFICALLY INCORPORATE THIS REPORT BY
REFERENCE THEREIN, AND SHALL NOT BE DEEMED SOLICITING MATERIAL OR OTHERWISE
DEEMED FILED UNDER EITHER OF SUCH ACTS.
18
<PAGE>
award of annual incentive compensation will be based on Operating Company's
performance in meeting targeted earnings per share before nonrecurring items
under its operating plan. The Committee also evaluates each individual's
performance with respect to individual objectives appropriate to the position
established at the beginning of the year and approved by the Committee. The
third component is the grant of long-term stock-based incentives, customarily in
the form of stock options, again based upon both Operating Company's performance
and the individual's performance.
Mr. Keller's base salary as Chief Executive Officer of Operating Company was
established in December 1994 at $400,000 for 1995 and 1996 on the basis of the
factors described above and, in particular, his leadership in formulating a
long-term growth strategy for Operating Company, his efforts in strengthening
the management team and his efforts in implementing the corporation's cost
reduction program. In connection with the recent management changes at Realty,
Mr. Keller has agreed to a reduction in his annual base salary to $300,000
effective April 1, 1996. Base compensation increases for other executives of
approximately 4 percent to 5 percent were made for 1996.
The Committee decided to make no annual incentive award to Mr. Keller for
1995. While Operating Company met its earnings per share performance goal and
Mr. Keller contributed significantly to that result, The Santa Anita Companies
recognized significant nonrecurring losses in 1995, and the Committee concluded
that, on balance, no cash bonus should be awarded to Mr. Keller. Other officers
of Operating Company received cash bonuses averaging approximately 17.1 percent
of their base compensation for 1995, based on the factors outlined above.
Mr. Keller received an option grant of 10,000 shares of common stock, which
represented 12.8 percent of the total grants made to Operating Company officers
and key supervisory personnel in 1995. Historically, the Chief Executive Officer
of Operating Company has received between 15 and 40 percent of the total options
granted each year since 1986. Other officers of Operating Company received
options on an aggregate of 68,000 shares of common stock, based on the factors
set forth above.
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 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 J. Thomas P.
Barrack, Jr. Arthur Lee Crowe Mullaney
April 8, 1996
19
<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
indicated, of the Chief Executive Officer, together with the other four
executive officers of Realty.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION(1) COMPENSATION
------------------------- ------------
SECURITIES
UNDERLYING
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS (#)
- ------------------------------------------------------ -------- ------- ------------
<S> <C> <C> <C> <C>
Sherwood C. Chillingworth 1995 $175,000 $30,000 9,000
Chief Executive Officer & Vice Chairman (2) 1994 129,167 30,000 45,000
Brian L. Fleming 1995 $170,625 $60,000 6,000
Executive Vice President, Chief Financial Officer 1994 99,687 20,000 35,000
and Secretary (3)(4)
Christopher T. Stirling 1995 $156,000 $10,000 6,000
President and Chief Operating Officer (5) 1994 107,250 20,000 30,000
Tom D. Austin (6) 1995 $100,000 $11,000 5,000
Vice President -- Design and Construction
Frederick B. Cordova (7) 1995 $ 71,603 $10,000 5,000
Vice President -- Development
</TABLE>
- ------------------------
(1) Realty provides automobiles or automobile allowances, club memberships and
other perquisites to certain key employees, including the officers listed
above, the value of which is not included in the table above and which in no
case exceeded 10% of the annual salary and bonus of any individual.
(2) Mr. Chillingworth joined Realty and was appointed Chief Executive Officer
and Vice Chairman effective March 16, 1994. Mr. Chillingworth served as
Chief Executive Officer of Realty until March 31, 1996.
(3) Mr. Fleming joined Realty and was appointed Executive Vice President and
Chief Financial Officer effective May 11, 1994.
(4) Bonus for 1995 includes a $30,000 bonus contingent upon Mr. Fleming's
employment at Realty on December 31, 1995 pursuant to the terms of his
employment agreement. Bonus for 1994 has been restated to reflect bonus
awarded in December 1995 for services performed in 1994.
(5) Mr. Stirling joined Realty and was appointed President and Chief Operating
Officer effective April 19, 1994.
(6) Mr. Austin became an executive officer of Realty on May 2, 1995. Previous to
that, he served as Director of Development. Mr. Austin began his employment
with Realty in January 1995.
20
<PAGE>
(7) Mr. Cordova became an executive officer of Realty on May 2, 1995. Mr.
Cordova began his employment with Realty in April 1995.
STOCK OPTIONS. The following table sets forth the individual grants to the
named executive officers during 1995, the percentage that each grant represents
of the total options granted to employees during 1995, the exercise price, the
expiration date, and the potential realizable value of each of the options
(assuming either a 5% or 10% annualized rate of appreciation from the date of
grant).
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SHARES OF PRICE APPRECIATION
REALTY STOCK % OF TOTAL FOR
UNDERLYING OPTIONS GRANTED EXERCISE OPTION TERM(1)
OPTIONS TO EMPLOYEES IN PRICE EXPIRATION ---------------------
GRANTED FISCAL YEAR ($/SH) DATE 5% 10%
------------ ---------------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Sherwood C. Chillingworth.................... 9,000 23.1% $11.415 12/12/05 $ 71,458 $ 181,089
Brian L. Fleming............................. 6,000 15.4% $11.415 12/12/05 $ 47,639 $ 120,726
Christopher T. Stirling...................... 6,000 15.4% $11.415 12/12/05 $ 47,639 $ 120,726
Tom D. Austin................................ 5,000 12.8% $15.25 05/02/05 $ 52,670 $ 133,476
Frederick B. Cordova......................... 5,000 12.8% $15.25 05/02/05 $ 52,670 $ 133,476
</TABLE>
- ------------------------
(1) The 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 Paired Common Stock, overall market conditions and the
option holder's continued employment through the applicable vesting periods.
Options granted in 1995 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 Realty 1995 Share
Award Plan ("Realty Award Plan") with an exercise price of 100% of the fair
market value of Realty Stock on the date of grant. Upon exercise of an option
under the Realty Award Plan, optionees are required to purchase from Operating
Company a number of shares of Operating Stock at a price equal to the then fair
market value of Operating Stock, equal to the number of shares of Realty Stock
acquired upon exercise. The exercise price and potential realizable values shown
above assume an acquisition price of a share of Operating Stock of $1.21 per
share for the grants to Messrs. Chillingworth, Fleming and Stirling and $1.50
per share for the grants to Messrs. Austin and Cordova and an assumed
acquisition price of Paired Common Stock equal to the fair market value of a
share of Paired Common Stock on the date of grant.
Under the Realty Award Plan, the exercise price of an option may be paid, in
full or in part, by delivering shares of Paired Common Stock to Realty or by
requesting that Realty withhold a number of shares of Realty Stock with a fair
market value equal to the option exercise price from the amount otherwise
issuable upon exercise. In addition, Realty may loan to an option holder funds
sufficient to
21
<PAGE>
exercise all or a portion of the options granted, such loans to be made at the
absolute discretion of the Compensation Committee ("Committee"). Each loan would
be evidenced by a note, bearing interest at a rate determined by the Committee
but not less than the applicable imputed interest rate specified by the Internal
Revenue Code, with full recourse to the option holder, and payable over a five
years with 10% annual minimum annual installments. In addition, Realty may also
loan an option holder funds sufficient to pay tax liability and loan funds and
award bonuses to an option holder in an aggregate amount equal to the purchase
price, in after-tax dollars, of Operating Stock required to be purchased under
the Realty Award Plan upon exercise of the option, less the aggregate par value
of the Operating Stock. The Committee retains discretion, subject to limits in
the Realty Award Plan, to modify the terms of outstanding options and to
re-price options. Upon a Change in Control, all unexpired options granted become
immediately exercisable except to the extent that the 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 Realty or the replacement of a
majority of the members of the incumbent Board of Directors of Realty (excluding
replacement directors nominated by the incumbent Board of Directors), subject to
certain exceptions.
None of the named officers exercised options during 1995 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, 1995 (broken
down between exercisable and unexercisable options).
FISCAL YEAR-END OPTION HOLDINGS
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
REALTY STOCK UNDERLYING
UNEXERCISED OPTIONS AT
DECEMBER 31, 1995
---------------------------
NAME EXERCISABLE UNEXERCISABLE
- ------------------------------------------------- ----------- -------------
<S> <C> <C>
Sherwood C. Chillingworth........................ 15,000 39,000
Brian L. Fleming................................. 12,000 29,000
Christopher T. Stirling.......................... 10,000 26,000
Tom D. Austin.................................... 0 8,000
Frederick B. Cordova............................. 0 8,000
</TABLE>
22
<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, prior to and during their service on such Committee, have never
served as officers of Santa Anita Realty Enterprises, Inc. ("Realty"),
determines and administers the compensation of the officers of Realty. During
1995, the members of the Committee consisted of Messrs. Mullaney, Baker, Barrack
and Crowe. Mr. Baker resigned from the Committee effective March 29, 1996, the
last business day prior to the effective date of his appointment as Chairman and
Chief Executive Officer of Realty.
The duties of the Committee include evaluation of the performance of
management, the review and 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 and administers various compensation, pension
and benefit plans of Realty, including its stock option and share award plans.
The Committee seeks to ensure that the compensation programs for executive
officers of Realty are effective in attracting, retaining and motivating key
executives responsible for the success of the corporation. This requires that
the overall compensation program be competitive with the compensation offered by
similar companies in the relevant geographical market. The Committee believes
that a portion of the annual compensation of each officer should be related to
the performance of Realty as well as the individual's contribution to Realty so
that a portion of the officer's annual compensation is "at risk." The Committee
believes that this practice provides incentive to maximize individual and
corporate performance.
In determining whether Realty's executive compensation program is
competitive, the Committee looks to the service industry in general and to
racing concerns and real estate investment trusts in particular, some of which
are included in the All-REIT Index included in the performance graph appearing
elsewhere in this Joint Proxy Statement. It has defined the relevant
geographical market as such companies located in California for more senior
executives and to those located in the Los Angeles area for other executives.
Finally, based on Realty's and Operating Company's combined revenues, assets and
employees, the Committee compares its compensation program with those of service
companies in the relevant geographical market with revenues of $200 million to
$350 million, assets of $200 million to $400 million and 1,000 to 2,000
employees.
The executive compensation program is composed of three elements. The first
element is a base salary which approximates competitive median salary levels.
The second component is an annual incentive opportunity in the form of a cash
bonus which, together with the base salary, is targeted to provide total annual
direct cash compensation at the 60th to 75th percentile of the marketplace. The
- ------------------------
* THE REPORT OF THE COMPENSATION COMMITTEE SHALL NOT BE DEEMED TO BE
INCORPORATED BY REFERENCE BY ANY GENERAL STATEMENT INCORPORATING BY REFERENCE
THIS JOINT PROXY STATEMENT INTO ANY FILINGS OF THE COMPANIES PURSUANT TO THE
SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,
EXCEPT TO THE EXTENT THE COMPANIES SPECIFICALLY INCORPORATE THIS REPORT BY
REFERENCE THEREIN, AND SHALL NOT BE DEEMED SOLICITING MATERIAL OR OTHERWISE
DEEMED FILED UNDER EITHER OF SUCH ACTS.
23
<PAGE>
award of annual incentive compensation will be based on Realty's performance in
meeting targeted earnings per share before nonrecurring items under its
operating plan. The Committee also evaluates each individual's performance with
respect to individual objectives appropriate to the position established at the
beginning of the year and approved by the Committee. The third component is the
grant of long-term stock-based incentives, customarily in the form of stock
options, again based upon both Realty's performance and the individual's
performance.
Mr. Chillingworth's base salary as Chief Executive Officer of Realty was
established in December 1994 at $175,000 for 1995 on the basis of the factors
described above and his efforts after taking into account the arrangement under
which Mr. Chillingworth is entitled to devote up to one-third of his time and
energy to the business of Oak Tree Racing Association, of which he currently
serves as Executive Vice President. The Committee also considered Mr.
Chillingworth's leadership in stabilizing corporate operations and in planning
the Entertainment Center project at Santa Anita Park. In December 1995, the
Committee assessed, among other things, Mr. Chillingworth's continuing
leadership in the Entertainment Center project and recommended, and the Board
approved, a base salary increase to $184,000 for Mr. Chillingworth for 1996. In
connection with the recent management changes at Realty, Mr. Chillingworth
remains Vice Chairman and serves as Executive Vice President of Realty. Base
compensation increases for other executives of approximately 4 percent to 5
percent were made for 1996.
The Committee recommended that Mr. Chillingworth receive, as an annual
incentive award, a cash bonus of $30,000 for 1995, based on the factors set
forth above and on Realty's success in meeting its earnings per share objective
for 1995. Other officers of Realty received cash bonuses averaging approximately
11.9 percent of their base compensation for 1995, based on the factors set forth
above.
Mr. Chillingworth received an option grant of 9,000 shares of common stock,
which represented 21.2 percent of the total grants made to Realty officers and
key supervisory personnel in 1995. Other officers of Realty received options on
an aggregate of 33,500 shares of common stock, based on the factors set forth
above.
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 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 J. Thomas P.
Barrack, Jr. Arthur Lee Crowe Mullaney
April 8, 1996
24
<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.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
THE SANTA ANITA COMPANIES S&P 500 ALL REIT INDEX
<S> <C> <C> <C>
1990 100 100 100
1991 92 131 136
1992 99 141 152
1993 108 155 180
1994 91 157 182
1995 83 215 215
</TABLE>
ASSUMES $100 INVESTED ON JANUARY 1, 1991
ASSUMES DIVIDEND REINVESTED
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
---------------------------------------
1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
The Santa Anita Companies............... 100 92 99 108 91 83
All REIT Index.......................... 100 136 152 180 182 215
S&P 500................................. 100 131 141 155 157 215
</TABLE>
- ------------------------
* THIS SECTION OF THE JOINT PROXY STATEMENT SHALL NOT BE DEEMED TO BE
INCORPORATED BY REFERENCE BY ANY GENERAL STATEMENT INCORPORATING BY REFERENCE
THIS JOINT PROXY STATEMENT INTO ANY FILINGS OF THE COMPANIES PURSUANT TO THE
SECURITIES ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED,
EXCEPT TO THE EXTENT THE COMPANIES SPECIFICALLY INCORPORATE THIS SECTION BY
REFERENCE THEREIN, AND SHALL NOT BE DEEMED SOLICITING MATERIAL OR OTHERWISE
DEEMED FILED UNDER EITHER OF SUCH ACTS.
25
<PAGE>
OTHER BENEFIT PLANS
FOR OPERATING COMPANY AND REALTY
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 $150,000, 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 (as defined in the plan), 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,
1995 subject to the maximum annual benefit of $120,000 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............................. $ 18,315 $ 36,715 $ 57,557 $ 79,241
$125,000............................. $ 23,315 $ 46,715 $ 72,557 $ 99,241
$150,000............................. $ 28,315 $ 56,715 $ 87,557 $ 120,000
$175,000............................. $ 28,315 $ 56,715 $ 87,557 $ 120,000
$200,000............................. $ 28,315 $ 56,715 $ 87,557 $ 120,000
$225,000............................. $ 28,315 $ 56,715 $ 87,557 $ 120,000
$250,000............................. $ 28,315 $ 56,715 $ 87,557 $ 120,000
$275,000............................. $ 28,315 $ 56,715 $ 87,557 $ 120,000
$300,000............................. $ 28,315 $ 56,715 $ 87,557 $ 120,000
$325,000............................. $ 28,315 $ 56,715 $ 87,557 $ 120,000
$350,000............................. $ 28,315 $ 56,715 $ 87,557 $ 120,000
$375,000............................. $ 28,315 $ 56,715 $ 87,557 $ 120,000
$400,000............................. $ 28,315 $ 56,715 $ 87,557 $ 120,000
$425,000............................. $ 28,315 $ 56,715 $ 87,557 $ 120,000
$450,000............................. $ 28,315 $ 56,715 $ 87,557 $ 120,000
$475,000............................. $ 28,315 $ 56,715 $ 87,557 $ 120,000
$500,000............................. $ 28,315 $ 56,715 $ 87,557 $ 120,000
</TABLE>
The officers under this plan as of December 31, 1995 and their years of
credited service are as follows: For Operating Company: Keller - 5 years;
Goodrich - 15 years; Robbins - 12 years; Manning - 15 years; and Brumbaugh - 24
years. For Realty: Chillingworth - 2 years; Fleming - 2 years; Stirling - 2
years; Austin - 1 year; and Cordova - 1 year.
26
<PAGE>
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 shares of Paired Common
Stock. Employee contributions are invested in a fixed income fund, an equity
fund or a balanced fund, or a combination of these funds, according to the
employee's choices. The plan provides for 20% vesting of Company contributions
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. In 1995, 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.
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 1995, 12 former directors with years
of service ranging from thirteen to thirty participated in the plan. Amounts
payable under the plan in 1995 totaled $126,480.
SEVERANCE AGREEMENTS. Operating Company has in effect severance agreements
with certain officers, including Messrs. Keller, Goodrich, Robbins, Manning and
Brumbaugh. Realty has in effect similar severance agreements with Messrs.
Chillingworth, Fleming and Stirling. 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 of the Internal Revenue Code to be exceeded.
EMPLOYMENT AGREEMENTS. Mr. Keller has an agreement for employment with
Operating Company, effective January 1, 1994 and expiring December 31, 1996,
subject to automatic renewal for one year periods unless either Mr. Keller or
Operating Company has noticed the other of his or its desire to terminate the
agreement at least six months prior to its expiration and subject to earlier
termination under the circumstances described below. The agreement provides that
Mr. Keller shall serve as Chief Executive Officer of Operating Company and shall
devote substantially all of his time and energy to the business of Operating
Company. The agreement provides for various benefits to Mr. Keller, including an
annual base salary, which is subject to periodic review and increase, but not to
decrease below $375,000 (although Mr. Keller recently agreed to a reduction in
his annual base salary to $300,000 effective April 1, 1996). Mr. Keller is also
entitled under the agreement to various fringe
27
<PAGE>
benefits and perquisites (such as car, club membership and financial planning
allowances) and to participate in the annual bonus, incentive, savings and
retirement welfare and vacation plans, programs and policies applicable
generally to other peer executives of Operating Company.
The agreement automatically terminates in the event of Mr. Keller's death or
"disability" (as defined in the agreement). Operating Company may also terminate
Mr. Keller's employment under the agreement at any time, with or without "cause"
(as defined in the agreement), upon 60 days written notice. The agreement
provides for various payments to Mr. Keller 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. Keller 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. Keller
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 (as defined in the agreement), Mr. Keller 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
Operating Company terminates Mr. Keller's employment other than for cause or
death or disability, or if Mr. Keller 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 lump sum payment equal to 112% of his then current base salary which would
otherwise be payable for the succeeding 18 months, subject to offset for any
cash lump sum payment he may receive pursuant to any severance agreement with
Operating Company. In the event Mr. Keller's employment is terminated for any
reason other than cause, any of the stock options granted to Mr. Keller 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. Goodrich has an agreement for employment with Operating Company to serve
as its Vice President and with Los Angeles Turf Club, Incorporated to serve as
its President and Chief Operating Officer, effective January 1, 1994 and
expiring December 31, 1996, subject to automatic renewal for one year periods
unless either Mr. Goodrich or Operating Company has noticed the other of his or
its desire to terminate the agreement at least six months prior to its
expiration. The other terms of his agreement are similar to those described
above for Mr. Keller, except that (a) Mr. Goodrich is entitled to receive a
current annual base salary which is subject to periodic review and increase, but
not to decrease below $230,000, (b) Mr. Goodrich is not entitled to a financial
planning allowance, and (c) Operating Company may terminate Mr. Goodrich's
employment, with or without "cause" upon 90 days' written notice.
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 (although Mr.
Chillingworth recently agreed to a change in his title to Executive Vice
President of Realty effective April 1, 1996). The agreement requires Mr.
Chillingworth to devote substantially two-thirds of his time and energy to the
business of Realty, but permits him to devote up to one-third of his
28
<PAGE>
time and energy to the business of Oak Tree Racing Association, of which he
currently serves as Executive Vice President. The agreement also contemplated
that Mr. Chillingworth would be appointed as a director of Realty and serve as
Vice Chairman of the Board of Realty, positions Mr. Chillingworth assumed on
June 16, 1994.
The agreement provides for various benefits to Mr. Chillingworth, including
an annual base salary which is subject to periodic review and increase, but not
to decrease below $160,000. 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 Plan) options to purchase 30,000 shares of Realty Stock at $18.75, which
was the fair market value of the Realty 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, the
provisions of which are the same as, and which are described above in the
summary of, Mr. Keller's employment agreement, (substituting Realty for
Operating Company).
Mr. Fleming has an agreement for employment with Realty to serve as
Executive Vice President and Chief Financial Officer commencing May 9, 1994 and
expiring June 30, 1996 (subject to earlier termination under the same
circumstances as described above for Mr. Chillingworth). The other terms of Mr.
Fleming's agreement are similar to those described above for Mr. Chillingworth,
except that (a) Mr. Fleming has agreed to devote substantially all of his time
and energy to the business of Realty, (b) Mr. Fleming is entitled to receive an
annual base salary of $150,000 per year through July 15, 1995 and $195,000 per
year from July 16, 1995 through June 30, 1996, subject to periodic review and
increase but not decrease, (c) Mr. Fleming was entitled to a guaranteed bonus of
$30,000 provided he was employed by Realty on December 31, 1995 and (d) as a
condition of the agreement, Mr. Fleming was granted (pursuant to the terms of
Realty's 1984 Stock Option Plan) options to purchase 25,000 shares of Realty
Stock at $17.125, which was the fair market value of the Realty Stock on the
date of grant.
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 above for Mr. Chillingworth). 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 which is subject to periodic review and increase, but
not to decrease below $150,000 and (c) as a condition of the agreement, Mr.
Stirling
29
<PAGE>
was granted (pursuant to the terms of Realty's 1984 Stock Option Plan) options
to purchase 20,000 shares of Realty Stock at $17.50, which was the fair market
value of the Realty Stock on the date of grant.
RELATED PARTY TRANSACTION
Mr. Chillingworth, an Executive Vice President 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 December 1999, Oak
Tree made rental payments of $3,515,000 to LATC during 1995.
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, Ernst & Young LLP has been
selected at this time for the 1996 audit. The firm of Ernst & Young LLP examined
each Company's financial statements for the year ended December 31, 1995, 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 appropriate
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 Annual Meetings, 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 1997, must be received at the
principal executive offices of the Company to which such proposal relates by
December 10, 1996, if such proposal is to be considered for inclusion in The
Companies' Joint Proxy Statement and form of proxy relating to those meetings.
The Companies' respective by-laws include advance notice and other requirements
regarding proposals for shareholder action at a shareholders' meeting other than
those proposed by the Board of Directors. A copy of the by-laws for either
Operating Company or Realty may be obtained by written request addressed to the
attention of the Secretary of Operating Company or Realty at the applicable
address set forth on the first page of this Joint Proxy Statement.
30
<PAGE>
ANNUAL REPORT (FORM 10-K)
The Companies undertake, on written request, to provide each shareholder,
without charge, a copy of The Companies' Joint Annual Report on Form 10-K for
the year ended December 31, 1995 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
60014, Arcadia, California 91066-6014, Attention: Kathryn J. McMahon, or Santa
Anita Realty Enterprises, Inc., P.O. Box 60025, Arcadia, California 91066-6025,
Attention: Brian L. Fleming.
31
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Printed on recycled paper L
<PAGE>
[LOGO] 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 Stephen F. Keller, Thomas P. Mullaney and
William D. Schulte 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 ("Operating
Company") and Santa Anita Realty Enterprises, Inc. ("Realty") held of record
by the undersigned on March 13, 1996, at the annual meetings of shareholders
to be held on May 7, 1996 or any adjournment thereof.
PLEASE MARK, SIGN, DATE AND RETURN THIS 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: Thomas J. Barrack, Jr., Richard S. Cohen,
Arthur L. Crowe, J. Terrence Lanni and Taylor B. Grant
-------------------------------------------------------
*Nominee Exception (print name)
FOR ALL
FOR WITHHOLD EXCEPT*
/ / / / / /
2. Election of Directors for Santa Anita Realty Enterprises, Inc.-
NOMINEES: Thomas J. Barrack, Jr., Richard S. Cohen,
Arthur L. Crowe, J. Terrence Lanni and Taylor B. Grant
-------------------------------------------------------
*Nominee Exception (print name)
FOR ALL
FOR WITHHOLD EXCEPT*
/ / / / / /
3. Approve two agreements providing for the grant to the Chairman and Chief
Executive Officer of Realty of options to purchase Realty stock.
FOR AGAINST ABSTAIN
/ / / / / /
In their discretion, the proxies are authorized to vote upon such other
business that may properly come before the meetings.
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 AND FOR APPROVAL
OF THE OPTION AWARD AGREEMENTS FOR THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER
OF REALTY.
Dated____________________, 1996
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.
<PAGE>
(The following copies of the two Nonstatutory Stock Option Agreements between
Santa Anita Realty Enterprises, Inc. and William C. Baker are filed as
appendices to the proxy materials filed with the Securities and Exchange
Commission pursuant to Instruction 3 to Item 10 of Schedule 14A, but are not
part of the proxy statement and do not otherwise constitute soliciting
material.)
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC.
NONSTATUTORY STOCK OPTION AGREEMENT
THIS AGREEMENT (the "Agreement") is dated as of the 1st day of April,
1996, by and between Santa Anita Realty Enterprises, Inc., a Delaware
corporation (the "Company") and William C. Baker (the "Optionee").
W I T N E S S E T H:
WHEREAS, on March 29, 1996, the Company's Board of Directors has
granted to the Optionee, effective as of April 1, 1996, (the "Award Date") a
nonstatutory option (the "Option") to purchase all or any part of an aggregate
of 135,756 shares of common stock (the "Aggregate Grant"), $0.10 par value, of
the Company (the "Common Stock"), upon the terms and conditions set forth
herein, the grant of which options are contingent upon the Company's
shareholders' approval.
NOW, THEREFORE, in consideration of the mutual promises and covenants
made herein and the mutual benefits to be derived herefrom, the parties hereto
agree as follows:
1. DEFINED TERMS. The Option hereunder is not being issued pursuant
to the Company's 1995 Share Award Plan (the "1995 Plan"). However, for ease of
reference capitalized terms used herein and not otherwise defined herein shall
have the meaning assigned to such terms in the Company's 1995 Share Award Plan.
2. GRANT OF OPTION. The Company has granted to the Optionee as a
matter of separate inducement and agreement in connection with his or her
employment, and not in lieu of any salary or other compensation for his or her
services, the right and option to purchase, on the terms and conditions
hereinafter set forth, all or any part of the Aggregate Grant at a price of
$14.04 per share, exercisable from time to time subject to the provisions of
this Agreement prior to the close of business on a date not later than the day
before the tenth anniversary of the Award Date (the "Expiration Date"). Such
price is at least 100% of the Fair Market Value of the Common Stock on the Award
Date.
3. EXERCISABILITY OF OPTION. The Option may be exercised from time
to time and for the number of shares as follows: 50% of the Aggregate Grant on
the first anniversary of the Award Date and an additional 50% of the Aggregate
Grant on the second anniversary of the Award Date.
Notwithstanding the foregoing, if, during the term of this Agreement,
the Optionee dies or incurs a Total Disability, or if the Optionee's employment
is terminated without Cause, or if the Optionee voluntarily terminates
employment for Good Reason, each outstanding Option granted to the Optionee
shall
<PAGE>
become exercisable, and the total number of shares subject thereto shall be
purchasable immediately. As used herein, the terms "Cause" and "Good Reason"
shall have the meaning assigned to them in the employment agreement between
Optionee and the Company.
To the extent the Optionee does not in any year purchase all or any
part of the shares to which the Employee is entitled, the Optionee has the right
cumulatively thereafter to purchase any shares not so purchased and such right
shall continue until the Option terminates or expires. Fractional share
interests shall be disregarded, but may be cumulated. No fewer than 10 shares
may be purchased at any one time, unless the number purchased is the total
number at the time available for purchase under the Option.
4. CHANGE IN CONTROL EVENT.
(a) Notwithstanding any provisions in this Agreement to the
contrary, each outstanding Option granted to the Optionee shall become
exercisable, and the total number of shares subject thereto shall be purchasable
immediately, upon a "Change in Control Event" (as that term is defined in the
Company's 1995 Share Award Plan).
(b) Notwithstanding subsection (a), the exercise date of Options
granted hereunder shall not be accelerated to the extent that the Committee
determines that such acceleration would cause the deduction limitations of
Section 280G of the Code to come into effect. In the event that all of an
Optionee's Options are not accelerated, the Optionee may request independent
verification of the Committee's calculations with respect to the application of
Section 280G. In such case, the Committee will provide to the Optionee within
15 business days after such a request an opinion from a nationally recognized
accounting firm selected by Optionee (the "Accounting Firm"). The opinion shall
state the Accounting Firm's opinion that any decrease in the acceleration of
Options hereunder is necessary to avoid the limits of Section 280G and shall
contain supporting calculations. The cost of such opinion shall be paid for by
the Company.
(c) This Section 4 shall be effective from April 1, 1996 through
September 30, 1997 and may not be amended or terminated during such period
except pursuant to an instrument in writing executed by all of the parties
hereto. Notwithstanding the preceding sentence, the Board of Directors of the
Company may, in its sole discretion and for any reason, provide written notice
of termination or amendment (effective as of the then applicable expiration
date, but not with respect to a Change in Control Event occurring on or before
such expiration date) to Optionee no later than six months before the expiration
date of this Section 4. If written notice is not so provided, this Section 4
shall be automatically extended for a period of 60
2
<PAGE>
months past the expiration date. This Section 4 shall continue to be
automatically extended for an additional 60 months at the end of such 60-month
period and each succeeding 60-month period unless notice is given in the manner
described in this Section 4.
5. ISSUANCE OF SANTA ANITA OPERATING COMPANY STOCK.
(a) The Option shall not be exercisable unless the Optionee
submits evidence satisfactory to the Company that a number of shares of the
common stock of Santa Anita Operating Company ("Operating Stock") equal to the
number of shares of Common Stock to be received upon exercise of all or a
portion of the Option will, and are able to, be purchased by or are available to
the Optionee, such that upon exercise the Optionee will receive or hold an equal
number of shares of Common Stock and Operating Stock. The Optionee shall
purchase the unpaired shares of Operating Stock at their Fair Market Value at
the time the Option is exercised, which value shall be determined pursuant to
the Pairing Agreement between the Company and Santa Anita Operating Company then
in effect. The Optionee shall be required to pair such unpaired shares of
Operating Stock with the Optionee's shares of Common Stock.
(b) In connection with the Optionee's purchase of Operating
Stock in accordance with clause (a), the Company shall pay to the Optionee as
additional compensation an amount equal to the excess, if any of (1) the
purchase price of such Operating Stock over (2) the Fair Market Value of such
Operating Stock on the Award Date. Payment of such amount, less any applicable
withholding, shall be made to the Optionee no later than 10 business days after
the date of purchase of such Operating Stock and exercise of the Option.
6. METHOD OF EXERCISE OF OPTION AND PAYMENT OF PURCHASE PRICE.
Subject to such further limitations and rules or procedures as the Committee may
from time to time establish, the exercise of all or any portion of the Option
shall be by means of written notice of exercise delivered to the Company,
specifying the number of whole shares with respect to which the Option is being
exercised, together with any written statements required by Section 14 of this
Agreement and payment of the purchase price according to the following terms:
(a) in cash, electronic funds transfer or by check payable to
the order of the Company;
(b) by notice and third party payment in such manner as may be
authorized by the Committee;
(c) subject to the Committee's ability in its absolute
discretion to deny such request and upon receipt of all necessary regulatory
approvals, the Optionee may request that the Optionee deliver in payment of a
portion or all of the purchase
3
<PAGE>
price, other already-owned shares of Common Stock (whether obtained through the
exercise of Options or otherwise), which shares of Common Stock shall be valued
at the then Fair Market Value. The Committee's consent is required prior to the
Optionee's use, pursuant to this clause, of Common Stock which he has held less
than six months. If the Committee permits delivery of Common Stock to pay the
purchase price, the Common Stock held six months or more may be used without
consent of the Committee; or
(d) subject to the Committee's ability in its absolute
discretion to deny such request, the Optionee may request that shares of Common
Stock that would otherwise be deliverable with a Fair Market Value equal to the
purchase price of the Common Stock being purchased be withheld in payment of the
purchase price.
(e) The Optionee shall in all cases be required to purchase the
number of unpaired shares of Operating Stock such that the Optionee will receive
or hold, upon exercising the Option, an equal number of shares of Common Stock
as Operating Stock, which shares shall then be paired by the Optionee.
7. CONTINUANCE OF EMPLOYMENT. Nothing contained in this Agreement
shall confer upon the Optionee any right to continue in the employ of the
Company or interfere in any way with the rights of the Company, which are hereby
expressly reserved, to reduce the Optionee's compensation from the rate in
existence at any time or to terminate the Optionee's employment for any reason.
The preceding sentence is subject, however, to the terms of any employment
agreement between the Optionee and the Company.
8. EFFECT OF TERMINATION OF RELATIONSHIP.
(a) To the extent the Option is exercisable on the date the
Optionee ceases to be employed by the Company, the Option shall be exercisable
by Optionee (or, in the event of Optionee's death, his Beneficiary) for a period
ending March 31, 2001. On or after April 1, 2001, the Option shall only be
exercisable if Optionee is then employed by the Company. In no event, however,
may the Option be exercised after the Expiration Date.
(b) If Optionee is employed by an entity which ceases to be a
Subsidiary, such event shall be deemed for purposes of this Section 8 to be a
termination of employment described in subsection (a) in respect of Optionee.
(c) Absence from work caused by military service or authorized
sick leave shall not be considered as a termination of employment for purposes
of this Section.
4
<PAGE>
9. NON-ASSIGNABILITY OF OPTION. Subject to the provisions of
Section 8 above, the Option and the rights and privileges conferred hereby are
not transferable or assignable and may not be offered, sold, pledged,
hypothecated or otherwise disposed of in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment, garnishment, levy
or similar process. Except as provided by this Agreement, the Option may be
exercised only by (i) the Optionee, during the Optionee's lifetime, or (ii) to
the extent provided by Section 8, by his transferees by will or under the laws
of descent and distribution, or (iii) by a person designated pursuant to a QDRO.
In the event that the spouse of the Optionee shall have acquired a community
property interest in the Option, the Optionee or such transferees may exercise
it on behalf of the spouse of the Optionee or such spouse's successor in
interest.
10. ADJUSTMENT AND TERMINATION OF OPTION UNDER CERTAIN CIRCUMSTANCES.
(a) If the outstanding shares of Common Stock or the outstanding
shares of Operating Company Stock are changed into or exchanged for cash, other
property or a different number or kind of shares or securities of the Company or
of Operating Company, as the case may be, or if additional shares or new or
different securities are distributed with respect to the outstanding shares of
Common Stock or the outstanding shares of Operating Company Stock, through a
reorganization or merger in which the Company or Operating Company, as the case
may be, is the surviving entity, or through a combination, consolidation,
recapitalization, reclassification, stock split, stock dividend, reverse stock
split, stock consolidation, dividend or distribution of cash or property to the
shareholders of the Company or of Operating Company, or if there shall occur any
other extraordinary corporate transaction or event in respect of the Common
Stock or the Operating Company Stock or a sale of substantially all the assets
of the Company or of Operating Company as an entirety which in the judgment of
the Committee materially affects the Common Stock or the Operating Company
Stock, then the Committee shall, in such manner and to such extent (if any) as
it deems appropriate and equitable (1) proportionately adjust any or all of (A)
the number and kind of shares of Common Stock that may be delivered under this
Agreement or (B) the exercise price per share under this Agreement; or (2) in
the case of an extraordinary dividend or other distribution, merger,
reorganization, consolidation, combination, sale of assets, split up, exchange,
or spin off, make provision for a cash payment or for the substitution or
exchange of the Agreement or the cash, securities or property deliverable to the
holder of the Agreement based upon the distribution or consideration payable to
holders of Common Stock or to holders of Operating Company Stock upon or in
respect of such event. In any of such events, the Committee may take such
action sufficiently prior to such event if necessary to permit the Optionee to
realize the
5
<PAGE>
benefits intended to be conveyed with respect to the underlying shares in the
same manner as is available to shareholders generally.
(b) Section 6.2(c) of the 1995 Plan is incorporated by
reference. As permitted by Section 6.2(c) of the 1995 Plan, the Option shall
terminate upon the occurrence of certain corporate reorganizations in which the
Company is not the survivor.
11. NOTICES. Any notice to be given under the terms of this
Agreement shall be in writing and addressed to the Secretary of the Company at
its principal office, and any notice to be given to the Optionee shall be
addressed to him or her at the address given beneath the Optionee's signature
hereto or at such other address as either party may hereafter designate in
writing to the other party. Any such notice shall be deemed to have been duly
given when enclosed in a properly sealed envelope addressed as aforesaid,
registered or certified, and deposited (postage and registry or certification
fee prepaid) in a post office or branch post office regularly maintained by the
United States Government.
12. SHAREHOLDER APPROVAL. The Option and all rights of Optionee
thereunder are contingent upon and subject to shareholder approval of this
Agreement. The Optionee acknowledges that the Option and all rights of the
Optionee hereunder are contingent upon shareholder approval.
13. OPTION IS PLAN. To the extent that Common Stock is issued under
this Agreement, this Agreement shall be regarded as a stock option plan adopted
by the Company. To the extent that Optionee purchases Operating Stock from
Santa Anita Operating Company ("Operating Company") in connection with the
issuance of Common Stock under this Agreement, the purchase of such shares of
6
<PAGE>
Operating Stock shall be treated as occurring pursuant to a separate stock
option plan of Operating Company.
14. COMPLIANCE WITH LAWS. The granting and vesting of the Option
under this Agreement and the offer, issuance and delivery of Paired Shares (or
Common Stock) pursuant to this Option are subject to compliance with all
applicable federal and state laws, rules and regulations (including, but not
limited to, state and federal securities laws (including, but not limited to,
registration and qualification requirements thereunder) and federal margin
requirements) and to such approvals by any listing, regulatory or governmental
authority as may, in the opinion of counsel for the Company, be necessary or
advisable in connection therewith. Any securities delivered under this
Agreement shall be subject to such restrictions, and the Optionee shall, if
requested by the Company, provide such assurances and representations to the
Company as the Company may deem necessary or desirable to assure compliance with
all applicable legal requirements.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed on its behalf by a duly authorized officer and the Optionee has
hereunto set his or her hand as of the day and year first above written.
SANTA ANITA REALTY ENTERPRISES, INC.
By:/s/ Thomas P. Mullaney
--------------------------------------
Thomas P. Mullaney
Chairman of the Compensation Committee
OPTIONEE
/s/ William C. Baker
-----------------------------------
(Signature)
William C. Baker
-----------------------------------
(Print Name)
7
<PAGE>
CONSENT OF SPOUSE
In consideration of the execution of the foregoing Nonstatutory Stock
Option Agreement by Santa Anita Realty Enterprises, Inc., I, Janice H. Baker
the spouse of the Optionee herein named, do hereby join with my spouse in
executing the foregoing Nonstatutory Stock Option Agreement and do hereby agree
to be bound by all of the terms and provisions thereof.
Date: 4/1/96 /s/ JANICE H. BAKER
_________________ ________________________________
Signature of Spouse
8
<PAGE>
SANTA ANITA REALTY ENTERPRISES, INC.
NONSTATUTORY STOCK OPTION AGREEMENT
THIS AGREEMENT (the "Agreement") is dated as of the 1st day of April,
1996, by and between Santa Anita Realty Enterprises, Inc., a Delaware
corporation (the "Company") and William C. Baker (the "Optionee").
W I T N E S S E T H:
WHEREAS, on March 29, 1996, the Company's Board of Directors has
granted to the Optionee, effective as of April 1, 1996, (the "Award Date") a
nonstatutory option (the "Option") to purchase all or any part of an aggregate
of 200,000 shares of common stock (the "Aggregate Grant"), $0.10 par value, of
the Company (the "Common Stock"), upon the terms and conditions set forth
herein, the grant of which options are contingent upon the Company's
shareholders' approval.
NOW, THEREFORE, in consideration of the mutual promises and covenants
made herein and the mutual benefits to be derived herefrom, the parties hereto
agree as follows:
1. DEFINED TERMS. The Option hereunder is not being issued pursuant
to the Company's 1995 Share Award Plan (the "1995 Plan"). However, for ease of
reference capitalized terms used herein and not otherwise defined herein shall
have the meaning assigned to such terms in the Company's 1995 Share Award Plan.
2. GRANT OF OPTION. The Company has granted to the Optionee as a
matter of separate inducement and agreement in connection with his or her
employment, and not in lieu of any salary or other compensation for his or her
services, the right and option to purchase, on the terms and conditions
hereinafter set forth, all or any part of the Aggregate Grant at a price of
$14.04 per share, exercisable from time to time subject to the provisions of
this Agreement prior to the close of business on a date not later than the day
before the tenth anniversary of the Award Date (the "Expiration Date"). Such
price is at least 100% of the Fair Market Value of the Common Stock on the Award
Date.
3. EXERCISABILITY OF OPTION.
(a) The Option may be exercised for 100% of the Aggregate Grant
(1) on or after the 60th consecutive business day after the Award Date that the
Fair Market Value of a Paired Share is $27.50 or more, provided such 60th day
occurs before April 1, 2001; (2) immediately prior to a reorganization that is
consummated before April 1, 2001 in which the Company is not the surviving
entity and the shareholders of the Company are to receive consideration worth
$27.50 or more per Paired Share; or (3) immediately prior to a sale by the
shareholders that occurs
<PAGE>
before April 1, 2001 of substantially all of the Paired Shares at a price of
$27.50 or more per share of Paired Share. Unless one of these three events
occurs by April 1, 2001, the Option shall expire on April 1, 2001.
(b) To the extent the Optionee does not in any year purchase all
or any part of the shares to which the Employee is entitled, the Optionee has
the right cumulatively thereafter to purchase any shares not so purchased and
such right shall continue until the Option terminates or expires. Fractional
share interests shall be disregarded, but may be cumulated. No fewer than 10
shares may be purchased at any one time, unless the number purchased is the
total number at the time available for purchase under the Option.
Notwithstanding anything to the contrary contained in this Agreement, if the
Option becomes exercisable, in all events the Optionee or the Optionee's
Beneficiary shall be entitled to a period of no less than 90 days to exercise
the Option.
(c) If there shall occur any extraordinary dividend or other
extraordinary distribution in respect of the Paired Share (whether in the form
of cash, Common Stock, Operating Stock, other securities, or other property), or
any reclassification, recapitalization, stock split (including a stock split in
the form of a stock dividend), reverse stock split, reorganization, merger,
combination, consolidation, split-up, spin-off, combination, repurchase, or
exchange of Common Stock, Operating Stock or other securities of the
corporation, or there shall occur any similar extraordinary corporate
transaction, then the Committee shall, in such manner and to such extent (if
any) as it deems appropriate and equitable, proportionately adjust the
performance standard of this Section 3.
4. ISSUANCE OF SANTA ANITA OPERATING COMPANY STOCK.
(a) The Option shall not be exercisable unless the Optionee
submits evidence satisfactory to the Company that a number of shares of
Operating Stock equal to the number of shares of Common Stock to be received
upon exercise of all or a portion of the Option will, and are able to, be
purchased by or are available to the Optionee, such that upon exercise the
Optionee will receive or hold an equal number of shares of Common Stock and
Operating Stock. The Optionee shall purchase the unpaired shares of Operating
Stock at their Fair Market Value at the time the Option is exercised, which
value shall be determined pursuant to the Pairing Agreement between the Company
and Santa Anita Operating Company then in effect. The Optionee shall be
required to pair such unpaired shares of Operating Stock with the Optionee's
shares of Common Stock.
(b) In connection with the Optionee's purchase of Operating
Stock in accordance with clause (a), the Company shall
2
<PAGE>
pay to the Optionee as additional compensation an amount equal to the excess, if
any of (1) the purchase price of such Operating Stock over (2) the Fair Market
Value of such Operating Stock on the Award Date. Payment of such amount, less
any applicable withholding, shall be made to the Optionee no later than 10
business days after the date of purchase of such Operating Stock and exercise of
the Option.
5. METHOD OF EXERCISE OF OPTION AND PAYMENT OF PURCHASE PRICE.
Subject to such further limitations and rules or procedures as the Committee may
from time to time establish, the exercise of all or any portion of the Option
shall be by means of written notice of exercise delivered to the Company,
specifying the number of whole shares with respect to which the Option is being
exercised, together with any written statements required by Section 13 of this
Agreement and payment of the purchase price according to the following terms:
(a) in cash, electronic funds transfer or by check payable to
the order of the Company;
(b) by notice and third party payment in such manner as may be
authorized by the Committee;
(c) subject to the Committee's ability in its absolute
discretion to deny such request and upon receipt of all necessary regulatory
approvals, the Optionee may request that the Optionee deliver in payment of a
portion or all of the purchase price, other already-owned shares of Common Stock
(whether obtained through the exercise of Options or otherwise), which shares of
Common Stock shall be valued at the then Fair Market Value. The Committee's
consent is required prior to the Optionee's use, pursuant to this clause, of
Common Stock which he has held less than six months. If the Committee permits
delivery of Common Stock to pay the purchase price, the Common Stock held six
months or more may be used without consent of the Committee; or
(d) subject to the Committee's ability in its absolute
discretion to deny such request, the Optionee may request that shares of Common
Stock that would otherwise be deliverable with a Fair Market Value equal to the
purchase price of the Common Stock being purchased be withheld in payment of the
purchase price.
(e) The Optionee shall in all cases be required to purchase the
number of unpaired shares of Operating Stock such that the Optionee will receive
or hold, upon exercising the Option, an equal number of shares of Common Stock
as Operating Stock, which shares shall then be paired by the Optionee.
3
<PAGE>
6. CONTINUANCE OF EMPLOYMENT. Nothing contained in this Agreement
shall confer upon the Optionee any right to continue in the employ of the
Company or interfere in any way with the rights of the Company, which are hereby
expressly reserved, to reduce the Optionee's compensation from the rate in
existence at any time or to terminate the Optionee's employment for any reason.
The preceding sentence is subject, however, to the terms of any employment
agreement between Optionee and the Company.
7. EFFECT OF TERMINATION OF RELATIONSHIP.
(a) The Option is exercisable by Optionee (or, in the event of
Optionee's death, his Beneficiary) for a period ending on the later of March 31,
2001 or 90 days after the end of the period described in Section 3(a)(1). On or
after the expiration of the period described in the preceding sentence, the
Option shall only be exercisable if Optionee is then employed by the Company.
In no event may the Option be exercised by anyone, however, unless the vesting
condition in Section 3(a) is satisfied and exercise occurs before the Expiration
Date.
(b) If Optionee is employed by an entity which ceases to be a
Subsidiary, such event shall be deemed for purposes of this Section 7 to be a
termination of employment described in subsection (a) in respect of Optionee.
(c) Absence from work caused by military service or authorized
sick leave shall not be considered as a termination of employment for purposes
of this Section.
8. NON-ASSIGNABILITY OF OPTION. Subject to the provisions of
Section 7 above, the Option and the rights and privileges conferred hereby are
not transferable or assignable and may not be offered, sold, pledged,
hypothecated or otherwise disposed of in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment, garnishment, levy
or similar process. The Option may be exercised only by (i) the Optionee,
during the Optionee's lifetime, or (ii) to the extent provided by Section 7, by
his transferees by will or under the laws of descent and distribution, or (iii)
by a person designated pursuant to a QDRO. In the event that the spouse of the
Optionee shall have acquired a community property interest in the Option, the
Optionee or such transferees may exercise it on behalf of the spouse of the
Optionee or such spouse's successor in interest.
9. ADJUSTMENT AND TERMINATION OF OPTION UNDER CERTAIN CIRCUMSTANCES.
(a) If the outstanding shares of Common Stock or the outstanding
shares of Operating Company Stock are changed into or exchanged for cash, other
property or a different number or kind
4
<PAGE>
of shares or securities of the Company or of Operating Company, as the case may
be, or if additional shares or new or different securities are distributed with
respect to the outstanding shares of Common Stock or the outstanding shares of
Operating Company Stock, through a reorganization or merger in which the Company
or Operating Company, as the case may be, is the surviving entity, or through a
combination, consolidation, recapitalization, reclassification, stock split,
stock dividend, reverse stock split, stock consolidation, dividend or
distribution of cash or property to the shareholders of the Company or of
Operating Company, or if there shall occur any other extraordinary corporate
transaction or event in respect of the Common Stock or the Operating Company
Stock or a sale of substantially all the assets of the Company or of Operating
Company as an entirety which in the judgment of the Committee materially affects
the Common Stock or the Operating Company Stock, then the Committee shall, in
such manner and to such extent (if any) as it deems appropriate and equitable
(1) proportionately adjust any or all of (A) the number and kind of shares of
Common Stock that may be delivered under this Agreement or (B) the exercise
price per share under this Agreement; or (2) in the case of an extraordinary
dividend or other distribution, merger, reorganization, consolidation,
combination, sale of assets, split up, exchange, or spin off, make provision for
a cash payment or for the substitution or exchange of the Agreement or the cash,
securities or property deliverable to the holder of the Agreement based upon the
distribution or consideration payable to holders of Common Stock or to holders
of Operating Company Stock upon or in respect of such event. In any of such
events, the Committee may take such action sufficiently prior to such event if
necessary to permit the Optionee to realize the benefits intended to be conveyed
with respect to the underlying shares in the same manner as is available to
shareholders generally.
(b) Section 6.2(c) of the 1995 Plan is incorporated by reference. As
permitted by Section 6.2(c) of the 1995 Plan, the Option shall terminate upon
the occurrence of certain corporate reorganizations in which the Company is not
the survivor.
10. NOTICES. Any notice to be given under the terms of this
Agreement shall be in writing and addressed to the Secretary of the Company at
its principal office, and any notice to be given to the Optionee shall be
addressed to him or her at the address given beneath the Optionee's signature
hereto or at such other address as either party may hereafter designate in
writing to the other party. Any such notice shall be deemed to have been duly
given when enclosed in a properly sealed envelope addressed as aforesaid,
registered or certified, and deposited (postage and registry or certification
fee prepaid) in a post office or branch post office regularly maintained by the
United States Government.
11. SHAREHOLDER APPROVAL. The Option and all rights of Optionee
thereunder are contingent upon and subject to
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shareholder approval of this Agreement. The Optionee acknowledges that the
Option and all rights of Optionee hereunder are contingent upon shareholder
approval.
12. OPTION IS PLAN. To the extent that Common Stock is issued under
this Agreement, this Agreement shall be regarded as a stock option plan adopted
by the Company. To the extent that Optionee purchases Operating Stock from
Santa Anita Operating Company ("Operating Company") in connection with the
issuance of Common Stock under this Agreement, the purchase of such shares of
Operating Stock shall be treated as occurring pursuant to a separate stock
option plan of Operating Company.
13. COMPLIANCE WITH LAWS. The granting and vesting of the Option
under this Agreement and the offer, issuance and delivery of Paired Shares (or
Common Stock) pursuant to this Option are subject to compliance with all
applicable federal and state laws, rules and regulations (including, but not
limited to, state and federal securities laws (including, but not limited to,
registration and qualification requirements thereunder) and federal margin
requirements) and to such approvals by any listing, regulatory or governmental
authority as may, in the opinion of counsel for the Company, be necessary or
advisable in connection therewith. Any securities delivered under this
Agreement shall be subject to such restrictions, and the Optionee shall, if
requested by the Company, provide such assurances and representations to the
Company as the Company may deem necessary or desirable to assure compliance with
all applicable legal requirements.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed on its behalf by a duly authorized officer and the Optionee has
hereunto set his or her hand as of the day and year first above written.
SANTA ANITA REALTY ENTERPRISES, INC.
By:/s/ Thomas P. Mullaney
--------------------------------------
Thomas P. Mullaney
Chairman of the Compensation Committee
OPTIONEE
/s/ William C. Baker
-----------------------------------
(Signature)
William C. Baker
-----------------------------------
(Print Name)
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CONSENT OF SPOUSE
In consideration of the execution of the foregoing Nonstatutory Stock
Option Agreement by Santa Anita Realty Enterprises, Inc., I, Janice H. Baker
the spouse of the Optionee herein named, do hereby join with my spouse in
executing the foregoing Nonstatutory Stock Option Agreement and do hereby agree
to be bound by all of the terms and provisions thereof.
Date: 4/1/96 /s/ JANICE H. BAKER
_________________ ________________________________
Signature of Spouse
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