<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
<PAGE>
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.
