<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 Fe Pacific Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 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:
-------------------------------------------------------------------------
Notes:
<PAGE>
LOGO
SANTA FE PACIFIC CORPORATION
- --------------------------------------------------------------------------------
Notice of Annual Meeting of Stockholders
- --------------------------------------------------------------------------------
The annual meeting of stockholders of Santa Fe Pacific Corporation will be
held at the Hyatt Regency-Woodfield, 1800 East Golf Road, Schaumburg, Illinois,
on Tuesday, April 25, 1995, at 10:00 a.m., for the following purposes:
(A) To elect four directors;
(B) To transact such other business as is properly brought before the
meeting and at any adjournment or postponement thereof.
Stockholders of record at the close of business on March 6, 1995, are
entitled to notice of the meeting and are entitled to vote at the meeting. A
list of such stockholders will be kept at the offices of the Corporation at
1700 East Golf Road, Schaumburg, Illinois 60173-5860, for a period of ten days
prior to the meeting.
By order of the Board of Directors.
MARSHA K. MORGAN
Corporate Secretary
1700 East Golf Road
Schaumburg, Illinois 60173-5860
March 8, 1995
YOUR VOTE IS IMPORTANT
PLEASE MARK, SIGN, AND DATE YOUR PROXY AND RETURN
IT PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT
YOU INTEND TO ATTEND THE MEETING.
<PAGE>
SANTA FE PACIFIC CORPORATION
1700 EAST GOLF ROAD
SCHAUMBURG, ILLINOIS 60173-5860
- --------------------------------------------------------------------------------
PROXY STATEMENT
MARCH 8, 1995
- --------------------------------------------------------------------------------
ANNUAL MEETING OF STOCKHOLDERS, APRIL 25, 1995
The annual meeting of stockholders of Santa Fe Pacific Corporation (the
"Corporation") will be held at 10:00 a.m. on April 25, 1995, in Schaumburg,
Illinois. The enclosed proxy card is solicited by the Board of Directors of the
Corporation, and your execution and prompt return of the card is requested.
Every stockholder, regardless of the number of shares held, should be
represented at the annual meeting. Whether or not you expect to be present at
the meeting, please mark, sign, and date the enclosed proxy card and return it
in the enclosed envelope. Any stockholder giving a proxy has the power to
revoke it at any time before it is voted at the meeting by delivering to the
Corporation written notification of revocation or a proxy bearing a later date,
or by attending the meeting in person and casting a ballot.
The shares represented by your proxy will be voted in accordance with the
specifications made on the proxy card. Unless otherwise directed, it is
intended that such shares will be voted:
(A) For the election as directors of the four nominees named below;
(B) In accordance with the best judgment of the persons acting under the
proxy concerning other matters that are properly brought before the
meeting and at any adjournment or postponement thereof.
Stockholders of record at the close of business on March 6, 1995 are entitled
to notice of the meeting and are entitled to vote at the meeting in person or
by proxy. Each share of common stock of the Corporation is entitled to one
vote. The Corporation's common stock is the only issued and outstanding class
of stock. At the close of business on February 28, 1995, the Corporation had
152,633,777 shares of common stock outstanding and entitled to vote. The
Corporation anticipates first sending this proxy statement and the enclosed
proxy card to stockholders on or about March 8, 1995.
ELECTION OF DIRECTORS
The Board of Directors consists of three classes, as nearly equal in number
as possible. One of the three classes, comprising approximately one-third of
the directors, is elected each year to succeed the directors whose terms are
expiring. The number of directors of the Corporation, as determined by the
Board under Article Fifth of the Corporation's Restated Certificate of
Incorporation, is currently ten and will be increased to eleven effective as of
March 28, 1995. The terms of four directors will expire in 1995, and all four
will be standing for election this year for three-year terms ending in 1998.
Three current directors will continue to serve in terms that expire in 1996,
and four current directors will continue to serve in terms that expire in 1997.
Directors hold office until the annual meeting for the year in which their
terms expire and until their successors are elected and qualify unless, prior
to that time, they have resigned, retired, or otherwise left office.
1
<PAGE>
The nominees for whom the enclosed proxy is intended to be voted are set
forth below. It is not contemplated that any of these nominees will be
unavailable for election, but if such a situation should arise, the proxy will
be voted in accordance with the best judgment of the persons acting under it
unless the stockholder has directed otherwise. Under the Corporation's By-laws,
directors are elected by a plurality of the votes cast at the meeting for
election of directors. Shares represented at the meeting in person or by proxy
but withheld or otherwise not cast for the election of directors will have no
effect on the outcome of the election.
Unless otherwise indicated, each director listed below has served in his or
her present occupation for at least five years. The indicated periods of
service as a director of the Corporation include prior service as directors of
Santa Fe Industries, Inc. and Southern Pacific Company, which two companies
combined in 1983 to form Santa Fe Pacific Corporation.
NOMINEES FOR ELECTION AS DIRECTORS TO BE ELECTED
FOR A TERM OF THREE YEARS ENDING IN 1998
<TABLE>
<CAPTION>
Shares of Common
First Stock Beneficially
Name, Age and Elected a Owned as of
Business Experience Director February 28, 1995(1)
- ------------------- --------- --------------------
<S> <C> <C>
JOSEPH F. ALIBRANDI, 66......................... 1982 1,550
Chairman, Chief Executive Officer and a director of Whittaker Corporation (an
aerospace company) since December 1985, and Chairman and a director of
BioWhittaker, Inc. (a biotechnology company) since October 1991; also Chief
Executive Officer of BioWhittaker, Inc. from October 1991 to September 1992.
Also a director of Catellus Development Corporation, BankAmerica Corporation,
and Jacobs Engineering Group Inc. Mr. Alibrandi is Chairman of the Compensation
and Benefits Committee and serves on the Audit Committee of the Board.
JOHN J. BURNS, JR., 63.......................... 1995(2) 1,000(2)
President and, since July 1992, Chief Executive Officer of Alleghany Corporation
(holding company with title insurance, investment management, reinsurance,
industrial minerals, and steel fastener operations). Previously President and
Chief Operating Officer of Alleghany Corporation. Also a director of Alleghany
Corporation and Armco Inc.
GEORGE DEUKMEJIAN, 66........................... 1991 500
Partner of Sidley & Austin (law firm) since January 1991. Formerly, Governor of
the State of California from 1983 until January 1991. Also a director of Health
Systems International, Inc. Mr. Deukmejian serves on the Audit Committee and the
Committee on Directors of the Board.
JEAN HEAD SISCO, 69............................. 1975 2,051
</TABLE>
Partner, Sisco Associates (management consultants). Also a director of Chiquita
Brands International, K-Tron International, Inc., McArthur/Glen Realty Corp.,
The Neiman Marcus Group, Inc., Santa Fe Pacific Gold Corporation, Textron Inc.,
and Washington Mutual Investors Fund. Mrs. Sisco serves on the Committee on
Directors and the Compensation and Benefits Committee of the Board.
2
<PAGE>
DIRECTORS WHOSE TERMS OF OFFICE CONTINUE
TERMS EXPIRING AT 1996 ANNUAL MEETING OF STOCKHOLDERS
<TABLE>
<CAPTION>
Shares of Common
First Stock Beneficially
Name, Age and Elected a Owned as of
Business Experience Director February 28, 1995(1)
- ------------------- --------- --------------------
<S> <C> <C>
ROBERT D. KREBS, 52.............................. 1983 1,382,456(3)
Chairman, President and Chief Executive Officer of the Corporation since June
1988; formerly President and Chief Executive Officer of the Corporation from
July 1987. Also a director of Phelps Dodge Corporation, Northern Trust
Corporation, Catellus Development Corporation, Santa Fe Energy Resources, Inc.,
and Santa Fe Pacific Gold Corporation. Mr. Krebs is Chairman of the Executive
Committee of the Board.
MICHAEL A. MORPHY, 62............................ 1972 7,000
Retired Chairman of the Board and Chief Executive Officer of California Portland
Cement Company (cement manufacturer). Mr. Morphy served as President of
MorMarketing (marketing of employee benefit concepts) from June 1985 until
September 1990. Also a director of Cyprus Amax Minerals Company, First
Interstate Bank of California, and Santa Fe Energy Resources, Inc. Mr. Morphy
serves on the Compensation and Benefits and the Audit Committees of the Board.
EDWARD F. SWIFT, 71.............................. 1973 5,568(4,5)
Consultant to Lehman Brothers, Inc. (investment banker and broker-dealer) since
December 1989, and prior to that, advisory director of Shearson Lehman Hutton,
Inc. from January 1988. Mr. Swift is Chairman of the Committee on Directors of
the Board and serves on the Executive and Audit Committees of the Board.
TERMS EXPIRING AT 1997 ANNUAL MEETING OF STOCKHOLDERS
<CAPTION>
Shares of Common
First Stock Beneficially
Name, Age and Elected a Owned as of
Business Experience Director February 28, 1995(1)
- ------------------- --------- --------------------
<S> <C> <C>
BILL M. LINDIG, 58............................... 1993 1,000
President and Chief Executive Officer since January 1995 of SYSCO Corporation
(marketer and distributor of foodservice products). Previously President and
Chief Operating Officer of SYSCO Corporation from November 1985. Also a director
of SYSCO Corporation since July 1983. Mr. Lindig serves on the Compensation and
Benefits Committee and the Committee on Directors of the Board.
ROY S. ROBERTS, 55............................... 1993 725
Vice President since October 1992 of General Motors Corporation (manufacturer of
motor vehicles) and General Manager, GMC Truck Division. Previously,
Manufacturing Manager of General Motors Corporation's North American Operations
Flint Automotive Division from 1992 and Manufacturing Manager of its Cadillac
Motor Car Division from 1990 to 1992. From 1988 to 1990, Vice President and
General Manager, Truck Operations for Navistar International Corporation
(manufacturer of trucks). Mr. Roberts serves on the Executive Committee and the
Compensation and Benefits Committee of the Board.
JOHN S. RUNNELLS II, 71.......................... 1975 10,947(4)
Owner and Operator, Runnells-Pierce Ranch in Bay City, Texas (ranching). Mr.
Runnells serves on the Committee on Directors and the Audit Committee of the
Board.
ROBERT H. WEST, 56............................... 1980 2,703(4)
</TABLE>
Chairman of the Board and a director of Butler Manufacturing Company
(manufacturer of systems and components for non-residential structures) since
May 1986. Also a director of Commerce Bancshares, Inc. and Kansas City Power &
Light Company. Mr. West is Chairman of the Audit Committee and serves on the
Executive and the Compensation and Benefits Committees of the Board.
3
<PAGE>
- --------
(1) The nature of beneficial ownership for shares listed in this column is sole
voting and investment power, except as otherwise indicated in the following
notes.
(2) Mr. Burns was elected by the Board as a director of the Corporation to be
effective as of March 28, 1995, to fill a vacancy created by an increase in
the size of the Board. Mr. Burns acquired his 1,000 shares of the
Corporation's common stock on March 1, 1995. Alleghany Corporation
beneficially owned approximately 11.8 percent of the Corporation's common
stock as of February 17, 1995. See "SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS" of this proxy statement.
(3) Includes 22,035 shares arising from participation in the Santa Fe Pacific
Retirement and Savings Plan for Salaried Employees as of February 28, 1995,
and 950,921 shares which may be acquired by Mr. Krebs within 60 days upon
the exercise of stock options granted under the Santa Fe Pacific Long Term
Incentive Stock Plan.
(4) Includes 932 shares, 2,567 shares, and 240 shares which are held by or in
trust for members of the families of Messrs. Swift, Runnells, and West,
respectively, and as to which beneficial ownership is disclaimed by them.
(5) Mr. Swift owns beneficially 3,500 common units of Santa Fe Pacific Pipeline
Partners, L.P., a Delaware limited partnership described under "OTHER
INFORMATION CONCERNING DIRECTORS" in this proxy statement. Mr. Swift's
ownership includes 1,000 common units held by his spouse as to which Mr.
Swift disclaims beneficial ownership.
OTHER INFORMATION CONCERNING DIRECTORS
Mr. Krebs also serves as Chairman, President and Chief Executive Officer and
as a director of The Atchison, Topeka and Santa Fe Railway Company ("Santa Fe
Railway"), a subsidiary of the Corporation. Mr. Krebs and Mr. Swift are
directors of Santa Fe Pacific Pipelines, Inc., which is a subsidiary of the
Corporation and the general partner of Santa Fe Pacific Pipeline Partners,
L.P., a Delaware limited partnership. Santa Fe Pacific Pipelines, Inc. owns a
two percent general partner interest and a 42 percent limited partnership
interest in Santa Fe Pacific Pipeline Partners, L.P. Mr. Runnells is a director
of SFP Pipeline Holdings, Inc., a subsidiary of the Corporation.
In 1994, the Board met 24 times, and each incumbent member of the Board
attended 75 percent or more of the aggregate of the total number of meetings of
the Board and the total number of meetings held by all committees of the Board
on which he or she served.
Board Committees. The Board has established Executive, Compensation and
Benefits, and Audit Committees, and a Committee on Directors. Following are
brief descriptions of the functions of its standing committees.
The Executive Committee, which did not meet in 1994, may exercise the powers
of the Board in the management of the business and affairs of the Corporation
when the Board is not in session, subject to certain limitations of Delaware
law.
The Compensation and Benefits Committee met five times during 1994. The
functions of the committee are: to review and make recommendations to the Board
with respect to salaries and other compensation paid to officers and key
employees; to administer the Corporation's incentive compensation and stock
plans, including the selection of participating officers and employees and the
establishment of performance goals; to monitor benefits under all employee
benefit plans; to consider and make recommendations to the Board with respect
to the management organization of the Corporation; and to make recommendations
to the Board regarding the membership of the Administration and Investment
Committees of the Corporation's retirement plan and retirement trust, review
the reports of such committees, and make recommendations to the Board regarding
substantive amendments to the plan or trust that do not change employee benefit
levels. No member of the Compensation and Benefits Committee is an employee of
the Corporation or its subsidiaries.
4
<PAGE>
The Audit Committee met three times during 1994. The functions of the
committee are: to recommend to the Board the engagement of an independent
accounting firm to conduct examinations of the annual consolidated financial
statements of the Corporation and its subsidiaries; to review the scope of the
independent accountant's audit and the results of the audit; and to confer with
the Corporation's internal auditors. No member of the Audit Committee is an
employee of the Corporation or its subsidiaries.
The Committee on Directors met once during 1994. The functions of the
committee are: to receive recommendations for, review, and evaluate the
qualifications of, and select and recommend to the Board, nominees for election
as directors; and to evaluate Board committees and committee membership
assignments, evaluate compensation for directors, and make recommendations to
the Board on such matters. The Committee on Directors will consider Director
nominees recommended by stockholders. Any such recommendation, together with
the nominee's qualifications and consent to being considered as a nominee,
should be sent in writing to the Corporate Secretary of the Corporation on or
before November 30 of the year preceding the annual meeting.
Directors' Compensation. Directors who are not employees of the Corporation
or its subsidiaries receive an annual retainer fee of $24,000, a fee of $1,000
for each meeting of the Board attended, and a fee of $1,000 ($1,500 for the
Committee Chairman) for each Committee meeting attended, plus expenses for each
Board or Committee meeting attended. Directors were given the option of
deferring all or a specified part of their compensation for services as a
director until this plan was terminated on June 29, 1994. Compensation was
deferred, at the director's option, until he or she retired from the Board,
reached age 72, or retired from his or her principal occupation, or upon plan
termination. Deferred amounts were credited with interest at the prevailing
treasury bill rate. The amounts deferred by directors were secured by the Trust
Agreements which are described under "EXECUTIVE COMPENSATION AND OTHER
INFORMATION, Employment Contracts and Change in Control Arrangements, Trust
Agreements" in this proxy statement.
By reason of Board resolution, no individual may serve as a director beyond
the annual meeting of stockholders on or following his or her seventy-second
birthday; a director who is also an employee of the Corporation, except the
Chairman of the Board, must retire as a director effective as of termination of
his or her employment with the Corporation. On July 26, 1988, the Board of
Directors adopted the Retirement Policy for Directors of Santa Fe Pacific
Corporation ("Retirement Policy"). An individual who is a member of the Board
and who is not an employee of the Corporation in the period immediately
preceding termination of service on the Board is eligible for benefits under
the Retirement Policy if he or she: (i) has served as a member of the Board for
ten consecutive years; (ii) has attained mandatory retirement age; or (iii) is
designated by the Compensation and Benefits Committee of the Board as eligible
for benefits. The annual benefit under this Retirement Policy is an amount
equal to the amount of the annual retainer fee for services as a Board member
at the time of termination of service and will cease upon the individual's
death.
----------------
Certain Relationships and Related Transactions. Mr. Jerome F. Donohoe, who
was Vice President--Law of the Corporation through September 30, 1994, is a
partner of the law firm of Mayer, Brown & Platt. Mayer, Brown & Platt serves as
principal outside counsel for the Corporation and its subsidiaries. Mayer,
Brown & Platt's fees and disbursements for services rendered to the Corporation
and its subsidiaries during 1994 aggregated approximately $4.2 million through
September 30, 1994. Although Mr. Donohoe served as Vice President--Law of the
Corporation, he was compensated by Mayer, Brown & Platt. Mr. Deukmejian is a
partner of the Sidley & Austin law firm, which firm provided legal services to
the Corporation in 1994 and is expected to provide legal services in 1995.
Compliance With Section 16(a) of the Securities Exchange Act of 1934. Mr.
Richard T. Zitting, who was an executive officer of the Corporation for a
portion of 1994, filed an Initial Statement of Beneficial Ownership of
Securities on Form 3 in 1994 pursuant to Section 16(a) of the Securities
Exchange Act of 1934, which report was two days late.
5
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
To the best of the Corporation's knowledge, the following are the only
persons who own beneficially five percent or more of its common stock
outstanding:
<TABLE>
<CAPTION>
Shares Held
Name and Address and Nature of
of Beneficial Owner Beneficial Ownership Percentage(5)
- ------------------- -------------------- -------------
<S> <C> <C>
Burlington Northern Inc................. 25,000,000(1) 16.4%
3800 Continental Plaza
777 Main Street
Fort Worth, Texas 76102-5384
Alleghany Corporation................... 18,061,996(2) 11.8%
Park Avenue Plaza
New York, NY 10055
FMR Corp................................ 12,263,162(3) 8.0%
82 Devonshire Street
Boston, MA 02109
The TCW Group, Inc...................... 9,822,875(4) 6.4%
865 South Figueroa Street
Los Angeles, CA 90017
</TABLE>
- --------
(1) Based on share holdings reported in Burlington Northern Inc.'s Initial
Statement of Beneficial Ownership of Securities on Form 3 filed pursuant to
Section 16(a) of the Securities Exchange Act of 1934 on February 17, 1995,
and provided to the Corporation. To the Corporation's knowledge, the
reporting person claims sole voting power and sole dispositive power.
(2) Based on share holdings reported in Alleghany Corporation's Initial
Statement of Beneficial Ownership of Securities on Form 3 filed pursuant to
Section 16(a) of the Securities Exchange Act of 1934 on February 17, 1995,
and provided to the Corporation. To the Corporation's knowledge, the
reporting person claims sole voting power and sole dispositive power for
11,846,958 shares and shared voting power and shared dispositive power for
6,215,038 shares.
(3) Based on share holdings reported in Schedule 13G, Amendment No. 3, dated
February 13, 1995, pursuant to the Securities Exchange Act of 1934 and
provided to the Corporation for holdings as of December 31, 1994. To the
Corporation's knowledge, the reporting person claims sole voting power for
126,255 shares and shared voting power for no shares, and claims sole
dispositive power for 12,263,162 shares.
(4) Based on share holdings reported in Schedule 13G, Amendment No. 2, dated as
of January 26, 1995, pursuant to the Securities Exchange Act of 1934 and
provided to the Corporation for holdings as of December 31, 1994. To the
Corporation's knowledge, the reporting person claims sole voting power and
sole dispositive power.
(5) Based on 152,633,777 shares of common stock of the Corporation outstanding
as of February 28, 1995.
6
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table shows, as of February 28, 1995, the number of shares of
the Corporation's common stock and common units of Santa Fe Pacific Pipeline
Partners, L.P. beneficially owned by the executive officers named in the
Summary Compensation Table, and owned by all present directors and executive
officers of the Corporation as a group. Common units represent limited
partnership interests in Santa Fe Pacific Pipeline Partners, L.P. and are
publicly traded on the New York Stock Exchange. Information as to the
Corporation's common stock and common units of Santa Fe Pacific Pipeline
Partners, L.P. beneficially owned by individual directors is set forth under
"ELECTION OF DIRECTORS" and "DIRECTORS WHOSE TERMS OF OFFICE CONTINUE" in this
proxy statement.
<TABLE>
<CAPTION>
Shares Held Common Units
and Nature of Held and Nature
Beneficial of Beneficial
Name of Beneficial Owner Ownership(1) Ownership(1)
- ------------------------ ------------- ---------------
<S> <C> <C>
Robert D. Krebs.................................. 1,382,456(2) --
Donald G. McInnes................................ 215,211(3) --
Denis E. Springer................................ 465,012(4) --
Steven F. Marlier................................ 223,367(5) --
Russell E. Hagberg............................... 186,648(6) --
Directors and Executive Officers As a Group...... 3,425,883(7) 3,600(8)
</TABLE>
- --------
(1) The nature of beneficial ownership for shares or units listed is sole
voting and investment power, unless otherwise indicated in the following
notes. As of February 28, 1995, no individual director or executive officer
owned more than one percent of the outstanding common stock of the
Corporation or more than one percent of the outstanding common units of
Santa Fe Pacific Pipeline Partners, L.P.
(2) Includes 22,035 shares through participation in the Santa Fe Pacific
Retirement and Savings Plan for Salaried Employees ("Retirement and Savings
Plan") as of February 28, 1995, and 950,921 shares which may be acquired
within 60 days upon the exercise of stock options granted under the Santa
Fe Pacific Long Term Incentive Stock Plan.
(3) Includes 3,063 shares through participation in the Retirement and Savings
Plan as of February 28, 1995, and 195,915 shares which may be acquired
within 60 days upon the exercise of stock options granted under the Santa
Fe Pacific Incentive Stock Compensation Plan and the Santa Fe Pacific Long
Term Incentive Stock Plan.
(4) Includes 429,267 shares which may be acquired within 60 days upon the
exercise of stock options granted under the Santa Fe Pacific Incentive
Stock Compensation Plan and the Santa Fe Pacific Long Term Incentive Stock
Plan.
(5) Includes 2,166 shares through participation in the Retirement and Savings
Plan as of February 28, 1995, and 209,842 shares which may be acquired
within 60 days upon the exercise of stock options granted under the Santa
Fe Pacific Incentive Stock Compensation Plan and the Santa Fe Pacific Long
Term Incentive Stock Plan.
(6) Includes 5,791 shares through participation in the Retirement and Savings
Plan as of February 28, 1995, and 156,134 shares which may be acquired
within 60 days upon exercise of stock options granted under the Santa Fe
Pacific Incentive Stock Compensation Plan and the Santa Fe Pacific Long
Term Incentive Stock Plan.
(7) Represents approximately 2.2 percent of the Corporation's outstanding
common stock. Includes 62,147 shares through participation in the
Retirement and Savings Plan as of February 28, 1995, and 2,779,349 shares
which may be acquired within 60 days upon the exercise of stock options
granted under the Santa Fe Pacific Incentive Stock Compensation Plan or the
Santa Fe Pacific Long Term Incentive Stock Plan.
(8) Represents less than one percent of outstanding common units of Santa Fe
Pacific Pipeline Partners, L.P.
7
<PAGE>
PROPOSED MERGER
On June 29, 1994, the Corporation and Burlington Northern Inc. ("BNI")
entered into a definitive Agreement and Plan of Merger (the "Merger
Agreement"), pursuant to which the Corporation and BNI are to merge (the
"Merger"). The Merger Agreement was amended on October 26, 1994, on December
18, 1994, and on January 24, 1995. Upon consummation of the Merger, each share
outstanding of the Corporation's common stock will be converted into the right
to receive a minimum of 0.40 of a share of BNI common stock. On February 7,
1995, the stockholders of each of the Corporation and BNI approved and adopted
the Merger Agreement, as amended. In connection with the Merger Agreement, the
Corporation and BNI conducted a joint tender offer to purchase 63,000,000
shares of the Corporation's common stock in the aggregate at a price of $20 per
share, net to the seller in cash, in which the Corporation purchased 38,000,000
shares and BNI purchased 25,000,000 shares.
Upon completion of the merger, the combined entity will be named Burlington
Northern Santa Fe Corporation ("BNSF"). Mr. Gerald Grinstein, BNI's chairman
and chief executive officer, will be chairman of BNSF. Mr. Robert D. Krebs,
chairman, president and chief executive officer of the Corporation, will be
president and chief executive officer of BNSF. Two-thirds of the directors of
BNSF will be designated by BNI, and one-third of the directors of BNSF will be
designated by the Corporation.
The Merger is subject to a number of conditions, including approval by the
Interstate Commerce Commission.
8
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table summarizes, for the years indicated, the compensation
paid by the Corporation and its subsidiaries to the Chief Executive Officer and
to each of the four other most highly compensated executive officers who were
serving as executive officers of the Corporation at the end of 1994.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
Annual -----------------------
Compensation Awards Payouts
----------------- ----------------------- -------
Securities
Underlying
Options/ All Other
Name and Principal Bonus Restricted SARs LTIP Compensation
Position Year Salary (1)(2) Stock (2) (Shares) (3) Payouts (4)
------------------ ---- -------- -------- ---------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert D. Krebs........ 1994 $475,000 $239,450 $359,175 232,334 $ 0 $24,246
Chairman, 1993 $450,000 $143,500 $215,325 329,834 $ 0 $ 4,000
President and Chief 1992 $450,000 $443,403 $ 30,803 0 $ 0 $ 4,000
Executive Officer of
the Corporation and of
Santa Fe Railway
Donald G. McInnes...... 1994 $225,000 $236,131 $ 88,534 20,000 $ 0 $13,903
Senior Vice President 1993 $181,900 $ 91,969 $ 34,488 80,000 $ 0 $ 4,000
and Chief Operating 1992 $170,000 $156,863 $ 0 0 $ 0 $ 4,000
Officer of Santa Fe
Railway
Denis E. Springer...... 1994 $250,000 $264,200 $ 0 0 $ 0 $13,950
Senior Vice President 1993 $237,100 $ 81,088 $121,632 100,000 $ 0 $ 4,000
and Chief Financial 1992 $228,000 $214,776 $ 0 0 $ 0 $ 4,000
Officer of the
Corporation and of
Santa Fe Railway
Steven F. Marlier...... 1994 $215,000 $298,900 $ 0 20,000 $ 0 $13,706
Senior Vice President 1993 $175,100 $109,107 $ 0 80,000 $ 0 $ 4,000
and Chief Marketing 1992 $170,000 $147,259 $ 0 50,000 $ 0 $ 4,000
Officer of Santa Fe
Railway
Russell E. Hagberg..... 1994 $210,000 $211,470 $ 0 1,836 $ 0 $11,829
Senior Vice President 1993 $185,500 $101,617 $ 10,829 80,000 $ 0 $ 4,000
and Chief of Staff of 1992 $175,000 $159,261 $ 0 0 $ 0 $ 4,000
Santa Fe Railway
</TABLE>
- --------
(1) The bonus awards for officers of Santa Fe Railway were paid pursuant to The
Atchison, Topeka and Santa Fe Railway Company Incentive Compensation Plan
("Incentive Plan"), in which salaried employees of Santa Fe Railway
participate. With respect to executive officers, the Incentive Plan
provides for the establishment of annual performance goals which may
include performance goals for Santa Fe Railway and individual productivity
objectives. The maximum award is established for each position and is based
upon 100 percent of the market reference point which reflects compensation
levels for comparable positions. The payment of an award depends upon
business goals achieved with 10 percent of the award based upon achievement
of individual goals. The
9
<PAGE>
Compensation and Benefits Committee ("Committee") has also permitted Messrs.
Krebs, McInnes, Springer, Marlier, and Hagberg (pursuant to the Incentive
Compensation Bonus Stock Program) to receive (at their option), in lieu of
up to 50 percent of their award under the Incentive Plan, a grant of
restricted stock or a grant of performance units as the Committee may
determine under the Santa Fe Pacific Long Term Incentive Stock Plan. The
grant is equal in value to 150 percent of the bonus that is waived and will
vest in three years from the date of grant or in two years if certain
performance criteria are attained. The bonuses waived by Messrs. Krebs and
McInnes have been excluded from the Bonus column and the value of the
performance units granted is included in the Restricted Stock column.
(2) Restricted stock shown for 1992 constitutes 2,250 shares granted to Mr.
Krebs effective as of January 1, 1992 under the Corporation's Incentive
Stock Compensation Plan ("Incentive Stock Plan") in lieu of a 1992 salary
increase. The restrictions on these shares lapsed December 31, 1992.
Messrs. Krebs, McInnes, Springer, Marlier, and Hagberg owned 42,158,
12,026, 18,805, 10,222, and 10,829 shares of restricted stock with a value
of $735,130, $209,703, $327,912, $178,246, and $188,831, respectively,
based upon a share value of $17.4375 as of December 31, 1994. Dividends are
paid on restricted stock awarded by the Corporation.
(3) Pursuant to the terms of the Corporation's Long Term Incentive Stock Plan,
these outstanding options were adjusted by a factor of 1.7274 as a result
of the spinoff of Santa Fe Pacific Gold Corporation, effective September
30, 1994 ("Spinoff Adjustment").
(4) Includes vested and unvested contributions by the Corporation to the
Retirement and Savings Plan, a 401(k) plan, and to a supplemental,
nonqualified Retirement and Savings Plan.
STOCK OPTION/SAR GRANTS
The following table sets forth information with respect to the individuals
named in the Summary Compensation Table concerning the grant of options and
stock appreciation rights during 1994.
OPTION/SAR GRANTS IN 1994 FISCAL YEAR
<TABLE>
<CAPTION>
Potential
Realizable Value at
Assumed Annual
Rates of Stock
Price Appreciation
Individual Grants for Option Term(4)
- --------------------------------------------------------------------------- -------------------
Number of % of Total
Securities Options/SARs Exercise
Underlying Granted to or Base
Options/SARs Employees in Price Expiration
Name Granted (Shares) Fiscal Year ($/Share) Date 5% 10%
- ------------------------ ---------------- ------------ --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Robert D. Krebs(1)...... 5,000 1.52% $22.19 01/01/04 $ 69,776 $ 176,826
27,309 8.31% $20.44 12/11/00 $169,037 $ 378,272
200,025 60.84% $20.44 08/01/98 $881,100 $1,897,478
Donald G. McInnes(2).... 20,000 6.08% $24.69 01/25/04 $310,548 $ 786,990
Denis E. Springer....... 0 0.00% $ 0.00 -- $ 0 $ 0
Steven F. Marlier(2).... 20,000 6.08% $24.69 01/25/04 $310,548 $ 786,990
Russell E. Hagberg(3)... 1,063 0.32% $20.13 01/01/97 $ 2,685 $ 5,573
</TABLE>
- --------
(1) The option grant with a $22.19 exercise price was granted to Mr. Krebs on
January 1, 1994 with a reload feature as a portion of his 1994 merit
increase and became exercisable on January 1, 1995. Pursuant to the Spinoff
Adjustment, the number of shares underlying this option grant was adjusted
to 8,637 shares with an option exercise price of $12.85. Mr. Krebs received
two option grants in connection with his use of shares to exercise options
based upon the fair market value of Corporation common stock on the date of
grant; both options with an exercise price of $20.44 became exercisable on
January 5, 1995. Pursuant to the Spinoff Adjustment, the number of shares
underlying these option grants were adjusted to 47,173 shares and 345,523
shares respectively, each with an option exercise price of $11.83.
10
<PAGE>
(2) The option grants for Messrs. McInnes and Marlier became exercisable in two
equal, annual installments beginning January 25, 1995. These option grants
contain a reload feature and vesting will accelerate upon retirement,
death, disability, or termination for an approved reason. Pursuant to the
Spinoff Adjustment, the number of shares underlying these option grants was
adjusted to 34,548 each, with an option exercise price of $14.29.
(3) Mr. Hagberg received this option grant in connection with his use of shares
to exercise his options and this option became exercisable on January 25,
1995. Pursuant to the Spinoff Adjustment, the number of shares underlying
this option grant were adjusted to 1,836, with an option exercise price of
$11.65.
(4) If the stockholders' common stock increased in value using the same
valuation method set forth in the table, the value of the stockholders'
equity as of December 31, 1994 would increase approximately $2.1 billion at
five percent and $5.2 billion at ten percent assumed stock price annual
appreciation rates.
OPTION/SAR EXERCISES AND HOLDINGS
The following table sets forth information with respect to the individuals
named in the Summary Compensation Table concerning their exercise of stock
options or SARs during 1994 and unexercised stock options and SARs held as of
the end of 1994.
AGGREGATED 1994 STOCK OPTION/SAR EXERCISES AND
YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options/SARs at In-the-Money Options/
Shares Aggregate Year End(2) (Shares) SARs at Year End(1)(3)
Acquired Value ------------------------- -------------------------
Name On Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert D. Krebs......... 520,639 $5,994,408 397,013 574,073 $2,913,572 $3,540,238
Donald G. McInnes....... 0 $ 0 107,097 103,644 $1,040,334 $ 628,169
Denis E. Springer....... 0 $ 0 363,062 86,370 $4,048,337 $ 649,286
Steven F. Marlier....... 6,082 $ 30,136 106,198 103,644 $ 917,102 $ 628,169
Russell E. Hagberg...... 4,078 $ 60,660 109,977 70,932 $1,079,812 $ 530,055
</TABLE>
- --------
(1) Dollar values are calculated by determining the difference between the fair
market value of the securities underlying the options or SARs and the
exercise or base price of the options or SARs at exercise or at year-end
($17.4375), as applicable.
(2) Pursuant to the administration of the Corporation's stock option plan,
outstanding options were adjusted by a factor of 1.7274 and the option
exercise price by a factor of .5789 to reflect the spinoff of Santa Fe
Pacific Gold Corporation, effective September 30, 1994. The numbers above
reflect the outstanding shares and values on an adjusted basis.
(3) Options or SARs are in-the-money if the fair market value of the underlying
securities exceeds the exercise or base price of the option or SAR.
11
<PAGE>
PENSION PLANS
The following table shows the estimated pension benefits payable to a covered
participant at normal retirement age (age 65) under the Santa Fe Pacific
Retirement Plan ("Retirement Plan"), as well as nonqualified supplemental
pension plans that provide benefits that would otherwise be denied participants
by reason of certain Internal Revenue Code limitations on qualified plan
benefits, based generally upon compensation that is covered under the plans and
upon years of service with the Corporation and its subsidiaries.
In light of the portion of his earned 1991 bonus under the Incentive Plan
that Mr. Krebs agreed to forego, the Board entered into a supplemental
retirement agreement with Mr. Krebs to provide that the bonus amount of
$213,165 that he forfeited would be included for purposes of his retirement
calculation as a supplemental benefit.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
Average Years of Service
Yearly --------------------------------------------------------------
Compensation 10 15 20 25 30 35 40
------------ -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 250,000...... $ 40,000 $ 60,000 $ 80,000 $ 99,000 $119,000 $139,000 $159,000
$ 300,000...... $ 48,000 $ 72,000 $ 95,000 $119,000 $143,000 $167,000 $191,000
$ 400,000...... $ 64,000 $ 96,000 $128,000 $160,000 $191,000 $223,000 $255,000
$ 500,000...... $ 80,000 $120,000 $160,000 $200,000 $240,000 $279,000 $319,000
$ 600,000...... $ 96,000 $144,000 $191,000 $239,000 $287,000 $335,000 $383,000
$ 800,000...... $128,000 $192,000 $255,000 $319,000 $383,000 $447,000 $511,000
$1,200,000...... $192,000 $288,000 $383,000 $479,000 $575,000 $671,000 $767,000
</TABLE>
A participant's average yearly compensation under the Corporation's pension
plans is based upon his or her average base salary and cash bonus earned for
the 60 consecutive months during the last 120 months of service for which such
average is the highest or, in the case of a participant who has been employed
for less than five years, the period of his or her employment with the
Corporation and its subsidiaries. The estimated years of service for Mr. Krebs,
Mr. McInnes, Mr. Springer, Mr. Marlier, and Mr. Hagberg are 29, 25, 12, 3, and
12, respectively. Benefit figures shown above are annual amounts payable based
on a straight life annuity under the Corporation's benefit formula without
regard to any Railroad Retirement, Social Security, or other offsets, assuming
normal retirement by the participant without a joint survivorship provision.
The Retirement Plan alternatively provides for joint survivorship options. For
purposes of the Pension Plan, covered compensation in 1994 for Mr. Krebs, Mr.
McInnes, Mr. Springer, Mr. Marlier, and Mr. Hagberg was $953,900, $520,164,
$514,200, $513,900, and $421,470, respectively.
EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS
The Corporation has approved severance agreements ("Severance Agreements")
for certain key executive officers of the Corporation including Messrs.
McInnes, Springer, Marlier, and Hagberg. The Severance Agreements are intended
to encourage such employees to remain in the employ of the Corporation during
periods of uncertainty in the event the Corporation undergoes a change in
control. A "change in control of the Corporation" is generally defined to occur
if: (a) any "person" becomes the beneficial owner of securities representing
25% or more of the voting power of the Corporation's or Santa Fe Railway's
outstanding securities; or (b) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board of
Directors of the Corporation cease to constitute at least a majority of the
Board; or (c) the Corporation's stockholders approve a merger or consolidation
of the Corporation or Santa Fe Railway with another corporation; or (d) the
Corporation's or Santa Fe Railway's stockholders approve a plan of complete
liquidation or an agreement for the
12
<PAGE>
sale or disposition by the Corporation or Santa Fe Railway of all or
substantially all of their assets, respectively. A "change in control of the
Corporation" event occurred on February 7, 1995 with the stockholders' vote
approving the Merger of the Corporation and BNI. Each Severance Agreement
provides for the payment of severance benefits to the employee if his or her
employment is terminated during the term of the Severance Agreement following
such an event either by the Corporation other than for "Cause" or by the
employee for "Good Reason," as those terms are defined therein.
The term of the Severance Agreements extends to December 31, 1995, and is
automatically extended for additional one-year periods unless, by September 30
of any year, the Corporation gives notice that the Severance Agreements will
not be extended for the following year. The Severance Agreements, however, are
automatically extended for a period of 36 months following a "change in control
of the Corporation."
The Severance Agreements for Messrs. McInnes, Springer, Marlier, and Hagberg
provide for: (a) lump sum payment equal to two years' base salary, or if
higher, the base salary paid in the last twenty-four months, or in lieu
thereof, the benefits provided under a subsidiary's severance program (as
described below), and two times the maximum bonus payment as if all performance
objectives have been met in full with an additional sum so that such benefits
are payable on an after-tax basis; (b) a lapse of restrictions on any
outstanding restricted stock grants and full payout of related Performance
Units; (c) a cash payment for each outstanding option equal to the amount by
which either (i) the fair market value of a share of common stock on the date
of termination or, in the case of Non-Qualified Stock Options, the highest
quoted per share price during the sixty-day period commencing on the date of
termination, or (ii) the price paid in connection with any "change in control
of the Corporation," whichever is higher, exceeds the fair market value of a
share of common stock on the date of grant; (d) legal fees and expenses
relating to claims under the Severance Agreements; and (e) life, disability,
and health benefits for a period of up to twenty-four months. The payments
provided in clauses (a), (b), and (c) above are payable pursuant to the
Severance Agreements and are further limited to the extent that the value
thereof, when aggregated with other benefits or payments, would exceed (i)
three times the "base amount" as defined in Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), the base amount approximating
the average of five years' compensation preceding a "change in control of the
Corporation," plus (ii) the value of all health and life insurance benefits,
and (iii) the earned portion of any award or benefit previously granted.
Santa Fe Railway and the Corporation's subsidiaries maintain severance
programs for all full-time salaried employees, including the executive officers
named in the Summary Compensation Table, who are terminated by their respective
companies other than for Cause as defined in the severance programs. A
participant is generally entitled to an amount up to one year's pay based upon
a participant's age, length of service, and current salary, or in certain
circumstances, supplemental payments provided that the aggregate does not
exceed two years' pay. The program further provides that in the event of a
change in control (which is similar to the definition used in the Severance
Agreements), the program will be maintained for a twenty-four month period.
Benefits under these programs will not be paid if a participant received
payments under a Severance Agreement.
The Corporation and its subsidiaries have change in control provisions in
certain of the incentive plans. In the event of a change in control (similarly
defined as in the Severance Agreement for the respective subsidiary), Santa Fe
Railway would be contractually bound to maintain the Incentive Plan and its
administrative committee throughout the year in which the change in control
occurred.
The Corporation's Stock Plan also has a change in control provision similar
to that discussed above except that it does not encompass changes in ownership
of Santa Fe Railway common stock or, in certain circumstances, assets. In the
event of a change in control, all awards of options and SARs become immediately
exercisable and all restrictions on restricted stock lapse except as limited by
individual agreement.
13
<PAGE>
The Retirement Plan has a similar change in control provision that restricts
the use of excess plan assets for purposes other than the payment of
participant benefits.
Trust Agreements. The Corporation maintains trust agreements ("Trust
Agreements") to set aside funds necessary to satisfy the Corporation's
obligations to present and former executives and directors under deferred
compensation programs and agreements, retirement commitments, certain
consulting agreements, and supplemental retirement plans. In 1988, one of the
Trust Agreements was amended to provide for permanent funding of benefits under
the supplemental retirement plans and the Retirement Policy for Directors of
Santa Fe Pacific Corporation on a present value basis, and to further provide
for a split-dollar life insurance plan ("Split-dollar Plan") for certain key
employees including Mr. Krebs and one individual who served as an executive
officer for a portion of 1994. The Split-dollar Plan provides for the purchase
of life insurance policies covering key employees, and for the payment to each
covered employee's beneficiary of a portion of the death benefit payable under
such employee's life insurance policy, with the remaining value in each policy
to be used to fund the other obligations of the trust established under such
trust. The trust retains all rights to any cash values of the policies and the
executive officers pay the cost of term coverage. In the event of a "change in
control of the Corporation" as defined in the Severance Agreements, the Trust
Agreements provide for the payment of amounts which may become due, subject
only to the claims of general creditors of the Corporation in the event that
the Corporation became bankrupt or insolvent.
COMPENSATION AND BENEFITS COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation and Benefits Committee (the "Committee") of the Board of
Directors is composed entirely of outside directors, none of whom are employees
or former employees of the Corporation or its subsidiaries. The Committee is
responsible for the overall executive compensation strategy of the Corporation,
the on-going monitoring of the strategy's implementation, and recommendations
to the Board to implement such strategies.
Executive Officers Compensation Policy. In 1994, the Committee reviewed and
reaffirmed its compensation philosophies previously established. The
Committee's executive compensation policy continues to have four overall
objectives: (1) to align the interests of its executive officers with that of
the Corporation's stockholders; (2) to link compensation to the performance of
the Corporation, as well as to the individual contribution of each officer; (3)
to emphasize variable as opposed to fixed compensation; and (4) to compensate
executives at a level which is competitive in the marketplace so that the
Corporation can continue to attract, motivate, and retain executives with
outstanding abilities.
Management of Annual Compensation. The Committee's executive compensation
strategy encompasses managing fixed compensation at a conservative level and
emphasizing variable, results-oriented compensation components, while ensuring
that it offers a competitive total compensation package to executives. The
Committee monitors total remuneration data on an annual basis to ensure that
the Corporation is appropriately aligned with the market for executive talent.
Base salaries for all executives and for all other salaried employees are based
upon salary ranges which are established for each position. Salary ranges are
determined through annual competitive analysis. In addition, each employee's
salary is based on an annual assessment of his or her performance.
During 1994, Hay Management Consultants conducted a review of the
compensation levels of the Corporation with those of corporations of comparable
size, revenues, and employee base. The Hay data bases for general industry,
transportation companies, and railroad companies of like size and revenues
(which includes companies in the Dow Jones Transportation Average), were the
basis for comparing compensation levels with respect to executives employed at
Santa Fe Railway. Based upon the review, it was determined that the Corporation
is at the moderate level of total compensation for executive employees. For
1995, executive base salaries and benefits have been set at moderately
competitive levels and total compensation is tied directly to performance
levels. Thus, executive
14
<PAGE>
compensation remains largely variable and should fluctuate with the performance
of the Corporation and stockholder value.
Performance-Based Executive Compensation Plans. The Committee seeks to tie
compensation to corporate performance and individual performance through
incentive plans maintained by the Corporation's operating units. Officers of
the Corporation who are officers and salaried employees of Santa Fe Railway
participate in The Atchison, Topeka and Santa Fe Railway Company Incentive
Compensation Plan (the "Incentive Plan"). In 1994, the Corporation's cash
incentive plans were designed to provide maximum awards at the 50th to 75th
percentile of competitive market data for each respective position. With
respect to executive officers, the Incentive Plan provides for the
establishment of annual performance goals which may include performance goals
for Santa Fe Railway and individual productivity objectives. Under the
Incentive Plan, awards to executive officers are weighted 80 percent upon the
achievement of targeted growth in Operating Income, 10 percent upon the
achievement of safety and on-time performance goals, and 10 percent upon the
achievement of individual productivity goals which are derived from the
Corporation's and Santa Fe Railway's key strategic objectives during each
calendar year. The individual productivity goals varied by executive officer
and were tailored to the individual's responsibilities. In 1994, these goals
were designed to promote the Corporation's strategic objectives in the areas of
cost containment and organizational effectiveness. Incentive Plan performance
goals were substantially achieved for 1994. The maximum award is established
for each position and is based upon 100 percent of the market reference point
which reflects compensation levels for comparable positions.
In 1993, the Committee adopted a new incentive and retention program ("Bonus
Stock Program") in connection with the Incentive Plan whereby each executive
officer and other key employees were given the opportunity to exchange up to 50
percent of the amount that would otherwise have been payable in cash to such
officer or employee as an annual incentive bonus for an award of restricted
stock or performance units. The number of shares of stock or performance units
subject to such an award is determined using the following formula:
(i) 1.5 times;
(ii) the quotient of:
(a) the amount of bonus foregone divided by
(b) the fair market value of a share of the Corporation's common
stock at the date of grant.
The Committee determined that providing participants with shares of common
stock or performance units having an initial 50 percent premium above the
amount of cash that would otherwise be payable was appropriate to encourage
stock ownership by executive officers and other key employees.
Shares of restricted stock or performance units awarded under the Bonus Stock
Program generally vest on the third anniversary of the award, except that all
of such shares or performance units will become vested upon the occurrence of
certain events (such as achievement of certain performance goals based upon
return on invested capital, death or a change of control other than a merger
with a Class I railroad) and that a pro rata portion of such shares or
performance units will vest upon the occurrence of certain other events (such
as retirement or an involuntary termination of employment without cause).
The Committee approved the Program to achieve two objectives. First, the
Committee believed that the amount of the Corporation's common stock owned by
executive officers should be increased to align further the economic interests
of management with those of stockholders. Second, the Committee believed it was
necessary to enhance the retentive effect of its compensation practices through
an award that provided an incentive to enhance stockholder value and to remain
in the Corporation's employ.
15
<PAGE>
The Committee has reviewed the impact upon the Corporation of Internal
Revenue Code Section 162(m), which disallows the deductibility of certain
executive compensation in excess of $1 million unless it is performance-based.
Absent extraordinary circumstances or outstanding company performance, it is
not expected that compensation will exceed this limitation and be
nondeductible. Mr. Krebs' compensation exceeded the Section 162(m) limitation
in 1994 because of the Santa Fe Pacific Gold Corporation stock received from
the spinoff of that company as a dividend on restricted stock held by him. The
Committee believes that, at this time, its ability to exercise discretion
outweighs the need to qualify compensation under Section 162(m). The Committee
thus believes there are circumstances in which the Corporation's interests are
best served by providing compensation that is not fully deductible under
Section 162(m).
Long-Term Incentive Plans. To encourage ownership in the Corporation and
alignment of executives' interests with those of stockholders, the Corporation
implemented in 1993 a new Long-Term Incentive Stock Plan (the "Stock Plan"). By
providing long-term incentives which comprise a substantial portion of an
executive's total compensation in the form of equity-based compensation, the
Stock Plan encourages executive performance that should lead to enhanced stock
performance. In determining amounts awarded, the Committee takes into account
current total compensation levels compared to competitive levels. Previous
awards and achievement of stock ownership goals are considered in determining
future stock awards. Option grants, which become exercisable over a number of
years, and performance-based restricted stock grants, with restrictions which
lapse over a number of years upon achievement of specified performance goals,
have been made under the Stock Plan to encourage executives to stay with the
Corporation and to identify with the long-term interests of the Corporation and
its stockholders. In 1994, without regard to reload option grants, long-term
incentive compensation comprised approximately one-third of total compensation
for executive officers (excluding Mr. Krebs) and approximately 40 percent of
total compensation for Mr. Krebs.
In 1994, option grants were awarded to four executive officers named in the
Summary Compensation Table and to six other salaried employees of the
Corporation, for a total of 328,795 shares.
The Corporation has also adopted stock ownership goals for the five named
executives of Santa Fe Railway and senior managers of that company that are
equal to one to five times an individual's base pay. Mr. Krebs has a stock
ownership goal of five times pay, and Messrs. McInnes, Springer, Marlier, and
Hagberg have stock ownership goals of two times pay, to be achieved over a
three-year time period beginning in 1993.
The 1994 Compensation of the Chief Executive Officer. The factors upon which
Mr. Krebs' 1994 compensation was based are the same as described above for all
executive officers pursuant to the Corporation's executive compensation
strategy. Mr. Krebs is eligible to participate in the same compensation plans
maintained by the Corporation and Santa Fe Railway that are available to other
executive officers of the Corporation as described above. Mr. Krebs' 1994 base
salary was considered low compared to market based upon the Hay review
discussed above. The annual incentive reported as earned in 1994 by Mr. Krebs
in the Summary Compensation Table was predominantly based on the achievement of
targeted growth in Santa Fe Railway's Operating Income from the Corporation's
1994 profit plan. Operating Income increased approximately 35 percent in 1994
from 1993. A lesser proportion of Mr. Krebs' 1994 bonus was based on his
achievement of Santa Fe Railway safety and service goals as well as personal
goals as determined by the Committee, derived from key long term and short term
business strategies. These business strategies included internal and external
confidential corporate initiatives designed to improve the Corporation's value
to stockholders.
In order to link compensation paid to Mr. Krebs to the Corporation's stock
performance and to provide him with an incentive for further growth in the
Corporation's total return to stockholders, a restricted stock grant with a
five year performance period was made in 1993 under the Stock Plan. In
16
<PAGE>
addition, to encourage his stock ownership, Mr. Krebs was eligible to
participate in the Bonus Stock Program previously described, and did
participate in 1994. Mr. Krebs is also entitled to receive option grants equal
to shares used to pay an option purchase price.
COMPENSATION AND BENEFITS COMMITTEE:
Joseph F. Alibrandi, Chairman
Bill M. Lindig
Michael A. Morphy
Roy S. Roberts
Jean Head Sisco
Robert H. West
17
<PAGE>
PERFORMANCE GRAPH
The following graph depicts a five year comparison of cumulative total
stockholder returns, assuming reinvestment of dividends,/1/ for the
Corporation, the Standard & Poor's 500 Stock Index ("S&P 500"), and the Dow
Jones Transportation Average ("DJTA")./2/ The Corporation is included within
both the S&P 500 and the DJTA indices. The graph assumes that $100 was
invested on December 31, 1989, in the Corporation's common stock, the S&P 500,
and the DJTA.
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG SANTA FE PACIFIC, S&P 500 INDEX AND DJTA
<TABLE>
<CAPTION>
Measurement Period SANTA FE S&P
(Fiscal Year Covered) PACIFIC 500 INDEX DJTA
- ------------------- ---------- --------- ----------
<S> <C> <C> <C>
1989 $100 $100 $100
1990 78 97 79
1991 171 126 120
1992 159 136 129
1993 275 150 159
1994 398 152 135
</TABLE>
- --------
(1) With respect to an investor in the Corporation's common stock (which
trades on the New York, Chicago and Pacific Stock Exchanges under "SFX"),
this analysis assumes that cash dividends were reinvested in additional
shares of SFX on the date the dividends were paid. Other distributions to
stockholders were included as follows:
(a) On December 4, 1990, the Corporation distributed its approximate 80
percent stock ownership in each of Catellus Development Corporation
("Catellus") and Santa Fe Energy Resources, Inc. ("Energy") to its
stockholders on a pro rata basis. Each SFX stockholder received one
share of Catellus stock for each four shares of SFX owned and one
share of Energy stock for each 3.317247 shares of SFX owned. For
this analysis, it is assumed that the investor sold these shares on
December 4, 1990 for the closing "when-issued" New York Stock
Exchange ("NYSE") price on such date and used the proceeds to
purchase additional shares of SFX at the closing "when-issued"
price.
(b) In January 1991, the Board voted to redeem rights issued under its
stockholder rights plan by means of a share distribution. Holders
received an amount of SFX equal to $0.05 per right on March 15,
1991. For this analysis, it is assumed that each investor received
.006557 additional shares for each share of SFX owned based on the
NYSE closing price for SFX on March 15, 1991.
(c) On September 30, 1994, the Corporation distributed its approximate
85.4 percent interest in Santa Fe Pacific Gold Corporation ("Gold")
to its stockholders on a pro rata basis. Each SFX stockholder
received one share of Gold stock for each 1.666633 shares of SFX
18
<PAGE>
owned. For this analysis, it is assumed that the investor sold these
shares on September 30, 1994 for the closing "when-issued" NYSE price
on such date and used the proceeds to purchase additional shares of
SFX at the closing "when-issued" price.
(2) Stock price performance shown on this graph is not necessarily indicative
of future price performance. The initial point selected for comparison of
investment performance, which for this year is December 31, 1989, as
required by Securities and Exchange Commission rules, is also a factor that
will affect total stockholder return over any given period of time.
INDEPENDENT PUBLIC ACCOUNTANTS
Price Waterhouse LLP served as the independent public accountant for the
Corporation in 1994. The Corporation's independent public accountant for 1995
will be selected by the Board at a regular Board meeting to be held in 1995.
Representatives of Price Waterhouse LLP will be present at the annual meeting
with the opportunity to make a statement if they desire to do so and are
expected to be available to respond to appropriate questions.
OTHER BUSINESS
The Board knows of no business that will come before the meeting except that
indicated above. However, if any other matters are properly brought before the
meeting, it is intended that the persons acting under the proxy will vote
thereunder in accordance with their best judgment.
COST OF PROXY SOLICITATION
The cost of preparing, assembling, and mailing this proxy material will be
borne by the Corporation. In addition to solicitation by mail, solicitations
may be made by regular employees of the Corporation or by paid solicitors in
person or by telephone, telecopy, or telegraph. Arrangements may be made with
brokerage houses, custodians, nominees, and fiduciaries to send proxy material
to their principals and the Corporation will reimburse them for their expense
in so doing.
STOCKHOLDER PROPOSALS
In accordance with the proxy rules of the Securities and Exchange Commission,
proposals by stockholders to be considered for inclusion in the proxy material
solicited by the Corporation for the 1996 annual meeting must be received at
the Corporation's executive offices no later than November 9, 1995. To be
eligible for inclusion, a proposal must also comply with all applicable
provisions of Regulation 14A under the Securities Exchange Act of 1934.
By order of the Board of Directors.
MARSHA K. MORGAN
Corporate Secretary
March 8, 1995
19
<PAGE>
DIRECTIONS TO
SANTA FE PACIFIC CORPORATION
ANNUAL MEETING OF STOCKHOLDERS
HYATT REGENCY--WOODFIELD
1800 EAST GOLF ROAD
SCHAUMBURG, ILLINOIS
(708) 605-1234
FROM CHICAGO OR O'HARE AIRPORT
------------------------------
Proceed west on Interstate 90 to Illinois 53 exit south. Proceed south on
Illinois 53 to the exit for Higgins/Golf Road, following the access road (stay
in the left lane) to the first stoplight (Woodfield Road). Turn left (going
under the expressway) and then left again to go north on the opposite access
road to reach Golf Road (Illinois 58) (north access road ends at Golf Road).
Turn left onto Golf Road and go approximately two blocks to turn right into the
Hyatt entrance. Immediately west of the Hyatt is an access road to the large
parking lot at the rear of the hotel.
FROM INTERSTATE 290/NORTH 53
----------------------------
Proceed north on Illinois 53/Interstate 290 to the Higgins/Golf Road exit.
Proceed north on the access road past stoplights at Higgins Road and Woodfield
Road to Golf Road (Illinois 58) (north access road ends at Golf Road). Turn
left onto Golf Road and go approximately two blocks to turn right into the
Hyatt entrance. Immediately west of the Hyatt is an access road to the large
parking lot at the rear of the hotel.
[MAP OF AREA SHOWING LOCATION OF HYATT REGENCY-WOODFIELD]
<PAGE>
SANTA FE PACIFIC CORPORATION
1700 East Golf Road, Schaumburg, IL 60173
This Proxy is solicited on behalf of the Board of Directors.
P
The undersigned hereby appoints Marsha K. Morgan and Denis E.
R Springer, and each of them, proxy for the undersigned, with power of
substitution, to vote as specified herein, all Common Stock held by the
O undersigned, with the same force and effect as the undersigned would be
entitled to vote if personally present, at the annual meeting of
X stockholders of the Company to be held in The Hyatt Regency-Woodfield,
1800 East Golf Road, Schaumburg, IL, on Tuesday, April 25, 1995, at
Y 10:00 A.M. and at any adjournment or postponement thereof. In their
discretion, the proxies are authorized to vote upon such other business
as is properly brought before the meeting.
Election of Directors--Nominees are:
Joseph F. Alibrandi
John J. Burns, Jr.
George Deukmejian
Jean Head Sisco
You are encouraged to specify your choices by marking the appropriate
box, SEE REVERSE SIDE, but you need not mark any box if you wish to vote
in accordance with the Board of Directors' recommendation. The Proxy
Committee cannot vote your shares unless you sign and return this card.
PLEASE SIGN AND DATE ON REVERSE SIDE
-------------
SEE REVERSE
SIDE
-------------
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
Annual Meeting of Stockholders
of
Santa Fe Pacific Corporation
April 25, 1995
10:00 A.M.
Hyatt Regency-Woodfield
1800 East Golf Road
Schaumburg, IL
<PAGE>
- --------------------------------------------------------------------------------
[X] Please mark your _____ | 8664
vote as in this | |_____
example. |
This Proxy, when properly executed, will be voted in the manner directed herein.
If no directions are made, this proxy will be voted "FOR" the Nominees for
Director.
- --------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR all Nominees:
- --------------------------------------------------------------------------------
Election of Directors "FOR" FOR WITHHELD If marked, vote
all nominees (except as [_] [_] is withheld from
marked to the contrary below) all nominees listed
NOMINEES FOR DIRECTOR:
Joseph F. Alibrandi
John J. Burns, Jr.
George Deukmejian
Jean Head Sisco
To withhold authority to vote for any individual nominee, write the name of the
nominee(s) in the space provided below
- --------------------------------------
- --------------------------------------------------------------------------------
In their discretion, the proxies are
authorized to vote upon such other
business as is properly brought before
the meeting.
Please sign exactly as name appears
hereon. Joint owners should each sign.
When signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. This
proxy votes all shares held in all
capacities.
------------------------------------
SIGNATURE DATE
------------------------------------
SIGNATURE(S) DATE
(IF HELD JOINTLY)
------------------------------------
TITLE OR AUTHORITY
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
/\ FOLD AND DETACH HERE /\
Santa Fe Pacific Corporation
Please sign, date and return your proxy in the
enclosed envelope.
- --------------------------------------------------------------------------------
