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.
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(Name of Registrant as (Name of Registrant as
Specified In Its Charter) Specified In Its Charter)
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(Name of Person(s) Filing (Name of Person(s) Filing
Proxy Statement, if other Proxy Statement, if other
than the Registrant) 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:
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2) Aggregate number of securities to which transaction applies:
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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):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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/ / 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:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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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 2, 1995
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 2, 1995 at 10:00 A.M. and 10:30 A.M.,
respectively, for the following purposes:
1. To elect two Directors of Operating Company for terms to expire in 1998;
2. To elect three Directors of Realty for terms to expire in 1998;
3. To approve the Santa Anita Operating Company 1995 Share Award Plan;
4. To approve the Santa Anita Realty Enterprises, Inc. 1995 Share Award
Plan; and
5. To transact such other business as may properly come before the meeting
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, 1995 will be entitled to vote at the
meeting.
KATHRYN J. McMAHON BRIAN L. FLEMING
Secretary Secretary
Santa Anita Operating Company Santa Anita Realty Enterprises, Inc.
Arcadia, California Arcadia, California
March 29, 1995 March 29, 1995
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.
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 2, 1995
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SOLICITATION OF PROXIES
Your proxy in the form enclosed is solicited by the respective Boards of
Directors of Santa Anita Operating Company ("Operating Company") and Santa Anita
Realty Enterprises, Inc. ("Realty") (sometimes referred to as a "Company" and
collectively as "The Companies") for use at the Annual Meetings of Shareholders
of The Companies to be held in the Club House of Santa Anita Park, 285 West
Huntington Drive, Arcadia, California on May 2, 1995 at 10:00 A.M. and 10:30
A.M., respectively. Your proxy may be revoked by you at any time prior to its
use by filing with the Secretary of the appropriate Company a written revocation
or a duly executed proxy bearing a later date, or by attending the meeting and
voting in person. The shares represented by the proxies received will be voted
at the meeting in the manner described thereon or, if no direction is indicated
(as in a situation where voting for directors is conducted by cumulative
voting), the shares will be voted in accordance with the recommendations of the
respective Boards of Directors. The solicitations of the proxies are being made
on behalf of the respective Boards of Directors of The Companies. The cost of
soliciting proxies will be borne by The Companies. Solicitations will be made
primarily by mail, but regular employees of The Companies, without additional
remuneration, may solicit proxies by telephone, telegram and personal interview.
This proxy statement and the accompanying notice and form of proxy are being
mailed to The Companies' shareholders on or about March 29, 1995.
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.
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, 1995 (the "Record Date") will be entitled to vote at the
meeting. On that date there were issued and outstanding 11,143,853 shares of
Operating Stock and 11,256,353 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 of March 15, 1995, these
shareholders collectively owned 1,104,900 shares representing 9.9% of Operating
Stock and 9.8% 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 meeting, prior to the voting, of the
shareholder's intention to cumulate the shareholder's votes. If any one
shareholder has given such notice, all shareholders may cumulate their votes for
the candidates in nomination. If voting for directors is conducted by cumulative
voting, each share will be entitled to a number of votes equal to the number of
directors to be elected, which votes may be cast for a single candidate or may
be distributed among two or more candidates in such proportion as the
shareholder may determine. If voting is not conducted by cumulative voting, each
share will be entitled to one vote and the holders of a majority of the shares
voting at the meeting will be able to elect all of the directors if they choose
to do so and, in such event, the other shareholders will not be able to elect
any director or directors.
Votes cast by proxy or in person at the Annual Meetings will be counted by
the persons appointed by The Companies to act as election inspectors for the
Annual Meetings. The election inspectors will treat shares represented by
proxies that reflect abstentions as shares that are present and entitled to vote
for purposes of determining the presence of a quorum, and as having voting power
for purposes of determining the outcome of any question submitted to the
shareholders for a vote at the Annual Meetings. Abstentions, however, do not
constitute a vote "for" or "against" any matter and thus will be disregarded in
the calculation of "votes cast."
The election inspectors will treat "broker non-votes" (i.e., shares held by
brokers or nominees as to which instructions have not been received from the
beneficial owners or persons entitled to vote that the broker or nominee does
not have discretionary power to vote on a particular matter), if any are
received by The Companies, as shares that are present and entitled to vote for
purposes of determining the presence of a quorum. However, for purposes of
determining the outcome of any matter as to which the broker has physically
indicated on the proxy that it does not have discretionary authority to vote,
those shares will be treated as not present and not empowered to vote with
respect to that matter (even though those shares are considered entitled to vote
for quorum purposes and may be empowered to vote on other matters).
2
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 only
one class of directors for each Company is elected annually. The nominees
standing for re-election in 1995 for each Company together with the directors
whose terms do not expire are listed on the following pages. Election of each of
the nominees will require the affirmative vote of a majority of the stock having
voting power present in person or represented by proxy at each of the Annual
Meetings (assuming the presence of a quorum).
It is intended that the proxies received will be voted for the election of
the nominees named below. Although it is not contemplated that any nominee will
decline or be unable to serve as a director, in the event any nominee will be
unable to serve, or for good cause will not serve, the proxies will be voted by
the proxy holders in their discretion for another person.
Unless otherwise instructed, the proxy holders will vote to elect the two
nominees for Operating Company and three nominees for Realty to terms expiring
in 1998. Thomas P. Mullaney and William D. Schulte are Class III Directors and
are nominees for Directors of both Operating Company and Realty. Sherwood C.
Chillingworth is a Class III Director and is a nominee for Realty only.
THE BOARD OF DIRECTORS OF OPERATING COMPANY RECOMMENDS THAT THE SHAREHOLDERS
VOTE "FOR" THE ELECTION OF THE TWO 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 THREE NOMINEES FOR THE BOARD OF
DIRECTORS OF REALTY NAMED IN THIS PROXY STATEMENT.
3
INFORMATION REGARDING NOMINEES AND CONTINUING DIRECTORS
The tabulation below lists the nominees for election as directors and shows
certain information concerning each such nominee, including the number of paired
shares of Operating Stock and Realty Stock beneficially owned directly or
indirectly by such nominee on March 13, 1995. The tabulation also provides such
information for continuing directors whose terms of office do not expire in
1995.
NOMINEES FOR DIRECTORS FOR TERMS WHICH EXPIRE IN 1998
CLASS III
AMOUNT AND
NATURE OF
BENEFICIAL
OWNERSHIP OF
PRINCIPAL BUSINESS EXPERIENCE COMMON STOCK
DURING PAST 5 YEARS AND ALL DIRECTOR OF EACH
DIRECTOR POSITIONS WITH THE COMPANIES AGE SINCE(1) COMPANY
------------------------- -------------------------------------------------------- --- -------- ------------
BOTH OPERATING COMPANY AND REALTY
Thomas P. Mullaney General Partner, Matthews, Mullaney & Co. (private 62 1989 1,000
investment partnership) since 1991; General Partner,
Kidd Kamm & Co (private investment partnership)
1986-1991; Director, Ducommun Incorporated
(manufacturing)
William D. Schulte Investor; former Vice Chairman, KPMG Peat Marwick; 62 1994 1,000
Director, H.F. Ahmanson & Company (thrift); Vastar
Resources, Inc. (energy); Leslie's Poolmart, Inc.
(swimming pool supplies)
REALTY ONLY
Sherwood C. Chillingworth Vice Chairman and Chief Executive Officer, Realty since 68 1994 6,000(2)
1994; Executive Vice President, Oak Tree Racing
Association since 1993; Vice President and General
Counsel, Oak Tree Racing Association 1992; President,
Chillingworth Corporation 1975-1992.
PERCENT OF
OUTSTANDING
DIRECTOR COMMON STOCK
------------------------- -------------
BOTH OPERATING COMPANY AN
Thomas P. Mullaney *
William D. Schulte *
REALTY ONLY
Sherwood C. Chillingworth *
4
CONTINUING DIRECTORS FOR TERMS WHICH EXPIRE IN 1997
CLASS II
AMOUNT AND
NATURE OF
BENEFICIAL
OWNERSHIP OF
PRINCIPAL BUSINESS EXPERIENCE COMMON STOCK
DURING PAST 5 YEARS AND ALL DIRECTOR OF EACH
DIRECTOR POSITIONS WITH THE COMPANIES AGE SINCE(1) COMPANY
------------------------- -------------------------------------------------------- --- -------- ------------
William C. Baker President, Red Robin International, Inc., since 1993; 61 1991 6,400
Investor 1988-1993; Chief Executive Officer, Del Taco,
Inc., 1976-1988; Director, Callaway Golf Company;
Storage Equities, Inc. (public storage)
Stephen F. Keller Chairman, Chief Executive Officer and President, 56 1991 53,188(3)
Operating Company since 1993; Chairman, Realty since
1992; President, Operating Company since 1991; Attorney,
Fulbright & Jaworski 1991; Vice Chairman, Seidler Amdec
Securities, Inc., 1988-1990; Attorney, Lillick & McHose,
1962-1990; Director, Leslie's Poolmart, Inc. (swimming
pool supplies); Member of Board of Trustees, The
Northwestern Mutual Life Insurance Company
OPERATING COMPANY ONLY
Clifford C. Goodrich Vice President, Operating Company since 1989; President 52 1989 28,769(4)
and General Manager, Los Angeles Turf Club, Incorporated
("LATC"), a wholly-owned subsidiary of Operating
Company, since 1989; Assistant General Manager, LATC
1980-1989
PERCENT OF
OUTSTANDING
DIRECTOR COMMON STOCK
------------------------- -------------
William C. Baker *
Stephen F. Keller *
OPERATING COMPANY ONLY
Clifford C. Goodrich *
5
CONTINUING DIRECTORS FOR TERMS WHICH EXPIRE IN 1996
CLASS I
AMOUNT AND
NATURE OF
BENEFICIAL
OWNERSHIP OF
PRINCIPAL BUSINESS EXPERIENCE COMMON STOCK
DURING PAST 5 YEARS AND ALL DIRECTOR OF EACH
DIRECTOR POSITIONS WITH THE COMPANIES AGE SINCE(1) COMPANY
------------------------- -------------------------------------------------------- --- -------- ------------
Thomas J. Barrack, Jr. Chief Executive Officer, Colony Capital, Inc. and Colony 47 1995 0
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 59 1969 10,443(5)
Frost Cohen since 1991; President, Four Seas
Restaurants, Inc. (restaurant franchisee) since 1988
Arthur Lee Crowe Investor; Vice Chairman, Realty and Operating Company 71 1960 342,910(6)
since 1988
J. Terrence Lanni Investor; President and Chief Operating Officer, Caesars 52 1995 10,000
World Inc. 1981-1995
REALTY ONLY
Taylor B. Grant Investor; Receiver - Superior Court, State of California 45 1988 141(7)
since 1993; Chief Executive Officer, Optima Asset
Management Services (management consulting) 1992-1993;
President, Grant Building Company 1988-1992 (real
estate)
PERCENT OF
OUTSTANDING
DIRECTOR COMMON STOCK
------------------------- -------------
Thomas J. Barrack, Jr. 0
Richard S. Cohen *
Arthur Lee Crowe 3.1 %
J. Terrence Lanni *
REALTY ONLY
Taylor B. Grant *
<FN>
--------------------------
* Less than one percent (1%) of the outstanding Common Stock.
(1) Includes years served as a director of SAC.
6
(2) Represents 6,000 shares which Mr. Chillingworth has a fully-vested option
to acquire.
(3) Includes 46,200 shares which Mr. Keller has a fully-vested option to
acquire, 681 fully vested shares allocated to Mr. Keller in the Thrift Plan
and 7,000 shares held indirectly by trust for which Mr. Keller acts as
trustee. Excludes 86,322 shares of Restricted Stock awarded to Mr. Keller
subject to shareholder approval of Operating Company's 1995 Share Award
Plan at the Annual Meeting. See "Restricted Stock Awards to be Made under
the 1995 Operating Plan to Certain Executive Officers" at page 18 of this
joint proxy statement.
(4) Includes 26,000 shares which Mr. Goodrich has a fully-vested option to
acquire and 1,769 fully vested shares allocated to Mr. Goodrich in the
Thrift Plan. Excludes 40,325 Shares of Restricted Stock awarded to Mr.
Goodrich subject to shareholder approval of Operating Company's 1995 Share
Award Plan. See "Restricted Stock Awards to be Made under the 1995
Operating Plan to Certain Executive Officers" at page 18 of this joint
proxy statement.
(5) Includes 5,443 shares held indirectly by trusts for which Mr. Cohen acts as
trustee. Includes 5,000 shares held in trust for the benefit of Mr. Cohen's
adult sister for which Mr. Cohen has voting power.
(6) Includes 159,871 shares beneficially owned by Mr. Crowe's spouse. Includes
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.
(7) Represents shares owned by Mr. Grant's children in which Mr. Grant
disclaims beneficial interest. Taylor B. Grant is the son of Robert H.
Grant.
Mr. Robert H. Grant, currently a Class III director of both Operating
Company and Realty, will retire from each Board effective May 2, 1995 and,
consequently, is not standing for re-election at the Annual Meetings. As of
March 13, 1995, Mr. Grant beneficially owned 387,622 shares of Paired Common
Stock, representing 3.5% of the outstanding Paired Common Stock.
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., Robert H. Grant, J.
Terrence Lanni and Thomas P. Mullaney. Prior to March 20, 1995, the Committees
consisted of Stephen F. Keller, Arthur Lee Crowe (Vice Chairman), Robert H.
Grant (Vice Chairman), Richard S. Cohen, and, until his retirement from the
Boards on March 17, 1995, Robert E. Morgan. Mr. Grant will retire from the
Boards and these Committees on May 2, 1995. 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 three times and the Executive Committee of Realty met five
times during the year ended December 31, 1994.
7
The Audit Committees of Operating Company and Realty both consist of William
D. Schulte (Chairman), William C. Baker, Richard S. Cohen and J. Terrence Lanni.
Prior to March 20, 1995, Arthur Lee Crowe served on each Committee and Taylor B.
Grant served on Realty's Audit Committee. Until March 17, 1995, Robert E. Morgan
served on the Audit Committees of both Companies and until their resignations
from the respective Boards in January 1995, John Strub served on Operating
Company's Audit Committee and Charles H. Strub, II served on Realty's Audit
Committee. The Audit Committees perform numerous functions, including
recommending the engagement of an independent accounting firm to the respective
Boards of Directors, meeting with the independent accounting firm to discuss the
scope and conduct of its annual audit, and the institution of generally accepted
accounting principles. In addition, the Committees make inquiries about and
discuss policies and procedures with respect to principles of business conduct,
financial and accounting controls, compliance with the Foreign Corrupt Practices
Act of 1977, areas of special concern and other related matters. The Audit
Committees also review with management the methodology and key assumptions
supporting The Companies' respective annual operating budgets and business
plans. The Audit Committees of both Operating Company and Realty met on four
occasions during the year ended December 31, 1994.
The Compensation Committees of Operating Company and Realty both consist of
Thomas P. Mullaney (Chairman), William C. Baker, Thomas J. Barrack, Jr. and
Arthur Lee Crowe. In addition, until their resignations from the respective
Boards in January 1995, Linda K. Mennis served on Operating Company's
Compensation Committee and Robert H. Strub served on Realty's Compensation
Committee. Each of the Compensation Committees annually reviews the performance
and effectiveness of the Chief Executive Officer and recommends annual
compensation levels for the Chief Executive Officer to the Board of Directors.
Each of the Committees also sets the compensation of all other executive
officers, approves all grants of stock options and administers The Companies'
respective stock option programs, pension plans and other executive and employee
compensation, retirement and benefit plans. The Compensation Committee for
Operating Company met five times and the Compensation Committee for Realty met
seven times during the year ended December 31, 1994.
The Nominating Committees of Operating Company and Realty both consist of
Richard S. Cohen (Chairman), Arthur Lee Crowe, Robert H. Grant, Stephen F.
Keller and William D. Schulte. Prior to March 20, 1995, Thomas P. Mullaney
served on the Committees in the place of Mr. Schulte. Mr. Grant will retire from
the Boards and these Committees on May 2, 1995. 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 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. The Nominating
Committee of Operating Company met on four occasions and the Nominating
Committee for Realty met on six occasions during the year ended December 31,
1994.
8
During the year ended December 31, 1994, all of the directors attended at
least 75%, in the aggregate, of the meetings of the Boards of Directors and
Committees of both Operating Company and Realty of which they were members, for
the periods in which they were members. During the past year, the Board of
Directors of Operating Company met seven times and the Board of Directors of
Realty met eight 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, 1994, each of
its officers and directors complied with all applicable Section 16(a) filing
requirements.
9
PROPOSAL TO ADOPT
SANTA ANITA OPERATING COMPANY
1995 SHARE AWARD PLAN
At the Annual Meeting, shareholders will be asked to approve the Santa Anita
Operating Company 1995 Share Award Plan (the "1995 Operating Plan") which was
adopted by Operating Company's Board of Directors on December 15, 1994. If
approved by shareholders, the 1995 Operating Plan will replace Operating
Company's 1984 Stock Option Program, which expires (except as to outstanding
stock options) at the close of business on May 3, 1995.
The following summary of the 1995 Operating Plan is qualified in its
entirety by the full text of the 1995 Operating Plan, a copy of which is
available for review at the principal office of Operating Company, and 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.
GENERAL DESCRIPTION OF THE 1995 OPERATING PLAN
The purpose of the 1995 Operating Plan is to promote the success of
Operating Company and its subsidiaries and the interests of shareholders by
providing an additional means (through the grant of incentive awards related to
equity interests in and the financial performance of Operating Company and
Realty) to attract, retain, motivate and reward employees and certain other
eligible individuals who perform substantial services for Operating Company and
its subsidiaries.
ADMINISTRATION. The 1995 Operating Plan will be administered by the
Compensation Committee of the Board of Directors (the "Committee"), which
consists of two or more members of the Board of Directors, each of whom must be
a "Disinterested" and "Outside" Director as such terms are defined for purposes
of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and Section 162(m) of the Internal Revenue Code (the "Code").
The Committee will have the authority to determine the persons to be granted
awards under the 1995 Operating Plan and to determine the specific terms and
conditions of such awards, including, without limitation, the number of shares
of Paired Common Stock subject to each award, the price to be paid for the
shares of Paired Common Stock and any performance or other vesting criteria. The
Committee will make all other determinations necessary or advisable for the
administration of the 1995 Operating Plan.
ELIGIBILITY. Any officer (whether or not a director) or employee of
Operating Company or its subsidiaries, and any individual consultant, advisor or
(to the extent such participation would not adversely affect Operating Company's
ability to comply with certain securities and other applicable laws) agent who
renders or has rendered BONA FIDE services (other than services in connection
with the offering or sale of securities of Operating Company in a capital
raising transaction) to Operating Company, is eligible for selection to
participate in the 1995 Operating Plan. Non-employee directors are not eligible
to receive awards under the 1995 Operating Plan. Approximately 25 employees of
Operating Company and its subsidiaries, including officers, are considered
eligible to participate in the 1995 Operating Plan at the present time, subject
to the power of the Committee to determine all eligible employees to whom awards
will be granted.
SHARES AVAILABLE FOR AWARDS. A maximum of 780,000 shares of Paired Common
Stock may be issued to eligible persons under the 1995 Operating Plan. The
number of awards payable solely in
10
cash, together with the number of awards payable in cash or shares that are
actually paid in cash and the aggregate number of shares of Paired Common Stock
that may be delivered under the 1995 Operating Plan, shall not exceed 780,000.
Awards payable solely in cash that are not treated as derivative securities
under Rule 16b-3 do not count against this limit. The maximum number of stock
options ("Options") and stock appreciation rights ("SAR's") (whether payable in
shares or cash) that may be granted to an eligible person during any one-year
period shall not exceed 150,000.
The number and kind of shares available under the 1995 Operating Plan are
subject to adjustment in the event of certain reorganizations,
recapitalizations, stock splits, stock dividends, distributions or other similar
extraordinary transactions or events in respect of Operating Company, Operating
Stock or Realty Stock. Shares of Paired Common Stock relating to (i) Options or
SAR's which are not exercised, (ii) Restricted Stock Awards which do not vest,
(iii) Performance Share Awards which are not issued, or (iv) any award which is
not exercised or converted or which expires or is cancelled, terminated or
forfeited (or certain cash awards with respect to shares of Paired Common Stock
that are not vested or paid) will again become available for regrant and award
purposes under the 1995 Operating Plan to the extent permitted by law. Shares of
Paired Common Stock that are issued pursuant to awards and subsequently
reacquired by Operating Company or Realty pursuant to the terms and conditions
of the awards also shall be available for reissuance under the 1995 Operating
Plan to the extent permitted by law. Additional rules for determining the number
of shares or cash only awards authorized under the 1995 Operating Plan may be
adopted by the Committee consistent with applicable law.
VESTING AND AWARD PERIODS; DEFERRED PAYMENTS. Except as may be provided in
the award agreement, no award made under the 1995 Operating Plan shall be
exercisable or shall vest for a period of six months after the award date. Each
award shall expire on such date as is determined by the Committee, but in the
case of Options or other rights to acquire shares of Paired Common Stock, not
later than ten (10) years after the award date.
The Committee may authorize the deferral of any payment of cash or issuance
of shares of Paired Common Stock under the 1995 Operating Plan at the election
and request of a participant.
LOANS TO FINANCE EXERCISE OF AWARDS. Operating Company, with the
Committee's approval, may loan to a participant funds sufficient to exercise or
pay for any award made under the 1995 Operating Plan. Each such loan shall be
evidenced by a promissory note bearing interest at a rate determined by the
Committee but not less than the applicable imputed interest rate specified by
the Code. The note shall provide for full recourse against the participant and
shall be repaid over a period of time not to exceed five years, with 10% minimum
annual installments and a 60% balloon of principal payable at the end of the
fifth year; provided that Operating Company may demand payment, in addition to
such installments, as may be required for it to remain in compliance with any
applicable state or federal regulation. Unless the Committee otherwise
determines, the note in most circumstances will become due and payable ten (10)
business days following any termination of the participant's employment with
Operating Company. In addition, Operating Company may loan the participant funds
sufficient to pay the tax liability, if any, resulting from the exercise,
payment or vesting of the award; the terms of such a loan need not conform to
the foregoing provisions.
11
TRANSFERABILITY. Awards under the 1995 Operating Plan are not transferable
by a participant other than by will or the laws of descent and distribution,
pursuant to a qualified domestic relations order or another exception to the
transfer restrictions under Rule 16b-3. Amounts payable or shares of Paired
Common Stock issuable pursuant to an award will be paid only to the participant
(during his or her lifetime), the participant's beneficiaries or representatives
or to the extent permitted by law and Rule 16b-3, to a third party pursuant to
such conditions as the Committee may establish; provided, however, that 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.
AWARDS THAT MAY BE GRANTED UNDER THE 1995 OPERATING PLAN.
OPTIONS. An Option is the right to purchase shares of Paired Common Stock
at a future date at a specified price ("Option price"). Under the 1995 Operating
Plan, each participant, at the time of grant, will be granted Options to acquire
an equal number of shares of Operating Stock and Realty Stock. The purchase
price of each share of Paired Common Stock covered by an Option will be
determined by the Committee, but will in no event be less than 100% of the fair
market value (as defined in the 1995 Operating Plan) of such shares of Paired
Common Stock on the date such Option is granted. The closing price of a share of
Paired Common Stock, as reported on the New York Exchange Composite Tape on
March 13, 1995, was $16.375.
An Option with respect to Operating Stock may either be an incentive stock
option, as defined in the Code, or a nonqualified stock option. Options for the
related Realty Stock will be non-qualified stock options. Incentive stock
options may not be granted to a person who owns more than 10% of the total
combined voting power of all classes of stock of Operating Company unless the
Option price with respect to the Operating Stock is at least 110% of the fair
market value of the Operating Stock subject to the Option and such Option by its
terms is not exercisable after expiration of five years from the date such
Option is granted; in such event, the portion of the Option price with respect
to Realty Stock is not required to exceed 100% of the fair market value of such
Realty Stock. The aggregate fair market value of the Operating Stock (determined
at the time the Option is granted) for which incentive stock options may be
first exercisable by an Option holder during any calendar year under the 1995
Operating Plan or any other plan of the Company or its subsidiaries may not
exceed $100,000. A nonqualified stock option is not subject to any of these
limitations.
Full payment for shares purchased on the exercise of any Option shall be
made at the time of such exercise in one or a combination of the following
methods: (i) cash, (ii) check, (iii) promissory note by the Option holder in
favor of Operating Company, (iv) third party payment (if authorized by the
Committee), (v) the delivery of shares of Paired Common Stock already owned by
the participant, or (vi) requesting that Operating Company reduce the number of
shares of Paired Common Stock by a number of shares of Paired Common Stock with
a fair market value equal to the Option exercise price. In addition, Option
holders may be permitted to offset or surrender stock or deliver already owned
stock in satisfaction of applicable tax withholding requirements.
Subject to early termination or acceleration provisions (which are
summarized below), an Option generally will be exercisable, in whole or in part,
from the date specified in the related award agreement until the expiration date
determined by the Compensation Committee. Unless the award
12
agreement provides otherwise, Options are not exercisable until at least six
months after the award date. In no event, however, is an Option exercisable
prior to six months, or after ten years, from its date of grant.
The Committee may grant to a holder of an Option under the 1995 Operating
Plan, if he or she is otherwise eligible and (where consent is required)
consents, a new or modified award in lieu of an award previously granted with
respect to a number of shares, at an exercise price and for a length of time,
which is greater or lesser that under the earlier award, or may do so by
cancellation and regrant, amendment, substitution or otherwise, subject only to
the general limitations described in the 1995 Operating Plan or under applicable
law.
DIVIDEND EQUIVALENTS. The Committee may, at the time of granting an Option,
grant Dividend Equivalents attributable to shares of Paired Common Stock subject
to the Option. Dividend Equivalents are cash payments representing all or a
portion of the value of dividends per share of Paired Common Stock paid by
Operating Company and Realty, calculated with reference to the number of shares
of Paired Common Stock subject to the Option, and are paid on a dividend payment
date to the Option holder. Dividend Equivalents shall be paid only to the extent
the Option is unexercised as of the dividend record date, and may be granted for
a portion of the time period during which the Option is unexercised.
STOCK APPRECIATION RIGHTS. In its discretion, the Committee may grant to a
participant a SAR. A SAR is a right to receive a number of shares of Paired
Common Stock or an amount of cash, or a combination of shares of Paired Common
Stock and cash, the aggregate amount or value of which is determined by
reference to a change in the fair market value of the shares of Paired Common
Stock.
SAR's may be granted either concurrently with the grant of another award or
in respect of an outstanding award, in whole or in part, or independently of any
other award. The Committee, in its discretion, may provide for payment upon
exercise of a SAR to be solely in shares of Paired Common Stock (valued at fair
market value at date of exercise), in cash, or in a combination of shares of
Paired Common Stock and cash, or leave the election of same to the participant,
subject to any applicable legal requirements.
RESTRICTED STOCK AWARDS. A Restricted Stock Award typically is an award for
a fixed number of shares of Paired Common Stock subject to vesting requirements
and other restrictions. The Committee specifies the price, if any, the
participant must pay for such shares of Paired Common Stock and the restrictions
(which may include performance standards) imposed on such shares of Paired
Common Stock which shall not terminate earlier than six months after the award
date, unless the award provides otherwise. Restricted Stock awarded to a
participant may not be voluntarily or involuntarily sold, assigned, transferred,
pledged or encumbered during the restricted period (i.e., prior to the vesting
date) and, unless the Committee otherwise determines, must be returned to
Operating Company if the participant terminates employment prior to the vesting
date. Unless otherwise provided in the award agreement, recipients of Restricted
Stock Awards shall have voting rights and receive dividends on the restricted
shares prior to the time the restrictions lapse.
PERFORMANCE SHARE AWARDS. The Committee may, in its discretion, grant one
or more Performance Share Awards to any eligible person based upon such factors
(including the contributions, responsibilities and other compensation of the
person) as the Committee shall deem relevant in light
13
of the specific type and terms of the award. The amount of cash or shares of
Paired Common Stock or other property that may be deliverable pursuant to such
an award is based upon the degree of attainment over a specified period (a
"performance cycle") of such measure(s) of performance of Operating Company (or
any part thereof) or the participant as may be established by the Committee.
An award agreement shall specify the maximum number of shares of Paired
Common Stock (if any) subject to the Performance Share Award, the consideration
(but not less than the minimum lawful consideration) to be paid for any such
shares as may be issuable to the participant, the duration of the award and the
conditions upon which delivery of any shares of Paired Common Stock or cash to
the participant shall be based.
STOCK BONUSES. The Committee may grant a stock bonus of shares of Paired
Common Stock to any eligible person to reward exceptional or special services,
contributions or achievements in the manner and on such terms and conditions
(including any restrictions on such shares) as determined from time to time by
the Committee. The number of shares of Paired Common Stock so awarded shall be
determined by the Committee and may be granted independently or in lieu of a
cash bonus.
OTHER MISCELLANEOUS PROVISIONS
ADJUSTMENTS; ACCELERATION. The 1995 Operating Plan contains provisions
relating to adjustments for changes in Operating Stock or Realty Stock upon
certain specified events. The number and kind of shares available under the 1995
Operating Plan, as well as the number, kind and price of shares subject to
outstanding awards, is subject to adjustment in the event of a reorganization,
merger, sale of assets, recapitalization, stock split, stock dividend, exchange
offer or similar events.
The 1995 Operating Plan also provides for full vesting and acceleration of
exercise dates of awards (subject to certain tax limitations) in the event of a
Change in Control Event affecting Operating Company. Except in the case of an
option award, the Committee, prior to the Change in Control Event, may determine
that there shall be no such acceleration of benefits. (A Change in Control Event
is generally defined as an acquisition by one person (or group of persons) of
20% of the ownership of Operating Company, the replacement of the majority of
the members of the incumbent Board of Directors (excluding replacement directors
nominated by the incumbent Board of Directors), mergers, sales of substantially
all of Operating Company's assets, and similar transactions which result in a
20% change in ownership, and liquidation or dissolution, subject to certain
exceptions.) This provision of the 1995 Operating Plan is effective only through
September 30, 1997, but is subject to an automatic 60-month extension unless the
Board of Directors provides notice of an amendment or change effective the date
of expiration.
TERMINATION OF EMPLOYMENT. The Committee shall establish in respect of
awards granted under the 1995 Operating Plan the effect of a termination of
employment on the rights and benefits thereunder and in so doing may make
distinctions based upon the cause of termination. The Committee shall have the
discretion (at the time of or following any such termination) to extend the
exercise period of an award and to increase the number of shares covered by the
award with respect to which the award is exercisable or vested.
TERMINATION OF OR CHANGES TO THE 1995 OPERATING PLAN. The authority to
grant new awards under the 1995 Operating Plan will terminate on December 15,
2004, unless the 1995 Operating Plan
14
is terminated prior to that time by the Board of Directors. Such termination
typically will not affect rights of participants which accrued prior to such
termination. The Board may, without shareholder approval, suspend or amend the
1995 Operating Plan at any time, and the Committee may, with the consent of a
holder, substitute awards or modify the terms and conditions of an outstanding
award, to, among other changes, extend the term (subject to maximum term
limits), reduce the price, accelerate exercisability or vesting or preserve
benefits of the award. Without shareholder approval, the Board may not increase
the maximum number of shares which may be delivered pursuant to awards granted
under the 1995 Operating Plan, materially increase the benefits accruing to
participants under the 1995 Operating Plan or materially change the requirements
as to the eligibility to participate in the 1995 Operating Plan. (Amendment of
the 1995 Operating Plan will not, without the consent of the participant,
adversely affect such person's rights under an award previously granted, unless
the award itself otherwise expressly so provides.) Amendments that are permitted
without shareholder approval could increase the costs to Operating Company of
the 1995 Operating Plan.
FEDERAL INCOME TAX TREATMENT OF AWARDS UNDER THE 1995 OPERATING PLAN
The federal income tax consequences of the 1995 Operating Plan under current
federal law, which is subject to change, are summarized in the following
discussion which deals with the general tax principles applicable to the 1995
Operating Plan. State and local tax consequences are beyond the scope of this
summary.
NONQUALIFIED STOCK OPTIONS. No taxable income will be realized by an Option
holder upon the grant of a nonqualified stock option. Upon exercise of a
nonqualified stock option, the Option holder will realize ordinary income in an
amount measured by the excess of the fair market value of the shares of Paired
Common Stock on the date of exercise over the Option price. Operating Company
will be entitled to a corresponding deduction; Operating Company will also
realize gain on the excess of the fair market value of the Realty Stock over its
basis. Upon a subsequent disposition of the shares of Paired Common Stock, the
participant will realize short-term or long-term capital gain or loss, depending
on the holding period. Operating Company will not be entitled to any further
deduction at that time.
INCENTIVE STOCK OPTIONS. An Option holder who receives an incentive stock
option will not be treated as receiving taxable income upon the grant of the
Option or upon the exercise of the Option (but only to the extent the exercise
relates to Operating Stock), provided the exercise occurs, in general, during
employment or within three months after termination of employment. However, any
appreciation in value of Operating Stock after the date of grant will be an item
of tax preference at the time of exercise in determining liability for the
alternative minimum tax. If Operating Stock acquired pursuant to an incentive
stock option is not sold or otherwise disposed of within two years from the date
of grant of the Option nor within one year after the date of exercise, any gain
or loss resulting from disposition of Operating Stock will be treated as
long-term capital gain or loss. If Operating Stock acquired upon exercise of an
incentive stock option is disposed of prior to the expiration of such holding
periods (a "disqualifying disposition"), the Option holder will realize ordinary
income in the year of such disposition in an amount equal to the excess of the
fair market value of Operating Stock on the date of exercise over the exercise
price. However, under a special rule, the ordinary income realized upon a
disqualifying disposition will not exceed the amount of the Option holder's
gain. Any remaining gain or any net loss will be taxed as capital gain or loss,
depending on the holding period.
15
Operating Company will not be entitled to any deduction as a result of the
grant or exercise of an incentive stock option, or on a later disposition of the
stock received, except that in the event of a disqualifying disposition
Operating Company will be entitled to a deduction equal to the amount of
ordinary income realized by the Option holder.
The portion of the Option relating to Realty Stock will be treated for tax
purposes as a nonqualified stock option.
STOCK APPRECIATION RIGHTS. At the time of receiving a SAR, the participant
will not recognize any taxable income. Likewise, Operating Company will not be
entitled to a deduction for the SAR. Upon the exercise of a SAR, the participant
will generally recognize ordinary income in an amount equal to the cash and/or
fair market value of the shares received. If a participant receives stock, then
the amount recognized as ordinary income becomes the participant's tax basis for
determining gains or losses (taxable either as short-term or long-term capital
gain or loss, depending on the holding period) on the subsequent sale of such
stock. The holding period for such shares commences as of the date ordinary
income is recognized. Operating Company will be entitled to a deduction in the
amount and at the time that the participant first recognizes ordinary income.
RESTRICTED STOCK. So long as the Restricted Stock remains both subject to
substantial risk of forfeiture and nontransferability, no tax consequences need
attach to the grant of this type of award. The recipient of Restricted Stock
will recognize ordinary income equal to the excess of the fair market value of
the Restricted Stock at the time the restrictions lapse over the amount, if any,
which the recipient paid for the Restricted Stock. However, the recipient may
elect, within 30 days after the date of receipt, to recognize ordinary income at
the time of receipt in an amount equal to the fair market value of the stock (at
the time of receipt) over the amount paid by the recipient. Operating Company
may deduct an amount equal to the income recognized by the recipient at the time
the recipient recognizes the income; Operating Company will also realize gain on
the excess of the fair market value of the Realty Stock over its basis.
The tax treatment of Restricted Stock which is disposed of will depend upon
whether the recipient made an election to include the value of the stock in
income when awarded. If the recipient made such an election, any disposition
after the restrictions lapse will result in a long-term or short-term capital
gain or loss depending upon the period the restricted stock is held. If,
however, such election is made and for any reason the restrictions imposed on
the Restricted Stock fail to lapse, the individual will not be entitled to a
deduction. If an election is not made, disposition after the lapse of
restrictions will result in short-term or long-term capital gain or loss
(depending on the period of time the stock is held after the restriction lapse)
equal to the difference between the amount received on disposition and the
greater of the amount paid for the stock by the recipient or its fair market
value at the date the restrictions lapsed.
PERFORMANCE SHARE AWARDS. A participant who has been granted a Performance
Share Award will not realize taxable income at the time of grant, and Operating
Company will not be entitled to a deduction at that time. When an award is paid,
whether in cash or shares, the participant will have ordinary income, and
Operating Company will have a corresponding deduction. The measure of such
income and deduction will be the amount of cash and the fair market value of the
shares at the time the award is paid.
16
STOCK BONUS. A participant who receives a stock bonus will be taxed on the
fair market value of the stock and Operating Company will have a deduction in
the same amount.
DIVIDEND EQUIVALENTS. A recipient of a Dividend Equivalent award will not
realize taxable income at the time of grant and Operating Company will not be
entitled to a deduction at that time. When a Dividend Equivalent is paid, the
participant will recognize ordinary income, and Operating Company will be
entitled to a deduction. The measure of the income and deduction will be the
amount of cash paid.
SPECIAL RULES GOVERNING PERSONS SUBJECT TO SECTION 16(B). Under the federal
tax law, special rules may apply to participants in the 1995 Operating Plan who
are subject to the restrictions on resale of Operating Company's common stock
under Section 16(b) of the Exchange Act. These rules, which effectively take
into account the Section 16(b) restrictions, apply in limited circumstances and
may impact the timing and/or amount of income recognized by these persons with
respect to certain stock-based awards under the 1995 Operating Plan.
ACCELERATED PAYMENTS. If, as a result of a Change in Control Event, a
participant's Options or SAR's become immediately exercisable, or if
restrictions immediately lapse on Restricted Stock, or if shares covered by a
Performance Share Award are immediately issued or a cash payment under an award
is accelerated, the additional economic value, if any, attributable to the
acceleration may be deemed a "parachute payment." 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 the participant'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 such participant's average annual taxable compensation will be
subject to a 20% non-deductible excise tax in addition to any income tax
payable. The Company will not be entitled to a deduction for that portion of any
parachute payment which is subject to the excise tax.
SECTION 162(M) LIMITS. Notwithstanding the foregoing discussion of the
deductibility of compensation under the 1995 Operating Plan by Operating
Company, Section 162(m) of the Code would render non-deductible to Operating
Company certain compensation to certain employees required to be named in the
Summary Compensation Table ("Named Executive Officers") in excess of $1,000,000
in any year unless such excess compensation is performance-based (as defined) or
is otherwise exempt from these new limits on deductibility. The applicable
conditions of an exemption for performance-based compensation plans include,
among others, a requirement that the shareholders approve the material terms of
the plans. Although Operating Company believes that Options and SAR's granted
under the 1995 Operating Plan (to the extent granted at a price not less than
market price on the date of grant) currently are exempt from such limits as
performance-based compensation, other awards under the 1995 Operating Plan may
not be, if the aggregate compensation of a covered officer would exceed such
limit. No assurances can be given that the applicable law or rules will not
change or that compensation under the 1995 Operating Plan to such persons will
be deductible to Operating Company.
The above tax summary is based upon federal income tax laws in effect as of
March 29, 1995.
17
RESTRICTED STOCK AWARDS TO BE MADE UNDER THE 1995 OPERATING PLAN TO CERTAIN
EXECUTIVE OFFICERS
The number and type of awards to be made under the 1995 Operating Plan in
the future are not determinable at this time, as such matters are to be
determined in the discretion of the Committee. However, Operating Company has
entered into Exchange Agreements effective as of December 15, 1994, with each of
Messrs. Keller and Goodrich pursuant to which the Committee, subject to
receiving shareholder approval of the 1995 Operating Plan, has authorized awards
of Restricted Stock under the 1995 Operating Plan to each of such executive
officers in exchange for their agreement to release all of their rights and
benefits under the Deferred Compensation Agreements ("DCA's") summarized under
"Other Benefit Plans for Operating Company and Realty -- Deferred Compensation
Arrangements." In the case of Mr. Keller, the shares of Restricted Stock will be
issued to a living trust established for the benefit of him and his wife. The
following table sets forth the number of shares and the value (as of the award
date) of the Restricted Stock which is subject to these awards:
NEW PLAN BENEFITS
SANTA ANITA OPERATING COMPANY
1995 SHARE AWARD PLAN
NUMBER OF SHARES
NAME AND POSITION DOLLAR VALUE ($) OF RESTRICTED STOCK
------------------------------------------------------------ ---------------- -----------------------
Stephen F. Keller,
President and Chief Executive Officer...................... $ 1,219,298 86,322
Clifford C. Goodrich,
Vice President............................................. $ 569,591 40,325
<FN>
------------------------
*Note: The values in the table do not reflect any offset for the value of the
benefits released under the DCA's (see the following paragraph) or take
into account the diminution in value attributable to the restrictions
applicable to the shares. The closing price on the award date (December
15, 1994) of a share of Paired Common Stock (as reflected on the New York
Stock Exchange Composite Tape) was $14.125.
The amount of Restricted Stock 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 the existing DCA's. For purposes of this calculation,
the Restricted Stock was priced at $13.90 per share, which represented the
average of the closing prices of the Paired Common Stock (as reflected on the
New York Stock Exchange Composite Tape) on the five trading days immediately
following the date on which the Board of Directors approved the 1995 Operating
Plan. The calculation also took into account the fact that the Restricted Stock
will not be issued prior to the date of shareholder approval of the 1995
Operating Plan.
The Restricted Stock awarded to Messrs. Keller and Goodrich may not be
transferred, sold or pledged except as provided in the award agreement. In the
case of Mr. Keller, the restrictions on such transfers expire with respect to
50% of the Restricted Stock 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
18
on July 1, 2001. In the case of Mr. Goodrich, the restrictions on such transfers
expire with respect to 20% of the Restricted Stock on the date of shareholder
approval, 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 transfers may terminate earlier upon the occurrence of
certain events. In the case of Mr. Keller, 50% of the Restricted Stock subject
to his award will be released from the restrictions if, prior to July 1, 1996,
Operating Company terminates Mr. Keller's employment other than for "cause," or
if Mr. Keller voluntarily terminates his employment for "good reason" (each, a
"Qualifying Termination"). Either a significant modification of Mr. Keller's
duties or a reduction of his total compensation may constitute "good reason." In
addition, 100% of Mr. Keller's Restricted Stock will be released from the
restrictions if there is a Qualifying Termination of his employment within three
years following a Change in Control Event. This provision is effective only
through September 30, 1997, but is subject to automatic 60-month extensions
unless the Board of Directors provides Mr. Keller with written notice to the
contrary prior to the expiration date. In the case of Mr. Goodrich, 100% of the
Restricted Stock subject to his award will be released from the restrictions if
there is a Qualifying Termination of his employment at any time. In the cases of
both Messrs. Keller and Goodrich, all of the Restricted Stock covered by their
respective awards will be released from the restrictions if the officer
terminates employment on account of death or total disability.
Upon a termination of employment prior to the date the restrictions lapse,
Operating Company has the right to acquire, for no consideration, any of the
Restricted Stock which remains subject to the restrictions. The Restricted Stock
is registered to the officer subject to the restrictions but is held by
Operating Company until such restrictions lapse. The officers are entitled to
dividends and have voting rights on the shares prior to the time the
restrictions lapse.
The Exchange Agreements and the Restricted Stock awards authorized by the
Committee to Messrs. Keller and Goodrich are subject to the receipt of
shareholder approval of the 1995 Operating Plan. The Exchange Agreements and the
Restricted Stock awards shall become null and void (and the officers will be
entitled to their full rights and benefits under the DCA's) in the event that
shareholders do not approve the 1995 Operating Plan or in the event the officer
dies, becomes totally disabled or terminates employment with the Company or
there is a Change in Control Event prior to obtaining such shareholder approval.
RECOMMENDATION OF THE BOARD OF DIRECTORS "FOR" THIS PROPOSAL
The Board of Directors believes that the adoption of the 1995 Operating Plan
will promote the interests of Operating Company and its shareholders and
continue to enable Operating Company to attract, retain and reward persons
important to Operating Company's success through the recognition of the
attainment of long-term corporate goals and objectives. The Board also believes
that the substitution of the Restricted Stock awards for the benefits otherwise
payable to Messrs. Keller and Goodrich under their respective DCA's will better
link the payment of such benefits to the performance of Operating Company. To
approve the 1995 Operating Plan, the affirmative vote of holders of the majority
of the shares having voting power present or represented by proxy at the
meeting, provided the votes cast on the proposal represents over 50% of the
shares entitled to vote on the proposal, is required.
19
Executive officers of Operating Company (including Messrs. Keller and
Goodrich, who are also directors of Operating Company) are eligible to receive
awards under the 1995 Operating Plan as described in this joint proxy statement.
THE BOARD OF DIRECTORS HAS APPROVED THE 1995 OPERATING PLAN AND RECOMMENDS
THAT SHAREHOLDERS VOTE "FOR" THE PROPOSAL. Proxies solicited by the Board of
Directors will be so voted unless shareholders specify otherwise in the proxy.
PROPOSAL TO ADOPT
SANTA ANITA REALTY ENTERPRISES, INC.
1995 SHARE AWARD PLAN
At the Annual Meeting, shareholders will be asked to approve the Santa Anita
Realty Enterprises, Inc. 1995 Share Award Plan (the "1995 Realty Plan") which
was adopted by Realty's Board of Directors on December 15, 1994. If approved by
shareholders, the 1995 Realty Plan will replace Realty's 1984 Stock Option Plan,
which expires (except as to outstanding stock options) at the close of business
on May 3, 1995.
The following summary of the 1995 Realty Plan is qualified in its entirety
by the full text of the 1995 Realty Plan, a copy of which is available for
review at the principal office of Realty and 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.
GENERAL DESCRIPTION OF THE 1995 REALTY PLAN
The purpose of the 1995 Realty Plan is to promote the success of Realty and
its subsidiaries and the interests of shareholders by providing an additional
means (through the grant of incentive awards related to equity interests in and
the financial performance of Realty and Operating Company) to attract, retain,
motivate and reward employees and certain other eligible individuals who perform
substantial services for Realty and its subsidiaries.
ELIGIBILITY. Any officer (whether or not a director) or employee of Realty
or its subsidiaries, and any individual consultant, advisor or (to the extent
such participation would not adversely affect Realty's ability to comply with
certain securities and other applicable laws) agent who renders or has rendered
BONA FIDE services (other than services in connection with the offering or sale
of securities of Realty in a capital raising transaction) to Realty, is eligible
for selection to participate in the 1995 Realty Plan. Non-employee directors are
not eligible to receive awards under the 1995 Realty Plan. Approximately 10
employees of Realty and its subsidiaries, including officers, are considered
eligible to participate in the 1995 Realty Plan at the present time, subject to
the power of the Committee to determine all eligible employees to whom awards
will be granted.
SHARES AVAILABLE FOR AWARDS. A maximum of 230,000 shares of Realty Stock
and shares of Operating Stock may be issued to eligible persons under the 1995
Realty Plan. The number of awards payable solely in cash, together with the
number of awards payable in cash or shares that are actually paid in cash and
the aggregate number of shares of Realty Stock that may be delivered under the
1995 Realty Plan, shall not exceed 230,000. Awards payable solely in cash that
are not treated as derivative
20
securities under Rule 16b-3 do not count against this limit. The maximum number
of stock options and stock appreciation rights (whether payable in shares or
cash) that may be granted to an eligible person during any one-year period shall
not exceed 150,000.
In general, the terms and conditions of the 1995 Realty Plan are identical
to the terms and conditions of the 1995 Operating Plan. See "Proposal to Adopt
Santa Anita Operating Company 1995 Share Award Plan." There are some
differences, however. Under the 1995 Realty Plan, each option holder is granted
options to acquire shares of Realty Stock but is not granted any options to
acquire Operating Stock. However, the option holder is required to acquire a
number of shares of Operating Stock equal to the number of shares of Realty
Stock acquired pursuant to the exercise of an option. Management estimates the
fair market value of a share of Realty Stock on March 13, 1995 was $14.875
(based on the price of a share of Paired Common Stock on that date), and the
price of a share of Operating Stock on March 13, 1995 was $1.50. All other
awards under the 1995 Realty Plan if paid or based on stock, are paid or based
on Paired Common Stock rather than Realty Stock.
Realty 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 Realty's Board of Directors. See "Santa Anita Operating Company 1995 Share
Award Plan -- General Description of the 1995 Operating Plan" for a further
description of these loans. In addition, Realty may 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 1995
Realty Plan upon exercise of the option, less the aggregate par value of the
Operating Stock.
RECOMMENDATION OF THE BOARD OF DIRECTORS "FOR" THIS PROPOSAL
The Board of Directors believes that the adoption of the 1995 Realty Plan
will promote the interests of Realty and its shareholders and continue to enable
Realty to attract, retain and reward persons important to Realty's success
through the recognition of the attainment of long-term corporate goals and
objectives. To approve the 1995 Realty Plan, the affirmative vote of holders of
the majority of the shares having voting power present or represented by proxy
at the meeting, provided the votes cast on the proposal represents over 50% of
the shares entitled to vote on the proposal, is required.
Executive officers of Realty (including Mr. Chillingworth, who is also a
director of Realty) are eligible to receive awards under the 1995 Realty Plan as
described in this joint proxy statement.
THE BOARD OF DIRECTORS HAS APPROVED THE 1995 REALTY PLAN AND RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE PROPOSAL. Proxies solicited by the Board of
Directors will be so voted unless shareholders specify otherwise in the proxy.
21
EXECUTIVE OFFICERS
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, 1995.
OPERATING COMPANY
SHARES BENEFICIALLY
OWNED AT
NAME MARCH 13, 1995(1)(2)(3)
------------------------------------------------------- -----------------------
Stephen F. Keller...................................... 53,881(4)
Clifford C. Goodrich................................... 28,769(5)
Thomas S. Robbins...................................... 12,322
Richard D. Brumbaugh................................... 12,960
All directors and executive officers as a group (15
persons).............................................. 876,797
REALTY
Sherwood C. Chillingworth.............................. 6,000
Christopher T. Stirling................................ 4,000
Brian L. Fleming....................................... 5,000
Glenn L. Carpenter(6).................................. 0
Glennon E. King(7)..................................... 6,968
All directors and executive officers as a group (13
persons).............................................. 829,987
<FN>
------------------------
(1) Includes 113,400 shares subject to options exercisable within 60 days of
the date of this statement, as follows: Keller -- 46,200; Goodrich --
26,000; Robbins -- 9,300; Brumbaugh -- 9,300; all directors and executive
officers of Operating Company as a group -- 98,400; Chillingworth -- 6,000;
Stirling -- 4,000; Fleming -- 5,000; all directors and executive officers
of Realty as a group -- 61,200.
(2) Includes 9,132 fully vested shares allocated to the named officer's
accounts in The Companies' Thrift Plan as follows: Keller -- 681; Goodrich
-- 1,769; Robbins -- 3,022; Brumbaugh -- 3,660, all directors and executive
officers of Operating Company as a group -- 9,132; all directors and
executive officers of Realty as a group -- 681.
(3) The percentages of shares of Operating Stock and Realty Stock beneficially
owned by any executive officer are less than one percent of the total
outstanding. The percentage of shares of Operating Stock owned by all
directors and executive officers of Operating Company as a group is 7.8%.
The percentage of shares of Realty Stock owned by all directors and
executive officers of Realty as a group is 7.3%.
(4) Includes 7,000 shares held indirectly by trust for which Mr. Keller acts as
trustee. Excludes 86,322 shares of Restricted Stock awarded to Mr. Keller
subject to shareholder approval of Operating
22
Company's 1995 Share Award Plan at the Annual Meeting. See "Restricted
Stock Awards to be Made under the 1995 Operating Plan to Certain Executive
Officers" at page 18 of this joint proxy statement.
(5) Excludes 40,325 shares of Restricted Stock awarded to Mr. Goodrich subject
to shareholder approval of Operating Company's 1995 Share Award Plan. See
"Restricted Stock Awards to be Made under the 1995 Operating Plan to
Certain Executive Officers" at page 18 of this joint proxy statement.
(6) Mr. Carpenter resigned as Chief Executive Officer on February 18, 1994.
(7) Mr. King was a consultant to Realty during calendar year 1994 and served as
acting Chief Executive Officer from February 18, 1994 to March 15, 1994 and
as acting Chief Financial Officer from March 15, 1994 to May 11, 1994.
23
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, 1994, 1993 and 1992 of the Chief Executive Officer
together with the other three most highly compensated executive officers of
Operating Company earning in excess of $100,000 in salary and bonus in 1994.
SUMMARY COMPENSATION TABLE
ALL OTHER
ANNUAL COMPENSATION(1) COMPENSATION(2)
--------------------------------- LONG TERM ----------------
COMPENSATION
--------------------------
SECURITIES
RESTRICTED UNDERLYING
STOCK AWARDS OPTIONS
NAME AND PRINCIPAL POSITION SALARY BONUS ($) (#)
-------------------------------------- ----------- --------- ------------- -----------
Stephen F. Keller, President, 1994 $ 379,167 $ 85,000 (3) 20,000 $ 9,448
and Chief Executive Officer 1993 347,917 50,000 22,000 2,299
1992 264,167 100,000 37,000 4,162
Clifford C. Goodrich 1994 $ 231,667 $ 40,000 (3) 15,000 --
Vice President 1993 221,667 30,000 15,000 --
1992 211,667 52,500 20,000 --
Thomas S. Robbins 1994 $ 153,750 $ 20,000 8,000 $ 9,433
Vice President -- Racing 1993 147,500 15,000 6,500 2,262
1992 141,083 11,250 5,000 4,327
Richard D. Brumbaugh 1994 $ 110,542 $ 20,000 5,000 $ 6,754
Vice President -- Finance and Chief
Financial Officer(4)
<FN>
------------------------
(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.
(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, but subject to receiving shareholder
approval of the 1995 Operating Company Share Award Plan (the "1995
Operating 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 the 1995 Operating Plan in exchange
for each of such officers agreement to release all of his rights and
benefits under the Deferred Compensation Arrangements ("DCA's") summarized
under "Other Benefit Plans for Operating Company and
24
Realty -- Deferred Compensation Arrangements." 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, assump-
tions 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 awarded to Messrs. Keller and Goodrich will become
null and void (and such officers will be entitled to their full rights and
benefits under the DCA's) in the event shareholders do not approve the 1995
Operating Plan or in the event the officer dies, becomes totally disabled
or terminates employment with Operating Company or there is a Change in
Control Event prior to obtaining such shareholder approval. (See
"Restricted Stock Awards to be Made under the 1995 Operating Plan to
Certain Executive Officers.")
The Restricted Shares are subject to certain restrictions on transfer,
which expire as described at page 18 of this joint proxy statement. At
year-end 1994, the Restricted Shares were worth $1,741,396 at the then
current market value (including $1,186,928, with respect to 86,322 Re-
stricted Shares held by Mr. Keller and $554,469 with respect to 40,325
Restricted Shares held by Mr. Goodrich) without giving effect to the
diminution of value attributable to the restrictions on such shares. If the
1995 Operating Plan is approved by shareholders, dividends will be paid on
the Restricted Shares at the same rate payable on all other shares of
Paired Common Stock.
(4) Mr. Brumbaugh was elected an executive officer of Operating Company on
March 1, 1994. Previous to that, he served as Controller.
25
STOCK OPTIONS. The following table sets forth the individual grants to the
named executive officers during 1994, the percentage that each grant represents
of the total options granted to employees during 1994, the exercise price, the
expiration date, and the potential realizable value of each of the options
(assuming either a 5% or 10% annualized rate of appreciation from the date of
grant).
OPTION GRANTS IN LAST FISCAL YEAR
NUMBER OF POTENTIAL REALIZABLE
SHARES OF VALUE AT ASSUMED
PAIRED ANNUAL RATES OF STOCK
COMMON STOCK % OF TOTAL PRICE APPRECIATION
UNDERLYING OPTIONS GRANTED EXERCISE FOR OPTION TERM(1)
OPTIONS TO EMPLOYEES IN PRICE EXPIRATION ---------------------
GRANTED FISCAL YEAR ($/SH) DATE 5% 10%
------------ --------------- -------- ---------- --------- ---------
Stephen F. Keller............................ 20,000 15.9% $17.125 9/12/04 215,396 545,857
Clifford C. Goodrich......................... 15,000 11.9% $17.125 9/12/04 161,547 409,393
Thomas S. Robbins............................ 8,000 6.3% $17.125 9/12/04 86,159 218,343
Richard D. Brumbaugh......................... 5,000 4.0% $17.125 9/12/04 53,849 136,464
<FN>
------------------------
(1) These amounts in these columns are based upon assumed rates of appreciation
over the option term which are prescribed by applicable regulations of the
Securities and Exchange Commission ("SEC"). 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 1994 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 1984
Stock Option Program with an exercise price of 100% of the fair market value of
Paired Common Stock on the date of grant.
The exercise price of an option may be paid, in full or in part, by
delivering shares of Paired Common Stock to Operating Company or by requesting
that Operating Company withhold a number of shares of Paired Common Stock with a
fair market value equal to the option exercise price from the amount otherwise
issuable upon exercise. In addition, Operating Company may loan to an option
holder funds sufficient to exercise all or a portion of the options granted,
such loans to be made at the absolute discretion of the Board of Directors. Each
loan would be evidenced by a note, bearing interest at the then prime rate of
interest charged by Bank of America NT & SA, subject to annual adjustments, with
full recourse to the option holder, and payable over a five years with 10%
annual minimum annual installments. In addition, Operating Company may also loan
an option holder funds sufficient to pay tax liability. Upon a Change in
Control, all unexpired options granted become immediately exercisable except to
the extent that the Compensation Committee determines that an acceleration of
the exercise date would cause the deduction limits of Section 280G of the
Internal Revenue Code to come into effect. A Change in Control is generally
defined as a 20% change in ownership of Operating
26
Company or the replacement of the majority of the members of the incumbent Board
of Directors (excluding replacement directors nominated by the incumbent Board
of Directors), subject to certain exceptions.
None of the named officers exercised any stock options during 1994 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, 1994 (broken
down between exercisable and unexercisable options):
FISCAL YEAR-END OPTION HOLDINGS
NUMBER OF SHARES OF PAIRED
COMMON STOCK UNDERLYING
UNEXERCISED OPTIONS AT
DECEMBER 31, 1994
---------------------------
NAME EXERCISABLE UNEXERCISABLE
------------------------------------------------- ----------- -------------
Stephen F. Keller................................ 46,200 77,800
Clifford C. Goodrich............................. 26,000 39,000
Thomas S. Robbins................................ 9,300 16,200
Richard D. Brumbaugh............................. 9,300 13,200
INDEBTEDNESS OF MANAGEMENT. In 1990, Mr. Goodrich, Vice President of
Operating Company, exercised stock options whereby he purchased 35,000 shares
and 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 1994 to Operating Company was $85,925. At February 28, 1995, the amount
owed by Mr. Goodrich to Operating Company was $73,650. The interest rate in
effect during 1994 on the amount owed was 7.25%.
27
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 1994, the members of the Committee
consisted of Messrs. Mullaney, Baker and Crowe and Ms. Linda K. Mennis. Ms.
Mennis resigned as a director of Operating Company in January 1995. Mr. Thomas
J. Barrack, Jr. became a member of the Committee as of March 20, 1995.
The duties of the Committee include evaluation of the performance of
management, consideration of management succession, 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 and deferred
compensation agreements for certain senior officers.
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. 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
Committee's subjective assessment of the individual's contribution to Operating
Company. Performance-based components, such as stock-based awards and
discretionary bonuses and salary adjustments, place a portion of the annual
compensation "at risk" and, in the Committee's view, provide appropriate
incentives to executive officers to maximize individual and corporate
performance.
The Committee's deliberations with respect to annual compensation also
include a review of the reasonableness of compensation paid compared with the
compensation paid by comparable companies in the thoroughbred horse racing
business. However, because of the unique nature of the horse racing business,
the Committee members also review salary data for companies in various service
industries whose revenues are comparable to the gross wagering levels generated
by Operating Company and whose employee base exceeds 1,000 persons.
Additionally, the Committee reviews general compensation surveys provided by
compensation consulting firms to assure that the base salaries and total cash
compensation levels for the Company's executives are competitive with the
previously referenced companies.
Base salaries for the Chief Executive Officer and other executive officers
are established initially at levels considered appropriate based on the factors
identified in the preceding paragraph and in light of the duties and scope of
responsibilities of each officer's position. Salaries are reviewed periodically
and adjusted as warranted on the same basis and based upon the Committee's
subjective assessment of the officer's individual performance and contribution
to the performance of Operating Company during the year. In 1994, salary
adjustments for executive officers other than the Chief Executive Officer were
generally determined on the basis of the recommendations of senior management
and the Committee's assessment of qualitative factors such as demonstrated
leadership ability and the successful supervision of relevant corporate
projects.
28
Mr. Keller's 1994 salary as Chief Executive Officer of Operating Company was
established in December 1993 at $375,000 on the basis of the factors described
above and, in particular, his leadership during the transition following Robert
P. Strub's death earlier that year and his effectiveness during implementation
of Operating Company's cost reduction program. In November 1994, the Committee
assessed, among other things, Mr. Keller's leadership in formulating a long-term
growth strategy for Operating Company, his efforts in strengthening the
management team, his continued efforts in implementing the corporation's cost
reduction program and his contribution to the successful completion of the
Pacific Gulf Properties transaction. The Committee then recommended, and the
Board approved, a salary increase to $400,000 for Mr. Keller effective November
1, 1994.
In 1994, Operating Company maintained an annual bonus plan under which cash
bonuses could be paid to executive officers. These bonuses were predicated on
the Committee's subjective evaluation of the performance of the executive
officer and his or her contribution to the performance of Operating Company or,
to the extent appropriate, the performance of both Realty and Operating Company.
The primary input to the Committee with respect to the bonus plan for officers
consisted of recommendations by the Chief Executive Officer of Operating
Company, except in the case of the bonus paid to the Chief Executive Officer,
which was determined by the Board of Directors based upon the recommendation of
the Committee. The Committee's recommendation concerning Mr. Keller's bonus for
1994 (which recommendation was accepted by the Board of Directors) was based
principally on his demonstrated leadership and the efforts of Mr. Keller in the
areas identified in the preceding paragraph.
Those senior officers of Operating Company that received options received
them based on their level of responsibility and relative position in Operating
Company. The Committee also considered current stock ownership and outstanding
stock options as factors in determining stock option grants, although the
Committee did not use any specific quantitative formula. Mr. Keller received an
option grant of 20,000 shares of common stock which represented 15.9 percent of
the total grants made to Operating Company officers and key supervisory
personnel in 1994. Historically, the Chief Executive Officer of Operating
Company has received between 20 and 40 percent of the total options granted
since 1985.
The Committee has recommended and the Board of Directors has approved the
1995 Share Award Plan (described beginning at page 10 of this joint proxy
statement), and the Committee has approved the restricted stock awards made
thereunder to each of Messrs. Keller and Goodrich in exchange for their
agreement to release all of their rights and benefits under their respective
Deferred Compensation Agreement ("DCA") (see descriptions beginning at page 18
and page 38 of this joint proxy statement). The Committee believes that the 1995
Share Award Plan will promote the interests of Operating Company and its
shareholders and continue to enable Operating Company to attract, retain and
reward persons important to Operating Company's success through the recognition
of the attainment of long-term corporate goals and objectives. The Committee
also believes that the substitution of the restricted stock awards for the
benefits otherwise payable to Messrs. Keller and Goodrich under the DCAs will
better link the payment of such benefits to the performance of Operating
Company.
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
29
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
William C. Baker Arthur Lee Crowe Thomas P. Mullaney
March 22, 1995
30
REALTY
The following table sets forth information concerning the annual and
long-term compensation for services in all capacities to Realty for the years
ended December 31, 1994, of the persons serving as Chief Executive Officer
during 1994, together with the other executive officers of Realty. Also included
is information concerning the annual and long-term compensation for services in
all capacities to Realty for the years ended December 31, 1993 and 1992 for
Glenn L. Carpenter, who served as Chief Executive Officer of Realty until
February 18, 1994.
SUMMARY COMPENSATION TABLE
ALL OTHER
ANNUAL COMPENSATION(1) COMPENSATION
------------------------- ---------------
LONG TERM
COMPENSATION
------------
SECURITIES
UNDERLYING
NAME AND PRINCIPAL POSITION SALARY BONUS OPTIONS(#)
------------------------------------------------------ -------- ------- ------------
Sherwood C. Chillingworth, 1994 $129,167 $30,000 45,000 --
Chief Executive Officer & Vice Chairman(2)
Christopher T. Stirling, 1994 $107,250 $20,000 30,000 --
President and Chief Operating Officer(3)
Brian L. Fleming, 1994 $ 99,687 -- 35,000 --
Executive Vice President, Chief Financial Officer and
Secretary(4)
Glenn L. Carpenter(5) 1994 $ 44,974 -- -- --
1993 258,780 $30,000 -- $ 2,299(6)
1992 226,667 60,000 30,000 --
Glennon E. King(7) 1994 $ 35,890 -- -- $ 27,944(8)
<FN>
------------------------
(1) Realty 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.
(2) Mr. Chillingworth joined Realty and was appointed Chief Executive Officer
and Vice Chairman effective March 16, 1994.
(3) Mr. Stirling joined Realty and was appointed President and Chief Operating
Officer effective April 19, 1994.
(4) Mr. Fleming joined Realty and was appointed Executive Vice President and
Chief Financial Officer effective May 11, 1994.
(5) Mr. Carpenter served as Chief Executive Officer and President until his
resignation from Realty on February 18, 1994.
31
(6) 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.
(7) Mr. King was a consultant to Realty during calendar year 1994 and served as
acting Chief Executive Officer from February 18, 1994 to March 15, 1994,
and as acting Chief Financial Officer from March 15, 1994 to May 11, 1994.
(8) Amounts shown are those paid to Mr. King as consulting fees.
STOCK OPTIONS. The following table sets forth the individual grants to the
named executive officers during 1994, the percentage that each grant represents
of the total options granted to employees during 1994, 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
POTENTIAL
REALIZABLE VALUE
NUMBER OF AT ASSUMED ANNUAL
SHARES OF RATES OF STOCK
PAIRED PRICE
COMMON STOCK % OF TOTAL APPRECIATION FOR
UNDERLYING OPTIONS GRANTED EXERCISE OPTION TERM(1)
OPTIONS TO EMPLOYEES IN PRICE EXPIRATION -----------------
GRANTED FISCAL YEAR ($/SH) DATE 5% 10%
------------ --------------- -------- ---------- ------- -------
Sherwood C. Chillingworth......................... 30,000 24.5% $20.25 3/25/04 382,053 968,199
15,000 12.2% $17.125 9/12/04 161,547 409,393
Christopher T. Stirling........................... 20,000 16.3% $19.00 4/18/04 238,980 605,622
10,000 8.2% $17.125 9/12/04 107,698 272,928
Brian L. Fleming.................................. 25,000 20.4% $18.625 5/11/04 292,829 742,086
10,000 8.2% $17.125 9/12/04 107,698 272,928
Glenn L. Carpenter................................ 0 -- -- -- -- --
Glennon E. King................................... 0 -- -- -- -- --
<FN>
------------------------
(1) These amounts in these columns are based upon assumed rates of appreciation
over the option term which are prescribed by applicable SEC regulations.
Actual gains, if any, on stock option exercises are dependent on the future
performance of the Paired Common Stock, overall market conditions and the
option holder's continued employment through the applicable vesting
periods.
Options granted in 1994 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 1984 Stock
Option 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 1984
Stock Option 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 $1.50 per share 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.
32
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 exercise all
or a portion of the options granted, such loans to be made at the absolute
discretion of the Board of Directors. Each loan would be evidenced by a note,
bearing interest at the then prime rate of interest charged by Bank of America
NT & SA, subject to annual adjustments, with full recourse to the option holder,
and payable over a five years with 10% annual minimum annual installments. In
addition, 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 1984 Stock Option Plan upon exercise of the
option, less the aggregate par value of the Operating Stock. Upon a Change in
Control, all unexpired options granted become immediately exercisable except to
the extent that the Compensation Committee determines that an acceleration of
the exercise date would cause the deduction limits of Section 280G of the
Internal Revenue Code to come into effect. A Change in Control is generally
defined as a 20% change in ownership of Realty or the replacement of the
majority of the members of the incumbent Board of Directors (excluding
replacement directors nominated by the incumbent Board of Directors), subject to
certain exceptions.
None of the named officers exercised options during 1994 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, 1994 (broken
down between exercisable and unexercisable options).
FISCAL YEAR-END OPTION HOLDINGS
NUMBER OF SHARES OF PAIRED
COMMON STOCK UNDERLYING
UNEXERCISED OPTIONS AT
DECEMBER 31, 1994
---------------------------
NAME EXERCISABLE UNEXERCISABLE
------------------------------------------------- ----------- -------------
Sherwood C. Chillingworth........................ 0 45,000
Christopher T. Stirling.......................... 0 30,000
Brian L. Fleming................................. 0 35,000
Glenn L. Carpenter............................... 0 0
Glennon E. King.................................. 0 0
33
REPORT OF THE COMPENSATION COMMITTEE
FOR SANTA ANITA REALTY ENTERPRISES, INC.
To: The Board of Directors
The Compensation Committee ("Committee"), a committee composed entirely of
Directors who have never served as officers of Santa Anita Realty Enterprises,
Inc. ("Realty"), determines and administers the compensation of the executive
officers of Realty. During 1994, the members of the Committee consisted of
Messrs. Mullaney, Baker and Crowe and Mr. Robert H. Strub. Mr. Strub resigned as
a director of Realty in January 1995. Mr. Thomas J. Barrack, Jr. became a member
of the Committee as of March 20, 1995.
The duties of the Committee include evaluation of the performance of
management, consideration of management succession, 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. The Committee
believes that a portion of the annual compensation of each officer should be
related to the financial performance of Realty as well as the Committee's
subjective assessment of the individual's contribution to Realty.
Performance-based components, such as stock-based awards and discretionary
bonuses and salary adjustments, place a portion of the annual compensation "at
risk" and, in the Committee's view, provide appropriate incentives to executive
officers to maximize individual and corporate performance.
The Committee's deliberations with respect to annual compensation also
include a review of the reasonableness of compensation paid compared with the
compensation paid by companies in the peer group identified in connection with
the performance graph contained in this proxy statement. Additionally, the
Committee reviews general compensation surveys provided by compensation
consulting firms to assure that the base salaries and total cash compensation
levels for the Company's executives fall within the range of competitive
practice when compared with companies of a comparable asset base in the peer
group.
Base salaries for the Chief Executive Officer and other executive officers
are established initially at levels considered appropriate based on the factors
identified in the preceding paragraph and in light of the duties and scope of
responsibilities of each officer's position. Salaries are reviewed periodically
and adjusted as warranted on the same basis and based upon the Committee's
subjective assessment of the officer's individual performance and contribution
to the performance of Realty during the year. In 1994, salary adjustments for
executive officers other than the Chief Executive Officer were generally
determined on the basis of the recommendations of senior management and the
Committee's assessment of qualitative factors such as demonstrated leadership
ability and the successful supervision of relevant corporate projects.
34
Following the completion of the reorganization of Realty in early 1994,
which resulted in the formation of Pacific Gulf Properties Inc. ("Pacific
Gulf"), Glenn L. Carpenter, then Realty's President and Chief Executive Officer,
resigned from Realty to assume the same position at Pacific Gulf. Effective
February 18, 1994, Glennon E. King, the former Vice President-Finance and
Controller of Operating Company, was named acting Chief Executive Officer of
Realty. On March 15, 1994, Mr. King resigned as acting Chief Executive Officer
and was appointed acting Chief Financial Officer of Realty. Effective March 16,
1994, Sherwood C. Chillingworth, was appointed Chief Executive Officer of
Realty.
The Board of Directors, following the recommendation of the Committee,
initially established Mr. Chillingworth's 1994 salary as Chief Executive Officer
of Realty at $160,000 on the basis of the factors described above and 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. In
November 1994, the Committee assessed, among other things, Mr. Chillingworth's
continued leadership in stabilizing the corporate operation (including executing
a move of Realty's headquarters to Arcadia, California and achieving efficient
staffing levels), in strengthening Realty's financial position and in planning
the Arcadia development project. The Committee then recommended, and the Board
approved, a salary increase to $175,000 for Mr. Chillingworth effective November
1, 1994.
In 1994, Realty maintained an annual bonus plan under which cash bonuses
could be paid to executive officers. These bonuses were predicated on the
Committee's subjective evaluation of the performance of the executive officer
and his or her contribution to the performance of Realty. The primary input to
the Committee with respect to the bonus plan for officers consisted of
recommendations by the Chief Executive Officer of Realty, except in the case of
the bonus paid to the Chief Executive Officer, which was determined by the Board
of Directors based upon the recommendation of the Committee. The Committee's
recommendation concerning Mr. Chillingworth's bonus for 1994 (which
recommendation was accepted by the Board of Directors) was based principally on
his continued leadership in the areas identified in the preceding paragraph.
Those senior officers of Realty that received options received them based on
their level of responsibility and relative position in Realty. The Committee
also considered current stock ownership and outstanding stock options as factors
in determining stock option grants, although the Committee did not use any
specific quantitative formula. Mr. Chillingworth received an option grant of
30,000 shares of common stock as a condition to his acceptance of employment
with Realty and a subsequent option grant of 15,000 shares of common stock
which, together, represented 37 percent of the total grants made to Realty
officers and key supervisory personnel in 1994.
The Committee has recommended and the Board of Directors has approved the
1995 Share Award Plan (described beginning at page 20 of this joint proxy
statement). The Committee believes that the 1995 Share Award Plan will promote
the interests of Realty and its shareholders and continue to enable Realty to
attract, retain and reward persons important to Realty's success through the
recognition of the attainment of long-term corporate goals and objectives.
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
35
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
William C. Baker Arthur Lee Crowe Thomas P. Mullaney
March 22, 1995
36
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
THE SANTA ANITA COMPANIES S&P 500 ALL REIT INDEX
1989 100 100 100
1990 77 97 83
1991 71 126 112
1992 77 136 126
1993 82 150 149
1994 69 152 150
ASSUMES $100 INVESTED ON JANUARY 1, 1990
ASSUMES DIVIDEND REINVESTED
YEAR ENDING DECEMBER 31,
----------------------------------------------------------------
1989 1990 1991 1992 1993 1994
--------- --------- --------- --------- --------- ---------
The Santa Anita Companies................................. 100 77 71 77 82 69
All REIT Index............................................ 100 83 112 126 149 150
S&P 500................................................... 100 97 126 136 150 152
37
OTHER BENEFIT PLANS
FOR OPERATING COMPANY AND REALTY
DEFERRED COMPENSATION ARRANGEMENTS. In 1994, Operating Company and Realty
had in effect deferred compensation arrangements with certain officers,
including Messrs. Keller and Goodrich (Operating Company) and Mr. Carpenter
(Realty), whereby they are entitled, if they have 10 years of service, to a
monthly benefit payable for 15 years, starting at the later of age 55 or
retirement, equal to 50% (plus 2% for each year of service in excess of 25
years) of their last monthly salary less a monthly benefit payable under the
Retirement Income Plan (except in situations in which a participating officer
dies while employed, in which case there is no such offset). Mr. Carpenter
resigned from Realty effective February 18, 1994 and his arrangement was assumed
by his new employer on February 18, 1994. Vesting is 50% after 5 years of
service, increasing to 100% after 10 years of service. Annualized examples of
these benefits, commencing at age 65, are set forth below. The examples assume
retirement as of December 31, 1994 after assumed years of service.
BENEFITS BASED ON YEARS OF SERVICE
------------------------------------------
BASE SALARY 10 YEARS 20 YEARS 30 YEARS 40 YEARS
--------------------------------- --------- --------- --------- ---------
$125,000......................... $ 39,080 $ 15,424 $ 2,133 $ 553
$150,000......................... $ 46,580 $ 17,924 $ 2,133 $ 1,200
$175,000......................... $ 59,080 $ 30,424 $ 17,133 $ 21,200
$200,000......................... $ 71,580 $ 42,924 $ 32,133 $ 41,200
$225,000......................... $ 84,080 $ 55,424 $ 47,133 $ 61,200
$250,000......................... $ 96,580 $ 67,924 $ 62,133 $ 81,200
$275,000......................... $ 109,080 $ 80,424 $ 77,133 $ 101,200
$300,000......................... $ 121,580 $ 92,924 $ 92,133 $ 121,200
$325,000......................... $ 134,080 $ 105,424 $ 107,133 $ 141,200
$350,000......................... $ 146,580 $ 117,924 $ 122,133 $ 161,200
$375,000......................... $ 159,080 $ 130,424 $ 137,133 $ 181,200
$400,000......................... $ 171,580 $ 142,924 $ 152,133 $ 201,200
$425,000......................... $ 184,080 $ 155,424 $ 167,133 $ 221,200
$450,000......................... $ 196,580 $ 167,924 $ 182,133 $ 241,200
$475,000......................... $ 209,080 $ 180,424 $ 197,133 $ 261,200
$500,000......................... $ 221,580 $ 192,924 $ 212,133 $ 281,200
These arrangements provide additional benefits if a "Qualifying Termination"
of the officer occurs within three years after a "Change in Control." In this
event, the officer will be treated as having an additional five years of service
under the arrangement. A Change in Control is generally defined as a 20% change
in the ownership of Company, or the replacement of the majority of the members
of the incumbent Board of Directors (excluding replacement directors nominated
by the incumbent Board of Directors), subject to certain exceptions. A
"Qualifying Termination" occurs if an officer is either involuntarily terminated
without cause or voluntarily terminates for good reason. Both a significant
modification of the executive's duties and a reduction of the executive's total
compensation may constitute good reason. Section 280G of the Internal Revenue
Code ("Section 280G") provides that payments occasioned by a change in control
may not be deducted by the
38
employer (and may be subject to 20% excise tax when received by the employee) if
total payments exceed certain limits. These additional benefits shall not be
made to the extent that they, when aggregated with other payments, would cause
the limits of Section 280G to be exceeded.
Subject to the receipt of shareholder approval of the Operating Company 1995
Share Award Plan ("1995 Operating Plan") at the Annual Meeting, Messrs. Keller
and Goodrich have released all of their rights and benefits under the deferred
compensation agreements in exchange for awards of Restricted Stock under the
1995 Operating Plan. See "Proposal to Adopt Santa Anita Operating Company 1995
Share Award Plan -- Restricted Stock Awards to be Made under the 1995 Operating
Plan to Certain Executive Officers."
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 (reduced from $235,840 in 1993), less
certain Social Security benefits.
Employees are eligible to participate in the plan after attaining age 21 and
completing one year of service. The plan currently provides for 100% vesting of
an employee's interest after five years of service (except to the extent faster
vesting is required under Internal Revenue Code "top-heavy" rules). However, in
the event of a Change in Control, the plan provides for immediate 100% vesting.
39
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,
1994 subject to the maximum annual benefit of $118,800 shown below. This maximum
annual amount is actuarially increased for participants who retire after age 65.
BENEFITS BASED ON YEARS OF SERVICE
------------------------------------------
BASE SALARY 10 YEARS 20 YEARS 30 YEARS 40 YEARS
------------------------------------- --------- --------- --------- ---------
$100,000............................. $ 18,420 $ 37,076 $ 57,867 $ 79,447
$125,000............................. $ 23,420 $ 47,076 $ 72,867 $ 99,447
$150,000............................. $ 28,420 $ 57,076 $ 87,867 $ 118,800
$175,000............................. $ 28,420 $ 57,076 $ 87,867 $ 118,800
$200,000............................. $ 28,420 $ 57,076 $ 87,867 $ 118,800
$225,000............................. $ 28,420 $ 57,076 $ 87,867 $ 118,800
$250,000............................. $ 28,420 $ 57,076 $ 87,867 $ 118,800
$275,000............................. $ 28,420 $ 57,076 $ 87,867 $ 118,800
$300,000............................. $ 28,420 $ 57,076 $ 87,867 $ 118,800
$325,000............................. $ 28,420 $ 57,076 $ 87,867 $ 118,800
$350,000............................. $ 28,420 $ 57,076 $ 87,867 $ 118,800
$375,000............................. $ 28,420 $ 57,076 $ 87,867 $ 118,800
$400,000............................. $ 28,420 $ 57,076 $ 87,867 $ 118,800
$425,000............................. $ 28,420 $ 57,076 $ 87,867 $ 118,800
$450,000............................. $ 28,420 $ 57,076 $ 87,867 $ 118,800
$475,000............................. $ 28,420 $ 57,076 $ 87,867 $ 118,800
$500,000............................. $ 28,420 $ 57,076 $ 87,867 $ 118,800
The officers and their salaries covered under these plans as of December 31,
1994 and their years of service for purposes of these plans are as follows:
DEFERRED
ANNUAL YEARS OF RETIREMENT COMPENSATION
NAME COMPANY SALARY SERVICE INCOME PLAN AGREEMENT
------------------------------------- ------------ ----------- ------------- ------------ -------------
Keller............................... Operating $ 400,000 4 yes yes
Goodrich............................. Operating $ 240,000 14 yes yes
Robbins.............................. Operating $ 160,000 11 yes no
Brumbaugh............................ Operating $ 120,000 23 yes no
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,
40
according to the employee's choices. The plan provides for 20% vesting of
company contribution after two years of service, increasing to 100% vesting
after six years of service. However, upon a Change in Control, the plan provides
for immediate 100% vesting.
DIRECTORS' COMPENSATION. In 1994, 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 1994, ten former directors with years
of service ranging from thirteen to thirty participated in the plan. Amounts
payable under the plan in 1994 totaled $116,160.
SEVERANCE AGREEMENTS. Operating Company has in effect Severance Agreements
with certain officers, including Messrs. Keller, Goodrich, Robbins and
Brumbaugh. Realty has in effect similar severance agreements with Messrs.
Chillingworth, Stirling and Fleming. Realty's severance agreements with Mr.
Carpenter and other former officers expired with their resignations as officers
of Realty on February 18, 1994. These agreements, which have a term of five
years, become effective if there is a Change in Control followed by a Qualifying
Termination of the named executive within three years. In that event, the
executive becomes entitled to a lump sum payment equal to 2 1/2 times the sum of
(1) the executive's current annual base salary rate plus (2) the executive's
average bonuses over the three calendar years preceding the Change in Control.
In addition, the executive may continue to participate in the Company's medical
and dental plans for three years if the executive pays the applicable premium.
The Severance Agreements provide that no payments shall be made to the extent
such payments, together with other payments by the Company, would cause the
limits of Section 280G 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 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. Mr. Keller is also
entitled under the agreement to various fringe 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.
41
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, 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 payment equal to 112%
of his then current annual base salary, subject to offset for any cash lump sum
payment he may receive pursuant to any severance agreement with 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 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 and shall devote
substantially two-thirds of his time and energy to the business of Realty. Mr.
Chillingworth is entitled under the agreement to devote up to one-third of his
time and energy to the business of 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
42
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's common stock at $20.25, which was the fair market value of the common
stock on the date of grant.
The agreement automatically terminates in the event of Mr. Chillingworth's
death or "disability" (as defined in the agreement). Realty may also terminate
Mr. Chillingworth's employment under the agreement at any time, with or without
"cause" (as defined in the agreement), upon 90 days' written notice. The
agreement provides for various payments to Mr. Chillingworth or his estate or
beneficiaries, as applicable, in the event of termination of his employment, 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. 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 was granted (pursuant to the terms of Realty's 1984 Stock Option Plan)
options to purchase 20,000 shares of Realty's common stock at the fair market
value of the common stock on the date of grant.
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 is entitled to a guaranteed bonus of
$30,000 provided he is 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's
common stock at the fair market value of the common stock on the date of grant.
RELATED PARTY TRANSACTION
Mr. Chillingworth, the Chief Executive Officer of Realty, also serves as
Executive Vice President of Oak Tree Racing Association ("Oak Tree"). Oak Tree
subleases Santa Anita Racetrack from LATC, a wholly owned subsidiary of
Operating Company, for the purpose of conducting a thoroughbred horse racing
meet lasting between five and six weeks each year. Under the current sublease,
which has been in place since January 1990 and expires in 2000, Oak Tree made
rental payments of $2,423,000 to LATC during 1994.
43
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of each Company customarily selects an independent
accounting firm to examine each Company's financial statements shortly before
the close of each fiscal year and, accordingly, Kenneth Leventhal & Company has
been selected at this time for the 1995 audit. The firm of Kenneth Leventhal &
Company examined each Company's financial statements for the year ended December
31, 1994, and a member of that firm will be present at each Company's Annual
Meeting of Shareholders with the opportunity to make a statement and to answer
questions by the shareholders.
OTHER MATTERS
Managements of each Company know of no business other than that mentioned
above to be transacted at the Annual Meetings, but if other matters do properly
come before the meeting, it is the intention of the persons named in the
enclosed proxy to vote in regard thereto in accordance with their judgment, and
discretionary authority to do so to the fullest extent permitted by applicable
law is included in the proxy.
PROPOSALS FOR NEXT ANNUAL MEETINGS
Any proposal which a shareholder intends to present at the next Annual
Meetings of Shareholders, to be held in May 1996, must be received at the
principal executive offices of the Company to which such proposal relates by
November 29, 1995, if such proposal is to be considered for inclusion in such
Company's Proxy Statement and form of proxy relating to that meeting.
ANNUAL REPORT (FORM 10-K)
The Companies undertake, on written request, to provide each shareholder,
without charge, a copy of The Companies' Joint Annual Report on Form 10-K for
the year ended December 31, 1994 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.
44
(THE FOLLOWING COPY OF THE SANTA ANITA OPERATING COMPANY 1995 SHARE
AWARD PLAN IS FILED PURSUANT TO INSTRUCTION 3 TO ITEM 10 OF SCHEDULE 14A,
BUT IS NOT PART OF THE PROXY STATEMENT AND DOES NOT OTHERWISE CONSTITUTE
SOLICITING MATERIAL.)
SANTA ANITA OPERATING COMPANY
1995 SHARE AWARD PLAN
TABLE OF CONTENTS
Page
----
I. THE PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Purpose. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Administration and Authorization; Power and Procedure. . . . . . . 1
1.3 Participation. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.4 Shares Available for Awards. . . . . . . . . . . . . . . . . . . . 3
1.5 Grant of Awards. . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.6 Award Period . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.7 Limitations on Exercise and Vesting of Awards. . . . . . . . . . . 5
1.8 Acceptance of Notes to Finance Exercise. . . . . . . . . . . . . . 6
1.9 No Transferability . . . . . . . . . . . . . . . . . . . . . . . . 7
II. EMPLOYEE OPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.1 Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.2 Option Price . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.3 Limitations on Grant and Terms of Incentive Stock Options. . . . . 9
2.4 Limits on 10% Holders. . . . . . . . . . . . . . . . . . . . . . . 9
2.5 Option Repricing; Cancellation and Regrant; Waiver of
Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.6 Dividend Equivalents . . . . . . . . . . . . . . . . . . . . . . . 10
III. STOCK APPRECIATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . 10
3.1 Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.2 Exercise of Stock Appreciation Rights. . . . . . . . . . . . . . . 11
3.3 Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
IV. RESTRICTED STOCK AWARDS . . . . . . . . . . . . . . . . . . . . . . . . 12
4.1 Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.2 Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.3 Return to the Corporation. . . . . . . . . . . . . . . . . . . . . 13
V. PERFORMANCE SHARE AWARDS AND STOCK BONUSES. . . . . . . . . . . . . . . 13
5.1 Grants of Performance Share Awards . . . . . . . . . . . . . . . . 13
5.2 Grants of Stock Bonuses. . . . . . . . . . . . . . . . . . . . . . 13
5.3 Deferred Payments. . . . . . . . . . . . . . . . . . . . . . . . . 14
(i)
VI. OTHER PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6.1 Rights of Eligible Employees, Participants and Beneficiaries . . . 14
6.2 Adjustments; Acceleration. . . . . . . . . . . . . . . . . . . . . 15
6.3 Effect of Termination of Employment. . . . . . . . . . . . . . . . 17
6.4 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . 17
6.5 Tax Withholding. . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.6 Plan Amendment, Termination and Suspension . . . . . . . . . . . . 18
6.7 Effect of Pairing Agreement on Awards. . . . . . . . . . . . . . . 19
6.8 Privileges of Stock Ownership. . . . . . . . . . . . . . . . . . . 20
6.9 Effective Date of the Plan . . . . . . . . . . . . . . . . . . . . 20
6.10 Term of the Plan . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.11 Governing Law; Construction; Severability. . . . . . . . . . . . . 21
6.12 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.13 Effect of Change of Subsidiary Status. . . . . . . . . . . . . . . 22
6.14 Non-Exclusivity of Plan. . . . . . . . . . . . . . . . . . . . . . 22
VII. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(ii)
SANTA ANITA OPERATING COMPANY
1995 SHARE AWARD PLAN
I. THE PLAN.
1.1 PURPOSE.
The purpose of this Plan is to promote the success of the Company by
providing an additional means through the grant of Awards to attract, motivate,
retain and reward key employees, including officers, whether or not directors,
of the Company with awards and incentives for high levels of individual
performance and improved financial performance of the Company. "Corporation"
means Santa Anita Operating Company and "Company" means the Corporation and its
Subsidiaries, collectively. These terms and other capitalized terms are defined
in Article VII.
1.2 ADMINISTRATION AND AUTHORIZATION; POWER AND PROCEDURE.
(a) COMMITTEE. This Plan shall be administered by, and all Awards to
Eligible Employees shall be authorized by, the Committee. Action of the
Committee with respect to the administration of this Plan shall be taken
pursuant to a majority vote or by written consent of its members.
(b) PLAN AWARDS; INTERPRETATION; POWERS OF COMMITTEE. Subject to the
express provisions of this Plan, the Committee shall have the authority:
(i) to determine from among those persons eligible the particular
Eligible Employees who will receive any Awards;
(ii) to grant Awards to Eligible Employees, determine the price at
which securities will be offered or awarded and the amount of securities to
be offered or awarded to any of such persons, and determine the other
specific terms and conditions of such Awards consistent with the express
limits of this Plan, and establish the installments (if any) in which such
Awards shall become exercisable or shall vest, or determine that no delayed
exercisability or vesting is required, and establish the events of
termination or reversion (if any) of such Awards;
(iii) to approve the forms of Award Agreements (which need not be
identical either as to type of Award or among Participants);
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(iv) to construe and interpret this Plan and any agreements defining
the rights and obligations of the Company and Participants under this Plan,
further define the terms used in this Plan, and prescribe, amend and
rescind rules and regulations relating to the administration of this Plan;
(v) to cancel, modify, or waive the Corporation's rights with respect
to, or modify, discontinue, suspend, or terminate any or all outstanding
Awards held by Participants, subject to any required consent under Section
6.6;
(vi) to accelerate or extend the exercisability or vesting extend the
term of any or all such outstanding Awards within the maximum ten-year term
of Awards under Section 1.6; and
(vii) to make all other determinations and take such other action
as contemplated by this Plan or as may be necessary or advisable for the
administration of this Plan and the effectuation of its purposes.
(c) BINDING DETERMINATIONS. Any action taken by, or inaction of, the
Corporation, any Subsidiary, the Board or the Committee relating or pursuant to
this Plan shall be within the absolute discretion of that entity or body and
shall be conclusive and binding upon all persons. No member of the Board or
Committee, or officer of the Corporation or any Subsidiary, shall be liable for
any such action or inaction of the entity or body, of another person or, except
in circumstances involving bad faith, of himself or herself. Subject only to
compliance with the express provisions hereof, the Board and Committee may act
in their absolute discretion in matters within their authority related to this
Plan.
(d) RELIANCE ON EXPERTS. In making any determination or in taking
or not taking any action under this Plan, the Committee or the Board, as the
case may be, may obtain and may rely upon the advice of experts, including
professional advisors to the Corporation. No director, officer or agent of the
Company shall be liable for any such action or determination taken or made or
omitted in good faith.
(e) DELEGATION. The Committee may delegate ministerial, non-
discretionary functions to individuals who are officers or employees of the
Company.
2
1.3 PARTICIPATION.
Awards may be granted by the Committee only to those persons that the
Committee determines to be Eligible Employees. An Eligible Employee who has
been granted an Award may, if otherwise eligible, be granted additional Awards
if the Committee shall so determine. Non-Employee Directors shall not be
eligible to receive any Awards.
1.4 SHARES AVAILABLE FOR AWARDS.
Subject to the provisions of Section 6.2, the capital stock that may
be delivered under this Plan shall be shares of the Corporation's authorized but
unissued Common Stock, any shares of its Common Stock held as treasury shares
and shares of Realty Stock. The shares may be delivered for any lawful
consideration.
(a) NUMBER OF SHARES. The maximum number of shares of Common Stock
and Realty Stock that may be delivered pursuant to Awards granted to Eligible
Employees under this Plan shall not exceed 780,000 Paired Shares, subject to
subsection (c) below and the adjustments contemplated by Section 6.2. The
maximum number of Options and Stock Appreciation Rights (whether payable in
Paired Shares, cash or any combination thereof) that may be granted to an
Eligible Employee during any one-year period shall not exceed 150,000, subject
to adjustment as contemplated in Section 6.2.
(b) RESERVATION OF SHARES. Common Stock subject to outstanding
Awards of derivative securities (as defined in Rule 16a-1(c) under the Exchange
Act) shall be reserved for issuance; a like number of shares of Realty Stock
shall be purchased from Realty or arrangements shall be made with Realty for
simultaneous issuance by Realty of the same number of shares of Realty Stock as
the number of shares of Common Stock to be issued in connection with an Award;
PROVIDED that nothing herein shall be construed to prevent the Corporation from
purchasing Paired Shares in the open market for use in connection with Awards.
If a Stock Appreciation Right or similar right is exercised or a Performance
Share Award based on the increased market value of a specified number of Paired
Shares is paid, the number of Paired Shares to which such exercise or payment
relates under the applicable Award shall be charged against the maximum amount
of Paired Shares that may be delivered pursuant to Awards under this Plan and,
if applicable, such Award. If the Corporation withholds Paired Shares pursuant
to Section 6.5, the number of shares that would have been deliverable with
respect to an Award but that are withheld pursuant to the provisions of Section
6.5 may in effect not be issued, but the aggregate number of shares issuable
with
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respect to the applicable Award and under the Plan shall be reduced by the
number of shares withheld and such shares shall not be available for additional
Awards under this Plan. To the extent a Performance Share Award constitutes an
equity security (as this phrase is defined in Rule 16a-1 under the Exchange Act)
issued by the Corporation and is paid in shares of Paired Shares, the number of
Paired Shares (if any) subject to such Performance Share Award shall be charged
(but in the case of tandem or substituted Awards, without duplication) against
the maximum number of Paired Shares that may be delivered pursuant to Awards
under this Plan.
(c) CASH ONLY AWARD LIMIT. Awards payable solely in cash under the
Plan and Awards payable either in cash or shares that are actually paid in cash
shall constitute and be referred to as "CASH ONLY AWARDS". The number of Cash
Only Awards shall be determined by reference to the number of Paired Shares by
which the Award is measured. The maximum number of Cash Only Awards that may be
paid shall not, together with the aggregate number of Paired Shares that may be
delivered under subsection (a), exceed 780,000, subject to adjustments under
Section 6.2. Awards payable either in cash or shares shall not be counted
against the Cash Only Award limit if charged against the share limit in
subsection (a). Notwithstanding the foregoing, if an Award paid or payable
solely in cash satisfies the requirements for the exclusion from the definition
of a derivative security in Rule 16a-1(c) that does not require that the award
be made under a Rule 16b-3 plan, the Award shall not be counted against any of
the limits of this Section.
(d) REISSUE OF AWARDS. Subject to any restrictions under Rule 16b-3,
any unexercised, unconverted, unvested or undistributed portion of any expired,
cancelled, terminated or forfeited Award, or any alternative form of
consideration under an Award that is not paid in connection with the settlement
of an Award or any portion of an Award, shall again be available for Award under
subsection (a) or (c) above, as applicable, whether or not the Participant has
received benefits of ownership (such as dividends or dividend equivalents or
voting rights) during the period in which the Participant's ownership was
restricted or otherwise not vested. Shares that are issued pursuant to Awards
and subsequently reacquired by the Corporation pursuant to the terms and
conditions of the Awards also shall be available for reissuance under the Plan.
(e) INTERPRETIVE ISSUES. Additional rules for determining the number
of shares or Cash Only Awards authorized under the Plan may be adopted by the
Committee, as it deems necessary or appropriate; provided that such rules are
consistent with Rule 16b.
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1.5 GRANT OF AWARDS.
Subject to the express provisions of this Plan, the Committee shall
determine the number of Paired Shares subject to each Award, and the price (if
any) to be paid for the Paired Shares or the Award and, in the case of
Performance Share Awards, in addition to matters addressed in Section 1.2(b),
the specific objectives, goals and performance criteria (such as an increase in
revenues, market value, earnings or book value over a base period, the years of
service before vesting, the relevant job classification or level of
responsibility or other factors) that further define the terms of the
Performance Share Award. Each Award shall be evidenced by an Award Agreement
signed by the Corporation and, if required by the Committee, by the Participant.
1.6 AWARD PERIOD.
Each Award and all executory rights or obligations under the related
Award Agreement shall expire on such date (if any) as shall be determined by the
Committee, but, in the case of Options or other rights to acquire Paired Shares,
not later than ten (10) years after the Award Date.
1.7 LIMITATIONS ON EXERCISE AND VESTING OF AWARDS.
(a) PROVISIONS FOR EXERCISE. Except as may otherwise be provided in
an Award Agreement, no Award shall be exercisable or shall vest until at least
six months after the initial Award Date, and once exercisable an Award shall
remain exercisable until the expiration or earlier termination of the Award,
unless the Committee otherwise provides.
(b) PROCEDURE. Any exercisable Award shall be deemed to be exercised
when the Secretary of the Corporation receives written notice of such exercise
from the Participant, together with any required payment made in accordance with
Section 2.2(b).
(c) FRACTIONAL SHARES/MINIMUM ISSUE. Fractional share interests
shall be disregarded, but may be accumulated. The Committee, however, may
determine that cash, other securities or other property will be paid or
transferred in lieu of any fractional share interests. No fewer than 10 Paired
Shares may be purchased on exercise of any Award at one time unless the number
purchased is the total number at the time available for purchase under the
Award.
5
1.8 ACCEPTANCE OF NOTES TO FINANCE EXERCISE.
The Corporation may, with the Committee's approval, accept one or more
notes from any Participant in connection with the exercise or receipt of any
outstanding Award; PROVIDED that any such note shall be subject to the following
terms and conditions:
(a) The principal of the note shall not exceed the amount required to
be paid to the Corporation upon the exercise or receipt of one or more
Awards under the Plan and the note shall be delivered directly to the
Corporation in consideration of such exercise or receipt.
(b) The note shall be repaid over a period of time not to exceed five
years, with annual installments of at least 10% of principal the first four
years and a balloon payment of the remaining principal amount at the end of
the fifth year; PROVIDED that the Corporation may demand any payment, in
addition to such installments, as may be required for the note to remain in
compliance with any applicable federal or state regulation.
(c) The note shall provide for full recourse to the Participant and
shall bear interest at a rate determined by the Committee but not less than
the applicable imputed interest rate specified by the Code.
(d) Except as otherwise provided by the Committee, if the employment
of the Participant terminates, the unpaid principal balance of the note
shall become due and payable on the 10th business day after such
termination; PROVIDED, HOWEVER, that if a sale of any Paired Shares
acquired by the Participant in connection with an Award to which the note
relates would cause such Participant to incur liability under Section 16(b)
of the Exchange Act, the unpaid balance shall become due and payable on the
10th business day after the first day on which a sale of such shares could
have been made without incurring such liability assuming for these purposes
that there are no other transactions by the Participant subsequent to such
termination.
(e) If required by the Committee or by applicable law, the note shall
be secured by a pledge of any shares or rights financed thereby in
compliance with applicable law.
(f) The terms, repayment provisions, and collateral release
provisions of the note and the
6
pledge securing the note shall conform with applicable rules and
regulations of the Federal Reserve Board as then in effect.
1.9 NO TRANSFERABILITY.
(a) Awards may be exercised only by, and amounts payable or Paired
Shares issuable pursuant to an Award shall be paid only to (or registered only
in the name of), the Participant or, if the Participant has died, the
Participant's Beneficiary or, if the Participant has suffered a Total
Disability, the Participant's Personal Representative, if any, or if there is
none, the Participant, or (to the extent permitted by applicable law and Rule
16b-3) to a third party pursuant to such conditions and procedures as the
Committee may establish. Other than by will or the laws of descent and
distribution or pursuant to a QDRO or other exception to transfer restrictions
under Rule 16b-3 (except to the extent not permitted in the case of an Incentive
Stock Option), no right or benefit under this Plan or any Award, including,
without limitation, any Option or shares of Restricted Stock that has not
vested, shall be transferrable by the Participant or shall be subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge (other than to the Corporation) and any such attempted
action shall be void. The Corporation shall disregard any attempt at transfer,
assignment or other alienation prohibited by the preceding sentences and shall
pay or deliver such cash or Paired Shares in accordance with the provisions of
this Plan. The designation of a Beneficiary hereunder shall not constitute a
transfer for these purposes.
(b) Nothing in this plan authorizes, or shall be construed to
authorize, a transfer or exchange by a Participant, Beneficiary, Personal
Representative or any third party of any shares of Common Stock or Realty Stock
in contravention of the provisions of the Pairing Agreement.
(c) The restrictions on exercise and transfer above shall not be
deemed to prohibit the authorization by the Committee of "cashless exercise"
procedures with unaffiliated third parties who provide financing for the purpose
of (or who otherwise facilitate) the exercise of Awards consistent with
applicable legal restrictions and Rule 16b-3, nor, to the extent permitted by
the Committee, transfers for estate and financial planning purposes,
notwithstanding that the inclusion of such features may render the particular
Awards ineligible for the benefits of Rule 16b-3, nor, in the case of
Participants who are not Section 16 Persons, transfers to such other persons or
in such other circumstances as the Committee may in the Award Agreement or other
writing expressly permit.
7
II. EMPLOYEE OPTIONS.
2.1 GRANTS.
One or more Options may be granted under this Article to any Eligible
Employee, subject to the provisions of Section 1.4. Each Option granted may be
either an Option intended to be an Incentive Stock Option (as to the Common
Stock covered by the Option, but not the Realty Stock), or an Option not so
intended, and such intent shall be indicated in the applicable Award Agreement.
2.2 OPTION PRICE.
(a) PRICING LIMITS. Subject to Section 2.4, (i) the purchase price
per share of the Common Stock covered by each Option and (ii) the purchase price
per share of the Realty Stock covered by each Option shall be determined by the
Committee at the time the Option is granted, but shall not be less than 100% of
the Fair Market Value of the Common Stock or Realty Stock, as the case may be,
on the date of grant.
(b) PAYMENT PROVISIONS. The purchase price of any shares purchased
on exercise of an Option granted under this Article shall be paid in full at the
time of each purchase in one or a combination of the following methods: (i) in
cash or by electronic funds transfer; (ii) by check payable to the order of the
Corporation; (iii) if authorized by the Committee or specified in the applicable
Award Agreement, in cash in an amount equal to the par value of the shares being
purchased, and, in the form of a promissory note (consistent with the
requirements of Section 1.8) of the Participant in an amount equal to the
difference between said cash amount and the purchase price of such shares; (iv)
by notice and third party payment in such manner as may be authorized by the
Committee; (v) by the delivery of Paired Shares already owned by the
Participant, PROVIDED, HOWEVER, that the Committee may in its absolute
discretion limit the Participant's ability to exercise an Award by delivering
such Paired Shares; or (vi) if authorized by the Committee or specified in the
applicable Award Agreement, by reduction in the number of Paired Shares
otherwise deliverable upon exercise by that number of Paired Shares which have a
then Fair Market Value equal to such purchase price. Previously owned Paired
Shares used to satisfy the exercise price of an Option under clause (v) shall be
valued at their Fair Market Value on the date of exercise.
8
2.3 LIMITATIONS ON GRANT AND TERMS OF INCENTIVE STOCK OPTIONS.
(a) $100,000 LIMIT. To the extent that the aggregate "fair market
value" of Common Stock subject to any Option with respect to which Incentive
Stock Options first become exercisable by a Participant in any calendar year
exceeds $100,000, taking into account both Common Stock subject to Incentive
Stock Options under this Plan and stock subject to incentive stock options under
all other plans of the Company, such options shall be treated as Nonqualified
Stock Options. For this purpose, the "fair market value" of the Common Stock
subject to Options shall be determined as of the date the Options were awarded.
In reducing the number of Options treated as Incentive Stock Options to meet the
$100,000 limit, the most recently granted Options shall be reduced first. To
the extent a reduction of simultaneously granted Options is necessary to meet
the $100,000 limit, the Committee may, in the manner and to the extent permitted
by law, designate which shares of Common Stock are to be treated as shares
acquired pursuant to the exercise of an Incentive Stock Option.
(b) OPTION PERIOD. Subject to Section 2.4, each Option and all
rights thereunder shall expire no later than ten years after the Award Date.
(c) OTHER CODE LIMITS. There shall be imposed in any Award Agreement
relating to Incentive Stock Options such terms and conditions as from time to
time are required in order that the Option be an "incentive stock option" as
that term is defined in Section 422 of the Code.
(d) REALTY STOCK. To the extent an Option is for the purchase of
Realty Stock, such Option shall be treated as a Nonqualified Stock Option.
2.4 LIMITS ON 10% HOLDERS.
No Incentive Stock Option may be granted to any person who, at the
time the Option is granted, owns (or is deemed to own under Section 424(d) of
the Code) shares of outstanding Common Stock possessing more than 10% of the
total combined voting power of all classes of stock of the Corporation, unless
the exercise price of such Option with respect to the Common Stock covered by
the Option is at least 110% of the Fair Market Value of the Common Stock subject
to the Option and such Option by its terms is not exercisable after the
expiration of five years from the date such Option is granted.
9
2.5 OPTION REPRICING; CANCELLATION AND REGRANT; WAIVER OF RESTRICTIONS.
Subject to Section 1.4 and Section 6.6 and the specific limitations on
Awards contained in this Plan, the Committee from time to time may authorize,
generally or in specific cases only, for the benefit of any Eligible Employee,
any adjustment in the exercise or purchase price, the number of shares subject
to, the restrictions upon or the term of, an Award granted under this Article by
cancellation of an outstanding Award and a subsequent regranting of an Award, by
amendment, by substitution of an outstanding Award, by waiver or by other
legally valid means. Such amendment or other action may result among other
changes in an exercise or purchase price which is higher or lower than the
exercise or purchase price of the original or prior Award, provide for a greater
or lesser number of shares subject to the Award, or provide for a longer or
shorter vesting or exercise period.
2.6 DIVIDEND EQUIVALENTS.
The Committee may, at the time of granting an Option, grant Dividend
Equivalents attributable to Paired Shares subject to the Option. Dividend
Equivalents shall be paid in cash only to the extent the Option is unexercised
as of the dividend record date, as specified in the Award Agreement, as follows:
the Dividend Equivalent per Paired Share shall be multiplied by the number of
Paired Shares subject to Option and an amount equal to the product so derived
shall be paid in cash to the Participant on the dividend payment date. The
Committee may in the Award specify that Dividend Equivalents shall be paid only
for a specified time period or only as to that portion of the Option that has
vested.
III. STOCK APPRECIATION RIGHTS.
3.1 GRANTS.
In its discretion, the Committee may grant to any Eligible Employee
Stock Appreciation Rights either concurrently with the grant of another Award or
in respect of an outstanding Award, in whole or in part, or independently of any
other Award. Any Stock Appreciation Right granted in connection with an
Incentive Stock Option shall contain such terms as may be required to comply
with the provisions of Section 422 of the Code and the regulations promulgated
thereunder.
10
3.2 EXERCISE OF STOCK APPRECIATION RIGHTS.
(a) EXERCISABILITY. Unless the Award Agreement or the Committee
otherwise provides, a Stock Appreciation Right related to another Award shall be
exercisable at such time or times, and to the extent, that the related Award
shall be exercisable.
(b) EFFECT ON AVAILABLE SHARES. In the event that a Stock
Appreciation Right is exercised, the number of Paired Shares subject to the
Award shall be charged against the number of Paired Shares subject to the Stock
Appreciation Right and the related Option of the Participant.
(c) STAND-ALONE SARS. A Stock Appreciation Right granted
independently of any other Award shall be exercisable pursuant to the terms of
the Award Agreement but, unless the Committee determines otherwise, in no event
earlier than six months after the Award Date, except in the case of death or
Total Disability.
3.3 PAYMENT.
(a) AMOUNT. Unless the Committee otherwise provides, upon exercise
of a Stock Appreciation Right and surrender of an exercisable portion of any
related Award, the Participant shall be entitled to receive payment of an amount
determined by multiplying
(i) the difference obtained by subtracting the exercise price
per Paired Share under the related Award (if applicable) or the initial
share value specified in the Award from the Fair Market Value of a Paired
Share on the date of exercise of the Stock Appreciation Right, by
(ii) the number of Paired Shares with respect to which the Stock
Appreciation Right shall have been exercised.
(b) FORM OF PAYMENT. The Committee, in its sole discretion, shall
determine the form in which payment shall be made of the amount determined under
paragraph (a) above, either solely in cash, solely in Paired Shares (valued at
Fair Market Value on the date of exercise of the Stock Appreciation Right), or
partly in such Paired Shares and partly in cash, PROVIDED that the Committee
shall have determined that such exercise and payment are consistent with
applicable law. If the Committee permits the Participant to elect to receive
cash or Paired Shares (or a combination thereof) on such exercise, any such
election shall be subject to such conditions as the Committee may
11
impose and, in the case of any Section 16 Person, any election to receive cash
shall be subject to any applicable limitations under Rule 16b-3.
IV. RESTRICTED STOCK AWARDS.
4.1 GRANTS.
The Committee may, in its discretion, grant one or more Restricted
Stock Awards to any Eligible Employee. Each Restricted Stock Award Agreement
shall specify the number of Paired Shares to be issued, the date of such
issuance, the consideration for such Paired Shares (but not less than the
minimum lawful consideration) to be paid by the Participant and the restrictions
imposed on such Paired Shares and the conditions of release or lapse of such
restrictions. Such restrictions shall not lapse earlier than six months after
the Award Date, except to the extent the Committee may otherwise provide. Stock
certificates evidencing shares of Restricted Stock pending the lapse of the
restrictions ("restricted shares") shall bear a legend making appropriate
reference to the restrictions imposed hereunder and shall be held by the
Corporation or by a third party designated by the Committee until the
restrictions on such shares shall have lapsed and the shares shall have vested
in accordance with the provisions of the Award and Section 1.7. Upon issuance
of the Restricted Stock Award, the Participant may be required to provide such
further assurance and documents as the Committee may require to enforce the
restrictions.
4.2 RESTRICTIONS.
(a) PRE-VESTING RESTRAINTS. Except as provided in Section 1.9 and
4.1, restricted shares comprising any Restricted Stock Award may not be sold,
assigned, transferred, pledged or otherwise disposed of or encumbered, either
voluntarily or involuntarily, until such shares have vested.
(b) DIVIDEND AND VOTING RIGHTS. Unless otherwise provided in the
applicable Award Agreement, a Participant receiving a Restricted Stock Award
shall be entitled to cash dividend and voting rights for all shares issued even
though they are not vested, PROVIDED that such rights shall terminate
immediately as to any restricted shares which cease to be eligible for vesting.
(c) CASH PAYMENTS. If the Participant shall have paid or received
cash (including any dividends) in connection with the Restricted Stock Award,
the Award Agreement shall specify whether and to what extent such cash shall be
returned (with or without an earnings factor) as to
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any restricted shares which cease to be eligible for vesting.
4.3 RETURN TO THE CORPORATION.
Unless the Committee otherwise expressly provides, shares of
Restricted Stock that are subject to restrictions at the time of termination of
employment or are subject to other conditions to vest that have not been
satisfied by the time specified in the applicable Award Agreement shall not vest
and shall be returned to the Corporation in such manner and on such terms as the
Committee shall therein provide.
V. PERFORMANCE SHARE AWARDS AND STOCK BONUSES.
5.1 GRANTS OF PERFORMANCE SHARE AWARDS.
The Committee may, in its discretion, grant one or more Performance
Share Awards to any Eligible Employee based upon such factors, which in the case
of any Award to a Section 16 Person shall include but not be limited to the
contributions, responsibilities and other compensation of the person, as the
Committee shall deem relevant in light of the specific type and terms of the
award. An Award Agreement shall specify the maximum number of Paired Shares (if
any) subject to the Performance Share Award, the consideration (but not less
than the minimum lawful consideration) to be paid for any such shares as may be
issuable to the Participant, the duration of the Award and the conditions upon
which delivery of any Paired Shares or cash to the Participant shall be based.
The amount of cash or Paired Shares or other property that may be deliverable
pursuant to such Award shall be based upon the degree of attainment over a
specified period (a "performance cycle") as may be established by the Committee
of such measure(s) of the performance of the Company (or any part thereof) or
the Participant as may be established by the Committee. The Committee may
provide for full or partial credit, prior to completion of such performance
cycle or the attainment of the performance achievement specified in the Award,
in the event of the Participant's death, Retirement, or Total Disability, a
Change in Control Event or in such other circumstances as the Committee,
consistent with Section 6.11(c)(2), if applicable, may determine.
5.2 GRANTS OF STOCK BONUSES.
The Committee may grant a Stock Bonus to any Eligible Employee to
reward exceptional or special services, contributions or achievements in the
manner and on such terms and conditions (including any restrictions on such
shares) as determined from time to time by the Committee.
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The number of shares so awarded shall be determined by the Committee. The Stock
Bonus may be granted independently or in lieu of a cash bonus.
5.3 DEFERRED PAYMENTS.
The Committee may authorize for the benefit of any Eligible Employee
the deferral of any payment of cash or Paired Shares that may become due or of
cash otherwise payable under this Plan, and provide for accreted benefits
thereon based upon such deferment, at the election or at the request of such
Participant, subject to the other terms of this Plan. Such deferral shall be
subject to such further conditions, restrictions or requirements as the
Committee may impose, subject to any then vested rights of Participants.
VI. OTHER PROVISIONS.
6.1 RIGHTS OF ELIGIBLE EMPLOYEES, PARTICIPANTS AND BENEFICIARIES.
(a) EMPLOYMENT STATUS. Status as an Eligible Employee shall not be
construed as a commitment that any Award will be made under this Plan to an
Eligible Employee or to Eligible Employees generally.
(b) NO EMPLOYMENT CONTRACT. Nothing contained in this Plan (or in
any other documents related to this Plan or to any Award) shall confer upon any
Eligible Employee or Participant any right to continue in the employ or other
service of the Company or constitute any contract or agreement of employment or
other service, nor shall interfere in any way with the right of the Company to
change such person's compensation or other benefits or to terminate the
employment of such person, with or without cause, but nothing contained in this
Plan or any document related hereto shall adversely affect any independent
contractual right of such person without his or her consent thereto.
(c) PLAN NOT FUNDED. Awards payable under this Plan shall be payable
in Paired Shares or from the general assets of the Corporation, and no special
or separate reserve, fund or deposit shall be made to assure payment of such
Awards. No Participant, Beneficiary or other person shall have any right, title
or interest in any fund or in any specific asset (including shares of Common
Stock or shares of Realty Stock, except as expressly otherwise provided) of the
Company by reason of any Award hereunder. Neither the provisions of this Plan
(or of any related documents), nor the creation or adoption of this Plan, nor
any action taken pursuant to the provisions of this Plan
14
shall create, or be construed to create, a trust of any kind or a fiduciary
relationship between the Company and any Participant, Beneficiary or other
person. To the extent that a Participant, Beneficiary or other person acquires
a right to receive payment pursuant to any Award hereunder, such right shall be
no greater than the right of any unsecured general creditor of the Company.
6.2 ADJUSTMENTS; ACCELERATION.
(a) ADJUSTMENTS. If the outstanding shares of Common Stock or the
outstanding shares of Realty Stock are changed into or exchanged for cash, other
property or a different number or kind of shares or securities of the
Corporation or of Realty, as the case may be, or if additional shares or new or
different securities are distributed with respect to the outstanding shares of
Common Stock or the outstanding shares of Realty Stock, through a reorganization
or merger in which the Corporation or Realty, as the case may be, is the
surviving entity, or through a combination, consolidation, recapitalization,
reclassification, stock split, stock dividend, reverse stock split, stock
consolidation, dividend or distribution of cash or property to the shareholders
of the Corporation or of Realty, or if there shall occur any other extraordinary
corporate transaction or event in respect of the Common Stock or the Realty
Stock or a sale of substantially all the assets of the Corporation or of Realty
as an entirety which in the judgment of the Committee materially affects the
Common Stock or the Realty Stock, then the Committee shall, in such manner and
to such extent (if any) as it deems appropriate and equitable (1)
proportionately adjust any or all of (A) the number and kind of shares of Common
Stock, Realty Stock or other consideration that is subject to or may be
delivered under this Plan and pursuant to outstanding Awards, (B) the
consideration payable with respect to Awards granted prior to any such change
and the price, if any, paid in connection with Restricted Stock Awards or (C)
the performance standards appropriate to any outstanding awards; or (2) in the
case of an extraordinary dividend or other distribution, merger, reorganization,
consolidation, combination, sale of assets, split up, exchange, or spin off,
make provision for a cash payment or for the substitution or exchange of any or
all outstanding Awards or the cash, securities or property deliverable to the
holder of any or all outstanding Awards based upon the distribution or
consideration payable to holders of Common Stock or to holders of Realty Stock
upon or in respect of such event; PROVIDED, HOWEVER, in each case, that with
respect to Awards of Incentive Stock Options, no such adjustment shall be made
which would cause the Plan to violate Section 422 or 424(a) of the Code or any
successor provisions thereto. Corresponding adjustments shall be made with
respect to any
15
Stock Appreciation Rights based upon the adjustments made to the Options to
which they are related. In any of such events, the Committee may take such
action sufficiently prior to such event if necessary to permit the Participant
to realize the benefits intended to be conveyed with respect to the underlying
shares in the same manner as is available to shareholders generally.
(b) ACCELERATION OF AWARDS UPON CHANGE IN CONTROL. As to any or all
Participants, upon the occurrence of a Change in Control Event (i) each Option
and Stock Appreciation Right shall become immediately exercisable, (ii)
Restricted Stock shall immediately vest free of restrictions, and (iii) each
Performance Share Award shall become payable to the Participant; PROVIDED,
HOWEVER, that in no event shall any Award be accelerated as to any Section 16
Person to a date less than six months after the Award Date of such Award.
Notwithstanding the foregoing, except in the case of an Award of an Option,
prior to a Change in Control Event, the Committee may determine that, upon its
occurrence, there shall be no acceleration of benefits under Awards or determine
that only certain or limited benefits under Awards shall be accelerated and the
extent to which they shall be accelerated, and/or establish a different time in
respect of such event for such acceleration. In addition, the Committee may
override the limitations on acceleration in this Section 6.2(b) by express
provision in the Award Agreement and may accord any Participant a right to
refuse any acceleration, whether pursuant to the Award Agreement or otherwise,
in such circumstances as the Committee may approve. Any acceleration of Awards
shall comply with applicable regulatory requirements, including without
limitation Section 422 of the Code.
Notwithstanding any other provision of this Plan, this Section 6.2(b)
shall be effective through September 30, 1997 and may not be amended or
terminated during such period except as required by law or to make changes that
do not diminish the benefits or rights provided by this Section 6.2(b). The
Board may, in its sole discretion and for any reason, provide written notice of
termination or amendment (effective as of the then applicable expiration date,
but not with respect to a Change in Control Event occurring on or before such
expiration date) no later than six months before the expiration date of this
Section 6.2(b). If such amendment or termination is not made, this Section
6.2(b) shall be automatically extended for an additional period of 60 months
past the expiration date. This Section 6.2(b) shall continue to be
automatically extended for an additional 60 months at the end of such 60-month
period and each succeeding 60-month period unless notice is given in the manner
described in this Section 6.2(b).
16
(c) POSSIBLE EARLY TERMINATION OF ACCELERATED AWARDS. If any Option
or other right to acquire Paired Shares under this Plan has not been exercised
prior to (i) a dissolution of the Corporation, (ii) a reorganization event
described in Section 6.2(a) that the Corporation does not survive, or (iii) the
consummation of a reorganization event described in Section 6.2(a) that results
in a Change in Control Event approved by the Board and no provision has been
made for the survival, substitution, exchange or other settlement of such Option
or right, such Option or right shall thereupon terminate.
(d) GOLDEN PARACHUTE LIMITATIONS. In no event shall an Award be
accelerated under this Plan to an extent or in a manner which would not be fully
deductible by the Company for federal income tax purposes because of Section
280G of the Code, nor shall any payment hereunder be accelerated if any portion
of such accelerated payment would not be deductible by the Company because of
Section 280G of the Code. If a holder would be entitled to benefits or payments
hereunder and under any other plan or program which would constitute "parachute
payments" as defined in Section 280G of the Code, then the holder may by written
notice to the Company designate the order in which such parachute payments shall
be reduced or modified so that the Company is not denied federal income tax
deductions for any "parachute payments" because of Section 280G of the Code.
6.3 EFFECT OF TERMINATION OF EMPLOYMENT.
The Committee shall establish in respect of each Award granted to an
Eligible Employee the effect of a termination of employment on the rights and
benefits thereunder and in so doing may make distinctions based upon the cause
of termination, E.G., Retirement, early retirement, termination for cause,
disability or death. Notwithstanding any terms to the contrary in an Award
Agreement or this Plan, the Committee may decide in its complete discretion at
the time of termination (or within a reasonable time thereafter) to extend the
exercise period of an Award (although not beyond the period described in Section
2.3(b)) and the number of shares covered by the Award with respect to which the
Award is exercisable or vested.
6.4 COMPLIANCE WITH LAWS.
This Plan, the granting and vesting of Awards under this Plan and the
offer, issuance and delivery of Paired Shares and/or the payment of money under
this Plan or under Awards granted hereunder are subject to compliance with all
applicable federal and state laws, rules and regulations (including, but not
limited to, state and
17
federal securities laws and federal margin requirements) and to such approvals
by any listing, regulatory or governmental authority as may, in the opinion of
counsel for the Corporation, be necessary or advisable in connection therewith.
Any securities delivered under this Plan shall be subject to such restrictions,
and the person acquiring such securities shall, if requested by the Corporation,
provide such assurances and representations to the Corporation as the
Corporation may deem necessary or desirable to assure compliance with all
applicable legal requirements.
6.5 TAX WITHHOLDING.
(a) CASH OR SHARES. Upon any exercise, vesting, or payment of any
Award, the Company shall have the right at its option to (i) require the
Participant (or Personal Representative or Beneficiary, as the case may be) to
pay or provide for payment of the amount of any taxes which the Company may be
required to withhold with respect to such transaction or (ii) deduct from any
amount payable in cash the amount of any taxes which the Company may be required
to withhold with respect to such cash amount. In any case where a tax is
required to be withheld in connection with the delivery of Paired Shares under
this Plan, the Committee may grant (either at the time of the Award or
thereafter) to the Participant the right to elect, or the Committee may require
(either at the time of the Award or thereafter), pursuant to such rules and
subject to such conditions as the Committee may establish, to have the
Corporation reduce the number of shares to be delivered by (or otherwise
reacquire) the appropriate number of shares valued at their then Fair Market
Value, to satisfy such withholding obligation.
(b) TAX LOANS. The Committee may, in its discretion, authorize a
loan to an Eligible Employee in the amount of any taxes which the Company may be
required to withhold with respect to Paired Shares received (or disposed of, as
the case may be) pursuant to a transaction described in subsection (a) above.
Such a loan shall be for a term, at a rate of interest and pursuant to such
other terms and conditions as the Committee, under applicable law may establish
and such loan need not comply with the provisions of Section 1.8.
6.6 PLAN AMENDMENT, TERMINATION AND SUSPENSION.
(a) BOARD AUTHORIZATION. The Board may, at any time, terminate or,
from time to time, amend, modify or suspend this Plan, in whole or in part. No
Awards may be granted during any suspension of this Plan or after termination of
this Plan, but the Committee shall retain
18
jurisdiction as to Awards then outstanding in accordance with the terms of this
Plan.
(b) SHAREHOLDER APPROVAL. If any amendment would (i) materially
increase the benefits accruing to Participants under this Plan, (ii) materially
increase the aggregate number of securities that may be issued under this Plan,
or (iii) materially modify the requirements as to eligibility for participation
in this Plan, then to the extent then required by Rule 16b-3 to secure benefits
thereunder or to avoid liability under Section 16 of the Exchange Act (and Rules
thereunder) or required under Section 425 of the Code or any other applicable
law, or deemed necessary or advisable by the Board, such amendment shall be
subject to shareholder approval.
(c) AMENDMENTS TO AWARDS. Without limiting any other express
authority of the Committee under but subject to the express limits of this Plan,
the Committee by agreement or resolution may waive conditions of or limitations
on Awards that the Committee in the prior exercise of its discretion has
imposed, without the consent of the Participant, and may make other changes to
the terms and conditions of Awards that do not affect in any manner materially
adverse to the Participant, his or her rights and benefits under an Award.
(d) LIMITATIONS ON AMENDMENTS TO PLAN AND AWARDS. No amendment,
suspension or termination of the Plan or change of or affecting any outstanding
Award shall, without written consent of the Participant, affect in any manner
materially adverse to the Participant any rights or benefits of the Participant
or obligations of the Corporation under any Award granted under this Plan prior
to the effective date of such change. Changes contemplated by Section 6.2 shall
not be deemed to constitute changes or amendments for purposes of this Section
6.6.
6.7 EFFECT OF PAIRING AGREEMENT ON AWARDS.
(a) PAIRING AGREEMENT. This Plan shall be subject to the terms and
conditions of the Pairing Agreement.
(b) PAIRED SHARES. All Awards shall be subject to the following:
(i) the grant of any Award for Common Stock pursuant to this
Plan shall also be for an equal number of shares of Realty Stock; upon
the exercise of any Options to purchase Common Stock, or the payment
of a Restricted Stock Award, a Stock Appreciation Right, a Performance
Share
19
Award payable in Common Stock or a Stock Bonus, the Participant shall
obtain a number of shares of Realty Stock equal to the number of
shares of Common Stock to be issued upon exercise or payment;
(ii) the grant of any Award for Realty Stock pursuant to this
Plan shall also be for an equal number of shares of Common Stock; upon
the exercise of any Options to purchase Realty Stock, or the payment
of a Restricted Stock Award, a Stock Appreciation Right, a Performance
Share Award payable in Realty Stock or a Stock Bonus, the Participant
shall obtain a number of shares of Common Stock equal to the number of
shares of Realty Stock to be issued upon exercise or payment.
(c) STOCK CERTIFICATES. Upon exercise of an Option or payment of an
Award, the person receiving Paired Shares shall be entitled to one stock
certificate evidencing the Paired Shares acquired; PROVIDED that any person
who tenders Paired Shares to the Corporation in payment of a portion or all
of the purchase price of the stock purchased upon exercise of an Option
shall be entitled to receive two certificates, one representing a number of
Paired Shares equal to the number of Paired Shares exchanged for the stock
acquired upon exercise, and another representing the additional Paired
Shares, if any, acquired upon exercise of the Option.
6.8 PRIVILEGES OF STOCK OWNERSHIP.
Except as otherwise expressly authorized by the Committee or this
Plan, a Participant shall not be entitled to any privilege of stock ownership as
to any Paired Shares not actually delivered to and held of record by him or her.
No adjustment will be made for dividends or other rights as a shareholder for
which a record date is prior to such date of delivery.
6.9 EFFECTIVE DATE OF THE PLAN.
This Plan shall be effective as of December 15, 1994, the date of
Board approval, subject to shareholder approval within 12 months thereafter.
6.10 TERM OF THE PLAN.
No Award shall be granted more than ten years after the effective date
of this Plan (the "termination date"). Unless otherwise expressly provided in
this Plan or
20
in an applicable Award Agreement, any Award theretofore granted may extend
beyond such date, and all authority of the Committee with respect to Awards
hereunder shall continue during any suspension of this Plan and in respect of
outstanding Awards on such termination date.
6.11 GOVERNING LAW; CONSTRUCTION; SEVERABILITY.
(a) CHOICE OF LAW. This Plan, the Awards, all documents evidencing
Awards and all other related documents shall be governed by, and construed in
accordance with the laws of the State of California applicable to contracts made
and performed within such State, except as such laws may be supplanted by the
laws of the United States of America, which laws shall then govern its effect
and its construction to the extent they supplant California law.
(b) SEVERABILITY. If any provision shall be held by a court of
competent jurisdiction to be invalid and unenforceable, the remaining provisions
of this Plan shall continue in effect.
(c) PLAN CONSTRUCTION. (1) It is the intent of the Corporation that
this Plan and Awards hereunder satisfy and be interpreted in a manner that in
the case of Participants who are or may be subject to Section 16 of the Exchange
Act satisfies the applicable requirements of Rule 16b-3 so that such persons
will be entitled to the benefits of Rule 16b-3 or other exemptive rules under
Section 16 of the Exchange Act and will not be subjected to avoidable liability
thereunder. If any provision of this Plan or of any Award or any prior action
by the Committee would otherwise frustrate or conflict with the intent expressed
above, that provision to the extent possible shall be interpreted and deemed
amended so as to avoid such conflict, but to the extent of any remaining
irreconcilable conflict with such intent as to such persons in the
circumstances, such provision shall be deemed void.
(2) It is the further intent of the Company that Options or Stock
Appreciation Rights with an exercise or base price not less than Fair Market
Value on the date of grant, that are granted to or held by a Section 16 Person,
shall qualify as performance-based compensation under Section 162(m) of the
Code, and this Plan shall be interpreted consistent with such intent.
6.12 CAPTIONS.
Captions and headings are given to the sections and subsections of
this Plan solely as a convenience to facilitate reference. Such headings shall
not be deemed in
21
any way material or relevant to the construction or interpretation of the Plan
or any provision thereof.
6.13 EFFECT OF CHANGE OF SUBSIDIARY STATUS.
For purposes of this Plan and any Award hereunder, if an entity ceases
to be a Subsidiary, a termination of employment shall be deemed to have occurred
with respect to each employee of such Subsidiary who does not continue as an
employee of another entity within the Company.
6.14 NON-EXCLUSIVITY OF PLAN.
Nothing in this Plan shall limit or be deemed to limit the authority
of the Board or the Committee to grant awards or authorize any other
compensation, with or without reference to the Common Stock and/or Realty Stock,
under any other plan or authority.
VII. DEFINITIONS.
7.1 DEFINITIONS.
(a) "AWARD" shall mean an award of any Option, Stock Appreciation
Right, Restricted Stock Award, Performance Share Award, Stock Bonus, Dividend
Equivalent or other right or security that would constitute a "derivative
security" under Rule 16a-1(c) of the Exchange Act, or any combination thereof,
whether alternative or cumulative, authorized by and granted under this Plan.
(b) "AWARD AGREEMENT" shall mean any writing setting forth the terms
of an Award that has been authorized by the Committee.
(c) "AWARD DATE" shall mean the date upon which the Committee took
the action granting an Award or such later date as the Committee designates as
the Award Date at the time of the Award.
(d) "AWARD PERIOD" shall mean the period beginning on an Award Date
and ending on the expiration date of such Award.
(e) "BENEFICIARY" shall mean the person, persons, trust or trusts
entitled by will or the laws of descent and distribution to receive the benefits
specified in the Award Agreement and under this Plan in the event of a
Participant's death, and shall mean the Participant's executor or administrator
if no other Beneficiary is identified and able to act under the circumstances.
22
(f) "BOARD" shall mean the Board of Directors of the Corporation.
(g) "CHANGE IN CONTROL EVENT" shall mean:
(1) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of either (A) the then
outstanding shares of Common Stock (the "Outstanding Common Stock") or (B)
the combined voting power of the then outstanding voting securities of the
Corporation entitled to vote generally in the election of directors (the
"Outstanding Voting Securities"); PROVIDED, HOWEVER, that the following
acquisitions shall not constitute a Change in Control Event: (A) any
acquisition directly from the Corporation (except that an acquisition by
virtue of the exercise of a conversion privilege shall not be considered
within this clause (A) unless the converted security was itself acquired
directly from the Corporation), (B) any acquisition by the Corporation, (C)
any acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Corporation or any corporation controlled by the
Corporation or (D) any acquisition by any corporation pursuant to a
reorganization, merger or consolidated, if, following such reorganization,
merger or consolidation, the conditions described in clauses (A) and (B) of
paragraph (3) below are satisfied;
(2) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; PROVIDED, HOWEVER, that any individual who becomes a
director subsequent to the date hereof whose election, or nomination for
election by the Corporation's shareholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board shall
be considered as though such individual were a member of the Incumbent
Board; but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of either an actual or threatened
election contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the Board; or
(3) Approval by the shareholders of the Corporation of a
reorganization, merger or consolidation (a "transaction"), unless,
following such
23
transaction in each case, (A) more than 80% of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
transaction and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election
of directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Common Stock and Outstanding
Voting Securities immediately prior to such transaction and (B) no Person
(excluding the Corporation, any employee benefit plan (or related trust) of
the Corporation or such corporation resulting from such transaction and any
Person beneficially owning, immediately prior to such transaction, directly
or indirectly, 20% or more of the Outstanding Common Stock or Outstanding
Voting Securities, as the case may be) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such transaction or the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors; or
(4) Approval by the shareholders of the Corporation of (A) a
complete liquidation or dissolution of the Corporation or (B) the sale or
other disposition of all or substantially all of the assets of the
Corporation, unless such assets are sold to a corporation and following
such sale or other disposition, the conditions described in clauses (A) and
(B) of paragraph (3) above are satisfied.
(h) "CODE" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(i) "COMMISSION" shall mean the Securities and Exchange Commission.
(j) "COMMITTEE" shall mean the Compensation Committee of the Board,
which Committee shall be comprised only of two or more directors or such greater
number of directors as may be required under applicable law, each of whom,
during such time as one or more Participants may be subject to Section 16 of the
Exchange Act, shall be a Disinterested and Outside director.
(k) "COMMON STOCK" shall mean the common stock of the Corporation,
$.10 par value per share, and such other securities or property as may become
the subject of Awards, or become subject to Awards, pursuant to an adjustment
made under Section 6.2 of this Plan.
24
(l) "COMPANY" shall mean, collectively, the Corporation and its
Subsidiaries.
(m) "CORPORATION" shall mean Santa Anita Operating Company, a
Delaware corporation, and its successors.
(n) "DISINTERESTED AND OUTSIDE" shall mean "disinterested" within the
meaning of any applicable regulatory requirements, including Rule 16b-3, and
"outside" within the meaning of Section 162(m) of the Code.
(o) "DIVIDEND EQUIVALENT" shall mean an amount equal to the amount of
cash dividends or other cash distributions paid (or such portion of such
dividend or other distribution as may be designated by the Committee) with
respect to each Paired Share after the date of an Award of a Dividend
Equivalent.
(p) "ELIGIBLE EMPLOYEE" shall mean an officer (whether or not a
director) or any other employee of the Company, or any Other Eligible Person, as
determined by the Committee in its discretion.
(q) "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
(r) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(s) "FAIR MARKET VALUE" shall mean, with respect to Common Stock or
Realty Stock, the fair market value of an unpaired share of Common Stock or
Realty Stock, as the case may be, as determined in good faith by the Committee.
The Fair Market Value of a Paired Share shall mean the closing price of a Paired
Share on the Composite Tape, as published in the Western Edition of The Wall
Street Journal, of the principal national securities exchange on which the
Paired Shares are so listed or admitted to trade, on such date, or, if there is
no trading of the Paired Shares on such date, then the closing price of the
Paired Shares as quoted on such Composite Tape on the next preceding date on
which there was trading in such shares; PROVIDED, HOWEVER, if the Paired Shares
are not listed or admitted to trade on a national securities exchange, the
Committee may designate such other exchange, market or source of data as it
deems appropriate for determining such value for Plan purposes.
(t) "INCENTIVE STOCK OPTION" shall mean an Option which is designated
as an incentive stock option within the meaning of Section 422 of the Code and
which contains such provisions as are necessary to comply with that section.
25
(u) "NONQUALIFIED STOCK OPTION" shall mean an Option that is
designated as a Nonqualified Stock Option and shall include any Option intended
as an Incentive Stock Option that fails to meet the applicable legal
requirements thereof. Any Option granted hereunder that is not designated as an
incentive stock option shall be deemed to be designated a nonqualified stock
option under this Plan and not an incentive stock option under the Code.
(v) "NON-EMPLOYEE DIRECTOR" shall mean a member of the Board who is
not an officer or employee of the Company.
(w) "OPTION" shall mean an option to purchase Paired Shares under
this Plan. The Committee shall designate any Option granted to an Eligible
Employee as a Nonqualified Stock Option or an Incentive Stock Option, PROVIDED
that all Options with respect to Realty Stock shall be Nonqualified Stock
Options.
(x) "OTHER ELIGIBLE PERSON" shall mean any individual consultant,
advisor or (to the extent provided in the next sentence) agent who renders or
has rendered BONA FIDE services (other than services in connection with the
offering or sale of securities of the Company in a capital raising transaction)
to the Company, and who is selected to participate in this Plan by the
Committee; PROVIDED that if the Corporation's officers and directors are or
become subject to Section 16 of the Exchange Act, a Non-Employee Director shall
not thereafter be selected as an Other Eligible Person. A non-employee agent
providing BONA FIDE services to the Company (other than as an eligible advisor
or consultant) may also be selected as an Other Eligible Person if such agent's
participation in this Plan would not adversely affect (x) the Corporation's
eligibility to use Form S-8 to register under the Securities Act of 1933, as
amended, the offering of shares issuable under this Plan by the Company or (y)
the Corporation's compliance with any other applicable laws.
(y) "PAIRED SHARE" means a share of Common Stock and a share of
Realty Stock.
(z) "PAIRING AGREEMENT" means the Pairing Agreement between the
Corporation and Realty, dated as of December 31, 1979, as it may be amended from
time to time.
(aa) "PARTICIPANT" shall mean an Eligible Employee who has been
granted an Award under this Plan.
(bb) "PERFORMANCE SHARE AWARD" shall mean an Award made pursuant to
the provisions, and subject to the terms and conditions, of Article V of the
Plan.
26
(cc) "PERSONAL REPRESENTATIVE" shall mean the person or persons who,
upon the Total Disability or incompetence of a Participant, shall have acquired
on behalf of the Participant, by legal proceeding or otherwise, the power to
exercise the rights or receive benefits under this Plan and who shall have
become the legal representative of the Participant.
(dd) "PLAN" shall mean this 1995 Share Award Plan.
(ee) "QDRO" shall mean a qualified domestic relations order as defined
in Section 414(p) of the Code or Title I, Section 206(d)(3) of ERISA (to the
same extent as if this Plan were subject thereto), or the applicable rules
thereunder.
(ff) "REALTY" means Santa Anita Realty Enterprises, Inc., a Delaware
corporation.
(gg) "REALTY STOCK" means the common stock of Realty, $.10 par value
per share, and such other securities or property as may become subject of Awards
or become subject to Awards, pursuant to an adjustment made under Section 6.2 of
this Plan.
(hh) "RESTRICTED STOCK" shall mean Paired Shares awarded to a
Participant subject to payment of such consideration, if any, and such
conditions on vesting and such transfer and other restrictions as are
established in or pursuant to this Plan, for so long as such shares remain
unvested under the terms of the applicable Award Agreement.
(ii) "RETIREMENT" shall mean retirement from active service as an
employee or officer of the Company on or after attaining age 65.
(jj) "RULE 16B-3" shall mean Rule 16b-3 as promulgated by the
Commission pursuant to the Exchange Act.
(kk) "SECTION 16 PERSON" shall mean a person subject to Section 16(a)
of the Exchange Act.
(ll) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended from time to time.
(mm) "STOCK APPRECIATION RIGHT" shall mean a right to receive a number
of Paired Shares or an amount of cash, or a combination of shares and cash, the
aggregate amount or value of which is determined by reference to a change in the
Fair Market Value of the Paired Shares that is authorized under this Plan.
27
(nn) "SUBSIDIARY" shall mean any corporation or other entity a
majority of whose outstanding voting stock or voting power is beneficially owned
directly or indirectly by the Corporation.
(oo) "TOTAL DISABILITY" shall mean a "permanent and total disability"
within the meaning of Section 22(e)(3) of the Code and such other disabilities,
infirmities, afflictions or conditions as the Committee by rule may include.
EXECUTED this 15th day of December, 1995.
SANTA ANITA OPERATING COMPANY
By: /s/ Kathryn J. McMahon
-----------------------------------
Its: General Counsel and Secretary
----------------------------------
28
(THE FOLLOWING COPY OF THE SANTA ANITA REALTY ENTERPRISES, INC. 1995
SHARE AWARD PLAN IS FILED PURSUANT TO INSTRUCTION 3 TO ITEM 10 OF
SCHEDULE 14A, BUT IS NOT PART OF THE PROXY STATEMENT AND DOES NOT
OTHERWISE CONSTITUTE SOLICITING MATERIAL.)
SANTA ANITA REALTY ENTERPRISES, INC.
1995 SHARE AWARD PLAN
TABLE OF CONTENTS
Page
I. THE PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Purpose. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Administration and Authorization; Power and Procedure. . . . . . . 1
1.3 Participation. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.4 Shares Available for Awards. . . . . . . . . . . . . . . . . . . . 3
1.5 Grant of Awards. . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.6 Award Period . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.7 Limitations on Exercise and Vesting of Awards. . . . . . . . . . . 5
1.8 Acceptance of Notes to Finance Exercise of Options or
Acquisitions of Operating Company Stock. . . . . . . . . . . . . . 6
1.9 No Transferability . . . . . . . . . . . . . . . . . . . . . . . . 7
II. EMPLOYEE OPTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.1 Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.2 Option Price . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.3 Limitations on Grant and Terms of Incentive Stock Options. . . . . 9
2.4 Limits on 10% Holders. . . . . . . . . . . . . . . . . . . . . . . 10
2.5 Option Repricing; Cancellation and Regrant; Waiver of
Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.6 Dividend Equivalents . . . . . . . . . . . . . . . . . . . . . . . 10
2.7 Issuance of Operating Company Stock. . . . . . . . . . . . . . . . 11
III. STOCK APPRECIATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . . 11
3.1 Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.2 Exercise of Stock Appreciation Rights. . . . . . . . . . . . . . . 11
3.3 Payment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
IV. RESTRICTED STOCK AWARDS . . . . . . . . . . . . . . . . . . . . . . . . 12
4.1 Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.2 Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.3 Return to the Corporation. . . . . . . . . . . . . . . . . . . . . 13
V. PERFORMANCE SHARE AWARDS AND STOCK BONUSES. . . . . . . . . . . . . . . 13
5.1 Grants of Performance Share Awards . . . . . . . . . . . . . . . . 13
5.2 Grants of Stock Bonuses. . . . . . . . . . . . . . . . . . . . . . 14
5.3 Deferred Payments. . . . . . . . . . . . . . . . . . . . . . . . . 14
(i)
VI. OTHER PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
6.1 Rights of Eligible Employees, Participants and Beneficiaries . . . 15
6.2 Adjustments; Acceleration. . . . . . . . . . . . . . . . . . . . . 15
6.3 Effect of Termination of Employment. . . . . . . . . . . . . . . . 18
6.4 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . 18
6.5 Tax Withholding. . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.6 Plan Amendment, Termination and Suspension . . . . . . . . . . . . 19
6.7 Effect of Pairing Agreement on Awards. . . . . . . . . . . . . . . 20
6.8 Privileges of Stock Ownership. . . . . . . . . . . . . . . . . . . 21
6.9 Effective Date of the Plan . . . . . . . . . . . . . . . . . . . . 21
6.10 Term of the Plan . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.11 Governing Law; Construction; Severability. . . . . . . . . . . . . 21
6.12 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.13 Effect of Change of Subsidiary Status. . . . . . . . . . . . . . . 22
6.14 Non-Exclusivity of Plan. . . . . . . . . . . . . . . . . . . . . . 23
VII. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(ii)
SANTA ANITA REALTY ENTERPRISES, INC.
1995 SHARE AWARD PLAN
I. THE PLAN.
1.1 PURPOSE.
The purpose of this Plan is to promote the success of the Company by
providing an additional means through the grant of Awards to attract, motivate,
retain and reward key employees, including officers, whether or not directors,
of the Company with awards and incentives for high levels of individual
performance and improved financial performance of the Company. "Corporation"
means Santa Anita Realty Enterprises, Inc. and "Company" means the Corporation
and its Subsidiaries, collectively. These terms and other capitalized terms are
defined in Article VII.
1.2 ADMINISTRATION AND AUTHORIZATION; POWER AND PROCEDURE.
(a) COMMITTEE. This Plan shall be administered by, and all Awards to
Eligible Employees shall be authorized by, the Committee. Action of the
Committee with respect to the administration of this Plan shall be taken
pursuant to a majority vote or by written consent of its members.
(b) PLAN AWARDS; INTERPRETATION; POWERS OF COMMITTEE. Subject to the
express provisions of this Plan, the Committee shall have the authority:
(i) to determine from among those persons eligible the particular
Eligible Employees who will receive any Awards;
(ii) to grant Awards to Eligible Employees, determine the price at
which securities will be offered or awarded and the amount of securities to
be offered or awarded to any of such persons, and determine the other
specific terms and conditions of such Awards consistent with the express
limits of this Plan, and establish the installments (if any) in which such
Awards shall become exercisable or shall vest, or determine that no delayed
exercisability or vesting is required, and establish the events of
termination or reversion (if any) of such Awards;
(iii) to approve the forms of Award Agreements (which need not be
identical either as to type of Award or among Participants);
1
(iv) to construe and interpret this Plan and any agreements defining
the rights and obligations of the Company and Participants under this Plan,
further define the terms used in this Plan, and prescribe, amend and
rescind rules and regulations relating to the administration of this Plan;
(v) to cancel, modify, or waive the Corporation's rights with respect
to, or modify, discontinue, suspend, or terminate any or all outstanding
Awards held by Participants, subject to any required consent under Section
6.6;
(vi) to accelerate or extend the exercisability or vesting extend the
term of any or all such outstanding Awards within the maximum ten-year term
of Awards under Section 1.6; and
(vii) to make all other determinations and take such other action
as contemplated by this Plan or as may be necessary or advisable for the
administration of this Plan and the effectuation of its purposes.
(c) BINDING DETERMINATIONS. Any action taken by, or inaction of, the
Corporation, any Subsidiary, the Board or the Committee relating or pursuant to
this Plan shall be within the absolute discretion of that entity or body and
shall be conclusive and binding upon all persons. No member of the Board or
Committee, or officer of the Corporation or any Subsidiary, shall be liable for
any such action or inaction of the entity or body, of another person or, except
in circumstances involving bad faith, of himself or herself. Subject only to
compliance with the express provisions hereof, the Board and Committee may act
in their absolute discretion in matters within their authority related to this
Plan.
(d) RELIANCE ON EXPERTS. In making any determination or in taking
or not taking any action under this Plan, the Committee or the Board, as the
case may be, may obtain and may rely upon the advice of experts, including
professional advisors to the Corporation. No director, officer or agent of the
Company shall be liable for any such action or determination taken or made or
omitted in good faith.
(e) DELEGATION. The Committee may delegate ministerial, non-
discretionary functions to individuals who are officers or employees of the
Company.
2
1.3 PARTICIPATION.
Awards may be granted by the Committee only to those persons that the
Committee determines to be Eligible Employees. An Eligible Employee who has
been granted an Award may, if otherwise eligible, be granted additional Awards
if the Committee shall so determine. Non-Employee Directors shall not be
eligible to receive any Awards.
1.4 SHARES AVAILABLE FOR AWARDS.
Subject to the provisions of Section 6.2, the capital stock that may
be delivered under this Plan shall be shares of the Corporation's authorized but
unissued Common Stock, any shares of its Common Stock held as treasury shares
and shares of Operating Company Stock. The shares may be delivered for any
lawful consideration.
(a) NUMBER OF SHARES. Subject to subsection (c) below, the maximum
number of shares of Common Stock and Operating Company Stock that may be
delivered pursuant to Awards granted to Eligible Employees under this Plan shall
not exceed 230,000 shares of Common Stock and 230,000 shares of Operating
Company Stock, respectively, in each case subject to adjustments contemplated by
Section 6.2. The maximum number of Options and Stock Appreciation Rights
(whether payable in Paired Shares, cash or any combination thereof) that may be
granted to an Eligible Employee during any one-year period shall not exceed
150,000, subject to adjustment as contemplated in Section 6.2.
(b) CALCULATION OF AVAILABLE SHARES. Common Stock subject to
outstanding Awards of derivative securities (as defined in Rule 16a-1(c) under
the Exchange Act) shall be reserved for issuance; except as provided in Section
2.7, a like number of shares of Operating Company Stock shall be purchased from
Operating Company or arrangements shall be made with Operating Company for
issuance by Operating Company of the same number of shares of Operating Company
Stock as the number of shares of Common Stock to be issued in connection with an
Award; PROVIDED that nothing herein, except as provided in Section 2.7, shall be
construed to prevent the Corporation from purchasing Paired Shares in the open
market for use in connection with Awards. If a Stock Appreciation Right or
similar right is exercised or a Performance Share Award based on the increased
market value of a specified number of Paired Shares is paid, the number of
Paired Shares to which such exercise or payment relates under the applicable
Award shall be charged against the maximum amount of shares of Common Stock and
Operating Company Stock that may be delivered pursuant to Awards under this Plan
and, if applicable, such Award. If the Corporation withholds Paired Shares (or
Common Stock)
3
pursuant to Section 6.5, the number of shares that would have been deliverable
with respect to an Award but that are withheld pursuant to the provisions of
Section 6.5 may in effect not be issued, but the aggregate number of shares
issuable with respect to the applicable Award and under the Plan shall be
reduced by the number of shares withheld and such shares shall not be available
for additional Awards under this Plan. To the extent a Performance Share Award
constitutes an equity security (as this phrase is defined in Rule 16a-1 under
the Exchange Act) issued by the Corporation and is paid in shares of Paired
Shares, the number of Paired Shares (if any) subject to such Performance Share
Award shall be charged (but in the case of tandem or substituted Awards, without
duplication) against the maximum number of shares of Common Stock and Operating
Company Stock that may be delivered pursuant to Awards under this Plan.
(c) CASH ONLY AWARD LIMIT. Awards payable solely in cash under the
Plan and Awards payable either in cash or shares that are actually paid in cash
shall constitute and be referred to as "CASH ONLY AWARDS". The number of Cash
Only Awards shall be determined by reference to the number of Paired Shares by
which the Award is measured. The maximum number of Cash Only Awards that may be
paid shall not, together with the aggregate number of shares of Common Stock
that may be delivered under subsection (a), exceed 230,000, subject to
adjustments under Section 6.2. Awards payable either in cash or shares shall
not be counted against the Cash Only Award limit if charged against the share
limit in subsection (a). Notwithstanding the foregoing, if an Award paid or
payable solely in cash satisfies the requirements for the exclusion from the
definition of a derivative security in Rule 16a-1(c) that does not require that
the award be made under a Rule 16b-3 plan, the Award shall not be counted
against any of the limits of this Section.
(d) REISSUE OF AWARDS. Subject to any restrictions under Rule 16b-3,
any unexercised, unconverted, unvested or undistributed portion of any expired,
cancelled, terminated or forfeited Award, or any alternative form of
consideration under an Award that is not paid in connection with the settlement
of an Award or any portion of an Award, shall again be available for Award under
subsection (a) or (c) above, as applicable, whether or not the Participant has
received benefits of ownership (such as dividends or dividend equivalents or
voting rights) during the period in which the Participant's ownership was
restricted or otherwise not vested. Shares that are issued pursuant to Awards
and subsequently reacquired by the Corporation pursuant to the terms and
conditions of the Awards also shall be available for reissuance under the Plan.
4
(e) INTERPRETIVE ISSUES. Additional rules for determining the number
of shares or Cash Only Awards authorized under the Plan may be adopted by the
Committee, as it deems necessary or appropriate; provided that such rules are
consistent with Rule 16b.
1.5 GRANT OF AWARDS.
Subject to the express provisions of this Plan, the Committee shall
determine the number of Paired Shares or shares of Common Stock subject to each
Award, and the price (if any) to be paid for the Paired Shares, Common Stock or
the Award and, in the case of Performance Share Awards, in addition to matters
addressed in Section 1.2(b), the specific objectives, goals and performance
criteria (such as an increase in revenues, market value, earnings or book value
over a base period, the years of service before vesting, the relevant job
classification or level of responsibility or other factors) that further define
the terms of the Performance Share Award. Each Award shall be evidenced by an
Award Agreement signed by the Corporation and, if required by the Committee, by
the Participant.
1.6 AWARD PERIOD.
Each Award and all executory rights or obligations under the related
Award Agreement shall expire on such date (if any) as shall be determined by the
Committee, but, in the case of Options to acquire Common Stock or other rights
to acquire Paired Shares, not later than ten (10) years after the Award Date.
1.7 LIMITATIONS ON EXERCISE AND VESTING OF AWARDS.
(a) PROVISIONS FOR EXERCISE. Except as may otherwise be provided in
an Award Agreement, no Award shall be exercisable or shall vest until at least
six months after the initial Award Date, and once exercisable an Award shall
remain exercisable until the expiration or earlier termination of the Award,
unless the Committee otherwise provides.
(b) PROCEDURE. Any exercisable Award shall be deemed to be exercised
when the Secretary of the Corporation receives written notice of such exercise
from the Participant, together with any required payment made in accordance with
Section 2.2(b).
(c) FRACTIONAL SHARES/MINIMUM ISSUE. Fractional share interests
shall be disregarded, but may be accumulated. The Committee, however, may
determine that cash, other securities or other property will be paid or
transferred in lieu of any fractional share interests. No fewer than 10 Paired
Shares (or shares of Common Stock) may be
5
purchased on exercise of any Award at one time unless the number purchased is
the total number at the time available for purchase under the Award.
1.8 ACCEPTANCE OF NOTES TO FINANCE EXERCISE OF OPTIONS OR ACQUISITIONS OF
OPERATING COMPANY STOCK.
The Corporation may, with the Committee's approval, accept one or more
notes from any Participant in connection with the exercise or receipt of any
outstanding Award; provided that any such note shall be subject to the following
terms and conditions:
(a) The principal of the note shall not exceed the amount required to
be paid to the Corporation upon the exercise or receipt of one or more
Awards under the Plan and the note shall be delivered directly to the
Corporation in consideration of such exercise or receipt.
(b) The note shall be repaid over a period of time not to exceed five
years, with annual installments of at least 10% of principal the first four
years and a balloon payment of the remaining principal amount at the end of
the fifth year; PROVIDED that the Corporation may demand any payment, in
addition to such installments, as may be required for the note to remain in
compliance with any applicable federal or state regulation.
(c) The note shall provide for full recourse to the Participant and
shall bear interest at a rate determined by the Committee but not less than
the applicable imputed interest rate specified by the Code.
(d) Except as otherwise provided by the Committee, if the employment
of the Participant terminates, the unpaid principal balance of the note
shall become due and payable on the 10th business day after such
termination; PROVIDED, however, that if a sale of any Paired Shares (or
Common Stock) acquired by the Participant in connection with an Award to
which the note relates would cause such Participant to incur liability
under Section 16(b) of the Exchange Act, the unpaid balance shall become
due and payable on the 10th business day after the first day on which a
sale of such shares could have been made without incurring such liability
assuming for these purposes that there are no other transactions by the
Participant subsequent to such termination.
6
(e) If required by the Committee or by applicable law, the note shall
be secured by a pledge of any shares or rights financed thereby in
compliance with applicable law.
(f) The terms, repayment provisions, and collateral release
provisions of the note and the pledge securing the note shall conform with
applicable rules and regulations of the Federal Reserve Board as then in
effect.
(g) In addition, the Corporation in the discretion of the Committee
may loan funds and award bonuses to an Option holder in aggregate amounts
equal, in after-tax dollars, to the purchase price of the Operating Company
Stock required to be acquired under this Plan (see Section 2.7 below) upon
the exercise of an Option, less the aggregate par value of such stock.
Such a loan shall be for a term, at a rate of interest and pursuant to such
other terms and conditions as the Committee, under applicable law, may
establish and such loan need not comply with the foregoing provisions of
Section 1.8.
1.9 NO TRANSFERABILITY.
(a) Awards may be exercised only by, and amounts payable or Paired
Shares (or Common Stock) issuable pursuant to an Award shall be paid only to (or
registered only in the name of), the Participant or, if the Participant has
died, the Participant's Beneficiary or, if the Participant has suffered a Total
Disability, the Participant's Personal Representative, if any, or if there is
none, the Participant, or (to the extent permitted by applicable law and Rule
16b-3) to a third party pursuant to such conditions and procedures as the
Committee may establish. Other than by will or the laws of descent and
distribution or pursuant to a QDRO or other exception to transfer restrictions
under Rule 16b-3 (except to the extent not permitted in the case of an Incentive
Stock Option), no right or benefit under this Plan or any Award, including,
without limitation, any Option or shares of Restricted Stock that has not
vested, shall be transferrable by the Participant or shall be subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge (other than to the Corporation) and any such attempted
action shall be void. The Corporation shall disregard any attempt at transfer,
assignment or other alienation prohibited by the preceding sentences and shall
pay or deliver such cash or Paired Shares (or Common Stock) in accordance with
the provisions of this Plan. The designation of a Beneficiary
7
hereunder shall not constitute a transfer for these purposes.
(b) Nothing in this plan authorizes, or shall be construed to
authorize, a transfer or exchange by a Participant, Beneficiary, Personal
Representative or any third party of any shares of Common Stock or Operating
Company Stock in contravention of the provisions of the Pairing Agreement.
(c) The restrictions on exercise and transfer above shall not be
deemed to prohibit the authorization by the Committee of "cashless exercise"
procedures with unaffiliated third parties who provide financing for the purpose
of (or who otherwise facilitate) the exercise of Awards consistent with
applicable legal restrictions and Rule 16b-3, nor, to the extent permitted by
the Committee, transfers for estate and financial planning purposes,
notwithstanding that the inclusion of such features may render the particular
Awards ineligible for the benefits of Rule 16b-3, nor, in the case of
Participants who are not Section 16 Persons, transfers to such other persons or
in such other circumstances as the Committee may in the Award Agreement or other
writing expressly permit.
II. EMPLOYEE OPTIONS.
2.1 GRANTS.
One or more Options may be granted under this Article to any Eligible
Employee, subject to the provisions of Section 1.4. Each Option granted may be
either an Option intended to be an Incentive Stock Option, or an Option not so
intended, and such intent shall be indicated in the applicable Award Agreement.
No options may be granted with respect to Operating Company Stock.
2.2 OPTION PRICE.
(a) PRICING LIMITS. Subject to Section 2.4, the purchase price per
share of the Common Stock covered by each Option shall be determined by the
Committee at the time the Option is granted, but shall not be less than 100% of
the Fair Market Value of the Common Stock, on the date of grant.
(b) PAYMENT PROVISIONS. The purchase price of any shares purchased
on exercise of an Option granted under this Article shall be paid in full at the
time of each purchase in one or a combination of the following methods: (i) in
cash or by electronic funds transfer; (ii) by check payable to the order of the
Corporation; (iii) if authorized
8
by the Committee or specified in the applicable Award Agreement, in cash in an
amount equal to the par value of the shares being purchased, and, in the form of
a promissory note (consistent with the requirements of Section 1.8) of the
Participant in an amount equal to the difference between said cash amount and
the purchase price of such shares; (iv) by notice and third party payment in
such manner as may be authorized by the Committee; (v) by the delivery of shares
of Common Stock already owned by the Participant, PROVIDED, HOWEVER, that the
Committee may in its absolute discretion limit the Participant's ability to
exercise an Award by delivering such shares of Common Stock; or (vi) if
authorized by the Committee or specified in the applicable Award Agreement, by
reduction in the number of shares of Common Stock otherwise deliverable upon
exercise by that number of shares of Common Stock which have a then Fair Market
Value equal to such purchase price. Previously owned shares of Common Stock
used to satisfy the exercise price of an Option under clause (v) shall be valued
at their Fair Market Value on the date of exercise.
2.3 LIMITATIONS ON GRANT AND TERMS OF INCENTIVE STOCK OPTIONS.
(a) $100,000 LIMIT. To the extent that the aggregate "fair market
value" of Common Stock subject to any Option with respect to which Incentive
Stock Options first become exercisable by a Participant in any calendar year
exceeds $100,000, taking into account both Common Stock subject to Incentive
Stock Options under this Plan and stock subject to incentive stock options under
all other plans of the Company, such options shall be treated as Nonqualified
Stock Options. For this purpose, the "fair market value" of the Common Stock
subject to Options shall be determined as of the date the Options were awarded.
In reducing the number of Options treated as Incentive Stock Options to meet the
$100,000 limit, the most recently granted Options shall be reduced first. To
the extent a reduction of simultaneously granted Options is necessary to meet
the $100,000 limit, the Committee may, in the manner and to the extent permitted
by law, designate which shares of Common Stock are to be treated as shares
acquired pursuant to the exercise of an Incentive Stock Option.
(b) OPTION PERIOD. Subject to Section 2.4, each Option and all
rights thereunder shall expire no later than ten years after the Award Date.
(c) OTHER CODE LIMITS. There shall be imposed in any Award Agreement
relating to Incentive Stock Options such terms and conditions as from time to
time are required in order that the Option be an "incentive stock option" as
that term is defined in Section 422 of the Code.
9
2.4 LIMITS ON 10% HOLDERS.
No Incentive Stock Option may be granted to any person who, at the
time the Option is granted, owns (or is deemed to own under Section 424(d) of
the Code) shares of outstanding Common Stock possessing more than 10% of the
total combined voting power of all classes of stock of the Corporation, unless
the exercise price of such Option with respect to the Common Stock covered by
the Option is at least 110% of the Fair Market Value of the Common Stock subject
to the Option and such Option by its terms is not exercisable after the
expiration of five years from the date such Option is granted.
2.5 OPTION REPRICING; CANCELLATION AND REGRANT; WAIVER OF RESTRICTIONS.
Subject to Section 1.4 and Section 6.6 and the specific limitations on
Awards contained in this Plan, the Committee from time to time may authorize,
generally or in specific cases only, for the benefit of any Eligible Employee,
any adjustment in the exercise or purchase price, the number of shares subject
to, the restrictions upon or the term of, an Award granted under this Article by
cancellation of an outstanding Award and a subsequent regranting of an Award, by
amendment, by substitution of an outstanding Award, by waiver or by other
legally valid means. Such amendment or other action may result among other
changes in an exercise or purchase price which is higher or lower than the
exercise or purchase price of the original or prior Award, provide for a greater
or lesser number of shares subject to the Award, or provide for a longer or
shorter vesting or exercise period.
2.6 DIVIDEND EQUIVALENTS.
The Committee may, at the time of granting an Option, grant Dividend
Equivalents attributable to shares of Common Stock subject to the Option.
Dividend Equivalents shall be paid in cash only to the extent the Option is
unexercised as of the dividend record date, as specified in the Award Agreement,
as follows: the Dividend Equivalent per share of Common Stock shall be
multiplied by the number of shares of Common Stock subject to Option and an
amount equal to the product so derived shall be paid in cash to the Participant
on the dividend payment date. The Committee may in the Award specify that
Dividend Equivalents shall be paid only for a specified time period or only as
to that portion of the Option that has vested.
10
2.7 ISSUANCE OF OPERATING COMPANY STOCK.
No Options granted pursuant to this Plan shall be exercisable unless
the Option holder submits evidence satisfactory to the Corporation that, at the
then Fair Market Value of an unpaired share of Operating Company Stock as
determined pursuant to the Pairing Agreement, a number of shares of the
Operating Company Stock equal to the number of shares of Common Stock to be
received upon exercise of all or a portion of the Option will, and are able to,
be purchased by the Option holder, such that upon exercise the Option holder
will receive an equal number of shares of Common Stock and Operating Company
Stock.
III. STOCK APPRECIATION RIGHTS.
3.1 GRANTS.
In its discretion, the Committee may grant to any Eligible Employee
Stock Appreciation Rights either concurrently with the grant of another Award or
in respect of an outstanding Award, in whole or in part, or independently of any
other Award. Any Stock Appreciation Right granted in connection with an
Incentive Stock Option shall contain such terms as may be required to comply
with the provisions of Section 422 of the Code and the regulations promulgated
thereunder.
3.2 EXERCISE OF STOCK APPRECIATION RIGHTS.
(a) EXERCISABILITY. Unless the Award Agreement or the Committee
otherwise provides, a Stock Appreciation Right related to another Award shall be
exercisable at such time or times, and to the extent, that the related Award
shall be exercisable.
(b) EFFECT ON AVAILABLE SHARES. In the event that a Stock
Appreciation Right is exercised, the number of Paired Shares subject to the
Award shall be charged against the number of Paired Shares subject to the Stock
Appreciation Right and Common Stock subject to the related Option of the
Participant shall be reduced by such number of Paired Shares.
(c) STAND-ALONE SARS. A Stock Appreciation Right granted
independently of any other Award shall be exercisable pursuant to the terms of
the Award Agreement but, unless the Committee determines otherwise, in no event
earlier than six months after the Award Date, except in the case of death or
Total Disability.
11
3.3 PAYMENT.
(a) AMOUNT. Unless the Committee otherwise provides, upon exercise
of a Stock Appreciation Right and surrender of an exercisable portion of any
related Award, the Participant shall be entitled to receive payment of an amount
determined by multiplying
(i) the difference obtained by subtracting the exercise price
per Paired Share under the related Award (if applicable) or the initial
share value specified in the Award from the Fair Market Value of a Paired
Share on the date of exercise of the Stock Appreciation Right, by
(ii) the number of Paired Shares with respect to which the Stock
Appreciation Right shall have been exercised.
(b) FORM OF PAYMENT. The Committee, in its sole discretion, shall
determine the form in which payment shall be made of the amount determined under
paragraph (a) above, either solely in cash, solely in Paired Shares (valued at
Fair Market Value on the date of exercise of the Stock Appreciation Right), or
partly in such Paired Shares and partly in cash, provided that the Committee
shall have determined that such exercise and payment are consistent with
applicable law. If the Committee permits the Participant to elect to receive
cash or Paired Shares (or a combination thereof) on such exercise, any such
election shall be subject to such conditions as the Committee may impose and, in
the case of any Section 16 Person, any election to receive cash shall be subject
to any applicable limitations under Rule 16b-3.
IV. RESTRICTED STOCK AWARDS.
4.1 GRANTS.
The Committee may, in its discretion, grant one or more Restricted
Stock Awards to any Eligible Employee. Each Restricted Stock Award Agreement
shall specify the number of Paired Shares to be issued, the date of such
issuance, the consideration for such Paired Shares (but not less than the
minimum lawful consideration) to be paid by the Participant and the restrictions
imposed on such Paired Shares and the conditions of release or lapse of such
restrictions. Such restrictions shall not lapse earlier than six months after
the Award Date, except to the extent the Committee may otherwise provide. Stock
certificates evidencing shares of Restricted Stock pending the lapse of the
restrictions ("restricted shares") shall bear a legend making appropriate
12
reference to the restrictions imposed hereunder and shall be held by the
Corporation or by a third party designated by the Committee until the
restrictions on such shares shall have lapsed and the shares shall have vested
in accordance with the provisions of the Award and Section 1.7. Upon issuance
of the Restricted Stock Award, the Participant may be required to provide such
further assurance and documents as the Committee may require to enforce the
restrictions.
4.2 RESTRICTIONS.
(a) PRE-VESTING RESTRAINTS. Except as provided in Section 1.9 and
4.1, restricted shares comprising any Restricted Stock Award may not be sold,
assigned, transferred, pledged or otherwise disposed of or encumbered, either
voluntarily or involuntarily, until such shares have vested.
(b) DIVIDEND AND VOTING RIGHTS. Unless otherwise provided in the
applicable Award Agreement, a Participant receiving a Restricted Stock Award
shall be entitled to cash dividend and voting rights for all shares issued even
though they are not vested, provided that such rights shall terminate
immediately as to any restricted shares which cease to be eligible for vesting.
(c) CASH PAYMENTS. If the Participant shall have paid or received
cash (including any dividends) in connection with the Restricted Stock Award,
the Award Agreement shall specify whether and to what extent such cash shall be
returned (with or without an earnings factor) as to any restricted shares which
cease to be eligible for vesting.
4.3 RETURN TO THE CORPORATION.
Unless the Committee otherwise expressly provides, shares of
Restricted Stock that are subject to restrictions at the time of termination of
employment or are subject to other conditions to vest that have not been
satisfied by the time specified in the applicable Award Agreement shall not vest
and shall be returned to the Corporation in such manner and on such terms as the
Committee shall therein provide.
V. PERFORMANCE SHARE AWARDS AND STOCK BONUSES.
5.1 GRANTS OF PERFORMANCE SHARE AWARDS.
The Committee may, in its discretion, grant one or more Performance
Share Awards to any Eligible Employee based upon such factors, which in the case
of any Award to a Section 16 Person shall include but not be limited to the
contributions, responsibilities and other compensation of
13
the person, as the Committee shall deem relevant in light of the specific type
and terms of the award. An Award Agreement shall specify the maximum number of
Paired Shares (if any) subject to the Performance Share Award, the consideration
(but not less than the minimum lawful consideration) to be paid for any such
shares as may be issuable to the Participant, the duration of the Award and the
conditions upon which delivery of any Paired Shares or cash to the Participant
shall be based. The amount of cash or Paired Shares or other property that may
be deliverable pursuant to such Award shall be based upon the degree of
attainment over a specified period (a "performance cycle") as may be established
by the Committee of such measure(s) of the performance of the Company (or any
part thereof) or the Participant as may be established by the Committee. The
Committee may provide for full or partial credit, prior to completion of such
performance cycle or the attainment of the performance achievement specified in
the Award, in the event of the Participant's death, Retirement, or Total
Disability, a Change in Control Event or in such other circumstances as the
Committee, consistent with Section 6.11(c)(2), if applicable, may determine.
5.2 GRANTS OF STOCK BONUSES.
The Committee may grant a Stock Bonus to any Eligible Employee to
reward exceptional or special services, contributions or achievements in the
manner and on such terms and conditions (including any restrictions on such
shares) as determined from time to time by the Committee. The number of shares
so awarded shall be determined by the Committee. The Stock Bonus may be granted
independently or in lieu of a cash bonus.
5.3 DEFERRED PAYMENTS.
The Committee may authorize for the benefit of any Eligible Employee
the deferral of any payment of cash or Paired Shares that may become due or of
cash otherwise payable under this Plan, and provide for accreted benefits
thereon based upon such deferment, at the election or at the request of such
Participant, subject to the other terms of this Plan. Such deferral shall be
subject to such further conditions, restrictions or requirements as the
Committee may impose, subject to any then vested rights of Participants.
14
VI. OTHER PROVISIONS.
6.1 RIGHTS OF ELIGIBLE EMPLOYEES, PARTICIPANTS AND BENEFICIARIES.
(a) EMPLOYMENT STATUS. Status as an Eligible Employee shall not be
construed as a commitment that any Award will be made under this Plan to an
Eligible Employee or to Eligible Employees generally.
(b) NO EMPLOYMENT CONTRACT. Nothing contained in this Plan (or in
any other documents related to this Plan or to any Award) shall confer upon any
Eligible Employee or Participant any right to continue in the employ or other
service of the Company or constitute any contract or agreement of employment or
other service, nor shall interfere in any way with the right of the Company to
change such person's compensation or other benefits or to terminate the
employment of such person, with or without cause, but nothing contained in this
Plan or any document related hereto shall adversely affect any independent
contractual right of such person without his or her consent thereto.
(c) PLAN NOT FUNDED. Awards payable under this Plan shall be payable
in Paired Shares or Common Stock, as applicable, or from the general assets of
the Corporation, and no special or separate reserve, fund or deposit shall be
made to assure payment of such Awards. No Participant, Beneficiary or other
person shall have any right, title or interest in any fund or in any specific
asset (including shares of Common Stock or shares of Operating Company Stock,
except as expressly otherwise provided) of the Company by reason of any Award
hereunder. Neither the provisions of this Plan (or of any related documents),
nor the creation or adoption of this Plan, nor any action taken pursuant to the
provisions of this Plan shall create, or be construed to create, a trust of any
kind or a fiduciary relationship between the Company and any Participant,
Beneficiary or other person. To the extent that a Participant, Beneficiary or
other person acquires a right to receive payment pursuant to any Award
hereunder, such right shall be no greater than the right of any unsecured
general creditor of the Company.
6.2 ADJUSTMENTS; ACCELERATION.
(a) ADJUSTMENTS. If the outstanding shares of Common Stock or the
outstanding shares of Operating Company Stock are changed into or exchanged for
cash, other property or a different number or kind of shares or securities of
the Corporation or of Operating Company, as the case may be, or if additional
shares or new or different securities are distributed with respect to the
outstanding shares of Common Stock or the outstanding shares of Operating
Company Stock,
15
through a reorganization or merger in which the Corporation or Operating
Company, as the case may be, is the surviving entity, or through a combination,
consolidation, recapitalization, reclassification, stock split, stock dividend,
reverse stock split, stock consolidation, dividend or distribution of cash or
property to the shareholders of the Corporation or of Operating Company, or if
there shall occur any other extraordinary corporate transaction or event in
respect of the Common Stock or the Operating Company Stock or a sale of
substantially all the assets of the Corporation or of Operating Company as an
entirety which in the judgment of the Committee materially affects the Common
Stock or the Operating Company Stock, then the Committee shall, in such manner
and to such extent (if any) as it deems appropriate and equitable (1)
proportionately adjust any or all of (A) the number and kind of shares of Common
Stock, Operating Company Stock or other consideration that is subject to or may
be delivered under this Plan and pursuant to outstanding Awards, (B) the
consideration payable with respect to Awards granted prior to any such change
and the price, if any, paid in connection with Restricted Stock Awards or (C)
the performance standards appropriate to any outstanding awards; or (2) in the
case of an extraordinary dividend or other distribution, merger, reorganization,
consolidation, combination, sale of assets, split up, exchange, or spin off,
make provision for a cash payment or for the substitution or exchange of any or
all outstanding Awards or the cash, securities or property deliverable to the
holder of any or all outstanding Awards based upon the distribution or
consideration payable to holders of Common Stock or to holders of Operating
Company Stock upon or in respect of such event; PROVIDED, HOWEVER, in each case,
that with respect to Awards of Incentive Stock Options, no such adjustment shall
be made which would cause the Plan to violate Section 422 or 424(a) of the Code
or any successor provisions thereto. Corresponding adjustments shall be made
with respect to any Stock Appreciation Rights based upon the adjustments made to
the Options to which they are related. In any of such events, the Committee may
take such action sufficiently prior to such event if necessary to permit the
Participant to realize the benefits intended to be conveyed with respect to the
underlying shares in the same manner as is available to shareholders generally.
(b) ACCELERATION OF AWARDS UPON CHANGE IN CONTROL. As to any or all
Participants, upon the occurrence of a Change in Control Event (i) each Option
and Stock Appreciation Right shall become immediately exercisable, (ii)
Restricted Stock shall immediately vest free of restrictions, and (iii) each
Performance Share Award shall become payable to the Participant; PROVIDED,
HOWEVER, that in no event shall any Award be accelerated as to any Section 16
Person to a date less than six months after the Award
16
Date of such Award. Notwithstanding the foregoing, except in the case of an
Award of an Option, prior to a Change in Control Event, the Committee may
determine that, upon its occurrence, there shall be no acceleration of benefits
under Awards or determine that only certain or limited benefits under Awards
shall be accelerated and the extent to which they shall be accelerated, and/or
establish a different time in respect of such event for such acceleration. In
addition, the Committee may override the limitations on acceleration in this
Section 6.2(b) by express provision in the Award Agreement and may accord any
Participant a right to refuse any acceleration, whether pursuant to the Award
Agreement or otherwise, in such circumstances as the Committee may approve. Any
acceleration of Awards shall comply with applicable regulatory requirements,
including without limitation Section 422 of the Code.
Notwithstanding any other provision of this Plan, this Section 6.2(b)
shall be effective through September 30, 1997 and may not be amended or
terminated during such period except as required by law or to make changes that
do not diminish the benefits or rights provided by this Section 6.2(b). The
Board may, in its sole discretion and for any reason, provide written notice of
termination or amendment (effective as of the then applicable expiration date,
but not with respect to a Change in Control Event occurring on or before such
expiration date) no later than six months before the expiration date of this
Section 6.2(b). If such amendment or termination is not made, this Section
6.2(b) shall be automatically extended for an additional period of 60 months
past the expiration date. This Section 6.2(b) shall continue to be
automatically extended for an additional 60 months at the end of such 60-month
period and each succeeding 60-month period unless notice is given in the manner
described in this Section 6.2(b).
(c) POSSIBLE EARLY TERMINATION OF ACCELERATED AWARDS. If any Option
or other right to acquire Common Stock or Paired Shares under this Plan has not
been exercised prior to (i) a dissolution of the Corporation, (ii) a
reorganization event described in Section 6.2(a) that the Corporation does not
survive, or (iii) the consummation of a reorganization event described in
Section 6.2(a) that results in a Change in Control Event approved by the Board
and no provision has been made for the survival, substitution, exchange or other
settlement of such Option or right, such Option or right shall thereupon
terminate.
(d) GOLDEN PARACHUTE LIMITATIONS. In no event shall an Award be
accelerated under this Plan to an extent or in a manner which would not be fully
deductible by the Company for federal income tax purposes because of Section
280G of the Code, nor shall any payment hereunder be
17
accelerated if any portion of such accelerated payment would not be deductible
by the Company because of Section 280G of the Code. If a holder would be
entitled to benefits or payments hereunder and under any other plan or program
which would constitute "parachute payments" as defined in Section 280G of the
Code, then the holder may by written notice to the Company designate the order
in which such parachute payments shall be reduced or modified so that the
Company is not denied federal income tax deductions for any "parachute payments"
because of Section 280G of the Code.
6.3 EFFECT OF TERMINATION OF EMPLOYMENT.
The Committee shall establish in respect of each Award granted to an
Eligible Employee the effect of a termination of employment on the rights and
benefits thereunder and in so doing may make distinctions based upon the cause
of termination, E.G., Retirement, early retirement, termination for cause,
disability or death. Notwithstanding any terms to the contrary in an Award
Agreement or this Plan, the Committee may decide in its complete discretion at
the time of termination (or within a reasonable time thereafter) to extend the
exercise period of an Award (although not beyond the period described in Section
2.3(b)) and the number of shares covered by the Award with respect to which the
Award is exercisable or vested.
6.4 COMPLIANCE WITH LAWS.
This Plan, the granting and vesting of Awards under this Plan and the
offer, issuance and delivery of Paired Shares (or Common Stock) and/or the
payment of money under this Plan or under Awards granted hereunder are subject
to compliance with all applicable federal and state laws, rules and regulations
(including, but not limited to, state and federal securities laws and federal
margin requirements) and to such approvals by any listing, regulatory or
governmental authority as may, in the opinion of counsel for the Corporation, be
necessary or advisable in connection therewith. Any securities delivered under
this Plan shall be subject to such restrictions, and the person acquiring such
securities shall, if requested by the Corporation, provide such assurances and
representations to the Corporation as the Corporation may deem necessary or
desirable to assure compliance with all applicable legal requirements.
6.5 TAX WITHHOLDING.
(a) CASH OR SHARES. Upon any exercise, vesting, or payment of any
Award, the Company shall have the right at its option to (i) require the
Participant (or Personal Representative or Beneficiary, as the case may be) to
pay or
18
provide for payment of the amount of any taxes which the Company may be required
to withhold with respect to such transaction or (ii) deduct from any amount
payable in cash the amount of any taxes which the Company may be required to
withhold with respect to such cash amount. In any case where a tax is required
to be withheld in connection with the delivery of Paired Shares (or Common
Stock) under this Plan, the Committee may grant (either at the time of the Award
or thereafter) to the Participant the right to elect, or the Committee may
require (either at the time of the Award or thereafter), pursuant to such rules
and subject to such conditions as the Committee may establish, to have the
Corporation reduce the number of Paired Shares or shares of Common Stock, as
applicable, to be delivered by (or otherwise reacquire) the appropriate number
of shares valued at their then Fair Market Value, to satisfy such withholding
obligation.
(b) TAX LOANS. The Committee may, in its discretion, authorize a
loan to an Eligible Employee in the amount of any taxes which the Company may be
required to withhold with respect to Paired Shares or Common Stock received (or
disposed of, as the case may be) pursuant to a transaction described in
subsection (a) above. Such a loan shall be for a term, at a rate of interest
and pursuant to such other terms and conditions as the Committee, under
applicable law may establish and such loan need not comply with the provisions
of Section 1.8.
6.6 PLAN AMENDMENT, TERMINATION AND SUSPENSION.
(a) BOARD AUTHORIZATION. The Board may, at any time, terminate or,
from time to time, amend, modify or suspend this Plan, in whole or in part. No
Awards may be granted during any suspension of this Plan or after termination of
this Plan, but the Committee shall retain jurisdiction as to Awards then
outstanding in accordance with the terms of this Plan.
(b) SHAREHOLDER APPROVAL. If any amendment would (i) materially
increase the benefits accruing to Participants under this Plan, (ii) materially
increase the aggregate number of securities that may be issued under this Plan,
or (iii) materially modify the requirements as to eligibility for participation
in this Plan, then to the extent then required by Rule 16b-3 to secure benefits
thereunder or to avoid liability under Section 16 of the Exchange Act (and Rules
thereunder) or required under Section 425 of the Code or any other applicable
law, or deemed necessary or advisable by the Board, such amendment shall be
subject to shareholder approval.
19
(c) AMENDMENTS TO AWARDS. Without limiting any other express
authority of the Committee under but subject to the express limits of this Plan,
the Committee by agreement or resolution may waive conditions of or limitations
on Awards that the Committee in the prior exercise of its discretion has
imposed, without the consent of the Participant, and may make other changes to
the terms and conditions of Awards that do not affect in any manner materially
adverse to the Participant, his or her rights and benefits under an Award.
(d) LIMITATIONS ON AMENDMENTS TO PLAN AND AWARDS. No amendment,
suspension or termination of the Plan or change of or affecting any outstanding
Award shall, without written consent of the Participant, affect in any manner
materially adverse to the Participant any rights or benefits of the Participant
or obligations of the Corporation under any Award granted under this Plan prior
to the effective date of such change. Changes contemplated by Section 6.2 shall
not be deemed to constitute changes or amendments for purposes of this Section
6.6.
6.7 EFFECT OF PAIRING AGREEMENT ON AWARDS.
(a) PAIRING AGREEMENT. This Plan shall be subject to the terms and
conditions of the Pairing Agreement.
(b) PAIRED SHARES. All Awards (other than Options) shall be subject
to the following:
(i) the grant of any Award for Common Stock pursuant to this
Plan shall also be for an equal number of shares of Operating Company
Stock; upon the payment of a Restricted Stock Award, a Stock
Appreciation Right, a Performance Share Award payable in Common Stock
or a Stock Bonus, the Participant shall obtain a number of shares of
Operating Company Stock equal to the number of shares of Common Stock
to be issued upon payment;
(ii) the grant of any Award for Operating Company Stock pursuant
to this Plan shall also be for an equal number of shares of Common
Stock; upon the payment of a Restricted Stock Award, a Stock
Appreciation Right, a Performance Share Award payable in Operating
Company Stock or a Stock Bonus, the Participant shall obtain a number
of shares of Common Stock equal to the number of shares of Operating
Company Stock to be issued upon payment.
20
(c) STOCK CERTIFICATES. Upon payment of an Award (other than an
Option), the person receiving Paired Shares shall be entitled to one stock
certificate evidencing the Paired Shares acquired. Upon exercise of an
Option and compliance with the provisions of Section 2.7, the person
receiving Common Stock shall be entitled to one stock certificate
evidencing the Paired Shares so acquired; provided that any person who
tenders Paired Shares to the Corporation in payment of a portion or all of
the purchase price of the stock purchased upon exercise of an Option, shall
be entitled to receive two certificates, one representing a number of
Paired Shares equal to the number of Paired Shares exchanged for the stock
acquired upon exercise and compliance with the provisions of Section 2, and
another representing the additional Paired Shares, if any, acquired upon
exercise of the Option and compliance with the provisions of Section 2.7.
6.8 PRIVILEGES OF STOCK OWNERSHIP.
Except as otherwise expressly authorized by the Committee or this
Plan, a Participant shall not be entitled to any privilege of stock ownership as
to any Paired Shares or Common Stock not actually delivered to and held of
record by him or her. No adjustment will be made for dividends or other rights
as a shareholder for which a record date is prior to such date of delivery.
6.9 EFFECTIVE DATE OF THE PLAN.
This Plan shall be effective as of December 15, 1994, the date of
Board approval, subject to shareholder approval within 12 months thereafter.
6.10 TERM OF THE PLAN.
No Award shall be granted more than ten years after the effective date
of this Plan (the "termination date"). Unless otherwise expressly provided in
this Plan or in an applicable Award Agreement, any Award theretofore granted may
extend beyond such date, and all authority of the Committee with respect to
Awards hereunder shall continue during any suspension of this Plan and in
respect of outstanding Awards on such termination date.
6.11 GOVERNING LAW; CONSTRUCTION; SEVERABILITY.
(a) CHOICE OF LAW. This Plan, the Awards, all documents evidencing
Awards and all other related documents shall be governed by, and construed in
accordance with the laws of the State of California applicable to contracts made
and performed within such State, except as such laws may be
21
supplanted by the laws of the United States of America, which laws shall then
govern its effect and its construction to the extent they supplant California
law.
(b) SEVERABILITY. If any provision shall be held by a court of
competent jurisdiction to be invalid and unenforceable, the remaining provisions
of this Plan shall continue in effect.
(c) PLAN CONSTRUCTION. (1) It is the intent of the Corporation that
this Plan and Awards hereunder satisfy and be interpreted in a manner that in
the case of Participants who are or may be subject to Section 16 of the Exchange
Act satisfies the applicable requirements of Rule 16b-3 so that such persons
will be entitled to the benefits of Rule 16b-3 or other exemptive rules under
Section 16 of the Exchange Act and will not be subjected to avoidable liability
thereunder. If any provision of this Plan or of any Award or any prior action
by the Committee would otherwise frustrate or conflict with the intent expressed
above, that provision to the extent possible shall be interpreted and deemed
amended so as to avoid such conflict, but to the extent of any remaining
irreconcilable conflict with such intent as to such persons in the
circumstances, such provision shall be deemed void.
(2) It is the further intent of the Company that Options or Stock
Appreciation Rights with an exercise or base price not less than Fair Market
Value on the date of grant, that are granted to or held by a Section 16 Person,
shall qualify as performance-based compensation under Section 162(m) of the
Code, and this Plan shall be interpreted consistent with such intent.
6.12 CAPTIONS.
Captions and headings are given to the sections and subsections of
this Plan solely as a convenience to facilitate reference. Such headings shall
not be deemed in any way material or relevant to the construction or
interpretation of the Plan or any provision thereof.
6.13 EFFECT OF CHANGE OF SUBSIDIARY STATUS.
For purposes of this Plan and any Award hereunder, if an entity ceases
to be a Subsidiary, a termination of employment shall be deemed to have occurred
with respect to each employee of such Subsidiary who does not continue as an
employee of another entity within the Company.
22
6.14 NON-EXCLUSIVITY OF PLAN.
Nothing in this Plan shall limit or be deemed to limit the authority
of the Board or the Committee to grant awards or authorize any other
compensation, with or without reference to the Common Stock and/or Operating
Company Stock, under any other plan or authority.
VII. DEFINITIONS.
7.1 DEFINITIONS.
(a) "AWARD" shall mean an award of any Option, Stock Appreciation
Right, Restricted Stock Award, Performance Share Award, Stock Bonus, Dividend
Equivalent or other right or security that would constitute a "derivative
security" under Rule 16a-1(c) of the Exchange Act, or any combination thereof,
whether alternative or cumulative, authorized by and granted under this Plan.
(b) "AWARD AGREEMENT" shall mean any writing setting forth the terms
of an Award that has been authorized by the Committee.
(c) "AWARD DATE" shall mean the date upon which the Committee took
the action granting an Award or such later date as the Committee designates as
the Award Date at the time of the Award.
(d) "AWARD PERIOD" shall mean the period beginning on an Award Date
and ending on the expiration date of such Award.
(e) "BENEFICIARY" shall mean the person, persons, trust or trusts
entitled by will or the laws of descent and distribution to receive the benefits
specified in the Award Agreement and under this Plan in the event of a
Participant's death, and shall mean the Participant's executor or administrator
if no other Beneficiary is identified and able to act under the circumstances.
(f) "BOARD" shall mean the Board of Directors of the Corporation.
(g) "CHANGE IN CONTROL EVENT" shall mean:
(1) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of either (A) the then
outstanding shares of Common Stock
23
(the "Outstanding Common Stock") or (B) the combined voting power of the
then outstanding voting securities of the Corporation entitled to vote
generally in the election of directors (the "Outstanding Voting
Securities"); provided, however, that the following acquisitions shall not
constitute a Change in Control Event: (A) any acquisition directly from the
Corporation (except that an acquisition by virtue of the exercise of a
conversion privilege shall not be considered within this clause (A) unless
the converted security was itself acquired directly from the Corporation),
(B) any acquisition by the Corporation, (C) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Corporation
or any corporation controlled by the Corporation or (D) any acquisition by
any corporation pursuant to a reorganization, merger or consolidated, if,
following such reorganization, merger or consolidation, the conditions
described in clauses (A) and (B) of paragraph (3) below are satisfied;
(2) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual who becomes a
director subsequent to the date hereof whose election, or nomination for
election by the Corporation's shareholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board shall
be considered as though such individual were a member of the Incumbent
Board; but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of either an actual or threatened
election contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the Board; or
(3) Approval by the shareholders of the Corporation of a
reorganization, merger or consolidation (a "transaction"), unless,
following such transaction in each case, (A) more than 80% of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such transaction and the combined voting power
of the then outstanding voting securities of such corporation entitled to
vote generally in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Common Stock and Outstanding Voting Securities immediately prior to such
transaction and
24
(B) no Person (excluding the Corporation, any employee benefit plan (or
related trust) of the Corporation or such corporation resulting from such
transaction and any Person beneficially owning, immediately prior to such
transaction, directly or indirectly, 20% or more of the Outstanding Common
Stock or Outstanding Voting Securities, as the case may be) beneficially
owns, directly or indirectly, 20% or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
transaction or the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election
of directors; or
(4) Approval by the shareholders of the Corporation of (A) a
complete liquidation or dissolution of the Corporation or (B) the sale or
other disposition of all or substantially all of the assets of the
Corporation, unless such assets are sold to a corporation and following
such sale or other disposition, the conditions described in clauses (A) and
(B) of paragraph (3) above are satisfied.
(h) "CODE" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(i) "COMMISSION" shall mean the Securities and Exchange Commission.
(j) "COMMITTEE" shall mean the Compensation Committee of the Board,
which Committee shall be comprised only of two or more directors or such greater
number of directors as may be required under applicable law, each of whom,
during such time as one or more Participants may be subject to Section 16 of the
Exchange Act, shall be a Disinterested and Outside director.
(k) "COMMON STOCK" shall mean the common stock of the Corporation,
$.10 par value per share, and such other securities or property as may become
the subject of Awards, or become subject to Awards, pursuant to an adjustment
made under Section 6.2 of this Plan.
(l) "COMPANY" shall mean, collectively, the Corporation and its
Subsidiaries.
(m) "CORPORATION" shall mean Santa Anita Realty Enterprises, Inc., a
Delaware corporation, and its successors.
(n) "DISINTERESTED AND OUTSIDE" shall mean "disinterested" within the
meaning of any applicable
25
regulatory requirements, including Rule 16b-3, and "outside" within the meaning
of Section 162(m) of the Code.
(o) "DIVIDEND EQUIVALENT" shall mean an amount equal to the amount of
cash dividends or other cash distributions paid (or such portion of such
dividend or other distribution as may be designated by the Committee) with
respect to each share of Common Stock after the date of an Award of a Dividend
Equivalent.
(p) "ELIGIBLE EMPLOYEE" shall mean an officer (whether or not a
director) or any other employee of the Company, or any Other Eligible Person, as
determined by the Committee in its discretion.
(q) "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
(r) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(s) "FAIR MARKET VALUE" shall mean, with respect to Common Stock or
Operating Company Stock, the fair market value of an unpaired share of Common
Stock or Operating Company Stock, as the case may be, as determined in good
faith by the Committee. The Fair Market Value of a Paired Share shall mean the
closing price of a Paired Share on the Composite Tape, as published in the
Western Edition of The Wall Street Journal, of the principal national securities
exchange on which the Paired Shares are so listed or admitted to trade, on such
date, or, if there is no trading of the Paired Shares on such date, then the
closing price of the Paired Shares as quoted on such Composite Tape on the next
preceding date on which there was trading in such shares; provided, however, if
the Paired Shares are not listed or admitted to trade on a national securities
exchange, the Committee may designate such other exchange, market or source of
data as it deems appropriate for determining such value for Plan purposes.
(t) "INCENTIVE STOCK OPTION" shall mean an Option which is designated
as an incentive stock option within the meaning of Section 422 of the Code and
which contains such provisions as are necessary to comply with that section.
(u) "NONQUALIFIED STOCK OPTION" shall mean an Option that is
designated as a Nonqualified Stock Option and shall include any Option intended
as an Incentive Stock Option that fails to meet the applicable legal
requirements thereof. Any Option granted hereunder that is not designated as an
incentive stock option shall be deemed to be designated a nonqualified stock
option under this Plan and not an incentive stock option under the Code.
26
(v) "NON-EMPLOYEE DIRECTOR" shall mean a member of the Board who is
not an officer or employee of the Company.
(w) "OPERATING COMPANY" means Santa Anita Operating Company, a
Delaware corporation.
(x) "OPERATING COMPANY STOCK" means the common stock of Operating
Company, $.10 par value per share, and such other securities or property as may
become subject of Awards or become subject to Awards, pursuant to an adjustment
made under Section 6.2 of this Plan.
(y) "OPTION" shall mean an option to purchase shares of Common Stock
under this Plan. The Committee shall designate any Option granted to an
Eligible Employee as a Nonqualified Stock Option or an Incentive Stock Option.
(z) "OTHER ELIGIBLE PERSON" shall mean any individual consultant,
advisor or (to the extent provided in the next sentence) agent who renders or
has rendered BONA FIDE services (other than services in connection with the
offering or sale of securities of the Company in a capital raising transaction)
to the Company, and who is selected to participate in this Plan by the
Committee; PROVIDED that if the Corporation's officers and directors are or
become subject to Section 16 of the Exchange Act, a Non-Employee Director shall
not thereafter be selected as an Other Eligible Person. A non-employee agent
providing BONA FIDE services to the Company (other than as an eligible advisor
or consultant) may also be selected as an Other Eligible Person if such agent's
participation in this Plan would not adversely affect (x) the Corporation's
eligibility to use Form S-8 to register under the Securities Act of 1933, as
amended, the offering of shares issuable under this Plan by the Company or (y)
the Corporation's compliance with any other applicable laws.
(aa) "PAIRED SHARE" means a share of Common Stock and a share of
Operating Company Stock.
(bb) "PAIRING AGREEMENT" means the Pairing Agreement between the
Corporation and Operating Company, dated as of December 31, 1979, as it may be
amended from time to time.
(cc) "PARTICIPANT" shall mean an Eligible Employee who has been
granted an Award under this Plan.
(dd) "PERFORMANCE SHARE AWARD" shall mean an Award made pursuant to
the provisions, and subject to the terms and conditions, of Article V of the
Plan.
27
(ee) "PERSONAL REPRESENTATIVE" shall mean the person or persons who,
upon the Total Disability or incompetence of a Participant, shall have acquired
on behalf of the Participant, by legal proceeding or otherwise, the power to
exercise the rights or receive benefits under this Plan and who shall have
become the legal representative of the Participant.
(ff) "PLAN" shall mean this 1995 Share Award Plan.
(gg) "QDRO" shall mean a qualified domestic relations order as defined
in Section 414(p) of the Code or Title I, Section 206(d)(3) of ERISA (to the
same extent as if this Plan were subject thereto), or the applicable rules
thereunder.
(hh) "RESTRICTED STOCK" shall mean Paired Shares awarded to a
Participant subject to payment of such consideration, if any, and such
conditions on vesting and such transfer and other restrictions as are
established in or pursuant to this Plan, for so long as such shares remain
unvested under the terms of the applicable Award Agreement.
(ii) "RETIREMENT" shall mean retirement from active service as an
employee or officer of the Company on or after attaining age 65.
(jj) "RULE 16B-3" shall mean Rule 16b-3 as promulgated by the
Commission pursuant to the Exchange Act.
(kk) "SECTION 16 PERSON" shall mean a person subject to Section 16(a)
of the Exchange Act.
(ll) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended from time to time.
(mm) "STOCK APPRECIATION RIGHT" shall mean a right to receive a number
of Paired Shares or an amount of cash, or a combination of shares and cash, the
aggregate amount or value of which is determined by reference to a change in the
Fair Market Value of the Paired Shares that is authorized under this Plan.
(nn) "SUBSIDIARY" shall mean any corporation or other entity a
majority of whose outstanding voting stock or voting power is beneficially owned
directly or indirectly by the Corporation.
(oo) "TOTAL DISABILITY" shall mean a "permanent and total disability"
within the meaning of Section 22(e)(3) of the Code and such other disabilities,
infirmities,
28
afflictions or conditions as the Committee by rule may include.
EXECUTED this 15th day of December, 1995.
SANTA ANITA REALTY ENTERPRISES, INC.
By: /s/ Brian L. Fleming
--------------------------------------------
Executive Vice President, Chief
Its: Financial Officer and Secretary
--------------------------------------------
29
SANTA ANITA SANTA ANITA REALTY
LOGO OPERATING COMPANY PROXY ENTERPRISES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE RESPECTIVE BOARDS OF DIRECTORS
The undersigned hereby appoints Richard S. Cohen, Arthur Lee Crowe and
Stephen F. Keller as Proxies, each with the power to appoint his substitute, and
hereby authorizes each of them to represent and vote as designated below, all
the shares of Common Stock of Santa Anita Operating Company and Santa Anita
Realty Enterprises, Inc. held of record by the undersigned on March 13, 1995, at
the annual meetings of shareholders to be held on May 2, 1995 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)
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY / /
FOR ALL
FOR WITHHOLD EXCEPT*
1. Election of Directors for Santa Anita / / / / / /
Operating Company--
Nominees: Thomas P. Mullaney, William D.
Schulte
------------------------------
*Nominee Exception
FOR ALL
FOR WITHHOLD EXCEPT*
2. Election of Directors for Santa Anita / / / / / /
Realty Enterprises, Inc.--
Nominees: Thomas P. Mullaney, William D.
Schulte, Sherwood C. Chillingworth
------------------------------
*Nominee Exception
FOR AGAINST ABSTAIN
3. Approve the Santa Anita Operating Company / / / / / /
1995 Share Award Plan
FOR AGAINST ABSTAIN
4. Approve the Santa Anita Realty Enterprises, / / / / / /
Inc. 1995 Share Award Plan
In their discretion, the proxies are authorized to vote upon such other business
that may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR THE ELECTION OF THE NOMINEES LISTED ON THIS CARD AND FOR APPROVAL OF EACH OF
THE SHARE AWARD PLANS.
Dated , 1995
------------------------------
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.