<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
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<PAGE> 2
PRELIMINARY STATEMENT FOR THE INFORMATION
OF THE SECURITIES AND EXCHANGE COMMISSION ONLY
AMERICAN REALTY TRUST, INC.
10670 NORTH CENTRAL EXPRESSWAY, SUITE 300
DALLAS, TEXAS 75231
TELEPHONE: (214) 692-4700
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
---------------------
To the Stockholders of American Realty Trust, Inc.:
PLEASE TAKE NOTICE that the Annual Meeting of Stockholders of American
Realty Trust, Inc. (the "Company") will be held at 2:00 p.m., Dallas time, on
Monday, December 15, 1997, at 10670 N. Central Expressway, Suite 600, Dallas,
Texas 75231, to consider and vote upon the following matters:
(1) the election of one Class III Director of the Company;
(2) a proposal to authorize and approve an amendment to the Company's
Articles of Incorporation to increase the number of authorized shares of
common stock from 16,666,667 to 100,000,000;
(3) a proposal to amend the By-Laws of the Company to remove the
provision for the division of the Board of Directors into three classes;
(4) a proposal to approve the Company's 1997 Stock Option Plan; and
(5) the transaction of such other business as may properly come before
the Annual Meeting or any adjournments thereof.
Only Stockholders of record at the close of business on Wednesday, November
12, 1997, will be entitled to vote at the Annual Meeting. Stockholders are
cordially invited to attend the Annual Meeting in person.
Regardless of whether you plan to be present at the Annual Meeting, please
promptly date, mark, sign and mail the enclosed proxy to American Stock Transfer
and Trust Company in the envelope provided. Any Stockholder who executes and
delivers the proxy may revoke the authority granted thereunder at any time prior
to its use by giving written notice of such revocation to American Stock
Transfer and Trust Company, 40 Wall Street, 46th Floor, New York, New York
10005, or by executing and delivering a proxy bearing a later date. A
STOCKHOLDER MAY ALSO REVOKE A PROXY BY ATTENDING AND VOTING AT THE ANNUAL
MEETING. Your vote is important, regardless of the number of shares of the
Company's common stock ("Shares") you own.
Dated: November 13, 1997
BY ORDER OF THE BOARD OF DIRECTORS
OF AMERICAN REALTY TRUST, INC.
/s/ ROBERT A. WALDMAN
Robert A. Waldman
Secretary
<PAGE> 3
IMPORTANT
YOU CAN HELP THE COMPANY AVOID THE NECESSITY AND EXPENSE OF SENDING
FOLLOW-UP LETTERS TO ENSURE A QUORUM BY PROMPTLY RETURNING THE ENCLOSED PROXY.
IF YOU ARE UNABLE TO ATTEND THE ANNUAL MEETING, PLEASE MARK, DATE, SIGN AND
RETURN THE ENCLOSED PROXY SO THAT THE NECESSARY QUORUM MAY BE REPRESENTED AT THE
ANNUAL MEETING. THE ENCLOSED ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES.
FAILURE TO VOTE MAY SUBJECT THE COMPANY TO FURTHER EXPENSE
If your Shares are held in the name of a brokerage firm, nominee or other
institution, only it can vote your Shares. Please contact promptly the person
responsible for your account and give instructions for your Shares to be voted.
<PAGE> 4
PRELIMINARY STATEMENT FOR THE INFORMATION
OF THE SECURITIES AND EXCHANGE COMMISSION ONLY
AMERICAN REALTY TRUST, INC.
10670 NORTH CENTRAL EXPRESSWAY, SUITE 300
DALLAS, TEXAS 75231
TELEPHONE: (214) 692-4700
---------------------
PROXY STATEMENT
---------------------
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 15, 1997
---------------------
GENERAL STOCKHOLDER INFORMATION
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of American Realty Trust, Inc. (the "Company") of proxies
to be used at the Annual Meeting of Stockholders (the "Annual Meeting") for a
vote upon (1) the election of one Class III Director, (2) a proposal to
authorize and approve an amendment to the Company's Articles of Incorporation to
increase the number of authorized shares of common stock from 16,666,667 to
100,000,000; (3) a proposal to amend the By-Laws of the Company to remove the
provision for the division of the Board of Directors into three classes; (4) a
proposal to approve the Company's 1997 Stock Option Plan; and (5) the
transaction of such other business as may properly come before the meeting or
any adjournments thereof. The Annual Meeting will be held at 2:00 p.m., Dallas
time, on Monday, December 15, 1997 at 10670 North Central Expressway, Suite 600,
Dallas, Texas 75231.
The Company's financial statements for the year ended December 31, 1996
were audited by BDO Seidman. Representatives of BDO Seidman are expected to be
present at the Annual Meeting to respond to appropriate questions, and such
representatives will have an opportunity to make a statement if they desire to
do so. This Proxy Statement and the accompanying proxy are first being mailed to
Stockholders on or about November 13, 1997. The Annual Report to Stockholders
for the year ended December 31, 1996, has been mailed to all Stockholders under
separate cover.
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1996 AND OF THE EXHIBITS THERETO, AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION, MAY BE OBTAINED FREE OF CHARGE BY WRITING TO:
INVESTOR RELATIONS
AMERICAN REALTY TRUST, INC.
10670 NORTH CENTRAL EXPRESSWAY, SUITE 300
DALLAS, TEXAS 75231
STOCKHOLDERS ENTITLED TO VOTE
Only holders of record of issued and outstanding shares of the Company's
common stock (the "Shares") at the close of business on Wednesday, November 12,
1997, (the "Record Date"), are entitled to vote at the Annual Meeting and at any
adjournments thereof. At the close of business on November 12, 1997 there were
[10,690,721] Shares outstanding. Each holder is entitled to one vote for each
Share held on the Record Date.
VOTING OF PROXIES
When the enclosed proxy is properly executed and returned, the Shares
represented thereby will be voted at the Annual Meeting in accordance with the
instructions noted thereon. As to the election of the nominee as Class III
Director (Proposal One), Stockholders may choose to vote for the nominee or to
withhold authority for voting for the nominee. As to the amendment to the
Articles of Incorporation to increase the number of
<PAGE> 5
authorized shares of Common Stock ("Proposal Two"), the proposal to amend the
By-Laws to remove the provision for the division of the Board of Directors into
three classes ("Proposal Three"), and the proposal to approve the Company's 1997
Stock Option Plan ("Proposal Four"), Stockholders may choose to vote for,
against or abstain from voting on each such proposal. In the absence of other
instructions, the Shares represented by a properly executed and submitted proxy
will be voted in favor of the nominee for election to the Board of Directors and
in favor of Proposal Two, Proposal Three and Proposal Four. The Board of
Directors does not know of any other business to be brought before the Annual
Meeting. If, however, any other matters properly come before the Annual Meeting,
it is the intention of the persons named in the enclosed proxy to vote such
proxy in accordance with their judgment on such matters.
VOTE REQUIRED FOR APPROVAL
Pursuant to Section 3.2 of the By-laws of the Company, election of any
Director requires the affirmative vote of a plurality of the votes cast at a
meeting of Stockholders at which a quorum is present and voting. Pursuant to
Section 14-2-1003 of the Georgia Business Corporation Code, Proposal Two must be
adopted by the affirmative vote of a majority of the shares outstanding and
entitled to vote thereon. Pursuant to Section 14-2-725 of the Georgia Business
Corporation Code, Proposal Three and Proposal Four each must be adopted by the
affirmative vote of a plurality of the votes cast at the meeting. Abstentions
and broker non-votes, if any, will not be included in vote totals, and, as such,
will have no effect on any proposal. Section 2.5 of the By-laws of the Company
provides that a majority of the outstanding Shares entitled to vote, represented
in person or by proxy, shall constitute a quorum at any such meeting.
As of October [ ], 1997, management and affiliates held [8,026,628] Shares
representing approximately [63.3%] of the Shares outstanding. Management intends
to vote such Shares for each of the proposals in accordance with the
recommendation of the Board of Directors.
REVOCATION OF PROXIES
A proxy is enclosed herewith. Any Stockholder who executes and delivers the
proxy may revoke the authority granted thereunder at any time prior to its use
by giving written notice of such revocation to American Stock Transfer and Trust
Company, 40 Wall Street, 46th Floor, New York, New York 10005, or by executing
and delivering a proxy bearing a later date. A STOCKHOLDER MAY ALSO REVOKE A
PROXY BY ATTENDING AND VOTING AT THE ANNUAL MEETING.
FUTURE PROPOSALS OF STOCKHOLDERS
Any proposal intended to be presented by a Stockholder at the 1998 Annual
Meeting of Stockholders of the Company must be received at the principal office
of the Company not later than March 31, 1998, in order to be considered for
inclusion in the Company's proxy statement and form of proxy for that meeting.
PROPOSAL ONE:
ELECTION OF CLASS III DIRECTOR
The Board of Directors is divided into three classes of Directors. Each
class serves for staggered three-year terms. The term of two of the Company's
six Directors -- the Class III Directors -- expires at the 1997 Annual Meeting.
One of the Class III Directors, Dale A. Crenwelge, is not standing for
reelection.
NOMINEE
Karl L. Blaha has been nominated to serve as a Class III Director of the
Company for a new term expiring in 2000. Mr. Blaha is currently a Class III
Director of the Company. Mr. Blaha has been nominated by the Board of Directors
to serve for a three-year term or until his successor shall have been duly
elected and qualified. Mr. Blaha has consented to being named in this Proxy
Statement as a nominee and has agreed to serve as a Class III Director if
elected. When a proxy is properly executed and returned, the Shares represented
thereby will be voted in favor of the election of the nominee, unless authority
to vote for any such
2
<PAGE> 6
nominee is specifically withheld. If the nominee is unable to serve or will not
serve (an event which is not anticipated), then the person acting pursuant to
the authority granted under the proxy will cast votes for such other person as
he or she may select in place of such nominee.
If the Stockholders approve the proposal to amend the By-Laws to remove the
provision for a classified Board, each of the Directors will serve until the
next Annual Meeting of Stockholders or until his successor shall have been duly
elected and qualified.
The nominee for Class III Director is listed below, together with his age,
terms of service, principal occupations, business experience and directorships
with other companies during the last five years or more. The designation
"Affiliated", when used below with respect to a Director or nominee, means that
the individual is an officer, director or employee of the Company's advisor,
Basic Capital Management, Inc. ("BCM" or the "Advisor"), or an officer of the
Company. The designation "Independent", when used below with respect to a
Director or nominee, means that the individual is neither an officer of the
Company nor a director, officer or employee of BCM, although the Company may
have certain business or professional relationships with such Director, as
discussed below under "Certain Business Relationships and Related Transactions".
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATIONS,
BUSINESS EXPERIENCE AND DIRECTORSHIPS AGE
------------------------------------- ---
<S> <C>
KARL L. BLAHA: Director (Class III) (Affiliated) (since 49
1996). President (since October 1993) and Executive Vice
President and Director of Commercial Management (April 1992
to October 1993).
Executive Vice President and Director of Commercial
Management (April 1992 to August 1995) and Executive Vice
President -- Commercial Asset Management (since July 1997)
of BCM, Transcontinental Realty Investors, Inc. ("TCI"),
Continental Mortgage and Equity Trust ("CMET"), Income
Opportunity Realty Investors, Inc. ("IORI") and Syntek Asset
Management, Inc. ("SAMI"), the managing general partner of
Syntek Asset Management, L.P. ("SAMLP"), which is the
general partner of National Realty, L.P. ("NRLP") and
National Operating, L.P. ("NOLP") and a corporation owned by
BCM; Executive Vice President (October 1992 to July 1997) of
Carmel Realty, Inc. ("Carmel Realty"), a company affiliated
with BCM which provides real estate brokerage services and
commercial property management services; Executive Vice
President and Director of Commercial Management (April 1992
to February 1994) of National Income Realty Trust ("NIRT")
and Vinland Property Trust ("VPT"); Partner -Director
(August 1988 to March 1992) of National Real Estate
Operations of First Winthrop Corporation; Corporate Vice
President (April 1984 to August 1988) of Southmark
Corporation ("Southmark"); and President (March 1986 to
August 1988) of Southmark Commercial Management.
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEE NAMED
ABOVE.
The Class I and Class II Directors, whose terms do not expire this year,
are listed below, together with their ages, classes, terms of service, all
positions and offices with the Company or BCM, other principal occupations,
business experience and directorships with other companies during the last five
years or more.
3
<PAGE> 7
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATIONS,
BUSINESS EXPERIENCE AND DIRECTORSHIPS AGE
------------------------------------- ---
<S> <C>
OSCAR W. CASHWELL: Director (Class I) (Affiliated) (since 70
1992).
President (February 1994 to August 1995) of CMET, IORI and
TCI; Executive Vice President (August 1995 to January 1997),
President and Director of Property and Asset Management
(January 1994 to August 1995) and Assistant to the
President, Real Estate Operations (July 1989 to December
1993) of BCM; President (February 1994 to August 1995) and
Director (March 1994 to August 1995) of SAMI; and Assistant
to the President, Real Estate Operations (March 1982 to June
1989) of Southmark.
CLIFF HARRIS: Director (Class I) (Independent) (since 1997). 48
President (since 1995) of Energy Transfer Group, L.L.C.;
Project Development Vice President (1990 to 1995) of Marsh &
McLennan; Vice Chairman (1990-1997) of the Dallas
Rehabilitation Institute; Director (since 1992) of Court
Appointed Special Advocates; and Director (since 1989) of
the NFL Alumni Association.
ROY E. BODE: Director (Class II) (Independent) (since 1996). 49
Vice President of Public Affairs (since May 1992) of
University of Texas Southwestern Medical Center; Editor
(June 1988 to December 1991) of Dallas Times Herald; and
Director (since 1991) of the DFW Metroplex Chapter of St.
Jude's Children's Research Hospital.
AL GONZALEZ: Director (Class II) (Independent) (since 1989). 61
President (since March 1991) of AGE Refining, Inc., a
petroleum refining and marketing firm; President (January
1988 to March 1991) of Moody-Day Inc., which sells and
leases construction equipment and supplies; owner and
President of Gulf-Tex Construction Company; owner and lessor
of two restaurant sites in Dallas, Texas; Director (since
April 1990) of Avacelle, Inc. ("Avacelle"); Director (1988
to 1992) of Greenbriar Corp., formerly Medical Resource
Companies of America; and member (1987 to 1989) of the
Dallas City Council.
</TABLE>
On March 18, 1992, Avacelle filed a voluntary petition under Chapter 11 of the
United States Bankruptcy Code and an Order confirming its Plan of Reorganization
was entered October 18, 1993 by the United States Bankruptcy Court, Northern
Division of Oklahoma. On April 22, 1997, Avacelle filed another voluntary
petition under Chapter 11 of the United States Bankruptcy Code. Such proceeding
is still pending in the United States Bankruptcy Court, Northern District of
Oklahoma.
BOARD MEETINGS AND COMMITTEES
The Company's Board of Directors held four meetings during 1996. For such
year, no incumbent Director attended fewer than 75% of (i) the total number of
meetings held by the Board during the period for which he had been a Director
and (ii) the total number of meetings held by all committees of the Board on
which he served during the periods that he served.
The Board of Directors has an Audit Committee, the function of which is to
review the Company's operating and accounting procedures. The current members of
the Audit Committee are Al Gonzalez (Chairman), Dale A. Crenwelge and Roy E.
Bode. The Audit Committee met twice during 1996.
The Company's Board of Directors does not have nominating or compensation
committees.
EXECUTIVE OFFICERS
The following persons currently serve as executive officers of the Company:
Karl L. Blaha, President; Bruce A. Endendyk, Executive Vice President; Thomas A.
Holland, Executive Vice President and Chief
4
<PAGE> 8
Financial Officer; and Randall M. Paulson, Executive Vice President. Their
positions with the Company are not subject to a vote of Stockholders. The age,
terms of service, all positions and offices with the Company or BCM, other
principal occupations, business experience and directorships with other
companies during the last five years or more of Messrs. Endendyk, Holland and
Paulson is set forth below.
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATIONS,
BUSINESS EXPERIENCE AND DIRECTORSHIPS AGE
------------------------------------- ---
<S> <C>
BRUCE A. ENDENDYK: Executive Vice President (since January 49
1995).
President (since January 1995) of Carmel Realty; Executive
Vice President (since January 1995) of BCM, SAMI, CMET, IORI
and TCI; Management Consultant (November 1990 to December
1994); Executive Vice President (January 1989 to November
1990) of Southmark; President and Chief Executive Officer
(March 1988 to January 1989) of Southmark Equities
Corporation; and Vice President/Resident Manager (December
1975 to March 1988) of Coldwell Banker Commercial Real
Estate Services in Houston, Texas.
THOMAS A. HOLLAND: Executive Vice President and Chief 55
Financial Officer (since August 1995) and Senior Vice
President and Chief Accounting Officer (July 1990 to August
1995).
Executive Vice President and Chief Financial Officer (since
August 1995) and Senior Vice President and Chief Accounting
Officer (July 1990 to August 1995) of BCM, SAMI, TCI, CMET
and IORI; Secretary (since February 1997) of TCI, CMET and
IORI; Senior Vice President and Chief Accounting Officer
(July 1990 to February 1994) of NIRT and VPT; Vice President
and Controller (December 1986 to June 1990) of Southmark;
Vice President -- Finance (January 1986 to December 1986) of
Diamond Shamrock Chemical Company; Assistant Controller (May
1976 to January 1986) of Maxus Energy Corporation (formerly
Diamond Shamrock Corporation); Trustee (August 1989 to June
1990) of Arlington Realty Investors; and Certified Public
Accountant (since 1970).
RANDALL M. PAULSON: Executive Vice President (since January 51
1995).
President (since August 1995) and Executive Vice President
(January 1995 to August 1995) of SAMI, CMET, IORI and TCI
and (October 1994 to August 1995) of BCM; Director (since
August 1995) of SAMI; Vice President (1993 to 1994) of GSSW,
LP, a joint venture of Great Southern Life and Southwestern
Life; Vice President (1990 to 1993) of Property Company of
America Realty, Inc.; President (1990) of Paulson Realty
Group; President (1983 to 1989) of Johnstown Management
Company; and Vice President (1979 to 1982) of Lexton-Ancira.
</TABLE>
OFFICERS
Although not executive officers of the Company, the following persons
currently serve as officers of the Company: Robert A. Waldman, Senior Vice
President, General Counsel and Secretary; and Drew D. Potera, Vice President and
Treasurer. Their positions with the Company are not subject to a vote of
Stockholders. Their ages, terms of service, all positions and offices with the
Company or BCM, other principal occupations,
5
<PAGE> 9
business experience and directorships with other companies during the last five
years or more are set forth below.
<TABLE>
<CAPTION>
NAME, PRINCIPAL OCCUPATIONS,
BUSINESS EXPERIENCE AND DIRECTORSHIPS AGE
------------------------------------- ---
<S> <C>
ROBERT A. WALDMAN: Senior Vice President and General Counsel 45
(since January 1995), Secretary (since December 1989) and
Vice President (January 1993 to January 1995).
Senior Vice President and General Counsel (since January
1995), Vice President (since December 1990) and Secretary
(December 1993 to February 1997) of CMET, IORI and TCI;
Senior Vice President and General Counsel (since November
1994), Vice President and Corporate Counsel (November 1989
to November 1994) and Secretary (since November 1989) of
BCM; Senior Vice President and General Counsel (since
January 1995), Vice President (April 1990 to January 1995)
and Secretary (since December 1990) of SAMI; Vice President
(December 1990 to February 1994) and Secretary (December
1993 to February 1994) of NIRT and VPT; and Director
(February 1987 to October 1989), General Counsel and
Secretary (1985 to October 1989) of Red Eagle Resources
Corporation (oil and gas).
DREW D. POTERA: Vice President (since December 1996), 38
Treasurer (since August 1991) and Assistant Treasurer
(December 1990 to August 1991).
Vice President (since December 1996) and Treasurer (since
December 1990) of IORI, CMET and TCI; Vice President,
Treasurer and Securities Manager (since July 1990) of BCM;
Vice President and Treasurer (since February 1992) of SAMI;
Treasurer (December 1990 to February 1994) of NIRT and VPT;
and Financial Consultant (June 1985 to June 1990) with
Merrill Lynch, Pierce, Fenner & Smith, Incorporated.
</TABLE>
In addition to the foregoing officers, the Company has several vice
presidents and assistant secretaries who are not listed herein.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934.
Under the securities laws of the United States, the Company's Directors,
executive officers, and any persons holding more than ten percent of the
Company's Shares of Common Stock are required to report their ownership of the
Company's Shares and any changes in that ownership to the Securities and
Exchange Commission (the "Commission") and the New York Stock Exchange. Specific
due dates for these reports have been established and the Company is required to
report any failure to file by these dates during 1996. All of these filing
requirements were satisfied by the Company's Directors and executive officers
and ten percent holders. In making these statements, the Company has relied on
the written representations of its incumbent Directors and executive officers
and its ten percent holders and copies of the reports that they have filed with
the Commission.
THE ADVISOR
Although the Company's Board of Directors is directly responsible for
managing the affairs of the Company and for setting the policies which guide it,
the day-to-day operations of the Company are performed by BCM, a contractual
advisor under the supervision of the Company's Board of Directors. The duties of
the advisor include, among other things, investigating, evaluating and
recommending real estate and mortgage loan investment opportunities as well as
financing and refinancing sources for the Company. The advisor also serves as a
consultant in connection with the Company's business plan and investment policy
decisions made by the Company's Board of Directors.
BCM has served as advisor to the Company since February 1989 pursuant to a
written advisory agreement (as amended through the date hereof, the "Advisory
Agreement"). BCM is a company owned by a trust for the benefit of the children
of Gene E. Phillips, who served as the Chairman of the Board and a Director of
the Company until November 16, 1992. Gene E. Phillips also served as a director
of BCM until
6
<PAGE> 10
December 22, 1989 and as Chief Executive Officer of BCM until September 1, 1992.
Ryan T. Phillips, the son of Gene E. Phillips and a Director of the Company
until June 1996, is also a director of BCM and a Trustee of the trust which owns
BCM. Mr. Cashwell, a Director of the Company, served as Executive Vice President
of BCM until January 1997. Mr. Blaha, the President and a Director of the
Company, serves as Executive Vice President of BCM.
Gene E. Phillips serves as a representative of the trust which owns BCM
and, in such capacity, has substantial contact with the management of BCM and
input with respect to BCM's performance of advisory services to the Company. As
of October [ ], 1997, BCM owned 5,246,124 shares of the Company's Common Stock,
approximately [49.1%] of the Shares then outstanding.
The Advisory Agreement provides for the advisor to receive monthly base
compensation at the rate of 0.125% (1.5% on an annualized basis) of the average
of the aggregate book value of the Company's assets invested in equity interests
in and loans secured by real estate before non-cash reserves (the "Average
Invested Assets").
On October 23, 1991, based on the recommendation of BCM, the Company's
Board of Directors approved a reduction in the advisor's base fee by 50%
effective October 1, 1991. This reduction remains in effect until the Company's
earnings for the four preceding quarters equals or exceeds $.50 per share.
In addition to base compensation, BCM or an affiliate of BCM receives the
following forms of compensation to be paid to BCM or an affiliate of BCM:
(a) an acquisition fee for locating, leasing or purchasing real estate
for the Company in an amount equal to the lesser of (i) the amount of
compensation customarily charged in similar arm's-length transactions or
(ii) up to 6% of the costs of acquisition, inclusive of commissions, if
any, paid to nonaffiliated brokers;
(b) a disposition fee for the sale of each equity investment in real
estate in an amount equal to the lesser of (i) the amount of compensation
customarily charged in similar arm's-length transactions or (ii) 3% of the
sales price of each property, exclusive of fees, if any, paid to
non-affiliated brokers;
(c) a loan arrangement fee in an amount equal to 1% of the principal
amount of any loan made to the Company arranged by BCM;
(d) an incentive fee equal to 10% of net income for the year in excess
of a 10% return on stockholders' equity, and 10% of the excess of net
capital gains over net capital losses, if any, realized from sales of
assets; and
(e) a mortgage placement fee, on mortgage loans originated or
purchased, equal to 50%, measured on a cumulative basis, of the total
amount of mortgage origination or placement fees on mortgage loans made by
the Company for the fiscal year.
The Advisory Agreement further provides that BCM shall bear the cost of
certain expenses of its employees, excluding fees paid to the Company's
Directors; rent and other office expenses of both BCM and the Company (unless
the Company maintains office space separate from that of BCM); costs not
directly identifiable to the Company's assets, liabilities, operations, business
or financial affairs; and miscellaneous administrative expenses relating to the
performance by BCM of its duties under the Advisory Agreement.
If and to the extent that the Company shall request BCM, or any director,
officer, partner or employee of BCM, to render services to the Company other
than those required to be rendered by BCM under the Advisory Agreement, such
additional services, if performed, will be compensated separately on terms
agreed upon between such party and the Company from time to time. The Company
has requested that BCM perform loan administration functions, and the Company
and BCM have entered into a separate agreement, as described below.
7
<PAGE> 11
The Advisory Agreement automatically renews from year to year unless
terminated in accordance with its terms. The Company's management believes that
the terms of the Advisory Agreement are at least as fair as could be obtained
from unaffiliated third parties.
Pursuant to the Advisory Agreement, BCM is the loan
administration/servicing agent for the Company, under an agreement dated as of
October 4, 1989, and terminable by either party upon thirty days' notice, under
which BCM services most of the Company's mortgage notes and receives as
compensation a monthly fee of 0.125% of the month-end outstanding principal
balances of the loans serviced.
Situations may develop in which the interests of the Company are in
conflict with those of one or more Directors or officers of the Company in their
individual capacities or of BCM, or of their respective affiliates. In addition
to services performed for the Company, as described above, BCM actively provides
similar services as agent for, and advisor to, other real estate enterprises,
including persons and entities involved in real estate development and
financing, including CMET, TCI and IORI. BCM also performs certain
administrative services for NRLP on behalf of NRLP's general partner, SAMLP. The
Advisory Agreement provides that BCM may also serve as advisor to other
entities. As advisor, BCM is a fiduciary of the Company's public investors. In
determining to which entity a particular investment opportunity will be
allocated, BCM will consider the respective investment objectives of each entity
and the appropriateness of a particular investment in light of each such
entity's existing mortgage note and real estate portfolio and which entity has
had uninvested funds for the longest period of time. To the extent any
particular investment opportunity is appropriate to more than one such entity,
such investment opportunity will be allocated to the entity that has had
uninvested funds for the longest period of time or if appropriate, the
investment may be shared among various entities. See "Certain Business
Relationships and Related Party Transactions -- Certain Business Relationships"
below.
The directors and principal officers of BCM are set forth below:
Mickey N. Phillips: Director
Ryan T. Phillips: Director
Randall M. Paulson: President
Karl L. Blaha: Executive Vice President -- Commercial
Asset Management
Bruce A. Endendyk: Executive Vice President
Thomas A. Holland: Executive Vice President and Chief
Financial Officer
A. Cal Rossi, Jr.: Executive Vice President
Cooper B. Stuart: Executive Vice President
Clifford C. Towns, Jr.: Executive Vice President -- Finance
Dan S. Allred: Senior Vice President -- Land Development
Robert A. Waldman: Senior Vice President, General Counsel
and Secretary
Drew D. Potera: Vice President, Treasurer and Securities
Manager
Mickey N. Phillips is the brother of Gene E. Phillips and Ryan T. Phillips
is the son of Gene E. Phillips. Gene E. Phillips serves as a representative of
the trust established for the benefit of his children which owns BCM and, in
such capacity, has substantial contact with the management of BCM and input with
respect to its performance of advisory services to the Company. As of October
[ ], 1997, BCM owned 5,246,124 Shares of the Company's Common Stock, [49.1%] of
the Company's then outstanding Shares.
PROPERTY MANAGEMENT
Since February 1, 1990, affiliates of BCM have provided property management
services to the Company. Currently, Carmel Realty Services, Ltd. ("Carmel,
Ltd.") provides property management services for a fee of
8
<PAGE> 12
5% or less of the monthly gross rents collected on the properties under
management. Carmel, Ltd. subcontracts with other entities for the provision of
the property-level management services to the Company at various rates. The
general partner of Carmel, Ltd. is BCM. The limited partners of Carmel, Ltd. are
(i) First Equity Properties, Inc. ("First Equity"), which is 50% owned by BCM
(ii) Gene E. Phillips and (iii) a trust for the benefit of the children of Gene
E. Phillips. Carmel, Ltd. subcontracts the property-level management of the
Company's hotels, shopping centers, one of its office buildings and the Denver
Merchandise Mart to Carmel Realty, which is a company owned by First Equity.
Carmel Realty is entitled to receive property and construction management fees
and leasing commissions in accordance with the terms of its property-level
management agreement with Carmel, Ltd.
REAL ESTATE BROKERAGE
Affiliates of BCM provide real estate brokerage services to the Company and
receive brokerage commissions in accordance with the Advisory Agreement.
EXECUTIVE COMPENSATION
Although the Company has a wholly-owned food service subsidiary which has
approximately 790 employees, the Company, itself, has no employees, payroll or
employee benefit plans and pays no compensation to executive officers of the
Company. The Directors and executive officers of the Company who are also
officers or employees of the Company's Advisor are compensated by the Advisor.
Such affiliated Directors and executive officers of the Company perform a
variety of services for the Advisor and the amount of their compensation is
determined solely by the Advisor. BCM does not allocate the cash compensation of
its officers among the various entities for which it serves as advisor.
The only direct remuneration paid by the Company is to those Directors who
are not officers or employees of BCM or its affiliated companies. The Company
compensates such Independent Directors at a rate of $5,000 per year, plus $500
per Board of Directors meeting attended and $300 per Audit Committee meeting
attended. During 1996, $21,950 was paid to Independent Directors in total
Directors' fees for all meetings, as follows: Roy E. Bode, $3,000; Dale A.
Crenwelge, $8,350; Al Gonzalez, $7,600; and Ryan T. Phillips, $3,000.
In July 1987, the Company's Board of Directors, including all of the
Independent Directors, approved the Company's 1987 Stock Option Plan (the
"Plan"). The Plan was approved by the Stockholders at the Company's Annual
Meeting held in June 1988. In February 1997, the Board of Directors approved the
termination of the Plan.
9
<PAGE> 13
PERFORMANCE GRAPH
The following graph compares the cumulative total stockholder return on the
Company's shares of Common Stock with the Dow Jones Equity Market Index ("DJ
Equity Index") and the Dow Jones Real Estate Investment Index ("DJ Real Estate
Index"). The comparison assumes that $100 was invested on December 31, 1991 in
shares of the Company's Common Stock and in each of the indices and further
assumes the reinvestment of all dividends. Past performance is not necessarily
an indicator of future performance.
COMPARISON OF FIVE YEAR
CUMULATIVE TOTAL RETURN GRAPHIC
<TABLE>
<CAPTION>
MEASUREMENT PERIOD DJ REAL ESTATE
(FISCAL YEAR COVERED) THE COMPANY DJ EQUITY INDEX INDEX
<S> <C> <C> <C>
1991 100 100 100
1992 119 109 90
1993 231 119 106
1994 248 120 100
1995 281 166 124
1996 509 206 166
</TABLE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Management. The following table sets forth the
ownership of Shares of the Company's Common Stock, both beneficially and of
record, both individually and in the aggregate, for the Directors and executive
officers of the Company, as of the close of business on October [ ], 1997.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF OF BENEFICIAL PERCENT OF
BENEFICIAL OWNER OWNERSHIP CLASS(1)
------------------- ----------------- ----------
<S> <C> <C>
All Directors and Executive Officers as a
group (9 persons).......................... [6,762,628](2)(3)(4)(5) [63.3%]
</TABLE>
- ---------------
(1) Percentage is based upon [10,690,721] Shares outstanding on October [ ],
1997.
(2) Includes 818,008 Shares owned by CMET over which the executive officers of
the Company may be deemed to be beneficial owners by virtue of their
positions as executive officers of CMET. Also includes 195,732 Shares owned
by NOLP over which the executive officers of the Company may be deemed to be
beneficial owners by virtue of their positions as executive officers of
SAMI, the managing general partner of SAMLP, the general partner of NOLP.
The executive officers of the Company disclaim beneficial ownership of such
Shares.
(3) Includes [5,246,124] Shares owned by BCM over which the executive officers
of the Company may be deemed to be beneficial owners by virtue of their
positions as executive officers of BCM. The executive officers of the
Company disclaim beneficial ownership of such Shares.
10
<PAGE> 14
(4) Includes 2,432 Shares owned directly over which Thomas A. Holland and his
wife jointly hold voting and dispositive power, and an additional 332 Shares
held by Mr. Holland in an individual retirement account.
(5) Includes 500,000 shares owned by ND Investments, Inc., a wholly-owned
subsidiary of the Company. Such Shares are pledged as additional collateral
for loans to the Company.
Security Ownership of Certain Beneficial Owners. The following table sets
forth the ownership of the Company's Common Stock both beneficially and of
record, both individually and in the aggregate, for those persons or entities
known by the Company to be the owner of more than 5% of the Shares of the
Company's Common Stock as of the close of business on October [ ], 1997.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF OF BENEFICIAL PERCENT OF
BENEFICIAL OWNER OWNERSHIP CLASS(1)
------------------- ----------------- ----------
<S> <C> <C>
Basic Capital Management, Inc............................ 5,246,124 49.1%
10670 N. Central Expressway
Suite 300
Dallas, Texas 75231
Davister Corp./Nanook Partners, L.P...................... 1,669,436(2) 15.6%
10670 N. Central Expressway
Suite 410
Dallas, Texas 75231
Continental Mortgage and Equity Trust.................... 818,088(3) 7.7%
10670 N. Central Expressway
Suite 300
Dallas, Texas 75231
Ryan T. Phillips......................................... 5,344,456(4) 50.0%
10670 N. Central Expressway
Suite 600
Dallas, Texas 75231
</TABLE>
- ---------------
(1) Percentage is based on [10,690,721] Shares of Common Stock outstanding on
October [ ], 1997.
(2) Each of the directors of Davister Corp., Ronald F. Akin and Ronald F. Bruce,
may be deemed to be the beneficial owners of such Shares by virtue of their
positions as directors of Davister Corp. The directors of Davister Corp.
disclaim beneficial ownership of such Shares.
(3) Each of the Trustees of CMET, Ted P. Stokely, Edward L. Tixier, Martin L.
White and Edward G. Zampa, may be deemed to be the beneficial owners of such
Shares by virtue of their positions as Trustees of CMET. The Trustees of
CMET disclaim such beneficiary ownership.
(4) Includes [5,246,124] Shares owned by BCM over which Ryan T. Phillips may be
deemed to be the beneficial owner by virtue of his position as a director of
BCM. Mr. Phillips disclaims beneficial ownership of such Shares. Also,
includes 98,332 Shares owned by the Gene E. Phillips Children's Trust. Ryan
T. Phillips is a beneficiary of such trust.
CERTAIN BUSINESS RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Policies with Respect to Certain Activities. The By-laws of the Company, as
amended, provide, in accordance with Georgia law, that no contract or
transaction between the Company and one or more of its Directors or officers, or
between the Company and any other corporation, partnership, association or other
organization in which one or more of its Directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
that reason, or solely because the Director or officer is present at or
participates in the meeting of the Company's Board of Directors or committee
thereof which authorizes the contract or transaction, or solely because his or
her votes are counted for such purpose, if one or more of the following three
conditions are met: (i) the material facts as to his or her interest and as to
the contract or transaction are disclosed or are known to the Company's Board of
Directors or the committee, and the Board
11
<PAGE> 15
or committee in good faith authorizes the contract or transaction by the
affirmative vote of a majority of the disinterested Directors, even though the
disinterested Directors constitute less than a quorum; (ii) the material facts
as to his or her interest and as to the contract or transaction are disclosed or
are known to the Stockholders entitled to vote thereon, and the contract or
transaction is specifically approved or ratified in good faith by vote of such
Stockholders; or (iii) the contract or transaction is fair to the Company as of
the time it is authorized, approved or ratified by the Company's Board of
Directors, a committee thereof, or the Stockholders.
The Company's policy is to have such contracts or transactions approved or
ratified by a majority of the disinterested Directors of the Company with full
knowledge of the character of such transactions, as being fair and reasonable to
the Stockholders at the time of such approval or ratification under the
circumstances then prevailing. Such Directors also consider the fairness of such
transactions to the Company. Management believes that, to date, such
transactions have represented the best investments available at the time and
that they were at least as advantageous to the Company as other investments that
could have been obtained.
The Company expects to enter into future transactions with entities the
officers, trustees, directors or stockholders of which are also officers,
Directors or Stockholders of the Company if such transactions would be
beneficial to the operations of the Company and consistent with the Company's
then-current investment objectives and policies, subject to approval by a
majority of disinterested Directors as discussed above.
The Company does not prohibit its officers, Directors, Stockholders or
related parties from engaging in business activities of the types conducted by
the Company.
CERTAIN BUSINESS RELATIONSHIPS
As mentioned above, BCM is a corporation of which Messrs. Blaha, Paulson,
Endendyk and Holland serve as executive officers. BCM is beneficially owned by a
trust for the benefit of the children of Gene E. Phillips, the trustees of which
are Mickey N. Phillips and Ryan T. Phillips. Mickey N. Phillips and Ryan T.
Phillips, brother and son, respectively, of Gene E. Phillips, are also directors
of BCM. Ryan T. Phillips served as a Director of the Company until June 1996.
CMET, IORI and TCI have the same relationship with BCM as does the Company.
In addition, BCM has been engaged to perform certain administrative functions
for NRLP and NOLP. Gene E. Phillips is a general partner of SAMLP, NRLP's and
NOLP's general partner, and until May 1996 served as Chief Executive Officer and
director of SAMLP's managing general partner, SAMI. BCM is the sole stockholder
of SAMI. The Company owns a 96% limited partner interest in SAMLP.
In March 1994 and December 1995, entities affiliated with Ryan T. Phillips,
a Director of the Company until June 1996, advanced BCM a total of $1.2 million
on unsecured demand notes. The notes bear interest at 10% per annum with
interest only payable monthly. During 1995 and 1996, BCM made several principal
reduction payments. The principal balance of the loans was $361,000 at December
31, 1996 and June 30, 1997.
BCM has advanced an entity affiliated with Ryan T. Phillips $1.1 million on
an unsecured demand note. The note bears interest at 10% per annum with interest
only payable monthly. Interest has not been paid since February 1994. The
principal balance of the loan was $1.1 million at December 31, 1996 and June 30,
1997.
The Company leases a single-family residence that it owns to A. Cal Rossi,
Jr., a Vice President of the Company and an Executive Vice President of BCM. The
rent of $2,353 per month is equal to the amount of the monthly mortgage payment
on the residence and home owners association dues. The Company has also granted
Mr. Rossi an option to purchase the residence for $267,000, an amount equal to
the purchase price the Company paid for the residence.
The Company has also granted Mr. Rossi an option to purchase 36.25% of the
Company's subsidiary that owns 80% of Pizza World Supreme, Inc., at any time for
an amount equal to the Company's net investment in such subsidiary.
12
<PAGE> 16
Since February 1, 1990, the Company has contracted with affiliates of BCM
for property management services. Currently, Carmel, Ltd. provides such property
management services. The general partner of Carmel, Ltd. is BCM. The limited
partners of Carmel, Ltd. are (i) First Equity, a company which is 50% owned by
BCM, (ii) Gene E. Phillips and (iii) a trust for the benefit of the children of
Gene E. Phillips. Carmel, Ltd. subcontracts the property-level management of the
Company's hotels, shopping centers, one of its office buildings and the Denver
Merchandise Mart to Carmel Realty, Inc., which is a company owned by First
Equity.
Affiliates of BCM provide brokerage services to the Company and receive
brokerage commissions in accordance with the Advisory Agreement.
The Company owns an equity interest in each of CMET, IORI, TCI, NRLP and
SAMLP. In addition, CMET and NRLP own a beneficial interest in the Company and
SAMLP owns a beneficial interest in TCI.
RELATED PARTY TRANSACTIONS
At December 31, 1996, the Company held a mortgage note receivable secured
by an apartment complex in Merrillville, Indiana, with a principal balance of
$3.5 million. The property is owned by a subsidiary of Davister Corp.
("Davister"), a general partner in a partnership that owns approximately 15.6%
of the Company's outstanding shares of Common Stock. The note matured in
December 1996. The Company and borrower agreed to a modification and extension
of the note. The modified note receivable bore interest at 10% per annum,
required monthly payments of principal and interest of $42,000 and had an
extended maturity date of December 2000. As additional collateral for this loan,
the Company received a second lien on another property owned by Davister as well
as Davister's guarantee of the loan. The loan was paid in full in May 1997.
In May, June and July 1997, the Company obtained a total of $8.0 million in
mortgage loans from entities and trusts affiliated with the limited partner in a
partnership that owns approximately 15.6% of the Company in outstanding shares
of Common Stock. The May loan of $3.0 million is secured by a second mortgage on
the Company's Pin Oak land in Houston, Texas, bears interest at 12.5% per annum
compounded monthly and matures in October 1997. The June loan of $3.0 million is
secured by a second mortgage on the Company's Lewisville land in Lewisville,
Texas, bears interest at 12.5% per annum, compounded monthly and matures in
December 1997. The July loan of $2.0 million is secured by a third mortgage on
the Company's Pin Oak land in Houston, Texas, bears interest at 12% per annum
compounded monthly and matures in December 1997.
BCM guaranteed a loan obtained by Garden Capital Merchandise Mart, Inc., a
wholly-owned subsidiary of the Company, from P.T. Bank Dagnang Nasional
Indonesia and Grand Pacific Financing Corporation, in the amount of $15,000,000.
This loan was paid in full in October 1997.
BCM has guaranteed a loan obtained by Ocean Beach Partners, L.P., a
partnership in which a subsidiary of the Company is the 1% general partner and
99% Class B limited partner, from CS First Boston Corporation, in the amount of
$5,186,000.
BCM has guaranteed a loan obtained by the Company from Foothill Capital
Corporation, in the approximate amount of $17,401,000. BCM has also pledged
177,000 shares of the Company's Common Stock in connection with this loan.
BCM has guaranteed a loan obtained by the Company from United Pacific Bank
in the amount of $2,000,000. In connection with this loan, BCM has also pledged
465,000 shares of the Company's Common Stock to United Pacific Bank.
BCM has entered into put agreements with certain holders of the Class A
limited partner units of Ocean Beach Partners, L.P. which are convertible into
Series D Cumulative Preferred Stock of the Company. The put price of the Series
D Preferred Stock is $20.00 per share plus accrued but unpaid dividends.
BCM has also entered into put agreements with the holders of the Class A
limited partner units of Valley Ranch Limited Partnership. Such Class A units
are convertible into Series E Cumulative Convertible Preferred Stock of the
Company which is further convertible into Common Stock of the Company. The put
price for the Class A units is $1.00 per unit and the put price for either the
Series E Preferred Stock or the
13
<PAGE> 17
Common Stock is 80% of the average daily closing price of the Company's Common
Stock on the 20 previous trading days.
In 1996, the Company paid BCM and its affiliates $1.5 million in advisory
and mortgage servicing fees, $1.9 million in real estate brokerage commissions,
$806,000 in loan arrangement fees and $892,000 in property and construction
management fees and leasing commissions, net of property management fees paid to
subcontractors, other than Carmel Realty. In addition, as provided in the
Advisory Agreement, BCM received cost reimbursements from the Company of
$691,000 in 1996.
PROPOSAL TWO:
INCREASE IN NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
The Board of Directors is recommending that Article Five of the Articles of
Incorporation of the Company be amended to increase the number of authorized
shares of Common Stock, $.01 par value per share, from 16,666,667 shares to
100,000,000 shares. The affirmative vote of a majority of the shares outstanding
and entitled to vote is required to approve the proposal to amend Article Five.
Pursuant to this proposal, the first paragraph of Article Five of the Articles
of Incorporation would be deleted and replaced in its entirety with the
following:
"The Corporation shall have authority exercisable by its
Board of Directors to issue not more than 100,000,000
shares of common voting stock, $.01 par value per share
(the "Common Stock"), and 20,000,000 shares of a special
class of stock, $2.00 par value per share (the "Special
Stock"), which shall be designated as the Board of
Directors may determine and which may be issued in series
by the Board of Directors as hereinafter provided.
Preferences, limitation, and relative rights with respect
to the shares of each class of stock of the Corporation
shall be as hereinafter set forth:"
As of October [ ], 1997, there were [10,690,721] shares of the Company's
Common Stock issued and outstanding. The number of outstanding shares increased
substantially during 1996 and 1997 due to the two for one stock splits effected
during each year. As a result of this increase, the number of authorized shares
available for future issuance has been reduced. The Board of Directors
recommends that the number of authorized shares be increased and thereby provide
the Company with the ability to issue additional new shares.
The Board of Directors recommends that Stockholders approve the proposal to
amend the Articles of Incorporation to increase the number of shares of Common
Stock authorized for issuance by the Company.
PROPOSAL THREE:
REMOVAL OF CLASSIFIED BOARD PROVISION
The Board of Directors has proposed an amendment to the By-Laws of the
Company that would remove the provision for division of the Board of Directors
into three classes ("Classified Board Provision"). The affirmative vote of a
majority of the votes cast at the Annual Meeting is required to approve the
proposal to amend the By-Laws. Pursuant to this proposal, Section 3.2 of the
By-Laws of the Company would be amended to read as follows:
3.2 Number, Election and Term of Office. The number of
directors of the Corporation will be six (6). The number of
directors may be decreased (if there is more than one director)
or increased from time to time by the Board of Directors by
amendment of this bylaw, but no decrease will have the effect of
shortening the term of an incumbent director. Except as provided
herein and in Section 3.4, the directors will be elected at each
annual meeting of the shareholders, or at a special meeting of
shareholders called for purposes that include the election of
directors. Election of directors shall be by a plurality of the
shares voted at any meeting of the shareholders at which a
quorum is present and voting. Each director, except in case of
death, resignation, retirement, disqualification, or removal,
will
14
<PAGE> 18
serve until the next succeeding meeting at which directors are
elected and thereafter until his successor has been elected and
has qualified.
In addition, this proposal would delete Section 3.7 of the By-Laws which
describes the three classes of Directors and the terms of the classes. Under
Section 3.7, the Company's Board of Directors is classified into three groups of
Directors, each of which shall have as nearly equal a number of Directors as
possible. One class of Directors is elected each year. The Directors are elected
for a term of three years and until their successors are elected and qualified.
In 1989, the Board of Directors believed that the Classified Board
Provision would be advantageous to the Company and its stockholders because, by
providing that Directors will serve three-year terms rather than the one-year
terms, it would enhance the likelihood of continuity and stability in the
composition of the Board and in the policies formulated by the Board and would
tend to promote long-range planning.
The Classified Board Provision would also serve as an acquisition safeguard
because it could delay a change in control of the Company's Board of Directors:
an insurgent will generally need two annual meetings of stockholders to elect a
majority of the board. The Classified Board Provision was intended to impede an
insurgent from packing the board or replacing Directors not up for election with
its chosen representatives or skewing the classes of Directors to achieve a
quick majority. For these reasons it was believed the Classified Board Provision
may deter proxy contests.
Shareholders should note that the Classified Board Provision applies to
every election of Directors and not just to elections occurring after, or which
involve, a change in control of the Company. Thus, even in the absence of a
takeover attempt, the Classified Board Provision makes it more difficult for
shareholders to change the majority of Directors quickly -- even when the only
reason for the change may be shareholder dissatisfaction with the performance of
the incumbent Directors.
The Board of Directors recommends that Stockholders approve the proposal to
remove the Classified Board Provision because the Company has other acquisition
safeguards in place which provide adequate protection from hostile attempts to
change control of the Company and because the Board of Directors believes that
it is in the best interests of the Stockholders to be allowed to vote upon the
election of all Directors annually.
PROPOSAL FOUR:
APPROVAL OF 1997 STOCK OPTION PLAN
BACKGROUND AND DESCRIPTION
On September 3, 1997, the Board of Directors of the Company adopted the
American Realty Trust, Inc. 1997 Stock Option Plan (the "Plan"). The Plan is
subject to approval by the holders of a majority of the outstanding shares of
Common Stock. The Plan provides that stock options may be granted for the
purchase of up to 300,000 shares of Common Stock, subject to adjustment upon
changes in capitalization. A copy of the Plan is included as Appendix A to this
Proxy Statement. The following summary description is qualified in its entirety
by reference to Appendix A.
The Plan is intended as an incentive for and as a means of encouraging
share ownership by persons who are key employees or Directors of the Company.
Options may be granted only to key employees of the Company, or any Affiliate of
the Company and to certain Directors of the Company, and may be granted either
as incentive stock options (which qualify for certain favorable tax
consequences, as discussed below), or as non-qualified stock options. Directors
of the Company who are not also officers or employees of the Company or persons
who are only officers or employees of an Affiliate may be granted non-qualified
stock options, but may not be granted incentive stock options. Options may not
be transferred except by will or by the laws of descent and distribution, and
during an optionee's lifetime may be exercised only by the optionee (or by his
guardian or legal representative, should one be appointed).
15
<PAGE> 19
The Plan will be administered by the Stock Option Committee, which will
consist of three non-employee Directors of the Company. Members of the committee
are not eligible to participate in the Plan. The Stock Option Committee
determines the individuals who are key employees and who will receive options,
and, based on each such person's position with and current and potential
contribution to the Company, the number of shares that will be covered by their
options. The Committee also determines the periods of time (not exceeding ten
years from date of grant) during which options will be exercisable and
determines whether termination of an optionee's employment under various
circumstances would terminate options granted under the Plan to that person. The
option price per share will not be less than 100% of the fair market value per
share on the date of grant. The option price is payable in full upon exercise,
and payment may be made in cash or by delivery to the Company of shares of
Common Stock (valued at fair market value at the time of exercise), or by a
combination of cash and such shares. The market value per share of the Company's
shares of Common Stock (determined by reference to the closing sales price of
such shares on the New York Stock Exchange) on November [ ], 1997 was
$ per share. The Company receives no consideration upon the granting of
an option.
The Board of Directors has the right at any time to terminate or amend the
Plan, but no such action may terminate options already granted or otherwise
affect the rights of any optionee under an outstanding option without the
optionee's consent. Without Stockholder approval, the Board of Directors may not
adopt any amendment of the Plan that would (i) increase the total number of
shares of Common Stock subject to option, (ii) change or modify the class of
employees that may participate, or (iii) otherwise materially increase the
benefits accruing to participants thereunder.
FEDERAL INCOME TAX CONSEQUENCES
There are no Federal income tax consequences to the optionee or to the
Company on the granting of options. The federal tax consequences upon exercise
will vary depending on whether the option is an incentive stock option or a
nonqualified stock option.
Incentive Stock Options. When an optionee exercises an incentive stock
option, the optionee will not at that time realize any income, and the Company
will not be entitled to a deduction. The optionee will recognize capital gain or
loss at the time of disposition of the shares acquired through the exercise of
an incentive stock option if the shares have been held for at least two years
after the option was granted and one year after it was exercised. The Company
will not be entitled to a tax deduction if the optionee satisfies these holding
period requirements. The net Federal income tax effect to the holder of
incentive stock options is to defer, until the acquired shares are sold,
taxation of any increase in the shares' value from the time of grant of the
option to the time of its exercise, and to tax such gain, at the time of sale,
at capital gain rates rather than at ordinary income rates. For the purpose of
calculating tax upon disposition where already-owned shares are surrendered in
payment of the option price, the capital gains holding period and basis of the
new shares, to the extent of the old shares surrendered, is the same as for
those old shares; the holding period for the additional shares (that is, the
shares received on exercise in excess of the old shares surrendered) begins on
the date the option is exercised, and such additional shares have a zero basis.
If the holding period requirements are not met, then upon sale of the
shares the optionee generally recognizes as ordinary income the excess of the
fair market value of the shares at the date of exercise over the exercise price
stated in the option agreement; any increase in the value of the shares
subsequent to exercise is long or short-term capital gain to the optionee
depending on the optionee's holding period for the shares. However, if the sale
is for a price less than the value of the shares on the date of exercise, the
optionee might recognize ordinary income only to the extent the sales price
exceeded the option price. In either case, the Company is entitled to a
deduction to the extent of ordinary income recognized by the optionee.
The maximum tax rate on long term capital gains is 33%.
Non-Qualified Stock Options. Generally, when an optionee exercises a
non-qualified stock option, the optionee recognizes income in the amount of the
aggregate market price of the shares received upon exercise less the aggregate
amount paid for those shares, and the Company may deduct as an expense the
amount of income so recognized by the optionee. The holding period of the
acquired shares begins upon the exercise of
16
<PAGE> 20
the option, and the optionee's basis in the shares is equal to the market price
of the acquired shares on the date of exercise.
If the optionee pays all or part of the purchase price by delivering to the
Company shares of Common Stock, there are no Federal income tax consequences to
the optionee or the Company to the extent of the number of shares so delivered.
As to any additional shares issued, the optionee recognizes income equal to the
aggregate market value of the additional shares received, less any cash paid to
the Company, and the Company is allowed to deduct the amount of such income. The
holding period and basis of the new shares, to the extent of the number of old
shares delivered, is the same as for those old shares. The holding period for
the additional shares begins on the date the option is exercised, and the basis
in those additional shares is equal to their market value on the date of
exercise.
VOTE REQUIRED AND RECOMMENDATION OF THE BOARD
Stockholder approval of the Plan is not required under the Articles of
Incorporation or By-Laws. The Plan is being submitted for Stockholder approval
in order to meet Internal Revenue Code requirements for incentive stock options.
In addition, Stockholder approval is required in order to obtain the benefits
provided by Rule 16b-3 under the Securities Exchange Act of 1934. Rule 16b-3
exempts officers and Directors engaging in certain stock transactions from
short-swing trading liability under the Act. In particular, Rule 16b-3 makes it
possible for Directors and officers to surrender shares of Common Stock in
payment of the exercise price of options, which the Board of Directors believes
will substantially enhance the incentive compensation benefits of the options.
The affirmative vote of the holders of a majority of the shares of Common Stock
represented in person or by proxy at the Annual Meeting is required to approve
the Plan.
The Board of Directors recommends that Stockholders vote "for" approval of
the Plan.
SELECTION OF AUDITORS FOR 1997
The Company's auditors for the 1996 fiscal year were BDO Seidman. A
representative of BDO Seidman will attend the annual meeting. The Board of
Directors has selected BDO Seidman to serve as the auditors for the Company for
the 1997 fiscal year.
OTHER MATTERS
Management knows of no other matters that may properly be, or that are
likely to be, brought before the meeting. However, if any other matters are
properly brought before the meeting, the persons named in the enclosed proxy or
their substitutes will vote in accordance with their best judgment on such
matters.
FINANCIAL STATEMENTS
The audited consolidated balance sheets of the Company, in comparative form
as of December 31, 1996 and 1995, and the audited consolidated statements of
operations and consolidated statements of cash flows for the years ended
December 31, 1996, 1995 and 1994 are contained in the 1996 Annual Report to
Stockholders. However, such report and the financial statements contained
therein are not to be considered part of this solicitation.
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<PAGE> 21
SOLICITATION OF PROXIES
This Proxy Statement is furnished to Stockholders to solicit proxies on
behalf of the Directors of the Company. The cost of soliciting proxies will be
borne by the Company. Directors and officers of the Company may, without
additional compensation, solicit by mail, in person or by telecommunication. In
addition, the Company has retained Shareholder Communications Corporation
("SCC") to assist in the solicitation of proxies. An agreement with SCC provides
that it will distribute materials relating to the solicitation of proxies,
contact Stockholders to confirm receipt of materials and answer questions
relating thereto. SCC is to be paid a base fee of $2,000 plus out-of-pocket
expenses and is to be indemnified against certain liability incurred as a result
of the provision of such services.
By Order of the Board of Directors
/s/ KARL L. BLAHA
KARL L. BLAHA
President
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
THE NOMINEE AND THAT YOU VOTE FOR PROPOSAL TWO, PROPOSAL THREE AND PROPOSAL FOUR
ON THE ENCLOSED PROXY. REGARDLESS OF HOW YOU WISH TO VOTE YOUR SHARES, YOUR
BOARD OF DIRECTORS URGES YOU TO PROMPTLY SIGN, DATE AND MAIL THE ENCLOSED PROXY.
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<PAGE> 22
AMERICAN REALTY TRUST, INC.
1997 STOCK OPTION PLAN
ARTICLE I
DEFINITIONS
As used herein, the following terms have the meanings hereinafter set forth
unless the context clearly indicates to the contrary:
1.1 "Affiliate" shall mean Basic Capital Management, Inc. ("BCM"),
National Payroll Management Company ("NPM"), and any parent or subsidiary of the
Company, BCM or NPM.
1.2 "Board" shall mean the Board of Directors of the Company.
1.3 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.4 "Company" shall mean American Realty Trust, Inc., a Georgia
corporation, or its successor.
1.5 "Director" shall mean a member of the Board of Directors of the
Company.
1.6 "Fair Market Value" shall mean (i) the average for the last trading
day immediately preceding the day and time such value is to be determined of the
high and low bid quotations for the stock, as reported and/or published by the
National Association of Securities Dealers Automatic Quotation System ("NASDAQ")
or other national quotation service, or (ii) if the stock is listed and
registered on a national securities exchange such as the New York Stock Exchange
or the American Stock Exchange, the average of the high and low selling prices
of the stock on such exchange as reported or published by such exchange or as
listed in the Wall Street Journal or other recognized financial publication, for
the last trading day immediately preceding the day and time such value is to be
determined, or (iii) if for any reason the foregoing is inapplicable or does not
represent fair market value, then by such other method as the Committee, in its
sole discretion in good faith, shall determine to be appropriate.
1.7 "Incentive Stock Option" shall mean an option that complies with and
is subject to the terms, limitations and conditions of section 422 of the Code
and any regulations promulgated under that Code section.
1.8 "Key Employee" shall mean any officer or employee of the Company, or
of any Affiliate, whose services, as determined by the Committee, are of
exceptional value to the Company.
1.9 "Option" shall mean a contractual right to purchase Stock granted
pursuant to the provisions of this Plan.
1.10 "Optionee" shall mean a person to whom an Option has been granted
under this Plan.
1.11 "Option Price" shall mean the price at which an Optionee may purchase
a share of Stock under a Stock Option Agreement.
1.12 "Parent" shall mean any corporation (other than the corporation with
respect to which the determination is being made) in an unbroken chain of
corporations ending with the corporation with respect to which the determination
is being made if, at the time of the grant (or modification) of the Option, each
of the corporations (other than the corporation with respect to which the
determination is being made) owns stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.
1.13 "Purchasable" shall refer to Stock that may be purchased by an
Optionee under the terms of this Plan on or after a certain date specified in
the applicable Stock Option Agreement.
1.14 "Stock" shall mean the shares of common stock, $.01 par value, of the
Company or, in the event that the outstanding shares of Stock are hereafter
changed into or exchanged for shares of a different stock or securities of the
Company or some other corporation or trust, such other stock or securities.
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<PAGE> 23
1.15 "Stock Option Agreement" shall mean an agreement between the Company
and an Optionee that grants the Optionee an option.
1.16 "Subsidiary" shall mean any corporation (other than the corporation
with respect to which the determination is being made) in an unbroken chain of
corporations beginning with the corporation with respect to which the
determination is being made if, at the time of the grant (or modification) of
the Option, each of the corporations other than the last corporation in the
unbroken chain owns stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
ARTICLE II
THE PLAN
2.1 Name. This plan (the "Plan") shall be known as the "American Realty
Trust, Inc. 1997 Stock Option Plan."
2.2 Participants. The participants in this Plan shall consist only of the
Key Employees and the Directors selected by the Committee to receive Options.
2.3 Purpose. The purpose of the Plan is to advance the interests of the
Company and its stockholders by offering Key Employees and Directors an
opportunity to acquire or increase their proprietary interests in the Company.
The Options are intended to promote the growth and profitability of the Company
because the Optionees will be provided with an additional incentive to achieve
the Company's objectives through participation in its success and growth and by
encouraging their continued employment with the Company and its Affiliates.
2.4 Effective Date. The Plan shall become effective on September 4, 1997.
2.5 Termination Date. The Plan shall terminate on the tenth (10th)
anniversary of the date the Plan is adopted by the Board.
ARTICLE III
ADMINISTRATION BY COMMITTEE
3.1 General; Grant of Options. The Plan shall be administered by a
committee (the "Committee") to be appointed from time to time by the Board
consisting of not less than three persons, all of whom shall be "non-employee
directors" as defined in Rule 16b-3 (or any successor thereto) promulgated under
the Securities Exchange Act of 1934. No person who is (or, within one year prior
to his or her appointment as a member of the Committee, was) eligible to
participate in the Plan shall be a member of the Committee. In administering the
Plan, the Committee's action and determinations shall be binding on all
interested parties. The Committee shall have the power to authorize the issuance
of Stock in accordance with the provisions of this Plan. Subject to the
provisions of the Plan, the Committee shall have the sole discretion and
authority to determine those Key Employees or Directors to whom options will be
granted, the number of shares of Stock subject to each Option, whether the
option is an Incentive Stock Option, whether to amend an outstanding Option,
such other matters as are specified herein, and any other terms and conditions
of the Stock Option Agreement, and any amendment or modification thereof.
3.2 Interpretation; Rules. Subject to the provisions of the Plan, the
Committee also shall have complete authority to interpret the Plan, to
prescribe, amend and rescind rules and regulations relating to it, to determine
the details and provisions of each Stock Option Agreement, and to make all other
determinations necessary or advisable for the administration of the Plan.
3.3 No Liability. No member of the Committee shall be liable to any person
for any act or determination made in good faith with respect to the Plan or any
Option granted under the Plan.
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<PAGE> 24
ARTICLE IV
SHARES OF STOCK SUBJECT TO PLAN
4.1 Limitations. Subject to any adjustment pursuant to the provisions of
Section 4.2 hereof, the maximum number of shares of Stock which may be issued
and sold hereunder shall not exceed 300,000 shares. Shares subject to an Option
may be either authorized and unissued shares, treasury shares held by the
Company or shares issued and later acquired by the Company. If outstanding
Options granted under the Plan shall terminate or expire for any reason without
being wholly exercised prior to the end of the period during which Options may
be granted under the Plan, new Options may be granted covering the shares
subject to such terminated or expired unexercised Options.
4.2 Adjustments. In the event that the outstanding shares of Stock are
changed into or exchanged for a different number or kind of shares or other
securities of the Company or of another trust or corporation by reason of
merger, consolidation, reorganization, recapitalization, reclassification,
combination of shares, stock split, reverse stock split or stock dividend:
(a) The aggregate number and kind of securities as to which Options
may be granted under the Plan shall be adjusted appropriately by the
Committee; and
(b) The rights concerning both the number of shares subject to options
and the Option Price under outstanding Options granted under the Plan shall
be adjusted appropriately by the Committee.
Termination of the Company shall cause every Option outstanding under the
Plan to terminate to the extent not exercised prior to the adoption of the plan
of dissolution or liquidation by the shareholders, provided that all Options
granted under the Plan shall become exercisable immediately prior to such
liquidation notwithstanding the provisions of the respective Stock Option
Agreements regarding exercisability.
The foregoing adjustments and the manner of their application shall be
determined solely by the Committee, and any such adjustment may provide for the
elimination of fractional share interests, provided, however, that without the
consent of the Optionee no adjustment made by the Committee shall be made in a
manner that will cause an Incentive Stock Option held by such Optionee to be
treated as any type of option other than an Incentive Stock Option under the
applicable statutory and regulatory provisions. The adjustment required under
this Article shall apply to any successors of the Company and shall be made
regardless of the number or type or successive events requiring such
adjustments.
ARTICLE V
OPTIONS
5.1 Types of Options Granted. The Committee may grant either Incentive
Stock Options or options that do not qualify as Incentive Stock Options. Within
the limitations provided herein, both types of Options may be granted to the
same Key Employee at the same time, or at different times, under the same or
different terms and conditions.
5.2 Option Grant and Agreement. Each Option granted under this Plan shall
be evidenced as follows:
(a) by either minutes of a meeting of the Committee or a written
consent of the Committee, and
(b) unless waived by the Committee, by a written Stock Option
Agreement executed by the Company and the Optionee.
As to each grant under this Plan, the terms of the Option, including but
not limited to the Option's duration, time or times of exercise, and exercise
price, shall be stated in the Stock Option Agreement or incorporated in that
agreement by reference to the resolution or written consent of the Committee
which granted the Option.
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<PAGE> 25
5.3 Incentive Stock Option Limitation. The Committee shall not grant an
Incentive Stock Option to any person who, at the time the Incentive Stock Option
would be granted, (a) is not an employee of the Company or of any Parent or
Subsidiary of the Company; or (b) owns or is considered to own stock possessing
more than 10% of the total combined voting power or value of all classes of
stock of the Company, any Parent or any of its Subsidiaries; provided, however,
that this limitation shall not apply if at the time an Option is granted the
Option Price is at least 110% of the Fair Market Value of the Stock subject to
the Option and such Option by its terms would not be exercisable after five
years from its date of grant.
5.4 Individual Limitation. No person may receive Options in any calendar
year under this Plan with respect to more than 100,000 shares.
5.5 Option Price. The Option Price of the Stock subject to each Option
shall be determined by the Committee, but, shall not be less than the Fair
Market Value of the Stock as of the date the Option is granted.
5.6 Exercise Period. The period for the exercise of each Option shall be
determined by the Committee, but in no instance shall such period exceed ten
(10) years from its date of grant.
5.7 Option Exercise.
(a) Unless otherwise provided in the Stock Option Agreement, an Option
may be exercised at any time or from time to time during the term of the
Option as to any or all full shares which have become Purchasable under the
provisions of the Option, but not at any time as to less than 100 shares
unless the remaining shares that have become so Purchasable are less than
100 shares.
(b) An option shall be exercised by (i) delivery to the Company at its
principal office of written notice of exercise with respect to a specified
number of shares of Stock, and (ii) payment to the Company at that office
of the full amount of the Option Price for such number of shares.
(c) The Option Price is to be paid in full in cash or check acceptable
to the Company upon the exercise of the Option, except that all or any
portion of the Option Price may be paid by constructively tendering to the
Company shares of Stock owned by the Optionee for at least six months, to
be credited against the Option Price at the Fair Market Value of such
shares on the date of exercise, a "cashless broker" exercise through
procedures approved by the Company, or any combination of the foregoing;
provided however, that the Committee may provide in a Stock Option
Agreement (or may otherwise determine in its sole discretion at the time of
exercise with respect to a nonqualified option) that in lieu of the
foregoing, all or a portion of the Option Price may be paid by the
Optionee's execution of a recourse note equal to the Option Price or
relevant portion thereof, subject to compliance with applicable state and
federal laws, rules and regulations.
(d) In addition to and at the time of payment of the Option Price, the
Optionee shall pay to the Company in cash or, if the Optionee is subject to
Rule 16b-3, shares of Stock withheld from such exercise at the Fair Market
Value thereof on the date of exercise, the full amount of any withholding
or other taxes applicable to the taxable income of such Optionee resulting
from such exercise.
(e) The holder of an Option shall not have any of the rights of a
stockholder with respect to the shares of Stock subject to the Option until
such shares have been issued and transferred to him upon the exercise of
the Option.
5.8 Nontransferability of Option. Except as provided below, (i) no Option
shall be transferable by an Optionee otherwise than by will or the laws of
descent and distribution or pursuant to a qualified domestic relations order and
(ii) during the lifetime of an Optionee, Options shall be exercisable only by
such Optionee, or by such Optionee's guardian or legal representative if one has
been appointed. Notwithstanding the foregoing, the Committee may permit the
transfer of an Option that is not an Incentive Stock Option on such terms and
conditions as the Committee may impose.
5.9 Termination of Employment. The Committee shall have the power to
specify, with respect to the Options granted to particular Optionees, the effect
upon such Optionee's right to exercise an Option upon termination of such
Optionee's employment under various circumstances, which effect may include
immedi-
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<PAGE> 26
ate or deferred termination of such Optionee's rights under an Option, or
acceleration of the date at which an option may be exercised.
5.10 Employment Rights. Options granted under the Plan to any persons
shall not be affected by any change of employment so long as such person
continues to be a Key Employee or Director of the Company or any of its
Affiliates. Nothing in this Plan or in any Stock Option Agreement shall confer
on any person any right to continue in the employ of the Company or any of its
Affiliates, nor shall it interfere in any way with the right of the Company or
any of its Affiliates to terminate such person's employment at any time.
5.11 Certain Successor Options. To the extent not inconsistent with the
terms, limitations and conditions of Section 422 of the Code, and any
regulations promulgated with respect thereto, an Option issued to a Key Employee
in respect of an option held by such employee to acquire stock of any entity
acquired, by merger or otherwise, by the Company (or any Parent or Subsidiary of
the Company) may contain terms that differ from those stated in this Article V,
but solely to the extent necessary to preserve for any such employee the rights
and benefits contained in such predecessor option.
5.12 Waiver of Terms. To the extent not inconsistent with other provisions
of the Plan, the Committee may waive any term, provision or condition originally
included in a Stock Option Agreement for the benefit of the Company, including
but not limited to any term, provision or condition regarding the passage of
time before an Option becomes exercisable; provided, however, that if any such
waiver would cause any Incentive Stock Option no longer to be an Incentive Stock
Option, the Committee may not cause any such waiver without the prior consent of
the Optionee.
ARTICLE VI
STOCK CERTIFICATES
The Company shall not be required to issue or deliver any certificate for
shares of Stock purchased upon the exercise of any Option or any portion of an
Option granted under this Plan prior to fulfillment of all of the following
conditions:
(a) The admission of such shares to listing by the New York Stock
Exchange or on any stock exchanges on which the Stock is then listed, if
such admission is required by the rules of such stock exchange;
(b) The completion of any registration or other qualification of such
shares that shall be necessary or advisable under any federal or state law
or under the rulings or regulations of the Securities and Exchange
Commission or any other governmental regulatory body, unless under the
terms of the applicable Stock Option Agreement the Company has agreed to
issue, and the Optionee has agreed to accept, shares under such
circumstances that such offer and sale are exempt from such registration;
(c) The obtaining of any approval or other clearance from any federal
or state governmental agency or body which shall be necessary or advisable;
and
(d) The lapse of such reasonable period of time following the exercise
of the option as may be appropriate for reasons of administrative
convenience.
ARTICLE VII
TERMINATION, AMENDMENT AND MODIFICATION OF PLAN
The Board may at any time, notwithstanding Section 2.5 of the Plan,
terminate the Plan, and may at any time and from time to time and in any respect
amend or modify the Plan, provided, however, that the Board (unless its actions
are approved or ratified by the shareholders of the Company within twelve months
of the date the Board amends the Plan) may not amend the Plan to:
(a) Increase the total number of shares of stock subject to the Plan,
except as contemplated in Section 4.2; or
5
<PAGE> 27
(b) Change or modify the class of employees that may participate in
the Plan.
No termination, amendment or modification of this Plan shall adversely
affect any Option previously granted hereunder without the written consent of
the Optionee or his guardian, legal representative or legatee.
ARTICLE VIII
MISCELLANEOUS
8.1 Plan Binding on Successors. The Plan shall be binding upon the
successors and assigns of the Company.
8.2 Singular and Plural Forms; Gender of Pronouns. Whenever a noun in the
singular form is used in this document, it shall include the plural form, and
whenever a pronoun of masculine gender is used in this document, it shall
include the feminine gender.
8.3 Headings. The headings of the articles and sections of this document
are inserted for convenience of reference; they do not constitute part of this
Plan.
8.4 Unsecured Obligation. Optionees under this Plan shall not have any
interest in any fund or specific asset of the Company by reason of this Plan. No
trust fund shall be created in connection with this Plan or any Option
thereunder and there shall be no required funding of amounts which may become
payable to any Optionee.
8.5 Other Compensation Plans. The adoption of the Plan shall not affect
any other Option or incentive or other compensation plans, practices or
arrangements in effect for the Company or any Affiliate, nor shall the Plan
preclude the Company from establishing any other forms of incentive or other
compensation for employees of or persons retained by the Company or any
Affiliate.
8.6 Requirements of Law. The granting of Options and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
8.7 Governing Law. To the extent not preempted by laws of the United
States of America, the Plan, and all agreements hereunder, shall be construed in
accordance with and governed by the laws of the State of Texas.
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<PAGE> 28
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 15, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
AMERICAN REALTY TRUST, INC.
The undersigned hereby appoints THOMAS A. HOLLAND and ROBERT A. WALDMAN,
and each of them, Proxies, with full power of substitution in each of them, in
the name, place and stead of the undersigned, to be at the Annual Meeting of
Stockholders of AMERICAN REALTY TRUST, INC., to be held on Monday, December 15,
1997, at 2:00 p.m. (Dallas time), or at any adjournments thereof, according to
the number of votes that the undersigned would be entitled to vote if personally
present, upon the following matters:
THE BOARD OF DIRECTORS OF AMERICAN REALTY TRUST, INC. RECOMMENDS A VOTE FOR THE
NOMINEE AND FOR PROPOSALS TWO, THREE AND FOUR.
YOUR PROXY IS IMPORTANT. PLEASE INDICATE YOUR SUPPORT FOR THE BOARD OF DIRECTORS
BY MARKING THE BOXES FOR ELECTION OF THE CLASS III DIRECTOR AND FOR PROPOSALS
TWO, THREE AND FOUR. PLEASE SIGN, DATE AND MAIL THIS CARD TODAY IN THE ENCLOSED
ENVELOPE. IF NOT OTHERWISE MARKED ABOVE, YOUR PROXY WILL BE VOTED FOR THE
ELECTION OF THE CLASS III NOMINEE AND FOR PROPOSALS TWO, THREE AND FOUR. THIS
PROXY REVOKES ALL PREVIOUS PROXIES.
SEE REVERSE
SIDE
(continued and to be signed and dated on the other side)
================================================================================
- --------------------------------------------------------------------------------
[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE.
- --------------------------------------------------------------------------------
WITHHOLD
FOR AUTHORITY NOMINEE: Karl L. Blaha
1. ELECTION OF CLASS III [ ] [ ]
DIRECTOR:
For the nominee (except as marked to the contrary below)
- --------------------------------------------------------
Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name in the space below. When a proxy card is properly
executed and returned, the Shares represented thereby will be voted in favor
of the election of the nominee, unless authority to vote for such nominee is
specifically withheld. There will be no cumulative voting for the election of
Class III Directors. If the nominee is unable to serve or will not serve (an
event which is not anticipated), then the person acting pursuant to the
authority granted under the proxy will cast votes for such other persons(s)
as he or she may select in place of such nominees.
FOR AGAINST ABSTAIN
2. Proposal To Authorize An Amendment To The
Articles Of Incorporation To Increase The
Number Of Authorized Shares Of Common Stock: [ ] [ ] [ ]
3. Proposal To Amend The By-Laws To Remove The
Provision For The Division Of The Board Of
Directors Into Three Classes: [ ] [ ] [ ]
4. Proposal To Approve The 1997 Stock Option Plan: [ ] [ ] [ ]
5. Other Business:
I AUTHORIZE the aforementioned proxies in their
discretion to vote upon such other business as
may properly come before the Annual Meeting and
any adjournments thereof. [ ] [ ] [ ]
SIGNATURE DATE , 1997
------------------------------------------------ -----------
SIGNATURE (IF HELD JOINTLY) TITLE
-------------------------- ----------------------
Please sign exactly as name appears herein. 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. When signing for
corporation, please sign full corporate name by an authorized officer. When
signing for a partnership, please sign partnership name by an authorized
person. If shares are held in more than one capacity, this proxy shall be
deemed valid for all shares held in all capacities.
