<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
[X] Filed by Registrant.
[ ] Filed by 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 (S)240.14a-11(c) or (S)240.14a-12
AMERICAN REAL ESTATE INVESTMENT CORPORATION
(Name of Registrant as Specified in Its Charter)
NOT APPLICABLE
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3)
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 computer
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 Number:_________________
3) Filing Party:____________________________________________________
4) Date Filed:______________________________________________________
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
1670 Broadway - Suite 3350
Denver, Colorado 80202
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 7, 1997
Notice is hereby given that the Annual Meeting of Stockholders of
American Real Estate Investment Corporation (the "Company") will be held at The
Clubhouse, Americana Lakewood Apartments, 12598 West Dakota Avenue, Lakewood,
Colorado, on Wednesday, May 7, 1997 at 10:00AM local time for the following
purposes:
1. To re-elect one director of the Company for a term of three years
and until his successor is elected and qualified;
2. To consider and vote on a proposal to amend the Company's 1993
Omnibus Incentive Plan to increase the number of shares reserved
thereunder to 500,000;
3. To consider and vote on a proposal to amend the Company's 1994
Non-Employee Stock Option Plan to increase the number of shares
reserved thereunder to 300,000; and
4. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Information with respect to the above is set forth in the Proxy
Statement which accompanies this Notice. Only stockholders of record at the
close of business on March 7, 1997 are entitled to notice of and to vote at the
meeting.
We hope that all of our stockholders who can conveniently do so will
attend the meeting. Stockholders who do not expect to be able to attend the
meeting are requested to mark, date and sign the enclosed proxy and return the
same in the enclosed addressed envelope which requires no postage and is
intended for your convenience.
Dated: March 14, 1997 Rick A. Burger, Secretary
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
The enclosed proxy is solicited by the Board of Directors of American
Real Estate Investment Corporation (the "Company"), from the holders of shares
of Common Stock, $.001 par value, to be voted at the Annual Meeting of
Stockholders (the "Meeting") to be held at The Clubhouse, Americana Lakewood
Apartments, 12598 West Dakota Avenue, Lakewood, Colorado, on Wednesday, May 7,
1997 at 10:00 AM local time and at any adjournments thereof.
The only business which the Board of Directors intends to present or
knows that others will present at the Meeting is (i) the re-election of one
Director of the Company for a term of three years and until his successor has
been elected and qualified; (ii) to consider and vote on a proposal to amend the
Company's 1993 Omnibus Incentive Plan to increase the number of shares reserved
thereunder to 500,000; and (iii) to consider and vote on a proposal to amend the
Company's 1994 Non-Employee Stock Option Plan to increase the number of shares
reserved thereunder to 300,000. Management does not know of any other business
to be brought before the Meeting but it is intended that as to any other
business, a vote may be cast pursuant to the proxy in accordance with the
judgment of the person or persons acting thereunder. If proxies in the enclosed
form are properly executed and returned, the Common Stock represented thereby
will be voted at the Meeting in accordance with the stockholder's direction.
Unless otherwise specified, proxies in the enclosed form will be voted in favor
of the election of the nominee for Director, for the proposal to amend the 1993
Omnibus Incentive Plan and for the proposal to amend the 1994 Non-Employee Stock
Option Plan. Any stockholder giving a proxy has the power to revoke it at any
time before the proxy is voted by revoking it in writing, by executing a later
dated proxy or appearing at the Meeting and voting in person. Any writing
revoking a proxy should be addressed to Mr. Rick A. Burger, Secretary, at the
address set forth below.
The Director to be elected at the Meeting will be elected by a
plurality of the votes cast by the stockholders present in person or by proxy
and entitled to vote and each of the other matters to be submitted to a vote of
stockholders will require the favorable vote of a majority of the votes cast at
the meeting on the proposal. With regard to the election of Director, votes may
be cast for or withheld from the nominee. Votes that are withheld will have no
effect on the outcome of the election because the Director will be elected by a
plurality of votes cast.
<PAGE>
Abstentions may be specified on all proposals submitted to a
stockholder vote other than the election of Directors. Abstentions will be
counted as present for purposes of determining the existence of a quorum
regarding the proposal on which the abstention is noted. However, abstentions
on any of the Company's proposals will have no effect on the outcome of the vote
on such proposal.
Under the rules of the New York Stock Exchange, brokers who hold
shares in street name have the authority to vote on certain routine matters on
which they have not received instructions from beneficial owners. Brokers
holding shares of the Company's Common Stock in street name who do not receive
instructions are entitled to vote on the election of a Director. Under
applicable Maryland law, "broker non-votes" on any proposal (where a broker
submits a proxy but does not vote a customer's shares on such proposal) will be
considered not entitled to vote on that proposal and thus will not be counted in
determining the outcome of such vote. Likewise, where authority to vote for the
election of a Director is withheld by a stockholder, such shares will not be
counted in determining the outcome of such vote. Therefore, broker non-votes
with respect to the election of a Director and stockholders who mark their
proxies to withhold authority to vote their shares will have no effect on the
outcome of such proposal, although broker non-votes and proxies submitted where
the vote for the election of Director is withheld are counted in determining the
existence of a quorum.
Only stockholders of record as of the close of business on March 7,
1997 are entitled to notice of and to vote at the Meeting or any adjournments
thereof. On such date, the Company had outstanding voting securities
consisting of 1,121,630 shares of Common Stock, $.001 par value, each of which
shares is entitled to one vote.
The Company's principal executive office address is 1670 Broadway,
Suite 3350, Denver, Colorado 80202 and its telephone number is (303) 869-4700.
This Proxy Statement and the enclosed Form of Proxy will be mailed to the
Company's stockholders on or about March 14, 1997.
1. ELECTION OF A DIRECTOR
The By-Laws of the Company provide for a Board of Directors of no
fewer than three nor more than fifteen members, divided into three classes, with
the exact number to be fixed from time to time pursuant to a resolution adopted
by a majority of the Board of Directors. Pursuant to the foregoing, the Board
of Directors has been fixed at five persons consisting of three classes of
Directors. The three classes have staggered terms of office so that the term of
office of Directors of only one class expires at each
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<PAGE>
Annual Meeting of Stockholders and the Directors of that class are elected for
three year terms at such meeting. The term of office of one Director expires at
the 1997 Annual Meeting of Stockholders and therefore one Director will be
elected at the Meeting for a three year term expiring at the 2000 Annual Meeting
of Stockholders.
The Board of Directors has nominated Mr. J. Christopher O'Keeffe for
re-election as a Director. The election of a Director requires the affirmative
vote of the holders of a plurality of the votes cast by the stockholders present
in person or by proxy and entitled to vote, assuming a quorum is present.
Proxies will be voted, unless authority to vote is withheld by the
stockholder, for the election of Mr. O'Keefe to serve as a Director until the
2000 Annual Meeting of Stockholders and until the election and qualification of
his successor; provided, that if he shall be unable or shall fail to accept
reelection by virtue of an unexpected occurrence, proxies may be voted for such
other person as shall be determined by the holders of proxies in their
discretion.
NOMINEE AND DIRECTORS OF THE COMPANY
The following table provides certain information regarding the
nominee for election as a Director and the current Directors whose terms will
continue after the Meeting:
<TABLE>
<CAPTION>
YEAR FIRST POSITIONS HELD WITH
NAME ELECTED DIRECTOR AGE THE COMPANY
_________________________________________________________________________________
<S> <C> <C> <C>
NOMINEE FOR TERM OF THREE YEARS
EXPIRING IN 2000:
J. Christopher O'Keefe 1993 36 Director
DIRECTORS WHOSE TERMS EXPIRES IN
1998:
Michael Rotchford 1993 38 Director
Hord Hardin,III 1993 35 Director
DIRECTORS WHOSE TERM EXPIRES IN
1999:
James Mulvihill 1993 32 Chairman, Board of Directors
Evan Zucker 1993 31 President and Director
</TABLE>
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<PAGE>
Mr. Mulvihill is Chairman of the Board of the Company, a position he
has held since December 1993. Since November 1993, he has been Chief Executive
Manager of H and J Associates, LLC, consultants in real estate investments. He
is also currently a principal of Black Creek Capital, LLC. Prior to November
1993, he was, commencing in November 1992, Senior Vice President of Finance and
Acquisitions at Jerry J. Moore Investments, an owner and manager of shopping
centers in Texas. Previously, from January 1992 to November 1992, Mr. Mulvihill
was a Vice President of Chemical Bank's Real Estate Investment Banking Group,
where he managed the Real Estate Owned Distribution Group. From 1988 to January
1992, Mr. Mulvihill gained real estate underwriting, syndication and capital
markets experience as an officer of Manufacturers Hanover Trust Company's Real
Estate Banking and Investment Banking Groups. Mr. Mulvihill graduated from
Stanford University in 1989 with a B.A. in Political Science.
Mr. Zucker has been President of the Company since August 1993. From
its inception in 1990, he has been President of Alpine Real Estate Investments,
Inc., and subsequently of Black Creek Capital, LLC, both Denver-based real
estate investment firms. At Alpine and Black Creek Capital, LLC, Mr. Zucker's
responsibilities include acquisitions and financing of all real property
purchased by the firms. From 1988 to 1990 he served as General Partner in
charge of acquisition and finance for Zucker Properties, a local Denver real
estate investment firm. In 1985, Mr. Zucker traded on The New York Futures
Exchange for his own account. Mr. Zucker graduated from Stanford University in
1987 with a B.A. in Economics.
Mr. Rotchford has been President of The Saratoga Group, Inc. since its
inception in May 1990. The Saratoga Group, Inc., through its subsidiaries, is
engaged as a registered broker-dealer in securities and licensed real estate
broker specializing in asset oriented transactions. From 1984 to January 1991
Mr. Rotchford worked in the Investment Banking Division of Merrill Lynch Capital
Markets, most recently as a Director specializing in real estate, asset-based
and tax-oriented financings. Mr. Rotchford graduated from The State University
of New York at Albany.
Mr. Hardin is Vice President of Nooney Krombach, a commercial real
estate brokerage, management, research and consulting firm where he has been
employed since 1985. Mr. Hardin is active in the St. Louis commercial real
estate community, specializing in the sale of investment properties. Mr. Hardin
graduated from Stanford University with a degree in Industrial Engineering in
1984.
Mr. O'Keeffe has been a project manager for Wm. Blanchard Co. since
1987. Wm. Blanchard Co., located in Springfield, NJ, is a construction
management firm for large institutional and commercial clients, with a focus on
major expansion and
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<PAGE>
renovation projects for the health care industry. Prior to 1987, Mr. O'Keeffe
was employed with V.B.S. Building Corp., a single family resort home building
firm on Long Island, NY.
EXECUTIVE OFFICERS
The following table sets forth certain information regarding the
executive officers of the Company.
NAME AGE PRINCIPAL OCCUPATION
_________________________________________________________________
Evan Zucker 31 President and Director
Rick A. Burger 38 Treasurer
Messrs. Zucker and Burger will hold office until the next annual
meeting of the Board of Directors following the annual meeting of stockholders
unless previously removed by the Board of Directors.
The employment background of Mr. Zucker is described above.
Mr. Burger is a Certified Public Accountant and has been Treasurer and
Chief Financial Officer of the Company since its inception in November 1993.
Mr. Burger was employed performing specialized consulting services in finance,
audit and acquisitions from May 1992 to November 1993. Mr. Burger was
previously employed from 1984 to 1992 by The Maddox Interests, a private equity
syndication firm. From 1981 to 1984, Mr. Burger was employed by Arthur Andersen
& Co. as a senior auditor in the real estate and financial services division.
Mr. Burger graduated in 1981 from the University of Illinois with a B.S. in
Accounting.
DIRECTORS AND COMMITTEE MEETINGS
During 1996, the Directors held eight meetings. No Director attended
fewer than 75% of the meetings held.
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<PAGE>
Audit Committee. Messrs. Mulvihill, Rotchford and O'Keeffe have been
----------------
appointed as the Audit Committee of the Board of Directors. The Audit Committee
has been established to make recommendations concerning the engagement of
independent public accountants, review with the independent public accountants
the plans and result of the audit engagement, approve professional services
provided by the independent public accountants, review the independence of the
independent public accountants, consider the range of audit and non-audit fees
and review the adequacy of the Company's internal accounting controls. The
Audit Committee did not meet in 1996 and met on one occasion in 1997 through the
date of this Proxy Statement.
Executive Committee. Messrs. Zucker, Mulvihill and Hardin have been
--------------------
appointed as the Executive Committee of the Board of Directors. The Executive
Committee has the authority to acquire, dispose of and finance investments for
the Company and execute contracts and agreements, including those related to the
borrowing of money by the Company, and generally exercise all other powers of
the Directors except for those which require action by all Directors or the
independent Directors under the Certificate of Incorporation or Bylaws of the
Company or under applicable law. The Directors have not appointed either a
nominating or compensation committee. The Executive Committee did not meet in
1996.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth for the three years ended December 31,
1996 the compensation earned by or paid to the Company's chief executive
officer. No other executive officer of the Company received compensation
exceeding $100,000 in the fiscal year ended December 31, 1996.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
__________________________________ _______________________________
NAME AND OTHER ANNUAL AWARDS ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMP. ($) OPTIONS (#) COMP. ($)
________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Evan Zucker 1996 $75,000 $25,000 -0- 25,000 -0-
President & Director 1995 $75,000 $25,000 -0- 25,000 -0-
1994 - 0- $25,000 $45,000 - 0- -0-
</TABLE>
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<PAGE>
Mr. Zucker's compensation of $75,000 for the year ended December 31,
1996 was payable quarterly by issuance of shares of the Company's Common Stock
at their fair market value on the last trading date of the quarter with respect
to which payment was made. During the year, Mr. Zucker was issued an aggregate
of 9,005 shares pursuant to the foregoing arrangement.
OPTION GRANTS IN YEAR ENDED DECEMBER 31, 1996
The following table provides information with respect to the above
named executive officer regarding options granted to such person during the
Company's year ended December 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL INDIVIDUAL GRANTS
SECURITIES OPTIONS/ ___________________________________________________
UNDERLYING SARS/ SARS GRANTED TO EXERCISE OR
OPTIONS GRANTED EMPLOYEES IN BASE PRICE MARKET PRICE ON
NAME (#) FISCAL YEAR ($/SHARE) EXPIRATION DATE DATE OF GRANT
_____________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C>
Evan Zucker 25,000 71.4% $10.00 12/31/05 $8.50
</TABLE>
STOCK OPTION HOLDINGS
The following table provides information with respect to the above
named executive officer regarding Company options held at the end of the
Company's year ended December 31, 1996 (such officer did not exercise any
options during the fiscal year).
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED OPTIONS AT VALUE OF UNEXERCISED IN-THE-MONEY OPTIONS
DECEMBER 31, 1996 (#) AT DECEMBER 31,1996 ($)
____________________________________________ __________________________________________
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
______________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Evan Zucker 140,850 -0- (1) -0-
______________________
</TABLE>
(1) Based on the closing price of the Company's Common Stock on the American
Stock Exchange on December 31, 1996, the fair market value of the common stock
underlying these options was less than the exercise price.
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<PAGE>
COMPENSATION OF DIRECTORS
During the year ended December 31, 1996, Mr. Mulvihill was paid
compensation at the annual rate of $75,000 payable quarterly by issuance of
shares of the Company's Common Stock at their fair market value on the last
trading date of the quarter with respect to which payment was made. During the
year, Mr. Mulvihill was issued an aggregate of 9,005 shares pursuant to such
arrangement.
Each of Messrs. Rotchford, Hardin and O'Keefe received compensation at
the annual rate of $4,000 payable quarterly by issuance of shares of the
Company's Common Stock at their fair market value on the last trading date of
the quarter with respect to which payment was made. During the year each of
such persons was issued 480 shares of Common Stock.
The Company reimburses the Directors for travel expenses incurred in
connection with their activities on behalf of the Company.
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with each of
Messrs. Zucker and Burger expiring December 31, 1999. Pursuant to such
agreements, Mr. Zucker devotes such time to the Company as is required and Mr.
Burger devotes substantially all of his time to the Company. Pursuant to such
agreements, Mr. Zucker is paid a salary of $75,000 per year and Mr. Burger is
paid a salary of $85,000. Both persons are entitled to receive an incentive
cash bonus of $25,000 per annum upon achievement of annualized Funds From
Operations of $1,550,000, an additional cash bonus upon achievement of
annualized Funds From Operations in an amount specified and approved by the
Board of Directors, plus such bonuses and additional compensation as may be
determined by the Board of Directors from time to time. Both Messrs. Zucker and
Burger agreed in their employment agreements that they will not engage in any
further activities relating to the ownership and operation of multifamily
residential properties otherwise than through the Company. In the event of the
merger, consolidation or sale of the Company, or in the event 45% or more of the
voting power of the Company's outstanding securities is acquired by a person or
entity or affiliated group of persons or entities, Messrs. Zucker and Burger are
entitled to be paid a sum of money equal to twice their then current base
salary.
-8-
<PAGE>
CERTAIN TRANSACTIONS
On July 1, 1995, the Company entered into a sublease agreement with
Black Creek Capital, LLC, pursuant to which the Company leases its executive
offices. The sublease provides for a term expiring December 31, 1999 and an
annual rental of approximately $16,150. Messrs. Mulvihill and Zucker are
principals of Black Creek Capital, LLC. The subrental paid by the Company is at
the same rental per square foot as is paid by the sublandlord under the
principal lease. During the year ended December 31, 1996, the Company paid
rental of $16,155 pursuant to this lease.
2. AMENDMENT OF 1993 OMNIBUS INCENTIVE PLAN
----------------------------------------
The Company's 1993 Omnibus Incentive Plan (the "Omnibus Plan"),
provides for compensatory awards (each an "Award") representing or corresponding
to up to 250,000 shares of Common Stock of the Company. Awards may be granted
for no consideration and consist of stock options, stock awards, stock
appreciation rights ("SARs"), dividend equivalents, other stock-based awards
(such as phantom stock) and performance awards consisting of any combination of
the foregoing. The Omnibus Plan is designed to provide an incentive to the
officers and certain other key employees of the Company by making available to
them an opportunity to acquire a proprietary interest or to increase their
proprietary interest in the Company. Any Award issued under the Omnibus Plan
which is forfeited, expires or terminates prior to vesting or exercise will
again be available for Award under the Omnibus Plan.
As of December 31, 1996, options with respect to an aggregate of
82,000 shares of Common stock had been granted under the Omnibus Plan to the
Company's President and Treasurer, leaving 168,000 shares reserved under the
Omnibus Plan. Management of the Company believes it is prudent to increase the
number of shares reserved under the Plan so as to have shares available for the
grant of options to compensate existing officers and to attract persons to
become employed by the Company in an executive officer capacity in the future.
Management has no present plans to grant any additional options under the
Omnibus Plan.
The Directors or a Compensation Committee of the Board of Directors
administers the Omnibus Plan. The Directors or, if appointed, Compensation
Committee has the full power and authority, subject to the provisions of the
Omnibus Plan, to designate participants, grant Awards and determine the terms of
all Awards. The Directors or, if appointed, Compensation Committee has the
right to make adjustments with respect to Awards granted under the Omnibus Plan
in order to
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<PAGE>
prevent dilution of the rights of any holder. Members of the Compensation
Committee, if appointed, are not eligible to receive Awards under the Omnibus
Plan.
Stock Awards. The Directors or, if appointed, Compensation Committee
has the right to grant Awards of shares of Common Stock which are subject to
such restrictions (including restrictions on transferability and limitations on
the right to vote or receive dividends with respect to the restricted shares)
and such terms regarding the lapse of restrictions as are deemed appropriate.
Generally, upon termination of employment for any reason during the restriction
period, restricted shares shall be forfeited to the Company.
SARs. An Award may consist of SARs. Upon exercising a SAR, the
holder will be paid by the Company an amount in cash equal to the difference
between the fair market value of the shares of Common Stock on the date of
exercise, and the fair market value of the shares of Common Stock on the date of
the grant of the SAR, less applicable withholding of Federal and State taxes.
In no event may (i) an aggregate payment by the Company during any fiscal year
upon the exercise of SARs exceed $250,000 without board approval, or (ii) a
holder of a SAR, who is also an employee of the Company, exercise an SAR if the
aggregate amount to be received as a result of his or her exercise of SARs in
the preceding twelve month period exceeds such employee's current base salary.
Options Issued Under Omnibus Plan. The terms of specific options are
determined by the Directors or, if appointed, Compensation Committee. Options
may be granted at an exercise price equal to 100% of fair market value of the
shares of Common Stock on the date of grant. Each option will be exercisable
after the period or periods specified in the option agreement, which will
generally not exceed 10 years from the date of grant. Options may be issued in
tandem with SARs ("Tandem Options") as a performance award.
Shares of Common Stock received upon exercise of options are not
transferable for a period six months following exercise (other than in the case
of death). In the event the employment of an optionee is terminated during such
period (other than in the case of death or disability), the Company has the
right to repurchase such shares during such six month period in exchange for the
payment of any amount equal to the exercise price. Upon the exercise of an
option, the option holder is to pay the Company the exercise price plus the
amount of the required Federal and State withholding taxes, if any. The
unexercised portion of any option granted under the Omnibus Plan will generally
be terminated (a) thirty (30) days after the date on which the optionee's
employment is terminated for any reason other than (i) Cause (as defined in the
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<PAGE>
Omnibus Plan), (ii) mental or physical disability, or (iii) death; (b)
immediately upon the termination of the optionee's employment for Cause;(c)
three months after the date on which the optionee's employment is terminated by
reason of retirement or mental or physical disability; or (d)(i) 12 months after
the date on which the optionee's employment is terminated by reason of the death
of the employee, or (ii) three months after the date on which the optionee shall
die if such death shall occur during the three-month period following the
termination of the optionee's employment by reason of retirement or mental or
physical disability.
Performance Awards Consisting of Options and SARs Issued in Tandem
Under Omnibus Plan. Upon exercise of a Tandem Option, the optionee will be
entitled to a credit toward the exercise price equal to the value of the SARs
issued in tandem with the option exercised, but not to exceed the amount of the
Federal income tax deduction allowed to the Company in respect of such SAR and
not in an amount which would reduce the amount of payment by the optionee below
the par value of the shares being purchased. Upon exercise of a Tandem Option,
the related SAR shall terminate, the value being limited to the credit which can
be applied only toward the purchase price of shares of Common Stock. In all
cases, full payment of the net purchase price of the shares must be made in cash
or its equivalent at the time the Tandem Option is exercised, together with the
amount of the required Federal and State withholding taxes, if any. When a SAR
issued as part of a Tandem Option is exercised, the option to which it relates
will cease to be exercisable to the extent of the number of shares with respect
to which the SAR was exercised, and that number of shares will thereafter be
available for issuance as an Award under the Omnibus Plan.
Other Performance Awards Issued Under the Omnibus Plan. The Omnibus
Plan authorizes the Directors or, if appointed, Compensation Committee to grant,
to the extent permitted under Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934 and applicable
law, other Awards that are denominated or payable in, valued by reference to, or
otherwise based on or related to shares of Common Stock of the Company.
Furthermore, the amount or terms of an Award may be related to the performance
of the Company or to such other criteria or measure of performance as the
Directors or, if appointed, Compensation Committee may determine.
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<PAGE>
3. AMENDMENT OF 1994 NON-EMPLOYEE STOCK OPTION PLAN
------------------------------------------------
In June 1995, the Company's stockholders approved the adoption of the
1994 Non-Employee Stock Option Plan (the "Non-Employee Plan"). The Non-Employee
Plan provides a means by which non-employee directors of the Company and
consultants to the Company can be given an opportunity to purchase stock in the
Company, thus assisting the Company to retain the services of non-employee
directors and consultants, to secure and retain the services of persons capable
of serving in such positions and to provide incentives for such persons to exert
maximum efforts for the success of the Company. The stock options granted under
the Non-Employee Plan are not eligible for the tax treatment accorded "incentive
stock options" under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code").
The Non-Employee Plan as adopted provides that a total of 150,000
shares of the Company's Common Stock may be issued pursuant to options granted
under the Non-Employee Plan, subject to certain adjustments described below. As
of December 31, 1996, options to purchase 104,000 shares had been granted under
the Non-Employee Plan all of which had been granted to Directors of the Company.
The exercise price of all such options is $10 per share of Common Stock issuable
on exercise. If options granted under the Non-Employee Plan expire or otherwise
terminate without being exercised in full, the stock not purchased pursuant to
such options again becomes available for issuance pursuant to exercises of
options granted under the Non-Employee Plan.
The exercise price for each option granted under the Non-Employee Plan
is not less than the fair market value of the Common Stock underlying the option
on the date of grant. The purchase price of stock acquired pursuant to options
granted under the Non-Employee Plan must be paid either: (i) in cash, (ii) by
delivery to the Company of other Common Stock of the Company that has been held
for the requisite period necessary to avoid a charge to the Company's reported
earnings and valued at the fair market value on the date of exercise or (iii) by
a combination of such methods of payment.
Each option granted under the Non-Employee Plan becomes exercisable
upon the date of grant, provided that as of each vesting date and during the
exercise period the option holder remains a director, employee or consultant to
the Company. The term of each option granted under the Non-Employee Plan is 10
years after the date of grant.
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<PAGE>
Options granted under the Non-Employee Plan may not be transferred
except by will or by the laws of descent and distribution, and may be exercised
during the lifetime of the person to whom the option is granted only by such
person.
The Non-Employee Plan provides that, if there is any change in the
stock subject to the Plan or subject to any option granted under the Non-
Employee Plan (through merger, consolidation, reorganization, recapitalization,
stock dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure, or otherwise), then the Non-Employee Plan and options outstanding
thereunder will be appropriately adjusted as to the class(es) and the maximum
number of shares subject to the Non-Employee Plan, and the class(es), number of
shares and price per share of stock subject to such outstanding options.
The Non Employee Plan provides that, in the event of a dissolution or
liquidation of the Company, specified type of merger or other corporate
reorganization, any outstanding options under the Non-Employee Plan will
terminate unless the Board of Directors determines in its sole discretion that:
(i) another corporation will assume such options or substitute similar options
therefor; or (ii) such options will continue in full force and effect.
The Non-Employee Plan is administered by the Board of Directors of the
Company. The Board has the power to construe and interpret the Non-Employee
Plan. The Board of Directors may delegate administration of the Non-Employee
Plan to a committee composed of not fewer than three members of the Board. The
Board may abolish any such committee at any time and revest in the Board the
administration of the Non-Employee Plan.
The Board may suspend or terminate the Non-Employee Plan without
stockholder approval or ratification at any time or from time to time. Unless
sooner terminated, the Non-Employee Plan will terminate in August 2004.
The Board may also amend the Non-Employee Plan at any time or from
time to time. However, no amendment will be effective unless approved by the
stockholders of the Company within twelve months before or after its adoption by
the Board if the amendment would: (i) increase the number of shares reserved for
issuance under the Non-Employee Plan; or (ii) modify the requirements as to
eligibility for participation in the Non-Employee Plan, to the extent that such
modification requires stockholder approval under Rule 16b-3; or (iii) modify the
Non-Employee Plan in any other way to the extent that such modification requires
stockholder approval under Rule 16b-3.
-13-
<PAGE>
PRINCIPAL AND OTHER STOCKHOLDERS
The following table sets forth, as of March 7, 1996, information with
respect to each person (including any "group" as that term is used in Section
13(d)(3) of the Securities Exchange Act of 1934) who is known to the Company to
be the beneficial owner of more than five percent of the Company's Common Stock
as well as shares of Common Stock beneficially owned by all Directors of the
Company and all Directors and executive officers of the Company as a group. The
table also includes shares issuable, as of March 7, 1997, on conversion by such
persons of their limited partnership interests in American Real Estate
Investment, L.P. (the "Operating Partnership"), a Delaware limited partnership
in which the Company currently owns a 58.61% interest. These limited
partnership interests are convertible into shares of Common Stock. See
"Conversion Right" below. As of March 7, 1997, the Company had 1,121,630 shares
of Common Stock outstanding, excluding shares reserved for issuance upon
conversion of the interests in the Operating Partnership and other outstanding
options and warrants.
<TABLE>
<CAPTION>
PERCENTAGE OF
NAME AND ADDRESS OF NUMBER OWNERSHIP OF
BENEFICIAL OF OPERATING
HOLDER OR IDENTITY OF GROUP SHARES /(1)/ PERCENT OF CLASS PARTNERSHIP
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Evan Zucker 187,828 /(2)/ 7.8% 1.6%
1670 Broadway - Suite 3350
Denver, CO 80202
Rick A. Burger 37,500 /(3)/ 1.6% ---
1670 Broadway - Suite 3350
Denver, CO 80202
James Mulvihill 240,324 /(4)/ 10.0% 4.6% /(4)/
5700 Piedmont
Cherry Hills Village, CO
80111
Michael Rotchford 25,433 /(5) (6)/ 1.1% 0.4%
c/o Saratoga Group
245 Park Avenue - 34/th/
Floor New York, NY 10167
</TABLE>
-14-
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF
OWNERSHIP OF
NAME AND ADDRESS OF BENEFICIAL OPERATING
HOLDER OR IDENTITY OF GROUP NUMBER OF SHARES /(1)/ PERCENT OF CLASS PARTNERSHIP
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Hord Hardin, III 23,672 /(6)/ 1.0% 0.3%
c/o Nooney Krombach
7701 Forsyth - 7/th/ Floor
St. Louis, MO 63105
J. Christopher O'Keeffe 18,998 /(6)/ 0.8% ---
39 North Star Drive
Morristown, NJ 07960
Rosalind Davidowitz 379,979 /(7) (8)/ 15.9% 11.8%
44 Wall Street
New York, NY 10005
Gail Mulvihill 173,531 /(7) (9)/ 7.2% 10.0%
Fox Hunt Road
New Vernon, NJ 07976
All Officers and Directors 533,755 /(10)/ 22.3% 6.9%
as a group
</TABLE>
- ---------------------------
(1) Includes shares issuable on exercise of the Conversion Right described
below.
(2) Includes 140,850 shares of Common Stock issuable upon exercise of a ten-
year option held by Mr. Zucker.
(3) Includes 37,000 shares of Common Stock issuable upon exercise of options
held by Mr. Burger.
(4) Includes 140,850 shares of Common Stock issuable upon exercise of a ten-
year option held by Mr. Mulvihill. Also includes 70,122 shares held by
Mr. Mulvihill's wife, as to which Mr. Mulvihill disclaims any beneficial
interest. Mr. Mulvihill is the son of Mrs. Gail Mulvihill.
(5) Includes 6,335 shares of Common Stock held by a family trust of which Mr.
Rotchford is a trustee and beneficiary and shares with another trustee
the power to vote and dispose of the shares.
(6) Includes 18,000 shares issuable on exercise of an option at an exercise
price of $10 per share.
(7) Also includes a portion of 18,327 shares of Common Stock held by a
corporation in which such person is a principal shareholder.
(8) Includes 175,000 shares of Common Stock issuable on exercise of a stock
purchase warrant at an exercise price of $10 per share.
(9) Mrs. Gail Mulvihill is the mother of Mr. James Mulvihill. Each of such
persons disclaims beneficial interest in the shares held by the other.
(10) Includes 372,700 shares of Common Stock issuable upon exercise of the
options held by Messrs. Zucker, Burger, Mulvihill, Rotchford, Hardin and
O'Keefe described above as well as the shares held by Mr. Mulvihill's
wife.
-15-
<PAGE>
CONVERSION RIGHT
Each of the limited partners of the Operating Partnership have the
right commencing November 10, 1994 to convert their limited partnership
interests in the Operating Partnership into shares of Common Stock of the
Company (the "Conversion Right"), provided the shares then issuable on exercise
of the Conversion Right are the subject of an effective registration statement
under the Securities Act of 1933, as amended. The Conversion Right enabled the
limited partners of the Operating Partnership to convert their partnership
interests into a maximum aggregate of 42.42% of the shares of Common Stock of
the Company outstanding as of November 10, 1993, the date of the initial public
offering and 41.39% of the shares of Common Stock of the Company outstanding as
of December 31, 1996. Such number of shares of Common Stock issuable upon
conversion of the partnership interests is subject to reduction to reflect cash
distributions to the limited partners in excess of net income of the Operating
Partnership allocated to the limited partners.
The purchase price ("Purchase Price") payable upon exercise of the
Conversion Right is the fair market value of the partnership interests with
respect to which the Conversion Right was exercised (the "Offered Interests")
computed as of the date on which such Conversion Right is exercised. The amount
of Common Stock received upon exercise of the Conversion Right is based upon the
trading price of the Company's Common Stock at the time of exercise. The
Purchase Price for the Offered Interests is payable by the Company's issuance of
the number of shares of Common Stock having a market value at the time of
exercise equal to the Purchase Price. Limited partners may exercise their
Conversion Right only once during each calendar quarter period. Exercise of the
Conversion Right is also conditioned upon compliance with applicable state
securities laws.
To the extent distributions of net operating cash flow to the limited
partners exceed their allocable portion of net income of the Operating
Partnership, the capital accounts of the limited partners will be reduced. See
Note 2 of Notes to the Consolidated Financial Statements of the Company. An
amount equal to this reduction will be deducted from the Purchase Price payable
upon exercise of the Conversion Right, until such time, if ever, that the
limited partner's capital account is restored out of allocations of net income
of the Operating Partnership. Accordingly, the result of the foregoing may be to
reduce the number of shares received by a limited partner of the Operating
Partnership upon exercise of the Conversion Right.
The allocations of Net Income and the distribution of net operating
cash flow by the Operating Partnership to the Company will be adjusted, pro
rata, to reflect any
-16-
<PAGE>
exercises of a Conversion Right. As and to the extent the Conversion Right is
exercised and shares of Common Stock of the Company are issued pursuant thereto,
allocations and distributions to the Company will be increased and allocations
and distributions to the limited partners of the Operating Partnership will be
reduced.
The Conversion Right will expire on November 10, 1998 if not exercised
or extended prior to that date.
CERTIFYING ACCOUNTANT
The Board of Directors has selected Arthur Andersen LLP as the
Company's independent auditors for 1997. The Company expects a representative
of Arthur Andersen LLP to be present at the Meeting and to be available to
respond to appropriate questions or make a statement if they desire to do so.
SUBMISSION OF SHAREHOLDERS PROPOSALS
FOR 1998 ANNUAL MEETING
Any proposals which shareholders intend to present for a vote of
shareholders at the Company's 1998 Annual Meeting and which such shareholders
desire to have included in the Company's proxy statement and form of proxy
relating to that meeting must be sent to the Company's executive office and
received by the Company not later than November 14, 1997.
-17-
<PAGE>
GENERAL
The cost of soliciting proxies will be borne by the Company. In
addition to solicitation by use of the mails, certain officers and regular
employees may solicit proxies personally and by telephone and the Company will
request banks, brokerage houses and nominees and fiduciaries to forward
soliciting material to their principals and will reimburse them for their
reasonable out-of-pocket expenses.
The Company's Annual Report to Stockholders for the year ended
December 31, 1996, including financial statements, is being mailed to
stockholders herewith.
By Order of the Board of Directors
Rick A. Burger, Secretary
Dated: March 14, 1997
-18-
<PAGE>
APPENDIX: FORM OF PROXY
AMERICAN REAL ESTATE INVESTMENT CORPORATION
1670 Broadway - Suite 3350
Denver, Colorado 80202
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Mr. James Mulvihill and Mr. Evan Zucker,
and each of them, as proxies, each with the power to appoint his substitute, and
hereby authorizes them to represent and vote, as designated below, all the
shares of common stock of American Real Estate Investment Corporation held of
record by the undersigned on March 7, 1997 at the annual meeting of shareholders
to be held on May 7, 1997 or any adjournment thereof.
1. Election of Director
[ ] For all nominees listed below (except as marked to contrary
below)
[ ] Withhold Authority to vote for the nominee listed below:
J. Christopher O'Keeffe
2. In Favor Of [ ] Against [ ] Abstain [ ]
A proposal to amend the Company's 1993 Omnibus Incentive Plan to
increase the number of shares reserved thereunder to 500,000.
3. In Favor Of [ ] Against [ ] Abstain [ ]
A proposal to amend the Company's 1994 Non-Employee Stock Option Plan
to increase the number of shares reserved thereunder to 300,000.
4. In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting.
<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY
THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR EACH OF THE PROPOSALS.
PLEASE SIGN EXACTLY AS NAME APPEARS BELOW. PLEASE MARK, SIGN, DATE AND
RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
WHEN SHARES ARE HELD BY JOINT TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS
ATTORNEY, AS EXECUTOR, ADMINISTRATOR, TRUSTEE, OR GUARDIAN, PLEASE GIVE FULL
TITLE AS SUCH. IF A CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY
PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN
PARTNERSHIP NAME BY AUTHORIZED PERSON.
Dated: _______________, 1997 _____________________________________
Signature
Title (if required)
_____________________________________
Signature (if held jointly)
-2-
