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
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 Rule 14a-11(c) or Rule 14a-12
American Real Estate Investment Corporation
(Name of Registrant as Specified in Its Charter)
Payment of filing fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
620 West Germantown Pike, Suite 200
Plymouth Meeting, PA 19462
(610) 834-7950
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on December 11, 1998
To our Stockholders:
We invite you to attend our 1998 Annual Meeting of Stockholders at
10:00 a.m., local time, on December 11, 1998, at [ , New York, NY ]. At the
meeting, our stockholders will vote on the following proposals, together with
any other business that may properly come before the meeting:
1. To approve the issuance of shares of our common stock upon
conversion of up to 1,362,940 units of limited partnership
interest ("OP Units") of our operating partnership, American
Real Estate Investment, L.P. (the "Operating Partnership"), by
the holders of such OP Units who obtained such OP Units
pursuant to two contribution agreements, each dated as of
February 4, 1998 between the Operating Partnership and the
parties listed on the signature pages thereto.
2. To approve the issuance of shares of our common stock upon
conversion of up to approximately 1,992,514 OP Units by the
holders of such OP Units who obtained, or may obtain, such OP
Units pursuant to the contribution agreement, dated as of
April 30, 1998 between the Company, the Operating Partnership
and the parties listed on the signature pages thereto.
3. To elect two Class I directors to serve until the Annual
Meeting of Stockholders to be held in 2001 and until their
successors are duly elected and qualified.
4. To approve a proposal to amend and restate our 1993
Omnibus Incentive Plan.
5. To transact other business which properly comes before the
annual meeting.
The Board of Directors has fixed the close of business on October 30,
1998 as the record date for the meeting. Only stockholders of record as of that
date are entitled to notice of and to vote at the meeting and any adjournment or
postponement thereof.
All stockholders are cordially invited to attend the meeting in person.
However, whether or not you plan to attend, please promptly sign, date and mail
the enclosed proxy card in the enclosed return envelope, which requires no
postage if mailed in the United States. Returning your proxy card does not
deprive you of your right to attend the meeting and vote your shares in person.
The proposals and other information relating to the annual meeting are described
in detail in the accompanying Proxy Statement.
By order of the Board of Directors,
Plymouth Meeting, PA David F. McBride
November 16, 1998 Secretary
<PAGE>
AMERICAN REAL ESTATE INVESTMENT CORPORATION
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
To Be Held on December 11, 1998
This Proxy Statement contains information related to the solicitation
of proxies for use at the 1998 Annual Meeting of Stockholders (the "Meeting") of
American Real Estate Investment Corporation, a Maryland corporation (the
"Company"), to be held at [ New York, NY ] on Tuesday, December 11, 1998, at
10:00 a.m. local time, and at any adjournment or postponement of the Meeting,
for the purposes set forth in the accompanying Notice of Annual Meeting of
Stockholders and more fully described herein. This solicitation is made on
behalf of the Board of Directors of the Company (the "Board"). This Proxy
Statement, the foregoing notice, the enclosed form of proxy and the 1997 Annual
Report to Stockholders are first being mailed to our stockholders beginning on
or about November 16, 1998. The principal executive offices of the Company are
located at 620 West Germantown Pike, Suite 200, Plymouth Meeting, PA 19462.
Stockholders Entitled to Vote
The Board has fixed the close of business on October 30, 1998 as the
record date (the "Record Date") for the Meeting. Only holders of shares of
common stock, par value $0.001 per share, of the Company (the "Common Stock") on
the close of business on the Record Date are entitled to notice of and to vote
at the Meeting. The Common Stock is the only class of voting stock of the
Company currently issued and outstanding and entitled to vote at the Meeting. On
the Record Date, there were 7,354,523 shares of Common Stock outstanding and
entitled to vote at the Meeting. Each holder of Common Stock on the Record Date
is entitled to cast one vote per share at the Meeting on each matter properly
brought before the meeting, exercisable in person or by properly executed proxy.
Quorum
The presence of the holders of a majority of the outstanding shares of
Common Stock entitled to vote at the Meeting, in person or by properly executed
proxy, is necessary to constitute a quorum. A quorum is necessary for any action
to be taken at the Meeting. Shares of Common Stock represented at the Meeting in
person or by properly executed proxy but not voted will be included in the
calculation of the number of shares considered to be present at the Meeting for
purposes of determining the presence of a quorum.
Votes Required for Approval
For the election of directors, assuming a quorum is present, the two
nominees receiving the highest number of votes cast at the Meeting will be
elected. There is no cumulative voting in the election of directors. The
affirmative vote of a majority of the shares of Common Stock present, in person
or by proxy, and entitled to vote at the Meeting shall be required to approve
the other matters to be submitted to a vote of the stockholders.
<PAGE>
Proxies
All shares of Common Stock represented by properly executed proxies
received prior to or at the Meeting and not revoked will be voted in accordance
with the instructions indicated in such proxies. If no instructions are given on
a properly returned proxy, your proxy will be voted FOR the issuance of Common
Stock, as provided in Proposal 1 below; FOR the issuance of Common Stock, as
provided in Proposal 2 below; FOR the election of the two nominees for director,
as provided in Proposal 3 below; FOR the amendment of the 1993 Omnibus Incentive
Plan, as provided in Proposal 4 below; and, to the extent permitted by
applicable rules of the Securities and Exchange Commission, in accordance with
the judgment of the persons voting the proxies upon such other matters as may
come before the Meeting and any adjournment or postponement thereof.
If a proxy is marked "withhold authority" or "abstain" on any matter,
or if specific instructions are given that no vote be cast on any specific
matter (a "Specified Non-Vote"), the shares represented by such proxy will not
be voted on such matter. Except as otherwise stated, all matters submitted to a
vote at the meeting will de decided by the vote of a majority of all votes cast
in person or by proxy at the Meeting. Abstentions will be treated as shares
present and entitled to vote for purposes of determining the presence of a
quorum but will not be considered as votes cast in determining whether a matter
has been approved by the stockholders. If a broker or other record holder or
nominee indicates on a proxy that it does not have authority as to certain
shares to vote on a particular matter, those shares will not be considered as
votes cast in determining whether a matter has been approved by the
stockholders. Directors will be elected by a plurality of the votes cast in
person or by proxy at the Meeting, and, as a result, nether abstentions nor
Specified Non-Votes will affect the outcome of the election of directors
(Proposal 3).
Stockholders may revoke their proxies at any time prior to its use by
delivering written notice to the Secretary of the Company at the offices of the
Company set forth above, by presenting a duly executed proxy bearing a later
date or by voting in person at the Meeting, but mere attendance at the Meeting
will not revoke a proxy.
Other Business; Adjournments
The Board is not currently aware of any business to be acted upon at
the Meeting other than as described herein. If other matters are properly
brought before the Meeting, or any adjournment or postponement thereof, the
persons appointed as proxies will, to the extent permitted by applicable rules
of the Securities and Exchange Commission, have discretion to vote or act
thereon according to their best judgment. Adjournments may be made for the
purpose of, among other things, soliciting additional proxies. Any adjournment
may be made from time to time by approval of the holders of a majority of the
shares present in person or by proxy at the Meeting (whether or not a quorum
exists) without further notice other than by an announcement made at the
Meeting. The Company does not currently intend to seek an adjournment of the
Meeting.
PROPOSAL 1 -- ISSUANCE OF COMMON STOCK (Galesi Transaction)
On April 30, 1998, the Company, through the Company's operating
partnership, American Real Estate Investment, L.P. (the "Operating
Partnership"), acquired a ten building portfolio of office and industrial
facilities in Albany, New York (collectively, the "Galesi Portfolio") containing
an aggregate of approximately 787,148 square feet. The Operating Partnership
acquired the Galesi Portfolio pursuant to two contribution agreements, each
dated as of February 4, 1998, between the Operating Partnership and the other
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<PAGE>
parties listed on the signature pages thereto (the "Galesi Contribution
Agreements"). As of April 30, 1998, the properties comprising the Galesi
Portfolio were approximately 99.8% leased to 42 tenants. Prudential
Insurance, Moran Foods and Ameriserve Food Distribution each individually
occupies more than 10% of the total net rentable area of the Galesi Portfolio.
The purchase price of the Galesi Portfolio of approximately $58 million
was funded through the assumption of approximately $18.0 million in debt, $18.5
million from our senior secured revolving credit facility (the "Credit
Facility") and the issuance of 1,362,940 units of limited partnership interest
("OP Units") in the Operating Partnership. The 1,362,940 OP Units are referred
to herein as the "Galesi OP Units."
Prior to the transaction, the seller of the Galesi Portfolio, the
Galesi Group and its affiliates (including Francesco Galesi, a director
nominee), was not affiliated with the Company or the Operating Partnership. The
Company based its determination of the purchase price of the Galesi Portfolio on
the expected cash flow, physical condition, location, competitive advantages,
existing tenancies and opportunities to retain and attract additional tenants.
The purchase price was determined through an arm's length negotiation between
the Company and the seller. Francesco Galesi became a director of the Company on
May 5, 1998, as provided for in the Galesi Contribution Agreements.
Pursuant to the Operating Partnership's partnership agreement, as
amended from time to time (the "Partnership Agreement"), holders of OP Units may
exercise their right (the "Conversion Right") to convert their OP Units to
shares of Common Stock or, at the Company's option, the cash equivalent thereof.
Currently, if the Company chose to deliver shares of Common Stock upon the
exercise of the Conversion Right, one share for each OP Unit would be delivered.
However, if a stock split, combination or other extraordinary event involving
the Common Stock were to occur, the number of shares of Common Stock delivered
upon exercise of the Conversion Right would be adjusted so that the holder of
the OP Units would receive the same number of shares of Common Stock that such
holder would have received had the holder exercised its Conversion Right prior
to such extraordinary event, as adjusted by such extraordinary event. Therefore,
if the holders of all of the Galesi OP Units were to exercise their Conversion
Right, and if the Company chose to deliver shares instead of cash, such holders
would currently receive 1,362,940 shares of Common Stock. Such number could be
higher or lower in the future if an extraordinary event as described above were
to occur.
The rules of the American Stock Exchange, upon which the Common Stock
is listed for trading, require stockholder approval for the issuance of common
stock (or securities convertible into common stock) equal to 20% or more of the
then outstanding common stock for less than the greater of book or market value
of the common stock. The Galesi OP Units were issued at an agreed upon value of
$16.50. At the time the Galesi OP Units were issued, the market value (based on
the prior day's closing price of the Common Stock) of the Common Stock was
$19.00 and the Galesi OP Units equalled approximately 24.9% of the then
outstanding shares of Common Stock. Pursuant to the Galesi Contribution
Agreements, the Conversion Right may not be exercised by the holders of the
Galesi OP Units until one year from the issuance of the Galesi OP Units. In
addition, until stockholder approval is obtained, no more than 1,088,905 of the
Galesi OP Units may be converted to Common Stock (such number represents 19.9%
of the outstanding shares of Common Stock at the time the Galesi OP Units were
issued). Pursuant to the Galesi Contribution Agreements, we agreed to seek to
obtain such stockholder approval so that all of the Galesi OP Units may be
converted into shares of Common Stock in the future.
The Board recommends a vote FOR approval of the issuance of shares of
Common Stock upon the exercise of the Conversion Right by the holders of the
Galesi OP Units. Proxies solicited by the Board will be so voted in the absence
of instructions to the contrary.
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<PAGE>
PROPOSAL 2 -- ISSUANCE OF COMMON STOCK (Pioneer Transaction)
Pursuant to a contribution agreement, dated as of April 30, 1998
between the Company, the Operating Partnership and the parties listed on the
signature pages thereto (the "Pioneer Contribution Agreement"), on August 19,
1998, the Company, through the Operating Partnership, acquired a portfolio of 11
office properties and one industrial property (the "Pioneer Portfolio") located
in Northern New York State containing approximately 801,720 leasable square
feet. As part of this transaction, the Company and the Operating Partnership
have also agreed to acquire three additional office properties (One Park Place,
Waterfront I and Waterfront II) which aggregate an additional 530,636 square
feet. The closing of the acquisitions of One Park Place and Waterfront I are
anticipated to occur in 1999. Waterfront II is to be acquired upon the
completion of its construction, which is also anticipated to occur in 1999. We
also have the option to acquire two additional properties located in Rochester,
New York containing approximately 350,000 leasable square feet. As of June 30,
1998, the Pioneer Portfolio was leased to 67 tenants. Niagara Mohawk, Inc.
occupies more than 10% of the total leasable area of the Pioneer Portfolio.
The purchase price of the Pioneer Portfolio, including closing costs,
was approximately $87.6 million and was funded through the assumption of
approximately $5.5 million in debt, $51.0 million from the Credit Facility, the
issuance of 1,170,893 OP Units (the "Initial Pioneer Units") and the issuance of
720,743 shares of Common Stock for an aggregate purchase price of $11.4 million
to the New York State Common Retirement Fund as a partial repayment of certain
indebtedness encumbering certain properties in the Pioneer Portfolio. The
aggregate purchase price for One Park Place, Waterfront I and Waterfront II is
approximately $43.8 million, which would be funded through the assumption of
approximately $10.7 million in debt, $26.6 million in cash and the issuance of
391,451 OP Units (the "Additional Pioneer Units"). If we exercise our option,
the purchase price for the two option properties is approximately $30.2 million,
which would be funded through $23.4 million in cash and the issuance of
approximately 412,131 OP Units (the "Option Pioneer Units"). The Initial Pioneer
Units, the Additional Pioneer Units and the Option Pioneer Units are
collectively referred to herein as the "Pioneer OP Units."
The sellers of the Pioneer Portfolio, various entities affiliated with
Pioneer Development Company, LLC and Michael J. Falcone (a director nominee),
were not affiliated with the Company or the Operating Partnership prior to the
transaction. The Company based its determination of the purchase price of the
Pioneer Portfolio on the expected cash flow, physical condition, location,
competitive advantages, existing tenancies and opportunities to retain and
attract additional tenants. The purchase price was determined by arm's length
negotiation between the Company and the sellers. Michael J. Falcone became a
director of the Company on August 19, 1998, as provided for in the Pioneer
Contribution Agreement.
As described above under Proposal 1, holders of OP Units may exercise
the Conversion Right. If the holders of all of the Pioneer OP Units were to
exercise their Conversion Right (assuming that the Additional Pioneer Units and
the Option Pioneer Units are issued), and if the Company chose to deliver shares
instead of cash, such holders would currently receive approximately 1,992,514
shares of Common Stock. However, if a stock split, combination or other
extraordinary event involving the Common Stock were to occur, such number could
be higher or lower in the future.
As described above under Proposal 1, the rules of the American Stock
Exchange, upon which the Common Stock is listed for trading, require stockholder
approval for the issuance of common stock (or securities convertible into common
stock) equal to 20% or more of the then outstanding common
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stock for less than the greater of book or market value of the common stock. The
Initial Pioneer Units were issued at an agreed upon value of $16.50. At the time
the Initial Pioneer Units were issued, the market value (based on the prior
day's closing price of the Common Stock) of the Common Stock was $15.875 and the
Initial Pioneer Units equalled approximately 17.6% of the then outstanding
shares of Common Stock. If the Additional Pioneer Units and the Option Pioneer
Units are also issued, the total number of OP Units issued pursuant to the
Pioneer Contribution Agreement would equal approximately 29.7% of the then
outstanding shares of Common Stock. Pursuant to the Pioneer Contribution
Agreement, the Conversion Right may not be exercised by the holders of the
Pioneer OP Units until one year from the issuance of such Pioneer OP Units. In
addition, until stockholder approval is obtained, Pioneer OP Units representing
no more than 19.9% of the outstanding shares of Common Stock at the time such OP
Units are issued may be converted to Common Stock. However, we agreed that if
such stockholder approval is not obtained, we would pay cash upon the exercise
of the Conversion Right by the holders of Pioneer OP Units. Pursuant to the
Pioneer Contribution Agreement, we agreed to seek to obtain such stockholder
approval so that all of the Pioneer OP Units may be converted into shares of
Common Stock in the future.
The Board recommends a vote FOR approval of the issuance of shares of
Common Stock upon the exercise of the Conversion Right by the holders of the
Pioneer OP Units. Proxies solicited by the Board will be so voted in the absence
of instructions to the contrary.
PROPOSAL 3 -- ELECTION OF DIRECTORS
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 of directors to be designated from time to time by resolution of
the Board. Pursuant to the foregoing, the Board is fixed at nine persons as of
the date of this Proxy Statement, but has been fixed at seven persons as of the
date of the Meeting. The three classes have staggered terms of office so that
the terms of office of directors of only one class expires at each Annual
Meeting of Stockholders and the directors of that class are elected for three
year terms and until his or her successor is elected and duly qualified or until
his or her earlier death, resignation or removal. The term of office of the
three Class I directors (Timothy McBride, Evan Zucker and Francesco Galesi)
expires at the Meeting. Messrs. Timothy McBride and Zucker are not standing for
re-election. The Board has nominated and recommends the re-election of Francesco
Galesi. Mr. Galesi was elected as a Class I director in May 1998 by the other
directors to fill a vacancy which resulted from an increase in the number of
directors. In addition, the Board has also nominated and recommends for election
as a Class I director Michael J. Falcone, who is currently a Class II director.
Mr. Falcone was elected as a Class II director in August 1998 by the other
directors to fill a vacancy which resulted from an increase in the number of
directors and his term expires at the Meeting by law. He has been nominated as a
Class I director so as to more nearly equalize the number of directors in each
class.
The Board recommends a vote FOR Messrs. Galesi and Falcone as directors
to hold office until the 2001 Annual Meeting of Stockholders and until their
successors are elected and qualified. Although the Board has no reason to
believe any of the nominees will be unable to serve, if such should occur,
proxies will be voted (unless marked to the contrary) for such person or
persons, if any, as shall be recommended by the Board. However, proxies will not
be voted for the election of more than two directors.
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Nominees and Continuing Directors of the Company
The following table sets forth, as of the date of the Meeting, the
class of directors to which such director belongs, the name and age of such
director, and the year in which such person first became a director of the
Company:
<TABLE>
<CAPTION>
Year First
Elected as
Name Title Director Age
<S> <C> <C> <C> <C>
Nominee For Term of Three Years
Expiring at the Annual Stockholders
Meeting held in 2001:
Francesco Galesi.................................. Director 1998 62
Michael J. Falcone................................ Director 1998 68
Directors Whose Terms Will Expire at the
Annual Stockholders Meeting held in
1999:
Jeffrey E. Kelter................................. Director 1997 44
Robert Branson.................................... Director 1997 50
Directors Whose Terms Will Expire at the
Annual Stockholders Meeting held in
2000:
James Mulvihill................................... Director 1993 34
David Lesser...................................... Director 1997 33
David F. McBride.................................. Director 1997 51
</TABLE>
Mr. Galesi has been a director of the Company since May 1998 as a result of
the acquisition of the Galesi Portfolio. Since 1969, he has been the Chairman
and Chief Executive Officer of the Galesi Group, which includes companies
engaged in distribution, manufacturing, real estate and telecommunications
industries. He has been a director of WorldCom since 1992. Mr. Galesi was a
director of ATC Communications Group until the ATC Merger with WorldCom in 1992.
Mr. Galesi also serves as a director of Amnex, Inc., and Walden Residential
Properties, Inc. Mr. Galesi is a graduate of Princeton University.
Mr. Falcone has been a director of the Company since August 1998 as a
result of the acquisition of the Pioneer Portfolio. He founded the Pioneer Group
in 1975, the predecessor to the Pioneer Development Company, one of the largest
developers of commercial office properties in Northern New York. He currently
serves as Chairman of Pioneer Development Company. Prior to the founding of the
Pioneer Group, he co-founded the Pyramid Companies, another real estate
development firm. Mr. Falcone is Chairman of the Board of Directors of First
National Bank of Rochester and serves on the Corporate Advisory counsel for the
Syracuse University School of Management. He is a graduate of Syracuse
University.
Mr. Kelter has been President of the Company since December 1997. He
has over 18 years of experience in all phases of commercial real estate
including development, third-party management and construction. Upon graduating
from Trinity College in Hartford, Connecticut in 1976, Mr. Kelter was employed
by The Bankers Trust Corporation where he was an assistant treasurer in the
Corporate Finance division. In 1982, Mr. Kelter was employed by Vector
Properties in Tulsa, Oklahoma, where he was in charge of the development and
finance of several downtown Tulsa office building renovations. In
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1982, Mr. Kelter founded Penn Square Properties, Inc. in Philadelphia and has
served as chief executive officer and president. Mr. Kelter also serves on the
Board of Directors of the Central Philadelphia Development Corporation (CPDC), a
non-profit urban planning commission. He has developed, owned, managed and
leased more than 4.5 million square feet of office and warehouse projects
throughout the Pennsylvania and New Jersey markets.
Mr. Branson has been a principal of Branson & Associates, a real estate
consulting firm, since January 1997. Prior thereto, from October 1981 to
December 1996, he was a principal of Linden & Branson, a certified public
accounting firm specializing in the real estate industry. Prior to October 1981,
Mr. Branson was employed by Arthur Andersen & Co.
Mr. Mulvihill was Chairman of the Board of the Company from December
1993 until December 1997. Since 1990, Mr. Mulvihill has been actively investing
in the Denver real estate market. In 1993, he formalized his activities with the
formation of Black Creek Capital, LLC, a firm specializing in Denver real estate
investment, including residential and commercial land development, tax exempt
housing and golf course construction and ownership. 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 1986 to January
1992, Mr. Mulvihill was an officer of Manufacturers Hanover Trust Company's Real
Estate Banking and Investment Banking Groups. Mr. Mulvihill graduated from
Stanford University in 1986 with a B.A. in Political Science.
Mr. Lesser formed Hudson Bay Partners, L.P. in May 1996 and is the
President of its general partner. Prior to founding Hudson Bay, from April 1995
until May 1996, he was the Senior Vice President for Business Development of
Crescent Real Estate Equities Company, in charge of acquisition, finance and
strategic investments. From July 1988 until April 1995, Mr. Lesser worked for
Merrill Lynch & Co. in the Real Estate Investment Banking Division where he was
a Director. Mr. Lesser received a B.S. and M.B.A. from Cornell University.
Mr. McBride has been Chairman of the Board of the Company since
December 1997. He was appointed Secretary of the Company in January 1998. He has
served as Chief Executive Officer of McBride Enterprises, Inc. and affiliated
family real estate, construction and brokerage companies since 1987 and has been
a director of McBride Enterprises, Inc. and such enterprises since 1975. Mr.
McBride had served as a Director of Midlantic Corporation, Midlantic National
Bank and various subsidiaries for thirteen years prior to its merger with PNC
Bank in 1996. Prior to 1987, he was a partner in the law firm of Harwood Lloyd
from 1981 to 1987, a partner in the law firm of Murphy, Ellis & McBride from
1977 to 1981, and an associate in the firm of Robinson, Wayne & Greenberg from
1973 to 1977, all located in New Jersey. He received B.A. and J.D. degrees from
Georgetown University in 1969 and 1973, respectively. He remains Of Counsel to
Harwood Lloyd and is a member of the bars of New Jersey and New York.
Information Concerning Meetings and Certain Committees
The Company has standing Audit, Compensation and Executive Committees of
the Board of Directors. The Audit Committee, currently comprised of Messrs.
Branson and Galesi, makes recommendations to the Board regarding the selection
of independent auditors, reviews the results and scope of the audit and other
services provided by the Company's independent auditors, reviews and evaluates
the Company's internal accounting controls and performs such other functions as
directed by the Board. The Compensation Committee, currently comprised of
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Messrs. Mulvihill and Timothy McBride (who will be replaced by the Board at a
subsequent meeting of the Board), administers the Company's stock incentive
plans, makes recommendations to the Board concerning executive officer
compensation and performs such other duties as from time to time are designated
by the Board. The Executive Committee, currently comprised of Messrs. Kelter,
David McBride and Lesser, supervises and maintains the financial affairs of the
Company, enters into acquisitions, dispositions and development projects not
exceeding $25 million per transaction, enters into financing arrangements not
exceeding $18.75 million per transaction and performs such other duties as from
time to time are designated by the Board. During 1997, the Board held 17
meetings. Mr. Mulvihill attended each such meeting and no other current director
or director nominee was a director of the Company at the time such meetings were
held. The Audit Committee held one meeting in 1997 and the Executive Committee
did not meet in 1997. The Compensation Committee was formed in January 1998 and
therefore held no meetings in 1997. The directors have not appointed a
nominating committee.
Compensation of Directors
During the year ended December 31, 1997, Mr. Mulvihill was paid cash
compensation at the quarterly rate of $18,750 payable quarterly commencing April
1, 1997, in addition to a $25,000 bonus earned and paid in 1997. In addition,
Mr. Mulvihill received compensation in the form of 2,027 shares of the Company's
Common Stock at a fair market value of $9.25 as of the last trading date of the
quarter (March 31, 1997) with respect to which payment was made.
In 1997, each of Messrs. Rotchford, Hardin and O'Keefe (former
directors of the Company) received compensation of $3,784 which consisted of
cash payments aggregating $2,785 and 108 shares of Common Stock at a fair market
value of $9.25 as of the last trading date of the quarter (March 31, 1997) with
respect to which payment was made.
Messrs. Kelter, Branson, Lesser and McBride became directors of the
Company on December 12, 1997 and Messrs. Galesi and Falcone became directors in
1998 and therefore did not receive any compensation as directors for the year
ended December 31, 1997.
The Company reimburses the directors for travel expenses incurred in
connection with their activities on behalf of the Company.
PROPOSAL 4 -- AMENDMENT AND RESTATEMENT OF 1993 OMNIBUS INCENTIVE
PLAN
At the Meeting, the Stockholders are being asked to vote on a proposal
to ratify and approve the adoption of the Company's Amended and Restated 1993
Omnibus Incentive Plan (the "Omnibus Plan"). The Omnibus Plan was approved by
the Company's Board of Directors (the "Board") on November 11, 1998, subject
to approval by the Stockholders.
The terms and provisions of the Omnibus Plan are summarized below. This
summary, however, does not purport to be a complete description of the Omnibus
Plan and is qualified in its entirety by the terms of the Omnibus Plan. A copy
of the Omnibus Plan is attached hereto.
Purpose
The Omnibus Plan is an amendment and restatement of the 1993 Omnibus
Incentive Plan which was adopted by the Company and approved by the Stockholders
in 1993. The purpose of the Omnibus
8
<PAGE>
Plan is to authorize the grant of compensatory awards (each an "Award") repre-
senting or corresponding to a number of shares of Common Stock which in total
are not more than 10% of the combined number of shares of Common Stock and units
of limited partnership interest of American Real Estate Investment, L.P. that
are outstanding from time to time. Such shares of Common Stock which may be
subject to Awards may consist of authorized and unissued shares or of treasury
shares. 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 and its
affiliates (as determined by the Compensation Committee) by making available to
them an opportunity to acquire a proprietary interest or to increase their
proprietary interest in the Company. If an Award which is issued under the
Omnibus Plan is forfeited, expires or terminates prior to vesting or exercise,
the shares of Common Stock subject to such Award will again be available for
Awards under the Omnibus Plan.
As of October 30, 1998, stock options with respect to an aggregate of
206,250 shares of Common Stock had been granted under the 1993 Omnibus Incentive
Plan, leaving 293,750 shares reserved under the 1993 Omnibus Incentive Plan.
Management of the Company believes that, commensurate with the dramatic growth
in the Company's shares of Common Stock and OP Units outstanding, assets under
management and overall size, it is prudent to increase the number of shares
reserved under the Omnibus Plan so as to have shares available for the grant of
stock options and other Awards to compensate existing officers and to attract
persons to become employed by the Company in an executive officer capacity in
the future. The amendment and complete restatement of the Plan is effective as
of October, 1993, the initial effective date of the Plan.
Administration
The Compensation Committee of the Board administers the Omnibus Plan.
The 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 Compensation Committee has the right to
make adjustments with respect to Awards granted under the Omnibus Plan in order
to prevent dilution of the rights of any holder. In the event that certain
reorganizations of the Company or other similar transactions or events occur,
the Compensation Committee may, in its discretion, make such adjustments to the
Plan and outstanding Awards, as applicable, as it deems appropriate. Members of
the Compensation Committee, if appointed, are not eligible to receive Awards
under the Omnibus Plan.
Types of Awards
Restricted Stock; Restricted Stock Units. An Award may consist of
restricted stock or restricted stock units. Such restricted stock or restricted
stock units shall be subject to such restrictions (including, without
limitation, any limitation on the right to vote a share of restricted stock or
the right to receive any dividend or other right or property), as the
Compensation Committee shall determine. Except as otherwise determined by the
Compensation Committee, upon a termination of employment for any reason during
the applicable restriction period, all shares of restricted stock and all
restricted stock units still subject to restriction shall be forfeited to the
Company (except that the Compensation Committee may
9
<PAGE>
waive any or all remaining restrictions with respect to such restricted stock or
restricted stock units when it finds that it is in the best interests of the
Company to do so).
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. The Compensation Committee may impose such conditions and restrictions
on the exercise of a SAR as it deems appropriate, including, but not limited to,
the following: (i) no aggregate payment by the Company during any fiscal year
upon the exercise of SARs may exceed $250,000 without approval of the Board, and
(ii) a holder of a SAR may not exercise a SAR if the aggregate amount to be
received as a result of his or her exercise of SARs, including any SARs
exercised in the preceding twelve-month period, exceeds such employee's current
base salary.
Options. An Award may consist of stock options. The terms of specific
options, including whether options shall constitute incentive stock options for
purposes of the Internal Revenue Code of 1986, as amended (the "Code"), shall be
determined by the Compensation Committee. In no event may more than two million
shares of Common Stock be made subject to options. Also, in no event may any
employee receive options (whether non-qualified stock options or incentive stock
options) with respect to more than one million shares of Common Stock over the
life of the Plan. Options may be granted at an exercise price not lower than
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
award 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. The Omnibus Plan provides, subject to the terms of the
applicable award agreements, for limited periods of time after termination of
employment during which options may be exercised.
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. 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.
10
<PAGE>
Dividend Equivalents. An Award may consist of dividend equivalents. A
dividend equivalent is a right to receive payments equivalent to dividends
declared on shares of Common Stock, with respect to a number of shares and
payable on such dates as determined by the Compensation Committee. The
Compensation Committee may provide that amounts payable with respect to dividend
equivalents shall be deemed to be reinvested in additional shares of Common
Stock or otherwise reinvested. Subject to the terms of the Omnibus Plan, the
Compensation Committee shall establish all other terms and conditions of Awards
of dividend equivalents.
Other Performance Awards Issued Under the Omnibus Plan. The Omnibus
Plan authorizes the Compensation Committee to grant other Awards
that are denominated or payable in, valued by reference to, or otherwise based
on or related to shares of Common Stock. 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 Compensation Committee may determine.
Forms of Payment Under Awards; Withholding
Subject to the terms of the Omnibus Plan and of any applicable award
agreement, payment or transfer to be made by the Company or one of its
affiliates upon the grant or exercise of an Award may be made in such form or
forms as the Compensation Committee shall determine, including, without
limitation, cash, shares of Common Stock, other securities, other Awards, or
other property, or any combination thereof, and may be made in a single payment
or transfer, in installments, or on a deferred basis, in each case in accordance
with rules and procedures established by the Compensation Committee. The Company
or any affiliate shall be authorized to withhold from any Award granted or any
payment due or transfer made under any Award or under the Omnibus Plan the
amount (in cash, Common Stock, other securities, or other property) of
withholding taxes due in respect of an Award, its exercise, the release of
restrictions on such Award or any payment or transfer under the Omnibus Plan and
to take such other actions as may be necessary in the opinion of the Company to
satisfy all obligations for the payment of such taxes.
Change in Control
Upon a Change in Control (as defined in the Omnibus Plan), (i) all
Awards which have been granted and are outstanding as of the date of the Change
in Control shall be fully vested and exercisable, (ii) all outstanding shares of
restricted stock shall become released securities and (iii) all performance
targets with respect to outstanding Awards, as applicable, shall be deemed met.
11
<PAGE>
Amendment and Termination
Except to the extent prohibited by applicable law and unless otherwise
expressly provided in an award agreement or in the Omnibus Plan, the Board may
amend, alter, suspend, discontinue, or terminate the Omnibus Plan, including,
without limitation, any amendment, alteration, suspension, discontinuation, or
termination that would impair the rights of any award holder or any beneficiary
of any Award previously granted to the extent such rights are not then accrued
and vested, without the consent of any Stockholder, holder or beneficiary of an
Award, or other person; provided, however, that notwithstanding any other
provision of the Omnibus Plan or any award agreement, without the approval of
the Stockholders no amendment, alteration, suspension, discontinuation, or
termination shall be made that would, if it were not approved by the
Stockholders, cause the Omnibus Plan to fail to comply with any requirement of
applicable law or regulation.
Federal Tax Consequences
Unless a holder of restricted stock makes an "83(b) election" (as
discussed below), there generally will be no tax consequences as a result of the
grant of restricted stock until the restricted stock is no longer subject to a
substantial risk of forfeiture or is transferable (free of such risk).
Generally, when the restrictions are lifted, the holder will recognize ordinary
income, and the Company will be entitled to a deduction, equal to the difference
between the fair market value of the stock at such time and the amount, if any,
paid by the holder for the restricted stock. Subsequently realized changes in
the value of the stock generally will be treated as long-term or short-term
capital gain or loss, depending on the length of time the shares are held prior
to disposition of such shares. In general terms, if a holder makes an 83(b)
election (under Section 83(b) of the Code) upon the award of restricted stock,
the holder will recognize ordinary income on the date of the award of restricted
stock, and the Company will be entitled to a deduction, equal to (i) the fair
market value of the restricted stock as though the stock were (A) not subject to
a substantial risk of forfeiture or (B) transferable, minus (ii) the amount, if
any, paid for the restricted stock. If an 83(b) election is made, there will
generally be no tax consequences to the holder upon the lifting of restrictions,
and all subsequent appreciation in the restricted stock generally would be
eligible for capital gains treatment.
The restricted stock units have been designed with the intention that
there generally will be no tax consequences as a result of the grant of a
restricted stock unit until payment is made with respect to such restricted
stock unit. Generally, when payment is made (and, it is intended, not until such
time), the holder of a restricted stock unit will recognize ordinary income, and
the Company will be entitled to a deduction, equal to the fair market value of
the Common Stock and cash, as applicable, received upon payment.
In general, neither the grant nor the exercise of an incentive stock
option will result in taxable income to an option holder or a deduction for the
Company. To receive special tax treatment as an incentive stock option under the
Code as to shares acquired upon exercise of an incentive stock option, an option
holder must neither dispose of such shares within two years after the incentive
stock option is granted nor within one year after the transfer of the shares to
the option holder pursuant to exercise of the option. In addition, the option
holder must be an employee of the Company or a qualified Company subsidiary at
all times between the date of grant and the date three months (one year in the
case disability)
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<PAGE>
before exercise of the option. (Special rules apply in the case of the death of
the option holder.) Incentive stock option treatment under the Code generally
allows the sale of Common Stock received upon the exercise of an incentive stock
option to result in any gain being treated as a capital gain to the option
holder, but the Company will not be entitled to a tax deduction. However, the
exercise of an incentive stock option (if the holding period rules described in
this paragraph are satisfied) will give rise to income includable by the option
holder in his or her alternative minimum taxable income for purposes of the
alternative minimum tax in an amount equal to the excess of the fair market
value of the stock acquired on the date of the exercise of the option over the
exercise price.
If the holding period rules noted above are not satisfied, gain
recognized on the disposition of the shares acquired upon the exercise of an
incentive stock option will be characterized as ordinary income. Such gain will
be equal to the difference between the exercise price and the fair market value
of the shares at the time of exercise. (Special rules may apply to disqualifying
dispositions where the amount realized is less than the value at exercise.) The
Company will generally be entitled to a deduction equal to the amount of such
gain included by an option holder as ordinary income. Any excess of the amount
realized upon such disposition over the fair market value at exercise will
generally be long-term or short-term capital gain depending on the holding
period involved. Notwithstanding the foregoing, in the event that exercise of
the option is permitted other than by cash payment of the exercise price,
various special tax rules may apply.
No income will be recognized by an option holder at the time a
non-qualified stock option is granted. Generally, ordinary income will, however,
be recognized by an option holder at the time a non-qualified stock option is
exercised in an amount equal to the excess of the fair market value of the
underlying Common Stock on the exercise date over the exercise price. The
Company will generally be entitled to a deduction for Federal income tax
purposes in the same amount as the amount included in ordinary income by the
option holder with respect to his or her non-qualified stock option. Gain or
loss on a subsequent sale or other disposition of the shares acquired upon the
exercise of a non-qualified stock option will be measured by the difference
between the amount realized on the disposition and the tax basis of such shares,
and will generally be long-term or short-term capital gain depending on the
holding period involved. The tax basis of the shares acquired upon the exercise
of any non-qualified stock option will be equal to the sum of the exercise price
of such non-qualified stock option and the amount included in income with
respect to such option. Notwithstanding the foregoing, in the event that
exercise of the option is permitted other than by cash payment of the exercise
price, various special tax rules may apply.
There generally will be no tax consequences as a result of the award of
a SAR until the SAR is exercised. Generally, when the SAR is exercised, the
holder will recognize ordinary income, and the Company will be entitled to a
deduction, equal to the fair market value of the Common Stock and cash, as
applicable, received upon exercise.
There generally will be no tax consequences as a result of the award of
a dividend equivalent. Generally, when payment is made, the holder of the
dividend equivalent will recognize ordinary income, and the Company will be
entitled to a deduction, equal to the amount received in respect of such
dividend equivalent.
Additional special tax rules may apply to those Award holders who are
subject to the rules set forth in Section 16 of the Securities Exchange Act of
1934, as amended.
The foregoing tax discussion is a general description of certain
expected Federal income tax results under current law, and all affected
individuals should consult their own advisors if they wish any further details
or have special questions.
13
<PAGE>
The Board recommends a vote FOR approval of the amendment and
restatement of the Omnibus Plan. Proxies solicited by the Board will be so voted
in the absence of instructions to the contrary.
PROPOSAL 5 -- OTHER MATTERS
The Board knows of no matters to be presented for action at the Meeting
other than those set forth in the attached Notice and customary procedural
matters. However, if any other matters should properly come before the Meeting
or any adjournment or postponement thereof, the proxies solicited hereby will be
voted on such other matters, to the extent permitted by applicable rules of the
Securities and Exchange Commission, in accordance with the judgment of the
persons voting such proxies.
ADDITIONAL INFORMATION
Reorganization
On December 12, 1997, the Company entered into a series of transactions
to transform the Company from a multi-family residential real estate investment
trust ("REIT") into an office and industrial REIT (the "Reorganization"). The
Reorganization involved (i) the acquisition by the Company of 15 properties (the
"McBride Portfolio") totaling approximately 1.3 million square feet from McBride
Hudson Bay, L.P. and various entities affiliated with it (collectively,
"McBride") in exchange for approximately 4.1 million shares of Common Stock, 2.9
million OP Units, and the assumption of $45.0 million in long-term debt, (ii)
the contribution by Jeffrey E. Kelter of a 95% non-voting equity interest in
Penn Square Properties, Inc., which has since been renamed American Real Estate
Management Inc. (the "Management Company"), a full service real estate
development, management, construction and brokerage company, in exchange for
363,636 OP Units, and (iii) $30.0 million in cash investments, in exchange for
Common Stock and OP Units, led by Hudson Bay Partners II, L.P. ("Hudson Bay")
along with CRA Real Estate Securities ("CRA"), McBride and Robert Branson
(McBride, the Management Company, Hudson Bay, CRA and Mr. Branson are
collectively referred to herein as the "Investor Group"). McBride, Mr. Kelter
and Hudson Bay received warrants to purchase 125,000 OP Units, 250,000 OP Units
and 300,000 shares of Common Stock, respectively, at a price of $11.00 per OP
Unit or share of Common Stock. Additionally, in conjunction with the
Reorganization, the Company acquired the right to purchase seven additional
properties, totaling approximately 1.3 million square feet for an aggregate cost
of approximately $39 million, including closing costs. The Company acquired all
seven of these properties between December 12, 1997 and January 9, 1998. The
Investor Group currently owns approximately 54% of the Company's outstanding
Common Stock and approximately 55% of the Company's outstanding Common Stock on
a diluted basis (assuming conversion of all outstanding OP Units to Common Stock
and exercise of all outstanding warrants or options to purchase Common Stock and
OP Units).
Interests of Certain Persons in Matters to be Acted Upon
Mr. Galesi is the direct or indirect owner of approximately 828,382 of
the 1,362,940 OP Units issued pursuant to the Galesi Contribution Agreements. If
Proposal 1 is not approved, Mr. Galesi's ability to convert his OP Units to
shares of Common Stock could be limited. Mr. Falcone is the direct or indirect
owner of approximately 130,444 of the 1,170,893 OP Units issued pursuant to the
Pioneer Contribution Agreement to date, and could be the direct or indirect
14
<PAGE>
owner of up to an additional 268,763 OP Units which could be issued pursuant to
such agreement. If Proposal 2 is not approved, Mr. Falcone's ability to convert
his OP Units to shares of Common Stock could be limited.
Executive Officers
The following table sets forth certain information regarding the
executive officers of the Company as of October 30, 1998:
<TABLE>
<CAPTION>
Name Age Position
- ---- ---- --------
<S> <C> <C>
David F. McBride 51 Chairman and Secretary
Jeffrey E. Kelter 44 President
Timothy A. Peterson 33 Senior Vice President; Chief Financial Officer
Steven J. Butte 38 Senior Vice President-- Investments
John B. Begier 33 Senior Vice President-- Acquisitions
Charles C. Lee 35 Senior Vice President-- Marketing and
Leasing
Francis K. Ryan 38 Senior Vice President -- Property Operations
Timothy E. McKenna 35 Vice President -- Finance; Treasurer
</TABLE>
The employment backgrounds of Messrs. McBride and Kelter are described
above under Proposal 3.
Mr. Peterson has served as Chief Financial Officer of the Company since
August 1998. Prior to joining the Company, Mr. Peterson held a variety of
positions with Post Properties, Inc. since 1989, including his most
recent responsibility as Executive Vice President, Finance. While at Post
Properties, Mr. Peterson managed all capital markets activities, maintained all
rating agency relationships and oversaw accounting, budgeting and financial
reporting functions. Mr. Peterson is a Certified Public Accountant, is a member
of the National Association of Real Estate Investment Trusts and currently
serves as Co-Chairman of its Accounting Committee and Adjunct member of the Best
Financial Practices Task Force. He is a member of the Tax Policy Advisory Board
of the National Realty Committee and the University of Florida Real Estate
Advisory Board. Mr. Peterson is a graduate of the University of Florida with a
B.S. in accounting in 1985 and an MBA in finance in 1987.
Mr. Butte is a Certified Public Accountant and has served as Senior Vice
President of the Company with primary responsibility for acquisition due
diligence and financing since December 1997. Prior to joining Penn Square
Properties, Inc. in 1988, he spent five years in public accounting as a manager
in the audit department of Asher & Company, specializing in providing financial
and accounting services to companies in the real estate industry. Mr. Butte is a
1984 graduate of Villanova University with a B.S. in Accounting and obtained a
Masters in Taxation from Villanova in 1994.
Mr. Begier has served as Senior Vice President of the Company since
December 1997 with primary responsibility for the Company's acquisition
activities. Mr. Begier joined Penn Square Properties, Inc. in 1995; prior to
working for Penn Square Properties he worked for eight years as a real estate
broker with the Pennsylvania office of Cushman & Wakefield where he was
responsible for leasing, sales and acquisition of commercial and industrial
properties. Mr. Begier is a 1987 graduate of the University of Virginia.
Mr. Lee has served as Senior Vice President of the Company since December
1997 with primary responsibility for the Company's leasing and marketing
activities. Mr. Lee joined Penn Square Properties, Inc. in 1987 where he was
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<PAGE>
responsible for leasing and marketing activities for variouscommercial
properties. From September, 1997 until March, 1998, when he re-joined the
Company, Mr. Lee was the regional leasing director for the Philadelphia region
of Equity Office Properties. Prior to working for Penn Square Properties,
he was an Assistant Portfolio Manager in the Private Banking Division of the
Boston Safe Deposit and Trust Company. Mr. Lee is a 1985 graduate of Tufts
University.
Mr. Ryan has served as Senior Vice President of the Company since December
1997 with primary responsibility for the Company's property operations and
management activities. Mr. Ryan joined Penn Square Properties, Inc. in 1991
where he was responsible for the management of various commercial offices and
industrial properties. Prior to working for Penn Square Properties, Mr. Ryan
worked for 4 years as a senior property manager for Cushman & Wakefield's
Pennsylvania office and as a project manager for American Building Maintenance
from 1984 through 1986. Mr. Ryan is a Real Property Administrator.
Mr. McKenna is a Certified Public Accountant and has served as Vice
President and Treasurer of the Company since January 1998. Mr. McKenna was
previously employed as a Senior Manager in the Real Estate Services Group of
Arthur Andersen LLP's Philadelphia office. He has over 12 years of experience in
providing consulting and accounting services to publicly and privately-owned
real estate companies and over 11 years of his experience was obtained as an
employee of Arthur Andersen LLP. Mr. McKenna is a 1985 graduate of the
University of Scranton with a B.S. in Accounting.
Executive Compensation
The following table sets forth, for the three years ended December 31,
1997, the compensation earned by or paid to each of the Company's chief
executive officers who served in such capacity during such fiscal year, as well
as each other executive officer of the Company serving as an executive officer
of the Company on December 31, 1997 whose total annual salary and bonus for the
fiscal year ended December 31, 1997 exceeds $100,000.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation Long-Term Compensation
-------------------------------------------------- -------------------------------
Name and Other Annual Awards of All Other
Principal Position(1) Year Salary Bonus Compensation Options(#) Compensation
<S> <C> <C> <C> <C> <C> <C>
- --------------------- --------- --------------- ---------------- ---------------- ---------------- -------------
David F. McBride
Chairman 1997 $ 235,000 $ 70,000 $ 0 0 $ 0
Jeffrey E. Kelter
President 1997 $ 320,000 $ 0 $ 0 0 $ 0
Evan Zucker
President 1997 $ 71,000(2) $ 25,000 $ 0 25,000 $ 1,116,383(5)
1996 $ 75,000(3) $ 25,000 $ 0 25,000 $ 0
1995 $ 75,000 $ 25,000 $ 0 25,000 $ 0
Rick A. Burger(4)
Treasurer 1997 $ 85,000 $ 25,000 $ 0 20,000 $ 393,972(5)
</TABLE>
16
<PAGE>
- ------------------
(1) Mr. Zucker resigned as President and Mr. Kelter and Mr. McBride became
Executive Officers of the Company on December 12, 1997 as part of the
Reorganization. Messrs. Kelter and McBride have executed Employment
Agreements with the Company whereby their respective annual base salary is
set at $200,000 each. See "Employment Agreements" below.
(2) Mr. Zucker's compensation of $71,000 for the year ended December 31, 1997
was paid through the issuance of 2,027 shares of Common Stock at the fair
market value on the last trading date of the quarter ended March 31, 1997
and $52,250 in cash payments.
(3) 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 1996, Mr. Zucker was issued an
aggregate of 9,005 shares pursuant to the foregoing arrangement.
(4) In January 1998, Timothy McKenna was named by the Board as Treasurer of
the Company. Mr. Burger was employed by the Company through April 1998 in
a similar capacity.
(5) Evan Zucker and Rick Burger's employment agreements were terminated
effective December 12, 1997. As a result of the termination of these
agreements all outstanding options held by these individuals were
cancelled. Messrs. Zucker and Burger received 75,687 and 26,710 shares of
Common Stock, respectively, as payment for the termination of these
agreements and the options. The market value of these shares on December
12, 1997 was $14.75 per share. See "Termination of Employment and
Consulting Agreements" below.
Option Grants in Year Ended December 31, 1997
The following table provides information with respect to the above
named executive officers regarding options or stock appreciation rights ("SARs")
granted to such persons during the Company's year ended December 31, 1997. All
options granted in 1997 vested 25% for each quarter in the fiscal year and had
an exercise price in excess of the market price on the date of the grant.
<TABLE>
<CAPTION>
Option/SARs Grants in Last Fiscal Year
(Individual Grants)
Number of Percent of Total Exercise or
Securities Underlying Options/SARs Granted to Base Price Expiration
Name Options/SARs Granted(1)Employees in Fiscal Year Per Share Date
- ---- ---------------------- ------------------------- ---------------- ----------
<S> <C> <C> <C> <C>
David F. McBride(1) 0 0% -- --
Jeffrey E. Kelter(1) 0 0% -- --
Evan Zucker(2) 25,000 55.5% 10.00 12/31/06
Rick A. Burger(2) 20,000 44.5% 10.00 12/31/06
------ -------
45,000 100.00%
====== ======
</TABLE>
- ---
(1) Excludes the 7-year warrants issued to Jeffrey Kelter and David McBride
to purchase 250,000 and 125,000 OP Units, respectively, at $11 per OP
Unit in conjunction with the Reorganization.
(2) These option grants were cancelled effective December 12, 1997, see
"Termination of Employment and Consulting Agreements" below.
During the year ended December 31, 1997, none of such executive
officers owned or exercised any stock option or SARs other than Messrs. Zucker
and Burger, whose option grants were cancelled effective December 12, 1997, see
"Termination of Employment and Consulting Agreements" below.
Employment Agreements
Concurrently with the closing of the Reorganization, the Company
entered into employment agreements with each of David F. McBride and Jeffrey E.
Kelter to serve as the Chairman and President of the Company, respectively. The
initial term of each such agreement is for three years with successive one-year
renewal terms thereafter until terminated. Each agreement provides for an annual
base salary
17
<PAGE>
of $200,000 together with such additional compensation as may be awarded from
time to time by the Board and further provides that each of Messrs. McBride and
Kelter shall devote substantially all of their working time to the Company's
business activities. In the event of the death, disability or termination of the
employment without cause or the involuntary termination of such executive's
employment, the executive is entitled to receive a lump sum payment equal to the
executive's base salary plus the prior year's bonus times the longer of one year
or the remainder of the term of the employment agreement. Each agreement also
restricts such executive from engaging in activities in competition with the
Company in the ownership, development, construction, management or operation of
office or industrial properties (except that Mr. McBride may continue to be a
director of certain McBride-family real estate related companies) during his
term of employment and during the period during which he serves as a director of
the Company and ending one year after the later of the termination of his
employment and the date he ceases to be a director of the Company.
As of August 15, 1998, the Company entered into an employment agreement
with Timothy A. Peterson to serve as the Senior Vice President and Chief
Financial Officer of the Company for an initial term of two years with
successive one-year renewal terms thereafter until terminated. The agreement
provides for an annual base salary of $200,000 together with such additional
compensation as may be awarded from time to time by the Board, including a
minimum bonus of $100,000 in the second year of the term, and further provides
that Mr. Peterson will receive stock options with respect to 50,000 shares of
Common Stock. Under the agreement, the Company has loaned $392,600 to Mr.
Peterson on an interest-free, recourse basis to enable him to purchase 25,000
shares of Common Stock of which $33,333.33 will be forgiven on each of the first
three anniversaries of his employment if he is employed by the Company on such
date. The Company also agreed to reimburse Mr. Peterson for certain costs he
incurs in connection with his relocation. In the event of the death or
disability of Mr. Peterson, the stock options initially granted to him under the
employment agreement would become immediately vested. In the event of a
termination of Mr. Peterson's employment without cause or for good reason or an
involuntary termination of such employment, Mr. Peterson is entitled to receive
a lump sum payment equal to his base salary plus the prior year's bonus, or, if
greater, $100,000. In addition, upon such a termination, the stock options
initially granted under the agreement become immediately vested and $300,000 of
the loan made to Mr. Peterson by the Company to permit his purchase of Company
stock will be forgiven. The agreement provides that, in the event that Mr.
Peterson's employment with the Company terminates for any reason other than
death, disability or cause within the one-year period to follow a change in
control (as defined in the agreement) of the Company, Mr. Peterson is entitled
to receive a lump sum equal to two times the sum of his base salary and the
prior year's bonus, all outstanding unvested options held by Mr. Peterson will
become vested and exercisable, and the loan described above will be forgiven.
The agreement also restricts Mr. Peterson from engaging in activities in
competition with the Company in the ownership, development, construction,
management or operation of office or industrial properties during his term of
employment and during the period during which he serves as a director of the
Company and ending one year after the later of the termination of his employment
and the date he ceases to be a director of the Company.
18
<PAGE>
Termination of Employment and Consulting Agreements
Upon the closing of the Reorganization, the employment agreements of
Messrs. Zucker and Burger and the oral consulting agreement of Mr. Mulvihill
were terminated. The Company agreed to pay to such persons the sums of $225,000,
$85,000 and $150,000, respectively, in consideration for the termination of such
agreements. Such persons elected to receive such payments in the form of shares
of Common Stock valued at $11 per share. Accordingly, they received 68,869,
75,687 and 26,710 shares, respectively, in order to terminate these agreements
and cancel their existing options, which had a fair market value of $14.75 per
share on December 12, 1997. In addition, each of Messrs. Zucker and Mulvihill
executed a non-competition agreement with the Company which agreement will
continue in effect throughout the term he is a director of the Company and
prohibits him from engaging in activities involving the acquisition, development
or operation of office and industrial properties throughout the United States.
The aggregate amount payable to such persons was arrived at in
negotiations with the Investor Group on the basis of the terms of the employment
agreements between Messrs. Zucker and Burger and the oral consulting agreement
of Mr. Mulvihill with the Company. Messrs. Zucker's and Burger's employment
agreements provided that in the event of certain major corporate transactions,
such persons are to be paid an amount equal to twice their current base salary.
The Investor Group agreed to pay such persons an aggregate amount approximately
equal to twice their expected compensation from the Company. The amounts of the
aggregate sum payable to each of Messrs. Mulvihill, Zucker and Burger was
determined by discussions among such persons.
Compensation Committee Interlocks and Insider Participation; Compensation
Committee Report on Executive Compensation
Prior to January 1998, there was no committee of the Board responsible
for establishing or recommending compensation policies applicable to the
Company's executive officers. The compensation to executive officers for 1997
was determined by negotiation between the Company and the executive officers and
is set forth in the executive officers' respective employment agreements with
the Company described above. As such, executive compensation during 1997 was not
performance based. Since then, the Compensation Committee has been delegated
responsibilities regarding executive compensation matters. The Compensation
Committee of the Board administers the Company's stock incentive plans and makes
recommendations to the Board regarding executive officer compensation matters,
including policies regarding the relationship of corporate performance and other
factors to executive compensation.
Share Price Performance Graph
The Company's Common Stock first commenced public trading on November
10, 1993 in connection with the Company's underwritten initial public offering
of common stock. The graph set forth below compares, for the period of November
10, 1993 through December 31, 1997, the cumulative total return to holders of
Common Stock with the cumulative total return of the Standard & Poor's 500 Stock
Index ("S&P 500") and the NAREIT Equity REIT Total Return Index ("NAREIT
Index"). Total return values for the S&P 500, the NAREIT Index and the Common
Stock were calculated based on cumulative total return assuming the investment
of $100 on November 10, 1993, and assuming reinvestment of dividends. The
stockholder return shown on the graph below is not necessarily indicative of
future performance.
19
<PAGE>
Comparison of Cumulative Total Return Among
American Real Estate Investment Corporation Common Stock,
S&P 500 and the NAREIT Index*
- --------------
* The NAREIT Index (consisting of 176 REITs with a total market
capitalization of approximately $127.8 billion at December 31, 1997) is
maintained by the National Association of Real Estate Investment
Trusts, Inc., is published monthly, and is based on the last closing
prices of the preceding month.
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of September 30, 1998, information
with respect to each person (including any "group" as that term is used in
Section 13(d)(3) of the Exchange Act of 1934, as amended) who is known to the
Company to be the beneficial owner of more than 5% of the Company's Common Stock
as well as shares of Common Stock beneficially owned by all directors and
executive officers of the Company and all directors and executive officers of
the Company as a group. The table also includes the number of OP Units owned, as
of September 30, 1998, by such persons. Any owner of OP Units may exercise its
Conversion Right, to convert its OP Units into shares of Common Stock or, at the
election of the Company, the cash equivalent thereof. As of September 30, 1998,
the Company had 7,354,523 shares of Common Stock outstanding, not including
6,452,155 and 1,315,000 shares, respectively, reserved for issuance upon
conversion of OP Units and other outstanding options and OP Unit and Common
Stock warrants.
<TABLE>
<CAPTION>
Amount And
Name and Address of Beneficial Nature of Percent of Ownership of
Holder or Identity of Group Beneficial Owner(1) Class OP Units
- -------------------------------------------- -------------------------- --------------- -----------------
<S> <C> <C> <C>
Jeffrey E. Kelter........................... 613,636(2) 6.92% 613,636(2)
c/o American Real Estate
Investment Corporation
620 W. Germantown Pike, Suite 200
Plymouth Meeting, PA 19462
Robert Branson.............................. 77,272(3) * 22,727(3)
Linden & Branson
1133 Connecticut Avenue NW
Suite 902
Washington, DC 20036
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Amount And
Name and Address of Beneficial Nature of Percent of Ownership of
Holder or Identity of Group Beneficial Owner(1) Class OP Units
- -------------------------------------------- -------------------------- --------------- -----------------
<S> <C> <C> <C>
James Mulvihill............................. 365,627(4) 4.12% 216,402(4)
5700 Piedmont
Cherry Hills Village, CO 80111
David Lesser................................ 1,946,190(5) 21.94% 181,818(5)
c/o Hudson Bay Partners II, L.P.
237 Park Avenue, Suite 900
New York, NY 10017
David F. McBride............................ 431,396(6) 4.86% 299,442(6)
1000 Scioto Drive
Franklin Lakes, NJ 07417
Francesco Galesi............................ 0 -- 828,382(7)
c/o Galesi Management Corporation
100 State Street
Albany, NY 12207-1800
Michael J. Falcone.......................... 0 -- 130,444(8)
c/o Pioneer Development Company
250 South Clinton Street
Syracuse, NY 13202-1258
Timothy McBride............................. 397,521(9) 4.48% 221,137(9)
4939 Quebec Street Northwest
Washington, DC 20016
Evan Zucker................................. 127,685(10) 1.44% 29,391(10)
1670 Broadway--Suite 3350
Denver, CO 80202
Timothy A. Peterson......................... 25,000 * 0
c/o American Real Estate
Investment Corporation
620 W. Germantown Pike, Suite 200
Plymouth Meeting, PA 19462
Stephen J. Butte............................ 1,500 * 0
c/o American Real Estate
Investment Corporation
620 W. Germantown Pike, Suite 200
Plymouth Meeting, PA 19462
Hudson Bay Partners II, L.P................. 1,936,363(5) 21.83% 181,818(5)
237 Park Avenue, Suite 900
New York, NY 10017
CRA Real Estate Securities, L.P............. 584,645(11) 6.59% 0
259 Radnor-Chester Road - Suite 200
Radnor, PA 19087
New York State Common Retirement 720,743 8.13% 0
Fund.......................................
633 Third Avenue, 31st Floor
New York, NY 10017
All Officers and Directors as a group....... 3,985,827 44.94% 2,543,379
</TABLE>
21
<PAGE>
* Less than 1%.
(1) Includes shares issuable on exercise of the Conversion Right if such '
right is exercisable within 60 days of September 30, 1998.
(2) Includes 613,636 shares of Common Stock issuable on exercise of the
Conversion Right; which number includes a warrant to purchase 250,000
OP Units held by Mr Kelter.
(3) Includes 27,272 shares of Common Stock held by a limited liability
company in which Mr. Branson is a principal owner, and 22,727 shares of
Common Stock issuable on exercise of the Conversion Right with respect
to OP Units beneficially owned through a limited partnership interest
in McBride.
(4) Includes 76,389 OP Units and 190 shares held by Mr. Mulvihill's wife,
as to which Mr. Mulvihill disclaims any beneficial interest. Includes
128,456 and 2,194 OP Units held by Mr. Mulvihill's parents and
siblings, respectively, and 57,359 shares directly and indirectly owned
by Mr. Mulvihill's parents, as to which Mr. Mulvihill disclaims any
beneficial interest. Also includes 38,616 shares held by a Rabbi Trust
of which Wells Fargo, N.A. is the Trustee and Mr. Mulvihill is the sole
beneficiary.
(5) Includes 300,000 shares of Common Stock issuable to Hudson Bay Partners
II, L.P. upon exercise of a stock purchase warrant at an exercise price
of $11.00 per share, which expires on December 12, 2004. Mr. Lesser is
President, sole director and sole shareholder of Hudson Bay Partners,
Inc., the general partner of Hudson Bay Partners II, L.P., and, as a
result of such affiliation, may be deemed to have shared voting and
dispositive power over the 1,754,545 shares of Common Stock owned by
Hudson Bay Partners II, L.P.; however, Mr. Lesser expressly disclaims
beneficial ownership of any Common Stock not directly owned by him.
Also includes 181,818 shares of Common Stock issuable on exercise of
the Conversion Right with respect to OP Units beneficially owned by
Hudson Bay through a limited partnership interest in McBride.
(6) Includes 1,031 shares of Common Stock owned by a limited liability
corporation in which Mr. McBride has an ownership interest and 101
shares of Common Stock owned by a trust, in the name of Mr. McBride's
deceased father, for which Mr. McBride is a trustee. Also includes a
warrant to purchase 125,000 OP Units held by Mr. McBride. Also includes
299,442 shares of Common Stock issuable on exercise of the Conversion
Right with respect to 294,572 OP Units beneficially owned through a
limited partnership interest in McBride and 4,870 OP Units owned by a
trust, in the name of Mr. McBride's deceased father, for which Mr.
McBride is the sole trustee.
(7) The OP Units are subject to a lock-up agreement contained in the Galesi
Contribution Agreements prohibiting exercise of the Conversion Right on
such OP Units until April 30, 1999.
(8) The OP Units are subject to a lock-up agreement contained in the
Pioneer Contribution Agreement prohibiting exercise of the Conversion
Right on such OP Units until after August 19, 1999.
(9) Includes 11,364 shares of Common Stock held jointly by Mr. McBride and
his wife and 1,290 shares of Common Stock owned by a limited liability
corporation in which Mr. McBride has an ownership interest and 202
shares of Common Stock owned by a trust, in the name of Mr. McBride's
mother, for which Mr. McBride is the sole trustee. Also includes
221,137 shares of Common Stock issuable on exercise of the Conversion
Right with respect to 211,977 OP Units beneficially owned through
a limited partnership interest in McBride and 9,160 OP Units owned by
a trust, in the name of Mr. McBride's mother, for which Mr. McBride
is the sole trustee.
(10) Includes 29,391 shares of Common Stock issuable on exercise of the
Conversion Right; which number incudes 1,027 of such OP Units held by
Mr. Zucker's parents and siblings, as to which Mr. Zucker disclaims
beneficial ownership. Also includes 750 shares held by Mr. Zucker's
parents, as to which Mr. Zucker disclaims beneficial ownership.
Includes 75,687 shares owned by Mr. Zucker which are subject to a
Lock-up Agreement until December 12, 1998, including 45,434 shares held
by a Rabbi Trust of which Wells Fargo, N.A. is the Trustee and Mr.
Zucker is the sole beneficiary.
22
<PAGE>
(11) These shares of Common Stock are beneficially owned by accounts managed
by CRA Real Estate Securities, L.P. and CRA Real Estate Securities,
L.P. expressly disclaims beneficial ownership of any shares of Common
Stock not directly owned by it.
Certain Relationships and Related Transactions
In connection with the Reorganization, the Company entered into a
series of transactions in which certain individuals who are currently executive
officers, directors and/or beneficial owners of more than 5% of the Common Stock
(each a "5% Holder") had a direct or indirect material interest.
Employment Agreements. As part of the Reorganization, Messrs. David McBride
and Kelter, each an officer and director of the Company, entered into employment
agreements with the Company. Messrs. Zucker (a director of the Company), Burger
(a former officer of the Company) and Mulvihill (a director of the Company)
agreed to receive $225,000, $85,000 and $150,000, respectively, in consideration
for the termination of employment agreements of Messrs. Zucker and Burger and
the oral consulting arrangement of Mr. Mulvihill. In connection with his
employment as Chief Financial officer of the Company in August 1998, Mr.
Peterson entered into an employment agreement with the Company. As part of the
conditions of his employment agreement, the Company has loaned $392,600 to Mr.
Peterson in order for him to acquire 25,000 shares of the Company's common stock
on an interest-free, recourse basis and the Company has agreed to reimburse him
for certain costs he incurs in connection with his relocation.
Employee Loan Guarantees by Company. The Company has agreed to guarantee
loans obtained by certain executive officers of the Company in order for these
executive officers to acquire the Company's Common Stock. As of October 30,
1998, the Company has committed to guarantee approximately $205,000 of such
loans.
Spin-Off. As part of the Reorganization, the Company organized and
agreed to spin-off at a later date a subsidiary of the Company to enable Messrs.
Mulvihill and Zucker, each directors of the Company, to pursue real estate
investment opportunities other than in the office and industrial sectors.
The terms of the spin-off have not yet been determined.
OP Units and Common Stock. The Investor Group received in the
Reorganization 3,910,223 shares of Common Stock, 3,362,503 OP Units and 7-year
warrants to purchase 300,000 shares of Common Stock at $11 per share and 375,000
OP Units at $11 per OP Unit. Mr. Lesser (a director of the Company) is the
president, sole director and sole shareholder of the general partner of Hudson
Bay. Messrs. Timothy McBride and David McBride, each a director of the Company,
and Hudson Bay (a 5% Holder), have an interest in McBride.
Leases. The Company has leases with companies in which David McBride is an
officer, and for certain of these companies, a shareholder. As of September 30,
1998, the annual aggregate base rental revenue under these leases was
approximately $236,000, of which approximately $12,000 is included in rental
income in the financial statements accompanying the 1997 Annual Report to
Stockholders as these leases relate to properties acquired in the
Reorganization. The Company has a lease for approximately 17,575 square feet
with a company in which Michael Falcone serves as Chairman. As of September 30,
1998, the annual aggregate base rental revenue for this lease is approximately
$354,000. The Company has a lease for approximately 73,000 square feet with a
company in which Francesco Galesi is an executive officer and a beneficial owner
of common stock. As of September 30, 1998, the annual aggregate base rental
revenue for this lease is approximately $481,000.
Prorations and Adjustments. At December 31, 1997, the Company owed
approximately $200,000 to an affiliate of David McBride relating to certain
prorations and adjustments for properties acquired in the Reorganization. As of
September 30, 1998, this amount has been reduced to approximately $25,000 as a
result of payments by the Company during 1998.
23
<PAGE>
Management Company. Through the Operating Partnership's 100% ownership
of the preferred stock of the Management Company, the Operating Partnership is
entitled to receive 95% of the amounts paid as dividends by the Management
Company. The remaining amounts paid as dividends by the Management Company are
paid to the holders of common stock of the Management Company. To date, the
Management Company has not paid any dividends. Mr. Kelter, Hudson Bay Partners,
L.P. and McBride, own 40%, 30% and 30%, respectively, of the common stock
of the Management Company. Mr. Lesser is the president, sole director and
sole shareholder of the general partner of Hudson Bay Partners, L.P.,
and Hudson Bay. Hudson Bay (a 5% Holder) is an affiliate of Hudson Bay
Partners, L.P. Messrs. Timothy McBride and David McBride and Hudson Bay have an
interest in McBride. The Management Company currently manages all but one of the
Company's properties. The Operating Partnership, in the normal course of
business, advances funds to the Management Company to fund working capital
needs. The Operating Partnership has a management agreement with the Management
Company for property management and leasing services. Under the terms of this
Agreement the Management Company receives a management fee equal to 3% of base
rent for all properties it manages. In addition, the Management Company is
reimbursed for the salaries of certain employees involved in management and
operations of the Company's properties. The Company believes that the management
fee paid to the Management Company is based upon competitive rates.
The Management Company manages two properties which are owned by
entities in which Mr. Kelter has a general partnership interest. In addition,
certain other executives of the Company have limited partnership interests in
one of these entities.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires directors and officers of the Company and persons, or "groups" of
persons, who own more than 10% of a registered class of the Company's equity
securities (collectively, "Covered Persons") to file with the Securities and
Exchange Commission and the American Stock Exchange, within specified time
periods, initial reports of beneficial ownership, and subsequent reports of
changes in ownership, of certain equity securities of the Company. Based solely
on its review of copies of such reports furnished to it and upon written
representations of Covered Persons that no other reports were required, other
than as described below, the Company believes that all such filing requirements
applicable to Covered Persons with respect to all periods up to and including
1997 have been complied with on a timely basis.
Independent Auditors
Arthur Andersen LLP served as the Company's independent public
accountants for 1997 and, subject to the formal recommendations of the Audit
Committee and approval of the Board, are expected to serve again as such for
1998. The Company expects representatives of that firm to be present at the
Meeting. They will be given an opportunity to make a statement if they wish to
do so, and are expected to be available to respond to appropriate questions.
Solicitation of Proxies
The cost of soliciting the proxies will be paid by the Company.
Directors, officers and employees of the Company may solicit proxies in person,
or by mail, telephone, electronic mail or otherwise, but no such person will be
compensated for such services. The Company will request banks, brokers and other
nominees and fiduciaries to forward proxy materials to beneficial owners of
Common Stock held of record by them and will, upon request, reimburse them for
their reasonable out-of-pocket expenses in so doing.
24
<PAGE>
Stockholder Proposals
In order to be eligible for inclusion in the Company's proxy material
for the 1999 Annual Meeting of Stockholders, stockholders' proposals to take
action at such meeting must comply with applicable Securities and Exchange
Commission rules and regulations and must be received by the Secretary of the
Company at its principal executive offices set forth above no later than July
16, 1999. In addition, any stockholder who wishes to propose a nominee to the
Board of Directors or submit any other matter to a vote at a meeting of
stockholders (other than a stockholder proposal included in the Company's proxy
materials pursuant to Rule 14a-8 of the rules promulgated under the Securities
and Exchange Act or 1934, as amended), must comply with the advance notice
provisions and other requirements of Section 2.8 of the Company's By-laws, which
are on file with the Securities and Exchange Commission and may be obtained from
the Secretary of the Company upon request.
Incorporation by Reference
The following documents are hereby incorporated by reference: the
Company's 1997 Annual Report on Form 10-K, Quarterly Reports on Form 10-Q for
the quarters ended March 31, 1998, June 30, 1998 and September 30, 1998, current
reports on Form 8-K/A No. 1 dated April 30, 1998 which was filed on July 14,
1998 (reporting under Item 5 and amending Item 7 as originally filed) regarding
the company's acquisition of the Galesi Portfolio and a Current Report on Form
8-K, dated August 19, 1998 filed on September 3, 1998 (reporting under Items 2
and 5) regarding the consummation of the acquisition of twelve of the fifteen
properties in the Pioneer Portfolio.
Miscellaneous
A copy of the Company's 1997 Annual Report to Stockholders is enclosed
but is not to be regarded as proxy solicitation material.
Upon request, the Company will furnish free of charge to record and
beneficial owners of its Common Stock a copy of its 1997 Annual Report on Form
10-K (including financial statements and schedules but without exhibits). Copies
of exhibits to the Form 10-K also will be furnished upon request and the payment
of a reasonable charge. All requests should be directed to the Secretary of the
Company at the address and telephone number of the Company's principal executive
offices set forth above.
25
<PAGE>
EXHIBIT A
AMERICAN REAL ESTATE INVESTMENT CORPORATION
AMENDED AND RESTATED
1993 OMNIBUS INCENTIVE PLAN
Section 1. Purpose
The purpose of this American Real Estate Investment
Corporation 1993 Omnibus Incentive Plan (the "Plan") are to encourage selected
employees of American Real Estate Investment Corporation, a Delaware corporation
(together with any successor thereto, the "Company") and its Affiliates (as
defined below) to acquire a proprietary interest in the growth and performance
of the Company, to generate an increased incentive to contribute to the
Company's future success and prosperity, thus enhancing the value of the Company
for the benefit of its shareholders, and to enhance the ability of the Company
and its Affiliates to attract and retain qualified individuals upon whom, in
large measure, the sustained progress, growth, and profitability of the Company
depend.
Section 2. Definitions
As used in the Plan, the following terms shall have the
meanings set forth below:
(a) "Affiliate" shall mean (i) any entity that directly or
through one or more intermediaries, is controlled by the Company and (ii) any
entity in which the Company has a significant equity interest, as determined by
the Committee. Affiliate expressly includes Americana Realty Limited
Partnership, a Delaware limited partnership and any other limited partnership of
which the Company is general partner.
(b) "Award" shall mean any Option, Stock Appreciation Right,
Restricted Stock, Restricted Stock Unit, Performance Award, Dividend Equivalent,
or other Stock Award or Stock-Based Award granted under the Plan.
(c) "Award Agreement" shall mean a written agreement,
contract, or other instrument or document evidencing an Award granted under the
Plan.
(d) "Board" shall mean the Board of Directors of the Company.
(e) "Change in Control" shall mean the happening of any of the
following:
(i) any "person," including a "group" (as such terms are used
in Sections 13(d) and 14(d) of the Exchange Act, but excluding
the Company, any entity controlling, controlled by or under
common control with the Company, any employee benefit plan of
the Company or any such entity, and, with respect to any
particular Optionee, the Optionee and any "group" (as such
term is used in Section 13(d)(3) of the Exchange Act) of which
the Optionee is a member), is or becomes the "beneficial
<PAGE>
owner" (as defined in Rule 13(d)(3) under the Exchange
Act), directly or indirectly, of securities of the
Company representing 50% or more of either (A) the
combined voting power of the Company's then outstanding
securities or (B) the then outstanding Shares (in either such
case other than as a result of an acquisition of securities
directly from the Company); or
(ii) any consolidation or merger of the Company where the
stockholders of the Company, immediately prior to the
consolidation or merger, would not, immediately after the
consolidation or merger, beneficially own (as such term is
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, shares representing in the aggregate 50% or more
of the combined voting power of the securities of the
corporation issuing cash or securities in the consolidation or
merger (or of its ultimate parent corporation, if any); or
(iii) there shall occur (A) any sale, lease, exchange or other
transfer (in one transaction or a series of transactions
contemplated or arranged by any party as a single plan) of all
or substantially all of the assets of the Company, other than
a sale or disposition by the Company of all or substantially
all of the Company's assets to an entity, at least 50% of the
combined voting power of the voting securities of which are
owned by Persons in substantially the same proportion as their
ownership of the Company immediately prior to such sale or (B)
the approval by stockholders of the Company of any plan or
proposal for the liquidation or dissolution of the Company; or
(iv) the members of the Board at the beginning of any
consecutive 24-calendar- month period (the "Incumbent
Directors") cease for any reason other than due to death to
constitute at least a majority of the members of the Board;
provided that any director whose election, or nomination for
election by the Company's stockholders, was approved by a vote
of at least a majority of the members of the Board then still
in office who were members of the Board at the beginning of
such 24-calendar-month period, shall be deemed to be an
Incumbent Director.
(f) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(g) "Committee" shall mean a committee of the Board designated
by the Board to administer the Plan and composed of not less than two directors,
each of whom is a "nonemployee director" within the meaning of Rule 16b-3 and
is, at such times as the Company is subject to Section 162(m) of the Code (to
the extent relief from the limitation of Section 162(m) is sought with respect
to Awards), an "outside director" within the meaning of Section 162(m) of the
Code.
(h) "Dividend Equivalent" shall mean any right granted under
Section 6(d) of the Plan.
2
<PAGE>
(i) "Fair Market Value" shall mean, with respect to any
property (including, without limitation, any Shares or other securities), the
fair market value of such property determined by such methods or procedures as
shall be established from time to time by the Committees.
(j) "Incentive Stock Option" shall mean an option granted
under Section 6(a) of the Plan that meets the requirements of Section 422 of the
Code or any successor provision thereto.
(k) "Key Employee" shall mean any officer, director or other
key employee who is a regular full-time employee of the Company or its present
and future Affiliates.
(l) "Non-Qualified Stock Option" shall mean an option granted
under Section 6(a) of the Plan that is not an Incentive Stock Option.
(m) "Option" shall mean an Incentive Stock Option or a Non-
Qualified Stock Option.
(n) "Participant" shall mean a Key Employee who has been
granted an Award under the Plan.
(o) "Performance Award" shall mean any right granted under
Section 6(f) of the Plan.
(p) "Person" shall mean any individual, corporation,
partnership, association, joint-stock company, trust, unincorporated
organization, or government or political subdivision thereof.
(q) "Released Securities" shall mean securities that were
Restricted Securities with respect to which all applicable restrictions have
expired, lapsed, or been waived.
(r) "Restricted Securities" shall mean Restricted Stock or
other any Award under which issued and outstanding Shares are held subject to
restrictions imposed by the terms of the Award.
(s) "Restricted Stock" shall mean any Share granted under
Section 6(c) of the Plan.
(t) "Restricted Stock Unit" shall mean any right granted under
Section 6(c) of the Plan that is denominated in Shares.
(u) "Rule 16b-3" shall mean Rule 16b-3 promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended, or any successor rule or regulation thereto.
3
<PAGE>
(v) "Shares" shall mean the common stock of the Company,
$0.001 par value, and such other securities or property as may become the
subject of Awards pursuant to an adjustment made under Section 4(b) of the Plan.
(w) "Stock Appreciation Right" shall mean any right granted
under Section 6(b) of the Plan.
(x) "Stock Award" shall mean an Award of an Option, Restricted
Stock, or other right or security consisting of or convertible into Shares.
(y) "Stock-Based Award" shall mean an Award of a Stock
Appreciation Right, Dividend Equivalent, Restricted Stock Unit or other right,
the value of which is determined by reference to Shares.
(z) "Tandem Option" shall mean a Non-Qualified Option issued
in tandem with a Stock Appreciation Right.
(aa) "Unit" shall mean a unit of limited partnership interest
in American Real Estate Investment, L.P.
Section 3. Administration
(a) Generally. The Plan shall be administered by the Board,
or, if appointed, the Committee (herein, unless the context otherwise requires,
the Board or the Committee, if appointed, is referred to as the Committee).
Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations and other decisions under or with respect to the
Plan or any Award shall be within the sole discretion of the Committee, may be
made at any time, and shall be final, conclusive, and binding upon all Persons,
including the Company, any Affiliate, any Participant, any holder or beneficiary
of any Award, any Shareholder, and any employee of the Company or of any
Affiliate.
(b) Powers. Subject to the terms of the Plan and applicable
law, the Committee shall have full power and authority to: (i) designate
Participants; (ii) determine the type or types of Awards to be granted to each
Participant under the Plan; (iii) determine the number of Shares to be covered
by (or with respect to which payments, rights or other matters are to be
calculated in connection with) Awards; (iv) determine the terms and conditions
of any Award; (v) determine whether, to what extent, and under what
circumstances Awards may be settled or exercised in cash, Shares, other Awards,
or other property, or canceled, forfeited, or suspended, and the method or
methods by which Awards may be settled, exercised, canceled, forfeited, or
suspended; (vi) determine whether, to what extent, and under what circumstances
cash, Shares, other Awards, other property, and other amounts payable with
respect to an Award under the Plan shall be deferred; (vii) interpret and
administer the Plan and any instruments or agreements relating to, or Awards
made under, the Plan; (viii) establish, amend, suspend, or waive such rules and
regulations and appoint such agents as it shall deem appropriate for the proper
administration of the Plan; and (ix) make any other determination and take any
other action that the Committee deems necessary or desirable for the
administration of the Plan.
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(c) Reliance, Indemnification. The Committee may employ
attorneys, consultants, accountants or other persons and the Committee, the
Company and its officers and directors shall be entitled to rely upon the
advice, opinions or valuations of any such persons. No member of the Committee
shall be personally liable for any action, determination or interpretation taken
or made in good faith with respect to the Plan, or Awards made thereunder, and
all members of the Committee shall be fully indemnified and protected by the
Company in respect of any such action, determination or interpretation.
(d) Performance Criteria and Shareholder Approval. Without
limiting the generality of the Committee's discretion hereunder, the Committee
may (subject to such considerations as may arise under Section 16 of the
Securities Exchange Act of 1934, as amended, or under other corporate,
securities or tax laws) take any steps it deems appropriate, that are not
inconsistent with the purposes and intent of the Plan, to establish
performance-based criteria applicable to Awards otherwise permitted to be
granted hereunder, and to attempt to procure shareholder approval with respect
thereto, to take into account the provisions of Section 162(m) of the Code.
Section 4. Shares Available for Awards
(a) Shares Available. Subject to adjustment as provided
in Section 4(b):
(i) Limitation on Number of Shares. Awards issuable under
the Plan are limited such that the maximum aggregate number of Shares which may
issued pursuant to, or by reason of, Stock Awards and Stock-Based Awards is a
number equal to 10% of the combined number of Shares and Units outstanding from
time to time. To the extent that an Award ceases to remain outstanding by reason
of termination of rights granted thereunder, forfeiture or otherwise, the Shares
subject to such Award shall again become available for Award under the Plan. In
no event may more than two million Shares be made subject to Options (except as
contemplated by the forgoing sentance), and no Key Employee may receive Options
(whether Non-Qualified Stock Options or Incentive Stock Options) with respect to
more than one million Shares over the term of the Plan. Notwithstanding the
foregoing, except in the case of Awards intended to qualify for relief from the
limitations of Section 162(m) of the Code, there shall be no limit on the number
of Dividend Equivalents or Performance Awards that may be granted under the Plan
to the extent they are paid out in cash. If any Dividend Equivalents or
Performance Awards are paid out in cash, the underlying Shares may again be made
the subject of Awards under the Plan.
(ii) Accounting for Awards. For purposes of this Section 4, for
any Award which is denominated in, or with respect to, Shares, the number of
Shares covered by such Award, or to which such Award relates, shall be counted
on the date of grant of such Award against the aggregate number of Shares
available for granting Awards under the Plan; provided, however, that Awards
that operate in tandem with (whether granted simultaneously with or at a
different time from), or that are substituted for, other Awards may be counted
or not counted under procedures adopted by the Committee in order to avoid
double counting. Any Shares that are delivered by the Company pursuant to any
Award, and any Awards that are granted by, or become obligations of, the
Company, through the assumption by the Company or an Affiliate of, or in
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substitution for, outstanding awards previously granted by an acquired
company shall be counted against the Shares available for granting Awards
under the Plan.
(iii) Sources of Shares Deliverable Under Awards. Any Shares
delivered pursuant to an Award may consist, in whole or in part, of authorized
and unissued Shares or of treasury Shares.
(b) Adjustments.
(i) In the event that the Committee shall determine that any (A)
subdivision or consolidation of Shares, (B) dividend or other distribution
(whether in the form of cash, Shares, other securities, or other property), (C)
recapitalization or other capital adjustment of the Company or (D) merger,
consolidation or other reorganization of the Company or other rights to purchase
Shares or other securities of the Company, or other similar corporate
transaction or event, affects the Shares such that an adjustment is determined
by the Committee to be appropriate in order to prevent dilution or enlargement
of the benefits or potential benefits intended to be made available under the
Plan, then the Committee shall, in such manner as it may deem equitable, adjust
any or all of (w) the number and type of Shares (or other securities or
property) which thereafter may be made the subject of Awards, (x) the number and
type of Shares (or other securities or property) subject to outstanding Awards,
(y) the grant, purchase, or exercise price with respect to any Award and (z) any
performance goals and periods applicable to outstanding Awards or, if deemed
appropriate, make provision for a cash payment to the holder of an outstanding
Award; provided, however, in each case, that with respect to Awards of Incentive
Stock Options no such adjustment shall be authorized to the extent that such
adjustment would cause the Plan to violate Section 422 of the Code or any
successor provisions thereto; and provided further, however, that the number of
Shares subject to any Award denominated in Shares shall always be a whole
number.
(ii) Any Shares or other securities distributed to a
Participant with respect to Restricted Stock or Restricted Stock Units may be
subject to the restrictions and requirements imposed by the Committee pursuant
to Section 6(c), including, where applicable, depositing the certificates
therefor with the Company together with a stock power and bearing a legend as
provided in Section 6(c)(i).
(iii) If the Company shall be consolidated or merged
with another corporation, each Participant who has received shares of Restricted
Stock that have not become Released Securities may be required to deposit with
the successor corporation the certificates for the stock or securities or the
other property that the Participant is entitled to receive by reason of the
ownership of Restricted Stock (or Restricted Stock Units) in a manner Consistent
with Section 6(c)(i).
Section 5. Eligibility
Awards may be granted only to Key Employees. In determining
the employees to whom Awards shall be granted and the number of shares or units
to be covered by each Award, the Committee shall take into account the nature of
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employees' duties, their present and potential contributions to the success of
the Company and such other factors as it shall deem relevant in connection with
accomplishing the purposes of the Plan. A Director of the Company or a
subsidiary who is not also a regular full-time employee will not be eligible to
receive an Award. A Key Employee who has been granted an Award or Awards under
the Plan may be granted an additional Award or Awards, subject to such
limitations as may be imposed by the Code on the grant of Incentive Stock
Options. No member of the Committee shall be eligible to receive an Award under
the Plan.
Section 6. Awards
(a) Options. The Committee is hereby authorized to grant
Options to Participants and shall cause each such Option to be designated as an
Incentive Stock Option or a Non-Qualified Stock Option. Options granted by the
Committee under the Plan shall have the following terms and conditions and such
additional terms and conditions, in either case not inconsistent with the
provisions of the Plan, as the Committee shall determine:
(i) Exercise Price. The purchase price per Share purchasable
under a Non-Qualified Stock Option shall be determined by the Committee;
provided, however, that such purchase price shall not be less than 100% of Fair
Market Value of a Share on the date of grant of such Non-Qualified Stock Option.
The purchase price per Share purchasable under an Incentive Stock Option shall
not be less than 100% of the Fair Market Value of a Share on the date of grant
of such Incentive Stock Option.
(ii) Option Term. The term of each Non-Qualified Stock Option
shall be fixed by the Committee but generally shall not exceed 10 years from the
date of grant. The term of each Incentive Stock Option shall in no event be more
than 10 years from the date of grant.
(iii) Time and Method of Exercise. The Committee shall
determine the time or times at which an Option may be exercised in whole or in
part, and the method or methods by which, and the form or forms (including,
without limitation, Shares, outstanding Awards or other consideration, or any
combination thereof, having a Fair Market Value on the exercise date equal to
the relevant option price) in which, payment of the option price with respect
thereto may be made or deemed to have been made.
(iv) Early Termination. Except as otherwise provided in the
Award Agreement, the unexercised portion of any option granted under the Plan
will generally be terminated (a) thirty (30) days after the date on which the
Participant's employment is terminated for any reason other than (i) cause, (ii)
mental or physical disability, or (iii) death; (b) immediately upon the
termination of the Participant's employment for cause; (c) three months after
the date on which the Participant's employment is terminated by reason of
retirement or mental or physical disability, or (d)(i) 12 months after the date
on which the Participant's employment is terminated by reason of the death of
the employee, or (ii) three months after the date on which the Participant shall
die if such death shall occur during the three-month period following the
termination of the Participant's employment by reason of retirement or mental or
physical disability.
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(v) Incentive Stock Options. All terms of any Incentive Stock
Option granted under the Plan shall comply in all respects with the provisions
of Section 422 of the Code, or any successor provision thereto, and any
regulations promulgated thereunder. To the extent that any Option does not
qualify as an Incentive Stock Option, it shall constitute a separate
Non-Qualified Stock Option. If Shares acquired upon exercise of an Incentive
Stock Option are disposed of in a disqualifying disposition within the meaning
of Section 422 of the Code, or any successor provision thereto, by a Participant
prior to the expiration of either two years from the date of grant of such
Option or one year from the transfer of Shares to the Participant pursuant to
the exercise of such Option, or in any other disqualifying disposition within
the meaning of Section 422 of the Code, or any successor provision thereto, such
Participant shall notify the Company in writing as soon as practicable
thereafter of the date and terms of such disposition and, and if the Company (or
any affiliate thereof) thereupon has a tax- withholding obligation, shall pay to
the Company (or such affiliate) an amount equal to any withholding tax the
Company (or affiliate) is required to pay as a result of the disqualifying
disposition.
(b) Stock Appreciation Rights. The Committee is authorized to
grant Stock Appreciation Rights to Participants. Subject to the terms of the
Plan and any applicable Award Agreement, a Stock Appreciation Right grant under
the Plan shall confer upon the holder hereof a right to receive, upon exercise
thereof, an amount in cash equal of the excess of (i) the Fair Market Value of
one Share on the date of exercise over (ii) the Fair Market Value of one share
on the date of grant of the Stock Appreciation Right. Subject to the terms of
the Plan and any applicable Award Agreement, the grant price, term, methods of
exercise, methods of settlement, and any other terms and conditions of any Stock
Appreciation Right shall be as determined by the Committee. The Committee may
impose such conditions or restrictions on the exercise of any Stock Appreciation
Right as it may deem appropriate, including, but not limited to the following:
(i) no aggregate payment by the Company during any fiscal year upon the exercise
of Stock Appreciation Rights may exceed $250,000 without Board approval and (ii)
a Participant may not exercise a Stock Appreciation Right if the aggregate
amount to be received as a result of his or her exercise of Stock Appreciation
Rights in the preceding 12 month periods exceeds such Participant's current base
salary.
(c) Restricted Stock and Restricted Stock Units. The Committee
is hereby authorized to grant Awards of Restricted Stock and Restricted Stock
Units to Participants subject to such restrictions as the Committee may impose
(including, without limitation, any limitation on the right to vote a Share of
Restricted Stock or the right to receive any dividend or other right or
property), which restrictions may lapse separately or in combination at such
time or times, in such installments or otherwise, as the Committee may deem
appropriate but not inconsistent with the provisions of the Plan:
(i)Registration. Any Restricted Stock granted under the Plan
may be evidenced in such a manner as the Committee may deem appropriate,
including, without limitation, book-entry registration or issuance of a stock
certificate or certificates. In the event any stock certificate is issued in
respect of Shares of Restricted Stock granted under the Plan, such certificate
shall be registered in the name of the Participant and shall bear an appropriate
legend referring to the terms, conditions, and restrictions applicable to such
Restricted Stock.
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The Committee shall require that the stock certificates evidencing such Shares
be held in custody by the Company until the restrictions thereon shall have
lapsed, and that, as a condition of any Award of Restricted Stock, the
Participant shall have delivered a stock power, endorsed in blank, relating to
the stock covered by such Award. If and when such restrictions so lapse, the
stock certificates shall be delivered by the Company to the Participant or his
or her designee as provided in Section 6(c)(iii).
(ii) Forfeiture. Except as otherwise determined by the
Committee, upon termination of employment (as determined under criteria
established by the Committee) for any reason during the applicable restriction
period, all Shares of Restricted Stock and all Restricted Stock Units still, in
either case, subject to restriction shall be forfeited to and reacquired by the
Company; provided, however, that the Committee may, when it finds that a waiver
would be in the best interests of the Company, waive in whole, or in part any or
all remaining restrictions with respect to Shares of Restricted Stock or
Restricted Stock Units.
(iii) Lapse of Restrictions. Unrestricted Shares, evidenced in
such manner as the Committee shall deem appropriate, shall be delivered to the
holder of Restricted Stock promptly after such Restricted Stock become Released
Securities.
(d) Dividend Equivalents. The Committee is hereby authorized
to grant Awards to Participants under which the holders thereof shall be
entitled to receive payments equivalent to dividends declared on Shares, with
respect to a number of Shares and payable on such date or dates as determined by
the Committee, and the Committee may provide that such amounts (if any) shall be
deemed to have been reinvested in additional Shares or otherwise reinvested.
Subject to the terms of the Plan and any applicable Award Agreement, such Awards
may have such terms and conditions as the Committee shall determine.
(e) Other Awards. The Committee is hereby authorized, to the
extent permitted under Rule 16b-3 and applicable law, to grant to participants
such other Awards that are denominated or payable in, valued in whole or in part
by reference to, or otherwise based on or related to, Shares (including, without
limitation, securities convertible into Shares), as are deemed by the Committee
to be consistent with the purpose of the Plan. Subject to the terms of the Plan
and any applicable Award Agreement, the Committee shall determine the terms and
conditions of such Awards. Shares or other securities delivered to a Participant
pursuant to a purchase right granted under this Section 6(e) shall be purchased
for such consideration, which may be paid by such method or methods and in such
form or forms, including, without limitation, cash, Shares, outstanding Awards,
or other consideration, or any combination thereof, as the Committee shall
determine. The value of the consideration paid for Shares and other securities
delivered to a Participant under this Section 6(e), as established by the
Committee, shall not be less than the Fair Market Value of such Shares or other
securities as of the date such purchase right is granted.
(f) Performance Awards. The Committee is hereby authorized to
grant Performance Awards to Participants. Subject to the terms of the Plan and
any applicable Award Agreement, a Performance Award granted under the Plan (i)
may be denominated as a Stock Award or a Stock-Based Award and payable in cash,
Shares, other securities or other property
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<PAGE>
and (ii) shall confer on the holder thereof rights valued as determined by the
Committee and payable to, or exercisable by, the holder of the Performance
Award, in whole or in part, upon the achievement of such performance goals and
during such performance periods as the Committee shall establish. Subject to the
terms of the Plan and any applicable Award Agreement, the performance goals to
be achieved during any performance period, the length of any performance period,
and the amount of any payment or transfer to be made pursuant to any Performance
Award shall be determined by the Committee.
(g) General.
(i) No Cash Consideration for Awards. Awards shall be
granted for no cash consideration or such minimal cash consideration as may be
required by applicable law.
(ii) Awards May Be Granted Separately or Together. Awards
may, in the discretion of the Committee, be granted either alone or in addition
to, in tandem with, or in substitution for any other Award or any award granted
under any other plan of the Company or any Affiliate. Awards granted in addition
to or in tandem with other Awards, or in addition to or in tandem with awards
granted under any other plan of the Company or any Affiliate, may be granted
either at the same time as or at a different time from the grant of such other
Awards or awards; provided, that any Tandem Option shall be subject to the
following provisions: upon exercise of an Option issued as part of a Tandem
Option, the Participant shall be entitled to a credit toward the option exercise
price equal to the value of the Stock Appreciation Rights issued in tandem with
the Option exercised, but not in an amount that would exceed the amount of the
federal income tax deduction allowed to the Company in respect of such Stock
Appreciation Rights and not in an amount which would reduce the amount of the
Participant's payment below the par value of the Shares subject to the Option.
Upon such exercise of a Tandem Option, the related Stock Appreciation Right
shall terminate and the value of such Stock Appreciation Right shall be limited
to such credit. Upon the exercise of a Stock Appreciation Right issued as part
of a Tandem Option, the Option to which such Stock Appreciation right relates
shall cease to be exercisable to the extent of the number of Shares with respect
to which the Stock Appreciation Right was exercised.
(iii) Forms of Payment Under Awards. Subject to the terms of
the Plan and of any applicable Award Agreement, payment or transfer to be made
by the Company or an Affiliate upon the grant or exercise of an Award may be
made in such form or forms as the Committee shall determine, including, without
limitation, cash, Shares, other securities, other Awards, or other property, or
any combination thereof, and may be made in a single payment or transfer, in
installments, or on a deferred basis, in each case in accordance with rules and
procedures established by the Committee. Such rules and procedures may include,
without limitation, provisions for the payment or crediting or reasonable
interest on installment or deferred payments or the grant of crediting of
Dividend Equivalents in respect of installments or deferred payments denominated
in Shares or other securities.
(iv) Limits on Transfer of Awards. No Award (other than
Released Securities), and no right under any such Aware, shall be assignable,
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alienable, saleable, or transferable by a Participant otherwise than by will or
by the laws of descent and distribution (or, on the case of an Award of
Restricted Securities, to the Company); provided, however, that, the Committee
may (but need not) permit other transfers of Options, where the Committee
concludes that such transferability (i) does not result in accelerated taxation,
(ii) does not cause any Option intended to be an Incentive Stock Option to fail
to be described in Section 422(b) of the Code, and (iii) is otherwise
appropriate and desirable; and provided, further, that, if so determined by the
Committee, a Participant may, in the manner established by the Committee,
designate a beneficiary or beneficiaries to exercise the rights of the
Participant, and to receive any property distributable, with respect to any
Award upon the death of the Participant. Each Award, and each right under any
Award, shall be exercisable, during the Participant's lifetime, only by the
Participant or, if permissible under applicable law with respect to any Award
that is not an Incentive Stock Option, by the Participant's guardian or legal
representative. No award (other than Released Securities), and no right under
such Award, may be pledged, alienated, attached, or otherwise encumbered, and
any purported pledge, alienation, attachment, or encumbrance thereof shall be
void and unenforceable against the Company or any Affiliate.
(v) Terms of Awards. Except as set forth in Section 6(a)(ii),
the term of each Award shall be for such period as may be determined by the
Committee.
(vi) Shares Certificates. All certificates for Shares or other
securities of the Company or any Affiliate delivered under the Plan pursuant to
any Award or the exercise thereof shall be subject to such stop transfer orders
and other restrictions as the Committee may deem advisable under the Plan or the
rules, regulations, and other restrictions as the Committee may deem advisable
under the Plan or the rules, regulations, and other requirements of the
Securities and Exchange Commission, any stock exchange upon which such Shares or
other securities are then listed, and any applicable Federal or state securities
laws, and the Committee may cause a legend or legends to be put on any such
certificates to make appropriate reference to such restrictions.
Section 7. Amendment and Termination
Except to the extent prohibited by applicable law and unless
otherwise expressly provided in an Award Agreement or in the Plan:
(a) Amendments to the Plan. The Board may amend, alter,
suspend, discontinue, or terminate the Plan, including, without limitation, any
amendment, alteration, suspension, discontinuation, or termination that would
impair the rights of any Participant, or any other holder or beneficiary of any
Award theretofore granted to the extent such rights are not then accrued and
vested, without the consent of any shareholder, Participant, other holder or
beneficiary of an Award, or other Person; provided, however, that
notwithstanding any other provision of the Plan or any Award Agreement, without
the approval of the shareholders of the Company no amendment, alternation,
suspension, discontinuation, or termination shall be made that would, if such
amendment, alternation, suspension, discontinuation or termination were not
approved by the shareholders of the Company, cause the Plan to fail to comply
with any requirement of applicable law or regulation.
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(b) Amendments to Awards. The Committee may waive any
conditions or rights under, amend any terms of, or amend, alter, suspend,
discontinue, or terminate, any Award theretofore granted, prospectively or
retroactively, without the consent of any relevant Participant or holder or
beneficiary of an Award.
(c) Adjustments of Awards Upon Certain Acquisitions. In the
event the Company or any Affiliate shall assume outstanding employee awards in
connection with the acquisition of another business or another corporation or
business entity, the Committee may make such adjustments, not inconsistent with
the terms of the Plan, in the terms of Awards as it shall deem appropriate in
order to achieve reasonable comparability or other equitable relationship
between the assumed awards and the Awards granted under the Plan as so adjusted.
(d) Adjustments of Awards Upon the Occurrence of Certain
Unusual or Nonrecurring Events. The Committee shall be authorized to make
adjustments in the terms and conditions of, and the criteria included in, Awards
in recognition of unusual or nonrecurring events (including, without limitation,
the events described in Section 4(b) hereof) affecting the Company, any
Affiliate, or the financial statements of the Company or any Affiliate or of
changes in applicable laws, regulations, or accounting principles, whenever the
Committee determines that such adjustments are appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits to be made
available under the Plan.
(e) Change in Control. Notwithstanding any other provision
hereof, upon a Change in Control, (i) all Awards which have been granted and are
outstanding as of the date of the Change in Control shall be fully vested and
exercisable, (ii) all outstanding shares of Restricted Stock shall become
Released Securities and (iii) all performance targets with respect to
outstanding Awards, as applicable, shall be deemed met.
(f) Correction of Defects, Omissions, and Inconsistencies. The
Committee may correct any defect, supply any omission or reconcile any
inconsistency in the Plan, or any Award in the manner and to the extent it shall
deem desirable to carry the Plan into effect.
Section 8. General Provisions
(a) No Rights to Awards. No key Employee or Participant shall
have any claim to be granted any Award under the Plan, and there is no
obligation for uniformity of treatment of Key Employees, Participants, or
holders or beneficiaries of Awards under the Plan. The terms and conditions of
Awards need not be the same with respect to each recipient.
(b) Withholding. The Company or any Affiliate shall be
authorized to withhold from any Award granted or any payment due or transfer
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made under any Award or under the Plan the amount (in cash, Shares, other
securities, or other property) of withholding taxes due in respect of an Award,
its exercise, the release of restrictions on such Award or any payment or
transfer under such Awards or under the Plan and to take such other actions as
may be necessary in the opinion of the Company to satisfy all obligations for
the payment of such taxes. In case of Awards paid in Shares, the Participant or
other person receiving such Shares may be required to pay the Company or
Affiliate, as appropriate, the amount of any such withholding taxes which is
required to be withheld with respect to such Shares. Notwithstanding anything
contained in the Plan to the contrary, the Participant's satisfaction of any
tax- withholding requirements imposed by the Committee shall be a condition
precedent to the Company's obligation as may otherwise be provided hereunder to
provide Shares to the Participant and to the release of any restrictions as may
otherwise be provided hereunder or under any Award Agreement, as applicable; and
the applicable Award shall be forfeited upon the failure of the Participant to
satisfy such requirements with respect to an Award, its exercise, the release of
restrictions on such Award, or any payment or transfer under such Award or under
the Plan.
(c) No Limit on Other Plans. Nothing contained in the Plan
shall prevent the Company or any Affiliate from adopting or continuing in effect
other or additional compensation arrangements and such arrangements may be
either generally applicable or applicable only in specific cases.
(d) No Right to Employment. The grant of an Award shall not be
construed as giving a Participant the right to be retained in the employ of the
Company or any Affiliate. Further, the Company or an Affiliate may at the time
dismiss a Participant from employment, free from any liability, or any claim
under the Plan, unless otherwise expressly provided in the Plan or in any Award
Agreement.
(e) Governing Law. The validity, construction, and effect of
the Plan and any rules and regulations relating to the Plan shall be determined
in accordance with the laws of the State of Colorado and applicable Federal law.
(f) Severability. If any provision of the Plan or any Award is
or becomes or is deemed to be invalid, illegal, or unenforceable in any
jurisdiction, or would disqualify the Plan or any Award under any law deemed
applicable by the Committee, such provision shall be construed or deemed amended
to conform to applicable laws, or if it cannot be construed or deemed amended
without, in the determination of the Committee, materially altering the intent
of the Plan, such provision shall be deemed void stricken and the remainder of
the Plan and any such Award shall remain in full force and effect.
(g) No Trust or Fund Created. Neither the Plan nor any Aware
shall create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company or any Affiliate and a Participant or
any other Person. To the extent that any Person acquires a right to receive
payments from the Company or any Affiliates pursuant to an Award, such right
shall be no greater than the right of any unsecured general creditor of the
Company or any Affiliate.
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(h) No Fractional Shares. No fractional Shares shall be issued
or delivered pursuant to the Plan or any Award, and the Committee shall
determine whether cash, other securities, or other property shall be paid or
transferred in lieu of any fractional Shares or whether such fractional Shares
or any rights thereto shall be canceled, terminated, or otherwise eliminated.
(i) Headings. Headings are given to the Sections and
subsections of the Plan solely as a convenience to facilitate reference. Such
headings shall not be deemed in any way material or relevant or to the
construction or interpretation of the Plan or any provision hereof.
(j) Notices. All notices under the Plan shall be in writing,
and if to the Company, shall be delivered to the Board or mailed to its
principal office, addressed to the attention of the Board; and if to the
Participant, shall be delivered personally, sent by facsimile transmission or
mailed to the Participant at the address appearing in the records of the
Company. Such addresses may be changed at any time by written notice to the
other party given in accordance with this Section 8(j).
Section 9. Effective Date of the Plan
This amendment and complete restatement of the Plan is
effective as of October, 1993, the initial effective date of the Plan.
Section 10. Term of the Plan
The Plan shall continue until the earlier of (i) the date on
which all Stock Awards and Stock-Based Awards issuable hereunder have been
issued, or (ii) the termination of the Plan by the Board. However, unless
otherwise expressly provided in the Plan or in an applicable Award Agreement,
any Award theretofore granted may extend beyond such date and the authority of
the Committee to amend, alter, adjust, suspend, discontinue, or terminate any
such Aware or to waive any conditions or rights under any such Award, and the
authority of the Board to amend the Plan, shall extend beyond such date.
Section 11. Regulations and Approvals.
(a) The obligation of the Company to sell Shares with respect
to an Award granted under the Plan shall be subject to all applicable laws,
rules and regulations, including all applicable federal and state securities
laws, and the obtaining of all such approvals by governmental agencies as may be
deemed necessary or appropriate by the Committee.
(b) The Committee may make such changes to the Plan as may be
necessary or appropriate to comply with the rules and regulations of any
government authority or to obtain tax benefits applicable to an Award.
(c) Each grant of an Award (or issuance of Shares in respect
thereof) is subject to the requirement that, if at any time the Committee
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determines, in its discretion, that thelisting, registration or qualification of
Shares issuable pursuant to the Plan is required by any securities exchange or
under any state or federal law, or the consent or approval of any governmental
regulatory body is necessary or desirable as a condition of, or in connection
with, the issuance of an Award or Shares, no payment shall be made or Shares
issued or grant of Restricted Stock or Restricted Stock Units made, in whole or
in part, unless listing, registration, qualification, consent or approval has
been effected or obtained free of any conditions in a manner acceptable to the
Committee.
(d) In the event that the disposition of stock acquired
pursuant to the Plan is not covered by a then current registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), and is not
otherwise exempt from such registration, such Shares shall be restricted against
transfer to the extent required under the Securities Act, and the Committee may
require any individual receiving Shares pursuant to the Plan, as a condition
precedent to receipt of such Shares, to represent to the Company in writing that
such Shares will be disposed of only if registered for sale under the Securities
Act or if there is an available exemption for such disposition.
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AMERICAN REAL ESTATE INVESTMENT CORPORATION
620 West Germantown Pike, Suite 200
Plymouth Meeting, PA 19462
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 11, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned, revoking all previous proxies, hereby appoints Jeffrey
E. Kelter, David F. McBride and Timothy A. Peterson, or any of them, as proxies,
each with full power of substitution and all of the powers which the undersigned
would possess if present in person, and hereby authorizes them to represent and
vote, as designated on the reverse side of this proxy, all of the shares of
common stock of American Real Estate Investment Corporation (the "Company")
registered in the name of the undersigned on October 30, 1998 at the Annual
Meeting of Stockholders of the Company to be held on December 11, 1998, and at
any adjournment or postponement thereof.
The shares represented hereby will be voted as directed by this proxy.
If no direction is made, this proxy will be voted FOR Proposal 1, FOR Proposal
2, FOR the election of all nominees for director listed under Proposal 3 and FOR
Proposal 4. In their discretion, the proxies are authorized to vote on such
other matters as may properly come before the meeting.
Receipt of the Company's Notice of Annual Meeting of Stockholders,
Proxy Statement and the Annual Report to Stockholders is acknowledged.
(IMPORTANT -- TO BE MARKED, SIGNED AND DATED ON REVERSE SIDE)
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Please mark your votes as in
/X/
this example.
For Against Abstain
1. To approve the issuance of shares of our common stock / / / / / /
upon conversion of up to 1,362,940 units of limited
partnership interest ("OP Units") of our operating
partnership, American Real Estate Investment, L.P. (the
"Operating Partnership"), by the holders of such OP Units
who obtained such OP Units pursuant to two contribution
agreements, each dated as of February 4, 1998 between
the Operating Partnership and the parties listed on the
signature pages thereto, as described in the Proxy
Statement
2. To approve the issuance of shares of common stock of the For Against Abstain
Company upon conversion of up to approximately / / / / / /
1,992,514 DP Units by the holders of such OP Units who
obtained, or may obtain, such OP Units pursuant
to the contribution agreement, dated as of
April 30, 1998 between the Company, the Operating
Partnership and the parties listed on the signature pages
thereto, as described in the Proxy Statement
Withheld
3. ELECTION OF DIRECTORS For all nominees from
all nominees
/ / / /
NOMINEES: Francesco Galesi and Michael J. Falcone
FOR, except vote withheld from the following nominee(s)
4. To approve a proposal to amend and For Against Abstain
restate our 1993 Omnibus Incentive / / / / / /
Plan, as described in the Proxy
Statement
5. In their discretion, the proxies are
authorized to vote upon such other
business as may properly come before
the meeting
NOTE:Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. Executors, administrators, trustees and other
fiduciaries should so indicate when signing. 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. This proxy may be mailed,
postage-free, in the enclosed envelope .
___________,1998 ____________________ ______________, 1998 ________________
Signature Title Signature (if
(if required) held jointly)
PLEASE MARK, SIGN,
DATE AND RETURN THIS
PROXY CARD PROMPTLY
USING THE ENCLOSED
ENVELOPE
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