UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Check the appropriate box:
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14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
American Spectrum Realty, Inc.
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(Name of Registrant as Specified In Its Charter)
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AMERICAN SPECTRUM REALTY, INC.
7700 Irvine Center Drive, Suite 555
Irvine, California 92618
Dear Stockholder:
On behalf of the Board of Directors of American Spectrum Realty, Inc., a
Maryland corporation (the "Company"), I cordially invite you to attend the
Company's 2002 Annual Meeting of Stockholders, which will be held on Friday,
November 15, 2002, at 9:00 a.m., local time, at Sheraton Suites Houston, 2400
West Loop South, Houston, Texas.
The attached Proxy Statement describes in detail the following matters expected
to be acted upon at the Annual Meeting: the election of five nominees for
director, each of whom is presently a director of the Company; and the
ratification of the selection of BDO Seidman, LLP, as the Company's independent
auditors. At the Annual Meeting, we will also report on the Company's progress
and respond to any questions that you may have about the Company's business.
We sincerely hope that you will be able to attend and participate in the
Company's first Annual Meeting of Stockholders. Whether or not you plan to come
to the Annual Meeting, however, it is important that your shares be represented
and voted at the meeting. You may vote your shares by completing the
accompanying proxy card, by a telephone proxy authorization, or by authorizing a
proxy electronically via the Internet. Please see the instructions on the
accompanying proxy card for details on telephone and electronic proxy voting.
BY RETURNING YOUR PROXY (EITHER BY SIGNING, DATING AND RETURNING THE
ACCOMPANYING PAPER PROXY CARD, BY A TELEPHONE PROXY AUTHORIZATION OR BY
AUTHORIZING A PROXY ELECTRONICALLY VIA THE INTERNET) YOU AUTHORIZE MANAGEMENT TO
REPRESENT YOU AND VOTE YOUR SHARES ACCORDING TO YOUR INSTRUCTIONS. SUBMITTING
YOUR PROXY NOW WILL NOT PREVENT YOU FROM VOTING IN PERSON AT THE ANNUAL MEETING,
BUT WILL ASSURE THAT YOUR VOTE IS COUNTED IF YOU ARE UNABLE TO ATTEND.
Sincerely,
/s/ William J. Carden
------------------
William J. Carden
Chairman of the Board
Irvine, California
October 15, 2002
AMERICAN SPECTRUM REALTY, INC.
7700 Irvine Center Drive, Suite 555
Irvine, California 92618
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FRIDAY, NOVEMBER 15, 2002
TO THE STOCKHOLDERS OF AMERICAN SPECTRUM REALTY, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of American Spectrum Realty, Inc., a Maryland corporation (the
"Company"), will be held on Friday, November 15, 2002, at 9:00 a.m., local time,
at Sheraton Suites Houston, 2400 West Loop South, Houston, Texas 77057.
At the Annual Meeting, stockholders will be asked:
1. To elect five directors to serve until the Company's nex Annual Meeting of
Stockholders and until their successors are duly elected and qualify.
2. To ratify the selection of BDO Seidman, LLP, as the Company's independent
auditors for the fiscal year ending December 31, 2002.
3. To transact such other business as may properly come before the Annual
Meeting or any adjournment or postponement thereof and may properly be
voted upon.
The Board of Directors of the Company has fixed the close of business on
September 20, 2002, as the record date (the "Record Date") for the determination
of stockholders of record entitled to notice of, and to vote at, the Annual
Meeting and any adjournment or postponement thereof.
All stockholders are cordially invited to attend the Annual Meeting in person.
Stockholders of record as of the Record Date will be admitted to the Annual
Meeting upon presentation of identification. Stockholders who own shares of
Common Stock beneficially through a bank, broker or other nominee will be
admitted to the Annual Meeting upon presentation of identification and proof of
ownership or a valid proxy signed by the record holder. A recent brokerage
statement or letters from a bank or broker are examples of proof of ownership.
If you own shares of the Company's Common Stock beneficially, you should contact
your broker or applicable agent in whose name the shares are registered to
obtain a broker's proxy and bring it to the Annual Meeting in order to vote.
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE RETURN YOUR PROXY
(EITHER BY SIGNING, DATING AND RETURNING THE ACCOMPANYING PAPER PROXY CARD, BY
TELEPHONE PROXY AUTHORIZATION, OR BY AUTHORIZING A PROXY ELECTRONICALLY VIA THE
INTERNET) AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR REPRESENTATION AT THE
MEETING.
EVEN IF YOU HAVE SUBMITTED YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU
ATTEND THE ANNUAL MEETING. PLEASE NOTE, HOWEVER, IF YOUR SHARES ARE HELD OF
RECORD BY A BROKER, BANK OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE MEETING,
YOU MUST OBTAIN FROM THE RECORD HOLDER A PROXY ISSUED IN YOUR NAME.
BY ORDER OF THE BOARD OF DIRECTORS
Harry A. Mizrahi, Secretary
Irvine, California
October 15, 2002
AMERICAN SPECTRUM REALTY, INC.
7700 Irvine Center Drive, Suite 555
Irvine, California 92618
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
November 15, 2002
GENERAL
This Proxy Statement is provided to the stockholders of American Spectrum
Realty, Inc., a Maryland corporation (the "Company"), in order to solicit
proxies, in the form enclosed, for use at the Annual Meeting of Stockholders of
the Company to be held on Friday, November 15, 2002, at 9:00 a.m., local time,
at Sheraton Suites Houston, 2400 West Loop South, Houston, Texas, and any
adjournments or postponements thereof (the "Annual Meeting"). The Board of
Directors (the "Board") knows of no matters to come before the Annual Meeting
other than those referred to in this Proxy Statement. This Proxy Statement and
the enclosed form of proxy are being mailed to stockholders on or about October
15, 2002.
SOLICITATION
This solicitation is made by mail on behalf of the Board of Directors of the
Company. Costs of the solicitation will be borne by the Company. Further
solicitation of proxies may be made by telephone, telegraph, fax or personal
interview by the directors, officers and employees of the Company, who will not
receive additional compensation for the solicitation. The Company will reimburse
banks, brokerage firms and other custodians, nominees and fiduciaries for
reasonable expenses incurred by them in sending proxy materials to their
customers or principals who are the beneficial owners of shares of the Common
Stock, par value $.01 per share (the "Common Stock"), of the Company.
VOTING PROCEDURES
Only those holders of Common Stock of record as of the close of business on
September 20, 2002 (the "Record Date") will be entitled to notice of, and to
vote at, the Annual Meeting. Each share of Common Stock entitles its holder to
one vote. Cumulative voting of shares of Common Stock is not permitted. A total
of 5,536,990 shares of Common Stock were issued and outstanding as of the Record
Date.
The presence of the holders of shares representing a majority of the outstanding
shares of Common Stock entitled to vote, whether in person or by proxy, is
necessary to constitute a quorum to transact business at the Annual Meeting.
Abstentions and broker non-votes (that is, proxies from brokers or nominees
indicating that such persons have not received instructions from the beneficial
owners or other persons entitled to vote on a matter on which the brokers or
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nominees do not have discretionary power to vote) are treated as present for
purposes of determining the existence of a quorum. Directors are elected by a
plurality of the votes cast. The ratification of the selection of BDO Seidman,
LLP, as the Company's independent auditors for fiscal year ending December 31,
2002, requires a majority of the votes cast at the Annual Meeting. For purposes
of the election of directors and ratification of the independent auditors,
abstentions will have no effect on the result of the vote. It is expected that
brokers will have discretionary power to vote on each of the proposals.
Shares represented by properly executed proxies in the form enclosed that are
timely received by Mellon Investor Services, as the Tabulator for the Company,
and not revoked will be voted as instructed on the proxy. If instructions are
not given on a properly executed and returned proxy, the shares represented
thereby will be voted (i) FOR the election of each of the five nominees for
director; and (ii) FOR the ratification of the selection of BDO Seidman, LLP, to
serve as independent auditors of the Company. If any other matters properly come
before the Annual Meeting or any adjournment or postponement thereof, it is the
intention of the persons named in the accompanying proxy to vote such proxies in
accordance with their discretion. In order to be voted, each proxy must be filed
with the Secretary of the Company prior to voting.
REVOCABILITY OF PROXIES
Stockholders may revoke a proxy at any time before the proxy is voted. This may
be done by filing a notice of revocation of the proxy with the Secretary of the
Company, by filing a later-dated proxy with the Secretary of the Company, or by
voting in person at the Annual Meeting.
BACKGROUND
Substantially all of the Company's assets are held through an operating
partnership (the "Operating Partnership") in which the Company holds a 1%
general partner interest and an 87.4% limited partner interest. Holders of
limited partnership units in the Operating Partnership ("OP Units") have the
same rights to distributions as holders of the Common Stock and have the right
to have their OP Units redeemed by the Operating Partnership and to receive, at
the Company's option, in exchange for each OP Unit, either one share of Common
Stock or cash equal to the fair market value of one share of Common Stock at the
date of exchange.
In October 2001, the Company issued shares of Common Stock and OP Units to
various individuals and entities in exchange for certain real property and
operating assets (the "Consolidation").
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PROPOSAL NUMBER ONE--ELECTION OF DIRECTORS
Stockholders will be asked at the Annual Meeting to elect five directors, who
will constitute the full Board of Directors. Each elected director will hold
office until the next Annual Meeting of Stockholders and until the director's
successor is duly elected and qualifies. If any nominee becomes unavailable to
serve for any reason, an event the Company does not anticipate, solicited
proxies will be voted for the election of the person, if any, designated by the
Board to replace that nominee.
Stockholders may withhold authority to vote for either (i) the entire slate of
nominated directors by checking the box marked WITHHOLD AS TO ALL on the proxy
card, or (ii) for any one or more individual nominees, by checking the box
marked FOR ALL EXCEPT on the proxy card and writing the name of individual
nominees in the space provided on the proxy card. Instructions on the
accompanying proxy card that withhold authority to vote for one or more of the
nominees will cause any such nominee to receive fewer votes.
The following five persons have been selected by the Board as nominees for
election to the Board of Directors:
Timothy R. Brown
William J. Carden
Lawrence E. Fiedler
William W. Geary, Jr.
Harry A. Mizrahi
All of the nominees are incumbent directors. The Board knows of no reason why
any of these nominees would be unable to serve, but in the event any nominee is
unable to serve or for good cause will not serve, the proxies received
indicating a vote in favor of such nominee will be voted for a substitute
nominee as the Board may recommend.
REQUIRED VOTE
The affirmative vote of a plurality of the votes cast at the Annual Meeting is
required to elect a director.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE NAMED NOMINEES.
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BOARD OF DIRECTORS, EXECUTIVE OFFICERS AND SENIOR MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND SENIOR MANAGEMENT
The following table sets forth certain information concerning the directors,
executive officers and senior management of the Company as of August 31, 2002:
APPROXIMATE TIME
NAME POSITION AGE IN OFFICE
- -------------------------- ----------------------------------------- --------- -------------------
William J. Carden Chairman of the Board, 58
Chief Executive Officer and President, Since 2000
Acting Chief Financial Officer Since 2002
Timothy R. Brown Director 56 Since 2000
Lawrence E. Fiedler Director 63 Since 2000
William W. Geary, Jr. Director 59 Since 2000
Harry A. Mizrahi Director, Chief Operating Officer, 44
Senior Vice President Since 2000
Secretary Since 2002
Thomas N. Thurber Senior Vice President 52 Since 2000
Paul E. Perkins Senior Vice President 36 Since 2000
Patricia A. Nooney Senior Vice President 45 Since 2000
Treasurer Since 2002
William J. Carden - Mr. Carden is Chairman of the Board, Chief Executive
Officer, President (positions held since the formation of the Company) and
Acting Chief Financial Officer (since August 2002) of the Company. Mr. Carden
serves as an officer and director of CGS Real Estate Company, Inc. ("CGS") and
related companies, positions he has held since 1989. He received his accounting
degree from Long Beach State.
Timothy R. Brown - Mr. Brown serves as a director, as chairman of the Company's
Audit Committee and as a member of the Company's Compensation Committee. Since
1999, Mr. Brown has been a partner in the law firm of Thompson & Knight LLP.
Prior to 1999, Mr. Brown was a partner of Brown Parker & Leahy, L.L.P. for
twenty-one years. Mr. Brown also serves as a director of Southwest Bank of
Texas, a subsidiary of Southwest Bank of Texas Bancshares. He received his BA
from Stanford University and his JD from the University of Texas School of Law.
Lawrence E. Fiedler - Mr. Fiedler serves as a director, as a member of the
Company's Audit Committee and as a member of the Company's Compensation
Committee. Since 1987, Mr. Fiedler has been the President of JRM Development
Enterprises, Inc. and its affiliated companies. These companies have developed,
acquired, managed and leased retail, residential and commercial properties
throughout the United States. Since 1979, Mr. Fiedler has been an
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Adjunct Professor at the New York University Real Estate Institute. Mr. Fiedler
received his BS from Syracuse University, an LLB from New York University School
of Law and an LLM from New York University School of Law in Taxation. Mr.
Fiedler is the President and sole director of a corporation which serves as the
general partner of a limited partnership that filed a petition for
reorganization under Chapter XI of the Federal Bankruptcy Act in November 2000.
William W. Geary, Jr. - Mr. Geary serves as a director, as a member of the
Company's Audit Committee and as a member of the Company's Compensation
Committee. Since February 1986, Mr. Geary has been the President of Carlsberg
Management Company, a real estate development and management company. Mr. Geary
received his BS and MBA from Northwestern University. Mr. Geary holds the
designations of Charter Financial Analyst, Certified Property Manager ("CPM"),
Specialist in Real Estate Securities ("SRS") and Certified Commercial-Investment
Member ("CCIM"). He is a Member of the Los Angeles Society of Security Analysts.
Harry A. Mizrahi - Mr. Mizrahi serves as a director, and is the Chief Operating
Officer, Senior Vice President (positions held since the formation of the
Company) and Secretary (since August 2002) of the Company. During 1999 and 2000,
Mr. Mizrahi headed the New York office of International Property Corporation, an
affiliate of the Reichmann Group of Companies. Mr. Mizrahi is an Adjunct
Assistant Professor at New York University's Real Estate Institute. From 1994 to
1998, Mr. Mizrahi was a Vice President and Director of Salomon Brothers' and
Salomon Smith Barney's Real Estate Investment Banking Groups. From 1981 to 1991,
Mr. Mizrahi was employed by Eastdil Realty and became an officer and partner.
Mr. Mizrahi received his BA from Northwestern University and an MBA from
Columbia University Graduate School of Business and has attended Harvard
University Kennedy School of Government.
Thomas N. Thurber - Mr. Thurber is a Senior Vice President of the Company. From
August 2000 to August 2002, Mr. Thurber was the Company's Chief Financial
Officer and Secretary. From 1995 to October 2001, Mr. Thurber was the Chief
Financial Officer of CGS and an officer and director of affiliates of CGS and
related companies. Mr. Thurber received his accounting degree from Florida State
University. Mr. Thurber is a Certified Public Accountant.
Paul E. Perkins - Mr. Perkins is a Senior Vice President of the Company. From
1994 to October 2001, Mr. Perkins was an officer of CGS and held various officer
positions in CGS-affiliated companies. From 1988 to 1992, he was an investment
broker with the Seeley Company, a Los Angeles-based commercial real estate
brokerage firm. Mr. Perkins received his undergraduate degree in Business and
Finance from the University of Southern California and a Master's Degree in Real
Estate from New York University.
Patricia A. Nooney - Ms. Nooney is a Senior Vice President (position held since
the formation of the Company) and Treasurer (since February 2002) of the
Company. From October 1997 to October 2001, Ms. Nooney was the President of the
St. Louis office of a CGS affiliate, which did business as Coldwell Banker
Commercial American Spectrum. From 1981 to September 1997, Ms. Nooney was an
officer of Brooklyn Street Properties, Inc. From 1978 to 1981, Ms.
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Nooney was an auditor with Deloitte & Touche. Ms. Nooney received her BA in
Business Administration from the University of Miami. Ms. Nooney holds the
designations of CPM and CCIM. As of November 2002, Ms. Nooney will serve as the
2003 President of the Institute of Real Estate Management ("IREM").
INFORMATION ON MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board has established and maintained an Audit Committee and in May 2002
designated a Compensation Committee. At present, there is no nominating
committee of the Board. From the date of the Consolidation (October 15, 2001) to
December 31, 2001 (the "2001 Fiscal Year"), the Board held two regular meetings,
at which all members were present. The Audit Committee convened one meeting
during the 2001 Fiscal Year, at which all members were present.
AUDIT COMMITTEE
The Audit Committee is composed of the non-employee directors of the Company:
Mr. Brown, Mr. Fiedler and Mr. Geary. Each of the members of the Audit Committee
is independent within the meaning of the listing standards of the American Stock
Exchange ("AMEX"). In 2002, the Audit Committee held special and regular
quarterly meetings throughout the year pursuant to its charter, a copy of which
is attached as Appendix A to this Proxy Statement. The Audit Committee has the
authority to make recommendations to the Board of an accounting firm to be
appointed as the Company's independent auditors, discuss the scope and results
of the audit with the independent auditors, review with management and the
independent auditors the Company's interim and year-end operating results,
consider the adequacy of the Company's internal accounting controls and audit
procedures and review non-audit services to be performed by the independent
auditors.
REPORT OF THE AUDIT COMMITTEE
The Audit Committee is composed of three directors, acts under the written
charter adopted and approved by the Board, and is independent, within the
meaning of the listing standards of AMEX. The Audit Committee members do not
serve as professional accountants or auditors and their functions are not
intended to duplicate or to certify the activities of management and the
independent auditors. The Committee assists the Board in its oversight of the
Company's financial reporting process and recommends to the Board the selection
of independent auditors. The Committee receives information from, consults with,
and provides its views and direction to, management and the independent auditors
on the basis of the information it receives and the experience of its members in
business, financial and accounting matters.
Management has the primary responsibility for the financial statements and the
reporting process. The independent auditors are responsible for expressing an
opinion on the conformity of the Company's audited financial statements to
generally accepted accounting principles. The Audit Committee reviews the
Company's financial reporting process on behalf of the Board.
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In this context, the Audit Committee (i) approved the decision to change the
independent auditors (see Proposal Number Two-Ratification of Selection of
Independent Auditors) and (ii) reviewed and discussed with management and BDO
Seidman, the newly appointed independent auditors, the Company's audited
financial statements for the 2001 Fiscal Year. The Audit Committee has also
discussed with the independent auditors the matters required to be discussed by
Statement on Auditing Standards No. 61 (Communication with Audit Committees) and
has received from the independent auditors the written disclosures and the
letter required by Independence Standards Board Standard No. 1 (Independence
Discussion with Audit Committees) and discussed with them their independence
from the Company and its management. Further, the Audit Committee has considered
whether the independent auditors' provision of certain non-audit services,
namely tax return preparation, to the Company is compatible with the auditor's
independence.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board that the audited financial statements be
included in the Company's Annual Report filed with the Securities and Exchange
Commission on Form 10-K for the 2001 Fiscal Year.
Respectfully submitted,
AUDIT COMMITTEE
Timothy R. Brown
Lawrence E. Fiedler
William W. Geary, Jr.
COMPENSATION COMMITTEE
A compensation committee was not established or maintained by the Board in the
2001 Fiscal Year. All matters related to compensation, employment agreements and
stock options were administered by the entire Board. In May 2002, the Board
established a compensation committee, composed of the non-employee directors of
the Company: Mr. Brown, Mr. Fiedler and Mr. Geary. No member of the Compensation
Committee has served as an officer of the Company or any of its subsidiaries.
The Compensation Committee has the authority to renew and approve salary
arrangements, including grants of annual incentive awards for the Company's
directors, officers and other employees, adopt and amend employment agreements
for its officers and other employees, and administer the Company's stock plans.
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
All compensation matters, review of employment agreements and the awarding of
shares and options were considered by the full Board. The Board believes that
the compensation program for the Company's executive officers ("Executive
Officers") should reflect the Company's performance and the value created for
the Company's stockholders. The Company
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commissioned an independent compensation study, looked to surveys and to other
publicly available information to ensure that the Company's executive
compensation is comparable to that of similarly situated companies within and
outside of the real estate industry.
The compensation opportunities for the Executive Officers are intended to
attract, motivate and retain talented executives and to ensure continuity and
stability of management. As presently in place, the annual compensation program
for Executive Officers includes: 1) an annual base salary that is competitive
with the market and reflects individual performance, 2) a cash bonus based on
the individual's achievement of performance goals and criteria to be established
in the discretion of the Compensation Committee, and 3) long-term stock-based
incentive awards, such as the restricted stock and options to purchase stock
which were granted in the 2001 Fiscal Year. The Company will consider such
factors as the specific performance of the Company, the respective Executive
Officer and the overall compensation of all of its executives.
Prior to the Consolidation, the management of the Company commissioned a
comprehensive study related to board and officer compensation, which was used as
a basis to negotiate the terms and provisions of the initial employment
agreements for the Executive Officers. The salaries, bonuses and long-term
stock-based incentives of the Executive Officers, as set forth in their
respective employment agreements (and paid pro rata for the 2001 Fiscal Year),
were intended to recognize the contributions of each Executive Officer in
connection with the Consolidation transaction, the Company's commencement of
operations as a public company and the ongoing obligations of the Executive
Officers. During 2001 and 2002, the Company finalized employment agreements with
each of Mr. Carden, Mr. Mizrahi, Mr. Thurber, Mr. Perkins and Ms. Nooney.
Respectfully submitted,
BOARD OF DIRECTORS
William J. Carden, Chairman
Timothy R. Brown
Lawrence E. Fiedler
William W. Geary, Jr.
Harry A. Mizrahi
COMPENSATION OF DIRECTORS
Each non-employee director receives $12,000 annually for serving on the Board,
$1,000 per meeting attended and $500 for each telephonic meeting in which the
director participates, including any committee meetings. A director may elect to
receive the fee in cash or in Common Stock valued at its then fair market value.
The director is also reimbursed for travel expenses for attending all meetings.
Pursuant to the Company's Omnibus Stock Incentive Plan (the "Plan"), each
non-employee director was granted an option to purchase 10,000 shares of
8
Common Stock. The option to purchase 5,000 shares was granted upon the
completion of the Consolidation in October 2001, with an exercise price of
$15.00 per share, which was the amount at which shares of Common Stock were
valued for purposes of the Consolidation (the "Exchange Value"). The option to
purchase the remaining 5,000 shares was granted six months after the
Consolidation at an exercise price of $6.79 per share, the fair market value on
the date of such grant. As an incentive for continued service, each non-employee
director elected at the Annual Meeting of the Stockholders is entitled to an
annual option to acquire an additional 5,000 shares of Common Stock. The
exercise price will be at the fair market value on the date of the Annual
Meeting.
EXECUTIVE COMPENSATION
The following table sets forth, in summary form, the compensation paid by the
Company to its Chief Executive Officer and the four other most highly
compensated officers of the Company (the "Named Executive Officers") whose total
annual salary and bonus equaled or exceeded $100,000 for services rendered to
the Company in all capacities for the 2001 Fiscal Year.
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
ANNUAL -----------------------------------------
COMPENSATION AWARDS
-------------------------------------------------------------------
NAME AND Restricted Securities
PRINCIPAL POSITION Stock Underlying
HELD DURING 2001 Year Salary Awards $ (1) Options # (2)
- -------------------------------------------------------------------------------------------------------------------
William J. Carden, Chief Executive Officer 2001 (3) $ 262,500 12,500
Harry A. Mizrahi, Chief Operating Officer 2001 (4) $ 525,000 25,000
Thomas N. Thurber, Chief Financial Officer 2001 (5) $ 525,000 25,000
Paul E. Perkins, Senior Vice President 2001 (6) $ 150,000 7,500
Patricia A. Nooney, Senior Vice President 2001 (7) $ 30,000 2,250
-----------------------------------------
- ----------
(1) Represents the following numbers of restricted shares granted on October 15,
2001 (the "Grant Date"): Mr. Carden 17,500; Mr. Mizrahi 35,000; Mr. Thurber
35,000; Mr. Perkins 10,000; and Ms. Nooney 2,000. The dollar value is based on
$15.00 per share, the Exchange Value. The restricted shares are subject to
repurchase by the Company upon termination of the individual's employment for a
price of $.01 per share. For Mr. Carden, Mr. Perkins and Ms. Nooney, the
repurchase option lapses in four equal installments on the first, second, third
and fourth anniversary of the Grant Date. For Mr. Mizrahi, the repurchase option
lapses on October 14, 2002. For Mr. Thurber, the repurchase option for 25% of
the shares lapsed on September 1, 2002, and the remaining repurchase options
will lapse on the first and/or second year anniversary
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of that date based on a performance-based formula. Recipients of restricted
stock paid no consideration to the Company for their shares, have the right to
vote their shares, to receive and retain all cash dividends payable to the
Company's stockholders and to exercise all other rights, powers and privileges
of a stockholder, with the exception that the recipients may not transfer the
Common Stock during the restricted period.
(2) The Named Executive Officers were granted options to purchase shares with an
exercise price of $15.00 per share, the Exchange Value. For Mr. Carden, Mr.
Perkins and Ms. Nooney, 25% of the options vested on the Grant Date and will
vest annually thereafter in equal installments. For Mr. Mizrahi, the option
fully vested on the Grant Date. For Mr. Thurber, 25% of the options vested on
the Grant Date and the remainder will vest on the first and/or second
anniversary of September 1, 2002, based on a performance-based formula.
(3) Prior to the Consolidation, Mr. Carden earned $372,083 in compensation paid
by CGS and its affiliates. After the Consolidation, Mr. Carden earned $100,417
in compensation and a cash bonus of $100,000 for the 2001 Fiscal Year, which was
paid by the Company to Mr. Carden or his affiliated companies.
(4) Prior to the Consolidation, Mr. Mizrahi earned $158,334 in compensation paid
by CGS and its affiliates. After the Consolidation, Mr. Mizrahi earned $41,666
in compensation for the 2001 Fiscal Year, which was paid by the Company.
(5) Prior to the Consolidation, Mr. Thurber earned $169,708 in compensation paid
by CGS and its affiliates. After the Consolidation, Mr. Thurber earned $57,292
in compensation for the 2001 Fiscal Year, which was paid by the Company.
(6) Prior to the Consolidation, Mr. Perkins earned $67,291 in compensation paid
by CGS and its affiliates. After the Consolidation, Mr. Perkins earned $24,375
in compensation for the 2001 Fiscal Year, which was paid by the Company. In
addition, the Company paid Mr. Perkins a cash bonus of $100,000.
(7) Prior to the Consolidation, Ms. Nooney earned $114,791 in compensation paid
by CGS and its affiliates. After the Consolidation, Ms. Nooney earned $26,875 in
compensation for the 2001 Fiscal Year, which was paid by the Company.
STOCK OPTION GRANTS IN 2001 FISCAL YEAR
The following table sets forth information regarding stock options granted to
the Named Executive Officers. No SARs (stock appreciation rights) were granted
by the Company. See Compensation Table above for details of the restricted stock
granted.
10
POTENTIAL
REALIZED VALUE AT
ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
- -------------------------------------------------------------------------------------- -----------------------
NUMBER OF % OF
SECURITIES TOTAL
UNDERLYING OPTIONS/ EXERCISE
OPTIONS/ SARS OR BASE
SARS GRANTED IN PRICE EXPIRATION
NAME GRANTED FISCAL YEAR (1) ($/Sh) (2) DATE (3) 5% (4) 10% (4)
- ---------------------- ------------- ----------------- ------------ ---------- --------- ---------
William J. Carden 12,500 14.3% $15.00 10/15/2011 $104,554 $264,960
Harry A. Mizrahi 25,000 28.7% $15.00 10/15/2011 $209,107 $529,919
Thomas N. Thurber 25,000 28.7% $15.00 10/15/2011 $209,107 $529,919
Paul E. Perkins 7,500 8.6% $15.00 10/15/2011 $ 62,732 $158,976
Patricia A. Nooney 2,250 2.6% $15.00 10/15/2011 $ 18,820 $ 47,693
- ------------------------------
(1) Aggregate for all 2001 Fiscal Year option grants.
(2) The exercise price is $15.00, the Exchange Value.
(3) For Mr. Carden, Mr. Perkins and Ms. Nooney, 25% of the options vested on the
Grant Date and will vest annually thereafter in equal installments. For Mr.
Mizrahi, the option fully vested on the Grant Date. For Mr. Thurber, 25% of the
options vested on the Grant Date and the remainder will vest on the first and/or
second anniversary of September 1, 2002, based on the performance-based formula.
(4) The amounts disclosed in these columns, which reflect appreciation of the
Company's Common Stock price at assumed 5% and 10% rates, as required by the
SEC, are not intended to be a forecast of the Company's Common Stock price and
are not necessarily indicative of actual values which may be realized by the
Named Executive Officers. These assumed rates of 5% and 10% would result in the
Company's Common Stock price increasing from $13.30, the closing market price on
the first day of trading of the Common Stock, to approximately $21.66 per share
and $34.50 per share, respectively.
11
AGGREGATED OPTION EXERCISES IN 2001 FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
The following table sets forth information regarding each exercise of stock
options during the 2001 Fiscal Year by the Named Executive Officers and the
fiscal year-end value of unexercised options held by such persons.
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FY-END (#) FY-END ($)
SHARES ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) VALUE REALIZED ($) UNEXERCISABLE UNEXERCISABLE
- ------------------------------------------------------------------------------------------------------------
William J. Carden ----- ----- 3,125/9,375 ---/---
Harry A. Mizrahi ----- ----- 25,000/0 ---/---
Thomas N. Thurber ----- ----- 6,250/18,750 ---/---
Paul E. Perkins ----- ----- 1,875/5,625 ---/---
Patricia A. Nooney ----- ----- 562/1,688 ---/---
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with each of Mr. Carden, Mr.
Mizrahi, Mr. Thurber, Mr. Perkins and Ms. Nooney. The employment agreements for
the Named Executive Officers provide for an annual base salary as follows: Mr.
Carden - $482,000, Mr. Mizrahi - $204,500, subject to increase up to $504,500
upon achievement of targets relating to the Company's total assets; Mr. Thurber
- - $300,000, Mr. Perkins - $125,000; and Ms. Nooney - $125,000 through January
28, 2002, and increased to $175,000 upon her election as Treasurer of the
Company. In addition, all of the employment agreements provide for an annual
incentive bonus, payable within 120 days of the fiscal year end, in an amount
determined in the sole discretion of the Board.
Shares of restricted stock and stock option grants were awarded to each Named
Executive Officer as of the date of the Consolidation: Mr. Carden - 17,500
shares of restricted stock and an option to purchase 12,500 shares; Mr. Mizrahi
- -35,000 shares of restricted stock and an option to purchase 25,000 shares; Mr.
Thurber - 35,000 shares of restricted stock and an option to purchase 25,000
shares; Mr. Perkins - 10,000 shares of restricted stock and an option to
purchase 7,500 shares; and for Ms. Nooney - 2,000 shares of restricted stock and
an option to purchase 2,250 shares. The exercise price is $15.00, the Exchange
Value. In addition, when Ms.
12
Nooney accepted the position of Treasurer in 2002, she was awarded an additional
10,000 shares of restricted stock.
Options were awarded to each of the Named Executive Officers on the six month
anniversary of the Consolidation (the "April Grant") at an exercise price of
$6.77 per share, the fair market value on that date. For Mr. Carden - an option
to purchase 12,500 shares; for Mr. Mizrahi - an option to purchase 25,000
shares; for Mr. Thurber - an option to purchase 25,000 shares; for Mr. Perkins -
an option to purchase 7,500 shares; and for Ms. Nooney - an option to purchase
2,250 shares.
All restricted shares are subject to repurchase by the Company upon termination
of the individual's employment for a price of $.01 per share. For Mr. Carden and
Mr. Perkins, the repurchase option lapses in four equal installments on the
first, second, third and fourth anniversary of the Grant Date. For Mr. Mizrahi,
the repurchase option lapses on October 14, 2002. For Mr. Thurber, the
repurchase option for 25% of the shares lapsed on September 1, 2002, and the
remaining repurchase options will lapse on the first and/or second year
anniversary of that date based on a performance-based formula. For the
restricted shares granted to Ms. Nooney on the Grant Date, the repurchase option
lapses in four equal installments on the first, second, third and fourth
anniversary of that date. For the restricted shares granted to Ms. Nooney as of
the April Grant, the repurchase option lapses as follows: 50% on the April Grant
date and 50% on the sixth month anniversary of that date. For the restricted
shares granted to each Named Executive Officer on the Grant Date, the recipients
paid no consideration to the Company for their shares. For the shares granted to
Ms. Nooney on the April Grant date, Ms. Nooney paid $.01 per share. Recipients
of restricted stock have the right to vote their shares, to receive and retain
all cash dividends payable to the Company's stockholders and to exercise all
other rights, powers and privileges of a stockholder, with the exception that
the recipients may not transfer the Common Stock during the restricted period.
In regard to the stock options for Mr. Carden, Mr. Perkins and Ms. Nooney, 25%
of the options vested on the Grant Date and will vest annually thereafter in
equal installments. For Mr. Mizrahi, the options fully vested on the Grant Date.
For Mr. Thurber, 25% of the options vested on the Grant Date and the remainder
will vest on the first and/or second anniversary of September 1, 2002, based on
the performance-based formula.
STOCK INCENTIVE PLAN
The Board adopted the Omnibus Stock Incentive Plan in July 2001 and believes
that the Plan is in the best interests of the Company and will enable it to
attract and retain highly qualified executive officers, directors and employees.
All of the options described above were granted under the Plan.
13
The Plan has been administered by the Board of Directors and provides for the
granting of options, stock appreciation rights, restricted stock and performance
units and shares, as may be determined by the Board. Under the Plan, 720,000
shares of the Company's Common Stock are available for issuance to executive
officers, directors or other key employees of the Company. Options to acquire
Common Stock are expected to be in the form of incentive and non-qualified stock
options and are exercisable for up to ten years following the date of the grant.
The Board will set the exercise price of each option, but the Plan requires that
the exercise price per share equal or exceed the fair market value of the
Company's Common Stock on the grant date. Hereafter, the Compensation Committee
will administer the Plan.
PERFORMANCE GRAPH
The following graph compares the annual cumulative total stockholder return on
the Common Stock from November 20, 2001, the first day the Common Stock was
traded on the American Stock Exchange ("AMEX"), through December 31, 2001, to
the cumulative total return on the NAREIT Property Index and the Morgan Stanley
REIT Index. The graph assumes an investment of $100 in the Common Stock and each
of the indices at the close of business on November 20, 2001, the first trading
day for the Common Stock, and that all dividends were reinvested. The return
shown on the graph is not necessarily indicative of future performance:
[THE FOLLOWING INFORMATION WAS REPRESENTED AS A LINE CHART IN THE PRINTED
MATERIAL]
[GRAPHIC OMITTED]
COMPARE CUMULATIVE TOTAL RETURN
AMONG AMERICAN SPECTRUM REALTY,
PROPERTY INDEX AND MORGAN STANLEY REIT INDEX
NOVEMBER 20, 2001 - DECEMBER 31, 2001
11/20/01 11/30/01 12/31/01
AMERICAN SPECTRUM REALTY 100.00 50.83 53.38
MORGAN STANLEY REIT INDEX 100.00 101.67 103.69
NAREIT PROPERTY INDEX 100.00 100.53 104.49
ASSUMES $100 INVESTED ON NOVEMBER 20, 2001
ASSUMES DIVIDEND REINVESTED
FISCAL YEAR ENDING DECEMBER 31, 2001
14
SECURITY OWNERSHIP OF MANAGEMENT
AND PRINCIPAL STOCKHOLDERS
The following table provides information regarding the beneficial ownership of
Common Stock as of August 31, 2002, by (i) each of the Company's directors, (ii)
each of the Executive Officers, (iii) all directors and Executive Officers as a
group and (iv) each person known by the Company to be the beneficial owner of
more than 5% of the outstanding shares of Common Stock. This table is based on
information provided to the Company or filed with the SEC by the Company's
directors, Executive Officers and principal stockholders. Except as otherwise
indicated, the Company believes that the beneficial owners of the Common Stock
listed below, based on information furnished by such owners, have sole
investment and voting power with respect to such shares, subject to community
property laws where applicable.
NUMBER OF SHARES PERCENTAGE OF
OF OUTSTANDING
NAME OF BENEFICIAL OWNER (1) COMMON STOCK (2) COMMON STOCK (3)
---------------------------- ---------------- ----------------
Directors and Executive Officers
- --------------------------------
William J. Carden (4) 1,203,617 20.0%
Harry A. Mizrahi (5) 85,000 1.5%
Thomas N. Thurber (6) 47,500 *
Paul E. Perkins (7) 15,625 *
Patricia A. Nooney (8) 14,313 *
Timothy R. Brown (9) 8,750 *
Lawrence E. Fiedler (10) 8,750 *
William W. Geary, Jr. (11) 3,750 *
All Directors and Executive Officers as a Group 1,387,305 22.8%
(8 persons) (12)
Others
- -------
John N. Galardi (13) 924,210 16.2%
Ira J. Gaines (14) 312,640 5.7%
- ----------------
*Less than 1%
(1) Except as specifically noted in the footnotes below, the address of each of
the named beneficial owners is c/o American Spectrum Realty, Inc., 7700 Irvine
Center Drive, Suite 555, Irvine, California 92618.
(2) For each beneficial owner, includes Common Stock subject to options or
conversion rights exercisable, respectively within 60 days of August 31, 2002.
Includes as to Mr. Carden, Mr. Galardi and Ms. Nooney, Common Stock issuable in
exchange for OP Units.
15
(3) The percentage ownership is based on 5,536,990 outstanding shares of Common
Stock and shares deemed outstanding pursuant to Rule 13d-3(d)(1) under the
Exchange Act.
(4) Includes 17,500 shares of restricted stock, which is subject to repurchase
by the Company on termination of Mr. Carden's employment for a price of $.01 per
share. The repurchase option lapses in four equal installments on the first,
second, third and fourth anniversary of the Grant Date. Includes 729,423 shares
of Common Stock and 464,819 shares of Common Stock issuable on exchange of OP
Units owned by Mr. Carden and the persons or entities listed as follows: (i) the
17,500 restricted shares referred to above, (ii) 2,600 OP Units owned by Mr.
Carden, (iii) 78,406 OP Units owned by trusts for the benefit of Mr. Carden's
children, as to which Michael L. Matkins is trustee, (iv) 257,253 shares of
Common Stock and 160,266 OP Units owned by Mr. Carden's spouse, (v) 45,529 OP
Units owned by a limited partnership controlled by Mr. Carden and (vi) 454,670
shares of Common Stock and 178,018 OP Units owned by companies controlled by Mr.
Carden. Certain shares may be deemed to be beneficially owned by Mr. Carden and
may also be deemed to be beneficially owned by Mr. Galardi. Mr. Carden disclaims
beneficial ownership of the shares and OP Units held by his spouse and trusts
for his children. Includes 9,375 shares of Common Stock, which Mr. Carden has
the right to acquire upon the exercise of stock options within sixty days of
August 31, 2002.
(5) Includes 35,000 shares of restricted stock, which is subject to repurchase
by the Company on termination of Mr. Mizrahi's employment for a price of $.01
per share. The repurchase option lapses on October 14, 2002. Also includes
50,000 shares of Common Stock, which Mr. Mizrahi has the right to acquire upon
the exercise of stock options at any time.
(6) Includes 35,000 shares of restricted stock, which is subject to repurchase
by the Company on termination of Mr. Thurber's employment for a price of $.01
per share. The repurchase option for 25% of the shares lapsed on September 1,
2002, and the remaining repurchase options will lapse on the first and/or second
anniversary of that date based on a performance-based formula. Also includes
12,500 shares of Common Stock, which Mr. Thurber has the right to acquire upon
the exercise of stock options within sixty days of August 31, 2002.
(7) Includes 10,000 shares of restricted stock, which is subject to repurchase
by the Company on termination of Mr. Perkins' employment for a price of $.01 per
share. The repurchase option lapses in four equal installments on the first,
second, third and fourth anniversary of the Grant Date. Also includes 5,625
shares of Common Stock, which Mr. Perkins has the right to acquire upon the
exercise of stock options within sixty days of August 31, 2002.
(8) Includes 12,000 shares of restricted stock, which is subject to repurchase
by the Company on termination of Ms. Nooney's employment for a price of $.01 per
share. For 2,000 of the restricted shares granted, the repurchase option lapses
in four equal installments on the first, second, third and fourth anniversary of
the Grant Date. For 10,000 of the restricted shares granted, the repurchase
option lapses as follows: 50% on the April Grant date and 50% on the sixth month
anniversary of that date. Includes 626 OP Units owned by Ms. Nooney's spouse.
16
Ms. Nooney disclaims beneficial ownership of the OP Units owned by her spouse.
Also includes 1,687 shares of Common Stock, which Ms. Nooney has the right to
acquire upon the exercise of stock options within sixty days of August 31, 2002.
(9) Mr. Brown's address is 333 Clay Street, Suite 3300, Houston, Texas 77002.
Includes 5,000 shares of Common Stock held in an IRA, reported as indirectly
beneficially owned by Mr. Brown, and 3,750 shares of Common Stock, which Mr.
Brown has the right to acquire upon the exercise of stock options within sixty
days of August 31, 2002.
(10) Mr. Fiedler's address is 156 West 56th Street, Suite 1101, New York, New
York 10019. Includes 5,000 shares of Common Stock held in trust, of which Mr.
Fiedler is the trustee, and 3,750 shares of Common Stock, which Mr. Fiedler has
the right to acquire upon the exercise of stock options within sixty days of
August 31, 2002.
(11) Mr. Geary's address is 6171 West Century Boulevard, Suite 100, Los Angeles,
California 90045. Includes 3,750 shares of Common Stock, which Mr. Geary has the
right to acquire upon the exercise of stock options within sixty days of August
31, 2002.
(12) Includes 109,500 restricted shares, which are subject to repurchase by the
Company on termination of employment of the Executive Officers for a price of
$.01 per share. The expiration of the repurchase options is described in the
individual footnotes. Includes (i) 2,600 OP Units owned by Mr. Carden, (ii)
78,406 OP Units owned by trusts for the benefit of Mr. Carden's children, as to
which Michael Matkins is trustee, (iii) 257,253 shares of Common Stock and
160,266 OP Units owned by Mr. Carden's spouse, (iv) 45,529 OP Units owned by a
limited partnership controlled by Mr. Carden, (v) 454,670 shares of Common Stock
and 178,018 OP Units owned by companies controlled by Mr. Carden, (vi) 626 OP
Units owned by Ms. Nooney's spouse, (vii) 5,000 shares held in trust, of which
Mr. Fiedler is the trustee and (viii) 5,000 shares held in an IRA, indirectly
beneficially owned by Mr. Brown. Includes 90,437 shares of Common Stock, which
certain Executive Officers and directors have the right to acquire upon the
exercise of stock options within sixty days of August 31, 2002.
(13) Mr. Galardi's address is 39590 Highway 82, Aspen, CO 81611. Includes
286,986 shares of Common Stock and 4,536 OP Units owned by Mr. Galardi. Also
includes 454,670 shares of Common Stock and 178,018 OP Units owned by companies
in which Mr. Galardi owns a significant interest. Certain shares may be deemed
to be beneficially owned by Mr. Galardi and may also be deemed to be
beneficially owned by Mr. Carden.
(14) Based solely on the Schedule 13D filed November 29, 2001, by Mr. Gaines,
his address is 1717 East Morten, Phoenix, AZ 85020, and together with IG
Holdings, Inc., Hintzin Capital Group, Paradise Wire Pension Plan and Sunshine
Wire Pension Plan (entities controlled solely by Mr. Gaines) he holds 193,671
shares of Common Stock. In addition, Mr. Gaines shares voting and dispositive
power over 119,069 shares of Common Stock owned by Baseline Investment, a
general partnership, Deuce Investment, a general partnership, and Summit
17
Venture, a limited partnership. Mr. Gaines is a 50% owner of each of the
partnerships referred to.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's directors, executive officers and persons who own more than 10% of the
Company's Common Stock, to file reports of ownership of, and transactions in,
the Company's securities with the SEC, the AMEX and the Company. Based solely on
the review of copies of such filings received by the Company or any written
representations from certain reporting persons, the Company believes that its
directors, officers and 10% or more stockholders timely filed all reports
required of them during 2001 under Section 16(a).
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As part of the Consolidation, Mr. Carden, members of his family, trusts for the
benefit of family members and entities in which Mr. Carden or members of his
family had sole or shared control acquired 686,923 shares of Common Stock and
464,819 OP Units.
As part of the Consolidation Mr. Galardi, members of his family, trusts for the
benefit of family members and entities in which Mr. Galardi or members of his
family had sole or shared control acquired 713,556 shares of Common Stock and
182,554 OP Units.
In connection with the Consolidation, the Company entered into a registration
rights agreement with persons issued Common Stock and OP Units in private
transactions, including certain of the persons referred to above. Under the
registration rights agreement, the Company has agreed to register for resale
under the Securities Act of 1933, as amended, Common Stock issued to such
persons, or issuable in exchange for OP Units issued to them, after the first
anniversary of the Consolidation.
Certain obligations of CGS and the majority-owned affiliates became liabilities
of the Company as a result of the Consolidation. These obligations include a
distribution payable of approximately $7,883,000 due to the former limited
partners of Sierra Pacific Development Fund II in connection with litigation
against a subsidiary of CGS relating to secured and unsecured loans, among other
matters. This obligation, including additional accrued interest of approximately
$186,000, is reflected in accrued and other liabilities in the consolidated
financial statements of the Company as of December 31, 2001, and $558,000 as of
June 30, 2002.
In addition, related party notes payable totaling $2,802,094 along with other
accruals associated with the loans were assumed by the Company. At December 31,
2001, and June 30, 2002 (provided in parenthesis) these consisted of the
following:
18
o $1,600,000 unsecured note and accrued interest of $126,036 ($190,036)
payable to Mr. Galardi;
o $1,000,000 secured note with accrued interest and a participating profit
liability of $1,207,081 ($1,283,933) payable to a California limited
partnership, the general partner of which was an entity controlled by Mr.
Carden.
o $202,094 unsecured note ($199,180) and accrued interest of $36,543
($51,160) payable to Brown Parker & Leahy, L.L.P., a law firm in which Mr.
Brown, a director of the Company, was a partner.
Other related party liabilities totaling $2,024,680 in the form of loans and
advances were assumed as well. These consisted of a $1,060,852 net indebtedness
to a limited partnership, in which Mr. Carden and Mr. Galardi own an aggregate
66% interest; $242,020 owed to CGS; and $721,808 owed to ASJ, Ltd, a Texas
limited partnership, which is owned by Mr. Carden, his spouse and trusts for his
children. During the first quarter of 2002, the Company made payments totaling
$521,808 on its obligation to ASJ, Ltd., reducing the balance due to $200,000 as
of June 30, 2002.
The law firm in which Mr. Brown, a director of the Company, is a partner was
retained by the Company to render legal services during 2001.
Effective January 1, 2002, the Company acquired a receivable in the amount of
$177,000 from a related party in connection with the Company's assumption of an
executive suite in an office building owned by the Company. The Company
cancelled this receivable by offsetting the amount of the receivable against the
amount payable by the Company to an entity owned by the related party.
PROPOSAL NUMBER TWO--RATIFICATION OF
SELECTION OF INDEPENDENT AUDITORS
In January 2002, the Company advised Arthur Andersen LLP ("Arthur Andersen")
that it was considering changing independent auditors. On February 8, 2002, the
Company and Arthur Andersen agreed that the client-auditor relationship between
the Company and Arthur Andersen had been terminated. On that date, Arthur
Andersen advised the Company that it was resigning as the Company's independent
auditors. The report of Arthur Andersen on the Company's financial statements
for the period from the Company's inception (August 8, 2000) to December 31,
2000, did not contain an adverse opinion, or disclaimer of opinion and was not
qualified or modified as to uncertainty, audit scope or accounting principles,
except that such report contained an explanatory paragraph regarding the
substantial doubt about the Company's ability to continue as a going concern. In
addition, Arthur Andersen's report on the financial statements of CGS and its
majority-owned affiliates as of December 31, 2000, contained an explanatory
19
paragraph regarding the substantial doubt about CGS's ability to continue as a
going concern. The Audit Committee of the Board approved the decision to
consider changing independent auditors. During the period from the Company's
inception through the end of its most recent fiscal year and subsequent interim
periods, there were no disagreements with Arthur Andersen on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedures, which disagreements, if not resolved to the satisfaction of
Arthur Andersen would have caused it to make reference to such disagreement in
its reports.
BDO Seidman, LLP ("BDO Seidman") has served as the Company's independent
auditors since February 22, 2002. BDO Seidman issued a report, dated April 10,
2002, on the Company's financial statements for the year ended December 31,
2001, that did not contain an adverse opinion or disclaimer of opinion and was
not qualified or modified as to uncertainty, audit scope or accounting
principles. On the recommendation of the Audit Committee, BDO Seidman has been
selected by the Board as the Company's independent auditors for the year ending
December 31, 2002. BDO Seidman has advised the Company that it does not have any
direct or indirect financial interest in the Company. Representatives of BDO
Seidman are expected to attend the Annual Meeting and will be given the
opportunity to make a statement if they choose to do so. They will also be
available to respond to appropriate questions.
The Board carefully considered BDO Seidman's qualifications and its reputation
for integrity and competence in the fields of accounting and auditing. The Audit
Committee also considered whether the independent auditors' provision of
non-audit services to the Company is compatible with the auditors' independence.
For the 2001 Fiscal Year, the Company paid BDO Seidman the following fees:
FINANCIAL INFORMATION
SYSTEMS DESIGN AND ALL OTHER FEES
AUDIT FEES IMPLEMENTATION FEES (TAX COMPLIANCE)
- ----------------------------------------------------------------------
$ 250,000 -0- $121,001
Stockholders will be asked at the Annual Meeting to ratify the selection of BDO
Seidman. If the stockholders ratify the selection of BDO Seidman, the Board may
still, in its discretion, decide to appoint a different independent audit firm,
at any time during the year 2002, if it concludes that such a change would be in
the best interests of the Company and the stockholders. If the stockholders fail
to ratify the selection, the Board will reconsider the retention of the
accounting firm.
20
REQUIRED VOTE
A majority of the votes cast at the Annual Meeting, provided a quorum is
present, will be required to ratify the selection of BDO Seidman, LLP, as the
Company's independent auditors for the year 2002.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSAL NUMBER TWO.
ANNUAL REPORT AND FINANCIAL STATEMENTS OF THE COMPANY
Copies of the Company's Annual Report to Stockholders for the 2001 Fiscal Year
were mailed to the stockholders previously on April 25, 2001. Additional copies
of the Company's Annual Report on Form 10-K filed with the SEC will be furnished
to interested stockholders, without charge, upon written request. Exhibits to
the Form 10-K will be provided upon written request and payment to the Company
of the cost of preparing and distributing those materials. Written requests
should be sent to American Spectrum Realty, Inc., One Memorial Drive, Suite 675,
St. Louis, Missouri 63102, Attention: Investor Relations.
STOCKHOLDER PROPOSALS FOR THE COMPANY'S 2003 ANNUAL MEETING
Typically, in order to be considered for inclusion in the Company's proxy
materials for an annual meeting, stockholder proposals and nominations that are
intended to be presented at that meeting must be received by the Secretary of
the Company, in writing, no later than 120 days before the first anniversary
from the date that the proxy statement for the prior year's annual meeting was
released to the stockholders. However, because the Company anticipates holding
the 2003 Annual Meeting in May, which is more than 30 days prior to the first
anniversary of the 2002 Annual Meeting, stockholder proposals and nominations
must be delivered to the Company within a reasonable time before the Company
begins to print and mail its proxy materials for the 2003 Annual Meeting. The
Company will notify stockholders of the date by which proposals must be
submitted in its Annual Report on Form 10-K.
Stockholder proposals and nominations also must comply with the advance notice
and other requirements set forth in the Company's Bylaws to be eligible to be
presented at an annual meeting. Typically, any such proposal or nomination must
be delivered to the Secretary of the Company at least 90 days and not more than
120 days prior to the first anniversary of the date of mailing of the notice for
the 2002 Annual Meeting. Because the Company anticipates holding its 2003 Annual
Meeting in May, which is at least 30 days prior to the first anniversary of the
2002 Annual Meeting, to present a proposal or nomination at the 2003 Annual
Meeting, the proposal or nomination must be delivered to the Secretary of the
Company not more than 120 days before the date of mailing of the notice for the
annual meeting and not later than the close
21
of business of the later of (1) the 90th day before the date of mailing of the
notice of that Meeting or (2) the tenth day after the day on which a public
announcement of the date of the 2003 Annual Meeting is made by the Company.
OTHER INFORMATION
Proxy authorizations submitted via the Internet or by telephone must be received
by 4:00 p.m. Eastern Standard Time on November 14, 2002. To authorize a proxy by
the Internet or by telephone, please see the instructions on the proxy card
enclosed with these materials. Costs associated with electronic access, such as
from access providers or telephone companies, will be borne by the stockholder.
BY ORDER OF THE BOARD OF DIRECTORS
Harry A. Mizrahi, Secretary
Irvine, California
OCTOBER 15, 2002
22
APPENDIX A
AMERICAN SPECTRUM REALTY, INC.
CHARTER AND POWERS OF THE AUDIT COMMITTEE
RESOLVED, that the membership of the audit committee shall consist of at
least three members of the board of directors, who shall be independent (as
defined under the rules of the American Stock Exchange) to the extent required
under the rules of the American Stock Exchange and shall serve at the pleasure
of the board of directors.
RESOLVED, that the charter and powers of the Audit Committee of the Board
of Directors (the "Audit Committee") shall be:
o Assisting the Board of Directors in the oversight of the
maintenance by management of the reliability and integrity of the
accounting policies and financial reporting and disclosure
practices of the Company;
o Assisting the Board of Directors in the oversight of the
establishment and maintenance by management of processes to
assure that an adequate system of internal control is functioning
within the Company;
o Assisting the Board of Directors in the oversight of the
establishment and maintenance by management of processes to
assure compliance by the Company with all applicable laws,
regulations and Company policy.
RESOLVED, that the Audit Committee shall have the following specific powers
and duties:
1. Holding such regular meetings as may be necessary and such
special meetings as may be called by the Chairman of the Audit
Committee or at the request of the independent accountants;
2. Reviewing the performance of the independent accountants and
making recommendations to the Board of Directors regarding the
appointment or termination of the independent accountants;
3. Ensuring its receipt from the independent accountants of a formal
written statement delineating all relationships between the
independent accountants and the Company, consistent with
Independence Standards Board Standard;
4. Actively engaging in a dialogue with the independent accountants
with respect to any disclosed relationships or services that may
impact the objectivity and independence of the independent
accountants and for taking, or recommending that the Board of
Directors take, appropriate action to oversee the independence of
the outside auditor;
5. Evaluating and, recommending to the Board of Directors the
selection and, where appropriate, the replacement of the
independent auditors (or nominating independent auditors to be
proposed for stockholder approval in any proxy statement), which
independent auditors shall ultimately be accountable to the Board
of Directors and the Audit Committee;
A-1
6. Conferring with the independent accountants and the internal
auditors concerning the scope of their examinations of the books
and records of the Company and its subsidiaries; reviewing and
approving the independent accountants' annual engagement letter;
reviewing and approving the Company's internal annual audit plans
and procedures; and authorizing the auditors to perform such
supplemental reviews or audits as the Audit Committee may deem
desirable;
7. Reviewing with management, the independent accountants and
internal auditors significant risks and exposures, audit
activities and significant audit findings;
8. Reviewing the range and cost of audit and non-audit services
performed by the independent accountants;
9. Reviewing the Company's audited annual financial statements and
the independent accountants opinion rendered with respect to such
financial statements, including reviewing the nature and extent
of any significant changes in accounting principles or the
application thereof;
10. Reviewing the adequacy of the Company's systems of internal
control;
11. Obtaining from the independent accountants and internal auditors
their recommendations regarding internal controls and other
matters relating to the accounting procedures and the books and
records of the Company and its subsidiaries and reviewing the
correction of controls deemed to be deficient;
12. Providing an independent, direct communication between the Board
of Directors, internal auditors and independent accountants;
13. Reviewing the programs and policies of the Company designed to
ensure compliance with applicable laws and regulations and
monitoring the results of these compliance efforts;
14. Reporting through its Chairman to the Board of Directors
following the meetings of the Audit Committee;
15. Reviewing the powers of the Committee annually and reporting and
making recommendations to the Board of Directors on these
responsibilities;
16. Conducting or authorizing investigations into any matters within
the Audit Committee's scope of responsibilities; and
17. Considering such other matters in relation to the financial
affairs of the Company and its accounts, and in relation to the
internal and external audit of the Company as the Audit Committee
may, in its discretion. determine to be advisable.
A-2
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS Please mark
INDICATED, WILL BE VOTED "FOR" THE PROPOSALS. your votes as
indicated in |X|
this example
1. Election of Directors WITHHOLD
Nominees: FOR ALL AS TO ALL FOR ALL EXCEPT
the nominees listed the nominees the nominees
01 Timothy R. Brown to the left listed to the left listed below
02 William J. Carden
03 Lawrence E. Fiedler |_| |_| |_|
04 William W. Geary, Jr.
05 Harry A. Mizrahi
Withheld for the nominees you list below: (Write that nominee's
name in the space provided below.)
_______________________________________________________________ MARK THIS BOX IF
YOU PLAN TO ATTEND |_|
THE MEETING
2. Ratification of appointment of BDO Seidman, LLP as Independent Auditors
for fiscal year 2002.
FOR AGAINST ABSTAIN
|_| |_| |_|
The Proxy holder may vote and otherwise represent the undersigned on any other
matter that may properly come before the meeting or any adjournment or
postponement thereof in the discretion of the Proxy holder.
Dated:____________________________________________________________________, 2002
________________________________________________________________________________
Signature
________________________________________________________________________________
Signature if held jointly
Please sign exactly as your name appears on this Proxy Card. If shares are
registered in more than one name, the signatures of all such persons are
required. A corporation should sign in its full corporate name by a duly
authorized officer, stating such officer's title. Trustees, guardians, executors
and administrators should sign in their official capacity giving their full
title as such. A partnership should sign in the partnership name by an
authorized person, stating such person's title and relationship to the
partnership.
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^FOLD AND DETACH HERE^
Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week
Internet and telephone voting is available through 4PM Eastern Time
the business day prior to annual meeting day.
Your Internet or telephone vote authorizes the named proxies to vote your shares
in the same manner as if you marked, signed and returned your proxy card.
- ------------------------------ ----------------------------- ---------------------
Internet Telephone
http://www.eproxy.com/aqq 1-800-435-6710 Mail
Use the Internet to vote your Use any touch-tone telephone
proxy. Have your proxy card in to vote your proxy. Have your Mark, sign and date
hand when you access the web proxy card in hand when you your proxy card
site. You will be prompted to OR call. You will be prompted to OR and
enter your control number, enter your control number, return it in the
located in the box below, to located in the box below, and enclosed postage-paid
create and submit an then follow the directions envelope.
electronic ballot. given.
- ------------------------------ ----------------------------- ---------------------
If you vote your proxy by Internet or by telephone,
you do NOT need to mail back your proxy card.
AMERICAN SPECTRUM REALTY, INC.
Proxy Solicited by the Board of Directors for the Annual Meeting
of Stockholders to be held on November 15, 2002
The undersigned stockholder of American Spectrum Realty, Inc. ("American
Spectrum") hereby appoints William J. Carden and Harry A. Mizrahi, and each of
them individually, with full power of substitution in each of them, attorneys
and proxies for the undersigned and authorizes them to represent, with all
powers possessed by the undersigned as if personally present at the meeting, and
vote all of the shares of common stock of American Spectrum which the
undersigned may be entitled, in any capacity, to vote at the Annual Meeting of
Stockholders to be held at the Sheraton Suites Houston, 2400 West Loop South,
Houston, TX, November 15, 2002, at 9:00 a.m., local time, and at any
adjournments or postponements of such meeting, on the proposals listed on the
reverse side, and with discretionary authority as to any other matters that may
properly come before the meeting, all in accordance with, and as described in,
the Notice and accompanying Proxy Statement. The undersigned acknowledges
receipt of the Notice of Annual Meeting of Stockholders dated October 15, 2002,
and the accompanying Proxy Statement and revokes any proxy previously given with
respect to such meeting. THE VOTES ENTITLED TO BE CAST BY THE UNDERSIGNED WILL
CAST AS INSTRUCTED ON THE REVERSE SIDE. IF NO DIRECTION IS GIVEN, THIS PROXY
WILL BE VOTED FOR THE ELECTION AS DIRECTORS OF THE NAMED NOMINEES AND FOR
PROPOSAL 2 AND IN THE DISCRETION OF THE PROXY HOLDER ON ANY OTHER MATTER THAT
MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
(Continued and to be signed on reverse side please mark, sign, date and
return this proxy using the enclosed envelope.)
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^FOLD AND DETACH HERE^