**Exhibit 10.04**

 

**EMPLOYMENT AGREEMENT**

 

This EMPLOYMENT AGREEMENT (the “Agreement”),effective as of September 1, 2002, is entered into between American SpectrumRealty, Inc., a Maryland corporation (the “Company”), and Thomas N.Thurber (“Executive”).

 

Recitals

 

A.            TheCompany is a corporation intended to be qualified and to operate as a realestate investment trust under the Internal Revenue Code of 1986, as amended.

 

B.            The Company wishesto employ Executive and Executive wishes to be employed by the Company, on theterms and conditions set forth below.

 

THEREFORE, the parties agree as follows:

 

1.             EmploymentDuties.  During the Term (as definedin paragraph 2 below), the Company will initially employ Executive as itsSenior Vice President Corporate Development. Executive will devotesubstantially all of his business time and attention to the performance of hisduties under this Agreement.  Executiveshall have the duties, rights and responsibilities normally associated with hisposition with the Company, together with such other reasonable duties relatingto the operation of the business of the Company and its affiliates as may beassigned to him from time to time by the President or Chief Executive Officerof the Company or by the Board of Directors. Such duties are generally set forth in the Bylaws of the Company and bymemorandum to Executive of even date with this employment agreement.  If the Company shall so request, Executiveshall act as an officer and/or director of any of the subsidiaries of the Companyas they may now exist or may be established by the Company in the futurewithout any compensation other than that provided for in paragraph 3.

 

2.             Term.  The term of Executive’s employment underthis Agreement (the “Term”) will begin on the date of this Agreement andwill continue, subject to the termination provisions set forth in paragraph 5below, until the second anniversary of the date hereof; provided that thisAgreement will automatically renew for additional one-year periods unlesseither party gives written notice to the other not to extend the Term not lessthan 90 days prior to the then next upcoming expiration date.

 

3.             Salary and Bonus.

 

a.             Salary.  During each year of the Term, Executive willreceive a salary at the annual rate of $300,000 (the “Base Salary”).

 

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b.             Bonus.  In addition to the Base Salary, theExecutive shall be entitled to an annual incentive bonus payable within 120days after the end of each year ended December 31 in an amount which shall bedetermined in the sole discretion of the Board of Directors taking into accountsuch factors concerning the performance of the Company and Executive and theExecutive’s overall compensation level, as shall be determined by the Board ofDirectors.  Per annum, the amount of theincentive bonus shall be determined in the sole discretion of the Board ofDirectors and Executive shall not be entitled to any incentive bonus unless anduntil such incentive bonus is approved by the Board of Directors.

 

4.             FringeBenefits.  In addition to the othercompensation payable pursuant to this Agreement, during the Term:

 

a.             StandardBenefits.  Executive will beentitled to receive such fringe benefits and perquisites, including medical andlife insurance, as are generally made available from time to time to seniormanagement employees and Executives of the Company and to participate in anypension, profit–sharing, stock option or similar plan or programestablished from time to time by the Company for the benefit of its seniormanagement employees.

 

b.             Vacationand Sick Leave.  Executive will beentitled to such periods of paid vacation (not less than three weeks per year)and sick leave allowance each year that are consistent with the Company’svacation and sick leave policy for senior management.

 

c.             BusinessExpenses.  The Company will pay orreimburse Executive for all business–related expenses incurred byExecutive and approved by the Chief Executive Officer in writing in the courseof his performance of duties under this Agreement, subject to the proceduresestablished by the Company from time to time with respect to incurrence,substantiation, reasonableness and approval. Also see Exhibit B relating to reimbursement of relocation costs.

 

d.             StockOptions.  Executive shall beentitled to participate in employee stock plans from time to time establishedfor the benefit of employees of the Company in accordance with the terms andconditions of such plans. Simultaneously with the closing of the consolidation of the Company,Executive received (i) pursuant to and subject to the Company’s Omnibus StockIncentive Plan (the “Plan”), a grant of 50,000 stock options, for common stockof the Company.  The options are 25%exercisable at the date of grant and the balance of which become exercisablesubject to Executive’s continuing to be employed by the Company under theformula described in Exhibit A to this Agreement.  The options were granted (i) 50% on the closing of theconsolidation pursuant to the Company’s Registration Statement on Form S-4 atan option exercise price of $15.00 per share and (ii) 50% on June 1, 2001 at anoption exercise price equal to the $6.77 per share.

 

Executive has previously received a grant of35,000 shares of restricted stock pursuant to the Plan, which shares shall besubject to repurchase by the Company on termination of Executive’s employmentfor a price of $.01 per share, which repurchase option for 25% of the sharesshall lapse upon execution of this Agreement.  The remainder of the Company’s repurchase option shall lapse under aformula described in Exhibit A to this Agreement. Notwithstanding theforegoing, stock

 

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options granted to Executive shall become exercisable and repurchaserestrictions on stock grants shall lapse in full upon Executive’s terminationof employment by Executive with Good Reason or by the Company without Cause,and Executive shall have one (1) year from such termination, or remaining termof the option, if earlier, to exercise such options.

 

5.             Terminationof Employment.

 

a.             Deathand Disability.  Executive’semployment under this Agreement will terminate immediately upon his death andupon 30 days’ prior written notice given by the Company in the event Executiveis determined to be “permanently disabled” (as defined below).

 

b.             ForCause.  The Company may terminateExecutive’s employment under this Agreement for “Cause” (as defined below),upon providing Executive 30 days’ prior written notice of termination, whichnotice will describe in detail the basis of such termination and will becomeeffective on the 30th day after the Executive’s receipt thereof,unless the Executive cures the alleged violation or other circumstance whichwas the basis of such termination within such 30-day notice period or (ii)sends, within such 30-day notice period, written notice to the Board disputingin good faith the existence of Cause and requesting arbitration of such disputepursuant to paragraph 9 below. Notwithstanding the foregoing, the Company may elect to suspend all ofExecutives duties and restrict his access during such 30-day period.

 

c.             ForGood Reason.  Executive mayterminate his employment under this Agreement for “Good Reason” (as definedbelow) upon providing the Company 30 days’ prior written notice of termination,which notice will detail the basis of such termination and will becomeeffective on the 30th day after the Company’s receipt thereof, unless theCompany cures the alleged violation or other circumstance which was the basisof such termination within such 30-day notice period.

 

d.             Definitions.  For purposes of this Agreement:

 

(i) Executive will be deemed “permanently disabled” if he becomesunable to discharge his normal duties as contemplated under this Agreement formore than six consecutive months as a result of incapacity due to mental orphysical illness as determined by a physician acceptable to Executive and theCompany and paid by the Company, whose determination will be final andbinding.  If Executive and the Companyare unable to agree on a physician, Executive and the Company will each chooseone physician who will mutually choose the third physician, whose determinationwill be final and binding.

 

(ii) “Cause” means either (A) a breach by Executive of any materialprovisions of this Agreement, but only if, after notice provided insubparagraph (b) above, Executive fails to cure such breach; (B) action byExecutive constituting willful misconduct or gross negligence in connectionwith performing his duties hereunder; (C) an act of fraud, misappropriation offunds or embezzlement by

 

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Executive in connection with his employmenthereunder; or (D) Executive is convicted of, pleads guilty to or confesses toany felony.

 

(iii) “Good Reason” means the occurrence of any of the following,without the prior written consent of Executive: (A) a breach by the Company ofany of its material obligations under this Agreement, but only if afterexpiration of the 30–day notice period provided in subparagraph (c)above, the Company fails to cure such breach or (B) change of location ofCompany’s offices where Executive is currently employed to a location more than30 miles from San Diego, California or (C) if Executive ceases to report toWilliam J. Carden or the then Chief Executive Officer of the Company, inconnection with the services under this Agreement.

 

6.             Benefitsupon Termination.

 

a.             Terminationwith Cause or Resignation.  Upontermination of Executive’s employment by the Company for Cause or a voluntaryresignation by Executive (other than for Good Reason pursuant to paragraph 5(c)above) during the Term, the Company will remain obligated to pay Executive onlythe unpaid portion of his Base Salary and benefits to the extent accruedthrough the effective date of termination. Any amount due under this subparagraph will be payable within 30 daysafter the date of termination.  Inaddition to whatever other rights or remedies the Company may have at law or inequity, all stock options held by Executive, whether vested or unvested as ofthe date of termination, shall immediately expire on the date of terminationand all unvested stock-based grants shall immediately expire.

 

b.             Terminationwithout Cause or for Good Reason. The Company or the Executive shall also have the right to terminateExecutive’s employment without Cause. If the Executive terminates theExecutive’s employment without Cause, then the Severance Amount and theadditional sums as provided in Section 6b(i) and (ii)shall not be due by theCompany to the Executive.  Upontermination of Executive’s employment (x) by the Company without Cause or (y)by Executive for Good Reason, Executive will be entitled to the benefitsprovided below, subject to signing by Executive of a general release of claimsin a form satisfactory to the Company:

 

(i)            the Company will pay as severancepay to Executive, in monthly installments over a twelve-month period, an amount(the “Severance Amount”) equal to one times Executive’s Base Salary andbonus for the immediately preceding calendar year or current year if thetermination is in the first calendar year of employment (which shall beannualized if the applicable calendar year is less than a full year) unless thetermination is covered by subsection (ii) below;

 

(ii)           in addition to the Severance Amount,the Company will pay to Executive, in a lump sum paid within 10 days ofExecutive’s notice, an amount equal to one (1.00) times Executive’s base salaryand bonus for the immediately preceding calendar year, reduced by 1/24 of suchamount times the number of complete months that have elapsed since theeffective date of this Agreement.   Byway of example, if

 

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Executive isterminated on January 1, 2003 and his salary and bonus for 2002 was $300,000.00then the lump sum payment shall equal $250,000.00, (calculated as  $300,000.00 minus 4/24 of $300,000.00 or$50,000.00 to equal $250,000.00)

 

(iii)          subjectto Executive making a valid election to continue medical coverage under theCompany’s group health plan, the Company will pay Executive’s COBRA premium forthe shorter of (x) 12 months following Executive’s termination of employment or(y) the end of the COBRA continuation period.

 

c.             NoMitigation.   Executive will not berequired to mitigate the amount of any payment under this paragraph 6 byseeking other employment or otherwise, nor will the amount of any payment orbenefit under this paragraph 6 be reduced by any compensation earned byExecutive as the result of employment by another employer or by retirementbenefits after the date of termination, or otherwise.

 

d              TerminationUpon Death or Permanent Disability. Upon termination of Executive’s employment upon Executive’s death orpermanent disability, Executive or Executive’s estate will be entitled to thebenefits provided below, subject to signing by Executive or Executive’s estateof a general release of claims in a form satisfactory to the Company:

 

(i)  the Company will pay as severance pay toExecutive or Executive’s estate, in monthly installments over a twelve-monthperiod, an amount equal to the Executive’s Base Salary as in effect on the dateof termination of employment; and

 

(ii)  subject to Executive making a valid electionto continue medical coverage under the Company’s group health plan, the Companywill pay Executive’s COBRA premium for the shorter of (x) 12 months followingExecutive’s termination of employment or (y) the end of the COBRA continuationperiod.

 

e.             Expirationof this Agreement.  In the event theTerm of this Agreement expires without having otherwise been previouslyterminated pursuant to paragraph 5 above or by the Company without Cause,Executive will not be entitled to any severance compensation whatsoever underthis paragraph 6.

 

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7.             NoSolicitation; Confidentiality; Competition; Cooperation

 

a.             During theRestricted Period (defined below), neither Executive nor anyExecutive-Controlled Person (defined below) will, without the prior writtenconsent of the Board, directly or indirectly solicit for employment, employ inany capacity or make an unsolicited recommendation to any other person that itemploy or solicit for employment any person who is or was, at any time duringthe Restricted Period, an officer, executive or employee of the Company or ofany of its affiliates.  As used in thisAgreement, the term “Executive-Controlled Person” shall mean any company,partnership, firm or other entity as to which Executive possesses, directly orindirectly, the power to direct or cause the direction of the management andpolicies of such entity, whether through the ownership of voting securities, bycontract or otherwise.

 

b.             Executiveacknowledges that, through his status as Senior Vice President CorporateDevelopment of the Company, he has, and will have, possession of important,confidential information and knowledge as to the business of the Company andits affiliates, including, but not limited to, knowledge of marketing andoperating strategies, acquisition, leasing and other agreements, financialresults and projections, future plans, the provisions of other importantcontracts entered into by the Company and its affiliates, possible acquisitionsand similar information.  Executive agreesthat all such knowledge and information constitutes a vital part of thebusiness of the Company and its affiliates and is by its nature trade secretsand confidential information proprietary to the Company and its affiliates(collectively, “Confidential Information”).  Executive agrees that he shall not, so long as the Companyremains in existence, divulge, communicate, furnish or make accessible (whetherorally or in writing or in books, articles or any other medium) to any individual,firm, partnership or corporation, any knowledge or information with respect toConfidential Information directly or indirectly useful in any aspect of thebusiness of the Company or any of its affiliates.

 

c.             All memoranda,notes, notebooks, lists, records and other documents or papers (and all copiesthereof), including such items stored in computer memories, portable computersand the like, on microfiche, disk or by any other means, made or compiled by oron behalf of Executive or made available to him relating to the Company are andshall be the Company’s property and shall be delivered to the Company promptlyupon the termination of Executive’s employment with the Company or at any othertime on request and such information shall be held confidential by Executiveafter the termination of his employment with the Company.

 

d.             As used in thisAgreement, “Restricted Period” shall mean the twelve (12) monthsfollowing Executive’s termination of employment for any reason.

 

e.             FollowingExecutive’s termination of employment, Executive will cooperate with theCompany, its executives, counsel and other professional advisors (i) to theextent reasonably possible with respect to the consummation of matters thatwere in progress at the time of Executive’s termination of employment and (ii)with respect to any litigation or regulatory matters arising out of or relatedto the business, operations, or personnel of the Company (includingparticipation in depositions, hearings and trials, as and if deemed necessaryor appropriate by the Company,

 

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execution of appropriate affidavits and participation in interviewswith Company counsel).  The Companyshall compensate Executive at an hourly rate of $200.00 plus out of pockettravel and lodging costs which have been approved in advance by the ChiefExecutive Officer, for any services provided by Executive pursuant to thisparagraph 7(f).

 

f.              The provisionscontained in this paragraph 7 as to the time periods, scope of activities,persons or entities affected, and territories restricted shall be deemeddivisible so that, if any provision contained in this paragraph 7 is determinedto be invalid or unenforceable, such provisions shall be deemed modified so asto be valid and enforceable to the full extent lawfully permitted.

 

g.             Executive agreesthat the provisions of this paragraph 7 are reasonable and necessary for theprotection of the Company and that they may not be adequately enforced by anaction for damages and that, in the event of a breach thereof by Executive orany Executive-Controlled Person, the Company shall be entitled to apply for andobtain injunctive relief in any court of competent jurisdiction to restrain thebreach or threatened breach of such violation or otherwise to enforcespecifically such provisions against such violation, without the necessity ofthe posting of any bond by the Company. Executive further covenants and agrees that if he shall violate any ofhis covenants under this paragraph 7, the Company shall not be obligatedto make any payments or provide any benefits provided in paragraph 6 and theCompany shall be entitled to recover any amounts previously paid pursuant toparagraph 6.  Such a remedy shall,however, not be exclusive and shall be in addition to any injunctive relief orother legal or equitable remedy to which the Company is or may beentitled.  Accordingly, Executive agreesthat he shall reimburse the Company for any reasonable attorneys’ fees andexpenses that the Company might incur in enforcing this paragraph 7 if itis judicially determined that Executive has breached this paragraph 7.

 

8.             Indemnification.To the full extent permitted by applicable law, Executive shall be indemnifiedand held harmless by the Company against any and all judgments, penalties,fines, amounts paid in settlement, and other reasonable expenses (including,without limitation, reasonable attorneys’ fees and disbursements) actuallyincurred by Executive in connection with any threatened, pending or completedaction, suit or proceeding (whether civil, criminal, administrative,investigative or other) for any action or omission in his capacity as adirector, officer or employee of the Company, its affiliates and predecessors(for which the Company would be liable). Indemnification under this paragraph 8 shall be in addition to, andnot in substitution of, any other indemnification by the Company of itsofficers and directors.

 

9.             Arbitration.  The parties hereto will endeavor to resolvein good faith any controversy, disagreement or claim arising between them,whether as to the interpretation, performance or operation of this Agreement orany rights or obligations hereunder.  Ifthey are unable to do so, any such controversy, disagreement or claim will besubmitted to binding arbitration, for final resolution without appeal, byeither party giving written notice to the other of the existence of a disputewhich it desires to have arbitrated. The arbitration will be conducted in Orange County, California by asingle neutral arbitrator and will be held in accordance with the rules of theAmerican Arbitration Association.  Thedecision and award of the arbitrators must be in writing and will be final and

 

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binding upon the parties hereto. Judgment upon the award may be entered in any court having jurisdictionthereof, or application may be made to such court for a judicial acceptance ofthe award and an order of enforcement, as the case may be.  The expenses of arbitration will be borne inaccordance with the determination of the arbitrator with respect thereto,except as otherwise specified in paragraph 5(b) above.  Pending a decision by the arbitrator withrespect to the dispute or difference undergoing arbitration, all other obligationsof the parties will continue as stipulated herein, and all monies not directlyinvolved in such dispute or difference will be paid when due.

 

10.           Miscellaneous.

 

a.             Executiverepresents and warrants that he is not a party to any agreement, contract orunderstanding, whether employment or otherwise, which would restrict orprohibit him from undertaking or performing employment in accordance with theterms and conditions of this Agreement.

 

b.             The provisions ofthis Agreement are severable and if any one or more provisions may bedetermined to be illegal or otherwise unenforceable, in whole or in part, theremaining provisions and any partially unenforceable provision to the extentenforceable in any jurisdiction will remain binding and enforceable.

 

c.             The rights andobligations of the Company under this Agreement inure to the benefit of, andwill be binding on, the Company and its successors and permitted assigns, andthe rights and obligations (other than obligations to perform services) ofExecutive under this Agreement will inure to the benefit of, and will bebinding upon, Executive and his heirs, personal representatives and permittedassigns; provided, however, that Executive shall not be entitled toassign or delegate any of his rights and obligations under this Agreementwithout the prior written consent of the Company; provided, further,that the Company shall not have the right to assign or delegate any of itsrights or obligations under this Agreement except to a corporation, partnershipor other business entity that is, directly or indirectly, controlled by theCompany.

 

d.             Any notice to begiven under this Agreement will be personally delivered in writing or will havebeen deemed duly given when received after it is posted in the United Statesmail, postage prepaid, registered or certified, return receipt requested, andif mailed to the Company, will be addressed to its principal place of business,attention: Secretary, and if mailed to Executive, will be addressed to him athis home address last known on the records of the Company or at such otheraddress or addresses as either the Company or Executive may hereafter designatein writing to the other.

 

e.             The failure ofeither party to enforce any provision or provisions of this Agreement will notin any way be construed as a waiver of any such provision or provisions as toany future violations thereof, nor prevent that party thereafter from enforcingeach and every other provision of this Agreement.  The rights granted the parties herein are cumulative and thewaiver of any single remedy will not constitute a waiver of such party’s rightto assert all other legal remedies available to it under the circumstances.

 

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f.              THIS AGREEMENTWILL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAWS OF THE STATE OFCALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAWS.

 

g.             Captions andparagraph headings used herein are for convenience and are not a part of thisAgreement and will not be used in construing it.

 

h.             THIS AGREEMENTSUPERCEEDES ANY AND ALL OTHER UNDERSTANDINGS AND AGREEMENTS BETWEEN EXECUTIVEAND COMPANY IN ANY MANNER RELATING TO EXECUTIVE’S EMPLOYMENT, INCLUDING ANYEMPLOYMENT AGREEMENT REFERENCED IN THE S-4 FILED BY THE COMPANY WITH THE U.S.SECURITIES EXCHANGE COMMISSION, WHICH BECAME EFFECTIVE IN 2001 AND ALL SUCHOTHER AGREEMENTS ARE TERMINATED. EXECUTIVE HEREBY RELEASES, RELIEVES AND RELINQUISHES COMPANY, ITSOFFICERS, DIRECTORS, EMPLOYEES, AGENTS, ATTORNEYS AND REPRESENTATIVES(COLLECTIVELY THE “RELEASED PARTIES”) FROM ALL CLAIMS, LIABILITIES, DUTIES ANDOBLIGATIONS WHICH EXECUTIVE MAY HAVE AGAINST THE RELEASED PARTIES AND THEEXECUTIVE AGREES TO INDEMNIFY AND HOLD THE RELEASED PARTIES HARMLESS FROM ANDAGAINST ANY AND ALL SUCH CLAIMS, LIABILITIES, DUTIES AND OBLIGATIONS.

 

i.              The Executiveagrees to abide by all Company policies including but not limited to therequirement of strict confidentiality on all information in any manner relatedto the Company.  Executive shall referany third party (being any party who is not an employee or board member of theCompany) inquiries concerning the operations of the Company, past, current orfuture to the Chief Executive Officer.

 

j.              The Executiveshall be deemed to have resigned from his position as Chief Financial Officereffective as of August 7, 2002.  In thisregard, the Executive shall fully cooperate in filing such information andnotices as may be required by law or requested by the Company announcing suchresignation.

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of theday and year first set forth above.

 
|   | AMERICAN SPECTRUM REALTY, INC. |
|--------|--------------------------------|
|   |                           |
|   |                           |
|   | By:                            |   |   |
|   |                           | William J. Carden, Chief Executive Officer |
|   |                           |   |
|   |                           |   |   |
|   |                           | Thomas N. Thurber |

 

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