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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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EXCHANGE ACT OF 1934
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<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
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Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
</TABLE>
Tarragon Realty Investors, Inc.
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TARRAGON REALTY INVESTORS, INC.
1775 Broadway, 23rd Floor
New York, New York 10019
(212) 949-5000
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 17, 2001
Please join us for the Annual Meeting of Stockholders of Tarragon
Realty Investors, Inc., which will be held on Wednesday, January 17, 2001 at
2:00 p.m. local New York City time, at 1775 Broadway, 23rd Floor, New York, New
York 10019.
The purposes of the Annual Meeting are:
1. To elect eight (8) Directors to serve until the next Annual
Meeting of Stockholders;
2. To ratify the selection of Arthur Andersen LLP as independent
auditors for fiscal year 2000;
3. To consider and vote upon a proposal to amend Tarragon's Share
Option and Incentive Plan to increase the number of shares of
common stock authorized for issuance under that Plan; and
4. To consider and take action upon any other business that may
properly come before the meeting.
You are cordially invited to attend the Annual Meeting in person.
You must be a stockholder of record at the close of business on
December 1, 2000 to vote at the Annual Meeting.
Your vote is important. Accordingly, whether or not you plan to attend
the Annual Meeting, please sign, date and promptly return the enclosed proxy
card in the envelope provided.
Dated: December 8, 2000 BY ORDER OF THE BOARD OF DIRECTORS
/s/ KATHRYN MANSFIELD
Kathryn Mansfield
Executive Vice President and Secretary
<PAGE> 3
TARRAGON REALTY INVESTORS, INC.
1775 Broadway, 23rd Floor
New York, New York 10019
(212) 949-5000
PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
JANUARY 17, 2001
GENERAL INFORMATION
This Proxy Statement is being furnished to you in connection with the
solicitation of proxies by the Board of Directors of Tarragon Realty Investors,
Inc. for use at the Annual Meeting of Stockholders. The Annual Meeting will be
held on Wednesday, January 17, 2001 at 2:00 p.m., local New York City time, at
1775 Broadway, 23rd Floor, New York, New York 10019. This Proxy Statement and
the accompanying proxy card are first being mailed to stockholders on or about
December 8, 2000.
STOCKHOLDERS ENTITLED TO VOTE
You are entitled to vote at the Annual Meeting and any adjournments
thereof if you are a holder of record of Tarragon common stock, par value $0.01
per share, as of the close of business on December 1, 2000 (the "Record Date").
As of the Record Date, there were 6,891,102 shares of common stock outstanding.
You are entitled to one vote for each share of Tarragon common stock you hold on
the Record Date.
VOTING OF PROXIES
You can vote in person at the Annual Meeting or you can vote by proxy.
To vote by proxy, you must sign, date and return the enclosed proxy card to
American Stock Transfer and Trust Company in the envelope provided prior to the
Annual Meeting. You may choose to vote for all of the nominees for Director,
withhold authority for voting for all of the nominees, or withhold authority for
voting for any individual nominee. Unless you instruct otherwise, the persons
named as your proxy will vote your shares FOR the election of each of the
nominees for Director, FOR the ratification of Arthur Andersen LLP as
independent auditors, and FOR the approval of the proposed amendment to
Tarragon's Share Option and Incentive Plan, as recommended by the Board of
Directors.
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REVOKING PROXIES
You may revoke a proxy at any time before it is exercised by delivering
written notice of revocation to the Secretary of Tarragon, or by signing and
delivering a proxy card bearing a later date. You may also attend the Annual
Meeting, withdraw your proxy before it is exercised, and vote in person.
If you are a beneficial owner of shares and you intend to vote in
person at the Annual Meeting, you should obtain a legal proxy or power of
attorney from your broker and present it to the inspectors of election at the
Annual Meeting to establish your right to vote such shares.
VOTE REQUIRED FOR APPROVAL
The holders of a majority of the outstanding shares of common stock
entitled to vote must be represented at the Annual Meeting in person or by proxy
to constitute a quorum for the transaction of business at the Annual Meeting.
In order to be elected as a Director, each nominee must receive the
affirmative vote of a plurality of the votes cast at the Annual Meeting
(Proposal 1). The affirmative vote of a majority of the votes cast at the Annual
Meeting is also required to ratify the appointment of Arthur Andersen LLP as
Tarragon's independent auditors (Proposal 2) and to approve the proposed
amendment to Tarragon's Share Option and Incentive Plan (Proposal 3).
Votes withheld from the election of any nominee for Director and
abstentions will be treated as shares that are present and entitled to vote for
the purposes of determining the presence of a quorum, but will not be counted in
the number of votes cast on any matter. If a broker does not receive voting
instructions from the beneficial owner of shares on a particular matter and
indicates on the proxy that it does not have discretionary authority to vote on
that matter, those shares will be considered as present and entitled to vote
with respect to that matter, but will not be counted in the number of votes cast
FOR or AGAINST the matter.
As of December 1, 2000, management and affiliates held 3,028,746 shares
representing approximately 44% of the shares outstanding. Management intends to
vote all of these shares for the election of each of the eight nominees for
Director, for the ratification of the appointment of Arthur Andersen LLP as
independent auditors, and for the approval of the proposed amendment to
Tarragon's Share Option and Incentive Plan.
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PROPOSAL 1
ELECTION OF DIRECTORS
Tarragon's Board of Directors currently consists of eleven members,
eight of whom are independent. Nine of the current members of the Board were
elected at the last annual meeting of stockholders held on August 18, 1999, to
serve until the next annual meeting of stockholders or until a successor has
been elected or approved. Mr. Rohdie was appointed to the Board effective
February 7, 2000, following Tarragon's acquisition of his interests in
Tarragon's joint venture projects with him. Mr. Rothenberg, who joined Tarragon
as Chief Operating Officer in September 2000, was appointed to the Board
effective September 25, 2000.
NOMINEES
Eight of the current members of the Board of Directors of Tarragon have
been nominated to serve for an additional term, until the next annual meeting of
stockholders or until his respective successor has been duly elected and
qualified. Each of the nominees has consented to being named in this Proxy
Statement as a nominee and has agreed to serve as a director if elected. The
persons named as your proxy will vote your shares for the election of each of
the nominees unless you instruct otherwise. If any nominee is unable or
unwilling to serve (an event which is not anticipated), then the persons named
as your proxy may vote for any substitute nominee proposed by the Board of
Directors in place of such nominee.
The eight nominees are listed below, together with their ages, terms of
service, all positions and offices with Tarragon or its predecessors, other
principal occupations, business experience and directorships with other
companies during the last five years or more. There are no family relationships
among any of the directors or executive officers of Tarragon. The designation
"Affiliated" when used below means that the director is an officer or employee
of Tarragon.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR EACH OF THE
FOLLOWING NOMINEES FOR ELECTION AS DIRECTOR:
CARL B. WEISBROD (56) (Independent) has served as Chairman of the Board
of Directors since December 1998. He was Chairman of the Board of Trustees of
National Income Realty Trust, a predecessor of Tarragon (sometimes referred to
as "NIRT"), from February 1994 to November 1998. He was a member of the Board of
Trustees of Vinland Property Trust, also a predecessor of Tarragon, from
February 1994 to May 1995. Mr. Weisbrod also serves as a trustee (since 1996) of
the Ford Foundation and as President (since 1994) of Alliance for Downtown New
York, Inc.
WILLIE K. DAVIS (68) (Independent) has served as a director of Tarragon
since December 1998. He was a member of the Board of Trustees of Vinland
Property Trust from October 1988 to July 1997, and a member of the Board of
Trustees of NIRT from October 1988 to March 1995. He served as President (from
1971 to 1985) and Chairman and 50% shareholder (since 1985) of Mid-South
Financial Corporation, the holding company for Mid-South Mortgage Company and
Gibbs
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Mortgage Company, as well as President (from 1978 to 1995) and Chairman and sole
shareholder (since December 1995) of FMS, Inc., a property management and real
estate development firm. He has been a Director (since 1987) of Southtrust Bank
of Middle Tennessee; and Trustee and Treasurer (since 1986) of Baptist Hospital,
Inc., a Tennessee general welfare not-for-profit corporation.
WILLIAM S. FRIEDMAN (57) (Affiliated) has served as President, Chief
Executive Officer and a Director of Tarragon since April 1997, and as a Trustee
(from March 1988), Chief Executive Officer (from December 1993), President (from
December 1988), acting Chief Financial Officer (from May 1990 to February 1991),
Treasurer (from August to September 1989), and acting Principal Financial and
Accounting Officer (from December 1988 to August 1989) of Vinland Property Trust
(until July 1997) and NIRT (until November 1998). He has been an attorney at law
since 1971.
LANCE LIEBMAN (59) (Independent) has been a Director of Tarragon since
December 1998. He also served as a Trustee of NIRT from March 1994 to November
1998. Mr. Liebman is the William S. Beinecke Professor of Law at Columbia Law
School and the Director of Parker School of Foreign and Comparative Law. He also
serves as a Director of the American Law Institute. He was the Dean of Columbia
Law School from 1991 to 1996. From 1970 to 1991, he was Assistant Professor,
Professor and Associate Dean of Harvard Law School. He has been a Director of
the Greater New York Insurance Co. (both mutual and stock companies) since 1991;
a Director of M&F Worldwide since 1995; and a Director of Brookfield Financial
Properties, Inc. since 1996. Since 1999 he has been Public Governor of the
Philadelphia Stock Exchange. He has been an attorney at law since 1968.
ROBERT C. ROHDIE (60) (Affiliated) was appointed to the Board of
Tarragon and began serving as President and Chief Executive Officer of Tarragon
Development Corporation, a wholly owned subsidiary of Tarragon responsible for
real estate development and renovation projects, in February 2000. Mr. Rohdie
has served as President of Rohdhouse Investments, Inc., his wholly owned real
estate development company, since 1988. Rohdhouse Investments acted as
Tarragon's joint venture partner in new construction and development projects
from 1997 through 2000. Mr. Rohdie has been an attorney at law since 1965.
ROBERT P. ROTHENBERG (41) (Affiliated) was appointed to the Board of
Directors and began serving as Chief Operating Officer of Tarragon in September
2000. Mr. Rothenberg has been the managing member of APA Management LLC, a real
estate investment and management company, since 1994. He has also been a
Managing Member of Ansonia LLC, which together with Tarragon has acquired close
to 2600 apartments in the State of Connecticut, since 1997. Mr. Rothenberg has
been a co-managing member of Accord Properties Associates, LLC, which manages
the Ansonia portfolio in Connecticut, since 1998. He previously founded and
served as President of Venture Realty Group, Ltd., which invested in multifamily
and industrial properties, from September 1992 through April 1996. Mr.
Rothenberg graduated from the Harvard Business School in June 1984.
LAWRENCE G. SCHAFRAN (62) (Independent) has been a Director of Tarragon
since December 1998. He was a Trustee of NIRT from March 1995 to November 1998.
Mr. Schafran has been
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Managing General Partner of L.G. Schafran & Associates, a real estate investment
and development firm in New York City, since 1984. He serves as Chairman of the
Board (since January 1996) and Co-Chief Executive Officer (since January 2000)
of Delta-Omega Technologies, Inc., a Broussard, Louisiana based specialty
chemical company. He also serves as Trustee (since December 1999), Interim Chief
Executive Officer and President (since August 2000) and Chairman (since October
2000) of the Banyan Strategic Realty Trust, a NASDAQ traded equity REIT. He has
been a Director of PubliCARDS, Inc. since 1986, and a Director of WorldSpace,
Inc. since April 2000. Mr. Schafran previously served as a Director of Kasper
A.S.L., Ltd. from April 1997 to March 2000; a Director of COMSAT Corporation
from August 1997 to August 2000; a Director of Capsure Holdings Corp. from 1986
to 1997; and a Director of Glasstech, Inc. from January 1995 to July 1997. From
December 1993 to October 1997, Mr. Schafran was a Director, Member (from
September 1994 to October 1997) and Chairman (from December 1994 to October
1997) of the Executive Committee of The Dart Group Corporation, a Landover,
Maryland NASDAQ listed holding company.
RAYMOND V.J. SCHRAG (55) (Independent) has been a Director of Tarragon
since December 1998. He was a Trustee of Vinland Property Trust from October
1988 to May 1995, and of NIRT from October 1988 to November 1998. Mr. Schrag has
been an attorney in private practice in New York City since 1973.
BOARD MEETINGS AND COMMITTEES
The Board of Directors reviews the business plan of Tarragon to
determine that it is in the best interest of the stockholders, supervises the
performance of management, selects executive officers and reviews the
reasonableness of their compensation, reviews Tarragon's operating results and
approves major acquisitions, sales and joint venture investments.
During the fiscal year ended December 31, 1999, the Board held four
regular meetings and acted four times by written consent. Through the end of the
third quarter of 2000, the Board met an additional three times, and acted by
written consent nine times. Each of the Directors attended at least 75% of the
aggregate of all meetings held by the Board and all meetings held by the
committees of the Board, if any, upon which such Director served during the
period of time that such person served on the Board or such committee.
The Board has an Audit Committee and an Executive Compensation
Committee.
The Audit Committee, which met once during 1999, and twice in the first
three quarters of 2000, reviews Tarragon's operating and accounting procedures.
The Audit Committee currently consists of Chester Beck and Messrs. Schrag and
Davis.
The Executive Compensation Committee makes recommendations to the Board
for the compensation of Tarragon's senior executive officers, administers
Tarragon's Share Option and Incentive Plan and authorizes option grants under
that plan. The Committee, which currently consists of Michael Smith and Messrs.
Weisbrod, Schafran, Schrag and Liebman, met once and acted
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once by written consent during 1999, and met once and acted twice by written
consent in the first three quarters of 2000.
DIRECTOR COMPENSATION
Our independent Directors receive annual compensation of $15,000 per
year plus reimbursement of expenses for their service on the Board. Mr.
Weisbrod, as Chairman of the Board, receives an additional $25,000 per year as
compensation for his services as Chairman. All other independent Directors
receive $2,000 per year for each committee of the Board on which they serve,
$1,000 per year for each committee that they chair, and $1,000 per day for any
special services rendered on Tarragon's behalf, plus reimbursement of expenses.
Directors who are also officers of Tarragon do not receive any separate
compensation for their services as Director.
Tarragon's Independent Director Stock Option Plan (the "Director Plan")
provides for automatic annual grants of options to independent Directors serving
on the Board on the first day of each new fiscal year. The exercise price of all
options granted under the Director Plan is equal to the market price on the
grant date. The options are immediately exercisable, and expire on the earlier
of the first anniversary of the date on which a Director ceases to be a Director
or ten years from the date of grant.
Pursuant to the terms of the Director Plan, each of our incumbent
independent Directors received an option to purchase 2,000 shares of Tarragon
common stock on January 1, 1999 and an option to purchase an additional 2,000
shares on January 1, 2000.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In 1999, affiliates of William S. Friedman and his wife, Lucy N.
Friedman, made advances to Tarragon pursuant to the terms of a $6 million
unsecured line of credit. Advances under the line of credit bear interest at the
lower of LIBOR plus 1% per annum or the lowest rate at which credit is offered
to Tarragon by any third party. The outstanding balance under the line of credit
as of December 31, 1999 was $5.1 million, including interest accrued during the
year of $360,000, and the outstanding balance as of December 1, 2000 was $7.4
million, including accrued interest year to date of $359,000. The largest
aggregate amount of indebtedness outstanding under the line of credit was $7.9
million as of September 30, 2000.
In 1999, Tarragon managed seven apartment properties and one commercial
property owned by affiliates of Mr. Friedman and received management fees
totaling $279,000 for these services.
During 1999, as an accommodation to Tarragon, the family of Mr.
Friedman pledged Tarragon common stock as collateral for a $6 million line of
credit facility obtained by Tarragon. As of December 31, 1999, the shares
pledged by the Friedman family had been replaced with treasury shares acquired
through our stock repurchase program.
On February 7, 2000, Tarragon acquired the interests of Robert C.
Rohdie and his affiliates in ten apartment communities recently completed or
currently under construction, as well as in all joint
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venture development projects still in the planning stages, for a total value of
up to $10,000,000. Mr. Rohdie, who was Tarragon's joint venture partner in the
development of these projects, contributed his equity interests to an operating
partnership formed by Tarragon in exchange for a preferred interest in the
operating partnership and a guaranteed fixed return of $200,000 for the first
two years, increasing by $40,000 per year for the next five years, plus an
annual amount equal to the dividends payable on 96,160 shares of Tarragon common
stock. In addition, upon completion and lease up of each of the five identified
apartment communities presently under construction or in advanced stages of
development planning, Mr. Rohdie will receive an increase in his guaranteed
fixed return based on the agreed value of his equity in the completed property.
After one year, Mr. Rohdie has the right to convert his preferred interest in
the operating partnership into 96,160 shares of our common stock, and preferred
stock with a face value of up to $8 million and a like dividend to his
guaranteed fixed return from the operating partnership. If we do not have
available an issue of preferred stock outstanding at the time of the conversion,
or at our discretion, we may pay Mr. Rohdie the cash value of his preferred
interest over three years. In connection with this transaction, Tarragon formed
a new development subsidiary to expand our real estate development and
renovation program, and Mr. Rohdie joined Tarragon as President and Chief
Executive Officer of Tarragon Development Corporation and as a member of our
Board of Directors effective February 7, 2000.
In 1997, Tarragon formed Ansonia Apartments, L.P. with Richard Frary,
Joel Mael, Robert Rothenberg and Saul Spitz. Since then, Ansonia has purchased
16 apartment properties, with an aggregate 2,580 units, and an 160,000 square
foot historic mill for conversion to residential lofts, all located in
Connecticut. Tarragon's capital contributions to the partnership earn a
preferred return and have priority over distributions to our partners. Tarragon
has also made interest-bearing advances to Ansonia to fund major renovations to
four of its properties. Our contributions and advances through September 30,
2000 total $20 million, $2 million of which was made during the first nine
months of 2000. Tarragon received $6.5 million from Ansonia during the first
nine months of 2000 from the refinancing of six of its properties.
With the approval of our Board, Tarragon entered into an agreement
dated November 15, 2000 to acquire the interests of Robert Rothenberg, Eileen
Swenson and Saul Spitz in Accord Properties Associates, LLC, a Connecticut
limited liability company which currently acts as the property manager for
Ansonia Apartments L.P. in Connecticut, for $300,000 in cash, 25,000 shares of
Tarragon 10% Cumulative Preferred Stock, valued at an additional $300,000, and
options to acquire 180,000 shares of Tarragon common stock, to be issued under
Tarragon's Share Option and Incentive Plan. The transaction contemplated by this
agreement is expected to close in January 2001. Mr. Rothenberg, Ms. Swenson and
Mr. Spitz joined Tarragon as executive officers, and Mr. Rothenberg was
appointed as a member of our Board of Directors, in September 2000.
We believe that the foregoing transactions were at least as
advantageous to us as we could have obtained from unrelated third parties.
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PROPOSAL 2
RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors, upon the recommendation of its Audit Committee,
has selected the firm of Arthur Andersen LLP to audit the consolidated financial
statements of Tarragon for the fiscal year ending December 31, 2000, and has
directed that its selection of independent auditors be submitted for
ratification by the stockholders at the Annual Meeting. In the event of a
negative vote on ratification, the Board of Directors will reconsider its
selection.
Arthur Andersen LLP served as the auditors for Tarragon for the 1997,
1998 and 1999 fiscal years. Representatives of Arthur Andersen LLP have been
invited to attend and are expected to be present at the Annual Meeting. They
will have the opportunity to make a statement if they desire to do so, and to
respond to appropriate questions.
The Board of Directors recommends that you vote FOR the approval and
ratification of Arthur Andersen LLP as independent auditors.
PROPOSAL 3
AMENDMENT TO SHARE OPTION AND INCENTIVE PLAN
On December 1, 2000, the Board of Directors unanimously adopted an
amendment to Tarragon's Share Option and Incentive Plan (the "Plan"), subject to
stockholder approval at this Annual Meeting, to increase the number of shares of
common stock reserved for issuance under the Plan by 800,000 shares, from
718,779 to 1,518,779 shares.
Tarragon's Plan was originally established by the Board of Trustees of
Vinland Property Trust on June 21, 1995, and was subsequently approved by the
shareholders of Vinland at an annual meeting of shareholders held on November
20, 1995. Originally, the Plan covered a maximum of 500,000 shares, which was
reduced by virtue of a 1-for-5 reverse share split effectuated December 1, 1995
to a maximum of 100,000 shares.
Prior to its 1998 merger with Tarragon, National Income Realty Trust
(or "NIRT") had a similar Share Option and Incentive Plan. Pursuant to the terms
of the merger, the NIRT Plan was merged with and into Tarragon's Plan, and the
shares of common stock available under Tarragon's Plan for option awards was
increased by the number of NIRT shares of beneficial interest available under
the NIRT Plan multiplied by the exchange ratio of 1.97 to 1. A total of 718,779
shares of common stock were therefore authorized for issuance under the Plan
from and after November 24, 1998.
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At September 30, 2000, there were options covering 617,466 shares
outstanding or authorized, with only 100,341 shares available for future grants
under the Plan. However, if any of the outstanding options granted under the
Plan terminate or expire for any reason without being wholly exercised, new
options or awards may be granted with those shares.
The Board believes that the amendment to increase the number of shares
of common stock reserved for issuance under the Plan by 800,000 shares is
necessary to assure that a sufficient reserve of common stock remains available
so that Tarragon can continue to utilize equity incentives to attract and retain
the services of key individuals essential to our long-term growth and financial
success. We rely significantly on equity incentives in the form of stock options
to attract and retain key employees and believe that such equity incentives are
necessary for Tarragon to remain competitive in the marketplace for executive
talent.
PLAN OVERVIEW
The Plan generally permits the issuance of shares of common stock
pursuant to the exercise of options or the grant of awards under the Plan. An
"option" under the Plan is a right to purchase shares of common stock and an
"award" under the Plan is broadly defined to include share options, alternate
settlement rights, share bonus awards, warrants, restricted shares and other
arrangements under which the shares of common stock reserved for purposes of the
Plan may be issued. Options granted under the Plan may be either incentive stock
options (an "ISO"), intended to qualify for favorable tax treatment under
federal tax law, or non-qualified stock options (an "NQSO"). The shares of
common stock subject to grant of options or awards under the Plan are generally
available from authorized but unissued shares or from the treasury, as
determined from time to time by our Board of Directors. Tarragon filed a
registration statement under the Securities Act of 1933, as amended, on Form S-8
with respect to the common stock issuable pursuant to the Plan on May 9, 2000.
ADMINISTRATION
The Plan is administered by a committee appointed from time-to-time by
the Board of Directors, comprised of at least three "non-employee directors" as
defined under applicable securities laws. The committee approves the grant of
options or awards to eligible directors, officers, employees and others,
designates the type of options or awards granted, determines the number of
shares subject to each option or award (subject to the specified maximum of
300,000 shares which may be granted under the Plan to any one participant in one
year), the term of each option or award, not to exceed ten years, the vesting
schedule, if any, the method of payment and other material terms of each grant.
The exercise price for each share of common stock covered by an option or award
is also determined by the committee, except (i) the exercise price for an ISO
may not be less than the fair market value of the stock on the date of grant,
and (ii) the exercise price for a NQSO may not be less than one half of the fair
market value of the stock on the date of grant.
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PERSONS ELIGIBLE TO PARTICIPATE
The committee may grant options and awards under the Plan to directors,
officers or key employees of Tarragon or its subsidiaries, as well as to other
persons who the committee determines are making or will make a significant
contribution to the growth and success of Tarragon. However, the committee may
not grant an ISO to anyone who is not an employee of Tarragon or its
subsidiaries. There are approximately 370 officers, directors and employees who
are eligible for options and awards under the Plan. There are 11 executive
officers and affiliated directors and 36 employees or former employees who
currently hold options under the Plan.
TERMS OF OUTSTANDING OPTIONS AND AWARDS
ISOs granted under the Plan to Tarragon employees in consideration for
their contributions and continued service to Tarragon generally vest between one
and five years from the date of grant, and expire between five and ten years
thereafter, unless the holder's relationship with Tarragon terminates earlier.
ISOs are not transferable, except by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order, and may be
exercised only by the holder while employed by Tarragon or its subsidiaries, or
within three months after termination.
NQSOs granted under the Plan may be immediately exercisable, in whole
or in part, and expire no later than ten years from the date of grant. They have
been issued to Tarragon officers in consideration for their services to
Tarragon. In addition, the committee has authorized the issuance of NQSOs for
180,000 shares under the Plan as partial consideration for Tarragon's
acquisition of Accord Properties Associates, LLC, a Connecticut limited
liability company, from Robert Rothenberg, Eileen Swenson and Saul Spitz, each
of whom joined Tarragon as executive officers, and Mr. Rothenberg as a member of
our Board of Directors, in September 2000.
The exercise prices for all outstanding options granted under the Plan
equal the fair market value of the common stock on the dates of grant, and range
from $4.61 to $12.00 per share. The options authorized by the committee for
Messrs. Rothenberg and Spitz and Ms. Swenson, in connection with Tarragon's
acquisition of their interests in Accord Properties Associates, LLC, will have
an exercise price of $10.50 per share.
In the event of a "change in control" of Tarragon, as that term is
defined in the Plan, all outstanding options become immediately exercisable and
remain exercisable for the remainder of their term.
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PLAN BENEFITS
The following table summarizes option activity under the Plan:
<TABLE>
<CAPTION>
For the Nine Months Ended For the Year Ended
--------------------------------- --------------------------------
September 30, December 31,
2000 1999
--------------------------------- --------------------------------
Weighted Weighted
Number of Average Number of Average
Options Exercise Prices Options Exercise Prices
------------ --------------- ----------- ----------------
<S> <C> <C> <C> <C>
Outstanding at January 1 210,015 7.89 271,498 7.34
Granted 420,000 10.50 0 --
Exercised (10,972) 8.27 (16,005) 4.81
Forfeited (1,577) 7.74 (45,478) 5.69
Expired 0 -- 0 --
------------ -----------
Outstanding at end of period 617,466(1) 9.66 210,015 7.89
============ ===========
Exercisable at end of period 285,586 8.60 153,001 6.78
============ ===========
</TABLE>
----------
(1) The information for the nine months ended September 30, 2000, is presented
as if the 180,000 shares authorized as of September 25, 2000 for subsequent
issuance to Robert Rothenberg, Eileen Swenson and Saul Spitz, as consideration
for Tarragon's acquisition of their interests in Accord Properties Associates,
LLC, have been issued.
The following table sets forth all options granted in the aggregate
under the Plan to the Chief Executive Officer, the Named Executive Officers, all
current executive officers of Tarragon as a group, all current directors of
Tarragon who are not executive officers as a group, each nominee for election as
a director, and all employees, including current officers who are not executive
officers, as a group, as of December 1, 2000.
<TABLE>
<CAPTION>
Name and Position Dollar Value ($) Number of Units
----------------- ----------------- ------------------
<S> <C> <C>
William S. Freidman, President, Chief Executive Officer, Director (1) 0 0
Charles Rubenstein, Executive Vice President, General Counsel 180,000 15,000
Todd C. Minor, Senior Vice President, Treasurer 57,967 10,497
John Stricklin, Managing Director-Real Estate Transactions 216,000 20,000
Kathryn Mansfield, Executive Vice President, Secretary, Corporate Counsel 128,650 13,000
Robert Rothenberg, Chief Operating Officer, Director (2) 3,150,000 300,000
Robert C. Rohdie, President and Chief Executive Officer of Tarragon Development 0 0
Corporation, Director
Saul Spitz, Executive Vice President-Acquisitions (3) 630,000 60,000
Eileen Swenson, President-Tarragon Management, Inc. (4) 630,000 60,000
Willie K. Davis, Nominee for Director 0 0
</TABLE>
11
<PAGE> 14
<TABLE>
<CAPTION>
Name and Position Dollar Value ($) Number of Units
----------------- ----------------- ------------------
<S> <C> <C>
Raymond V.J. Schrag, Nominee for Director 0 0
Lawrence Schafran, Nominee for Director 0 0
Lance Liebman, Nominee for Director 0 0
Carl Weisbrod, Nominee for Director 0 0
All current executive officers as a group (11 persons)(2)(3)(4) 5,322,154 525,350
All current directors who are not executive officers as a group (8 persons) 0 0
All employees, including all current officers who are not executive officers, as a 642,955 92,116
group (36 persons)
</TABLE>
----------
(1) Mr. Friedman has options covering 625,000 shares of Tarragon common stock.
However, these options were not issued under the Plan.
(2) Includes 60,000 shares authorized for subsequent issuance to Robert
Rothenberg as partial consideration for Tarragon's acquisition of his
interest in Accord Properties Associates, LLC.
(3) Includes 60,000 shares authorized for subsequent issuance to Saul Spitz as
partial consideration for Tarragon's acquisition of his interest in Accord
Properties Associates, LLC.
(4) Includes 60,000 shares authorized for subsequent issuance to Eileen Swenson
as partial consideration for Tarragon's acquisition of her interest in
Accord Properties Associates, LLC.
FEDERAL INCOME TAX CONSEQUENCES
Generally, an employee who is granted an ISO under the Plan will not be
taxed upon the grant or exercise of such ISO. However, upon the disposition of
the shares of common stock received through exercise of the ISO, the employee
will recognize a capital gain on the excess of the amount realized upon
disposition over the option price of the ISO, provided that they have held the
shares for the required holding periods (two years after the date the ISO is
granted, and one year after the date of exercise of the ISO) and that the shares
are held as a capital asset. Assuming that the employee meets the applicable
holding period requirements before disposing of the shares, Tarragon will not be
entitled to a deduction with respect to the grant or exercise of the ISO. An
employee's failure to comply with the holding requirements will result in
ordinary income treatment for the gain on the disposition of their shares, and
Tarragon will generally be entitled to a corresponding deduction.
Option holders generally will not recognize any taxable income at the
time they are granted a NQSO. However, upon the exercise of an NQSO, the option
holder will recognize ordinary income measured by the excess of the then fair
market value of the shares of common stock over the option price, and Tarragon
will be entitled to a deduction for a corresponding amount to the extent such
amount is an ordinary and necessary expense, satisfies the test of reasonable
compensation and the compensation is properly reported to the Internal Revenue
Service by Tarragon.
Upon a taxable disposition of shares acquired by an option holder
pursuant to the exercise of NQSOs, any amount received by the option holder in
excess of the sum of (i) the option price of the shares as of the date of
exercise and (ii) the amount includable in income with respect to such option,
if any (such sum being his "basis" in the shares), will, in general, be treated
as long-term or short-term capital gain, depending upon the holding period of
the shares. Tarragon would not be entitled to any tax deduction in connection
with such taxable disposition by the option holder. If upon such disposition the
option holder receives less than his basis in the shares, the loss will, in
general, be treated as a long-term or short-term capital loss, depending upon
the holding period of the shares.
12
<PAGE> 15
Section 162(m) of the Internal Revenue Code places a $1,000,000 cap on
the deductible compensation that can be paid to certain executives of publicly
traded corporations. Amounts that qualify as "performance based" compensation
under Section 162(m)(4)(C) of the Internal Revenue Code are exempt from the cap
and do not count toward the $1,000,000 limit. Generally, options granted with an
option price at least equal to the fair market value of the common stock on the
date of grant, issued under a Plan approved by the stockholders of the
corporation which states the maximum number of shares with respect to which
options may be granted during a specified period to any employee, will qualify
as performance based.
In the event of a "change in control" of Tarragon, as that term is
defined in the Plan, the acceleration of the vesting of options could result in
"excess parachute" amounts under Section 280G of the Internal Revenue Code. In
such case, Tarragon would not be entitled to a deduction with respect to excess
parachute amounts, and the individual would be subject to a 20% excise tax on
the same.
THE FOREGOING DOES NOT PURPORT TO BE A COMPLETE DESCRIPTION OF ALL
FEDERAL TAX CONSEQUENCES THAT MIGHT RESULT TO ANY INDIVIDUAL OR TO TARRAGON, AND
YOU ARE ENCOURAGED TO REVIEW THE FEDERAL TAX CONSEQUENCES APPLICABLE TO YOU WITH
YOUR OWN SELECTION OF TAX EXPERTS.
STOCKHOLDER APPROVAL OF AMENDMENTS
The Board of Directors has amended the Plan on four prior occasions,
primarily to address administrative issues. The Board of Directors may, at any
time, terminate, amend or modify the Plan, provided that the Board may not amend
the Plan to increase the maximum number of shares of common stock which may be
issued pursuant to all options or awards granted under the Plan, change the
class of employees eligible to receive ISOs under the Plan, or otherwise
adversely affect the rights of any existing option holder, without the approval
of our stockholders.
BOARD RECOMMENDATION
The Board of Directors recommends that you vote FOR the approval of the
amendment to increase the number of shares of common stock that may be issued
under the Plan by 800,000 shares.
13
<PAGE> 16
MANAGEMENT
Messrs. Friedman, Rohdie and Rothenberg, together with the individuals
listed below, currently serve as the executive officers of Tarragon. Their
positions with Tarragon are not subject to a vote of stockholders. Tarragon's
employment of Messrs. Friedman, Rohdie and Rothenberg is subject to the terms of
employment agreements more fully described below. All other executive officers
serve until the first meeting of the Board of Directors following the next
succeeding annual meeting of stockholders or until their successors have been
duly chosen and qualified.
CHRIS CLINTON (53) has been Senior Vice President - Commercial Asset
Management of Tarragon since March 1994. He also served as Senior Vice President
- Commercial Asset Management for Vinland Property Trust from March 1994 to July
1997 and for NIRT and Tarragon Realty Advisors from March 1994 to November 1998,
and as Vice President of Vinland Property Trust and NIRT from October 1988 to
March 1994.
ERIN D. DAVIS (39) has been Executive Vice President and Chief
Financial Officer of Tarragon since December 1998. She previously served as Vice
President and Chief Accounting Officer for Tarragon from April 1997 to November
1998, of Vinland Property Trust from September 1996 to July 1997, and of NIRT
from September 1996 to November 1998. She served as Accounting Manager of
Vinland, NIRT, and Tarragon Realty Advisors from June 1995 to August 1996. She
has been a Certified Public Accountant since 1990.
PETER LARSEN (58) has served as Senior Vice President - Acquisitions of
Tarragon since July 1997. From July 1997 to November 1998, he was Senior Vice
President, and from April 1996 through June 1997, he was Vice President of NIRT
and Tarragon Realty Advisors. He previously worked as an Independent Consultant
from January 1995 to June 1996.
KATHRYN MANSFIELD (40) has been Executive Vice President of Tarragon
since December 1998 and Secretary and Corporate Counsel of Tarragon since May
1998. She previously served as Vice President for Tarragon, NIRT, and Tarragon
Realty Advisors from May 1998 to December 1998. Prior to joining Tarragon, she
was Vice President and Senior Counsel for CB Richard Ellis, Inc., formerly CB
Commercial Real Estate Group, Inc., from October 1994 to May 1998. She has been
an attorney at law since 1984.
LORI D. MEYER (39) has served as Senior Vice President - Deputy
Director of Property Management of Tarragon since December 1998. She has also
served as Senior Vice President (since November 1998), Controller (from February
1996 to October 2000) and Vice President (from February 1996 to November 1998)
of Tarragon Management, Inc., a wholly owned subsidiary of Tarragon. She has
been a Certified Public Accountant since 1996.
TODD C. MINOR (42) has been Senior Vice President (since December 1998)
and Treasurer (since April 1997) of Tarragon. Mr. Minor was also the Treasurer
of Vinland Property Trust from December 1996 through July 1997 and of NIRT from
December 1996 through November 1998. He served as Senior Vice President -
Mortgage Servicing and Financing from May 1995 to November 1996, Senior Vice
President - Finance from March 1994 to April 1995, and Vice President from
14
<PAGE> 17
April 1991 to July 1993 of Vinland Property Trust and NIRT and Senior Vice
President of Tarragon Realty Advisors from March 1994 through November 1998.
CHARLES RUBENSTEIN (42) has been Executive Vice President of Tarragon
since December 1998 and General Counsel since September 1998. He also served as
Senior Vice President for Tarragon, NIRT, and Tarragon Realty Advisors from
September 1998 to December 1998. Prior to joining Tarragon, he was employed as
General Counsel for Simpson Housing Limited Partnership in Denver, Colorado from
January 1996 to February 1998, and as a Real Estate Associate with the law firm
of Andrews & Kurth, L.L.P., in New York, New York, from October 1987 to November
1995. He has been an attorney at law since 1984.
TODD M. SCHEFLER (44) has been Vice President - Structured Transactions
of Tarragon since January 2000. Prior to joining Tarragon, he was employed at
Burroughs Development Corporation of Paramus, New Jersey as a Senior Vice
President - Acquisitions and Finance from April 1998 to December 1999, and as
Vice President from April 1994 to August 1997. He served as President of TMS
Realty Inc., a real estate finance and development consulting firm, from
September 1997 to April 1998.
SAUL SPITZ (49) joined Tarragon as Executive Vice President of
Acquisitions in September 2000. He has been a member of APA Management LLC, a
real estate investment and management company, since September 1994. He has also
been a member of Ansonia LLC, which together with Tarragon has acquired close to
2600 apartments in the State of Connecticut, since November 1997. Mr. Spitz has
been a co-managing member of Accord Properties Associates, LLC, which manages
the Ansonia portfolio in Connecticut, since 1998. He previously served as
President of East Island Management Corp., a New York based real estate
management firm, from April 1984 to July 1992.
JOHN C. STRICKLIN (54) has served as Managing Director - Real Estate
Transactions for Tarragon since November 1998. He previously served as Executive
Vice President (from May 1995 to April 1996) and as Senior Vice President - Real
Estate (from May 1994 to April 1995) of NIRT and as Vice President - Real Estate
(from February 1994 to April 1995) of Vinland Property Trust. Mr. Stricklin
acted as Special Assistant to the President of Basic Capital Management, Inc.
from April 1996 to November 1998.
EILEEN A. SWENSON (50) joined Tarragon as President of Tarragon
Management, Inc. in September 2000. Ms. Swenson founded and has served as
President of Accord Properties Associates, LLC and its predecessor, Accord
Ventures, Inc., since August 1994. Ms. Swenson has been a Certified Property
Manager since 1987.
WILLIAM H. THOMPSON (41) joined Tarragon as Executive Vice President
and Chief Information Officer in September 2000. He has served as Chief
Financial Officer of Accord Properties Associates, LLC since August 1998. Mr.
Thompson was previously Chief Financial Officer of Myers Northeast, a
Connecticut based property management firm, from November 1992 until August
1998. Mr. Thompson has been a Certified Public Accountant since 1982.
15
<PAGE> 18
EXECUTIVE COMPENSATION
We did not have any employees or pay any compensation to executive
officers prior to our acquisition of Tarragon Realty Advisors, Inc. on November
24, 1998. Prior to that date, our executive officers were compensated solely by
Tarragon Realty Advisors. They performed a variety of services for Tarragon
Realty Advisors, and the amount of their compensation was determined solely by
it. Following our acquisition of Tarragon Realty Advisors, we began paying
compensation to executive officers and employees. However, none of our executive
officers earned or received compensation in excess of $100,000 from Tarragon in
fiscal year 1998.
The following table reflects the compensation paid to our Chief
Executive Officer in fiscal years 1998 and 1999, and the compensation paid to
each of our four most highly compensated executive officers (collectively, the
"named executive officers") in 1999 for services rendered to Tarragon and its
subsidiaries.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
Annual Awards
Compensation Securities Underlying
--------------------------------------- Options/SARs
Name Principal Position Year Salary Bonus (Number of Shares)
------------------ -------------------------- ----------- -------------- ------------ -----------------------------
<S> <C> <C> <C> <C> <C>
William S. Friedman President 1998 $ 28,846 -- 450,000(1)
Chief Executive Officer
Director 1999 $300,000 -- --
-------- --------- --------- --------
Charles Rubenstein Executive Vice President
General Counsel 1999 $153,000 $ 50,000 --
-------- --------- --------- --------
Todd C. Minor Senior Vice President
Treasurer 1999 $128,000 $ 25,000 --
-------- --------- --------- --------
John Stricklin Managing Director -
Real Estate Transactions 1999 $130,000 $ 15,000 --
-------- --------- --------- --------
Kathryn Mansfield Executive Vice President
Secretary Corporate Counsel 1999 $103,000 $ 30,000 --
-------- --------- --------- --------
</TABLE>
----------
(1) Mr. Friedman received options for an additional 175,000 shares of common
stock as part of the consideration for Tarragon's acquisition of Tarragon
Realty Advisors.
16
<PAGE> 19
The following table shows the stock options exercised during 1999 by
each of our named executive officers and the fiscal year-end value of their
unexercised options on an aggregated basis.
AGGREGATED OPTION/SAR EXERCISES IN FISCAL YEAR 1999 AND FISCAL YEAR-END
OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of securities
underlying Value of unexercised
unexercised in-the-money
Shares acquired on options/SARs at options/SARs at
exercise Value Realized fiscal year end fiscal year end
Name (#) ($) (#) ($)
------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Exercisable/ Exercisable/
Unexercisable Unexercisable
---------------------- ----------------------
<S> <C> <C> <C> <C>
William S. Friedman -- -- 625,000/-0- -0-/-0-
---------------------- ----------------------- ---------------------- ----------------------
Charles Rubenstein -- -- 3,000/12,000 -0-/-0-
---------------------- ----------------------- ---------------------- ----------------------
Todd C. Minor 5,000 $17,166 10,498/-0- $49,629/-0-
---------------------- ----------------------- ---------------------- ----------------------
John Stricklin -- -- 4,000/16,000 -0-/-0-
---------------------- ----------------------- ---------------------- ----------------------
Kathryn Mansfield -- -- 7,266/5,734 $4,167/$2,083
---------------------- ----------------------- ---------------------- ----------------------
</TABLE>
EMPLOYMENT CONTRACTS
Tarragon entered into an employment agreement with William S. Friedman
in November 1998 in connection with our acquisition of Tarragon Realty Advisors
from Mr. Friedman and his wife, Lucy N. Friedman. Mr. Friedman's employment
agreement is for a term of four years at an annual salary of $300,000, includes
a broad covenant not to compete with Tarragon during the term of the agreement
and for a period of three years following termination, and includes a right of
first refusal in favor of Tarragon with regard to any real estate investment
opportunity that comes to his attention. Mr. Friedman also received immediately
exercisable stock options to purchase 250,000 shares of Tarragon common stock at
an exercise price of $12 per share and 200,000 shares of Tarragon common stock
at an exercise price of $15 per share in connection with his employment
agreement.
Mr. Friedman's employment with Tarragon may be terminated at any time
by mutual agreement of the parties on terms to be negotiated and reduced to
writing at the time of termination. In the event that Mr. Friedman dies during
the initial or any renewal term of his employment agreement, his estate is
entitled to the greater of the compensation which would have been payable to him
over the remainder of the initial term of the agreement or through the end of
the then current
17
<PAGE> 20
calendar year if in a renewal term or the value of any other benefits available
to them under any benefit plan Tarragon then has in effect. In the event that
Mr. Friedman's employment is terminated during the initial or any renewal term
of his employment agreement for any reason other than the mutual agreement of
the parties or his death, Tarragon is obligated to continue to pay him $25,000
per month for the greater of the balance of the initial term of the agreement or
through the end of the then current calendar year if in a renewal term and the
number of months he observes the restrictive covenants and agreement not to
compete contained in his employment agreement, but in any event not more than 36
months from the date of termination.
Tarragon entered into an employment agreement with Robert C. Rohdie
effective February 1, 2000, following Tarragon's acquisition of Mr. Rohdie's
interests in our joint venture projects with him. Mr. Rohdie's employment
agreement is for a term of three years at an annual salary of $200,000. It also
includes a broad covenant not to compete with Tarragon during the term of the
agreement and for a period of one year following termination and a right of
first refusal in favor of Tarragon with regard to any real estate investment
opportunity that comes to his attention. Mr. Rohdie's employment with Tarragon
may be terminated at any time by mutual agreement of the parties on terms to be
negotiated and reduced to writing at the time of termination. In the event that
Mr. Rohdie's employment with Tarragon is terminated by the Board without cause
during the initial or any renewal term of his agreement, Tarragon is obligated
to continue to pay him $16,666 per month for the lesser of the remaining number
of months in the initial term of the agreement or the then annual renewal term
of the agreement and the number of months he observes the restrictive covenants
and agreement not to compete contained in his employment agreement, but in any
event not more than 12 months from the date of termination.
Tarragon entered into an employment agreement with Robert P. Rothenberg
effective September 25, 2000. Mr. Rothenberg's employment agreement is for a
term of three years at an annual salary of $250,000, with a guaranteed minimum
annual incentive bonus of $100,000. In addition Mr. Rothenberg received options
to acquire 240,000 shares of Tarragon common stock at its fair market value on
the date of grant. The agreement also includes a broad covenant not to compete
with Tarragon during its term and for a minimum period of one year following its
termination, and a right of first refusal in favor of Tarragon with regard to
any real estate investment opportunity that comes to his attention. Mr.
Rothenberg's employment with Tarragon may be terminated at any time by mutual
agreement of the parties on terms to be negotiated and reduced to writing at the
time of termination. In the event that Mr. Rothenberg's employment with Tarragon
is terminated by the Board without cause during the initial or any renewal term
of his agreement, Tarragon is obligated to continue to pay him $20,833.33 per
month for 12 months following the date of termination or the number of months
remaining under the agreement, whichever is greater.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Executive Compensation Committee currently consists of Lance
Liebman, Carl B. Weisbrod, Raymond V.J. Schrag, Lawrence Schafran and Michael
Smith, who are all independent members of our Board of Directors. None of the
members of the committee are current or former employees of Tarragon.
18
<PAGE> 21
REPORT ON EXECUTIVE COMPENSATION
BY THE EXECUTIVE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
In December 1998, the Board of Directors established the Executive
Compensation Committee to review and approve Tarragon's compensation philosophy
and executive compensation programs, plans and awards. In April 2000 the
Executive Compensation Committee was merged with the Option Committee, and began
administering Tarragon's Share Option and Incentive Plan, as well as authorizing
option grants thereunder. Tarragon's compensation policy has been to provide all
employees with a total compensation package which includes a competitive salary,
an incentive bonus based upon individual performance, competitive benefits and
an efficient, worker-friendly workplace environment. In addition, most employees
are eligible to receive qualified incentive stock options under Tarragon's Share
Option and Incentive Plan, which was established to reward and motivate
employees by providing them with an opportunity to acquire a proprietary
interest in Tarragon and aligning their interests with those of our
stockholders.
The Executive Compensation Committee reviews executive officer salaries
and incentive bonus and option awards. Tarragon's executive officers are paid
salaries in line with their experience and responsibilities. Peer group
compensation practices are also taken into consideration. In addition, they are
eligible for an annual incentive bonus based upon individually established
performance goals. Stock option grants to executive officers are likewise based
on various subjective factors, primarily relating to the responsibilities of the
individual officers, and their expected future contributions and prior option
grants.
The Executive Compensation Committee reviewed and approved the terms of
the employment agreement that Tarragon entered into with Robert P. Rothenberg
effective September 25, 2000. The Board of Directors as a whole considered and
approved the terms of the employment agreements Tarragon entered into with
William S. Friedman in November 1998, and with Robert C. Rohdie in February
2000.
Prior to entering into an employment agreement with Mr. Friedman, the
Board considered his qualifications and experience in the real estate industry
in general, and his long term commitment to Tarragon and its predecessors. The
Board also considered the financial performance of Tarragon and its predecessors
under Mr. Friedman's management, in terms of net increase in assets and asset
value, stockholder return and increase in market price of our common stock. The
Board determined that it was in the best interest of Tarragon to ensure Mr.
Friedman's continued full time involvement in management, and fashioned a
compensation package consisting of base salary and stock option awards to
achieve this purpose. In determining the amount of base salary payable to Mr.
Friedman, the Board considered the responsibilities of the position, the
competitive marketplace for comparable executive talent, including market
information relative to the compensation paid to other chief executive officers
of comparable real estate investment trusts, and the financial performance of
Tarragon in fiscal year 1998 and historically. Mr. Friedman was also awarded
options to purchase common stock at above market prices, reflecting the Board's
desire to motivate the chief executive officer to achieve strategic and
financial goals and to create value for the stockholders of Tarragon.
19
<PAGE> 22
EXECUTIVE COMPENSATION COMMITTEE
Lance Liebman Lawrence G. Schafran
Carl B. Weisbrod Michael E. Smith
Raymond V.J. Schrag
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables set forth information concerning the holdings of
each person known to Tarragon to be the beneficial owner of more than five
percent of our common stock, of each director and named executive officer, and
of all of Tarragon's directors and executive officers as a group. All
information with respect to beneficial ownership was furnished to Tarragon by
the respective director, officer, or stockholder.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
<TABLE>
<CAPTION>
Amount and Nature
Name and Address of of Beneficial Percent of
Beneficial Owner Ownership Class (1)
------------------------------------ ----------------------------- --------------
<S> <C> <C>
Lucy N. Friedman 3,059,732(2)(3)(4) 43%
1775 Broadway 23rd Floor (5)(6)
New York, New York 10017
</TABLE>
----------
(1) Percentage is based upon 6,891,102 shares of common stock outstanding at
December 1, 2000.
(2) Includes 1,410,068 shares owned by Mrs. Friedman directly and 175,000
shares covered by a presently exercisable option.
(3) Includes 598,676 shares owned by Lucy N. Friedman's spouse, William S.
Friedman.
(4) Includes 76,299 shares owned by Mrs. Friedman's minor sons, Gideon and
Samuel Friedman. Mrs. Friedman disclaims beneficial ownership of such
shares.
(5) Includes 124,738 shares owned by Tarragon Capital Corporation, of which
Mrs. Friedman and Mr. Friedman are executive officers and directors;
131,344 shares owned by Tarragon Partners, Ltd., of which Mrs. Friedman
and Mr. Friedman are limited partners and Tarragon Capital is the general
partner; and 543,607 shares owned by Beachwold Partners, L.P., in which
Mrs. Friedman and Mr. Friedman are the general partners and their four
children are the limited partners.
20
<PAGE> 23
(6) Does not include 91,504 shares owned by Mrs. Friedman's adult son, Ezra
Friedman, and 67,343 shares owned by Mrs. Friedman's adult daughter, Tanya
Friedman. Mrs. Friedman disclaims beneficial ownership of such shares.
SECURITY OWNERSHIP OF MANAGEMENT
<TABLE>
<CAPTION>
Amount and Nature
of Beneficial Percent of
Name of Beneficial Owner Ownership Class (1)
---------------------------- ------------------- ------------
<S> <C> <C>
William S. Friedman 3,509,732 (2)(3)(4)(5)(6) 47%
Sally Hernandez-Pinero 17,672 (7) *
Lance Liebman 19,848 (8) *
L. G. Schafran 17,672 (9) *
Raymond V.J. Schrag 69,920 (10) 1%
Carl B. Weisbrod 19,777 (11) *
Chester Beck 9,000 (12) *
Willie K. Davis 8,200 (13) *
Michael E. Smith 6,500 (14) *
Robert C. Rohdie 48,323 (15) *
Robert P. Rothenberg 81,000 (16) 1%
Kathryn Mansfield 11,600 (17) *
Todd C. Minor 15,498 (18) *
Charles D. Rubenstein 6,000 (19) *
John Stricklin 11,100 (20) *
All Directors and Executive 3,896,996 (2)(3)(4)(5)(6) 50%
Officers as a group (7)(8)(9)(10)(11)
(19 individuals) (12)(13)(14)(15)(16)(17)
(18)(19)(20)
</TABLE>
----------
* Less than 1%.
21
<PAGE> 24
(1) Percentages are based upon 6,891,102 shares of common stock outstanding at
December 1, 2000.
(2) Includes 598,676 shares owned by Mr. Friedman directly and 625,000 shares
covered by two separate presently exercisable options.
(3) Includes 1,410,068 shares owned by Mr. Friedman's spouse, Lucy N.
Friedman. Mr. Friedman disclaims beneficial ownership of all such shares.
(4) Includes 124,738 shares owned by Tarragon Capital Corporation, 131,344
shares owned by Tarragon Partners, Ltd., and 543,607 shares owned by
Beachwold Partners, L.P.
(5) Includes 76,299 shares owned by Mr. Friedman's minor sons, Gideon and
Samuel Friedman. Mr. Friedman disclaims beneficial ownership of such
shares.
(6) Does not include 91,504 shares owned by Mr. Friedman's adult son, Ezra
Friedman, and 67,343 shares owned by Mr. Friedman's adult daughter, Tanya
Friedman. Mr. Friedman disclaims beneficial ownership of such shares.
(7) Includes 17,672 shares covered by six separate presently exercisable
options.
(8) Includes 2,176 shares owned by Mr. Liebman directly and 17,672 shares
covered by six separate presently exercisable options.
(9) Includes 17,672 shares covered by six separate presently exercisable
options.
(10) Includes 45,838 shares owned by Mr. Schrag directly and 17,672 shares
covered by six separate presently exercisable options. Also includes 6,410
shares owned by Mr. Schrag's wife individually and/or as custodian for his
minor son, Ben. It does not include 1,410 shares owned by Mr. Schrag's
adult daughter, Rebecca, as to which shares Mr. Schrag disclaims any
beneficial ownership.
(11) Includes a total of 5,105 shares owned by Mr. Weisbrod directly and 14,672
shares covered by five separate presently exercisable options.
(12) Includes 5,000 shares of Tarragon common stock owned by Mr. Beck directly
and 4,000 shares covered by two separate presently exercisable options.
Does not include 1500 shares of 10% Cumulative Preferred Stock owned by
Mr. Beck.
(13) Includes a total of 4,200 shares owned by Mr. Davis directly and 4,000
shares covered by two separate presently exercisable options.
(14) Includes 1,000 shares owned by Mr. Smith directly and 5,500 shares covered
by six separate presently exercisable options.
22
<PAGE> 25
(15) Includes 47,673 shares owned by Rohdhouse Investments, Inc., a Florida
corporation owned by Mr. Rohdie, and 650 shares owned by his spouse. See
also "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" for a discussion of
Mr. Rohdie's interest in an operating partnership with Tarragon.
(16) Includes 1,000 shares owned by Mr. Rothenberg directly, and 80,000 shares
covered by a presently exercisable option.
(17) Includes 1,000 shares owned by Ms. Mansfield and her spouse as custodians
for their minor children, Colin and Ashlyn. Also includes 10,600 shares
covered by two presently exercisable options.
(18) Includes 5,000 shares owned by Mr. Minor directly and 10,498 shares
covered by five separate presently exercisable options.
(19) Includes 6,000 shares covered by two presently exercisable options.
(20) Includes 7,100 shares owned by Mr. Stricklin directly and 4,000 shares
covered by a presently exercisable option.
COMPLIANCE WITH SECTION 16(a) REPORTING REQUIREMENTS
Section 16(a) of the Exchange Act requires that our directors,
executive officers, and persons holding more than ten percent of our common
stock file initial reports of ownership of the common stock and reports of any
changes in that ownership to the SEC. Specific due dates for these reports have
been established, and Tarragon is required to report any failure to file by
these dates during fiscal 1999.
To our knowledge, based solely upon the written representations of our
incumbent directors, executive officers, and ten percent stockholders and copies
of the reports that they have filed with the SEC, these filing requirements were
satisfied during 1999 except that a report on Form 4 for Mr. Rohdie, reflecting
two transactions in the month of December 1999 (before he became an officer or
director of Tarragon) was filed late.
23
<PAGE> 26
PERFORMANCE GRAPH
The following performance graph and table compare the cumulative total
shareholder return on Tarragon's common stock for the five year period ended
December 31, 1999, with the cumulative total return on the Standard & Poor's 500
Stock Index ("S&P 500 Index") and the National Association of Real Estate
Investment Trusts Equity REIT Total Return Index ("NAREIT Equity Index") over
the same period. The comparison assumes that $100 was invested on December 31,
1994 in Tarragon common stock and in each of the indices and further assumes the
reinvestment of all dividends. The shareholder return shown on the graph below
is not necessarily indicative of future performance.
[GRAPH]
24
<PAGE> 27
COMPARISON OF CUMULATIVE TOTAL RETURNS
FOR THE FIVE YEARS ENDED DECEMBER 31, 1999
AMONG TARRAGON*, S&P 500 INDEX, AND NAREIT EQUITY INDEX
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998 1999
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
TARRAGON* 100.00 108.83 145.79 208.79 289.83 280.00
-------- -------- -------- -------- -------- --------
S&P 500 INDEX 100.00 137.43 168.98 225.37 289.77 350.71
-------- -------- -------- -------- -------- --------
NAREIT EQUITY INDEX 100.00 115.27 155.92 187.51 154.69 147.54
======== ======== ======== ======== ======== ========
</TABLE>
----------
*The merger of Tarragon and NIRT was accounted for as a reverse
acquisition of Tarragon by NIRT using the purchase method of
accounting. As a result, Tarragon's historical balances and operations
for dates prior to November 24, 1998, the effective date of the merger,
are those of NIRT. Information set forth above for dates prior to
November 24, 1998, reflect the performance of NIRT and its shares of
beneficial interest, as adjusted to give effect to the 1.97 to 1
exchange ratio established in the merger.
FINANCIAL STATEMENTS
The audited financial statements of Tarragon (and its predecessors) in
comparative form as of December 31, 1999 and 1998, are contained in the 1999
Annual Report to Stockholders, which is being delivered with this Proxy
Statement. Such report and the financial statements therein are not to be
considered a part of this solicitation.
OTHER MATTERS
The Board of Directors does not know of any other matters to be brought
before the Annual Meeting. If, however, any other matters should properly come
before the Annual Meeting, the persons named in the accompanying proxy will vote
the shares of common stock represented by duly executed proxies in accordance
with their best judgment.
FUTURE PROPOSALS OF STOCKHOLDERS
If you want to present a stockholder proposal at Tarragon's Next Annual
Meeting of Stockholder, you must send the proposal to Kathryn Mansfield,
Corporate Secretary, 3100 Monticello, Suite 200, Dallas, TX 75205, by registered
or certified mail, not later than August 1, 2001, in order for it to be
considered for inclusion in Tarragon's proxy statement and form of proxy for
that meeting.
25
<PAGE> 28
SOLICITATION OF PROXIES
This Proxy Statement is furnished to Stockholders to solicit proxies on
behalf of the Board of Directors of Tarragon. The cost of soliciting proxies
will be borne by Tarragon. Directors and officers of Tarragon may, without any
additional compensation, solicit proxies by mail, in person or by
telecommunication.
COPIES OF TARRAGON'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED DECEMBER
31, 1999 ON FORM 10-K ARE AVAILABLE TO STOCKHOLDERS WITHOUT CHARGE UPON WRITTEN
REQUEST TO TARRAGON REALTY INVESTORS, INC., 1775 BROADWAY, 20TH FLOOR, NEW YORK,
NEW YORK, 10019, ATTN: INVESTOR RELATIONS.
Dated: December 8, 2000 BY ORDER OF THE BOARD OF DIRECTORS
/s/ KATHRYN MANSFIELD
Kathryn Mansfield, Executive Vice President
and Secretary
26
<PAGE> 29
================================================================================
PROXY
TARRAGON REALTY INVESTORS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS, JANUARY 17, 2001
The undersigned stockholder of TARRAGON REALTY INVESTORS, INC. hereby
appoints WILLIAM S. FRIEDMAN and CARL B. WEISBROD, each with full power of
substitution, as attorneys and proxies to vote all shares of Common Stock, par
value $0.01 per share, of TARRAGON REALTY INVESTORS, INC. which the undersigned
is entitled to vote at the Annual Meeting of Stockholders of Tarragon to be held
on January 17, 2001 at 2:00 p.m., local New York City time, at 1775 Broadway,
23d Floor, New York, New York, or any adjournment(s) thereof, with all powers
the undersigned would possess if personally present, as indicated below, for the
transaction of such other business as may properly come before said meeting or
any adjournment(s) thereof, all as set forth in the December 8, 2000 Proxy
Statement for said meeting:
THIS PROXY WILL BE VOTED AS DIRECTED BUT IF NO DIRECTION IS INDICATED
IT WILL BE VOTED FOR ALL NOMINEES, FOR THE RATIFICATION OF THE APPOINTMENT OF
ARTHUR ANDERSEN LLP, AND FOR THE APPROVAL OF THE AMENDMENT TO TARRAGON'S SHARE
OPTION AND INCENTIVE PLAN. ON OTHER MATTERS THAT MAY COME BEFORE SAID MEETING,
THIS PROXY WILL BE VOTED IN THE DISCRETION OF THE ABOVE-NAMED PERSONS.
(continued and to be signed on reverse side)
--------------------------------------------------------------------------------
Please date, sign and mail your proxy
card back as soon as possible!
Annual Meeting of Stockholders
TARRAGON REALTY INVESTORS, INC.
January 17, 2001
Please Detach and Mail in the Envelope Provided
--------------------------------------------------------------------------------
[X] PLEASE MARK YOUR VOTES LIKE THIS EXAMPLE.
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS
[ ] FOR All Nominees (except as marked to the contrary) NOMINEES
[ ] WITHHOLD Authority For All Nominees listed at right Robert C. Rohdie
INSTRUCTION: To withhold authority to vote for any William S. Friedman
individual nominee, strike a line through the Robert P. Rothenberg
nominee's name listed at right. Lance Liebman
Lawrence G. Schafran
2. RATIFICATION OF THE APPOINTMENT OF ARTHUR Raymond V.J. Schrag
ANDERSON LLP AS INDEPENDENT AUDITORS FOR AGAINST ABSTAIN Carl B. Weisbrod
[ ] [ ] [ ] Willie K. Davis
3. APPROVAL OF AMENDMENT TO TARRAGON'S
SHARE OPTION AND INCENTIVE PLAN FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. In their discretion on any other matters which may properly
come before the meeting or any adjournment(s) thereof.
</TABLE>
Please complete, date, sign and return this proxy promptly in the
accompanying envelope.
PLEASE SIGN HERE: Date:
---------------------------------------------- -----------
NOTE: PLEASE SIGN EXACTLY AS YOUR NAME OR NAMES APPEAR HEREON. WHEN THERE IS
MORE THAN ONE OWNER, EACH MUST SIGN. WHEN SIGNING AS AN AGENT, ATTORNEY,
ADMINISTRATOR, EXECUTOR, GUARDIAN, OR TRUSTEE, PLEASE INDICATE YOUR TITLE AS
SUCH. IF EXECUTED BY A CORPORATION, THIS PROXY SHOULD BE SIGNED BY A DULY
AUTHORIZED OFFICER WHO SHOULD INDICATE HIS TITLE. IF A PARTNERSHIP, PLEASE SIGN
IN PARTNERSHIP NAME, BY AN AUTHORIZED PERSON. PLEASE DATE, SIGN AND MAIL THIS
PROXY CARD IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES.
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