<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. )
Filed by the Registrant /x/
Filed by a Party other than Registrant / /
CHECK THE APPROPRIATE BOX:
/x/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
VINLAND PROPERTY TRUST
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
NONE
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/x/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction
applies: N/A
---
(2) Aggregate number of securities to which transaction
applies: N/A
---
(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule
0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined): N/A
---
(4) Proposed maximum aggregate value of transaction: N/A
---
(5) Total fee paid: N/A
---
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: N/A
---
(2) Form, Schedule or Registration Statement No.: N/A
---
(3) Filing Party: N/A
---
(4) Date Filed: N/A
---
<PAGE> 2
PRELIMINARY PROXY MATERIAL FOR
THE SECURITIES AND EXCHANGE
COMMISSION REVIEW ONLY
VINLAND PROPERTY TRUST
3878 Oak Lawn Avenue
Suite 300
Dallas, Texas 75219
(214) 522-9910
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
-----------------------------
To the Shareholders of Vinland Property Trust:
PLEASE TAKE NOTICE that the Annual Meeting of Shareholders of Vinland
Property Trust (the "Trust") will be held at 10:00 a.m., local Dallas, Texas
time, on Wednesday, July 26, 1995, at 3878 Oak Lawn Avenue, Suite 300, Dallas,
Texas 75219 to consider and vote on the following matters:
(1) election of five Trustees of the Trust;
(2) approval of the Trust's Advisory Agreement with Tarragon Realty
Advisors, Inc.;
(3) approval of an amendment to the Amended Declaration of Trust to
authorize implementation of reverse share splits;
(4) approval of the Vinland Property Trust Share Option and
Incentive Plan;
(5) approval of the Vinland Property Trust Independent Trustee's
Share Option Plan; and
(6) the transaction of such other business as may properly come
before the Annual Meeting or any adjournments thereof.
Only Shareholders of record at the close of business on Wednesday, June
21, 1995 will be entitled to vote at the Annual Meeting. Shareholders are
cordially invited to attend the Annual Meeting in person.
Regardless of whether you plan to be present at the Annual Meeting,
please promptly date, mark, sign, and mail the enclosed proxy ballot card to
American Stock Transfer & Trust Company, in the envelope provided. Any
Shareholder who executes and delivers the enclosed proxy may revoke the
authority granted thereunder at any time prior to its use by giving written
notice of such revocation to American Stock Transfer & Trust Company, 40 Wall
Street, 46th Floor, New York, New York 10005, or by executing and delivering a
proxy bearing a later date. A SHAREHOLDER MAY ALSO REVOKE A PROXY BY ATTENDING
AND VOTING AT THE ANNUAL MEETING. Your vote is important, regardless of the
number of shares you own.
The Annual Report to Shareholders for the year ended November 30, 1994
was previously mailed to Shareholders under separate cover.
Dated: June 21, 1995
BY ORDER OF THE BOARD OF TRUSTEES
OF VINLAND PROPERTY TRUST
David L. Miller, Vice President - Legal and Secretary
IMPORTANT
YOU CAN HELP THE TRUST AVOID THE NECESSITY AND EXPENSE OF SENDING
FOLLOW-UP LETTERS TO ENSURE A QUORUM BY PROMPTLY RETURNING THE ENCLOSED PROXY
BALLOT CARD. IF YOU ARE UNABLE TO ATTEND THE ANNUAL MEETING, PLEASE MARK, DATE,
SIGN AND RETURN THE ENCLOSED PROXY BALLOT CARD SO THAT THE NECESSARY QUORUM MAY
BE REPRESENTED AT THE ANNUAL MEETING. THE ENCLOSED ENVELOPE REQUIRES NO POSTAGE
IF MAILED IN THE UNITED STATES.
FAILURE TO VOTE MAY SUBJECT THE TRUST TO FURTHER EXPENSE
- --------------------------------------------------------------------------------
If your shares are held in the name of a brokerage firm, nominee or other
institution, only it can vote your shares. Please contact promptly the
person responsible for your account and give instructions for your shares to
be voted.
- --------------------------------------------------------------------------------
<PAGE> 3
VINLAND PROPERTY TRUST
3878 Oak Lawn Avenue
Suite 300
Dallas, Texas 75219
(214) 522-9910
PROXY STATEMENT
For the Annual Meeting of Shareholders
To Be Held on July 26, 1995
GENERAL SHAREHOLDER INFORMATION
This Proxy Statement is furnished in connection with the solicitation
by the Board of Trustees of Vinland Property Trust (the "Trust") of proxies to
be used at the Annual Meeting of Shareholders for consideration and voting upon
(1) the election of five Trustees, (2) the approval of the Trust's Advisory
Agreement with Tarragon Realty Advisors, Inc. ("Tarragon" or the "Advisor"), (3)
the approval of an amendment to the Amended Declaration of Trust to authorize
implementation of reverse share splits; (4) the approval of the Vinland Property
Trust Share Option and Incentive Plan, (5) the approval of the Vinland Property
Trust Independent Trustee's Share Option Plan, and (6) the transaction of such
other business as may properly come before the Annual Meeting or any
adjournments thereof. The Annual Meeting will be held at 10:00 a.m., local
Dallas, Texas time, on July 26, 1995 at 3878 Oak Lawn Avenue, Suite 300, Dallas,
Texas 75219. The Trust's financial statements for the year ended November 30,
1994 were audited by Arthur Andersen, L.L.P. A representative from Arthur
Andersen, L.L.P. is expected to be present at the Annual Meeting to respond to
appropriate questions, and such representative will have an opportunity to make
a statement if such representative desires to do so. The Trust's Annual Report
for the fiscal year ended November 30, 1994, which includes financial
statements, has preceded this Proxy Statement. This Proxy Statement and the
accompanying proxy are first being mailed to Shareholders on or about June 23,
1995.
The Trustees have unanimously approved the Trust's Advisory Agreement
with Tarragon as in the best interest of the Trust and its Shareholders because
the terms of such agreement are, in their view, as favorable to the Trust as
those that would be obtained from unaffiliated third parties for the performance
of similar services, while at the same time the agreement gives the Advisor an
incentive to improve the performance of the Trust's properties and mortgages.
The Trustees strongly recommend that you vote FOR the advisory agreement and FOR
each of the nominees as Trustees. The Trustees also recommend that all
Shareholders vote FOR the approval of the amendment to the Amended Declaration
of Trust, FOR the approval of the Share Option and Incentive Plan and FOR the
approval of the Trustee's Share Option Plan.
SHAREHOLDERS ENTITLED TO VOTE
Only holders of record of issued and outstanding Shares of Beneficial
Interest, no par value, of the Trust (the "Shares") at the close of business on
June 21, 1995 (the "Record Date"), are entitled to vote at the Annual Meeting
and at any adjournments thereof. At the close of business on June 21, 1995,
there were 6,960,034 Shares outstanding. Each holder is entitled to one vote for
each Share held on the Record Date.
VOTING OF PROXIES
When the enclosed proxy is properly executed and returned, the Shares
represented thereby will be voted at the Annual Meeting in accordance with the
instructions noted thereon. As to the election of the five nominees as Trustees
(Proposal One), Shareholders may choose to vote for all of the nominees,
withhold authority for voting for all of the nominees or withhold authority for
voting for any individual
<PAGE> 4
nominee. As to the approval of each of the Trust's Advisory Agreement with
Tarragon (Proposal Two), the amendment to the Amended Declaration of Trust
(Proposal Three), the Share Option and Incentive Plan (Proposal Four) and the
Trustee's Share Option Plan (Proposal Five), Shareholders may choose to vote
for, against or abstain from voting on such proposal in its entirety. In the
absence of other instructions, the Shares represented by a properly executed and
submitted proxy will be voted in favor of the five nominees for election to the
Board of Trustees and in favor of Proposals Two, Three and Four. The Board of
Trustees does not know of any other business which may be properly brought
before the Annual Meeting. If, however, any other matters properly come before
the Annual Meeting, it is the intention of the persons named in the enclosed
proxy to vote such proxy in accordance with their judgment on such matters.
VOTE REQUIRED FOR APPROVAL
Pursuant to Section 6.7 of the Declaration of Trust, election of any
Trustee requires the affirmative vote of a majority of the votes cast at a
meeting of Shareholders by holders of Shares entitled to vote thereon. Such
Section also provides that a majority of the issued and outstanding Shares
entitled to vote, represented in person or by proxy, shall constitute a quorum
at any such meeting. The approval of the Trust's Advisory Agreement with
Tarragon (Proposal Two) also requires the affirmative vote of a majority of the
votes cast at the Annual Meeting. The approval of the amendment to the Amended
Declaration of Trust (Proposal Three) requires the affirmative vote of a
majority of the outstanding Shares (3,480,018 Shares). The approval of the Share
Option and Incentive Plan and the Trustee's Share Option Plan each require the
affirmative vote of a majority of the votes cast on each such Plan, provided
that the vote cast thereon represents over 50% in interest of all Shares
entitled to vote.
Abstentions will be included in vote totals and, as such, will have the
same effect on each proposal as a negative vote. Broker non-votes, if any, will
not be included in vote totals and, as such, will have no effect on any
proposal.
As of June 21, 1995, management and affiliates held 1,605,793 Shares
representing approximately 23.1% of the Shares outstanding. Management and such
affiliates all intend to vote all such Shares in favor of all of the proposals
in accordance with the recommendation of the Board of Trustees.
REVOCATION OF PROXIES
A proxy is enclosed herewith. Any Shareholder who executes and delivers
the proxy may revoke the authority granted thereunder at any time prior to its
use by giving written notice of such revocation to American Stock Transfer &
Trust Company, 40 Wall Street, 46th Floor, New York, New York 10005, or by
executing and delivering a proxy bearing a later date. A SHAREHOLDER MAY ALSO
REVOKE A PROXY BY ATTENDING AND VOTING AT THE ANNUAL MEETING.
FUTURE PROPOSALS OF SHAREHOLDERS
Any proposal intended to be presented by a Shareholder at the next
Annual Meeting of Shareholders of the Trust must be received at the principal
office of the Trust not later than January 5, 1996, in order to be considered
for inclusion in the Trust's proxy statement and form of proxy (as the case may
be) for that meeting.
PRINCIPAL SHAREHOLDERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of June 21, 1995, according the Share transfer records of the Trust
and other information available to the Trust, the following persons were known
to be beneficial owners of more than 5% of the Shares of Beneficial Interest of
the Trust:
2
<PAGE> 5
<TABLE>
<CAPTION>
Amount and Nature
Name and Address of of Beneficial Percent of
Beneficial Owner Ownership Class (1)
- --------------------------------------- ----------------- ----------
<S> <C> <C>
Lucy N. Friedman 1,493,593 (2) 21.5%
280 Park Avenue
East Building, 20th Floor
New York, New York 10017
</TABLE>
- --------------------------------
(1) Percentages are based upon 6,960,034 Shares of Beneficial Interest
outstanding at June 21, 1995.
(2) Includes 1,307,343 shares owned by Lucy N. Friedman; also, includes
148,750 shares owned by Tarragon Capital Corporation, of which Lucy N.
Friedman may be deemed to be a beneficial owner by virtue of her
position as an executive officer, director and shareholder. Does not
include 39,063 shares owned by Tanya Friedman, and adult daughter of
Mrs. Friedman; Mrs. Friedman disclaims any beneficial ownership of such
39,063 Shares.
SECURITY OWNERSHIP OF MANAGEMENT
As of June 21, 1995, according to the Share transfer records of the
Trust and other information available to the Trust, the executive officers,
current Trustees and nominees for election as Trustees at the Annual Meeting and
all officers and Trustees as a group beneficially owned the following Shares of
Beneficial Interest of the Trust:
<TABLE>
<CAPTION>
Amount and Nature Approximate
of Beneficial Percent of
Name of Beneficial Owner Ownership Class (a)
--------------------------------------- ------------------------ -----------
<S> <C> <C>
William S. Friedman 1,493,593 (b)(c)(d)(g) 21.5%
Chester Beck None --
Willie K. Davis None --
John A. Doyle 124,500 (e) 1.8%
Michael E. Smith None --
All Trustees and Executive Officers as a 1,621,093 (b)(c)(d) 23.3%
group (8 individuals) (e)(f)(g)
</TABLE>
- --------------------------------
* Less than 1%.
(a) Percentages are based upon 6,960,034 Shares of Beneficial Interest
outstanding at June 21, 1995.
(b) Includes 1,307,343 shares owned by William S. Friedman's wife, Lucy
N. Friedman. Mrs. Friedman has complete control over the Shares owned
by her and Mr. Friedman disclaims beneficial ownership of such shares.
(c) Includes 148,750 shares owned by Tarragon Capital Corporation, of which
Lucy N. Friedman and William S. Friedman are executive officers and
directors and Lucy N. Friedman is a shareholder.
(d) Includes 37,500 shares owned by Tarragon Partners, Ltd., of which Lucy
N. Friedman and William S. Friedman are limited partners and Tarragon
Capital Corporation is the general partner.
(e) Includes 124,500 shares which Mr. Doyle owns personally.
3
<PAGE> 6
(f) Includes 3,000 shares owned by Ivan Roth personally.
(g) Does not include 39,063 shares owned by Mrs. Friedman's adult daughter,
Tanya Friedman, as to which shares Mrs. Friedman disclaims any
beneficial ownership.
PROPOSAL ONE
ELECTION OF TRUSTEES
GENERAL
The affairs of the Trust are managed and controlled by a Board of
Trustees presently consisting of six members who have all been nominated to
serve as Trustees until the next Annual Meeting of Shareholders. John A. Doyle
and Carl B. Weisbrod were elected in February 1994 to vacancies created by an
increase in the number of members of the Board of Trustees. Bennett B. Sims, who
had been a Trustee since December 1992, resigned effective February 15, 1995 and
the number of members of the Board was reduced to six. Dan L. Johnston (a
Trustee since December 1992), Raymond V.J. Schrag (a Trustee since October 1988)
and Carl B. Weisbrod (a Trustee since February 1994) each resigned on May 17,
1995 and the number of members of the Board of Trustees was reduced to five. The
Trustees are elected at the Annual Meeting of Shareholders or appointed by the
incumbent Board of Trustees and serve until the next Annual Meeting of
Shareholders or until their respective successor has been duly elected.
NOMINEES
The following persons have been nominated to serve as Trustees of the
Trust: Chester Beck, Willie K. Davis, John A. Doyle, William S. Friedman and
Michael E. Smith. Each of the five nominees is currently a Trustee of the Trust
and has been nominated by the Board of Trustees to serve for an additional term
until the next Annual Meeting of Shareholders or until his successor shall have
been duly elected and qualified. Each nominee has consented to being named in
this Proxy Statement as a nominee and has agreed to serve as a Trustee if
elected. When a proxy is properly executed and returned, the Shares represented
thereby will be voted in favor of the election of each of the nominees, unless
authority to vote for any such nominee is specifically withheld. There will be
no cumulative voting for the election of Trustees. If any nominee is unable to
serve or will not serve (an event which is not anticipated), then the person
acting pursuant to the authority granted under the proxy will cast votes for the
remaining nominees and, unless the Board of Trustees takes action to reduce the
number of Trustees, for such other person(s) as he or she may select in place of
such nominee(s).
The five nominees are listed below, together with their ages, terms of
service, all positions and offices with the Trust or the Trust's advisor,
Tarragon, other principal occupations, business experience and directorships
with other companies during the last five years or more. The designation
"Affiliated", when used below with respect to a Trustee, means that the Trustee
is an officer, director or employee of the Advisor or an officer of the Trust.
The designation "Independent", when used below with respect to a Trustee, means
the Trustee is neither an officer or employee of the Trust nor a director,
officer or employee of the Advisor, although the Trust may have certain business
or professional relationships with such Trustee as discussed below under
"Certain Business Relationships and Related Transactions".
<TABLE>
<CAPTION>
Name, Principal Occupations,
Business Experience and Directorships Age
------------------------------------- ---
<S> <C>
CHESTER BECK: Trustee since May 1995 (Independent) 66
</TABLE>
President (since March 1995) Highland Funding Corp., a mortgage
brokerage firm; National Sales Manager (January 1994 to March 1995)
Columbia Equities Limited, a real estate financing entity; Senior Vice
President (April 1992 to January 1994) Peregine Mortgage Company, Inc.,
an FHA approved mortgagee specializing in multi-family and healthcare
project financing; Senior Vice
4
<PAGE> 7
President (1988 to March 1992) Related Mortgage Corporation, an FHA
Co-Insurer and Approved Mortgagee.
<TABLE>
<S> <C>
WILLIE K. DAVIS: Trustee since October, 1988 (Independent) 63
</TABLE>
President (1971 to 1985) and Chairman and 50% shareholder (since 1985)
of Mid-South Financial Corporation, holding company for Mid-South
Mortgage Company and Gibbs Mortgage Company; President (since 1978) and
Chairman and sole shareholder (since December 1985) of FMS, Inc., a
property management and real estate development firm; President (1983
to February 1990) of BVT Management Services, Inc., a real estate
advisory and tax service firm; Director (since 1987) of Southtrust Bank
of Middle Tennessee; Trustee and Treasurer (since 1986) of Baptist
Hospital, Inc., a Tennessee general welfare not-for-profit corporation;
and Trustee or Director (October 1988 to March 7, 1995) of Continental
Mortgage and Equity Trust ("CMET"); Income Opportunity Trust ("IORT");
Transcontinental Realty Investors, Inc. ("TCI"); and Trustee (October
1988 to March 31, 1995) of National Income Realty Trust ("NIRT").
<TABLE>
<S> <C>
JOHN A. DOYLE: Trustee since January 1994 (Affiliated) 36
</TABLE>
Executive Vice President and Chief Operating Officer (since February
1994) and Chief Financial Officer (since May 1995) of the Trust and
NIRT; Director, President, Chief Operating Officer and 50% shareholder
(since February 1994) of Tarragon; President and Chairman of the Board
(since December 1993) of Investors General Acquisition Corp., which
owns 100% of the shares of Investors General, Inc; Director, President
and Chief Executive Officer (since June 1992) of Garden Capital
Incorporated; Director (since October 1993) of Home States Holdings;
Director and Chief Operating Officer (October 1990 to December 1991) of
ConCap Equities, Inc.; President, Chief Executive Officer, Chief
Operating Officer and sole Director (April 1989 to October 1990) of
Consolidated Capital Equities Corporation ("CCEC"); and Certified
Public Accountant (since 1985).
<TABLE>
<S> <C>
WILLIAM S. FRIEDMAN: Trustee since March 1988 (Affiliated) 51
</TABLE>
Trustee (since March 1988), Chief Executive officer (since December
1993), President (since December 1988), Acting Chief Financial Officer
(May 1990 to February 1991), Treasurer (August to September 1989) and
Acting Principal Financial and Accounting Officer (December 1988 to
August 1989) of the Trust and NIRT; Trustee or Director (March 1988 to
February 1994), Chief Executive Officer (December 1993 to February
1994), President (December 1988 to February 1994), Acting Chief
Financial Officer (May 1990 to February 1991), Treasurer (August to
September 1989) and Acting Principal Accounting Officer (December 1988
to August 1989) of CMET, IORT and TCI; Director and Chief Executive
Officer (since December 1990) of Tarragon, the Advisor to the Trust
effective April 1, 1994; President (February 1989 to March 1993) and
Director (February to December 1989) of Basic Capital Management, Inc.
("BCM"), the Advisor to the Trust (March 1989 to March 1994); General
Partner (1987 to March 1994) of Syntek Asset Management, L.P.
("SAMLP"), which is the General Partner of National Realty, L.P.
("NRLP") and National Operating, L.P. ("NOLP"); Director and President
(March 1989 to February 1994) and Secretary (March 1989 to December
1990) of Syntek Asset Management, Inc. ("SAMI"), the Managing General
Partner of SAMLP and a corporation owned by BCM; President (1982 to
October 1990) of Syntek Investment Properties, Inc. ("SIPI"), which has
invested in, developed and syndicated real estate through its
subsidiaries and other related entities since 1973; Director and
President (1982 to October 1990) of Syntek West, Inc. ("SWI"); Vice
President (1984 to October 1990) of Syntek Finance Corporation;
Director (1981 to December 1992), President (July 1991 to December
1992), Vice President and Treasurer (January 1987 to July 1991) and
Acting Chief Financial officer (May 1990 to February 1991) of American
Realty Trust, Inc. ("ART"); practicing Attorney (since 1971) with the
Law Offices of William S. Friedman; Director and Treasurer
5
<PAGE> 8
(November 1989 to February 1991) of Carmel Realty Services, Inc.
("CRSI"); Limited Partner (January 1991 to December 1992) of Carmel
Realty Services, Ltd. ("Carmel, Ltd.").
<TABLE>
<S> <C>
MICHAEL E. SMITH: Trustee (from October 1988 to August 1991 and since
May 1995) (Independent) 51
</TABLE>
Lawyer and Assistant Professor of Law (effective August 1995)
University of Wisconsin, Madison, Wisconsin; President (1988 to
December, 1994) and Director (since 1978) of the Vera Institute of
Justice, a New York not-for-profit corporation concerned with the
administration of justice; Trustee of Prosecuting Attorney's Research
Council, Inc. (since 1987), New York Lawyers for the Public Interest
(since 1986), Housing and Services, Inc. (since 1986), Manhattan Bowery
Corporation, Inc. (since 1978), Center for Alternative Sentencing and
Employment Services, Inc., formerly the Court Employment Project, Inc.
(since 1978), and New York City Criminal Justice Agency, Inc. (since
1978); Trustee or Director (October 1988 to March 1992) of IORT, CMET
and TCI; and Attorney at Law (since 1971).
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF
EACH OF THE NOMINEES NAMED ABOVE.
LITIGATION AND CLAIMS INVOLVING MR. FRIEDMAN RELATED TO SOUTHMARK CORPORATION
Until January 1989, William S. Friedman, the President, Chief Executive
Officer and a Trustee of the Trust, was an executive officer and director of
Southmark Corporation ("Southmark"), serving as Vice Chairman of the Board
(since 1982), Director (since 1980) and Secretary (since 1984) of Southmark. As
a result of a deadlock on Southmark's Board of Directors, Mr. Friedman and Gene
E. Phillips, (who served as Trustee of the Trust until December 31, 1992)
reached a series of related agreements (later modified) with Southmark on
January 17, 1989 (collectively, the "Separation Agreement"), whereby Messrs.
Friedman and Phillips resigned their position with Southmark and certain of
Southmark's subsidiaries and affiliates. Southmark filed a voluntary petition in
bankruptcy under Chapter 11 of the United States Bankruptcy Code on July 14,
1989. Subsequent to the filing of the Southmark bankruptcy, several lawsuits
were filed against Southmark, its former officers and directors (including Mr.
Friedman) and others, alleging, among other things, that such persons and
entities misrepresented the financial condition of Southmark. Mr. Friedman
denies all of such allegations. Those lawsuits in which Mr. Friedman was also a
defendant are summarized below. THE TRUST IS NOT A DEFENDANT IN ANY OF THESE
LAWSUITS.
In Burt v. Grant Thornton, Gene E. Phillips and William S. Friedman,
the plaintiff, a purchaser of Southmark preferred stock, alleged that the
defendants disseminated false and misleading corporate reports, financial
analysis and news releases in order to induce the public to continue investing
in Southmark. Grant Thornton served as independent certified public accountants
to Southmark and, for 1988 and 1989, to the Trust. The plaintiff sought actual
damages in the amount of less than $10,000, treble damages and punitive damages
in an unspecified amount plus attorneys' fees and costs. This case was settled
in October 1993 for a nominal payment.
Consolidated actions entitled Salsitz v. Phillips et al., purportedly
brought as class actions on behalf of purchasers of Southmark securities during
specified periods, were pending before the United States District court for the
Northern District of Texas. Mr. Friedman entered into a settlement agreement
with the plaintiffs, which was approved by the court in October 1993.
Mr. Friedman also served as a director of Pacific Standard Life
Insurance Company ("PSL"), a wholly-owned subsidiary of Southmark, from October
1984 to January 1989. In a proceeding brought by the California Insurance
commissioner, a California Superior Court appointed a conservator for PSL on
December 11, 1989. On October 12, 1990, the California Insurance Commissioner
filed suit against the former directors of PSL (including Mr. Friedman) seeking
damages of $12 million and additional punitive damages. Such lawsuit alleged,
among other things, that the defendants knowingly and willfully conspired among
themselves to breach their duties as directors of PSL to benefit Southmark. Such
suit further alleged that PSL's board of directors failed to convene meetings
and delegated to Mr. Phillips authority to make
6
<PAGE> 9
decisions regarding loans, investments and other transfers and exchanges of PSL
assets. In August 1993, five former directors of PSL, including Mr. Friedman,
settled this lawsuit without admitting any liability.
One of Southmark's principal businesses was real estate syndication and
from 1981 to 1987 Southmark raised over $500 million in investments from limited
partners of several hundred limited partnerships. Seven lawsuits were filed by
investors alleging breach of fiduciary duties on the part of Mr. Friedman and
others. Two cases were settled in July and October, 1993 for nominal payments.
In one case, all claims were dismissed by the Court and the defendants
(including Mr. Friedman) were awarded sanctions against plaintiffs' counsel. The
other four cases were voluntarily dismissed by the plaintiffs without payment of
any kind by the defendants.
San Jacinto Savings Association. On November 30, 1990, San Jacinto
Savings Association ("SJSA"), a savings institution that had been owned by
Southmark since 1983, was placed under conservatorship of the Resolution Trust
Corporation ("RTC") by federal banking authorities. The Office of Thrift
Supervision ("OTS") also conducted a formal investigation of SJSA and its
affiliates. During late November 1994, Mr. Friedman entered into certain
agreements with the RTC and OTS settling all claims relating to his involvement
with SJSA. Pursuant to such arrangements, Mr. Friedman and certain other
respondents (including Mr. Phillips) agreed to pay restitution over a 10 year
period in the amount of $20,000,000. Mr. Friedman's liability terminates when
the respondents as a group shall have paid a total of $4,000,000 out of the
total requirement. Mr. Friedman also consented to an order prohibiting him from
participating in the conduct of the affairs of an insured depository institution
without the prior written approval of the Director of OTS, and agreed to submit
certain information to the OTS on a periodic basis. Such arrangements constitute
an order limiting Mr. Friedman from engaging in a type of business practice.
BOARD COMMITTEES AND MEETINGS
The Trust's Board of Trustees held four meetings during the fiscal year
ended November 30, 1994. For such year, no incumbent Trustee attended fewer than
75% of the aggregate of (i) the total number of meetings held by the Board of
Trustees during the period for which he had been a Trustee and (ii) the total
number of meetings held by all committees of the Board of Trustees on which he
served during the periods that he served.
The Trust's Board of Trustees has an Audit committee, the function of
which is to review the Trust's operating and accounting procedures. The current
members of the Audit committee during fiscal 1994, all of whom were Independent
Trustees, were Messrs. Schrag (Chairman) and Davis. The Audit Committee met one
time during fiscal 1994.
The Trust's Board of Trustees does not have Nominating or Compensation
or any other Committees.
EXECUTIVE OFFICERS
The following persons currently serve as executive officers of the
Trust: William S. Friedman, President and Chief Executive Officer, and John A.
Doyle, Executive Vice President, Chief Operating Officer and Chief Financial
Officer. Their positions with the Trust are not subject to a vote of
Shareholders. The age, terms of service, all positions and offices with the
Trust, BCM or Tarragon, other principal occupations, business experience and
directorships with other companies during the last five years or more of Messrs.
Friedman and Doyle are set forth above.
7
<PAGE> 10
OFFICERS
Although not executive officers of the Trust, the following persons
currently serve as officers of the Trust: John C. Stricklin, Executive Vice
President; Chris W. Clinton, Senior Vice President - Asset Management; R.W.
Lockhart, Senior Vice President - Asset Management; Todd C. Minor, Senior Vice
President - Mortgage Servicing and Financing; Katie Jackson - Vice President -
Chief Accounting Officer; David L. Miller, Vice President - Legal and Secretary;
and Ivan Roth, Treasurer. Their positions with the Trust are not subject to a
vote of shareholders. Their ages, terms of service, all positions and offices
with the Trust, BCM or Tarragon, other principal occupations, business
experience and directorships with other companies during the last five years or
more are set forth below.
JOHN C. STRICKLIN: Age 48, Executive Vice President (since May 1995), Senior
Vice President - Real Estate (May 1994 to April 1995) and Vice President
(February 1994 to April 1994).
Executive Vice President (since May 1995), Senior Vice President - Real
Estate (May 1994 to April 1995) and Vice President (February 1994 to
April 1994) of NIRT; Senior Vice President (since February 1994) of
Tarragon; Vice President (June 1992 to January 1994) of Carmel Realty,
Inc.; Real Estate Broker (June 1989 to May 1992) with Carmel, Ltd.;
Executive Vice President (June 1980 to May 1989) of Windsor Financial
Corporation; and Vice President (June 1975 to June 1980) of Syntek
Corporation.
CHRIS W. CLINTON: Age 47, Senior Vice President - Asset Management (since May
1995) and Senior Vice President - Commercial Asset Management (March 1994 to
April 1995).
Senior Vice President - Asset Management (since May 1995) and Senior
Vice President - Commercial Asset Management (March 1994 to April 1995)
of NIRT; Senior Vice President (since March 1994) of Tarragon; Vice
President (October 1988 to March 1994) of ART, CMET, IORT, NIRT, TCI,
VPT and BCM.
TODD C. MINOR: Age 36, Senior Vice President - Mortgage Servicing and Financing
(since May 1995) and Senior Vice President - Finance (March 1994 to April 1995
and from July 1993 to January 1994).
Senior Vice President - Mortgage Servicing and Financing (since May
1995) and Senior Vice President - Finance (March 1994 to April 1995 and
from July 1993 to January 1994) of NIRT; Senior Vice President (since
March 1994) of Tarragon; Senior Vice President - Finance (from July
1993 to March 1994) of BCM, ART, CMET, IORT and TCI; Vice President
(from January 1989 to July 1993) of BCM and (from April 1991 to July
1993) of ART, CMET, IORT, NIRT, TCI and VPT.
R.W. LOCKHART: Age 50, Senior Vice President - Asset Management (since May
1995); Senior Vice President - Asset Management (since May 1995).
Senior Vice President - Asset Management (since May 1995); Senior Vice
President - Asset Management (since May 1995) of VPT; Senior Vice
President (since March 1994) of Tarragon; Independent Consultant (March
1992 to February 1994); Senior Vice President (July 1989 to March 1992)
of BCM and CRSI.
KATIE JACKSON: Age 33, Vice President - Chief Accounting Officer (since March
1994).
Vice President - Chief Accounting Officer (since March 1994) of NIRT;
Vice President - Chief Accounting Officer (since March 1994) of
Tarragon; Accounting Manager for BCM (October 1990 to March 1994);
Financial Analyst of DSC Communications Corp. (August 1987 to October
1990); Certified Public Accountant (since 1988).
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<PAGE> 11
DAVID L. MILLER: Age 30, Vice President - Legal (since May 1995) and Secretary
(since April 1995).
Secretary (since April 1995) of NIRT; Vice President - Legal (since
July 1994) of Tarragon; Associate (October 1991 to June 1994)
Backenroth & Grossman, a New York City law firm; Attorney at law (since
1991); prior thereto from 1988 to 1991, law student at Brooklyn Law
School, Brooklyn, New York.
IVAN ROTH: Age 59, Treasurer (since February 1994) and Chief Financial Officer
(February 1994 to April 1995)
Treasurer (since February 1994) and Chief Financial Officer (February
1994 to April 1995) of NIRT; Treasurer (since February 1994) of
Tarragon; Treasurer and Chief Financial Officer (1978 to 1992) of
Servico, Inc. 1; Financial Controller (1970 to 1978) of New York Motel
Enterprises, Inc.; General Manager (1968 to 1970) of Affiliated
Financial Corporation; and Certified Public Accountant (since 1968).
In addition to the foregoing officers, the Trust has other officers who
are not listed herein.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Under the securities laws of the United States, the Trust's Trustees,
executive officers, and any persons holding more than ten percent of the Trust's
shares of beneficial interest are required to report their ownership of the
Trust's shares and any changes in that ownership to the Securities and Exchange
Commission (the "Commission"). Specific due dates for these reports have been
established and the Trust is required to report any failure to file by these
dates during 1994. All of these filing requirements (except as noted below) were
satisfied by its Trustees and executive officers and ten percent holders. In
making these statements, the Trust has relied on the written representations of
its incumbent Trustees and executive officers and its ten percent holders and
copies of the reports that they have filed with the Commission. The following
reports filed under Section 16(a) of the Securities Exchange Act of 1934 during
or with respect to the fiscal year ended November 30, 1994, were not filed on a
timely basis. Initial Forms 3 of John C. Stricklin, Chris W. Clinton and Katie
Jackson; none of such persons own any Shares of the Trust.
THE ADVISOR
Although the Trust's Board of Trustees is directly responsible for
managing the affairs of the Trust and for setting the policies which guide it,
the day-to-day operations of the Trust are performed by a contractual advisory
firm under the supervision of the Trust's Board of Trustees. The stated duties
of the Advisor include, among other things, locating, investigating, evaluating
and recommending real estate and mortgage note investment and sales
opportunities, as well as financing and refinancing sources for the Trust. The
Advisor also serves as a consultant in connection with the business plan and
investment policy decisions made by the Trust's Board of Trustees.
CCEC was the sponsor of and original advisor of the Trust. CCEC was
replaced as advisor on August 1, 1988, by Consolidated Advisors, Inc. ("CAI"),
the parent of CCEC. On December 2, 1988, CCEC filed a petition seeking
reorganization under Chapter 11 of the United States Bankruptcy Code in the
United States District Court for the Northern District of Texas. Mr. Friedman
was director of CCEC and CAI from March 1988 through January 1989. Mr. Doyle was
President, Chief Executive Officer, Chief Operating Officer and sole director of
CCEC from 1989 through October 1990. Southmark was a controlling shareholder of
The Consolidated Companies, the parent of CAI, from March 1988 through February
1989.
- ------------------------
(1) On September 19, 1990, Servico, Inc. filed a voluntary petition
under Chapter 11 of the United States Bankruptcy Code and was reorganized
effective August 5, 1992.
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<PAGE> 12
BCM served as the Trust's advisor from March 1989 to February 28, 1994.
Mr. Friedman served as President of BCM until May 1, 1993. BCM is beneficially
owned by a trust for the benefit of the children of Mr. Phillips, who served as
a Trustee of the Trust until December 7, 1992. At the Trust's annual meeting of
shareholders held on April 26, 1993, the Trust's shareholders approved the
renewal of the Trust's Advisory Agreement with BCM. BCM resigned as advisor to
the Trust effective February 28, 1994. BCM also serves as advisor to CMET, IORT
and TCI. One Trustee of the Trust, Mr. Willie K. Davis, was also a trustee of
CMET and IORT and a director of TCI until March 7, 1995. BCM served as advisor
to NIRT until March 31, 1994. A majority of the Trustees of the Trust are also
directors or trustees of NIRT. Mr. Friedman, President of the Trust, also serves
as President of NIRT. Mr. Friedman was a general partner of the general partner
of NRLP. BCM performs certain administrative functions for NRLP and NOLP, the
operating partnership of NRLP, on a cost-reimbursement basis. BCM also serves as
advisor to ART. Messrs. Friedman and Phillips served as executive officers and
directors of ART until November 6, 1992 and December 31, 1992, respectively. Mr.
Friedman resigned from his positions with CMET, IORT and TCI in February 1994
and from his position with NRLP in March 1994 to concentrate his attention on
the Trust, NIRT and Tarragon.
On February 10, 1994, the Trust's Board of Trustees selected Tarragon
to replace BCM as the Trust's advisor. Since March 1, 1994, Tarragon has
provided advisory services to the Trust under an advisory agreement. Mr.
Friedman serves as a director and Chief Executive Officer of Tarragon. Tarragon
is owned by Lucy N. Friedman, Mr. Friedman's wife, and Mr. Doyle, who serves as
a director, President and Chief Operating Officer of Tarragon and Executive Vice
President and Trustee of the Trust. The Friedman and Doyle families own
approximately 23% of the outstanding shares of the Trust.
The provisions of the Trust's initial Advisory Agreement dated February
15, 1994 (the "Initial Advisory Agreement") with Tarragon were substantially the
same as to those of the prior BCM advisory agreement except for the annual base
advisory fee and the elimination of the net income fee. The BCM advisory
agreement provided for BCM to receive an advisory fee comprised of a gross asset
fee of .0625% per month (.75% per annum) of the average of the gross asset value
of the Trust (total assets less allowance for amortization, depreciation or
depletion and valuation reserves) and an annual net income fee equal to 7.5% per
annum of the Trust's net income. The Tarragon Initial Advisory Agreement called
for a base advisory fee of $50,000 (which was paid upon execution on March 1,
1994) plus an incentive advisory fee equal to 16% of the Trust's adjusted funds
from operations before deduction of the advisory fee. Adjusted funds from
operations is defined as net income <loss> before gains or losses from the sales
of properties and debt restructurings plus depreciation and amortization plus
any loss due to the writedown or sale of any real property or mortgage loan
acquired prior to January 1, 1989. The incentive fee was cumulative within any
fiscal year to maintain the 16% per annum rate.
The following provisions were included in both the BCM advisory
agreement and the Tarragon Initial Advisory Agreement:
(1) The Advisor or an Affiliate of the Advisor was to receive an
acquisition commission for supervising the acquisition,
purchase or long-term lease of real estate for the Trust equal
to the lessor of (i) up to 1% of the cost of acquisition,
inclusive of commissions, if any, paid to non-affiliated
brokers or (ii) the compensation customarily charged in
arm's-length transactions by others rendering similar property
acquisition services as an ongoing public activity in the same
geographical location and for comparable property; provided
that the purchase price of each property (including acquisition
commissions and all real estate brokerage fees) could not
exceed such property's appraised value at acquisition.
(2) The Advisor was to receive an incentive sales compensation
equal to 10% of the amount, if any, by which the aggregate
sales consideration for all real estate sold by the Trust
during such fiscal year exceeds the sum of (i) the cost of each
such property as originally recorded in the Trusts's books for
tax purposes (without deduction for depreciation, amortization
or reserve for losses), (ii) capital improvements made to such
assets during the period owned by the Trust, and (iii) all
closing costs (including real estate commissions) incurred in
the
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<PAGE> 13
sale of such property. However, no incentive fee was to be paid
unless (a) such real estate sold in such fiscal year, in the
aggregate, had produced an 8% simple annual return of the
Trust's net investment including capital improvements,
calculated over the Trust's holding period before depreciation
and inclusive of operating income and sales consideration and
(b) the aggregate net operating income from all real estate
owned by the Trust for each of the prior and current fiscal
years was to be at least 5% higher in the current fiscal year
than in the prior fiscal year.
(3) The Advisor or An Affiliate of the Advisor was to receive a
mortgage or loan acquisition fee with respect to the
acquisition or purchase from an unaffiliated party of an
existing mortgage or loan by the Trust equal to the lesser of
(i) 1% of the amount of the mortgage or loan purchased or (ii)
a brokerage or refinancing fee which is reasonable and fair
under the circumstances. Such fee was not to be paid in
connection with the origination or funding by the Trust of any
mortgage loan.
(4) The Advisor or an Affiliate of the Advisor was also to receive
a mortgage brokerage and equity refinancing fee for obtaining
loans to the Trust or refinancing on Trust properties equal to
the lesser of (i) 1% of the amount of the loan or the amount
refinanced or (ii) a brokerage or refinancing fee which is
reasonable and fair under the circumstances; provided, however,
that no such fee was to be paid on loans from the Advisor or an
Affiliate of the Advisor without the approval of the Trust's
Board of Trustees. No fee was to be paid on loan extensions.
(5) The Advisor or any Affiliate of the Advisor must pay to the
Trust one-half of any compensation received from third parties
with respect to the origination, placement or brokerage of any
loan made by the Trust, provided, however, that the
compensation retained by the Advisor or any Affiliate of the
Advisor shall not exceed the lesser of (i) 2% of the amount of
the loan committed by the Trust or (ii) a loan brokerage
commitment fee which is reasonable and fair under the
circumstances.
The Initial Advisory Agreement was replaced effective April 1, 1995
with the revised Advisory Agreement. By unanimous consent, the Board of Trustees
approved a revised Advisory Agreement with Tarragon effective April 1, 1995
which is to be submitted to the Shareholders for approval at the Annual Meeting.
The revised Advisory Agreement is similar to the Initial Advisory Agreement, but
eliminates the $50,000 base annual fee and makes various technical changes
designed to further clarify the responsibilities of Tarragon. In addition, the
revised Advisory Agreement provides that real estate commissions shall be
payable to Tarragon and its affiliates only following specific approval by the
Board of Trustees for each transaction rather than pursuant to a general
agreement. See "Proposal Two - Approval of the Advisory Agreement" for a
description of the compensation under the revised Advisory Agreement.
Under the Tarragon Advisory Agreement, the Advisor is required to
formulate and submit annually for approval by the Trust's Board of Trustees a
budget and business plan for the Trust containing a twelve-month forecast of
operations and cash flow, a general plan for asset sales or acquisitions,
lending, foreclosure and borrowing activity, and other investments, and the
Advisor is required to report quarterly to the Trust's Board of Trustees on the
Trust's performance against the business plan. In addition, all transactions or
investments by the Trust shall require prior approval by the Trust's Board of
Trustees unless they are explicitly provided for in the approved business plan
or are made pursuant to authority expressly delegated to the Advisor by the
Trust's Board of Trustees.
The Tarragon Advisory Agreement also requires prior approval of the
Trust's Board of Trustees for retention of all consultants and third party
professionals, other than legal counsel. The advisory agreement provides that
the Advisor shall be deemed to be in a fiduciary relationship to the Trust's
shareholders; contains a broad standard governing the Advisor's liability for
losses by the Trust; and contains guidelines for the Advisor's allocation of
investment opportunities as among itself, the Trust and other entities it
advises.
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<PAGE> 14
Under the Advisory Agreement (as required by the Trust's Declaration of
Trust) all or a portion of the annual advisory fee must be refunded by the
Advisor to the Trust if the Operating Expenses of the Trust (as defined in the
Trust's Declaration of Trust) exceed certain limits specified in the Declaration
of Trust based on the book value, net asset value and net income of the Trust
during such fiscal year. In 1993, the effect of the operating expense limitation
was to require BCM to refund $146,000 of the 1993 advisory fee. In 1992, the
effect of the fee and compensation limitation as set forth in the Advisory
Agreement was a second quarter refund of $100,000 of the $125,000 advisory fee
paid through April 30, 1992 and the discontinuance of payment of an advisory fee
for the remainder of 1992. In 1991, the effect of the operating expense
limitation was to require that BCM refund $248,000 of the 1991 annual advisory
fee.
In August 1994, the Trust accepted a promissory note from BCM for the
outstanding balance of 1993 advisory fees. This unsecured note accrues interest
at 12% per annum, calls for monthly payments of $10,000 and all outstanding
principal and interest is due on October 1, 1995. At November 30, 1994, the
principal balance of this note was $110,440.
Also, if the Trust were to request that the Advisor render services to
the Trust other than those required by the advisory agreement, the Advisor or an
affiliate of the Advisor would be separately compensated for such additional
services on terms to be agreed upon from time to time. In the past, the Trust
had hired Carmel, Ltd., an affiliate of BCM, to provide property management
services for the Trust's properties. Since April 1, 1994, Tarragon has provided
property management services for the Trust's properties. The Trust also engaged,
on a non-exclusive basis, Carmel Realty, Inc. ("Carmel Realty"), also an
affiliate of BCM, to perform brokerage services for the Trust until March 31,
1994.
Approval, and any renewal, of the Tarragon Advisory Agreement is
required by the Trust's shareholders.
The Advisory Agreement may only be assigned with the prior consent of
the Trust.
The directors and principal officers of Tarragon are set forth below:
WILLIAM S. FRIEDMAN: Director and Chief Executive Officer
JOHN A. DOYLE: Director, President and Chief Operating Officer
JOHN C. STRICKLIN: Executive Vice President
CHRIS W. CLINTON: Senior Vice President
ROBERT W. LOCKHART: Senior Vice President
TODD C. MINOR: Senior Vice President
KATIE JACKSON: Vice President - Chief Accounting Officer
DAVID L. MILLER: Vice President - Legal and Secretary
IVAN ROTH: Treasurer
PROPERTY MANAGEMENT
From February 1, 1990 until February 28, 1994, affiliates of BCM
provided property management services to the Trust. Carmel, Ltd. provided
property management services for a fee of 5% or less of the monthly gross rents
collected on the properties under management. In many cases, Carmel, Ltd.
subcontracted with other entities for the provision of the property-level
management services to the Trust at various rates. The general partner of
Carmel, Ltd. is BCM. The limited partners of Carmel, Ltd. are
12
<PAGE> 15
(i) SWI, of which Mr. Phillips is the sole shareholder, (ii) Mr. Phillips and
(iii) a trust for the benefit of the children of Mr. Phillips. Carmel, Ltd.
subcontracts the property-level management and leasing of eleven of the Trust's
commercial properties and the commercial properties owned by two of the real
estate partnerships in which the Trust is a partner to Carmel Realty, which is
owned by SWI. Carmel, Ltd. resigned as property manager for the Trust's
properties effective February 28, 1994.
Commencing March 1, 1994, Tarragon has provided property management
services to the Trust for a fee of 4.5% of the monthly gross rents collected on
apartment properties and not in excess of 5% of the monthly gross rents
collected on commercial properties. Tarragon subcontracts with other entities
for the provision of most of the property-level management services to the
Trust.
REAL ESTATE BROKERAGE
Prior to December 1, 1992, affiliates of BCM provided brokerage
services to the Trust and received brokerage commissions in accordance with the
advisory agreement. Effective December 1, 1992, the Trust's Board of Trustees
approved the non-exclusive engagement by the Trust of Carmel Realty to provide
brokerage services for the Trust. Such agreement terminated March 31, 1994.
Carmel Realty was entitled to receive a real estate acquisition commission for
locating and negotiating the lease or purchase by the Trust of any property
equal to the lesser of (i) up to 3% of the purchase price, inclusive of
commissions, if any, paid by the Trust to other brokers or (ii) the compensation
customarily charged in arm's-length transactions by others rendering similar
property acquisition services in the same geographical location and for
comparable property. Any commission paid to Carmel Realty by the seller was to
be credited against the commission to be paid by the Trust. Carmel Realty was
also entitled to receive a real estate sales commission for the sale of each
Trust property equal to the lesser of (i) 3% (inclusive of fees, if any, paid by
the Trust to other brokers) of the sales price of each property or (ii) the
compensation customarily charged in arm's-length transactions paid by others
rendering similar services in the same geographic location for comparable
property.
Since March 1, 1994 Tarragon's real estate brokerage affiliate has
been available to and may act as a broker in both purchases and sales of Trust
property with commissions payable in amounts customarily charged in arms-length
transactions by others rendering similar property acquisition services in the
same geographical location and for comparable property.
EXECUTIVE COMPENSATION
The Trust has no employees, payroll or benefit plans and pays no
compensation to the executive officers of the Trust. The Trustees and executive
officers of the Trust who are also officers or employees of Tarragon are
compensated by Tarragon. Such affiliated Trustees and executive officers of the
Trust perform a variety of services for the Advisor and the amount of their
compensation is determined solely by Tarragon. Compensation for certain officers
of the Trust who are responsible for legal and accounting services are allocated
among the various entities for which Tarragon serves as advisor and none of
these individual's annual salary exceeds $100,000.
The only direct remuneration paid by the Trust is to the Trustees
who are not officers or directors of Tarragon or their affiliated companies. The
Independent Trustees (i) review the business plan of the Trust to determine that
it is in the best interest of the Trust's shareholders, (ii) review the Trust's
contract with the advisor, (iii) supervise the performance of the Trust's
advisor and review the reasonableness of the compensation which the Trust pays
to its advisor in terms of the nature and quality of services performed, (iv)
review the reasonableness of the total fees and expenses of the Trust and (v)
select, when necessary, a qualified independent real estate appraiser to
appraise properties acquired by the Trust. From and after June 1, 1993, the
Independent Trustees receive compensation in the amount of $6,000 per year, plus
reimbursement for expenses. In addition, each Independent Trustee receives (i)
$3,000 per year for each committee of the Board of Trustees on which he serves,
(ii) $2,500 per year for each committee chairmanship and (iii) $1,000 per day
for any special services rendered by him to the Trust outside of his
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<PAGE> 16
ordinary duties as Trustee, plus reimbursement for expenses, provided such
services are specifically requested by the Board.
During fiscal 1994, $38,000 was paid to the Independent Trustees in
total Trustees' fees for all services, including the annual fee for service
during the period, and 1994 special service fees: Willie K. Davis, $9,000; Dan
L. Johnston (a Trustee from December 1992 to May 1995), $6,000; Raymond V.J.
Schrag (a Trustee from October 1988 to May 1995), $11,500; Carl Weisbrod (a
Trustee from February 1994 to May 1995), $5,500; and Bennett B. Sims (a Trustee
from December 1992 to August 1994), $6,000. Messrs. Davis and Schrag have served
on the Fairness Committee of NRLP (for which they each received $4,000 in 1993)
whose function is to review certain transactions between NRLP and its general
partner and affiliates of such general partner. Mr. Schrag has also served as a
lawyer to Mr. Friedman's family for several years.
14
<PAGE> 17
PERFORMANCE GRAPH
Securities and Exchange Commission rules require that a line graph
performance presentation be provided comparing cumulative total stockholder
return with a performance indicator of a broad market index and either a
nationally recognized industry index or a registrant constructed peer group
index over a minimum period of five years. The following performance graph
compares the cumulative total shareholder return on the Trust's shares of
beneficial interest with the Standard & Poor's 500 Stock Index ("S&P 500 Index")
and the National Association of Real Estate Investment Trusts, Inc. Hybrid REIT
Total Return Index ("REIT Index"). The comparison assumes that $100 was invested
on November 30, 1989 in the Trust's shares of beneficial interest and in each of
the indices and further assumes the reinvestment of all dividends. Past
performance is not necessarily an indicator of future performance.
COMPARISON OF FIVE YEARS ENDED NOVEMBER 30, 1994
CUMULATIVE TOTAL RETURN
VINLAND PROPERTY TRUST, S&P 500 INDEX, AND NAREIT HYBRID REIT
TOTAL RETURN INDEX
<TABLE>
<CAPTION>
11/30/89 11/30/90 11/30/91 11/30/92 11/30/93 11/30/94
<S> <C> <C> <C> <C> <C> <C>
VINLAND 100 25.23 83.10 72.45 202.55 231.48
S&P 500 STOCK 100 96.47 116.12 137.51 151.37 153.00
INDEX
NAREIT HYBRID 100 69.98 90.88 109.06 138.08 141.27
REIT INDEX
</TABLE>
The data set forth above in the graph and related table was obtained from the
National Association of Real Estate Investment Trusts, Inc. ("NAREIT"). All of
the data is based upon the last closing price of the month for all tax-qualified
REITs listed on the New York Stock Exchange ("NYSE"), American Stock Exchange
("AMEX") and the NASDAQ National Market System. The data is market weighted. The
total return calculation is based upon the weighting at the beginning of the
period. Dividends are included in the month based upon their payment date. The
total return index includes dividends reinvested on a monthly basis. At the end
of November 1994, there were 22 tax-qualified REITs in the NAREIT Hybrid REIT
Total Return Index with a total market capitalization of $2.6 billion.
15
<PAGE> 18
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
CERTAIN BUSINESS RELATIONSHIPS. On February 10, 1994, the Trust's
Board of Trustees selected Tarragon to replace BCM as the Trust's advisor
effective March 1, 1994 under an advisory agreement. Mr. Friedman serves as
director and Chief Executive Officer of Tarragon. Tarragon is owned by Lucy N.
Friedman, Mr. Friedman's wife, and Mr. Doyle, who serves as President and Chief
Operating Officer of Tarragon and Trustee and Executive Vice President of the
Trust. The Friedman and Doyle families own approximately 23% of the outstanding
shares of the Trust.
Also on February 10, 1994, NIRT's Board of Trustees selected
Tarragon to replace BCM as NIRT's advisor commencing April 1, 1994. William S.
Friedman, a Trustee and President and Chief Executive Officer of the Trust also
serves as a trustee and officer of NIRT. NIRT has the same relationship with
Tarragon as the Trust. Willie K. Davis also served on the Fairness Committee of
NRLP, which has as its function to review certain transactions between NRLP and
its general partner and affiliates. Mr. Friedman owes fiduciary duties to such
other entities as well as the Trust under applicable law.
Tarragon occupies office space at the Trust's One Turtle Creek
Office/Retail Complex, which serves as the Trust's executive offices.
From February 1, 1990 until February 28, 1994, affiliates of BCM
provided property management services to the Trust. Carmel, Ltd. provided
property management services for a fee of 5% or less of the monthly gross rents
collected on the properties under management. In many cases, Carmel, Ltd.
subcontracted with other entities for the property-level management services to
the Trust at various rates. The general partner of Carmel, Ltd. is BCM. The
limited partners of Carmel, Ltd. are (i) SWI, of which Mr. Phillips is the sole
shareholder, (ii) Mr. Phillips and (iii) a trust for the benefit of the children
of Mr. Phillips. Carmel, Ltd. subcontracted the property-level management and
leasing of eleven of the Trust's commercial properties and the commercial
properties owned by two of the real estate partnerships in which the Trust is a
partner to Carmel Realty, which is owned by SWI. Carmel, Ltd. resigned as
property manager for the Trust's properties effective March 31, 1994. Since
March 1, 1994, Tarragon has provided property management services to the Trust.
Effective December 1, 1992, the Trust engaged Carmel Realty, on a
non-exclusive basis, to provide brokerage services for the Trust. Carmel Realty
is owned by SWI. Such agreement terminated February 28, 1994.
RELATED PARTY TRANSACTIONS. Historically, the Trust has engaged in
and may continue to engage in business transactions, including real estate
partnerships, with related parties. All related party transactions entered into
by the Trust must be approved by a majority of the Trust's Board of Trustees,
including a majority of the Independent Trustees. The Trust's management
believes that all of the related party transactions were at least as
advantageous to the Trust as could have been obtained from unrelated third
parties.
On June 30, 1989, the Trust purchased from First City, Texas -
Houston ("First City"), a $1.2 million first lien mortgage note (the Cochonour
Note) with respect to which an individual is the borrower, secured in part by a
lien on a thoroughbred horse breeding farm located in Carroll County, Missouri
and a personal guarantee from a third party who, at the time, was an officer of
First City. Until November 30, 1992, F.C. MacArthur, Inc., a wholly-owned
subsidiary of Collecting Bank, N.A., owned approximately 16% of the outstanding
shares of beneficial interest of IORT and 4% of the outstanding shares of common
stock of TCI. First City performed substantial management and investment
functions for Collecting Bank, N.A. At the time, the Trustees of the Trust also
served as trustees or directors to IORT and TCI. At present, none of the current
Trustees also serve as a trustee of IORT and a director of TCI. The note matured
on December 7, 1990. In September 1991, the guarantor provided additional
collateral in the form of first lien mortgages and assignments of mortgages on
condominium units located in Cook County, Illinois. In return, the Trust
extended the maturity date of the note to December 7, 1995 and all accrued but
unpaid interest was added to principal and the outstanding principal balance of
the note was increased to $1.4 million.
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<PAGE> 19
During 1993 and 1994, eighteen of the twenty condominium units securing the
Cochonour note receivable were sold, and in accordance with the terms of the
note, the proceeds of such sales were applied to reduce the principal balance of
the note. In connection with the sale of three units, the Trust accepted
five-year notes in the principal amounts of $69,900, $73,000 and $66,400,
secured by each respective unit. Terms of the condominium notes provide for
monthly payments of principal and interest, based upon a 25-year amortization,
with the unpaid principal balance due at the notes' maturity. The notes bear
interest from 6% to 7% per annum for the first two years and from 8% to 9% per
annum thereafter. In September 1994, the Trust and the borrower agreed to a
settlement of the Cochonour Note. Under the agreed-upon terms, a portion of the
collateral property, a farm and luxury residence in Carroll County, Missouri,
was conveyed to the Trust. The borrower has six months ("marketing period") to
sell the two remaining condominium units securing the note and, if such sale
takes place, remit any sales proceeds to the Trust. In accordance with the terms
of the note, any such sales proceeds will be applied to reduce the principal
balance of the Cochonour Note. After the marketing period has expired, any
remaining condominium units will be conveyed to the Trust. The Trust agreed to
accept the above provisions as full settlement for the mortgage note receivable.
After the application of the condominium sales and the conveyance of the Carroll
County horse farm and residence, the principal balance of the mortgage note was
$110,000 at November 30, 1994.
In fiscal 1993, the Trust paid BCM and its affiliates $154,000 in
advisory fees, $20,000 in equity financing fees and $90,000 in property
management fees and leasing commissions. In addition, as provided in the
advisory agreement, BCM received cost reimbursements from the Trust of $87,000
in fiscal 1993. In accordance with the BCM advisory agreement, BCM has refunded
$146,000 of such fees.
In fiscal 1994, the Trust incurred fees to BCM and its affiliates
of $75,000 in advisory fees and $18,000 in property management fees and leasing
commissions. In addition, also as provided in the BCM advisory agreement, BCM
received cost reimbursements from the Trust of $34,000 in fiscal 1994.
In fiscal 1994, the Trust paid Tarragon $157,000 in advisory fees,
$24,000 in acquisition commissions and $51,000 in property management fees. The
Trust also incurred cost reimbursements totaling $127,000 to Tarragon in
accordance with the terms of the advisory agreement.
RESTRICTIONS ON RELATED PARTY TRANSACTIONS. The Trust's Declaration
of Trust provides that:
"The Trust shall not purchase or lease, directly or indirectly, any
Real Property from the Advisor or any affiliated Person, or from
any partnership in which any of the foregoing may also be a general
partner, and the Trust will not sell, directly or indirectly, any
of its Real Property to any of the foregoing Persons."
Moreover, the Declaration of Trust further provides that:
". . . the Trust shall not, directly or indirectly, engage in any
transaction with any Trustee, officer, or employee of the Trust or
any director, officer, or employee of the Advisor . . ., or of any
company or other organization of which any of the foregoing is an
Affiliate, except for . . . transactions with . . . the Advisor or
Affiliates thereof involving loans, real estate brokerage services,
mortgage brokerage services, real property management services, the
servicing of Mortgages, the leasing of personal property or other
services, provided such transactions are on terms not less
favorable to the Trust than the terms on which unaffiliated parties
are then making similar loans or performing similar services for
comparable entities in the same area and are not entered into on an
exclusive basis with such Person; provided, however, that any
[such] transaction . . . may be entered into only after a showing
that such transaction is fair and reasonable to the Shareholders
and upon approval by affirmative vote of a majority of the Trustees
who are not, other than as Trustees, interested in or Affiliates of
any Person who is interested in the transaction."
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<PAGE> 20
The Declaration of Trust defines "Affiliate" as follows:
"[A]s to any Person, any other Person who owns beneficially,
directly, or indirectly, 1% or more of the outstanding capital
stock, shares, or equity interests of such Person or of any other
Person which controls, is controlled by, or is under common control
with, such Person or is an officer, retired officer, director,
employee, partner, or trustee of such Person or of any other Person
which controls, is controlled by, or is under common control with,
such Person."
PROPOSAL TWO
APPROVAL OF THE ADVISORY AGREEMENT
Section 4.2 of the Trust's Declaration of Trust provides that any
contract with the Advisor cannot have an initial term of more than two years and
must provide for annual renewal or extension thereafter, subject to approval by
the Shareholders of the Trust. Such provision also provides that the Trustees
shall not enter into such a contract with any person of which a Trustee is an
Affiliate unless such contract provides for renewal or extension thereof by the
affirmative vote of a majority of the Trustees who are not Affiliates of such
person. Such contract with the Advisor may be terminated without penalty by the
Advisor upon 120 days' written notice, or by action of holders of a majority of
the outstanding shares of the Trust without penalty, or by the Trust without
penalty by action of a majority of the Trustees, including a majority of the
Trustees not affiliated with the Advisor or any of its Affiliates, upon 60 days'
written notice in a manner to be set forth in the contract with the Advisor.
In considering Proposal Two for the approval of the advisory
agreement, Shareholders should be aware that William S. Friedman, Trustee and
President of the Trust, is a director and the Chief Executive Officer of
Tarragon. Tarragon is owned by Lucy N. Friedman, Mr. Friedman's wife, and John
A. Doyle, a Trustee of the Trust who also serves as a director, President and
Chief Operating Officer of Tarragon and Trustee and Executive Vice President of
the Trust. If the advisory agreement is approved, Tarragon will be entitled to
receive payments of certain fees from the Trust for the services it will
perform. In addition, Tarragon serves as advisor to other entities engaged in
real estate investment activities that are similar to those of the Trust and
which may compete with the Trust in purchasing, selling, leasing and financing
real estate and related investments.
On February 10, 1994, the Trust's Board of Trustees selected
Tarragon to replace BCM as the Trust's Advisor.
Since March 1, 1994, Tarragon has provided advisory services to the
Trust under an Advisory Agreement dated February 15, 1994 between the Trust and
Tarragon (the "Initial Advisory Agreement"). The provisions of the Trust's
Initial Advisory Agreement with Tarragon were substantially the same as those of
the BCM Advisory Agreement except for the annual base advisory fee and the
elimination of the net income fee. The Tarragon Initial Advisory Agreement
called for an annual base advisory fee of $50,000 plus an incentive advisory fee
equal to 16% of the Trust's Adjusted Funds From Operations before deduction of
the advisory fee. Adjusted Funds From Operations is defined as net income (loss)
before gains or losses from the sale of properties and debt restructuring plus
depreciation and amortization plus any loss due to the write-down or sale of any
real property or mortgage loan acquired prior to January 1, 1989.
By unanimous consent, the Board of Trustees approved a revised
Advisory Agreement with Tarragon effective April 1, 1995. A copy of the revised
Advisory Agreement dated effective April 1, 1995 between the Trust and Tarragon
(herein called the "Advisory Agreement" or the "New Advisory Agreement") appears
as Appendix I to this Proxy Statement and is described below. The affirmative
vote of a majority of the votes cast at the Annual Meeting is required to
approve the Advisory Agreement.
The Advisory Agreement is similar to the Initial Advisory Agreement
but eliminates the $500,000 base annual fee, makes certain technical changes
designed to further clarify the responsibilities and rights
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<PAGE> 21
of Tarragon, and provides that real estate commissions shall be payable to
Tarragon and its affiliates only following specific approval by the Board of
Trustees for each transaction rather than pursuant to a general agreement. If
the Shareholders approve Proposal Two which is the approval of the New Advisory
Agreement, Shareholders will be deemed to have ratified the entry by the Trust
into the Initial Advisory Agreement. If the Shareholders approve Proposal Two,
the Advisory Agreement will have a term extending through the next Annual
Meeting of Shareholders, and any renewal of the Advisory Agreement thereafter
will be subject to Shareholder approval in accordance with the provisions of
Section 4.2 of the Declaration of Trust. If the Shareholders fail to approve
Proposal Two, the Board of Trustees may choose to engage a different party to
serve as Advisor under a different contract or may operate the Trust without an
advisor.
The Advisory Agreement may be terminated without cause or penalty
upon 60 days' written notice by the Trust to Tarragon or 120 days' written
notice by Tarragon to the Trust. Termination requires a majority vote of the
Trustees who are not affiliated with Tarragon or a majority vote of the
Shareholders. The Board of Trustees may enter into an advisory contract with a
new advisor without Shareholder approval. Such contract could not have an
initial term of more than two years and must provide for annual renewal or
extension thereafter, subject to Shareholder approval.
THE CURRENT ADVISORY AGREEMENT WITH TARRAGON
The current Advisory Agreement with Tarragon provides that Tarragon
is to be responsible for the day-to-day operations of the Trust and to receive
an advisory compensation from the Trust based on the following:
(1) no base or fixed advisory fee is payable, but the
Advisor is to receive an incentive advisory fee equal to 16% per
annum of the Trust's "Adjusted Funds From Operations" (funds from
operations plus any loss on a property or mortgage acquired prior
to January 1, 1989 and the amount of advisory fees payable to the
extent such fees are considered as current expenses in determining
profit or loss) for each Fiscal Year or portion thereof for which
the Advisor provides services, beginning March 31, 1994; the
incentive fee is payable monthly in advance based on the most
recent month for which a monthly financial statement has been
prepared and is cumulative within any fiscal year to maintain the
16% per annum rate.
(2) the Advisor or an Affiliate of the Advisor is to
receive an acquisition commission for supervising the acquisition,
purchase or long-term lease of real estate for the Trust equal to
1% of the cost of acquisition, inclusive of commissions, if any,
paid to non-affiliated brokers except that no fee is due for the
acquisition through or from an affiliate of the Trust or the
Advisor; provided that the purchase price of each property
(including acquisition commissions and all real estate brokerage
fees) may not exceed such property's appraised value at
acquisition.
(3) the Advisor or an Affiliate of the Advisor is also to
receive a mortgage brokerage and refinancing fee for obtaining
loans to the Trust or refinancing on Trust properties equal to the
lesser of (i) 1% of the amount of the loan or the amount refinanced
or (ii) a brokerage or refinancing fee which is reasonable and fair
under the circumstances; provided, however, that no
such fee shall be paid on loans from the Advisor or an Affiliate of
the Advisor without the approval of the Trust's Board of Trustees.
No fee shall be paid on loan extensions.
(4) subject to the approval by the Board of Trustees, the
Trust may pay the Advisor or an Affiliate of the Advisor a
real estate brokerage commission for (i) the purchase of real
property by the Trust, or (ii) the sale of real property owned by
the Trust when the Advisor acts as the broker in such transaction
in amounts which are not to exceed customary fees charged by
nationally recognized real estate brokers for normal, similar
transactions on a non-exclusive basis.
The Advisor or any Affiliate of the Advisor must pay to the Trust
the full amount of any compensation received from third parties with respect to
the origination, placement or brokerage of any loan made by the Trust.
19
<PAGE> 22
Also under the Advisory Agreement, Tarragon is to receive
reimbursement of certain expenses incurred by it in the performance of the
Advisory services to the Trust. Under the Advisory Agreement (as required by the
Trust's Declaration of Trust), all or a portion of the annual Advisory fee must
be refunded by the Advisor to the Trustee if the Operating Expenses of the Trust
(as defined in the Trust's Declaration of Trust) exceeds certain limits
specified in the Declaration of Trust based on the book value, net asset value
and net income of the Trust during such fiscal year.
Additionally, if the Trust were to request Tarragon render services
to the Trust other than those required by the Advisory Agreement, the Advisory
Agreement provides that Tarragon or an Affiliate of Tarragon will be separately
compensated for such additional services on terms to be agreed upon from time to
time.
Tarragon may only assign the Advisory Agreement with the prior
consent of the Trust.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS
APPROVE THE ADVISORY AGREEMENT because the terms of such agreement are, in its'
view, as favorable to the Trust as those that would be obtained from
unaffiliated third parties for the performance of similar services, while at the
same time the advisory agreement gives Tarragon adequate incentive to improve
the performance of the Trust's properties and mortgages.
PROPOSAL THREE
AMENDMENT OF DECLARATION OF TRUST TO
TO AUTHORIZE IMPLEMENTATION OF
REVERSE SHARE SPLITS
Section 6.1 of the Declaration of Trust, as amended, currently
authorizes the Trustees to, among other things, issue an unlimited number of
Shares "for such consideration as the Trustees, in their sole discretion and in
good faith, shall determine or by way of share dividend or share split in the
discretion of the Trustees."
The proposed amendment would add the following sentence to Section
6.1 following the language quoted above:
"The Trustees shall also have the power, in their sole
discretion, to effect reverse share splits on a pro rata basis and
to redeem for cash any fractional shares outstanding as a result
thereof."
The Board of Trustees has adopted resolutions which, subject to
Shareholder approval of Proposal Three, would effect a one-for-five reverse
share split of all of the Trust's Shares on the basis of one new share (a
"Post-Split Share") for each five Shares presently outstanding (each an "Old
Share"). Each Post-Split Share, like an existing Old Share, would continue to
have no par value. Additionally, Proposal Three would authorize the Trustees, in
their discretion, to implement additional reverse share splits in the future. No
other future share splits are currently contemplated by the Board of Trustees.
Based upon the 6,960,034 Shares outstanding on June 21, 1995, the
proposed one-for-five reverse share split would decrease the number of
outstanding Shares by approximately 80% and thereafter approximately 1,392,007
Post-Split Shares (subject to adjustment for elimination of fractional shares)
would be outstanding. The proposed reverse share split would not affect any
Shareholder's proportionate equity interest in the Trust, subject to the
provisions for the elimination of fractional shares. If the amendment is
approved and the proposed reverse share split is implemented, each outstanding
Post-Split Share will be entitled to one vote at each Shareholders' meeting as
is the case with each currently outstanding Share.
Elimination of fractional shares may reduce each Shareholder's
holdings by as much as four Shares currently held and would eliminate entirely
the holdings of any Shareholder who currently owns less than
20
<PAGE> 23
five Shares. The Trust's Shares are currently held by approximately 4,182
holders of record. The reverse share split could reduce the number of record
holders by approximately 672. To the extent that any equity interest of
Shareholders is reduced or eliminated by Fractional Share Payments, the
proportionate equity interest of the other Shareholders will increase.
Management and affiliates own a substantial number of Shares of the Trust
representing approximately 23% of the Shares outstanding which could increase
slightly due to elimination of fractional shares.
Under the Trust's Rights Agreement, dated as of March 10, 1989, as
amended, each Share certificate also represents one Share Purchase Right which,
under the circumstances described therein, entitles its holder to purchase one
Share for $12. If Proposal Three is adopted and the one-for-five reverse share
split is implemented, the Share Purchase Rights will be proportionately adjusted
so that each new Share certificate will also represent one Share Purchase Right
which would permit the holder thereof to purchase one Share for $60 under such
circumstances. After the Rights become exercisable, holders have the right to
buy, for the exercise price, Shares with a market value of twice the exercise
price. The Board of Trustees may redeem the Rights in whole, but not in part, at
a price of $0.01 per Right, subject to adjustment. The proposed one-for-five
reverse Share split would cause the redemption price to be adjusted to equal
$0.05.
The Board of Trustees believes that the relatively low per-share
market price of the Shares impairs the acceptability of the Shares to
institutional investors and other members of the investing public. The Shares
have experienced a substantial spread between the bid price that is offered to
acquire the Shares ($1.00 per Share as of April 18, 1995) and the ask price that
is sought by potential sellers ($1.25 per Share as of March 31, 1995). The
difference in the bid and ask prices is approximately 20% of the ask price and
reduces the marketability of the Shares. A potential purchaser may refrain from
acquiring Shares at price which is 25% above the price he could obtain when he
sells the Shares. While there is no assurance, it is anticipated that the
proposed reverse share split will increase the market price per Share to a range
in which the spread between the bid and ask prices is not as great and,
therefore, increase the marketability of the Shares.
Theoretically, the number of Shares outstanding should not, by
itself, affect the marketability of the Shares, the type of investor who
acquires them, or the issuer's reputation in the financial community. In
practice, this is not necessarily the case, as many institutional investors look
upon low-price shares (shares that trade at less than $5 per share) as unduly
speculative in nature and, as a matter of policy, avoid investment in such
Shares.
Further, the Board of Trustees believes that the current per-share
price level of the Shares has reduced the effective marketability of such Shares
because of the reluctance of many leading brokerage firms to recommend low-price
shares to their clients. In addition, a variety of brokerage house policies and
practices tend to discourage individual brokers within those firms from dealing
in low-priced shares. Some of those policies and practices pertain to the
payment of brokers' commissions and to time-consuming procedures that function
to make the handling of low-priced shares unattractive to brokers, from an
economic standpoint. Many brokerage firms also prohibit investors from
purchasing on margin shares that are trading below certain prices per share.
Additionally, the structure of trading commissions also tends to have an adverse
impact on holders of low-priced shares because the brokerage commission on a
sale of low-priced shares generally represents a higher percentage of the sales
price than the commission on relatively higher priced shares. Therefore, the
present low prices for the Shares may adversely affect Shareholders who wish to
liquidate their holdings.
The proposed reverse share split is intended to result in a higher
per-share market price for the Trust's Shares that will increase investor
interest and possibly eliminate some of the resistance of brokerage firms. It is
anticipated that the price per Share after the reverse split could be in the
range of $5 to $6 per Share. Even with this intended increase in market price,
the Shares may still be considered low-priced by some brokerage firms.
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<PAGE> 24
To the extent the Trust could raise additional capital through the
issuance and sale of Shares, the Board of Trustees also believes increasing the
share price through the proposed one-for-five reverse share split might enhance
the Trust's ability to increase capital through issuance and sale of new
Post-Split Shares, including through offerings to existing Shareholders. The
Trust currently has no plans to issue new Shares and there are uncertainties as
to whether any market would exist for newly issued Shares and whether any plan
to raise capital through issuance and sale of new Post-Split Shares would be
successful.
The Trust currently does not qualify for admission to National
Association of Securities Dealers Automated Quotation System ("NASDAQ") National
Market System because its per-share price is too low and it did not have pre-tax
income in excess of $750,000 for two of the last three fiscal years. The effect
of the proposed one-for-five reverse share split on the per-share price could
enable the Trust to meet all requirements for admission into the NASDAQ National
Market System other than the financial test. Accordingly, approval of Proposal
Three followed by implementation of the one-for-five reverse share split may
enable the Trust to successfully seek a waiver of any remaining requirements
thereby potentially enhancing the marketability of the Post-Split Shares. In
addition, the approval of Proposal Three may put the Trust in the position, in
the future, if its' Post-Split Shares trade above the minimum threshold price,
and it meets the financial tests, to meet all requirements for admission into
the NASDAQ National Market System without seeking a waiver. Because the Trust's
future performance is dependent on a number of business and general economic
factors which cannot be predicted with certainty, there can be no assurance that
the financial requirements for admission into the NASDAQ National Market System
will be attained at any future point in time.
There can be no assurance that the market price for the Post-Split
Shares after the proposed reverse share split will be five times the market
price for the proposed reverse share split, that the marketability of the
Post-Split Shares will increase or that the reverse share split will otherwise
have the desired effects described. There are numerous other factors that affect
the market price and marketability of the Shares, some of which include the
operating performance of the Trust, the amount of income or losses, the
underlying value of the assets of the Trust and the Trust's operational
expenses.
Assuming that Proposal Three is approved, an amendment to the
Declaration of Trust will be filed in the Office of the Alameda County
(California) Recorder of Deeds as promptly as practicable thereafter. The
amendment and the proposed reverse share split would become effective as of the
close of business on the date of such filing (the "Effective Date").
Shareholders would then be furnished with the necessary materials and
instructions to exchange their certificates representing the Trust's existing
Shares of beneficial interest for new certificates representing the Trust's
Post-Split Shares of beneficial interest. Shareholders should not submit any
such certificates until requested to do so.
No fractional Shares will be issued. Accordingly, Shareholders who
would otherwise be entitled to receive fractional Shares will receive cash in
lieu thereof, computed at the average of the mean high and low bid quotations
for the Shares as reported by the NASDAQ inter-dealer quotation system for the
ten trading days immediately preceding the Effective Date.
The cost to the Trust for the fractional share payments cannot be
precisely determined, but it is expected not to be material nor to exceed
approximately $10,000. The Trust's Shareholder list indicates that a portion of
the outstanding Shares is registered in the names of clearing agencies and
broker nominees. It is, therefore, not possible to predict with any certainty
the number of fractional Shares and the total amount that the Trust will be
required to pay to redeem such fractional Shares. The funds required to purchase
any such fractional Shares are available and will be paid from the current cash
reserves and operating cash flow of the Trust.
The following table sets forth the high and low bid quotations as
reported by the NASDAQ inter-dealer quotation system for the last three fiscal
years and during the current fiscal year. (Over the counter market quotations
reflect inter-dealer prices, without retail mark-up, mark-down or commissions
and may not necessarily represent actual transactions):
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<PAGE> 25
<TABLE>
<CAPTION>
QUARTER ENDED HIGH LOW
<S> <C> <C>
February 29, 1992 . . . . . . . . . . . . . . . . . . 5/16 5/16
May 31, 1992 . . . . . . . . . . . . . . . . . . . . 9/16 5/16
August 31, 1992 . . . . . . . . . . . . . . . . . . . 9/16 5/16
November 30, 1992 . . . . . . . . . . . . . . . . . . 9/16 5/16
February 28, 1993 . . . . . . . . . . . . . . . . . . 1 3/4 5/16
May 31, 1993 . . . . . . . . . . . . . . . . . . . . 1 1/2 7/8
August 31, 1993 . . . . . . . . . . . . . . . . . . . 1 1/16 9/16
November 30, 1993 . . . . . . . . . . . . . . . . . . 7/8 9/16
February 28, 1994 . . . . . . . . . . . . . . . . . . 15/16 5/8
May 31, 1994 . . . . . . . . . . . . . . . . . . . . 11/16 11/16
August 31, 1994 . . . . . . . . . . . . . . . . . . 1 1/16 11/16
November 30, 1994 . . . . . . . . . . . . . . . . . . 1 1/8 11/16
February 28, 1995 . . . . . . . . . . . . . . . . . . 1 1
May 31, 1995 . . . . . . . . . . . . . . . . . . . . 1 1/8 1 1/8
August 31, 1995 (through June 2, 1995) . . . . . . . 1 1/8 1 1/8
</TABLE>
As of June 2, 1995, the closing bid price of the Trust's Shares on
the NASDAQ inter-dealer quotation system was $1.125 per Share.
Shareholders have no right, under California law, to dissent from
the proposed reverse share split.
The Shares are currently registered under Section 12(g) of the
Securities Exchange Act of 1934 (the "Exchange Act") and, as a result, the Trust
is subject to the periodic reporting and other requirements of the Exchange Act.
The amendment to the Declaration of Trust and the proposed reverse share split
will not affect the registration of the Shares under the Exchange Act. After the
Effective Date, trades of Post-Split Shares will continue to be reported on the
NASDAQ under the Trust's symbol "VIPTs."
FEDERAL INCOME TAX CONSEQUENCES
The following description of federal income tax consequences of the
proposed reverse share split is based on the Internal Revenue Code of 1986, as
amended (the "Code"), the applicable Treasury Regulations promulgated
thereunder, judicial authority, and current administrative rulings and practices
as in effect on the date of this Proxy Statement. The discussion is for general
information only and does not cover the consequences which may apply for special
classes of taxpayers (e.g., non-resident aliens, broker-dealers or insurance
companies). All shareholders are urged to consult their own selection of tax
advisors to determine the particular consequences to each of them of the
proposed reverse share split.
The Trust has not sought and will not seek an opinion of counsel or
a ruling from the Internal Revenue Service regarding the federal income tax
consequences of the proposed reverse share split. The Trust, however, believes
that because the proposed reverse share split is not part of a plan to
periodically increase any Shareholder's proportionate interest in the assets or
earnings and profits of the Trust, the reverse share split will have the federal
income tax effects described below:
1. The exchange of Old Shares for Post-Split Shares, except
as discussed below with respect to Shareholders who receive cash in
lieu of a fractional share interest, will not result in recognition
of gain or loss for federal income tax purposes on such exchange.
In the aggregate, the Shareholder's basis in the Post-Split Shares
will equal his basis in the Old Shares. A Shareholder's holding
period for the Post-Split Shares will be the same as the holding
period of the Old Shares
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<PAGE> 26
exchanged therefor. Provided that a Shareholder held the Old Shares
as a capital asset, the Post-Split Shares received in exchange
therefor will also be held as a capital asset.
2. Shareholders who receive cash in lieu of a fractional
share interest will be treated as if the Trust had redeemed their
fractional share interest. Provided that such share redemption
results in a reduction of Shareholder's percentage ownership
interest in the Trust (including, for this purpose, Shares
constructively owned), such Shareholder will recognize gain or
loss, as the case may be, measured by the difference between the
amount of cash received and the basis of the fractional share
interest determined as described above. Such gain or loss will be
capital gain or loss if such Shareholder's Old Shares were held as
a capital asset, and any such capital gain or loss will generally
be long-term capital gain or loss to the extent such Shareholder's
holding period for his Old Shares exceeds twelve months.
Pursuant to Section 8.3(a) of the Declaration of Trust, as amended,
the proposal to amend Section 6.1 of the Declaration of Trust to authorize the
Board of Trustees to implement reverse share splits, including the proposed
one-for-five reverse share split of all of the authorized shares, must be
approved by a vote of Shareholders holding a majority of the outstanding Shares
entitled to vote thereon which constitutes the requirement for an affirmative
vote of 3,480,018 Shares. As of June 21, 1995, management and affiliates held
1,621,093 Shares representing approximately 23% of the Shares outstanding.
Management intends to vote all of such Shares for Proposal Three in accordance
with the recommendation below of the Board of Trustees.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR PROPOSAL THREE
The Trust has estimated that the cost of servicing its Shareholders
(i.e. preparation and mailing of Shareholder communications, maintaining stock
transfer records, transferring shares, etc.) was approximately $20.00 per
Shareholder for the fiscal year ended November 30, 1994. The Trust presently has
approximately 4200 Shareholders of record, of which 672 hold 100 Shares or less
each. Assuming the approval of Proposal Three and implementation of the proposed
one-for-five reverse share split, mathematically the Trust should then have
approximately 3,510 Shareholders of record, of which 1,502 will each hold less
than 100 Shares. In order to reduce the total cost of servicing Shareholders,
the Trust intends to make an offer to purchase Shares from all holders of less
than 100 Post-Split Shares of the Trust (the "Future Odd Lot Shares"). Such
offer is expected to have the following terms:
1. The offer to purchase the Future Odd Lot Shares will remain open
for at least sixty (60) days until a date certain not later than September 30,
1995, unless the Trust notifies such Shareholders in writing of termination
thereof prior to that date. Mailing of such notice to the Shareholder at the
address to which his communications are regularly mailed shall constitute notice
to such Shareholder of termination of the offer unless the Trust has received
written instructions from the Shareholder to a change in his address.
2. The offer will be made to all Shareholders holding Future Odd
Lot Shares and will be an offer to purchase all but not less than all of such
Future Odd Lot Shares.
3. The purchase price will be the next closing price of the Trust's
Post-Split Shares as reported by the NASDAQ interdealer quotation system on the
day on which the Trust receives the Letter of Transmittal, properly completed,
signed and validly tendered with certificates for Post-Split Shares attached, at
its offices at the address listed in the Letter of Transmittal. Checks in
payment for the Post-Split Shares will be made payable to the registered owner.
4. Any Shareholder of Future Odd Lot Shares desiring to accept the
offer as to all Shares owned by such Shareholder should complete and sign the
Letter of Transmittal (including current tax identification information) and
deliver it with certificates for such Post-Split Shares to the Trust in the
enclosed self-addressed, postage prepaid envelope.
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<PAGE> 27
PROPOSAL FOUR
SHARE OPTION AND INCENTIVE PLAN
On June 21, 1995, the Board of Trustees of the Trust adopted the
Vinland Property Trust Share Option and Incentive Plan (the "Plan"), subject to
approval by the Shareholders of the Trust at the next meeting of such
Shareholders, whether Annual or Special, by a majority of votes cast on such
Plan, provided that the total vote cast thereon represents over 50% in interest
of all voting securities of the Trust entitled to vote thereon. The Trust does
not presently have any formal bonus, profit sharing, pension, retirement, share
option, share purchase or deferred compensation plan for any Trustees, officers,
key employees or others of or for the Trust, except for the Plan.
The Board of Trustees believes that the Trust's earnings
performance and growth is dependent upon insuring the best possible management
and advice for the Trust. The Board of Trustees further believes the Plan will
encourage equity ownership in the Trust by Trustees, officers, key employees and
others and, in turn, provide such individuals with further incentive and
motivation to perform in the best interests of the Trust and its Shareholders
and will aid in attracting and retaining high quality individuals. The Plan will
be effective on the date the Plan is approved by the Shareholders at the Annual
Meeting. The principal features of the Plan are summarized below. THIS SUMMARY
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE PLAN WHICH IS
ANNEXED AS APPENDIX II TO THIS PROXY STATEMENT.
GENERAL
The Trust believes that the frequent changes in the law and
regulations pertaining to the concept of stock options and incentive
arrangements, together with the continuing development of a wide variety of new
incentive plans involving shares, partly in response to such changes in the law
and regulations, have made it desirable for the Trust to have a plan containing
as much flexibility as possible in order to obviate the need to continually
amend a particular plan or adopt new plans and to permit the Trust to remain
competitive in the area of benefits for employees, officers and others.
The Plan generally permits the issuance of up to 500,000* Shares of
Beneficial Interest of the Trust pursuant to the grant or exercise of either
"Options" or "Awards" granted under the Plan. An "Option" under the Plan is an
option to purchase Shares and an "Award" under the Plan is broadly defined in
the Plan to include share options, alternate settlement rights, share bonus
awards, warrants, restricted shares and other arrangements under which the
shares reserved for the purposes of the Plan may be issued. The Plan permits the
grant of Options or Awards prior to the requisite approval of Shareholders if
they are conditioned upon such approval. The Shares subject to grant of Options
or Awards under the Plan are generally to be made available from the authorized
but unissued Shares or from the Treasury, as determined from time to time by the
Board of Trustees. Options may be granted by the Committee described below as
incentive share options ("ISOs") intended to qualify for favorable tax treatment
under federal tax law or as nonqualified share options ("NQSOs"). Alternate
Settlement Rights may be granted with respect to any Options granted under the
Plan and may be exercised only when the underlying Option is exercisable. An
Alternate Settlement Right has the features described below.
ADMINISTRATION
The Plan, if approved by the Shareholders, will be administered by
a Committee of the Board of Trustees (the "Committee") which will consist of at
least three persons, each of whom shall be a "Disinterested Person" within the
meaning of that phrase set forth in Rule 16b-3 under the Securities Exchange Act
of 1934 (the "Exchange Act"). None of the members of the Committee have received
an Award or Option and may not, during their administration. The members of the
Committee are John A. Doyle, William S. Friedman and Michael E. Smith. The
Committee has the sole authority to administer and
- ----------------------
* assuming the approval of Proposal Three and the effectuation of a
one-for-five reverse share split, the number of Shares would automatically be
reduced to 100,000 Post-Split Shares.
25
<PAGE> 28
interpret the Plan. The Committee, within the terms of the Plan, will select
eligible Trustees, officers, employees and others to participate in the Plan,
determine the type, amount and duration of any individual Award or Option and
may accelerate payments, vesting and periods of available exercise of Awards
or Options.
SHARES AVAILABLE
The Plan provides that the aggregate number of Shares which may be
subject to the Plan may not exceed [500,000]*, subject to adjustment in certain
circumstances to prevent dilution. At the discretion of the Committee, the
Shares delivered under the Plan may be authorized and unissued shares, treasury
stock or shares purchased on the open market. Shares underlying Awards or
Options that are cancelled, expired, forfeited, or terminated shall, in most
circumstances, again be available for the grant of additional Awards or Options
within the limits provided by the Plan.
TYPES OF GRANT
There are a number of existing types of grants and other incentives
or features which could be made under the Plan. A summary of certain of those
generally recognized types of incentives, with reference to the specific
treatment accorded to such incentives by the Plan, where applicable, is:
(a) NONQUALIFIED AND INCENTIVE SHARE OPTIONS. The Plan
permits the Committee to grant both NQSOs and ISOs and provides
that the price at which NQSOs may be granted shall not be less than
one-half (1/2) of the "Fair Market Value" (as defined in the Plan)
of the Shares on the date of grant of the Option, but contains no
limitation on the term of any such Option unless it is intended to
qualify as an ISO. ISOs may only be awarded to employees of the
Trust. The price and term of each Option will be fixed by the
Committee at the time of grant. The price at which ISOs may be
granted may not be less than the Fair Market Value of the Shares on
the date of grant of the Option. The Committee shall also determine
at such time the particular conditions or limitations to which each
Option shall be subject, such as, for example, if or to what extent
an Option shall continue to be exercisable following the
termination of the person's relationship with the Trust or
following the death of such person by the personal representative
of such person, but in the event the Committee does not fix same at
the time of grant, a provision of the Plan deals specifically with
this matter.
(b) ALTERNATE SETTLEMENT RIGHTS. The Plan contains a
provision permitting the grant of "Alternate Settlement Rights"
which, in general, are rights which permit a grantee to surrender
his Option or right in exchange for cash, shares, or a combination
of cash and shares, in an amount equal to the difference between
the Fair Market Value of the Shares and the Option or Award
exercise price at the time the Option or Award is surrendered.
(c) RESTRICTED SHARES. Under a restricted share
arrangement, a Plan participant is issued shares which may be
forfeited to the Trust in the event certain conditions fail to be
met. Such conditions might include, for example, meeting
pre-determined performance criteria or remaining in the employment
of or within a relationship with the Trust for a specified period
of time. Typically, the restrictions applicable to the grant of a
restricted share arrangement would gradually lapse with the passage
of time such that a participant would become "vested" and the
shares would be issued to him in installments as the conditions
attaching thereto are satisfied.
(d) SHARE BONUS AWARDS. The Plan permits an outright grant
of shares to a participant. Such grant will represent an award for
performance in much the same fashion as a cash bonus.
- ------------------------
* assuming the approval of Proposal Three and the effectuation of a
one-for-five reverse share split, the number of Shares would automatically be
reduced to 100,000 Post-Split Shares.
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<PAGE> 29
(e) PYRAMIDING AND CASHLESS EXERCISE. Subject to such rules
as the Committee may impose, the exercise price of an Option or
Award may be paid in cash, in Shares already owned by the
individual, with a combination of cash and Shares, by "pyramiding"
Shares or effecting a "cashless exercise" if so approved by the
Committee or with such other consideration as shall be approved by
the Committee. "Pyramiding" is a technique whereby an optionee
requests the issuer to automatically apply a portion of the Shares
received upon exercise, in whole or in part, of a Share Option to
satisfy the exercise price of additional Share Options, thus
resulting in multiple simultaneous exercises of Options by use of
Shares as payment. A "cashless exercise" is a technique which
allows the optionee to exercise Share Options without cash through
the assistance of a broker through either a simultaneous exercise
and sale or a broker loan. Both the "pyramiding" and "cashless
exercise" techniques do not increase the compensation that the
Option provides; the individual receives the same economic benefit
as he or she would upon exercise of an Alternate Settlement Right
issued in tandem with the Option.
(f) RELOAD OPTION. The Committee may provide at the time of
any grant that an individual shall also be granted an Option (a
"Reload Option") in the event such individual exercises all or part
of an Option (an "Original Option") by surrendering already owned
Shares in full or partial payment of the exercise price under such
Original Option, subject to the availability of Shares under the
Plan at the time of exercise. Each Reload Option shall cover a
number of Shares equal to the number of Shares surrendered in
payment of the exercise price, shall have an exercise price per
Share equal to the Fair Market Value of the Shares on the date of
grant of such Reload Option and shall expire on the stated
expiration date of the Original Option. A Reload Option shall be
generally exercisable at any time and from and after the date of
grant of such Reload Option (or, as the Committee, in its sole
discretion, shall determine at the time of grant, at such time or
times as shall be specified in the Reload Option). The first such
Reload Option may provide for the grant, when exercised, of one
subsequent Reload Option to the extent and upon such terms and
conditions, as the Committee, in its sole discretion, shall specify
at or after the time of grant of such Reload Option.
(g) CHANGE IN CONTROL OF THE TRUST. In the case of a Change
in Control of the Trust (as defined in the Plan), or a potential
therefor, Options and Awards granted pursuant to the Plan become
fully exercisable as to all Shares from and after the date of such
Change in Control.
(h) RE-PURCHASE ARRANGEMENTS. The Plan contains a
re-purchase feature pursuant to which, if granted, at the election
of the person to whom such Shares have been issued under the Plan,
the Trust could purchase all or any portion of such Shares at a
price not exceeding its Fair Market Value on the date of
re-purchase. However, the Trust would not be obligated to purchase
such Shares if the capital of the Trust would become impaired
thereby or if such purchase, in the opinion of counsel for the
Trust, would be a violation of any law, rule or regulation, any
agreement to which the Trust is a party, or the Declaration of
Trust, as amended, of the Trust.
The foregoing are merely examples of some of the more commonly utilized forms of
grants and other incentive arrangements and features which the Plan authorizes
the Committee to make and grant, and the terms of the Plan are sufficiently
broad so that other types of incentive arrangements may be granted by the
Committee. Such incentive arrangements may be granted singly, in combination or
tandem, or coupled with a cash or other incentive feature, as the Committee may
determine. Under current accounting rules, some of the types of incentive
arrangements which could be granted under the Plan, as in the case of, for
example, Alternate Settlement Rights, could result in charges (or credits) to
net income for financial statement purposes.
OFFICERS AND TRUSTEES SUBJECT TO SECTION 16(b) LIABILITY
Special rules may apply to officers and Trustees subject to
liability under Section 16(b) of the Exchange Act that may prevent the
recognition of income by such individuals and the corresponding deduction by the
Trust before the date six months following the grant of an Option or Alternate
Settlement
27
<PAGE> 30
Right or the receipt of restricted Shares or other Awards (unless the individual
receives the Shares before that date and elects to be taxed upon such receipt).
In addition, the Trust's deductions may be limited (an employee's receipt of an
Award may be subject to an excise tax) to the extent that benefits under the
Plan become payable as a result of a Change in Control of the Trust. Moreover,
proposed legislation could deny the Trust a deduction for any compensation paid
to an officer or Trustee in excess of $1,000,000 in any year; while this
limitation would not apply to payments that are linked to productivity, it is
not clear whether compensation arising under the Plan would qualify for this
exception.
CONSIDERATION FOR ISSUANCE OF SHARES
Subject to the requirements of applicable law, consideration for
the issuance of Shares under the Plan may take any form, including cash, notes,
Shares or other securities, property or other performance of services under an
employment arrangement or otherwise. In addition, subject to the requirements of
applicable law, the Committee is expressly empowered to authorize a loan to any
person eligible to receive an Option or Award for the purpose of exercising any
option, warrant, right or otherwise acquiring any Shares issuable under the
Plan. No determination has been made as to the circumstances under which
consideration for issuance of Shares under the Plan would consist of notes,
Shares or other securities or property, and no determination has been made as to
whether any such loan will be authorized or would bear any specified rate of
interest or be non-interest bearing, or as to the term thereof or whether
collateral would be required therefor.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
Agreements covering Options or Awards may contain such provisions
as the Committee may determine for the adjustment of the number of Shares
subject thereto and of the Option or Award purchase prices in the event of
changes in the outstanding Shares by reason of share dividends,
recapitalizations, mergers, split-ups, combinations or exchanges of shares and
the like. In addition, each Option or Award granted under the Plan shall contain
such provisions or undertakings by the holder pertaining to the resale or
distribution of the Shares acquired pursuant thereto as the Trust shall deem
appropriate and necessary to comply with the Securities Act of 1933, as amended,
and the Exchange Act and the rules, regulations and administrative
interpretations thereunder.
FEDERAL INCOME TAX CONSEQUENCES
The Trust has been advised by its counsel that under existing law
(so long as options in the Shares are not actively traded) a recipient of a
Non-qualified Share Option granted under the Plan will not recognize any taxable
income from the grant of such Option and the Trust will not be entitled to any
tax deductions for income tax purposes. Upon the exercise of Non-qualified Stock
Options granted under the Plan, the employee will recognize taxable ordinary
income equal to the excess of the Fair Market Value of the Shares on the date
the Option is exercised over the Option price, and the Trust will at that time
be entitled to a corresponding deduction. An individual who receives restricted
Shares will not realize any taxable income at the time of grant of the
restricted Shares so long as the Shares are subject to a substantial risk of
forfeiture. When the restrictions lapse, the recipient will recognize ordinary
income equal to the Fair Market Value of the Shares at the time of the lapse of
the restrictions. The Trust is entitled to a tax deduction at the same time in
the amount taxable to the individual. With regard to dividends paid by the Trust
in cash and Shares during the time the restrictions are in effect, the Trust
will be entitled to a deduction for compensation for the value of such dividends
at the time they are paid to the recipient and the recipient will have taxable
compensation income at the time in a corresponding amount. A Trustee or employee
who is granted an Option containing an Alternate Settlement Right under the Plan
will not realize any taxable income upon the grant of such Option containing an
Alternate Settlement Right and the Trust will not be entitled to any tax
deduction for any income tax purposes. However, when such person exercises an
Alternate Settlement Right, the Optionee will recognize taxable income to the
extent that cash or property from the Alternate Settlement Right is received or
utilized to fund the exercise of the Option. The Trust will then be entitled to
a corresponding deduction for the taxable year in which the Alternate Settlement
Right is exercised.
28
<PAGE> 31
The foregoing does not purport to be a complete description of all
federal tax consequences that might result to any individual and each individual
is encouraged to review the federal tax consequences applicable to him or her
with their own selection of tax experts.
AMENDMENT AND TERMINATION
The Board of Trustees may, at any time, and from time to time,
terminate, amend or modify the Plan. However, without the approval of the
Shareholders of the Trust (as may be required by Section 16 of the Exchange Act,
the Internal Revenue Code, by any national securities exchange or system on
which the Shares are then listed or reported, or by regulatory body having
jurisdiction with respect hereto), no such termination, amendment or
modification may (i) without the consent of the person to whom any Option or
Award has theretofore been granted, adversely affect the rights of such person
under such Option or Award; or (j) increase (other than by required adjustments
provided in the Plan) the maximum number of Shares which may be issued pursuant
to all Options or Awards granted under the Plan; or (k) modify the Plan or the
terms of Awards or Options in such a way that the members of the Committee lose
their status as "Disinterested Persons" under Rule 16b-3 of the Exchange Act.
As of June 21, 1995, no Options or Awards have been granted under
the Plan. There are no definite plans concerning the individuals to whom the
Options or Awards will be granted under the Plan, the types of Options or Awards
to be granted, or the number of Shares to be subject thereto, the time or times
when the same will be granted, or as to any term or condition which, under the
Plan, are all within the discretionary authority of the Committee to fix with
respect to any such Option or Award. The Plan is not limited as to time.
The Shares are traded in the over-the-counter market and have been
quoted on the National Association of Securities Dealers Automated Quotation
System. The reported closing bid quotation of the Shares as reported by
published financial sources on June 2, 1995, was $1.125.
THE BOARD OF TRUSTEES RECOMMEND THE VOTE FOR ADOPTION AND APPROVAL
OF THE VINLAND PROPERTY TRUST SHARE OPTION AND INCENTIVE PLAN. UNLESS
INSTRUCTIONS ARE NOTED THEREON, THE ENCLOSED PROXY WILL BE VOTED IN FAVOR OF
APPROVAL OF THIS PROPOSAL.
PROPOSAL FIVE
INDEPENDENT TRUSTEES' SHARE OPTION PLAN
The Board of Trustees of the Trust has reviewed various
arrangements for compensation of Trustees, which does not include a program
enabling Trustees who are not also employees of the Trust to participate in the
Trust's growth through stock ownership except for purchases of Shares in the
open market. The Board of Trustees believes that a program fostering share
ownership by Trustees who are "independent" will promote the long-term financial
success of the Trust by attracting and retaining outstanding Trustees and
providing incentives to such Trustees through grants of Share Options linked to
continued improvements in the Trust's earnings.
On June 21, 1995, by unanimous written consent the Board of
Trustees of the Trust adopted the Vinland Property Trust Independent Trustee
Share Option Plan (the "Trustee Plan") subject to approval by the Shareholders
of the Trust at the next meeting of the Shareholders, whether Annual or Special,
by a majority of votes cast on such Trustee Plan, provided that the total vote
cast thereon represents over 50% in interest of all voting securities of the
Trust entitled to vote thereon. The Trust does not presently have any formal
bonus, profit sharing, pension, retirement, share option, share purchase or
deferred compensation plan for any of the Trustees except for the Trustee Plan
and the proposed Share Option and Incentive Plan.
The Trustee Plan will be effective on the date the Trustee Plan is
approved by the Shareholders at the Annual Meeting. The principal features of
the Trustee Plan are summarized below. THIS SUMMARY IS
29
<PAGE> 32
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE TRUSTEE PLAN
WHICH IS ANNEXED AS APPENDIX III TO THIS PROXY STATEMENT.
ADMINISTRATION AND ELIGIBILITY; ADJUSTMENT, AMENDMENT AND TERMINATION
Because Options to be granted under the Trustee Plan are automatic
and non-discretionary, the Trustee Plan is largely self administered. To the
extent necessary, the Board of Trustees is authorized to administer the Plan. In
the event of a share dividend, share split, share combination or other reduction
in issued shares, merger, consolidation, recapitalization or sale or exchange of
all of the assets or dissolution of the Trust, the Board of Trustees is required
to adjust the number and type of shares authorized by the Trustee Plan and
subject to outstanding grants of Options, as well as Option prices of any
outstanding share Options, to prevent in enlargement or dilution of rights. No
Option will be granted under the Trustee Plan after [July 26], 2005. The Board
of Trustees may suspend or terminate the Trustee Plan at any time or amend the
Trustee Plan from time to time without Shareholder approval, but no amendment,
suspension or termination shall impair the rights of any Trustee under
outstanding Options. However, without Shareholder approval (to the extent
required by law or agreement) no amendment may be made which would (l)
materially increase the number of Shares issuable under the Trustee Plan (other
than pursuant to the adjustment provisions described above), (m) materially
modify the requirements as to eligibility for participation, (n) materially
increase the benefits accruing to Trustees under the Plan, or (o) extend the
termination date of the Trustee Plan.
Eligibility for Options under the Trustee Plan is limited to
Trustees of the Trust who, at the time of grant of an Option, are not, and have
not been for at least one year, either an employee or officer of the Trust or
any of its Affiliates. The aggregate number of Shares under the Trustee Plan is
300,000* (subject to adjustments in order to prevent enlargement or dissolution
as described above). The Shares are traded in the over-the-counter market and
have been quoted on the National Association of Securities Dealers Automated
Quotation System. The reported closing bid quotation of the Shares, as reported
by published financial sources on June 2, 1995, was $1.125; accordingly, the
aggregate market value of 3,000 Shares based upon such bid quotation would be
$3,375.
OPTIONS
Effective at the time of approval by the Shareholders of the
Trustee Plan, each Independent Trustee will automatically be awarded an Option
to purchase 3,000 Shares. In addition, for each year such Trustee continues to
serve as a Trustee, he will be awarded an option covering 1,500 Shares on
December 1 of each year. All Options are to be granted at "fair market value"
(as defined in the Trustee Plan). All Options granted under the Trustee Plan
will be exercisable for the lesser of ten years or one year after a Trustee
ceases to serve on the Board of Trustees. In the event of a Trustee's death,
such Options will be exercisable for a period of time from the date of death.
Payment of the exercise price may be made in cash, in Shares already owned by
the Individual, with a combination of cash and Shares, by "pyramiding" Shares or
effecting a "cashless exercise" at the selection of the Optionee.
In the case of a Change in Control of the Trust (as defined in the
Plan) or a potential therefor, Options granted pursuant to the Trustee Plan may
become fully exercisable as to all Shares from and after the date of such Change
in Control.
FEDERAL INCOME TAX CONSEQUENCES
The Trust has been advised by its counsel that under existing law,
a recipient of a Share Option granted under the Plan will not realize any
taxable income from the grant of such Option and the Trust will
- -------------------------
* assuming the approval of Proposal Three and the effectuation of a
one-for-five reverse share split, the number of shares would automatically be
reduced to 60,000; the numbers under "Options" will also be automatically
reduced.
30
<PAGE> 33
not be entitled to any tax deductions for income tax purposes. Upon the exercise
of Stock Options granted under the Plan, the Optionee will realize taxable
ordinary income equal to the excess of the Fair Market Value of the Shares on
the date the Option is exercised over the Option price, and the Trust will be
entitled to a corresponding deduction. The Trust is entitled to a tax deduction
at the same time in the amount taxable to the individual.
THE BOARD OF TRUSTEES RECOMMEND THE VOTE FOR ADOPTION AND APPROVAL
OF THE VINLAND PROPERTY TRUST INDEPENDENT TRUSTEES' SHARE OPTION PLAN. UNLESS
INSTRUCTIONS ARE NOTED HEREON, THE ENCLOSED PROXY WILL BE VOTED IN FAVOR OF
APPROVAL OF THIS PROPOSAL.
SELECTION OF AUDITORS FOR 1994
The Board of Trustees selected Arthur Andersen, L.L.P. to serve as
the Auditors for the Trust for the 1994 fiscal year. The Trust Auditors for 1993
were BDO Seidman. Representatives of Arthur Andersen, L.L.P. and BDO Seidman
have been invited to attend the annual meeting.
OTHER MATTERS
By the date of this Proxy Statement, the Trustees and officers do
not know of any other matters that may properly be, or that are likely to be,
brought before the meeting. However, if any other matters are properly brought
before the meeting, the persons named in the enclosed Proxy or their substitutes
will vote in accordance with their best judgment on such matters.
INTEREST OF CERTAIN PERSONS
IN MATTERS TO BE ACTED UPON
As described above under "Certain Business Relationships," Mr.
Friedman, a Trustee, President and Chief Executive Officer of the Trust, also
serves as the Chief Executive Officer of Tarragon and Mr. Doyle, a Trustee,
Executive Vice President and Chief Operating Officer of the Trust, also serves
as President and Chief Operating Officer of Tarragon. Tarragon is owned by Lucy
N. Friedman, Mr. Friedman's wife, 50% and John A. Doyle 50% and therefore
Messrs. Friedman and Doyle could be deemed to benefit financially from
Shareholder approval of the Trust Advisory Agreement with Tarragon pursuant to
Proposal Two. The amount of any possible financial benefit to either Messrs.
Friedman or Doyle is not directly quantifiable at this time.
FINANCIAL STATEMENTS
The audited financial statements of the Trust, in comparison form
for the years ended November 30, 1994, 1993 and 1992 are contained in the 1994
Annual Report to Shareholders. Such report and the financial statements therein
are not to be considered a part of this solicitation.
SOLICITATION OF PROXIES
THIS PROXY STATEMENT IS FURNISHED TO SHAREHOLDERS TO SOLICIT
PROXIES ON BEHALF OF THE TRUSTEES AND OFFICERS OF THE TRUST. The cost of
soliciting proxies will be borne by the Trust. In addition to the solicitation
of proxies by use of the mails, the officers and Trustees may also solicit
proxies personally or by mail, telephone, facsimile transmission or telegraph,
but they will not receive any compensation for such services.
-----------------------------
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<PAGE> 34
COPIES OF THE TRUST'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED
NOVEMBER 30, 1994 TO THE SECURITIES AND EXCHANGE COMMISSION ON FORM 10-K ARE
AVAILABLE TO SHAREHOLDERS WITHOUT CHARGE UPON WRITTEN REQUEST TO VINLAND
PROPERTY TRUST, 3878 OAK LAWN AVENUE, SUITE 300, DALLAS, TEXAS 75219, ATTENTION:
INVESTOR RELATIONS.
BY ORDER OF THE TRUSTEES
David L. Miller, Vice President - Legal and Secretary
THE BOARD OF TRUSTEES OF THE TRUST UNANIMOUSLY RECOMMEND YOU VOTE
FOR ALL SIX OF THE NOMINEES AND THAT YOU VOTE FOR APPROVAL OF THE ADVISORY
AGREEMENT BY VOTING FOR PROPOSAL TWO ON THE ENCLOSED PROXY, THAT YOU VOTE FOR
APPROVAL OF THE AMENDMENT TO THE AMENDED DECLARATION OF TRUST TO AUTHORIZE
IMPLEMENTATION OF REVERSE SHARE SPLITS, THAT YOU VOTE FOR APPROVAL OF THE
VINLAND PROPERTY TRUST SHARE OPTION AND INCENTIVE PLAN BY VOTING FOR PROPOSAL
THREE ON THE ENCLOSED PROXY, AND THAT YOU VOTE FOR APPROVAL OF THE VINLAND
PROPERTY TRUST INDEPENDENT TRUSTEE'S SHARE OPTION AND BY VOTING FOR PROPOSAL
FOUR ON THE ENCLOSED PROXY. REGARDLESS OF HOW YOU WISH TO VOTE YOUR SHARES, YOUR
BOARD OF TRUSTEES URGES YOU TO PROMPTLY SIGN, DATE AND MAIL THE ENCLOSED PROXY.
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APPENDIX I
31456.01000:051895:SCM:5
ADVISORY AGREEMENT
BETWEEN
VINLAND PROPERTY TRUST
AND
TARRAGON REALTY ADVISORS, INC.
THIS AGREEMENT dated April 1, 1995, between Vinland Property Trust, a
California real estate investment trust (the "Trust"), and Tarragon Realty
Advisors, Inc., a New York corporation (the "Advisor").
W I T N E S S E T H:
WHEREAS:
1. The Trust owns a complex, diversified portfolio of real estate,
mortgages and other assets, including affordable and middle
income housing complexes, shopping centers, warehouses, office
buildings and mortgages.
2. The Trust has funds available for new investment, primarily in
the acquisition of income-producing real estate.
3. The Advisor and its employees have extensive experience in the
administration of real estate assets and the origination,
structuring and evaluation of real estate and mortgage
investments.
NOW THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties agree as follows:
1. DUTIES OF THE ADVISOR. Subject to the supervision of the
Board of Trustees, the Advisor will be responsible for the day-to-day
operations of the Trust and, subject to Section 17 hereof, shall provide such
services and activities relating to the assets, operations and business plan
of the Trust as may be appropriate, including:
(a) preparing and submitting an annual budget and business plan for
approval by the Board of the Trust (the "Business Plan");
(b) using its best efforts to present to the Trust a continuing and
suitable investment program consistent with the investment
policies and objectives of the Trust as set forth in the
Business Plan;
(c) using its best efforts to present to the Trust investment
opportunities consistent with the Business Plan and such
investment program as the Trustees may adopt from time to time;
(d) furnishing or obtaining and supervising the performance of the
ministerial functions in connection with the administration of
the day-to-day operations of the Trust including the investment
of reserve funds and surplus cash in short-term money market
investments;
(e) serving as the Trust's investment and financial advisor and
providing research, economic, and statistical data in
connection with the Trust's investments and investment and
financial policies;
I-1
<PAGE> 36
(f) on behalf of the Trust, investigating, selecting and conducting
relations with borrowers, lenders, mortgagors, brokers,
investors, builders, developers and others;
(g) consulting with the Trustees and furnishing the Trustees with
advice and recommendations with respect to the making,
acquiring (by purchase, investment, exchange, or otherwise),
holding, and disposition (through sale, exchange, or otherwise)
of investments consistent with the Business Plan of the Trust;
(h) obtaining for the Trustees such services as may be required in
acquiring and disposing of investments, disbursing and
collecting funds of the Trust, paying the debts and fulfilling
the obligations of the Trust, and handling, prosecuting, and
settling any claims of the Trust, including foreclosing and
otherwise enforcing mortgage and other liens securing
investments;
(i) obtaining for and at the expense of the Trust such services as
may be required for property management, loan disbursements,
and other activities relating to the investments of the Trust,
provided, however, the compensation for such services shall be
agreed to by the Trust and the service provider;
(j) advising the Trust in connection with public or private sales
of shares or other securities of the Trust, or loans to the
Trust, but in no event in such a way that the Advisor could be
deemed to be acting as a broker-dealer or underwriter;
(k) quarterly, and at any time requested by the Trustees, making
reports to the Trustees regarding the Trust's performance to
date in relation to the Trust's approved Business Plan and its
various components, as well as the Advisor's performance of the
foregoing services;
(l) making or providing appraisal reports, where appropriate, on
investments or contemplated investments of the Trust;
(m) assisting in preparation of reports and other documents
necessary to satisfy the reporting and other requirements of
any governmental bodies or agencies and to maintain effective
communications with shareholders of the Trust; and
(n) doing all things necessary to ensure its ability to render the
services contemplated herein, including providing office space
and office furnishings and personnel necessary for the
performance of the foregoing services as Advisor, all at its
own expense, except as otherwise expressly provided for herein.
2. NO PARTNERSHIP OR JOINT VENTURE. The Trust and the Advisor are
not partners or joint venturers with each other, and nothing herein shall be
construed so as to make them such partners or joint venturers or impose any
liability as such on either of them.
3. RECORDS. At all times, the Advisor shall keep proper books of
account and records of the Trust's affairs which shall be accessible for
inspection by the Trust at any time during ordinary business hours.
4. ADDITIONAL OBLIGATIONS OF THE ADVISOR. The Advisor shall
refrain from any action (including, without limitation, furnishing or rendering
services to tenants of property or managing or operating real property) that
would A. adversely affect the status of the Trust as a real estate investment
trust, as defined and limited in Sections 856-860 of the Internal Revenue Code,
B. violate any law, rule, regulation, or statement of policy of any governmental
body or agency having jurisdiction over the Trust or over its securities, C.
cause the Trust to be required to register as an investment company under the
Investment Company Act of 1940, or D. otherwise not be permitted by the
Declaration of Trust of the Trust.
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5. BANK ACCOUNTS. The Advisor may establish and maintain one or
more bank accounts in its own name, and may collect and deposit into any such
account or accounts, and disburse from any such account or accounts, any money
on behalf of the Trust, under such terms and conditions as the Trustees may
approve, provided that no funds in any such account shall be commingled with
funds of the Advisor; and the Advisor shall from time to time render appropriate
accounting of such collections and payments to the Trustees and to the auditors
of the Trust.
6. BOND. The Advisor shall maintain a fidelity bond with a
responsible surety company in such amount as may be required by the Trustees
from time to time, covering all directors, officers, employees, and agents of
the Advisor handling funds of the Trust and any investment documents or records
pertaining to investments of the Trust. Such bond shall inure to the benefit of
the Trust in respect to losses of any such property from acts of such directors,
officers, employees and agents through theft, embezzlement, fraud, error, or
omission or otherwise, the premium for said bond to be at the expense of the
Trust.
7. INFORMATION FURNISHED ADVISOR. The Trustees shall have the
right to change the Business Plan at any time, effective upon receipt by the
Advisor of notice of such change. The Trust shall furnish the Advisor with a
certified copy of all financial statements, a signed copy of each report
prepared by independent certified public accountants, and such other information
with regard to the Trust's affairs as the Advisor may from time to time
reasonably request.
8. CONSULTATION AND ADVICE. In addition to the services described
above, the Advisor shall consult with the Trustees, and shall, at the request of
the Trustees or the officers of the Trust, furnish advice and recommendations
with respect to any aspect of the business and affairs of the Trust, including
any factors that in the Advisor's best judgment should influence the policies of
the Trust.
9. ANNUAL BUSINESS PLAN AND BUDGET. No later than January 15th of
each year, the Advisor shall submit to the Trustees a written Business Plan for
the current Fiscal Year of the Trust. Such Business Plan shall include a
twelve-month forecast of operations and cash flow with explicit assumptions and
a general plan for asset sales or acquisitions, lending, foreclosure and
borrowing activity, other investments or ventures and proposed securities
offerings or repurchases or any proposed restructuring of the Trust. To the
extent possible, the Business Plan shall set forth the Advisor's recommendations
and the basis therefore with respect to all material investments of the Trust.
Upon approval by the Board of Trustees, the Advisor shall be authorized to
conduct the business of the Trust in accordance with the explicit provisions of
the Business Plan, specifically including the borrowing, leasing, maintenance,
capital improvements, renovations and sale of investments set forth in the
Business Plan. Any transaction or investment not explicitly provided for in the
approved Business Plan shall require the prior approval of the Board of Trustees
unless made pursuant to authority expressly delegated to the Advisor. Within
sixty (60) days of the end of each calendar quarter, the Advisor shall provide
the Board of Trustees with a report comparing the Trust's actual performance for
such quarter against the Business Plan.
10. DEFINITIONS. As used herein, the following terms shall have the
meanings set forth below:
(a) "Adjusted Funds From Operations" shall mean, for any period of
time, funds from operations (as defined by the National
Association of Real Estate Investment Trusts) for such period
of time plus 1. any loss due to the write-down or sale of any
real property or mortgage loan acquired prior to January 1,
1989 and 2. the amount of advisory fees payable to the Advisor
under Article 11 hereof but only to the extent such fees are
considered as current expenses in determining profit or loss.
(b) "Affiliate" shall mean, as to any Person, any other Person who
owns beneficially, directly, or indirectly, 1% or more of the
outstanding capital stock, shares or equity interests of such
Person or of any other Person which controls, is controlled by,
or is under common control with such
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Person or is an officer, retired officer, director, employee,
partner, or trustee (excluding non-interested trustees not
otherwise affiliated with the entity) of such Person or of any
other Person which controls, is controlled by, or is under
common control with, such Person.
(c) "Appraised Value" shall mean the value of a Real Property
according to an appraisal made by an independent qualified
appraiser who is a member in good standing of the American
Institute of Real Estate Appraisers and is duly licensed to
perform such services in accordance with the applicable state
law, or, when pertaining to Mortgage Loans, the value of the
underlying property as determined by the Advisor.
(d) "Book Value" of an asset or assets shall mean the value of such
asset or assets on the books of the Trust, before provision for
amortization, depreciation, depletion or valuation reserves and
before deducting any indebtedness or other liability in respect
thereof, except that no asset shall be valued at more than its
fair market value as determined by the Trustees.
(e) "Business Plan" shall mean the Trust's investment policies and
objectives and the capital and operating budget based thereon,
approved by the Board as thereafter modified or amended.
(f) "Fiscal Year" shall mean any period for which an income tax
return is submitted to the Internal Revenue Service and which
is treated by the Internal Revenue Service as a reporting
period.
(g) "Mortgage Loans" shall mean notes, debentures, bonds, and other
evidences of indebtedness or obligations, whether negotiable or
non-negotiable, and which are secured or collateralized by
mortgages, including first, wraparound, construction and
development, and junior mortgages.
(h) "Net Asset Value" shall mean the Book Value of all the assets
of the Trust minus all the liabilities of the Trust.
(i) "Net Income" for any period shall mean the Net Income of the
Trust for such period computed in accordance with generally
accepted accounting principles after deduction of the Gross
Asset Fee, but before deduction of the Net Income Fee, as set
forth in Sections 11(a) and 11(b), respectively, herein, and
inclusive of gain or loss of the sale of assets.
(j) "Net Operating Income" shall mean rental income less property
operating expenses.
(k) "Person" shall mean and include individuals, corporations,
limited partnerships, general partnerships, joint stock
companies or associations, joint ventures, associations,
companies, trusts, banks, trust companies, land trusts,
business trusts, or other entities and governments and agencies
and political subdivisions thereof.
(l) "Real Property" shall mean and include land, rights in land,
leasehold interests (including but not limited to interests of
a lessor or lessee therein), and any buildings, structures,
improvements, fixtures, and equipment located on or used in
connection with land, leasehold interests, and rights in land
or interests therein.
All calculations made pursuant to this Agreement shall be based on
statements (which may be unaudited, except as provided herein) prepared on an
accrual basis consistent with generally accepted accounting principles,
regardless of whether the Trust may also prepare statements on a different
basis. All other terms shall have the same meaning as set forth in the Trust's
Declaration of Trust and Trustees' Regulations.
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11. ADVISORY COMPENSATION.
(a) No Base Advisory Fee. The Trust shall not be required to pay to
the Advisor any Base Advisory Fee for advisory services for the
term hereof.
(b) Incentive Advisory Fee. As an incentive for successful
investment and management of the Trust's assets, the Trust
shall pay the Advisor a fee equal to 16% per annum of the
Trust's Adjusted Funds from Operation for each Fiscal Year or
portion thereof for which the Advisor provides services. The
Incentive Advisory Fee shall be payable monthly in advance
based on the Adjusted Funds from Operation for the most recent
month for which a monthly financial statement for the Trust has
been prepared. The Incentive Advisory Fee shall be cumulative
within any Fiscal Year, such that if the Trust has negative
Adjusted Funds from Operation in any month, each subsequent
payment shall be adjusted to maintain the 16% per annum rate.
(c) Acquisition Commission. For supervising the acquisition,
purchase or long-term lease of Real Property for the Trust, the
Trust shall pay to the Advisor an Acquisition Commission equal
to 1% of the acquisition cost for each real property acquired
during the term hereof, except that no such fee shall be due
for any acquisition through or from an affiliate of the Trust
or the Advisor, inclusive of commissions, if any, paid to
nonaffiliated brokers. The aggregate of each purchase price of
each property (including the Acquisition Commissions and all
real estate brokerage fees) may not exceed such property's
Appraised Value at acquisition.
(d) Mortgage Brokerage and Refinancing Fees. For obtaining loans to
the Trust or refinancing on Trust properties, the Advisor or an
Affiliate is to receive a Mortgage Brokerage and Refinancing
Fee equal to the lesser of (i) 1% of the amount of the loan or
the amount refinanced or (ii) a brokerage or refinancing fee
which is reasonable and fair under the circumstances; provided,
however, that no such fee shall be paid on loans from the
Advisor or an Affiliate without the approval of the Board of
Trustees. No fee shall be paid on loan extensions.
(e) Real Estate Brokerage Commission. Subject to approval by the
Board of Trustees, the Trust may pay to the Advisor or an
Affiliate of the Advisor a Real Estate Brokerage Commission for
services rendered upon (a) the purchase of real property by the
Trust or (b) the sale of real property owned by the Trust, for
which the Advisor or an Affiliate acts as the broker in such
transaction in amounts not to exceed customary fees charged by
nationally recognized real estate brokers for normal similar
transactions on a non-exclusive basis. The provision of real
estate brokerage services by the Advisor or an Affiliate shall
be on terms not less favorable to the Trust than the terms on
which unaffiliated parties are then performing similar services
for entities comparable to the Trust not entered into on an
exclusive basis. The entry into the applicable real estate
brokerage arrangement between the Trust and the Advisor shall
be approved as required by the Declaration of Trust.
12. LIMITATION ON THIRD PARTY MORTGAGE PLACEMENTS FEES. The
Advisor or any of its Affiliates shall pay to the Trust, the full amount of any
compensation received by the Advisor or any such Affiliate from third parties
with respect to the origination, placement or brokerage of any loan made by the
Trust.
13. STATEMENTS. The Advisor shall furnish to the Trust not later
than the tenth day of each calendar month, beginning with the second calendar
month of the term of this Agreement, a statement showing the computation of
the fees, if any, payable in respect to the next preceding calendar month (or,
in the case of incentive compensation, for the preceding Fiscal Year, as
appropriate) under the Agreement. The final settlement of incentive
compensation for each Fiscal Year shall be subject to adjustment in
accordance with, and upon completion of, the annual audit of the Trust's
financial statements; any payment by the Trust or repayment
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by the Advisor that shall be indicated to be necessary in accordance therewith
shall be made promptly after the completion of such audit and shall be reflected
in the audited statements to be published by the Trust.
14. COMPENSATION FOR ADDITIONAL SERVICES. If and to the extent
that the Trust shall request the Advisor or any director, officer, partner, or
employee of the Advisor to render services for the Trust other than those
required to be rendered by the Advisor hereunder, such additional services, if
performed, will be compensated separately on terms to be agreed upon between
such party and the Trust from time to time. In particular, but without
limitation, if the Trust shall request that the Advisor perform property
management, leasing, loan disbursement or similar functions, the Trust and the
Advisor shall enter in to a separate agreement specifying the obligations of
the parties and providing for reasonable additional compensation to the
Advisor for performing such services.
15. EXPENSES OF THE ADVISOR. Without regard to the amount of
compensation or reimbursement received hereunder by the Advisor, the Advisor
shall bear the following expenses:
(a) employment expenses of the executive officers, directors or
shareholders of the Advisor (including Trustees, officers, and
employees of the Trust who are directors, officers, or
employees of the Advisor or of any company that controls, is
controlled by, or is under common control with the Advisor),
including, but not limited to, fees, salaries, wages, payroll
taxes, travel expenses, and the cost of employee benefit plans
and temporary help expenses except for those personnel expenses
relating to employees of the Advisor principally engaged in
accounting, shareholder relations or mortgage servicing;
(b) advertising and promotional expenses incurred in seeking
investments for the Trust;
(c) rent, telephone, utilities, office furniture and furnishings,
and other office expenses of the Advisor, except as any of such
expenses relates to employees of the Advisor principally
engaged in accounting, shareholder relations or mortgage
servicing; and
(d) miscellaneous administrative expenses relating to performance
by the Advisor of its functions hereunder.
In addition to the Advisory Compensation described in Section 11, the
Advisor shall be reimbursed for certain costs and expenses monthly on the basis
of an equitable allocation applied on a consistent and timely basis in
accordance with the Advisor's regular procedures. Such procedures provide for
identification of all material costs and expenses to be accounted for as a cost
of particular functions. Only costs and expenses allocable to legal, mortgage
servicing, treasury and financial departments are reimbursable as well as
certain portions of expenses not specifically identifiable to a particular
department.
16. EXPENSES OF THE TRUST. The Trust shall pay all its expenses
not assumed by the Advisor, including without limitation, the following
expenses:
(a) the cost of money borrowed by the Trust;
(b) income taxes, taxes and assessments on real property, and all
other taxes applicable to the Trust;
(c) legal, auditing, accounting, underwriting, brokerage, listing,
registration and other fees, printing, and engraving and other
expenses, and taxes incurred in connection with the issuance,
distribution, transfer, registration, and stock exchange
listing of the Trust's securities;
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(d) fees, salaries, and expenses paid to officers, and employees of
the Trust who are not directors, officers or employees of the
Advisor, or of any company that controls, is controlled by, or
is under common control with the Advisor other than employees
of the Advisor principally engaged in accounting, shareholder
relations and mortgage servicing;
(e) expenses directly connected with the origination or purchase of
Mortgage Loans and with the acquisition, disposition, and
ownership of real estate equity interests or other property
(including the costs of foreclosure, insurance, legal,
protective, brokerage, maintenance, repair, and property
improvement services) and including all compensation, traveling
expenses, and other direct costs associated with the Advisor's
employees or other personnel engaged in (i) real estate
transactionlegal services, (ii) internal auditing, (iii)
foreclosure and other mortgage finance services, (iv) sale or
solicitation for sale of mortgages, (v) engineering and
appraisal services, and (vi) transfer agent services;
(f) expenses of maintaining and managing real estate equity
interests;
(g) insurance, as required by the Trustees (including Trustees'
liability insurance);
(h) the expenses of organizing, revising, amending, converting,
modifying, or terminating the Trust;
(i) expenses connected with payments of dividends or interest or
distributions in cash or any other form made or caused to be
made by the Trustees to holders of securities of the Trust;
(j) all expenses connected with communications to holders of
securities of the Trust and the other bookkeeping and clerical
work necessary to maintaining relations with holders of
securities, including the cost of printing and mailing
certificates for securities and proxy solicitation materials
and reports to holders of the Trust's securities;
(k) the cost of any accounting, statistical, bookkeeping or
computer equipment or computer time necessary for maintaining
the books and records of the Trust and for preparing and filing
Federal, State and Local tax returns;
(l) transfer agent's, registrar's, and indenture trustee's fees and
charges;
(m) legal, accounting, investment banking, and auditing fees and
expenses charged by independent parties performing these
services not otherwise included in clauses (c) and (e) of this
Section 16;
(n) expenses incurred by the Advisor arising from the sales of
Trust properties, including those expenses related to carrying
out foreclosure proceedings;
(o) expenses incurred by the Advisor in connection with the sale or
disposition of Trust assets, including mortgage servicing;
(p) costs and expenses connected with computer services, including
but not limited to employee or other personnel compensation,
hardware and software costs, and related development and
installation costs associated therewith;
(q) costs and expenses associated with risk management (i.e.,
insurance relating to the Trust's assets);
(r) loan refinancing compensation; and
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(s) expenses associated with special services requested by the
Trustees pursuant to Section 14 hereof.
17. OTHER ACTIVITIES OF ADVISOR. The Advisor, its officers, directors,
or employees or any of its Affiliates may engage in other business activities
related to real estate investments or act as advisor to any other person or
entity (including another real estate investment trust), including those with
investment policies similar to the Trust, and the Advisor and its officers,
directors, or employees and any of its Affiliates shall be free from any
obligation to present to the Trust any particular investment opportunity that
comes to the Advisor or such persons, regardless of whether such opportunity is
in accordance with the Trust's Business Plan. However, to minimize any possible
conflict, the Advisor shall consider the respective investment objectives of,
and the appropriateness of a particular investment to each such entity in
determining to which entity a particular investment opportunity should be
presented. If appropriate to more than one entity, the Advisor shall present the
investment opportunity to the entity that has had sufficient uninvested funds
for the longest period of time. The Advisor shall promptly inform the Trust of
each real estate acquisition made by the Advisor or any Affiliate.
18. LIMITATION ON OPERATING EXPENSES. To the extent that the operating
expenses of the Trust for any Fiscal Year exceeds the limitation set forth in
the Trust's Declaration of Trust, as amended from time to time, or any similar
limitation (if contained) in a successor Declaration of Trust or Certificate of
Incorporation, the Advisor shall refund to the Trust such portion of its fees
payable hereunder as may be required by such Section.
19. TERM; TERMINATION OF AGREEMENT. This Agreement shall continue in
force for a period of one year, and, thereafter, it may be renewed from year to
year, subject to any required approval of the Shareholders of the Trust, and if
any Trustee is an Affiliate of the Advisor, the approval of a majority of the
Trustees who are not so affiliated. Notice of renewal shall be given in writing
by the Trustees to the Advisor not less than 60 days before the expiration of
this Agreement or of any extension thereof. This Agreement may be terminated for
any reason without penalty upon 60 days' written notice by the Trust to the
Advisor or 120 days' written notice by the Advisor to the Trust, in the former
case by the vote of a majority of the Trustees who are not Affiliates of the
Advisor or by the vote of holders of a majority of the outstanding shares of the
Trust. Notwithstanding the foregoing, however, in the event of any material
change in the ownership, control or management of the Advisor, the Trust may
terminate this Agreement without penalty and without advance notice to the
Advisor.
20. AMENDMENTS. This Agreement shall not be changed, modified,
terminated or discharged in whole or in part except by an instrument in writing
signed by both parties hereto, or their respective successors or assigns, or
otherwise as provided herein.
21. ASSIGNMENT. This Agreement shall not be assigned by the Advisor
without the prior consent of the Trust. The Trust may terminate this Agreement
in the event of its assignment by the Advisor without the prior consent of the
Trust. Such an assignment or any other assignment of this Agreement by the
Advisor shall bind the assignee hereunder in the same manner as the Advisor is
bound hereunder. This Agreement shall not be assignable by the Trust without the
consent of the Advisor, except in the case of assignment by the Trust to a
corporation, association, trust, or other organization that is a successor to
the Trust. Such successor shall be bound hereunder and by the terms of said
assignment in the same manner as the Trust is bound hereunder.
22. DEFAULT, BANKRUPTCY, ETC. At the option solely of the Trustees,
this Agreement shall be and become terminated immediately upon written notice of
termination from the Trustees to the Advisor if any of the following events
shall occur:
(a) If the Advisor shall violate any provision of this Agreement,
and after notice of such violation shall not cure such default
within 30 days; or
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(b) If the Advisor shall be adjudged bankrupt or insolvent by a
court of competent jurisdiction, or an order shall be made by a
court of competent jurisdiction for the appointment of a
receiver, liquidator, or trustee of the Advisor or of all or
substantially all of its property by reason of the foregoing,
or approving any petition filed against the Advisor for its
reorganization, and such adjudication or order shall remain in
force or unstayed for a period of 30 days; or
(c) If the Advisor shall institute proceedings for voluntary
bankruptcy or shall file a petition seeking reorganization
under the Federal bankruptcy laws, or for relief under any law
for the relief of debtors, or shall consent to the appointment
of a receiver of itself or of all or substantially all its
property, or shall made a general assignment for the benefit of
its creditors, or shall admit in writing its inability to pay
its debts generally, as they become due.
The Advisor agrees that if any of the events specified in subsections
(b) and (c) of this Section 22 shall occur, it will give written notice thereof
to the Trustees within seven days after the occurrence of such event.
23. ACTION UPON TERMINATION. From and after the effective date of
termination of this Agreement, pursuant to Sections 19, 21 or 22 hereof, the
Advisor shall not be entitled to compensation for further services hereunder but
shall be paid all compensation accruing to the date of termination. The Advisor
shall forthwith upon such termination:
(a) pay over to the Trust all monies collected and held for the
account of the Trust pursuant to this Agreement;
(b) deliver to the Trustees a full accounting, including a
statement showing all payments collected by it and a statement
of any monies held by it, covering the period following the
date of the last accounting furnished to the Trustees; and
(c) deliver to the Trustees all property and documents of the Trust
then in the custody of the Advisor.
24. MISCELLANEOUS. The Advisor shall be deemed to be in a fiduciary
relationship to the shareholders of the Trust. The Advisor assumes no
responsibility under this Agreement other than to render the services called for
hereunder in good faith, and shall not be responsible for any action of the
Trustees in following or declining to follow any advise or recommendations of
the Advisor. Neither the Advisor nor any of its shareholders, directors,
officers, or employees shall be liable to the Trust, the Trustees, the holders
of securities of the Trust or to any successor or assign of the Trust for any
losses arising from the operation of the Trust if the Advisor had determined, in
good faith, that the course of conduct which caused the loss or liability was in
the best interests of the Trust and the liability or loss was not the result of
negligence or misconduct by the Advisor. However, in no event will the
directors, officers or employees of the Advisor be personally liable for any act
or failure to act unless it was the result of such person's willful misfeasance,
bad faith, gross negligence or reckless disregard of duty.
25. NOTICES. Any notice, report, or other communication required or
permitted to be given hereunder shall be in writing unless some other method of
giving such notice, report, or other communication is accepted by the party to
whom it is given, and shall be given by being delivered at the following address
of the parties hereto:
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The Trustees and/or the Trust:
Vinland Property Trust
One Turtle Creek Village
3878 Oak Loan Avenue
Suite 300
Dallas, Texas 75219
Attention: President
The Advisor:
Tarragon Realty Advisors, Inc.
280 Park Avenue, East Bldg.
20th Floor
New York, New York 10017
Attention: Executive Vice President and
Chief Financial Officer
Either party may at any time give notice in writing to the other party
of a change of its address for the purpose of this Section 25.
26. HEADINGS. The section headings hereof have been inserted for
convenience of reference only and shall not be construed to affect the meaning,
construction, or effect of this Agreement.
27. GOVERNING LAW. This Agreement has been prepared, negotiated and
executed in the State of New York. The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the State of New York
applicable to agreements made and to be performed entirely in the State of New
York.
28. EXECUTION. This instrument is executed and made on behalf of the
Trust by a Trustee of the Trust, not individually but solely as a Trustee under
the Declaration of the Trust, and the obligations under this Agreement are not
binding upon, nor shall resort be had to the private property of, any of the
Trustees, shareholders, officers, employees, or agents of the Trust personally,
but bind only the Trust property.
IN WITNESS WHEREOF, VINLAND PROPERTY TRUST AND TARRAGON REALTY
ADVISORS, INC., by their duly authorized officers, have signed these presents
all as of the day and year first above written.
VINLAND PROPERTY TRUST
BY: /S/ WILLIAM S. FRIEDMAN
--------------------------
William S. Friedman
President and Trustee
TARRAGON REALTY ADVISORS, INC.
BY: /S/ JOHN A. DOYLE
--------------------------
John A. Doyle
President
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APPENDIX II
VINLAND PROPERTY TRUST
SHARE OPTION AND INCENTIVE PLAN
(As adopted [ ], 1995)
ARTICLE I
ESTABLISHMENT, PURPOSE AND DURATION
1.01 ESTABLISHMENT OF THE PLAN. Vinland Property Trust, a
California real estate investment trust (herein called the "Trust"), hereby
establishes a share option and incentive plan to be known as the "Vinland
Property Trust Share Option and Incentive Plan" (hereinafter referred to as the
"Plan"), as set forth in this document. The Plan permits the granting of
Nonqualified Share Options, Incentive Share Options, Alternate Settlement
Rights, Restricted Shares and Share Bonuses or other incentives.
1.02 PURPOSE. The purpose of the Plan is to promote the
success, enhance the value, and advance the interests of the Trust and its
Shareholders by attempting to secure for the Trust and its Shareholders the
benefits of the incentive inherent in the ownership of the Trust's Shares by
officers, key employees, trustees, and others of or with respect to the Trust
and its Subsidiaries and by other persons who contribute to the future growth
and continued success of the Trust and its Subsidiaries. The Plan is further
intended to provide flexibility to the Trust in its ability to motivate,
attract, and retain the services of officers, key employees and trustees upon
whose judgment, interest and special effort the successful conduct of its
operation is largely dependent. It is generally recognized that incentive plans
aid in retaining and encouraging competent executives and furnish a means of
attracting executives of exception ability to the Trust and its Subsidiaries
because of the opportunity to acquire proprietary interest in the business.
1.03 EFFECTIVE DATE. The Plan shall become effective upon its
approval by the Board of Trustees of the Trust (the "Adoption Date"), subject to
ratification by an affirmative vote of the holders of a majority of votes cast
on such proposal of Shares present and entitled to vote at a meeting of
Shareholders at which a quorum is present, which vote shall represent over 50%
in interest of all voting securities of the Trust entitled to vote therein, and
the date of such approval by such Shareholders shall be determined and deemed to
be the "Effective Date," but notwithstanding the actual Effective Date as
defined herein, any and all Options or Awards granted pursuant to written
agreements entered into between the Trust and any Optionee or Grantee after the
Adoption Date and prior to the Effective Date shall be deemed to have been
ratified effective as of the date of such written Option Agreement. In the case
of Options granted prior to the Effective Date, the grant of such Options is
conditioned on Shareholder approval of the Plan. If the Plan is not approved by
the Shareholders within twelve months of its adoption by the Board of Trustees,
the Plan shall not become effective.
1.04 DURATION OF THE PLAN. Subject to approval by the Board of
Trustees and ratification by the Shareholders of the Trust, the Plan shall
commence on the Effective Date and shall remain in effect, subject to the right
of the Board of Trustees to terminate the Plan at any time pursuant to Section
8.01 herein, until all Shares then subject to it shall have been purchased or
acquired according to the Plan's provisions; provided, however,
that in no event may an Award or Option be granted under the Plan on or after
the tenth anniversary of the earlier of the date of the grant of the Option or
the Plan's Effective Date. Notwithstanding the foregoing, the terms of the Plan
may be amended in accordance with the provisions of Section 8.02.
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ARTICLE II
DEFINITIONS
2.01 DEFINED TERMS. For the purposes hereof and as used herein,
the following terms set forth below shall have the meanings set forth below
unless the context clearly indicates to the contrary:
(a) "Acceleration Event" means any event which in the opinion
of the Board of Trustees is likely to lead to a "Change in Control" of
Share ownership of the Trust, whether or not such "Change in Control"
actually occurs.
(b) "Adoption Date" shall mean the date the Plan is approved by
the Board of Trustees.
(c) "Affiliate" and "Associate" shall have the respective
meaning ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act.
(d) "Alternate Settlement Right" shall have the meaning
assigned in Section 6.05.
(e) "Award" shall mean any incentive feature granted under the
Plan including, but not limited to, any Option, warrant or alternate
settlement right, Share bonus, restricted Share grant or other
incentive, whether similar or dissimilar to the foregoing and whether
singly, in combination or tandem, or coupled with a cash or other
incentive feature.
(f) "Board" or "Board of Trustees" shall mean the Board of
Trustees of the Trust.
(g) "Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in the State of Texas are
authorized or obligated by law or executive order to close.
(h) "Change in Control" shall be deemed to occur (i) upon the
approval by the Board (or if approval of the Board is not required as a
matter of law, the Shareholders of the Trust) of (A) any consolidation
or merger of the Trust in which the Trust is not the continuing or
surviving entity or pursuant to which the Shares would be converted
into cash, securities or other property other than a merger in which
the holders of the Shares immediately prior to the merger will have the
same proportionate ownership of the Shares of the surviving entity
immediately after the merger, (B) any sale, lease, exchange, or other
transfer (in one transaction or a series of related transactions of all
or substantially all the assets of the Trust, or (C) adoption of any
plan or proposal for the liquidation or dissolution of the Trust, (ii)
when any "person" (as defined in Section 13(d) of the Exchange Act),
other than the Trust or any Subsidiary or employee benefit plan or
trust maintained by the Trust, shall become the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
or more than 20% of the Shares outstanding at the time, without the
prior approval of the Board, or (iii) at any time during a period of
two consecutive years, individuals who at the beginning of such period
constituted the Board shall cease for any reason to constitute at least
a majority thereof, unless the election or the nomination for election
by the Shareholders of each new Trustee during such two-year period was
approved by a vote of at least two-thirds of the Trustees then still in
office who were Trustees at the beginning of such two-year period.
(i) "Code" means the Internal Revenue Code of 1986, as amended.
(j) "Committee" shall mean the group of individuals designated
by the Board pursuant to Sections 3.01 and 3.02.
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(k) "Disinterested" shall mean disinterested within the meaning
of applicable regulatory requirements, including those promulgated
under Section 16 of the Exchange Act.
(l) "Effective Date" shall have the meaning assigned in Section
1.03.
(m) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
(n) "Exercise Price" shall mean, with respect to each Share
subject to (i) a Nonqualified Share Option (other than a Reload
Option), the price fixed by the Committee at which such Share may be
purchased from the Trust pursuant to the exercise of such NQSO, which
price at no time may be less than 50% of the Fair Market Value of the
Shares on the date the NQSO is granted or (ii) an Incentive Share
Option (other than a Reload Option), the price fixed by the Committee
at which such Share may be purchased from the Trust pursuant to the
exercise of such Option, which price at no time may be less than 100%
of the Fair Market Value of the Shares (110% of the Fair Market Value
of the Shares in the case of a 10% Shareholder) or the date the ISO is
granted, or (iii) a Reload Option, the price of which is as fixed
pursuant to Section 6.12 of the Plan.
(o) "Fair Market Value" shall mean (i) the simple average for
the five trading days immediately preceding the day and time such value
is to be determined (which may include the day of determination) of the
mean between the high "bid" and low "asked" trading prices of the
Shares, or if no such prices are available for the full five day
period, any prices within such time frame, as reported and/or published
by the National Association of Securities Dealers Automatic Quotation
System ("NASDAQ") or other national quotation service, or (ii) if the
Shares are listed and registered on a national securities exchange such
as the New York Stock Exchange or the American Stock Exchange, the
simple average of the highest and lowest quoted selling prices of the
Shares on such exchange as reported or published by such exchange or as
listed in the Wall Street Journal or other recognized financial
publication, for the five trading days immediately preceding the day
and time such value is to be determined (which may include the day of
determination), or, if no such sales were made during such period on
such exchange, then by such other method as the Committee, in its sole
discretion, shall determine to be appropriate, or (iii) if the Shares
are not listed and registered on any national securities exchange, the
simple average of the bid and ask prices per Share in the
over-the-counter market at the end of each trading day for the five
trading days preceding the day and time such value is to be determined
(which may include the day of determination) or, (iv) if for any reason
no such quotations are available, then by such other method as the
Committee, in its sole discretion in good faith, shall determine to be
appropriate; provided, however, in the case of grants
of ISO's, the Committee shall determine whether the foregoing
methodology yields an accurate fair market value of the Shares on the
date of the grant within the meaning of Code Section 422; and, if the
Committee concludes it does not, the Committee shall use such other
methodology as it deems appropriate to in good faith determine the fair
market value of the Shares on the date of the grant.
(p) "Grantee" shall mean a person to whom an Award has been
granted pursuant to the Plan.
(q) "Incentive Share Option" or "ISO" means an option to
purchase Shares, granted under Article VI herein, which is designated
as an Incentive Stock Option and is intended to meet the requirements
of Section 422 of the Code or any successor provision.
(r) "Insider" shall mean an individual who is, at the time an
Award is made under this Plan, an officer, Trustee, or holder of more
than 10 percent of the Shares, as defined in Section 16(a) of the
Exchange Act.
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(s) "Nonqualified Share Option" or "NQSO" means an Option to
purchase Shares, granted pursuant to this Plan which is not intended to
be, or does not qualify as, an Incentive Stock Option.
(t) "Option" shall mean an option to purchase Shares granted
pursuant to the provisions of the Plan.
(u) "Option Agreement" shall mean the agreement between the
Trust and the Optionee or Grantee under which the Optionee or Grantee
may purchase or receive or acquire Shares hereunder.
(v) "Optionee" shall mean a person to whom an Option has been
granted pursuant to the Plan.
(w) "Original Option" shall mean an option as defined in
subsection (D) of Section 6.12 of the Plan.
(x) "Period of Restriction" means the period during which the
transfer of Shares of Restricted Stock is limited in some way (based on
the passage of time, the achievement of performance goals, or upon the
occurrence of other events as determined by the Committee, at its
discretion), and the Shares are subject to a substantial risk of
forfeiture, as provided in Section 6.06.
(y) "Plan" shall mean the Vinland Property Trust Share Option
and Incentive Plan, the terms of which are set forth herein.
(z) "Reload Option" shall mean an Option granted pursuant to
Section 6.12.
(aa) "Rule 16b-3" means Rule 16b-3 promulgated by the
Securities and Exchange Commission under the Exchange Act.
(bb) "Section 16(b) Optionee" shall mean an individual who is
subject to Section 16(b) of the Exchange Act.
(cc) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(dd) "Share Payment" means a payment in Shares at a specified
value to replace all or any portion of a payment that would otherwise
be payable solely in cash.
(ee) "Shares" shall mean the Trust's authorized Shares of
Beneficial Interest, no par value, or, in the event that the
outstanding Shares are hereafter changed into or exchanged for other
shares of a different class or securities of the Trust or some other
entity, such other shares or class or securities.
(ff) "Subsidiary" shall mean an entity, in which the Trust owns
directly, or indirectly, through subsidiaries, at least 50 percent of
the total combined voting power of all classes of equity, or any other
entity (including, but not limited to, partnerships and joint ventures)
in which the Trust owns at least 50 percent of the combined equity
thereof. In the event that applicable law permits the ownership of less
than 50 percent of the total combined voting power of all classes of
equity to constitute a "Subsidiary," then the requirement of 50 percent
ownership in this definition shall be lowered to the lowest level
permitted under applicable law; provided, however, in no event shall
"Subsidiary" mean any entity which is not a "subsidiary" within the
meaning of Code Section 424(f).
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(gg) "10% Shareholder" means an individual who, at the time the
ISO is granted, owns Shares possessing more than 10% of the total
combined voting power of all classes of shares of the Trust or any
subsidiary of the Trust.
(hh) "Trust" shall mean Vinland Property Trust, a California
real estate investment trust.
2.02 OTHER DEFINITIONAL PROVISIONS. All terms defined in this
Plan shall have the meanings set forth in Section 2.01 above when used in any
Option Agreement or other document made or delivered pursuant to this Plan,
unless the context therein shall otherwise require or unless re-defined therein.
Defined terms used herein in the singular shall import the plural and vice
versa. The words "hereof," "herein," "hereunder" and similar terms when used in
this Plan shall refer to this Plan as a whole and not to any particular
provision of the Plan.
ARTICLE III
ADMINISTRATION
3.01 DUTIES AND POWERS OF THE COMMITTEE. The Plan shall be
administered by a committee designated by the Board (the "Committee"). Subject
to express provisions of the Plan, the Committee shall have plenary authority,
in its discretion, to determine the individuals to whom, and the time or times
at which, Options or Awards may or shall be granted, the types of Options or
Awards to be granted, and the number of Shares to be subject thereto. In making
such determinations, the Committee may take into account the nature of the
services rendered by the respective individuals, their present potential
contributions to the Trust's success, and such other factors as the Committee,
in its sole discretion, shall deem relevant. Subject to the express provisions
of the Plan, the Committee shall also have the complete plenary authority to
interpret the Plan, to prescribe, amend and rescind rules and regulations
relating to it, to determine and to amend, subject to the concurrence of the
holder of any Option or Award, if required, the terms and provisions of the
respective Option Agreement or any other agreement and to make all other
determinations necessary or advisable for the administration of the Plan. The
Committee's determinations on the matters referred to herein shall be conclusive
for all purposes.
3.02 THE COMMITTEE. The Committee shall consist of three or
more members, each of whom shall be a "Disinterested" person within the meaning
of that phrase set forth in Rule 16b-3 under the Exchange Act. The Committee
shall be appointed by the Board of Trustees, which may, from time to time,
appoint members of the Committee in substitution for members previously
appointed and may fill vacancies, however caused, in the Committee. No person
who is (or, within one year prior to his or her appointment as a member of the
Committee, was) eligible to participate in the Plan shall be a member of the
Committee. The Committee shall select one of its members as its chairman, and
shall hold its meetings at such times and places as it may determine. A majority
of its members shall constitute a quorum. All determinations of the Committee
shall be made by a majority of its members. Any decision or determination
reduced to writing and signed by a majority of the members shall be fully as
effective as if it had been made by a majority vote at a meeting duly called and
held. The Committee may appoint a secretary, shall keep minutes of its meetings,
and shall make such rules and regulations for the conduct of its business as it
shall deem advisable.
3.03 TRUST ASSISTANCE. The Trust shall supply full and timely
information to the Committee on all matters relating to eligible individuals,
their employment, death, retirement, disability or other termination of
employment, and such other pertinent facts as the Committee may require or
request. The Trust shall furnish the Committee with such clerical or other
assistance as is necessary in the performance of the Committee's duties.
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3.04 ABSENCE OF A COMMITTEE. In the absence of the appointment
of members of the Board to serve on the Committee, and until such time as at
least three Board members have been appointed to serve as the Committee, the
Board of Trustees of the Trust may (as a whole) perform the functions of the
Committee.
3.05 EXPENSES OF PLAN. The expenses of administering the Plan
shall be borne by the Trust and its Subsidiaries.
3.06 RELIANCE ON REPORTS. Each member of the Committee and each
member of the Board of Trustees shall be fully justified in relying or acting in
good faith upon any report made by the independent public accountants of the
Trust and its Subsidiaries and upon any other information furnished in
connection with the Plan by any person or persons other than himself. In no
event shall any person who is or shall have been a member of the Committee or of
the Board of Trustees be liable for any determination made or other action taken
or any omission to act in reliance upon any such report or information or for
any action, including the furnishing of information, taken or failure to act, if
in good faith.
3.07 INDEMNIFICATION. Each person who is or shall have been a
member of the Committee or of the Board of Trustees shall be indemnified and
held harmless by the Trust against and from any loss, cost, liability, or
expense that may be imposed upon or reasonably incurred by him in connection
with or resulting from any claim, action, suit or proceeding to which he may be
a party or in which he may be involved by reason of any action taken or failure
to act under the Plan and against and from any and all amounts paid by him in
settlement thereof, with the Trust s approval, or paid by him in satisfaction of
judgment in any such action, suit, or proceeding against him, provided
he shall give the Trust an opportunity, at its own expense, to handle and defend
the same before he undertakes to handle and defend it on his own behalf. The
foregoing right of indemnification shall not be exclusive of any other rights of
indemnification to which such person may be entitled under the Trust's
Declaration of Trust, as amended, or Trustee's Regulations, as amended, as a
matter of law, or otherwise, or any power that the Trust may have to indemnify
them or hold them harmless.
ARTICLE IV
SHARES SUBJECT TO THE PLAN
4.01 LIMITATIONS. Subject to adjustment pursuant to the
provisions of Section 4.02, a total of 500,000 authorized but unissued Shares
shall be reserved for issuance under the Plan, provided, however, that any
Shares held, from time to time, as treasury Shares may be issued or reserved for
issuance in lieu of authorized but unissued Shares, as determined from time to
time by the Board of Trustees, in which event the number of authorized but
unissued Shares so reserved shall be correspondingly reduced. Shares may be
issued pursuant to the exercise of any Option or Award. In the event any such
Option or Award shall expire or terminate for any reason without having been
exercised in full, or in the event any condition or contingency pertaining to
the issuance or vesting of any Shares under the Plan shall fail to be met, then,
subject to the provisions of the Plan, such Shares subject to such Option or
Award subject to any such condition or contingency shall again become available
for the purposes of the Plan.
4.02 ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
Notwithstanding any other provision of the Plan, any Option Agreement or other
agreement covering an Option or Award may contain such provisions as the
Committee shall determine to be appropriate for the adjustment of the number and
class of Shares subject thereto and of the purchase or acquisition prices
thereof in the event of changes in the outstanding Shares by reason of stock
dividends, recapitalizations, mergers, consolidations, split-ups, combinations
or exchanges of Shares and the like; and, in the event of any such change in the
Shares, the aggregate number and class of Shares available under the Plan shall
be adjusted in such manner as the Committee shall in its sole discretion
determine to be equitable and consistent for the purpose of the Plan and the
applicable provisions of law and such determination shall be conclusive for all
purposes of the Plan and of each Option Agreement or
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other agreement, whether theretofore or thereafter executed. In addition, the
Committee's determination with respect to any adjustment may provide for the
elimination of fractional share interests, if applicable, and the payment for
same in cash.
ARTICLE V
ELIGIBILITY
Options and Awards may be granted only to Trustees, officers or
key employees (future as well as present) of the Trust or any present or future
Subsidiary of the Trust and to other persons who the Committee determines are
making, or will make, a significant contribution to the growth and success of
the Trust and its Subsidiaries. Options and Awards may also be granted to
non-employee Trustees of the Trust. The Committee may grant Options or Awards or
both to any of those eligible in accordance with such determinations as the
Committee from time to time in its sole discretion shall make; provided,
however, no Incentive Share Option shall be granted to persons who are not
"employees" of the Trust or it subsidiaries. For purposes of this Plan,
"employees" shall include only those persons who are classified as employees
within the meaning of Code Section 422.
ARTICLE VI
OPTIONS AND AWARDS
6.01 GRANT AND AGREEMENT. Each Option or Award granted pursuant
to the terms of the Plan shall be evidenced by minutes of the meeting or the
written consent of the Committee and by a written Option Agreement or other
agreement dated as of the date of grant and executed on behalf of the Trust and
the Optionee or Grantee, as the case may be, which agreement shall set forth
such terms and conditions as may be determined by the Committee consistent with
the Plan.
6.02 CONSIDERATION FOR ISSUANCE. The Committee shall determine
the consideration to be received in connection with the issuance of Shares
pursuant to an Option and the rights granted pursuant to an Award pursuant to
the grant, exercise, lapsing of restrictions, or other attribute of any Option
or Award made under the Plan, provided, however, that with respect to an Option
such consideration per Share must equal not less than one-half (1/2) of the Fair
Market Value per Share of the Trust's Shares on the date of grant in the case of
an NQSO and not less than 100% of the Fair Market Value (110% in the case of a
10% Shareholder) on the date of the grant in the case of an ISO. Additionally,
each Optionee or Grantee must agree to use or continue to use his best lawful
efforts for the benefit of the Trust and its Subsidiaries during the term of the
Option or Award so granted. Nothing contained in this Plan or in any agreement
executed pursuant to this Plan shall be deemed to limit the right of the Trust
or any Subsidiary to terminate any Optionee's or Grantee's employment or
relationship with the Trust or any subsidiary at any time for or without cause.
Subject to the applicable provisions of law, any such consideration may take any
form, including, without limitation, cash, notes, Shares, a Share Payment or
other securities, property, or other performance of services under an employment
agreement or otherwise. Subject to the requirements of applicable law, the
Committee may authorize (but shall not be required to do so) a loan by the Trust
on such terms as it shall deem fit to any person eligible to receive an Option
or Award for the purpose of exercising any Option or Award granted under the
Plan or of otherwise acquiring any Shares issuable under the Plan, or for the
purpose of paying any taxes to the Trust due hereunder; provided, however, all
loans made to fund the exercise of an ISO must be with full recourse against the
Optionee.
6.03 TERM AND EXERCISE. The term of each Option or Award
granted under the Plan shall be fixed by the Committee. Every Incentive Stock
Option shall provide for a fixed expiration date of not later
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than ten years from the date such Incentive Stock Option is granted (5 years in
the case of a 10% Shareholder). Any ISO must be exercised not later than three
(3) months following the Optionee's termination of employment with the Trust or
any Subsidiary of the Trust; such three (3) month period is extended to one (1)
year if the Optionee is disabled within the meaning of Code Section 22(e)(3).
The Exercise Price of Shares issued pursuant to each Option (other than a Reload
Option) shall be fixed by the Committee at the time of the granting of the
Option; provided, however, that such Exercise Price of each Incentive Stock
Option shall in no event be less than 100% of the Fair Market Value (110% in the
case of a 10% Shareholder) of the Shares on the date such Option is granted. The
Shares subject to each Option or Award may become exercisable in full or in
installments of equal or unequal amount at such times as shall be determined by
the Committee. The Committee shall have the discretion to amend, at any time or
from time to time, any Option or Award granted under the Plan in order to
accelerate the exercisability thereof, or any installment or part thereof.
Unless otherwise provided in the applicable Option Agreement or other agreement,
the Shares comprising each Option or Award or installment thereof may be
purchased in whole at any time or in part from time to time, after such Option
or Award or any installment thereof, as the case may be, becomes exercisable;
provided, however, that no Option (other than a Reload Option) shall be
exercisable prior to the first anniversary of the date of its grant, except as
provided in the Option Agreement or as the Committee otherwise determines in
accordance with the Plan, and in no case may an Option be exercised at any time
for fewer than 100 Shares (or the total remaining shares covered by the Option
if fewer than 100 Shares) during the term of the Option. The specified number of
shares will be issued upon receipt by the Trust of (i) notice from the Optionee
of exercise of an Option, and (ii) either payment to the Trust, of the "Exercise
Price" for the number of Shares with respect to which the Option is exercised,
or with approval of the Committee, a secured promissory note as hereinafter
provided. Each such notice and payment shall be delivered or mailed by first
class postage prepaid mail, addressed to the Treasurer of the Trust at such
place as the Trust may designate from time to time. Separate certificates shall
be issued by the Trust for those Shares acquired pursuant to the exercise of an
ISO and for those shares acquired pursuant to a NQSO. Options or Awards granted
under the Plan may also provide for their termination upon the occurrence of
such events as the Committee shall determine and shall be incorporated in the
respective Option Agreement or other agreements, which need not be identical,
and which shall be subject to all such other conditions and restrictions as the
Committee shall approve. No Optionee or Grantee shall have any of the rights of
a Shareholder with respect to any Shares subject to any Option or Award until
such Shares shall be issued to him upon the exercise or completion of any
contingencies contained in the grant of any Option or Award.
6.04 NON-TRANSFERABILITY OF OPTIONS AND AWARDS. No Option or
Award granted under the Plan shall be transferable other than by will or the
laws of descent and distribution, and an Option or Award may be exercised,
during the lifetime of the Optionee or Grantee, only by the Optionee or Grantee
or, if the Optionee or Grantee is legally incapacitated, by his or her
respective guardian or legal representative, regardless of any community
property interests therein of any Optionee's or Grantee's spouse or such
spouse's successors in interest; provided, however, that in the
event Rule 16b-3 under the Exchange Act is further amended so as to eliminate
therefrom the holding period requirement of nontransferability, then Options or
Awards granted under the Plan may be made transferable on such terms as the
Committee shall determine, consistent with the requirements of Code Section 422
in the case of Incentive Share Options.
6.05 ALTERNATE SETTLEMENT RIGHTS. The Committee may, in its
sole discretion, grant an "Alternate Settlement Right" in respect of any Options
or Awards heretofore or hereafter granted under the Plan. An "Alternate
Settlement Right" shall be subject to such terms and conditions and evidenced by
Option Agreements or other agreements in such form as shall be determined from
time to time by the Committee, and shall in any event by subject to the
following provisions:
(a) NATURE OF ALTERNATE SETTLEMENT RIGHT. An Alternate
Settlement Right shall entitle an Optionee or Grantee to receive from
the Trust, in exchange for the surrender of any Option or Award or any
portion thereof which is exercisable on the date of exercise of such
Alternate Settlement Right, Shares, cash, or a combination thereof,
having an aggregate Fair Market Value which is equal to the excess of
the Fair Market Value as of the date of exercise of one Share over the
purchase or acquisition
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price of one such Share specified in such Option or Award multiplied by
the number of Shares covered by such Option or Award or portion thereof
which is so surrendered.
(b) EXERCISE. The exercise of an Alternate Settlement Right
shall be subject to all of the terms and conditions (other than payment
of the applicable Option or Award price) applicable to the exercise of
an Option or Award granted under the Plan in addition to such other
terms and conditions as may be imposed by the Committee or required by
applicable law.
Upon the exercise of an Alternate Settlement Right, the number of Shares
reserved for issuance under the Plan shall be reduced by the number of Shares,
if any, received by the Optionee or Grantee upon surrender of the Option or
Award in respect of which such Shares were issued.
6.06 RESTRICTED SHARES, SHARE BONUS, ETC. The Committee may
authorize the issuance of Shares pursuant to an Option (other than an ISO) or
Award to those persons eligible for purchase at a discount or without requiring
any payment therefor and upon such conditions or subject to such restrictions,
if any, as shall be determined by the Committee. All such conditions or
restrictions shall be evidenced by written agreement between the Trust and the
holder of such Shares in form approved by the Committee.
6.07 PURCHASE FOR INVESTMENT. Each Optionee and Grantee
receiving an Option or Award pursuant to the Plan must represent, and agree to
give such further representation as may be reasonably required by the Trust upon
the exercise of such Option or Award or any part thereof, that any Shares
purchased pursuant to such Option or Award will be, or are, acquired for his own
account for investment and not with a view to, or for offer or sale in
connection with, the distribution thereof, unless in the opinion of counsel
satisfactory to the Trust that same is not necessary at such time.
6.08 PURCHASE OF OPTION OR AWARD BY THE TRUST. To the extent
the Committee shall determine that it is desirable and in the best interests of
the Trust, the Committee may grant Options or Awards providing that the Trust
shall purchase for cash, at the election of the applicable Optionee or Grantee,
all or a portion of the Shares previously issued to such Optionee or Grantee
pursuant to an Option or Award at a price not exceeding the Fair Market Value of
the Shares utilizing the date of such purchase in place of the date of exercise
of such Option or Award. In the event of any such purchase, such Shares shall
again become available for the grant of Options or Awards under the Plan. The
Trust shall have no obligation to purchase Shares pursuant to any such Options
or Awards (and the agreements relating thereto shall so state) if (a) the
capital of the Trust would become impaired thereby in the opinion of the
Committee, or (b) in the opinion of counsel for the Trust, such purchase would
at the time be a violation of any law or any rule or regulation thereunder or
the Declaration of Trust, as amended of the Trust, or any agreement to which the
Trust or any Subsidiary is a party.
6.09 EFFECT OF DEATH OR OTHER TERMINATION OF RELATIONSHIP WITH
THE TRUST. Unless otherwise approved by the Committee at the time of granting
any Option or Award and specifying same in the particular Option Agreement or
other agreement, subject to the other provisions of the Plan, in the event that
an Optionee or Grantee:
(a) has his relationship with the Trust or any Subsidiary
terminated for any reason other than death (including discharge by the
Trust) an Option or Award granted pursuant to the terms of the Plan, to
the extent not exercised or exercisable at the time of such termination
in accordance with its terms, shall terminate and be without further
force or effect.
(b) dies during the term of such Option or Award, such Option
or Award, to the extent not exercisable in accordance with its terms,
shall terminate and be without further force or effect and to the
extent such Option or Award is exercisable on the date of death, it
may, within six months after the date of death be exercised by such
Optionee's or Grantee's legal representatives or by the person
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or persons to whom such Option or Award has been transferred by will or
the applicable laws of descent and distribution; provided, however,
that such six-month period shall be subject to the provisions of the
particular Option Agreement or other agreement with respect to the
final expiration of such Option or Award and such Option or Award, to
the extent not exercised within said six-month period (or such shorter
period as may be required by the terms of such Option Agreement or
other agreement) shall in all events terminate upon the expiration of
such six-month period (or such shorter period); and provided further,
that no transfer of an Option or Award by the Optionee or Grantee by
will or by the laws of descent and distribution shall be effective to
bind the Trust unless the Trust shall have been furnished with written
notice thereof and an authenticated copy of the will and/or such other
evidence as the Committee may deem necessary to establish the validity
of the transfer and the acceptance by the transferee or transferees of
the terms and conditions of such Option or Award.
6.10 OPTIONS LIMITATION AS TO VALUE. The aggregate Fair Market
Value, determined as of the time any Option is granted under this Plan which is
intended to qualify as an "Incentive Stock Option" (herein an "Incentive Share
Option" or "ISO") under Section 422 of the Code, of the Shares for which any
"individual" may be granted an Incentive Stock Option pursuant to the terms of
the Plan in any calendar year under all such plans of the Trust and its
Subsidiaries, shall not exceed $100,000.
6.11 PAYMENT FOR SHARES. Except as otherwise provided in the
Plan or the Option Agreement, the Exercise Price for the Shares shall be paid in
full when the Option is exercised. Subject to such rules as the Committee may
impose, the Exercise Price may be paid in whole or in part in (i) cash, (ii)
whole Shares owned by the individual six months or longer and evidenced by
negotiable certificates, valued at their Fair Market Value on the date of
exercise, (iii) by a combination of such methods of payment or (iv) such other
consideration as shall constitute lawful consideration for the issuance of
Shares and be approved by the Committee (including without limitation, assurance
satisfactory to the Committee from a broker registered under the Exchange Act,
of the delivery of the proceeds of an imminent sale of the Shares to be issued
pursuant to the exercise of such option, such sale to be made at the direction
of the individual). If certificates representing Shares are used to pay all or
part of the Exercise Price of an Option, separate certificates shall be
delivered by the Trust representing the same number of Shares as each
certificate so used and an additional certificate shall be delivered
representing any additional Shares to which the individual is entitled as a
result of exercise of the Option. Moreover, if so provided in the Option
Agreement, and subject to such restrictions, terms and conditions as the
Committee may impose, an individual may request the Trust to "pyramid" his or
her shares; that is, to automatically apply the Shares which he or she is
entitled to receive on the exercise of a portion of an Option to satisfy the
exercise for additional portions of the Option, thus resulting in multiple
simultaneous exercises of an Option by use of whole Shares as payment. However,
in the case of an ISO, such pyramiding may result in a disqualifying disposition
under Code Section 424. The Committee may, in its discretion, authorize payment
of all or any part of the Exercise Price over a period of not more than five
years from the date the Option is exercised. In such instance any unpaid balance
of the Exercise Price shall be evidenced by the individual's full recourse
promissory note payable to the order of the Trust which shall be secured by such
collateral and shall bear interest at such rate or rates as determined from time
to time by the Committee.
6.12 RELOAD OPTIONS. The Committee shall have the authority
(but shall not be obligated or required) to specify at the time of grant that an
individual shall be granted another Option (a "Reload Option") in the event such
individual exercises all or part of an Option (an "Original Option") by
surrendering in accordance with Section 6.11 above already owned Shares in full
or partial payment of the Exercise Price under such Original Option, subject to
the availability of Shares under the Plan at the time of exercise. Each Reload
Option shall cover a number of Shares equal to the number of Shares surrendered
in payment of the Exercise Price, shall have an Exercise Price per Share equal
to the Fair Market Value of the Shares (110% of the Fair Market Value in the
case of a 10% Shareholder) on the date of grant of such Reload Option and shall
expire on the stated expiration date of the Original Option. A Reload Option
shall be exercisable at any time and from time to time from and after the date
of grant of such Reload Option (or, as the Committee, in its sole discretion,
shall determine at the time of grant, at such time or times as shall be
specified in the Reload Option);
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provided, however, that a Reload Option granted to a Section 16(b) Optionee
shall not be exercisable during the first six months from the date of grant of
such Reload Option. The first such Reload Option may provide for the grant, when
exercised, of one subsequent Reload Option to the extent and upon such terms and
conditions, consistent with this Section 6.12 as the Committee, in its sole
discretion, shall specify at or after the time of grant of such Reload Option. A
Reload Option shall contain such other terms and conditions which may include a
restriction on the transferability of the number of Shares received upon
exercise of the Original Option reduced by a number of shares equal in value to
the tax liability incurred upon exercise as the Committee, in its sole
discretion, may deem desirable which may be set forth in the Agreement
evidencing the Reload Option. The Committee may, in its sole discretion,
structure any Reload Option as an ISO by complying with the provisions of Code
Section Section 421, 422 and 424.
ARTICLE VII
COMPLIANCE WITH LAW AND ISSUANCE
OF CERTIFICATES OR PAYMENT OF FUNDS
7.01 COMPLIANCE WITH THE SECURITIES ACT. Each Option or Award
granted under the Plan shall contain such provisions or undertakings by the
Optionee or Grantee pertaining to the re-sale or distribution of any Shares
acquired pursuant to such Award or Option as the Trust shall deem appropriate
and necessary to comply with the Securities Act, and the rules, regulations and
administrative interpretations thereunder; provided that the Trust may
waive any such provisions or undertakings if the Trust shall determine that same
are no longer required under said Securities Act, rules, regulations or
interpretations, or are otherwise unnecessary.
7.02 GOVERNMENTAL APPROVAL. Each Option or Award shall be
subject to the requirement that if at any time the Board of Trustees shall
determine, in its sole discretion, that the listing, registration or
qualification of the Shares covered thereby upon any securities exchange or
under any state or federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of or in connection
with the granting of such Option or Award or the issuance or acquisition of
Shares thereunder, no such Award or Option shall be effective unless and until
such listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Board of
Trustees.
7.03 ISSUANCE OF CERTIFICATES AND PAYMENT OF FUNDS. The Trust
shall not be required to issue or deliver any certificate for Shares to be
purchased or issued, or any funds required to be paid by the Trust upon the
exercise of any Option or Award granted under the Plan or any portion thereof,
pursuant to any Option Agreement or any other agreement relating to the Plan
prior to the fulfillment of all of the following conditions:
(a) compliance with any requirements under Section 7.01 above;
(b) compliance with any applicable requirements under Section
7.02 above;
(c) the lapse of such reasonable period of time following the
exercise of the Option or Award as the Committee, from time to time,
may establish for reasons of administrative convenience; and
(d) if pursuant to any applicable statute or regulation, as
then in effect, if such issuance or delivery would be in violation of
any statute, law, rule or regulation, whether federal or state.
7.04 TAX WITHHOLDING. The Trust or a Subsidiary, as
appropriate, shall have the right to deduct from all cash payments to be made to
any Optionee or Grantee any federal, state or local taxes required
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by law to be withheld with respect to such cash payments and, in the case of any
Alternate Settlement Right redeemed in Shares, the Optionee or Grantee receiving
such Shares may be required to pay to the Trust or a Subsidiary, as appropriate,
the amount of any such taxes which the Trust or Subsidiary is required to
withhold with respect to such Shares. In the event the cash portion of any
Alternate Settlement Right is insufficient to cover the required withholding,
the Optionee or Grantee may be required to pay to the Trust the amount of such
taxes.
7.05 SHARE WITHHOLDING. Whenever the Trust or Subsidiary, as
appropriate, proposes or is required to issue or transfer Shares under the Plan,
the Trust or Subsidiary shall have the right to require the Grantee to remit to
the Trust an amount sufficient to satisfy any Federal, State or local
withholding tax requirements prior to the delivery of any certificate for such
Shares. Alternatively, with respect to withholding required upon the exercise of
Options, upon the lapse of restrictions on Restricted Shares, or upon any other
taxable event hereunder, individuals may elect, subject to the approval of the
Committee, to satisfy the withholding requirement, in whole or in part, by
having the Trust withhold Shares having a Fair Market Value, on the date the tax
is to be determined, equal to the minimum marginal tax which could be imposed on
the transaction. Share withholding upon the exercise of an Option will be done
if the individual makes a signed, written election and one of the following
occurs:
(a) The Option exercise occurs during a "window period" and the
election to use Share withholding is made at any time prior to
exercise. For this purpose, "window period" means the period beginning
on the third (3rd) Business Day following the date of public release of
the Trust's quarterly financial information and ending on the twelfth
(12th) Business Day following such date. An earlier election can be
revoked up until the exercise of the Option during the window period;
or
(b) An election to withhold Shares is made at least six months
before the Option is exercised. If this election is made, then the
Option can be exercised outside of the window period.
Share withholding upon the vesting of Restricted Shares will be done if the
individual makes a signed, written election and one of the following occurs:
(a) The election occurs during a window period, and the
Restricted Share Award is subject to vesting according to a fixed
schedule established by the Committee at the time of grant; or
(b) An election to use Share withholding is made at least six
(6) months before vesting occurs.
ARTICLE VIII
TERMINATION, AMENDMENT AND
MODIFICATION OF THE PLAN
8.01 TERMINATION OF PLAN. The Plan may be terminated at any
time by the Board of Trustees except with respect to Options or Awards then
outstanding under the Plan for which there exist written Option Agreements or
other written agreements relating to each such Option or Award. No termination
of the Plan may, without the consent of the person to whom any Option or Award
shall theretofore been granted, adversely affect the rights of such person under
such Option or Award.
8.02 AMENDMENT. The Board of Trustees may, at any time and from
time to time, alter, amend, suspend or discontinue the Plan and the rules for
its administration; provided, however, that the Board of Trustees may not,
without further approval by a majority of votes cast on such proposal provided
the total votes cast thereon represents over 50% in interest of the holders of
the then outstanding voting securities of the
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Trust entitled to vote thereon, (i) increase (other than by adjustments provided
for by Section 4.02) the maximum number of Shares which may be issued pursuant
to all Options or Awards granted under the Plan, or (ii) change the class of
employees eligible to receive ISO's and, provided further, that no such
amendment or modification of the Plan may, without the consent of the person to
whom any Option or Award shall theretofore have been granted, adversely affect
the rights of such person under such Option or Award.
8.03 AMENDMENT OF PRIOR AND OTHER OPTIONS. In addition to
administering the Plan, the Committee may, in its discretion with the consent of
each such person affected, amend any or all Options to purchase the Shares which
are outstanding on the date of the vote of the Trust's Shareholders approving
the Plan, to the extent not exercised at the time of any such amendment, so as
to add, modify, or delete any provision thereof which would have been
permissible to so add, modify, or delete, if such Option had been granted under
the Plan as now in effect.
8.04 CHANGE IN CONTROL. In the event of a Change in Control of
the Trust all Awards, Alternate Settlement Rights and Options granted under this
Plan that are still outstanding and not yet exercisable shall become immediately
exercisable as of the date of the Change in Control and shall remain exercisable
for their term. Further, all restrictions placed on Restricted Share Awards
shall lapse in the event of a Change in Control. The Board has final authority
to determine the exact date on which a Change in Control has been deemed to have
occurred. Notwithstanding the foregoing, the Board may deem that an Acceleration
Event has occurred, specifying the date thereof, which determination, if made,
shall have the same effect as a Change in Control.
ARTICLE IX
MISCELLANEOUS
9.01 CLAIM TO OPTION OR AWARD, OWNERSHIP, OR EMPLOYMENT RIGHTS.
No person shall have any claim or right to be granted any Option or Award under
this Plan. No Optionee or Grantee, prior to the issuance of Shares, shall be
entitled to voting rights, dividends or other rights of Shareholders with
respect to any Shares covered by such Option or Award. Neither this Plan nor any
action taken hereunder shall be construed as giving any person any right to be
retained in the employ of or otherwise by the Trust or a Subsidiary or an
Affiliate or Associate.
9.02 UNSECURED OBLIGATION. Optionees and Grantees under this
Plan shall not have any interest in any fund or specific asset of the Trust by
reason of this Plan. No trust fund shall be created in connection with this Plan
or any Option or Award thereunder and there shall be no required funding of
amounts which may become payable to any Optionee or Grantee.
9.03 OTHER COMPENSATION PLANS. The adoption of the Plan shall
not affect any other Option or incentive or other compensation plans, practices
or arrangements in effect for the Trust or any Subsidiary, nor shall the Plan
preclude the Trust from establishing any other forms of incentive or other
compensation for employees of or persons retained by the Trust or any
Subsidiary.
9.04 PLAN BINDING ON SUCCESSORS. The Plan shall be binding upon
the successors and assigns of the Trust.
9.05 REQUIREMENTS OF LAW. The granting of Awards and Options
and the issuance of Shares under the Plan shall be subject to all applicable
laws, rules, and regulations, and to such approvals by any governmental agencies
or national securities exchanges as may be required.
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9.06 GOVERNING LAW. To the extent not preempted by laws of the
United States of America, the Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of Texas.
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APPENDIX III
VINLAND PROPERTY TRUST
INDEPENDENT TRUSTEE SHARE OPTION PLAN
(As adopted [ ], 1995)
ARTICLE I
ESTABLISHMENT, PURPOSE AND DURATION
1.01 ESTABLISHMENT OF THE PLAN. Vinland Property Trust, a
California real estate investment trust (herein called the "Trust"), hereby
establishes a share option plan to be known as the "Vinland Property Trust
Independent Trustee Share Option Plan" (hereinafter referred to as the "Plan"),
as set forth in this document. The Plan permits the granting of Nondiscretionary
Options or other incentives.
1.02 PURPOSE. The purpose of the Plan is to foster and promote
the long term financial success, enhance the value, and advance the interests of
the Trust and its Shareholders by attracting and retaining outstanding
nonemployee Trustees for the Trust and its Shareholders by enabling them to
participate in the Trust's growth through automatic, nondiscretionary awards of
Options. It is generally recognized that incentive plans aid in retaining and
encouraging competent executives and furnish a means of attracting executives of
exception ability to the Trust and its Subsidiaries because of the opportunity
to acquire proprietary interest in the business.
1.03 PARTICIPATION. Only Trustees of the Trust who, at the time
an Option is granted, meet the following criteria shall receive Options under
the Plan. A Trustee must be an "Independent" Trustee (which means that the
Trustee is neither an officer or employee of the Trust nor a trustee, director,
officer or employee of the Advisor, but the Trust may have certain business or
professional relationships with such Trustee) and such Trustee is not, and has
not been for at least one year, an employee or officer of the Trust or any
Subsidiary and the Trustee is a "disinterested" person, as such term is defined
in Rule 16b-3 promulgated under the "Exchange Act" or any similar rule which
may subsequently be in effect.
1.04 EFFECTIVE DATE. The Plan shall become effective upon its
approval by the Board of Trustees of the Trust (the "Adoption Date"), subject to
ratification by an affirmative vote of the holders of a majority of votes cast
on such proposal of Shares present and entitled to vote at a meeting of
Shareholders at which a quorum is present, which vote shall represent over 50%
in interest of all voting securities of the Trust entitled to vote therein, and
the date of such approval by such Shareholders shall be determined and deemed to
be the "Effective Date," but notwithstanding the actual Effective Date as
defined herein, any and all Options granted pursuant to written agreements
entered into between the Trust and any Optionee after the Adoption Date and
prior to the Effective Date shall be deemed to have been ratified effective as
of the date of such written Option Agreement. In the case of Options granted
prior to the Effective Date, the grant of such Options is conditioned upon
Shareholder approval of the Plan. If the Plan is not approved by the
Shareholders within twelve months of its adoption by the Board of Trustees, the
Plan shall not become effective.
1.05 DURATION OF THE PLAN. Subject to approval by the Board of
Trustees and ratification by the Shareholders of the Trust, the Plan shall
commence on the Effective Date and shall remain in effect, subject to the right
of the Board of Trustees to terminate the Plan at any time pursuant to Section
8.01 herein, until all Shares then subject to it shall have been purchased or
acquired according to the Plan's provisions;
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provided, however, that in no event may an Option be granted under the Plan on
or after the tenth anniversary of earlier of the date of the grant of the Option
or the Plan's Effective Date. Notwithstanding the foregoing, the terms of the
Plan may be amended in accordance with the provisions of Section 8.02.
ARTICLE II
DEFINITIONS
2.01 DEFINED TERMS. For the purposes hereof and as used herein,
the following terms set forth below shall have the meanings set forth below
unless the context clearly indicates to the contrary:
(a) "Acceleration Event" means any event which in the opinion
of the Board of Trustees is likely to lead to a "Change in Control" of
Share ownership of the Trust, whether or not such "Change in Control"
actually occurs.
(b) "Adoption Date" shall mean the date the Plan is approved by
the Board of Trustees.
(c) "Affiliate" and "Associate" shall have the respective
meaning ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act.
(d) "Board" or "Board of Trustees" shall mean the Board of
Trustees of the Trust.
(e) "Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in the State of Texas are
authorized or obligated by law or executive order to close.
(f) "Change in Control" shall be deemed to occur (i) upon the
approval by the Board (or if approval of the Board is not required as a
matter of law, the Shareholders of the Trust) of (A) any consolidation
or merger of the Trust in which the Trust is not the continuing or
surviving entity or pursuant to which the Shares would be converted
into cash, securities or other property other than a merger in which
the holders of the Shares immediately prior to the merger will have the
same proportionate ownership of the Shares of the surviving entity
immediately after the merger, (B) any sale, lease, exchange, or other
transfer (in one transaction or a series of related transactions of all
or substantially all the assets of the Trust, or (C) adoption of any
plan or proposal for the liquidation or dissolution of the Trust, (ii)
when any "person" (as defined in Section 13(d) of the Exchange Act),
other than the Trust or any Subsidiary or employee benefit plan or
trust maintained by the Trust, shall become the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
or more than 20% of the Shares outstanding at the time, without the
prior approval of the Board, or (iii) at any time during a period of
two consecutive years, individuals who at the beginning of such period
constituted the Board shall cease for any reason to constitute at least
a majority thereof, unless the election or the nomination for election
by the Shareholders of each new Trustee during such two-year period was
approved by a vote of at least two-thirds of the Trustees then still in
office who were Trustees at the beginning of such two-year period.
(g) "Code" means the Internal Revenue Code of 1986, as amended.
(h) "Disinterested" shall mean disinterested within the meaning
of applicable regulatory requirements, including those promulgated
under Section 16 of the Exchange Act.
(i) "Effective Date" shall have the meaning assigned in Section
1.03 of the Plan.
(j) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
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(k) "Exercise Price" shall mean, with respect to each Share
subject to a Nonqualified Share Option, the price at which such Share
may be purchased from the Trust pursuant to the exercise of such NQSO.
(l) "Fair Market Value" shall mean (i) the simple average for
the five trading days immediately preceding the day and time such value
is to be determined (which may include the day of determination) of the
mean between the high "bid" and low "asked" trading prices of the
Shares, or if no such prices are available for the full five day
period, any prices within such time frame, as reported and/or published
by the National Association of Securities Dealers Automatic Quotation
System ("NASDAQ") or other national quotation service, or (ii) if the
Shares are listed and registered on a national securities exchange such
as the New York Stock Exchange or the American Stock Exchange, the
simple average of the highest and lowest quoted selling prices of the
Shares on such exchange as reported or published by such exchange or as
listed in the Wall Street Journal or other recognized financial
publication, for the five trading days immediately preceding the day
and time such value is to be determined (which may include the day of
determination), or, if no such sales were made during such period on
such exchange, then by such other method as the Board, in its sole
discretion, shall determine to be appropriate, or (iii) if the Shares
are not listed and registered on any national securities exchange, the
simple average of the bid and ask prices per Share in the
over-the-counter market at the end of each trading day for the five
trading days preceding the day and time such value is to be determined
(which may include the day of determination) or, (iv) if for any reason
no such quotations are available, then by such other method as the
Board, in its sole discretion in good faith, shall determine to be
appropriate; provided, however, in the case of all grants of Options
the Committee shall determine whether the foregoing methodology yields
an accurate fair market value of the Shares on the date of the grant
within the meaning of Code Section 422; and, if the Committee concludes
it does not, the Committee shall use such other methodology as it deems
appropriate to in good faith determine the fair market value of the
Shares on the date of the grant.
(m) "Incentive Share Option" or "ISO" means an option to
purchase Shares (which are not available for grant under Article VI
herein) which is designated as an Incentive Stock Option and is
intended to meet the requirements of Section 422 of the Code or any
successor provision.
(n) "Independent Trustee" shall have the meaning assigned in
Section 1.03 of the Plan.
(o) "Insider" shall mean an individual who is, at the time an
Award is made under this Plan, an officer, Trustee, or holder of more
than 10 percent of the Shares, as defined in Section 16(a) of the
Exchange Act.
(p) "Nonqualified Share Option" or "NQSO" means an Option to
purchase Shares, granted pursuant to this Plan which is not intended to
be, or does not qualify as, an Incentive Stock Option.
(q) "Option" shall mean an option to purchase Shares granted
pursuant to the provisions of the Plan.
(r) "Option Agreement" shall mean the agreement between the
Trust and the Optionee under which the Optionee may purchase or receive
or acquire Shares hereunder.
(s) "Optionee" shall mean a person to whom an Option has been
granted pursuant to the Plan.
(t) "Plan" shall mean the Vinland Property Trust Independent
Trustee Share Option Plan, the terms of which are set forth herein.
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(u) "Rule 16b-3" means Rule 16b-3 promulgated by the Securities
and Exchange Commission under the Exchange Act.
(v) "Section 16(b) Optionee" shall mean an individual who is
subject to Section 16(b) of the Exchange Act.
(w) "Securities Act" shall mean the Securities Act of 1933, as
amended.
(x) "Share Payment" means a payment in Shares at a specified
value to replace all or any portion of a payment that would otherwise
be payable solely in cash.
(y) "Shares" shall mean the Trust's authorized Shares of
Beneficial Interest, no par value, or, in the event that the
outstanding Shares are hereafter changed into or exchanged for other
shares of a different class or securities of the Trust or some other
entity, such other shares or class or securities.
(z) "Subsidiary" shall mean an entity, in which the Trust owns
directly, or indirectly, through subsidiaries, at least 50 percent of
the total combined voting power of all classes of equity, or any other
entity (including, but not limited to, partnerships and joint ventures)
in which the Trust owns at least 50 percent of the combined equity
thereof. In the event that applicable law permits the ownership of less
than 50 percent of the total combined voting power of all classes of
equity to constitute a "Subsidiary," then the requirement of 50 percent
ownership in this definition shall be lowered to the lowest level
permitted under applicable law; provided, however, in no event shall
"Subsidiary" mean any entity which is not a "subsidiary" within the
meaning of Code Section 424(f).
(aa) "10% Shareholder" means an individual who, at the time the
Option is granted, owns Shares possessing more than 10% of the total
combined voting power of all classes of Shares of the Trust or any
subsidiary of the Trust.
(bb) "Trust" shall mean Vinland Property Trust, a California
real estate investment trust.
2.02 OTHER DEFINITIONAL PROVISIONS. All terms defined in this
Plan shall have the meanings set forth in Section 2.01 above when used in any
Option Agreement or other document made or delivered pursuant to this Plan,
unless the context therein shall otherwise require or unless re-defined therein.
Defined terms used herein in the singular shall import the plural and vice
versa. The words "hereof," "herein," "hereunder" and similar terms when used in
this Plan shall refer to this Plan as a whole and not to any particular
provision of the Plan.
ARTICLE III
ADMINISTRATION
3.01 DUTIES AND POWERS OF THE BOARD. The Plan shall be
administered by the Board. Subject to express provisions of the Plan, the Board
shall have plenary authority, in its discretion, to interpret all matters
involving the Plan, to prescribe, amend and rescind rules and regulations
relating to it, to determine and to amend, subject to the concurrence of the
holder of any Option, if required, the terms and provisions of the respective
Option Agreement or any other agreement and to make all other determinations
necessary or advisable for the administration of the Plan. The Board's
determinations on the matters referred to herein shall be conclusive for all
purposes.
3.02 EXPENSES OF PLAN. The expenses of administering the Plan
shall be borne by the Trust and its Subsidiaries.
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3.03 RELIANCE ON REPORTS. Each member of the Board of Trustees
shall be fully justified in relying or acting in good faith upon any report made
by the independent public accountants of the Trust and its Subsidiaries and upon
any other information furnished in connection with the Plan by any person or
persons other than himself. In no event shall any person who is or shall have
been a member of the Board of Trustees be liable for any determination made or
other action taken or any omission to act in reliance upon any such report or
information or for any action, including the furnishing of information, taken or
failure to act, if in good faith.
3.04 INDEMNIFICATION. Each person who is or shall have been a
member of the Board of Trustees shall be indemnified and held harmless by the
Trust against and from any loss, cost, liability, or expense that may be imposed
upon or reasonably incurred by him in connection with or resulting from any
claim, action, suit or proceeding to which he may be a party or in which he may
be involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by him in settlement thereof, with the
Trust s approval, or paid by him in satisfaction of judgment in any such action,
suit, or proceeding against him, provided he shall give the Trust an
opportunity, at its own expense, to handle and defend the same before he
undertakes to handle and defend it on his own behalf. The foregoing right of
indemnification shall not be exclusive of any other rights of indemnification to
which such person may be entitled under the Trust's Declaration of Trust, as
amended, or Trustee's Regulations, as amended, as a matter of law, or otherwise,
or any power that the Trust may have to indemnify them or hold them harmless.
ARTICLE IV
SHARES SUBJECT TO THE PLAN
4.01 LIMITATIONS. Subject to adjustment pursuant to the
provisions of Section 4.02, a total of 300,000 authorized but unissued Shares
shall be reserved for issuance under the Plan, provided, however, that any
Shares held, from time to time, as treasury Shares may be issued or reserved for
issuance in lieu of authorized but unissued Shares, as determined from time to
time by the Board of Trustees, in which event the number of authorized but
unissued Shares so reserved shall be correspondingly reduced. Shares may be
issued pursuant to the exercise of any Option. In the event any such Option
shall expire or terminate for any reason without having been exercised in full,
or in the event any condition or contingency pertaining to the issuance or
vesting of any Shares under the Plan shall fail to be met, then, subject to the
provisions of the Plan, such Shares subject to such Option subject to any such
condition or contingency shall again become available for the purposes of the
Plan.
4.02 ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
Notwithstanding any other provision of the Plan, any Option Agreement or other
agreement covering an Option may contain such provisions as the Board shall
determine to be appropriate for the adjustment of the number and class of Shares
subject thereto and of the purchase or acquisition prices thereof in the event
of changes in the outstanding Shares by reason of stock dividends,
recapitalizations, mergers, consolidations, split-ups, combinations or exchanges
of Shares and the like; and, in the event of any such change in the Shares, the
aggregate number and class of Shares available under the Plan shall be adjusted
in such manner as the Board shall in its sole discretion determine to be
equitable and consistent for the purpose of the Plan and the applicable
provisions of law and such determination shall be conclusive for all purposes of
the Plan and of each Option Agreement or other agreement, whether theretofore or
thereafter executed. In addition, the Board's determination with respect to any
adjustment may provide for the elimination of fractional share interests, if
applicable, and the payment for same in cash.
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ARTICLE V
ELIGIBILITY
Eligibility in this Plan shall be limited to members of the
Board of Trustees of the Trust or an Affiliate of the Trust who, at the time the
Option is made, is not an employee or officer of the Trust or an Affiliate of
the Trust.
ARTICLE VI
GRANT OF OPTIONS
6.01 GRANT AND AGREEMENT. Each Option granted pursuant to the
terms of the Plan shall be evidenced by minutes of the meeting or the written
consent of the Board and by a written Option Agreement or other agreement dated
as of the date of grant and executed on behalf of the Trust and the Optionee, as
the case may be, which agreement shall set forth such terms and conditions as
may be determined by the Board consistent with the Plan.
6.02 ISSUANCE OF OPTION. Effective on the Effective Date (as
that term is defined in Section 1.04 as being the date of the meeting of the
Shareholders at which the Plan is ratified and approved), each Independent
Trustee then in office will automatically be awarded an Option under the Plan to
purchase 3,000 Shares (subject to adjustment pursuant to Section 4.02). None of
the Options are intended to qualify as "Incentive Share Options" pursuant to
Section 422[b] of the Code. After the Effective Date, each Independent Trustee
shall also be granted an Option on the first day of each fiscal year of the
Trust commencing with December 1, 1995 for 1,500 Shares (subject to adjustment
pursuant to Section 4.02) if such Independent Trustee is a Trustee of the Trust
on such date. A former Trustee who is not a Trustee at such date shall not
receive a grant of any subsequent Option. The term and exercise of each such
Option shall be as set forth in Section 6.03 below. Nothing contained in this
Plan or any agreement executed pursuant to this Plan shall be deemed to limit or
confer upon any Trustee any right to serve as a Trustee for any period of time
or to continue at any rate of compensation.
6.03 TERM AND EXERCISE. The term of each Option granted under
the Plan shall be for a fixed expiration date of the first to occur of (i) not
later than ten years from the date such Option is granted or (ii) the first
anniversary of the date the Trustee ceases to be a Trustee, provided,
that to the extent required to comply with Rule 16b-3, no Option shall be
exercisable within the first six months of its term, unless death or disability
of the Trustee occurs during such period. The Exercise Price of Shares issued
pursuant to each Option shall be 100% of the Fair Market Value of the Shares on
the date such Option is granted. The Shares subject to each Option may become
exercisable in full or in installments of equal or unequal amount at such times
as shall be determined by the Optionee. The Shares comprising each Option or
installment thereof may be purchased in whole at any time or in part from time
to time, after such Option or any installment thereof, as the case may be,
becomes exercisable; provided, however, that no Option shall be
exercised at any time for fewer than 100 Shares (or the total remaining shares
covered by the Option if fewer than 100 Shares) during the term of the Option.
The specified number of shares will be issued upon receipt by the Trust of (i)
notice from the Optionee of exercise of an Option, and (ii) either payment to
the Trust, of the "Exercise Price" for the number of Shares with respect to
which the Option is exercised, or with approval of the Board, a secured
promissory note as hereinafter provided. Each such notice and payment shall be
delivered or mailed by first class postage prepaid mail, addressed to the
Treasurer of the Trust at such place as the Trust may designate from time to
time. Certificates shall be issued by the Trust for those Shares acquired
pursuant to the exercise of an Option. No Optionee shall have any of the rights
of a Shareholder with respect to any Shares subject to any Option until such
Shares shall be issued to him upon the exercise of the Option.
6.04 NON-TRANSFERABILITY OF OPTIONS. No Option granted under
the Plan shall be transferable other than by will or the laws of descent and
distribution, and an Option may be exercised, during the lifetime
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of the Optionee, only by the Optionee or, if the Optionee is legally
incapacitated, by his or her respective guardian or legal representative,
regardless of any community property interests therein of any Optionee's spouse
or such spouse's successors in interest; provided, however, that in the event
Rule 16b-3 under the Exchange Act is further amended so as to eliminate
therefrom the holding period requirement of nontransferability, then Options
granted under the Plan may be made transferable on such terms as the Board shall
determine, consistent with the requirements of Code Section 422 in the case of
an Incentive Share Option.
6.05 PURCHASE FOR INVESTMENT. Each Optionee receiving an Option
pursuant to the Plan must represent, and agree to give such further
representation as may be reasonably required by the Trust upon the exercise of
such Option or any part thereof, that any Shares purchased pursuant to such
Option will be, or are, acquired for his own account for investment and not with
a view to, or for offer or sale in connection with, the distribution thereof,
unless in the opinion of counsel satisfactory to the Trust that same is not
necessary at such time.
6.06 EFFECT OF DEATH OR OTHER TERMINATION OF RELATIONSHIP WITH
THE TRUST. Subject to the other provisions of the Plan, in the event that an
Optionee:
(a) has his relationship with the Trust or any Subsidiary
terminated for any reason other than death (including discharge by the
Trust) an Option granted pursuant to the terms of the Plan, to the
extent not exercisable at the time of such termination in accordance
with its terms, shall terminate and be without further force or effect.
(b) dies during the term of such Option, such Option, to the
extent not exercisable in accordance with its terms, shall terminate
and be without further force or effect and to the extent such Option is
exercisable on the date of death, it may, within six months after the
date of death be exercised by such Optionee's legal representatives or
by the person or persons to whom such Option has been transferred by
will or the applicable laws of descent and distribution;
provided, however, that such six-month period shall be
subject to the provisions of the particular Option Agreement or other
agreement with respect to the final expiration of such Option and such
Option, to the extent not exercised within said six-month period (or
such shorter period as may be required by the terms of such Option
Agreement or other agreement) shall in all events terminate upon the
expiration of such six-month period (or such shorter period); and
provided further, that no transfer of an Option by the Optionee
by will or by the laws of descent and distribution shall be effective
to bind the Trust unless the Trust shall have been furnished with
written notice thereof and an authenticated copy of the will and/or
such other evidence as counsel for the Board may deem necessary to
establish the validity of the transfer and the acceptance by the
transferee or transferees of the terms and conditions of such Option.
6.07 PAYMENT FOR SHARES. Except as otherwise provided in the
Plan or the Option Agreement, the Exercise Price for the Shares shall be paid in
full when the Option is exercised. The Exercise Price may be paid in whole or in
part in (i) cash, (ii) whole Shares owned by the individual six months or longer
and evidenced by negotiable certificates, valued at their Fair Market Value on
the date of exercise, (iii) by a combination of such methods of payment or (iv)
such other consideration as shall constitute lawful consideration for the
issuance of Shares and be approved by the Board (including without limitation,
assurance satisfactory to the Board from a broker registered under the Exchange
Act, of the delivery of the proceeds of an imminent sale of the Shares to be
issued pursuant to the exercise of such Option, such sale to be made at the
direction of the individual). If certificates representing Shares are used to
pay all or part of the Exercise Price of an Option, separate certificates shall
be delivered by the Trust representing the same number of Shares as each
certificate so used and an additional certificate shall be delivered
representing any additional Shares to which the individual is entitled as a
result of exercise of the Option. Moreover, an individual may request the Trust
to "pyramid" his or her Shares; that is, to automatically apply the Shares which
he or she is entitled to receive on the exercise of a portion of an Option to
satisfy the exercise for additional portions of the Option, thus resulting in
multiple simultaneous exercises of an Option by use of whole Shares as payment.
The Optionee may, in its discretion,
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make payment of all or any part of the Exercise Price over a period of not more
than five years from the date the Option is exercised. In such instance any
unpaid balance of the Exercise Price shall be evidenced by the individual's full
recourse promissory note payable to the order of the Trust which shall be
secured by such collateral and shall bear interest at such rate or rates as
determined from time to time by the Board.
ARTICLE VII
COMPLIANCE WITH LAW AND ISSUANCE
OF CERTIFICATES OR PAYMENT OF FUNDS
7.01 COMPLIANCE WITH THE SECURITIES ACT. Each Option granted
under the Plan shall contain such provisions or undertakings by the Optionee
pertaining to the re-sale or distribution of any Shares acquired pursuant to
such Option as the Trust shall deem appropriate and necessary to comply with the
Securities Act, and the rules, regulations and administrative interpretations
thereunder; provided that the Trust may waive any such provisions or
undertakings if the Trust shall determine that same are no longer required under
said Securities Act, rules, regulations or interpretations, or are otherwise
unnecessary.
7.02 GOVERNMENTAL APPROVAL. Each Option shall be subject to the
requirement that if at any time the Board of Trustees shall determine, in its
sole discretion, that the listing, registration or qualification of the Shares
covered thereby upon any securities exchange or under any state or federal law,
or the consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of or in connection with the granting of such Option or
the issuance or acquisition of Shares thereunder, no such Option shall be
effective unless and until such listing, registration, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Board of Trustees.
7.03 ISSUANCE OF CERTIFICATES AND PAYMENT OF FUNDS. The Trust
shall not be required to issue or deliver any certificate for Shares to be
purchased or issued, or any funds required to be paid by the Trust upon the
exercise of any Option granted under the Plan or any portion thereof, pursuant
to any Option Agreement or any other agreement relating to the Plan prior to the
fulfillment of all of the following conditions:
(a) compliance with any requirements under Section 7.01 above;
(b) compliance with any applicable requirements under Section
7.02 above;
(c) the lapse of such reasonable period of time following the
exercise of the Option as the Board, from time to time, may establish
for reasons of administrative convenience; and
(d) if pursuant to any applicable statute or regulation, as
then in effect, if such issuance or delivery would be in violation of
any statute, law, rule or regulation, whether federal or state.
7.04 TAX WITHHOLDING. The Trust or a Subsidiary, as
appropriate, shall have the right to deduct from all cash payments to be made to
any Optionee any federal, state or local taxes required by law to be withheld
with respect to such cash payments.
7.05 SHARE WITHHOLDING. Wherever the Trust or Subsidiary, as
appropriate, proposes or is required to issue or transfer Shares under the Plan,
the Trust or Subsidiary shall have the right to require the Optionee to remit to
the Trust an amount sufficient to satisfy any Federal, State and/or local
withholding tax requirements prior to the delivery of any certificate for such
Shares. Alternatively, with respect to withholding required upon the exercise of
Options, or upon any other taxable event hereunder, individuals may elect,
subject to the approval of the Board, to satisfy the withholding requirement, in
whole or in part, by having the Trust withhold Shares having a Fair Market
Value, on the date the tax is to be determined, equal to the minimum
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marginal tax which could be imposed on the transaction. Share withholding upon
the exercise of an Option will be done if the individual makes a signed, written
election and one of the following occurs:
(a) The Option exercise occurs during a "window period" and the
election to use Share withholding is made at any time prior to
exercise. For this purpose, "window period" means the period beginning
on the third (3rd) Business Day following the date of public release of
the Trust's quarterly financial information and ending on the twelfth
(12th) Business Day following such date. An earlier election can be
revoked up until the exercise of the Option during the window period;
or
(b) An election to withhold Shares is made at least six months
before the Option is exercised. If this election is made, then the
Option can be exercised outside of the window period.
ARTICLE VIII
TERMINATION, AMENDMENT AND
MODIFICATION OF THE PLAN
8.01 TERMINATION OF PLAN. The Plan may be terminated at any
time by the Board of Trustees except with respect to Options then outstanding
under the Plan for which there exist written Option Agreements or other written
agreements relating to each such Option. No termination of the Plan may, without
the consent of the person to whom any Option shall theretofore been granted,
adversely affect the rights of such person under such Option.
8.02 AMENDMENT. The Board of Trustees may, at any time and from
time to time, alter, amend, suspend or discontinue the Plan and the rules for
its administration as the Board of Trustees may deem advisable in order that any
Options thereunder shall conform to or otherwise reflect any change in
applicable laws or regulations or to permit the Trust or the Independent
Trustees to enjoy the benefits of any change in applicable laws or regulations,
or in any other respect the Board of Trustees may deem to be in the best
interests of the Trust; provided, however, that the Board of
Trustees may not, without further approval by a majority of votes cast on such
proposal provided the total votes cast thereon represents over 50% in interest
of the holders of the then outstanding voting securities of the Trust entitled
to vote thereon,
(a) increase (other than by adjustments provided for by Section
4.02) the maximum number of Shares which may be issued pursuant to all
Options granted under the Plan,
(b) materially modify the requirements as to eligibility for
participation in the Plan,
(c) materially increase the benefits accruing to Trustees under
the Plan, or
(d) extend the termination date of the Plan, and,
provided further, that no such amendment or modification of the
Plan may, without the consent of the person to whom any Option shall theretofore
have been granted, adversely affect the rights of such person under such Option.
8.03 CHANGE IN CONTROL. In the event of a Change in Control of
the Trust all Options granted under this Plan that are still outstanding and not
yet exercisable shall become immediately exercisable as of the date of the
Change in Control and shall remain exercisable for their term. The Board has
final authority to determine the exact date on which a Change in Control has
been deemed to have occurred. Notwithstanding the foregoing, the Board may deem
that an Acceleration Event has occurred, specifying the date thereof, which
determination, if made, shall have the same effect as a Change in Control.
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ARTICLE IX
MISCELLANEOUS
9.01 UNSECURED OBLIGATION. Optionees under this Plan shall not
have any interest in any fund or specific asset of the Trust by reason of this
Plan. No trust fund shall be created in connection with this Plan or any Option
thereunder and there shall be no required funding of amounts which may become
payable to any Optionee.
9.02 OTHER COMPENSATION PLANS. The adoption of the Plan shall
not affect any other Option or incentive or other compensation plans, practices
or arrangements in effect for the Trust or any Subsidiary, nor shall the Plan
preclude the Trust from establishing any other forms of incentive or other
compensation for employees of or persons retained by the Trust or any
Subsidiary.
9.03 PLAN BINDING ON SUCCESSORS. The Plan shall be binding upon
the successors and assigns of the Trust.
9.04 REQUIREMENTS OF LAW. The granting and Options and the
issuance of Shares under the Plan shall be subject to all applicable laws,
rules, and regulations, and to such approvals by any governmental agencies or
national securities exchanges as may be required.
9.05 GOVERNING LAW. To the extent not preempted by laws of the
United States of America, the Plan, and all agreements hereunder, shall be
construed in accordance with and governed by the laws of the State of Texas.
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PRELIMINARY PROXY MATERIAL FOR
THE SECURITIES AND EXCHANGE
COMMISSION REVIEW ONLY
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PROXY
VINLAND PROPERTY TRUST
This Proxy is Solicited on behalf of the Board of Trustees for the
Annual Meeting of Shareholders, July 26, 1995.
The undersigned shareholder of VINLAND PROPERTY TRUST hereby appoints
WILLIAM S. FRIEDMAN and JOHN A. DOYLE each with full power of substitution, as
attorneys and proxies to vote all of the Shares of the Beneficial Interest, no
par value per share, of VINLAND PROPERTY TRUST (the "Trust") which the
undersigned is entitled to vote at the Annual Meeting of Shareholders of said
Trust to be held on July 26, 1995 at 10:00 a.m., local Dallas, Texas time, at
3878 Oak Lawn Avenue, Suite 300, Dallas, Texas 75219, or any adjournment(s)
thereof, with all powers the undersigned would possess if personally present, as
indicated below, and 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
[________________], 1995 Proxy Statement for said meeting:
<TABLE>
<S> <C> <C>
1. ELECTION OF TRUSTEES: / / FOR all nominees listed below / / WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees listed below
</TABLE>
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME LISTED BELOW.
Chester Beck Willie K. Davis John A. Doyle William S. Friedman
Michael E. Smith
2. / / FOR / / AGAINST / / ABSTAIN approval of the Trust's Advisory Agreement
with Tarragon Realty Advisors, Inc.
3. / / FOR / / AGAINST / / ABSTAIN approval of an amendment to the
Amended Declaration of Trust to authorize implementation of reverse share
splits.
4. / / FOR / / AGAINST / / ABSTAIN approval of the Vinland Property Trust Share
Option and Incentive Plan.
5. / / FOR / / AGAINST / / ABSTAIN approval of the Vinland Property Trust
Independent Trustee's Share Option Plan.
6. In their discretion on any other matters which may properly come before the
meeting or any adjournment(s) thereof.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
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(CONTINUED FROM OTHER SIDE)
THIS PROXY WILL BE VOTED AS DIRECTED BUT IF NO DIRECTION IS INDICATED
IT WILL BE VOTED FOR THE ELECTION OF THE NOMINEES NAMED IN PROPOSAL (1), AND FOR
THE PROPOSAL TO APPROVE THE TRUST'S ADVISORY AGREEMENT WITH TARRAGON REALTY
ADVISORS, INC. DESCRIBED IN PROPOSAL (2), FOR THE PROPOSAL TO APPROVE THE
AMENDMENT TO THE AMENDED DECLARATION OF TRUST TO AUTHORIZE IMPLEMENTATION OF
REVERSE SHARE SPLITS DESCRIBED IN PROPOSAL (3), FOR THE PROPOSAL TO APPROVE THE
VINLAND PROPERTY TRUST SHARE OPTION AND INCENTIVE PLAN, DESCRIBED IN PROPOSAL
(4), AND FOR THE PROPOSAL TO APPROVE THE VINLAND PROPERTY INDEPENDENT TRUSTEE
SHARE OPTION PLAN DESCRIBED IN PROPOSAL (5). ON OTHER MATTERS THAT MAY COME
BEFORE SAID MEETING, THIS PROXY WILL BE VOTED IN THE DISCRETION OF THE
ABOVE-NAMED PERSONS.
Please
Sign ----------------------------------------------------
Here
----------------------------------------------------
Dated: , 1995
--------------------------------
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, THE 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 FOR WHICH NO POSTAGE IS REQUIRED IF MAILED
IN THE UNITED STATES.
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