SCHEDULE 14A INFORMATION
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NOONEY REALTY TRUST, INC.
(Name of Registrant as Specified in its Charter)
THE COMMITTEE TO INCREASE
SHAREHOLDER VALUE AT
NOONEY REALTY TRUST, INC.
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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The Committee to Increase Shareholder Value at
Nooney Realty Trust, Inc.
1100 Main, Suite 2100
Kansas City, MO 64105
July 17, 1997
Dear Fellow Nooney Shareholder:
The Committee is pleased that we finally have the opportunity to ask for
your support. We invite you to read this letter and the Committee's proxy
statement, previously mailed to you, to learn why it is important that you
reject the Board's self-serving attempt to amend your Bylaws.
The Committee can find nothing positive to be gained by supporting the
Board's proposed amendment. After acquainting yourself with the facts, we hope
you will reject the proposed amendment by signing, dating and returning the
enclosed GREEN proxy card in the postage-paid envelope provided for your
convenience.
Have you received more dis-information from Nooney?
The Board's recent "Fight Letter" claims Mr. Johnson wants to control the
Trust, that he is costing shareholders money and cites glowing statistics to
prove how well you are doing as shareholders.
This proposal is NOT about Mr. Johnson or control of the Trust. The
upcoming Special Meeting has only one proposal on the agenda and it has nothing
to do with Mr. Johnson or control of the Trust. It has to do with letting the
Board off the hook for its inability to properly manage your Trust. The Board's
proposal asks you to give away substantial rights as shareholders.
The Board's proposed Bylaw amendment is NOT about Money. To our knowledge,
Mr. Johnson is the single largest non-PICO affiliated shareholder of the Trust.
He holds more than twice the number of shares held by all Board members combined
and stands to lose much more than the Board members if the Trust is
unprofitable. So if the Committee's effort to prevent the adoption of a Bylaw
amendment not in the shareholders' best interest is costing the Trust money, Mr.
Johnson is paying a higher price than the Board members.
As for the spectacular return the Board cites for shareholders: has
investing in the Trust been a spectacular investment for you? Has YOUR TOTAL
RETURN been 132.5%? So much for statistics and generalizations.
-- LET'S GET DOWN TO SPECIFICS --
Why it is imperative that you reject the Board's self-serving
attempt to amend your Bylaws.
Your Board of Directors is attempting to amend the Bylaws of your Trust
because in our opinion:
- they want you, the shareholder, to release the Board members from any
potential personal liability retroactively for any event that took place on
or prior to April 23, 1997, with regard to their inability to determine
ownership of the Trust's shares;
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- they apparently have not had, nor do they have now, any idea of how to
effectively monitor who owns shares of the Trust so they can comply with
the Bylaws; and
- after repeated notification of PICO's violations of the Bylaws, the Board
chose not to correct the situation even though explicit remedies exist.
Do you assume responsibility for your actions?
Shouldn't you demand the same of your Board of
Directors?
Not surprisingly, the Board now asks the shareholders to retroactively
relieve the Board of its responsibility and potential liability for failure to
exercise its fiduciary obligations on or prior to April 23, 1997. This is the
date of the Special Directors Meeting at which the Board decided not to take any
action against PICO for the acquisition of excess shares. The Board was aware,
since at least early May 1996, that PICO was violating the Trust's Bylaws and
yet took no substantive action until it called the Special Board Meeting, eleven
months later... No substantive action during that eleven months, that is, except
to nominate and subsequently elect Mr. Hart, the President and Chief Executive
Officer of PICO, to your Board.
Monitoring the Shareholders of the Trust.
Don't be confused by the Board's lengthy dissertation on the complexities
of the ownership test. The Board, by its own admission in its proxy statement,
takes great pains to explain that they were aware of PICO's acquisition of 9.11%
of the Trust's shares. Whether the Board had a monitoring procedure in place and
knew at the time of the filing or whether they became aware of the filing at
some later time is unclear.
This issue is important because the Board makes the assertion that it
cannot know, for tax purposes or otherwise, when a shareholder may exceed the
9.8% limit in the Bylaws, which is based on the IRS attribution rules. Because
of the Securities and Exchange Commission ("SEC") filing requirements, the Board
should at least be aware of anyone who exceeds the 5.0% ownership filing
requirement of the SEC, as exhibited by PICO's filing to disclose its ownership
of 9.11% based on the SEC beneficial ownership rules.
The Board did not contact PICO after the 9.11% filing. The Committee is
left to wonder why the Board did not ascribe any significance to this extremely
important issue.
The Board, in its effort to amend Article VIII of the Bylaws, says it
cannot possibly know who owns shares of the Trust or how many shares they own.
But, in fact, the Board did know, and has always known, the extent of PICO's
holding based on the SEC filings. The Committee believes that with even the most
rudimentary due diligence the Board can make sure that the Trust, your Trust,
does not risk violating the IRS closely held test, which would jeopardize its
tax status as a REIT.
If not the Board...Who?
Further, common sense would dictate that if the favorable tax status of the
Trust is grounded in the ownership requirement as specified by the IRS, some
mechanism must be put in place that assures compliance. Will the Board's claim
that "it is virtually impossible for the Trust to determine the direct and
indirect ownership of any person..." stand the test of the IRS? We think NOT.
The Committee operates under the assumption that as qualified business
persons the Board members are empowered to ensure the Trust's compliance with
all rules and regulations regarding your
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investment. The Board members should not be allowed to simply throw up their
collective hands and say, "This issue is too tough for us, don't make us do it."
Violating the Bylaws.
In June 1996, Greg Nooney wrote PICO and notified them of the Bylaw
violations. In September 1996, a Director of the Trust, Mr. R. Michael O'Brien,
Jr., died and Mr. Hart, President and Chief Executive Officer of none other than
PICO, was elected to the Board of the Trust by the other Directors. This is in
spite of the fact that these Directors knew PICO was already violating the
Bylaws. Then, within 2 months after his election as a Director, Mr. Hart filed a
SEC Form 3 disclosing that PICO increased its ownership of the Trust to 20.75%
from 14.29%, a violation of the Trust's Bylaws that Mr. Hart was surely aware of
by virtue of his being a Director of the Trust and having access to the Bylaws.
Only now, after a violation has existed for over a year, does the Board ask
you to suspend application and enforcement of Article VIII of the Bylaws. There
is, in their interpretation, no clear or effective way to deal with violators.
The Committee takes exception to the Board's assertion. The Bylaws are
quite specific on the issue. Section 8.8(b) of the Trust's Bylaws provides that
shares held in excess of 9.8% must be:
o declared null and void;
o acquired by and held on behalf of the Trust;
o not considered outstanding for quorum or voting purposes; and
o not entitled to receive dividends, interest or any
distributions.
There can be no doubt that the Bylaws speak effectively on the issue of
"excess shares." For some reason, however, the Board searches for reasons not to
enforce these provisions. Perhaps the presence of Mr. Hart on the Board, PICO's
most senior executive, is the reason the Board is unwilling to act. The Board
owes a duty of loyalty to all shareholders, not just to shareholders represented
on the Board.
Please note that the Board has voluntarily self-imposed the higher voting
requirement of 62% to pass this proposal to counter-act the effect of the
"excess shares." It appears that even the board does not believe the excess
shares should be counted toward the proposed Bylaw amendment.
Yet another curious fact.
The Board has maintained that it is relying on an opinion of counsel as to
whether or not the PICO shares violate the IRS closely held test. The counsel
that rendered the opinion is counsel hired by PICO. Do not be confused about
what this opinion says. It addresses only the IRS regulations regarding the
Trust's tax status, NOT whether or not the PICO shares are "excess shares" as
defined in the Trust's Bylaws.
The curious fact is that the Board states in its preliminary proxy
statement dated May 20, 1997, for the postponed Annual Shareholder Meeting that
it has this opinion.
But the opinion is dated June 2, 1997.
We suspect the Board knew it was coming, but it certainly was not available
at the April 23, 1997, Special Board Meeting. At that meeting the Board decided
not to pursue any remedy provided for in the Bylaws with respect to the excess
shares owned or controlled by PICO. In fact, for the entire duration of this
saga, since at least May 1996, when PICO notified the Trust that it owned 14.29%
of the Trust's shares, until April 23, 1997, to our knowledge the Board never
took any official corporate action
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nor sought any legal opinion to verify whether the Trust's Bylaws had been
violated or whether the tax status of the Trust was in jeopardy. The Board seems
to have been operating in the dark.
The Committee believes that the current provisions of Article VIII of the
Bylaws are a necessary fail-safe to maintain the Trust's favorable tax status as
a REIT.
Don't be fooled by the Board's rhetoric. The Board appears to be only
interested in promoting its own interests, and based on its actions and
inaction, the interests of PICO, not the shareholders'. Protect your interests
by voting AGAINST the Board's proposed amendment to the Bylaws. Time is short
and every vote is important, so please act today by signing, dating and mailing
the GREEN proxy card.
On behalf of the Committee, thank you for your support.
Sincerely,
/s/David L. Johnson
David L. Johnson
For the Committee
- ----------------------------------- Important ----------------------------------
Your vote is important. Please take a moment to sign, date and promptly
mail your GREEN proxy card in the postage-paid envelope provided. Remember, do
not return any proxy card sent to you by the Board. Properly voting the enclosed
GREEN proxy card automatically revokes any proxy card previously signed by you.
Remember, only your latest dated and signed proxy card will be voted.
Even if you are planning to attend the Special Meeting, we urge you to
complete and return the enclosed GREEN proxy card so that your shares will be
represented. If you do attend the Special Meeting, you may revoke your proxy at
any time and vote your shares personally.
If your shares are registered in the name of a broker or bank, only your
broker or bank can execute a proxy and vote your shares and only after receiving
your specific instructions. Please contact the person responsible for your
account and direct him or her to execute a proxy on your behalf today. Then mail
your proxy at once in the envelope provided. If you have any questions or need
further assistance in voting, please call:
D.F. King & Co., Inc.
77 Water Street
New York, New York 10005
(212) 269-5550 (Collect)
Call Toll-Free -- 1 800-326-3066
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