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SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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 the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
/X/ Definitive Proxy Statement Rule 14a-6(e)(2))
/ / Definitive Additional Materials
/ / Soliciting Materials Pursuant to Rule 14a-11(c) or Rule 14a-12
Nooney Realty Trust, Inc.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No Fee required
/ / 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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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NOONEY REALTY TRUST, INC.
7701 FORSYTH BOULEVARD
ST. LOUIS, MISSOURI 63105
July 9, 1997
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders to be
held at 10:00 A.M. on Friday, August 8, 1997, at the Pierre Laclede Conference
Center, 7733 Forsyth Boulevard, 2nd Floor, in Clayton, Missouri. Information
regarding business to be conducted at the Meeting is set forth in the
accompanying Notice of Special Meeting and Proxy Statement.
The Annual Meeting of Shareholders that was scheduled for July 3, 1997, has
been postponed in connection with a settlement agreement between the Trust and
a shareholder of the Trust named KelCor, Inc. ("KelCor"). We will notify you
when the Annual Meeting has been rescheduled. On June 5, 1997, KelCor filed a
lawsuit against the Trust to, among other things, obtain a declaratory judgment
on matters related to certain Trust shares owned by affiliates of PICO
Holdings, Inc. Pursuant to the settlement agreement, the Trust agreed to call
the Special Meeting for the sole purpose of voting upon a proposal to amend the
Trust's Bylaws in certain respects related to the share ownership of PICO.
YOUR BOARD OF DIRECTORS BELIEVES THAT THE PROPOSED AMENDMENT TO ARTICLE
VIII OF THE TRUST'S BYLAWS AS DESCRIBED IN THE ATTACHED PROXY STATEMENT IS IN
THE BEST INTERESTS OF THE TRUST'S SHAREHOLDERS FOR THE FOLLOWING REASONS:
* THE ENFORCEMENT OF THE CURRENT BYLAW WOULD INVOLVE LEGAL ACTION THAT
WOULD BE EXPENSIVE--COSTING SHAREHOLDERS MONEY--AND MAY NOT BE SUCCESSFUL
IN RECOVERING ANY MONEY FOR THE TRUST;
* ANY SUCH LEGAL ACTION COULD AFFECT THE MARKETABILITY OF THE TRUST'S
SHARES;
AND
* THE TAX STATUS OF THE TRUST IS NOT IN JEOPARDY.
This proposed amendment and the reasons for the Board's decisions with
respect thereto are fully described in the attached materials.
We cannot stress enough the importance of the vote of every shareholder at
the Special Meeting, regardless of the number of shares owned.
We anticipate that a group formed by KelCor will solicit proxies to oppose
the Board of Directors' proposal to be voted on at the Special Meeting.
THEREFORE, EVEN IF YOU HAVE PREVIOUSLY RETURNED A PROXY CARD FOR THE POSTPONED
ANNUAL MEETING OR IF YOU ARE PLANNING TO ATTEND THE SPECIAL MEETING, WE URGE YOU
TO COMPLETE AND RETURN THE ENCLOSED GOLD PROXY CARD SO THAT YOUR SHARES WILL BE
REPRESENTED AT THE SPECIAL MEETING. A postage-paid envelope is enclosed for your
convenience. Should you later decide to attend the Meeting, you may revoke your
proxy at any time and vote your shares personally at the Meeting.
If you have any questions or require assistance, please call MacKenzie
Partners, Inc., who is assisting us in our solicitation, at 1-800-322-2885.
We look forward to seeing you at the Meeting.
Sincerely,
/s/ Gregory J. Nooney, Jr.
GREGORY J. NOONEY, JR.
Chairman of the Board and
Chief Executive Officer
<PAGE> 3
NOONEY REALTY TRUST, INC.
7701 FORSYTH BOULEVARD
ST. LOUIS, MISSOURI 63105
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD FRIDAY, AUGUST 8, 1997
To the Shareholders of
Nooney Realty Trust, Inc.:
You are hereby notified that a Special Meeting of Shareholders of Nooney
Realty Trust, Inc. (the "Trust") will be held at 10:00 A.M. on Friday, August
8, 1997, at the Pierre Laclede Conference Center, 7733 Forsyth Boulevard, 2nd
floor, in Clayton, Missouri, for the following purpose:
1. To consider and vote upon a proposal to amend, in certain respects,
Article VIII of the Trust's Bylaws relating to the limitation on a
person or entity to acquire shares of the Trust representing an amount
greater than 9.8% of the total value of the issued and outstanding
shares.
In accordance with Section 7.3(c) of the Trust's Bylaws, no other business
may be considered at the Special Meeting.
The Trust's Board of Directors has fixed the close of business on June 27,
1997, as the record date for the determination of shareholders entitled to
receive notice of and to vote at the Special Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
PATRICIA A. NOONEY
Secretary
July 9, 1997
St. Louis, Missouri
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NOONEY REALTY TRUST, INC.
7701 FORSYTH BOULEVARD
ST. LOUIS, MISSOURI 63105
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD AUGUST 8, 1997
The enclosed GOLD PROXY CARD is solicited on behalf of the Board of
Directors of Nooney Realty Trust, Inc., a Missouri corporation, for use at the
Special Meeting of Shareholders to be held at 10:00 A.M. on Friday, August 8,
1997, at the Pierre Laclede Conference Center, 7733 Forsyth Boulevard, 2nd
Floor, in Clayton, Missouri, or any adjournment thereof, for the purpose set
forth in the accompanying Notice of Special Meeting of Shareholders. This proxy
statement and the enclosed GOLD PROXY CARD are being first mailed to
shareholders on or about July 9, 1997.
The close of business on June 27, 1997, has been fixed by the Board of
Directors as the record date for the determination of shareholders entitled to
receive notice of and to vote at the Special Meeting. On June 27, 1997, there
were issued and outstanding and entitled to vote 866,624 shares of the Trust's
common stock, par value $1.00 per share.
If a shareholder is a participant in the Trust's Dividend Reinvestment
Plan, the enclosed GOLD PROXY CARD represents the number of full shares in the
dividend reinvestment plan account, as well as shares registered in the
participant's name. All proxies in the accompanying form will be voted in
accordance with the instructions given in the proxy. Shareholders will be
entitled to one vote per share. A shareholder may revoke his proxy at any time
before it is voted by delivering to the Trust another proxy bearing a later
date, by submitting written notice to the Secretary of such revocation, or by
appearing in person at the Special Meeting and casting a contrary vote.
The affirmative vote of 62.0% of the issued and outstanding shares of the
Trust will be required to amend the Bylaws as described in Proposal 1 (the
"Bylaw Amendment"). Although only the affirmative vote of a majority of the
issued and outstanding shares of the Trust is required to amend the Bylaws, the
Board of Directors of the Trust has elected to require the greater percentage
described above with respect to the Bylaw Amendment in order to negate the
voting power of certain shares discussed below.
Shares represented by proxies which are marked "abstain" on the Bylaw
Amendment will be counted for the purpose of determining the number of shares
represented by proxy at the Meeting. Such proxies will have the same effect as
if the shares represented thereby were voted against the Bylaw Amendment.
Shares not voted on proxies returned by brokers will have the same effect as
shares voted against the Bylaw Amendment.
The Trust will pay all costs of preparing and soliciting proxies for the
Special Meeting. In addition to solicitation by mail, the Trust may solicit
proxies from shareholders personally, or by telephone. The Trust has also
retained MacKenzie Partners, Inc. to assist in soliciting proxies for a fee of
approximately $7,500 plus reasonable expenses and costs, which does not include
its fee in connection with the postponed Annual Meeting. The Trust will also
reimburse brokerage firms, banks and other nominees for their reasonable costs
incurred in forwarding proxy materials for shares held of record by them to the
beneficial owners of such shares.
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PROPOSAL 1
PROPOSAL TO APPROVE AN AMENDMENT TO ARTICLE VIII
OF THE TRUST'S BYLAWS
The Internal Revenue Code of 1986, as amended (the "Code") contains
several ownership tests which an entity must meet in order to qualify as a
"real estate investment trust" or "REIT" for federal income tax purposes.
Pursuant to one of those ownership tests, at all times during the second half
of the Trust's taxable year, no more than 50% in value of the Trust's shares
may be owned, directly or indirectly, by five or fewer individuals (the
so-called "closely held test"). If the closely held test is violated, the
Trust would lose its REIT status for five years (including the year of
violation).
In addition, there are various income tests which an entity must meet in
order to qualify as a REIT. As a practical matter, under those income tests,
the Trust must not, among other things, derive more than 5% of its income from
the rents paid by one or more tenants in which the Trust owns, directly or
indirectly, a 10% or greater interest (the so-called "tenant owned test").
Under the tenant owned test, the Trust will be deemed to own an interest in a
tenant owned by any shareholder of the Trust who owns, directly or indirectly,
10% or more of the value of the outstanding shares of the Trust. A violation of
the tenant owned test does not necessarily result in loss of REIT tax status
since there are several relief provisions which may (or may not) be applicable.
Such relief provisions, however, could cause tax to be payable by the Trust.
The Trust's Bylaws place certain restrictions on the accumulation of shares
by the Trust's shareholders in order to guard against the concentration of
ownership of shares to an extent which may be contrary to the closely held test
and tenant owned test. Specifically, Section 8.8(a) of the Bylaws provides that
no person may acquire, directly or indirectly, in excess of 9.8% of the
outstanding shares of the Trust.
Section 8.8(b) of the Trust's Bylaws provides that any acquisition of
shares in excess of 9.8% shall be null and void with respect to the shares that
are acquired in excess of the 9.8% limitation. Section 8.8(b) further provides
that any such excess shares (i) shall be considered to have been acquired by
and held on behalf of the Trust, (ii) shall not be considered outstanding for
quorum or voting purposes and (iii) shall not be entitled to receive dividends,
interest or any other distribution.
THE PROPOSED AMENDMENT
For the reasons described below, the Board of Directors proposes to adopt
an amendment to Article VIII of the Trust's Bylaws that would:
(I) CLARIFY THAT THE CALCULATION OF THE 9.8% OWNERSHIP THRESHOLD IS TO
BE MADE IN CONFORMITY WITH THE PROVISIONS OF THE CODE RELATED TO REAL
ESTATE INVESTMENT TRUSTS;
(II) SUSPEND APPLICATION AND ENFORCEMENT OF SECTION 8.8(b) OF THE BYLAWS
FOR ALL PERIODS ON OR PRIOR TO APRIL 23, 1997;
(III) CLARIFY THAT NEITHER THE TRUST NOR THE OFFICERS AND DIRECTORS OF
THE TRUST ARE RESPONSIBLE FOR MAKING DETERMINATIONS WITH RESPECT TO THE
NUMBER OF SHARES THAT ANY PERSON SHALL BE DEEMED TO OWN FOR PURPOSES OF
SECTION 8.8;
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(IV) PROVIDE THAT THE BYLAWS MAY BE AMENDED BY A VOTE OF A MAJORITY OF
THE INDEPENDENT DIRECTORS IF THE INDEPENDENT DIRECTORS DETERMINE THAT SUCH
AMENDMENT IS NECESSARY OR ADVISABLE TO PROTECT THE STATUS OF THE TRUST AS A
REAL ESTATE INVESTMENT TRUST OR OTHERWISE MINIMIZE THE RISK THAT THE TRUST
MAY BECOME SUBJECT TO FEDERAL INCOME TAX PAYABLE BY THE TRUST; AND
(V) ELIMINATE CERTAIN REFERENCES IN SECTION 8.8 OF THE BYLAWS TO
WARRANTS TO PURCHASE ADDITIONAL TRUST SHARES.
The Trust's proxy statement distributed in connection with the Annual
Meeting of Shareholders that was scheduled for July 3, 1997, had contemplated
an additional change to Section 8.8 of the Bylaws. This further change would
have, subject to the satisfaction of certain conditions, enabled the
Independent Directors to waive or modify periodically any provisions of Section
8.8 of the Bylaws with respect to any shares acquired in excess of the 9.8%
ownership threshold. Your Board of Directors had believed that such a grant of
discretionary authority to the Independent Directors would have provided such
Independent Directors with a desirable degree of flexibility in connection with
their strategic planning for the Trust. Moreover, your Board was comfortable
proposing such an amendment since other real estate investment trusts have
bylaw provisions granting similar discretionary authority to their respective
directors. However, after having discussed and reviewed the contemplated grant
of authority with some of the Trust's shareholders and certain advisors to some
of the Trust's shareholders, your Board has decided not to propose an amendment
containing this additional grant of authority.
Section 8.8, if amended as described above, would read as set forth in
Exhibit A. Please note that the version of Section 8.8 set forth in Exhibit A
shows the proposed additions to Section 8.8 in bold face type and the proposed
deletions as struck through.
BACKGROUND
As of December 31, 1995, Physicians Insurance Company of Ohio, Inc.
("PICO"), a subsidiary of PICO Holdings, Inc. ("PICO Holdings," and
together with PICO and their respective affiliates and subsidiaries, the "PICO
Group") reported direct ownership of 9.11% of the Trust shares. This
information was contained in Amendment No. 1 to Schedule 13G dated as of
December 31, 1995, as filed by PICO with the Securities and Exchange Commission
("SEC"). The Trust relies on such statements filed with the SEC for
information relating to the PICO Group's stock ownership positions in the Trust
since all of the PICO Group's stock holdings in the Trust are held through Cede
& Co., a nominee of Depository Trust Co., a depository for securities held in
brokerage accounts. Many of the Trust's other shareholders also hold their
shares through this nominee or other nominees. As of June 2, 1997,
approximately 50% of the issued and outstanding shares of the Trust were held
of record by Cede & Co. and an additional 12% were held of record by other
nominee owners. Moreover, for purposes of Section 8.8 of the Trust's Bylaws, a
person "owns" not only the shares that person directly owns, but also those
shares that person is deemed to own by application of highly technical
attribution rules imposed by the REIT Provisions of the Code. Therefore, from a
practical standpoint, it is virtually impossible for the Trust to determine the
direct and indirect ownership of any person in its shares at any given time,
without attempting to obtain such information directly from any such
shareholder. Moreover, because of these highly technical attribution rules
imposed by the Code, shareholders in the Trust may or may not be able to
determine exactly how many shares they are deemed to own indirectly for
purposes of Section 8.8.
In May, 1996, the Trust received a letter from PICO dated May 1, 1996,
advising the Trust that the PICO Group beneficially owned directly 14.29% of
the Trust's outstanding shares. On June 17, 1996, the Trust sent PICO a letter
advising that, as a result of the increase in the PICO
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<PAGE> 7
Group's direct ownership position in the Trust from 9.11% to 14.29%, the PICO
Group's direct share ownership exceeded the 9.8% level permitted by the Trust's
Bylaws. The Trust also suggested in its letter that PICO seek legal counsel
with respect to this matter.
In December, 1996, the Trust learned of a further increase in the PICO
Group's ownership position in the Trust upon the filing of a Form 3 with the
SEC by John R. Hart, President and Chief Executive Officer of PICO Holdings,
following Mr. Hart's election to the Board of Directors of the Trust to fill a
vacancy created by the death of R. Michael O'Brien, Jr. in September, 1996. Mr.
Hart's Form 3 disclosed that PICO owned 20.75% of the Trust's shares as of
November 15, 1996. In February, 1997, the Trust received a copy of Amendment
No. 2 to Schedule 13G filed with the SEC by PICO Holdings disclosing that the
PICO Group beneficially owned 202,061 of the Trust's shares as of December 31,
1996. According to this Amendment No. 2 to Schedule 13G, of these 202,061
shares, 18,200 shares (approximately 2.1% of the Trust shares) were
beneficially owned by Summit Global Management, Inc., a wholly owned subsidiary
of PICO ("Summit"). PICO has represented that Summit is an investment manager
of numerous investment advisory accounts that own Trust shares and that Summit
merely holds dispositive power over any Trust shares owned by these accounts.
The PICO Group has informed the Trust that the beneficiaries of the accounts
retain the right to vote the shares, the right to receive dividends on the
shares, and the benefits (and risk) of any increase (or decrease) in the value
of the shares. Accordingly, counsel to the PICO Group has advised the Trust
that the beneficiaries of the accounts, and not Summit, should be deemed to own
these shares for purposes of Section 8.8 of the Bylaws.
It should be noted that Schedule 13G is filed pursuant to Section 13(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and Form
3 is filed pursuant to Section 16(a) of the Exchange Act. The rules and forms
under these sections have different reporting thresholds and different
definitions of "beneficial owner." For purposes of Section 13(d), a
beneficial owner of securities is a person who has or shares voting power
and/or investment (or dispositive) power, i.e., the power to vote or direct the
voting and/or the power to dispose or direct the disposition of such
securities, while for purposes of Section 16(a) a beneficial owner of
securities is a person who has or shares a pecuniary interest in such
securities, i.e., the opportunity to profit from a transaction in such
securities. Shares beneficially owned as reported pursuant to Section 13(d) are
not necessarily the same as shares beneficially owned as reported pursuant to
Section 16(a). Moreover, the REIT Provisions of the Code use different, and
sometimes broader rules, to determine who is deemed to be the indirect owner of
shares.
KELCOR'S ALLEGATIONS
On March 11, 1997, the Trust began receiving correspondence from KelCor,
Inc., a shareholder in the Trust ("KelCor"), making certain allegations and
demands regarding the PICO Group's ownership position in the Trust. Among other
things, KelCor demanded that the Board of Directors of the Trust enforce the
provisions of the Bylaws and treat any shares owned by the PICO Group in excess
of 9.8% in the manner provided in Section 8.8(b) of Article VIII of the Bylaws.
The Trust advised the PICO Group of KelCor's demands. The PICO Group
subsequently informed the Trust that as of March 19, 1997, the PICO Group had
sold its interest in 98,895 shares, 11.4% of the Trust's shares, to numerous
investment advisory accounts managed by Summit. Therefore, according to the
PICO Group, the investment advisory accounts managed by Summit should be deemed
to own a total of 117,095 Trust shares (98,895 shares plus the 18,200 shares
described above as previously owned by Summit), or approximately 13.5% of the
Trust shares, for purposes of Section 8.8 of the Bylaws. Moreover, according to
the PICO Group, as of March 19, 1997, the PICO Group directly owned 9.8% of the
Trust's shares for purposes of Section 8.8 of the Bylaws and was in compliance
with that section (assuming that said 9.8% direct ownership is not increased by
any additional shares the PICO Group is deemed to own indirectly
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on account of the attribution rules of the Code). The information provided to
the Trust by the PICO Group in regards to its sale of the 98,895 shares to
Summit is consistent with the information contained in Amendment No. 3 to
Schedule 13G filed by PICO Holdings as of March 19, 1997. For more detailed
information regarding Amendment No. 3 to Schedule 13G, please see the
discussion under the heading "Security Ownership of Certain Beneficial Owners
and Management" on page 10.
THE TRUST'S RESPONSE TO KELCOR
In response to KelCor's demands as described above, the Trust called a
special meeting of the Board of Directors to discuss the matters raised by
KelCor and wrote to KelCor to advise it of such meeting and of the fact that
the PICO Group had informed the Trust that it had disposed of its interest in
11.4% of the Trust's shares. However, despite the disposition of 11.4% of the
Trust's shares by the PICO Group, KelCor has continued to demand, among other
things, that the Trust treat any shares that are or were owned at any time by
the PICO Group in excess of 9.8% of the Trust's issued and outstanding shares
(the "Excess Shares") as null and void. The PICO Group has informed the Trust
that KelCor has made a written offer to the PICO Group to buy some or all of
the PICO Group's shares in the Trust.
The Trust believed that KelCor wanted the Trust to (i) refuse to pay
dividends on the Excess Shares, (ii) refuse to allow the Excess Shares to vote,
and (iii) file a lawsuit to cancel the Excess Shares, recover, if applicable,
the proceeds of the PICO Group's sale of shares and recover any dividends
already paid on the Excess Shares. The sale price for the Trust's shares as
reported for July 1, 1997, was $10.25 per share. Therefore, assuming that the
PICO Group exceeded the 9.8% limitation in the Trust's Bylaws by 98,895 shares,
the Trust may have a claim against the PICO Group for (i) the cancellation of
all such Excess Shares, which cancellation may result in the return to the
Trust's treasury of shares valued at approximately $1,013,673 (based on the
July 1, 1997 price described above) and (ii) the recovery of the amount of
dividends that have been paid to the PICO Group with respect to the Excess
Shares. Dividends were paid on all shares in all four quarters of 1996 and in
the first quarter of 1997. At the request of the Trust, the PICO Group has
estimated that approximately $56,000 in dividends have been paid to the PICO
Group with respect to the Excess Shares.
YOUR BOARD'S DECISIONS
THE BOARD OF DIRECTORS HELD ITS SPECIAL MEETING ON APRIL 23, 1997 TO
CONSIDER, AMONG OTHER THINGS, THE APPROPRIATE RESPONSE TO KELCOR'S DEMANDS.
AFTER REVIEW OF THE FACTS AND IN CONSIDERATION OF THE FACTORS DESCRIBED BELOW,
THE BOARD CONCLUDED IN THE EXERCISE OF ITS BUSINESS JUDGMENT THAT, TO THE
EXTENT KELCOR WAS DEMANDING LITIGATION AGAINST THE PICO GROUP, SUCH ACTION
WOULD NOT BE IN THE BEST INTERESTS OF THE TRUST AND ITS SHAREHOLDERS.
In connection with its decision not to pursue litigation against the PICO
Group, the Board also decided to seek shareholder approval of the above
described amendment to Article VIII of the Trust's Bylaws. As stated above,
this amendment would, among other things, suspend application and enforcement
of Section 8.8(b) of the Trust's Bylaws with respect to any ownership of shares
in excess of 9.8% on or prior to April 23, 1997 (including that of the PICO
Group). The Board of Directors unanimously voted in favor of not pursuing
litigation against the PICO Group and in favor of recommending that the
shareholders approve the proposed amendment to Section 8.8 of the Trust's
Bylaws. Mr. Hart was absent from the deliberations and voting with respect to
these proposals because of his relationship with PICO Holdings, and Mr. Kresko
did not vote on these matters because he was required to leave the meeting
early as a result of a prior engagement.
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REASONS FOR THE BOARD'S DECISIONS
These Board decisions were based on consideration of several factors:
* THE ENFORCEMENT OF SECTION 8.8(b) WOULD LIKELY INVOLVE EXTENSIVE AND
COSTLY LITIGATION THAT MAY NOT BE SUCCESSFUL IN RECOVERING THE AMOUNTS SET
FORTH ABOVE.
* ANY SUCH LITIGATION WOULD LIKELY CAST A CLOUD OF UNCERTAINTY OVER THE
MARKETABILITY OF TRUST SHARES IN LIGHT OF THE FACT THAT THIRD PARTIES MAY
NOT BE ABLE TO DETERMINE WHETHER SHARES THEY ARE PROPOSING TO PURCHASE MAY
BE EXCESS SHARES.
* THE LANGUAGE OF SECTION 8.8(b) OF THE BYLAWS DOES NOT PROVIDE A SPECIFIC
MECHANISM OR PROCEDURE FOR ENFORCEMENT OF THE PROVISIONS OF THAT SECTION
WITH RESPECT TO THE PICO GROUP, PARTICULARLY IN LIGHT OF THE FACT THAT THE
PICO GROUP HAS TRANSFERRED THE ECONOMIC INTEREST OF ALL SHARES IN EXCESS
OF 9.8% TO THE INVESTMENT ACCOUNTS OF THIRD PARTIES NOT KNOWN TO THE
TRUST. IT IS REASONABLE TO ANTICIPATE THAT ANY SUCH THIRD PARTY
TRANSFEREES OF TRUST SHARES WOULD EXPECT TO BE COMPENSATED FOR SUCH
SHARES. ANY SUCH THIRD PARTY TRANSFEREES COULD ALSO REASONABLY ARGUE THAT
THE SALE TO THIRD PARTIES OF WHAT MAY HAVE BEEN CONSIDERED EXCESS SHARES
IN THE HANDS OF THE PICO GROUP CLEANSED SUCH SHARES OF THIS STATUS. THE
PRINCIPLES OF EQUITY, THE SILENCE OF THE BYLAWS ON THESE ISSUES AND OTHER
PROVISIONS OF THE BYLAWS MAY REQUIRE THAT THE TRUST PAY THE PICO GROUP OR
SUCH OTHER THIRD PARTIES, AS APPLICABLE, FOR THE FAIR MARKET VALUE OF ANY
TRUST SHARES CURRENTLY OWNED BY SUCH PARTIES THAT ARE DEEMED EXCESS SHARES
BY THE TRUST.
* THE PRIMARY PURPOSE OF THE BYLAWS IS TO PROTECT THE TRUST'S STATUS AS A
REAL ESTATE INVESTMENT TRUST AND THE TRUST BELIEVES THAT SUCH STATUS HAS
NOT BEEN IMPAIRED AS A RESULT OF THE PICO GROUP'S SHARE OWNERSHIP (SUCH
BELIEF IS BASED, IN PART, ON AN OPINION OF THE PICO GROUP'S COUNSEL AS
DESCRIBED BELOW).
* THE POTENTIAL DISRUPTION OF THE TRUST'S BUSINESS AS A RESULT OF THE TIME
AND EFFORT THAT MANAGEMENT AND THE DIRECTORS OF THE TRUST WOULD BE
REQUIRED TO DEVOTE TO SUCH LITIGATION.
Your Board of Directors urges you to complete and return the enclosed GOLD
PROXY CARD so that your shares will be represented at the Special Meeting.
Your Board of Directors also urges you not to be concerned about the effect
of the PICO Group's past ownership of Trust shares on the status of the Trust
as a REIT for tax purposes.
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THE TAX STATUS OF THE TRUST IS NOT IN JEOPARDY.
The Board of Directors of the Trust has received an opinion letter from
counsel to the PICO Group, subject to various assumptions and qualifications,
to the effect that the ownership by the PICO Group of Trust shares in excess of
the 9.8% limitation did not at any time cause the Trust to violate either the
closely held test or the tenant owned test.
RECENT DEVELOPMENTS
The Board of Directors scheduled the Annual Meeting of Shareholders for
July 3, 1997, to vote upon the election of directors, the Bylaw Amendment and
certain other matters, and mailed its proxy statement to shareholders on June
3, 1997. KelCor formed a committee to solicit proxies for the election of its
nominees as directors of the Trust and to oppose the Bylaw Amendment and
certain other matters proposed by the Board of Directors.
On June 5, 1997, KelCor filed a lawsuit in the Circuit Court of St. Louis
County, Missouri (the "Court") against the Trust. The lawsuit sought, among
other things, (i) a declaratory judgment to the effect that all Excess Shares
owned by the PICO Group are not entitled to vote, or to be considered in
determining the presence of a quorum, on any matter on which shares of the
Trust are otherwise permitted to vote and (ii) an injunction enjoining the
Trust from, among other things, soliciting or voting any proxies in connection
with any special or annual meeting of shareholders and conducting any special
or annual meeting of shareholders of the Trust. KelCor also filed a motion for
a temporary restraining order to prevent the Trust from soliciting proxies in
connection with any special or annual meeting of shareholders and to prevent
the Trust from conducting any special or annual meeting of shareholders.
On June 6, 1997, the Court denied KelCor's motion for a temporary
restraining order and set June 13, 1997 as the date for a hearing on KelCor's
motion for the injunction described above. On June 24, 1997, the Trust and
KelCor agreed, among other things, to postpone the Annual Meeting of
Shareholders scheduled for July 3, 1997 and to schedule a Special Meeting of
Shareholders for August 8, 1997 only to consider and vote upon the Bylaw
Amendment. Attached to this Proxy Statement as Exhibit B is a copy of the
settlement agreement reached between the parties.
THE BOARD OF DIRECTORS BELIEVES THAT THE AMENDMENT TO THE BYLAWS
AS DESCRIBED ABOVE IS IN THE BEST INTERESTS OF THE SHAREHOLDERS.
* The Board believes that a more desirable degree of certainty would result
from an amendment to the Bylaws that clarifies that the calculation of the
9.8% ownership threshold is to be in conformity with the provisions of the
Code related to REITs.
* The Board believes that suspending application and enforcement of Section
8.8(b) for all periods on or prior to April 23, 1997 would remove possible
doubt as to the marketability of any of the Trust's shares, would enable
the Trust to avoid becoming entangled in costly litigation with uncertain
results and would enable management of the Trust to devote more of its
attention to the real estate business of the Trust.
* The Board believes that it is proper to clarify that neither the Trust,
nor the Board nor the officers of the Trust are responsible for making
determinations as to how many Trust shares are owned by any given person
for purposes of Section 8.8 of the Bylaws because the difficulties
involved in such a task are largely the result of the nominee ownership
system of securities.
9
<PAGE> 11
* The Board believes that providing the Independent Directors with a right
to amend the Bylaws without shareholder approval in order to protect the
Trust's REIT status or otherwise minimize the Trust's federal income tax
is consistent with the discretion and flexibility otherwise provided to
the Independent Directors with respect to issues related to Section 8.8 of
the Trust's Bylaws.
* The references in Section 8.8 to warrants to purchase additional Trust
shares are no longer necessary since all warrants previously outstanding
have expired.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ABOVE DESCRIBED AMENDMENT TO
---
THE TRUST'S BYLAWS ON THE ENCLOSED GOLD PROXY CARD.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
On or about March 19, 1997, an Amendment No. 3 to Schedule 13G setting
forth the following information was filed with the SEC by PICO Holdings, its
wholly owned subsidiary, PICO, and various of their other subsidiaries. The
Amendment No. 3 to Schedule 13G indicates that PICO Holdings and its
subsidiaries are collectively the beneficial owners of 202,061 shares of the
Trust's common stock, or 23.3% of the total outstanding shares, have sole
dispositive power with respect to all of such shares, sole voting power with
respect to 84,966 of the shares and no voting power with respect to 117,095
shares. The principal business address of PICO Holdings is 875 Prospect Street,
Suite 301, La Jolla, California 92037. Refer to the discussion of Proposal 1
for additional information with respect to the ownership of the Trust's shares
by the PICO Group. The Trust has been informed that Mr. Dean Jones, P.O. Box
247, Sneedville, Tennessee owns 46,500 shares, or approximately 5.3%, of the
Trust's outstanding common stock.
The table below sets forth information as of April 1, 1997, regarding the
number of shares of the Trust beneficially owned by each of the directors,
anticipated nominees for director and executive officers of the Trust and by
all directors, anticipated nominees and officers as a group:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT
NAME OF BENEFICIALLY OF
BENEFICIAL OWNER OWNED<F2> CLASS<F4>
---------------- ---------------- ---------
<S> <C> <C>
Gregory J. Nooney, Jr <F1>.................... 7,900<F3> <F*>
Patricia A. Nooney <F5>....................... 4,957 <F*>
Robert E. Kresko <F6>......................... 100 <F*>
Gene K. Beare <F7>............................ 6,750 <F*>
Bruce P. Hayden <F7>.......................... 100 <F*>
James P. Ingram <F7>.......................... 50 <F*>
John R. Hart <F7><F8>......................... 0 <F*>
Directors and officers as a group............. 19,857 2.3%
<FN>
- -------
<F1> Chairman of the Board, Chief Executive Officer and Director of the Trust.
<F2> Under the rules of the Securities and Exchange Commission, persons who have
power to vote or dispose of securities, either alone or jointly with
others, are deemed to be the beneficial owners of such securities.
Accordingly, shares owned separately by spouses or other family members are
not included. Except as described in the footnotes below, the director has
both sole voting power and sole investment power with respect to the shares
set forth in the table.
10
<PAGE> 12
<F3> Includes 2,909 shares owned by Nooney Company, of which Gregory J. Nooney,
Jr. is a director and shareholder. Includes 3,535 shares held as co-trustee
of a trust, as to which Mr. Nooney shares voting and investment power.
<F4> An asterisk indicates that the number of shares beneficially owned does not
exceed one percent of the Trust's common stock issued and outstanding.
<F5> President, Secretary, Treasurer and Director of the Trust.
<F6> Director of the Trust.
<F7> Independent Director as defined in the Trust's Bylaws.
<F8> Mr. Hart disclaims any beneficial ownership interest in the shares owned by
PICO Holdings, Inc. as described above.
</TABLE>
John R. Hart has been a director of the Trust since November 15, 1996 when
he was elected to the Board of Directors to fill the vacancy on the Board of
Directors caused by the death of R. Michael O'Brien in September, 1996. Mr.
Hart is also the President and Chief Executive Officer of PICO Holdings. Mr.
Hart owns presently exercisable options to purchase up to 1,908,848 shares of
PICO Holdings, which number of shares represents approximately 6.8% of the
issued and outstanding shares of PICO Holdings.
BY ORDER OF THE BOARD OF DIRECTORS
PATRICIA A. NOONEY
Secretary
July 9, 1997
St. Louis, Missouri
11
<PAGE> 13
EXHIBIT A<F*>
PROPOSED BYLAW AMENDMENT
[(a) In](a) Except as otherwise provided in this Section 8.8, in order to
--------------------------------------------------------
guard against the concentration of ownership of Shares [and warrants or similar
rights to purchase Shares] to an extent which is contrary to the requirements of
the REIT Provisions of the Internal Revenue Code (including, but not limited
---------------------------
to, Sections 856(a)(6) and 856(d)(2)(B), or successor provisions, of the
- ------------------------------------------------------------------------
Internal Revenue Code), no Person may at any time subsequent to the Trust's
- -----------------------
commencement of business operations acquire ownership of or own, [directly or
indirectly, as determined pursuant to both (i) Section 318 and (ii) Sections
542(a) and 544] directly or indirectly by application of the pertinent indirect
---------------------------------------------------------------
ownership rules of the Internal Revenue Code[, (A) a number of Shares]
- ---------------
(including, but not limited to, Sections 318, 542(a), 544, 856(d)(5) and
- ------------------------------------------------------------------------
856(h), or successor provisions, of the Internal Revenue Code) in excess of
- --------------------------------------------------------------
9.8% of the value of the outstanding Shares of the Trust[, or (B) an aggregate
------------
number of Shares and warrants and similar rights to purchase Shares in excess
of 9.8% of the aggregate number of outstanding Shares and warrants and similar
rights to purchase Shares] (the "9.8% Limit"). In addition, no Shares shall be
-------------------
transferred (or issued[, for example, upon the exercise of warrants) and no
warrants shall be transferred])to any Person if, following such transfer (or
- ---
issuance), such Person's direct or [indirect] indirect ownership of Shares would
- ---------- -------- -----
exceed the 9.8% Limit. If [and warrants and similar rights to purchase Shares
- -------------------------
would exceed these limits.]
[(b) If Shares or warrants or similar rights to purchase] Shares are
acquired by any Person in violation of [this Section 8.8] the 9.8% Limit, such
---------------
acquisition shall be valid only to the extent it does not result in a violation
of [this Section 8.8] the 9.8% Limit, and such acquisition shall be null and
---------------
void with respect to the excess ("Excess Shares" [and/or "Excess Warrants")]).
-
Excess Shares shall be deemed to have been acquired by, and to be held on behalf
---
of, the Trust, and, as the equivalent of treasury shares for such purpose, shall
not be considered to be outstanding for quorum or voting purposes, and shall
not be entitled to receive dividends, interest or any other distribution.
[Excess warrants shall be deemed to be void] Notwithstanding anything to the
-------------------------------
contrary contained in these By-laws, the Trust shall not be required to make
- ----------------------------------------------------------------------------
any payment to any Person in respect of Excess Shares, such Excess Shares shall
- -------------------------------------------------------------------------------
be forfeited to the Trust without compensation, and the Trust shall
- -------------------------------------------------------------------
automatically become the record and beneficial owner of the Excess Shares.
- --------------------------------------------------------------------------
(b) The provisions of Section 8.8(a) shall not (before or after April 23,
-------------------------------------------------------------------------
1997) be applicable with respect to any Excess Shares acquired by any Person on
- -------------------------------------------------------------------------------
or prior to April 23, 1997 (the "Exempt Shares") provided, however, that any
- ----------------------------------------------------------------------------
person who owns or owned any Exempt Shares on or prior to April 23, 1997 shall
- ------------------------------------------------------------------------------
not acquire ownership of or own, directly or indirectly, any additional Shares
- ------------------------------------------------------------------------------
subsequent to such date if all Shares owned, directly or indirectly, by such
- ----------------------------------------------------------------------------
Person after such acquisition exceeds the 9.8% Limit and, if such new Shares
- ----------------------------------------------------------------------------
are in fact acquired, such new Shares shall be treated as Excess Shares.
- -----------------------------------------------------------------------
(c) The Trust shall, if deemed necessary or [desirable] advisable to
---------
implement the provisions of this Section 8.8, include on the face or back of
each Share [or warrant] certificate issued by the Trust an appropriate legend
referring the holder of such certificate to the restrictions contained in this
Section 8.8 and stating that the complete text of this Section 8.8 is on file
with the Secretary of the Trust at the Trust's registered office.
(d) Nothing herein contained shall limit the ability of the Trustees to
impose or to seek judicial or other imposition of additional restrictions if
deemed necessary or advisable to protect the Trust and the interests of its
Shareholders by preservation of the Trust's status as a [qualified] REIT under
the Internal Revenue Code or otherwise minimize the risk that the Trust may
-------------------------------------------------
become subject to federal income tax payable by the Trust.
- ----------------------------------------------------------
A-1
<PAGE> 14
(e) If any provision of this Section 8.8 or any application of any such
provision is determined to be invalid by any federal or state court having
jurisdiction over the issue, the validity of the remaining provisions shall not
be affected and the other applications of such provisions shall be affected
only to the extent necessary to comply with the determination of such court.
(f) Except as expressly required by the REIT Provisions of the Internal
-----------------------------------------------------------------------
Revenue Code, nothing contained in these By-laws shall in any manner be read or
- -------------------------------------------------------------------------------
understood to obligate or make the Trust, the Trustees or the officers of the
- -----------------------------------------------------------------------------
Trust, responsible for making determinations relating to the number of Shares
- -----------------------------------------------------------------------------
deemed to be owned by any Person for purposes of this Section 8.8.
- ------------------------------------------------------------------
(g) Notwithstanding anything to the contrary contained in Article XI, these
---------------------------------------------------------------------------
Bylaws may be amended from time to time upon a vote of the majority of the
- --------------------------------------------------------------------------
Independent Directors, and without the approval of the Shareholders, if said
- ----------------------------------------------------------------------------
majority of the Independent Directors determine that an amendment is necessary
- ------------------------------------------------------------------------------
or advisable to protect the status of the Trust as a REIT under the REIT
- ------------------------------------------------------------------------
Provisions of the Code or otherwise minimize the federal income tax payable by
- ------------------------------------------------------------------------------
the Trust.
- ----------
[FN]
<F*> This Exhibit A of the printed proxy statement will contain text in bold
face type and text that is stricken. For purposes of electronically filing
this definitive proxy statement with the Securities and Exchange Commission
EDGAR system, it was necessary to indicate the proposed deletions as bracketed
([]) text and the proposed additions as underlined (--) text. The definitive
proxy statement that will be distributed to shareholders will indicate the
proposed deletions as struck through text and the proposed additions in bold
face type.
A-2
<PAGE> 15
EXHIBIT B
SETTLEMENT AGREEMENT
This Settlement Agreement between KelCor, Inc. and its affiliates, as
defined under the Securities Exchange Act of 1934, ("KelCor") and Nooney
Realty Trust, Inc. and its affiliates, as defined under the Securities Exchange
Act of 1934, ("Nooney") is entered into as of this 24th day of June 1997.
WHEREAS, Nooney is a publicly-traded corporation and KelCor is a
shareholder of Nooney; and
WHEREAS, KelCor has commenced an action against Nooney styled KelCor, Inc.
v. Nooney Realty Trust, Inc., in the Circuit Court for St. Louis County, Civil
Action No. 97 CC-001750 (the "Lawsuit") on June 5, 1997, seeking a
declaratory judgment and preliminary and permanent injunctive relief barring
Nooney from conducting an annual meeting of shareholders and from voting
certain proxies in connection with any annual or special meeting of
shareholders of the Trust, inter alia; and
WHEREAS, the parties appeared and began argument on KelCor's motion for a
preliminary injunction on June 13, 1997; and
WHEREAS, the parties desire amicably to resolve their differences, for the
sole purpose of settlement, and without admitting the merits of any position
taken by either party in the course of the Lawsuit and without admitting any
fault or liability.
NOW, THEREFORE, the undersigned parties agree as follows:
1. Nooney shall postpone its Annual Meeting of Shareholders to a date at
least forty-five (45) days after the special meeting referred to in the next
paragraph and, if Section 6(a) hereof is applicable pursuant to the terms of
this Agreement, no later than 45 days after the court enters its order in the
Lawsuit with respect to the voting rights of the "Excess Shares" of the PICO
Group (as defined below in Section 5(d).
2. Nooney shall call a special meeting of shareholders to be held thirty
(30) days after the date on which the parties can mail their proxy materials as
provided in paragraph 4, below, to vote on a single issue that shall be the
same as Proposal A (except that subparagraph (f) of the amendment proposed
therein will be deleted and the remaining subparagraphs appropriately re-
lettered) as contained in the proxy statement filed by Nooney with the
Securities and Exchange Commission ("SEC") on June 3, 1997 (the "By-Law
Amendment Proposal") and, in connection with such meeting:
(a) Nooney shall set the record date as Friday, June 27, 1997; and
(b) The affirmative vote of 62.0% of the issued and outstanding shares
of Nooney will be required to pass the By-Law Amendment Proposal. As used
in this Settlement Agreement, "issued and outstanding shares of Nooney"
shall refer to 866,624 shares without disqualification of any shares that
may be deemed Excess Shares pursuant to the present By-Law Section 8.8(b).
3. KelCor and Nooney shall file their proxy materials regarding the By-Law
Amendment Proposal with the SEC no sooner than the first (1st) business day
after the full execution of this Settlement Agreement and no later than three
(3) business days after the full execution of this Settlement Agreement.
4. KelCor and Nooney, and each of their directors, officers and agents,
shall not mail proxy solicitation materials or otherwise actively solicit
proxies prior to thirteen (13) days after the full execution of this Settlement
Agreement; provided, if the SEC reviews the proxy solicitation
B-1
<PAGE> 16
material of KelCor and/or Nooney, both parties agree to mail such materials and
conduct any other solicitation of proxies no earlier than the third (3rd)
business day after the SEC has completed its reviews and notified KelCor and
Nooney that it has no further comments. Both KelCor and Nooney agree to
promptly proceed with all matters relating to the SEC review, if any, of such
proxy solicitation material.
5. KelCor and Nooney agree that the Special Meeting of Shareholders and the
Annual Meeting of Shareholders will be conducted as follows:
(a) Nooney will appoint an independent inspector of elections mutually
acceptable to Nooney and KelCor to tabulate votes on all matters brought
before the special meeting or the annual meeting with the fees and expenses
of such independent inspector to be split by Nooney and KelCor;
(b) Representatives of all shareholders will be allowed to attend the
special meeting and the annual meeting;
(c) All stockholders will be provided reasonable opportunity to speak at
the special meeting and annual meeting on all matters brought before the
special meeting or annual meeting; and
(d) If the court determines that some of the shares of Nooney stock
owned directly or indirectly by PICO Holdings, Inc. and its affiliates, as
defined under the Securities Exchange Act of 1934 (collectively, the "PICO
Group"), are "Excess Shares" under the Nooney Bylaws and cannot be voted
at the annual meeting, then Nooney and Kelcor agree to follow the court's
instructions with respect to the voting of any such Excess Shares at the
annual meeting.
6. Upon the tabulation of votes on the By-Law Amendment Proposal at the
special meeting of shareholders:
(a) if the By-Law Amendment Proposal receives less than 62.0% of the
vote of the issued and outstanding shares of Nooney as of the record date
for the special meeting of shareholders, then paragraph 6(b) of this
Settlement Agreement shall be void in its entirety.
(b) if the By-Law Amendment Proposal receives 62.0% or more of the vote
of the issued and outstanding shares of Nooney as of the record date for
the special meeting of shareholders, then KelCor (i) shall not challenge
the passage of the By-Law Amendment and Proposal, (ii) shall accept the
By-Law Amendment as valid and enforceable and (iii) shall dismiss Count I
of the Lawsuit with prejudice with each party to bear its own costs.
KELCOR, INC.
By: /s/ David L. Johnson
-------------------------------------
Witnessed:
/s/ Larry Huebner
- ----------------------------------
Its Attorney
NOONEY REALTY TRUST, INC.
By: /s/ Gregory J. Nooney, Jr.
-------------------------------------
Witnessed:
/s/ Frederick W. Scherrer
- ----------------------------------
Its Attorney
B-2
<PAGE> 17
- -------------------------------------------------------------------------------
GOLD PROXY NOONEY REALTY TRUST, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned does hereby appoint Gregory J. Nooney, Jr., Patricia A.
Nooney and Gene K. Beare and each of them, the true and lawful attorneys-in-
fact and proxies of the undersigned (acting by a majority hereunder), with full
power of substitution, to vote all common shares of the undersigned in Nooney
Realty Trust, Inc. at the Special Meeting of Shareholders to be held on Friday,
August 8, 1997, commencing at 10:00 A.M. at the Pierre Laclede Conference
Center, 7733 Forsyth Boulevard, 2nd floor, in Clayton, Missouri, and at any
adjournment thereof, as specified on the reverse side of this proxy. This proxy
revokes all prior proxies given by the undersigned.
The undersigned acknowledges receipt of the Notice of Special Meeting and
Proxy Statement dated July 9, 1997.
------------------------------------------------
Date
------------------------------------------------
Signature
------------------------------------------------
Signature if held jointly
------------------------------------------------
Title or Authority
<PAGE> 18
- -------------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING:
---
1. PROPOSAL TO AMEND ARTICLE VIII OF THE TRUST'S BYLAWS
FOR / / AGAINST / / ABSTAIN / /
THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSAL 1.
IT IS IMPORTANT THAT YOU VOTE, SIGN AND RETURN THE ENCLOSED PROXY AS SOON AS
POSSIBLE.
BY DOING SO, YOU MAY SAVE THE TRUST THE EXPENSE OF ADDITIONAL SOLICITATION.
