UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
( X ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission File Number 1-8820
Banyan Short Term Income Trust
(Exact name of Registrant as specified in its charter)
Massachusetts 36-6801275
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
150 South Wacker Drive, Chicago, Illinois 60606
(Address of principal executive offices (Zip Code)
(Registrant's telephone number, including area code) (312) 553-9800
Securities registered pursuant to Section 12(b) of the Act:
Title of each Class Name of each exchange on which registered
Shares of Beneficial Interest American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X . NO .
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. ( X )
The Registrant's revenues for the preceding twelve months were $646,710.
Shares of beneficial interest outstanding as of February 2, 1996: 6,667,410.
The aggregate market value of the Registrant's shares of beneficial interest
held by non-affiliates on such date was approximately $4,569,472.
DOCUMENTS INCORPORATED BY REFERENCE
Exhibit index located on page 19 of the sequentially numbered pages.
Transitional Small Business Disclosure Format: YES . NO X .
TABLE OF CONTENTS
PART I
ITEM 1. DESCRIPTION OF BUSINESS . . . . . . . . . . . . . . . . . 1
ITEM 2. DESCRIPTION OF PROPERTY . . . . . . . . . . . . . . . . . 2
ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . 3
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . 3
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . 4
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION OR PLAN OF OPERATION . . . . . . . . . . . . . 5
ITEM 7. FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . 11
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . . . 11
PART III
ITEM 9. TRUSTEES, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS OF THE REGISTRANT . . . . . . . . . . . . . . . . 12
ITEM 10. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . 14
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . 16
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . 18
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K . . . . . . . . . . . . . . . . . . . . . . . . 19
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
The Registrant, Banyan Short Term Income Trust (the "Trust"), is a
Massachusetts business trust organized pursuant to a Declaration of Trust filed
July 13, 1984, as amended, under the name VMS Short Term Income Trust. The
Trust began doing business under its present name during the first quarter of
1991 and subsequently received shareholder authorization during the second
quarter of 1991 to amend its Declaration of Trust to formally change its name
to Banyan Short Term Income Trust.
BUSINESS OPERATIONS
The Trust was formed to make short-term loans to affiliates of VMS
Realty Partners. These borrowers subsequently defaulted on their obligations
adversely affecting the Trust. As a result of these defaults, the Trust
suspended the making of new loans, except for advances of additional funds
under circumstances which it was deemed necessary to preserve the value of
existing collateral, including instances where the Trust has foreclosed upon or
taken title, directly or indirectly, to the collateral. The Trust also
suspended distributions to shareholders. In early 1990, the Trust implemented
a Principal Recovery Plan designed to preserve its assets and manage its
properties acquired through foreclosure or otherwise until they could be
disposed of in an orderly manner. On August 17, 1995, the Trust's Board of
Trustees authorized management to prepare a Plan of Termination and Liquidation
(the "Plan") for the Trust which was to include plans for disposing of its
remaining assets and the distribution of any net cash proceeds to the
shareholders. On October 26, 1995 the Trustees unanimously approved the Plan.
A review of the Trust's business plan, which led to the consideration
and ultimately the adoption of the Plan, was triggered by the Trust's 1995
disposition of its largest remaining assets, its note receivable collateralized
by the Boca Raton Golf and Tennis Club and the sale of its interest in the Boca
Raton Marina Parcel. As a result of the Boca dispositions, the Trustees
concluded that termination of the Trust would be the best strategy to maximize
shareholder value. Pursuant to the Plan, it is the Trustees' intention to
complete the sale of the townhome unit in the Federal Square Project, complete
the sale of the remaining 5-acre portion of the Oakridge site, dispose of its
liquidating trust interest and proceed to wind-up and terminate the Trust's
affairs within the next nine months. See Item 2, "Description of Property" and
Item 6, "Management Discussion and Analysis of Financial Condition or Plan of
Operation" for further details regarding the Trust's remaining real estate
assets and its Plan of Termination and Liquidation.
The Trust has four employees who serve as executive officers.
Administrative and accounting services are provided by Banyan Management Corp.
See Item 12, "Certain Relationships and Related Transactions," Item 10,
"Executive Compensation" and Note 6, "Transactions with Affiliates" of Notes to
Consolidated Financial Statements.
The Trust reviews and monitors compliance with federal, state and local
provisions which have been enacted or adopted regulating the discharge of
material into the environment, or otherwise relating to the protection of the
environment. For the year ended December 31, 1995, the Trust did not incur any
material capital expenditures for environmental control facilities nor does it
anticipate making any expenditures for environmental control facilities for the
year ended December 31, 1996.
The Trust elected to be treated as a real estate investment trust
("REIT") under Sections 856-860 of the Internal Revenue Code for the years
ended December 31, 1995, 1994 and 1993. On March 20, 1996, the Trust notified
the Internal Revenue Service of its intent to revoke the tax election to be
treated as a REIT under section 856(c)(1) of the Internal Revenue Code of 1986,
as amended, due to the decision to liquidate and terminate the Trust. Pursuant
to the revocation of tax election 856(c)(1), the Trust will be taxable as a "C"
corporation and will no longer be required to meet certain pre-determined
distribution, asset and income requirements, effective January 1,1996.
The business of the Trust is not seasonal and the Trust does no foreign
or export business. The Trust does not segregate revenue or assets by
geographic region, and such presentation is not applicable and would not be
material to an understanding of the Trust's business taken as a whole.
ITEM 2. DESCRIPTION OF PROPERTY
As of March 18, 1996 the Trust has ownership interests in two
properties. See Item 6, "Management's Discussion and Analysis of Financial
Condition or Plan of Operation" and Note 4, "Foreclosed Real Estate Held for
Sale, Note Receivable and Other Income", and Note 5, "Investment in Real Estate
Ventures" of the Notes to Consolidated Financial Statements for additional
information pertaining to the Trust's property interests. Below is a brief
description of property interests owned by the Trust as of March 18, 1996:
Property Name/ Date of Property
Ownership Ownership Location Description
Oakridge 03/06/91 Dania, approx. 5-acre
(a 50% General Florida parcel of
Partnership vacant land
Interest)
Federal Square 08/21/91 Chicago, 1 unit of a 117
at Dearborn Illinois unit townhouse
Park (a 75% development
General Part-
nership Inter-
est)
ITEM 3. LEGAL PROCEEDINGS
The Registrant is not aware of any material pending legal proceedings
as of March 18, 1996, nor were any proceedings terminated during the quarter
ended December 31, 1995.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Trust did not submit any matter to a vote of its security holders
during the fourth quarter of 1995.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The Trust's shares were traded on the American Stock Exchange ("AMEX")
(Symbol - VST) until February 2, 1996. On November 29, 1995, the Trust
declared its initial liquidating distribution of $3.95 per share which was
paid December 22, 1995 to all record holders of beneficial interest on
December 11, 1995. The initial liquidating distribution was declared and
paid pursuant to the Trust's Plan of Termination and Liquidation (the
"Plan"). See Item 1, "Description of Business" and Item 6, "Management
Discussion and Analysis of Financial Condition or Plan of Operation" for
further details of the Trust's Plan. Subsequent to the initial liquidating
distribution, the Trust was no longer able to meet certain financial and
listing requirements of the AMEX and as a result the AMEX ceased trading the
Trust's shares on February 2, 1996. The AMEX has notified the Trust that
final delisting of its shares is to occur on April 10, 1996. There were no
other distributions declared by the Trust for the years ending December 31,
1995 and 1994. The range of high and low sales prices per share for each of
the quarters in the years ended December 31, 1995 and 1994 are as follows:
Share Price
Quarter 1995 1994
1 High $2.500 $1.812
Low $1.813 $1.375
2 High $3.250 $2.063
Low $1.875 $1.625
3 High $3.750 $2.250
Low $2.813 $1.812
4 High $4.500 $2.125
Low $0.438 $1.750
(a)
(a) Subsequent to the $3.95 per share liquidating distribution discussed
above.
The Trust's remaining distribution to its shareholders is dependent
upon, among other things: (i) changes in eventual sales price of and cash
distributions derived from the Trust's investments in the Federal Square
Project and the Oakridge property; (ii) the Trust's ability to control its
expenses; and (iii) recovery on and potential distribution of cash proceeds
from the assets of the liquidating trust in which the Trust holds an
interest.
The Trust anticipates making a final distribution to the shareholders
of $0.40 to $0.60 per share pursuant to the Plan during the fourth quarter of
1996 depending upon the disposition of its remaining assets. See Item 6.
"Management's Discussion and Analysis of Financial Condition or Plan of
Operation" for further details regarding the Trust's final distribution and
Plan of Termination and Liquidation.
As of March 18, 1996, there were 2,736 record holders of shares of
beneficial interest.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN
OF OPERATION
GENERAL
Banyan Short Term Income Trust (the "Trust") was formed to make short-
term loans to affiliates of VMS Realty Partners. These borrowers
subsequently defaulted on their obligations adversely affecting the Trust.
As a result of these defaults, the Trust suspended the making of new loans,
except for advances of additional funds under circumstances which it was
deemed necessary to preserve the value of existing collateral, including
instances where the Trust has foreclosed upon or taken title, directly or
indirectly, to the collateral. In early 1990, the Trust implemented a
Principal Recovery Plan designed to preserve its assets and manage its
properties acquired through foreclosure or otherwise until they could be
disposed of in an orderly manner. On August 17, 1995, the Trust's Board of
Trustees authorized management to prepare a Plan of Termination and
Liquidation (the "Plan") for the Trust which was to include plans for
disposing of its remaining assets and the distribution of any net cash
proceeds to the shareholders. On October 26, 1995 the Trustees unanimously
approved the Plan.
A review of the Trust's business plan which led to the consideration
and ultimately the adoption of the Plan was triggered by the Trust's 1995
disposition of its largest remaining assets; its note receivable
collateralized by the Boca Raton Golf and Tennis Club and the sale of its
interest in the Boca Raton Marina Parcel. Prior to the adoption of the Plan,
the Trustees evaluated three other alternatives: (i) continuing operations
as a real estate investment trust; (ii) a secondary offering; or (iii) a
merger. Management analyzed internally generated financial projections,
which contained leverage and internal growth assumptions, in order to assess
the viability of continuing the Trust in its present form without the
infusion of any addition capital. The Trustees concluded that the Trust,
with its existing equity base and expense structure, would not generate
enough net income, upon reinvestment of the Boca proceeds and its cash
reserves to support a market price per share in excess of the anticipated
liquidation value per share of the Trust. Management also reviewed the
following two alternatives: (i) a secondary offering; or (ii) a merger. The
Trustees concluded that the Trust would not be a candidate for a secondary
offering due to the Trust's small asset base and lack of income generating
properties. The Trust also considered locating a merger partner that would
contribute additional management depth and real estate assets. Management
hired an investment banker to locate potential merger candidates and
conducted discussions with various entities but was unable to identify a
suitable merger candidate.
Based on these findings, the Trustees concluded that termination of
the Trust would be the best strategy to maximize shareholder value. Pursuant
to the Plan, it is the Trustees' intention to complete the sale of the
townhome unit in the Federal Square Project, complete the sale of the
remaining portion of the Oakridge site, dispose of its liquidating trust
interest and proceed to wind-up and terminate the Trust's affairs within the
next nine months. See Property Operations below for further details
regarding the Trust's remaining real estate assets. The Plan does not
contemplate the distribution to the shareholders of the Trust of securities
or other property in kind and, therefore, the Trustees did not seek
shareholder approval of the Plan. On December 22, 1995, the Trust made an
initial liquidating distribution per the Plan to all shareholders of record
on December 11, 1995 in the amount of $3.95 per share. Assuming completion
of the sale of the Trust's remaining real estate assets by the end of the
third quarter of 1996, the Trust anticipates a final distribution to
shareholders of $0.40 to $0.60 per share. The distribution is anticipated to
occur sometime in the fourth quarter of 1996. The estimated timing and
amount of the Trust's termination and final distribution is based upon
various assumptions associated with the disposition of its remaining assets,
as discussed above. The final termination and distribution could vary from
the Trust's estimates in the event the assets are disposed of earlier or
later than anticipated and cash proceeds received upon disposition are more
or less than expected due to changes in the market conditions as originally
estimated.
Subsequent to the initial liquidating distribution, the Trust was no
longer able to meet certain financial and listing requirements of the
American Stock Exchange (the "AMEX") and as a result the AMEX ceased trading
of the Trust's shares on February 2, 1996. The AMEX has notified the Trust
that final delisting of its shares is to occur on April 10, 1996. Following
the final distribution, the Trust will close its transfer books and other
records at the close of business on a date determined by the Trustees and
thereafter certificates representing shares shall not be assignable or
transferable on the Trust's books. At such time, the existence of the Trust
will effectively be terminated.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents consist of cash and short-term investments.
The Trust's cash and cash equivalents balance at December 31, 1995 and 1994
was $1,635,312 and $2,687,908, respectively. In addition, as of December 31,
1994, the Trust also held $4,638,553 in investment securities which were
subsequently converted to cash. The decrease in cash, cash equivalents and
investment securities between the years ended December 31, 1995 and 1994 of
approximately $5,691,000 is the result of the Trust's use of approximately
$27,000,000 in cash proceeds, offset by the receipt of cash proceeds, from
various sources, in the amount of approximately $21,000,000. The Trust's use
of cash proceeds is due primarily to the liquidating distribution in the
amount of $26,336,270 as discussed above and payment of the Trust's operating
expenses. Partially offsetting these decreases in cash, cash equivalents and
investment securities was the Trust's receipt of net cash proceeds from the
Boca Marina Sale of $13,895,000, the repayment of the Boca Golf and Tennis
Club notes receivable of $3,500,000, the receipt of capital distributions
from the Federal Square Project of $3,035,118, the receipt of $503,623 in
distributions from the Trust's interest in a liquidating trust (see below)
and income received on the investment of cash and cash equivalents and
investment securities. See Results of Operations below for further details
regarding the Trust's property activities.
The Trust's current balance of cash and cash equivalents along with
the cash proceeds to be derived from the sale of the Trust's remaining
property interests is expected to be sufficient to meet its reasonably
anticipated needs for its Plan as discussed above.
On February 9, 1995 and December 20, 1995, the Trust received cash
distributions of $497,873 and $5,750, respectively with respect to its
interest in a liquidating trust established for the benefit of the unsecured
creditors of VMS Realty Partners and its affiliates ("VMS"). For the year
ended December 31, 1995, the Trust has recorded $591,311 of the distributions
as a recovery of losses on loans, notes and interest receivable and class
action settlement costs and expenses. The $591,311 net recovery in 1995
includes the $503,623 distribution received during 1995 plus the Trust's
recognition of a $87,688 reduction in the amount due to the Class Action
Settlement Fund representing the Trust's share of amounts due as required per
the terms of the previously settled VMS securities litigation. The reduction
in the amount due to the Class Action Settlement Fund was recorded by the
Trust as an accounting adjustment pursuant to a final determination of
amounts actually due per the Settlement. As of December 31, 1995 the Trust
had paid all amounts due to the Class Action Settlement Fund.
On February 22, 1995, the Trust received repayment from the Boca Raton
Hotel and Club Limited Partnership (the "Borrower") of its Boca Golf and
Tennis Club mortgage note receivable in the amount of $3,500,000 plus $24,757
of interest. Pursuant to the Borrower's note repayment the Trust released
its mortgage lien on the Boca Golf and Tennis Club property.
On June 9, 1995 a subsidiary of the Trust entered into a contract to
sell its interest in the Boca Marina Parcel to Boca Marina, Ltd. an
unaffiliated third party for a total purchase price of $14,000,000. On
September 21, 1995 the Trust completed the sale of the property and, net of
closing costs, received cash proceeds of $13,895,000. The sales price was
based upon consideration of a number of factors including market studies,
sales comparisons and other internal valuations and considerations. The sale
of the Boca Raton Marina Parcel resulted in a gain on disposition to the
Trust of $2,336,957. The Trust has no further interest in the Boca Marina
Parcel.
RESULTS OF OPERATIONS
As a result of the adoption of the Plan on October 26, 1995, effective
October 27, 1995, the Trust began reporting on the liquidation basis of
accounting. The 1995 results, therefore, are a combination of operations for
the period January 1, 1995 through October 26, 1995 on a going concern basis
as reported on the Consolidated Statements of Income and Expenses and
operations for the period October 27, 1995 to December 31, 1995 as stated on
the liquidation basis as reported on the Consolidated Statement of Changes in
Net Assets in Liquidation. See Note 2, "Summary of Significant Accounting
Policies" of the Notes to Consolidated Financial Statements for further
information.
Total income for the years ended December 31, 1995, 1994 and 1993 was
$646,710, $289,433 and $299,187 respectively. The increase in total income
for year ended December 31, 1995 compared to the same period in 1994 is due
to the increase in interest income as a result of an increase in cash and
cash equivalents available for investment. This increase in cash and cash
equivalents is primarily related to the cash proceeds received by the Trust
from the disposition of its interests in the Boca assets discussed above and
capital distributions received from the Federal Square Project. The decrease
in total income for the year ended December 31, 1994 when compared to 1993 is
primarily attributable to the decrease in operating property revenue which
resulted from the sale of the Stoughton Lock-Up property in the fourth
quarter of 1993. During 1994 and 1995, the Trust no longer owned any
operating properties. The decrease in property operating revenue was
partially offset by the increase in interest income on cash and cash
equivalents and investment securities which is attributable to an increase in
cash available for investment and an increase in interest rates on such
investments during 1994.
For the years ended December 31, 1995, 1994 and 1993 total expenses
were $1,059,442, $250,365, and $988,917, respectively. The $809,077 increase
in total expenses for the year ended December 31, 1995 when compared to 1994
is primarily related to the Trust's recognition of $550,000 of termination
and liquidation costs, a $135,716 increase in other operating expenses, and
the $123,361 decrease in the recovery of losses on loans, notes and interest
receivable and class action settlement costs and expenses. The Trust's
termination and liquidation costs consist of accrued expenses of
approximately $314,000 for directors and officers tail coverage insurance, a
termination fee payable to Banyan Management Corp. of approximately $160,000
and a severance and termination fee payable to Leonard G. Levine in the
amount of approximately $76,000 pursuant to his current employment agreement
as President of the Trust.
Other operating expenses of the Trust for 1995 increased when compared
to 1994 as a result of costs associated with the liquidation of the Trust's
remaining real estate assets and establishing the Trust's plan of termination
and liquidation. During 1995, the Trust treated the receipt of $591,311 as a
recovery of losses on mortgage loans, notes and interest receivable
reflecting the distributions received from its liquidating trust as discussed
above in Liquidity and Capital Resources. During 1994, the Trust treated the
receipt of $194,729 as a recovery of losses on mortgage interest receivable
and the receipt of $519,943 as a recovery of class action settlement costs
and expenses attributable to the recovery of net escrow proceeds related to
the litigation captioned In re VMS Securities Litigation.
The $738,552 decrease in total expenses in 1994 when compared to 1993
is primarily a result of a $714,672 recovery of losses on loans, notes and
interest receivable and class action settlement costs as discussed above, a
$187,457 decrease in expenses from operating properties and a $169,451
decrease in general and administrative expenses. Total expenses from
property operating activities was $187,457 for the year ended December 31,
1993. The Trust had no operating properties during 1995 or 1994 due to the
sale of the Stoughton Lock-Up in the fourth quarter of 1993 and the transfer
of the Trust's Dearborn property to the Dearborn Park Townhome Partnership in
May of 1993. The decrease in general and administrative expenses in 1994
when compared to 1993 is primarily the result of a decrease in the hours
charged to the Trust by Banyan Management Corp. ("BMC") as less time was
incurred by BMC personnel on Trust related matters as a result of the 1993
sale of the Stoughton Lock-Up and Manhattan Hi-Rise Garage properties.
Partially offsetting this decrease was an increase in legal costs, which are
included in other professional fees, associated with the Trust's foreclosure
action against the borrower of the Boca Golf and Tennis Club and Boca Marina
mortgage loans. Also, directors' fees, expenses, and insurance increased for
the year ended December 31, 1994 when compared to the same period in 1993 due
to higher premiums for directors' and officers' insurance.
Net Income from Real Estate Ventures was $456,849 and $1,730,764 for
the years ended December 31, 1995 and 1994, respectively compared to a net
loss of $554,380 for the year ended December 31, 1993. For the year ended
December 31, 1995, net income from real estate ventures consisted of the
Trust's share of net income from its interest in the Federal Square
Partnership in the amount of $670,365 plus the Trust's share of net loss from
the Oakridge Partnership in the amount of $213,516. The Trust's share of the
1995 net income of the Federal Square Project represents the Trust's 75%
share of the partnership's approximate $865,000 of net income from the sale
of 44 townhomes plus the recognition of $21,375 of interest income from the
Trust's construction loan to the Federal Square project. Development of the
Federal Square Project, consisting of a total of 117 townhomes, is complete
with 116 units sold or under contract as of March 18, 1996. For the year
ended December 31, 1994, net income from real estate ventures consisted of
the Trust's share of net income from its interest in the Federal Square
Partnership and the Trust's share of net income from its interest in the
Oakridge Partnership. The Trust's share of the 1994 net income in the
Oakridge Partnership was $436,123. The Trust's share of the 1994 income of
the Federal Square Project represents the Trust's 75% share of the
partnership's approximate $1,679,000 of net income from the sale of 69
townhomes plus the recognition of $35,218 of interest income from the Trust's
construction loan to the Federal Square Project. Net income per unit at the
Federal Square Project for 1995 decreased to approximately $20,000 from
approximately $24,000 for 1994 as a result of the larger more profitable
units with additional upgrades being completed and sold during the earlier
stage of the Federal Square Project. The 1994 net income from the Oakridge
site includes the Trust's gain of $869,704 on the sale of a 60-acre portion
of the site and a $433,581 loss on its operations. The Trust's losses on
operations of the Oakridge site are primarily related to zoning and marketing
costs incurred in the process of marketing the property for sale during 1995
and 1994. The Trust's 1993 $554,380 net loss from real estate ventures
related to the loss on operations of the Oakridge property. The 1993 loss on
operations includes $602,035 of zoning and holding costs which were partially
offset by $47,655 of net income generated from the golf course operations.
Golf course operations at Oakridge generated a net loss of $23,375 before
they were terminated in September 1994.
Net income from foreclosed real estate held for sale was $2,311,262
for the year ended December 31, 1995 compared to a net loss of $320,131 for
the year ended December 31, 1993. The $2,311,262 of income in 1995 consists
of a net loss from operations of the Boca Marina Parcel of $25,695 and a
$2,336,957 gain on the sale of the Boca Marina Parcel as discussed above.
The Trust's 1993 net loss from operations of foreclosed real estate held for
sale includes a net loss of $56,926 from operations of the Manhattan Hi-Rise
Garage ("Garage") plus the Trust's recognition of a $263,205 loss on the
December 28, 1993 sale of the Garage.
The combination of these changes resulted in net income for the years
ended December 31, 1995 and 1994 of $2,355,379 ($0.35 per share) and
$1,769,832 ($0.27 per share), respectively compared to a net loss of
($1,543,499) ($0.23 per share) for the year ended December 31, 1993.
PROPERTY OPERATIONS
On December 18, 1992, Banyan Dearborn Park Limited Partnership, a
wholly owned subsidiary of the Trust, entered into a partnership agreement
with Thrush Dearborn, Inc. a wholly owned subsidiary of Thrush Development
Corp. ("Thrush") to develop 117 townhomes on 3.74 acres located in the South
Loop area of downtown Chicago which had been owned by the Trust. The
partnership agreement between the Trust and Thrush became effective on May
21, 1993. The Trust contributed its ownership interest in the land valued at
$2,200,000 in exchange for a 75% general partnership interest in the
Partnership while Thrush contributed $580,000 for its 25% general partnership
interest in the Partnership. Development has been completed and during the
year ended December 31, 1995, the Dearborn Partnership sold 44 townhomes and
recognized net income from the sales of approximately $865,000. The Trust
has recognized $670,365 as its 75% share of the net income from these sales
plus the recognition of $21,375 of interest income from the Trust's
construction loan to the Federal Square Project. During 1994, the Dearborn
Partnership sold 69 townhomes and recognized net income from the sales of
approximately $1,679,000. The Trust recognized $1,294,641 as its 75% of the
net income from these sales plus the recognition of $35,218 of interest
income from the Trust's construction loan to the Federal Square Project. As
of December 31, 1995, the Dearborn Partnership had sold 113 units of the
117 units available and subsequently sold an additional 3 units.
On March 6, 1991, in satisfaction of their mortgage loans receivable,
the Trust and Banyan Mortgage Investment Fund ("BMIF"), each received a 50%
interest in the Oakridge joint venture (the "Venture") pursuant to a deed-in-
lieu agreement with the borrower. The Trust and BMIF each holds a 50%
general partnership interest in the Oakridge joint venture. The property was
comprised of 270 acres of vacant land located in Hollywood and Dania, Florida
which had been operated as a golf course. On September 30, 1994, the Venture
sold a 60-acre residential parcel of the Oakridge site to an unaffiliated
third party for $4,100,000. Subsequent to December 31, 1995, on February 5,
1996 and March 1, 1996, the Trust sold a total of 180 acres to an
unaffiliated party for approximately $4,600,000. In addition, on March 1,
1996, the Trust sold an additional 25-acre parcel of the Oakridge site to an
unaffiliated party for approximately $2,200,000. The disparity in the price
per acre between the three contracts of approximately $88,000 per acre to
$26,000 per acre is due to each parcel's unit density per approved zoning and
entitlement rights. The February and March, 1996 sales enabled the Venture
to repay a first mortgage loan collateralized by the Oakridge property in the
amount of $1,916,617. After repayment of the mortgage loan, interest and
other closing costs the Venture received net proceeds from the sales of
$4,180,505 of which $2,090,253 was distributed to the Trust representing its
50% interest in the Venture. The Trust will recognize its share of the gain
from the February and March property sales of approximately $1,051,000 in the
first quarter of 1996. The Venture is currently engaged in negotiations to
sell the remaining 5-acre retail parcel at the Oakridge site.
ITEM 7. FINANCIAL STATEMENTS
See Index to Consolidated Financial Statements on Page F-1 of this
Report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in or disagreements with the accountants on
any matter of accounting principles, practices or financial statements
disclosure.
PART III
ITEM 9. TRUSTEES, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF THE
REGISTRANT
The trustees and executive officers of the Trust are as follows:
Norman M. Gold Trustee
Gerald L. Nudo Trustee
Marvin A. Sotoloff Trustee
Leonard G. Levine President
Neil D. Hansen First Vice President
Robert G. Higgins Vice President and Secretary/General
Counsel
Joel L. Teglia Vice President/Chief Financial Officer
NORMAN M. GOLD, age 65, is a senior partner in the law firm of
Altheimer & Gray and has actively practiced law for over 40 years,
specializing in taxation, corporate and real estate law. Mr. Gold is also a
trustee of Banyan Strategic Realty Trust and a director of Banyan Management
Corp. and a trustee of New Plan Realty Trust. Mr. Gold has been a trustee of
the Trust since 1985. Mr. Gold is a certified public accountant and a member
of the Chicago and American Bar Associations.
GERALD L. NUDO, age 46, is senior vice president of the investment
banking firm of Mesirow Realty Finance, Inc., a subsidiary of Mesirow
Financial Corp., since 1990. Mr. Nudo received his Bachelor of Science
Degree from Northwestern University and his Masters Degree in Business
Administration from the University of Chicago Graduate School of Business.
Mr. Nudo is also a certified public accountant and a licensed real estate
broker in Illinois. Mr. Nudo has been a trustee of the Trust since 1985. He
is also a director of Banyan Strategic Land Fund II and Banyan Management
Corp.
MARVIN A. SOTOLOFF, age 52, is regional vice president of Premisys
Marketing Services, Inc., effective July 1993, a division of Premisys Real
Estate Services, Inc. Prior to joining Premisys Marketing Services, Inc.,
Mr. Sotoloff was executive vice president of The Palmer Group Ltd., a company
involved in real estate brokerage, development and property management, con-
centrating on commercial real estate. He is a past president of the Chicago
Office Leasing Brokers Association, a licensed real estate broker and a
member of the Illinois and Pennsylvania Bar Associations. Mr. Sotoloff has
been a trustee of the Trust since 1985. Mr. Sotoloff is also a trustee of
Banyan Strategic Realty Trust and a director of Banyan Management Corp.
LEONARD G. LEVINE, age 49, has been president of the Trust as well as
Banyan Management Corp., Banyan Strategic Realty Trust, Banyan Strategic Land
Fund II and Banyan Mortgage Investment Fund since 1990. He received a
B.S./B.A. Degree in Accounting from Roosevelt University and a Masters Degree
in Taxation from DePaul University in 1972. His areas of specialization
include real estate syndications, estate planning and taxation of closely-
held corporations. Mr. Levine is also a certified public accountant and a
licensed real estate broker.
NEIL D. HANSEN, age 49, has been first vice president of the Trust as
well as Banyan Management Corp., Banyan Mortgage Investment Fund, Banyan
Strategic Realty Trust and Banyan Strategic Land Fund II since 1991. He
received a B.S. Degree in Finance from the University of Illinois and a
Master of Management Degree from Northwestern University. He is a certified
public accountant.
ROBERT G. HIGGINS, age 44, has been vice president and general counsel
of the Trust as well as Banyan Management Corp., Banyan Mortgage Investment
Fund, Banyan Strategic Realty Trust and Banyan Strategic Land Fund II since
1992, and secretary of these entities since 1995. From 1990 to 1992, Mr.
Higgins was a contract partner at the law firm of Chapman and Cutler. Mr.
Higgins' legal experience has concentrated in the areas of real estate
development, finance, acquisition, land use, sales, lending, syndications,
general corporate and business practice. Mr. Higgins is admitted to the bar
in the States of Illinois, Minnesota and Texas. He received a B.A. Degree in
Government from the University of Notre Dame and a J.D. Degree from Loyola
University of Chicago.
JOEL L. TEGLIA, age 34, has been vice president and chief financial
officer of the Trust as well as Banyan Management Corp., Banyan Mortgage
Investment Fund, Banyan Strategic Realty Trust and Banyan Strategic Land Fund
II since 1994. Prior to assuming the responsibilities of his current
position, Mr. Teglia held the position of Controller for Banyan Management
Corp. from 1991 to 1994. He received a B.B.A. Degree in Accounting from the
University of Notre Dame. Mr. Teglia is a certified public accountant.
ITEM 10. EXECUTIVE COMPENSATION
A. TRUSTEE COMPENSATION
The Trustees are paid an annual fee of $15,000, payable quarterly,
plus $875 for each board meeting, including meetings of the audit committee,
attended in person and $250 an hour for each board meeting, including
meetings of the audit committee, attended via telephonic conference call. In
addition, each Trustee is reimbursed for out-of-pocket expenses incurred in
attending meetings of the Board.
B. EXECUTIVE COMPENSATION
Compensation paid to executive officers of the Trust for the year
ended December 31, 1995, 1994 and 1993 is as follows:
Annual Compensation
Other
Annual
Compen-
Year Salary Bonus(2) sation
Leonard G. Levine, 1995 $40,610 $27,997 n/a
President and Chief 1994 $40,610 $29,441 n/a
Executive Officer(1) 1993 $40,610 $ 5,705 n/a
Long-Term Compensation
Awards Payouts
Restricted All Other
Stock Options/ LTIP Compen-
Year Award(s) SARs (#) Payouts sation
Leonard G. Levine, 1995 n/a n/a n/a n/a
President and Chief 1994 n/a n/a n/a n/a
Executive Officer(1) 1993 n/a n/a n/a n/a
(1) No other executive officer earned more than $100,000 in salary and
bonus.
(2) See incentive compensation program discussion below.
Mr. Levine serves as chief executive officer of the Trust pursuant to an
employment agreement originally entered into January 1, 1990. This agreement is
automatically renewed each year unless either the Trust or Mr. Levine gives the
other notice of termination before March 31 preceding the end of the current
employment period. As notice was not given by either party prior to March 31,
1995, the agreement was automatically renewed through December 31, 1995. Mr.
Levine's annual salary is subject to annual review for increases due to the cost
of living and merit factor, but any increases are at the sole discretion of the
Board of Trustees.
In addition to his base salary, the Board may grant Mr. Levine a
discretionary bonus based on merit performance. Further, Mr. Levine also
receives additional compensation under an incentive compensation program
included in his contract. Mr. Levine's incentive compensation earnings are
calculated based on the following four components: (i) 0.56% of the amount of
the Trust's collateralized claims which are converted into cash; (ii) 1.35% of
the amount of the Trust's unsecured claims which are converted into cash; (iii)
the percentage increase in the Trust's market capitalization between January 1,
1990 and the end of each calendar year (0.25% of the first 10% increase, .50% of
the next 10% increase and 1.00% of any increase in excess of 20%); and (iv) 0.1%
of the amount of cash distributions to shareholders of the Trust. In order to
be eligible to receive the incentive compensation for the preceding calendar
year, Mr. Levine must be employed by the Trust on March 31 of the following
year. Except as provided below, any incentive compensation which has not been
paid prior to Mr. Levine's termination is forfeited. Mr. Levine earned
incentive compensation, as described in items (i) through (iv), of $147,706 for
the year ended December 31, 1995 which was paid on March 1, 1996. Incentive
amounts paid in 1995 of $27,997, 1994 of $29,441 and 1993 of $5,705 also
represent incentive compensation earned as discussed above in items (i) through
(iv) in 1994, 1993 and 1992, respectively.
If the Trust terminates Mr. Levine for cause or Mr. Levine voluntarily
terminates, all incentive compensation not previously paid to Mr. Levine is
forfeited and he is not entitled to any severance payment. If Mr. Levine's dies
or becomes permanently disabled, he is entitled to all incentive compensation
earned through the date of his disability or death plus any disability or life
insurance proceeds in the amount of two times his annual salary which is
consistent with standard insurance benefits of all Banyan Management Corp.
employees, but he is not entitled to any other severance payments. If his
employment is terminated without cause following a change of control (as defined
in the agreement), the Trust will continue to pay Mr. Levine's salary during the
remainder of the employment period and will pay him all incentive compensation
which he would have earned as if all the Trust's assets had been converted into
cash and all proceeds were distributed. If Mr. Levine is terminated without
cause but no change of control has occurred, he will receive a severance payment
equal to one year's salary plus all incentive compensation earned through the
date of his termination (including incentive compensation based upon assets
converted into cash within one year following his termination if the Trust had
received "expression of interest" prior to Mr. Levine's termination), plus an
amount equal to the full cost of continuing Mr. Levine's health benefits for one
year.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following entities are known by the Trust to be the beneficial owners
of more than 5% of the outstanding shares as of March 18, 1996:
Amount &
Nature of
Name & Address of Beneficial Percent
Title of Class Beneficial Owner Ownership of Class
Shares of FMR Corp. 653,200 9.80%
Beneficial 82 Devonshire St.
Interest, No Boston, MA 02109
Par Value
Shares of Fir Tree Partners 789,300 11.84%
Beneficial 1211 Avenue of the
Interest, No Americas
Par Value 29th Floor
New York, NY 10035
Shares of Laifer Capital 501,650 7.52%
Beneficial Management, Inc.
Interest, No 45 W. 45th St.
Par Value 9th Floor
New York, NY 10036
The following table sets forth the ownership of shares owned directly and
indirectly by the trustees and officers of the Trust as of March 18, 1996:
Amount &
Nature of
Title of Name of Beneficial Percent
Class Beneficial Owner Ownership of Class
Shares of Leonard G. Levine 10,955 Shares less than 1%
Beneficial
Interest, No
Par Value
Shares of Gerald L. Nudo 4,000 Shares less than 1%
Beneficial
Interest, No
Par Value
Shares of Neil D. Hansen 4,000 Shares less than 1%
Beneficial
Interest, No
Par Value
Shares of Robert G. Higgins 1,950 Shares less than 1%
Beneficial
Interest, No
Par Value
Shares of All Trustees and 20,905 Shares less than 1%
Beneficial Officers of the
Interest, No Trust, as a group
Par Value (7 persons)
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Administrative costs, primarily salaries and general and administrative
expenses are reimbursed by the Trust to Banyan Management Corp. ("BMC"). BMC is
owned by the Trust, Banyan Strategic Realty Trust, Banyan Strategic Land Fund II
and Banyan Mortgage Investment Fund (the "Banyan Funds"). Mr. Levine is the
president of BMC for which he receives no additional compensation. Messrs.
Teglia, Hansen and Higgins are employees of the Trust but are compensated by BMC
and their compensation is included in the administrative costs for which BMC is
reimbursed by the Trust. The directors/trustees of all Banyan Funds serve as
directors of BMC but receive no additional compensation. These costs are
allocated to the Trust and other Banyan Funds to which BMC provides
administrative services based upon the actual number of hours spent by BMC
personnel on matters related to the particular entity. The Trust's allocated
share of costs for the years ended December 31, 1995, 1994 and 1993 aggregated
$370,399, $289,626 and $440,191, respectively. As one of its administrative
services, BMC serves as the paying agent for general and administrative costs of
the Trust. As part of providing this payment service, BMC maintains a bank
account on behalf of the Trust. As of December 31, 1995, the Trust had a net
receivable due from BMC of $167,207.
Reference is made to Note 6, "Transactions with Affiliates" of the Notes
to Consolidated Financial Statements for the amount of administrative costs paid
to and a description of various transactions with Banyan Management Corp.
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report:
(1)(2) The financial statements indicated in Part II, Item 7,
Consolidated Financial Statements and Supplementary
Data.
(3) Exhibits
The following exhibit is incorporated by reference from the Trust's
Form 8-K dated November 1, 1995:
Exhibit No. Description
(2) Plan of Liquidation/Termination
The following exhibit is incorporated by reference from the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1989:
Exhibit No. Description
3(a) Fifth Amended and Restated Declaration of Trust dated
October 23, 1987
The following exhibit is incorporated by reference from the Trust's
Registration Statement on Forms S-4 (file no. 33-11038) referencing the exhibit
numbers used in that Registration Statement.
Exhibit No. Description
(3)(b) By-Laws of the Registrant - Dated December 14, 1984
Exhibit No. Description
(10) Material Contracts
Second Amendment of Leonard G. Levine's Employment
Contract dated December 31, 1992
(21) Schedule of Subsidiaries of the Registrant
(b) Exhibits and Reports on Form 8-K:
A current report on Form 8-K was filed on October 6, 1995 wherein Item 2.
Disposition of Assets, disclosed the Registrant's sale of its ownership
interest in the Boca Marina Parcel.
A current report on Form 8-K was filed on November 1, 1995 wherein Item 5.
Other Information, disclosed that the Board of Trustees of the Registrant
had unanimously approved a Plan of Termination/ Liquidation for the Trust.
A current report on Form 8-K was filed on December 6, 1995 wherein Item 5.
Other Information, disclosed the Registrant declaration of its initial
liquidating distribution to shareholders pursuant to its Plan of
Liquidation/Termination.
(c) See Item 13(a)(3) above.
(d) None.
An annual report will be sent to the shareholders subsequent to this
filing and the Trust will furnish copies of such report to the Commission at
that time.
SIGNATURES
PURSUANT to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned thereunto duly authorized.
BANYAN SHORT TERM INCOME TRUST
By: /s/ Leonard G. Levine Date: April 4, 1996
Leonard G. Levine, President
PURSUANT to the requirements of the Securities Exchange Act of 1934, this Annual
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
By: /s/ Leonard G. Levine Date: April 4, 1996
Leonard G. Levine, President
By: /s/ Joel L. Teglia Date: April 4, 1996
Joel L. Teglia, Vice President
of Finance and Administration
and Chief Financial and
Accounting Officer
By: /s/ Norman M. Gold Date: April 4, 1996
Norman M. Gold, Trustee
By: /s/ Gerald L. Nudo Date: April 4, 1996
Gerald L. Nudo, Trustee
By: /s/ Marvin A. Sotoloff Date: April 4, 1996
Marvin A. Sotoloff, Trustee
<PAGE> EXHIBIT 10
<PAGE> EXHIBIT 21
BANYAN SHORT TERM INCOME TRUST
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Pages
Report of Independent Auditors F-2
Consolidated Statement of Net Assets in Liquidation at
December 31, 1995 (Liquidation Basis) F-3
Consolidated Statement of Changes in Net Assets in
Liquidation, For the Period October 27, 1995 to December
31, 1995 (Liquidation Basis) F-4
Consolidated Balance Sheet at December 31, 1994
(Going Concern Basis) F-5
Consolidated Statements of Income and Expenses For
the Period January 1, 1995 to October 26, 1995
and the Years Ended December 31, 1994 and 1993
(Going Concern Basis) F-6
Consolidated Statements of Shareholders' Equity For
the Period January 1, 1995 to October 26, 1995 and For
the Years Ended December 31, 1994 and 1993 (Going
Concern Basis) F-7 to F-8
Consolidated Statements of Cash Flows For the Period
January 1, 1995 to October 26, 1995 and For the Years
Ended December 31, 1994 and 1993 (Going Concern Basis) F-9 to F-10
Notes to Consolidated Financial Statements F-11 to F-17
All schedules are omitted since the required information is not present or is
not present in amounts sufficient to require submission of the schedule or
because the information required is included in the consolidated financial
statements and notes thereto.
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of Banyan Short Term Income Trust:
We have audited the accompanying consolidated balance sheet of Banyan
Short Term Income Trust as of December 31, 1994, and the related consolidated
statements of income and expenses, shareholders' equity and cash flows for each
of the two years in the period ended December 31, 1994 and the consolidated
statements of income and expenses, shareholders' equity and cash flows for the
period January 1, 1995 to October 26, 1995 (prepared on a going concern basis).
In addition, we have audited the consolidated statement of net assets in
liquidation as of December 31, 1995, and the related consolidated statement of
changes in net assets in liquidation for the period from October 27, 1995 to
December 31, 1995 (prepared on a liquidation basis). These financial statements
are the responsibility of the Trust's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described in Note 1 to the consolidated financial statements, the
Trustees of Banyan Short Term Income Trust approved a plan of liquidation on
October 26, 1995, and the Trust commenced liquidation shortly thereafter. As a
result, the Trust has changed its basis of accounting for periods subsequent to
October 26, 1995 from a going-concern basis to a liquidation basis.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Banyan Short
Term Income Trust at December 31, 1994, the consolidated results of its
operations and its cash flows for each of the two years in the period ended
December 31, 1994 and for the period from January 1, 1995 to October 26, 1995
(prepared on a going concern basis), its consolidated net assets in liquidation
as of December 31, 1995, and the changes in its net assets in liquidation for
the period from October 27, 1995 to December 31, 1995 (prepared on a liquidation
basis), in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
ERNST & YOUNG LLP
Chicago, Illinois
March 20, 1996
BANYAN SHORT TERM INCOME TRUST
CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION
(LIQUIDATION BASIS)
DECEMBER 31, 1995
ASSETS
Cash and Cash
Equivalents $ 1,635,312
Interest Receivable 1,942
Net Investment in Real
Estate Ventures 1,636,749
Other Assets 282,879
------------
Total Assets 3,556,882
------------
LIABILITIES
Accounts Payable and
Accrued Expenses 829,822
------------
NET ASSETS IN LIQUIDATION $ 2,727,060
============
Book Value Per Share
of Beneficial
Interest (6,667,410
Shares Issued and
Outstanding) $ 0.41
============
The accompanying notes are an integral part of the consolidated
financial statements.
BANYAN SHORT TERM INCOME TRUST
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
(LIQUIDATION BASIS)
FOR THE PERIOD OCTOBER 27, 1995 TO DECEMBER 31, 1995
Net Assets at October 27,
1995 (Going Concern
Basis) $ 29,624,697
Adjustment to Liquidation
Basis (550,000)
Interest Income on Cash and
Cash Equivalents 135,524
Operating Expenses (235,097)
Net Income From Real Estate
Ventures 67,964
Change in Unrealized Gain
on Investment Securities 20,242
Distributions Paid to
Shareholders (26,336,270)
------------
Net Assets in Liquidation
at December 31, 1995 $ 2,727,060
============
The accompanying notes are an integral part of the consolidated
financial statements.
BANYAN SHORT TERM INCOME TRUST
CONSOLIDATED BALANCE SHEET
(GOING CONCERN BASIS)
DECEMBER 31, 1994
ASSETS
Cash and Cash Equivalents $ 2,687,908
Investment Securities 4,638,553
Interest Receivable 64,556
Foreclosed Real Estate
Held for Sale 11,558,043
Net Investment in Real
Estate Ventures 4,229,540
Note Receivable 3,500,000
Other Assets 211,004
------------
Total Assets $ 26,889,604
============
LIABILITIES AND SHARE-
HOLDERS' EQUITY
Liabilities
Accounts Payable and
Accrued Expenses $ 306,273
------------
Shareholders' Equity
Shares of Beneficial Interest,
No Par, 7,500,000 Shares
Authorized, 6,917,510 Shares
Issued 61,870,851
Accumulated Deficit (34,881,537)
Unrealized Losses on
Investment Securities (124,620)
Treasury Stock, at Cost,
for 250,100 Shares of
Beneficial Interest (281,363)
------------
Total Shareholders' Equity 26,583,331
------------
Total Liabilities and
Shareholders' Equity $ 26,889,604
============
Book Value Per Share
of Beneficial
Interest (6,667,410
Shares Issued and
Outstanding) $ 3.99
============
The accompanying notes are an integral part of the consolidated
financial statements.
<TABLE>
BANYAN SHORT TERM INCOME TRUST
CONSOLIDATED STATEMENTS OF INCOME AND EXPENSES
(GOING CONCERN BASIS)
<CAPTION>
For the Period For the Years Ended
January 1, 1995 to December 31, December 31,
October 26, 1995 1994 1993
<S> <C> <C> <C>
INCOME
Interest Income
on Cash and Cash
Equivalents $ 184,882 $ 68,887 $ 60,157
Interest Income on
Investment Securities 301,547 220,546 ---
Operating Property
Revenue --- --- 239,030
Other Interest Income 24,757 --- ---
----------- ----------- -----------
Total Income 511,186 289,433 299,187
----------- ----------- -----------
EXPENSES (RECOVERIES)
Shareholder Expenses 65,944 105,053 119,495
Directors' Fees,
Expenses and
Insurance 188,838 208,632 194,289
Other Professional Fees 118,129 289,421 278,247
General and
Administrative 486,995 361,931 531,382
Expenses From Property
Operating Activities --- --- 187,457
Recovery of Losses on
Loans, Notes and
Interest Receivable
and Class Action
Settlement Costs and
Expenses (585,561) (714,672) (321,953)
----------- ----------- -----------
Total Expenses 274,345 250,365 988,917
----------- ----------- -----------
Operating Income
(Loss) 236,841 39,068 (689,730)
Net Income (Loss)
From Real Estate
Ventures 388,885 1,730,764 (554,380)
Net Income (Loss) From
Foreclosed Real
Estate Held for Sale 2,311,262 --- (320,131)
Gain on Disposition of
Real Estate --- --- 20,742
----------- ----------- -----------
Net Income (Loss) $ 2,936,988 $ 1,769,832 $(1,543,499)
=========== =========== ===========
Net Income (Loss) Per
Share of Beneficial
Interest (Based on
Shares Outstanding of
6,667,410) $ 0.44 $ 0.27 $ (0.23)
=========== =========== ===========
<FN> The accompanying notes are an integral part of the consolidated
financial statements.
</TABLE>
<TABLE>
BANYAN SHORT TERM INCOME TRUST
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(GOING CONCERN BASIS)
FOR THE PERIOD JANUARY 1, 1995 TO OCTOBER 26, 1995
AND FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
<CAPTION>
Shares of Unrealized
Beneficial Interest (Losses) Gains on
Investment
Shares Amount Securities
<S> <C> <C> <C>
Shareholders' Equity,
December 31, 1992 6,917,510 $61,870,851 $ --
Net Loss --- --- ---
---------- ----------- -----------
Shareholders' Equity,
December 31, 1993 6,917,510 61,870,851 ---
Net Income --- --- ---
Unrealized Losses --- --- (124,620)
---------- ---------- -----------
Shareholders' Equity,
December 31, 1994 6,917,510 61,870,851 (124,620)
Net Income as of
October 26, 1995 --- --- ---
Unrealized Gains --- --- 104,378
----------- ----------- -----------
Shareholders' Equity,
October 26, 1995 6,917,510 $61,870,851 $ (20,242)
=========== =========== ===========
<FN> The accompanying notes are an integral part of the consolidated
financial statements.
</TABLE>
<TABLE>
BANYAN SHORT TERM INCOME TRUST
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(GOING CONCERN BASIS)
FOR THE PERIOD JANUARY 1, 1995 TO OCTOBER 26, 1995
AND FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
(CONTINUED)
<CAPTION>
Accumulated Treasury
Deficit Stock Total
<S> <C> <C> <C>
Shareholders' Equity,
December 31, 1992 $(35,107,870) $(281,363) $26,481,618
Net Loss (1,543,499) --- (1,543,499)
------------ --------- -----------
Shareholders' Equity,
December 31, 1993 (36,651,369) (281,363) 24,938,119
Net Income 1,769,832 --- 1,769,832
Unrealized Losses --- --- (124,620)
----------- ---------- -----------
Shareholders' Equity,
December 31, 1994 (34,881,537) (281,363) 26,583,331
Net Income as of
October 26, 1995 2,936,988 --- 2,936,988
Unrealized Gain --- --- 104,378
------------ ----------- -----------
Shareholders' Equity,
October 26, 1995 $(31,944,549) $ (281,363) $29,624,697
============ =========== ===========
<FN> The accompanying notes are an integral part of the consolidated
financial statements.
</TABLE>
<TABLE>
BANYAN SHORT TERM INCOME TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(GOING CONCERN BASIS)
<CAPTION>
For the Period For the Years Ended
January 1, 1995 to December 31, December 31,
October 26, 1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
NET INCOME (LOSS) $ 2,936,988 $ 1,769,832 $(1,543,499)
Adjustments to Reconcile
Net Income (Loss) to
Net Cash Provided By
(Used In) Operating
Activities:
Provision for (Re-
covery of) Losses
on Loans, Notes and
Interest Receivable --- 51,694 (51,694)
Amortization of Pre-
mium on Investment
Securities and
Depreciation Expense 2,661 17,638 26,626
Net (Income) Loss from
Real Estate Ventures (388,885) (1,730,764) 554,380
Net (Income) Loss from
Operations of Fore-
closed Real Estate
Held for Sale (2,311,262) --- 320,131
Gain on Disposition
of Real Estate --- --- (20,742)
Net Change In:
Interest Receivable
on Cash and Cash
Equivalents (14,145) (13,683) (13,835)
Other Assets (94,425) (87,992) (43,580)
Accounts Payable
and Accrued Expenses (75,252) 81,754 (122,474)
------------ ---------- ----------
Net Cash Provided By
(Used In) Oper-
ating Activities 55,680 88,479 (894,687)
------------ ---------- ----------
CASH FLOWS FROM IN-
VESTING ACTIVITIES:
Purchase of Investment
Securities (34,403,784) (8,944,452) (399,178)
Proceeds from Sale of
Investment Securities 13,592,151 4,562,819 ---
Net Proceeds From Sale
of Real Estate and
Foreclosed Real
Estate Held for Sale 13,895,000 --- 4,824,130
Collections of Notes
Receivable 3,500,000 1,000,000 ---
Distributions from
(Investment in) Real
Estate Ventures, Net 3,051,796 744,059 (1,114,029)
Investment in Foreclosed
Real Estate Held For
Sale (25,695) --- (56,926)
------------ ----------- -----------
Net Cash (Used In)
Provided by Invest-
ing Activities (390,532) (2,637,574) 3,253,997
------------ ----------- -----------
Net (Decrease) In-
crease in Cash and
Cash Equivalents (334,852) (2,549,095) 2,359,310
Cash and Cash Equiva-
lents at Beginning
of year 2,687,908 5,237,003 2,877,693
------------ ----------- -----------
Cash and Cash Equiva-
lents at End of Period $ 2,353,056 $ 2,687,908 $ 5,237,003
============ =========== ===========
<FN> The accompanying notes are an integral part of the consolidated
financial statements.
</TABLE>
BANYAN SHORT TERM INCOME TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. LIQUIDATION
Banyan Short Term Income Trust (the "Trust") was organized under the laws
of the Commonwealth of Massachusetts, pursuant to a Declaration of Trust filed
July 13, 1984. On October 26, 1995 the Trust's Board of Trustees unanimously
approved a Plan of Termination and Liquidation (the "Plan") for the Trust which
included plans for the disposition of its remaining assets and the distribution
of any net cash proceeds to the shareholders.
A review of the Trust's business plan which led to the consideration and
ultimately the adoption of the Plan was triggered by the Trust's disposition of
its largest remaining assets, its note receivable collateralized by the Boca
Raton Golf and Tennis Club and the sale of its interest in the Boca Raton Marina
Parcel.
As a result of the Boca dispositions, the Trustees concluded that
termination of the Trust would be the best strategy to maximize shareholder
value. Pursuant to the Plan, it is the Trustees intention to complete the sale
of the townhome units in the Federal Square Project and to complete the sale of
the remaining portion of the Oakridge site and proceed to wind-up and terminate
the Trust's affairs. On December 22, 1995 the Trust made an initial liquidating
distribution per the Plan to all record holders of beneficial interest on
December 11, 1995 in the amount of $3.95 per share. The final liquidating
distribution is anticipated to occur sometime in the fourth quarter of 1996.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. BASIS OF PRESENTATION
Effective with the adoption of the Plan, the accounting basis used by the
Trust in preparing its financial statements changed from the going concern to
the liquidation basis of accounting. The accompanying liquidation basis
financial statements include a reduction in net assets of $550,000 to reflect
this change in basis of presentation (See Note 3). The amount ultimately
available for distribution to shareholders will depend on the amounts realized
from the liquidation of assets, including the timing of the liquidation process
and the resolution of the Trust's liabilities.
The accompanying consolidated financial statements include the accounts of
the Trust, its wholly-owned subsidiaries, the Trust's 50% interest in the
Oakridge Joint Venture and 75% interest in the Dearborn Park Townhome
Partnership both of which are accounted for on the equity method. All
intercompany balances and transactions have been eliminated in consolidation.
B. REAL ESTATE ACQUIRED THROUGH FORECLOSURE
Real estate and investments in real estate ventures acquired through
foreclosure is recorded at the lesser of the mortgage loan balance plus fore-
closure costs or the estimated fair market value at the date of foreclosure.
In March 1995, the Financial Accounting Standards Board issued Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets
to be Disposed of," under which the Trust would be required to recognize
impairment losses for its properties when indicators of impairment are present
and a property's expected undiscounted cash flows are not sufficient to recover
the property's carrying amount. The Trust adopted Statement No. 121 in the
fourth quarter effective January 1, 1995 with no effect on the accompanying
financial statements.
C. INCOME TAXES
For the years ended December 31, 1995, 1994, and 1993, the Trust continued
to be treated as a real estate investment trust ("REIT") under Internal Revenue
Code Sections 856-860. In order to qualify, the Trust is required to distribute
at least 95% of its taxable income to shareholders and meet asset and income
tests as well as certain other requirements. However, if these requirements had
not been met as of December 31, 1995, loss of REIT status would not
significantly affect the Trust's tax position. On March 20, 1996, the Trust
notified the Internal Revenue Service of its intent to revoke its tax election
as a real estate investment trust ("REIT") under section 856(c)(1) of the
Internal Revenue Code of 1986, as amended, due to the Trust's decision to
liquidate.
The Trust's tax basis in Net Investment in Real Estate Ventures is
$1,732,654. As of December 31, 1995, the Trust had a net operating loss carry
forward of approximately $25,800,000 which expires in 2005 through 2008 and
2010.
D. CASH AND CASH EQUIVALENTS
The Trust considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash and cash equivalents.
E. INVESTMENT SECURITIES
Investment securities are classified as available for sale and carried at
fair value determined by quoted market prices with unrealized gains and losses
reflected in the statement of shareholders' equity. Realized gains and losses
are determined on a specific identification basis. The basis of investment
securities is adjusted for amortization of premiums and discounts using a level
yield method. There were no investment securities held by the Trust as of
December 31, 1995. Investment securities as of December 31, 1994, were
comprised of obligations of the Federal Home Loan Bank, the Federal Farm Credit
Bank, the Federal Home Mortgage Corp. and the Federal National Mortgage
Association with a total cost and market value of $4,763,973 and $4,638,553,
respectively.
F. USE OF ESTIMATES
In addition to the termination and liquidation costs described above, the
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
G RECLASSIFICATIONS
Certain reclassifications have been made to the previously reported 1994
and 1993 consolidated financial statements in order to provide comparability
with the 1995 consolidated financial statements. These reclassifications have
not changed the 1994 or 1993 results.
3. ADJUSTMENT TO LIQUIDATION BASIS
At October 27, 1995 the Trust recorded $550,000 related to the termination
and liquidation costs of the Trust. The termination and liquidation costs
consist of approximately $314,000 for directors and officers tail coverage
insurance, a termination fee payable to Banyan Management Corp. of approximately
$160,000 and a severance and termination fee payable to Leonard G. Levine,
President of the Trust, in the amount of approximately $76,000 pursuant to his
current employment agreement. This amount is included on the Trust's
Consolidated Statement of Changes in Net Assets in Liquidation. No adjustments
to the carrying amounts of the Trust's assets were required.
4. FORECLOSED REAL ESTATE HELD FOR SALE, NOTE RECEIVABLE AND OTHER INCOME
The Trust had previously made three mortgage loans to the Boca Raton Hotel
and Club Limited Partnership (the "Borrower"). Those loans were cross
collateralized by the Boca Golf and Tennis Club and by a seven-acre undeveloped
parcel of land located near an existing marina adjacent to the Boca Raton Hotel
and Resort (the "Marina Parcel"). Both parcels are located in Boca Raton,
Florida. In March 1993, the Trust initiated foreclosure proceedings against the
Borrower, because of a default under its three mortgage loans.
On December 29, 1994, the Court, before which the foreclosure was pending,
approved a Settlement Stipulation (the "Settlement Agreement") regarding the
Trust's foreclosure litigation related to the Trust's three mortgage loans.
Under the Settlement Agreement, the Trust received $1,000,000 in cash and a
stipulated judgment providing for a foreclosure sale of the Marina Parcel. The
Settlement Agreement further provided that anytime prior to March 31, 1995 the
Borrower could obtain a release of the Trust's lien against the Boca Golf and
Tennis Club by tendering to the Trust the sum of $3,500,000 plus interest at 10%
per annum from the court approval date of the Settlement Agreement. On February
7, 1995, a subsidiary of the Trust acquired title to the Marina Parcel pursuant
to the consensual foreclosure sale. On February 22, 1995, the Trust received
the aforesaid $3,500,000 plus $24,757 in interest and released its mortgage lien
on the Boca Golf and Tennis Club. For the period January 1, 1995 to October 26,
1995, the Trust recognized a net loss of $25,695 related to the operation of the
Marina Parcel.
On June 9, 1995, a subsidiary of the Trust entered into a contract to sell
its interest in the Marina Parcel to Boca Marina, Ltd. an unaffiliated third
party for a total purchase price of $14,000,000. On September 21, 1995 the
Trust completed the sale of the property and, net of closing costs, received
cash proceeds of $13,895,000. The sale of the property resulted in a gain on
disposition to the Trust of $2,336,957. The Trust has no further interest in
the Marina Parcel.
5. INVESTMENT IN REAL ESTATE VENTURES
OAKRIDGE
On March 6, 1991, in satisfaction of their mortgage loans receivable, the
Trust and Banyan Mortgage Investment Fund ("BMIF"), each received a 50% interest
in the Oakridge joint venture (the "Venture") pursuant to a deed-in-lieu
agreement with the borrower. The Trust and BMIF each holds a 50% general
partnership interest in the Oakridge joint venture pursuant to the partnership
agreement of the VST/VMIF Oakridge Partnership. The property was comprised of
270 acres of vacant land located in Hollywood and Dania, Florida which had been
operated as a golf course. On September 30, 1994, the Venture sold a 60-acre
residential parcel of the Oakridge site to an unaffiliated third party for
$4,100,000. Subsequent to December 31, 1995, on February 5, 1996 and March 1,
1996, the Venture sold a total of 180 acres to an unaffiliated party for
approximately $4,600,000. In addition, on March 1, 1996, the Venture sold an
additional 25-acre parcel of the Oakridge site to an unaffiliated party for
approximately $2,200,000. The February and March, 1996 sales resulted in the
Venture's repayment of a first mortgage loan collateralized by the Oakridge
property in the amount of $1,916,617. After repayment of the mortgage loan,
interest and other closing costs the Venture received net proceeds from the
sales of $4,180,505 of which $2,090,253 was distributed to the Trust repre-
enting its 50% interest in the Venture. The Trust recognized its share of the
gain from the February and March property sales of approximately $1,051,000.
The Venture is currently engaged in negotiations with potential purchasers of
the remaining 5-acre retail parcel at the Oakridge site. The 50% interest in
the Oakridge property partnership was originally recorded by the Trust at its
estimated fair market value of $568,121 and is being accounted for on the equity
method. Under this method of accounting, the Trust recognized a loss of
$165,705 for the period January 1, 1995 to October 26, 1995 and a loss of
$47,811 for the period from October 27, to December 31, 1995. The Trust also
recognized a loss of $554,380 for the year ended December 31, 1993. For the
year ended December 31, 1994 the Trust recognized income of $436,123 which
included a gain of $869,704 from the property sale.
DEARBORN PARK TOWNHOME PARTNERSHIP
On December 18, 1992, Banyan Dearborn Park Limited Partnership, a wholly
owned subsidiary of the Trust, entered into a partnership agreement with Thrush
Dearborn, Inc. a wholly owned subsidiary of Thrush Development Corp.
("Thrush"). The Partnership agreement established Dearborn Park Townhome
Partnership (the "Partnership") for the purpose of developing 117 townhomes on
on the Trust's 3.74 acres located in the South Loop area of downtown Chicago
known as Federal Square Townhomes. The partnership agreement between the
Trust and Thrush became effective on May 21, 1993. The Trust
contributed its ownership interest in the land ($2,200,000) in exchange
for a 75% general partnership interest in the Partnership while Thrush
contributed $580,000 for its 25% general partnership interest in the
Partnership. Development has been completed and for the period
January 1, 1995 to October 26, 1995 and for the period from October 27, to
December 31, 1995, the Partnership recorded the sale of 41 and 3 townhomes,
respectively, for net sales proceeds of approximately $713,000 and $152,000,
respectively. The Trust recognized $554,590 and $115,775, respectively as its
75% share of the net income from these sales. During 1994, the Partnership sold
69 townhomes with respect to which the Trust recognized $1,294,641 as 75% of the
net income from the sale. As of December 31, 1995, the Partnership sold 113
units of the 117 units available and subsequently sold an additional 3 units.
Summary unaudited financial information for the Oakridge Venture and the
Federal Square Project as of December 31, 1995 and 1994 is as follows:
OAKRIDGE
1995 1994
Investment Property, Net $ 4,667,192 $ 4,565,573
Other Assets 38,056 63,862
Mortgage Payable (1,916,617) (1,963,689)
Other Liabilities (593,904) (14,943)
Venture Partners' Equity (1,097,364) (1,325,401)
----------- -----------
Trust's Equity $ 1,097,363 $ 1,325,402
=========== ===========
Venture Total Revenues $ 3,645 $ 601,150
=========== ===========
Venture Gain on
Disposition $ 19,288 $ 1,739,408
=========== ===========
Venture Net (Loss) Income $ (427,032) $ 872,246
=========== ===========
FEDERAL SQUARE PROJECT
1995 1994
Investment Property, Net $ 224,073 $ 4,151,507
Other Assets 615,351 749,163
Mortgage Payable --- (307,305)
Other Liabilities (119,762) (689,129)
Minority Partners' Equity (180,276) (1,000,098)
----------- -----------
Trust's Equity $ 539,386 $ 2,904,138
=========== ===========
Venture Total Revenues $ 7,700,285 $12,646,140
=========== ===========
Venture Net Income $ 865,320 $ 1,679,230
=========== ===========
6. TRANSACTIONS WITH AFFILIATES
Administrative costs, primarily salaries and general and administrative
expenses are reimbursed by the Trust to Banyan Management Corp. ("BMC"). These
costs are allocated to the Trust and other entities to which BMC provides
administrative services based upon the actual number of hours spent by BMC
personnel on matters related to the particular entity. The Trust's allocated
share of costs for the period January 1, 1995 to October 26, 1995 and the period
from October 27, to December 31, 1995 aggregated $314,343 and $56,056
respectively. The Trust's allocated share of costs for the years ended
December 31, 1994 and 1993 aggregated $289,626 and $440,191 respectively. As
one of its administrative services, BMC serves as the paying agent for general
and administrative costs of the Trust. As part of providing this payment
service, BMC maintains a bank account on behalf of the Trust. As of
December 31, 1995 and 1994, the Trust had a net receivable due from BMC of
$167,207 and $169,629, respectively. The net receivable is included in other
assets in the Trust's Consolidated Statement of Net Assets in Liquidation.
7. RECOVERY OF LOSSES ON LOANS, NOTES, INTEREST RECEIVABLE AND CLASS ACTION
SETTLEMENT COSTS AND EXPENSES
The Trust has received cash distributions of $503,623, $194,729 and
$321,953 during 1995, 1994 and 1993, respectively, related to its interest in a
liquidating trust established for the benefit of the unsecured creditors
(including the Trust) of VMS Realty Partners and its affiliates ("VMS"), former
affiliates of the Trust. The Trust has recorded $497,873, $194,729 and
$321,953, for the period January 1, 1995 to October 26, 1995 and the years ended
December 31, 1994 and 1993, respectively as recovery of losses on mortgage
loans, notes and interest receivable in its consolidated statement of income and
expenses. In addition, for the period from October 27, 1995 to December 31,
1995 the Trust recorded $5,750 of its 1995 distribution as a recovery against
its operating expenses on its Consolidated Statement of Changes in Net Assets in
Liquidation. During 1995 the Trust also recognized a recovery of losses on
mortgage loans, notes and interest receivable on its consolidated statement of
income and expenses as a result of a $87,688 reduction in the amount due to the
Class Action Settlement Fund representing its share of the amounts due per the
terms of the prior settlement of the VMS Securities litigation. As of
December 31, 1995 the Trust had paid all amounts due to the Class Action
Settlement Fund per the terms of the Class Action Settlement.
On January 25, 1994, the Trust received net proceeds of $519,943 by
terminating an escrow established as part of the Class Action Settlement of the
VMS securities litigation. The escrow was established to provide the trustees
and officers of the Trust with monies to fund the cost of any litigation in
which they might be named as defendants following settlement of the class
action. Subsequently, the trustees released the proceeds from the escrow, and
the Trust purchased an insurance policy to cover the officers and trustees.
EXHIBIT 10
SECOND AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This AGREEMENT ("Agreement") is made and entered as of December 31, 1992
by and between LEONARD G. LEVINE (the "Executive") and BANYAN SHORT TERM INCOME
TRUST ("Fund").
WHEREAS, the parties have previously entered into an Amended and Restated
Employment Agreement made as of January 1, 1990 by and between the parties
hereto and Banyan Hotel Investment Fund, Banyan Mortgage Investment Fund, Banyan
Mortgage Investment Fund, Banyan Mortgage Investors L.P. I, Banyan Mortgage
Investors L.P. II, Banyan Mortgage Investors L.P. III, Banyan Strategic Land
Fund II, and Banyan Strategic Land Trust (collectively, the "Other Funds") (the
"1990 Agreement");
WHEREAS, the parties desire to amend and restate the 1990 Agreement;
WHEREAS, the Fund desires to continue to employ the Executive and the
Executive desires to accept such continued employment on the terms set forth in
this Agreement;
NOW THEREFORE, in consideration of the promises, mutual covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Fund and the
Executive do hereby agree as follows:
1. Employment and Duties. On the terms and subject to the conditions
set forth in this Agreement, the Fund agrees to employ the Executive as the
chief executive officer of the Fund to perform such duties as are consistent
with such position as may be assigned, from time to time, by the Fund's Board of
Trustees ("Board of Trustees"). The Executive agrees to accept appointment as
President of the Fund.
2. Performance. The Executive accepts the employment described in
Section 1 of this Agreement and agrees to faithfully and diligently perform the
services described therein.
3. Term. The term of employment under this Agreement shall commence on
January 1, 1990 (the "Commencement Date") and shall remain in effect for a
period of four (4) years, ending on December 31, 1993, (the "Employment Period")
unless sooner terminated hereunder. The Employment Period thereafter shall be
automatically renewed for successive one (1) year periods unless this Agreement
is terminated by either the Executive or the Fund by giving written notice of
termination on or before the March 31 preceding the end of the then-current
Employment Period.
4. Salary. For the services to be rendered by the Executive hereunder,
the Fund shall pay the Salary ("Salary") of $40,610 effective July 1, 1992. The
Salary shall be payable in the manner and frequency in which the payroll of
Banyan Management Corp. is customarily handled. The Salary shall be subject to
annual review for increases due to cost of living and merit factors, but any
increases shall be at the sole discretion of the Fund's Board of Trustees.
5. Incentive Compensation. In addition to the Executive's Salary, the
Fund shall pay to the Executive additional compensation ("Incentive
Compensation") calculated as follows:
(a) Liquification of Secured Claims. The Fund shall pay the
Executive an amount equal to .56% of all Secured Claims of the Fund, up to the
aggregate amount of $31,900,000, which are converted into cash prior to the end
of the Employment Period.
(b) Liquification of Unsecured Claims and Excess Secured Claims.
The Fund shall pay the Executive an amount equal to 1.35% of all Unsecured
Claims of the Fund and all Secured Claims of the Fund in excess of $31,900,000
which are converted into cash prior to the end of the Employment Period.
(c) Market Capitalization. The Fund shall pay the Executive an
amount based upon the increase in Market Capitalization from its value on
January 1, 1990 (which the parties agree was $34,600,000) through the end of
each calendar year for 1990, 1991, 1992 and 1993. The Fund shall pay the
Executive a cumulative award equal to the following percentages of the increase
in Market Capitalization:
.25% of the first 10% increase
.50% of the next 10% increase
1.00% of any increase in excess of 20%
Any incentive Compensation earned by the Executive under this Section 5(c) as of
the end of any year shall not be reduced as a result of any decrease in the
Market Capitalization of the Fund as of the end of any subsequent calendar year.
(d) Distributions to Shareholders. The Fund shall pay the
Executive an amount equal to .1% of all distributions of capital and .14% of all
distributions of income to shareholders of the Fund made after January 1, 1990
and prior to the end of the Employment Agreement.
(e) Payment of Incentive Compensation. All Incentive Compensation
shall be computed on a calendar year basis and, subject to Section 5(f) below,
shall be paid to the Executive on March 31 of the following year if the
Executive is employed by the Fund on that date. In the event that the Executive
is not employed by the Fund when the payment is due, all amounts receivable
under this paragraph shall be forfeited except to the extent provided in Section
12.
(f) Deferral of Incentive Compensation. Notwithstanding any
provision in this Section to the contrary, payment of the Incentive Compensation
due on March 31 of any year during the Employment Period shall be deferred to
the extent that, when added to all prior payments of Incentive Compensation by
the Fund and the Other Funds, such cumulative Incentive Compensation plus all
similar Incentive Compensation from the Other Funds would exceed $400,000
multiplied by the number of full calendar years in the Employment Period
preceding the date of payment. For purposes of the preceding sentence, the
amount of similar Incentive Compensation from the Other Funds shall be
determined as if each of the Other Funds determine and pay Incentive
Compensation in the manner provided in this Section 5, notwithstanding the
actual method used by any of the Other Funds for determining incentive
compensation. For the purposes of this Section 5(f), the amounts which are
deferred due to the foregoing limitation shall be paid, without interest, when
otherwise payable in accordance with the preceding sentence, but in all events
shall be payable on March 31, 1994, provided that the Executive is employed by
the Fund on December 31, 1993. The Fund shall pay Banyan Management Corp., on
or before March 31 of each year, the full amount of the Incentive Compensation
earned by the Executive from the Fund for the preceding calendar year without
regard to the deferral provided under this Section 5(f).
The following is an example of the deferral provided in this Section 5(f),
assuming the Executive is employed by the Fund on each March 31.
- During 1990, the Executive earns Incentive Compensation of $350,000.
He receives $350,000 on March 31, 1991, since the limit is $400,000
per year and the Executive's Incentive Compensation does not exceed
the limit.
- During 1991, the Executive earns Incentive Compensation of $600,000.
He receives $450,000 on March 31, 1992. The limit is computed as
follows: ((400,000 x 2) - 350,000) = $450,000. The balance of
$150,000 ($600,000 - $450,000) is deferred.
- During 1992, the Executive earns Incentive Compensation of $100,000.
He receives $250,000 on March 31, 1993. ((400,000 x 3) - (350,000 +
450,000)) = $400,000. Since the current payment ($100,000) plus the
deferred amount ($150,000) is less than the limit of $400,000 for
1992, the full amount is paid to the Executive.
(g) Special Rules Where Board of Trustees Elects Not to Market
Property. If any asset of the Fund has not been converted into cash due to a
decision of the Board of Trustees to retain such asset, such asset shall be
deemed to have been converted into cash, at the fair market value of such asset,
on the date on which the Board of Trustees determines not to market such asset.
This Section 5(g) shall not apply to any asset retained by the Fund as a result
of the failure to receive a price which the Board of Trustees deems acceptable.
(h) Definition of Secured Claim and Unsecured Claim. The term
"Secured Claim" shall include each loan made by the Fund to a VMS-related entity
which is secured by a mortgage on real property or by a partnership interest.
The term "Unsecured Claim" shall mean any debt owed to the Fund by a VMS-related
entity which is not a Secured Claim under the preceding sentence. The term
"Unsecured Claim" shall include, but not be limited to, any deficiency notes
issued by a VMS-related entity which are unsecured, notwithstanding the fact
that the original debt to which such notes relate may have been secured. The
determination of whether a recovery is of a Secured Claim or an Unsecured Claim
shall be determined by the nature of the claim on January 1, 1990. For example,
if an Unsecured Claim is exchanged for a piece of property, any recovery from
the sale of that property will be treated as liquidation of an Unsecured Claim.
(i) Joint Ventures. If the Fund enters into a joint venture
agreement with respect to any Secured Claim or Unsecured Claim, the Fund shall
be deemed to have liquified such claim at the time of the receipt of such joint
venture interest. The right to receive payments with respect to the
liquification of such claim shall be vested in the Executive at the time of the
formation of the joint venture but shall be paid out to the Executive as cash is
received by the Fund over the life of the joint venture. The parties recognize
that the payments of Incentive Compensation to the Executive as determined in
accordance with this Section 5(i) may survive the termination of the Employment
Period or this Agreement. Consequently, the Fund shall give the Executive
reasonable security for his continuing interest in the receipt of payments from
the joint venture at a time and in a form as the Executive and the Fund may
agree.
6. Bonus. During the Employment Period, the Board of Trustees may, in
its sole discretion, pay a bonus to the Executive in consideration of the
Executive's performance of his duties and the Fund's profitability. The Fund,
however, shall not be obligated to pay any bonus unless and until such bonus is
declared by its Board of Trustees.
7. Life Insurance. During the Employment Period, the Fund shall apply
for and diligently attempt to procure in the Executive's name and for the
Executive's benefit, life insurance in the face amount of not less than twice
the Executive's Salary and the Executive shall submit to any medical or other
examination and execute and deliver any application or other instrument in
writing reasonably necessary to effectuate such insurance. If such insurance is
only available on a rated basis, the Fund shall acquire the amount of insurance
available upon payment of the premium which would have been payable if such
insurance had been available on a unrated basis.
8. Disability Benefit. If at any time during the Employment Period the
Executive is permanently unable to perform fully his duties hereunder by reason
of illness, accident, or other disability (as confirmed by competent medical
evidence), the Executive shall be entitled to receive periodic payments equal to
one hundred percent (100%) of his Salary for six (6) months following his
disability. Thereafter, the Executive shall be entitled to receive periodic
payments equal to sixty percent (60%) of his Salary as long as he is disabled
but in no event beyond the Executive's sixty-fifth (65th) birthday.
Notwithstanding the foregoing provision, the amounts payable to the Executive
pursuant to this Section 8 shall be reduced by any amounts received by the
Executive with respect to any such disability pursuant to any insurance policy,
plan, or other employee benefit provided to the Executive by the Fund and any
Social Security or similar government disability programs. The Fund's
obligation to make the payments beyond the first six (6) months of the
Executive's disability is subject to the ability of the Fund to obtain
disability insurance covering such payments after diligent attempts to procure
such insurance.
9. Other Benefits. Except as otherwise specifically provided herein,
during the Employment Period, the Executive shall be eligible for all non-wage
benefits the Fund or Banyan Management Corp. provide generally for their other
salaried employees.
10. Business Expenses. The Fund shall reimburse the Executive for the
reasonable, ordinary, and necessary business expenses incurred by him in
connection with the performance of his duties hereunder, including, but not
limited to, ordinary and necessary travel expenses and entertainment expenses
and car phone expenses. The Executive shall provide the Fund with an
accounting of his expenses, which accounting shall clearly reflect
which expenses are reimbursable by the Fund. The Executive shall provide
the Fund with such other supporting documentation and other substantiation
of reimbursable expenses as will conform to Internal Revenue Service
or other requirements. All such reimbursements shall be payable by the
Fund to the Executive within a reasonable time after receipt by the Fund
of appropriate documentation therefor.
11. Termination.
(a) Termination by the Executive. The Executive may terminate his
employment by the Fund at any time by written notice of termination given to the
Fund at least ninety (90) days' in advance of the termination date stated in
such notice.
(b) Termination for Just Cause. The Fund may terminate the
Executive's employment, effective upon written notice of such termination to the
Executive, for Just Cause. For purposes of this Agreement, the term "Just
Cause" shall mean the occurrence of any one or more of the following events:
(1) the conviction of or the rendering of a civil judgment against the Executive
for theft or embezzlement of Fund property; (2) the conviction of the Executive
for a felony resulting in injury to the business, property or reputation of the
Fund or any affiliate of the Fund; or (3) a decision by an Arbitrator (appointed
pursuant to Section 14(a)) that the Executive, in the performance of his duties
under this Agreement, acted in a manner that constituted gross, willful, or
wanton negligence. Any acts or omissions or alleged acts or omissions of the
Executive which relate to the Executive's employment by VMS Realty Partners or
any of its affiliates prior to January 1, 1990, shall not be deemed "Just Cause"
except to the extent that the Executive admits, is adjudicated or is determined
by an Arbitrator to have committed fraud or a material violation of securities
laws during his employment by VMS Realty Partners or any of its affiliates prior
to January 1, 1990. If the Board of Trustees of the Fund believes, in good
faith, that facts exist which, upon final resolution, will constitute Just
Cause, the Fund may suspend the Executive from his duties under this Agreement,
with full Salary and all other benefits until such final resolution.
(c) Termination without Just Cause. The Fund may terminate the
Executive's employment at any time by written notice of termination given to the
Executive at least ninety (90) days' in advance of the termination date stated
in such notice.
(d) Constructive Termination. The Fund shall be deemed to have
terminated the Executive without Just Cause if any of the following events
occurs:
(1) The Fund materially reduces the authority of the
Executive;
(2) The Fund requires the Executive to relocate from the
Chicago area and the Executive refuses; or
(3) There is a material adverse change in working conditions
for the Executive.
(e) Termination Upon Death or Disability. The employment of the
Executive shall terminate upon the permanent disability (as defined in Section
8) or death of the Executive.
12. Severance Pay.
(a) In the event that the Executive's employment is terminated
voluntarily by the Executive or is terminated by the Fund for Just Cause, the
Executive shall be entitled to any Salary earned through the date of
termination. All Incentive Compensation not previously paid to the Executive by
the Fund shall be forfeited and the Executive shall note be entitled to any
other severance benefit from the Fund.
(b) In the event that the Executive's employment terminates due to
the permanent disability or death of the Executive, the Fund shall pay to the
Executive, or his personal representative, all Salary and Incentive Compensation
earned through the date of the Executive's permanent disability or death,
including any amounts previously deferred under Section 5(f). The Executive,
his heirs, beneficiaries or personal representatives shall also be entitled to
any disability benefits or life insurance proceeds provided under this
Agreement.
(c) Upon any termination of the Executive's employment by the Fund
following a Change of Control (as defined below) except as set forth in Section
12(a) or (b), the Fund shall pay the Executive a severance pay benefit
determined as follows:
(1) The Fund shall continue to pay the Salary due to the
Executive until the end of the Employment Period.
(2) The Fund shall immediately pay the Executive all amounts
of Incentive Compensation earned by the Executive through the date of the
termination the Executive's employment, including any amounts previously
deferred under Section 5(f). For the purposes of this Section 12(c)(2), all
assets of the Fund shall be deemed to have been sold at book
value (as reflected in the Fund's most recent financial statements,
adjusted to reflect any events subsequent to the date of the most recent
financial statements, up to the date of payment) and all proceeds thereof
shall be deemed to have been distributed to the shareholders of the Fund
as of the date of the termination of the Executive's employment.
For the purposes of this Section 12(c), the term "Change of Control" shall mean
that the members of the Board of Trustees of the Fund as of the date this
Agreement is executed fail to constitute a majority of the members of the Board
of Trustees of the Fund; provided, however, that if the Executive has consented
to the appointment or election of an individual who becomes a new member of the
Board of Trustees, for the purposes of this paragraph, that new member shall be
treated as if he were a member of the Board of Trustees as of the date this
Agreement is executed.
(d) Upon any termination of the Executive's employment by the Fund
except as set forth in Sections 12(a), (b), or (c), the Fund shall pay the
Executive a severance pay benefit computed as follows:
(1) The Fund shall pay the Executive an amount equal to one
(1) year's Salary.
(2) The Fund shall pay the Executive all Incentive
Compensation earned through the date of termination, including any amounts
previously deferred under Section 5(f). For the purposes of this Section
12(d)(2), Incentive Compensation shall be deemed to have been earned under
Sections 5(a) or (b) if, prior to the termination to the Executive's employment,
the Fund has received an expression of interest with respect to such underlying
asset or claim and the party (or an affiliate thereof) expressing such interest
ultimately acquires the underlying asset or claim; provided that the portion of
the Incentive Compensation due with respect to such claim shall be payable only
upon the closing of the transaction involving such claim and shall be payable
only if the closing of the transaction occurs within one (1) year of the date of
termination of the Executive's employment.
(3) The Fund shall pay the Executive an amount equal to full
cost of the Executive's COBRA benefits for one (1) year.
(4) Except as specifically provided under Section 12(d)(2)
with respect to transactions not closed prior to the Executive's termination,
all amounts payable under this Section 12(d) shall be payable in full, in cash
within ninety (90) days after the date of the termination of the Executive's
employment.
13. Other Activities of the Executive
(a) The Executive may engage in other activities undertaken for
profit without the consent of the Board of Trustees, including activities
involving the management of real estate and real estate investments, provided
that these activities do not compete, directly or indirectly, with the Fund's
goals and purposes, including but not limited to specific Fund investments, and
do not substantially interfere with the performance of the Executive's duties
under this Agreement. The Board of the Fund acknowledges that the Executive has
a proprietary interest in Oak Realty Group, Inc. ("Oak") and will devote a
portion of time to Oak's affairs so long as no actions taken on the part of Oak
or by Oak itself would cause the Executive to contravene this Agreement.
(b) The Executive shall not: (i) engage in any activity which may
be adverse to the Fund's business; (ii) appropriate or usurp Fund business
opportunities; or (iii) engage or invest in businesses or assets which compete
directly or indirectly with the Fund.
(c) The obligations and limitations imposed by this Section shall
be in addition to those provided by law. The Executive shall, on an annual
basis, provide the Board of Trustees with a signed statement warranting
compliance with this Section in the form of the attached Exhibit A.
(d) The Executive shall not engage in any business or investment
activity with individuals or entities who were or are associate with VMS Realty
Partners or its affiliates without prior disclosure to the Board.
14. Arbitration.
(a) Any dispute under this Agreement shall be submitted to
arbitration conducted in accordance with the Commercial Arbitration Rules
("Rules") of the American Arbitration Association ("AAA") except as amplified or
otherwise varied hereby. The parties shall submit the dispute to the Chicago
regional office of the AAA and the situs of the arbitration shall be Chicago.
The arbitration shall be conducted by a single arbitrator. The parties shall
appoint the single arbitrator to arbitrate the dispute within ten (10) business
days of the submission of the dispute. In the absence of agreement as to the
identity of the single arbitrator to arbitrate the dispute within such time, the
AAA is authorized to appoint an arbitrator in accordance with the Rules, except
that the arbitrator shall have as his principal place of business the Chicago
metropolitan area.
(b) Anything in the Rules to the contrary notwithstanding, in any
dispute seeking a monetary award, the arbitration award shall be made in
accordance with the following procedure: Each party shall, at the commencement
of the arbitration hearing, submit an initial statement of the amount each party
proposes be selected by the arbitrator as the arbitration award ("Settlement
Amount"). During the course of the arbitration, each party may vary its
proposed Settlement Amount. At the end of the arbitration hearing, each party
shall submit to the arbitrator its final Settlement Amount ("Final Settlement
Amount"), and the arbitrator shall be required to select either one or the other
Final Settlement Amounts as the arbitration award without discretion to select
any other amount as the award. The arbitration award shall be paid within five
(5) business days after the award has been made, together with interest from the
date the dispute was submitted to arbitration at the rate of ten percent (10%)
per annum. Judgment upon the award may be entered in any federal or state court
having jurisdiction over the parties.
15. Indemnification. The Fund shall indemnify and hold harmless the
Executive from liabilities, which he may incur resulting from or arising out of
any act undertaken in connection with his duties under this Agreement in the
same manner and to the same extent as the Fund indemnifies any director or any
other officer.
16. General Provisions.
(a) Notice. Any notice required or permitted hereunder shall be
made in writing (i) either by actual delivery of the notice into the hands of
the party thereunder entitled, or (ii) by the mailing of the notice in the
United States mail, certified or registered mail, return receipt requested, all
postage prepaid and addressed to the party to whom the notice is to be given at
the party's respective address set forth below, or such other address as the
parties may from time to time designate by written notice as herein provided.
As addressed to the Fund:
c/o Banyan Management Corp.
Suite 2900
150 South Wacker Drive
Chicago, Illinois 60606
With a copy to:
Shefsky & Froelich Ltd.
444 North Michigan Avenue
Suite 2500
Chicago, Illinois 60611
Attention: Cezar M. Froelich
As addressed to the Executive:
Mr. Leonard G. Levine
3142 East Kay Jay Drive
Northbrook, Illinois 60062
The notice shall be deemed to be received in case (i) on the date of its actual
receipt by the party entitled thereto and in case (ii) on the date of its
mailing.
(b) Amendment and Waiver. No amendment or modification of this
Agreement shall be valid or binding upon the Fund unless made in writing and
signed by an officer of the Fund duly authorized by the Board of Trustees or
upon the Executive unless made in writing and signed by him. The waiver by the
Fund of the breach of any provision of this Agreement by the Executive shall not
operate or be construed as a waiver of any subsequent breach by him.
(c) Entire Agreement. This Agreement constitutes the entire
Agreement between the parties with respect to the Executive's duties and
compensation as an executive of the Fund, and there are no representations,
warranties, agreements or commitments between the parties hereto with respect to
his employment except as set forth herein.
(d) Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws (and not the law of conflicts) of
the State of Illinois.
(e) Severability. If any provision of this Agreement shall, for
any reason, be held unenforceable, such provision shall be severed from this
Agreement unless, as a result of such severance, the Agreement fails to reflect
the basic intent of the parties. If the Agreement continues to reflect the
basic intent of the parties, then the invalidity of such specific provision
shall not affect the enforceability of any other provision herein, and the
remaining provisions shall remain in full force and effect.
(f) Assignment. The Executive may not under any circumstances
delegate any of his rights and obligations hereunder without first obtaining the
prior written consent of the Fund. This Agreement and all of the Fund's rights
and obligations hereunder may be assigned or transferred by it, in whole or in
part, to be binding upon and inure to the benefit of any subsidiary or successor
of the Fund.
(g) Costs of Enforcement. In the event of any suit or proceeding
seeking to enforce the terms, covenants, or conditions of this Agreement, the
prevailing party shall, in addition to all other remedies and relief that may be
available under this Agreement or applicable law, recover his or its reasonable
attorneys' fees and costs as shall be determined and awarded by the court.
IN WITNESS WHEREOF, this Agreement is entered into on the day and year
first above written.
BANYAN SHORT TERM INCOME TRUST
By: /s/ William M. Karnes
_________________________________
William M. Karnes,
Senior Vice President -
Finance and Administration
Chief Financial and Accounting Officer
EXECUTIVE:
/s/ Leonard G. Levine
____________________________________
Leonard G. Levine
Exhibit A
DATE
Board of Trustees
Banyan Short Term Income Trust
Re: Statement of Other Activities
Gentlemen:
Pursuant to the provisions of Section 13(c) of my Second Amended and
Restated Employment Agreement, please be advised that I have not engaged in any
activities during the preceding year in contravention of the requirements set
forth in Section 13.
/s/ Leonard G. Levine
_____________________________
Leonard G. Levine
EXHIBIT 21
SUBSIDIARIES OF BANYAN SHORT TERM INCOME TRUST
State of
Name of Subsidiary Organization
VST Dearborn Park, Inc. Illinois
VST Oakridge Corp. Illinois
VST Stoughton Corp. Illinois
VST/VMIF Oakridge Partnership Illinois
BST Manhattan Garage Corp. Illinois
Banyan Dearborn Park Limited Partnership Illinois
Dearborn Park Townhome Partners Illinois
BST Boca Marina Corp. Illinois
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
"This schedule contains summary financial information extracted from
Banyan Short Term Income Trust's Form 10-KSB for the year ended December
31, 1995 and is qualified in its entirety by reference to such Form 10-KSB."
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,635,312
<SECURITIES> 0
<RECEIVABLES> 1,942
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,637,254
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,556,882
<CURRENT-LIABILITIES> 829,822
<BONDS> 0
<COMMON> 3,008,423
0
0
<OTHER-SE> (281,363)
<TOTAL-LIABILITY-AND-EQUITY> 3,556,882
<SALES> 0
<TOTAL-REVENUES> 646,710
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,059,442
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,355,379
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,355,379
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,355,379
<EPS-PRIMARY> 0.35
<EPS-DILUTED> 0.35
</TABLE>
