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, 1994
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 1-9043
Banyan Hotel Investment Fund
(Exact name of Registrant as specified in its charter)
Delaware 36-3361229
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
One Penn Plaza, Suite 1531, New York, New York 10119
(Former Address: 150 S. Wacker Drive, Chicago, IL) (60606)
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 736-7880
Securities registered pursuant to Section 12(b) of the Act:
Title of each Class Name of each exchange on which registered
Shares of Common Stock 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 re-
quirements for the past 90 days. Yes X . No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K 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 Revenue for the preceeding twelve months was $138,603.
Shares of common stock outstanding as of March 16, 1995: 12,370,808. The
aggregate market value of the Registrant's shares of common stock held by non-
affiliates as of such date was approximately $7,712,972.
DOCUMENTS INCORPORATED BY REFERENCE
Exhibit index located on page 18 of 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 . . . . . . . . . . . . . . . . . . . 4
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . 4
Item 4. Submission of Matters to a Vote of Security Holders . . . . . 4
PART II
Item 5. Market for Common Equity and Related Shareholder Matters . . . 5
Item 6. Management's Discussion and Analysis or Plan of Operation . . 6
Item 7. Financial Statements . . . . . . . . . . . . . . . . . . . . . 10
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . . . . . 10
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons
of the Registrant . . . . . . . . . . . . . . . . . . . . . 11
Item 10. Executive Compensation . . . . . . . . . . . . . . . . . . . 14
Item 11. Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . . . . . . . 15
Item 12. Certain Relationships and Related Transactions . . . . . . . 17
Item 13. Exhibits, Financial Statement Schedules and Reports on
Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . 18
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
The Registrant, Banyan Hotel Investment Fund (the "Fund"), was originally
organized as a Massachusetts business trust pursuant to a Declaration of Trust
filed March 19, 1985, under the name VMS Hotel Investment Trust and subsequently
reorganized as a Delaware corporation on March 13, 1987, at which time the
Fund's name was changed to VMS Hotel Investment Fund. The Fund began doing
business under its present name following shareholder authorization to amend its
Certificate of Incorporation to formally change its name to Banyan Hotel
Investment Fund during the second quarter of 1991.
On September 13, 1985, the Fund commenced a public offering of up to
10,000,000 units pursuant to a Registration Statement filed on Form S-11 under
the Securities Act of 1933. Each unit consisted of two shares of common stock
("shares") at an offering price of $9.50 per share and one warrant entitling the
holder to purchase one additional share at an initial exercise price of $9.50
per share. The shares and warrants were separated January 14, 1986. The
warrants were exercisable for a five year period ending January 13, 1991, on
which date all outstanding warrants were converted by the Fund into one-tenth of
a share.
The public offering was terminated on December 16, 1985 and the final
closing occurred on January 13, 1986, with 4,931,333 units sold. The Fund
received gross proceeds of $98,462,751, net of volume discounts, from the sale
of units of which $201,000 represented the sale of 10,050 units purchased by VMS
Realty Partners. The shares of the Fund, which are registered with and listed
on the American Stock Exchange, began trading on January 17, 1986.
PRESENT BUSINESS OPERATIONS
The Fund was originally established to invest in mortgage loans,
principally to entities affiliated with VMS Realty Partners which were
collateralized by hotel and resort properties. Mortgage loans made by the Fund
were for initial terms of three, five or seven years, and were pre-payable in
whole at any time without prepayment penalty.
On January 28, 1992, the Board of Directors of the Fund authorized the
preparation of a formal plan of liquidation which was subsequently adopted on
April 7, 1992 (the "Plan"). The Plan contemplated the Fund liquidating its
assets and distributing the proceeds to its shareholders. The Fund estimated
that its liquidation value was between $.15 and $.20 per share. Since the
adoption of the Plan, Management of the Fund completed the workout or
liquidation of certain assets and considered alternatives to the announced plan
of liquidation which could provide greater shareholder value, including a number
of unsolicited proposals from various third parties. Based upon Management's
review of these various proposals, the Board of Directors resolved that one
proposal was in the best interest of the Fund and its shareholders because it
allowed every shareholder an opportunity to sell his shares at an amount in
excess of the projected liquidation value. The Board of Directors, by unanimous
written consent dated June 15, 1994, authorized the Fund to execute and deliver
a non-binding letter of intent with a Mr. Harvey Polly.
On August 3, 1994 the Fund entered into a Purchase Agreement (the
"Purchase Agreement") with Mr. Polly providing, among other things, for an all
cash tender offer, under which Mr. Polly agreed to offer to purchase 100% of the
shares of common stock of the Fund for $0.35 per share. The Purchase Agreement
was subsequently amended on November 4, 1994, December 19, 1994 and February 15,
1995. The Purchase Agreement provided, among other things, for the following
events to occur at or before closing: (i) the resignation of the current
officers and directors; (ii) the purchase by the Fund of "run-off" directors'
and officers' liability insurance coverage for the current officers and
directors; (iii) the termination of the employment contract of Leonard G. Levine
and payment of the severance compensation associated therewith; (iv) the
termination of the Administrative Services Agreement with Banyan Management
Corp. and payment of the termination fee associated therewith; and (v) the
assignment by the Fund of its ownership interest in Banyan Management Corp.
On February 15, 1995, a change in control of the Fund occurred pursuant
to the closing of the sale of shares of common stock in the Fund to Mr. Polly
pursuant to the Purchase Agreement. Mr. Polly's tender offer, which commenced
on December 28, 1994, concluded on January 26, 1995, and resulted in the tender
to Mr. Polly of 1,288,217 shares of common stock, or 12.5% of the Fund's then
outstanding shares of common stock, for a cash price of $0.35 per share.
Subsequent to the closing of the tender offer, the terms of the Purchase
Agreement also required Mr. Polly to purchase from the Fund a number of shares
sufficient to allow Mr. Polly to own, by virtue of the combination of the tender
offer and the share purchase, not less than 3,335,000 and not more than 40% of
the shares of common stock after giving effect to the shares issued in
connection with the purchase. On February 15, 1995, per the Purchase Agreement,
Mr. Polly purchased 2,047,766 newly issued shares of common stock of the Fund
for a cash price of $0.22 per share. Upon the acquisition of the aforesaid
shares from the Fund, when combined with the shares of common stock previously
owned and acquired pursuant to the tender offer, Mr. Polly is the beneficial
owner of 3,335,983 shares, or approximately 27% of the Fund's outstanding voting
shares of common stock.
Although the Fund currently does not satisfy certain American Stock
Exchange ("AMEX") criteria for continued listing of its stock on the exchange,
Mr. Polly is optimistic that AMEX will continue to defer consideration of
delisting for the immediate future. There can be no assurance, however, that
listing will be continued. Mr. Polly has indicated that he has no present
intention of taking the Fund private, but he is contemplating, subject to
shareholder approval, a 1 for 5 reverse stock split in the near future.
Upon the closing of the sale of shares of common stock of the Fund on
February 15, 1995, the Purchase Agreement provided for the resignation of the
Fund's current Directors and Officers. Accordingly, all of the then current
Directors and Officers resigned and were replaced with Mr. Polly's designees.
Subsequent to the resignation of the Directors and Officers of the Fund, no
further arrangements or understanding among the Fund or its new officers and
directors existed. On February 15, 1995, Messrs. Leo Yarfitz, Morton I. Kalb,
Willis G. Ryckman and Harvey Polly were appointed as new Directors of the Fund.
In addition, the new Directors appointed Mr. Harvey Polly as President and Chief
Executive Officer, Mr. Morton I. Kalb as Vice President and Chief Financial
Officer, Ms. Celia Zisfein as Secretary and Mr. William L. Weiss as Assistant
Secretary. Effective February 15, 1995, Mr. Polly's and the Fund's address of
their principal executive office is One Penn Plaza, Suite 1531, New York, NY
10119.
The Fund currently owns a 50% limited partnership interest in the Santa
Barbara Biltmore Resort and a loan collateralized by a third mortgage on the
Omni Park Centre Hotel. Both the assets are illiquid due to the poor operating
performance of these two hotels. While the Fund believes that the operations of
both hotels may improve over time to the point that sale of these assets could
result in a recovery of a portion of the Fund's investment, the timing and
amount of such a recovery is difficult to predict. In the interim, the Fund has
attempted to reduce the ongoing operating expenses of the Fund in order to
maximize the net cash return to shareholders.
Below is a summary and current status for each of the Fund's remaining
assets as of March 16, 1995.
SANTA BARBARA BILTMORE
The Fund's 50% limited partnership interest in the Santa Barbara Biltmore
Partnership was recorded by the Fund at its fair market value and is accounted
for on the equity method. The Fund recorded $3,749,581 as its share of the
operating loss of the Santa Barbara Biltmore Resort for 1992. The 1992 amount
included an additional loss of $861,691 to reduce the December 31, 1992 carrying
value of its interest in the Santa Barbara Biltmore to $506,695 which
represented amounts due to the Fund under the settlement agreement from certain
amounts held in escrow related to renovation work on the hotel which was
completed in 1990. The Fund received this cash on February 3, 1993. The Fund
did not record losses related to its interest in the Santa Barbara Biltmore
during 1994 and 1993 since the carrying value of the partnership interest was
reduced to zero as of December, 1992 and the Fund has no obligation to make
additional capital contributions to, or to pay the liabilities of, the
partnership.
OMNI PARK CENTRE
On July 19, 1991 the Fund was served with a summons in a mortgage
foreclosure action filed by Sheraton Holding Inc. ("Sheraton") in the Superior
Court of New York, New York. Sheraton seeks to foreclose on its $54,000,000
first mortgage collateralized by the Omni Park Centre located in New York, New
York. The Sheraton foreclosure action is based on monetary defaults by Park
Centre Associates (the "Borrower"). The Fund holds a third mortgage loan on the
Omni Park Centre in the original principal amount of $5,154,600 which is also in
monetary default. On September 30, 1991 the Fund filed a counterclaim to the
foreclosure action of Sheraton with the court. The second mortgage on the Omni
Park property in the amount of approximately $5,600,000 is also in default and
the holder of the mortgage has also filed a counterclaim to the foreclosure with
the court.
On June 12, 1992, the Borrower filed for protection under the U.S.
Bankruptcy Code. On June 30, 1992, an order was entered in the Bankruptcy Court
between the Fund, Sheraton, the second mortgagee and the Borrower authorizing
and restricting the use of cash collateral by the Borrower. The Fund recorded a
provision for losses for the full amount of the loan which is considered in
substantive foreclosure and will continue to monitor the foreclosure action.
Management currently considers it unlikely that the sale of the hotel in the
near future will result in more than a nominal recovery of the Fund's mortgage
loan.
Prior to the February 15, 1995 acquisition of the Fund by Mr. Polly (as
discussed above), the Fund had four employees who served as executive officers.
Administrative and accounting services performed on behalf of the Fund were
primarily provided by Banyan Management Corp. Please see Item 12, "Certain
Relationships and Related Transactions," and Note 5 of Notes to Consolidated
Financial Statements.
Prior to January 1, 1995, the Fund continued to be treated as a real
estate investment trust (REIT) under Sections 856-860 of the Internal Revenue
Code of 1986. However, management of the Fund intends to discontinue its REIT
status.
The Fund reviews and monitors compliance with federal, state and local
provisions which have been enacted or adopted regarding the discharge of
material into the environment, or otherwise relating to the protection of the
capital expenditures for environmental control facilities for the years ended
December 31, 1994 and 1993.
The business of the Fund is not seasonal and the Fund does no foreign or
export business. The Fund 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 Partnership's business taken as a whole.
ITEM 2. DESCRIPTION OF PROPERTY
As of December 31, 1994, the Fund owned a 50% partnership interest in the
Santa Barbara Biltmore Hotel. In addition, see Note 3 of the Notes to Financial
Statements for certain information pertaining to the property which
collateralizes the Fund's mortgage loan to which the Fund has not acquired
title.
ITEM 3. LEGAL PROCEEDINGS
The Registrant is not aware of any material pending legal proceedings as
of March 16, 1995 nor were any proceedings terminated during the quarter ended
December 31, 1994.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Fund did not submit any matter to a vote of its security holders during
the quarter ended December 31, 1994.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The Fund's shares of common stock are traded on the American Stock
Exchange ("AMEX") (Symbol - VHT). The range of high and low sales prices per
share for each of the quarters in the years ended December 31, 1994 and 1993 are
as follows:
Share Price
Quarter 1994 1993
1 High $0.344 $0.188
Low $0.156 $0.094
2 High $0.438 $0.500
Low $0.250 $0.125
3 High $0.500 $0.500
Low $0.281 $0.281
4 High $0.500 $0.438
Low $0.281 $0.188
Prior to the acquisition of the Fund by Mr. Polly (See Item 1.
Description of Business), the Fund had suspended distributions due to
interruption in the Fund's cash flow resulting from defaults by borrowers on the
Fund's mortgage loans, the modest size of the Fund's cash position, the
uncertainty regarding the cash requirements for operating activities, and
expected expenses to be incurred prior to disposition of the Fund's assets. No
distributions were declared by the Fund in 1994 and 1993. Although the Fund
currently does not satisfy certain AMEX criteria for continued listing of its
stock on the exchange, Mr. Polly is optimistic that AMEX will continue to defer
consideration of delisting for the immediate future. There can be no assurance,
however, that listing will be continued. Mr. Polly has indicated that he has no
present intention of taking the Fund private, but he is contemplating, subject
to shareholder approval, a 1 for 5 reverse stock split in the near future.
At March 16, 1995, there were 2,632 record holders of shares of common
stock.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
GENERAL
Banyan Hotel Investment Fund (the "Fund"), was formed to make mortgage
loans to affiliates of VMS Realty Partners, ("VMS"), secured by hotel and resort
properties. The Fund has been adversely affected as a result of the non-payment
of amounts due from these borrowers on mortgage loans and notes receivable. As
a result of these defaults, the Fund suspended the making of new loans (except
for advances of additional funds under circumstances which it is deemed
necessary to preserve the value of existing collateral) and suspended
distributions to shareholders.
In early 1990, the Fund implemented a business plan focused on
preservation of its assets and managing its properties acquired through
foreclosure until they could be disposed of in an orderly manner (the "Principal
Recovery Plan").
On January 28, 1992, the Board of Directors of the Fund authorized the
preparation of a formal plan of liquidation which was subsequently adopted on
April 7, 1992 (the "Plan"). The Plan contemplated the Fund liquidating its
assets and distributing the proceeds to its shareholders. The Fund estimated
that its liquidation value was between $.15 and $.20 per share. Since the
adoption of the Plan, Management of the Fund completed the workout or
liquidation of certain assets and considered alternatives to the announced plan
of liquidation which could provide greater shareholder value, including a number
of unsolicited proposals from various third parties. Based upon Management's
review of these various proposals, the Board of Directors resolved that one
proposal was in the best interest of the Fund and its shareholders because it
allowed every shareholder an opportunity to sell his shares at an amount in
excess of the projected liquidation value. The Board of Directors, by unanimous
written consent dated June 15, 1994, authorized the Fund to execute and deliver
a non-binding letter of intent with a Mr. Harvey Polly.
On August 3, 1994 the Fund entered into a Purchase Agreement (the
"Purchase Agreement") with Mr. Polly providing, among other things, for an all
cash tender offer, under which Mr. Polly agreed to offer to purchase 100% of the
shares of common stock of the Fund for $0.35 per share. The Purchase Agreement
was subsequently amended on November 4, 1994, December 19, 1994 and February 15,
1995. The Purchase Agreement provided, among other things, for the following
events to occur at or before closing: (i) the resignation of the current
officers and directors; (ii) the purchase by the Fund of "run-off" directors'
and officers' liability insurance coverage for the current officers and
directors; (iii) the termination of the employment contract of Leonard G. Levine
and payment of the severance compensation associated therewith; (iv) the
termination of the Administrative Services Agreement with Banyan Management
Corp. and payment of the termination fee associated therewith; and (v) the
assignment by the Fund of its ownership interest in Banyan Management Corp.
On February 15, 1995, a change in control of the Fund occurred pursuant to
the closing of the sale of shares of common stock in the Fund to Mr. Polly
pursuant to the Purchase Agreement. Mr. Polly's tender offer, which commenced
on December 28, 1994, concluded on January 26, 1995, and resulted in the tender
to Mr. Polly of 1,288,217 shares of common stock, or 12.5% of the Fund's then
outstanding shares of common stock, for a cash price of $0.35 per share.
Subsequent to the closing of the tender offer, the terms of the Purchase
Agreement also required Mr. Polly to purchase from the Fund a number of shares
sufficient to allow Mr. Polly to own, by virtue of the combination of the tender
offer and the share purchase, not less than 3,335,000 and not more than 40% of
the shares of common stock after giving effect to the shares issued in
connection with the purchase. On February 15, 1995, per the Purchase Agreement,
Mr. Polly purchased 2,047,766 newly issued shares of common stock of the Fund
for a cash price of $0.22 per share. Upon the acquisition of the aforesaid
shares from the Fund, when combined with the shares of common stock previously
owned and acquired pursuant to the tender offer, Mr. Polly is the beneficial
owner of 3,335,983 shares, or approximately 27% of the Fund's outstanding voting
shares of common stock.
Upon the closing of the sale of shares of common stock of the Fund on
February 15, 1995, the Purchase Agreement provided for the resignation of the
Fund's current Directors and Officers. Accordingly, all of the then current
Directors and Officers resigned and were replaced with Mr. Polly's designees.
Subsequent to the resignation of the Directors and Officers of the Fund, no
further arrangements or understanding among the Fund or its new officers and
directors existed. On February 15, 1995, Messrs. Leo Yarfitz, Morton I. Kalb,
Willis Ryckman and Harvey Polly were appointed as new Directors of the Fund. In
addition, the new Directors appointed Mr. Harvey Polly as President and Chief
Executive Officer, Mr. Morton I. Kalb as Vice President and Chief Financial
Officer, Ms. Celia Zisfein as Secretary and Mr. William L. Weiss as Assistant
Secretary. Effective February 15, 1995, Mr. Polly's and the Fund's address of
their principal executive office is One Penn Plaza, Suite 1531, New York, NY
10119.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents consist of cash and short-term investments. The
Fund's cash and cash equivalents balance at December 31, 1994 and 1993 was
$275,161 and $2,443,797, respectively. This decrease in cash and cash
equivalents is due primarily to the purchase of investment securities during
1994 with a carrying value of $1,907,531 as of December 31, 1994 and the payment
of the Fund's operating expenses. Partially offsetting these payments was the
receipt of $143,329, representing proceeds received by the Fund from an escrow
account established in connection with the sale of the Silver Sands Motel (see
discussion below for further details). In addition, the Fund received net
proceeds of $90,693 from an escrow established as part of the class action
settlement of the litigation captioned In re VMS Securities Litigation. The
escrow was established to provide the directors of the Fund with monies to fund
the cost of any litigation in which they may be named as defendants post
settlement of the class action. Subsequently, the directors released the
proceeds from the escrow, and the Fund purchased an insurance policy to cover
the directors. During 1994, the Fund also received approximately $151,000 in
interest income on its cash and cash equivalents and investment securities. On
February 15, 1995, the purchase by Mr. Polly of 2,047,766 shares of common stock
from the Fund resulted in cash proceeds of approximately $450,000 to the Fund.
At this time, there are no material commitments for capital expenditures.
The Fund's cash and cash equivalents are sufficient to meet its needs for
anticipated operating expenses. The Fund deems its liquidity to be adequate.
As of December 31, 1994 and 1993, the Fund's mortgage loan portfolio
consisted of one loan, classified as loans in substantive foreclosure. The Fund
has recorded a provision for losses on the loan representing its full carrying
balance.
Effective December 20, 1993, the Fund and the unaffiliated third party
which purchased the Silver Sands Motel property from the Fund in October, 1991
("the Buyer") jointly agreed to terminate an escrow established at the time of
the sale to be used in connection with monitoring various environmental issues
at the property. In anticipation of the final approval regarding the
environmental issues by local authorities, the Fund and the Buyer determined
that the necessary work was substantially complete and the escrow, which
originally contained $327,000, was no longer required. After deducting the cost
of the environmental work performed, the remaining balance of the escrow account
was approximately $193,000 which had been classified by the Fund as an other
asset. On January 10, 1994, the Fund paid the Buyer $50,000, representing the
final settlement of the escrow. For the year ended December 31, 1993, the Fund
recorded a gain on disposition of real estate of $143,329 representing its
recovery from the escrow.
On November 18, 1993, in final settlement of guarantees of VMS Realty
Partners of loans made by the Fund in prior years, the Fund received a cash
distribution of $27,831 and an interest in a liquidating trust established for
the benefit of the unsecured creditors of VMS. As of December 31, 1993, the
Fund valued its interest at $4,939 representing its pro rata portion of the cash
assets of the trust. During 1994 and 1993, the Fund has recorded $16,788 and
$32,770, respectively, on its Statement of Income and Expenses as a recovery of
the Provision for Losses on Mortgage Loans, Notes and Interest Receivable
related to the distributions received from the liquidating trust. The $16,788
net recovery recorded in 1994 includes a $34,764 distribution received net of an
estimated $13,037 due to the Class Action Settlement Fund representing the
Fund's share of amounts due per the terms of the previously settled VMS
Securities litigation.
The Fund's ultimate return of cash to its shareholders is dependent upon,
among other things: (i) the activities undertaken by the Fund under Mr.
Polly's direction; (ii) interest earned from the investment of cash and cash
equivalents and investment securities; (iii) the Fund's ability to control its
operating expenses; and (iv) possible recoveries from the Santa Barbara
Biltmore Hotel, the Omni Park Loan and the liquidating trust, if any.
RESULTS OF OPERATIONS
Total income for the years ended December 31, 1994, 1993 and 1992 was
$138,603, $85,931 and $113,104, respectively. The increase in total income
between 1994 and 1993 is the result of an increase in interest earned on the
Fund's cash and cash equivalents and investment securities due to an increase in
interest rates available on its cash and investment securities. Total income
decreased between 1993 and 1992 as a result of decrease in interest income on
short term investments attributable to the lower rates available during 1993 on
investments of the Fund's cash and cash equivalents.
Other operating expenses for the year ended December 31, 1994 decreased
when compared to the same period in 1993 as a result of decreases in stockholder
expenses, directors' fees, expenses and insurance, other professional fees, and
general and administrative expenses. These decreases are due to the Fund's
limited asset base and management's continued cost control efforts during 1994.
Similarly, other operating expenses for the year ended December 31, 1993
decreased when compared to 1992 as a result of reductions in stockholder
expenses, other professional fees and general and administrative expenses.
These decreases reflect cost control efforts by management and the limited
activity required during 1993 to maintain the Fund's remaining assets as a
result of completion of the workout of most of the Fund's real estate assets and
the replacement of outside consultants who formerly performed this work, with
BMC personnel. Partially offsetting the decreases, directors' fees, expenses
and insurance increased due to higher directors' and officers' insurance
premiums in 1993.
During 1994 and 1993, the Fund recorded net recoveries of losses on loans,
notes and interest receivable of $16,788 and $32,770, respectively, as a result
of cash received pursuant to the VMS Creditor Repayment Agreement as discussed
above. During 1992, the Fund recognized a $2,606,600 provision for losses on
loans, notes and interest receivable as a result of a provision recorded by the
Fund regarding its interest in the Omni Park Centre. For 1994, the Fund
recorded a $90,693 recovery of class action settlement costs and expenses
representing the receipt of net escrow proceeds as discussed above in liquidity
and capital resources. No class action settlement costs were recorded during
1993 and 1992 due to the completion of the settlement regarding the litigation
captioned In re VMS Securities Litigation. During 1994 and 1993, the Fund did
not record losses related to its interest in the Santa Barbara Biltmore since
the carrying value of the partnership interest was reduced to zero as of
December 31, 1992, and the Fund has no obligation to make additional capital
contributions to, or pay the liabilities of, the partnership. For 1992, the
Fund recorded $3,749,581 representing its share of the losses from its Santa
Barbara Biltmore partnership interest.
The above changes for the year ended December 31, 1994, when compared to
1993 and 1992, resulted in a decrease in the net loss to $385,838 ($0.04 per
share) from $488,081 ($0.05 per share) and $7,327,651 ($0.71 per share),
respectively.
ITEM 7. FINANCIAL STATEMENTS
See Index to Consolidated Financial Statements on Page F-1 of this Report
for financial statements.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in or disagreements with the accountant on any
matter of accounting principles, practices or financial statement disclosure.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF THE
REGISTRANT
Prior to the February 15, 1995 acquisition of the Fund by Mr. Polly (see
Item 1. Description of Business), the following individuals were serving as
directors and the executive officers of the Fund:
Norman M. Gold Director
Gerald L. Nudo Director
Marvin A. Sotoloff Director
Leonard G. Levine President
Neil D. Hansen First Vice President
Robert G. Higgins Vice President/General Counsel
Joel L. Teglia Acting Chief Financial Officer
NORMAN M. GOLD, age 64, 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 a trustee of Banyan Short Term
Income Trust, Banyan Strategic Realty Trust, and director of Banyan Management
Corp. Mr. Gold is also a trustee of New Plan Realty Trust. Mr. Gold is a
certified public accountant and a member of the Chicago and American Bar
Associations.
GERALD L. NUDO, age 45, is senior vice president of Mesirow Realty
Finance, Inc., a subsidiary of Mesirow Financial Corp., a regional investment
banking firm. From 1982 to 1990 Mr. Nudo was a principal and vice president of
Capital Realty Services, Inc., a commercial real estate investment banking
company. 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. He is a trustee of
Banyan Short Term Income Trust and a director of Banyan Strategic Land Fund II
and Banyan Management Corp.
MARVIN A. SOTOLOFF, age 51, is regional vice president of Premisys
Marketing Services, Inc., effective July 1993. Premisys Marketing Services, a
division of Premisys Real Estate Services, Inc., is a national real estate
services firm involved in the leasing and management of office, retail and
industrial properties. From 1979-1993, Mr. Sotoloff was executive vice presi-
dent of The Palmer Group Ltd., a company involved in real estate brokerage,
development and property management, concentrating 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 is a trustee of Banyan Strategic Realty Trust,
Banyan Short Term Income Trust and director of Banyan Management Corp.
LEONARD G. LEVINE, age 48, is president of Banyan Management Corp., Banyan
Short Term Income Trust, Banyan Strategic Realty Trust, Banyan Strategic Land
Fund II, Banyan Mortgage Investment Fund. Mr. Levine was employed by VMS Realty
Partners from 1981 to 1989 before becoming president of the other Banyan
Entities mentioned above. He received a B.S./B.A. Degree in Accounting from
Roosevelt University in 1968 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 48, is first vice president of Banyan Management
Corp., Banyan Short Term Income Trust, Banyan Strategic Realty Trust, Banyan
Strategic Land Fund II, and Banyan Mortgage Investment Fund. From 1988 through
1990 Mr. Hansen was senior vice president of Ruff Callaghan & Hemmeter Company,
a real estate development firm, and executive vice president, secretary and
treasurer of Resort Income Investors, Inc., an American Stock Exchange listed
real estate investment trust. 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 43, is vice president/general counsel of Banyan
Management Corp., Banyan Short Term Income Trust, Banyan Strategic Realty Trust,
Banyan Strategic Land Fund II, and Banyan Mortgage Investment Fund. From 1990
to 1992, Mr. Higgins was a contract partner at the law firm of Chapman and
Cutler. From 1984 to 1990, Mr. Higgins was a partner at the law firm of
Schwartz & Freeman. During these years, Mr. Higgins concentrated in the areas
of real estate development, finance, acquisition, land use, sales, lending and
syndications, and 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 33, is acting chief financial officer of Banyan
Management Corp., Banyan Strategic Realty Trust, Banyan Mortgage Investment
Fund, Banyan Short Term Income Trust and Banyan Strategic Land Fund II. Prior
to assuming the responsibilities of his current position, Mr. Teglia was the
Controller for Banyan Management Corp. From 1986 to 1990 Mr. Teglia held
positions as Project Controller and Director of Finance and Budgeting at the
Prime Group, Inc., an international real estate investment and development
firm. He received a B.B.A. Degree in Accounting from the University of Notre
Dame. Mr. Teglia is a certified public accountant.
On February 15, 1995, Norman M. Gold, Gerald L. Nudo and Marvin A.
Sotoloff (the "Directors") submitted their respective resignations as
Independent Directors of the Fund. Also on February 15, 1995, Leonard G.
Levine, Neil D. Hansen, Robert G. Higgins and Joel L. Teglia (the "Officers")
submitted their respective resignations as officers of the Fund. The
resignations of the Directors and Officers, which were effective immediately,
were submitted as a result of a change in control of the Fund pursuant to the
closing of the February 15, 1995 sale of shares of stock in the Fund to Mr.
Harvey Polly. See discussion in Item 1. Description of Business and Item 6.
Management's Discussion and Analysis or Plan of Operation for details of this
change in control.
Subsequent to the February 15, 1995 acquisition of the Fund by Mr. Polly,
the following individuals were appointed to serve as directors and the executive
officers of the Fund:
Harvey Polly Director, President and
Chief Executive Officer
Morton I. Kalb Director, Vice President
and Chief Financial Officer
Willis G. Ryckman Director
Leo Yarfitz Director
HARVEY POLLY, age 66, is a director and president and chief executive officer of
the Fund. Mr. Polly also serves as the chief executive officer and a
stockholder of H/R Industries, Inc. H/R Industries, Inc. is essentially a
personal holding company which was formed in 1984 under the name Helena
Rubinstein, Inc. and was engaged from 1984 until 1988 in various aspects of the
cosmetics business. In 1988, the name of the corporation was changed to Elite
Industries, Ltd., and in 1990 the name was changed to H/R Industries, Inc. Mr.
Polly has been involved in the railroad business for approximately 20 years.
In 1973 he founded and became a major stockholder in Emons Industries, Inc.,
which was formed on the basis of the acquisition of the Maryland and
Pennsylvania Railroad Company. Since the founding of Emons Industries, Mr.
Polly has been involved in the railroad freight car business. Mr. Polly has
been, since 1975, Chief Financial Officer and a stockholder of Railway Freight
Car Services, Inc., which is involved in the railroad boxcar leasing business.
In 1984 and 1985, Mr. Polly was Chairman of CAGY Industries, Inc., the publicly
held holding company for the Columbus and Greenville Railway, the Chattooga &
Chickamauga Railway and the Redmont Railway and was the largest stockholder with
approximately 40% of the outstanding shares of common stock. Mr. Polly sold his
shares and resigned from the Board effective February 16, 1995. Since 1988 he
has served on the Board of Directors of the Delaware Otsego Corp., which is a
publicly held corporation that operates the New York Susquehanna Railroad. In
prior years, Mr. Polly was also a stockholder and heavily involved in the
operations of the Louisiana Midland Railroad. He is also presently a
stockholder and officer of SLF of Martin County, Inc., a real estate development
company. From 1987 to 1990 he was a principal shareholder, Chief Executive
Officer and Director of Hanover Bank of Florida, a publicly held corporation.
MORTON I. KALB, age 61, is a director, vice president and chief financial
officer of the Fund. Mr. Kalb has served as vice president of H/R Industries,
Inc., since July 1984. Mr. Kalb is also a certified public accountant.
WILLIS G. RYCKMAN, age 50, is a director of the Fund. Mr. Ryckman has served as
chairman of the Board of Directors of Tri-Tech Labs since August 1990. From
December 1966 through August 1990, Mr. Ryckman was senior vice president of
Manufacturers Hanover Trust Company.
LEO YARFITZ, age 79, is a director of the Fund. Mr. Yarfitz has been a
financial consultant with Sterling Management of Florida since June 1990. From
October 1987 until October 1989, Mr. Yarfitz served as Chief Financial Officer
of Hanover Bank of Florida. From October 1989 until December 1989, Mr. Yarfitz
served as President of Hanover Bank of Florida.
ITEM 10. EXECUTIVE COMPENSATION
A. DIRECTOR COMPENSATION
Prior to February 15, 1995, the Independent Directors were 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 Director was reimbursed for out-
of-pocket expenses incurred in attending meetings of the Board. On February 15,
1995 a change in control of the Fund occurred pursuant to the closing of the
sale of shares of common stock in the Fund to Mr. Harvey Polly. (See discussion
in Item 1. Description of Business and Item 6. Management's Discussion and
Analysis or Plan of Operation.) To date, no arrangements or decisions have been
made with respect to payments to the new directors for their service on the
Fund's Board of Directors.
B. EXECUTIVE COMPENSATION
Compensation paid to executive officers for the years ended December 31,
1994, 1993 and 1992 is as follows:
Annual Compensation
Other
Annual
Compen-
Year Salary Bonus(2) sation
Leonard G. Levine, 1994 $41,554 $ 376 n/a
President & Chief 1993 $41,554 $30,633 n/a
Executive Officer (1) 1992 $41,554 $15,018 n/a
Long-Term Compensation
Awards Payouts
Restricted All Other
Stock Options/ LTIP Compen-
Year Award(s) SARs (#) Payouts sation
Leonard G. Levine, 1994 n/a n/a n/a n/a
President & Chief 1993 n/a n/a n/a n/a
Executive Officer (1) 1992 n/a n/a n/a n/a
(1) No executive officer earned more than $100,000 in salary and bonus.
(2) See incentive compensation program disclosure below.
Until February 15, 1995, Mr. Levine served as President of the Fund
pursuant to an employment agreement entered into January 1, 1990. This
agreement provided that Mr. Levine was to be employed through December 31, 1994
with automatic one year renewals unless either the Fund or Mr. Levine gave the
other notice of termination before March 31 preceding the end of the current
employment period.
In consideration of his employment, Mr. Levine received annual
compensation from the Fund equal to $41,554 per year. In addition to his base
salary, Mr. Levine could have been granted a bonus at the discretion of the
Board of Directors of the Fund. Further, Mr. Levine was eligible to receive
compensation under an incentive compensation program included in his contract.
Mr. Levine's incentive compensation earnings were calculated based on the
following four components: (i) 0.56% of the amount of the Fund's collateralized
claims which were converted into cash; (ii) 1.35% of the amount of the Fund's
unsecured claims which were converted into cash; (iii) the percentage increase
in the Fund'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 stockholder of the Fund. The total incentive compensation that
Mr. Levine was permitted receive in any year (on a cumulative basis) from the
Fund was subject to certain limitations. Any amounts in excess of these limits
would have been deferred.
Pursuant to the terms of the August 3, 1994 agreement, as amended, between
the Fund and Mr. Polly (see Item 1. Description of Business), on February 15,
1995, Mr. Levine resigned as President of the Fund. In accordance with the
terms of his employment agreement, Mr. Levine was paid a total of $61,160
representing a severance payment equal to one year's salary, all incentive
compensation earned through the date of his termination, and an amount equal to
the full cost of continuing Mr. Levine's health benefits for one year.
To date, no arrangements or decisions have been made with respect to
compensation to be paid to the Fund's new executive officers. The new Board of
Directors will create a compensation committee which will recommend to the Board
the compensation to be paid to the Fund's executive officers.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of March 16, 1994, the following persons or entities were known by the
Fund to be the beneficial owner of more than five percent (5%) of the
outstanding shares of common stock of the Fund:
Name of Amount and Nature of Percent
Title of Class Beneficial Owner Beneficial Ownership of Class
Share of Common Mr. Harvey Polly 3,380,983 Shares 27%
Stock, $.01 Par
Value
The following table sets forth the ownership of shares owned directly or
indirectly by the directors and principal officers of the Fund as of March 16,
1995:
Name of Amount and Nature of Percent
Title of Class Beneficial Owner Beneficial Ownership of Class
Share of Common Mr. Harvey Polly, 3,380,933 Shares 27%
Stock, $.01 Par Director,
Value President and Chief
Executive Officer
Shares of Common Mr. Morton I. Kalb, 75,000 Shares 1%
Stock, $.01 Par Director, Vice
Value President and Chief
Financial Officer
Shares of Common Mr. Leo Yarfitz, 100,000 Shares 1%
Stock, $.01 Par Director
Value
Shares of Common All Directors and 3,555,983 Shares 29%
Stock, $.01 Par Officers of the
Value Fund,
as a group (6
persons)
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As a result of the acquisition of the Fund by Mr. Polly (See Item 1.
Description of Business), the Administrative Services Agreement with Banyan
Management Corp. was terminated on February 15, 1995. Banyan Management Corp.
had performed certain administrative and accounting services on behalf of the
Fund for which it was reimbursed at cost. Banyan Management Corp. is owned by
the Banyan Funds for which it provides services. Prior to February 15, 1995,
the Fund had been a stockholder of Banyan Management Corp. Mr. Levine is the
president of Banyan Management Corp. for which he receives no compensation.
Messrs. Hansen, Higgins and Teglia were employees of the Fund but are
compensated by Banyan Management Corp., and their compensation was included in
the administrative costs charged by Banyan Management Corp. to and reimbursed by
the Fund. The directors/trustees of all the Banyan Funds serve as directors of
Banyan Management Corp. but receive no additional compensation. Prior to
February 15, 1995, the Fund's directors had also served as directors of Banyan
Management Corp. Administrative costs reimbursed by the Fund to Banyan
Management Corp. for the year ended December 31, 1994, 1993 and 1992 totalled
$96,917, $119,404 and $150,344, respectively. Banyan Management Corp. charges
its operating expenses among the Banyan Funds for which it performs services and
acts as a common paymaster for the Fund. As of December 31, 1994, the Fund had
a net receivable from Banyan Management Corp. of $4,239.
Reference is made to Note 5 of the Notes to the 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,
Financial Statements.
(3) Exhibit (2) Plan of organization, reorganization, management,
liquidation or succession;
Exhibit (21) Subsidiaries of the Fund
The following exhibits are incorporated by reference from the Registrant's
Registration Statement on Form S-11 (file number 2-96565), referencing the
exhibit number used in such Registration Statement.
Exhibit Number Description
(3)(a) Certificate of Incorporation
(3)(b) By-Laws
(b) No reports on Form 8-K were filed during the quarter ending December 31,
1994.
(c) See Item 13(a)(3) above.
(d) None.
An annual report will be sent to the shareholders subsequent to this
filing and the Fund 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 HOTEL INVESTMENT FUND
By: /s/Harvey Polly Date: March 30, 1995
Harvey Polly, Director, President
and Chief Executive Officer
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/Harvey Polly Date: March 30, 1995
Harvey Polly, Director, President
and Chief Executive Officer
/s/Morton I. Kalb Date: March 30, 1995
Morton I. Kalb, Director, Vice President
and Chief Financial Officer
/s/Willis Ryckman Date: March 30, 1995
Willis Ryckman, Director
/s/Leo Yarfitz Date: March 30, 1995
Leo Yarfitz, Director
EXHIBIT 21
SUBSIDIARY OF BANYAN HOTEL INVESTMENT FUND
Name of subsidiary State of Organization
BHF Merger Corp. Illinois
BMC Santa Barbara Corp. Illinois
BANYAN HOTEL INVESTMENT FUND
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Pages
Report of Independent Auditors F-2
Consolidated Balance Sheets as of December 31, 1994 and 1993 F-3
Consolidated Statements of Income and Expenses For the
Years Ended December 31, 1994, 1993 and 1992 F-5
Consolidated Statements of Stockholders' Equity For the
Years Ended December 31, 1994, 1993 and 1992 F-6
Consolidated Statements of Cash Flows For the Years Ended
December 31, 1994, 1993 and 1992 F-8
Notes to Consolidated Financial Statements F-10 to F-14
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 Stockholders of Banyan Hotel Investment Fund
We have audited the accompanying consolidated balance sheets of Banyan
Hotel Investment Fund as of December 31, 1994 and 1993, and the related
consolidated statements of income and expenses, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1994. These
financial statements are the responsibility of the Fund'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.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Banyan Hotel
Investment Fund at December 31, 1994 and 1993, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1994, in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Chicago, Illinois
February 15, 1995
BANYAN HOTEL INVESTMENT FUND
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
1994 1993
ASSETS
Cash and Cash Equivalents $ 275,161 $ 2,443,797
Investment Securities 1,907,531 ---
Interest Receivable on
Cash and Cash
Equivalents and
Investment Securities 16,279 29,131
Mortgage Loans in Sub-
stantive Foreclosure --- ---
Prepaid Insurance 40,091 59,056
Net Investment in
Liquidating Trust --- 4,939
Investment in Partnership --- ---
Other Assets 31,461 235,483
------------ ------------
Total Assets $ 2,270,523 $ 2,772,406
============ ============
LIABILITIES AND
STOCKHOLDERS' EQUITY
Liabilities
Accounts Payable and
Accrued Expenses $ 111,197 $ 162,104
------------ ------------
Commitments and
Contingencies --- ---
Stockholders' Equity
Shares of Common Stock
$0.01 Par Value,
20,000,000 Shares
Authorized, 10,355,799
Shares Issued 87,027,338 87,027,338
Accumulated Deficit (84,794,685) (84,408,847)
Unrealized Losses on
Investment Securities (65,138) ---
Treasury Stock, At Cost,
for 32,757 Shares of
Common Stock (8,189) (8,189)
------------ ------------
Total Stockholders'
Equity 2,159,326 2,610,302
------------ ------------
Total Liabilities and
Stockholders' Equity $ 2,270,523 $ 2,772,406
============ ============
Book Value Per Share of
Common Stock
(10,323,042 $ 0.21 $ 0.25
Shares Outstanding) ============ ============
The accompanying notes are an integral part of the
consolidated financial statements.
BANYAN HOTEL INVESTMENT FUND
CONSOLIDATED STATEMENTS OF INCOME AND EXPENSES
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
1994 1993 1992
INCOME
Interest Income on Cash
and Cash Equivalents $ 18,305 $ 85,931 $ 113,104
Interest Income on
Investment Securities 120,298 --- ---
----------- ----------- -----------
Total Income 138,603 85,931 113,104
----------- ----------- -----------
EXPENSES
(Recovery of) Provision
for Losses on Mortgage
Loans, Notes and
Interest Receivable
(16,788) (32,770) 2,606,600
Other Expenses:
Stockholder Expenses 76,620 92,298 134,087
Directors' Fees, Expenses
and Insurance 260,670 300,428 280,681
Other Professional Fees 122,444 127,098 429,155
General and Administrative 172,188 230,287 240,651
----------- ----------- -----------
Total Other Expenses 631,922 750,111 1,084,574
----------- ----------- -----------
Recovery of Class Action
Settlement Costs and
Expenses (90,693) --- ---
----------- ----------- -----------
TOTAL EXPENSES 524,441 717,341 3,691,174
----------- ----------- -----------
Operating Loss (385,838) (631,410) (3,578,070)
Net Loss From Investment
in Partnership --- --- (3,749,581)
Gain on Disposition of
Real Estate Held for
Sale --- 143,329 ---
----------- ----------- -----------
Net Loss $ (385,838) $ (488,081) $(7,327,651)
=========== =========== ===========
Net Loss Per Share of
Common Stock (Based
on Weighted Average
Number of Shares
Outstanding of
10,323,042 for 1994 and
1993 and 10,324,388 for
1992) $ (0.04) $ (0.05) $ (0.71)
=========== =========== ===========
The accompanying notes are an integral part of
the consolidated financial statements.
BANYAN HOTEL INVESTMENT FUND
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
Unrealized
losses on
Investment
Shares of Common Stock Securities
Shares Amount
Stockholders'
Equity, (Deficit)
December 31, 1991 10,355,799 $87,027,338 $ ---
Acquisition of
32,757 Shares of
Treasury Stock --- --- ---
Net Loss for the
Year Ended
December 31, 1992 --- ---
---------- ------------ ------------
Stockholders'
Equity (Deficit)
December 31, 1992 10,355,799 87,027,338 ---
Net Loss For The
Year Ended
December 31, 1993 --- --- ---
---------- ------------ ------------
Stockholders'
Equity (Deficit)
December 31, 1993 10,355,799 87,027,338 ---
Net Loss For The
Year Ended
December 31, 1994 --- --- ---
Market Adjustment
December 31, 1994 --- --- (65,138)
---------- ----------- ------------
Stockholders'
Equity (Deficit)
December 31, 1994 10,355,799 $ 87,027,338 $ (65,138)
========== ============ =============
BANYAN HOTEL INVESTMENT FUND
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(CONTINUED)
Accumulated Treasury
Deficit Stock Total
Stockholders'
Equity, (Deficit)
December 31, 1991 $(76,593,115) $ --- $10,434,223
Acquisition of
32,757 Shares of
Treasury Stock --- (8,189) (8,189)
Net Loss for the
Year Ended
December 31, 1992 (7,327,651) --- (7,327,651)
------------ --------- -----------
Stockholders'
Equity (Deficit)
December 31, 1992 (83,920,766) (8,189) 3,098,383
Net Loss For The
Year Ended
December 31, 1993 (488,081) --- (488,081)
------------ --------- -----------
Stockholders'
Equity (Deficit)
December 31, 1993 (84,408,847) (8,189) 2,610,302
Net Loss For The
Year Ended
December 31, 1994 (385,838) --- (385,838)
Market Adjustment
December 31, 1994 --- --- (65,138)
------------ --------- -----------
Stockholders'
Equity (Deficit)
December 31, 1994 $(84,794,685) $ (8,189) $ 2,159,326
============= ========= ===========
The accompanying notes are an integral part of
the consolidated financial statements.
BANYAN HOTEL INVESTMENT FUND
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
1994 1993 1992
CASH FLOWS FROM
OPERATING
ACTIVITIES:
NET LOSS $ (385,838) $ (488,081) $(7,327,651)
Adjustments to
Reconcile Net Income
(Loss) to Net Cash
Used In Operating
Activities:
(Recovery of) Pro-
vision for Losses
on Mortgage Loans,
Notes and Interest
Receivable 4,939 (4,939) 2,606,600
Amortization of Pre-
mium on Investment
Securities 4,096 --- ---
Gain On Dispositions
of Real Estate Held
For Sale --- (143,329) ---
Net Loss From Oper-
ations of Fore-
closed Real Estate
Held For Sale and
Investment in
Partnership --- --- 3,749,581
Net Change In:
Interest Receivable
on Cash and Cash
Equivalents and
Investment
Securities 12,852 24,533 (26,128)
Prepaid Insurance 18,965 55,219 (55,317)
Other Assets 204,022 (11,163) 246,636
Accounts Payable and
Accrued Expenses (50,907) (134,438) (2,806,203)
----------- ----------- -----------
Net Cash Used In
Operating Activities (191,871) (702,198) (3,612,482)
----------- ----------- -----------
CASH FLOWS FROM
INVESTING
ACTIVITIES:
Purchase of Investment
Securities (2,126,765) --- ---
Proceeds from Maturity
of Investment
Securities 150,000 --- ---
Recovery from Invest-
ment in Partnership --- 506,695 ---
Principal Collections
on Mortgage Loans --- --- 4,735,493
----------- ----------- -----------
Cash (Used In) Provided
By Investing
Activities (1,976,765) 506,695 4,735,493
------------ ------------ ------------
CASH FLOWS USED IN
FINANCING ACTIVITIES:
Acquisition of Treasury
Stock --- --- (8,189)
----------- ----------- -----------
Cash Used In Financing
Activities --- --- (8,189)
----------- ----------- -----------
Net (Decrease) Increase
in Cash and Cash
Equivalents (2,168,636) (195,503) 1,114,822
Cash and Cash Equi-
valents at Beginning
of Year 2,443,797 2,639,300 1,524,478
----------- ----------- -----------
Cash and Cash Equi-
valents at End of
Year $ 275,161 $ 2,443,797 $ 2,639,300
=========== =========== ===========
The accompanying notes are an integral part of the
consolidated financial statements.
BANYAN HOTEL INVESTMENT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. BASIS OF PRESENTATION
Banyan Hotel Investment Fund (the "Fund") was organized under the laws of
the State of Massachusetts, pursuant to a Declaration of Trust filed March 19,
1985, and subsequently reorganized as a Delaware corporation on March 13, 1987.
The accompanying consolidated financial statements include the accounts of
the Fund and its wholly-owned subsidiaries. All intercompany balances and
transactions have been eliminated in consolidation.
B. INCOME TAXES
For the years ended December 31, 1994, 1993 and 1992, the Fund continued
to be treated as a real estate investment trust ("REIT") under Internal Revenue
Code Sections 856-860. In order to qualify, the Fund is required to distribute
at least 95% of its taxable income to stockholders and meet asset and income
tests as well as certain other requirements. However, if these requirements had
not been met as of December 31, 1994, loss of REIT status would not
significantly affect the Fund's current tax position.
As of December 31, 1994, the investment securities and the mortgage loan
in substantive foreclosure have a basis of $1,972,669 and $5,154,000,
respectively, for income tax purposes. In addition, unsecured notes receivable,
which have a tax basis of $25,405, have not been accorded any value for
financial reporting purposes.
As of December 31, 1994, the Fund had a net operating loss carry forward
of approximately $74,000,000 which expires in 2005, 2006, 2007, 2008 and 2009.
The utilization of the net operating losses may be subject to limitations
contained in the Internal Revenue Code.
C. INCOME (LOSS) PER SHARE
For 1992, a weighted average number of shares, 10,324,388 was used for
calculating earnings per share due to the acquisition of 32,757 shares of
Treasury Stock by the Fund on January 16, 1992. For 1994 and 1993, earnings per
share was calculated using the 10,323,042 shares outstanding during the years.
D. CASH AND CASH EQUIVALENTS
The Fund considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash and cash equivalents.
E. INVESTMENT SECURITIES
Effective January 1, 1994, the Fund adopted the provisions of Financial
Accounting Standard No. 115, Accounting for Certain Investments in Debt and
Equity Securities. Accordingly, Investment Securities are classified as
available for sale and carried at fair value, as determined by quoted market
prices, with unrealized gains and losses reflected in the Statements of
Shareholder Equity. Realized gains and losses are determined on a specific
identification basis. The carrying value of investment securities is adjusted
for amortization of premiums and discounts using a level yield method.
F. RECLASSIFICATIONS
Certain 1993 and 1992 amounts have been reclassified to conform to the
1994 financial statement presentation. These reclassifications have not changed
1993 or 1992 operating results.
2. INVESTMENT SECURITIES
The Fund's investment securities portfolio at December 31, 1994 is as
follows:
Amortized Cost
Net of Principal
Paydowns Estimated Market
Received Value at Dec.
Title of Each Issue Dec. 31, 1994 31, 1994 (2)
and Name of Issuer
Federal National
Mortgage Assn. (1)
8.00%, 1/20/94-
2/25/2005 $1,066,836 $1,042,125
Federal National
Mortgage Assn. (1)
5.00%, 1/20/94-
9/25/2011 905,833 865,406
---------- ----------
$1,972,669 $1,907,531
========== ==========
(1) The Guaranteed REMIC Pass-Through Certificates are guaranteed as to timely
payment of principal and interest by the Federal National Mortgage
Association. The maturity of the principal of the above investment
securities is dependent upon the repayment of the underlying U.S. Agency
sponsored mortgages. The rate of repayment is dependent upon the current
market level of interest rates on mortgage loans as it relates to the
interest rates of the mortgages underlying each REMIC security. The
expected maturity of these investment securities, under the market
conditions as of the fourth quarter of 1994, is expected to be from
February 25, 2005 to February 25, 2011. These expectations may change as
interest rates on mortgage loans change.
(2) The Fund has recorded a market adjustment of $65,138 representing
unrealized losses on its investment securities based on current market
values at December 31, 1994.
3. MORTGAGE LOANS RECEIVABLE IN SUBSTANTIVE FORECLOSURE
OMNI PARK CENTRE
On June 17, 1987, the Fund issued a $5,154,600 third mortgage loan to Park
Centre Associates (the "Borrower") which was collateralized by the Omni Park
Hotel (the "Property") located in New York, New York. On July 19, 1991 the Fund
was served with a summons in a mortgage foreclosure action filed by Sheraton
Holding Inc. ("Sheraton") in the Superior Court of New York, New York. Sheraton
sought to foreclose on its $54,000,000 first mortgage collateralized by the
Property. The Sheraton foreclosure action was based on monetary defaults by the
Borrower. On September 30, 1991 the Fund filed a counterclaim to the Sheraton
foreclosure action. In addition, the second mortgage on the property in the
amount of approximately $5,600,000 is also in default and the holder of the
mortgage has filed a counterclaim to the foreclosure with the court. On June
12, 1992, the Borrower filed for protection under the U.S. Bankruptcy Code. On
June 30, 1992, an order was entered in the Bankruptcy Court between the Fund,
Sheraton, the second mortgage holder and the Borrower authorizing and
restricting the use of cash collateral by the Borrower. During 1992, the Fund
recorded a provision for losses for the remaining carrying balance of the loan
($2,606,600) which is considered in substantive foreclosure.
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 114, Accounting by Creditors for Impairment
of a Loan ("FAS 114"). FAS 114 would require the Fund to reclassify Mortgage
Loans in Substantive Foreclosure to Mortgage Loans Receivable with an
appropriate allowance for loan losses determined based on consideration of the
fair value of the collateral or discounted future cash flows to be received.
The Fund does not anticipate any material impact to its financial statements and
will adopt FAS 114, as required, effective January 1, 1995.
4. INVESTMENT IN PARTNERSHIP
In 1991, in connection with a release from liability related to a loan
made by the Fund, the Fund acquired a 50% interest in the partnership which owns
the Santa Barbara Biltmore Resort. The 50% limited partnership interest in the
Santa Barbara Biltmore Partnership was recorded by the Fund at its estimated
fair market value of $5,769,000 and was accounted for on the equity method.
This method resulted in the Fund recognizing a loss of $3,749,581 for the year
ended December 31, 1992. The 1992 amount included an additional loss of
$861,691 to reduce the investment's carrying value to $506,695, representing
the amount due to the Fund from certain funds held in escrow. The $506,695 was
received by the Fund on February 3, 1993 and was recorded by the Fund as a
reduction in the investment carrying value. The Fund did not record losses
related to its interest in the Santa Barbara Biltmore during 1994 and 1993 since
the carrying value of the partnership interest was reduced to zero as of
December, 1992, and the Fund has no obligation to make additional capital
contributions to, or to pay the liabilities of, the partnership.
5. TRANSACTIONS WITH AFFILIATES
Administrative costs, primarily salaries and general and administrative
expenses, are reimbursed by the Fund to Banyan Management Corp. ("BMC").
Effective January 1, 1993, these costs are charged to each Banyan Fund based
upon the actual number of hours spent by BMC personnel on matters related to
that Fund. During 1992, these costs were allocated among the Banyan Funds 25%
equally and 75% based on the percentage which each of the Banyan Fund's net book
value, less cash and cash equivalents, represented of the total net book value
less cash and cash equivalents, of all Banyan Funds. The Fund's costs for the
year ended December 31, 1994 were $96,917 compared to $119,404 and $150,344 for
1993 and 1992, respectively.
Prior to the February 15, 1995 acquisition of the Fund by Mr. Polly (see
Note 10), as one of its administrative services, BMC served as the paying agent
for general and administrative costs of the Fund. As part of providing this
payment service, BMC maintained a bank account on behalf of the Fund. At
December 31, 1994, the Fund had a net receivable from BMC of $4,239.
6. INVESTMENT IN LIQUIDATING TRUST
On November 18, 1993, in final settlement of guarantees of VMS Realty
Partners of loans made by the Fund in prior years, the Fund received a cash
distribution of $27,831 and an interest in a liquidating trust established for
the benefit of the unsecured creditors of VMS. As of December 31, 1993, the
Fund valued its interest at $4,939 representing its pro rata portion of the cash
assets of the trust. During 1994 and 1993, the Fund has recorded $16,788 and
$32,770, respectively, on its Statement of Income and Expenses as a recovery of
the Provision for Losses on Mortgage Loans, Notes and Interest Receivable
related to the distributions received from the liquidating trust. The $16,788
net recovery recorded in 1994 includes the $34,764 distribution received net of
an estimated $13,037 due to the Class Action Settlement Fund representing the
Fund's share of amounts due per the terms of the previously settled VMS
Securities litigation.
7. TREASURY STOCK
On January 16, 1992 the Fund acquired 32,757 shares of its common stock
for which were previously held by VMS Realty Partners for $8,189.
8. RECOVERY OF CLASS ACTION SETTLEMENT COSTS AND EXPENSES
On January 25, 1994, the Fund received net proceeds of $90,693 relating to
a recovery of payments previously made into an escrow established as part of the
1992 class action settlement of the VMS securities litigation. The escrow was
established to provide the directors of the Fund with monies to fund the cost of
any litigation in which they may be named as defendants post settlement of the
class action. Subsequently, the directors released the proceeds from the
escrow, and the Fund purchased an insurance policy to cover the directors.
9. OTHER ASSETS AND GAIN ON DISPOSITION OF REAL ESTATE
Effective December 20, 1993, the Fund and the unaffiliated third party
which purchased the Silver Sands Motel property from the Fund in October, 1991
("the Buyer") jointly agreed to terminate an escrow established at the time of
the sale to be used in connection with monitoring various environmental issues
at the property. In anticipation of the final approval regarding the
environmental issues by local authorities, the Fund and the Buyer determined
that the necessary work was substantially complete and the escrow, which
originally contained $327,000, was no longer required. After deducting the cost
of the environmental work performed, the remaining balance of the escrow account
was approximately $193,000 which had been classified by the Fund as an other
asset. On January 10, 1994, the Fund paid the Buyer $50,000, representing the
final settlement of the escrow. For the year ended December 31, 1993, the Fund
recorded a gain in disposition of real estate of $143,329 representing the
amount of its recovery from the escrow.
10. SUBSEQUENT EVENTS
On February 15, 1995, a change in control of the Fund occurred pursuant to
the closing of the sale of shares of common stock in the Fund to Mr. Harvey
Polly pursuant to a purchase agreement. Mr. Polly's tender offer, which
commenced on December 28, 1994, concluded on January 26, 1995, and resulted in
the tender to Mr. Polly of 1,288,217 shares of common stock, or 12.5% of the
Fund's then outstanding shares of common stock, for a cash price of $0.35 per
share. Subsequent to the closing of the tender offer, the terms of the purchase
agreement also required Mr. Polly to purchase from the Fund a number of shares
sufficient to allow Mr. Polly to own, by virtue of the combination of the tender
offer and the share purchase, not less than 3,335,000 and not more than 40% of
the shares of common stock after giving effect to the shares issued in
connection with the purchase. On February 15, 1995, per the purchase agreement
Mr. Polly purchased 2,047,766 newly issued shares of common stock of the Fund
for a cash price of $0.22 per share. Upon the acquisition of the aforesaid
shares from the Fund, when combined with the shares of common stock previously
owned and acquired pursuant to the tender offer, Mr. Polly is the beneficial
owner of 3,335,983 shares, or approximately 27% of the Fund's outstanding voting
shares of common stock.
February 14, 1995
Mr. Robert G. Higgins
Vice President and General Counsel
Banyan Management Corp.
150 S. Wacker Drive, Suite 2900
Chicago, Il 60606
Mr. Harvey Polly
c/o Mr. William L. Weiss
1 1 0 East 59th Street
New York, NY 10022
Dear Mr. Polly:
Reference is hereby made to the Purchase Agreement between us dated August
3,1994, as amended by letter dated November 4,1994, by letter dated December 19,
1994, and by letter dated February 3, 1995 (the "Agreement").
Paragraph 5 of the Agreement is hereby amended to provide that the aggregate
amount of Tender Stock and Purchased Stock shall not be less than 3,335,000
shares.
Except as hereby amended, all of the terms and conditions of the Agreement shall
remain in full force and effect.
Please confirm your understanding of and agreement with the foregoing by signing
and returning the enclosed copy of this letter.
Very truly yours,
Banyan Hotel Investment Fund
/s/ Robert G. Higgins
ACCEPTED AND AGREED TO:
/s/ Harvey Polly
February 3, 1995
Robert G. Higgins
Vice President and General Counsel
Banyan Management Corp.
150 S. Wacker Drive, Suite 2900
Chicago, Il 60606
Mr. Harvey Polly
c/o Mr. William L. Weiss
1 1 0 East 59th Street
New York, NY 10022
Dear Mr. Polly:
Reference is hereby made to the Purchase Agreement between us dated August
3,1994, as amended by letter dated November 4, 1,994 and by letter dated
December 19, 1994 (the "Agreement").
Paragraph 3(a) of the Agreement is hereby amended to provide that the closing
shall take place on February 15, 1995.
Except as hereby amended, all of the terms and conditions of the Agreement shall
remain in full force and effect.
Please confirm your understanding of and agreement with the foregoing by signing
and returning the enclosed copy of this letter.
Very truly yours,
Banyan Hotel Investment Fund
/s/ Robert G. Higgins
ACCEPTED AND AGREED TO:
/s/ Harvey Polly
December 19, 1994
HARVEY POLLY
2901 South Highland Boulevard
Highland Beach, Florida 33487
Banyan Hotel Investment Fund
150 South Wacker Drive
Chicago, Illinois 60606
Gentlemen:
Reference is hereby made to the purchase agreement between us dated August 3,
1994, as amended by letter dated November 4, 1994 (the "Agreement").
In order to provide for sufficient time to consummate the transaction set forth
in the Agreement, it has been agreed that paragraph 4 of the Agreement shall be
and is hereby amended to provide that I will make the tender offer referred to
in the Agreement by December 30, 1994.
We have also agreed that paragraph 3(a) of the Agreement shall be and it hereby
is amended to provide that the closing will take place no later than ten days
after the expiration of the tender offer, but no later than February 15, 1995.
In like manner, paragraph 12(b) of the Agreement is hereby amended to provide
that the transaction must be consummated no later than February 15, 1995.
Section 13 of the Agreement has been amended to provide that the escrow account
be increased to $125,000. Upon execution and delivery of this letter by you, I
will wire an additional $25,000 into the escrow account established pursuant to
the Agreement.
Except as hereby amended, all of the terms and conditions of the Agreement shall
remain in full force and effect.
Please confirm your understanding of and agreement with the foregoing by signing
and returning to me the enclosed copy of this letter.
Very truly yours,
/s/ Harvey Polly
ACCEPTED AND AGREED TO:
Banyan Hotel Investment Fund
/s/ Robert G. Higgins
Vice President
November 4, 1994
HARVEY POLLY
2901 South Highland Boulevard
Highland Beach, Florida 33487
Banyan Hotel Investment Fund
150 South Wacker Drive
Chicago, Illinois 60606
Gentlemen:
Reference is hereby made to the purchase agreement between us dated August 3,
1994 (the "Agreement").
In order to provide for sufficient time to consummate the transactions set forth
in the Agreement, it has been agreed that paragraph 4 of the Agreement shall be
and hereby is amended to provide that I will make the tender offer referred to
within thirty days from the date hereof.
We have also agreed that paragraph 3(a) of the Agreement shall be and hereby is
amended to provide that the closing shall take place no later than ten days
after the expiration of the tender offer.
In like manner, paragraph 12(b) of the Agreement is hereby amended to provide
that the transaction must be consummated no later than fifteen days after the
expiration of the tender offer, but no later than 12/31/94.
In addition, paragraphs 1 and 2 of the Agreement are hereby amended to provide
that the price paid by Purchaser for the Purchased Stock shall be the book value
per share of the common stock as reflected on the Company's Form 10-Q for the
period ended September 30, 1994.
Except as hereby amended, all of the terms and conditions of the Agreement shall
remain in full force and effect.
Please confirm your understanding of and agreement with the foregoing by signing
and returning to me the enclosed copy of this letter.
Very truly yours,
/s/ Harvey Polly
ACCEPTED AND AGREED TO:
/s/ Robert G. Higgins
Vice President
PURCHASE AGREEMENT
AGREEMENT, dated this 3rd day of August, 1994, by and between BANYAN HOTEL
INVESTMENT FUND, with offices located at 150 South Wacker Drive, Chicago,
Illinois 60606 (hereinafter called the "Company") and HARVEY POLLY, residing at
2901 South Ocean Boulevard, Highland Beach, Florida 33487 (hereinafter called
the "Purchaser").
W I T N E S S E T H
WHEREAS, the Company is a Delaware corporation, listed on the American Stock
Exchange, the authorized capital stock of which consists of 20,000,000 shares,
par value $.01 per share, of which 10,323,042 shares are issued and outstanding
(the "Common Stock".); and
WHEREAS, the Purchaser desires to conduct an all cash tender offer for all of
the Common Stock at $.35 per share; and
WHEREAS, Purchaser desires to acquire up to 40% of the outstanding shares of
Common Stock and subject to the completion of the tender by the Purchaser and to
the extent that less than such percentage of Common Stock is tendered, the
Company desires to sell to Purchaser shares of Common Stock, all as set forth
herein, in exchange for the consideration, and upon the terms and conditions
herein contained.
NOW, THEREFORE, the parties hereto agree as follows:
1. Upon the terms and subject to the conditions set forth in this agreement, at
the Closing (as hereinafter defined), the Company agrees to sell to Purchaser
the number of shares of Common Stock, if any, as may be calculated under and
pursuant to the terms of paragraph 5 hereof for $.18 per share (the "Purchased
Stock"). Purchaser understands and agrees that the Purchased Stock will be
common stock which has not been registered under the Securities Act of 1933, as
amended.
2. Upon the terms and subject to the conditions set forth in this agreement and
in consideration of the sale of the Purchased Stock by the Company as provided
herein, at the Closing Purchaser shall deliver to the Company a good certified
or official bank check in the amount of $.18 multiplied by the number of shares
of Purchased Stock which the Company will be selling to Purchaser pursuant to
this agreement.
3.(a) Unless this agreement has been terminated pursuant to Section.12, the
consummation of the transactions contemplated under this agreement (the
"Closing".) shall take place at 10:00 a.m. on October 12, 1994 (the "Closing
Date"),, or such other date as the parties hereto may agree, at the offices of
the Company's counsel, Shefsky & Froelich, 444 North Michigan Avenue, Chicago,
Illinois 60611.
(b) Subject to the terms and conditions set forth in this agreement, at
Closing', the Company shall execute and deliver, or cause to be executed and
delivered, the following:
(i) The certificates representing the Purchased Stock, if any;
(ii) The documents required by paragraphs 11(b),(c),(d) and (h);
(iii) The resignations of the current officers and directors of the Company; and
(iv) Such other documents as Purchaser may reasonably request.
(c) Subject to the terms and conditions set forth in this agreement, at Closing,
the Purchaser shall execute and deliver, or cause to be executed and delivered,
the following:
(i) The documents required by paragraph 10(b), (c),(d) and (e);
(ii) Such other documents as the Company may reasonably request.
4. As a material ingredient to the consummation of this transaction and as an
inducement for the Company to sell the Purchased Stock, Purchaser represents and
agrees that he will, no later than forty-five days after the date of this
agreement, make an offer pursuant to Section 14(d) of the Securities Exchange
Act of 1934 (the "Exchange Act") and in accordance with the rules and
regulations of the Securities and Exchange Commission to purchase all of the
outstanding shares of Common Stock of the Company for $.35 a share cash without
interest (the "Tender Offer"). The cost and expense of preparation of the
Tender offer material and the related expenses of the tender agent will be borne
by the Purchaser. Such shares as may be tendered by the stockholders of the
Company are hereinafter referred to as the "Tender Stock".
5. Subject to the provisions of paragraph 2, in the event that less than
4,000,000 shares of Common Stock are tendered by the stockholders of the Company
and purchased pursuant to the Tender Offer, Purchaser shall have the right to
purchase, subject to the provisions of paragraph 2, directly from the Company
that number of shares of Common Stock as would be required so that Purchaser
will have acquired, by way of Tender offer and the purchase of Common Stock from
the Company under paragraphs 1 and 5, up to 40% of the then total of the
outstanding shares of Common Stock, after reflecting the issuance of the
Purchased Stock, but in no event shall the aggregate amount of Tender Stock and
Purchased Stock be less than 3,500,000 shares.
6. The Company hereby represents and warrants the following to the Purchaser:
(a) The Company is duly organized, validly existing and in good standing under
the laws of the State of Delaware, and has the full corporate power to carry on
its business as it is now being conducted and is entitled to own or lease and to
operate the properties and assets now owned or leased and operated by it. The
Company is qualified to do business and is in good standing in each jurisdiction
where the conduct of its business or the ownership or leasing of its properties
requires such qualification. Subject to approval of this agreement by the
Company's Board of Directors as contemplated herein, the Company has full
corporate power and authority to enter into this agreement and to carry out the
transactions contemplated hereby.
(b) The authorized capital stock of the Company is set forth in the first
paragraph of the recitals hereto. All of the issued and outstanding shares of
Common Stock of the Company are validly issued, fully paid and non-assessable.
There is no existing agreement, option, warrant, right, call or commitment of
any kind relating to the Company's authorized and unissued shares of Common
Stock.
(c) Except as set forth on Schedule A hereto, the Company has no subsidiaries.
(d) The execution and delivery of this agreement by the Company do not and,
subject to the approval of this agreement by the Board of Directors of the
Company, the consummation of the transactions contemplated hereby, will not
violate any provisions of the Company's certificate or incorporation or by-laws
or violate any provision of, or result in acceleration of any obligation under
any mortgage, loan,,lease, agreement, instrument, court order, judgment or
decree to which the Company is a party or by which the Company or any of its
properties are bound, except as set forth on Schedule A-1 annexed hereto.
(e) The consolidated balance sheet of the Company as of December 31, 1993 (the
"Balance Sheet") and the consolidated statement of income and expenses for the
two years then ended as audited or certified by Ernst & Young, included in the
Company's annual report on Form 10-K (the "Form 10-K"), a copy of which has
heretofore been furnished by the Company to the Purchaser (such statements
together with the Balance Sheet being collectively referred to as the "Company
Financial Statements") have been prepared in accordance with generally accepted
accounting principles consistently applied, and fairly present the consolidated
financial position of the Company as of such date and the results of operations
of the Company for the periods covered thereby. The unaudited consolidated
balance sheet of the Company as of March 31, 1994 and the related unaudited
statement of income and expenses for the three-month period then ended, as
included in the Company's quarterly report on Form 10-Q (the "Form 10-Q") for
the quarter ended March 31, 1994, a copy of which has been heretofore furnished
by the Company to the Purchaser, have been prepared in accordance with generally
accepted accounting principles applied consistently with the Balance Sheet and
the Company Financial Statements and fairly present the consolidated financial
position of the Company as of such date and the results of operations of the
Company for the periods covered thereby.
(f) The Company has good and marketable title to all of its assets (including,
but not limited to those reflected in the Balance Sheet), free and clear of any
liens, claims, charges, options or encumbrances of any nature except for the
matters specified in Schedule B.
(g) The Company has set forth in Schedule C all material contracts and
commitments to which it is a party or by which it is bound. For the purposes of
this section 6(g), the term "material contracts" and commitments" is defined as:
(i) contracts and commitments arising outside the ordinary course of business;
(ii) contracts or commitments affecting ownership of, title to, use of, or any
interest in real estate; (iii) all bonuses, incentive compensation, pension,
group insurance or employee welfare plans of any nature whatsoever; (iv)
employment contracts and all other Contracts, agreements ,or commitments to or
with individual employees or agents extending for a period of more than three
months from the date hereof or providing for termination upon the payment of a
penalty or the equivalent thereof; and (v) all contracts or commitments, whether
in the ordinary course of business or not, which involve future payments,
performance of services or delivery of goods and/or materials to or by the
Company of an aggregate value in excess of $10,000.
(h) Except as disclosed in Schedule D, since March 31, 1994, there has not been
any material adverse change in the business, operations or financial condition
of the Company; any damage, destruction or loss (whether or not covered by
insurance) which materially and adversely affects the assets, business or
operations of the Company; any declaration, setting aside or payment of
dividends or other distribution in respect of the Common Stock of the Company or
any direct or indirect redemption, purchase or other acquisition of any such
stock by the Company; any increase in the compensation payable to or become
payable by the company to any of its directors, officers or employees over the
rates of compensation in effect at December 31, 1993; any agreement for issuance
of Common Stock by the Company or any grant of an option or warrant to purchase
any such stock to any person, firm or corporation; any increase of indebtedness
by the Company for borrowed money or the entering into by the Company of any
commitment to borrow money; any mortgage, pledge or material subjection to lien,
charge or encumbrance of any kind of any of the assets of the Company; or any
other event or condition of any character which materially and adversely affects
any of the business of the Company.
(i) Except as specifically disclosed on the Balance Sheet or in Schedule E and
except for the liabilities or obligations arising in the ordinary course of
business, since March 31, 1994, the Company was not obligated for nor are any of
its assets or properties subject to any liabilities or obligations.
(j) Except as otherwise disclosed on the Schedules hereto, to the knowledge of
the Com any, the Company P is not engaging in any activity or omitting to take
any action as a result of which it is or has been in violation of any applicable
federal, state, local, foreign or other law or order or any other requirement of
any governmental or regulatory agency or authority, or to its securities,
properties, business or employment practices. The Company is not now and has
not been charged with and is not now and has not been under investigation with
respect to, any possible violation of any such applicable law, regulation,
decree or requirement relating to any of the foregoing. Without limiting the
generality of the foregoing, the Company is in compliance in all material
respects with all such applicable laws, regulations, decrees and requirements in
respect of employment and employment practices, terms and conditions of
employment, wages and hours, safety, occupational safety, health or welfare
conditions, relating to premises occupied, environmental protection, product
safety and liability and civil rights.
(k) Except as set forth in Schedule F, there are no material claims, actions,
suits or proceedings pending or, to the Company's knowledge, threatened against
it, which if adversely determined would materially and adversely affect the
Company or its properties.
(l) The Company has filed all income tax, franchise and other tax returns
required to be filed by it (including, but not limited to, those required to be
filed with the United States or any state or any subdivision thereof or any
foreign jurisdiction). All federal, foreign, state, county and local income,
franchise, sales, use, occupation, property, excise and other taxes required to
be paid by it in respect of the period covered by such returns have been paid or
adequate reserves therefor have been established and the Company has set up an
adequate reserve for the payment of all income taxes or other taxes anticipated
to be payable in respect of the periods subsequent to the last of such periods.
The Company has heretofore delivered to Purchaser copies of its tax returns and
reports (federal, state, local and foreign) for each of its prior taxable
years. Said returns constitute complete and accurate representations of its tax
liabilities for said years. The Company is not delinquent in the payment of any
tax, assessment or governmental charge. The last year for which the federal
income tax return of the Company has been audited by the Internal Revenue
Service was for the year ended December 31, 1992, and no deficiencies for
federal income tax have been assessed or asserted which have not been paid or
settled. No waivers of statutes of limitations are outstanding with respect to
any taxable years of the Company. Notwithstanding anything to the contrary in
this agreement, the Company has no material liabilities for any taxes with
respect to current periods, or to any prior periods, pursuant to any section of
the Internal Revenue Code (or comparable provisions of any state income or
franchise tax law), other than corporate income taxes (or comparable state
franchise taxes) due (or comparable state income or franchise tax laws).
(m) The Company has heretofore delivered (or will hereafter furnish) to
Purchaser true, accurate and complete copies of its certificate of incorporation
and by-laws, together with all amendments to each.
(n) Except as set forth in Schedule G, the Company does not have or contribute
to, and never has terminated, any pension, profit-sharing, option, other
incentive plan, or any other type of Employee Benefit Plan (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974) or have any
obligation to or customary arrangement with employees for bonuses, incentive
compensation, vacations, severance pay, insurance or other benefits. The
Company has delivered to Purchaser simultaneously herewith true and correct
copies of all documents evidencing any such plans, obligations or arrangements
(or true and correct written summaries of such plans, obligations or
arrangements to the extent not evidenced by documents) and true and correct
copies of all documents evidencing trusts relating to any such plans.
Compensation increases, if any, since December 31, 1993, have been made only in
the ordinary course of business, and rates of compensation have not increased by
more than 4% above the rate at December 31, 1993 unless such employee's business
classification or responsibilities changed. All employee loans and advances are
listed as of December 31, 1993 on Schedule G.
(o) Since December 31, 1993, the Company had the insurance coverages described
in Schedule H or comparable coverages; coverages now in effect are accurately
described therein; and the insurance policies referred to therein are in full
force and are effective in accordance with their terms.
(p) Schedule I lists each bank and brokerage account of the Company, the
signatures thereon, and whether their signing authority is joint, single or
otherwise.
(q) Neither the Company nor any of its officers, directors or agents has
incurred any liability to any broker, finder or agent for any brokerage fees,
finder's fees or commissions with respect to the transactions contemplated by
this agreement, which liability will diminish the assets or properties of the
Company or which liability may be asserted against the Company or the Purchaser.
(r) No representation or warranty by the Company in this agreement, in the
Schedules, or information set forth in the Form 10-K or 10-Q, contains any
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements contained herein or
therein not misleading.
7. The Purchaser hereby represents and warrants the following to the Company:
(a) The Purchaser has full capacity and authority to enter into this agreement,
has duly executed and delivered this agreement to the Company and this agreement
represents a valid and binding obligation of the Purchaser enforceable in
accordance with its terms.
(b) The Tender Stock and the Purchased Stock to be acquired by the Purchaser are
being acquired from Purchaser's personal funds, for investment purposes only and
not for distribution. The Purchaser is an accredited investor (as defined in
Regulation D under the Securities Act of 1933, as amended) and understands that
the Purchased Stock to be acquired by him will be sold to him in reliance upon
an exemption to the registration requirements of the Securities Act of 1993, as
amended, and such shares cannot be resold without compliance with or exemption
from certain provisions of the Securities Act.
(c) The Purchaser has not incurred any liability to any broker, finder or agent
for any brokerage fees, finder's fees or commissions with respect to the
transactions contemplated by this agreement.
(d) No representation or warranty by the Purchaser in this agreement or in any
information to be supplied by the Purchaser to the Company in connection with
the Tender Offer Solicitation/Recommendation Statement to be filed with the
Securities and Exchange Commission will contain any-untrue-statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements contained herein or therein not misleading.
(e) The Purchaser has the financial resources necessary to consummate the
transactions contemplated by this agreement.
8. Except as contemplated in paragraphs 10(h) and 11(j), the Company covenants
and agrees-that between the date hereof and the Closing Date:
(a) The Company will (except to the extent Purchaser consents in writing to a
waiver of the requirements of this paragraph 8):
(i) Continue to conduct its business in its usual manner and not engage in any
activity or transaction or sell, encumber or otherwise dispose of any material
asset or incur any material obligation, except in the ordinary course of
business or as described in Schedule J;
(ii) Use all reasonable efforts to preserve intact its business organization,
and to preserve for the Purchaser the goodwill of the suppliers, vendors,
customers and others having business relationships with the Company;
(iii) Not enter into any contracts, leases or commitments of any kind except in
the ordinary course of business, except that the Company will purchase a
directors' and officers' liability insurance policy providing "run off" or "tail
coverage" for resigning officers and directors;
(iv) Give Purchaser's representatives full access, during normal business hours
and upon reasonable notice, to all of the assets, properties, books, records,
agreements, commitments, officers, directors, employees, professional advisers
and agents of the Company, and furnish Purchaser's representatives during such
period with all such information concerning the Company's affairs as Purchaser
may reasonably request, including copies and/or extracts of pertinent records,
documents and contracts, and shall use its best efforts to cause its accountants
to furnish Purchaser during such period any and all of their statements,
working papers and underlying records as Purchaser reasonably
may request; provided, however, that any furnishing of such information
to Purchaser or any investigation by Purchaser shall not affect Purchaser's
right to rely on the representations and warranties made by the Company
in this agreement; and provided further, that the Purchaser will hold in
confidence all documents and information concerning the Company so furnished or
obtained as well as all such documents and information heretofore furnished to
Purchaser by the Company other than what is required pursuant to Section 14(d)
of the Exchange Act and the rules and regulations of the Securities and Exchange
Commission. If the Closing does not occur, such confidence shall be maintained
by Purchaser and Purchaser shall not use such information to the detriment of
the Company (except to the extent that such information can be shown to be
previously known to Purchaser from other legitimate sources or as duly required
to be disclosed by a court or governmental agency) and all such documents shall
promptly thereafter be returned to the Company;
(v) Maintain in full force and effect insurance policies providing the coverage
and the amount of coverage comparable to the coverage and the amount of coverage
provided under its policies of insurance now in effect and
(vi) Not solicit or enter into an agreement with any third party for acquisition
of a controlling interest in the Company, provided, however, the Company may
take such actions in response to unsolicited, third party offers for a
controlling interest in the Company that the Board of Directors, in its sole
judgment, believes are required under applicable law in the exercise of its
fiduciary duties; provided, further, if the Company terminates this agreement
pursuant to paragraph 12(f) of this agreement, the Company shall pay Purchaser a
fee equal to $175,000 within five days of such termination.
(b) The Company will furnish to Purchaser all information concerning the Company
required for inclusion in the Tender Offer Statement pursuant to Section 14(d)
of the Exchange Act and the rules and regulations of the Securities and Exchange
Commission, to be furnished to the Company's stockholders in connection with the
Tender Offer. The Company will file with the Securities and Exchange Commission
a solicitation/recommendation statement on Schedule 14D-9 pursuant to Section
14(d) the Exchange Act, setting forth its recommendation with respect to the
Tender Offer and the reasons for such recommendation.
(c) From and after December 31, 1993 and until the Closing Date, the Company has
not or will not:
(i) Changed or change its capital stock by reclassification, subdivision,
reorganization or otherwise;
(ii) Amended or amend its charter or certificate of incorporation or by-laws,
except as set forth in Schedule A-1; or
(iii) Issued or issue any additional capital stock.
At the Closing Date, the Company will not have more than 10,323,042 shares of
Common Stock issued and outstanding plus such number of shares as Purchaser may
acquire directly from the Company as provided for in paragraph 5.
(d) From and after December 31, 1993 and until the Closing Date, the Company has
not and will not declare or pay any dividends on its capital stock or make any
distribution with respect thereto.
(e) The Company will obtain all consents and approvals required of it to carry
out the transactions contemplated by this agreement.
9. The Purchaser covenants and agrees that between the date hereof and the
Closing Date:
(a) Purchaser will at his cost and expense, prepare, file and use his best
efforts to obtain approval of, a Tender Offer Statement, on Schedule 14D-1,
together with all exhibits thereto, pursuant to Rule 14d-3 of the General Rules
and Regulations under the Exchange Act.
(b) Purchaser will furnish to the Company all information concerning the
Purchaser required for inclusion by the Company in the
solicitation/recommendation statement referred to in paragraph 8(b) hereof, and
will cooperate with the Company in the preparation of the solicitation/
recommendation statement.
(c) The Purchaser will obtain all consents and approvals required of him to
carry out the transactions contemplated by this agreement.
10. The obligations of the Company under this agreement are subject to
satisfaction of the following conditions on or prior to the Closing Date:
(a) The Board of Directors of the Company shall have adopted and approved this
agreement, and shall have authorized its execution and delivery by the Company.
(b) Purchaser shall have completed the Tender offer and made payment or
provision for payment for all shares of the Tendered Stock tendered by the
Company's stockholders and provided evidence thereof to the Company.
(c) The Purchaser shall have paid and provided evidence thereof to the Company
the amounts required to be paid by Purchaser for the Purchased Stock, if any,
under the terms of paragraphs 2 and 5, hereof by delivering the check required
thereunder.
(d) The Company shall have received a letter from Purchaser's counsel dated the
Closing Date in form and substance satisfactory to the Company and its counsel.
(e) All of the terms and conditions of this agreement to be complied with and
performed by Purchaser shall have been complied with and performed in all
material respects, and the representations and warranties made by Purchaser in
this agreement shall be true and correct in all material respects at and as of
the Closing Date, with the same force and effect as though such representations
and warranties had been made at and as of the Closing Date, except for changes
contemplated by this agreement. Purchaser shall have delivered to the Company a
certificate dated the Closing Date signed by the Purchaser, certifying to the
fulfillment of these conditions.
(f) Any federal or state regulatory authority having jurisdiction shall, to the
extent required by law, have consented to or approved the consummation of the
transactions contemplated by this agreement to the extent legally required.
(g) No proceedings enjoining the Tender offer shall have been initiated or
threatened by the Securities and Exchange Commission or any stockholder or
competing bidder and no court or agency order or injunction shall exist
restraining the consummation of the transactions contemplated hereby.
(h) The Company shall have disposed of its shares of capital stock in Banyan
Management Corp. by sale, assignment, redemption or otherwise.
(i) If any of the conditions specified in this paragraph 10 shall have not been
satisfied, the Company shall, nevertheless, have the right to proceed with the
transactions contemplated hereby.
11. The obligations of Purchaser under this agreement are subject to the
satisfaction of the following conditions on or prior to the Closing Date:
(a) The Board of Directors of the Company shall have adopted and approved this
agreement and shall have authorized its execution and delivery by the Company
and the Company shall have taken all necessary corporate action to provide for
the issuance and reservation of such number of shares of the Company's Common
Stock as may be required to carry out the terms of this agreement.
(b) The Purchaser shall have received a letter from Company's counsel dated the
Closing Date in form and substance satisfactory to the Purchaser and his
counsel.
(c) All of the terms and conditions of this agreement to be complied with and
performed by the Company shall have been complied with and performed in all
material respects, and the representations and warranties made by the Company in
this agreement shall be true and correct in all material respects at and as of
the Closing Date, with the same force and effect as though such representations
and warranties had been made at and as of the Closing Date, except for changes
contemplated by or disclosed in schedules to this agreement. The Company shall
have delivered to the Purchaser a certificate dated the Closing Date signed by
an executive officer of the Company, certifying to the fulfillment of these
conditions.
(d) On the Closing Date, the Company shall have furnished Purchaser with a
certified copy of resolutions duly authorized by the Board of Directors of the
Company adopting this agreement and authorizing the transactions contemplated
hereby, authorizing the issuance of the shares of the Company's Common Stock, if
any, pursuant to paragraph 5 hereof, and authorizing the execution, delivery and
performance of this agreement by the Company.
(e) Any federal or state regulatory authority having jurisdiction shall, to the
extent required by law, have consented to of approved the consummation of the
transactions contemplated by this agreement to the extent legally required.
(f) The American Stock Exchange, if necessary, shall have consented to or
approved the consummation of the transactions contemplated by this agreement and
shall have confirmed that the Company remains eligible for continued listing on
the American Stock Exchange.
(g) No proceedings enjoining the Tender Offer shall have been initiated or
threatened by the Securities and Exchange Commission or any stockholder or
competing bidder and no court or agency order or injunction shall exist
restraining the consummation of the transactions contemplated hereby.
(h) The Purchaser shall have received a certificate or telegram of the Company's
transfer agent dated the Closing Date, specifying the number of shares of the
Company's Common Stock outstanding at the most recent practical time.
(i) Contemporaneously with the Closing of the transactions contemplated herein,
individuals designated by the Purchaser shall have been elected or appointed to
the Board of Directors of the Company and Purchaser's designees shall constitute
a majority of the Board of Directors of the Company.
(j) The Company shall have (i) terminated the Banyan Hotel Investment Fund
Administrative Service Agreement by and between the Company and Banyan
Management Corp. dated February 27, 1994 and paid the termination fee thereunder
and otherwise complied with the terms thereunder and (ii) terminated the Amended
and Restated Employment Agreement between Leonard G. Levine and the Company and
paid the termination fee thereunder.
(k) If any of the conditions specified in this paragraph 11 shall have not been
satisfied, the Purchaser shall, nevertheless, have the right to proceed with the
transactions contemplated hereby.
12. This agreement and the transactions contemplated hereby may be terminated at
any time at or prior to the Closing (and any such termination, other than due to
a breach of this agreement shall be without liability to any party to any other
party except as provided in paragraph 13 and paragraph 8(a) (vi)):
(a) By mutual consent of the Company and the Purchaser.
(b) By the Company if such transaction shall not have been consummated on or
prior to October 17, 1994 or such later date as may be established by mutual
consent of the parties to this agreement.
(c) By the Purchaser if any of the conditions provided for in paragraph 11 of
this agreement have not been met on or before the Closing Date and have not been
waived in writing by Purchaser.
(d) By the Company if any of the conditions provided for in paragraph 10 of this
agreement have not been met on or before the Closing Date and have not been
waived in writing by the Company.
(e) By the Company or the Purchaser if either party shall determine in its or
his sole discretion that the transactions contemplated by this agreement have
become inadvisable or impracticable by reason of any judgment, decree or order
entered in any proceedings involving the Purchaser or the Company which
restrains or prohibits the transactions contemplated hereby.
(f) By the Company if the Company's Board of Directors determines in the
exercise of its fiduciary duties, as contemplated by paragraph 8(a) (vi), to
accept an unsolicited third party offer.
13. Except as provided herein, Purchaser shall pay all reasonable fees and
expenses incurred by the Company in connection with the transactions
contemplated by this agreement. To secure Purchaser's obligation, upon the
execution and delivery of this agreement, the Purchaser shall deposit at the
Company's direction $100,000 into an escrow account. If this agreement and the
transactions contemplated hereby are terminated by either party for any reason
pursuant to paragraph 12, the escrow agent, upon presentment by the Company to
the escrow agent of (i) a written reimbursement request, which sets forth in
detail all of the fees and expenses incurred by the Company in connection with
the transactions contemplated by this agreement, and (ii) evidence of
termination of this agreement, shall pay the amount reflected on such request to
the Company, and refund the balance of the deposit, if any, to the Purchaser.
If such fees and expenses of the Company exceed the deposit, the Purchaser shall
have no obligation for-any shortfall. If the Closing occurs, the escrow agent
shall refund the entire deposit to Purchaser upon Closing and the Company shall
be solely responsible for and shall pay all of its fees and expenses.
14. Subsequent to the Closing, Purchaser covenants and agrees to use his best
efforts, and to cause the Company, to preserve the Company's eligibility for
continued listing on the American Stock Exchange. Purchaser recognizes that the
"Banyan"-service mark is not owned by the Company and that he will, within 180
days after the Closing, take such steps as are necessary or required to amend
the Company's certificate of incorporation to a name not containing the word
"Banyan", provided, however, the Company shall use its best efforts to obtain
the necessary consents to permit Purchaser to use the name "Banyan" after the
Closing Date. In the event the Company obtains such consents, the Purchaser
shall be under no obligation to change the Company's name.
15. The parties hereto may by mutual agreement in writing signed by each party
amend this agreement in any respect. Any party hereto may in writing:
(a) Extend the time for performance due to such party of any of the obligations
of the other party hereto.
(b) Waive any inaccuracies in representations to such party by another party
contained in this agreement or in any document delivered pursuant hereto.
(c) Waive compliance with any of the covenants to such party by the other party
contained in this agreement and performance of any obligations due to such party
by the other party hereunder; and
(d) Waive the fulfillment of any condition that is precedent to the performance
by the party so waiving, of any of its obligations under this agreement.
Any agreement on the part of either party for such amendment, extension or
waiver shall be validly and sufficiently authorized for the purposes of this
agreement if authorized or ratified by the Board of Directors of the Company and
by the Purchaser.
16. Each of the representations, warranties and covenants of the Company and the
Purchaser contained herein shall survive the Closing for a period of two years,
except where this agreement expressly provides for a different period.
17. This agreement shall be construed under and in accordance with the laws of
the State of Delaware. All representations and warranties made hereunder by the
Company shall not be deemed to have been given by the officers and directors
personally.
18. All notices, requests, demands and other communications hereunder shall be
in writing and shall be deemed to have been duly given if delivered or mailed by
United States certified or registered mail, postage prepaid, to the parties at
the following addresses (or at such other address as shall be given in writing
by any party to another):
To the Company: Banyan Hotel Investment Fund
150 South Wacker Drive
Chicago, Illinois 60606
Att: Robert G. Higgins
With a copy to: Shefsky & Froelich
444 North Michigan Avenue
Chicago, Illinois 60611
Att: Michael J. Choate
If to Purchaser: Harvey Polly
2901 S. Ocean Boulevard
Highland Beach, Florida 33487
With a copy to: William L. Weiss
110 East 59 Street
23rd Floor
New York, New York 10022
19. Whether or not the Closing occurs, Purchaser will bear the costs and
expenses of the Tender Offer, printing, mailing and Blue Sky compliance, if
any. Purchaser shall also be responsible for the other costs and expenses of
consummating the transactions contemplated hereby as provided in paragraph 13
hereof.
20. Except as otherwise specifically provided, no remedy conferred by any of the
specific provisions of this agreement is intended to be exclusive of any other
remedy, and each and every remedy shall be cumulative and shall be in addition
to every other remedy given hereunder or now or hereafter existing at law or in
equity or by statute or otherwise. The election by a party of any ore or more
remedies shall not constitute a waiver of the right to pursue other available
remedies.
21. The rights under this agreement shall not be assignable nor the duties
delegable by any party without the prior written consent of the other and
nothing contained in agreement, express or implied, is intended to confer upon
any person or entity, other than the parties hereto and their successors in
interests and permitted assignees, any rights or remedies under or by reason of
this agreement unless so stated to the contrary. All covenants, represen-
tations, warranties and agreements of the parties contained herein shall,
subject to the provisions of the preceding sentence be binding upon and inure to
the benefit of their respective successors and permitted assigns.
22. This agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original, but all of which together shall constitute
one and the same instrument.
23. This agreement, including the Schedules hereto, and all documents, schedules
and instruments to be delivered on or before the Closing Date, pursuant to its
terms, constitutes the entire agreement between the parties and supersedes all
agreements, representations, warranties, statements, promises and
understandings, whether oral or written, with respect to the subject matter
hereof. Neither of the parties hereto shall be bound by or charged with any
oral or written agreements, representations, warranties, statements, promises or
understandings not specifically set forth in this agreement and the Schedules
hereto, or in the documents, schedules and instruments to be delivered on or
before the Closing Date.
24. The invalidity or unenforceability of any provision of this agreement shall
not affect the validity or enforceability of the remaining provisions of this
agreement provided that the omission of the invalid or unenforceable provision
does not materially affect the basic understanding hereunder.
IN WITNESS WHEREOF, the parties hereto have executed
this agreement the day and year first above written.
BANYAN HOTEL INVESTMENT FUND
By: /s/ William M. Karnes
Vice President
ATTEST: /s/ Robert G. Higgins
Assistant Secretary
HARVEY POLLY
/s/ Harvey Polly
SCHEDULE A
BANYAN HOTEL INVESTMENT FUND
("Parent Fund")
1 a. Name: Banyan Management Corp.
b. Date Created: March 29, 1990
c. Percent Owned by Application:
10% of Class A Voting Stock
12.5% of Class 8 Non-voting Stock
d. Nature of Business: Provision of administrative services to the eight
Banyan publicly-traded mortgage funds.
e. State of Incorporation: Banyan Management Corporation is an Illinois
corporation.
f. Name of Parent Institution: Banyan Management Corporation is co-owned
by the eight Banyan publicly-traded mortgage funds, including the
Parent Fund.
g. Net Worth
h. Total Assets
i. Net Income: Banyan Management Corporation was initially capitalized at
$1,000.00. Its net worth is currently $184,000. As its business
purpose is to provide Administrative services to the eight Banyan
publicly traded mortgage funds, its total assets and net income are
not meaningful.
2. a. Name: VHF Sliver Sands Corp. n/k/a BHF Merger Corp.
(EIN 36-3716217)
b. Date of Creation: June 29, 1990
c. Percentage owned by Insured: 100%
d. Type of Operations:
To own, acquire, hold, operate, lease, develop, finance, refinance,
and sell property foreclosed upon by the Parent Fund. The property
has subsequently been sold to an unrelated entity.
e. State of Incorporation: Illinois
Merger: On December 4,1992, VHF Shadowood Corp. merged with VHF Silver
Sands Corp. and Silver Sands Corp. (as the surviving corporation)
changed its name to BHF Merger Corp.
Reason for Merger: To maintain a corporate existence for entities
which at one time held title to real property.
3. a. Name: VHF Shadowood Corp. (EIN 36-3739751)
Reinstated, November 24, 1992.
b. Date of Creation: November 16, 1990
c. Percentage Ownership by Insured: 100%
d. Nature of Business: To own, acquire, hold, operate, lease, develop,
finance, refinance, and sell property foreclosed upon by the Parent
Fund. The property has subsequently been sold to an unrelated entity.
e. State of lncorporation: Illinois
Merger: On December 4,1992, VHF Shadowood Corp. merged with VHF Silver
Sands Corp. and Silver Sands Corp. (as the surviving corporation)
changed its name to BHF Merger Corp.
Reason for Merger: To maintain a corporate existence for entities
which at one time held title to real property.
4. a. Name: BHF Bermuda Hotel Corp. (EIN 36-3796172)
Dissolved May 3, 1993
b. Date of Creation: November 27, 1991
c. Percentage Owned by Insured: 100%
d. Type of Operations: To own, acquire, hold, operate, lease, develop,
finance, refinance, and sell property foreclosed upon by the Parent
Fund.
e. State of incorporation: Illinois
f. Name of Parent Institution: n/a
g. Net Worth
h. Total Assets
i. Net Income:
Most recent year end figures are not meaningful.
Reason for Dissolution. Property contemplated in 4d was foreclosed by
senior lender in February, 1992 without BHIF ever acquiring title.
5. a. Name: BMC Santa Barbara Corp. (EIN 36-3771073)
b. Date of Creation: June 6, 1991
c. Percentage Ownership by Insured: 100%
d. Nature of Business: Acts. as a 50% limited partner in a limited
partnership known as Santa Barbara Biltmore Associates, a California
Limited Partnership, whose general partner is Santa Barbara Hotel
Investment L.P., a Delaware Limited Partnership, doing business in
California as SBHI, L.P., an unrelated third party, and whose purpose
is to acquire, hold, own, operate, lease, develop, finance, refinance,
and sell property known as the Santa Barbara Biltmore Hotel in Santa
Barbara, California.
e. State of Incorporation: Illinois
f. Name of Parent Institution: n/a
g.h. Net Worth/Total Assets: Investment in Limited Partnership is
accounted for under the equity method of accounting and has a zero
net worth.
i. Net Income:
Schedule A-1 (Section 6(d)) to Purchase Agreement Between Banyan Hotel
Investment Fund (the "Fund") and Harvey Polly
Section 6.1.4 of the Fund's Bylaws which will be amended prior to Closing
6.1.4. Grant options or warrants or rights to purchase Shares at an exercise
price, or for consideration which consists of services or is otherwise than for
cash, that in the judgment of the Directors (including a majority of the
Independent Directors in the case of the grant of any option, warrant or right
to the Advisor or to any officer, director or employee of the Advisor or of the
Corporation) is less than the fair market value of such Shares on the date of
grant, or which may be exercisable for a period in excess of 5 years from the
date of grant, or which are for a number of Shares that (when added to the
number of other Shares exercisable pursuant to all then outstanding options and
warrants) is in excess of 10% of the number of outstanding Shares on the date of
grant (warrants options or Share purchase rights that are issued ratably to the
holders of all Shares or another class of securities, or as part of a financing
arrangement are not prohibited by, or to be included within the limitations of,
the preceding sentence of this Section 6.1.4);
Schedule B (Secton 6(f) to Purchase Agreement Between Banyan Hotel Investment
Fund (the "Fund") and Harvey Polly
Exceptions to Title to the Fund's Assets
None.
Schedule C (Section 6(g)) to Purchase Agreement Between Banyan Hotel Investment
Fund (the "Funcr) and Harvey Polly
Material Contracts and Commitments
1. Amended and Restated Agreement of Limited Partnership of Santa Barbara
Biltmore Associates dated July 31, 1991. (BMC Santa Barbara Corp., an Illinois
corporation, a wholly owned subsidiary of the Fund, is the sole limited
partner.)
2. Agreement and Declaration of Trust dated as of November 17, 1993 of the
Partners Liquidating Trust. (The Fund is a beneficiary of this trust with a 0.61
percent interest.)
3. Amended and Restated Employment Agreement between the Fund and Leonard G.
Levine dated December 31, 1992.
4. Banyan Hotel Investment Fund Administrative Services Agreement by and
between the Fund and Banyan Management Corp. dated February 27, 1994.
5. Banyan Hotel Investment Fund Director and Officers Insurance Policies:
Carrier Coverage Date
Gulf Insurance Co. $10M 5/31/94
Agricultural Excess & $ 5M 5/31/94
Surplus Insurance Co.
Old Republic Insurance Co. $ 5M 5/31/94
Gulf Insurance Co. $ 5M 5/31/94
Aetna Casualty & Surety $ 5M 5/31/94
Reliance Insurance Co. $ 5M 5/31/94
6. Commercial Insurance Premium Financing Agreement dated June 22, 1994, as
amended.
7. Run-off insurance coverage for Officers and Directors Liability: Coverage
Amount $1,000,000; Retention $0.00; Premium $315,000 to be purchased to insure
the present board members and officers at the time of resignation.
8. Listing Agreement between the Fund and the American Stock Exchange.
Schedule D (Section 6(h)) to Purchase Agreement Between Banyan Hotel Investment
Fund (the "Fund") and Harvey Polly
Material Adverse Changes In Business or Financial Conditions of the Company
1. Negotiation regarding possible de-listing by the American Stock Exchange.
(See most recent letter dated June 28,1994 extending the listing to September 1,
1994.)
Schedule E (Secton 6(i)) to Purchase Agreement Between
Banyan Hotel Investment Fund (the "Fund") and Harvey Polly
Extraordinary Liabilities
See Items 6 and 7 on Schedule C.
Schedule F (Secton 6(k)) to Purchase Agreement Between
Banyan Hotel Investment Fund (the "Fund") and Harvey Polly
Claims, Actions, Suits or Proceedings Pending
In re: Park Centre Associates, F/K/A VMS Seventh Avenue Associates, Case No. 92
B 43319(CB), United States Bankruptcy Court, Southern District of New York. (The
Fund filed a proof of claim in this matter on January 15, 1993.)
Schedule G (Section 6(n)) to Purchase Agreement Between Banyan Hotel Investment
Fund (the "Fund") and Harvey Polly
Employment Arrangements
Amended and Restated Employment Agreement between the Fund and Leonard G. Levine
dated December 31, 1992.
Schedule H (Secton 6(o)) to Purchase Agreement Between Banyan Hotel Investment
Fund (the "Fund") and Harvey Polly
Insurance Coverages
See Schedule C, Item 5.
Schedule I (Secton 6(s)) to Purchase Agreement Between Banyan Hotel Investment
Fund (the "Fund") and Harvey Polly
BANYAN HOTEL FUND BANK ACCOUNTS:
Checking Account #4122771
Money Market Account #14392127
American National Bank
33 North LaSalle Street
Chicago, Illinois 60690
ABA Routing #071 000 770
Signers: Leonard G. Levine, William M. Karnes, Joel L. Teglia, Roger L. Baker
Schedule J (Section 8(i)) to Purchase Agreement Between Banyan Hotel Investment
Fund (the "Fund") and Harvey Polly
1. Purchase of Run-off ("Tail Coverage") Insurance as described in Schedule C,
Item 7.
2. Abandonment or Assignment to such entity as is designated by the current
directors of the Fund of the Fund's shares in Banyan Management Corp., an
Illinois corporation.
3. Termination by the Fund (and payment of the Termination Fee) of the Banyan
Hotel Investment Fund Administrative Services Agreement as set forth at Item 4
on Schedule C.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information
extracted from Banyan Hotel Investment Fund's Form
10-KSB for the year ended December 31, 1994, and is
qualified in its entirety by reference to such
Form 10-KSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 275,161
<SECURITIES> 1,907,531
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,270,523
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,270,523
<CURRENT-LIABILITIES> 111,197
<BONDS> 0
<COMMON> 2,232,653
0
0
<OTHER-SE> (65,138)
<TOTAL-LIABILITY-AND-EQUITY> 2,270,523
<SALES> 0
<TOTAL-REVENUES> 138,603
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 541,229
<LOSS-PROVISION> (16,788)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (385,838)
<INCOME-TAX> 0
<INCOME-CONTINUING> (385,838)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (385,838)
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
