VALUE PROPERTY TRUST
(formerly Mortgage and Realty Trust)
120 Albany Street, 8th Floor
New Brunswick, New Jersey 08901
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on February 25, 1997
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TO OUR SHAREHOLDERS:
The Annual Meeting of the Shareholders of Value Property Trust (the
"Trust") will be held at the Trust's corporate office located at 120 Albany
Street, New Brunswick, New Jersey 08901 at 11:00 A.M. (Local Time) on Tuesday,
February 25, 1997 for the following purposes:
1. To elect seven Trustees to serve until the next Annual Meeting of
Shareholders and until their successors have been duly elected and
qualified; and
2. To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof.
Only shareholders of record at the close of business on December 30, 1996
are entitled to notice of the meeting and to vote at the meeting and any
adjournment or postponement thereof.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SPECIFY YOUR VOTE ON
THE ACCOMPANYING PROXY AND SIGN, DATE AND RETURN IT AS PROMPTLY AS POSSIBLE IN
THE POSTAGE-PAID ENVELOPE. A PROMPT RETURN OF YOUR PROXY WILL BE GREATLY
APPRECIATED.
By order of the Board of Trustees,
Robert T. English
Secretary
New Brunswick, New Jersey
December 30, 1996
<PAGE>
VALUE PROPERTY TRUST
(formerly Mortgage and Realty Trust)
120 Albany Street, 8th Floor
New Brunswick, New Jersey 08901
PROXY STATEMENT
This Proxy Statement is furnished to the shareholders of Value Property
Trust, a Maryland real estate investment trust (the "Trust"), in connection with
the solicitation of proxies by the Trustees for use at the Annual Meeting of
Shareholders (the "Meeting") to be held at 120 Albany Street, New Brunswick, New
Jersey 08901, on Tuesday, February 25, 1997, at 11:00 A.M. (Local Time), and at
any adjournment or postponement thereof. The first date on which this Proxy
Statement and related form of proxy are being sent to shareholders of the Trust
is on or about December 30, 1996.
A form of proxy for use at the meeting is enclosed. Any shareholder may
revoke a proxy at any time before the authority granted by it is exercised by
giving written notice of revocation to the Secretary of the Trust, by submitting
another executed proxy to the Secretary of the Trust bearing a later date (but
prior to the voting of such proxy), or by attending the meeting and asking
(prior to the voting of such proxy) for a return of such proxy.
The cost of preparing, assembling and mailing the proxy materials will be
borne by the Trust. In addition to the use of the mails, proxies may be
solicited by personal interview, telephone and telegram by certain officers and
employees of the Trust who will not be specifically compensated for their
services. The Trust must by federal regulation reimburse brokers, dealers, banks
and other entities exercising fiduciary powers holding issued and outstanding
common shares, par value $1.00 per share, of the Trust ("Shares") as nominees
for reasonable out-of-pocket expenses incurred by them in forwarding these proxy
materials to beneficial owners.
Each Share is entitled to one vote on each matter as may properly be
brought before the Meeting. Only holders of record of Shares at the close of
business on December 30, 1996 will be entitled to receive notice of and to vote
at the Meeting. On that date there were 11,226,310 Shares outstanding.
The presence in person or by proxy of shareholders entitled to cast a
majority of all the votes entitled to be cast at the Meeting constitutes a
quorum. The affirmative vote of a majority of all the votes cast at a meeting at
which a quorum is present is required for adoption of Proposal 1.
<PAGE>
PROPOSAL 1
ELECTION OF TRUSTEES
At the Meeting, seven Trustees are to be elected, each to hold office until
the next Annual Meeting of Shareholders and until his successor shall have been
duly elected and qualified. The Board of Trustees has nominated Jeffrey A.
Altman, Martin Bernstein, Richard S. Frary, Richard B. Jennings, John B. Levy,
Carl A. Mayer, Jr. and George R. Zoffinger to serve as Trustees (the
"Nominees"). In accordance with Maryland law, the Declaration of Trust of the
Trust, as amended, and the By-laws of the Trust, each Nominee must receive a
majority of the votes cast at the Annual Meeting of Shareholders in order to be
elected. In the absence of instructions to the contrary, the Shares represented
by duly executed proxies will be voted for the election of each of the seven
Nominees listed above, all of whom have consented to be named and to serve if
elected. Broker non-votes will not be considered as votes for purposes of the
election of Trustees.
The Trust does not presently know of anything that would preclude any
Nominee from serving. However, should any Nominee for any reason become unable
or unwilling to serve as a Trustee, the discretionary authority provided in the
proxy will be exercised to vote for a substitute or substitutes unless the
Trustees determine to reduce the number of Trustees to be elected.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS A VOTE
FOR ALL OF THE NOMINEES.
<PAGE>
Information Regarding Nominees for Election as Trustees
The following table and biographical descriptions set forth certain
information with respect to the seven Nominees for election as trustees at the
Annual Meeting of Shareholders based on information furnished to the Trust by
each Trustee. There is no family relationship between any Trustee or executive
officer of the Trust.
<TABLE>
<CAPTION>
Positions
Name, Age and Year With the
First Became Trustee Trust Principal Occupation and Other Directorships(1)
- -------------------- --------- -------------------------------------------------------------------------------------
<S> <C> <C>
Jeffrey A. Altman Chairman, Chairman of the Board of Trustees of the Trust since October 1995. Senior Vice
30 years Trustee President of Franklin Mutual Advisers, Inc. and Vice President of Franklin Mutual
September, 1995 Series Fund Inc. since November 1, 1996. Vice President of Mutual Series Fund Inc.
from May 1995 to October 1996. Analyst with Heine Securities Corp. from August 1988
to October 1996. Director of Resurgence Properties Inc.
Martin Bernstein Trustee A private investor who has been managing family funds since 1988. Prior to this
59 years period, Mr. Bernstein served as a founding General Partner of Halcyon Investments and
September, 1995 Alan B. Slifka & Co. (investments). Mr. Bernstein also currently serves on the Board
of Directors of Astro Communications and MBO Properties, Inc.
Richard S. Frary Trustee The founding partner and majority shareholder of Tallwood Associates, Inc., a private
49 years merchant banking firm specializing in corporate restructurings and real estate, and
September, 1995 has served in that capacity since March 1990. Co-founder in 1993 and a member of the
Board of Directors of Brookwood Financial Co. Inc., a real estate syndication
company. Mr. Frary currently serves on the Board of Directors of Washington Homes,
Inc.
Richard B. Jennings Trustee Currently the President of Realty Capital International Inc., a real estate
53 years investment banking firm, and has served in that capacity since March 1991. Mr.
September, 1995 Jennings has also been President of Jennings Securities Corporation since July 1995.
Mr. Jennings currently serves on the Board of Directors of MBO Properties, Inc.
John B. Levy Trustee Currently the President of John B. Levy & Company, Inc., a real estate investment
49 years banking firm based in Richmond, Virginia, and has served in that capacity since June
September, 1995 1995. Mr. Levy was an Executive Vice President of Republic Realty Mortgage
Corporation from 1993 to June 1995. Prior to 1993, Mr. Levy acted as Senior Vice
President of NationsBanc Mortgage Corporation, and was charged with lender relations,
production of new income property loans and management of the production offices.
Carl A. Mayer, Jr. Trustee A real estate investment banker who founded The Mayer Group in 1990, an advisor group
59 years offering consulting and marketing expertise and services to real estate investment
September, 1995 companies who are seeking investment capital from the pension fund community. Mr.
Mayer continues to serve as a principal of The Mayer Group. From August 1995 to the
present, Mr. Mayer has served as Chairman of Mayer-Bialer and Associates, Inc.
George R. Zoffinger President, Currently the Chairman of CoreStates New Jersey National Bank, and has served in that
48 years Chief Executive capacity since April 1994 and serves as a member of the Board of Directors of
September, 1995 Officer, and CoreStates Bank, N.A. From December 1991 to April 1994, Mr. Zoffinger served as
Trustee President and Chief Executive Officer of Constellation Bancorp and Constellation
Bank. He has served on the Board of Directors of the Multicare Companies, Inc. since
April 1995 and as a member of the Board of Directors of New Jersey Resources, Inc.
since May 1996.
</TABLE>
<PAGE>
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(1) Included are only directorships in companies with a class of equity
securities registered pursuant to Section 12 or subject to the requirements
of Section 15(d) of the Securities Exchange Act of 1934 and in financial
institutions and insurance companies.
Information Regarding Executive Officers
The names and ages of all executive officers of the Trust and principal
occupation and business experience during at least the last five years for each
are set forth below:
<TABLE>
<CAPTION>
Name Age Position(1)
- ---- --- -----------
<S> <C> <C>
George R. Zoffinger 48 President, Chief Executive Officer and Trustee
Paul I. McArthur 44 Executive Vice President
Robert T. English 41 Secretary, Treasurer and Chief Financial Officer
</TABLE>
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(1) The officers of the Trust serve a one-year term of office and are elected to
their positions each year by the Trustees at the annual organization meeting
of Trustees which normally immediately follows the Annual Meeting of the
Shareholders.
Mr. Zoffinger has held the position of President, Chief Executive Officer,
and Trustee since September, 1995. For information about Mr. Zoffinger's
professional background, see "Information Regarding Nominees for Election as
Trustees."
Mr. McArthur became the Executive Vice President of the Trust in January
1996. From 1995 to 1996, he served as Vice President of Corporate Real Estate
Services for Bushman Jackson-Cross. From 1985 to 1994, Mr. McArthur served DKM
Properties Corp., a privately held real estate management and development firm
in various capacities, including as Vice President of Development and Senior
Vice President of Operations.
Mr. English became the Secretary, Treasurer and Chief Financial Officer of
the Trust in January 1996. Prior to January 1996, Mr. English was Senior Vice
President and Chief Financial Officer of Garden State Bancshares. From 1982
until 1994, Mr. English served Constellation Bancorp and Constellation Bank in
various capacities, including as Senior Vice President and Comptroller from 1988
to 1994.
The Board of Trustees and its Committees
Board of Trustees
The Trust is managed by a seven member Board of Trustees, a majority of
whom are independent of the Trust's management. The Board of Trustees held eight
meetings during fiscal 1996. Each of the Trustees attended at least 75% of the
total number of meetings of the Board of Trustees and of the committees of the
Trust of which he was a member.
<PAGE>
The Board of Trustees has appointed an Audit Committee and a Compensation
and Nominating Committee. Descriptions of the Audit Committee and the
Compensation and Nominating Committee follow.
Audit Committee. The Audit Committee, which currently consists of Messrs.
Jennings (Chairman), Bernstein and Mayer, makes recommendations concerning the
engagement of independent public accountants, reviews with the independent
public accountants the plans and results of the audit engagement, approves
professional services provided by the independent public accountants, reviews
the independence of the independent public accountants, considers the range of
audit and non-audit fees and reviews the adequacy of the Trust's internal
accounting controls. The Audit Committee met three times in fiscal 1996.
Compensation and Nominating Committee. The Compensation and Nominating
Committee, which currently consists of Messrs. Bernstein (Chairman), Frary and
Levy makes recommendations and exercises all powers of the Board of Trustees in
connection with certain compensation matters, including incentive compensation
and benefit plans. The Compensation and Nominating Committee administers, and
has authority to grant awards under, the 1995 Share Option Plan to the employee
Trustees and management of the Trust and its subsidiaries and other key
employees. The Compensation and Nominating Committee is also responsible for
recommending to the shareholders and the Board of Trustees individuals to serve
as Trustees and officers of the Trust. The Compensation and Nominating Committee
met three times in fiscal 1996. Recommendations from shareholders for nominees
for election as Trustees may be directed to Mr. Martin Bernstein, Chairman of
the Compensation and Nominating Committee, Value Property Trust, 120 Albany
Street, 8th Floor, New Brunswick, New Jersey 08901.
Trustee Compensation
During the fiscal year ended September 30, 1996, the Trustees received as
compensation for their services as Trustees $750 for any Trustee or committee
meeting attended in person or conducted by telephone conference except that no
additional compensation was paid for attendance at any additional Trustee or
committee meeting held on the same day as any Trustee or committee meeting.
Non-local Trustees were reimbursed for hotel, airfare and automobile expenses.
In lieu of an annual retainer, each of the non-officer Trustees was granted
options to purchase 35,000 Trust Shares under the 1995 Share Option Plan.
During fiscal 1996, in addition to his duties as a Trustee, Mr. Mayer
served as a special consultant to the Trust in regards to its West Coast
operations. In consideration of such services, Mr. Mayer was paid a $40,000
consulting fee.
Employment Agreement
The Trust entered into an Employment Agreement (the "Employment Agreement")
with George R. Zoffinger on September 29, 1995. The original term of the
Employment Agreement is three years and is automatically renewed for additional
one-year periods unless otherwise terminated by the Trust or Mr. Zoffinger.
Pursuant to the Employment Agreement, Mr. Zoffinger serves as the President and
Chief Executive Officer of the Trust, and he receives an annual base salary at a
rate of $200,000 ("Base Salary") per year. The Employment Agreement provides
that the Base Salary may be increased, but not decreased, at the discretion of
the Compensation and Nominating Committee of the Board of Trustees. In addition,
Mr. Zoffinger is eligible for compensation in the form of bonuses under the
Trust's Performance Incentive Bonus Plan and option grants under the 1995 Share
Option Plan, as discussed in the Report of the Compensation and Nominating
Committee.
<PAGE>
Mr. Zoffinger has agreed to devote substantially all of his business time
and efforts to the business and affairs of the Trust. The Employment Agreement
includes a non-competition provision which provides that during the term of
employment Mr. Zoffinger is prohibited, without written consent of the Board of
Trustees, from investing in any property or any business venture which competes,
directly or indirectly, with the Trust or which investment would require Mr.
Zoffinger's active involvement in such business or venture or would materially
impair his ability to perform fully his obligations under the Employment
Agreement. If Mr. Zoffinger terminates his employment without cause, as defined
in the Employment Agreement, he must continue to comply with the non-competition
provision until the first anniversary of such termination date.
If the employment of Mr. Zoffinger is terminated by the Trust without cause
or by Mr. Zoffinger upon occurrence of certain events such as a material breach
of the Employment Agreement by the Trust, Mr. Zoffinger will be entitled to
continue to receive the Base Salary at the same rate for six (6) months.
Additionally, any unexercised vested options will remain exercisable only to the
extent provided in the applicable share option plan and option agreement.
Executive Compensation
Summary Compensation. The following table shows for the fiscal years ended
September 30, 1996, 1995, 1994, the annual compensation paid by the Trust to the
Chief Executive Officer and the four other most highly compensated executive
officers of the Trust who earned more than $100,000 during fiscal 1996
(collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation(1) Awards Payouts
--------------------------------- -------------------- -------
Other Annual Restricted Options/ All Other
Fiscal Salary Bonus Compensation Shares SARs(3) LTIP Compensation
Name and Principal Position Year ($)(2) ($) ($) ($) (#) Payouts ($)
- --------------------------- ------ ------ ----- ------------ ---------- -------- ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
George R. Zoffinger, 1996 $200,000 $50,000 - - 244,000 - $7,080(4)
President and Chief 1995(5) - - - - - - -
Executive Officer 1994 - - - - - - -
Paul I. McArthur, Executive 1996 $97,500 $53,545 - - 100,000 - $3,842(6)
Vice President 1995 - - - - - - -
1994 - - - - - - -
Robert T. English, Secretary, 1996 $96,918 $15,000 - - 25,000 - $6,195(7)
Treasurer and Chief 1995 - - - - - - -
Financial Officer 1994 - - - - - - -
</TABLE>
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(1) In the fiscal year ended September 30, 1996, the Trust provided certain
personal benefits to its executive officers. The amount of such benefits to
each of the Named Executive Officers did not exceed the lesser of $50,000 or
10% of salary and bonus for such fiscal year.
<PAGE>
(2) Includes salary deferrals and employee contributions under the Trust's
401(k) plan.
(3) These options were granted under the 1995 Share Option Plan, as described in
the Report of the Compensation and Nominating Committee.
(4) $1,080 of this amount represents the full dollar value of insurance premiums
paid by the Trust during fiscal 1996 on behalf of Mr. Zoffinger with respect
to term life insurance. $6,000 of this amount represents matching
contributions made by the Trust on Mr. Zoffinger's behalf under the Trust's
401(k) plan.
(5) Between April 24, 1995 and September 29, 1995, the Trust paid a monthly
consulting fee of $17,667 to GRZ, Inc. for the consulting services of George
R. Zoffinger. Mr. Zoffinger became the President and Chief Executive Officer
of the Trust on September 29, 1995, but he received no salary in fiscal
1995.
(6) $842 of this amount represents the full dollar value of insurance premiums
paid by the Trust during fiscal 1996 on behalf of Mr. McArthur with respect
to term life insurance. $3,000 of this amount represents matching
contributions made by the Trust on Mr. McArthur's behalf under the Trust's
401(k) plan.
(7) $695 of this amount represents the full dollar value of insurance premiums
paid by the Trust during fiscal 1996 on behalf of Mr. English with respect
to term life insurance. $5,500 of this amount represents matching
contributions made by the Trust on Mr. English's behalf under the Trust's
401(k) plan.
Option Grants in Fiscal Year 1996; Aggregated Option Exercises In Fiscal Year
1996 and Fiscal Year-End 1996 Option Values
Option Grants
The following table sets forth certain information concerning grants of
stock options made during fiscal 1996 to each of the Named Executive Officers.
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
(Individual Grants)(1)
Potential Realizable Value
Percent of at Assumed Annual Rates of
Number of Total Options Stock Price Appreciation
Securities Granted to Exercise for Option Term (4)
Underlying Employees in Price Per Expiration -------------------------------
Name Options Granted Fiscal Year(2) Share (3) Date 5% 10%
- ---- --------------- -------------- ---------- ---------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
George R. Zoffinger 244,000 38.79% $10.00 10/05/99 $527,040 $1,132,160
Paul I. McArthur 100,000 15.90% $10.625 01/18/00 $228,500 $ 493,500
Robert T. English 25,000 3.97% $10.00 10/27/99 $ 54,000 $ 116,000
</TABLE>
<PAGE>
- -------------------------
(1) All options were granted pursuant to the 1995 Share Option Plan. The
exercisability of each option automatically accelerates upon a "Change in
Control of the Company" (as defined in the 1995 Share Option Plan). These
options vest in three equal annual installments commencing on the first
anniversary of grant and continuing on the next two succeeding anniversaries
of such date.
(2) Percentages are based on a total of 629,000 Common Shares underlying all
options granted to employees of the Trust in fiscal 1996 under the 1995
Share Option Plan. This total does not include options for 55,000 Common
Shares granted and subsequently cancelled in fiscal 1996.
(3) Options were granted at 100% of fair market value on the date of grant.
(4) This column shows the hypothetical gains or "option spreads" of the options
granted based on assumed annual compound stock appreciation rates of 5% and
10% over the full 4-year term of the options. The 5% and 10% assumed rates
of appreciation are mandated by the rules of the Securities and Exchange
Commission and do not represent the Trust's estimate or projection of future
Share prices. The gains shown are net of the option exercise price, but do
not include deductions for taxes or other expenses associated with the
exercise of the option or the sale of the underlying shares. The actual
gains, if any, on the exercises of stock options will depend on the future
performance of the Common Shares, the option holder's continued employment
through the option period and the date on which the options are exercised.
The dates of grant were as follows: Mr. Zoffinger, October 5, 1995; Mr.
McArthur, January 18, 1996; and Mr. English, October 27, 1995. Based on
these assumed annual rates of stock price appreciation of 5% and 10%,
respectively, the Trust's Share price from the date of grant through the
expiration date of the options, would be as follows: Mr. Zoffinger, $12.16
and $14.64, respectively; Mr. McArthur, $12.91 and $15.56, respectively; and
Mr. English, $12.16 and $14.64, respectively.
<PAGE>
Option Exercises and Holdings
The following table sets forth certain information concerning exercises of
stock options during fiscal 1996 by each of the Named Executive Officers and the
number and value of options held by each of the Named Executive Officers on
September 30, 1996.
<TABLE>
<CAPTION>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
Number of Value of
Securities Unexercised
Underlying Unexercised In-the-Money
Options at Options at
Number of Fiscal YE Fiscal YE (1)
Shares ---------------------- -------------------
Acquired on Value Exercisable/ Exercisable/
Exercise Realized Unexercisable Unexercisable
------------ -------- ---------------------- -------------------
<S> <C> <C> <C> <C>
George R. Zoffinger -0- -0- 0 / 244,000 0 / $427,000
Paul I. McArthur -0- -0- 0 / 100,000 0 / $112,500
Robert T. English -0- -0- 0 / 25,000 0 / $ 43,750
</TABLE>
- --------------------
(1) Based on the fair market value of the Shares on September 30, 1996, $11.75
per share, less the option exercise price.
Report of the Compensation and Nominating Committee of the Board of Trustees on
Executive Compensation
The Compensation and Nominating Committee (the "Compensation Committee") is
comprised of Messrs. Bernstein, Frary and Levy, all independent Trustees. The
Compensation Committee is generally responsible for developing and reviewing the
Trust's executive and employee compensation programs and monitoring the
performance and compensation of executive officers. The Compensation Committee
also administers the Performance Incentive Bonus Plan and the 1995 Share Option
Plan of the Trust.
Overview. The Trust's executive compensation program has been designed to
accomplish two objectives. The first objective is to provide a direct link
between executive compensation and the performance of the Trust, thereby,
aligning the interests of the executive officers with those of its shareholders.
The second is to provide a competitive compensation package that will enable the
Trust to motivate and retain its key executive personnel. The Compensation
Committee expects to review the executive and employee compensation program from
time to time and to make changes as appropriate.
It is the philosophy of the Compensation Committee to provide a
compensation package to the CEO and other executive officers that consists of
(i) competitive base salaries; (ii) the opportunity to earn additional cash
bonus compensation if certain quantifiable goals are achieved and (iii)
consideration of the grant of stock options in order to directly link an element
of pay to shareholder return. The granting of stock options is intended to
simultaneously reward the executive officers for their contributions to the
Trust and to create an opportunity for individual participation, as
shareholders, in the Trust's performance.
<PAGE>
Base Salaries. Base salaries and base salary adjustments for executive
officers are determined by the Compensation Committee, in its discretion, by
evaluating the responsibilities of the position held and the experience of the
individual, and by reference to the competitive marketplace in the Trust's
industry segment.
Annual Bonus. All of the Trust's executive officers and employees are
eligible for an annual cash bonus under the Performance Incentive Bonus Plan
(the "Bonus Plan"). In determining the amount of annual cash bonuses, if any, to
be paid, the Compensation Committee, at the end of the fiscal year, reviews the
performance of the Trust to the performance measurement targeted by the Bonus
Plan to promote the long-term strategic growth of the Trust.
1995 Share Option Plan. The Compensation Committee believes that Share
options and other Share-based incentive awards can play an important role in the
success of the Trust by encouraging and enabling the officers and other
employees of the Trust and its subsidiaries upon whose judgment, initiative and
efforts the Trust largely depends for the successful conduct of its business to
acquire proprietary interest in the Trust. The Compensation Committee
anticipates that providing such persons with a direct stake in the Trust will
assure a closer identification of the interests of participants in the 1995
Share Option Plan (the "1995 Plan") with those of the Trust, thereby stimulating
their efforts on the Trust's behalf and strengthening their desire to remain
with the Trust. The Compensation Committee believes that the 1995 Plan will help
the Trust to achieve its goals by keeping the Trust's incentive compensation
program dynamic and competitive with those of other companies.
Compensation of the Chief Executive Officer. During fiscal 1996, Mr.
Zoffinger served as President and Chief Executive Officer of the Trust. For the
fiscal year ended September 30, 1996, he received a base salary of $200,000, a
cash bonus of $50,000 awarded under the Bonus Plan and 244,000 shares of stock
under the 1995 Plan. In awarding the cash bonus the Compensation Committee
considered the successful refinancing of the Trust's outstanding long-term
indebtedness at a substantially lower rate of interest and the disposition of
substantially all of its mortgage loan portfolio for cash.
The Trust and Mr. Zoffinger entered into an employment agreement on
September 29, 1995, the terms of which are described above under "Employment
Agreement." Mr. Zoffinger's base salary was established by this agreement. The
Compensation Committee believes that Mr. Zoffinger's compensation is consistent
with the various objectives of the compensation programs described above.
<PAGE>
Federal Tax Regulations Limiting Deductibility of Certain Compensation. As
a result of Section 162(m) of the Internal Revenue Code (the "Code"), the
Trust's deduction of executive compensation may be limited to the extent that a
"covered employee" (i.e., the chief executive officer or one of the four highest
compensated officers who is employed on the last day of the company's taxable
year and whose compensation is reported in the summary compensation table in the
company's proxy statement) receives compensation in excess of $1 million in such
taxable year of the company (other than performance-based compensation that
otherwise meets the requirements of Section 162(m) of the Code). The Trust
believes that, because it qualifies as a REITunder the Code and therefore is not
subject to Federal income taxes, the payment of compensation that does not
satisfy the requirements of Section 162(m) will not affect the Trust's net
income, although to the extent that compensation does not qualify for deduction
under Section 162(m) a larger portion of shareholder distributions may be
subject to Federal income taxation as dividend income rather than return of
capital. The Trust does not believe that Section 162(m) will materially affect
the taxability of shareholder distributions, although no assurance can be given
in this regard due to the variety of factors that affect the tax position of
each shareholder. For these reasons, the Compensation Committee's compensation
policy and practices are not directly governed by Section 162(m). The Trust did
not pay any compensation during fiscal 1996 that would be subject to Section
162(m).
Submitted by the Compensation and Nominating Committee:
Martin Bernstein Richard S. Frary John B. Levy
Indemnification
Maryland General Corporation law provides for indemnification of directors,
trustees, officers, employees and agents, except to the extent that (i) it is
established that the person actually received an improper benefit or profit in
money, property or services, or (ii) a judgment or other final adjudication is
entered in a proceeding based on a finding that the person's action, or failure
to act, was the result of active and deliberate dishonesty and was material to
the matter giving rise to the proceeding. (Md. Code, Title 2 Sec. 2-418 (1996))
Article 7.04 of the Declaration of Trust provides that the Trust will indemnify,
to the full extent permitted by Maryland law, now or hereafter in force, the
trustees and officers of the Trust. The Trust is not aware of any pending legal
proceedings for which any such person would be entitled to indemnification.
<PAGE>
Stock Performance Graph
The following graph provides a comparison of the cumulative total
shareholder return for the period from September 1991 to September 1996
(assuming reinvestment of any dividends) among the Trust, the Standard & Poor's
("S&P") 500 Index and the NAREIT Hybrid Total Return Index (the "Index"), an
industry index of 12 "hybrid" REITs. The Index includes REITs which do not have
at least 75% of their gross invested book assets invested directly or indirectly
in either the equity ownership of real estate or in mortgage loans. Upon written
request, the Trust will provide shareholders with a list of the REITs included
in the Index. The historical information set forth below is not necessarily
indicative of future performance.
[GRAPHIC -- GRAPH PLOTTED TO POINTS LISTED IN CHART BELOW]
<TABLE>
<CAPTION>
9/91 12/91 3/92 6/92 9/92 12/92 3/93 6/93 9/93 12/93
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Value Property Trust $100.00 $ 87.50 $118.75 $ 81.25 $ 56.25 $ 62.50 $ 87.50 $ 34.40 $ 20.30 $ 28.15
NAREIT Hybrid $100.00 $107.86 $104.08 $107.65 $116.88 $125.75 $145.07 $144.20 $153.92 $152.38
S&P 500 $100.00 $108.36 $105.60 $107.67 $111.01 $116.67 $121.67 $122.30 $125.43 $128.33
<CAPTION>
3/94 6/94 9/94 12/94 3/95 6/95 9/95 12/95 3/96 6/96 9/96
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Value Property Trust $ 25.00 $ 20.30 $ 20.30 $ 7.05 $ 10.15 $ 12.50 $ 15.65 $ 15.94 $ 18.56 $ 18.94 $ 17.63
NAREIT Hybrid $155.64 $159.94 $161.28 $158.48 $159.87 $177.62 $184.24 $194.92 $199.94 $202.46 $215.95
S&P 500 $123.43 $123.94 $130.04 $130.01 $142.66 $156.20 $168.62 $178.67 $188.26 $196.70 $202.78
</TABLE>
<PAGE>
Compensation Committee Interlocks and Insider Participation
The Compensation and Nominating Committee consists of Messrs. Bernstein,
Frary and Levy. None of them has served as an officer or employee of the Trust
or any of its subsidiaries.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
The table below sets forth information concerning the only persons,
entities or groups which the Trust believes are the beneficial owners of five
percent or more of the outstanding shares of the Trust's Shares as of October
30, 1996.
<TABLE>
<CAPTION>
Name and Address of Amount and nature of
Beneficial Owner Beneficial Ownership Percent of Class
- ------------------- -------------------- ----------------
<S> <C> <C>
Franklin Mutual Advisers, Inc.(1) 5,611,048 49.98%
51 JFK Parkway
Short Hills, New Jersey 07078
Intermarket Corporation 2,788,827 24.84%
667 Madison Avenue
20th Floor
New York, New York 10021
Angelo Gordon & Co., L.P. 1,215,232 10.82%
245 Park Avenue
New York, New York 10167
Strome Susskind & Co. 562,138 5.01%
1250 Fourth Street
Santa Monica, California 90401
</TABLE>
- ---------------
(1) Franklin Mutual Advisers, Inc. ("FMAI"), is an investment adviser registered
under the Investment Advisers Act of 1940. One or more of FMAI's advisory
clients are the beneficial owners of 5,611,048 shares of the Trust's common
stock. Pursuant to investment advisory agreements with its advisory clients,
FMAI has sole investment discretion and voting authority with respect to
such securities. FMAI has no interest in dividends or proceeds from the sale
of such securities and disclaims beneficial ownership of all the securities
owned by FMAI's advisory clients.
<PAGE>
Security Ownership of Management
The following table sets forth information as of October 30, 1996, with
respect to the beneficial ownership of Shares by each Named Executive Officer
and Trustee of the Trust and by all Trustees and executive officers as a group.
The information set forth below is based upon filings with the Securities and
Exchange Commission, the Trust's Share records, and information obtained by the
Trust from the persons named below. As of October 30, 1996, no individual
Trustee or officer had beneficial ownership of 1% or more of the outstanding
Shares and all Trustees and executive officers as a group beneficially owned
2.13% of the outstanding Shares.
<TABLE>
<CAPTION>
Amount and Nature of Percent
Name of Beneficial Owner(1) Beneficial Ownership of Class
- --------------------------- -------------------- --------
<S> <C> <C>
Jeffrey A. Altman 15,000(2) *
Martin Bernstein 43,162(3) *
Robert T. English 8,333 *
Richard S. Frary 33,775 *
Richard B. Jennings 15,000 *
John B. Levy 19,206(4) *
Carl A. Mayer, Jr. 15,000 *
Paul I. McArthur 0 *
George R. Zoffinger 89,776 *
Trustees and executive officers
as a group 239,252 2.13%
</TABLE>
- ----------------
* Less than one percent.
(1) The address of all Named Executive Officers is in care of the Trust.
(2) Beneficial ownership of 15,000 of the Common Shares reported as beneficially
owned by Mr. Altman are beneficially owned by Franklin Mutual Advisers,
Inc.'s advisory clients pursuant to an agreement between Mr. Altman and
Franklin Mutual Advisers, Inc.
(3) Includes 18,775 Common Shares owned by Evelyn Bernstein, Mr. Bernstein's
wife. Mr. Bernstein disclaims beneficial ownership of such Shares.
(4) Includes 4,206 Common Shares owned by Judith Brown Levy, Mr. Levy's wife.
Mr. Levy disclaims beneficial ownership of such Shares.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Exchange Act requires the Trust's executive officers
and Trustees, and persons who own more than 10% of a registered class of the
Trust's equity securities, to file reports of ownership and changes in ownership
with the Securities and Exchange Commission (the "SEC") and the New York Stock
Exchange (the "NYSE"). Officers, Trustees and greater than 10% shareholders are
required by SEC regulation to furnish the Trust with copies for all Section
16(a) forms they file. To the Trust's knowledge, based solely on review of the
copies of such reports furnished to the Trust and written representations that
no other reports were required during the fiscal year ended September 30, 1996,
all Section 16(a) filing requirements applicable to its executive officers,
Trustees and greater than 10% beneficial owners were satisfied.
<PAGE>
Shareholder Proposals
Any shareholder desiring to submit a proposal to the shareholders of the
Trust for inclusion in the proxy materials of the Trustees for the Annual
Meeting of Shareholders for fiscal 1997 may do so by forwarding such proposal in
writing no later than September 1, 1997 to the Trust's Secretary at Value
Property Trust, 120 Albany Street, 8th Floor, New Brunswick, New Jersey 08901.
The Trust reserves the right to omit any proposal from its proxy materials which
the Trust is not required under applicable rules to include therein.
Independent Auditors
On April 11, 1996, the Trust received notice from its independent auditors,
Ernst &Young LLP, that it declined to stand for reelection. At a meeting held on
April 12, 1996, the Audit Committee recommended the selection and engagement of
Coopers & Lybrand L.L.P. to the Board of Trustees. At that meeting, the Board of
Trustees approved the engagement of Coopers &Lybrand L.L.P. as its independent
auditors for the fiscal year ending September 30, 1996.
Prior to their engagement, no events or consultations occurred with Coopers
&Lybrand L.L.P. which would require disclosure of the type specified in Item
304(a)(2) of Regulation S-K.
The reports of the Trust's independent auditors on the financial statements
of the Trust for the past two fiscal years did not contain any adverse opinion
or disclaimer of opinion, and were not qualified as to audit scope, or
accounting principles.
During the Trust's two most recent fiscal years there were no disagreements
between Ernst &Young LLP and the Trust regarding any matter of accounting
principles or practices, financial statement disclosure, or audit scope and
procedures, which if not resolved to the satisfaction of Ernst &Young LLPwould
have caused Ernst &Young LLPto make reference to the matter in their report.
There were no "reportable events" as that term is described in Item 304(a)(1)(v)
of Regulation S-K.
The Board of Trustees has selected the firm of Coopers & Lybrand L.L.P. as
the auditors of the financial statements of the Trust and its subsidiaries for
its current fiscal year ending September 30, 1997. A member of such firm will be
present at the Annual Meeting and will be given the opportunity to make a
statement and to answer any appropriate questions.
Other Matters
The Trustees are not aware of any matters not set forth herein that may
come before the meeting. If, however, further business properly comes before the
meeting, the persons named in the proxies will vote the Shares represented
thereby in accordance with their best judgment.
<PAGE>
REGARDLESS OF THE NUMBER OF SHARES YOU OWN, YOUR VOTE IS IMPORTANT TO THE TRUST.
PLEASE COMPLETE, SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD TODAY.
PROXY FOR THE ANNUAL MEETING OF SHAREHOLDERS OF VALUE PROPERTY TRUST
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
AND MAY BE REVOKED PRIOR TO ITS EXERCISE
The undersigned shareholder(s) of Value Property Trust (the "Trust") hereby
appoints Mr. Jeffrey A. Altman and Mr. George R. Zoffinger proxies, and each of
them, with full power of substitution, for and in the name of the undersigned at
the Annual Meeting of Shareholders of the Trust to be held on February 25, 1997
and at any and all adjournments thereof, to vote all common shares of the Trust,
par value $1.00 per share (the "Shares"), held of record by the undersigned on
December 30, 1996, as if the undersigned were present and voting the Shares.
1. ELECTION OF DIRECTORS.
[ ] FOR all nominees listed below
(except as indicated to the contrary).
[ ] WITHHOLD AUTHORITY
to vote for all nominees listed below.
Nominees: Jeffrey A. Altman, Martin Bernstein, Richard S. Frary, Richard B.
Jennings, John B. Levy, Carl A. Mayer and George R. Zoffinger
(INSTRUCTIONS: To withhold authority to vote for any nominee, write the
nominee's name on the space provided below.)
- --------------------------------------------------------------------------------
2. The proxies are authorized to vote in their discretion upon such other
business as may properly come before the meeting.
The Shares represented by this proxy will be voted in the manner directed.
In the absence of any direction, the Shares will be voted FOR each nominee named
in Proposal 1 above, and in accordance with the proxy's discretion on such other
business as may properly come before the meeting.
DATED:____________________________, 1997
----------------------------------------
(Signature)
----------------------------------------
(Signature if held jointly)
(Please date this Proxy and sign exactly
as your name appears hereon. When
signing as attorney, executor,
administrator, trustee or guardian,
please give your full title. If there is
more than one trustee, all should sign.
All joint owners should sign.)
I PLAN TO ATTEND THE MEETING [ ]
