<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________.
Commission File Number 0-16886
Banyan Strategic Land Fund II
(Exact name of Registrant as specified in its charter)
Delaware 36-3465422
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 South Wacker Drive, Chicago, Illinois 60606
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 553-9800
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Shares of Common Stock
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X . NO .
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ X ]
The Registrants revenues for the preceding twelve months were $416,440. Shares
of common stock outstanding as of March 18, 1996: 9,936,421. The aggregate
market value of the Registrant's shares of common stock held by non-affiliates
on such date was approximately $12,347,321.
DOCUMENTS INCORPORATED BY REFERENCE
Exhibit index located on page 25 of sequentially numbered pages.
Transitional Small Business Disclosure Format: YES . NO X .
<PAGE> 2
\ TABLE OF CONTENTS
PART I
ITEM 1. DESCRIPTION OF BUSINESS . . . . . . . . . . . . . . . . . . 1
ITEM 2. DESCRIPTION OF PROPERTY . . . . . . . . . . . . . . . . . . 3
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 STOCKHOLDER MATTERS . . 5
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR
PLAN OF OPERATION . . . . . . . . . . . . . . . . . . . . . 6
ITEM 7. FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . 15
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . . . . . 15
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ITEM 10. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . 18
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 23
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . 24
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
<PAGE> 3
PART I
ITEM 1. DESCRIPTION OF BUSINESS
BUSINESS OPERATION
The Registrant, Banyan Strategic Land Fund II (the "Fund"), is a
Delaware corporation, organized pursuant to a Certificate of Incorporation
filed on April 14, 1987 under the name VMS Strategic Land Fund II. The Fund's
name was changed to its current name during 1991.
The Fund was originally established to invest primarily in
short-term, junior, predevelopment and construction mortgage loans. The
borrowers subsequently defaulted on these mortgage loan obligations, adversely
affecting the Fund. 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, including instances where it has foreclosed upon or taken title,
directly or indirectly, to the collateral. The Fund also suspended
distributions to stockholders. In early 1990, the Fund implemented a Principal
Recovery Plan designed to preserve its assets and manage its properties
acquired through foreclosure or otherwise until they could be disposed of in an
orderly manner. The Fund continues to operate under the Principal Recovery
Plan which focuses on preserving and maximizing the value of its assets,
including managing and/or improving development rights regarding such
properties.
The Fund is currently finalizing the zoning and development rights
for its Rancho Malibu project. Upon final approval by the Los Angeles County
Board of Supervisors, it is the Fund's intent to reassess all options regarding
the Rancho Malibu project, including all alternatives from site development to
a bulk land sale. The BSLT/BSLFII H Street Partnership (the "Venture"), of
which the Fund owns a 47% partnership interest, has completed and obtained the
zoning, entitlement and historic preservation for the development of an
approximately 330,000 square foot commercial building on the H Street site in
Washington, D.C. The Venture is currently marketing the H Street property for
sale based upon its current assessment of the Washington D.C. office market.
It is the Venture's intent to continue to operate the approximately 55,900
square foot Victor Building which currently sits on a portion of the H Street
site in order to cover a portion of the holding costs associated with the
property. The Victor Building is currently being rented to various tenants
pursuant to short term leases to improve the marketability of the property to
potential buyers looking to redevelop the site. The Fund is also continuing
its marketing and sales efforts regarding its Westholme assets which consist of
four land parcels comprising approximately forty-three acres, located in
Florida and California. The Fund anticipates completing the sales of the
Westholme land parcels during the next twelve months. In addition, the Fund
holds a 0.3% ownership interest in a liquidating trust, established for the
benefit of a group of unsecured creditors of a previous borrower of the Fund,
which holds interests in various real estate assets. See Item 2, Description
of Property, and Item 6, Management Discussion and Analysis, for further
details regarding the Fund's assets as discussed above.
As of December 31, 1995 the Fund held a receivable from Northholme
Partners ("Northholme"). Northholme Partners, of which the Fund holds an 80%
limited partnership interest, was created by the Fund and a partner of the
Anden Group on August 31, 1992. On September 2, 1992, the Fund and Northholme
entered into a Loan Agreement whereby the Fund committed to lend Northholme
$700,000. The loan is collateralized by a Development Agreement on a
1,000-acre parcel located north of Los Angeles, California (the "Whittaker
Parcel"). During the year ended December 31, 1995, the Fund
1
<PAGE> 4
ITEM 1. DESCRIPTION OF BUSINESS (CONTINUED)
completed the zoning and entitlement work on the property. It is the intent
of Northholme to market its interest which it anticipates will generate cash
proceeds sufficient to fully discharge the Fund's loan. As of December 31,
1995, the carrying balance of the Northholme loan is $560,000.
Pursuant to a deed-in-lieu of foreclosure settlement agreement with
Westholme Partners in 1994, the Fund received an interest in a note
collateralized by an undeveloped land parcel commonly known as the Hemet IV
land parcel with a current carrying value of $225,000. It is the Fund's intent
to sell its interest in the Hemet IV loan during the next twelve months. See
Note 3, "Loans Receivable", of the Notes to Consolidated Financial Statements
for further details regarding the above notes.
At such time as the various property interests and notes
receivable are sold or converted to cash as discussed above, it is the Fund's
intent to assess its current overall business plans and all options available
to the Fund regarding its continued operations.
OTHER INFORMATION
The Fund's real property investments are subject to competition
regarding the size and location of similar types of properties in the
vicinities in which they are located. Approximate occupancy levels for the
operating property are set forth on a quarterly basis in the table in Item 2.
The Fund has no real property investments located outside the United States.
The Fund does not segregate revenue or assets by geographic region, and such a
presentation is not applicable and would not be significant to an understanding
of the Fund's business taken as a whole.
The Fund has four employees who serve as executive officers.
The Fund reviews and monitors compliance with federal, state and
local provisions which have been enacted or adopted regulating the discharge of
material into the environment, or otherwise relating to the protection of the
environment. For the year ended December 31, 1995, the Fund did not incur any
material capital expenditures for environmental control facilities nor does it
anticipate making any such expenditures for the year ended December 31, 1996.
The Fund elected to be treated as a real estate investment trust
("REIT") under Sections 856-860 of the Internal Revenue Code for the years
ended December 31, 1995, 1994 and 1993. On March 20, 1996, the Fund notified
the Internal Revenue Service of its intent to revoke the tax election to be
treated as a REIT under section 856(c) (1) of the Internal Revenue Code of
1986, as amended, in order to avoid the adverse tax effects associated with the
potential disposition or development of its various real estate assets
consisting of undeveloped land for which a REIT structure is not intended.
Pursuant to the revocation of tax election 856(c) (1), the Fund will be taxable
as a "C" corporation and will no longer be required to meet certain
pre-determined distribution, asset and income requirements, effective January
1, 1996.
2
<PAGE> 5
ITEM 2. DESCRIPTION OF PROPERTY
As of December 31, 1995, the Fund held ownership interests through its
wholly owned subsidiaries in the properties as set forth in the table below:
<TABLE>
<CAPTION>
Name, Type and Date
Location of Property Size Acquired Description
<S> <C> <C> <C>
H Street Assemblage
Washington, D.C.
Land Parcel 17,000 06/05/92 Fee ownership of land (subject to a
sq. ft. partnership agreement) (a)
Victor Building 55,900 Fee ownership of land and improvements
sq. ft. (through a 47% interest in a Partnership
g.l.a. which has equitable title to this
property) (a)
Rancho Malibu 274 acres 07/01/92 Fee ownership of land (through
Land Parcel a joint venture partnership)(b)
Malibu, CA
Lindfield A 13 acres 03/10/94 Fee ownership of land (b)
Land Parcel
Kissimmee, FL
Lindfield D 8.5 acres 03/10/94 Fee ownership of land (b)
Land Parcel
Kissimmee, FL
Lake Rogers 2.5 acres 03/10/94 Fee ownership of land (b)
Land Parcel
Oveido, FL
Hemet III 18.5 acres 03/10/94 Fee ownership of land (b)
Land Parcel
Hemet, CA
</TABLE>
(a) Reference is made to Note 6, "Investment in Joint Venture", of
Notes to Consolidated Financial Statements filed with this
annual report for a description of the joint venture
partnership through which the Fund has acquired this real
property.
(b) Reference is made to Note 4, "Foreclosed Real Estate Held for
Sale", of Notes to Consolidated Financial Statements filed
with this annual report for additional description of these
real property investments.
3
<PAGE> 6
ITEM 2. DESCRIPTION OF PROPERTY (CONTINUED)
The following is a list of occupancy levels at the end of each quarter
for 1995 and 1994 regarding the Fund's operating property:
<TABLE>
<CAPTION>
1995
at at at at
03/31 06/30 09/30 12/31
<S> <C> <C> <C> <C>
Victor Office Building
Washington, D.C. 50% 56% 55% 55%
1994
at at at at
03/31 06/30 09/30 12/31
Victor Office Building
Washington, D.C. 40% 42% 41% 45%
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
On May 25, 1994, Banyan Strategic Land Fund II and its subsidiary,
VSLF II Key Biscayne Hotel Corp. (collectively referred to as the "Fund")
filed in Illinois a multi-count complaint (the "Illinois Complaint") against
THSP Associates Limited Partnership II ("THSP"), formerly known as Banyan
Mortgage Investors L.P. III and its affiliate, VMLP III Key Biscayne Villas
Limited Partnership, an Illinois limited partnership, (collectively referred to
as the "Partnership"). The Illinois Complaint sought, in part, a declaration
of the rights and obligations of the Fund and the Partnership with respect to
their joint development of, and rights to receive proceeds from, a project on
the island of Key Biscayne, Florida, known as the Key Biscayne Hotel and
Villas.
On March 16, 1995, the Fund executed a settlement agreement with the
Partnership. Pursuant to the settlement agreement, on March 17, 1995, the Fund
received cash and other consideration totalling approximately $24,700,000 and
the Fund then transferred to a subsidiary of THSP ownership of the Fund's
22-acre site in Key Biscayne, Florida. The Fund also released all claims it
had asserted to an adjacent parcel owned by THSP. In addition, the Fund and
THSP consensually terminated all litigation currently pending and exchanged
mutual releases.
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 fourth quarter of 1995.
4
<PAGE> 7
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Fund's shares are included for quotation on the NASDAQ National
Market (symbol - VSLF). The table below shows the quarterly high and low bid
prices reported by NASDAQ for the years ended December 31, 1995 and 1994:
Share Price
<TABLE>
<CAPTION>
Quarter 1995 1994
<S> <C> <C> <C>
3/31 High $1.406 $ 1.313
Low $1.125 $ 1.063
6/30 High $1.750 $ 1.625
Low $1.250 $ 1.125
9/30 High $1.688 $ 1.500
Low $1.188 $ 1.219
12/31 High $1.375 $ 1.438
Low $1.188 $ 1.125
</TABLE>
As a result of the defaults by borrowers on the Fund's mortgage loans,
the resultant interruption in the Fund's cash flow, the uncertainties regarding
its assets and the Fund's future cash requirements, and the modest size of the
Fund's cash position, the Fund suspended distributions since 1990. In early
1995, as a result of the Fund's receipt of significant cash proceeds from
collections on the Key Biscayne settlement and disposition of properties and
mortgage loans, management proposed several alternatives to the Board of
Directors of the Fund in connection with the utilization of the Fund's cash
proceeds in excess of those needed for operations. On May 5, 1995, the Board
of Directors of the Fund authorized management to commence a tender offer for
up to 10,000,000 shares of its stock at a price of $1.70 per share. The tender
offer expired at midnight on June 5, 1995. The trading price of the Fund's
stock on the last day prior to commencement of the tender offer was $1.31 per
share. The tender offer resulted in the purchase by the Fund of 9,309,747
shares for a total purchase price of $15,826,570. The Fund will continue to
periodically assess the status of its assets, evaluate its distribution policy
and the overall business plan for the Fund as cash proceeds are recovered from
the disposition of its current assets. The Fund's management currently does
not anticipate commencing distributions in the foreseeable future.
At March 18, 1996, there were 6,777 record holders of the Fund's
shares of common stock.
The Fund's ability to make future distributions to its stockholders is
dependent upon, among other things: (i) the eventual sales price and recoveries
on properties to which the Fund has taken title; (ii) operating results of the
Fund's properties; (iii) the Fund's ability to control its operating expenses;
and (iv) the general improvement of conditions in the real estate markets where
the Fund's properties or loan collateral are located.
5
<PAGE> 8
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR
PLAN OF OPERATION
GENERAL
The Fund was originally established to invest primarily in short-term,
junior, predevelopment and construction mortgage loans. The borrowers
subsequently defaulted on these mortgage loan obligations, adversely affecting
the Fund. The Fund has ceased funding mortgage loans except where necessary to
protect the value of its assets acquired through foreclosure or otherwise. In
1990, the Fund implemented a Principal Recovery Plan designed to preserve its
assets and manage its properties acquired through foreclosure or otherwise
until they would be disposed of in an orderly manner. In addition, in 1990 the
Fund suspended distributions to stockholders due to its modest cash position
and the uncertainty regarding its remaining assets and the Fund's future cash
requirements. The Fund continues to operate under the Principal Recovery Plan
which focuses on preserving and maximizing the value of its assets, including
managing and/or improving development rights regarding such properties.
The Fund currently holds an ownership interest in a 274 acre land
parcel located in Southern California known as the Rancho Malibu property as
well as other smaller parcels of land located in California and Florida. In
addition, the Fund acquired a 47% partnership interest in the H Street Venture
which holds title to an approximately 55,900 square foot office building
including an adjacent land parcel containing 17,000 square feet located in
Washington D.C. The Fund's current loan portfolio consists of the Northholme
Partners and Hemet IV loans. See Liquidity & Capital Resources and Results of
Operations below for further details regarding the Fund's interest in these
assets.
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, 1995 and 1994 was
$549,309 and $290,366, respectively. In addition, at December 31, 1995 the
Fund owns $626,946 in investment securities which are immediately convertible
to cash. The increase in total cash, cash equivalents and investment
securities of approximately $886,000 is primarily due to the receipt of
approximately $21,500,000 in proceeds from the resolution of the Key Biscayne
project and the settlement of the Key Biscayne litigation. Also contributing
to this increase in total cash, cash equivalents and investment securities was
approximately $980,000 in 1995 sales proceeds from the Lancaster site,
Lindfield Multi-Family land parcel, the Lindfield's Single Family property and
the Palmdale property (see Results of Operations below for further details
regarding the sale of these properties). Further contributing to the increase
in cash, cash equivalents and investment securities is the receipt of forfeited
proceeds from sales contracts of $58,086 on the Hemet III, Lindfield's Single
Family and Lake Rogers properties, the receipt of a final payment of $16,000 on
the Chino Hill loan, cash distributions received of $23,727 regarding the
Fund's interest in the liquidating trust (see below) and the receipt of
interest earned on the Fund's investment securities and short-term investments.
Partially offsetting these cash receipts was the cash used by the Fund to
purchase its shares of common stock pursuant to the self tender offer totalling
$15,826,570 (see below), the payment of approximately $1,604,000 related to
entitlement, litigation and holding costs associated with the Rancho Malibu
property, the repayment of $730,229 to Banyan Strategic Realty Trust ("BSRT")
relating to advances made on behalf of the Fund for H Street Assemblage
expenditures, $527,409 in
6
<PAGE> 9
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR
PLAN OF OPERATION (CONTINUED)
payments of liabilities relating to legal costs associated with the Key
Biscayne settlement and the payment of the Fund's operating expenses.
In early 1995, the receipt of cash proceeds from the Key Biscayne
settlement and the sale of other various properties and collections on loans
caused the Fund to reassess the reinstatement of distributions. Management
proposed several alternatives to the Board of Directors of the Fund in
connection with the utilization of the Fund's cash proceeds in excess of those
needed for operations. On May 5, 1995, the Board of Directors of the Fund
authorized management to commence a tender offer for up to 10,000,000 shares of
its stock at a price of $1.70 per share. The tender offer expired at midnight
on June 5, 1995. The trading price of the Fund's stock on the last day prior
to commencement of the tender offer was $1.31 per share. The tender offer
resulted in the purchase by the Fund of 9,309,747 shares for a total purchase
price of $15,826,570. Management will continue its efforts to maximize its
cash recoveries on its existing real estate assets as they are developed, sold
or converted to cash. Simultaneously, management will continue to pursue the
principal recovery plan while assessing the Fund's overall business plan
including all options available to the Fund regarding its continued operations.
The Fund currently does not anticipate commencing distributions in the
foreseeable future.
The Fund has entered into a partnership agreement with BSRT regarding
the ownership and operation of the H Street Assemblage ("H Street Venture").
Under the terms of this agreement, BSRT has the right, but is not obligated, to
advance expenditures on behalf of the Fund. During 1994 and 1993, BSRT advanced
to the H Street Venture all funds expended on the H Street Assemblage,
including the Fund's portion. As provided in the H Street partnership
agreement, all advances made by BSRT for the Fund's share of the H Street
Venture's expenditures bore interest at a rate of prime plus 2% per annum until
repaid. As of December 31, 1994, the Fund's total payable to BSRT was
approximately $730,000. On March 24, 1995, the Fund repaid the December 31,
1994 outstanding balance. As of December 31, 1995, the H Street advances, and
all interest thereon, made by BSRT have been repaid in full by the Fund.
On February 9 and December 20, 1995, the Fund received cash
distributions of $23,277 and $450, respectively, with respect to its interest
in a liquidating trust established for the benefit of the unsecured creditors
of VMS Realty Partners and its affiliates. For the year ended December 31,
1995, the Fund recorded $23,727 of these distributions as a recovery of losses
on mortgage loans, notes and interest receivable on its consolidated statement
of income and expenses. During 1994 and 1993, the Fund has recorded $14,628
and $3,124,916, respectively, on its consolidated Statement of Income and
Expenses as a recovery of losses on mortgage loans, notes and interest
receivable related to the distributions received from the liquidating trust.
The Fund's future liquidity needs are expected to be funded from cash
proceeds from the sale or any potential third party joint development of its
properties, collection of principal and interest on the Fund's mortgage loans,
distributions of cash from the liquidating trust of which the Fund is a
beneficiary and interest earned on the Fund's investment securities and
short-term investments. At the present time, the Fund's cash position, as well
as cash anticipated to be generated from the sale of various land parcels which
had collateralized the Fund's loans, is anticipated to provide adequate
liquidity to meet the Fund's operating expenses plus the
7
<PAGE> 10
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR
PLAN OF OPERATION (CONTINUED)
holding costs and operating expenses consistent with the Fund's business plan
for the H Street Assemblage, Rancho Malibu property and other various land
parcels acquired through foreclosure. In the event the Fund is unable to sell
its various real estate assets, the Fund will be required to seek additional
sources of liquidity to meet its operational needs.
As of December 31, 1995 and 1994, the Fund's mortgage loan portfolio
consisted of two and three loans, respectively, with carrying values totaling
$785,000 and $801,000, respectively. During the year ended December 31, 1995,
the Fund received a final principal and interest payment on the Chino Hills
loan totalling $16,360.
RESULTS OF OPERATIONS
Total income for the year ended December 31, 1995 increased to
$416,440 from $104,451 and $235,063 for the years ended December 31, 1994 and
1993, respectively. The increase of approximately $312,000 for 1995 from 1994
was due to an increase in income earned on investments offset partially by a
decrease in interest earned on loans. The increase in income on investments is
due to an increase in cash available for investment due to the proceeds
received on March 17, 1995 from the resolution of the Key Biscayne litigation
and cash proceeds received as a result of the 1995 sales of various land
parcels. See Property Activities and Dispositions below for details on land
sales. The decrease in interest on loans is due primarily to a decrease in
loans receivable. Loans receivable decreased in 1995 when compared to 1994 due
to the Westholme Partners Notes I and II foreclosures which occurred in March
of 1994. The decline in total income for 1994 from 1993 is attributable to
decreases in interest on loans and income on investments. The decrease in
interest on loans is due to decreases in loans receivable. Loans receivable
decreased in 1994 from 1993 due to the Anden Group and Westholme Partners Note
I and II foreclosures which occurred in October 1993 and March 1994,
respectively.
Total expenses for the year ended December 31, 1995 were $7,714,609 as
compared to $29,862,035 and $6,664,899 for the years ended December 31, 1994
and 1993, respectively. The decrease in 1995 as compared to 1994 is due to a
decrease in property operating expenses of $21,455,266 and total other expenses
of $692,160. The increase in total expenses for 1994 compared to 1993 is due
to an increase of $24,646,856 in property operating expenses offset partially
by a decrease in total other expenses of $1,449,720. The decrease in property
operating expenses for 1995 when compared to 1994 is due to a decrease in all
expense categories under expenses from property operating activities. Interest
on advances from affiliates decreased due primarily to the Fund's settlement of
the Key Biscayne litigation. See Property Activities and Dispositions below
for further details on the Key Biscayne settlement. In addition, during March
1995, the Fund repaid all outstanding advances to BSRT relating to the H Street
Venture thereby creating a further decrease in interest on advances. The
decrease in net loss on disposition of properties, note receivable and
foreclosed real estate held for sale recorded in 1995 and 1994 relate to the
sales of assets received from the March 1994 foreclosures of the Fund's
Westholme Partners Notes I and II loans. See below for details regarding the
assets sold during 1995 and 1994. As a result of the Key Biscayne settlement,
net loss from operations of foreclosed real estate held for sale decreased
approximately $1,172,000 in 1995 when compared to 1994 due to the elimination
of real estate tax expense and other holding costs associated with the Fund's
interest in the Key Biscayne project. In
8
<PAGE> 11
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR
PLAN OF OPERATION (CONTINUED)
addition, eight of the Fund's land parcels were sold during 1994 which resulted
in the elimination of certain holding and operating costs which further
decreased the net loss from operations of foreclosed real estate held for sale
by approximately $180,000. These decreases were partially offset by an
increase in Rancho Malibu expenses of approximately $124,000 in 1995 when
compared to 1994 due to costs associated with finalizing the zoning and
development rights in 1995. During 1995, the Fund recorded a provision for
loss on foreclosed real estate held for sale of $4,200,000 associated with the
Fund's interest in the Rancho Malibu property. See Property Activities and
Dispositions below for further details. During 1994, the Fund recorded a
$20,899,566 provision for loss on foreclosed real estate held for sale of which
$19,699,566 relates to the Key Biscayne Settlement with THSP and $1,200,000
relates to the Fund's recognition of a valuation allowance recorded against the
carrying value of the assets received pursuant to the Westholme foreclosure in
March 1994. For discussion regarding the increase of $2,857,867 in 1995 as
compared to 1994 in income from operations of real estate venture see below.
Property operating expenses for the year ended December 31, 1994 are
not comparable to the same period in 1993. Expenses from property operating
activities increased in 1994 as compared to 1993 due in part to a change in
accounting policy effective January 1, 1994, regarding the Key Biscayne Project
whereby ongoing holding costs of $1,126,000 were expensed during 1994 in the
Fund's consolidated statement of income and expenses. During 1993,
expenditures on the Key Biscayne Project were capitalized on the Fund's balance
sheet as development in progress. This change in accounting policy resulted
from the substantial completion of the zoning and entitlement steps necessary
to begin development on the Key Biscayne Project during 1993. In addition,
effective January 1, 1994, the Fund changed its accounting policy regarding the
Rancho Malibu project. During 1993, expenditures on the Rancho Malibu property
were initially capitalized as development in progress. For the year ended
December 31, 1993, the Fund recorded a valuation allowance of $1,514,503
against its carrying value of the Rancho Malibu project. The change in
accounting policy for the Rancho Malibu property from 1993 to 1994 was due to
the uncertainty as to when the zoning and entitlement work would be completed.
For the year ended December 31, 1994, the entitlement and holding costs for the
Rancho Malibu property consisted of approximately $730,000 in legal costs,
approximately $679,000 in consulting and other holding costs and approximately
$72,000 in real estate taxes. In addition, net loss from operations of
foreclosed real estate held for sale in 1994 includes approximately $294,000 in
expenses associated with various land parcels received pursuant to the
Westholme loan foreclosures. The Fund recorded a net gain on disposition of
properties, note receivable and foreclosed real estate held for sale during
1993 in the amount of $308,794 relating to the sale of a property interest of
the Fund in 1993. For details regarding the net loss on disposition of assets
recorded in 1994 see Property Activities and Dispositions discussed below. The
net loss from operations of real estate venture increased by $1,220,024 for
1994 when compared to 1993. See discussion below for further details. The
Fund recorded a provision for loss on foreclosed real estate held for sale of
$20,899,566 in 1994 (as discussed above) as compared to $1,514,503 in 1993
which relates to a valuation allowance for the Rancho Malibu property as
discussed above.
Total other expenses decreased by $692,160 for 1995 from 1994 and
decreased by $1,449,720 for 1994 from 1993. The decrease in 1995 when compared
to 1994 reflects decreases in directors' fees, expenses and insurance and other
professional fees. In addition, the Fund recorded a
9
<PAGE> 12
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR
PLAN OF OPERATION (CONTINUED)
$23,727 recovery of losses on loans, notes, interest receivable and class
action settlement costs and expenses during 1995 relating to cash distributions
received regarding the Fund's interest in the liquidating trust. During 1994,
the Fund recorded a $17,769 net provision for losses on loans, notes, interest
receivable and class action settlement costs and expenses. The $17,769
recorded in 1994 relates to a $242,603 recovery of class action settlement
costs and expenses relating to the release of an escrow established as part of
the class action settlement of the VMS securities litigation, a $14,628 cash
distribution received relating to the Fund's interest in a liquidating trust
which was offset by a $275,000 provision relating to the Fund's Hemet IV
mortgage loan. Director's fees, expenses and insurance decreased due to a
decrease in the number of meetings held during 1995 as compared to the same
period in 1994 and a decrease in the insurance premium. Other professional
fees decreased due to nonrecurring legal costs incurred in 1994 relating to the
Fund's Key Biscayne litigation. These changes were partially offset by
increases in stockholder expenses and general and administrative expenses.
Stockholder expenses increased due to the nonrecurring costs paid in 1995
associated with the Fund's tender offer. General and administrative expenses
increased as a result of additional administrative expenses associated with the
Rancho Malibu litigation and entitlement activities.
The decrease in other expenses for 1994 when compared to 1993 reflect
decreases in general and administrative expenses and provision for losses on
loans, notes, interest receivable and class action settlement costs and
expenses. During 1993, the Fund recorded a $5,001,490 provision for losses on
loans, notes and interest receivable relating to the Fund's loan to BMC Banden
Corp. offset partially by a $3,124,916 recovery of losses on loans, notes and
interest receivable in connection with the Fund's interest in the liquidating
trust. During 1994, the Fund recorded a net provision for losses on loans,
notes, interest receivable and class action settlement costs and expenses of
$17,769 as discussed above. The decrease in general and administrative
expenses is the result of the decrease in the hours charged to the Fund by
Banyan Management Corp. personnel as a result of the completion of the workout
of several of the Fund's assets. These decreases were offset by increases in
directors' fees, expenses and insurance and other professional fees.
Directors' fees, expenses and insurance increased due to an increased premium
for insurance coverage as well as additional Board meetings which were required
as a result of the Key Biscayne activities. The increase in other professional
fees is associated with the Fund's legal costs regarding its dispute with THSP
on the Key Biscayne property.
For the year ended December 31, 1995, the Fund recorded net income of
$33,488 from the operations of a real estate venture as compared to a net loss
of $2,824,379 when compared to 1994. Net income from operations of real estate
venture includes the 47% interest in the real estate venture known as the H
Street Assemblage located in Washington, D.C. The H Street Assemblage consists
of an approximately 55,900 square foot office building (the "Victor Building")
and an adjacent land parcel consisting of 17,000 square feet. The Fund's share
of the net income from the H Street property for 1995 compared to 1994
increased by $2,857,867 due primarily to a write-down in the value of the H
Street Assemblage during 1994 in the amount of $5,500,000 of which $2,585,000
is the Fund's share. The write-down was due to the Venture revising its
strategy from holding the property in anticipation of potential development to
marketing the property for immediate sale. This increase in net income for the
H Street property for 1995 as compared to 1994 is due further to a reduction in
legal costs
10
<PAGE> 13
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR
PLAN OF OPERATION (CONTINUED)
compared to 1994 relating to the completion of a real estate tax appeal which
reduced the property's assessed taxable value. During 1995, the Venture
recorded approximately $433,000 in real estate tax refunds and interest,
thereon, relating to taxes paid in 1992 and 1993, resulting in a decrease in
real estate tax expense of approximately $457,000 for the year ended December
31, 1995 when compared to the same period in 1994. In addition, legal and
entitlement costs for 1995 decreased when compared to 1994 since the costs
incurred during 1994 included nonrecurring payments for professional services
associated with obtaining the historic preservation rights.
During 1994, the H Street Venture completed and obtained the zoning,
entitlement and historic preservation rights for the development of an
approximately 330,000 square foot commercial building on the H Street site.
The H Street Venture has not made any significant capital expenditures on the H
Street property and is allowing occupancy to decline by selectively retenanting
the Victor Building at the H Street Assemblage with short term leases so that
the building will be more marketable to a potential buyer which would need to
vacate the Victor Building before its redevelopment. The H Street Venture is
currently marketing the H Street Assemblage for sale based upon its current
assessment of the Washington D.C. office market. The current market for the
sale of undeveloped land where the H Street Assemblage is located is currently
limited because of the decline in demand for commercial development sites in
the Washington, D.C. market resulting from the recent government decision to
downsize various departments and agencies and place a freeze on leasing of any
additional office space. Therefore, the H Street Venture currently anticipates
its marketing efforts could proceed slower than originally anticipated. The
Venture will continue to try to find ways to limit holding costs at the H
Street Assemblage while attempting to find a buyer.
For the year ended December 31, 1993, the operations of the H Street
Venture resulted in a loss on the H Street Assemblage of $1,604,355. The H
Street Assemblage generated losses in 1993 due primarily to the H Street
Venture write off of a $2,300,000 nonrefundable deposit on the option parcels
in the second quarter of 1993. The Fund's share of this write off was
$1,081,000. The increase in net loss for 1994 as compared to 1993 was offset
by a reduction in real estate tax expense for the Venture. Real estate tax
expense decreased as the H Street Venture is no longer required to pay real
estate taxes on the option parcels due to the termination of the option
agreement in the second quarter of 1993. In addition, real estate tax expense
decreased resulting from a successful real estate tax appeal which reduced the
property's assessed value when compared to the same period in 1993.
On a quarterly basis, management reviews the mortgage loans in the
Fund's portfolio and records appropriate loss provisions. The provisions are
based upon a number of factors, including analysis of the value of the
collateral and, in certain cases, ongoing negotiations regarding disposition of
this collateral, as well as consideration of the general business conditions
affecting the Fund's portfolio. Management also reviews the investment
properties held by the Fund on a quarterly basis and, when it has been
determined that a permanent impairment in the value of a given property has
occurred, the carrying value of the property is then written down to its fair
market value. During the quarter ended December 31, 1995, the Fund recorded a
$4,200,000 valuation allowance against its interest in the Rancho Malibu
property. See Property Activities and Dispositions below for further details.
The Fund determined
11
<PAGE> 14
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR
PLAN OF OPERATION (CONTINUED)
that no further reductions are necessary for the quarter ended December 31,
1995.
These changes for the year ended December 31, 1995 resulted in a net
loss of $7,298,169 ($0.52 per share) as compared to a net loss of $29,757,584
($1.55 per share) and a net loss of $6,237,233 ($0.32 per share) in 1994 and
1993, respectively.
PROPERTY ACTIVITIES AND DISPOSITIONS
On May 25, 1994, Banyan Strategic Land Fund II and its subsidiary,
VSLF II Key Biscayne Hotel Corp. (collectively referred to as the "Fund")
filed in Illinois a multi-count complaint against THSP Associates Limited
Partnership II ("THSP"), formerly known as Banyan Mortgage Investors L.P. III
and its affiliate, VMLP III Key Biscayne Villas Limited Partnership, an
Illinois limited partnership, (collectively referred to as the "Partnership").
On March 16, 1995, the Fund executed a settlement agreement with the
Partnership. Pursuant to the settlement agreement, on March 17, 1995, the Fund
received cash and other consideration totalling approximately $24,700,000 and
the Fund then transferred to THSP ownership of the Fund's 22-acre site in Key
Biscayne, Florida. The Fund also released all claims it had asserted to an
adjacent parcel owned by THSP. In addition, the Fund and THSP consensually
terminated all litigation currently pending and exchanged mutual releases.
Of the $24,700,000 settlement, the Fund received approximately
$21,500,000 in cash. The remaining $3,200,000 was used to pay approximately
$1,500,000 in closing costs and prorations and to discharge the Fund's
liability of approximately $1,700,000 due THSP for advances made to the Fund
pursuant to a prior agreement between the Fund and THSP. As a result of the
settlement, the Fund recorded a year-end valuation provision of approximately
$19,700,000 during 1994 which represented the difference between the net book
value of the Fund's investment in the Key Biscayne project less the settlement
amount as reduced by closing costs and prorations. As a result of the
settlement of the litigation with THSP, a major uncertainty was removed which
had negatively impacted the Fund. The amount of the settlement was less than
the net book value of the Key Biscayne Property, but the Fund's ability to
fully recover its carrying value was contingent upon its ability to jointly
develop the Key Biscayne project with THSP. As the litigation and settlement
negotiations evolved, it became evident to management of the Fund that joint
development of the Key Biscayne property would occur, if at all, after a costly
and protracted legal battle.
Rancho Malibu is a 274-acre parcel of undeveloped land north of
Malibu, California. On July 1, 1992 a joint venture (the "Venture") between
the Fund and Banyan Mortgage Investment Fund ("BMIF") acquired title to the
property pursuant to a deed in lieu of foreclosure agreement. The Fund owns a
98.6% general partner interest in the Venture while BMIF holds the remaining
1.4% interest as a limited partner.
From the acquisition date, the Venture has engaged in zoning and
entitlement activities which have been opposed by the City of Malibu. The city
initiated two separate legal actions intended to preclude the issuance of a
Coastal Development Permit, the most recent of which has been decided in favor
of the Venture and as to which the City of Malibu appealed. On December 5,
1995, the Court of Appeals of the State of California decided
12
<PAGE> 15
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR
PLAN OF OPERATION (CONTINUED)
this appeal in favor of the Fund and on January 4, 1996 a petition for
rehearing was denied.
Concurrent with the aforementioned appeal, the Venture pursued
entitlements before the County of Los Angeles. In August 1995, the Los Angeles
County Regional Planning Commission, by a 3 to 2 vote, approved a revised plan
to develop a fifty-one unit housing community on the Rancho Malibu property.
The Los Angeles County Regional Planning Commission's approval was appealed to
the Los Angeles County Board of Supervisors. On January 23, 1996, the Los
Angeles County Board of Supervisors tentatively approved a compromise forty-six
unit project. Final County approval is anticipated to occur in April of 1996.
This approval can be challenged only by a separate action brought in Superior
Court.
During the years ended December 31, 1995 and 1994, the Fund expended
approximately $1,604,000 and $1,481,000, respectively, relating to entitlement
activities, holding costs and litigation. These costs were included in total
expenses from property operating activities on the Fund's consolidated
statement of income and expenses. As a result of the decrease in number of
units approved for residential development from fifty-one units to the agreed
upon forty-six units as discussed above, the Fund recorded a $4,200,000
valuation allowance against the property during the quarter ended December 31,
1995. For the year ended December 31, 1993, the Fund incurred $1,514,503 of
costs related to entitlement work and the litigation which were capitalized.
Concurrently, in light of the litigation and the foregoing factors, the Fund
recorded a $1,514,503 valuation allowance. As of December 31, 1995, the Fund's
carrying balance for the property is $9,961,991.
The realization of this carrying value is based on the present intent
of the Fund to finalize the zoning and development rights and then assess all
options regarding the Rancho Malibu project, including all alternatives from
site development to a bulk land sale. In the event the final zoning rights and
entitlements are again challenged, further modified, or approval is postponed,
management of the Fund estimates the net proceeds to be realized from the sale
of the Rancho Malibu property would potentially be less than its current
carrying value.
During 1990, the Fund and Banyan Strategic Realty Trust ("BSRT")
acquired title to a property known as the H Street Assemblage located in
Washington, D.C. On June 5, 1992, the Fund and BSRT formed a joint venture
(the "Venture") to pursue its development rights. The Fund has a 47% interest
in the Venture while BSRT has the remaining 53%. This property consists of a
17,000 square feet parcel of vacant land located in downtown Washington D.C.
including an adjacent 55,900 square foot office building. The entire
property is zoned for office development. See above for discussions regarding
the operations of the H Street Assemblage.
On February 15, 1996, the Fund sold the remaining 11 single family
home lots comprising the Lake Rogers property to an unaffiliated third party
for approximately $165,000. After prorations for closing costs of
approximately $19,400, the Fund received net proceeds of approximately $145,600
and recognized a loss of approximately $77,300 which has been reflected in the
accompanying consolidated statements of income and expenses for the year ended
December 31, 1995.
On December 18, 1995, the Fund sold the Lancaster property to an
unaffiliated third party for approximately $326,000. After prorations for
13
<PAGE> 16
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR
PLAN OF OPERATION (CONTINUED)
closing costs of approximately $18,000 and payment of assumed liabilities of
approximately $189,500, the Fund received net proceeds of approximately
$118,500 and recognized a loss of approximately $57,100.
On December 15, 1995, the Fund sold the remaining eight acres of the
total fourteen acres of the Lindfield Multi-family property to an unaffiliated
third party for approximately $686,100. After prorations for closing costs of
approximately $81,200, the Fund received net proceeds of approximately $604,900
and recognized a gain of approximately $55,000.
On June 16, 1995, the Fund sold six of the eleven lots comprising the
Lindfield's Single Family property to an unaffiliated third party for $54,000.
After prorations for closing costs of approximately $900 and payment of assumed
liabilities of approximately $900, the Fund received net proceeds of
approximately $52,200 and recognized a gain of approximately $9,500 on the
sale. On November 28, 1995, the Fund sold the remaining five Lindfield's
Single Family property lots to an unaffiliated third party for $64,000. After
prorations for closing costs of approximately $7,700, the Fund received net
proceeds of approximately $56,300 and recognized a gain of approximately
$21,900 from the sale of these five lots.
On June 20, 1995, the Fund sold the Palmdale property to an
unaffiliated third party for approximately $350,300. After prorations for
closing costs of approximately $24,600 and payment of assumed liabilities of
approximately $178,200, the Fund received net proceeds of approximately
$147,500 and recognized a loss of approximately $49,300 on the sale.
During 1994, the Fund sold the Hemet II, Bolingbrook, Twin Rivers,
Fullerton and Sunset Townhome properties and a portion of the Lake Rogers and
Lindfield's Multi-Family properties to unaffiliated third parties. The
properties were sold for an aggregate sales price of approximately $2,465,500.
The Fund received total net cash proceeds of approximately $2,172,600 and
recognized an aggregate net loss on disposition of approximately $472,100.
On July 5, 1994, the Fund sold the Princeton Ridings Note to an
unaffiliated third party for $200,000 which resulted in a loss on disposition
of $65,000.
Northholme Partners ("Northholme"), of which the Fund holds an 80%
limited partnership interest, was created by the Fund and a partner of The
Anden Group on August 31, 1992. On September 2, 1992, the Fund and Northholme
entered into a loan agreement whereby the Fund committed to lend Northholme
$700,000. The loan is collateralized by a Development Agreement on a
1,000-acre land parcel located north of Los Angeles, California (the "Whittaker
Parcel"). During the year ended December 31, 1995, the Fund completed the
zoning and entitlement work on the property. It is the intent of Northholme to
market its interest which it anticipates will generate cash proceeds sufficient
to fully discharge the Fund's loan. In the event the Fund does not fully
recover its carrying value, the Fund's overall liquidity position would not be
materially effected. As of December 31, 1995 the carrying balance of the
Northholme loan is $560,000. Pursuant to a deed-in-lieu of foreclosure
settlement agreement with Westholme Partners in 1994, the Fund received an
interest in a note collateralized by an undeveloped land parcel commonly known
as the Hemet IV land parcel with a current carrying value of $225,000. It is
the Fund's intent to sell its interest in the Hemet IV loan during the next
twelve
14
<PAGE> 17
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR
PLAN OF OPERATION (CONTINUED)
months. See Note 3, "Loans Receivable", of the Notes to Consolidated Financial
Statements for further details regarding these notes.
ITEM 7. FINANCIAL STATEMENTS
See Index to Consolidated Financial Statements on Page F-1 of this
Report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in, or disagreements with, the accountants
on any matter of accounting principles, practices or financial statement
disclosure.
15
<PAGE> 18
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The directors and executive officers of the Fund are:
Walter E. Auch, Sr. Director
Gerald L. Nudo Director
Robert M. Ungerleider Director
Leonard G. Levine President
Neil D. Hansen First Vice President
Robert G. Higgins Vice President and Secretary/
General Counsel
Joel L. Teglia Vice President/Chief Financial
Officer
WALTER E. AUCH, SR., age 74, was the chairman and chief executive
officer of the Chicago Board Options Exchange. Prior to that time, he was
executive vice president, director and a member of the executive committee of
Paine Weber. Mr. Auch is a director of Pimco L.P., Geotek Industries, Smith
Barney Concert Series Funds, Smith Barney Trak Fund, Nicholas Applegate Funds
and Fort Dearborn Fund, and a trustee of Hillsdale College and the Arizona
Heart Institute. Mr. Auch has been a director of the Fund since 1987. Mr.
Auch is also a trustee of Banyan Strategic Realty Trust and a director of
Banyan Mortgage Investment Fund and Banyan Management Corp.
GERALD L. NUDO, age 46, is senior vice president of the investment
banking firm of Mesirow Realty Finance, Inc., a subsidiary of Mesirow Financial
Corp., since 1990. Mr. Nudo received his Bachelor of Science Degree from
Northwestern University and his Masters Degree in Business Administration from
the University of Chicago Graduate School of Business. Mr. Nudo is also a
certified public accountant and a licensed real estate broker in Illinois. Mr.
Nudo has been a director of the Fund since 1987. He is a trustee of Banyan
Short Term Income Trust and a director of Banyan Management Corp.
ROBERT M. UNGERLEIDER, age 54, is presently practicing law with and is
counsel to the firm of Lane Felcher Kurlander & Fox in New York, New York. He
has founded, developed and sold a number of start-up ventures including
Verifone Finance, an equipment leasing business, SmartPage, a paging service
company and Financial Risk Underwriting Agency, Inc., an insurance agency
specializing in financial guarantee transactions. Prior to these endeavors,
Mr. Ungerleider practiced real estate and corporate law in New York City for
ten years. Mr. Ungerleider received his B. A. Degree from Colgate University
and his Law Degree from Columbia University Law School. Mr. Ungerleider has
been a director of the Fund since 1987. Mr. Ungerleider is also a director of
Banyan Mortgage Investment Fund and Banyan Management Corp.
LEONARD G. LEVINE, age 49, has been president of the Fund as well as
Banyan Management Corp., Banyan Short Term Income Trust, Banyan Strategic
Realty Trust and Banyan Mortgage Investment Fund since 1990. He received a
B.S./B.A. Degree in Accounting from Roosevelt University and a Masters Degree
in Taxation from DePaul University. 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.
16
<PAGE> 19
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
(CONTINUED)
NEIL D. HANSEN, age 49, has been first vice president of the Fund as
well as Banyan Management Corp., Banyan Mortgage Investment Fund, Banyan Short
Term Income Trust and Banyan Strategic Realty Trust since 1991. He received a
B.S. Degree in Finance from the University of Illinois and a Master of
Management Degree from Northwestern University. He is a certified public
accountant.
ROBERT G. HIGGINS, age 44, has been vice president and general counsel
of the Fund as well as Banyan Management Corp., Banyan Mortgage Investment
Fund, Banyan Short Term Income Trust and Banyan Strategic Realty Trust since
1992, and secretary of these entities since 1995. From 1990 to 1992, Mr.
Higgins was a contract partner at the law firm of Chapman and Cutler. Mr.
Higgins' legal experience has concentrated in the areas of real estate
development, finance, acquisition, land use, sales, lending, syndications,
general corporate and business practice. Mr. Higgins is admitted to the Bar in
the States of Illinois, Minnesota and Texas. He received a B.A. Degree in
Government from the University of Notre Dame and a J.D. from Loyola University
of Chicago.
JOEL L. TEGLIA, age 34, has been vice president and chief financial
officer of the Fund, as well as Banyan Management Corp., Banyan Mortgage
Investment Fund, Banyan Short Term Income Trust and Banyan Strategic Realty
Trust since 1994. Prior to assuming the responsibilities of his current
position, Mr. Teglia held the position of Controller for Banyan Management
Corp. from 1991 to 1994. He received a B.B.A. Degree in Accounting from the
University of Notre Dame. Mr. Teglia is a certified public accountant.
17
<PAGE> 20
ITEM 10. EXECUTIVE COMPENSATION
A. DIRECTOR COMPENSATION
The Directors are paid an annual fee of $15,000, payable quarterly,
plus $875 for each board meeting, including meetings of the audit committee,
attended in person and $250 an hour for each board meeting, including meetings
of the audit committee, attended via telephonic conference call. In addition,
each Director is reimbursed for out-of-pocket expenses incurred in attending
meetings of the board.
B. EXECUTIVE COMPENSATION
Compensation paid to executive officers of the Fund for the years
ended December 31, 1995, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
Long-Term Compensation
Annual Compensation Awards Payouts
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Other
Annual Restricted All Other
Compen- Stock Options/ LTIP Compen-
Year Salary Bonus (2) sation Award(2) SARs (#) Payouts sation
Leonard G. Levine, 1995 $105,606 $27,612 n/a ($19,606) n/a n/a n/a
President and Chief 1994 $102,800 $78,425 n/a $19,606 n/a n/a n/a
Executive Officer 1993 $100,000 $ --- n/a n/a n/a n/a n/a
</TABLE>
(1) Total compensation for the next three highest paid executives
of the Fund for 1995, 1994 and 1993 was less than $100,000
per individual.
(2) Pursuant to Mr. Levine's employment agreement the incentive
amounts which were earned in 1994 and 1993 were paid or
awarded to him by the Fund in 1995 and 1994, respectively.
Therefore, this compensation will be presented as paid in 1995
and 1994.
Mr. Levine serves as Chief Executive Officer of the Fund pursuant to
an employment agreement entered into on January 1, 1990. The agreement expires
on December 31, 1997. Under the agreement, Mr. Levine is paid a salary equal
to $105,606 per year. His base salary is adjusted on January 1 of each year
based on increases in the "consumer price index."
Mr. Levine is eligible to receive compensation under an incentive
program included in his agreement. Effective January 1, 1993, Mr. Levine earns
incentive compensation based and calculated on the following four components:
(i) 1.00% of the Fund's collateralized claims which are converted into cash;
(ii) 3.00% of the Fund's unsecured claims which are converted into cash; (iii)
0.1% of all cash distributions of capital; and (iv) .14% of all distributions
of income to shareholders of the Fund.
Incentive compensation earned is paid 80% in cash and 20% in shares
("Award Shares") of the Fund on March 15 of the year following the period for
which the incentive was earned. Pursuant to the Fund's Board of Directors
meeting on April 28, 1995, the Board of Directors amended Mr. Levine's
employment agreement with respect to the issuance of Award Shares and the
previously issued shares were returned to the Fund and cancelled. Mr. Levine
will not receive actual shares of the Fund's Common Stock as Award Shares.
Under Mr. Levine's amended employment agreement, an "Award Share" has been
redefined to mean the right to receive a cash bonus equal to: (i) the value of
one share of Common Stock of the Fund; and (ii) any distributions of the Fund
with respect to a share of Common Stock between the grant date and the
settlement date. The value of an Award Share on a grant date and on a
settlement date will be the average closing price of the Fund's shares of
Common Stock for the five business days ended at the
18
<PAGE> 21
ITEM 10. EXECUTIVE COMPENSATION (CONTINUED)
grant date or the settlement date, as the case may be. Mr. Levine will
continue to receive twenty percent (20%) of his Incentive Compensation in Award
Shares. At the time upon which Mr. Levine determines to dispose of Award
Shares, Mr. Levine will notify the Fund of the number of Award Shares he
wishes to tender and he will receive from the Fund a cash bonus equal to the
value of the Award Shares tendered to the Fund. The cash bonus from the Award
Shares attributable to distributions will be paid currently for all
distributions declared for stockholders of record between the grant date and
the settlement date. Shares of Common Stock previously issued as Award Shares
were converted into cash bonus shares as described above on April 28, 1995, as
provided for in the amended employment agreement. The amendment is intended to
preserve the original intent of the Award Shares which was to further align the
interests of Mr. Levine with those of the Fund's stockholders. All Award
Shares shall be forfeited by Mr. Levine if he fails to be employed by the Fund
on December 31, 1997, unless such failure is due to death or permanent
disability or termination without just cause.
On March 1, 1996, March 24, 1995 and January 28, 1994, Mr. Levine was
paid $217,135, $27,612 and $78,425, representing 80% of his 1995, 1994 and 1993
incentive, respectively. The 43,083, 6,136 and 17,428 Award Shares valued at
$1.26, $1.125 and $1.125 per share, or $54,284, $6,903, and $19,606 for 1995,
1994 and 1993, respectively, represents 20% of Mr. Levine's incentive and will
be held by the Fund, pending satisfaction of the vesting requirements, for the
benefit of Mr. Levine until the earlier of (i) December 31, 1997; (ii) the
termination of Mr. Levine's employment by the Fund without just cause; or (iii)
the permanent disability or death of Mr. Levine. All Award Shares shall be
forfeited by Mr. Levine if he fails to be employed by the Fund on December 31,
1997, unless such failure is due to death or permanent disability or
termination without just cause. Mr. Levine will be entitled to all
distributions paid on shares held by the Fund for his benefit.
Either Mr. Levine or the Fund can terminate the employment agreement
at any time upon 90 days written notice. If the termination is by the Fund for
cause or by Mr. Levine voluntarily, all incentive compensation not previously
paid to Mr. Levine is forfeited and he is not entitled to any severance
payment. In the event of Mr. Levine's death or permanent disability, he is
entitled to all incentive compensation earned through the date of his
disability or death plus any disability or life insurance proceeds in the
amount of two times his annual salary which is consistent with standard
insurance benefits of all Banyan Management Corp. personnel, but he is not
entitled to any other severance payments. If his employment is terminated
without cause following a change of control (as defined in the agreement) the
Fund is obligated to pay Mr. Levine's salary during the remainder of the
employment period and must pay him all incentive compensation which he would
have earned as if all the Fund's assets had been converted into cash and all
proceeds were distributed. If Mr. Levine is terminated without cause but no
change of control has occurred, he will receive a severance payment equal to
one year's salary plus all incentive compensation earned through the date of
his termination (including incentive compensation based upon assets converted
into cash within one year following his termination by the Fund had he received
an "expression of interest" prior to Mr. Levine's termination), plus an amount
equal to the full cost of Mr. Levine's benefits for one year.
C. EXECUTIVE AND DIRECTORS STOCK OPTION PLAN
On June 30, 1994, the stockholders approved and adopted the 1994
Executive and Directors Stock Option Plan (the "Plan"). The Plan granted the
Board of Directors the authority to issue up to 1,000,000 shares of the
19
<PAGE> 22
ITEM 10. EXECUTIVE COMPENSATION (CONTINUED)
C. EXECUTIVE AND DIRECTORS STOCK OPTION PLAN (CONTINUED)
Fund's common stock for stock option awards. The Plan consists of an Executive
Option Grant Program and a Director Option Grant Program. Under the Director
Option Grant Program, each of Gerald L. Nudo, Robert M. Ungerleider and Walter
E. Auch, Sr., in consideration of their length of service on the board on the
tenth business day after adjournment of each annual meeting received an option
to acquire 50,000 shares. Each of David J. Brail and Alan S. Cooper on the
tenth business day after adjournment of each annual meeting received an option
to acquire 10,000 shares. The options granted to Messrs. Brail and Cooper have
been cancelled by the Fund as a result of their June 7, 1995 decision to not
stand for reelection at the February 1995 annual meeting. The exercise price
of the options initially granted to the Board of Directors under the Director
Option Grant Program was $1.125. No executive is eligible to receive options
under the Director Option Grant Program.
The Board administers the Executive Option Grant Program and has the
authority to determine, among other things, the individuals to be granted
Executive Options, the exercise price at which shares may be acquired, the
number of shares subject to each option and the exercise period of each option.
The Board is also authorized to construe and interpret the Executive Option
Grant Program and to prescribe additional terms and conditions of exercise in
option agreements and provide the form of option agreement to be utilized with
the Executive Option Grant Program. No Director is eligible to receive options
under the Executive Option Grant Program.
Options are not transferable except by will or by the laws of descent
and distribution, and are exercisable during an optionee's lifetime only by the
optionee or the appointed guardian or legal representative of the optionee.
Upon the: (a) death or permanent and total disability of an optionee; or (b)
retirement in accord with the Fund's retirement practices, any unexercised
options will be exercisable at any time within one year in the case of (a) and
ninety days in the case of (b) (but in no case beyond the expiration date
specified in the Option Agreement). If, while unexercised options remain
outstanding under the Plan, the Fund ceases to be a publicly-traded company, or
if the Fund merges with another entity or a similar event occurs, all options
outstanding under the Plan shall immediately become exercisable at that time.
The Plan requires the optionee to pay, at the time of exercise, for
all shares acquired on exercise in cash, shares, or in the case of the
Executive Option Program, other forms of consideration acceptable to the Board.
If the Fund declares a stock dividend, splits its stock, combines or
exchanges its shares, or engages in any other transactions which results in a
change in capital structure such as a merger, consolidation, dissolution,
liquidation or similar transaction, the Board may adjust or substitute, as the
case may be, the number of shares available for options under the Plan, the
number of shares covered by outstanding options, the exercise price per share
of outstanding options, any target price levels for vesting of the options and
any other characteristics of the options as the Board deems necessary to
equitably reflect the effects of those changes on the option holders.
On July 11, 1995 and January 18, 1994 the Board granted, subject to
approval of the Plan by the stockholders, initial options totalling 90,000 and
90,000, respectively, to management under the program, at a price of
20
<PAGE> 23
ITEM 10. EXECUTIVE COMPENSATION (CONTINUED)
C. EXECUTIVE AND DIRECTORS STOCK OPTION PLAN (CONTINUED)
$1.50 and $1.125 per share, respectively (the closing price on the day of the
grant of options).
Pursuant to the terms of the grants, options for all shares granted
under the Executive Option Grant Program are exercisable and vested in
installments as follows: (1) 33.3% of the number of shares commencing on the
first anniversary of the date of grant; (ii) an additional 33.3% of the shares
commencing on the second anniversary of the date of the grant; and (iii) an
additional 33.4% of shares commencing on the third anniversary of the date of
grant. Options for all shares as granted under the Director Option Grant
Program shall be exercisable in installments as follows: (i) 50.0% of the
number of shares commencing on the first anniversary of the date of grant; and
(ii) an additional 50.0% of the number of shares commencing on the second
anniversary of the date of grant. The Board is granted discretion to determine
the term of each option granted under the Executive Option Grant Program, but
in no event will the term exceed ten years and one day from the date of grant.
21
<PAGE> 24
ITEM 10. EXECUTIVE COMPENSATION (CONTINUED)
Stock Options granted or exercised by executive officers for the year
ended December 31, 1995, are as follows:
STOCK OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
<TABLE>
<CAPTION>
Number of % of Total Potential Realized Value
Securities Options at Assumed Annual Rates
Underlying Granted to Exercise of Stock Price Appreci-
Options Employees in or Base Expiration ation for Option Term
Name Granted Fiscal Year Price Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Leonard G. Levine 60,000 67% $1.50 Jul. 11, 2005 $ 56,601 $143,437
</TABLE>
AGGREGATED STOCK OPTION EXERCISES DURING YEAR AND YEAR END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Unexercised Options In-the-Money Options
at December 31 at December 31
Shares Acquired Exercisable/ Exercisable/
Name on Exercise Value Realized Unexercisable Unexercisable
<S> <C> <C> <C> <C>
Leonard G. Levine --- $ --- 20,000/120,000 $ ---/$---
</TABLE>
22
<PAGE> 25
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of March 18, 1996, no person owns of record or is known by the Fund
to own more than five percent (5%) of the outstanding shares of common stock of
the Fund.
The following table sets forth the ownership of shares owned directly
and indirectly by the directors and officers of the Fund as of March 18, 1996.
<TABLE>
<CAPTION>
Amount of
Title Name of Beneficial Percent of
of Class Beneficial Owner Ownership Interest
<S> <C> <C> <C>
Shares of Leonard G. Levine, 31,564 Less than 1%
Common Stock President Shares
Shares of Gerald L. Nudo, 5,000 Less than 1%
Common Stock Director Shares
Shares of Robert M. Ungerleider, 6,000 Less than 1%
Common Stock Director Shares
Shares of Walter E. Auch, Sr., 16,000 Less than 1%
Common Stock Director Shares
Shares of All Directors and 58,564 Less than 1%
Common Stock Officers of the Fund, Shares
as a group (7 persons)
</TABLE>
See Item 10, Executive Compensation, for information on Stock Options
of the Fund held by officers and directors pursuant to the 1994 Executive and
Director's Stock Option Plan.
23
<PAGE> 26
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Administrative costs, primarily salaries and general and
administrative expenses, are reimbursed by the Fund to Banyan Management Corp.
("BMC"). BMC is owned by the Fund, Banyan Strategic Realty Trust, Banyan Short
Term Income Trust and Banyan Mortgage Investment Fund (the "Banyan Funds").
Mr. Levine is the president of BMC for which he receives no compensation.
Messrs. Teglia, Hansen and Higgins are employees of the Fund but are actually
paid by BMC. The portion of their time which is allocable to the Fund is
included in the administrative costs for which BMC is reimbursed by the Fund.
The directors/trustees of all Banyan Funds serve as directors of BMC but
receive no additional compensation. All costs incurred on behalf of BMC for
the Fund are allocated to the Fund and other Banyan Funds to which BMC provides
administrative services based upon the actual number of hours spent by BMC
personnel on matters related to that particular entity. The Fund's allocable
share of costs for the years ended December 31, 1995, 1994 and 1993, aggregated
$557,899, $593,964 and $652,113, respectively. As one of its administrative
services, BMC serves as the paying agent for general and administrative costs
of the Fund. As part of providing this payment service, BMC maintains a bank
account on behalf of the Fund. As of December 31, 1995, the Fund had a net
receivable due from BMC of $261,566.
Reference is made to the Note 9, "Transactions with Affiliates," of
the Notes to the Consolidated Financial Statements for the amount of
administrative costs paid to, and a description of various transactions with
BMC.
24
<PAGE> 27
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 8,
Financial Statements and Supplementary Data.
(3) Exhibit Number Description
(10) Material Contracts
(i) Second Amendment of Leonard
G. Levine's Employment
Contract dated December 31,
1992
(ii) First Amendment to Second
Amended and Restated
Employment Agreement for
Leonard G. Levine dated
December 31, 1992
(iii) Directors Stock Option Agreement
dated July 15, 1994
(iv) Executive Stock Option
Agreements dated July 1, 1994
and July 11, 1995
(21) Subsidiaries of the Fund
The following exhibits are incorporated by reference
from the Registrant's Registration Statement on Form S-11
(file number 33-13585), 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 ended December
31, 1995.
(c) See Item 13(a)(3) above.
(d) Financial Statements for the H Street Venture as required pursuant to
Regulation 3-09 of Section S-X (will be filed subsequently).
An annual report will be sent to the shareholders subsequent to this
filing and the Fund will furnish copies of such reports to the Commission at
that time.
25
<PAGE> 28
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 STRATEGIC LAND FUND II
By: /s/ Leonard G. Levine Date: April 4, 1996
Leonard G. Levine, President
PURSUANT to the requirements of the Securities Exchange Act of 1934, this
Annual Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
By: /s/ Leonard G. Levine Date: April 4, 1996
Leonard G. Levine, President
By: /s/ Joel L. Teglia Date: April 4, 1996
Joel L. Teglia, Vice President of
Finance and Administration, Chief
Financial and Accounting Officer
By: /s/ Walter E. Auch, Sr. Date: April 4, 1996
Walter E. Auch, Sr., Director
By: /s/ Gerald L. Nudo Date: April 4, 1996
Gerald L. Nudo, Director
By: /s/ Robert G. Ungerleider Date: April 4, 1996
Robert G. Ungerleider, Director
26
<PAGE> 29
BANYAN STRATEGIC LAND FUND II
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Pages
Report of Independent Auditors F-2
Consolidated Balance Sheets as of December 31, 1995 and 1994 F-3 to F-4
Consolidated Statements of Income and Expenses
For the Years Ended December 31, 1995, 1994 and 1993 F-5 to F-6
Consolidated Statements of Stockholders' Equity
For the Years Ended December 31, 1995, 1994 and 1993 F-7
Consolidated Statements of Cash Flows For the Years
Ended December 31, 1995, 1994 and 1993 F-8 to F-9
Notes to Consolidated Financial Statements F-10 to F-22
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.
F-1
<PAGE> 30
REPORT OF INDEPENDENT AUDITORS
To the Stockholders of Banyan Strategic Land Fund II
We have audited the accompanying consolidated balance sheets of Banyan
Strategic Land Fund II as of December 31, 1995 and 1994, 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, 1995. 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
Strategic Land Fund II at December 31, 1995 and 1994, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1995, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
March 20, 1996
F-2
<PAGE> 31
BANYAN STRATEGIC LAND FUND II
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
ASSETS
Cash and Cash
Equivalents $ 549,309 $ 290,366
Interest Receivable
on Investments 3,754 ---
Interest Receivable
on Loans 59,470 28,614
Investment Securities 626,946 ---
------------ ------------
1,239,479 318,980
------------ ------------
Loans Receivable 785,000 801,000
Foreclosed Real
Estate Held for
Sale, Net 11,700,657 38,813,530
Investment in Real
Estate Venture 7,122,492 7,093,058
Other Assets 822,592 245,146
------------ ------------
Total Assets $ 21,670,220 $ 47,271,714
============ ============
LIABILITIES AND
STOCKHOLDERS' EQUITY
Liabilities
Accounts Payable and
Accrued Expenses $ 630,500 $ 1,730,465
Accrued Real Estate
Taxes --- 170,769
Liabilities Assumed at
Foreclosure of Real
Estate --- 456,186
Due To Affiliates --- 730,229
------------ ------------
Total Liabilities 630,500 3,087,649
============ ============
</TABLE>
F-3
<PAGE> 32
BANYAN STRATEGIC LAND FUND II
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 and 1994
(Continued)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Stockholders' Equity
Shares of Common
Stock, $0.01 Par
Value, 50,000,000
Authorized,
19,266,268 and
19,283,696 Shares
Issued, Respectively 170,927,133 170,946,739
Accumulated Deficit (134,033,206) (126,735,037)
Treasury Stock at
Cost, 9,329,847 and
20,100 Shares,
Respectively (15,854,207) (27,637)
------------ ------------
Total Stockholders'
Equity 21,039,720 44,184,065
------------ ------------
Total Liabilities and
Stockholders' Equity $ 21,670,220 $ 47,271,714
============ ============
Book Value Per Share
of Common Stock
(9,936,421 and
19,263,596 Shares
Outstanding for 1995
and 1994,
Respectively) $ 2.12 $ 2.29
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE> 33
BANYAN STRATEGIC LAND FUND II
CONSOLIDATED STATEMENTS OF INCOME AND EXPENSES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
INCOME
Income From Lending and
Investing Activities:
Interest on Loans $ 40,710 $ 75,815 $ 184,689
Income on Investments 375,730 28,636 50,374
------------ ------------ ------------
Total Income From
Lending and Investing
Activities 416,440 104,451 235,063
------------ ------------ ------------
EXPENSES
Expenses From Property
Operating Activities:
Interest on Advances
From Affiliates 17,712 304,022 9,377
Loss (Gain) on Dispo-
sition of Properties,
Note Receivable and
Foreclosed Real
Estate Held for Sale,
Net 97,347 537,179 (308,794)
Net Loss From
Operations of Fore-
closed Real Estate
Held for Sale 1,729,460 2,901,151 ---
(Income) Loss From
Operations of Real
Estate Venture (33,488) 2,824,379 1,604,355
Provision for Loss on
Foreclosed Real
Estate Held for Sale 4,200,000 20,899,566 1,514,503
------------ ------------ ------------
Total Expenses From
Property Operating
Activities 6,011,031 27,466,297 2,819,441
------------ ------------ ------------
Other Expenses:
Stockholder Expenses 231,700 196,728 192,779
Directors' Fees,
Expenses and
Insurance 373,968 507,313 460,549
Other Professional
Fees 244,328 843,038 373,251
General and
Administrative 877,309 830,890 942,305
(Recovery of) Provision
for Losses on Loans,
Notes, Interest
Receivable and Class
Action Settlement
Costs and Expenses (23,727) 17,769 1,876,574
------------ ------------ ---------
Total Other Expenses 1,703,578 2,395,738 3,845,458
------------ ------------ ----------
</TABLE>
F-5
<PAGE> 34
BANYAN STRATEGIC LAND FUND II
CONSOLIDATED STATEMENTS OF INCOME AND EXPENSES
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 and 1993
(Continued)
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Total Expenses 7,714,609 29,862,035 6,664,899
------------ ------------ ------------
Operating Loss (7,298,169) (29,757,584) (6,429,836)
Minority Interest in
Consolidated --- --- 192,603
Partnership ------------ ------------ ------------
Net Loss $(7,298,169) $ (29,757,584) $(6,237,233)
============ ============ ============
Net Loss Per Share of
Common Stock (Based on
the Weighted Average
Number Shares Outstand-
ing of 13,946,474,
19,257,962 and
19,246,168,
Respectively) $ (0.52) $ (1.55) $ (0.32)
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE> 35
BANYAN STRATEGIC LAND FUND II
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Common Stock Accumulated Treasury
Shares Amount Deficit Stock Total
<S> <C> <C> <C> <C> <C>
Stockholders'
Equity,
December 31,
1992 19,266,268 $170,927,133 $ (90,740,220) $ (27,637) $ 80,159,276
Net Loss --- --- (6,237,233) --- (6,237,233)
---------- ------------ ------------- ------------ ------------
Stockholders'
Equity,
December 31,
1993 19,266,268 170,927,133 (96,977,453) (27,637) 73,922,043
Award Shares
Issued 17,428 19,606 --- --- 19,606
Net Loss --- --- (29,757,584) --- (29,757,584)
---------- ------------ ------------- ------------ ------------
Stockholders'
Equity,
December 31,
1994 19,283,696 170,946,739 (126,735,037) (27,637) 44,184,065
Elimination
of Award
Shares
Issued (17,428) (19,606) --- --- (19,606)
Acquisition
of 9,309,747
Shares of
Treasury
Stock, at
Cost --- --- --- (15,826,570) (15,826,570)
Net Loss --- --- (7,298,169) --- (7,298,169)
---------- ------------ ------------- ------------ ------------
Stockholders'
Equity,
December 31,
1995 19,266,268 $170,927,133 $(134,033,206) $(15,854,207) $ 21,039,720
========== ============ ============= ============ ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-7
<PAGE> 36
BANYAN STRATEGIC LAND FUND II
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
NET LOSS $ (7,298,169) $ (29,757,584) $(6,237,233)
Adjustments to Reconcile
Net Loss to Net Cash
(Used In) Provided
By Operating
Activities:
(Recovery of) Provision
for Losses on Loans,
Notes, Interest
Receivable and Class
Action Settlement
Costs and Expenses (23,727) 260,372 4,999,020
Provision for Loss on
Foreclosed Real
Estate Held for Sale 4,200,000 20,899,566 1,514,503
Loss (Gain) from
Disposition of
Properties, Note
Receivable and
Foreclosed Real
Estate Held for Sale,
Net 97,347 537,179 (318,201)
Minority Interest Par-
ticipation in Conso-
lidated Partnership --- --- (192,603)
Net (Income) Loss From
Operations of Real
Estate Venture (33,488) 2,824,379 1,604,355
Net Change In:
Interest Receivable on
Investments (3,754) 49,896 (37,463)
Interest Receivable on
Loans (30,856) (69,807) (91,485)
Other Assets (577,166) (64,528) 189,740
Accounts Payable and
Accrued Expenses (1,119,571) 260,501 (132,805)
Accrued Real Estate
Taxes (170,769) 158,809 739,348
Due to Affiliates --- (20,841) (13,751)
------------ ------------ ------------
Net Cash (Used In)
Provided by Operating
Activities (4,960,153) (4,922,058) 2,023,425
------------ ------------ ------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchase of Investment
Securities (2,134,482) --- ---
Proceeds from Sale of
Investment Securities 778,331 --- 1,865,000
Principal Payments on
Investment Securities 728,925 --- ---
Recovery of (Provision
For) Losses on Loans,
Notes, Interest
Receivable and Class
Action Settlement
Costs and Expenses 23,727 17,098 ---
Collection of
(Investment In) Loans
Receivable, Net 16,000 (134,426) 826,521
</TABLE>
F-8
<PAGE> 37
BANYAN STRATEGIC LAND FUND II
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, 1993
(Continued)
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Additions to Foreclosed
Real Estate Held for
Sale --- --- (1,514,503)
Investments in Real
Estate Venture 4,054 (222,473) (461,080)
Proceeds from the Sale
of Foreclosed Real
Estate Held for
Sale 22,479,900 2,172,611 ---
Proceeds from the Sale
of Note Receivable --- 200,000 ---
Forfeited Proceeds
from Sales Contracts 58,086 121,977 ---
Cash Received Upon
Loan Foreclosure --- 900,000 ---
Payment of Liabilities
Assumed at Foreclo-
sure of Real Estate (87,699) (254,083) ---
Proceeds from Sales of
Property --- --- 440,762
Additions to Develop-
ment in Progress --- --- (2,539,425)
Investment in
Foreclosed Real
Estate Held for Sale (90,947) (229,495) ---
(Payment To) Due to
Affiliates (730,229) 627,267 1,110,326
------------ ------------ ------------
Net Cash Provided By
(Used In)Investing
Activities 21,045,666 3,198,476 (272,399)
------------ ------------ ------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Acquisition of Treasury
Stock (15,826,570) --- ---
------------ ------------ ------------
Cash Used in Financing
Activities (15,826,570) --- ---
------------ ------------ ------------
Net Increase (Decrease)
in Cash and Cash
Equivalents 258,943 (1,723,582) 1,751,026
Cash and Cash Equivalents
at Beginning of Year 290,366 2,013,948 262,922
------------ ------------ ------------
Cash and Cash Equivalents
at End of Year $ 549,309 $ 290,366 $ 2,013,948
============= ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
F-9
<PAGE> 38
BANYAN STRATEGIC LAND FUND II
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. BASIS OF PRESENTATION
Banyan Strategic Land Fund II (the "Fund") was organized as a
corporation under the laws of the State of Delaware, pursuant to the
Certificate of Incorporation filed April 14, 1987.
The accompanying consolidated financial statements include the
accounts of the Fund and its wholly-owned subsidiaries and consolidated venture
which hold title to the Fund's properties. All intercompany balances and
transactions have been eliminated in consolidation. The Fund's 47% interest in
the H Street Assemblage is accounted for on the equity method as an investment
in real estate joint venture.
B. INVESTMENT SECURITIES
Investment securities are classified as available for sale and carried
at fair value determined by quoted market prices with unrealized gains and
losses reflected in the statement of shareholders' equity. Realized gains and
losses are determined on a specific identification basis. The basis of
investment securities is adjusted for amortization of premiums and discounts
using a level yield method.
C. REVENUE RECOGNITION
Interest income is accrued when earned. The accrual of interest is
discontinued when the borrower acknowledges its inability to make payments or
when payments become contractually delinquent ninety days or more, unless the
loan is in the process of collection. Once a loan has been placed in a
non-accrual status, all cash received is applied against the outstanding loan
balance until such time as the borrower has demonstrated an ability to make
payments under the terms of the then current loan agreement. That portion of
accrued interest income which the Fund considers to be unlikely of collection
is reflected in the accompanying consolidated statements of income and expenses
in the provision for losses on loans, notes and interest receivable. However,
the Fund intends to pursue collection of all amounts contractually due from the
borrowers.
D. LOANS RECEIVABLE
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 114 and No. 118, Accounting by Creditors
for Impairment of a Loan ("FAS 114/118"). The adoption of FAS 114/118 by the
Fund effective January 1, 1995 has not had any impact on the carrying value of
the Fund's loans or financial statements as of December 31, 1995.
E. FORECLOSED REAL ESTATE HELD FOR SALE
Foreclosed real estate held for sale is recorded at the lesser of the
mortgage loan balance plus costs incurred on behalf of the borrower or the
estimated fair market value at the date of foreclosure.
In March 1995, the Financial Accounting Standards Board issued
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to be Disposed of," under which the Fund would be
F-10
<PAGE> 39
BANYAN STRATEGIC LAND FUND II
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
required to recognize impairment losses for its properties when
indicators of impairment are present and a property's expected
undiscounted cash flows are not sufficient to recover the property's
carrying amount. The Fund adopted Statement No. 121 in the fourth
quarter effective January 1, 1995 with no effect on the accompanying
financial statements.
F. INCOME TAXES
For the years ended December 31, 1995, 1994 and 1993, 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 was
required to distribute at least 95% of its taxable income to stockholders and
meet certain asset and income tests as well as other requirements. However,
if these requirements had not been met as of December 31, 1995, loss of REIT
status would not significantly affect the Fund's tax position. On March 20,
1996, the Fund notified the Internal Revenue Service of its intent to revoke
the tax election to be treated as a REIT under section 856(c) (1) of the
Internal Revenue Code of 1986, as amended, in order to avoid the adverse tax
effects associated with the potential disposition or development of its various
real estate assets consisting of undeveloped land for which a REIT structure is
not intended. Pursuant to the revocation of tax election 856(c) (1), the Fund
will be taxable as a "C" corporation and will no longer be required to meet
certain pre-determined distribution, asset and income requirements, effective
January 1, 1996.
As of December 31, 1995, Loans Receivable, Foreclosed Real Estate Held
for Sale and Investment in Real Estate Venture have a basis of $1,060,000,
$21,333,949 and $10,102,155, respectively, for income tax purposes.
Additionally, Mortgage Loans and investment in partnership with a tax basis of
$35,979,000 and $100,000, respectively, have not been accorded any value for
financial reporting purposes.
As of December 31, 1995, the Fund had a net operating loss carry
forward of approximately $39,000,000 which expires in 2005 through 2010.
G. CASH EQUIVALENTS
The Fund considers all highly liquid debt instruments with a maturity
of three months or less to be cash equivalents.
H. VALUATION OF STOCK OPTIONS
The Fund's Stock Options awarded purusant to its 1994 Directors and
Executive Option Plans are accounted for in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees."
I. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-11
<PAGE> 40
BANYAN STRATEGIC LAND FUND II
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
J. RECLASSIFICATIONS
Certain reclassifications have been made to the previously reported
1994 and 1993 consolidated financial statements in order to provide
comparability with the 1995 consolidated financial statements. These
reclassifications have not changed the 1994 or 1993 results.
2. INVESTMENT SECURITIES
The Fund's investment securities portfolio at December 31, 1995 is as
follows:
<TABLE>
<CAPTION>
Amortized Cost
Net of Principal
Name of Each Issue and Paydowns Received
Name of Each Issuer Dec. 31, 1995 (2)
<S> <C>
Federal Home Loan $ 369,502
Mortgage Corp., 6.0%,
7/05/95-6/25/2014 (1)
Collateralized 257,444
Mortgage Security
Corp., 9.0%, 7/05/95-6/25/2007
----------
$ 626,946
==========
</TABLE>
(1) The Guaranteed REMIC Pass-Through Certificate is guaranteed as to
timely payment of principal and interest by the Federal National
Mortgage Association. The maturity of the principal of the above
investment security 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 maturity of the investment security, under the
market conditions as of the fourth quarter of 1995, is expected to be
from June 25, 2007 to June 25, 2014. These expectations may change as
interest rates on mortgage loans change.
(2) The estimated market value of the Fund's investment securities as of
December 31, 1995 approximates its carrying value.
F-12
<PAGE> 41
BANYAN STRATEGIC LAND FUND II
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. LOANS RECEIVABLE
The Fund's loan portfolio at December 31, 1995 consists of the following loans:
<TABLE>
<CAPTION>
Borrowing Partnership/
Property Pledged as
Collateral/Interest Rate/ Carrying Interest
Maturity Date Face Amount Amount Receivable
<S> <C> <C> <C>
Northholme Partners $ 560,000 $ 560,000 $ 59,470
Development Agreement on
Whittaker Parcel (a)
Interest Rate: 11%
Maturity Date: 7/31/96
Hemet IV 500,000 225,000 ---
Land Parcel
Interest Rate: 10%
Maturity Date: (b)
---------- ---------- ---------
Total Investment in Loans
Receivable $1,060,000 $ 785,000 $ 59,470
========== ========== =========
</TABLE>
(a) Northholme Partners ("Northholme"), of which the Fund holds an
80% limited partnership interest, was created by the Fund and a
partner of The Anden Group on August 31, 1992. On September 2, 1992,
the Fund and Northholme entered into a loan agreement whereby the Fund
committed to lend Northholme $700,000. The maturity date of the
Northholme loan has been subsequently extended to July 31, 1996. The
loan is collateralized by a Development Agreement on a 1,000-acre land
parcel located north of Los Angeles, California (the "Whittaker
Property"). The partner associated with the Anden Group has a 20%
participation in the loan. The loan originally required monthly
payments of interest only with the principal plus accrued interest due
at maturity. As a result of Northholme's inability to generate
current cash proceeds sufficient to meet the monthly interest
payments, the Fund agreed to modify the terms of the loan on July 31,
1994. Pursuant to the July 31, 1994 modification, payment of interest
on the loan is to be deferred until the earlier of the loan's maturity
date or upon receipt of cash proceeds from the sale or refinancing of
the Whittaker Property per the terms of the Development Agreement. As
a result of the loan modification, the Northholme loan has also been
placed on nonaccrual status effective January 1, 1995. As of
December 31, 1995, the Fund has also advanced $391,443 as additional
partnership advances to the Northholme Partnership for costs
associated with the completion of the zoning and entitlement work for
the Whittaker Property per the Partnership Agreement which earns
interest at a rate of 12%. The Northholme Partnership Agreement
provides for the Fund's partnership advances to be repaid prior to the
repayment of the Fund's mortgage loans. For financial reporting
purposes, these advances are recorded in other assets on the Fund's
Balance Sheet. Based on the Fund's valuation estimates of the
underlying collateral it has determined that the loan and all
subsequent advances plus accrued interest are deemed collectible as of
December 31, 1995.
F-13
<PAGE> 42
BANYAN STRATEGIC LAND FUND II
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. LOANS RECEIVABLE (CONTINUED)
(b) During 1994, in connection with a restructuring of Anden, the
Fund was conveyed an interest in a first mortgage loan collateralized
by a parcel of land located in Hemet, California. The borrower is
Hemet Phase IV Partners L.P., an affiliate of the Anden Group. The
Fund recorded its interest in the loan acquired at $500,000 as of the
date of foreclosure. During 1994, the Fund recorded a provision for
losses on loans, notes and interest receivable relating to the Hemet
IV loan in the amount of $275,000. The interest rate on the loan is
10%. Interest and principal on the loan shall be due and payable upon
the sale or disposition of the collateral. Pursuant to the Fund's
valuation of the underlying collateral, the note has been placed on
non-accrual status.
F-14
<PAGE> 43
BANYAN STRATEGIC LAND FUND II
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. LOANS RECEIVABLE (CONTINUED)
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Reconciliation of
Loans Receivable:
Balance at
Beginning of
Year $ 801,000 $ 956,563 $ 8,828,564
Additions During
Year:
New Loans --- 675,426 356,405
Capitalized
Interest on
Loans --- 33,533 152,218
Amortization
of Loan Fees --- 2,227 14,092
------------ ------------ ------------
--- 711,186 522,715
------------ ------------ ------------
Deductions
During Year:
Provision For
Loan Losses --- (275,000) ---
Principal
Collections
on Loans (16,000) (41,000) (1,125,926)
Loans Written-
Off, Fore-
closed or
Loans in
Substantive
Foreclosure --- (550,749) (7,268,790)
------------ ------------ ------------
(16,000) (866,749) (8,394,716)
------------ ------------ ------------
Balance at End of
Year $ 785,000 $ 801,000 $ 956,563
============ ============ ============
</TABLE>
F-15
<PAGE> 44
BANYAN STRATEGIC LAND FUND II
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. FORECLOSED REAL ESTATE HELD FOR SALE
LINDFIELD TRACT A
The Lindfield Tract A property consists of a 13-acre parcel of land zoned
tourist-commercial within a multi-use planned unit development, located in
Kissimmee, Florida (near Orlando, Florida). As of December 31, 1995, the
Fund's current carrying value for this property is $600,000.
LINDFIELD TRACT D
The Lindfield Tract D property consists of an 8.5-acre parcel of land
zoned for commercial use within a multi-use planned unit development, located
in Kissimmee, Florida. As of December 31, 1995, the Fund's current carrying
value for this property is $650,000.
LAKE ROGERS
The Lake Rogers property consisted of 11 single family home lots located
in Oveido, Florida. As of December 31, 1995, the Fund's carrying value for
this property was $223,531. In addition, during the year ended December 31,
1995, the Fund received a $8,520 forfeited sales contract deposit from a
potential buyer. This deposit was recorded against the carrying value of the
property. The 11 single family home lots were sold in February 1996 to an
unaffiliated third party. (See Note 5 for further details.).
HEMET PHASE III
The Hemet Phase III property consists of 75 single family home lots
located in Hemet, California. As of December 31, 1995, the Fund's current
carrying value for this property is $342,434. During the year ended December
31, 1995, the Fund received $37,566 in forfeited sales deposits from potential
buyers. These deposits were recorded against the carrying value of the
property.
RANCHO MALIBU
Rancho Malibu is a 274-acre parcel of undeveloped land north of Malibu,
California. On July 1, 1992, a joint venture (the "Venture") between the Fund
and Banyan Mortgage Investment Fund ("BMIF") acquired title to the property
pursuant to a deed in lieu of foreclosure agreement. The Fund owns a 98.6%
general partner interest in the Venture while BMIF holds the remaining 1.4%
interest as a limited partner. The Venture's results are consolidated in the
accompanying financial statements.
From the acquisition date, the Venture has engaged in zoning and
entitlement activities which have been opposed by the City of Malibu. The city
initiated two separate legal actions intended to preclude the issuance of a
Coastal Development Permit, the most recent of which has been decided in favor
of the Venture and as to which the City of Malibu appealed. On December 5,
1995, the Court of Appeals of the State of California decided this appeal in
favor of the Fund and on January 4, 1996 a petition for rehearing was denied.
Concurrent with the aforementioned appeal, the Venture pursued
entitlements before the County of Los Angeles. In August 1995, the Los Angeles
County Regional Planning Commission, by a 3 to 2 vote, approved a revised plan
to develop a fifty-one unit housing community on the Rancho Malibu property.
The Los Angeles County Regional Planning Commission's approval was appealed to
the Los Angeles County Board of Supervisors. On
F-16
<PAGE> 45
BANYAN STRATEGIC LAND FUND II
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. FORECLOSED REAL ESTATE HELD FOR SALE (CONTINUED)
January 23, 1996, the Los Angeles County Board of Supervisors tentatively
approved a compromise forty-six-unit project. Final County approval can be
challenged only by a separate action brought in Superior Court.
During the year ended December 31, 1995 and 1994, the Fund expended
approximately $1,604,000 and $1,481,000, respectively, relating to entitlement
activities, holding costs and litigation. These costs were included in total
expenses from property operating activities on the Fund's consolidated
statement of income and expenses. As a result of the decrease in number of
units approved for residential development from fifty-one units to the agreed
upon forty-six units as discussed above, the Fund recorded a $4,200,000
valuation allowance against the property during the quarter ended December 31,
1995. For the year ended December 31, 1993, the Fund incurred $1,514,503 of
costs related to entitlement work and the litigation which were capitalized.
Concurrently, in light of the litigation and the foregoing factors, the Fund
recorded a $1,514,503 valuation allowance. As of December 31, 1995, the Fund's
carrying balance for the property is $9,961,992.
5. DISPOSITION OF FORECLOSED REAL ESTATE HELD FOR SALE AND REPAYMENT OF LOAN
RECEIVABLE
FORECLOSED REAL ESTATE HELD FOR SALE
KEY BISCAYNE
In 1990, title to 22 acres of property located in Key Biscayne, Florida,
was conveyed to the Fund under a deed-in- lieu of foreclosure agreement. The
Fund's parcel represented a portion of the "Key Biscayne Project"; the
remainder was owned by THSP Associates Limited Partnership II ("THSP"),
formerly known as Banyan Mortgage Investors L.P. III. The Fund and THSP had
been developing the Key Biscayne Project pursuant to a Joint Development
Agreement ("JDA") dated September 17, 1990 to which the Fund and THSP were
parties. As of December 31, 1993, the Fund's carrying value for this property
was $42,740,410 which was based on the estimated value of the property assuming
completion of the development plan. During 1994, the Fund and THSP engaged in
extensive litigation in Florida and Illinois and settlement negotiations
involving the Key Biscayne Project. On March 16, 1995, the Fund executed a
settlement agreement with THSP. Pursuant to the settlement agreement, the Fund
received cash and other consideration totalling approximately $24,700,000 and
transferred to THSP ownership of the Fund's 22-acre site in Key Biscayne,
Florida. The Fund also released all claims it had asserted to an adjacent
parcel owned by THSP. In addition, the Fund and THSP consensually terminated
all pending litigation and exchanged mutual releases.
Of the $24,700,000 settlement, the Fund received approximately
$21,500,000 in cash. The remaining $3,200,000 was used to pay approximately
$1,500,000 in closing fees and prorations and to discharge the Fund's liability
of approximately $1,700,000 due THSP for advances made to the Fund pursuant to
the JDA. The Fund also reduced the Key Biscayne carrying value at December 31,
1994 for legal and other costs of approximately $775,000 which were anticipated
related to the settlement. For the year ended December 31, 1995, the Fund has
expended approximately $527,000 of the total $775,000 anticipated costs. The
remaining costs of approximately $248,000 were expended during the first
quarter of 1996. As a result of the settlement, the Fund recorded a loss
provision of approximately $19,700,000 as of December 31, 1994 which
represented the difference between the net book value of the Fund's investment
in the Key
F-17
<PAGE> 46
BANYAN STRATEGIC LAND FUND II
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. DISPOSITION OF FORECLOSED REAL ESTATE HELD FOR SALE AND REPAYMENT OF LOAN
RECEIVABLE (CONTINUED)
Biscayne project less the settlement amount as reduced by closing fees and
prorations.
On February 15, 1996, the Fund sold the 11 single family home lots
comprising the Lake Rogers property to an unaffiliated third party for
approximately $165,000. After prorations for closing costs of approximately
$19,400, the Fund received net proceeds of approximately $145,600 and
recognized a loss of approximately $77,300 which has been reflected in the
accompanying consolidated statements of income and expenses for the year ended
December 31, 1995.
On December 18, 1995, the Fund sold the Lancaster property to an
unaffiliated third party for approximately $326,000. After prorations for
closing costs of approximately $18,000 and payment of assumed liabilities of
approximately $189,500, the Fund received net proceeds of approximately
$118,500 and recognized a loss of approximately $57,100.
On December 15, 1995, the Fund sold the remaining eight acres of the
total fourteen acres of the Lindfield Multi-family property to an unaffiliated
third party for approximately $686,100. After prorations for closing costs of
approximately $81,200, the Fund received net proceeds of approximately $604,900
and recognized a gain of approximately $55,000.
On June 16, 1995, the Fund sold six of the eleven lots comprising the
Lindfield's Single Family property to an unaffiliated third party for $54,000.
After prorations for closing costs of approximately $900 and payment of assumed
liabilities of approximately $900, the Fund received net proceeds of
approximately $52,200 and recognized a gain of approximately $9,500 on the
sale. On November 28, 1995, the Fund sold the remaining five Lindfield's
Single Family property lots to an unaffiliated third party for $64,000. After
prorations for closing costs of approximately $7,700, the Fund received net
proceeds of approximately $56,300 and recognized a gain of approximately
$21,900. In addition, during the year ended December 31, 1995, the Fund
received $12,000 in forfeited sales contract deposits from potential buyers.
These deposits were recorded against the carrying value of the portfolio.
On June 20, 1995, the Fund sold the Palmdale property to an unaffiliated
third party for approximately $350,300. After prorations for closing costs of
approximately $24,600 and payment of assumed liabilities of approximately
$178,200, the Fund received net proceeds of approximately $147,500 and
recognized a loss of approximately $49,300 on the sale.
LOAN RECEIVABLE
CHINO HILLS MORTGAGE LOAN
The Fund was assigned an interest in a loan valued at $57,000 which was
collateralized by a Deed of Trust secured by five acres of undeveloped land
located in Chino Hills, California ("Chino Hills"). The borrower was New
Romanoffsky Church of California. The loan required monthly payments of
interest at a rate of 9% and periodic principal payments scheduled through the
maturity date of February 14, 1995. During the quarter ended March 31, 1995,
the Fund received the final principal and interest payments of $16,000 and
$360, respectively, on the loan and thereupon released its lien. The Fund has
no further interest in the Chino Hills property.
F-18
<PAGE> 47
BANYAN STRATEGIC LAND FUND II
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. INVESTMENT IN JOINT VENTURE
On October 22, 1990, the Fund acquired title to the property known as
the H Street Assemblage located in Washington, D.C. pursuant to an agreement
with Banyan Strategic Realty Trust ("BSRT"). On June 5, 1992, the Fund and
BSRT formed a joint venture (the "Venture") to pursue its development rights.
The Fund has a 47% interest in the Venture while BSRT has the Remaining 53%.
This property consists of 17,000 square feet of undeveloped land in downtown
Washington D.C. plus an approximately 55,900 square foot office building. The
entire property is zoned for office development.
The Venture has completed and obtained the zoning, entitlement and
historic preservation for the development of an approximately 330,000 square
foot commercial office building on the H Street Assemblage. In December 1994,
based on the current market conditions in Washington D.C., the Venture
determined that it would be in its best interest to initiate marketing efforts
to sell the property rather than assume the risk associated with the
development of the property, thereby necessitating a $5,500,000 valuation
allowance. The Fund's share of $2,585,000 is included in the Loss From
Operations of Real Estate Venture in the Fund's 1994 Statement of Income and
Expenses. For the year ended December 31, 1993, the Venture recorded a write
off of a $2,300,000 non-refundable deposit on the option parcels on the
termination date, of which the Fund's share, $1,081,000, is included in the
Loss From Operations of Real Estate Venture in the Fund's 1993 Statement of
Income and Expenses.
Summary financial information (unaudited) for the H Street Assemblage as
of December 31, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Investment Property, Net $ 16,039,027 $ 16,096,527
Other Assets 255,923 23,014
Other Liabilities (276,780) (206,131)
Venture Partners' Equity (8,895,678) (8,820,352)
------------ ------------
Fund's Equity $ 7,122,492 $ 7,093,058
============ ============
Total Revenues $ 469,337 $ 406,315
============ ============
Net Income (Loss) $ 71,252 $ (6,009,317)
============ ============
</TABLE>
F-19
<PAGE> 48
BANYAN STRATEGIC LAND FUND II
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. DUE TO AFFILIATES
The Fund has entered into a partnership agreement with BSRT regarding the
ownership and operation of the H Street Assemblage (the "H Street Venture").
See Note 6, Investment in Joint Venture, for further details. Under the terms
of this agreement, BSRT has the right, but is not obligated, to advance
expenditures on behalf of the Fund. During 1994 and 1993, BSRT advanced to the
H Street Venture all funds expended on the H Street Assemblage, including the
Fund's portion. As provided in the H Street partnership agreement, all
advances made by BSRT for the Fund's share of the H Street Venture's expenses
bore interest at a rate of prime plus 2% per annum until repaid. As of
December 31, 1994, the Fund's total payable to BSRT was approximately $730,000.
On March 24, 1995, the Fund repaid the December 31, 1994 outstanding balance.
As of December 31, 1995, the H Street advances, and all interest thereon, made
by BSRT have been repaid in full by the Fund.
8. RECOVERY OF LOSSES ON LOANS, NOTES, INTEREST RECEIVABLE AND CLASS ACTION
SETTLEMENT COSTS AND EXPENSES
The Fund has received cash of $23,727, $17,098 and $3,122,446 during
1995, 1994 and 1993, respectively, related to its interest in a liquidating
trust established for the benefit of the unsecured creditors (including the
Fund) of VMS Realty Partners and its affiliates ("VMS"), former affiliates of
the Fund. The Fund has recorded $23,727, $14,628 and $3,124,916, respectively,
of these amounts as recovery of losses on mortgage loans, notes and interest
receivable in its consolidated statement of income and expenses. The
recoveries for 1994 and 1993 were partially offset by the Fund's recognition of
losses on loans receivable of $275,000 and $5,001,490, respectively.
On January 25, 1994, the Fund received net proceeds of $242,603 as 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 might be named as defendants following
settlement of the class action. Subsequently, the directors have released the
proceeds from the escrow and the Fund has purchased an insurance policy to
cover the directors.
9. TRANSACTIONS WITH AFFILIATES
Administrative costs, primarily salaries and general and administrative
expenses, are reimbursed by the Fund to Banyan Management Corp. ("BMC"). These
costs are allocated to the Fund and other entities to which BMC provides
administrative services based upon the actual number of hours spent by BMC
personnel on matters related to that particular entity. The Fund's allocable
share of costs for the years ended December 31, 1995, 1994 and 1993 aggregated
$557,899, $593,964 and $652,113, respectively. As one of its administrative
services, BMC serves as the paying agent for general and administrative costs
of the Fund. As part of providing this payment service, BMC maintains a bank
account on behalf of the Fund. At December 31, 1995 and 1994, the Fund had a
net receivable due from BMC of $261,566 and $30,022, respectively. The net
receivable is included in Other Assets on the Fund's Consolidated Balance
Sheet.
F-20
<PAGE> 49
BANYAN STRATEGIC LAND FUND II
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. ELIMINATION OF AWARD SHARES OUTSTANDING AND WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING
On April 29, 1994, the Fund issued 17,428 shares of its common stock to
Leonard G. Levine, its President. Pursuant to Mr. Levine's amended employment
agreement, all incentive amounts earned subsequent to January 1, 1993 are to be
paid 80% in cash on or before March 15 of the year following the period for
which the incentive is earned and 20% in shares ("Award Shares") of the Fund.
On March 1, 1996, March 24, 1995 and January 28, 1994, Mr. Levine was paid
$217,135, $27,612 and $78,425, representing 80% of his 1995, 1994 and 1993
incentive, respectively. The 43,083, 6,136 and 17,428 Award Shares valued at
$1.26, $1.125 and $1.125 per share, respectively, or $54,284, $6,903, and
$19,606 for 1995, 1994 and 1993, respectively, represent 20% of Mr. Levine's
incentive and will be held by the Fund, pending satisfaction of the vesting
requirements, for the benefit of Mr. Levine until the earlier of (i) December
31, 1997; (ii) the termination of Mr. Levine's employment by the Fund without
just cause; or (iii) the permanent disability or death of Mr. Levine. The
"Award Shares" were issued at a price equal to the average closing price of
the Fund's shares for the five business days ended prior to December 31 of the
respective year. At a meeting of the Fund's Board of Directors on April 28,
1995, the Board of Directors amended Mr. Levine's employment agreement with
respect to the issuance of Award Shares and the previously issued shares were
returned to the Fund and cancelled. Mr. Levine will no longer receive actual
shares of the Fund's Common Stock as Award Shares. Under Mr. Levine's amended
employment agreement, an "Award Share" has been redefined to mean the right to
receive a cash bonus equal to: (i) the value of one share of Common Stock of
the Fund; and (ii) any distributions of the Fund with respect to a share of
Common Stock between the Grant Date and the Settlement Date. The value of an
Award Share on a Grant Date and on a Settlement Date will be the average
closing price of the Fund's shares of Common Stock for the five business days
ended at the Grant Date or the Settlement Date, as the case may be. Mr. Levine
will continue to receive twenty percent (20%) of his Incentive Compensation in
Award Shares. At the time upon which Mr. Levine determines to dispose of Award
Shares, Mr. Levine will notify the Company of the number of Award Shares he
wishes to tender and he will receive from the Company a cash bonus equal to the
value of the Award Shares tendered to the Company. The cash bonus from the
Award Shares attributable to distributions will be paid currently for all
distributions declared for stockholders of record between the Grant Date and
the Settlement Date. Shares of Common Stock previously issued as Award Shares
were converted into cash bonus shares as described above on April 28, 1995, as
provided for in the amended employment agreement. The 17,428 shares as
previously issued on April 29, 1994 have been excluded effective April 28, 1995
when calculating Net Income Per Share of Common Stock Based on Weighted Average
Number of Shares Outstanding. See Note 12, Tender Offer, for further details
impacting the Fund's weighted average number of shares outstanding. The Award
Shares will continue to be subject to the existing vesting provisions. The
amendment is intended to preserve the original intent of the Award Shares which
was to further align the interests of Mr. Levine with those of the Fund's
stockholders. All Award Shares shall be forfeited by Mr. Levine if he fails
to be employed by the Fund on December 31, 1997, unless such failure is due to
death or permanent disability or termination without just cause.
11. STOCK OPTION PLAN
On June 30, 1994, the stockholders approved and adopted the 1994
Executive and Directors Stock Option Plan (the "Plan"). The Plan granted the
Board of Directors the authority to issue up to 1,000,000 shares of the Fund's
common stock for stock option awards. The Plan consists of an
F-21
<PAGE> 50
BANYAN STRATEGIC LAND FUND II
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. STOCK OPTION PLAN (CONTINUED)
Executive Option Grant Program and a Director Option Grant Program. Under the
Director Option Grant Program, each of Gerald L. Nudo, Robert M. Ungerleider
and Walter E. Auch, Sr., in consideration of their length of service on the
board on the tenth business day after adjournment of the annual meeting
received an option to acquire 50,000 shares. Each of David J. Brail and Alan
S. Cooper on the tenth business day after adjournment of the annual meeting
received an option to acquire 10,000 shares. The options granted to Messrs.
Brail and Cooper have been cancelled by the Fund as a result of their June 7,
1995 decision to not stand for reelection at the February 1995 annual
meeting.During the thirty day period following the annual meeting and the
retirement of Messrs. Brail and Cooper from the Board of Directors, neither of
them elected to exercise any options as they were entitled to under the
Director Option Plan. The exercise price of the options initially granted to
the Board of Directors under the Director Option Grant Program was $1.125.
The Board administers the Executive Option Grant Program and has the
authority to determine, among other things, the individuals to be granted
Executive Options, the exercise price at which shares may be acquired, the
number of shares subject to each option and the exercise period of each option.
No Director is eligible to receive options under the Executive Option Grant
Program. On July 11, 1995 and January 18, 1994 the Board granted, subject to
approval of the Plan by the stockholders, initial options totalling 90,000 and
90,000, respectively, to management under the program, at a price of $1.50 per
share and $1.125 per share, respectively, (the closing price on the day of the
grant of options). Pursuant to the terms of the grants, options for all shares
granted under the Executive Option Grant Program will be exercisable and vested
in installments as follows: (i) 33.3% of the number of shares commencing on the
first anniversary of the date of grant; (ii) an additional 33.3% of the shares
commencing on the second anniversary of the date of the grant; and (iii) an
additional 33.4% of shares commencing on the third anniversary of the date of
grant. Options for all shares as granted under the Director Option Grant
Program shall be exercisable in installments as follows: (i) 50% of the number
of shares commencing on the first anniversary of the date of grant; and (ii)
50% of the number of shares commencing on the second anniversary of the date of
the grant. The Board is granted discretion to determine the term of each
Option granted under the Executive Option Grant Program, but in no event will
the term exceed ten years and one day from the date of the grant. At December
31, 1995, 330,000 options for shares were outstanding of which 30,000 were
exercisable. None of the granted options have been exercised.
12. TENDER OFFER
On May 5, 1995, the Fund commenced a tender offer for up to 10,000,000
shares of its stock at a price of $1.70 per share. The tender offer expired at
midnight on June 6, 1995. The trading price of the Fund's stock on the last
day prior to commencement of the tender offer was $1.31 per share. The tender
offer resulted in the purchase by the Fund of 9,309,747 shares for a total
purchase price of $15,826,570. The shares purchased pursuant to the tender
offer have been excluded effective June 6, 1995 when calculating Net Income Per
Share of Common Stock Based on Weighted Average Number of Shares Outstanding.
F-22
<PAGE> 1
EXHIBIT 10(i)
SECOND AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This AGREEMENT ("Agreement") is made and entered into as of December
31, 1992 by and between LEONARD G. LEVINE (the "Executive") and BANYAN
STRATEGIC LAND FUND II (the "Fund").
WHEREAS, the parties have previously entered into an Amended and
Restated Employment Agreement made as of January 1, 1990 by and between the
parties hereto and certain other parties (the "1990 Agreement");
WHEREAS, the parties desire to amend and restate the 1990 Agreement
effective January 1, 1993;
WHEREAS, the Fund desires to continue to employ the Executive and the
Executive desires to accept such continued employment on the terms set forth in
this Agreement;
NOW THEREFORE, in consideration of the promises, mutual covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Fund and the
Executive do hereby agree as follows:
1. Employment and Duties. On the terms and subject to the
conditions set forth in this Agreement, the Fund agrees to employ the Executive
as the chief executive officer of the Fund to perform such duties as are
consistent with such position as may be assigned, from time to time, by the
Fund's Board of Directors ("Board of Directors"). The Executive agrees to
accept appointment as President of the Fund.
2. Performance. The Executive accepts the employment described in
Section 1 of this Agreement and agrees to faithfully and diligently perform the
services described therein.
3. Term. The term of employment under this Agreement shall
commence on January 1, 1993 (the "Commencement Date") and shall remain in
effect for a period of five (5) years, ending on December 31, 1997, (the
"Employment Period") unless sooner terminated hereunder. The Employment Period
thereafter shall be automatically renewed for successive one (1) year periods
unless this Agreement is terminated by either the Executive or the Fund by
giving written notice of termination on or before the March 31 preceding the
end of the then-current Employment Period.
<PAGE> 2
4. Salary. For the services to be rendered by the Executive
hereunder, the Fund shall pay the Executive an annual base salary of $63,337
effective July 1, 1992 and an annual base salary of $100,000 effective January
1, 1993, subject to the CPI Adjustment described below ("Salary"). The Salary
shall be payable in the manner and frequency in which the payroll of Banyan
Management Corp. is customarily handled. The Salary shall be subject to annual
increases (but no decreases) due to cost of living ("CPI Adjustment") as
follows: the Salary shall be increased effective January 1 of each year
beginning 1994 by multiplying the Salary for the year just ended by a fraction
the numerator of which is the Index (as defined below) for November of the year
just ended and the denominator of which is the Index for November of the
immediately prior year. For purposes of this Agreement, the term "Index" shall
mean the Chicago All Items Consumer Price Index--All Urban Consumers (1982-84
base) as released by the U. S. Bureau of Labor Statistics.
5. Incentive Compensation. In addition to the Executive's Salary,
the Fund shall pay to the Executive additional compensation ("Incentive
Compensation") calculated as follows:
(a) Liquification of Secured Claims. The Fund shall pay
the Executive an amount equal to one percent (1%) of all Secured Claims of the
Fund which are converted into cash on or after January 1, 1993 and prior to the
end of the Employment Period.
(b) Liquification of Unsecured Claims and Excess Secured
Claims. The Fund shall pay the Executive an amount equal to 3% of all Unsecured
Claims of the Fund which are converted into cash on or after January 1, 1993
and prior to the end of the Employment Period.
(c) Distributions to Shareholders. The Fund shall pay the
Executive an amount equal to .1% of all distributions of capital and .14% of
all distributions of income to shareholders of the Fund made after January 1,
1993 and prior to the end of the Employment Period.
(d) Payment of Incentive Compensation. Except as set
forth in Section 12(d), Incentive Compensation under Sections 5(a) and (b)
shall be deemed earned by the Executive upon the Fund's receipt of the cash
payments contemplated by those sections provided that such cash payments are
received by the Fund during the Employment Period. Eighty percent (80%) of the
Incentive Compensation shall be paid to the Executive in cash on or before
March 15 of the following year without regard to whether the Executive is
employed by the Fund on the date of payment. Twenty percent (20%) of the
Incentive Compensation
2
<PAGE> 3
shall be paid to the Executive in the form of Common stock of the Fund ("Award
Shares"). The number of Award Shares distributable to the Executive shall be
based upon the average closing price of the Fund's shares for the five business
days ended prior to December 31 of the calendar year for which the payments are
made. All Award Shares distributed to the Executive shall vest on the earlier
of (i) December 31, 1997; (ii) the termination of the Executive's employment by
the Fund without Just Cause (as defined in Section 11); or (iii) the permanent
disability or death of the Executive (the "Vesting Date") and shall be
forfeited by the Executive if he fails to be employed by the Fund on December
31, 1997, unless such failure is due to the Executive's death or permanent
disability or to termination of the Executive's employment by the Fund without
Just Cause. The Award Shares shall not be transferable prior to the Vesting
Date and any certificate representing all or any portion of the Award Shares
shall bear an appropriate legend and shall be held by the Fund in trust for the
Executive. The Executive shall be entitled to receive and retain all dividends
on the Award Shares held by him. The Fund, at its sole cost, shall take all
reasonable steps necessary to cause the filing of a registration statement and
listing application, to be effective as soon after the Vesting Date as
practical, with respect to the Award Shares with the appropriate regulatory
bodies, except that if, (i) in the Board of Directors' discretion, the time and
expense of registering and listing the Award Shares is unduly burdensome and
costly, or (ii) in the opinion of the Fund's investment bankers, it would
interfere with a pending registration or offering of the Fund's securities, the
Board of Directors may, in its discretion, purchase the Award Shares from the
Executive and pay the Executive the "cash value" of the Award Shares on or
before the seventy-fifth (75th) day after the Vesting Date. For purposes of
this Section 5(d), "cash value" shall mean the aggregate market value of the
Award Shares based on the average closing price of the Fund's shares for the
five business days ended at the Vesting Date.
(e) Special Rules Where Board of Directors Elects Not to
Market Property. If any asset of the Fund has not been converted into cash due
to a decision of the Board of Directors to retain such asset, such asset shall
be deemed to have been converted into cash, at the fair market value of such
asset, on the date on which the Board of Directors determines not to market
such asset. This Section 5(e) shall not apply to any asset retained by the Fund
as a result of the failure to receive a price which the Board of Directors
deems acceptable.
(f) Definition of Secured Claim and Unsecured Claim. The
term "Secured Claim" shall include each loan made by the Fund to a VMS-related
entity which is secured by a mortgage on real
3
<PAGE> 4
property or by a partnership interest. The term "Unsecured Claim" shall mean
any debt owed to the Fund by a VMS-related entity which is not a Secured Claim
under the preceding sentence. The term "Unsecured Claim" shall include, but not
be limited to, any deficiency notes issued by a VMS-related entity which are
unsecured, notwithstanding the fact that the original debt to which such notes
relate may have been secured. The determination of whether a recovery is of a
Secured Claim or an Unsecured Claim shall be determined by the nature of the
claim on January 1, 1990. For example, if an Unsecured Claim is exchanged for a
piece of property, any recovery from the sale of that property will be treated
as liquidation of an Unsecured Claim.
(g) Joint Ventures. If the Fund enters into a joint venture
agreement with respect to any Secured Claim or Unsecured Claim, the Fund shall
be deemed to have liquified such claim at the time of the receipt of such joint
venture interest. The right to receive payments with respect to the
liquification of such claim shall be vested in the Executive at the time of the
formation of the joint venture but shall be paid out to the Executive as cash
is received by the Fund over the life of the joint venture. The parties
recognize that the payments of Incentive Compensation to the Executive as
determined in accordance with this Section 5(g) may survive the termination of
this Agreement. Consequently, the Fund shall give the Executive reasonable
security for his continuing interest in the receipt of payments from the joint
venture at a time and in a form as the Executive and the Fund may agree.
6. Bonus. During the Employment Period, the Board of Directors
may, in its sole discretion, pay a bonus to the Executive in consideration of
the Executive's performance of his duties and the Fund's profitability. The
Fund shall not be obligated to pay any bonus unless and until such bonus is
declared by its Board of Directors.
7. Life Insurance. During the Employment Period, the Fund shall
apply for and diligently attempt to procure in the Executive's name and for the
Executive's benefit, life insurance in the face amount of not less than twice
the Executive's Salary and the Executive shall submit to any medical or other
examination and execute and deliver any application or other instrument in
writing reasonably necessary to effectuate such insurance. If such insurance is
only available on a rated basis, the Fund shall acquire the amount of insurance
available upon payment of the premium which would have been payable if such
insurance had been available on an unrated basis.
8. Disability Benefit. If at any time during the Employment
Period the Executive is permanently unable to perform
4
<PAGE> 5
fully his duties hereunder by reason of illness, accident, or other disability
(as confirmed by competent medical evidence), the Executive shall be entitled
to receive periodic payments equal to one hundred percent (100%) of his Salary
for six (6) months following his disability. Thereafter, the Executive shall be
entitled to receive periodic payments equal to sixty percent (60%) of his
Salary as long as he is disabled but in no event beyond the Executive's
sixty-fifth (65th) birthday. Notwithstanding the foregoing provision, the
amounts payable to the Executive pursuant to this Section 8 shall be reduced by
any amounts received by the Executive with respect to any such disability
pursuant to any insurance policy, plan, or other employee benefit provided to
the Executive by the Fund and any Social Security or similar government
disability programs. The Fund's obligation to make the payments beyond the
first six (6) months of the Executive's disability is subject to the ability of
the Fund to obtain disability insurance covering such payments after diligent
attempts to procure such insurance.
9. Other Benefits. Except as otherwise specifically provided
herein, during the Employment Period, the Executive shall be eligible for all
non-wage benefits the Fund or Banyan Management Corp. provide generally for
their other salaried employees.
10. Business Expenses. The Fund shall reimburse the Executive for
the reasonable, ordinary, and necessary business expenses incurred by him in
connection with the performance of his duties hereunder, including, but not
limited to, ordinary and necessary travel expenses and entertainment expenses
and car phone expenses. The Executive shall provide the Fund with an accounting
of his expenses, which accounting shall clearly reflect which expenses are
reimbursable by the Fund. The Executive shall provide the Fund with such other
supporting documentation and other substantiation of reimbursable expenses as
will conform to Internal Revenue Service or other requirements. All such
reimbursements shall be payable by the Fund to the Executive within a
reasonable time after receipt by the Fund of appropriate documentation
therefor.
11. Termination.
(a) Termination by the Executive. The Executive may
terminate his employment by the Fund at any time by written notice of
termination given to the Fund at least ninety (90) days in advance of the
termination date stated in such notice.
(b) Termination for Just Cause. The Fund may terminate
the Executive's employment, effective upon written notice of such termination
to the Executive, for Just Cause. For
5
<PAGE> 6
purposes of this Agreement, the term "Just Cause" shall mean the occurrence of
any one or more of the following events: (1) the conviction of or the rendering
of a civil judgment against the Executive for theft or embezzlement of Fund
property; (2) the conviction of the Executive for a felony resulting in injury
to the business, property or reputation of the Fund or any affiliate of the
Fund; or (3) a decision by an Arbitrator (appointed pursuant to Section 14(a))
that the Executive, in the performance of his duties under this Agreement,
acted in a manner that constituted gross, willful, or wanton negligence. Any
acts or omissions or alleged acts or omissions of the Executive which relate to
the Executive's employment by VMS Realty Partners or any of its affiliates
prior to January 1, 1990 shall not be deemed "Just Cause" except to the extent
that the Executive admits, is adjudicated or is determined by an Arbitrator to
have committed fraud or a material violation of securities laws during his
employment by VMS Realty Partners or any of its affiliates prior to January 1,
1990. If the Board of Directors of the Fund believes, in good faith, that facts
exist which, upon final resolution, will constitute Just Cause, the Fund may
suspend the Executive from his duties under this Agreement, with full Salary
and all other benefits until such final resolution.
(c) Termination without Just Cause. The Fund may
terminate the Executive's employment at any time by written notice of
termination given to the Executive at least ninety (90) days in advance of the
termination date stated in such notice.
(d) Constructive Termination. The Fund shall be deemed to
have terminated the Executive without Just Cause if any of the following events
occurs:
(1) The Fund materially reduces the authority of
the Executive;
(2) The Fund requires the Executive to relocate
from the Chicago area and the Executive refuses; or
(3) There is a material adverse change in working
conditions for the Executive.
(e) Termination Upon Death or Disability. The employment
of the Executive shall terminate upon the permanent disability (as defined in
Section 8) or death of the Executive.
12. Severance Pay.
(a) In the event that the Executive's employment is
terminated voluntarily by the Executive or is terminated by the Fund for Just
Cause, the Executive shall be entitled to any
6
<PAGE> 7
Salary earned through the date of termination. The portion of Incentive
Compensation which is payable in cash to the Executive pursuant to Section 5(d)
and not previously paid to the Executive by the Fund shall be paid to the
Executive. All unvested Award Shares and the portion of Incentive Compensation
payable in Award Shares shall be forfeited and the Executive shall not be
entitled to any other severance benefit from the Fund.
(b) In the event that the Executive's employment
terminates due to the permanent disability or death of the Executive, the Fund
shall pay to the Executive, or his personal representative, all Salary and
Incentive Compensation (including all Award Shares) earned through the date of
the Executive's permanent disability or death. The Executive, his heirs,
beneficiaries or personal representatives shall also be entitled to any
disability benefits or life insurance proceeds provided under this Agreement.
(c) Upon any termination of the Executive's employment by
a Fund following a Change of Control (as defined below) except as set forth in
Section 12(a) or (b), the Fund shall pay the Executive a severance pay benefit
determined as follows:
(1) The Fund shall continue to pay the Salary due
to the Executive until the end of the Employment Period;
(2) The Fund shall immediately pay the Executive
all amounts of Incentive Compensation (including all Award Shares) earned by
the Executive through the date of the termination of the Executive's
employment. For the purposes of this Section 12(c)(2), all assets of the Fund
shall be deemed to have been sold at book value (as reflected in the Fund's
most recent financial statements, adjusted to reflect any events subsequent to
the date of the most recent financial statements, up to the date of payment)
and all proceeds thereof shall be deemed to have been distributed to the
shareholders of the Fund as of the date of the termination of the Executive's
employment.
For the purposes of this Section 12(c), the term "Change of Control" shall mean
that the members of the Board of Directors of the Fund as of the date this
Agreement is executed fail to constitute a majority of the members of the Board
of Directors of the Fund; provided, however, that if the Executive has
consented to the appointment or election of an individual who becomes a new
member of the Board of Directors, for the purposes of this paragraph, that new
member shall be treated as if he were a member of the Board of Directors as of
the date this Agreement is executed.
7
<PAGE> 8
(d) Upon any termination of the Executive's employment by
the Fund except as set forth in Sections 12(a), (b), or (c), the Fund shall pay
the Executive a severance pay benefit computed as follows:
(1) The Fund shall pay the Executive an amount
equal to one (1) year's Salary.
(2) The Fund shall pay the Executive all
Incentive Compensation (including all Award Shares) earned through the date of
termination. For the purposes of this Section 12(d)(2), Incentive Compensation
shall be deemed to have been earned under Sections 5(a) or (b) if, prior to the
termination to the Executive's employment, the Fund has received an expression
of interest with respect to such underlying asset or claim and the party (or an
affiliate thereof) expressing such interest ultimately acquires the underlying
asset or claim; provided that the portion of the Incentive Compensation due
with respect to such claim shall be payable only upon the closing of the
transaction involving such claim and shall be payable only if the closing of
the transaction occurs within one (1) year of the date of termination of the
Executive's employment.
(3) The Fund shall pay the Executive an amount
equal to full cost of the Executive's COBRA benefits for one (1) year.
(4) Except as specifically provided under Section
12(d)(2) with respect to transactions not closed prior to the Executive's
termination, all amounts payable under this Section 12(d) shall be payable in
full, in cash within ninety (90) days after the date of the termination of the
Executive's employment.
13. Other Activities of the Executive.
(a) The Executive may engage in other activities
undertaken for profit without the consent of the Board of Directors, including
activities involving the management of real estate and real estate investments,
provided that these activities do not compete, directly or indirectly, with the
Fund's goals and purposes, including but not limited to specific Fund
investments, and do not substantially interfere with the performance of the
Executive's duties under this Agreement. The Board of the Fund acknowledges
that the Executive has a proprietary interest in Oak Realty Group, Inc. ("Oak")
and will devote a portion of time to Oak's affairs so long as no actions taken
on the part of Oak or by Oak itself would cause the Executive to contravene
this Agreement.
8
<PAGE> 9
(b) The Executive shall not: (i) engage in any activity
which may be adverse to the Fund's business; (ii) appropriate or usurp Fund
business opportunities; or (iii) engage or invest in businesses or assets which
compete directly or indirectly with the Fund.
(c) The obligations and limitations imposed by this
Section shall be in addition to those provided by law. The Executive shall, on
an annual basis, provide the Board of Directors with a signed statement
warranting compliance with this Section in the form of the attached Exhibit A.
(d) The Executive shall not engage in any business or
investment activity with individuals or entities who were or are associated
with VMS Realty Partners or its affiliates without prior disclosure to the
Board.
14. Arbitration.
(a) Any dispute under this Agreement shall be submitted
to arbitration conducted in accordance with the Commercial Arbitration Rules
("Rules") of the American Arbitration Association ("AAA") except as amplified
or otherwise varied hereby. The parties shall submit the dispute to the Chicago
regional office of the AAA and the situs of the arbitration shall be Chicago.
The arbitration shall be conducted by a single arbitrator. The parties shall
appoint the single arbitrator to arbitrate the dispute within ten (10) business
days of the submission of the dispute. In the absence of agreement as to the
identity of the single arbitrator to arbitrate the dispute within such time,
the AAA is authorized to appoint an arbitrator in accordance with the Rules,
except that the arbitrator shall have as his principal place of business the
Chicago metropolitan area.
(b) Anything in the Rules to the contrary
notwithstanding, in any dispute seeking a monetary award, the arbitration award
shall be made in accordance with the following procedure: Each party shall, at
the commencement of the arbitration hearing, submit an initial statement of the
amount each party proposes be selected by the arbitrator as the arbitration
award ("Settlement Amount"). During the course of the arbitration, each party
may vary its proposed Settlement Amount. At the end of the arbitration hearing,
each party shall submit to the arbitrator its final Settlement Amount ("Final
Settlement Amount"), and the arbitrator shall be required to select either one
or the other Final Settlement Amounts as the arbitration award without
discretion to select any other amount as the award. The arbitration award shall
be paid within five (5) business days after the award has been made, together
with interest from the date the dispute was submitted to arbitration at the
9
<PAGE> 10
rate of ten percent (10%) per annum. Judgment upon the award may be entered in
any federal or state court having jurisdiction over the parties.
15. Indemnification. The Fund shall indemnify and hold harmless
the Executive from liabilities, which he may incur resulting from or arising
out of any act undertaken in connection with his duties under this Agreement in
the same manner and to the same extent as the Fund indemnifies any director or
any other officer.
16. General Provisions.
(a) Notice. Any notice required or permitted hereunder
shall be made in writing (i) either by actual delivery of the notice into the
hands of the party thereunder entitled, or (ii) by the mailing of the notice in
the United States mail, certified or registered mail, return receipt requested,
all postage prepaid and addressed to the party to whom the notice is to be
given at the party's respective address set forth below, or such other address
as the parties may from time to time designate by written notice as herein
provided.
As addressed to the Fund:
c/o Banyan Management Corp.
Suite 2900
150 South Wacker Drive
Chicago, Illinois 60606
With a copy to:
Shefsky & Froelich Ltd.
444 North Michigan Avenue
Suite 2500
Chicago, Illinois 60611
Attention: Cezar M. Froelich
As addressed to the Executive:
Mr. Leonard G. Levine
3142 East Kay Jay Drive
Northbrook, Illinois 60062
The notice shall be deemed to be received in case (i) on the date of its actual
receipt by the party entitled thereto and in case (ii) on the date of its
mailing.
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<PAGE> 11
(b) Amendment and Waiver. No amendment or modification of
this Aqreement shall be valid or binding upon the Fund unless made in writing
and signed by an officer of the Fund duly authorized by the Board of Directors
or upon the Executive unless made in writing and signed by him. The waiver by
the Fund of the breach of any provision of this Agreement by the Executive
shall not operate or be construed as a waiver of any subsequent breach by him.
(c) Entire Agreement. This Agreement constitutes the
entire Agreement between the parties with respect to the Executive's duties and
compensation as an executive of the Fund on or after January 1, 1993, and there
are no representations, warranties, agreements or commitments between the
parties hereto with respect to his employment except as set forth herein. The
1990 Agreement shall continue to govern issues with respect to the Executives's
employment prior to January 1, 1993 except that all amounts of Incentive
Compensation owed to the Executive by the Fund and deferred under Section 5(f)
of the 1990 Agreement shall be payable on or before December 31, 1992
notwithstanding anything in the 1990 Agreement to the contrary.
(d) Governing Law. This Agreement shall be governed by
and construed in accordance with the internal laws (and not the law of
conflicts) of the State of Illinois.
(e) Severability. If any provision of this Agreement
shall, for any reason, be held unenforceable, such provision shall be severed
from this Agreement unless, as a result of such severance, the Agreement fails
to reflect the basic intent of the parties. If the Agreement continues to
reflect the basic intent of the parties, then the invalidity of such specific
provision shall not affect the enforceability of any other provision herein,
and the remaining provisions shall remain in full force and effect.
(f) Assignment. The Executive may not under any
circumstances delegate any of his rights and obligations hereunder without
first obtaining the prior written consent of the Fund. This Agreement and all
of the Fund's rights and obligations hereunder may be assigned or transferred
by it, in whole or in part, to be binding upon and inure to the benefit of any
subsidiary or successor of the Fund.
(g) Costs of Enforcement. In the event of any suit or
proceeding seeking to enforce the terms, covenants, or conditions of this
Agreement, the prevailing party shall, in addition to all other remedies and
relief that may be available under this Agreement or applicable law recover his
or its reasonable
11
<PAGE> 12
attorneys' fees and costs as shall be determined and awarded by the court.
IN WITNESS WHEREOF, this Agreement is entered into on the day and
year first above written.
BANYAN STRATEGIC LAND FUND II
By: /s/ William M. Karnes
-------------------------
William M. Karnes,
Senior Vice President -
Finance and Administration
Chief Financial and
Accounting Officer
EXECUTIVE:
/s/ Leonard G. Levine
---------------------
12
<PAGE> 13
Exhibit A
DATE
Board of Directors
Banyan Strategic Land Fund II
Re: Statement of Other Activities
Gentlemen:
Pursuant to the provisions of Section 13(c) of my Second Amended and
Restated Employment Agreement, please be advised that I have not engaged in any
activities during the preceding year in contravention of the requirements set
forth in Section 13.
/s/ Leonard G. Levine
13
<PAGE> 1
EXHIBIT 10(ii)
FIRST AMENDMENT TO
SECOND AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This AGREEMENT ("Agreement") is made and entered into as of December
31, 1992, by and between LEONARD G. LEVINE (the "Executive") and BANYAN
STRATEGIC LAND FUND II (the "Fund").
WHEREAS, the parties have previously entered into a Second Amended and
Restated Employment Agreement made as of December 31, 1992 by and between the
parties hereto (the "Agreement"), which amended and restated an Amended and
Restated Employment Agreement made as of January 1, 1990 by and between the
parties hereto and certain other parties;
WHEREAS, the parties desire to amend and restate the Agreement
effective December 31, 1992;
WHEREAS, the Fund desires to continue to employ the Executive and the
Executive desires to accept such continued employment on the terms set forth in
this Agreement;
NOW THEREFORE, in consideration of the promises, mutual covenants and
agreements contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Fund and the
Executive do hereby agree as follows:
1. Section 5(d) of the Agreement is hereby amended in its
entirety to read as follows:
"(d) Payment of Incentive Compensation. Except as set forth in Section
12(d), Incentive Compensation under Sections 5(a), and 5(b) shall be
deemed earned by the Executive upon the Fund's receipt of the cash
payments contemplated by those sections provided that such cash
payments are received by the Fund during the Employment Period. Eighty
percent (80%) of the Incentive Compensation shall be paid to the
Executive in cash on or before March 15 of the following year without
regard to whether the Executive is employed by the Fund on the date of
payment. Twenty percent (20%) of the Incentive Compensation shall be
paid to the Executive in the form of Award Shares, as set forth in
Section 17."
2. A new Section 17 of the Agreement is hereby added as follows:
<PAGE> 2
17. "Award Shares
(a) Definitions. Unless otherwise specified or unless the context
otherwise requires, the following terms, as used in this section have the
following meanings:
(1) "Award Share" shall mean the right to receive a cash
bonus equal to (i) the value of one share of common stock of the Fund and (ii)
any distributions of the Fund with respect to a share of common stock between
the Grant Date and the Vesting Date.
(2) "Grant Date" means December 31 of the calendar year
for which the Incentive Compensation is to be paid to the Executive.
(3) "Vesting Date" shall mean the earlier of (i) December
31, 1997; (ii) the termination of the Executive's employment by the Fund
without Just Cause (as defined in Section 11); or (iii) the permanent
disability or death of the Executive. All Award Shares shall be forfeited by
the Executive if he fails to be employed by the Fund on December 31, 1997,
unless such failure is due to the Executive's death or permanent disability or
to termination of the Executive's employment by the Fund without Just Cause.
(b) Calculation of Value. The value of an Award Share on a Grant
Date or the Vesting Date shall be determined as follows:
(1) if the Common Stock of the Fund is publicly traded,
the value of an Award Share shall be the average closing price of the Fund's
shares of Common Stock for the five business days ended at the Grant Date or
the Vesting Date, as the case may be; or
(2) if the Common Stock of the Fund is not publicly
traded, the value of an Award Share shall be the book value per share as
reflected on the Company's most recent available financial statements,
multiplied by the average "price to book value ratio" for the last day of each
of the three most recent quarters for which the stock was publicly traded. The
"price to book value ratio" as of the last day of a quarter shall be the
average closing price of the Fund's shares of Common Stock for the five
business days then ended, divided by the book value per share on the last day
of the quarter.
As used in this subparagraph (b), the term "publicly traded" means that the
Common Stock of the Fund is traded on a recognized national securities exchange
or national market system.
(c) Number of Shares. The number of Award Shares
distributable to the Executive shall be equal to twenty percent (20%) of the
Incentive Compensation divided by the per share value
<PAGE> 3
of the Award Shares on the Grant Date.
(d) Settlement. On or before thirty (30) days after the
Vesting Date, the Fund shall pay to the Executive, in cash, the value of the
Award Shares on the Vesting Date, unless converted by the Fund pursuant to
Section 17 (f) below.
(e) Distributions. For each Award Share held by the
Executive, the Fund shall promptly pay to the Executive, in cash, an amount
equal to each distribution made by the Fund with respect to a share of common
stock between the Grant Date and the Vesting Date. The Executive shall be
entitled to retain all distributions paid to him by the Fund with respect to
the Award Shares even if the Award Shares are subsequently forfeited by him.
(f) Conversion Right. If shares of common stock of the
Fund are listed on a national securities exchange on the Vesting Date and are
available to be issued to the Executive without violating any securities laws
or regulations or the rules of any securities exchange upon which the common
stock of the Fund is then traded, the Fund may elect to convert each Award
Share into one share of common stock on the Vesting Date, by notice to the
Executive within ten (10) days after the Vesting Date.
(g) Adjustment. To avoid dilution of the Executive's
benefits under this Agreement, each Award Share shall be subject to equitable
adjustment for stock splits, stock dividends, reorganizations and other similar
changes in capitalization of the Fund.
(h) No Rights as a Stockholder. The Executive shall have
no rights as a stockholder with respect to the Award Shares.
(i) Assignability and Transferability of Award. Award
Shares shall not be transferable by the Executive. Award Shares shall not be
assigned, pledged or hypothecated in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment or similar
process. Any attempted transfer, assignment, pledge, hypothecation or other
disposition of any Award Shares or of any rights granted thereunder contrary to
the provisions of this Section, or the levy of any attachment or similar
process upon an Award Share or such rights, shall be null and void.
3. Except as expressly modified by this Amendment, the Agreement
shall continue in full force and effect.
<PAGE> 4
IN WITNESS WHEREOF, this Agreement is entered into on the day and year
first above written.
BANYAN STRATEGIC LAND FUND II
By: /s/ Robert G. Higgins
EXECUTIVE:
/s/ Leonard G. Levine
<PAGE> 1
EXHIBIT 10(iii)
BANYAN STRATEGIC LAND FUND II
1994 EXECUTIVE AND DIRECTOR STOCK OPTION AGREEMENT
DIRECTOR OPTION GRANT PROGRAM
THIS OPTION AGREEMENT is made as of the 15th day of July, 1994 by and
between BANYAN STRATEGIC LAND FUND II (the "Fund"), and (See Schedule A)
("Optionee"). All definitions contained in the Banyan Strategic Land Fund II
1994 Executive and Director Stock Option Plan ("Plan") are hereby incorporated
by reference and shall have the same meanings in this Agreement as are
contained in the Plan.
WHEREAS, Optionee is a director of the Fund. By affording an
opportunity to purchase Shares, the Fund desires to provide additional
motivation to the Optionee to achieve long-term growth in stockholder equity.
NOW, THEREFORE, in consideration of the premises, the mutual covenants
hereinafter set forth, and other good and valuable consideration, the Fund and
Optionee agree as follows:
1. Grant of Option. Subject to the terms and conditions of the
Plan and this Option Agreement, the Fund hereby grants to the Optionee the
option to purchase (See Schedule A) shares of the Fund's Common Stock (the
"Shares"). The Options granted hereunder are designated as non-qualified stock
options and the Options are not incentive stock options as described in Section
422 of the Internal Revenue Code of 1986, as may be amended (the "Code").
2. Purchase Price. The price per share which Shares may be
acquired on exercise shall be $1.125, which is one hundred percent (100%) of
the Fair Market Value on the date of grant.
3. Exercise Schedule. Subject to becoming exercisable earlier as
provided in the Plan and subject to the provisions of Section 4 of this
Agreement, the Options granted hereunder shall vest and be exercisable in
installments as follows: (i) to the extent of 50.0% of the number of Shares
commencing on the first anniversary of the date of grant; and (ii) to the
extent of 50.0% of the number of Shares commencing on the second anniversary of
the date of grant; provided, however, that if the Optionee shall die or become
permanently or totally disabled or retire in accordance with the Fund's
retirement procedures, then all Options granted hereunder shall become
immediately exercisable.
4. Period and Cancellation. The exercise period of each Option
shall terminate ten years and one day from the date of grant, unless sooner
terminated as provided in this Option Agreement or under the Plan. The exercise
period of an Option shall also terminate if the Optionee ceases to be a
director of the Fund except if:
<PAGE> 2
(i) the Optionee ceases to be a director of the Fund due to: (a)
the death or permanent and total disability of the Optionee; or (b) expiration
of the director's term in office after the director attains his 75th birthday;
then any unexercised Options to acquire Shares will become exercisable, as of
the date of death, disability or retirement and may be exercised by the
Optionee, the Optionee's legal representative or the Optionee's
Beneficiary(ies), as the case may be, at any time within one year in the case
of (a) and ninety (90) days in the case of (b);
(ii) the Optionee ceases to be a director of the Fund due to any
reason other than as described in subsections (i) above, any unexercised
Options must be exercised by the Optionee, his legal representative or his
Beneficiary(ies) within 30 days after the last date the Optionee is a director
of the Fund; and
(iii) the Optionee ceases to be a director of the Fund due to the
reasons described in subsection (i) above (other than by death) and the
Optionee dies prior to the expiration of the applicable exercise period set
forth therein, the Options may be exercised by his legal representative or his
Beneficiary(ies) within the remainder of the period that would have been
applicable to the Optionee prior to the Optionee's death.
Termination of the exercise period shall result in termination and
cancellation of the Options. For purposes of this Option Agreement,
"disability" of the Optionee shall be deemed to have occurred if the Optionee
has suffered permanent and total physical or mental illness, injury or
infirmity of such a nature, degree or effect as to render the Optionee
substantially unable to serve as a director. The remaining members of the Board
shall determine, according to the facts then available to them, whether and
when disability has occurred and the date of disability shall be the date of
any such determination.
5. Method of Option Exercise. An Optionee shall exercise Options
by delivering written notice of intent to exercise to the Fund's vice president
general counsel at the Fund's principal office located at Suite 2900, 150 South
Wacker Drive, Chicago, Illinois 60606 (or the office which is the successor
main office or which is otherwise designated as the office to which notice is
to be given as the Board may direct). Each notice shall: (i) state the
Optionee's election to exercise the Option and the number of Shares in respect
of which the Option is being exercised; (ii) be signed by the person or persons
exercising the Option; (iii) be accompanied by proof, reasonably satisfactory
to the Fund's general counsel, of the right of that person or persons to
exercise the Option if the Option is being exercised by any person or persons
other than the Optionee; and (iv) be accompanied by payment, in cash or Shares.
An Option shall not have been exercised unless all the preceding provisions of
this paragraph shall have been complied with and, for all purposes of this
Option Agreement, the date of the exercise of the Option with respect to any
particular Shares shall be the date on which the notice, proof (if required),
and payment shall all have been received by the general counsel. The
certificate or certificates for
2
<PAGE> 3
the Shares as to which the Option shall have been so exercised shall be
registered in the name of the person or persons so exercising the Option and
shall be delivered to or upon the written order of the person or persons
exercising the Option as soon as practicable after receipt by the general
counsel of the notice, proof (if required) and payment. Delivery of the
Certificate shall be made at the place designated by the Director in the
written notice of intent to execute.
6. No Rights as Stockholder. The Optionee shall have no rights as
a stockholder with respect to Shares covered by the Option until the date of
issuance of a stock certificate for the Shares; no adjustment for cash
dividends, or otherwise, shall be made if the record date therefor is prior to
the date of exercise of the Option.
7. Requirements of Law. The Fund may issue or deliver
certificates for Shares prior to: (i) listing of the Shares on any stock
exchange on which the Shares may then be listed; (ii) registering or qualifying
the Shares under federal or state law; provided, however, the Fund shall not
issue or deliver certificates for Shares prior to an Optionee tendering to the
Fund those documents or payments as the Board may deem necessary to satisfy any
applicable withholding obligation for the Fund to obtain a deduction on its
federal, state or local tax return with respect to the exercise of an Option.
If the disposition of Shares acquired on exercise of any Option is not covered
by a then current registration statement under the Securities Act and is not
otherwise exempt from registration, the acquired Shares shall be restricted
against transfer to the extent required by the Securities Act or regulations
thereunder. Furthermore, on demand by the Board, the individual exercising an
Option shall state in writing, as a condition precedent to each exercise, that
the Optionee is acquiring the Common Stock for investment only and not for
resale or with a view to distribution. In addition, any certificates for Shares
issued under this Section 7 shall bear the following or similar legend:
The shares of common stock represented by this certificate have not
been registered under the Securities Act of 1933 or under the
securities laws of any state and may not be sold or transferred except
upon registration or receipt by the Fund of an opinion of counsel
satisfactory to the Fund, in form and substance satisfactory to the
Fund, that registration is not required for sale or transfer.
No Shares may be sold, transferred, or otherwise alienated or hypothecated so
long as the certificate evidencing the Shares bears this legend.
8. Cause to be Registered Under the Act. The Board may, in its
discretion, register the Shares acquired by Optionees under the Securities Act.
Further, if at any time the Fund proposes to register any of its equity
securities under the Securities Act, whether or not for its own account, and
there exist Shares which cannot be sold under an existing registration
statement or Rule 144(k) (or any similar provision then enforced), then the
Fund shall give written notice of the proposed filings to the holders of the
Shares at least 20 days before the anticipated filing date. This notice shall
offer the holders the opportunity to register the Shares. The Fund shall
register
3
<PAGE> 4
all Shares with respect to which the Fund has received written requests for
inclusion therein within 15 business days after notice has been duly given to
the applicable holder. The holder of restricted Shares shall be permitted to
withdrawal all or any part or the restricted Shares from this registration at
any time prior to the effective date of the registration.
9. Non-transferability. The Option shall not be assigned,
transferred (except as herein provided), pledged, or hypothecated in any way
(whether by operation of law or otherwise), other than by will or the laws of
descent and distribution. The Option is exercisable during an Optionee's
lifetime only by the Optionee or the appointed guardian or legal representative
of the Optionee, and no Option shall be subject to execution, attachment, or
similar process. Any attempted assignment, transfer, pledge, hypothecation, or
other disposition contrary to the provisions hereof, and the levy of any
attachment or similar process upon the Option shall be null and void and
without effect. The Fund shall have the right to terminate the Option upon any
assignment, transfer, pledge, hypothecation, other disposition of the Option,
or level of attachment or similar process, by notice to that effect to the
person then entitled to exercise the Option; provided, however, that
termination of the Option hereunder shall not prejudice any rights or remedies
which the Optionee, the Fund or any subsidiary of the Fund may have under this
Option Agreement or otherwise.
10. Changes in Fund's Capital Structure. The existence of the
Option shall not affect in any way the right or authority of the Fund or its
stockholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Fund's capital structure or its
business, or any merger or consolidation of the Fund's capital structure or its
business, or any merger or consolidation of the Fund, or any issue of bonds,
debentures, preferred or prior preference stock ahead of or affecting the
Common Stock or the rights thereof, or the dissolution or liquidation of the
Fund, or any sale or transfer of all or any part of its assets or business, or
any other corporate act or proceeding, whether of a similar character or
otherwise.
11. Board Action Final. Any dispute or disagreement which shall
arise under, as a result of, or in any way relate to the interpretation or
construction of this Agreement or the Plan shall be determined by the Board.
Any such determination made hereunder shall be final, binding, and conclusive
for all purposes.
12. Plan Controlling. This Option Agreement is executed pursuant
to the provisions of the Plan and is subject to all of the provisions of the
Plan which shall be controlling.
13. Successors and Assigns. This Option Agreement shall inure to
the benefit of and be binding upon each successor and assign of the Fund. All
obligations imposed upon the Optionee or his Beneficiary and all rights granted
to the Fund, hereunder or as stipulated in the Plan shall be binding upon the
Optionee's or the Beneficiary's heirs, legal representatives, and successors.
4
<PAGE> 5
14. Choice of Laws. This Agreement shall be construed and enforced
according to the internal laws of the State of Delaware.
IN WITNESS WHEREOF, Fund has caused this Agreement to be executed by
its duly authorized officers, and the Optionee has hereunto set his hand and
seal, as of the day and year first above written.
BANYAN STRATEGIC LAND FUND II
By: /s/ Leonard G. Levine
-----------------------------------
Leonard G. Levine
Its: ______________________________
(Optionee)_________________________
5
<PAGE> 6
Schedule A
Optionee Number of Shares
Robert M. Ungerleider 50,000
Walter E. Auch 50,000
Gerald L. Nudo 50,000
6
<PAGE> 1
EXHIBIT 10(iv)
BANYAN STRATEGIC LAND FUND II
1994 EXECUTIVE AND DIRECTOR STOCK OPTION AGREEMENT
EXECUTIVE OPTION GRANT PROGRAM
THIS OPTION AGREEMENT is made as of the 1st day of July, 1994 by and
between BANYAN STRATEGIC LAND FUND II (the "Fund"), and (See Schedule A)
("Optionee"). All definitions contained in the Banyan Strategic Land Fund II
1994 Executive and Director Stock Option Plan ("Plan") are hereby incorporated
by reference and shall have the same meanings in this Agreement as are
contained in the Plan.
WHEREAS, Optionee is employed by the Fund, its subsidiaries or Banyan
Management Corp. and in the course of this employment provides services to the
Fund, its subsidiaries or Banyan Management Corp. and whereas by affording an
opportunity to purchase Shares, the Fund desires to provide additional
motivation to the Optionee to achieve long-term growth in stockholder equity.
NOW, THEREFORE, in consideration of the premises, the mutual covenants
hereinafter set forth, and other good and valuable consideration, the Fund and
Optionee agree as follows:
1. Grant of Option. Subject to the terms and conditions of the
Plan and this Option Agreement, the Fund hereby grants to the Optionee the
option to purchase an aggregate of (See Schedule A) shares of the Fund's Common
Stock ("Shares"). The Options granted hereunder are designated as non-qualified
stock options and the Options are not incentive stock options as described in
Section 422 of the Internal Revenue code of 1986, as may be amended (the
"Code").
2. Purchase Price. The price per share at which Shares may be
acquired on exercise shall be $1.125, which is one hundred percent (100%) of
the Fair Market Value on the date of grant.
3. Exercise Schedule. Subject to becoming exercisable earlier as
provided in the Plan, and subject to the provisions of Section 4 of this
Agreement, the Options granted hereunder shall vest and be exercisable in
installments as follows: (i) to the extent of 33.3% of the number of Shares
commencing on the first anniversary of the date of grant; (ii) to the extent of
an additional 33.3% of Shares commencing on the second anniversary of the date
of grant; and (iii) to the extent of an additional 33.4% of Shares commencing
on the third anniversary of the date of grant; provided, however, that if the
Optionee shall die or become permanently or totally disabled, retire in
accordance with the Fund's retirement procedures, then all options granted
hereunder shall become immediately exercisable.
4. Period and Cancellation. The exercise period of each Option
shall terminate ten years and one day from the date of grant, unless sooner
terminated as provided in this Option Agreement or under the Plan. The exercise
period of an Option shall also terminate on Optionee's Termination of
Employment except if:
(i) the Termination of Employment is due to: (a) the
death or permanent and total disability of the Optionee; or (b) the retirement
in accordance with the Fund's retirement practices; then any unexercised
Options to acquire Shares will become exercisable (without regard to meeting or
complying with the other vesting provisions of this Option
<PAGE> 2
Agreement or the Plan), as of the date of death, disability or retirement and
may be exercised by the Optionee, the Optionee's legal representative or the
Optionee's Beneficiary(ies), as the case may be, at any time within one year in
the case of (a) and ninety (90) days in the case of (b);
(ii) the Termination of Employment is due to any reason other than as
described in subsections (i) above, any unexercised Options which have vested
pursuant to the terms of this Option Agreement and the Plan on or before the
Termination of Employment must be exercised by the Optionee, his legal
representative or his Beneficiary(ies) within 30 days after the date of
termination; and
(iii) the employment is terminated in the manner described in
subsection (i) above (other than by death) and the Optionee dies prior to the
expiration of the applicable exercise period set forth therein, the Options may
be exercised by his legal representative or his Beneficiary(ies) within the
remainder of the period that would have been applicable to the Optionee prior
to the Optionee's death.
Termination of the exercise period shall result in termination and
cancellation of the Options. For purposes of this Option Agreement,
"disability" of the Optionee shall be deemed to have occurred if the Optionee
has suffered permanent and total physical or mental illness, injury or
infirmity of such a nature, degree or effect as to render the Optionee
substantially unable to perform his duties to the same level as he previously
performed for the Fund or subsidiary. The Board shall determine, according to
the facts then available to them, whether and when disability has occurred and
the date of disability shall be the date of any such determination.
5. Method of Option Exercise. An Optionee shall exercise Options
by delivering written notice of intent to exercise to the Fund's Vice President
General Counsel at the Fund's principal office located at Suite 2900, 150 South
Wacker Drive, Chicago, Illinois 60606 (or the office which is the successor
main office or which is otherwise designated as the office to which notice is
to be given as the Board may direct). Each notice shall: (i) state the
Optionee's election to exercise the Option and the number of Shares in respect
of which the Option is being exercised; (ii) be signed by the person or persons
exercising the Option; (iii) be accompanied by proof, reasonably satisfactory
to the Fund's General Counsel, of the right of that person or persons to
exercise the Option if the Option is being exercised by any person or persons
other than the Optionee; and (iv) be accompanied by payment, in cash, Shares or
any other form of payment acceptable to the Board. An Option shall not have
been exercised unless all the preceding provisions of this paragraph shall have
been complied with and, for all purposes of this Option Agreement, the date of
the exercise of the Option with respect to any particular Shares shall be the
date on which the notice, proof (if required), and payment shall all have been
received by the General Counsel. The certificate or certificates for the Shares
as to which the Option shall have been so exercised shall be registered in the
name of the person or persons so exercising the Option and shall be delivered
to or upon the written order of the person or persons exercising the Option as
soon as practicable after receipt by the General Counsel of the notice, proof
(if required) and payment. Delivery shall be made at the principal office of
the Fund, or at any
2
<PAGE> 3
other place as the Board shall have designated by notice. The purchase price of
any Shares as to which Options shall be exercised shall be paid in full at the
time of the exercise.
6. Change in Control. Notwithstanding the provisions of Section 3
of this Agreement, if while unexercised Options remain outstanding under the
Option Agreement and an Optionee's employment by the Fund or by Banyan
Management Corp. is terminated due to a Change in Control (as defined below),
all outstanding Options shall become exercisable from and after the date of the
termination of the Optionee's employment. For the purposes of this Section 6,
all assets of the Fund shall be deemed to have been sold at book value (as
reflected in the Fund's most recent financial statements, adjusted to reflect
any events subsequent to the date of the most recent financial statements, up
to the date of payment) and all proceeds thereof shall be deemed to have been
distributed to the shareholders of the Fund as of the date of the termination
of the Optionee's employment.
For the purposes of this Section 6, the term "Change of Control" shall mean
that the members of the Board of Directors of the Fund as of the date this
Agreement is executed fail to constitute a majority of the members of the Board
of Directors of the Fund; provided, however, that if the Optionee has consented
to the appointment or election of an individual who becomes a new member of the
Board of Directors, for the purposes of this paragraph, that new member shall
be treated as if he were a member of the Board of Directors as of the date this
Agreement is executed.
7. No Rights as Stockholder. The Optionee shall have no rights as
a stockholder with respect to Shares covered by the Option until the date of
issuance of a stock certificate for the Shares; no adjustment for cash
dividends, or otherwise, shall be made if the record date therefor is prior to
the date of exercise of the Option.
8. Requirements of Law. The Fund may issue or deliver
certificates for Shares prior to: (i) listing of the Shares on any stock
exchange on which the Shares may then be listed; (ii) registering or qualifying
the Shares under federal or state law; provided, however, the Fund shall not
issue or deliver certificates for Shares prior to an Optionee tendering to the
Fund those documents or payments as the Board may deem necessary to satisfy any
applicable withholding obligation for the Fund to obtain a deduction on its
federal, state or local tax return with respect to the exercise of an Option.
If the disposition of Shares acquired on exercise of any Option is not covered
by a then current registration statement under the Securities Act and is not
otherwise exempt from registration, the acquired Shares shall be restricted
against transfer to the extent required by the Securities Act or regulations
thereunder. Furthermore, on demand by the Board, the individual exercising an
Option shall state in writing, as a condition precedent to each exercise, that
the Optionee is acquiring the Common Stock for investment only and not for
resale or with a view to distribution. In addition, any certificates for Shares
issued under this Section 8 shall bear the following or similar legend:
The shares of common stock represented by this
certificate have not been registered under the
Securities Act of 1933, as amended, or under the
securities laws of any state and may not be sold or
transferred except upon registration or receipt by
the Fund of an opinion of counsel in form and
substance satisfactory to the Fund, that registration
is not required for sale or transfer.
3
<PAGE> 4
No Shares may be sold, transferred, or otherwise alienated or hypothecated so
long as the certificate evidencing the Shares bears this legend.
9. Cause to be Registered Under the Act. The Board may, in its
discretion, register the Shares acquired by Optionees under the Securities Act.
Further, if at any time the Fund proposes to register any of its equity
securities under the Securities Act, whether or not for its own account, and
there exist Shares which cannot be sold under an existing registration
statement or Rule 144(k) (or any similar provision then enforced), then the
Fund shall give written notice of the proposed filings to the holders of the
Shares at least 20 days before the anticipated filing date. This notice shall
offer the holders the opportunity to register the Shares. The Fund shall
register all Shares with respect to which the Fund has received written
requests for inclusion therein within 15 business days after notice has been
duly given to the applicable holder. The holder of restricted Shares shall be
permitted to withdraw all or any part or the restricted Shares from this
registration at any time prior to the effective date of the registration.
10. Non-transferability. The Option shall not be assigned,
transferred (except as herein provided), pledged, or hypothecated in any way
(whether by operation of law or otherwise), other than by will or the laws of
descent and distribution. The Option is exercisable during an Optionee's
lifetime only by the Optionee or the appointed guardian or legal representative
of the Optionee, and no Option shall be subject to execution, attachment, or
similar process. Any attempted assignment, transfer, pledge, hypothecation, or
other disposition contrary to the provisions hereof, and the levy of any
attachment or similar process upon the Option shall be null and void and
without effect. The Fund shall have the right to terminate the Option upon any
assignment, transfer, pledge, hypothecation, other disposition of the Option,
or level of attachment or similar process, by notice to that effect to the
person then entitled to exercise the Option; provided, however, that
termination of the Option hereunder shall not prejudice any rights or remedies
which the Optionee, the Fund or any subsidiary of the Fund may have under this
Option Agreement or otherwise.
11. Changes in Fund's Capital Structure. The existence of the
Option shall not affect in any way the right or authority of the Fund or its
stockholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Fund's capital structure or its
business, or any merger or consolidation of the Fund, or any issue of bonds,
debentures, preferred or prior preference stock ahead of or affecting the
Common Stock or the rights thereof,or the dissolution or liquidation of the
Fund, or any sale or transfer of all or any part of its assets or business, or
any other corporate act or proceeding, whether of a similar character or
otherwise.
12. Board Action Final. Any dispute or disagreement which shall
arise under, as a result of, or in any way relate to the interpretation or
construction of this Agreement or the Plan shall be determined by the Board.
Any such determination made hereunder shall be final, binding, and conclusive
for all purposes.
4
<PAGE> 5
13. Withholding. The Optionee and Fund agree that the Fund shall
have no obligation to issue or transfer Shares upon the exercise of the Option,
unless and until the Optionee or Beneficiary shall have reasonably satisfied
the obligation of the Fund and any of its subsidiaries with respect to the
withholding of federal, state or local taxes, or in order to reasonably sustain
a right of the Fund to a tax deduction under federal, state or local law with
respect to the exercise of an Option. At the election of the Optionee or the
Beneficiary, as the case may be, the Fund's withholding obligation may be
satisfied by the Optionee or Beneficiary tendering cash, or Shares previously
owned by the Optionee or directing that a number of Shares be withheld from
issuance upon the exercise of an Option (or any combination of any of the
foregoing) as the Board reasonably determines necessary to satisfy the
obligation of the Fund or any of its subsidiaries, or in order to sustain a
right of the Fund to a tax deduction under federal, state or local law with
respect to the exercise of an Option.
14. Condition of Employment. The Plan, this Option Agreement and
any Option granted under the Plan and this Option Agreement shall not confer
upon any Optionee any right to continued employment by the Fund, its
subsidiaries or Banyan Management Corp., nor shall they interfere in any way
with the right of the Fund, its subsidiaries or Banyan Management Corp., to,
subject to other agreements with the Optionee, terminate an Optionee's
employment at any time.
15. Plan Controlling. This Option Agreement is executed pursuant
to the provisions of the Plan and is subject to all of the provisions of the
Plan which shall be controlling.
16. Successors and Assigns. This Option Agreement shall inure to
the benefit of and be binding upon each successor and assign of the Fund. All
obligations imposed upon the Optionee or his Beneficiary and all rights granted
to the Fund, hereunder or as stipulated in the Plan shall be binding upon the
Optionee's or the Beneficiary's heirs, legal representatives, and successors.
17. Choice of Laws. This Agreement shall be construed and enforced
according to the internal laws of the State of Delaware.
IN WITNESS WHEREOF, Fund has caused this Agreement to be executed by
its duly authorized officers, and the Optionee has hereunto set his hand and
seal, as of the day and year first above written.
BANYAN STRATEGIC LAND FUND II
By: ____________________________
Its: _______________________
(Optionee)
5
<PAGE> 6
Schedule A
<TABLE>
<CAPTION>
Optionee Number of Shares
<S> <C>
Leonard G. Levine 60,000
Neil D. Hansen 5,000
Robert G. Higgins 5,000
Joel L. Teglia 1,500
</TABLE>
6
<PAGE> 7
BANYAN STRATEGIC LAND FUND II
l995 EXECUTIVE AND DIRECTOR STOCK OPTION AGREEMENT
EXECUTIVE OPTION GRANT PROGRAM
THIS OPTION AGREEMENT is made as of the 11th day of July, 1995 by and
between BANYAN STRATEGIC LAND FUND II (the "Fund"), and (see Schedule A)
("Optionee"). All definitions contained in the Banyan Strategic Land Fund II
1994 Executive and Director Stock Option Plan ("Plan") are hereby incorporated
by reference and shall have the same meanings in this Agreement as are
contained in the Plan.
WHEREAS, Optionee is employed by the Fund, its subsidiaries or Banyan
Management Corp. and in the course of this employment provides services to the
Fund, its subsidiaries or Banyan Management Corp. and whereas by affording an
opportunity to purchase Shares, the Fund desires to provide additional
motivation to the Optionee to achieve long-term growth in stockholder equity.
NOW, THEREFORE, in consideration of the premises, the mutual covenants
hereinafter set forth, and other good and valuable consideration, the Fund and
Optionee agree as follows:
1. Grant of Option. Subject to the terms and conditions of the
Plan and this Option Agreement, the Fund hereby grants to the Optionee the
option to purchase an aggregate of (See Schedule A) shares of the Fund's Common
Stock ("Shares"). The Options granted hereunder are designated an non-qualified
stock options and the Options are not incentive stock options as described in
Section 422 of the Internal Revenue code of 1986, as may be amended (the
"Code").
2. Purchase Price. The price per share at which Shares may be
acquired on exercise shall be $1.50, which is one hundred percent (100%) of the
Fair Market Value on the date of grant.
3. Exercise Schedule. Subject to becoming exercisable earlier as
provided in the Plan, and subject to the provisions of Section 4 of this
Agreement, the Options granted hereunder shall vest and be exercisable in
installments as follows: (i) to the extent of 33.3% of the number of Shares
commencing on the first anniversary of the date of grant; (ii) to the extent of
an additional 33.3% of Shares commencing on the second anniversary of the date
of grant; and (iii) to the extent of an additional 33.4% of Shares commencing
on the third anniversary of the date of grant; provided, however, that if the
Optionee shall die or become permanently or totally disabled, retire in
accordance with the Fund's retirement procedures, then all options granted
hereunder shall become immediately exercisable.
4. Period and Cancellation. The exercise period of each Option
shall terminate ten years and one day from the date of grant, unless sooner
terminated as provided in this Option Agreement or under the Plan. The exercise
period of an Option shall also terminate on Optionee's Termination of
Employment except if:
(i) the Termination of Employment is due to: (a) the
death or permanent and total disability of the Optionee; or (b) the retirement
in accordance with the Fund's retirement practices; then any unexercised
Options to acquire Shares will become exercisable (without regard to meeting or
complying with the other vesting provisions of this Option
<PAGE> 8
Agreement or the Plan), as of the date of death, disability or retirement and
may be exercised by the Optionee, the Optionee's legal representative or the
Optionee's Beneficiary(ies), as the case may be, at any time within one year in
the case of (a) and ninety (90) days in the case of (b);
(ii) the Termination of Employment is due to any reason
other than as described in subsections (i) above, any unexercised Options which
have vested pursuant to the terms of this Option Agreement and the Plan on or
before the Termination of Employment must be exercised by the Optionee, his
legal representative or his Beneficiary(ies) within 30 days after the date of
termination; and
(iii) the employment is terminated in the manner described in
subsection (i) above (other than by death) and the Optionee dies prior to the
expiration of the applicable exercise period set forth therein, the Options may
be exercised by his legal representative or his Beneficiary(ies) within the
remainder of the period that would have been applicable to the Optionee prior
to the Optionee's death.
Termination of the exercise period shall result in termination and
cancellation of the Options. For purposes of this Option Agreement,
"disability" of the Optionee shall be deemed to have occurred if the Optionee
has suffered permanent and total physical or mental illness, injury or
infirmity of such a nature, degree or effect as to render the Optionee
substantially unable to perform his duties to the same level as he previously
performed for the Fund or subsidiary. The Board shall determine, according to
the facts then available to them, whether and when disability has occurred and
the date of disability shall be the date of any such determination.
5. Method of Option Exercise. An Optionee shall exercise Options
by delivering written notice of intent to exercise to the Fund's Vice President
General Counsel at the Fund's principal office located at Suite 2900, 150 South
Wacker Drive, Chicago, Illinois 60606 (or the office which is the successor
main office or which is otherwise designated as the office to which notice is
to be given as the Board may direct). Each notice shall: (i) state the
Optionee's election to exercise the Option and the number of Shares in respect
of which the Option is being exercised; (ii) be signed by the person or persons
exercising the Option; (iii) be accompanied by proof, reasonably satisfactory
to the Fund's General Counsel, of the right of that person or persons to
exercise the Option if the Option is being exercised by any person or persons
other than the Optionee; and (iv) be accompanied by payment, in cash, Shares or
any other form of payment acceptable to the Board. An Option shall not have
been exercised unless all the preceding provisions of this paragraph shall have
been complied with and, for all purposes of this Option Agreement, the date of
the exercise of the Option with respect to any particular Shares shall be the
date on which the notice, proof (if required), and payment shall all have been
received by the General Counsel. The certificate or certificates for the Shares
as to which the Option shall havebeen so exercised shall be registered in the
name of the person or persons so exercising the Option and shall be delivered
to or upon the written order of the person or persons exercising the Option as
soon as practicable after receipt by the General Counsel of the notice, proof
(if required) and payment. Delivery shall be made at the principal office of
the Fund, or at any
2
<PAGE> 9
other place as the Board shall have designated by notice. The purchase price of
any Shares as to which Options shall be exercised shall be paid in full at the
time of the exercise.
6. Change in Control. Notwithstanding the provisions of Section 3
of this Agreement, if while unexercised Options remain outstanding under the
Option Agreement and an Optionee's employment by the Fund or by Banyan
Management Corp. is terminated due to a Change in Control (as defined below),
all outstanding Options shall become exercisable from and after the date of the
termination of the Optionee's employment. For the purposes of this Section 6,
all assets of the Fund shall be deemed to have been sold at book value (as
reflected in the Fund's most recent financial statements, adjusted to reflect
any events subsequent to the date of the most recent financial statements, up
to the date of payment) and all proceeds thereof shall be deemed to have been
distributed to the shareholders of the Fund as of the date of the termination
of the Optionee's employment.
For the purposes of this Section 6, the term "Change of Control" shall mean
that the members of the Board of Directors of the Fund as of the date this
Agreement is executed fail to constitute a majority of the members of the Board
of Directors of the Fund; provided, however, that if the Optionee has consented
to the appointment or election of an individual who becomes a new member of the
Board of Directors, for the purposes of this paragraph, that new member shall
be treated as if he were a member of the Board of Directors as of the date this
Agreement is executed.
7. No Rights as Stockholder. The Optionee shall have no rights as a
stockholder with respect to Shares covered by the Option until the date of
issuance of a stock certificate for the Shares; no adjustment for cash
dividends, or otherwise, shall be made if the record date therefor is prior to
the date of exercise of the Option.
8. Requirements of Law. The Fund may issue or deliver
certificates for Shares prior to: (i) listing of the Shares on any stock
exchange on which the Shares may then be listed; (ii) registering or qualifying
the Shares under federal or state law; provided, however, the Fund shall not
issue or deliver certificates for Shares prior to an Optionee tendering to the
Fund those documents or payments as the Board may deem necessary to satisfy any
applicable withholding obligation for the Fund to obtain a deduction on its
federal, state or local tax return with respect to the exercise of an Option.
If the disposition of Shares acquired on exercise of any Option is not covered
by a then current registration statement under the Securities Act and is not
otherwise exempt from registration, the acquired Shares shall be restricted
against transfer to the extent required by the Securities Act or regulations
thereunder. Furthermore, on demand by the Board, the individual exercising an
Option shall state in writing, as a condition precedent to each exercise, that
the Optionee is acquiring the Common Stock for investment only and not for
resale or with a view to distribution. In addition, any certificates for Shares
issued under this Section 8 shall bear the following or similar legend:
The shares of common stock represented by this certificate have not
been registered under the Securities Act of 1933, as amended, or under
the securities laws of any state and may not be sold or transferred
except upon registration or receipt by the
3
<PAGE> 10
Fund of an opinion of counsel in form and substance satisfactory to
the Fund, that registration is not required for sale or transfer.
No Shares may be sold, transferred, or otherwise alienated or hypothecated so
long as the certificate evidencing the Shares bears this legend.
9. Cause to be Registered Under the Act. The Board may, in its
discretion, register the Shares acquired by Optionees under the Securities Act.
Further, if at any time the Fund proposes to register any of its equity
securities under the Securities Act, whether or not for its own account, and
there exist Shares which cannot be sold under an existing registration
statement or Rule 144(k) (or any similar provision then enforced), then the
Fund shall give written notice of the proposed filings to the holders of the
Shares at least 20 days before the anticipated filing date. This notice shall
offer the holders the opportunity to register the Shares. The Fund shall
register all Shares with respect to which the Fund has received written
requests for inclusion therein within 15 business days after notice has been
duly given to the applicable holder. The holder of restricted Shares shall be
permitted to withdraw all or any part or the restricted Shares from this
registration at any time prior to the effective date of the registration.
10. Non-transferability. The Option shall not be assigned,
transferred (except as herein provided), pledged, or hypothecated in any way
(whether by operation of law or otherwise), other than by will or the laws of
descent and distribution. The Option is exercisable during an Optionee's
lifetime only by the Optionee or the appointed guardian or legal representative
of the Optionee, and no Option shall be subject to execution, attachment, or
similar process. Anyattempted assignment, transfer, pledge, hypothecation, or
other disposition contrary to the provisions hereof, and the levy of any
attachment or similar process upon the Option shall be null and void and
without effect. The Fund shall have the right to terminate the Option upon any
assignment, transfer, pledge, hypothecation, other disposition of the Option,
or level of attachment or similar process, by notice to that effect to the
person then entitled to exercise the Option; provided, however, that
termination of the Option hereunder shall not prejudice any rights or remedies
which the Optionee, the Fund or any subsidiary of the Fund may have under this
Option Agreement or otherwise.
11. Changes in Fund's Capital Structure. The existence of the
Option shall not affect in any way the right or authority of the Fund or its
stockholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Fund's capital structure or its
business, or any merger or consolidation of the Fund, or any issue of bonds,
debentures, preferred or prior preference stock ahead of or affecting the
Common Stock or the rights thereof, or the dissolution or liquidation of the
Fund, or any sale or transfer of all or any part of its assets or business, or
any other corporate act or proceeding whether of a similar character or
otherwise.
12. Board Action Final. Any dispute or disagreement which shall
arise under, as a result of, or in any way relate to the interpretation or
construction of this Agreement or the Plan shall be determined by the Board.
Any such determination made hereunder shall be final, binding, and conclusive
for all purposes.
4
<PAGE> 11
13. Withholding. The Optionee and Fund agree that the Fund shall
have no obligation to issue or transfer Shares upon the exercise of the Option,
unless and until the Optionee or Beneficiary shall have reasonably satisfied
the obligation of the Fund and any of its subsidiaries with respect to the
withholding of federal, state or local taxes, or in order to reasonably sustain
a right of the Fund to a tax deduction under federal, state or local law with
respect to the exercise of an Option. At the election of the Optionee or the
Beneficiary, as the case may be, the Fund's withholding obligation may be
satisfied by the Optionee or Beneficiary tendering cash, or Shares previously
owned by the Optionee or directing that a number of Shares be withheld from
issuance upon the exercise of an Option (or any combination of any of the
foregoing) as the Board reasonably determines necessary to satisfy the
obligation of the Fund or any of its subsidiaries, or in order to sustain a
right of the Fund to a tax deduction under federal, state or local law with
respect to the exercise of an Option.
14. Condition of Employment. The Plan, this Option Agreement and
any Option granted under the Plan and this Option Agreement shall not confer
upon any Optionee any right to continued employment by the Fund, its
subsidiaries or Banyan Management Corp., nor shall they interfere in any way
with the right of the Fund, its subsidiaries or Banyan Management Corp., to,
subject to other agreements with the Optionee, terminate an Optionee's
employment at any time.
15. Plan Controlling. This Option Agreement is executed pursuant
to the provisions of the Plan and is subject to all of the provisions of the
Plan which shall be controlling.
16. Successors and Assigns. This Option Agreement shall inure to
the benefit of and be binding upon each successor and assign of the Fund. All
obligations imposed upon the Optionee or his Beneficiary and all rights granted
to the Fund, hereunder or as stipulated in the Plan shall be binding upon the
Optionee's or the Beneficiary's heirs, legal representatives, and successors.
17. Choice of Laws. This Agreement shall be construed and enforced
according to the internal laws of the State of Delaware.
IN WITNESS WHEREOF, Fund has caused this Agreement to be executed by
its duly authorized officers, and the Optionee has hereunto set his hand and
seal, as of the day and year first above written.
BANYAN STRATEGIC LAND FUND II
By: /s/ Robert G. Higgins
---------------------------------------
Its:
----------------------------------
-------------------------------------------
(Optionee)
5
<PAGE> 12
Schedule A
Optionee Number of Shares
Leonard G. Levine 60,000
Neil D. Hansen 6,000
Robert G. Higgins 6,000
Joel Teglia 4,500
6
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF BANYAN STRATEGIC LAND FUND II
STATE OF
NAME OF SUBSIDIARY ORGANIZATION
VSLF II Key Biscayne Hotel Corp. Illinois
VSLF II Odlum Farm Corp. Illinois
VSLF II 1A Farm Corp. Illinois
VSLF II Norwood Corp. Illinois
VSLF II H Street Corp. Illinois
BSLF II Rancho Malibu Corp. Illinois
BSLT/BSLFII H Street Partnership Illinois
BMC Hemet Corp. Illinois
BMC Weeds Corp. Illinois
BMC Princeton Corp. Illinois
BSLFII Westholme - Illinois Corp. Illinois
BSLF II Westholme - Florida Corp. Illinois
BMIF/BSLFII Rancho Malibu Illinois
Limited Partnership
BMC Banden Corp. California
BMC Rancho Malibu Corp. California
BMC Westholme Corp. California
Westholme Partners* California
BMC Anden Group Corp. California
BMC Northholme Corp. California
BMC Eastholme Corp. California
Northholme Partners* California
Eastholme Partners* California
BSLF II Westholme - Chino Corp. California
BSLF II Westholme - California Corp. California
Princeton Ridings Group, Ltd. New Jersey
* California Limited Partnerships
29
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
"This schedule contains summary financial information extracted from Banyan
Strategic Land Fund II's Form 10KSB for the year ended December 31, 1995 and is
qualified in its entirety by reference to such Form 10KSB."
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 549,309
<SECURITIES> 626,946
<RECEIVABLES> 848,224
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,239,479
<PP&E> 18,823,149
<DEPRECIATION> 0
<TOTAL-ASSETS> 21,670,220
<CURRENT-LIABILITIES> 630,500
<BONDS> 0
<COMMON> 21,039,720
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 21,670,220
<SALES> 0
<TOTAL-REVENUES> 416,440
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7,738,336
<LOSS-PROVISION> (23,727)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (7,298,169)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,298,169)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,298,169)
<EPS-PRIMARY> (.52)
<EPS-DILUTED> (.52)
</TABLE>
