<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission File Number 1-9885
Banyan Mortgage Investment Fund
(Exact name of Registrant as specified in its charter)
Delaware 36-3465359
(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
Shares of Common Stock New York Stock Exchange
Chicago Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES X . NO .
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ X ]
Shares of common stock outstanding as of April 8, 1996: 39,822,304. The
aggregate market value of the Registrant's shares of common stock held by
non-affiliates on such date was $18,554,903.
DOCUMENTS INCORPORATED BY REFERENCE
See Exhibit index located on page 36
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TABLE OF CONTENTS
PART I
ITEM 1. BUSINESS....................................................... 1
ITEM 2. PROPERTIES..................................................... 4
ITEM 3. LEGAL PROCEEDINGS.............................................. 5
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............ 7
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S SHARES AND RELATED SHAREHOLDER
MATTERS........................................................ 8
ITEM 6. SELECTED FINANCIAL DATA........................................ 9
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS...................................... 13
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA....... 27
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE....................................... 27
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT............. 28
ITEM 11. EXECUTIVE COMPENSATION......................................... 30
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT..................................................... 34
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................. 34
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K............................................................ 36
SIGNATURES............................................................... 37
<PAGE> 3
PART I
ITEM 1. DESCRIPTION OF BUSINESS
BUSINESS OPERATIONS
The Registrant, Banyan Mortgage Investment Fund (the "Fund"), is a
Delaware corporation. The Fund was originally established to invest primarily
in (i) short-term loans, junior mortgage loans, wraparound mortgage loans and
first mortgage loans on income-producing properties and (ii) construction
loans, pre-development loans and land loans. In response to defaults on loans
made by the Fund to its borrowers, in February 1990, the Fund suspended making
new loans, except for advances of additional funds under circumstances which it
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.
The Fund owns interests in an office building and five undeveloped or
partially developed parcels of land aggregating approximately 5,600 acres.
In particular, the Fund effectively owns 100% of the Southbridge, Wayside,
Charles County and Bishop Ranch projects since the remaining limited
partnership interests in the projects are subordinated to a specific return on
investment to the Fund. Based on current financial projections, proceeds to be
generated from the projects will likely be insufficient to meet the total
prioritized return due to the Fund. Therefore, since such limited partners
have made no investment in the respective partnerships, have no control over
the operations of the partnerships and are not obligated to fund losses in
excess of their investment, their minority interests have been accorded no
value in the Fund's financial statements. The Fund believes that the value of
these assets can be enhanced through a combination of: (i) prudent management,
(ii) enhancement of entitlements and zoning applicable to the undeveloped land,
(iii) completing infrastructure improvements and developing lots for sale to
builders. A substantial portion of the Funds assets, measured by the carrying
value, is comprised of interests in large tracts of undeveloped land in
metropolitan Washington D.C. and Northern California all of which are in
various stages of the entitlement process. The Fund believes that the market
for the sale of large tracts of undeveloped land is currently limited.
Consequently, the Fund has attempted to enhance the value of these parcels by
modifying their zoning and entitlements. With respect to the Fund's operating
property, 120 S. Spalding, in early 1995 a tenant occupying approximately two-
thirds of the building's leasable space vacated the property. Subsequent to
December 31, 1995 the Fund entered into a contract with an unaffiliated third
party to sell 120 S. Spalding for $7,450,000. The sale of 120 S. Spalding is
scheduled to close on April 19, 1996.
The success of the Fund's business strategy is significantly influenced by
the level of its capital and the ability to raise additional capital when
needed. In October 1994 the Fund completed a refinancing of its long term debt
in the amount of $20,500,000 with a group of lenders for which Morgen,
Waterfall, Vintiadis & Co., Inc. served as agent (the "Morgens Loan"). In
addition, the Fund restructured its mortgage loan obligation on its Wayside
Village project with Societe Generale ("SoGen") in the principal amount of
$7,000,000 ("Modified Loan"). The renegotiated loan obligation with SoGen also
provided for a Revolving Loan Facility ("Revolving Loan"), in the amount of
$2,000,000, which was to fund additional infrastructure improvements at Wayside
Village. At the closing of the Morgens Loan, approximately $12,400,000 of the
loan proceeds were either utilized or designated for the repayment of the
Fund's then current outstanding debt obligations. The remaining $8,100,000 of
Morgens Loan proceeds was utilized to pay loan closing costs, general operating
expenses and zoning and development costs on the Fund's land parcels. In
August and September of 1995 the Fund submitted several draw requests to SoGen
under the Revolving Loan. SoGen declined to disburse cash proceeds to the Fund
under the Revolving Loan agreement. It was the opinion of SoGen that the
development costs as submitted pursuant
1
<PAGE> 4
ITEM 1. DESCRIPTION OF BUSINESS (CONTINUED)
to the Fund's draw requests did not qualify as fundable costs defined under the
Revolving Loan. It is the Fund's position that all development costs as
submitted qualified as "fundable costs" and the Fund was in complete compliance
with the Revolving Loan agreement. As a result of SoGen's refusal to honor the
Revolving Loan agreement, the Fund did not make its principal and interest
payment due October 1, 1995 on its Modified Loan. On November 3, 1995, SoGen
notified the Fund of its decision to cancel the Revolving Loan and to
accelerate and demand repayment of the balance of its outstanding Modified
Loan. In light of the SoGen actions, which the Fund believes delayed the
development and sale of finished lots at Wayside Village and the continued
general cash demands of the Fund's other land parcels, the cash proceeds from
the loan refinancings proved to be insufficient to meet the Fund's capital
needs for the continued implementation of its business plan. These delays also
required the Fund to incur additional holding costs which were not originally
anticipated when the refinancings were negotiated. As a result, the Fund was
unable to complete various infrastructure improvements at its Wayside Village
and Chapman's Landing projects which the Fund believes impeded its ability to
realize approximately $7,000,000 in lot sales revenues as originally
projected for the year ended December 31, 1995.
During 1995, the Fund has continued its efforts to enhance its liquidity
position through the attempted sale of the 120 S. Spalding property and smaller
ancillary land parcels extraneous to the overall development plan of the Fund's
undeveloped land parcels. However, cash proceeds generated from the sale of
120 S. Spalding or other smaller land parcels will be insufficient to provide
the Fund with the cash proceeds necessary for the continued implementation of
its business plan. Therefore, effective as of April 12, 1996, the Fund entered
into an Agreement and Plan of Merger (the "Merger Agreement") with RGI
Holdings, Inc. ("RGI Holdings") and its wholly owned affiliate RGI U.S.
Holdings, Inc., ("RGI U.S." or collectively "RGI"). The Fund entered into the
Merger Agreement with RGI in order to provide the Fund with cash liquidity and
capital resources necessary to proceed with the implementation of its business
plan. Under the Merger Agreement, RGI Holdings will invest $3,500,000 to
acquire 7,466,666 shares or approximately 16% of the Fund's outstanding common
stock, and will purchase the Morgens Loan and SoGen Loan from the holders
thereof. RGI Holdings has agreed that prior to December 31, 1996 it will not
accelerate the Morgens Loan or SoGen Loan or foreclose on any collateral for
the Morgens Loan or SoGen Loan based upon (i) any events of default occurring
before May 15, 1996; or (ii) any non-monetary defaults occurring after May 15,
1996 but before the merger or the termination of the Merger Agreement; or (iii)
as a result of the execution of the Merger Agreement. Subject to the approval
of the Fund's stockholders, RGI U.S. will be merged with and into the Fund with
all of the outstanding shares of RGI U.S. being converted into 151,445,333
shares of the Fund's common stock. RGI U.S. owns a shopping center in
Lynnwood, Washington and two development properties in Vero Beach, Florida. If
the merger is approved, RGI Holdings will own approximately 80% of the Fund's
outstanding shares of common stock. The Fund anticipates seeking a vote on
this merger at its annual meeting which is not expected to occur until late
summer or early fall 1996 after the Fund makes the necessary regulatory filings
associated with the proposed merger.
2
<PAGE> 5
ITEM 1. DESCRIPTION OF BUSINESS (CONTINUED)
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. See Item 2, "Properties" for a description of the Fund's
real property investments. The business of the Fund is not seasonal and the
Fund does no foreign or export business. The Fund has no real property
investments located outside of 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 each of whom 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 expenditures for environmental control facilities for the
year ended December 31, 1996.
The Fund elected to be treated as a real estate investment trust ("REIT")
under Internal Revenue Code Sections 856-860 during the fiscal years ended
December 31, 1993 and 1994. On January 30, 1995, 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 enable it to develop its tracts of undeveloped land and to
avoid the adverse tax effect of being deemed a dealer of real property.
Pursuant to the revocation of tax election 856(c)1, the Fund will be taxed as a
"C" corporation for the year ended December 31, 1995.
3
<PAGE> 6
ITEM 2. PROPERTIES
As of December 31, 1995, the Fund owned interests in seven properties.
Below is a brief description of property interests owned by the Fund:
<TABLE>
<CAPTION>
Name, Type and Location Date
of Property Size Acquired Description
<S> <C> <C> <C>
120 S. Spalding Building 65,500 8/6/90 Fee ownership of land and improvements
Medical Office Building sq. ft.
Beverly Hills, CA g.l.a.
Chapman's Landing 2,230 acres 3/5/91 a 51% interest in a general
Land Parcel partnership which provides for
Charles County, MD prioritized return of investment
Southbridge 2,048 acres 5/16/91 a 51% interest in a general
Land Parcel partnership which provides for a
Prince William prioritized return of investment
County, VA
Wayside 506 acres 5/16/91 a 51% interest in a general
Land Parcel partnership which provides for a
Prince William prioritized return of investment
County, VA
Bishop Ranch 565 acres 9/4/91 a 50% interest in a limited
Land Parcel partnership which provides for a
Monterey County, CA prioritized return of investment
Oakridge Golf Club 210 acres 3/6/91 a 50% interest in a general partnership
Land Parcel
Dania, FL
Rancho Malibu 274 acres 7/1/92 a 1.4% limited partnership interest in
Land Parcel a limited partnership
Los Angeles County, CA
</TABLE>
The Fund also owns a small "carried interest" in 950 L'Enfant Plaza an
eight story office building located in Washington, D.C. with two parking levels
located in a four-building complex with 232,000 square feet of rentable space.
The property is currently under a renovation and retenanting program which is
anticipated to be completed in 1996. The Fund is entitled to 2.5% of monthly
cash flow from operations of the property and 4% of the gross sales proceeds
of the property upon sale. The Fund is not entitled to participate in the
decisions of management in respect to the property.
The following summarizes 1995 and 1994 occupancy levels by quarter for 120
S. Spalding:
<TABLE>
<CAPTION>
1995 1994
at 12/31 at 9/30 at 6/30 at 3/31 at 12/31 at 9/30 at 6/30 at 3/31
<S> <C> <C> <C> <C> <C> <C> <C>
27% 27% 27% 27% 92% 92% 100% 100%
</TABLE>
4
<PAGE> 7
ITEM 3. LEGAL PROCEEDINGS
On September 1, 1995, an action was filed in the Circuit Court of Cook
County, Illinois entitled: Monterey County Partners et al v. BMIF Monterey
County Limited Partnership et al (the "Illinois Litigation"). The plaintiffs
in the Illinois Litigation are as follows: (a) Monterey County Partners, a
partnership which itself is a partner of the Fund's subsidiary, BMIF Monterey
County Corp., in a partnership known as BMIF Monterey County Limited
Partnership (the "Ownership Partnership"), which is the entity that owns the
Bishop Ranch project; (b) Investors Liquidating Trust, a Delaware Trust which
has been alleged to own 100% of the common stock of VMS Laguna Seca, Inc., the
1% general partner of VMS Laguna Seca Limited Partnership, which is an alleged
80% partner in Monterey County Partners and the 99% limited partnership
interest in VMS Laguna Seca Limited Partnership and (c) VMTGZ Mortgage
Investors, L.P.II, the principal beneficiary of Investors Liquidating Trust.
Named in the case as defendants, in addition to the Ownership Partnership
and BMIF Monterey County Corp. were: (a) Leonard G. Levine, President of the
Fund and (b) Banyan Management Corp., the company which provides administrative
services to the Fund pursuant to an Administrative Services Agreement. Mr.
Levine and Banyan Management Corp. were subsequently dismissed from this
litigation.
The complaint seeks: (i) the removal of BMIF Monterey County Corp. as the
general partner of the Ownership Partnership (BMIF Monterey County Limited
Partnership) and the replacement with Kimball Small Residential Properties,
Inc., a partner in Monterey County Partners; (ii) declaratory relief that BMIF
Monterey County Corp. is not entitled to any "priority return" or "preferred
return" on its capital account in the Ownership Partnership; (iii) avoidance of
an alleged fraudulent transfer whereby the Ownership Partnership became the
owner of the project after the default in 1991 on the Fund's former mortgage
loan to Monterey County Partners upon which the Fund had initiated foreclosure
proceedings which culminated in the execution of the Ownership Partnership
agreement; and the creation of a capital account in an amount not less than
approximately $4,800,000 in favor of Monterey County Partners; (iv) an
accounting and (v) a constructive trust to be created for the benefit of one of
the plaintiffs. Count I of the complaint, seeking the removal of BMIF Monterey
County Corp. as general partner and the replacement with Kimball Small
Residential Properties, Inc. has been stricken on the Fund's motion. An
amended Count I eliminates the request that Kimball Small Residential
Properties, Inc. be named as the replacement general partner.
The Fund filed an Answer, Counterclaim and Third Party Complaint on March
29, 1996. The Counterclaim seeks a dissolution of the Ownership Partnership
and a wind-up of its affairs and monetary damages against Monterey County
Partners. The Counterclaim and Third Party Complaint seek monetary damages
against Kimball Small Management and Kimball Small Residential Properties,
Inc., which were associated with Monterey County Partners. All parties have
served and answered initial discovery requests and are presently producing
documents.
The Fund believes the Illinois Litigation is totally without merit and
intends to vigorously defend the Illinois Litigation and to prosecute the
Counterclaim and the Third Party Complaint. The partnership agreement which
creates the Ownership Partnership requires an unsuccessful litigant
5
<PAGE> 8
ITEM 3. LEGAL PROCEEDINGS (CONTINUED)
or its representative whose claim is based upon or related to the partnership
agreement to pay the reasonable attorneys' fees of its opponent. The Fund
intends to seek reimbursement of all attorneys' fees expended or incurred in
defense of the Illinois Litigation.
On October 10, 1995, an action was filed in the Superior Court of Monterey
County, California entitled: Monterey County Partners, et al. v. BMIF Monterey
County Limited Partnership, et al., (the "California Litigation").
The plaintiff entity, which is a partner with the Fund's subsidiary, BMIF
Monterey County Corp., in the limited partnership known as BMIF Monterey
County Limited Partnership, which owns the Bishop Ranch property (the
"Ownership Partnership") has filed suit in its own name and derivatively on
behalf of the Ownership Partnership against the Ownership Partnership and each
of the participant entities in the Morgens, Waterfall, Vintiadis & Co., Inc.
("MWV") loan, which loan is partially guaranteed by the Ownership Partnership,
which partial guaranty is collateralized by a deed of trust recorded against
the Bishop Ranch property.
The California Litigation alleges fraudulent transfer and conspiracy and
seeks the following as remedies: (i) to set aside the Deed of Trust and the
obligations of the Ownership Partnership under the MWV guaranty, (ii) to quiet
title to the Bishop Ranch project, declaring null and void the interest of the
various defendant lenders which arises under the Deed of Trust and (iii) an
award of attorneys' fees and costs.
A motion to stay the California case, made by all defendants, was heard
and denied without prejudice on January 5, 1996. Subsequently, on March 8,
1996, the court held a hearing on several motions to dismiss filed by all
defendants. The California Court encouraged the parties to attempt to agree
upon a schedule for conducting discovery and a trial in the Illinois Litigation
while the California Litigation would remain in suspense. The court gave the
parties until April 19, 1996 to report to the court on the progress of such an
agreement. The parties appeared before the Illinois Court on April 3, 1996,
upon the defendants' motion, to request the Court to impose a discovery and
trial schedule. The Illinois Court ordered that if the parties conclude
discovery by September 13, 1996, a trial date would be set in September or
shortly thereafter.
None of the defendants has yet answered the California complaint. The Fund
believes that the California Litigation is totally without merit and intends to
vigorously defend it. The partnership agreement which creates the Ownership
Partnership requires an unsuccessful litigant or its representative whose claim
is based upon or related to the partnership agreement to pay the reasonable
attorneys' fees of its opponent. The Fund intends to seek reimbursement of all
attorneys' fees expended or incurred in defense of the California Litigation.
In a related but separate action entitled BMIF Monterey County Limited
Partnership v. Lombardo et. al., Superior Court of California, Monterey County,
the Ownership Partnership seeks a writ of possession against Anthony Lombardo,
a local attorney, who, the Ownership Partnership contends, formerly represented
it and who is therefore in possession of documents belonging to the Ownership
Partnership. The trial court denied the plaintiff's application for a writ of
possession and Lombardo has
6
<PAGE> 9
ITEM 3. LEGAL PROCEEDINGS (CONTINUED)
counterclaimed alleging abuse of process. The Ownership Partnership has filed
motions to dismiss the counterclaim. A hearing on the motions to dismiss has
been scheduled for May 10, 1996.
The Registrant is not aware of any other material pending legal
proceedings as of April 8, 1996.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Fund did not submit any matter to a vote of its security holders
during the quarter ended December 31, 1995.
7
<PAGE> 10
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S SHARES AND RELATED SHAREHOLDER MATTERS
Although the Fund's shares of common stock are listed on both the New York
Stock Exchange and the Chicago Stock Exchange, they trade principally on the
New York Stock Exchange under the symbol "VMG". The range of high and low
share prices as reported by the New York Stock Exchange for each of the
quarters in the years ended December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
Share Price
Quarter 1995 1994
<S> <C> <C> <C>
3/31 High $0.687 $1.250
Low $0.375 $0.938
6/30 High $0.750 $0.938
Low $0.625 $0.625
9/30 High $0.687 $0.938
Low $0.437 $0.688
12/31 High $0.500 $0.875
Low $0.375 $0.500
</TABLE>
As a result of the defaults by borrowers on the Fund's mortgage loans and
the resultant effect on the Fund's cash flow as well as capital needed to hold
and maximize the long-term value of the Fund's assets acquired through
foreclosure or deeds in lieu of foreclosure, no distributions were declared by
the Fund during the years ended December 31, 1995 and 1994. See Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for further details.
The Fund's ability to make future distributions to its stockholders is
dependent upon, among other things: (i) the Fund's ability to complete the
Agreement and Plan of Merger with RGI; (ii) the Fund's ability to consummate
the sale of 120 S. Spalding; (iii) the Fund's ability to control
operating/development expenses; (iv) the Fund's ability to consummate the sales
of finished lots at its development projects; (v) complete the sale of other
undeveloped ancillary land parcels and (vi) the general improvement of
conditions in the real estate markets where the Fund's properties are located.
See Item 7, "Management's Discussion and Analysis of Financial Condition and
Results of Operations" for further details.
At April 8, 1996, there were 10,374 record holders of the Fund's shares of
common stock.
8
<PAGE> 11
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
For the Year Ended December 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Cash and Cash
Equivalents $ 316,012 $ 8,040,629 $ 3,750,553 $ 2,605,685 $ 4,167,997
Investment in Real ============ ============= ============= ============= ============
Estate (1) $103,428,617 $110,493,745 $127,562,429 $127,100,840 $177,203,644
============ ============= ============= ============= ============
Properties Owned at
December 31 5 5 8 10 15
============ ============= ============= ============= ============
Total Assets $109,133,514 $124,667,926 $136,227,364 $135,816,276 $201,583,955
============ ============= ============= ============= ============
Mortgage Loans
Payable $ 33,625,737 $ 31,932,645 $ 33,307,035 $ 35,472,262 $ 79,392,447
============ ============= ============= ============= ============
Total Income $ 1,399,918 $ 3,600,930 $ 4,975,764 $ 5,184,375 $ 12,303,971
============ ============= ============= ============= ============
(Recovery of)
Provision for Losses
on Mortgage Loans,
Notes, and Interest
Receivable and Class
Action Settlement
Costs and Expenses $ (906,629) $ (1,095,800) $ (7,916,073) $ 178,000 $ 723,513
Provision for Losses ============ ============= ============= ============= ============
on Investment
Properties $ 12,900,000 $ 9,000,000 $ 4,650,000 $ 1,900,000 $ 11,567,252
============ ============= ============= ============= ============
Income (Loss) Before
Extraordinary Item $(18,544,207) $(12,096,171) $ 1,139,858 $ (5,603,869) $(21,030,711)
============ ============= ============= ============= ============
Net Income (Loss) $(18,544,207) $ (9,282,279) $ 1,139,858 $ (5,603,869) $(21,030,711)
============ ============= ============= ============= ============
</TABLE>
9
<PAGE> 12
ITEM 6. SELECTED FINANCIAL DATA (CONTINUED)
<TABLE>
<CAPTION>
For the Year Ended December 31
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Income (Loss) Per
Share of Common
Stock Before
Extraordinary
Item $ (0.47) $ (0.30) $ 0.03 $ (0.14) $ (0.53)
============ ============= ============= ============= ============
Net Income (Loss) Per
Share of Common
Stock (2) $ (0.47) $ (0.23) $ 0.03 $ (0.14) $ (0.53)
============ ============= ============= ============= ============
</TABLE>
(1) Represents the carrying amount of the Fund's Investment in Real Estate
less accumulated depreciation and valuation adjustments for losses on
investment properties.
(2) For the year ended December 31, 1995, a weighted average number of shares
(39,770,637) was used for calculating Net Income (Loss) Per Share due to
the issuance of 79,909 shares of common stock during the third quarter of
1995. For the year ended December 31, 1994, a weighted average number of
shares (39,724,995) was used for calculating Net Income (Loss) Per Share
due to the issuance of a total of 53,101 shares of common stock during the
second quarter of 1994. The shares outstanding for 1993 are 39,689,294.
For the year ended December 31, 1992 a weighted average number of shares
(39,690,132) was used for calculating Net Income (Loss) Per Share of
Common Stock due to the acquisition of 20,100 Shares of Common Stock by
the Fund on January 16, 1992 which are being treated as treasury stock for
financial statement presentation. The shares outstanding for 1991 are
39,709,394.
10
<PAGE> 13
ITEM 6. SELECTED FINANCIAL DATA (CONTINUED)
QUARTERLY RESULTS OF OPERATIONS
The following is a summary of the quarterly results of operations for the
years ended December 31, 1995 and 1994.
<TABLE>
<CAPTION>
Three Months Ended
1995 March 31 June 30 September 30 December 31
<S> <C> <C> <C> <C>
Total Income $ 617,371 $ 325,174 $ 231,503 $ 225,870
Recovery of Losses on Mortgage
Loans, Notes, Interest
Receivable and Class Action Settlement
Costs and Expenses 495,591 --- --- 411,038
Provision for Losses on Investment
in Real Estate (1) --- --- --- (12,900,000)
Operating Expenses (2,015,086) (1,995,161) (1,834,234) (1,897,147)
Loss From Operations
of Real Estate Venture (43,629) (47,087) (67,645) (55,155)
Gain (Loss) on Disposition of
Real Estate 1,017 6,541 (3,168) ---
----------- ----------- ------------ ------------
Net Loss (2) $ (944,736) $(1,710,533) $(1,673,544) $(14,215,394)
=========== =========== ============ ============
Net Loss Per Share of Common
Stock (2) $ (0.02) $ (0.04) $ (0.04) $ (0.36)
=========== =========== ============ ============
</TABLE>
11
<PAGE> 14
ITEM 6. SELECTED FINANCIAL DATA (CONTINUED)
<TABLE>
<CAPTION>
Three Months Ended
1994 March 31 June 30 September 30 December 31
<S> <C> <C> <C> <C>
Total Income $ 1,213,720 $ 972,571 $ 688,699 $ 725,940
Recovery of Losses on Mortgage
Loans, Notes, and Interest
Receivable and Class Action Settlement Costs 796,985 --- --- 298,815
Provision for Losses on Investment
in Real Estate (1) --- --- --- (9,000,000)
Operating Expenses (2,151,917) (2,361,020) (1,541,806) (1,810,863)
Income (Loss) From Operations
of Real Estate Venture (50,202) (163,596) 717,948 (62,059)
Arbitration Award --- (3,768,743) 518,743 ---
Gain (Loss) on Disposition of
Real Estate (35,423) 2,864,083 226,264 (174,310)
----------- ----------- ------------ ------------
Income (Loss) Before Extraordinary
Item (226,837) (2,456,705) 609,848 (10,022,477)
Forgiveness of Debt --- --- --- 2,813,892
----------- ----------- ------------ ------------
Net Income (Loss) (3) $ (226,837) $(2,456,705) $ 609,848 $ (7,208,585)
=========== =========== ============ ============
Income (Loss) Per Share of Common Stock $ (0.01) $ (0.06) $ 0.02 $ (0.25)
Before Extraordinary Item =========== =========== ============ ============
Net Income (Loss) Per Share of Common Stock(3) $ (0.01) $ (0.06) $ 0.02 $ (0.18)
=========== =========== ============ ============
</TABLE>
(1) During the quarters ended December 31, 1995 and 1994, the Fund recorded
an additional provision for losses on investment properties of $12,900,000
and $9,000,000, respectively.
(2) For the first and second quarters of 1995, Net Income (Loss) per share is
computed using 39,742,395 shares then outstanding. On August 25, 1995,
the Fund issued 79,909 shares of common stock to Leonard G. Levine, its
President, according to his employment agreement. Accordingly, Net Income
(Loss) per share is computed using 39,774,532 shares representing the
weighted average number of shares outstanding during the third quarter.
For the fourth quarter of 1995, 39,822,304 shares were used to compute Net
Income (Loss) per share.
(3) For the first quarter of 1994, Net Income (Loss) per share is computed
using the 39,689,294 shares then outstanding. On April 29, 1994, the Fund
issued 50,437 shares of its common stock to Leonard G. Levine, its
President, according to the terms of his employment agreement and 2,664
shares of its common stock on May 31, 1994 in connection with the exercise
of certain vested options granted to certain officers of the Fund and
employees of Banyan Management Corp. pursuant to the Executive and
Directors Stock Option Grant Plan approved by the Fund's shareholders in
June of 1993. Accordingly, Net Income (Loss) per share is computed using
39,725,119 shares representing the weighted average number of shares
outstanding during the second quarter. There were 39,742,395 shares
outstanding during the third and fourth quarters of 1994.
12
<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Banyan Mortgage Investment Fund (the "Fund") was originally established to
invest primarily in (i) short-term loans, junior mortgage loans, wraparound
mortgage loans and first mortgage loans on income-producing properties and (ii)
construction loans, pre-development loans and land loans. In response to
defaults on loans made by the Fund to its borrowers, in February 1990, the Fund
suspended making new loans, except for advances of additional funds under
circumstances which it 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.
The Fund owns interests in an office building and five undeveloped or
partially developed parcels of land aggregating approximately 5,600 acres. In
particular, the Fund effectively owns 100% of the Southbridge, Wayside, Charles
County and Bishop Ranch projects since the remaining limited partnership
interests in the projects are subordinated to a specific return on investment
to the Fund. Based on current financial projections, proceeds to be generated
from the projects will likely be insufficient to meet the total prioritized
return due to the Fund. Therefore, since such limited partners have made no
investment in the respective partnerships, have no control over the operations
of the partnerships and are not obligated to fund losses in excess of their
investment, their minority interests have been accorded no value in the Fund's
financial statements. The Fund believes that the value of these assets can be
enhanced through some combination of: (i) prudent management, (ii) enhancement
of entitlements and zoning applicable to the undeveloped land; and (iii)
completing infrastructure improvements and developing lots for sale to
builders. A substantial portion of the Fund's assets, measured by the carrying
value, is comprised of interests in large tracts of undeveloped land in
metropolitan Washington D.C. and Northern California all of which are in
various stages of the entitlement process. The Fund believes that long-term
shareholder value will be maximized by completing the entitlements and various
infrastructure improvements at the Wayside Village, Southbridge, Chapman's
Landing and Bishop Ranch properties which could make each of these properties
more marketable. As of December 31, 1995, the Fund's cash position and
financing capabilities were insufficient to proceed with the entitlement and
development of its assets. The Fund is currently working to enhance its cash
and liquidity position through the sale of the 120 S. Spalding property and
smaller ancillary land parcels extraneous to the overall development plan of
its undeveloped land parcels. The Fund has also entered into an Agreement and
Plan of Merger (the "Merger Agreement") dated as of April 12, 1996 with RGI
Holdings, Inc. ("RGI Holdings") and its wholly owned affiliate, RGI U.S.
Holdings, Inc., ("RGI U.S." or collectively "RGI"). The Fund entered into the
Merger Agreement with RGI in order to provide the Fund with cash liquidity and
capital resources necessary to proceed with the implementation of its business
plan.
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 December 31,
1994 was $316,012 and $8,040,629, respectively. This decrease in cash and cash
equivalents is due primarily to the payment of approximately $8,500,000 of
expenses and capitalized items related to the Chapman's Landing, Southbridge,
Wayside Village and Bishop Ranch properties, the payoff of approximately
$1,041,000 of the Wayside Village and Southbridge mortgage loan principal, the
payment of approximately $842,000 of interest on the Morgens Loan, the purchase
of approximately $55,000 of land and the payment of the Fund's operating
expenses.
13
<PAGE> 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Partially offsetting the decreases in cash was the receipt of $1,028,539 of net
proceeds from the Wayside Village lot sales, the receipt of $981,950 of
distributions from the Fund's interests in the liquidating trusts established
for the benefit of the unsecured creditors of VMS, approximately $254,000 of
interest earned on cash and cash equivalents and income from property operating
activities.
Management has taken a number of steps to enhance the Fund's working
capital position. Over the past several years, the Fund's liquidity has been
provided by cash generated from the operations of the Fund's existing operating
properties which currently consist solely of 120 S. Spalding (scheduled
to be sold on April 19, 1996 for $7,450,000), interest on short term
investments, cash proceeds from property sales, interim financing, and cash
distributions received from the liquidating trusts. Historically, these
sources have not produced the working capital necessary to meet the
requirements for both development and entitlement costs related to the Fund's
development properties and the Fund's operating costs.
On October 17, 1994, the Fund executed a Credit Agreement with a group
of lenders for which Morgens, Waterfall, Vintiadis & Co. Inc. served as agent
in the amount of $20,500,000. The Fund was obligated to make quarterly
interest payments in arrears at an annual rate of 17.5% as well as certain
payments, which were applied to repay Morgens Loan interest, based on 50% of
the net cash flow generated by its wholly owned subsidiaries. For the year
ended December 31, 1995, the Fund made cash flow payments of $841,548 which
were treated as payments of deferred interest. From October 17, 1994 until
September 30, 1995, the Fund elected to defer interest due on the Morgens Loan,
other than the cash flow payments, which were added to the outstanding
principal balance of the loan. As of December 31, 1995, the principal balance
outstanding, including capitalized interest through September 30, 1995, was
$23,233,737. The Morgens Loan is collateralized by first mortgages on the 120
S. Spalding, Chapman's Landing and Bishop Ranch properties and portions of the
Southbridge property, as well as pledges of the common stock and partnership
interests of the Fund's subsidiaries, the Fund's accounts receivable, bank
accounts and all other tangible and intangible personal property.
The Fund utilized the net proceeds of the Morgens Loan to repay
outstanding loans collateralized by first mortgages on the Chapman's Landing
and Bishop Ranch properties in the amount of $1,130,853 and $1,959,409,
respectively, and $3,250,000 to fund its obligation arising from Buckeye
arbitration. The Fund also paid a total of $4,323,630 from the
14
<PAGE> 17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Morgens Loan proceeds to Chase Manhattan Bank ("Chase"), in exchange
for Chase's full release of its 50% interest in the $14,069,462 outstanding
loan collateralized by a first mortgage on the Wayside Village property and
portions of the Southbridge property (the "Original Wayside Loan"). The
payment to Chase consisted of a partial principal payment of $4,220,839, which
represented Chase's $7,034,731 principal portion of the Original Wayside Loan,
less a 40% discount, and accrued interest of $102,791. Simultaneously, the
Fund and Societe Generale ("SoGen") agreed to modify the terms of SoGen's
$7,034,731 principal portion of the Original Wayside Loan (the "Amended Wayside
Loan"). The terms of the loan modification agreement (the "Amended Agreement")
extended the maturity date of the Amended Wayside Loan to December 31, 1997 and
provided for monthly interest payments, in arrears, at an interest rate of
prime plus 200 basis points. The Fund and SoGen also agreed upon a $2,000,000
revolving credit line (the "Revolving Loan") to fund specific development costs
associated with lot sales contracts for the Wayside Village property. The
terms of the Revolving Loan provide for monthly interest payments in arrears at
an interest rate of prime plus 300 basis points. The Amended and Revolving
Wayside Loans require principal to be repaid as lots are sold, based on
specified release prices, and are cross-collateralized and cross-defaulted.
Pursuant to the SoGen transactions, the Fund paid $34,731 to reduce the
outstanding Amended Wayside Loan principal to $7,000,000. The Fund also paid
accrued interest of $102,791, loan fees of $95,000 and other fees and expenses
totalling approximately $188,500 from the Loan proceeds, including $126,500
escrowed for future real estate taxes on Wayside Village.
In August and September of 1995 the Fund submitted several draw
requests to SoGen under the Revolving Loan. SoGen declined to disburse cash
proceeds to the Fund under the Revolving Loan agreement. It was the opinion of
SoGen that the development costs as submitted pursuant to the Fund's draw
requests did not qualify as fundable costs defined under the Revolving Loan.
It is the Fund's position that all development costs as submitted qualified as
"fundable costs" and were in complete compliance with the Revolving
Loan agreement. As a result of SoGen's refusal to honor the Revolving Loan
agreement, the Fund did not make its principal and interest payment due October
1, 1995 on its Amended Wayside Loan. On November 3, 1995, SoGen declared a
default under the Amended Wayside Loan. As a result of the default, SoGen has
demanded immediate repayment of all sums due under the loan, amounting to
approximately $6,600,000 which includes the outstanding principal balance of
$6,360,000. In addition, SoGen separately cancelled the Revolving Loan. The
Fund had not drawn any monies to date under the Revolving Loan. On March 23,
1996 SoGen gave the Fund notice of a foreclosure sale which was scheduled for
April 10, 1996. On April 5, 1996 SoGen agreed to postpone the sale to a date
not earlier than May 20, 1996 in exchange for which the Fund paid SoGen
$25,000.
It is the Fund's contention that a limited number of lots were developed
at Wayside Village during the past construction season due, in large part, to a
seven-month delay in obtaining SoGen's consent to a subordination agreement
among the Fund, a home builder and SoGen, causing the Fund to seek deferral of
the mandatory principal payments due and to
15
<PAGE> 18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
become due during the remaining nine months of 1996. The Fund has also
been unsuccessful in its efforts to obtain a draw under the Revolving Loan as
discussed above, despite the Fund's interpretations of the Revolving Loan
agreement and submission of what the Fund believes are appropriate draw
requests and documentation to SoGen. The Fund has expended $3,270,000 in
infrastructure improvements and other costs during the last year as a condition
precedent to such funding requests. As a result of these delays and SoGen's
refusal to honor the Revolving Loan agreement, the Fund was unable to complete
various infrastructure improvements at its Wayside Village project which
impeded the Fund's ability to realize approximately $7,000,000 in lot sales
revenues as originally projected for the year ended December 31, 1995.
The default and acceleration of the SoGen Loan constitutes a default
under the Morgens Loan. In addition, the Fund has not made the January 1, 1996
and April 1, 1996 interest payments of approximately $1,025,000 and
approximately $1,014,000, respectively, due under the Morgens Loan. Morgens has
indicated that it does not presently intend to accelerate repayment of its loan
as a result of the default under the SoGen Loan or by reason of the failure by
the Fund to make either the January 1, 1996 or April 1, 1996 interest payment
due under the Morgens Loan agreement. Morgens has notified the Fund that this
nonpayment of interest constitutes an Event of Default under the Credit
Agreement. Morgens has entered into an agreement to sell the Morgens Loan to
RGI Holdings, Inc. provided that the warrants issued to the lenders of the
Morgens Loan by the Fund will be cancelled by the Fund as part of this sale.
In addition, the Fund anticipates entering into an agreement with RGI Holdings
modifying the terms of the Morgens Loan to provide the Fund with additional
flexibility in implementing its business plan.
During 1995, the Fund has continued its efforts to enhance its
liquidity position through the sale of the 120 S. Spalding property and smaller
ancillary land parcels extraneous to the overall development plan of its
undeveloped land parcels. Subsequent to December 31, 1995 the Fund entered
into a contract with an unaffiliated third party to sell 120 S. Spalding for
$7,450,000. The sale of 120 S. Spalding is scheduled to occur on April 19,
1996. The cash proceeds received from the sale of 120 S. Spalding will be
redeployed to continue with the entitlement and development of the Fund's land
parcels as discussed above and to pay interest and restructure its long term
debt. However, cash proceeds generated from the sale of 120 S. Spalding and
the smaller land parcels will be insufficient to provide the Fund with the cash
proceeds necessary for the continued implementation of its business plan.
Therefore, effective as of April 12, 1996, the Fund entered into an Agreement
and Plan of Merger (the "Merger Agreement") with RGI Holdings, Inc. ("RGI
Holdings") and its wholly owned affiliate RGI U.S. Holdings Inc., ("RGI U.S."
or collectively "RGI"). The Fund entered into the Merger Agreement with RGI in
order to provide the Fund with cash liquidity and capital resources necessary
to proceed with the implementation of its business plan. Under the Merger
Agreement, RGI Holdings will invest $3,500,000 to acquire 7,466,666 shares or
approximately 16% of the Fund's outstanding common stock, and will purchase the
Morgens Loan and SoGen Loan from the holders thereof. RGI Holdings has agreed
that prior to December 31, 1996 it will not accelerate the Morgens Loan or
SoGen Loan or foreclose on any collateral for the Morgens Loan or SoGen Loan
based upon (i) any events of default occurring before May 15, 1996; or (ii) any
non-monetary defaults occurring after May 15, 1996 but before the merger or the
termination of the Merger Agreement; or (iii) as a result of the execution of
the Merger Agreement. Subject to the approval of the
16
<PAGE> 19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Fund's stockholders, RGI U.S. will be merged with and into the Fund
with all of the outstanding shares of RGI U.S. being converted to 151,445,333
shares of the Fund's common stock. RGI U.S. owns a shopping center in
Lynnwood, Washington and two development properties in Vero Beach, Florida. If
the merger is approved, RGI Holdings will own approximately 80% of the Fund's
outstanding shares of common stock. The Fund anticipates seeking a vote on
this merger at its annual meeting which is not expected to occur until late
summer or early fall 1996 after the Fund makes the necessary regulatory filings
associated with the proposed merger.
Management of the Fund believes that its remaining cash reserves, proceeds
from the sale of 120 S. Spalding, its interest in the Oakridge Venture,
ancillary land parcels at its development properties and the cash proceeds and
capital resources to be derived from the Agreement and Plan of Merger with RGI,
will enable the Fund to execute the business plans of its real estate assets
and should provide sufficient funds to meet its reasonably expected liquidity
needs for the foreseeable future.
During 1995, the Fund received cash distributions of $981,950 in
respect of its interests in liquidating trusts established for the benefit of
the unsecured creditors, including the Fund, of VMS Realty Partners and its
affiliates ("VMS"). For the year ended December 31, 1995, the Fund has treated
$906,629 of these distributions as a recovery of losses on loans, notes,
interest receivable and class action settlement costs and expenses. The
$906,629 net recovery recorded in 1995 represents the total $981,950
distributions received net of an estimated $75,321 due to the Class Action
Settlement Fund representing the Fund's share of amounts due as required per
the terms of the previously settled VMS securities litigation. During 1994 and
1993, the Fund recorded $298,815 and $7,916,073, respectively, on its
Consolidated Statements of Income and Expenses as a recovery of losses on
mortgage loans, notes and interest receivable in respect of distributions
received from the liquidating trusts. The $298,815 net recovery realized in
1994 includes the recognition of a $350,962 distribution received net of the
estimated $52,147 due to the Class Action Settlement Fund. As of December 31,
1995 the Fund owed $127,468 to the Class Action Settlement Fund.
17
<PAGE> 20
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS
GENERAL
Total income for the years ended December 31, 1995, 1994 and 1993 was
$1,399,918, $3,600,930 and $4,975,764, respectively. Total income for the year
ended December 31, 1995 decreased by $2,201,012 when compared to the same
period in 1994 due primarily to the decrease in operating property income.
Operating property income decreased to $1,230,028 for the year ended December
31, 1995 from $3,455,283 for the year ended December 31, 1994. This decrease
is primarily attributable to the 65% decrease in occupancy and the resulting
decline in rental income at the 120 S. Spalding property which occurred in
March 1995. Partially offsetting this decline was a slight increase in
interest income earned on cash and cash equivalents. Total income for the year
ended December 31, 1994 decreased by $1,374,834 when compared to the year ended
December 31, 1993. This decrease was due to a $1,481,569 decrease in operating
property income. Operating property income decreased as a result of the Fund's
May 26, 1994 sale of the Cascades Apartments and the corresponding decrease of
approximately $1,200,000 in rental income for 1994 when compared to 1993. In
addition, prior to its sale on September 23, 1994, the 9025 Wilshire Blvd.
building was unoccupied for most of 1994 due to structural damage caused by the
January 17, 1994 Los Angeles area earthquake which further contributed to a
decrease in operating property income. During 1993, the 9025 Wilshire
Boulevard property generated gross operating property income of approximately
$227,000. Partially offsetting this decline in property operating revenue was
an $80,987 increase in rental income at 120 S. Spalding for the year ended
December 31, 1994 when compared to the year ended December 31, 1993. Interest
income earned on income from cash and cash equivalents increased approximately
$107,000 for the year ended December 31, 1994 when compared to 1993 due to the
receipt of cash proceeds from property sales and the Morgens Loan financing
which increased the amount of cash available for short term investment.
Management reviews the properties held by the Fund on a quarterly basis
utilizing current market information, including appraisals, market studies,
financial projections and sales comparisons. When it has been determined, in
management's opinion, that a permanent impairment in the value of a given
property has occurred due to changes in market conditions and/or business
strategy, the carrying value of the property is adjusted accordingly.
Expenses from property operations for the years ended December 31,
1995, 1994 and 1993 were $15,607,077, $11,939,380 and $8,554,566, respectively.
The increase in expenses from property operations for the year ended December
31, 1995 when compared to the year ended December 31, 1994 is primarily
attributable to an increase of $3,900,000 in the provision for losses on
investment properties and an increase of approximately $708,000 in development
property expenditures. For the year ended December 31, 1995, the Fund recorded
a $6,000,000 provision for losses on investment properties in respect to its
Wayside project, a $3,600,000 provision for losses on investment properties in
respect to its 120 S. Spalding building and a $3,300,000 provision for losses
on investment properties in respect to its Bishop Ranch Project. The provision
for losses on investment properties related to the Wayside project, for the
year ended December 31, 1995 results of the Fund's inability to complete lot
and infrastructure improvements at the project as originally scheduled pursuant
to its business plan due to a continued shortfall in cash resources as
discussed below. In addition, for the year ended December 31, 1995, the Fund
recorded a provision for losses on investment properties against the carrying
value of its 120 S. Spalding property. The carrying value of the 120 S.
Spalding property has been written down to reflect the fair market value as
evidenced by a contract for sale of the property which was executed in February
of 1996 and is expected to be consummated on April 19, 1996.
18
<PAGE> 21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
It is the Fund's intent to utilize the proceeds from the sale of 120 S.
Spalding to continue with the development of its development assets as
discussed below. A $3,300,000 provision for losses on investment properties
was recorded for Bishop Ranch during the fourth quarter of 1995. This provision
was necessary due to the additional holding costs incurred on the property
caused primarily by the protracted entitlement process. The increase in
development property expenditures relates to costs associated with the
increased sales, advertising and marketing efforts for the Wayside Village and
Chapman's Landing projects. Partially offsetting these increases was the
decrease in operating property expenses, repairs and maintenance, real estate
taxes and depreciation expenses of approximately $916,000 for the year ended
December 31, 1995 when compared to 1994. These decreases were due to the sale
of the Cascades Apartments, the 9025 Wilshire Blvd. building and the Rocky
Point property in the second and third quarters of 1994. Bad debt expense also
decreased for 1995 by approximately $25,000 when compared to 1994 due primarily
to the favorable settlement of certain outstanding receivables at the 120 S.
Spalding building.
The increase of approximately $3,385,000, in expenses from property
operations for the year ended December 31, 1994 when compared to the year
ended December 31, 1993 was primarily attributable to a $4,350,000 increase in
the provision for losses on investment properties. In particular, for the
quarter ended December 31, 1994, the Fund recognized a $9,000,000 provision for
losses on investment properties compared to a $4,650,000 provision for losses
on investment property recognized for the quarter ended December 31, 1993. The
$9,000,000 provision for losses on investment properties consisted of a
$6,000,000 provision taken on the 120 S. Spalding property and a $3,000,000
provision taken on the Wayside development.
With respect to the Fund's operating property, 120 S. Spalding, the
$6,000,000 provision for losses on investment properties was recognized by the
Fund, upon notification from the building's largest tenant, which occupied
two-thirds of the building, that it was relocating. In light of the
engineering plans and cost projections assembled pursuant to the redevelopment
business plan for 120 S. Spalding, the revised projection of market leasing
rates and the interest cost on the Morgens Loan discussed above, the Fund
determined that an immediate sale of the property could generate a return to
shareholders that is comparable to the proceeds available after incurring
redevelopment expenses given the development and leasing risk associated with
refurbishing the property.
The $3,000,000 provision for losses on investment properties regarding the
Wayside development was required as a result of the Fund's inability to
complete lot and infrastructure improvements at Wayside as originally scheduled
due to a shortfall in cash resources. As a result, the Fund was unable to
complete and sell the same volume of lots and home sites as originally
projected in its business plan, thereby extending the time frame, in excess of
two years, for the sell-off of the Wayside development. As a result of the
delay, holding costs were increased which include interest on the Amended
Wayside Loan at prime plus 200 basis points and interest on a portion of the
Morgens Loan at 17.5%. At April 1, 1996, the prime rate as published in the
Wall Street Journal was 8.25%. The holding costs associated with the project
during 1994 were capitalized and
19
<PAGE> 22
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
added to the carrying value of the Wayside Development. The additional costs
associated with holding the property, based on the revised time frame required
for the disposition and sell-off of the Wayside Development, would have
exceeded the projected cash recovery for the development if the provision had
not been recognized.
The $4,650,000 provision for losses on investment properties as recorded
in 1993 was primarily the result of the continued decline in real estate values
in the Southern California office market.
Also contributing to the increase in expenses from property operations for
the year ended December 31, 1994 when compared to 1993, was the $271,000
increase in development property expenses. These expenses reflect costs
related to the Southbridge development. Effective January 1, 1994, after an
interruption of progress toward active development of the Southbridge site had
occurred and after the VMIF/Anden Southbridge Venture filed a voluntary
petition under Chapter 11 of the U.S. Bankruptcy Code, the Fund made a decision
not to capitalize these costs. The Bankruptcy Court confirmed the Venture's
plan of reorganization on December 21, 1994. (See Property Operations for
further details.) These increases in Provision for Losses on Investment
Properties and the increases in development property expenses were partially
offset by decreases in operating property expenses, repair and maintenance
expenses and depreciation expense attributable to the sale of the Cascades
Apartments and the 9025 Wilshire building during the second and third quarter
of 1994 and the exclusion of its expenses for the remainder of the year ended
December 31, 1994. Bad debt expense also decreased for the year ended December
31, 1994 when compared to the same period in 1993 due to the settlement of
certain outstanding receivables at the 120 S. Spalding and 9025 Wilshire Blvd.
buildings which took place during 1993.
Total other expenses (recoveries) for the year ended December 31, 1995,
1994, and 1993 were $4,127,922, $3,830,426 and ($4,264,742), respectively. The
$297,496 increase in other expenses (recoveries) for the year ended December
31, 1995 when compared to 1994, was primarily due to an increase in interest
expense and amortization of deferred loan, and other costs as well as a
decrease in the recovery of losses on mortgage loans, notes, interest
receivable and class action settlement costs and expenses. The $696,792
increase in interest expense and amortization of deferred loan and other costs
is a result of the Morgens Loan completed in October of 1994. In addition, the
decrease in the recovery of losses on mortgage loans, notes, interest
receivable and class action settlement costs and expenses is attributable to
the non-recurring receipt of $796,985 representing net proceeds from a recovery
of payments previously made into an escrow established as part of the class
action settlement of the VMS securities litigation on January 25, 1994. During
1994, the Fund also recorded a $298,815 recovery related to its interest in the
liquidating trusts. The 1994 recovery of $1,095,800 exceeded the 1995 recovery
of $906,629 of losses on mortgage loans, notes and interest receivable by
approximately $189,000. The 1995 recovery related to its distributions
received from the Fund's interests in the liquidating trusts as discussed above
in Liquidity and Capital Resources. Partially offsetting the increase in
expenses and decrease in recoveries for 1995 when compared to 1994, was a
decrease in stockholder expenses, directors' fees, expenses and
20
<PAGE> 23
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
insurance, other professional fees, and general and administrative expenses.
Stockholder expenses decreased by $57,939 due to Banyan Management Corp. ("BMC")
personnel performing more of the responsibilities related to investor relations
as apposed to outside third parties. Directors fees, expenses and insurance
decreased by $96,361 due to the improved rates received for directors and
officers insurance. Other professional fees decreased by $184,509 as a result
of the decreased expenditures for legal costs attributable to the Buckeye
arbitration which was settled in October 1994. General and administrative
expenses decreased by $249,658 primarily due to a decrease in the number of
hours spent by BMC personnel on Fund-related matters. In comparison, during
1994, a significant amount of time and resources were devoted to exploring
various sources of financing for the Fund, resolving the Beverly Hills
arbitration and negotiating of the sale of the Cascades and Rocky Point
properties.
Total other expenses (recoveries) for the year ended December 31, 1994
reflect an increase of approximately $8,095,000 when compared to 1993. The
increase is primarily due to a decrease in recovery of losses on mortgage
loans, notes, interest receivable and class action settlement costs and
expenses. Also contributing to this increase is an increase in interest
expense and amortization of deferred loan costs, stockholder expenses, other
professional fees, general and administrative expenses. In 1993 the Fund
recorded a $7,916,073 recovery of losses on mortgage loans, notes, interest
receivable and class action settlement costs and expenses with respect to its
interests and receipt of distributions from two liquidating trusts (see
Liquidity and Capital Resources above and Note 6 to the Notes to Consolidated
Financial Statements for further details). In 1994 the Fund recorded a
recovery of $298,815 with respect to distributions received from the
liquidating trusts and a recovery of $796,985 related to the recovery of net
escrow proceeds attributable to the litigation captioned "In re VMS Securities
Litigation". Interest expense and amortization of deferred loan costs
increased by approximately $914,000 for the year ended December 31, 1994 when
compared to 1993. This increase is primarily attributable to approximately
$538,000 of Southbridge related interest expenses recorded during 1994 which
had been capitalized in 1993. Also, during the second quarter of 1994 the Fund
wrote-off approximately $484,000 of deferred loan fees in connection with the
repayment of the Fund's Heller Loan obligation. In 1993, the Fund incurred
$887,786 in interest expense, amortization of deferred loan, and other costs
relating to the Fund's Heller Loan and $35,395 related to amortization of
organizational costs. Stockholder expenses for 1994 increased when compared to
1993 due to the increased annual report and transfer service costs. Other
professional fees increased for 1994 when compared to 1993 as a result of
increased expenditures for legal and other consulting costs attributable to the
Beverly Hills arbitration as discussed below. General and administrative
expenses for 1994 increased when compared to the prior year due primarily to an
increase in BMC expenses which were allocated to the Fund based on the hours
spent by BMC personnel on Fund-related matters. Partially offsetting these
increases, director's fees, expenses and insurance decreased slightly for 1994
when compared to 1993 due to lower directors' and officers' expenses as a
result of a decrease in board meeting costs.
21
<PAGE> 24
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
The line item "Net Loss from Operations of Real Estate Ventures" relates
to the Oakridge Venture and was $213,516 and $560,347 for the years ended
December 31, 1995 and 1993, respectively compared to net income of $442,091 for
the year ended December 31, 1994. The 1994 net income includes the Fund's
portion of a gain of $869,704 on the sale of a 60-acre portion of the Oakridge
site and a $427,613 loss on operations. The $213,516, $427,613 and $560,347
loss on operations for the years ended 1995, 1994 and 1993 related primarily to
the costs of zoning the property and marketing it for sale. The continuous
decline in operating expenses reflects the completion of the zoning process and
negotiation of several sales contracts.
The line item entitled "Arbitration Award" appearing in 1994 and not
repeated in 1995 relates to a one-time arbitration award paid by the Fund in
1994. The Fund and Banyan Mortgage Investors L.P. II ("BMLPII"), acting for
itself and on behalf of THSP Associates L.P. II ("THSP") (formerly Banyan
Mortgage Investors L.P. III), had agreed to resolve, by means of arbitration,
the issue of the amount of compensation, if any, owed by the Fund to BMLPII in
consideration for BMLPII's agreement to relinquish, and take no action with
respect to its interests in certain Beverly Hills, California properties
commonly known as the Buckeye properties which the Fund took control of in
1990. On July 20, 1994, a panel of arbitrators awarded BMLPII approximately
$3,768,000. Subsequently, a negotiated settlement was reached, and on October
17, 1994, the award was satisfied by the Fund's payment of $3,250,000.
For the years ended December 31, 1995, 1994 and 1993, the Fund recognized
gains on the disposition of real estate in the amount of $4,390, $2,880,614 and
$1,014,265, respectively. See Property Operations below for additional details
regarding the sale of the Fund's properties.
For the year ended December 31, 1994, the Fund recognized a $2,813,892
extraordinary gain from the forgiveness of debt related to the refinancing of
the existing debt on the Wayside development. See Property Operations below
for further details.
The above changes for the year ended December 31, 1995 and 1994 resulted
in a net loss of $18,544,207 ($0.47 per share) and $9,282,279 ($0.23 per
share), respectively compared to net income of $1,139,858 ($0.03 per share) in
1993.
PROPERTY OPERATIONS
At December 31, 1995, the Fund owned an office building located at 120 S.
Spalding Dr. in Beverly Hills, California which was 27% leased (92% leased as
of December 31, 1994). For the year ended December 31, 1995, the 120 S.
Spalding property provided the Fund with cash flow from rental income in excess
of operating expenses of approximately $304,000 as compared to approximately
$1,700,000 for 1994. The $1,396,000 decrease is a result of the decrease in
rental income attributable to the expiration of the lease of the building's
largest tenant, City National Bank ("City National") which occupied two-thirds
of the building. A provision for losses on investment properties in the amount
of $3,600,000 and $6,000,000 was recognized by the Fund for the quarters ended
December 31, 1995 and 1994, respectively with respect to the 120 S. Spalding
building. With the notification from City National that it was relocating, the
Fund proceeded
22
<PAGE> 25
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
with the previously announced plan to redevelop and re-lease the space vacated
by City National as medical office space along with marketing the property for
sale. In light of the engineering plans and cost projections assembled pursuant
to the redevelopment business plan, the revised projection of market leasing
rates and interest costs on the financing of a redevelopment of property, the
Fund determined that an immediate sale of the property could generate a return
to shareholders that is comparable to the proceeds available after incurring
redevelopment expenses given the development and leasing risk associated with
refurbishing the property. The provision for loss recognized in the fourth
quarters of 1995 and 1994, therefore, reflect the Fund's change in strategy to
include immediate disposition of the asset. Subsequent to December 31, 1995 the
Fund entered into a contract with an unaffiliated third party to sell 120 S.
Spalding for $7,450,000. This sale is scheduled to close on April 19, 1996.
In addition to the 120 S. Spalding property, the Fund also owns interests
in five parcels of land (see Item 2, "Properties" for further details on
ownership structure). During the year ended December 31, 1995, the Fund
disbursed a net total of approximately $7,285,000, excluding mortgage loan
principal repayments, for capitalized development costs and carrying costs
which include approximately $1,859,000 on the Chapman's Landing property,
approximately $4,195,000 on Wayside Village and approximately $1,231,000 on
Bishop Ranch. The expenditures were primarily for capitalized interest, real
estate taxes, land planning, engineering, site improvements and entitlement
work. (See discussion below for further details).
The Fund's other large land parcel, the Southbridge project, consists of
2,048 acres, of which, 278 acres was previously zoned for residential
development. On January 5, 1993, the Prince William County Board of
Supervisors approved the Cherry Hill Sector Plan for the remaining 1,770 acres
of land in the project which is now entitled for 4,100 residential units and
4,200,000 square feet of commercial space. The Fund believes that this sector
plan designation enhances the property's value and marketability. During 1993,
the Fund entered into a series of negotiations to restructure the scheduled
repayment of principal of a note in the principal amount of $4,200,000, which
is collateralized by a first mortgage on a 538 acre parcel of the Southbridge
property. The Fund was unable to reach an acceptable restructuring with the
noteholder and therefore, on December 20, 1993, VMIF/Anden Southbridge Venture
(the "Venture"), a subsidiary of the Fund which holds the Fund's ownership
interest in the Southbridge property, filed a Voluntary Petition under Chapter
11 of the Bankruptcy Code in the United States Bankruptcy Court for the Eastern
District of Virginia, Alexandria Division (the "Court") as the Debtor in
Possession.
On December 21, 1994, the Court confirmed an amended plan of
reorganization as ratified by the creditors (the "Plan") submitted by the
Venture. Per the terms of the Plan, all of the Venture's creditors were to be
paid in full. The Plan also provided for certain modifications of the terms of
three loans collateralized by first mortgages on various portions of the
Southbridge project. On December 26, 1995, the Fund successfully re-negotiated
the terms of the $3,700,000 Southbridge first mortgage loan. The note holder
agreed to defer payment of the $250,000 principal due on December 20, 1995
until June 20, 1996. As consideration
23
<PAGE> 26
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
for the extension, the Fund agreed to pay an extension fee of $8,000 and certain
other legal fees and other costs of the lender in the amount of $54,000. The
lender also agreed to provide the Fund with the option to further extend the
date of the December 20, 1995 principal payment until September 20, 1996, in
exchange for an increase in the interest rate of the loan from 12% to 12.5%.
All other terms of the loan remain the same.
The Fund will seek to implement its business plan for the Southbridge
project which currently calls for continued land planning and marketing efforts
designed to achieve sales of certain portions of the project beginning in the
third quarter of 1996. The Fund contemplates selling small ancillary parcels
of the site and would utilize any net sales proceeds to repay portions of
outstanding debt obligations of the Fund.
The Wayside Village property was acquired by the Fund in May of 1991. The
Fund is continuing its efforts to fund site-infrastructure work so that
additional finished lots can be sold to third party developers and builders.
The project is currently zoned for 2,224 residential units and 280,000 square
feet of commercial space. During the year ended December 31, 1995, the Fund
sold 17 single family lots to a builder which generated gross sales proceeds of
$1,029,830. After payment of closing costs of $1,291, real estate tax
prorations of $1,162 and other costs of $14,777, the Fund received net cash
proceeds of $1,029,149. The sale of the lots resulted in an aggregate net gain
on disposition of real estate of $4,390. Pursuant to the refinancing of the
Fund's SoGen Loan and Morgens Loan, the sale of 120 S. Spalding and the
completion of the merger of the Fund if approved by the stockholders as
discussed above in Liquidity and Capital, it is the intent of the Fund to
continued infrastructure and site improvements at the Wayside Village property.
As of December 31, 1995 there were 1,124 unfinished residential units and
280,000 square feet of commercial space available for sale under the current
development Plan. The Fund's capitalized expenditures at Wayside Village have
primarily been utilized for completion of engineering, lot development,
capitalized interest, and real estate taxes. Once further improvements are
made at Wayside Village, it is the Fund's belief that negotiation of additional
sales contracts with local homebuilders and developers can be finalized. As a
result of the Fund's inability to complete the necessary lot and infrastructure
improvements at Wayside Village as scheduled due to a shortfall in cash
resources during 1995 and 1994, the Fund chose to reduce the carrying value of
the property in the amounts of $6,000,000 and $3,000,000 during the fourth
quarters ended December 31, 1995 and 1994 respectively. Due to the delay in
the financing in 1994 and the insufficient cash resources available in 1995 the
Fund was unable to complete and sell the volume of lots and home sites as
originally projected in its business plan, thereby extending the time frame, in
excess of two years, for the sell-off the Wayside development. As a result of
this delay, holding costs were increased which include interest on the Amended
Wayside Loan at prime plus 200 basis points, and interest on a portion of the
Morgens Loan at 17.5%. The prime rate as of April 1, 1996, as published in the
"Wall Street Journal" was 8.25%. The holding costs associated with the project
during 1994 and 1995 were capitalized and added to the carrying value of the
Wayside Development.
24
<PAGE> 27
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
In August 1992, the Chapman's Landing zoning and development plan was
approved by Charles County and the project is now included in the overall
comprehensive development plan for Charles County, Maryland. On October 11,
1994 Charles County approved zoning modifications for Chapman's Landing
increasing the project's total density count to 4,600 residential units from
3,500 units and 2,000,000 square feet of commercial space from 1,000,000 square
feet. During 1995, the Fund continued its efforts to secure the necessary
permits to allow development of the project to commence and complete
engineering work on sections of Phase I of the project. The Phase I portion of
the project consists of 330 acres and is planned for development of 404
single-family homes and 172 townhomes. The Fund intends to begin work on
infrastructure and site improvements on Phase I at Chapman's Landing in the
third quarter of 1996 upon final refinancing of the SoGen Loan and Morgens
Loan, sale of 120 S. Spalding and completion of the merger of the Fund if
approved by the stockholders. As of December 31, 1995, the Fund has one
executed sales contract and has two contracts pending with home developers for
the sale of an aggregate of approximately 260 residential finished lots in
Phase I of the Chapman's Landing development. These contracts provide for the
sale of 175 townhome lots at approximately $28,000 per lot and the sale of 85
single family homes for approximately $50,000 per lot. The contracts are
subject to the home developers' due diligence, feasibility studies and other
performance contingencies. Also, the Fund is currently in negotiations with
several other national and regional builders and developers to sell finished
lots and/or development sites in Phase I of Chapman's Landing. The Fund
anticipates that additional sales contracts will be finalized sometime in the
first half of 1996 with sales of finished lots to builders beginning in early
1997. The Fund's expenditures at the Chapman's Landing development have
primarily been for completion of zoning, engineering, capitalized interest, and
real estate taxes.
During the year ended December 31, 1995, the Fund continued to pursue
modified entitlements on the Bishop Ranch property, located in Monterey County,
California. On September 12, 1995 the Monterey County Board of Supervisors
approved the Environmental Impact Report, Zoning and Conditional Use Permits
for the Bishop Ranch property which provides for the development of 253 single
family and townhome lots and an eighteen-hole golf course. Since 1991, when
the Fund assumed its ownership interest in Bishop Ranch, the Fund has pursued
zoning and entitlement rights for the project. The costs incurred in this
process have been capitalized through December 31, 1995. Due to the protracted
entitlement process and a prolonged holding period, as of December 31, 1995,
these costs exceeded the Fund's most recent fair market value estimates for
the property. As a result, for the quarter ended December 31, 1995, the Fund
reduced the carrying value for this property by $3,300,000. Beginning January
1, 1996 no further holding and entitlement costs will be capitalized by the
Fund associated with Bishop Ranch. It is management's belief that in the
future, the residential market should experience gradual growth as the demand
for mid-price-range housing product increases and the overall economy improves
although there can be no assurance of such growth. It is the Fund's intent to
begin marketing efforts on the Bishop Ranch property pursuant to an outright
sale or possible joint venture development of the project.
25
<PAGE> 28
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
The Fund also owns a 50% interest in the Oakridge joint venture (the
"Venture"). The property was comprised of 270 acres of vacant land located in
Hollywood and Dania, Florida which had been operated as a golf course. On
September 30, 1994, the Venture sold a 60-acre residential parcel of the
Oakridge site to an unaffiliated third party for $4,100,000. Subsequent to
December 31, 1995, on February 5, 1996 and March 1, 1996, the Venture sold a
total of 180 acres to an unaffiliated third party for approximately $4,000,000.
In addition, on March 1, 1996, the Venture sold an additional 25-acre parcel
of the Oakridge site to an unaffiliated third party for approximately
$2,200,000. The variance in the price per acre between the three contracts is
due to a difference in unit density approved for the individual parcels as well
as a difference in the number of developable acres in each parcel. The
February and March, 1996 sales enabled the Venture to repay a first mortgage
loan collateralized by the Oakridge property in the amount of $1,916,617.
After repayment of the mortgage loan, interest and other closing costs the
Venture received net proceeds from the sales of $4,180,505 of which $2,090,253
was distributed to the Fund. The Venture is currently engaged in negotiations
to sell the remaining 5-acre retail parcel at the Oakridge site.
The Fund also owns a small "carried interest" in 950 L'Enfant Plaza, an
eight story office building with two parking levels situated in a four-building
complex with 232,000 square feet of rentable space located in Washington, D.C.
The property is currently under a renovation and retenanting program which is
anticipated to be completed in 1996. The Fund is entitled to 2.5% of monthly
cash flow from operation of the property, which provided approximately $28,000
and $164,000 in cash flow to the Fund for the years ended December 31, 1995 and
1994, respectively. The $136,000 decrease is due to the current interruption
in cash flow due to the termination of the lease with the building's tenant
while retenanting of the building is under way. The Fund is also entitled to
receive 4% of the gross sales proceeds of the property upon sale. The Fund is
not entitled to participate in the decisions of management in respect to the
property.
26
<PAGE> 29
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Consolidated Financial Statements on Page F-1 of this Report
for financial statements and financial statement schedules, where applicable.
See Item 6, Selected Financial Data, for the supplemental financial
information specified by Item 302 of Regulation S-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On December 18, 1995, the Fund was informed by Coopers & Lybrand L.L.P.
("C&L") that it was resigning as the Fund's independent accountant effective
immediately. At no time during the past two years did C&L's report on the
Fund's financial statements contain an adverse opinion or a disclaimer of
opinion, nor was it qualified or modified as to uncertainty, audit scope, or
accounting principles. C&L's decision was based solely on its own
considerations and was not made based on any action taken or not taken by the
Fund's Board of Directors. At no time during C&L's engagement as the Fund's
principal accountant were there any disagreements between the Fund and C&L on
any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure.
Effective December 21, 1995, the Fund has engaged the independent
accounting firm of Ernst and Young LLP ("E&Y") to serve as the Fund's principal
independent accountant, to audit the Fund's financial statements. At no time
during the Fund's two most recent fiscal years, or any subsequent interim
period, did the Fund (or someone on its behalf) consult E&Y regarding: (i) the
application of accounting principles to a specified transaction, either
completed or proposed or the type of audit opinion that might be rendered on
the Fund's financial statements; or (ii) any matter that was either the subject
of a disagreement between the Fund and its principal accountant or a reportable
event.
27
<PAGE> 30
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and the executive officers of the Fund are:
Walter E. Auch, Sr Director
Robert M. Ungerleider Director
Leonard G. Levine President
Neil D. Hansen First Vice President
Robert G. Higgins Vice President, Secretary and General
Counsel
Joel L. Teglia Vice President and 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
PaineWebber. 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 1988. Mr.
Auch is a trustee of Banyan Strategic Realty Trust and a director of Banyan
Strategic Land Fund II and Banyan Management Corp.
ROBERT M. UNGERLEIDER, age 54, is presently practicing law with and is of
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 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 1988. Mr. Ungerleider is a director of Banyan Management Corp.
and Banyan Strategic Land Fund II.
LEONARD G. LEVINE, age 49, has been president of the Fund as well as
Banyan Management Corp., Banyan Short Term Income Trust, Banyan Strategic Land
Fund II and Banyan Strategic Realty Trust since 1990. He received a B.S./B.A.
Degree in Accounting from Roosevelt University and a Masters Degree in Taxation
from DePaul University in 1972. His areas of specialization include real
estate syndications, estate planning and taxation of closely-held corporations.
Mr. Levine is also a certified public accountant and a licensed real estate
broker.
28
<PAGE> 31
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (CONTINUED)
NEIL D. HANSEN, age 49, has been first vice president of the Fund as well
as Banyan Management Corp., Banyan Strategic Realty Trust, Banyan Short Term
Income Trust and Banyan Strategic Land Fund II since 1991. He received a B.S.
Degree in Finance from the University of Illinois and a Master of Management
Degree from Northwestern University. He is a certified public accountant.
ROBERT G. HIGGINS, age 44, has been vice president and general counsel of
the Fund as well as Banyan Management Corp., Banyan Strategic Realty Trust,
Banyan Short Term Income Trust and Banyan Strategic Land Fund II since 1992,
and secretary of these entities since 1995. From 1990 to 1992, Mr. Higgins was
a contract partner at the law firm of Chapman and Cutler. Mr. Higgins' legal
experience has concentrated in the areas of real estate development, finance,
acquisition, land use, sales, lending, syndications, general corporate and
business practice. Mr. Higgins is admitted to the bar in the States of
Illinois, Minnesota and Texas. He received a B.A. Degree in Government from
the University of Notre Dame and a J.D. 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 Strategic Realty
Trust, Banyan Short Term Income Trust and Banyan Strategic Land Fund II since
1994. Prior to assuming the responsibilities of his current position, Mr.
Teglia held the position of Controller for Banyan Management Corp. from 1991 to
1994. He received a B.B.A. Degree in Accounting from the University of Notre
Dame. Mr. Teglia is a certified public accountant.
29
<PAGE> 32
ITEM 11. 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 is as follows:
<TABLE>
<CAPTION>
Long-Term Compensation
Awards
Securities
Annual Compensation Underlying
Other Annual Restricted Stock Options/ Payouts All Other
Year Salary Bonus(2) Compensation Award(2) SARs (#) LTIP Payouts Compensation
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Leonard G. Levine, 1995 $105,606 $171,805 n/a $42,951 n/a n/a n/a
President (1) 1994 $102,800 $231,166 n/a $58,002 n/a n/a n/a
1993 $100,000 $ --- n/a n/a n/a n/a n/a
</TABLE>
(1) No other executive officer earned more than $100,000 in salary and
bonus.
(2) Pursuant to Mr. Levine's employment agreement the incentive
amounts which were earned in the current year are paid or awarded to
him by the Fund in the following year.
Mr. Levine serves as Chief Executive Officer of the Fund pursuant to an
employment agreement entered into on January 1, 1990. As amended, the
agreement expires December 31, 1998. Under the amended agreement, Mr. Levine
is paid a salary equal to $105,606 per year, adjusted on January 1 of each year
based on increases in the "consumer price index".
Mr. Levine is also eligible to receive compensation under an incentive
program included in his contract. Effective January 1, 1993, Mr. Levine
earns incentive compensation based and calculated on the following four
components: (i) 1.00% of the amount of the Fund's collateralized claims which
are converted into cash; (ii) 3.00% of the amount of the Fund's unsecured
claims which are converted into cash; and (iii) 0.1% of all cash distributions
of capital and (iv) .14% of all distributions of income to shareholders of the
Fund.
Effective January 1, 1993 all incentive amounts are paid 80% in cash and
20% in shares ("Award Shares") of the Fund on or before March 15 of the year
following the period for which the incentive is earned except that pursuant to
Board of Director's approval, Mr. Levine was paid $120,000 of his 1994
incentive compensation December 31, 1994. On March 15, 1995, Mr. Levine was
paid the balance of the cash portion of his 1994 incentive compensation in the
amount of $51,805. On January 28, 1994, Mr. Levine was paid the cash portion
of his 1993 incentive compensation in the amount of $231,166. The $171,805 and
$231,166 cash payments received by Mr. Levine for 1994 and 1993, respectively,
represent 80% of his incentive compensation pursuant to his employment
agreement. The 79,909 Award Shares
30
<PAGE> 33
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
valued at $0.537 per share or $42,951 for 1994 and the 50,437 Award
Shares valued at $1.15 per share or $58,002, for 1993 represent 20% of Mr.
Levine's 1994 and 1993 incentive, respectively, 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 is entitled to all dividends paid on shares held by the Fund
for his benefit. The $214,756 in incentive compensation earned by Mr. Levine
during 1994 is comprised of: (i) $203,941 in respect of collateralized claims
converted into cash; and (ii) $10,815 in respect of unsecured claims converted
into cash. The $289,168 in incentive compensation earned by Mr. Levine during
1993 is comprised of: (i) $51,972 in respect of collateralized claims
converted into cash; and (ii) $237,196 in respect of unsecured claims
converted into cash.
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 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 in accordance with an
expression of interest received by the Fund prior to Mr. Levine's termination),
plus an amount equal to the full cost of Mr. Levine's COBRA benefits for one
year.
C. EXECUTIVE AND DIRECTORS STOCK OPTION PLAN
On June 25, 1993, the shareholders approved and adopted the 1993 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 Executive Option Grant
Program and a Director Option Grant Program. Under the Director Option Grant
Program, each Director holding office on the tenth business day after
adjournment of the 1992 annual meeting received options to acquire 25,000
shares. Commencing with the annual meeting of stockholders as held during 1994
and each thereafter, each Director holding office on the tenth business day
after adjournment of the annual meeting automatically receives an option to
acquire 25,000 shares. The Director's options vest 50% upon the first
anniversary of the date of the grant and
31
<PAGE> 34
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
50% upon the second anniversary of the date of the grant and expire ten
years from the date of the grant. The share price for the options granted in
1995, 1994 and 1993 is $0.625, $0.6875 and $0.625 per share, respectively.
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 granted under the Plan 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 and Banyan Management
Corp.'s retirement practices, then any unexercised options to acquire shares
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 Grant 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.
Pursuant to the Plan, the Board granted, 121,000 options on February 8,
1995, 120,000 options on January 12, 1994 and 120,000 options on April 21, 1993
to the Funds officers and certain Banyan Management Corp. personnel under the
program, at a price of $0.50 per share, $1.125 per share and $0.625 per share,
(the average weekly closing price of common stock for the month of January
1995, December 1993 and March 1993), respectively.
32
<PAGE> 35
ITEM 11. EXECUTIVE COMPENSATION (CONTINUED)
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: (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. Option for all shares as granted under the Director Option Grant
Program shall be exercisable and vested 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.
Stock Options granted or exercised by executive officers for the year
ended December 31, 1995, are as follows:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants
Potential Realized Value
Number of % of Total Options at Assumed Annual Rates
Securities Granted to of Stock Price Appre-
Underlying Options Employees in Fiscal Exercise ciation for Option Term
Name Granted (1) Year or Base Price Expiration Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Leonard G. Levine 80,000 66% $0.50 Feb. 9, 2005 $25,156 $63,750
</TABLE>
(1) The remainder of the 1995 stock options were granted to employees of the
Fund and Banyan Management Corp.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND YEAR END
OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised Options In-the-Money
at December 31 Options at December 31
Shares Acquired on Exercisable/ Exercisable/
Name Exercise Value Realized Unexercisable Unexercisable
<S> <C> <C> <C> <C>
Leonard G. Levine --- $ --- 80,000/160,000 $ ---/$---
</TABLE>
33
<PAGE> 36
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following entity is known by the Fund (based on filings on Schedule
13d) to be the beneficial owner of more than five percent (5%) of the
outstanding shares of common stock of the Fund as of March 18, 1996.
<TABLE>
<CAPTION>
Title of Class Name and Address of Amount of Percent
Beneficial Owner Beneficial Ownership of Interest
<S> <C> <C> <C>
Shares of Common Gabrielle, Hueglin 2,952,000 7.41%
Stock, $0.01 par & Cashman
value 9197 Third Ave.
New York, NY 10022
</TABLE>
The following table sets forth the ownership interest and shares owned
directly or indirectly by the directors and principal officers of the Fund as
of March 18, 1996:
<TABLE>
<CAPTION>
AMOUNT OF
NAME OF BENEFICIAL PERCENT
TITLE OF CLASS BENEFICIAL OWNER OWNERSHIP OF INTEREST
<S> <C> <C> <C>
Shares of Common
Stock, $0.01 par
value Walter E. Auch, Sr. 16,000 Shares Less than 1%
Shares of Common
Stock, $0.01 par
value Robert M. Ungerleider 39,000 Shares Less than 1%
Shares of Common
Stock, $0.01 par
value Leonard G. Levine 148,346 Shares Less than 1%
Shares of Common
Stock, $0.01 par
value Neil D. Hansen 12,664 Shares Less than 1%
Shares of Common
Stock, $0.01 par
value Robert G. Higgins 22,500 Shares Less than 1%
Shares of Common All Directors and
Stock, $0.01 par Officers of the
value Fund, as a group (6 238,510 Shares Less than 1%
persons)
</TABLE>
ITEM 13. 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 Short Term Income Trust, Banyan Strategic Realty
Trust, and Banyan Strategic Land Fund II (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 compensated by BMC and
their compensation is included in the administrative costs for which BMC is
reimbursed by the Fund. The
34
<PAGE> 37
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (CONTINUED)
directors/trustees of all Banyan Funds serve as directors of BMC but
receive no additional compensation. These costs are allocated to the Fund and
the 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 allocated share of costs for the years ended
December 31, 1995, 1994 and 1993 aggregated $1,092,081, $1,141,675 and
$971,321, 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 payable due to BMC of
$175,725.
Reference is made to the Note 5, "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.
35
<PAGE> 38
PART IV
ITEM 14. 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) Exhibits
Exhibit Number Description
(2) Agreement and Plan of Merger dated as of April 12, 1996
by and among RGI U.S. Holdings, Inc., RGI Holdings Inc. and
the Registrant.
(10)(i) Second Amendment of Leonard G. Levine's Employment Contract
dated December 31, 1992.
(10)(ii) Form of Director Stock Option Agreements dated July 1,
1993, July 24, 1994 and July 7, 1995.
(10)(iii) Form of Executive Stock Option Agreements dated July 1,
1993, January 12, 1994 and February 8, 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 33-17597),
referencing the exhibit numbers used in such Registration Statement.
Exhibit Number Description
(3)(a) Restated Certificate of Incorporation
(3)(b) By-Laws
The following exhibit is incorporated by reference from the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1994:
Exhibit Number Description
(10) Material Contracts
Description of Registrant Credit Agreements, Notes and
Warrants with Morgan Waterfall, Vintiadis & Co. Inc.,
Exhibit 10(a) through 10(n).
(b) The following report on Form 8-K was filed during the quarter ended
December 31, 1995:
A current report on Form 8-K was filed on December 21, 1995 wherein
Item 4. Change in Registrant's Certifying Accountants and Item 7.
Financial Statements, Proforma Financial Information and Exhibits
disclosed that the Registrant was informed by Coopers & Lybrand
L.L.P. that it was resigning as the Registrant's independent
accountant and the Registrant had engaged Ernst & Young LLP as
its new independent accountant.
36
<PAGE> 39
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(CONTINUED)
(c) See Item 14 (a) (3) above.
(d) None
37
<PAGE> 40
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 MORTGAGE INVESTMENT FUND
By: /s/ Leonard G. Levine Date: April 12, 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 12, 1996
Leonard G. Levine, President
By: /s/ Joel L. Teglia Date: April 12, 1996
Joel L. Teglia, Vice President
and Chief Financial Officer
By: /s/ Walter E. Auch, Sr. Date: April 12, 1996
Walter E. Auch, Sr., Director
By: /s/ Robert M. Ungerleider Date: April 12, 1996
Robert M. Ungerleider, Director
38
<PAGE> 41
BANYAN MORTGAGE INVESTMENT FUND
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Pages
<S> <C>
Reports of Independent Auditors F-2
Consolidated Balance Sheets at December 31, 1995 and 1994 F-4
Consolidated Statements of Income and Expenses For
the Years Ended December 31, 1995, 1994 and 1993 F-6
Consolidated Statements of Stockholders' Equity For
the Years Ended December 31, 1995, 1994 and 1993 F-8
Consolidated Statements of Cash Flows For the Years
Ended December 31, 1995, 1994 and 1993 F-9
Notes to Consolidated Financial Statements F-11 to F-26
</TABLE>
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> 42
REPORT OF INDEPENDENT AUDITORS
To the Stockholders of Banyan Mortgage Investment Fund:
We have audited the accompanying consolidated balance sheet of Banyan
Mortgage Investment Fund as of December 31, 1995, and the related consolidated
statements of income and expenses, stockholders' equity and cash flows for the
year then ended. 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 audit.
We conducted our audit 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 audit provides 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
Mortgage Investment Fund at December 31, 1995, and consolidated results of its
operations and cash flows for the year then ended, in conformity with generally
accepted accounting principles.
The accompanying 1995 consolidated financial statements have been prepared
assuming that Banyan Mortgage Investment Fund will continue as a going concern.
As more fully described in Note 1B, the Fund has not complied with certain
covenants of the loan agreement with its principle lender. This condition
raises substantial doubt about the Fund's ability to continue as a going
concern. Management's plans in regard to this matter are also described in
Note 1B. The 1995 consolidated financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts and classification of liabilities that
may result from the outcome of this uncertainty.
ERNST & YOUNG LLP
Chicago, Illinois
April 12, 1996
F - 2
<PAGE> 43
REPORT OF INDEPENDENT AUDITORS
To the Stockholders of Banyan Mortgage Investment Fund:
We have audited the accompanying consolidated balance sheet of Banyan
Mortgage Investment Fund and subsidiaries as of December 31, 1994, and the
related consolidated statements of income and expenses, stockholders' equity
and cash flows for each of the two years in the period ended December 31, 1994.
These financial statements are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Banyan
Mortgage Investment Fund and subsidiaries as of December 31, 1994, and the
consolidated results of their operations and their cash flows for each of the
two years in the period ended December 31, 1994 in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
March 29, 1995
F - 3
<PAGE> 44
BANYAN MORTGAGE INVESTMENT FUND
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
ASSETS
Cash and Cash
Equivalents $316,012 $8,040,629
Repair, Improvement and
Real Estate Tax
Escrows 775,754 602,211
Accounts Receivable (Net
of Allowance for
Doubtful Accounts of
$65,000 and $34,000
for 1995 and 1994,
respectively) 76,110 18,509
Interest Receivable on
Cash and Cash --- 84,272
Equivalents ------------- ------------
1,167,876 8,745,621
------------- -------------
Investment in Real
Estate:
Land 55,379,003 79,400,569
Buildings and --- 1,986,851
Improvements ------------- -------------
55,379,003 81,387,420
Less: Accumulated --- (1,645,927)
Depreciation ------------- -------------
55,379,003 79,741,493
Developments in
Progress 30,872,769 30,752,252
Real Estate Held 17,176,845 ---
For Sale ------------- -----------
Net Investment in Real 103,428,617 110,493,745
Estate ------------- -------------
Net Investment in Real
Estate Venture 1,097,363 1,325,401
Deferred Financing
Costs (Net of Accumu-
lated Amortization of
$399,831 and $68,034
for 1995 and 1994,
respectively) 909,365 1,241,162
Other Assets 2,530,293 2,861,997
------------- -------------
Total Assets $109,133,514 $124,667,926
============= =============
</TABLE>
F - 4
<PAGE> 45
BANYAN MORTGAGE INVESTMENT FUND
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
(CONTINUED)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
LIABILITIES AND
STOCKHOLDERS' EQUITY
Liabilities
Accounts Payable and
Accrued Expenses $ 1,686,511 $ 1,255,286
Interest Payable 1,268,553 810,526
Real Estate Taxes
Payable 384,500 ---
Mortgage Loans Payable 33,625,737 31,932,645
------------ ------------
Total Liabilities 36,965,301 33,998,457
------------ ------------
Stockholders' Equity
Shares of Common Stock,
$0.01 Par Value,
100,000,000 Shares
Authorized, 39,842,404
and 39,762,495 Shares
Issued, respectively 348,205,447 348,162,496
Accumulated Deficit (276,025,918) (257,481,711)
Treasury Stock, at Cost, (11,316) (11,316)
20,100 Shares ------------ ------------
Total Stockholders' 72,168,213 90,669,469
Equity ------------ ------------
Total Liabilities and $109,133,514 $124,667,926
Stockholders' Equity ============ ============
Book Value Per Share of
Common Stock
(39,822,304 and
39,742,395 Shares
Outstanding for 1995 $ 1.81 $ 2.28
and 1994 respectively) ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F - 5
<PAGE> 46
BANYAN MORTGAGE INVESTMENT FUND
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
Interest on Cash and
Cash Equivalents $ 169,890 $ 145,647 $ 38,912
Operating Property 1,230,028 3,455,283 4,936,852
Revenue ------------ ------------ ------------
1,399,918 3,600,930 4,975,764
TOTAL INCOME ------------ ------------ ------------
EXPENSES
Expenses From Property
Operating Activities:
Provision for Losses
on Investment in Real
Estate 12,900,000 9,000,000 4,650,000
Operating Property
Expenses 452,603 971,022 1,344,472
Development Property
Expenses 1,259,616 551,335 279,572
Repairs and
Maintenance 316,143 320,539 479,507
Real Estate Taxes 298,640 455,600 568,739
Depreciation 374,075 609,969 782,722
Bad Debt Expense 6,000 30,915 449,554
------------ ------------ ------------
Total Expenses From
Property Operating 15,607,077 11,939,380 8,554,566
Activities ------------ ------------ ------------
Other Expenses
(Recoveries):
Stockholder Expenses 277,296 335,235 315,758
Directors' Fees,
Expenses and
Insurance 437,983 534,344 541,296
Other Professional
Fees 435,847 620,356 535,553
General and
Administrative 1,349,584 1,599,242 1,335,543
</TABLE>
F - 6
<PAGE> 47
BANYAN MORTGAGE INVESTMENT FUND
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>
Recovery of Losses on
Mortgage Loans,
Notes, Interest
Receivable and Class
Action Settlement
Costs and Expenses (906,629) (1,095,800) (7,916,073)
Interest Expense,
Amortization of
Deferred Loan, and
Other Costs 2,533,841 1,837,049 923,181
------------ ------------ ------------
Total Other Expenses 4,127,922 3,830,426 (4,264,742)
(Recoveries) ------------ ------------ ------------
19,734,999 15,769,806 4,289,824
TOTAL EXPENSES ------------ ------------ ------------
Operating Income (Loss) (18,335,081) (12,168,876) 685,940
Net (Loss) Income From
Operations of Real
Estate Venture (213,516) 442,091 (560,347)
Arbitration Award --- (3,250,000) ---
Gain on Disposition of
Real Estate 4,390 2,880,614 1,014,265
------------ ------------ ------------
Income (Loss) Before
Extraordinary Item (18,544,207) (12,096,171) 1,139,858
Gain from Forgiveness --- 2,813,892 ---
of Debt ------------ ------------ ------------
Net Income (Loss) $(18,544,207) $ (9,282,279) $ 1,139,858
============ ============ ============
Net Income (Loss) Per
Share of Common Stock
(Based on Weighted
Average Number of
Shares Outstanding of
39,770,637, 39,724,995
and 39,689,294 during
1995, 1994, and 1993,
respectively) Before
Extraordinary Item $ (0.47) $ (0.30) $ 0.03
Extraordinary Item --- .07 ---
------------ ------------ ------------
Net Income (Loss) $ (0.47) $ (0.23) $ 0.03
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F - 7
<PAGE> 48
BANYAN MORTGAGE INVESTMENT FUND
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
39,709,394 $348,102,829 $(249,339,290) $(11,316) $98,752,223
Net Income For
the Year Ended --- --- 1,139,858 --- 1,139,858
December 31, 1993 ----------- ------------ ------------- ---------- ------------
Stockholders'
Equity, December 31, 1993
39,709,394 348,102,829 (248,199,432) (11,316) 99,892,081
Award Shares Issued 50,437 58,002 --- --- 58,002
Executive Stock
Options Exercised 2,664 1,665 --- --- 1,665
Net Loss For the
Year Ended --- --- (9,282,279) --- (9,282,279)
December 31, 1994 ----------- ------------ ------------- ---------- ------------
Stockholders'
Equity, December 31, 1994
39,762,495 348,162,496 (257,481,711) (11,316) 90,669,469
Award Shares Issued 79,909 42,951 --- --- 42,951
Net Loss for the Year Ended --- --- (18,544,207) --- (18,544,207)
December 31, 1995 ----------- ----------- ----------- ---------- -----------
Stockholders'
Equity, December 31, 1995 39,842,404 $348,205,447 $(276,025,918) $(11,316) $72,168,213
=========== =========== =========== ========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F - 8
<PAGE> 49
BANYAN MORTGAGE INVESTMENT FUND
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 INCOME (LOSS) $(18,544,207) $(9,282,279) $1,139,858
Adjustments to Reconcile
Net Income (Loss)to
Net Cash (Used In)
Provided by Operating
Activities:
Provision for Losses on
Investment in Real
Estate 12,900,000 9,000,000 4,650,000
Gain from Forgiveness of
Debt --- (2,813,892) ---
Depreciation 374,075 609,969 782,722
Amortization of Deferred
Loan and Other Costs 331,797 609,760 177,556
Provision for Bad Debts 6,000 30,915 449,554
Gain on Disposition of
Real Estate (4,390) (2,880,614) (1,014,265)
Net (Income) Loss From
Operations of Real
Estate Venture 213,516 (442,091) 560,347
Deferred Interest
Payable on Mortgage
Loans 1,996,307 --- ---
Net Change In:
Interest Receivable on
Cash and Cash
Equivalents 84,272 (84,272) 59,063
Real Estate Escrow (34,321) 209,661 68,574
Accounts Receivable (88,601) 186,536 160,287
Other Assets 323,555 (154,570) (244,000)
Accounts Payable and
Accrued Expenses 474,176 (558,376) 408,680
Real Estate Taxes
Payable 384,500 (546,865) 492,927
Interest Payable 1,195,457 200,807 534,850
------------ ------------ ------------
Net Cash (Used In)
Provided By (387,864) (5,915,311) 8,226,153
Operating Activities ------------ ------------ ------------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Proceeds from Sale of
Real Estate 1,028,539 18,658,663 5,460,205
</TABLE>
F - 9
<PAGE> 50
BANYAN MORTGAGE INVESTMENT FUND
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(CONTINUED)
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Increase in Developments
in Progress (7,144,850) (8,127,177) (10,021,877)
(Increase) Decrease in
Repair and Improvement
Escrows (139,222) (49,556) 533,571
Distributions From
(Investment in) Real
Estate Venture 14,522 (408,516) (608,882)
Purchases of Land and
Property Improvements (55,097) --- (279,075)
------------ ------------ ------------
Net Cash (Used In)
Provided By Investing
Activities (6,296,108) 10,073,414 (4,916,058)
------------ ------------ ------------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from Mortgage
Loans Payable --- 20,500,000 ---
Issuance of Shares of
Common Stock --- 1,665 ---
Payment of Deferred
Financing Costs --- (1,309,195) ---
Payment of Mortgage
Loans Payable (1,040,645) (19,060,497) (2,165,227)
------------ ------------ ------------
Net Cash (Used in)
Provided By Financing
Activities (1,040,645) 131,973 (2,165,227)
------------ ------------ ------------
Net (Decrease) Increase
in Cash and Cash
Equivalents (7,724,617) 4,290,076 1,144,868
Cash and Cash Equiva-
lents at Beginning of
Year 8,040,629 3,750,553 2,605,685
------------ ------------ ------------
Cash and Cash Equiva-
lents at End of Year $ 316,012 $ 8,040,629 $ 3,750,553
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-10
<PAGE> 51
BANYAN MORTGAGE INVESTMENT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. ORGANIZATION AND PRINCIPLES OF CONSOLIDATION
Banyan Mortgage Investment Fund (the "Fund") was organized as a
corporation under the laws of the State of Delaware, pursuant to a Restated
Certificate of Incorporation filed March 22, 1988. The accompanying
consolidated financial statements include the accounts of the Fund, its
wholly-owned subsidiaries and the Chapman's Landing, Southbridge, Wayside and
Bishop's Ranch partnerships in which the Fund holds a controlling 50% general
partnership interest. Losses from these partnerships are allocated to the
minority interest partners to the extent of their respective investments in the
partnerships. Since such partners have made no investment in the partnerships
and are not obligated to fund losses in excess of their investment, their
minority interest currently has no value, therefore the Fund has recorded all
of the above partnerships' losses as of December 31, 1995. Profits may be
allocated pro rata to the minority interest partners to the extent that net
proceeds generated from the projects exceed priority returns payable to the
Fund. All intercompany balances and transactions have been eliminated in
consolidation. The consolidated financial statements also include the Fund's
50% interest in the VST/VMIF Oakridge Partnership accounted for on the equity
method.
B. DEBT DEFAULT AND BASIS OF PRESENTATION
In 1994 the Fund executed a credit agreement with Morgens, Waterfall
Vintiadis & Co., Inc. ("Morgens") that is collateralized by substantially all
of the assets of the Fund. As of December 31, 1995, the principal balance
outstanding was $23,233,737 (see Note 3). The Fund has not made the January 1,
or April 1, 1996 required interest payments of approximately $1,025,000 and
approximately $1,014,000, respectively. Morgens has notified the Fund that
this non-payment of interest constitutes an "Event of Default" under the Credit
Agreement. Morgens has reserved all of its rights and remedies under the
Credit Agreement (including demand of immediate payment of the outstanding
principal amount) but has taken no additional action as of April 12, 1996. In
addition, the Fund is in default with respect to its mortgage loan payable to
Societe General ("SoGen") which has a principal balance of $6,360,000
outstanding as of December 31, 1995 (see Note 3).
Effective as of April 12, 1996, an Agreement and Plan of Merger (the
"Merger Agreement") was executed among the Fund and RGI Holdings, Inc. ("RGI
Holdings") and its wholly owned subsidiary, RGI U.S. Holdings ("RGI U.S." or
collectively "RGI").
The Agreement provides, among other things, for the following:
(1) At the initial closing, scheduled to occur May 15, 1996, RGI
Holdings will acquire 7,466,666 shares of the Fund's common
stock for $3,500,000 in cash.
(2) Also at the initial closing, RGI Holdings will purchase the
Morgens Loan and SoGen Loan and has agreed that prior to December
31, 1996 it will not accelerate the Morgens Loan or the SoGen Loan
or foreclose upon any collateral for the Morgens Loan or the SoGen
Loan based upon any events of default
F-11
<PAGE> 52
BANYAN MORTGAGE INVESTMENT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
occurring on or before May 15, 1996 or as a result of the execution
of the Merger Agreement.
(3) Subsequent to the initial closing, upon approval of the Fund's
stockholders and the satisfaction of other conditions precedent, all
of the outstanding shares of RGI U.S. will be converted into
151,445,333 shares of the Fund. The Merger will result in the Fund
owning all of the real estate assets of RGI U.S. The merger is
expected to be consummated before the end of 1996.
In consideration of the RGI transactions, the accompanying consolidated
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and the classification of assets that may
result from the default under the Morgens Loan or the SoGen Loan.
Specifically, the carrying amount of the Fund's development real estate
continues to be evaluated for impairment based on the undiscounted cash flows
estimated to be generated by those assets over the development period without
regard to the default. If the RGI transactions are not consummated or the
Morgens Loan or the SoGen Loan defaults are not otherwise cured or waived, the
classification of the Fund's development real estate may be changed to "held
for disposal" possibly necessitating a valuation allowance to reflect such
assets at current fair market value.
C. INVESTMENT IN REAL ESTATE
During the development in progress phase of a property, interest, real
estate taxes and other development costs are capitalized in Developments in
Progress. The costs of land being developed are included in Land.
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". Statement No. 121 requires the Fund to recognize
impairment losses for its development 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 and to record its
properties held for disposal at the lower of carrying amount or fair value less
cost to sell. The Fund adopted Statement No. 121 in the fourth quarter
effective January 1, 1995 with no effect on the accompanying financial
statements.
D. DEFERRED FINANCING COST
Deferred financing costs are being amortized over the terms of the related
loans using the level yield method.
E. REVENUE RECOGNITION
Rental income (included in operating property revenues) is recognized on a
straight-line basis over the terms of the respective tenant leases.
F-12
<PAGE> 53
BANYAN MORTGAGE INVESTMENT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenues on retail land sales are recorded upon closing of escrow and transfer
of title to the buyer. Costs associated with retail land sales are allocated on
a pro-rata basis.
F. INCOME TAXES
On January 30, 1995, the Fund notified the Internal Revenue Service of its
intent to revoke its election to be treated as a real estate investment trust
("REIT") under section 856(c)(1) of the Internal Revenue Code of 1986, as
amended, in order to enable the Fund to develop its large tracts of undeveloped
land and to avoid the adverse tax effects of being deemed a dealer of real
property. For the years ended December 31, 1994 and 1993 the Fund elected to
be treated as a REIT under the Internal Revenue Code Sections 856-860. In
order to qualify, the Fund was required to meet distribution, asset and income
tests as well as certain other requirements.
Beginning in 1995, income taxes are accounted for in accordance with
Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes."
G. CASH AND CASH EQUIVALENTS
The Fund considers all highly liquid investments which mature within three
months or less from the date of purchase to be cash and cash equivalents. At
December 31, 1995, the Fund's cash and cash equivalents is comprised of demand
and money market deposits only. At December 31, 1994, cash and cash
equivalents included demand and money market deposits of $1,145,629 as well as
a Federal Farm Credit Bank Bond with a face amount of $6,895,000 bearing
interest at 5.0% which matured on January 3, 1995. The cost, which approximates
market value, of this obligation at December 31, 1994 was $6,979,272.
H. NET INCOME (LOSS) PER SHARE
Net income (loss) per share is computed using the weighted average number
of shares outstanding during the year of 39,770,637, 39,724,995, and 39,689,294
for the years ended December 31, 1995, 1994, and 1993 respectively. Income
(Loss) per share for the years ended December 31, 1995 and 1994 is computed
using the weighted average number of shares outstanding due to the Fund's
issuance of a total of 79,909 shares and 53,101 shares of its common stock
during 1995 and 1994, respectively. See Notes 7 and 8 for further details.
Options issued under the Fund's 1993 Executive and Directors Stock Option Plan
have been excluded from the computation of Weighted Average Shares Outstanding
because their inclusion is anti-dilative. In addition, warrants issued
pursuant to the Credit Agreement with Morgens, Waterfall, Vintiadis & Co.,
Inc., (see Note 3, "Investment in Real Estate and Related Mortgage Loans
Payable" for further details) are excluded from the computation of Weighted
Average Shares Outstanding as inclusion is also anti-dilative.
F-13
<PAGE> 54
BANYAN MORTGAGE INVESTMENT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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.
K. NON-CASH INVESTING AND FINANCING ACTIVITIES
On August 25, 1995 and April 29, 1994, the Fund issued 79,909 and 50,437
shares, respectively of its common stock to Leonard G. Levine, its President.
(See Note 7 "Award Shares" for further information.)
Pursuant to the Credit Agreement executed October 17, 1994 with Morgens,
Waterfall, Vintiadis & Co., Inc., as agent for a group of lenders, the Fund has
elected to defer payment of $2,733,737 of accrued interest, which has been
added to the principal balance of the loan as of December 31, 1995. Of the
$2,733,737 balance of deferred interest, $737,430 was expensed and included as
interest payable at December 31, 1994.
F-14
<PAGE> 55
BANYAN MORTGAGE INVESTMENT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. DISPOSITION OF REAL ESTATE
WAYSIDE VILLAGE DEVELOPMENT
For the year ended December 31, 1995, the Fund sold 17 single family lots
to home developers at the Fund's Wayside Village development. The sale of
these lots generated gross proceeds of $1,029,830. After payment of closing
costs of $1,291 the Fund received net proceeds of $1,028,539 of which
approximately $477,000 was applied toward principal payments on a mortgage loan
collateralized by the Wayside Village development as discussed below. After
allocation of overhead, holding costs and development expenses, the sale of the
lots resulted in an aggregate net gain on disposition of approximately $4,000.
For the year ended December 31, 1994 the Fund sold 22 single family lots and 41
townhome lots to home developers for $1,990,611. After payment of closing
costs of $2,403, the Fund received net proceeds of $1,988,208 of which
approximately $1,333,000 was applied toward interest and principal payments on
the mortgage loan collateralized by the Wayside Village development. After
allocation of overhead, holding costs and development expenses, the sale of the
lots resulted in an aggregate net loss on disposition of approximately
$401,000. Through December 31, 1993, the Fund sold 36 single family lots and
27 townhome lots to home developers on the Fund's Wayside Development. The
sale of these lots generated gross proceeds of $2,411,551. After payment of
closing costs of $15,214 the Fund received net proceeds of $2,396,337 of which
approximately $1,937,000 was applied toward interest and principal payments on
the loan on the Wayside Development as discussed below. After allocation of
overhead, holding costs and development expenses, the sale of the lots resulted
in an aggregate net loss on disposition of approximately $147,000. See Note 3,
"Investment in Real Estate and Related Mortgage Loan Payable" of notes to
consolidated financial statements for further information regarding the Wayside
Village development and the mortgage loan collateralized by the development.
9025 WILSHIRE BOULEVARD
On September 23, 1994, the Fund sold the 9025 Wilshire Blvd. property
("9025 Wilshire") to an unaffiliated third party for $2,200,000. After payment
of selling commissions of $78,000, real estate tax prorations of $11,082 and
other fees and expenses of $16,551, the Fund received net proceeds from the
sale totaling $2,094,367. Per the terms of the sale agreement, the Fund was
also entitled to a share in the insurance proceeds received from a claim filed
by the Fund for property damage sustained during the January 17, 1994 Los
Angeles area earthquake. After prorations for professional fees paid in
connection with negotiating the insurance claim and the cost of pending repair
work at the property, the Fund received additional settlement proceeds of
$205,265 upon sale of the property. The transaction resulted in a gain on
disposition to the Fund of $323,333.
F-15
<PAGE> 56
BANYAN MORTGAGE INVESTMENT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. DISPOSITION OF REAL ESTATE (CONTINUED)
CASCADES
On May 26, 1994, the Fund sold the Cascades Apartments to an unaffiliated
third party for $14,482,100. After payment of selling commissions of $163,669,
transfer taxes and title charges of $130,449 and net prorations and credits
totalling $264,657 for real estate and personal property taxes, rent, net
operating expenses and security deposits the Fund received net proceeds of
$13,950,066. During 1992, the Fund borrowed a total of $10,500,000 from Heller
Financial, Inc. (the "Heller Loan"), collateralized by first mortgages on the
Cascades Apartments and the Fund's 120 S. Spalding property, under a loan
commitment dated June 13, 1992. Per the terms of the Heller Loan, the Fund was
required to repay $9,926,159, representing the entire outstanding principal
balance upon the sale of the Cascades Apartments, net of real estate tax escrow
proceeds of $327,996. The Fund also paid 26-days accrued interest and fees of
$67,370. The Fund is now fully released from its obligations under the Heller
Loan and has obtained the release of Heller's first mortgages on the Cascades
Apartments and on the 120 S. Spalding building. As a result of the Cascades
Apartments sale, net cash proceeds of $3,956,537 were transferred to the Fund,
and the transaction resulted in a gain on disposition to the Fund of $2,885,305.
ROCKY POINT
On April 22, 1994, the Fund sold the remaining 1.41 acre parcel of the
Rocky Point property to an unaffiliated third party for $180,000. After
payment of selling commissions, title charges, real estate tax prorations and
other closing costs, the Fund received net proceeds of $156,099. The sale of
this property resulted in a gain on disposition to the Fund of $73,290.
ACTON
On April 2, 1993, the Fund sold the Acton (Great Hill Village) property to
an unaffiliated third party for $952,000. After payment of selling
commissions, title charges, and other closing costs, the Fund received net
proceeds of $911,127. The sale of this property resulted in a gain on
disposition to the Fund of approximately $719,000.
WHITWORTH
On June 15, 1993, the Fund sold the Whitworth property to an unaffiliated
third party for $2,216,283. After payment of selling commissions, title
charges and other closing costs, the Fund received net proceeds of $2,152,741.
The sale of this property resulted in a gain on disposition to the Fund of
approximately $442,000.
F-16
<PAGE> 57
BANYAN MORTGAGE INVESTMENT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. INVESTMENT IN REAL ESTATE AND RELATED MORTGAGE LOANS PAYABLE
At December 31, 1995, the Fund's investments in real estate consisted of
the following:
<TABLE>
<CAPTION>
Initial Cost Cost Adjustments
to the Fund Subsequent to Acquisition
Buildings
Description Encum- & Improve- Improve- Carrying
brances Land ments ments Costs(a) Land
<S> <C> <C> <C> <C> <C> <C>
LAND:
Chapman's Landing (c) $23,000,000 $ --- $ 9,240,109 $ 1,704,357 $139,095
2,230 acres in
Charles County, MD
Southbridge, (c) 34,300,000 --- 2,547,494 2,433,919 128,462
2,048 acres in
Prince William County, VA
Wayside, (c) 17,595,446 --- 6,510,436 8,481,454 ---
506 acres in
Prince William County, VA
Bishop's Ranch, (c) 7,063,498 --- 4,154,881 2,085,467 ---
565 acres in
Monterey County, CA
OFFICE BUILDING:
120 S. Spalding Dr. (c) 10,773,000 14,877,000 48,850 --- ---
Beverly Hills, CA (e)(f) ----------- ----------- ----------- ----------- --------
$92,731,944 $14,877,000 $22,501,770 $14,705,197 $267,557
Less: Development in
Progress --- --- --- --- ---
Real Estate Held --- --- --- --- ---
for Sale (g) ----------- ----------- ----------- ----------- --------
(c) $92,731,944 $14,877,000 $22,501,770 $14,705,197 $267,557
=========== =========== =========== =========== ========
<CAPTION>
Amounts at which Carried
at December 31, 1995
Buildings Valuation Date of Date
& Improve- Adjustment Total Const- Acqui-
Land ments & Accumulated (b) ruction red
Depreciation
<S> <C> <C> <C> <C> <C> <C>
LAND:
Chapman's Landing $23,139,095 $10,944,466 $ --- $34,083,561 (d) 03/91
2,230 acres in
Charles County, MD
Southbridge, 34,428,462 4,981,413 (10,829,000) 28,580,875 (d) 05/91
2,048 acres in
Prince William County, VA
Wayside, 17,595,446 14,991,890 (9,000,000) 23,587,336 (d) 05/91
506 acres in
Prince William County, VA
Bishop's Ranch, 7,063,498 6,240,348 (3,300,000) 10,003,846 (d) 09/91
565 acres in
Monterey County, CA
10,773,000 14,925,850 (18,525,851) 7,172,999 1984 8/90
OFFICE BUILDING: ----------- ----------- ----------- ----------
120 S. Spalding Dr. $92,999,501 $52,083,967 ($41,654,851) $103,428,617
Beverly Hills, CA (e)(f)
Less: Development in
Progress --- (30,872,769) --- (30,872,769)
Real Estate Held
for Sale (g) (10,936,497) (6,240,348) --- (17,176,845)
----------- ----------- ------------- ------------
$82,063,004 $14,970,850 ($41,654,851) $ 55,379,003
=========== =========== ============ ===========
</TABLE>
F-17
<PAGE> 58
BANYAN MORTGAGE INVESTMENT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. INVESTMENT IN REAL ESTATE AND RELATED MORTGAGE LOANS PAYABLE (CONTINUED)
(a) Consists primarily of capitalized construction period interest and
related loan fees, where applicable, and real estate taxes of $11,571,992
and $3,133,205, respectively. During 1995, $1,860,275 of interest was
paid and $2,859,437 of interest was capitalized. During 1994, $2,898,813
of interest was paid and $1,872,331 of interest was capitalized.
(b)
<TABLE>
<CAPTION>
Reconciliation of Real Estate
1995 1994 1993
<S> <C> <C> <C>
Balance at Beginning of Year $112,139,672 $129,667,715 $128,487,820
Net Dispositions Through Sale (1,024,149) (14,714,346) (4,471,057)
Net Additions 7,199,945 6,186,303 10,300,952
Valuation Adjustments (12,900,000) (9,000,000) (4,650,000)
------------ ------------ ------------
Balance at End of the Year $105,415,468 $112,139,672 $129,667,715
============ ============ ============
<CAPTION>
Reconciliation of Accumulated Depreciation
1995 1994 1993
<S> <C> <C> <C>
Balance at Beginning of Year $1,645,927 $2,105,286 $1,386,980
Depreciation Expense for the Year 374,075 609,969 782,722
Retirements (Other Assets) (33,151) (1,069,328) (64,416)
---------- ---------- ----------
Balance at End of the Year $1,986,851 $1,645,927 $2,105,286
========== ========== ==========
</TABLE>
(c) The properties of the Fund as described above are subject to mortgage
loans at December 31, 1995 as follows:
<TABLE>
Mortgage Loans Payable Annual Final
Property 12/31/95 12/31/94 Interest Rate Maturity Date Payments
<S> <C> <C> <C> <C> <C>
All Properties of Fund (i) $23,233,737 $20,500,000 17.5% (Default 09/30/98 Quarterly, interest only
Rate 19.5%)
Southbridge 3,700,000 4,200,000 12% 01/20/99 Monthly, interest only
Prince William County, VA (ii) 202,000 232,000 Prime + 2%; Max 10% 09/30/97 Monthly, interest only
130,000 163,420 Prime + 2%; Max 10% 09/30/96 Monthly, interest only
Wayside 6,360,000 6,837,225 Prime + 2% (Default 12/31/97 Monthly, interest only
Prince William County, VA (iii) ----------- ----------- Rate Prime + 6%)
$33,625,737 $31,932,645
=========== ===========
</TABLE>
F-18
<PAGE> 59
BANYAN MORTGAGE INVESTMENT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. INVESTMENT IN REAL ESTATE AND RELATED MORTGAGE LOANS PAYABLE (CONTINUED)
(i) On October 17, 1994, the Fund executed a Credit Agreement with
Morgens, Waterfall, Vintiadis & Co. Inc. (the "Morgens Loan") in the
amount of $20,500,000. The Fund has agreed to make quarterly interest
payments in arrears at an annual rate of 17.5% and is also obligated to
make certain payments, which were applied to repay Morgens Loan
interest, based on 50% of the net cash flow generated by its wholly
owned subsidiaries. For the year ended December 31, 1995, the Fund made
required cash flow payments of $841,548 which were recorded as payments
of deferred interest. From October 17, 1994 until September 30, 1995,
the Fund elected to defer interest due on the Morgens Loan in accordance
with the Credit Agreement, other than the cash flow payments discussed
above, which was then added to the outstanding principal balance of the
loan. As of December 31, 1995, the principal balance outstanding,
including capitalized interest through September 30, 1995, was
$23,233,737. The Morgens Loan is collateralized by first mortgages on
the Fund's 120 S. Spalding, Chapman's Landing and Bishop Ranch
properties and portions of its Southbridge property, as well as pledges
of the common stock and partnership interests of the Fund's
subsidiaries, its accounts receivable, bank accounts and all other
tangible and intangible personal property. The Credit Agreement
includes certain financial and other covenants the most restrictive of
which limit the Fund's leverage to a maximum of 0.6:1, require a minimum
net worth of $70,000,000 and restrict additional indebtedness. Pursuant
to the terms of the Credit Agreement, the Lender also received warrants
which entitle it to purchase up to 4,380,000 shares of the Fund's common
stock at any time until October 1, 1998 at an exercise price of $0.70
per share. As of December 31, 1995, these warrants had not been
exercised.
Pursuant to the Morgens Loan closing, the Fund paid an advisory fee to
the Lender's advisors of $615,000, accrued real estate taxes of $183,510,
legal fees of $140,000 and other fees and expenses totaling approximately
$66,000 related to the transaction. In addition, the Fund utilized
Morgens Loan proceeds at closing to retire the balance of outstanding
loans collateralized by first mortgages on its Chapman's Landing and
Bishop Ranch properties. The holder of the Chapman's Landing note was
paid $1,130,853 representing principal repayment of $1,089,204 and
accrued interest of $41,649 while the holder of the Bishop Ranch note
received $1,959,409 representing principal repayment of $1,900,000 and
accrued interest and fees of $59,409. The Fund also paid a total of
$3,250,000 pursuant to a final negotiated settlement of its previously
disclosed Buckeye arbitration award obligation.
As a result of insufficient cash available to the Fund, on January 1,
and April 1, 1996 it did not make the required interest payments due on
the Morgens Loan in the amounts of approximately $1,025,000 and
$1,014,000, respectively. On January 11, 1996 the Fund received
notification from the Lender that the failure to make this required
interest payment constituted an "Event of Default" under the Credit
Agreement. The Lender has reserved all of its rights and remedies under
the Credit Agreement with respect to this Event of Default but has taken
no additional action at this time. The Morgens Loan is also in default as
a result of the separate default on the Societe General Loan, which is
discussed below.
(ii) On December 21, 1994, the Court confirmed an amended plan of
reorganization as ratified by the creditors (the "Plan") submitted by
the Southbridge Venture (the "Venture"). Per the terms of the Plan, all
of the Venture's creditors were to be paid in full. The Plan also
provided for certain modifications of the terms of three loans
collateralized by first mortgages on various portions of the Project.
On December 21, 1994, the Venture paid $506,800 representing accrued
interest due to the holder of the mortgage loan in the principal amount
of $3,700,000 ("Loan 1"). The maturity date of Loan 1 has been extended
from September 20, 1994 until January 20, 1999. Loan 1 requires the
Venture to make monthly payments of interest only at a rate of 12%,
three $250,000 annual principal paydowns on December 20, 1995, 1996 and
1997, respectively, with the balance of the remaining unpaid principal
of $2,950,000 due upon maturity. Subsequently, on December 26, 1995,
the lender agreed to defer payment of the $250,000 principal due on
December 20, 1995 until June 20, 1996. As consideration for the
extension, the Fund agreed to pay an extension fee of $8,000 and certain
other legal fees of the lender in the amount of $54,000. The lender
also agreed to provide the Fund with the option to further extend the
date of the December 20, 1995 principal payment until September 20,
1996, in exchange for an increase in the interest rate of Loan 1 from
12% to 12.5%. In addition, prior to the full repayment of Loan 1, the
Venture may obtain releases of liens on portions of the approximately
538 acres of the Project which collateralize Loan 1 upon pro rata
payment of 120% of the then outstanding principal balance as specified
in the Plan, for the purpose of constructing the VRE/Amtrak Station and
service road in accordance with the Prince William County Cherry Hill
Sector Plan. Also, on December 21, 1994, the Venture paid $28,855
representing accrued interest due to the holder of the mortgage loan in
the principal amount of $202,000 ("Loan 2"). The maturity date of Loan
2 was extended from October 1, 1995 until September 30, 1997. Loan 2
requires the Venture to make monthly payments of interest only at a rate
of prime plus 2%, not to exceed 10%, plus a principal paydown of $70,000
on September 30, 1996 with the balance of the remaining unpaid principal
of $132,000 due upon maturity. Finally, on December 21, 1994 the
Venture paid $16,240 representing accrued interest due to the holder of
the mortgage loan in the principal
F-19
<PAGE> 60
BANYAN MORTGAGE INVESTMENT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. INVESTMENT IN REAL ESTATE AND RELATED MORTGAGE LOANS PAYABLE (CONTINUED)
amount of $130,000 ("Loan 3"). The maturity date of Loan 3 was modified
from December 1, 2003 to September 30, 1996. Loan 3 requires the Venture
to make monthly payments of interest only at a rate of prime plus 2%, not
to exceed 10%, with the principal balance of $130,000 due at maturity.
All other terms of Loans 1, 2 and 3 are unchanged. The prime rate as of
December 31, 1995, as published in the "Wall Street Journal" was 8.5%.
(iii) On October 17, 1994, the Fund paid a total of $4,323,630 from the
Morgens, Waterfall, Vintiadis & Co. Inc., loan proceeds to Chase
Manhattan Bank ("Chase"), in exchange for Chase's full release of its
50% interest in the $14,069,462 outstanding loan collateralized by a
first mortgage on the Fund's Wayside Village property and portions of
the Fund's Southbridge property (the "Original Wayside Loan"). The
payment to Chase consisted of a partial principal payment of $4,220,839,
which represented Chase's $7,034,731 principal portion of the Original
Wayside Loan, less a 40% discount, and accrued interest of $102,791.
Simultaneously, the Fund and Societe Generale ("SoGen") agreed to modify
the terms of SoGen's $7,034,731 principal portion of the Original
Wayside Loan (the "Amended Wayside Loan"). The terms of the loan
modification agreement (the "Amended Agreement") extended the maturity
date of the Amended Wayside Loan to December 31, 1997 and provided for
monthly interest payments in arrears at an interest rate of prime + 2%.
At the option of the Fund, the maturity date of the Amended Wayside Loan
may be further extended for two one-year periods in the event certain
conditions defined in the Amended Agreement are met. The Fund and SoGen
also agreed upon a $2,000,000 revolving credit line (the "Wayside
Revolving Loan") to fund specific development costs associated with lot
sales contracts for the Wayside Village property. The terms of the
Wayside Revolving Loan provide for monthly interest payments in arrears
at an interest rate of prime + 3%. The Amended and Revolving Wayside
loans require principal to be repaid as lots are sold, based on
specified release prices, and are cross-collateralized and
cross-defaulted. Pursuant to the SoGen transactions, the Fund paid
$34,731 to reduce the outstanding Amended Wayside Loan principal to
$7,000,000. The Fund also paid accrued interest of $102,791, loan fees
of $95,000 and other fees and expenses totalling approximately $188,500
from the Loan proceeds, including $126,500 escrowed for future real
estate taxes on Wayside Village.
On November 3, 1995, SoGen declared a default under the Amended Wayside
Loan. As a result of the default, SoGen has demanded immediate repayment
of all sums due under the loan, amounting to approximately $6,600,000.
In addition, SoGen separately cancelled the Wayside Revolving Loan. The
Fund had not drawn any monies to date under the Wayside Revolving Loan.
The default arose when a principal payment due October 1, 1995 was not
made.
In the Fund's view, a limited number of lots were developed at Wayside
Village during the past construction season due, in large part, to a
seven-month delay in obtaining a subordination agreement between a home
builder and SoGen causing the Fund to seek deferral of the mandatory
principal payments due and to become due during the next three calendar
quarters. The Fund has also been unsuccessful in its efforts to obtain a
draw under the Wayside Revolving Loan described above, despite the
submission of what the Fund believes are appropriate draw requests and
documentation. The Fund has expended $3,270,000 in infrastructure
improvements and other costs during the last year as a condition
precedent to such funding. SoGen has refused to fund the draw requests
due to a differing interpretation of the conditions contained in the
revolving loan agreement. The draws are needed to complete the
improvements so that the lots may be delivered. The Fund has been
involved in and is continuing its discussions with SoGen with respect to
the alleged default on the Amended Wayside Loan and cancellation of the
Revolving Loan and has recently made several proposals which SoGen has
declined. There can be no assurance, however, that the parties will
reach any resolution of the dispute.
The default and acceleration of the SoGen loan constitutes a default
under the Morgens Loan as discussed above. Morgens has indicated that it
does not presently intend to accelerate repayment of its loan as a result
of the SoGen default or failure by the Fund to make the January 1, and
April 1, 1996 interest payments under the Morgens Credit Agreement.
F-20
<PAGE> 61
BANYAN MORTGAGE INVESTMENT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. INVESTMENT IN REAL ESTATE MORTGAGE LOANS PAYABLE (CONTINUED)
The principal balances of the mortgage loans are scheduled to be repaid as
follows (without respect to any potential payment acceleration of Morgens or
SoGens Loans):
<TABLE>
<S> <C>
1996 $4,710,000
1997 14,965,737
1998 11,000,000
1999 2,950,000
Thereafter ---
-----------
Total $33,625,737
===========
</TABLE>
(d) Properties are currently at various stages of development and
entitlement. The development of projects is currently expected to
continue through 2010.
(e) Depreciation expense is computed using the straight line method with a
mid-month convention. Rates used in the determination of depreciation are
based upon the following estimated useful lives:
Years
Buildings, Building Appurtenances and Improvements 40.0
(f) Subsequent to December 31, 1995, the Fund entered into a contract with an
unaffiliated third party for a sale price of $7,450,000. The carrying
amount of this property in the accompanying consolidated financial
statements is the sales price less estimated closing costs of
approximately $277,000. The Fund has received an earnest money deposit in
the amount of $400,000 and the sale is scheduled to occur on April 19,
1996.
(g) Real Estate Held for Sale includes 120 S. Spalding Dr. and Bishop's Ranch
which are reflected net of accumulated depreciation and their respective
valuation adjustments as of December 31, 1995.
F-21
<PAGE> 62
BANYAN MORTGAGE INVESTMENT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. INVESTMENT IN REAL ESTATE VENTURE
On March 6, 1991, in satisfaction of their mortgage loans receivable, the
Fund and Banyan Short Term Income Trust ("BST"), each received a 50% interest
in the Oakridge joint venture (the "Venture") pursuant to a deed-in-lieu
agreement with the borrower. The Fund and BST each holds a 50% general
partnership interest in the Oakridge joint venture pursuant to the partnership
agreement of the VST/VMIF Oakridge Partnership. The property was originally
comprised of 270 acres of vacant land located in Hollywood and Dania, Florida
which had been operated as a golf course. On September 30, 1994, the Venture
sold a 60-acre residential parcel of the Oakridge site to an unaffiliated third
party for $4,100,000. Subsequent to December 31, 1995, on February 5, 1996 and
March 1, 1996, the Fund sold a total of 180 acres to an unaffiliated party for
approximately $4,600,000. In addition, on March 1, 1996, the Venture sold an
additional 25-acre parcel of the Oakridge site to an unaffiliated party for
approximately $2,200,000. The February and March, 1996 sales resulted in the
Venture's repayment of a first mortgage loan collateralized by the Oakridge
property in the amount of $1,916,617. After repayment of the mortgage loan,
interest and other closing costs the Venture received net proceeds from the
sales of $4,180,505 of which $2,090,253 was distributed to the Fund
representing its 50% interest in the Venture. The Fund will recognize its
share of the gain from the February and March property sales of approximately
$1,051,000 in the first quarter of 1996. The Venture is currently engaged in
negotiations with potential purchasers of the remaining 5-acre retail parcel at
the Oakridge site. The Fund has recognized losses of $213,516 and $560,347 for
the years ended December 31, 1995 and 1993, respectively. For the year ended
December 31, 1994 the Fund recognized income of $442,091 which included a gain
of $869,704 from the property sale.
5. 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 allocated
share of costs for the years ended December 31, 1995, 1994 and 1993 aggregated
$1,092,081, $1,141,675 and $971,321, 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
and 1994, the Fund had a net payable due to BMC of $175,725 and $86,296,
respectively. The net payable is included in the accounts payable and accrued
expenses in the Fund's consolidated balance sheet.
6. RECOVERY OF LOSSES ON MORTGAGE LOANS, NOTES, INTEREST RECEIVABLE AND
CLASS ACTION SETTLEMENT COSTS AND EXPENSES
The Fund received cash of $981,950, $360,515 and $7,906,520 during 1995,
1994 and 1993, respectively, related to its interest in its liquidating trusts
established for the benefit of the unsecured creditors
F-22
<PAGE> 63
BANYAN MORTGAGE INVESTMENT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. RECOVERY OF LOSSES ON MORTGAGE LOANS, NOTES, INTEREST RECEIVABLE AND
CLASS ACTION SETTLEMENT COSTS AND EXPENSES (CONTINUED)
(including the Fund) of VMS Realty Partners and its affiliates ("VMS"), former
affiliates of the Fund. The Fund has recorded $906,629, $298,815 and $7,916,073,
respectively, of these amounts as recovery of losses on mortgage loans, notes,
interest receivable and class action settlement costs in its consolidated
statements of income and expenses. The remainder of $127,468 was recorded as a
liability to the Class Action Settlement Fund representing the Fund's share of
amounts due under the terms of the previously settled VMS securities litigation.
This amount is recorded in Accounts Payable and Accrued Expenses at December 31,
1995.
On January 25, 1994, the Fund received net proceeds of $796,985 by
terminating an escrow established as part of the Class Action Settlement of the
VMS securities litigation. The escrow was established to provide the directors
and officers of the Fund with monies to fund the cost of any litigation in
which they may 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 and officers.
7. AWARD SHARES
On August 25, 1995 and April 29, 1994, the Fund issued 79,909 shares and
50,437 shares, respectively 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 which are
valued based on the average closing price of the Fund's common stock for the
last five business days of the year in which the incentive is earned. Mr.
Levine's incentive compensation earned during 1995 was $40,013. The 1995
incentive compensation will be paid out 80% in cash, or $32,010 and 20% in
Award Shares valued at $0.431 per share or $8,003 in 1996. Pursuant to Board
of Director's approval, Mr. Levine was paid $120,000 of his 1994 incentive
compensation on December 31, 1994. On March 15, 1995, Mr. Levine was paid the
balance of his 1994 incentive compensation in the amount of $51,805. The
$171,805 of total cash payments represents 80% of Mr. Levine's 1994 incentive.
The 79,909 Award Shares issued in respect of the incentive compensation earned
during 1994 were valued at a price equal to $0.537 per share or $42,951. On
January 28, 1994, Mr. Levine was paid $231,166 representing 80% of his 1993
incentive. The 50,437 Award Shares valued at $1.15 per share or $58,002,
represent 20% of Mr. Levine's 1993 incentive. The Award Shares will be held by
the Fund, pending satisfaction of the vesting requirements included in Mr.
Levine's contract which provides that Mr. Levine will fully vest on 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. Mr. Levine will, however, lose his right to these Award Shares if he
is not 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 is
entitled to all dividends paid on shares held by the Fund for his benefit. The
Award Shares are included in the total shares outstanding
F-23
<PAGE> 64
BANYAN MORTGAGE INVESTMENT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. AWARD SHARES (CONTINUED)
of the Fund effective August 25, 1995 and April 29, 1994 for the purpose of
calculating Net Income Per Share of Common Stock based on the Weighted Average
Number Shares Outstanding for the years ended December 31, 1995 and 1994,
respectively.
8. STOCK OPTION PLAN
On June 25, 1993, the Shareholders approved and adopted the 1993 Executive
and Directors Stock Option Plan (the "Plan"). The Plan provides that the Board
of Directors has the authority to issue up to 1,000,000 shares of the Fund's
common stock for stock option awards. Under the Plan, options have been
granted to Directors and management to purchase shares at fair market value at
date of grant.
A summary of option activity is as follows:
<TABLE>
<CAPTION>
Exercise Price
Shares Per Share
<S> <C> <C>
Options outstanding at January 1, 1993 --- ---
Options granted 1993 170,000 $0.625
Options cancelled 1993 (8,000) $0.625
-------
Options outstanding at December 31, 1993 162,000 $0.625
Options granted 1994 170,000 $0.6875 - $1.125
Options cancelled 1994 (10,000) $1.125
Options exercised 1994 (2,664) $0.625
-------
Options outstanding at December 31, 1994 319,336 $0.625 - $1.125
Options granted 1995 171,000 $0.500 - $0.625
Options cancelled 1995 (1,000) $0.500
-------
Options outstanding at December 31, 1995 489,336 $0.500 - $1.125
=======
</TABLE>
At December 31, 1995, options on 183,670 shares are exercisable at $0.50 to
$1.25 per share and options on 508,000 shares were available for future grant.
9. ARBITRATION AWARD PAYABLE
The Fund and Banyan Mortgage Investors L.P. II ("BMLPII") acting for
itself and on behalf of THSP Associates Limited Partnership II ("THSP")
(formerly Banyan Mortgage Investors L.P. III) had agreed to resolve, by means
of arbitration, the issue of the amount of compensation, if any, owed by the
Fund to BMLPII in consideration for BMLPII's agreement to relinquish, and take
no action with respect to its interests in certain Beverly Hills, California
properties commonly known as the Buckeye properties when the Fund took control
of certain of these properties in 1990. On July 20, 1994, a majority of two
members of a panel of three arbitrators awarded BMLPII approximately $3,768,000
in connection with this
F-24
<PAGE> 65
BANYAN MORTGAGE INVESTMENT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. ARBITRATION AWARD PAYABLE (CONTINUED)
arbitration. On July 25, 1994, BMLPII filed suit in the Circuit Court of Cook
County, Illinois to confirm the award. Pursuant to the terms of a negotiated
settlement, the award was satisfied on October 17, 1994 by the payment of
$3,250,000.
10. INCOME TAXES
Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts reported for income tax purposes at December 31, 1995,
are as follows:
<TABLE>
<S> <C>
Deferred tax assets:
Investment in real estate $ 19,320,389
Notes and accounts receivable 103,939
Other 56,285
Net operating loss carry
forwards 107,785,235
------------
Total deferred tax assets 127,265,848
Less valuation allowance for
deferred tax assets (127,265,848)
------------
Net deferred tax assets $ ---
============
</TABLE>
As of December 31, 1995, the Fund had net operating loss carry forwards
of approximately $268,122,000 which expire as follows: $83,040,000 in 2005;
$55,604,000 in 2006; $120,412,000 in 2007; $3,536,000 in 2009; and $5,530,000
in 2010.
11. LITIGATION AND CONTINGENCIES
On September 1, 1995, an action was filed in the Circuit Court of Cook
County, Illinois entitled: Monterey County Partners et al v. BMIF Monterey
County Limited Partnership et al (the "Illinois Litigation"). BMIF Monterey
County Limited Partnership (the "Ownership Partnership") is controlled by a
subsidiary of the Fund and it holds the ownership interest in the Bishop Ranch
project. The complaint seeks: (i) the removal of the Fund's wholly-owned
subsidiary, BMIF Monterey County Corp. as the general partner of the Ownership
Partnership; (ii) declaratory relief that BMIF Monterey County Corp. is not
entitled to any "priority return" or "preferred return" on its capital account
in the Ownership Partnership; (iii) avoidance of an alleged fraudulent transfer
whereby the Ownership Partnership became the owner of the Bishop Ranch project
after the default in 1991 on the Fund's former mortgage loan; (iv) an
accounting and (v) a constructive trust to be created for the benefit of one of
the plaintiffs.
The Fund filed an Answer, Counterclaim and Third Party Complaint on March
29, 1996. All parties have been served with and have answered initial
discovery requests and are presently producing documents.
F-25
<PAGE> 66
BANYAN MORTGAGE INVESTMENT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. LITIGATION AND CONTINGENCIES (CONTINUED)
The Fund believes the Illinois Litigation is totally without merit and
intends to vigorously defend the Illinois Litigation and to prosecute the
Counterclaim and the Third Party Complaint. The partnership agreement which
creates the Ownership Partnership requires an unsuccessful litigant or its
representative whose claim is based upon or related to the partnership
agreement to pay the reasonable attorneys' fees of its opponent. The Fund
intends to seek reimbursement of all attorneys' fees expended or incurred in
defense of the Illinois Litigation.
On October 10, 1995, an action was filed in the Superior Court of Monterey
County, California entitled: Monterey County Partners, et al. v. BMIF Monterey
County Limited Partnership, et al., (the "California Litigation").
The California Litigation alleges fraudulent transfer and conspiracy and
seeks the following as remedies: (i) to set aside the Deed of Trust and the
obligations of the Ownership Partnership under a guaranty provided for in the
Morgens Loan, (ii) to quiet title to the Bishop Ranch project, declaring null
and void the interest of the various defendant lenders which arises under the
Deed of Trust and (iii) an award of attorneys' fees and costs.
The California Court has encouraged the parties to attempt to agree upon a
schedule for conducting discovery and a trial in the Illinois Litigation while
the California Litigation would remain in suspense. The court gave the parties
until April 19, 1996 to report to the court on the progress of such an
agreement. The parties appeared before the Illinois Court on April 3, 1996,
upon the defendants' motion, to request the Court to impose a discovery and
trial schedule. The Illinois Court ordered that if the parties conclude
discovery by September 13, 1996, a trial date would be set in September or
shortly thereafter.
None of the defendants has yet answered the California complaint. The Fund
believes that the California Litigation is totally without merit and intends to
vigorously defend it. The partnership agreement which creates the Ownership
Partnership requires an unsuccessful litigant or its representative whose claim
is based upon or related to the partnership agreement to pay the reasonable
attorneys' fees of its opponent. The Fund intends to seek reimbursement of all
attorneys' fees expended or incurred in defense of the California Litigation.
12. SIGNIFICANT ADJUSTMENTS
After considering appraisals, market studies, financial projections and
sales comparisons, management has taken a $3,600,000, $3,300,000 and $6,000,000
valuation adjustment on its 120 S. Spalding building, Bishop Ranch property,
and Wayside Village development, respectively, during the fourth quarter of
1995. These adjustments have been reflected in the Consolidated Statements of
Income and Expenses.
F-26
<PAGE> 1
EXHIBIT 2
AGREEMENT AND PLAN
OF
MERGER
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
ARTICLE I PRIVATE PLACEMENT; PURCHASE...................................... 2
Section 1.01 The Private Placement...................................... 2
Section 1.02 Purchase of the Morgens Loan............................... 5
Section 1.03 Purchase of the SoGen Loan................................. 5
ARTICLE II THE MERGER...................................................... 5
Section 2.01 Merger Closing............................................. 5
Section 2.02 The Merger................................................. 6
Section 2.03 Conversion of Shares; Exchange of Certificates............. 6
Section 2.04 Certificate of Incorporation............................... 6
Section 2.05 Bylaws..................................................... 6
Section 2.06 Directors.................................................. 6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BANYAN........................ 7
Section 3.01 Corporate Existence and Power.............................. 7
Section 3.02 Corporate Authorization.................................... 7
Section 3.03 Governmental Authorization................................. 8
Section 3.04 Non-Contravention.......................................... 8
Section 3.05 Capitalization............................................. 9
Section 3.06 Subsidiaries............................................... 10
Section 3.07 SEC Filings................................................ 11
Section 3.08 Financial Statements....................................... 11
Section 3.09 Compliance with Law........................................ 12
Section 3.10 No Defaults................................................ 12
Section 3.11 Litigation................................................. 12
Section 3.12 Absence of Certain Changes................................. 13
Section 3.13 No Undisclosed Material Liabilities........................ 14
Section 3.14 Certain Agreements......................................... 14
Section 3.15 Employee Benefits.......................................... 15
Section 3.16 Major Contracts............................................ 16
Section 3.17 Taxes...................................................... 16
Section 3.18 Intellectual Property...................................... 19
Section 3.19 Restrictions on Business Activities ....................... 19
Section 3.20 Title to Properties: Absence of Liens and Encumbrances..... 19
Section 3.21 Environmental Matters...................................... 21
Section 3.22 Insurance.................................................. 23
Section 3.23 Labor Matters.............................................. 23
Section 3.24 Employees.................................................. 24
Section 3.25 Finders' Fees.............................................. 24
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF RGI/US AND
RGI HOLDINGS ................................................... 24
Section 4.01 Corporate Existence and Power.............................. 24
Section 4.02 Corporate Authorization.................................... 25
Section 4.03 Governmental Consents and Approvals........................ 25
Section 4.04 Non-Contravention.......................................... 26
Section 4.05 Capitalization of RGI/US................................... 26
Section 4.06 Subsidiaries............................................... 27
Section 4.07 Financial Statements....................................... 28
Section 4.08 Compliance with Law........................................ 28
Section 4.09 No Defaults................................................ 28
Section 4.10 Litigation................................................. 28
Section 4.11 Absence of Certain Changes................................. 29
Section 4.12 No Undisclosed Material Liabilities........................ 30
Section 4.13 Certain Agreements......................................... 31
Section 4.14 Employee Benefits.......................................... 31
Section 4.15 Major Contracts............................................ 32
Section 4.16 Taxes...................................................... 32
Section 4.17 Intellectual Property...................................... 34
Section 4.18 Restrictions on Business Activities........................ 34
Section 4.19 Title to Properties: Absence of Liens and Encumbrances..... 35
Section 4.20 Environmental Matters...................................... 37
Section 4.21 Insurance.................................................. 38
Section 4.22 Labor Matters.............................................. 38
Section 4.23 Employees.................................................. 38
Section 4.24 Finders' Fees.............................................. 39
Section 4.25 Certain Securities Representations......................... 39
ARTICLE V COVENANTS OF BANYAN.............................................. 40
Section 5.01 Conduct of Banyan.......................................... 40
Section 5.02 Banyan Stockholders' Meeting............................... 40
Section 5.03 Access to Properties and Financial, Operational and
Technical Information; Monthly Financial Statements........ 41
Section 5.04 Other Offers............................................... 41
Section 5.05 Compliance with Obligations................................ 42
Section 5.06 Notice of Certain Events................................... 42
Section 5.07 Confidentiality............................................ 43
Section 5.08 Registration Statement..................................... 43
Section 5.09 Listing Application........................................ 44
ARTICLE VI COVENANTS OF RGI/US............................................. 44
Section 6.01 Conduct of RGI/US.......................................... 44
Section 6.02 Confidentiality............................................ 44
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C>
Section 6.03 Access to Properties and Financial, Operational and
Technical Information; Monthly Financial Information....... 44
Section 6.04 Compliance with Obligations................................ 45
Section 6.05 Notice of Certain Events................................... 45
Section 6.06 Registration Statement..................................... 46
Section 6.07 Audited Financial Statements............................... 46
ARTICLE VII COVENANTS OF ALL PARTIES....................................... 46
Section 7.01 Advice of Changes.......................................... 46
Section 7.02 Regulatory Approvals....................................... 46
Section 7.03 Actions Contrary to Stated Intent.......................... 47
Section 7.04 Certain Filings............................................ 47
Section 7.05 Public Announcements....................................... 47
ARTICLE VIII CONDITIONS TO THE MERGER...................................... 47
Section 8.01 Conditions to Obligations of RGI/US and RGI Holdings....... 47
Section 8.02 Conditions to Obligations of Banyan........................ 48
Section 8.03 Conditions to Obligations of Each Party.................... 49
ARTICLE IX TERMINATION OF AGREEMENT........................................ 50
Section 9.01 Termination Prior to the Initial Closing................... 50
Section 9.02 Termination After the Initial Closing...................... 50
Section 9.03 Effect of Termination...................................... 51
ARTICLE X MISCELLANEOUS.................................................... 52
Section 10.01 Definitions............................................... 52
Section 10.02 Further Assurances........................................ 54
Section 10.03 Fees and Expenses......................................... 54
Section 10.04 Notices................................................... 55
Section 10.05 Governing Laws............................................ 56
Section 10.06 Binding upon Successors and Assigns....................... 56
Section 10.07 Severability.............................................. 56
Section 10.08 Entire Agreement.......................................... 56
Section 10.09 Other Remedies............................................ 56
Section 10.10 Amendment and Waivers..................................... 56
Section 10.11 No Waiver................................................. 57
Section 10.12 Construction of Agreement; Knowledge...................... 57
Section 10.13 Absence of Third Party Beneficiary Rights................. 57
Section 10.14 Mutual Drafting........................................... 57
Section 10.15 Counterparts.............................................. 57
</TABLE>
SCHEDULES
Banyan Disclosure Schedule
RGI/US Disclosure Schedule
iii
<PAGE> 5
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is entered into as of
this 12th day of April, 1996, by and among RGI U.S. HOLDINGS, INC., a
Washington corporation ("RGI/US"), RGI HOLDINGS, INC., a Washington corporation
("RGI Holdings") and BANYAN MORTGAGE INVESTMENT FUND, a Delaware corporation
("Banyan" and, together with RGI/US and RGI Holdings, the "Parties").
RECITALS
A. The Board of Directors of each of RGI/US and Banyan have determined
that a business combination between RGI/US and Banyan is in the best interests
of their respective companies and stockholders and presents an opportunity for
their respective companies to achieve long-term strategies and financial
benefits, and accordingly, have agreed to effect the transactions contemplated
herein including a merger of RGI/US with and into Banyan (the "Merger") upon
the terms and subject to the conditions set forth herein.
B. In connection with the contemplated Merger, RGI/US, RGI Holdings and
Banyan have each determined to engage in the transactions contemplated hereby,
pursuant to which: (i) RGI Holdings shall purchase in a private placement (the
"Private Placement") 7,466,666 shares of Banyan's authorized but unissued
common stock, $0.01 par value per share ("Banyan Common Stock") at a purchase
price of $.46875 per share, as a result of which RGI Holdings will own
approximately 16.5% of the total outstanding capital stock of Banyan; (ii) RGI
Holdings or an affiliate will purchase from Morgens, Waterfall, Vintiadis &
Co., Inc. ("Morgens") as agent for several institutional lenders, a loan
previously made to Banyan in the principal amount of $20,500,000 (the "Morgens
Loan"), the terms and conditions of which will be modified by agreement of the
Parties to cure or waive certain defaults that have occurred under the Morgens
Loan; and (iii) RGI Holdings or an affiliate will purchase from Societe
Generale, Southwest Agency ("SoGen"), a loan previously made to Banyan in the
principal amount of $7,000,000 (the "SoGen Loan"), the terms and conditions of
which will be modified by agreement of the Parties to cure or waive certain
defaults that have occurred under the SoGen Loan.
C. Subject to the terms and conditions of this Agreement, RGI/US shall be
merged with and into Banyan in accordance with the General Corporation Law of
the
1
<PAGE> 6
State of Delaware ("Delaware Law") and the Washington Business Corporation Act
("Washington Law"), the separate existence of RGI/US shall cease, and Banyan
shall be the surviving corporation (the "Surviving Corporation"). In
connection therewith, each of the 1,000 issued and outstanding shares of
RGI/US common stock, no par value per share ("RGI/US Common Stock"), shall be
converted into 151,445.333 newly-issued shares of Banyan Common Stock, in the
manner and upon the terms and subject to the conditions set forth herein.
D. RGI/US and Banyan intend for the Merger to qualify as a reorganization
in accordance with the provisions of Section 368(a)(1)(A) of the Internal
Revenue Code of 1986, as amended (the "Code").
E. RGI/US, RGI Holdings and Banyan desire to make certain representations,
warranties and agreements in connection with the Private Placement and the
Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein, the
parties agree as follows:
ARTICLE I
PRIVATE PLACEMENT; PURCHASE OF MORGENS LOAN
SECTION 1.01 THE PRIVATE PLACEMENT.
(a) Subject to the terms and conditions of this Agreement, RGI
Holdings shall purchase at the Initial Closing (as defined in Section 1.01(c)
below) and Banyan shall sell and issue to RGI Holdings at the Initial Closing,
seven million four hundred sixty-six thousand six hundred sixty-six (7,466,666)
shares of Banyan Common Stock (the "Initial Shares") for the purchase price of
Three Million Five Hundred Thousand Dollars ($3,500,000) (the "Purchase Price").
(b) [deleted]
(c) Initial Closing. The closing of the purchase and sale of the
Initial Shares (the "Initial Closing") shall take place on the later of May 15,
1996 or one business day after satisfaction or waiver of the latest to occur of
the conditions set forth in Subsection 1.01(e) and 1.01(f) below, at the offices
of Davis Wright Tremaine, 2600 Century Square, 1501 Fourth Avenue, Seattle,
Washington 98101, unless a different date or place is agreed to in writing by
the Parties hereto. At the Initial Closing, Banyan shall deliver to RGI
Holdings a certificate representing the Initial Shares against delivery to
Banyan by RGI Holdings of a federal funds wire transfer in the amount of the
Purchase Price.
2
<PAGE> 7
(d) Third Party Consents. The Parties shall use their
commercially reasonable best efforts to obtain such written consents,
authorizations, approvals, waivers and consents as may be required from third
parties in connection with the Private Placement and the purchase of the
Morgens Loan.
(e) Conditions to RGI Holdings' Obligations at Initial Closing.
The obligations of RGI Holdings to Banyan under Section 1.01(a) of this
Agreement are subject to the fulfillment on or before the Initial Closing of
each of the following conditions:
(i) [deleted]
(ii) The representations and warranties of Banyan contained
in Article III shall be true and accurate on and as of the Initial Closing with
the same force and effect as if such representations and warranties had been
made on and as of the date of such Initial Closing, and the president of Banyan
shall have delivered to RGI/US and RGI Holdings at the Initial Closing a
certificate dated as of the Initial Closing certifying the same;
(iii) All corporate and other proceedings in connection with
the transactions contemplated at the Initial Closing and all documents incident
thereto shall be reasonably satisfactory in form and substance to Davis Wright
Tremaine, and they shall have received all such counterpart original and
certified or other copies of such documents as they may reasonably request;
(iv) All written consents, authorizations, approvals, waivers
and consents of third parties to the Private Placement and the purchase of the
Morgens Loan and the SoGen Loan shall have been obtained and RGI Holdings or an
affiliate of RGI Holdings shall have purchased the Morgens Loan and the SoGen
Loan and the Parties shall have agreed to the Morgens Loan Modification (as
defined in Section 1.02 below) and the SoGen Loan Modification (as defined in
Section 1.03 below);
(v) The directors of Banyan shall be Messrs. Walter E. Auch,
Robert Ungerleider and Kenneth Uptain, there shall be no vacancies on the Banyan
Board of Directors and there shall have been no other changes to the Banyan
Board of Directors except as agreed to by the Parties;
(vi) RGI/US and RGI Holdings shall have received from Shefsky
Froelich & Devine, special counsel for Banyan, an opinion, dated as of the
Initial Closing, in form and substance agreed to by the Parties;
(vii) RGI Holdings shall have received and agreed to a
Registration Rights Agreement in form and substance agreed to by the Parties;
and
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(viii) RGI Holdings shall have received and agreed to a Tax
Allocation Agreement in form and substance agreed to by the Parties.
(f) Conditions of Banyan's Obligations at Initial Closing. The
obligations of Banyan to RGI Holdings under Section 1.01(a) of this Agreement
are subject to the fulfillment on or before the Initial Closing of each of the
following conditions:
(i) [deleted]
(ii) The representations and warranties of each of RGI
Holdings and RGI/US contained in Article IV shall be true and accurate on and as
of the Initial Closing with the same force and effect as if such representations
and warranties had been made on and as of the date of such Initial Closing, and
the Presidents of RGI/US and RGI Holdings shall have delivered to Banyan a
certificate dated as of the Initial Closing certifying the same;
(iii) RGI Holdings shall have delivered to Banyan the Purchase
Price specified in Section 1.01(a);
(iv) All corporate and other proceedings in connection with the
transactions contemplated at the Initial Closing and all documents incident
thereto shall be reasonably satisfactory in form and substance to Shefsky
Froelich & Devine, and they shall have received all such counterpart original
or certified or other copies of such documents as they may reasonably request;
(v) All written consents, authorizations, approvals, waivers
and consents of third parties to the Private Placement and the purchase of the
Morgens Loan shall have been obtained and RGI Holdings or an affiliate of RGI
Holdings shall have purchased the Morgens Loan and the Parties shall have agreed
to the Morgens Loan Modification;
(vi) Banyan shall have received from Davis Wright Tremaine,
special counsel to each of RGI Holdings and RGI/US, an opinion, dated as of the
Initial Closing, in form and substance agreed to by the Parties;
(viii) Banyan shall have received an opinion from Josephthal
Lyon & Ross Incorporated that the Merger as contemplated herein is fair from a
financial point of view to the holders of Banyan Common Stock (the "Fairness
Opinion");
(ix) Banyan shall have received and agreed to a Registration
Rights Agreement in form and substance agreed to by the Parties;
(x) Those certain promissory notes of RGI/US listed on
Schedule 1.01(f)(x) attached hereto shall have been converted into equity of
RGI/US by the lenders thereof; and
(xi) Banyan shall have received and agreed to a Tax
Allocation Agreement in form and substance agreed to by the Parties.
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SECTION 1.02 PURCHASE OF THE MORGENS LOAN.
At the Initial Closing, RGI Holdings or an affiliate of RGI Holdings,
shall purchase the Morgens Loan on such terms and conditions as are acceptable
to RGI Holdings. RGI Holdings agrees with Banyan that concurrently with the
purchase of the Morgens Loan, RGI Holdings or its affiliate will amend the
terms of the Morgens Loan in a manner that is acceptable to RGI Holdings and
Banyan (the "Morgens Loan Modification"); provided that RGI Holdings, or such
affiliate that purchases the Morgens Loan, hereby agrees that prior to December
31, 1996 it will not accelerate the Morgens Loan or foreclose on any security
for the Morgens Loan based upon any events of default occurring on or before
May 15, 1996 or occurring as a result of the execution, delivery and
performance of this Agreement, the Ancillary Documents and the transactions
contemplated hereby and thereby. Moreover, RGI Holdings agrees that prior to
the earlier of (i) the Merger Closing or (ii) the termination of this Agreement
for any reason, it will not accelerate the Morgens Loan or foreclose on any
security for the Morgens Loan as a result of the occurrence of any non-payment
(technical) events of default occurring after May 15, 1996.
SECTION 1.03 PURCHASE OF THE SOGEN LOAN.
At the Initial Closing, RGI Holdings or an affiliate of RGI Holdings,
shall purchase the SoGen Loan on such terms and conditions as are acceptable to
RGI Holdings. RGI Holdings agrees with Banyan that concurrently with the
purchase of the SoGen Loan, RGI Holdings or its affiliate will amend the terms
of the SoGen Loan in a manner that is acceptable to RGI Holdings and Banyan
(the "SoGen Loan Modification"); provided that RGI Holdings, or such affiliate
that purchases the SoGen Loan, hereby agrees that prior to December 31, 1996 it
will not accelerate the SoGen Loan or foreclose on any security for the SoGen
Loan based upon any events of default occurring on or before May 15, 1996 or
occurring as a result of the execution, delivery and performance of this
Agreement, the Ancillary Documents and the transactions contemplated hereby and
thereby. Moreover, RGI Holdings agrees that prior to the earlier of (i) the
Merger Closing or (ii) the termination of this Agreement for any reason, it
will not accelerate the SoGen Loan or foreclose on any security for the SoGen
Loan as a result of the occurrence of any non-payment (technical) events of
default occurring after May 15, 1996.
ARTICLE II
THE MERGER
SECTION 2.01 MERGER CLOSING. The closing of the Merger (the "Merger
Closing") shall take place on the first business day after satisfaction or
waiver of the latest to occur of the conditions set forth in Article VIII, at
the offices of Davis Wright Tremaine, 2600
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Century Square, 1501 Fourth Avenue, Seattle, Washington 98101, unless a
different date or place is agreed to in writing by the Parties hereto (the
"Merger Date").
SECTION 2.02 THE MERGER. If all of the conditions to the Merger set forth
in this Agreement shall have been fulfilled or waived in accordance herewith,
and this Agreement shall not have been terminated as provided herein, then
concurrent with the Merger Closing, RGI/US and Banyan shall file an agreement
of merger in the Office of the Secretary of State of the State of Delaware in
accordance with Delaware Law and a plan of merger in the Office of the
Secretary of State of the State of Washington. The Merger shall become
effective at such time as the agreement or plan of merger is duly filed in both
the Office of the Secretary of State of the State of Delaware and the Office of
the Secretary of State of the State of Washington (the date of such filings
being hereinafter referred to as the "Effective Date" and the time of the
latest to occur of such filing being hereinafter referred to as the "Effective
Time"), and of the separate existence of RGI/US shall cease and Banyan shall be
the Surviving Corporation. It is the intention of the parties that this
Agreement shall constitute the "agreement of merger" under Section 252 of
Delaware Law and the "plan of merger" under RCW 23B.11.050 of Washington Law.
SECTION 2.03 CONVERSION OF SHARES; EXCHANGE OF CERTIFICATES. At the
Effective Time each share of RGI/US Common Stock outstanding immediately prior
to the Effective Time shall, automatically and without any action on the part
of the holder thereof, be converted into one hundred fifty-one thousand four
hundred fourty-five and three hundred thirty-three thousandths (151,445.333)
shares of the Banyan Common Stock (the "Exchange Ratio"); each share of Banyan
Common Stock, outstanding immediately prior to the Effective Time shall remain
outstanding and shall represent one share of common stock of the Surviving
Corporation. Banyan shall make available for exchange certificates
representing the shares of Banyan Common Stock issuable pursuant to this
Section 2.03 in exchange for certificates representing the outstanding shares
of RGI/US Common Stock.
SECTION 2.04 CERTIFICATE OF INCORPORATION. The Amended and Restated
Certificate of Incorporation of Banyan (the "Existing Certificate") shall be
further amended and restated at the Effective Time to adopt the amendments to
the Existing Certificate and to restate the Existing Certificate in a manner
agreed to by the Parties (the "Restated Certificate").
SECTION 2.05 BYLAWS. The Bylaws of Banyan (the "Existing Bylaws") shall
be amended and restated to adopt the amendments to the Existing Bylaws and to
restate the Existing Bylaws in a manner agreed to by the Parties (the "New
Bylaws").
SECTION 2.06 DIRECTORS. From and after the Effective Time, until
successors are duly elected or appointed and qualified in accordance with
applicable law, the directors of the Surviving Corporation shall be the New
Board (as defined in Section 5.02).
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BANYAN
Except as set forth in a document referring specifically to the relevant
Section or subsection of this Agreement which is delivered by Banyan to RGI/US
and RGI Holdings prior to the execution of this Agreement (the "Banyan
Disclosure Schedule"), Banyan represents and warrants to RGI/US and RGI
Holdings as follows:
SECTION 3.01 CORPORATE EXISTENCE AND POWER. Banyan is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, and has all corporate powers required to carry on its business as
now conducted. Banyan is duly qualified to do business as a foreign
corporation, and is in good standing, in each jurisdiction where the character
of the property owned or leased by it or the nature of its activities makes
such qualification necessary, except for those jurisdictions where the failure
to be so qualified would not, individually or in the aggregate, have a Material
Adverse Effect on Banyan. Banyan has delivered to RGI/US true and complete
copies of Banyan's Existing Certificate and Existing Bylaws as currently in
effect. For purposes of this Agreement, the term "Material Adverse Effect"
means, with respect to any person or entity, a material adverse effect on the
condition (financial or otherwise), business, properties, assets, liabilities
(including contingent liabilities), results of operations of such person or
entity and its subsidiaries; and the term "Material Adverse Change" means a
change which would have a Material Adverse Effect; provided, however, that the
happening or the occurrence of the events set forth on Schedule 3.01 of the
Banyan Disclosure Schedule shall not constitute a Material Adverse Effect or
Material Adverse Change for purposes of this Agreement and shall not cause a
breach of any representation or warranty of Banyan made herein or cause a
failure of a condition to RGI/US' obligations hereunder.
SECTION 3.02 CORPORATE AUTHORIZATION. The execution, delivery and
performance by Banyan of this Agreement, the Registration Rights Agreement and
the Morgens Loan Modification and the consummation by Banyan of the
transactions contemplated hereby and thereby are within Banyan's corporate
powers and have been and, to the extent not executed as of the date hereof,
will be prior to execution, duly authorized by all necessary corporate action,
subject to approval by Banyan's stockholders of the Merger. The Registration
Rights Agreement and the Morgens Loan Modification and such documents as are
executed in connection with the Morgens Loan or RGI/US' purchase of the Morgens
Loan are collectively referred to herein as the "Ancillary Agreements." This
Agreement and the Ancillary Agreements constitute, or upon execution will
constitute, valid and binding agreements of Banyan, enforceable against Banyan
in accordance with their respective terms except as enforcement may be limited
by
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applicable bankruptcy, insolvency, moratorium or other similar laws relating to
creditors' rights and general principles of equity.
SECTION 3.03 GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by Banyan of this Agreement, the Ancillary Agreements, the
consummation of the transactions contemplated hereby and thereby by Banyan and
the Banyan Subsidiaries (as defined in Section 3.06 below) requires no action
by or in respect of, or filing with, any governmental body, agency, official or
authority other than:
(a) compliance with any applicable requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act");
(b) compliance with any applicable requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations promulgated thereunder;
(c) compliance with any applicable requirements of the Securities
Act of 1933, as amended (the "Securities Act") and the rules and regulations
promulgated thereunder;
(d) compliance with any applicable requirements of the New York
Stock Exchange ("NYSE");
(e) compliance with any applicable state securities or "blue sky"
laws; and
(f) such other filings or registrations with, or authorizations,
consents, or approvals of, governmental bodies, agencies, officials or
authorities, the failure of which to make or obtain would not have a Material
Adverse Effect on the ability of the Parties to consummate the transactions
contemplated hereby.
SECTION 3.04 NON-CONTRAVENTION. The execution, delivery and performance
by Banyan of this Agreement, the Ancillary Agreements and the consummation by
Banyan of the transactions contemplated hereby and thereby do not and will not:
(a) contravene or conflict with the Existing Certificate or
Existing Bylaws of Banyan;
(b) assuming compliance with the matters set forth in Section 3.03
and assuming the requisite approval of Banyan's stockholders of the Merger, to
the best of Banyan's knowledge, (i) contravene, conflict with or constitute a
violation of any provision of any judgment, injunction, order or decree binding
upon Banyan or any Banyan Subsidiary (as defined in Section 3.06 below), or
(ii) contravene, conflict with or constitute a violation of any provision of
any law or regulation applicable to Banyan or
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any Banyan subsidiary to the extent such contravention, conflict or violation
would have a Material Adverse Effect on Banyan;
(c) except as set forth on Schedule 3.04(c) of the Banyan
Disclosure Schedule, constitute a default under, require the approval of, or
give rise to a right of termination, cancellation or acceleration or loss of any
material benefit under any agreement, contract or other instrument (including
loan documents) binding upon Banyan or any Banyan Subsidiary or under any
license, franchise, permit or other similar authorization held by Banyan or any
such Banyan Subsidiary; or
(d) result in the creation or imposition of any Lien (as defined
below) on any material asset of Banyan or any Banyan Subsidiary.
For purposes of this Agreement, the term "Lien" means, with respect to any
asset, any mortgage, lien, pledge, charge, security interest or encumbrance of
any kind in respect of such asset.
SECTION 3.05 CAPITALIZATION OF BANYAN. The authorized capital stock of
Banyan consists of 100,000,000 shares of Banyan Common Stock. As of March 31,
1996, there were outstanding:
(a) 39,822,304 shares of Banyan Common Stock;
(b) options to purchase an aggregate of 490,836 shares of Banyan
Common Stock;
(c) warrants to purchase an aggregate of 4,380,000 shares of
Banyan Common Stock; and
(d) 18,831 shares issuable by Banyan pursuant to its existing
employment agreement with Leonard G. Levine dated December 31, 1992, as amended
(the "Levine Contract").
All outstanding shares of Banyan Common Stock have been duly authorized and
validly issued and are fully paid and nonassessable. All outstanding shares of
Banyan Common Stock are listed, or approved for listing upon official notice of
issuance, on the NYSE and to the best of Banyan's knowledge, there are no
proceedings or other actions being taken to delist any such shares. Except as
set forth above in this Section 3.05 and except for changes since March 31,
1996 resulting from the exercise of options or warrants to purchase Banyan
Common Stock or shares issuable pursuant to the Levine Contract and except as
otherwise unanimously agreed to by the Board of Directors of Banyan after the
date of the Initial Closing, there are outstanding (i) no shares of capital
stock or other voting securities of Banyan, (ii) no securities of Banyan
convertible into or exchangeable for shares of capital stock or voting
securities of Banyan and (iii) no options or other
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rights to acquire from Banyan, and no obligation of Banyan to issue,
any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or other voting securities of Banyan (the items
in clauses (i), (ii) and (iii) being referred to collectively as the "Banyan
Securities"). There are no outstanding obligations of Banyan or any Banyan
Subsidiary to repurchase, redeem or otherwise acquire any Banyan Securities.
The shares of Banyan Common Stock which are being purchased at the Initial
Closing and which are issuable in connection with the Merger when issued and
paid for in accordance with the terms of this Agreement for the consideration
expressed herein, will be duly authorized, validly issued, fully paid and
nonassessable.
SECTION 3.06 SUBSIDIARIES.
(a) Schedule 3.06(a) to the Banyan Disclosure Schedule sets forth
a true and accurate list of each "Subsidiary" of Banyan (each a "Banyan
Subsidiary" and together, the "Banyan Subsidiaries"). Each Banyan Subsidiary is
either a corporation or other entity duly incorporated or otherwise organized,
validly existing and in good standing (or local law equivalent) under the laws
of its jurisdiction of organization, and has all corporate or other
organizational powers required to carry on its business as now conducted. Each
Banyan Subsidiary is duly qualified to do business as a foreign corporation or
partnership (as the case may be), is in good standing or local law equivalent
and has all licenses and permits necessary in each jurisdiction where the
character of the property owned or leased by, or the nature of its activities,
make such qualification, licenses or permits necessary except for those
jurisdictions where the failure to be so qualified or have such licenses or
permits would not, individually or in the aggregate, have a Material Adverse
Effect on Banyan or on the relevant Banyan Subsidiary. For purposes of this
Agreement, the term "Subsidiary" means, with respect to any entity, any
corporation or other organization of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are directly or
indirectly owned by such entity or of which such entity is a partner or is,
directly or indirectly, the beneficial owner of 50% or more of any class of
equity securities or equivalent profit participation interest. Banyan has
delivered to RGI/US true and complete copies of the articles or certificate of
incorporation, bylaws, partnership agreement and other similar organizational
documents as currently in effect for each Banyan Subsidiary.
(b) Except as set forth on Schedule 3.06(b) of the Banyan
Disclosure Schedule, all of the outstanding capital stock of, or other ownership
interests in, each Banyan Subsidiary is owned by Banyan, directly or indirectly,
free and clear of any Lien and free of any other limitation or restriction
(including any restriction on the right to vote, sell or otherwise dispose of
such capital stock or other ownership interests). Except as set forth on
Schedule 3.06(b) of the Banyan Disclosure Schedule, there are no
outstanding:
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(i) securities of any Banyan Subsidiary which are convertible into
or exchangeable for shares of capital stock or other voting securities of any
Banyan Subsidiary; or
(ii) options or other rights to acquire from Banyan or any Banyan
Subsidiary, and no other obligation of Banyan or any Banyan Subsidiary to
issue, any capital stock, voting securities of or other ownership interests in,
or any securities convertible into or exchangeable for any capital stock,
voting securities or other ownership interests of, any Banyan Subsidiary (the
items in clauses (i) and (ii) being referred to collectively as the "Banyan
Subsidiary Securities"). There are no outstanding obligations of Banyan or any
Banyan Subsidiary to repurchase, redeem or otherwise acquire any outstanding
Banyan Subsidiary Securities.
(c) Schedule 3.06(c) of the Banyan Disclosure Schedule sets forth a
complete list of all material agreements, contracts and other documentation
which set forth the terms and conditions of Banyan's ownership interest in each
Banyan Subsidiary (the "Banyan Subsidiary Agreements"). Each Banyan Subsidiary
Agreement is valid and binding on each party thereto, and is in full force and
effect, and, except as set forth on Schedule 3.06(c), neither Banyan nor any of
the Banyan Subsidiaries, nor to the knowledge of Banyan any other party
thereto, has breached any provision of, or is in default under the terms of,
any Banyan Subsidiary Agreement.
SECTION 3.07 SEC FILINGS.
(a) Schedule 3.07(a) of the Banyan Disclosure Schedule sets forth
a true and complete list of all Banyan Reports (as defined below) that Banyan
has delivered to RGI/US, or, to the extent not yet filed, will deliver to RGI/US
prior to the Merger Closing.
(b) As of their respective filing date, no such report or
statement filed with the Securities and Exchange Commission (the "SEC")
pursuant to the Exchange Act (collectively the "Banyan Reports") contained any
untrue statement of a material fact or omitted to state any material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. Except as set forth
on Schedule 3.07(b) of the Banyan Disclosure Schedule, Banyan has timely filed
all reports, statements or forms required by it to be filed pursuant to the
Exchange Act and the rules and regulations thereunder.
SECTION 3.08 FINANCIAL STATEMENTS. Each of the consolidated balance
sheets of Banyan included in or incorporated by reference into the Banyan
Reports (including the related notes and schedules) fairly presents the
consolidated financial position of Banyan and its subsidiaries as of its date
and each of the consolidated statements of income, retained earnings and
cashflows of Banyan included in or incorporated by reference into the Banyan
Reports (including any related notes and schedules) fairly presents results of
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operations, retained earnings or cashflows, as the case may be, of Banyan and
its subsidiaries for the period set forth therein (subject, in the case of
unaudited statements to normal year-end audit adjustments which would not be
material in amount or effect), in each case in accordance with generally
accepted accounting principles consistently applied during the periods involved,
except as may be noted therein and except, in the case of the unaudited
statements, as permitted by Form 10-Q of the SEC. For purposes of this
Agreement, "Banyan Balance Sheet" means the consolidated balance sheet of
Banyan as of December 31, 1995, and the notes thereto and "Banyan Balance Sheet
Date" means December 31, 1995.
SECTION 3.09 COMPLIANCE WITH LAW. Banyan and each Banyan Subsidiary is in
compliance and has conducted its business so as to comply with all laws, rules
and regulations, judgments, licenses, permits, decrees or orders of any court,
administrative agency, commission, regulatory authority or other governmental
authority or instrumentality, domestic or foreign (a "Governmental Authority")
applicable to their respective businesses or properties except to the extent
that noncompliance would not have a Material Adverse Effect on Banyan or the
Banyan Subsidiaries taken as a whole. Except as set forth on Schedule 3.09 of
the Banyan Disclosure Schedule, there are no judgments or orders, injunctions,
decrees, stipulations or awards (whether rendered by a court or administrative
agency or by arbitration), including any such actions relating to affirmative
action claims or claims of discrimination, against Banyan or any Banyan
Subsidiary or against any of their respective properties or businesses.
SECTION 3.10 NO DEFAULTS. Except as set forth on Schedule 3.10 of the
Banyan Disclosure Schedule, neither Banyan nor any Banyan Subsidiary is, or has
received notice that it would be with the passage of time, (i) in violation of
any provision of its articles or certificate of incorporation or bylaws or
other similar organizational document or (ii) in default or violation of any
term, condition or provision of (A) any judgment, decree, order, injunction or
stipulation applicable to Banyan or any Banyan Subsidiary or (B) any material
agreement, note, mortgage, indenture, contract, lease or instrument, permit,
concession, franchise or license to which Banyan or any Banyan Subsidiary is a
party or by which Banyan or any Banyan Subsidiary or their respective
properties or assets may be bound.
SECTION 3.11 LITIGATION. Except as set forth on Schedule 3.11 of the
Banyan Disclosure Schedule, there is no action, suit, proceeding, claim or
investigation pending or, to the best of Banyan's knowledge, threatened,
against Banyan or any Banyan Subsidiary which could, individually or in the
aggregate, have a Material Adverse Effect on Banyan and the Banyan
Subsidiaries, taken as a whole, or which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay any of the transactions contemplated
by this Agreement or by any of the Ancillary Agreements. Except as set forth
on Schedule 3.11, Banyan has delivered to RGI/US complete copies of all audit
response letters prepared by its counsel for Banyan's independent public
accountants and all management letters prepared in connection with the last
three completed audits of
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Banyan's financial statements, including the audit conducted in connection with
the Banyan Balance Sheet, and any such correspondence since the Banyan Balance
Sheet Date.
SECTION 3.12 ABSENCE OF CERTAIN CHANGES. Except as expressly allowed or
contemplated by this Agreement or, as set forth on Schedule 3.12 to the Banyan
Disclosure Schedule, since the Banyan Balance Sheet Date, there has not
occurred:
(a) A Material Adverse Change with respect to Banyan or the Banyan
Subsidiaries, taken as a whole;
(b) Any amendments or changes in the articles or certificate of
incorporation or bylaws or other similar organizational document of Banyan or
any Banyan Subsidiary, except for the Restated Certificate and New Bylaws as
contemplated by this Agreement;
(c) Any damage, destruction or loss, not covered by insurance in
excess of $250,000 with respect to any of the properties or businesses of Banyan
or any Banyan Subsidiary;
(d) Any redemption, repurchase or other acquisition of shares of
capital stock, partnership interests or ownership units of Banyan or any Banyan
Subsidiary by Banyan or any Banyan Subsidiary (other than pursuant to
arrangements with terminated employees or consultants), or any declaration,
setting aside or payment of any dividend or other distribution (whether in
cash, stock or property) with respect to the capital stock of Banyan or any
Banyan Subsidiary;
(e) Any increase in the hourly rate of compensation payable or to
become payable (by reimbursement or otherwise) by Banyan or any Banyan
Subsidiary to any of their respective directors, officers, partners, employees
or consultants, whether as employees of Banyan or Banyan Management Corp.;
(f) Except as set forth on Schedule 3.12(f) of the Banyan
Disclosure Schedule, any increase in or modification of any bonus, pension,
insurance or other employee benefit plan, payment or arrangement (including, but
not limited to, the granting of stock options, restricted stock awards or stock
appreciation rights) made to, for or with any of Banyan's directors, officers
or employees, whether as employees of Banyan or Banyan Management Corp.;
(g) Except as contemplated by this Agreement, any acquisition or
sale of a material amount of property or assets by or of Banyan or any Banyan
Subsidiary;
(h) Any alteration in any term of any outstanding Banyan
securities or any Banyan Subsidiary Securities;
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(i) Except as contemplated by this Agreement, any (i)
incurrence, assumption or guarantee by Banyan or any Banyan Subsidiary of any
debt for borrowed money; (ii) issuance or sale of any securities convertible
into or exchangeable for debt securities of Banyan or any Banyan Subsidiary; or
(iii) issuance or sale of options or other rights to acquire from Banyan or any
Banyan Subsidiary, directly or indirectly, debt securities of Banyan or any
Banyan Subsidiary or any securities convertible into or exchangeable for any
such debt securities;
(j) Any creation or assumption by Banyan or any Banyan
Subsidiary of any Lien on any material asset, except as permitted or
contemplated by this Agreement;
(k) Any loan, advance or capital contribution to or investment
in any person other than (i) loans, advances or capital contributions to or
investments in any Banyan Subsidiary, (ii) travel loans or advances made in the
ordinary course of business of Banyan, and (iii) other loans and advances in an
aggregate amount which do not exceed $10,000 outstanding at any time;
(l) Any entry into, amendment of, relinquishment, termination or
nonrenewal by Banyan or any Banyan Subsidiary of any material contract, lease,
commitment or other right or obligation other than as permitted or contemplated
by this Agreement; or
(m) To the best of Banyan's knowledge, any agreement or
arrangement made by Banyan or any Banyan Subsidiary to take any action which, if
taken prior to the date hereof, would have made any representation or warranty
set forth in this Section 3.12 untrue or incorrect as of the date when made.
SECTION 3.13 NO UNDISCLOSED MATERIAL LIABILITIES. Except as set forth
on Schedule 3.13 to the Banyan Disclosure Schedule, there are no liabilities of
Banyan or any Banyan Subsidiary of any kind whatsoever that are material to the
business of Banyan and the Banyan Subsidiaries, taken as a whole, other than:
(a) liabilities disclosed or provided for in the Banyan
Balance Sheet;
(b) liabilities incurred in the ordinary course of business
consistent with past practice since the Banyan Balance Sheet Date; and
(c) liabilities under this Agreement.
SECTION 3.14 CERTAIN AGREEMENTS. Except as set forth on Schedule 3.14
of the Banyan Disclosure Schedule, neither the execution and delivery of this
Agreement nor the Ancillary Agreements nor the consummation of the transactions
contemplated hereby or thereby will (i) result in any payment (including,
without limitation, severance, unemployment compensation, golden parachute,
bonus or otherwise) becoming due to
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any director or employee of Banyan or any Banyan Subsidiary from Banyan or any
such Banyan Subsidiary, under any Banyan Employee Plan (as defined in Section
3.15(a) below) or otherwise, (ii) materially increase any benefits otherwise
payable under any Banyan Employee Plan, or (iii) result in the acceleration of
the time of payment or vesting of any such benefits.
SECTION 3.15 EMPLOYEE BENEFITS.
(a) Schedule 3.15 of the Banyan Disclosure Schedule sets forth each
"employee benefit plan," as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974 ("ERISA"), and each employment agreement,
compensation agreement, bonus, commission or similar arrangement, and fringe
benefit arrangement which is maintained, administered or contributed to by
Banyan or any affiliate thereof (as defined below) and covers any employee or
former employee of Banyan or any affiliate or under which Banyan or any
affiliate has any liability. Such plans are referred to collectively herein as
the "Banyan Employee Plans." For purposes of this Section 3.15 only, an
"affiliate" of any person or entity means any other person or entity, which,
together with such person or entity, would be treated as a single employer
under Section 414 of the Code or Title IV of ERISA. The only Banyan Employee
Plans which individually or collectively would constitute an "employee pension
benefit plan" as defined in Section 3(2) of ERISA are identified as such in the
list referred to above.
(b) No Banyan Employee Plan constitutes a "multiemployer plan" as
defined in Section 3(37) of ERISA (a "Multiemployer Plan"), no Banyan Employee
Plan is maintained in connection with any trust described in Section 501(c)(9)
of the Code and no Banyan Employee Plan is subject to Title IV of ERISA or
Section 412 of the Code. If Banyan or an affiliate thereof ever maintained or
was obligated to contribute to a Multiemployer Plan or a plan subject to Title
IV of ERISA, any withdrawal or other liability under Title IV of ERISA with
respect to such plan has been fully satisfied. To Banyan' knowledge, nothing
done or omitted to be done and no transaction or holding of any asset under or
in connection with any Banyan Employee Plan has or will make Banyan or any of
its Subsidiaries, or any officer or director thereof, subject to any liability
under Title I of ERISA or liable for any tax pursuant to Section 4975 of the
Code.
(c) To the best knowledge of Banyan, each Banyan Employee Plan
which is intended to be qualified under Section 401(a) of the Code is so
qualified and has been so qualified during the period from its adoption to date,
and each trust forming a part thereof is exempt from tax pursuant to Section
501(a) of the Code. Banyan has furnished to RGI/US copies of the most recent
Internal Revenue Service determination letters, if any, with respect to each
such Banyan Employee Plan. To the best knowledge of Banyan, each Banyan
Employee Plan has been maintained in substantial compliance with its terms and
with the requirements prescribed by any and all statutes, orders, rules and
regulations, including but not limited to ERISA and the Code, which are
applicable
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to such Banyan Employee Plan. Except as set forth on Schedule 3.15(c) of the
Banyan Disclosure Schedule, there are no pending or threatened disputed claims
against any Banyan Employee Plan or against Banyan or any affiliate arising
under any such plan. No Banyan Employee Plan is currently under examination by
the Internal Revenue Service or Department of Labor and Banyan has received no
notice from either agency of its intent to examine any Banyan Employee Plan.
(d) There is no contract, agreement, plan or arrangement covering any
employee or former employee of Banyan or any affiliate that would obligate the
Surviving Corporation or any affiliate to pay any additional compensation,
including severance pay or additional withholding taxes, as a result of the
consummation of the transactions contemplated by this Agreement or that,
individually or collectively, could give rise to the payment by the Surviving
Corporation of any amount that would not be deductible pursuant to the terms of
Sections 162(a)(1) or 280G of the Code.
(e) Neither Banyan nor its affiliates have any projected liability in
respect of post-retirement health, life and medical benefits for retired
employees of Banyan and its affiliates. Other than provisions of applicable
law, no condition exists that would prevent Banyan or any of its Subsidiaries
from amending or terminating any Banyan Employee Plan.
(f) There has been no amendment to, written interpretation or announcement
(whether or not written) by Banyan or any of its affiliates relating to, or
change in employee participation or coverage under, any Banyan Employee Plan
which would materially increase the expense of maintaining such Banyan Employee
Plan above the level of the expense incurred in respect thereof for the most
recent fiscal year.
SECTION 3.16 MAJOR CONTRACTS. Schedule 3.16 of the Banyan Disclosure
Schedule sets forth a list of all "material contracts" as defined in Item 601
of Regulation S-K under the Securities Act and to which Banyan or any Banyan
Subsidiary is a party or has a beneficial interest in (each a "Banyan Material
Contract"). Each Banyan Material Contract is valid and binding on Banyan or a
Banyan Subsidiary, as applicable, and except as set forth on Schedule 3.16 of
the Banyan Disclosure Schedule, neither Banyan nor any of the Banyan
Subsidiaries, nor to the best of their knowledge any other party thereto, has
breached any provision of, or is in default under the terms of, any Banyan
Material Contract.
SECTION 3.17 TAXES.
(a) Except as set forth on Schedule 3.17(a) of the Banyan
Disclosure Schedule, all Tax returns, statements, reports and forms (including
estimated Tax returns and reports and information returns and reports) required
to be filed with any Taxing Authority with respect to any Taxable period ending
on or before the Effective Time by or on behalf of Banyan or any of the Banyan
Subsidiaries (collectively, the "Banyan Tax
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Returns"), the non-filing of which would have a Material Adverse Effect on
Banyan or would result in criminal penalties against Banyan or any officer or
employee thereof, have been or will be filed when due (including any
extensions of such due date).
(b) Banyan and the Banyan Subsidiaries have timely paid, withheld or made
provision on their books for all Taxes shown as due and payable on Banyan Tax
Returns that have been filed.
(c) All Banyan Tax Returns relating to income or franchise Taxes filed
with respect to Taxable years of Banyan and Banyan Subsidiaries ending on or
after December 31, 1990, have been filed or extensions have been duly made.
(d) Neither Banyan nor any Banyan Subsidiary has been granted any
extension or waiver of the limitation period applicable to any Banyan Tax
Returns.
(e) To the best of Banyan's knowledge, there is no claim, audit, action,
suit, proceeding, or investigation now pending or threatened in writing against
or with respect to Banyan or any Banyan Subsidiary in respect of any Tax or
assessment.
(f) There are no requests for rulings in respect of any Tax pending
between Banyan or any Banyan Subsidiary and any Taxing Authority.
(g) None of the property owned or used by Banyan or any of the Banyan
Subsidiaries is subject to a tax benefit transfer lease executed in accordance
with Section 168(f)(8) of the Code.
(h) None of the property owned by Banyan or any Banyan Subsidiary is
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
(i) Neither Banyan nor any Banyan Subsidiary, nor any other person on
behalf of Banyan or any such Banyan Subsidiary, has entered into nor will it
enter into any agreement or consent pursuant to Section 341(f) of the Code.
(j) Except as set forth on Schedule 3.17(j) of the Banyan Disclosure
Schedule, there are no Liens for Taxes upon the assets of Banyan or any of the
Banyan Subsidiaries, except Liens for Taxes not yet due.
(k) Neither Banyan nor any Banyan Subsidiary will be required to include
any adjustment in Taxable income for any Tax period (or portion thereof) ending
after the Effective Time pursuant to Section 481(c) of the Code (or any similar
provision of the Tax laws of any jurisdiction) as a result of a change in
method of accounting for any Tax period (or portion thereof) ending on or
before the Effective Time or pursuant to the provisions of any agreement
entered into with any Taxing Authority with regard to
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the Tax liability of Banyan or any such Banyan Subsidiary for any Tax period (or
portion thereof) ending on or before the Effective Time.
(l) Neither Banyan nor any Banyan Subsidiary has been a member of an
affiliated group other than one of which Banyan was the common parent, or filed
or been included in a combined, consolidated or unitary Tax return other than
one filed by Banyan (or a return for a group consisting solely of Banyan
Subsidiaries or predecessors), or participated in any other similar arrangement
whereby any income, revenues, receipts, gains, losses, deductions, credits or
other Tax items of Banyan or any such Banyan Subsidiary was determined or taken
into account for Tax purposes with reference to or in conjunction with any such
items of another person other than Banyan or any such Banyan Subsidiary or
predecessor.
(m) Neither Banyan nor any Banyan Subsidiary is currently under any
contractual obligation to pay the income or franchise tax obligations of, or
with respect to transactions relating to, any other person or to indemnify any
other person with respect to any income or franchise tax.
(n) Neither Banyan nor any Banyan Subsidiary has signed any letter or
entered into any agreement or arrangement consenting to the surrender or
sharing of any deductions, credits, or other Tax attributes with any other
person or transferred or assigned to any other person for Tax purposes any such
item.
(o) Notwithstanding any of the foregoing, no representation or warranty is
made by Banyan with respect to the Tax consequences that may result from the
transactions contemplated by this Agreement and the Ancillary Agreements.
(p) For the purposes of this Agreement, "Tax" (and, with correlative
meaning, "Taxes" and "Taxable") means, for any entity, (i) any net income,
alternative or add-on minimum tax, gross income, gross receipts, sales, use, ad
valorem, value added, transfer, franchise, profits, license, withholding on
amounts paid to or by such entity or any subsidiary thereof, payroll,
employment, excise, severance, stamp, occupation, property, environmental or
windfall profit tax, or other tax, together with any interest or any penalty,
addition to tax or additional amount imposed by any governmental authority (a
"Taxing Authority") responsible for the imposition of any such tax (domestic or
foreign), (ii) liability of such entity or any subsidiary thereof for the
payment of any amounts of the type described in (i) as a result of being a
member of an affiliated, consolidated, combined or unitary group for any
Taxable period and (iii) liability of such entity or any subsidiary thereof for
the payment of any amounts of the type described in (i) or (ii) as a result of
any express or implied obligation to indemnify any other person.
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SECTION 3.18 INTELLECTUAL PROPERTY.
(a) Schedule 3.18(a) of the Banyan Disclosure Schedule sets forth all
licensing arrangements which Banyan or any Banyan Subsidiary has with third
parties and which are material to the business of Banyan and the Banyan
Subsidiaries taken as a whole (collectively, the "Banyan Intellectual Property
Rights").
(b) Neither Banyan nor any Banyan Subsidiary, during the three years
preceding the date of this Agreement, has been sued or charged in writing with
or been a defendant or plaintiff in any claim, suit, action or proceeding
relating to its business which has not been finally terminated prior to the
date hereof and which involves a claim of infringement of any patents or
licenses, and to Banyan's best knowledge (i) there are no other claims by any
other person of patent or license infringement by Banyan or a Banyan
Subsidiary, and (ii) there are no continuing infringements by any other person
or persons of any Banyan Intellectual Property Rights.
SECTION 3.19 RESTRICTIONS ON BUSINESS ACTIVITIES. Except as set forth on
Schedule 3.19 of the Banyan Disclosure Schedule, there is no material
agreement, judgment, injunction, order or decree binding upon Banyan or any
Banyan Subsidiary which has or could reasonably be expected to have the effect
of prohibiting or materially impairing any acquisition of property by Banyan or
any Banyan Subsidiary or the conduct of business by Banyan or any Banyan
Subsidiary as currently conducted or as currently proposed to be conducted by
Banyan.
SECTION 3.20 TITLE TO PROPERTIES: ABSENCE OF LIENS AND ENCUMBRANCES.
(a) Schedule 3.20(a) of the Banyan Disclosure Schedule sets forth a true
and complete description of all real property owned or leased (as lessee) by
Banyan or any Banyan Subsidiary (the "Banyan Properties"), the aggregate annual
rental or other fee payable under any such lease, and, with respect to any such
Banyan Properties currently under contract for sale, the parties to such
contract or contracts.
(b) Except as set forth on Schedule 3.20(b) of the Banyan Disclosure
Schedule, Banyan or a Banyan Subsidiary has marketable title to, or, in the
case of leased properties and assets, valid leasehold interests in, all of the
Banyan Properties, and, except as set forth on Schedule 3.20(b) of the Banyan
Disclosure Schedule and to the best of Banyan's knowledge without conducting a
title search of the Banyan Properties, such title or leasehold interests are
free and clear of any Liens. Banyan or a Banyan Subsidiary is the sole owner
of the Banyan Properties free and clear of any right to or claim of possession
by any other party (except tenants under the leases copies of which have been
delivered to RGI/US and the rights of various public or private entities for
easement purposes). Schedule 3.20(b) of the Banyan Disclosure Schedule sets
forth a list of all material management agreements, development agreements or
other agreements of any kind with respect to any of the Banyan Properties to
which Banyan or
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any Banyan Subsidiary is a party and such agreements are valid and binding on
Banyan or the Banyan Subsidiary (as the case may be) and, to the best of
Banyan's knowledge, without default by any party thereto. All approved or
proposed site plans, master development plans or similar development plans
with respect to any of the Banyan Properties have been provided to RGI/US.
(c) With respect only to the Banyan Property commonly known as 120 S.
Spalding ("120 S. Spalding"), to the best of Banyan's knowledge, there are no
material, physical or mechanical defects, including, without limitation, the
mechanical, ventilation, plumbing, heating, air conditioning, life safety, and
electrical systems and all such items are in operating condition and repair and
neither Banyan nor any Banyan Subsidiary has received of any notification of
noncompliance with any applicable governmental requirements.
(d) To the best of Banyan's knowledge, the use and operation of 120 S.
Spalding is in material compliance with applicable building codes, and neither
Banyan nor any Banyan Subsidiary has received of any notification of
noncompliance with the Americans with Disabilities Act ("ADA"), seismic design,
zoning and land use laws, other local, state and federal laws and regulations,
and restrictive easements or covenants affecting the Banyan Properties.
(e) Schedule 3.20(e) of the Banyan Disclosure Schedule sets forth a rent
roll for the Banyan Properties and such rent roll accurately summarizes the
status of the existing leases and any defaults thereunder. There are no
leasing or other commissions due and unpaid under any of the leases, and all
tenant improvements required under existing leases have been completed and are
fully paid and no credit is due to any tenant.
(f) Except as set forth in Schedule 3.20(f) of the Banyan Disclosure
Schedule, to the best of Banyan's knowledge, there are no condemnation
proceedings or any land-use or development regulations or proceedings pending
or threatened, including but not limited to historical designation or
preservation proceedings, that would have a Material Adverse Effect on the
development, use and operation of any of the Banyan Properties, nor has Banyan
received notice of any special assessment proceedings affecting any of the
Banyan Properties.
(g) All water, sewer, gas, electric, telephone, drainage facilities and
any other utilities required for the normal use of those specific Banyan
Properties set forth on Schedule 3.20(g) of the Banyan Disclosure Schedule are
installed and connected pursuant to valid permits, and are adequate to service
such Banyan Properties, and to the best of Banyan's knowledge comply with all
applicable legal requirements.
(h) Schedule 3.20(h) of the Banyan Disclosure Schedule to be delivered to
RGI/US prior to the Initial Closing summarizes the licenses, permits,
certificates,
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approvals, variances, easements and rights of way received, and to the best of
Banyan's knowledge required, from all governmental authorities having
jurisdiction over each of the Banyan Properties or from private parties for the
normal use (both existing and proposed) and operation of the Banyan Properties
and to insure vehicular and pedestrian ingress to and egress from each of the
Banyan Properties.
(i) None of the Banyan Properties are located in an area identified by the
Secretary of Housing and Urban Development or other governmental agency as an
area having special flood hazards, and except as identified on the master
development plans or site plans delivered to RGI/US pursuant to Section 3.20(b),
no separate areas within any of the Banyan Properties are required to be set
aside for water retention, "green belt," open space or drainage.
(j) Except with respect to Banyan Properties for which Banyan is
attempting to change existing zoning requirements, Banyan has no knowledge of
any plan by any person or entity to change the existing zoning applicable to
any of the Banyan Properties.
(k) Except as set forth on Schedule 3.20(k) of the Banyan Disclosure
Schedule, all fees and charges due and payable for thirty (30) days or more for
materials and labor (including property management, design, engineering,
surveying, and other professional services) delivered or performed in
connection with the development of the Banyan Properties as of the date of the
Merger Closing will have been paid in full or lien releases for such fees and
charges will have been obtained.
(l) To the best of Banyan's knowledge there is no claim, litigation, or
governmental investigation or proceeding, pending or threatened that may affect
the Banyan Properties and no unrecorded easements or claims of encroachment or
prescriptive easement affecting the Banyan Properties exist.
SECTION 3.21 ENVIRONMENTAL MATTERS.
(a) Neither Banyan nor any Banyan Subsidiary, nor to the knowledge of
Banyan (without inquiry) any tenant on the Banyan Properties, has received any
written notice, demand, citation, summons, complaint or order or any notice of
any penalty, Lien or assessment, and to the best of Banyan's knowledge (without
inquiry with respect to any tenant on the Banyan Properties), there is no
investigation or review pending by any governmental entity, with respect to any
(i) alleged violation by Banyan, any Banyan Subsidiary or any tenant on the
Banyan Properties of any Environmental Law (as defined in subsection (f)
below), (ii) alleged failure by Banyan, any Banyan Subsidiary or any tenant on
the Banyan Properties to have any environmental permit, certificate, license,
approval, registration or authorization required in connection with the conduct
of its business or (iii) Regulated Activity (as defined in subsection (f)
below).
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(b) Neither Banyan nor any Banyan Subsidiary, with respect to any of the
Banyan Properties, has any knowledge of any Environmental Liabilities (as
defined in subsection (f) below), or of any release of Hazardous Substances (as
defined in subsection (f) below) into the environment in violation of any
Environmental Law or environmental permit. Banyan has disclosed to RGI/US in
writing the presence, to the best of Banyan's knowledge, of any asbestos in any
of its premises other than fully encapsulated asbestos-containing construction
materials.
(c) Banyan has delivered to RGI/US copies of all environmental audits and
other similar reports which have been prepared by or for Banyan or any Banyan
Subsidiary, or by or for any tenant on the Banyan Properties to the extent
delivered to Banyan by such tenant, with respect to the Banyan Properties.
(d) Except as set forth on Schedule 3.21(d) of the Banyan Disclosure
Schedule, to the best of Banyan's knowledge, (i) no asbestos-containing
materials were installed or exposed in the Banyan Properties through
demolition, renovation or otherwise, (ii) no electrical transformers or other
equipment containing PCB's are or were located on the Banyan Properties, (iii)
no storage tanks for gasoline, heating oil or diesel fuel or any other
substances are or were located on or under the Banyan Properties, and (iv) no
materials regulated under any federal, state or local law or regulation, as
amended from time to time, as a toxic, hazardous, contaminated or similarly
harmful or dangerous material or substance (including, without limitation,
asbestos and radon) are or were located on, in or under the Banyan Properties
or have affected the Banyan Properties or waters on or under the Banyan
Properties.
(e) Neither Banyan nor any Banyan Subsidiary, nor to the knowledge of
Banyan (without inquiry) any tenant on the Banyan Properties, has received any
written notice under the California Health and Safety Code or any other
applicable local, state or federal law regarding Hazardous Substances on, under
or affecting the Banyan Properties or requiring the removal of any Hazardous
Substances from the Banyan Properties.
(f) For the purposes of this Agreement, the following terms have the
following meanings:
"Environmental Laws" shall mean any and all
federal, state and local laws (including case law),
regulations, ordinances, rules, judgments, orders,
decrees, codes, plans, injunctions, permits,
concessions, grants, franchises, licenses, agreements
and governmental restrictions relating to human
health, the environment or to emissions, discharges or
releases of pollutants, contaminants, Hazardous
Substances or wastes into the environment or otherwise
relating to the manufacture, processing, distribution,
use, treatment, storage,
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disposal, transport or handling of pollutants,
contaminants, Hazardous Substances or wastes
or the cleanup or other remediation thereof.
"Environmental Liabilities" shall mean all
liabilities, whether vested or unvested, contingent or
fixed, which (i) arise under or relate to a violation
of Environmental Laws and (ii) relate to actions
occurring or conditions existing on or prior to the
Effective Time.
"Hazardous Substances" shall mean any toxic,
radioactive, caustic or otherwise hazardous substance
regulated by any Environmental Law, including
petroleum, its derivatives, by-products and other
hydrocarbons, or any substance having any material
constituent elements displaying any of the foregoing
characteristics.
"Regulated Activity" shall mean any generation,
treatment, storage, recycling, transportation,
disposal or release of any Hazardous Substances.
SECTION 3.22 INSURANCE. Schedule 3.22 of the Banyan Disclosure Schedule
sets forth a list of all insurance policies and fidelity bonds insuring the
assets, business, equipment, properties, operations, employees, officers and
directors of Banyan and the Banyan Subsidiaries. Copies of all such policies
have been delivered to RGI/US prior to the date hereof. There is no claim by
Banyan or any Banyan Subsidiary pending under any of such policies or bonds as
to which coverage has been questioned, denied or disputed by the underwriters
of such policies or bonds. All premiums payable under all such policies and
bonds have been paid and Banyan and the Banyan Subsidiaries are otherwise in
full compliance with the terms of such policies and bonds (or other policies
and bonds providing substantially similar insurance coverage). To the best of
Banyan's knowledge no termination or material premium increase is pending or
threatened with respect to any of such policies.
SECTION 3.23 LABOR MATTERS. Banyan, each Banyan Subsidiary and, to the
best of Banyan's knowledge after inquiry, Banyan Management Corp., is in
compliance with all currently applicable laws and regulations respecting
employment, discrimination in employment, verification of immigration status,
terms and conditions of employment and wages and hours and occupational safety
and health and employment practices, and is not engaged in any unfair labor
practice, except to the extent that non-compliance would not have a Material
Adverse Effect on Banyan. Neither Banyan nor any Banyan Subsidiary nor, to the
best of Banyan's knowledge after inquiry, Banyan Management Corp., has received
any notice from any Governmental Entity, and there has not been asserted before
any Governmental Entity, any claim, action or proceeding to which
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Banyan or any Banyan Subsidiary is a party, and to the best of Banyan's
knowledge, there is neither pending nor threatened any investigation or hearing
concerning or involving Banyan, any Banyan Subsidiary or any officer or employee
of Banyan or any Banyan Subsidiary arising out of or based upon any such laws,
regulations or practices.
SECTION 3.24 EMPLOYEES. Schedule 3.24 of the Banyan Disclosure Schedule
lists each employee of Banyan and each Banyan Subsidiary, his or her current
position, salary, bonus and general compensation arrangement. Except for the
employment agreements listed on Schedule 3.24 of the Banyan Disclosure
Schedule, complete and accurate copies of which have been delivered to RGI/US,
neither Banyan nor any Banyan Subsidiary is a party to any employment
agreements. All employees of Banyan and the Banyan Subsidiaries who are
employed in a technical, managerial or executive capacity and who are material
to the operations of Banyan and the Banyan Subsidiaries, taken as a whole, have
the right under applicable immigration laws to work in their present locations
for at least two years from the Effective Date.
SECTION 3.25 FINDERS' FEES. Except for Josephthal Lyon & Ross
Incorporated, there is no investment banker, broker, finder or other
intermediary which has been retained by or is authorized to act on behalf of
Banyan or any Banyan Subsidiary who might be entitled to any fee or commission
upon consummation of the transactions contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF RGI/US AND RGI HOLDINGS
Except as set forth in a document referring specifically to the relevant
Section or subsection of this Agreement which is delivered by RGI/US to Banyan
prior to execution of this Agreement (the "RGI/US Disclosure Schedule"), RGI/US
and RGI Holdings, jointly and severally, represent and warrant to Banyan as
follows:
SECTION 4.01 CORPORATE EXISTENCE AND POWER. Each of RGI/US and RGI
Holdings is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Washington. Each of RGI/US and RGI
Holdings has all corporate powers and all material Governmental Authorizations
required to carry on its respective business as now conducted. Each of RGI/US
and RGI Holdings is duly qualified to do business as a foreign corporation and
is in good standing in each jurisdiction where the character of the property
owned or leased by it or the nature of its activities makes such qualification
necessary, except for those jurisdictions where the failure to be so qualified
would not, individually or in the aggregate, have a Material Adverse Effect on
RGI/US or RGI Holdings (as the case may be). With respect to RGI/US and the
RGI/US Subsidiaries taken as a whole, a Material Adverse Change shall be deemed
to have occurred for purposes of this Agreement if the fair market value of the
RGI/US Properties as reported by Coopers & Lybrand in its report dated as of
April 1, 1996
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shall have declined by ten percent (10%) or more prior to the Merger Date in the
report to be delivered by Coopers & Lybrand on the Merger Date (such a decline
to be a "RGI/US Decline in Value" for purposes of this Agreement). RGI/US has
delivered to Banyan true and complete copies of RGI/US' and RGI Holdings'
Articles of Incorporation and Bylaws, each as currently in effect.
SECTION 4.02 CORPORATE AUTHORIZATION. The execution, delivery and
performance by RGI/US and RGI Holdings of this Agreement and the Ancillary
Agreements (to the extent either RGI/US or RGI Holdings is a party thereto) and
the consummation by RGI/US and RGI Holdings of the transactions contemplated
hereby and thereby are within such corporations' corporate powers and have been
and, to the extent not executed as of the date hereof, will be prior to
execution, duly authorized by all necessary corporate action. This Agreement
and the Ancillary Agreements (to the extent either RGI/US or RGI Holdings is a
party thereto) constitute valid and binding agreements of RGI/US and RGI
Holdings (as the case may be) enforceable against each of them in accordance
with its terms except as enforcement may be limited by applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights
and general principles of equity.
SECTION 4.03 GOVERNMENTAL CONSENTS AND APPROVALS. The execution, delivery
and performance by RGI/US and RGI Holdings of this Agreement and the Ancillary
Agreements (to the extent either RGI/US or RGI Holdings is a party thereto) and
the consummation of the transactions contemplated hereby and thereby by RGI/US
and RGI Holdings requires no action by or in respect of, or filing with, any
governmental body, agency, official or authority other than:
(a) compliance with any applicable requirements of the HSR Act;
(b) compliance with any applicable requirements of the Exchange Act and
the rules and regulations promulgated thereunder;
(c) compliance with any applicable requirements of the Securities Act and
the rules and regulations promulgated thereunder;
(d) compliance with any applicable requirements of the NYSE;
(e) compliance with any applicable state securities or "blue sky" laws;
and
(f) such other filings or registrations with, or authorizations, consents,
or approvals of, governmental bodies, agencies, officials or authorities, the
failure of which to make or obtain would not have a Material Adverse Effect on
the ability of the Parties to consummate the transactions contemplated hereby.
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SECTION 4.04 NON-CONTRAVENTION. The execution, delivery and performance
by RGI/US and RGI Holdings of this Agreement and the Ancillary Agreements (to
the extent either RGI/US or RGI Holdings is a party thereto) and the
consummation of the transactions by RGI/US and RGI Holdings contemplated hereby
and thereby and do not and will not:
(a) contravene or conflict with the articles of incorporation or bylaws of
RGI/US or RGI Holdings;
(b) assuming compliance with the matters set forth in Section 4.03, to the
best of RGI/US and RGI Holdings' knowledge, (i) contravene, conflict with or
constitute a violation of any provision of any judgment, injunction, order or
decree binding upon RGI/US, RGI Holdings or any RGI/US Subsidiary (as defined in
Section 4.06), or (ii) contravene, conflict with or constitute a violation of
any provision of any law or regulation applicable to RGI/US or any RGI/US
Subsidiary to the extent that such contravention, conflict or violation would
have a Material Adverse Effect on RGI/US;
(c) except as set forth on Schedule 4.04(c) of the RGI/US Disclosure
Schedule, constitute a default under, require the approval of, or give rise to
a right of termination, cancellation, acceleration or loss of any material
benefit under any agreement, contract or other instrument (including loan
documents) binding upon RGI/US, RGI Holdings or any RGI/US Subsidiary or under
any license, franchise, permit or other similar authorization held by RGI/US,
RGI Holdings or any such RGI/US Subsidiary; or
(d) result in the creation or imposition of any Lien on any material asset
of RGI/US, RGI Holdings or any RGI/US Subsidiary.
SECTION 4.05 CAPITALIZATION OF RGI/US.
(a) The authorized capital stock of RGI/US consists of 100,000 shares of
RGI/US Common Stock, 1,000 of which shares are outstanding and owned by RGI
Holdings. All outstanding shares of RGI/US Common Stock have been duly
authorized and validly issued and are fully paid and nonassessable. Except for
the 1,000 shares of RGI/US Common Stock owned by RGI Holdings, there are
outstanding (i) no shares of capital stock or other voting securities of
RGI/US, (ii) no securities of RGI/US convertible into or exchangeable for
shares of capital stock or voting securities of RGI/US and (iii) no options or
other rights to acquire from RGI/US, and no obligation of RGI/US to issue, any
capital stock, voting securities or securities convertible into or exchangeable
for capital stock or other voting securities of RGI/US (the items in clauses
(i), (ii) and (iii) being referred to collectively as the "RGI/US Securities").
There are no outstanding obligations of RGI/US or any RGI Subsidiary to
repurchase, redeem or otherwise acquire any RGI/US Securities.
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SECTION 4.06 SUBSIDIARIES.
(a) Schedule 4.06(a) of the RGI/US Disclosure Schedule sets forth a true
and accurate list of each "Subsidiary" of RGI/US (each an "RGI/US Subsidiary"
and together, the "RGI/US Subsidiaries"). Each RGI/US Subsidiary is either a
corporation or other entity duly incorporated or otherwise organized, validly
existing and in good standing (or local law equivalent) under the laws of its
jurisdiction of organization, and has all corporate or other organizational
powers required to carry on its business as now conducted. Each RGI/US
Subsidiary is duly qualified to do business as a foreign corporation or
partnership (as the case may be), is in good standing or local law equivalent
and has all licenses and permits necessary in each jurisdiction where the
character of the property owned or leased by, or the nature of its activities,
make such qualification, licenses or permits necessary except for those
jurisdictions where the failure to be so qualified or have such licenses or
permits would not, individually or in the aggregate, have a Material Adverse
Effect on RGI/US or on the relevant RGI/US Subsidiary. RGI/US has delivered to
Banyan true and complete copies of the articles or certificate of incorporation,
bylaws, partnership agreement and other similar organizational documents as
currently in effect for each such RGI/US Subsidiary.
(b) Except as set forth on Schedule 4.06(b) of the RGI/US Disclosure
Schedule, all of the outstanding capital stock of, or other ownership interests
in, each RGI/US Subsidiary is owned by RGI/US, directly or indirectly, free and
clear of any Lien and free of any other limitation or restriction (including
any restriction on the right to vote, sell or otherwise dispose of such capital
stock or other ownership interests). Except as set forth on Schedule 4.06(b)
of the RGI/US Disclosure Schedule, there are no outstanding:
(i) securities of RGI/US or any RGI/US Subsidiary convertible into or
exchangeable for shares of capital stock or other voting securities of any
RGI/US Subsidiary; or
(ii) options or other rights to acquire from RGI/US or any RGI/US
Subsidiary, and no other obligation of RGI/US or any RGI/US Subsidiary to
issue, any capital stock, voting securities of or other ownership interests in,
or any securities convertible into or exchangeable for any capital stock,
voting securities or other ownership interests of, any RGI/US Subsidiary (the
items in clauses (i) and (ii) being referred to collectively as the "RGI/US
Subsidiary Securities"). There are no outstanding obligations of RGI/US or any
RGI/US Subsidiary to repurchase, redeem or otherwise acquire any outstanding
RGI/US Subsidiary Securities.
(c) Except as set forth on Schedule 4.06(c) of the RGI/US Disclosure
Schedule, there are no material agreements, contracts and other documentation
setting forth any terms or conditions with respect to RGI/US' ownership
interest in the RGI/US Subsidiaries.
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SECTION 4.07 FINANCIAL STATEMENTS. RGI/US has delivered to Banyan the
unaudited consolidated balance sheet of RGI/US as of December 31, 1995 and the
related unaudited statements of operations, stockholders equity and cash flows
for the year ended December 31, 1995, together with audited balance sheets as
of December 31, 1992, 1993, 1994 and 1995 and related audited statements of
operations, stockholders equity and cash flows for the years ended December 31,
1992, 1993, 1994 and 1995 for Grand Harbor Associates, Inc. The consolidated
financial statements of RGI/US present fairly, in conformity with GAAP applied
on a consistent basis (except that the unaudited consolidated financial
statements do not contain notes), the consolidated financial position of RGI/US
and the RGI/US Subsidiaries as of the dates thereof and their consolidated
results of operations and cash flows for the periods then ended. For purposes
of this Agreement, "RGI/US Balance Sheet" means the unaudited consolidated
balance sheet of RGI/US as of December 31, 1995, and "RGI/US Balance Sheet
Date" means December 31, 1995.
SECTION 4.08 COMPLIANCE WITH LAW. RGI/US and each RGI/US Subsidiary is in
compliance and has conducted its business so as to comply with all laws, rules
and regulations, judgments, licenses, permits decrees or orders of any
Governmental Authority applicable to their respective businesses or properties
except to the extent that noncompliance would not have a Material Adverse
Effect on RGI/US or the RGI/US Subsidiaries taken as a whole. Quality Life
Services, Ltd., an RGI/US Subsidiary, has all necessary licenses and permits to
operate the Royal Palm Convalescent Center. Except as set forth on Schedule
4.08 to the RGI/US Disclosure Schedule, there are no judgments or orders,
injunctions, decrees, stipulations or awards (whether rendered by a court or
administrative agency or by arbitration), including any such actions relating
to affirmative action claims or claims of discrimination, against RGI/US or any
RGI/US Subsidiary or against any of their respective properties or businesses.
SECTION 4.09 NO DEFAULTS. Neither RGI/US nor any RGI/US Subsidiary is, or
has received notice that it would be with the passage of time, (i) in violation
of any provision of its articles or certificate of incorporation or bylaws or
other similar organizational document or (ii) in default or violation of any
term, condition or provision of (A) any judgment, decree, order, injunction or
stipulation applicable to RGI/US or any RGI/US Subsidiary or (B) any material
agreement, note, mortgage, indenture, contract, lease or instrument, permit,
concession, franchise or license to which RGI/US or any RGI/US Subsidiary is a
party or by which RGI/US or any RGI/US Subsidiary or their respective
properties or assets may be bound.
SECTION 4.10 LITIGATION. Except as set forth on Schedule 4.10 of the
RGI/US Disclosure Schedule, there is no action, suit, proceeding, claim or
investigation pending or, to the best of RGI/US' and RGI Holdings' knowledge,
threatened, against RGI/US or any RGI/US Subsidiary which could, individually
or in the aggregate, have a Material Adverse Effect on RGI/US and the RGI/US
Subsidiaries, taken on as a whole, or which in any manner challenges or seeks
to prevent, enjoin, alter or materially delay any of the
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transactions contemplated hereby or by any of the Ancillary Agreements. Except
as set forth on Schedule 4.10, RGI/US has delivered to Banyan complete copies of
all audit response letters prepared by RGI/US' counsel for RGI/US' independent
public accountants and all management letters prepared in connection with the
last three completed audits (if such audits took place) of the financial
statements of RGI/US' and any of the RGI/US Subsidiaries, including the audit
conducted in connection with the RGI/US Balance Sheet, and any such
correspondence since the RGI/US Balance Sheet Date.
SECTION 4.11 ABSENCE OF CERTAIN CHANGES. Except as expressly allowed or
contemplated by this Agreement or as set forth on Schedule 4.11 of the RGI/US
Disclosure Schedule, since the RGI/US Balance Sheet Date, there has not
occurred:
(a) Material Adverse Change with respect to RGI/US or the RGI/US
Subsidiaries, taken as a whole;
(b) Any amendments or changes in the articles or certificate of
incorporation or bylaws or other similar organizational document of RGI/US or
any RGI/US Subsidiary;
(c) Any damage, destruction or loss, not covered by insurance in excess of
$250,000 with respect to any of the properties or businesses of RGI/US or any
RGI/US Subsidiary;
(d) Any redemption, repurchase or other acquisition of shares of capital
stock, partnership units or ownership units of RGI/US or any RGI/US Subsidiary
by RGI/US or any RGI/US Subsidiary (other than pursuant to arrangements with
terminated employees or consultants), or any declaration, setting aside or
payment of any dividend or other distribution (whether in cash, stock or
property) with respect to the capital stock of RGI/US or any RGI/US Subsidiary;
(e) Any increase in or modification of the compensation or benefits
payable or to become payable by RGI/US or any RGI/US Subsidiary to any of their
respective directors, officers, partners, employees or consultants;
(f) Any increase in or modification of any bonus, pension, insurance or
other employee benefit plan, payment or arrangement (including, but not limited
to, the granting of stock options, restricted stock awards or stock
appreciation rights) made to, for or with any of its directors or employees;
(g) Except as contemplated by this Agreement, any acquisition or sale of a
material amount of property or assets by or of RGI/US or any RGI/US Subsidiary;
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(h) Any alteration in any term of any outstanding securities of RGI/US or
any RGI/US Subsidiaries;
(i) Except as contemplated by this Agreement, any (i) incurrence,
assumption or guarantee by RGI/US or any RGI/US Subsidiary of any debt for
borrowed money; (ii) issuance or sale of any securities convertible into or
exchangeable for debt securities of RGI/US or any RGI/US Subsidiary; or (iii)
issuance or sale of options or other rights to acquire from RGI/US or any
RGI/US Subsidiary, directly or indirectly, debt securities of RGI/US or any of
RGI/US Subsidiary or any securities convertible into or exchangeable for any
such debt securities;
(j) Any creation or assumption by RGI/US or any RGI/US Subsidiary of any
Lien on any material asset;
(k) Any loan, advance or capital contribution to or investment in any
person other than (i) loans, advances or capital contributions to or
investments in RGI/US Subsidiaries, (ii) travel loans or advances made in the
ordinary course of business of RGI/US, and (iii) other loans and advances in an
aggregate amount which do not exceed $10,000 outstanding at any time;
(l) Any entry into, amendment of, relinquishment, termination or
nonrenewal by RGI/US or any RGI/US Subsidiary of any material contract, lease,
commitment or other right or obligation other than in the ordinary course of
business; or
(m) To the best of RGI/US and RGI Holdings' knowledge, any agreement or
arrangement made by RGI/US or any RGI/US Subsidiary to take any action which,
if taken prior to the date hereof, would have made any representation or
warranty set forth in this Section 4.11 untrue or incorrect as of the date when
made; or
(n) Any labor dispute, other than routine individual grievances, or any
actions or proceedings by a labor union or representative thereof to organize
any employee of RGI/US or any RGI/US Subsidiary.
SECTION 4.12 NO UNDISCLOSED MATERIAL LIABILITIES. Except as set forth on
Schedule 4.12 of the RGI/US Disclosure Schedule, there are no liabilities of
RGI/US or any RGI/US Subsidiary of any kind whatsoever that are material to the
business of RGI/US and the RGI/US Subsidiaries, taken as a whole, other than:
(a) liabilities disclosed or provided for in the RGI/US Balance Sheet;
(b) liabilities incurred in the ordinary course of business consistent
with past practice since the RGI/US Balance Sheet Date; and
(c) liabilities under this Agreement.
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SECTION 4.13 CERTAIN AGREEMENTS. Neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby
will (i) result in any payment (including, without limitation, severance,
unemployment compensation, golden parachute, bonus or otherwise) becoming due
to any director or employee of RGI/US or any RGI/US Subsidiary from RGI/US or
any such RGI/US Subsidiary, under any RGI/US Employee Plan (as defined in
Section 4.14(a) below) or otherwise, (ii) materially increase any benefits
otherwise payable under any RGI/US Employee Plan, or (iii) result in the
acceleration of the time of payment or vesting of any such benefits.
SECTION 4.14 EMPLOYEE BENEFITS.
(a) Schedule 4.14(a) of the RGI/US Disclosure Schedule sets forth each
"employee benefit plan," as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974 ("ERISA"), and each employment agreement,
compensation agreement, bonus, commission or similar arrangement, and fringe
benefit arrangement which is maintained, administered or contributed to by
RGI/US or any affiliate thereof (as defined below) and covers any employee or
former employee of RGI/US or any affiliate or under which RGI/US or any
affiliate has any liability. Such plans are referred to collectively herein as
the "RGI/US Employee Plans." For purposes of this Section 4.14 only, an
"affiliate" of RGI/US means (i) RGI Holdings and RGI Real Estate, Inc. and any
domestic corporation owned 80% or more by either of them, and (ii) Resource
Group International, Inc. The only RGI/US Employee Plans which individually or
collectively would constitute an "employee pension benefit plan" as defined in
Section 3(2) of ERISA are identified as such in the list referred to above.
(b) No RGI/US Employee Plan constitutes a "multiemployer plan" as defined
in Section 3(37) of ERISA (a "Multiemployer Plan"), no RGI/US Employee Plan is
maintained in connection with any trust described in Section 501(c)(9) of the
Code and no RGI/US Employee Plan is subject to Title IV of ERISA or Section 412
of the Code. If RGI/US or an affiliate thereof ever maintained or was
obligated to contribute to a Multiemployer Plan or a plan subject to Title IV
of ERISA, any withdrawal or other liability under Title IV of ERISA with
respect to such plan has been fully satisfied. To RGI/US's knowledge, nothing
done or omitted to be done and no transaction or holding of any asset under or
in connection with any RGI/US Employee Plan has or will make RGI/US or any of
its Subsidiaries, or any officer or director thereof, subject to any liability
under Title I of ERISA or liable for any tax pursuant to Section 4975 of the
Code.
(c) To the best knowledge of RGI/US, each RGI/US Employee Plan which is
intended to be qualified under Section 401(a) of the Code is so qualified and
has been so qualified during the period from its adoption to date, and each
trust forming a part thereof is exempt from tax pursuant to Section 501(a) of
the Code. RGI/US has furnished to Banyan copies of the most recent Internal
Revenue Service determination
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letters, if any, with respect to each such RGI/US Employee Plan. To the best of
knowledge of RGI/US, each RGI/US Employee Plan has been maintained in
substantial compliance with its terms and with the requirements prescribed by
any and all statutes, orders, rules and regulations, including but not limited
to ERISA and the Code, which are applicable to such RGI/US Employee Plan.
Except as set forth on Schedule 4.14(c) of the RGI/US Disclosure Schedule, there
are no pending or threatened disputed claims against any RGI/US Employee Plan or
against RGI/US or any affiliate of RGI/US arising under any such Plan. No
RGI/US Employee Plan is currently under examination by the Internal Revenue
Service or Department of Labor and RGI/US has received no notice from
either agency of its intent to examine by RGI/US Employee Plan.
(d) There is no contract, agreement, plan or arrangement covering any
employee or former employee of RGI/US or any affiliate that would obligate the
Surviving Corporation to pay any additional compensation, including severance
pay or additional withholding taxes, as a result of the consummation of the
transactions contemplated by this Agreement or that, individually or
collectively, could give rise to the payment by the Surviving Corporation of
any amount that would not be deductible pursuant to the terms of Sections
162(a)(1) or 280G of the Code.
(e) Neither RGI/US nor its affiliates have any projected liability in
respect of post-retirement health, life and medical benefits for retired
employees of RGI/US and its affiliates. Other than provisions of applicable
law, no condition exists that would prevent RGI/US or any of the RGI/US
Subsidiaries from amending or terminating any RGI/US Employee Plan.
(f) There has been no amendment to, written interpretation or announcement
(whether or not written) by RGI/US or any of its affiliates relating to, or
change in employee participation or coverage under, any RGI/US Employee Plan
which would materially increase the expense of maintaining such RGI/US Employee
Plan above the level of the expense incurred in respect thereof for the most
recent fiscal year.
SECTION 4.15 MAJOR CONTRACTS. Schedule 4.15 of the RGI/US Disclosure
Schedule sets forth a list of all "material contracts" as defined in Item 601
of Regulation S-K under the Securities Act and to which RGI/US or any RGI/US
Subsidiary is a party or has a beneficial interest in (each a "RGI/US Material
Contract"). Each RGI/US Material Contract is valid and binding on RGI/US or
the RGI/US Subsidiary, as applicable, and neither RGI/US nor any RGI/US
Subsidiary, nor to the best of their knowledge any other party thereto, has
breached any provision of, or is in default under the terms of, any RGI/US
Material Contract.
SECTION 4.16 TAXES.
(a) Except as set forth on Schedule 4.16(a) of the RGI/US Disclosure
Schedule, all Tax returns, statements, reports and forms (including estimated
Tax returns
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and reports and information returns and reports) required to be filed with any
Taxing Authority with respect to any Taxable period ending on or before the
Effective Time by or on behalf of RGI/US or any of the RGI/US Subsidiaries
(collectively, the "RGI/US Tax Returns"), the non-filing of which would have a
Material Adverse Effect on RGI/US or would result in criminal penalties against
RGI/US or any officer or employee thereof, have been or will be filed when
due (including any extensions of such due date).
(b) RGI/US and the RGI/US Subsidiaries have timely paid, withheld or made
provision on their books for all Taxes shown as due and payable on RGI/US Tax
Returns that have been filed.
(c) All RGI/US Tax Returns relating to income or Franchise Taxes filed
with respect to Taxable Years of RGI/US and RGI/US Subsidiaries ending on or
after December 31, 1990 have been filed or extensions have been duly made.
(d) Neither RGI/US nor any RGI/US Subsidiary has been granted any
extension or waiver of the limitation period applicable to any RGI/US Tax
Returns.
(e) To the best of RGI/US and each of the RGI/US Subsidiaries' knowledge,
there is no claim, audit, action, suit, proceeding, or investigation now
pending or threatened in writing against or with respect to RGI/US or any
RGI/US Subsidiary in respect of any Tax or assessment.
(f) There are no requests for rulings in respect of any Tax pending
between RGI/US or any RGI/US Subsidiary and any Taxing Authority.
(g) None of the property owned or used by RGI/US or any of the RGI/US
Subsidiaries is subject to a tax benefit transfer lease executed in accordance
with Section 168(f)(8) of the Code.
(h) Except as set forth on Schedule 4.16(h) of the RGI/US Disclosure
Schedule, none of the property owned by RGI/US or any RGI/US Subsidiary is
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
(i) Neither RGI/US nor any RGI/US Subsidiary, nor any other person on
behalf of RGI/US or any such RGI/US Subsidiary, has entered into nor will it
enter into any agreement or consent pursuant to Section 341(f) of the Code.
(j) Except as set forth on Schedule 4.16(j) of the RGI/US Disclosure
Schedule, there are no liens for Taxes upon the assets of RGI/US or any RGI/US
Subsidiary except liens for current Taxes not yet due.
(k) Except as set forth on Schedule 4.16(k) of the RGI/US Disclosure
Schedule, neither RGI/US nor any RGI/US Subsidiary will be required to include
any
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adjustment in Taxable income for any Tax period (or portion thereof) ending
after the Effective Time pursuant to Section 481(c) of the Code (or any similar
provision of the Tax laws of any jurisdiction) as a result of a change in
method of accounting for any Tax period (or portion thereof) ending on or
before the Effective Time or pursuant to the provisions of any agreement
entered into with any Taxing Authority with regard to the Tax liability of
RGI/US or any such RGI/US Subsidiary for any Tax period (or portion thereof)
ending on or before the Effective Time.
(l) Neither RGI/US nor any RGI/US Subsidiaries is currently under any
contractual obligation to pay the income or franchise tax obligations of, or
with respect to transactions relating to, any other person or to indemnify any
other person with respect to any income or franchise tax.
(m) Except as set forth on Schedule 4.16(m) of the RGI/US Disclosure
Schedule, neither RGI/US nor any RGI/US Subsidiary has signed any letter or
entered into any agreement or arrangement consenting to the surrender or
sharing of any deductions, credits, or other Tax attributes with any other
person or transferred or assigned to any other person for Tax purposes any such
item.
(n) Notwithstanding any of the foregoing, no representation or warranty is
made by RGI/US with respect to the Tax consequences that may result from the
transactions contemplated by this Agreement and the Ancillary Agreements.
SECTION 4.17 INTELLECTUAL PROPERTY.
(a) Schedule 4.17 of the RGI/US Disclosure Schedule sets forth a schedule
of all licensing arrangements which RGI/US or any RGI/US Subsidiary has with
third parties and which are material to the business of RGI/US and the RGI/US
Subsidiaries taken as a whole (collectively, the "RGI/US Intellectual Property
Rights").
(b) Neither RGI/US nor any RGI/US Subsidiary, during the three years
preceding the date of this Agreement, has been sued or charged in writing with
or been a defendant or plaintiff in any claim, suit, action or proceeding
relating to its business which has not been finally terminated prior to the
date hereof and which involves a claim of infringement of any patents or
licenses, and to the best of the knowledge of RGI/US (i) there are no other
claims by any other person of patent or license infringement by RGI/US or a
RGI/US Subsidiary, and (ii) there are no continuing infringements by any other
person or persons of any RGI/US Intellectual Property Rights with respect to
patents.
SECTION 4.18 RESTRICTIONS ON BUSINESS ACTIVITIES. Except as set forth on
Schedule 4.18 of the RGI/US Disclosure Schedule, there is no material
agreement, judgment, injunction, order or decree binding upon RGI/US or any
RGI/US Subsidiary which has or could reasonably be expected to have the effect
of prohibiting or materially
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impairing any acquisition of property by RGI/US or any RGI/US Subsidiary or the
conduct of business by RGI/US or any RGI/US Subsidiary as currently conducted or
as currently proposed to be conducted by the Surviving Corporation.
SECTION 4.19 TITLE TO PROPERTIES: ABSENCE OF LIENS AND ENCUMBRANCES.
(a) Schedule 4.19(a) of the RGI/US Disclosure Schedule sets forth a true
and complete list of all real property owned or leased (as lessee) by RGI/US or
any RGI/US Subsidiary (the "RGI/US Properties"), the aggregate annual rental or
other fee payable under any such lease, and, with respect to any such RGI/US
Properties currently under contract for sale, the parties to such contract or
contracts and the principal terms thereof.
(b) Except as set forth on Schedule 4.19(b) of the RGI/US Disclosure
Schedule, RGI/US or an RGI/US Subsidiary has marketable title to, or, in the
case of leased properties and assets, valid leasehold interests in, all of the
RGI/US Properties, and, except as set forth on Schedule 4.19(b) of the RGI/US
Disclosure Schedule and to the best of RGI/US' knowledge without conducting a
title search of the RGI/US Properties, such title or leasehold interests are
free and clear of any Liens. Except as set forth on Schedule 4.19(b) of the
RGI/US Disclosure Schedule, RGI/US and its Subsidiaries are the sole owners of
the RGI/US Properties free and clear of any right to or claim of possession by
any other party (except tenants under the leases copies of which have been
delivered to Banyan and the rights of various public or private entities for
easement purposes). Schedule 4.19(b) of the RGI/US Disclosure Schedule sets
forth a list of all material management agreements, development agreements or
other agreements of any kind with respect to any of the RGI/US Properties to
which RGI/US or any RGI/US Subsidiary is a party and such agreements are valid
and binding on RGI/US or the RGI/US Subsidiary (as the case may be) and, to the
best of RGI/US's knowledge, without default by any party thereto. All approved
or proposed site plans, master development plans or similar development plans
with respect to any of the RGI/US Properties have been provided to Banyan.
(c) With respect to any buildings or other structures on the RGI/US
Properties, to the best of RGI/US's knowledge, except as set forth on Schedule
4.19(c) of the RGI/US Disclosure Schedule, there are no material, physical or
mechanical defects, including, without limitation, the mechanical, ventilation,
plumbing, heating, air conditioning, life safety, and electrical systems and
all such items are in operating condition and repair and neither RGI/US nor any
RGI/US Subsidiary has received any notification of noncompliance with any
applicable governmental requirements.
(d) To the best of RGI/US' knowledge, the use and operation of each of the
RGI/US Properties is in material compliance with applicable building codes, and
neither RGI/US nor any RGI/US Subsidiary has received any notification of
noncompliance with the Americans with Disabilities Act ("ADA"), seismic design,
zoning
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and land use laws, other local, state and federal laws and regulations, and
restrictive easements or covenants affecting the RGI/US Properties.
(e) Schedule 4.19(e) of the RGI/US Disclosure Schedule sets forth a rent
roll for the RGI/US Properties and such rent roll accurately summarizes the
status of the existing leases and any defaults thereunder. There are no
leasing or other commissions due and unpaid under any of the leases, and all
tenant improvements required under existing leases have been completed and are
fully paid and no credit is due to any tenant.
(f) Except as set forth in Schedule 4.19(f) of the RGI/US Disclosure
Schedule, to the best of RGI/US' knowledge, there are no condemnation
proceedings or any land-use or development regulations or proceedings pending
or threatened, including but not limited to historical designation or
preservation proceedings, that would have a Material Adverse Effect on the
development, use and operation of any of the RGI/US Properties, nor has RGI/US
received notice of any special assessment proceedings affecting any of the
RGI/US Properties.
(g) All water, sewer, gas, electric, telephone, drainage facilities and
any other utilities required for the normal use of those specific RGI/US
Properties set forth on Schedule 4.19(g) of the RGI/US Disclosure Schedule are
installed and connected pursuant to valid permits, and are adequate to service
such RGI/US Properties, and to the best of RGI/US' knowledge comply with all
applicable legal requirements.
(h) Except as set forth in Schedule 4.19(h) of the RGI/US Disclosure
Schedule, RGI/US has obtained all licenses, permits, certificates, approvals,
variances, easements and rights of way required from all governmental
authorities having jurisdiction over each of the RGI/US Properties or from
private parties for the normal use (both existing and proposed) and operation
of the RGI/US Properties and to insure vehicular and pedestrian ingress to and
egress from each of the RGI/US Properties.
(i) Except as set forth on Schedule 4.19(i) of the RGI/US Disclosure
Schedule, none of the RGI/US Properties are located in an area identified by
the Secretary of Housing and Urban Development or other governmental agency as
an area having special flood hazards, and except as indicated on the master
development plans or site plans delivered to Banyan pursuant to Section
4.19(b), no separate areas within any of the RGI/US Properties are required to
be set aside for water retention, "green belt," open space or drainage.
(j) Except with respect to RGI/US Properties for which RGI/US is
attempting to change existing zoning requests, RGI/US has no knowledge of any
plan by any person or entity to change the existing zoning applicable to any of
the RGI/US Properties.
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(k) Except as set forth on Schedule 4.19(k) of the RGI/US Disclosure
Schedule, all fees and charges due and payable for thirty (30) days or more for
materials and labor (including property management, design, engineering,
surveying, and other professional services) delivered or performed in
connection with the development of the RGI/US Properties as of the date of the
Merger Closing will have been paid in full or lien releases for such fees and
charges will have been obtained.
(l) Except as set forth on Schedule 4.19(b) of the RGI/US Disclosure
Schedule, to the best of RGI/US's knowledge there is no claim, litigation, or
governmental investigation or proceeding, pending or threatened, that may
affect the RGI/US Properties and no unrecorded easements or claims of
encroachment or prescriptive easement affecting the RGI/US Properties exist.
SECTION 4.20 ENVIRONMENTAL MATTERS.
(a) Neither RGI Holdings, RGI/US nor any RGI/US Subsidiary, nor to the
knowledge of RGI Holdings or RGI/US (without inquiry) any tenant on the RGI/US
Properties, has received any written notice, demand, citation, summons,
complaint or order or any notice of any penalty, Lien or assessment, and to the
best of RGI Holdings' and RGI/US' knowledge (without inquiry with respect to
any tenant on the RGI/US Properties), there is no investigation or review
pending by any governmental entity, with respect to any (i) alleged violation
by RGI/US, any RGI/US Subsidiary or any tenant on the RGI/US Properties of any
Environmental Law, (ii) alleged failure by RGI/US, any RGI/US Subsidiary or any
tenant on the RGI/US Properties to have any environmental permit, certificate,
license, approval, registration or authorization required in connection with
the conduct of its business or (iii) Regulated Activity.
(b) Neither RGI Holdings, RGI/US nor any RGI/US Subsidiary, with respect
to any of the RGI/US Properties, has any knowledge of any Environmental
Liabilities, or of any release of Hazardous Substances into the environment in
violation of any Environmental Law or environmental permit. RGI/US has
disclosed to Banyan in writing the presence, to the best of RGI/US' knowledge,
of any asbestos in any of its premises other than fully encapsulated
asbestos-containing construction materials.
(c) RGI/US has delivered to Banyan copies of all environmental audits and
other similar reports which have been prepared by or for RGI/US or any RGI/US
Subsidiary, or by or for any tenant on the RGI/US Properties to the extent
delivered to RGI/US by such tenant, with respect to the RGI/US Properties.
(d) Except as set forth on Schedule 4.20(d) of RGI/US Disclosure Schedule,
to the best of RGI Holdings' and RGI/US' knowledge, (i) no asbestos-containing
materials were installed or exposed in the RGI/US Properties through
demolition, renovation or otherwise, at any time, (ii) no electrical
transformers or other
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equipment containing PCB's are or were located on the RGI/US Properties, (iii)
no storage tanks for gasoline, heating oil or diesel fuel or any other
substances are or were located on or under the RGI/US Properties, and (iv) no
materials regulated under any federal, state or local law or regulation, as
amended from time to time, as a toxic, hazardous, contaminated or similarly
harmful or dangerous material or substance (including, without limitation,
asbestos and radon) are or were located on, in or under the RGI/US Properties or
have affected the RGI/US Properties or waters on or under the RGI/US Properties.
(e) Neither RGI Holdings, RGI/US nor any RGI/US Subsidiary, nor to the
knowledge of RGI Holdings or RGI/US (without inquiry) any tenant on the RGI/US
Properties, has received any written notice under any applicable local, state
or federal law regarding Hazardous Substances on, under or affecting the RGI/US
Properties or requiring the removal of any Hazardous Substances from the RGI/US
Properties.
SECTION 4.21 INSURANCE. Schedule 4.21 of the RGI/US Disclosure Schedule
sets forth a list of all insurance policies and fidelity bonds insuring the
assets, business, equipment, properties, operations, employees, officers and
directors of RGI/US and the RGI/US Subsidiaries. Copies of all such policies
have been delivered to Banyan prior to the date hereof. There is no claim by
RGI/US or any RGI/US Subsidiary pending under any of such policies or bonds as
to which coverage has been questioned, denied or disputed by the underwriters
of such policies or bonds. All premiums payable under all such policies and
bonds have been paid and RGI/US and the RGI/US Subsidiaries are otherwise in
full compliance with the terms of such policies and bonds (or other policies
and bonds providing substantially similar insurance coverage). To the best of
RGI/US' knowledge, no termination or material premium increase is pending or
threatened with respect to any of such policies.
SECTION 4.22 LABOR MATTERS. RGI/US and each RGI/US Subsidiary is in
compliance with all currently applicable laws and regulations respecting
employment, discrimination in employment, verification of immigration status,
terms and conditions of employment and wages and hours and occupational safety
and health and employment practices, and are not engaged in any unfair labor
practice, except to the extent that non-compliance would not have a Material
Adverse Effect on RGI/US. Neither RGI/US nor any RGI/US Subsidiary has
received any notice from any Governmental Entity, and there has not been
asserted before any Governmental Entity, any claim, action or proceeding to
which RGI/US or any RGI/US Subsidiary is a party and, to the best of RGI/US'
knowledge, there is neither pending nor threatened any investigation or hearing
concerning RGI/US or any RGI/US Subsidiary arising out of or based upon any
such laws, regulations or practices.
SECTION 4.23 EMPLOYEES. Schedule 4.23 of the RGI/US Disclosure Schedule
lists each employee or consultant (if under a current contract) of RGI/US and
each RGI/US
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Subsidiary, his or her current position, salary, bonus and general compensation
arrangement. Except for the employment agreements listed on Schedule 4.23 to
the RGI/US Disclosure Schedule, complete and accurate copies of which have been
delivered to Banyan, neither RGI/US nor any RGI/US Subsidiary is a party to any
employment agreements. All employees of RGI/US and the RGI/US Subsidiaries who
are employed in a technical, managerial or executive capacity and who are
material to the operations of RGI/US and the RGI/US Subsidiaries, taken as a
whole, have the right under applicable immigration laws to work in their present
locations for at least two years from the Effective Date.
SECTION 4.24 FINDERS' FEES. Except for Goodman Financial Services, Inc.,
there is no investment banker, broker, finder or other intermediary which has
been retained by or is authorized to act on behalf of RGI/US or RGI Holdings or
any affiliate thereof who might be entitled to any fee or commission upon
consummation of the transactions contemplated by this Agreement.
SECTION 4.25 CERTAIN SECURITIES REPRESENTATIONS. RGI Holdings understands
and hereby acknowledges that the Initial Shares have not been registered under
the Securities Act of 1933, as amended, and may not be resold except pursuant
to a registration statement which has been declared effective under the
Securities Act or pursuant to an exemption from the registration requirements
of the Securities Act as confirmed in an opinion of counsel, acceptable in form
and substance to Banyan, and in accordance with the applicable securities laws
of any state of the United States or any other applicable jurisdiction. RGI
Holdings acknowledges that the Initial Shares will be acquired for its own
account and are not being acquired with a view to, or for offer or sale in
connection with any distribution in violation of the Securities Act. RGI
Holdings has such knowledge and experience in financial and business matters as
to be capable of evaluating the merits and risks of purchasing the Initial
Shares and is able to bear the economic risk of the investment. RGI Holdings
and RGI/US acknowledge that they have had access to such financial and other
information, and have been afforded the opportunity to ask such questions of
representatives of Banyan and the Banyan Subsidiaries and receive answers
thereto, as they each deem necessary in connection with RGI Holdings' decision
to purchase the Initial Shares. RGI Holdings was not induced to invest by any
form of general solicitation or general advertising including, but not limited
to, the following: (i) any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or
broadcast over the television or radio; or (ii) any seminar or meeting whose
attendees had been invited by any general solicitation or general advertising.
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ARTICLE V
COVENANTS OF BANYAN
SECTION 5.01 CONDUCT OF BANYAN. From the date of this Agreement until the
Merger Closing, and except as set forth on Schedule 5.01 of the Banyan
Disclosure Schedule, or with the express written consent of RGI/US, Banyan and
each Banyan Subsidiary shall conduct their businesses in all material respects
in the ordinary course and neither Banyan nor any Banyan Subsidiary will:
(a) adopt or propose any change in the Existing Certificate or Existing
Bylaws, except as contemplated by the Restated Certificate or New Bylaws;
(b) enter into or amend any contract, agreement, plan or arrangement
covering any director, officer or employee of Banyan or any Banyan Subsidiary
that provides for the making of any payments, the acceleration of vesting of
any benefit or right or any other entitlement contingent upon (i) the Merger or
(ii) the termination of employment after the occurrence of any such contingency
if such payment, acceleration or entitlement would not have been provided but
for such contingency;
(c) except for issuances pursuant to outstanding Banyan Options and
Warrants, and the issuance of the Initial Shares, issue any securities;
(d) terminate or amend any of its existing insurance policies or modify or
reduce the coverage thereunder;
(e) sell, transfer, license, sublicense or otherwise dispose of any of its
material assets, or pay any dividend or make any other distribution to holders
of its capital stock;
(f) incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or guarantee any debt
securities of others; or
(g) agree or commit to do any of the foregoing.
SECTION 5.02 BANYAN STOCKHOLDERS' MEETING. Banyan shall call a meeting
of its stockholders (the "Stockholders' Meeting") to be held as promptly as
practicable following the date of this Agreement (the date on which such
meeting is scheduled in the proxy statement (the "Proxy Statement") to be
prepared by Banyan in connection with such meeting when first mailed to Banyan'
stockholders being hereinafter referred to as the "Stockholders' Meeting Date")
for the purpose of obtaining the stockholder approval required in connection
with the transactions contemplated hereby including (i) the approval of the
Merger, (ii) the approval and adoption of the Restated Certificate,
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(iii) the approval and adoption of the New Bylaws, and (iv) the election of
those individuals listed on Schedule 5.02 hereto (or otherwise agreed to by the
Parties) to the Board of Directors of the Surviving Corporation (the "New
Board"). The Board of Directors of Banyan shall recommend in the Proxy
Statement the approval of the Merger, the New Certificate, and New Bylaws and
the election of the New Board by the stockholders of Banyan; provided, however,
that nothing contained in this Section 5.02 shall prohibit the Board of
Directors of Banyan from failing to recommend approval of this Agreement and the
transactions contemplated hereby or using its commercially reasonable best
efforts to obtain approval if the board of directors of Banyan determines in
good faith, after consultation with and based upon the advice of Shefsky
Froelich & Devine Ltd. or such other counsel selected by the Board of Directors
of Banyan, that such action is necessary for the board of directors to comply
with its fiduciary duties to its stockholders under Delaware Law. Without the
prior unanimous consent of the Banyan Board of Directors, Banyan shall not
change the Stockholders' Meeting Date or adjourn the Stockholders' Meeting
unless such adjournment is due to the lack of a quorum, in which case the
chairman of the Stockholders' Meeting shall announce at such meeting the time
and place of the adjourned meeting.
SECTION 5.03 ACCESS TO PROPERTIES AND FINANCIAL, OPERATIONAL AND
TECHNICAL INFORMATION; MONTHLY FINANCIAL STATEMENTS.
(a) From the date hereof until the Merger Closing, Banyan will give RGI/US
and RGI Holdings, their counsel, financial advisors, auditors and other
authorized representatives reasonable access during normal business hours to
the Banyan Properties, and the offices, books and records of Banyan and any of
the Banyan Subsidiaries, will furnish to RGI/US and RGI Holdings, their
counsel, financial advisors, auditors and other authorized representatives such
financial and operating data and all other technical information as such
persons may reasonably request and will instruct Banyan's employees, counsel
and financial advisors to cooperate with RGI/US and RGI Holdings in their
investigation of the business of Banyan and the Banyan Subsidiaries and in the
planning for the combination of the businesses of Banyan and RGI/US following
the consummation of the Merger.
(b) From May 1, 1996 until the Merger Closing, within 15 days following
the end of each month (the first such report being due June 15, 1996), Banyan
will deliver to RGI/US a consolidated balance sheet, consolidated statement of
operations and consolidated statement of cash flows for such month.
SECTION 5.04 OTHER OFFERS. From the date hereof unless and until this
Agreement shall have been terminated in accordance with its terms, Banyan and
the Banyan Subsidiaries and the officers, directors, employees or other agents
of Banyan and such Banyan Subsidiaries will not, directly or indirectly, (i)
take any action to solicit, initiate or encourage the making of any Acquisition
Proposal (as defined below) or (ii) engage in negotiations with any person or
entity that has made an Acquisition
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Proposal, or (iii) except as required by applicable law, disclose any nonpublic
information relating to Banyan or any of the Banyan Subsidiaries or, afford
access to the properties, books or records of Banyan or any of the Banyan
Subsidiaries. Banyan will promptly notify RGI/US after receipt by it of any
Acquisition Proposal or any request for nonpublic information relating to
Banyan or any Banyan Subsidiary or for access to the properties, books or
records of Banyan or any Banyan Subsidiary by any person or entity. The term
"Acquisition Proposal" as used in this Agreement means any offer or proposal
for, or any indication of interest in, a merger or other business combination
involving Banyan or any Banyan Subsidiary or the acquisition of a ten percent
(10%) or greater equity interest in, or a ten percent (10%) or greater portion
of the assets of, Banyan or any Banyan Subsidiary, other than the transactions
contemplated by this Agreement; provided, however, that nothing contained in
this Section 5.04 shall prohibit the Board of Directors of Banyan from: (i)
furnishing information to or entering into discussions or negotiations with,
any person or entity that makes an unsolicited bona fide Acquisition Proposal,
if, and only to the extent that (a) the board of directors of Banyan, after
consultation with and based upon the advice of Shefsky Froelich & Devine Ltd.
or such other counsel selected by the Banyan Board of Directors, determines in
good faith that such action is required for the board of directors to comply
with its fiduciary duties to stockholders under applicable law and (b) prior to
furnishing the information to, or entering into discussions or negotiations
with, the person or entity, Banyan provides written notice to RGI/US to the
effect that it is furnishing to, or entering into discussions or negotiation
with, the person or entity; and (ii) to the extent applicable, complying with
Rule 14e-2 and Rule 14a-9 promulgated under the Exchange Act with regard to an
Acquisition Proposal.
SECTION 5.05 COMPLIANCE WITH OBLIGATIONS. Except to the extent that
non-compliance would not have a Material Adverse Effect on Banyan and the
Banyan Subsidiaries taken as a whole, prior to the Effective Date, Banyan and
each of the Banyan Subsidiaries shall comply with (i) all applicable federal,
state, local and foreign laws, rules and regulations, (ii) all material
agreements and obligations, including its respective certificate of
incorporation and bylaws and other similar organizational documents, by which
it, its properties or its assets may be bound, and (iii) all final and
unappealable decrees, orders, writs, injunctions, judgments, statutes, rules
and regulations applicable to it and its respective properties or assets.
SECTION 5.06 NOTICE OF CERTAIN EVENTS. Banyan shall promptly notify
RGI/US of:
(a) any notice or other communication from any person or entity alleging
that the consent of such person or entity is or may be required in connection
with the transactions contemplated by this Agreement or any of the Ancillary
Agreements;
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(b) any employment by Banyan Management Corp. of any new non-hourly
employee to work for, and whose compensation shall be reimbursed by, Banyan or
any Banyan Subsidiary for an annual salary (including benefits) in excess of
$50,000;
(c) any termination of employment by, or threat to terminate employment
received from, any salaried or non-hourly, skilled employee who works for, or
is compensated by, Banyan or any Banyan Subsidiary;
(d) any notice or other communication from any governmental or regulatory
agency or authority in connection with the transactions contemplated by this
Agreement and the Ancillary Agreements;
(e) any notice or other communication from the SEC or NYSE;
(f) any notice or other communication from any lender; and
(g) any actions, suits, claims, investigations or proceedings commenced
or, to the best of Banyan's knowledge threatened against, Banyan or any Banyan
Subsidiary which, if pending on the date of this Agreement, would have been
required to have been disclosed pursuant to Section 3.11 or which relate to the
consummation of the transactions contemplated by this Agreement.
SECTION 5.07 CONFIDENTIALITY. Banyan agrees that the confidentiality
agreement dated February 5, 1996, between RGI/US and Banyan (the
"Confidentiality Agreement") shall remain valid and binding in accordance with
its terms at all times prior to the Merger Closing or after any termination of
this Agreement, and provided further, that Banyan agrees to maintain in
confidence in accordance with the Confidentiality Agreement any information
which it receives regarding other entities to which either RGI/US or RGI
Holdings is affiliated.
SECTION 5.08 REGISTRATION STATEMENT. Banyan shall promptly prepare, and
Banyan shall file with the SEC as soon as practicable, a combined Registration
Statement and Proxy Statement on Form S-4 under the Securities Act, with
respect to the shares of Banyan Common Stock issuable in the Merger (the "Form
S-4"). Banyan will cause the Form S-4 to comply as to form in all material
respects with the applicable provisions of the Securities Act, the Exchange Act
and the rules and regulations thereunder. Banyan shall use its reasonable best
efforts to have the Form S-4 declared effective by the SEC as promptly as
practicable. Banyan shall use its reasonable best efforts to obtain, prior to
the effective date of the Form S-4, all necessary state securities law or "Blue
Sky" permits or approvals required to carry out the transactions contemplated
by this Agreement. Banyan agrees that the Form S-4 and each amendment or
supplement thereto at the time it is mailed to the Banyan stockholders and at
the time of the Stockholders' Meeting, will not include an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to
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make the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that the foregoing shall not apply to
the extent that any such untrue statement of a material fact or omission to
state a material fact was made by Banyan in reliance upon and in conformity with
information concerning RGI/US, RGI Holdings or any RGI/US Subsidiary furnished
to Banyan by RGI/US, RGI Holdings, any RGI/US Subsidiary or any of their agents
specifically for use in the Form S-4.
SECTION 5.09 LISTING APPLICATION. Banyan shall promptly prepare and
submit to the NYSE a listing application covering the shares of Banyan Common
Stock issuable in the Merger and the Private Placement, and shall use its
commercially reasonable best efforts to obtain, prior to the Effective Time,
approval for the listing of such Banyan Common Stock, subject to official
notice of issuance.
ARTICLE VI
COVENANTS OF RGI/US
SECTION 6.01 CONDUCT OF RGI/US. From the date of this Agreement until the
Merger Closing, and except as set forth on Schedule 6.01 of the RGI/US
Disclosure Schedule, or with the express written consent of Banyan, RGI/US and
each RGI/US Subsidiary shall conduct their business in all material respects in
the ordinary course, and neither RGI/US nor any RGI/US Subsidiary will (i) make
any changes to or modify any indebtedness, or any guaranty of any indebtedness,
of RGI/US or any RGI/US Subsidiary the effect of which benefits any affiliate
(other than RGI/US or an RGI/US Subsidiary) of RGI Holdings and detrimentally
affects RGI/US or any RGI/US Subsidiary, or (ii) pay any dividend or make any
other distribution to the holders of its capital stock.
SECTION 6.02 CONFIDENTIALITY. RGI/US agrees that the Confidentiality
Agreement shall remain valid and binding in accordance with its terms at all
times prior to the Merger Closing or after any termination of this Agreement,
and provided further, that RGI/US and RGI Holdings agree to maintain in
confidence in accordance with the Confidentiality Agreement any information
which it or they receive regarding other entities to which Banyan Management
Corp. provides administrative services.
SECTION 6.03 ACCESS TO PROPERTIES AND FINANCIAL, OPERATIONAL AND TECHNICAL
INFORMATION; MONTHLY FINANCIAL INFORMATION.
(a) From the date hereof until the Merger Closing, RGI/US will give
Banyan, its counsel, financial advisors, auditors and other authorized
representatives reasonable access during normal business hours to the RGI/US
Properties, and the offices, books and records of RGI/US and any of the RGI/US
Subsidiaries, will furnish to Banyan, its counsel, financial advisors, auditors
and other authorized representatives
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such financial and operating data and all other technical information as such
persons may reasonably request and will instruct RGI/US' employees, counsel and
financial advisors to cooperate with Banyan in its investigation of the business
of RGI/US and the RGI/US Subsidiaries and in the planning for the combination of
the businesses of Banyan and RGI/US following the consummation of the Merger
provided that no investigation pursuant to this Section shall affect any
representation or warranty given by RGI/US and RGI Holdings to Banyan hereunder.
(b) From May 1, 1996 until the Merger Closing, within 15 days following
the end of each month (the first such report being due June 15, 1996), RGI/US
will deliver to Banyan a consolidated balance sheet, consolidated statement of
operations and consolidated statement of cash flows for such month.
SECTION 6.04 COMPLIANCE WITH OBLIGATIONS. Except to the extent that
non-compliance would not have a Material Adverse Effect on RGI/US and the
RGI/US Subsidiaries taken as a whole, prior to the Effective Date, RGI/US and
each of the RGI/US Subsidiaries shall comply with (i) all applicable federal,
state, local and foreign laws, rules and regulations, (ii) all material
agreements and obligations, including its respective certificate of
incorporation and bylaws and other similar organizational documents, by which
it, its properties or its assets may be bound, and (iii) all final and
unappealable decrees, orders, writs, injunctions, judgments, statutes, rules
and regulations applicable to it and its respective properties or assets.
SECTION 6.05 NOTICE OF CERTAIN EVENTS. RGI/US shall promptly notify
Banyan of:
(a) any notice or other communication from any person or entity alleging
that the consent of such person or entity is or may be required in connection
with the transactions contemplated by this Agreement or any of the Ancillary
Agreements;
(b) any employment of any new non-hourly employee by RGI/US or any RGI/US
Subsidiary for an annual salary (including benefits) in excess of $50,000;
(c) any termination of employment by, or threat to terminate employment
received from, any salaried or non-hourly, skilled employee of RGI/US or any
RGI/US Subsidiary;
(d) any notice or other communication from any governmental or regulatory
agency or authority in connection with the transactions contemplated by this
Agreement and the Ancillary Agreements;
(e) any notice or other communication from the SEC or NYSE;
(f) any notice or other communication from any lender; and
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(g) any actions, suits, claims, investigations or proceedings commenced
or, to the best of RGI/US' knowledge threatened against, relating to or
involving or otherwise affecting RGI/US or any RGI/US Subsidiary which, if
pending on the date of this Agreement, would have been required to have been
disclosed pursuant to Section 4.10 or which relate to the consummation of the
transactions contemplated by this Agreement.
SECTION 6.06 REGISTRATION STATEMENT. RGI/US and RGI Holdings shall
cooperate with Banyan in the preparation of the Form S-4 and the information
supplied by RGI/US, RGI Holdings and any RGI/US Subsidiary for inclusion in the
Form S-4 and each amendment or supplement thereto, at the time the Form S-4 is
mailed to Banyan stockholders and at the time of the Stockholders' Meeting,
will not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. RGI/US shall deliver to Banyan no later than May 15, 1996 the
information required to be disclosed by RGI/US in the Form S-4 pursuant to Item
404 of Regulation S-K.
SECTION 6.07 AUDITED FINANCIAL STATEMENTS. RGI/US shall deliver to Banyan
no later than May 15, 1996 an audited consolidated balance sheet at December
31, 1995 and related consolidated audited statements of operations,
stockholders equity and cash flows as of December 31, 1995 for RGI/US.
ARTICLE VII
COVENANTS OF ALL PARTIES
RGI/US, RGI Holdings and Banyan agree that:
SECTION 7.01 ADVICE OF CHANGES. Each Party will promptly advise the other
in writing (i) of any event occurring subsequent to the date of this Agreement
that would render any representation or warranty of such Party contained in
this Agreement, if made on or as of the date of such event or the Effective
Date, untrue, inaccurate or misleading in any material respect and (ii) of any
Material Adverse Change in the business condition of the party and its
subsidiaries, taken as a whole.
SECTION 7.02 REGULATORY APPROVALS. Prior to the Merger Closing, each
party shall execute and file, or join in the execution and filing of, any
application or other document that may be necessary in order to obtain the
authorization, approval or consent of any governmental body, federal, state,
local or foreign, which may be reasonably required, or that the other company
may reasonably request, in connection with the consummation of the transactions
contemplated by this Agreement. Each party shall use its commercially
reasonable best efforts to obtain all such authorizations, approvals and
consents.
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SECTION 7.03 ACTIONS CONTRARY TO STATED INTENT. No party hereto will,
either before or after the Merger Closing, take any action that would prevent
the Merger from qualifying as a reorganization under Sections 368(a)(1)(A) and
368(a)(2)(D) of the Code.
SECTION 7.04 CERTAIN FILINGS. The parties hereto shall cooperate with one
another:
(a) in connection with the preparation of the Form S-4;
(b) in connection with the preparation of any filing required by the HSR
Act; and
(c) in determining whether any action by or in respect of, or filing with,
any governmental body, agency or official, or authority is required, or any
actions, consents, approvals or waivers are required to be obtained from
parties to any material contracts, in connection with the consummation of the
transactions contemplated by this Agreement.
SECTION 7.05 PUBLIC ANNOUNCEMENTS. The parties hereto will use all
reasonable efforts to consult with each other before issuing any press release
or making any public statement with respect to this Agreement and the
transactions contemplated hereby and, except as may be required by applicable
law or the NYSE, will use all reasonable efforts not to issue any such press
release or make any such public statement prior to such consultation.
ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.01 CONDITIONS TO OBLIGATIONS OF RGI/US AND RGI HOLDINGS. The
obligations of RGI/US and RGI Holdings hereunder are subject to the fulfillment
or satisfaction, on and as of the Effective Date, of each of the following
conditions (any one or more of which may be waived by RGI/US and RGI Holdings,
but only in a writing signed by RGI/US and RGI Holdings):
(a) The representations and warranties of Banyan contained in Article III
shall be true and accurate in all material respects (and without regard to any
knowledge limitation contained therein) on and as of the Effective Date with
the same force and effect as if they had been made on the Effective Date, except
for changes therein specifically permitted or contemplated by this Agreement or
resulting from any transaction expressly consented to in writing by RGI/US.
Banyan shall have provided RGI/US with a certificate executed by the President
and the Chief Financial Officer of Banyan, dated as of the Effective Date,
certifying compliance with this subsection (a).
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(b) Banyan shall have performed and complied with all of its covenants
contained in Articles V and VII in all material respects on or before the
Effective Date, and RGI/US shall have received a certificate to such effect
signed by Banyan's President and Chief Financial Officer.
(c) RGI/US shall have received an opinion dated the Effective Date of
Shefsky Froelich & Devine, counsel to Banyan, in form and substance to be
agreed to by the Parties.
(d) All written consents, assignments, waivers or authorizations
("Consents"), other than Governmental Authorizations and other than those
permits and authorizations referred to in Sections 8.03(f) and (g), that are
required as a result of the Merger shall have been obtained.
(e) The boards of directors of RGI/US and RGI Holdings shall have received
from Banyan's independent public accountants letters dated the date the proxy
statement contained in the Form S-4 is mailed to the Banyan stockholders and
the date of the Merger Closing which shall be in a form customary for
accountants "comfort letters" in transactions such as the Merger and acceptable
to RGI/US and RGI Holdings.
SECTION 8.02 CONDITIONS TO OBLIGATIONS OF BANYAN. The obligations
hereunder are subject to the fulfillment or satisfaction, on and as of the
Effective Date, of each of the following conditions (any one or more of which
may be waived by Banyan, but only in a writing signed by Banyan):
(a) The representations and warranties of RGI/US and RGI Holdings set
forth in Article IV shall be true and accurate in all material respects (and
without regard to any knowledge limitation contained therein) on and as of the
Effective Date with the same force and effect as if they had been made on and
as of the Effective Date, except for changes therein specifically permitted or
contemplated by this Agreement or resulting from any transaction expressly
consented to in writing by Banyan; provided that an RGI Decline in Value shall
not cause a failure of a condition to Banyan's obligations hereunder if, at
RGI/US' option, the Merger shall occur at the Exchange Ratio set forth in
Exhibit 9.02 hereto. RGI/US shall have provided Banyan with a certificate
executed by the President and the Chief Financial Officer of RGI/US and RGI
Holdings, dated as of the Effective Date, certifying compliance with this
subsection (a).
(b) RGI/US and RGI Holdings shall have performed and complied with all of
its covenants contained in Articles VI and VII in all material respects on or
before the Effective Date, and Banyan shall have received a certificate to such
effect signed by RGI/US and RGI Holdings' President and Chief Financial Officer.
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<PAGE> 53
(c) Banyan shall have received an opinion dated the Effective Date of
Davis Wright Tremaine, counsel to RGI/US and RGI Holdings, in form and
substance to be agreed to by the Parties.
(d) All Consents other than Governmental Authorizations and other than
those permits and authorizations referred to in Sections 8.03(f) and (g), that
are required as a result of the Merger shall have been obtained.
(e) The board of directors of Banyan shall have received from RGI/US'
independent public accountants letters dated the date the proxy statement
contained in the Form S-4 is mailed to the Banyan stockholders and the date of
the Merger Closing which shall be in a form customary for accountants "comfort
letters" in transactions such as the Merger and acceptable to Banyan.
(f) Banyan shall have received an opinion from Josephthal Lyon & Ross that
the Merger and the transactions contemplated by this Agreement are fair from a
financial point of view to the holders of Banyan Common Stock (the "Fairness
Opinion").
SECTION 8.03 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective
obligations of RGI/US, RGI Holdings, and Banyan hereunder are subject to the
fulfillment, on and as of the Effective Date, of each of the following
conditions (any one or more of which may be waived by such parties, but only in
a writing signed by such parties):
(a) Banyan's stockholders shall have duly approved this Merger and the New
Board all in accordance with applicable laws.
(b) The Form S-4 shall have become effective under the Securities Act and
shall not be the subject of any stop order.
(c) Each of Banyan and RGI/US shall have received a written opinion from
their respective counsel to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a)(1)(A) of the Code, which
opinions shall be substantially identical in form and substance and which shall
not have been withdrawn or modified in any material respect. In preparing the
Banyan and the RGI/US tax opinions, counsel may rely on reasonable
representations related thereto.
(d) The shares to be issued in the Merger shall have been approved for
listing on the NYSE subject to official notice of issuance thereof.
(e) No statute, rule, regulation, executive order, decree, injunction or
restraining order shall have been enacted, promulgated or enforced (and not
repealed, superseded or otherwise made inapplicable) by any court or
governmental authority which prohibits the consummation of the Merger and the
transactions contemplated by
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<PAGE> 54
this Agreement and each Party shall use its commercially reasonable best efforts
to have any such order, decree or injunction lifted.
(f) There shall have been obtained any and all Governmental
Authorizations, permits, approvals and consents of securities or "blue sky"
commissions of any jurisdiction and of any other governmental body or agency,
that may reasonably be deemed necessary so that the consummation of the Merger
will be in compliance with applicable laws.
(g) The waiting period (and any extension thereof) applicable to the
consummation of the Merger under the HSR Act shall have expired or a been
terminated.
ARTICLE IX
TERMINATION OF AGREEMENT
SECTION 9.01 TERMINATION PRIOR TO THE INITIAL CLOSING. This Agreement may
be terminated at any time prior to the Initial Closing:
(a) by mutual consent of the Boards of Directors of RGI/US, RGI Holdings
and Banyan; or
(b) by RGI/US or RGI Holdings if the conditions set forth in Section
1.01(e) are not satisfied, or by Banyan if the conditions set forth in Section
1.01(f) are not satisfied.
SECTION 9.02 TERMINATION AFTER THE INITIAL CLOSING. This Agreement may be
terminated at any time after the Initial Closing and prior to the Effective
Time whether before or after the approval and adoption of the Merger by the
stockholders of Banyan:
(a) by mutual consent of the Boards of Directors of RGI/US, RGI Holdings
and Banyan;
(b) by Banyan, if the Fairness Opinion has not been received by Banyan or
has been withdrawn prior to the Stockholders' Meeting;
(c) by either RGI/US, RGI Holdings or Banyan if the stockholders of Banyan
do not approve the Merger and the transaction contemplated hereby upon the
holding of a duly convened stockholders meeting;
(d) by Banyan, if Banyan shall have received an Acquisition Proposal that
Banyan's Board of Directors determines to recommend to the stockholders of
Banyan for approval and acceptance;
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<PAGE> 55
(e) by RGI/US or RGI Holdings, if it is not in breach of this Agreement
and if the Board of Directors of Banyan shall have (i) withdrawn its
recommendation of the Merger (except if such withdrawal is caused by any
disclosures made or required to be made by RGI/US in the Form S-4 pursuant to
Item 404 of Regulation S-K that in the opinion of the disinterested members of
the Board of Directors of Banyan materially and adversely affects the Merger
such that Banyan could have terminated this Agreement pursuant to Section
9.02(h) hereto), or (ii) recommended or approved acceptance by Banyan's
stockholders of any Acquisition Proposal;
(f) by RGI/US or RGI Holdings, if (i) there has been a breach by Banyan of
any of its representations and warranties hereunder such that Section 8.01(a)
will not be satisfied, or (ii) there has been the breach on the part of Banyan
of any of its covenants or agreements contained in this Agreement such that
Section 8.01(b) will not be satisfied, and, in both case (i) and case (ii),
such breach has not been promptly cured after notice (in reasonable detail) to
Banyan;
(g) by Banyan, if (i) there has been a breach by RGI/US or RGI Holdings of
any of their respective representations and warranties hereunder such that
Section 8.02(a) will not be satisfied, or (ii) there has been a breach on the
part of RGI/US or RGI Holdings of any of their respective covenants or
agreements contained in this Agreement such that Section 8.02(b) will not be
satisfied, and, in both case (i) and case (ii), such breach has not been
promptly cured after notice (in reasonable detail) to RGI/US or RGI Holdings;
provided, that at Banyan's option a breach of Section 6.06 of this Agreement
may not be cured by RGI/US; and provided further that if Banyan seeks to
terminate this Agreement because of an RGI/US Decline in Value (as defined in
Section 4.01), then at RGI/US' option, in lieu of such termination the Exchange
Ratio set forth in Section 2.03 shall be recomputed in accordance with the
formula set forth in Exhibit 9.02 hereto;
(h) By Banyan if there shall be any disclosures made or required to be
made by RGI/US in the Form S-4 pursuant to Item 404 of Regulation S-K that in
the opinion of the disinterested members of the Board of Directors of Banyan
materially and adversely affects the Merger; or
(i) by any Party if the Effective Date has not occurred by December 31,
1996.
SECTION 9.03 EFFECT OF TERMINATION; SURVIVAL OF REPRESENTATION AND
WARRANTIES. In the event of termination of this Agreement as provided above,
all further obligation of the Parties under this Agreement shall terminate
without further liability of any Party to the other except that the agreements
contained or referred to in Article I (provided that termination occurs after
the Initial Closing) and Sections 4.25, 5.07, 6.02, 6.06 and 10.03 (provided
that termination occurs after the Initial Closing) shall survive the
termination
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<PAGE> 56
hereof. Except for Sections 4.25, 5.07, 6.02 and 6.06, all representations,
warranties and covenants made herein, and in any instrument delivered pursuant
to Articles III and IV of this Agreement, shall be deemed to be conditions to
the Merger Closing and shall not survive the Effective Time.
ARTICLE X
MISCELLANEOUS
SECTION 10.01 DEFINITIONS. The following terms are defined in the section
of this Agreement referenced below:
<TABLE>
<CAPTION>
Defined Term Reference
-------------------------------------- -------------
<S> <C>
Acquisition Proposal ................. Section 5.04
Agreement............................. Preamble
Ancillary Agreements.................. Section 3.02
Banyan................................ Preamble
Banyan Balance Sheet.................. Section 3.08
Banyan Balance Sheet Date............. Section 3.087
Banyan Common Stock................... Recital B
Banyan Disclosure Schedule............ Article III
Banyan Employee Plans................. Section 3.16(a)
Banyan Intellectual Property Rights... Section 3.18(b)
Banyan Material Contract.............. Section 3.16
Banyan Options........................ Section 1.07(a)
Banyan Properties..................... Section 3.20
Banyan Reports........................ Section 3.07(b)
Banyan Securities..................... Section 3.05
Banyan Stockholders' Meeting Date..... Section 5.02
Banyan Subsidiary..................... Section 3.06(a)
Banyan Subsidiary Agreements.......... Section 3.06(c)
Banyan Subsidiaries................... Section 3.06(a)
Banyan Subsidiary Securities.......... Section 3.06(b)
Banyan Tax Returns.................... Section 3.18(a)
Business Plan......................... Section 1.01(d)
Certificate of Incorporation.......... Section 3.01
Code.................................. Recital D
Completion Notice..................... Section 1.01(b)
Commitment............................ Section 1.02(a)
Consents.............................. Section 8.01(f)
Delaware Law.......................... Recital C
Effective Date........................ Section 2.02
Effective Time........................ Section 2.02
</TABLE>
52
<PAGE> 57
Environmental Laws................... Section 3.21(f)
Environmental Liabilities............ Section 3.21(f)
ERISA................................ Section 3.15(a)
Exchange Act......................... Section 3.03(a)
Exchange Ratio....................... Section 2.03
Fairness Opinion..................... Section 1.01(g)
Form S-4............................. Section 5.08
GAAP................................. Section 1.03(a)
Governmental Authority............... Section 3.09
Governmental Authorizations.......... Section 3.23
Hazardous Substances................. Section 3.21(f)
HSR Act.............................. Section 3.03(a)
Initial Closing...................... Section 1.01(c)
Initial Shares....................... Section 1.01(a)
Knowledge............................ Section 10.13
Levine Contract...................... Section 3.05
Lien................................. Section 3.04
Material Adverse Change.............. Section 3.01
Material Adverse Effect.............. Section 3.01
Merger............................... Recital A
Merger Closing....................... Section 2.01
Merger Date.......................... Section 2.01
Morgens.............................. Recital B
Morgens Loan......................... Recital B
Morgens Loan Modifications........... Section 1.02
Multiemployer Plan................... Section 3.15(b)
New Bylaws........................... Section 2.05
New Board............................ Section 5.02
NYSE................................. Section 3.03(d)
Parties.............................. Preamble
Private Placement.................... Recital B
Purchase Price....................... Section 1.01(a)
Proxy Statement...................... Section 5.02
Registration Statement............... Section 3.31
Regulated Activity................... Section 3.21(f)
Restored Certificate................. Section 2.04
RGI Holdings......................... Preamble
RGI/US............................... Preamble
RGI/US Balance Sheet................. Section 4.07
RGI/US Balance Sheet Date............ Section 4.07
RGI/US Common Stock.................. Recital C
RGI/US Decline in Value.............. Section 4.01
RGI/US Disclosure Schedule........... Article IV
RGI/US Employee Plans................ Section 4.14(a)
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RGI/US Intellectual Property Rights......................... Section 4.18
RGI/US Material Contract.................................... Section 4.15
RGI/US Subsidiary........................................... Section 4.06(a)
RGI/US Subsidiary Securities................................ Section 4.06(b)
RGI/US Subsidiaries......................................... Section 4.06(a)
SEC......................................................... Section 3.03(c)
Securities Act.............................................. Section 1.08
SoGen....................................................... Recital B
SoGen Loan.................................................. Recital B
SoGen Loan Modification..................................... Section 1.03
Stockholders' Meeting....................................... Section 5.02
Stockholders' Meeting Date.................................. Section 5.02
Subsidiary.................................................. Section 3.06(a)
Surviving Corporation....................................... Recital C
Tax......................................................... Section 3.17(p)
Taxing Authority............................................ Section 3.17(p)
Termination Date............................................ Section 1.02(a)
Washington Law.............................................. Recital C
SECTION 10.02 FURTHER ASSURANCES. Each Party agrees to cooperate fully
with the other parties and to execute such further instruments, documents and
agreements and to give such further written assurances as may be reasonably
requested by any other party to better evidence and reflect the transactions
described herein and contemplated hereby and to carry into effect the intents
and purposes of this Agreement.
SECTION 10.03 FEES AND EXPENSES.
(a) Except as set forth below, each party shall bear its own fees and
expenses, including counsel fees and fees of brokers and investment bankers
contracted by such party, in connection with the transactions contemplated
hereby.
(b) If the Merger is not consummated because (i) RGI/US or RGI Holdings
terminates this Agreement pursuant to Section 9.02(e) or (f), or (ii) Banyan
has terminated this Agreement in accordance with Section 9.02(d), or (iii)
Banyan terminates this Agreement pursuant to Section 9.02(b) and there shall
not have occurred an RGI/US Decline in Value in RGI/US, then, in each case,
Banyan shall pay to RGI/US a termination fee of $1,000,000 and shall repurchase
the Initial Shares from RGI Holdings at a repurchase price of $1.00 per share.
The termination fee and repurchase of the Initial Shares shall be liquidated
damages to RGI/US for loss of its bargain hereunder and the above termination
fee and repurchase agreement shall be RGI/US's sole and exclusive remedy in
such event.
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(c) If this Agreement is terminated pursuant to Section 9.02(c), then
Banyan shall reimburse RGI/US and RGI Holdings for its expenses (including,
without limitation, attorney fees, accountant fees and appraisal fees).
(d) If the Merger is not consummated because Banyan terminates this
Agreement pursuant to Section 9.02(g) (and it is not continued by RGI/US) or
Section 9.02(h), then RGI/US shall reimburse Banyan for its expenses
(including, without limitation, attorney fees, accountant fees, and appraisal
fees).
SECTION 10.04 NOTICES. Whenever any Party hereto desires or is required
to give any notice, demand, or request with respect to this Agreement, each
such communication shall be in writing and shall be effective only if it is
delivered by personal service or mailed, United States registered or certified
mail, postage prepaid, or sent by prepaid overnight courier or confirmed
telecopier, addressed as follows:
If to RGI/US:
RGI Holdings, Inc.
U.S. Bank Centre
1420 Fifth Avenue, 42nd Floor
Seattle, WA 98101-2333
Attention: Kenneth Uptain
With a copy in each case to:
Davis Wright Tremaine
2600 Century Square
1501 Fourth Avenue
Seattle, WA 98101-1688
Attention: Richard M. Rawson, Esq.
If to Banyan:
Banyan Mortgage Investment Fund
150 S. Wacker Drive, Suite 2900
Chicago, IL 60606
Attention: Leonard G. Levine, President
With a copy in each case to:
Shefsky Froelich & Devine, Ltd.
444 N. Michigan Avenue, Suite 2500
Chicago, IL 60611
Attention: Michael J. Choate, Esq.
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Such communications shall be effective when they are received by the
addressee thereof. Any Party may change its address for such communications by
giving notice thereof to the other parties in conformity with this Section.
SECTION 10.05 GOVERNING LAWS. The laws of the State of Delaware
(irrespective of its choice of law principles) shall govern the validity of
this Agreement, the construction of its terms, and the interpretation and
enforcement of the rights and duties of the parties.
SECTION 10.06 BINDING UPON SUCCESSORS AND ASSIGNS. This Agreement is
personal to each of the parties and may not be assigned without the written
consent of the other parties.
SECTION 10.07 SEVERABILITY. If any provision of this Agreement, or the
application thereof, shall for any reason or to any extent be invalid or
unenforceable, the remainder of this Agreement and application of such
provision to other persons or circumstances shall continue in full force and
effect and in no way be affected, impaired or invalidated, except to the extent
that the intent of the Parties in entering into the Agreement shall be
substantially and materially impaired.
SECTION 10.08 ENTIRE AGREEMENT. This Agreement, the Confidentiality
Agreement and the Ancillary Agreements constitute the entire understanding and
agreement of the parties with respect to the subject matter hereof and thereof
and supersede all prior and contemporaneous agreements or understandings,
inducements or conditions, express or implied, written or oral, between the
parties with respect hereto.
SECTION 10.09 OTHER REMEDIES. Except as otherwise provided herein, any
and all remedies herein expressly conferred upon a party shall be deemed
cumulative with and not exclusive of any other remedy conferred hereby or by
law on such party, and the exercise of any one remedy shall not preclude the
exercise of any other.
SECTION 10.10 AMENDMENT AND WAIVERS. Any term or provision of this
Agreement may be amended, and the observance of any term of this Agreement may
be waived (either generally or in a particular instance and either
retroactively or prospectively) only by a writing signed by the party to be
bound thereby. The waiver by a party of any breach hereof or default in the
performance hereof shall not be deemed to constitute a waiver of any other
default or any succeeding breach or default. This Agreement may not be amended
or supplemented by any party hereto except pursuant to a written amendment
executed by all parties, and provided further that following approval by the
stockholders of Banyan of the Merger there shall be no amendment or change to
the provisions hereof with respect to the Exchange Ratio (except as expressly
provided in this Agreement) without further approval by the stockholders of
Banyan, and no other amendment shall be made which by law requires further
approval by such stockholders without such further approval.
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SECTION 10.11 NO WAIVER. The failure of any party to enforce any of the
provisions hereof shall not be construed to be a waiver of the right of such
party thereafter to enforce such provisions.
SECTION 10.12 CONSTRUCTION OF AGREEMENT; KNOWLEDGE. A reference to an
Article, Section, Schedule or Exhibit shall mean an Article of, a Section in,
or Schedule or Exhibit to, this Agreement unless otherwise explicitly set
forth. The titles and headings herein are for reference purposes only and shall
not in any manner limit the construction of this Agreement which shall be
considered as a whole. The words "include," "includes," and "including" when
used herein shall be deemed in each case to be followed by the words "without
limitation." For purposes of this Agreement, and except as provided in the
following sentence, the term "knowledge," when used in reference to a
corporation means the actual knowledge of the executive officers of such
corporation after such officers shall have made any such inquiry that is
customary and appropriate under the circumstances to which reference is made,
and when used in reference to an individual means the actual knowledge of such
individual after the individual shall have made any such inquiry that is
customary and appropriate under the circumstances to which reference is made.
SECTION 10.13 ABSENCE OF THIRD PARTY BENEFICIARY RIGHTS. No provision of
this Agreement is intended, nor will be interpreted, to provide to create any
third party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, stockholder, employee, partner or any party hereto or any
other person or entity and all provisions hereof will be personal solely
between the parties to this Agreement.
SECTION 10.14 MUTUAL DRAFTING. This Agreement is the joint product of the
parties hereto, and each provision hereof has been subject to the mutual
consultation, negotiation and agreement of such parties, and shall not be
construed for or against any party hereto.
SECTION 10.15 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be an original as against any party whose
signature appears thereon and all of which together shall constitute one and
the same instrument. This Agreement shall become binding when one or more
counterparts hereof, individually or taken together, shall bear the signatures
of all of the paries reflected
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hereon as signatories.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
RGI U.S. HOLDINGS, INC.
By /s/ Kenneth L. Uptain
------------------------
Kenneth L. Uptain
Its President
RGI HOLDINGS, INC.
By /s/ Kenneth L. Uptain
-------------------------
Kenneth L. Uptain
Its President
BANYAN MORTGAGE INVESTMENT FUND
By /s/ Leonard G. Levine
------------------------
Leonard G. Levine
Its President
58
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[Exhibits Omitted]
<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 MORTGAGE
INVESTMENT FUND (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 $101,648 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(el 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 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.
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<PAGE> 4
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 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
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<PAGE> 5
insurance covering such payments after diligent attempts to procure such
insurance.
9. Other Benefits. Except as otherwise specifically provided herein,
during the Employment Period, the Executive shall be eligible for all non-wage
benefits the Fund or Banyan Management Corp. provide generally for their other
salaried employees.
10. Business Expenses. The Fund shall reimburse the Executive for the
reasonable, ordinary, and necessary business expenses incurred by him in
connection with the performance of his duties hereunder, including, but not
limited to, ordinary and necessary travel expenses and entertainment expenses
and car phone expenses. The Executive shall provide the Fund with an accounting
of his expenses, which accounting shall clearly reflect which expenses are
reimbursable by the Fund. The Executive shall provide the Fund with such other
supporting documentation and other substantiation of reimbursable expenses as
will conform to Internal Revenue Service or other requirements. All such
reimbursements shall be payable by the Fund to the Executive within a
reasonable time after receipt by the Fund of appropriate documentation therefor.
11. Termination.
(a) Termination by the Executive. The Executive may terminate his
employment by the Fund at any time by written notice of termination given to
the Fund at least ninety (90) days in advance of the termination date stated in
such notice.
(b) Termination for Just Cause. The Fund may terminate the Executive's
employment, effective upon written notice of such termination to the Executive,
for Just Cause. For purposes of this Agreement, the term "Just Cause" shall
mean the occurrence of any one or more of the following events: (1) the
conviction of or the rendering of a civil judgment against the Executive for
theft or embezzlement of Fund property; (2) the conviction of the Executive for
a felony resulting in injury to the business, property or reputation of the
Fund or any affiliate of the Fund; or (3) a decision by an Arbitrator
(appointed pursuant to Section 14(al) 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
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<PAGE> 6
termination given to the Executive at least ninety (90) days in advance of the
termination date stated in such notice.
(d) Constructive Termination. The Fund shall be deemed to have
terminated the Executive without Just Cause if any of the following events
occurs:
(1) The Fund materially reduces the authority of the Executive;
(2) The Fund requires the Executive to relocate from the Chicago
area and the Executive refuses; or
(3) There is a material adverse change in working conditions for
the Executive.
(e) Termination Upon Death or Disability. The employment of the
Executive shall terminate upon the permanent disability (as defined in Section
8) or death of the Executive.
12. Severance Pay.
(a) In the event that the Executive's employment is terminated
voluntarily by the Executive or is terminated by the Fund for Just Cause, the
Executive shall be entitled to any Salary earned through the date of
termination. 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 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
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<PAGE> 7
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.
(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
7
<PAGE> 8
a portion of time to Oak's affairs so long as no actions taken on the part of
Oak or by Oak itself would cause the Executive to contravene this Agreement.
(b) The Executive shall not: (i) engage in any activity which may be
adverse to the Fund's business; (ii) appropriate or usurp Fund business
opportunities; or (iii) engage or invest in businesses or assets which compete
directly or indirectly with the Fund.
(c) The obligations and limitations imposed by this Section shall be in
addition to those provided by law. The Executive shall, on an annual basis,
provide the Board of 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
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
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<PAGE> 9
arising out of any act undertaken in connection with his duties under this
Agreement in the same manner and to the same extent as the Fund indemnifies any
director or any other officer.
16. General Provisions.
(a) Notice. Any notice required or permitted hereunder shall be made in
writing (i) either by actual delivery of the notice into the hands of the party
thereunder entitled, or (ii) by the mailing of the notice in the United States
mail, certified or registered mail, return receipt requested, all postage
prepaid and addressed to the party to whom the notice is to be given at the
party's respective address set forth below, or such other address as the
parties may from time to time designate by written notice as herein provided.
As addressed to the Fund:
c/o Banyan Management Corp.
Suite 2900
150 South Wacker Drive
Chicago, Illinois 60606
With a copy to:
Shefsky & Froelich Ltd.
444 North Michigan Avenue
Suite 2500
Chicago, Illinois 60611
Attention: Cezar M. Froelich
As addressed to the Executive:
Mr. Leonard G. Levine
3142 East Kay Jay Drive
Northbrook, Illinois 60062
The notice shall be deemed to be received in case (i) on the date of its actual
receipt by the party entitled thereto and in case (ii) on the date of its
mailing.
(b) Amendment and Waiver. No amendment or modification of this
Agreement shall be valid or binding upon the Fund unless made in writing and
signed by an officer of the Fund duly authorized by the Board of 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
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<PAGE> 10
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 S(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 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 MORTGAGE INVESTMENT FUND
By: /s/ William M. Karnes
------------------------------
William M. Karnes,
Senior Vice President -
Finance and Administration
Chief Financial and Accounting Officer
EXECUTIVE:
/s/ Leonard G. Levine
-----------------------------
Leonard G. Levine
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Exhibit A
DATE
Board of Directors
Banyan Mortgage Investment Fund
Re: Statement of Other Activities
Gentlemen:
Pursuant to the provisions of Section 13(c) of my Second Amended and
Restated Employment Agreement, please be advised that I have not engaged in any
activities during the preceding year in contravention of the requirements set
forth in Section 13.
/s/ Leonard G. Levine
--------------------------------
Leonard G. Levine
11
<PAGE> 1
EXHIBIT 10(ii)
FORM OF
BANYAN MORTGAGE INVESTMENT FUND
1993 EXECUTIVE AND DIRECTOR STOCK OPTION AGREEMENT
DIRECTOR OPTION GRANT PROGRAM
THIS OPTION AGREEMENT is made as of the 1st day of July, 1993 by and
between BANYAN MORTGAGE INVESTMENT FUND (the "Fund"), and (See Schedule A)
("Optionee"). All definitions contained in the Banyan Mortgage Investment Fund
1993 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 nonqualified 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 $0.625, 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:
(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);
<PAGE> 2
(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 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
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<PAGE> 3
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 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
3
<PAGE> 4
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.
14. Choice of Laws. This Agreement shall be construed and enforced
according to the internal laws of the State of Delaware.
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<PAGE> 5
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 MORTGAGE INVESTMENT FUND
By: /s/ Leonard G. Levine
------------------------------------
Its: President
------------------------------
------------------------------------
(Optionee)
5
<PAGE> 6
Schedule A
Optionee Number of Shares
Walter E. Auch 25,000
Robert M. Ungerleider 25,000
6
<PAGE> 7
FORM OF
BANYAN MORTGAGE INVESTMENT FUND
1994 EXECUTIVE AND DIRECTOR STOCK OPTION AGREEMENT
DIRECTOR OPTION GRANT PROGRAM
THIS OPTION AGREEMENT is made as of the 24th day of July, 1994 by and
between BANYAN MORTGAGE INVESTMENT FUND (the "Fund"), and (See Schedule A)
("Optionee"). All definitions contained in the Banyan Mortgage Investment Fund
1993 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 $0.6875, 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> 8
(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
2
<PAGE> 9
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 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
3
<PAGE> 10
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 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
4
<PAGE> 11
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.
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 MORTGAGE INVESTMENT FUND
By: /s/ Leonard G. Levine
---------------------------
Its: President
---------------------------
---------------------------------
(Optionee)
5
<PAGE> 12
Schedule A
Optionee Number of
Shares
Robert M. Ungerleider 25,000
Walter E. Auch 25,000
6
<PAGE> 13
FORM OF
BANYAN MORTGAGE INVESTMENT FUND
1995 EXECUTIVE AND DIRECTOR STOCK OPTION AGREEMENT
DIRECTOR OPTION GRANT PROGRAM
THIS OPTION AGREEMENT is made as of the 7th day of July, 1995 by and
between BANYAN MORTGAGE INVESTMENT FUND (the "Fund"), and (See Schedule A)
("Optionee"). All definitions contained in the Banyan Mortgage Investment Fund
1993 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 nonqualified 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 $0.625, 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:
(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);
<PAGE> 14
(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 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
2
<PAGE> 15
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 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
3
<PAGE> 16
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.
14. Choice of Laws. This Agreement shall be construed and enforced
according to the internal laws of the State of Delaware.
4
<PAGE> 17
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 MORTGAGE INVESTMENT FUND
By: /s/ Robert G. Higgins
----------------------------
Its: Vice President
---------------------------
---------------------------------
Optionee
5
<PAGE> 18
Schedule A
Optionee Number of Shares
Walter E. Auch 25,000
Robert M. Ungerleider 25,000
6
<PAGE> 1
EXHIBIT 10(iii)
FORM OF
BANYAN MORTGAGE INVESTMENT FUND
1993 EXECUTIVE AND DIRECTOR STOCK OPTION AGREEMENT
EXECUTIVE OPTION GRANT PROGRAM
THIS OPTION AGREEMENT is made as of the 1st day of July, 1993 by and
between BANYAN MORTGAGE INVESTMENT FUND (the "Fund"), and (See Schedule A)
("Optionee"). All definitions contained in the Banyan Mortgage Investment Fund
1993 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 $0.625, 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
<PAGE> 2
provisions of this Option 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
2
<PAGE> 3
General Counsel of the notice, proof (if required) and payment. Delivery shall
be made at the principal office of the Fund, or at any 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: (i) the Optionee at the time of issuance of this Option has a
seperate employment agreement with the Fund or by Banyan Management Corp. which
defines a "change in control" of the Fund and provides certain rights to the
Optionee in the event of a change of control; and (ii) if a change of control
as defined in the employment agreement occurs, all outstanding Options shall
become exercisable from and after the date of the change in control.
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, 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.
3
<PAGE> 4
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's capital structure or its business, or any merger or consolidation of 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'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 obligation of the preceding sentence may
be satisfied by the Optionee or Beneficiary tendering cash, or by tendering a
number of 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.
5
<PAGE> 6
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 MORTGAGE INVESTMENT FUND
By:/s/ Leonard G. Levine
----------------------------
Its: President
-----------------------
----------------------------
(Optionee)
6
<PAGE> 7
Schedule A
Optionee Number of Shares
Leonard G. Levine 80,000
Neil D. Hansen 8,000
Robert G. Higgins 8,000
Joel L. Teglia 2,000
7
<PAGE> 8
FORM OF
BANYAN MORTGAGE INVESTMENT FUND
1994 EXECUTIVE AND DIRECTOR STOCK OPTION AGREEMENT
EXECUTIVE OPTION GRANT PROGRAM
THIS OPTION AGREEMENT is made as of the 12th day of January, 1994 by and
between BANYAN MORTGAGE INVESTMENT FUND (the "Fund"), and (See Schedule A)
("Optionee"). All definitions contained in the Banyan Mortgage Investment Fund
1993 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. 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 $1.125, 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 Agreement or the Plan), as of the date of
<PAGE> 9
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
2
<PAGE> 10
General Counsel of the notice, proof (if required) and payment. Delivery shall
be made at the principal office of the Fund, or at any 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, 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:
3
<PAGE> 11
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.
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
4
<PAGE> 12
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.
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 obligation of the preceding sentence may
be satisfied by the Optionee or Beneficiary tendering cash, or by tendering a
number of 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.
5
<PAGE> 13
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 MORTGAGE INVESTMENT FUND
By: /s/ Leonard G. Levine
---------------------------
Its: President
---------------------
---------------------------
(Optionee)
6
<PAGE> 14
Schedule A
Optionee Number of Shares
Leonard G. Levine 80,000
Neil D. Hansen 7,000
Robert G. Higgins 7,000
Joel L. Teglia 2,000
7
<PAGE> 15
FORM OF
BANYAN MORTGAGE INVESTMENT FUND
l995 EXECUTIVE AND DIRECTOR STOCK OPTION AGREEMENT
EXECUTIVE OPTION GRANT PROGRAM
THIS OPTION AGREEMENT is made as of the 8th day of February, 1995 by and
between BANYAN MORTGAGE INVESTMENT FUND (the "Fund"), and (see Schedule A)
("Optionee"). All definitions contained in the Banyan Mortgage Investment Fund
1993 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. 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 $.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
<PAGE> 16
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
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
2
<PAGE> 17
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 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, the Fund is involved in a dissolution, liquidation, corporate
separation or division, merger, consolidation, sale of assets or similar
corporate transaction or event as described in Section IV.G of the Plan, all
outstanding Options shall become exercisable immediately and under the terms
and conditions set forth in the Plan.
Notwithstanding the provisions of Section 3 of this Agreement, if while
unexercised capital options remain outstanding under this Option Agreement and
Optionee's employment by the Fund or by Banyan Management Corp. is terminated
due to a Change in Control (as defined below), all outstanding capital 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, 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
3
<PAGE> 18
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.
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
4
<PAGE> 19
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'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.
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 obligation of the preceding sentence may
be satisfied by the Optionee or Beneficiary tendering cash, or by tendering a
number of 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
5
<PAGE> 20
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.
6
<PAGE> 21
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 MORTGAGE INVESTMENT FUND
By: /s/ Robert G. Higgins
--------------------------------------
Its: Vice President
------------------------------------
------------------------------------------
(Optionee)
7
<PAGE> 22
Schedule A
Optionee Number of
Shares
Leonard G. Levine 80,000
Neil D. Hansen 7,500
Robert G. Higgins 7,500
Joel Teglia 5,000
8
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF BANYAN MORTGAGE INVESTMENT FUND
<TABLE>
<CAPTION>
Name of Subsidiary State of
Organization
<S> <C>
BMIF Merger Corp. Illinois
BMIF Merger Partnership Illinois
BMIF Monterey County Corp. Illinois
BMIF Monterey County Limited Partnership Illinois
BMIF Rancho Malibu II Corp. Illinois
BMIF Virginia Management Corp. Illinois
BMIF/BSLFII Rancho Malibu Limited Partnership Illinois
VMIF 248 Buckeye Wilshire Corp. Delaware
VMIF 9025 Wilshire Corp. Illinois
VMIF Acton Corp. N/K/A BMIF Merger II Corp. Illinois
VMIF/Anden Southbridge Venture Illinois
VMIF/Anden Wayside Venture Illinois
VMIF Charles County Corp. Delaware
VMIF Charles County L.P. Illinois
VMIF Charles County Venture Illinois
VMIF Oakridge Corp. Illinois
VMIF Rancho Malibu Corp. Illinois
VMIF Southbridge Corp. Delaware
VMIF Southbridge L.P. Illinois
VMIF Wayside L.P. Illinois
VMIF Wayside Corp. Illinois
VST/VMIF Oakridge Partnership Illinois
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
"This schedule contains summary financial information extracted from Banyan
Mortgage Investment Fund's 10K for the year ended December 31, 1995 and is
qualified in its entirety by reference to such Form 10K."
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 316,012
<SECURITIES> 0
<RECEIVABLES> 141,110
<ALLOWANCES> (65,000)
<INVENTORY> 0
<CURRENT-ASSETS> 1,167,876
<PP&E> 105,074,544
<DEPRECIATION> (1,645,927)
<TOTAL-ASSETS> 109,133,514
<CURRENT-LIABILITIES> 3,339,564
<BONDS> 0
72,179,529
0
<COMMON> 0
<OTHER-SE> (11,316)
<TOTAL-LIABILITY-AND-EQUITY> 109,133,514
<SALES> 0
<TOTAL-REVENUES> 1,399,918
<CGS> 0
<TOTAL-COSTS> 2,707,077
<OTHER-EXPENSES> 1,594,081
<LOSS-PROVISION> 12,900,000
<INTEREST-EXPENSE> 2,533,841
<INCOME-PRETAX> (18,544,207)
<INCOME-TAX> 0
<INCOME-CONTINUING> (18,544,207)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (18,544,207)
<EPS-PRIMARY> (0.47)
<EPS-DILUTED> (0.47)
</TABLE>
