<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/ / Definitive proxy statement
/X/ Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
BANYAN MORTGAGE INVESTMENT FUND
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
BANYAN MORTGAGE INVESTMENT FUND
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/ / $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
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[BANYAN LETTERHEAD]
December 16, 1996
Dear Stockholder:
Enclosed please find Supplement No. 2 to the Proxy Statement/Prospectus.
This supplement provides an update to certain information contained in our
previous mailings to you. As most of you know, prior to the date of the original
Annual Meeting, the Company received a couple of unsolicited Acquisition
Proposals which the Board reviewed and directed management and its advisors to
more fully explore. We have subsequently engaged in this process, but no firm
offers have been forthcoming. The Board has concluded that further delay is not
in the stockholders' best interest and have decided to proceed with the Annual
Meeting. Although the Annual Meeting is scheduled to be reconvened on December
18, 1996, in order to give stockholders a sufficient opportunity to review the
information in the enclosed supplement, we will reconvene that meeting, but will
not take any substantive actions on the proposals, including the Merger.
Instead, we anticipate adjourning that meeting and reconvening again on December
27, 1996 at 10:00 a.m. central time at which time we expect to take action on
these proposals. As described more fully in the supplement, the polls will
remain open until 3:00 p.m. central time on December 30, 1996.
Some of you may be receiving a letter from John Hinson in which he makes a
number of assertions which we believe are wrong. A second letter from Mr.
Hinson, modifying the first letter, is enclosed herein. We think it speaks for
itself. We believe the disclosure in the Proxy Statement/Prospectus and the
supplements thereto is complete and provides you with the facts necessary to
make an informed decision. We urge you to ignore Mr. Hinson's other letter.
Enclosed with this Supplement No. 2 is another proxy card. If you wish to
reconfirm or change your vote, please follow the instructions set forth in the
supplement. The Board has unanimously approved the Merger and believes that the
Merger is fair to, and in the best interest of, Banyan and its stockholders, and
unanimously recommends that all stockholders vote FOR the Merger and the other
proposals presented to the stockholders.
Very truly yours,
BANYAN MORTGAGE INVESTMENT FUND
Leonard Levine signature
Leonard G. Levine
President
<PAGE> 3
[LOGO]
SUPPLEMENT NO. 2
DATED DECEMBER 16, 1996
BANYAN MORTGAGE INVESTMENT FUND
PROXY STATEMENT/PROSPECTUS
This Supplement No. 2 supplements information contained in the Company's
Proxy Statement/Prospectus dated October 9, 1996 as supplemented on November 7,
1996 ("Supplement No. 1") and should be read in conjunction therewith. Unless
otherwise defined, capitalized terms used herein shall have the same meaning as
in the Proxy Statement/Prospectus and Supplement No. 1.
GENERAL
As described more fully herein, the Annual Meeting was convened on November
26, 1996 at 3:00 p.m. central time. Mr. Leonard G. Levine, president of the
Company and chairman of the Annual Meeting provided the attendees with a report
on the Company's operations for the fiscal year-ended December 31, 1995 and the
first nine months ended September 30, 1996. In order to provide the Board with
time to review the Acquisition Proposals described below and in accordance with
an agreement reached with plaintiffs in the case captioned Hinson and Temple v.
Levine et al., the proposals set forth in the notice and agenda for the Annual
Meeting were not presented for consideration and no action was taken on these
matters. The meeting was adjourned to December 18, 1996. Although the meeting
will be reconvened on December 18, 1996, no substantive action will be taken on
the Proposals, including the Merger. Instead, the meeting will be adjourned to
December 27, 1996 at 10:00 a.m. to allow for dissemination of this supplement.
If the Proposals are acted upon at the meeting to be reconvened on December 27,
1996, the polls will remain open until 3:00 p.m. central time on December 30,
1996 to allow stockholders sufficient time to cast a vote on the Proposals,
including revoking a proxy previously given to the Board. A Stockholder may
revoke a proxy at any time prior to its exercise by: (i) giving written notice
thereof to the Board before the proxy is voted at the Annual Meeting; (ii)
signing and returning a later-dated proxy; or (iii) attending the Annual Meeting
and voting the shares in person. Stockholders may transmit proxies via facsimile
to the Company's tabulation agent, First Chicago Trust Company of New York, at
(908-417-2916). Mere attendance at the Annual Meeting will not constitute a
revocation. See "Matters to be Considered by Stockholders -- Proposal Number
One -- Background of and Reasons for the Merger" and "Banyan -- Legal
Proceedings" below. Finally, the Company has been advised that if the Merger is
approved, its shares of common stock will not qualify for listing on the Chicago
Stock Exchange. The Company has, however, applied to have its shares of common
stock included for quotation on The Nasdaq SmallCap Market and has been
conditionally approved for listing.
MATTERS TO BE CONSIDERED BY STOCKHOLDERS
QUORUM AND VOTING RIGHTS; PROXIES
With respect to Proposal Number One, RGI Holdings has agreed to vote the
7,466,666 shares purchased in the Private Placement in proportion to the vote of
all other Stockholders, provided that abstentions and broker non-votes will not
be treated as votes cast for this purpose. RGI intends, however, to fully vote
the Purchased Shares (as defined below) to the extent that it has valid proxies
to vote such shares. In addition to
<PAGE> 4
the use of mails, proxies may be solicited by directors, officers and employees
of Banyan, Banyan Management Corp., RGI U.S. Holdings, Inc., or RGI Holdings,
Inc. None of these individuals or entities will be specifically compensated for
these services.
BACKGROUND OF AND REASONS FOR THE MERGER
On November 15, 1996, the Company received an unsolicited Acquisition
Proposal from Apollo Real Estate Advisors II L.P. ("Apollo"). In its proposal,
Apollo expressed interest in acquiring the Company under which Apollo would pay
$0.46875 for each share of Banyan common stock outstanding. In addition, Apollo
indicated that it would make a loan to the Company sufficient to enable it to
retire the obligations under the Morgens Loan and the SoGen Loan each of which
are held by RGI. Pursuant to Section 5.04 of the Merger Agreement, the Company
subsequently notified RGI that the Company had received this proposal and that,
consistent with the Board's fiduciary duties, the Company intended to enter into
discussions or negotiations with Apollo. The Company subsequently entered into a
confidentiality agreement with Apollo and provided Apollo with access to, or
copies of, material non-public information regarding the Company and its assets.
In addition, Josephthal was retained to act as financial advisor to the Company
and the Board and to assist the Company and the Board in evaluating the Apollo
proposal or any other unsolicited proposal received by the Company, as well as
to assist as financial advisor in connection with the Merger. A series of
special meetings of the Board were subsequently convened to discuss and consider
the Apollo proposal, as well as other Acquisition Proposals described below. The
Board noted that the Apollo proposal was subject to a significant due diligence
period and provided few details on the manner in which Apollo would effect its
proposal. Kenneth Uptain, a director of the Company, as well as president and a
director of RGI Holdings, Inc. and RGI U.S., did not attend any of these
meetings and did not participate in any of the discussions regarding these
proposals, having agreed to recuse himself from these meetings and discussions.
In addition, Mr. Levine, along with counsel and a representative from
Josephthal, met with representatives of Apollo and its counsel on November 20,
1996 to discuss the Apollo proposal and to impress upon Apollo the need for
timely action since the forbearance agreements entered into with RGI in respect
of the Morgens Loan and the SoGen Loan expire on December 31, 1996, and RGI
would have the right to terminate the Merger Agreement if the Merger was not
consummated by December 31, 1996. This meeting was followed by a series of
telephone conferences and in-person meetings between representatives of the
Company and Apollo, and representatives of Apollo subsequently toured certain of
Banyan's properties.
On November 19, 1996, the Company received an unsolicited Acquisition
Proposal from Gabriel Capital Group ("Gabriel") expressing an interest in
investing approximately $10 million in the Company. The Gabriel proposal did not
address the need for funds to satisfy the Morgens Loan and the SoGen Loan and
mirrored the proposal made by Gabriel shortly before closing of the Private
Placement in May 1996. Pursuant to Section 5.04 of the Merger Agreement, the
Company subsequently notified RGI that the Company had received this proposal
and that, consistent with the Board's fiduciary duties, the Company intended to
enter into discussions or negotiations with Gabriel. As a condition to providing
Gabriel with material, non-public information regarding the Company and its
assets, the Company presented Gabriel with a confidentiality agreement in form
and substance identical to the agreement entered into with Apollo. Although
representatives of the Company engaged in preliminary discussions with
representatives of Gabriel in order to learn more about Gabriel's proposal,
Gabriel declined to enter into a confidentiality agreement with the Company.
Consequently, the Company did not provide Gabriel with material, non-public
information concerning the Company. The Gabriel proposal was also discussed at
the special board meetings noted above although the Board noted that the
proposal did not contemplate providing funds to retire the Morgens loan and the
SoGen loan. Mr. Uptain was not present at the meetings held to discuss this
proposal and did not participate in any of the discussions regarding this
proposal.
On December 2, 1996, the Company received an unsolicited Acquisition
Proposal from D. Andrew Beal expressing an interest in either individually, or
through affiliates, acquiring the Company for a cash price of approximately
$24.1 million or $0.51 per share. Pursuant to Section 5.04 of the Merger
Agreement, the Company subsequently notified RGI that it had received this
proposal and that, consistent with the Board's fiduciary duties, the Company
intended to enter into discussions or negotiations with Mr. Beal. As a condition
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<PAGE> 5
to providing Mr. Beal with material, non-public information regarding the
Company and its assets, the Company presented Mr. Beal with a confidentiality
agreement in form and substance identical to the agreement entered into with
Apollo. Representatives of both the Company and Mr. Beal engaged in negotiations
over the terms and conditions of a confidentiality agreement, but the parties
were unable to agree on terms and a confidentiality agreement was never signed.
Consequently, the Company did not provide Mr. Beal with any material, non-public
information regarding the Company and its properties. The proposal from Mr. Beal
was also discussed at the special board meetings noted above. Similar to the
Apollo proposal, the Board noted that the proposal made by Mr. Beal was subject
to due diligence conditions and also provided few details on the manner in which
it might be effected. Mr. Uptain was not present at the meetings held to discuss
this proposal and did not participate in any of the discussions regarding this
proposal.
On December 6, 1996, at a special meeting of the Board, from which Mr.
Uptain recused himself, the Board further reviewed the status of each
Acquisition Proposal described above and received a report from management
regarding the substance of discussions with each party. Mr. Levine informed the
Board that despite the fact that representatives of Apollo had indicated to him,
as well as to a representative of Josephthal, that an offer would be forthcoming
by the end of business on either December 4th or December 5th, Apollo had
neither made an offer nor returned calls to the Company made for the purpose of
inquiring into the status of the Apollo proposal. Similarly, Mr. Levine also
informed the Board that he was in receipt of a filing made with the Securities
and Exchange Commission by affiliates of Gabriel indicating that the affiliates
had entered into an agreement to sell all of their shares of Banyan common stock
to RGI Holdings for approximately $0.60 per share. He added that Gabriel had
provided no further details to its November 19th proposal in discussions with
representatives of Josephthal over the course of the last two weeks. Finally,
Mr. Levine advised the Board that Mr. Beal had taken no further steps to provide
any further information or substance to the proposal made to the Company on
December 2nd.
The Board expressed its concerns regarding the imminent deadline for
completing the Merger contained in the Merger Agreement and the debt forbearance
agreements, as well as the lack of any firm alternatives and directed management
to make further inquiry of each of Apollo, Gabriel and Mr. Beal to determine
whether any of these parties were going to make a firm offer. Further, the Board
directed management to set a deadline of 5:00 p.m. Chicago time on December 9,
1996 for the receipt of firm offers from these parties and that failing the
receipt of any such firm offer, management was to prepare a supplement to the
Company's Proxy Statement/Prospectus and proceed with the Company's Annual
Meeting. Mr. Levine later advised the Board that as of 5:00 p.m. Chicago time on
December 9, 1996, over three weeks from receipt of the Apollo Acquisition
Proposal, no firm offer had been received from any of these parties, that
Gabriel had expressly declined to make an offer and that Mr. Beal had advised
the Company that he would not execute a confidentiality agreement and did not
make an offer although he expressed an interest in purchasing assets should the
Company be so inclined to sell. As a result, the Board concluded that further
delay in proceeding with the Annual Meeting was not in the best interest of the
Banyan stockholders. Apollo subsequently indicated after 5:00 p.m. on December
9th in a telephone conference between Mr. Levine and a representative of Apollo
that Apollo was still considering making an offer but was not prepared to
respond at that time. Mr. Levine advised Apollo that, in management's view, the
Board would consider a firm offer even if made after 5:00 p.m. on December 9th,
but that the exigencies of the situation demanded swift and unconditional
action. As of the date of this supplement, no offer had been received from
Apollo.
REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARD OF DIRECTORS OF BANYAN
In reaching the conclusions set forth above, the Board considered a number
of factors as described in the Proxy Statement/Prospectus. For example, the
Board considered the Company's need for additional capital to continue
implementing its business plans coupled with RGI Holdings' willingness, as part
of the overall transaction, to purchase the Morgens Loan and the SoGen Loan and
to provide the Company with enhanced flexibility by amending certain provisions
contained in the agreements governing these loans. As part of its analysis,
management prepared and the Board reviewed a model projecting the cash flow
which may be generated from continued development and ultimate sale of both the
Company's properties and the RGI Properties or in the case of the RGI
Properties, sale of club memberships and other amenities on a post-
3
<PAGE> 6
merger basis (the "Merger Cash Flow Model"). The Merger Cash Flow Model did not
consider the tax impact on the cash flows since management concluded that the
Company would have sufficient tax planning opportunities coupled with existing
net operating loss carryforwards ("NOL's") to shelter any gain or income that
the Company may realize even though the Merger would limit use of the NOL's.
Management advised the Board that these projections reflected management's good
faith estimate of these potential cash flows.
The Merger Cash Flow Model projects cash flow for the fiscal years ended
December 31, 1996 through December 31, 2003 on a property-by-property basis for
each Banyan property, as well as each of the RGI Properties. For purposes of
this analysis, cash flows projected for receipt beyond 2003 (the "Terminal Cash
Flows") were assumed to be received in 2003 by discounting to present value
(December 31, 2003 for this purpose) these Terminal Cash Flows. Projections for
lot sales at each property were derived from management's estimate of absorption
and pricing based on management's review of what it deemed were market
comparable transactions and its understanding of the market in which each
property is located.
In the Merger Cash Flow Model, which assumes that the SoGen Loan will be
refinanced with new construction financing and that new construction financing
would be obtained for the future development at Wayside and Chapman's Landing,
the Banyan properties were projected to produce total cash flows through
December 31, 2003 of approximately $224 million, a substantial portion
(approximately $184 million) of which is not projected to be received until
after 2003. These property cash flows include amortization of principal and
interest on the construction financing referred to above. The RGI Properties are
projected to produce total cash flows through December 31, 2003 of approximately
$138 million, of which approximately $89 million is projected for receipt in
2002 (approximately $17 million) and 2003 (approximately $72 million). Operating
expenses of approximately $17.6 million for the 1996-2003 time period were
projected based on the Company's historical results and management's best
estimate of the impact that the Merger would have on the Company's operating
expenses. The Merger Cash Flow Model also projects the use of cash to pay a
termination fee to Banyan Management Corp. under the Administrative Services
Agreement ($350,000) and severance obligations to the Company's president,
Leonard G. Levine, ($1.2 million) and repayment of the Morgens Loan by the end
of 1997 (approximately $27.4 million), as well as costs associated with the
Merger ($1.0 million).
The Company did not retain an advisor or other expert to review these
estimates. The cash flows for the RGI Properties estimated by management were
subsequently compared to those contained in the Net Asset Valuation Report
prepared by C&L. In addition, representatives of the Company visited each of the
RGI Properties to satisfy management and the Board of the reasonableness of the
methodologies, assumptions and various other input contained in the Net Asset
Valuation Report. Representatives of the Company also spoke with various
professionals in the healthcare industry to determine the appropriateness of the
assumptions utilized in projecting cash flows from the Oak Harbor property
including a review of all of the contractual arrangements between the Oak Harbor
entity and the various contractors, including the developer of the property, as
well as the lifecare provider. Management also examined other comparable
properties and performed a due diligence analysis on the assumptions utilized in
projecting the cash flows to be derived from club operations both at Oak Harbor
and Grand Harbor and examined all of the significant leases at the Lynnwood
Shopping Center. Further, management reviewed the terms and conditions of a
transaction in January 1996 under which RGI purchased a 45% interest in the
entity which owns the Grand Harbor property. Although RGI had purchased the
interest for cash of approximately $52,000 and a note of approximately $990,000,
management concluded that this transaction was not reflective of the fair market
value of the property because of the circumstances surrounding the sale which
involved a settlement between RGI and its former partner.
In evaluating the potential benefits of the Merger, the Board compared the
projected cash flows from the Merger Cash Flow Model to a similar analysis
prepared by management which projected the cash flows to be received by the
Company if it were to liquidate its existing properties by the end of calendar
year 1997 in their "as is" condition without any further development (the
"Liquidation Model"). In addition, the Board noted the disparity between the
relative contribution of cash flow in the Merger Cash Flow Model between Banyan
and RGI and the allocation of equity between RGI Holdings and the other Banyan
stockholders. The Board concluded, however, that without the Merger and
restructuring of the Morgens Loan and the SoGen Loan, the
4
<PAGE> 7
Company would not be able to realize the cash flow from the further development
of the properties but instead would be forced to sell the properties at
liquidation values in an "as is" condition.
The Liquidation Model projected total cash flows of approximately $25
million to be received during the years 1996-1997 after selling the properties,
paying the expenses to operate the Company (approximately $5.1 million) over the
liquidation period, including the termination fee to Banyan Management Corp.
under the Administrative Services Agreement ($350,000), salary, severance and
incentive obligations to Mr. Levine (approximately $1.1 million) and retiring
the Morgens Loan, the SoGen Loan and other indebtedness totalling approximately
$4 million. The Board noted that the Liquidation Model assumed that a
liquidation could be achieved in an orderly manner which the Board believed was
unlikely in light of the defaults on the Morgens Loan and the SoGen Loan
existing as of early January 1996. In comparing the alternative, management also
discounted the cash flows under both the Merger Cash Flow Model and the
Liquidation Model to present value (January 1, 1996 for this purpose). The cash
flows projected in the Merger Cash Flow Model were discounted at a rate of 12%.
To give effect to the Merger, management assumed that between 130 million and
150 million shares would be issued in the Merger and the Private Placement to
RGI Holdings which, when added to the existing outstanding shares, resulted in
reference ranges of per-share cash flow of $0.90 per share to $0.80 per share
based on the cash flows from the Merger Cash Flow Model. This assumption was
necessary since at the time the analysis was performed the Capital Stock
Valuation Report had not been completed and, therefore, a final number of shares
issuable to RGI Holdings had not been determined. The discount rate selected by
management was based on management's experience with, and knowledge of, the
returns required by investors investing in real estate related securities. The
cash flows projected in the Liquidation Model were also discounted using a rate
equal to 12%. This analysis resulted in reference ranges of cash flow of $0.53
to $0.49 per share.
Stockholders are cautioned that the projections described above in the
Merger Cash Flow Model represent an estimate of cash available for distribution.
There is no assurance that even if the projections are achieved, the Company
will distribute any monies to the stockholders. In addition, certain of the
statements contained herein describing the factors relied upon by management and
the Board in evaluating the Merger, such as the description of the Merger Cash
Flow Model and the Liquidation Model constitute "forward-looking statements"
within the meaning of Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act of 1934, as amended ( the "Exchange Act"). These
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the Company to be materially different from any future results, performance or
achievements expressed or implied by these forward-looking statements. These
statements must be read in conjunction with those factors set forth in the Proxy
Statement/Prospectus under the headings "Risk Factors," "Banyan" and "RGI/US."
The projections contained in the Merger Cash Flow Model and the Liquidation
Model were made by management and are based upon a number of estimates and
assumptions that, while presented with numerical specificity and considered
reasonable by management, are inherently subject to significant business,
economic and competitive uncertainties and contingencies, many of which are
beyond the control of the Company, and upon assumptions with respect to future
business decisions which are subject to change, and there can be no assurance
that the projections that the Board relied upon will be realized. The inclusion
of the projected per-share values herein should not be regarded as a
representation by the Company or any other person (including Josephthal or C&L)
that the projected per-share values will be achieved and stockholders are
cautioned not to place undue reliance on these projected values. Completion of
the Merger is subject to a number of conditions including, but not limited to:
(i) approval by the Stockholders; (ii) receipt by the Board of a confirming
opinion from Josephthal that the consideration to be paid by Banyan pursuant to
the Merger is fair to Banyan and its Stockholders from a financial point of
view; and (iii) receipt by Banyan of a report from C&L which reports a fair
market value of the RGI/US common stock of not less than $45.9 million; provided
that if C&L reports a value for the RGI/US common stock of less than $45.9
million, RGI Holdings may choose to accept fewer shares of Banyan Common Stock
in the Merger. In this case, the Exchange Ratio would be determined by: (i)
adding the sum of the fair market value of the RGI Properties as reported by
Coopers & Lybrand in its report dated the date of the Merger Closing; (ii)
dividing such sum by $0.46875; and (iii) dividing such quotient by 1,000.
5
<PAGE> 8
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
On December 9, 1996 RGI Holdings, Inc. purchased a total of 6,766,600
shares of the Company's common stock (collectively, the "Purchased Shares") in
privately negotiated transactions from a total of six stockholders, including
all of the shares (3,561,900) of the Company's common stock owned by affiliates
of Gabriel (the "Gabriel Shares"). A total of 1,806,200 shares were purchased
for $0.50 per share; 1,398,500 shares were purchased for $0.56 per share. The
Gabriel Shares were purchased for $0.60 per share. Pursuant to the agreements
under which RGI Holdings purchased these shares, the sellers have granted RGI
Holdings irrevocable proxies to vote the Purchased Shares at the Annual Meeting;
provided, however, that 609,500 of these shares were not owned by the sellers at
the Record Date and therefore, the irrevocable proxies as to such shares are not
valid.
In addition, RGI Holdings has agreed to pay all the sellers, except for
affiliates of Gabriel, any difference between the per share price paid by RGI
Holdings and the fair market value of the consideration that such seller would
have received if the Company completes an "acquisition transaction." An
"acquisition transaction" is defined in the various stock purchase agreements to
include the acquisition by a third party of 50% of the outstanding securities of
Banyan or the consummation of a transaction in which Banyan is not the surviving
corporation or its securities are converted into cash or other securities, or
any sale of all or substantially all the assets of Banyan is consummated within
four months. As a result of these purchases, RGI Holdings owns a total of
14,393,266 shares of the Company's common stock or 30.4% of the outstanding
shares. If the Merger is approved, RGI Holdings will own approximately 79% of
the Company's outstanding common stock (including shares owned by RGI, Inc.) and
all other Banyan stockholders will own approximately 21% of Banyan's outstanding
common stock. Hence, RGI Holdings will have significant influence over the
Company's management and operation and may take actions which have a material
adverse effect on the Company's other stockholders.
On December 10, 1996, an action was filed in the Federal District Court for
the Southern District of New York captioned John A. Hinson and John W. Temple v.
RGI Holdings, Inc., RGI/US Holdings, Inc. and Kenneth L. Uptain, Case No. 96
Civ. 9257. The plaintiffs claim, among other things, that the individual
defendants violated Sections 14(d) and 14(e) of the Securities Exchange Act of
1934 and the rules and regulations promulgated thereunder by making an unlawful
tender offer in violation of these sections. The plaintiffs are requesting,
among other things, that the court: (i) require the defendants to comply with
Section 14(d) of the Securities Exchange Act and enjoin the defendants from any
solicitation of, or tender offer for, shares of the Company's stock until the
defendants fully comply with these provisions; (ii) require the defendants to
offer to purchase all of the Company's remaining outstanding shares at the same
price and on the same terms as defendants have offered to certain holders;
and/or (iii) preclude the defendants from changing the vote of those shares
(which allegedly had delivered proxies to vote "no" to the proposed Merger
between RGI/US and the Company) acquired pursuant to the alleged unlawful tender
offer. RGI Holdings, Inc., RGI/US and Mr. Uptain have advised the Company that
they believe that the suit is without merit, and each of the defendants intends
to vigorously contest the allegations. A hearing on this matter has not been
scheduled. The Company is not a party in this litigation.
BANYAN
PROPERTY OPERATIONS -- LAGUNA SECA RANCH
On November 11, 1996, the Company entered into a non-binding letter of
intent with The Golf Group of America, Inc. ("Golf Group") under which the
Company expressed its intent to enter into a definitive contract to sell the
property commonly known as Laguna Seca Ranch for approximately $12.0 million.
The sale is subject to negotiation and execution of a definitive agreement as
well as due diligence by Golf Group and is expected to close on or about January
31, 1997. If a definitive agreement is concluded and the sale is completed, all
of the net proceeds are required to be applied to outstanding interest and
principal on the Morgens Loan. As of December 10, 1996, the remaining principal
balance on the Morgens Loan was $24.3 million. As of September 30, 1996, the
carrying value of the property was $10.0 million. The execution of the
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letter of intent was followed by a decision by a trial court in the Circuit
Court of Cook County on November 12, 1996 which resulted in dissolution of the
partnership which holds title to the property. The general partner of the
partnership, a wholly-owned subsidiary of the Company, is now in the process of
winding up the affairs of the partnership and disposing of the partnership's
assets in accordance with the partnership agreement.
LEGAL PROCEEDINGS
The hearing in the action captioned Hinson and Temple v. Levine, et al.,
filed in the Court of Chancery of the State of Delaware, Case No. 15287 NC,
previously disclosed and scheduled for November 21, 1996, was postponed by
agreement of the parties. No further hearings have been scheduled. On November
13, 1996, an action captioned Goldberg v. Walter E. Auch Sr., et al, C.A. No.
15340 N.C., was filed in The Court of Chancery of the State of Delaware,
alleging the same essential allegations as in the Hinson action. The cases were
subsequently consolidated for all purposes under the caption In re Banyan
Mortgage Investment Fund Shareholders Litigation, Case No. 15287.
7
<PAGE> 10
JOHN A. HINSON
169 Miracle Mile, Suite 200
Coral Gables, Florida 33134
Telephone (305) 444-2300 - Fax (305) 446-3633
Dear Fellow Banyan Stockholders:
I sent you a letter dated December 10, 1996 (the "Letter"). Banyan has told
me it believes several statements in the Letter are wrong. While I disagree, it
may be that the statements could be read to have meaning I did not intend. I
have agreed to modify them as follows.
The underlined last sentence of the fourth paragraph of the Letter should
say that I have been advised by persons I regard to be knowledgeable
professionals that if the Proposed Merger is effected, Banyan will lose a
portion of its considerable tax loss carry-forwards.
Regarding the fourth paragraph, the Company has advised me that it believes
that the $1,200,000 it plans to pay to Leonard Levine in connection with the
Proposed Merger is a "contractual payment" relating to a 1990 agreement rather
than a "Bonus". Moreover, the Company has advised me that neither Kenneth Uptain
nor any other representative of RGI was a member of the Board at the time the
Proposed Merger was approved by the Board.
As to the first sentence of the fifth paragraph of the Letter, the Delaware
Chancery Court has not entered an Order requiring Banyan to mail supplemental
proxy materials. The Company decided to do so subsequent to receiving the Apollo
proposal and plaintiffs brief filed with the Court in support of our preliminary
injunction motion. I believe the Company's decision was motivated, at least in
part, by claims raised in the Delaware lawsuit.
The second sentence of the sixth paragraph of the Letter should have read:
"With only a very limited effort on our part, we caused two potentially more
attractive proposals to surface." The Company has advised me that subsequent to
these proposals no firm offer has been received.
My position regarding the Proposed Merger remains unchanged.
Sincerely,
John A. Hinson
John A. Hinson
December 13, 1996
