AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 29, 1998
REGISTRATION NO. 333-56049
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------
MUNICIPAL MORTGAGE AND EQUITY, L.L.C.
(Exact name of registrant as specified in its charter)
DELAWARE 52-1449733
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
218 NORTH CHARLES STREET, SUITE 500
BALTIMORE, MARYLAND 21201
(410) 962-8044
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
MARK K. JOSEPH
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
MUNICIPAL MORTGAGE AND EQUITY, L.L.C.
218 NORTH CHARLES STREET, SUITE 500
BALTIMORE, MARYLAND 21201
(410) 962-8044
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
COPY TO:
ROBERT E. KING, JR., ESQ.
ROGERS & WELLS LLP
200 PARK AVENUE
NEW YORK, NEW YORK 10166
----------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after this Registration Statement becomes effective as determined by
market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. <square>
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. <checked-box>
If this Form is filed to register additional securities for an offering
pursuant to rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. <square>
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. <square>
If delivery of the prospectus is to be expected to be made pursuant to rule
434, please check the following box. <square>
----------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
PURSUANT TO RULE 429 UNDER THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT CONTAINS A COMBINED PROSPECTUS THAT ALSO RELATES TO $188,125,000 OF
COMMON SHARES REGISTERED ON FORM S-3, FILE NO. 333-20945, WHICH WAS DECLARED
EFFECTIVE ON JUNE 2, 1997 (THE "PREVIOUSLY REGISTERED EQUITY SECURITIES"),
WHICH HAVE NOT BEEN OFFERED OR SOLD AS OF THE DATE OF THE FILING OF THIS
REGISTRATION STATEMENT. THIS REGISTRATION STATEMENT CONSTITUTES POST-EFFECTIVE
AMENDMENT NO. 2 TO REGISTRATION STATEMENT FILE NO. 333-20945, PURSUANT TO WHICH
THE TOTAL AMOUNT OF UNSOLD PREVIOUSLY REGISTERED EQUITY SECURITIES, REGISTERED
ON REGISTRATION STATEMENT FILE NO. 333-20945 MAY BE OFFERED AND SOLD BY THE
COMPANY.
===============================================================================
<PAGE>
SUBJECT TO COMPLETION, DATED JUNE 29, 1998
PROSPECTUS
- ----------
$349,304,375
------------
MUNICIPAL MORTGAGE AND EQUITY, L.L.C.
Common Shares, Preferred Shares and Warrants
-----------
Municipal Mortgage and Equity, L.L.C. (the "Company") may from time to
time offer, together or separately, in one or more series: (i) growth shares of
limited liability company interest ("Common Shares"); (ii) preferred shares of
limited liability company interest ("Preferred Shares"); and (iii) warrants or
other rights to purchase Common Shares, Preferred Shares, or any combination
thereof, as may be designated by the Company at the time of the offering
("Warrants"), with an aggregate public offering price of up to $349,304,375, in
amounts, at prices and on terms to be determined at the time of offering. The
Common Shares, Preferred Shares and Warrants (collectively, the "Securities")
may be offered, separately or together, in separate series and in amounts, at
prices and on terms to be set forth in one or more supplements to this
Prospectus (each a "Prospectus Supplement").
The specific terms of the Securities in respect of which this Prospectus
is being delivered will be set forth in the applicable Prospectus Supplement
and will include, where applicable, in the case of Common Shares, the number of
shares and the terms of the offering and sale; (ii) in the case of Preferred
Shares, the number of shares, the specific title, the aggregate amount, any
distribution (including the method of calculating payment of distributions),
seniority, liquidation, redemption, voting and other rights, any terms for any
conversion or exchange into other Securities, the initial public offering price
and any other terms; and (iii) in the case of Warrants, the designation and
number, the exercise price and any other terms in connection with the offering,
sale and exercise of the Warrants. The Common Shares are listed on the New
York Stock Exchange, Inc. ("NYSE") under the symbol "MMA."
The applicable Prospectus Supplement will also contain information, where
applicable, about certain United States federal income tax considerations
relating to, and any listing on a national securities exchange of, the
Securities covered by such Prospectus Supplement, not contained in this
Prospectus.
The Securities may be offered directly to one or more purchasers, through
agents designated from time to time by the Company or to or through
underwriters or dealers. If any agents or underwriters are involved in the
sale of any of the Securities, their names, and any applicable purchase price,
fee, commission or discount arrangement between or among them, will be set
forth, or will be calculable from the information set forth, in an accompanying
Prospectus Supplement. The net proceeds to the Company from such sale will
also be set forth in an accompanying Prospectus Supplement. No Securities may
be sold by the Company without delivery of a Prospectus Supplement describing
the method and terms of the offering of such series of Securities. See "Plan
of Distribution."
SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR A DISCUSSION OF CERTAIN
FACTORS RELEVANT TO AN INVESTMENT IN THE SECURITIES.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------
The date of this Prospectus is , 1998.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement (of which this Prospectus is a part) on
Form S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the Securities in respect of which this Prospectus is
being delivered. This Prospectus does not contain all the information set
forth in the Registration Statement, certain portions of which have been
omitted as permitted by the rules and regulations of the Commission, and in the
exhibits thereto. Statements contained in this Prospectus as to the content of
any contract or other document are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference and the exhibits and schedules
thereto. For further information regarding the Company and the Securities,
reference is hereby made to the Registration Statement and such exhibits and
schedules, which may be examined without charge at, or copies obtained upon
payment of prescribed fees from, the Commission and its regional offices listed
below.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Commission. The Registration Statement, as well as such reports, proxy
statements and other information filed with the Commission, can be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's Regional Offices at Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661, and Seven World Trade Center, 13th Floor,
New York, New York 10048. Copies of such material also can be obtained from
the Public Reference Section of the Commission, Washington, D.C. 20549 at
prescribed rates. The Company files its reports, proxy statements and other
information with the Commission electronically. The Commission maintains a Web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission
at http://www.sec.gov. The Common Shares are listed on the NYSE, and reports,
proxy statements and other information concerning the Company can be inspected
and copied at the offices of the New York Stock Exchange at 20 Broad Street,
New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by the Company under the Exchange
Act with the Commission and are incorporated by reference in this Prospectus:
1. The Company's Annual Report on Form 10-K for the year ended
December 31, 1997, as amended by the Company's Form 10-K/A filed on
May 29, 1998.
2. The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998, as amended by the Company's Form 10-Q/A filed on
May 29, 1998.
3. The Company's Current Report on Form 8-K filed January 23, 1998.
4. The Company's Current Report on Form 8-K filed January 29, 1998.
5. The Company's Prospectus/Consent Solicitation Statement included in
its Registration Statement on Form S-4 (File No. 33-99088), as
declared effective by the Commission on May 29, 1996, as it relates
to the description of the Company's Common Shares contained under
the caption "Description of Shares" and incorporated by reference
into Item 1 of Form 8-A filed with the Commission on July 25, 1996,
pursuant to 12(b) of the Exchange Act, including all amendments and
reports updating such description.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of filing hereof and prior to the
date on which the Company ceases offering and selling Securities pursuant to
2
<PAGE>
this Prospectus shall be deemed to be incorporated by reference in this
Prospectus and to be a part hereof from the dates of filing of such documents.
Any statement contained in a document incorporated or deemed to be incorporated
by reference herein shall be deemed modified or superseded for the purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document that also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Company will furnish without charge to each person, including any
beneficial owner, to whom this Prospectus and the accompanying Prospectus
Supplement are delivered, upon the written or oral request of such person, a
copy of any or all of the documents incorporated by reference herein by
reference, other than exhibits to such documents unless such exhibits are
specifically incorporated by reference into the Registration Statement to which
this Prospectus relates or into such other documents. Requests for documents
should be directed to Municipal Mortgage and Equity, L.L.C., 218 North Charles
Street, Suite 500, Baltimore, Maryland 21201, Attention: Derek Cole, (410)
962-8044.
THE COMPANY
The Company is a self-advised and self-managed Delaware limited liability
company which, together with its predecessor, has since 1986 been in the
business of originating, investing in and servicing tax-exempt instruments
backed by multifamily housing developments. The Company's investments
principally represent interests in mortgage bonds which have been issued by
state and local governments or their agencies or authorities to finance
multifamily housing developments and other bond related investments (the
"Mortgage Bonds"). The Company owns a portfolio of investments (the
"Investments") secured directly or indirectly by properties (the "Properties")
located in a variety of states. Certain of the Investments are participating
Mortgage Bonds where the amount of the interest payments made to the Company is
based, in part, on property performance, providing the Company the opportunity
to realize greater returns if and to the extent property performance improves.
As a limited liability company, the Company combines the limited
liability, governance and management characteristics of a corporation with
outside directors together with the pass-through income features of a
partnership. As a result, the tax-exempt income derived from the investments
may be passed through to shareholders. Approximately 85% of the Company's
interest income in 1997 was tax-exempt.
The principal executive offices of the Company are located at 218 North
Charles Street, Suite 500, Baltimore, Maryland 21201, and its telephone number
at that location is (410) 962-8044.
RISK FACTORS
RISKS OF INVESTING IN MORTGAGE BONDS SECURED BY MULTIFAMILY APARTMENT
PROPERTIES
One of the major risks of investing in Mortgage Bonds secured by
multifamily residential properties is the possibility that the property
securing a Mortgage Bond (a "Mortgaged Property") will not generate income
sufficient to meet its operating expenses, including debt service on the
related Mortgage Bonds, or that the net proceeds of a sale of such Mortgaged
Property will not be sufficient to repay the related Mortgage Bonds. In that
event, delays in payments on the Mortgage Bonds and/or losses of principal on
the Mortgage Bonds may occur. The factors affecting the operations of each
Mortgaged Property and its potential for appreciation in value include general
and local economic or market conditions, changes in neighborhood
characteristics, changes in real estate taxes, insurance premiums, cost of
utilities, changes in the amount of operating, administrative and maintenance
costs relating to the Mortgaged Property, rental values, rent strikes,
collection difficulties, governmental rules and fiscal policies, vandalism,
uninsured losses and competition from existing and future housing complexes in
the vicinity of the Mortgaged Properties. A significant portion of the
Mortgaged Properties have failed in the past to meet required debt service
under the Mortgage Bonds, and a number of the Mortgage Bonds have been refunded
on terms which defer, and in certain circumstances reduce, the amounts payable
3
<PAGE>
thereunder. There can be no assurance that such defaults and refundings will
not occur in the future.
INVESTMENTS IN JUNIOR MORTGAGES
When the Company invests in mortgages (or related bonds) which are junior
to senior mortgages on a particular property, the Company is subject to the
risks of such investment, which include the risks that borrowers may not be
able to make debt service payments on both the senior and the junior mortgages,
that the value of the mortgaged property may be less than the amounts owed
under both mortgages and that debt service collected on the junior mortgages
may be lower than the Company's cost of funds. If any of the above occurred,
the Company's ability to make expected distributions to the Company's
shareholders could be adversely affected.
The Company's business may be adversely affected by periods of economic
slowdown or recession which may be accompanied by declining property values or
performance, particularly declines in the value or performance of multifamily
properties. Any material decline in property values increases the loan-to-
value ratios of Mortgage Bonds previously issued, thereby weakening collateral
coverage and increasing the possibility of a loss in the event of default.
With respect to a significant portion of the Investments, a decline in
performance of the related underlying multifamily properties will directly
affect the Company's interest income. Significant declines in the late 1980s
and early 1990s in the value of the underlying Properties and in cash flow on
the Properties led to defaults on most of the bonds held by the Company's
predecessor and to restructuring, refinancing or extension of many of such
investments. There can be no assurance that similar problems may not occur in
the future. See "-Risks of Investing in Mortgage Bonds Secured by Multifamily
Apartment Properties."
Each Mortgage Bond owned by the Company is secured by an assignment to
the Company of the related mortgage loan, which in turn is secured by a
mortgage on the underlying property and assignment of rents. Although such
Mortgage Bonds are issued by state or local governments or their agencies or
authorities, the Mortgage Bonds are not general obligations of any state or
local government, no government is liable under the Mortgage Bonds, nor is the
taxing power of any government pledged to the payment of principal or interest
under the Mortgage Bonds. In addition, the underlying mortgage loans are
nonrecourse, which means that the owners of the underlying Properties, which
are also the borrowers under the mortgage loans, are not liable for the payment
of principal and interest under the loans except to the extent of cash flow
from, and value of, the Properties. Accordingly, the sole source of funds for
payment of principal and interest under the Mortgage Bonds is the revenue
derived from operation of the Properties and amounts derived from the sale,
refinancing or other disposition of such Properties.
RISKS OF SECURITIZATIONS
The Company seeks to enhance its overall return on its Investments and to
purchase additional investments through the securitization of part of its
portfolio of Mortgage Bonds. In a typical securitization,
Mortgage Bonds are sold and deposited into a trust. Short term floating rate
interests in the trust, which have first priority on the cash flow from the
Mortgage Bonds, are sold to third party investors and these interests are paid
before the Company's residual interest described herein. The Company retains
the residual cash flow from the trust and receives the proceeds from the sale
of the floating rate interests less certain transaction costs. The Company
will recognize taxable capital gains (or losses) upon the deposit of Mortgage
Bonds in a trust. In the event the trust cannot meet its obligations, all or a
portion of the deposited Mortgage Bonds may be distributed to the floating rate
interest holders or sold to satisfy such obligations. Therefore, cash flow
from these Mortgage Bonds may not be available to pay any amounts on the
residual interest held by the Company and in the event of the liquidation of
the Mortgage Bonds, no payment will be made to the Company except to the extent
that the market value of the Mortgage Bonds exceeds the amounts due on the
other obligations of the trust. Additional Mortgage
Bonds may be pledged to secure repayment of the floating rate certificates.
Upon any default in repayment of such certificates, the pledged Mortgage Bonds
may be subject to foreclosure and sale and the Company may lose the cash flow
therefrom, and/or its ownership interest therein. The Company may have a
limited ability to remedy defaults inside the trust and prevent the loss of its
investment in the residual interest. As a result of these securitizations, the
Company generally owns higher yielding but riskier portions of bond related
investments such as Residual Interest Tax Exempt Securities receipts
4
<PAGE>
("RITES<reg-trade-mark>"). Furthermore, the RITES<reg-trade-mark> may be
subject to call in certain circumstances which are beyond the control of the
Company. Where the Mortgage Bonds bear fixed rates of interest, securitization
may also create interest rate risks, as described below. See "-Interest Rate
Risks; Hedging Risks" below.
The Company relies, in part, on securitizations to fund acquisitions of
its investments. Accordingly, the ability of the Company to achieve its
investment objectives depends on its ability to successfully securitize its
Mortgage Bonds and manage its interest rate exposure. Certain of the Company's
Mortgage Bonds may have credit or other characteristics which make them
unsuitable for securitization at this time. Any failure to consummate
securitization and interest rate swap transactions could reduce the Company's
net interest income and have a material adverse effect on the Company's
operations.
INTEREST RATE RISKS; HEDGING RISKS
An increase in market interest rates may lead prospective purchasers of
the Company's existing assets or holders of the Company's debt or equity
securities to demand a higher annual yield than they would have otherwise and
could increase the cost to the Company of borrowing funds for investment in
additional assets, any of which could adversely affect the amount of funds
available for distribution to the holders of Securities. Any increase in
market interest rates also may reduce the market value of the Company's assets
and the market value of the Securities.
The results of the Company's operations depend on, among other things,
the level of net interest income derived from the difference between the return
on the securitized Mortgage Bonds and the short term floating rate payments
owed to the floating rate certificate holders. While the interest rate on the
securitized Mortgage Bonds is fixed, the third party holders of the floating
rate certificates in the securitization are paid interest at a floating rate
that is reset periodically. The Company, as holder of the residual trust
interest, receives the balance of interest on the Mortgage Bonds not used to
pay the third party trust certificates. Rising short term interest rates would
therefore reduce the net interest income available to the Company, and possibly
result in a loss.
To reduce the Company's exposure to rising interest rates, the Company
enters into interest rate swaps, which are contracts exchanging an obligation
to pay a floating rate approximating the rate on the floating rate trust
certificates for an obligation to pay a fixed rate. Net swap payments received
by the Company, if any, will be taxable income, even though the investment
being hedged pays tax-exempt interest. The interest rate swaps are for limited
time periods which generally match the anticipated prepayment date of the
underlying Mortgage Bond. However, there is no certainty that prepayment will
occur at the end of the swap period, and the swap period is typically shorter
than the term of the underlying bond. There can be no assurance that the
Company will be able to acquire interest rate swaps at favorable prices, or at
all, when the existing arrangements expire, in which case the Company would be
fully exposed to the interest rate risks described above.
To the extent, that from time to time, the Company repurchases the short
term floating rate interests in connection with a securitization transaction,
the Company may elect to keep in place any related swap to the extent that such
swap is expected to be used in the future as a hedge with respect to another
transaction. To the extent that a swap is not terminated at such time as the
Company repurchases short term floating rate interests, the Company may be
exposed to interest rate risks under such swap, particularly in a declining
interest rate environment.
Developing an effective interest rate risk management strategy is complex
and no management strategy can completely insulate the Company from all
potential risks associated with interest rate changes. In addition, hedging
involves transaction costs. In the event the Company hedges against interest
rate risks, the Company may substantially reduce its net income or adversely
affect its financial condition. Furthermore, there can be no assurance that
the Company's interest rate hedging activities will be effective.
In the event that the Company purchases interest rate swaps or other
instruments, the Company must rely for payment under these agreements on the
creditworthiness of the counterparties which to date has been Merrill Lynch
Capital Services, Inc. ("MLCS"). In addition, certain of the owners of the
Properties have entered into interest rate swaps with Credit Suisse Financial
Products under which the Property owner pays the counterparty a variable rate
up to the cap in exchange for the counterparty's obligation to pay a fixed rate.
To the extent that short term interest rates increase, the cash flow on such
Property which may be distributed to the holder of the participating Mortgage
Bond may decrease. There can be no assurance any third party
will honor its payment obligations under the agreements. If the provider of
such swap or other instrument becomes financially unsound or insolvent, the
Company may be forced to unwind such swap or other instrument with such
provider and may take a loss thereon. Further, the Company could suffer the
adverse consequences against which the hedging transaction was intended to
protect. No assurance can be given that the Company can avoid risks of third
party insolvency.
5
<PAGE>
The Company may also engage in limited amounts of buying and selling of
other mortgage hedging securities or other hedging products, including, but not
limited to, buying and selling financial futures contracts and options on
financial futures contracts and trading forward contracts in order to hedge
commitments. These types of hedging devices and mortgage instruments are
complex and can produce volatile results. Accordingly, there can be no
assurance that the Company's hedging strategy will have the desired beneficial
impact on the Company's cash flow and on the resulting distribution yield of
the Securities.
CONFLICTS OF INTEREST
Affiliates of certain directors and officers of the Company are
responsible for a full range of property management functions for certain
Mortgaged Properties for which they receive property management fees pursuant
to management contracts. The Company's management believes that these
contracts provide for fees which are at or below market rates for property
management fees. These management contracts will continue to be renewed only
if (i) such affiliates are providing such property management services at a
price competitive with the prices which would be charged for such goods and
services by independent parties for comparable goods and services in the same
geographic location, and (ii) in the case of any management contract with any
affiliate of any member of the Company's Board of Directors, such management
contract is approved by the independent directors of the Company. Nonetheless,
conflicts may exist in determining whether to renew or terminate these
management contracts, and in setting the fees payable under such contracts,
since any change in such fees could affect the amounts payable under the
related Mortgage Bonds.
Certain entities which control certain Mortgaged Properties are
controlled by Mark K. Joseph, the Chairman of the Board and Chief Executive
Officer of the Company. As a result, such entities could have interests which
do not fully coincide with, or even are adverse to, the interests of the
Company. Such entities could choose to act in accordance with their own
interests, which could adversely affect the Company. Among the actions such
entities could desire to take might be selling a Mortgaged Property, and
thereby causing a redemption event, at a time and under circumstances which
would not be advantageous to the Company.
Management and certain affiliates own Term Common Shares, which
participate in the cash flow of the Company. The Term Common Shares, which
will be redeemed when the preferred equity of the Company issued in 1996 is
fully redeemed, are expected to have little or no residual value, but while
outstanding receive an aggregate of 2% of the net cash flow of the Company.
While these shares remain outstanding, the holders may have conflicts of
interest in determining whether redemption of the preferred equity issued in
1996 and Term Common Shares is in the best interest of the Company, in
particular due to the limited residual value of the Term Common Shares.
Holders of Term Common Shares also receive a greater return as cash flow
increases in total, regardless of whether per share cash flow increases or
there is a distribution to shareholders. See "Description of Preferred
Shares."
DEPENDENCE ON KEY EMPLOYEES
The Company is wholly dependent for the selection, structuring and
monitoring of its Mortgage Bonds and other Investments on the diligence and
skill of its executive officers, many of whom would be difficult to replace.
REGISTRATION UNDER THE INVESTMENT COMPANY ACT
The Company at all times intends to conduct its business so as not to
become regulated as an investment company under the Investment Company Act of
1940, as amended (the "Investment Company Act"). The Investment Company Act
exempts entities that are "primarily engaged in the business of purchasing or
otherwise acquiring mortgages and other liens on and interests in real estate"
("Qualifying Interests"). Under current interpretation of the staff of the
Securities and Exchange Commission, in order to qualify for this exemption, the
Company must maintain at least 55% of its assets directly in Qualifying
Interests and the balance in real estate-type interests. For example, unless
certain mortgage securities represent all of the certificates issued with
respect to an underlying pool of mortgages, such mortgage securities may be
treated as securities separate from the underlying mortgage loans and, thus,
may not be considered Qualifying Interests for purposes of the 55% requirement.
Similar interpretations mandate that the Company own "whole" bonds in order for
6
<PAGE>
its Mortgage Bonds to be Qualifying Interests. Based on advice of counsel, the
Company believes it meets the 55% test. However, the Company's
RITES<reg-trade-mark> interests and certain of its Mortgage Bonds are not
Qualifying Interests. The requirement that the Company maintain 55% of its
assets in Qualifying Interests may inhibit the Company's ability to acquire
certain kinds of assets or to securitize additional interests in the future.
If the Company fails to qualify for exemption from registration as an
investment company, its ability to maintain its financing strategies would be
substantially reduced, and it would be unable to conduct its business as
described herein. Such a failure to qualify could have a material adverse
effect on the Company.
LIMITED OPERATING HISTORY DOES NOT PREDICT FUTURE PERFORMANCE
The Company embarked on its acquisition growth strategy in 1996 and,
accordingly, has not yet developed an extensive financial history or
experienced a wide variety of interest rate fluctuations or market conditions.
Consequently, the Company's financial results to date may not be indicative of
future results. Furthermore, there can be no assurance that the Company will
receive returns on its investments sufficient to compensate for interest rate
and credit risks inherent in the Company's investment strategy.
FAILURE TO MANAGE EXPANSION MAY ADVERSELY AFFECT RESULTS OF OPERATIONS
The Company's expansion as a result of its investment of the net proceeds
of an offering may cause a significant strain on the Company's financial,
management and other resources. To manage the Company's growth effectively,
the Company must continue to improve and expand its existing resources and
management information systems. If the Company is unable to manage growth
effectively, the Company's financial conditions and results of operations may
be adversely affected.
INVESTMENTS IN MORTGAGE BONDS AND RITES<reg-trade-mark> MAY BE ILLIQUID
The Company's Investments lack a regular trading market and may be
illiquid. In addition, during turbulent market conditions, the liquidity of all
of the Company's Investments may be adversely impacted. There is no limit to
the percentage of the Company's assets that may be invested in illiquid
Mortgage Bonds and RITES<reg-trade-mark>. In the event the Company required
additional cash, the Company may be required to liquidate its Investments on
unfavorable terms which could substantially reduce the value of the Securities.
ENVIRONMENTAL MATTERS
Under various federal, state and local laws, ordinances and regulations,
an owner or operator of real estate is liable for the costs of removal or
remediation of certain hazardous or toxic substances released on, above, under
or in such property. Such laws often impose such liability without regard to
whether the owner knew of, or was responsible for, the presence of such
hazardous or toxic substances. The costs of such removal or remediation could
be substantial and could negatively impact the availability of property cash
flow for payments on the Investments. Phase I environmental site assessments
(which involve inspection without soil sampling or groundwater analysis) have
been conducted by independent environmental consultants ("Phase I Assessments")
with respect to most, but not all, of the Properties. The assessments that
have been completed have not revealed any environmental conditions as of the
time such studies were completed which the Company believes would have a
material adverse effect on its business, assets or results of operations. No
assurance can be given that these Phase I Assessments or the Company's
inspections have revealed all environmental liabilities and problems relating
to the Properties or that nothing has occurred since the completion of such
Phase I Assessments. Management is not aware of any material
environmental problems with respect to the Properties. No assurance can be
given that the Properties on which no environmental assessment was conducted do
not contain regulated toxic or hazardous substances.
7
<PAGE>
BOARD OF DIRECTORS' ABILITY UNILATERALLY TO EFFECT CHANGES IN
INVESTMENT, FINANCING AND CERTAIN OTHER POLICIES
The major policies of the Company, including its policies with respect to
acquisitions, financing, growth, debt, capitalization and distributions, will
be determined by the Company's Board of Directors. Although the Board of
Directors of the Company has no present intention to change the Company's
business plan, the Board of Directors may amend or revise these and certain
other policies from time to time without a vote of the Company's shareholders.
Accordingly, the Company's shareholders will have no control over changes in
the policies of the Company (except for certain policies directly affecting
holders of the Company's preferred shares), and changes in the Company's
policies may not fully serve the interests of all of the Company's
shareholders.
PROVISIONS THAT MAY DISCOURAGE CHANGES OF CONTROL
The Company's organizational documents contain provisions that may be
deemed to have an anti-takeover effect, including the staggered terms of the
Company's directors, business combination and fair price provisions and control
share acquisition provisions. The Company has adopted a shareholder rights
plan. Further, the employment agreements of certain of the officers provide
them with substantial payments should their employment terminate as a result of
a change of control. These provisions are intended to enhance the likelihood
of continuity and stability in the composition of the Company's Board of
Directors and management and in the policies formulated by the Board of
Directors and to discourage an unsolicited takeover of the Company if the Board
of Directors determines that such takeover is not in the best interests of the
persons to which the Board of Directors feels it owes a fiduciary duty,
including the Company's shareholders. These provisions may, however, have the
effect of delaying, deferring or preventing a takeover attempt that a
shareholder might consider to be in the shareholder's best interest, including
offers that might result in a premium over market price for the Common Shares.
These provisions may reduce interest in the Company as a potential acquisition
target or reduce the likelihood of a change in the management or voting control
of the Company without the consent of the then incumbent Board of Directors.
In addition, in the event that certain business combination or share
acquisition transactions occur, and the Company's special shareholder does not
approve of such transaction, such special shareholder has the right to withdraw
as a shareholder of the Company; and in the event of such withdrawal, (i) the
Company would be obligated to pay the withdrawing special shareholder
$1,000,000, and (ii) a new special shareholder might have to be found in order
to ensure that the Company is not deemed to be taxable as a corporation, any of
which may have an adverse effect on the Company or the Common Shares.
ISSUANCE OF ADDITIONAL SECURITIES
The Company may issue additional securities, including additional
preferred interests in the Company, in the public or private market to obtain
funds for the acquisition of additional assets or may exchange such securities
for additional assets. The ability of the Company to sell or exchange such
securities will depend on conditions then prevailing in the relevant capital
markets and the Company's results of operations, financial condition and
business prospects. The issuance of such additional securities will not be
subject to the approval of the holders of Securities, could affect the timing
and amount of distributions to the holders of Securities, and may affect the
trading price of the Securities. The holders of Securities will not have any
preemptive rights in connection with the issuance of any additional securities
of the Company.
FORWARD-LOOKING STATEMENTS
This Prospectus, the accompanying Prospectus Supplement and the other
reports incorporated by reference contain certain forward-looking statements
within the meaning of Section 27A of the Securities Act and Section 21E of the
Exchange Act. Such 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 results or plans
expressed or implied by such forward-looking statements. Such factors include,
among other things, adverse changes in the real estate markets, risk of default
under the Mortgage Bonds, financial condition and bankruptcy of tenants,
interest rate fluctuations, tax treatment of the Company and its Investments,
environmental/safety requirements, adequacy of insurance coverage, and general
and local economic and business conditions. Although the Company believes that
8
<PAGE>
the assumptions underlying the forward-looking statements are reasonable, any
of the assumptions could be inaccurate and, therefore, there can be no
assurance that the forward-looking statements included or incorporated by
reference in this Prospectus or the accompanying Prospectus Supplement will
prove to be accurate. In light of the significant uncertainties inherent in
the forward-looking statements, the inclusion of such information, including
the information presented herein and under "The Company," should not be
regarded as a representation by the Company or any other person that the
objectives and plans of the Company will be achieved.
RATIOS OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED DIVIDENDS
The following are ratios of consolidated earnings to combined fixed
charges and preferred dividends for the Company for each of the years ended
December 31, 1997, 1996, 1995, 1994 and 1993 and for the three months ended
March 31, 1998 and 1997.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
FISCAL YEAR ENDED DECEMBER 31, MARCH 31,
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993 1998 1997
------ ------ ------ ------ ------ ------ ------
RATIO: 8.9 10.7 507.7 592.1 323.8 9.4 7.6
</TABLE>
For purposes of computing this ratio, earnings represent earnings from
continuing operations. Combined fixed charges include management's estimate of
the interest portion of operating lease rentals based on one third of such
rentals. For the periods in which Preferred Shares were outstanding, preferred
dividend requirements represent the share of net income that is allocable to
Preferred Shares, Preferred CD Shares and Term Growth Shares.
USE OF PROCEEDS
Unless otherwise described in the applicable Prospectus Supplement, the
Company intends to use the net cash proceeds from the sale of Securities in
respect of which this Prospectus is being delivered for general corporate
purposes, including new investments and working capital. Pending such uses,
the Company may invest such net proceeds in short term liquid investments. Any
specific allocation of the net proceeds of an offering of Securities to a
specific purpose will be determined at the time of such offering and will be
described in the related Prospectus Supplement.
DESCRIPTION OF COMMON SHARES
The following brief description of the Common Shares does not purport to
be complete and is subject in all respects to applicable Delaware law and to
the provisions of the Company's Amended and Restated Certificate of Formation
and Operating Agreement (the "Operating Agreement") and By-laws, copies of
which are exhibits to the Registration Statement of which this Prospectus is a
part.
GENERAL
The Operating Agreement does not limit the number of Common Shares which
the Company's Board of Directors may cause the Company to issue. The Company
had 14,359,407 Common Shares outstanding at March 31, 1998. The Company will
pay distributions to holders of the Common Shares on a PRO RATA basis when
declared by its Board of Directors out of funds legally available therefor.
Distributions to the holders of Common Shares are subject to preferences on
distributions on the Company's then Outstanding Preferred Shares (as defined
below), and any other preferred securities which may be issued by the Company
in the future.
Holders of Common Shares have no preemptive, conversion, sinking fund or
cumulative voting rights. The shares of Common Shares are not redeemable,
except pursuant to certain anti-takeover provisions adopted by the Company.
9
<PAGE>
The Operating Agreement and By-laws of the Company set forth the
relationship of the shareholders to the Company and to one another and the
manner in which the Company will conduct its operations, much like the articles
and bylaws of a Delaware corporation or the partnership agreement of a Delaware
general or limited partnership. While, as a limited liability company, the
Company is not subject to the Delaware General Corporation Law (the "DGCL"),
the Delaware Limited Liability Company Act permits a limited liability company
agreement to provide, and the Operating Agreement and By-laws of the Company do
provide, that the management of a limited liability company shall be conducted
by a board of directors and officers designated by such board and that the
holders of shares in such limited liability company (as is the case with the
holders of the Common Shares) be afforded substantially all of the rights that
are afforded holders of the common shares issued by a corporation organized
under the DGCL. In all material respects, the fiduciary duties of the
directors and officers of the Company and any duties of shareholders of the
Company and their affiliates are the same as those applicable under the DGCL.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Shares is Registrar and
Transfer Company, 10 Commerce Drive, Cranford, New Jersey 07016, telephone
number (908) 272-8511.
DESCRIPTION OF PREFERRED SHARES
Under the Company's Operating Agreement, the Company's Board of Directors
(without any further vote or action by the Company's shareholders) is
authorized to provide for the issuance, in one or more series, of an unlimited
amount of Preferred Shares. The Board of Directors is authorized to fix the
number of shares, the relative powers, preferences and rights, and the
qualifications, limitations or restrictions applicable to each series thereof
by resolution authorizing the issuance of such series.
OUTSTANDING PREFERRED SHARES
In connection with the merger of its predecessor with the Company in
1996, the Company issued the original preferred shares (the "Original Preferred
Shares") and Preferred CD Shares (collectively, the "Outstanding Preferred
Shares"). The Company is required to distribute to the holders of the
Outstanding Preferred Shares cash flow attributable to such shares (defined in
the Operating Agreement to be the cash flow derived from a specific pool of 22
Mortgage Bonds (the "Original Bonds")). In addition, the Company is required
to distribute 2% of the Company's net cash flow to the holders of the 2000
shares of Term Common Shares.
As of March 31, 1998, there were 22,940 Original Preferred Shares and
11,860 Preferred CD Shares outstanding. The Company does not intend to issue
any shares of the series of Outstanding Preferred Shares. The terms of the
Outstanding Preferred Shares require that no other Preferred Shares be senior
in rank or priority of payment to the Outstanding Preferred Shares with respect
to the cash flow from the Original Bonds.
The description below sets forth certain general terms and provisions of
the Company's Preferred Shares to which a Prospectus Supplement may relate. The
specific terms of any series of Preferred Shares in respect of which this
Prospectus is being delivered (the "Offered Preferred Shares") will be
described in the Prospectus Supplement relating to such Offered Preferred
Shares. The following summary of certain provisions governing the Company's
preferred shares does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, the Operating Agreement and the
resolutions of the Board of Directors relating to each particular series of
Offered Preferred Shares in connection with such Offered Preferred Shares.
If so indicated in the applicable Prospectus Supplement, the terms of any
series of Offered Preferred Shares may differ from the terms set forth below,
except those terms required by the Operating Agreement.
10
<PAGE>
GENERAL
The Offered Preferred Shares, when issued in accordance with the terms of
the Operating Agreement and of the applicable resolutions of the Board of
Directors and as described in the applicable Prospectus Supplement, will be
fully paid and non-assessable.
To the extent not fixed in the Operating Agreement, the relative rights,
preferences, powers, qualifications, limitations or restrictions of the Offered
Preferred Shares of any series will be fixed pursuant to resolutions of the
Board of Directors relating to such series. The Prospectus Supplement relating
to the Offered Preferred Shares of each such series shall specify the terms
thereof, including:
(1) The class, series title or designation and stated value (if
any) for such Offered Preferred Shares;
(2) The maximum number of shares of Offered Preferred Shares in
such series, the liquidation preference per share and the offering price
per share for such Offered Preferred Shares;
(3) The distribution preferences and the distribution rate(s),
period(s) and/or payment date(s) or method(s) of calculation thereof
applicable to such Offered Preferred Shares;
(4) The date from which distributions on such Offered Preferred
Shares will accumulate, if applicable, and whether distributions will be
cumulative;
(5) The provisions for a retirement or sinking fund, if any, with
respect to such Offered Preferred Shares;
(6) The provisions for redemption, if applicable, of such Offered
Preferred Shares;
(7) The voting rights, if any, of shares of such Offered
Preferred Shares;
(8) Any listing of such Offered Preferred Shares for trading on
any securities exchange or any authorization of such Offered Preferred
Shares for quotation in an interdealer quotation system of a registered
national securities association;
(9) The terms and conditions, if applicable, upon which such
Offered Preferred Shares will be convertible into, or exchangeable for,
any other equity securities of the Company, including the title of any
such securities and the conversion or exchange price therefor;
(10) A discussion of federal income tax considerations applicable
to such Offered Preferred Shares; and
(11) Any other specific terms, preferences, rights, limitations or
restrictions of such Offered Preferred Shares.
Subject to the terms of the Operating Agreement and to any limitations
contained in the resolutions of the Board of Directors pertaining to any series
of Outstanding Preferred Shares, the Company may issue additional series of
Preferred Shares at any time or from time to time, with such powers,
preferences and relative, participating, optional or other special rights and
qualifications, limitations or restrictions thereof, as the Board of Directors
shall determine, all without further action of the shareholders, including the
holders of any series of Outstanding Preferred Shares of the Company.
11
<PAGE>
DISTRIBUTIONS
Holders of any series of Offered Preferred Shares will be entitled to
receive cash distributions when, as and if declared by the Board of Directors
of the Company out of funds of the Company legally available therefor, at such
rate and on such dates as will be set forth in the applicable Prospectus
Supplement. Each distribution will be payable to holders of record as they
appear on the share ledger of the Company on the record date fixed by the Board
of Directors. Distributions, if cumulative, will be cumulative from and after
the date set forth in the applicable Prospectus Supplement.
LIQUIDATION RIGHTS
The Company's Operating Agreement provides that, in the event of a
liquidation or dissolution of the Company, or a winding up of its affairs,
whether voluntary or involuntary, or in the event of a merger or consolidation
of the Company, no distributions will be made to holders of any class of the
Company's capital shares until after payment or provision for payment of the
debts or liabilities of the Company. The holders of the Outstanding Preferred
Shares have priority on the proceeds derived from the liquidation of the
Original Bonds and to the allocation of items of income and deduction up to the
value of their respective capital accounts. The applicable Prospectus
Supplement will specify the amount and type of distributions to which the
holders of any series of Offered Preferred Shares would be entitled upon the
occurrence of any such event.
REDEMPTION
If so provided in the applicable Prospectus Supplement, the Offered
Preferred Shares will be redeemable in whole or in part at the option of the
Company, at the times, at the redemption prices and in accordance with any
additional terms and conditions set forth therein. The Operating Agreement
provides that the Company may not redeem shares of any series until all of the
Outstanding Preferred Shares are redeemed.
VOTING RIGHTS
Except as indicated in the applicable Prospectus Supplement, or except as
expressly required by applicable law, the holders of any series of Offered
Preferred Shares will not be entitled to vote.
CONVERSION
The terms and conditions, if any, on which shares of the Offered
Preferred Shares are convertible into any other class of the Company's
securities will be set forth in the Prospectus Supplement relating thereto.
Such terms will include the designation of the security into which such shares
are convertible, the conversion price, the conversion period, provisions as to
whether conversion will be at the option of the holder or the Company, the
events requiring an adjustment of the conversion price and provisions affecting
conversion in the event of the redemption of the Offered Preferred Shares. In
the case of conversion of the Offered Preferred Shares into Common Shares or
into any other security of the Company for which there exists an established
public trading market at the time of such conversion, such terms may include
provisions under which the amount of such security to be received by the
holders of the Offered Preferred Shares would be calculated according to the
market price of such security as of a time stated in the Prospectus Supplement.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Offered Preferred Shares will be
named in the applicable Prospectus Supplement.
12
<PAGE>
DESCRIPTION OF WARRANTS
The Company may issue Warrants for the purchase of Common Shares,
Preferred Shares or any combination thereof. Warrants may be issued
independently, together with any other Securities offered by a Prospectus
Supplement, and may be attached to or separate from such Securities. Warrants
may be issued under warrant agreements (each, a "Warrant Agreement") to be
entered into between the Company and a warrant agent specified in the
applicable Prospectus Supplement (the "Warrant Agent"). The Warrant Agent will
act solely as an agent of the Company in connection with the Warrants of a
particular series and will not assume any obligation or relationship of agency
or trust for or with any holders or beneficial owners of Warrants. The
following sets forth certain general terms and provisions of the Warrants
offered hereby. Further terms of the Warrants and the applicable Warrant
Agreement will be set forth in the applicable Prospectus Supplement.
The applicable Prospectus Supplement will describe the terms of the
Warrants in respect of which this Prospectus is being delivered, including,
where applicable, the following: (i) the title of such Warrants; (ii) the
aggregate number of such Warrants; (iii) the price or prices at which such
Warrants will be issued; (iv) the designation, number and terms of the Common
Shares, Preferred Shares or combination thereof, purchasable upon exercise of
such Warrants; (v) the designation and terms of the other Securities, if any,
with which such Warrants are issued and the number of such Warrants issued with
each such Security; (vi) the date, if any, on and after which such Warrants and
the related underlying Securities will be separately transferable; (vii) the
price at which each underlying Security purchasable upon exercise of such
Warrants may be purchased; (viii) the date on which the right to exercise such
Warrants shall commence and the date on which such right shall expire; (ix) the
minimum amount of such Warrants which may be exercised at any one time;
(x) information with respect to book-entry procedures, if any; (xi) a
discussion of any applicable federal income tax considerations; and (xii) any
other terms of such Warrants, including terms, procedures and limitations
relating to the transferability, exchange and exercise of such Warrants.
PLAN OF DISTRIBUTION
The Company may sell Securities to or through underwriters or dealers,
directly to other purchasers, or through agents. The Prospectus Supplement
with respect to any Securities will set forth the terms of the offering of the
Securities, including the name or names of any underwriters, dealers or agents,
the price of the offered Securities and the net proceeds to the Company from
such sale, any underwriting discounts or other items constituting underwriters'
compensation, any discounts or concessions allowed or reallowed or paid to
dealers and any national securities exchanges on which such Securities may be
listed.
If underwriters are used in the sale, the Securities will be acquired by
the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
price or at varying prices determined at the time of sale. The underwriter or
underwriters with respect to a particular underwritten offering of Securities
will be named in the Prospectus Supplement relating to such offering, and if an
underwriting syndicate is used, the managing underwriter or underwriters will
be set forth on the cover of such Prospectus Supplement. Unless otherwise set
forth in the Prospectus Supplement, the obligations of the underwriters or
agents to purchase the Securities will be subject to certain conditions
precedent and the underwriters will be obligated to purchase all the Securities
if any are purchased. Any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers may be changed from time to
time.
If a dealer is utilized in the sale of any Securities in respect of which
this Prospectus is delivered, the Company will sell such Securities to the
dealer, as principal. The dealer may then resell such Securities to the public
at varying prices to be determined by such dealer at the time of resale. The
name of the dealer and the terms of the transaction will be set forth in the
Prospectus Supplement relating thereto.
Securities may be sold directly by the Company to one or more
institutional purchasers, or through agents designated by the Company from time
to time, at a fixed price, or prices, which may be changed, or at varying
prices determined at the time of sale. Any agent involved in the offer or sale
of the Securities will be named, and any commissions payable by the Company to
13
<PAGE>
such agent will be set forth, in the Prospectus Supplement relating thereto.
Unless otherwise indicated in the Prospectus Supplement, any such agent will be
acting on a best efforts basis for the period of its appointment.
In connection with the sale of the Securities, underwriters or agents may
receive compensation from the Company or from purchasers of Securities for whom
they may act as agents in the form of discounts, concessions, or commissions.
Underwriters, agents, and dealers participating in the distribution of the
Securities may be deemed to be underwriters, and any discounts or commissions
received by them from the Company and any profit on the resale of the
Securities by them may be deemed to be underwriting discounts or commissions
under the Securities Act.
Unless otherwise specified in the applicable Prospectus Supplement, each
series of Securities, other than the Common Shares, will be a new issue with no
established trading market. Any Common Shares sold pursuant to a Prospectus
Supplement will be listed on the NYSE subject to official notice of issuance.
The Company may elect to list any series of the Securities on an exchange, but
it is not obligated to do so. Any underwriters to whom Securities are sold by
the Company for public offering and sale may make a market in such Securities,
but such underwriters will not be obligated to do so and may discontinue any
market making at any time without notice. No assurance can be given as to the
liquidity of the trading market for any Securities.
Under agreements entered into with the Company, underwriters, dealers,
and agents may be entitled to indemnification by the Company against certain
civil liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments that such agents, dealers, or
underwriters may be required to make with respect thereto. Underwriters,
dealers, or agents and their associates may be customers of, engage in
transactions with and perform services for, the Company in the ordinary course
of business.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize underwriters or other persons acting as the Company's agents to
solicit offers by certain institutions to purchase Securities from the Company
pursuant to contracts providing for payment and delivery on a future date.
Institutions with which such contracts may be made include commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and others, but in all cases such
institutions must be approved by the Company. The obligations of any purchaser
under any such contract will be subject to the condition that the purchase of
the Securities shall not at the time of delivery be prohibited under the laws
of the jurisdiction to which such purchaser is subject. The underwriters and
such other agents will not have any responsibility in respect in respect of the
validity or performance of such contracts.
In order to comply with the securities laws of certain states, if
applicable, the Securities offered hereby will be sold in such jurisdictions
only through registered or licensed brokers or dealers. In addition, in
certain states Securities may not be sold unless they have been registered or
qualification requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of Securities offered hereby may not engage in
market making activities with respect to the Securities for a period of two
business days prior to the commencement of such distribution.
EXPERTS
The financial statements incorporated in this Prospectus by reference to
the Annual Report on Form 10-K of the Company for the year ended December 31,
1997 have been so incorporated in reliance on the report (which contains an
explanatory paragraph relating to management's estimates of fair value of
mortgage revenue bonds and other bond related investments as described in Note
2 to the financial statements) of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
14
<PAGE>
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Rogers &
Wells LLP, New York, New York.
15
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table summarizes the costs and expenses to be incurred by
the Company in connection with the issuance and distribution of the Securities
being registered hereby, other than underwriting discounts and commissions.
All amounts are estimates, except for the Securities and Exchange Commission
Registration Fee:
<TABLE>
<CAPTION>
<S> <C>
Securities and Exchange Commission Registration Fee $ 51,625
Printing and Engraving Expenses 200,000
Accounting Fees and Expenses 200,000
Legal Fees and Expenses (other than Blue Sky) 375,000
Blue Sky Fees and Expenses 15,000
Miscellaneous 125,000
---------
Total $ 966,625
=========
</TABLE>
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company's Amended and Restated Certificate of Formation and Operating
Agreement dated as of August 1, 1996 (the "Operating Agreement") contains the
following provisions relating to indemnification of directors and officers.
All terms capitalized below and not otherwise defined shall have the meanings
set forth in the Operating Agreement.
"8.1. LIMITATIONS ON LIABILITY, AND INDEMNIFICATION OF, DIRECTORS
------------------------------------------------------------
AND OFFICERS.
------------
(a) No directors or officer of the Company shall be
liable, responsible or accountable in damages or otherwise to
the Company or any of the Shareholders for any act or omission
performed or omitted by him or her, or for any decision, except
in the case of fraudulent or illegal conduct of such person.
For purposes of this Section 8.1, the fact that an action,
omission to act or decision is taken on the advice of counsel
for the Company shall be evidence of good faith and lack of
fraudulent conduct.
(b) All Directors and officers of the Company shall be
entitled to indemnification from the Company for any loss,
damage or claim (including any reasonable attorney's fees
incurred by such person in connection therewith) due to any act
or omission made by him or her, except in the case of fraudulent
or illegal conduct of such person; PROVIDED, that any indemnity
shall be paid out of, and to the extent of, the assets of the
Company only (or any insurance proceeds available therefor), and
no Shareholder shall have any personal liability on account
thereof.
(c) The termination of any action, suit or proceeding by
judgment, order, settlement or conviction, or upon a plea of
NOLO CONTENDERE or its equivalent, shall not, of itself, create
a presumption that the Person acted fraudulently or illegally.
II-1
<PAGE>
(d) The indemnification provided by this Section 8.1
shall not be deemed exclusive of any other rights to which those
indemnified may be entitled under any agreement, vote of
Shareholders or Directors, or otherwise, and shall inure to the
benefit of the heirs, executors and administrators of such a
person.
(e) Any repeal or modification of this Section 8.1 shall
not adversely affect any right or protection of a Director or
officer of the Company existing at the time of such repeal or
modification.
(f) The Company may, if the Board of Directors of the
Company deems it appropriate in its sole discretion, obtain
insurance for the benefit of the Company's Directors and
officers, relating to the liability of such persons."
The Company has purchased insurance for the benefit of the directors and
officers of the Company, relating to the liability of such persons. The
directors and officers liability insurance insures (i) the officers and
directors of the Company from any claim arising out of an alleged wrongful act
by such persons while acting as directors and officers of the Company and (ii)
the Company to the extent that it has indemnified the directors and officers
for such loss.
ITEM 16. EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
1.1**** Form of Underwriting Agreement (for Common Shares, Preferred Shares
and Warrants)
4.1*** Amended and Restated Certificate of Formation and Operating Agreement
of the Company
4.2* By-laws of the Company
4.3 Specimen Copy of Common Share (filed as Exhibit 4.1 to the Company's
Registration Statement on Form S-4 (File No. 33-99088), filed November
7, 1995, and incorporated by reference herein)
4.4** Form of specimen certificate representing Preferred Share
4.5** Form of Warrant
5.1**** Opinion of Rogers & Wells LLP
8.1** Opinion of Rogers & Wells LLP as to certain tax matters
12.1** Statement regarding computation of ratios
23.1** Consent of Rogers & Wells LLP (contained in the opinion filed as
Exhibit 5.1)
23.2**** Consent of Price Waterhouse LLP
24.1**** Powers of Attorney
- --------------------
* Filed herewith.
** To be filed by amendment hereto or incorporated by reference to a Current
Report on Form 8-K in connection with the offering of securities.
*** Filed as an Exhibit to the Company's Amended Annual Report on Form 10-K/A
for the year 1997 and incorporated by reference.
**** Previously filed with the Company's Registration Statement on Form S-3
filed on June 4, 1998.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
II-2
<PAGE>
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933 (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities offered would
not exceed that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Securities and Exchange Commission (the "Commission")
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the effective
registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
PROVIDED, HOWEVER, that paragraphs (1)(i) and (1)(ii) of this section do
not apply if the registration statement is on Form S-3, Form S-8 or Form
F-3, and the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed with
or furnished to the Commission by the registrant pursuant to Section 13
or Section 15(d) of the Securities Exchange Act of 1934 (the "Exchange
Act") that are incorporated by reference in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial BONA
FIDE offering thereof; and
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at the time shall be deemed to be the initial BONA
FIDE offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
II-3
<PAGE>
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Baltimore, State of Maryland, on this 2{nd} day
of June, 1998.
MUNICIPAL MORTGAGE AND EQUITY, L.L.C
By: /S/ MARK K. JOSEPH
--------------------------------------------
Name: Mark K. Joseph
Title: Chairman of the Board and Chief
Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS, IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/S/ MARK K. JOSEPH Chairman of the Board, Chief Executive June 2, 1998
- -----------------------------------
Mark K. Joseph Officer (Principal Executive Officer)
and Director
/S/ GARY A. MENTESANA* Chief Financial Officer (Principal June 2, 1998
- -----------------------------------
Gary A. Mentesana Financial Officer and Principal
Accounting Officer)
/S/ CHARLES BAUM* Director June 2, 1998
- -----------------------------------
Charles Baum
/S/ RICHARD O. BERNDT* Director June 2, 1998
- -----------------------------------
Richard O. Berndt
/S/ ROBERT S. HILLMAN* Director June 2, 1998
- -----------------------------------
Robert S. Hillman
/S/ WILLIAM L. JEWS* Director June 2, 1998
- -----------------------------------
William L. Jews
/S/ CARL W. STERN* Director June 2, 1998
- -----------------------------------
Carl W. Stern
</TABLE>
- -----------------------------------------
* By Mark K. Joseph as Attorney-in-Fact.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<S> <C>
1.1**** Form of Underwriting Agreement (for Common Shares, Preferred Shares and Warrants)
4.1*** Amended and Restated Certificate of Formation and Operating Agreement of the Company
4.2* By-laws of the Company
4.3 Specimen Copy of Common Share (filed as Exhibit 4.1 to the Company's Registration
Statement on Form S-4 (File No. 33-99088), filed November 7, 1995, and incorporated
by reference herein)
4.4** Form of specimen certificate representing Preferred Share
4.5** Form of Warrant
5.1**** Opinion of Rogers & Wells LLP
8.1** Opinion of Rogers & Wells LLP as to certain tax matters
12.1** Statement regarding computation of ratios
23.1** Consent of Rogers & Wells LLP (contained in the opinion filed as Exhibit 5.1)
23.2**** Consent of Price Waterhouse LLP
24.1**** Powers of Attorney
</TABLE>
- --------------------
* Filed herewith.
** To be filed by amendment hereto or incorporated by reference to a Current
Report on Form 8-K in connection with the offering of securities.
*** Filed as an Exhibit to the Company's Amended Annual Report on Form 10-K/A
for the year 1997 and incorporated by reference.
**** Previously filed with the Company's Registration Statement on Form S-3
filed on June 4, 1998.
<PAGE>
Exhibit 4.2
BY-LAWS
OF
MUNICIPAL MORTGAGE AND EQUITY, L.L.C.
(a Delaware limited liability company)
All capitalized words and terms used in these By-Laws and not
defined herein shall have the respective meanings ascribed to them in the
Amended and Restated Certificate of Formation and Operating Agreement of
Municipal Mortgage and Equity, L.L.C. (the "Company"), as amended from time
to time (the "Operating Agreement").
ARTICLE I.
OFFICES AND FISCAL YEAR
1.1. REGISTERED OFFICE. The registered office of the Company
shall be in the City of Wilmington, County of New Castle, State of Delaware
until a change in such office is established by resolution of the Board of
Directors and a statement of such change is filed in the manner provided by
applicable law.
1.2. OTHER OFFICES. The Company may also have offices and keep
its books, documents and records at such other places within or without the
State of Delaware as the Board of Directors may from time to time determine
or the business of the Company may require.
1.3. FISCAL YEAR. The fiscal year of the Company shall end on
the last day of December in each year or on such other date as the Board of
Directors may designate by resolution.
ARTICLE II.
MEETINGS OF SHAREHOLDERS
2.1. ANNUAL MEETINGS. The annual meeting of Shareholders of the
Company for the election of the appropriate class and number of Directors,
pursuant to the terms of the Operating Agreement, and for the translation
of such other business as properly may come before such meeting, shall be
held at such place, either within or without the State of Delaware, and at
such time and on such date as shall be fixed from time to time by
resolution of the Board of Directors and set forth in the notice or waiver
of notice of the meeting.
<PAGE>
2.2. SPECIAL MEETINGS. Subject to the provisions of Article 13
of the Operating Agreement, special meetings of Shareholders may be called
at any time by the Board of Directors. In addition, a special meeting
shall be called by the Board of Directors or the President, promptly upon
receipt of a written request therefor from Shareholders holding in the
aggregate at least ten percent in interest of the Shares which would be
entitled to vote on any matter to be considered and acted upon at the
special meeting being so called. If such officers or the Board of
Directors shall fail to call such meeting within 20 days after receipt of
such request, any Shareholder executing such request may call such meeting.
Such special meetings of Shareholders shall be held at such places, within
or without the State of Delaware, as shall be specified in the respective
notices or waivers of notice thereof.
2.3. NOTICE OF MEETINGS; WAIVER. (a) Subject to the provisions
of Article 13 of the Operating Agreement, the Secretary or any Assistant
Secretary shall cause written, telephonic or telecopied notice of the
place, date, and hour of each meeting of Shareholders, and, in the case of
a special meeting, the purpose or purposes for which such meeting is
called, to be given personally or by telephone, facsimile, other electronic
transmission, or mail, not less than ten nor more than 60 days prior to the
meeting, to each Shareholder entitled to vote at such meeting. If such
notice is mailed, it shall be deemed to have been given to a Shareholder
when deposited in the United States mail, postage prepaid, directed to the
Shareholder at his, her, or its address as it appears on the record of
Shareholders of the Company, or, if he, she, or it shall have duly filed
with the Secretary of the Company a written request that notices to him,
her, or it be mailed to some other address, then directed to such other
address. Such further notice shall be given as may be required by law.
(b) No notice of any meeting of Shareholders need be given to
any Shareholder who submits a signed waiver of notice, whether before or
after the meeting. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of Shareholders need be
specified in a written waiver of notice. The of any Shareholder at a
meeting of Shareholders shall constitute a waiver of notice of such
meeting, except when the Shareholder attends a meeting for the sole and
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
2.4. QUORUM. The required number of Shareholders to be present
at any meeting of Shareholders so to constitute a quorum thereat shall be
as set forth in the Operating Agreement.
2.5. VOTING. Shareholders shall be entitled to vote on such
actions as are specified in the Operating Agreement, and the required vote
of Shareholders to approve any such actions shall be as is set forth in the
Operating Agreement.
2.6. ADJOURNMENT. If a quorum is not present at any meeting of
Shareholders, the Shareholders present in person or by proxy shall have the
power to adjourn any such meeting from time to time until a quorum is
present. The Shareholders present in person or by proxy shall have the
power to adjourn any meeting of the Shareholders. Notice of any adjourned
meeting of Shareholders of the Company need not be given if the place,
date, and hour thereof are announced at the meeting at which the
2
<PAGE>
adjournment is taken; PROVIDED, that if the adjournment is for more
than 30 days, a notice of the adjourned meeting, conforming to the
requirements of Section 2.3 hereof, shall be given to each Shareholder
entitled to vote at such meeting. At any adjourned meeting at which
a quorum is present, any business may be transacted that might have been
transacted on the original date of the meeting.
2.7. PROXIES. (a) Any Shareholder entitled to vote at any
meeting of Shareholders or to express consent to or dissent from action
without a meeting may, by a written instrument signed by such Shareholder
or his, her or its attorney-in-fact, authorize another Person to vote at
any such meeting and express such consent or dissent for him, her or it by
proxy. Execution may be accomplished by the Shareholder or his, her or its
authorized officer, director, employee or agent signing such writing or
causing his, her or its signature to be affixed to such writing by any
reasonable means including, but not limited to, facsimile signature. A
Shareholder may authorize another Person to act for him, her or it as proxy
by transmitting or authorizing the transmission of a telegram, facsimile or
other means of electronic transmission to the Person who will be the holder
of the proxy; PROVIDED, that any such telegram, facsimile or other means of
electronic transmission must either set forth or be submitted with
information from which it can be determined that the telegram, facsimile or
other electronic transmission was authorized by the Shareholder.
(b) No such proxy shall be voted or acted upon after the
expiration of the three years from the date of such proxy, unless such
proxy provides for a longer period. Every proxy shall be revocable at the
pleasure of the Shareholder executing it, except in those cases where
applicable law provides that a proxy shall be irrevocable. A Shareholder
may revoke any proxy that is not irrevocable by attending the meeting and
voting in person or by filing an instrument in writing revoking the proxy
or by filing another duly executed proxy bearing a later date with the
Secretary. A duly executed proxy shall be irrevocable if it states that it
is irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power.
2.8. ORGANIZATION; PROCEDURE. At every meeting of Shareholders,
the presiding officer shall be the Chairman of the Board or, in the event
of his or her absence or disability, the President or, in the event of his
or her absence or disability, a presiding officer chosen by the Board of
Directors prior to or at such meeting. The Secretary, any Assistant
Secretary, or any appointee of the presiding officer shall act as secretary
of the meeting. The order of business and all other matters of procedure
at every meeting of Shareholders may be determined by such presiding
officer.
2.9. INSPECTORS. The presiding officer of the meeting of
Shareholders shall appoint one or more inspectors to act at any meeting of
Shareholders. Such inspectors shall perform such duties as shall be
specified by the presiding officer of the meeting. Inspectors need not be
Shareholders. No Director or nominee for the office of Director shall be
appointed to be such inspector.
2.10. CONSENT OF SHAREHOLDERS IN LIEU OF MEETING. (a) To the
fullest extent permitted by the Delaware Limited Liability Company Act,
DEL. CODE ANN. tit. 6, ch. 18, as amended from time to time (the "Act"),
but subject to the terms of the Operating Agreement (which limit, define or
3
<PAGE>
modify such rights in certain circumstances), whenever the vote of
Shareholders at a meeting is required or permitted to be taken for or in
connection with any action, such action may be taken without a meeting,
without prior notice, and without a vote of Shareholders, if a consent or
consents in writing, setting forth the action so taken, shall be signed by
the holders of such percentage of the Shares entitled to vote as would be
necessary under the terms of the Operating Agreement to authorize or take
such action and shall be delivered to the Company by delivery to its
registered office in the State of Delaware, its principal place of
business, or a Director, officer, or agent of the Company having custody of
the book in which proceedings of meetings of Shareholders are recorded.
(b) Prompt written or telephonic notice of the taking of any
action without a meeting by less than unanimous written consent of the
Shareholders entitled to vote shall be given to those Shareholders
(entitled to vote thereon) who have not consented in writing.
2.11. ACTION BY TELEPHONIC COMMUNICATIONS. Shareholders may
participate in a meeting of Shareholders by means of conference telephone
or similar communications equipment by means of which all Persons
participating in the meeting can hear each other, and participation in a
meeting pursuant to this provision shall constitute presence in person at
such meeting.
2.12. SHAREHOLDER PROPOSALS. For any Shareholder proposal to be
presented in connection with an annual meeting of Shareholders of the
Company, as permitted by this Agreement or required by applicable law,
including any proposal relating to the nomination of a person to be elected
to the Board of Directors of the Company, the Shareholders must have given
timely notice thereof in writing to the Secretary of the Company. To be
timely, a Shareholder's notice shall be delivered to the Secretary at the
principal business offices of the Company not less than 60 days nor more
than 90 days prior to the first anniversary of the preceding year's annual
meeting; provided, however, that in the event that the date of the annual
meeting is advanced by more than 30 days or delayed by more than 60 days
from such anniversary date, notice by the Shareholder to be timely must be
so delivered not earlier than the 90th day prior to such annual meeting and
not later than the close of business on the later of the 60th day prior to
such annual meeting or the tenth day following the day on which public
announcement of the date of such meeting is first made. Such Shareholder's
notice shall set forth (a) as to each person whom the Shareholder proposes
to nominate for election or reelection as a Director, all information
relating to such person that is required to be disclosed in solicitations
of proxies for election of Directors, or is otherwise required, in each
case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (including such person's written consent to being named in the
proxy statement as a nominee and to serving as a Director if elected); (b)
as to any other business that the Shareholder proposes to bring before the
meeting, a brief description of the business desired to be brought before
the meeting, the reasons for conducting such business at the meeting and
any material interest in such business of such Shareholder and of the
beneficial owner, if any, on whose behalf the proposal is made; and (c) as
to the Shareholder giving the notice and the beneficial owner, if any, on
whose behalf the nomination or proposal is made, (i) the name and address
of such Shareholder, as they may appear on the Company's books, and of such
beneficial owner and (ii) the class and number of Shares of the Company
4
<PAGE>
which are owned beneficially and of record by such Shareholder and such
beneficial owner.
ARTICLE III.
BOARD OF DIRECTORS
3.1. GENERAL POWERS. Except as may otherwise be provided by the
Act or by the terms of the Operating Agreement, the property, affairs and
business of the Company shall be managed by or under the direction of the
Board of Directors, and the Board of Directors may exercise all the powers
of the Company as set forth in the Operating Agreement. The Directors
shall act only as a Board or by designated committees, and the individual
Directors shall have no power as such.
3.2. NUMBER AND TERM OF OFFICE. The number and classes of
Directors constituting the entire Board of Directors shall be as provided
by the terms of the Operating Agreement. Each Director (whenever elected)
shall, subject to the terms of the Operating Agreement, hold office until
his or her successor has been duly elected and qualified, or until his or
her earlier death, resignation, or removal. A Director shall not be
required to be a Shareholder or a resident of the State of Delaware.
3.3. ELECTION OF DIRECTORS. Except as provided in Section 3.12
hereof, or as otherwise provided in the Operating Agreement (with respect
to Specially Appointed Directors(s), the Payments Director, or otherwise),
the appropriate class and number of Directors shall be elected at each
annual meeting of Shareholders. At each meeting of Shareholders for the
election of Directors, provided a quorum of Shareholders is present, the
appropriate class and number of Directors to be elected thereat shall be
elected by the vote of Shareholders (entitled to vote thereon) set forth in
the Operating Agreement. The Operating Agreement shall govern the election
of specific classes of directors in addition to the Specially Appointed
Director(s) and Payments Director.
3.4. ANNUAL AND REGULAR MEETINGS. The annual meeting of the
Board of Directors for the purpose of electing officers and for the
transaction of such other business as may come before the meeting shall be
held as soon as possible following adjournment of the annual meeting of
Shareholders at the place of such annual meeting of Shareholders or at such
other place as the Board of Directors may determine. Notice of such annual
meeting of the Board of Directors need not be given. The Board of
Directors from time to time may by resolution provide for the holding of
regular meetings and fix the place (which may be within or without the
State of Delaware) and the date and hour of such meetings. Notice of
regular meetings need not be given; PROVIDED, that if the Board of
Directors shall fix or change the time or place of any regular meeting,
notice of such action shall be mailed, given by telephone, hand delivered
or sent by facsimile promptly, to each Director who shall not have been
present at the meeting at which such action was taken. Notice of such
action need not be given to any Director who attends the first regular
meeting after such action is taken without protesting the lack of notice to
him or her, prior to or at the commencement of such meeting, or to any
Director who submits a signed waiver of notice, whether before or after
such meeting.
5
<PAGE>
3.5. SPECIAL MEETINGS; NOTICE. Special meetings of the Board of
Directors shall be held whenever called by the Chairman of the Board, by
the President or by a majority of the members of the Board of Directors, at
such place (within or without the State of Delaware), date and hour as may
be specified in the respective notices or waivers of notice of such
meetings. Special meetings of the Board of Directors may be called on 24
hours' notice, if notice is given to each Director personally or by
telephone or facsimile, or on three days' notice, if notice is mailed to
each Director. Unless otherwise indicated in the notice thereof, and
subject to the terms of Operating Agreement, any and all business may be
transaction at any special meeting of the Board of Directors. Notice of
any special meeting need not be given to any Director who attends such
meeting without protesting the lack of notice to him or her, prior to or at
the commencement of such meeting, or to any Director who submits a signed
waiver of notice, whether before or after such meeting.
3.6. QUORUM: VOTING. Subject to the terms of the Operating
Agreement and these By-Laws with respect to matters on which action may be
taken without the presence of a quorum, at all meetings of the Board of
Directors, the presence of a majority of the members of the Board
(including in such membership count the Specially Appointed Director(s) and
the Payments Director) then in office as Directors shall constitute a
quorum for the transaction of business. Except as otherwise required by
law, and subject to the terms of the Operating Agreement and these By-Laws
(with respect to the required vote of disinterested Directors on certain
specified matters or otherwise), the vote of a majority of the Directors
present at any meeting at which a quorum is present shall be the act of the
Board of Directors.
3.7. ADJOURNMENT. A majority of the Directors present, whether
or not a quorum is present, may adjourn any meeting of the Board of
Directors to another time or place. No notice need be given of any
adjourned meeting unless the time and place of the adjourned meeting are
not announced at the time of adjournment, in which case notice conforming
to the requirements of Section 3.5 hereof shall be given to each Director.
3.8. ACTION WITHOUT A MEETING. Any action required or permitted
to be taken at any meeting of the Board of Directors may be taken without a
meeting if all members of the Board of Directors consent thereto in
writing, and such writing or writings are filed with the minutes of
proceedings of the Board of Directors.
3.9. REGULATIONS: MANNER OF ACTING. To the extent consistent
with applicable law and the terms of the Operating Agreement, the Board of
Directors may adopt such rules and regulations for the conduct of meetings
of the Board of Directors and for the management of the property, affairs
and business of the Company as the Board of Directors may deem appropriate.
3.10. ACTION BY TELEPHONIC COMMUNICATIONS. Members of the Board
of Directors may participate in a meeting of the Board of Directors by
means of conference telephone or similar communications equipment by means
of which all Persons participating in the meeting can hear each other, and
participation in a meeting pursuant to this provision shall constitute
presence in person at such meeting.
6
<PAGE>
3.11. RESIGNATIONS; REMOVAL. Subject to the terms of the
Operating Agreement, a Director may resign at any time upon 60 days' prior
written notice to the Company. A Director may be removed, with or without
cause at any time pursuant to the terms of the Operating Agreement.
3.12. VACANCIES AND NEWLY CREATED DIRECTORSHIPS. Subject to the
terms of the Operating Agreement (with respect to the Specially Appointed
Director(s), Payments Director, or other Directors to be elected by a
specific class of Shares), if any vacancies shall exist or occur in the
Board of Directors, by reason of death, resignation, removal or otherwise,
or if the authorized number of Directors shall be increased by the Board of
Directors or by the Operating Agreement, the Directors then in office shall
continue to act, and such vacancies and newly created directorships may be
filled by a majority of the Directors then in office, although less than a
quorum. A Director elected to fill a vacancy or a newly created position
on the Board shall hold office until his or her successor has been elected
and qualified or until his or her earlier death, resignation or removal.
Any such vacancy or newly created position on the Board of Directors also
may be filled at any time by vote of Shareholders pursuant to the terms of
the Operating Agreement and Section 3.3 hereof. In the event that a
vacancy on the Board of Directors is filled pursuant to the terms of this
Section 3.12, any such replacement shall assume the term of his/her
predecessor.
3.13. BOOKS AND RECORDS. (a) The Board of Directors shall cause
to be kept complete and accurate books and records of account of the
Company. The books of the Company (other than books required to maintain
Capital Accounts) shall be kept on a basis that permits the preparation of
financial statements in accordance with generally accepted accounting
principles, and shall be made available to the Board of Directors for
review from time to time, at the principal business office of the Company.
(b) In addition to the foregoing, and for purposes of fully
complying with the Act so to allow Shareholders access to certain
information relating to the Company (for any purpose reasonably related to
the requesting Shareholder's interest as a Shareholder of the Company), the
Company shall maintain at its principal business office the following
information: (i) a current list of the full name and last known business
or mailing address of each Shareholder and Director, set forth in
alphabetical order, (ii) a copy of the Certificate, the Operating Agreement
and By-Laws including all amendments thereto, and executed copies of all
powers of attorney pursuant to which the Certificate, the Operating
Agreement or any amendment thereto has been executed, (iii) copies of the
Company's federal, state and local income tax returns and reports, for each
fiscal year of the Company, (iv) copies of any financial statements of the
Company for the three most recent years (or for such number of years as
shall be necessary to afford a Shareholder full information regarding the
financial condition of the Company), (v) true and full information
regarding the status of the business of the Company, (vi) true and full
information regarding the amount of cash and a description and statement of
the agreed value of any other property or services contributed by each
Shareholder and which each Shareholder has agreed to contribute in the
future, and the date on which each became a Shareholder, and (vii) all
other records and information required to be maintained pursuant to the
Act. A Shareholder desiring to review any of the foregoing information
must, prior to being given access to such information, make a written
request on the Board of Directors or President of the Company for
7
<PAGE>
permission to review such information. Whether or not to allow access to
Shareholders to any of the foregoing information shall be at the sole
discretion of the Board of Directors or President of the Company, and shall
be subject to such reasonable standards (including standards governing what
information and documents are to be furnished at what time and location and
at whose expense) as shall be established by the Board of Directors or
President of the Company from time to time.
(c) Notwithstanding anything contained in the foregoing to the
contrary, but subject to the provisions of the Act, the Board of Directors
and the President each has the right to keep confidential from the
Shareholders, for such period of time as the Board of Directors or
President deems reasonable, any information which the Board of Directors or
President reasonably believes to be in the nature of trade secrets or other
information the disclosure of which the Board of Directors or President in
good faith believes is not in the best interest of the Company or could
damage the Company or its business or which the Company is required by law
or by agreement with a third party to keep confidential.
3.14. REPORTS. Forthwith upon request, the Board of Directors
shall, at the cost and expense of the Company, cause the officers of the
Company to furnish to each Director such information bearing on the
financial condition and operations of the Company as any such Director may
from time to time reasonably request, provided however, that such Director
shall hold and maintain all such information in confidence unless otherwise
approved in advance by the Board of Directors.
3.15. COMPENSATION TO DIRECTORS. Compensation for any Director
shall be determined by the affirmative vote of a majority of the
disinterested Directors, even though the disinterested Directors be less
than a quorum. Upon submission of appropriate documentation, the Company
shall reimburse Directors for all reasonable costs and expenses incurred by
each Director in the performance of his/her duties as a Director of the
Company.
3.16. RESERVES. The Board of Directors may from time to time in
its discretion establish reasonable cash reserves.
3.17. COMMITTEES OF THE BOARD OF DIRECTORS. The Board of
Directors may, from time to time, establish committees of the Board of
Directors to exercise such powers and authorities of the Board of Directors
and to perform such other functions, as the Board of Directors may from
time to time determine by resolution. Such committees shall be composed of
two or more Directors. The Chairman of the Board shall appoint the
chairman of each such committee, and the Board of Directors shall appoint
the remaining members of the committee.
ARTICLE IV.
OFFICERS
4.1. NUMBER. The officers of the Company shall consist of a
Chairman of the Board, a President, one or more Vice-Presidents, a
Secretary, a Chief Financial Officer, and, if deemed necessary, expedient,
or desirable by the Board of Directors, one or more Assistant Secretaries,
8
<PAGE>
one or more Assistant Financial Officers, and such other officers with such
titles as the resolution of the Board of Directors choosing them shall
designate.
4.2. ELECTION. Unless otherwise determined by the Board of
Directors, the officers of the Company shall be elected by the Board of
Directors at the annual meeting of the Board of Directors, and shall be
elected to hold office until the next succeeding annual meeting of the
Board of Directors. In the event of the failure to elect officers at such
annual meeting, officers may be elected at any regular or special meeting
of the Board of Directors. Each officer shall hold office until his or her
successor has been elected and qualified, or until his or her earlier
death, resignation or removal.
4.3. SALARIES. The salaries of the Chief Executive Officer and
the Executive and Senior Vice Presidents of the Company shall be fixed by
the Compensation Commitee; the salaries of the other officers, employees
and agents of the Company shall be fixed by the Board of Directors.
4.4. RESIGNATION, VACANCIES AND REMOVAL. Subject to any
employment contractual arrangements that may be in place with the Company,
any officer may resign at any time by giving written notice of resignation,
signed by such officer, to the Board of Directors, at the Company's
principal office. Unless otherwise specified therein, such resignation
shall take effect upon delivery. Any vacancy occurring in any office of
the Company by death, resignation, removal or otherwise, shall, subject to
the terms of the Operating Agreement, be filled by the Board of Directors.
Subject to any employment contractual arrangements that may be in place
with the Company, all officers, agents and employees of the Company shall
be subject to removal with or without cause at any time by the affirmative
vote of a majority of all members of the Board of Directors then in office.
4.5. AUTHORITY AND DUTIES OF OFFICERS. The officers of the
Company shall have such authority and shall exercise such powers and
perform such duties as may be specified in the Operating Agreement, in
these By-Laws or from time to time by the Board of Directors, except that
in any event each officer shall exercise such powers and perform such
duties as may be required by law. The express powers and duties set forth
below for each officer shall not restrict nor be in limitation of any
powers or duties that may be delegated to any such officer by the Board of
Directors or the President.
4.6. THE CHAIRMAN OF THE BOARD. The Chairman of the Board shall
preside at all meeting of the Shareholders and of the Board of Directors at
which he or she is present. The Chairman of the Board (a) shall perform
all of the duties usually incident to such office, subject to the direction
of the Board of Directors and (b) shall perform such other duties as may
from time to time be assigned by the Board of Directors to the Chairman of
the Board.
4.7. THE PRESIDENT. The President shall be the chief executive
officer and the chief operating officer of the Company, shall have general
control and supervision of the policies and operations of the Company, and
shall see that all orders and resolutions of the Board of Directors are
carried into effect. He or she shall manage and administer the Company's
business and affairs. In the event of the absence or disability of the
Chairman of the Board, the President shall preside at all meetings of the
9
<PAGE>
Shareholders and the Directors at which he or she is present. He or she
shall have the authority to sign, in the name and on behalf of the Company,
checks, orders, contracts, leases, notes, drafts and other documents and
instruments in connection with the business of the Company, and together
with the Secretary or an Assistant Secretary, conveyances of real estate
and other documents and instruments to which the seal of the Company, if
any, is affixed, subject to any requirements for prior approval of the
Board of Directors and/or the Shareholders contained in the Act or in the
Operating Agreement. He or she shall have the authority to cause the
employment or appointment of such employees and agents of the Company as
the conduct of the business of the Company may require, and to remove or
suspend any employee or agent elected or appointed by him or her. The
President shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
4.8. THE VICE PRESIDENT. If one or more Vice Presidents is
elected, he/they shall perform the duties of the President in his absence
(in their order of rank) and such other duties as may from time to time be
assigned to them by the Board of Directors or the President.
4.9. THE SECRETARY. The Secretary shall have the following
powers and duties: (a) keep or cause to be kept a record of all the
proceedings of the meetings of Shareholders and of the Board of Directors
in books provided for that purpose; (b) cause all notices to be duly given
in accordance with the provisions of these By-Laws and as required by law;
(c) be the custodian of the records of the Company; (d) properly maintain
and file all books, reports, statements, certificates and all other
documents and records required by law, the terms of the Operating Agreement
or these By-Laws; (e) have charge of the books and ledgers of the Company
and cause the books to be kept in such manner as to show at any time the
Shares of all Shareholders, the names (alphabetically arranged) and the
addresses of the Shareholders, the Shares held by such Shareholders, and
the date as of which each became a Shareholder; (f) sign (unless the Chief
Financial Officer, an Assistant Financial Officer or Assistant Secretary
shall have signed) certificates (if any) representing Shares, the issuance
of which shall have been authorized by the Board of Directors; and (g)
perform, in general, all duties incident to the officer of Secretary and
such other duties as may be assigned to him or her from time to time by the
Board of Directors or the President.
4.10. THE CHIEF FINANCIAL OFFICER. The Chief Financial Officer
shall have the following powers and duties: (a) have charge and
supervision over and be responsible for the moneys, securities, receipts
and disbursements of the Company, and shall keep or cause to be kept full
and accurate records of all receipts of the Company; (b) cause the moneys
and other valuable effects of the Company to be deposited in the name and
to the credit of the Company in such banks or trust companies or with such
bankers or other depositaries as shall be selected in accordance with the
terms of the Operating Agreement and these By-Laws; (c) cause the moneys of
the Company to be disbursed by checks or drafts (signed as provided in
Section 7.2 hereof) upon the authorized depositaries of the Company and
cause to be taken and preserved proper vouchers for all moneys disbursed;
(d) render to the Board of Directors, individual directors or the
President, whenever requested, a statement of the financial condition of
the Company and of all his or her transactions as Chief Financial Officer,
and render a full financial report at the annual meeting of the
Shareholders, if called upon to do so by the Board of Directors or the
10
<PAGE>
President; (e) be empowered from time to time to require from any officers
or agents of the Company reports or statements giving such information as
he or she may desire with respect to any and all financial transactions of
the Company; (f) sign (unless an Assistant Financial Officer or the
Secretary or an Assistant Secretary shall have signed) certificates (if
any) representing Shares, the issuance of which shall have been authorized
by the Board of Directors; and (g) perform, in general, all duties incident
to the office of Chief Financial Officer and such other duties as may be
assigned to him or her from time to time by the Board of Directors or the
President.
4.11. ADDITIONAL OFFICERS. The Board of Directors may appoint
such other officers and agents as it may deem appropriate, and such other
officers and agents shall hold their offices for such terms and shall
exercise such powers and perform such duties as may be determined from time
to time by the Board of Directors. The Board of Directors from time to
time may delegate to any officer or agent the power to appoint subordinate
officers or agents and to prescribe their respective rights, terms of
office, authorities and duties. Any such officer or agent may remove any
such subordinate officer or agent appointed by him or her, for or without
cause.
4.12. FAILURE TO ELECT. A failure to elect officers shall not
dissolve or otherwise affect the Company.
ARTICLE V.
NOTICE; WAIVERS OF NOTICE
5.1. NOTICE, WHAT CONSTITUTES. Except as otherwise provided by
the terms of these By-Laws, any provision of applicable law, the Operating
Agreement or these By-Laws which requires notice to be given to any
Director or Shareholder of the Company shall not be deemed or construed to
require personal notice (unless otherwise expressly provided therein), such
notice may be given in writing and delivered by telecopy, first or second
class mail or Federal Express or similar expedited commercial carrier,
addressed to such Director or Shareholder at his address as it appears on
the records of the Company, with postage thereon prepaid, and such notice
shall be deemed to be given at the time when the same is received or
deposited in the U.S. mail or with Federal Express or similar expedited
commercial carrier or at the time it is telecopied.
Whenever any notice is required to be given by applicable law,
the terms of the Operating Agreement or these By-Laws to any Shareholder,
to whom (a) notice of two consecutive annual meetings, and all notices of
meetings or of the taking of action by written consent without a meeting to
such Shareholder during the period between such two consecutive annual
meetings, or (b) all, and at least two, distributions (if sent by first
class mail, Federal Express or similar expedited commercial carrier) during
a twelve-month period, have been mailed addressed to such Shareholder at
his address as shown on the records of the Company and have been returned
undeliverable, the giving of such notice to such Shareholder shall not
thereafter be required. Any action or meeting which shall be taken or held
without notice to such Shareholder shall have the same force and effect as
if such notice had been duly given.
11
<PAGE>
If any such Shareholder shall deliver to the Company a written
notice setting forth his then current address, the requirement that notice
be given to such Shareholder shall be reinstated.
5.2. WAIVERS OF NOTICE. Except as otherwise provided by the
terms of these By-Laws, whenever any notice is required to be given under
applicable law, the terms of the Operating Agreement or these By-Laws, a
written waiver thereof, signed by the person or persons entitled to such
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Except as otherwise provided by applicable law, the
terms of the Operating Agreement or these By-Laws, neither the business to
be transacted at, nor the purpose of, any regular or special meeting of
Shareholders, Directors or members of a committee of Directors need be
specified in any written waiver of notice of such meeting.
ARTICLE VI.
CERTIFICATES OF SHARES, TRANSFER, ETC.
6.1. ISSUANCE. Each Shareholder shall be entitled to a
certificate or certificates for Shares of the Company owned by him, her or
it upon his, her or its request therefor. The Share certificates of the
Company shall be registered in the Share ledger and transfer books of the
Company as they are issued. They shall be signed by (i) the Chairman of
the Board, the President or a Vice-President, and (ii) the Secretary or an
Assistant Secretary, if any, or by the Chief Financial Officer or an
Assistant Financial Officer, if any; and shall bear the Company's seal, if
any, which may be a facsimile, engraved or printed. Any or all of the
signatures upon such certificate may be a facsimile, engraved or printed.
In case any officer, transfer agent or registrar who has signed, or whose
facsimile signature has been placed upon, any share certificate shall have
ceased to be such officer, transfer agent or registrar before the
certificate is issued, it may be issued with the same effect as if he or
she were such officer, transfer agent or registrar at the date of its
issue.
6.2. TRANSFER, LEGENDS, ETC. Upon surrender to the Company or
the transfer agent of the Company of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignment or authority to
transfer, the Company shall issue a new certificate to the person entitled
thereto, cancel the old certificate, and record the reaction upon its
books. Subject to applicable law, the Board of Directors may, by
resolution, (a) impose restrictions on transfer or registration of transfer
of Shares of the Company, and (b) require as a condition to the issuance or
transfer of such Shares that the person or persons to whom such Shares are
to be issued or transferred agree in writing to such restrictions. In the
event that any such restrictions on transfer or registration of transfer
are so imposed, the Company shall require that such restrictions be
conspicuously noted on all certificates representing such Shares.
6.3. SHARE CERTIFICATE. Share certificates of the Company shall
be in such form as is required or authorized by statute and approved by the
Board of Directors. The Share record books and the blank Share certificate
books shall be kept by the Secretary or an Assistant Secretary, if any, or
by any agent designated by the Board of Directors for that purpose.
12
<PAGE>
6.4. LOST, STOLEN, DEFACED, WORN OUT, OR DESTROYED. The Board of
Directors may direct a new certificate or certificates to be issued in
place of any certificate or certificates theretofore issued by the Company
alleged to have been lost, stolen, defaced, worn out or destroyed, upon the
making of an affidavit of that fact by the person claiming the certificate
of Share to be lost, stolen, defaced, worn out or destroyed. When
authorizing such issuance of a new certificate or certificates, the Company
may, as a condition precedent thereto, (a) require the owner of any defaced
or worn out certificate to deliver such certificate to the Company and
order the cancellation of the same, and (b) require the owner of any lost,
stolen, or destroyed certificate or certificates, or his, her or its legal
representative, to advertise the same in such manner as the Company shall
require and to give the Company a bond in such sum as it may direct as
indemnity against any claim that may be made against the Company with
respect to the certificate alleged to have been lost, stolen, or destroyed.
Thereupon, the Company may cause to be issued to such person a new
certificate in replacement for the certificate alleged to have been lost,
stolen, defaced, worn out or destroyed. Upon the stub of every new
certificate so issued shall be noted the fact of such issue and the number,
date and name of the registered owner of the lost, stolen, defaced, worn
out or destroyed certificate in lieu of which the new certificate is
issued. Every certificate issued hereunder shall be issued without payment
to the Company for such certificate; provided, that there shall be paid to
the Company a sum equal to any exceptional expenses incurred by the Company
in providing for or obtaining any such indemnity and security as is
referred to herein.
6.5. RECORD HOLDER OF SHARES. Except as otherwise provided by
applicable law, the terms of the Operating Agreement, or these By-Laws, the
Company (a) shall be entitled to recognize the exclusive right of a person
registered on its books as the owner of Shares to receive distributions and
to vote as such owner and (b) shall not be bound to recognize any equitable
or other claim to or interest in such Share or Shares on the part of any
other person, whether or not it shall have express or other notice thereon.
The Company may treat a fiduciary as having capacity and
authority to exercise all rights of ownership in respect of Shares of
record in the name of a decedent holder, a person, firm or corporation in
conservation, receivership or bankruptcy, a minor, an incompetent person,
or a person under disability, as the case may be, for whom such fiduciary
is acting, and the Company, its transfer agent and its registrar, if any,
upon presentation of evidence of appointment of such fiduciary shall be
under no duty to inquire as to the powers of such fiduciary and shall not
be liable for any loss caused by any act done or omitted to be done by the
Company or its transfer agent or registrar, if any, in reliance thereon.
6.6. DETERMINATION OF SHAREHOLDERS OF RECORD. In order that the
Company may determine the Shareholders entitled to notice of or to vote at
any meeting of Shareholders or any adjournment thereof, or to express
consent to the Company's actions in writing without a meeting, or entitled
to exercise any rights in respect of any change, conversion or exchange of
Shares, or for the purpose of any other lawful action, the Board of
Directors may fix, in advance, a record date, which shall not be more than
sixty (60) nor less than ten (10) calendar days before the date of such
meeting, nor more than sixty (60) calendar days prior to any other action.
13
<PAGE>
If no record date is fixed:
(a) The record date for determining Shareholders entitled to
notice of or to vote at a meeting of Shareholders shall be
at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the
close of business on the day next preceding the day on which
the meeting is held.
(b) The record date for determining Shareholders entitled to
express consent to corporate action in writing without a
meeting, when no prior action by the Board of Directors is
necessary, shall be the day on which the first written
consent is expressed.
(c) The record date for determining Shareholders for any other
purpose shall be at the close of business on the day on
which the Board of Directors adopts the resolution relating
thereto.
A determination of Shareholders of record entitled to notice of or to vote
at a meeting of Shareholders shall apply to any adjournment of the meeting;
provided, that the Board of Directors may fix a new record date for the
adjourned meeting.
6.7. APPOINTMENT OF TRANSFER AGENTS, REGISTRARS, ETC. The Board
of Directors may from time to time by resolution appoint (a) one or more
transfer agents and registrars for the Shares of the Company, (b) a plan
agent to administer any employee benefit, dividend reinvestment, or similar
plan of the Company, and (c) a dividend disbursing agent to disburse any
and all dividends authorized by the Board and payable with respect to the
Shares of the Company. The Board of Directors shall also have authority to
make such other rules and regulations, not inconsistent with applicable
law, the terms of the Operating Agreement or these By-Laws, as it deems
necessary or advisable with respect to the issuance, transfer and
registration of certificates for Shares and the Shares represented thereby.
ARTICLE VII.
GENERAL PROVISIONS
7.1. CONTRACTS, ETC. Except as otherwise provided by applicable
law, the terms of the Operating Agreement or these By-Laws, the Board of
Directors may authorize any officer or officers, any employee or employees,
or any agent or agents, to enter into any contract or to execute,
acknowledge or deliver any agreement, deed, mortgage, bond or other
instrument in the name of and on behalf of the Company, and to affix the
Company's seal, if any, thereon. Such authority may be general or confined
to specific instances.
7.2. CHECKS. All checks, notes, obligations, bills of exchange,
acceptances or other orders in writing shall be signed by such person or
persons as the Board of Directors may from time to time designate by
resolution, or by those officers of the Corporation given such express
authority by the terms of these By-Laws.
14
<PAGE>
7.3. COMPANY'S SEAL. The Company's seal, if any such seal is
approved by the Board of Directors, shall have inscribed thereon the name
of the Company and the year of its formation. The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or in any
other manner reproduced.
7.4. DEPOSITS. All funds of the Company shall be deposited from
time to time to the credit of the credit of the Company in such banks,
trust companies or other depositories as the Board of Directors may approve
or designate, and all such funds shall be withdrawn only upon checks or
other orders signed by such one or more officers, employees or agents as
designated in the Operating Agreement, in these By-Laws or from time to
time by the Board of Directors.
7.5. AMENDMENT OF BY-LAW. Except as otherwise provided by the
terms of the Operating Agreement, these By-Laws may be amended, modified or
repealed, or new By-Laws may be adopted, by the affirmative vote of a
majority of all members of the Board of Directors then in office at any
regular meeting of the Board of Directors, or at any special meeting
thereof, if notice of such amendment, modification, repeal, or adoption of
new By-Laws is contained in the notice of such special meeting.
7.6. OPERATING AGREEMENT. In the event of a conflict between the
provisions of these By-Laws and the Provisions of the Operating Agreement
or of applicable law, the terms of the Operating Agreement or of such law,
respectively, shall control.
* * * * * * *
15
<PAGE>
