SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A Amendment #1
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
Commission File Number 001-11981
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
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (410) 962-8044
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
___________________ ____________________
Growth Shares American Stock Exchange
Securities registered pursuant to Section 12(g)
of the Act: Preferred Shares
Preferred Capital
Distribution Shares
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. YES [x] NO [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the registrant's Growth Shares held by
non-affiliates of the registrant as of March 24, 1998 (computed by reference
to the closing price of such stock on the American Stock Exchange)
was $283,530,824.
DESCRIPTION OF AMENDMENT
AMENDMENT #1:
A) Item 14 (c) has been amended to: (i) reflect additional exhibits
furnished as part of the Company's 1997 Annual Report on Form 10-K;
(ii) file the Company's Amended and Restated Certificate of Formation
and Operating Agreement of the Company; and (iii) file the Company's
Amended By-laws.
DOCUMENTS INCORPORATED BY REFERENCE
DOCUMENT WHERE INCORPORATED
Portions of the Registrant's definitive Proxy Statement
regarding the 1998 Annual Meeting of Shareholders Part III
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K.
(a) (1) List of Financial Statements. The following is a list of the
consolidated financial statements included at the end of this
report:
Report of Independent Accountants
Consolidated Balance Sheets as of December 31, 1997 and 1996
Consolidated Statements of Income for the Years Ended
December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995
Consolidated Statement of Shareholders' Equity for the Years
Ended December 31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
(2) List of Financial Statement Schedules.
All schedules prescribed by Regulation S-X have been omitted
as the required information is inapplicable or the information is
presented elsewhere in the consolidated financial statements or
related notes.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the three months
ended December 31, 1997.
(c) List of Exhibits. The following is a list of exhibits furnished.
3.1 Amended and Restated Certificate of Formation and
Operating Agreement of the Company.
3.2 By-laws of the Company.
10.1 Employment Agreement between the Registrant and
Mark K. Joseph, dated August 1, 1996 (filed as Item 7
(c) Exhibit 10.1 to the Company's current report on
Form 8-K, filed with the Commission on January 28,
1998 and incorporated by reference herein).
10.2 Employment Agreement between the Registrant and
Michael L. Falcone, dated August 1, 1996 (filed as
Item 7 (c) Exhibit 10.2 to the Company's current report
on Form 8-K, filed with the Commission on January
28, 1998 and incorporated by reference herein).
10.3 Employment Agreement between the Registrant and
Thomas R. Hobbs, dated August 1, 1996 (filed as Item
7 (c) Exhibit 10.3 to the Company's current report on
Form 8-K, filed with the Commission on January 28,
1998 and incorporated by reference herein).
10.4 Master Repurchase Agreement among the Registrant,
Trio Portfolio Investors, L.L.C., Rio Portfolio
Partners, L.P., Blackrock Capital Finance, L.P., Brazos
Fund, L.P. and M.F. Swapco, Inc. dated June 30, 1997
(filed as Item 7 (c) Exhibit 10.4 to the Company's
current report on Form 8-K, filed with the Commission
on January 28, 1998 and incorporated by reference
herein).
11 Computation of Earnings Per Share
21 Subsidiaries
23 Consent of Price Waterhouse LLP
27 Financial Data Schedule
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Municipal Mortgage and Equity, L.L.C.
By: /s/ Mark K. Joseph
__________________
Mark K. Joseph
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons, in the capacities and on
the dates indicated.
Signature Title Date
/s/ Mark K. Joseph Chairman of the Board, Chief Executive May 29, 1998
__________________ Officer (Principal Executive Officer),
Mark K. Joseph and Director
INDEX TO EXHIBITS
Exhibit
Number Document
3.1 Amended and Restated Certificate of Formation and
Operating Agreement of the Company
3.2 Amended By-laws of the Company
11 Computation of Earnings Per Share
21 Subsidiaries of the Registrant
23 Consent of Price Waterhouse LLP (previously filed on
March 24, 1998)
27 Financial Data Schedule (previously filed on March 24,
1998)
AMENDED AND RESTATED
CERTIFICATE OF FORMATION AND OPERATING AGREEMENT
OF
MUNICIPAL MORTGAGE AND EQUITY, L.L.C.
(a Delaware limited liability company)
THIS AMENDED AND RESTATED CERTIFICATE OF FORMATION AND OPERATING AGREEMENT (the
"Agreement") of Municipal Mortgage and Equity, L.L.C., a Delaware limited
liability company (the "Company"), dated as of August 1, 1996, is entered into
by and among those persons who have executed this Agreement or a counterpart
hereof, or who become parties hereto pursuant to the terms of this Agreement.
The Company's Certificate of Formation filed with the Delaware Secretary of
State on July 6, 1995, is hereby amended to amend and restate all of the
provisions thereof so that said Certificate, as amended and restated hereby,
reads in its entirety as follows; and the Company's Operating Agreement is
hereby amended so that said Operating Agreement reads in its entirety as
follows:
FIRST: The name of the limited liability company is Municipal Mortgage and
Equity, L.L.C.
SECOND: The address of the limited liability company's registered office in the
State of Delaware is Corporation Service Company, 1013 Centre Road, in
the City of Wilmington, County of New Castle, 19805. The name of its
registered agent at such address is Corporation Service Company.
THIRD: The remainder of the Certificate of Formation and Operating Agreement
is as follows:
W I T N E S S E T H :
WHEREAS, MME I Corporation, a Delaware corporation, and MME II Corporation, a
Delaware corporation (collectively, the "Original Shareholders" or the
"Original Members") have formed the Company and contributed to the Company, in
consideration for their respective membership interests in the Company, the
consideration specified herein;
WHEREAS, SCA Tax Exempt Fund Limited Partnership, a Delaware limited
partnership ("SCATEF"), will be merged with and into the Company and thereafter
will cease to exist as a separate legal entity (such merger and related steps
to be referred to herein as the "Transaction"); and
WHEREAS, this Agreement shall constitute the Certificate (as defined herein) of
the Company and shall also constitute the Operating Agreement (as defined
herein) of the Company, and shall be binding upon all Persons (as defined
herein) now or at any time hereafter who are Shareholders (as defined herein)
of the Company.
NOW, THEREFORE, in consideration of the mutual covenants and obligations set
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forth in this Agreement, and of other good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto, intending legally
to be bound, hereby agree as follows:
ARTICLE 1
Definitions
Capitalized terms used in this Agreement shall have the meanings set forth
below or in the Section of this Agreement referred to below, except as
otherwise expressly indicated or limited by the context in which they appear in
this Agreement. All terms defined in this Article 1 or in the preamble to this
Agreement in the singular have the same meanings when used in the plural and
vice versa.
1.1. "Acquiring Person" shall have the meaning set forth in Section 13.1 of
this Agreement.
1.2. "Act" means the Delaware Limited Liability Company Act, Del. Code Ann.
<section><section>18-101 et seq., as amended from time to time.
1.3. "Affiliate" means, with respect to any Person, any Relative of such
Person, any trust for the benefit of such Person or such Person's Relative, any
beneficiary of such a trust and any other Person that directly, or indirectly
through one or more intermediaries, controls (including without limitation all
officers and directors of such Person), is controlled by, or is under common
control with, such Person or a Relative of such Person. The term "control" (or
any form thereof), as used in the preceding sentence, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract, or otherwise.
1.4. "Agreement" means this Agreement, as may be amended, restated,
supplemented or otherwise modified from time to time as herein provided.
1.5. "Announcement Date" shall have the meaning set forth in Section 12.3 of
this Agreement.
1.6. "Associate" shall have the meaning set forth in Sections 12.1 and 13.1 of
this Agreement.
1.7. "BAC" means a beneficial assignee certificate of STEF I Assignor
Corporation.
1.8. "BAC Conversion Price" means the price assigned to a particular BAC upon
such BAC's conversion into Shares, as provided in the Transaction Agreement.
1.9. "BAC Holder" means a Person who is or was (as the context requires) the
record holder of a BAC.
1.10. "Base Interest" means the base interest applicable under the original
loan terms of a particular SCATEF Asset (without taking into account the
effects of the Refunding and any future refundings).
1.11. "Beneficial Owner" shall have the meaning set forth in Section 12.3 of
this Agreement.
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1.12. "Board of Directors" or "Board of Managers" means the board on which all
of the Company's Managers sit, in their capacities as Managers.
1.13. "Bond" means a mortgage revenue bond owned at a particular time by the
Company as part of the Property; and the term "Bond" shall include working
capital loans associated with such mortgage revenue bond.
1.14. "Book Gain" or "Book Loss" means the gain or loss recognized by the
Company for book purposes in any Fiscal Year by reason of any sale or
disposition with respect to any of the assets of the Company. Such Book Gain or
Book Loss shall be computed by reference to the Book Value of such property or
assets as of the date of such sale or disposition (determined in accordance
with Section 1.15 of this Agreement), rather than by reference to the tax basis
of such property or assets as of such date, and each and every reference herein
to "gain" or "loss" shall be deemed to refer to Book Gain or Book Loss, rather
than to tax gain or tax loss, unless the context manifestly otherwise requires.
1.15. "Book Value" of an asset means, as of any particular date, the value at
which the asset is properly reflected on the books and records of the Company
as of such date in accordance with Section 1.704-1(b)(2)(iv) of the Treasury
Regulations. The initial Book Value of each asset shall be its cost, unless
such asset was contributed to the Company by a Shareholder, in which case the
initial Book Value shall be the fair market value for such asset as reasonably
determined by the Board of Directors, and, in each case, such Book Value shall
thereafter be adjusted for cost recovery deductions to which the Company is
entitled for federal income tax purposes with respect thereto, in the amount
that bears the same relationship to the Book Value of such asset as the cost
recovery deduction computed for tax purposes bears to the adjusted tax basis of
such assets. The Book Values of all Company assets shall be adjusted to equal
their respective fair market values, as reasonably determined by the Board of
Directors under appropriate circumstances, which circumstances may include but
are not limited to the following: (a) the acquisition, by any new or existing
Shareholder, of any interest issued after the Transaction Consummation Date by
the Company; (b) the distribution by the Company to a Shareholder of more than
a DE MINIMIS amount of Company assets, including money, if, as a result of such
distribution, such Shareholder's interest in the Company is reduced; and (c)
the termination of the Company for federal income tax purposes pursuant to
Section 708(b)(1)(B) of the Code.
1.16. "Business Combination" shall have the meaning set forth in Section 12.1
of this Agreement.
1.17. "By-laws" means the by-laws of the Company, as amended from time to time,
governing various aspects of the operation of the Company and the rights and
obligations of its Shareholders, Board of Directors, officers and agents. All
provisions of the By-laws not inconsistent with law or this Agreement shall be
valid and binding.
1.18. "Capital Account" shall have the meaning ascribed thereto in Section 3.5
of this Agreement.
1.19. "Capital Contributions" means the total amount of cash and other property
contributed to the Company by the Shareholders.
1.20. "Capital Transactions" means (a) any Repayment, Sale, or other sale,
exchange, taking by eminent domain, damage, destruction or other disposition of
all or any part of the assets of the Company, other than tangible personal
property disposed of in the ordinary course of business; or (b) any financing
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or refinancing of any Company indebtedness; PROVIDED, that the receipt by the
Company of Capital Contributions shall not constitute Capital Transactions.
1.21. "Certificate" means this Agreement, in its function as a "certificate of
formation" as provided for pursuant to the Act, as originally filed with the
office of the Secretary of State of the State of Delaware, as amended,
restated, supplemented or otherwise modified from time to time as herein
provided.
1.22. "Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any subsequent federal law of similar import, and, to the extent
applicable, any Treasury Regulations promulgated thereunder.
1.23. "Company" means the limited liability company hereby established in
accordance with this Agreement by the parties hereto, as such limited liability
company may from time to time be constituted.
1.24. "Company Interest" means an equity interest in the Company, and, if the
context so allows, the percentage of equity ownership interest in the Company
represented by the Capital Account attributable to such equity interest as
compared to all of the aggregate Capital Accounts of all Shareholders of the
Company (as such percentage may be changed from time to time to reflect
adjustments as provided for in this Agreement); it being understood and agreed
that this term shall not be deemed to apply to any debt incurred by the Company
(directly or indirectly), including but not limited to through custodial, trust
or similar or other arrangements.
1.25. "Consent" means either the consent given by vote at a duly called and
held meeting or the prior written consent, as the case may be, of a Person to
do the act or thing for which the consent is solicited, or the act of granting
such consent, as the context may require.
1.26. "Control Company Interest" shall have the meaning set forth in Section
13.1 of this Agreement.
1.27. "Conversion" means a conversion of Preferred Shares or Preferred Capital
Distribution Shares into Growth Shares or cash under the terms of Section
5.2(b) hereof.
1.28. "Depreciation" means, for each Fiscal Year, an amount equal to the
depreciation, amortization or other cost recovery deduction allowable with
respect to an asset for such year or other period; PROVIDED, that if the Book
Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of any such year or other period, Depreciation shall
be an amount that bears the same relationship to the Book Value of such asset
as the depreciation, amortization, or other cost recovery deduction computed
for tax purposes with respect to such asset for the applicable period bears to
the adjusted tax basis of such asset at the beginning of such period, or if
such asset has a zero adjusted tax basis, Depreciation shall be an amount
determined under any reasonable method selected by the Board of Directors.
1.29. "Determination Date" shall have the meaning set forth in Section 12.3 of
this Agreement.
1.30. "Director" shall have the same meaning as "Manager."
1.31. "Dissolution Shareholder" means Shelter Development Holdings, Inc., for
so long as such Person remains a Dissolution Shareholder under Section 6.4 of
this Agreement, and shall also mean any other Person who agrees under Section
6.4 to be a Dissolution Shareholder.
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1.32. "Dividend Payment Date" means each February 15 and August 15.
1.33. "Entity" means any general partnership, limited partnership, corporation,
joint venture, trust, limited liability company, limited liability partnership,
business trust, cooperative, or association. An Entity may or may not be an
Affiliate of the Company or of a Company Affiliate.
1.34. "Financing" means the financing transaction which SCATEF consummated on
February 14, 1995 in which proceeds were raised through the offering of
$67,700,000 in aggregate principal amount of Multifamily Mortgage Revenue Bond
Receipts. The term Future Financing means a financing, refinancing or other
leveraging of the SCATEF Assets after the Transaction Consummation Date as
described in Section 5.1(a)(ii) of this Agreement.
1.35. "Fiscal Year" means the fiscal year of the Company and shall be the same
as its taxable year, which shall be the calendar year unless otherwise
determined by the Board of Directors in accordance with the Code. Each Fiscal
Year shall commence on the day immediately following the last day of the
immediately preceding Fiscal Year.
1.36. "Five Year Tolling Period" shall have the meaning set forth in Section
12.2 of this Agreement.
1.37. "Future Shares" shall have the meaning set forth in Section 3.1 of this
Agreement.
1.38. "Future Special Distributions" means distributions to be made to holders
of Preferred Capital Distribution Shares if the SCATEF Assets are financed,
refinanced or otherwise leveraged after the Transaction Consummation Date, as
described in Section 5.1(a)(ii) of this Agreement.
1.39. "General Partners" means the general partners of SCATEF immediately prior
to the Transaction Consummation Date.
1.40. "Growth Shareholders" means the holders of Growth Shares.
1.41. "Growth Shares" shall have the meaning set forth in Section 3.1 of this
Agreement.
1.42. "Initial Capital Contribution" means any Capital Contribution made in
accordance with Section 3.2 hereof.
1.43. "Interested Company Interests" shall have the meaning set forth in
Section 13.1 of this Agreement.
1.44. "Interested Party" shall have the meaning set forth in Section 12.1 of
this Agreement.
1.45. "Managers" means those individuals serving on the Board of Directors of
the Company, including successor or additional Managers duly elected in
accordance with the terms of this Agreement.
1.46. "Market Value" shall have the meaning set forth in Section 12.1 of this
Agreement.
1.47. "Members" means the Original Shareholders, together with all Persons who
become Members as herein provided and who are listed as Members of the Company
in the books and records of the Company, in such Persons' capacity as Members
of the Company.
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1.48. "Mortgage Loans" means the mortgage loans which have been assigned to the
Company to secure the repayment of a Bond.
1.49. "New Shares" means Growth Shares and Term Growth Shares, collectively;
provided, however, that, after all Term Growth Shares have been fully redeemed
by the Company, this term shall refer only to Growth Shares.
1.50. "New Shares Working Capital Reserve" means a reserve, to be separately
accounted for by the Company, which consists of that portion of the Working
Capital Reserves which is attributable to funds placed in the Working Capital
Reserves which are not Preferred Shares Series I Working Capital Reserve funds,
Preferred Shares Series II Working Capital Reserve funds, Preferred Capital
Distribution Shares Series I Working Capital Reserve funds, or Preferred
Capital Distribution Shares Series II Working Capital Reserve funds.
1.51. "Operating Agreement" means this Agreement, in its function as an
"operating agreement" as provided for pursuant to the Act, as amended,
restated, supplemented or otherwise modified from time to time as herein
provided.
1.52. "Original Member" or "Original Shareholder" has the meaning therefor set
forth in the recitals to this Agreement.
1.53. "Par Value Appraisal" means an independent third-party appraisal (which
appraisals shall be conducted at least approximately every other year beginning
in the year 2000) indicating that the fair market value of the real property
securing a Bond which is a SCATEF Asset held by the Company (taking into
account the Bond in place at that time, if any, relating to such asset),
adjusted for Permitted Selling Expenses, is at least equal to the sum of (a)
the original face value of the Bond which originally related to such asset,
plus (b) the accrued but unpaid Base Interest under the original loan terms
relating to the Bond which originally related to such Property, plus (c) the
accrued but unpaid interest under the then-current loan terms relating to such
Bond (if any).
1.54. "Payments Director" shall have the meaning set forth in Section
5.2(a)(iii)(A) of this Agreement.
1.55. "Per Share Conversion Value" shall have the meaning set forth in Section
5.2(b) of this Agreement.
1.56. "Permitted Selling Expenses" means the out-of-pocket expenses actually
incurred directly by the Company in the course of selling a particular SCATEF
Asset, or by securing such SCATEF Asset; or, if no such actual sale has
occurred in the case in question, the out-of-pocket expenses which would have
been incurred directly by (a) the Company (based on local conditions and
practices existing at the time) had the Company sold a particular SCATEF Asset
or (b) the owner of the property securing a SCATEF Asset if such property were
sold, as appropriate depending on the context in which this defined term is
used.
1.57. "Person" means any individual or Entity, and the heirs, executors,
administrators, legal representatives, successors, and assigns of such Person
where the context so admits.
1.58. "Preferred Capital Distribution Shareholders" means the holders of
Preferred Capital Distribution Shares.
1.59. "Preferred Capital Distribution Shares" means the Series I Preferred
Capital Distribution Shares and the Series II Preferred Capital Distribution
Shares, collectively.
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1.60. "Preferred Capital Distribution Shares Allocable Portfolio Cash Flow"
means, for any fiscal period, the product of:
(a) all Preferred Capital Distribution Shares Revenues relating to the
applicable Series, plus any amounts which the Board of Directors releases from
the Preferred Capital Distribution Shares Series I Working Capital Reserve or
the Preferred Capital Distribution Shares Series II Working Capital Reserve, as
the case may be, as being no longer necessary to hold as part of the applicable
Working Capital Reserve, less all amounts from Preferred Capital Distribution
Shares Revenues added to the Preferred Capital Distribution Shares Series I
Working Capital Reserve or the Preferred Capital Distribution Shares Series II
Working Capital Reserve, as the case may be, during such period, multiplied by
(b) the relevant Preferred Capital Distribution Shares Allocation Factor.
"Preferred Capital Distribution Shares Allocable Series I Portfolio Cash Flow"
means Preferred Capital Distribution Shares Allocable Portfolio Cash Flow
relating only to SCATEF Series I Assets. "Preferred Capital Distribution Shares
Allocable Series II Portfolio Cash Flow" means Preferred Capital Distribution
Shares Allocable Portfolio Cash Flow relating only to SCATEF Series II Assets.
It is understood that Preferred Capital Distribution Shares Allocable Series I
Portfolio Cash Flow plus Preferred Capital Distribution Shares Allocable Series
II Portfolio Cash Flow equals Preferred Capital Distribution Shares Allocable
Portfolio Cash Flow.
1.61. "Preferred Capital Distribution Shares Allocation Factor" with respect to
a Series of Preferred Capital Distribution Shares, calculated as of a
particular date (the "Calculation Date"), means the product of (i) a fraction,
the numerator of which is the number of BACs of such Series which are exchanged
in the Transaction by BAC Holders for Preferred Capital Distribution Shares
(less the aggregate number of such Preferred Capital Distribution Shares which,
through such Calculation Date, have been redeemed or repurchased by the
Company, converted into cash or other Shares, or otherwise are no longer then
outstanding), and the denominator of which is the total number of BACs of such
Series which are outstanding immediately prior to the consummation of the
Transaction, multiplied by (ii) 98%.
1.62. "Preferred Capital Distribution Shares Net Proceeds," as it relates to
SCATEF Assets, means
(a) with respect to a Sale of real estate included within the Property, the
amount under the Bond then held by the Company relating to such real estate
which is paid upon such Sale, less Permitted Selling Expenses, and less the
amount of debt which then remains unamortized with respect to such Bond, if
any, incurred in any Future Financing,
(b) with respect to a sale of an entire Bond, the gross sale proceeds actually
received in consideration for the Sale of such Bond (and the fair value of any
non-cash proceeds actually received in consideration for the Sale of such
Bond), computed without regard to any indebtedness or other obligation
encumbering such Bond, less Permitted Selling Expenses, and less the amount of
debt which then remains unamortized with respect to such Bond, if any, incurred
in any Future Financing, and
(c) upon receipt of a Par Value Appraisal relating to a particular Bond, the
value ascribed to such Bond pursuant to such Par Value Appraisal (including
without limitation the unpaid principal amount of, and unpaid Base Interest and
any interest and contingent interest then-due with respect to, such Bond), less
the amount of debt which then remains unamortized with respect to such Bond, if
any, incurred in any Future Financing.
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1.63. "Preferred Capital Distribution Shares Revenues" for any period means the
net cash flows generated from the Company's operating activities (defined
below), (a) decreased for any cash flows generated from the investment of any
net Financing (or Future Financing) proceeds, (b) decreased for any gross cash
flows generated from the contributed activities engaged in (as of the
Transaction Consummation Date) or to be engaged in the future by the General
Partners or their affiliates of acquiring and servicing mortgages, (c)
increased for any cash flows used to pay for expenses related to the investment
of the net Financing (and Future Financings) proceeds, (d) increased for any
cash flows used to pay for expenses related to the Transaction, and (e)
increased for any cash flows used to pay for growth-oriented general and
administrative expenses (defined below). All of those adjustments to revenues
and expenses of the Company noted above (which will be disclosed within the
Company's quarterly and annual reports) can and will be specifically identified
and will be subject to the review of the Company's independent auditor on an
annual basis.
"Net cash flows generated from the Company's operating activities" means all
sources of cash generated by Company operating activities less all uses of cash
for Company operating activities. This includes, but may not be limited to, (i)
all debt service received on un-refunded Bonds, plus (ii) all debt service
received on Series B Bonds and the retained portions (but not the portions
financed, refinanced or otherwise leveraged in any Future Financing) of any
Bond refunded after the Effective Time, plus (iii) all debt service received on
New Mortgage Investments, plus (iv) all operating cash flows generated by the
activities engaged in (as of the Transaction Consummation Date) or to be
engaged in the future by the General Partners or their affiliates of acquiring
and servicing mortgages, plus (v) all cash flows generated from the interest
income on short term investments, less (vi) cash flows used for general and
administrative purposes (including those expenses incurred for growth-oriented
activities), less (vii) cash flows used for expenses incurred with respect to
the investment of net Financing (and Future Financing) proceeds, less (viii)
cash flows used for expenses incurred with respect to the Transaction (which
include, among other things, legal costs, cost of the fairness opinion and
stock exchange listing fees).
"Growth-oriented general and administrative expenses" means cash flows used to
pay expenses incurred for the expansion of the Company which would not have
been incurred had the Transaction not been consummated. This includes, but may
not be limited to, the costs of raising new capital and the additional costs
necessary to administer a larger asset portfolio. The Company shall not incur
any growth-oriented general and administrative expenses which will exceed the
net cash flows of the activities engaged in (as of the Transaction Consummation
Date) or to be engaged in the future by the General Partners or their
affiliates of acquiring and servicing mortgages, without an advance
determination by a majority of the independent members of the Board of
Directors that adequate cash flow is reasonably expected to exist to pay the
otherwise required distributions to the holders of the Preferred Shares and the
Preferred Capital Distribution Shares.
1.64. "Preferred Capital Distribution Shares Series I Allocation Factor",
calculated as of a particular date (the "Calculation Date"), means the product
of (i) a fraction, the numerator of which is the number of Series I BACs which
are exchanged in the Transaction by BAC Holders for Series I Preferred Capital
Distribution Shares (less the aggregate number of such Series I Preferred
Capital Distribution Shares which, through such Calculation Date, have been
redeemed or repurchased by the Company, have been converted into cash or other
Shares, or otherwise are no longer then outstanding), and the denominator of
which is the total number of Series I BACs which are outstanding immediately
prior to the consummation of the Transaction, multiplied by (ii) 98%.
1.65. "Preferred Capital Distribution Shares Series I Working Capital Reserve"
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means a reserve, to be separately accounted for by the Company, which consists
of that portion of the Working Capital Reserves which is attributable to funds
placed in the Working Capital Reserves which are derived from SCATEF Series I
Assets solely for the benefit of Series I Preferred Capital Distribution
Shareholders.
1.66. "Preferred Capital Distribution Shares Series II Allocation Factor",
calculated as of a particular date (the "Calculation Date"), means the product
of (i) a fraction, the numerator of which is the number of Series II BACs which
are exchanged in the Transaction by BAC Holders for Series II Preferred Capital
Distribution Shares (less the aggregate number of such Series II Preferred
Capital Distribution Shares which, through such Calculation Date, have been
redeemed or repurchased by the Company, have been converted into cash or other
Shares, or otherwise are no longer then outstanding), and the denominator of
which is the total number of Series II BACs which are outstanding immediately
prior to the consummation of the Transaction, multiplied by (ii) 98%.
1.67. "Preferred Capital Distribution Shares Series II Working Capital Reserve"
means a reserve, to be separately accounted for by the Company, which consists
of that portion of the Working Capital Reserves which is attributable to funds
placed in the Working Capital Reserves which are derived from SCATEF Series II
Assets solely for the benefit of Series II Preferred Capital Distribution
Shareholders.
1.68. "Preferred Shareholders" means the holders of Preferred Shares.
1.69. "Preferred Shares" means the Series I Preferred Shares and the Series II
Preferred Shares, collectively.
1.70. "Preferred Shares Allocable Portfolio Cash Flow" means, for any fiscal
period, the product of:
(a) all Preferred Shares Revenues relating to the applicable Series, plus any
amounts which the Board of Directors releases from the Preferred Shares Series
I Working Capital Reserve or the Preferred Shares Series II Working Capital
Reserve, as the case may be, as being no longer necessary to hold as part of
the applicable Working Capital Reserve, less all amounts from Preferred Shares
Revenues added to the Preferred Shares Series I Working Capital Reserve or the
Preferred Shares Series II Working Capital Reserve during such period,
multiplied by (b) the relevant Preferred Shares Allocation Factor.
"Preferred Shares Allocable Series I Portfolio Cash Flow" means Preferred
Shares Allocable Portfolio Cash Flow relating only to SCATEF Series I Assets.
"Preferred Shares Allocable Series II Portfolio Cash Flow" means Preferred
Shares Allocable Portfolio Cash Flow relating only to SCATEF Series II Assets.
It is understood that Preferred Shares Allocable Series I Portfolio Cash Flow
plus Preferred Shares Allocable Series II Portfolio Cash Flow equals Preferred
Shares Allocable Portfolio Cash Flow.
1.71. "Preferred Shares Allocation Factor" with respect to a Series of
Preferred Shares, calculated as of a particular date (the "Calculation Date"),
means the product of (i) a fraction, the numerator of which is the number of
BACs of such Series which are exchanged in the Transaction by BAC Holders for
Preferred Shares (less the aggregate number of such Preferred Shares which,
through such Calculation Date, have been redeemed or repurchased by the
Company, converted into cash or other Shares, or otherwise are no longer then
outstanding), and the denominator of which is the total number of BACs of such
Series which are outstanding immediately prior to the consummation of the
Transaction, multiplied by (ii) 98%.
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1.72. "Preferred Shares Net Proceeds", as it relates to SCATEF Assets, means
(a) with respect to a Sale of real estate included within the Property, the
gross sale proceeds actually received in connection with such a Sale, less
Permitted Selling Expenses, (b) with respect to a sale of an entire Bond, the
gross sale proceeds which would have been received in consideration for the
sale of the SCATEF Assets relating to such Bond, computed without regard to any
indebtedness or other obligation encumbering such Bond, less Permitted Selling
Expenses, and (c) upon receipt of a Par Value Appraisal relating to a
particular SCATEF Asset, the value ascribed to such SCATEF Asset pursuant to
such Par Value Appraisal (including without limitation the unpaid principal
amount of, and unpaid Base Interest and any interest and contingent interest
then-due with respect to, the Bond relating to such SCATEF Asset).
1.73. "Preferred Shares Revenues" for any period means the net cash flows
generated from the Company's operating activities (defined below), (a)
increased for the cash flows lost as a result of the sale of the Receipts
(Series A Bond interest and related items) (defined below) or as a result of
any Future Financings, (b) decreased for any cash flows generated from the
investment of any net Financing (or Future Financings) proceeds, (c) decreased
for any gross cash flows generated from the contributed activities engaged in
(as of the Transaction Consummation Date) or to be engaged in the future by the
General Partners or their affiliates of acquiring and servicing mortgages, (d)
increased for any cash flows used to pay for expenses related to the investment
of the net Financing (and Future Financings) proceeds, (e) increased for any
cash flows used to pay for expenses related to the Transaction, and (f)
increased for any cash flows used to pay for growth-oriented general and
administrative expenses (defined below). All of those adjustments to revenues
and expenses of the Company noted above (which will be disclosed within the
Company's quarterly and annual reports) can and will be specifically identified
and will be subject to the review of the Company's independent auditor on an
annual basis.
"Net cash flows generated from the Company's operating activities" means all
sources of cash generated by Company operating activities less all uses of cash
for Company operating activities. This includes, but may not be limited to, (i)
all debt service received on un-refunded Bonds, plus (ii) all debt service
received on Series B Bonds and the retained portions (but not the portions
financed, refinanced or otherwise leveraged in any Future Financing) of any
Bond refunded after the Effective Time, plus (iii) all debt service received on
New Mortgage Investments, plus (iv) all operating cash flows generated by the
activities engaged in (as of the Transaction Consummation Date) or to be
engaged in the future by the General Partners or their affiliates of acquiring
and servicing mortgages, plus (v) all cash flows generated from the interest
income on short term investments, less (vi) cash flows used for general and
administrative purposes (including those expenses incurred for growth-oriented
activities), less (vii) cash flows used for expenses incurred with respect to
the investment of net Financing (and Future Financing) proceeds, less (viii)
cash flows used for expenses incurred with respect to the Transaction (which
include, among other things, legal costs, cost of the fairness opinion and
stock exchange listing fees).
"Cash flows lost as a result of the sale of the Receipts" means cash flows that
would have been collected by the Company had the sale of the Receipts in the
Series A Bonds not occurred. This includes, but may not be limited to, an
amount equal to (i) as a starting amount, the cash flows paid by the operating
partnerships on the Series A Bonds, plus (ii) cash flows paid by the operating
partnerships for credit enhancement fees, plus (iii) cash flows paid by the
operating partnerships for miscellaneous bond trustee and collateral agent
fees, less (iv) cash flows received by the operating partnership from the swap
arrangements.
"Growth-oriented general and administrative expenses" means cash flows used to
pay expenses incurred for the expansion of the Company which would not have
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been incurred had the Transaction not been consummated. This includes, but may
not be limited to, the costs of raising new capital and the additional costs
necessary to administer a larger asset portfolio. The Company shall not incur
any growth-oriented general and administrative expenses which will exceed the
net cash flows of the activities engaged in (as of the Transaction Consummation
Date) or to be engaged in the future by the General Partners or their
affiliates of acquiring and servicing mortgages, without an advance
determination by a majority of the independent members of the Board of
Directors that adequate cash flow is reasonably expected to exist to pay the
otherwise required distributions to the holders of the Preferred Shares and the
Preferred Capital Distribution Shares.
The distributions attributable to the Preferred Shares (by series) will be
determined in accordance with a monthly analysis of the Properties which
collateralize the Financing (and Future Financings). This monthly analysis will
be dependent upon a review of the monthly Property operating statements which,
pursuant to their loan agreements, the owners of the Property will be required
to supply to the Company (and, on an annual basis, audited financial statements
of the operating partnerships), and a calculation of the net effects of the
cash flow adjustments described above.
1.74. "Preferred Shares Series I Allocation Factor", calculated as of a
particular date (the "Calculation Date"), means the product of (i) a fraction,
the numerator of which is the number of Series I BACs which are exchanged in
the Transaction by BAC Holders for Series I Preferred Shares (less the
aggregate number of such Series I Preferred Shares which, through such
Calculation Date, have been redeemed or repurchased by the Company, have been
converted into cash or other Shares, or otherwise are no longer then
outstanding), and the denominator of which is the total number of Series I BACs
which are outstanding immediately prior to the consummation of the Transaction,
multiplied by (ii) 98%.
1.75. "Preferred Shares Series I Working Capital Reserve" means a reserve, to
be separately accounted for by the Company, which consists of that portion of
the Working Capital Reserves which is attributable to funds placed in the
Working Capital Reserves which are derived from SCATEF Series I Assets solely
for the benefit of Series I Preferred Shareholders.
1.76. "Preferred Shares Series II Allocation Factor", calculated as of a
particular date (the "Calculation Date"), means the product of (i) a fraction,
the numerator of which is the number of Series II BACs which are exchanged in
the Transaction by BAC Holders for Series II Preferred Shares (less the
aggregate number of such Series II Preferred Shares which, through such
Calculation Date, have been redeemed or repurchased by the Company, have been
converted into cash or other Shares, or otherwise are no longer then
outstanding), and the denominator of which is the total number of Series II
BACs which are outstanding immediately prior to the consummation of the
Transaction, multiplied by (ii) 98%.
1.77. "Preferred Shares Series II Working Capital Reserve" means a reserve, to
be separately accounted for by the Company, which consists of that portion of
the Working Capital Reserves which is attributable to funds placed in the
Working Capital Reserves which are derived from SCATEF Series II Assets solely
for the benefit of Series II Preferred Shareholders.
1.78. "Profit" and "Loss" means, for each Fiscal Year or other period for which
allocations to Shareholders are made, an amount equal to the Company's taxable
income or loss for such year or period, determined in accordance with Section
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703(a) of the Code (PROVIDED, that for this purpose, all items of income, gain,
loss, or deduction required to be stated separately pursuant to Section
703(a)(1) of the Code shall be included in taxable income or loss), with the
following adjustments:
(a) Any income of the Company that is exempt from federal income tax and not
otherwise taken into account in computing Profit or Loss pursuant to this
provision shall be added to such taxable income or loss;
(b) Any expenditures of the Company described in Section 705(a)(2)(B) of the
Code or treated as Code Section 705(a)(2)(B) expenditures pursuant to Section
1.704-1(b)(2)(iv)(i) of the Treasury Regulations, and not otherwise taken into
account in computing Profit or Loss pursuant to this provision, shall be
subtracted from such taxable income or loss;
(c) Book Gain or Book Loss from a Capital Transaction shall be taken into
account in lieu of any tax gain or tax loss recognized by the Company by reason
of such Capital Transaction; and
(d) In lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account Depreciation for such Fiscal Year, computed as
provided in this Agreement.
If the Company's taxable income or loss for such Fiscal Year or other period,
as adjusted in the manner provided above, is a positive amount, such amount
shall be the Company's Profit for such Fiscal Year or other period; and if a
negative amount, such amount shall be the Company's Loss for such Fiscal Year
or other period.
1.79. "Property" means the land and the buildings thereon upon which the
Company holds a mortgage or other similar encumbrance at a particular time, and
the Bonds held by the Company at a particular time.
1.80. "Redemption Event" means (a) the Sale or Repayment of a SCATEF Asset, or
(b) the receipt by the Company of a Par Value Appraisal.
1.81. "Refunded Bonds" means those SCATEF Assets which were refunded by SCATEF
in the SCATEF Restructuring, which Bonds are generally referred to as the
following: Montclair, Newport Village, Nicollet Ridge, Steeplechase Falls,
Barkley Place, Mallard Cove I, Mallard Cove II, Whispering Lake, Gilman
Meadows, Hamilton Chase, and Meadows. "Refunded Bonds (Series A)" means the
Series A Bonds issued in the Refunding, and "Refunded Bonds (Series B)" means
the Series B Bonds issued in the Refunding.
1.82. "Refunding" means the refunding by the issuers of the Refunded Bonds, in
the aggregate principal amount of $126,590,000, which resulted in the exchange
of the Refunded Bonds for a Series A Bond and a Series B Bond (whose aggregate
principal amount equals that of the Refunded Bonds).
1.83. "Relative" means, with respect to any Person, any parent, spouse,
brother, sister, or natural or adopted lineal descendant or spouse of such
descendant of such Person.
1.84. "Repayment" shall have the meaning set forth in Section 1.85 below.
1.85. "Sale" or "Repayment" means the sale or other disposition of a Property
(a "Sale") or, in the absence of a Sale, the repayment of the principal and
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interest, if any, payable upon the redemption or remarketing of a Bond which
was included within the Property (a "Repayment"); provided, however, that these
terms shall not include the pledge of a Property in connection with the
financing, refinancing or other leveraging of such Property or otherwise. The
term "Sale" shall include (a) a foreclosure by a third party which is
unaffiliated with the current operating partnership (or respective general
partner) owning a Property, (b) a deed-in-lieu of foreclosure to a third party
which is unaffiliated with the current operating partnership (or respective
general partner) owning a Property, or (c) a sale or transfer of a Property to
a third party which is unaffiliated with the current operating partnership (or
respective general partner) owning a Property; and a "Sale" shall not be deemed
to occur if the Company forecloses on a Property or if the Company directs a
deed-in-lieu of foreclosure on a Property.
1.86. "SCATEF" has the meaning set forth in the recitals to this Agreement.
1.87. "SCATEF Assets" means collectively the 23 Bonds as originally held by
SCATEF, taking into account the Refunding and any future refundings but
ignoring the Financing and any Future Financing. "SCATEF Series I Assets" means
those SCATEF Assets with respect to which SCATEF's Series I BAC Holders hold an
economic interest, and "SCATEF Series II Assets" means those SCATEF Assets with
respect to which SCATEF's Series II BAC Holders hold an economic interest.
1.88. "SCATEF Partnership Agreement" means the Amended and Restated Agreement
of Limited Partnership of SCATEF dated June 3, 1986, as amended through the
close of business on February 13, 1995 but not including any amendments
effective on or after February 14, 1995 (provided, however, that to the extent
that the context of a reference to such agreement of limited partnership
indicates that a different effective date of such agreement of limited
partnership should apply, then such indicated effective date shall apply to
such reference). The SCATEF Partnership Agreement is hereby incorporated herein
to the extent specified in this Agreement.
1.89. "SCATEF Post-Financing Assets" means collectively the 23 Bonds as
originally held by SCATEF; provided, however, that (a) with respect to the
Refunded Bonds, this term shall refer only to the Series B Bond portions of
such Refunded Bonds (and not to the Series A Bond portions thereof), and (b)
such term shall also refer to the retained portions (but not the portions
financed, refinanced or otherwise leveraged in a Future Financing) of any Bond
refunded after the Transaction Consummation Date. "SCATEF Series I Post-
Financing Assets" means those SCATEF Post-Financing Assets with respect to
which SCATEF's Series I BAC Holders hold an economic interest, and "SCATEF
Series II Post-Financing Assets" means those SCATEF Post-Financing Assets with
respect to which SCATEF's Series II BAC Holders hold an economic interest.
1.90. "SCATEF Restructuring" means the Financing and the Refunding,
collectively, and related transactions.
1.91. "SCATEF Series I Assets Profit or Loss" means, for each Fiscal Year or
other period for which allocations to Shareholders are made, an amount of the
Company's items of income, gain, loss and deduction, generated by the SCATEF
Series I Assets.
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1.92. "SCATEF Series I Post-Financing Assets Profit or Loss" means, for each
Fiscal Year or other period for which allocations to Shareholders are made, an
amount of the Company's items of income, gain, loss and deduction, generated by
the SCATEF Series I Post-Financing Assets.
1.93. "SCATEF Series II Assets Profit or Loss" means, for each Fiscal Year or
other period for which allocations to Shareholders are made, an amount of the
Company's items of income, gain, loss and deduction, generated by the SCATEF
Series II Assets.
1.94. "SCATEF Series II Post-Financing Assets Profit or Loss" means, for each
Fiscal Year or other period for which allocations to Shareholders are made, an
amount of the Company's items of income, gain, loss and deduction, generated by
the SCATEF Series II Post-Financing Assets.
1.95. "Series" refers to the two-series structure of the SCATEF Assets, and, in
general, refers in the singular to either Series I or Series II as such
references are used in this Agreement.
1.96. "Series I BAC Holders" means BAC Holders in their capacities as holders
of BACs which were designated by SCATEF as Series I BACs ("Series I BACs").
1.97. "Series I Preferred Capital Distribution Shareholder" means a Shareholder
in its capacity as a holder of Series I Preferred Capital Distribution Shares.
1.98. "Series I Preferred Capital Distribution Shares" shall have the meaning
set forth in Section 3.1 of this Agreement.
1.99. "Series I Preferred Shareholder" means a Shareholder in its capacity as a
holder of Series I Preferred Shares.
1.100. "Series I Preferred Shares" shall have the meaning set forth in Section
3.1 of this Agreement.
1.101. "Series II BAC Holders" means BAC Holders in their capacities as holders
of BACs which were designated by SCATEF as Series II BACs ("Series II BACs").
1.102. "Series II Preferred Capital Distribution Shareholder" means a
Shareholder in its capacity as a holder of Series II Preferred Capital
Distribution Shares.
1.103. "Series II Preferred Capital Distribution Shares" shall have the meaning
set forth in Section 3.1 of this Agreement.
1.104. "Series II Preferred Shareholder" means a Shareholder in its capacity as
a holder of Series II Preferred Shares.
1.105. "Series II Preferred Shares" shall have the meaning set forth in Section
3.1 of this Agreement.
1.106. "Shareholders" means all persons who hold Shares, and shall have the
same meaning as the word "Members."
1.107. "Shares" means Company Interests.
1.108. "Special Distributions" means distributions to the holders of BACs who
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convert those BACs to Preferred Capital Distribution Shares in the Transaction,
payable in accordance with Section 5.1(a)(i) of this Agreement.
1.109. "Special Shareholder" means Shelter Development Holdings, Inc., for so
long as such Person is subject to certain liabilities as set forth in Section
6.1(b) of this Agreement, and shall also mean any other Person who agrees under
Article 6 to be a Special Shareholder.
1.110. "Specially Appointed Director(s)" shall have the meaning ascribed
thereto in Section 6.1(d) of this Agreement.
1.111. "Subsidiary" shall have the meaning set forth in Section 12.1 of this
Agreement.
1.112. "Tax Matters Partner" shall have the meaning ascribed thereto in Section
3.7 of this Agreement.
1.113. "Term Growth Shareholders" means the holders of Term Growth Shares.
1.114. "Term Growth Shares" shall have the meaning set forth in Section 3.1 of
this Agreement.
1.115. "Transaction" shall have the meaning set forth in the recitals to this
Agreement.
1.116. "Transaction Agreement" means that certain agreement dated as of August
1, 1996, to which the Company and SCATEF are parties, governing the terms of
the Transaction.
1.117. "Transaction Consummation Date" means the date on which the Transaction
is consummated.
1.118. "Transfer" (or "Transferred") means to give, sell, assign, encumber,
pledge, hypothecate, devise, bequeath, or otherwise dispose of, encumber,
transfer, or permit to be transferred, during life or at death. The word
"Transfer," when used as a noun, shall mean any Transfer transaction.
1.119. "Transferee" means any Person to whom Shares are Transferred for any
reason or by any means.
1.120. "Treasury Regulations" means the federal income tax regulations,
including any temporary or proposed regulations, promulgated under the Code, as
such Treasury Regulations may be amended from time to time (it being understood
that all references herein to specific sections of the Treasury Regulations
shall be deemed also to refer to any corresponding provisions of succeeding
Treasury Regulations).
1.121. "Valuation Date" shall have the meaning set forth in Section 12.3 of
this Agreement.
1.122. "Working Capital Reserves" means funds held in reserves which are
maintained as working capital for the Company and available for any
contingencies relating to the ownership of the Property and the operation of
the Company. The Working Capital Reserves funds shall be segregated between (a)
Preferred Shares (segregated between Series I and Series II), (b) Preferred
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Capital Distribution Shares (segregated between Series I and Series II), and
(c) New Shares. Amounts held in the Working Capital Reserves may at any time,
in the discretion of the Board of Directors, be added to the respective
Allocable Portfolio Cash Flows or to liquidation proceeds allocable to the
respective Shares (depending upon the characterization of such amounts when
received by the Company), but may not be otherwise removed from the respective
Working Capital Reserve.
ARTICLE 2
Continuation, Purpose and Term
2.1. Continuation. The parties hereto hereby agree to continue the limited
liability company known as Municipal Mortgage and Equity, L.L.C., as a limited
liability company under the provisions of the Act.
2.2. Company Name. The name of the Company is "Municipal Mortgage and Equity,
L.L.C.". The business of the Company shall be conducted under such name or such
other names as the Board of Directors or the Shareholders may from time to time
determine on and pursuant to the terms of this Agreement.
2.3. The Certificate. The Shareholders hereby agree to execute, file and
record all such certificates and documents, including amendments to the
Certificate, and to do such other acts as may be appropriate to comply with all
requirements for the formation, continuation, and operation of a limited
liability company, the ownership of property, and the conduct of business under
the laws of the State of Delaware and any other jurisdiction in which the
Company may own property or conduct business.
2.4. Principal Business Office. The principal business office of the Company
shall be located at 218 North Charles Street, Suite 500, Baltimore, Maryland
21201, or at such other location as may hereafter be determined by the Board of
Directors. The principal business office, as well as the registered office and
the registered agent, of the Company may be changed by the Board of Directors
from time to time in accordance with the then applicable provisions of the Act
and any other applicable laws, as well as the terms and conditions of this
Agreement.
2.5. Term of Company. The term of the Company shall continue until it is wound
up and dissolved pursuant to the provisions of Article 10 hereof.
2.6. Purposes. The purposes of the Company are (a) to invest in or engage in
activities related to investment in Bonds and in real estate, including but not
limited to loan servicing and loan origination (whether in connection with
loans to the Company or to others), and to generate returns from such
investments; this may include investing in entities which invest in bonds and
in real estate assets; provided, however, that the investment criteria shall be
established by the Board of Directors from time to time in its sole discretion
subject to the requirement that such criteria be consistent with the purposes
of the Company; (b) to engage in any other activities relating to, and
compatible with, the purposes set forth above; (c) to acquire, own and dispose
of general and limited partnership interests, membership interests, and stock
or other equity interests in Entities, and to exercise all rights and powers
granted to the owner of any such interests; (d) to take such other actions, or
do such other things, as are necessary or appropriate (in the sole discretion
of the Board of Directors) to carry out the provisions of this Agreement; and
(e) to invest in any type of investment and to engage in any other lawful act
or activity for which limited liability companies may be organized under the
Act, and by such statement all lawful acts and activities shall be within the
purposes of the Company, except for express limitations, if any.
2.7. Powers. In furtherance of its purposes, but subject to all of the
provisions of this Agreement, the Company shall have the power and is hereby
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authorized to (a) invest (at any time during the term of the Company) in (i)
mortgage revenue bonds or portions of or interests in (including junior
positions) mortgage revenue bonds financing multifamily properties, senior
living facilities, manufactured housing communities, or congregate care
facilities, beneficial ownership certificates or any other securities of other
funds or investments with similar underlying investment objectives, (ii)
multifamily real estate, including senior living facilities, manufactured
housing communities, and congregate care facilities, and (iii) entities which
engage in any activities described in clauses (i) or (ii) of this sentence;
invest (at any time during the term of the Company) in other assets which are
designed to accomplish any of the foregoing investment purposes or in any
manner consistent with the Company's then-existing investment criteria and
objectives; and to reinvest the proceeds of any sales by the Company of Company
assets, in any permitted investments; (b) act as a general or limited partner,
member, joint venturer, manager or shareholder of any Entity (including but not
limited to an operating partnership), and to exercise all of the powers,
duties, rights and responsibilities associated therewith; (c) take any and all
actions necessary, convenient or appropriate as the holder of any such
interests or positions; (d) operate, purchase, maintain, finance, improve, own,
sell, convey, assign, mortgage, lease, demolish or otherwise dispose of any
real or personal property that may be necessary, convenient or incidental to
the accomplishment of the purposes of the Company; (e) borrow money and issue
evidences of indebtedness in furtherance of any or all of the purposes of the
Company, and secure the same by mortgage, pledge or other lien on any assets of
the Company; (f) invest any funds of the Company pending distribution or
payment of the same pursuant to the provisions of this Agreement; (g) prepay in
whole or in part, refinance, recast, increase, modify or extend any
indebtedness of the Company and, in connection therewith, execute any
extensions, renewals or modifications of any mortgage or security agreement
securing such indebtedness; (h) enter into, perform and carry out contracts of
any kind, including, without limitation, contracts with any Person affiliated
with any of the Shareholders, necessary to, in connection with or incidental to
the accomplishment of the purposes of the Company; (i) establish reserves for
capital expenditures, working capital, debt service, taxes, assessments,
insurance premiums, repairs, improvements, depreciation, depletion,
obsolescence and general maintenance of buildings and other property out of the
rents, profits or other income received; (j) employ or otherwise engage
employees, managers, contractors, advisors and consultants, and pay reasonable
compensation for such services, and enter into employee benefit plans of any
type; (k) enter into partnerships or other ventures with other Persons in
furtherance of the purposes of the Company; (l) purchase or repurchase Shares
from any Person for such consideration as the Board of Directors may determine
in its reasonable discretion (whether more or less than the original issuance
price of such Share or the then trading price of such Share); (m) enter into
rights plans or other plans relating to Shares, options or bonuses, and to
issue Shares, options or warrants thereunder (or other derivatives relating
thereto) for any consideration (even if such consideration is less than the
market value of such Shares); and (n) do such other things and engage in such
other activities as may be necessary, convenient or advisable with respect to
the conduct of the business of the Company, and have and exercise all of the
powers and rights conferred upon limited liability companies formed pursuant to
the Act.
2.8. Effectiveness of this Agreement. This Agreement shall govern the
operations of the Company and the rights and restrictions applicable to the
Shareholders, to the extent permitted by law. Pursuant to Section 18-
101(7)(a)(2) of the Act, all Persons who become holders of Shares in the
Company shall be bound by the provisions of this Agreement and shall be deemed
to be parties hereto, whether or not such Persons execute a counterpart of this
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Agreement. The payment for any Shares acquired by any Person (which payment, in
the case of the conversion of BACs into Shares pursuant to the Transaction,
shall be deemed to be made by BAC Holders as such conversion occurs), or the
action of becoming an assignee or Transferee of such Shares, shall be deemed to
constitute a request that the records of the Company reflect such admission,
assignment or Transfer, and shall be deemed to be sufficient acts to comply
with the requirements of Section 18-101(7)(a)(2) of the Act and to so cause
that Person to become a Shareholder and to bind that Person to the terms and
conditions of this Agreement (and to entitle that Person to the rights of a
Shareholder hereunder), without the requirement for execution of this Agreement
by such Person.
ARTICLE 3
Classes of Shares; Admission of Shareholders; Capitalization
3.1. Classes of Shares.
(a) The Company shall have the authority to issue the following classes and
series of Shares:
(i) shares which are designated "Growth Shares";
(ii) shares which are designated "Term Growth Shares," which shares shall be
identical to Growth Shares in all respects except that (a) at such time as the
last then-outstanding Preferred Share and Preferred Capital Distribution Share
are fully redeemed by the Company, all of the Term Growth Shares shall be
redeemed in full and shall be cancelled (and, in connection with such
redemption and cancellation, the Company shall make no further distribution,
whether of cash flow, return of capital, or otherwise, to the holders of Term
Growth Shares; provided, however, that the Company shall distribute to the
holders of Term Growth Shares, upon such redemption and cancellation, an amount
equal in the aggregate to (1) $2,963 per each of the 1,000 Term Growth Shares
(less any prior distributions of residual proceeds) issued on the Transaction
Consummation Date to an affiliate of Merrill Lynch & Co. (the "Subordinated BAC
Holder"), to the extent that, under the applicable terms of the SCATEF
Partnership Agreement, residual Bond proceeds permit such distribution, and (2)
the pro-rata operating cash distributions (that is, the operating cash
distributions attributable on a pro-rata basis to the Term Growth Shares in the
aggregate) generated through the date of such redemption and cancellation since
the then most recent Dividend Payment Date), (b) each Term Growth Share shall
give its holder a 0.001% interest in the cash distributions from the Company,
on a pari passu basis (with respect to other Term Growth Shares), in each such
case payable after required cash distributions are paid to the Preferred
Shareholders and the Preferred Capital Distribution Shareholders under the
terms of this Agreement, and cumulative to the extent not previously paid, (c)
Term Growth Shares are transferrable only to (i) holders of Term Growth Shares
and their Affiliates or (ii) other Persons approved by the Board of Directors,
and (d) the Term Growth Shares have certain voting rights on certain matters
which would affect their distribution or other rights, preferences or
privileges, as and to the extent set forth in this Agreement;
(iii) shares which are designated "Series I Preferred Shares";
(iv) shares which are designated "Series II Preferred Shares";
(v) shares which are designated "Series I Preferred Capital Distribution
Shares";
(vi) shares which are designated "Series II Preferred Capital Distribution
Shares"; and
(vii) one or more other classes or series of Shares, as to which the Board of
Directors shall have the exclusive authority, by resolution or resolutions
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providing for the issuance of Shares or of a particular class or series
thereof, to fix and determine the voting powers, full or limited or no voting
power, and such designations, preferences, and relative, participating,
optional or other special rights, and qualifications, limitations, or
restrictions thereof, as may be desired by the Board of Directors from time to
time, to the fullest extent now or hereafter permitted by the laws of the State
of Delaware (collectively, all such other classes and series to be referred to
as the "Future Shares"); provided, however, that, so long as any Preferred
Shares or Preferred Capital Distribution Shares are outstanding, such classes
or series of Future Shares cannot be senior to the outstanding Preferred Shares
or Preferred Capital Distribution Shares with respect to the SCATEF Assets or
revenues therefrom. Nothing in this Section 3.1(a)(vii) shall be deemed to
restrict the ability of the Company to incur secured or unsecured debt
(directly or indirectly), including but not limited to through custodial, trust
or similar or other arrangements.
(b) Each Term Growth Share, Growth Share, Series I Preferred Share, Series II
Preferred Share, Series I Preferred Capital Distribution Share and Series II
Preferred Capital Distribution Share shall (i) have no stated par value per
Share, and (ii) have the rights and be governed by the provisions set forth in
this Agreement; and none of such shares shall have any preemptive rights, or
give the holders thereof any rights to convert into any other securities of the
Company, or give the holders thereof any cumulative voting rights, except as
specifically set forth herein.
(c) The Board of Directors may cause the Company to issue such numbers of
Growth Shares and Future Shares from time to time as the Board of Directors may
determine in its sole discretion, and the number of such shares is not limited.
(d) If the Board of Directors determines that it is necessary or desirable to
amend this Agreement or to make any filings under the Act or otherwise in order
to reference the existence or creation of a class or series of Future Shares,
the Board of Directors may cause such amendments and filings to be made, which
filings might take the form of amendments to the Company's Certificate;
provided, however, that, unless specifically required by the Act or this
Agreement, no approval or Consent of any Shareholders shall be required in
connection with the making of any such filing, instrument or amendment.
(e) No Future Share shall have any preemptive rights or give the holder
thereof any rights to convert into any other securities of the Company, or give
any holders thereof any cumulative voting rights, unless such rights are
specifically provided for in the Board of Directors' resolution creating the
class of which such Future Share is a part.
(f) The Board of Directors, without any Consent of any Shareholders being
required, may effect a split or reverse split of Shares of any series or class,
by adopting a resolution therefor. If the Board of Directors determines that it
is necessary or desirable to make any filings under the Act or otherwise in
order to reference the existence of such a split or reverse split, the Board of
Directors may cause such filings to be made, which filings might take the form
of amendments to the Company's Certificate; provided, however, that, unless
specifically required by the Act or this Agreement, no approval or Consent of
any Shareholders shall be required in connection with the making of any such
filing or amendment.
(g) Notwithstanding any other provisions of this Agreement, the Board of
Directors may, without the consent of Shareholders, amend this Agreement to the
extent required to allow the Board of Directors to exercise the powers granted
to it by this Section 3.1.
3.2. Original Shareholders and their Affiliates; Initial and Subsequent
Capital Contributions.
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(a) Prior to the Transaction Consummation Date, the only Shareholders shall be
the Original Shareholders.
(b) Each of the Original Shareholders has contributed or caused to have been
contributed to the Company, prior to the Transaction Consummation Date, its
Initial Capital Contribution, which amounts are as follows:
MME I Corporation: $100
MME II Corporation: $100
In exchange for such contributions, each Original Shareholder has been issued
four Growth Shares.
3.3. Admission of SCATEF BAC Holders and Other Persons as Shareholders of
the Company.
(a) On the Transaction Consummation Date, and as provided under and in
accordance with the terms of the Transaction Agreement, each and every Person
who is a BAC Holder shall automatically become a Shareholder. Such Person shall
automatically receive Growth Shares in exchange for all of his, her or its
BACs, as provided for in the Transaction Agreement, unless such Person duly
elected otherwise in the Transaction voting and approval process conducted by
SCATEF prior to the consummation of the Transaction (whether or not such Person
voted in favor of the Transaction), all pursuant to the terms of the
Transaction Agreement. The class and number of Shares to be received by each
such Person shall be calculated pursuant to the Transaction Agreement. Each
such Person shall be deemed to have contributed capital to the Company, in the
form of such Person's interest in SCATEF being converted to an interest in the
Company, as provided in Section 3.5 of this Agreement.
(b) The Persons who are the general partners of SCATEF immediately prior to
the consummation of the Transaction, certain of their affiliates, and certain
other Persons shall also be admitted as Shareholders of the Company as of the
Transaction Consummation Date, all in accordance with the Transaction
Agreement.
3.4. Additional Provisions Relating to Additional Shareholders. In the
event that the Board of Directors determines that additional funds are required
by the Company for any Company purpose, or that the Company should for any
reason seek to raise additional capital, the Board may cause the Company to
sell Future Shares for a price equal to what the Board of Directors determines
to be the fair value of such Shares, in exchange for cash, other property,
services or any other lawful consideration to be received by the Company in
consideration of such Shares (to be valued by the Board of Directors in its
discretion), or may cause the Company to obtain funds as a loan from any third
party upon such terms and conditions as the Board of Directors deems
appropriate, or any combination thereof from time to time. The Initial Capital
Contribution of any such additional Shareholders shall be specified by the
Board of Directors at the time of admission of such additional Shareholder.
3.5. Capital Accounts. A separate capital account (a "Capital Account")
shall be established and maintained for each Shareholder, including any
Transferee or additional Shareholder who shall hereafter acquire a Company
Interest, in accordance with the following provisions:
(a) To each Shareholder's Capital Account there shall be credited the amount
of cash and fair market value of the property actually contributed to the
Company by such Shareholder pursuant to Sections 3.2, 3.3 and 3.4 hereof
(which, in the case of the BAC Holders, shall initially be an amount equal to
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the BAC Conversion Price for each BAC), such Shareholder's allocable share of
Profit, and the amount of any Company liabilities that are assumed by such
Shareholder or that are secured by any Company property distributed to such
Shareholder.
(b) To each Shareholder's Capital Account there shall be debited the amount of
cash and the fair market value of any Company property distributed to such
Shareholder pursuant to any provision of this Agreement, such Shareholder's
allocable share of Loss, and the amount of any liabilities of such Shareholder
that are assumed by the Company or that are secured by any property contributed
by such Shareholder to the Company.
(c) If any asset of the Company is distributed in kind, the Company shall be
deemed to have realized Profit or Loss thereon in the same manner as if the
Company had sold such asset for an amount equal to the greater of (i) the fair
market value of such asset, or (ii) the fair market value of any debts to which
such asset is then subject, in each case as determined by the Board of
Directors. If at any time after the date of this Agreement, the Book Value of
any Company asset is adjusted pursuant to the last sentence of the definition
of Book Value set forth in Section 1 hereof, the Capital Accounts of all
Shareholders shall be adjusted simultaneously to reflect the aggregate net
adjustments, as if the Company recognized Profit or Loss equal to the
respective amounts of such aggregate net adjustments.
(d) The provisions of this Agreement relating to the maintenance of Capital
Accounts are intended to comply with Section 1.704-1(b)(2)(iv) of the Treasury
Regulations, and shall be interpreted and applied in a manner consistent with
such Treasury Regulations.
(e) A Shareholder shall not be entitled to withdraw any part of its Capital
Account or to receive any distributions from the Company, except as provided in
Article 5 hereof, nor shall a Shareholder be entitled to make any loan or
Capital Contribution to the Company other than as expressly provided herein. No
loan made to the Company by any Shareholder shall constitute a capital
contribution to the Company for any purpose.
(f) Except as required by the Act, no Shareholder shall have any liability
for the return of the Capital Contribution of any other Shareholder. A
Shareholder who has more than one interest in the Company may have a separate
Capital Account for each different class of interest owned.
3.6. Transfer of Capital Accounts. The original Capital Account
established for each Transferee shall be in the same amount as the Capital
Account of the Shareholder which such Transferee succeeds, at the time such
Transferee is admitted to the Company. The Capital Account of any Shareholder
whose Company Interest shall be increased by means of the Transfer to it of all
or part of the Company Interest of another Shareholder shall be appropriately
adjusted to reflect such Transfer. Any reference in this Agreement to a Capital
Contribution of, or distribution to, a then-Shareholder shall include a Capital
Contribution or distribution previously made by or to any prior Shareholder on
account of the Company Interest of such then-Shareholder.
3.7. Tax Matters Partner.
(a) Shelter Development Holdings, Inc. or its assignee shall be the Company's
"tax matters partner" (as such term is defined in Section 6231(a)(7) of the
Code) (the "Tax Matters Partner"), for purposes of Section 6231 of the Code,
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with all of the powers that accompany such status (except as otherwise provided
in this Agreement). Promptly following the written request of the Tax Matters
Partner, the Company shall, to the fullest extent permitted by law, reimburse
and indemnify the Tax Matters Partner for all reasonable expenses, including
reasonable legal and accounting fees, claims, liabilities, losses and damages
incurred by the Tax Matters Partner in connection with any administrative or
judicial proceeding with respect to the tax liability of the Shareholders. The
provisions of this Section 3.7 shall survive the termination of the Company and
shall remain binding on the Shareholders for as long as a period of time as is
necessary to resolve with the Internal Revenue Service any and all matters
regarding the federal income taxation of the Company or the Shareholders.
(b) Notwithstanding Section 3.7(a) hereof, the Tax Matters Partner shall have
no fiduciary duty whatsoever to any other Shareholder, and shall be treated in
exactly the same manner as any other Shareholder other than as specifically
provided in Section 3.7(a) hereof.
ARTICLE 4
Allocations
4.1. General Rules Concerning Allocations. Within 45 days after the end
of each calendar month, the Company shall conduct an interim closing of the
books as of the end of the last day of that calendar month. On the basis of the
closing of the books for each calendar month, the Company shall determine the
amount of Profit and Loss attributable to that calendar month. Profits and
Losses shall be determined in accordance with the accounting methods followed
by the Company for federal income tax purposes.
4.2. Allocations of Profits and Losses. All allocations to the
Shareholders of items included within the Company's Profits and Losses
attributable to each calendar month shall be allocated solely among the
Shareholders recognized as Shareholders as of the last day of that calendar
month, as follows:
(a) Each holder of Preferred Shares shall be allocated pro rata items of the
Company's Profit and Loss attributable to the applicable SCATEF Assets of the
related Series equal to the allocations such Shareholders would have received
under the SCATEF Partnership Agreement if the Financing (and any Future
Financings) had not occurred; provided, however, that
(i) such allocations to the holders of Preferred Shares shall be made in a
manner consistent with the application of Article 5 of this Agreement,
including but not limited to the increase and decrease adjustments which are
made in accordance with Section 1.73's definition of Preferred Shares Revenues
(reference to which term is required in order to make the required calculations
under Article 5), and
(ii) if and to the extent that the SCATEF Assets of the related Series do not
produce sufficient amounts of Profit or Loss to make the allocations otherwise
required by this paragraph (a), then, to the extent of such insufficiency, an
additional amount of other tax-exempt Company Profit or Loss, and then (to the
extent that such other tax-exempt Company Profit or Loss is insufficient) other
Company Profit or Loss, shall be allocated to such holder of Preferred Shares
in order to make up such insufficiency;
(b) Each holder of Preferred Capital Distribution Shares shall be allocated
pro rata items of the Company's Profit and Loss attributable to the applicable
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SCATEF Assets of the related Series equal to the allocations such Shareholders
would have received under the SCATEF Partnership Agreement (as in effect
immediately prior to consummation of the Transaction) but taking into account
the Financing and any Future Financings with respect to which Special
Distributions are made; provided, however, that
(i) such allocations to the holders of Preferred Capital Distribution Shares
shall be made in a manner consistent with the application of Article 5 of this
Agreement, including but not limited to the increase and decrease adjustments
which are made in accordance with Section 1.63's definition of Preferred
Capital Distribution Shares Revenues (reference to which term is required in
order to make the required calculations under Article 5), and
(ii) if and to the extent that the SCATEF Assets of the related Series do not
produce sufficient amounts of Profit or Loss to make the allocations otherwise
required by this paragraph (b), then, to the extent of such insufficiency, an
additional amount of other tax-exempt Company Profit or Loss, and then (to the
extent that such other tax-exempt Company Profit or Loss is insufficient) other
Company Profit or Loss, shall be allocated to such holder of Preferred Capital
Distribution Shares in order to make up such insufficiency;
(c) Of the remaining items, if any, of the Company's Profit or Loss for the
applicable period, an amount equal to 0.001% of the Company's total Profit or
Loss for such applicable period shall be allocated to each Term Growth Share.
(d) The remaining items, if any, of the Company's Profit or Loss for the
applicable period which remains after the amounts allocated in paragraphs (a),
(b) and (c) above (whether such result is a positive number (Profit) or a
negative number (Loss)) shall be allocated among the Growth Shareholders in
proportion to their relative ownership of Growth Shares.
(e) The Tax Matters Partner is authorized to make reasonable determinations
regarding the allocation of Profit and Loss under this Section 4.2, including
determinations relating to the calculation of Profit or Loss, and such other
items of the Company's income, gain, loss, deduction and credit as may be
appropriate to carry out the intent of this Section 4.2.
4.3. Special Allocations. Notwithstanding any other provision of this
Agreement, to the extent an allocation of Profit or Loss or any item thereof to
any Shareholder pursuant to Sections 4.1 or 4.2 of this Agreement would be in
violation of the requirements of the Treasury Regulations under Section 704(b)
of the Code, the Tax Matters Partner shall comply with the requirements of such
Treasury Regulations and adjust such allocations to comply with such
requirements in a manner that will, in the reasonable judgment of the Tax
Matters Partner, have the least effect on the amounts to be allocated and
distributed under this Agreement. In the event a Shareholder unexpectedly
receives any adjustment, allocation or distribution described in Treasury
Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6) that causes or
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increases a negative balance in a Shareholder's Capital Account, items of
Profit shall be specially allocated to such Shareholder so as to eliminate such
negative balance as quickly as possible. Special allocations shall also be made
to the extent required by the provisions of Section 5.2(b)(vi) or 5.2(c)(ii) of
this Agreement. The Shareholders agree that if this Section 4.3 becomes
applicable, the Tax Matters Partner is authorized to review and adjust the
allocations made pursuant to Sections 4.1 or 4.2 of this Agreement.
4.4. Additional Allocations.
(a) If there is a net decrease in "partnership minimum gain" (within the
meaning of Treasury Regulation Section 1.704-2(d)) during a taxable year, a
Shareholder shall be allocated, before any other allocation of the Company's
items for such taxable year (and if necessary, subsequent years), items of the
Company's income and gain in the amount equal to the Shareholder's share of
such net decrease in partnership minimum gain (within the meaning of Treasury
Regulations Section 1.704-2(g)).
(b) The Tax Matters Partner, in order to preserve uniformity of Shares within
a class, may, in its sole discretion, make a special allocation of items of
income, gain, loss or deduction but only if such allocations would not have a
material adverse effect on the Shareholders and if they are consistent with the
principles of Section 704 of the Code.
(c) If, and to the extent that any Shareholder is deemed to recognize income
as a result of any transaction between such Shareholder and the Company
pursuant to Sections 1272-1274, Section 7872, Section 483 or Section 482 of the
Code, or any similar provision now or hereafter in effect, any corresponding
loss or deduction of the Company shall be allocated to the Shareholder who was
charged with such income.
(d) Adjustments to the Capital Accounts of Shareholders with respect to an
adjustment to the tax basis of any asset of the Company pursuant to Section
734(b) or Section 743(b) of the Code shall be made in accordance with the
provisions of Treasury Regulation Section 1.704-1(b)(2)(m).
4.5. Tax Allocations.
(a) For federal income tax purposes, except as otherwise provided in this
Section 4.5, each item of income, gain, loss and deduction of the Company shall
be allocated among the Shareholders in the same proportion as the corresponding
items are allocated pursuant to Sections 4.3 and Section 4.4 hereof.
(b) In the event that the Book Value of any asset contributed to and held by
the Company differs from its basis for federal income tax purposes ("Tax
Basis"), allocations of income, gain, loss or deduction with respect to such
asset shall, solely for tax purposes, be allocated among the Shareholders so as
to take account of any variation between Book Value and Tax Basis in accordance
with the provisions of Section 704(c) of the Code and Treasury Regulations
thereunder. The Tax Matters Partner may elect any reasonable method or methods
for making such allocations.
(c) If the Book Value of any asset of the Company is adjusted pursuant to
Section 1.15 hereof, subsequent allocations of income, gain, loss and
deductions with respect to such asset shall take into account any variation
between Book Value and Tax Basis in accordance with the provisions of Section
704(c) of the Code and Treasury Regulations thereunder.
(d) The Tax Matters Partner shall have the sole discretion to make special
allocations of items of income, gain, loss and deductions that are consistent
with the principles of Section 704(c) of the Code and to amend the provisions
of this Agreement (without Shareholder action, notwithstanding Section 14.4 of
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this Agreement), as appropriate, to reflect the proposal or promulgation of
Treasury Regulations under Subchapter K of the Code. The Tax Matters Partner
may adopt and employ such methods and procedures for (A) the maintenance of
capital accounts for book and tax purposes, (B) the determination and
allocation of adjustments under Sections 704(c), 734 and 743 of the Code, (C)
the determination and allocation of taxable income, tax loss and items thereof
under this Agreement and pursuant to the Code, (D) the determination of the
identities and tax classification of Shareholders, (E) the provision of tax
information and reports to the Shareholders, (F) the adoption of reasonable
conventions and methods for the valuation of assets and the determination of
tax basis, (G) the allocation of asset values and tax basis, (H) conventions
for the determination of depreciation, cost recovery and amortization
deductions and the adoption and maintenance of accounting methods, (I) the
recognition of the transfer of Shares, (J) for compliance and other tax-related
requirements, including without limitation, the use of computer software, to
use filing and reporting procedures similar to those employed by publicly-
traded partnerships and limited liability companies, as it determines in its
sole discretion are necessary and appropriate to execute the provisions of this
Agreement and to comply with federal and state tax law, and to achieve
uniformity of Shares. The Tax Matters Partner shall be indemnified and held
harmless by the Company for any expenses, penalties or other liabilities
arising as a result of decisions made in good faith on any of the matters
referred to in the preceding sentence. If the Tax Matters Partner determines,
based on advice of counsel, that no reasonable allowable convention or other
method is available to preserve the uniformity of Shares within a class, or the
Tax Matters Partner in its discretion so elects, Shares may be separately
identified as distinct classes to reflect differences in tax consequences.
ARTICLE 5
Distributions, Redemptions and Certain Permitted Conversions
5.1. Special Distributions; Distributions of Cash Flow from Operations or
Financings. This Section 5.1 applies only to distributions of cash flow from
operations of the Property and other operating cash flow, and to the proceeds
of financings, refinancings or other leveragings involving the Properties, and
does not relate to distributions upon the occurrence of a Redemption Event or
liquidation of the Company (such subjects being governed by Section 5.2 of this
Agreement).
(a) (i) Prior to the distributions described in paragraphs (b), (c), (d) and
(e) of this Section 5.1, and on the first Dividend Payment Date following the
consummation of the Transaction, a Special Distribution shall be made to each
BAC Holder who converts BACs to Preferred Capital Distribution Shares, in the
amount per Series I Preferred Capital Distribution Share and Series II
Preferred Capital Distribution Share so received by such Person of $170.91 and
$235.30, respectively. These Special Distributions represent returns of capital
to the Preferred Capital Distribution Shareholders who receive Special
Distributions.
(ii) Within three months after each time (after the Transaction Consummation
Date) any of the SCATEF Assets are financed, refinanced or otherwise leveraged
in a Future Financing, there shall be pro-rata a special capital distribution
(a "Future Special Distribution") to each holder of Preferred Capital
Distribution Shares in an aggregate amount equal to the product of (A) the net
proceeds of such transaction, and (B) the applicable Preferred Capital
Distribution Shares Allocation Factor. These Future Special Distributions
represent returns of capital to the Preferred Capital Distribution Shareholders
who receive Special Distributions.
(b) Each Series I Preferred Shareholder shall be entitled to receive, to the
fullest extent permitted by law, on each Dividend Payment Date, a pro-rata
portion (with reference to the number of Series I Preferred Shares held by such
Series I Preferred Shareholder and the total number of all then-outstanding
Series I Preferred Shares) of the following:
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(i) with respect to the first Dividend Payment Date which occurs after the
Transaction Consummation Date, a preferential distribution equal in aggregate
amount to the Preferred Shares Allocable Series I Portfolio Cash Flow generated
from February 14, 1995 through the June 30 or December 31 date which most
immediately precedes the Transaction Consummation Date, minus any and all
amounts distributed to the Series I Preferred Shareholders (including without
limitation distributions made to such Persons while they were BAC Holders) for
the period from February 14, 1995 through the time immediately prior to the
first Dividend Payment Date; and
(ii) with respect to each subsequent Dividend Payment Date, a preferential
semi-annual distribution (which in the case of a Dividend Payment Date of
February 15 shall relate to the six full calendar month period ending on the
then-most recent December 31, and in the case of a Dividend Payment Date of
August 15 shall relate to the six full calendar month period ending on the
then-most recent June 30), equal in aggregate amount to the Preferred Shares
Allocable Series I Portfolio Cash Flow generated by the Company in the
applicable six month period.
(c) Each Series II Preferred Shareholder shall be entitled to receive, to the
fullest extent permitted by law, on each Dividend Payment Date, a pro-rata
portion (with reference to the number of Series II Preferred Shares held by
such Series II Preferred Shareholder and the total number of all then-
outstanding Series II Preferred Shares) of the following:
(i) with respect to the first Dividend Payment Date which occurs after the
Transaction Consummation Date, a preferential distribution equal in aggregate
amount to the Preferred Shares Allocable Series II Portfolio Cash Flow
generated from February 14, 1995 through the June 30 or December 31 date which
most immediately precedes the Transaction Consummation Date, minus any and all
amounts distributed to the Series II Preferred Shareholders (including without
limitation distributions made to such Persons while they were BAC Holders) for
the period from February 14, 1995 through the time immediately prior to the
first Dividend Payment Date; and
(ii) with respect to each subsequent Dividend Payment Date, a preferential
semi-annual distribution (which in the case of a Dividend Payment Date of
February 15 shall relate to the six full calendar month period ending on the
then-most recent December 31, and in the case of a Dividend Payment Date of
August 15 shall relate to the six full calendar month period ending on the
then-most recent June 30), equal in aggregate amount to the Preferred Shares
Allocable Series II Portfolio Cash Flow generated by the Company in the
applicable six month period.
(d) Each Series I Preferred Capital Distribution Shareholder shall be entitled
to receive, to the fullest extent permitted by law, on each Dividend Payment
Date, a pro-rata portion (with reference to the number of Series I Preferred
Capital Distribution Shares held by such Series I Preferred Capital
Distribution Shareholder and the total number of all then-outstanding Series I
Preferred Capital Distribution Shares) of the following:
(i) with respect to the first Dividend Payment Date which occurs after the
Transaction Consummation Date, a preferential distribution equal in aggregate
amount to the Preferred Capital Distribution Shares Allocable Series I
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Portfolio Cash Flow generated from February 14, 1995 through the June 30 or
December 31 date which most immediately precedes the Transaction Consummation
Date, minus any and all amounts distributed to the Series I Preferred Capital
Distribution Shareholders under this paragraph (d) (including without
limitation distributions made to such Persons while they were BAC Holders, but
excluding the Special Distributions described in Section 5.1(a)(i) of this
Agreement) for the period from February 14, 1995 through the time immediately
prior to the first Dividend Payment Date; and
(ii) with respect to each subsequent Dividend Payment Date, a preferential
semi-annual distribution (which in the case of a Dividend Payment Date of
February 15 shall relate to the six full calendar month period ending on the
then-most recent December 31, and in the case of a Dividend Payment Date of
August 15 shall relate to the six full calendar month period ending on the
then-most recent June 30), equal in aggregate amount to the Preferred Capital
Distribution Shares Allocable Series I Portfolio Cash Flow generated by the
Company in the applicable six month period (but excluding Special Future
Distributions described in Section 5.1(a)(ii) of this Agreement).
(e) Each Series II Preferred Capital Distribution Shareholder shall be
entitled to receive, to the fullest extent permitted by law, on each Dividend
Payment Date, a pro-rata portion (with reference to the number of Series II
Preferred Capital Distribution Shares held by such Series II Preferred Capital
Distribution Shareholder and the total number of all then-outstanding Series II
Preferred Capital Distribution Shares) of the following:
(i) with respect to the first Dividend Payment Date which occurs after the
Transaction Consummation Date, a preferential distribution equal in aggregate
amount to the Preferred Capital Distribution Shares Allocable Series II
Portfolio Cash Flow generated from February 14, 1995 through the June 30 or
December 31 date which most immediately precedes the Transaction Consummation
Date, minus any and all amounts distributed to the Series II Preferred Capital
Distribution Shareholders under this paragraph (e) (including without
limitation distributions made to such Persons while they were BAC Holders, but
excluding the Special Distributions described in Section 5.1(a)(i) of this
Agreement) for the period from February 14, 1995 through the time immediately
prior to the first Dividend Payment Date; and
(ii) with respect to each subsequent Dividend Payment Date, a preferential
semi-annual distribution (which in the case of a Dividend Payment Date of
February 15 shall relate to the six full calendar month period ending on the
then-most recent December 31, and in the case of a Dividend Payment Date of
August 15 shall relate to the six full calendar month period ending on the
then-most recent June 30), equal in aggregate amount to the Preferred Capital
Distribution Shares Allocable Series II Portfolio Cash Flow generated by the
Company in the applicable six month period (but excluding Future Special
Distributions described in Section 5.1(a)(ii) of this Agreement).
(f) To the extent that amounts to be distributed under paragraphs (b) and (d)
of this Section 5.1 derive from cash flow generated by Series I SCATEF Assets,
such distributions shall be made on a pari passu, pro-rata basis with regard to
each other. To the extent that amounts to be distributed under paragraphs (c)
and (e) of this Section 5.1 derive from cash flow generated by SCATEF Series II
Assets, such distributions shall be made on a pari passu, pro-rata basis with
regard to each other. To the extent that amounts to be distributed under
paragraphs (b), (c), (d) and (e) of this Section 5.1 derive from cash flow
generated by sources other than SCATEF Assets, such distributions shall be made
on a pari passu, pro-rata basis with regard to each other.
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(g) Holders of Preferred Shares or Preferred Capital Distribution Shares shall
have no right (on account of such holdings) to receive any distributions
whatsoever on account of cash flow generated by Property of the Company other
than the SCATEF Assets; provided, however, that, to the extent that the Company
has insufficient cash on hand to pay the full amounts owing to holders of
Preferred Shares and Preferred Capital Distribution Shares under paragraphs
(a), (b), (c), (d) or (e) of this Section 5.1, then the holders of Preferred
Shares and Preferred Capital Distribution Shares shall be entitled to
distributions from cash flow generated by any and all Property of the Company
(including Property other than the SCATEF Assets) prior to the rights of other
Shareholders to such cash flow, as contemplated by Section 5.1(i) of this
Agreement.
(h) Holders of Term Growth Shares shall be entitled to receive, to the fullest
extent permitted by law, on each Dividend Payment Date, their 0.001%-per-Term-
Growth-Share distributions as described in Section 3.1(a)(ii) of this
Agreement.
(i) Although the Board of Directors is under no obligation to cause the
Company to make distributions or dividends to holders of New Shares, and may
instead, for example, determine to cause the Company to reinvest excess cash or
to hold excess cash for reserves or otherwise, if the Board of Directors does
declare a distribution or dividend payable on a Dividend Payment Date, then,
following the distributions to holders of Preferred Shares and Preferred
Capital Distribution Shares under paragraphs (a), (b), (c), (d) and (e) of this
Section 5.1, and following the 0.001% per share distributions to holders of
Term Growth Shares (as described in Section 3.1(a)(ii) of this Agreement and
paragraph (h) above), the holders of Growth Shares shall be entitled to receive
all distributions or dividends which the Board has declared which remain
available for distribution, with each holder of Growth Shares entitled to
receive a pro-rata portion (with reference to the number of Growth Shares then-
held by such holder of Growth Shares and the total number of Growth Shares
then-held by all Persons) of such available dividends or distributions.
5.2. Redemptions; Distributions Relating to Redemption Events; Certain
Permitted Conversions of Preferred Shares and Preferred Capital Distribution
Shares.
(a) Mandatory Partial Redemptions.
(i) Part I. Within six months of the occurrence of a Redemption Event which
relates to only a SCATEF Series I Asset, Series I Preferred Shares of each
Series I Preferred Shareholder, and Series I Preferred Capital Distribution
Shares of each Series I Preferred Capital Distribution Shareholder, shall be
redeemed, pro-rata pari passu, in cash (or such other mutually agreeable
property as the Company and an affected Shareholder may agree) by the Company,
but only out of funds legally available therefor, pro-rata in part (with
reference to the number of Series I Preferred Shares then-held by each Series I
Preferred Shareholder and the total number of then-outstanding Series I
Preferred Shares and the number of Series I Preferred Capital Distribution
Shares then-held by each Series I Preferred Capital Distribution Shareholder
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and the total number of then-outstanding Series I Preferred Capital
Distribution Shares), in an aggregate amount of redemption payments (1) to
holders of Series I Preferred Shares equal to the product of (A) the Preferred
Shares Net Proceeds related to SCATEF Series I Assets in connection with such
Redemption Event multiplied by (B) the Preferred Shares Series I Allocation
Factor, and (2) to holders of Series I Preferred Capital Distribution Shares
equal to the product of (A) the Preferred Capital Distribution Shares Net
Proceeds related to SCATEF Series I Assets in connection with such Redemption
Event multiplied by (B) the Preferred Capital Distribution Shares Series I
Allocation Factor; and in such event, Series I Preferred Shares of each Series
I Preferred Shareholder, and Series I Preferred Capital Distribution Shares of
each Series I Preferred Capital Distribution Shareholder, shall be deemed
returned to and cancelled by the Company, in a pro-rata proportion which is
equivalent to the pro-rata redemption-in-part proportion.
Part II. Within six months of the occurrence of a Redemption Event which
relates to only a SCATEF Series II Asset, Series II Preferred Shares of each
Series II Preferred Shareholder, and Series II Preferred Capital Distribution
Shares of each Series II Preferred Capital Distribution Shareholder, shall be
redeemed, pro-rata pari passu, in cash (or such other mutually agreeable
property as the Company and an affected Shareholder may agree) by the Company,
but only out of funds legally available therefor, pro-rata in part (with
reference to the number of Series II Preferred Shares then-held by each Series
II Preferred Shareholder and the total number of then-outstanding Series II
Preferred Shares and the number of Series II Preferred Capital Distribution
Shares then-held by each Series II Preferred Capital Distribution Shareholder
and the total number of then-outstanding Series II Preferred Capital
Distribution Shares), in an aggregate amount of redemption payments (1) to
holders of Series II Preferred Shares equal to the product of (A) the Preferred
Shares Net Proceeds related to SCATEF Series II Assets in connection with such
Redemption Event multiplied by (B) the Preferred Shares Series II Allocation
Factor, and (2) to holders of Series II Preferred Capital Distribution Shares
equal to the product of (A) the Preferred Capital Distribution Shares Net
Proceeds related to SCATEF Series II Assets in connection with such Redemption
Event multiplied by (B) the Preferred Capital Distribution Shares Series II
Allocation Factor; and in such event, Series II Preferred Shares of each Series
II Preferred Shareholder, and Series II Preferred Capital Distribution Shares
of each Series II Preferred Capital Distribution Shareholder, shall be deemed
returned to and cancelled by the Company, in a pro-rata proportion which is
equivalent to the pro-rata redemption-in-part proportion.
(ii) For purposes of clause (i) above, in the case of a Redemption Event
relating to a SCATEF Asset, the number of Preferred Shares and Preferred
Capital Distribution Shares to be redeemed shall be equal to (A) the dollar
amount of the original face value of the SCATEF Asset as to which the
Redemption Event in question relates, divided by (B) the total dollar face
amount of all SCATEF Assets which were originally SCATEF Assets relating to the
Series in question, multiplied by (C) the total number of Preferred Shares and
Preferred Capital Distribution Shares (of whichever Series is the subject of
the Redemption Event in question) originally issued by the Company upon the
consummation of the Transaction.
(iii) If all such Preferred Shares and Preferred Capital Distribution Shares
cannot be redeemed in full as provided for in Section 5.2(a)(i), when required
because of an insufficiency of funds then legally available therefor, then such
redemptions shall occur in stages as promptly as possible, with, at each stage,
the maximum amount legally available therefor being used to make such
redemptions, and Preferred Shareholders and Preferred Capital Distribution
Shareholders being redeemed pro-rata pari passu in part (with reference to (a)
the number of Preferred Shares then-held by each Preferred Shareholder owed
redemptions, and the total number of then-outstanding Preferred Shares, and (b)
the number of Preferred Capital Distribution Shares then-held by each Preferred
Capital Distribution Shareholder owed redemptions, and the total number of
then-outstanding Preferred Capital Distribution Shares), with Preferred
Shareholders and Preferred Capital Distribution Shareholders sharing in the
available funds pro-rata pari passu. If such staged redemptions are necessary,
then, until the Preferred Shares and Preferred Capital Distribution Shares are
redeemed in full, notwithstanding any other provision of this Agreement,
(A) the Preferred Shareholders and Preferred Capital Distribution Shareholders
(or the affected Series if only one Series is owed redemptions) shall, through
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the final such redemption, be entitled to elect one Director (the "Payments
Director") to serve on the Company's Board of Directors; such election to be
accomplished from time to time when more than 50% in interest of the total then
issued and outstanding Preferred Shares and Preferred Capital Distribution
Shares (voting as one class), or of the affected Series if only one Series is
owed redemptions, voting as one class, votes at a duly held meeting to be
called reasonably promptly by the Board of Directors following such inability
to redeem in full as described above in this Section 5.2(a) (or acts by written
consent without such a meeting) in favor of a particular person to fill such
position, and
(B) until the final redemption described in this clause (iii) is made, no
distributions shall be made by the Company to any Shareholders other than the
Preferred Shareholders and Preferred Capital Distribution Shareholders.
(iv) As to any particular Redemption Event, the amount of the Preferred Shares
Net Proceeds and Preferred Capital Distribution Shares Net Proceeds from such
Redemption Event remaining in the Company after the making of the redemption
payments described in clause (i) of this Section 5.2(a) shall be applied,
first, to distribute to the holders of Term Growth Shares an amount equal in
the aggregate to (1) the residual proceeds which they would have received from
the application of the SCATEF Partnership Agreement's provisions related to the
distributions of residual proceeds on a pro-rata basis, if any, and (2) the
pro-rata operating cash distributions (that is, the operating cash
distributions attributable on a pro-rata basis to the Term Growth Shares in the
aggregate) generated through the date of such Redemption Event since the then
most recent June 30 or December 31; and, following such distributions, may then
be utilized by the Company in any manner deemed appropriate by the Board of
Directors, including without limitation, if the Board of Directors so
determines, the making of a distribution to holders of New Shares (in which
case each holder of New Shares shall be entitled to receive a pro-rata portion
(with reference to the number of New Shares then-held by such holder of New
Shares and the total number of New Shares held by all Persons) of such
distribution).
(b) Certain Permitted Conversions of Preferred Shares and Preferred Capital
Distribution Shares. The holder of each Preferred Share and Preferred Capital
Distribution Share shall be permitted to convert such share to either Growth
Shares or cash once every two years beginning in June 2004 (with the
determination of whether cash or Growth Shares is to be received by converting
Shareholders to be made each such two years by the Board of Directors). The
following provisions govern the mechanical aspects of the conversion process;
provided, however, that the Board of Directors is empowered to make reasonable
decisions and determinations concerning appropriate details in order to
facilitate the smooth operation of the conversion process.
(i) The Company shall retain an independent third-party appraiser once every
two years, beginning in June 2003, to determine the fair market value of the
SCATEF Assets remaining in the Company, adjusted for Permitted Selling
Expenses. Once that valuation is made at such time, the Board of Directors
shall decide within a reasonable time (with the date of such decision being
referred to as the "Decision Date") which SCATEF Assets are attributable to
each Series of Preferred Shares and Preferred Capital Distribution Shares, and,
based on the results of such appraisals, what the conversion value is for each
share of each Series of Preferred Shares and Preferred Capital Distribution
Shares (the "Per Share Conversion Value").
(ii) Once the Per Share Conversion Values are determined, the Board of
Directors of the Company shall, also on the Decision Date, determine whether,
for the upcoming conversion opportunity, converting holders of Preferred Shares
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and Preferred Capital Distribution Shares would receive cash or Growth Shares
if they convert. The Company shall then notify each holder of Preferred Shares
and Preferred Capital Distribution Shares of the upcoming conversion
opportunity (including the date by which a conversion decision and notification
to the Company must be made), the Per Share Conversion Value of each Preferred
Share and Preferred Capital Distribution Share held by such Person, and whether
Preferred Shares and Preferred Capital Distribution Shares are convertible into
Growth Shares (and if so, at what ratio of Growth Shares per Preferred Share or
Preferred Capital Distribution Share) or cash.
(iii) Each holder of Preferred Shares or Preferred Capital Distribution Shares
who chooses to convert some or all of his or her Preferred Shares or Preferred
Capital Distribution Shares, and who follows the process set by the Board of
Directors for accomplishing such a conversion, shall receive either cash (in an
amount per converted Preferred Share or Preferred Capital Distribution Share
equal to the Per Share Conversion Value for such Preferred Share or Preferred
Capital Distribution Share), or a number of Growth Shares whose determined
value is equal to such Per Share Conversion Value times the number of the
converted Preferred Shares or Preferred Capital Distribution Shares. For
purposes of the foregoing sentence, the term "determined value" means the
average daily closing price of a Growth Share, over the 25th through 5th
trading days immediately preceding the Decision Date (as that term is defined
in clause (i) above), on whatever stock exchange or other trading system (the
"Exchange") the Growth Shares are traded, and if the Growth Shares are traded
on no such Exchange on the Decision Date, then the "determined value" shall be
reasonably determined on the Decision Date by the Board of Directors.
(iv) To the extent reasonably feasible, each conversion shall be effective on
or about June 1 of the year in which such conversion opportunity occurs,
beginning with the year 2004 and thereafter at approximately two year
intervals.
(v) Once there are no Preferred Shares and Preferred Capital Distribution
Shares outstanding, the conversion opportunities shall terminate permanently.
(vi) In the event that there is a conversion of Shares into Growth Shares under
this Section 5.2(b), the Board of Directors shall determine at the time of such
conversion whether (i) to revalue the Capital Accounts of all of the Growth
Shareholders (including persons who acquire Growth Shares in such conversion)
pursuant to Section 1.704-1(b)(2)(iv)(f) of the Treasury Regulations, or (ii)
to specially allocate items of Profit or Loss to the persons who acquire Growth
Shares in such conversion in order to ensure that the Capital Accounts of all
of the Growth Shareholders (including the persons who acquire Growth Shares in
such conversion) are identical on a per-Growth Share basis.
(c) Liquidation. Upon the dissolution, liquidation or winding-up of the
Company, after payment of all of the Company's creditors,
(i) Each Shareholder shall receive an amount in cash or in kind equal to the
positive Capital Account balance of such Shareholder, as determined after
taking into account all Capital Account adjustments for the taxable year of the
dissolution, liquidation or winding-up of the Company other than the
distribution under this clause (i) of Section 5.2(c); and
(ii) For the taxable year in which the dissolution, liquidation or winding-up
occurs and, if necessary, for the preceding taxable year, items of the
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Company's gross income and deduction shall be specially allocated to the
Shareholders so that the amount distributed to each holder of Preferred Shares
and Preferred Capital Distribution Shares under clause (i) of this Section
5.2(c) shall equal an amount per Share equal to the most recently calculated
applicable Per Share Conversion Value (as may be equitably adjusted by the
Board of Directors to take account of intervening events since the time of the
calculation of such Per Share Conversion Value).
Following payment of the full amount of the liquidating distribution to which
they are entitled as described above in this Section 5.2(c), the holders of
Preferred Shares and Preferred Capital Distribution Shares shall not be
entitled to any further participation in any distribution of assets of the
Company, but the holders of New Shares shall participate exclusively in any
such distributions (in which case each holder of New Shares shall be entitled
to receive a pro-rata portion (with reference to the number of New Shares then-
held by such Person and the total number of New Shares held by all holders of
New Shares) of such distribution; provided, however, that holders of Term
Growth Shares shall be entitled to no more of such distributions than they
would have been entitled to had there been a Redemption Event distribution as
required under the terms of the SCATEF Partnership Agreement).
A consolidation or merger of the Company with or into any other Entity, or a
sale, lease or exchange of any or all of the assets of the Company in
consideration for the issuance of equity securities of another Entity, shall
not be deemed to be a liquidation, dissolution or winding up of the Company,
provided that the consolidation, merger, sale, lease or exchange does not
adversely affect the Preferred Shareholders or the Preferred Capital
Distribution Shareholders as a class in a manner materially different than how
it adversely affects other classes of Shareholders.
5.3. Priority.
(a) Notwithstanding the above Sections of this Article 5, the Company shall
not declare or pay any distribution of any kind on any Shares other than the
Preferred Shares and Preferred Capital Distribution Shares, unless at such time
full cumulative distributions have been paid with respect to the Preferred
Shares and Preferred Capital Distribution Shares, as provided for under this
Agreement, through the most recent Dividend Payment Date; and, subject to
Section 13.7 hereof, no Shares other than Preferred Shares and Preferred
Capital Distribution Shares may be redeemed or repurchased by the Company while
any Preferred Shares and Preferred Capital Distribution Shares remain
outstanding.
(b) Notwithstanding any other provision of this Agreement, it is specifically
acknowledged and agreed by each Shareholder that the Company's failure to pay
any amounts to such Shareholder, whether as a dividend, redemption payment or
other distribution, even if such payment is specifically required hereunder,
shall not give such Shareholder creditor status with regard to such unpaid
amount; but rather, such Shareholder shall be treated only as a shareholder of
whatever class such person is a Shareholder, and not as a creditor, of the
Company. This Section 5.3(b) is, as permitted by Section 18-606 of the Act,
intended to override the provisions of Section 18-606 of the Act relating to a
member's status and remedies as a creditor, to the extent that such provisions
would be applicable in the absence of this Section 5.3(b).
5.4. Payments to Shareholders for Services. Any payments by the Company
to a Shareholder for services rendered to or on behalf of the Company shall be
treated as guaranteed payments for services under Section 707(c) of the Code.
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ARTICLE 6
Shareholders
6.1. Limited Liability.
(a) Except as otherwise provided by the Act or in Section 6.1(b) hereof, the
debts, obligations and liabilities of the Company, whether arising in contract,
tort or otherwise, shall be solely the debts, obligations and liabilities of
the Company, and the Shareholders shall not be obligated personally for any
such debt, obligation or liability of the Company solely by reason of being a
Shareholder of the Company. The Shareholders shall not be required to lend any
funds to the Company. Each of the Shareholders shall only be liable to make
payment of his, her or its respective contributions as and when due hereunder
and other payments as expressly provided in this Agreement. If and to the
extent a Shareholder's contribution shall be fully paid, such Shareholder shall
not, except as required by the express provisions of the Act regarding
repayment of sums wrongfully distributed to Shareholders, be required to make
any further contributions.
(b) Notwithstanding Section 6.1(a) hereof, the Special Shareholder, for so
long as such Person holds Shares (unless such Person duly resigns as a Special
Shareholder in accordance with this Section 6.1 or Section 6.3 of this
Agreement), shall have personal liability to creditors of the Company (and any
such creditor may seek personal satisfaction from the Special Shareholder), to
the extent that the assets of the Company (including without limitation the
proceeds of any and all available insurance) are insufficient to satisfy such
creditor's claim (and, if there be more than one Special Shareholder at any
time, then such Special Shareholders shall be jointly liable for all
liabilities set forth in this Section 6.1(b)); provided, however, that,
notwithstanding Section 6.3 of this Agreement, any Special Shareholder may
resign its status as a Special Shareholder after (i) the consummation of a
transaction in which a Person acquires more than 10% of the then-outstanding
Shares of any class or series where such acquisition is not consented to by the
Special Shareholder, or (ii) any Shareholder or group of Shareholders controls
a majority of the seats on the Board of Directors in any case where such
control is not consented to by the Special Shareholder. In the event of such a
resignation, (x) the Special Shareholder's personal liability under the first
sentence of this Section 6.1(b) shall, to the fullest extent permissible under
law, terminate immediately, automatically, and in full, although such Person
may continue to hold Shares, and (y) the Company shall pay to the Special
Shareholder, promptly after such resignation, the sum of $1,000,000 in direct
consideration for the Special Shareholder's prior service to the Company.
(c) Notwithstanding Section 6.1(b) hereof, the Special Shareholder shall have
no fiduciary duty whatsoever to any other Shareholder, and shall be treated in
exactly the same manner as any other Shareholder other than as specifically
provided in Section 6.1(b) hereof. Without limiting the foregoing, it is agreed
that (i) the Special Shareholder has no responsibility to treat other
Shareholders, including without limitation holders of Preferred Shares and
Preferred Capital Distribution Shares, as creditors of the Company toward which
the Special Shareholder would bear any responsibility or have any liability
whatsoever (including without limitation in the event of any Company failure to
pay any amounts to such Shareholders, whether as a dividend, redemption payment
or other distribution, even if such amounts are specifically required hereunder
to be paid), and (ii) the Special Shareholder is entitled to act solely in its
own self interests without regard to the interests of other Shareholders.
(d) Notwithstanding any other provision of this Agreement, the Dissolution
Shareholder shall have the right to serve as one (or, if there are at any time
more than ten Directors on the Board of Directors, two) of the Company's
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Directors, through such representatives as are appointed by the Dissolution
Shareholder (such designated persons to be referred to as the "Specially
Appointed Director(s)") at all times and from time to time, and shall have the
sole right to remove such representative(s) as Directors; all as provided in
Section 7.2(b) of this Agreement.
6.2. Voting Rights of Shareholders; Authority of Board of Directors.
(a) The Board of Directors shall make all decisions made for and on behalf of
the Company, such decisions shall be binding upon the Company, and the
Shareholders shall have no voting rights; except, however, as expressly set
forth herein. The Board of Directors, in its sole discretion, has full,
complete and exclusive right, power and authority in the management and control
of the Company business to do any and all things necessary to effectuate the
purpose of the Company; except, however, as expressly set forth herein. The
members of the Board of Directors shall devote such time as is necessary to the
affairs of the Company, and shall receive such compensation from the Company
and such reimbursement for expenses as is permitted by the Company's By-laws as
then in effect. No Person dealing with the Board of Directors shall be required
to determine its authority to make any undertaking on behalf of the Company or
to determine any facts or circumstances bearing upon the existence of such
authority.
(b) Notwithstanding Section 6.2(a) above, but subject to Sections 10.1(a)(i)
and 10.1(a)(ii), Article 12 and Article 13 hereof, in the event of a proposed
sale or other disposition of all or substantially all of the assets of the
Company at any one time, merger or consolidation of the Company (where the
Company is not the surviving Entity), dissolution of the Company, or issuance
of any restricted Share or deferred Share awards under a Company incentive
share plan, any such proposed occurrence, in order to be approved must, (i)
with respect to the merger or consolidation of the Company (where the Company
is not the surviving Entity), first receive the approval of the Board of
Directors, (ii) with respect to a sale or other disposition of all or
substantially all of the assets of the Company at any one time, or dissolution
of the Company, if no Preferred Shares or Preferred Capital Distribution Shares
are outstanding any such proposed action must first receive the approval of the
Board of Directors, and (iii) receive the vote, at a duly held meeting, of more
than 50% in interest of the total then issued and outstanding Shares (or, in
the case of a written Consent without a meeting, more than 50% in interest of
the total then issued and outstanding Shares), voting as one class (and not as
separate classes, notwithstanding the fact that there may be members of more
than one class voting) (or such greater percentage as is then required under
the Act); provided, however, that any sales of any assets which are necessary
in order to fund redemptions of Preferred Shares or Preferred Capital
Distribution Shares under Article 5 of this Agreement shall not require the
Consent of any Shareholders, but rather shall require only Board of Directors
approval in order to be approved and effected.
(c) Notwithstanding Section 6.2(a) above, but subject to Sections 6.1(d),
7.2(a) and 7.2(b) and Articles 12 and 13 hereof, the vote, at a duly held
meeting, of more than 50% in interest of the total then issued and outstanding
Shares (or, in the case of a written Consent without a meeting, more than 50%
in interest of the total then issued and outstanding Shares), voting as one
class (and not as separate classes, notwithstanding the fact that there may be
members of more than one class voting), shall be able to remove any Director
(other than a Payments Director or a Specially Appointed Director) and elect a
replacement therefor. If the Shareholders vote to remove a Director pursuant to
this Section 6.2(c), they shall provide the removed Director with notice
thereof, which notice shall set forth the date upon which such removal is to
become effective.
(d) Notwithstanding anything to the contrary in this Agreement,
(i) the vote, at a duly held meeting, of more than 50% in interest of the
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total then issued and outstanding Preferred Shares (or, in the case of a
written Consent without a meeting, more than 50% in interest of the total then
issued and outstanding Preferred Shares), voting as one class (and not as
separate series, notwithstanding the fact that there may be members of more
than one series voting), shall be required in order for there to be any
alteration in the rights, preferences or privileges of the Preferred Shares as
a class,
(ii) the vote, at a duly held meeting, of more than 50% in interest of the
total then issued and outstanding affected series of Preferred Shares (or, in
the case of a written Consent without a meeting, more than 50% in interest of
the total then issued and outstanding affected series of Preferred Shares),
shall be required in order for there to be any alteration in the rights,
preferences or privileges of a particular series of Preferred Shares,
(iii) the vote, at a duly held meeting, of more than 50% in interest of the
total then issued and outstanding Preferred Shares (or, in the case of a
written Consent without a meeting, more than 50% in interest of the total then
issued and outstanding Preferred Shares), voting as one class (and not as
separate series, notwithstanding the fact that there may be members of more
than one series voting), shall be required in order for there to be any
amendment of Article 5 of this Agreement which would result in an alteration in
the rights of the Preferred Shareholders (as a class, vis-a-vis other classes
of Shareholders) to distributions under Article 5 of this Agreement,
(iv) the vote, at a duly held meeting, of more than 50% in interest of the
total then issued and outstanding affected series of Preferred Shares (or, in
the case of a written Consent without a meeting, more than 50% in interest of
the total then issued and outstanding affected series of Preferred Shares),
shall be required in order for there to be any amendment of Article 5 of this
Agreement which would result in an alteration in the rights of a particular
series of Preferred Shares (as a series, vis-a-vis other series of Preferred
Shareholders) to distributions under Article 5 of this Agreement,
(v) the vote, at a duly held meeting, of more than 50% in interest of the
total then issued and outstanding Preferred Capital Distribution Shares (or, in
the case of a written Consent without a meeting, more than 50% in interest of
the total then issued and outstanding Preferred Capital Distribution Shares),
voting as one class (and not as separate series, notwithstanding the fact that
there may be members of more than one series voting), shall be required in
order for there to be any alteration in the rights, preferences or privileges
of the Preferred Capital Distribution Shares as a class,
(vi) the vote, at a duly held meeting, of more than 50% in interest of the
total then issued and outstanding affected series of Preferred Capital
Distribution Shares (or, in the case of a written Consent without a meeting,
more than 50% in interest of the total then issued and outstanding affected
series of Preferred Capital Distribution Shares), shall be required in order
for there to be any alteration in the rights, preferences or privileges of a
particular series of Preferred Capital Distribution Shares,
(vii) the vote, at a duly held meeting, of more than 50% in interest of the
total then issued and outstanding Preferred Capital Distribution Shares (or, in
the case of a written Consent without a meeting, more than 50% in interest of
the total then issued and outstanding Preferred Capital Distribution Shares),
voting as one class (and not as separate series, notwithstanding the fact that
there may be members of more than one series voting), shall be required in
order for there to be any amendment of Article 5 of this Agreement which would
result in an alteration in the rights of the Preferred Capital Distribution
Shareholders (as a class, vis-a-vis other classes of Shareholders) to
distributions under Article 5 of this Agreement, and
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(viii) the vote, at a duly held meeting, of more than 50% in interest of the
total then issued and outstanding affected series of Preferred Capital
Distribution Shares (or, in the case of a written Consent without a meeting,
more than 50% in interest of the total then issued and outstanding affected
series of Preferred Capital Distribution Shares), shall be required in order
for there to be any amendment of Article 5 of this Agreement which would result
in an alteration in the rights of a particular series of Preferred Capital
Distribution Shares (as a series, vis-a-vis other series of Preferred Capital
Distribution Shareholders) to distributions under Article 5 of this Agreement.
Notwithstanding Section 14.4 of this Agreement, this Section 6.2(d) cannot be
amended without the vote, at a duly held meeting, of more than 50% in interest
of the total then issued and outstanding Preferred Shares and Preferred Capital
Distribution Shares (or, in the case of a written Consent without a meeting,
more than 50% in interest of the total then issued and outstanding Preferred
Shares and Preferred Capital Distribution Shares), voting as one class (and not
as separate series, notwithstanding the fact that there may be members of more
than one series voting); provided, however, that if any proposed amendment of
this Section 6.2(d) would adversely affect in any way only one Series or type
of Preferred Shares or Preferred Capital Distribution Shares and not the other
Series or type, then any such amendment must be approved in the manner provided
in Section 6.2(d)(iv) or 6.2(d)(viii) above, respectively and as the case may
be.
(e) Except as otherwise provided in this Agreement or in any share plan or
share incentive plan adopted by the Company, the holders of New Shares have
sole Shareholder authority
(i) to vote on such matters as may be brought before the Shareholders from
time to time (on issues other than those as to which this Agreement
specifically provides for voting rights of Shareholders in addition to or
instead of holders of New Shares), and
(ii) to elect Directors, and shall do so on an annual basis;
and in all such votes on which the holders of New Shares have sole Shareholder
voting authority, in order for the holders of New Shares to act to approve a
matter on which they are voting, such matter must receive the vote of more than
50% in interest of the New Shares which are voted at a meeting at which a
quorum of New Shares is present (or, in the case of a written Consent without a
meeting, must receive the written Consent of more than 50% in interest of the
aggregate New Shares), voting as one class (and not as separate classes,
notwithstanding the fact that there may be members of more than one class
voting) (or such greater percentage as is then required under the Act or under
the express terms of this Agreement). For purposes of the foregoing sentence,
the term "quorum" means more than 50% of the then issued and outstanding New
Shares, except as provided in any share plan or share incentive plan adopted by
the Company.
The annual meeting of the holders of New Shares of the Company for the election
of Directors and for the transaction of such other business as properly may
come before such meeting shall be held in accordance with the By-laws. Subject
to the provisions of Article 13 relating to meetings of Shareholders and
related subjects, the By-laws shall govern matters relating to, among other
things, annual and special meetings, notice, waiver of notice, adjournment,
proxies, written consents, procedures, and telephonic meetings, to the extent
not inconsistent with this Agreement.
(f) Notwithstanding any other provision of this Agreement, Shareholders have
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voting rights with respect to a particular matter (to the extent provided
herein with regard to categories of Shareholders permitted to vote on
particular matters, and otherwise) only after such matter has first been
approved by the Board of Directors, except with regard to (i) the removal of a
Director (and the election of a replacement therefor in connection therewith)
as provided in this Agreement, (ii) the amendment of this Agreement, (iii) the
sale or other disposition of all or substantially all of the assets of the
Company at any one time, (iv) the dissolution of the Company, and (v) any
matter as to which any share plan or share incentive plan adopted by the
Company provides otherwise.
(g) For purposes of this Agreement, in order for a meeting of
Shareholders to be considered duly held with regard to a particular question, a
quorum of more than 50% in interest of the Shares which are entitled to vote at
such meeting on the particular question must be present (in person or by
proxy).
(h) Notwithstanding any other provision of this Agreement, the percentage
vote in the Company, as a whole, which each Preferred Share and each Preferred
Capital Distribution Share carries with it as of the Transaction Consummation
Date will be equivalent to the percentage vote in SCATEF which each BAC carried
with it prior to the Transaction.
(i) Notwithstanding Section 6.2(a) above, the vote, at a duly held meeting, of
more than 50% in interest of the total then issued and outstanding Term Growth
Shares (or, in the case of a written Consent without a meeting, more than 50%
in interest of the total then issued and outstanding Term Growth Shares),
voting as one class, shall be required in order for there to be any alteration
in the rights, preferences or privileges of the Term Growth Shares as a class,
or any alteration in the rights of the Term Growth Shareholders (as a class,
vis-a-vis other classes of Shareholders) to distributions under Article 5 of
this Agreement. Notwithstanding Section 14.4 of this Agreement, this Section
6.2(i) cannot be amended without the vote, at a duly held meeting, of more than
50% in interest of the total then issued and outstanding Term Growth Shares
(or, in the case of a written Consent without a meeting, more than 50% in
interest of the total then issued and outstanding Term Growth Shares), voting
as one class.
6.3. Transfers of Special Shareholder Interests. The restrictions, limitations
and other provisions of this Section 6.3 shall in no manner limit or restrict
the right of a Special Shareholder to resign its status as a Special
Shareholder to the extent permitted under Section 6.1(b) of this Agreement;
and, once such Special Shareholder properly resigns pursuant thereto, the
transfer restrictions set forth in this Section 6.3 as they relate to such
Special Shareholder shall automatically and immediately terminate. Subject to
the foregoing sentence, it is agreed that:
(a) No Special Shareholder (a "Special Transferor") may make any Transfer of
any of its Shares to a Transferee (a "Special Transferee") unless each of the
following requirements is met:
(i) At all times during the existence of the Company, including upon
consummation of such Transfer, one or more Special Shareholders must have, in
the aggregate, at least a number of Shares which will result in the allocation
to the Special Shareholder(s), in the aggregate, of the minimum percentage
interest in the Company which will permit the Company to retain its tax status
as an association taxable as a partnership rather than as a corporation, in the
opinion of counsel to the Company; and
(ii) Before any such Transfer can be made, the Company must be furnished with
an opinion of counsel (which may or may not be the same counsel as is
referenced in subparagraph (i) above) to the effect that the Transfer in
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question will not adversely affect the Company's tax status as an association
taxable as a partnership rather than as a corporation.
(b) No Transfer to a Special Transferee shall be recognized by the Company
unless the Board of Directors of the Company receives documentation
satisfactory to it that the requirements of this Section 6.3 have been met.
(c) If the Special Transferor transfers all of its Shares in such Transfer,
in accordance with the restrictions and requirements of Sections 6.3(a) and
6.3(b) of this Agreement, then such Special Transferor shall thereafter no
longer be a Special Shareholder. If the Special Transferor transfers fewer than
all of its Shares in such Transfer, then:
(i) if such Special Transferor makes no provision for the termination of its
status as a Special Shareholder in accordance with clause (ii) immediately
below, such Special Transferor shall continue to be a Special Shareholder; and
(ii) if the Special Transferee agrees in writing to be a Special Shareholder
and to be subject to the liabilities of a Special Shareholder as provided in
this Agreement, then, if all of the requirements and limitations set forth in
Section 6.3(a) of this Agreement are complied with, the Special Transferor may
terminate its status as a Special Shareholder upon notice thereof to the
Company; provided, however, that no such resignation shall be recognized by the
Company unless the Board of Directors of the Company receives documentation
satisfactory to it that the requirements of this Section 6.3(c) have been met.
6.4. Transfers of Dissolution Shareholder Interests.
(a) No Dissolution Shareholder (a "Dissolution Transferor") may make any
Transfer of any of its Shares to a Transferee (a "Dissolution Transferee")
unless each of the following requirements is met:
(i) At all times during the existence of the Company, including upon
consummation of such Transfer, one or more Dissolution Shareholders must have,
in the aggregate, at least a number of Shares which will result in the
allocation to the Dissolution Shareholder, in the aggregate, of the minimum
percentage interest in the Company which will permit the Company to retain its
tax status as an association taxable as a partnership rather than as a
corporation, in the opinion of counsel to the Company; and
(ii) Before any such Transfer can be made, the Company must be furnished with
an opinion of counsel (which may or may not be the same counsel as is
referenced in subparagraph (i) above) to the effect that the Transfer in
question will not adversely affect the Company's tax status as an association
taxable as a partnership rather than as a corporation.
(b) No Transfer to a Dissolution Transferee shall be recognized by the Company
unless the Board of Directors of the Company receives documentation
satisfactory to it that Section 6.4(a)'s requirements have been met.
(c) If the Dissolution Transferor transfers all of its Shares in such
Transfer, in accordance with the restrictions and requirements of Sections
6.4(a) and 6.4(b) of this Agreement, then such Dissolution Transferor shall
thereafter no longer be a Dissolution Shareholder. If the Dissolution
Transferor transfers fewer than all of its Shares in such Transfer, then:
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(i) if such Dissolution Transferor makes no provision for the termination of
its status as a Dissolution Shareholder in accordance with clause (ii)
immediately below, such Dissolution Transferor shall continue to be a
Dissolution Shareholder; and
(ii) if the Dissolution Transferee agrees in writing to be a Dissolution
Shareholder, then, if all of the requirements and limitations set forth in
Section 6.4(a) of this Agreement are complied with, the Dissolution Transferor
may terminate its status as a Dissolution Shareholder upon notice thereof to
the Company; provided, however, that no such resignation shall be recognized by
the Company unless the Board of Directors of the Company receives documentation
satisfactory to it that this Section 6.4(c)'s requirements have been met.
ARTICLE 7
Directors and Officers
7.1. General Powers of Directors.
(a) Except as may otherwise be provided by the Act or by this Agreement, the
property, affairs and business of the Company shall be managed by or under the
direction of the Board of Directors, the Board of Directors may exercise all
the powers of the Company (including but not limited to deciding whether to
make various tax elections), and the Shareholders shall have no right to act on
behalf of or bind the Company. The Directors shall act only as a Board, and the
individual Directors shall have no power as such. Subject to the provisions of
this Agreement and the By-laws with regard to Board of Directors actions that
can be taken without a quorum, the approval of a matter by a majority of the
Directors present at a meeting at which a quorum is present shall constitute
approval by the Board of Directors (or, in the case of a written consent
without a meeting, the approval of a matter by all of the Directors shall
constitute approval by the Board of Directors).
(b) Unless expressly provided otherwise under this Agreement, the Board of
Directors shall have the exclusive authority to make all determinations under
this Agreement and under the By-laws (including but not limited to what
expenses are properly included within the defined terms in this Agreement which
include the words "cash flow" or "cash flows", and including but not limited to
having the exclusive authority to make such other determinations and
adjustments as are necessary to assure that (i) cash flows to the holders of
Preferred Capital Distribution Shares reflect the amount of net cash flow which
would have been received by the Preferred Capital Distribution Shareholders as
a group if the Transaction had not occurred, and (ii) cash flows to the holders
of Preferred Shares reflect the amount of net cash flow which would have been
received by the Preferred Shareholders as a group if the Transaction, the
Financing and Future Financings had not occurred), and to interpret the
provisions of this Agreement and of the By-laws.
(c) No contract or transaction among the Company and one or more of its
Affiliates, Directors or officers, or among the Company and any other Entity in
which one or more of the Company's Affiliates, Directors or officers are
directors or officers, or have a financial interest, shall be void or voidable
solely for this reason, or solely because the Director or officer is present at
or participates in the meeting of the Board of Directors or of a committee
thereof which authorizes the contract or transaction, or solely because his or
their votes are counted for such purpose, if:
(i) The material facts as to such Affiliate's, Director's or officer's
relationship or interest and as to the contract or transaction are disclosed or
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are known to the Board of Directors or the committee, and the Board of
Directors or committee in good faith authorizes the contract or transaction by
the affirmative vote of a majority of the disinterested Directors, even though
the disinterested Directors be less than a quorum;
(ii) The material facts as to such Affiliate's, Director's or officer's
relationship or interest and as to the contract or transaction are disclosed or
are known to the Shareholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by more than 50% in interest
of the New Shares which are present and entitled to vote at a meeting at which
a quorum is present (or, in the case of a written Consent without a meeting,
more than 50% in interest of the aggregate New Shares), voting as one class
(and not as separate classes, notwithstanding the fact that there may be
members of more than one class voting), who are not Affiliates of any of the
interested Persons involved in such transaction; or
(iii) The contract or transaction is fair as to the Company.
Common or interested Directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or of a committee which
authorizes the contract or transaction.
Notwithstanding, and instead of, the foregoing provisions of this Section
7.1(c), the Company shall enter into or renew no agreement pursuant to which
any Affiliate of any Director would provide management services for any
Property, unless such agreement is approved by a majority of the Directors who
(a) are not officers of the Company, (b) are neither related to any Company
officer nor represent concentrated or family holdings of the Company's Shares,
and (c) are, in the view of the Board of Directors, free of any relationship
that would interfere with the exercise of independent judgment; and, if such
approval is obtained in the case of a particular contract, such approval shall
be deemed to satisfy the requirements of this Section 7.1(c).
(d) Notwithstanding the above provisions of this Section 7.1, in any
transaction which occurs after the Transaction Consummation Date, in which the
Company wishes to issue Shares to SCATEF or any Affiliate of SCATEF in exchange
for such Person giving up fees otherwise payable to it, such transaction,
including but not limited to the exchange ratio of Shares for such fees, shall
not be approved or undertaken by the Company unless and until approved, in lieu
of the requirements set forth in Section 7.1(c), by a majority of the directors
of the Company who are not Affiliates of SCATEF or of any SCATEF Affiliate
(even though the disinterested Directors may be less than a quorum of the full
Board of Directors), after the material facts as to such transaction are
disclosed or are known to such unaffiliated Directors.
7.2. Number and Term of Office of Directors. Subject to Section
5.2(a)(iii) of this Agreement:
(a) The number of seats constituting the entire Board of Directors shall be
at least five and no more than 15, with the exact number of seats on the Board
of Directors to be determined from time to time by resolution of the Board of
Directors. At least a majority of the Directors in office at any point in time
must be individuals who are not employed by the Company or by any Affiliate of
the Company. Each Director (whenever elected) shall hold office until his or
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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. Effective immediately upon
consummation of the Transaction, (i) the size of the Board of Directors is set
at six seats, and (ii) Mark K. Joseph is elected to serve as a Director (with
term to expire in 1999).
(b) The Specially Appointed Director(s) and the Payments Director shall have
all of the powers, rights, privileges, obligations and duties as all other
Directors, and shall for all purposes be Directors of the Company, except that
(i) the Specially Appointed Director(s) and the Payments Director shall not be
counted when determining the total size of the Board of Directors for the sole
purpose of making the determination in Section 7.2(c) below as to how many
Directors are in each class, (ii) no Shareholders other than the Dissolution
Shareholder shall have any right to elect, remove or replace the Specially
Appointed Director(s), and, without limiting the foregoing, the Specially
Appointed Director(s) shall not stand for election or reelection at any meeting
of the holders of New Shares, and (iii) no Shareholders other than the
Preferred Shareholders and Preferred Capital Distribution Shareholders (or the
affected Series or type thereof, as the case may be in accordance with Section
5.2 of this Agreement) shall have any right to elect, remove or replace the
Payments Director, and, without limiting the foregoing, the Payments Director
shall not stand for election or reelection at any meeting of the holders of New
Shares. Without limiting the foregoing, all other Shareholders, by becoming
Shareholders of the Company, agree that (I) the Dissolution Shareholder has
such rights to serve, through its appointed representatives, as the Specially
Appointed Director(s) and that the necessary one seat or two seats on the Board
of Directors shall be reserved for such appointment(s) (and the size of the
Company's Board of Directors shall automatically be expanded at any time if
such expansion is necessary in order to permit the Dissolution Shareholder to
effect such appointment(s)), (II) the Preferred Shareholders and the Preferred
Capital Distribution Shareholders have the right to appoint the Payments
Director as provided in Section 5.2 of this Agreement, and that the necessary
seat on the Board of Directors shall be reserved for such appointment (and the
size of the Company's Board of Directors shall automatically be expanded at any
time if such expansion is necessary in order to effect such appointment), and
(III) the Company's officers and Directors may take any and all steps deemed
appropriate by them, in connection with Shareholder meetings or otherwise, to
implement this Section 7.2(b).
(c) Subject to Section 7.2(b) above, at all times the Board of Directors
shall be divided into three classes, as nearly equal in numbers as the then
total number of directors constituting the entire Board of Directors permits,
with the term of office of one class expiring each year (with the first such
class expiration to occur at the first annual meeting of Shareholders); and the
Board of Directors shall have sole power to make such determinations. At the
first annual meeting of the holders of New Shares, only the Directors of the
first class shall be elected by the holders of New Shares (in accordance with
Section 6.2 hereof), and such persons shall hold office thereafter for a term
expiring at the third succeeding annual meeting. At the second annual meeting
of Shareholders, only the Directors of the second class shall be elected by the
holders of New Shares (in accordance with Section 6.2 hereof), and such persons
shall hold office thereafter for a term expiring at the third succeeding annual
meeting. At the third annual meeting of Shareholders, only the Directors of the
third class shall be elected by the holders of New Shares (in accordance with
Section 6.2 hereof), and such persons shall hold office thereafter for a term
expiring at the third succeeding annual meeting. At each subsequent annual
meeting of Shareholders thereafter, the successors to any class of directors
whose term shall then expire shall be elected by the holders of New Shares (in
accordance with Section 6.2 hereof) to hold office for a term expiring at the
third succeeding annual meeting.
7.3. By-law Provisions. The By-laws shall govern matters relating to,
among other things, (a) with respect to directors, annual and special meetings,
notice, waiver of notice, quorum, voting, adjournment, written consents,
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committees, procedures, telephonic meetings, resignations, removals, vacancies,
books and records, reports, and compensation and reimbursement of expenses, to
the extent not inconsistent with this Agreement, (b) with respect to officers,
all matters not governed by this Agreement, and (c) employee benefit matters,
which matters shall be subject to and managed as provided by the discretion of
the Board of Directors.
ARTICLE 8
Exculpation and Indemnification
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.
(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.
ARTICLE 9
Transfers of Interests; Admission of New Shareholders
9.1. Transfers. Subject to Section 6.3 of this Agreement (relating to
Special Shareholders) and Section 6.4 of this Agreement (relating to
Dissolution Shareholders), the Shares shall be freely transferrable (provided,
however, that Term Growth Shares are transferrable only to other Persons who
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are then already holders of Term Growth Shares); and any Person who is a
Transferee of Shares shall, by having such status, (a) automatically become a
Shareholder of the Company with no further action being required on such
Persons's part, and (b) automatically be bound to the terms and conditions of
this Agreement (and be entitled to the rights of a Shareholder hereunder),
without the requirement for execution of this Agreement by such Person. Certain
mechanical aspects of the transfer of Shares shall be set forth in the By-laws.
ARTICLE 10
Dissolution and Termination
10.1. Events of Dissolution.
(a) In accordance with Section 18-801 of the Act, and the provisions therein
permitting this Agreement to specify the events of the Company's dissolution,
the Company shall be dissolved and the affairs of the Company wound up upon the
occurrence of any of the following events:
(i) a unanimous written decision of all of the Original Shareholders who are
then still Shareholders to dissolve the Company;
(ii) the death, retirement, resignation, expulsion, bankruptcy (as defined in
Section 18-304 of the Act) or dissolution of a Person who is then a Dissolution
Shareholder, or the occurrence of any other event that terminates the continued
membership in the Company of a Person who is then a Dissolution Shareholder,
unless more than 50% in interest of the then-outstanding Shares votes, at a
duly held meeting (or, in the case of a written Consent without a meeting, more
than 50% in interest of the aggregate Shares acts), within 180 days of such
event to continue the Company; or
(iii) the vote of the Shareholders pursuant to Section 6.2(b) hereof.
The death, retirement, resignation, expulsion, bankruptcy (as defined in
Section 18-304 of the Act) or dissolution of a Shareholder or the occurrence of
any other event that terminates the continued membership of a Shareholder in
the Company, shall not cause the dissolution of the Company except to the
extent specified above in this Section 10.1(a).
(b) Dissolution of the Company shall be effective on the day on which the
event occurs giving rise to the dissolution, but the Company shall not
terminate until the assets of the Company shall have been distributed as
provided herein and a certificate of cancellation of the Certificate has been
filed with the Secretary of State of the State of Delaware.
10.2. Application of Assets. In the event of dissolution, the Company shall
conduct only such activities as are necessary to wind up its affairs (including
the sale of the assets of the Company in an orderly manner), and the assets of
the Company shall be applied, first, as required by Section 18-804(a)(1) of the
Act, and then in the manner, and in the order of priority, set forth in Article
5.
10.3. Gain or Losses in Process of Liquidation. Any gain or loss or
disposition of Company property in the process of liquidation shall be credited
or charged to the Capital Accounts of Shareholders in accordance with the
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provisions of Article 3. Any property distributed in kind in the liquidation
shall be valued and treated as though the property were sold at its fair market
value and the cash proceeds were distributed. The difference between the fair
market value of property distributed in kind and its Book Value shall be
treated as a gain or loss on the sale of such property and shall be credited or
charged to the Capital Account of Shareholders in accordance with Article 3;
PROVIDED, that no Shareholder shall have the right to request or require the
distribution of the assets of the Company in kind.
10.4. Procedural and Other Matters.
(a) Upon dissolution of the Company and until the filing of a certificate of
cancellation as provided in Section 10.4(b), the Persons winding up the affairs
of the Company may, in the name of, and for and on behalf of, the Company,
prosecute and defend suits, whether civil, criminal or administrative,
gradually settle and close the business of the Company, dispose of and convey
the property of the Company, discharge or make reasonable provision for the
liabilities of the Company, and distribute to the members any remaining assets
of the Company, in accordance with this Article 10 and all without affecting
the liability of Shareholders and Directors and without imposing liability on a
liquidating trustee.
(b) The Certificate may be cancelled upon the dissolution and the completion
of winding up of the Company, by any Person authorized to cause such
cancellation in connection with such dissolution and winding up.
ARTICLE 11
Appointment of Attorney-in-Fact
11.1. Appointment and Powers.
(a) Each Shareholder hereby irrevocably constitutes and appoints the Company's
chief executive officer, with full power of substitution, as his, her or its
true and lawful attorney-in-fact, with full power and authority in his, her or
its name, place and stead to execute, acknowledge, deliver, swear to, file and
record at the appropriate public offices such documents, instruments and
conveyances as may be necessary or appropriate to carry out the provisions or
purposes of this Agreement, including, without limitation, the following: (i)
the Certificate; (ii) all other certificates and instruments and amendments
thereto that the Board of Directors deems appropriate to qualify or continue
the Company as a limited liability company in the jurisdiction in which the
Company may conduct business; (iii) all instruments that the Board of Directors
deems appropriate to reflect a change or modification of the Company in
accordance with the terms of this Agreement; (iv) all conveyances and other
instruments that the Board of Directors deems appropriate to reflect the
dissolution and termination of the Company; (v) all fictitious or assumed name
certificates required or permitted to be filed on behalf of the Company; (vi)
any and all documents necessary to admit Shareholders to the Company, or to
reflect any change or transfer of a Shareholder's Company Interest, or relating
to the admission or increased Capital Contribution of a Shareholder; (vii) any
amendment or other document to be filed as referenced in Section 3.1(d) or
3.1(f) of this Agreement; and (viii) all other instruments that may be required
or permitted by law to be filed on behalf of or relating to the Company and
that are not inconsistent with this Agreement.
(b) The authority granted by this Section 11.1 (i) is a special power of
attorney coupled with an interest, is irrevocable, and shall not be affected by
the subsequent incapacity or disability of the Shareholder; (ii) may be
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exercised by a signature for each Shareholder or by listing the names of all of
the Shareholders executing this Agreement with a single signature of any such
Person acting as attorney-in-fact for all of them; and (iii) shall survive the
Transfer by a Shareholder of the whole or any portion of his, her or its
Company Interest.
11.2. Presumption of Authority. Any Person dealing with the Company may
conclusively presume and rely upon the fact that any instrument referred to
above, executed by such Person acting as attorney-in-fact, is authorized,
regular and binding, without further inquiry.
ARTICLE 12
Certain Provisions Relating to
Changes in Control and Business Combinations
12.1. Definitions. For purposes of this Article 12, the following definitions
shall apply:
"ASSOCIATE" when used to indicate a relationship with any Person, means:
(a) Any Entity (other than the Company or a Subsidiary of the Company) of which
such Person is an officer, director or partner or is, directly or indirectly,
the beneficial owner of 10 percent or more of any class of equity securities of
such Entity;
(b) Any trust or other estate in which such Person has a substantial beneficial
interest or as to which such person serves as trustee or in a similar fiduciary
capacity; and
(c) Any Relative of such Person, or any Relative of a spouse of such Person,
who has the same home as such Person or who is a Director or officer of the
Company or a manager, director or officer of any of its Affiliates.
"BENEFICIAL OWNER" when used with respect to Company Interests, means a Person:
(a) That, individually or with any of its Affiliates or Associates,
beneficially owns Company Interests, directly or indirectly; or
(b) That, individually or with any of its Affiliates or Associates, has (i) the
right to acquire Company Interests (whether such right is exercisable
immediately or only after the passage of time), pursuant to any agreement,
arrangement, or understanding or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise; or (ii) the right to vote
Company Interests pursuant to any agreement, arrangement or understanding; or
(c) That has any agreement, arrangement, or understanding for the purpose of
acquiring, holding, voting, or disposing of Company Interests with any other
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Person that beneficially owns, or whose Affiliates or Associates beneficially
own, directly or indirectly, such Company Interests.
"BUSINESS COMBINATION" means:
(a) Unless the merger, consolidation or exchange of Company Interests does not
alter the contract rights of the Company Interests as expressly set forth in
this Agreement or change or convert in whole or in part the outstanding Company
Interests, any merger, consolidation or exchange of Company Interests or any
Subsidiary with (i) any Interested Party or (ii) any other Entity (whether or
not itself an Interested Party) which is, or after the merger, consolidation or
exchange of interests would be, an Affiliate of an Interested Party that was an
Interested Party prior to the transaction;
(b) Any sale, lease, transfer or other disposition, other than in the ordinary
course of business or pursuant to a distribution or any other method affording
substantially proportionate treatment to the Shareholders, in one transaction
or a series of transactions in any 12-month period, to any Interested Party or
any Affiliate of any Interested Party (other than the Company or any of its
Subsidiaries) of any assets of the Company or any Subsidiary having, measured
at the time the transaction or transactions are approved by the Board of
Directors of the Company, an aggregate book value as of the end of the
Company's most recently ended fiscal quarter of 10 percent or more of the total
market value of the outstanding Company Interests or of its net worth as of the
end of its most recently ended fiscal quarter;
(c) The issuance or transfer by the Company or any Subsidiary, in one
transaction or a series of transactions, of any Company Interests or any equity
securities of a Subsidiary which have an aggregate market value of five percent
or more of the total market value of the outstanding Company Interests to any
Interested Party or any Affiliate of any Interested Party (other than the
Company or any of its Subsidiaries) except pursuant to the exercise of warrants
or rights to purchase securities pro-rata to all Shareholders or any other
method affording substantially proportionate treatment to those Shareholders;
(d) The adoption of any plan or proposal for the liquidation or dissolution of
the Company in which anything other than cash will be received by an Interested
Party or any Affiliate of any Interested Party;
(e) Any reclassification of securities or recapitalization of the Company, or
any merger, consolidation or exchange of Company Interests with any of its
Subsidiaries which has the effect, directly or indirectly, in one transaction
or series of transactions, of increasing by five percent or more of the total
number of outstanding Company Interests, the proportionate amount of the
outstanding Company Interests or the outstanding number of any class of equity
securities of any Subsidiary which is directly or indirectly owned by any
Interested Party or any Affiliate of any Interested Party; or
(f) The receipt by any Interested Party or any Affiliate of any Interested
Party (other than the Company or any of its Subsidiaries) of the benefit,
directly or indirectly (except proportionately as a holder of Company
Interests), of any loan, advance, guarantee, pledge or other financial
assistance or any tax credit or other tax advantage provided by the Company or
any of its Subsidiaries.
"INTERESTED PARTY" means any Person (other than (i) the Company, (ii) any
subsidiary of the Company, (iii) the General Partners, the Special Shareholder,
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the Original Shareholders, and the Dissolution Shareholder, and (iv) any
Affiliate or Associate of any Person described in clause (iii) above) that:
(a) Is the beneficial owner, directly or indirectly, of 10 percent or more of
the outstanding Company Interests;
(b) Is an Affiliate or Associate of the Company and at any time within the two-
year period immediately prior to the date in question was the beneficial owner,
directly or indirectly, of 10 percent or more of the then outstanding Company
Interests; or
(c) Is an Affiliate or Associate of (a) or (b).
For purposes of determining whether a Person is an Interested Party, the number
of Company Interests deemed to be outstanding shall include Company Interests
deemed beneficially owned by the Person through the definition of Beneficial
Ownership set forth above but may not include any other Company Interests which
may be issuable pursuant to any agreement, arrangement or understanding, or
upon exercise of conversion rights, warrants or options, or otherwise.
"MARKET VALUE" means:
(a) In the case of Company Interests, the highest closing sale price during the
30-day period immediately preceding the date in question of a Company Interest
of the same class or series on the composite tape of the New York Stock
Exchange-listed stocks, or, if such Company Interest of the same class or
series is not quoted on the composite tape, on the New York Stock Exchange, or
if such Company Interest of the same class or series is not listed on such
Exchange, on the principal United States securities exchange registered under
the Securities Exchange Act of 1934 on which the Company Interest of the same
class or series is listed, or, if the Company Interest of the same class or
series is not listed on any such exchange, the highest closing bid quotation
with respect to such a Company Interest of the same class or series during the
30-day period preceding the date in question on the National Association of
Securities Dealers, Inc. automated quotations system or any system then in use,
or, if no such quotations are available, the fair market value on the date in
question of such a Company Interest of the same class or series as determined
by the Board of Directors in good faith; and
(b) In the case of property other than cash or stock, the fair market value of
such property on the date in question as determined by the Board of Directors
in good faith.
"SUBSIDIARY" means any Person (other than an individual) in which the Company,
directly or indirectly, holds a majority of the voting securities.
12.2. Business Combinations.
(a) Unless an exemption under Section 12.3(c) applies, the Company may not
engage in any Business Combination with any Interested Party or any Affiliate
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of an Interested Party for a period of five years following the most recent
date on which such Interested Party became an Interested Party (the "Five Year
Tolling Period"), unless:
(1) in addition to any vote otherwise required by law or this Agreement, the
Board of Directors of the Company, prior to the most recent date upon which the
Interested Party became an Interested Party, approved either the Business
Combination or the transaction which resulted in the Interested Party becoming
an Interested Party; or
(2) on or subsequent to the date upon which the Interested Party became an
Interested Party, the Business Combination is (A) approved by at least two-
thirds of the persons who are then members of the Board of Directors and (B)
authorized at an annual or special meeting of the Shareholders (and not by
written consent) by the affirmative vote of at least two-thirds in interest of
the Shareholders, excluding the Company Interests held by an Interested Party
who will (or whose Affiliate will be) a party to the Business Combination or by
an Affiliate or Associate of that Interested Party, voting together as a single
class.
(b) Unless an exemption under Section 12.3 applies, in addition to any vote
otherwise required by law or this Agreement, a Business Combination proposed by
an Interested Party or an Affiliate of the Interested Party after the Five Year
Tolling Period shall be permitted only if recommended by the Board of Directors
who are present at a duly-called meeting at which a quorum is present and
approved by the affirmative vote of at least:
(i) 80% in interest of all Shareholders, voting together as a single voting
group; and
(ii) Two-thirds in interest of the Shareholders, excluding Company Interests
held by an Interested Party who will (or whose Affiliate will) be a party to
the Business Combination or by an Affiliate or Associate of the Interested
Party, voting together as a single voting group.
12.3. Exemptions.
(a) For purposes of this Section 12.3.:
"ANNOUNCEMENT DATE" means the first general public announcement of the proposal
or intention to make a proposal of the Business Combination or its first
communication generally to the Shareholders, whichever is earlier;
"DETERMINATION DATE" means the most recent date on which the Interested Party
became an Interested Party; and
"VALUATION DATE" means:
(i) For a Business Combination voted upon by the Shareholders, the latter of
the day prior to the date of the vote or the day 20 days prior to the
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consummation of the Business Combination; and
(ii) For Business Combination not voted upon by the Shareholders, the date of
the consummation of the Business Combination.
(b) The vote required by Section 12.2(b) does not apply to a Business
Combination if (1) the Business Combination or the transaction which resulted
in the Interested Party becoming an Interested Party shall have been approved
by the Board of Directors prior to the Determination Date or (2) each of the
conditions in items (i) through (iii) below is met:
(i) The aggregate amount of the cash and the market value as of the Valuation
Date of consideration other than cash to be received for each Company Interest
in such Business Combination (whether or not the Interested Party has
previously acquired the particular class or series of Company Interest in
question) is at least equal to the highest of the following:
(A) The highest per Company Interest price (including any brokerage
commissions, transfer taxes and soliciting dealers' fees) paid by the
Interested Party for any Company Interests of the same class or series acquired
by it within the five-year period immediately prior to the Announcement Date of
the proposal of the Business Combination, plus an amount equal to interest
compounded annually from the earliest date on which the highest per Company
Interest acquisition price was paid (for the same class or series) through the
Valuation Date at the rate for one-year United States Treasury obligations from
time to time in effect, less the aggregate amount of any cash distributions
paid and the market value of any distributions paid in other than cash, per
Company Interest (for the same class or series) from the earliest date through
the Valuation Date, up to the amount of the interest; or
(B) The highest per Company Interest price (including any brokerage
commissions, transfer taxes and soliciting dealers' fees) paid by the
Interested Party for any Company Interest of the same class or series acquired
by it on, or within the five-year period immediately before, the Determination
Date, plus an amount equal to interest compounded annually from the earliest
date on which the highest per Company Interest acquisition price was paid for
the same class or series through the valuation Date at the rate for one-year
United States Treasury obligations from time to time in effect, less the
aggregate amount of any cash distributions paid and the market value of any
distributions paid in other than cash, per Company Interest of the same class
or series from the earliest date through the Valuation Date, up to the amount
of the interest; or
(C) The highest preferential amount per Company Interest to which the holders
of Company Interests of such class or series are entitled in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the Company;
or
(D) The Market Value per Company Interest of the same class or series on the
Announcement Date, plus an amount equal to interest compounded annually from
that date through the Valuation Date at the rate for one-year United States
Treasury obligations from time to time in effect, less the aggregate amount of
any cash distributions paid and the market value of any distributions paid in
other than cash, per Company Interest of the same class or series from that
date through the Valuation Date, up to the amount of interest; or
(E) The Market Value per Company Interest of the same class or series on the
Determination Date, plus an amount equal to interest compounded annually from
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that date through the Valuation Date at the rate for one-year United States
Treasury obligations from time to time in effect, less the aggregate amount of
any cash distributions paid and the Market Value of any distributions paid in
other than cash, per Company Interest of the same class or series from that
date through the Valuation Date, up to the amount of the interest; or
(F) The price per Company Interest equal to the Market Value per Company
Interest of the same class or series on the Announcement Date or on the
Determination Date, whichever is higher, multiplied by the fraction of:
(1) The highest per Company Interest price (including any brokerage
commissions, transfer taxes and soliciting dealers' fees) paid by the
Interested Party for any Company Interests of the same class or series acquired
by it within the five-year period immediately prior to the Announcement Date,
over
(2) The Market Value per Company Interest of the same class or series on the
first day in such five-year period on which the Interested Party acquired the
Company Interests.
(ii) The consideration to be received by the holders of any Company Interests
is to be in cash or in the same form as the Interested Party has previously
paid for Company Interests, except to the extent that the Shareholders
otherwise elect in connection with their approval of the proposed transaction
under Section 6.2 of this Agreement. If the Interested Party has paid for
Company Interests with varying forms of consideration, the form of
consideration for such Company Interests of the same class or series shall be
either cash or the form used to acquire the largest number of Company Interests
of the same class or series previously acquired by it, except to the extent
that the Shareholders otherwise elect.
(iii) After the Determination Date and prior to the consummation of such
Business Combination:
(A) There shall have been no failure to declare and pay at the regular date
therefor (if applicable) any full periodic distributions (whether or not
cumulative) on any outstanding preferred Company Interests or other securities
of the Company;
(B) There shall have been:
(1) No reduction in the annual rate of distributions made with respect to any
class or series of Company Interests that are not preferred (except as
necessary to reflect any subdivision of Company Interests); and
(2) An increase in such annual rate of distributions as necessary to reflect
any reclassification, recapitalization, reorganization or any similar
transaction which has the effect of reducing the number of outstanding Company
Interests; and
(C) The Interested Party did not become the Beneficial Owner of any additional
Company Interests except as part of the transaction which resulted in such
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Interested Party becoming an Interested Party or by virtue of proportionate
Company Interest splits or distributions.
The provisions of items (A) and (B) of this subsection (b)(iii) do not apply if
no Interested Party or an Affiliate or Associate of the Interested Party voted
as a member of the Board of Directors of the Company in a manner inconsistent
with such items (A) and (B) and the Interested Party, within 10 days after any
act or failure to act inconsistent with such items, notifies the Board of
Directors of the Company in writing that the Interested Party disapproves
thereof and requests in good faith that the Board of Directors rectify such act
or failure to act.
(c) The provisions of Section 12.2 do not apply to any Business Combination of
the Company with an Interested Party that became an Interested Party
inadvertently, if the Interested Party:
(i) As soon as practicable (but not more than 10 days after the Interested
Party knew or should have known it had become an Interested Party) divests
itself of a sufficient amount of Company Interests so that it no longer is the
beneficial owner, directly or indirectly, of 10 percent or more of the
outstanding Company Interests; and
(ii) Would not at any time with the five-year period preceding the Announcement
Date with respect to the Business Combination have been an Interested Party
except by inadvertence.
12.4. Amendment. Notwithstanding any other provisions of this Agreement, this
Article 12 may be amended or repealed only by a vote of 80% in interest of all
Shareholders, voting together as a single class, excluding Company Interests
held by any Interested Party or any Affiliate of an Interested Party.
12.5. Certain Determinations with Respect to this Article 12. The Board of
Directors shall have the power to determine for the purposes of this Article
12, on the basis of information known to the Directors: (i) the number of
Company Interests of which any Person is the Beneficial Owner, (ii) whether a
Person is an Affiliate or Associate of another, (iii) whether a Person has an
agreement, arrangement or understanding with another as to the matters referred
to in the definition of "Beneficial Owner" as hereinabove defined, (iv) whether
two or more transactions constitute a "series of transactions," and (v) such
other matters with respect to which a determination is required under this
Article 12.
12.6. Voting Power. For purposes of this Article 12, the Growth Shares, the
Term Growth Shares, the Preferred Shares and the Preferred Capital Distribution
Shares shall be deemed to have equal voting power, on a share-for-share basis,
with respect to the approval of matters set forth in this Article 12.
ARTICLE 13
Voting Rights of Certain Control Company Interests
13.1. Definitions. For purposes of this Article 13, the following definitions
shall apply:
"ACQUIRING PERSON" means a person who makes or proposes to make a Control
Company Interests Acquisition, or such Person's Affiliate or Associate.
"ASSOCIATE" when used to indicate a relationship with any Person means:
(a) An "Associate" as defined in Section 12.1; or
(b) A Person that:
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(i) Directly or indirectly controls, or is controlled by, or is under common
control with, the Person specified; or
(ii) Is acting or intends to act jointly or in concert with the Person
specified.
"CONTROL COMPANY INTERESTS" means those Company Interests that, except for this
Article 13, would, if aggregated with all other Company Interests (including
Company Interests the acquisition of which is excluded from the definition
"Control Company Interests Acquisition" below) owned by a Person or in respect
of which that Person is entitled to exercise or direct the exercise of voting
power, except solely by virtue of a revocable proxy, entitle that Person,
directly or indirectly, to exercise or direct the exercise of the voting power
of any class or series of Company Interests within any of the following ranges
of voting power:
(a) One-fifth or more, but less than one-third of all voting power;
(b) One-third or more, but less than a majority of all voting power; or
(c) A majority or more of all voting power.
"Control Company Interests" includes Company Interests only to the extent that
the Acquiring Person, following the acquisition of the Company Interests, is
entitled, directly or indirectly, to exercise or direct the exercise of voting
power within any level of voting power set forth in this section for which
approval has not been obtained previously under Section 13.2.
"CONTROL COMPANY INTERESTS ACQUISITION" means the acquisition, directly or
indirectly, by any Person (other than (i) the Company, (ii) any subsidiary of
the Company, (iii) the General Partners, the Special Shareholder, the Original
Shareholders, and the Dissolution Shareholder, and (iv) any Affiliate or
Associate of any Person described in clause (iii) above), of ownership of, or
the power to direct the exercise of voting power with respect to, issued and
outstanding Control Company Interests. Control Company Interests Acquisition
does not include the acquisition of Control Company Interests:
(a) Under the laws of descent and distribution;
(b) Under the satisfaction of a pledge or other security interest created in
good faith and not for the purpose of circumventing this Article 13; or
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(c) Under a merger, consolidation or exchange of interests if the Company is a
party to the merger, consolidation or exchange of interests.
Unless the acquisition entitles any Person, directly or indirectly, to exercise
or direct the exercise of voting power of Company Interests in excess of the
range of voting power previously authorized or attained under an acquisition
that is exempt under items (a), (b) or (c) of this definition, "Control Company
Interests Acquisition" does not include the acquisition of Company Interests in
good faith and not for the purpose of circumventing this Article 13, by or from
any Person whose voting rights have previously been authorized by the
Shareholders in compliance with this Article 13 or any Person whose previous
acquisition of Company Interests would have constituted a Control Company
Interests Acquisition but for the exclusions in items (a) through (c) of this
definition.
"INTERESTED COMPANY INTERESTS" means Company Interests in respect of which an
Acquiring Person is entitled to exercise or direct the exercise of the voting
power of Company Interests in the election of Directors or otherwise.
13.2. Voting Rights.
(a) Control Company Interests acquired in a Control Company Interests
Acquisition have no voting rights except to the extent approved by the
Shareholders at a meeting held under Section 13.4 by the affirmative vote of
two-thirds in interest of all Shareholders, excluding any votes cast with
respect to Interested Company Interests.
(b)For purposes of this Section 13.2:
(i) Company Interests acquired within 180 days or Company Interests acquired
under a plan to make a Control Company Interests Acquisition are considered to
have been acquired in the same acquisition; and
(ii) A Person may not be deemed to be entitled to exercise or direct the
exercise of voting power with respect to Company Interests held for the benefit
of others if the Person:
(A) Is acting in the ordinary course of business, in good faith and not for the
purpose of circumventing the provisions of this Section of the Agreement; and
(B) Is not entitled to exercise or to direct the exercise of the voting power
of the Company Interests unless the Person first seeks to obtain the
instruction of another person.
13.3. Acquiring Person Statement.
Any Person who proposes to make or who has made a Control Company Interests
Acquisition may deliver an Acquiring Person statement to the Company at the
Company's principal office. The Acquiring Person statement shall set forth all
of the following:
(a) The identity of the Acquiring Person and each other member of any group of
which the Person is a part for purposes of determining Control Company
Interests;
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(b) A statement that the Acquiring Person statement is given under this Article
13;
(c) The number of Company Interests owned (directly or indirectly) by the
Acquiring Person and each other member of any group;
(d) The applicable range of voting power as set forth in the definition of
"Control Company Interests"; and
(e) If the Control Company Interests Acquisition has not occurred:
(i) A description in reasonable detail of the terms of the proposed Control
Company Interests Acquisition; and
(ii) Representations of the Acquiring Person, together with a statement in
reasonable detail of the facts on which they are based, that:
(A) The proposed Control Company Interests Acquisition, if consummated, will
not be contrary to law; and
(B) The Acquiring Person has the financial capacity, through financing to be
provided by the Acquiring Person, and any additional specified sources of
financing required under Section 13.5, to make the proposed Control Company
Interests Acquisition.
13.4. Special Meeting.
(a) Except as provided in Section 13.5, if the Acquiring Person requests, at
the time of delivery of an Acquiring Person statement, and gives a written
undertaking to pay the Company's expenses of a special meeting, except the
expenses of opposing approval of the voting rights, within ten days after the
day on which the Company receives both the request and undertaking, the Board
of Directors of the Company shall call a special meeting of the Shareholders,
to be held within 50 days after receipt of the Acquiring Person statement and
undertaking, for the purpose of considering the voting rights to be accorded
the Company Interests acquired or to be acquired in the Control Company
Interests Acquisition.
(b) The Board of Directors may require the Acquiring Person to give bond,
with sufficient surety, to reasonably assure the Company that this undertaking
will be satisfied.
(c) Unless the Acquiring Person agrees in writing to another date, the special
meeting of Shareholders shall be held within 50 days after the day on which the
Company has received both the request and the undertaking.
(d) If the Acquiring Person makes a request in writing at the time of
delivery of the Acquiring Person statement, the special meeting may not be held
sooner than 30 days after the day on which the Company receives the Acquiring
Person statement.
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(e) If no request is made under subsection (a) of this Section 13.4, the issue
of the voting rights to be accorded the Company Interests acquired in the
Control Company Interests Acquisition may, at the option of the Company, be
presented for consideration at any meeting of the Shareholders. If no request
is made under subsection (a) of this Section 13.4 and the Company proposes to
present the issue of the voting rights to be accorded the Company Interests
acquired in a Control Company Interests Acquisition for consideration at any
meeting of the Shareholders, the Company shall provide the Acquiring Person
with written notice of the proposal not less than 20 days before the date on
which notice of the meeting is given.
13.5. Calls.
(a) A call of a special meeting of Shareholders is not required to be made
under Section 13.4 unless, at the time of delivery of an Acquiring Person
statement under Section 13.3, the Acquiring Person has:
(i) Entered into a definitive financing agreement or agreements with one or
more responsible financial institutions or other entities that have the
necessary financial capacity, providing for any amount of financing of the
Control Company Interests Acquisition not to be provided by the Acquiring
Person; and
(ii) Delivered a copy of the agreements to the Company.
13.6. Notice of Meeting.
(a) If a special meeting of the Shareholders is requested, notice of the
special meeting shall be given as promptly as reasonably practicable by the
Company to all Shareholders of record as of the record date set for the
meeting, whether or not the Shareholder is entitled to vote at the meeting.
(b) Notice of the special or annual meeting at which the voting rights are to
be considered shall include or be accompanied by the following:
(i) A copy of the Acquiring Person statement delivered to the Company under
Section 13.3; and
(ii) A statement by the Board of Directors setting forth its position or
recommendation, or stating that it is taking no position or making no
recommendation, with respect to the issue of voting rights to be accorded the
Control Company Interests.
13.7. Redemption Rights.
(a) If an Acquiring Person statement has been delivered on or before the 10th
day after the Control Company Interests Acquisition, the Company may, at its
option, redeem any or all Control Company Interests, except Control Company
Interests for which voting rights have been previously approved under Section
13.2, at any time during a 60-day period commencing on the day of a meeting at
which voting rights are considered under Section 13.4 and are not approved.
(b) In addition to the redemption rights authorized under subsection (a) of
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this Section 13.7, if an Acquiring Person statement has not been delivered on
or before the 10th day after the Control Company Interests Acquisition, the
Company may, at its option, redeem any or all Control Company Interests, except
Control Company Interests for which voting rights have been previously approved
under Section 13.2, at any time during a period commencing on the 11th day
after the Control Company Interests Acquisition and ending 60 days after the
acquiring person statement has been delivered.
(c) Any redemption of Control Company Interests under this Section shall be at
the fair value of the Company Interests. For purposes of this section, "fair
value" shall be determined:
(i) As of the date of the last acquisition of Control Company Interests by the
Acquiring Person in a Control Company Interests Acquisition or, if a meeting is
held under Section 13.4, as of the date of the meeting; and
(ii) Without regard to the absence of voting rights for the Control Company
Interests.
13.8. Amendment. Notwithstanding any other provisions of this Agreement, this
Article 13 may only be amended or repealed by a vote of 80% in interest of all
Shareholders, voting together as a single class, excluding any votes cast with
respect to Interested Company Interests.
13.9. Voting Power. For purposes of this Article 13, the Growth Shares, Term
Growth Shares, Preferred Shares and Preferred Capital Distribution Shares shall
be deemed to have equal voting power on a share-for-share basis with respect to
approval of matters set forth in this Article 13.
ARTICLE 14
Miscellaneous Provisions
14.1. Notices.
(a) Except as otherwise provided in this Agreement or in the By-laws, any and
all notices, consents, offers, elections and other communications required or
permitted under this Agreement shall be deemed adequately given only if in
writing and the same shall be delivered either in hand, by telecopy, or by mail
or Federal Express or similar expedited commercial carrier, addressed to the
recipient of the notice, postage prepaid and registered or certified with
return receipt requested (if by mail), or with all freight charges prepaid (if
by Federal Express or similar carrier).
(b) All notices, demands, and requests to be sent hereunder shall be deemed to
have been given for all purposes of this Agreement upon the date of receipt or
refusal.
(c) All such notices, demands and requests shall be addressed as follows: (i)
if to the Company, to its principal place of business, as set forth in Article
2 hereof and (ii) if to a Shareholder, to the address of such Shareholder
listed on the Company's Shareholder register.
(d) By giving to the other parties written notice thereof, the parties hereto
and their respective successors and assigns shall have the right from time to
time and at any time during the term of this Agreement to change their
respective addresses effective upon receipt by the other parties of such notice
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and each shall have the right to specify as its address any other address.
14.2. Word Meanings. The words such as "herein", "hereinafter", "hereof" and
"hereunder" refer to this Agreement as a whole and not merely to a subdivision
in which such words appear unless the context otherwise requires. The singular
shall include the plural and the masculine gender shall include the feminine
and neuter, and vice versa, unless the context otherwise requires.
14.3. Binding Provisions. The covenants and agreements contained herein shall
be binding upon, and inure to the benefit of, the heirs, legal representatives,
successors and assigns of the respective parties hereto.
14.4. Amendment and Modification. Unless otherwise specifically provided in
this Agreement, this Agreement may be amended, modified or supplemented only by
the vote, at a duly held meeting, of more than 50% in interest of the then-
outstanding New Shares (or, in the case of a written Consent without a meeting,
more than 50% in interest of the aggregate then-outstanding New Shares), voting
or acting as one class (and not as separate classes, notwithstanding the fact
that there may be members of more than one class voting); provided, however,
that Section 8.1 shall not be amended, modified or supplemented, unless such
amendment, modification or supplement receives the Consent of at least 80% in
interest of the holders of then-outstanding New Shares.
14.5. Waiver. The waiver by any party hereto of a breach of any provisions
contained herein shall be in writing, signed by the waiving party, and shall in
no way be construed as a waiver of any succeeding breach of such provision or
the waiver of the provision itself.
14.6. Applicable Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Delaware, without regard to such
state's laws concerning conflicts of laws. In the event of a conflict between
any provision of this Agreement and any nonmandatory provision of the Act, the
provision of this Agreement shall control and take precedence.
14.7. Separability of Provisions. Each provision of this Agreement shall be
deemed severable, and if any part of any provision is held to be illegal, void,
voidable, invalid, nonbinding or unenforceable in its entirety or partially or
as to any party, for any reason, such provision may be changed, consistent with
the intent of the parties hereto, to the extent reasonably necessary to make
the provision, as so changed, legal, valid, binding and enforceable. If any
provision of this Agreement is held to be illegal, void, voidable, invalid,
nonbinding or unenforceable in its entirety or partially or as to any party,
for any reason, and if such provision cannot be changed consistent with the
intent of the parties hereto to make it fully legal, valid, binding and
enforceable, then such provision shall be stricken from this Agreement, and the
remaining provisions of this Agreement shall not in any way be affected or
impaired, but shall remain in full force and effect.
14.8. Headings. The headings contained in this Agreement (including but not
limited to the titles of the Schedules and Exhibits hereto) have been inserted
for the convenience of reference only, and neither such headings nor the
placement of any term hereof under any particular heading shall in any way
restrict or modify any of the terms or provisions hereof.
14.9. Further Assurances. The Shareholders shall execute and deliver such
further instruments and do such further acts and things as may be required to
carry out the intent and purposes of this Agreement.
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14.10. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which taken
together shall constitute one and the same instrument.
14.11. Entire Agreement. This Agreement, and all Schedules and Exhibits
hereto, constitutes the entire agreement between the parties hereto with
respect to the transactions contemplated herein, and supersedes all prior
understandings or agreements, oral or written, between the parties.
IN WITNESS WHEREOF, the parties hereto, being the sole current Members of the
Company, have executed and delivered this Amended and Restated Certificate of
Formation and Operating Agreement as of the day and year first-above written.
MME I CORPORATION, (a Delaware corporation)
By: /S/ MARK K. JOSEPH
- ------------------------------------------
Name: MARK K. JOSEPH,
Title: PRESIDENT
MME II CORPORATION, (a Delaware corporation)
- ------------------------------------------
By: /S/ MARK K. JOSEPH
Name: MARK K. JOSEPH,
Title: PRESIDENT
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. 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 adjournment is taken; PROVIDED, that if the
adjournment is for more than 30 days, a notice of the adjourned meeting,
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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
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<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
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<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
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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
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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
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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
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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
NH43953.1
<PAGE>
EXHIBIT NO. 11
COMPUTATION OF EARNINGS PER SHARE
A dual presentation of basic and diluted EPS is presented for Growth
Shares. Basic EPS is calculated by dividing net income allocable to Growth
Shares by the weighted average number of Growth Shares outstanding. In
addition to Growth Shares that are issued and outstanding, the weighted
average shares outstanding includes the Deferred Shares payable under the
Directors' Plan (see Note 16 to the Company's Form 10-K included herein) and
the vested portion of restricted shares granted to officers (see Note 16 to the
Company's Form 10-K included herein).
The calculation of diluted EPS is similar to that of basic EPS except
that the denominator is increased to include the number of additional shares
that would have been outstanding if the restricted shares had vested, options
granted had been exercised and the Preferred Shares and Preferred CD Shares
had been converted to Growth Shares. Accordingly, the numerator is adjusted
to add back the income allocable to the Preferred and Preferred CD Shares, as
well as the Term Growth Shares, that would have been allocated to Growth
Shares as a result of the conversion of these shares. The diluted EPS
calculation does not assume conversion if the conversion would have an anti-
dilutive effect on EPS. The following tables reconcile the numerators and
denominators in the basic and diluted EPS calculations for 1997 and 1996:
<TABLE>
<CAPTION>
For the year ended December 31, 1997
(in thousands, except share and per share data)
------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
-------------- -------------- --------------
<S> <C> <C> <C>
Basic EPS
Income allocable to growth shares $16,739 11,094,881 $ 1.51
Effect of Dilutive Securities
Options and restricted shares - 59,611
Convertible preferred shares
(including term growth shares) 2,058 1,383,025
-------------- -------------- --------------
Dilutive EPS
Income allocable to growth shares
plus assumed conversions $18,797 12,537,517 $ 1.50
============== ============== =============
For the period ended December 31, 1996
(in thousands, except share and per share data)
------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
--------------- --------------- -----------
<S> <C> <C> <C>
Basic EPS
Income allocable to growth shares $ 6,275 11,122,705 $ 0.56
Effect of Dilutive Securities
Options and restricted shares - 343
Convertible preferred shares
(including term growth shares) - -
----------------- -------------- ----------
Dilutive EPS
Income allocable to growth shares
plus assumed conversions $6,275 11,123,048 $ 0.56
================= ============= ===========
For the period ended December 31, 1996, the effect of the potential
dilution from the conversion of the preferred shares is not included in the
calculation of diluted EPS because the effect of the conversion would have
been anti-dilutive.
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Name of Subsidiary Jurisdiction of Incorporation
SCA Tax Exempt Trust Maryland
MMACap, LLC Delaware
Municipal Mortgage Servicing, LLC Maryland
Municipal Mortgage Investments, LLC Maryland
</TABLE>
