<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Plymouth Commercial Mortgage Fund
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
- --------------------------------------------------------------------------------
<PAGE> 2
PLYMOUTH COMMERCIAL MORTGAGE FUND
April 4, 1997
Dear Fellow Shareholder:
I am writing to let you know that the first Annual Meeting of Shareholders
of Plymouth Commercial Mortgage Fund (the "Company") will be held on April 24,
1997 to vote on five important proposals that affect the Company and your
investment in it. As a Shareholder, you have the opportunity to voice your
opinion on these matters. This package contains information about the proposals
and the materials to use when voting by mail.
Please take the time to read the enclosed materials. YOUR PROXY IS
IMPORTANT TO US. SIGNED BUT UNMARKED PROXY BALLOTS WILL BE COUNTED IN
DETERMINING WHETHER A QUORUM IS PRESENT AND WILL BE VOTED IN FAVOR OF EACH OF
THE PROPOSALS, AND, IN THE DISCRETION OF THE PROXY AGENTS, AS TO OTHER MATTERS
THAT PROPERLY MAY COME BEFORE, OR ON MATTERS INCIDENT TO THE CONDUCT OF, THE
ANNUAL MEETING.
The proposals summarized below have been carefully reviewed by the
Company's Board of Trustees (the "Board"). The Board believes these proposals
are in the best interest of Shareholders and recommends that you vote FOR each
proposal.
Your early response will be appreciated and could save the Company the
substantial costs associated with a follow-up meeting. You may be contacted by
a representative of the Company who is soliciting proxies on behalf of the
Board. If signed proxy ballots are not returned in sufficient numbers to
constitute a quorum, the Board intends to re-solicit proxies from Shareholders
who have not responded so that business can be conducted at the Annual Meeting.
Such re-solicitation would be a costly process paid for by the Company.
HERE IS A BRIEF SUMMARY OF THE PROPOSALS:
PROPOSAL 1 is to elect 5 trustees of the Company to serve for 1 year
and until their successors are elected and qualified.
PROPOSAL 2 is to approve the continuation of the investment advisory
agreement between the Company and Greystone Advisers, Inc.
PROPOSAL 3 is to ratify the selection of KPMG Peat Marwick LLP as the
Company's independent public accountant for the year ending December
31, 1997.
PROPOSAL 4 is to approve a change of a term, and to ratify the
issuance, of certain Class A Warrants that have been issued to
SouthWest Federated Holding Company, Inc.
PROPOSAL 5 is to approve a change of a term, and the future issuance,
of certain Class B Warrants that will be issued to SouthWest
Federated Holding Company, Inc.
VOTING BY MAIL IS QUICK AND EASY. EVERYTHING YOU NEED IS ENCLOSED.
We encourage you to exercise your right as a Shareholder and to vote on
the proposals. To cast your vote, simply complete the proxy ballot enclosed in
this package. Please be sure to sign the card before mailing it in the
postage-paid envelope provided. WHETHER YOU PLAN TO ATTEND THE ANNUAL MEETING
OR NOT, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY BALLOT AND RETURN IT
PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
If you have any questions before you vote, please call John Mosher at
(210) 493-3971, Ext. 204. We'll be glad to help you get your vote in quickly.
Thank you for your participation in this important process for the Company.
Sincerely,
/s/ Robert R. Swendson
Robert R. Swendson
President and Chief Executive Officer
<PAGE> 3
PLYMOUTH COMMERCIAL MORTGAGE FUND
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To the Shareholders:
NOTICE IS HEREBY GIVEN that the first Annual Meeting (the "Meeting") of
owners of common shares of beneficial interest ("Shareholders") in Plymouth
Commercial Mortgage Fund, a Delaware business trust (the "Company"), will be
held at the offices of Duncan-Smith Co., 311 Third Street, 3rd Floor, San
Antonio, Texas 78205 on Thursday, April 24, 1997, at 8 a.m. Central time. The
purpose of the Meeting is to consider and act upon the following proposals,
which are more fully described in the accompanying proxy statement:
1. To elect 5 trustees to serve for 1 year and until their successors
are elected and qualified.
2. To approve the continuation of the investment advisory agreement
between the Company and Greystone Advisers, Inc.
3. To ratify the selection of KPMG Peat Marwick LLP as the Company's
independent public accountant for the year ending December 31, 1997.
4. To approve a change of a term, and to ratify the issuance, of certain
Class A Warrants that have been issued to SouthWest Federated Holding
Company, Inc.
5. To approve a change of a term, and the future issuance, of certain
Class B Warrants that will be issued to SouthWest Federated Holding
Company, Inc.
6. To transact such other business as may properly come before the
Meeting or any adjournment thereof.
The Board of Trustees of the Company has fixed the close of business on
Friday, March 21, 1997, as the record date for the determination of
Shareholders entitled to notice of, and to vote at, the Meeting and any
adjournments thereof.
By order of the Board of Trustees,
/s/ Kenneth L. Bennight, Jr.
Kenneth L. Bennight, Jr.
Vice President and Secretary
April 4, 1997
YOUR VOTE IS IMPORTANT.
PLEASE RETURN YOUR PROXY BALLOT PROMPTLY.
===============================================================================
AS A SHAREHOLDER OF THE COMPANY, YOU ARE INVITED TO ATTEND THE MEETING, EITHER
IN PERSON OR BY PROXY. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON,
PLEASE COMPLETE, SIGN, DATE, AND RETURN THE ENCLOSED PROXY BALLOT IN THE
POSTAGE-PAID ENVELOPE PROVIDED. YOUR PROMPT RETURN OF THE PROXY BALLOT WILL
HELP ASSURE THAT A QUORUM, WHICH IS REQUIRED TO CONDUCT BUSINESS, IS PRESENT AT
THE MEETING AND WILL AVOID ADDITIONAL EXPENSES TO THE COMPANY IN CONNECTION
WITH FURTHER SOLICITATION OF PROXIES. MAILING YOUR PROXY BALLOT WILL NOT
PREVENT YOU FROM ATTENDING THE MEETING AND VOTING YOUR BENEFICIAL INTERESTS IN
PERSON, IF YOU LATER CHOOSE TO DO SO.
===============================================================================
<PAGE> 4
PLYMOUTH COMMERCIAL MORTGAGE FUND
C/O GREYSTONE ADVISERS, INC.
13333 BLANCO ROAD, SUITE 314
SAN ANTONIO, TEXAS 78216-7756
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Trustees of Plymouth Commercial Mortgage Fund, a
Delaware business trust (the "Company"), for use at the Company's first Annual
Meeting (the "Meeting") of owners of common shares of beneficial interest
("Shareholders"), to be held at 8 a.m. Central time on Thursday, April 24,
1997, at the office of Duncan-Smith Co., 311 Third Street, 3rd Floor, San
Antonio, Texas 78205, and at any adjournments thereof. This Proxy Statement and
the accompanying proxy ballot are first being sent to Shareholders on or about
April 4, 1997.
If the accompanying proxy ballot is properly signed and dated and is
received in time for the Meeting, those common shares of beneficial interest
("Shares") held of record by you (i.e., those Shares registered directly in
your name) will be voted as specified on that proxy ballot. If no instructions
are given on the proxy ballot, the Shares covered thereby will be voted FOR the
proposals listed in the accompanying Notice of Annual Meeting of Shareholders
(the "Notice"). Shareholders authorized to vote may revoke a proxy at any time
before it is exercised by so notifying the Secretary of the Company in writing
at the above address, by submitting a properly executed proxy with a later
date, or by attending the Meeting and voting in person. Any Shareholder of
record attending the Meeting may vote in person whether or not he or she has
previously executed and returned a proxy ballot.
BACKGROUND OF THE COMPANY AND THE PROPOSALS
The Company was organized under the laws of the State of Delaware on
August 23, 1996 as a business trust, and has elected to be regulated as a
business development company ("BDC") under the Investment Company Act of 1940,
as amended (the "1940 Act"). The Meeting constitutes the first annual meeting
of Shareholders, and has been called to permit Shareholders to consider the
following proposals:
1. To elect 5 trustees to serve for 1 year and until their successors
are elected and qualified.
2. To approve the continuation of the investment advisory agreement
(the "Advisory Agreement") between the Company and Greystone
Advisers, Inc. ("Greystone").
3. To ratify the selection of KPMG Peat Marwick LLP as the Company's
independent public accountant for the year ending December 31, 1997.
4. To approve a change of a term, and to ratify the issuance, of certain
Class A Warrants that have been issued to SouthWest Federated
Holding Company, Inc. ("SWFHC").
5. To approve a change of a term, and the future issuance, of certain
Class B Warrants that will be issued to SWFHC.
6. To transact such other business as may properly come before the
Meeting or any adjournments thereof.
VOTING
On March 21, 1997, there were 921,627 Shares outstanding, each of which is
entitled to one vote. The Shareholders entitled to vote at the Meeting are
those of record as of the close of business on that date. SouthWest Federated,
Inc., which directly owns approximately 2.25% of the Shares, and Robert R.
Swendson, who directly
<PAGE> 5
owns 1.09% of the Shares, have agreed to vote their Shares, on all matters on
which Shareholders are required or permitted to vote, only in the same
proportion as the Shares voted by the Company's other Shareholders. The
foregoing approach is often taken by a shareholder which is affiliated with an
investment company, but is not necessarily required.
One-tenth (1/10) of the Shares entitled to vote at the Meeting constitutes
a quorum. If a Share is represented in person or by proxy for any purpose at
the Meeting, it is deemed to be present for quorum purposes. Abstentions will
be counted as present in determining whether a quorum has been reached. Once a
quorum has been reached, a determination must be made as to the results of the
vote on each of the Proposals.
With respect to Proposal 1, to elect 5 Trustees to serve on the Company's
Board, the Trustee nominees each must receive a plurality of the votes cast at
the Meeting, which means that a vote withheld from a particular nominee or
nominees will not affect the outcome of the vote for that particular nominee or
nominees. Proposal 2, to approve the continuation of the Company's Advisory
Agreement, must be approved by a "1940 Act vote," which means a vote of the
holders of (a) more than 50% of the outstanding Shares of the Company or (b)
67% or more of the Shares present at the Meeting if more than 50% of the
outstanding Shares of the Company are represented at the Meeting in person or
by proxy, whichever is less. In this instance, abstentions are considered in
determining the number of votes required to pass Proposal 2, and will have the
same legal effect as a vote against it. Proposal 3, to ratify the selection of
accountants, must be approved by an affirmative vote of a majority of the votes
cast on such Proposal, and abstentions are not counted in determining the
outcome of the vote on Proposal 3. Approval of Proposals 4 and 5, to approve a
change of a term, and to approve or ratify, as applicable, the issuance, of
certain Class A and Class B Warrants that have been or will be issued to SWFHC,
must be approved by a majority of the Company's outstanding voting securities,
and by the holders of a majority of the Company's outstanding voting securities
that are not affiliated persons of the Company, and therefore abstentions would
count as votes against these Proposals.
In the event that a quorum is not present at the Meeting, or in the event
that a quorum is present but sufficient votes to approve a proposal are not
received, the persons named as proxies may propose one or more adjournments of
the Meeting to permit further solicitation of proxies. Any such adjournment
will require the affirmative vote of a majority of the Shares represented at
the Meeting in person or by proxy. The persons named as proxies will vote those
proxies for such adjournment unless marked to be voted against any proposal for
which an adjournment is sought to permit further solicitation of proxies. Prior
to any such adjournment, Shareholder action may be taken to transact such other
business as may properly come before the Meeting if sufficient affirmative
votes have been received.
INFORMATION REGARDING THIS SOLICITATION
The expense of the Company's solicitation of proxies for the Meeting,
including the cost of preparing, printing, and mailing this Proxy Statement and
the accompanying Notice and proxy ballot, will be borne by the Company. In
addition to the solicitation of proxies by the use of the mails, proxies may be
solicited in person and by telephone, facsimile transmission, or telegram by
Trustees or officers of the Company or by regular employees of Greystone, the
Company's investment adviser, without special compensation therefor.
BENEFICIAL OWNERSHIP OF COMMON STOCK
As of March 21, 1997 there were 921,627 Shares outstanding. Each Share is
entitled to one vote. The following table sets forth information as of such
date with respect to the beneficial ownership of the Company's Shares by: (i)
each person known by the Company to own beneficially more than 5% of such
Shares; (ii) each Trustee of the Company; (iii) the Chief Executive Officer of
the Company; and (iv) all Trustees and officers of the Company as a group.
- 2 -
<PAGE> 6
<TABLE>
<CAPTION>
=======================================================================================================================
Amount and nature of Percent of
Title of class Name and address of beneficial owner beneficial ownership(1) class
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common shares SWFHC(2) 70,697 Shares(3) 7.28%(4)
of beneficial
interest, no par Robert R. Swendson (2) 80,747 Shares(5) 8.31%(4)
value
James R. Clifton(6) 65,000 Shares(7) 7.05%
William L. Clifton, Jr.(6) 81,160 Shares(8) 8.81%
Goodhue W. Smith III 136,197 Shares(9) 14.02%(4)
311 Third Street
San Antonio, TX 78205
Christopher Goldsbury, Jr. 200,000 Shares 21.70%
200 Concord Plaza, Suite 620
San Antonio, TX 78216
Trinity University 50,000 Shares 5.43%
715 Stadium Drive
San Antonio, TX 78212
Willis H. Wagner 5,000 Shares .54%
200 Concord Plaza, Suite 620
San Antonio, TX 78216
All Trustees and Executive 226,247 Shares(3) 23.29%(4)
Officers as a Group
====================================================================================================================
</TABLE>
(1) Directly owned unless otherwise indicated.
(2) 13333 Blanco Road, Suite 314, San Antonio, TX 78216-7756.
(3) Includes 50,000 Shares that may be acquired under presently
exercisable subscription rights directly owned by SWFHC and 20,697
Shares directly owned by SouthWest Federated, Inc., a wholly-owned
subsidiary of SWFHC. Does not include 200,000 Shares that may be
acquired upon exercise of certain conditional warrants.
(4) Reflects the dilutive effect of 50,000 Shares not outstanding but
subject to presently exercisable subscription rights which are deemed
to be outstanding for the purpose of computing this percentage.
(5) Includes 100% of the Shares beneficially owned by SWFHC, the voting or
disposition of which Robert R. Swendson may be deemed to have the
power to direct by virtue of his ownership of approximately 46% of
SWFHC's common stock and his position as president and chief executive
officer of SWFHC and as one of its two directors. Mr. Swendson
disclaims beneficial ownership of the Shares owned by SWFHC.
(6) 4830 Lakewood, Suite 5, Waco, TX 76710.
(7) Includes 20,000 Shares owned by two family trusts of which James R.
Clifton is one of two trustees and 20,000 Shares owned by two family
trusts for the benefit of Mr. Clifton's children of which Mr. Clifton
is not a trustee. Mr. Clifton disclaims beneficial ownership of those
Shares that he does not directly own.
(8) Includes 61,160 Shares owned by three family trusts of which William
L. Clifton, Jr., is one of two trustees and 20,000 Shares owned by two
family trusts for the benefit of Mr. Clifton's children of which
Mr. Clifton is not a trustee. Mr. Clifton disclaims beneficial
ownership of all the Shares attributed to him.
(9) Includes 50,000 Shares owned by five trusts of which Goodhue W. Smith,
III is one of two trustees and 100% of the Shares beneficially owned
by SWFHC, the voting or disposition of which Mr. Smith may be deemed
to have the power to direct by virtue of his position as one of its
two directors. Mr. Smith disclaims beneficial ownership of those
Shares that he does not own directly.
- 3 -
<PAGE> 7
1. PROPOSAL 1: ELECTION OF TRUSTEES
BACKGROUND
Shareholders will be asked to consider electing 5 individuals to the Board
of Trustees of the Company. The names of the nominees for election to the Board
of Trustees are Dr. Ronald K. Calgaard, James R. Clifton, Robert R. Swendson,
Goodhue W. Smith III, and Willis H. Wagner. All the individuals currently serve
as Trustees, Mr. Swendson since the Company's founding on August 23, 1996, Mr.
Clifton and Dr. Calgaard since September 13, 1996, and Mr. Smith and Mr. Wagner
since January 30, 1997.
Each of the nominees for Trustee has consented to be named in this Proxy
Statement and to serve as a Trustee if elected. The Board of Trustees has no
reason to believe that any of the nominees named above will become unavailable
for election as a Trustee, but if that should occur before the Meeting, proxies
will be voted for such persons as the Board of Trustees may recommend.
Certain information regarding the Trustees of the Company is set forth
below.
<TABLE>
<CAPTION>
================================================================================================================
Position with
Name and Address Company Age Recent Professional Experience
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Ronald K. Calgaard Trustee 59 Dr. Calgaard is President of Trinity University,
715 Stadium Drive a post he has held since 1979. He also serves
San Antonio, Texas 78212 as a director of Valero Energy Corporation, a
Trustee of Southwest Research Institute, a
member of the Advisory Board of the San
Antonio Spurs, and a Trustee of Texas Military
Institute.
James R. Clifton Trustee 46 Mr. Clifton is a founder of The Clifton Group,
4830 Lakewood, Suite 5 a private investment partnership formed in
Waco, Texas 76710 January 1996. From 1973 to January 1996,
Mr. Clifton served in a number of positions for
Behrens, Inc., a family-owned (until 1994)
distributor of pharmaceuticals to independent
pharmacies, including Executive Vice
President, Chief Operating Officer, and
Director.
Goodhue W. Smith III* Trustee 47 Since its founding in 1978, Mr. Smith has been
311 Third Street, 3rd Floor employed by Duncan-Smith Co., an
San Antonio, TX 78205 investment banking firm located in San Antonio,
Texas, where he currently serves as a Vice
President. Mr. Smith is the President of
Duncan-Smith Securities, Inc., a registered
broker/dealer and wholly owned subsidiary of
Duncan-Smith Co. He also serves as the Chairman of
the Executive Committee of Citizens National Bank
of Milam County (Texas) and as a director of
publicly-traded Consolidated Health Care
Associates, Inc.
</TABLE>
- 4 -
<PAGE> 8
<TABLE>
<CAPTION>
================================================================================================================
Position with
Name and Address Company Age Recent Professional Experience
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Robert R. Swendson* Trustee, 54 From 1989 to 1996, Mr. Swendson was
13333 Blanco Road President and employed by SouthWest Federated, Inc., a
Suite 314 Chief purchaser of consumer and commercial loans
San Antonio, TX 78216 Executive which he helped found. Mr. Swendson
Officer remains the company's President and Chief Executive
Officer. He is currently employed by Greystone, the
Company's investment adviser, as its President and
Chief Executive Officer.
Willis H. Wagner Trustee 46 Since 1995, Mr. Wagner has served as the
200 Concord Plaza, Suite 620 Managing Director of SV Capital
San Antonio, TX Management, a venture capital firm located in
San Antonio, Texas. Mr. Wagner was
previously the Chief Financial Officer for Pace
Foods, Ltd. from 1991-1995 and served in
several senior positions with Ernst & Young
from 1986-1991.
================================================================================================================
</TABLE>
* Trustee who is an "interested person" of the Company as defined in
the 1940 Act.
COMPENSATION OF EXECUTIVE OFFICERS AND TRUSTEES
Under U.S. Securities and Exchange Commission ("SEC") rules applicable to
BDCs, the Company is required to set forth certain information regarding
certain of its executive officers who received compensation from the Company in
excess of $60,000 in 1996. However, the Company has no employees and does not
pay any cash compensation to its officers. All of the Company's officers are
employed by Greystone, which pays their cash compensation. The Company may
determine in the future to issue options to purchase newly issued Shares to
officers of the Company or other individuals or entities. Any issuance of such
options must be authorized by the Company's Shareholders. The issuance of
Shares of the Company pursuant to the exercise of options could result in a
dilution of the ownership interest and voting power of then-existing
Shareholders.
Compensation of Trustees
The Trustees may provide for their own compensation, and for the
compensation of officers, advisers, administrators, custodians, other agents,
consultants and employees of the Company on such terms as the Trustees deem
appropriate. Currently, each member of the Board of Trustees who is not an
officer of the Company receives from the Company a fee of $750 for each meeting
of the Board that the Trustee attends, and an additional meeting fee of $500
per committee meeting attended, unless the committee meeting occurs on the same
day as a Board meeting, in which case the fee for attending the committee
meeting would be $250.
It is expected that the Board of Trustees will hold a least four Board
meetings per year. None of the Company's officers is compensated by the Company
for attending Board meetings.
- 5 -
<PAGE> 9
Aggregate Trustees' fees for 1996 were $1,500. The following table sets
forth certain details of the compensation paid to Trustees during 1996.
<TABLE>
<CAPTION>
Pension or
Aggregate Retirement Benefits Total Compensation
Compensation Accrued as Part of from Company
Name and Position from Company Company Expenses Paid to Trustees
- ----------------- ------------ ---------------- ----------------
<S> <C> <C> <C>
Ronald K. Calgaard $750 0 $750
James R. Clifton 750 0 750
Goodhue W. Smith III 0 0 0
Robert R. Swendson 0 0 0
Willis H. Wagner 0 0 0
</TABLE>
MEETINGS OF TRUSTEES AND COMMITTEES
During 1996, the Board of Trustees held one (1) special meeting. All the
Trustees then on the Board attended that meeting. In addition, the bylaws of
the Company permit the Trustees, by a vote of a majority of the Trustees then
in office, to elect from their number an Audit Committee or any other
committee. The Board may delegate some or all of its powers to any such
committee except those which by applicable law or the Company's declaration of
trust or bylaws may not be delegated. The Board created an Interim Valuation
Committee, a Compensation Committee and an Audit Committee at the meeting of
the Board of the Trustees that was held on January 30, 1997 (the "Board
Meeting").
The Interim Valuation Committee has the responsibility to value and
revalue, between meetings of the Board of Trustees, any portfolio investments
for which market quotations or sale prices are not readily available, to
approve any loan purchase or sale made on behalf of the Company when such
approval is requested by a seller or purchaser of loans or loan packages.
However, when a purchase of a loan package presents an exposure to any one
borrower greater than $750,000.00, such approval shall also require the
approval of one disinterested Trustee. The Board appointed Messrs. Swendson and
Smith as the members of the Interim Valuation Committee.
The function of the Compensation Committee is to consider the adoption of
a stock option plan, if such plan is proposed, and other compensation matters
that may arise from time to time. The Trustees appointed Dr. Calgaard and Mr.
Wagner as the members of the Compensation Committee.
The members of the Audit Committee work with the Company's independent
public accountant to effect the Company's annual audit and review related
matters. The Board appointed Dr. Calgaard and Messrs. Clifton and Smith as the
members of the Audit Committee.
Each of the members of the above committees serves at the pleasure of the
Board. As each of the Interim Valuation Committee, Compensation Committee and
Audit Committee was formed in 1997, none held any meetings in 1996.
CERTAIN TRANSACTIONS AND BUSINESS RELATIONSHIPS
Investment Advisory Agreement
The Company is a party to an investment advisory agreement with Greystone
Advisers, Inc. ("Greystone"). Pursuant to the investment advisory agreement,
Greystone is entitled to be paid, monthly in arrears, a fee at the rate
- 6 -
<PAGE> 10
of 5.94% per annum on the value of the Company's invested assets, and 0.48% per
annum of its cash and short-term investments. From September 22, 1996 (the date
the investment advisory agreement was executed) through December 31, 1996, the
Company incurred approximately $32,322 in investment advisory fees. Greystone
waived advisory fees for the months of September and October, 1996. The
advisory agreement is described in further detail in Proposal 2.
Each officer of the Company also is an officer of Greystone. As of
December 31, 1996, all of the shares of Greystone were owned by Robert R.
Swendson, the Company's President and Chief Executive Officer. Greystone has
not issued any options, warrants, or convertible securities of any nature.
Exchange Offer
The Company's operations began on September 27, 1996 with the acquisition
of all of the interests in SWF 1995 Limited Partnership, a Texas limited
partnership ("SWF-95"), through an offer made to SWF-95's investors to exchange
their equity and subordinated debt interests for Shares of the Company (the
"Exchange Offer"). The Exchange Offer was approximately a $3.6-million
transaction involving the purchase of the various outstanding general
partnership, limited partnership, and subordinated debt interests in SWF-95
(the "SWF-95 interests") and the assumption of certain indebtedness by the
Company in exchange for newly issued Shares or cash, at the option of the
seller of each interest. The Company's purchase price for the SWF-95 interests
was determined by the Company with the assistance of a third-party appraiser.
The following table identifies by name any of the following persons who
had a direct or indirect material interest in the Exchange Offer: each Trustee
or executive officer of the Company; each Shareholder of the Company who is
known to own of record or beneficially more than 5% of any class of the
Company's voting securities; and any member of the immediate family of any of
the foregoing persons. The table also includes the following information: the
person's relationship to the Company; the nature and amount of the person's
interest in the Exchange Offer; and the cost of the person's interest.
<TABLE>
<CAPTION>
Name of Person with Amount of Original Cost
Direct or Indirect Material Person's Relationship Nature of Person's of Person's
Interest in the Transaction to the Company Person's Interest Interest(1) Interest(1)
--------------------------- -------------- ----------------- ----------- -----------
<S> <C> <C> <C> <C>
SWFHC 5%+ owner 100% stockholder of $248,320 $166,000
SouthWest Federated,
Inc. ("SWFI")
SWFI(2) 5%+ owner General partner of $248,320 $166,000
SWF-95
Robert R. Swendson 5%+ owner; Trustee, 46% stockholder of $114,227 $76,860
President & Chief SWFHC; President of
Executive Officer SWFI
James R. Clifton 5%+ owner; Trustee Owner of SWF-95 $105,100 $100,000
subordinated debt
Mary Lacy Clifton Chase(2) 5%+ owner; sibling of Limited partner of $169,842 $150,000
Trustee SWF-95 and owner of
SWF-95 subordinated
debt
Eddie W. Spalten(2) 5%+ owner Limited partner of $207,173 $160,000
SWF-95
</TABLE>
- 7 -
<PAGE> 11
<TABLE>
<CAPTION>
Name of Person with Amount of Original Cost
Direct or Indirect Material Person's Relationship Nature of Person's of Person's
Interest in the Transaction to the Company Person's Interest Interest(1) Interest(1)
--------------------------- -------------- ----------------- ----------- -----------
<S> <C> <C> <C> <C>
Margaret Pace Willson(2) 5%+ owner Limited partner of $129,483 $100,000
SWF-95
Rhojcoamt Partnership, 5%+ owner Owner of SWF-95 $129,483 $100,000
Ltd.(2) subordinated debt
Lon A. Critchfield(3) Senior Vice President Senior Vice President --- ---
of SWFI
Larry D. Krause Senior Vice President Vice President, --- ---
Secretary/Treasurer of
SWFI
John C. Mosher Vice President & Chief Vice President & --- ---
Financial Officer Chief Financial
Officer of SWFI
</TABLE>
- ------------------------------------
(1) Where determinable.
(2) No longer a 5%+ owner.
(3) During the fiscal year ended on December 31, 1996, Lon A. Critchfield
served with the Company as a Senior Vice President. Mr. Critchfield
resigned from the Company effective March 14, 1997.
Issuance of Subordinated Note, Warrants, and Rights to SWFHC
For working capital purposes the Company borrowed $250,000 from SWFHC. As
an incentive to make this loan, the Company entered into an agreement to issue
to SWFHC transferable warrants to purchase up to 200,000 Shares at the greater
of $10 per Share or net asset value per Share at the time of issuance of the
warrants, which expire on September 22, 2006, and transferable rights to
subscribe to 50,000 Shares at the greater of $10 per Share or net asset value
per Share at the time the rights are exercised, which expire on May 22, 1996.
(The rights and warrants are described in greater detail below in the sections
relevant to Proposals 4 and 5.) The following persons, each of which has the
indicated relationship with the Company, may be deemed to have a direct or
indirect material interest in the issuance of the subordinated note, warrants,
and rights to SWFHC.
<TABLE>
<CAPTION>
Name of Person with
Direct or Indirect Material Person's Relationship Nature of Amount of
Interest in the Transaction to the Company Person's Interest Person's Interest*
--------------------------- -------------- ----------------- ------------------
<S> <C> <C> <C>
SWFHC 5%+ owner Holder of subordinated $250,000
note, warrants, and
subscription rights
Robert R. Swendson 5%+ owner; Trustee, 46% stockholder & $115,000
President & Chief President of SWFHC
Executive Officer
Larry D. Krause Senior Vice President Secretary/Treasurer of ---
SWFHC
</TABLE>
- ------------------------------------
* Where determinable.
- 8 -
<PAGE> 12
Contingent Expense Reimbursement Agreement
As memorialized in a letter agreement dated September 22, 1996, the
Company has a contingent obligation to reimburse SouthWest Federated, Inc.
("SWFI") for various organizational, consulting, and certain other expenses,
including cash disbursed and to be disbursed to various suppliers of products
and services, on behalf of the Company in connection with determining the
financial and legal feasibility of, and effecting preparations for, the
consummation of the Exchange Offer (collectively, "Start-Up Expenses"). The
actual amount of Start-Up Expenses incurred by SWFI on behalf of the Company
was approximately $70,000. By virtue of its 100% ownership of the common stock
of SWFI, SWFHC may be deemed to have a indirect material interest in this
contingent expense reimbursement agreement. Also, Robert R. Swendson, the owner
of 46% of the outstanding stock of SWFHC, as well as any other stockholders and
officers of SWFHC listed in the table above, may also be deemed to have an
indirect material interest in this transaction. The Company satisfied its
obligation to reimburse SWFI on September 27, 1996.
Cash Offering
In addition to the Exchange Offer described above, on December 26, 1996
the Company issued and sold 700,000 Shares in a private placement (the "Cash
Offering") resulting in gross cash proceeds of $7,000,000 ($10.00 per Share).
The sale was made to current Company Shareholders and to "accredited investors"
within the meaning of Rule 501(a) under the Securities Act of 1933, as amended.
The following persons, each of which has the indicated relationship with the
Company, may be deemed to have a direct or indirect material interest in the
Cash Offering. The table includes the following information: the person's
relationship to the Company; the nature of the person's interest in the Cash
Offering; and the amount of the person's interest.
<TABLE>
<CAPTION>
Name of Person with
Direct or Indirect Material Person's Relationship Nature of Amount of
Interest in the Transaction to the Company Person's Interest Person's Interest(1)
--------------------------- -------------- ----------------- --------------------
<S> <C> <C> <C>
Robert R. Swendson 5%+ owner; Trustee, Purchaser of newly $100,000
President & Chief issued Shares
Executive Officer
James R. Clifton 5%+ owner; Trustee Purchaser of newly $150,000
issued Shares
Mary Lacy Clifton Chase(2) 5%+ owner; sibling of Purchaser of newly $150,000
Trustee issued Shares
Goodhue W. Smith III 5%+ owner; Trustee Purchaser of newly $155,000
issued Shares
Christopher Goldsbury, Jr. 5%+ owner Purchaser of newly $2,000,000
issued Shares
Willis H. Wagner Trustee Purchaser of newly $50,000
issued Shares
Trinity University 5%+ owner Purchaser of newly $500,000
issued Shares
</TABLE>
- ------------------------------------
(1) Where determinable.
(2) No longer a 5%+ owner.
- 9 -
<PAGE> 13
Payments to Duncan-Smith Co. and Duncan-Smith Securities, Inc.
As noted above, Goodhue W. Smith III is a Vice-President of Duncan-Smith
Co. ("Duncan-Smith") and President of Duncan-Smith Securities, Inc. and holds
33% of Duncan-Smith's equity. Duncan-Smith was deemed to be a promoter of the
Company, and in this capacity received a fee of $3,000 per month for consulting
services from May 1996 through November 1996 from the Company in connection
with determining the financial feasibility of, and effecting preparations for,
the consummation of the Exchange Offer. Duncan-Smith Securities, Inc., as the
sole placement agent for the Cash Offering, received underwriting discounts and
commissions (i.e., fees for placement services) in the amount of $426,000.
Indebtedness of Management
No person serving as a Trustee or executive officer of the Company and no
nominee for election as a Trustee at any time since the beginning of the
Company's last fiscal year has been indebted to the Company.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Pursuant to Section 16(a) of the Securities Exchange Act of 1934, as
amended, certain persons, including the Company's Trustees and executive (and
certain other) officers, directors of the Company's investment adviser, and any
persons beneficially owning 10% or more of the Company's Shares are required to
report their beneficial ownership and any changes therein to the SEC and the
Company. Specific due dates for those reports, including Forms 3, 4 and 5, have
been established, and the Company must report herein any failure on the part of
any of the foregoing individuals to file a required report. Based on its review
of Forms 3, 4 and 5 filed by such individuals, the Company determined that Dr.
Calgaard and Messrs. Clifton, Critchfield, Krause, Mosher and Swendson each
filed a late Form 3 and a late Form 5. Messrs. Bennight, Hanes, Smith and
Wagner each filed a late Form 3. As discussed above, each of Messrs. Swendson
and Clifton acquired shares in the Cash Offering, and each was required to file
a Form 4 with respect to these purchases. Messrs. Swendson and Clifton did not
file these Forms 4, but later reported their transactions on respective Forms
5.
VOTE REQUIRED
The election of Dr. Calgaard and Messrs. Clifton, Swendson, Smith, and
Wagner requires the affirmative vote of a plurality of the votes cast at a
meeting of Shareholders at which a quorum is present. Under the Company's
Declaration of Trust, the presence in person or by proxy of Shareholders
entitled to cast one-tenth (1/10th) of the votes entitled to be cast thereat
shall constitute a quorum. For this purpose, abstentions will be counted in
determining whether a quorum is present at the Meeting.
THE COMPANY'S BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE FOR EACH OF THE
FOREGOING NOMINEES FOR TRUSTEE NAMED IN THIS PROPOSAL 1.
2. PROPOSAL 2: APPROVE THE CONTINUATION OF THE INVESTMENT ADVISORY
AGREEMENT BETWEEN THE COMPANY AND GREYSTONE
Greystone serves as investment adviser to the Company pursuant to the
Advisory Agreement, dated September 22, 1996, which initially was approved by
the Board of Trustees of the Company, including a majority of the Trustees who
are not parties to the Advisory Agreement or "interested persons" of any such
party, as that term is defined in the 1940 Act, at a Special Meeting held on
September 13, 1996. The Board of Trustees re-approved the selection of
Greystone as investment adviser of the Company and the Advisory Agreement at
the Board Meeting on January 30, 1997. The Agreement was last submitted to
Shareholders on September 13, 1996, and Robert R. Swendson, in his capacity
- 10 -
<PAGE> 14
as the initial sole Shareholder of the Company, approved the Advisory Agreement
at a Special Meeting held on that date. The following discussion of the
Advisory Agreement is qualified in its entirety by reference to the Agreement,
a copy of which is attached hereto as Exhibit A.
By approving and re-approving the Advisory Agreement, the Trustees have
acted in what they believe to be the best interests of the Shareholders of the
Company. The Board based its decision to recommend the re- approval of the
Advisory Agreement on the following material factors: (i) Greystone's ability
to provide advisory services, specifically the experience its personnel has in
managing impaired loan portfolios; and (ii) the ability of Greystone to meet
the unique needs of a BDC.
The Board believes that Greystone's personnel have had significant
experience purchasing and resolving impaired loans. Greystone's president,
Robert R. Swendson, and its vice president and controller, Larry D. Krause,
have been working with impaired loans since 1989 when they helped found
SouthWest Federated, Inc. ("SWFI").
From 1989 to 1996, SWFI invested approximately $20 million to purchase
more than $180 million in impaired commercial mortgages and consumer loans
(outstanding principal balance at the time of purchase). SWFI made these
investments as the general partner for several limited partnerships and for its
own account. Mr. Swendson attributes the success of SWFI to thorough due
diligence prior to making a bid, experienced and patient negotiations with
obligors, and a focus on investor returns.
At the Board Meeting, the Board engaged in a detailed discussion
concerning the advisory fee paid to Greystone, which is higher than fees
typically paid to funds holding portfolios of marketable securities. The
Trustees considered certain factors underlying the fee arrangements.
Specifically, the Company currently has a comparatively small capital base and
its investments require a greater amount of attention than those of typical
registered investment company. The larger asset bases of typical investment
companies permit these funds to conduct business with an advisory fee that
represents a smaller percentage of their assets. The Trustees also were
apprised by Greystone that the current advisory fee was necessary in order for
Greystone to continue operations. After considering the foregoing and other
factors, as well as the standards that Trustees must meet in approving
investment advisory agreements, the Trustees re-approved the Advisory Agreement
and recommended its submission to Shareholders for consideration.
Although the Advisory Agreement has already received the approvals
required under the 1940 Act, in light of the unique nature of the advisory
services required by the Company and the level of advisory fees under the
Advisory Agreement, the Board of Trustees is seeking approval of the
continuation of the agreement by Shareholders.
THE ADVISORY AGREEMENT
Pursuant to the Advisory Agreement, Greystone directs the investments of
the Company, subject to the supervision, control and policies of the Company's
Board of Trustees. Specifically, Greystone identifies, evaluates, resolves and
monitors the investments made by the Company. The Agreement initially will
remain in effect until September 22, 1998 and from year to year thereafter as
long as it is approved (a) at least annually, by the Board of Trustees or by
"vote of a majority of the outstanding voting securities" of the Company, and
(b) by the vote of a majority of the Trustees who are not parties to the
Advisory Agreement or "interested persons" of any such party, as that term is
defined in the 1940 Act, cast in person at a meeting called for the purpose of
voting on such approval.
The Advisory Agreement may be terminated by the Company at any time,
without payment of any penalty, on sixty (60) days written notice to Greystone
if the decision to terminate has been made by the Board or by "vote of a
majority of the outstanding voting securities" of the Company. The Advisory
Agreement will terminate automatically in the event of its "assignment" (as
defined in Section 2(a)(4) of the 1940 Act). Greystone may also terminate the
Advisory Agreement on sixty (60) days written notice to the Company; provided,
however, that
- 11 -
<PAGE> 15
Greystone may not terminate the Advisory Agreement unless: (a) the terms of a
new investment advisory agreement with Greystone or another investment advisory
agreement have been approved by the Board, including a majority of its members
casting their votes in person who are not parties to such agreement or
"interested persons" of any such party, at a meeting called for the purpose of
voting on such approval; and (b) such new investment advisory agreement has
been approved by the "vote of a majority of the outstanding voting securities"
of the Company.
Under the Advisory Agreement, the Company pays its own operating expenses,
except those specifically required to be borne by Greystone. The latter include
the cost of office space, telephone, equipment and personnel required to
satisfy its obligations under the Advisory Agreement. Expenses borne by the
Company include all expenses of any offering and sale by the Company of its
Shares; fees and disbursements of the Company's outside legal counsel,
accountants and custodian; fees and expenses incurred in effecting filings with
federal and state securities administrators; costs of the Company's periodic
reports and other communications to Shareholders; fees and expenses of members
of the Company's Board of Trustees who are not directors, officers or employees
of Greystone; premiums for the fidelity bond maintained by the Company; and all
costs related to portfolio investments including, without limitation, financing
costs, legal and accounting fees and other professional or technical fees and
expenses (i.e., credit reports, title searches and delivery charges, property
taxes, insurance premiums, long-distance telephone charges, costs of
specialized consultants such as accountants or industry-specific technical
experts, and travel expenses) incurred in acquiring, monitoring, negotiating,
maintaining, working-out, and effecting disposition of such investments, as
well as responding to any litigation arising therefrom.
Pursuant to the Advisory Agreement, the Company pays to Greystone, on the
15th day of each month: (a) a fee calculated at the rate of 0.495% (5.94% on an
annual basis) of the Company's invested assets as of the end of the previous
month; and (b) a fee calculated at the rate of 0.04% (0.48% on an annual basis)
of the Company's cash and short-term investments as of the end of the previous
month. For purposes of calculating the fee to be paid on a monthly basis,
"invested assets" is defined as the asset value as determined by the Board of
Trustees as of the end of the previous fiscal quarter minus cash, short-term
investments, intangible assets, and the amount of collections applied to the
carrying value of the loan portfolio since the end of the previous quarter,
plus the cost of loans purchased and any capitalized advances to protect
portfolio investments or underlying collateral since the end of the previous
quarter. For the fiscal year ended December 31, 1996, the Company paid
Greystone $32,322 in investment advisory fees, not including any advisory fees
for September and October which were waived by Greystone. As the sole
shareholder of Greystone, Mr. Swendson has a direct interest in the advisory
relationship with Greystone and the Advisory Agreement and transactions
contemplated thereunder. As discussed earlier, the Company paid to
Duncan-Smith, which is an affiliate of an affiliate of the Company and
Greystone, a fee of $3,000 per month for consulting services from May 1996
through November 1996, and to Duncan-Smith's subsidiary, underwriting
discounts and commissions (i.e., fees for placement services) in the amount
of $426,000 for the offering that took place in December 1996.
INFORMATION REGARDING THE ADVISER
Greystone Advisers, Inc. (formerly known as Emerald Advisers, Inc.) was
organized on August 27, 1996 as a Delaware corporation, and currently is
privately held. The address of Greystone is 13333 Blanco Road, Suite 314, San
Antonio, Texas 78216-7756. As of December 31, 1996, all of the shares of
Greystone were owned by Robert R. Swendson, the Company's President and Chief
Executive Officer.
The principal executive officers and directors of Greystone are listed
below. Unless otherwise specified, the address of each such officer or director
is 13333 Blanco Road, Suite 314, San Antonio, Texas 78216-7756.
- 12 -
<PAGE> 16
<TABLE>
<CAPTION>
Name, Title Principal Occupation
----------- --------------------
<S> <C>
Robert R. Swendson, Director, President Investment Management
and Chief Executive Officer
Goodhue W. Smith III, Director Investment banker with Duncan-Smith Co., President
311 Third Street of Duncan-Smith Securities, Inc.
San Antonio, TX 78205
Larry D. Krause, Senior Vice President Investment Management
John C. Mosher, Vice President and Chief Investment Management
Financial Officer
Kenneth L. Bennight, Jr., Vice President Attorney
and General Counsel
Ted J. Hanes, Vice President Investment Management
</TABLE>
Each of the officers and directors listed above is an officer or trustee
of the Company. Lon A. Critchfield also served Greystone as Senior Vice
President until his resignation on March 14, 1997.
VOTE REQUIRED
The Advisory Agreement must be approved by a vote of the holders of (a)
more than 50% of the outstanding Shares of the Fund or (b) 67% or more of the
Shares of the Company present at the Meeting if more than 50% of the
outstanding Shares of the Company are represented at the Meeting in person or
by proxy, whichever is less. If the continuation of the Advisory Agreement is
not approved by the Shareholders, the Board of Trustees will take such action
as it considers necessary or appropriate to protect the interests of the
Company and its Shareholders.
THE COMPANY'S BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL
2 TO APPROVE THE CONTINUATION IF THE ADVISORY AGREEMENT BETWEEN THE COMPANY AND
GREYSTONE.
3. PROPOSAL 3: RATIFY THE SELECTION OF KPMG PEAT MARWICK LLP AS THE
COMPANY'S INDEPENDENT PUBLIC ACCOUNTANT.
The Board of Trustees of the Company, including a majority of the Trustees
who are not "interested persons" of the Company within the meaning of the 1940
Act, has selected the accounting firm of KPMG Peat Marwick LLP ("KPMG") as the
Company's independent public accountant to audit the Company's financial
statements, and otherwise provide services to the Company as the Company's
independent public accountant for the fiscal year ending December 31, 1997. The
Shareholders will be asked at the Meeting to consider ratifying the selection
of KPMG as independent public accountant for the fiscal year ending December
31, 1997.
KPMG has served as the Company's independent accountant since the
Company's inception and the Company knows of no direct or indirect financial
interest of KPMG in the Company. A representative of KPMG is expected to be
present at the Meeting and will be available to make a statement if he or she
so desires, and to respond to appropriate Shareholder inquiries.
- 13 -
<PAGE> 17
The expense recorded during the fiscal year ended December 31, 1996 for
the professional services provided to the Company by KPMG consisted of fees for
audit services (which included examination of the consolidated financial
statements of the Company and its subsidiary and review of the filings by the
Company of reports and registration statements) and for non-audit services.
Approximately 80% of the fees were for audit services. The non-audit services,
which were arranged for by management without prior consideration by the Board
of Trustees, consisted of non-audit related consultation and the preparation of
tax returns for the Company and its subsidiary.
VOTE REQUIRED
Approval of the proposal to ratify the selection of KPMG Peat Marwick LLP
as the Company's independent public accountant requires an affirmative vote of
a majority of the votes cast with respect to the proposal.
THE COMPANY'S BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE FOR THIS PROPOSAL
3 TO RATIFY THE SELECTION OF KPMG AS THE COMPANY'S INDEPENDENT PUBLIC
ACCOUNTANT.
4. PROPOSALS 4 & 5: TO APPROVE A CHANGE OF A TERM, AND RATIFY OR
APPROVE THE ISSUANCE, OF CERTAIN CLASS A AND CLASS B WARRANTS THAT
HAVE BEEN OR WILL BE ISSUED TO SWFHC
At the Meeting, Shareholders will be asked to vote on (i) a proposal to
approve a change of a term, and ratify the issuance, of certain Class A
Warrants that have been issued to SWFHC and (ii) a proposal to approve a change
of a term, and the future issuance, of certain Class B Warrants that will be
issued to SWFHC. The Company undertook to issue these warrants to SWFHC
pursuant to respective agreements between the Company and SWFHC, each dated
September 22, 1996 (the "Agreements"). The Agreements provide that SWFHC will
receive warrants to purchase an aggregate total of 200,000 Shares, provided
such issuance is permitted under the 1940 Act. The Company agreed to issue the
warrants, as well as rights to subscribe to 50,000 Shares, in consideration for
SWFHC taking the financial risks attendant to supporting the formation of the
Company (i.e., with respect to a $250,000 subordinated loan for the Company's
start-up expenses).
The issuance of the warrants was approved by the Board, including a
majority of the Trustees who have no financial interest in the warrants to be
issued pursuant to the Agreements and who are not "interested persons" of the
Company, as defined in the 1940 Act, on September 23, 1996, on the basis that
such issuance was in the best interest of the Company and its Shareholders. The
1940 Act requires shareholder approval of the issuance of any warrants. Robert
R. Swendson, as the initial sole Shareholder of the Trust, approved the
issuance of the warrants pursuant to the Agreements on September 23, 1996.
According to the principal terms of the Agreements, as clarified in a
letter between the Company and SWFHC dated September 22, 1996, the warrants are
to be issued and become outstanding only to the extent permitted by the 1940
Act. The 1940 Act states that the amount of shares that would result from the
exercise of all outstanding warrants, options, and rights at the time of
issuance shall not exceed 25% of the outstanding voting securities of a BDC.
Accordingly, based on 921,627 Shares outstanding as of December 26, 1996, the
Company issued all of the Class A Warrants to SWFHC on December 31, 1996, and
will issue the Class B Warrants at some time in the future.
The terms of the Class A and Class B Warrant Agreements are as follows:
- 14 -
<PAGE> 18
1. The Class A Warrant Agreement provides for the issuance of
warrants to purchase one hundred fifty thousand (150,000) Shares
at the greater of $10.00 per Share or net asset value per Share
on the date of issuance of the warrants. The warrants expire on
September 22, 2006 and are exercisable only upon the condition
that within three (3) years of the consummation of an equity
offering for $8,000,000 in cash, the Company or one or more
underwriters and selling brokers or dealers on the Company's
behalf shall have received gross cash proceeds of at least
$10,000,000 from one or more sales of newly issued Shares at an
average price of at least Fifteen Dollars ($15.00) per Share
(adjusted proportionately for any Share dividends, splits, or
combinations). Thereafter, these warrants may be transferred or
exercised in whole or in part from time to time. The Company's
issuance of 700,000 additional Shares in consummation of an
equity offering on December 26, 1996, increased the total number
of outstanding Shares from 221,627 (immediately following
consummation of the Exchange Offer) to 921,627, permitting all
the Class A Warrants to be issued in their entirety on December
31, 1996 with an exercise price of $10.00 per share.
2. The Class B Warrant Agreement provides for the issuance of
warrants to purchase fifty thousand (50,000) Shares at the
greater of $10.00 per Share or net asset value per Share on the
date of issuance of the warrants. The warrants expire on
September 22, 2006 and are exercisable only upon the condition
that within three (3) years of the consummation of an equity
offering for $8,000,000 in cash, the Company or one or more
underwriters and selling brokers or dealers on the Company's
behalf shall have received gross cash proceeds of at least
$10,000,000 from one or more sales of newly issued Shares at an
average price of at least Twenty Dollars ($20.00) per Share
(adjusted proportionately for any Share dividends, splits, or
combinations). These warrants may be transferred or exercised in
whole or in part from time to time.
As noted above, the respective Agreements provide that each class of
warrants would be exercisable if the Company raises $10,000,000 (gross cash
proceeds) within three years of the date on which the Company would consummate
an equity offering raising an anticipated $8,000,000 in cash (the "Cash
Offering"), with the Class A Warrants exercisable if the $10,000,000 is raised
at an average price of at least $15 per Share, and the Class B Warrants
exercisable if the $10,000,000 is raised at an average price of at least $20
per Share. The Company and SWFHC, as parties to the Agreements (the "Parties"),
viewed this reference to $8,000,000 in the text of the Agreements to be
descriptive, rather than a material term of the Agreements. This reference was
included in the Agreements as a means of indicating, with some specificity, the
intent of the Parties as to the date on which the 3-year period for raising at
least $10,000,000 in new equity at the specified prices would commence. The
$8,000,000 figure was viewed by the Parties as the amount likely to be raised
in the Offering. The Parties never contemplated that the Warrants would not be
exercisable merely because a somewhat lower amount than anticipated was
actually raised in the Cash Offering. In fact, gross proceeds of $7,000,000
were raised in the Cash Offering.
At the Board Meeting, the Board of Trustees reviewed the Agreements and
discussed the original intent of the Parties. Based on its discussion, the
Board determined that it would be contrary to the intent of the Parties at the
time of the execution of the Agreements for the 3-year period not to have
commenced because of a non-material reference intended solely to identify the
time at which that period would begin. In addition, the Trustees believe such a
result would be unfair to the holders of the Warrants. Based on the foregoing,
the Trustees concluded that the condition the Company raise at least
$10,000,000 in cash within three (3) years of the consummation of an equity
offering for $8,000,000 in cash be changed so that the 3-year period commenced
on December 26, 1996, when the Company raised $7,000,000 in cash. The Board,
including a majority of the Trustees who have no financial interest in the
warrants issued, or to be issued, pursuant to the Agreements and who are not
"interested persons" of the Company, as defined in the 1940 Act, approved
changing this term of the warrants and submitting the proposals to change a
term of the Class A and Class B Warrants and ratify or approve the issuance of
the warrants under that term to Shareholders for approval. The Trustees based
their decision on their belief that this change of a term of the Warrants is in
the best interest of the Company and its Shareholders.
In determining whether to approve and/or ratify the proposed change in a
term, and issuance, of the Class A and Class B Warrants under that term,
Shareholders should be aware that the issuance of these Warrants would
- 15 -
<PAGE> 19
allow SWFHC or its transferees to benefit from any future increase in the value
of the Company's Shares without requiring SWFHC to invest the exercise price
thereof in the Company until such benefit is realizable. As with any warrant
arrangement, the exercise of the Class A and Class B Warrants would increase
the number of outstanding Shares of the Company. Such an increase would cause
the existing Shareholders to experience a corresponding loss of proportionate
voting power and economic interest in the Company. The Board of Trustees has
concluded, however, that the change of a term of the Class A and B Warrants
merely incorporates the actual intent of the Parties.
VOTE REQUIRED
Proposal 4 to approve a change of a term, and ratify the issuance, of
certain Class A Warrants that have been issued to SWHFC, and Proposal 5 to
approve a change of a term, and the future issuance, of certain Class B
Warrants that will be issued to SWHFC, must be approved by a majority of the
Company's outstanding voting securities, and the holders of a majority of the
Company's outstanding voting securities that are not affiliated persons of the
Company. If Proposal 4 or 5 is not so approved, the Board of Trustees will take
such action as it considers necessary or appropriate to protect the interest of
the Company and its Shareholders.
THE COMPANY'S BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE FOR PROPOSAL 4
AND PROPOSAL 5 TO CHANGE A TERM OF, AND TO RATIFY OR APPROVE THE ISSUANCE OF,
CERTAIN CLASS A AND CLASS B WARRANTS THAT HAVE BEEN OR WILL BE ISSUED TO SWHFC.
OTHER BUSINESS
The Board of Trustees knows of no other business to be presented for
action at the Meeting. If any matters do come before the Meeting on which
action can properly be taken, it is intended that the proxies shall vote in
accordance with the judgment of the person or persons exercising the authority
conferred by the proxy at the Meeting.
1998 ANNUAL MEETING OF SHAREHOLDERS
The Company expects that the 1998 Annual Meeting of Shareholders will be
held in April 1998 but the exact date, time, and location of such meeting have
yet to be determined. A Shareholder who intends to present a proposal at that
annual meeting must submit the proposal in writing to the Company at the
address of its investment adviser in Texas no later than December 5, 1997, in
order for the proposal to be considered for inclusion in the Company's proxy
statement for that meeting. The submission of a proposal does not guarantee its
inclusion in the Company's proxy statement or presentation at the meeting
unless certain securities law requirements are met.
MISCELLANEOUS
Shareholders may obtain copies of the Annual Report, without charge, by
writing the Company's investment adviser at 13333 Blanco Road, Suite 314, San
Antonio, Texas 78216-7756.
- 16 -
<PAGE> 20
INCORPORATION OF DOCUMENTS BY REFERENCE
The Company has enclosed its Annual Report on Form 10-K for the fiscal
year ended December 31, 1996 (the "Annual Report"). The Company hereby
incorporates by reference in this Proxy Statement (i) the financial statements
and notes thereto (including the independent public accountant's report of KPMG
Peat Marwick LLP) contained in the Annual Report, and (ii) "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" contained in the Annual Report. The Annual Report is not otherwise
incorporated in this Proxy Statement and is not part of this soliciting
material.
YOUR PROXY IS VERY IMPORTANT TO US. WHETHER YOU PLAN TO ATTEND THE MEETING IN
PERSON OR NOT, PLEASE MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY BALLOT
TODAY IN THE ENCLOSED POSTAGE-PAID ENVELOPE OR MAY CONVEY YOUR VOTE ON EACH
PROPOSAL BY CALLING 1-800-330-3971.
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<PAGE> 21
EXHIBIT A
PLYMOUTH COMMERCIAL MORTGAGE FUND
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT is made by and between Plymouth Commercial
Mortgage Fund, a Delaware business trust (the "Company"), and Emerald Advisers,
Inc., a Delaware corporation (the "Adviser").
1. PURPOSE OF THE COMPANY
The Company is a closed-end management investment company that
will elect to be regulated as a business development company under the
Investment Company Act of 1940, as amended (the "1940 Act").
2. THE INVESTMENT ADVISER
The Adviser is registered as an investment adviser with the
U.S. Securities and Exchange Commission (the "SEC") under the Investment
Advisers Act of 1940, as amended (the "Advisers Act"), and has entered into
this Agreement with the Company to act as its investment adviser on the terms
set forth herein.
3. OBLIGATIONS OF THE ADVISER
The Company hereby engages the Adviser's services as the
Company's investment adviser. As such, the Adviser will:
(a) advise the Company as to the acquisition and disposition of
securities, loans, real estate interests and other assets in
accordance with the Company's investment policies;
(b) assist the Company in making available and, if requested by
entities in which the Company has invested or is proposing to
invest, in rendering managerial assistance to such entities;
(c) provide to the Company, to the extent required, office space
and facilities and the services of the Adviser's officers and
employees;
(d) maintain the Company's books of account and other records and
files;
(e) report to the Company's Board of Trustees (the "Board"), or to
any committee thereof or officer of the Company acting
pursuant to the authority of the Board, at such times and in
such detail as the Board deems appropriate in order
<PAGE> 22
to enable the Company to determine that its investment
policies are being observed and implemented and that the
Adviser's obligations hereunder are being fulfilled. Any
investment program undertaken by the Adviser pursuant hereto
and any other activities undertaken by the Adviser on the
Company's behalf shall at all times be subject to any
directives of the Board or any duly constituted committee
thereof or officer of the Company acting pursuant to authority
of the Board;
(f) subject to the Company's investment policies and any specific
directives from the Board, effect acquisitions and
dispositions for the Company's account in the Adviser's
discretion and to arrange for the documents evidencing
securities, loans, real estate interests and other assets
acquired on behalf of the Company to be delivered to a
custodian of the Company;
(g) on a continuing basis, monitor, manage and service the
Company's loan portfolio and other investments; and
(h) comply with all applicable rules and regulations of the SEC
and, in addition, conduct its activities under this Agreement
in accordance with other applicable law.
4. STATUS OF THE ADVISER
For a period of two years after the completion of the sale by
Plymouth of newly issues common shares of beneficial interest for cash pursuant
to an offering to be commenced in or about October 1996, the services of the
Adviser to the Company with regard to advice on new loan package purchases are
to be deemed exclusive, and the Adviser shall not be free to render similar
services to others. After this period, the services of the Adviser to the
Company are not to be deemed exclusive, and the Adviser shall be free to render
similar services to others so long as its services to the Company are not
impaired thereby. The Adviser shall be deemed to be an independent contractor
and shall, unless otherwise expressly provided or authorized, have no authority
to act for or represent the Company in any way or otherwise be deemed an agent
of the Company. To the extent that the purchase or sale of securities or other
investments of any issuer may be deemed by the Adviser, and to the extent
permitted by applicable law, to be suitable for two or more accounts managed by
the Adviser, the available securities or investments may be allocated in a
manner believed by the Adviser to be equitable to each account. It is
recognized that in some cases this may adversely affect the price paid or
received by the Company or the size or position obtainable for or disposed of
by the Company.
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<PAGE> 23
5. EXPENSES TO BE PAID BY THE ADVISER
The Adviser shall pay all expenses incurred by it in rendering
the services to be rendered by the Adviser hereunder. Generally, and except as
may otherwise be specified in this Agreement, these expenses include the cost
of office space, telephone service, equipment and personnel required to perform
its obligations under this Agreement. Without limiting the generality of the
foregoing, the Adviser will pay the salaries and other employee benefits of the
persons in its organization whom the Adviser may engage to render such
services, including without limitation persons who may from time to time act as
the Company's officers. Notwithstanding the foregoing, the Board may, in its
sole discretion, award to such officers options to acquire shares of beneficial
interest in the Company, which options shall not be deemed part of their
salaries or other employee benefits for the purpose of this paragraph.
6. EXPENSES TO BE PAID BY THE COMPANY
In general, the Company shall pay all of its operating
expenses and reimburse the Adviser promptly for expenses which the Adviser may
pay on the Company's behalf, except those specifically required to be borne by
the Adviser under this Agreement. Expenses borne by the Company include but
are not limited to:
(a) all expenses of any offering and sale by the Company of its
shares, including promotional expenses;
(b) fees and disbursements of the Company's outside legal counsel
and accountants and the custodian of its investments;
(c) fees and expenses incurred in producing and effecting filings
with federal and state securities administrators;
(d) costs of the Company's periodic reports to (and other
communications with) shareholders;
(e) fees and expenses of members of the Board who are not
directors, officers or employees of the Adviser;
(f) premiums for the fidelity bond maintained by the Company;
(g) all costs related to portfolio investments, including without
limitation financing costs, legal and accounting fees,
expenses related to protecting or maintaining the value of the
loan portfolio or its underlying collateral, and other
professional or technical fees and expenses (e.g., credit
reports, title searches and delivery charges, property taxes,
insurance premiums, long-distance telephone
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<PAGE> 24
charges, costs of specialized consultants such as accountants
or industry-specific technical experts, and travel expenses)
incurred in acquiring, monitoring, negotiating, working-out,
and effecting disposition of such investments, as well as
responding to any litigation arising therefrom; and
(h) all expenses related to any borrowings by the Company.
7. COMPENSATION TO THE ADVISER
During the term of this Agreement, the Company will pay to the
Adviser, on the 15th day of each month: (a) a fee calculated at an effective
annual rate of 5.94% of the Company's invested assets as of the end of the
previous month; and (b) a fee calculated at an effective annual rate of 0.48%
of the Company's cash and short-term investments as of the end of the previous
month.
For purposes of calculating the fee to be paid on a monthly
basis, "invested assets" means the asset value as determined by the Board as of
the end of the previous fiscal quarter minus cash, short-term investments,
intangible assets, and the amount of collections applied to the carrying value
of the loan portfolio since the end of the previous quarter, plus the cost of
loans purchased and capitalized advances to protect portfolio investments or
underlying collateral since the end of the previous quarter. Such values shall
be established using generally accepted accounting principles ("GAAP"). The
fee paid on a monthly basis will be ratified on a quarterly basis by the Board.
8. CERTAIN RECORDS
The Adviser shall keep and maintain all books and records with
respect to the Company's portfolio transactions required by Rule 31a-1 under
the 1940 Act and shall render to the Board such periodic and special reports as
the Board may reasonably request. The Adviser shall also furnish to the
Company any other information that is required to be filed by the Company with
the SEC or sent to shareholders under the 1940 Act (including rules adopted
thereunder) or any exemptive or other relief that the Adviser or the Company
obtains from the SEC. The Adviser agrees that the records that it maintains on
behalf of the Company are the property of the Company and the Adviser will
surrender promptly to the Company any of such records upon the Company's
request; provided, however, that the Adviser may retain a copy of such records.
In addition, for the duration of this Agreement, the Adviser shall preserve for
the periods prescribed by Rule 31a-2 under the 1940 Act any such records as are
required to be maintained by it pursuant to this Agreement, and shall transfer
said records to any successor investment adviser upon the termination of this
Agreement (or, if there is no successor investment adviser, to the Company.)
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<PAGE> 25
9. LIABILITY OF THE ADVISER AND INDEMNIFICATION
The duties of the Adviser shall be confined to those expressly
set forth herein, and no implied duties are assumed by or may be asserted
against the Adviser hereunder. The Adviser may rely on information reasonably
believed by it to be accurate and reliable. The Adviser shall not be liable to
the Company or to any shareholder of the Company for any error of judgment or
mistake of law or for any loss arising out of any investment or for any act or
omission in carrying out its duties hereunder, except:
(a) for a loss resulting from willful misfeasance, bad faith or
gross negligence in the performance of its duties, or by
reason of reckless disregard of its obligations and duties
hereunder, except as may otherwise be provided under
provisions of applicable state law which cannot be waived or
modified hereby;
(b) to the extent specified in Section 36(b) of the 1940 Act
concerning losses resulting from a breach of fiduciary duty
with respect to the Adviser's receipt of compensation; and
(c) for a loss resulting from any breach of any representation and
warranty of the Adviser contained in this Agreement.
In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties hereunder on the part
of the Adviser, to the fullest extent permitted by applicable law, the Company
hereby agrees to indemnify and hold the Adviser harmless from and against all
claims, actions, suits and proceedings at law or in equity, whether brought or
asserted by a private party or a governmental agency, instrumentality or entity
of any kind, relating to the sale, purchase, pledge of, advertisement of, or
solicitation of sales or purchases of any security (whether of the Company or
otherwise) by the Company, its officers, trustees, employees or agents in
alleged violation of applicable federal, state or foreign laws, rules or
regulations.
As used in this Section 9, the term "Adviser" shall include
any affiliates of the Adviser performing services for the Company contemplated
hereby and the directors, officers, employees and other corporate agents of the
Adviser and such affiliates.
10. APPROVAL OF THE AGREEMENT
The Company represents that: (a) the terms of this Agreement
were approved by the Board, including a majority of its members casting their
votes in person who are not "interested persons" of the Company, at a meeting
held on September 13, 1996, called for the purpose of voting on such approval;
and (b) this Agreement was approved by the "vote of a majority of the
outstanding voting securities" (as defined in Section 2(a)(42) of the 1940 Act)
of the Company, at a meeting held on September 13, 1996. This Agreement shall
continue in
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<PAGE> 26
effect for two (2) years from the date of its execution and thereafter from
year to year as long as such continuance is specifically approved at least
annually by the Board, including a majority of its members casting their votes
in person who are not "interested persons" of the Company at a meeting called
for the purpose of voting on such approval, or by "vote of a majority of the
outstanding voting securities" of the Company.
11. TERMINATION OF THE AGREEMENT
The foregoing notwithstanding, this Agreement may be
terminated by the Company at any time, without payment of any penalty, on sixty
(60) days' written notice to the Adviser if the decision to terminate has been
made by the Board or by "vote of a majority of the outstanding voting
securities" of the Company. This Agreement will terminate automatically in the
event of its "assignment" (as defined in Section 2(a)(4) of the 1940 Act). The
Adviser may also terminate this Agreement on sixty (60) days' written notice to
the Company; provided, however, that the Adviser may not terminate this
Agreement unless: (a) the terms of a new investment advisory agreement with the
Adviser or another investment adviser have been approved by the Board,
including a majority of its members casting their votes in person who are not
parties to such agreement or "interested persons" of any such party, at a
meeting called for the purpose of voting on such approval; and (b) such new
investment advisory agreement has been approved by the "vote of a majority of
the outstanding voting securities" of the Company.
12. JURISDICTION
This Agreement shall be governed by the laws of the State of
Texas.
13. SEVERABILITY
If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of this
Agreement shall not be affected thereby.
* * *
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<PAGE> 27
IN WITNESS WHEREOF, the parties have executed this Agreement
on and as of September 22, 1996.
PLYMOUTH COMMERCIAL EMERALD ADVISERS, INC.
MORTGAGE FUND
By: /s/ Robert R. Swendson By: /s/ John C. Mosher
---------------------- ------------------
Name: Robert R. Swendson Name: John C. Mosher
Title: President Title: Vice President
Attest: /s/ Larry D. Krause Attest: /s/ Larry D. Krause
-------------------- --------------------
Name: Larry D. Krause Name: Larry D. Krause
Title: Senior Vice President/Secretary Title: Senior Vice President/Secretary
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<PAGE> 28
PROXY BALLOT
PLYMOUTH COMMERCIAL MORTGAGE FUND
c/o GREYSTONE ADVISERS, INC.
13333 BLANCO ROAD, SUITE 314
SAN ANTONIO, TEXAS 78216-7756
ANNUAL MEETING OF SHAREHOLDERS
HELD ON APRIL 24, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
OF PLYMOUTH COMMERCIAL MORTGAGE FUND
BY SIGNING AND DATING THE LOWER PORTION OF THIS PROXY BALLOT, YOU AUTHORIZE THE
PROXY AGENTS TO VOTE ON EACH PROPOSAL AS MARKED OR, IF NOT MARKED, TO VOTE
"FOR" THE PROPOSAL, AND TO USE THEIR DISCRETION TO VOTE ON ANY OTHER MATTERS
THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING.
The undersigned hereby appoints John C. Mosher and Kenneth L.
Bennight, Jr. (the "Proxy Agents"), and each of them, attorneys and Proxy
Agents of the undersigned, each with the power of substitution and
resubstitution, to attend, vote and act for the undersigned at the annual
meeting of owners of common shares of beneficial interest ("Shareholders"), and
at any adjournments(s) thereof, of Plymouth Commercial Mortgage Fund (the
"Company") to be held at the office of Duncan-Smith Co., 311 Third Street, 3rd
Floor, San Antonio, Texas 78205, beginning at 8:00 a.m. Central time on
Thursday, April 24, 1997. The Proxy Agents shall cast votes based on the number
of common shares of beneficial interest of the Company that the undersigned may
be entitled to vote with respect to the proposals set forth below, in
accordance with the instructions indicated, if any, and shall have all the
powers that the undersigned would possess if personally present. The
undersigned hereby revokes any prior proxy to vote at such meeting, and hereby
ratifies and confirms all that said Proxy Agents, or each of them, may lawfully
do by virtue hereof or thereof. For your convenience, you may vote by calling
the Company toll-free at 1-800-330-3971 from 8:30 a.m. and 5:00 p.m. Central
time.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS OF THE COMPANY, THE PROXY STATEMENT DATED APRIL 4, 1997, AND THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1996.
1. ELECTION OF TRUSTEES
FOR all nominees listed below / / WITHHOLD AUTHORITY / /
(Except as marked to the contrary below) to vote for all nominees
listed below
<PAGE> 29
(INSTRUCTION: If you intend to withhold authority to vote for any individual
nominee strike a line through the nominee's name in the list below.)
Dr. Ronald K. Calgaard, James R. Clifton, Robert R. Swendson,
Goodhue W. Smith III, and Willis H. Wagner
2. PROPOSAL 2 TO APPROVE THE CONTINUATION OF THE INVESTMENT
ADVISORY AGREEMENT BETWEEN THE COMPANY AND GREYSTONE
ADVISERS, INC.
/ / For / /Against / / Abstain
3. PROPOSAL 3 TO RATIFY THE SELECTION OF KPMG PEAT MARWICK
LLP AS THE COMPANY'S INDEPENDENT PUBLIC ACCOUNTANT FOR THE
YEAR ENDING DECEMBER 31, 1997.
/ / For / /Against / / Abstain
4. PROPOSAL 4 TO APPROVE A CHANGE OF A TERM, AND TO RATIFY THE
ISSUANCE, OF CERTAIN CLASS A WARRANTS THAT HAVE BEEN ISSUED
TO SOUTHWEST FEDERATED HOLDING COMPANY, INC.
/ / For / /Against / / Abstain
5. PROPOSAL 5 TO APPROVE A CHANGE OF A TERM, AND THE FUTURE ISSUANCE,
OF CERTAIN CLASS B WARRANTS THAT WILL BE ISSUED TO SOUTHWEST
FEDERATED HOLDING COMPANY, INC.
/ / For / /Against / / Abstain
6. In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before this meeting.
THE BOARD OF TRUSTEES OF THE COMPANY
RECOMMENDS A VOTE "FOR" ALL PROPOSALS.
This Proxy may be revoked at any time prior to the meeting by so
notifying the Secretary of the Company in writing at the above address, by
submitting a properly executed proxy with a later date, or by attending the
meeting and voting in person.
Please sign exactly as your name(s) appear(s) hereon. When shares
are held by joint tenants, both should sign. When signing as attorney,
executor, administrator, trustee guardian or fiduciary, please give full title
as such. If a corporation, please sign full corporate name by President or
other authorized officer. If a partnership, please sign in partnership name by
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<PAGE> 30
authorized person. Proxy ballots signed or authorized by telephone by one owner
will be presumed to be valid absent prior written notification to the Company
that more than one owner is required for valid execution.
Dated: , 1997
---------- ------------------------------
Signature
Dated: , 1997
---------- ------------------------------
Signature if held jointly
PLEASE VOTE, SIGN, DATE
AND RETURN THE PROXY
USING THE ENCLOSED
ENVELOPE
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