File No. 333-_________
As filed with the Securities and Exchange Commission on December 1, 1997.
-------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM S-1
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
1ST ATLANTIC GUARANTY COMPANY
(Exact Name of Registrant as Specified in Its Charter)
Maryland
(State or other Jurisdiction of Incorporation or Organization)
6726
(Primary Standard Industrial Classification Code Number)
52-2064471
(I.R.S. Employer Identification Number)
3 Bethesda Metro Center, Suite 700
Bethesda, MD 20814
(301) 961-1999
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
John J. Lawbaugh
3 Bethesda Metro Center, Suite 700
Bethesda, MD 20814
(301) 961-1999
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
Copies To:
----------
Richard T. Choi, Esq.
Freedman, Levy, Kroll & Simonds
1050 Connecticut Avenue, Suite 825
Washington, D.C. 20036
(202) 457-5142
<PAGE>
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until Registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
<PAGE>
<TABLE>
Cross-Reference Sheet Required by
Rule 404 under the Securities Act of 1933
<CAPTION>
PART I
Form S-1 Item No. Caption In Prospectus
----------------- ---------------------
<S> <C>
1. Forepart of Registration Statement and Forepart of Registration
Outside Front Cover Page of Prospectus Statement; Cover Page
2. Inside Front and Outside Back Cover Table of Contents
Pages of Prospectus
3. Summary Information, Risk Factors and Questions and Answers; The
Ratio of Earnings to Fixed Charges Certificates--At A Glance;
Special Risk Considerations
4. Use of Proceeds The Company - Organization and
Operations; Investments
5. Determination of Offering Price Not applicable
6. Dilution Not applicable
7. Selling Security Holders Not applicable
8. Plan of Distribution How to Buy Certificates; Accessing
Your Account Value; Account Transactions
9. Description of Securities to be The Certificates; General
Registered Terms and Conditions; Reserves;
Accessing Your Account Value; Account
Transactions
10. Interests of Named Experts and Counsel Not applicable
11. Information With Respect to the Not applicable except for items (a),
Registrant (e), (j), (k), (l), (m) and
(n); as to the latter, see below
(a) The Company - Organization and
Operations; Special Risk
Considerations; The Certificates;
General Terms and Conditions
(e) Financial Statements
(j) Special Risk Considerations
(k) - (l) The Company - Directors and Officers
(m) The Company - Organization and
Operations
(n) Management - Related Party
Transactions
12. Disclosure of Commission Position on Not applicable
Indemnification For Securities Act
Liabilities
</TABLE>
i
<PAGE>
PART II
Information required to be set forth in Part II is set forth under the
appropriate item, so numbered in Part II of this Registration Statement.
ii
<PAGE>
SUBJECT TO COMPLETION
1ST ATLANTIC GUARANTY CORPORATION
[PRELIMINARY] PROSPECTUS
________________, 1998
This Prospectus describes four types of face-amount certificates
("Certificates") currently offered by 1st Atlantic Guaranty Corporation ("1st
Atlantic Guaranty" or "Company"):
o ACCUMULATOR CERTIFICATES
o GROWTH CERTIFICATES
o RESERVE CERTIFICATES
o GOLD CERTIFICATES
You can use the Certificates to lock-in competitive interest rates GUARANTEED
BY THE COMPANY, for one or more renewable terms of varying length to suit your
needs. SEE "The Certificates." Like any securities investment, the
Certificates involve certain risks that you should consider. SEE "Special Risk
Considerations."
Please read this Prospectus carefully before you invest and keep it for future
reference. No one has the authority to change the terms and conditions of the
Certificate as described in this Prospectus, or to bind the Company by any
statement not in it.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. THE
COMPANY HAS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ("SEC") A
REGISTRATION STATEMENT RELATING TO THE SECURITIES DESCRIBED IN THIS
PROSPECTUS. NO ONE MAY SELL OR ACCEPT OFFERS TO BUY THE SECURITIES DESCRIBED
IN THIS PROSPECTUS UNTIL THE REGISTRATION STATEMENT, AS AMENDED, BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BY ANY SALE OF THESE
SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD
BE UNLAWFUL.
NEITHER THE SEC NOR ANY STATE REGULATOR HAS APPROVED OR DISAPPROVED THE
SECURITIES DESCRIBED IN THIS PROSPECTUS OR PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE CERTIFICATES ARE BACKED BY THE ASSETS OF THE COMPANY. THEY ARE NOT INSURED
OR GUARANTEED BY THE FEDERAL GOVERNMENT OR ANY GOVERNMENT AGENCY.
[OUTSIDE FRONT COVER PAGE]
<PAGE>
CERTIFICATE INTEREST RATES
As of the date of this Prospectus, the available interest rates for each type
of Certificate are set out below. Different rates may apply to your
Certificate, depending on when you purchase it. Please call us at
1-888-74-YIELD or 301-215-7515 to find out what our current interest rates
are.
<TABLE>
ACCUMULATOR CERTIFICATE:
---------------------------------------------------------------------------------------------
<CAPTION>
Interest Rate/Guarantee Period
Amount Of Principal Investment 1 Year 3 Years 5 Years 10 Years
------------------------------ ------ ------- ------- --------
<S> <C> <C> <C> <C>
[To be supplied by amendment.]
---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
GROWTH CERTIFICATE:
---------------------------------------------------------------------------------------------
<CAPTION>
Interest Rate/Guarantee Period
Amount Of Principal Investment 1 Year 3 Years 5 Years 10 Years
------------------------------ ------ ------- ------- --------
<S> <C> <C> <C> <C>
[To be supplied by amendment.]
---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
RESERVE CERTIFICATE:
---------------------------------------------------------------------------------------------
<CAPTION>
Interest Rate/Guarantee Period
Amount Of Principal Investment 1 Year 3 Years 5 Years 10 Years
------------------------------ ------ ------- ------- --------
<S> <C> <C> <C> <C>
[To be supplied by amendment.]
---------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
GOLD CERTIFICATE:
---------------------------------------------------------------------------------------------
<CAPTION>
Interest Rate/Guarantee Period
Amount Of Principal Investment 1 Year 3 Years 5 Years 10 Years
------------------------------ ------ ------- ------- --------
<S> <C> <C> <C> <C>
[To be supplied by amendment.]
---------------------------------------------------------------------------------------------
</TABLE>
[INSIDE FRONT COVER PAGE]
<PAGE>
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Description Page
----------- ----
<S> <C>
Glossary
Questions and Answers
Special Risk Considerations
The Certificates
At A Glance
Accumulator Certificates
Growth Certificates
Reserve Certificates
Gold Certificates
General Terms and Conditions
Face-Amount
Account Value
Principal Investments
Additional Investments
Interest Rates
Guarantee Periods
Maturity Date
Fees and Charges
Other Terms and Conditions
Performance
How to Buy Certificates
Through the Company
Through Authorized Sellers
Affinity Groups
Investment Amounts
Canceling Your Order
Accessing Your Account Value
Interest Withdrawals
Principal Withdrawals
Withdrawal Amounts
Penalty for Early Withdrawal
Affect on Interest Rates
Requesting a Withdrawal
Account Transactions
Transferring Ownership
Exchanging Certificates
Tax Matters
The Company
Organization and Operations
Directors and Officers
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Management
Board of Directors
Committees of the Board of Directors
Investment Adviser
Atlantic Capital
Related Party Transactions
Reserves
Investments
Types of Investments
Investment Practices
Custody of Assets
Investor Services
Automatic Investments
Direct Deposits
Inquiries
Reports
Independent Auditors
Financial Statements
The Company and Its Service Providers
</TABLE>
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GLOSSARY
The following is a glossary of terms frequently used in this Prospectus:
ACCOUNT VALUE - your principal investments(s), plus accrued interest, less
withdrawals and applicable fees and charges.
CERTIFICATE - one of the four different Certificates offered by this
Prospectus, namely, the Accumulator, Growth, Reserve, or Gold Certificates.
CERTIFICATE ANNIVERSARY - one or more 12 month periods following the Effective
Date of your Certificate.
COMPANY - 1st Atlantic Guaranty Corporation.
EFFECTIVE DATE - the first day of the month following the date we accept your
application to purchase a Certificate, unless we accept your application on
the first day of the month, in which case the latter will be the Effective
Date of your Certificate.
FACE-AMOUNT - the amount that you invest at the time you purchase your
Certificate, or, in the case of the Accumulator Certificate, the sum of the
installments you agree to make during the life of the Certificate. You select
the face-amount subject to certain minimum and maximum limitations.
GUARANTEE PERIOD - a time period that you select to lock in the interest rate
applicable to your principal investment for that period.
INTEREST RATE - the rate of interest that you earn on your Certificate. We
guarantee the interest rate for the Guarantee Periods that you select.
Interest compounds monthly, based on a 30 day month and a 360 day year.
INTEREST RATE DATE - the date on which we set the interest rate available
under the Certificates, generally, the first and third Monday of each month.
MATURITY DATE - the date on which the Certificate matures. Each Certificate
matures 20 years after its Effective Date.
MINIMUM INTEREST RATE - the minimum rate of interest you will earn during any
Guarantee Period, i.e., 6% for the Reserve Certificate and 4.5% for each other
Certificate.
OUR, US, WE - 1st Atlantic Guaranty Corporation.
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PRINCIPAL, PRINCIPAL INVESTMENT - the amount of your initial and any
subsequent investment. For purposes of these definitions, we treat interest
that has accrued during a Guarantee Period as principal for the next Guarantee
Period to which it is applied.
SERVICE OFFICE - the department of 1st Atlantic Guaranty Corporation
responsible for administering and servicing the Certificates. The address and
telephone numbers of our Service Office are Bethesda Metro Center, Suite 700,
Bethesda, MD 20814 (1-888-74-YIELD or 301-215-7515).
SURRENDER VALUE - the amount of your Account Value, less any applicable
withdrawal charge and early withdrawal penalty.
YOU, YOUR -- a current or prospective Certificate owner.
6
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QUESTIONS AND ANSWERS
WHO IS 1ST ATLANTIC GUARANTY? 1st Atlantic Guaranty is a Maryland corporation
registered with the SEC as a face-amount certificate company, which is a type
of investment company. Like other investment companies, 1st Atlantic Guaranty
invests the monies that it receives from investors in a portfolio of
securities issued by other companies. It also invests in other types of
assets, including real estate and real estate loans. SEE "The Company" and
"Investments."
WHAT ARE THE CERTIFICATES? The Certificates are basically guaranteed
fixed-income securities. When you buy a Certificate, you are buying a
guarantee by the Company, backed by its assets, to pay you the amount of your
principal investment (known as the "face-amount"), plus accrued interest (less
any withdrawals and applicable fees and charges), when your Certificate
matures. We currently offer four different Certificates that you can select
from to suit your needs. SEE "The Certificates" and "General Terms and
Conditions."
WHAT ASSETS BACK THE COMPANY'S GUARANTEES? The Company maintains reserves to
meet its guarantees under the Certificates. These reserves consist primarily
of income-producing instruments such as government and corporate bonds,
preferred stock, and real estate mortgages. SEE "Reserves" and "Other Terms
and Conditions" under "General Terms and Conditions."
WHY BUY A CERTIFICATE? We guarantee Certificate interest rates that are
generally higher than those available through bank certificates of deposits
("CDs") or U.S. Treasury obligations ("Treasuries"). SEE "Interest Rates"
under "General Terms and Conditions." The Certificates also have several
features that can give you more investment flexibility than are available
through CDs and Treasuries. SEE "The Certificates" and "General Terms and
Conditions." SEE ALSO "Special Risk Considerations."
HOW IS INTEREST PAID? You can elect to withdraw the interest earned on your
Certificate on a monthly, quarterly, or annual basis during the life of your
Certificate, provided you maintain an Account Value of at least $10,000. You
can also allow your interest to accumulate up to the Maturity Date of your
Certificate. Interest compounds monthly. SEE "Interest Withdrawals" under
"Accessing Your Account Value."
WHAT FACTORS AFFECT THE INTEREST I CAN EARN? The amount of interest you can
earn will depend on the type of Certificate you select, the amount you invest,
the available interest rates, and the length of time you decide to lock in the
interest rate. You will always earn at least the Minimum Interest Rate for
each Certificate, subject to the terms and conditions described herein. SEE
"The Certificates" and "General Terms and Conditions."
WHO MANAGES THE COMPANY? The Board of Directors ("Board") of the Company is
primarily responsible for the management of the Company. The Board has
established an Investments Committee, which oversees the investment activities
of the Company. Spears, Benzak, Salomon & Farrell, a division of Key Asset
Management, Inc. ("Adviser"), manages the Company's securities portfolio. As
of _______________, 1997, the Adviser managed approximately __ billion in
7
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assets, including __ billion in investment company assets. The Company's
wholly- owned subsidiary, Atlantic Capital Funding Corporation ("Atlantic
Capital"), manages the Company's real estate loan portfolio. SEE "Management."
HOW DO I BUY, REDEEM, OR EXCHANGE CERTIFICATES? You can purchase and redeem
Certificates, or exchange one Certificate for another, by contacting our
Service Office. SEE "How to Buy Certificates," "Accessing Your Account Value,"
and "Account Transactions." Certain minimum and maximum investment
requirements apply to each Certificate. SEE "At A Glance" under "The
Certificates." In addition to a withdrawal charge, a penalty may apply for
early withdrawals of principal. SEE "Fees and Charges" under "General Terms
and Conditions" and "Penalty for Early Withdrawal" under "Accessing Your
Account Value."
SHOULD I BUY A CERTIFICATE? Before purchasing a Certificate, you should
consider whether the Certificate suits your financial objectives, particularly
in light of the amount of your purchase and the long-term nature of the
Certificates. You should not rely on the Certificates for short-term financial
needs. The Certificates are intended to be part of a well-balanced,
comprehensive investment program. SEE "Special Risk Considerations,"
immediately below.
SPECIAL RISK CONSIDERATIONS
As with any security that you buy, you bear certain risks when you invest in a
Certificate. We highlight below certain risks that you may find prudent to
consider before investing in a Certificate.
OPERATING HISTORY. The Company is newly formed, which means it has no
operating history or "track record." This fact is common to all new investment
companies.
PORTFOLIO INVESTMENTS. We expect to meet our obligations under the
Certificates through earnings on our portfolio investments. Because our
guarantees under the Certificates are backed only by our assets, you bear a
number of portfolio investment risks. These include, for example, (i) market
risk (i.e., the risk that the market value of one or all of our investments
might decline), (ii) credit risk (i.e., the risk that an issuer of a security
that we purchased might default), (iii) liquidity risk (i.e., the risk that
one or more of our investments might not be liquid at the time necessary to
meet our payment obligations), (iv) interest rate risk (i.e., the risk that
interest rates might move in a direction that causes an adverse effect on our
investments), and (v) valuation risk (i.e., the risk that one or more of our
investments might be overvalued). We will try to minimize these risks by
following certain investment guidelines established by federal law and
administered by the SEC. SEE "Investments." Failure of the Company's portfolio
investments to generate adequate earnings may limit our ability to pay
competitive interest rates and could conceivably prevent the Company from
meeting its obligations under the Certificates, including the payment of
principal and interest.
8
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COMPETITIVE FACTORS. There are but a handful of face-amount certificate
companies in existence today. One company, IDS Certificate Company, dominates
the face-amount certificate industry. In addition, there exist a number of
financial products, such as CDs and insurance products, that offer investors a
guaranteed fixed rate of return. Our principal means of competing is by
offering attractive interest rates on our Certificates and responsive customer
service.
THE CERTIFICATES
AT A GLANCE
The chart below provides an overview of the four different types of
Certificates we offer. For more detailed information, please refer to the
remainder of this section. SEE ALSO "General Terms and Conditions" for
additional information about common features of the Certificates.
<TABLE>
|----------------------------------------------------------------------------------------------------------------------|
| | Name of Certificate |
<CAPTION>
| |----------------------------------------------------------------------------------------|
| | Accumulator | Growth | Reserve | Gold |
| | ----------- | ------ | ------- | ---- |
| |---------------------|---------------------|---------------------|----------------------|
<S> <C> <C> <C> <C>
| Certificate Type | Installment | Fully Paid | Fully Paid | Fully Paid |
| ----------------------------|---------------------|---------------------|---------------------|----------------------|
| Minimum Investment | $250* | $2,500 | $25,000 | $250,000 |
|-----------------------------|---------------------|---------------------|---------------------|----------------------|
| Min. Additional Investments | $50* | $250** | None | $5,000 |
|-----------------------------|---------------------|---------------------|---------------------|----------------------|
| Maximum Investment | $1.5 million | $250,000 | $2.5 million | $2.5 million |
|-----------------------------|----------------------------------------------------------------------------------------|
| Guarantee Periods | 1, 3, 5 or 10 years |
|-----------------------------|----------------------------------------------------------------------------------------|
| Maturity Date | 20 years from Effective Date |
|-----------------------------|----------------------------------------------------------------------------------------|
| | |
| Benchmarks | FOR 1, 3, 5 YEAR GUARANTEE PERIODS: the HIGHER of (i) the average rate for |
| | CDs of comparable maturities as quoted on the Bank Rate Monitor National |
| | Index and (ii) the yield on Treasuries of comparable maturities, on a given |
| | Interest Rate Date. SEE "Interest Rates" under "General Terms and |
| | Conditions." |
| | |
| | FOR 10 YEAR GUARANTEE PERIODS: the yield on 10-year Treasury notes on a |
| | given Interest Rate Date. SEE "Interest Rates" under "General Terms and |
| | Conditions." |
|-----------------------------|----------------------------------------------------------------------------------------|
|Interest Rate Target*** 0.5% to 2.5% above benchmark**** |
|----------------------------------------------------------------------------------------------------------------------|
| MINIMUM INTEREST RATE 4.5% 4.5% 6% 4.5% |
|----------------------------------------------------------------------------------------------------------------------|
<FN>
| |
| * The minimum face-amount for any Accumulator Certificate is $5,000. |
| |
| ** You may make additional contributions in an aggregate amount up to 15% of |
| your initial investment. |
| |
| *** The Company reserves the right to set an interest rate target above |
| the target stated above. |
| |
|**** Interest rates generally will be higher for larger investments. |
|-----------------------------------------------------------------------------------------------------------------------
</FN>
</TABLE>
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ACCUMULATOR CERTIFICATES
WHO SHOULD INVEST. Accumulator Certificates are designed for investors who
want to save for retirement, or save to meet college or other long-term
expenses, by systematically investing in a fixed-income investment that offers
competitive interest rates.
INVESTMENT AMOUNTS. You can invest up to the face-amount of your Accumulator
Certificate in monthly or quarterly installments, which is why these
Certificates are sometimes referred to as "installment Certificates." You can
select how much you would like to invest on an installment basis, subject to
the limits described above. PLEASE NOTE THAT FAILURE TO MAKE A SCHEDULED
PAYMENT FOR YOUR ACCUMULATOR CERTIFICATE MAY RESULT IN THE LAPSE OF YOUR
CERTIFICATE. SEE "Lapse and Reinstatement," immediately below.
LAPSE AND REINSTATEMENT. All scheduled payments for Accumulator Certificates
are due on the first day of the month. If we do not receive your scheduled
payment by the 15th day of the month, your Certificate will be in default, and
will lapse.
You can reinstate your Accumulator Certificate by paying the missed payment,
plus an administrative fee equal to the higher of 5% of the missed payment or
$5.00, within six months from the original due date of the missed payment. We
will apply any missed payments that we receive to the current Guarantee Period
to which you have applied your Account Value. Any missed payment will earn
interest commencing on the date we apply it to such Guarantee Period.
Alternatively, you can elect to surrender your lapsed Certificate for its
Surrender Value, or convert it to a "fully paid" Certificate in an amount
equal to its then Surrender Value. Your fully paid Certificate will have the
same Maturity Date as your lapsed Certificate, and your Account Value will be
applied automatically to the Guarantee Period that ends closest to the
Maturity Date of the Certificate, without extending past such Maturity Date,
at the interest rate applicable to such Guarantee Period.
If, within six months from the original due date of your missed payment, you
have not notified the Company of your decision to reinstate, surrender or
convert your lapsed Accumulator Certificate, the Company will automatically
convert your lapsed Accumulator Certificate into a fully paid Certificate as
described above.
GROWTH CERTIFICATES
WHO SHOULD INVEST. Growth Certificates are designed for investors seeking
competitive interest rates on a single lump-sum investment, but who do not
have the amount necessary to purchase a Gold Certificate, which normally
offers a higher rate of interest.
INVESTMENT AMOUNTS. You can purchase Growth Certificates with a single
principal investment or "lump sum," subject to the limits described above.
Because these Certificates do not require any additional payment, they are
sometimes referred to as "fully paid" Certificates. You have the option,
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however, of making one or more additional principal investments in amounts
ranging from $250 up to an aggregate maximum of 15% of your initial
investment, subject to the maximum principal investment limit described above.
SEE "Additional Investments" under "General Terms and Conditions."
RESERVE CERTIFICATES
WHO SHOULD INVEST. Reserve Certificates are designed for investors seeking a
high rate of current income. Because of the Reserve Certificate's unique
systematic withdrawal feature, the Certificate may be ideal for retired
persons who need to receive disbursements from their retirement accounts
either to meet IRS requirements for minimum disbursements from their
tax-qualified plan or to fund retirement living.
INVESTMENT AMOUNTS. You can purchase Reserve Certificates with a single
principal investment ranging from $25,000 to $2.5 million. Like the Growth
Certificates, Reserve Certificates are sometimes referred to as "fully paid"
Certificates. We do not accept additional principal investments under the
Reserve Certificates.
SYSTEMATIC WITHDRAWAL. Reserve Certificates allow you to make systematic
withdrawals of both principal and accrued interest, without incurring any
withdrawal charge or early withdrawal penalty. You can choose to make
systematic withdrawals either monthly or quarterly. The minimum amount you may
withdraw at any time is $150. We will treat withdrawals as coming first from
interest earned on your principal investment, and then from principal. Reserve
Certificates require a minimum Account Value of 50% of your original principal
investment. Systematic withdrawals will reduce the amount of your Account
Value, and may result in the application of a lower interest rate. SEE "Affect
on Interest Rates" under "Accessing Your Account Value."
GOLD CERTIFICATES
WHO SHOULD INVEST. Gold Certificates are designed for investors seeking
competitive interest rates on large investments. Interest rates on Gold
Certificates normally will be the most favorable of all of the Certificates
offered by this Prospectus.
INVESTMENT AMOUNTS. You can purchase Gold Certificates with a single principal
investment, subject to the limits described above. Like the Growth
Certificates, Gold Certificates are sometimes referred to as "fully paid"
Certificates. You can also make one or more additional principal investments,
subject to a $5,000 minimum. SEE "Additional Investments" under "General Terms
and Conditions."
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GENERAL TERMS
AND CONDITIONS
The following terms and conditions apply to each type of Certificate described
in this Prospectus, unless otherwise specifically noted. We reserve the right
to issue other Certificates with different terms and conditions. The terms and
conditions of your Certificate may not be changed except by mutual agreement.
FACE-AMOUNT
The face-amount of your Certificate equals the amount you invest when you
purchase your Certificate, or, in the case of the Accumulator Certificate, the
amount you agree to invest during the life of the Certificate. The face-amount
will remain the same during the life of your Certificate.
ACCOUNT VALUE
Your Account Value initially will equal the face-amount of your Certificate
(except for Accumulator Certificates, in which case it will equal the amount
of your first scheduled principal investment). Periodically, we will adjust
your Account Value to reflect increases due to additional principal
investments and accrued interest, and decreases due to withdrawals and fees
and charges. SEE "Reports" under "Shareholder Services" for information on the
types of reports we will provide to you.
PRINCIPAL INVESTMENTS
The amounts that you invest in your Certificate constitute your principal
investments. We also treat interest that has accrued on your Certificate
during a Guarantee Period and that you apply to another Guarantee Period as
principal for that period. We will credit your initial principal investment
and issue your Certificate on the Effective Date, that is, the first day of
the month following the date we accept your application. We will credit
interest on your initial principal investment during the period prior to the
Effective Date at the rate in effect when we accept your application.
ADDITIONAL INVESTMENTS
You can make additional unscheduled principal investments during the life of
your Certificate (other than the Reserve Certificate), subject to the minimum
and maximum limits described above. Please note that we will credit additional
principal investments only on the first day of each month. We will not accept
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additional principal investments for any Reserve Certificate. Accumulator
Certificate owners are required to make the principal investments according to
the agreed upon schedule to avoid a lapse of their Certificate.
INTEREST RATES
WHEN WE CALCULATE INTEREST RATES. We calculate the Certificate interest rates
for each Guarantee Period generally on the first and third Monday of each
month (each an "Interest Rate Date"). We may calculate the interest rates more
frequently or at different times, in our sole discretion, and, from time to
time, we may offer special promotional rates on the Certificates.
HOW WE CALCULATE INTEREST RATES. We calculate the interest rates in our sole
discretion, primarily in response to changes in market conditions, as
generally reflected in the benchmarks that we use. On any given Interest Rate
Date, the interest rates available for each Guarantee Period will be the
HIGHER of (i) the Minimum Interest Rate and (ii) our Interest Rate Target for
that Guarantee Period. The Minimum Interest Rate for each Certificate is 4.5%
(6% in the case of the Reserve Certificates). The Interest Rate Target for
each Guarantee Period will equal the benchmark for that Period, plus a margin
generally ranging from 0.50% to 2.5%. At no time will the margin that we apply
be less than 0.50%.
When determining the Interest Rate Target for the one, three, and five year
Guarantee Periods, the benchmark will be the HIGHER of: (i) the average rate
for CDs of comparable maturity quoted on the Bank Rate Monitor National Index
("BRM Index") and (ii) the yield for Treasuries of comparable maturity, on a
given Interest Rate Date. The average rates set out in the BRM Index are based
on a weekly survey of the 50 largest banks and the 50 largest thrift
institutions in the 10 largest metropolitan areas in the United States. The
Bank Rate Monitor is a publication of Advertising New Services, Inc., an
independent national news organization that collects and disseminates
information about bank rates and the banking industry.
The BRM Index does not include an average rate for 10 year CDs. Accordingly,
we use the yield on 10 year Treasury notes as the benchmark for the 10 year
Guarantee Period.
APPLICABLE INTEREST RATE. You will earn interest for your initial Guarantee
Period at the rate in effect on the date we accept your application and
receive your initial principal investment at our offices. We will send you a
confirmation of the interest rate that applies to your Certificate. For any
subsequent principal investment, we will apply the interest rate available,
for the current Guarantee Period in which you are invested, on the date we
credit the payment. If you pay by check, you will begin earning interest on
the day your check clears. Prior to the end of each Guarantee Period, we will
notify you of the interest rates available under your Certificate for the
subsequent Guarantee Periods.
INFORMATION ON INTEREST RATES.
We will publish quotations of the available interest rates from time to time.
You also can find out what the available interest rates are on any given day
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by calling us at 1-888-74-YIELD or 301-215-7515. Interest rates for future
Guarantee Periods may be greater or less than the interest rates for the
current Guarantee Period that you select.
GUARANTEE PERIODS
You can lock in the interest rates available under your Certificate for
Guarantee Periods of one, three, five and 10 years. Your initial Guarantee
Period begins on the Effective Date. Generally, the longer the Guarantee
Period you select, the higher the interest rate you will earn. At the end of
each Guarantee Period, you can select another Guarantee Period of the same or
different length. We will notify you at least 15 days prior to the expiration
of each Guarantee Period. For convenience, unless you specify otherwise prior
to the end of your current Guarantee Period, we will automatically apply your
Account Value to another Guarantee Period of equal length, using the then
applicable interest rate.
You may continue to select successive Guarantee Periods up until the
Certificate's Maturity Date. SEE "Maturity Date," immediately below. You may
not select a Guarantee Period that would carry the Certificate past its
Maturity Date. If you select a Guarantee Period that would end after your
Certificate's Maturity Date, we will instead apply your Account Value to the
next shortest Guarantee Period that ends at or prior to your Certificate's
Maturity Date, using that period's then applicable interest rate.
MATURITY DATE
The Maturity Date for all 1st Atlantic Guaranty Certificates is 20 years from
the Effective Date. On the Maturity Date, we will pay you the face-amount of
your Certificate plus all accrued interest, plus any subsequent principal
investments, less any withdrawals and applicable fees and charges.
FEES AND CHARGES
SERVICE FEES. We charge a per payment fee of $5.00 to process regular monthly
or quarterly payments of accrued interest that you have elected to withdraw
and $25.00 to process any unscheduled interest payment requests. We will
deduct the fee from each payment you receive. This charge does not apply to
systematic withdrawals under the Reserve Certificates.
WITHDRAWAL CHARGE. If you withdraw some or all of your principal investment
prior to your fifth Certificate Anniversary, we will assess a withdrawal
charge from your remaining Account Value or, in the case of a complete
surrender, the amount withdrawn, according to the following schedule:
14
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
As a % of Amount Withdrawn: 5% 4% 3% 2% 1% 0%
---------------------------
# of Certificate Anniversaries: 1 2 3 4 5 Over 5
------------------------------
</TABLE>
This charge does not apply to systematic withdrawals under the Reserve
Certificates. In addition to a withdrawal charge, you may be subject to an
early withdrawal penalty. SEE "Penalty for Early Withdrawal" under "Accessing
Your Account Value."
OTHER TERMS AND CONDITIONS
The Certificates carry no voting rights and are not entitled to participate in
any dividends that may be declared by the Board of Directors. The Certificates
are not secured by any particular asset of the Company; however, as required
by federal law, the Company maintains reserves with its custodian to support
its obligations under the Certificates. SEE "Reserves."
PERFORMANCE
From time to time, we may quote current and historical yields on our
Certificates in advertisements and in sales literature. The availability of
the current yields quoted will depend on when you purchase your Certificate
and how much you invest. Quotations of historical yields are not indicative of
future yields. We also may compare our yields to those offered by competing
products, such as CDs and Treasuries, as well as other fixed-income
securities.
HOW TO BUY
CERTIFICATES
You can buy Certificates through one of the methods described below. You must
complete an application and submit it, along with payment, at the time of
purchase. WE RESERVE THE RIGHT TO ACCEPT OR REJECT ANY APPLICATION IN OUR SOLE
DISCRETION.
THROUGH THE COMPANY
BY MAIL. You can buy Certificates directly from the Company by sending a
completed application, along with a check, to 1st Atlantic Guaranty
Corporation, Bethesda Metro Center, Suite 700, Bethesda, MD 20814.
BY WIRE. You may also wire payments for Certificates to the Company's wire
bank account. Before wiring funds, please call us at 1-888-74-YIELD or
301-215-7515 to advise us of your investment and to receive instructions as to
15
<PAGE>
how and where to wire your investment. The minimum amount you may wire is
$_________. Please remember to return your completed application to us at the
address above.
THROUGH AUTHORIZED SELLERS
You can buy Certificates through broker-dealers that have selling group
agreements with us. Please call us at 1-888-74-YIELD or 301-215-7515 to find
out whether your broker-dealer is on our list of authorized sellers. We will
pay any compensation to authorized sellers out of our general funds, so that
all of your money will be invested in your Certificate. Compensation paid will
not exceed the maximum withdrawal charge and penalty for early withdrawal.
AFFINITY GROUPS
From time to time, we may seek to introduce our Certificates to members of
affinity groups, including service organizations, non-profit associations, and
other types of membership organizations (collectively, "affinity groups").
Although affinity groups are not permitted to sell Certificates, they may
provide us with mailing lists and other information to enable us to market
Certificates to their members. For their cooperation, we may compensate
affinity groups an amount that we mutually agreed upon. Please call us at
1-888-74-YIELD or 301-215-7515 for the current list of affinity groups with
whom we have arrangements.
INVESTMENT AMOUNTS
For an explanation of the minimum and maximum investments in each type of
Certificate, SEE "The Certificates." Certain additional restrictions may apply
under if you use the Certificates to fund your Individual Retirement Account
("IRA") or other qualified retirement plan account.
CANCELING YOUR ORDER
You can, without penalty or withdrawl charge, cancel your investment in a
Certificate within 10 days after the date of purchase. Simply call us at the
same telephone number or write to us. You will not earn any interest on
Certificates that you cancel under this provision.
16
<PAGE>
ACCESSING YOUR
ACCOUNT VALUE
You can access all or any part of your Certificate's Account Value at any
time, subject to the terms and conditions described below.
INTEREST WITHDRAWALS
You can schedule regular withdrawals of interest that has accrued under your
Certificate on a monthly, quarterly, or annual basis. Each accrued interest
withdrawal will be subject to a small service fee. Unscheduled interest
withdrawals are subject to a higher fee. SEE "Fees and Charges" under "General
Terms and Conditions." To qualify for this feature, you must maintain an
Account Value at all times equal to at least $10,000.
PRINCIPAL WITHDRAWALS
You can also withdraw some or all of your principal investments in your
Certificate prior to maturity. However, a withdrawal charge and an early
withdrawal penalty may apply upon withdrawal, other than for systematic
withdrawals under the Reserve Certificates. SEE "Withdrawal Charge" under
"Fees and Charges," and "Penalty for Early Withdrawal," below. To avoid
incurring a withdrawal charge and the penalty for early withdrawal, you may
request a temporary principal withdrawal of up to 50% of your Account Value
for a term not to exceed the earlier of five years or the Maturity Date of
your Certificate. You will not earn interest on the amount you withdraw from
your Certificate. Temporary principal withdrawals are subject to an annual
interest charge not to exceed 6% of the amount withdrawn. If you decide not to
reinvest your temporary principal withdrawal, we will treat it as a permanent
withdrawal and will assess against your remaining Account Value the penalty
for early withdrawal that would have applied at the time of the withdrawal.
Temporary principal withdrawls are not available for Accumulator Certificates.
Withdrawals of principal may cause your Certificate to fall into a lower
interest rate category. SEE "Affect on Interest Rates," below.
WITHDRAWAL AMOUNTS
The minimum amount that you may withdraw at any time from your Certificate is
$100 ($150 in the case of the Reserve Certificates), provided, however, that
the remaining Account Value under your Certificate (other than Reserve
Certificate) does not fall below the stated minimums. We will notify you and
seek additional instructions from you if the amount of your withdrawal request
would cause your Account Value to fall below that minimum. If you fail to
respond and your withdrawal would cause your Account Value to fall below that
minimum, we will treat your it as a request for a complete surrender of your
Certificate.
17
<PAGE>
PENALTY FOR EARLY WITHDRAWAL
If you withdraw some or all of your PRINCIPAL INVESTMENTS on or before your
fifth Certificate Anniversary, we will deduct a penalty from your remaining
Account Value, or, in the case of a complete surrender, from the amount
withdrawn, equal to 12 months interest payable on the amount withdrawn. After
your fifth Certificate Anniversary, the penalty will apply only if you
withdraw prior to the end of a Guarantee Period.
The foregoing penalty does not apply to systematic withdrawals under the
Reserve Certificate. In addition, the penalty does not apply if the withdrawal
is due to the need to meet unexpected expenses from your death, illness, or
other hardship for which we, in our sole discretion, may determine to grant an
exemption.
We assess the foregoing penalty largely because of the negative impact that
early withdrawals of principal investments may have on our reserves and our
ability to offer competitive interest rates to our customers. You may be
subject to additional penalties if you withdraw amounts held in a Certificate
from an IRA or other tax-qualified plan.
AFFECT ON INTEREST RATES
A withdrawal will cause a reduction in the Account Value under your
Certificate. If the reduction puts your Account Value in a lower category of
applicable interest rates, we will apply the lower interest rate from the date
of the withdrawal, even if it occurs prior to the end of a Guarantee Period.
REQUESTING A WITHDRAWAL
You may submit written requests for a withdrawal to the Company at our Service
Office. We will treat withdrawal requests as coming first from accrued
interest, and then from your principal investment. We will process withdrawal
requests on the business day that we receive them, and will generally send out
a check to you by the next business day.
We make take longer to process your request if you recently purchased or added
to a Certificate with a check that has not yet cleared. In addition, we
reserve the right to defer payments for up to 30 days, in which case we will
pay interest on the deferred payment at the Minimum Interest Rate.
For our mutual protection, we may require a signature guarantee if:
0 you seek to withdraw an amount in excess of $50,000,
0 you ask us to pay redemption proceeds to someone other than the
registered owners,
18
<PAGE>
0 you ask us to send redemption proceeds to an address other than the
address of record, a preauthorized bank account, or a preauthorized
brokerage firm account,
0 we receive instructions from an agent, not the registered owners, or
0 we believe a signature guarantee would protect us against potential
claims based on the instructions received.
A signature guarantee verifies the authenticity of your signature. You can
obtain a signature guarantee from certain banks, brokers or other eligible
guarantors. YOU SHOULD VERIFY THAT THE INSTITUTION IS AN ELIGIBLE GUARANTOR
PRIOR TO SIGNING. A NOTARIZED SIGNATURE IS NOT SUFFICIENT.
ACCOUNT TRANSACTIONS
TRANSFERRING OWNERSHIP
You may transfer ownership of your Certificate by submitting a completed
transfer request form to our Service Office. Please note that transfers of
ownership from a tax-qualified plan may have adverse tax consequences. Please
consult your tax adviser.
EXCHANGING CERTIFICATES
You may one Certificate for another, provided you meet the minimum investment
threshold for the new Certificate. Exchanges will become effective on the
first day of the next Guarantee Period following the date we receive your
exchange request. Withdrawal charges and penalties do not apply upon the
exchange of one Certificate for another; however, they may apply to
withdrawals from the new Certificate. To effect an exchange, please call us at
1-888-74-YIELD or 301-215-7515 to receive instructions.
TAX MATTERS
All interest that you earn on your Certificate is taxable to you in the year
in which it accrues, regardless of whether you elect to receive it during that
year. We will send you a report showing all reportable income under your
Certificate.
If you are using your Certificate to fund an IRA or other tax-qualified plan,
you generally will pay no federal income taxes on your interest until you
begin taking withdrawals. We are required to withhold federal income taxes on
IRA withdrawals unless you tell us not to. We are also required to
19
<PAGE>
withhold 20% on most other distributions from tax-qualified plans, unless the
distribution is directly rolled over to another tax-qualified plan or IRA.
If you are using your Certificate to fund a Roth IRA, your contributions will
not be tax deductible; however, the distributions from your Roth IRA may be
tax free depending on how and when you withdraw your money from the account.
Subject to certain income limitations, you may make a rollover contribution
from a non-Roth IRA to a Roth IRA. The rollover will be taxable currently, but
future distributions from the Roth IRA may be tax free as in the preceding
sentence. The maximum contribution to a Roth IRA is $2,000, not counting
rollover contributions, and contributions may be made beyond age 70 1/2. The
maximum yearly contribution to all IRA's combined is still $2,000.
THE COMPANY
ORGANIZATION AND OPERATIONS
The Company was organized as a Maryland corporation on October 1, 1997. It is
registered with the SEC as a face-amount certificate company, which is a type
of investment company.
The Company's capitalization consists solely of 10,000,000 shares of
authorized common stock, par value $0.01 per share ("common stock"). On
___________, 1998, ____________________ contributed the initial capitalization
of the Company, and as of that date, owned all of the issued and outstanding
shares of the Company's common stock. As of the date of this Prospectus, the
Company has capital in excess of the minimum amount required by the rules and
regulations of the SEC and the Investment Company Act of 1940 ("1940 Act").
The Company believes that its capital is adequate for its business activities.
The Company's business activities consist entirely of the issuance and
servicing of Certificates and the investment of the proceeds received from the
sale of its Certificates in securities and other assets. The profitability of
the Company's operations is determined by the difference between (1) the
amount of the Company's earnings on its investment portfolio and (2) the
expenses the Company incurs (e.g., the interest it agrees to pay, taxes, and
its investment and operating expenses, such as investment advisory fees,
brokerage costs, custodial expenses, disinterested director fees, and
distribution fees). The Company, through it wholly-owned subsidiary, Atlantic
Capital, manages its real estate loan portfolio, which supports its
obligations under the Certificates. SEE "Atlantic Capital" under "Management."
DIRECTORS AND OFFICERS
Certain information about the Company's directors and officers, including
their principal occupations for the past five years, is set out below. Members
of the Board who are considered "interested persons" of the Company under the
20
<PAGE>
1940 Act are indicated by an asterisk (*). The Company has no employees, and
all of the directors and officers, other than directors who are not interested
persons of the Company, serve in such capacities without compensation.
<TABLE>
<CAPTION>
Principal Occupations
Name, Address and Age Positions with the Company During the Past Five Years
---------------------- -------------------------- --------------------------
<S> <C> <C>
</TABLE>
[TO BE FILED BY
AMENDMENT.]
MANAGEMENT
BOARD OF DIRECTORS
The Board of Directors ("Board") is responsible for managing the Company's
business affairs. Directors are elected annually at the Company's annual
meeting of shareholders. Each Director who is not an interested person of the
Company receives an annual retainer of $______ for serving on the Board, an
annual retainer of $____ for serving on one or more committees of the Board,
and a $____ fee for each regular or special Board meeting he or she attends.
The Directors also receive reimbursement for their expenses incurred in
attending any meeting of the Board. The Board generally meets quarterly.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company has an Audit Committee and an Executive Committee. The duties of
each Committee and its present membership are as follows:
AUDIT COMMITTEE: The members of the Audit Committee consult with the Company's
independent auditors if the auditors deem it desirable, and meet with the
Company's independent auditors at least once annually to discuss the scope and
results of the annual audit of the Company and such other matters as the
Committee members deem appropriate or desirable. Directors _____, _____, and
_____ are members of the Audit Committee.
EXECUTIVE COMMITTEE: During intervals between meetings of the Board, the
Executive Committee possesses and may exercise all of the powers of the Board
in the management of the Company except as to those matters that specifically
require action by the Board. Directors _____, _____, and _____ are members of
the Executive Committee.
21
<PAGE>
INVESTMENTS COMMITTEE: The members of the Investments Committee oversee the
investment activities of the Adviser, which manages the Company's securities
portfolio, and the activities of the Company's wholly-owned subsidiary,
Atlantic Capital, which manages the Company's real estate loan portfolio.
Directors _____, _____, and _____ are members of the Investments Committee.
INVESTMENT ADVISER
The Adviser serves as the investment adviser to the Company pursuant to an
investment advisory agreement, dated _________, 1998 ("Advisory Agreement").
Subject to the supervision of the Board, the Adviser is responsible under the
Advisory Agreement for selecting and managing the Company's securities
investments to ensure that the Company has, in cash or qualified investments,
as that term is defined in Section 28(b) of the 1940 Act, assets having an
aggregate value not less than that required by applicable law. The Adviser
also is responsible for placing orders for the purchase and sale of the
Company's securities investments with brokers and dealers that the Adviser
selects.
In addition, pursuant to the Advisory Agreement, the Adviser has agreed to
render regular reports to the Board regarding its investment decisions and
brokerage allocation practices for the Company, to assist the Company's
custodian in valuing portfolio securities and computing the Company's
reserves, and to furnish the Company with the assistance, cooperation, and
information necessary for it to meet various legal requirements regarding
registration and reporting. The Adviser also has agreed to furnish to the
Company adequate facilities and personnel necessary for the Directors and
officers of the Company to manage the affairs and conduct of the Company's
business.
The Adviser, located at 45 Rockefeller Plaza, New York, NY 10111, is a
division of Key Asset Management, Inc., a registered investment adviser with
over $___ billion of assets under management as of the date of this
Prospectus.
For its services, the Adviser receives, pursuant to the Advisory Agreement, a
monthly fee from the Company equal to:
[TO BE FILED BY AMENDMENT.]
ATLANTIC CAPITAL
Atlantic Capital is a Maryland corporation newly created by the Company for
the purpose of managing its real estate loan portfolio. [ADDITIONAL
INFORMATION TO BE FILED BY AMENDMENT.]
22
<PAGE>
RELATED PARTY TRANSACTIONS
[TO BE FILED BY AMENDMENT.]
RESERVES
Federal law requires us to maintain a portion of the payments that we receive
under the Certificates as reserves. The purpose of these reserves is to ensure
that we have enough assets to meet our obligations under the Certificates.
Federal law also requires that we invest our reserves in "qualified
investments," which are investments of a kind that life insurance companies
can invest in or hold under the provisions of the laws of the District of
Columbia or those otherwise approved for investment by the SEC. SEE "Types of
Investments" under "Investments." In addition, federal law prohibits us from
declaring or paying dividends to our shareholders in excess of certain limits
unless we meet our reserve requirements.
We maintain our reserves with our custodian, Key Trust Company of Ohio, 127
Public Square, Cleveland, Ohio, 44114 ("Custodian"). Pursuant to its Custody
Agreement with us, the Custodian is responsible for the safekeeping of our
assets, and, among other things, is authorized to take certain remedial steps
should we fail to make a payment when due or otherwise default on any of our
obligations under the Certificates. The Custodian is an affiliate of the
Adviser.
INVESTMENTS
TYPES OF INVESTMENTS
We expect to invest our reserves, as well as the amount that we hold in excess
of the reserves, primarily in the types of securities and other investments
described below. Except as specifically noted, we may invest our reserves in
such investments without limitation. In addition, except as specifically
noted, the limitations described below apply only at the time of investment.
The assets that we hold in excess of reserves are not subject to the
limitations described below.
BANK OBLIGATIONS. We may invest in CDs, bankers' acceptances, and other
short-term debt obligations of banks. CDs are short-term obligations that
commercial banks issue for a specified period of time and at a specified
interest rate. Banker's acceptances are time drafts drawn on a commercial bank
by a borrower, usually in connection with international commercial
transactions.
23
<PAGE>
COMMERCIAL PAPER AND OTHER CORPORATE DEBT. We may invest in commercial paper
issued by companies that meet certain qualifications established by the Board
of Directors ("qualified corporations"). Commercial paper consists of
short-term unsecured promissory notes that qualified corporations issue to
finance short-term credit needs. We also may invest in longer-term debt
obligations of qualified corporations. We will not invest more than two
percent of our reserves in any one issue of such obligations of any one
qualified corporation.
EQUIPMENT RELATED INSTRUMENTS. We may invest in equipment trust certificates
and similar instruments (collectively, "equipment related instruments") that
are secured by transportation equipment (e.g., railroad cars, trucks, and
airplanes) that has been sold or leased to a common carrier. Equipment related
instruments are a means of financing the acquisition of equipment. A trustee,
such as a bank, holds the title to the equipment, collects purchase or lease
payments from the purchaser, and, in turn, makes principal and interest
payments to the instrument holders for a specified term. In case of default,
the trustee is authorized to sell the equipment to protect the instrument
holders. We will not invest more than two percent of our reserves in any one
issue of a equipment related instrument by any one corporation.
MUNICIPAL SECURITIES. We may invest in various types of municipal securities,
which are debt securities issued by a state, its political subdivisions,
agencies, authorities, school districts, and other governmental
instrumentalities for various public purposes, including, for example, the
construction of public facilities, hospitals, highways, and schools. We will
only invest in municipal securities that (i) represent direct and general
obligations of the issuing governmental entity, or (ii) are payable from
designated revenues pledged to the payment of the principal and interest on
such securities.
PREFERRED AND COMMON STOCK. We may invest in preferred and common stock of
qualified corporations. Preferred stock has priority over common stock as to
income and generally as to the assets of an issuer, but usually has limited
voting rights. We may invest in the common stocks of qualified corporations
whose debt and preferred stock, if any, also meet our criteria for investment.
We will not invest more than one percent of our reserves in the preferred or
common stock of any single qualified corporation.
REAL ESTATE AND REAL ESTATE LOANS. We may invest directly in real estate or in
real estate loans. We generally will only purchase or hold real estate if it
is income producing. We may, however, also receive real estate in satisfaction
of debts owed to us, and may improve or develop any real estate that we
acquire. We will not invest or agree to invest in real estate if such
investment would cause us to: (i) invest more than two percent of our reserves
in real estate or improvements thereon during any period of 12 consecutive
months; (ii) invest or hold more than five percent of our reserves in real
estate or improvements thereon for the purpose of producing income; or (iii)
hold more than 10% of our reserves in real estate. We also may invest in real
estate loans secured by a first lien on the real estate, PROVIDED such loan is
worth at least 33 1/3% more than the amount loaned.
U.S. GOVERNMENT SECURITIES. We may invest in direct obligations of the U.S.
Government ("U.S. Government securities"). These include bills (which have
maturities of one year or less), notes (which have maturities of between 2 and
24
<PAGE>
10 years), and bonds (which have maturities greater than 10 years) issued by
the U.S. Treasury ("Treasury"). The market value of U.S. Government securities
will fluctuate with changes in interest rate levels. Thus, if interest rates
increase from the time the security was purchased, the market value of the
security will decrease. Conversely, if interest rates decrease, the market
value of the security will increase.
U.S. GOVERNMENT AGENCY SECURITIES. We may invest in securities issued by
certain federal agencies that are (i) backed by the full faith and credit of
the United States, (ii) guaranteed by the Treasury, (iii) or are supported by
the agency's right to borrow from the Treasury. Issuing agencies may include,
for example, the Government National Mortgage Association ("GNMA" or Ginnie
Mae"), Federal National Mortgage Association ("FNMA" or "Fannie Mae"), or
Federal Home Loan Mortgage Corporation ("FHLMC" or "Freddie Mac"). Although
their close relationship with the U.S. Government is believed to make them
high-quality securities with minimal credit risks, the U.S. Government is not
obligated by law to support either FNMA or FHLMC.
INVESTMENT PRACTICES
The Company's Board has established the investment policies set out below. The
Board may change these policies at any time without shareholder or Certificate
owner approval.
BORROWING. We may borrow money to a limited extent from banks (including the
Company's custodian bank) as we deem necessary or appropriate to our business.
We will not buy securities on margin or sell securities short.
COMMODITIES. We do not currently intend to engage in the purchase or sale of
commodities.
CONCENTRATION. We maintain no restrictions on the amount of securities that we
may invest in any industry or group of industries.
LOANS. We may make loans in amounts up to 85% of the value of the securities
pledged as collateral for the loans. The securities pledged as collateral must
be of a type in which we can invest.
PORTFOLIO TURNOVER. We will buy, sell, or hold our assets in the manner that
we deem prudent, without regard to the impact on the turnover rate of our
portfolio.
SENIOR SECURITIES. We are restricted by law from issuing any securities other
than face-amount certificates, common stock, and promissory notes or other
paper related to our borrowings.
UNDERWRITING SECURITIES. We do not intend to act as an underwriter of
securities issued by other persons. We may, however, be deemed to be an
underwriter when we purchase and later sell unregistered securities.
25
<PAGE>
INVESTOR SERVICES
AUTOMATIC INVESTMENTS
You can automatically make periodic investments in your Accumulator, Growth,
or Gold Certificates. To establish your automatic investment plan, please call
1-888-74-YIELD or 1-301-215-7515.
DIRECT DEPOSITS
You can arrange for your investment in your Certificates to be deposited
directly out of your payroll or government check. To establish your direct
deposit arrangement, please call 1-888-74-YIELD or 301-215-7515.
INQUIRIES
1st Atlantic Guaranty has a dedicated staff of individuals that are available
each business day to assist you with questions you may have about the
Certificates or your account. Please call 1-888- 74-YIELD between the hours of
9:00 and 4:00 on any business day.
REPORTS
Each quarter we will send you an account statement showing your Certificate's
Account Value, your Certificate's surrender value, and all account activity
for the preceding quarter, including the amount and rate of interest you
earned, the amount of any principal investments you made, and the amount of
any fees and charges assessed. In addition, we will send you annual reports
that include audited financial statements for the Company.
INDEPENDENT AUDITORS
_________________, located at _________________, serve as the independent
auditors of the Company. Their auditing services include rendering an opinion
on the financial statements of the Company.
26
<PAGE>
FINANCIAL STATEMENTS
We had no operations prior to the date of this Prospectus. An audited balance
sheet for the Company, as of _____________, 1998, and the report of the
Company's independent auditors thereon, appears on the next page. The Company
has included the audited balance sheet in this Prospectus in reliance upon the
report of _______________, independent auditors, and upon the authority of
said firm as experts in accounting and auditing.
[AUDITED BALANCE SHEET TO BE SUPPLIED BY AMENDMENT.]
27
<PAGE>
THE COMPANY
AND ITS SERVICE PROVIDERS
THE COMPANY:
1ST Atlantic Guaranty Corporation
Bethesda Metro Center, Suite 700
Bethesda, MD 20814
INVESTMENT ADVISER:
Spears, Benzak, Salomon & Farrell,
a division of Key Asset Management, Inc.
45 Rockefeller Plaza
New York, NY 10111
CUSTODIAN:
Key Trust Company of Ohio
127 Public Square
Cleveland, OH 44114
INDEPENDENT AUDITORS:
[TO BE FILED BY AMENDMENT.]
LEGAL COUNSEL:
Freedman, Levy, Kroll & Simonds
1050 Connecticut Avenue, Suite 825
Washington, D.C. 20036
[BACK COVER PAGE]
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
SEC Registration Fee
State Fees
Printing fees [TO BE FILED BY AMENDMENT.]
Legal fees
Accounting Fees
Miscellaneous
Total:
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Section 2-418 of Maryland General Corporation Law, a corporation
may indemnify certain Directors, officers, employees, or agents. Consistent
with Maryland law, Article Seventh(E)(viii) of Registrant's Articles of
Incorporation ("Articles") permits it to indemnify its Directors and officers
to the fullest extent permitted by law. In addition, Article X of Registrant's
By-Laws permits it to insure and indemnify its Directors, officers, employees
and agents to the fullest extent permitted by law. The above-cited provisions
of Registrant's Articles and By-Laws, which are filed herewith, are
incorporated by reference into this Item.
Various agreements that Register has entered or will enter into contain
provisions for the indemnification of Registrant's officers and directors to
the extent permitted by applicable law. These agreements have been filed as
exhibits to this Registration Statement, and are hereby incorporated by
reference into this Item to the extent necessary.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The disclosure set forth under the heading "The Company Organization and
Operations" in the Prospectus contained herein is hereby incorporated by
reference in response to this item. Registrant issued the shares described
therein in reliance upon the exemption set forth in Section 4(2) of the
Securities Act of 1933 for transactions not involving a public offering.
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibits (Filed Herewith Unless Otherwise Indicated)
-------- -------------------------------------------------------------------
<S> <C>
(1)-(2) Not applicable.
(3)(i) Articles of Incorporation of 1st Atlantic
Guaranty Corporation.
(3)(ii) By-laws of 1st Atlantic Guaranty Corporation.
(4)(a) Forms of Certificates. [TO BE FILED BY AMENDMENT.]
(4)(b) Form of Application. [TO BE FILED BY AMENDMENT.]
(5) Opinion of Counsel. [TO BE FILED BY AMENDMENT.]
(6)-(9) Not applicable.
(10)(a) Form of Investment Advisory Agreement. [TO BE FILED BY AMENDMENT.]
(10)(b) Form of Custody Agreement. [TO BE FILED BY AMENDMENT.]
(10)(c) Form of Subscription Agreement. [TO BE FILED BY AMENDMENT.]
(11)-(20) Not applicable.
(21) Subsidiaries of 1st Atlantic Guaranty Corporation, incorporated by
reference to the disclosure under the captions "The Company -
Organization and Operations" and "Management - Atlantic Capital" in
the Prospectus contained herein.
(22) Not applicable.
(23) Consent of Independent Auditors. [TO BE FILED BY AMENDMENT.]
(24) Powers of attorney. [TO BE FILED BY AMENDMENT.]
(25)-(26) Not applicable.
(27) Financial Data Schedule. [TO BE FILED BY AMENDMENT.]
</TABLE>
<PAGE>
(b) Financial Statement Schedules:
Not applicable.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under Securities Act
of 1933 (the "1933 Act") may be permitted to Directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that, in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the 1933 Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a Director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such Director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by a controlling precedent, submit to a court of appropriate
jurisdiction the question of whether indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
ITEM 18. FINANCIAL STATEMENTS AND SCHEDULES.
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Bethesda and State of
Maryland, on the 1st day of December, 1997.
1st ATLANTIC GUARANTY COMPANY
By:/s/JOHN J. LAWBAUGH
---------------------------
John J. Lawbaugh, President
Pursuant to the requirements of the Securities Act of 1933, the following
persons have signed the Registration Statement in the capacities indicated on
the 1st day of December, 1997.
Signature Capacity
/s/JOHN J. LAWBAUGH President, Treasurer, and Director
------------------- (Principal Executive, Financial, and
John J. Lawbaugh Accounting Officer)
EXHIBIT 3(i)
ARTICLES OF INCORPORATION
OF
1ST ATLANTIC GUARANTY CORPORATION
FIRST: The undersigned, John J. Lawbaugh, whose address is 3 Bethesda
Metro Center, Suite 700, Bethesda, MD 20814, being at least eighteen (18)
years of age does hereby file these Articles of Incorporation forming a
corporation under the general laws of the State of Maryland, as set forth
below.
SECOND: The name of the corporation ("Corporation") is:
1st Atlantic Guaranty Corporation
THIRD: The purposes for which the Corporation is formed are as follows:
(A) To operate as and carry on the business of an investment company,
and exercise all the powers necessary and appropriate to the conduct of
such operations.
(B) In general, to carry on any other business in connection with or
incidental to the foregoing purpose, to have and exercise all the powers
conferred upon corporations by the laws of the State of Maryland as in
force from time to time, to do everything necessary, suitable, or proper
for the attainment of any object or the furtherance of any power not
inconsistent with Maryland law, either alone or in association with
others, and to take any action incidental or appurtenant to or growing
out of or connected with the Corporation's business or purposes,
objects, or powers.
(C) To conduct and carry on its business, or any part thereof, to have
one or more offices, and to exercise any or all of its corporate powers
and rights, in the State of Maryland, in other states, territories,
districts, colonies, and dependencies of the United States, and in any
or all foreign countries.
The foregoing clauses shall be construed both as objects and powers, and
the foregoing enumeration of specific powers shall not be held to limit or
restrict in any manner the general powers of the Corporation, within the
fullest extent of the law.
<PAGE>
FOURTH: The address of the principal office of the Corporation in the
State of Maryland is: 1st Atlantic Guaranty Corporation, 3 Bethesda Metro
Center, Suite 700, Bethesda, MD 20814. The name and address of the resident
agent of the Corporation in the State of Maryland is John J. Lawbaugh, 3
Bethesda Metro Center, Suite 700, Bethesda, MD 20814. The resident agent
resides in, and is a citizen of, the State of Maryland.
FIFTH: CAPITAL STOCK.
(A) GENERAL. The total number of shares of stock which the
Corporation, by resolution or resolutions of the Board of Directors,
shall have authority to issue is Ten Million (10,000,000) shares, par
value of One Cent ($0.01) per share, such shares having an aggregate par
value of One-Hundred Thousand Dollars ($100,000). All such shares are
herein classified as "Common Stock," subject, however, to the authority
hereinafter granted to the Board of Directors to classify or reclassify
any such shares that are issued in accordance with subparagraph (B)
below.
(B) CLASSIFICATION. The Board of Directors is hereby expressly granted
authority to classify or reclassify any unissued stock (whether now or
hereafter authorized) from time to time by setting or changing the
preferences, conversion, or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, valuation, or terms or
conditions of redemption of such shares of stock.
SIXTH:
(A) NUMBER OF DIRECTORS. The number of Directors of the Corporation
shall be 3, or such other number as may from time to time be fixed by
the By-Laws of the Corporation, or pursuant to authorization contained
in such By-Laws, but the number of Directors shall never be less than
(i) three (3) or (ii) the number of shareholders of the Corporation,
whichever is less. John J. Lawbaugh shall serve as the Corporation's
initial Director until the first meeting of shareholders and until his
successor is duly chosen and qualified.
(B) REMOVAL OF DIRECTORS. The shareholders of the Corporation may
remove any Director, of the Corporation prior to the expiration of his
or her term of office for cause, and not otherwise, by the affirmative
vote of a majority of all votes entitled to be cast for the election of
Directors.
SEVENTH: POWERS OF THE CORPORATION AND ITS DIRECTORS AND SHAREHOLDERS.
(A) GENERAL. All corporate powers and authority of the Corporation
(except as otherwise provided by statute, by these Articles of
Incorporation, or by the By-Laws of the Corporation) shall be vested in
and exercised by the Board of Directors.
2
<PAGE>
(B) PORTFOLIO SECURITIES. Subject to the requirements of applicable
law, the Board of Directors shall have the power to determine or cause
to be determined the nature, quality, character, and composition of the
portfolio of securities and investments of the Corporation, but the
foregoing shall not limit the ability of the Board of Directors to
delegate such power to a Committee of the Board of Directors or to an
officer of the Corporation, or to enter into an investment advisory or
management contract as described in paragraph (E)(v) of this Article
SEVENTH.
(C) ISSUANCE OF SHARES. The Board of Directors may from time to time
issue and sell or cause to be issued and sold any of the Corporation's
authorized shares. All such authorized shares, when issued in accordance
with the terms of this paragraph (C) shall be fully paid and
nonassessable. No holder of any shares of the Corporation shall be
entitled, by reason of holding or owning such shares, to any prior,
preemptive, or other right to subscribe to, purchase, or otherwise
acquire any additional shares of the Corporation subsequently issued for
cash or other consideration or by way of a dividend or otherwise. Shares
of the Corporation, whether now or hereafter authorized or created, may
be issued, reissued, or transferred, if the same have been reacquired
and have treasury status, to such persons, firms, corporations, and
associations, and for such lawful consideration, and on such terms as
the Board of Directors in its discretion may determine, without first
offering the same, or any portion thereof, to any said holder. The Board
of Directors may issue and sell fractions of shares having pro rata all
the rights of full shares, including, without limitation, the right to
vote and to receive dividends.
(D) ELECTION OF DIRECTORS. Voting power in the election of Directors
and for all other purposes shall be vested exclusively in the holders of
the Corporation's authorized and issued shares.
(E) MISCELLANEOUS.
(i) COMPENSATION OF DIRECTORS. The Board of Directors shall
have power from time to time to authorize payment of compensation
to the Directors for services to the Corporation, including fees
for attendance at meetings of the Board of Directors and of
committees of the Board of Directors.
(ii) INSPECTION OF CORPORATION'S BOOKS. The Board of Directors
shall have power from time to time to determine whether and to
what extent, and at what times and places, and under what
conditions and regulations the accounts and books of the
Corporation or any of them shall be open to the inspection of
shareholders; and no shareholder, shall have any right to inspect
any account, book, or document of the Corporation except as at the
time and to the extent required by applicable law, unless
authorized by a resolution of the shareholders or the Board of
Directors.
3
<PAGE>
(iii) RESERVATION OF RIGHT TO AMEND. The Corporation reserves the
right to make any amendment of its charter, now or hereafter
authorized by law, including any amendment which alters the
contract rights, as expressly set forth in its charter, of any
outstanding stock, and all rights herein conferred upon
shareholders are granted subject to such reservation. The Board of
Directors shall have the power to adopt, alter, or repeal the
By-Laws of the Corporation, except to the extent that the By-Laws
otherwise provide, or as otherwise provided by applicable law.
(iv) DETERMINATION OF NET PROFITS, DIVIDENDS, ETC. The Board of
Directors is expressly authorized to determine, in accordance with
generally accepted accounting principles and practices, what
constitutes net profits, earnings, surplus, or net assets in
excess of capital, and to determine what accounting periods,
whether daily, annual, or any other period, shall be used by the
Corporation, for any purpose; to set apart out of any funds of the
Corporation, such reserves for such purposes as it shall determine
and to abolish the same; to declare and pay dividends and
distributions in cash, securities, or other property from surplus
or any funds legally available therefor, in such amounts and at
such intervals (which may be as frequently as daily) or on such
other periodic basis, as it shall determine; to declare such
dividends or distributions by means of a formula or other method
of determination, at meetings held less frequently than the
frequency of the effectiveness of such declarations; to establish
payment dates for dividends or any other distributions on any
basis, including dates occurring less frequently than the
effectiveness of the declaration thereof; and to provide for the
payment of declared dividends on a date earlier than the specified
payment date in the case of shareholders of the Corporation
redeeming their entire ownership of shares of the Corporation.
(v) CONTRACTS. The Board of Directors may in its discretion
from time to time enter into an underwriting contract or contracts
providing for the sale of the securities of the Corporation.
The Board of Directors may in its discretion from time to time
enter into an investment advisory or management contract whereby
the other party to such contract shall undertake to furnish to the
Corporation, such management, investment advisory, statistical and
research facilities and services, and such other facilities and
services, if any, and all upon such terms and conditions, as the
Board of Directors may in its discretion determine.
4
<PAGE>
Any contract of the character described in the paragraphs above or
for services as custodian, transfer agent, or disbursing agent or
related services, or any other type of contract or transaction,
may be entered into with any corporation, firm, trust, or
association, although one or more of the Directors or officers of
the Corporation may be an officer, director, trustee, shareholder,
or member of such other party, or may have a material financial
interest in the contract or transaction, and no such contract or
transaction shall be invalidated or rendered voidable by reason of
the existence of any such relationship or interest, nor shall any
person holding such relationship or interest be liable merely by
reason of such relationship or interest for any loss or expense to
the Corporation under or by reason of said contract or
transaction, or be accountable for any profit realized directly or
indirectly therefrom, provided that such relationship or interest
is disclosed or otherwise known to the Board of Directors, and the
Board of Directors authorizes, approves or ratifies the contract
or transaction by the affirmative vote of the majority of the
disinterested Directors, except as otherwise provided by
applicable law.
Any contract entered into pursuant to the first two paragraphs of
this paragraph (E)(v) of Article SEVENTH shall be consistent with
and subject to the requirements of Section 15 of the 1940 Act, to
the extent applicable, with respect to its continuance in effect,
its termination, and the method of authorization and approval of
such contract or renewal thereof.
(vi) SHAREHOLDER VOTING. On each matter submitted to a vote of
the shareholders, each holder of a share shall be entitled to one
vote for each whole share and to a proportionate fractional vote
for each fractional share standing in his name on the books of the
Corporation, except as otherwise provided in paragraph (E)(ix) of
Article FIFTH. Notwithstanding any provision of Maryland Law
requiring a greater proportion than a majority of the votes of
shares of stock entitled to be cast to take or authorize any
action, such action may, subject to other applicable provisions of
law, these Articles of Incorporation, and the By-Laws of the
Corporation, be taken or authorized upon the concurrence of a
majority of the aggregate number of the votes entitled to be cast
thereon. Except as otherwise provided by law, the presence in
person or by proxy of the holders of record of one-third of the
shares of stock issued and outstanding and entitled to vote
thereon shall constitute a quorum for the transaction of any
business at all meetings of the shareholders.
(vii) CERTIFICATES. The Board of Directors of the Corporation may
by resolution authorize the issuance of some or all of the shares
of the Corporation's Common Stock without certificates.
5
<PAGE>
(viii) INDEMNIFICATION AND LIMITATION OF Liability. To the fullest
extent permitted by Maryland and Federal law, as amended or
interpreted, no Director or officer of the Corporation shall be
personally liable to the Corporation or the holders of shares of
its series or classes for money damages and each Director and
officer shall be indemnified (including any advancement of
expenses) by the Corporation; PROVIDED, HOWEVER, that nothing
herein shall be deemed to protect or purport to protect any
Director or officer of the Corporation against any liability to
the Corporation or the holders of its shares to which such
Director or officer would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his or her
office. This limitation on liability applies to events occurring
at the time a person serves as a director or officer of the
Corporation whether or not such person is a director or officer at
the time of any proceeding in which liability is asserted.
EIGHTH: References in these Articles to the 1940 Act shall mean the
Investment Company Act of 1940, the rules thereunder, and, where applicable,
published cases and interpretative letters of the Securities and Exchange
Commission.
-----------------------------
IN WITNESS WHEREOF, the undersigned incorporator of 1ST Atlantic
Guaranty Corporation, who executed the foregoing Articles of Incorporation,
hereby acknowledges the same to be his act on this First day of October, 1997.
/s/JOHN J. LAWBAUGH
-------------------
John J. Lawbaugh
6
EXHIBIT 3(ii)
BY-LAWS
OF
1st ATLANTIC GUARANTY CORPORATION
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I. NAME OF CORPORATION, LOCATION OF OFFICES, AND SEAL...... 1
Section 1.01. Name.......................................... 1
Section 1.02. Principal Office.............................. 1
Section 1.03. Seal.......................................... 1
ARTICLE II. SHAREHOLDERS............................................ 1
Section 2.01. Annual Meetings............................... 1
Section 2.02. Special Meetings.............................. 2
Section 2.03. Place of Meetings............................. 2
Section 2.04. Notice of Meetings............................ 2
Section 2.05. Shareholder Conference Communications......... 2
Section 2.06. Voting In General............................. 3
Section 2.07. Voting Shareholders Entitled to Vote.......... 3
Section 2.08. Voting Proxies................................ 3
Section 2.09. Quorum........................................ 3
Section 2.10. Absence of Quorum............................. 3
Section 2.11. Stock Ledger and List of Shareholders......... 4
Section 2.12. Informal Action By Shareholders............... 4
ARTICLE III. BOARD OF DIRECTORS...................................... 4
Section 3.01. Number and Term of Office..................... 4
Section 3.02. Qualification of Directors.................... 4
Section 3.03. Election of Directors......................... 5
Section 3.04. Removal of Directors.......................... 5
Section 3.05. Vacancies and Newly Created Directorships..... 5
Section 3.06. General Powers................................ 5
Section 3.07. Power to Issue and Sell Stock................. 6
Section 3.08. Power to Declare Dividends.................... 6
Section 3.09. Borrowing..................................... 6
Section 3.10. Annual and Regular Meetings................... 6
Section 3.11. Special Meetings.............................. 7
Section 3.12. Notice........................................ 7
Section 3.13. Waiver of Notice.............................. 7
Section 3.14. Quorum and Voting............................. 7
Section 3.15. Director Conference Communications............ 7
Section 3.16. Compensation.................................. 7
Section 3.17. Action Without a Meeting...................... 7
ARTICLE IV. EXECUTIVE COMMITTEE AND OTHER COMMITTEES................ 8
Section 4.01. How Constituted............................... 8
Section 4.02. Powers of the Executive Committee............. 8
Section 4.03. Other Committees of the Board of Directors.... 8
Section 4.04. Proceedings, Quorum, and Manner of Acting..... 8
Section 4.05. Other Committees.............................. 8
<PAGE>
ARTICLE V. OFFICERS................................................ 9
Section 5.01. General....................................... 9
Section 5.02. Election, Term of Office, and Qualifications.. 9
Section 5.03. Resignation................................... 9
Section 5.04. Removal....................................... 9
Section 5.05. Vacancies and Newly Created Offices........... 9
Section 5.06. Chairman of the Board......................... 9
Section 5.07. President..................................... 10
Section 5.08. Vice President................................ 10
Section 5.09. Treasurer and Assistant Treasurers............ 10
Section 5.10. Secretary and Assistant Secretaries........... 11
Section 5.11. Subordinate Officers.......................... 11
Section 5.12. Remuneration.................................. 11
ARTICLE VI. CUSTODY OF SECURITIES AND CASH.......................... 11
Section 6.01. Employment of a Custodian..................... 11
ARTICLE VII. EXECUTION OF INSTRUMENTS, VOTING OF SECURITIES.......... 12
Section 7.01. Execution of Instruments...................... 12
Section 7.02. Voting of Securities.......................... 12
ARTICLE VIII. CAPITAL STOCK........................................... 12
Section 8.01. Certificate of Stock.......................... 12
Section 8.02. Transfer of Capital Stock..................... 13
Section 8.03. Transfer Agents and Registrars................ 13
Section 8.04. Transfer Restrictions......................... 13
Section 8.05. Fixing of Record Date......................... 13
Section 8.06. Lost, Stolen, or Destroyed Certificates....... 14
ARTICLE IX. FISCAL YEAR, ACCOUNTANT................................. 14
Section 9.01. Fiscal Year................................... 14
Section 9.02. Accountant.................................... 14
ARTICLE X. INDEMNIFICATION, ADVANCE PAYMENT OF EXPENSES,
AND INSURANCE........................................... 15
Section 10.01. Indemnification Generally.................... 15
Section 10.02. Limitations on Indemnification............... 15
Section 10.03. Authorization of Indemnification............. 16
Section 10.04. Advance Payment of Expenses.................. 16
Section 10.05. Non-Exclusivity of Indemnification........... 17
Section 10.06. Report of Indemnification to Shareholders.... 17
Section 10.07. Insurance of Officers, Directors, Employees,
and Agents................................... 17
ii
<PAGE>
ARTICLE XI. AMENDMENTS.............................................. 17
Section 11.01. General...................................... 17
Section 11.02. By Shareholders Only......................... 18
iii
<PAGE>
1ST ATLANTIC GUARANTY CORPORATION
(A Maryland Corporation)
BY-LAWS
ARTICLE I. NAME OF CORPORATION,
LOCATION OF OFFICES, AND SEAL
Section 1.01. NAME: The name of the Corporation is 1st Atlantic Guaranty
Corporation.
Section 1.02. PRINCIPAL OFFICE: The principal office of the Corporation
in the State of Maryland shall be located at 3 Bethesda Metro Center, Suite
700, Bethesda, MD 20814, c/o John J. Lawbaugh. The Corporation may, in
addition, establish and maintain such other offices and places of business,
within or outside the State of Maryland, as the Board of Directors may from
time to time determine. [MGCL, Sections 2-103(4), 2-108(a)(1)] (1)
Section 1.03. SEAL: The corporate seal of the Corporation shall be
circular in form, and shall bear the name of the Corporation, the year of its
incorporation, and the words "Corporate Seal, Maryland." The form of the seal
shall be subject to alteration by the Board of Directors and the seal may be
used by causing it or a facsimile to be impressed or affixed or printed or
otherwise reproduced. In lieu of affixing the corporate seal to any document
it shall be sufficient to meet the requirements of any law, rule, or
regulation relating to a corporate seal to affix the word "(Seal)" adjacent to
the signature of the authorized officer of the Corporation. Any officer or
Director of the Corporation shall have authority to affix the corporate seal
of the Corporation to any document requiring the same. [MGCL, Sections
1-304(b), 2-103(3)]
ARTICLE II. SHAREHOLDERS
Section 2.01. ANNUAL MEETINGS: The Corporation shall not be required to
hold an annual meeting of its shareholders in any year in which election of
Directors is not required to be acted upon under the Investment Company Act.
In the event that the Investment Company Act requires the Corporation to hold
a meeting of shareholders to elect Directors, such meeting shall for all
purposes constitute the annual meeting of shareholders for the fiscal year of
the Corporation in which the meeting is held, and shall be held at a date and
time set by the Board of Directors in accordance with the Investment Company
Act, but in no event later than one hundred and twenty (120) days after the
event requiring the meeting. At any such meeting, the shareholders shall elect
-----------------------------
(1) Bracketed citations are to the State of Maryland General Corporation
Law ("MGCL") or to the United States Investment Company Act of 1940, as
amended (the "Investment Company Act"), or to Rules of the United States
Securities and Exchange Commission thereunder ("ICA Rules"). The citations are
inserted for reference only and do not constitute a part of the By-Laws.
<PAGE>
Directors to hold the offices of any Directors, as required by applicable law.
Except as the Articles of Incorporation or applicable law provides otherwise,
Directors may transact any business within the powers of the Corporation as
may properly come before the meeting. Any business of the Corporation may be
transacted at the annual meeting without being specially designated in the
notice, except such business as is specifically required by applicable law to
be stated in the notice. The use of the term "annual meeting" in these By-Laws
shall not be construed as implying a requirement that a shareholder's meeting
be held annually. [MGCL, Section 2-501]
Section 2.02. SPECIAL MEETINGS: Special meetings of the shareholders may
be called at any time by the Chairman of the Board, if there be such an
officer, the President, any Vice President, or by the Board of Directors.
Special meetings of the shareholders also shall be called by the Secretary on
the written request of shareholders entitled to cast at least ten (10) percent
of all the votes entitled to be cast at such meeting, PROVIDED that (a) such
request shall state the purpose or purposes of the meeting and the matters
proposed to be acted on, and (b) the shareholders requesting the meeting shall
have paid to the Corporation the reasonably estimated cost of preparing and
mailing the notice thereof, which the Secretary shall determine and specify to
such shareholders. Unless requested by shareholders entitled to cast a
majority of all the votes entitled to be cast at the meeting, a special
meeting need not be called to consider any matter which is substantially the
same as a matter voted upon at any annual or special meeting of the
shareholders held during the preceding twelve (12) months. [MGCL, Section
2-502]
Section 2.03. PLACE OF MEETINGS: All shareholders' meetings shall be
held at such place within the United States as may be fixed from time to time
by the Board of Directors. [MGCL, Section 2-503]
Section 2.04. NOTICE OF MEETINGS: Not less than ten (10) days, nor more
than ninety (90) days before each shareholders' meeting, the Secretary or an
Assistant Secretary of the Corporation shall give to each shareholder entitled
to vote at the meeting, and each other shareholder entitled to notice of the
meeting, written notice stating (a) the time and place of the meeting, and (b)
the purpose or purposes of the meeting if the meeting is a special meeting or
if notice of the purpose is required by applicable law to be given. Such
notice shall be personally delivered to the shareholder, or left at his (2)
residence or usual place of business, or mailed to him at his address as it
appears on the records of the Corporation. No notice of a shareholders'
meeting need be given to any shareholder who shall sign a written waiver of
such notice, whether before or after the meeting, which is filed with the
records of shareholders' meetings, or to any shareholder who is present at the
meeting in person or by proxy. Notice of adjournment of a shareholders'
meeting to another time or place need not be given if such time and place are
announced at the meeting, unless the adjournment is for more than one hundred
and twenty (120) days after the original record date. [MGCL, Sections 2-504,
2-511(d)]
Section 2.05. SHAREHOLDER CONFERENCE COMMUNICATIONS: Shareholders may
participate in a shareholders' meeting by means of a conference call or
similar communication equipment if all persons participating in the meeting
can hear each other at the same time. Participation by such means shall
constitute presence in person at such meeting, unless otherwise prohibited by
applicable law. [MGCL, Section 2-502.1]
-----------------------------
(2) For convenience, references to masculine pronouns are intended to
include, as appropriate, the corresponding feminine pronouns.
2
<PAGE>
Section 2.06. VOTING IN GENERAL: Except as otherwise specifically
provided in the Articles of Incorporation or these By-Laws, or as required by
provisions of the Investment Company Act or other applicable law, at every
shareholders' meeting, each shareholder shall be entitled to one (1) vote for
each share of stock of the Corporation validly issued and outstanding and held
by such shareholder, except that no shares held by the Corporation shall be
entitled to a vote. Fractional shares shall be entitled to fractional votes.
Except as otherwise specifically provided in the Articles of Incorporation, or
these By-Laws, or as required by provisions of the Investment Company Act or
other applicable law, a majority of all the votes cast at a meeting at which a
quorum is present is sufficient to approve any matter which properly comes
before the meeting. The vote upon any question shall be by ballot whenever
requested by any person entitled to vote, but, unless such a request is made,
voting may be conducted in any way approved by the meeting. [MGCL, Sections
2-214(a)(1), 2-506(a)(2), 2-507(a), 2-509(b)]
Section 2.07. VOTING SHAREHOLDERS ENTITLED TO VOTE: If a record date has
been established for the determination of shareholders entitled to notice of
or to vote at any shareholders' meeting in accordance with Section 8.05
hereof, each such shareholder of the Corporation shall be entitled to vote in
person or by proxy, each share or fraction of a share of stock outstanding in
his name on the books of the Corporation on such record date. [MGCL, Section
2-507]
Section 2.08. VOTING PROXIES: The right to vote by proxy shall exist
only if the shareholder has authorized another person to act as proxy by
signing a writing authorizing the other person to act as proxy. Such signing
may be accomplished by the shareholder or the shareholder's authorized agent
signing the writing or causing the shareholder's signature to be affixed to
the writing by any reasonable means, including facsimile signature. A
shareholder may authorize another person to act as proxy by transmitting, or
authorizing the transmission of, a telegram, cablegram, datagram, or other
means of electronic transmission to the person authorized to act as proxy or
to a proxy solicitation firm, proxy support service organization, or other
person authorized by the person who will act as proxy to receive the
transmission. A copy, facsimile communication, or other reliable reproduction
of the writing or transmission herein authorized may be substituted for the
original writing or transmission for any purpose for which the original
writing or transmission could be used. A proxy is revocable by a shareholder
at any time without condition or qualification unless made irrevocable in
accordance with Maryland General Corporation Law, as amended, from time to
time ("Maryland Law"). No proxy shall be valid more than eleven (11) months
after its date unless it provides for a longer period. Unless otherwise agreed
to in writing, the holder of record of a share of stock which actually belongs
to another shall issue a proxy to vote the share to the actual owner on his
demand. [MGCL, Section 2-507]
Section 2.09. QUORUM: The presence at any shareholders' meeting, in
person or by proxy, of shareholders entitled to cast one-third of the votes
entitled to be cast at the meeting shall constitute a quorum, unless otherwise
required by applicable law. [MGCL, Section 2-506(a)]
Section 2.10. ABSENCE OF QUORUM: In the absence of a quorum, the holders
of a majority of shares entitled to vote at the meeting and present thereat in
person or by proxy, or, if no shareholder entitled to vote is present in
person or by proxy, any officer present who is entitled to preside at or act
as Secretary of such meeting, may adjourn the meeting sine die or from time to
time. Any business that might have been transacted at the meeting originally
called may be transacted at any such adjourned meeting at which a quorum is
present.
3
<PAGE>
Section 2.11. STOCK LEDGER AND LIST OF SHAREHOLDERS: It shall be the
duty of the Secretary or Assistant Secretary of the Corporation to cause an
original or duplicate stock ledger to be maintained at the office of the
Corporation's transfer agent, containing the names and addresses of all
shareholders and the number of shares of each series or class held by each
shareholder. Such stock ledger may be in written form, or any other form
capable of being converted into written form within a reasonable time for
visual inspection. One or more persons, who together and for at least six (6)
months have been shareholders of record of at least five (5) percent of the
outstanding capital stock of the Corporation, may submit (unless the
Corporation at the time of the request maintains a duplicate stock ledger at
its principal office) a written request to any officer of the Corporation or
its resident agent in Maryland for a list of the shareholders of the
Corporation. Within twenty (20) days after such a request, there shall be
prepared and filed at the Corporation's principal office a list, verified
under oath by an officer of the Corporation or by its transfer agent or
registrar, which sets forth the name and address of each shareholder and the
number of shares of each series or class which the shareholder holds. [MGCL,
Sections 2-209, 2-513]
Section 2.12. INFORMAL ACTION BY SHAREHOLDERS: Any action required or
permitted to be taken at a meeting of shareholders may be taken without a
meeting, if the following are filed with the records of shareholders'
meetings:
(a) A unanimous written consent which sets forth the action and is
signed by each shareholder entitled to vote on the matter; and
(b) A written waiver of any right to dissent signed by each shareholder
entitled to notice of the meeting, but not entitled to vote at it.
[MGCL, 2-505]
ARTICLE III. BOARD OF DIRECTORS
Section 3.01. NUMBER AND TERM OF OFFICE: The Board of Directors shall
consist of three (3) Directors, which number may be increased or decreased by
a resolution of a majority of the entire Board of Directors, PROVIDED that the
number of Directors shall not be more than eleven (11) nor less than the
lesser of (i) three (3) or (ii) the number of shareholders of the Corporation.
Each Director (whenever elected) shall hold office until the next annual
meeting of shareholders and until his successor is elected and qualified or
until his earlier death, resignation, or removal. [MGCL, Sections 2-402, 2-404
2-405(b)]
Section 3.02. QUALIFICATION OF DIRECTORS: No member of the Board of
Directors need be a shareholder of the Corporation. The composition of the
Board of Directors shall at all times comply with the requirements of
applicable law. [MGCL, Section 2-403; Investment Company Act, Section 10]
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Section 3.03. ELECTION OF DIRECTORS: Until the first annual meeting of
shareholders and until successors are duly elected and qualified, the Board of
Directors shall consist of the person(s) named as such in the Articles of
Incorporation. Thereafter, except as otherwise provided in Sections 3.04 and
3.05 hereof, at each annual meeting, the shareholders shall elect Directors to
hold office until the next annual meeting and until their successors are
elected and qualified. In the event that Directors are not elected at an
annual shareholders' meeting, then Directors may be elected at a special
shareholders' meeting. Directors shall be elected by vote of the holders of a
plurality of the shares present in person or by proxy and entitled to vote.
[MGCL, Section 2-404]
Section 3.04. REMOVAL OF DIRECTORS: At any meeting of shareholders, duly
called and at which a quorum is present, the shareholders may, by the
affirmative vote of the holders of a majority of the votes entitled to be cast
thereon, remove any Director or Directors from office, for cause, and may
elect a successor or successors to fill any resulting vacancies for the
unexpired terms of any removed Directors. [MGCL, Sections 2-406, 2-407]
Section 3.05. VACANCIES AND NEWLY CREATED DIRECTORSHIPS: In the event
that at any time, other than the time preceding the first meeting of
shareholders, any vacancies occur in the Board of Directors by reason of
resignation, removal, or otherwise, or if the authorized number of Directors
is increased, the Directors then in office shall continue to act, and such
vacancies (if not previously filled by the shareholders) may be filled by a
majority of the Directors then in office, whether or not sufficient to
constitute a quorum, PROVIDED that, immediately after filling such vacancy, at
least two-thirds of the Directors then holding office shall have been elected
to such office by the shareholders of the Corporation. In the event that at
any time, other than the time preceding the first meeting of shareholders,
less than a majority of the Directors of the Corporation holding office at
that time were so elected by the shareholders, a meeting of the shareholders
shall be held promptly and in any event within sixty (60) days for the purpose
of electing Directors to fill any existing vacancies in the Board of Directors
unless the Securities and Exchange Commission shall by order extend such
period. Except as provided in Section 3.04 hereof, a Director elected by the
Board of Directors to fill a vacancy shall be elected to hold office until the
next annual meeting of shareholders and until his successor is elected and
qualified. A Director elected by the shareholders to fill a vacancy which
results from the removal of a Director serves for the balance of the term of
the removed Director. [MGCL, Section 2-407; Investment Company Act, Section
16(a)]
Section 3.06. GENERAL POWERS:
(a) The property, business, and affairs of the Corporation shall be
managed under the direction of the Board of Directors, which may exercise all
the powers of the Corporation except as conferred upon or reserved to the
shareholders of the Corporation by applicable law, by the Articles of
Incorporation, or by these By-Laws. [MGCL, Section 2-401]
(b) All acts done by any meeting of the Board of Directors or by any
person acting as a Director, so long as his successor shall not have been duly
elected or appointed, shall be treated as valid as if the Directors or such
person, as the case may be, were or was duly elected and qualified to be
Directors or a Director of the Corporation, notwithstanding that it may be
afterwards discovered that there was some defect in the election of the
Directors or such person acting as a Director, or that they or any of them
were disqualified.
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Section 3.07. POWER TO ISSUE AND SELL STOCK: The Board of Directors may
from time to time authorize by resolution the issuance and sale of any of the
Corporation's authorized shares to such persons as the Board of Directors
shall deem advisable. Such resolution shall set the minimum price or value of
consideration for the stock or a formula for its determination, and shall
include a fair description of any consideration, other than money, and a
statement of the actual value of such consideration as determined by the Board
of Directors or a statement that the Board of Directors has determined that
the actual value is or will be not less than a certain sum. [MGCL, Section
2-203]
Section 3.08. POWER TO DECLARE DIVIDENDS:
(a) The Board of Directors, from time to time as it may deem advisable,
may declare that the Corporation pay dividends, in cash, property, or shares
of the Corporation available for dividends, out of any source available for
dividends, to the shareholders according to their respective rights and
interests.
(b) The Board of Directors shall cause a written statement to accompany
any dividend payment wholly or partly from any source other than the
Corporation's accumulated undistributed net income not including profits or
losses realized upon the sale of securities or other properties (as determined
in accordance with good accounting practice and the rules and regulations of
the Securities and Exchange Commission then in effect). Such statement shall
adequately disclose the source or sources of such payment and the basis of
calculation and shall be otherwise in such form as the Securities and Exchange
Commission may prescribe. [Investment Company Act, Section 19 and ICA Rule
19a-l]
(c) Notwithstanding the above provisions of this Section 3.08, the Board
of Directors may at any time declare and distribute pro rata among the
shareholders a stock dividend out of the Corporation's authorized but unissued
shares of stock, including any shares previously redeemed by the Corporation.
The shares so distributed may be declared and paid to the holders of shares of
another series or class. The shares so distributed shall be issued in
accordance with these By-Laws and applicable law. [MGCL, Section 2-309]
Section 3.09. BORROWING: The Board of Directors, from time to time as it
may deem advisable, may establish limitations upon the borrowing of money and
pledging of assets by the Corporation.
Section 3.10. ANNUAL AND REGULAR MEETINGS: The annual meeting of the
Board of Directors held for the purpose of choosing officers and transacting
other proper business shall be held after the annual shareholders' meeting at
such time and place as may be specified in the notice of such meeting of the
Board of Directors or, in the absence of such annual shareholders' meeting, at
such time and place as the Board of Directors may provide. The Board of
Directors from time to time may provide by resolution for the holding of
regular meetings and fix their time and place (within or outside the State of
Maryland). [MGCL, Section 2-409(a)]
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Section 3.11. SPECIAL MEETINGS: Special meetings of the Board of
Directors shall be held whenever called by the Chairman of the Board, if there
be such an officer, the President (or, in the absence or disability of the
President, by any Vice President), the Treasurer, or two (2) or more
Directors, at the time and place (within or outside the State of Maryland)
specified in the respective notices or waivers of notice of such meetings.
[MGCL, Section 2-409(a)]
Section 3.12. NOTICE: Notice of annual, regular, and special meetings of
the Board of Directors shall be in writing, stating the time and place, and
shall be mailed to each Director at his residence or regular place of business
or caused to be delivered to him personally or to be transmitted to him by
telegraph, telecopy, cable, or wireless at least two (2) days before the day
on which the meeting is to be held. Except as otherwise required by these
By-Laws or the Investment Company Act, such notice need not include a
statement of the business to be transacted at, or the purpose of, the meeting.
[MGCL, Section 2-409(b)]
Section 3.13. WAIVER OF NOTICE: No notice of any meeting of the Board of
Directors need be given to any Director who is present at the meeting or to
any Director who signs a waiver of the notice of the meeting (which waiver
shall be filed with the records of the meeting) whether before or after the
meeting. [MGCL, Section 2-409(c)]
Section 3.14. QUORUM AND VOTING: At all meetings of the Board of
Directors the presence of one-third of the total number of Directors, but not
less than two (2) Directors if there are at least (2) two Directors, shall
constitute a quorum. In the absence of a quorum, a majority of the Directors
present may adjourn the meeting, from time to time, until a quorum shall be
present. The action of a majority of the Directors present at a meeting at
which a quorum is present shall be the action of the Board of Directors unless
the concurrence of a greater proportion is required for such action by
applicable law, by the Articles of Incorporation, or by these By-Laws. [MGCL,
Section 2-408]
Section 3.15. DIRECTOR CONFERENCE COMMUNICATIONS: Members of the Board
of Directors or of any committee designated by the Board of Directors may
participate in a meeting of the Board of Directors or of such committee by
means of a conference telephone or similar communications equipment if all
persons participating in the meeting can hear each other at the same time.
Participation by such means shall constitute presence in person at such
meeting, unless otherwise prohibited by applicable law. [MGCL, Section
2-409(d); Investment Company Act, Sections 15 and 32]
Section 3.16. COMPENSATION: Each Director may receive such remuneration
for his services as shall be fixed from time to time by resolution of the
Board of Directors.
Section 3.17. ACTION WITHOUT A MEETING: Any action required or permitted
to be taken at any meeting of the Board of Directors or any committee thereof
may be taken without a meeting if a unanimous written consent which sets forth
the action is signed by each member of the Board of Directors or of such
committee and such written consent is filed with the minutes of proceedings of
the Board of Directors or committee, unless otherwise prohibited by applicable
law. [MGCL, Section 2-408(c); Investment Company Act, Sections 15 and 32]
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ARTICLE IV. EXECUTIVE COMMITTEE AND OTHER COMMITTEES
Section 4.01. HOW CONSTITUTED: By resolution adopted by the Board of
Directors, the Board of Directors may appoint from among its members one or
more committees, including an Executive Committee and an Audit Committee, each
consisting of at least one (1) or more Directors. Each member of a committee
shall hold such position at the pleasure of the Board of Directors. [MGCL,
Section 2-411(a)]
Section 4.02. POWERS OF THE EXECUTIVE Committee: Unless otherwise
provided by resolution of the Board of Directors, the Executive Committee, in
the intervals between meetings of the Board of Directors, shall have and may
exercise all of the powers of the Board of Directors to manage the business
and affairs of the Corporation except the power to:
(a) Authorize dividends on stock;
(b) Issue stock other than as provided in Section 2-411(b) of the
Maryland Law;
(c) Recommend to the shareholders any action which requires shareholder
approval;
(d) Amend these By-Laws; or
(e) Approve any merger or share exchange which does not require
shareholder approval. [MGCL, Section 2-411(a)]
Section 4.03. OTHER COMMITTEES OF THE BOARD OF DIRECTORS: To the extent
provided by resolution of the Board of Directors, other committees shall have
and may exercise any of the powers that may lawfully be granted to the
Executive Committee. [MGCL, Section 2-411 (a)]
Section 4.04. PROCEEDINGS, QUORUM, AND MANNER OF ACTING: In the absence
of an appropriate resolution of the Board of Directors, each committee may
adopt such rules and regulations governing its proceedings, quorum, and manner
of acting as it shall deem proper and desirable. In the absence of any member
of any such committee, the members thereof present at any meeting, whether or
not they constitute a quorum, may appoint a member of the Board of Directors
to act in the place of such absent member. [MGCL, Section 2-411(a)]
Section 4.05. OTHER COMMITTEES: The Board of Directors may appoint other
committees, each consisting of one or more persons who need not be Directors.
Each such committee shall have such powers and perform such duties as may be
assigned to it from time to time by the Board of Directors, but shall not
exercise any power which may lawfully be exercised only by the Board of
Directors or a committee thereof.
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ARTICLE V. OFFICERS
Section 5.01. GENERAL: The officers of the Corporation shall be a
President, one or more Vice-Presidents (one or more of whom may be designated
Executive Vice President), a Secretary, and a Treasurer, and may include one
or more Assistant Vice Presidents, one or more Assistant Secretaries, one or
more Assistant Treasurers, and such other officers as may be appointed in
accordance with the provisions of Section 5.11 hereof. The Board of Directors
may elect, but shall not be required to elect, a Chairman of the Board of
Directors. [MGCL, Section 2-412]
Section 5.02. ELECTION, TERM OF OFFICE, AND QUALIFICATIONS: The officers
of the Corporation (except those appointed pursuant to Section 5.11 hereof)
shall be elected by the Board of Directors at its first meeting and thereafter
at each annual meeting of the Board of Directors. If any officer or officers
are not elected at any such meeting, such officer or officers may be elected
at any subsequent regular or special meeting of the Board of Directors. Except
as provided in Sections 5.03, 5.04, and 5.05 hereof, each officer elected by
the Board of Directors shall hold office until the next annual meeting of the
Board of Directors and until his successor shall have been chosen and
qualified. Any person may hold two (2) or more offices of the Corporation,
except that neither the Chairman of the Board, if there be such an officer,
nor the President, may hold the office of Vice-President. A person who holds
more than one office may not act in more than one (1) capacity to execute,
acknowledge, or verify any instrument required by applicable law, the Articles
of Incorporation, or these By-Laws to be executed, acknowledged, or verified
by two (2) or more officers of the Corporation, except as otherwise permitted
or required by law. The Chairman of the Board of Directors, if there be such
an officer, shall be selected from among the Directors of the Corporation and
may hold such office only so long as he continues to be a Director. No other
officer need be a Director. [MGCL, Sections 2-412, 2-413, 2-415]
Section 5.03. RESIGNATION: Any officer may resign his office at any time
by delivering a written resignation to the Board of Directors, the Chairman of
the Board if there be such an officer, the President, the Secretary, or any
Assistant Secretary. Unless otherwise specified therein, such resignation
shall take effect upon delivery.
Section 5.04. REMOVAL: Any officer may be removed from office by the
Board of Directors whenever in the judgment of the Board of Directors the best
interests of the Corporation will be served thereby. [MGCL, Section 2-413(c)]
Section 5.05. VACANCIES AND NEWLY CREATED OFFICES: If any vacancy shall
occur in any office by reason of death, resignation, removal,
disqualification, or other cause, or if any new office shall be created, such
vacancies or newly created offices may be filled by the Board of Directors at
any meeting or, in the case of any office created pursuant to Section 5.11
hereof, by any officer upon whom such power shall have been conferred by the
Board of Directors. [MGCL, Section 2-413(d)]
Section 5.06. CHAIRMAN OF THE BOARD: Unless otherwise provided by
resolution of the Board of Directors, the Chairman of the Board of Directors,
if there be such an officer, shall be the chief executive and operating
officer of the Corporation. He shall preside at all shareholders' meetings and
at all meetings of the Board of Directors, and he shall be an ex officio
member of all standing committees of the Board of Directors. Subject to the
supervision of the Board of Directors, he shall have general charge of the
business affairs, property, and operation of the Corporation and its officers,
employees, and agents. He may sign (unless the President or a Vice-President
shall have signed) certificates, if any, representing stock of the Corporation
authorized for issuance by the Board of Directors and shall have such other
powers and perform such other duties as may be assigned to him from time to
time by the Board of Directors.
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Section 5.07. PRESIDENT: Unless otherwise provided by resolution of the
Board of Directors, the President shall, at the request of or in the absence
or disability of the Chairman of the Board, or if no Chairman of the Board has
been chosen, preside at all shareholders' meetings and at all meetings of the
Board of Directors and shall in general exercise the powers and perform the
duties of the Chairman of the Board. He may sign (unless the Chairman of the
Board or a Vice-President shall have signed) certificates, if any,
representing stock of the Corporation authorized for issuance by the Board of
Directors. Except as the Board of Directors may otherwise order, he may sign
in the name and on behalf of the Corporation all deeds, bonds, contracts, or
agreements. He shall exercise such other powers and perform such other duties
as from time to time may be assigned to him by the Board of Directors.
Section 5.08. VICE-PRESIDENT: The Board of Directors shall, from time to
time, designate and elect one or more Vice-Presidents (one or more of whom may
be designated Executive Vice-President) who shall have such powers and perform
such duties as from time to time may be assigned to them by the Board of
Directors or the President. At the request or in the absence or disability of
the President, the Vice-President (or, if there are two (2) or more Vice-
Presidents, the Vice-President in order of seniority of tenure in such office
or in such other order as the Board of Directors may determine) may perform
all the duties of the President and, when so acting, shall have all the powers
of and be subject to all the restrictions placed upon the President. Any
Vice-President may sign (unless the Chairman of the Board, the President, or
another Vice President shall have signed) certificates, if any, representing
stock of the Corporation authorized for issuance by the Board of Directors.
Section 5.09. TREASURER AND ASSISTANT TREASURERS: The Treasurer shall be
the principal financial and accounting officer of the Corporation and shall
have general charge of the finances and books of account of the Corporation.
Except as otherwise provided by the Board of Directors, he shall have general
supervision of the funds and property of the Corporation and of the
performance by the custodian of its duties with respect thereto. He may
countersign (unless an Assistant Treasurer or Secretary or Assistant Secretary
shall have countersigned) certificates, if any, representing stock of the
Corporation authorized for issuance by the Board of Directors. He shall render
to the Board of Directors, whenever directed by the Board of Directors, an
account of the financial condition of the Corporation and of all his
transactions as Treasurer; and as soon as possible after the close of each
fiscal year he shall make and submit to the Board of Directors a like report
for such fiscal year. He shall cause to be prepared annually a full and
correct statement of the affairs of the Corporation, including a balance sheet
and a financial statement of operations for the preceding fiscal year, which
shall be submitted at the annual meeting of shareholders and filed within
twenty (20) days thereafter at the principal office of the Corporation or, if
no annual meeting is held, then within sixty (60) days of the end of the
fiscal year. He shall perform all the acts incidental to the office of the
Treasurer, subject to the control of the Board of Directors. Any Assistant
Treasurer may perform such duties of the Treasurer as the Treasurer or the
Board of Directors may assign, and, in the absence of the Treasurer, he may
perform all the duties of the Treasurer and, when so acting, shall have all
the powers of and be subject to all the restrictions upon the Treasurer.
[MGCL, Section 2313; Investment Company Act, Section 30 and ICA Rule 30d-1]
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Section 5.10. SECRETARY AND ASSISTANT SECRETARIES: The Secretary shall
attend to the giving and serving of all notices of the Corporation and shall
record all proceedings of the meetings of the shareholders and Directors in
one or more books to be kept for that purpose. He shall keep in safe custody
the seal of the Corporation and shall have charge of the records of the
Corporation, including the stock books and such other books and papers as the
Board of Directors may direct, and such books, reports, certificates, and
other documents required by law to be kept, all of which shall, at all
reasonable times, be open to inspection by any Director. He shall countersign
(unless the Treasurer, an Assistant Treasurer, or an Assistant Secretary shall
have countersigned) certificates, if any, representing stock of the
Corporation authorized for issuance by the Board of Directors. He shall
perform such other duties as appertain to his office or as may be required by
the Board of Directors. Any Assistant Secretary may perform such duties of the
Secretary as the Secretary or the Board of Directors may assign, and, in the
absence of the Secretary, he may perform all the duties of the Secretary and,
when so acting, shall have all the powers of and be subject to all the
restrictions upon the Secretary.
Section 5.11. SUBORDINATE OFFICERS: The Board of Directors from time to
time may appoint such other officers or agents as it may deem advisable, each
of whom shall have such title, hold office for such period, have such
authority and perform such duties as the Board of Directors may determine. The
Board of Directors from time to time may delegate to one or more officers or
agents the power to appoint any such subordinate officers or agents and to
prescribe their respective rights, terms of office, authorities, and duties.
[MGCL, Section 2-412 (b)]
Section 5.12. REMUNERATION: The salaries or other compensation of the
officers of the Corporation shall be fixed from time to time by resolution of
the Board of Directors, except that the Board of Directors may by resolution
delegate to any person or group of persons the power to fix the salaries or
other compensation of any subordinate officers or agents appointed in
accordance with the provisions of Section 5.11 thereof.
ARTICLE VI. CUSTODY OF SECURITIES AND CASH
Section 6.01. EMPLOYMENT OF A CUSTODIAN: The Corporation shall place and
at all times maintain in the custody of a Custodian (including any
subcustodian for the Custodian) all funds, securities, and similar investments
owned by the Corporation. The Custodian shall be a bank or other institution
meeting the requirements set out in Section 26(a)(1) of the Investment Company
Act. Subject to such rules, regulations, and orders as the Securities and
Exchange Commission may adopt as necessary or appropriate for the protection
of investors, the Corporation's Custodian may deposit all or a part of the
securities owned by the Corporation in the custody of a subcustodian or
sub-custodians situated within or without the United States. The Custodian
shall be appointed and its remuneration fixed by the Board of Directors.
[Investment Company Act, Section 28(c)]
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ARTICLE VII. EXECUTION OF INSTRUMENTS, VOTING OF SECURITIES
Section 7.01. EXECUTION OF INSTRUMENTS: All deeds, documents, transfers,
contracts, agreements, requisitions or orders, promissory notes, assignments,
endorsements, checks and drafts for the payment of money by the Corporation,
and other instruments requiring execution by the Corporation shall be signed
by the Chairman of the Board, if there be such an officer, the President, a
Vice-President, or the Treasurer, or as the Board of Directors may otherwise
authorize, from time to time. Any such authorization may be general or
confined to specific instances.
Section 7.02. VOTING OF SECURITIES: Unless otherwise ordered by the
Board of Directors, the Chairman of the Board, if there be such an officer,
the President, or any Vice President shall have full power and authority on
behalf of the Corporation to attend and to act and to vote, or in the name of
the Corporation to execute proxies to vote, at any meeting of shareholders of
any company in which the Corporation may hold stock. At any such meeting such
officer shall possess and may exercise (in person or by proxy) any and all
rights, powers, and privileges incident to the ownership of such stock. The
Board of Directors may by resolution from time to time confer like powers upon
any other person or persons. [MGCL, Section 2-509(a)]
ARTICLE VIII. CAPITAL STOCK
Section 8.01. CERTIFICATE OF STOCK:
(a) The Board of Directors may authorize the issuance of some or all
shares of stock of the Corporation stock without certificates. At the time of
the issuance of shares without certificates, the Corporation shall send to the
shareholder a written statement of the information required to be on
certificates by Section 2-211 of the Maryland Law. [MGCL, Section 2-210]
(b) In the event certificates of stock of the Corporation are to be
issued, then such certificates shall be in the form approved by the Board of
Directors. Certificates of stock, if any, shall be signed in the name of the
Corporation by the Chairman of the Board, if there be such an officer, or the
President, or any Vice President and countersigned by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary, and shall
certify the number and kind of shares owned by the holder thereof in the
Corporation. Such certificate may be sealed with the corporate seal of the
Corporation. Such signatures may be either manual or facsimile signatures and
the seal may be either facsimile or any other form of seal. [MGCL, Sections
2-210(a), 2-212]
(c) In case any officer, transfer agent, or registrar who shall have
signed any such certificate, or whose facsimile signature has been placed
thereon, shall cease to be such an officer, transfer agent or registrar
(because of death, resignation or otherwise) before such certificate is
issued, such certificate may be issued and delivered by the Corporation with
the same effect as if he were such officer, transfer agent, or registrar at
the date of issue. [MGCL, Section 2-212(c)]
(d) The number of any certificate issued, the name of the person owning
the shares represented thereby, the number of such shares, and the date of
issuance shall be entered upon the stock books of the Corporation at the time
of issuance.
(e) Every certificate exchanged, surrendered for redemption, or otherwise
returned to the Corporation shall be marked "Canceled" with the date of
cancellation.
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Section 8.02. TRANSFER OF CAPITAL STOCK:
(a) Shares of stock of the Corporation shall be transferable only upon
the books of the Corporation kept for such purpose and, if one or more
certificates representing such shares have been issued, upon surrender to the
Corporation or its transfer agent or agents of such certificate or
certificates duly endorsed, or accompanied by appropriate evidence of
assignment, transfer, succession, or authority to transfer.
(b) The Corporation shall be entitled to treat the holder of record of
any share of stock as the absolute owner thereof for all purposes, and
accordingly shall not be bound to recognize any legal, equitable, or other
claim or interest in such share on the part of any other person, whether or
not it shall have express or other notice thereof, except as otherwise
expressly provided by law.
Section 8.03. TRANSFER AGENTS AND REGISTRARS: The Board of Directors
may, from time to time, appoint or remove transfer agents and registrars of
transfers of shares of stock of the Corporation, and it may appoint the same
person as both transfer agent and registrar. Upon any such appointment being
made all certificates, if any, representing shares of capital stock thereafter
issued shall be countersigned by one of such transfer agents or by one of such
registrars of transfers and shall not be valid unless so countersigned.
Section 8.04. TRANSFER RESTRICTIONS: The shares of stock of the
Corporation may be freely transferred; provided, however, that the Board of
Directors may, from time to time, adopt lawful rules and regulations with
reference to the method of transfer of the shares of stock of the Corporation.
[SEE Investment Company Act, Section 22(f)]
Section 8.05. FIXING OF RECORD DATE: The Board of Directors may fix in
advance a date as a record date for the determination of the shareholders
entitled to notice of or to vote at any meeting of shareholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or to receive payment of any dividend or other distribution
or allotment of any rights, or to exercise any rights in respect of any
change, conversion, or exchange of stock, or for any other proper purpose,
PROVIDED that such record date shall be a date not more than ninety (90) days
nor, in the case of a meeting of shareholders, less than ten (10) days prior
to the date on which the particular action, requiring such determination of
shareholders, is to be taken. In such case, only such shareholders of record
on the record date so fixed shall be entitled to such notice of, and to vote
at, such meeting or adjournment, or to give such consent, or to receive
payment of such dividend or other distribution, or to receive such allotment
of rights, or to exercise such rights, or to take other action, as the case
may be, notwithstanding any transfer of any shares on the books of the
Corporation after any such record date. If a record date, as referred to in
this Section 8.05, is not set: (a) the record date for determining the
shareholders entitled to notice of or to vote at any meeting of shareholders,
or to notice of any adjournment of such meeting, or to express consent to
corporate action in writing without a meeting, shall be the later of (i) the
close of business on the day on which notice of the meeting is mailed or (ii)
the thirtieth (30th) day before such meeting (unless notice has been waived by
all shareholders, in which case the record date shall be at the close of
business on the tenth (10th) day preceding the date of the meeting); and (b)
the record date for determining shareholders entitled to receive payment of
any dividend or other distribution or allotment of any rights, or to exercise
any rights in respect of any change, conversion, or exchange of stock, shall
be the close of business on the day on which the resolution of the Board of
Directors declaring such dividend, distribution, allotment or exercise of
rights is adopted, but the payment of dividend or distribution, or allotment
or exercise of rights, as the case may be, may not be made more than sixty
(60) days after the date on which the resolution is adopted. [MGCL, Section
2-511]
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Section 8.06. LOST, STOLEN, OR DESTROYED CERTIFICATES: Before issuing a
new certificate for stock of the Corporation alleged to have been lost,
stolen, or destroyed, the Board of Directors, or any officer authorized by the
Board of Directors, may, in its discretion, require the owner of the lost,
stolen, or destroyed certificate (or his legal representative) to give the
Corporation a bond or other indemnity, in such form and in such amount as the
Board of Directors or any such officer may direct and with such surety or
sureties as may be satisfactory to the Board of Directors or any such officer,
sufficient to indemnify the Corporation against any claim that may be made
against it on account of the alleged loss, theft, or destruction of any such
certificate or the issuance of such new certificate. The issuance of a new
certificate under such circumstances shall not constitute an over-issue of the
shares represented thereby. [MGCL, Section 2-213]
ARTICLE IX. FISCAL YEAR, ACCOUNTANT
Section 9.01. FISCAL YEAR: The fiscal year of the Corporation shall be
the twelve (12) calendar months beginning on the first day of January in each
year and ending on the last day of the following December, or such other
period of twelve (12) calendar months as the Board of Directors may by
resolution prescribe.
Section 9.02. ACCOUNTANT:
(a) The Corporation shall employ an independent public accountant or firm
of independent public accountants as its accountant to examine the accounts of
the Corporation and to sign and certify the Corporation's financial
statements, which may be filed with various regulatory agencies. The
accountant's certificates and reports shall be addressed both to the Board of
Directors and to the shareholders.
(b) A majority of the members of the Board of Directors who are not
"interested persons" (as such term is defined in Section 2(a)(19) of the
Investment Company Act) of the Corporation shall select the accountant, by
vote cast in person, at any meeting held before the first annual shareholders'
meeting, and thereafter shall select the accountant annually, by vote cast in
person, at a meeting held within thirty (30) days before or after the
beginning of the fiscal year of the Corporation or within thirty (30) days
before the annual shareholders' meeting, if any, held in that year. Such
selection shall be submitted for ratification or rejection at the next
succeeding annual shareholders' meeting. If the holders of a majority vote of
the outstanding voting securities at such meeting reject such selection, the
accountant shall be selected by majority vote of the Corporation's outstanding
voting securities, either at the meeting at which the rejection occurred or at
a subsequent meeting of shareholders called for that purpose. [Investment
Company Act, Section 32(a)]
(c) Any vacancy occurring between annual meetings, due to the death or
resignation of the accountant, may be filled by the vote of a majority of
those members of the Board of Directors who are not "interested persons" (as
such term is defined in Section 2(a)(19) of the Investment Company Act) of the
Corporation, cast in person at a meeting called for the purpose of voting on
such action. [Investment Company Act, Section 32(a)]
(d) The employment of the accountant shall be conditioned upon the right
of the Corporation by vote of a majority of the outstanding voting securities
at any meeting called for the purpose to terminate such employment forthwith
without any penalty. [Investment Company Act, Section 32(a)]
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ARTICLE X.. INDEMNIFICATION, ADVANCE PAYMENT
OF EXPENSES, AND INSURANCE
Section 10.01. INDEMNIFICATION GENERALLY: The Corporation shall indemnify
any individual ("Indemnitee") who is a present or former Director, officer,
employee, or agent of the Corporation, or who is or was serving at the request
of the Corporation as a director, officer, partner, trustee, employee, or
agent of another corporation, partnership, joint venture, trust, other
enterprise, or employee benefit plan, who, by reason of his service in that
capacity, was, is, or is threatened to be made a party to any threatened,
pending, or completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative (hereinafter collectively referred to as a
"Proceeding") against any judgments, penalties, fines, settlements, and
reasonable expenses (including attorneys' fees) incurred by such Indemnitee in
connection with any Proceeding, to the fullest extent under Maryland Law and
the Investment Company Act. [MGCL, Section 2-418(b); Investment Company Act,
Section 17(h)]
Section 10.02. LIMITATIONS ON INDEMNIFICATION: Notwithstanding the
foregoing, nothing herein shall protect or purport to protect any Indemnitee
against any liability to which he would otherwise be subject by reason of:
(a) willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office;
(b) any act or omission that was material to the matter giving rise to
the Proceeding and was the result of active and deliberate
dishonesty;
(c) the receipt of an improper personal benefit in money, property, or
services, whether or not involving action in an official capacity
as that term is defined in Section 2-418 of the Maryland Law
("Official Capacity");
(d) in the case of any criminal Proceeding, the Indemnitee's reasonable
cause to believe that the act or omission giving rise to such
Proceeding was unlawful; or
(e) an adjudication in a Proceeding by or in the right of the
Corporation that the Indemnitee is liable to the Corporation.
[MGCL, Section 2-418(b); Investment Company Act, Section 17(h)]
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Section 10.03. AUTHORIZATION OF Indemnification: Indemnification shall be
made by the Corporation to an Indemnitee only if authorized for a specific
Proceeding after a determination has been made that indemnification is
permissible under the circumstances because the Indemnitee has met the
requisite standard of conduct necessary for indemnification under Maryland Law
and the Investment Company Act. Such determination as to permissibility shall
be made:
(a) by a court or other body before whom the Proceeding was brought,
based on a final decision on the merits, or in the absence of such
a decision, then:
(b) by the vote of a majority of a quorum of Directors who are neither
"interested persons" of the Corporation as defined in Section
2(a)(19) of the Investment Company Act nor parties to the
Proceeding ("disinterested non-party Directors");
(c) by independent legal counsel, selected in accordance with Maryland
Law, in a written opinion; or
(d) by the Corporation's shareholders, except that shares held by
Directors who are parties to the Proceeding may not be voted on the
subject matter pertaining to the Proceeding.
Authorization of indemnification and determination as to reasonableness
of expenses shall be made in the same manner as the determination that
indemnification is permissible. However, if the determination that
indemnification is permissible is made by independent legal counsel,
authorization of indemnification and determination as to reasonableness of
expenses shall be made by such counsel in the manner specified by Maryland
Law. [MGCL, Section 2-418(e)]
Section 10.04. ADVANCE PAYMENT OF EXPENSES: The Corporation shall pay any
reasonable expenses so incurred by any Indemnitee in defending a Proceeding in
advance of the final disposition thereof to the fullest extent permitted by
applicable law, but only upon receipt of: (a) a written affirmation by the
Indemnitee of his good faith belief that the requisite standard of conduct
necessary for indemnification under Maryland Law and the Investment Company
Act has been met and (b) a written undertaking by such Indemnitee to repay the
advance if it is ultimately determined that such standard of conduct has not
been met, and if one of the following conditions is met: (i) the Indemnitee
provides a security for his undertaking; (ii) the Corporation is insured
against losses arising by reason of any lawful advances; or (iii) a majority
of disinterested non-party Directors or independent legal counsel in a written
opinion determines, based on a review of readily available facts, that there
is reason to believe that the Indemnitee will ultimately be found entitled to
indemnification. [MGCL, Section 2-418(f); Investment Company Act Section
17(h)]
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Section 10.05. NON-EXCLUSIVITY OF Indemnification. The indemnification
and advancement of expenses herein authorized are not deemed to be exclusive
of any other rights, by indemnification or otherwise, to which an Indemnitee
may be entitled under the Articles of Incorporation, these By-Laws, a
resolution of the shareholders or Directors, an agreement or otherwise, both
as to action in an Official Capacity and as to action in another capacity
while holding such office. [MGCL, Section 2-418(g)]
Section 10.06. REPORT OF INDEMNIFICATION TO SHAREHOLDERS. If arising out
of a Proceeding by or in the right of the Corporation, any indemnification of,
or advance of expenses to, any Indemnitee, shall be reported promptly in
writing to the Corporation's shareholders. [MGCL, Section 2-418(1)]
Section 10.07. INSURANCE OF OFFICERS, DIRECTORS, EMPLOYEES, AND AGENTS:
To the fullest extent permitted by applicable law, the Corporation may
purchase and maintain insurance on behalf of any person who is or was a
Director, officer, employee, or agent of the Corporation, or who is or was
serving at the request of the Corporation as a director, officer, partner,
trustee, employee, or agent of another corporation, partnership, joint
venture, trust, other enterprise, or employee benefit plan against any
liability asserted against or incurred by him in any such capacity or arising
out of his position, whether or not the Corporation would have the power to
indemnify against such liability. [MGCL, Section 2-418(k); Investment Company
Act, Section 17(h)]
ARTICLE XI. AMENDMENTS
Section 11.01. GENERAL: Except as provided in Section 11.02 hereof, all
By-Laws of the Corporation, whether adopted by the Board of Directors or the
Shareholders, shall be subject to amendment, alteration, or repeal, and new
By-Laws may be made, by the affirmative vote of a majority of either:
(a) the holders of record of the outstanding shares of stock of the
Corporation entitled to vote, at any annual or special meeting the notice or
waiver of notice of which shall have specified or summarized the proposed
amendment, alteration, repeal, or new by-law; or
(b) the Directors present at any regular or special meeting at which a
quorum is present if the notice or waiver of notice thereof or material sent
to the Directors in connection therewith on or prior to the last date for the
giving of such notice under these By-Laws shall have specified or summarized
the proposed amendment, alteration, repeal, or new by-law. [MGCL, Section
2-109]
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Section 11.02. BY SHAREHOLDERS ONLY:
(a) No amendment of any section of these By-Laws shall be made except by
the shareholders of the Corporation if the shareholders shall have provided in
the By-Laws that such section may not be amended, altered, or repealed except
by the shareholders.
(b) From and after the issuance of any shares of the Corporation, no
amendment of this Article XI shall be made except by the shareholders of the
Corporation.
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