UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission File Number 1-9885
Banyan Mortgage Investment Fund
(Exact name of Registrant as specified in its charter)
Delaware 36-3465359
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 South Wacker Drive, Chicago, Illinois 60606
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 553-9800
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES (x). NO ( ).
Shares of common stock outstanding as of August 14, 1996: 47,307,527.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
BANYAN MORTGAGE INVESTMENT FUND
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 AND DECEMBER 31, 1995
(UNAUDITED)
1996 1995
ASSETS
Cash and Cash Equivalents $ 6,647,172 $ 316,012
Repair, Improvement and Real
Estate Tax Escrows 647,110 775,754
------------ ------------
7,294,282 1,091,766
------------ ------------
Investment in Real Estate:
Land 55,322,493 55,379,003
Developments in Progress 30,820,485 30,872,769
Real Estate Held for Sale 10,003,846 17,176,845
------------ ------------
Net Investment in
Real Estate 96,146,824 103,428,617
------------ ------------
Net Investment in Real
Estate Venture 251,474 1,097,363
Deferred Financing Costs
(Net of Accumulated
Amortization of $563,934
and $399,831 for 1996 and
1995, respectively) 1,825,144 909,365
Other Assets 2,536,596 2,606,403
------------ ------------
Total Assets $108,054,320 $109,133,514
============ ============
LIABILITIES AND STOCK-
HOLDERS' EQUITY
Liabilities
Accounts Payable and
Accrued Expenses $ 1,838,997 $ 1,686,511
Interest Payable 1,291,252 1,268,553
Real Estate Taxes Payable 195,066 384,500
Mortgage Loans Payable 34,371,494 33,625,737
------------ ------------
Total Liabilities 37,696,809 36,965,301
------------ ------------
Stockholders' Equity
Shares of Common Stock,
$0.01 Par Value,
100,000,000 Shares
Authorized, 47,327,627
Shares Issued 351,713,450 348,205,447
Accumulated Deficit (281,344,623) (276,025,918)
Treasury Stock, at Cost,
20,100 Shares of Common
Stock Estate Tax Escrows (11,316) (11,316)
------------ ------------
Total Stockholders' Equity 70,357,511 72,168,213
------------ ------------
Total Liabilities and
Stockholders' Equity $108,054,320 $109,133,514
============ ============
Book Value Per Share of
Common Stock (47,307,527
and 39,822,304 Shares
Outstanding for 1996 and
1995, respectively) $ 1.49 $ 1.81
============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
BANYAN MORTGAGE INVESTMENT FUND
CONSOLIDATED STATEMENTS OF INCOME AND EXPENSES
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
1996 1995
INCOME
Interest on Cash and Cash
Equivalents $ 65,412 $ 142,512
Operating Property Income 232,094 800,033
----------- ------------
Total Income 297,506 942,545
----------- ------------
EXPENSES
Expenses From Property
Activities:
Operating Property Expenses 203,857 221,401
Development Property Expenses 1,073,209 767,133
Repairs and Maintenance 71,875 98,503
Real Estate Taxes 233,804 159,407
Depreciation 10,807 205,952
Bad Debt (Recovery) Expense 56,000 (11,000)
----------- ------------
Total Expenses From Property
Activities 1,649,552 1,441,396
----------- ------------
Other Expenses:
Stockholder Expenses 110,693 236,679
Directors' Fees, Expenses
and Insurance 161,065 254,470
Other Professional Fees 649,967 127,443
General and Administrative 992,316 629,961
Recovery of Losses on
Mortgage Loans, Notes
and Interest Receivable (418,972) (495,591)
Interest Expense and Amorti-
zation of Deferred Loan
Costs 3,516,011 1,320,298
----------- ------------
Total Other Expenses 5,011,080 2,073,260
----------- ------------
Total Expenses 6,660,632 3,514,656
----------- ------------
Operating Loss (6,363,126) (2,572,111)
Net Income (Loss) From
Operations of Real Estate
Venture 981,330 (90,716)
Gain on Dispositions of
of Real Estate 63,091 7,558
----------- ------------
Net Loss (5,318,705) $ (2,655,269)
=========== ============
Net Loss Per Share of
Common Stock (Based on
Weighted Average Number of
Shares Outstanding of
41,507,108 and 39,742,395
during 1996 and 1995,
respectively) $ (0.13) $ (0.07)
=========== ============
The accompanying notes are an integral part of the consolidated financial
statements.
BANYAN MORTGAGE INVESTMENT FUND
CONSOLIDATED STATEMENTS OF INCOME AND EXPENSES
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
1996 1995
INCOME
Interest on Cash and Cash
Equivalents $ 55,059 $ 56,401
Operating Property Income 26,535 268,773
----------- -----------
Total Income 81,594 325,174
----------- -----------
EXPENSES
Expenses From Property
Activities:
Operating Property Expenses 74,425 106,746
Development Property
Expenses 659,127 354,612
Repairs and Maintenance 37,453 50,661
Real Estate Taxes 51,665 70,498
Depreciation 5,403 102,976
----------- -----------
Total Expenses From Property
Activities 828,073 685,493
----------- -----------
Other Expenses:
Stockholder Expenses 60,098 164,832
Directors' Fees, Expenses
and Insurance 81,356 124,722
Other Professional Fees 296,604 53,108
General and Administrative 528,528 328,162
Interest Expense and Amorti-
zation of Deferred Loan
Costs 1,573,662 638,844
----------- -----------
Total Other Expenses 2,540,248 1,309,668
----------- -----------
Total Expenses 3,368,321 1,995,161
----------- -----------
Operating Loss (3,286,727) (1,669,987)
Net Income (Loss) from
Operations of Real Estate
Venture 1,499 (47,087)
Gain on Dispositions of
of Real Estate 63,091 6,541
----------- -----------
Net Loss (3,222,137) $(1,710,533)
=========== ===========
Net Loss Per Share of Common
Stock (Based on Weighted
Average Number of Shares
Outstanding of 43,191,912
and 39,742,395 during 1996
and 1995, respectively) $ (0.07) $ (0.04)
=========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
<TABLE>
BANYAN MORTGAGE INVESTMENT FUND
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<CAPTION>
Common Stock Accumulated Treasury
Shares Amount Deficit Stock Total
<S> <C> <C> <C> <C> <C>
Stockholders'
Equity,
December 31,
1995 39,842,404 $348,205,447 $(276,025,918) $(11,316) $72,168,213
Issuance of
Stock 7,466,666 3,500,000 --- --- 3,500,000
Award Shares
Issued 18,557 8,003 --- --- 8,003
Net Loss --- --- (5,318,705) --- (5,318,705)
---------- ------------ ------------- -------- -----------
Stockholders'
Equity,
June 30,
1996 47,327,627 $351,713,450 $(281,344,623) $(11,316) $70,357,511
========== ============ ============= ======== ===========
<FN> The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
BANYAN MORTGAGE INVESTMENT FUND
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
1996 1995
CASH FLOWS FROM OPERATING
ACTIVITIES:
NET LOSS: $(5,318,705) $(2,655,269)
Adjustments to Reconcile Net
Loss to Net Cash Used In
Operating Activities:
Depreciation 10,807 205,952
Amortization of Deferred
Loan Costs 164,103 164,974
Provision (Recovery) for Bad
Debts 56,000 (11,000)
Gain on Disposition of
Real Estate (63,091) (7,558)
Net (Income) Loss From
Operations of Real Estate
Venture (981,330) 90,716
Deferred Interest Payable on
Mortgage Loans --- 824,764
Net Change In:
Interest Receivable on Cash
and Cash Equivalents --- 16,721
Real Estate Tax Escrow (28,681) (177,100)
Other Assets 3,000 263,492
Accounts Payable and
Accrued Expenses 152,486 56,710
Real Estate Taxes
Payable (189,434) 196,564
Interest Payable 1,047,750 140,594
----------- -----------
Net Cash Used In
Operating Activities (5,147,095) (890,440)
----------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Proceeds From Sale of
Real Estate 7,501,728 707,414
Increase in Developments in
Progress (156,845) (4,101,398)
Decrease (Increase) in
Repair and Improvement
Escrow 157,325 (256,137)
Distributions from Real
Estate Venture 1,827,220 62,648
Purchases of Land and
Property Improvements --- (179,960)
----------- -----------
Net Cash Provided by
(Used In) Investing
Activities 9,329,428 (3,767,433)
----------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Payment of Mortgage Loans
Payable (279,294) (977,225)
Payment of Deferred
Financing Costs (1,079,882) ---
Issuance of Common Stock 3,508,003 ---
----------- -----------
Net Cash Provided by (Used In)
Financing Activities 2,148,827 (977,225)
----------- -----------
Net Increase (Decrease) in
Cash and Cash Equivalents 6,331,160 (5,635,098)
Cash and Cash Equivalents at
Beginning of Period 316,012 8,040,629
----------- -----------
Cash and Cash Equivalents at
End of Period $ 6,647,172 $ 2,405,531
=========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
BANYAN MORTGAGE INVESTMENT FUND
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
Readers of this quarterly report should refer to Banyan Mortgage
Investment Fund's (the "Fund") audited consolidated financial statements for the
year ended December 31, 1995, which are included in the Fund's 1995 Annual
Report, as certain footnote disclosures which substantially duplicate those
contained in such audited statements have been omitted from this report. In the
opinion of management, all adjustments necessary for a fair presentation have
been made to the accompanying consolidated financial statements as of June 30,
1996 and for the six months and quarters ended June 30, 1996 and 1995. These
adjustments made to the financial statements, as presented, are all of a normal
recurring nature to the Fund, unless otherwise indicated.
1. Principles of Consolidation
The accompanying consolidated financial statements, as of June 30, 1996,
include the accounts of the Fund, its wholly-owned subsidiaries and Chapman's
Landing, Southbridge, Wayside Village and Laguna Seca Ranch partnerships in
which the Fund owns, indirectly through wholly-owned subsidiaries, controlling
50% general partnership interests. Losses from these partnerships are allocated
to the minority interest partners to the extent of their respective investments
in the partnerships. Since the minority partners have made no investment in the
partnerships and are not obligated to fund losses in excess of their investment,
their minority interest in each instance currently has no value. Therefore, all
of the above partnerships' losses as of June 30, 1996 have been allocated to the
Fund. Profits may be allocated pro rata to the minority interest partners to the
extent that net proceeds generated from the projects exceed priority returns
payable to the Fund. All intercompany balances and transactions have been
eliminated in consolidation. The consolidated financial statements also include
the Fund's 50% interest in the VST/VMIF Oakridge Partnership accounted for on
the equity method.
2. Plan of Merger, Mortgage Loans Payable, and Basis of Presentation
On May 20, 1996, the Fund entered into an Amended and Restated Agreement
and Plan of Merger (the "Amended Merger Agreement") with RGI Holdings, Inc.
("RGI Holdings") and its wholly owned subsidiary, RGI U.S. Holdings,Inc. ("RGI
U.S." or collectively "RGI"). Closing of the merger is subject to certain
conditions including, approval by the Fund's Stockholders. On May 21, 1996, RGI
Holdings (i) paid $3,500,000 to acquire 7,466,666 shares ($0.46875 per share) or
approximately 16% of the Fund's outstanding common stock (ii) purchased the loan
made to the Fund in October, 1994 by a group of lenders for which Morgens,
Waterfall, Vintiadis & Co., Inc. served as agent (the "Morgens Loan") and (iii)
purchased the loan made to a subsidiary of the Fund by Societe Generale ("SoGen
Loan") and secured by a first mortgage on the Fund's Wayside property and a
portion of the Southbridge property which is subject to approval by the Fund's
Stockholders. In addition, Mr. Kenneth Uptain, President of RGI Holdings and
RGI U.S. was named to fill a vacant seat on the Fund's Board of Directors.
Both the Morgens Loan and the SoGen Loan were in default, and concurrent
with the purchase by RGI Holdings the Fund and RGI Holdings entered into
agreements modifying each loan. Under these modification agreements, RGI
Holdings has agreed that, among other things, prior to December 31, 1996 it will
not accelerate either the Morgens Loan or the SoGen Loan nor foreclose on any
collateral securing such loans based upon (i) any events of default occurring
before May 15, 1996; or (ii) any non-monetary defaults occurring after May 15,
1996 but before the merger is completed or the Amended Merger Agreement is
terminated; or (iii) as a result of the execution of the Merger Agreement as
described above.
RGI Holdings also agreed to capitalize and add to the outstanding
principal balance of the Morgens Loan the interest payment due on January 1,
1996 in the approximate amount of $1,025,000. The outstanding principal balance
of the Morgens Loans as of June 30, 1996 was $24,258,788. Additionally, if the
Merger is approved, the terms of the Morgens Loan will be further modified to
reduce the interest rate on the Morgens Loan from 17.5% per annum to Prime plus
2% per annum and the real estate assets owned by RGI U.S. will be merged into
the Fund and the sales proceeds of which can be used to repay the Morgens Loan.
Finally, the original Morgens Loan provisions that required the outstanding
principal balance to be reduced to $11,000,000 by September 30, 1997 and
prohibited prepayment of the entire loan prior to September 30, 1996 will be
eliminated and the entire loan will become due and payable on September 30,
1998. A portion of the proceeds from the sale of stock were used to pay
interest for the period January 1, 1996 through March 31, 1996, which was due
April 1, 1996, in the amount of approximately $1,179,000 and a $500,000 loan
restructuring fee was also paid to RGI Holdings. In the event that the Merger
closing does not occur on or before December 31, 1996 (as the same may be
extended by mutual agreement) or if RGI is unable to obtain the consent of its
lender to a subordination of the lien created in favor of RGI for the purpose of
placing construction financing on any of the Fund's development projects, then
the loan restructuring fee will be applied against future interest payments
due. As of June 30, 1996 the Fund had treated the $500,000 fee paid to
RGI Holdings as a deferred financing cost but it is not being amortized
pending the vote on the merger and completion of construction
financing for the Fund's various development projects. As part of
RGI Holding's acquisition of the Morgens Loan, outstanding
warrants to purchase 4,380,000 shares of common stock of the Fund
which were issued to the lenders were cancelled. Also, RGI allowed the Fund to
utilize, without requiring applications against debt, the net proceeds from the
sale of the Oakridge and 120 S. Spalding properties, in the aggregate amount of
approximately $8,683,000. RGI Holdings will, however, require the Fund to
utilize future cash proceeds exclusively for the repayment of debt from either
the sale or joint venture development of the Laguna Seca Ranch and 50% of the
net cash proceeds generated by developed lot or raw land sales at the
Southbridge, Wayside Village and Chapman's Landing properties.
Upon acquisition of the SoGen Loan by RGI Holdings, the $287,702 of
interest due as of December 31, 1995 was capitalized and added to the
outstanding loan balance of $6,360,000. The principal balance of the loan after
adding interest was reduced by approximately $317,000 which primarily represents
the net proceeds released from escrow by SoGen in respect to the sale of four
lots at the Wayside property which occurred on April 9, 1996. The outstanding
principal balance subsequent to the modification is $6,330,706. Using a portion
of the proceeds from the stock sale, the Fund paid interest for the period
January 1, 1996 through April 30, 1996 in the amount of $319,782 and late fees
and legal fees in the amount of $302,708. No additional payments of principal
or interest will be required until the earlier of fifteen days after the merger
closing, termination of the merger agreement or the merger closing deadline of
December 31, 1996. The maturity date of the SoGen Loan is December 31, 1997. The
$2,000,000 revolving loan agreement, executed by SoGen and the Fund in 1994,
under which no funds were ever disbursed, was cancelled and released. The Fund
and SoGen exchanged mutual releases.
Subject to the approval of the Fund's Stockholders, RGI U.S. will be
merged with and into the Fund with all of the outstanding shares of RGI U.S.
being converted into 109,674,667 shares of the Fund's common stock. As a
result, the percentage of the Fund's common stock that RGI Holdings will own if
the merger is approved will be approximately 75%. The Fund anticipates seeking
a vote on the merger at the annual meeting which will likely be held in the fall
of 1996 after the Fund completes all necessary regulatory filings associated
with the proposed merger.
The accompanying consolidated financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and the
classification of assets that would result from the default under the Morgens
loan or the SoGen loan due to the completion of the initial closing of the RGI
Transaction. Specifically, the carrying amount of the Fund's development real
estate continues to be evaluated for impairment based on the undiscounted cash
flows estimated to be generated by those assets over the development period. If
the merger is not completed and the defaults under the Morgens Loan or the SoGen
Loan are not otherwise cured or waived, the classification of the Fund's
development real estate could be required to be changed to "held for disposal"
thereby possibly necessitating a valuation allowance to reflect such assets at
current disposable fair market value.
3. Reclassifications
Certain reclassifications have been made to the previously reported 1995
consolidated financial statements in order to provide comparability with the
1996 consolidated financial statements. The reclassifications have not changed
the 1995 operating results.
4. Transactions With Affiliates
Administrative costs, primarily salaries and general and administrative
expenses, are reimbursed by the Fund to Banyan Management Corp. ("BMC"). These
costs are allocated to the Fund and other entities to which BMC provides
administrative services based upon the actual number of hours spent by BMC
personnel on matters related to that particular entity in relation to the total
number of BMC personnel hours. The Fund's allocable share of costs for the six
months ended June 30, 1996 and 1995 aggregated $806,952 and $518,383,
respectively. As one of its administrative services, BMC serves as the paying
agent for general and administrative costs of the Fund. As part of providing
this payment service, BMC maintains a bank account on behalf of the Fund. As of
June 30, 1996, the Fund had a net payable due to BMC of $184,857. The net
payable is included in the accounts payable and accrued expenses in the Fund's
consolidated balance sheet.
5. Investment in Real Estate Venture
On February 5, and March 1, 1996, the VST/VMIF Oakridge Partnership (the
"Oakridge Venture") of which the Fund owns a 50% interest through a wholly-owned
subsidiary, sold a total of 180 acres to an unaffiliated party for approximately
$4,600,000. In addition, on March 1, 1996, the Oakridge Venture sold an
additional 25-acre parcel of the Oakridge property to an unaffiliated party for
approximately $2,200,000. The Oakridge Venture utilized the proceeds to repay a
first mortgage loan collateralized by the Oakridge property in the amount of
$1,916,617. After repayment of the mortgage loan, interest and other closing
costs, the Oakridge Venture received net proceeds from the sales of $4,180,505
(including $467,928 of deposits received during 1995) of which $2,090,253 was
distributed to the Fund in respect of its 50% interest in the Oakridge Venture.
The Fund recognized a gain equal to approximately $1,051,000. The Oakridge
Venture is currently engaged in negotiations to sell the remaining five-acre
retail parcel at the Oakridge property.
6. Recovery of Losses on Loans, Notes and Interest Receivable
For the six months ended June 30, 1996 and 1995 the Fund received cash
distributions of $418,972 and $566,783, respectively, in respect of its
interests in two liquidating trusts established for the benefit of the unsecured
creditors (including the Fund) of VMS Realty Partners and its affiliates
("VMS"). The Fund has treated $418,972 and $495,591, respectively, of these
amounts as recovery of losses on mortgage loans, notes and interest receivable
in its consolidated statement of income and expenses. As of December 31, 1995
and June 30, 1996, a total of $127,468 of these distributions has been recorded
as a liability to the Class Action Settlement Fund representing the Fund's share
of amounts due under the terms of the previously settled VMS securities
litigation. This amount is recorded in Accounts Payable and Accrued Expenses at
June 30, 1996, which was subsequently paid by the Fund on July 28, 1996.
7. Litigation and Contingencies
On September 1, 1995, an action was filed in the Circuit Court of Cook
County, Illinois entitled: Monterey County Partners et al v. BMIF Monterey
County Limited Partnership et al; (the "Illinois Litigation"). BMIF Monterey
County Limited Partnership (the "Ownership Partnership") is controlled by a
subsidiary of the Fund and it holds the ownership interest in the Laguna Seca
project. The complaint seeks: (i) the removal of the Fund's wholly-owned
subsidiary, BMIF Monterey County Corp. as the general partner of the Ownership
Partnership; (ii) declaratory relief that BMIF Monterey County Corp. is not
entitled to any "priority return" or "preferred return" on its capital account
in the Ownership Partnership; (iii) avoidance of an alleged fraudulent transfer
whereby the Ownership Partnership became the owner of the Laguna Seca Ranch
project after the default in 1991 on the Fund's former mortgage loan; (iv) an
accounting; and (v) a constructive trust to be created for the benefit of one of
the plaintiffs.
The Fund filed an Answer, Counterclaim and Third Party Complaint on March
29, 1996. All parties have been served with and have answered initial discovery
requests and are presently producing documents.
The Plaintiffs then filed a Third Amendment Complaint which purports to
add Mr. Levine and Banyan Management Corp. as parties and also adds the Fund and
RGI Holdings Inc. as parties. On August 9, 1996, the Fund answered certain
counts of the Third Amended Complaint and responded to other counts by moving to
strike and dismiss or for judgment.
The Fund believes the Illinois Litigation is totally without merit and
intends to vigorously defend the Illinois Litigation and to prosecute the
Counterclaim and the Third Party Complaint. The partnership agreement which
creates the Ownership Partnership requires an unsuccessful litigant or its
representative whose claim is based upon or related to the partnership agreement
to pay the reasonable attorneys' fees expended or incurred in defense of the
Illinois Litigation.
On October 10, 1995, an action was filed in the Superior Court of Monterey
County, California entitled: Monterey County Partners, et al. v. BMIF Monterey
County Limited Partnership, et al; (the "California Litigation").
The California Litigation alleges fraudulent transfer and conspiracy and
seeks the following as remedies: (i) to set aside the Deed of Trust and the
obligations of the Ownership Partnership under a guaranty provided for in the
Morgens Loan, (ii) to quiet title to the Laguna Seca Ranch project, declaring
null and void the interest of the various defendant lenders which arises under
the Deed of Trust and (iii) an award of attorneys' fees and costs.
The California Court has encouraged the parties to attempt to agree upon a
schedule for conducting discovery and a trial in the Illinois Litigation while
the California Litigation would remain in suspense. On April 19, 1996, the
parties reported to the California Court that a schedule had been promulgated in
the Illinois Litigation providing that if the parties concluded discovery by
September 13, 1996, a trial date would be set in September or shortly
thereafter. The California Court then ordered that provided discovery is
completed by August 31, 1996, and a trial commences in Illinois during September
of 1996, no further action will be taken.
None of the defendants has yet answered the California complaint. The Fund
believes that the California Litigation is totally without merit and intends to
vigorously defend it. The partnership agreement which creates the Ownership
Partnership requires an unsuccessful litigant or its representative whose claim
is based upon or related to the partnership agreement to pay the reasonable
attorneys' fees of its opponent. The Fund intends to seek reimbursement of all
attorneys' fees expended or incurred in defense of the California Litigation.
8. Disposition of Real Estate
On April 22, 1996 the Fund sold the 120 S. Spalding property to an
unaffiliated third party for $7,450,000. After payment of selling commissions of
$186,250 and transfer taxes and title charges of $23,290 the Fund received net
proceeds of $7,240,460. The Fund recorded a net gain on disposition of real
estate of $67,460.
During the six months ended June 30, 1996, the Fund sold four single
family lots to a home developer at the Fund's Wayside Village Development. The
sale of these lots generated gross sales proceeds of $261,556. After payment of
closing costs of $288, the Fund received net cash proceeds of $261,268 related
to the sales. The sale of these lots resulted in an aggregate net loss on
disposition of real estate of $4,369.
During the six months ended June 30, 1995, the Fund sold twelve single
family lots to a home developer at the Fund's Wayside Development. The sale of
these lots generated gross sales proceeds of $720,707. After payment of closing
costs of $877, real estate taxes of $1,531 and other costs of $10,885 the Fund
received net cash proceeds of $707,414 related to the sales. The sale of these
lots resulted in an aggregate net gain on disposition of real estate of $7,558.
9. Award Shares
On June 4, 1996, the Fund issued 18,557 shares of its common stock to
Leonard G. Levine, its President, in payment of incentive compensation earned by
Mr. Levine for the fiscal year ended December 31, 1995. Pursuant to Mr.
Levine's amended employment agreement, all incentive amounts earned subsequent
to January 1, 1993 are paid 80% in cash and 20% in shares of the Fund ("Award
Shares"), the value of which is based on the average closing price of the Fund's
common stock for the last five business days of the year in which the incentive
is earned. Mr. Levine's incentive compensation earned during 1995 was $40,013.
The cash portion equal to $32,010 will be paid to Mr. Levine in the third
quarter of 1996. The 18,557 Award Shares were valued at a price equal to
$0.43125 per share or $8,003. The Award Shares are subject to restrictions of
transfer and are held in escrow by the Fund, pending satisfaction of the vesting
requirements included in Mr. Levine's contract which provides that Mr. Levine
will fully vest on the earlier of (i) December 31, 1997; (ii) the termination of
Mr. Levine's employment by the Fund without just cause; or (iii) the permanent
disability or death of Mr. Levine. Mr. Levine will, however, lose his right to
these Award Shares if he is not employed by the Fund on December 31, 1997,
unless such failure is due to death or permanent disability or termination
without just cause. Mr. Levine is entitled to all dividends paid on shares held
by the Fund for his benefit. The Award Shares are included in the total shares
outstanding of the Fund effective June 4, 1996 for the purpose of calculating
Net Income Per Share of Common Stock based on the Weighted Average Number of
Shares Outstanding.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Overview
Since early 1990, the Fund's liquidity and capital has been provided
primarily from asset dispositions and proceeds from financings secured by the
Fund's assets and to a lesser extent from property operations and distributions
in respect of the Fund's interest in two liquidating trusts. Historically,
these sources have not produced enough capital to permit the Fund to continue
implementing its business plans for each of its properties and to fund ongoing
operating expenses. Delays in the entitlement and zoning process, most of which
were out of the Fund's control, caused the Fund to incur additional costs and
expenses beyond those originally contemplated. These delays further reduced the
Fund's capital since it was unable to sell certain parcels which the Fund had
contemplated selling to supplement its capital needs. In addition, the Fund's
business plan for the Wayside Village parcel was negatively impacted by its
inability to draw funds under the revolving line of credit previously agreed to
with Societe Generale, Southwest Agency (the "SoGen Loan"). The Fund was not
able to draw on the line of credit until SoGen approved the form of sales
contract and negotiated a subordination agreement with a lot purchaser
acceptable to SoGen, a process which took approximately nine months. At the
same time, however, a dispute arose over SoGen's obligation to reimburse, under
the line of credit, costs incurred by the Fund at the Wayside Village parcel.
This dispute was never resolved and resulted in the cancellation of the sales
contract. Consequently, the Fund's board directed the Fund to increase its
efforts to secure additional capital. These efforts culminated in the proposed
merger of RGI U.S. Holdings, Inc. ("RGI/US") with and into the Fund (the
"Merger").
The board of directors of each of the Fund and RGI/US have approved the
Merger and the Agreement and Plan of Merger, dated as of April 12, 1996, by and
among RGI/US., RGI Holdings, Inc. ("RGI Holdings") and the Fund as amended and
restated as of May 20, 1996 (the "Merger Agreement"). Upon fulfillment or
waiver of the conditions set forth in the Merger Agreement, at the effective
time thereunder (the "Effective Time"): (i) RGI/US will be merged with and into
the Fund with the Fund being the surviving entity; and (ii) all of the issued
and outstanding shares of RGI/US common stock, no par value per share ("RGI/US
Common Stock") will be converted into 109,674,667 newly-issued shares of the
Fund's common stock. Each share of the Fund's common stock issued and
outstanding immediately prior to Effective Time will remain outstanding and will
represent one share of common stock of the Fund following the Merger.
On May 21, 1996, RGI Holdings purchased 7,466,666 shares of authorized but
unissued shares of the Fund's common stock for $.46875 per share, or an
aggregate purchase price of $3.5 million (the "Private Placement"). In
addition, RGI Holdings purchased (i) the SoGen Loan and (ii) loans previously
made to the Fund by a group of lenders for which Morgens, Waterfall, Vintiadis &
Co., Inc. served as agent (the "Morgens Loan"). Contemporaneously with the
purchase of the loans, the Fund and RGI Holdings entered into agreements
modifying the terms of the these loans. At May 31, 1996, the outstanding
principal amounts of the Morgens Loan and the SoGen Loan were $24.3 million and
$6.4 million, respectively. If the Merger is approved, RGI Holdings will own
approximately 75% of the Fund's outstanding common stock. If the Merger is not
approved, RGI Holdings will own approximately 16% of the Fund's outstanding
common stock and will continue to hold approximately 88% of the Fund's
indebtedness.
Liquidity and Capital Resources
Cash and cash equivalents consist of cash and short-term investments. The
Fund's cash and cash equivalents balance at June 30, 1996 and December 31, 1995
was approximately $6.6 million and $316,012, respectively. This increase in cash
and cash equivalents is attributable to an increase in cash flow from investing
activities of approximately $9.3 million and cash flow from financing activities
of approximately $2.1 million. Also contributing to the increase in cash and
cash equivalents was cash flow of $418,972 from the Fund's receipt of cash
distributions in respect of its interests in two liquidating trusts and income
from property operating activities. Partially offsetting the increase in cash
and cash equivalents was the payment of expenses and capitalized items related
to the development properties and the payment of the Fund's operating expenses.
Cash Flows From Operating Activities: Net cash utilized in operating
activities increased by approximately $4.2 million for the six months ended June
30, 1996 to approximately ($5.1 million) from approximately ($890,000) for the
same period in 1995. This increase was due primarily to an increase in net loss
to approximately ($5.3 million) from ($2.6 million), for the six months ended
June 30, 1996 and 1995, respectively. The increase in net loss for the six
months ended June 30, 1996 is primarily the result of an increase in development
property expenses of $306,000 and an increase in interest expense and deferred
loan costs of approximately $2.2 million, with respect to the Fund's Wayside
Village, Chapmans Landing and Laguna Seca Ranch properties. The increases in
these expenses are due to the Fund's change in accounting treatment of
development and interest costs for its development properties. For the six
months ended June 30, 1996 the Fund has elected to treat as an expense all
interest related to the Morgens Loan and SoGen Loans and other development and
holding costs due to delays in the infrastructure development at its Wayside
Village and Chapman's Landing projects. These development and holding costs had
been capitalized and recorded as developments in progress for the six months
ended June 30, 1995. Also contributing to this increase in cash outflow for the
six months ended June 30, 1996 was a decrease in property operating activities
as a result of the Fund's sale of its 120 S. Spalding property in April 1996.
Cash Flows From Investing Activities: During the six months ended June
30, 1996, the Fund generated cash flow from investing activities of
approximately $9.3 million compared to a net outflow of cash for the same period
in 1995 of approximately ($3.8 million). The increase in cash flow from
investing activities for the six months ended June 30, 1996 is primarily due to
the Fund's receipt of cash proceeds of approximately $7.2 million from the sale
of the 120 S. Spalding property, the receipt of cash proceeds of approximately
$261,000 from the sale of four lots at the Wayside Village development and the
Fund's receipt of its 50% share of cash proceeds from the VST/VMIF Oakridge
Partnership in the amount of approximately $1.8 million from the sale of 205
acres of the Oakridge property. The Fund's outflow of cash from investing
activities for the six months ended June 30, 1995 is primarily the result of
cash expenditures on developments in progress, purchase of land and property
improvements, and for repairs and improvement escrows in the amounts of
approximately ($4.1 million), ($180,000) and ($256,000), respectively pursuant
to the development activities regarding the Wayside Village, Chapmans Landing
and Laguna Seca Ranch properties. Partially offsetting these cash expenditures
for the six months ended June 30, 1995 was the receipt of approximately $707,000
in cash proceeds from the sale of lots at the Wayside Village development.
Cash Flows from Financing Activities: For the six months ended June 30,
1996 the Fund generated cash flow from financing activities of approximately
$2.1 million compared to cash used in financing activities of approximately
($977,000) for the same period in 1995. The increase in cash flow from
financing activities for the six months ended June 30, 1996 when compared to the
same period in 1995 is due primarily to the Fund's receipt of approximately $3.5
million from RGI as discussed above. Partially offsetting the receipt of these
cash proceeds in 1996 were cash expenditures by the Fund for deferred financing
costs of approximately ($1.1 million) associated with the restructuring of the
Morgens Loan and SoGen Loan. In addition, for the six months ended June 30,
1996, the Fund utilized approximately ($280,000) in cash proceeds derived
primarily from the sale of the four lots at Wayside Village for principal
repayments on the SoGen Loan. The net cash outflow of approximately ($977,225)
for the six months ended June 30, 1995 was due to principal payments made by the
Fund on its mortgage loans collateralized by the Wayside Village and Southbridge
properties in the amounts of ($477,225) and ($500,000), respectively.
Management of the Fund believes that its remaining cash and cash
equivalents, proceeds from the sale of its interest in the Oakridge Venture and
ancillary land parcels at its development properties should provide sufficient
capital to meet its reasonably expected liquidity needs until completion of the
merger. However, the Fund's ability to implement and complete its business plans
is dependent upon its success in obtaining construction financing which will be
facilitated by the completion of the RGI Transaction. If the proposed merger
with RGI is not approved by the Stockholders of the Fund, the Fund may be
required to dispose of portions of its core assets at fair market values which
may likely be below the carrying values as of June 30, 1996, in order to retire
its debt.
RESULTS OF OPERATIONS
Total income for the six months ended June 30, 1996 and 1995 was $297,506
and $942,545, respectively. Total income for the quarters ended June 30, 1996
and 1995 was $81,594 and $325,174, respectively. This decrease was due
primarily to a decrease in operating property income. Operating property income
for the six months ended June 30, 1996 and 1995 was $232,094 and $800,033,
respectively. For the quarters ended June 30, 1996 and 1995, operating property
income was $26,535 and $268,773, respectively. This decrease is attributable to
the combination of a 65% decrease in occupancy at the 120 S. Spalding property
which occurred in late March 1995 and the subsequent sale of the 120 S. Spalding
property on April 22, 1996. Also contributing to this decline was a decrease in
interest income from cash and cash equivalents due to the decrease in cash
available for investment.
Expenses from property activities for the six months ended June 30, 1996
and 1995 were approximately $1.6 million and $1.4 million, respectively. For the
quarters ended June 30, 1996 and 1995, the expenses from property activities
were $828,073 and $685,493, respectively. This increase was attributable to the
increase in development property expenses, real estate taxes and bad debt
expense. Development property expenses increased for the six months ended June
30, 1996 when compared to the same period in 1995. This increase was due to the
decision to treat as an expense, interest and certain other development costs
including real estate taxes incurred in 1996. These expeses had been
capitalized during the same period in 1995. Bad debt expense increased by
$67,000 during the six months ended June 30, 1996 when compared to the six
months ended June 30, 1995 due to write-offs taken regarding the settlement of
certain receivables at the 120 S. Spalding property during the first quarter of
1996 as well as the recognition of recoveries of certain receivables during the
first quarter of 1995. Partially offsetting these increases in other expenses
were the decreases in depreciation, repairs and maintenance expenses and
operating property expenses. No depreciation was taken on the 120 S. Spalding
building during the six months ended June 30, 1996 as the valuation allowance
taken in the fourth quarter of 1995 had reduced the depreciable basis of the
building to zero. Repair and maintenance expense and operating property expenses
decreased for the six months ended June 30, 1996 when compared to 1995 due to
the combination of a 65% decrease in occupancy in late March 1995 and subsequent
sale on April 22, 1996 of the 120 S. Spalding building.
Total other expenses for the six months ended June 30, 1996 and 1995 were
$5,011,080 and $2,073,260, respectively. For the quarters ended June 30, 1996
and 1995, total other expenses were $2,540,248 and $1,309,668, respectively.
This increase is primarily attributable to an increase of approximately $2.2
million and $934,818 in interest expense and amortization of deferred loan costs
for the six months ended June 30, 1996 when compared to the six months ended
June 30, 1995 and for the quarter ended June 30, 1996 when compared to same
period in 1995, respectively, due to the Fund's election to treat as an expense
all interest related to the Chapman's Landing, Laguna Seca Ranch and Wayside
Village properties during the six months and quarter ended June 30, 1996 periods
which had been capitalized during the same periods in 1995. Also contributing
to the increase in other expenses for the six months and the quarter ended June
30, 1996 when compared to the same periods in 1995, was the increase of $522,524
and $243,496, respectively, in other professional fees and general and
administrative expenses. General and administrative expenses increased due
primarily to an increase in the expenses of Banyan Management Corp. ("BMC")
which were allocated to the Fund based on the amount of hours spent by BMC
personnel on Fund-related matters. A significant amount of hours were required
by BMC personnel, during the six months and quarter ended June 30, 1996,
relating to efforts to sell a portion of the Oakridge property and all of 120 S.
Spalding as well as negotiating and finalizing the terms of the Amended and
Restated Agreement and Plan of Merger. During the six months ended June 30,
1996 and 1995, the Fund received cash distributions of $418,972 and $566,783,
respectively, in respect of its interests in two liquidating trusts established
for the benefit of the unsecured creditors (including the Fund) of VMS Realty
Partners and its affiliates ("VMS"). For the six months ended June 30, 1996 and
1995 the Fund has treated $418,972 and $495,591, respectively, of these amounts,
as a recovery of losses on loans, notes and interest receivables. A total of
$127,471 of these distributions has been treated, as of December 31, 1995 and
June 30, 1996, as a liability to the Class Action Settlement Fund representing
the Fund's share of amounts due as required per the terms of the previously
settled VMS securities litigation. These amounts were subsequently paid on July
28, 1996. There were no distributions received during the quarters ended June
30, 1996 and 1995 and the Fund does not anticipate receiving significant
distributions pursuant to these interests in the future. Partially offsetting
these increases are the decreases in stockholder expenses and directors' fees,
expenses and insurance. Stockholder expenses for the six months and quarter
ended June 30, 1996 decreased when compared to the same periods in 1995 due to
the decision to delay the annual meeting, proxy costs, mailing and the printing
costs associated with the Fund's annual reports and meeting until the merger, as
discussed above, can be voted on by the Fund's Stockholders. Directors fees,
expenses and insurance for the six months and quarter ended June 30, 1996
decreased when compared to the same periods in 1995 due to improved premium
rates received for directors' and officers' insurance.
The Fund received distributions equal to $981,330 representing its share
of the Oakridge Venture's income for the six months ended June 30, 1996 as
compared to a net loss of ($90,716) for the same period in 1995. The increase
in the income for 1996 when compared to 1995 is primarily attributable to the
$1,050,936 gain on the sale of 205 acres in February and March of 1996.
Partially offsetting this gain was a $69,606 loss on operations for the six
months ended June 30, 1996. The Fund's share of the Oakridge Venture's net
income for the quarter ended June 30, 1995 was $1,499 compared to a ($47,087)
operating loss for the same period in 1995. The increase in income for the
quarter is primarily attributable to the sale of a portion of the property in
1995 and 1996 which reduced the operating costs of the venture.
During the six months and quarter ended June 30, 1996 the Fund recognized a
gain on disposition of real estate of $63,091. This consists of a gain on
disposition of $67,460 for the 120 S. Spalding property and a loss of ($4,369)
related to the sale of four lots at the Wayside Village property. For the six
months and quarter ended June 30, 1995, the Fund recognized a gain on the
disposition of real estate in the amount of $7,558 and $6,541, respectively,
related to lot sales at the Wayside Village property.
The combination of the above changes resulted in a net loss of $5,318,705
($0.13 per share) for the six months ended June 30, 1996 as compared to a net
loss of $2,655,269 ($0.07 per share) for the same period in 1995. For the
quarters ended June 30, 1996 the Fund recorded net loss of $3,222,137 ($0.07 per
share) compared to net loss of $1,710,533 ($0.04 per share) for the same period
in 1995.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On September 1, 1995, an action was filed in the Circuit Court of Cook
County, Illinois entitled: Monterey County Partners et al v. BMIF Monterey
County Limited Partnership et al; 95 CH 8456 (the "Illinois Litigation"). The
plaintiffs in the Illinois Litigation are as follows: (a) Monterey County
Partners, a partnership which itself is a partner with the Fund's subsidiary,
BMIF Monterey County Corp., in a partnership known as BMIF Monterey County
Limited Partnership (the "Ownership Partnership"), which is the entity that owns
the Laguna Seca project; (b) Investors Liquidating Trust, a Delaware Trust which
has been alleged to own 100% of the common stock of VMS Laguna Seca, Inc., the
1% general partner of VMS Laguna Seca Limited Partnership, which is an alleged
80% partner in Monterey County Partners and the 99% limited partnership interest
in VMS Laguna Seca Limited Partnership and (c) VMTGZ Mortgage Investors, L.P.II,
the principal beneficiary of Investors Liquidating Trust.
Named in the case as defendants, in addition to the Ownership Partnership
and BMIF Monterey County Corp. were: (a) Leonard G. Levine, President of the
Fund and (b) Banyan Management Corp., the company which provides administrative
services to the Fund pursuant to an Administrative Services Agreement. Mr.
Levine and Banyan Management Corp. were subsequently dismissed from this
litigation, but have been named in a Third Amended Complaint.
The original complaint seeks: (i) the removal of BMIF Monterey County
Corp. as the general partner of the Ownership Partnership (BMIF Monterey County
Limited Partnership) and the replacement with Kimball Small Residential
Properties, Inc., a partner in Monterey County Partners as the new general
partner; (ii) declaratory relief that BMIF Monterey County Corp. is not entitled
to any "priority return" or "preferred return" on its capital account in the
Ownership Partnership; (iii) avoidance of an alleged fraudulent transfer whereby
the Ownership Partnership became the owner of the project after the default in
1991 on the Fund's former mortgage loan to Monterey County Partners upon which
the Fund had initiated foreclosure proceedings which culminated in the execution
of the Ownership Partnership agreement; and the creation of a capital account in
an amount not less than approximately $4,800,000 in favor of Monterey County
Partners; (iv) an accounting; and (v) a constructive trust to be created for the
benefit of one of the plaintiffs. Count I of the complaint, seeking the removal
of BMIF Monterey County Corp. as general partner and the replacement with
Kimball Small Residential Properties, Inc. has been stricken on the Fund's
motion. An amended Count I eliminates the request that Kimball Small Residential
Properties, Inc. be named as the replacement general partner.
The Fund filed an Answer, Counterclaim and Third Party Complaint on March
29, 1996. The Counterclaim seeks a dissolution of the Ownership Partnership and
a wind-up of its affairs and monetary damages against Monterey County Partners.
The Counterclaim and Third Party Complaint seek monetary damages against Kimball
Small Management and Kimball Small Residential Properties, Inc., which were
associated with Monterey County Partners. All parties have served and answered
discovery requests and have produced documents. Depositions of certain parties
and others have been noticed and are presently being taken.
The parties appeared before the Illinois Court on April 3, 1996, upon the
defendants' motion, to request the Court to impose a discovery and trial
schedule. The Illinois Court ordered that if the parties conclude discovery by
September 13, 1996, a trial date would be set in September or shortly
thereafter.
On May 14, 1996, the Plaintiffs filed a pleading entitled First Amended
Complaint To Remove and Replace General Partner, For Declaratory Judgment, An
Accounting, To Set Aside Fraudulent Transfers, To Quiet Title And For Other
Equitable Relief And For Damages which purports to name, as additional
defendants, the Fund, RGI Holdings, Inc., the various Morgens, Waterfall
Lenders, Mr. Levine and Banyan Management Corp.
The Plaintiffs then filed a Third Amended Complaint which purports to add
Mr. Levine and Banyan Management Corp. as parties and also adds the Fund, the
various Morgens Waterfall Lender and RGI Holdings Inc. as parties. On August 9,
1996, the Fund answered certain counts of the Third Amended Complaint and
responded to other counts by moving to strike and dismiss or for judgment.
The Fund believes the Illinois Litigation is totally without merit and
intends to vigorously defend the Illinois Litigation and to prosecute the
Counterclaim and the Third Party Complaint. The partnership agreement which
creates the Ownership Partnership requires an unsuccessful litigant or its
representative whose claim is based upon or related to the partnership agreement
to pay the reasonable attorneys' fees of its opponent. The Fund intends to seek
reimbursement of all attorneys' fees expended or incurred in defense of the
Illinois Litigation.
On October 10, 1995, an action was filed in the Superior Court of Monterey
County, California entitled: Monterey County Partners, et al. v. BMIF Monterey
County Limited Partnership, et al; Case No. 105280 (the "California
Litigation").
The plaintiff entity, which is a partner with the Fund's subsidiary, BMIF
Monterey County Corp., in the limited partnership known as BMIF Monterey County
Limited Partnership, which owns the Laguna Seca Ranch property (the "Ownership
Partnership") has filed suit in its own name and derivatively on behalf of the
Ownership Partnership against the Ownership Partnership and each of the
participant entities in the Morgens Loan, which loan is partially guaranteed by
the Ownership Partnership, which partial guaranty is collateralized by a deed of
trust recorded against the Laguna Seca Ranch property.
The California Litigation alleges fraudulent transfer and conspiracy and
seeks the following as remedies: (i) to set aside the Deed of Trust and the
obligations of the Ownership Partnership under the Morgens Loan guaranty; (ii)
to quiet title to the Laguna Seca Ranch project, declaring null and void the
interest of Morgens under the Deed of Trust; and (iii) an award of attorneys'
fees and costs.
A motion to stay the California case, made by all defendants, was heard
and denied without prejudice on January 5, 1996. Subsequently, on March 8, 1996,
the court held a hearing on several motions to dismiss filed by all defendants.
The California Court encouraged the parties to attempt to agree upon a schedule
for conducting discovery and a trial in the Illinois Litigation while the
California Litigation would remain in suspense. On April 19, 1996, the parties
reported to the California Court the schedule that had been promulgated in the
Illinois Litigation. The California Court then ordered that provided discovery
is completed by August 30, 1996, and a trial commences in Illinois during
September of 1996, no further action will be taken in California.
None of the defendants has yet answered the California complaint. The Fund
believes that the California Litigation is totally without merit and intends to
vigorously defend it. As stated above, the partnership agreement which creates
the Ownership Partnership requires an unsuccessful litigant or its
representative whose claim is based upon or related to the partnership agreement
to pay the reasonable attorneys' fees of its opponent. The Fund intends to seek
reimbursement of all attorneys' fees expended or incurred in defense of the
California Litigation.
In a related but separate action entitled BMIF Monterey County Limited
Partnership v. Lombardo et al; Case No. 106363, Superior Court of California,
Monterey County, the Ownership Partnership sought a writ of possession against
Anthony Lombardo, a local attorney, who, the Ownership Partnership contends,
formerly represented it and who was therefore in possession of documents
belonging to the Ownership Partnership. The trial court denied the plaintiff's
application for a writ of possession and Lombardo counterclaimed alleging abuse
of process. The Ownership Partnership filed motions to dismiss
the counterclaim. The parties are in the process of documenting
a settlement of this litigation.
The Fund is not aware of any other material pending legal proceedings as
of August 12, 1996.
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following document is filed as part of this Report:
Exhibit Number Description
(3) Amended and Restated Bylaws of the Registrant dated July 1, 1996.
The following exhibits are incorporated by reference from the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1995:
Exhibit Number Description
(2) Agreement and Plan of Merger dated as of April
12, 1996 by and among RGI U.S. Holdings, Inc.,
RGI Holdings Inc. and the Registrant.
(10)(i) Second Amendment of Leonard G. Levine's
Employment Contract dated December 31, 1992.
(10)(ii) Form of Director Stock Option Agreements dated
July 1, 1993, July 24, 1994 and July 7, 1995.
(10)(iii) Form of Executive Stock Option Agreements dated
July 1, 1993, January 12, 1994 and February 8, 1995.
(21) Subsidiaries of the Fund
The following exhibits are incorporated by reference from the Registrant's
Registration Statement on Form S-11 (file number 33-17597), referencing the
exhibit numbers used in such Registration Statement:
Exhibit Number Description
(3)(a) Restated Certificate of Incorporation
(3)(b) By-Laws
The following exhibit is incorporated by reference from the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1994:
Exhibit Number Description
(10) Material Contracts
Description of Registrant Credit Agreements,
Notes and Warrants with Morgens Waterfall,
Vintiadis & Co. Inc., Exhibit 10(a) through
10(n).
The following exhibits are incorporated by reference from the Registrant's
Form 8-K report as filed with the Securities and Exchange Commission on May 29,
1996:
Exhibit Number Description
(2)(i) Amended and Restated Agreement and Plan of Merger dated as of
May 20, 1996 by and among RGI U.S. Holdings, Inc., RGI
Holdings, Inc. and the Fund.
(4)(i) Registration Rights Agreement dated as of May 21, 1996 between
RGI Holdings, Inc. and the Fund.
(10)(i) "Morgens" Loan Modification dated as of May 21, 1996 between
RGI Holdings, Inc. and the Fund.
(10)(ii) "Societe Generale" Loan Modifications dated May 21, 1996
between RGI Holdings, Inc. and VMIF Anden Wayside Venture and
VMIF Southbridge Venture
The following report on Form 8-K was filed during the quarter ended
June 30, 1996:
(b) A current report on Form 8-K was filed on May 29, 1996, wherein Item
5. Other Events, disclosed that the Registrant had entered into an
Amended and Restated Agreement and Plan of Merger with RGI Holdings,
Inc. and its wholly owned subsidiary, RGI U.S. Holdings, Inc. and
completed its initial closing.
SIGNATURES
PURSUANT to the requirements of the Securities Exchange Act of 1934, the
Fund has duly caused this Report to be signed on its behalf by the undersigned
thereunto duly authorized.
BANYAN MORTGAGE INVESTMENT FUND
By: /s/ Leonard G. Levine Date: August 14, 1996
Leonard G. Levine, President
By: /s/ Joel L. Teglia Date: August 14, 1996
Joel L. Teglia, Vice President,
Chief Financial and Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
"This schedule contains summary financial information extracted from Banyan
Mortgage Investment Fund's Form 10-Q for the period ended June 30, 1996 and is
qualified in its entirety by reference to such 10-Q."
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 6,646,172
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,294,282
<PP&E> 96,146,824
<DEPRECIATION> 0
<TOTAL-ASSETS> 108,054,320
<CURRENT-LIABILITIES> 3,325,315
<BONDS> 0
0
0
<COMMON> 70,368,827
<OTHER-SE> (11,316)
<TOTAL-LIABILITY-AND-EQUITY> 108,054,320
<SALES> 0
<TOTAL-REVENUES> 297,506
<CGS> 0
<TOTAL-COSTS> 1,649,552
<OTHER-EXPENSES> 1,495,069
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,516,011
<INCOME-PRETAX> (5,318,705)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,318,705)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,318,705)
<EPS-PRIMARY> (0.13)
<EPS-DILUTED> (0.13)
</TABLE>
EXHIBIT (3) AMENDED AND RESTATED BYLAWS
AMENDED AND RESTATED BYLAWS
OF
BANYAN MORTGAGE INVESTMENT FUND
Dated as of July 1, 1996
ARTICLE 1
OFFICES
Section 1.1 Registered Office. The registered office shall be in the City
of Wilmington, County of New Castle, State of Delaware.
Section 1.2 Other Offices. The Corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE 2
STOCKHOLDERS
Section 2.1 Annual Meetings. An annual meeting of stockholders shall be
held for the election of directors at such date, time and place, either within
or without the State of Delaware, as may be designated by resolution of the
Board of Directors from time to time or in the manner provided in these Bylaws.
Any other proper business may be transacted at the annual meeting
Section 2.2 Special Meetings. Special meetings of stockholders for any
purpose or purposes may be called at any time by the Board of Directors, by a
committee of the Board of Directors which has been duly designated by the Board
of Directors and whose powers and authority include the power to call such
meetings, or by the Chairman of the Board or the Chief Executive Officer upon
the written request of stockholders holding at least 33% of the outstanding
shares of Common Stock of the Corporation. The stockholders' request shall state
the purpose of the meeting. Only business related to the purposes set forth in
the notice of the meeting may be transacted at a special meeting.
Section 2.3 Time and Place of Meetings. Subject to the provisions of
Section 3.1, each meeting of stockholders shall be held at a time and place
convenient to stockholders, as determined by the Board of Directors. Such
meetings may be at the principal office of the Corporation or at such place
within or without the State of Delaware, and at such hour, as shall be fixed by
the Board of Directors or in the notice of the meeting or, in the case of an
adjourned meeting, as announced at the meeting at which the adjournment is
taken.
Section 2.4 Notice of Meetings. Whenever stockholders are required or
permitted to take any action at a meeting, a written notice of the meeting shall
be given which shall state the place, date and hour of the meeting, and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called. Unless otherwise provided by law, the written notice of any meeting
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting. If
mailed, such notice shall be deemed to be given when deposited in the mail,
postage prepaid, directed to the stockholder at his address as it appears on the
records of the Corporation.
Section 2.5 Waiver of Notice. Anything herein to the contrary
notwithstanding, notice of any meeting of stockholders need not be given to any
stockholder who shall have waived in writing notice of the meeting, either
before or after such meeting, or who shall attend the meeting in person or by
proxy, unless he attends for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened. All such written waivers shall be filed with the
Fund's records or made a part of the minutes of the meeting.
Section 2.6 Adjournments. Any meeting of stockholders, annual or special,
may adjourn from time to time to reconvene at the same or some other place, and
notice need not be given of any such adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment is taken. At the
adjourned meeting the Corporation may transact any business which might have
been transacted at the original meeting. If the adjournment is for more than
thirty (30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 2.7 Quorum. At each meeting the stockholders, except where
otherwise provided by law or the Certificate of Incorporation or these Bylaws,
the holders of a majority of the outstanding shares of stock entitled to vote at
the meeting, present in person or by proxy, shall constitute a quorum. In all
matters other than the election of directors, the affirmative vote of the
majority of shares present in person or represented by proxy at the meeting and
entitled to vote on the subject matter shall be the act of the stockholders.
Where a separate vote by class or classes is required, a majority of the
outstanding shares of such class or classes, present in person or represented by
proxy, shall constitute a quorum entitled to take action with respect to that
vote on that matter and the affirmative vote of the majority of shares of such
class or classes present in person or represented by proxy at the meeting shall
be the act of such class. In the absence of quorum, the stockholders so present
may, by majority vote, adjourn the meeting from time to time in the manner
provided in Section 2.4 of these Bylaws until a quorum shall attend.
Section 2.8 Voting; Proxies. Each stockholder entitled to vote at any
meeting of stockholders shall be entitled to one vote for each share of stock
held by him which has voting power upon the matter in question. Each stockholder
entitled to vote at a meeting of stockholders may authorize another person to
act for him by proxy, but no such proxy shall be voted or acted upon after three
(3) years from its date, unless the proxy provides for a longer period. A duly
executed proxy shall be irrevocable if it states that it is irrevocable and if,
and only as long as, it is coupled with an interest sufficient in law to support
an irrevocable power. A stockholder may revoke any proxy which is not
irrevocable by attending the meeting and voting in person or by filing an
instrument in writing revoking the proxy or another duly executed proxy bearing
a later date with the Secretary of the Corporation. The votes for directors may
be by ballot or by written consent. At all meetings of stockholders for the
election of directors a plurality of the votes cast shall be sufficient to
elect. All other elections and questions shall, unless otherwise provided by law
or by the Certificate of Incorporation or these Bylaws, be decided by the vote
of the holders of a majority of the outstanding shares of stock entitled to vote
thereon present in person or by proxy at the meeting.
Section 2.9 Fixing Date for Determination of Stockholders of Record.
(a) In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which shall
not precede the date such record date is fixed and shall not be more than sixty
(60) nor less than ten (10) days before the date of such meeting, nor more than
sixty (60) days prior to any other action. If no record date is fixed, the
record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given. The record date for any other
purpose other than stockholder action by written consent shall be at the close
of business on the day on which the Board of Directors adopts the resolution
relating thereto. A determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
(b) In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall not be more than sixty (60) days prior to
such action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
Section 2.10 List of Stockholders Entitled to Vote. The Secretary shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof and may be inspected by any stockholder who is present. The stock ledger
shall be the only evidence as to who are the stockholders entitled to examine
the stock ledger, the list of stockholders or the books of the Corporation, or
to vote in person or by proxy at any meeting of the stockholders.
Section 2.11 Inspectors of Election.
(a) The Corporation shall, in advance of any meeting of
stockholders, appoint one or more inspectors to act at the meeting and make a
written report thereof. The Corporation may designate one or more persons as
alternate inspectors or replace an inspector who fails to act. If no inspector
or alternate is able to act at a meeting of stockholders, the person presiding
at the meeting shall appoint one or more inspectors to act at the meeting. Each
inspector, before entering upon the discharge of his duties, shall take and sign
an oath faithfully to execute the duties of inspector with strict impartiality
and according to the best of his ability.
(b) The inspectors shall (i) ascertain the number of shares
outstanding and the voting power of each, (ii) determine the shares represented
at a meeting and the validity of proxies and ballots, (iii) count all votes and
ballots, (iv) determine and retain for a reasonable period a record of the
disposition of any challenges made to any determination by the inspectors, and
(v) certify their determination of the number of shares represented at the
meeting, and their count of all votes and ballots. The inspectors may appoint or
retain other persons or entities to assist the inspectors in the performance of
the duties of the inspectors.
(c) The date and time of the operating and the closing of the
polls for each matter upon which the stockholders will vote at meeting shall be
announced at the meeting.
(d) In determining the validity and counting of proxies and
ballots, the inspectors shall be limited to an examination of the proxies, any
envelopes submitted with those proxies, ballots and the regular books and
records of the Corporation, except that the inspectors may consider other
reliable information for the limited purpose of reconciling proxies and ballots
submitted by or on behalf of banks, brokers, their nominees or similar persons
which represent more votes than the holder of a proxy is authorized by the
record owner to cast or more votes than the stockholder holds of record. If the
inspectors consider other reliable information for the limited purpose permitted
herein, the inspectors at the time they make their certification pursuant to
subsection (b)(v) of this section shall specify the precise information
considered by them including the person or persons from whom they obtained
information, when the information was obtained and the basis for the inspectors'
belief that such information is accurate and reliable.
Section 2.12 Action by Consent of Stockholders
(a) Any action required or permitted to be taken at any annual or
special meeting of stockholders of the Corporation, may be taken without a
meeting, without prior notice and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted and shall be delivered to the
Corporation by delivery to its registered office, its principal place of
business, or an officer or agent of the Corporation having custody of the book
in which proceedings of meetings of members are recorded. Delivery made to the
Corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested.
(b) Every written consent shall bear the date of signature on each
stockholder or member who signs the consent and no written consent shall be
effective to take the corporation action referred to therein unless, within
sixty days of the earliest dated consent delivered in the manner required by
this Section 2.9 to the Corporation, written consents signed by a sufficient
number of holders or members to take action are delivered to the Corporation by
delivery to its registered office, its principal place of business, or an
officer or agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders or members are recorded. Delivery made
to the Corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested.
(c) Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders or members, as the case maybe, who have not consented in writing.
ARTICLE 3
BOARD OF DIRECTORS
Section 3.1 Number; Qualifications. The Board of Directors shall consist
of five (5) members at least three (3) of whom shall at all times be Independent
Directors. This number maybe amended as provided in Section 8.6 herein.
Directors need not be stockholders. For purposes of this Section 3.1,
"Independent Directors" shall mean directors who (i) are not affiliated directly
or indirectly (whether by ownership of, ownership interest in, employment by, or
service as an officer or director by such person or an immediate family member)
with RGI Holdings, Inc., or any person or entity controlling, controlled by, or
under common control with, RGI Holdings, Inc.,and (ii) perform no other services
for the Corporation except as directors.
Section 3.2 Election; Resignation; Removal; Vacancies. Except as
provided below, the Directors shall be elected at each annual meeting and each
director elected shall hold office until his successor is elected and qualified.
Notwithstanding the foregoing, the positions occupied at the time these Bylaws
were adopted, whose terms expire in 1997 and 1998, shall not be subject to
election until the annual meetings occurring in 1997 and 1998, respectively, but
shall be subject to election at each annual meeting thereafter. Any Director may
resign at any time upon written notice to the Corporation. Any vacancy occurring
in the Board of Directors may be filled by the affirmative vote of a majority of
the Board, although such majority is less than a quorum, or by a plurality of
the votes cast at a meeting of stockholders, and each Director so elected shall
hold office until the expiration of the term of office of the Director whom he
has replaced.
Section 3.3 Management of the Business and Affairs of the Corporation.
The business and affairs of the Corporation shall be managed by or under the
direction of the Board of Directors, except as may be otherwise provided in the
Certificate of Incorporation. If any such provision is made in the Certificate
of Incorporation, the powers and duties conferred or imposed upon the Board of
Directors shall be exercised or performed to such extent and by such person or
persons as shall be provided in the Certificate of Incorporation.
Section 3.4 Regular Meetings. Regular meetings of the Board of Directors
may be held at such places within or without the State of Delaware and at such
times as the Board of Directors may from time to time determine, and if so
determined, notices thereof need not be given.
Section 3.5 Special Meetings. Special meetings of the Board of Directors
may be held at any time or place within or without the State of Delaware
whenever called by the Chief Executive Officer, President, the Secretary, or by
any member of the Board of Directors. Reasonable notice thereof shall be given
by the person or persons calling the meeting, not later than the second day
before the date of the special meeting.
Section 3.6 Telephonic Meetings Permitted. Members of the Board of
Directors, or any committee designated by the Board, may participate in a
meeting of such Board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to these
Bylaws shall constitute presence in person at such meeting.
Section 3.7 Quorum; Vote Required for Action. At all meetings of the
Board of Directors a majority of the whole Board shall constitute a quorum for
the transaction of business. Except in cases in which the Certificate of
Incorporation or these Bylaws otherwise provide, the vote of a majority of the
Directors present at a meeting at which a quorum is present shall be the act of
the Board of Directors.
Section 3.8 Information Action by Directors. Unless otherwise restricted
by the Certificate of Incorporation or these Bylaws, any action required or
permitted to be taken at any meeting of the Board of Directors, or of any
committee thereof, may be taken without a meeting if all members of the Board of
such committee, as the case may be, consent thereto in writing, and the writings
are filed with the minutes of proceedings of the Board or committee.
Section 3.9 Compensation of the Directors. Unless otherwise restricted by
the Certificate of Incorporation or these Bylaws, the Board of Directors shall
have the authority to fix the compensation of Directors.
Section 3.10 Removal of Directors. Unless otherwise restricted by the
Certificate of incorporation or these Bylaws, a director may be removed only for
good cause shown by a majority of shares entitled to vote at an election of
Directors.
ARTICLE 4
COMMITTEES
Section 4.1 Executive Committee. By resolution adopted by an affirmative
vote of the majority of the entire Board of Directors, the Board of Directors
may appoint an Executive Committee consisting of three or more Directors, and,
if deemed desirable, one or more Directors as alternate members who may replace
any absentee or disqualified member at any meeting of the Executive Committee.
If so appointed, the Executive Committee shall, when the Board is not in
session, have and may exercise all powers and authority of the Board in the
management of the business and affairs of the Corporation not reserved to the
whole Board by the General Corporation Law of the State of Delaware. The
Executive Committee shall keep a record of its acts and proceedings and shall
report the same from time to time to the Board of Directors. The Directors shall
have the power to prescribe the manner in which proceedings of the Executive
Committee, if appointed, and other committees, shall be conducted.
Section 4.2 Other Committee. By resolution adopted by an affirmative vote
of the majority of the entire Board of Directors, the Board may from time to
time appoint such other committees of the Board, including without limitation,
audit and nominating committees, consisting of three or more Directors, and, if
deemed desirable, one or more Directors who shall act as alternate members and
who may replace any absentee or disqualified member at any meeting of the
committee, and may delegate to each such committee any of the powers and
authority of the Board in the management of the business and affairs of the
Company not reserved by law, the Restated Certificate of Incorporation, or these
Bylaws, to the whole Board. Each such committee shall keep a record of its acts
and proceedings and shall report the same from time to time to the Board of
Directors.
Section 4.3 Election of Committee Members; Vacancies. So far as
practicable, members of the committees of the Board and their alternates (if
any) shall be appointed at each annual meeting of the Board of Directors and,
unless sooner discharged by an affirmative vote of a majority of the Board
members present at any meeting of the entire Board at which a quorum is present,
committee members shall hold office until the next annual meeting of the Board
and until their respective successors are appointed. Vacancies in committees of
the Board created by death, resignation or removal may be filled by an
affirmative vote of a majority of the committee members present at any meeting
at which a quorum is present.
Section 4.4 Meetings. Each committee of the Board may provide for regular
meetings of such committee. Special meetings of each committee may be called by
any two members of the committee (or, if there is only one member, by that
member in concert with the Chief Executive Officer) or by the Chief Executive
Officer of the Corporation. The provisions of Section 3 regarding the business,
time and place, notice and waivers of notice of meetings, attendance at meetings
and action without a meeting shall apply to each committee of the Board, except
that the references in such provisions to the Directors and the Board of
Directors shall be deemed respectively to the references to the members of the
committee and to the committee. Each committee shall keep regular minutes of its
proceedings and report the same to the Board of Directors when required.
Section 4.5 Quorum and Manner of Acting. The majority of the members of
any committee of the Board shall constitute a quorum for the transaction of
business at meetings of the committee, and the act of a majority of the members
present at any meeting at which a quorum is present shall be the act of the
committee. A majority of the members present at any meeting, regardless of
whether or not they constitute a quorum, may adjourn the meeting to another time
or place. Any business which might have been transacted at the original meeting
may be transacted at any adjourned meeting at which a quorum is present.
ARTICLE 5
OFFICERS
Section 5.1 Executive Officers; Election; Qualifications; Term of Office;
Resignation; Removal: Vacancies. The Board of Directors shall choose a Chief
Executive Officer, President and Secretary, and it may, if it so determines,
choose a Chairman of the Board and a Vice Chairman of the Board from among its
members. The Board of Directors may also choose one or more Vice Presidents, one
or more Assistant Secretaries, a Treasurer and one or more Assistant Treasurers.
Each such officer shall hold office until the first meeting of the Board of
Directors after the annual meeting of stockholders next succeeding this
election, and until his successor is elected and qualified or until his earlier
resignation or removal. The Board of Directors may appoint such other officers
and agents as it shall deem necessary who shall hold their office for such terms
and shall exercise such powers and perform such duties as shall be determined
from time to time by the Board of Directors. Any officer may resign at any time
upon written notice to the Corporation. The Board of Directors may remove any
officer with or without cause at any time, but such removal shall be without
prejudice to the contractual rights of such officer, if any, with the
Corporation. Any number of offices may be held by the same person. Any vacancy
occurring in any office of the Corporation by death, resignation, removal or
otherwise may be filled for the unexpired portion of the term by the Board of
Directors at any regular or special meeting.
Section 5.2 Chairman of the Board. The Chairman of the Board of Directors
shall have the power to preside at all meetings of the Board of Directors, and
to call meetings of the stockholders and of the Board of Directors to be held
within the limitations prescribed by law or by these Bylaws, at such times and
at such places as the Chairman of the Board shall deem proper. The Chairman of
the Board shall have such other powers and shall be subject to such other duties
at the Board of Directors may from time to time prescribe.
Section 5.3 Chief Executive Officer. The powers and duties of the Chief
Executive Officer are:
(a) to act as the chief executive officer of the Corporation and,
subject to the control of the Board of Directors, to have general supervision,
direction and control of the business and affairs of the Corporation;
(b) to preside at all meetings of the Stockholders and, in the
absence of the Chairman of the Board, at all meetings of the Board of Directors;
(c) to call meetings of the Stockholders and also of the Board of
Directors to be held, subject to the limitations prescribed by law or by these
By-Laws, at such times and at such places as the Chief Executive Officer shall
deem proper; and
(d) subject to the direction of the Board of Directors, to have
general charge of the property of the Corporation, to supervise and control all
officers, agents and employees of the Corporation, and to exercise such other
general powers of management as are usually vested in the office of Chief
Executive Officer of a corporation organized under the laws of the State of
Delaware.
Section 5.4 President. In case of the absence, disability or death of the
Chief Executive Officer, the President shall exercise all the powers and perform
all the duties of the Chief Executive Officer. The President shall have such
other powers and perform such other duties as may be granted or prescribed by
the Board of Directors or the Chief Executive Officer.
Section 5.5 Vice President. In case of the absence, disability or death
of the President, the Vice President, or one of the Vice Presidents, shall
exercise all the powers and perform all the duties of the President. If there is
more than one Vice President, the order in which the Vice Presidents shall
succeed to the powers and duties of the President shall be in order of their
rank as fixed by the Board of Directors, or, if not ranked, the Vice President
designated by the Board of Directors. The Vice President or Vice Presidents
shall have such other powers and perform such other duties as may be granted or
prescribed by the Board of Directors or the Chief Executive Officer.
Section 5.6 Secretary. The powers and duties of the Secretary are:
(a) to keep a book of minutes at the principal office of the
Corporation, or such other place as the Board of Directors may order, all
meetings of its Directors and stockholders with the time and place of holding,
whether regular or special, and, if special, how authorized, the notice thereof
given, the names of those present at Director's meetings, the number of Shares
present or represented at stockholders' meetings and the proceedings thereof.
(b) to maintain custody of and keep the books of account and other
records of the Corporation except as are in the custody of the Treasurer;
(c) to keep the seal of the Corporation and to affix the same to
all instruments which may require it;
(d) to keep or cause to be kept at the principal office of the
Corporation a stock ledger, or duplicate stock ledger if the original is kept at
the office of the transfer agent or agents, showing the names of the
stockholders and their addresses, the number and classes of shares held by each,
the number and date of certificates issued for shares, and the number and date
of cancellation of every certificate surrendered for cancellation;
(e) to keep a supply of certificates for shares of the
Corporation, to fill in all certificates issued and to make a proper record of
each such issuance; provided, that so long as the Corporation shall have one or
more duly appointed and acting transfer agents of the Shares, or any class or
series of Shares, of the Corporation, such duties with respect to such Shares
shall be performed by such transfer agent or transfer agents;
(f) to transfer upon the share books of the Corporation any and
all Shares of the Corporation; provided, that so long as the Corporation shall
have one or more duly appointed and acting transfer agents of the Shares, or any
class or series of shares, of the Fund, such duties with respect to such Shares
shall be performed by such transfer agent or transfer agents, and the method of
transfer of each certificate shall be subject to the reasonable regulations of
the transfer agent to which the certificate is presented for transfer, and also,
if the Fund then has one or more duly appointed and acting registrars, to the
reasonable regulations of the registrar to which the new certificate is
presented for registration; and provided, further, that no certificate for
Shares shall be issued or delivered or, if issued or delivered, shall have any
validity whatsoever until and unless it has been signed or authenticated in
manner provided in Section 7.1 hereof;
(g) to make service and publication of all notices that may be
necessary or proper. In case of the absence, disability, refusal or neglect of
the Secretary to make service or publication of any notices, then such notices
may be served and/or published by the Chief Executive Officer, the President or
a Vice President, or by any person thereunder authorized by either of them or by
the Board of Directors or by the holders of a majority of the outstanding shares
of the Corporation entitled to vote thereon: and
(h) generally to do and perform all such duties as pertain to the
office of Secretary and as may be required by the Board of Directors.
Section 5.7 Treasurer. The powers and duties of the Treasurer are:
(a) to supervise and control the keeping and maintaining of
adequate and correct accounts of the Corporation's investments and business
transactions, including accounts of its assets, liabilities, receipts,
disbursements, gains, losses, capital, retained earnings and Shares. The
Treasurer shall maintain all books of account and other records of the
Corporation, except as are in the custody of the Secretary;
(b) to have the custody of all money, securities, evidence of
indebtedness and other valuable documents of the Corporation, and, at the
Treasurer's discretion, to cause any or all thereof to be deposited for the
account of the Corporation with such depository as may be designated from time
to time by the Board of Directors;
(c) to receive or cause to be received, and to give or cause to be
given, receipts and acquittances for moneys paid in for the account of the
Corporation;
(d) to disburse, or cause to be disbursed, all money of the Fund
as may be directed by the Board of Directors, taking proper vouchers for such
disbursements;
(e) to render to the President and to the Board of Directors,
whenever they may require, accounts of all transactions and of the financial
condition of the Fund; and
(f) generally to do and perform all such duties as pertain to the
office of Treasurer and as may be required by the Board of Directors.
Section 5.8 Term of Office and Vacancy. So far as practicable, the
elected officers shall be elected at each annual meeting of the Board, and shall
hold office until the next annual meeting of the Board and until their
respective successors are elected and qualified. If a vacancy shall occur in any
elected office, the Board of Directors may elect a successor for the remainder
of the term. Any officer may resign by written notice to the Corporation.
Section 5.9 Removal of Elected Officers. Elected officers may be removed
at any time, either for or without cause, by the affirmative vote of a majority
of a quorum of the entire Board of Directors.
Section 5.10 Compensation of Elected Officers. The compensation of all
elected officers of the Corporation shall be fixed from time to time by the
Board of Directors.
ARTICLE 6
STOCK
Section 6.1 Certificate. Every holder of stock shall be entitled to have
a certificate signed by or in the name of the Corporation by the Chairman or
Vice Chairman of the Board of Directors, if any, or the President or a Vice
President, and by the Treasurer or an Assistant Treasurer, or the Secretary or
an Assistant Secretary, of the Corporation, certify the number of shares owned
by him in the Corporation. Any of or all of the signatures on the certificate
may be a facsimile. In case any officer, transfer agent, or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent, or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent, or registrar at the date of issue.
All certificates shall be consecutively numbered. The name of the person owning
the share represented thereby, with the number of such shares and the date of
issue, shall be entered on the Corporation's books.
Section 6.2 Lost, Stolen or Destroyed Stock Certificates; Issuance of New
Certificates. The Corporation may issue a new certificate of stock in the place
of any certificate theretofore issued by it, alleged to have been lost, stolen
or destroyed, and the Corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the Corporation a
bond sufficient to indemnify it 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.
ARTICLE 7
INDEMNIFICATION
Section 7.1 Power to Indemnify in Actions. Suits or Proceedings Other
Than Those By or In the Right of the Corporation. The Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the Corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officers, employee or agent of
another Corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines, and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendre or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to be believe that his conduct was unlawful.
Section 7.2 Power to Indemnify in Actions, Suits or Proceedings By or In
the Right of the Corporation. The Corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred, by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interest of the Corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to the extent that
the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
Section 7.3 Success on the Merits in Defense of Any Action, Suit or
Proceeding. To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 7.1 or 7.2 of this Article 7
or in defense of any claim, issue or matter therein, he shall be indemnified
against expense (including attorneys' fees) actually and reasonably incurred by
him in connection therewith.
Section 7.4 Authorization of Indemnification. Any indemnification under
Section 7.1 or 7.2 of this Article 7 (unless ordered by a court) shall be made
by the Corporation only as authorized in the specific case upon a determination
that indemnification of the director, officer, employee or agent is proper in
the circumstances because he has met the applicable standard of conduct set
forth in Section 7.1 or 7.2 of this Article 7. Such determination shall be made
(a) by the Board of Directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceedings, or (b) if
such a quorum is not obtainable, or, even if obtainable, a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (c) by the stockholders.
Section 7.5 Expenses Payable in Advance. Expenses incurred by a director,
officer, employee or agent of the Corporation in defending a civil or criminal
action, suit or proceeding may be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding as authorized by the Board
of Directors in the specific case upon receipt of an undertaking by or on behalf
of the director, officer, employee or agent to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
Corporation as authorized in this Article 7.
Section 7.6 Nonexclusivity of Indemnification and Advancement of
Expenses. The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article shall not be deemed exclusive of any other
rights to which those seeking indemnification or advancement of expenses may be
entitled under any bylaw, agreement, vote of stockholder or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office.
Section 7.7 Insurance. The Corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation, as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article 7.
Section 7.8 Certain Definitions. For purposes of Article 7, references to
"other enterprises" shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed on a person with respect to any employee
benefit plan; and reference to "serving at the request of the corporation" shall
include any service as a director, officer, employee or agent of the Corporation
which imposes duties on, or involves service by, such director, officer,
employee, or agent with respect to an employee benefit plan, its participants,
or beneficiaries; and person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in Article 7.
Section 7.9 Survival of Indemnification and Advancement of Expenses. The
indemnification and advancement of expenses provided by, or granted pursuant to,
this section shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such a person.
Section 7.10 Limitation on Indemnification. Notwithstanding anything
contained in this Article 7 to the contrary, except for proceedings ordered by a
court, the Corporation shall not be obligated to indemnify any director, officer
or employee in connection with a proceeding (or part thereof) initiated by such
person unless such proceeding (or part thereof) was authorized or consented to
by the Board of Directors of the Corporation.
Section 7.11 Indemnification of Employees and Agents. The Corporation
may, to the extent authorized from time to time by the Board of Directors,
provide rights to indemnification and to the advancement of expenses to
employees and agents of the Corporation similar to those conferred in this
Article 7 to directors and officers of the Corporation if not so conferred
herein.
ARTICLE 8
MISCELLANEOUS
Section 8.1 Fiscal Year. The fiscal year of the Corporation shall be
determined by resolution of the Board of Directors
Section 8.2 Seal. The corporate seal shall have the name of the
Corporation inscribed thereon and shall be in such form as may be approved from
time to time by the Board of Directors.
Section 8.3 Waiver of Notice of Meetings of Stockholders, Directors and
Committees. Any written waiver of notice, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of any
regular or special meeting of the stockholders, directors, or members of a
committee of directors need be specified in any written waiver of notice.
Section 8.4 Interested Directors: Quorum. No contract or transaction
between the Corporation and one or more of its directors or officers, or between
the Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board or committee thereof which authorizes
the contract or transactions, or solely because his or their votes are counted
for such purpose, if: (1) the material facts as to his relationship or interest
and as to the contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board or committee in good faith authorizes
the contract or transaction by the affirmative votes of majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or (2) the material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or (3) the contract or
transaction is fair as to the Corporation as of the time it is authorized,
approved or ratified by the Board of Directors, a committee thereof, or the
stockholders. Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
Section 8.5 Form of Records. Any records maintained by the Corporation in
the regular course of its business, including its stock ledger, books of
account, and minute books, may be kept on, or be in the form of any information
storage device, provided that the records so kept can be converted into clearly
legible form within a reasonable time. The Corporation shall so convert any
records so kept upon the request of any person entitled to inspect the same.
Section 8.6 Amendment of Bylaws. These Bylaws may be altered or repealed,
and new Bylaws made, by the Board of Directors, but the stockholders may make
additional Bylaws and may alter and repeal any Bylaws whether adopted by them or
otherwise; provided that any amendment to these Bylaws which seeks to impose
restrictions on the transferability or alienation of the Company's shares of
common stock shall require the unanimous approval of the Board of Directors.
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