SECURITIES EXCHANGE FILING
MASTER MORTGAGE INVESTMENT FUND, INC.
PROXY
JUNE 18, 1996
FILED: JUNE 18, 1996
NOTICE OF MEETING
VOTING PROCEDURES
PROPOSALS
BENEFICIAL OWNERSHIP
MATTERS CONCERNING BOARD OF TRUSTEES
EXECUTIVE OFFICER COMPENSATION
COMPENSATION REPORT OF BOARD OF TRUSTEES
PERFORMANCE GRAPH
CERTAIN TRANSACTIONS
AMENDMENT OF ARTICLES OF INCORPORATION
RE: AUTHORIZED CAPITAL
AMENDMENT OF ARTICLES OF INCORPORATION
RE: CHANGE OF NAME
AMENDMENT OF ARTICLES OF INCORPORATION
RE: INDEMNIFICATION PROVISIONS
AMENDMENT AND RESTATEMENT OF BYLAWS
CREATION OF CLASSIFIED BOARD OF TRUSTEES
ELECTION OF TRUSTEES
AUDITORS
NOTICE OF MEETING
MASTER MORTGAGE INVESTMENT FUND, INC.
712 Broadway, Suite 700
Kansas City, MO 64105
June 18, 1996
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
A special meeting of the shareholders of Master Mortgage Investment Fund,
Inc., (the "Company") to be held in lieu of the annual meetings for 1992,
1993, 1994 and 1995 will be held at 510 Delaware, Kansas City, Missouri 64105
on July 23, 1996 at 10:00 a.m. for the following purposes:
1. To ratify the Amendment of the Articles of Incorporation of the
Company to increase the authorized common shares of the Company
to 45,000,000 and reduce the authorized number of preferred
shares to 2,500,000.
2. To amend the Articles of Incorporation of the Company to change the
name of the Company from Master Mortgage Investment Fund, Inc. to
Master Realty Properties, Inc.
3. To amend the Articles of Incorporation of the Company to conform
the indemnification provisions contained therein to the
indemnification provisions contained in the Bylaws.
4. To amend and restate the Bylaws of the Company to reflect the
current business plan of the Company.
5. To amend the Bylaws of the Company to establish a Classified
Board of Trustees.
6. To elect trustees for terms expiring at the Annual Meeting of
Shareholders.
7. To vote on the recommendation of management that Mayer Hoffman &
McCann be appointed auditors of the Company for 1996.
8. To transact such other business as may properly come before the
meeting.
Please be advised that the Annual Report to Shareholders of the
Company for the fiscal year ended December 31, 1995 is included with
this mailing to all shareholders of record.
By Order of the Board of Trustees
Byron Constance,
Secretary
YOUR VOTE IS IMPORTANT. Whether or not you plan to attend the meeting,
please sign and date the enclosed Proxy and mail it promptly in the envelope
provided, which requires no postage if mailed in the United States.
MASTER MORTGAGE INVESTMENT FUND, INC.
712 BROADWAY, SUITE 700
KANSAS CITY, MISSOURI 64105
(816) 474-9333
The mailing date of this Proxy
Statement is June 18, 1996
PROXY STATEMENT
FOR SPECIAL MEETING IN LIEU OF
THE ANNUAL MEETINGS OF SHAREHOLDERS
FOR 1992, 1993, 1994 AND 1995
MASTER MORTGAGE INVESTMENT FUND, INC.
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation
of proxies on behalf of the Board of Trustees of Master Mortgage Investment
Fund, Inc. (the "Company") for the special meeting of Shareholders to be held
in lieu of the annual meetings for 1992, 1993, 1994 and 1995 to be held on July
23, 1996 at 10:00 a.m., Central Standard Time, at 510 Delaware, Kansas City,
Missouri 64105 (the "Meeting"). Only Shareholders of record at the close of
business on June 18, 1996 are entitled to notice of and to vote at the
Meeting. There were 1,308,669 common shares and 2,491,622 preferred shares
outstanding and entitled to vote on that date.
Shareholders are not entitled to cumulative voting rights. Each
Shareholder shall be entitled to one vote per each common share and one
vote per each preferred share owned by him\her on each
proposal.
When you sign and return the enclosed proxy, the shares represented
thereby will be voted for the proposals set forth in Items 1, 2, 3, 4, 5
and 7 in the Notice of Meeting and for the nominees for trustee
listed in Item 6, unless otherwise indicated on the proxy.
Returning your completed proxy will not prevent you from voting in
person at the Meeting should you be present and wish to do so. In addition,
you may revoke your proxy any time before it is voted by sending notice to
Byron Constance, Secretary, Master Mortgage Investment Fund, Inc.,
712 Broadway, Suite 700, Kansas City, Missouri 64105. If you submit
more than one proxy, each later-dated proxy will
revoke all previous proxies.
The Company knows of no specific matter to be brought before the
Meeting that is not referred to in the Notice of Meeting or this proxy
statement. However, if proposals of Shareholders that are not
included in this proxy statement are presented at the Meeting, the proxies
will be voted in the discretion of the proxy holders. Regulations of
the Securities and Exchange Commission permit the proxies solicited
pursuant to this proxy statement to confer discretionary authority with
respect to matters of which the Company did not know a reasonable time
before the Meeting. Accordingly, the proxy holders may use
their discretionary authority to vote with respect to any such matter
pursuant to the proxy solicited hereby.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED ON
To the best of the Company's knowledge no person who has been
a director, trustee or executive officer of the Company at any time since
the beginning of the last fiscal year has any substantial interest,
direct or indirect, in any matter to be acted upon at the Meeting, except
for the proposed revision to the Bylaws at Section 11.2 allowing the
payment of fees or commissions to companies affiliated with the
Trustees, with the approval of the disinterested Trustees.
I. VOTING PROCEDURES
Vote Required: Trustees will be elected at the Meeting by a
majority of the votes cast at the Meeting by the Shareholders
represented in person or by proxy. Approval of Items 1, 2, 3, 4, 5 and 7
also require the affirmative vote of the majority of the votes cast
at the Meeting by the Shareholders represented in person or by proxy.
The holders of a majority of the total number of Common and
Preferred shares entitled to vote, present in person or represented by
proxy, constitute a quorum for the transaction of business. Shareholders
will not be entitled to appraisal rights in connection with any of the
matters to be voted at the Meeting.
Effect of an Abstention and Broker Non-Votes: A Shareholder
who abstains from voting on any or all proposals will be included in
the number of Shareholders present at the Meeting for the purpose of
determining the presence of a quorum. Abstentions will not be
counted either in favor of or against the election of the
nominees or other proposals.
Inspectors of Election: Pursuant to Section 3.8 of the Bylaws
of the Company and Section 2.31 of the Delaware Corporation Code, the
Board of Trustees has appointed Thomas H. Trabon as the Inspector
of Election (the "Inspector of Election") of the Meeting. The
Inspector of Election shall determine the outstanding Common and
Preferred shares of the Company, the number of shares represented at the
Meeting and the existence of a quorum. The Inspector of Election
shall receive votes, proxies, ballots and consents, will count and
tabulate all votes and determine the result. The Inspector of Election will
determine the authority, validity and effect of each proxy, hear
and determine all challenges and questions and do all other
ministerial acts as may be proper to conduct the election or
vote with fairness to all Shareholders.
Confidentiality: In connection with all meetings of Shareholders,
all proxies, ballots and vote tabulations that identify the particular
vote of a Shareholder are kept confidential, except that disclosure
may be made (i) to allow the Inspector of Election to certify the
results of the vote; or (ii) as necessary to meet applicable legal
requirements, including the pursuit or defense of judicial actions.
Comments written on proxies, consents or ballots may be transcribed
and provided to the Secretary of the Company with the
name and address of the Shareholder without reference to the vote
of the Shareholder, except where such vote is included in the
comment or disclosure is necessary to understand the comment.
II. SHAREHOLDER PROPOSALS
The Annual Meeting of Shareholders of the Company for 1996 is
scheduled to be held in February, 1997. In order to have any
proposal to be presented by a shareholder at such meeting included
in the Company's proxy statement and form of proxy relating to
the meeting, the proposals must be received by the Company no later
than November 30, 1996.
III. INFORMATION REGARDING BENEFICIAL OWNERSHIP OF TRUSTEES, MANAGEMENT
AND THE FIVE PERCENT BENEFICIAL OWNERS
A. Beneficial Ownership
The following table sets forth information regarding the beneficial
ownership (1) of the Company's shares by the Trustees, Nominees, Management,
and Five Percent Beneficial Owners as of April 15, 1996:
Name(17) Amount of % of Beneficial Amount of % of
Ownership Preferred Ownership Ownership
Preferred Common Common
John J.
Bennett
3850 W. 171st
Stilwell, KS
66085 29,559(3) 1.19% 103,718(4) .37%
Byron
Constance
3729 S. Union
Independence,
MO 64055 27,066(5) 1.09% 130(6) 0%
Richard
Polcari
27 Thayer Road
P.O. Box 79191
Belmont,
MA 02179 20,197(7) .81% 48,181(8) .17%
James E.
Trimmer
3130 Wheeling
Kansas City,
MO 64129 171,533(9) 6.88% 604,226(10) 2.16%
Dr. Richard
Padula
6420 Prospect,
Ste T-211,
Kansas City,
MO 64132 103,416(11) 4.15% 3,624,854(12) 12.96%
Daniel
Root
5201 College
Boulevard
Leawood,
KS 66211 95,836(13) 3.85% 812,691(14) 2.90%
James E.
Williams
4419 S. Chrysler
Independence,
MO 64055 63,426(15) 2.55% 1,748,837(16) 6.25%
Executive
Officers
and
Trustees
as a Group
(4 Persons) 248,355 9.97% 756,125 2.70%
(1) A person is deemed a beneficial owner if he has the right to acquire
beneficial ownership within 60 days, whether upon the exercise of a stock
option or otherwise.
(2) Includes beneficial shares which underlie an unexercised conversion
privilege as evidenced by a Convertible Subordinated Debenture issued by the
Company on April 11, 1994 as part of the Company's Plan of Reorganization
(the "Debentures"). The Debentures were issued in the initial aggregate
principal amount of $9,127,752, and bear interest at the rate of 6% per
annum. Interest on the Debentures accrues semi-annually on January 1 and
July 1 of each year commencing in 1995, and mature on December 31, 2003. At
any time prior to maturity, the Debentures are convertible into common
shares of the Company. The number of shares issuable upon conversion is
based on the Company's book value on December 31, 1993 of $.22 per share.
The Debentures are subordinate and junior in right of payment to all senior
indebtedness of the Company. The figures disclosed in this column assume
conversion of all outstanding Debentures of the Company.
(3) Includes 25,115 preferred shares owned by the American Fiduciary
Corporation 401(k) Profit Sharing Plan & Trust and 4,444 preferred shares
owned by Integrated Financial Services, Inc.
(4) Includes 545 beneficial shares represented by the unexercised
conversion privilege under the Debentures owned by the American Fiduciary
Corporation 401(k) Profit Sharing Plan and Trust and 22,325 shares
owned by Integrated Financial Services, Inc.
(5) Includes 26,827 shares owned by Constance, Stewart & Cook
Defined Benefit Pension Plan. Includes 239 preferred
shares owned by Constance, Stewart & Cook Defined Benefit Pension Plan.
(6) Includes 111 shares owned by Constance, Stewart & Cook Defined
Benefit Pension Plan and 19 shares owned by Constance, Steward
& Cook Profit Sharing Plan.
(7) Includes 20,197 preferred shares owned by Sandrick
Associates, Inc. Profit Sharing Plan.
(8) Includes 199 shares owned by Sandrick Associates, Inc. Profit
Sharing Plan. Also includes 47,982 beneficial shares represented by
the unexercised conversion privilege under the Debentures including 46,277
shares owned jointly by Maria Polcari, Mr. Polcari's wife, and
Sandrick Associates, Inc. Profit Sharing Plan; and 1705 shares owned by
Sandrick Associates, of which Mr. Polcari is the chief executive officer.
(9) Includes 119,603 preferred shares owned by Precise Forms Profit
Sharing Plan. Also includes 51,930 preferred
shares owned by Precise Forms Defined Benefit Plan & Trust.
(10) Includes 428,259 beneficial shares represented by the unexercised
conversion privilege under the Debentures owned by the Precise Forms
Profit Sharing Plan and 175,634 beneficial shares beneficially owned by
Precise Forms Defined Benefit Plan & Trust.
(11) Includes 103,416 preferred shares owned by Dr. Padula in a
retirement accounts.
(12) Includes 3,623,397 beneficial shares represented by the unexercised
conversion privilege under the Debentures including 147,830 common
shares owned by R.T. Padula, M.D. & Associates Money Purchase Pension
Plan and 319,254 common shares owned by R.T. Padula, M.D. & Associates,
in which Dr. Padula is a partner. Also includes 464 shares owned by
Marta Padula, Dr. Padula's wife, in a retirement account.
(13) Includes 27,969 preferred shares owned by Root Management
Corporation Profit Sharing Plan & Trust and 67,867 preferred shares
owned by Root Management Corporation Defined Benefit Plan & Trust.
(14) Includes 336,754 beneficial shares represented by the
unexercised conversion privilege under the Debentures owned by
the Root Management Corporation Profit Sharing Plan & Trust and 475,495
beneficial shares beneficially owned by the
Root Management Defined Benefit Plan & Trust.
(15) Includes 63,426 preferred shares owned by
James E. Williams, D.O., Inc. Money Purchase Pension Plan & Trust.
(16) Includes 559,460 beneficial shares represented by the
unexercised conversion privilege under the Debentures owned by
James E. Williams, D.O., Inc. Money Purchase Pension Plan and Trust
and 1,188,157 beneficial shares represented by
the unexercised conversion privilege under the Debentures
beneficially owned by Dr. James E. Williams.
(17) Messrs. Bennett, Constance, Polcari and Trimmer are Trustees
of the Company. Messrs. Padula, Root and Williams,
upon total conversion of all Debentures beneficially owned by them,
would be shareholders beneficially owning in
excess of 5% of the Company's stock.
B. Section 16(a) Filings
Section 16(a) of the Securities Exchange Act of 1934 ("Section 16(a)")
requires executive officers, directors, trustees, and persons who
beneficially own more than 10% of the Company's shares, to file with
the Securities Exchange Commission reports of ownership and changes in
ownership of common stock of the Company. Officers, directors,
trustees and greater than 10% shareholders are required by SEC regulation to
furnish the Company with copies of all Section 16(a) forms they file.
To the best of the Company's knowledge, Richard Padula is the
only shareholder beneficially owning a greater than 10% interest
in the Company. Based solely on review of the copies of such reports
furnished to the Company, the Company believes that, during the 1992,
1993 and 1994 fiscal years, the filing requirements applicable to the
Company's officers, trustees and 10% shareholders were not complied with.
The Company is currently in the process of assisting the officers,
trustees and 10% beneficial owners in complying with the filing
requirements of Section 16(a).
IV. OTHER MATTERS CONCERNING THE BOARD OF TRUSTEES
A. Meetings of Board of Trustees
During the fiscal year ended December 31, 1994, the Board
of Trustees held three (3) meetings. All Trustees attended 100% of the
aggregate of all Board meetings during 1994. During the fiscal
year 1995, the Board of Trustees held two (2) meetings. All Trustees
attended 100% of the aggregate of all Board meetings
during 1995.
B. Trustee's Compensation and Benefits
The Bylaws of the Company provide that the Independent
Trustees shall be paid their reasonable expenses incurred in connection
with their services as Trustees, including, without limitation, travel
to and attendance at each meeting of the Board of Trustees and any committee
thereof, as well as each annual meeting of the Shareholders. In
addition, each Independent Trustee receives a $5,000.00 annual fee
and $250.00 per meeting.
The Affiliated Trustees do not receive compensation for
services rendered as a member of the Board of Trustees.
V. INFORMATION REGARDING EXECUTIVE OFFICERS
A. Executive Officers
The current executive officers of the Company are as follows:
John J. Bennett, 52
3850 W. 171st Street
Stilwell, KS 66085
President, Chairman of the Board of Master Mortgage Investment Fund, Inc.
since 1988.
Mr. Bennett is the President of Integrated Financial Services, Inc.,
a private corporation which provided banking and financial services to the
Company from 1988 until June 1, 1994. He has held that position since
1974. Mr. Bennett was the sole Shareholder, President and Chairman of
Embassy Properties, Inc., a property management and financial services
company from 1983 until 1994. Mr. Bennett no longer has an ownership
interest in Embassy Properties, Inc.. He is the President of Master Mortgage
Realty II, Inc., Master Mortgage Realty III, Inc. and Master Mortgage
Realty V, Inc. and the Vice President of Master Mortgage Realty IV, Inc.,
all of which are wholly owned subsidiaries of the Company. Mr. Bennett
has also been a Director of First Trust of MidAmerica since 1989.
Thomas H. Trabon, 45
3441 W. 131st Street
Leawood, KS 66209
Executive Vice President and Treasurer since 1991.
Mr. Trabon was a partner in Laventhol & Horwath, a National Certified
Public Accounting firm from January 1, 1984 to November, 1990.
Laventhol & Horwath filed a voluntary petition under Chapter 11 of
the Federal Bankruptcy Code on November 21, 1990 as case number
90-B13839 in the Southern District of New York. A plan was confirmed in
that case on August 25, 1992. Mr. Trabon is currently the President and
shareholder of Trabon Consulting Company, an accounting service firm
located in Kansas City, Missouri. He is also currently a partner in
Trabon & Company, a certified public accounting firm located in
Kansas City, Missouri. Mr. Trabon was the Executive Vice President of
Integrated Financial Services, Inc. from November, 1991 until June,
1994, a private corporation which provided banking and financial
services to the Company from 1988 until June, 1994.
Mr. Trabon is also the President of River Market Venture, Inc.
and Master Mortgage Realty IV, Inc. and the Vice President of
Master Mortgage Realty II, Inc., Master Mortgage Realty V, Inc. and
Master Mortgage Realty VI, Inc., all of which are wholly owned
subsidiaries of the Company.
Byron Constance, 68
3729 S. Union
Independence, MO 64055
Secretary of Master Mortgage Investment Fund, Inc. since January 26, 1991.
Mr. Constance is the Senior Partner in Constance Stewart & Cook, L.C.,
a law firm located in Independence, Missouri. He has practiced law
with Constance, Stewart & Cook, L.C. since 1949, and serves on the Board of
Directors of Hillcrest Bank, located in Kansas City, Missouri.
Christine L. Schlomann, 40
712 Broadway
Kansas City, MO 64105
Assistant Secretary of Master Mortgage Investment Fund, Inc. from
January 26, 1991 through April 16, 1992. Ms. Schlomann was re-elected
as Assistant Secretary on November 1, 1994.
Ms. Schlomann is a partner in Schlomann & McClelland, P.C., since
June, 1994. Prior to that time, Ms. Schlomann was a partner in
King, Burke, Hershey, Farchmin & Schlomann, P.C., a law firm located
in Kansas City, Missouri.
B. Information regarding Executive Officer Compensation
The following table discloses compensation received for the last
three (3) fiscal years by the Company's President and executive
officers ("Named Executive Officers").
SUMMARY COMPENSATION TABLE
Annual Compensation
Name and Principal All Other
Position Year Salary Bonus(1) Compensation (2)
John J. Bennett,
Chairman of the
Board, President 1995 $184,400.00 $152,401.00 $30,000.00
1994 92,092.78(3) 0 8.055.00
1993(4)
1992(4)
$92,092.78(3)
Thomas H. Trabon,
Executive
Vice President,
Treasurer 1995 $ 91,500.00 12,000.00 9,397.73
1994 67,750.00(3) 0 7,008.00
1993(4)
1992(4)
(1) As employees of the Company, Mr. Bennett and Mr. Trabon are entitled
to participate in the Company's Bonus Pool (the "Pool") which became
effective on June 15, 1994. The minutes of the Company dated July 26, 1994
provide that the following amounts will be calculated and contributed
to the Pool on an annual basis commencing January 1, 1995;
An amount equal to one-half of one percent (1/2 of 1%) of the increase
in the net assets of the Company during the calendar year. Net assets
being defined as the gross assets of the Company determined on a
consolidated basis in the certified audited financial statements,
less all reserves provided for in those financial statements;
An amount equal to the calculated return defined as twenty percent (20%)
of the Company's increase in equity in a calendar year that exceeds
the base return defined as three percent (3%) over the average one (1) year
treasury bill rate in effect at the end of each quarter of the calendar year
applied to the average equity of the Company for the calendar
year. The amounts owed under this subsection will be payable over a
three year term beginning with the year immediately after the
computation year (deferral payments). However, to the extent the
Company recognizes a net decline in the equity in any subsequent year
or the actual calculated return does not exceed the base return,
the deferral payment will be offset by the calculated negative return
taking into consideration the equity declines or the less than
expected returns; and
An amount based on subjective criteria or special performance as
determined by the Board of Trustees of the Company.
Distributions of the Bonus Pool will be made on a quarterly basis
commencing in the first quarter of 1995, to Company
employees in the sole discretion of the President.
(2) In 1994, Mr. Bennett received $8,055.00 as a Company contribution
to the Company's Employee Defined Contribution Plan. Mr. Trabon
received $7,008.00 as a Company contribution to the Company's Employee
Contribution Plan. In 1995, Mr. Bennett received $30,000 as a
Company contribution to the Company's Employee Defined Contribution Plan
and Mr. Trabon received $9,397.43 to the Company's Employee Defined
Contribution Plan.
(3) Amounts disclosed were earned and paid between July 1, 1994
and December 31, 1994.
(4) Prior to June 1, 1994, Mr. Bennett and Mr. Trabon were employees
of Integrated Financial Services, Inc., a private corporation which
provided advisory services to the Company as well as other entities,
from 1988 through June, 1994. In 1992, the Company paid
IFS $767,482 in fees and expense reimbursements. In 1993, the Company
paid IFS $722,783 in fees and expense reimbursements. In 1994, the
Company paid IFS $294,286 in fees and expense reimbursements. The
Company did not make any payments to IFS in 1995.
C. Executive Compensation Report of the Board of Trustees
1. Compensation Overview
The Company does not currently have a Compensation Committee. The Board
of Trustees is responsible for advising management on matters pertaining
to compensation arrangements for executive employees, as well as
administration of the Company's bonus pool. The Company's employee
compensation policy is to offer a package including a competitive
salary, an incentive bonus pool based upon individual performance goals,
competitive benefits and an efficient workplace environment.
The Company's employee base compensation policy is subjective in nature
and is not based on any specific formula. In determining compensation
for the 1994 and 1995 fiscal year, the Board of Trustees took
into account the difficult real estate market of the last several
years and the diligence and managerial expertise which the executive
officers have demonstrated in managing the business of the Company
in a difficult real estate environment. The amount of time and effort
which Management was required to expend in managing the
non-performing portion of the Company's loan portfolio (including
management of foreclosure litigation and bankruptcy matters as well as
negotiations dealing with defaulted loans prior to, or in lieu of litigation)
significantly increased in the last several years. The Board of Trustees
also looked to compensation paid generally by other real estate
investment trusts to its executive officers. Finally, the Board
of Trustees took into consideration the negotiated termination of the
Advisory Agreement with Integrated Financial Services, Inc.
which caused the Company to become self-administered in June, 1994.
The Board of Trustees, with the assistance of an independent consultant,
gathered information from the National Association of Real Estate
Investment Trusts, to insure competitive median compensation levels.
2. Executive Performance
The Board of Trustees believes that Management has been
extremely successful in their efforts since the last annual meeting.
The progress under the Company's Strategic Redirection Plan (the "SRP"),
which was adopted by the Board of Trustees in June, 1991, is indicative
of the performance of the Company, and its executive management. The
SRP was adopted in an effort to stabilize and improve the Company's
operations during an increasingly difficult real estate environment.
It is divided into three separate phases, each of which is
discussed in detail below.
(a) Phase I - Asset Preservation. The first Phase of the SRP requires
the Company to take steps to protect its interest in each of its assets.
In order to effectuate this Phase, the Company, through the efforts of
its Management, has undertaken foreclosures, workouts, litigation
and bankruptcy proceedings. As of September 30, 1995, only four of
the Company's remaining assets are still subject to Phase I monitoring.
(b) Phase II - Cash Flow Enforcement. The second Phase of the SRP
is designed to re-establish cash flow to the Company. This
includes asset monitoring, collection efforts and control procedures
over workout programs. To date, Management has been very successful in
implementing Phase II, examples of which are detailed below.
(i) The Company owns a 75% interest in the Ramada Inn in
Euless, Texas. This property operated with a deficit in
1994. This deficit was funded by Amerihost Properties,
Inc., the Company's joint venture partner. Once the
property has repaid all of the operating fund advances and
the original joint venture partner debt to Amerihost, the
Company will share in 80% of the ongoing cash flow. The
Company anticipates it will begin to receive its 80%
distributions in 1998.
(ii) The Company foreclosed on a Ramada Inn in Phoenix,
Arizona in June, 1994. During 1994, no cash was available
from the project for distribution to the Company. However,
the Company received in excess of $480,000.00 in 1995.
(iii) The Company completed a Chapter 11 proceeding related to
a certain project located in the River Market area of Kansas
City, Missouri in May, 1995. This project has produced
substantial cash flow in excess of the required debt service.
This cash flow has been used to fund substantial tenant
improvements under new leases in the project.
(iv) In January, 1992, the Company acquired title to a 510 unit
apartment complex in Tempe, Arizona. In December, 1994,
the Company negotiated and successfully sold this asset at a
substantial gain.
(v) The Company holds a second mortgage position on the Soho
III residential apartment project located in Kansas City,
Missouri. In 1993, the Company facilitated the completion
of Chapter 11 bankruptcy proceedings concerning this
property. The Company now receives seven and one-half
percent (7.5%) of the cash flow out of this project toward its
second mortgage.
These projects are typical of the assets in the Company's
portfolio. While there are projects remaining in the
portfolio from which the Company is receiving no distributions,
the Board ofTrustees believe that Management has been extremely
successful in its current efforts.
(c) Phase III - Shareholder Liquidity. The final Phase of the
SRP is to provide Shareholders with liquidity options. The
major objective of this Phase is to create a marketplace for the
Company's stock.
3. Bonus Pool
The Board of Trustees believe that the compensation of the
President and the other officers of the Company should be commensurate
with the performance of the Company, as compared to other enterprises
similar to those of the Company. The criteria utilized to measure
such performance includes total shareholder return, returns on equity
and the growth in funds from operations. The Board of Trustees
believe that the base compensation for its executive management
must be competitive. Accordingly, the Bonus Pool Program has
been designed to provide competitive financial rewards for
successfully meeting the Company's ultimate goal of
maximizing return to its shareholders and successful completion
of the SRP.
The following amounts will be calculated and contributed to
the Pool on an annual basis commencing
January 1, 1995;
An amount equal to one-half of one percent (1/2 of 1%) of the
increase in the net assets of the Company during the calendar year.
Net assets being defined as the gross assets of the Company
determined on a consolidated basis in the certified audited
financial statements, less all reserves provided for in
those financial statements;
An amount equal to the calculated return defined as twenty
percent (20%) of the Company's increase in equity in a calendar
year that exceeds the base return defined as three percent (3%)
over the average one (1) year treasury bill rate in effect
at the end of each quarter of the calendar year applied to the
average equity of the Company for the calendar year. The amounts
owed under this subsection will be payable over a three year term
beginning with the year immediately after the computation
year (deferral payments). However, to the extent the Company
recognizes a net decline in the equity in any subsequent year or
the actual calculated return does not exceed the base return, the
deferral payment will be offset by the calculated
negative return taking into consideration the equity declines
or the less than expected returns; and
An amount based on subjective criteria or special performance
as determined by the Board of Trustees of the Company.
Distributions of the Bonus Pool will be made on a quarterly basis
commencing in the first quarter of 1995, to Company employees
in the sole discretion of the President.
4. Board of Trustees Interlocks and Insider Participation in
Compensation Decisions
During the last three fiscal years, John J. Bennett and Byron
Constance were the only officers or employees of the Company, or any
of its subsidiaries, who participated in deliberations of the
Company's Board of Trustees concerning executive compensation. No
executive officer of the Company served as a member on
the compensation committee (or equivalent) or board of directors of
another entity, one of whose executive officers served on the
compensation committee of the Company. No executive officer of
the Company served as a director of another entity, one of whose
executive officers served on the compensation committee (or
equivalent) or Board of Trustees of the Company. No executive
officer of the Company served as a member of the compensation
committee (or equivalent) or board of directors of another entity,
one of whose executive officers served as a Trustee of the Company.
5. Conclusion
In determining compensation of the President and other executive
officers of the Company, the Board of Trustees reviewed the
expertise with which Management implemented the SRP, giving
consideration to the substantial reduction in operating expenses;
profitability of the Company; success of Management regarding
workouts with senior creditors of the Company; management
of foreclosure litigation; and bankruptcy matters.
The Board of Trustees believes that the Company, under the
direction of Management, exceeded the targeted performance
objectives set in the SRP. In view of Management's performance,
the Board of Trustees has determined that Mr. Bennett's base
annual salary for the 1995 fiscal year of $185,000.00 and Mr. Trabon's
annual base salary for the 1995 fiscal year of $84,000.00 were reasonable.
Respectfully submitted,
John J. Bennett
Byron Constance
Richard Polcari
Robert K. Brown
James E. Trimmer
James I. Threatt
D. Employment Contracts
1. John J. Bennett Employment Agreement
The Company entered into a five (5) year Employment Agreement
with Mr. Bennett dated June 15, 1994. His base salary is $185,000.00
per year. In addition, the Company agreed to negotiate increases in base
salary and bonus compensation based on (i) comparable salaries and
benefits then provided to the chief executive officers of other
business enterprises similar to the business of the Company; (ii) objective
performance criteria of the Company, including, without limitation,
total shareholder returns, return on equity and growth in funds from
operations, (as defined in Section V(c)(2)(above); (iii) proper
execution of the Company's Strategic Redirection Plan and (iv) other
special circumstances which would warrant a further increase in base
salary or bonus compensation. As an employee of the Company,
Mr. Bennett is entitled to participate in the Bonus Pool.
In the event that the Employment Agreement is terminated by the
Company because of the misconduct of Mr. Bennett, the mental or physical
disability of Mr. Bennett or the voluntary or involuntary liquidation or
sale of the assets of the Company, the Company will pay to Mr. Bennett
all compensation accrued up to the date of such termination, liquidation
or sale. In addition, if the Employment Agreement is terminated due
to Mr. Bennett's mental or physical disability, the Company will pay
a lump sum aggregate amount equal to all base salary plus the aggregate
value of all other benefits which the Company would have been required to
pay Mr. Bennett during the remainder of the term of the Agreement. In
the event that the Employment Agreement is terminated by the Company
for any other reason, the Company is obligated to pay Mr. Bennett all
compensation accrued up to the event of such termination and a lump
sum aggregate amount equal to all base salary plus the
aggregate value of all other benefits which the Company would have
been required to pay Mr. Bennett during the remainder of the term
of the Agreement.
2. Thomas H. Trabon Employment Agreement
The Company entered into a one (1) year Employment Agreement with
Mr. Trabon dated August 1, 1994. This Agreement has been continued by
the Board of Trustees for an additional one year period. His base
salary for 1994 was $84,000.00 per year, and his base salary for 1995
was $91,500.00 per year. As an employee of the Company, Mr. Trabon is
entitled to participate in the Bonus Pool.
In the event that the Employment Agreement is terminated by the
Company because of the misconduct of Mr. Trabon, the mental or physical
disability of Mr. Trabon or the voluntary or involuntary liquidation or sale
of the assets of the Company, the Company will pay to Mr. Trabon all
compensation accrued up to the date of such termination, liquidation
or sale. In the event that the Employment Agreement is terminated by the
Company for any other reason, the Company is obligated to pay Mr. Trabon
all compensation accrued up to the event of such termination and
a lump sum aggregate amount equal to all base salary plus the
aggregate value of all other benefits which the Company would have
been required to pay Mr. Trabon during the remainder of the
term of the Agreement.
E. Performance Graph
The Securities Exchange Act of 1934 requires that the Company
provide a line graph comparing, over a five year period, cumulative
shareholder return against an acceptable industry index. However, it
must be noted that the data listed below is market weighted and that,
to the Company's knowledge, stock of the Company has not been traded
during the period covered by this proxy statement.
Comparison of Five Year Cumulative Total Return
December 31, 1990 through December 31, 1995
The following graph compares the performance of the Company's
beneficial shares with the Standard & Poor's 500 Annual Total Return
Index and a peer group index consisting of publicly traded mortgage REIT's
prepared by the National Association of Real Estate Investment Trusts. The
graph assumes that $100 was invested on September 30, 1989 in the
Company's beneficial shares, the S&P Index and the peer group index
and assumes the reinvestment of dividends. The comparisons in this table
are not intended to forecast or be indicative of any future performance
of the Company's beneficial shares.
12/90 12/91 12/92 12/93 12/94 12/95
Master Mortgage
Investment Fund $100.00 *$35.20 *-0- $1.00 *$1.30 *$1.30
All Mortgage
REITS $100.00 $107.62 $108.68 $125.64 $95.11 $63.42
S & P Index $100.00 $130.46 $107.61 $110.07 $101.32 $137.57
*Total Shareholder equity divided by total outstanding shares (calculation
does not include Alternative Treatment Plan (for a description of the
Alternative Treatment Plan see Paragraph VI.C.)). Due to the non-existence
of a market for the shares, the computation of value shown above is not
according to market value. The reflection of a zero dollar value at
year end 1992 and 1993 is due to the filing of the Company's Chapter 11
Bankruptcy in 1992.
VI. INFORMATION REGARDING TRANSACTIONS WITH TRUSTEES, MANAGEMENT AND
FIVE PERCENT BENEFICIAL OWNERS
A. Janet Gatz-Bennett, John Bennett's wife, is the Secretary/Treasurer
and majority shareholder of Embassy Properties, Inc. ("EPI"). EPI performs
property management services and acts as a loan servicer for the
Company in connection with assets of the Company. The Company believes
the property management and loan servicing fees paid by the Company are
on terms as favorable to the Company as would be available from a
non-affiliated party. EPI earned a total of $275,600 in fees from the
Company in 1992; $206,186 in fees from the Company in 1993; $176,643
in fees from the Company in 1994, and $145,158 in fees from the
Company in 1995.
B. John J. Bennett is the sole shareholder and President of
Integrated Financial Services, Inc. ("IFS"), a private corporation
which provided banking and financial advisory services to the Company
from 1988 until June, 1994. The Company believes that the advisory
fees paid by the Company are on terms as favorable to the
Company as would be available from a non-affiliated party. Mr.
Trabon was the Vice-President of IFS from November, 1994 until June,
1994. IFS earned a total of $767,482 in fees and expense reimbursements
from the Company in 1992; $722,783 in fees and expense reimbursements
from the Company in 1993; $294,286 in fees and expense reimbursements
from the Company in 1994, and $0 in fees and expense reimbursements
from the Company in 1995.
C. Under the terms of the Company's Chapter 11 Plan of Reorganization,
certain individuals, or qualified plans under which they participated,
who held the Company's Convertible Subordinated Debentures (the
"Debentures") intend to participate in the Company's Alternative
Treatment Plan (the "ATP"). Under the terms of the ATP, these
individuals will convert all or part of their Debentures, together
with an equal cash contribution, into a direct loan participation
interest in a collateral pool loan. The loan will be collateralized by
certain assets of the Company, and is to be repaid in 10 years,
in quarterly installments including interest at 9%
based on a 20 year amortization. In the interim, 9% interest
has accrued and been paid on amounts contributed.
The following reporting persons and/or their qualified retirement
plans have made cash contributions in the
amounts listed opposite their name:
James E. Trimmer $540,186
Richard Polcari $700,000
Robert Brown $ 10,000
John J. Bennett $235,000
Daniel Root $250,000
Richard Padula $200,000
VII. INFORMATION REGARDING CERTAIN BUSINESS RELATIONSHIPS
Christine L. Schlomann, the Assistant Secretary of the Company is also
a principal in Schlomann McClelland P.C., a law firm located in
Kansas City, Missouri. Prior to her association with Schlomann
McClelland P.C., Ms. Schlomann was a partner in King, Burke, Hershey,
Farchmin & Schlomann. Schlomann McClelland P.C. provides (and King,
Burke, Hershey, Farchmin & Schlomann provided) legal services to the
Company.
ITEM 1: AMENDMENT OF THE ARTICLES OF INCORPORATION
REGARDING AUTHORIZED CAPITAL
Prior to March, 1996 the authorized capital of the Company was
20,000,000 common and 20,000,000 preferred shares, both with
a par value of $.01 per share(3).
____________
(3) On March 12, 1993, the Board of Trustees filed with the
Delaware Secretary of State a Certificate of Amendment to the
Certificate of Incorporation of the Company, which amendment
reduced the authorized capital of the Company from 20,000,000
common shares and 20,000 preferred shares, both with a par value
of .01 per share, to 4,000,000 common shares and 4,000,000
preferred shares with the same par value of $.01 per share. This
amendment was voted upon by the Board of Trustees and filed with
the Delaware Secretary of State on March 12, 1993. However,
because no annual meeting was held in 1993, this amendment was
not put to a vote of the shareholders, and is therefore invalid.
A copy of this file-stamped amendment is enclosed with this proxy
statement.
- - - --------- End of Footnote (3) -----------
____________
(4) Section 303 of the Delaware Corporation Code states:
(a) Any corporation of this State, a plan of reorganization of
which, pursuant to any applicable statute of the United States
relating to reorganization of corporations, has been or shall
be confirmed by the decree or order of a court of competent
jurisdiction, may put into effect and carry out the plan and
the decrees and orders of the court or judge relative thereto
and may take any proceeding and do any act provided in the plan
or directed by such decrees and orders, without further action
by its directors or stockholders. Such power and authority
may be exercised, and such proceedings and acts may be taken,
as may be directed by such decrees or orders, by the trustee
or trustees of such corporation appointed in the reorganization
proceedings (or a majority thereof), or if none be appointed
and acting, by designated officers of the corporation, or by
a Master or other representative appointed by the court or
judge, with like effect as if exercised and taken by unanimous
action of the directors and stockholders of the corporation.
(b) Such corporation may, in the manner provided in subsection
(a) of this section, but without limiting the generality or
effect of the foregoing, alter, amend or repeal its bylaws;
constitute or reconstitute and classify or reclassify its board
of directors, and name, constitute or appoint directors and
officers in place of or in addition to all or some of the
directors or officers then in office; amend its certificate of
incorporation, and make any change in its capital or capital
stock, or any other amendment, change, or alteration, or
provision, authorized by this chapter; be dissolved, transfer
all or part of its assets, merge or consolidate as permitted
by this chapter; be dissolved, transfer all or part of its
assets, merge or consolidate as permitted by this chapter, in
which case, however, no stockholder shall have any statutory
right of appraisal of his stock; change location of its
registered office, change its registered agent, and remove or
appoint any agent to receive service of process; authorize
and fix the terms, manner and conditions of, the issuance of
bonds, debentures or other obligations, whether or not
convertible into stock of any class, or bearing warrants or
other evidences of optional rights to purchase or subscribe
for stock of any class; or lease its property and franchise
to any corporation, if permitted by law.
(c) A certificate of any amendment, change or alteration, or
of dissolution, or any agreement of merger or consolidation,
made by such corporation pursuant to the foregoing provisions,
shall be filed with the Secretary of State and recorded in
accordance with Section 103 of this title, and, subject to
subsection (d) of said Section 103, shall thereupon become
effective in accordance with its terms and the provisions
hereof. Such certificate, agreement of merger or other
instrument shall be made, executed and acknowledged, as may
be directed by such decrees or others, by the trustee or
trustees appointed by the court or judge, and shall certify
that provision for the making of such certificate, agreement
or instrument is contained in a decree or order of a court
or judge having jurisdiction of a proceeding under such
applicable statute of the United States for the
reorganization of such corporation.
(d) This section shall cease to apply to such corporation
upon the entry of a final decree in the reorganization
proceedings closing the case and discharging the trustee
or trustees, if any.
(e) On filing any certificate, agreement, report or other
paper made or executed pursuant to this section, there
shall be paid to the Secretary of State for the use of
the State the same fees as are payable by corporations
not in reorganization upon the filing of like certificates,
agreements, reports or other papers.
- - - -------- End of Footnote 4 ----------
This amount of authorized shares does not allow for the conversion
into common stock of the Convertible Subordinated Debentures which were
issued by the Company on April 11, 1994 as part of the Company's Plan
of Reorganization. The total amount of common stock issuable upon
the conversion of the Convertible Subordinated Debentures is 40,748,893.
Accordingly, the Company has filed a Certificate of Amendment with
the Delaware Secretary of State increasing the authorized capital of
the Company to 45,000,000 common shares, which amount is sufficient
for the conversion of the Debentures and reducing the number of
preferred shares to 2,500,000. Currently, the Company has
2,491,622 preferred shares outstanding, and is not
anticipating the issuance of any more preferred shares. In order
to save any costs associated with the excess authorized preferred shares,
the Company reduced this amount. A copy of this Amendment is included
with this proxy statement. This action taken by the Board of Trustees,
without shareholder approval, pursuant to Section 303 of the Delaware
Corporation Code. That section provides that any corporation
having a confirmed plan of reorganization may take any action to put
into effect or carry out that plan of reorganization without further
action by its shareholders. Section 303(b) specifically states that
such action may include the making of any change in its capital or
capital stock.
While the Company has legally effectuated the increase in authorized
common shares as stated above, the Board of Trustees requests that the
Amendment be ratified by the Shareholders of the Company. The Board
of Trustees believes that, while such ratification is not necessary to
the validity or effectiveness of the Amendment, ratification of the
Amendment insures a full and complete understanding by the Shareholders
of the Amendment, including the dilution of the ownership interests of
current Shareholders. In the event that the Shareholders do not vote to
approve the Amendment, the legal effect and validity of the Amendment
will not be effected, and the Company will continue to have 45,000,000
authorized shares of common stock and 2,500,000
shares of preferred stock.
THE BOARD RECOMMENDS THAT SHAREHOLDERS RATIFY THE AMENDMENT OF THE
ARTICLES OF INCORPORATION TO INCREASE THE AUTHORIZED COMMON SHARES OF THE
COMPANY TO 45,000,000 SHARES AND REDUCE THE AUTHORIZED SHARES PREFERRED
SHARES OF THE COMPANY TO 2,500,000 SHARES, EACH HAVING $.01 PAR VALUE.
ITEM 2:AMENDMENT OF THE ARTICLES OF INCORPORATION
AUTHORIZING CHANGE OF NAME OF THE COMPANY
Master Mortgage Investment Fund, Inc. has in the past engaged almost
solely in the business of investing in senior and junior real estate loans
primarily secured by income producing real property. The Company's name
clearly reflected such activities. However, in the past several years,
the activities of the Company have shifted. The Company has
substantially curtailed its lending activities and focuses primarily on
managing and monitoring its current portfolio.
Accordingly, the Board of Trustees believes that the current name of
the Company is misleading and no longer appropriate. The presence of
the word "Mortgage" in the Company's current name mistakenly implies
that the Company's portfolio consists of mortgages only. This is
no longer the case. Additionally, the presence of the word "Fund"
in the Company's current name mistakenly implies that the Company is
continuing its lending activities. As previously stated, the
majority of the Company's current activities focus on managing and
monitoring its current assets.
The Board of Trustees believes that the only probable negative effect
of changing the name of the Company would be the loss of name
recognition to the general public. While the Board of Trustees does not
believe this to be a serious concern, the Board of Trustees has
committed to take all reasonable action to reduce any negative effect
and to use its best efforts to promote the name
"Master Realty Properties", in the event the name change should be
approved by the Shareholders.
In order to effectuate a name change, Delaware law requires an affirmative
vote of the majority of the Shareholders. The Board of Trustees
proposes that the name of the Company be changed to "Master Realty
Properties, Inc.". This name is more illustrative of the Company's
revised business plan. A copy of the proposed amended Articles of
Incorporation is included with this proxy statement. If the
Shareholders do not vote to approve this Amendment to the
Articles of Incorporation, the name of the Company will remain Master
Mortgage Investment Fund, Inc.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE AMENDMENT
OF THE ARTICLES OF INCORPORATION TO CHANGE THE NAME OF
THE COMPANY TO "MASTER REALTY PROPERTIES, INC."
ITEM 3:AMENDMENT OF THE ARTICLES OF INCORPORATION
CONFORMING THE INDEMNIFICATION PROVISIONS CONTAINED
IN THE ARTICLES OF INCORPORATION TO THE INDEMNIFICATION
PROVISIONS CONTAINED IN THE BYLAWS
At this time, the cost of obtaining officer and director liability
insurance is cost prohibitive for the Company. Accordingly, it has
been necessary for the Company, in order to attract and maintain qualified
Trustees, to become as self-insuring as possible. Therefore, on
September 17, 1991, the Board of Trustees duly amended the Bylaws
to increase the indemnification provisions as they pertain to officers,
directors, trustees, employees and agents. The effect of this amendment
was to provide for payment of expenses incurred by officers, directors,
trustees, employees and agents of the Company in connection with
any threatened, pending or completed action, lawsuit or proceeding,
by reason of the fact that he/she is or was an officer, director, trustee,
employee or agent of the Company. Previously, the Bylaws did not
specifically provide for the payment of a legal defense for its officers,
directors, trustees, employees and agents. The amendment does
provide that there will be no indemnification if the officer,
director, trustee, employee or agent acted fraudulently, or was
guilty of willful and wanton misconduct or intentional wrongdoing.
This determination is made by the majority vote of
disinterested Trustees.
While the Bylaws have been duly amended to specifically provide
this protection to the Company's officers, directors, trustees,
employees and agents, which protection would normally be provided
under officer and director liability insurance, the Articles of
Incorporation, which require a vote of the Shareholders to amend,
do not contain this protection. Currently, Article Eighth of
the Articles of Incorporation of the Company,
currently state as follows:
The corporation shall have the power to indemnify the officers,
directors, employees, agents and the corporation's Advisory Company
for losses arising from the operation of the corporation if all
of the following conditions are met:
(1) The indemnitee has determined, in good faith, that the course of
conduct which caused the loss or liability was in the best interests
of the corporation; and
(2) Such liability or loss was not the result of negligence or
misconduct by the indemnitee; and
(3) Such indemnification or agreement to hold harmless is recoverable
only out of the assets of the corporation and not from its shareholders.
Indemnification will not be allowed for any liability imposed by
judgment and costs associated therewith, including attorney's fees,
arising from or out of a violation of state or federal securities laws
associated with the offer and sale of securities of the corporation.
Indemnification will be allowed for settlements and related expenses
of lawsuits alleging securities law violations, and for expenses
incurred in successfully defending such lawsuits, provided a Court either:
(a) Approves the settlement and finds that indemnification of the
settlement and related costs should be made; or
(b) Approves indemnification of litigation costs if a
successful defense is made.
The Board of Trustees believes that, in an effort to maintain
consistency through the corporate organizational documents, and to
provide adequate protection to the Company's officers, trustees
and employees for expenses incurred by reason of his/her employment
by the Company, it is in the best interest of the Company
to amend the Articles of Incorporation of the Company to reflect
the expanded indemnity language previously adopted in the Bylaws.
This language provides for the payment by the Company of expenses
incurred by officers, directors, trustees, employees and agents
of the Company in connection with any threatened, pending or
completed action or proceeding, by reason of the fact that he/she
is or was an officer, director, trustee, employee
or agent of the Company. This protection is necessary in order
for the Company to obtain and maintain qualified Trustees and
employees, in light of the current lack of officer and director
liability insurance. It must be noted that the adoption of this
amendment may cause the Company to expend funds on behalf of its
officers, trustees and employees in connection with any threatened,
pending or completed action, lawsuit or proceeding. Such expenditures
may be substantial. However, without the protection
provided by the proposed amendment and without appropriate
liability insurance, it will be unlikely that the Company will be
able to continue to find qualified, competent individuals to serve
as officers and trustees.
A copy of the proposed amended Articles of Incorporation is
included with this proxy statement. In the event that the
Shareholders do not vote to approve this Amendment to the Articles
of Incorporation, the indemnification provisions of the Articles of
Incorporation will remain as stated above.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE AMENDMENT OF THE
ARTICLES OF INCORPORATION TO CONFORM THE INDEMNIFICATION PROVISIONS
CONTAINED IN THE ARTICLES OF INCORPORATION TO THE INDEMNIFICATION PROVISIONS
CONTAINED IN THE BYLAWS
ITEM 4: AMENDMENT AND RESTATEMENT OF BYLAWS
Section 13.1 of the Company's Bylaws states that "[T]he Trustees, by a
majority vote, may amend these Bylaws to change the name of the Fund
or to alter the provisions hereof with respect to Trustee meetings,
Trustee compensation, registration and transfer of Shares, lost share
certificates or distribution record dates. All other amendments to
these Bylaws shall require the Majority Vote of the Shareholders."
The Board of Trustees has proposed that the Bylaws of the Company
be amended and restated to more accurately reflect the current
business activities of the Company. Specifically, the Board of Trustees
proposes the following amendments, all of which are discussed in
greater detail below and are set forth in the proposed
Amended and Restated Bylaws included with this proxy statement:
a) Removal of References to Integrated Financial Services, Inc.
as the Advisory Company. Currently, the Bylaws are drafted to
provide for the employment of Integrated Financial Services, Inc. ("IFS')
as the investment advisor and administrator of the Company. In June, 1994,
the Company terminated its advisory agreement with IFS and determined
that the Company should be self-administered. The Company has entered
into various employment agreements with management personnel to
perform duties previously provided to the Company by IFS. Accordingly,
the Board of Trustees believes that the current Bylaws should be
amended and restated to remove any reference to the Advisory Company
and to reflect the self-administration of the Company.
The Board of Trustees does not believe that the removal of references
to the Advisory Company in the Bylaws would have any negative effect on
the Company or its Shareholders. Rather, the Board of Trustees
believes that continued references to the Advisory Company
in the Bylaws are ambiguous and could cause confusion in the
interpretation of the Bylaws.
b) Removal of Language Indicative of Lending Activities. As discussed
in Item 2 above, the Company has drastically revised its business
activities in the last several years. While the Company originally engaged
almost solely in the business of extending senior and junior real
estate loans, the Company's current business plan involves the management
and monitoring of its current real estate portfolio. Accordingly,
the language contained in the current Bylaws regulating the Company's
lending activities is now obsolete. The Board of Trustees believes
the Bylaws should be amended and restated to remove the language
indicative of the Company's prior lending activities. As of
year-end, 1994, 77.85% of the Company's assets were made up of
real estate owned. As of year-end 1985, 78.66% of the Company's assets
were made up of real estate owned. In addition, the Company is
currently in the process of negotiating to acquire additional real
estate, through foreclosure or other means, which will further reduce
the Company's loan portfolio to approximately 1.5 million
dollars. Clearly, the Company has now established itself as an
equity REIT, as opposed to a mortgage REIT. Further, the Company
has no plans to continue its lending activities.
The intent of the language in the original Bylaws was to give direction
to the Advisory Company, Integrated Financial Services, Inc. in
connection with the approval of loan transactions. Integrated Financial
Services, Inc. was the entity who structured and approved the
Company's lending transactions. However, since the Advisory Company
is no longer part of the business plan of the Company, this language
is no longer necessary. Instead, the Board of Trustees has the ability
to approve or disapprove loan transactions. Under the terms of the
Proposed Amended and Restated Bylaws, if the Company does choose to engage
in future lending activities, the Board of Trustees must give prior
approval for all loans, all investments in real property and any
changes in the Company's investment objectives and policies. Section 4.17
of the Proposed Amended and Restated Bylaws indicates that the Company
will not purchase property from a Trustee, or any affiliates of said
Trustee unless a majority of the Trustees not otherwise interested
in the transaction approve the transaction as being clear and
reasonable to the Company. The Board of Trustees believes that
this requirement of Board approval contained in the Bylaws is
sufficient to regulate sound investments by the Company.
It is not intended that the Company's specific lending criteria be
revised due to the adoption of this Amendment. The Trustees, as the
parties ultimately responsible for the operation of the Company,
will still be required to satisfy requisite elements prior to
the completion of any loan transaction. These elements, as
specified in the 1988 prospectus, include the following:
(i) legal opinion that the security for the loan is of a type permitted
by the prospectus; that the loan meets the requirements under the
Internal Revenue Code to qualify as a REIT asset; and that the loan
will not cause the Company to lose its qualifications to be taxed as a
REIT under the Internal Revenue Code; and
(ii) an MAI appraisal for any underlying property indicating that
the amount of the loan (and all other loans on the property equal or
senior in priority to the loan) do not exceed 85% of the appraised
value of the property (or, in the case of a short term loan, 100% of the
appraised value) and that the value is sufficient to meet REIT
qualifications.
The Board of Trustees will continue to adopt written investment
policies which it will follow on an ongoing basis. These policies
will be reviewed at least annually to determine that they are being
followed and that they are in the best interests of the Shareholders.
It is possible that the removal of the marked language will
increase investment opportunities available to the Company, since many
of the previous restrictions will be eliminated. However, because
the Company is no longer actively pursuing lending activities and because
any lending activities will be determined by the Board of Trustees in
accordance with REIT guidelines and Company investment policies, as well
as in their fiduciary capacity to the Shareholders, the Board of Trustees
believes that these revisions will not have any negative effect
on the Company. Rather, the Board of Trustees believes that these
revisions will clarify the Company's current
business objectives.
c) Redefining Independent Trustee. The current Bylaws are written to
define an Independent Trustee as an individual who has no affiliation
with IFS, as the Advisory Company. Because the Advisory Company is no
longer employed by the Company, this definition is obsolete. The
Board of Trustees does not believe that the revised definition of
"Independent Trustee" in the Bylaws would have any negative effect
on the Company or its Shareholders. Rather, the current definition
of "Independent Trustee" is ambiguous, given the termination of IFS
as the Advisory Company, and could cause confusion in the
interpretation of the Bylaws. Therefore, the Board of Trustees
recommends that the Bylaws be amended and restated to redefine the term
Independent Trustee as an individual with no affiliation with the
Company, not Integrated Financial Services, Inc.
d) Reduction of Loan Servicing Fee. Currently, the Bylaws
provide that the Company shall pay to Embassy Properties, Inc. ("EPI")
the sum of one half of one percent of the principal amount of all
loans of the Company as a loan servicing fee. Because the loan
servicing duties of EPI have been significantly reduced due
to the self-administration of the Company, the Board of Trustees
recommends that the amount payable to EPI as a loan servicing fee be
reduced to one fourth of one percent. The Board of Trustees does not
believe that the reduction of the Loan Servicing Fee has any
negative effect on the Company or its Shareholders. Rather, the
reduction of the Loan Servicing Fee will effectuate a cost savings
to the Company.
e) Removal of References to the Original 1988 Prospectus. In 1988,
the Company made its original public offering, and in connection
therewith, issued a comprehensive prospectus. The current Bylaws
refer to this document in connection with organizational and offering
expense reimbursements to IFS and minimum and maximum offering
requirements. These references are no longer necessary, because
the Company has been organized and operating since 1988. The Board
of Trustees does not believe that the removal of references to
the 1988 prospectus in the Bylaws will have any negative effect
on the Company or its Shareholders. The Board of Trustees recommends
that the Bylaws be amended and restated to remove the references to the 1988
prospectus.
f) Commissions Payable in Affiliated Transactions. Currently,
at Section 11.2 (Section 12.2 of the Proposed Amended and Restated
Bylaws) the Bylaws provide that "[no] commissions will be payable by the
Company or any other party to any company with which the
Independent Trustees are affiliated in connection
with the acquisition or disposition of any investments by the Company."
The Board of Trustees proposes that this provision by revised to
state that "[no] commissions will be payable by the Company or any
other party to any company with which the Independent and/or
Affiliated Trustees are affiliated in connection with the
acquisition or disposition of any investments by the Company, unless
said commission is approved by the majority vote of the
disinterested Trustees."
This original language prevented the Company from paying any commissions
to entities affiliated with Independent Trustees which were defined
as Trustees not affiliated with the advisory company, it did not prevent
the Company from paying commissions to entities affiliated with the
Affiliated Trustees, those Trustees affiliated with the advisory company.
Since the Company is now self-administered, this limitation is obsolete.
However, the Board of Trustees believes that any commissions should be
approved by a majority vote of the disinterested Trustees. It must be
noted that the revision of this language will allow for the payment
of commissions by the Company to any entity affiliated with any Trustee,
thus, possibly increasing expenditures by the Company. However, these
commissions must be approved as reasonable by the majority vote of the
disinterested Trustees.
Conclusion. The effect of amending and restating the Bylaws is to
make them applicable to the current administration and organization
of the Company. Because the current Bylaws do not recognize the
self-administering structure of the Company, they should be amended
and restated to reflect the Company's current situation. In the
event that the Shareholders do not vote to approve this
Amendment to the Articles of Incorporation, the Bylaws will remain unchanged.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
AMENDMENT AND RESTATEMENT OF THE BYLAWS TO REFLECT
THE CURRENT BUSINESS PLAN OF THE COMPANY.
ITEM 5:CREATION OF A CLASSIFIED BOARD OF TRUSTEES
The current Bylaws provide that each Trustee shall serve for a
period of one year, or until the election and qualification of his or
her successor. The Board of Trustees has proposed that a classified
Board of Trustees be implemented. Under a classified Board of Trustees,
a first class Trustee would be chosen to hold office for one year,
or until the next annual election following their election.
A second class Trustee would be chosen to hold office for two years,
or until the second annual election following their election.
The establishment of a classified Board of Trustees and related changes
to the Certification of Incorporation, are intended to moderate
the pace of any change in the Board of Trustees by extending the time
required to replace the majority of the incumbent Trustees. At a minimum,
two successive annual meetings would be required in order to replace the
majority of the Board of Trustees other than for cause. The provisions
would also impede assumption of the management of the Company by any
other organization that, through a hostile take-over bid or otherwise, might
obtain a substantial amount of the Company's outstanding voting stock.
An effect of the provisions may be to deter certain mergers, tender
offers, or future take-over attempt that some or a majority
of Shareholders could deem to be in their best interest. The classified
Board of Trustees and related changes are not being proposed in
response to any present actions known by the Board of Trustees
to effectuate a change in the composition of the
Board of Trustees or to acquire control of the Company.
A classified Board of Trustees may make it more difficult for
Shareholders to change the majority of Trustees. Nonetheless, the
Board of Trustees believes that a classified board would tend to
assure desirable continuity and leadership in policy since the majority
of the Trustees at any time will have had prior experience
on the Board. In addition, the Board of Trustees believes that
classification of Trustees will permit the effective
representation of the interest of all Shareholders in a greater
variety of situations, including responses to circumstances created by
demands or actions by a significant Shareholder or Shareholder group.
The principal objective of a classified Board is to minimize sudden
disruptive influences on the Company to the detriment of
the Company and its Shareholders. In the event that the Shareholders
do not vote to approve this Amendment to the Articles of Incorporation,
the Bylaws will remain unchanged and the Board of Trustees will continue
to hold one year terms.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE
FOR THE CREATION OF A CLASSIFIED BOARD OF TRUSTEES.
ITEM 6: ELECTION OF TRUSTEES
The Bylaws of the Company provide that the Company shall not have
less than three (3) nor more than (9) nine Trustees, a majority of whom
shall at all times be Independent Trustees. The exact number of Trustees
is set by Board resolution. Currently, Section 4.1 of the Bylaws provide
that the number of Independent Trustees at any time shall not
exceed the number of Affiliate Trustees by more than one. The
definition of an "Affiliated Trustee" is based partly on a Trustee's
relationship with Integrated Financial Services, Inc. ("IFS"), a
private corporation which provided banking and financial advisory
services to the Company from 1980 until June, 1994. Because IFS no longer
provides advisory services to the Company, the Board of Trustees is
recommending that the Bylaws be amended and restated to remove references
to IFS, or any other advisory company, and that the definition of
an "Affiliated Trustee" be revised to reflect a Trustee's relationship
with any entity who provides services for the Company, not IFS
or other advisory company. (See Item 4). Accordingly,
the roster of nominees which is slated below is not in compliance
with the current Bylaws, but rather, is, in the opinion of the
Board of Trustees, more appropriate to the Company's current needs.
At each annual meeting of Shareholders, Trustees are elected to succeed
those whose terms expire at such annual meeting, for a term
expiring at the next succeeding annual meeting of Shareholders. The Company
did not have annual meetings in 1992, 1993, 1994 and 1995, and
therefore, the current Trustees are serving until the election and
qualification of his successor, pursuant to Section 4.1 of the Bylaws.
Mr. Threatt was duly appointed by the Board of Trustees as an
Independent Trustee in 1995 to fill a vacancy.
The Bylaws of the Company provide that the Independent Trustees shall
either nominate persons to be elected as Independent Trustees or
appoint a committee of Trustees to make such nominations. The Affiliated
Trustees are nominated by the Board of Trustees. Shareholders of
the Company are permitted to nominate persons for election to the
Board of Trustees by giving notice in writing to the Secretary of
the Company which is received at the executive offices of the
Company not less than 60 nor more than 90 days prior to any annual
or special meeting of Shareholders; provided, that in the event
less than 70 days' notice or prior disclosure of the date of the
meeting is given or made to the Shareholders, notice
by a Shareholder to be timely must be so received not later
than the close of business on the 10th day following the day on
which such notice of the date of the meeting is mailed or such
public disclosure was made. Such Shareholder's notice shall
set forth (a) as to each person whom the Shareholder proposes
to nominate for election or re-election as a Trustee; (i) the name,
age, business address and residence address of such person;
(ii) the principal occupation or employment of such
person; (iii) the number of Common and Preferred Shares of
the Company which are beneficially owned by such
person; and (iv) any other information relating to such
person that is required to be disclosed in solicitations of
proxies for election of Trustees, or is otherwise required,
in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (including,
without limitation such person's written consent to
being named in the proxy statement as a nominee and to
serving as a Trustee if elected); and (b) as to the
Shareholder giving the notice; (i) the name and address, as
they appear on the Company's books, of such Shareholder; and
(ii) the number of Common and Preferred Shares of the Company
which are beneficially owned by such Shareholder. The foregoing
is only a summary of the detailed provisions of the Bylaws and is
qualified by reference to the text thereof. Shareholders wishing
to submit a nomination or proposal should review the
Bylaw requirements regarding nominations and proposals by
Shareholders and should communicate with the
Secretary of the Company.
The slate of nominees listed below designates each individual
as a nominee for "First Class Trustee" or "Second Class Trustee".
This designation is made to conform to the proposed classified Board
of Trustees described in Item 5 above. As described in the
Proposed Certificate of Amendment to the Certificate of
Incorporation of the Company, a copy of which is enclosed with
this proxy statement, a First Class Trustee would be chosen to hold
office for one year or until the next annual election
following their election. A Second Class Trustee would be chosen
to hold office for two years or until the second annual election
following their election.
NOMINEES
John J. Bennett, 52
Affiliate Trustee since 1988.
Nominee for Second Class Trustee
President, Chairman of the Board of Master Mortgage Investment Fund, Inc.
since 1988. Mr. Bennett is also the sole shareholder and President
of Integrated Financial Services, Inc., a private corporation which provided
banking and financial advisory services to the Company from 1988
until June, 1994. He has held that position since 1974. Mr. Bennett
was the sole Shareholder, President and Chairman of Embassy
Properties, Inc., a property management and financial services company
from 1983 until 1994. Mr. Bennett still retains a minority
ownership interest in Embassy Properties, Inc., but no longer
is an officer or director. Mr. Bennett has also been a Director of
First Trust of MidAmerica since 1989. He is the President of
Master Mortgage Realty II, Inc., Master Mortgage Realty III, Inc.
and Master Mortgage Realty V, Inc. and the Vice President of Master Mortgage
Realty IV, Inc., all of which are wholly owned subsidiaries of the Company.
Byron Constance, 68
Independent Trustee since 1991.
Nominee for First Class Trustee
Mr. Constance is the Senior Partner in Constance Stewart & Cook, L.C.,
a law firm located in Independence, Missouri, and currently
serves on the Board of Directors of Hillcrest Bank located
in Kansas City, Missouri.
Richard Polcari, 58
Independent Trustee since 1991.
Nominee for Second Class Trustee
Mr. Polcari has been the Chief Executive Officer of Sandrick
Associates, Inc., an investment firm in Boston, Massachusetts since 1976.
Robert K. Brown, 50
Independent Trustee since 1991.
Nominee for First Class Trustee
Mr. Brown has been a partner in Floyd R. Brown & Co., P.C.,
a Certified Public Accounting firm in Kansas City, Missouri, since 1969.
James E. Trimmer, 64
Independent Trustee since 1991.
Nominee for Second Class Trustee
Mr. Trimmer has been the President of Precise Forms, Inc., a
manufacturer of aluminum forms located in Kansas
City, Missouri since 1967 and is a former director of Grain Valley Bank.
Roger Buford, 47
Nominee for Affiliated First Class Trustee.
Mr. Buford was the President of Vista Construction Company,
a Real Estate Broker/Real Estate Construction
firm from 1984 to 1994. Mr. Buford has been the Vice President
and Secretary of Recon Development Company since 1993. Recon
Development Company is a development and construction management firm.
It supervises all maintenance, building improvements,
marketing and construction for the Company's River Market
project. It also provides property management assistance to
certain properties in which the Company is either
owner or lender. Mr. Buford is also the President of
Metro West Properties, Inc., which is a real estate
brokerage licensed in both Missouri and Kansas. Mr. Buford
is the General Partner of Historic Suites Partners I,
a Missouri general partnership which owns and operates a
102-room all suites historic hotel in Kansas City,
Missouri. Mr. Buford is also a partner in Tiffany Plaza
South, a Missouri general partnership, and Tiffany Plaza
Associates, a Missouri general partnership both of which own
shopping centers in Kansas City, Missouri. On
September 28, 1995, Involuntary Chapter 11 Bankruptcy petitions
were filed against Tiffany Plaza South and
Tiffany Plaza Associates in the United States Bankruptcy Court,
Western District of Missouri (Case Numbers 95-50464 SJ 11 and
95-50463 SJ 11, respectively). Motions to Dismiss in each
case are currently pending.
James I. Threatt, 72
Independent Trustee since 1995.
Nominee for First Class Trustee
Mr. Threatt was duly appointed as an Independent Trustee by the
Board of Directors on November 1, 1995. Mr.
Threatt held the position of Assistant City Manager of
Kansas City, Missouri from January, 1974 to January,
1994. Mr. Threatt is currently the President of James A.
Threatt and Associates, a private consulting firm and
serves as a Trustee and on the Board of Directors of the
Kansas City Public School Retirement Systems and on
the Board of Directors of the Downtown Minority Development
Corporation and the Kansas City Neighborhood
Alliance.
In the event that the amendments in connection with
the Board of Trustees to the Bylaws and Certificate
of Incorporation are not adopted at the Meeting, the
Trustees will be elected in accordance with the current
Bylaws of the Company. Since the current required number
of Trustees, as set by Board Resolution is seven (7),
there must be three (3) Affiliated Trustees and four (4)
Independent Trustees. If the proposed amendments to
the Bylaws and Certificate of Incorporation are not
adopted at the Meeting, the Board of Trustees proposes that
Mr. Bennett, Mr. Buford and Ms. Dianna Woolery be
elected as Affiliated Trustees. Ms. Woolery was Vice
President of Real Estate for Oppenheimer Industries, Inc.,
a public corporation based in Kansas City from
October, 1981 through August, 1989. She was responsible
for over 100 real estate investments that included
land, apartments, water rights, mini-storage complexes,
parking lots/garages, and commercial properties. Ms.
Woolery has handled the management, disposition, and acquisition
of over 2,000 multi-family residential units,
over 3,000 mini-storage units, over 500 multi-family
resort units, and over 200 land sales and leases. She is
currently the President and a shareholder of Embassy
Properties, Inc., a private corporation which provides
financial services, property management, and asset services
to the Company.
Ms. Woolery is also Vice President of Benchmark Management
Group, Inc., a wholly owned subsidiary of Embassy Properties, Inc.
Under the current Bylaws, the nominated Independent Trustees
would be as stated above, omitting Mr. Constance.
ITEM 7:APPOINTMENT OF AUDITORS
Item 5 is the recommendation of management that Mayer, Hoffman
& McCann, Certified Public Accountants, be appointed independent
auditors for the Company for the current fiscal year. Representatives of
Mayer, Hoffman & McCann will be present at the Meeting, will be
available to respond to questions and may
make a statement if they so desire.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
APPOINTMENT OF MAYER, HOFFMAN & MCCANN AS THE AUDITORS
FOR THE COMPANY FOR 1996, AS PROPOSED IN ITEM 7.
OTHER MATTERS
Officers and other employees of the Company may
solicit proxies by personal interview, telephone and
telegram, in addition to the use of the mails. None of
these individuals will receive special compensation for
these services which will be performed in addition to
their regular duties, and some of them may not necessarily
solicit proxies. The Company has also made arrangements
with brokerage firms, banks, nominees and other
fiduciaries to forward proxy solicitation materials for
shares held of record by them to the beneficial owners of
such shares. The Company will reimburse them for reasonable
out of pocket expenses. The Company will pay
the cost of all proxy solicitation.
FINANCIAL STATEMENTS
The financial statements of the Company, in comparison
form for the years ended December 31, 1995,
1994 and 1993 are contained in the 1995 Annual Report
to Shareholders, a copy of which is enclosed with this
proxy statement.
By Order of the Trustees
John J. Bennett, President
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
APPROVAL OF THE AMENDMENT TO THE ARTICLES OF INCORPORATION TO
AUTHORIZE THE REDUCTION OF AUTHORIZED CAPITAL; THAT YOU VOTE FOR
APPROVAL OF THE AMENDMENT TO THE ARTICLES OF INCORPORATION TO
AUTHORIZE THE CHANGE OF CORPORATE NAME TO MASTER REALTY PROPERTIES,
INC.; THAT YOU VOTE FOR APPROVAL OF THE AMENDMENT TO THE ARTICLES OF
INCORPORATION TO AUTHORIZE THE CONFORMATION OF THE INDEMNIFICATION
PROVISIONS CONTAINED THEREIN TO THE INDEMNIFICATION PROVISIONS
CONTAINED IN THE BYLAWS; THAT YOU VOTE FOR APPROVAL OF THE
AMENDMENT AND RESTATEMENT OF THE BYLAWS AS DESCRIBED IN ITEM 4; THAT
YOU VOTE FOR APPROVAL OF THE CREATION OF A CLASSIFIED BOARD OF
TRUSTEES AS DESCRIBED IN ITEM 5; THAT YOU VOTE FOR THE ELECTION OF THE
NOMINEES TO THE BOARD OF TRUSTEES LISTED IN ITEM 6; AND THAT YOU VOTE
FOR THE APPROVAL OF MAYER, HOFFMAN & MCCANN AS AUDITORS FOR THE
COMPANY. REGARDLESS OF HOW YOU WISH TO VOTE YOUR SHARES, YOUR BOARD
OF TRUSTEES URGES YOU TO PROMPTLY SIGN, DATE AND MAIL THE ENCLOSED
PROXY FORM.
PROXY CARD
MASTER MORTGAGE INVESTMENT FUND, INC.
712 BROADWAY, SUITE 700
KANSAS CITY, MISSOURI 64105
PROXY SOLICITED BY
THE BOARD OF TRUSTEES OF
MASTER MORTGAGE INVESTMENT FUND, INC.
SPECIAL MEETING IN LIEU OF
THE ANNUAL MEETINGS OF SHAREHOLDERS
FOR 1992, 1993, 1994, and 1995
July 23, 1996
The undersigned Shareholder of Master Mortgage Investment
Fund, Inc. (the "Company") hereby appoints JOHN J. BENNETT and
THOMAS H. TRABON and each of them, the true and lawful proxies and
attorneys in fact of the undersigned, with power of
substitution of each, for and in the name of the undersigned,
to attend the Special Meeting in lieu of the Annual Meetings
of Shareholders of the Company for 1992, 1993,
1994 and 1995 to be held on July 23, 1996, commencing
at 10:00, Central Standard Time, at 510 Delaware,
Kansas City, Missouri 64105 and any adjournments thereof,
and to vote thereat in the name and on behalf of the
undersigned at said Meeting and any adjournment thereof,
the number of Preferred and/or Common Shares which
the undersigned would be entitled to vote, as fully and
with the same effect as the undersigned might do if
personally present, on the following matters as set forth in
the Proxy Statement and Notice dated June 18, 1996.
9. To ratify the Amendment of the Articles of Incorporation
of the Company to increase the authorized common shares of the
Company to 45,000,000 and reduce the authorized number of
preferred shares to 2,500,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
10. To amend the Articles of Incorporation of the Company
to change the name of the Company from Master Mortgage
Investment Fund, Inc. to Master Realty Properties, Inc.
[ ] FOR [ ]AGAINST [ ]ABSTAIN
11. To amend the Articles of Incorporation of the Company
to conform the indemnification provisions contained in the
Articles of Incorporation to the indemnification provisions contained
in the Bylaws.
[ ] FOR [ ]AGAINST [ ]ABSTAIN
12. To amend and restate the Bylaws to reflect the current
business plan of the Company.
[ ] FOR [ ]AGAINST [ ]ABSTAIN
13. To amend the Bylaws of the Company to establish a
Classified Board of Trustees.
[ ]FOR [ ]AGAINST [ ]ABSTAIN
14. ELECTION OF TRUSTEES. (INSTRUCTION: TO BE USED IF ITEM 5 ABOVE IS
PASSED BY THE SHAREHOLDERS.)
[ ] For all nominees listed below
[ ] Withhold authority to vote for all
nominees listed below (INSTRUCTION:
TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE STRIKE A LINE THROUGH THE NOMINEE'S NAME IN
THE LIST BELOW)
John J. Bennett -- Second Class Trustee
Byron Constance -- First Class Trustee
Richard Polcari -- Second Class Trustee
Robert K. Brown -- First Class Trustee
James E. Trimmer -- Second Class Trustee
Roger Buford -- First Class Trustee
James I. Threatt -- First Class Trustee
6A. ELECTION OF TRUSTEES. (INSTRUCTION: TO BE USED IF ITEM 5 ABOVE IS NOT
PASSED BY THE SHAREHOLDERS.)
[ ] For all nominees listed below
[ ] Withhold authority to vote for all nominees listed below
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE STRIKE A LINE THROUGH THE NOMINEE'S NAME IN
THE LIST BELOW)
John J. Bennett -- Affiliated Trustee
Robert K. Brown -- Independent Trustee
Richard Polcari -- Independent Trustee
James E. Trimmer -- Independent Trustee
Roger Buford -- Affiliated Trustee
James I. Threatt -- Independent Trustee
Dianna Woolery -- Affiliated Trustee
NOTE:
Responses to both Item 6 and Item 6A are required.
In the event that Item 5 is passed at the Annual Meeting
by a majority vote of the Shareholders, the Inspector of Elections will
tabulate the result of Item 6 above and disregard the responses
to Item 6A. In the event that Item 5 is not passed at the
Annual Meeting by a majority vote of the Shareholders, the
Inspector of Elections will tabulate the result of Item 6A
above and disregard the responses to Item 6.
15. To appoint Mayer Hoffman & McCann as auditors of the
Company for the 1995 fiscal year.
[ ] FOR [ ]AGAINST [ ] ABSTAIN
This proxy is revocable and the undersigned reserves the
right to attend the Meeting and vote in person.
The undersigned hereby revokes any proxy heretofore
given in respect of Shares of the Company.
Please sign exactly as name appears.
Where Shares are registered jointly in
the names of two or more persons, all
should sign. Executing partners,
trustees, guardians, etc. should
so indicate when signing.
Signature(s)
Dated: , 1996
THE BOARD OF TRUSTEES URGES THAT YOU FILL IN, SIGN AND DATE THIS PROXY AND
RETURN IT PROMPTLY BY MAIL IN THE ENCLOSED ENVELOPE.
PROPOSED CERTIFICATE
OF AMENDMENT TO THE
ARTICLES OF INCORPORATION
PROPOSED CERTIFICATE OF AMENDMENT TO THE
CERTIFICATE OF INCORPORATION
OF
MASTER MORTGAGE INVESTMENT FUND, INC.
It is hereby certified that:
Master Mortgage Investment Fund, Inc., a corporation
organized and existing under and by virtue of
the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY;
FIRST: That at a meeting of the Board of Trustees of
Master Mortgage Investment Fund, Inc.
resolutions were duly adopted setting forth a proposed
amendment to the Certificate of Incorporation of said
Corporation, declaring said amendment to be advisable
and calling a meeting of the stockholders of said
Corporation for consideration thereof. The resolutions
setting forth the proposed amendment were as follows:
"RESOLVED, That the Certificate of Incorporation of this
Corporation be amended by deleting the FIRST paragraph in its
entirety and substituting the following paragraph FIRST in
lieu thereof:
FIRST: The name of the Corporation is MASTER REALTY
PROPERTIES, INC.
RESOLVED, That the Certificate of Incorporation of this
Corporation be amended by deleting the FOURTH paragraph in
its entirety and substituting the following paragraph FOURTH in
lieu thereof:
FOURTH: The authorized capital shall consist of 45,000,000 Common
Shares, $.01 par value per Share, and 4,02,500,000 Preferred
Shares, $.01 par value per Share, with the Preferred Shares
to have such rights, privileges, designations and preferences
as determined by the Board of Directors.
RESOLVED, That the Certificate of Incorporation of this
Corporation be amended by adding the following language after
the text contained in paragraph SEVENTH, subparagraph (1):
The entire number of Trustees shall be divided into two (2)
classes, as nearly equal in number as possible, with respect
to the time for which they shall severally hold office. Trustees of the
First Class first chosen shall hold office for one year or until
the next annual election following their election; and Trustees of
the Second Class first chosen shall hold office for two years or
until the second annual election following their election,
so that the term of office of one class of Trustees shall
expire in each year. Each Trustee shall hold office
until the election and qualification of his successor.
RESOLVED, That the Certificate of Incorporation of this
Corporation be amended by deleting the EIGHTH paragraph in
its entirety and substituting the following paragraph EIGHTH in
lieu thereof:
EIGHTH: The Corporation shall have the power to indemnify the
officers, directors, employees, agents and the Corporation's
Advisory Company for losses arising from the operation of the
corporation if all of the following conditions are met:
(a) The Fund shall indemnify any person who was or is a party
or is threatened to 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 Fund) by reason of the fact that he is or was a
trustee, officer, 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, unless such person shall have
acted fraudulently or be guilty of willful and wanton misconduct
or intentional wrongdoing and, with respect to any criminal action
or proceeding, had 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 contendere or its
equivalent shall not, of itself, create a presumption that the
person acted fraudulently or was guilty of willful and wanton
misconduct or intentional wrongdoing and, with respect to any criminal
action or proceeding, had reasonable cause to believe that
his conduct was unlawful.
(b) The Fund 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 Fund to procure a judgment in
its favor by reason of the fact that he is or was a trustee, officer,
employee or agent of the Fund, or is or was serving at the request of
the Fund as a director, trustee, 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, unless such person shall have acted fraudulently or be
guilty of willful and wanton misconduct or intentional wrongdoing 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 Fund, unless and only to the extent that 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 shall deem proper.
(c) Any indemnification under subsections (a) and (b) and any
indemnification for expenses incurred by the person to be indemnified
pursuant to such subsections shall be made by the Fund in advance of the
final disposition of such person is not proper in the circumstances
because he has not met the applicable standard of conduct set forth
in subsections (a) and (b). Such determination shall be made
(1) by the Board of Trustees of the Fund by a majority vote of
a quorum consisting of trustees who were not parties to such
action, suit or proceeding, or (2) if such a quorum is not
obtainable or even if obtainable a quorum of disinterested
trustees so directs, by independent legal counsel in a written
opinion or (3) by the Shareholders of the Fund.
(d) The indemnification and advancement of expenses provided
by, or granted pursuant to, the other subsections of this Section
shall not be deemed exclusive of any other rights to which
those seeking indemnification or advancement of expenses
may be entitled under any by-law, agreement, vote of shareholders
or disinterested trustees of the Fund or otherwise, both as
to action in his official capacity and as to action in
another capacity while holding such office.
(e) The Fund shall have the power to purchase and maintain
insurance on behalf of any person who is or was a trustee,
officer, employee or agent of the Fund or is or was serving
at the request of the Fund as a director, trustee, 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 Fund would have the power to indemnify him against such
liability under the provisions of this Section.
(f) For purposes of this Section, references to "the Fund" shall
include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power
and authority to indemnify its directors, trustees, officers,
and employees or agents, so that any person who is or
was a director, trustee, officer, employee or agent of such
constituent corporation, or is or was serving at the request of
such constituent corporation as a director, trustee, officer,
employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same
position under the provisions of this Section with
respect to the resulting or surviving corporation as
he would have with respect to such constituent corporation
if its separate existence had continued.
(g) For purposes of this Section, references to "other enterprises"
shall include employee benefit plans; referenced to "fines" shall
include any excise taxes assessed on a person with respect to any
employee benefit plan; and references to "serving at the request
of the Fund" shall include any service as a trustee, officer,
employee or agent of the Fund which imposes duties on, or
involves services by, such trustee, officer, employee or agent
with respect to an employee benefit plan, its participants,
or beneficiaries; and a 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 Fund" as referred to in this Section.
(h) 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, trustee, officer,
employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such person."
SECOND: That thereafter, pursuant to resolution of it Board of
Trustees, a meeting of the stockholders of said Corporation
was duly called and held, upon notice in accordance with
Section 222 of the General Corporation Law of the State
of Delaware, at which meeting the necessary number of shares
as required by statute was voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance
with the provision of Section 242 of the General Corporation
Law of the State of Delaware.
IN WITNESS WHEREOF, said Master Mortgage Investment Fund, Inc.,
has caused its corporate seal to be hereunto affixed and
this Certificate to be signed by its President and attested
by its Secretary this _____
day of ________________________, 1996.
By:
President
(SEAL)
ATTEST:
Secretary
(MUST BE SIGNED BEFORE A NOTARY)
STATE OF _______________ )
) SS.
COUNTY OF ______________ )
BE IT REMEMBERED, that on this _____ day of _____________________, 1996,
personally appeared before me, a Notary Public in and for the
County and State aforesaid, ____________________________, President
of Master Mortgage Investment Fund, Inc, a Delaware corporation,
and he duly executed said Certificate before me and acknowledged
the said Certificate to be his act and deed and
the act and deed of said Corporation and the facts stated
thereon to be true; and that the seal affixed to said
Certificate and attested by the Secretary of said Corporation
is the common or corporate seal of said Corporation.
IN WITNESS WHEREOF, I have hereunto set my hand and seal of
office the day and year aforesaid.
Notary Public in and for said
County and State
My Commission Expires:
PROPOSED AMENDED AND RESTATED BYLAWS
PROPOSED
AMENDED AND RESTATED
BYLAWS
OF
MASTER REALTY PROPERTIES, INC.
(f/k/a MASTER MORTGAGE INVESTMENT FUND, INC.)
SECTION 1
DEFINITIONS
1.1 Definitions. Whenever used in these Bylaws, capitalized terms,
unless otherwise defined herein, shall have the following meanings.
Such definitions may not be amended in the absence of a Majority
Vote of the Shareholders.
"Acquisition Expenses" shall mean expenses related to the
Company's acquisition and investment in existing Loans and
Real Property (whether or not made), including but not limited
to legal fees and expenses, travel and communications
expenses, costs of appraisals, accounting fees and expenses,
title insurance and miscellaneous other expenses.
"Acquisition Fees" shall mean the total of all fees and
commissions paid by any party in connection with the making
or investing in Loans or the acquisition of Real Properties by
the Company, including the 1% Acquisition Fee payable to IFS, but
not including a development fee paid to a person not affiliated
with IFS in connection with the actual development of a
project after acquisition of the land by the Company. Included
within the computation of Acquisition Fees for purposes of
the NASAA Guidelines shall be any real estate
commission, selection fee, development fee, nonrecurring
management fee, or any fee of a similar nature,
however designated.
"Adjusted Contribution" shall mean the Original Contribution
paid by a purchaser of Preferred or Common Shares reduced by
the total cash distributed with respect to such Shares
from Disposition Proceeds.
"Adjusted Original Value" of a property securing a Loan from
the Company shall mean (i) for properties held by the Borrower
or its Affiliates for one year or more, prior to the
making of the Loan: the aggregate amount of (a) the Current
Appraised Value of the property at the time the Loan is made plus
(b) the cost of all capital expenditures made during the
term of the Loan which have been approved by the Company; or
(ii) for properties held by the Borrower or its Affiliates for
less than one year prior to the making of the Loan;
the aggregate amount of (x) the greater of
(1) the cost of the property or (2) the aggregate amount of all
indebtedness outstanding on the property at the time the Loan
is made plus Deferred Interest, if any (except that
if some material change has occurred to the property which
would increase the value of the property since acquisition
by the Borrower or its Affiliates prior to the making of the
Loan, upon approval of a majority of the Trustees, including a
majority of the Independent Trustees, the Current Appraised Value
shall instead be used), plus (y) the cost of all expenditures
made during the term of the Loan which have been approved by the
Company (not including expenditures payable from proceeds from
sources described in clause (ii)(x)(2) above).
"Advisory Agreement" shall mean the agreement between the Company
and IFS, pursuant to which IFS will act as the investment advisor and
administrator of the Company.
"Advisory Company" or "Advisor" shall mean Integrated Financial
Services, Inc. ("IFS"), which, pursuant to the Advisory Agreement,
will serve as the investment advisor and administrator of the Company, or
any successor Advisory Company selected by the Trustees; it shall
also include any person or entity to which the Advisory Company
subcontracts substantially all of its administrative functions.
"Advisory Fee" shall mean an amount equal to 1% per annum of
the month-end value of the Assets of the Company, payable monthly to IFS.
"Affiliate" shall mean (i) any person directly or indirectly
controlling, controlled by or under common
control with another person, (ii) any person owning
or controlling 10% or more of the outstanding voting
securities or beneficial interests of such other person,
(iii) any officer, director, trustee or general partner of such
person and (iv) if such other person is an officer, director,
trustee or general partner of another entity, then the
entity for which that person acts in any such capacity.
"Affiliated Borrower" shall mean any Affiliate of the
Company and any program sponsored by IFS or
its Affiliates which obtains a Loan from the Company.
"Affiliated Trustees" shall mean those Trustees who are
not Independent Trustees.
"Appraised Value" of a Real Property shall mean (i) for
pre-development loans, the appraised value of
the mortgaged property (as determined by MAI Appraisal),
taking into account the planned development of the
property; (ii) for construction loans, the appraised value
of the mortgaged property (as determined by MAI
Appraisal), including improvements, taking into account
the planned construction on the property; and (iii) for
mortgage loans, land loans and Real Property acquired by
the Company, the current appraised value as determined
by an MAI Appraisal, without taking into account any planned
development or construction.
"Appreciation" for all Loans will generally be defined
as the amount obtained by subtracting:
(a) the Adjusted Original Value of the property at the time
the Loan was made, from
(b) either
(x) the Current Appraised Value of the subject property as of the
maturity of the Loan (whether as a result of a refinancing or
otherwise), reduced by the estimated ordinary and customary
costs which would have been incurred to sell the property, or
(y) the sale price net of ordinary and customary selling costs.
The Company will be empowered to approve a different
definition of "Appreciation" in connection with any
Loan.
"Asset Coverage" shall mean the ratio which the value of
the total assets of the Company, less all
liabilities and indebtedness except indebtedness for
unsecured borrowings, bears to the aggregate amount of all
unsecured borrowings of the Company.
"Assets" shall mean the Total Assets of the Company (other
than intangibles) at cost before deducting
depreciation or other non-cash reserves, calculated
at least quarterly according to generally accepted accounting
principles on a basis consistently applied.
"Average Invested Assets" shall mean, for any period,
the average aggregate book value of the Total
Assets of the Company invested, directly or indirectly,
in Loans and Real Property, before reserves for bad debts
or other similar non-cash reserves, computed by taking
the average of such values at the end of each month
during such period.
"Basic Interest" shall mean the rate of interest accruing
on a Loan, as determined at the beginning of
each Loan and any extension thereof.
"Basis Point" shall mean one one-hundredth of one percent.
"Bonus Interest" shall mean Interest payable to the Company
under a participating Loan, calculated as a
percentage of the Appreciation in value of the property securing the Loan.
"Borrower" shall mean any person, including an Affiliated
Borrower, which obtains a Loan from the Company.
"Bylaws" shall mean the Bylaws of the Company, as
amended from time to time.
"Certificate of Incorporation" shall mean the Certificate
of Incorporation filed by the Company with the
Secretary of State of Delaware, as further amended or
restated from time to time.
"Code" shall mean the Internal Revenue Code of 1986, as amended,
or corresponding provisions of any successor legislation.
"Commitment Fees" shall mean nonrefundable fees paid by
Borrowers in return for the Company's agreement to make a
Loan if all conditions for the making of such Loan are met.
"Common Shares" shall mean the common stock authorized, the
common stock offered by this Prospectus, and any other
common stock and issued by the Company.
"Construction Loan" shall mean a Loan obtained by a Borrower
for the purpose of constructing improvements on real property.
"Contract Price for the Property" means the amount actually
paid or allocated to the purchase, development, construction
or improvement of a Real Property exclusive of Acquisition Fees
and Acquisition Expenses.
"Current Appraised Value" of a property shall mean the
current appraised value of the property as
determined by an MAI Appraisal.
"Current Interest" shall mean that portion of Basic Interest
which is payable currently during the term of
a Loan.
"Deferred Interest" shall mean that portion of Basic Interest,
the payment of which is deferred until the
maturity of the Loan.
"Delaware Corporation Statute" shall mean the General Corporation
Law of the State of Delaware, as amended from time to time.
"Disposition Proceeds" shall mean the net cash realized from
the repayment, prepayment, retirement, refinancing, sale or other
disposition of Loans and Real Property investments,
including payments of Principal, Interest Reserve and Bonus
Interest, but excluding Origination Fees and Basic Interest,
after reduction for the following: (i) payment of all expenses
related to the transaction; (ii) payment of all debts and
obligations of the Company arising from or otherwise related to
the transaction, including fees to IFS or its Affiliates; and (iii) any
amount set aside by IFS the Company for working capital
reserves; provided, however, that proceeds from a
disposition of a Company investment shall not be deemed to
be "Disposition Proceeds" to the extent such
proceeds are reinvested by the Company and not distributed
to the Shareholders.
"Distributions" shall mean cash dividend Distributions
declared by the Company and paid to Shareholders of record
as of a record date determined by the Trustees.
"Dividend Reinvestment Plan" or "Plan" shall mean the plan pursuant to
which Shareholders may direct that cash Distributions otherwise
payable to them from the Company with respect to Preferred or Common
Shares owned by them be delivered instead to the Reinvestment
Agent, who is directed, pursuant to the terms of
the Plan, to acquire additional Preferred or Common Shares,
(after a mandatory 100 Common Share purchase)
subject to availability, with such cash.
"Due Diligence Fee" shall mean the fee in the amount of $.05
payable to participating broker-dealers for each Preferred
and Common Share sold as reimbursement for due diligence
expenses incurred in connection with
offering such Shares.
"Embassy Properties, Inc." shall mean an entity affiliated
with IFS the Company which may perform
property management and other services for the Company.
"Equity Investments" shall mean direct or indirect
investments of all forms in Real Property, but
excluding Loans that are considered equity investments
under Generally Accepted Accounting Principles,
Acquisition, Development and Construction Rules.
"Escrow Agent" shall mean The Merchants Bank, Kansas City,
Missouri, or any other entity selected by
the Trustees to serve as escrow agent for the Company.
"Expense Reimbursement" shall mean the expense reimbursement
in the amount of $.05 payable to participating broker-dealers
for each Preferred Share sold as reimbursement for expenses
incurred in offering the Preferred Shares.
"Final Closing Date" shall mean the date on which the last closing
for Preferred and Common Shares sold pursuant to this Prospectus occurs.
"Company" shall mean Master Realty Properties, Inc.
(f/k/a Master Mortgage Investment Fund, Inc.), a Delaware
corporation, or any successor thereto.
"Gross Proceeds" shall mean the aggregate Original Contributions
of all Shareholders, except that during the offering period
Gross Proceeds shall mean the Increased Maximum Offering.
"IFS" shall mean Integrated Financial Services, Inc., the Sponsor
and Advisory Company of the Company. For the purpose of
indemnification, IFS shall also mean the officers, directors,
stockholders and employees of IFS.
"Increased Maximum Offering" shall mean the offer and sale of 3,000,000
Preferred Shares and 2,000,000 Common Shares in this public offering.
"Independent Advisor" shall mean any person selected by the Trustees
to provide an opinion concerning the fairness of the terms of any
Loan to an Affiliated Borrower and certain other transactions
with Affiliates of IFS of the Company.
"Independent Trustees" shall mean the Trustees who (i) are
not affiliated, directly or indirectly, with IFS or any of
its Affiliates, whether by ownership of, ownership interest
in, employment by, any material business or professional
relationship with, or service as an officer or director of,
IFS or its Affiliates or with any person owning beneficially 5%
or more of the outstanding Common or Preferred Shares; and (ii)
perform no other services for the Company, except as Trustees.
An indirect relationship shall include circumstances in which the
immediate family of a Trustee has one of the foregoing relationships
with IFS or the Company.
"Initial Closing Date" shall mean the date on which the first
closing for Shares sold pursuant to this Prospectus occurs.
"Interest" shall mean Basic Interest, Bonus Interest, Interest
payable on default, and all other amounts received by or payable
to the Company for the use of its Loan funds by a Borrower, but
shall not include Commitment Fees, Origination Fees or Loan Fees.
"Interest Reserve" shall mean any amount loaned to a Borrower
to fund the Borrower's projected future payments of Basic Interest
to the Company and upon which Basic Interest may be charged.
"IRA" shall mean an Individual Retirement Account established
pursuant to Section 408 of the Code or any successor provision.
"Junior Mortgage Loans" shall mean Mortgage Loans on properties
which are subordinated to other existing loans on the same properties.
"Land Loans" shall mean a Loan obtained by a Borrower for the
purpose of acquiring Unimproved Real Property.
"Loan Fees" shall mean all fees and expenses charged by the
Company to Borrowers which are not designated as Commitment
Fees or Origination Fees.
"Loan Origination Fee" shall mean the fee payable to IFS
equal to 50% of the amount of all Origination Fees paid by
Borrowers on Loans made by the Company and under shared
funding arrangements.
"Loan Servicing Fee" shall mean the fee payable monthly to
Embassy Properties, Inc. equal to 1/2 1/4 of 1% of the principal
amount of all Loans of the Company for services performed
in administering the Company's Loan portfolio.
"Loans" shall mean short-term loans, junior mortgage loans,
wraparound mortgage loans, first mortgage loans with and
without participation features, construction loans, pre-
development loans and land loans evidenced by notes, debentures,
bonds and other evidences of indebtedness or obligations
(other than temporary investments made by the Company) which are
secured or collateralized by (i) interests in real property, (ii)
other beneficial interests essentially equivalent to a mortgage
on real property, (iii) interests in partnerships, joint ventures
or other entities which own real property or (iv) other security
acceptable to the Company and consistent with the Company's
intention to qualify as a REIT.
"MAI Appraisal" shall mean an appraisal made by a member in good
standing of the American Institute of Real Estate Appraisers.
"Majority Vote" shall mean, unless otherwise required by the
Delaware Corporation Statute rate Law, the affirmative vote or
consent of the holders owning more than 50% of the outstanding
Common and Preferred Shares of the Company, voting without
regard to class.
"Maximum Offering" shall mean the sale of 2,500,000 Preferred
Shares and 1,500,000 Common Shares in this public offering.
"Minimum Offering" shall mean the sale of 100,000 Preferred Shares
to not less than 100 investors in this public offering.
"Mortgage Loans" shall mean loans which are short-term loans,
junior mortgage loans, wraparound mortgage loans and first mortgage
loans on income producing properties (other than land loans,
pre-development loans and construction loans).
"NASD" shall mean the National Association of Securities Dealers,
Inc.
"NASDAQ" shall mean the National Association of Securities Dealers,
Inc. Automated Quotation System.
"Net Assets" shall mean the total assets of the Company
(other than intangibles) at cost before deducting depreciation
and other non-cash reserves, less total liabilities, calculated
at least quarterly on a basis consistently applied.
"Net Income" for any period shall mean total revenues applicable
to such period as determined for federal income tax purposes,
less the expenses applicable to such period, other than additions
to reserves for bad debts or other similar non-cash reserves; for
purposes of calculating Operating Expenses, Net Income shall not
include the gain from the sale of the Company's assets.
"Net Proceeds" shall mean Gross Proceeds less Due Diligence Fees,
the 0.5% Expense Reimbursements, Sales Commissions and the organization
and offering Expense Allowance.
"Operating Expenses" shall mean all operating, general and
administrative expenses of the Company as determined under
generally accepted accounting principles, including rent,
utilities, capital equipment, salaries, fringe benefits,
travel expenses and other administrative items, but excluding
the expenses of raising capital, interest payments, taxes,
non-cash expenditures (e.g., depreciation, amortization, bad
debt reserve), fees payable to IFS and its Affiliates, and the
costs related directly to a specific Loan or Real Property
investment by the Company, such as expenses for originating,
acquiring, servicing or disposing of a Loan or Real Property.
"Organization and Offering Expense Allowance" shall mean an
amount equal to 2% of Gross Proceeds payable to IFS in
reimbursement for certain Organization and Offering Expenses.
IFS shall pay any Sales Commissions on sales of Preferred
Shares plus any organization and offering Expenses (not including
Due Diligence Fees or expense reimbursements on sales of Preferred
Shares or Sales Commissions or Due Diligence Fees on sales of
Common Shares) in excess of 2% of Gross Proceeds. To the extent
actual Organization and Offering Expenses (not including Due
Diligence Fees or expense reimbursements on sales of Preferred
Shares or Sales Commissions or Due Diligence Fees on sales of
Common Shares) are less than 2% of Gross Proceeds, the balance
shall constitute compensation to IFS.
"Organization and Offering Expenses" shall mean those expenses
payable in connection with the formation, qualification and
registration of the Company and in marketing, distributing and
processing Preferred and Common Shares, including such expenses
as: (a) fees and expenses paid to attorneys in connection with the
offering, (b) registration fees, filing fees and taxes, (c) the
costs of qualifying, printing, amending, supplementing, mailing
and distributing the Company's registration statement and Prospectus,
including telephone and telegraphic costs, (d) the costs of
qualifying, printing, amending, supplementing, mailing and distributing
sales materials used in connection with the issuance of Shares,
including telephone and telegraphic costs, (e) remuneration of
officers and employees of IFS and its Affiliates while directly
engaged in marketing, distributing, processing and establishing
records of Shares, and (f) accounting and legal fees and expenses
incurred in connection therewith.
"Organizational Documents" shall mean the Company's Certificate of
Incorporation and Bylaws, as amended from time to time.
"Origination Fee" shall mean the fee payable to the Company by a
Borrower as additional compensation to the Company for actually
making a Loan to such Borrower, which fee will ordinarily be
computed as a percentage of the Principal amount of the Loan.
"Pre-Development Loan" shall mean a Loan obtained by a Borrower
for the purpose of acquiring, carrying and engaging in pre-
development activities with respect to real property prior to
the construction of improvements thereon.
"Preferred Shares" shall mean the Preferred Shares of the Company
offered by this Prospectus and any other shares of preferred stock
authorized and/or issued by the Company.
"Principal" of a Loan shall mean the funds loaned to a Borrower,
excluding the amount of any Interest Reserve.
"Procedural Review" shall mean the procedural review conducted
by the Trustees of all Loans selected by IFS and for investments
by the Company which do not require the Trustees' prior approval
but which are required to meet certain criteria, as set forth
under "Management - Procedural Review."
"Property Management Fee" shall refer to the fee for property
management services, which fee may be paid to Embassy Properties,
Inc. from gross revenues of a Real Property or any property acquired
upon foreclosure of a Loan.
"Prospectus" shall mean the final prospectus of the Company, as
amended or supplemented, with respect to the offer and sale of
the Preferred and Common Shares, filed with the Securities and
Exchange Commission as part of the Company's Registration
Statement on Form S-11.
"Qualified Plans" shall mean qualified pension, profit-sharing
and other employee retirement benefit plans (including Keogh [HR
10] plans) and trusts, bank commingled trust funds for such plans,
insurance company variable annuity and separate accounts, and
individual retirement accounts.
"Real Properties" shall refer to any properties or any interest
therein acquired directly or indirectly by the Company,
including an interest securing a Loan. Reference to "Real
Property" shall be to any one of them.
"Reference Rate" shall mean the interest rate inclusive of
origination Fees and exclusive of participations which would
be charged by other lenders for similar loans, as determined
by IFS as of the granting of a Loan.
"Reinvestment Agent" shall mean American Stock Transfer
Company, New York, New York, or its successors, as agent for
the Reinvestment Plan.
"REIT" and "real estate investment trust" shall mean a real
estate investment trust as defined in Sections 856 to 860 of the
Code.
"REIT-Qualifying Income" shall mean that income described in Section
856(c) of the Code, or any successor provision.
"REIT-Qualifying Investment" shall mean an investment in assets
described in Section 856(c)(5) of the Code, or any successor
provision.
"REIT Taxable Income" shall mean the taxable income as computed for
a corporation which is not a REIT, (i) without the deductions
allowed by Code Sections 241 through 247, 249 and 250 (relating
generally to the deduction for dividends received); (ii) excluding
amounts equal to (a) the net income from foreclosure property and
(b) the net income derived from prohibited transactions; and (iii)
deducting amounts equal to (a) the tax imposed by Code Section
857(b)(5) upon a failure to meet the 95% and/or the 75% gross
income tests and (b) the dividends paid, computed without regard
to the amount of the net income from foreclosure property which is
excluded from REIT Taxable Income; and (iv) without regard to Code
Section 443(b) (relating to the computation of a tax on the change
of an annual accounting period).
"Sales Commissions" shall mean any Sales Commissions paid by IFS
the Company to participating broker-dealers on the sale of Preferred
Shares and the $.75 per Share Sales Commission payable by the Company
to participating broker-dealers on sales of Common Shares.
"Sellers" shall mean sellers of any Real Properties or interests
therein to the Company.
"Shares" shall mean either the Preferred Shares or the Common
Shares of the Company offered by this Prospectus, or both of them.
"Shareholders" shall mean as of any particular time the registered
holders of outstanding Preferred or Common Shares at such time.
"Short-Term Loans" shall mean Mortgage Loans with initial terms of
up to six months, subject to extension, primarily made to provide a
Borrower with interim capital for the acquisition of a Real Property.
"Sponsor" shall mean any person directly or indirectly instrumental
in organizing, wholly or in part, the Company or any person who
will manage or participate in the management of the Company, and
any Affiliate of any such person, but excluding (i) a person whose
only relationship with the Company is that of an independent property
manager and whose only compensation is as such, and (ii) wholly
independent third parties such as attorneys, accountants and
underwriters whose only compensation is for professional services.
The term "Sponsor" shall include IFS.
"Subordinated Incentive Management Fee" shall mean that fee payable
quarterly to IFS which is equal to 15% of the amount by which the
Yield on the Company's Loan portfolio exceeds 250 Basis Points
over the one-year Treasury Bill rate in effect at the beginning of
each quarter, plus 25% of the amount by which such Yield exceeds 500
Basis Points over such Treasury Bill rate.
"Tax-Exempt Entities" shall mean Qualified Plans and other entities
exempt from federal income taxation, such as retirement plans,
IRA'S, insurance company variable annuity and separate accounts,
401(k) Plans, endowment funds and foundations and charitable,
religious, scientific or educational organizations.
"Total Assets" shall mean the book value of all assets of the
Company, determined in accordance with generally accepted
accounting principles.
"Total Invested Capital" shall mean the Shareholders' Equity of
the Company just prior to the liquidation of the Company, determined
in accordance with generally accepted accounting principles, without
taking into account any Distributions of the Company from operations
or from liquidation proceeds, except as required under generally
accepted accounting principles.
"Total Operating Expenses" shall mean all operating, general and
administrative expenses of the Company as determined under
generally accepted accounting principles, except the expenses
of raising capital, interest payments, taxes, non-cash expenditures
(e.g., depreciation, amortization, bad debt reserve), incentive fees
paid to IFS, and the costs related directly to asset acquisition,
operation and disposition.
"Transfer Agent" shall mean American Stock Transfer and Trust Company,
New York, New York, or any other entity selected by the Trustees to
serve as Transfer Agent for the Preferred and Common Shares.
"Trustees" shall mean, as of any particular time, the corporate
directors of the Company holding the office of directors under
the Organizational Documents, whether they are directors as of
the date of the Prospectus or additional or successor directors.
"Unimproved Real Property" shall mean raw land on which no development
or construction is planned to commence for at least one year.
"Wraparound Mortgage Loans" shall mean Mortgage Loans made on
properties which are already subject to mortgage indebtedness,
in which the Principal amount shall equal the outstanding
balance under the prior existing mortgages plus the amount
actually advanced by the Company under the Wraparound Mortgage
Loan.
"Yield" shall mean the total yield on all Loans and any Real
Property investments of the Company, including, but not limited
to, payments of Basic Interest, Bonus Interest interest, additional
payments required in the event of a default under a Loan, rents from
Real Property, and income from Temporary Investments.
SECTION 2
OFFICE
2.1 Principal Office. The principal office for the transaction
of the business of the Company shall be located at 10500 Barkley,
Suite 200, Overland Park, Kansas 66212 712 Broadway, Kansas City, Missouri
64105. The Board of Trustees is hereby granted full power and
authority to change the principal office to another location
within or without the State of Delaware.
2.2 Other Offices. The Company may also have offices at such other
places both within and without the State of Delaware as the Board
of Trustees may from time to time determine or the business of the
Company may require.
2.3 Office of Registered Agent. The address of the Company's
registered office in the State of Delaware is Corporation Trust
Center, 1209 Orange Street, Wilmington, Delaware 19801. The
name of the Company's registered agent at such address is The
Corporation Trust Company.
SECTION 3
MEETINGS OF SHAREHOLDERS
3.1 Annual Meetings. Annual meetings of Shareholders shall
be held not less than 30 days after delivery of the Company's
annual report, but within six months after the end of each
fiscal year.
3.2 Special Meetings. Special meetings of the Shareholders
may be called by resolution of the Board of Trustees and shall
be called by the Chairman of the Board, the Chief Executive
Officer or the President upon written request of Shareholders
holding not less than 10% of the outstanding Shares of the Company.
The Shareholders' request shall state the purpose or purposes of the
meeting. Only business related to purposes set forth in the notice of
the meeting may be transacted at a special meeting.
3.3 Time and Place of Meetings. Subject to the provisions of Section
3.1, each meeting of Shareholders shall be held at a time and place
determined by the Board of Trustees. Such time and place must be
convenient to the Shareholders. Such meetings may be at the
principal office of the Company or at such place within or without
the State of Delaware, and at such hour, as shall be fixed by the
Board of Trustees or stated 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.
3.4 Notice of Meetings. A written notice of each meeting of
Shareholders, stating 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, shall be given either personally
or by mail or telegraph, charges prepaid, to each Shareholder entitled to
vote at the meeting. Upon receipt of a written request either in
person or by registered mail stating the purpose or purposes of
any special meeting requested by Shareholders, the Company shall
provide all Shareholders within 10 business days after receipt of
such request, written notice (either in person or by mail) of
such meeting and the purpose or purposes thereof. Such meeting
shall be held not less than 20 nor more than 60 days after receipt
by the Company of such request. Except as otherwise provided above
or by statute, notice of any annual or special Shareholders' meeting
shall be given not less than 20 nor more than 60 days before the
date of the meeting, and, if mailed, shall be deposited in the
United States mail, postage prepaid, and if by telegraph, delivered
to the telegraph company, charges prepaid, directed to each Shareholder
at his address as it appears on the records of the Company or as
theretofore given by him to the Company for the purpose of notice.
No notice need by given to any person with whom communication is
unlawful, nor shall there be any duty to apply for any permit or
license to give notice to any such person.
3.5 Waiver of Notice. Anything herein to the contrary
notwithstanding, notice of any meeting of Shareholders need
not be given to any Shareholder who in person or by proxy 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 Company's records or made
a part of the minutes of the meeting.
3.6 Quorum; Manner of Acting and order of Business. Subject to the
provisions of these Bylaws, the Certificate of Incorporation and
the Delaware Corporation Statute as to the vote that is required for
a specified action, the presence in person or by proxy of the holders
of a majority of the outstanding Preferred and Common Shares of the
Company entitled to vote at any meeting of Shareholders shall
constitute a quorum for the transaction of business. The Majority
Vote of Shareholders shall be binding on all Shareholders of the
Company. The Shareholders present at a duly called or held meeting
at which a quorum is present may continue to do business until
adjournment, notwithstanding the withdrawal of enough Shareholders
to leave less than a quorum.
In the absence of a quorum, Shareholders holding a majority of the
Common and Preferred Shares present in person or by proxy and entitled
to vote, regardless of whether or not they constitute a quorum, or if no
Shareholders are present, any officer entitled to preside at or act
as secretary of the meeting, may adjourn the meeting to another
time and 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. No notice of an adjourned
meeting need be given if the time and place are announced at the
meeting at which the adjournment is taken except that, if
adjournment is for more than thirty days or if, after the
adjournment, a new record date is fixed for the meeting,
notice of the adjourned meeting shall be given pursuant
to Section 3.4. Meetings of the Shareholders shall be
presided over by the Chairman of the Board, if any, or
in his absence by the Vice Chairman of the Board, if any,
or in his absence by the Chief Executive Officer, or in
his absence by the President, or in his absence by a vice
President, or in the absence of the foregoing persons by
a chairman designated by the Board of Trustees, or in
the absence of such designation by a chairman chosen at the meeting.
The Secretary shall act as secretary of the meeting, but in his
absence the chairman of the meeting may appoint any person to
act as secretary of the meeting. The order of business at
all meetings of the Shareholders shall be determined by the
chairman. The order of business so determined, however, may
be changed by vote of the holders of Preferred and Common Shares
entitled to cast a majority of votes at the meeting present in
person or represented by proxy.
3.7 Voting Proxies. Each Shareholder of record shall be entitled to
one vote for every Common Share and one vote for every Preferred
Share registered tirade in his name, except that the Board of
Trustees is empowered to prohibit the holders of Excess Shares from
voting the Excess Shares. Warrants and options to purchase Shares
shall have no voting rights unless and until exercised and Shares
are issued upon such exercise. Voting need not be by ballot unless
requested by a Shareholder at the meeting or ordered by the chairman
of the meeting; however, all elections of Trustees shall be by written
ballot, unless otherwise provided in the Certificate of Incorporation.
Each Shareholder entitled to vote at any meeting of Shareholders or
to express consent to or dissent from corporate action in writing
without a meeting may authorize another person to act for him by proxy.
Every proxy must be signed by the Shareholder or his attorney-in-fact.
No proxy shall be valid after three years from its date of execution,
unless the proxy provides for a longer period.
3.8 Inspectors of Election. (a) In advance of any meeting of Shareholders,
the Board of Trustees may appoint inspectors of election to act
at each meeting of Shareholders and any adjournment thereof. If
inspectors of election are not so appointed, the chairman of the
meeting may, and upon the request of any Shareholder or his proxy
shall, appoint inspectors of election at the meeting. The number
of inspectors shall be either one or three. If appointed at a
meeting upon the request of one or more Shareholders or proxies,
the vote of the holders of a majority of Common and Preferred
Shares present shall determine whether one or three
inspectors are appointed. In case any person appointed
as an inspector fails to appear or fails or refuses to act,
the vacancy may be filled by appointment made by the Trustees
in advance of the convening of the meeting or at
the meeting by the person acting as Chairman.
(b) The inspectors of election shall determine the outstanding
Preferred and Common Shares of the Company, the Shares represented
at the meeting and the existence of a quorum, shall receive votes,
proxies, ballots or consents, shall count and tabulate all votes and
shall determine the result; and in connection therewith, the inspector
shall determine the authority, validity and effect of proxies, hear and
determine all challenges and questions, and do such other ministerial
acts as may be proper to conduct the election or vote with fairness to all
Shareholders. If there are three inspectors of election, the decision,
act or certificate of a majority is effective in
all respects as the decision, act or certificate of
all. If no inspectors of election are appointed, the Secretary shall
pass upon all questions and shall have all other duties specified in
this Section.
(c) Upon request of the chairman of the meeting or any Shareholder
or his proxy, the inspectors of election shall make a report in
writing of any challenge or question or other matter determined
by them and shall execute a certificate of any fact found in
connection therewith. Any such report or certificate shall be filed with
the records of the meeting.
3.9 Action Without a Meeting. Any action required to be taken at
any annual or special meeting of Shareholders, or any action which
may be taken at any annual or special meeting of Shareholders, 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 Common and Preferred Shares 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 Company by delivery to its
registered office in the State of Delaware, its principal place
of business, or an officer or agent of the Company
having custody of the book in which proceedings of
meetings of Shareholders are recorded. Delivery made to
the Company's registered office shall be by hand or by
certified or registered mail, return receipt requested.
Every written consent shall bear the date of signature
of each Shareholder who signs the consent and no written
consent shall be effective to take the corporate action
referred to therein unless, within sixty days of the date the
earliest dated consent is delivered in the manner required by
this Section 3.9 to the Company, written consents
signed by a sufficient number of Shareholders to take
action are delivered to the Company in such manner.
Prompt notice of the taking of the corporate action
without a meeting by less than unanimous written consent
shall be given to those Shareholders who have not consented in writing.
3.10 Revocation of Consent. Any Shareholder giving a written consent,
or the Shareholder's proxy holders, or a transferee of the Shares, or a
personal representative of the Shareholder or his respective proxy holder,
may revoke the consent by a writing received by the Company prior to the
time written consents of the number of Preferred and Common Shares required
to authorize the proposed action have been filed with the
Secretary of the Company, but may not do so thereafter.
Such revocation is effective upon its receipt by the Secretary of the Company.
SECTION 4
BOARD OF TRUSTEES
4.1 Number. The directors of the Company shall be known as
"Trustees." The Company shall have not less than three nor more
than nine Trustees, at least a majority of whom shall at all
times be Independent Trustees. The number of Independent
Trustees at any time shall not exceed the number of Affiliated
Trustees by more than one. The exact number of Trustees shall
be fixed within the limits herein specified by resolution of
the Board of Trustees. The term of office of each Trustee
shall be one year, or until the election and qualification
of his successor. At each annual meeting of Shareholders,
Trustees chosen to succeed those whose terms
then expire at such annual meeting shall be
elected for a term of office expiring at the next succeeding annual
meeting of Shareholders after their election. Commencing with the
1995 annual meeting of shareholders of the
Corporation, the Trustees shall be divided,
with respect to the time for which they severally
hold office, into two classes, with the term of office
of the first class to expire at the 1996 annual meeting
of Shareholders and the term of office of the second class
to expire at the 1997 annual meeting of Shareholders, with
each Trustee to hold office until his or her successor shall
have been duly elected and qualified. At each annual meeting
thereafter, trustees elected to succeed those trustees whose
terms then expire shall be elected for a term of office to expire
at the second succeeding annual meeting of Shareholders after their
election, with each Trustee to hold office until his or her
successor shall have been duly elected and qualified. Trustees
need not be Shareholders. Each Trustee shall have at least three
years of relevant experience demonstrating the knowledge and experience
required to successfully manage the Company's investments. At
least one of the Independent Trustees shall have
three years of relevant real estate experience.
4.2 Nomination of Trustees. (a) Only persons who are nominated
in accordance with the procedures set forth in this Section 4.2
shall be eligible for election as Trustees.
(b) The Independent Trustees shall nominate persons to be elected
as Independent Trustees or may appoint a committee of Trustees to
make such nominations. The Affiliated Trustees shall be nominated by the
Board of Trustees, after considering the recommendations of the
Advisory Company.
(c) Nominations by Shareholders of persons for election to the
Board of Trustees may be made at a meeting of Shareholders by
any Shareholder of the Company entitled to vote for the election
of Trustees at the meeting who complies with the notice procedures
set forth in this Section 4.2(c). Such Shareholder nominations
shall be made pursuant to timely notice in writing to the
Secretary of the Company. To be timely, a Shareholder's
notice shall be delivered to or mailed and received at the
principal executive offices of the Company no less than 60
days nor more than 90 days prior to the meeting; provided,
however, that in the event less than 70 days notice or prior
public disclosure of the date of the meeting is given or made to the
Shareholders, notice by the Shareholder to be timely must be so
received not later than the close of business on the 10th day
following the day on which such notice of the date of the meeting
was mailed or such public disclosure was made. Such Shareholder's
notice shall be set forth (a) as to each person whom the Shareholder
proposes to nominate for election or re-election as a Trustee, (i)
the name, age, business address and residence address of such person,
(ii) the principal occupation or employment of such person, (iii)
the number of Common and Preferred Shares of the Company which
are beneficially owned by such person and (iv) any other
information relating to such person that is required to be
disclosed in solicitations of proxies for election of Trustees,
or is otherwise required, in each case pursuant to Regulation
14A under the Securities Exchange Act of 1934, as amended (including,
without limitation such person's written consent to being named in
the proxy statement as a nominee and to serving as a Trustee if
elected); and (b) as to the Shareholder giving the notice (i)
the name and address, as they appear on the Company's books,
of such Shareholder and (ii) the number of
Common and Preferred Shares of the Company which are
beneficially owned by such Shareholder. At the
request of the Board, any person nominated by the
Board for election as a Trustee shall furnish to the Secretary
of the Company that information required to be set forth in a
Shareholder's notice of nomination which pertains
to the nominee.
(d) No person shall be eligible for election as a Trustee of the
Company unless nominated in accordance with the procedures set forth
in this Section 4.2. The chairman of the meeting shall, if the facts
warrant, determine that a nomination was not made in accordance with
the procedures prescribed by the Bylaws, and if he should so determine,
he shall so declare to the meeting and the defective nomination shall be
disregarded.
4.3 Annual Meetings. As promptly as practicable after each annual
meeting of Shareholders, an annual meeting of the Board of Trustees
shall be held for the purpose of election of officers and the transaction
of any other business. The Independent Trustees shall review the
investment policies of the Company described in the Prospectus
under "Investment Objectives and Policies" with sufficient
frequency and at least annually to determine that the policies
being followed by the Company at any time are in the best interests of the
Shareholders. Each such determination and the basis therefor shall be
set forth in the minutes of the Trustees.
4.4 Regular Meetings. Regular meetings of the Board of Trustees
shall be held at such time and on such dates as may be designated
by the Board at the principal office of the Company or at any other
place as may be designated by the Board. Regular meetings shall be
held not less than four times per year.
4.5 Special Meetings. Special meetings of the Board of Trustees may
be called by the Chairman of the Board or the Chief Executive Officer,
and the Chairman of the Board or the Chief Executive Officer shall
call a special meeting at any time upon the request of any two Trustees.
4.6 Business Meetings. Except as otherwise expressly provided in
these Bylaws, any and all business may be transacted at any meeting
of the Board of Trustees; provided, that if so stated in the notice of
meeting, the business transacted at a special meeting shall be limited
to the purpose or purposes specified in the
notice unless all the Trustees agree otherwise.
The Trustees may adopt such rules and regulations for their
conduct and the management of the affairs of the Company as
they may deem proper and as are not inconsistent with the
Certificate of Incorporation or these Bylaws. The Trustees shall
establish written policies on investments and borrowing and shall
monitor the administrative procedures, investment operations and per-
formance of the Company and the Advisory Company to assure that such
policies are carried out. At each meeting of the Board of Trustees,
the Board will review any Loansinvestments made since their previous
meeting meeting and conduct a Procedural Review to ascertain whether
the following requirements were met by the Advisory Company
Company prior to completion of any Loan transaction:
(a) an opinion of Counsel to the Company that, based upon Counsel's
review of the Loan terms and Loan documentation submitted to or
prepared by Counsel, and subject to certain assumptions and to
certain parameters which may be established by the Trustees, (i)
the security for the Loan is of a type permitted by the Prospectus,
and (ii) it is more likely than not that, as of the date of the
opinion, (A) the Loan meets the requirements under the Code to
qualify as a REIT asset, (B) the income therefrom meets the
requirements under the Code to qualify as REIT income and (C)
to the extent the Loan does not so qualify, the making of the Loan will
not cause the Company to lose its qualification to be taxed as a REIT
under the Code;
(b) an MAI Appraisal for the underlying property indicating that
the Appraised Value of the property exceeds the Principal amount
of the Loan and all other loans on the property equal or
senior in priority to the Loan and (ii) the value of the
underlying property is sufficient to ensure that the 75%
income test for qualification as a REIT will be met;
(c) a letter of opinion from an Independent Advisor that each Loan
to an Affiliated Borrower is fair and at least as favorable to the
Company as a loan to an unaffiliated Borrower in similar circumstances; and
(d) a statement of the Advisory Company determination by the
Company that the Loan, at the time the Loan qualifies for a
commitment, is reasonably expected to fulfill fill the Company's
investment objectives, as defined in the Prospectus, for
such Loan and a representation of the Advisory Company
determination by the Company that the elements noted in
(a), (b) and (c) above either have been obtained or will be obtained as a
condition of funding of the Loan.
The actual terms of all Loans shall be determined in the sole
discretion of the Advisory Company, subject at all times to compliance
with the foregoing requirements and to the supervision of the Board of
Trustees.
The prior approval of the Board of Trustees, including the
Independent Trustees, will be required for (a) Loans in respect of
which any one of the requirements specified above will not be met,
(b) all Equity Iinvestments in Real Property, (c) any investments
which are not contemplated by the terms of the Prospects, (d) all
Loans to Affiliated Borrowers, and (c) any changes in the Company's
investment objectives and policies.
The Trustees shall review the investment policies of the Company with
sufficient frequency and at least annually to determine that the
policies being followed by the Company at the time are in the best
interests of the Shareholders. Each such determination and the
basis therefor shall be set forth in the minutes of the Trustees.
4.7 Time and Place of Meetings. Subject to the provisions of
Section 4.5, each meeting of the Board of Trustees shall be held
on such date, at such hour and in such place as fixed by the Board or in the
notice or waivers of notice of the meeting or, in the case of an
adjourned meeting, as announced at the meeting at which the
adjournment is taken. Meetings may be held within or without
the State of Delaware, at such places as shall be designated by the Trustees.
4.8 Notice of Meetings. No notice need be given of any annual or
regular meeting of the Board of Trustees. Notice of the date, hour,
place and purpose of all special meetings shall be given to each
Trustee personally, by telephone, by telegraph or by mail. If
by mail, the notice shall be deposited in the United States mail,
postage prepaid, directed to the Trustee at his address, appearing
on the books of the Company or theretofore given by him to the Company,
for the purpose of notice. If given by telegraph, the notice shall be
directed to the Trustee at his address appearing on the books of the
Company or theretofore given by him to the Company for the purpose of
notice. If the meeting is to be held in person, such notice shall be
given at least 72 hours prior to the time fixed for the holding of the
meeting. If the meeting is to be held by conference telephone or
similar equipment, such notice shall be given at least eight hours
prior to the time fixed for the holding of the meeting. If notice
is not so given by the Secretary, it may be given by the President,
or the Trustees requesting the meeting may issue the call and give notice.
4.9 Waiver of Notice. Anything herein to the contrary
notwithstanding, notice of any meeting of the Board of
Trustees need not be given to any Trustee who shall have
waived in writing notice of the meeting, either before or
after the meeting, or who shall attend such meeting, 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 waivers shall be filed
with the records or made a part of the minutes of the meeting.
4.10 Attendance by Telephone. Trustees may participate in meetings
of the Board of Trustees by conference telephone or similar
communications equipment by means of which all Trustees
participating in the meeting can hear one another, and such
participation shall constitute presence in person at the meeting.
4.11 Quorum and Manner of Acting; Adjournment. A majority of the
Trustees shall constitute a quorum for the transaction of business
at any meeting of the Board of Trustees and, except as otherwise
provided in these Bylaws, in the Certificate of Incorporation or
by statute, the act of a majority of the Trustees present at any
meeting at which a quorum is present shall be the act of the Board.
A meeting at which a quorum is initially present may continue to
transact business, notwithstanding the withdrawal of Trustees, if
any action taken is approved by at least a majority of the required
quorum for such meeting. A majority of the Trustees present at any
meeting, regardless of whether or not they constitute a quorum, may
adjourn the meeting to another time or place. The motion for
adjournment shall be lodged with the records of the Company or the
minutes of the meeting. Notice of the time and place of an
adjourned meeting need not be given to any Trustee if the time
and place is fixed at the meeting adjourned. Any business which
might have been transacted at the original meeting may be transacted
at any adjourned meeting at which a quorum is present.
4.12 Action Without a Meeting. Any action which could be taken
at a meeting of the Board of Trustees may be taken without a meeting
if all of the Trustees consent to the action in writing and the writing or
writings are filed with the minutes of proceedings of the Board.
4.13 Resignation of Trustees. Any Trustee may resign at any
time upon written notice to the Company. The resignation shall
become effective on the date such notice is given or at a later
time specified in the notice and, unless otherwise provided in
the notice, acceptance of the resignation shall not be necessary to
make it effective.
In the event a person elected as an Independent Trustee ceases to
satisfy the requirements of an Independent Trustee, such Trustee
shall cease to be an Independent Trustee and if, as a result, a
majority of the Trustees are no longer Independent Trustees, such
person shall immediately resign as a Trustee, or an Affiliated
Trustee shall resign in favor of such person's designation as
an Affiliated Trustee, and such vacancy shall be filled in a
manner consistent with Section 4.15 hereof.
4.14 Removal of Trustees. A Trustee may be removed at any time with
or without cause by a Majority Vote of the Shareholders. A Trustee
may be removed at a special meeting of the Shareholders as provided
in Section 3.2.
4.15 Filling of Vacancies.A vacancy or vacancies in the Board
of Trustees shall exist when any authorized position of Trustee
is not then filled by a duly elected Trustee, whether caused by
death, resignation or removal.
Vacancies and newly created trusteeships resulting from an increase
in the authorized number of Trustees may be filled as follows:
vacancies among the Independent Trustees shall be filled for the unexpired
term by a majority of the remaining Independent Trustees, though less
than a quorum, or by a sole remaining Independent Trustee. Vacancies
occurring among the Affiliated Trustees shall be filled by appointment
of the remaining Affiliated Trustees, after considering the
recommendation of the Advisory Company. If at any time there
shall be no Independent or Affiliated Trustees in office, successor
Trustees may be elected by the Shareholders as provided in the Delaware
Corporation Statute. The Trustees so chosen shall hold office for the
unexpired portion of the term of the class of the Trustee whose place
is being filled, unless sooner displaced. Until vacancies are filled,
the remaining Trustee or Trustees may exercise the powers of the Trustees
hereunder.
In order that a majority of the Trustees shall at all times be
Independent Trustees, if, at any time, by reason of one or more
vacancies, there shall not be such a majority,, then within 90
days after such vacancy occurs, the continuing Independent Trustee
or Trustees then in office shall appoint a sufficient number of other
persons who are Independent Trustees, so that there shall be such a
majority. Notwithstanding the provisions of Section 4.1 or the
preceding sentence of this Section, or of any other provisions
of these Bylaws, there shall be no requirement as to the election,
appointment or incumbency of, or as to any action by, Independent
Trustees at any time that all of the outstanding Shares of the
Company are owned by the Advisory Company and/or Affiliates of
the Advisory Company.
4.16 Compensation of Trustees. The Independent Trustees shall be
paid their reasonable expenses, incurred in connection with their
service as Trustees, including, without limitation, travel to and
attendance at each meeting of the Board of Trustees and any
committee thereof, as well as each annual meeting of Shareholders.
Each Independent Trustee shall also initially be entitled to receive
$5,000 per year and $250 per Board meeting attended for his services
as Trustee hereunder. The compensation payable to the Independent
Trustees for their services hereunder may be increased or decreased
at the discretion of the Trustees. The Affiliated Trustees shall not
be entitled to receive, directly or indirectly, any remuneration for
services rendered to the Company in any capacity, including, without
limitation, services as an officer of or consultant to the
Company, legal, accounting or other professional services, or otherwise.
4.17 Conflicts of Interest. The Company shall not purchase property
from the Advisory Company or a Trustee or Affiliates thereof unless a
majority of Trustees (including a majority of the Independent Trustees)
not otherwise interested in such transaction approve the transaction as
being fair and reasonable to the Company and at a price to the Company
no greater than the cost of such asset to the Advisory Company, Trustee or
Affiliate thereof, or if the price to the Company is in excess; of such
cost, that substantial justification for such excess exists and such excess
is not unreasonable. In no event shall the cost of such asset to the Company
excess its current appraised value.
The Company shall not sell property to the Advisory Company, a Trustee
or Affiliates thereof.
The Company may not make loans to or borrow money from the Advisory
Company, a Trustee or Affiliates unless a majority of the Trustees
(including a majority of the Independent Trustees) not otherwise
interested in such transaction approves such transaction as being
fair, competitive and commercially reasonable and no less favorable
to the Company than loans between unaffiliated lenders and borrowers
under the same circumstances.
The Company shall not make joint investments or invest in joint
ventures with the Advisory Company, a Trustee or Affiliates thereof,
unless a majority of Trustees (including a majority of the Independent
Trustees) not otherwise interested in such transaction approves the
transaction as being fair and reasonable to the Company and on
substantially the same terms and conditions as those received by
other joint venturers.
Payments to the Advisory Company, its Affiliates and the Trustees or
Affiliates thereof for services rendered in a capacity other than that
as investment advisor or a Trustee may be made only upon a determination
that: (i) the compensation is not in excess of their compensation paid
for any comparable services, and (ii) the compensation is not greater
than the charges for comparable services available from others who are
competent and not affiliated with any of the parties involved.
The Organization and Offering Expenses paid by the Company in connection
with its formation and the public offering of its Shares, including
Due Diligence Fees and a $.05 expense reimbursement payable on sales
of Preferred Shares, Sales Commissions and Due Diligence Fees payable
on sales of common Shares, and the Organization and offering Expenses
Allowance payable to the Advisory Company, shall not exceed 15% of
Gross Proceeds. The Advisory Company shall reimburse the Company
in any amount by which the above-described organization and Offering
Expenses exceed 15% of Gross Proceeds.
It shall be the duty of the Trustees (including the Independent
Trustees) to insure that the provisions for resolution of conflicting
investment opportunities among the Company and other public programs
sponsored by the Advisory Company described in the Section the
Prospectus entitled "Conflicts of Interest" are applied fairly
to the Company.
The total of all Acquisition Fees and Acquisition Expenses paid by the
Company, including the Acquisition Fee, and Acquisition Expense
Reimbursement and Loan Origination Fee payable to IFS, shall not
exceed 6% of the aggregate amount of all funds advanced under the
Company's loans unless a majority of the Trustees (including a
majority of the Independent Trustees) not otherwise interested
in the transactions approves such transactions as being commercially
competitive, fair and reasonable to the Company.
All other transactions between the Company and the Advisory Company,
a Trustee or Affiliates thereof shall require approval by a majority
of the Trustees (including a majority of the Independent Trustees) not
otherwise interested in such transaction as being fair and reasonable
to the Company and on terms and conditions not less favorable to the
Company than those available from unaffiliated parties. Any future
transactions between the Company and its officers, trustees, employees
or Affiliates will be on terms which are no less favorable to the
Company than can be obtained from unaffiliated parties. Any such
transaction shall be subject to the approval of a majority of the
Independent Trustees not otherwise interested in such transaction.
4.18 Fiduciary Duty. The Trustees shall have a fiduciary duty to the
Shareholders to supervise the relationship of the Company with the
Advisory Company and its Affiliates.
4.18 Leverage. The aggregate borrowings of the Company, secured and
unsecured, shall be reasonable in relation to the Net Assets of the
Company and shall be reviewed by the Trustees at least quarterly.
The Company may not undertake unsecured borrowings which result in
an Asset Coverage of less than 300%. The maximum amount of all
borrowings of the Company, secured and unsecured, shall not exceed
300% of the Net Assets of the Company.
4.19 Ratification of Organizational Documents. At or before the
first meeting of Trustees, the Organizational Documents shall be
reviewed and ratified by a Majority Vote of the Trustees (including a
majority of the Independent Trustees).
SECTION 5
COMMITTEES OF THE BOARD OF TRUSTEES
5.1 Executive Committee. By resolution adopted by an affirmative
vote of the majority of the entire Board of Trustees, the Board
may appoint an Executive Committee consisting of one or more Trustees, a
majority of whom shall be Independent Trustees and, if deemed desirable,
one or more Trustees as alternative 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 the powers and authority of the
Board in the management of the business and affairs of the Company
not reserved to the whole Board by the Delaware Corporation Statute.
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 Trustees. The Trustees shall have the power
to prescribe the manner in which proceedings of the Executive
Committee, if appointed, and other committees shall be conducted.
5.2 Other Committees. By resolution adopted by an affirmative vote
of the majority of the entire Board of Trustees, the Board may from
time to time appoint such other committees of the Board, including
without limitation, audit and nominating committees, consisting of one
or more Trustees, a majority of whom shall be Independent Trustees,
and, if deemed desirable, one or more Trustees 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 Certificate of Incorporation,
or these Bylaws, to the whole Board of Trustees. 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 Trustees.
5.3 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 Trustees 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.
5.4 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 Company. The provisions of
Section 4 regarding the business, time and place, notice and
waiver 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
Trustees and the Board of Trustees shall be deemed
respectively to be 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 Trustees when required.
5.5 Quorum and Manager 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.
5.6 Indemnification of Officers, Directors, Trustees,
Employees and agents; Insurance.
(a) The Company 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 Company)
by reason of the fact that he is or was a trustee, officer, employee
or agent of the Company, or is or was serving at the request of the
Company as a director, trustee, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprises,
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, unless such
person shall have acted fraudulently or be guilty of willful and
wanton misconduct or intentional wrongdoing and, with respect to
any criminal action or proceeding, had 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 contendere or its equivalent shall not, of itself,
create a presumption that the person acted fraudulently or was guilty of
willful and wanton misconduct or intentional wrongdoing and, with
respect to any criminal action or proceeding, had reasonable cause
to believe that his conduct was unlawful.
(b) The Company 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 Company to procure a judgment
in its favor by reason of the fact that he is or was a trustee, officer,
employee or agent of the Company, or is or was serving at the request
of the Company as a director, trustee, 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, unless such person shall have
acted fraudulently or be guilty of willful and wanton misconduct
or intentional wrongdoing and except that no indemnification shall be
made in respect to any claim, issue or matter as to which such person
shall have been adjudged to be liable to the Company, unless and only
to the extent that 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 shall deem proper.
(c) Any indemnification under the subsections (a) and (b) and
any indemnification for expenses incurred by the person to be
indemnified pursuant to such subsections shall be made by the Company in
advance of the final disposition of such action, suit or proceeding
described therein, unless and until a determination is made that
indemnification of such person is not proper in the circumstances
because he has not met the applicable standard of conduct set forth
in subsections (a) and (b). Such determination shall be made (1)
by the board of trustees of the Company by a majority vote of a
quorum consisting of trustees who were not parties to such action,
suit or proceeding, or (2) if such a quorum is not obtainable or
even if obtainable a quorum of disinterested trustees so directs,
by independent legal counsel in a written opinion or (3) by the
Shareholders of the Company.
(d) The indemnification and advancement of expenses provided by,
or granted pursuant to, the other subsections of this Section
shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be
entitled under any by-law, agreement, vote of shareholders
or disinterested trustees of the Company or otherwise, both as
to action in his official capacity and as to action in another
capacity while holding such office.
(e) The Company shall have the power to purchase and maintain insurance
on behalf of any person who is or was a trustee, officer, employee or
agent of the Company or is or was serving at the request of the
company as a director, trustee, 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 Company would have the power to indemnify him against such
liability under the provisions of this Section.
(f) For purposes of this Section, references to "the Company" shall
include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had
continued, would have had power and authority to indemnify its
directors, trustees, officers, and employees or agents, so that
any person who is or was a director, trustee, officer, employee or
agent of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, trustee,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same
position under the provisions of this Section with respect to the
resulting or surviving corporation as he would have with respect to
such constituent corporation if its separate existence had continued.
(g) For purposes of this Section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the Company"
shall include any service as a trustee, officer, employee or agent
of the Company which imposes duties on, or involves services by,
such trustee, officer, employee or agent with respect to an employee
benefit plan, its participants, or beneficiaries; and a 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 Company" as referred to in this Section.
(h) 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, trustee, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators
of such person.
SECTION 6
OFFICERS
6.1 Election and Appointment. The elected officers of the Company may
shall consist of a Chief Executive Officer, a President, one or more
Vice Presidents (including an Executive Vice President), a Secretary,
one or more Assistant Secretaries, a Treasurer, and such other elected
officers and agents as shall from time to time be designated by the
Board of Trustees, including, in its discretion, a Chairman of the
Board of Trustees. When their duties do not conflict, any two or
more offices, except those of President and Secretary, or President
and Assistant Secretary, may be held by the same person.
6.2 Chairman of the Board. The Chairman of the Board of Trustees shall
have the power to preside at all meetings of the Board of Trustees, and
to call meetings of the Shareholders and of the Board of Trustees 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 as the Board of Trustees may
from time to time prescribe.
6.3 Chief Executive Officer. The Chief Executive Officer shall act as
the chief executive officer of the Company and, subject to the control
of the Board of Trustees, have general supervision, direction and control
of the business and affairs of the Company.
6.4 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 powers and perform such duties as may be granted or
prescribed by the Board of Trustees or the Chief Executive Officer.
6.5 Vice President. I the 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 Trustees,
or if not ranked, the Vice President designated by the Board of
Trustees. 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 Trustees or the Chief Executive Officer.
6.6 Secretary. The Secretary and any Assistant Secretary shall generally
do and perform all such duties as pertain to the office of Secretary and
as may be required by the Board of Trustees.
6.7 Treasurer. The Treasurer and any Assistant Treasurer shall generally
do and perform all such duties as pertain to the office of Treasurer
and as may be required by the Board of Trustees.
6.8 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 Trustees may elect
a successor for the remainder of the term. Any officer may resign
by written notice to the Company.
6.9 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 Trustees.
6.10 Compensation of Elected Officers. The compensation of all
elected officers of the Company shall be fixed from time to time
by the Board of Trustees.
SECTION 7
SHARES AND TRANSFER OF SHARES
7.1 Liability of Shareholders. The Preferred and Common Shares of the
Company shall be non-assessable and the Shareholders shall not be
personally liable on account of any contractual obligations of the
Company. The Company may not issue securities which are non-voting
or assessable or which are redeemable at the option of the holder.
7.2 Stock Record and Certificates. Records shall be kept by or on behalf
of the Company, which shall contain the names and addresses of
Shareholders, the number of Preferred and common Shares held by
them, respectively, and the number of certificates representing
the Shares, and in which shall be recorded all transfers of Shares.
Every Shareholder shall be entitled to a certificate signed by the
Chairman or Vice Chairman of the Board of Trustees, or the Chief
Executive Officer, or the President or a Vice President, and by
the Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary of the Company, certifying the class and number
of Shares owned by him in the Company; provided that any and all
signatures on a 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 Company with the same
effect as if he or it were such officer, transfer agent or registrar
at the date of issue.
7.3 Transfer Agents and Registrars. The Board of Trustees may, in
its discretion, appoint one or more responsible banks, trust
companies or recognized stock transfer companies as the Board
may deem advisable, from time to time, to act as transfer agents
and registrars of Shares of the Company; and, when such appointments
shall have been made, no certificate for Shares of the Company
shall be valid until countersigned by one of such transfer agents
and registered by one of such registrars.
7.4 Shareholders' Addresses. Every Shareholder or transferee shall
furnish the Secretary or a transfer agent with the address to which
notice of meetings and all other notices may be served upon or mailed
to such Shareholder or transferee, and in default thereof, such
Shareholder or transferee shall not be entitled to service or mailing
of any such notice.
7.5 Lost Certificates. In case any certificate for Shares of the
Company shall be lost, stolen, mutilated or destroyed, the Board of
Trustees, in its discretion, or any transfer agent thereunto duly
appointed by the Board, may authorize the issuance of a substitute
certificate in place of the certificate so lost, stolen, mutilated
or destroyed, and may cause such substitute certificate to be
countersigned by the appropriate transfer agent (if any) and
registered by the appropriate registry (if any); provided that,
in each such case, the applicant for a substitute certificate
shall furnish to the Company and to such of its transfer agents
and registrars as may require the same, evidence to their
satisfaction, in their discretion, of the loss, theft,
mutilation or destruction of such certificate and of the
ownership thereof, and also such security or indemnity as may
by them be required.
The Board of Trustees may adopt such other provisions and
restrictions with reference to lost certificates, not inconsistent
with applicable law, as it shall in its discretion deem appropriate.
7.6 Distributions to Shareholders. To the extent permitted by the
Delaware Corporation Statute and except as set forth below, the
Trustees shall declare and pay to Shareholders quarterly Distributions
within 45 days after the end of each quarter, beginning not later than
45 days after the end of the first full quarter after the commencement
of operations. Distributions from operations will be apportioned among
Shareholders pro rata based upon the number of their outstanding
Preferred and Common Shares on the record date, as determined by
Section 7.7. Distributions shall be in cash and may be made from
any source, provided that such Distributions comply with the
Delaware Corporation Statute. In any event, the Trustees shall,
from time to time, declare and pay to the Shareholders such
Distributions as may be necessary to continue to qualify the
Company as a real estate investment trust, so long as such
qualification, in the opinion of the Trustees, is in the best
interest of the Shareholders. The Company shall furnish the
Shareholders at the time of each such Distribution with a
statement in writing advising as to the source of the funds so
distributed or, if the source thereof has not been determined,
a written statement disclosing the source shall be sent to each
Shareholder who received the Distribution not later than 75 days
after the close of the fiscal year in which the Distribution was made.
Upon liquidation of the Company, in the event the Net Assets of the
Company in liquidation are in an amount which is less than the Company's
Total Invested Capital, the Preferred Shareholders shall receive a
preferential right to a pro rata Distribution aggregating five percent
of the Company's Net Assets in liquidation prior to any liquidating
Distributions to the Common Shareholders. After such preferential
Distribution has been made to the Preferred Shareholders, all
remaining liquidating Distributions shall be made pro rata to
all the Shareholders of the Company. In the event the Net Assets
of the Company in liquidation equal or exceed the Company's Total
Invested Capital, liquidating Distribution shall be made pro rata
to all the Shareholders.
The terms of the Preferred Shares of the Company offered by the
Prospectus shall not be adversely modified without the affirmative
vote or consent of the holders of 66-2/3% of such Preferred Shares.
No such change shall require the approval or consent of the Common
Shareholders.
No adverse change in any rights with respect to any outstanding class of
Shares, by reducing the amount of Distributions payable thereon
(assuming the liquidation preference described above) or by
diminishing or eliminating any voting rights pertaining thereto,
may be made without the affirmative vote or consent of the
holders of 66-2/3% of the outstanding shares of such class.
Notwithstanding the foregoing, no additional issuance of Shares shall
require the consent of the Shareholders or any class thereof unless
otherwise required under Delaware law.
7.7 Record Dates. In order that the Company may determine the
Shareholders entitled to notice ofor to vote at any meeting of
Shareholders, or any adjournment thereof, or entitled to receive
payment of any dividend or other Distribution or allotment of any
rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of Shares or for the purpose of
any other lawful action, the Board of Trustees may fix, in advance,
a record date which shall be not more than sixty days nor less than
ten days before the date of any meeting of Shareholders, and not more
than sixty days prior to any other action. In order that the
Company may determine the Shareholders entitled to consent to
corporate action in writing without a meeting, the Board of Trustees
may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the
Board of Trustees, and which date shall not be more than ten
days after the date upon which the resolution fixing the record
date is adopted by the Board of Trustees. In such case, those
Shareholders, and only those Shareholders, who are Shareholders
of record on the date fixed by the Board of Trustees shall,
notwithstanding any subsequent transfer of Shares on the Books
of the Company, be entitled to notice of and to vote at such meeting
of Shareholders, or any adjournment thereof, or to express consent
to such corporate action in writing without a meeting, or entitled
to receive payment of such dividend or other Distribution or allotment
of rights, or entitled to exercise rights in respect of any such change,
conversion or exchange of shares or to participate in any such other
lawful action.
7.8 Transfer of Shares. Subject to Section 7.9, Shares of the Company
may be transferred by delivery of the certificates therefor, accompanied
either by an assignment in writing on the back of the certificates or by
written power of attorney to sell, assign and transfer the same, signed
by the record holder thereof; but no transfer shall affect the right of
the Company to pay any Distribution upon the Shares to the holder of
record thereof, or to treat the holder of record as the holder in fact
thereof for all purposes, and no transfer shall be valid, except
between the parties thereto, until such transfer shall have been made
upon the books of the Company.
7. 9 Shareholders' Disclosure; Trustees' Right to Refuse to
Transfer Shares; Limitation on Holdings; Repurchase of Shares.
(a) The Shareholders shall upon demand disclose to the Trustees in
writing Such information with respect to direct and indirect ownership
of the Shares as the Trustees deem necessary to comply with the
requirements of any taxing authority or governmental agency.
(b) whenever it is deemed by them to be reasonably necessary to protect
the tax status of the fund as a REIT, the Trustees may require a
statement or affidavit from each proposed transferee of Common or
Preferred Shares setting forth the number of Common and Preferred
Shares already owned by him and any related person specified in the
form prescribed by the Trustees and, in connection therewith, if the
proposed transfer shall cause the transferee to hold Excess Shares (as
defined below), the Trustees shall have the right, but not a duty, to
refuse to transfer the Shares to the proposed transferee. All contracts
for the sale or other transfer of Shares of Common or Preferred Stock
shall be subject to this provision.
(c) Notwithstanding any other provision of these Bylaws to the contrary
and subject to the provisions of Section 7.9(f), the Company may
prohibit any person from directly or indirectly acquiring ownership
(beneficial or otherwise) in the aggregate of more than 9.9% of the
outstanding Common or Preferred Shares of the Company (the "Limit").
Either Common or Preferred Shares owned by a person or group of persons
in excess of the Limit at any time shall be deemed "Excess Shares." If
any person knowingly holds Excess Shares and the Company loses its REIT
qualification under the Code or becomes a personal holding company,
such person shall indemnify the Company for the full amount of any
damages and expenses (including increased corporate taxes, attorneys'
fees and administrative costs) resulting from the Company's loss of
its REIT qualification. For the purposes of this Section 7.9, "person"
shall have the meaning set forth in Section 7701(a)(1) of the Code
and shall also mean any partneship, limited partnership, syndicate
or other group deemed to be a "person" pursuant to Section
13(d)(3) of the Securities Exchange Act of 1934, as amended;
and a person shall be deemed to own (i) Shares actually owned by
such person, (ii) Shares constructively owned by such person
after applying the rules of Section 544 of the Code, and (iii) Shares
of which such person is beneficial owner as defined in Rule 13d-3
promulgated under the Securities Exchange Act of 1934. All
Common and Preferred Shares which any person has the right to
acquire upon exercise of outstanding rights, options and warrants, and
upon conversion of any securities convertible into either Common or
Preferred Shares, if any, shall be considered outstanding for
purposes of the Limit if such inclusion will cause such person to
own more than the Limit.
(d) The Company may require a holder of Excess Shares to sell the Excess
Shares within 30 days of written notice given by the Company to such
holder. If the holder does not sell the Excess Shares within such
30-day period, the Board of Trustees shall have the right to (i) prohibit
the holder from voting the Excess Shares, (ii) place any dividends on
such Excess Shares in an escrow account for payment when those Shares
are no longer classified as Excess shares and (iii) repurchase any
or all Excess Shares as set forth below. The Company may prohibit the
exercise of any option, warrant or right to purchase either Common or
Preferred Shares if such exercise would result in any person holding
Excess Shares or if the person so exercising already holds Excess Shares.
(e) After the 30-day period provided in Section 7.9(d), the Trustees,
by notice of the holder thereof, may cause the Company to repurchase
any or all Shares that are Excess Shares (including Shares that remain
or become Excess Shares because of the decrease in outstanding
Shares resulting from such repurchase), provided that such repurchase
complies with the Delaware Corporate Statute, and from and after the
date of giving of such notice of repurchase ("Repurchase Date") the
Shares called for repurchase shall cease to be outstanding and the
holder thereof shall cease to be entitled to dividends, voting rights
and other benefits with respect to such Shares excepting only the
right to payment by the Company of the repurchase price determined
and payable as set forth below. The Company shall not be required to
purchase or redeem any exercised option, warrant or right to
purchase either Common or Preferred Shares which is restricted
against exercise in accordance with this Section. The repurchase
price of each Excess Share called for repurchase shall be its fair
market value as reflected by the mean between the average per Share
closing bid and asked prices during the 30 calendar day period ending
on the business day prior to the Repurchase Date, or if there have
been no published bid quotations and no published asked quotations
with respect to such Shares during such 30 calendar day period, the
repurchase price shall be the price determined by the Trustees in good
faith. Payment of such purchase price shall be made by delivery to
the holder of a non-interest bearing promissory note of the Company
payable to the holder only to the extent that the Company has funds
legally available for such purchase and only if such payment under
the note would not otherwise reduce the Distributions payable to
the other Shareholders as if the Excess Shares were still outstanding.
Payments on all such notes in any year shall not exceed Distributions
otherwise allocable to the Excess Shares and in no event more than 5% of
REIT Taxable Income.
(f) The Trustees in their discretion may exempt from the Limit
ownership of certain designated Common or Preferred Shares while
owned by a person who has provided the Trustees with evidence and
assurance acceptable to the Trustees that the qualification of the
Company as a REIT would not be jeopardized thereby.
7.10 Repurchase of Shares on Open Market. The Company may purchase
its Common or Preferred Shares on the open market and invest its assets
in its own Shares, provided, that in each case the consent of the
Board of Trustees, including a majority of the Independent Trustees,
shall have been obtained.
7.11 Legend. Each certificate for Common and Preferred Shares of
the Company shall bear the following legend:
FOR THE CORPORATION TO QUALIFY AS A REIT UNDER THE INTERNAL
REVENUE CODE, NOT MORE THAN 50% OF ITS OUTSTANDING COMMON OR
PREFERRED SHARES MAY BE OWNED BY FIVE OR FEWER INDIVIDUALS.
SECTION 7.9 OF THE BYLAWS PROVIDES THAT THE CORPORATION MAY
PROHIBIT ANY PERSON FROM DIRECTLY OR INDIRECTLY ACQUIRING
OWNERSHIP (BENEFICIAL OR OTHERWISE) IN THE AGGREGATE OF MORE THAN
9.9% OF THE OUTSTANDING COMMON OR PREFERRED SHARES OF THE
CORPORATION. TO ENFORCE THIS REQUIREMENT, THE CORPORATION MAY
GENERALLY REPURCHASE COMMON AND PREFERRED SHARES HELD BY ANY
PERSON IN EXCESS OF THE 9.9% LIMIT. IN ADDITION, A SHAREHOLDER WHO
KNOWINGLY HOLDS EXCESS SHARES IS REQUIRED TO INDEMNIFY THE Company
CORPORATION FOR ANY LOSSES THE CORPORATION MAY SUFFER AS A RESULT
OF SUCH HOLDINGS. THE TRUSTEES MAY REFUSE TO ISSUE OR TRANSFER
SHARES TO ANY PERSON IF THE PROPOSED ISSUANCE OR TRANSFER OF SHARES
RESULTS IN OWNERSHIP OF MORE THAN 9.9% OF THE OUTSTANDING COMMON
OR PREFERRED SHARES. THE CORPORATION WILL FURNISH A COPY OF SECTION
7.9 OF THE BYLAWS TO THE REGISTERED HOLDER OF THIS CERTIFICATE UPON
RESTATE REQUEST AND WITHOUT CHARGE.
7.12 Election to be Governed by Section 203 of the Delaware Corporation
Statute. The Company does hereby elect to be governed by the provisions
of Section 203 of the Delaware Corporate Statute, as amended,
entitled "Business Combinations with Interested Stockholders,"
or any successor Statute, the terms and provisions of which are
incorporated by reference herein.
SECTION 8
ADVISORY COMPANY AND OTHER AGENTS
8.1 Employment of Advisory Company, Employees And Agents. It shall be
the duty of the Trustees to evaluate the performance of the Advisory
Company before entering into or renewing the Advisory Agreement.
The criteria used in such evaluation shall be reflected in the
minutes of such meeting. Each contract for the services of the
Advisory Company entered into by the Trustees shall have a term of
no more than one year, subject to renewal for one or more one year terms
at the option of the Company. The Advisory Agreement shall be terminable
by a majority of the Independent Trustees or by the Advisory Company
on 60 days' written notice without cause. The Advisory Agreement may
also be terminated without cause by a Majority Vote of the Shareholders.
In the event of such termination, the Advisory Company shall cooperate
with the Company and take all reasonable steps requested to assist the
Trustees in making an orderly transition of the advisory function.
The Trustees shall determine that any successor advisor possesses
sufficient qualifications to perform the advisory function for the
Company and to justify the compensation set forth in its agreement with
the Company. Any successor advisor shall have at least three years'
relevant experience demonstrating the knowledge and experience required
to successfully acquire and manage the Company's assets.
The Trustees are responsible for the general policies of the Company and
for such general supervision of the business of the Company conducted
by all officers, agents, employees, advisors, managers or independent
contractors of the Company as may be necessary to insure that such
business conforms to the provisions of these Bylaws. The Trustees
shall have the power to retain the Advisory Company or any substitute
Advisor and/or to appoint, employ or contract with any person as the
Trustees may deem necessary or proper for the transaction of the
business of the Company, and for such purpose may grant or delegate
such authority to any such person as the Trustees may in their sole
discretion deem necessary or desirable, provided that such authority
is exercised under the supervision of the Board of Trustees. The
Trustees may exercise broad discretion in allowing the Advisory
Company to administer and regulate the operations of the Company,
to act as agent for the Company, to execute documents on behalf of
the Trustees, and to make executive decisions which conform to general
policies and general principles established by the Trustees or set forth
in these Bylaws.
8.2 Compensation of the Advisory Company. The Independent Trustees shall
determine from time to time and at least annually that the compensation
which the Company contracts to pay the Advisory Company is reasonable in
relation to the nature and quality of services performed and that such
compensation is within the limits set forth in the NASAA Guidelines.
The Independent Trustees shall also supervise the performance of the
Advisory Company and the compensation paid to it by the Company to
determine that the provisions of the Advisory Agreement are carried out.
Each such determination shall be based on the factors set forth below and
all other factors the Independent Trustees may deem relevant and the
findings of the Trustees on such factors shall be recorded in the
minutes of the Trustees: (a) the size of the advisory fees in relation
to the size, composition and profitability of the Company's portfolio,
(b) the success of the Advisory Company in generating
opportunities that meet the investment objectives of the
Company; (c) the rates charged to other REIT's and to
investors other than REIT's by advisors performing similar
services; (d) additional revenues realized by the
Advisory Company and its Affiliates through their
relationship with the Company, including loan
administration, underwriting or broker commissions,
servicing, engineering, inspection and other fees,
whether paid by the Company or by others with whom
the Company does business, (e) the quality and extent
of service and advice furnished by the Advisory Company,
(f) the performance of the investment portfolio of the
Company including income, conservation or appreciation of
capital, frequency of problem investments and competence
in dealing with distress situations, and (g) the quality
of the Company's portfolio in relationship to the investments
generated by the Advisory Company for its own account.
If the Advisory Company, a Trustee or an Affiliate provides a
substantial amount of services in the effort to sell a property
of the Company, such entity may receive up to one-half of the
brokerage commission paid, but in no event to exceed an amount
equal to 3% of the contracted-for sales price. In addition,
the amount paid when added to the sums paid to unaffiliated
parties in such capacity shall not exceed the lesser of a
competitive real estate commission or an amount equal to
6% of the contracted-for sales price.
An interest in the gain from the sale of assets of the Company for
which full consideration is not paid in cash or property of
equivalent value shall be allowed provided the amount or percentage
of such interest is reasonable. Such interest shall be considered
presumptively reasonable if it does not exceed 15% of the balance
of the gain remaining after payment to Shareholders, in the aggregate,
of an amount equal to 100% of the original issue price of the
Company's Shares plus an amount equal to 6% of such original
issue price (reduced by prior Distributions of gain from the sale
of Company assets) per annum cumulative. In the case of multiple
Advisory Companies, Advisory Companies and Affiliates shall be
allowed incentive fees, provided such fees are distributed by a
proportional method reasonably designed to reflect the value added
to the Company's assets by each respective Advisory Company or Affiliate.
SECTION 8
EXPENSES
8.1 Annual Operating Expenses. The annual operating Expenses of the
Company shall be reviewed by the Independent Trustees may not exceed
in any fiscal year the greater of (a) 2% of the Average Invested
Assets of the Company during such fiscal year or (b) 25% of the
Net Income of the Company for such fiscal year. The Independent
Trustees shall have the fiduciary responsibility of limiting such
expenses to amounts that they determine to be reasonably necessary
do not exceed such limitations.
The Advisory Company shall reimburse the Company at the end of
each fiscal year the amount by which the aggregate Operating
Expenses paid or incurred by the Company in such year exceed the foregoing
limitations.
SECTION 9
REPORTS
9.1 Annual Report. The Company shall prepare an annual report concerning
its operation for each fiscal year containing audited financial statements,
which report shall be delivered to the Shareholders within 120
days after the end of each fiscal year. The Company shall
include in the annual report (a) the ratio of the costs
of raising capital during the period to the capital raised, and
(b) the aggregate amount of all advisory fees paid to and the
aggregate amount of all other fees paid to the Advisory Company and
affiliates by the Company and including fees or charges paid to the
Advisory Company and Affiliates by third parties doing business with the
Company. The Company shall also include in its annual report, separately
stated, full disclosure of all material terms, factors and
circumstances surrounding any and all transactions involving
the Company and the Trustees, Advisory Company and Affiliates
occurring in the year under report. The Independent Trustees shall
have a duty to examine and comment in the report on the fairness of
such transactions. Annual Reports shall be mailed or delivered to
each Shareholder as of a record date after the end of each fiscal
year and within 120 days after the end of the fiscal year to which
the Annual Report relates. The Annual Meeting of Shareholders shall
be held upon reasonable notice and within a reasonable period (not
less than 30 days) after delivery of the Annual Report. The Trustees,
including the Independent Trustees, shall be required to take
reasonable steps to insure that the foregoing requirements are met.
SECTION 10
OTHER LIMITATIONS
10.1 Other Limitations. In addition to the limitations imposed in
connection with maintaining its status as a REIT, the Company shall
not: (a) invest more than 10% of its total assets in unimproved Real
Property or Mortgage Loans on unimproved Real Property; (b) invest
in commodities or commodity futures contracts, provided, the Company
may invest in interest rate futures when used solely for hedging
purposes; (c) invest in or make Mortgage Loans unless an appraisal
is obtained concerning the underlying property. In cases in which
a majority of the Independent Trustees so determines and in all
cases in which the transaction is with the Advisory Company or an
Affiliate, such appraisal must be obtained from an independent
qualified appraiser selected by the Independent Trustees. Such
appraisal shall be retained in the Company's records for five years
and be available for inspection and copying by any Shareholder;
(d) make a Loan or acquire a Property without obtaining a mortgagee's
or owner's title policy; (e) invest in real estate contracts of sale
unless the same are in recordable form and are appropriately recorded
in the chain of title; (f) make or invest in Mortgage Loans
(except short-term Loans) on any one property, if the aggregate
amount of all mortgage loans outstanding on the property which are
equal or senior in priority to the Company's Loan, including the
Company's Loan, would exceed 85% of the Appraised Value of the
underlying property (100% in the case of a Short-Term Loan), unless
substantial justification exists because of the presence of additional
collateral which qualifies as an interest in real estate. The Company
will observe the following underwriting criteria, among others, in
connection with junior and wraparound mortgage Loans: (i) the
amount of each Junior and Wraparound Mortgage Loan, together with
all other loans on the underlying property or properties equal or
senior in priority to the Company's Loan, may not exceed 85% of the
Appraised Value of the underlying property or properties, (ii) the
aggregate amount of all junior and wraparound Mortgage Loans of the
Company, together with all other loans on the underlying properties
equal or senior in priority to the Company's Loans, may not exceed the
aggregate of 85% of the Appraised Values of the underlying properties,
(iii) all Loan documentation will contain a clause which authorizes
foreclosure of the Company's Loan within a reasonable period of time,
(iv) the applicable statutes in the states in which Junior and Wraparound
Mortgage Loans are made, at the time the Loan is made, permit
foreclosure and recovery of the underlying property within six
months of the Borrower's default, and (v) the Company will maintain
a minimum working capital reserve of not less than 2% of the
aggregate amount of all funds advanced by the Company under
all Loans outstanding; (g) make or invest in Mortgage Loans that are
subordinate to any mortgage or equity interest of the Advisory
Company, Trustees or Affiliates; (h) issue redeemable equity
securities; (i) issue debt securities unless the historical
debt service coverage (in the most recently completed fiscal
year) as adjusted for known charges is sufficient to properly
service that level of higher debt; (j) issue options or warrants
to purchase Common or Preferred Shares to the Advisory Company,
Trustees or Affiliates, except on the same terms as such options
or warrants are sold to the general public. The Company
may not issue options or warrants unless (i) issued to
all of its Shareholders ratably, (ii) as part of a financing
arrangement, or (iii) as part of a stock option plan to Trustees,
officers or employees which meets, at a minimum, the requirements
of the California Department of Corporations regarding employee
stock purchase plans. Options or warrants issuable to the Advisory
Company, Trustees or Affiliates shall not exceed an amount
equal to 10% of the outstanding Common or Preferred Shares,
as the case may be, outstanding on the date of the grant; (k)
invest in the equity securities of any nongovernmental issuer,
including other REIT's or limited partnerships, for a period in
excess of 18 months; (l) issue Common or Preferred Shares on a
deferred payment basis or other similar arrangement; (m) engage
in any short sale or borrow, on an unsecured basis, if such
borrowing would result in an Asset Coverage of less than 300%.
The maximum amount of all borrowings of the Company shall not
exceed 300% of Net Assets; (n) engage in trading, as compared
with investment activities; (o) acquire securities in any company
holding investments or engaging in activities prohibited by this
Section; or (p) engage in underwriting or the agency distribution
of securities by others.
SECTION 11
OTHER MATTERS
11.1 Fiduciary Relationship. The Trustees of the Company and the
Advisory Company shall be deemed to be in a fiduciary relationship
to the Shareholders.
11.2 Right of Trustees and Officers to Own Shares or Other Property
and to Engage in Other Business. Any Trustee or officer may acquire,
own, hold and dispose of Shares in the Company, for his individual
account, and may exercise all rights of a Shareholder to the same extent
and in the same manner as if he were not a Trustee or officer, subject to
applicable federal and state securities laws. Except as otherwise
provided by law, any Trustee or officer may have personal business
interests and may engage in personal business activities, which
interest and activities may include the acquisition, syndication,
holding, management, development, operation or investment in, for
his own account or for the account of others, interests in real
property or persons engaged in the real estate business. However,
each Affiliated Trustee must present investment opportunities which
comply with the Company's investment policies to the Company prior to
engaging in such investments themselves. No commissions will be payable
by the Company or any other party to any company with which the
Independent and/or Affiliated Trustees are affiliated in connection
with the acquisition or disposition of any investments by the Company,
unless said commission is approved by the majority vote of the
disinterested Trustees. Each Trustee is required to disclose
any interest he has, and any interest known to him, of any person
or entity with which he is affiliated, in any investment opportunity
presented to the Company.
11.3 Appraisal. The consideration paid for any Real Property acquired
by the Company shall be based on the fair market value of such Property
as determined by a majority of the Trustees. In cases where a
majority of the Independent Trustees so determines, and in all
cases in which assets are acquired from the Advisory Company,
Trustees or Affiliates, such fair market value shall be determined
by a qualified independent real estate appraiser selected by the
Independent Trustees.
SECTION 12
BYLAW AMENDMENTS
12.1 The Trustees, by a majority vote, may amend these Bylaws to change
the name of the Company or to alter the provisions hereof with respect to
Trustee meetings, Trustee compensation, registration and transfer of
Shares, lost Share certificates or Distribution record dates. All
other amendments to these Bylaws shall require the Majority vote of the
Shareholders.
SECTION 13
DISSOLUTION
13.1 The duration of the Company shall be for a period set forth in
the Certificate of Incorporation, as amended, unless the Company is
sooner dissolved in accordance with these Bylaws, the Delaware Corporation
Statute or by operation of law. The Company may be dissolved prior to
the expiration date of the Company upon the Majority vote of the
Shareholders.
SECTION 14
MISCELLANEOUS
14.1 Fiscal Year. The fiscal year of the Company shall be fixed by
resolution of the Board of Trustees.
14.2 Signature on Negotiable Instruments. All bills, notes, checks
or other instruments for the payment of money shall be signed or
countersigned in such manner as from time to time may be prescribed by
resolution of the Board of Trustees.
14.3 Form of Records. Any records maintained by the Company 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,
punch cards, magnetic tape, photographs, microphotographs, or
any other information storage device, provided
that the records so kept can be converted into
clearly legible form within a reasonable time.
14.4 Inspection of Company's Records. Any Shareholder of record, in
person or by attorney or other agent, shall upon written demand under
oath stating a purpose reasonably related to his interests as a
Shareholder, have the right during usual business hours to
inspect for any proper purpose the Company's stock ledger, a
list of its Shareholders, the books of account, the minutes of
the proceedings of the Shareholders and the Board of Trustees,
and the Company's other books and records and to make copies or
extracts therefrom. In every instance where ail attorney or other
agent shall be the person who seeks the right to inspection, the demand
under oath shall be accompanied by a power of attorney or such other
writing which authorizes the attorney or other agent to so act on behalf
of the Shareholder. The demand under oath shall be directed to the
Company at its registered office in Delaware or at its principal place
of business.
Any Trustee shall have the right to examine the Company's stock
ledger, a list of its Shareholders and its other books and records
for a purpose reasonably related to his position as a Trustee.
The Texas State Securities Administrator and any other state securities
administrator shall have the right to examine the books and records of
the Company upon request, with reasonable notice and during normal
business hours.
14.5 Notices. Any reference in these Bylaws to the time a notice is
given or sent means, unless otherwise expressly provided, the time a
written notice by mail is deposited in the United States mails, postage
prepaid, addressed to such Shareholder at his address as it appears on
the records of the Company; or the time any other written notice is
personally delivered to the recipient or is delivered to a common
carrier for transmission, or actually transmitted by the person
giving the notice by electronic means, to the recipient; or the
time any oral notice is communicated, in person or by telephone
or wireless, to the recipient or to a person at the
office of the recipient who the person giving the notice
has reason to believe will promptly communicate it to
the recipient.
14.6 Dividend Reinvestment Plan. If the Company provides a Dividend
Reinvestment Plan, such plan, at the minimum, shall provide that (a)
all material information regarding the Distributions to the Shareholders
and the effect of reinvesting such Distributions, including the tax
consequences thereof, shall be provided to the Shareholders participating
in the plan at least annually, and (b) each Shareholder participating in
the plan shall have a reasonable opportunity to withdraw from the plan
at least annually after receipt of the information required in
subparagraph (a) above.
