FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the period ended September 30, 1998
Commission File Number 0-25230
FIRST WASHINGTON REALTY TRUST, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 52-1879972
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification no.)
4350 East-West Highway, Suite 400, Bethesda, MD 20814
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (301) 907-7800
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No[ ]
Common Stock, $.01 par value, outstanding as of November 13, 1998:
8,566,985 Shares of Common Stock
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC.
FORM 10-Q
INDEX
Part I: Financial Information Page
- ----------------------------- ----
Item 1. Consolidated Balance Sheets as of September 30, 1998
(unaudited) and December 31, 1997.............................. 1
Consolidated Statements of Operations (unaudited) for
the three months and nine months ended September 30,
1998 and 1997 ................................................. 2
Consolidated Statements of Cash Flows (unaudited) for
the nine months ended September 30, 1998 and 1997 ............. 3
Notes to Unaudited Consolidated Financial Statements ........... 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ............................ 10
Part II: Other Information
Item 2. Market for the Registrant's Common Equity and Related
Shareholders Matters ........................................... 14
Item 6. Exhibits and Reports on Form 8-K ............................... 15
Signatures ............................................................. 16
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands except share data)
-----------
September 30, December 31,
1998 1997
---- ----
(unaudited)
ASSETS
Rental properties:
Land ............................................ $ 99,557 $ 89,042
Buildings and improvements ...................... 408,567 367,756
--------- ---------
508,124 456,798
Accumulated depreciation .......................... (48,045) (40,839)
--------- ---------
Rental properties, net ............................ 460,079 415,959
Cash and equivalents .............................. 2,868 3,142
Tenant receivables, net ........................... 7,680 7,274
Deferred financing costs, net ..................... 2,260 2,734
Other assets ...................................... 14,931 10,032
--------- ---------
Total assets ............................ $ 487,818 $ 439,141
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage notes payable .......................... $ 218,296 $ 212,030
Debentures ...................................... 25,000 25,000
Accounts payable and accrued expenses ........... 9,920 10,914
--------- ---------
Total liabilities ....................... 253,216 247,944
Minority interest ................................. 52,500 38,255
Stockholders' equity:
Convertible preferred stock $.01 par
value, 3,800,000 shares designated;
2,314,189 issued and outstanding
(aggregate liquidation preference
of $57,855) .................................... 23 23
Common stock $.01 par value, 90,000,000
shares authorized; 8,556,985 and 7,291,732
shares issued and outstanding, respectively .... 86 72
Additional paid-in capital ...................... 212,935 179,356
Accumulated distributions in excess of earnings . (30,942) (26,509)
--------- ---------
Total stockholders' equity .............. 182,102 152,942
--------- ---------
Total liabilities and stockholders'
equity ................................. $ 487,818 $ 439,141
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
1
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
-------
<TABLE>
<CAPTION>
For three month For nine months ended
September 30 September 30
------------------- --------------------
1998 1997 1998 1997
---- ---- ---- ----
Revenues:
<S> <C> <C> <C> <C>
Minimum rents ............................ $ 14,707 $ 10,984 $ 41,689 $ 30,891
Tenant reimbursements .................... 3,360 2,499 9,847 6,730
Percentage rents ......................... 170 263 925 836
Other income ............................. 326 370 854 906
-------- -------- -------- --------
Total revenues ........................ 18,563 14,116 53,315 39,363
-------- -------- -------- --------
Expenses:
Property operating and maintenance ....... 4,254 3,452 12,838 9,419
General and administrative ............... 857 611 2,709 2,751
Interest ................................. 4,811 4,747 14,782 13,675
Depreciation and amortization ............ 3,766 2,750 10,687 7,867
-------- -------- -------- --------
Total expenses ........................ 13,688 11,560 41,016 33,712
-------- -------- -------- --------
Income before gain on sale of properties,
income (loss) from Management Company,
extraordinary item, minority interest and
distributions to Preferred Stockholders . 4,875 2,556 12,299 5,651
Gain on sale of properties ............... 335 0 2,018 45
Income (loss) from Management Company .... (59) 77 281 376
-------- -------- -------- --------
Income before extraordinary item,
minority interest and distributions
to Preferred Stockholders ............... 5,151 2,633 14,598 6,072
Extraordinary item - loss on early
extinguishment of debt .................. 0 (561) (358) (695)
-------- -------- -------- --------
Income before minority interest and
distributions to Preferred Stockholders . 5,151 2,072 14,240 5,377
Income allocated to minority interest .... (1,116) (339) (3,069) (838)
-------- -------- -------- --------
Income before distributions to
Preferred Stockholders .................. 4,035 1,733 11,171 4,539
Distributions to Preferred Stockholders .. (1,410) (1,410) (4,231) (4,231)
-------- -------- -------- --------
Income allocated to Common Stockholders .. $ 2,625 $ 323 $ 6,940 $ 308
======== ======== ======== ========
Earnings per Common Share - Basic
Income before extraordinary item ....... $ 0.31 $ 0.16 $ 0.94 $ 0.20
Extraordinary item ..................... 0.00 (0.10) (0.05) (0.14)
-------- -------- -------- --------
Net income ............................. $ 0.31 $ 0.06 $ 0.89 $ 0.06
======== ======== ======== ========
Earnings per Common Share - Diluted
Income before extraordinary item ....... $ 0.31 $ 0.16 $ 0.93 $ 0.19
Extraordinary item ..................... 0.00 (0.10) (0.05) (0.13)
-------- -------- -------- --------
Net income ............................. $ 0.31 $ 0.06 $ 0.88 $ 0.06
======== ======== ======== ========
Shares of Common Stock - Basic............ 8,506 5,396 7,769 5,114
======== ======== ======== ========
Shares of Common Stock - Diluted ........ 8,560 5,471 7,848 5,179
======== ======== ======== ========
Common Distributions per share ........... $ 0.4875 $ 0.4875 $ 1.4625 $ 1.4625
======== ======== ======== ========
Preferred Distributions per share ........ $ 0.6094 $ 0.6094 $ 1.8281 $ 1.8281
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
--------
For the nine
months ended
September 30,
----------------------
1998 1997
---- ----
Operating Activities:
Income before distributions to Preferred
Stockholders ...................................... $ 11,172 $ 4,539
Adjustment to reconcile net cash provided
by operating activities:
Income allocated to minority interest ............ 3,069 838
Depreciation and amortization .................... 10,687 7,867
Gain of sale of rental properties ................ (2,018) (45)
Loss on early extinguishment of debt ............. 358 695
Amortization of deferred financing costs and
loan premiums ................................... (428) 1,071
Equity in earnings of Management Company ......... 79 (16)
Compensation paid or payable in company stock .... 953 1,678
Provision for uncollectible accounts ............. 1,163 902
Recognition of deferred rent ..................... (807) (912)
Net changes in:
Tenant receivables ............................. (762) (2,172)
Other assets ................................... (5,434) (1,138)
Accounts payable and accrued expenses .......... 107 2,553
-------- --------
Net cash provided by operating activities ... 18,139 15,860
-------- --------
Investing Activities:
Additions to rental properties ..................... (3,443) (5,309)
Acquisition of rental properties ................... (21,970) (17,252)
Proceeds from sale of rental properties ............ 4,957 1,172
-------- --------
Net cash used in investing activities ....... (20,456) (21,389)
-------- --------
Financing Activities:
Net proceeds from line of credit ................... 30,937 20,500
Proceeds from mortgage notes ....................... 318 1,098
Proceeds from issuance of common stock ............. 25,781 48,929
Proceeds from exercise of stock options ............ 57 --
Repayment of line of credit ........................ (32,237) (20,500)
Repayment on mortgage notes ........................ (2,431) (34,556)
Additions to deferred financing costs .............. (689) (537)
Distributions paid to Preferred Stockholders ....... (4,231) (4,231)
Distributions paid to Common Stockholders .......... (11,374) (7,361)
Distributions paid to minority interest ............ (4,088) (2,046)
-------- --------
Net cash provided by financing activities ... 2,043 1,296
-------- --------
Net decrease in cash and equivalents ............... (274) (4,233)
Cash and equivalents, beginning of period .......... 3,142 11,780
-------- --------
Cash and equivalents, end of period ......... $ 2,868 $ 7,547
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
---------
1. Business
General
First Washington Realty Trust, Inc. (the "Company") is a fully integrated
real estate organization with expertise in acquisitions, property management,
leasing, renovation and development of principally supermarket-anchored
neighborhood shopping centers that has elected to be taxed as a real estate
investment trust ("REIT") under the Internal Revenue Code of 1986, as amended
(the "Code") . The Company owns a portfolio of 52 retail properties containing a
total of approximately 5.6 million square feet of gross leasable area located in
the Mid-Atlantic region and the Chicago metropolitan area.
The Company currently owns approximately 77.1% of the partnership interests
in First Washington Realty Limited Partnership (the "Operating Partnership").
All of the Company's operations are conducted through the Operating Partnership.
The Operating Partnership owns 34 Properties directly and 18 Properties are
owned by lower tier entities in which the Operating Partnership owns a 99%
partnership interest and the Company (or a wholly-owned subsidiary of the
Company) owns a 1% interest.
Due to the Company's ability, as the general partner, to exercise both
financial and operational control over the Operating Partnership, the Operating
Partnership is consolidated for financial reporting purposes. Allocation of net
income to the limited partners of the Operating Partnership is based on their
respective partnership interests and is reflected in the accompanying
Consolidated Financial Statements as minority interests. Losses allocable to the
limited partners in excess of their basis are allocated to the Common
Stockholders as the limited partners have no requirement to fund losses.
The Operating Partnership also owns 100% of the non-voting preferred stock
of First Washington Management, Inc. ("FWM" or "Management Company") and is
entitled to 99% of the cash flow from FWM. FWM provides management, leasing and
related services for the Properties and to third-party clients, including
individual, institutional and corporate property owners.
In July 1998, the Company completed a public offering of 1,150,000 shares
of Common Stock (the "July 1998 Offering"). The shares of stock were priced at
$23.75, resulting in net proceeds of approximately $25,781 after deducting the
underwriter's discount and offering expenses of approximately $1,532. The
proceeds of the offering were used to pay down the Company's Line of Credit.
2. Summary of Significant Accounting Policies
Basis of Presentation
The unaudited interim consolidated financial statements of the Company are
prepared pursuant to the Securities and Exchange Commission's rules and
regulations for reporting on Form 10-Q and should be read in conjunction with
the financial statements and the notes thereto of the Company's 1997 Annual
Report to Stockholders. Accordingly, certain disclosures accompanying annual
financial statements prepared in accordance with generally accepted accounting
principles are omitted. In the opinion of management, all adjustments,
consisting solely of normal recurring adjustments, necessary for fair
presentation of the consolidated financial statements for the interim periods
have been included. The current period's results of operations are not
necessarily indicative of results which ultimately may be achieved for the year.
4
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
---------
The consolidated financial statements include the accounts of the Company
and its majority owned entities, including the Operating Partnership. All
significant intercompany balances and transactions have been eliminated.
Income per Share
Basic and diluted income per share is calculated by dividing income after
minority interest, less preferred distributions by the weighted average number
of common shares outstanding during the periods presented.
Recent Accounting Pronouncements
On March 19, 1998, the Emerging Issues Task Force ("EITF") of the Financial
Accounting Standards Board reached a consensus opinion on issue No. 97-11,
"Accounting for Internal Costs Relating to Real Estate Property Acquisitions"
which requires that the internal costs of preacquisition activities incurred in
connection with the acquisition of an operating property be expensed as
incurred. The Company has historically capitalized internal preacqusition costs
of operating properties as a component of the acquisition price. The Company
capitalized $227 for the period January 1 through March 19, 1998 and $229 for
the nine months ended September 30, 1997. The Company will realize an increase
in general and administrative expense due to the adoption of this ruling which
is effective immediately.
On May 21, 1998, the Emerging Issues Task Force ("EITF") of the Financial
Accounting Standards Board reached a consensus opinion on Issue No. 98-9,
"Accounting for Contingent Rent In Interim Financial Periods" which provides
that recognition of rental income in interim periods must be deferred until the
specified target that triggers the contingent rental income is achieved. The
Company has historically recognized rental income based on a percentage of
tenant sales ratably over the course of the year. This consensus become
effective May 21, 1998 and requires the Company to defer recognition of this
income until the date that the tenant's sales exceed the breakpoint set forth in
the lease agreement. The impact of this consensus was to decrease the percentage
rentals recognized in the third quarter by $200 and the remainder of the fiscal
year ending December 31, 1998 by approximately $40. Additionally, the amount of
percentage rentals recognized in each quarter of subsequent fiscal years will
differ from historical experience, with a significant concentration of revenue
being recognized in the third and fourth quarters.
During the second quarter, the Financial Accounting Standards Board issued
SFAS 133 "Accounting for Derivative Instruments and Hedging Activities", which
will be effective for the Company's fiscal year 2000. This statement establishes
accounting and reporting standards requiring that every derivative instrument,
including certain derivative instruments imbedded in other contracts, be
recorded in the balance sheet as either an asset or liability measured at its
fair value. The statement also requires that changes in the derivative's fair
value be recognized in earnings unless specific hedge accounting criteria are
met. The Company is currently assessing the impact of this new statement on its
consolidated financial position, liquidity, and results of operations.
The Company adopted SFAS No. 130, "Reporting Comprehensive Income" on
January 1, 1998. The Company has no items of other comprehensive income.
5
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
---------
3. Acquisition of Rental Properties
During the first nine months of 1998, the Company acquired five shopping
centers for an aggregate acquisition cost of approximately $57,363. All the
acquisitions were accounted for using the purchase method of accounting and the
operations of each property is included in the Company's Statement of Operations
from their respective dates of acquisition. The following is a summary of the
acquisitions:
<TABLE>
<CAPTION>
Date Total Anchor Anchor
Acquired Property Name Location GLA Cost Tenant (GLA)
- -------- ------------- -------- --- ---- ------ -----
<S> <C> <C> <C> <C> <C> <C>
1/98 Bowie Plaza Bowie, Maryland 104,836 $12,135 Giant Food 21,750
3/98 Watkins Park Plaza Mitchellville, Maryland 112,143 14,662 Safeway 43,205
4/98 Parkville Shopping Center Baltimore, Maryland 140,925 8,388 A&P Superfresh 39,571
5/98 Elkridge Corners Elkridge, Maryland 73,529 8,873 A&P Superfresh 18,750
6/98 Village Shopping Center Richmond, Virginia 110,885 13,305 Ukrop's Supermarket 39,003
------- ------ ------
542,318 $57,363 162,279
======= ======= =======
</TABLE>
The acquisitions were financed as follows:
<TABLE>
<CAPTION>
Number of
Property Partnerships Market Assumed Mortgage Line of Credit
Name Units Value Debt(1) Draw Cash Total
---- ----- ----- ------- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Bowie Plaza 130,626 $3,592 $5,374 $3,000 $ 169 $12,135
Watkins Park Plaza -- -- -- 10,000 4,662(2) 14,662
Parkville Shopping Center 185,361 4,819 3,182 -- 387 8,388
Elkridge Corners 89,109 2,228 6,645 -- -- 8,873
Village Shopping Center 373,162 9,702 -- 3,500 103 13,305
------- ------- ------- ------- ------ -------
778,258 $20,341 $15,201 $16,500 $5,321 $57,363
======= ======= ======= ======= ====== =======
</TABLE>
- -------------
(1) Includes loan premiums.
(2) Includes net proceeds from the sale of properties of approximately $4,253.
The following unaudited pro forma condensed combined results of operations
are presented as if the acquisitions of the rental properties, the sale of
properties as discussed in footnote 4 and the September 1997 and July 1998
offerings occurred on January 1, 1997. The proforma statements are provided for
information purposes only. They are based on historical information and do not
necessarily reflect the actual results that would have occurred nor are they
necessarily indicative of future results of operations of the Company.
6
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
---------
For the nine months ended
September 30,
-------------------------
1998 1997
---- ----
Total Revenues ............................... $54,390 $ 53,088
======= =========
Pro forma net income ......................... $ 6,992 $ 6,563
======= =========
Pro forma earnings per Common Share - Basic .. $ 0.81 $ 0.79
======= =========
Pro forma earnings per Common Share - Diluted $ 0.80 $ 0.79
======= =========
4. Sale of Properties
In March 1998, the Company sold its two multi-family properties (Branchwood
and Park Place Apartments) for a combined sales price of approximately $8,050.
The gain on sale is approximately $1,536 and net proceeds after the payment of
the existing mortgage debt was approximately $3,962. In March 1998, the Company
sold one of the Georgetown retail shops consisting of 5,000 square feet for
$750. The gain on sale is approximately $147 and net proceeds after the payment
of existing mortgage debt was approximately $291. The proceeds of these sales
were used to purchase Watkins Park Plaza in a like-kind exchange as defined in
Internal Revenue Code Section 1031.
In September 1998, the Company sold one of the Georgetown retail shops
consisting of 3,700 square feet for $800. The gain on sale is approximately
$335, and net proceeds was approximately $757. The proceeds of this sale is
currently held in escrow and is expected to be used in a like-kind exchange as
defined in Internal Revenue Code Section 1031.
5. Line of Credit
In January 1998, the Company closed on a $35,500 collateralized revolving
Line of Credit with Union Bank of Switzerland. This line is collateralized by
six properties (Kenhorst Plaza, Shoppes of Graylyn, Four Mile Fork, Takoma Park,
Centre Ridge Marketplace and Newtown Square). The line which matures on January
31, 2001 replaces the Lines of Credit the Company had with Mellon Bank and
Corestates Bank. Loans under this line will bear interest at LIBOR plus one
percent (1%). The line was subsequently increased to $45,000 on March 20, 1998
and Watkins Park Plaza was pledged as additional collateral. As of September 30,
1997, $2,000 is outstanding on the Line of Credit which is included in mortgage
notes payable.
7
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
---------
6. Summary of Noncash Investing and Financing Activities
Significant noncash transactions for the nine months ended September 30,
1998 and 1997 were as follows:
1998 1997
---- ----
Liabilities assumed in acquisition of
rental properties ..................................... $15,201 $60,057
Common units in the Operating Partnership
issued in connection with the acquisition
of rental properties .................................. $20,341 $25,013
Preferred units in the Operating Partnership
issued in connection with the acquisition
of rental properties .................................. -- $ 277
Increase in minority interest's ownership
of the Operating Partnership .......................... $15,266 $14,847
Accrued compensation paid through the issuance
of Common Stock ....................................... $ 898 $ 3,233
7. Stock Option Plans
On May 8, 1998, the Stockholders approved an amendment to the Company's
1994 Stock Option Plan. The amendment increases the number of shares available
for issuance under the Stock Option Plan from 796,691 to 1,296,691 shares.
On May 8, 1998, the Stockholders approved an amendment to the Company's
1996 Restricted Stock Plan. The Amendment increases the number of shares
available for issuance under the Restricted Stock Plan from 18,508 to 368,508
shares.
On May 8, 1998, the Stockholders approved an amendment to the Company's
1996 Contingent Stock Agreements. The amendment further grants an additional
150,000 shares of Common Stock to senior management under a performance-based
incentive plan.
8. Subsequent Events
In October 1998, the Company acquired Town Center at Sterling located in
Sterling, Virginia. The total acquisition cost of $22,195 was financed through
the issuance of 325,452 common units to the seller of the property with a value
of approximately $7,485, assumed mortgage indebtness of $9,357 and cash of
$5,353. The mortgage loan carries an all-in effective rate of 7.0% and matures
in July 2003. The Center contains 179,002 square feet of GLA and is anchored by
Giant Food.
8
<PAGE>
FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except share data)
---------
In October 1998, the Company acquired Willston Centers I & II, two
contiguous neighborhood shopping centers located in Falls Church, Virginia. The
total acquisition cost of $23,804 was financed through the issuance of 551,084
common units to the seller of the property with a value of approximately
$12,675, assumed mortgage indebtness of $10,668, and cash of $461. The mortgage
loan carries an all-in effective rate of 7.0% and matures in October 2002.
Willston Center I contains 86,468 square feet of GLA and is anchored by CVS
Pharmacy. Willston Center II contains 127,434 square feet of GLA and anchored by
Safeway.
On October 10, 1998, the Board of Directors declared a distribution of
$0.4875 and $0.6094 per share of Common Stock and Preferred Stock, respectively
to shareholders of record as of November 1, 1998, payable on November 15, 1998.
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation
Overview
The following discussion should be read in conjunction with the "Selected
Consolidated Financial Information" and the Financial Statements and notes
thereto of the Company appearing elsewhere in this Form 10-Q. Dollars are in
thousands except per share data.
Comparison of the three months ended September 30, 1998 to the three months
ended September 30, 1997
For the three months ended September 30, 1998, the net income allocated to
common stockholders increased by $2,302 from a net income of $323 to a net
income of $2,625, when compared to the three months ended September 30, 1997,
due to an increase in revenues which were primarily due to the purchase of the
six Chicago properties in September 1997, Mitchellville Plaza in October 1997,
Spring Valley Center in December 1997 (the "1997 Acquisitions"), Bowie Plaza in
January 1998, Watkins Park Plaza in March 1998, Parkville Shopping Center in
April 1998, Elkridge Corners Shopping Center in May 1998, and Village Shopping
Center in June 1998 (the "1998 Acquisitions"), and a gain recognized an the sale
of a property, offset by an increase in expenses primarily due to the 1997 and
1998 Acquisitions, and an increase in the amount of income allocated to minority
interests.
Total revenues increased by $4,447 or 31.5%, from $14,116 to $18,563, due
primarily to an increase in minimum rents of $3,723 and tenant reimbursements of
$861. The increases were primarily due to the 1997 and 1998 Acquisitions.
Property operating and maintenance expense increased by $802, or 23.2%,
from $3,452 to $4,254, due primarily to the 1997 Acquisitions and the 1998
Acquisitions. General and administrative expenses increased by $246 or 40.3%,
from $611 to $857 due primarily to an increase in the amount of accrued
officers' compensation of $150 and internal preacquisition costs of $129. Prior
to March 19, 1998, internal preacquisition costs were capitalized and included
in the cost of acquiring rental properties.
Interest expense increased by $64, or 1.3%, from $4,747 to $4,811, due
primarily to the increased mortgage indebtedness associated with the 1997
Acquisitions and the 1998 Acquisitions offset by a reduction of mortgage debt
through proceeds from the September 1997 and July 1998 Offering and a decrease
in the weighted average interest rate. The average debt outstanding increased
from $218.0 million for 1997 to $255.8 million for 1998 and the weighted average
interest rate decreased from 8.7% to 7.5%.
Depreciation and amortization expenses increased by $1,016, or 36.9%, from
$2,750 to $3,766, primarily due to the 1997 Acquisitions and the 1998
Acquisitions.
A gain on sale of properties of $335 was realized and there was no
extraordinary loss. For the same period in 1997, there was no gain on sale of
properties and there was a $561 extraordinary loss due to the early
extinguishment of debt.
Income allocated to minority interests increased by $777 from $339 to
$1,116 due to an increase in net income and an increase in the minority
interests' ownership of the Operating Partnership from 16.9% to 22.9%.
10
<PAGE>
Comparison of the nine months ended September 30, 1998 to the nine months ended
September 30, 1997
For the nine months ended September 30, 1998, the net income allocated to
common stockholders increased by $6,633 from a net income of $308 to a net
income of $6,941, when compared to the nine months ended September 30, 1997, due
to an increase in revenues which were primarily due to the purchase of the six
Chicago properties in September 1997, Mitchellville Plaza in October 1997,
Spring Valley Center in December 1997 (the "1997 Acquisitions"), Bowie Plaza in
January 1998, Watkins Park Plaza in March 1998, Parkville Shopping Center in
April 1998, Elkridge Corners Shopping Center in May 1998, and Village Shopping
Center in June 1998 (the "1998 Acquisitions"), a gain recognized on the sale of
properties offset by an increase in expenses primarily due to the 1997 and 1998
Acquisitions, and an increase in the amount of income allocated to minority
interests.
Total revenues increased by $13,952 or 35.4%, from $39,363 to $53,315, due
primarily to an increase in minimum rents of $10,798 and tenant reimbursements
of $3,117. The increases were primarily due to the 1997 and 1998 Acquisitions.
Property operating and maintenance expense increased by $3,419, or 36.3%,
from $9,419 to $12,838, due primarily to the 1997 and 1998 Acquisitions. General
and administrative expenses decreased by $42 or 1.5%, from $2,751 to $2,709 due
primarily to an decrease in the amount of compensation paid or payable to
officers in Company stock of $722 offset by an increase in internal
preacquisition costs of $305, accrued cash bonuses to officers of $175 and other
cash expenses of $200. Prior to March 19, 1998, internal preacquisition costs
were capitalized and included in the cost of acquiring rental properties.
Interest expense increased by $1,107, or 8.1%, from $13,675 to $14,782, due
primarily to the increased mortgage indebtedness associated with the 1997 and
1998 Acquisitions offset by a reduction in mortgage debt from the proceeds of
the September 1997 and July 1998 offering and a reduction in the weighted
average interest rate. The average debt outstanding increased from $212.8
million for 1997 to $253.5 million for 1998, and the weighted average interest
rate decreased from 8.6% to 7.8%.
Depreciation and amortization expenses increased by $2,820, or 35.8%, from
$7,867 to $10,687, primarily due to the 1997 and 1998 Acquisitions.
During 1998, a gain on sale of properties of $2,018 was realized and there
was a $358 extraordinary loss due to the early extinguishment of debt. For the
same period in 1997, a gain on sale of properties of $45 was realized and there
was a $695 extraordinary loss due to the early extinguishment of debt.
In 1998, the Company sold its two multi-family properties (Branchwood and
Park Place) and two of the Georgetown retail shops retiring $4,236 of mortgage
debt associated with these properties. In 1997, the Company sold Thieves Market
in which $734 of mortgage debt associated with the property was retired.
Income allocated to minority interests increased by $2,231 from $838 to
$3,069 due to an increase in net income and an increase in the minority
interests ownership of the Operating Partnership from 16.9% to 22.9%.
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Liquidity and Capital Resources
Indebtedness
As of September 30, 1998, the Company had total indebtedness of
approximately $243.3 million (including $25.0 million of debentures and
approximately $218.3 million of mortgage indebtedness). The mortgage
indebtedness consists of approximately $211.4 million in indebtedness
collateralized by 35 of the Properties and tax-exempt bond financing obligations
issued by the Philadelphia Authority for Industrial Development (the "Bond
Obligations") of approximately $6.9 million collateralized by one of the
properties. Of the Company's indebtedness, $15.5 million (6.4%) is variable rate
indebtedness, and $227.8 million (93.6%) is at a fixed rate. The effective
interest rates of the indebtedness range from 5.6% to 9.8%, with a weighted
average interest rate of 7.8%, and will mature between 1999 and 2014. A large
portion of the Company's indebtedness will become due by 2000, requiring balloon
payments of $88.9 million in 1999, and $24.4 million in 2000. From 1999 through
2014, the Company will have to refinance an aggregate of approximately $204.5
million. Since the Company anticipates that only a small portion of the
principal of such indebtedness will be repaid prior to maturity and the Company
will likely not have sufficient funds on hand to repay such indebtedness, the
Company will need to refinance such indebtedness through modification or
extension of existing indebtedness, additional debt financing or through an
additional offering of equity securities.
The Company currently has two collateralized revolving lines of credit (the
"Lines of Credit") totaling approximately $51 million. In January 1998, the
Company closed on $35,500 collateralized revolving Line of Credit with Union
Bank of Switzerland. This line is collateralized by six properties (Kenhorst
Plaza, Shoppes of Graylyn, Four Mile Fork, Takoma Park, Centre Ridge Marketplace
and Newtown Square). The line which matures on January 31, 2001 replaces the
Lines of Credit the Company had with Mellon Bank and Corestates Bank. Loans
under this line will bear interest at LIBOR plus one percent (1%). The line was
subsequently increased to $45,000 on March 20, 1998 and Watkins Park Plaza was
pledged as additional collateral. The Company has a collateralized revolving
line of credit of up to $5.8 million from First Union Bank. Loans under the line
of credit bear interest at LIBOR plus two percent (2%) per annum, and mature on
December 15, 1998. Loans under the line of credit are collateralized by a first
mortgage lien on Brafferton Shopping Center. As of September 30, 1998, there was
$2,000 outstanding under the Lines of Credit which is reflected as mortgage
notes payable and included in the discussion of mortgage indebtedness above.
Liquidity
The Company expects to meet its short-term liquidity requirements generally
through its working capital, net cash provided by operations and draws on the
Lines of Credit. The Company believes that the foregoing sources of liquidity
will be sufficient to fund liquidity needs through 1999.
The Company expects to meet certain long-term liquidity requirements such
as development, property acquisitions, scheduled debt maturities, renovations,
expansions and other non-recurring capital improvements through long-term
secured and unsecured indebtedness, including the Lines of Credit and the
issuance of additional equity securities. The Company also expects to use funds
available under the Lines of Credit to fund acquisitions, development activities
and capital improvements on an interim basis.
During 1999, $88.9 million of the Company's indebtedness becomes due,
including the $25.0 million Exchangeable Debentures. The Company believes that
it will be able to retire this debt through either a refinancing of the debt
using the properties as collateral, an equity offering or a combination of both.
The Company currently believes that the loan-to-values on the properties are at
a level that will enable the Company to refinance the loans without an
additional requirement for capital.
The Company has elected to qualify as a REIT for federal income tax
purposes commencing with its tax year ended December 31, 1994. To qualify as a
REIT, the Company is required, among other items, to pay distributions to its
shareholders of at least 95% of its taxable income. The Company intends to make
quarterly distributions to its shareholders from operating cash flow.
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New Accounting Standards
On March 19, 1998, the Emerging Issues Task Force ("EITF") of the Financial
Accounting Standards Board reached a consensus opinion on issue No. 97-11,
"Accounting for Internal Costs Relating to Real Estate Property Acquisitions"
which requires that the internal costs of preacquisition activities incurred in
connection with the acquisition of an operating property be expensed as
incurred. The Company has historically capitalized internal preacqusition costs
of operating properties as a component of the acquisition price. The Company has
historically capitalized internal preacqusition costs of operating properties as
a component of the acquisition price. The Company capitalized $227 for the
period January 1 through March 19, 1998 and $229 for the nine months ended
September 30, 1997. The Company will realize an increase in general and
administrative expense due to the adoption of this ruling which is effective
immediately.
On May 21, 1998, the Emerging Issues Task Force ("EITF") of the Financial
Accounting Standards Board reached a consensus opinion on Issue No. 98-9,
"Accounting for Contingent Rent In Interim Financial Periods" which provides
that recognition of rental income in interim periods must be deferred until the
specified target that triggers the contingent rental income is achieved. The
Company has historically recognized rental income based on a percentage of
tenant sales ratably over the course of the year. This consensus become
effective May 21, 1998 and requires the Company to defer recognition of this
income until the date that the tenant's sales exceed the breakpoint set forth in
the lease agreement. The impact of this consensus was to decrease the percentage
rentals recognized in the third quarter by $200 and the remainder of the fiscal
year ending December 31, 1998 by approximately $40. Additionally, the amount of
percentage rentals recognized in each quarter of subsequent fiscal years will
differ from historical experience, with a significant concentration of revenue
being recognized in the fourth quarter.
During the second quarter, the Financial Accounting Standards Board issued
SFAS 133 "Accounting for Derivative Instruments and Hedging Activities", which
will be effective for the Company's fiscal year 2000. This statement establishes
accounting and reporting standards requiring that every derivative instrument,
including certain derivative instruments imbedded in other contracts, be
recorded in the balance sheet as either an asset or liability measured at its
fair value. The statement also requires that changes in the derivative's fair
value be recognized in earnings unless specific hedge accounting criteria are
met. The Company is currently assessing the impact of this new statement on its
consolidated financial position, liquidity, and results of operations.
Year 2000
Many of the world's computer systems currently record years in a two digit
format. These computer systems will be unable to properly interpret dates beyond
the year 1999, which could lead to disruptions in our operations. This problem
is commonly referred to as the Year 2000 issue.
The following systems are vulnerable to the Year 2000 issue:
Accounting/General Ledger/Property Management Software. The Company
currently believes that our software package is Year 2000 compliant in all
material aspects. Additional testing and compliance is ongoing. Nonetheless, the
Company is currently reviewing other vendor products which better serve the
Company's current needs. These products also claim to be fully Year 2000
compliant. The Company has budgeted $500 for replacement software and hardware,
including installation and implementation costs. Currently, the Company expects
implementation commencement in early 1999 with completion by June 1999.
Hardware Components, Servers and Workstations. These components are
currently being upgraded to be fully Year 2000 compliant. We expect such
upgrades to be completed by early 1999.
Key Vendors. We have identified key vendors and customers we believe could
have a material impact on operations if those vendors are not Year 2000
compliant. We are developing a short questionnaire to send to our majorvendors
regarding their Year 2000 compliance. However, the Company currently believes
that there will be no mutual adverse impact on the Company's operations.
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Although we are taking the foregoing steps to establish Year 2000
compliance, we cannot guarantee that all of our systems will be Year 2000
compliant or that other companies on which we rely will be timely converted. As
a result, our operations could be adversely affected.
Part II
OTHER INFORMATION
Item 2. Recent Sales of Unregistered Equity Securities
(a) Securities Sold
The following table sets forth the date of sale, title and amount of
unregistered securities sold by the Company since December 31, 1997:
Date of Sale Title Amount
------------ ----- ------
01/01/98 Common Units 130,626
04/30/98 Common Units 185,361
05/28/98 Common Units 89,109
06/01/98 Common Units 373,162
(b) Underwriters and other purchasers
i. January 1, 1998 Sales. Underwriters were not retained in
connection with the sale of these securities. These units were
sold to the seller of Bowie Plaza, an "accredited investor".
ii. April 30, 1998 Sales. Underwriters were not retained in
connection with the sale of these securities. These units were
sold to the seller of Parkville Shopping Center, an "accredited
investor".
iii. May 28, 1998 Sales. Underwriters were not retained in connection
with the sale of these securities. These units were sold to the
seller of Elkridge Corners, an "accredited investor".
iv. June 1, 1998 Sales. Underwriters were not retained in connection
with the sale of these securities. These units were sold to the
seller of Village Shopping Center, an "accredited investor".
(c) Consideration
i. January 1, 1998 Sales. These units were issued in exchange for
property having a value of approximately $6.8 million, net of
assumed indebtedness. There were no underwriting discounts or
commissions with respect to such securities.
ii. April 30, 1998 Sales. These units were issued in exchange for
property having a value of approximately $5.2 million, net of
assumed indebtedness. There were no underwriting discounts or
commissions with respect to such securities.
iii. May 28, 1998 Sales. These units were issued in exchange for
property having a value of approximately $2.2 million, net of
assumed indebtedness. There were no underwriting discounts or
commissions with respect to such securities.
14
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iv. June 1, 1998 Sales. These units were issued in exchange for
property having a value of approximately $9.8 million, net of
assumed indebtedness. There were no underwriting discounts or
commissions with respect to such securities.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Amended and Restated Bylaws
27 Financial Data Schedule
(b) Reports on Form 8-K.
An interim report on Form 8-K was filed on May 18, 1998 including
certain exhibits thereto.
An interim report on Form 8-K was filed on June 17, 1998 reporting the
acquisition of five retail properties.
An interim report on Form 8-K was filed on July 28, 1998 regarding
recently enacted legislation.
An interim report on Form 8-K was filed on July 31, 1998 including
certain exhibits thereto.
An interim report on Form 8-K was filed on October 23, 1998, regarding
the adopted Stockholder Rights Amendment.
An interim report of Form 8-K was filed on October 27, 1998, including
certain exhibits thereto.
An interim report of Form 8-K was filed on October 30, 1998, regarding
Risk Factors.
15
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRST WASHINGTON REALTY TRUST, INC.
Date: November 11, 1998 /s/ William J. Wolfe
--------------------------------
By: William J. Wolfe
President and
Chief Executive Officer
Date: November 11, 1998 /s/ James G. Blumenthal
-------------------------------
By: James G. Blumenthal
Executive Vice President and
Chief Financial Officer
16
FIRST WASHINGTON REALTY TRUST, INC.
AMENDED AND RESTATED BYLAWS
ARTICLE I
OFFICES
Section 1. Principal Office. The principal office of the Corporation shall
be located at such place or places as the Board of Directors may designate.
Section 2. Additional Offices. The Corporation may have additional offices
at such places as the Board of Directors may from time to time determine or the
business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Place. All meetings of stockholders shall be held at the
principal office of the Corporation or at such other place within the United
States as shall be stated in the notice of the meeting.
Section 2. Annual Meeting. An annual meeting of the stockholders for the
election of directors and the transaction of any business within the powers of
the Corporation shall be held on a date and at the time set by the Board of
Directors during the month of May.
Section 3. Special Meetings. (a) The president, chief executive officer or
Board of Directors may call special meetings of the stockholders. Subject to
subsections (b) through (h) of this Section 3, special meetings of stockholders
shall also be called by the secretary upon the written request of the
stockholders entitled to cast not less than a majority of all the votes entitled
to be cast at such meeting.
(b) In order that the Corporation may determine the stockholders entitled
to request a special meeting, the Board of Directors may fix a record date to
determine the stockholders entitled to make such a request (the "Request Record
Date"). The Request Record Date shall not precede the close of business on the
date upon which the resolution fixing the Request Record Date is adopted by the
Board of Directors and shall not be more than ten days after the date upon which
the resolution fixing the Request Record Date is adopted by the Board of
Directors. Any stockholder of record seeking to have stockholders request a
special meeting shall, by sending written notice to the secretary of the
Corporation by certified or registered mail, return receipt requested, request
the Board of Directors to fix a Request Record Date. Unless the Board of
Directors shall, within ten days after the date on which a valid request to fix
a Request Record Date is received, adopt a resolution fixing the Request Record
Date and make a public announcement of such Request Record Date, the Request
Record Date shall be the close of business on the tenth day after the first date
on
<PAGE>
which a valid written request to set a Request Record Date is received by the
secretary. To be valid, such written request shall set forth the purpose or
purposes for which the special meeting is to be held and the matters proposed to
be acted on at such meeting, shall be signed by one or more stockholders of
record (or their duly authorized proxies or other representatives), shall bear
the date of signature of each such stockholder (or proxy or other
representative) and shall set forth all information relating to such stockholder
that is required to be disclosed in solicitations of proxies for election of
directors in an election contest, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and Rule 14a-11 thereunder.
(c) In order for a stockholder or stockholders to request a special
meeting, a written request or requests for a special meeting signed by the
stockholders of record as of the Request Record Date entitled to cast not less
than a majority of all of the votes entitled to be cast at such meeting, must be
delivered to the Corporation. To be valid, each written request by a stockholder
for a special meeting shall set forth the specific purpose or purposes for which
the special meeting is to be held (which purpose or purposes shall be limited to
the purpose or purposes set forth in the written request to set a Request Record
Date received by the Corporation pursuant to paragraph (b) of this Section 3 of
Article II), shall be signed by one or more persons who as of the Request Record
Date are stockholders of record (or their duly authorized proxies or other
representatives), shall bear the date of signature of each such stockholder (or
proxy or other representative), and shall set forth the name and address, as
they appear in the Corporation's books, of each stockholder signing such request
and the class and number of shares of stock of the Corporation which are owned
of record and beneficially by each such stockholder, shall be sent to the
secretary by certified or registered mail, return receipt requested, and shall
be received by the secretary within 60 days after the Request Record Date.
(d) The secretary of the Corporation shall inform the Soliciting
Stockholder (as defined below) or Soliciting Stockholders of the reasonably
estimated cost of holding the special meeting, including the costs of preparing
and mailing proxy materials for the Corporation's own solicitation. The
Corporation shall not be required to call a special meeting upon stockholder
request unless, in addition to the documents required by paragraph (C) of this
Section 3 of Article II, the secretary receives payment of such reasonably
estimated cost of holding the special meeting from the Soliciting Stockholders.
If each of the resolutions introduced by any Soliciting Stockholder at such
meeting is adopted, and each of the individuals nominated by or on behalf of any
Soliciting Stockholder for election as a director at such meeting is elected,
then the Corporation shall refund to the Soliciting Stockholders the amount of
such reasonably estimated cost. For purposes of this paragraph (d), the
following terms shall have the meanings set forth below:
(i) "Affiliate" of any Person (as defined herein) shall mean any Person
controlling, controlled by or under common control with such first
Person.
(ii) "Participant" shall have the meaning assigned to such term in Rule
14a-11 promulgated under the Exchange Act.
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(iii) "Person" shall mean any individual, firm, corporation, partnership,
limited liability company, joint venture, association, real estate
investment trust, trust, unincorporated organization or other entity.
(iv) "Proxy" shall have the meaning assigned to such term in Rule 14a-1
promulgated under the Exchange Act.
(v) "Solicitation" shall have the meaning assigned to such term in Rule
14a-11 promulgated under the Exchange Act.
(vi) "Soliciting Stockholder" shall mean, with respect to any special
meeting requested by a stockholder or stockholders, any of the
following persons:
(1) if the number of stockholders signing the request or requests of
meeting delivered to the Corporation pursuant to paragraph (C) of
this Section 3 of Article II is ten or fewer, each stockholder
signing such Request;
(2) if the number of stockholders signing the request or requests of
meeting delivered to the Corporation pursuant to paragraph (C) of
this Section 3 of Article II is more than ten, each Person who
either (I) as a Participant in any Solicitation of such request
or requests or (II) at the time of the delivery to the
Corporation of the documents described in paragraph (C) of this
Section 3 of Article II had engaged or intended to engage in any
Solicitation of Proxies for use at such special meeting (other
than a Solicitation of Proxies on behalf of the Corporation); or
(3) any Affiliate of a Soliciting Stockholder, if a majority of the
directors then in office determine that such Affiliate should be
required to sign the written notice described in paragraph (C) of
this Section 3 of Article II and/or the written agreement
pursuant to this paragraph (d) in order to prevent the purposes
of this Section 3 of Article II from being evaded.
(e) Except as provided in the following sentence, any special meeting shall
be held at such place, hour and day as may be designated by whoever of the
president, chief executive officer or Board of Directors shall have called such
meeting. In the case of any special meeting called by the secretary upon the
request of stockholders (a "Request Special Meeting"), such meeting shall be
held at such place, hour and day as may be designated by the Board of Directors;
provided, however, that the date of any Request Special Meeting shall be not
more than 60 days after the Meeting Record Date (as defined
3
<PAGE>
in subsection (h) of this Section 3 of Article II); and provided further that in
the event that the Board of Directors fails to designate, within ten days after
the date that valid written requests for such meeting by the stockholders of
record as of the Request Record Date entitled to cast not less than a majority
of all the votes entitled to be cast at such meeting are delivered to the
Corporation (the "Delivery Date"), an hour and date for a Request Special
Meeting, then such meeting shall be held at 2:00 p.m. local time on the 90th day
after the Delivery Date or, if such 90th day is not a Business Day (as defined
below), on the first preceding Business Day; and provided further that in the
event that the Board of Directors fails to designate a place for a Request
Special Meeting within 10 days after the Delivery Date, then such meeting shall
be held at the principal executive offices of the Corporation. In fixing a date
for any special meeting, the president, chief executive officer or Board of
Directors may consider such factors as he, she or it deems relevant within the
good faith exercise of business judgment, including, without limitation, the
nature of the action proposed to be taken, the facts and circumstances
surrounding any request of such meeting, and any plan of the Board of Directors
to call an annual meeting or a special meeting for the conduct of related
business.
(f) The Corporation may engage regionally or nationally recognized
independent inspectors of elections to act as an agent of the Corporation for
the purpose of promptly performing a ministerial review of the validity of any
purported written request or requests for a special meeting received by the
secretary. For the purpose of permitting the inspectors to perform such review,
no purported request shall be deemed to have been delivered to the Corporation
until the earlier of (I) five Business Days following receipt by the secretary
of such purported request and (ii) such date as the independent inspectors
certify to the Corporation that the valid requests received by the secretary
represent at least a majority of the issued and outstanding shares of stock that
would be entitled to vote at such meeting. Nothing contained in this paragraph
(f) shall in any way be construed to suggest or imply that the Board of
Directors or any stockholder shall not be entitled to contest the validity of
any request, whether during or after such five Business Day period, or to take
any other action (including, without limitation, the commencement, prosecution
or defense of any litigation with respect thereto, and the seeking of injunctive
relief in such litigation).
(g) For purposes of these Bylaws, "Business Day" shall mean any day other
than a Saturday, a Sunday or a day on which banking institutions in the State of
Maryland are authorized or obligated by law or executive order to close.
(h) In the case of any Request Special Meeting, (I) the record date for
such meeting (the "Meeting Record Date") shall be not later than the 30th day
after the Delivery Date and (ii) if the Board of Directors fails to fix the
Meeting Record Date within 30 days after the Delivery Date, then the close of
business on such 30th day shall be the Meeting Record Date.
Section 4. Notice. Not less than ten nor more than 90 days before each
meeting of stockholders, the secretary shall give to each stockholder entitled
to vote at such meeting and to each stockholder not entitled to vote who is
entitled to notice of the meeting written or printed notice
4
<PAGE>
stating the time and place of the meeting and, in the case of a special meeting
or as otherwise may be required by statute, the purpose for which the meeting is
called, either by mail or by presenting it to such stockholder personally or by
leaving it at his residence or usual place of business. If mailed, such notice
shall be deemed to be given when deposited in the United States mail addressed
to the stockholder at his post office address as it appears on the records of
the Corporation, with postage thereon prepaid.
Section 5. Scope of Notice. Any business of the Corporation may be
transacted at an annual meeting of stockholders without being specifically
designated in the notice, except such business as is required by statute to be
stated in such notice. No business shall be transacted at a special meeting of
stockholders except as specifically designated in the notice.
Section 6. Quorum. At any meeting of stockholders, the presence in person
or by proxy of stockholders entitled to cast a majority of all the votes
entitled to be cast at such meeting shall constitute a quorum; but this section
shall not affect any requirement under any statute or the charter of the
Corporation (the "Charter") for the vote necessary for the adoption of any
measure. If, however, such quorum shall not be present at any meeting of the
stockholders, the Chairman of the meeting or the stockholders entitled to vote
at such meeting, present in person or by proxy, shall have power to adjourn the
meeting from time to time to a date not more than 120 days after the original
record date without notice other than announcement at the meeting. At such
adjourned meeting at which a quorum shall be present, any business may be
transacted which might have been transacted at the meeting as originally
notified.
Section 7. Voting. A plurality of all the votes cast at a meeting of
stockholders duly called and at which a quorum is present shall be sufficient to
elect a director. Each share may be voted for as many individuals as there are
directors to be elected and for whose election the share is entitled to be
voted. A majority of the votes cast at a meeting of stockholders duly called and
at which a quorum is present shall be sufficient to approve any other matter
which may properly come before the meeting, unless more than a majority of the
votes cast is required by statute or by the Charter. Unless otherwise provided
in the Charter, each outstanding share, regardless of class, shall be entitled
to one vote on each matter submitted to a vote at a meeting of stockholders.
Section 8. Proxies. A stockholder may vote the stock owned of record by
him, either in person or by proxy executed in writing by the stockholder or by
his duly authorized attorney in fact. Such proxy shall be filed with the
secretary of the Corporation before or at the time of the meeting. No proxy
shall be valid after eleven months from the date of its execution, unless
otherwise provided in the proxy.
Section 9. Voting of Stock by Certain Holders. Stock registered in the name
of a corporation, partnership, trust or other entity, if entitled to be voted,
may be voted by the president or a vice president, a general partner or trustee
thereof, as the case may be, or a proxy appointed by any of the foregoing
individuals, unless some other person who has been appointed to vote such stock
pursuant to a bylaw or a resolution of the board of directors of such
corporation or other entity presents a certified copy of such bylaw or
resolution, in which case such person may vote such stock.
5
<PAGE>
Any director or other fiduciary may vote stock registered in his name as such
fiduciary, either in person or by proxy.
Shares of stock of the Corporation directly or indirectly owned by it shall
not be voted at any meeting and shall not be counted in determining the total
number of outstanding shares entitled to be voted at any given time, unless they
are held by it in a fiduciary capacity, in which case they may be voted and
shall be counted in determining the total number of outstanding shares at any
given time.
The Board of Directors may adopt by resolution a procedure by which a
stockholder may certify in writing to the Corporation that any shares of stock
registered in the name of the stockholder are held for the account of a
specified person other than the stockholder. The resolution shall set forth the
class of stockholders who may make the certification, the purpose for which the
certification may be made, the form of certification and the information to be
contained in it; if the certification is with respect to a record date or
closing of the stock transfer books, the time after the record date of closing
of the stock transfer books within which the certification must be received by
the Corporation; and any other provisions with respect to the procedure which
the Board of Directors considers necessary or desirable. On receipt of such
certification, the person specified in the certification shall be regarded as,
for the purposes set forth in the certification, the stockholder of record of
the specified stock in place of the stockholder who makes the certification.
Section 10. Inspectors. At any meeting of stockholders, the chairman of the
meeting may, or upon the request of any stockholder shall, appoint one or more
persons as inspectors for such meeting. Such inspectors shall ascertain and
report the number of shares represented at the meeting based upon their
determination of the validity and effect of proxies, count all votes, report the
results and perform such other acts as are proper to conduct the election and
voting with impartiality and fairness to all the stockholders.
Each report of an inspector shall be in writing and signed by him or by a
majority of them if there is more than one inspector acting at such meeting. If
there is more than one inspector, the report of a majority shall be the report
of the inspectors. The report of the inspector or inspectors on the number of
shares represented at the meeting and the results of the voting shall be prima
facie evidence thereof.
Section 11. Nominations and Stockholder Business
(a) Annual Meetings of Stockholders.
(1) Nominations of persons for election to the Board of Directors and
the proposal of business to be considered by the stockholders may be made
at an annual meeting of stockholders (I) pursuant to the Corporation's
notice of meeting, (ii) by or at the direction of the Board of Directors or
(iii) by any stockholder of the Corporation who was a stockholder of record
at the time of giving of notice provided for in this Section 11(a), who
6
<PAGE>
is entitled to vote at the meeting and who complied with the notice
procedures set forth in this Section 11(a).
(2) For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (iii) of paragraph
(a)(1) of this Section 11, the stockholder must have given timely notice
thereof in writing to the secretary of the Corporation. To be timely, a
stockholder's notice shall be delivered to the secretary at the principal
executive offices of the Corporation not less than 60 days nor more than 90
days prior to the first anniversary of the preceding year's annual meeting;
provided, however, that in the event that the date of the annual meeting is
advanced by more than 30 days or delayed by more than 60 days from such
anniversary date, notice by the stockholder to be timely must be so
delivered not earlier than the 90th day prior to such annual meeting and
not later than the close of business on the later of the 60th day prior to
such annual meeting or the tenth day following the day on which public
announcement of the date of such meeting is first made. Such stockholder's
notice shall set forth (I) as to each person whom the stockholder proposes
to nominate for election or reelection as a director all information
relating to such person that is required to be disclosed in solicitations
of proxies for election of directors, or is otherwise required, in each
case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (the "Exchange Act") (including such person's written consent to
being named in the proxy statement as a nominee and to serving as a
director if elected); (ii) as to any other business that the stockholder
proposes to bring before the meeting, a brief description of the business
desired to be brought before the meeting, the reasons for conducting such
business at the meeting and any material interest in such business of such
stockholder and of the beneficial owner, if any, on whose behalf the
proposal is made; and (iii) as to the stockholder giving the notice and the
beneficial owner, if any, on whose behalf the nomination or proposal is
made, (x) the name and address of such stockholder, as they appear on the
Corporation's books, and of such beneficial owner and (y) the class and
number of shares of stock of the Corporation which are owned beneficially
and of record by such stockholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of paragraph
(a)(2) of this Section 11 to the contrary, in the event that the number of
directors to be elected to the Board of Directors is increased and there is
no public announcement naming all of the nominees for director or
specifying the size of the increased Board of Directors made by the
Corporation at least 70 days prior to the first anniversary of the
preceding year's annual meeting, a stockholder's notice required by this
Section 11(a) shall also be considered timely, but only with respect to
nominees for any new positions created by such increase, if it shall be
delivered to the secretary at the principal executive offices of the
Corporation not later than the close of business on the tenth day following
the day on which such public announcement is first made by the Corporation.
(b) Special Meetings of Stockholders. Only such business shall be conducted
at a special meeting of stockholders as shall have been brought before the
meeting pursuant to the Corporation's notice of meeting. Nominations of persons
for election to the Board of Directors may
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be made at a special meeting of stockholders at which directors are to be
elected (I) pursuant to the Corporation's notice of meeting, (ii) by or at the
direction of the Board of Directors or (iii) provided that the Board of
Directors has determined that directors shall be elected at such special
meeting, by any stockholder of the Corporation who is a stockholder of record at
the time of giving of notice provided for in this Section 11(b), who is entitled
to vote at the meeting and who complied with the notice procedures set forth in
this Section 11(b). In the event the Corporation calls a special meeting of
stockholders for the purpose of electing one or more directors to the Board of
Directors, any such stockholder may nominate a person or persons (as the case
may be) for election to such position as specified in the Corporation's notice
of meeting, if the stockholder's notice required by paragraph (a)(2) of this
Section 11(b) shall be delivered to the secretary at the principal executive
offices of the Corporation not earlier than the 90th day prior to such special
meeting and not later than the close of business on the later of the 60th day
prior to such special meeting or the tenth day following the day on which public
announcement is first made of the date of the special meeting and of the
nominees proposed by the Board of Directors to be elected at such meeting.
(c) General.
(1) Only such persons who are nominated in accordance with the
procedures set forth in this Section 11 shall be eligible to serve as
directors and only such business shall be conducted at a meeting of
stockholders as shall have been brought before the meeting in accordance
with the procedures set forth in this Section 11. The presiding officer of
the meeting shall have the power and duty to determine whether a nomination
or any business proposed to be brought before the meeting was made in
accordance with the procedures set forth in this Section 11 and, if any
proposed nomination or business is not in compliance with this Section 11,
to declare that such defective nomination or proposal be disregarded.
(2) For purposes of this Section 11, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable news service or in a document publicly filed
by the Corporation with the Securities and Exchange Commission pursuant to
Sections 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Section 11, a
stockholder shall also comply with all applicable requirements of state law
and of the Exchange Act and the rules and regulations thereunder with
respect to the matters set forth in this Section 11. Nothing in this
Section 11 shall be deemed to affect any rights of stockholders to request
inclusion of proposals in the Corporation's proxy statement pursuant to
Rule 14a-8 under the Exchange Act.
Section 12. Informal Action by Stockholder. Any action required or
permitted to be taken at a meeting of stockholders may be taken without a
meeting if a consent in writing, setting forth such action, is signed by each
stockholder entitled to vote on the matter and any other stockholder entitled to
notice of a meeting of stockholders (but not to vote thereat) has waived in
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writing, any right to dissent from such action, and such consent and waiver are
filed with the minutes of proceedings of the stockholders.
Section 13. Voting by Ballot. Voting on any question or in any election may
be viva voce unless the presiding officer shall order or any stockholder shall
demand that voting be by ballot.
Section 14. Control Share Acquisition Act. Notwithstanding any other
provision of the Charter or these Bylaws, Title 3, Subtitle 7 of the
Corporations and Associations Article of the Annotated Code of Maryland (or
successor statute) shall not apply to any acquisition by any person of shares of
stock of the Corporation. This section may be repealed, in whole or in part, at
any time, whether before or after an acquisition of control shares and, upon
such repeal, may, to the extent provided by any successor bylaw, apply to any
prior or subsequent control share acquisition.
ARTICLE III
DIRECTORS
Section 1. General Powers; Qualifications. The business and affairs of the
Corporation shall be managed under the direction of its Board of Directors.
Section 2. Number, Tenure and Qualifications. At any regular meeting or at
any special meeting called for that purpose, a majority of the entire Board of
Directors may establish, increase or decrease the number of directors, provided
that the number thereof shall never be less than the minimum number required by
the Maryland General Corporation Law, nor more than 15, and further provided
that the tenure of office of a director shall not be affected by any decrease in
the number of directors. Pursuant to the Charter, the directors have been
divided into classes with terms of three years, with the term of office of one
class expiring at the annual meeting of stockholders in each year. Each director
shall hold office for the term for which he is elected and until his successor
is elected and qualified.
Section 3. Annual and Regular Meetings. An annual meeting of the Board of
Directors shall be held immediately after and at the same place as the annual
meeting of stockholders, no notice other than this Bylaw being necessary. The
Board of Directors may provide, by resolution, the time and place, either within
or without the State of Maryland, for the holding of regular meetings of the
Board of Directors without other notice than such resolution.
Section 4. Special Meetings. Special meetings of the Board of Directors may
be called by or at the request of the chairman of the board (or any co-chairman
of the board if more than one), president or by a majority of the directors then
in office. The person or persons authorized to call special meetings of the
Board of Directors may fix any place, either within or without the State of
Maryland, as the place for holding any special meeting of the Board of Directors
called by them.
Section 5. Notice. Notice of any special meeting shall be given by written
notice delivered personally, transmitted by facsimile, telegraphed or mailed to
each director at his
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business or residence address. Personally delivered, facsimile transmitted or
telegraphed notices shall be given at least two days prior to the meeting.
Notice by mail shall be given at least five days prior to the meeting. If
mailed, such notice shall be deemed to be given when deposited in the United
States mail properly addressed, with postage thereon prepaid. If given by
telegram, such notice shall be deemed to be given when the telegram is delivered
to the telegraph company. Neither the business to be transacted at, nor the
purpose of, any annual, regular or special meeting of the Board of Directors
need be stated in this notice, unless specifically required by statute or these
Bylaws.
Section 6. Quorum. A majority of the directors shall constitute a quorum
for transaction of business at any meeting of the Board of Directors, provided
that, if less than a majority of such directors are present at said meeting, a
majority of the directors present may adjourn the meeting from time to time
without further notice, and provided further that if, pursuant to the Charter or
these Bylaws, the vote of a majority of a particular group of directors is
required for action, a quorum must also include a majority of such group.
The directors present at a meeting of the Board of Directors which has been
duly called and convened may continue to transact business until adjournment,
notwithstanding the withdrawal of enough directors to leave less than a quorum.
Section 7. Voting. The action of the majority of the directors present at a
meeting at which a quorum is present shall be the action of the Board of
Directors, unless the concurrence of a greater proportion is required for such
action by applicable statute.
Section 8. Telephone Meetings. Directors may participate in a meeting by
means of a conference telephone or similar communications equipment if all
persons participating in the meeting can hear each other at the same time.
Participation in a meeting by these means shall constitute presence in person at
the meeting.
Section 9. Informal Action by Directors. Any action required or permitted
to be taken at any meeting of the Board of Directors may be taken without a
meeting, if a consent in writing to such action is signed by each director and
such written consent is filed with the minutes of proceedings of the Board of
Directors.
Section 10. Vacancies. If for any reason any or all the directors cease to
be directors, such event shall not terminate the Corporation or affect these
Bylaws or the powers of the remaining directors hereunder (even if fewer than
three directors remain). Any vacancy on the Board of Directors for any cause
other than an increase in the number of directors shall be filled by a majority
of the remaining directors, although such majority is less than a quorum. Any
vacancy in the number of directors created by an increase in the number of
directors may be filled by a majority vote of the entire Board of Directors. Any
individual so elected as director shall hold office for the unexpired term of
the director he is replacing.
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Section 11. Compensation. Directors shall not receive any stated salary for
their services as directors but, by resolution of the Board of Directors, fixed
sums per year and/or per meeting. Expenses of attendance, if any, may be allowed
to directors for attendance at each annual, regular or special meeting of the
Board of Directors or of any committee thereof; but nothing herein contained
shall be construed to preclude any directors from serving the Corporation in any
other capacity and receiving compensation therefor.
Section 12. Removal of Directors. The Stockholders may remove any director
for cause or without cause, in the manner provided in the Charter.
Section 13. Loss of Deposit. No director shall be liable for any loss which
may occur by reason of the failure of the bank, trust company, savings and loan
association, or other institution with whom moneys or stock have been deposited.
Section 14. Surety Bonds. Unless required by law, no director shall be
obligated to give any bond or surety or other security for the performance of
any of his duties.
Section 15. Reliance. Each director, officer, employee and agent of the
Corporation shall, in the performance of his duties with respect to the
Corporation, be fully justified and protected with regard to any act or failure
to act in reliance in good faith upon the books of account or other records of
the Corporation, upon an opinion of counsel or upon reports made to the
Corporation by any of its officers or employees or by the adviser, accountants,
appraisers or other experts or consultants selected by the Board of Directors or
officers of the Corporation, regardless of whether such counsel or expert may
also be a director.
Section 16. Certain Rights of Directors, Officers, Employees and Agents.
The directors shall have no responsibility to devote their full time to the
affairs of the Corporation. Any director or officer, employee or agent of the
Corporation, in his personal capacity or in a capacity as an affiliate,
employee, or agent of any other person, or otherwise, may have business
interests and engage in business activities similar to or in addition to those
of or relating to the Corporation.
ARTICLE IV
COMMITTEES
Section 1. Number, Tenure and Qualifications. The Board of Directors may
appoint from among its members an Executive Committee, an Audit Committee and
other committees, composed of two or more directors, to serve at the pleasure of
the Board of Directors.
Section 2. Powers. The Board of Directors may delegate to committees
appointed under Section 1 of this Article any of the powers of the Board of
Directors, except as prohibited by law.
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Section 3. Meetings. In the absence of any member of any such committee,
the members thereof present at any meeting, whether or not they constitute a
quorum, may appoint another director to act in the place of such absent member.
Section 4. Telephone Meetings. Members of a committee of the Board of
Directors may participate in a meeting by means of a conference telephone or
similar communications equipment if all persons participating in the meeting can
hear each other at the same time. Participation in a meeting by these means
shall constitute presence in person at the meeting.
Section 5. Informal Action by Committees. Any action required or permitted
to be taken at any meeting of a committee of the Board of Directors may be taken
without a meeting, if a consent in writing to such action is signed by each
member of the committee and such written consent is filed with the minutes of
proceedings of such committee.
ARTICLE V
OFFICERS
Section 1. General Provisions. The officers of the Corporation shall
include a chief executive officer, a president, a secretary and a treasurer and
may include a chairman of the board (or one or more co-chairmen of the board), a
vice chairman of the board, one or more vice presidents, a chief operating
officer, a chief financial officer, a treasurer, one or more assistant
secretaries and one or more assistant treasurers. In addition, the Board of
Directors may from time to time appoint such other officers with such powers and
duties as they shall deem necessary or desirable. The officers of the
Corporation shall be elected annually by the Board of Directors at the first
meeting of the Board of Directors held after each annual meeting of
stockholders, except that the chief executive officer may appoint one or more
vice presidents, assistant secretaries and assistant treasurers. If the election
of officers shall not be held at such meeting, such election shall be held as
soon thereafter as may be convenient. Each officer shall hold office until his
successor is elected and qualifies or until his death, resignation or removal in
the manner hereinafter provided. Any two or more offices except president and
vice president may be held by the same person. In its discretion, the Board of
Directors may leave unfilled any office except that of president, treasurer and
secretary. Election of an officer or agent shall not of itself create contract
rights between the Corporation and such officer or agent.
Section 2. Removal and Resignation. Any officer or agent of the Corporation
may be removed by the Board of Directors if in its judgment the best interests
of the Corporation would be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed. Any officer
of the Corporation may resign at any time by giving written notice of his
resignation to the Board of Directors, the chairman of the board (or any
co-chairman of the board if more than one), the president or the secretary. Any
resignation shall take effect at any time subsequent to the time specified
therein or, if the time when it shall become effective is not specified therein,
immediately upon its receipt. The acceptance of a resignation shall not be
necessary to make it effective unless otherwise stated in the resignation.
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Section 3. Vacancies. A vacancy in any office may be filled by the Board of
Directors for the balance of the term.
Section 4. Chief Executive Officer. The Board of Directors shall designate
a chief executive officer. In the absence of such designation, the chairman of
the board (or, if more than one, the co-chairmen of the board in the order
designated at the time of their election or, in the absence of any designation,
then in the order of their election) shall be the chief executive officer of the
Corporation. The chief executive officer shall have general responsibility for
implementation of the policies of the Corporation, as determined by the Board of
Directors, and for the management of the business and affairs of the
Corporation.
Section 5. Chief Operating Officer. The Board of Directors may designate a
chief operating officer. The chief operating officer shall have the
responsibilities and duties as set forth by the Board of Directors or the chief
executive officer.
Section 6. Chief Financial Officer. The Board of Directors may designate a
chief financial officer. The chief financial officer shall have the
responsibilities and duties as set forth by the Board of Directors or the chief
executive officer.
Section 7. Chairman of the Board. The Board of Directors shall designate a
chairman of the board (or one or more co-chairmen of the board). The chairman of
the board shall preside over the meetings of the Board of Directors and of the
stockholders at which he shall be present. If there be more than one, the
co-chairmen designated by the Board of Directors will perform such duties. The
chairman of the board shall perform such other duties as may be assigned to him
or them by the Board of Directors.
Section 8. President. The president or chief executive officer, as the case
may be, shall in general supervise and control all of the business and affairs
of the Corporation. In the absence of a designation of a chief operating officer
by the Board of Directors, the president shall be the chief operating officer.
He may execute any deed, mortgage, bond, contract or other instrument, except in
cases where the execution thereof shall be expressly delegated by the Board of
Directors or by these Bylaws to some other officer or agent of the Corporation
or shall be required by law to be otherwise executed; and in general shall
perform all duties incident to the office of president and such other duties as
may be prescribed by the Board of Directors from time to time.
Section 9. Vice President. In the absence of the president or in the event
of a vacancy in such office, the vice president (or in the event there be more
than one vice president, the vice presidents in the order designated at the time
of their election or, in the absence of any designation, then in the order of
their election) shall perform the duties of the president and when so acting
shall have all the powers of and be subject to all the restrictions upon the
president; and shall perform such other duties as from time to time may be
assigned to him by the president or by the Board of Directors. The Board of
Directors may designate one or more vice presidents as executive vice president
or as vice president for particular areas of responsibility.
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Section 10. Secretary. The secretary shall (a) keep the minutes of the
proceedings of the stockholders, the Board of Directors and committees of the
Board of Directors in one or more books provided for that purpose; (b) see that
all notices are duly given in accordance with the provisions of these Bylaws or
as required by law; (c) be custodian of the trust records and of the seal of the
Corporation; (d) keep a register of the post office address of each stockholder
which shall be furnished to the secretary by such stockholder; (e) have general
charge of the share transfer books of the Corporation; and (f) in general
perform such other duties as from time to time may be assigned to him by the
chief executive officer, the president or by the Board of Directors.
Section 11. Treasurer. The treasurer shall have the custody of the funds
and securities of the Corporation and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. In the absence of a designation of a chief financial officer by the
Board of Directors, the treasurer shall be the chief financial officer of the
Corporation.
The treasurer shall disburse the funds of the Corporation as may be ordered
by the Board of Directors, taking proper vouchers for such disbursements, and
shall render to the president and Board of Directors, at the regular meetings of
the Board of Directors or whenever it may so require, an account of all his
transactions as treasurer and of the financial condition of the Corporation.
If required by the Board of Directors, he shall give the Corporation a bond
in such sum and with such surety or sureties as shall be satisfactory to the
Board of Directors for the faithful performance of the duties of his office and
for the restoration to the Corporation, in case of his death, resignation,
retirement or removal from office, all books, papers, vouchers, moneys and other
property of whatever kind in his possession or under his control belonging to
the Corporation.
Section 12. Assistant Secretaries and Assistant Treasurers. The assistant
secretaries and assistant treasurers, in general, shall perform such duties as
shall be assigned to them by the secretary or treasurer, respectively, or by the
president or the Board of Directors. The assistant treasurers shall, if required
by the Board of Directors, give bonds for the faithful performance of their
duties in such sums and with such surety or sureties as shall be satisfactory to
the Board of Directors.
Section 13. Salaries. The salaries of the officers shall be fixed from time
to time by the Board of Directors and no officer shall be prevented from
receiving such salary by reason of the fact that he also a director.
ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. Contracts. The Board of Directors may authorize any officer or
agent to enter into any contract or to execute and deliver any instrument in the
name of and on behalf of
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Corporation and such authority may be general or confined to specific instances.
Any agreement, deed, mortgage, lease or other document executed by one or more
of the directors or by an authorized person shall be valid and binding upon the
Board of Directors and upon the Corporation when authorized or ratified by
action of the Board of Directors.
Section 2. Checks and Drafts. All checks, drafts or other orders for the
payment of money, notes or other evidences of indebtedness issued in the name of
the Corporation shall be signed by such officer or officers, agent or agents of
the Corporation and in such manner as shall from time to time be determined by
the Board of Directors.
Section 3. Deposits. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or other depositories as the Board of Directors may
designate.
ARTICLE VII
STOCK
Section 1. Certificates. Each stockholder shall be entitled to a
certificate or certificates which shall represent and certify the number of
shares of each class of stock held by him in the Corporation. Each certificate
shall be signed by the chief executive officer, the president or a vice
president and countersigned by the secretary or an assistant secretary or the
treasurer or an assistant treasurer and may be sealed with the seal, if any, of
the Corporation. The signatures may be either manual or facsimile. Certificates
shall be consecutively numbered; and if the Corporation shall, from time to
time, issue several classes of stock, each class may have its own number series.
A certificate is valid and may be issued whether or not an officer who signed it
is still an officer when it is issued. Each certificate representing shares
which are restricted as to their transferability or voting powers, which are
preferred or limited as to their dividends or as to their allocable portion of
the assets upon liquidation or which are redeemable at the option of the
Corporation, shall have a statement of such restriction, limitation, preference
or redemption provision, or a summary thereof, plainly stated on the
certificate. In lieu of such statement or summary, the Corporation may set forth
upon the face or back of the certificate a statement that the Corporation will
furnish to any stockholder, upon request and without charge, a full statement of
such information.
Section 2. Transfers. Upon surrender to the Corporation or the transfer
agent of the Corporation of a stock certificate duly endorsed or accompanied by
proper evidence of succession, assignment or authority to transfer, the
Corporation shall issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
The Corporation shall be entitled to treat the holder of record of any
share of stock as the holder in fact thereof and, accordingly, shall not be
bound to recognize any equitable or other claim to or interest in such share on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of the State of
Maryland.
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Notwithstanding the foregoing, transfers of shares of any class of stock
will be subject in all respects to the Charter and all of the terms and
conditions.
Section 3. Lost Certificate. The Board of Directors (or any officer
designated by it) may direct a new certificate to be issued in place of any
certificate previously issued by the Corporation alleged to have been lost,
stolen or destroyed upon the making of an affidavit of that fact by the person
claiming the certificate to be lost, stolen or destroyed. When authorizing the
issuance of a new certificate, the Board of Directors may, in its discretion and
as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed certificate or his legal representative to advertise
the same in such manner as they shall require and/or to give bond, with
sufficient surety, to the Corporation to indemnify it against any loss or claim
which may arise as a result of the issuance of a new certificate.
Section 4. Closing of Transfer Books or Fixing of Record Date. The Board of
Directors may set, in advance, a record date for the purpose of determining
stockholders entitled to notice of or to vote at any meeting of stockholders, or
stockholders entitled to receive payment of any dividend or the allotment of any
other rights, or in order to make a determination of stockholders for any other
proper purpose. Such date, in any case, shall not be prior to the close of
business on the day the record date is fixed and shall be not more than 90 days
and, in the case of a meeting of stockholders, not less than ten days, before
the date on which the meeting or particular action requiring such determination
of stockholders is to be held or taken.
In lieu of fixing a record date, the Board of Directors may provide that
the stock transfer books shall be closed for a stated period but not longer than
20 days. If the stock transfer books are closed for the purpose of determining
stockholders entitled to notice of or to vote at a meeting of stockholders, such
books shall be closed for at least ten days before the date of such meeting.
If no record date is fixed and the stock transfer books are not closed for
the determination of stockholders, (a) the record date for the determination of
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day on which the notice of meeting is mailed
or the 30th day before the meeting, whichever is the closer date to the meeting;
and (b) the record date for the determination of stockholders entitled to
receive payment of a dividend or an allotment of any other rights shall be the
close of business on the day on which the resolution of the directors, declaring
the dividend or allotment of rights, is adopted.
When a determination of stockholders entitled to vote at any meeting of
stockholders has been made as provided in this section, such determination shall
apply to any adjournment thereof, except where the determination has been made
through the closing of the transfer books and the stated period of closing has
expired.
Section 5. Stock Ledger. The Corporation shall maintain at its principal
office, or at the office of its counsel, accountants or transfer agent, an
original or duplicate share ledger
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containing the name and address of each stockholder and the number of shares of
each class held by such stockholder.
Section 6. Fractional Stock; Issuance of Units. The Board of Directors may
issue fractional stock or provide for the issuance of scrip, all on such terms
and under such conditions as they may determine. Notwithstanding any other
provision of the Charter or these Bylaws, the Board of Directors may issue units
consisting of different securities of the Corporation. Any security issued in a
unit shall have the same characteristics as any identical securities issued by
the Corporation, except that the Board of Directors may provide that for a
specified period securities of the Corporation issued in such unit may be
transferred on the books of the Corporation only in such unit.
ARTICLE VIII
ACCOUNTING YEAR
The Board of Directors shall have the power, from time to time, to fix the
fiscal year of the Corporation by a duly adopted resolution.
ARTICLE IX
DIVIDENDS
Section 1. Declaration. Dividends upon the stock of the Corporation may be
declared by the Board of Directors, subject to the provisions of law and the
Charter. Dividends may be paid in cash, property or stock of the Corporation,
subject to the provisions of law and the Charter.
Section 2. Contingencies. Before payment of any dividends, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the Board of Directors may from time to time, in its absolute
discretion, think proper as a reserve fund for contingencies, for equalizing
dividends, for repairing or maintaining any property of the Corporation or for
such other purpose as the Board of Directors shall determine to be in the best
interest of the Corporation, and the Board of Directors may modify or abolish
any such reserve in the manner in which it was created.
ARTICLE X
INVESTMENT POLICY
Subject to the provisions of the Charter, the Board of Directors may from
time to time adopt, amend, revise or terminate any policy or policies with
respect to investments by the Corporation as it shall deem appropriate in its
sole discretion.
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ARTICLE XI
SEAL
Section 1. Seal. The Board of Directors may authorize the adoption of a
seal by the Corporation. The seal shall have inscribed thereon the name of the
Corporation and the year of its organization. The Board of Directors may
authorize one or more duplicate seals and provide for the custody thereof.
Section 2. Affixing Seal. Whenever the Corporation is required to place its
seal to a document, it shall be sufficient to meet the requirements of any law,
rule or regulation relating to a seal to place the word "(SEAL)" adjacent to the
signature of the person authorized to execute the document on behalf of the
Corporation.
ARTICLE XII
INDEMNIFICATION
To the maximum extent permitted by Maryland law in effect from time to
time, the Corporation, without requiring a preliminary determination of the
ultimate entitlement to indemnification, shall indemnify and shall pay or
reimburse reasonable expenses in advance of final disposition of a proceeding to
(i) any individual who is a present or former director or officer of the
Corporation or (ii) any individual who, while a director of the Corporation and
at the request of the Corporation, serves or has served another corporation,
partnership, joint venture, trust, employee benefit plan or any other enterprise
as a director, officer, partner or trustee of such corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise. The Corporation
may, with the approval of its Board of Directors, provide such indemnification
and advancement of expenses to a person who served a predecessor of the
Corporation in any of the capacities described in (i) or (ii) above and to any
employee or agent of the Corporation or a predecessor of the Corporation.
Neither the amendment nor repeal of this Article, nor the adoption or
amendment of any other provision of these Bylaws or the Charter inconsistent
with this Article, shall apply to or affect in any respect the applicability of
the preceding paragraph with respect to any act or failure to act which occurred
prior to such amendment, repeal or adoption.
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ARTICLE XIII
WAIVER OF NOTICE
Whenever any notice is required to be given pursuant to the Charter or
these Bylaws or pursuant to applicable law, a waiver thereof in writing, signed
by the person or persons entitled to such notice, whether before or after the
time stated herein, shall be deemed equivalent to the giving of such notice.
Neither the business to be transacted at nor the purpose of any meeting need be
set forth in the waiver of notice, unless specifically required by statute. The
attendance of any person at any meeting shall constitute a waiver of notice of
such meeting, except where such person attends a meeting for the express purpose
of objecting to the transaction of any business on the ground that the meeting
is not lawfully called or convened.
ARTICLE XIV
AMENDMENT OF BYLAWS
The Board of Directors shall have the exclusive power to adopt, alter or
repeal any provision of these Bylaws and to make new Bylaws.
19
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0
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