-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Lr7AMHhbPvUXNVZJHGsw5mxSRW9WadLcQ6lM5mtdwO6IGUeqVisxlW8t8w1cW8K0 n6QF/KgnF7MPZ03gLRUK3A== 0000950164-98-000149.txt : 19981116 0000950164-98-000149.hdr.sgml : 19981116 ACCESSION NUMBER: 0000950164-98-000149 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST WASHINGTON REALTY TRUST INC CENTRAL INDEX KEY: 0000926861 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 521879972 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-14571 FILM NUMBER: 98748068 BUSINESS ADDRESS: STREET 1: 4350 EAST WEST HWY - STE 400 CITY: BETHESDA STATE: MD ZIP: 20814 BUSINESS PHONE: 3019077800 MAIL ADDRESS: STREET 1: 4350 EAST WEST HIGHWAY SUITE 400 STREET 2: 4350 EAST WEST HIGHWAY SUITE 400 CITY: BETHESDA STATE: MD ZIP: 20814 10-Q 1 FORM 10-Q 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 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 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 FIRST WASHINGTON REALTY TRUST, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited) -------
For three month For nine months ended September 30 September 30 ------------------- -------------------- 1998 1997 1998 1997 ---- ---- ---- ---- Revenues: 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 ======== ======== ======== ========
The accompanying notes are an integral part of these consolidated financial statements. 2 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 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 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 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:
Date Total Anchor Anchor Acquired Property Name Location GLA Cost Tenant (GLA) - -------- ------------- -------- --- ---- ------ ----- 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 ======= ======= =======
The acquisitions were financed as follows:
Number of Property Partnerships Market Assumed Mortgage Line of Credit Name Units Value Debt(1) Draw Cash Total ---- ----- ----- ------- ---- ---- ----- 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 ======= ======= ======= ======= ====== =======
- ------------- (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 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 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 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 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 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%. 11 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. 12 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. 13 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 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 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 EX-3 2 EXHIBIT 3.1 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 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. 2 (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 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 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 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 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 7 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 8 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 9 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. 10 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. 11 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. 12 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. 13 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 14 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. 15 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 16 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. 17 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. 18 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 EX-27 3 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-1998 SEP-30-1998 2,868 0 7,680 0 0 0 508,124 48,045 487,818 0 218,296 0 23 86 212,935 487,818 0 53,315 0 26,234 0 0 14,782 0 0 7,298 0 (358) 0 6,940 .89 .88
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