[FORM]
--------------------------------------------------------------------------------
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY
AMENDED AND RESTATED TRUST AGREEMENT
--------------------------------------------------------------------------------
This AMENDED AND RESTATED TRUST AGREEMENT is entered into as of _______ __,
1997 by and among the undersigned Trustees and those persons who become
Shareholders pursuant to the terms of this Trust Agreement. Capitalized terms
used but not defined shall have the meanings assigned to such terms in Article
2.
W I T N E S S E T H :
WHEREAS, certain of the Trustees have created a business trust in
accordance with applicable provisions of the Trust Act by entering into a Trust
Agreement, dated as of August 12, 1996, as amended by an Amendment No. 1 to
Trust Agreement dated as of April 30, 1997 (jointly, the "Original Trust
Agreement"), and by the filing with the Secretary of State of the State of
Delaware of a Certificate of Trust on August 12, 1996, as heretofore amended;
and
WHEREAS, the Trustees desire to amend and restate the Original Trust
Agreement in its entirety as provided herein; and
WHEREAS, the Trustees desire that the Trust qualify as a partnership for
federal income tax purposes under the Code.
NOW, THEREFORE, the Trustees hereby declare that all money and property
contributed to or otherwise owned or held by or on behalf of the Trust, together
with the proceeds thereof, shall be held and managed in trust for the benefit of
the Shareholders, subject to the provisions hereof.
1. ORGANIZATION
1.1 Name. The trust hereby created shall be known as Charter Municipal
Mortgage Acceptance Company in which name the Board of Trustees may conduct
business or any subsequent name as shall be selected by the Board of Trustees.
1.2 Business Offices. The principal office of the Trust, and such
additional offices as the Board of Trustees may determine to establish, shall be
located at such place or places inside or outside the State of Delaware as the
Board of Trustees may designate from time to time.
1.3 Declaration of Trust. The Board of Trustees hereby declares that they
will hold the Trust Property in trust upon and subject to the conditions set
forth herein for the use and
benefit of the Shareholders. It is the intention of the parties hereto that this
Trust Agreement and the Bylaws shall constitute the governing instruments of the
Trust.
2. DEFINITIONS AND GLOSSARY OF TERMS
The following terms used in this Trust Agreement shall (unless otherwise
expressly provided herein or unless the context otherwise requires) have the
following respective meanings:
"Adjusted Capital Account Deficit" shall have the meaning ascribed thereto
in Section 9.5.
"Adjusted Contribution" shall mean the capital contributions of any
Shareholder reduced by the total Distributions to such Shareholder from Capital
Events but excluding Distributions to such Shareholder attributable to gains, if
any, from Capital Events.
"Affiliate" of an Entity shall mean (i) any officer, director, partner,
employee or controlling shareholder of such Entity; (ii) any Person controlling,
controlled by or under common control with any Entity or any individual
described in (i) above; (iii) any officer, director, trustee, general partner or
employee of any Person described in (ii) above; and (iv) any Person who is a
member, other than as limited partner, with any individual described in (i) and
(ii) above in a relationship of joint venture, general partnership, or similar
form of unincorporated business association; provided however, that a partner in
a partnership or joint venture with (a) the Trust or (b) an Affiliate of a
Related Manager, shall not by virtue of such relationship be deemed an Affiliate
of a Related Manager. For purposes of this definition, the term "control" shall
also mean the control or ownership of 10% or more of the outstanding Voting
Securities of the Person referred to.
"Available Cash" shall mean, with respect to the applicable period of
measurement (i.e., any period beginning on the first day of the fiscal year,
quarter or other period commencing immediately after the last day of the fiscal
year, quarter or other applicable period for purposes of the prior calculation
of Available Cash for, or with respect to which, a Distribution has been made,
and ending on the last day of the fiscal year, quarter or other applicable
period immediately preceding the date of the calculation), the excess, if any,
as of such date, of
(a) the gross cash receipts of the Trust for such period from all
sources whatsoever, including, without limitation, the following:
(i) all interest and other revenues, income and proceeds derived
by the Trust from its operations, including, without limitation,
distributions received by the Trust from any Entity in which the Trust
has an interest;
2
(ii) all proceeds and revenues received by the Trust on account
of any sales of First Mortgage Bonds, Tax-Exempt Securities or other
property or assets of the Trust or as a refinancing of or payment of
principal, interest, costs, fees, penalties or otherwise on account of
any borrowings made by, or other leverage of, the Trust or financings
or refinancings of any asset of the Trust;
(iii) the amount of any insurance proceeds and condemnation
awards received by the Trust;
(iv) all capital contributions or loans received by the Trust
from its Shareholders;
(v) all Reserves previously set aside by the Trust, to the extent
such amounts are no longer needed for the specific purposes for which
such amounts were reserved; and
(vi) the proceeds of liquidation of the Trust's assets in
accordance with this Agreement;
over
(b) the sum of:
(i) all operating costs and expenses, including taxes and other
expenses of the assets directly and indirectly held by the Trust and
capital expenditures made during such period (without deduction,
however, for any capital expenditures, charges for depreciation or
other expenses not paid in cash or expenditures from Reserves
described in (vii) below);
(ii) all costs and expenses expended or paid during such period
in connection with the sale or other disposition, or financing or
refinancing, of the assets directly or indirectly held by the Trust or
the recovery of insurance or condemnation proceeds;
(iii) all fees and reimbursements provided for under this
Agreement;
(iv) all debt service, including principal and interest, paid
during such period on all indebtedness (including under any line of
credit) of the Trust;
(v) all capital contributions, advances, reimbursements or
similar payments made to any Person in which the Trust has an
interest;
3
(vi) all loans made by the Trust in accordance with the terms of
this Agreement; and
(vii) any new Reserves or increases in Reserves reasonably
determined by the Managing Trustees to be necessary for working
capital, capital improvements, payments of periodic expenditures, debt
service or other purposes for the Trust or any Person in which the
Trust has an interest.
"Board of Trustees" shall mean, collectively, the Managing Trustees named
in Section 3.1(b) so long as they continue in office, and all other individuals
who have been duly elected and qualify as Managing Trustees.
"Book Amortization" shall have the meaning ascribed thereto in Section 9.7.
"Book Depreciation" shall have the meaning ascribed thereto in Section 9.7.
"Book Disparity" shall have the meaning ascribed thereto in Section 9.7.
"Book Gain" shall have the meaning ascribed thereto in Section 9.7.
"Book Loss" shall have the meaning ascribed thereto in Section 9.7.
"Bylaws" shall mean the Bylaws of the Trust as adopted, and as amended or
restated from time to time, by the Board of Trustees pursuant to Section
10.2(b), which Bylaws are incorporated herein by reference and shall form a part
of the governing instrument of the Trust.
"Capital Account" shall have the meaning ascribed thereto in Section 9.4.
"Capital Event" shall mean any Trust transaction not in the ordinary course
of its business including, without limitation, principal payments, prepayments,
the incurrence of prepayment penalties, sales, exchanges, foreclosures or other
dispositions of assets directly or indirectly owned by the Trust, recoveries of
damage awards and insurance proceeds not used to rebuild (other than the receipt
of contributions to the capital of the Trust and business or rental interruption
insurance proceeds not used to rebuild).
"Cause" shall mean gross negligence or willful misconduct.
"Code" shall mean the Internal Revenue Code of 1986, as amended, or
corresponding provisions of subsequent revenue laws.
"Common Shares" shall mean any Shares classified or reclassified as such by
the Board of Trustees.
4
"Common Shareholder" shall mean any Person who holds Common Shares in its
capacity as a beneficial owner of the Trust including the Manager to the extent
it holds Common Shares.
"Consolidation Contribution" shall have the meaning ascribed thereto in
Section 9.4(c).
"control" (and its correlative forms) shall have the meaning ascribed to
such term under the Investment Company Act of 1940, as amended and in effect on
the date of this Agreement.
"Covered Person" shall have the meaning ascribed thereto in Section 10.9.
"Distributions" shall mean any cash distributed to Shareholders of Common
Shares arising from their interest in the Trust, but shall not include the
Special Distribution.
"Entity" shall mean any general partnership, limited partnership,
corporation, joint venture, trust, business trust, real estate investment trust,
limited liability company, cooperative or association.
"Final Ratio" shall have the meaning ascribed thereto in Section 9.6(c).
"First Mortgage Bonds" shall mean tax-exempt participating or
non-participating first mortgage bonds issued by various state or local
governments or their agencies or authorities.
"Fourth Anniversary" shall have the meaning ascribed thereto in Section
12.2(a).
"Incentive Share Option Plan" shall mean any Share option plan which may be
adopted from time to time by the Board of Trustees.
"Indemnified Party(ies)" shall have the meaning ascribed thereto in Section
14.1.
"Independent Trustees" shall mean those Managing Trustees who are not
officers or employees of the Trust; who are neither related to the Trust's
officers nor represent concentrated or family holdings of the Trust's voting
interests; and who, in the view of the Board of Trustees, are free of any
relationship that would interfere with the exercise of independent judgment with
respect to matters relating or pertaining to the affairs of the Trust.
"Liquidation Fee" shall have the meaning ascribed thereto in Article 8.
"Major Decisions" shall mean (i) the sale, mortgage, pledge or other
Transfer of joint venture assets owned by the Trust; (ii) the merger or
consolidation of any joint venture in which the Trust is a venturer with, or
conversion of such joint venture into, another Person; and (iii) the dissolution
or liquidation of such joint venture.
5
"Majority Vote" shall mean the affirmative vote of the holders of more than
50% of the outstanding Common Shares together with any other class or series of
Shares entitled to vote on the matter.
"Management Agreement" shall mean the agreement between the Trust and the
Manager, as amended from time to time, pursuant to which the Manager will be
engaged by the Trust to conduct the business and affairs of the Trust upon the
terms and conditions therein.
"Manager" shall mean such Person (including any Related Manager) to which
the Board of Trustees delegates the authority to conduct the business and
affairs of the Trust in all matters as set forth in the Management Agreement
with the Manager.
"Managing Trustees" shall mean the individuals named in Section 3.1(b) so
long as they continue in office, and all other individuals who have been duly
elected and qualify as trustees of the Trust hereunder, including the
Independent Trustees but not including the Registered Trustee.
"Mergers" shall have the meaning ascribed thereto in Section 11.3.
"Minority Position" shall mean a minority portion of a First Mortgage Bond,
which is subordinated to the credit position of the holders of the remaining
portions of such First Mortgage Bond.
"Mortgage Loan" shall mean the first mortgage and related mortgage loan on
an Underlying Property which has been financed with the proceeds of a First
Mortgage Bond.
"Net Income" or "Net Loss" shall mean for each fiscal year or other
applicable period, an amount equal to the Trust's taxable income or loss for
such year or period as determined for federal income tax purposes determined in
accordance with Section 703(a) of the Code (for this purpose, all items of
income, gain, loss or deduction required to be stated separately pursuant to
Section 703(a) of the Code shall be included in taxable income or loss), and (a)
by including as an item of gross income any tax-exempt income received by the
Trust and not otherwise taken into account in computing Net Income or Net Loss;
(b) by treating as a deductible expense any expenditure of the Trust described
in Section 705(a)(2)(B) of the Code (or which is treated as a Section
705(a)(2)(B) expenditure pursuant to Section 1.704-1(b)(2)(iv)(i) of the
Regulations) and not otherwise taken into account in computing Net Income or Net
Loss; and (c) by not taking into account in computing Net Income or Net Loss
items separately allocated to the Shareholders pursuant to the provisions of
Article 10 hereof. "Net Income" or "Net Loss" shall also include the Trust's
share of income or loss of any Entity which owns a particular First Mortgage
Bond or Tax-Exempt Security, as determined for federal income tax purposes.
"Original Trust Agreement" shall have the meaning ascribed thereto in the
Preamble.
"Partnerships" shall have the meaning ascribed thereto in Section 11.3.
6
"Percentage Interest" shall mean, as to a Common Shareholder, the
fractional part of the Common Shares owned by such Common Shareholder and
expressed as a percentage computed by dividing the Common Shares owned by such
Common Shareholder by the total number of issued and outstanding Common Shares.
"Person" shall mean an individual or Entity.
"Preferred Shares" shall mean any Shares classified or reclassified as such
by the Board of Trustees.
"Registered Trustee" shall mean Wilmington Trust Company, a Delaware
banking corporation, not in its individual capacity but solely as a trustee
hereunder, or any other Person which succeeds it in such capacity pursuant to
Section 15.2 and in compliance with Section 3807 of the Trust Act.
"Registered Trustee Person" shall have the meaning ascribed thereto in
Section 14.2.
"Related Management Agreement" shall have the meaning ascribed thereto in
Section 12.2(a).
"Related Manager" shall mean any Manager which is an Affiliate of Related
Capital Company, a New York general partnership, or any successor thereto.
"Reserves" shall mean the amount set aside by the Board of Trustees or the
Manager as reserves of the Trust for working capital and for repairs,
replacements, contingencies or other purposes.
"Shareholder" shall mean collectively, any Common Shareholder or any other
Person who holds Shares in its capacity as a beneficial owner of the Trust,
including the Manager to the extent it holds Shares.
"Shareholder Minimum Gain" shall mean an amount, with respect to each
Shareholder Nonrecourse Debt, equal to the Trust Minimum Gain (assuming, for
this purpose, that the Trust's only liability was the Shareholder Nonrecourse
Debt), that would result if such Shareholder Nonrecourse Debt were treated as a
nonrecourse liability, determined in accordance with Treas. Reg. [Section]
1.704-2(i)(3) and then aggregating the separately computed gains.
"Shareholder Nonrecourse Debt" shall have the meaning ascribed to "partner
nonrecourse debt" set forth in Treas. Reg. [Section] 1.704-2(b)(4).
"Shareholder Nonrecourse Deductions" shall have the meaning ascribed to
"partner nonrecourse deductions" set forth in Treas. Reg. [Section]
1.704-2(i)(2).
7
"Shares" shall mean the beneficial interests of a Shareholder in the Trust
representing undivided beneficial interests in the assets of the Trust, which
may be evidenced by Trust Certificates, including, without limitation, Common
Shares and Preferred Shares.
"SML" shall mean second mortgage loans advanced to obligors under a First
Mortgage Bond.
"Solicitation Statement" shall mean the Solicitation Statement of the Trust
dated June 18, 1997 pursuant to which the initial Common Shares were issued.
"Special Distribution" shall mean the distribution payable to a Related
Manager pursuant to Section 9.10.
"Substantially All of the Assets" shall mean First Mortgage Bonds and
Tax-Exempt Securities representing 66-2/3% or more of the net book value of all
of the Trust's assets as of the end of the most recently completed calendar
quarter.
"Taxable Tail" shall mean a taxable bond which funds certain costs
associated with the issuance of First Mortgage Bonds that cannot be funded by
the First Mortgage Bonds.
"Tax-Exempt Securities" shall mean securities, the income from which is
exempt from federal income taxation, which are rated not lower than A1 by
▇▇▇▇▇'▇ Investors Service, Inc. or A+ by Standard & Poor's Ratings Group, or are
unrated but which the Manager determines are of comparable quality.
"Terminating Capital Transaction" shall mean any sale or other disposition
of assets of the Trust in connection with a liquidation of the Trust.
"Total Invested Assets" shall mean the aggregate original amount invested
from time to time in mortgage investments and Tax-Exempt Securities (including
amounts which the Trust is committed to invest as part of a series or pursuant
to an installment funding obligation) reduced, upon the receipt of sale
proceeds, or insurance or guarantee proceeds or, by the original amount invested
in the mortgage investment or Tax-Exempt Securities which is not reinvested,
except that in the case of a partial prepayment, Total Invested Assets shall be
reduced on a pro rata basis to the extent not reinvested. Total Invested Assets
shall be calculated without regard to whether mortgage investments or Tax-Exempt
Securities are held by the Trust or other Persons (i) to whom the Trust has
Transferred such mortgage investments or Tax-Exempt Securities to facilitate
financing) or (ii) which retain the proceeds resulting from any such financing.
For purposes of the definition of Total Invested Assets, mortgage investments
include, without limitation, First Mortgage Bonds, SMLs and investments similar
to the foregoing.
"Total Market Value" shall mean the greater of (i) the sum of (a) the
aggregate market value of the Trust's outstanding Shares, and (b) the total
leverage of the Trust and (ii) the
8
aggregate value of the Trust's assets as determined by the Manager based upon
third-party or management appraisals and other criteria as the Board of Trustees
shall determine in its sole discretion.
"Transfer" shall mean sale, assignment, conveyance, transfer, gift, pledge,
hypothecation, mortgage, exchange or other disposition whether voluntary,
involuntary, by operation of law or otherwise.
"Trust" shall mean Charter Municipal Mortgage Acceptance Company.
"Trust Act" shall mean the Delaware Business Trust Act, 12 Del.C.
[Sections] 3801 et. seq., as amended from time to time, or the corresponding
provisions of any succeeding law.
"Trust Agreement" shall mean this Amended and Restated Trust Agreement,
dated as of ______ __, 1997 among the undersigned Trustees and those Persons who
become Shareholders pursuant to the terms of this Trust Agreement, as amended or
restated from time to time, and shall include the By-laws, as amended or
restated from time to time by the Board of Trustees.
"Trust Certificate" shall mean a certificate signed on behalf of the Trust
by a Trustee or the Manager, evidencing the Shares of a Shareholder in the
Trust.
"Trust Minimum Gain" shall mean the sum of the amounts determined by
computing with respect to each nonrecourse liability of the Trust, the amount of
gain (of whatever character), if any, that would be realized by the Trust if it
disposed (in a taxable transaction) of the Trust Property subject to such
liability for no consideration other than full satisfaction of such liability
and then aggregating the separately computed gains.
"Trust Property" shall mean all right, title and interest of the Trust in
and to any property contributed to the Trust by the Shareholders or otherwise
acquired by the Trust, including, without limitation, all distributions or
payments thereon or proceeds therefrom.
"Trustees" shall mean, collectively, the Managing Trustees and the
Registered Trustee.
"Underlying Properties" shall mean the properties which secure the
obligations under the Mortgage Loans, First Mortgage Bonds and other mortgage
investments.
"Voting Securities" shall have the meaning ascribed to such term under the
Investment Company Act of 1940, as amended and in effect on the date of this
Trust Agreement.
9
3. TRUSTEES; LEGAL TITLE
3.1 Managing Trustees.
(a) Number. There shall be not less than three nor more than nine
Managing Trustees, at least one-third of whom must be Independent Trustees.
Initially, the Trust shall have five Managing Trustees, which number may be
increased or decreased pursuant to the Bylaws, but shall never be less than the
minimum number, if any, required by the Trust Act nor more than nine.
(b) Initial Board of Trustees. The names of the initial Managing
Trustees are:
J. ▇▇▇▇▇▇▇ ▇▇▇▇▇ (Class III)
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (Class III)
▇▇▇▇ ▇. ▇▇▇▇▇▇ (Class II)
▇▇▇▇▇ ▇. ▇▇▇▇▇ (Independent Trustee) (Class I)
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (Independent Trustee) (Class I)
(c) Classes; Terms. The Board of Trustees shall be elected by the
Common Shareholders. The Managing Trustees (other than any Managing Trustee
elected solely by holders of one or more classes or series of Shares) shall be
classified, with respect to the terms for which they severally hold office, into
three classes, as nearly equal in number as possible, Class I to hold office
initially for a term expiring at the next succeeding annual meeting of
Shareholders, Class II to hold office initially for a term expiring at the
second succeeding annual meeting of Shareholders and Class III to hold office
initially for a term expiring at the third succeeding annual meeting of
Shareholders, with the members of each class to hold office until their
successors are duly elected and qualify. At each annual meeting of the
Shareholders, the successors to the class of Managing Trustees whose term
expires at such meeting shall be elected to hold office for a term expiring at
the annual meeting of Shareholders held in the third year following the year of
their election. The Managing Trustees may increase the number of Managing
Trustees and may fill any vacancy, whether resulting from an increase in the
number of Managing Trustees or otherwise, on the Board of Trustees occurring
before the first annual meeting of Shareholders in the manner provided in the
Bylaws.
(d) Removal of Managing Trustees. Subject to the rights of holders of
one or more classes or series of Shares to elect one or more Managing Trustees,
any Managing Trustee, or the entire Board of Trustees, may be removed from
office at any time, but only by Majority Vote; provided, however, that prior to
the Fourth Anniversary, such removal may only be for Cause.
(e) Resignation of Managing Trustees. Any Managing Trustee may resign
at any time by delivering his resignation in writing to the Board of Trustees,
to take effect at the
10
time specified in the resignation; the acceptance of a resignation, unless
required by its terms, shall not be necessary to make it effective.
3.2 Registered Trustee.
(a) Initial Registered Trustee; Powers. The Registered Trustee has
been appointed as trustee and joined as a party hereunder for the sole and
limited purpose of fulfilling the requirements of Section 3807 of the Trust Act.
In the event of the resignation or removal of the Registered Trustee, the Board
of Trustees shall appoint a successor Registered Trustee in accordance with
Section 15.2.
The Registered Trustee shall be responsible for performing only the
following duties with respect to the Trust: (i) to execute, deliver, acknowledge
and file any certificates of trust and any amendments thereto required to be
filed pursuant to applicable law, (ii) to execute any Trust Certificates (or
other certificates of the Trust) representing Shares issued to Shareholders if
reasonably requested to do so by written instruction from the Board of Trustees,
(iii) to execute any duly adopted amendments to this Trust Agreement and (iv) to
execute, deliver, acknowledge and file any certificates of cancellation required
to be filed pursuant to applicable law. The Board of Trustees or the Manager
shall keep the Registered Trustee reasonably informed of any actions of the
Board of Trustees or the Manager or other circumstances that could affect the
rights, duties or liabilities of the Registered Trustee. The Registered Trustee
shall have no other authority, duties or liabilities. The Registered Trustee has
no responsibility for monitoring the conduct of the Board of Trustees or the
Manager or causing the Board of Trustees or the Manager, or any other Person to
discharge their respective duties under this Trust Agreement, the Bylaws or the
Management Agreement, and the Registered Trustee shall have no liability for the
acts and omissions of the Trust, the Board of Trustees or the Manager.
(b) Compensation and Expenses of Registered Trustee. The Registered
Trustee shall be entitled to receive from the Trust reasonable compensation for
its services hereunder, as shall be agreed to from time to time by the Board of
Trustees and the Registered Trustee, and the Registered Trustee shall be
entitled to be reimbursed by the Trust for reasonable out-of-pocket expenses
incurred by the Registered Trustee in the performance of its duties hereunder.
(c) The Registered Trustee shall have a lien on the assets of the
Trust for any compensation or expenses and indemnity due to the Registered
Trustee by the Trust, which lien shall be prior to all other liens. The parties
hereto hereby approve and ratify the Trust's execution, delivery and performance
of the Fee Agreement, dated as of July 25, 1997, by and between the Registered
Trustee and the Trust.
3.3 Legal Title. Legal title to all Trust Property shall be vested in the
Trust, except that the Board of Trustees may cause legal title to any Trust
Property to be held by or in the name
11
of any Managing Trustee or any other Person as nominee. Written evidence of the
qualification and acceptance of election or appointment of successor and
additional Managing Trustees may be filed with the records of the Trust and in
such other offices, agencies or places as the Board of Trustees may deem
necessary or desirable. To the fullest extent permitted by law, no Shareholder
shall be deemed to have a severable ownership interest in any individual asset
of the Trust or any right of partition or possession thereof.
4. PURPOSES
The purposes of the Trust shall be, as determined from time to time by the
Board of Trustees, to engage in any lawful business or activity for which a
business trust may be created under the Trust Act.
5. TERM
The Trust commenced on August 12, 1996, and shall have perpetual existence,
unless earlier terminated in accordance with the provisions of this Trust
Agreement or the Bylaws.
6. SHAREHOLDERS; SHARES
6.1 Authorization of Shares. The Trust is authorized to issue 50,000,000
Shares. Notwithstanding anything to the contrary set forth in this Trust
Agreement (except for the immediately preceding sentence) and without any
express or implied limitation on the authority of the Trust, and the Board of
Trustees on behalf of the Trust, to issue additional Shares, the Trust is
authorized (i) to issue any or all Shares necessary or desirable to consummate
the Consolidation (as defined in the Solicitation Statement), including, without
limitation, to consummate Mergers, (ii) to issue any or all Shares necessary or
desirable in connection with the settlement of the Litigation (as defined in the
Solicitation Statement), and (iii) to issue any or all Shares upon exercise of
options granted by the Board of Trustees or to be granted pursuant to an
Incentive Share Option Plan upon payment in accordance with the terms of the
Incentive Share Option Plan or other plans. Shareholders have no preemptive or
other similar rights with respect to the issuance of Shares.
6.2 Common Shares. Each Common Share shall entitle the holder thereof to
one vote. The Board of Trustees may reclassify any unissued Common Shares from
time to time in one or more classes or series of beneficial interests.
6.3 Preferred Shares. Preferred Shares shall not entitle the holder
thereof to vote unless the Board of Trustees, in its sole discretion, determines
to grant voting rights to holders of Preferred Shares. The Board of Trustees may
classify any unissued Preferred Shares and reclassify any previously classified
but unissued Preferred Shares of any series from time to time, in one or more
series of beneficial interests in the Trust.
12
6.4 Classified or Reclassified Shares. Prior to issuance of classified or
reclassified Shares of any class or series, the Board of Trustees by resolution
shall: (a) designate that class or series to distinguish it from all other
classes and series of Shares of the Trust; (b) specify the number of Shares to
be included in the class or series; and (c) set or change, subject to the
express terms of any class or series of Shares of the Trust outstanding at the
time, the preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends or other distributions, qualifications and terms and
conditions of redemption for each class or series.
6.5 Trust Agreement and Bylaws. All Persons who shall acquire Shares in
the Trust shall acquire the same subject to the provisions of this Trust
Agreement and the Bylaws and shall be bound by the terms and provisions of this
Trust Agreement and Bylaws.
6.6 Effective Date of Transfer of Shares. The effective date for the
recognition of transfers of Shares, and the identification of the Person
entitled to be treated as the Shareholder at any given time, shall be determined
as follows:
(a) for purposes of Article 9 and any other provision of this Trust
Agreement which relates to the allocation or apportionment of Net Income, Net
Loss or Distributions, the Person entitled to be recognized as the Shareholder
shall be determined in accordance with the provisions of Section 9.2; and
(b) for all purposes other than those set forth in Section 6.6(a),
the Person entitled to be recognized as the Shareholder shall be the Person who
is then listed as the record owner of the Shares on the books and records of the
Trust.
7. LIABILITY OF THE SHAREHOLDERS; REGISTERED TRUSTEE; MANAGING TRUSTEES;
EMPLOYEES; MANAGER
7.1 Shareholders. The Shareholders shall be entitled to the same
limitation of personal liability extended to stockholders of private
corporations for profit organized under the General Corporation Law of the State
of Delaware. If and to the extent required by Delaware law, a Shareholder may,
under certain circumstances, be required to return to the Trust for the benefit
of Trust creditors, amounts previously distributed to him.
7.2 Registered Trustee. The Registered Trustee shall not be liable to the
Trust, Shareholders, the Trustees or any other Person or third parties for any
act, omission or obligation of the Trust, the Board of Trustees, any
Shareholder, the Registered Trustee or the Manager, under any circumstance,
except for any loss directly attributable to its own gross negligence or willful
misconduct. In particular, but not by way of limitation:
(a) The Registered Trustee shall not be liable for any error of
judgment made which did not constitute gross negligence or willful
misconduct by it;
13
(b) No provision of this Trust Agreement shall require the Registered
Trustee to take any action, to expend or risk its personal funds or
otherwise incur any financial liability in the performance of its rights,
powers or obligations hereunder, if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such
action, risk or liability is not reasonably assured or provided to it;
(c) Under no circumstance shall the Registered Trustee be personally
liable for any representation, warranty, covenant or other obligation or
indebtedness of the Trust;
(d) The Registered Trustee shall not be personally responsible for or
in respect of the validity or sufficiency of this Trust Agreement, or the
form, validity, value or sufficiency of the Trust Property;
(e) The Registered Trustee shall not be personally liable for its
good faith reliance on the provisions of this Trust Agreement;
(f) Under no circumstances shall the Registered Trustee be personally
liable for (i) any action it takes or omits to take in good faith in
accordance with the instruction of the Board of Trustees or the Manager,
(ii) the acts or omissions of the Board of Trustees or the Manager or (iii)
the supervision of or the failure of the Board of Trustees or the Manager
to discharge their respective duties hereunder or pursuant to the
Management Agreement; and
(g) The Registered Trustee shall not incur any liability to anyone in
acting upon any document believed in good faith by it to be genuine and
believed in good faith by it to be signed by the proper party or parties
and need not investigate any fact or matter pertaining to or in any such
document. The Registered Trustee may accept a certified copy of a
resolution of the board of directors or other governing body of any Person
as conclusive evidence that such resolution has been duly adopted by such
Person and that the same is in full force and effect. As to any fact or
matter, the method of the determination of which is not specifically
prescribed herein, the Registered Trustee may for all purposes hereof rely
on a certificate, signed by any officer of the relevant Person, as to such
fact or matter, and such certificate shall constitute full protection to
the Registered Trustee for any action taken or omitted to be taken by it in
good faith in reliance thereon.
7.3 Managing Trustees; Employees. A Managing Trustee or employee of the
Trust, when acting in such respective capacities, shall not be personally liable
to any Person other than the Trust or a Shareholder for any act, omission or
obligation of the Trust, the Registered Trustee, the Manager or any Managing
Trustee. To the maximum extent that Delaware law in effect from time to time
permits limitation of the liability of trustees of a business trust, no Managing
Trustee shall be liable to the Trust or to any Shareholder for monetary damages
for
14
breach of any duty (including, without limitation, fiduciary duty) as a Managing
Trustee, except (i) for acts or omissions of such Managing Trustee that involve
actual fraud or willful misconduct, or (ii) for any transaction from which such
Managing Trustee derived improper personal benefit. Neither the amendment nor
repeal of this Section 7.3 nor the adoption or amendment of any other provision
of this Trust Agreement inconsistent with this Section 7.3 shall apply to or
affect in any respect the applicability of the immediately preceding sentence
with respect to any act or failure to act that occurred prior to such amendment,
repeal or adoption.
7.4 Reliance on Agents, Attorneys, Etc. In the exercise of their rights
and obligations hereunder, the Registered Trustee and the Managing Trustees (i)
may act directly, or at the expense of the Trust, through agents (including,
without limitation, a Related Manager) or attorneys pursuant to agreements
entered into with any of them, and they shall not be liable for the default or
misconduct of such agents or attorneys if such agent or attorney shall have been
selected in good faith and (ii) may, at the expense of the Trust, consult with
counsel to be selected in good faith, and employed by them, and shall not be
liable for anything done, suffered or omitted in good faith in accordance with
the advice or opinion of any such counsel.
7.5 Manager. In the event that, immediately prior to the dissolution of
the Trust referred to in Section 12.3, the Manager[, in its capacity as
Shareholder,] shall have a deficiency in its Capital Account as determined in
accordance with tax accounting principles, then the Manager shall contribute in
cash to the capital of the Trust an amount equal to whichever is the lesser of
(a) the deficiency in the Manager's Capital Account or (b) the excess of 1.01%
of the total Consolidation Contributions over the total capital contribution of
the Manager.
8. COMPENSATION TO A RELATED MANAGER AND ITS AFFILIATES
If the Trust retains a Manager pursuant to Section 10.2(h) to manage the
day-to-day affairs of the Trust which is a Related Manager, the fees payable by
the Trust (except as otherwise provided) to such Related Manager or its
designees shall not exceed the following:
Fee/Compensation Amount
---------------- ------
Bond Selection Fee: 2.0% of the principal amount of each First
Mortgage Bond and other tax-exempt instrument
originated or acquired by the Trust, its
subsidiaries or other Persons which holds, or
to whom the Trust or its subsidiaries has
Transferred, such First Mortgage Bond or other
tax-exempt instrument to facilitate financing.
Bond Placement Fee: 2.0% of the principal amount of each First
Mortgage Bond and other tax-exempt instrument
originated or acquired by the Trust, its
subsidiaries or other Persons which holds, or
15
to whom the Trust or its subsidiaries has
Transferred, such First Mortgage Bond or other
tax-exempt instrument to facilitate financing
(payable by the borrower, and not the Trust or
its subsidiaries).
Special Distributions: .375% per annum of Total Invested Assets of the
Trust and its subsidiaries.
Shareholder Distributions: Related Manager shall be entitled to receive
distributions from the Trust or its
subsidiaries in respect of any Shares it holds.
Loan Servicing Fees: .25% per annum of the outstanding principal
amount of First Mortgage Bonds and other
mortgage investments held by the Trust, its
subsidiaries or other Persons which holds, or
to whom the Trust or its subsidiaries has
Transferred, such First Mortgage Bonds or other
mortgage investments to facilitate financing.
Operating Expense For direct expenses incurred by the Related
Reimbursement: Manager in an amount not to exceed $200,000 per
annum subject to (i) annual increases after the
Trust's first 12 months of operations and each
year thereafter based upon increases in the
Consumer Price Index for All Urban Consumers,
N.Y., N.Y. - Northeastern N.J. (Base Year
1982-1984 = 100) specified for "All Items" as
issued by the Bureau of Labor Statistics, U.S.
Department of Labor (or comparable substitute
index) and (ii) proportionately as the Trust's
assets increase based upon the amount of Total
Invested Assets of the Trust from time to time.
Incentive Share Options: Related Manager may receive options to acquire
additional Shares pursuant to the Trust's share
option plan only on the following basis:
Commencement: No options may be granted until six months
after the Trust's Shares have begun to trade.
Administration: Compensation Committee comprised only of two or
more Independent Trustees.
16
Number of Options: Maximum over life of plan - [2,058,638] options
for Common Shares. [10% of Common Shares
outstanding on the date of reorganization.]
Maximum each calendar year - 3% of Shares
outstanding as of the end of the prior year
([617,591] options for the Trust's first
calendar year). Any Common Shares available for
grant of options, but for which options are not
granted, in previous years, may be carried over
for grant in a subsequent year.
Exercise Price: Equal to or greater than fair market value on
date of grant.
Conditions to Compensation Committee may only grant options
Issuance: in a given year if the dividend per Common
Share for the year prior to the grant year
exceeds $.____ per Share [the pro forma
dividend per Share set forth in the Information
Statement]
Maximum Option 10 years.
Term:
Liquidation Fee: 1.50% of the gross sales price of the assets
sold by the Trust, its subsidiaries or other
Persons which holds, or to whom the Trust has
Transferred, such assets in connection with a
liquidation of the Trust's directly or
indirectly owned assets.
Miscellaneous: Related Manager may also earn miscellaneous
compensation which may include, without
limitation, construction fees, escrow interest,
property management fees, leasing commissions
and insurance brokerage fees. The payment of
any such compensation by the Trust shall be
limited to the competitive rate for the
services being performed.
9. ALLOCATION OF INCOME, LOSS AND DISTRIBUTIONS
9.1 Allocations. That portion of Net Income, Net Loss and Available Cash
shall be allocated in the manner hereinafter provided.
9.2 Apportionment Among Shareholders of Net Income, Net Loss and
Distributions Generally.
17
(a) Non-Capital Events. Net Income, Net Loss and Distributions, other
than Net Income, Net Loss and Distributions attributable to a Capital
Event, allocated to the Shareholders shall be apportioned each calendar
quarter among the Persons who were Shareholders of record on the last day
of each calendar quarter in accordance with their Percentage Interests
based upon the number of Shares owned by each such Shareholder on the last
day of such calendar quarter without regard to Capital Accounts or the
number of days during such calendar quarter in which a Person was a
Shareholder.
(b) Capital Events. That portion of Distributions attributable to a
Capital Event and allocations of Net Income and Net Loss from a Capital
Event which is allocated to the Shareholders shall be apportioned among the
Persons who were Shareholders of record on the date on which the Trust
received the proceeds of such Capital Event in accordance with their
Percentage Interests based upon the number of Shares owned by each such
Shareholder on that date.
9.3 Consent to Methods. The methods set forth in this Article 9 by which
Distributions and allocations of Net Income and Net Loss are made and
apportioned are hereby expressly consented to by each Shareholder as an express
condition to becoming an Shareholder.
9.4 Capital Accounts.
(a) General. A separate capital account ("Capital Account") shall be
maintained for each Shareholder in accordance with this Section 9.4. Each
Shareholder's Capital Account shall be increased by (1) the amount of money
contributed, or deemed contributed, by such Shareholder to the capital of
the Trust; and (2) such Shareholder's share of Trust Net Income. Each
Shareholder's Capital Account shall be decreased by (i) the amount of
Distributions to such Shareholder and (ii) such Shareholder's share of Net
Loss for federal income tax purposes.
(b) Multiple Class or Series of Interests. A Shareholder who has
Shares which represent more than one class or series of interests in the
Trust shall have a single Capital Account that reflects all such interests,
regardless of the class of interests owned by such Shareholder and
regardless of the time or manner in which such interests were acquired.
(c) Contributions of Property. In the event that property (other than
cash) is contributed (or deemed contributed pursuant to the provisions of
Code Section 708) by a Shareholder to the Trust, including the contribution
of a Shareholder's interest in Summit Tax Exempt Bond Fund, L.P., Summit
Tax Exempt ▇.▇. ▇▇, and/or Summit Tax Exempt L.P. III to the Trust pursuant
to the Solicitation Statement (the "Consolidation Contribution"), the
computation of Capital Accounts, as set forth in this Section 9.4, shall be
adjusted as follows:
18
(i) the contributing Shareholder's Capital Account shall be
increased by the fair market value of the property contributed to the
Trust by such Shareholder (net of liabilities securing such
contributed property that the Trust is considered to assume or take
subject to under Code Section 752); and
(ii) as required by Treas. Reg. [Sections] 1.704-1(b)(2)(iv)(g)
and 1.704-1(b)(4)(i), if any Shareholder's Capital Account reflects a
fair market value for property which differs from such property's
adjusted basis, each Shareholder's Capital Account shall be adjusted
to take account of the amount of Book Gain and Book Loss, as defined
below, allocated to such Shareholder pursuant to Section 9.7 hereof
and shall not take into account the Net Income and Net Loss for tax
purposes allocated to such Shareholder pursuant to this Article 9.
(d) Distributions of Property. In the event that property is
distributed (or deemed distributed pursuant to the provisions of Code
Section 708) by the Trust to a Shareholder, the following special rules
shall apply:
(iii) the Capital Account of the Shareholder receiving the
distribution first shall be adjusted (as provided in Treas. Reg.
[Section] 1.704-1(b)(2)(iv)(e)) to reflect the manner in which the
unrealized income, gain, loss and deduction inherent in such property
(that has not already been reflected in such Shareholder's Capital
Account) would be allocated to such Shareholder if there were a
taxable disposition of such Shareholder for its fair market value on
the date of distribution; and
(iv) the Capital Account of the Shareholder who is receiving the
distribution of property from the Trust shall be charged with the fair
market value of the property at the time of distribution (net of
liabilities secured by such property that such Shareholder is
considered to assume or take subject to under Code Section 752).
(e) Intention. The foregoing provisions are intended to satisfy the
capital account maintenance requirements of Treas. Reg. [Sections]
1.704-1(b) and 1.704-2 and such provisions shall be modified to the extent
required by such section or any successor provision thereto.
9.5 Allocations Causing Negative Capital Accounts. Notwithstanding Section
9.2, to the extent that any allocation of Net Loss to a Shareholder would reduce
such Shareholder's capital account balance (determined after taking into account
all prior distributions and all prior allocations of Net Income and Net Loss)
below zero or would increase the negative balance in such Shareholder's capital
account at a time when another Shareholder has a positive capital account
balance, such Net Loss shall instead be allocated pro rata to Shareholders
having positive capital account balances in proportion to their respective
positive capital account
19
balances until such capital account balances are reduced to zero, provided,
however, that in no event shall there be a reallocation of any item of income,
gain, loss or deduction allocated among the Shareholders pursuant to this Trust
Agreement for prior years.
If the provisions of this Section 9.5 prohibit the allocation of any
portion of Net Loss to every Shareholder, such portion of the Net Loss shall
instead be allocated to the Manager.
For purposes of determining a Shareholder's Capital Account balance under
this Section 9.5, Distributions made prior to or contemporaneous with any
allocation to a Shareholder shall be reflected in such Shareholder's capital
account prior to making such allocation to such Shareholder. For purposes of
this Section 9.5, a Shareholder's Capital Account shall be reduced for:
(x) allocations of Net Loss (or items thereof) which, as of the end of
each Trust year, are reasonably expected to be allocated to such
Shareholder pursuant to Code Section 704(e)(2), Code Section 706(d) and
Treas. Reg. [Section] 1.751-1(b)(2)(ii); and
(y) Distributions that, as of the end of such year, reasonably are
expected to be made to such Shareholder to the extent they exceed
offsetting increases to such Shareholder's Capital Account that reasonably
are expected to occur during (or prior to) the Trust taxable years in which
such Distributions reasonably are expected to be made.
For purposes of determining the amount of expected Distributions and
expected Capital Account increases described in (y) above: (A) the rule set
forth in Treas. Reg. [Section] 1.704- 1(b)(2)(iii)(c) concerning the presumed
value of property shall apply, and (B) gross income or Net Income allocated to a
Shareholder pursuant to Section 9.9 hereof shall be taken into account. For
purposes of this Section 9.5 and Section 9.9, a Shareholder's Capital Account
shall be increased (i) to the extent that such Shareholder is obligated to fund
deficits in such Shareholder's Capital Account upon liquidation of the Trust (or
is treated as obligated to so restore such deficits pursuant to Treas. Reg.
[Section] 1.704-1(b)(2)(ii)(c)), and (ii) to the extent of such Shareholder's
share of any Trust Minimum Gain and Shareholder Minimum Gain remaining at the
close of the fiscal period in respect of which such allocations are being made.
A Capital Account which has a negative balance after adjustment in accordance
with clauses (i) and (ii) shall be referred to as an "Adjusted Capital Account
Deficit."
9.6 Allocation of Net Income and Net Loss.
(a) General.
(i) First, Net Income (and, if necessary gross income), other
than Net Income arising in connection with a Terminating Capital
Transaction), shall be allocated to the Manager in an amount equal to
the amount distributed to the Manager pursuant to Section 9.10.
hereof; and
20
(ii) Second, except as otherwise provided in Sections 9.5, 9.8,
and 9.9 in each year Net Income and Net Loss remaining after the
allocations made pursuant to the provisions of Section 9.6.(a), other
than Net Income and Net Loss arising in connection with a Terminating
Capital Transaction, shall be allocated to the Shareholders in
accordance with their Percentage Interests; provided, however, that if
the Manager's Percentage Interest is less than 1%, the Manager, after
taking into account the allocations required by Section 9.5,
9.6(a)(i), 9.8 and 9.9, shall be allocated 1% of such Net Income and
Net Loss.
(b) Terminating Capital Transaction. Allocations of Net Income or Net
Loss (or items thereof) in connection with a Terminating Capital
Transaction or liquidation of the Trust shall first be made so that, to the
extent possible, each Shareholder's Capital Account balance is equal to
such Shareholder's Adjusted Contribution, and the remainder of such Net
Income or Net Loss (or items thereof) shall, subject to the provisions of
Section 9.5, be allocated to the Shareholders in accordance with their
Percentage Interests.
(c) Final Ratio. It is intended that the allocation provisions of this
Article 9 shall result in final positive Capital Account balances of the
Shareholders under Section 12.3 hereof which are initially equal to each
Shareholder's Adjusted Contribution and are then in proportion to the
Shareholders' respective Percentage Interests (the "Final Ratio"). To the
extent that such final positive Capital Account balances are not in the
Final Ratio, income and loss of the Partnership for the current year and
future years, as computed for book purposes, shall be allocated among the
Shareholders so as to result in final positive Capital Account balances
which are in the Final Ratio. This Section 9.6.(c) shall control
notwithstanding any reallocation of income, loss, or items thereof, as
computed for book purposes, by the Internal Revenue Service or any other
taxing authority.
9.7 Allocation of Book Items. In cases where property of the Trust is,
under Treas. Reg. [Section] 1.704-1(b)(2)(iv)(g), properly reflected in the
capital accounts of the Shareholders at a fair market value that differs from
the adjusted tax basis of such property (such difference is hereinafter referred
to as the "Book Disparity"), then depreciation, amortization and gain or loss as
computed for book purposes with respect to such property ("Book Depreciation,"
"Book Amortization," and "Book Gain," and "Book Loss," respectively) will be
greater or less than the depreciation, amortization or gain or loss as computed
for tax purposes. The Manager shall adopt, pursuant to Treas. Reg. [Section]
1.704-1(b)(2)(iv)(g), a reasonable method of computing Book Depreciation and
Book Amortization. Such Book Depreciation and Book Amortization shall be
allocated among the Shareholders and reflected in the Shareholders' capital
accounts under Section 9.4 hereof, in a manner so as to eliminate to the extent
possible, the Book Disparity.
9.8 Mandatory Allocations. Any allocation of Net Income or Net Loss for
tax purposes which is required to be allocated among the Shareholders to take
into account the
21
disparity between the fair market value of a Trust asset and its adjusted basis
(e.g., allocations under Code Section 704(c) for contributed property) shall be
allocated among the Shareholders in accordance with the requirements of the Code
and the regulations promulgated thereunder.
9.9 Minimum Gain Chargeback and Qualified Income Offset.
(a) Minimum Gain Chargeback. Notwithstanding any other provision of
this Agreement to the contrary, in the event there is a net decrease in a
Shareholder's share of Trust Minimum Gain and/or Shareholder Minimum Gain
during a Trust taxable year, such Shareholder shall be allocated items of
income and gain for that year (and if necessary, other years) as required
by and in accordance with Regulations Sections 1.704- 2(f)(1) and
1.704-2(i)(4) before any other allocation is made. This subsection 9.9(a)
is intended to constitute a "minimum gain chargeback" under Treas. Reg.
[Section] 1.704-2(f)(1) and 1.704-2(i)(4).
(b) Qualified Income Offset. In the event a Shareholder unexpectedly
receives any adjustments, allocations or distributions described in Treas.
Reg. [Sections] 1.704- 1(b)(2)(ii)(d)(4), (5) or (6), and such Shareholder
has an Adjusted Capital Account Deficit, items of Trust income (including
gross income) and gain shall be specially allocated to such Shareholder in
an amount and manner sufficient to eliminate the Adjusted Capital Account
Deficit as quickly as possible. This subsection 9.9.(b) is intended to
constitute a "qualified income offset" under Treas. Reg. [Section]
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
(c) Other Chargeback of Impermissible Negative Capital Account. To the
extent any Shareholder has an Adjusted Capital Account Deficit at the end
of any Trust fiscal year, each such Shareholder shall be specially
allocated items of Trust income (including gross income) and gain in the
amount of such excess as quickly as possible, provided that an allocation
pursuant to this subsection 9.9.(c) shall be made if and only to the extent
that such Shareholder would have an Adjusted Capital Account Deficit in
excess of such sum after all other allocations provided for in this Article
9 have been tentatively made as if this subsection 9.9.(c) were not in the
Agreement.
9.10 Distributions. The Manager shall be entitled to receive a Special
Distribution equal to .375% per annum of Total Invested Assets from the date of
investment, payable quarterly. After payment of the Special Distribution,
Distributions shall be made to the Shareholders in accordance with their
Percentage Interests.
9.11 Manager's Interest. Except as otherwise provided in Sections 9.5, 9.8
and 9.9, the Manager shall be allocated no less than an aggregate of 1% of Net
Income or Net Loss for federal and state income tax purposes or such lesser
amount as shall permit the Trust to be treated as a partnership for federal and
state income tax purposes.
22
9.12 Deductions of Manager. Except as otherwise provided in this Section
9.12, to the extent that the Trust shall be entitled to any deduction for
federal income tax purposes as a result of any amounts paid as Distributions to
the Manager, such deduction shall be allocated for federal income tax purposes
to the Manager. The preceding sentence shall not apply to the extent the Trust
is entitled to a deduction by reason of any distribution made to the Manager
pursuant to Section 9.10, which deduction shall be allocated to the
Shareholders, subject only to the other limitations on allocations of Net Loss
or deduction contained in this Article 9.
9.13 Restrictions.
(a) General. The Trust may be restricted under Delaware law from
making Distributions under certain circumstances, as well as under the
terms of notes, mortgages or other types of financing obligations which it
may issue or assume in conjunction with borrowed funds, if any. In
addition, Distributions are subject to the payment of Trust expenses and to
the maintenance of sufficient Reserves. Distributions may also be
restricted or suspended in circumstances when the Manager determines, in
its absolute discretion, that such action is in the best interest of the
Trust.
(b) Withholding Tax. As security for any withholding tax or other
liability or obligation (or reduced deduction for federal income tax
purposes) to which the Trust may be subject as a result of any act or
status of any Shareholder or to which the Trust becomes subject with
respect to any Shares, the Trust shall have, and there is hereby granted to
the Trust, a security interest in all Available Cash distributable to such
Shareholder or with respect to such Shares, to the extent of the amount of
such withholding tax or other liability or obligation or the cost to the
other Shareholders of any reduced deduction of the Trust (as reasonably
determined by the Manager). The Trust shall have a right of set-off against
any such Distributions of Available Cash in the amount of such withholding
tax or other liability or obligation or the cost of such reduced deduction.
For purposes of this Trust Agreement, any amount of federal, state or local
tax required to be withheld by the Trust with respect to any amount
distributable by the Trust to any Shareholder shall be deemed to be a
Distribution to such Shareholder and shall reduce the amount otherwise
distributable to such Shareholder under this Agreement.
10. BOARD OF TRUSTEES
10.1 General. Subject to the express limitations herein or in the Bylaws,
(a) the business and affairs of the Trust shall be managed by or under the
direction of the Board of Trustees, and (b) the Board of Trustees shall have
full, exclusive and absolute power, control and authority over the Trust
Property and over the business of the Trust. The Board of Trustees may take any
actions as in its sole judgment and discretion are necessary or desirable to
conduct the business of the Trust. This Trust Agreement shall be construed with
a presumption in favor of the grant of power and authority to the Board of
Trustees. To the fullest extent permitted by law,
23
any construction of this Trust Agreement or determination made in good faith by
the Board of Trustees concerning its powers and authority hereunder shall be
conclusive. The enumeration and definition of particular powers of the Board of
Trustees included in this Article 10 shall in no way be limited or restricted by
reference to or inference from the terms of this or any other provision of this
Trust Agreement or construed or deemed by inference or otherwise in any manner
to exclude or limit the powers conferred upon the Board of Trustees under the
general laws of the State of Delaware as now or hereafter in force.
10.2 Powers of the Board of Trustees. The conduct of the Trust's business
shall be controlled solely by the Board of Trustees in accordance with this
Trust Agreement and the Bylaws. The Board of Trustees shall have all authority,
rights and powers conferred by law and those required or appropriate to the
management of the Trust's business which, by way of illustration but not by way
of limitation, shall, subject only to the provisions of Section 10.3, include
the right, authority and power, without the vote of Shareholders, or any other
Person to:
(a) make all filings as may be necessary or proper in order to create
the Trust or to provide that this Trust Agreement shall constitute, for all
purposes, an agreement of trust under the laws of the State of Delaware as
in effect from time to time;
(b) adopt, implement and from time to time amend Bylaws of the Trust
relating to the business and organization of the Trust that are not
inconsistent with the provisions of this Trust Agreement;
(c) alter the Trust's investment objectives and policies if, in its
sole discretion, it determines that such a change is in the best interests
of the Trust and its Shareholders;
(d) raise capital for the Trust by offering and selling, or causing to
be offered and sold, additional beneficial interests in the Trust (subject
to Section 6.1), to classify or reclassify any unissued beneficial
interests (as Common Shares, Preferred Shares or any other classification
or series it may determine in its sole discretion), to provide for the
issuance of beneficial interests in other classes or series of securities,
to establish the number of beneficial interests in each class or series and
to fix the preferences, conversion and other rights, voting powers (if
any), restrictions (including transfer restrictions, if any), limitations
as to Distributions, qualifications or terms or conditions of redemption of
such class or series;
(e) cause the Trust to repurchase Shares from time to time out of
surplus funds of the Trust, if any, to further the business of the Trust;
(f) cause the Trust to acquire, hold, sell, dispose of and otherwise
act with respect to First Mortgage Bonds, Tax Exempt Securities, Taxable
Tails, SMLs or other mortgage investment, any portion of a First Mortgage
Bond, Tax-Exempt Securities, Taxable Tails, SMLs or other mortgage
investment in such principal amounts and upon
24
such terms and conditions as the Board of Trustees deems, in its sole
discretion, to be in the best interests of the Trust; provided, however,
that no First Mortgage Bond will be acquired, unless:
(i) the Trust has received an opinion of appropriate legal
counsel (which may be more than one) which may be qualified in certain
respects to the effect that substantially all interest payments will
be excluded from gross income for purposes of federal income taxation
under current law, that the First Mortgage Bond shall be characterized
as debt for federal income tax purposes and the Trust shall not be a
"substantial user" of the Underlying Property or a "related person" of
a substantial user as those terms are used in the Code solely by
virtue of the terms of the First Mortgage Bonds;
(ii) the Trust has received an opinion of counsel (which may be
qualified in certain respects and which may be based upon a
requirement that interest be reduced in certain events) to the effect
that the interest rate payable on the First Mortgage Bond is not
usurious under applicable state law;
(iii) mortgagee title insurance will be obtained in connection
with each First Mortgage Bond in substantially the outstanding
principal amount thereof (subject to certain exceptions, including
pending disbursement provisions); provided that where such insurance
is not customarily available, there may be obtained the assurance of
title that is customarily available, which may not include insurance;
and
(iv) an appraisal is obtained from an independent appraiser;
(g) cause the Trust or permit the Manager to purchase or otherwise
acquire First Mortgage Bonds or other investments in its own name or in the
name of a nominee, a trust or a corporate "nominee" or otherwise and hold
title thereto for the purpose of facilitating the acquisition of such First
Mortgage Bonds or other investments or any other purpose related to the
business of the Trust; provided that in the event of the acquisition of
such First Mortgage Bonds or other investments by the Trust from the
Manager or its Affiliates, (i) the purchase price paid by the Trust may not
exceed the cost of the First Mortgage Bonds or other investment to the
seller thereof plus Bond Selection Fees paid by the Trust and (ii) no
compensation or other benefit may accrue to the Manager or its Affiliates
except as otherwise permitted herein and except that they may be reimbursed
for the costs incurred to carry the First Mortgage Bonds or other
investment;
(h) subject to the provisions of Article 8, cause the Trust to enter
into one or more agreements with any Person, whereby, subject to the
supervision and control of the Board of Trustees, any such Person shall
render or make available to the Trust
25
managerial, investment, advisory and/or related services, office space and
other services and facilities (including, if deemed advisable by the Board
of Trustees, the management or supervision of the investments of the Trust)
upon such terms and conditions, including the right to indemnification, as
may be provided in such agreement or agreements (including, if deemed fair
and equitable by the Board of Trustees, the compensation payable thereunder
by the Trust); provided, however, that so long as the Trust is treated as a
partnership for federal income tax purposes, the Board of Trustees shall
cause the Trust to retain a Manager or other Person to serve as the general
partner of the Trust for tax purposes which Manager or other Person shall
at all times own at least 10 Common Shares;
(i) cause the Trust to place record title to or the right to use Trust
assets in the name or names of a nominee or nominees, trustee or trustees
(other than the Registered Trustee) for any purpose convenient or
beneficial to the Trust;
(j) cause the Trust to acquire by purchase, lease, or otherwise, and
dispose of, any real or personal property to be used in connection with the
business of the Trust;
(k) sign a check or Trust Certificate on behalf of the Trust;
(l) open accounts and deposit and maintain funds in the name of the
Trust in banks or savings and loan associations, provided, however, that
the Trust's funds shall not be commingled with the funds of any other
Person;
(m) change the Trust's accounting year from a calendar year to such
fiscal year as approved by the Internal Revenue Service;
(n) cause the Trust to borrow money or otherwise leverage, finance or
refinance its assets or obtain credit in such amounts, at such rates of
interest and upon such other terms and conditions as the Board of Trustees
deems appropriate, on a recourse or nonrecourse basis, and to secure
payment of the principal of any such indebtedness and the interest thereon
by mortgage, pledge, conveyance, assignment in trust of, or grant of a
security interest in, the whole or any part of any or all of the property
and assets of the Trust; provided that the Trust may not incur aggregate
financing or leverage (whether secured or unsecured) in excess of 50% of
Total Market Value (calculated at the time any additional financing or
leverage is incurred);
(o) cause the Trust to provide forward loan commitments to prospective
borrowers;
(p) require in all Trust obligations that the Board of Trustees or the
Manager shall not have any personal liability thereon and that the Person
contracting with the Trust is to look solely to the Trust and its assets
for satisfaction; provided, however, that the
26
Board of Trustees' failure to so require such limitation on personal
liability of the Manager shall not be construed to imply that the Manager
has personal liability for any such Trust obligations;
(q) prepare or cause to be prepared reports, statements and other
relevant information for distribution to Shareholders including annual and
quarterly reports;
(r) cause the Trust to make or revoke any of the elections permitted
by the Code;
(s) determine the appropriate accounting method or methods to be used
by the Trust in maintaining its books and records;
(t) assure any Person dealing with the Trust or the Manager that he
may rely upon a certificate signed by the Manager as authority with respect
to: (i) the identity of the Registered Trustee, the Managing Trustees, the
Manager or any Shareholder; (ii) the existence or nonexistence of any fact
or facts which constitute a condition precedent to acts by the Manager or
in any other manner germane to the affairs of the Trust; (iii) the Persons
who are authorized to execute and deliver any instrument or document of the
Trust; or (iv) any act or failure to act by the Trust or as to any other
matter whatsoever involving the Trust, the Managing Trustees, the Manager,
or any Shareholder;
(u) remove the Registered Trustee at any time with or without Cause in
its sole discretion and in the event of such removal or the resignation of
the Registered Trustee, to appoint a successor Registered Trustee in
accordance with Section 15.2;
(v) establish Reserves or increase or decrease Reserves as it deems
necessary, appropriate, convenient or advisable for the proper operation of
the business of the Trust;
(w) cause the Trust to acquire assets in joint venture investments;
provided that, in connection with such investments, the Trust owns more
than 50% of the Voting Securities of the joint venture or otherwise has the
right to veto or control any Major Decisions;
(x) cause the Trust to issue Shares in exchange for First Mortgage
Bonds, Tax Exempt Securities and other assets;
(y) pay, collect, compromise, litigate, arbitrate, or otherwise adjust
or settle any and all other claims or demands of or against the Trust or to
hold such proceeds against the payment of contingent liabilities;
(z) qualify the Trust to do business in any state, territory,
dependency or foreign country;
27
(aa) list the Shares on the American Stock Exchange or any other
exchange or market;
(bb) cause the Trust to issue options (including, without limitation,
options pursuant to an Incentive Share Option Plan), rights or warrants to
purchase any class or series of beneficial interests in the Trust (subject
to Section 6.1) (including options, rights or warrants to purchase Common
Shares, Preferred Shares or any other Shares);
(cc) in connection with the leveraging of the Trust's assets, cause
the Trust to form and invest in subsidiaries and other investment vehicles
and transfer any or all of the Trust's assets to such entities; provided,
however, that such entities shall be operated in a manner which is
consistent with the provisions of this Trust Agreement; and
(dd) execute, acknowledge and deliver any and all instruments to
effectuate all of the foregoing, and to take all such action in connection
therewith as the Board of Trustees shall deem necessary, appropriate,
convenient or advisable.
10.3 Limitations. The Board of Trustees shall not have the authority
without a Majority Vote (in which case the Board of Trustees shall have such
authority) to:
(a) cause the Trust to originate or acquire First Mortgage Bonds
secured by Mortgage Loans secured by Underlying Properties owned by
Affiliates of a Related Manager or in which such Affiliates have a
controlling interest, unless conditions (i) through (vii) below are met. In
addition, the Board of Trustees shall not have the authority to cause the
Trust to acquire such First Mortgage Bonds, in an amount in excess of 15%
of Total Market Value (measured at the time of investment) regardless of
whether the conditions below are met. This 15% limit shall not be
applicable to properties which the Related Manager or its Affiliates have
taken title to for the benefit of the Trust, and shall only apply to newly
acquired First Mortgage Bonds which are acquired by the Trust after the
date of this Trust Agreement.
(i) an independent and qualified adviser must issue a letter of
opinion to the effect that any First Mortgage Bond secured by such an
Underlying Property is fair and at least as favorable to the Trust as
a First Mortgage Bond secured by an Underlying Property owned by an
unaffiliated borrower in similar circumstances;
(ii) the Board of Trustees or the Manager must obtain a letter of
opinion from the independent adviser in connection with any
Disposition, renegotiation or other subsequent transaction involving
First Mortgage Bonds secured by Underlying Properties owned by
Affiliates of the Related Manager;
28
(iii) the independent adviser's compensation for any such
services must be paid by the Related Manager or its Affiliates and not
be reimbursable by the Trust;
(iv) the independent adviser must be a long established,
nationally recognized investment banking firm, accounting firm,
mortgage banking firm, real estate financial consulting firm or
advisory firm;
(v) the independent adviser must have a staff of real estate
professionals;
(vi) the compensation of the independent adviser must be
predetermined; and
(vii) the adviser, directly or indirectly, must have no interest
in, nor any material business or professional relationship with, the
Trust, the Manager, the borrower, or any Affiliates thereof
(independence will be considered to be impaired if, for example,
during the period of the independent adviser's engagement, or at the
time of expressing his opinion, he or his firm: (a) had, or was
committed to acquire any direct or indirect ownership interest in the
Trust, the Manager, the borrower or Affiliates thereof, (b) had any
joint closely held business investment with the Trust, the Manager,
the borrower or any Affiliates thereof, which was material in relation
to the independent adviser's net worth or (c) had any loan to or from
the Trust, the Manager, the borrower, or Affiliates thereof;
(b) cause the Trust to acquire Minority Positions which, in the
aggregate, are in excess of 15% of Total Market Value (measured at the time
of such investment);
(c) cause the Trust to invest in a First Mortgage Bond secured by a
Mortgage Loan on any one Underlying Property if the principal of such First
Mortgage Bond would exceed, in the aggregate, an amount equal to 20% of
Total Market Value (measured at the time of such investment);
(d) cause the Trust to invest in First Mortgage Bonds secured by
Mortgage Loans to any one borrower if the principal of such First Mortgage
Bonds would exceed, in the aggregate, an amount greater than 20% of Total
Market Value (measured at the time of such investment);
(e) cause the Trust to invest in First Mortgage Bonds secured by
Mortgage Loans on unimproved real property or Tax-Exempt Securities
relating to unimproved real property in an amount in excess of 10% of Total
Market Value (measured at the time of such investment);
29
(f) cause the Trust to invest in a First Mortgage Bond secured by a
Mortgage Loan on any one Underlying Property if the aggregate amount of all
mortgage loans outstanding on the Underlying Property, including the
principal amount of the Mortgage Loan, would exceed an amount equal to 85%
of the appraised fair market value of the Underlying Property, as
determined by an independent appraiser, unless the Board of Trustees or the
Manager determines that substantial justification exists for investing in
such a First Mortgage Bond because of other aspects of the loans, such as
the net worth of the borrower, the credit rating of the borrower based on
historical financial performance, additional collateral (such as a pledge
or assignment of other real estate or another real estate mortgage) or an
assignment of rents under a lease or where the Trust has purchased a First
Mortgage Bond at a price that is no more than 85% of the value of the
Underlying Property (notwithstanding that the face amount of the
outstanding mortgage loans with respect to the Underlying Property exceeds
85% of the appraised fair market value of the Underlying Property),
provided that any loans relating to the Underlying Property which are
advanced by third parties (and which cause the aggregate amount of all
mortgage loans outstanding on the Underlying Property to exceed 85% of the
appraised fair market value of the Underlying Property) are subordinated to
the Trust's investment and do not entitle such third party lender to any
material rights upon default without the Trust's consent until after the
Trust's First Mortgage Bond and related Mortgage Loan with respect to such
Underlying Property have been repaid;
(g) except as permitted in Section 10.2(g) (which Section is hereby
deemed applicable to Affiliates of the Related Manager) and by Section
10.3(a) and (c), permit a Related Manager to purchase First Mortgage Bonds
or Tax-Exempt Securities from the Trust or sell First Mortgage Bonds or
Tax-Exempt Securities to the Trust or purchase real property from the
Trust;
(h) do any act in contravention of this Trust Agreement or which would
make it impossible to carry on the ordinary business of the Trust;
(i) confess a judgment against the Trust in connection with any
threatened or pending legal action;
(j) possess any Trust asset or assign the rights of the Trust in
specific Trust assets for other than a Trust purpose;
(k) perform any act (other than an act required by this Trust
Agreement or any act taken in good faith reliance upon counsel's opinion)
which would, at the time such act occurred, subject any Shareholders to
liability in any jurisdiction;
(l) commingle the Trust funds with those of any other Person;
30
(m) operate the Trust in such a manner as to have the Trust classified
as (1) an "investment company" for purposes of the Investment Company Act
of 1940, as amended, or (2) other than as a partnership for purposes of the
Code;
(n) grant a Related Manager or any of its Affiliates an exclusive
right to sell or exclusive employment to sell the Trust's investments for
the Trust; and
(o) cause the Trust to invest in real estate contracts of sale,
otherwise known as land sale contracts, unless such contracts of sale are
in recordable form and are appropriately recorded in the chain of title.
10.4 Amendments Without Consent. In addition to any amendments otherwise
authorized herein, this Trust Agreement may be amended from time to time by the
Board of Trustees without the consent of the Shareholders or the Registered
Trustee (subject to the provisions in this Section 10.4):
(a) to add to the representations, duties or obligations of the Board
of Trustees or the Registered Trustee or their respective Affiliates or
surrender any right or power granted to the Board of Trustees or its
Affiliates or the Registered Trustee herein, for the benefit of the
Shareholders; provided, that no representations, duties or obligations of
the Registered Trustee shall be added or right or power granted to the
Registered Trustee or its Affiliates surrendered without the Registered
Trustee's consent;
(b) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with law applicable to the Trust as in
effect at the time the amendment is adopted, or judicial or administrative
interpretations thereof, or with any other provision herein, as long as any
such change will not adversely affect the rights of the Shareholders or the
Registered Trustee;
(c) to delete or add any provision of this Trust Agreement required to
be so deleted or added by the staff of the Securities and Exchange
Commission or by a State "Blue Sky" Commissioner or similar such official,
which addition or deletion is deemed by such Commission or state official
to be for the benefit or protection of the Shareholders;
(d) to reflect the addition or substitution of Shareholders or the
reduction of Capital Accounts upon the return of capital to Shareholders;
(e) upon notice to all Shareholders, to amend the provisions of
Article 9 of this Trust Agreement (a) so as to revise the date upon which
each Shareholder's distributive share of Net Income, Net Loss and
Distributions is determined and the period of time over which such
distributive share relates, provided that in the opinion of the accountants
or counsel to the Trust, such amended provisions are not impermissible
under
31
applicable federal and/or state income tax legislation, rules or
regulations enacted or promulgated thereunder, or administrative
pronouncements or interpretations thereof; and (b) to the minimum extent
necessary to take account of any amendments to Section 704 of the Code or
the regulations thereunder or any judicial or administrative
interpretations thereof;
(f) to change the name of the Trust to any lawful name which it may
select (in which case the Trust shall notify the Registered Trustee of such
change in name);
(g) to take such steps as the Board of Trustees or the Manager
determines are advisable or necessary in order to preserve the tax status
of the Trust as an Entity which is not taxable as a corporation for federal
income tax purposes. The Board of Trustees are each empowered to amend such
provisions to the minimum extent necessary or desirable in accordance with
the advice of the accountants and/or counsel to comply with any applicable
federal or state legislation, rules or regulations enacted or promulgated,
administrative pronouncements or interpretations and/or judicial
interpretations thereof after the date of this Trust Agreement. Subject to
Article 14, the Board of Trustees shall be entitled to rely upon the advice
of the accountants or counsel as described above in making such amendment
or amendments; and
(h) to reflect any rights, preferences or privileges granted in
connection with the issuance of a class or series of Shares not outstanding
as of the date of this Trust Agreement.
Written notice of any amendments to the Trust Agreement shall be
provided to the Registered Trustee within ten days of their adoption.
10.5 Notice of Limitation of Liability. The Board of Trustees or the
Manager shall use its best efforts, in the conduct of the Trust's business, to
put all suppliers and other Persons with whom the Trust does business on notice
that the Shareholders, the Trustees, and the Manager are not liable for the
Trust's obligations and that such suppliers and other Persons shall look solely
to the assets of the Trust for payment, and all agreements to which the Trust is
a party shall include a statement to the effect that the Trust is a business
trust organized under the Trust Act; but the Board of Trustees or the Manager
shall not be liable for any failure to give such notice to such suppliers or
other Persons and any failure in giving such notice shall not imply that the
Shareholders, the Managing Trustees, the Manager and the Registered Trustee are
liable for the Trust's obligations.
10.6 Accounting Matters. The Board of Trustees or the Manager shall make
all decisions as to accounting matters in accordance with the accounting methods
adopted by the Trust in accordance with generally accepted accounting principles
and procedures applied on a consistent basis. Such party may rely on the Trust's
independent certified public accountants to
32
determine whether such decisions are in accordance with generally accepted
accounting principles.
10.7 Tax-Matters Partner. The Manager is hereby designated as the "Tax
Matters Partner" in accordance with Section 6231(a)(7) of the Code and, in
connection therewith and in addition to all other powers given thereunder, shall
have all other powers needed to fully perform hereunder including, without
limitation, the power to retain all attorneys and accountants of its choice and
the right to settle any audits without the consent of the Shareholders. The
designation made in this Section 10.7 is hereby expressly consented to by each
Shareholder as an express condition to becoming a Shareholder.
10.8 Funds and Assets. The Board of Trustees and the Manager shall have a
fiduciary responsibility for the safekeeping and use of all funds and assets of
the Trust, whether or not in its immediate possession or control, and shall not
employ, or permit another to employ, such funds or assets in any manner except
for the exclusive benefit of the Trust.
10.9 Duties of Board of Trustees and Manager and Registered Trustee. To the
extent that, at law or in equity, the Board of Trustees or the Manager or the
Registered Trustee, or any Affiliate thereof (each, a "Covered Person") has
duties (including fiduciary duties) and liabilities relating thereto to the
Trust or to the Shareholders, the Covered Person acting in connection with the
Trust's business or affairs shall not be liable to the Trust or to any
Shareholder for its good faith reliance on the provisions of this Trust
Agreement. The provisions of this Trust Agreement, to the extent that they
restrict the duties and liabilities of a Covered Person otherwise existing at
law or in equity, are agreed by the Trust and the Shareholders to replace such
other duties and liabilities of such Covered Person.
10.10 Discretion. Whenever in this Trust Agreement the Board of Trustees or
the Manager is permitted or required to make a decisions (i) in its "discretion"
or under a grant of similar authority, the Board of Trustees and the Manager
shall be entitled to consider such interests and factors as it desires,
including its own interests, and shall have no duty or obligation to give any
consideration to any interest of or factors affecting the Trust or any other
person; or (ii) in its "good faith" or under another express standard, the Board
of Trustees and the Manager shall act under such express standard and shall not
be subject to any other or different standard imposed by this Trust Agreement or
by applicable law.
11. RIGHTS AND POWERS OF SHAREHOLDERS
11.1 Control. Other than as expressly set forth in this Trust Agreement,
Shareholders shall have no voting rights and Shareholders shall take no part in
any manner in the control, conduct or operation of the Trust and shall have no
right or authority to act for or bind the Trust.
33
11.2 Voting Rights. The Shareholders (except Shareholders who by the terms
of their Shares have no voting rights) considered together as a single class,
have the right by Majority Vote (voting in the manner set forth in the Bylaws),
to vote upon:
(a) without the consent and recommendation of the Board of Trustees:
(i) subject to the provisions of Section 3.1(d), the removal of
Managing Trustees; and
(ii) the election of Managing Trustees; and
(b) with the prior consent and recommendation of the Board of
Trustees:
(i) the merger, consolidation or conversion of the Trust with
or into another Entity;
(ii) the determination to dissolve the Trust, subject to the
provisions of Article 12;
(iii) amendment of the Trust Agreement, provided such amendment
is not otherwise permissible without Shareholder vote under
Section 10.4; and
(iv) subject to the provisions of Article 12, the disposition of
Substantially All of the Assets of the Trust in a single
disposition, or in multiple dispositions in the same 12-
month period (other than in connection with leveraging or
other financing permitted pursuant to Section 10.2).
11.3 Consolidation. Notwithstanding any other provision in this Trust
Agreement or the By Laws to the contrary, including, without limitation, Section
11.2, the Trust is hereby authorized (without the need for the consent of any
Person) to merge with and into Summit Tax Exempt Bond Fund, L.P., a Delaware
limited partnership, Summit Tax Exempt ▇.▇. ▇▇, a Delaware limited partnership,
and Summit Tax Exempt L.P. III, a Delaware limited partnership (collectively,
the "Partnerships"), with the Trust being the surviving entity (the "Mergers").
In furtherance of the foregoing, notwithstanding any other provision in this
Trust Agreement to the contrary, the Trust (and each Managing Trustee on behalf
of the Trust, acting singly or jointly) is hereby authorized (without the need
for the consent of any Person), (a) to execute, deliver and perform (including,
without limitation, by the issuance of all Shares contemplated therein) any
agreement and plan of merger by and among the Trust and the Partnerships (the
"Merger Agreement"), (b) to execute and file with all appropriate governmental
or other authorities one or more Certificates of Merger reflecting the Mergers,
and (c) to execute, deliver and perform any or all amendments to the limited
partnership agreements of the Partnerships entered into to
34
facilitate the consummation of the Consolidation (as defined in the Solicitation
Statement), including, without limitation, to consummate the Mergers.
Each Managing Trustee, acting singly or jointly, is hereby authorized
(without the need for the consent of any Person), at such time in his sole
discretion as he deems necessary or appropriate, to execute, acknowledge,
verify, deliver, file and record, for and in the name of the Trust and, to the
extent necessary or appropriate, the Shareholders, any and all documents and
instruments, including, without limitation, those required or contemplated by
applicable law that the Managing Trustees or any one of them deem necessary or
appropriate to effectuate the Mergers.
12. TERMINATION AND DISSOLUTION OF THE TRUST
12.1 Duration. The Trust shall continue perpetually unless dissolved
pursuant to Section 12.2 or pursuant to any applicable provision of the Trust
Act.
12.2 Dissolution. The Trust may be dissolved as follows:
(a) If a Management Agreement between the Trust and a Related Manager,
as the same may be amended from time to time (a "Related Management
Agreement"), is still in effect and it is prior to the fourth anniversary
of the date on which such Related Management Agreement was originally
executed (the "Fourth Anniversary"), subject to the provisions of any class
or series of Shares at the time outstanding, the Trust may be dissolved if:
(i) the Related Manager recommends dissolution of the Trust in
writing to the Board of Trustees;
(ii) the Board of Trustees concurs in such recommendation; and
(iii) the dissolution of the Trust is approved by a Majority
Vote; or
(b) If a Related Management Agreement is still in effect and it is
after the Fourth Anniversary, the Trust may be dissolved if:
(i) (A) the Related Manager recommends dissolution of the Trust
in writing to the Board of Trustees;
(B) the Board of Trustees concurs in such recommendation;
and
(C) the dissolution of the Trust is approved by a Majority
Vote; or
35
(ii) (A) the Board of Trustees recommends dissolution of the
Trust; and
(B) the dissolution of the Trust is approved by the
affirmative vote of two-thirds of the votes of the
Shareholders entitled to vote on the matter; or
(c) If at any time, whether prior to or after the Fourth Anniversary,
a Related Management Agreement is no longer in effect, the Trust may be
dissolved upon the recommendation of the Board of Trustees and the approval of
Shareholders by Majority Vote; or
(d) The Trust may be dissolved by order of a court of competent
jurisdiction to judicially dissolve the Trust if it is no longer reasonably
practicable to continue the business and affairs of the Trust as contemplated by
this Trust Agreement.
12.3 Liquidation and Distribution of Assets. Upon a dissolution and
termination of the Trust for any reason, the Board of Trustees or the Manager
shall take full account of the Trust's assets and liabilities, shall liquidate
the assets as promptly as is consistent with obtaining the fair value thereof,
and shall apply and distribute the proceeds therefrom in the following order:
(a) first, to the satisfaction to the extent permitted by law (whether
by payment or reasonable provision for payment thereof) of obligations of
the Trust to creditors of the Trust (other than as set forth in paragraphs
(b), (c) and (d) below);
(b) second, to the repayment of any outstanding loans made by the
Manager or its Affiliates to the Trust;
(c) third, to the payment of expenses of liquidation (including the
payment of the Liquidation Fee to the Related Manager) and the
establishment of any Reserves for contingencies; and
(d) fourth, to the Common Shareholders, in accordance with, and to the
extent of, the positive balances in their capital accounts after the Net
Income or Net Loss (or items thereof) from any Terminating Capital
Transaction has been allocated pursuant to the provisions of Section 9.6(b)
hereof.
12.4 Termination of the Trust. Upon dissolution and the completion of the
winding up of the affairs of the Trust, the Trust shall be terminated by the
executing and filing with the Secretary of State of the State of Delaware by one
or more Managing Trustees of a certificate of cancellation of the certificate of
trust of the Trust.
36
13. SPECIAL POWER OF ATTORNEY
13.1 Grant of Power of Attorney. By subscribing and paying for Shares, each
Shareholder is hereby granting to the Board of Trustees and the Manager a
special power of attorney irrevocably making, constituting and appointing the
Board of Trustees and the Manager, acting singly or collectively, as the
attorney-in-fact for such Shareholder, with power and authority to act in his
name and on his behalf to execute, acknowledge and swear to the execution,
acknowledgment and filing of documents, which shall include, by way of
illustration but not of limitation, the following:
(a) this Trust Agreement, any separate certificates of trust of the
Trust, as well as any amendments to or restatements of the foregoing which,
under the laws of the State of Delaware or the laws of any other state, are
required to be filed or which the Board of Trustees or the Manager deems to
be advisable to file;
(b) any duly adopted amendments or restatements of this Trust
Agreement;
(c) any other instrument or document which may be required to be filed
by the Trust under the laws of any state or by any governmental agency, or
which the Board of Trustees or Manager deems advisable to file; and
(d) any instrument or document which may be required to effect the
continuation of the Trust, the admission of an additional or substituted
Shareholder, or the dissolution and termination of the Trust (provided such
continuation, admission or dissolution and termination are in accordance
with the terms of this Trust Agreement), or to reflect any reductions in
amount of contributions of Shareholders.
13.2 Character of Power of Attorney. The special power of attorney being
hereby granted by each Shareholder:
(a) is a special power of attorney coupled with an interest, is
irrevocable, shall survive the death, legal incapacity, disability,
dissolution, bankruptcy or termination of the granting Shareholder, and is
limited to those matters herein set forth;
(b) may be exercised by the Board of Trustees or the Manager acting
for each Shareholder by a facsimile signature of the Managing Trustee,
Manager or by one of its officers, or by listing all of the Shareholders
executing any instrument with a signature of a Managing Trustee, the
Manager or one of its officers acting as its attorney-in-fact; and
(c) shall survive a Transfer by a Shareholder of all or any portion of
his Shares for the sole purpose of enabling the Board of Trustees or the
Manager to execute, acknowledge and file any instrument or document
necessary to effect such Transfer.
37
13.3 Reliance. Each Shareholder has executed this special power of
attorney, and each Shareholder will rely on the effectiveness of such powers
with a view to the orderly administration of the Trust's affairs.
14. INDEMNIFICATION
14.1 Managing Trustees; Employees. To the fullest extent permitted by law,
the Trust shall indemnify its present and former Managing Trustees, the Manager
and its officers, directors, members, partners and employees and agents (the
"Indemnified Part(y)(ies)") against judgments, penalties, fines, settlements and
reasonable expenses actually incurred by them in connection with any proceeding
to which they may be made a party by reason of their service in those or other
capacities unless it is established that (a) the act or omission of the
Indemnified Party was material to the matter giving rise to the proceeding and
(i) was committed in bad faith or (ii) was the result of active and deliberate
dishonesty, (b) the Indemnified Party actually received an improper personal
benefit in money, property or services, or (c) in the case of any criminal
proceeding, the Indemnified Party had reasonable cause to believe that the act
or omission was unlawful. In addition, the Trust shall pay or reimburse
reasonable expenses in advance of final disposition of a proceeding to any
present or former Indemnified Party, provided that the Trust first obtains (i) a
written affirmation by the Indemnified Party of his or its good-faith belief
that he or it has met the standard of conduct necessary for indemnification by
the Trust as authorized by the Trust Agreement and (ii) a written statement by
him or it or on his or its behalf to repay the amount paid or reimbursed by the
Trust if it shall ultimately be determined that the standard of conduct was not
met. The Trust shall also provide indemnification and advance expenses to any
present or former Indemnified Party who served a predecessor of the Trust in
such capacity.
14.2 The Registered Trustee. To the fullest extent permitted by law, the
Trust shall indemnify and hold harmless the Registered Trustee and its
Affiliates, and their respective officers, directors, employees, agents and
representatives, (collectively, the "Registered Trustee Persons") from and
against any and all claims or liabilities (including any environmental
liabilities) for which any such Person may become liable by reason of the
Registered Trustee's acting in such capacity under the Trust Agreement or
arising out of or connected with (i) the Trust, (ii) the Trust Agreement, (iii)
any breach of duty owed to the Trust or the Shareholders by a third party or
(iv) any violation or alleged violation of federal or state securities laws. The
Trust shall not indemnify such Persons for liabilities resulting from such
Persons' own fraud, gross negligence or willful misconduct. In addition, the
Trust shall pay or reimburse reasonable expenses in advance of final disposition
of a proceeding to any present or former Registered Trustee Person, provided
that the Trust first obtains (i) a written affirmation by the Registered Trustee
Person of his or its good-faith belief that he or it has met the standard of
conduct necessary for indemnification by the Trust as authorized by this Trust
Agreement and (ii) a written statement by him or it or on his or its behalf to
repay the amount paid or reimbursed by the Trust if it shall ultimately be
determined that the standard of conduct was not met. The Trust
38
shall also provide indemnification and advance expenses to any present or former
Registered Trustee Person who served a predecessor of the Trust in such
capacity.
15. CONCERNING THE REGISTERED TRUSTEE
15.1 Authority and Duties of the Registered Trustee.
(a) General. The Registered Trustee shall have only those rights,
authority, powers, responsibilities and duties as set forth in Section
3.2(a).
(b) Limitations. Without limiting the generality of Section 15.1, the
Registered Trustee shall have no duty or liability (i) as to any document
contemplated by this Trust Agreement, (ii) to see to any recording or filing of
this Trust Agreement, the Bylaws or any document contemplated hereby or any
security interest or lien or to see to the maintenance of any such
documentation, recording or filing, (iii) to see to any maintenance of or
insurance on the Trust Property, (iv) to see to the payment or discharge of any
tax, assessment or other governmental charge or any lien assessed or levied
against the Trust or any part of the Trust Property or to make or prepare any
reports or returns related thereto, (v) to confirm, verify or inquire into the
failure of the Board of Trustees or the Manager to exercise or perform any of
their respective rights or duties under this Trust Agreement, or (vi) to approve
as satisfactory to it or consent to any matter contemplated by this Trust
Agreement or any document contemplated hereby.
15.2 Resignation and Removal of the Registered Trustee.
(a) General. The Registered Trustee may resign as of the last business
day of any month by giving 60 days' prior notice to the Board of Trustees
or the Manager, and the Board of Trustees or the Manager may remove the
Registered Trustee as of the last business day of any month on 60 days'
prior notice to the Registered Trustee. In the case of the resignation or
removal of the Registered Trustee, the Board of Trustees or the Manager
shall, without the consent of any Shareholder, appoint a successor
Registered Trustee, provided that such successor Registered Trustee shall
in all respects satisfy the requirements of Section 3807 of the Trust Act,
or any successor provision. The appointment of the successor Registered
Trustee shall take effect concurrently with the resignation or removal of
the former Registered Trustee, and, thereupon, the Registered Trustee so
resigned or removed shall be fully discharged of its duties and liabilities
hereunder, if any. The Registered Trustee shall not be liable for the acts
or omissions to act of any successor Registered Trustee.
(b) Failure to Appoint Successor. If a successor Registered Trustee
shall not have been appointed within 60 days after such notice of
resignation or removal, the Registered Trustee, the Board of Trustees, the
Manager or any Shareholder may apply to any court of competent jurisdiction
to appoint a successor Registered Trustee to act until
39
such time, if any, as a successor shall have been appointed as above
provided. Such court may thereupon, after prescribing such notice, if any,
as it may deem proper, appoint a successor Registered Trustee.
(c) Successor by Merger. Any Person into which the Registered Trustee
may be merged or converted or with which it may be consolidated, or any
Person resulting from any merger, conversion or consolidation to which the
Registered Trustee shall be a party, or any corporation to which
substantially all the corporate trust business of the Registered Trustee
may be Transferred, shall, subject to such Person satisfying in all
respects the requirements of Section 3807 of the Trust Act, be the
Registered Trustee hereunder without further act.
(d) Amendment of Certificate of Trust. Upon the substitution of the
successor Registered Trustee, the Board of Trustees or the Manager shall
file an amendment along with the successor Registered Trustee to the
certificate of trust with the Secretary of State of the State of Delaware
in accordance with the provisions of Section 3810 of the Trust Act,
indicating the change in the Registered Trustee.
Except as expressly provided above, all Persons having any claim against
the Registered Trustee by reason of the transactions contemplated by this Trust
Agreement shall look only to the property and assets of the Trust for payment or
satisfaction thereof.
16. CERTAIN TRANSACTIONS
The Trustees, any Shareholder, the Manager and any Affiliate thereof, and
any shareholder, officer, director, partner or employee thereof, or any Person
owning a legal or beneficial interest therein, may engage in or possess an
interest in any other business or venture of every nature and description,
independently or with or for the account of others including, but not limited
to, investments in revenue bonds or mortgages of any type or instruments backed
by or representing a participation interest in revenue bonds or mortgages, and
the ownership, financing, leasing, operation, management, brokerage and
development of real property; provided, however, that the Related Manager shall
be obligated to present to the Trust any suitable investment opportunity before
acquiring it for its own account. Except for the foregoing proviso, neither the
Trustees, any Shareholder, the Manager nor their Affiliates shall be obligated
to present to the Trust any particular investment opportunity, regardless of
whether such opportunity might be suitable for investment by the Trust, and each
Trustee, the Shareholders, the Manager and each Affiliate shall have the right
to take for its own account (individually or otherwise) or to recommend to
others any such investment opportunity.
40
17. MISCELLANEOUS
17.1 Counterparts. This Trust Agreement may be executed in several
counterparts and all so executed shall constitute one Trust Agreement, binding
on all of the parties hereto, notwithstanding that all of the parties are not
signatory to the original or the same counterpart.
17.2 Binding Provisions. The terms and provisions of this Trust Agreement
shall be binding upon and shall inure to the benefit of the successors and
assigns of the respective parties.
17.3 Severability. In the event any sentence or section of this Trust
Agreement is declared by a court of competent jurisdiction to be void, such
sentence or section shall be deemed severed from the remainder of the Trust
Agreement and the balance of the Trust Agreement shall remain in effect.
17.4 Notices. All notices under this Trust Agreement shall be in writing
and shall be given to the party entitled thereto, by personal service or by
mail, posted to the address maintained by the Trust for such Person or at such
other address as he may specify in writing.
17.5 Headings. Paragraph titles or captions contained in this Trust
Agreement are inserted only as a matter of convenience and for reference. Such
titles and captions in no way define, limit, extend or describe the scope of
this Trust Agreement or the intent of any provision hereof.
17.6 Meanings. Whenever required by the context hereof, the singular shall
include the plural, and vice-versa; and the masculine gender shall include the
feminine and neuter genders, and vice-versa.
17.7 Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware (including the
Trust Act) applicable to agreements to be made and performed entirely in said
State, and the Shares shall be construed in accordance with the laws of the
State of Delaware, and the obligations, rights and remedies of the parties
hereunder shall be determined in accordance with such laws; provided, however,
that nothing herein shall affect the obligations of the Trust to comply with
federal or state securities laws; and provided further, however, that there
shall not be applicable to the Trust, the Board of Trustees, the Registered
Trustee or this Trust Agreement any provisions of the laws (statutory or common)
of the State of Delaware pertaining to trusts (other than the Trust Act) that
relate to or regulate, in a manner inconsistent with the terms hereof (i) the
filing with any court or governmental body or agency of trustee accounts or
schedules of trustee fees and charges, (ii) affirmative requirements to post
bonds for trustees, officers, agents or employees of a trust, (iii) the
necessity for obtaining court or other governmental approval concerning the
acquisition, holding or disposition of real or personal property, (iv) fees or
other sums payable to trustees, officers, agents or employees of a trust, (v)
the allocation of receipts and expenditures to income or principal, (vi)
restrictions or limitations on the permissible nature, amount or
41
concentration of trust investments or requirements relating to the titling,
storage or other manner of holding or investing trust assets, or (vii) the
establishment of fiduciary or other standards or responsibilities or limitations
on the acts or powers of trustees, which are inconsistent with the limitations
or liabilities or authorities and powers of trustees as set forth or referenced
in this Trust Agreement. Section 3540 of Title 12 of the Trust Act shall not
apply to the Trust.
17.8 Other Jurisdictions. In the event the business of the Trust is carried
on or conducted in states in addition to the State of Delaware, then the Board
of Trustees and the Shareholders agree that this Trust shall be qualified under
the laws of each state in which business is actually conducted by the Trust, and
they severally agree to execute such other and further documents as may be
required or requested in order that the Board of Trustees or the Manager legally
may qualify this Trust to do business in such states. The power of attorney
granted to the Board of Trustees and the Manager by each Shareholder in Article
15 shall constitute the authority of the Board of Trustees and the Manager to
perform the ministerial duty of qualifying this Trust under the laws of any
state in which it is necessary to file documents or instruments of
qualification. A Trust office or principal place of business in any jurisdiction
(within or without the State of Delaware) may be designated from time to time by
the Board of Trustees.
17.9 Power to Reconstitute. In the event that the State of Delaware amends
the Trust Act in any manner which precludes the Trust, at any time, from
obtaining an opinion of tax counsel to the effect that the Trust will be treated
as a partnership for federal income tax purposes and not as an association
taxable as a corporation, then the Board of Trustees or the Manager may, in its
sole discretion, reconstitute the Trust under the laws of another state.
17.10 Agreement to be Bound. EVERY PERSON, BY VIRTUE OF HAVING BECOME A
SHAREHOLDER IN ACCORDANCE WITH THE TERMS OF THIS TRUST AGREEMENT, SHALL BE
DEEMED TO HAVE EXPRESSLY ASSENTED AND AGREED TO THE TERMS OF, AND SHALL BE BOUND
BY, THIS TRUST AGREEMENT.
42
IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of the day and year first above written.
MANAGING TRUSTEES:
----------------------------------------
Name:
----------------------------------------
Name:
----------------------------------------
Name:
----------------------------------------
Name:
----------------------------------------
Name:
REGISTERED TRUSTEE:
WILMINGTON TRUST COMPANY
By:
------------------------------------
Name:
Title:
43
ACKNOWLEDGED AND CONSENTED TO:
RELATED CAPITAL COMPANY
By: SJB Associates, L.P. as
general partner
By: SJB Associates, Inc. as
general partner
By:
------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
44