Form 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2007
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 0-24412
MACC PRIVATE EQUITIES INC.
(Exact Name of Registrant as specified in Charter)
Delaware 42-1421406
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation) Identification No.)
101 Second Street SE, Ste. 800, Cedar Rapids, Iowa 52401
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number Including Area Code: (319) 363-8249
Securities Registered Pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class On Which Registered
None None
Securities Registered Pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act. Yes [ ] No |X|
Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No |X|
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the
Exchange Act) during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes |X| No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer |X|
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No |X|
Aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 30, 2007, based upon the closing sale price reported by
the Nasdaq Capital Market on that date of $2.15: $2,816,895.60.
Number of shares outstanding of the registrant's Common Stock, $.01 par value,
as of November 30, 2007: 2,464,621.
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Annual Report to Stockholders for the year
ended September 30, 2007 are incorporated by reference into Parts II and IV of
this Report.
This Annual Report on Form 10-K of MACC Private Equities Inc. (the
"Corporation" or "we" or "us") and its subsidiary, MorAmerica Capital
Corporation (together, the "Companies") contains forward-looking statements. All
statements in this Annual Report on Form 10-K, including those made by the
management of the Companies, other than statements of historical fact, are
forward-looking statements. Examples of forward-looking statements include
statements regarding the Companies' future financial results, operating results,
business strategies, projected costs, competitive positions, management's plans
and objectives for future operations, and industry trends. These forward-looking
statements are based on management's estimates, projections and assumptions as
of the date hereof and include the assumptions that underlie such statements.
Forward-looking statements may contain words such as "may," "will," "should,"
"could," "would," "expect," "plan," "anticipate," "believe," "estimate,"
"predict," "potential," and "continue," the negative of these terms, or other
comparable terminology. Any expectations based on these forward-looking
statements are subject to risks and uncertainties and other important factors,
including those discussed below and in the section titled "Risk Factors." Other
risks and uncertainties are disclosed in the Corporation's prior Securities and
Exchange Commission ("SEC") filings. These and many other factors could affect
the Corporation's future financial condition and operating results and could
cause actual results to differ materially from expectations based on
forward-looking statements made in this document or elsewhere by the Corporation
or on its behalf. The Corporation undertakes no obligation to revise or update
any forward-looking statements.
The following information should be read in conjunction with the
Consolidated Financial Statements and the accompanying Notes to Consolidated
Financial Statements included in this Annual Report. All references to fiscal
year apply to the Companies' respective fiscal years which end on September 30
of each year.
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FORM 10-K TABLE OF CONTENTS AND CROSS-REFERENCE INDEX
Certain information required to be included in this Form 10-K is
incorporated by reference to information contained in the Corporation's Annual
Report to Shareholders for its fiscal year ending September 30, 2007 filed as an
exhibit to this report on Form 10-K (the "2007 Annual Report"). The following
cross-reference index shows the page locations in the 2007 Annual Report of that
information which is incorporated by reference into this Form 10-K. All other
sections of the 2007 Annual Report are not required to be included in this Form
10-K and therefore should not be considered a part hereof.
Form 10-K Index Form 2007
10-K Annual
Page Report
Page
Part I
Item 1 Business 4
Item 1A Risk Factors 5
Item 2 Properties 10
Item 3 Legal Proceedings 10
Item 4 Submission of Matters to a Vote of Security Holders 10
Part II
Item 5 Market for Registrant's Common Equity, Related Stockholder 11 30
Matters and Issuer Purchases of Equity Securities
Item 6 Selected Financial Data 11 5
Item 7 Management's Discussion and Analysis of Financial Conditions and 11 6
Results of Operation
Item 7A Quantitative and Qualitative Disclosures About Market Risk 11 10
Item 8 Financial Statements and Supplementary Data 11 14
Item 9 Changes in and Disagreements with Accountants on Accounting and 11
Financial Disclosure
Item 9A Controls and Procedures 11
Item 9B Other Information 12
Part III
Item 10 Directors and Executive Officers of the Registrant 13
Item 11 Executive Compensation 16
Item 12 Security Ownership of Certain Beneficial Owners and Management 17
Item 13 Certain Relationships and Related Transactions 18
Item 14 Principal Accounting Fees and Services 20
Part IV
Item 15 Exhibits and Financial Statement Schedules 21
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Part I
Item 1. Business.
General
MACC Private Equities Inc. was formed as a Delaware corporation on March 3,
1994. It has elected to be treated as a business development company ("BDC")
under the Investment Company Act of 1940, as amended (the "1940 Act"). The
Corporation has one direct wholly-owned subsidiary, MorAmerica Capital
Corporation ("MorAmerica"). As of September 30, 2007, MorAmerica comprised
approximately 99% of the Corporation's assets. MorAmerica is an Iowa corporation
incorporated in 1959 and which was licensed as a small business investment
company ("SBIC") since that year until the voluntary surrender of its SBIC
license in December, 2007. It has also elected treatment as a BDC under the 1940
Act. Neither of the Companies has any employees. All of the Companies' day to
day operations are carried out by its officers and the staff of its investment
advisor, InvestAmerica Investment Advisors, Inc. ("InvestAmerica" or the
"Investment Advisor").
The Corporation's Operation as a BDC
As noted above, both the Corporation and its wholly-owned subsidiary,
MorAmerica, have elected treatment as BDCs under the 1940 Act. Under the 1940
Act, a BDC may not acquire any asset other than Qualifying Assets as defined
under the 1940 Act, unless, at the time the acquisition is made, Qualifying
Assets represent at least 70 percent of the value of the BDC's total assets. The
principal categories of Qualifying Assets relevant to the business of the
Companies are the following:
(1) Securities purchased in transactions not involving any public offering
from the issuer of such securities, which issuer is an eligible
portfolio company. An eligible portfolio company is defined in the
1940 Act as any issuer that:
(a) is organized under the laws of, and has its principal place of
business in, the United States;
(b) is not an investment company; and
(c) satisfies one of the following:
(i) it does not have any class of securities with respect to
which a broker may extend credit;
(ii)it is controlled by a BDC and such BDC exercises control over
the company;
(iii) it has total assets of not more than $4,000,000, and
capital and surplus of not less than $2,000,000; or
(iv) it meets other criteria prescribed by the SEC.
The Corporation's investment in all of the issued and outstanding
common stock of MorAmerica is also a Qualifying Asset under the 1940
Act.
(2) Cash, cash items, government securities, or high quality debt
securities maturing in one year or less from the time of investment.
In addition, a BDC must have been organized (and have its principal place
of business) in the United States for the purpose of making investments in the
types of securities described in (1) above and, in order to count the securities
as Qualifying Assets for the purpose of the 70 percent test, the BDC must make
available to the issuers of the securities significant managerial assistance.
Making available significant managerial assistance means, among other things,
any arrangement whereby the BDC, through its directors, officers or employees
offers to provide, and, if accepted, does so provide, significant guidance and
counsel concerning the management, operations or business objectives and
policies of a portfolio company.
Under the 1940 Act, once a company has elected to be regulated as a BDC, it
may not change the nature of its business so as to cease to be, or withdraw its
election as, a BDC unless authorized by vote of a majority, as
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defined in the 1940 Act, of the company's shares. In order to maintain their
status as BDCs, the Corporation and MorAmerica each must have at least 50% of
their total assets invested in the types of portfolio companies described by
Sections 55(a)(1) though 55(a)(3) of the 1940 Act.
MorAmerica's Regulation by the SBA
As an SBIC during fiscal year 2007, MorAmerica was subject to regulation by
the SBA. Such regulation includes the regulations promulgated by the SBA (the
"SBA Regulations") which, consistent with the SBA's goal of fostering investment
in small businesses, limit the extent to which an SBIC's capital may be
impaired, impose certain standards upon an SBIC's investment advisor, and limit
the type of portfolio company an SBIC may invest in and the nature of such
investments. In December, 2007, the SBA approved MorAmerica's voluntary
surrender of its SBIC license. As a result, MorAmerica is no longer subject to
the SBA Regulations.
Investments and Divestitures
MorAmerica invested $65,000 in a follow-on investment in one existing
portfolio company in fiscal year 2007. The Companies' investment-level
objectives on a consolidated basis call for follow-on investments of
approximately $150,000 during fiscal year 2008, unless the Companies raise
additional capital, subject to adjustment based upon current economic and
operating conditions.
During fiscal year 2007, the Corporation recorded a net realized gain on
investments of $1,351,456.
Item 1A. Risk Factors.
AN INVESTMENT IN THE CORPORATION'S COMMON STOCK IS SUBJECT TO A NUMBER OF RISKS
AND SPECIAL CONSIDERATIONS, INCLUDING THE FOLLOWING. YOU SHOULD CAREFULLY
CONSIDER THESE RISK FACTORS, TOGETHER WITH ALL OF THE OTHER INFORMATION INCLUDED
IN OUR PROSPECTUS, BEFORE YOU DECIDE WHETHER TO MAKE AN INVESTMENT. THE RISKS
SET OUT BELOW ARE THE PRINCIPAL RISK FACTORS ASSOCIATED WITH AN INVESTMENT IN
THE CORPORATION, AS WELL AS THOSE FACTORS GENERALLY ASSOCIATED WITH AN
INVESTMENT IN A COMPANY WITH INVESTMENT OBJECTIVES, INVESTMENT POLICIES, CAPITAL
STRUCTURE OR TRADING MARKETS SIMILAR TO THE CORPORATION'S.
RISKS RELATED TO OUR INVESTMENTS
Our investments may be risky, and you could lose all or part of your investment.
The Corporation is designed for long-term investors. Investors should not
rely on the Corporation for their short-term financial needs. The value of the
higher risk securities in which the Corporation invests will be affected by
general economic conditions; the securities market; the markets for public
offerings and corporate acquisitions; specific industry conditions; and the
management of the individual portfolio companies. Additionally, the Corporation
may not achieve its investment objectives.
An investment strategy focused primarily on privately-held companies presents
certain challenges, including the lack of available information about these
companies, a dependence upon the talents and efforts of only a few key portfolio
company personnel and a greater vulnerability to economic downturns.
As a BDC, the Corporation invests a large portion of its assets in
restricted securities issued by small, private companies, some of which have
operated at losses or have experienced substantial fluctuations in operating
results. There is generally little or no publicly available information about
such companies and the Corporation must rely on the diligence of its Investment
Advisor to obtain the information necessary for the Corporation's decision to
invest in these companies. In order to maintain its status as a BDC, the
Corporation must have at least 70 percent of its total assets invested in these
types of portfolio companies, as described in Sections 55(a)(1) through 55(a)(3)
of the 1940 Act. Typically, such companies depend for their success on the
management talents and efforts of one person or a small group of persons, so
that the death, disability or resignation of such person or persons could
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have a materially adverse impact on them. Moreover, smaller companies frequently
have narrower product lines and smaller market shares than larger companies and,
therefore, may be more vulnerable to competitors' actions and market conditions,
as well as general economic downturns. Such companies may face intense
competition, including competition from companies with greater financial
resources, more extensive research and development, manufacturing, marketing and
service capabilities, and a larger number of qualified managerial and technical
personnel. Because these companies will generally have highly leveraged capital
structures, reduced cash flow resulting from an adverse business development,
shifts in customer preferences, or an economic downturn or the inability to
complete a public offering or other financing may adversely affect the return
on, or the recovery of, the Corporation's investment in them. Investment in such
companies therefore involves a high degree of business and financial risk, which
can result in substantial losses and, accordingly, should be considered highly
speculative. No assurance can be given that some of the Corporation's
investments will not result in substantial or complete losses.
The long-term character of our portfolio investments may negatively impact their
current return and capital gains.
The Corporation's investments yield a current return for most of their
lives, but generally only produce a capital gain, if any, from an accompanying
equity feature after five to eight years. Both the current yield and a capital
gain must be achieved on most investments in order to meet the Corporation's
investment goals. There can be no assurance that either a current return or
capital gain will actually be achieved on the Corporation's investments.
Because our portfolio investments are typically privately-issued, there is no
market for the securities, and thus their value is decreased.
Most of the investments of the Corporation consist of securities acquired
directly from their issuers in private transactions. They are usually subject to
restrictions on resale and are generally illiquid. Usually there is no
established trading market for such securities into which they could be sold. In
addition, most of the securities are not eligible for sale to the public without
registration under the Securities Act of 1933, as amended (the "Securities
Act"), which would involve delay and expense. Restricted securities generally
sell at a price lower than similar securities that are not subject to
restrictions on sale.
There may be circumstances where our debt investments could be subordinated to
claims of other creditors or we could be subject to lender liability claims.
If one of our portfolio companies were to go bankrupt, even though we may
have structured our interest as senior debt, depending on the facts and
circumstances, including the extent to which we actually provided managerial
assistance to that portfolio company, a bankruptcy court might recharacterize
our debt holding and subordinate all or a portion of our claim to that of other
creditors. In addition, lenders can be subject to lender liability claims for
actions taken by them where they become too involved in the borrower's business
or exercise control over the borrower. It is possible that we could become
subject to a lender's liability claim, including as a result of actions taken if
we actually render significant managerial assistance.
Our portfolio companies may incur debt or issue equity securities that rank
equally with, or senior to, our investments in such companies.
Our portfolio companies usually will have, or may be permitted to incur,
other debt, or issue other equity securities, that rank equally with, or senior
to, the securities in which we invest. By their terms, such instruments may
provide that the holders are entitled to receive payment of dividends, interest
or principal on or before the dates on which we are entitled to receive payments
in respect of the securities in which we invest. Also, in the event of
insolvency, liquidation, dissolution, reorganization or bankruptcy of a
portfolio company, holders of securities ranking senior to our investment in
that portfolio company would typically be entitled to receive payment in full
before we receive any distribution in respect of our investment. After repaying
the senior security holders, the portfolio company may not have any remaining
assets to use for repaying its obligation to us. In the case of securities
ranking equally with securities in which we invest, we would have to share on an
equal basis any distributions with other security holders in the event of an
insolvency, liquidation, dissolution, reorganization or bankruptcy of the
relevant portfolio company.
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We will be exposed to risks associated with changes in interest rates.
Generally, when market interest rates rise, the values of debt securities
decline, and vice versa. During periods of declining interest rates, the issuer
of a security may exercise its option to prepay principal earlier than
scheduled, forcing us to reinvest in lower yielding securities. This is known as
call or prepayment risk. Lower grade securities frequently have call features
that allow the issuer to repurchase the security prior to its stated maturity.
An issuer may redeem a lower grade obligation if the issuer can refinance the
debt at a lower cost due to declining interest rates or an improvement in the
credit standing of the issuer.
RISKS RELATED TO OUR BUSINESS
Closed-end investment companies' shares usually trade below net asset value.
Shares of closed-end investment companies like the Corporation frequently
trade at a discount from net asset value and the Corporation's shares have
historically traded at a discount from net asset value. At September 30, 2007,
the Corporation's shares traded at a 47% discount to their net asset value. This
characteristic of shares of closed-end investment companies is separate and
distinct from the risk that the Corporation's per share net asset value will
decline. In addition, due to the following reasons, the Corporation is not only
different from other closed-end funds, is a greater risk than similar venture
capital closed-end funds.
• First, many closed-end funds generally are structured to produce
annual dividends to shareholders. The Corporation, however, does not
presently pay dividends but, rather, retains all income after taxes
and expenses to reduce debt or fund additional investments and thus
create capital appreciation. The return to holders of the
Corporation's Common Stock is thus anticipated to be long-term and
capital in nature. The Corporation's Board of Directors (the "Board")
will, however, consider payment of dividends in the future and
reserves the right to do so without shareholder approval.
• Second, due to several factors, including the small size of the
Corporation relative to fixed expenses, and the fact that much of the
income of the Corporation arises through capital gains rather than
ordinary income, on a consolidated basis, the Corporation has lost
money (that is, had net investment expense, rather than new investment
income) in each of the last six years. Many similar funds are
structured to earn sufficient current income to achieve operating
income (investment income in excess of operating expenses) each year.
Many of our portfolio investments will be recorded at fair value as determined
in good faith by our Board and, as a result, there will be uncertainty as to the
value of our portfolio investments.
Pursuant to the requirements of the 1940 Act, substantially all of the
Corporation's portfolio investments are recorded at fair value as determined in
good faith by our Board on a quarterly basis, and, as a result, there is
uncertainty regarding the value of the Corporation's portfolio investments. At
September 30, 2007, approximately 92% of the Corporation's total assets
represented investments recorded at fair value. Since there is typically no
readily ascertainable market value for the investments in the Corporation's
portfolio, our Board determines in good faith the fair value of these
investments pursuant to a valuation policy and a consistently applied valuation
process.
There is no single standard for determining fair value in good faith. As a
result, determining fair value requires that judgment be applied to the specific
facts and circumstances of each portfolio investment while employing a
consistently applied valuation process for the types of investments the
Corporation makes. Unlike banks, the Corporation is not permitted to provide a
general reserve for anticipated loan losses; the Corporation is instead required
by the 1940 Act to specifically value each individual investment and record
unrealized depreciation for an investment that the Corporation believes has lost
value, including where collection of a debt security or realization of an equity
security is doubtful. Conversely, the Corporation records unrealized
appreciation if the Corporation has an indication that the underlying portfolio
company has appreciated in value and, therefore, our security has also
appreciated in value, where appropriate. Without a readily ascertainable market
value and because of the inherent uncertainty of valuation, fair value of our
investments determined in good faith by the Board may
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differ significantly from the values that would have been used had a ready
market existed for the investments, and the differences could be material.
We adjust quarterly the valuation of our portfolio to reflect the Board's
determination of the fair value of each investment in our portfolio. Any changes
in fair value are recorded in our statement of operations as "Net change in
unrealized depreciation/appreciation on investments."
We operate in a highly competitive market for investment opportunities.
A large number of entities and individuals compete for the kinds of
investments we make. Many of these entities and individuals have greater
financial resources than we do. As a result of this competition, we may, from
time to time, be precluded from entering into attractive transactions on terms
considered by the Investment Adviser to be prudent in light of the risks to be
assumed.
We may not be able to elect pass-through tax treatment in the future as planned.
Currently, the Corporation is a taxable entity (a "C corporation") in order
to utilize net operating loss carryforwards generated from a predecessor company
as well as the Corporation's operating losses. In the future the Corporation may
elect to qualify for pass-through tax treatment contained in Subchapter M of the
Internal Revenue Code of 1986, as amended ("Code"). Subchapter M treatment
essentially means that certain income is taxed at the shareholder level only
with no tax at the corporate level, although the Corporation may be subject to a
corporate level tax on certain built-in gains in existence at the time the
Corporation would first become subject to Subchapter M. It is possible that, for
a number of reasons, the Corporation may be unable to meet Subchapter M
requirements, or that it may also cease to qualify for pass-through treatment,
or be subject to a four percent excise tax, if it fails to make certain
distributions. Under the 1940 Act, the Corporation is not permitted to make
distributions to shareholders unless it meets certain asset coverage
requirements with respect to money borrowed and senior securities issued.
Non-availability of pass-through tax treatment may potentially have a materially
adverse effect on the total return, if any, obtainable from an investment in the
Corporation's shares, once net operating loss carryforwards are no longer
available and the Subchapter M election has become advantageous.
We are dependent upon the Investment Advisor's key personnel for our future
success.
The Corporation is wholly dependent for the selection, structuring, closing
and monitoring of its investments on the diligence and skill of its officers and
of its Investment Advisor, subject to supervision by the Board. However, the
advisory agreement with InvestAmerica is short-term in nature and is subject to
cancellation on sixty days' notice. InvestAmerica's management believes that
performance is attributable largely to the abilities and experiences of certain
key individuals. The loss to InvestAmerica of these individuals could have a
material adverse effect on the Corporation's performance.
Potential significant conflicts of interest may impact our investment returns.
All of our officers also serve in similar capacities with InvestAmerica,
and with its affiliates, which include investment advisors to other investment
funds. Accordingly, our officers may have obligations to investors in those
entities, the fulfillment of which might not be in the best interests of the
Corporation or its stockholders or that may require them to devote time to
services for such other entities, which could interfere with the time available
to provide services to the Corporation. Nonetheless, InvestAmerica is of the
opinion that the efforts of its officers relative to the Corporation will be
synergistic with and beneficial to the affairs of both the Corporation and
InvestAmerica.
As a result of regulatory restrictions, we are not permitted to invest in
any portfolio company in which the Investment Advisor or any affiliate currently
has an investment. However, under the terms of an exemptive order granted by the
SEC, under certain specified circumstances, the Corporation may invest (and make
follow on investments) in portfolio companies at the same time and on the same
terms as InvestAmerica's affiliates. All such investments are reviewed by the
Corporation's independent directors to assure conformity to the exemptive order.
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If we issue senior securities, including debt, we will be exposed to additional
risks, including the typical risks associated with leverage.
The Corporation may borrow funds from and issue senior debt securities to
banks, insurance companies or other lenders up to the limit permitted by the
1940 Act. Currently, through MorAmerica, the Corporation has borrowed funds from
Cedar Rapids Bank & Trust Company (CRB&T) consisting of a term loan in the
amount of $6,250,000 and a revolving loan to borrow up to $500,000. Such
borrowings cause the Corporation to be leveraged. When such borrowings are
incurred, the lenders of these funds will have fixed dollar claims on the
Corporation's assets superior to the claims of the Corporation's shareholders.
Decreases in the value of the investments below their value at the time of
acquisition would cause the Corporation's net asset value to decline more
sharply than it would if the funds had not been borrowed. Any decrease in the
rate of income would cause net income to decline more sharply than it would had
the funds not been borrowed and invested. Leverage is thus generally considered
a speculative investment technique. Conversely, however, the ability of the
Corporation to achieve its investment objectives may depend in part on its
ability to acquire leverage on favorable terms by borrowing through banks or
insurance companies, and there can be no assurance that such leverage can in
fact be acquired.
As of September 30, 2007, the Corporation, on a consolidated basis through
its wholly-owned subsidiary MorAmerica, had outstanding $6,108,373 on the term
loan from CRB&T. The Corporation is currently using proceeds of portfolio
liquidity events to pay down this loan. The Corporation has not made any
drawings under the revolving loan with CRB&T, but may do so during fiscal year
2008 for working capital purposes, including making follow-on investments in its
portfolio companies, as further described below.
When we are a debt or minority equity investor in a portfolio company, we may
not be in a position to control that portfolio company.
When we make minority equity investments or invest in debt, we will be
subject to the risk that a portfolio company may make business decisions with
which we may disagree, and that the stockholders and management of such company
may take risks or otherwise act in ways that do not serve our interests. As a
result, a portfolio company may make decisions that could decrease the value of
our investments.
To protect or maintain our existing portfolio investments, we may need to
increase our investments in existing portfolio companies.
Following our initial investment, we may make additional debt and equity
investments in portfolio companies ("follow-on investments") in order to
increase our investment in a successful portfolio company, to exercise
securities that were acquired in the original financing, to preserve our
proportionate ownership when a subsequent financing is planned or to protect our
initial investment when such portfolio company's performance does not meet
expectations.
We may not have the funds to make additional investments in our portfolio
companies.
There is no assurance that we will make, or will have sufficient funds to
make, follow-on investments. Additionally, we are subject to limitations
relating to our BDC status which may limit our ability to make additional
investments in portfolio companies. Any decisions not to make a follow-on
investment or any inability on our part to make such an investment may have a
negative impact on a portfolio company in need of such an investment, may result
in a missed opportunity for us to increase our participation in a successful
operation, or may reduce the expected yield on the investment.
Changes in the law or regulations that govern us could have a material impact on
us or our operations.
We are regulated by the SEC. In addition, changes in the laws or
regulations that govern BDCs and registered investment companies may
significantly affect our business. Any change in the law or regulations that
govern our business could have a material impact on us or our operations. Laws
and regulations may be changed from time to time, and the interpretations of the
relevant laws and regulations also are subject to change, which may have a
material effect on our operations.
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Results may fluctuate and may not be indicative of future performance.
Our operating results may fluctuate and, therefore, you should not rely on
current or historical period results to be indicative of our performance in
future reporting periods. Factors that could cause operating results to
fluctuate include, but are not limited to, variations in the investment
origination volume and fee income earned, variation in timing of prepayments,
variations in and the timing of the recognition of net realized gains or losses
and changes in unrealized appreciation or depreciation, the level of our
expenses, the degree to which we encounter competition in our markets, and
general economic conditions.
Our Common Stock price may be volatile.
The trading price of our Common Stock may fluctuate substantially. The
price of the Common Stock may be higher or lower than the price you pay for your
shares, depending on many factors, some of which are beyond our control and may
not be directly related to our operating performance. These factors include, but
are not limited to, the following:
• price and volume fluctuations in the overall stock market from time to
time;
• significant volatility in the market price and trading volume of
securities of BDCs or other financial services companies;
• changes in laws or regulatory policies or tax guidelines with respect
to BDCs or regulated investment companies;
• actual or anticipated changes in our earnings or fluctuations in our
operating results or changes in the expectations of securities
analysts;
• risks associated with possible disruption in our operations due to
terrorism;
• general economic conditions and trends;
• loss of a major funding source;
• departures of key personnel; or
• other risks and uncertainties as may be detailed from time to time in
our public announcements and SEC filings.
Item 2. Properties.
The Corporation does not own or lease any properties or other tangible
assets. Its business premises and equipment are furnished by InvestAmerica. The
Investment Advisor is compensated for its provision of the business premises and
equipment to the Companies through the management fees paid by the Companies to
the Investment Advisor.
Item 3. Legal Proceedings.
There are no items to report.
Item 4. Submission of Matters to a Vote of Security Holders.
There are no items to report.
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PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities.
Information in response to this Item is incorporated by reference to the
"Shareholder Information" section of the 2007 Annual Report.
Item 6. Selected Financial Data.
Information in response to this Item is incorporated by reference to the
"Selected Financial Data" section of the 2007 Annual Report.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operation.
Information in response to this Item is incorporated by reference to the
"Management's Discussion and Analysis" section of the 2007 Annual Report.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Information in response to this Item is incorporated by reference to the
"Quantitative and Qualitative Disclosures About Market Risk" section of the 2007
Annual Report.
Item 8. Financial Statements and Supplementary Data.
Information in response to this Item is incorporated by reference to the
Consolidated Financial Statements, notes thereto and report thereon contained in
the 2007 Annual Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
There are no items to report.
Item 9A. Controls and Procedures.
In accordance with Item 307 of Regulation S-K promulgated under the
Securities Act, the Chief Executive Officer and Chief Financial Officer of the
Corporation (the "Certifying Officers") have conducted evaluations of the
Corporation's disclosure controls and procedures. As defined under Sections
13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the term "disclosure controls and procedures" means controls
and other procedures of an issuer that are designed to ensure that information
required to be disclosed by the issuer in the reports that it files or submits
under the Exchange Act is recorded, processed, summarized and reported, within
the time periods specified in the Commission's rules and forms. Disclosure
controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by an issuer in the
reports that it files or submits under the Exchange Act is accumulated and
communicated to the issuer's management, including its principal executive
officer or officers and principal financial officer or officers, or persons
performing similar functions, as appropriate to allow timely decisions regarding
required disclosure. The Certifying Officers have reviewed the Corporation's
disclosure controls and procedures and have concluded that those disclosure
controls and procedures are effective as of the date of this Annual Report on
Form 10-K. In compliance with Section 302 of the Sarbanes-Oxley Act of 2002 (18
U.S.C. 1350), each of the Certifying Officers executed an Officer's
Certification included in this Annual Report on Form 10-K.
-11-
As of the date of this Annual Report on Form 10-K, there have not been any
significant changes in the Corporation's internal controls or other factors that
could significantly affect these controls subsequent to the date of their
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
Item 9B. Other Information.
There are no items to report.
-12-
PART III
Item 10. Directors and Executive Officers of the Registrant.
Directors
Position(s) Term of Other
Name Held with Office and Directorships
and Age the Length of Principal Occupation(s) Held by Director
Corporation Time Served During Past 5 Years (1)
Benjamin Director Since President and CEO, Central Proteina Prima None
Jiaravanon, 37 February, (manufacturer of animal, poultry and fish feeds),
2004 since 2004; President, Strategic Planning Group,
Charoen Pokphand Indonesia (agribusiness
conglomerate), 2002 - 2004; Associate, Direct
Investments Group, Merrill Lynch, 1996 - 2002. Mr.
Jiaravanon received his Bachelor of Science degree
in industrial management from Carnegie Mellon
University.
Geoffrey T. Director Director Executive Chairman, Kreos Capital Limited (founded None
Woolley, and since in 1997 by Mr. Woolley to introduce "venture
48 Chairman 2003, leasing," an asset-backed debt instrument with
of the elected equity participation to the European and Israeli
Board Chairman markets); Founding Partner, Dominion Ventures,
April, 2004 Inc.; Managing Member, Hild Partners, LLC;
Director: BH Thermal Corp, University Opportunity
Fund and Utah Capital Investment Corporation;
Chairman of the Board: MorAmerica, University
Venture Fund, Hild Assets, Ltd. and Unitus Equity
Fund; Advisor: Polaris Ventures and Von Braun &
Schreiber Private Equity. Mr. Woolley holds an
M.B.A. from the University of Utah and a B.S. in
Business Management with a Minor in Economics from
Brigham Young University.
Gordon J. Roth, Director Since 2000 CFO and Chief Operating Officer, Roth Capital None
53 Partners, LLC (independent investment banking firm
specializing in small-cap companies), 2000-present;
Chairman, Roth & Company, P.C. (public accounting
firm located in Des Moines, Iowa), 1990-2000. Prior
to that, Mr. Roth was a partner at Deloitte &
Touche, a public accounting firm, in Des Moines.
Jasja Director Since Executive Director of Corporate Strategy and None
Kotterman, 38 February, Business Development, Avon Products, 2004-present;
2004 Vice President, Strategic Planning and Business
Development for Primedia Inc. (diversified media
company), 2003-2004; Managing Director, Primedia
International (the international development group
for Primedia), 2000-2003. Ms. Kotterman holds an
M.B.A. from the Wharton
-13-
Position(s) Term of Other
Name Held with Office and Directorships
and Age the Length of Principal Occupation(s) Held by Director
Corporation Time Served During Past 5 Years (1)
School, an M.A. in International Studies from the
University of Pennsylvania, and is a graduate of
Cambridge University in England, where she received
an M.A. in Genetics and an M.Phil. in International
Development.
Michael W. Director Since 1994 Director, MorAmerica since 1994; C.E.O. (since None
Dunn, 1980), President and CEO and Director (since 1983),
58 Farmers & Merchants Savings Bank of Manchester,
Iowa.
(1) "Other Directorships" indicate other U.S. publicly-traded companies
(companies with a class of securities registered pursuant to section 12 of the
Securities Exchange Act of 1934 (the "Exchange Act") or subject to the
requirements of section 15(d) of such Act or any company registered as an
investment company under the 1940 Act).
Executive Officers
As affiliated persons of InvestAmerica, the officers of the Corporation
listed in the chart below are "interested persons," as that term is defined in
Section 2(a)(19) of the 1940 Act, of the Corporation. The address for all
officers is 101 Second Street SE, Suite 800, Cedar Rapids, Iowa 52401.
The Corporation's officers listed below also serve in similar capacities
with MorAmerica and serve in various capacities with the following companies
which are under common control with or are affiliated with InvestAmerica:
InvestAmerica Venture Group, Inc. (provides management and investment services
to a private investment partnership, the Iowa Venture Capital Fund, L.P.);
InvestAmerica N.D. Management, Inc. (provides management and investment services
to NDSBIC, L.P., a Small Business Investment Company ("SBIC")); InvestAmerica
ND, L.L.C. (general partner of NDSBIC, L.P.); InvestAmerica L&C Management, Inc.
(provides management and investment services to Lewis & Clark Private Equities,
L.P., an SBIC ("Lewis")); InvestAmerica L&C, LLC (general partner of Lewis);
InvestAmerica NW Management, Inc. (provides management and investment services
to Invest Northwest, L.P. ("NWLP") (private venture capital fund); and
InvestAmerica NW, LLC (general partner of NWLP).
As representatives of InvestAmerica and its affiliates, the Corporation's
officers listed below also serve on the boards of directors of several of the
Corporation's portfolio companies and the portfolio companies of other managed
funds.
Term of
Position(s) Office and
Name Held with the Length of Principal Occupation(s)
and Age Corporation Time Served During Past 5 Years
David R. President and Since April, Chief Compliance Officer and Treasurer of the Corporation, March,
Schroder, 64 Secretary 2005 2004-April, 2005; President, Secretary and a Director of the
Corporation, 1994-2004. Mr. Schroder also serves as President,
Assistant Secretary and Director of InvestAmerica. He received a
B.S.F.S. from Georgetown University and an M.B.A. from the
University of Wisconsin.
Robert A. Chief Since April, Chief Financial Officer, Executive Vice President, Treasurer and a
Comey, 60 Financial 2005 Director of the Corporation, 1994-2004; Director of MorAmerica,
-14-
Term of
Position(s) Office and
Name Held with the Length of Principal Occupation(s)
and Age Corporation Time Served During Past 5 Years
Officer, 1989-2004; Executive Vice President and Assistant Secretary of
Executive Vice MorAmerica, 1994-2004; Treasurer of MorAmerica, 1994-April, 2005.
President, Mr. Comey has been the Executive Vice President, Treasurer,
Chief Assistant Secretary and a Director of InvestAmerica since 1994. He
Compliance received an A.B. in Economics from Brown University and an M.B.A.
Officer, from Fordham University.
Treasurer and
Assistant
Secretary
Kevin F. Senior Vice Since April, Vice President of the Corporation, 1994-1999; Vice President of
Mullane, 52 President 2005 MorAmerica, 1994-1998; Senior Vice President of the Corporation,
2000-2004; Senior Vice President of MorAmerica, 1999-2004. Mr.
Mullane is a Senior Vice President, Assistant Secretary and a
Director of InvestAmerica. He received an M.B.A. and an M.S. in
Business Administration, Emphasis in Accounting, from Rockhurst
Jesuit University.
Michael H. Vice President Since April, Vice President of MorAmerica since 2002. Mr. Reynoldson is Vice
Reynoldson41 2005 President of InvestAmerica. He received an M.B.A. from the
University of Iowa and a B.A. in Business Administration from
Washington State University.
Section 16(a) Beneficial Ownership Reporting Compliance
Pursuant to Section 16(a) of the Exchange Act, officers and directors of
the Corporation and persons beneficially owning 10% or more of the Corporation's
Common Stock (collectively, "reporting persons") must file reports on Forms 3, 4
and 5 regarding changes in their holdings of the Corporation's equity securities
with the Securities and Exchange Commission ("SEC"). Based solely upon a review
of copies of these reports sent to the Secretary of the Corporation and/or
written representations from reporting persons that no Form 5 was required to be
filed with respect to Fiscal Year 2007, the Corporation believes that all Forms
3, 4, and 5 required to be filed by all reporting persons have been properly and
timely filed with the SEC.
Code of Ethics
The Corporation has adopted a Code of Business Conduct and Ethics that
applies to all of the Corporation's officers, directors and employees. The
Corporation's Code of Business Conduct and Ethics, as amended by the Board of
Directors on October 5, 2004, is filed as an exhibit to this Annual Report on
Form 10-K.
If the Corporation makes any substantive amendments to the Code of Business
Conduct and Ethics or grant any waiver, including any implicit waiver, from a
provision of the Code of Business Conduct and Ethics to its principal executive
or principal financial officer, the Corporation will disclose the nature of such
amendment or waiver in a report on Form 8-K. A copy of the Code of Business
Conduct and Ethics will be mailed to persons without charge upon written request
to Secretary, MACC Private Equities Inc., 101 Second Street, S.E., Suite 800,
Cedar Rapids, Iowa 52401 or by calling (319) 363-8249.
-15-
Audit Committee
The Corporation has a separately-designated standing audit committee
established in accordance with section 3(a)(58)(A) of the Exchange Act. The
Audit Committee makes recommendations to the Board of Directors regarding the
engagement of the independent auditors for audit and non-audit services;
evaluates the independence of the auditors and reviews with the independent
auditors the fee, scope and timing of audit and non-audit services. The Audit
Committee also is charged with monitoring the Corporation's Policy Against
Insider Trading and Prohibited Transactions and its Code of Conduct. The Audit
Committee presently consists of Michael W. Dunn (Chair), Jasja Kotterman and
Gordon J. Roth. Each member of the Audit Committee is considered "independent"
under applicable NASDAQ listing standards. The Board of Directors has determined
that Gordon J. Roth is an Audit Committee financial expert.
Item 11. Executive Compensation.
Compensation Discussion and Analysis
The Corporation has no employees and does not pay any compensation to any
of its officers. The Corporation has not compensated its executive officers in
any of the last three fiscal years. The Corporation does not provide any of
bonus, stock options, stock appreciation rights, non-equity incentive plans,
non-qualified deferred compensation or pension benefits to its executive
officers. Further, the Corporation has no agreements with any officer pertaining
to change in control payments. All of the Corporation's officers and staff are
employed by InvestAmerica Investment Advisors, Inc., which pays all of their
cash compensation.
Compensation Committee Interlocks and Insider Participation
The Corporation does not have a separate compensation committee utilized to
determine the appropriate compensation payable to the Corporation's executive
officers and Directors due to the size of the Corporation. The Corporate
Governance/Nominating Committee, however, is responsible for, among other
things, annually reviewing and approving the Corporation's compensation policies
for Directors. The members of the Corporate Governance/Nominating Committee for
Fiscal Year 2007 were Jasja Kotterman (Chair), Gordon Roth and Michael Dunn. All
members of the Corporate Governance/Nominating Committee are considered
"independent" under applicable NASDAQ listing standards. No members of the
Committee have ever served as officers or employees of the Corporation. No
executive officers of the Corporation served, during Fiscal Year 2007: (i) on a
compensation committee of another entity which had an executive officer serving
on the Corporate Governance/Nominating Committee; (ii) as a director of another
entity which had an executive officer serving on the Corporate
Governance/Nominating Committee; or (iii) as a member of a compensation
committee of another entity which had an executive officer who served as a
Director of the Corporation.
Compensation Committee Report
The Corporate Governance/Nominating Committee has not reviewed or discussed
with the Corporation's management the Compensation Discussion and Analysis set
forth above because the Corporation's standing policy is to not compensate
executive officers. The Corporate Governance/Nominating Committee did recommend
to the Board of Directors that the Compensation Discussion and Analysis be
included in this report on Form 10-K.
CORPORATE GOVERNANCE /
NOMINATING COMMITTEE:
Jasja Kotterman, Chair
Gordon J. Roth
Michael W. Dunn
-16-
Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.
Common Stock Ownership
As of November 30, 2007, there were 2,464,621 shares of Common Stock issued
and outstanding. The following table sets forth certain information as of
November 30, 2007, with respect to the Common Stock ownership of: (i) those
persons or groups (as that term is used in Section 13(d)(3) of the Exchange Act
who beneficially own more than 5% of the Common Stock, (ii) each Director of the
Corporation, and (iii) all Officers and Directors of the Corporation, nine in
number, as a group. Unless otherwise provided, the address of those in the
following table is 101 Second Street S.E., Suite 800, Cedar Rapids IA 52401.
-17-
Name and Address of Amount and Nature Percent of Class of
Beneficial Owner Of Beneficial Ownership Voting Common Stock
---------------- ----------------------- -------------------
Atlas Management Partners, LLC(1) 804,689 Shares 32.65%
One South Main Street, Suite 1660, Salt Lake
City, Utah 84133
Bridgewater International Group, LLC(1) 804,689 Shares 32.65%
10500 South 1300 West, South Jordan, Utah
84095
Timothy A. Bridgewater(1) 809,689 Shares 32.85%
10500 South 1300 West
South Jordan, Utah 84095
Jasja Kotterman 1,000 Shares 0.04%
Michael W. Dunn 46,584 Shares 1.89%
Benjamin Jiaravanon(2) 804,689 Shares 32.65%
Ancol Barat, J1 Ancol VIII, No.1
Jakarta 14430 Indonesia
Gordon J. Roth 5,151 Shares 0.21%
David R. Schroder(3) 77,416 Shares 3.14%
Kevin F. Mullane(3) 11,264 Shares 0.46%
Robert A. Comey(3) 57,019 Shares 2.31%
Michael Reynoldson(4) 0 Shares --
Geoffrey T. Woolley 151,314 Shares 6.14%
All Officers and Directors as a Group 1,154,437 Shares 46.84%
------------------------------------
(1) Information with respect to Atlas Management Partners, LLC
("Atlas"), Bridgewater International Group, LLC ("BIG") and Mr. Bridgewater is
based upon Amendment No. 1 to Schedule 13D, dated September 30, 2003, as
subsequently amended February 13, 2004, April 28, 2005 and April 30, 2005, filed
by Atlas, BIG and others with the SEC (collectively, the "Atlas Group 13D"). The
Atlas Group 13D disclosed that control over
-17-
804,689 shares of Common Stock owned by BIG (the "BIG Shares") is governed by a
Shareholder and Voting Agreement dated September 29, 2003 among Atlas, BIG and
Kent Madsen (the "Shareholder Agreement"). The term of the Shareholder Agreement
extends to March 1, 2010 and may be extended in certain circumstances; however,
the Shareholder Agreement may also be terminated at any time by any party.
Under the Shareholder Agreement, BIG appointed Atlas as its limited proxy
to vote the BIG Shares, but BIG retains all other incidents of ownership of the
stock, including beneficial ownership and dispositive power. The Shareholder
Agreement also provides Atlas with certain rights of first refusal respecting
the BIG Shares and limits BIG's ability to otherwise dispose of the BIG Shares.
Pursuant to a Mutual Release and Waiver of Claims and Termination of Shareholder
and Voting Agreements among Atlas, BIG and the former managers of Atlas dated
April 28, 2005 and filed as part of the Atlas Group 13D, the former managers of
Atlas, including Geoffrey Woolley and Kent Madsen, no longer have any interests
in Atlas and have no voting rights respecting the BIG Shares.
As a voting Managing Director of Atlas, Mr. Bridgewater has shared control
over the voting power granted to Atlas under the Shareholder Agreement
respecting the BIG Shares, subject to the parties' rights under the Shareholder
Agreement. Mr. Bridgewater also individually owns 5,000 shares of Common Stock.
(2) Information with respect to Mr. Jiaravanon is based upon the Atlas
Group 13D. As the sole manager of BIG, Mr. Jiaravanon has shared control over
the voting power granted to Atlas under the Shareholder Agreement respecting the
BIG Shares, subject to the parties' rights under the Shareholder Agreement. To
the extent that BIG may be deemed to be in control of the Corporation as a
result of beneficial ownership of the Company's Common Stock, Mr. Jiaravanon, as
the sole manager of BIG, may be an "interested person" of the Company, as that
term is defined in Section 2(a)(19) of the 1940 Act.
(3) As principals, officers and directors of InvestAmerica, the investment
advisor for the Companies, and as officers of the Companies, Messrs. Schroder,
Mullane and Comey are "interested persons" of the Corporation, as that term is
defined in Section 2(a)(19) of the 1940 Act.
(4) As an officer of the Companies, and as an officer or director of
several companies affiliated with InvestAmerica, Mr. Reynoldson is an
"interested person" of the Corporation, as that term is defined in Section
2(a)(19) of the 1940 Act.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Investment Adviser & Certain Business Relationships
InvestAmerica is the investment advisor to the Corporation pursuant to
an Investment Advisory Agreement between the Corporation and InvestAmerica dated
July 21, 2005, which was approved by the Corporation's shareholders at its 2005
Annual Shareholders Meeting held on July 19, 2005 (the "MACC Advisory
Agreement"). The address of InvestAmerica is 101 Second Street S.E., Suite 800,
Cedar Rapids IA 52401.
The MACC Advisory Agreement provides that InvestAmerica is entitled to
receive a management fee equal to an annual rate of 1.5% of the Assets Under
Management (as defined in the MACC Advisory Agreement), payable monthly in
arrears. In addition to the annual management fee of 1.5% of the Assets Under
Management, InvestAmerica is entitled to receive an incentive fee (the "MACC
Incentive fee") in an amount equal to 13.4% of the Corporation's realized
capital gains in excess of realized capital losses of the Corporation after
allowance for any unrealized capital losses on the portfolio investments of the
Corporation. The MACC Incentive fee is calculated, accrued, and paid on a
quarterly basis, subject to adjustment at the end of each fiscal year. Total
management fees under the MACC Advisory Agreement amounted to $735 for the year
ended September 30, 2007. There were no MACC Incentive Fees accrued or paid
under the MACC Advisory Agreement in fiscal year 2007.
MorAmerica has a separate investment advisory agreement (the "MorAmerica
Advisory Agreement") with InvestAmerica dated July 21, 2005. MorAmerica pays
InvestAmerica, monthly in arrears, a management fee equal to the lesser of 1.5%
per annum of the (i) Combined Capital (as defined under regulations promulgated
by the
-18-
United States Small Business Administration) or (ii) Assets Under Management (as
defined in the MorAmerica Advisory Agreement). These fees are not based upon any
of the Corporation's assets managed by InvestAmerica under the MACC Advisory
Agreement. In addition, the MorAmerica Advisory Agreement provides that
MorAmerica will pay InvestAmerica an incentive fee in an amount equal to 13.4%
of the net capital gains, before taxes (the "MorAmerica Incentive Fee"). Net
capital gains, as defined in the MorAmerica Advisory Agreement, are calculated
as gross realized gains, minus the sum of capital losses, less any unrealized
depreciation, including reversals of previously recorded unrealized
depreciation, recorded during the year, and net investment losses, if any.
Capital losses and realized capital gains are not cumulative under the
computation of the MorAmerica Incentive Fee. Payments for MorAmerica Incentive
Fee resulting from noncash gains are deferred until the assets are sold. Total
management fees (net of management fees waived) under the MorAmerica Advisory
Agreement amounted to $330,890 for the year ended September 30, 2007. The
MorAmerica Incentive Fee earned and paid for the year ended September 30, 2007
amounted to $143,732 and $0, respectively. Included in the MorAmerica Incentive
Fee earned of $143,732 are approximately $27,617 of MorAmerica Incentive Fees
related to noncash gains which are being deferred.
Mr. David Schroder, President and Secretary of the Corporation and
MorAmerica, is a shareholder of, Director, President and Secretary of
InvestAmerica. Mr. Robert A. Comey, Executive Vice President, Chief Financial
Officer, Treasurer, Chief Compliance Officer and Assistant Secretary of the
Corporation and of MorAmerica, is a Director of and the Executive Vice
President, Treasurer and Assistant Secretary of InvestAmerica. Mr. Kevin
Mullane, Senior Vice President of the Corporation and MorAmerica, is a
shareholder and Director of, and the Senior Vice President and Assistant
Secretary of InvestAmerica. Mr. Michael H. Reynoldson, Vice President of the
Corporation and MorAmerica, is an officer or director of several companies
affiliated with InvestAmerica.
Independent Directors
The following Directors of the Corporation meet the definition of
"independent director" provided in the independence standards applicable to
companies listed on the Nasdaq Capital Market (the "Independence Standards"):
Michael W. Dunn
Jasja Kotterman
Gordon J. Roth
Geoffrey T. Woolley
All Directors who are voting members of committees of the Board meet the
definition of "independent director" under the Independence Standards applicable
to such committees.
In identifying Mr. Woolley as independent under the Independence Standards,
the Board considered the fact that Mr. Woolley was a Voting Managing Director of
Atlas Management Partners, LLC ("Atlas") from March, 2004 until April 2005.
Atlas served as the investment adviser to the Corporation and to MorAmerica from
March 1, 2004 through April 29, 2005. As of April 28, 2005, Mr. Woolley no
longer holds any interests in Atlas. The Board also considered the fact that, as
previously reported, Mr. Woolley entered into an Amended and Restated
Convertible Note and Security Agreement with the Corporation on July 20, 2005,
which amended and restated the terms of the loan made by Mr. Woolley to the
Corporation on March 1, 2004. Under the July 20, 2005 amendment, Mr. Woolley
subsequently elected to convert all debt owed by the Corporation to Mr. Woolley
into 135,366 shares of the Corporation's Common Stock.
-19-
Item 14. Principal Accounting Fees and Services.
The following table presents fees paid for professional services rendered
by KPMG LLP ("KPMG"), the Corporation's independent auditors, for fiscal Year
2007 and for the fiscal year ending September 30, 2006:
Fee Category Fiscal Year 2007 Fees Fiscal Year 2006 Fees
---------------------------------------- ---------------------------- ----------------------------
$71,225 $67,800
Audit Fees
-0- -0-
Audit-Related Fees
$22,700 $25,900
Tax Fees
-0- -0-
All Other Fees
---------------------------- ----------------------------
$93,925 $93,700
Total Fees
Audit Fees were for professional services rendered for the audit of the
Corporation's consolidated financial statements and review of the interim
consolidated financial statements included in quarterly reports and services
that are normally provided by KPMG in connection with statutory and regulatory
filings or engagements and include quarterly reviews, security counts and audit
of SBA Form 468.
Audit-Related Fees were for assurance and related services that are
reasonably related to the performance of the audit or review of the
Corporation's consolidated financial statements and are not reported under
"Audit Fees." These services include accounting consultations in connection with
acquisitions, consultations concerning financial accounting and reporting
standards.
Tax Fees were for professional services for federal, state and
international tax compliance, tax advice and tax planning and include
preparation of federal and state income tax returns, and other tax research,
consultation, correspondence and advice.
All Other Fees are for services other than the services reported above. The
Corporation did not pay any fees for such other services in fiscal year 2007 or
fiscal year 2006.
The Audit Committee has concluded the provision of the non-audit services
listed above is compatible with maintaining the independence of KPMG. KPMG did
not bill the Corporation's investment advisor, InvestAmerica, for any non-audit
services in either fiscal year 2007 or fiscal year 2006.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit
Services of Independent Auditors
The Audit Committee pre-approves all audit and permissible non-audit
services provided by the independent auditors. These services may include audit
services, audit-related services, tax services and other services. Pre-approval
is generally provided for up to one year and any pre-approval is detailed as to
the particular service or category of services and is generally subject to a
specific budget. The independent auditors and management are required to
periodically report to the Audit Committee regarding the extent of services
provided by the independent auditors in accordance with this pre-approval, and
the fees for the services performed to date. The Audit Committee may also
pre-approve particular services on a case-by-case basis.
-20-
PART IV
Item 15. Exhibits and Financial Statement Schedules.
(a) Documents filed as part of this Report:
(1) A. The following financial statements are incorporated
by reference to the 2007 Annual Report.
Consolidated Balance Sheet at September 30, 2007
Consolidated Statement of Operations for the year
ended September 30, 2007
Consolidated Statements of Changes in Net Assets for
the years ended September 30, 2007 and
September 30, 2006
Consolidated Statement of Cash Flows for the year
ended September 30, 2007
Notes to Consolidated Financial Statements
Consolidated Schedule of Investments as of
September 30, 2007
Notes to the Consolidated Schedule of Investments
B. The Report of the Registered Independent Public
Accounting Firm with respect to the financial
statements listed in A. above is incorporated by
reference to the 2007 Annual Report.
(2) No financial statement schedules of the Corporation are filed
herewith because (i) such schedules are not required or (ii)
the information required has been presented in the
aforementioned financial statements and schedule of
investments.
(3) The following exhibits are filed herewith or incorporated by
reference as set forth below:
3(i).1(1) Certificate of Incorporation of the Corporation.
3(i).2(2) Articles of Amendment to the Certificate of
Incorporation of the Corporation.
3(ii) Amended and Restated By-Laws of the Corporation.
4 See Exhibits 3(i).1 and 3(i).2.
10.1(3) Investment Advisory Agreement between MACC Private
Equities Inc. and InvestAmerica Investment
Advisors, Inc. dated July 21, 2005.
10.2(3) Investment Advisory Agreement between MorAmerica
Capital Corporation and InvestAmerica Investment
Advisors, Inc. dated July 21, 2005.
10.3(4) Business Loan Agreement dated August 30, 2007
between MorAmerica Capital Corporation and Cedar
Rapids Bank and Trust Company.
10.4(4) Commercial Guaranty given by MACC Private Equities
Inc. in favor of Cedar Rapids Bank and Trust
Company.
10.5(4) Commercial Pledge and Security Agreement dated
August 30, 2007 between MorAmerica Capital
Corporation and Cedar Rapids Bank and Trust
Company.
10.6(4) Commercial Security Agreement dated August 30,
2007 between MorAmerica Capital Corporation and
Cedar Rapids Bank and Trust Company.
10.7(4) Promissory Note in the amount of $500,000 dated
August 30, 2007 made by MorAmerica Capital
Corporation in favor of Cedar Rapids Bank and
Trust Company.
10.8(4) Promissory Note in the amount of $6,250,000 dated
August 30, 2007 made by MorAmerica Capital
Corporation in favor of Cedar Rapids Bank and
Trust Company.
10.9(4) Letter Agreement dated August 30, 2007 made by
MorAmerica Capital Corporation in favor of Cedar
Rapids Bank and Trust Company.
-21-
10.10(4) Safekeeping Agreement dated September 1, 2007
between MACC Private Equities Inc., MorAmerica
Capital Corporation and Cedar Rapids Bank and
Trust Company.
13 2007 Annual Report to Stockholders.
14(5) Code of Business Conduct and Ethics
21(6) Subsidiary of the Corporation and jurisdiction of
incorporation.
31.1 Section 302 Certification of David R. Schroder
(President).
31.2 Section 302 Certification of Robert A. Comey
(CFO).
32.1 Section 906 Certification of David R. Schroder
(President).
32.2 Section 906 Certification of Robert A. Comey
(CFO).
(1) Incorporated by reference to the Corporation's
Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 1997, as filed with the SEC on
May 14, 1997.
(2) Incorporated by reference to the Corporation's
Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 2005, as filed with the SEC on
August 15, 2005.
(3) Incorporated by reference to the Corporation's
Current Report on Form 8-K as filed with the SEC on
July 21, 2005.
(4) Incorporated by reference to the Corporation's
Current Report on Form 8-K as filed with the SEC on
September 6, 2007.
(5) Incorporated by reference to the Corporation's Annual
Report on Form 10-K for the period ended September
30, 2006, as filed with the SEC on December 28, 2006.
(6) Incorporated by reference to the Corporation's Annual
Report on Form 10-K for the period ended September
30, 2003, as filed with the SEC on December 29, 2003.
(b) Exhibits
See (a)(3) above.
(c) Financial Statement Schedules
See (a)(1) and (a)(2) above.
-22-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized on December 28, 2007.
/s/ David R. Schroder
-----------------------------------------
David R. Schroder
President and Secretary
/s/ Robert A. Comey
-----------------------------------------
Robert A. Comey
Chief Financial Officer and Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
Signature Date
/s/ Geoffrey T. Woolley
------------------------------ December 28, 2007
Geoffrey T. Woolley, Chairman of the Board
/s/ Michael W. Dunn
------------------------------ December 28, 2007
Michael W. Dunn, Director
/s/ Benjamin Jiaravanon
------------------------------ December 28, 2007
Benjamin Jiaravanon, Director
/s/ Jasja Kotterman
------------------------------ December 28, 2007
Jasja Kotterman, Director
/s/ Gordon J. Roth
------------------------------ December 28, 2007
Gordon J. Roth, Director
Exhibit 3(ii)
SECOND AMENDED AND RESTATED BYLAWS
OF
MACC PRIVATE EQUITIES INC.
ARTICLE I
STOCKHOLDERS
Section 1. Annual Meeting. An annual meeting of the stockholders, for the
election of directors to succeed those whose terms expire and for the
transaction of such other business as may properly come before the meeting,
shall be held on the fourth Tuesday of February commencing with the year 1996.
Section 2. Special Meetings. Special meetings of the stockholders, for any
purpose or purposes prescribed in the notice of the meeting, may be called by
the Board of Directors or the Chairman of the Board or by vote of forty percent
(40%) of the issued and outstanding Common Stock of the Corporation. In
addition, special meetings shall be held at such place, on such date and at such
time as they or he or she shall fix.
Section 3. Notice of Meetings. Written notice of the place, date and time
of all meetings of the stockholders, and, in case of a special meeting, the
purpose or purposes for which the meeting is called, shall be given, not less
than ten (10) nor more than sixty (60) days before the date on which the meeting
is to be held, to each stockholder entitled to vote at such meeting, except as
otherwise provided herein or required by law (meaning, here and hereinafter, as
required from time to time by the Delaware General Corporation Law or the
Certificate of Incorporation of the Corporation).
When a meeting is adjourned to another place, date or time, written notice
need not be given of the adjourned meeting if the place, date and time thereof
are announced at the meeting at which the adjournment is taken; provided,
however, that if the date of any adjourned meeting is more than thirty (30) days
after the date for which the meeting was originally noticed, or if a new record
date is fixed for the adjourned meeting, written notice of the place, date and
time of the adjourned meeting shall be given in conformity herewith. At any
adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 4. Quorum. At any meeting of the stockholders, the holders of a
majority of all of the shares of the stock entitled to vote at the meeting,
present in person or by proxy, shall constitute a quorum for all purposes,
unless or except to the extent that the presence of a larger number may be
required by law. Where a separate vote by a class or classes is required, a
majority of the shares of such class or classes present in person or represented
by proxy shall constitute a quorum entitled to take action with respect to that
vote on that matter.
If a quorum shall fail to attend any meeting, the chairman of the meeting
or the holders of a majority of the shares of stock entitled to vote who are
present, in person or by proxy, may adjourn the meeting to another place, date
or time. If a notice of any adjourned special meeting
of stockholders is sent to all stockholders entitled to vote thereat, stating
that it will be held with those present constituting a quorum, then except as
otherwise required by law, those present at such adjourned meeting shall
constitute a quorum, and all matters shall be determined by a majority of the
votes cast at such meeting.
Section 5. Organization. The Chairman of the Board, or such other person as
the Board of Directors may have designated or, in the absence of the Chairman
and such other person, the chief executive officer of the Corporation or, in his
or her absence, such person as may be chosen by the holders of a majority of the
shares entitled to vote who are present, in person or by proxy, shall call to
order any meeting of the stockholders and act as chairman of the meeting. In the
absence of the Secretary of the Corporation, the secretary of the meeting shall
be such person as the chairman appoints.
Section 6. Conduct of Business. The chairman of any meeting of stockholders
shall determine the order of business and the procedure at the meeting,
including such regulation of the manner of voting and the conduct of discussion
as seem to him or her in order.
The date and time of the opening and the closing of the polls for each
matter upon which the shareholders will vote at a meeting shall be announced at
the meeting by the person presiding over the meeting. The Board of Directors of
the Corporation may adopt by resolution such rules and regulations for the
conduct of the meeting of shareholders as it shall deem appropriate. Except to
the extent not inconsistent with any such rules and regulations as adopted by
the Board of Directors, the chairman of any meeting of shareholders shall have
the right and authority to prescribe such rules, regulations and procedures and
to do all such acts as, in the judgment of such chairman, are appropriate for
the proper conduct of the meeting. Such rules, regulations or procedures whether
adopted by the Board of Directors or prescribed by the chairman of the meeting,
may include, without limitation, the following: (i) the establishment of an
agenda or order of business for the meeting; (ii) rules and procedures for
maintaining order at the meeting and the safety of those present; (iii)
limitations on attendance at or participation in the meeting to shareholders of
record of the Corporation, their duly authorized and constituted proxies or such
other persons as the chairman of the meeting shall determine; (iv) restrictions
on entry to the meeting after the time fixed for the commencement thereof; and
(v) limitations on the time allotted to questions or comments by participants.
Unless and to the extent determined by the Board of Directors or the chairman of
the meeting, meetings of shareholders shall not be required to be held in
accordance with the rules of parliamentary procedure.
Section 7. Proxies and Voting. At any meeting of the stockholders, every
stockholder entitled to vote may vote in person or by proxy authorized by an
instrument in writing filed in accordance with the procedure established for the
meeting.
Each stockholder shall have one (1) vote for every share of stock entitled
to vote which is registered in his or her name on the record date for the
meeting, except as otherwise provided herein or required by law.
All voting, including the election of directors but excepting where
otherwise required by law, may be by a voice vote; provided, however, that upon
demand therefor by a stockholder entitled to vote or by his or her proxy, a
stock vote shall be taken. Every stock vote shall be taken
by ballots, each of which shall state the name of the stockholder or proxy
voting and such other information as may be required under the procedure
established for the meeting. Every vote taken by ballots shall be counted by an
inspector or inspectors appointed by the chairman of the meeting.
All elections shall be determined by a plurality of the votes cast, and
except as otherwise required by law, all other matters shall be determined by a
majority of the votes cast.
Section 8. Stock List. A complete list of stockholders entitled to vote at
any meeting of stockholders, arranged in alphabetical order for each class of
stock and showing the address of each such stockholder and the number of shares
registered in his or her name, shall be open to the examination of any such
stockholder, for any purpose germane to the meeting, during ordinary business
hours for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or if not so specified, at the place
where the meeting is to be held.
The stock list shall also be kept at the place of the meeting during the
whole time thereof and shall be open to the examination of any such stockholder
who is present. This list shall presumptively determine the identity of the
stockholders entitled to vote at the meeting and the number of shares held by
each of them.
Section 9. No Consent of Stockholders in Lieu of Meeting. Any action
required or permitted to be taken at any annual or special meeting of
stockholders of the Corporation must be effected at a duly called annual or
special meeting of the stockholders, and may not be effected by written consent
of the stockholders.
Section 10. Notice of Nominations and Other Business at Annual Meetings.
(a) Nominations of persons for election to the Board of Directors of
the Corporation and the proposal of business to be considered by the
stockholders may be made at an annual meeting of stockholders (1) pursuant
to the Corporation's notice of meeting, (2) by or at the direction of the
Board of Directors or (3) by any stockholder of record at the time of
giving of the notice by the stockholders provided for in this Section, who
is entitled to vote at the meeting and who complied with the notice
procedures set forth in this Section.
(b) For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to clause (3) of paragraph (a) of
this Section, the stockholder must have given timely notice thereof in
writing to the Secretary of the Corporation. To be timely, a stockholder's
notice shall be delivered to the Secretary not less than sixty (60) days
nor more than ninety (90) days prior to the date on which the Corporation
first mailed its proxy materials for the prior year's annual meeting;
provided, however, that in the event that the date of the annual meeting
has changed more than thirty (30) days from the prior year, notice by the
stockholder to be timely must be so delivered a reasonable time before the
date on which the Corporation first mails its proxy materials with respect
to the annual meeting at which such proposal is to be made. Such
stockholder's notice shall set forth (1) as to each person whom the
stockholder proposes to nominate for election or reelection as a director
all information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors,
or is otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (including
such person's written consent to being named in the proxy statement as a
nominee and to serving as a director if elected); (2) as to any other
business that the stockholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material
interest in such business of such stockholder and the beneficial owner, if
any, on which behalf the proposal is made; and (3) as to the stockholder
giving the notice and the beneficial owner, if any, on which behalf the
nomination or proposal is made (i) the name and address of such
stockholder, as they appear on the Corporation's books, and of such
beneficial owner and (ii) the class and number of shares of the Corporation
which are owned beneficially and of record by such stockholder and
beneficial owner.
(c) Notwithstanding anything in the second sentence of paragraph (b)
of this Section to the contrary, in the event that the number of directors
to be elected to the Board of Directors of the Corporation is increased and
there is no public announcement naming all of the nominees for director or
specifying the size of the increased Board of Directors made by the
Corporation at least seventy (70) days prior to the first anniversary of
the preceding year's annual meeting, a stockholder's notice required by
this Section shall also be considered timely, but only with respect to
nominees for any new positions created by such increase, if it shall be
delivered to the Secretary at the principal executive offices for the
Corporation not later than the close of business on the l0th day following
the day on which such public announcement is first made by the Corporation.
(d) Only such persons who are nominated in accordance with the
procedures set forth in this Section shall be eligible to serve as
directors and only such business shall be conducted at an annual meeting of
stockholders as shall have been brought before the meeting in accordance
with the procedures set forth in this Section. The chairman of the meeting
shall have the power and duty to determine whether a nomination or any
business proposed to be brought before the meeting was made in accordance
with the procedures set forth in this Section and, if any proposed
nomination or business is not in compliance with these Bylaws, to declare
that such defective proposed business or nomination shall be disregarded.
(e) For the purposes of this Section, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service,
Associated Press or a comparable national news service in a document
publicly filed by the Corporation with the Securities and Exchange
Commission pursuant to Section 13, 14 or 15 (d) of the Exchange Act.
(f) Notwithstanding the foregoing provisions of this Section, a
stockholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this Section. Nothing in this Section shall be deemed
to affect any rights of stockholders to request inclusion of proposals in
the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange
Act.
ARTICLE II
BOARD OF DIRECTORS
Section 1. Number and Term of Office. The number of directors of the
Corporation to constitute the Board of Directors shall be nine (9). Each
director shall hold office until such director's successor has been elected and
has qualified, or until such director's death, retirement, disqualification,
resignation or removal. The Board of Directors shall be and is divided into
three (3) classes, designated Class I, Class II and Class III. Class I directors
shall consist of three (3) directors who shall hold office until the annual
meeting of the stockholders in 1996. Class II directors shall consist of three
(3) directors who shall hold office until the annual meeting of stockholders in
1997. Class III directors shall consist of three (3) directors who shall hold
office until the annual meeting of stockholders in 1998. Upon expiration of the
terms of the office of directors as classified above, their successors shall be
elected for the term of three (3) years each. Commencing with the annual meeting
in 2003, all directors whose terms expire at such annual meeting and each annual
meeting thereafter shall be elected for one (1) year terms. Each director shall
hold office until the annual meeting of the stockholders for year in which his
term expires and until his or her successor shall be elected and qualify,
subject, however, to prior death, resignation, retirement, disqualification or
removal from office.
Section 2. Vacancies. If the office of any director becomes vacant by
reason of death, resignation, disqualification, removal or other cause, a
majority of the directors remaining in office, although less than a quorum, may
elect a successor for the unexpired term and until his or her successor is
elected and qualified.
Section 3. Regular Meetings. Regular meetings of the Board of Directors
shall be held at such place or places, on such date or dates, and at such time
or times as shall have been established by the Board of Directors and publicized
among all directors. A notice of each regular meeting shall not be required.
Section 4. Special Meetings. Special meetings of the Board of Directors may
be called by one-third (1/3) of the directors then in office (rounded up to the
nearest whole number) or by the chairman and shall be held at such place, on
such date and at such time as they or he or she shall fix. Notice of the place,
date and time of each such special meeting shall be given each director by whom
it is not waived by mailing written notice not less than five (5) days before
the meeting or by telegraphing or telexing or by facsimile transmission of the
same not less than twenty-four (24) hours before the meeting. Unless otherwise
indicated in the notice thereof, any and all business may be transacted at a
special meeting.
Section 5. Quorum. At any meeting of the Board of Directors, a majority of
the total number of the whole Board shall constitute a quorum for all purposes.
If a quorum shall fail to attend any meeting, a majority of those present may
adjourn the meeting to another place, date or time, without further notice or
waiver thereof.
Section 6. Participation in Meetings by Conference Telephone. Members of
the Board of Directors, or of any committee thereof, may participate in a
meeting of such Board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other and such participation shall
constitute presence in person at such meeting. However, this Section 6 and the
means of holding Board meetings authorized hereunder shall not apply to Board
meetings required to be held in person by the Investment Company Act of 1940, as
amended.
Section 7. Conduct of Business. At any meeting of the Board of Directors,
business shall be transacted in such order and manner as the Board may from time
to time determine, and all matters shall be determined by the vote of a majority
of the directors present, except as otherwise provided herein or required by
law. Action may be taken by the Board of Directors without a meeting if all
members thereof consent thereto in writing, and the writing or writings are
filed with the minutes of proceedings of the Board of Directors. However, the
Board shall not take action by consent and without a meeting if the provisions
of the Investment Company Act of 1940, as amended, would otherwise require the
meeting to be held in person.
Section 8. Powers. The Board of Directors may, except as otherwise required
by law, exercise all such powers and do all such acts and things as may be
exercised or done by the Corporation, including, without limiting the generality
of the foregoing, the unqualified power:
(a) To declare dividends from time to time in accordance with law;
(b) To purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;
(c) To authorize the creation, making and issuance, in such form as it
may determine, of written obligations of every kind, negotiable or
non-negotiable, secured or unsecured, and to do all things necessary in
connection therewith;
(d) To remove any officer of the Corporation with or without cause,
and from time to time to devolve the powers and duties of any officer upon
any other person for the time being;
(e) To confer upon any officer of the Corporation the power to
appoint, remove and suspend subordinate officers, employees and agents;
(f) To adopt from time to time such stock, option, stock purchase,
bonus or other compensation plans for directors, officers, employees and
agents of the Corporation and its subsidiaries as it may determine;
(g) To adopt from time to time such insurance, retirement and other
benefit plans for directors, officers, employees and agents of the
Corporation and its subsidiaries as it may determine; and
(h) To adopt from time to time regulations, not inconsistent with
these Bylaws, for the management of the Corporation's business and affairs.
Section 9. Compensation of Directors. Directors, as such, may receive,
pursuant to resolution of the Board of Directors, fixed fees and other
compensation for their services as directors, including, without limitation,
their services as members of committees of the Board of Directors.
ARTICLE III
COMMITTEES
Section 1. Committees of the Board of Directors. The Board of Directors, by
a vote of a majority of the whole Board, may from time to time designate
committees of the Board, with such lawfully delegable powers and duties as it
thereby confers, to serve at the pleasure of the Board and shall, for those
committees and any others provided for herein, elect a director or directors to
serve as the member or members, designating, if it desire, other directors as
alternate members who may replace any absent or disqualified member at any
meeting of the committee. Any committee so designated may exercise the power and
authority of the Board of Directors to declare a dividend, to authorize the
issuance of stock or to adopt a certificate of ownership and merger pursuant to
Section 253 of the Delaware General Corporation Law if the resolution which
designates the committee or a supplemental resolution of the Board of Directors
shall so provide. In the absence or disqualification of any member of any
committee and any alternate member in his or her place, the member or members of
the committee present at the meeting and not disqualified from voting, whether
or not he or she or they constitute a quorum, may by unanimous vote appoint
another member of the Board of Directors to act at the meeting in the place of
the absent or disqualified member.
Section 2. Conduct of Business. Each committee may determine the procedural
rules for meeting and conducting its business and shall act in accordance
therewith, except as otherwise provided herein or required by law. Adequate
provision shall be made for notice to members of all meetings; a majority of the
members shall constitute a quorum unless the committee shall consist of one (1)
or two (2) members, in which event one (1) member shall constitute a quorum; and
all matters shall be determined by a majority vote of the members present.
Action may be taken by any committee without a meeting if all members thereof
consent thereto in writing, and the writing or writings are filed with the
minutes of the proceedings of such committee.
ARTICLE IV
OFFICERS
Section 1. Generally. The officers of the corporation shall consist of a
Chairman of the Board, a President, an Executive Vice President, one or more
Vice Presidents, a Secretary, a Treasurer and such other officers as may from
time to time be appointed by the Board of Directors. Officers shall be elected
by the Board of Directors, which shall consider that subject at its first
meeting after every annual meeting of stockholders. Each officer shall hold
office until his or her successor is elected and qualified or until his or her
earlier resignation or removal. Any number of offices may be held by the same
person.
Section 2. President. The President shall be the chief executive officer of
the Corporation. Subject to the provisions of these Bylaws and to the direction
of the Board of Directors, he or she shall have the responsibility for the
general management and control of the business and affairs of the Corporation
and shall perform all duties and have all powers which are commonly incident to
the office of chief executive or which are delegated to him or her by the Board
of Directors. He or she shall have power to sign all stock certificates,
contracts and
other instruments of the Corporation which are authorized and shall have general
supervision and direction of all of the other officers, employees and agents of
the Corporation.
Section 3. Vice President. Each Vice President shall have such powers and
duties as may be delegated to him or her by the Board of Directors. One (1) Vice
President shall be designated by the Board to perform the duties and exercise
the powers of the President in the event of the President's absence or
disability, provided that if there shall be only one Vice President, that Vice
President shall perform the duties and exercise the powers of the President in
the event of the President's absence or disability.
Section 4. Treasurer. The Treasurer shall have the responsibility for
maintaining the financial records of the Corporation. He or she shall make
disbursements of the funds of the Corporation as are authorized and shall render
from time to time an account of all such transactions and of the financial
condition of the Corporation. The Treasurer shall also perform such other duties
as the Board of Directors may from time to time prescribe.
Section 5. Secretary. The Secretary shall issue all authorized notices for,
and shall keep minutes of, all meetings of the stockholders and the Board of
Directors. He or she shall have charge of the corporate books and shall perform
such other duties as the Board of Directors may from time to time prescribe.
Section 6. Designation of Authority. The Board of Directors may from time
to time delegate the powers or duties of any officer to any other officers or
agents, notwithstanding any provision hereof.
Section 7. Removal. Any officer of the Corporation may be removed at any
time, with or without cause, by the Board of Directors.
Section 8. Action with Respect to Securities of Other Corporations. Unless
otherwise directed by the Board of Directors, the President or an officer of the
Corporation authorized by the President shall have power to vote and otherwise
act on behalf of the Corporation, in person or by proxy, at any meeting of
stockholders of or with respect to any action of stockholders of any other
corporation in which this Corporation may hold securities and otherwise to
exercise any and all rights and powers which this Corporation may possess by
reason of its ownership of securities in such other corporation.
ARTICLE V
STOCK
Section 1. Stock.
(a) The shares of the Corporation may be represented by certificates
signed by, or in the name of the Corporation by, the President or a Vice
President, and by the Secretary or Assistant Secretary, or the Treasurer or
an Assistant Treasurer, certifying the number of shares owned by him or
her. Any or all of the signatures on the certificate may be by facsimile.
(b) Notwithstanding the foregoing, the Corporation may issue shares of
stock in the form of uncertificated shares. Such uncertificated shares of
stock shall be credited to a book entry account maintained by the
Corporation (or its designee) on behalf of the stockholder.
(c) Notwithstanding the foregoing, the shares of stock of the
Corporation shall be eligible for a Direct Registration Program operated by
a clearing agency registered under Section 17A of the Securities Exchange
Act of 1934, as amended.
Section 2. Transfers of Stock. Transfers of stock shall be made only upon
the transfer books of the Corporation kept at an office of the Corporation or by
transfer agents designated to transfer shares of the stock of the Corporation.
Except where a certificate is issued in accordance with Section 4 of Article V
of these Bylaws, an outstanding certificate for the number of shares involved
shall be surrendered for cancellation before a new certificate is issued
therefor, if such shares are represented by certificates.
Section 3. Record Date. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders, or
to receive payment of any dividend or other distribution or allotment of any
rights or to exercise any rights in respect of any change, conversion or
exchange of stock or for the purpose of any other lawful action, the Board of
Directors may fix a record date, which record date shall not precede the date on
which the resolution fixing the record date is adopted and which record date
shall not be more than sixty (60) days nor less than ten (10) days before the
date of any meeting of shareholders, nor more than sixty (60) days prior to the
time for such other action as hereinbefore described; provided, however, that if
no record date is fixed by the Board of Directors, the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given or, if notice is not waived, at the close of business
on the day next preceding the day on which the meeting is held, and, for
determining stockholders entitled to receive payment of any dividend or other
distribution or allotment of rights or to exercise any rights of change,
conversion or exchange of stock or for any other purpose, the record date shall
be at the close of business on the day on which the Board of Directors adopts a
resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
Section 4. Lost, Stolen or Destroyed Certificates. In the event of the
loss, theft or destruction of any certificate of stock, another may be issued in
its place pursuant to such regulations as the Board of Directors may establish
concerning the giving of a satisfactory bond or bonds of indemnity.
Section 5. Regulations. The issue, transfer, conversion and registration of
certificates of stock shall be governed by such other regulations as the Board
of Directors may establish.
ARTICLE VI
NOTICES
Section 1. Notices. Except as otherwise specifically provided herein or
required by law, all notices required to be given to any stockholder, director,
officer, employee or agent shall be in writing and may in every instance be
effectively given by hand delivery to the recipient thereof, by depositing such
notice in the mails, postage paid, or by sending such notice by pre-paid
telegram or mailgram. Any such notice shall be addressed to such stockholder,
director, officer, employee or agent at his or her last known address as the
same appears on the books of the Corporation. The time when such notice is
received, if hand delivered, or dispatched, if delivered through the mails or by
telegram or mailgram, shall be the time of the giving of the notice.
Section 2. Waivers. A written waiver of any notice, signed by a
stockholder, director, officer, employee or agent, whether before or after the
time of the event for which notice is to be given, shall be deemed equivalent to
the notice required to be given to such stockholder, director, officer, employee
or agent. Neither the business nor the purpose of any meeting need be specified
in such a waiver.
ARTICLE VII
MISCELLANEOUS
Section 1. Facsimile Signatures. In addition to the provisions for use of
facsimile signatures elsewhere specifically authorized in these Bylaws,
facsimile signatures of any officer or officers of the Corporation may be used
whenever and as authorized by the Board of Directors or a committee thereof.
Section 2. Corporate Seal. The Board of Directors may provide a suitable
seal, containing the name of the Corporation, which seal shall be in the charge
of the Secretary. If and when so directed by the Board of Directors or a
committee thereof, duplicates of the seal may be kept and used by the Treasurer
or by an Assistant Secretary or Assistant Treasurer.
Section 3. Reliance upon Books, Reports and Records. Each director, each
member or any committee designated by the Board of Directors, and each officer
of the Corporation shall, in the performance of his or her duties, be fully
protected in relying in good faith upon the books of account or other records of
the Corporation and upon such information, opinions, reports or statements
presented to the Corporation by any of its officers or employees, or committees
of the board of Directors so designated, or by any other person as to matters
which such director or committee member reasonably believes are within such
other person's professional or expert competence or who has been selected with
reasonable care by or on behalf of the Corporation.
Section 4. Fiscal Year. The fiscal year of the Corporation shall be as
fixed by the Board of Directors.
Section 5. Time Periods. In applying any provision of these Bylaws which
requires that an act be done or not be done a specified number of days prior to
an event or that an act be
done during a period of a specified number of days prior to an event, calendar
days shall be used, the day of the doing of the act shall be excluded, and the
day of the event shall be included.
ARTICLE VIII
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1. Right to Indemnification. Each person who was or is made a party
or is threatened to be made a party to or is otherwise involved in any action,
suit or proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she is or was a
director or an officer of the Corporation or is or was serving at the request of
the Corporation as a director, officer, employee or agent of another corporation
or of a partnership, joint venture, trust or other enterprise, including service
with respect to an employee benefit plan (hereinafter an "indemnitee") , whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation broader indemnification rights than such law permitted the
Corporation to provide prior to such amendment), against all expense, liability
and loss (including attorneys' fees, judgments, fines, ERISA excise taxes and or
penalties and amounts paid in settlement) reasonably incurred or suffered by
such indemnitee in connection therewith; provided, however, that, except as
provided in Section 3 of this Article VIII with respect to proceedings to
enforce rights to indemnification, the Corporation shall indemnify any such
indemnitee in connection with a proceeding (or part thereof) initiated by such
indemnitee only if such proceeding (or part thereof) was authorized by the Board
of Directors of the Corporation. The right of indemnification provided for in
this Section 1 is subject to the limitation provided in Section 7 and elsewhere
in this Article VIII.
Section 2. Right to Advancement of Expenses. The right to indemnification
conferred in Section 1 of this Article VIII shall include the right to be paid
by the Corporation the expenses incurred in defending any such proceeding in
advance of its final disposition (hereinafter an "advancement of expenses");
provided, however, that an advancement of expenses incurred by an indemnitee in
his or her capacity as a director or officer (and not in any other capacity in
which service was or is rendered by such indemnitee, including, without
limitation, service to an employee benefit plan) shall be made only (i) upon
delivery to the Corporation of an undertaking (hereinafter an "undertaking"), by
or on behalf of such indemnitee, to repay all amounts so advanced if it shall
ultimately be determined by final judicial decision from which there is no
further right to appeal (hereinafter a "final adjudication") that such
indemnitee is not entitled to be indemnified for such expenses under this
section 2 or otherwise, (ii) if the Corporation shall be insured against any
such advances or (iii) if a majority of a quorum of the disinterested, non-party
directors of the Corporation, or an independent legal counsel in a written
opinion, shall determine, based on a review of readily available facts (as
opposed to a full trial-type inquiry), that there is reason to believe that the
indemnitee ultimately will be found entitled to indemnification. The rights to
indemnification and to the advancement of expenses conferred in Sections 1 and 2
of this Article VIII shall be contract rights and such
rights shall continue as to an indemnitee who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the indemnitee's
heirs, executors and administrators.
Section 3. Right of Indemnitee to Bring Suit. If a claim under Section 1 or
2 of this Article VIII is not paid in full by the Corporation within sixty (60)
days after a written claim has been received by the Corporation, except in the
case of a claim for an advancement of expenses, in which case the applicable
period shall be twenty (20) days, the indemnitee may at any time thereafter
bring suit against the Corporation to recover the unpaid amount of the claim. If
successful in whole or in part in any such suit, or in a suit brought by the
Corporation to recover an advancement of expenses pursuant to the terms of the
undertaking, the indemnitee shall be entitled to be paid also the expense of
prosecuting or defending such suit. In
(a) any suit brought by the indemnitee to enforce a right to
indemnification hereunder (but not in a suit brought by the indemnitee to
enforce a right to an advancement of expenses) it shall be a defense that,
and
(b) in any suit brought by the Corporation to recover an advancement
of expenses pursuant to the terms of an undertaking, the Corporation shall
be entitled to recover such expenses upon final adjudication that, the
indemnitee has not met any applicable standard for indemnification set
forth in the Delaware General Corporation Law or Section 7 of this Article
VIII. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel or its stockholders) to have made a
determination prior to the commencement of such suit that indemnification
of the indemnitee is proper in the circumstances because the indemnitee has
met the applicable standard of conduct set forth in the Delaware General
Corporation Law and Section 7 of this Article VIII, nor an actual
determination by the Corporation (including its Board of Directors,
independent legal counsel or its stockholders) that the indemnitee has not
met such applicable standard of conduct, shall create a presumption that
the indemnitee has not met the applicable standard of conduct or, in the
case of such a suit brought by the indemnitee, be a defense to such suit.
In any suit brought by the indemnitee to enforce a right to indemnification
or to an advancement of expenses hereunder, or brought by the Corporation
to recover an advancement of expenses pursuant to the terms of an
undertaking, the burden of proving that the indemnitee is not entitled to
be indemnified, or to such advancement of expenses, under this Article VIII
or otherwise, shall be on the corporation.
Section 4. Non-Exclusivity of Rights. The rights to indemnification and to
the advancement of expenses conferred in this Article VIII shall not be
exclusive of any other right which any person may have or hereafter acquire
under any statute, the Corporation's Certificate of Incorporation, Bylaws,
agreement, vote of stockholders or disinterested directors or otherwise.
Section 5. Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law; provided, however,
that no insurance may be obtained for the purpose of indemnifying any disabling
conduct, as defined in Section 7 of this Article VIII.
Section 6. Indemnification of Employees and Agents of the Corporation. The
Corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification and to the advancement of expenses to
any employee or agent of the Corporation to the fullest extent of the provisions
of this Article with respect to the indemnification and advancement of expenses
of directors and officers of the Corporation.
Section 7. Limitation for Disabling Conduct. Notwithstanding any of the
foregoing, the Corporation may not indemnify any director or officer of the
Corporation against any liability to the corporation or its security holders to
which such director or officer might otherwise be subject by reason of
"disabling conduct," as hereinafter defined.
(a) In the case of a director or officer of the Corporation, such
determination shall include a determination that the liability for which
such indemnification is sought did not arise by reason of such person's
disabling conduct. Such determination may be based on:
(i) a final decision on the merits by a court or other body
before whom the action, suit or proceeding was brought that the person
to be indemnified was not liable by reason of disabling conduct, or
(ii) in the absence of such a decision, a reasonable
determination, based on a review of the facts, that the person to be
indemnified was not liable by reason of such person's disabling
conduct by
(A) the vote of majority of a quorum of directors who are
disinterested, non-party directors, or
(B) an independent legal counsel in a written opinion.
In making such determination, such disinterested, non-party directors or
independent legal counsel, as the case may be, may deem the dismissal for
insufficiency of evidence of any disabling conduct of either a court action or
an administrative proceeding against a person to be indemnified to provide
reasonable assurance that such person was not liable by reason of disabling
conduct.
(b) For the purpose of this Section:
(i) "disabling conduct" of a director or officer shall mean such
person's willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office;
(ii) "disinterested, non-party director" shall mean a director of
the Corporation who is neither an "interested person" of the
Corporation as defined in Section 2(a)(19) of the Investment Company
Act of 1940 nor a party to the action, suit or proceeding in
connection with which indemnification is sought;
(iii) "independent legal counsel" shall mean a lawyer who is not,
and at least two (2) years prior to his engagement to render the
opinion in question has not been,
employed or retained by the Corporation, by any investment advisor to
or the principal underwriter for the Corporation, or by any person
affiliated with any of the foregoing; and
(iv) "the Corporation" shall include any wholly-owned subsidiary
of the corporation and, in addition to the resulting Corporation, any
constituent Corporation (including any constituent of a constituent)
absorbed in a consolidation or merger which, if its separate existence
had continued, would have had power and authority to indemnify its
directors, officers, employees or agents.
ARTICLE IX
AMENDMENTS
These Bylaws may be amended or repealed by the Board of Directors at any
meeting or by the stockholders at any meeting.
THE AMENDED AND RESTATED BY-LAWS WERE ADOPTED AS OF DECEMBER 12, 2007.