Exhibit 99.2
AGREEMENT AND PLAN OF MERGER
dated as of February 8, 2000
by and among
ANTHRACITE CAPITAL, INC.,
ANTHRACITE ACQUISITION CORP.
and
CORE CAP, INC.
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to
which it is attached but is inserted for convenience only.
Page
No.
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ARTICLE I THE MERGER..............................................................................................1
1.01 The Merger......................................................................................1
1.02 Closing.........................................................................................1
1.03 Effective Time..................................................................................2
1.04 Certificate of Incorporation and Bylaws of the Surviving Corporation............................2
1.05 Directors and Officers of the Surviving Corporation.............................................2
1.06 Effects of the Merger...........................................................................2
1.07 Further Assurances..............................................................................2
ARTICLE II CONVERSION OF SHARES...................................................................................3
2.01 Conversion of Capital Stock.....................................................................3
2.02 Exchange of Certificates........................................................................5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................................................8
3.01 Organization and Qualification..................................................................8
3.02 Capital Stock...................................................................................8
3.03 Authority Relative to This Agreement............................................................9
3.04 Non-Contravention; Approvals and Consents......................................................10
3.05 Financial Reports..............................................................................11
3.06 Absence of Certain Changes or Events...........................................................11
3.07 Absence of Undisclosed Liabilities.............................................................11
3.08 Legal Proceedings..............................................................................12
3.09 Information Supplied...........................................................................12
3.10 Compliance with Laws and Orders................................................................12
3.11 Investment Company Act.........................................................................13
3.12 Compliance with Agreements; Certain Agreements.................................................13
3.13 Mortgage Backed Securities.....................................................................14
3.14 Mortgage Loans.................................................................................14
3.15 Indebtedness...................................................................................15
3.16 Taxes..........................................................................................16
3.17 Employee Benefit Plans; ERISA..................................................................17
3.18 Labor Matters..................................................................................18
3.19 Real Property; Mortgage Loans..................................................................18
3.20 Intellectual Property Rights...................................................................18
3.21 Vote Required..................................................................................18
3.22 Financial Advisor..............................................................................19
3.23 Ownership of Parent Common Stock...............................................................19
3.24 Affiliate Transactions.........................................................................19
3.25 Article FIFTH of the Company's Certificate of Incorporation and Section 203 of the DGCL Not
Applicable.....................................................................................19
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB......................................................19
4.01 Organization and Qualification.................................................................19
4.02 Capital Stock..................................................................................20
4.03 Authority Relative to This Agreement...........................................................21
4.04 Non-Contravention; Approvals and Consents......................................................21
4.05 SEC Reports and Financial Statements...........................................................22
4.06 Absence of Certain Changes or Events...........................................................23
4.07 Absence of Undisclosed Liabilities.............................................................23
4.08 Legal Proceedings..............................................................................23
4.09 Information Supplied...........................................................................24
4.10 Compliance with Laws and Orders................................................................24
4.11 Investment Company Act.........................................................................24
4.12 Compliance with Agreements; Certain Agreements.................................................25
4.13 Mortgage Backed Securities.....................................................................25
4.14 Mortgage Loans.................................................................................26
4.15 Taxes..........................................................................................27
4.16 Employee Benefit Plans; ERISA..................................................................28
4.17 Labor Matters..................................................................................28
4.18 Environmental Matters..........................................................................28
4.19 Intellectual Property Rights...................................................................29
4.20 Opinion of Financial Advisor...................................................................29
4.21 Ownership of Company Common Stock..............................................................29
4.22 Affiliate Transactions.........................................................................29
4.23 Ownership Limit Restrictions of Parent's Articles of Incorporation and Section
3-602 of the Maryland General Corporation Law Not Applicable................................30
ARTICLE V COVENANTS..............................................................................................30
5.01 Conduct of Business by the Company.............................................................30
5.02 Conduct of Business by Parent and Sub..........................................................32
5.03 Covenants of the Company and Parent............................................................34
5.04 No Solicitations...............................................................................35
5.05 Purchases of Common Stock of the Other Party...................................................36
5.06 Management Agreement Assignment Agreement......................................................36
ARTICLE VI ADDITIONAL AGREEMENTS.................................................................................36
6.01 Access to Information..........................................................................36
6.02 Preparation of Registration Statement and Proxy Statement......................................37
6.03 Approval of Stockholders.......................................................................37
6.04 Company Affiliates.............................................................................38
6.05 Stock Exchange Listing.........................................................................38
6.06 Regulatory and Other Approvals.................................................................38
6.07 Company Option Plan............................................................................38
6.08 Directors' and Officers' Indemnification and Insurance.........................................39
6.09 Parent Governance..............................................................................41
6.10 Expenses.......................................................................................41
6.11 Brokers or Finders.............................................................................41
6.12 Takeover Statutes..............................................................................41
6.13 Conveyance Taxes...............................................................................42
6.14 Letters of Accountants.........................................................................42
6.15 Coordination of Dividends......................................................................42
ARTICLE VII CONDITIONS...........................................................................................42
7.01 Conditions to Each Party's Obligation to Effect the Merger.....................................43
7.02 Conditions to Obligation of Parent and Sub to Effect the Merger................................43
7.03 Conditions to Obligation of the Company to Effect the Merger...................................44
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER...................................................................46
8.01 Termination....................................................................................46
8.02 Effect of Termination..........................................................................47
8.03 Amendment......................................................................................48
8.04 Waiver.........................................................................................48
ARTICLE IX GENERAL PROVISIONS....................................................................................49
9.01 Non-Survival of Representations, Warranties, Covenants and Agreements..........................49
9.02 Notices........................................................................................49
9.03 Entire Agreement; Incorporation of Exhibits....................................................50
9.04 Public Announcements...........................................................................50
9.05 No Third Party Beneficiary.....................................................................51
9.06 No Assignment; Binding Effect..................................................................51
9.07 Headings.......................................................................................51
9.08 Invalid Provisions.............................................................................51
9.09 Governing Law..................................................................................51
9.10 Enforcement of Agreement.......................................................................51
9.11 Certain Definitions............................................................................52
9.12 Counterparts...................................................................................53
EXHIBITS
EXHIBIT A Form of Articles Supplementary for Parent Preferred Stock
EXHIBIT B Form of Affiliate Agreement
EXHIBIT C Form of Opinion of Company's Counsel
EXHIBIT D Form of REIT Opinion of Company's Counsel
EXHIBIT E Form of Opinion of Parent's Counsel
EXHIBIT F Form of REIT Opinion of Parent's Counsel
EXHIBIT G Form of Opinion of Parent's Local Counsel
SCHEDULES
SCHEDULE I Computation of Net Asset Value
SCHEDULE 7.01(E)
GLOSSARY OF DEFINED TERMS
The following terms, when used in this Agreement, have the meanings
ascribed to them in the corresponding Sections of this Agreement listed
below:
"affiliate" -- Section 9.11(a)
"Affiliate Agreement" -- Section 6.04
"Agreement" -- Preamble
"Alternative Proposal" -- Section 5.04
"Appraisals" -- Section 2.01(c)(i)
"Appraisers" -- Section 2.01(c)(i)
"Benchmark Price" -- Section 2.01(c)(i)
"beneficially" -- Section 9.11(b)
"Break-up Fee" -- Section 8.02(b)
"business day" -- Section 9.11(c)
"Certificate of Merger" -- Section 1.03
"Certificates" -- Section 2.02(b)
"Class A Common Stock" -- Section 2.01(b)
"Class B Common Stock" -- Section 2.01(b)
"Closing" -- Section 1.02
"Closing Date" -- Section 1.02
"Code" -- Section 2.02(f)
"Common Stock Conversion Number" -- Section 2.01(c)(i)
"Company" -- Preamble
"Company Affiliates" -- Section 6.04
"Company Common Stock" -- Section 2.01(b)
"Company Disclosure Letter" -- Section 3.01
"Company Employee Benefit Plans" -- Section 3.17(d)(i)
"Company Financial Information" -- Section 3.05
"Company MBS" -- Section 3.13(a)
"Company MBS Certificates" -- Section 3.13(a)
"Company Mortgage Files" -- Section 3.14(a)
"Company Mortgage Loans" -- Section 3.14(a)
"Company Mortgage Notes" -- Section 3.14(a)
"Company Permits" -- Section 3.10
"Company Permitted Liens" -- Section 3.13(a)
"Company Principal MBS Agreements" -- Section 3.13(b)
"Company Series A Preferred Stock" -- Section 2.01(b)
"Company Stock" -- Section 2.01(b)
"Company Stock Option" -- Section 6.07
"Company Stockholders' Approval" -- Section 6.03
"Company Stockholders' Meeting" -- Section 6.03
"Confidentiality Agreement" -- Section 6.01
"Constituent Corporations" -- Section 1.01
"Contracts" -- Section 3.04(a)
"control," "controlling," "controlled
by" and "under common control with" -- Section 9.11(a)
"DGCL" -- Section 1.01
"Disputed Values" -- Section 2.01(c)(i)
"Dissenting Share" -- Section 2.01(d)(i)
"Effective Time" -- Section 1.03
"Environmental Laws" -- Section 4.18(e)
"Environmental Liability" -- Section 4.18(a)
"ERISA" -- Section 3.17(d)(i)
"Evaluation Material" -- Section 6.01
"Exchange Act" -- Section 4.05
"Exchange Agent" -- Section 2.02(a)
"Exchange Fund" -- Section 2.02(a)
"Expense Fee" -- Section 8.02(b)
"Governmental or Regulatory Authority" -- Section 3.04(a)
"group" -- Section 9.11(g)
"Indebtedness" -- Section 3.15
"Indemnified Liabilities" -- Section 6.08(a)
"Indemnified Parties" -- Section 6.08(a)
"Indemnifying Party" -- Section 6.08(a)
"Intellectual Property" -- Section 3.20
"knowledge" -- Section 9.11(d)
"laws" -- Section 3.04(a)
"Liens" -- Section 9.11(e)
"Management Agreement Assignment Agreement" -- Section 5.06
"material", "material adverse
effect" and "materially adverse" -- Section 9.11(f)
"MBS" -- Section 3.13(a)
"Merger" -- Preamble
"Mortgage Loan" -- Section 7.02(f)
"Net Asset Value" -- Section 2.01(c)(i)
"Net Asset Valuation" -- Section 2.01(c)(i)
"New Parent Preferred Stock" -- Section 2.01(c)(i)
"NYSE" -- Section 2.01(c)(i)
"Options" -- Section 3.02(a)
"orders" -- Section 3.04(a)
"Parent" -- Preamble
"Parent Common Stock" -- Section 2.01(c)(i)
"Parent Disclosure Letter" -- Section 4.01
"Parent Financial Statements" -- Section 4.05
"Parent MBS" -- Section 4.13(a)
"Parent MBS Certificates" -- Section 4.13(a)
"Parent Mortgage Files" -- Section 4.14(a)
"Parent Mortgage Loans" -- Section 4.14(a)
"Parent Mortgage Notes" -- Section 4.14(a)
"Parent Permits" -- Section 4.10
"Parent Permitted Liens" -- Section 4.13(a)
"Parent Preferred Stock" -- Section 4.02(a)
"Parent Principal MBS Agreements" -- Section 4.13(b)
"Parent SEC Reports" -- Section 4.05
"Parent Stock" -- Section 2.01(c)(i)
"person" -- Section 9.11(g)
"Plan" -- Section 3.17(d)(ii)
"Proxy Statement" -- Section 3.09
"Purchased Loans" -- Section 7.02(f)
"Registration Statement" -- Section 3.09
"Representatives" -- Section 9.11(h)
"Sales Price" -- Section 2.01(c)(i)
"SEC" -- Section 3.04(b)
"Secretary of State" -- Section 1.03
"Securities Act" -- Section 3.04(b)
"Sub" -- Preamble
"Sub Common Stock" -- Section 2.01(a)
"Subsidiary" -- Section 9.11(i)
"Surviving Corporation" -- Section 1.01
"Surviving Corporation Common Stock" -- Section 2.01(a)
"Taxes" -- Section 3.16(b)
"Termination Fee" -- Section 8.02(c)
"Termination Fee Opinion" -- Section 8.02(c)
"Termination Year" -- Section 8.02 (c)
"Trading Day" -- Section 2.01(c)(i)
"Transfer Taxes" -- Section 6.13
This AGREEMENT AND PLAN OF MERGER dated as of February 8, 2000 ("this
Agreement") is made and entered into by and among Anthracite Capital, Inc.,
a Maryland corporation ("Parent"), Anthracite Acquisition Corp., a Delaware
corporation wholly owned by Parent ("Sub"), and CORE Cap, Inc., a Delaware
corporation (the "Company").
WHEREAS, the Boards of Directors of Parent, Sub and the Company have
each determined that it is advisable and in the best interests of their
respective stockholders to consummate, and have approved, the business
combination transaction provided for herein in which Sub would merge with
and into the Company and the Company would become a wholly-owned subsidiary
of Parent (the "Merger");
WHEREAS, the respective Boards of Directors of Parent and the Company
have determined that the Merger is in furtherance of and consistent with
their respective long-term business strategies and is fair to and in the
best interests of their respective stockholders, and Parent has approved
this Agreement and the Merger as the sole stockholder of Sub;
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties and agreements in connection with the Merger
and also to prescribe various conditions to the Merger;
WHEREAS, Parent intends at all times following the Effective Time to
maintain 50% or more of its investments in high quality residential
mortgage loans and securities;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.01 The Merger. Upon the terms and subject to the conditions of this
Agreement, at the Effective Time, Sub shall be merged with and into the
Company in accordance with the General Corporation Law of the State of
Delaware (the "DGCL"). At the Effective Time, the separate existence of Sub
shall cease and the Company shall continue as the surviving corporation in
the Merger (the "Surviving Corporation"). Sub and the Company are sometimes
referred to herein as the "Constituent Corporations". As a result of the
Merger, the outstanding shares of capital stock of the Constituent
Corporations shall be converted or cancelled in the manner provided in
Article II.
1.02 Closing. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to
Section 8.01, subject to Section 2.01(c), and subject to the satisfaction
or waiver (where applicable) of the conditions set forth in Article VII,
the closing of the Merger (the "Closing") will take place at the offices of
Milbank, Tweed, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇ ▇▇▇▇▇ at 10:00 a.m., local time, on the third business day following the
first day upon which all of the conditions set forth in Sections 7.01(a)
and 7.02(f) have been satisfied (assuming satisfaction of all other
conditions), unless another date, time or place is agreed to in writing by
the parties hereto (the "Closing Date"). At the Closing there shall be
delivered to Parent, Sub and the Company the certificates and other
documents and instruments required to be delivered under Article VII.
1.03 Effective Time. At the Closing, a certificate of merger (the
"Certificate of Merger") shall be duly prepared and executed by the
Surviving Corporation and thereafter delivered to the Secretary of State of
the State of Delaware (the "Secretary of State") for filing, as provided in
Section 251 of the DGCL, as soon as practicable on the Closing Date. The
Merger shall become effective at the time of the filing of the Certificate
of Merger with the Secretary of State (the date and time of such filing
being referred to herein as the "Effective Time").
1.04 Certificate of Incorporation and Bylaws of the Surviving
Corporation. At the Effective Time, (i) the Certificate of Incorporation of
the Company as in effect immediately prior to the Effective Time shall be
the Certificate of Incorporation of the Surviving Corporation until
thereafter amended as provided by law and such Certificate of
Incorporation, and (ii) the Bylaws of the Company as in effect immediately
prior to the Effective Time shall be the Bylaws of the Surviving
Corporation until thereafter amended as provided by law, the Certificate of
Incorporation of the Surviving Corporation and such Bylaws.
1.05 Directors and Officers of the Surviving Corporation. The
directors of Sub and the officers of Sub immediately prior to the Effective
Time shall, from and after the Effective Time, be the directors and
officers, respectively, of the Surviving Corporation until their successors
shall have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the Surviving
Corporation's Certificate of Incorporation and Bylaws.
1.06 Effects of the Merger. Subject to the foregoing, the effects of
the Merger shall be as provided in the applicable provisions of the DGCL.
1.07 Further Assurances. Each party hereto will, either prior to or
after the Effective Time, execute such further documents, instruments,
deeds, bills of sale, assignments and assurances and take such further
actions as may reasonably be requested by one or more of the others to
consummate the Merger, to vest the Surviving Corporation with full title to
all assets, properties, privileges, rights, approvals, immunities and
franchises of either of the Constituent Corporations or to effect the other
purposes of this Agreement.
ARTICLE II
CONVERSION OF SHARES
2.01 Conversion of Capital Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of the holder thereof:
(a) Capital Stock of Sub. Each issued and outstanding share of the
common stock, par value $.001 per share, of Sub ("Sub Common Stock") shall
be converted into and become one fully paid and nonassessable share of
common stock, par value $.01 per share, of the Surviving Corporation
("Surviving Corporation Common Stock"). Each certificate representing
outstanding shares of Sub Common Stock shall at the Effective Time
represent an equal number of shares of Surviving Corporation Common Stock.
(b) Cancellation of Treasury Stock and Stock Owned by Parent and
Subsidiaries. All shares of Class A common stock, par value $.01 per share,
of the Company (the "Class A Common Stock"), all shares of Class B common
stock, par value $.01 per share, of the Company ( the "Class B Common
Stock", and collectively, the "Company Common Stock") and all shares of 10%
Cumulative Convertible Series A Preferred Stock, par value $.01 per share,
of the Company (the "Company Series A Preferred Stock", and together with
the Company Common Stock, the "Company Stock") that are owned by the
Company as treasury stock and any shares of Company Common Stock owned by
Parent, Sub or any other wholly-owned Subsidiary of Parent shall be
canceled and retired and shall cease to exist, and no stock of Parent or
other consideration shall be delivered in exchange therefor.
(c) Exchange Ratio for Company Stock. (i) Each issued and outstanding
share of Company Common Stock (other than shares to be canceled in
accordance with Section 2.01(b) and other than Dissenting Shares) shall be
converted into the right to receive the number (the "Common Stock
Conversion Number") of fully paid and nonassessable shares of common stock,
par value $.001 per share, of Parent ("Parent Common Stock") which have an
aggregate Net Asset Value equal to 1.05 multiplied by the Net Asset Value
of one share of Company Common Stock (as adjusted pursuant to the proviso
at the end of this sentence, provided, however, that if the mean average of
the Sales Prices of a whole share of Parent Common Stock on the ten
consecutive Trading Days ending three Trading Days prior to the Closing
Date is below $6.00 per share (the "Benchmark Price"), at the option of the
Company the Common Stock Conversion Number shall be multiplied by a
fraction the numerator of which is the Benchmark Price, subject to
adjustment as provided in paragraph (ii) below, and the denominator of
which is that mean average of such Sales Prices. The term "Net Asset Value"
shall mean net asset value per share of common stock and shall be computed
for each of the Company's and Parent's shares by each of the Company and
Parent, as of the latest date of the satisfaction of the conditions
described in Sections 7.01(a) and 7.02(f),such computation to be determined
within three business days and to be made in the manner provided in
Schedule I to this Agreement (the "Net Asset Valuations"). The Company and
Parent shall use their best efforts to resolve any differences and reach
agreement regarding their respective Net Asset Value calculations for each
of the Company and Parent. If the Company and Parent are unable to arrive
at the same value for any of the Company's and/or Parent's items referred
to in Schedule I ("Disputed Values"), the aggregate value for such Disputed
Values shall be determined as follows: the Company and Parent each shall
select a nationally recognized investment banking firm with experience in
such computations that is independent of each of the Company and Parent and
that within the past three years has not performed, and is not contemplated
to perform, any services for either the Company or Parent (collectively,
the "Appraisers") to compute the value of the Disputed Values in the manner
provided in Schedule I (the "Appraisals"). The average of the parties' two
valuations and the two Appraisals for each Disputed Value shall be the
value for such Disputed Value for purposes of computing Net Asset Value.
This determination for each Disputed Value shall be conclusive and binding.
The Appraisers shall complete the Appraisals within five business days
following their appointment and in the event that the Appraisals are
required, the Closing shall be postponed until the Appraisals are
completed. Each of the Company and Parent shall give the other party and
the Appraisers, if necessary, access to its books and records for the
purpose of computing the Net Asset Value. The Company and Parent shall
share the fees and expenses of the Appraisers and each party shall have its
Net Asset Value reduced by 50% of the amount of the fees and expenses of
the Appraisers in connection with the Appraisals. The term "Sales Price"
shall mean, on any Trading Day, the closing sales price of Parent Common
Stock reported on the New York Stock Exchange, Inc. ("NYSE") Composite Tape
on such day. The term "Trading Day" shall mean any day on which securities
are traded on the NYSE. Each issued and outstanding share of Company Series
A Preferred Stock shall be converted into the right to receive one fully
paid and nonassessable share of 10% Cumulative Convertible Series B
Preferred Stock of Parent having the terms and designations specified in
the form of Articles Supplementary attached as Exhibit A hereto (such
preferred stock, the "New Parent Preferred Stock", and together with the
Parent Common Stock, the "Parent Stock"). Parent shall cause the Articles
Supplementary for the New Parent Preferred Stock to be filed with the
Secretary of State of the State of Maryland at or prior to the Effective
Time.
(ii) If, prior to the Effective Time, Parent shall pay a dividend in,
subdivide, combine into a smaller number of shares or issue by
reclassification of its shares, any shares of Parent Common Stock, the
Common Stock Conversion Number shall be multiplied by, and the Benchmark
Price shall be divided by, a fraction the numerator of which shall be the
number of shares of Parent Common Stock outstanding immediately after, and
the denominator of which shall be the number of such shares outstanding
immediately before, the occurrence of such event, and the resulting product
shall from and after the date of such event be the Common Stock Conversion
Number and the resulting quotient shall from and after the date of such
event be the Benchmark Price, subject to further adjustment in accordance
with this sentence.
(iii) All shares of Company Stock converted in accordance with
paragraph (i) of this Section 2.01(c) shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist, and
each holder of a certificate representing any such shares shall cease to
have any rights with respect thereto, except the right to receive the
shares of Parent Stock and any cash in lieu of fractional shares of Parent
Stock to be issued or paid in consideration therefor (determined in
accordance with Section 2.02(e)), upon the surrender of such certificate in
accordance with Section 2.02, without interest.
(d) Dissenting Shares. (i) Notwithstanding any provision of this
Agreement to the contrary, each outstanding share of Company Stock the
holder of which has not voted in favor of the Merger, has perfected such
holder's right to an appraisal of such holder's shares in accordance with
the applicable provisions of the DGCL and has not effectively withdrawn or
lost such right to appraisal (a "Dissenting Share"), shall not be converted
into or represent a right to receive shares of Parent Stock pursuant to
Section 2.01(c), but the holder thereof shall be entitled only to such
rights as are granted by the applicable provisions of the DGCL; provided,
however, that any Dissenting Share held by a person at the Effective Time
who shall, after the Effective Time, withdraw the demand for appraisal or
lose the right of appraisal, in either case pursuant to the DGCL, shall be
deemed to be converted into, as of the Effective Time, the right to receive
shares of Parent Stock pursuant to Section 2.01(c).
(ii) The Company shall give Parent (x) prompt notice of any written
demands for appraisal, withdrawals of demands for appraisal and any other
instruments served pursuant to the applicable provisions of the DGCL
relating to the appraisal process received by the Company and (y) the
opportunity to direct all negotiations and proceedings with respect to
demands for appraisal under the DGCL. The Company will not voluntarily make
any payment with respect to any demands for appraisal and will not, except
with the prior written consent of Parent, settle or offer to settle any
such demands.
(e) Stock Option Plan. The 1997 Long Term Incentive Plan, the stock
option agreements executed pursuant thereto and each option to purchase
Company Common Stock granted thereunder that is outstanding at the
Effective Time shall be cancelled by Parent in exchange for a payment in
the amount of $150,000 to GMAC Mortgage Asset Management, Inc., the holder
of such outstanding options. Subject to the terms and conditions of the
Company's Director Stock Option Plan and the stock option agreements
executed pursuant thereto, the Director Stock Option Plan and each option
to purchase Company Common Stock granted thereunder that is outstanding at
the Effective Time shall be assumed by Parent and continued in accordance
with their respective terms and each such option shall become a right to
purchase a number of shares of Parent Common Stock equal to the Common
Stock Conversion Number multiplied by the number of shares of Company
Common Stock subject to such option immediately prior to the Effective
Time, as more fully described in Section 6.07.
2.02 Exchange of Certificates.
------------------------
(a) Exchange Agent. Promptly following the Effective Time, Parent
shall make available to the Surviving Corporation for deposit with The Bank
of New York or such other bank or trust company designated before the
Closing Date by Parent and reasonably acceptable to the Company (the
"Exchange Agent") certificates representing the number of duly authorized
whole shares of Parent Stock issuable in connection with the Merger plus an
amount of cash equal to the aggregate amount payable in lieu of fractional
shares in accordance with Section 2.02(e), to be held for the benefit of
and distributed to such holders in accordance with this Section. The
Exchange Agent shall agree to hold such shares of Parent Stock and funds
(such shares of Parent Stock and funds, together with earnings thereon,
being referred to herein as the "Exchange Fund") for delivery as
contemplated by this Section and upon such additional terms as may be
agreed upon by the Exchange Agent, the Company and Parent.
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Surviving Corporation shall cause the Exchange Agent to
mail to each holder of record of a certificate or certificates which
immediately prior to the Effective Time represented outstanding shares of
Company Stock (the "Certificates") whose shares are converted pursuant to
Section 2.01(c) into the right to receive shares of Parent Stock (i) a
letter of transmittal (which shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent and shall be in such
form and have such other provisions as the Surviving Corporation may
reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing
shares of Parent Stock and cash in lieu of fractional shares. Upon
surrender of a Certificate for cancellation to the Exchange Agent, together
with such letter of transmittal duly executed and completed in accordance
with its terms, the holder of such Certificate shall be entitled to receive
in exchange therefor a certificate representing that number of whole shares
of Parent Stock, plus the cash amount payable in lieu of fractional shares
in accordance with Section 2.02(e), which such holder has the right to
receive pursuant to the provisions of this Article II, and the Certificate
so surrendered shall forthwith be canceled. In no event shall the holder of
any Certificate be entitled to receive interest on any funds to be received
in the Merger. In the event of a transfer of ownership of Company Stock
which is not registered in the transfer records of the Company, a
certificate representing that number of whole shares of Parent Stock, plus
the cash amount payable in lieu of fractional shares in accordance with
Section 2.02(e), may be issued to a transferee if the Certificate
representing such Company Stock is presented to the Exchange Agent
accompanied by all documents required to evidence and effect such transfer
and by evidence that any applicable stock transfer taxes have been paid.
Until surrendered as contemplated by this Section 2.02(b), each Certificate
shall be deemed at any time after the Effective Time for all corporate
purposes of Parent, except as limited by paragraph (c) below, to represent
ownership of the number of shares of Parent Stock into which the number of
shares of Company Stock shown thereon have been converted as contemplated
by this Article II. Notwithstanding the foregoing, Certificates
representing Company Stock surrendered for exchange by any person
constituting an "affiliate" of the Company for purposes of Section 6.04
shall not be exchanged until Parent has received an Affiliate Agreement as
provided in Section 6.04.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the Effective Time with respect
to Parent Stock with a record date on or after the Effective Time shall be
paid to the holder of any unsurrendered Certificate with respect to the
shares of Parent Stock represented thereby, and no cash payment in lieu of
fractional shares shall be paid to any such holder pursuant to Section
2.02(e) until the holder of record of such Certificate shall surrender such
Certificate in accordance with this Section. Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall
be paid to the record holder of the certificates representing whole shares
of Parent Stock issued in exchange therefor, without interest, (i) at the
time of such surrender, the amount of dividends or other distributions, if
any, with a record date on or after the Effective Time which theretofore
became payable, but which were not paid by reason of the immediately
preceding sentence, with respect to such whole shares of Parent Stock, and
(ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date on or after the Effective Time but prior
to surrender and a payment date subsequent to surrender payable with
respect to such whole shares of Parent Stock.
(d) No Further Ownership Rights in Company Stock. All shares of Parent
Stock issued upon the surrender for exchange of Certificates in accordance
with the terms hereof (including any cash paid pursuant to Section 2.02(e))
shall be deemed to have been issued at the Effective Time in full
satisfaction of all rights pertaining to the shares of Company Stock
represented thereby, subject, however, to the Surviving Corporation's
obligation to pay any dividends which may have been declared by the Company
on such shares of Company Stock in accordance with the terms of this
Agreement and which remained unpaid at the Effective Time. From and after
the Effective Time, the stock transfer books of the Company shall be closed
and there shall be no further registration of transfers on the stock
transfer books of the Surviving Corporation of the shares of Company Stock
which were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving Corporation
for any reason, they shall be canceled and exchanged as provided in this
Section.
(e) No Fractional Shares. No certificate or scrip representing
fractional shares of Parent Common Stock will be issued in the Merger upon
the surrender for exchange of Certificates, and such fractional share
interests will not entitle the owner thereof to vote or to any rights of a
stockholder of Parent. In lieu of any such fractional shares, each holder
of Certificates who would otherwise have been entitled to a fraction of a
share of Parent Common Stock in exchange for such Certificates pursuant to
this Section shall receive from the Exchange Agent a cash payment in lieu
of such fractional share determined by multiplying (A) the Sales Price of a
whole share of Parent Common Stock on the last Trading Day immediately
preceding the Closing Date by (B) the fractional share interest to which
such holder would otherwise be entitled.
(f) Withholding. Parent or the Exchange Agent shall be entitled to
deduct and withhold from any merger consideration or cash paid on
Dissenting Shares and any dividends or distributions otherwise payable
pursuant to this Agreement to any stockholders of the Company such amounts
as Parent or the Exchange Agent is required to deduct and withhold with
respect to the making of such payment under the Internal Revenue Code of
1986, as amended (the "Code"), or any provision of state, local or foreign
tax law. To the extent amounts are so withheld by Parent or the Exchange
Agent, such withheld amount shall be treated for all purposes of this
Agreement as having been paid to the stockholder of the Company in respect
of which such deduction and withholding was made by Parent or the Exchange
Agent.
(g) Termination of Exchange Fund. Any portion of the Exchange Fund
which remains undistributed to the stockholders of the Company for six
months after the Effective Time shall be delivered to the Surviving
Corporation, upon demand, and any stockholders of the Company who have not
theretofore complied with this Article II shall thereafter look only to the
Surviving Corporation (subject to abandoned property, escheat and other
similar laws) for payment of their claim for Parent Stock, any cash in lieu
of fractional shares of Parent Stock and any dividends or distributions
with respect to Parent Stock. Neither Parent nor the Surviving Corporation
shall be liable to any holder of shares of Company Stock for shares of
Parent Stock (or dividends or distributions with respect thereto) or cash
payable in respect of fractional share interests delivered to a public
official pursuant to any applicable abandoned property, escheat or similar
law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
3.01 Organization and Qualification. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has full corporate power and authority to
conduct its business as and to the extent now conducted and to own, use and
lease its assets and properties, except for such failures to be so
incorporated, existing and in good standing or to have such power and
authority which, individually or in the aggregate, are not having and could
not be reasonably expected to have a material adverse effect on the
Company. The Company has no Subsidiaries. The Company is duly qualified,
licensed or admitted to do business and is in good standing in each
jurisdiction in which the ownership, use or leasing of its assets and
properties, or the conduct or nature of its business, makes such
qualification, licensing or admission necessary, except for such failures
to be so qualified, licensed or admitted and in good standing which,
individually or in the aggregate, are not having and could not be
reasonably expected to have a material adverse effect on the Company. As of
the date hereof, except as disclosed in Section 3.01 of the letter dated
the date hereof and delivered to Parent and Sub by the Company concurrently
with the execution and delivery of this Agreement (the "Company Disclosure
Letter"), the Company does not directly or indirectly own any equity or
similar interest in, or any interest convertible into or exchangeable or
exercisable for, any equity or similar interest in, any corporation,
partnership, limited liability company, joint venture or other business
association or entity (other than (i) non-controlling investments in the
ordinary course of business and corporate partnering, development,
cooperative marketing and similar undertakings and arrangements entered
into in the ordinary course of business and (ii) other investments of less
than $100,000). The Company has previously delivered to Parent correct and
complete copies of the certificate or articles of incorporation and bylaws
(or other comparable charter documents) of the Company.
3.02 Capital Stock.
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(a) The authorized capital stock of the Company consists solely of
20,000,000 shares of Class A Common Stock, 25,000 shares of Class B Common
Stock, and 12,000,000 shares of Company Series A Preferred Stock (and no
other shares of preferred stock). As of December 31, 1999, 2,260,997 shares
of Company Series A Preferred Stock, 3,237,158 shares of Class A Common
Stock and 20,500 shares of Class B Common Stock of the Company were issued
and outstanding, 1,871,603 shares of Company Series A Preferred Stock,
1,871,603 shares of Class A Common Stock and no shares of Class B Common
Stock of the Company were held in the treasury of the Company and no shares
of Company Series A Preferred Stock, no shares of Class A Common Stock and
no shares of Class B Common Stock of the Company were reserved for
issuance. Since such date, except as set forth in Section 3.02 of the
Company Disclosure Letter, there has been no change in the number of issued
and outstanding shares of Company Stock or shares held in treasury or
reserved for issuance. All of the issued and outstanding shares of Company
Stock are, and all shares reserved for issuance will be, upon issuance in
accordance with the terms specified in the instruments or agreements
pursuant to which they are issuable, duly authorized, validly issued, fully
paid and nonassessable. Except pursuant to this Agreement and except as set
forth in Section 3.02 of the Company Disclosure Letter, there are no
outstanding subscriptions, options, warrants, rights (including "phantom"
stock rights), preemptive rights or other contracts, commitments,
understandings or arrangements, including any right of conversion or
exchange under any outstanding security, instrument or agreement (together,
"Options"), obligating the Company to issue or sell any shares of capital
stock of the Company or to grant, extend or enter into any Option with
respect thereto.
(b) Except as disclosed in Section 3.02 of the Company Disclosure
Letter, there are no outstanding contractual obligations of the Company to
repurchase, redeem or otherwise acquire any shares of Company Stock or to
provide funds to, or make any investment (in the form of a loan, capital
contribution or otherwise) in, any other person.
3.03 Authority Relative to This Agreement. The Company has full
corporate power and authority to enter into this Agreement and, subject to
obtaining the Company Stockholders' Approval, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement by the Company and
the consummation by the Company of the transactions contemplated hereby
have been duly and validly approved by the Board of Directors of the
Company, the Board of Directors of the Company has recommended adoption of
this Agreement by the stockholders of the Company and directed that this
Agreement be submitted to the stockholders of the Company for their
consideration, and no other corporate proceedings on the part of the
Company or its stockholders are necessary to authorize the execution,
delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby, other
than obtaining the Company Stockholders' Approval. This Agreement has been
duly and validly executed and delivered by the Company and, subject to the
obtaining of the Company Stockholders' Approval, constitutes a legal, valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
3.04 Non-Contravention; Approvals and Consents.
-----------------------------------------
(a) The execution and delivery of this Agreement by the Company do
not, and the performance by the Company of its obligations hereunder and
the consummation by it of the transactions contemplated hereby will not,
conflict with, result in a violation or breach of, constitute (with or
without notice or lapse of time or both) a default under, result in or give
to any person any right of payment or reimbursement, termination,
cancellation, modification or acceleration of, or result in the creation or
imposition of any Lien upon any of the assets or properties of the Company
under, any of the terms, conditions or provisions of (i) the certificates
or articles of incorporation or bylaws (or other comparable charter
documents) of the Company, or (ii) subject to the obtaining of the Company
Stockholders' Approval and the taking of the actions described in paragraph
(b) of this Section, (x) any statute, law, rule, regulation or ordinance
(together, "laws"), or any judgment, decree, order, writ, permit or license
(together, "orders"), of any court, tribunal, arbitrator, authority,
agency, commission, official or other instrumentality of the United States,
any foreign country or any domestic or foreign state, county, city or other
political subdivision (a "Governmental or Regulatory Authority") applicable
to the Company or any of its assets or properties, or (y) any note, bond,
mortgage, security agreement, indenture, license, franchise, permit,
concession, contract, lease or other instrument, obligation or agreement of
any kind (together, "Contracts") to which the Company is a party or by
which the Company or any of its assets or properties is bound, excluding
from the foregoing clauses (x) and (y) conflicts, violations, breaches,
defaults, terminations, modifications, accelerations and creations and
impositions of Liens which, individually or in the aggregate, could not be
reasonably expected to have a material adverse effect on the Company or on
the ability of the Company to consummate the transactions contemplated by
this Agreement.
(b) Except (i) for the filing of the Registration Statement with the
Securities and Exchange Commission (the "SEC") pursuant to the Securities
Act of 1933, as amended, and the rules and regulations thereunder (the
"Securities Act"), the declaration of the effectiveness of the Registration
Statement by the SEC and filings with various state securities authorities
that are required in connection with the transactions contemplated by this
Agreement, (ii) for the filing of the Certificate of Merger and other
appropriate merger documents required by the DGCL with the Secretary of
State and appropriate documents with the relevant authorities of other
states in which the Constituent Corporations are qualified to do business,
and (iii) as disclosed in Section 3.04 of the Company Disclosure Letter, no
consent, approval or action of, filing with or notice to any Governmental
or Regulatory Authority or other public or private third party is necessary
or required under any of the terms, conditions or provisions of any law or
order of any Governmental or Regulatory Authority or any Contract to which
the Company is a party or by which the Company or any of its assets or
properties is bound for the execution and delivery of this Agreement by the
Company, the performance by the Company of its obligations hereunder or the
consummation of the transactions contemplated hereby, other than such
consents, approvals, actions, filings and notices which the failure to make
or obtain, as the case may be, individually or in the aggregate, could not
be reasonably expected to have a material adverse effect on the Company or
on the ability of the Company to consummate the transactions contemplated
by this Agreement.
3.05 Financial Reports. The Company delivered to Parent prior to the
execution of this Agreement a true and complete copy of the Company's
Annual Report for the year ended December 31, 1998 and the Company's
Financial Reporting Package dated December 1999 (the "Company Financial
Information"). The Company's audited financial statements and unaudited
interim financial statements (including, in each case, the notes, if any,
thereto) included in the Company Financial Information were prepared in
accordance with generally accepted accounting principles applied on a
consistent basis during the periods involved (except as may be indicated
therein or in the notes thereto) and fairly present (subject, in the case
of the interim unaudited financial statements, to normal, recurring
year-end audit adjustments (which are not expected to be, individually or
in the aggregate, materially adverse)) the financial position of the
Company as at the respective dates thereof and the results of its
operations and cash flows for the respective periods then ended. As of its
respective dates, the Company Financial Information (other than such
financial statements) does not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Since December
31, 1999 and prior to the date hereof, there has not been any material
change, or any application or request for any material change, by the
Company in accounting principles, methods or policies for financial
accounting or tax purposes (except as required by generally accepted
accounting principles or otherwise disclosed in the Company's financial
statements and subject, in the case of unaudited interim financial
statements, to normal year-end adjustments).
3.06 Absence of Certain Changes or Events. Except as disclosed in the
Company Financial Information, since December 31, 1999, there has not been
any change, event or development having, or that could be reasonably
expected to have, individually or in the aggregate, a material adverse
effect on the Company, other than those occurring as a result of general
economic or financial conditions which are not unique to the Company but
also affect other persons who participate or are engaged in the lines of
business in which the Company participates or is engaged, and except as
disclosed in Section 3.06 of the Company Disclosure Letter, between such
date and the date hereof (i) the Company has conducted its business only in
the ordinary course consistent with past practice and (ii) the Company has
not taken any action which, if taken after the date hereof, would
constitute a breach of any provision of clause (ii) of Section 5.01(b).
3.07 Absence of Undisclosed Liabilities. Except for matters reflected
or reserved against in the balance sheet for the period ended December 31,
1999 included in the Company Financial Information or the notes thereto or
as disclosed in Section 3.07 of the Company Disclosure Letter, the Company
has not at such date, nor incurred since that date, any liabilities or
obligations (whether absolute, accrued, contingent, fixed or otherwise, or
whether due or to become due) of any nature that would be required by
generally accepted accounting principles to be reflected on a balance sheet
of the Company (including the notes thereto), except liabilities or
obligations (i) which were incurred in the ordinary course of business
consistent with past practice or (ii) which have not been, and could not be
reasonably expected to be, individually or in the aggregate, materially
adverse to the Company.
3.08 Legal Proceedings. Except as disclosed in Section 3.08 of the
Company Disclosure Letter, (i) there are no actions, suits, arbitrations or
proceedings pending or, to the knowledge of the Company, threatened
against, relating to or affecting, nor to the knowledge of the Company are
there any Governmental or Regulatory Authority investigations or audits
pending or threatened against, relating to or affecting, the Company or any
of its assets and properties which, individually or in the aggregate, could
be reasonably expected to have a material adverse effect on the Company or
on the ability of the Company to consummate the transactions contemplated
by this Agreement, and (ii) the Company is not subject to any order of any
Governmental or Regulatory Authority which, individually or in the
aggregate, is having or could be reasonably expected to have a material
adverse effect on the Company or on the ability of the Company to
consummate the transactions contemplated by this Agreement.
3.09 Information Supplied. The information relating to the Company set
forth in the proxy statement relating to the Company Stockholders' Meeting,
as amended or supplemented from time to time (as so amended and
supplemented, the "Proxy Statement") included in the Registration Statement
on Form S-4 to be filed with the SEC by Parent in connection with the
issuance of shares of Parent Stock in the Merger, as amended or
supplemented from time to time (as so amended and supplemented, the
"Registration Statement"), except as the Company shall otherwise advise in
writing, complies in all material respects with the requirements of the
Securities Act and will not, taken together with any additional information
supplied by the Company expressly for inclusion therein, on the date of its
filing or, in the case of the Registration Statement, at the time it
becomes effective under the Securities Act, at the date the Proxy Statement
is mailed to stockholders and at the time of the Company Stockholders'
Meeting, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
are made, not misleading, and any other documents to be filed by the
Company or information supplied in writing by the Company to be included in
documents to be filed by Parent with any Governmental or Regulatory
Authority in connection with the Merger and the other transactions
contemplated hereby will not, on the date of its filing or, in the case of
the Proxy Statement, at the date it is mailed to stockholders and at the
time of the Company Stockholders' Meeting or at the time the stockholders'
consent is effective, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances
under which they are made, not misleading.
3.10 Compliance with Laws and Orders. The Company holds all permits,
licenses, variances, exemptions, orders and approvals of all Governmental
and Regulatory Authorities necessary for the lawful conduct of its business
(the "Company Permits"), except for failures to hold such permits,
licenses, variances, exemptions, orders and approvals which, individually
or in the aggregate, are not having and could not be reasonably expected to
have a material adverse effect on the Company. The Company is in compliance
with the terms of the Company Permits, except failures so to comply which,
individually or in the aggregate, are not having and could not be
reasonably expected to have a material adverse effect on the Company.
Except as disclosed in the Company Financial Information and in Section
3.10 of the Company Disclosure Letter, the Company is not in violation of
or default under any law or order of any Governmental or Regulatory
Authority, except for such violations or defaults which, individually or in
the aggregate, are not having and could not be reasonably expected to have
a material adverse effect on the Company.
3.11 Investment Company Act. The Company (i) is not an "investment
company" or a company "controlled" by an investment company within the
meaning of the Investment Company Act of 1940, as amended, (ii) a "holding
company" or a "subsidiary company" of a holding company or an "affiliate"
thereof within the meaning of the Public Utility Holding Company Act of
1935, as amended, or (iii) subject to regulation under the Federal Power
Act or the Interstate Commerce Act.
3.12 Compliance with Agreements; Certain Agreements. (a) Section
3.12(a) of the Company Disclosure Letter sets forth a list of contracts to
which the Company is a party that involve expected annual payments to or
from the Company which are greater than $100,000 and cannot be terminated
within 90 days after giving notice without resulting in any material cost
or penalty to the Company and are material to the business, properties,
assets, financial position or results of the Company. Except as disclosed
in the Company Financial Information, neither the Company nor, to the
knowledge of the Company, any other party thereto is in breach or violation
of, or in default in the performance or observance of any term or provision
of, and no event has occurred which, with notice or lapse of time or both,
could be reasonably expected to result in a default under, (i) the
certificates or articles of incorporation or bylaws (or other comparable
charter documents) of the Company or (ii) any Contract to which the Company
is a party or by which the Company or any of its assets or properties is
bound, except in the case of clause (ii) for breaches, violations and
defaults which, individually or in the aggregate, are not having and could
not be reasonably expected to have a material adverse effect on the
Company.
(b) Except as disclosed in Section 3.12(b) of the Company Disclosure
Letter or in the Company Financial Information or as provided for in this
Agreement, as of the date hereof, the Company is not a party to any oral or
written (i) management or consulting agreement not terminable on 30 days'
or less notice involving the payment of more than $100,000 per annum or
$500,000 per annum in the aggregate for all such agreements, (ii) agreement
with any executive officer or other key employee of the Company the
benefits of which are contingent or vest, or the terms of which are
materially altered, upon the occurrence of a transaction involving the
Company of the nature contemplated by this Agreement, (iii) agreement with
respect to any executive officer or other key employee of the Company
providing any term of employment or compensation guarantee extending for a
period longer than one year and for the payment of more than $100,000 per
annum or $500,000 per annum in the aggregate for all such agreements or
(iv) agreement or plan, including any stock option, stock appreciation
right, restricted stock or stock purchase plan, any of the benefits of
which will be increased, or the vesting of the benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by
this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement.
3.13 Mortgage Backed Securities. (a) Except as set forth in Section
3.13(a) of the Company Disclosure Letter, the Company is on the date hereof
the sole owner of each of the mortgage backed securities ("MBS") identified
in Section 3.13(a) of the Company Disclosure Letter ("Company MBS") and the
related certificates and other instruments evidencing ownership of the
Company MBS (the "Company MBS Certificates"), free and clear of any adverse
claims, Liens, pledges, assignments, charges or security interests of any
nature (including, without limitation, Liens arising under the federal tax
laws or ERISA), other than any Company Permitted Liens. The term "Company
Permitted Liens" shall mean (i) Liens set forth in the Company Disclosure
Letter, and (ii) mechanics', carriers', workmen's, repairmen's and
materialmens' liens and other Liens and other limitations of any kind, if
any, which, individually or in the aggregate, would not be reasonably
likely to result in a material adverse effect on the Company.
(b) Except as set forth in Section 3.13(b) of the Company Disclosure
Letter, the Company to its knowledge is not in default in the performance
of any of its obligations under any pooling and servicing agreements, trust
and servicing agreements, trust agreements, servicing agreements or other
similar documents providing for the creation of the MBS or the servicing of
the mortgage loans underlying the MBS (the "Company Principal MBS
Agreements") and has not received any notice of any default by any master
servicer of any Company MBS, the effect of which, individually or in the
aggregate, could reasonably be expected to be materially adverse to the
Company.
(c) Except as set forth in Section 3.13(c) of the Company Disclosure
Letter, as of the date hereof, there are no material agreements (other than
the Company Principal MBS Agreements) between Company and the master
servicer with respect to any series of Company MBS.
3.14 Mortgage Loans
(a) Except as set forth in Section 3.14(a) of the Company Disclosure
Letter, the Company is the sole owner of each of the mortgage loans
reflected in the most recent monthly report delivered to Parent or made or
acquired since such date (the "Company Mortgage Loans") and is the sole
owner or beneficiary of or under any related notes (the "Company Mortgage
Notes"), deeds of trust, mortgages, security agreements, guaranties,
indemnities, financing statements, assignments, endorsement, bonds, letters
of credit, accounts, insurance contracts and policies, credit reports, tax
returns, appraisals, escrow documents, participation agreements (if
applicable), loan files, servicing files and all other documents evidencing
or securing the Company Mortgage Loans (the "Company Mortgage Files"),
except (i) any Company Mortgage Loans disposed of in the ordinary course
since the date of such financial statements, and (ii) to the extent any
Company Mortgage Loan is prepaid in full or subject to a completed
foreclosure action (or non-judicial proceeding or deed in lieu of
foreclosure) in which case the Company shall be the sole owner of the real
property securing such foreclosed loan or shall have received the proceeds
of such action to which the Company was entitled, in each case free and
clear of any adverse claims or Liens except Company Permitted Liens.
(b) Except as set forth in Section 3.14(b) to the Company Disclosure
Letter, to the knowledge of the Company, (i) the lien of each Company
Mortgage is subject only to "Permitted Exceptions" which consist of the
following: (A) Company Permitted Liens; (B) covenants, conditions,
restrictions, reservations, rights, Liens, easements, encumbrances,
encroachments, and other matters affecting title acceptable to prudent
mortgage lending institutions generally; (C) rights of tenants with no
options to purchase or rights of first refusal to purchase, except as
disclosed in the Company Mortgage Files; and (D) other matters which, in
the aggregate, would not be reasonably likely to result in a material
adverse effect on the Company; (ii) each of the Company Mortgage Loans has
generally been serviced in accordance with the terms of the related
mortgage note and pooling and servicing agreements and otherwise in
accordance with industry accepted servicing practices except for events
that, individually or in the aggregate, would not be reasonably likely to
result in a material adverse effect on the Company; and (iii) there is no
delinquency in the payments of principal and interest required to be made
under the terms of any Company Mortgage Loan in excess of 30 days beyond
the applicable due date that has occurred since origination or in any other
payments required to be made under the terms of any Company Mortgage Loan
(inclusive of any applicable grace or cure period) that would be reasonably
likely to result in a material adverse effect on the Company.
(c) Except as set forth in Section 3.14(c) of the Company Disclosure
Letter or in the applicable Company Mortgage File, the Company has no
knowledge of (i) any written notice asserting any offset, defense
(including the defense of usury), claim (including claims of lender
liability), counterclaim, or right to rescission with respect to any
Company Mortgage Loan, Company Mortgage Note or other related agreements,
(ii) any uncured monetary default in excess of 30 days or event of
acceleration existing under any Company Mortgage or the related Company
Mortgage Note or (iii) any uncured non-monetary default, breach, violation
or event of acceleration existing beyond the applicable grace or cure
period under any Company Mortgage or the related Company Mortgage Note,
except for notices, violations, breaches, defaults or events of
acceleration that would not, individually or in the aggregate, be
reasonably likely to result in a material adverse effect on the Company.
3.15 Indebtedness. Section 3.15 of the Company Disclosure Letter sets
forth as of January 31, 2000 (x) a list of all loan or credit agreements,
notes, bonds, mortgages, indentures and other agreements and instruments
pursuant to which any Indebtedness of the Company, other than Indebtedness
payable to the Company, in an aggregate principal amount in excess of
$100,000 per item, is outstanding or may be incurred and (y) the respective
principal amounts outstanding thereunder. For purposes of this Agreement,
"Indebtedness" shall mean, with respect to any Person, without duplication,
(A) all indebtedness of such Person for borrowed money, whether secured or
unsecured, (B) all obligations of such Person under conditional sale or
other title retention agreements relation to property purchased by such
Person, (C) all capitalized lease obligations of such Person, (D) all
obligations of such Person under interest rate or currency hedging
transactions (valued at the termination value thereof) and (E) all
guarantees of such Person of any such indebtedness of any other Person
other than endorsements for collection in the ordinary course.
3.16 Taxes.
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(a) The Company has filed all tax returns and reports required to be
filed by it, or requests for extensions to file such returns or reports
have been timely filed or granted and have not expired, the Company has
paid all Taxes shown as due thereon, and all tax returns and reports are
complete and accurate in all respects, except to the extent that such
failures to file, have extensions granted that remain in effect, pay Taxes
shown as due or be complete and accurate in all respects, as applicable,
individually or in the aggregate, would not have a material adverse effect
on the Company. The information contained in the Company Financial
Information reflects adequate reserves for all Taxes payable by the Company
for all taxable periods and portions thereof accrued through the date of
such financial statements, and no deficiencies for any taxes have been
proposed, asserted or assessed against the Company that are not adequately
reserved for, except for inadequately reserved taxes and inadequately
reserved deficiencies that would not, individually or in the aggregate,
have a material adverse effect on the Company. True, correct and complete
copies of all income and other material federal, state and local tax
returns and reports for the Company, and all written communications in the
Company's possession relating thereto, have been delivered or made
available to representatives of Parent. Since the date of the most recent
financial statements included in the Company Financial Information, the
Company has incurred no liability for taxes under Sections 857(b), 860(c)
or 4981 of the Code, and the Company has not incurred any material
liability for Taxes other than in the ordinary course of business. To the
knowledge of the Company, no event has occurred, and no condition or
circumstance exists, which presents a material risk that any material Tax
described in the preceding sentence will be imposed upon the Company. No
requests for waivers of the time to assess any taxes against the Company
have been granted or are pending, except for requests with respect to such
taxes that have been adequately reserved for in the most recent financial
statements, or, to the extent not adequately reserved, the assessment of
which would not, individually or in the aggregate, have a material adverse
effect on the Company.
(b) As used in this Agreement, "Taxes" shall include all federal,
state, local and foreign income, franchise, property, sales, use, excise
and other taxes, including obligations for withholding taxes from payments
due or made to any other person and any interest, penalties or additions to
tax with respect thereto.
(c) The Company (A) for all taxable years commencing with the year
ending December 31, 1997 has been subject to taxation as a REIT within the
meaning of the Code and has satisfied all requirements to qualify as a REIT
for such years, (B) has operated, and intends to continue to operate, in
such a manner as to qualify as a REIT for the tax year ending on the
Closing Date, and (C) has not taken or omitted to take any action which
would reasonably be expected to result in loss of its status as a REIT, and
to the Company's knowledge, no such challenge is pending or threatened. The
Company does not hold any material asset (x) the disposition of which would
be subject to rules similar to Section 1374 of the Code as a result of an
election under Internal Revenue Service ("IRS") Notice 88-19 or (y) that is
subject to a consent filed pursuant to Section 341(f) of the Code and the
regulations thereunder.
3.17 Employee Benefit Plans; ERISA
(a) Section 3.17 of the Company Disclosure Letter contains a true and
complete list of all Company Employee Benefit Plans. Except as would not
have a material adverse effect on the Company, (i) all Company Employee
Benefit Plans are in compliance with all applicable requirements of law,
including ERISA and the Code and have been operated in accordance with
their terms, and (ii) the Company does not have any liabilities or
obligations with respect to any such Company Employee Benefit Plans,
whether accrued, contingent or otherwise, and to the Company's knowledge no
circumstances exist that could reasonably be expected to result in any such
liabilities or obligations being incurred. The execution of, and
performance of the transactions contemplated in, this Agreement will not
(either alone or upon the occurrence of any additional or subsequent
events) constitute an event under any Company Employee Benefit Plan that
will or may result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution, increase
in benefits or obligation to fund benefits with respect to any employee.
The only severance agreements or severance policies applicable to the
Company are the agreements and policies specifically referred to in Section
3.17 of the Company Disclosure Letter.
(b) Each of the Company Employee Benefit Plans intended to be
"qualified" within the meaning of Section 401(a) or Section 501(c)(9) of
the Code is so qualified, and no circumstances exist that could reasonably
be expected to result in the revocation of any such determination.
(c) Except as disclosed in Section 3.17(c) of the Company Disclosure
Letter or as disclosed in the Company Financial Information, other than
continuation coverage required to be provided under Section 4980B of the
Code or Part 6 of Title I of ERISA or otherwise as provided by state law or
as incidental benefits under a qualified plan, none of the Company Employee
Benefit Plans that are "welfare plans," within the meaning of Section 3(1)
of ERISA provides for any benefits with respect to current or former
employees for periods extending beyond their retirement or other
termination of service, other than benefits the full cost of which is borne
by such former employees.
(d) As used herein:
(i) "Company Employee Benefit Plan" means any Plan entered into,
established, maintained, sponsored, contributed to or required to be
contributed to by the Company for the benefit of the current or former
employees or directors of the Company and existing on the date of this
Agreement or at any time subsequent thereto and on or prior to the
Effective Time and, in the case of a Plan which is subject to Part 3
of Title I of the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations thereunder ("ERISA"), Section
412 of the Code or Title IV of ERISA, at any time during the five-year
period preceding the date of this Agreement; and
(ii) "Plan" means any employment, bonus, incentive compensation,
deferred compensation, pension, profit sharing, retirement, stock
purchase, stock option, stock ownership, stock appreciation rights,
phantom stock, leave of absence, layoff, vacation, day or dependent
care, legal services, cafeteria, life, health, medical, accident,
disability, workmen's compensation or other insurance, severance,
separation, termination, change of control or other benefit plan,
agreement, practice, policy, program or arrangement of any kind,
whether written or oral, including, but not limited to, any "employee
benefit plan" within the meaning of Section 3(3) of ERISA.
3.18 Labor Matters. Except for those individuals listed in Section
3.18 of the Company Disclosure Letter, the Company has no employees. Except
as set forth in Section 3.18 of the Company Disclosure Letter, no officer
or director of the Company has received or is (or could become) entitled to
receive compensation, severance, bonus, indemnification or employment
benefits from the Company.
3.19 Real Property; Mortgage Loans. The Company owns no real property.
With respect to environmental matters, all of the Mortgage Loans included
in the Company's portfolio conformed to the Underwriting Guidelines (as
defined in the Mortgage Loan Master Purchase and Servicing Agreements to
which the Company is a party) as in effect at the time of their purchase by
the Company, except where such failures to conform could not, in the
aggregate, reasonably be expected to have a material adverse effect on the
Company.
3.20 Intellectual Property Rights. The Company has all right, title
and interest in, or a valid and binding license to use, all Intellectual
Property (as defined below) individually or in the aggregate material to
the conduct of the businesses of the Company. The Company is not in default
(or with the giving of notice or lapse of time or both, would not be in
default) under any license to use such Intellectual Property, such
Intellectual Property is not being infringed by any third party, and the
Company is not infringing any Intellectual Property of any third party,
except for such defaults and infringements which, individually or in the
aggregate, are not having and could not be reasonably expected to have a
material adverse effect on the Company. For purposes of this Agreement,
"Intellectual Property" means patents and patent rights, trademarks and
trademark rights, trade names and trade name rights, service marks and
service ▇▇▇▇ rights, service names and service name rights, copyrights and
copyright rights and other proprietary intellectual property rights and all
pending applications for and registrations of any of the foregoing.
3.21 Vote Required. Assuming the accuracy of the representation and
warranty contained in Section 4.21, the affirmative vote of the holders of
record of at least a majority of the outstanding shares of Company Stock
and of Class B Common Stock with respect to the adoption of this Agreement
is the only vote of the holders of any class or series of the capital stock
of the Company required to adopt this Agreement and approve the Merger and
the other transactions contemplated hereby.
3.22 Financial Advisor. The Company has received the opinion of
PaineWebber Incorporated, dated the date hereof, to the effect that, as of
the date hereof, the consideration to be received in the Merger by the
stockholders of the Company is fair from a financial point of view to the
stockholders of the Company.
3.23 Ownership of Parent Common Stock. Neither the Company nor any
affiliates beneficially owns any shares of Parent Common Stock.
3.24 Affiliate Transactions. Except as set forth in the Section 3.24
of the Company Disclosure Letter, as of the date hereof, there is no
material transaction and no material transaction is now proposed, to which
the Company is or is to be a party to which any current shareholder
(holding in excess of 10% of the Company Stock or any securities
convertible into or exchangeable for such Company Stock), director or
executive officer of the Company is a party.
3.25 Article FIFTH of the Company's Certificate of Incorporation and
Section 203 of the DGCL Not Applicable. The Company has taken all necessary
actions so that neither the provisions of Article FIFTH of the Company's
Certificate of Incorporation nor the provisions of Section 203 of the DGCL
will, before the termination of this Agreement, apply to this Agreement,
the Merger or the other transactions contemplated hereby or thereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant to the Company as follows:
4.01 Organization and Qualification. Each of Parent and its
Subsidiaries (including Sub) is a corporation or limited liability company
duly incorporated or duly formed, validly existing and in good standing
under the laws of its jurisdiction of incorporation and has full corporate
power and authority to conduct its business as and to the extent now
conducted and to own, use and lease its assets and properties, except for
such failures to be so incorporated, existing and in good standing or to
have such power and authority which, individually or in the aggregate, are
not having and could not be reasonably expected to have a material adverse
effect on Parent and its Subsidiaries taken as a whole. Sub was formed
solely for the purpose of engaging in the transactions contemplated by this
Agreement, has engaged in no other business activities and has conducted
its operations only as contemplated hereby. Each of Parent and its
Subsidiaries is duly qualified, licensed or admitted to do business and is
in good standing in each jurisdiction in which the ownership, use or
leasing of its assets and properties, or the conduct or nature of its
business, makes such qualification, licensing or admission necessary,
except for such failures to be so qualified, licensed or admitted and in
good standing which, individually or in the aggregate, are not having and
could not be reasonably expected to have a material adverse effect on
Parent and its Subsidiaries taken as a whole. Section 4.01 of the letter
dated the date hereof and delivered by Parent and Sub to the Company
concurrently with the execution and delivery of this Agreement (the "Parent
Disclosure Letter") sets forth a complete and correct list of all
Subsidiaries of Parent and Parent's interests therein. Except for interests
in the Subsidiaries of Parent and as disclosed in Section 4.01 of the
Parent Disclosure Letter, Parent does not directly or indirectly own any
equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for, any equity or similar interest in, any
corporation, partnership, joint venture or other business association or
entity. The restated articles of incorporation, dated as of March 20, 1998,
provided by Parent to the Company and the bylaws filed by Parent in
Parent's Annual Report on Form 10-K for the year ended December 31, 1998
are complete and correct as of the date hereof.
4.02 Capital Stock.
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(a) The authorized capital stock of Parent consists solely of
400,000,000 shares of Parent Common Stock par value $.001 per share, and
100,000,000 shares of preferred stock, par value $.001 per share ("Parent
Preferred Stock"). As of December 31, 1999, 1,200,000 shares of Parent
Preferred Stock and 20,961,534 shares of Parent Common Stock were issued
and outstanding, no shares of Parent Preferred Stock and no shares of
Parent Common Stock were owned by Parent or any Subsidiary and no shares of
Parent Preferred Stock and no shares of Parent Common Stock were reserved
for issuance. Since such date, except as set forth in Section 4.02 of the
Parent Disclosure Letter, there has been no change in the number of issued
and outstanding shares of Parent Preferred Stock or Parent Common Stock or
shares of Parent Preferred Stock or Parent Common Stock held in treasury or
reserved for issuance. All of the issued and outstanding shares of Parent
Preferred Stock and Parent Common Stock are, and all shares reserved for
issuance, including shares issuable on conversion of the Parent Preferred
Stock and shares issuable on conversion of the New Parent Preferred Stock
referred to in Section 2.01(c), will be, upon issuance in accordance with
the terms specified in the instruments or agreements pursuant to which they
are issuable, duly authorized, validly issued, fully paid and
nonassessable. Except pursuant to this Agreement and except as set forth in
the Parent SEC Reports or Section 4.02 of the Parent Disclosure Letter,
there are no outstanding Options obligating Parent or any of its
Subsidiaries to issue or sell any shares of capital stock of Parent or to
grant, extend or enter into any Option with respect thereto.
(b) Except as disclosed in the Parent SEC Reports filed prior to the
date hereof, or in Section 4.02 of the Parent Disclosure Letter, all of the
outstanding shares of capital stock of each Subsidiary of Parent are duly
authorized, validly issued, fully paid and nonassessable and are owned,
beneficially and of record, by Parent or a Subsidiary wholly owned,
directly or indirectly, by Parent, free and clear of any Liens. Except as
disclosed in the Parent SEC Reports filed prior to the date hereof, or in
Section 4.02 of the Parent Disclosure Letter, there are no (i) outstanding
Options obligating Parent or any of its Subsidiaries to issue or sell any
shares of capital stock of any Subsidiary of Parent or to grant, extend or
enter into any such Option or (ii) voting trusts, proxies or other
commitments, understandings, restrictions or arrangements in favor of any
person other than Parent or a Subsidiary wholly owned, directly or
indirectly, by Parent with respect to the voting of or the right to
participate in dividends or other earnings on any capital stock of any
Subsidiary of Parent.
(c) Except as disclosed in the Parent SEC Reports filed prior to the
date hereof, or in Section 4.02 of the Parent Disclosure Letter, there are
no outstanding contractual obligations of Parent or any Subsidiary of
Parent to repurchase, redeem or otherwise acquire any shares of Parent
Common Stock or Parent Preferred Stock or any capital stock of any
Subsidiary of Parent or to provide funds to, or make any investment (in the
form of a loan, capital contribution or otherwise) in, any Subsidiary of
Parent or any other person.
4.03 Authority Relative to This Agreement. Each of Parent and Sub has
full corporate power and authority to enter into this Agreement, to perform
its obligations hereunder and, subject to obtaining stockholder approval
with respect to the listing of shares of Parent Common Stock issuable upon
conversion of the New Preferred Stock, to consummate the transactions
contemplated hereby. The execution, delivery and performance of this
Agreement by each of Parent, Sub and their affiliates, as applicable, and
the consummation by each of Parent, Sub and their affiliates, as
applicable, of the transactions contemplated hereby and thereby have been
duly and validly approved by their respective Boards of Directors and by
Parent in its capacity as the sole stockholder of Sub, and no other
corporate proceedings on the part of either of Parent or Sub or their
stockholders are necessary to authorize the execution, delivery and
performance of the Basic Agreements by Parent, Sub and their affiliates and
the consummation by them of the transactions contemplated hereby other than
stockholder approval with respect to the listing of shares of Parent Common
Stock issuable upon conversion of the New Preferred Stock. This Agreement
has been duly and validly executed and delivered by each of Parent, Sub and
their affiliates and constitute legal, valid and binding obligations of
each of Parent, Sub and their affiliates enforceable against each of them
in accordance with its terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
4.04 Non-Contravention; Approvals and Consents.
-----------------------------------------
(a) The execution and delivery of this Agreement by each of Parent,
Sub and their affiliates do not, and the performance by each of them of
their obligations hereunder and the consummation by it of the transactions
contemplated hereby and thereby will not, conflict with, result in a
violation or breach of, constitute (with or without notice or lapse of time
or both) a default under, result in or give to any person any right of
payment or reimbursement, termination, cancellation, modification or
acceleration of, or result in the creation or imposition of any Lien upon
any of their assets or properties under, any of the terms, conditions or
provisions of (i) their certificates or articles of incorporation or bylaws
(or other comparable charter documents), or (ii) subject to the taking of
the actions described in paragraph (b) of this Section, (x) any laws or
orders of any Governmental or Regulatory Authority applicable to them or
any of their respective assets or properties, or (y) any Contracts to which
any of them is a party or by which any of them or any of their respective
assets or properties is bound, excluding from the foregoing clauses (x) and
(y) conflicts, violations, breaches, defaults, terminations, modifications,
accelerations and creations and impositions of Liens which, individually or
in the aggregate, could not be reasonably expected to have a material
adverse effect on Parent and its Subsidiaries taken as a whole or on the
ability of Parent, Sub and their affiliates to consummate the transactions
contemplated by this Agreement.
(b) Except (i) for the filing of the Registration Statement with the
SEC pursuant to the Securities Act, the declaration of the effectiveness of
the Registration Statement by the SEC and filings with various state
securities authorities that are required in connection with the
transactions contemplated by this Agreement and (ii) for the filing of the
Certificate of Merger and other appropriate merger documents required by
the DGCL with the Secretary of State and appropriate documents with the
relevant authorities of other states in which the Constituent Corporations
are qualified to do business, no consent, approval or action of, filing
with or notice to any Governmental or Regulatory Authority or other public
or private third party is necessary or required under any of the terms,
conditions or provisions of any law or order of any Governmental or
Regulatory Authority or any Contract to which Parent, any of its
Subsidiaries or any of its affiliates is a party or by which any of them or
any of their respective assets or properties is bound for the execution and
delivery of this Agreement by each of Parent, Sub or any of its affiliates,
the performance by each of them of its obligations thereunder or the
consummation of the transactions contemplated hereby, other than such
consents, approvals, actions, filings and notices which the failure to make
or obtain, as the case may be, individually or in the aggregate, could not
be reasonably expected to have a material adverse effect on Parent and its
Subsidiaries taken as a whole or on the ability of Parent, Sub and their
affiliates to consummate the transactions contemplated by this Agreement.
4.05 SEC Reports and Financial Statements. The forms, reports,
schedules, registration statements, definitive proxy statements and other
documents (together with all amendments thereof and supplements thereto)
filed by Parent or any of its Subsidiaries with the SEC since November 1997
(as such documents have since the time of their filing been amended or
supplemented, the "Parent SEC Reports"), are all of the documents (other
than preliminary material) that Parent and its Subsidiaries were required
to file with the SEC since such date. As of their respective dates, the
Parent SEC Reports (i) complied as to form in all material respects with
the requirements of the Securities Act or the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder (the "Exchange
Act"), as the case may be, and (ii) did not contain any untrue statement of
a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited interim consolidated
financial statements (including, in each case, the notes, if any, thereto)
included in the Parent SEC Reports (the "Parent Financial Statements")
complied as to form in all material respects with the published rules and
regulations of the SEC with respect thereto, were prepared in accordance
with generally accepted accounting principles applied on a consistent basis
during the periods involved (except as may be indicated therein or in the
notes thereto and except with respect to unaudited statements as permitted
by Form 10-Q of the SEC) and fairly present (subject, in the case of the
unaudited interim financial statements, to normal, recurring year-end audit
adjustments (which are not expected to be, individually or in the
aggregate, materially adverse to Parent and its Subsidiaries taken as a
whole)) the consolidated financial position of Parent and its consolidated
subsidiaries as at the respective dates thereof and the consolidated
results of their operations and cash flows for the respective periods then
ended. Except as set forth in the Parent SEC Reports or Section 4.05 of the
Parent Disclosure Letter, each Subsidiary of Parent is treated as a
consolidated subsidiary of Parent in the Parent Financial Statements for
all periods covered thereby.
4.06 Absence of Certain Changes or Events. Except as disclosed in the
Parent SEC Reports filed prior to the date of this Agreement, (a) since
September 30, 1999 there has not been any change, event or development
having, or that could be reasonably expected to have, individually or in
the aggregate, a material adverse effect on Parent and its Subsidiaries
taken as a whole, other than those occurring as a result of general
economic or financial conditions or other developments which are not unique
to the Company and the Subsidiaries but also affect other persons who
participate or are engaged in the lines of business in which the Company
and the Subsidiaries participate or are engaged and (b) between such date
and the date hereof (i) Parent and its Subsidiaries have conducted their
respective businesses only in the ordinary course consistent with past
practice and (ii) neither Parent nor any of its Subsidiaries has taken any
action which, if taken after the date hereof, would constitute a breach of
any provision of Section 5.02.
4.07 Absence of Undisclosed Liabilities. Except for matters reflected
or reserved against in the balance sheet for the period ended September 30,
1999 included in the Parent Financial Statements, neither Parent nor any of
its Subsidiaries had at such date, or has incurred since that date, any
liabilities or obligations (whether absolute, accrued, contingent, fixed or
otherwise, or whether due or to become due) of any nature that would be
required by generally accepted accounting principles to be reflected on a
consolidated balance sheet of Parent and its consolidated subsidiaries
(including the notes thereto), except liabilities or obligations (i) which
were incurred in the ordinary course of business consistent with past
practice or (ii) which have not been, and could not be reasonably expected
to be, individually or in the aggregate, materially adverse to Parent and
its Subsidiaries taken as a whole.
4.08 Legal Proceedings. Except as disclosed in the Parent SEC Reports
filed prior to the date of this Agreement, (i) there are no actions, suits,
arbitrations or proceedings pending or, to the knowledge of Parent,
threatened against, relating to or affecting, nor to the knowledge of
Parent are there any Governmental or Regulatory Authority investigations or
audits pending or threatened against, relating to or affecting, Parent or
any of its Subsidiaries or any of their respective assets and properties
which, individually or in the aggregate, could be reasonably expected to
have a material adverse effect on Parent and its Subsidiaries taken as a
whole or on the ability of Parent and Sub to consummate the transactions
contemplated by this Agreement, and (ii) neither Parent nor any of its
Subsidiaries is subject to any order of any Governmental or Regulatory
Authority which, individually or in the aggregate, is having or could be
reasonably expected to have a material adverse effect on Parent and its
Subsidiaries taken as a whole or on the ability of Parent and Sub to
consummate the transactions contemplated by this Agreement.
4.09 Information Supplied. The Registration Statement and any other
documents to be filed by Parent with the SEC or any other Governmental or
Regulatory Authority in connection with the Merger and the other
transactions contemplated hereby will (in the case of the Registration
Statement and any such other documents filed with the SEC under the
Securities Act or the Exchange Act) comply as to form in all material
respects with the requirements of the Exchange Act and the Securities Act,
respectively, and will not, on the date of its filing or, in the case of
the Registration Statement, at the time it becomes effective under the
Securities Act, at the date the Proxy Statement is mailed to stockholders
and at the time of the Company Stockholders' Meeting or at the time the
stockholders' consent is effective, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading, except that no
representation is made by Parent or Sub with respect to information
supplied in writing by or on behalf of the Company expressly for inclusion
therein.
4.10 Compliance with Laws and Orders. Parent and its Subsidiaries hold
all permits, licenses, variances, exemptions, orders and approvals of all
Governmental and Regulatory Authorities necessary for the lawful conduct of
their respective businesses (the "Parent Permits"), except for failures to
hold such permits, licenses, variances, exemptions, orders and approvals
which, individually or in the aggregate, are not having and could not be
reasonably expected to have a material adverse effect on Parent and its
Subsidiaries taken as a whole. Parent and its Subsidiaries are in
compliance with the terms of the Parent Permits, except failures so to
comply which, individually or in the aggregate, are not having and could
not be reasonably expected to have a material adverse effect on Parent and
its Subsidiaries taken as a whole. Except as disclosed in the Parent SEC
Reports filed prior to the date of this Agreement, Parent and its
Subsidiaries are not in violation of or default under any law or order of
any Governmental or Regulatory Authority, except for such violations or
defaults which, individually or in the aggregate, are not having and could
not be reasonably expected to have a material adverse effect on Parent and
its Subsidiaries taken as a whole.
4.11 Investment Company Act. Parent (i) is not an "investment company"
or a company "controlled" by an investment company within the meaning of
the Investment Company Act of 1940, as amended, (ii) a "holding company" or
a "subsidiary company" of a holding company or an "affiliate" thereof
within the meaning of the Public Utility Holding Company Act of 1935, as
amended, or (iii) subject to regulation under the Federal Power Act or the
Interstate Commerce Act.
4.12 Compliance with Agreements; Certain Agreements. (a) Except as
disclosed in the Parent SEC Reports filed prior to the date of this
Agreement, neither Parent nor any of its Subsidiaries nor, to the knowledge
of Parent, any other party thereto is in breach or violation of, or in
default in the performance or observance of any term or provision of, and
no event has occurred which, with notice or lapse of time or both, could be
reasonably expected to result in a default under, (i) the certificates or
articles of incorporation or bylaws (or other comparable charter documents)
of Parent or any of its Subsidiaries or (ii) any Contract to which Parent
or any of its Subsidiaries is a party or by which Parent or any of its
Subsidiaries or any of their respective assets or properties is bound,
except in the case of clause (ii) for breaches, violations and defaults
which, individually or in the aggregate, are not having and could not be
reasonably expected to have a material adverse effect on Parent and its
Subsidiaries taken as a whole.
(b) Except for the Investment Advisory Agreement, dated as of March
27, 1998, as amended, between Parent and BlackRock Financial Management,
Inc., as of the date hereof, neither Parent nor any of its Subsidiaries is
a party to any oral or written (i) management or consulting agreement not
terminable on 30 days or less notice involving the payment of more than
$100,000 per annum or $500,000 per annum in the aggregate for all such
agreements, (ii) agreement with any executive officer or other key employee
of Parent or any of its Subsidiaries the benefits of which are contingent
or vest, or the terms of which are materially altered, upon the occurrence
of a transaction involving Parent or any of its Subsidiaries of the nature
contemplated by this Agreement, (iii) agreement with respect to any
executive officer or other key employee of Parent or any of its
Subsidiaries providing any term of employment or compensation guarantee
extending for a period longer than one year and for the payment of more
than $100,000 per annum or $500,000 per annum in the aggregate for all such
agreements or (iv) agreement or plan, including any stock option, stock
appreciation right, restricted stock or stock purchase plan, any of the
benefits of which will be increased, or the vesting of the benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement or the value of any of the benefits of which
will be calculated on the basis of any of the transactions contemplated by
this Agreement.
4.13 Mortgage Backed Securities.
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(a) Parent is on the date hereof the sole owner of each of its MBS
("Parent MBS") and the related certificates and other instruments
evidencing ownership of Parent MBS (the "Parent MBS Certificates"), free
and clear of any adverse claims, Liens, pledges, assignments, charges or
security interests of any nature (including, without limitation, Liens
arising under the federal tax laws or ERISA), other than any Parent
Permitted Liens. For purposes of this Agreement, "Parent Permitted Liens"
means (i) Liens set forth in the Parent Disclosure Letter, and (ii)
mechanics', carriers', workmen's, repairmen's and materialmens' liens and
other Liens and other limitations of any kind, if any, which, individually
or in the aggregate, would not be reasonably likely to result in a material
adverse effect on Parent.
(b) Parent to its knowledge is not in default in the performance of
any of its obligations under any pooling and servicing agreements, trust
and servicing agreements, trust agreements, servicing agreements or other
similar documents providing for the creation of the MBS or the servicing of
the mortgage loans underlying the MBS (the "Parent Principal MBS
Agreements") and has not received any notice of any default by any master
or special servicer of any Parent MBS the effect of which, individually or
in the aggregate could reasonably be expected to be materially adverse to
Parent.
(c) As of the date hereof, there are no material agreements (other
than Parent Principal MBS Agreements) between Parent and the master
servicer or any special servicer with respect to any series of Parent MBS.
4.14 Mortgage Loans.
(a) Except as set forth in Section 4.14(a) of Parent Disclosure
Letter, Parent is the sole owner of each of the mortgage loans reflected in
the most recent financial statements in the Parent Financial Statements or
made or acquired since such date (the "Parent Mortgage Loans") and is the
sole owner or beneficiary of or under any related notes (the "Parent
Mortgage Notes"), deeds of trust, mortgages, security agreements,
guaranties, indemnities, financing statements, assignments, endorsement,
bonds, letters of credit, accounts, insurance contracts and policies,
credit reports, tax returns, appraisals, environmental reports, escrow
documents, participation agreements (if applicable), loan files, servicing
files and all other documents evidencing or securing Parent Mortgage Loans
(the "Parent Mortgage Files"), except (i) any Parent Mortgage Loans
disposed of in the ordinary course since the date of such financial
statements, and (ii) to the extent any Parent Mortgage Loan is prepaid in
full or subject to a completed foreclosure action (or non-judicial
proceeding or deed in lieu of foreclosure) in which case Parent shall be
the sole owner of the real property securing such foreclosed loan or shall
have received the proceeds of such action to which Parent was entitled, in
each case free and clear of any adverse claims or Liens except Parent
Permitted Liens.
(b) To the knowledge of Parent, (i) the lien of each Parent Mortgage
is subject only to "Permitted Exceptions" which consist of the following:
(A) Parent Permitted Liens; (B) covenants, conditions, restrictions,
reservations, rights, Liens, easements, encumbrances, encroachments, and
other matters affecting title acceptable to prudent mortgage lending
institutions generally; (C) rights of tenants with no options to purchase
or rights of first refusal to purchase, except as disclosed in Parent
Mortgage File; and (D) other matters which, in the aggregate, would not be
reasonably likely to result in a material adverse effect on Parent; (ii)
each of Parent Mortgage Loans has generally been serviced in accordance
with the terms of the related mortgage note and pooling and servicing
agreements and otherwise in accordance with industry accepted servicing
practices except for events that, individually or in the aggregate, would
not be reasonably likely to result in a material adverse effect on Parent;
and (iii) there is no delinquency in the payments of principal and interest
required to be made under the terms of any Parent Mortgage Loan in excess
of 30 days beyond the applicable due date that has occurred since
origination or in any other payments required to be made under the terms of
any Parent Mortgage Loan (inclusive of any applicable grace or cure period)
that would be reasonably likely to result in a material adverse effect on
Parent.
(c) Except as set forth in the applicable Parent Mortgage File, Parent
has no knowledge of (i) any written notice asserting any offset, defense
(including the defense of usury), claim (including claims of lender
liability), counterclaim, or right to rescission with respect to any Parent
Mortgage Loan, Parent Mortgage Note or other related agreements, (ii) any
uncured monetary default in excess of 30 days or event of acceleration
existing under any Parent Mortgage or the related Parent Mortgage Note or
(iii) any uncured non-monetary default, breach, violation or event of
acceleration existing beyond the applicable grace or cure period under any
Parent Mortgage or the related Parent Mortgage Note, except for notices,
violations, breaches, defaults or events of acceleration that would not,
individually or in the aggregate, be reasonably likely to result in a
material adverse effect on Parent.
4.15 Taxes
(a) Each of Parent and its Subsidiaries has filed all tax returns and
reports required to be filed by it, or requests for extensions to file such
returns or reports have been timely filed or granted and have not expired,
each of Parent and its Subsidiaries has paid all Taxes shown as due
thereon, and all tax returns and reports are complete and accurate in all
respects, except to the extent that such failures to file, have extensions
granted that remain in effect, pay Taxes shown as due or be complete and
accurate in all respects, as applicable, individually or in the aggregate,
would not have a material adverse effect on Parent and its Subsidiaries
taken as a whole. The most recent financial statements contained in the
Parent SEC Reports reflect an adequate reserve for all Taxes payable by
Parent and its Subsidiaries for all taxable periods and portions thereof
accrued through the date of such financial statements, and no deficiencies
for any taxes have been proposed, asserted or assessed against Parent or
any of its Subsidiaries that are not adequately reserved for, except for
inadequately reserved taxes and inadequately reserved deficiencies that
would not, individually or in the aggregate, have a material adverse effect
on Parent and its Subsidiaries taken as a whole. True, correct and complete
copies of all income and other material federal, state and local tax
returns and reports for Parent and each of its Subsidiaries, and all
written communications in the Parent's possession relating thereto, have
been delivered or made available to representatives of Company. Since the
date of the most recent financial statements included in the Parent SEC
Reports, Parent has incurred no liability for tax under Sections 857(b),
860(c) or 4981 of the Code, and neither Parent nor any of its Subsidiaries
has incurred any material liability for Taxes other than in the ordinary
course of business. To the knowledge of Parent, no event has occurred, and
no condition or circumstance exists, which presents a material risk that
any material Tax described in the preceding sentence will be imposed upon
Parent or any of its Subsidiaries. No requests for waivers of the time to
assess any taxes against Parent or any of its Subsidiaries have been
granted or are pending, except for requests with respect to such taxes that
have been adequately reserved for in the most recent financial statements
contained in the Parent SEC Reports, or, to the extent not adequately
reserved, the assessment of which would not, individually or in the
aggregate, have a material adverse effect on Parent and its Subsidiaries
taken as a whole.
(b) Parent (A) for all taxable years commencing with the year ending
December 31, 1998 has been subject to taxation as a REIT within the meaning
of the Code and has satisfied all requirements to qualify as a REIT for
such years, (B) has operated, and intends to continue to operate, in such a
manner as to qualify as a REIT for the tax year ending December 31, 2000,
and (C) has not taken or omitted to take any action which would reasonably
be expected to result in loss of its status as a REIT, and to Parent's
knowledge, no such challenge is pending or threatened. Parent does not hold
any material asset (x) the disposition of which would be subject to rules
similar to Section 1374 of the Code as a result of an election under
Internal Revenue Service ("IRS") Notice 88-19 or (y) that is subject to a
consent filed pursuant to Section 341(f) of the Code and the regulations
thereunder.
4.16 Employee Benefit Plans; ERISA. There is no Plan entered into,
established, maintained, sponsored, contributed to or required to be
contributed to by Parent or any of its Subsidiaries for the benefit of the
current or former employees or directors of Parent or any of its
Subsidiaries and existing on the date of this Agreement or at any time
subsequent thereto and on or prior to the Effective Time and, in the case
of a Plan which is subject to Part 3 of Title I of ERISA, Section 412 of
the Code or Title IV of ERISA, at any time during the five-year period
preceding the date of this Agreement.
4.17 Labor Matters. Except for those individuals listed in Section
4.17 of the Parent Disclosure Letter, Parent has no employees. Except as
set forth in Section 4.17 of the Parent Disclosure Letter, no officer or
director of Parent has received or is (or could become) entitled to receive
compensation, severance, bonus, indemnification or benefits from Parent.
4.18 Environmental Matters. Parent owns no real property. With respect
to any Mortgage Loan secured by real property, except as disclosed in
Section 4.18 of the Parent Disclosure Letter:
(a) Parent conducted, at or prior to the making of such Mortgage Loan,
reasonable and customary due diligence with respect to potential
environmental liabilities associated with property in which Parent holds a
security interest and determined that such properties did not expose the
Parent or owner, operator or lessee of such property to any material
liabilities relating to investigation, response, removal, abatement,
remediation or cleanup (an "Environmental Liability");
(b) Parent's loan agreements and mortgages relating to such Mortgage
Loan contain reasonable and customary representations, covenants,
indemnifications and remedies obligating borrowers owning, operating or
leasing such properties to comply with Environmental Laws, report material
Environmental Liabilities to the Parent, and indemnify and hold the Parent
harmless from and against material Environmental Liabilities;
(c) Parent is not aware of any condition related to the condition,
ownership or operation of such properties that constitutes a material
violation of Environmental Laws, could expose the Parent or owner, operator
or lessee with respect to such properties to material Environmental
Liabilities, or has resulted or could reasonably be expected to result in
any claim, proceeding, litigation or suit, or the imposition of any fines
or liens upon or with respect to such properties, that could reasonable be
expected to have a material adverse effect; and
(d) Parent has not engaged in activities relating to the
workout of any such Mortgage Loan, has not directed the business or
operations of the borrower with respect to such Mortgage Loan and has not
directly controlled the business or operations conducted at such
properties, except as could not lead to Parent becoming directly
responsible for Environmental Liabilities.
(e) As used herein "Environmental Laws" means any law or
order of any Governmental or Regulatory Authority relating to the
regulation or protection of human health, safety or the environment or to
emissions, discharges, releases or threatened releases of pollutants,
contaminants, chemicals or industrial, toxic or hazardous substances or
wastes into the environment (including, without limitation, ambient air,
soil, surface water, ground water, wetlands, land or subsurface strata), or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of pollutants,
contaminants, chemicals or industrial, toxic or hazardous substances or
wastes.
4.19 Intellectual Property Rights. Parent and its Subsidiaries have
all right, title and interest in, or a valid and binding license to use,
all Intellectual Property individually or in the aggregate material to the
conduct of the businesses of Parent and its Subsidiaries taken as a whole.
Neither Parent nor any Subsidiary of Parent is in default (or with the
giving of notice or lapse of time or both, would be in default) under any
license to use such Intellectual Property, such Intellectual Property is
not being infringed by any third party, and neither Parent nor any
Subsidiary of Parent is infringing any Intellectual Property of any third
party, except for such defaults and infringements which, individually or in
the aggregate, are not having and could not be reasonably expected to have
a material adverse effect on Parent and its Subsidiaries taken as a whole.
4.20 Opinion of Financial Advisor. Parent has received the opinion of
Prudential Securities, Inc., dated the date hereof, to the effect that, as
of the date hereof, the consideration to be paid in the Merger by Parent is
fair from a financial point of view to Parent.
4.21 Ownership of Company Common Stock. Neither Parent nor any of its
Subsidiaries or other affiliates beneficially owns any shares of Company
Common Stock.
4.22 Affiliate Transactions. As of the date hereof, there is no
material transaction and no transaction is now proposed, to which Parent is
or is to be a party to which any current shareholder (holding in excess of
10% of Parent Stock or any securities convertible into or exchangeable for
such Parent Stock), director or executive officer of Parent is a party.
4.23 Ownership Limit Restrictions of Parent's Articles of
Incorporation and Section 3-602 of the Maryland General Corporation Law Not
Applicable. Parent has taken all necessary actions so that neither the
Ownership Limit (as such term is defined in Section 6.1.2(a) of Parent's
Articles of Incorporation) of Article VI of Parent's Articles of
Incorporation (subject to the satisfaction of the requirements set forth in
Article VI, Section 6.1.7 of Parent's Articles of Incorporation) nor the
provisions of Section 3-602 of the Maryland General Corporation Law will,
before the termination of this Agreement, apply to this Agreement, the
Merger or the other transactions contemplated hereby.
ARTICLE V
COVENANTS
5.01 Conduct of Business by the Company. At all times from and after
the date hereof until the Effective Time, the Company covenants and agrees
as to itself that (except as expressly contemplated or permitted by this
Agreement, or to the extent that Parent shall otherwise previously consent
in writing):
(a) Ordinary Course. The Company shall conduct its business only in,
and shall not take any action except in, the ordinary course consistent
with past practice.
(b) Certain Activities. Without limiting the generality of paragraph
(a) of this Section, the Company (i) shall use all commercially reasonable
efforts to preserve intact in all material respects its present business
organization and reputation, to keep available the services of its key
officers and employees, to maintain its assets and properties in good
working order and condition, ordinary wear and tear excepted, to maintain
insurance on its tangible assets and businesses in such amounts and against
such risks and losses as are currently in effect, to preserve its
relationships with customers and suppliers and others having significant
business dealings with it and to comply in all material respects with all
laws and orders of all Governmental or Regulatory Authorities applicable to
it, and (ii) shall not, except as otherwise expressly provided for in this
Agreement:
(A) amend or propose to amend its certificate or articles
of incorporation or bylaws (or other comparable corporate charter
documents);
(B) (w) declare, set aside or pay any dividends on or
make other distributions in respect of any of its capital stock,
except that the Company may continue the declaration and payment
of regular quarterly cash dividends (subject to Schedule I
attached hereto) plus special dividends to distribute current
earnings before the Closing Date on Company Stock (and reduce the
Company's Net Asset Value in order to have Section 312.03(c)(1) of
the NYSE Listed Company Manual not apply to Parent), in each case
with usual record and payment dates for such dividends in
accordance with past dividend practice, (x) split, combine,
reclassify or take similar action with respect to any of its
capital stock or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of or in substitution for
shares of its capital stock, (y) adopt a plan of complete or
partial liquidation or resolutions providing for or authorizing
such liquidation or a dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization or (z)
directly or indirectly redeem, repurchase or otherwise acquire any
shares of its capital stock or any securities convertible into, or
rights, warrants or options to acquire, any such shares;
(C) issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock or
any securities convertible into, or rights, warrants or options to
acquire, any such shares (other than (w) the issuance of Company
Stock pursuant to Company Stock Options outstanding on the date of
this Agreement and in accordance with their present terms, and (x)
the issuance of options under the Company's 1997 Long Term
Incentive Plan), or modify or amend any right of any holder of
outstanding shares of capital stock or securities convertible
into, or rights, warrants or options to acquire, any such shares);
(D) acquire (by merging or consolidating with, or by
purchasing a substantial equity interest in or a substantial
portion of the assets of, or by any other manner) any business or
any corporation, partnership, association or other business
organization or division thereof or otherwise acquire or agree to
acquire any assets other than in the ordinary course of its
business consistent with past practice;
(E) other than dispositions in the ordinary course of its
business consistent with past practice, sell, lease, grant any
security interest in or otherwise dispose of or encumber any of
its assets or properties;
(F) except to the extent required by applicable law (x)
settle any shareholder derivative or class action claims arising
out of or in connection with any of the transactions contemplated
hereby, (y) permit any material change in (A) any pricing,
marketing, purchasing, investment, accounting, financial
reporting, inventory, credit, allowance or tax practice or policy
or (B) any method of calculating any bad debt, contingency or
other reserve for accounting, financial reporting or tax purposes
or (z) make or rescind any material Tax election (unless required
by law or necessary to preserve the Company's status as a REIT
under Section 856(i) of the Code), or settle or compromise any
material claim, action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to Taxes or
materially change any method of reporting income or deductions for
federal income tax purposes from those employed in the preparation
of its federal income tax return for the most recent completed
taxable year except as may be required by the SEC, applicable law
or GAAP;
(G) (x) incur any indebtedness for borrowed money or
guarantee any such indebtedness other than in the ordinary course
of its business consistent with past practice, or (y) voluntarily
purchase, cancel, prepay or otherwise provide for a complete or
partial discharge in advance of a scheduled repayment date with
respect to, or waive any right under, any indebtedness for
borrowed money other than in the ordinary course of its business
consistent with past practice;
(H) enter into, adopt, amend in any material respect
(except as may be required by applicable law) or terminate any
Company Employee Benefit Plan or other agreement, arrangement,
plan or policy between the Company and one or more of its
directors, officers or employees, or, except for normal increases
in the ordinary course of business consistent with past practice
that, in the aggregate, do not result in a material increase in
benefits or compensation expense to such party and its
Subsidiaries taken as a whole, increase in any manner the
compensation or fringe benefits of any director, officer or
employee or pay any benefit not required by any plan or
arrangement in effect as of the date hereof;
(I) enter into any Contract or amend or modify any
existing Contract, or engage in any new transaction outside the
ordinary course of business consistent with past practice or not
on an arm's length basis, with any affiliate of the Company or any
of such affiliate's Subsidiaries;
(J) make any capital expenditures or commitments for
additions to plant, property or equipment constituting capital
assets except in the ordinary course of business consistent with
past practice;
(K) make any change in the lines of business in which it
participates or is engaged; or
(L) enter into any Contract, commitment or arrangement to
do or engage in any of the foregoing.
5.02 Conduct of Business by Parent and Sub. At all times from and
after the date hereof until the Effective Time, Parent covenants and agrees
as to itself and its Subsidiaries that (except as expressly contemplated or
permitted by this Agreement, or to the extent that the Company shall
otherwise previously consent in writing):
(a) Ordinary Course. Parent and each of its Subsidiaries shall conduct
their respective businesses only in, and shall not take any action except
in, the ordinary course consistent with past practice. Without limiting the
generality of the foregoing Parent and its Subsidiaries shall use all
commercially reasonable efforts to preserve intact in all material respects
their present business organizations and reputation, to keep available the
services of their key officers and employees, to maintain their assets and
properties in good working order and condition, ordinary wear and tear
excepted, to maintain insurance on their tangible assets and businesses in
such amounts and against such risks and losses as are currently in effect,
to preserve their relationships with customers and suppliers and others
having significant business dealings with them and to comply in all
material respects with all laws and orders of all Governmental or
Regulatory Authorities applicable to them. Notwithstanding the foregoing,
Parent shall not, nor shall it permit any of its Subsidiaries to, except as
otherwise expressly provided for in this Agreement:
(A) amend or propose to amend Parent's certificate or
articles of incorporation or bylaws (or other comparable charter
documents);
(B) settle any shareholder or derivative or class action
claims arising out of or in connection with any of the
transactions contemplated hereby;
(C) (w) declare, set aside or pay any dividends on or
make other distributions in respect of any of its capital stock,
except that Parent may continue the declaration and payment of
regular quarterly cash dividends, in each case with usual record
and payment dates for such dividends in accordance with past
dividend practice, (x) split, combine, reclassify or take similar
action with respect to any of its capital stock or issue or
authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its
capital stock, (y) adopt a plan of complete or partial liquidation
or resolutions providing for or authorizing such liquidation or a
dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization or (z) directly or
indirectly redeem, repurchase or otherwise acquire any shares of
its capital stock or any securities convertible into, or rights,
warrants or options to acquire, any such shares;
(D) acquire (by merging or consolidating with, or by
purchasing a substantial equity interest in or a substantial
portion of the assets of, or by any other manner) any business or
any corporation, partnership, association or other business
organization or division thereof or otherwise acquire or agree to
acquire any assets other than in the ordinary course of its
business consistent with past practice;
(E) other than dispositions in the ordinary course of its
business consistent with past practice, sell, lease, grant any
security interest in or otherwise dispose of or encumber any of
its assets or properties;
(F) except to the extent required by applicable law, make
or rescind any material Tax election (unless required by law or
necessary to preserve Parent's status as a REIT or the status of
any of its Subsidiaries as a "qualified REIT subsidiary" under
Section 856(i) of the Code, as the case may be), or settle or
compromise any material claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy
relating to Taxes or materially change any method of reporting
income or deductions for federal income tax purposes from those
employed in the preparation of its federal income tax return for
the most recent completed taxable year except as may be required
by the SEC, applicable law or GAAP;
(G) enter into any Contract or amend or modify any
existing Contract, or engage in any new transaction outside the
ordinary course of business consistent with past practice or not
on an arm's length basis, with any affiliate of Parent or any of
its Subsidiaries or any of such affiliate's Subsidiaries; or
(H) enter into any Contract, commitment or arrangement to
do or engage in any of the foregoing.
(b) Conduct of Business of Sub. Prior to the Effective
Time, except as may be required by applicable law and subject to the other
provisions of this Agreement, Parent shall cause Sub to (a) perform its
obligations under this Agreement in accordance with its terms, (b) not
incur directly or indirectly any liabilities or obligations other than
those incurred in connection with the Merger and (c) not engage directly or
indirectly in any business or activities of any type or kind and not enter
into any agreements or arrangements with any person, or be subject to or
bound by any obligation or undertaking, which is not contemplated by this
Agreement.
5.03 Covenants of the Company and Parent.
-----------------------------------
(a) Advice of Changes. Each party shall confer on a regular and
frequent basis with the other with respect to its business and operations
and other matters relevant to the Merger, and shall promptly advise the
other, orally and in writing, of any change, matter or event, including,
without limitation, any complaint, investigation or hearing by any
Governmental or Regulatory Authority (or communication indicating the same
may be contemplated) or the institution or threat of litigation, (i)
having, or which, insofar as can be reasonably foreseen, could have, a
material adverse effect on the Company or Parent, as the case may be, and
its Subsidiaries taken as a whole or on the ability of the Company or
Parent, as the case may be, to consummate the transactions contemplated
hereby or (ii) which, if existing or known at the date of this Agreement,
would have been required to be set forth or described in the Company
Disclosure Letter or the Parent Disclosure Letter, as the case may be;
provided that no party shall be required to make any disclosure to the
extent such disclosure would constitute a violation of any applicable law.
(b) Other Actions. Each of the Company and Parent shall not, and shall
use commercially reasonable efforts to cause its respective Subsidiaries
and joint ventures not to, knowingly take any action that would result in
(i) any of the representations and warranties of such party (without giving
effect to any "knowledge" qualification) set forth in this Agreement that
are qualified as to materiality becoming untrue, (ii) any of such
representations and warranties (without giving effect to any "knowledge"
qualification) that are not so qualified becoming untrue in any material
respect or (iii) any of the conditions to the other party's obligation set
forth in Article VII not being satisfied.
(c) Notice and Cure. Each of Parent and the Company will notify the
other of, and will use all commercially reasonable efforts to cure before
the Closing, any event, transaction or circumstance, as soon as practical
after it becomes known to such party, that causes or will cause any
covenant or agreement of Parent or the Company under this Agreement to be
breached or that renders or will render untrue any representation or
warranty of Parent or the Company contained in this Agreement. Each of
Parent and the Company also will notify the other in writing of, and will
use all commercially reasonable efforts to cure before the Closing, any
violation or breach, as soon as practical after it becomes known to such
party, of any representation, warranty, covenant or agreement made by
Parent or the Company. No notice given pursuant to this paragraph shall
have any effect on the representations, warranties, covenants or agreements
contained in this Agreement for purposes of determining satisfaction of any
condition contained herein.
(d) Fulfillment of Conditions. Subject to the terms and conditions of
this Agreement, each of Parent and the Company will take or cause to be
taken all commercially reasonable steps necessary or desirable and proceed
diligently and in good faith to satisfy each condition to the other's
obligations contained in this Agreement and to consummate and make
effective the transactions contemplated by this Agreement, and neither
Parent nor the Company will, nor will it permit any of its Subsidiaries to,
take or fail to take any action that could be reasonably expected to result
in the nonfulfillment of any such condition.
5.04 No Solicitations. Prior to the Effective Time, the Company agrees
(a) that neither it nor any of its Subsidiaries or other affiliates shall,
and it shall use its best efforts to cause their respective Representatives
not to, initiate, solicit or encourage, directly or indirectly, any
inquiries or the making or implementation of any proposal or offer
(including, without limitation, any proposal or offer to its stockholders)
with respect to a merger, consolidation or other business combination
including the Company or any of its Subsidiaries or any acquisition or
similar transaction (including, without limitation, a tender or exchange
offer) involving the purchase of (i) all or any significant portion of the
assets of the Company and its Subsidiaries taken as a whole, (ii) 20% or
more of the outstanding shares of Company Common Stock or (iii) 20% of the
outstanding shares of the capital stock of any Subsidiary of the Company
(any such proposal or offer being hereinafter referred to as an
"Alternative Proposal"), or engage in any negotiations concerning, or
provide any confidential information or data to, or have any discussions
with, any person or group relating to an Alternative Proposal (excluding
the transactions contemplated by this Agreement), or otherwise facilitate
any effort or attempt to make or implement an Alternative Proposal; (b)
that it will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties with respect to
any of the foregoing, and it will take the necessary steps to inform such
parties of its obligations under this Section; and (c) that it will notify
Parent immediately if any such inquiries, proposals or offers are received
by, any such information is requested from, or any such negotiations or
discussions are sought to be initiated or continued with, it or any of such
persons; provided, however, that nothing contained in this Section 5.04
shall prohibit the Board of Directors of the Company from (i) furnishing
information to (but only pursuant to a confidentiality agreement in
customary form) or entering into discussions or negotiations with any
person or group that makes an unsolicited bona fide Alternative Proposal,
if, and only to the extent that, (A) the Board of Directors of the Company,
based upon the advice of outside counsel, determines in good faith that
such action is required for the Board of Directors to comply with its
fiduciary duties to stockholders imposed by law, (B) prior to furnishing
such information to, or entering into discussions or negotiations with,
such person or group, the Company provides written notice to Parent to the
effect that it is furnishing information to, or entering into discussions
or negotiations with, such person or group, and (C) the Company keeps
Parent informed of the status and all material information with respect to
any such discussions or negotiations; and (ii) to the extent required,
complying with Rule 14e-2 promulgated under the Exchange Act with regard to
an Alternative Proposal. Nothing in this Section 5.04 shall (x) permit the
Company to terminate this Agreement (except as specifically provided in
Article VIII), (y) permit the Company to enter into any agreement with
respect to an Alternative Proposal for so long as this Agreement remains in
effect (it being agreed that for so long as this Agreement remains in
effect, the Company shall not enter into any agreement with any person or
group that provides for, or in any way facilitates, an Alternative Proposal
(other than a confidentiality agreement under the circumstances described
above)), or (z) affect any other obligation of the Company under this
Agreement.
5.05 Purchases of Common Stock of the Other Party. During the period
from the date hereof through the Effective Time, neither Parent nor any of
its Subsidiaries or other affiliates will purchase any shares of Company
Common Stock, and neither the Company nor any of its Subsidiaries or other
affiliates will purchase any shares of Parent Common Stock.
5.06 Management Agreement Assignment Agreement. From the date hereof
through the Effective Time, Parent will not permit BlackRock Financial
Management, Inc. to amend or terminate the Management Agreement Assignment
Agreement between GMAC Mortgage Asset Management, Inc. and BlackRock
Financial Management, Inc. (the "Management Agreement Assignment
Agreement").
ARTICLE VI
ADDITIONAL AGREEMENTS
6.01 Access to Information. Each of the Company and Parent shall, and
shall cause each of its Subsidiaries to, throughout the period from the
date hereof to the Effective Time, (i) provide the other party and its
Representatives with full access, upon reasonable prior notice and during
normal business hours, to all officers, employees, agents and accountants
of the Company or Parent, as the case may be, and its Subsidiaries and
their respective assets, properties, books and record, but only to the
extent that such access does not unreasonably interfere with the business
and operations of the Company or Parent, as the case may be, and its
Subsidiaries, and (ii) furnish promptly to such persons (x) a copy of each
report, statement, schedule and other document filed or received by the
Company or Parent, as the case may be, or any of its Subsidiaries pursuant
to the requirements of federal or state securities laws and each material
report, statement, schedule and other document filed with any other
Governmental or Regulatory Authority, and (y) all other information and
data (including, without limitation, copies of Contracts or Company
Employee Benefit Plans, as the case may be, and other books and records)
concerning the business and operations of the Company or Parent, as the
case may be, and its Subsidiaries as the other party or any of such other
persons reasonably may request. No investigation pursuant to this paragraph
or otherwise shall affect any representation or warranty contained in this
Agreement or any condition to the obligations of the parties hereto. Any
such information or material obtained pursuant to this Section 6.01 that
constitutes "Evaluation Material" (as such term is defined in the letter
agreement dated as of October 19, 1999 between the Company and Parent (the
"Confidentiality Agreement")) shall be governed by the terms of the
Confidentiality Agreement, provided that following the Effective Time
Parent and the Surviving Corporation shall have all the rights of the
Company with respect thereto.
6.02 Preparation of Registration Statement and Proxy Statement. The
Company and Parent shall prepare the Proxy Statement and Parent shall
prepare and file with the SEC as soon as reasonably practicable after the
date hereof the Registration Statement, in which the Proxy Statement will
be included as the prospectus. Parent and the Company shall use their best
efforts to have the Registration Statement declared effective by the SEC as
promptly as practicable after such filing. Parent shall also take any
action (other than qualifying as a foreign corporation or taking any action
which would subject it to service of process in any jurisdiction where
Parent is not now so qualified or subject) required to be taken under
applicable state blue sky or securities laws in connection with the
issuance of Parent Common Stock in connection with the Merger. If at any
time prior to the Effective Time any event shall occur that should be set
forth in an amendment of or a supplement to the Registration Statement,
Parent with the cooperation of the Company shall prepare and file with the
SEC such amendment or supplement as soon thereafter as is reasonably
practicable. Parent, Sub and the Company shall cooperate with each other in
the preparation of the Registration Statement and the Proxy Statement and
any amendment or supplement thereto, and Parent shall notify the Company of
the receipt of any comments of the SEC with respect to the Registration
Statement and of any requests by the SEC for any amendment or supplement
thereto or for additional information, and shall provide to the Company
promptly copies of all correspondence between Parent or any of its
Representatives with respect to the Registration Statement. Parent shall
give the Company and its counsel the opportunity to review the Registration
Statement and all responses to requests for additional information by and
replies to comments of the SEC before their being filed with, or sent to,
the SEC. Each of the Company, Parent and Sub agrees to use its reasonable
best efforts, after consultation with the other parties hereto, to respond
promptly to all such comments of and requests by the SEC and to cause (x)
the Registration Statement to be declared effective by the SEC at the
earliest practicable time and to be kept effective as long as is necessary
to consummate the Merger, and (y) the Proxy Statement to be mailed to the
holders of Company Common Stock entitled to vote at the meeting of the
stockholders of the Company at the earliest practicable time.
6.03 Approval of Stockholders. The Company shall, through its Board of
Directors, either duly call, give notice of, convene and hold a meeting of
its stockholders (the "Company Stockholders' Meeting" for the purpose of
voting on, or solicit written consents required for, the adoption of this
Agreement (the "Company Stockholders' Approval") as soon as reasonably
practicable after the date hereof. Subject to the exercise of fiduciary
obligations under applicable law as advised by outside counsel, the Company
shall, through its Board of Directors, include in the Proxy Statement the
recommendation of the Board of Directors of the Company that the
stockholders of the Company adopt this Agreement, and shall use its best
efforts to obtain such adoption.
6.04 Company Affiliates. At least 30 days prior to the Closing Date
the Company shall deliver a letter to Parent identifying all persons who,
at the time of the Company Stockholders' Meeting, may, in the Company's
reasonable judgment, be deemed to be "affiliates" (as such term is used in
Rule 145 under the Securities Act) of the Company ("Company Affiliates").
The Company shall use its best efforts to cause each Company Affiliate to
deliver to Parent on or prior to the Closing Date a written agreement
substantially in the form and to the effect of Exhibit B hereto (an
"Affiliate Agreement"). Parent shall be entitled to place legends as
specified in such Affiliate Agreements on the certificates evidencing any
Parent Common Stock to be received by such Company Affiliates pursuant to
the terms of this Agreement, and to issue appropriate stop transfer
instructions to the transfer agent for the Parent Common Stock, consistent
with the terms of such Affiliate Agreements.
6.05 Stock Exchange Listing. Parent shall use its best efforts to
cause the shares of Parent Common Stock to be issued in connection with the
Merger and under the Director Stock Option Plan after the Merger in
accordance with this Agreement, to be approved for listing on the NYSE,
subject to official notice of issuance, prior to the Closing Date. Parent
shall use its reasonable best efforts after the Closing to cause the shares
of Parent Common Stock issuable upon conversion of the New Parent Preferred
Stock issued pursuant to Section 2.01(c) to be listed on the NYSE,
including by submitting the conversion of the New Parent Preferred Stock
for adoption by the requisite vote of, and recommending such adoption to,
the stockholders of Parent.
6.06 Regulatory and Other Approvals. Subject to the terms and
conditions of this Agreement and without limiting the provisions of
Sections 6.02 and 6.03, each of the Company and Parent will proceed
diligently and in good faith to, as promptly as practicable, (a) obtain all
consents, approvals or actions of, make all filings with and give all
notices to Governmental or Regulatory Authorities or any other public or
private third parties, including Societe Generale and ABN AMRO Bank N.V.,
required of Parent, the Company or any of their Subsidiaries to consummate
the Merger and the other matters contemplated hereby, and (b) provide such
other information and communications to such Governmental or Regulatory
Authorities or other public or private third parties as the other party or
such Governmental or Regulatory Authorities or other public or private
third parties may reasonably request in connection therewith.
6.07 Company Option Plan.
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(a) At the Effective Time, each outstanding option to purchase shares
of Company Common Stock (a "Company Stock Option") under the Director Stock
Option Plan, whether vested or unvested, shall be deemed to constitute an
option to acquire, on the same terms and conditions as were applicable
under such Company Stock Option, a number of shares of Parent Common Stock
equal to the product (rounded down to the nearest whole share) of (i) the
number of shares of Company Common Stock issuable upon exercise of the
option immediately prior to the Effective Time and (ii) the Common Stock
Conversion Number; and the option exercise price per share of Parent Common
Stock at which such option is exercisable shall be the amount (rounded up
to the nearest whole cent) obtained by dividing (iii) the option exercise
price per share of Company Common Stock at which such option is exercisable
immediately prior to the Effective Time by (iv) the Common Stock Conversion
Number.
(b) As soon as practicable after the Effective Time, Parent shall
deliver to the holders of Company Stock Options a notice stating that the
agreements evidencing the grant of the Company Stock Options shall continue
in effect on the same terms and conditions (subject to the adjustments, if
any, required by this Section after giving effect to the Merger and the
terms of the Director Stock Option Plan).
(c) Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Common Stock for delivery
under the Director Stock Option Plan as adjusted in accordance with this
Section. As soon as practicable after the Effective Time, Parent shall file
a registration statement on Form S-8 promulgated by the SEC under the
Securities Act (or any successor or other appropriate form) with respect to
the Parent Common Stock subject to such options held by individuals and
shall use reasonable best efforts to maintain the effectiveness of such
registration statement or registration statements (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as
such options remain outstanding. With respect to those individuals who
subsequent to the Merger will be subject to the reporting requirements
under Section 16(a) of the Exchange Act, where applicable, Parent shall
administer the Director Stock Option Plan in a manner that complies with
Rule 16b-3 promulgated under the Exchange Act.
6.08 Directors' and Officers' Indemnification and Insurance.
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(a) From and after the Effective Time and until the sixth anniversary
of the Effective Time and for so long thereafter as any claim for
indemnification asserted on or prior to such date has not been fully
adjudicated, Parent and the Surviving Corporation (each, an "Indemnifying
Party") shall indemnify, defend and hold harmless each person who is now,
or has been at any time prior to the date hereof or who becomes prior to
the Effective Time, a director or officer of the Company or any of its
Subsidiaries (the "Indemnified Parties") against (i) all losses, claims,
damages, costs and expenses (including attorneys' fees), liabilities,
judgments and settlement amounts that are paid or incurred in connection
with any claim, action, suit, proceeding or investigation (whether civil,
criminal, administrative or investigative and whether asserted or claimed
prior to, at or after the Effective Time) that is based in whole or in part
on, or arises in whole or in part out of, the fact that such Indemnified
Party is or was a director or officer of the Company or any of its
Subsidiaries and relates to or arises out of any action or omission
occurring at or prior to the Effective Time ("Indemnified Liabilities"),
and (ii) all Indemnified Liabilities based in whole or in part on, or
arising in whole or in part out of, or pertaining to this Agreement or the
transactions contemplated hereby, in each case to the full extent a
corporation is permitted under applicable law to indemnify its own
directors or officers, as the case may be; provided that no Indemnifying
Party shall be liable for any settlement of any claim effected without its
written consent, which consent shall not be unreasonably withheld; and
provided, further, that no Indemnifying Party shall be liable for any
Indemnified Liabilities which occur as a result of the gross negligence or
willful misconduct of any Indemnified Party or conduct with respect to
which the Company would not be permitted to indemnify the Indemnified Party
under the Company's Certificate of Incorporation on the date hereof.
Without limiting the foregoing, in the event that any such claim, action,
suit, proceeding or investigation is brought against any Indemnified Party
(whether arising prior to or after the Effective Time), (w) the
Indemnifying Parties will pay expenses in advance of the final disposition
of any such claim, action, suit, proceeding or investigation to each
Indemnified Party to the full extent permitted by applicable law; provided
that the person to whom expenses are advanced provides any undertaking
required by applicable law to repay such advance if it is ultimately
determined that such person is not entitled to indemnification; (x) the
Indemnified Parties shall retain counsel reasonably satisfactory to the
Indemnifying Parties; (y) the Indemnifying Parties shall pay all reasonable
fees and expenses of such counsel for the Indemnified Parties (subject to
the final sentence of this paragraph) promptly as statements therefor are
received; and (z) the Indemnifying Parties shall use all commercially
reasonable efforts to assist in the defense of any such matter. Any
Indemnified Party wishing to claim indemnification under this Section, upon
learning of any such claim, action, suit, proceeding or investigation,
shall notify the Indemnifying Parties, but the failure so to notify an
Indemnifying Party shall not relieve such Indemnifying Party from any
liability which it may have under this paragraph except to the extent such
failure irreparably prejudices such Indemnifying Party. The Indemnified
Parties as a group may retain only one law firm (together with appropriate
local counsel) to represent them with respect to each such matter unless
there is, under applicable standards of professional conduct, a conflict on
any significant issue between the positions of any two or more Indemnified
Parties in which case the Indemnified Parties may retain more than one law
firm; provided, however, that the Indemnifying Parties shall be required to
pay the reasonable fees and expenses of only one law firm as determined by
the Indemnifying Parties.
(b) Except to the extent required by law, until the sixth anniversary
of the Effective Time, Parent will not take any action so as to amend,
modify or repeal the provisions for indemnification of directors, officers
or employees contained in the certificates or articles of incorporation or
bylaws (or other comparable charter documents) of the Surviving Corporation
(which as of the Effective Time shall be no more favorable to such
individuals than those maintained by the Company on the date hereof) in
such a manner as would adversely affect the rights of any individual who
shall have served as a director, officer or employee of the Company or any
of its Subsidiaries prior to the Effective Time to be indemnified by such
corporations in respect of their serving in such capacities prior to the
Effective Time.
(c) Parent and the Surviving Corporation shall, until the sixth
anniversary of the Effective Time and for so long thereafter as any claim
for insurance coverage asserted on or prior to such date has not been fully
adjudicated, cause to be maintained in effect, to the extent available, the
policies of directors' and officers' liability insurance maintained by the
Company as of the date hereof (or policies of at least the same coverage
and amounts containing terms that are no less advantageous to the insured
parties) with respect to claims arising from facts or events that occurred
on or prior to the Effective Time; provided that in no event shall Parent
or the Surviving Corporation be obligated to expend in order to maintain or
procure insurance coverage pursuant to this paragraph any amount per annum
in excess of 200% of the aggregate premiums payable by the Company in 1999
(on an annualized basis) for such purpose.
(d) The provisions of this Section are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party and each party
entitled to insurance coverage under paragraph (c) above, respectively, and
his or her heirs and legal representatives, and shall be in addition to any
other rights an Indemnified Party may have under the certificate or
articles of incorporation or bylaws of the Surviving Corporation, under the
DGCL or otherwise.
6.09 Parent Governance. Parent's Board of Directors shall take action
to cause the full Board of Directors of Parent at the Effective Time to
include ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ or any other current independent director of the
Company, or such other individual designated by the Company and approved by
Parent (who shall be designated a Class I Director on Parent's Board of
Directors) for a term continuing until the Parent's annual meeting of
stockholders in 2001 and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ or such other individual
designated by the Company and approved by Parent (who shall be designated a
Class II Director on Parent's Board of Directors) for a term continuing
until Parent's annual meeting of stockholders in 2002 or until their
successors are elected.
6.10 Expenses. Except as set forth in Section 8.02, whether or not the
Merger is consummated, all costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such cost or expense.
6.11 Brokers or Finders. Each of Parent and the Company represents, as
to itself and its affiliates, that no agent, broker, investment banker,
financial advisor or other firm or person is or will be entitled to any
broker's or finder's fee or any other commission or similar fee in
connection with any of the transactions contemplated by this Agreement
except PaineWebber Incorporated, whose fees and expenses will be paid by
the Company in accordance with the Company's agreement with such firm (a
true and complete copy of which has been delivered by the Company to Parent
prior to the execution of this Agreement), and Prudential Securities,
Incorporated, whose fees and expenses will be paid by Parent in accordance
with Parent's agreement with such firm (a true and complete copy of which
has been delivered by Parent to the Company prior to the execution of this
Agreement), and each of Parent and the Company shall indemnify and hold the
other harmless from and against any and all claims, liabilities or
obligations with respect to any other such fee or commission or expenses
related thereto asserted by any person on the basis of any act or statement
alleged to have been made by such party or its affiliate.
6.12 Takeover Statutes. If any "fair price", "moratorium", "control
share acquisition" or other form of antitakeover statute or regulation
shall become applicable to the transactions contemplated hereby, the
Company, Parent and the members of their respective Boards of Directors
shall grant such approvals and take such actions as are reasonably
necessary so that the transactions contemplated hereby may be consummated
as promptly as practicable on the terms contemplated hereby and thereby and
otherwise act to eliminate or minimize the effects of such statute or
regulation on the transactions contemplated hereby and thereby.
6.13 Conveyance Taxes. The Company and Parent shall cooperate in the
preparation, execution and filing of all returns, questionnaires,
applications or other documents regarding any real property transfer or
gains, sales, use, transfer, value added, stock transfer and stamp taxes,
any transfer, recording, registration and other fees, and any similar taxes
which become payable in connection with, and are solely and directly
related to, the transactions contemplated by this Agreement ("Transfer
Taxes") that are required or permitted to be filed on or before the
Effective Time.
6.14 Letters of Accountants.
----------------------
(a) The Company shall use its commercially reasonable efforts to cause
to be delivered to Parent "comfort" letters of PriceWaterhouseCoopers, the
Company's independent public accountants, dated and delivered the date on
which the Registration Statement shall become effective and as of the
Effective Time, and addressed to Parent, in form and substance reasonably
customary in scope and substance for letters delivered by independent
public accountants in connection with transactions such as those
contemplated by this Agreement.
(b) Parent shall use its commercially reasonable efforts to cause to
be delivered to the Company "comfort" letters of Deloitte & Touche LLP,
Parent's independent public accountants, dated the date on which the
Registration Statement shall become effective and as of the Effective Time,
and addressed to the Company, in form and substance reasonably customary in
scope and substance for letters delivered by independent public accountants
in connection with transactions such as those contemplated by this
Agreement.
6.15 Coordination of Dividends. Each of the Company and Parent shall
coordinate with the other regarding the declaration and payment of
dividends in respect of Company Common Stock and Parent Common Stock and
the record dates and payment dates relating thereto, it being the intention
of the Company and Parent that except as contemplated by Section
5.01(b)(ii)(B)(w), any holder of Company Common Stock or Parent Common
Stock, as the case may be, shall not receive two dividends, or fail to
receive one dividend, for any single calendar quarter with respect to such
holder's Company Common Stock or Parent Common Stock.
ARTICLE VII
CONDITIONS
7.01 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger is subject to the
fulfillment, at or prior to the Closing, of each of the following
conditions:
(a) Stockholder Approval. This Agreement shall have been adopted by
the requisite vote of the stockholders of the Company under the DGCL.
(b) Registration Statement; State Securities Laws. The Registration
Statement shall have become effective in accordance with the provisions of
the Securities Act, and no stop order suspending such effectiveness shall
have been issued and remain in effect and no proceeding seeking such an
order shall be pending or threatened. Parent shall have received all state
securities or blue sky permits and other authorizations necessary to issue
the Parent Stock pursuant to this Agreement and under the Company Stock
Plans after the Merger.
(c) Exchange Listing. The shares of Parent Common Stock issuable to
the Company's stockholders in the Merger and under the Director Stock
Option Plan after the Merger in accordance with this Agreement shall have
been authorized for listing on the NYSE.
(d) No Injunctions or Restraints; Material Proceedings. No court of
competent jurisdiction or other competent Governmental or Regulatory
Authority shall have enacted, issued, promulgated, enforced or entered any
law or order (whether temporary, preliminary or permanent) which is then in
effect and has the effect of making illegal or otherwise restricting,
preventing or prohibiting consummation of the Merger or the other
transactions contemplated by this Agreement, and there shall be no pending
or threatened material proceedings that could reasonably be expected to
have a material adverse effect on the consummation of the Merger.
(e) Governmental and Regulatory and Other Consents and Approvals.
Other than the filing provided for by Section 1.03, all consents, approvals
and actions of, filings with and notices to any Governmental or Regulatory
Authority or any other public or private third parties listed in Schedule
7.01(e) to this Agreement shall have been obtained, all in form and
substance reasonably satisfactory to Parent and the Company.
7.02 Conditions to Obligation of Parent and Sub to Effect the Merger.
The obligation of Parent and Sub to effect the Merger is further subject to
the fulfillment, at or prior to the Closing, of each of the following
additional conditions (all or any of which may be waived in whole or in
part by Parent and Sub in their sole discretion).
(a) Representations and Warranties. The representations and warranties
made by the Company in this Agreement taken as a whole shall be true and
correct in all respects material to the business, assets, financial
condition or results of operation of the Company and the validity and
enforceability of this Agreement as of the Closing Date as though made on
and as of the Closing Date or, in the case of representations and
warranties made as of a specified date earlier than the Closing Date, on
and as of such earlier date, except as affected by the transactions
contemplated by this Agreement, and the Company shall have delivered to
Parent a certificate, dated the Closing Date and executed in the name and
on behalf of the Company by its President, to such effect.
(b) Performance of Obligations. The Company shall have performed and
complied with, in all material respects, its agreements, covenants and
obligations required by this Agreement to be so performed or complied with
by the Company at or prior to the Closing, and the Company shall have
delivered to Parent a certificate, dated the Closing Date and executed in
the name and on behalf of the Company by its President, to such effect.
(c) Management Agreement Assignment Agreement. The Management
Agreement Assignment Agreement shall be in full force and effect.
(d) Opinion of the Company's Counsel. Parent shall have received an
opinion from Milbank, Tweed, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, legal counsel to the
Company, substantially in the form attached hereto as Exhibit C (with
customary exceptions, assumptions, qualifications and based upon customary
representations).
(e) REIT Opinion. Parent shall have received an opinion from Milbank,
Tweed, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, substantially in the form attached hereto as
Exhibit D.
(f) Societe Generale and ABN AMRO Bank N.V. Consents. Either (i)
Parent shall have (x) received copies of documents pursuant to which
Societe Generale and ABN AMRO Bank N.V. have consented to the Merger
Agreement without any material change in the economic terms of the
financing arrangements in place as of the Effective Time between the
Company and Societe Generale and the Company and ABN AMRO Bank N.V. or (y)
received copies of the documents pursuant to which ABN AMRO Bank N.V. has
consented to the Merger Agreement without any material change in the
economic terms of the financing arrangements in place as of the Effective
Date between the Company and ABN AMRO Bank N.V. and ABN AMRO Bank N.V. has
agreed to provide financing under its existing arrangement with the Company
with respect to the Mortgage Loans financed under the financing
arrangements as of the date hereof between the Company and Societe Generale
or (ii) the Company shall have settled the sale of the Purchased Loans and
the Mortgage Loans underlying the amounts indicated as outstanding under
the CP Facilities in Section 3.15 of the Company Disclosure Letter with the
party or parties that have not so consented to the Merger Agreement. For
purposes of this Section 7.02(f), "Mortgage Loans" shall have the meaning
under the financing agreements between the Company and Societe Generale and
"Purchased Loans" shall have the meaning under the financing agreements
between the Company and ABN AMRO Bank N.V.
7.03 Conditions to Obligation of the Company to Effect the Merger. The
obligation of the Company to effect the Merger is further subject to the
fulfillment, at or prior to the Closing, of each of the following
additional conditions (all or any of which may be waived in whole or in
part by the Company in its sole discretion):
(a) Representations and Warranties. The representations and warranties
made by Parent and Sub in this Agreement taken as a whole shall be true and
correct in all respects material to the business, assets, financial
condition or results of operation of Parent and the validity and
enforceability of this Agreement as of the Closing Date as though made on
and as of the Closing Date or, in the case of representations and
warranties made as of a specified date earlier than the Closing Date, on
and as of such earlier date, except as affected by the transactions
contemplated by this Agreement, and Parent and Sub shall each have
delivered to the Company a certificate, dated the Closing Date and executed
in the name and on behalf of Parent by its Chairman of the Board, President
or any Senior Executive Officer and in the name and on behalf of Sub by its
Chairman of the Board, President or any Vice President, to such effect.
(b) Performance of Obligations. Parent and Sub each shall have
performed and complied with, in all material respects, its agreements,
covenants and obligations required by this Agreement to be so performed or
complied with by Parent or Sub at or prior to the Closing, and Parent and
Sub shall each have delivered to the Company a certificate, dated the
Closing Date and executed in the name and on behalf of Parent by its
Chairman of the Board, President or any Senior Executive Officer and in the
name and on behalf of Sub by its Chairman of the Board, President or any
Vice President, to such effect.
(c) The Management Agreement Assignment Agreement. The Management
Agreement Assignment Agreement shall be in full force and effect and shall
not have been amended or terminated since its original date of execution.
(d) Opinion of Parent's Counsel. The Company shall have received an
opinion from Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, legal counsel to
Parent, or local Maryland counsel to Parent acceptable to the Company,
substantially in the form attached hereto as Exhibit E (with customary
exceptions, assumptions, qualifications and based upon customary
representations).
(e) REIT Opinion. The Company shall have received an opinion from
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, substantially in the form
attached hereto as Exhibit F.
(f) Opinion of Parent's Local Counsel. The Company shall have received
an opinion from Miles & Stockbridge P.C., Maryland counsel to Parent,
substantially in the form attached hereto as Exhibit G.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.01 Termination. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned, at any time prior to the
Effective Time, whether prior to or after the Company Stockholders'
Approval:
(a) By mutual written agreement of the parties hereto
duly authorized by action taken by or on behalf of their respective Boards
of Directors;
(b) By either the Company or Parent upon notification to
the non-terminating party by the terminating party:
(i) at any time after June 30, 2000 if the Merger shall
not have been consummated on or prior to such date and such
failure to consummate the Merger is not caused by a breach of this
Agreement by the terminating party;
(ii) if the Company Stockholders' Approval shall not be
obtained by reason of the failure to obtain the requisite vote
upon a vote held at a meeting of such stockholders, or any
adjournment thereof, called therefor;
(iii) if there has been a material breach of any
representation, warranty, covenant or agreement on the part of the
non-terminating party set forth in this Agreement, which breach is
not curable or, if curable, has not been cured within 30 days
following receipt by the non-terminating party of notice of such
breach from the terminating party; or
(iv) if any court of competent jurisdiction or other
competent Governmental or Regulatory Authority shall have issued
an order making illegal or otherwise restricting, preventing or
prohibiting the Merger and such order shall have become final and
nonappealable;
(c) By the Company if the Board of Directors of the
Company determines in good faith, based upon the written opinion of outside
counsel (a copy of which shall be provided promptly to Parent), that
termination of the Agreement is required for the Board of Directors to
comply with its fiduciary duties to stockholders imposed by law by reason
of an unsolicited bona fide Alternative Proposal if such Alternative
Proposal is not conditioned on the receipt of financing and the Board of
Directors has reasonably concluded in good faith that the person or group
making such Alternative Proposal will have adequate sources of financing to
consummate such Alternative Proposal and that such Acquisition Proposal is
more favorable to the Company's stockholders than the Merger, and the Board
of Directors has received a written opinion from a nationally-recognized
investment banking firm (a copy of which shall be provided promptly to
Parent) to the effect that the consideration to be received by stockholders
of the Company in connection with such Alternative Proposal is superior,
from a financial point of view, to the consideration to be received by them
in the Merger; provided that the Company shall have complied with the
provisions of clauses (B) and (C) of Section 5.04 and shall notify Parent
promptly of its intention to terminate this Agreement or enter into a
definitive agreement with respect to such Alternative Proposal, but in no
event shall such notice be given less than 48 hours prior to the public
announcement of the Company's termination of this Agreement; and provided
further that the Company's ability to terminate this Agreement pursuant to
this paragraph (c) is conditioned upon the prior payment by the Company to
Parent of any amounts owed by it pursuant to Section 8.02(b);
(d) By Parent if the Board of Directors of the Company
(or any committee thereof) shall have withdrawn or modified in a manner
materially adverse to the terminating party its approval or recommendation
of this Agreement or the Merger or shall have recommended an Alternative
Proposal to its stockholders;
(e) By the Company if the average Sales Price of a share
of Parent Common Stock on the ten consecutive Trading Days ending three
Trading Days prior to the Closing Date is below the Benchmark Price; or
(f) By Parent if the Company adjusts the Common Stock
Conversion Number in accordance with Section 2.01(c)(i).
8.02 Effect of Termination.
---------------------
(a) If this Agreement is validly terminated by either the Company or
Parent pursuant to Section 8.01, this Agreement will forthwith become null
and void and there will be no liability or obligation on the part of either
the Company or Parent (or any of their respective Representatives or
affiliates), except (i) that the provisions of Sections 6.01, 6.11 and 6.12
and this Section 8.02 will continue to apply following any such
termination, (ii) that nothing contained herein shall relieve any party
hereto from liability for willful breach of its representations,
warranties, covenants or agreements contained in this Agreement and (iii)
as provided in paragraphs (b) and (c) below.
(b) In the event that any person or group shall have made an
Alternative Proposal and thereafter (i) this Agreement is terminated (x) by
the Company pursuant to Section 8.01(c), (y) by Parent pursuant to Section
8.01(b)(iii) or Section 8.01(d) or (z) by either party pursuant to Section
8.01(b)(ii) as a result of the Company Stockholders' Approval not being
obtained, then the Company shall owe to Parent a "Break-up Fee" in the
amount of $2,000,000. In the event that this Agreement is terminated by
either party pursuant to Section 8.01(b)(ii) as a result of the Company
Stockholders' Approval not being obtained, then the Company shall owe to
Parent an "Expense Fee" in the amount equal to the aggregate amount of all
reasonable documented out of pocket expenses and fees incurred by Parent
and Sub in connection with this Agreement and the transaction contemplated
hereby (including, without limitation, reasonable fees and expenses payable
to all banks, investment banking firms and other financial institutions and
persons and their respective agents and counsel for acting as Parent's
financial advisor with respect to, or arranging or committing to provide or
providing any financing for, the Merger), provided that in no event shall
the amount of such reimbursable fees and expenses exceed $400,000 in the
aggregate. The total of the Break-up Fee and the Expense Fee shall in no
event exceed $2,000,000.
(c) If Parent is owed either the Break-up Fee or the Expense Fee (the
"Termination Fee") from the Company pursuant to Section 8.02(b), the
Company shall pay to Parent by wire transfer of same day funds, either on
the date contemplated in Section 8.01(c) if applicable, or otherwise,
within two business days after such amount becomes due, an amount equal to
the lesser of (i) the Termination Fee and (ii) the sum of (A) the maximum
amount that can be paid to Parent in the year in which this Agreement is
terminated (the "Termination Year") and in all relevant taxable years
thereafter without causing it to fail to meet the requirements of Sections
856(c)(2) and (3) of the Code (the "REIT Requirements") for such year,
determined as if the payment of such amount did not constitute income
described in Section 856(c)(2)(A)-(H) and 856(c)(3)(A)-(I) of the Code
("Qualifying Income"), as determined by independent accountants to Parent,
and (B) in the event Parent receives an opinion of counsel (a "Termination
Fee Opinion") to the effect that its receipt of the Termination Fee would
either constitute Qualifying Income or would be excluded from gross income
within the meaning of the REIT Requirements, the Termination Fee less the
amount payable under clause (A) above. If the amount payable for the
Termination Year under the preceding sentence is less than the Termination
Fee, Parent shall notify the Company in writing and the Company shall place
the remaining portion of the Termination Fee in escrow and shall not
release any portion thereof to Parent. Parent shall not be entitled to any
such amount unless and until the Company receives either of the following:
(i) a letter from Parent's independent accountants indicating the maximum
amount that can be paid at that time to Parent without causing Parent to
fail to meet the REIT Requirements for any relevant taxable year, in which
event the Company shall pay such maximum amount, or (ii) a Termination Fee
Opinion, in which event the Company shall pay to the Parent the unpaid
Termination Fee. The Company's obligation to pay any unpaid portion of the
Termination Fee shall terminate ten years from the date of this Agreement
and the Company shall have no obligation to make any further payments
notwithstanding that the entire Termination Fee has not been paid as of
such date.
8.03 Amendment. This Agreement may be amended, supplemented or
modified by action taken by or on behalf of the respective Boards of
Directors of the parties hereto at any time prior to the Effective Time,
whether prior to or after the Company Stockholders' Approval shall have
been obtained, but after such adoption and approval only to the extent
permitted by applicable law. No such amendment, supplement or modification
shall be effective unless set forth in a written instrument duly executed
by or on behalf of each party hereto.
8.04 Waiver. At any time prior to the Effective Time any party hereto,
by action taken by or on behalf of its Board of Directors, may to the
extent permitted by applicable law (i) extend the time for the performance
of any of the obligations or other acts of the other parties hereto, (ii)
waive any inaccuracies in the representations and warranties of the other
parties hereto contained herein or in any document delivered pursuant
hereto or (iii) waive compliance with any of the covenants, agreements or
conditions of the other parties hereto contained herein. No such extension
or waiver shall be effective unless set forth in a written instrument duly
executed by or on behalf of the party extending the time of performance or
waiving any such inaccuracy or non-compliance. No waiver by any party of
any term or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other
term or condition of this Agreement on any future occasion.
ARTICLE IX
GENERAL PROVISIONS
9.01 Non-Survival of Representations, Warranties, Covenants and
Agreements. The representations, warranties, covenants and agreements
contained in this Agreement or in any instrument delivered pursuant to this
Agreement shall not survive the Merger but shall terminate at the Effective
Time, except for the agreements contained in Article I and Article II, in
Sections 6.07, 6.08, 6.09, 6.10, 6.11 and 6.13, this Article IX and the
agreements of the "affiliates" of the Company delivered pursuant to Section
6.04, which shall survive the Effective Time.
9.02 Notices. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if
delivered personally or by facsimile transmission or mailed (first class
postage prepaid) to the parties at the following addresses or facsimile
numbers:
If to Parent or Sub, to:
Anthracite Capital, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇, Chief Financial Officer and Chief Operating
Officer
with a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
If to the Company, to:
CORE Cap, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇
with a copy to:
Milbank, Tweed, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile
number as provided in this Section, be deemed given upon receipt, and (iii)
if delivered by mail in the manner described above to the address as
provided in this Section, be deemed given upon receipt (in each case
regardless of whether such notice, request or other communication is
received by any other person to whom a copy of such notice, request or
other communication is to be delivered pursuant to this Section). Any party
from time to time may change its address, facsimile number or other
information for the purpose of notices to that party by giving notice
specifying such change to the other parties hereto.
9.03 Entire Agreement; Incorporation of Exhibits.
-------------------------------------------
(a) This Agreement supersedes all prior discussions and agreements
among the parties hereto with respect to the subject matter hereof and is
the sole and entire agreement among the parties hereto with respect to the
subject matter hereof.
(b) The Company Disclosure Letter, the Parent Disclosure Letter and
any Exhibit attached to this Agreement and referred to herein are hereby
incorporated herein and made a part hereof for all purposes as if fully set
forth herein.
9.04 Public Announcements. Except as otherwise required by law or the
rules of any applicable securities exchange or national market system, so
long as this Agreement is in effect, Parent and the Company will not, and
will not permit any of their respective Representatives to, issue or cause
the publication of any press release or make any other public announcement
with respect to the transactions contemplated by this Agreement without the
consent of the other party, which consent shall not be unreasonably
withheld. Parent and the Company will cooperate with each other in the
development and distribution of all press releases and other public
announcements with respect to this Agreement and the transactions
contemplated hereby, and will furnish the other with drafts of any such
releases and announcements as far in advance as practicable.
9.05 No Third Party Beneficiary. The terms and provisions this
Agreement are intended solely for the benefit of each party hereto and
their respective successors or permitted assigns, and except as provided in
Sections 6.08 and 6.09 (which are intended to be for the benefit of the
persons entitled to herein, and may be enforced by any of such persons), it
is not the intention of the parties to confer third-party beneficiary
rights upon any other person.
9.06 No Assignment; Binding Effect. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned by any party hereto
without the prior written consent of the other parties hereto and any
attempt to do so will be void, except that Sub may assign any or all of its
rights, interests and obligations hereunder to another direct or indirect
wholly-owned Subsidiary of Parent, provided that any such Subsidiary agrees
in writing to be bound by all of the terms, conditions and provisions
contained herein. Subject to the preceding sentence, this Agreement is
binding upon, inures to the benefit of and is enforceable by the parties
hereto and their respective successors and assigns.
9.07 Headings. The headings used in this Agreement have been inserted
for convenience of reference only and do not define, modify or limit the
provisions hereof.
9.08 Invalid Provisions. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future law or
order, and if the rights or obligations of any party hereto under this
Agreement will not be materially and adversely affected thereby, (i) such
provision will be fully severable, (ii) this Agreement will be construed
and enforced as if such illegal, invalid or unenforceable provision had
never comprised a part hereof, and (iii) the remaining provisions of this
Agreement will remain in full force and effect and will not be affected by
the illegal, invalid or unenforceable provision or by its severance
herefrom.
9.09 Governing Law. Except to the extent that the DGCL is mandatorily
applicable to the Merger and the rights of the stockholders of the
Constituent Corporations, this Agreement shall be governed by and construed
in accordance with the laws of the State of New York applicable to a
contract executed and performed in such State, without giving effect to the
conflicts of laws principles thereof.
9.10 Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of
this Agreement was not performed in accordance with its specified terms or
was otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in
any court of competent jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
9.11 Certain Definitions. As used in this Agreement:
-------------------
(a) except as provided in Section 6.04, the term "affiliate," as
applied to any person, shall mean any other person directly or indirectly
controlling, controlled by, or under common control with, that person; for
purposes of this definition, "control" (including, with correlative
meanings, the terms "controlling," "controlled by" and "under common
control with"), as applied to any person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and policies of that person, whether through the ownership of voting
securities, by contract or otherwise;
(b) a person will be deemed to "beneficially" own securities if such
person would be the beneficial owner of such securities under Rule 13d-3
under the Exchange Act, including securities which such person has the
right to acquire (whether such right is exercisable immediately or only
after the passage of time);
(c) the term "business day" means a day other than Saturday, Sunday or
any day on which banks located in the State of New York are authorized or
obligated to close;
(d) the term "knowledge" or any similar formulation of "knowledge"
shall mean, with respect to the Company, the actual knowledge of the
persons named in Section 9.11(d) of the Company Disclosure Letter, and with
respect to Parent, the actual knowledge of the persons named in Section
9.11(d) of the Parent Disclosure Letter;
(e) the term "Liens" means any mortgage, pledge, assessment, security
interest, lease, lien, adverse claim, levy, charge or other encumbrance of
any kind, or any conditional sale Contract, title retention Contract or
other Contract to give any of the foregoing;
(f) any reference to any event, change or effect being "material" or
"materially adverse" or having a "material adverse effect" on or with
respect to an entity (or group of entities taken as a whole) means such
event, change or effect is material or materially adverse, as the case may
be, to the business, assets, financial condition or results of operations
of such entity (or of such group of entities taken as a whole);
(g) the term "person" shall include individuals, corporations,
partnerships, trusts, other entities and groups (which term shall include a
"group" as such term is defined in Section 13(d)(3) of the Exchange Act);
(h) the "Representatives" of any entity means such entity's directors,
officers, employees, legal, investment banking and financial advisors,
accountants and any other agents and representatives; and
(i) the term "Subsidiary" means, with respect to any party, any
corporation or other organization, whether incorporated or unincorporated,
of which more than 50% of either the equity interests in, or the voting
control of, such corporation or other organization is, directly or
indirectly through Subsidiaries or otherwise, beneficially owned by such
party.
9.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, each party hereto has caused this Agreement to be
signed by its officer thereunto duly authorized as of the date first above
written.
Attest: ANTHRACITE CAPITAL, INC.
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
_____________________ _______________________________
Secretary Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: President
Attest: ANTHRACITE ACQUISITION CORP.
▇▇▇▇▇▇▇ ▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
_____________________ _____________________________
Secretary Name: ▇▇▇▇ ▇▇▇▇▇▇
Title:
Attest: CORE CAP, INC.
▇▇▇▇▇▇ ▇'▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
_____________________ ____________________________
Secretary Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
EXHIBIT A
FORM OF
ARTICLES SUPPLEMENTARY
OF
ANTHRACITE CAPITAL, INC.
Anthracite Capital, Inc., a Maryland corporation (the "Corporation"),
certifies as follows:
FIRST: Under the authority set forth in Article FIFTH of the
charter of the Corporation, as heretofore amended (which, as hereinafter
amended or restated from time to time is, together with the Articles
Supplementary, herein called the "Articles"), the Board of Directors of the
Corporation on __________, 2000, by resolution duly designated and
classified [NUMBER OF SHARES OF CORE CAP PREFERRED OUTSTANDING AT THE
EFFECTIVE TIME] of the authorized, but unissued shares of the preferred
stock, par value $.001 per share, of the Corporation as the "10% Cumulative
Convertible Series B Preferred Stock" (the "Series B Preferred Stock") and
has authorized the issuance and sale of such shares.
SECOND: The preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications, and
other provisions of shares of Series B Preferred Stock shall be included as
part of Article FIFTH of the Articles and are as follows:
1. Designation. A series of preferred shares
designated as 10% Series B Cumulative Convertible Redeemable
Preferred Stock is hereby established (the "Series B Preferred
Stock") and the number of shares constituting the Series B
Preferred Stock shall be [NUMBER OF SHARES OF CORE CAP PREFERRED
OUTSTANDING AT EFFECTIVE TIME]. Shares of the Series B Preferred
Stock shall have a liquidation preference of $25.00 (the "Initial
Liquidation Preference") plus an amount equal to the accrued and
unpaid dividends, if any, thereon. The number of authorized shares
of the Series B Preferred Stock may be reduced by further
resolution duly adopted by the Board of Directors and by the
filing of a certificate pursuant to the provisions of the Maryland
General Corporation Law stating that such reduction has been so
authorized, but the number of authorized shares of the Series B
Preferred Stock shall not be increased.
2. Dividends. (a) For each quarterly dividend period (a
"Dividend Period"), dividends payable on the shares of the Series
B Preferred Stock shall be payable at a rate of 10% of the Initial
Liquidation Preference per annum (i.e., an amount equivalent to
$2.50 per share per annum) (as adjusted pursuant to the proviso at
the end of this sentence, the "Dividend Rate"), provided, however,
that if the shares of Common Stock issuable on conversion of the
shares of the Series B Preferred Stock have not been listed as
required by Section 4(k) hereof, then on June 15 of each year
beginning with the year 2000 the Dividend Rate shall be increased
by 0.50%. If the shares of Common Stock issuable on conversion of
the shares of the Series B Preferred Stock thereafter are listed
in accordance with Section 4 hereof then the Dividend Rate will
immediately be reduced to 10%. In the event that two Dividend
Rates are in effect during a Dividend Period, the Dividend Rate
for such Dividend Period shall be the weighted average of the two
Dividend Rates that are in effect during such Dividend Period. The
amount of dividends per share for each full Dividend Period shall
be computed by dividing the Dividend Rate per annum by four. The
Dividend Periods shall commence on the first day of the months of
January, April, July and October of each year and shall end on and
include the last day of each of the months of March, June,
September and December of each year (except that the first
Dividend Period shall commence on the date immediately following
the last day of the dividend period with respect to which
dividends were last paid on the 10% Cumulative Convertible Series
A Preferred Stock of CORE Cap, Inc., a Delaware corporation).
Dividends shall be cumulative from such date and shall be payable,
when and as declared by the Board of Directors out of funds
legally available therefor, on the last day of each Dividend
Period, commencing on [MARCH 31], 2000. Each such dividend shall
be paid to the holders of record of shares of the Series B
Preferred Stock as they appear on the stock ledger of the
Corporation on such record date, not exceeding 45 days preceding
the payment date thereof, as shall be fixed by the Board of
Directors. Undeclared dividends on account of arrears for any past
Dividend Periods may be declared and paid at any time, without
reference to any regular dividend payment date, to holders of
record on such date, not exceeding 45 days preceding the payment
date thereof, as may be fixed by the Board of Directors.
(b) Dividends payable on the Series B Preferred Stock for
any period greater or less than a full Dividend Period shall be
computed on the basis of a 360-day year consisting of twelve
30-day months.
(c) When dividends are not paid in full (or a sum
sufficient for such full payment is not set apart) upon the shares
of the Series B Preferred Stock and any other series of Preferred
Stock ranking on a parity as to dividends with the Series B
Preferred Stock, all dividends declared upon shares of the Series
B Preferred Stock and any other series of Preferred Stock ranking
on a parity as to dividends with the Series B Preferred Stock
shall be declared pro rata so that the amount of dividends
declared per share on the Series B Preferred Stock and such other
Preferred Stock shall in all cases bear to each other the same
ratio that accrued and unpaid dividends per share on the shares of
the Series B Preferred Stock and such other Preferred Stock bear
to each other.
(d) So long as any shares of the Series B Preferred Stock
are outstanding, no dividend (other than a dividend in common
stock or in any other stock ranking junior to the Series B
Preferred Stock as to dividends and upon liquidation, dissolution
or winding up and other than as provided in paragraph (c) of this
Section 2) shall be declared or paid or set aside for payment and
no other distribution declared or made upon the common stock or
upon any other stock ranking junior to or on a parity with the
Series B Preferred Stock as to dividends or amounts upon
liquidation, dissolution or winding up, nor shall any common stock
or any other stock of the Corporation ranking junior to or on a
parity with the Series B Preferred Stock as to dividends or
amounts upon liquidation, dissolution or winding up, be redeemed,
purchased or otherwise acquired for any consideration (or any
moneys be paid to or made available for a sinking fund for the
redemption of any shares of any such stock) by the Corporation or
any subsidiary (except by conversion into or exchange for stock of
the Corporation ranking junior to the Series B Preferred Stock as
to dividends and amounts upon liquidation, dissolution or winding
up) unless, in each case, the full cumulative dividends on all
outstanding shares of the Series B Preferred Stock shall have been
paid or declared and set aside for payment for all past Dividend
Periods and the then current Dividend Period.
(e) Holders of shares of the Series B Preferred Stock
shall not be entitled to any dividend, whether payable in cash,
property or stock, in excess of full cumulative dividends, as
herein provided, on the Series B Preferred Stock. No interest, or
sum of money in lieu of interest, shall be payable in respect of
any dividend payment or payments on the Series B Preferred Stock
which may be in arrears.
3. Redemption. (a) The shares of the Series B Preferred
Stock are not redeemable prior to September 30, 2002. The
Corporation, at its option, may redeem shares of the Series B
Preferred Stock out of funds legally available therefor, as a
whole or in part, at any time or from time to time, on or after
September 30, 2002, at a redemption price equal to the Initial
Liquidation Preference per share plus accrued and unpaid dividends
thereon to the date fixed for redemption.
(b) If fewer than all the outstanding shares of the
Series B Preferred Stock are to be redeemed, the number of shares
to be redeemed shall be determined by the Board of Directors and
such shares shall be redeemed pro rata from the holders of record
of such shares in proportion to the number of such shares held by
such holders (as nearly as may be practicable without creating
fractional shares) or by any other method as may be determined by
the Board of Directors in its sole discretion to be equitable.
(c) In the event the Corporation shall redeem shares of
the Series B Preferred Stock, notice of such redemption shall be
given by first class mail, postage prepaid, mailed not less than
30 or more than 60 days prior to the redemption date, to each
holder of record of the shares to be redeemed, at such holder's
address as the same appears on the stock ledger of the
Corporation. No failure to give such notice or any defect therein
or the mailing thereof will affect the validity of the proceeding
for the redemption of any shares of the Series B Preferred Stock
except as to the holder to whom notice was defective or not given.
Each such notice shall state: (i) the redemption date; (ii) the
number of shares of the Series B Preferred Stock to be redeemed
and, if fewer than all the shares held by such holder are to be
redeemed, the number of such shares to be redeemed from such
holder; (iii) the redemption price; (iv) the place or places where
certificates for such shares are to be surrendered for payment of
the redemption price; (v) that dividends on the shares to be
redeemed will cease to accrue on the redemption date; and (vi)
that the conversion right of the holders of shares of the Series B
Preferred Stock shall terminate on the redemption date.
(d) If notice of redemption has been given as aforesaid
and if the funds necessary for such redemption have been set aside
by the Corporation in trust for the benefit of the holders of any
shares so called for redemption, then from and after the
redemption date dividends on the shares of the Series B Preferred
Stock so called for redemption shall cease to accrue, and said
shares shall no longer be deemed to be outstanding, and all rights
of the holders thereof as stockholders of the Corporation (except
the right to receive from the Corporation the redemption price)
shall terminate. Any moneys so set aside in trust which remain
unclaimed by the holders of shares of the Series B Preferred Stock
at the end of two years after the redemption date will be returned
by the trustee thereof to the Corporation and the holders of such
shares of the Series B Preferred Stock will be entitled to look
only to the Corporation for the payment thereof. Upon surrender in
accordance with said notice of the certificates for any shares so
redeemed (properly endorsed or assigned for transfer, if the Board
of Directors shall so require and the notice shall so state), such
shares shall be redeemed by the Corporation at the redemption
price aforesaid. In case fewer than all the shares represented by
any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares without cost to the
holder thereof.
(e) Notwithstanding the foregoing provisions of
this Section 3, if any dividends on the Series B Preferred Stock
are in arrears, no shares of the Series B Preferred Stock shall be
redeemed unless all outstanding shares of the Series B Preferred
Stock are simultaneously redeemed, and the Corporation shall not
purchase or otherwise acquire any shares of the Series B Preferred
Stock (except by conversion of such shares); provided, however,
that the Corporation may purchase or acquire shares of the Series
B Preferred Stock pursuant to a purchase or exchange offer made on
the same terms to holders of all outstanding shares of the Series
B Preferred Stock.
4. Conversion by Holders. Subject to the approval of
holders of the Corporation's Common Stock with respect to the
issuance of shares of Common Stock upon conversion of shares of
the Series B Preferred Stock to the extent required for listing of
such shares, the holders of shares of the Series B Preferred Stock
shall have the right to convert all or a portion of such shares
into shares of Common Stock, par value $.001 per share (the
"Common Stock"), as follows:
(a) Subject to and upon compliance with the provisions of
this Section 4, a holder of shares of the Series B Preferred Stock
shall have the right, at such holder's option, at any time, to
convert such shares, in whole or in part, into the number of fully
paid and non-assessable shares of authorized but previously
unissued shares of Common Stock per each share of the Series B
Preferred Stock obtained by dividing the Initial Liquidation
Preference per share of the Series B Preferred Stock by a
conversion price of [$21.93 DIVIDED BY THE COMMON STOCK CONVERSION
NUMBER SET FORTH IN THE MERGER AGREEMENT]1 per share, as the same
may be adjusted and as in effect at the time and on the date
provided for in the last subparagraph of Section 4(b) or in the
last subparagraph of Section 5(d), as the case may be (the
"Conversion Price"), and by surrendering such shares to be
converted, such surrender to be made in the manner provided in
paragraph (b) of this Section 4; provided, however, that the right
to convert shares of the Series B Preferred Stock called for
redemption shall terminate as provided in the notice of
redemption.
(b) In order to exercise the conversion right, the holder
of each share of the Series B Preferred Stock to be converted
shall surrender the certificate representing such share, duly
endorsed or assigned to the Corporation or in blank, at the office
of the transfer agent, accompanied by written notice to the
Corporation that the holder thereof elects to convert such share
of the Series B Preferred Stock. Unless the shares issuable on
conversion are to be issued in the same name as the name in which
such share of the Series B Preferred Stock is registered, each
share surrendered for conversion shall be accompanied by
instruments of transfer, in form satisfactory to the Corporation,
duly executed by the holder or such holder's duly authorized
attorney and an amount sufficient to pay any transfer or similar
tax (or evidence reasonably satisfactory to the Corporation
demonstrating that such taxes have been paid).
As promptly as practicable after the surrender of
certificates for shares of the Series B Preferred Stock as
aforesaid, the Corporation shall issue and shall deliver at such
office to such holder, or send on such holder's written order, a
certificate or certificates for the number of full shares of
Common Stock issuable upon the conversion of such shares of the
Series B Preferred Stock, and any fractional interest in respect
of a share of Common Stock arising upon such conversion shall be
settled as provided in paragraph (c) of this Section 4.
Each conversion pursuant to this Section 4 shall be
deemed to have been effected immediately prior to the close of
business on the date on which the certificates for shares of the
Series B Preferred Stock shall have been surrendered and such
notice received by the Corporation as aforesaid, and the person or
persons in whose name or names any certificate or certificates or
shares of Common Stock shall be issuable upon such conversion
shall be deemed to have become the holder or holders of record of
the shares represented thereby at such time on such date and such
conversion shall be at the Conversion Price in effect at such time
on such date, unless the stock transfer books of the Corporation
shall be closed on that date in which event such person or persons
shall be deemed to have become such holder or holders of record at
the close of business on the next succeeding day on which such
transfer books are open, but such conversion shall be at the
Conversion Price in effect on the date on which such shares shall
have been surrendered and such notice received by the Corporation.
The Corporation will make no payment or allowance for unpaid
dividends, whether or not in arrears, on converted shares or for
dividends on the Common Stock issued upon such conversion.
(c) No fractional share of common stock or scrip
representing fractions of a share of Common Stock shall be issued
upon conversion of the shares of the Series B Preferred Stock
whether pursuant to this Section 4 or Section 5. Instead of any
fractional interest in a share of Common Stock that would
otherwise be deliverable upon the conversion of shares of the
Series B Preferred Stock, the Corporation shall pay to the holder
of such share an amount in cash based upon the market value of the
Common Stock on the date of conversion. If more than one share
shall be surrendered for conversion at one time by the same
holder, the number of full shares of Common Stock issuable upon
conversion thereof shall be computed on the basis of the aggregate
number of shares of the Series B Preferred Stock so surrendered.
(d) The Conversion Price shall be adjusted from time to
time as follows:
(i) If the Corporation shall, after the date the
shares of the Series B Preferred Stock are issued, (A)
pay a dividend or make a distribution on its capital
stock in shares of Common Stock, (B) subdivide its
outstanding Common Stock into a greater number of shares,
(C) combine its outstanding Common Stock into a smaller
number of shares or (D) issue any shares of Common Stock
by reclassification of its outstanding Common Stock, the
Conversion Price in effect at the opening of business on
the day following the date fixed for the determination of
shareholders entitled to receive such dividend or
distribution or at the opening of business on the day
following the day on which the subdivision, combination
or reclassification becomes effective, as the case may
be, shall be adjusted so that the holder of any share of
the Series B Preferred Stock thereafter surrendered for
conversion shall be entitled to receive the number of
shares of Common Stock (or fraction of a share of Common
Stock) that such holder would have owned or would have
been entitled to receive after the happening of any of
the events described above had such share of the Series B
Preferred Stock been converted immediately prior to the
record date in the case of dividend or distribution or
the effective date in the case of a subdivision,
combination or reclassification. An adjustment made
pursuant to this paragraph (d)(i) shall become effective
immediately after the opening of business on the day next
following the record date (except as provided in
paragraph (h) below) in the case of a dividend
distribution and shall become effective immediately after
the opening of business on the day next following the
effective date in the case of a subdivision, combination
or reclassification.
(ii) If the Corporation shall issue, after the
date the shares of the Series B Preferred Stock are
issued, rights, options or warrants to all holders of
Common Stock entitling them to subscribe for or purchase
Common Stock at a price per share less than the market
price per share of the Common Stock on the record date
for the determination of the shareholders entitled to
receive such rights, options or warrants, then the
Conversion Price in effect at the opening of business on
the day next following such record date shall be adjusted
to equal the price determined by multiplying (A) the
Conversion Price in effect immediately prior to the
opening of business on the day following the date fixed
for such determination by (B) a fraction, the numerator
of which shall be the sum of (X) the number of shares of
common stock outstanding on the close of business on the
date fixed for such determination and (Y) the number of
shares that could be purchased at such market price from
the aggregate proceeds to the Corporation from the
exercise of such rights, options or warrants for Common
Stock, and the denominator of which shall be the sum of
(XX) the number of shares of Common Stock outstanding on
the close of business on the date fixed for such
determination and (YY) the number of additional shares of
Common Stock offered for subscription or purchase
pursuant to the such rights or warrants. Such adjustment
shall become effective immediately after the opening of
business on the date next following such record date
(except as provided in paragraph (h) below). In
determining whether any rights, options or warrants
entitle the holders of Common Stock to subscribe for or
purchase Common Stock at less than the market price,
there shall be taken into account any consideration
received by the Corporation upon the issuance and upon
exercise of such rights, options or warrants, the value
of such consideration, if other than cash, to be
determined in good faith by the Board of Directors.
(iii) If the Corporation shall, after the date
the shares of the Series B Preferred Stock are issued,
make a distribution on its Common Stock other than in
cash or shares of Common Stock (including any
distribution in securities other than rights, options or
warrants as set forth above) (each of the foregoing being
referred to herein as the "Securities"), then the
Conversion Price in effect at the opening of business on
the next day following the record date for the
determination of the shareholders entitled to receive
such distribution of Securities shall be adjusted to
equal the price determined by multiplying (A) the
Conversion Price in effect immediately prior to the
opening of business on the day following the record date
by (B) a fraction, the numerator of which shall be the
amount obtained by subtracting the per share value of the
property being distributed by (bb) the market price per
share of Common Stock on the record date, and the
denominator of which shall be the market price of Common
Stock outstanding on the close of business on the record
date; provided, however, that the Corporation may, in
lieu of the foregoing adjustment, make adequate provision
such that each holder of shares of the Series B Preferred
Stock shall have the right to receive the amount and kind
of property such holder would have received had such
holder converted each such share of the Series B
Preferred Stock immediately prior to the record date for
determination of the shareholders entitled to receive
such distribution of property. Such adjustment shall
become effective immediately after the opening of
business on the day next following such record date
(except as provided below). The value of the property
being distributed shall be as determined in good faith by
the Board of Directors. Neither the issuance by the
Corporation of rights, options or warrants to subscribe
for or purchase securities of the Corporation nor the
exercise thereof shall be deemed a distribution of
Securities under this paragraph.
(iv) Notwithstanding any other provision of this
Section 4, no adjustment in the Conversion Price shall be
required unless such adjustment would require a
cumulative increase or decrease of at least 1% in such
price; provided, however, that any adjustments that by
reason of this paragraph (d)(iv) are not required to be
made shall be carried forward and taken into account in
any subsequent adjustment until made; and provided,
further, that any adjustment shall be required and made
in accordance with the provisions of this Section 4 not
later than such time as may be required in order to
preserve the tax free nature of a distribution to the
holders of shares of Common Stock. Notwithstanding any
other provisions of this Section 4, the Corporation shall
not be required to make any adjustment for the Conversion
Price for the issuance of (A) any shares of Common Stock
pursuant to any plan providing for the reinvestment of
dividends or interest payable on securities of the
Corporation and the investment of optional amounts in
shares of Common Stock under such plan or (B) any
options, rights or shares of Common Stock pursuant to any
stock option, stock purchase or any stock-based plan
maintained by the Corporation. All calculations under
this Section 4 shall be made to the nearest cent (with
$.005 being rounded upward), or to the nearest one tenth
of a share (with .05 of a share being rounded upward), as
the case may be. Anything in this paragraph (d) of this
Section 4 to the contrary notwithstanding, the
Corporation shall be entitled, to the extent permitted by
law, to make such reductions in the Conversion Price, in
addition to those required by this paragraph (d), as it
in its discretion shall determine to be advisable in
order that any stock dividends, subdivision of shares,
reclassification or combination of shares, distribution
of other assets (other than cash dividends) hereafter
made by the Corporation to its shareholders shall not be
taxable, or if that is not possible, to diminish any
income taxes that are otherwise payable because of such
event.
(e) If the Corporation shall be a party to any
transaction (including without limitation a merger, consolidation,
statutory share exchange, issuer or self tender offer for all or a
substantial portion of the shares of Common Stock outstanding,
sale of all or substantially all of the Corporation's assets or
recapitalization of the Common Stock, but excluding any
transaction as to which paragraph (d)(i) of this Section 4
applies) (each of the foregoing being referred to herein as a
"Transaction"), in each case as a result of which shares of Common
Stock shall be converted into or shall have the right to receive
stock, securities or other property (including cash or any
combination thereof), each share of the Series B Preferred Stock,
if convertible after the consummation of the Transaction, shall
thereupon be convertible into the kind and amount of shares of
stock, securities and other property (including cash or any
combination thereof) receivable upon consummation of such
Transaction by a holder of that number of shares or fraction
thereof of Common Stock into which one share of the Series B
Preferred Stock was convertible immediately prior to such
Transaction. The Corporation shall not be a party to any
Transaction unless the terms of such Transaction are consistent
with the provisions of this paragraph (e), and it shall not
consent or agree to the occurrence of any Transaction until the
Corporation has entered into an agreement with the successor or
purchasing entity, as the case may be, for the benefit of the
holders of shares of the Series B Preferred Stock that remain
outstanding after such Transaction to convert into the
consideration received by holders of Common Stock at the
Conversion Price in effect immediately prior to such Transaction.
The provisions of this paragraph (e) shall similarly apply to
successive Transactions.
(f) If:
(i) the Corporation shall declare a dividend (or
any other distribution) on the Common Stock (other than
cash dividends and cash distributions); or
(ii) the Corporation shall authorize the
granting to all holders of the Common Stock of rights or
warrants to subscribe for or purchase any shares of any
class or series of capital stock or any other rights or
warrants; or
(iii) there shall be any reclassification of the
outstanding Common Stock or any consolidation or merger
to which the Corporation is a party and for which
approval of any shareholders of the Corporation is
required, or a statutory share exchange, or an issuer or
self tender offer by the Corporation for all or a
substantial portion of its outstanding shares of Common
Stock ( or an amendment thereto changing the maximum
number of shares sought or the amount or type of
consideration being offered therefor) or the sale or
transfer of all or substantially all of the assets of the
Corporation as an entirety; or
(iv) there shall occur the voluntary or involuntary
liquidation, dissolution or
winding up of the Corporation,
then the Corporation shall cause to be filed with the transfer
agent and shall cause to be mailed to each holder of shares of the
Series B Preferred Stock at such holder's address as shown on the
stock records of the Corporation, as promptly as possible but at
least 15 days prior to the applicable date hereinafter specified,
a notice stating (A) the record date for the payment of such
dividend, distribution or rights or warrants, or, if a record date
is not established, the date as of which the holders of Common
Stock of record to be entitled to such dividend, distribution or
rights or warrants are to be determined or (B) the date on which
such reclassification, consolidation, merger, statutory share
exchange, sale, transfer, liquidation, dissolution or winding up
is expected to become effective, and the date as of which it is
expected that holders of Common Stock of record shall be entitled
to exchange their shares of Common Stock for securities or other
property, if any, deliverable upon such reclassification,
consolidation, merger, statutory share exchange, sale, transfer,
liquidation, dissolution, or winding up or (C) the date on which
such tender offer commenced, the date on which such tender offer
is scheduled to expire unless extended, the consideration offered
and the other material terms thereof (or the material terms of any
amendment thereto). Failure to give or receive such notice or any
defect therein shall not affect the legality or validity of the
proceeding described in this Section 4(f).
(g) Whenever the Conversion Price is adjusted as herein
provided, the Corporation (i) shall promptly file with the
transfer agent an officer's certificate describing in reasonable
detail such adjustment, setting forth the adjusted Conversion
Price and the date such adjustment became effective, which
certificate shall be conclusive evidence of the correctness of
such adjustment of the Conversion Price and (ii) shall mail by
first class mail, postage prepaid, as soon as practicable, such
notice of such adjustment of the Conversion Price to each holder's
last address as shown on the stock records of the Corporation.
(h) In any case in which paragraph (d) of this Section 4
provides that an adjustment shall become effective on the next day
following the record date for an event, the Corporation may defer
until the occurrence of such event (A) issuing to the holder of
any share of the Series B Preferred Stock converted after such
record date and before the occurrence of such event of the
additional Common Stock issuable upon such conversion by reason of
the adjustment required by such event over and above the Common
Stock issuable upon the conversion before giving effect to such
adjustment and (B) paying to such holder any amount of cash in
lieu of any fraction pursuant to paragraph (c) of this Section 4.
(i) There shall be no adjustment of the Conversion Price
in case of the issuance of any stock of the Corporation in a
reorganization, acquisition or other similar transaction, except
as specifically set forth in this Section 4.
(j) If the Corporation shall take any action affecting
the Common Stock, other than action described in this Section 4,
that in the opinion of the Board of Directors would materially
adversely affect the conversion rights of the holders of shares of
the Series B Preferred Stock, the Conversion Price may be
adjusted, to the extent permitted by law, in such manner, if any,
and at such time as the Board of Directors, in its sole
discretion, may determine to be applicable under the
circumstances, it being understood that the Board of Directors
shall have no obligation to make such adjustment.
(k) The Corporation shall at all times reserve and keep
available, free from preemptive rights, out of the aggregate of
its authorized but unissued Common Stock solely for the purpose of
effecting conversion of the shares of the Series B Preferred
Stock, the full number of shares of Common Stock deliverable upon
the conversion of all outstanding shares of the Series B Preferred
Stock. The number of shares of Common Stock deliverable upon the
conversion of all outstanding shares of the Series B Preferred
Stock shall be computed as if at the time of computation all such
outstanding shares were held by a single holder (and without
regard to the limitation with respect to the Ownership Limit set
forth in the Charter of the Corporation).
The Corporation covenants that any shares of Common Stock
issued upon conversion of the shares of the Series B Preferred
Stock shall be validly issued, fully paid and nonassessable. The
Corporation will not be required to permit conversion unless the
Common Stock issuable upon conversion of the shares of the Series
B Preferred Stock is listed on any securities exchange on which
the Common Stock is then listed.
(l) The Corporation will pay any and all documentary
stamp or similar issue or transfer taxes payable in respect of the
issue or delivery of shares of Common Stock or other securities or
property on conversion or redemption of shares of the Series B
Preferred Stock; provided, however, that the Corporation shall not
be required to pay any tax that may be payable in respect of any
transfer involved in the issue or delivery of shares of Common
Stock or other securities or property in a name other than that of
the holder of the shares of the Series B Preferred Stock to be
converted or redeemed, and no such issue or delivery shall be made
unless and until the person requesting such issue or delivery has
paid to the Corporation the amount of any such tax or established,
to the reasonable satisfaction of the Corporation, that such tax
has been paid.
5. Conversion by the Corporation. (a) If, at any time,
the Corporation in good faith determines that a conversion
pursuant to Section 4 will cause Benefit Plan Investors to own in
excess of 24.9% of the aggregate number of outstanding shares of
the Series B Preferred Stock (excluding for this purpose any
shares held by persons exercising investment management authority
over the assets of the Corporation or providing investment advice
for a fee with respect to such assets and any affiliates of such
persons), the Corporation shall have the right to cause shares of
the Series B Preferred Stock that are held by Benefit Plan
Investors (as determined by the Corporation in good faith) to be
converted into Common Stock (without the necessity of any action
on behalf of the holders of such shares) so that following such
conversion Benefit Plan Investors do not own more than 24.9% of
the outstanding shares of the Series B Preferred Stock (excluding
for this purpose any shares held by persons exercising investment
management authority over the assets of the Corporation or
providing investment advice for a fee with respect to such assets
and any affiliates of such persons). Each share of the Series B
Preferred Stock to be converted pursuant to this Section 5 shall
be converted into the number of fully paid and non-assessable
shares of authorized but previously unissued shares of Common
Stock obtained by dividing the Initial Liquidation Preference per
share of the Series B Preferred Stock plus accrued and unpaid
dividends thereon to the Conversion Date by the Conversion Price.
(b) If fewer than all the outstanding shares of the
Series B Preferred Stock that are held by Benefit Plan Investors
(as determined by the Corporation in good faith) are to be
converted, the number of shares to be converted shall be
determined by the Board of Directors and such shares shall be
converted pro rata from the holders of such shares that are
Benefit Plan Investors (as determined by the Corporation in good
faith) in proportion to the number of such shares held by such
holders (as nearly as may be practicable without creating
fractional shares) or by any other method as may be determined by
the Board of Directors in its sole discretion to be equitable.
(c) The Corporation shall exercise its right to convert
shares of the Series B Preferred Stock pursuant to this Section 5
by resolution or written consent of the Board of Directors or a
duly authorized committee thereof or as otherwise authorized by
the Board of Directors. In the event the Corporation shall
exercise its right to cause the conversion of shares of the Series
B Preferred Stock pursuant to this Section 5, notice of such
exercise shall be given by first class mail, postage prepaid,
mailed as soon as practicable following such exercise, to each
holder of shares of the Series B Preferred Stock that is a Benefit
Plan Investor (as determined by the Corporation in good faith), at
the address of such holder as the same appears on the stock ledger
of the Corporation. No failure to give such notice or any defect
therein or the mailing thereof will affect the validity of the
conversion of shares of the Series B Preferred Stock pursuant to
this Section 5. Each such notice shall state: (i) the Conversion
Date (defined below); (ii) the number of shares of the Series B
Preferred Stock held by such holder that were converted; (iii) the
Conversion Price; and (iv) the place or places where certificates
for shares of the Series B Preferred Stock are to be surrendered.
(d) The holder of any share of the Series B Preferred
Stock that has been converted pursuant to this Section 5 shall
surrender the certificate representing such share, duly endorsed
or assigned to the Corporation or in blank, at the office of the
transfer agent immediately following receipt of the notice
described in Section 5(c). Unless the shares issuable on
conversion are to be issued in the same name as the name in which
such share of the Series B Preferred Stock is registered, each
share surrendered for conversion shall be accompanied by
instruments of transfer, in form satisfactory to the Corporation,
duly executed by the holder or such holder's duly authorized
attorney and an amount sufficient to pay any transfer or similar
tax (or evidence reasonably satisfactory to the Corporation
demonstrating that such taxes have been paid).
As promptly as practicable after the surrender of
certificates for shares of the Series B Preferred Stock as
aforesaid, the Corporation shall issue and shall deliver at such
office to such holder, or send on such holder's written order, (i)
a certificate or certificates for the number of full shares of
Common Stock issuable upon the conversion of such shares of the
Series B Preferred Stock and (ii) if necessary, a certificate or
certificates for the number of full shares of the Series B
Preferred Stock that were not subject to conversion, and any
fractional interest in respect of a share of Common Stock arising
upon such conversion shall be settled as provided in Section 4(c).
Each conversion pursuant to this Section 5 shall be
deemed to have been effected on the date that the Corporation
exercises its right to convert shares of the Series B Preferred
Stock in accordance with this Section 5 (the "Conversion Date"),
unless the stock transfer books of the Corporation shall be closed
on that date in which event such person or persons shall be deemed
to have become such holder or holders of record at the close of
business on the next succeeding day on which such transfer books
are open, but such conversion shall be at the Conversion Price in
effect on the date on which that the Corporation exercised its
rights under this Section 5. Except as provided above, the
Corporation will make no payment or allowance for unpaid
dividends, whether or not in arrears, on converted shares or for
dividends on the Common Stock issued upon such conversion.
(e) From the Conversion Date to the time that a holder
surrenders its shares in accordance with this Section 5(d), the
Corporation shall treat for all purposes the certificate(s) held
by such holder as representing both (i) the number of shares of
the Series B Preferred Stock that are not subject to conversion
and (ii) the number of shares of Common Stock that were issuable
upon conversion.
(f) For purposes of this Section 5, the following terms
shall have the following meanings:
"Benefit Plan Investor" means any employee
benefit plan as defined in Section 3(3) of ERISA, whether
or not subject to ERISA and Section 4975 of the Internal
Revenue Code of 1986, as amended (including without
limitation foreign plans and governmental plans), and any
entity whose underlying assets include the assets of any
such plan by reason of the plan's direct or indirect
investment in such entity (but only to the extent of the
plan's interest in such entity).
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended or any successor law.
6. Liquidation Rights. (a) Upon the voluntary or
involuntary liquidation, dissolution or winding up of the
Corporation, the holders of the shares of the Series B Preferred
Stock shall be entitled to receive and to be paid out of the
assets of the Corporation legally available for distribution to
its stockholders, before any payment or distribution shall be made
on the common stock or on any other class of stock ranking junior
to the Series B Preferred Stock upon liquidation, liquidating
distributions in the amount of the Initial Liquidation Preference,
plus accrued and unpaid dividends thereon, if any, to the date of
liquidation.
(b) After the payment to the holders of the shares of the
Series B Preferred Stock of the full preferential amounts provided
for in this Section 6, the holders of the Series B Preferred Stock
as such shall have no right or claim to any of the remaining
assets of the Corporation.
(c) If, upon any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the liquidating
distribution on the shares of the Series B Preferred Stock and the
corresponding amounts payable on any other shares of stock of the
Corporation ranking as to any such distribution on a parity with
the shares of the Series B Preferred Stock are not paid in full,
the holders of the shares of the Series B Preferred Stock and of
such other shares will share ratably in any such distribution of
assets of the Corporation in proportion to the full respective
liquidating distributions to which they are entitled.
(d) Neither the sale of all or substantially all the
property or business of the Corporation, nor the merger or
consolidation of the Corporation into or with any other
corporation or the merger or consolidation of any other
corporation into or with the Corporation, shall be deemed to be a
liquidation, dissolution or winding up, voluntary or involuntary,
for the purposes of this Section 6.
7. Ranking. For purposes of this resolution, any stock
of any class or classes of the Corporation shall be deemed to rank:
(a) prior to the shares of the Series B Preferred Stock,
either as to dividends or upon liquidation, if the holders of such
class or classes shall be entitled to the receipt of dividends or
of amounts distributable upon dissolution, liquidation or winding
up of the Corporation, as the case may be, in preference or
priority to the holders of shares of the Series B Preferred Stock;
(b) on a parity with shares of the Series B Preferred
Stock, either as to dividends or upon dissolution, liquidation or
winding up, whether or not the dividend rates, dividend payment
dates or redemption or liquidation prices per share or sinking
fund provisions, if any, be different from those of the Series B
Preferred Stock, if the holders of such stock shall be entitled to
the receipt of dividends or of amounts distributable upon
dissolution, liquidation or winding up of the Corporation, as the
case may be, without preference or priority, one over the other,
as between the holders of such stock and the holders of shares of
the Series B Preferred Stock (any stock on a parity as to both
dividends and amounts payable upon dissolution, liquidation or
winding up shall be hereinafter referred to as "Parity Stock").
The 10 1/2% Series A Senior Cumulative Convertible Redeemable
Preferred Stock of the Corporation shall be deemed to rank pari
passu with shares of the Series B Preferred Stock; and
(c) junior to shares of the Series B Preferred Stock,
either as to dividends or upon liquidation, if such class shall be
common stock or if the holders of shares of the Series B Preferred
Stock shall be entitled to receipt of dividends or of amounts
distributable upon dissolution, liquidation or winding up of the
Corporation, as the case may be, in preference or priority to the
holders of shares of such class or classes.
8. Voting Rights. The shares of the Series B Preferred
Stock shall not have any voting powers, either general or special,
except as set forth below. In the event that the holders of shares
of the Series B Preferred Stock are entitled to vote as set forth
below, each share will be entitled to one vote on such matters.
(a) If the Corporation fails to pay full dividends on the
shares of the Series B Preferred Stock on six consecutive dividend
payment dates, then in accordance with the bylaws of the
Corporation, the Board of Directors shall take all requisite
action in accordance with the Maryland General Corporation Law to
increase by two the number of directors of the Corporation and the
holders of the shares of the Series B Preferred Stock, voting
together with the holders of any other outstanding Parity Stock
that share this right as a single class, shall have the right to
elect two additional directors of the Corporation to fill such
newly created directorships at an annual meeting of stockholders
or special meeting held in place thereof or at a properly called
special meeting of the holders of the shares of the Series B
Preferred Stock and of any such Parity Stock, and at each
subsequent annual meeting of stockholders or special meeting held
in place thereof. Once all accrued dividends on the shares of the
Series B Preferred Stock have been paid in full, (i) the voting
rights of the holders of the shares of the Series B Preferred
Stock shall, without further action, terminate, subject to
revesting and (ii) the term of office of the directors elected by
the holders of the shares of the Series B Preferred Stock and any
such Parity Stock (the "Preferred Directors") shall, without
further action, terminate unless otherwise required by law. Any
Preferred Director may be removed by, and shall not be removed
except by, the vote of the holders of record of the outstanding
shares of the Series B Preferred Stock and any such Parity Stock,
voting together as a single class, at a meeting of the
Corporation's stockholders, or of the holders of shares of the
Series B Preferred Stock and of any such Parity Stock, called for
the purpose. So long as a default in any preference dividends on
the shares of the Series B Preferred Stock shall exist, (i) any
vacancy in the office of a Preferred Director may be filled
(except as provided in the following clause (ii)) by an instrument
in writing signed by the remaining Preferred Director and filed
with the Corporation and (ii) in the case of the removal of any
Preferred Director, the vacancy may be filled by the vote of the
holders of the outstanding shares of the Series B Preferred Stock
and any such Parity Stock, voting together as a single class, at
the same meeting at which such removal shall be voted. Each
director appointed as aforesaid by the remaining Preferred
Director shall be deemed, for all purposes hereof, to be a
Preferred Director.
(b) Without the consent of the holders of shares entitled
to cast at least 66 2/3% of the votes entitled to be cast by the
holders of the total number of shares of the Series B Preferred
Stock then outstanding, the Corporation may not (i) create any
class or series of stock which shall have preference as to
dividends or upon liquidation, dissolution or winding up over
shares of the Series B Preferred Stock or (ii) alter or change the
provisions of the Charter of the Corporation so as to adversely
affect the voting power, preferences or special rights of the
holders of shares of the Series B Preferred Stock.
(c) The foregoing voting provisions will not apply if, at
or prior to the time when the act with respect to which such vote
would otherwise be required is effected, all outstanding shares of
the Series B Preferred Stock have been redeemed or called for
redemption and sufficient funds have been deposited in trust to
effect such redemption pursuant to Section 3.
IN WITNESS WHEREOF, the Corporation has caused these
Articles Supplementary to be signed in its name and on its behalf on this
___ day of _____, 2000 by its President who acknowledges that these
Articles Supplementary are the act of the Corporation and to the best of
his knowledge, information and belief and under penalties for perjury, all
matters and facts contained in these Articles Supplementary are true in all
material respects.
ANTHRACITE CAPITAL, INC.
By_________________________
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: President
ATTEST:
By________________________
Name:
Title: Secretary
