EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
Dated as of July 12, 2003
by and among
AMERICAN HOME MORTGAGE HOLDINGS, INC.,
a Delaware corporation
AHM NEW HOLDCO, INC.,
a Maryland corporation
and
APEX MORTGAGE CAPITAL, INC.,
a Maryland corporation
TABLE OF CONTENTS
ARTICLE I THE MERGER
1.1 The Merger
1.2 Closing
1.3 Effective Time
1.4 Effects of the Merger
1.5 Organizational Documents
1.6 Directors and Officers of Surviving Corporation
1.7 Effect on Capital Stock
1.8 Further Assurances
1.9 Tax Consequences
1.10 Board of Directors of AHM
ARTICLE II EXCHANGE OF CERTIFICATES
2.1 Exchange Fund
2.2 Exchange of Shares
2.3 Investment of the Exchange Fund
2.4 Withholding Rights
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.1 Organization, Standing and Power of the Company
3.2 Capital Structure; Subsidiaries
3.3 Authority; No Violations
3.4 Company SEC Reports; Financial Statements
3.5 Absence of Liabilities
3.6 Compliance
3.7 Absence of Certain Changes or Events
3.8 Taxes
3.9 Investment Company Act
3.10 Mortgage Backed Securities
3.11 Mortgage Loans
3.12 Insurance
3.13 Opinion of Company Financial Advisor
3.14 Brokers or Finders
3.15 Litigation
3.16 Employee Benefit Plans; ERISA
3.17 Vote Required
3.18 Material Contracts
3.19 Company Rights Plan Inapplicable
3.20 Certain Agreements
3.21 No Material Adverse Effect
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF AHM AND NEW HOLDCO
4.1 Organization, Standing and Power
4.2 Capital Structure; Subsidiaries
4.3 Authority; No Violations
4.4 AHM SEC Reports; Financial Statements
4.5 Absence of Liabilities
4.6 Compliance
4.7 Absence of Certain Changes or Events
4.8 Taxes
4.9 Investment Company Act
4.10 Mortgage Backed Securities
4.11 Mortgage Loans
4.12 Insurance
4.13 Opinion of AHM Financial Advisor
4.14 Brokers or Finders
4.15 Litigation
4.16 Employee Benefit Plans; ERISA
4.17 Vote Required
4.18 Material Contracts
4.19 Interim Operations of New Holdco
4.20 Certain Agreements
4.21 No Material Adverse Effect
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Covenants of the Company
5.2 Covenants of AHM and New Holdco
5.3 Final Company Dividend
ARTICLE VI ADDITIONAL AGREEMENTS
6.1 Preparation of Joint Proxy Statement/Prospectus and
Registration Statement
6.2 Access to Information
6.3 Stockholders Meetings
6.4 Approvals
6.5 Notice of Defaults
6.6 Acquisition Proposals
6.7 Fees and Expenses
6.8 Directors' and Officers' Indemnification and Insurance
6.9 Public Announcements
6.10 Listing on NASDAQ
6.11 Company Stock Options
6.12 Deposit of Escrow Amount; Payment of Termination Fee
6.13 Lock-Up
6.14 Section 368(a) Reorganization
ARTICLE VII CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation to Effect the Merger
7.2 Additional Conditions to Obligations of AHM and New Holdco
7.3 Additional Conditions to Obligations of the Company
ARTICLE VIII TERMINATION AND AMENDMENT
8.1 Termination
8.2 Effect of Termination
8.3 Amendment
8.4 Extension; Waiver
ARTICLE IX GENERAL PROVISIONS
9.1 Non-Survival of Representations, Warranties and Agreements
9.2 Notices
9.3 Interpretation
9.4 Counterparts
9.5 Damages; Equitable Relief
9.6 Entire Agreement; Third Party Beneficiaries
9.7 Governing Law
9.8 Severability
9.9 Waiver of Jury Trial
9.10 Submission to Jurisdiction
9.11 Definitions
EXHIBITS
EXHIBIT A. ....Form of Company Voting Agreement
EXHIBIT B. ....Form of AHM Voting Agreement
EXHIBIT C. ....Third Amendment to Management Agreement
EXHIBIT D. ....Escrow Agreement
EXHIBIT E. ....New Holdco Charter
EXHIBIT F. ....New Holdco Bylaws
EXHIBIT G. ....Form of Lock-Up Agreement
EXHIBIT H. ....Form of Opinion of AHM's Tax Counsel to AHM
EXHIBIT I-1. ..Form of Officer's Certificate of the Company in Support of
Tax Opinions
EXHIBIT I-2. ..Form of Officer's Certificate of AHM in Support of Tax
Opinions
EXHIBIT J. ....Form of REIT Opinion of Company's Tax Counsel to the Company
EXHIBIT K. ....Form of Opinion of the Company's Tax Counsel to the Company
EXHIBIT L. ....Form of REIT Opinion of AHM's Tax Counsel to AHM
SCHEDULES
SCHEDULE A. ...Company Significant Stockholders
SCHEDULE B. ...AHM Significant Stockholders
SCHEDULE C. ...Board of Directors of New Holdco
SCHEDULE D. ...List of Lock-Up Parties
SCHEDULE 1.7. .Valuation Methodology
SCHEDULE 7.2(h)...Investment Guidelines
Company Disclosure Schedule
AHM Disclosure Schedule
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of July 12, 2003, by and among American Home Mortgage Holdings, Inc., a
Delaware corporation ("AHM"), AHM New Holdco, Inc., a Maryland corporation and a
wholly-owned subsidiary of AHM ("New Holdco"), and Apex Mortgage Capital, Inc.,
a Maryland corporation (the "Company").
THE PARTIES TO THIS AGREEMENT enter into this Agreement on the basis of
the following facts, intentions and understandings:
A. The Board of Directors of the Company, upon the recommendation of a
duly authorized special committee of independent directors (such committee,
including any later reconstitution of such committee, being the "Special
Committee"), and the respective Boards of Directors of AHM and New Holdco have
each approved and deem it advisable and in the best interests of their
respective stockholders to consummate the acquisition of the Company by New
Holdco upon the terms and subject to the conditions set forth in this Agreement.
B. In furtherance of the acquisition of the Company by New Holdco, the
respective Boards of Directors of AHM, New Holdco and the Company have approved
this Agreement and the merger of the Company with and into New Holdco, with New
Holdco being the surviving corporation in such merger (the "Merger"), and AHM,
as the sole stockholder of New Holdco, has approved the Merger (this Agreement
and all other documents to be executed by the Company, AHM and New Holdco or any
of such parties in connection with the transactions contemplated hereby and
thereby shall be hereinafter referred to as the "Transaction Documents," and the
transactions contemplated hereby, including, without limitation, the
Reorganization (as defined below), and thereby shall be hereinafter referred to
as the "Transactions").
C. Prior to the Effective Time (as defined below), New Holdco shall form a
Delaware corporation as a wholly-owned subsidiary of New Holdco ("Merger Sub").
Immediately prior to the Merger, AHM shall merge with and into Merger Sub, with
AHM as the surviving corporation (the "Reorganization"), and by virtue of the
Reorganization and without any action on the part of AHM or Merger Sub, or the
holders of capital stock of either of them, each share of common stock, par
value $0.01 per share, of AHM ("AHM Common Stock") issued and outstanding as of
such time (other than shares of AHM Common Stock that are held by New Holdco or
Merger Sub or any Subsidiary of them, which shall be cancelled) shall be
converted into and become one fully-paid and non-assessable share of common
stock, par value $0.01 per share, of New Holdco ("New Holdco Common Stock"),
such that immediately prior to the Effective Time the authorized capital stock
of New Holdco shall be as set forth in Section 4.2(b) hereof. At the Effective
Time, each share of New Holdco Common Stock shall remain outstanding and shall
thereafter be one fully-paid and non-assessable share of common stock of the
Surviving Corporation (as defined below). Upon consummation of the Merger, the
Surviving Corporation shall be authorized to use the name "Apex Mortgage
Capital, Inc." to the extent of the Company's rights to use the name "Apex
Mortgage Capital, Inc." for a period not to exceed six (6) months following the
Effective Time, subject to the terms of the Settlement Agreement and Consent to
Use Agreement contemplated to be entered into by the Company and others prior to
Closing; thereafter, the Surviving Corporation shall not be authorized to use
the names "Apex Mortgage Capital, Inc.", "Apex Mortgage", "Apex" or any
derivative thereof. The respective Boards of Directors of AHM and New Holdco
have approved the Reorganization.
D. Concurrently with both the execution and the delivery of this Agreement
and as a condition and inducement to each party's willingness to enter into this
Agreement, (i) the stockholders of the Company listed on Schedule A attached
hereto ("Company Significant Stockholders"), which collectively own
approximately 2.4% of the outstanding shares of Company Common Stock (as defined
in Section 1.7 below), shall execute and deliver to AHM a voting agreement in
substantially the form attached hereto as Exhibit A (the "Company Voting
Agreement"); and (ii) each of the stockholders of AHM listed on Schedule B
attached hereto ("AHM Significant Stockholders"), which collectively own
approximately 27.2% of the outstanding shares of AHM Common Stock, shall execute
and deliver to the Company a voting agreement in substantially the form attached
hereto as Exhibit B (the "AHM Voting Agreement").
E. As a condition to the Closing (as defined in Section 1.2 below), the
Company and TCW Investment Management Company (the "Manager") shall enter into a
third amendment to that certain Management Agreement dated as of December 9,
1997 (as amended by the First Amendment to Management Agreement dated as of
December 16, 1998 and as further amended by the Second Amendment to Management
Agreement dated as of December 16, 1999), by and between the Company and the
Manager, substantially in the form attached hereto as Exhibit C (the "Third
Amendment to Management Agreement"), which shall provide, in part, that (x)
immediately prior to the Closing, the Manager is entitled to receive from the
Company the Termination Fee (as defined in Section 1.7(c) hereof), and (y)
immediately upon receipt of the Termination Fee by the Manager (and without any
further action or notice by the Company), the Management Agreement shall
terminate. In order to provide for the payment of the Termination Fee
immediately prior to the Closing, the Company and the Manager shall enter into
an escrow agreement by and among the Company, the Manager and such escrow agent
as the Company and the Manager shall mutually agree (the "Escrow Agent"),
substantially in the form of Exhibit D hereto (the "Escrow Agreement"), which
shall provide for, among other things, the deposit by the Company of $10,000,000
(the "Escrow Amount") in an account established with and maintained by the
Escrow Agent (the "Escrow Account") no later than three (3) Business Days prior
to the Initial Closing Date (as defined in Section 1.2 hereof), to be held and
released in accordance with the terms and subject to the conditions contained in
the Escrow Agreement.
F. For United States federal income tax purposes, the parties hereto
intend that the Merger will qualify as a reorganization and that this Agreement
will constitute a "plan of reorganization" within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder (the "Code").
G. AHM, New Holdco and the Company desire to make certain representations,
warranties, covenants and agreements and the other transactions contemplated by
this Agreement and also to prescribe various conditions to the Merger as
specifically set forth herein.
H. Certain terms used in this Agreement are defined in Section 9.11
hereof.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained herein, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions of this
Agreement, and in accordance with the applicable provisions of the Maryland
General Corporation Law, as amended ("MGCL"), the Company shall be merged with
and into New Holdco at the Effective Time. At the Effective Time, the separate
corporate existence of the Company shall cease and New Holdco shall continue as
the surviving corporation (the "Surviving Corporation") in accordance with the
MGCL.
1.2 Closing; Closing Date.
(a) Subject to the provisions of this Agreement, the closing of the
Merger (the "Closing") will take place at 10:00 a.m. (New York City time) on the
Closing Date (as defined below). The Closing shall be held at the offices of
O'Melveny & ▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, unless another place is agreed to in writing by the parties hereto. At
the Closing, the documents, certificates, opinions and instruments referred to
in Article VII hereof shall be executed and delivered to the applicable party.
(b) For purposes of this Agreement:
(i) The "Initial Closing Date" shall mean a date as soon as
practicable after, but in no event later than the fifth (5th) Business Day
after, the satisfaction or waiver of the conditions set forth in Article VII
hereof (excluding conditions that, by their terms, cannot be satisfied until the
Closing), unless another time or date is agreed to in writing by the parties to
this Agreement.
(ii) The "Closing Date" shall mean the Initial Closing Date;
provided, however, that if (A) AHM makes the AHM Election (as defined in Section
1.7(b)(iv) below) or (B) the Company makes the Company Election (as defined in
Section 1.7(b)(v) below), then the Closing Date shall mean the second Business
Day following the Initial Closing Date.
1.3 Effective Time. Subject to the provisions of this Agreement, as soon
as reasonably practicable on or after the Closing Date, the parties shall
execute and file articles of merger or other appropriate documents (the
"Articles of Merger"), in such form as required by and executed in accordance
with the relevant provisions of the MGCL, and shall make all other filings,
recordings and publications required under the MGCL in connection with the
Merger. The Merger shall become effective on the date and at the time (the
"Effective Time") that the Articles of Merger are accepted for record by the
Department of Assessments and Taxation of Maryland (the "Maryland Department")
under the MGCL, or at such later time as New Holdco and the Company shall agree
should be specified in the Articles of Merger (not to exceed ten (10) days after
the Articles of Merger are filed with the Maryland Department).
1.4 Effects of the Merger. At and after the Effective Time, the Merger
shall have the effects set forth in Section 3-114 of the MGCL and this
Agreement. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all of the property, rights, privileges, powers
and franchises of the Company and New Holdco will vest in the Surviving
Corporation, and all of the debts, liabilities and duties of the Company and New
Holdco will become the debts, liabilities and duties of the Surviving
Corporation; provided, however, upon consummation of the Merger, the Surviving
Corporation shall be authorized to use the name "Apex Mortgage Capital, Inc." to
the extent of the Company's rights to use the name "Apex Mortgage Capital,
Inc.", for a period not to exceed six (6) months following the Effective Time,
subject to the terms of the Settlement Agreement and Consent to Use Agreement
contemplated to be entered into by the Company and others prior to Closing;
thereafter, the Surviving Corporation shall not be authorized to use the names
"Apex Mortgage Capital, Inc.", "Apex Mortgage", "Apex" or any derivative
thereof.
1.5 Organizational Documents. From and after the Effective Time, (a) the
charter of New Holdco, substantially in the form of Exhibit E attached hereto,
shall constitute the charter of the Surviving Corporation, until amended after
the Effective Time in accordance with the relevant provisions of the MGCL; and
(b) the bylaws of New Holdco, substantially in the form of Exhibit F attached
hereto, shall constitute the bylaws of the Surviving Corporation, until amended
after the Effective Time in accordance with the relevant provisions of the MGCL
and the charter and bylaws of the Surviving Corporation.
1.6 Board of Directors of Surviving Corporation. At the Effective Time,
each of the persons listed on Schedule C attached hereto shall be elected to the
Board of Directors of the Surviving Corporation; provided that, New Holdco may,
in its sole discretion, designate a member of the Company's Board of Directors
(a "Company Nominee") to join the Board of Directors of the Surviving
Corporation at the Effective Time. In the event that New Holdco designates a
Company Nominee, and the Company Nominee agrees to serve on the Board of
Directors of the Surviving Corporation, the Surviving Corporation shall take all
actions necessary and appropriate to appoint the Company Nominee to the Board of
Directors of the Surviving Corporation as of the Effective Time, including,
without limitation, expanding the size of its Board of Directors by one (1) seat
or causing one of its directors to resign as of the Effective Time.
1.7 Effect on Capital Stock.
(a) Company Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of AHM, New Holdco, the Company, or
the holders of capital stock of any of them, each share of the common stock,
$0.01 par value, of the Company (the "Company Common Stock"), issued and
outstanding immediately prior to the Effective Time (other than shares of
Company Common Stock that are owned or held by AHM, New Holdco, or any
wholly-owned Subsidiary of AHM or New Holdco, which shall be cancelled as
provided in Section 1.7(f) below) shall be converted into and become the
following: (i) the number of shares of fully-paid and non-assessable shares of
common stock, par value $0.01 per share, of New Holdco (the "New Holdco Common
Stock") equal to the Exchange Ratio as defined below, plus (b) any cash in lieu
of fractional shares of New Holdco Common Stock as set forth in Section 2.2(e)
hereof (collectively, the "Merger Consideration").
(b) The "Exchange Ratio" shall be determined as follows:
(i) subject to clause (iv) below, if the Average Price (as
defined below) is greater than $21.86164, the Exchange Ratio shall equal a
quotient (computed to the fifth decimal place), the numerator of which is the
product of (A) the Book Value Per Share (as defined below) and (B) 1.075, and
the denominator of which is $21.86164;
(ii) if the Average Price is less than or equal to $21.86164
and greater than or equal to $17.00350, the Exchange Ratio shall equal a
quotient (computed to the fifth decimal place), the numerator of which is the
product of (A) the Book Value Per Share and (B) 1.075, and the denominator of
which is the Average Price;
(iii) subject to clause (v) below, if the Average Price is
less than $17.00350, the Exchange Ratio shall equal a quotient (computed to the
fifth decimal place), the numerator of which is the product of (A) the Book
Value Per Share and (B) 1.075, and the denominator of which is $17.00350;
(iv) if the Average Price is greater than $24.29071, (A) AHM
may notify the Company in writing of its election to terminate this Agreement
pursuant to Section 8.1(d)(v) hereof (the "AHM Election"), and the Company shall
have the option in its sole and absolute discretion, but not the obligation, to
adjust the Exchange Ratio to be equal to the quotient (computed to the fifth
decimal place), the numerator of which is the product of (x) the Book Value Per
Share and (y) 1.19444, and the denominator of which is the Average Price, or (B)
in the event that AHM does not elect to make the AHM Election, the Exchange
Ratio shall equal a quotient (computed to the fifth decimal place), the
numerator of which is the product of (I) the Book Value Per Share and (II)
1.075, and the denominator of which is $21.86164; and
(v) if the Average Price is less than $14.57443, (A) the
Company may notify AHM in writing of its election to terminate this Agreement
pursuant to Section 8.1(e)(v) hereof (the "Company Election"), and AHM shall
have the option in its sole and absolute discretion, but not the obligation, to
adjust the Exchange Ratio to be equal to the quotient (computed to the fifth
decimal place), the numerator of which is the product of (x) the Book Value Per
Share and (y) .92143, and the denominator of which is the Average Price, or (B)
in the event that the Company does not make the Company Election, the Exchange
Ratio shall equal a quotient (computed to the fifth decimal place), the
numerator of which is the product of (I) the Book Value Per Share and (II)
1.075, and the denominator of which is $17.00350.
(c) For purposes of this Agreement:
(i) The "Average Price " means an amount calculated prior to
the Closing Date by taking the average (computed to the fifth decimal place) of
the daily volume weighted averages of the trading prices of AHM Common Stock on
The Nasdaq National Market ("NASDAQ"), as reported by Bloomberg Financial
Markets, for the 10 consecutive trading days ending on and including the
Determination Date (as defined below).
(ii) The "Notional Book Value" means the net book value of the
Company on the Determination Date, which shall be equal to the marked-to-market
assets of the Company minus the marked-to-market liabilities of the Company,
such determination to be made in the manner provided in Schedule 1.7 attached
hereto (the "Valuation Methodology") and in accordance with generally accepted
accounting principles in the United States ("GAAP").
(iii) The "Notional Book Value Per Share" means the net book
value per share of Company Common Stock on the Determination Date, which shall
be equal to a quotient, the numerator of which is the Notional Book Value and
the denominator of which is the number of issued and outstanding shares of
Company Common Stock on the Determination Date.
(iv) The "Termination Fee" means forty percent (40%) of the
difference between (A) the Notional Aggregate Consideration (as defined below)
and (B) the Notional Book Value; provided, however, that in no event shall the
Termination Fee exceed $10,000,000.
(v) The "Notional Aggregate Consideration" means the product
of (A) the Average Price, (B) the Notional Exchange Ratio (as defined below) and
(C) the number of shares of Company Common Stock outstanding as of the
Determination Date.
(vi) The "Notional Exchange Ratio" shall be calculated as
follows:
(A) if the Average Price is greater than $21.86164, the
Notional Exchange Ratio shall equal a quotient (computed to the fifth
decimal place), the numerator of which is the product of (1) the Notional
Book Value Per Share (as defined below) and (2) 1.075, and the denominator
of which is $21.86164;
(B) if the Average Price is less than or equal to
$21.86164 and greater than or equal to $17.00350, the Notional Exchange
Ratio shall equal a quotient (computed to the fifth decimal place), the
numerator of which is the product of (1) the Notional Book Value Per Share
and (2) 1.075, and the denominator of which is the Average Price;
(C) if the Average Price is less than $17.00350, the
Notional Exchange Ratio shall equal a quotient (computed to the fifth
decimal place), the numerator of which is the product of (1) the Notional
Book Value Per Share and (2) 1.075, and the denominator of which is
$17.00350;
(D) if the Average Price is greater than $24.29071, the
Notional Exchange Ratio to be equal to the quotient (computed to the fifth
decimal place), the numerator of which is the product of (1) the Notional
Book Value Per Share and (2) 1.19444, and the denominator of which is the
Average Price; and
(E) if the Average Price is less than $14.57443, the
Notional Exchange Ratio to be equal to the quotient (computed to the fifth
decimal place), the numerator of which is the product of (1) the Notional
Book Value Per Share and (2) .92143, and the denominator of which is the
Average Price.
(vii) The "Determination Date" means the trading day
immediately preceding the Initial Closing Date.
(viii) The "Book Value" means (A) the Notional Book Value
plus (B) the Escrow Amount (plus accrued interest thereon through the Closing
Date and net of any applicable fees and expenses, as allocated in the Escrow
Agreement), minus (C) the Termination Fee.
(ix) The "Book Value Per Share" means the net book value per
share of Company Common Stock on the Determination Date, which shall be equal to
a quotient, the numerator of which is the Book Value and the denominator of
which is the number of issued and outstanding shares of Company Common Stock on
the Determination Date.
(x) References to shares of Company Common Stock include,
unless the context requires otherwise, the associated rights (individually, a
"Company Right" and collectively, the "Company Rights") to purchase shares of
Series A Junior Participating Preferred Stock (the "Company Preferred Stock"
and, together with the Company Common Stock, the "Company Capital Stock") issued
pursuant to the Stockholder Rights Agreement dated as of July 19, 1999, as
amended (the "Company Rights Plan"), by and between the Company and The Bank of
New York, as rights agent.
(d) Treatment of Company Options. The Company shall cause each
unvested Company Option (as defined in Section 3.2 hereof) to become vested as
of the Effective Time, and each Company Option that shall not have been
exercised as of the Effective Time shall be terminated at the Effective Time and
shall not be assumed by the Surviving Corporation.
(e) Adjustment of Exchange Ratio. The Exchange Ratio shall be
proportionately and equitably adjusted to reflect fully (i) the effect of any
stock split, reverse split, stock dividend (including any dividend or
distribution of securities convertible into AHM Common Stock, Company Common
Stock or New Holdco Common Stock, as applicable), reorganization,
recapitalization, subdivision, reclassification, combination, exchange of shares
of similar transaction with respect to AHM Common Stock, Company Common Stock or
New Holdco Common Stock occurring after the Determination Date and at or prior
to the Effective Time, and (ii) any Company Options exercised after the
Determination Date and at or prior to the Effective Time ("Exercised Company
Options"), it being expressly agreed and acknowledged by the parties that (x)
any shares of Company Common Stock issued pursuant to Exercised Company Options
shall be reflected in the denominator for purposes of calculating the "Book
Value Per Share" for all purposes under this Agreement and (y) any amounts paid
to the Company in respect of the respective exercise prices of the Exercised
Company Options shall be reflected in the marked-to-market assets of the Company
for purposes of calculating the "Book Value" for all purposes under this
Agreement.
(f) Cancellation of shares of Company Common Stock held by AHM, New
Holdco or their Subsidiaries. Each outstanding share of Company Common Stock
that is owned or held directly or indirectly by AHM, New Holdco or any of their
respective Subsidiaries at the Effective Time shall, by virtue of the Merger,
cease to be outstanding and shall be canceled and no payment or other
consideration shall be delivered in exchange therefor.
1.8 Further Assurances. At and after the Effective Time, the directors and
officers of the Surviving Corporation will be authorized to execute and deliver,
in the name and on behalf of the Company or New Holdco, any deeds, bills of
sale, assignments or assurances and to take and do, in the name and on behalf of
the Company or New Holdco, any other actions and things to vest, perfect or
confirm of record or otherwise in the Surviving Corporation any and all right,
title and interest in, to and under any of the rights, properties or assets
acquired or to be acquired by the Surviving Corporation as a result of, or in
connection with, the Merger.
1.9 Tax Consequences. It is intended that the Merger shall constitute a
reorganization within the meaning of Section 368(a) of the Code and that this
Agreement shall constitute a "plan of reorganization" for purposes of the Code.
ARTICLE II
EXCHANGE OF CERTIFICATES
2.1 Exchange Fund. At or prior to the Effective Time, New Holdco shall
deposit, or shall cause to be deposited, with a bank or trust company reasonably
acceptable to the Company (the "Exchange Agent"), for the benefit of the holders
of Certificates, for exchange in accordance with this Article II, certificates
representing the shares of New Holdco Common Stock and AHM shall deposit an
amount of cash reasonably estimated to be paid in lieu of all fractional shares
(the cash payable in lieu of fractional shares and certificates for shares of
New Holdco Common Stock, together with any dividends or distributions with
respect thereto, being hereinafter referred to as the "Exchange Fund") to be
issued pursuant to Section 1.7 hereof and paid pursuant to Section 2.2(a) hereof
in exchange for outstanding shares of Company Common Stock. The Exchange Agent
shall agree to hold the Exchange Fund for delivery as contemplated by this
Article II.
2.2 Exchange of Shares.
(a) Exchange. As soon as practicable after the Effective Time, and
in no event later than ten (10) Business Days thereafter, the Surviving
Corporation shall cause the Exchange Agent to mail to each holder of record of a
Certificate or Certificates a form 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
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing the shares of New Holdco Common Stock and the cash
in lieu of fractional shares, if any, into which the shares of Company Common
Stock represented by such Certificate or Certificates shall have been converted
pursuant to this Agreement. Upon proper surrender of a Certificate for exchange
and cancellation to the Exchange Agent, together with such properly completed
letter of transmittal, duly executed, the holder of such Certificate shall be
entitled to receive in exchange therefore, as applicable, (i) a certificate
representing that number of shares of New Holdco Common Stock, if any, to which
such holder shall have become entitled pursuant to the provisions of Article I
hereof, and (ii) a check representing the amount of cash in lieu of fractional
shares and dividends or other distributions on such number of shares of New
Holdco Common Stock, if any, which such holder has the right to receive in
respect of the Certificate surrendered pursuant to the provisions of this
Article II, and the Certificate so surrendered shall forthwith be cancelled. No
interest will be paid or accrued on the cash in lieu of fractional shares and
unpaid dividends and distributions, if any, payable to holders of Certificates.
(b) Dividends. No dividends or other distributions with a record
date after the Effective Time with respect to shares of New Holdco Common Stock
shall be paid to the holder of any unsurrendered Certificate until the holder
thereof shall surrender such Certificate in accordance with this Article II.
After the surrender of a Certificate in accordance with this Article II, the
record holder thereof shall be entitled to receive any such dividends or other
distributions, without any interest thereon, which theretofore had become
payable with respect to shares of New Holdco Common Stock represented by such
Certificate.
(c) Other Names. If any certificate representing shares of New
Holdco Common Stock is to be issued in a name other than that in which the
Certificate surrendered in exchange therefore is registered, it shall be a
condition of the issuance thereof that the Certificate so surrendered shall be
properly endorsed (or accompanied by an appropriate instrument of transfer) and
otherwise in proper form for transfer, and that the person requesting such
exchange shall pay to the Exchange Agent in advance any transfer or other taxes
required by reason of the issuance of a certificate representing shares of New
Holdco Common Stock in any name other than that of the registered holder of the
Certificate surrendered, or required for any other reason, or shall establish to
the satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
(d) No Further Transfers. At or after the Effective Time, there
shall be no transfers on the stock transfer books of the Company of the shares
of Company Common Stock which were issued and outstanding immediately prior to
the Effective Time. If, after the Effective Time, Certificates representing such
shares are presented for transfer to the Exchange Agent, they shall be cancelled
and exchanged for as provided in this Article II.
(e) Cash in Lieu of Fractional Shares. Notwithstanding anything to
the contrary contained herein, no certificates or scrip representing fractional
shares of New Holdco Common Stock shall be issued upon the surrender for
exchange of Certificates, no dividend or distribution with respect to shares of
New Holdco Common Stock shall be payable on or with respect to any fractional
share, and such fractional share interests shall not entitle the owner thereof
to vote or to any other rights of a stockholder of New Holdco. In lieu of the
issuance of any such fractional share, New Holdco shall pay to each former
stockholder of the Company who otherwise would be entitled to receive such
fractional share an amount in cash determined by multiplying (i) the Average
Price by (ii) the fraction of a share of New Holdco Common Stock to which such
holder would otherwise be entitled pursuant to Section 1.7 hereof.
(f) Unclaimed Funds. Any portion of the Exchange Fund that remains
unclaimed by the stockholders of the Company for nine (9) months after the
Effective Time shall be paid to New Holdco. Any stockholders of the Company who
have not theretofore complied with this Article II shall thereafter look only to
New Holdco for payment of shares of New Holdco Common Stock, cash in lieu of any
fractional shares and unpaid dividends and other distributions on the shares of
New Holdco Common Stock deliverable in respect of each share of Company Common
Stock that such stockholder holds, as determined pursuant to this Agreement, in
each case, without any interest thereon. Notwithstanding anything to the
contrary contained herein, none of New Holdco, the Company, the Exchange Agent
or any other person shall be liable to any former holder of a share of Company
Common Stock for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(g) Lost Certificates. In the event any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by New Holdco, the posting by such person of a bond in such amount as
New Holdco may determine is reasonably necessary as indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed Certificate of shares
of New Holdco Common Stock and cash in lieu of fractional shares and dividends
and other distributions on shares of New Holdco Common Stock deliverable in
respect thereof pursuant to this Agreement.
2.3 Investment of the Exchange Fund. The Exchange Agent shall invest any
cash included in the Exchange Fund only in one or more of the following
investments as directed by the Surviving Corporation from time to time: (i)
obligations of the United States government maturing not more than thirty (30)
days after the date of purchase; (ii) certificates of deposit maturing not more
than thirty (30) days after the date of purchase issued by a bank organized
under the laws of the United States or any state thereof having a combined
capital and surplus of at least One Billion Dollars ($1,000,000,000); (iii) a
money market fund having assets of at least One Hundred Million Dollars
($100,000,000); or (iv) tax-exempt or corporate debt obligations maturing not
more than thirty (30) days after the date of purchase given the highest
investment grade rating by Standard & Poor's and ▇▇▇▇▇'▇ Investor Service. Any
interest and other income resulting from such investments shall promptly be paid
to the Surviving Corporation.
2.4 Withholding Rights. Each of the Surviving Corporation and New Holdco
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of Company Common Stock such
amounts as it is required to deduct and withhold with respect to the making of
such payment under the Code, or any provision of state, local or foreign tax Law
or Order. To the extent that amounts are so withheld by the Surviving
Corporation or New Holdco, as the case may be, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of
a Certificate in respect of which such deduction and withholding was made by the
Surviving Corporation or New Holdco, as the case may be.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Disclosure Schedule (provided that an item on
such Disclosure Schedule shall be deemed to qualify only the particular section
or sections of this Article III specified for such item, unless it is reasonably
apparent that the disclosure or statement in one section of the Disclosure
Schedule should apply to one or more sections thereof) delivered by the Company
to AHM prior to the execution of this Agreement (the "Company Disclosure
Schedule"), the Company represents and warrants to AHM and New Holdco as
follows:
3.1 Organization, Standing and Power of the Company. The Company is a
corporation duly organized and validly existing under the Laws of Maryland, with
the corporate power and authority to carry on its business as now being
conducted. The Company is duly qualified or licensed to do business as a foreign
corporation and is in good standing in each jurisdiction in which the nature of
its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, except for such failures to be so
qualified or licensed, individually or in the aggregate, that would not have a
Material Adverse Effect on the Company. The Company has previously made
available to AHM complete and correct copies of (a) the charter of the Company,
as amended to the date of this Agreement (the "Company Charter") and (b) bylaws
of the Company, as amended to the date of this Agreement.
3.2 Capital Structure; Subsidiaries.
(a) As of the date of this Agreement, the authorized capital stock
of the Company (the "Company Capital Stock") consists of 100,000,000 shares of
Company Common Stock of which 29,857,000 shares of Company Common Stock are
outstanding, and 50,000,000 shares of Company Preferred Stock, none of which are
outstanding. All issued and outstanding shares of Company Capital Stock are duly
authorized, validly issued, fully paid and nonassessable, and no class of
Company Capital Stock is entitled to preemptive rights. As of the date of this
Agreement, there are outstanding no options, warrants or other rights to acquire
Company Capital Stock other than options to acquire 791,000 shares of Company
Common Stock (each, a "Company Option") issued pursuant to the Company's Amended
and Restated 1997 Stock Option Plan (the "the Company Stock Option Plan"). As of
the date of this Agreement, 1,000,000 shares of Company Common Stock are
reserved for issuance pursuant to the Company Stock Option Plan. All shares of
Company Common Stock subject to issuance as aforesaid, upon issuance on the
terms and conditions specified in the instruments pursuant to which they are
issuable, will be duly authorized, validly issued, fully paid and nonassessable.
(b) As of the date of this Agreement, no bonds, debentures, notes or
other indebtedness of the Company are issued or outstanding.
(c) Except as set forth in this Section 3.2, as of the date of this
Agreement, there are no securities, options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind to which the
Company is a party, or by which it is bound, obligating the Company to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
Company Capital Stock or other voting securities of the Company or, securities
convertible into or exchangeable for shares of Company Capital Stock or other
voting securities of the Company, or obligating the Company to issue, grant,
extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. As of the date of this
Agreement, there are no outstanding obligations of the Company (i) to
repurchase, redeem or otherwise acquire any shares of Company Capital Stock or
any other voting securities of the Company, or (ii) to make any equity
investment in any other Person.
(d) All dividends on shares of Company Common Stock that have been
declared prior to the date of this Agreement have been paid in full.
(e) The Company has no Subsidiaries. The Company does not own,
directly or indirectly, any capital stock or other securities (whether voting or
otherwise) or other ownership interest in any corporation, joint stock company,
partnership, limited partnership, limited liability company, joint venture or
other entity.
3.3 Authority; No Violations.
(a) The Company has the requisite corporate power and corporate
authority to execute and deliver this Agreement and to perform its obligations
hereunder and to consummate the Transactions, subject to obtaining the Company
Stockholder Approval (as defined in Section 3.17 hereof). Both the execution and
the delivery of this Agreement by the Company and the consummation by the
Company of the Transactions have been duly authorized by all necessary corporate
action on the part of the Company, except for and subject to the Company
Stockholder Approval. This Agreement has been duly executed and delivered by the
Company and constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with and subject to its terms,
subject to applicable bankruptcy, insolvency, moratorium or other similar Laws
relating to creditors' rights and general principles of equity.
(b) Both the execution and the delivery of the Transaction Documents
by the Company do not, and the consummation of the Transactions and compliance
with the provisions hereof and thereof, will not, conflict with, or result in
any violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any material obligation or to the loss of a material benefit under, or give rise
to a right of purchase under, result in the creation of any Lien upon any of the
properties or assets of the Company, require the consent or approval of any
third party or otherwise result in a material detriment to the Company (any such
conflict, violation, default, termination, cancellation, acceleration, right or
detriment being a "Violation") under, any provision of (i) the charter or bylaws
or other comparable organizational documents of the Company, or (ii) assuming
the Company Stockholder Approval, and other consents, approvals, authorizations,
registrations, or permits and filings or notifications referred to in Section
3.3(c) below (the "Required Company Consents") are duly and timely obtained or
made, any Material Contracts, any Laws or Orders applicable to the Company, or
any of its properties or assets, any permit, concession, franchise, license or
other governmental authorization applicable to the Company, or any agreement,
instrument, permit, concession, franchise or license applicable to the Company,
other than, in the case of clause (ii) any such Violations that, individually or
in the aggregate, would not have a Material Adverse Effect on the Company.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, or permit from any court,
governmental, regulatory or administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign (a "Governmental
Entity"), is required by or with respect to the Company in connection with
either the execution or the delivery of the Transaction Documents by the Company
or the consummation by the Company of the Transactions, except for: (i) the
filing with the Securities and Exchange Commission (the "SEC") of a joint proxy
statement/prospectus in preliminary and definitive form (the "Joint Proxy
Statement/Prospectus") relating to the Company Stockholders Meeting (as defined
in Section 6.3 below) to be held in connection with the Merger, and such other
compliance with the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder (the "Exchange Act"), as may be required in
connection with the Transaction Documents and the Transactions; (ii) the filing
of the Articles of Merger with, and the acceptance for record of the Articles of
Merger by, the Maryland Department; (iii) filings with AMEX; (iv) such filings
and approvals as may be required by any applicable state securities, "blue sky"
or takeover laws, or environmental laws; (v) the filing, if applicable, of a
pre-merger notification and report by the Company under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the
expiration or termination of the applicable waiting period thereunder; and (vi)
such consents, approvals, Orders, authorizations, registrations, declarations
and filings the failure of which to make or obtain would not, individually or in
the aggregate, have a Material Adverse Effect on the Surviving Corporation or
AHM following consummation of the Merger.
3.4 Company SEC Reports; Financial Statements.
(a) The Company has filed all required reports, schedules, forms,
statements and other documents required to be filed by it with the SEC pursuant
to the Exchange Act and the Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder (the "Securities Act") since January 1,
2000 (collectively, including all exhibits thereto, the "Company SEC Reports").
As of their respective dates, with respect to Company SEC Reports filed pursuant
to the Exchange Act, and as of their respective effective dates, as to Company
SEC Reports filed pursuant to the Securities Act (and, if amended or superseded
by a filing or effectiveness prior to the date of this Agreement or the Closing
Date, then on the date of such filing or effectiveness, as appropriate), the
Company SEC Reports (a) complied, or, with respect to those not yet filed, will
comply, in all material respects with the applicable requirements of the
Securities Act and the Exchange Act, and (b) did not, or, with respect to those
not yet filed, will not, contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(b) Each of the audited financial statements and unaudited interim
financial statements included in or incorporated by reference into the Company
SEC Reports (including the related notes and schedules) presents fairly, in all
material respects, the financial position and results of operations and cash
flows, as the case may be, of the Company as of their respective dates or for
the respective periods set forth therein, all prepared in accordance with GAAP
consistently applied during the periods involved except as otherwise noted
therein, and subject, in the case of the unaudited interim financial statements,
to normal and recurring year-end adjustments that have not been and are not
expected to be material in amount.
3.5 Absence of Liabilities. Except for liabilities or obligations which
are accrued or reserved against in the Company's most recent financial
statements (or in the related notes thereto) included in the Company SEC Reports
or which were incurred in the ordinary course of business and consistent with
past practices since the date of the Company's most recent financial statements
included in the Company SEC Reports, or constitute obligations owed to officers,
directors or employees that will become due as a result of the consummation of
the Transactions and which are listed on Schedule 3.5 of the Company Disclosure
Schedule, the Company does not have any material liabilities or obligations
(whether absolute, accrued, contingent or otherwise) of a nature required to be
reflected on, or reserved against in, a balance sheet of the Company or in the
notes thereto, prepared in accordance with GAAP consistently applied.
3.6 Compliance. Except as set forth in the Company SEC Reports, the
Company is not in violation of, is not, to the knowledge of the Company, under
investigation with respect to any violation of, or has not been given notice or
threatened with any violation of, any Laws or Orders, except for violations or
possible violations which would not, individually or in the aggregate, have a
Material Adverse Effect on the Company. The Company has all permits, licenses,
franchises and other governmental authorizations, consents and approvals
necessary to conduct its businesses as presently conducted, except for such
permits, licenses, franchises and other governmental authorizations, consents
and approvals the absence of which would not, individually or in the aggregate,
have a Material Adverse Effect on the Company. The Company is not in breach or
violation of, or in default in the performance or observance of (a) any
provision of its charter or bylaws or similar governing document, or (b) except
as would not, individually or in the aggregate, have a Material Adverse Effect
on the Company, any Company Material Contract, permit, license, franchise or
other governmental authorization, consent or approval applicable to the Company
or its respective properties or assets.
3.7 Absence of Certain Changes or Events. Except as disclosed in the
Company SEC Reports and except as contemplated in the Transaction Documents and
the Transactions, since the date of the most recent audited financial statements
included in the Company SEC Reports (the "Company Financial Statement Date")
through the date of this Agreement, (a) the Company has conducted its business
only in the ordinary course (taking into account prior practices, including the
acquisition and disposition of properties and issuance of securities),
consistent with past practices, and (b) there has not been any event,
occurrence, development or state of circumstances or facts that has had, or
would, individually or in the aggregate, have a Material Adverse Effect on the
Company.
3.8 Taxes.
(a) (i) All material Tax Returns required to be filed by, or with
respect to, the Company have been, or in the case of material Tax Returns the
due date for filing of which is after the date of this Agreement and before the
Closing Date (taking into account any available extensions), will be, timely
filed with appropriate Governmental Entities and all such Tax Returns are, or in
the case of such Tax Returns not yet filled, will be, true, correct and complete
in all material respects, and (ii) all material Taxes that were shown to be due
on such Tax Returns have been, or in the case of material Taxes due after the
date of this Agreement and before the Closing Date (taking into account any
available extensions), will be, timely paid.
(b) There are no ongoing federal, state, local or foreign audits or
examinations of any Tax Return of the Company and, to the knowledge of the
Company, no audits or examinations have been proposed by any taxing authority.
(c) The most recent financial statements contained in the Company
SEC Reports reflect an adequate reserve for all Taxes payable by the Company for
all Taxable periods and portions thereof through the date of such financial
statements. No deficiencies for any Taxes have been proposed, asserted or
assessed against the Company that are not adequately reserved for, and there are
no outstanding requests, agreements, consents or waivers to extend the statutory
period of limitations applicable to the assessment of any Taxes or deficiencies
against the Company, and no power of attorney granted by the Company with
respect to any Taxes is currently in force.
(d) The Company is not a party to any agreement providing for the
allocation or sharing of Taxes.
(e) There are no material Liens for Taxes (other than for current
Taxes not yet due and payable) on the assets of the Company.
(f) Since the Company Financial Statement Date, the Company has
incurred no material liability for Taxes under Sections 857(b), 857(f), 860(c)
or 4981 of the Code, including without limitation any Tax arising from a
prohibited transaction described in Section 857(b)(6) of the Code. The Company
does not hold any material asset the disposition of which would be subject to
rules similar to Section 1374 of the Code under the provisions of Treas. Reg.
ss. 1.337(d)-7T, other than as set forth on Schedule 3.8(f) of the Company
Disclosure Schedule.
(g) The Company (i) for all taxable years commencing with its
initial taxable year through December 31, 2002 has been properly subject to
taxation as a real estate investment trust (a "REIT") within the meaning of
Sections 856-860 of the Code and has qualified as a REIT for such years, (ii)
has operated since December 31, 2002, and will continue to operate to the
Closing, in such a manner as to qualify as a REIT (determined without regard to
the dividends paid deduction requirements for the current year) for the taxable
year beginning January 1, 2003 and ending as of the Closing Date, and (iii) has
not taken or omitted to take any action which would reasonably be expected to
result in a challenge to its status as a REIT, and no such challenge is pending
or to the Company's knowledge threatened.
(h) The Company has not taken or agreed to take any action that
(without regard to any action taken or agreed to be taken by AHM or any of its
Affiliates) would prevent the Transactions from qualifying as a reorganization
within the meaning of Section 368(a) of the Code. The Company has no knowledge
of any agreement, plan or other circumstance that would prevent the Transactions
from qualifying as a reorganization within the meaning of Section 368(a) of the
Code.
(i) The Company has complied in all material respects with all
applicable laws, rules and regulations relating to the payment and withholding
of Taxes (including, without limitation, withholding of Taxes pursuant to
Sections 1441, 1442, 1445, 1446, and Subtitle C of the Code or similar
provisions under any state or foreign laws) and has, within the time period
prescribed by law, withheld and paid over to the proper Governmental Entities
all material amounts required to be so withheld and paid over under applicable
laws and regulations.
(j) No event has occurred, and no circumstance exists with respect
to the Company, which presents a material risk that any material Tax will be
imposed on the Company pursuant to Sections 857 or 4981 of the Code or as a
result of a failure to qualify as a REIT.
(k) The Company has not entered into nor is subject, directly or
indirectly, to any Company Tax Protection Agreements. As used herein, a "Company
Tax Protection Agreement" is an agreement, oral or written, (A) that has as one
of its purposes to permit a person or entity to take the position that such
person or entity could defer federal taxable income that otherwise might have
been recognized upon a transfer of property to a partnership of which the
Company is a partner or to any other Subsidiary of the Company that is treated
as a partnership for federal income tax purposes, and that (i) prohibits or
restricts in any manner the disposition of any assets of the Company, (ii)
requires that the Company maintain, or put in place, or replace, indebtedness,
whether or not secured by one or more of the Company's assets, or (iii) requires
that the Company offer to any person or entity at any time the opportunity to
guarantee, indemnify against or otherwise assume, directly or indirectly, the
risk of loss for federal income tax purposes for indebtedness or other
liabilities of the Company, (B) that specifies or relates to a method of taking
into account book tax disparities under Section 704(c) of the Code with respect
to one or more assets of the Company, or (C) that requires a particular method
for allocating one or more liabilities of the Company under Section 752 of the
Code. The Company is not in violation of or in default under any Company Tax
Protection Agreement.
(l) For purposes of this Agreement:
(i) "Taxes" means any and all federal, state, local, foreign
or other taxes of any kind (together with any and all interest, penalties,
additions to tax and additional amounts imposed with respect thereto) imposed by
any local, municipal, state, foreign, Federal or other Governmental Entity,
including, without limitation, taxes or other charges on or with respect to
income, franchises, windfall or other profits, gross receipts, property, sales,
use, capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation or net worth, and taxes or other charges in the nature
of excise, withholding, ad valorem or value added.
(ii) "Tax Return" means any return, report or similar
statement (including the attached schedules) required to be filed with respect
to any Tax, including, without limitation, any information return, claim for
refund, amended return or declaration of estimated Taxes.
3.9 Investment Company Act. The Company is not (a) an "investment company"
or a company "controlled" by an investment company within the meaning of the
Investment Company Act of 1940, as amended, (b) 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 (c)
subject to regulation under the Federal Power Act or the Interstate Commerce
Act.
3.10 Mortgage Backed Securities.
(a) The Company is on the date hereof the sole owner of each of the
mortgage backed securities ("MBS") identified on Schedule 3.10 of the Company
Disclosure Schedule ("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 or Liens (including,
without limitation, Liens arising under the federal tax laws or the Employee
Retirement Income Security Act of 1974, as amended, and the rules and
regulations thereunder ("ERISA")), other than any Company Permitted Liens. The
term "Company Permitted Liens" shall mean (i) Liens set forth in the Company
Disclosure Schedule, (ii) statutory Liens arising out of operation of Law with
respect to a Liability incurred in the ordinary course of business and which is
not delinquent; (iii) such Liens and other imperfections of title as do not
detract from the value or impair the use of the property subject thereto or make
such property unmarketable; (iv) mechanics' carriers', workmens', repairmens' or
materialmens' Liens that are not delinquent, and (v) other Liens and other
limitations of any kind, if any, which, individually or in the aggregate, are
not in excess of $5 million.
(b) To the knowledge of the Company, the Company 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 or
special servicer of any Company MBS the effect of which, individually or in the
aggregate could reasonably be expected to result in a Material Adverse Effect on
the Company.
(c) As of the date hereof, there are no material agreements (other
than Company Principal MBS Agreements) between the Company and the master
servicer or any special servicer with respect to any series of Company MBS.
3.11 Mortgage Loans. Other than through MBS, the Company does not own any
mortgage loans.
3.12 Insurance. The Company is insured with financially responsible
insurers in such amounts and against such risks and losses as are (a) customary
in all material respects for companies in the United States conducting the
business conducted by the Company, (b) required to be maintained by the Company
under the terms of any Contract with respect to the borrowing of money to which
the Company is a party or by which any of its respective properties are bound,
and (c) required to be maintained pursuant to all applicable Laws and Orders,
except for (in the case of clause (c)) such insurance the absence of which would
not have a Material Adverse Effect on the Company. The Company has not received
any notice of cancellation or termination with respect to any material insurance
policy of the Company. The Company has fulfilled all of its obligations under
each material insurance policy, including the timely payment of premiums, other
than such failures to fulfill its obligations that would not, individually or in
the aggregate reduce or nullify the benefits under such policy.
3.13 Opinion of Company Financial Advisor. The Company has received the
opinion of UBS Warburg LLC (the "Company Financial Advisor"), dated the date of
this Agreement, to the effect that, as of such date, the Exchange Ratio is fair,
from a financial point of view, to the stockholders of the Company, a draft copy
of which opinion has been made available to AHM (the "Draft Opinion of Company
Financial Advisor").
3.14 Brokers or Finders. 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 similar commission or fee in connection with any of
the transactions contemplated by this Agreement, except the Company Financial
Advisor, whose fees and expenses will be paid by the Company in accordance with
the Company's agreement with such firm, based upon arrangements made by or on
behalf of the Company.
3.15 Litigation. As of the date hereof, there are no claims, actions,
suits, proceedings or investigations (collectively, "Claims") pending or, to the
Company's knowledge, threatened against the Company, or any properties or rights
of the Company, by or before any Governmental Entity, other than Claims that
would not have a Material Adverse Effect on the Company. To the Company's
knowledge, there are no such Claims pending or threatened against the Company as
of the date hereof. There is no judgment, decree, injunction or order of any
Governmental Entity applicable to the Company that, when taken together with the
Claims, would have a Material Adverse Effect on the Company. Schedule 3.15 of
the Company Disclosure Schedule sets forth all Claims which are pending or, to
the knowledge of the Company, threatened against the Company as of the date
hereof.
3.16 Employee Benefit Plans; ERISA.
(a) The Company has no employees and, except for the Company Stock
Option Plan, there is no 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 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. Each Company
Option will either be exercised or will terminate or be terminated upon or prior
to the Effective Time.
(b) For purposes of this Agreement, "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.
3.17 Vote Required. The affirmative vote of the holders of two-thirds of
the outstanding shares of Company Common Stock entitled to vote thereon (the
"Company Stockholder Approval") is the only vote of the holders of any class or
series of the Company's equity interests necessary to approve the Merger. The
Board of Directors of the Company, based on the approval and recommendation of
the Special Committee (which approval and recommendation was a condition to the
approval of the Company's Board of Directors set forth in clause (a) of this
sentence), at a meeting duly called and held, subject to its right to withdraw
its support of the Merger and recommend a Superior Proposal (as defined in
Section 6.6 hereof), (a) determined that this Agreement and the Transactions,
including the Merger, are fair to, and in the best interests of, the
stockholders of the Company, (b) approved this Agreement and the Merger, (c) has
declared that this Agreement and the Merger are advisable, and (d) resolved to
recommend that the holders of Company Common Stock approve the Merger.
3.18 Material Contracts.
(a) Except as set forth on Schedule 3.18(a) of the Company
Disclosure Schedule, all material contracts required to be described in Item
601(b)(1) of Regulation S-K to which the Company is a party or may be bound have
been filed as exhibits to, or incorporated by reference in, the Company SEC
Reports (collectively, the "Company Material Contracts").
(b) As of the date of this Agreement, (i) there is no breach or
violation of or default by the Company under any of the Company Material
Contracts, except such breaches, violations and defaults as have been waived,
and (ii) no event has occurred with respect to the Company which, with notice or
lapse of time or both, could reasonably be expected to constitute a breach,
violation or default, or give rise to a right of termination, modification,
cancellation, foreclosure, imposition of a lien, prepayment or acceleration
under any of the Company Material Contracts, which breach, violation or default
referred to in clauses (i) or (ii), individually or in the aggregate with other
such breaches, violations or defaults referred to in clauses (i) or (ii), would
cause a Material Adverse Effect on the Company. True copies of the Company
Material Contracts in effect as of the date hereof have been delivered or made
available to AHM.
3.19 Company Rights Plan Inapplicable. The Company has taken all actions
necessary or appropriate under the Company Rights Plan so that (i) neither AHM
nor New Holdco shall be deemed an "Acquiring Person" as a result of the
transactions contemplated hereby, and (ii) the entering into this Agreement and
the consummation of the Transactions, including the Merger, will not result in
the grant of any rights to any person under the Company Rights Plan or enable or
require the Company Rights to be exercised, distributed or triggered.
3.20 Certain Agreements. The Company is not a party to any oral or written
agreement or plan any of the benefits of which will be increased, or the vesting
or exercisability of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Agreement either
alone or upon the occurrence of any additional or further acts or events.
3.21 No Material Adverse Effect. Since January 1, 2000, except as
disclosed in the Company SEC Reports, to the knowledge of the Company, no fact,
circumstance or condition has arisen or existed that could reasonably be
expected to result in a Material Adverse Effect on the Company.
3.22 Ownership of Company Common Stock by Manager. As of the date of this
Agreement, neither the Manager nor any Affiliate of the Manager that is an
entity (and not an individual or fund) owns shares of Company Common Stock,
except for TCW Capital Investment Corporation, which owns 300,000 shares of
Company Common Stock.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF AHM AND NEW HOLDCO
Except as set forth in the Disclosure Schedule (provided that an item on
such Disclosure Schedule shall be deemed to qualify only the particular section
or sections of this Article IV specified for such item, unless it is reasonably
apparent that the disclosure or statement in one section of the Disclosure
Schedule should apply to one or more sections thereof) delivered by AHM and New
Holdco to the Company prior to the execution of this Agreement (the "AHM
Disclosure Schedule"), AHM and New Holdco represent and warrant to the Company
as follows:
4.1 Organization, Standing and Power. New Holdco, AHM and each Subsidiary
of AHM and New Holdco is duly organized, validly existing and in good standing
under the Laws of the jurisdiction of its organization, with corporate,
partnership or limited liability company power and authority to carry on its
business as now being conducted. New Holdco, AHM and each Subsidiary of AHM and
New Holdco is duly qualified or licensed to do business as a foreign corporation
and is in good standing in each jurisdiction in which the nature of its business
or the ownership or leasing of its properties makes such qualification or
licensing necessary, except for such failures of New Holdco, AHM and each
Subsidiary of AHM and New Holdco to be so qualified or licensed, individually or
in the aggregate, that would not have a Material Adverse Effect on AHM. AHM has
previously made available to the Company complete and correct copies of New
Holdco's, AHM's and each Subsidiary of AHM's and New Holdco's organizational
documents as amended to and in effect on the date of this Agreement.
4.2 Capital Structure; Subsidiaries.
(a) As of the date of this Agreement, the authorized capital stock
of AHM consists of 19,000,000 shares of AHM Common Stock, of which 17,210,545
shares of AHM Common Stock are outstanding, and 1,000,000 shares of preferred
stock, par value $1.00, of AHM (the "AHM Preferred Stock" and, together with the
AHM Common Stock, the "AHM Capital Stock"), none of which are outstanding. All
issued and outstanding shares of AHM Capital Stock are duly authorized, validly
issued, fully paid and nonassessable, and no class of AHM Capital Stock is
entitled to preemptive rights. As of the date of this Agreement, there are
outstanding no options, warrants or other rights to acquire AHM Capital Stock
other than options to acquire 993,720 shares of AHM Common stock and warrants to
acquire 50,000 shares of AHM Common Stock.
(b) As of the date of this Agreement, the authorized capital stock
of New Holdco consists of 100 shares of New Holdco Common Stock, of which 10
shares of New Holdco Common Stock are outstanding. Immediately prior to the
Effective Time, the authorized capital stock of New Holdco shall consist of
100,000,000 shares of New Holdco Common Stock, and 10,000,000 shares of
preferred stock, par value $0.01, of New Holdco (the "New Holdco Preferred
Stock" and, together with the New Holdco Common Stock, the "New Holdco Capital
Stock"). As of the date of this Agreement, all issued and outstanding shares of
New Holdco Capital Stock are duly authorized, validly issued, fully paid and
nonassessable, and no class of New Holdco Common Stock is entitled to preemptive
rights. As of the date of this Agreement, there are outstanding no options,
warrants or other rights to acquire New Holdco Common Stock.
(c) As of the date of this Agreement, no bonds, debentures, notes or
other indebtedness of New Holdco, AHM or any Subsidiary of AHM or New Holdco
having the right to vote on any matters on which stockholders may vote are
issued or outstanding.
(d) Except as set forth on Schedule 4.2(d) of the AHM Disclosure
Schedule, as of the date of this Agreement, there are no securities, options,
warrants, calls, rights, commitments, agreements, arrangements or undertakings
of any kind to which (i) AHM is a party, or by which it is bound, obligating AHM
to issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of AHM Capital Stock or other voting securities of AHM or, securities
convertible into or exchangeable for shares of AHM Capital Stock or other voting
securities of AHM, or obligating AHM to issue, grant, extend or enter into any
such security, option, warrant, call, right, commitment, agreement, arrangement
or undertaking; or (ii) New Holdco is a party, or by which it is bound,
obligating New Holdco to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of New Holdco Common Stock or other voting
securities of New Holdco or, securities convertible into or exchangeable for
shares of New Holdco Common Stock or other voting securities of New Holdco, or
obligating New Holdco to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, arrangement or undertaking.
As of the date of this Agreement, there are no outstanding obligations of (A)
AHM (I) to repurchase, redeem or otherwise acquire any shares of AHM Capital
Stock or any other voting securities of AHM, or (II) to make any equity
investment in any other Person; or (B) New Holdco (x) to repurchase, redeem or
otherwise acquire any shares of New Holdco Common Stock or any other voting
securities of New Holdco, or (y) to make any equity investment in any other
Person (other than pursuant to the Reorganization).
(e) Except as set forth on Schedule 4.2(e) of the AHM Disclosure
Schedule, all dividends on shares of AHM Common Stock and New Holdco Common
Stock that have been declared prior to the date of this Agreement have been paid
in full.
(f) Schedule 4.2(f) of the AHM Disclosure Schedule contains a list
of each Subsidiary of AHM and New Holdco, its jurisdiction of incorporation or
organization and their respective holdings of each such Subsidiary by AHM and/or
New Holdco, as applicable. All the issued and outstanding shares of capital
stock or other securities (whether voting or otherwise) of each Subsidiary of
AHM and New Holdco have been validly issued and are fully paid and nonassessable
and are owned as set forth on Schedule 4.2(f) of the AHM Disclosure Schedule,
free and clear of any Liens. Except as set forth on Schedule 4.2(f), each
Subsidiary of AHM is wholly-owned by AHM, each Subsidiary of New Holdco is
wholly-owned by New Holdco, and no other person owns any rights to purchase
capital stock or other securities (whether voting or otherwise) in any of AHM's
Subsidiaries or New Holdco's Subsidiaries. Except for the capital stock of its
Subsidiaries, AHM does not own, directly or indirectly, any capital stock or
other securities (whether voting or otherwise) or other ownership interest in
any corporation, joint stock company, partnership, limited partnership, limited
liability company, joint venture or other entity.
4.3 Authority; No Violations.
(a) AHM and New Holdco have the requisite corporate power and
corporate authority to execute and deliver this Agreement and to perform their
respective obligations hereunder and to consummate the transactions contemplated
hereby, subject, in the case of AHM, to obtaining the AHM Stockholder Approval.
Both the execution and the delivery of this Agreement by AHM and New Holdco and
the consummation by AHM and New Holdco of the Transactions have been duly
authorized by all necessary corporate action on the part of AHM and New Holdco,
except for and subject to the AHM Stockholder Approval. This Agreement has been
duly executed and delivered by AHM and New Holdco and constitutes a valid and
binding obligation of AHM and New Holdco, enforceable against AHM and New Holdco
in accordance with and subject to its terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar Laws relating to creditors' rights and
general principles of equity.
(b) Both the execution and the delivery of the Transaction Documents
by AHM or each applicable Subsidiary of AHM do not, and the consummation of the
Transactions (including, without limitation, the Reorganization) and compliance
with the provisions hereof or thereof, will not result in a Violation under, any
provision of (i) the charter or bylaws or other comparable organizational
documents of New Holdco, AHM or any Subsidiary of AHM or New Holdco, (ii)
assuming the consents, approvals, authorizations, registrations, or permits and
filings or notifications referred to in Section 4.3(c) below (the "Required AHM
Consents") are duly and timely obtained or made, any AHM Material Contracts, any
Laws or Orders applicable to AHM or any of its or New Holdco's Subsidiaries, or
any of their properties or assets, any permit, concession, franchise, license or
other governmental authorization applicable to New Holdco, AHM or any Subsidiary
of AHM or New Holdco, or any reciprocal easement agreement, lease, joint venture
agreement, development agreement, benefit plan or other agreement, instrument,
permit, concession, franchise or license applicable to New Holdco, AHM or any
Subsidiary of AHM or New Holdco, other than, in the case of clause (ii) any such
Violations that, individually or in the aggregate, would not have a Material
Adverse Effect on New Holdco or AHM.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with, or permit from any Governmental
Entity, is required by or with respect to New Holdco, AHM or any Subsidiary of
AHM or New Holdco in connection with either the execution or the delivery of the
Transaction Documents by New Holdco, AHM or any Subsidiary of AHM or New Holdco
or the consummation by New Holdco, AHM or any Subsidiary of AHM or New Holdco of
the Transactions, except for: (i) the filing with the SEC of (A) the
registration statement on Form S-4 pursuant to which the issuance of shares of
New Holdco Common Stock to be issued in the Merger will be registered under the
Securities Act (the "Registration Statement"), of which the Joint Proxy
Statement/Prospectus will form a part, and (B) such reports under Section 13(a)
of the Exchange Act and such other compliance with the Exchange Act and the
rules and regulations thereunder, as may be required in connection with the
Transaction Documents and the transactions contemplated hereby or thereby; (ii)
the filing of the Articles of Merger with, and the acceptance for record of the
Articles of Merger by, the Maryland Department; (iii) the filing of articles of
merger with the Maryland Department in connection with the Merger; (iv) the
filing of the Certificate of Merger with the Delaware Secretary of State in
connection with the Reorganization; (v) filings with the NASDAQ or the making of
an application for listing on the New York Stock Exchange (the "NYSE"), as
determined by AHM; (vi) such filings and approvals as may be required by any
applicable state securities, "blue sky" or takeover laws, or environmental laws;
(vii) the filing, if applicable, of a pre-merger notification and report under
the HSR Act, and the expiration or termination of the applicable waiting period
thereunder; (viii) consents from various state mortgage lending regulators
approving the change of control resulting from the Reorganization, (ix) consents
set forth on Schedule 4.3(c) of the AHM Disclosure Schedule, and (x) such other
consents, approvals, Orders, authorizations, registrations, declarations and
filings the failure of which to make or obtain would not, individually or in the
aggregate, have a Material Adverse Effect on AHM, New Holdco, or, following
consummation of the Merger, the Surviving Corporation.
4.4 AHM SEC Reports; Financial Statements.
(a) AHM has filed all required reports, schedules, forms, statements
and other documents required to be filed by it with the SEC pursuant to the
Exchange Act and the Securities Act since January 1, 2000 (collectively,
including all exhibits thereto, the "AHM SEC Reports"). None of AHM's or New
Holdco's Subsidiaries is required to file any form, report or other document
with the SEC pursuant to the Exchange Act or the Securities Act. As of their
respective dates, with respect to AHM SEC Reports filed pursuant to the Exchange
Act, and as of their respective effective dates, as to AHM SEC Reports filed
pursuant to the Securities Act (and, if amended or superseded by a filing or
effectiveness prior to the date of this Agreement or the Closing Date, then on
the date of such filing or effectiveness, as appropriate), the AHM SEC Reports
(a) complied, or, with respect to those not yet filed, will comply, in all
material respects with the applicable requirements of the Securities Act and the
Exchange Act, and (b) did not, or, with respect to those not yet filed, will
not, contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
(b) Each of the audited consolidated financial statements and
unaudited interim consolidated financial statements included in or incorporated
by reference into the AHM SEC Reports (including the related notes and
schedules) presents fairly, in all material respects, the consolidated financial
position and consolidated results of operations and cash flows, as the case may
be, of AHM, New Holdco and their Subsidiaries as of their respective dates or
for the respective periods set forth therein, all in conformity with GAAP
consistently applied during the periods involved except as otherwise noted
therein, and subject, in the case of the unaudited interim financial statements,
to normal and recurring year-end adjustments that have not been and are not
expected to be material in amount.
4.5 Absence of Liabilities. Except for liabilities or obligations which
are accrued or reserved against in AHM's most recent financial statements (or in
the related notes thereto) included in the AHM SEC Reports or which were
incurred in the ordinary course of business and consistent with past practices
since the date of AHM's most recent financial statements included in the AHM SEC
Reports, or constitute obligations owed to officers, directors or employees that
will become due as a result of the consummation of the Transactions, neither
AHM, or any of its Subsidiaries nor New Holdco or any of its Subsidiaries have
any material liabilities or obligations (whether absolute, accrued, contingent
or otherwise) of a nature required by GAAP to be reflected in a consolidated
balance sheet (or reflected in the notes thereto) of AHM.
4.6 Compliance. Except as set forth in the AHM SEC Reports filed prior to
the date hereof, neither AHM, or any of its Subsidiaries nor New Holdco or any
of its Subsidiaries is in violation of, is, to the knowledge of AHM, under
investigation with respect to any violation of, or has been given notice or
threatened with any violation of, any Laws or Orders, except for violations or
possible violations which would not, individually or in the aggregate, have a
Material Adverse Effect on AHM. AHM and its Subsidiaries and New Holdco and its
Subsidiaries have all permits, licenses, franchises and other governmental
authorizations, consents and approvals necessary to conduct their businesses as
presently conducted, except for such permits, licenses, franchises and other
governmental authorizations, consents and approvals the absence of which would
not, individually or in the aggregate, have a Material Adverse Effect on AHM.
Neither AHM, or any of its Subsidiaries nor New Holdco or any of its
Subsidiaries is in breach or violation of, or in default in the performance or
observance of (a) any provision of its certificate of incorporation or bylaws or
similar governing document, or (b) except as would not, individually or in the
aggregate, have a Material Adverse Effect on AHM, any AHM Material Contract,
permit, license, franchise or other governmental authorization, consent or
approval applicable to New Holdco, AHM or any Subsidiary of AHM or New Holdco or
their respective properties or assets.
4.7 Absence of Certain Changes or Events. Except as disclosed in the AHM
SEC Reports, since the date of the most recent audited financial statements
included in the AHM SEC Reports (the "AHM Financial Statement Date") through the
date of this Agreement, (a) AHM and its Subsidiaries and New Holdco and its
Subsidiaries have conducted their business only in the ordinary course (taking
into account prior practices, including the acquisition and disposition of
properties and issuance of securities), consistent with past practices, and (b)
there has not been any event, occurrence, development or state of circumstances
or facts that has had, or would, individually or in the aggregate, have a
Material Adverse Effect on AHM.
4.8 Taxes.
(a) (i) All material Tax Returns required to be filed by, or with
respect to, AHM and each Subsidiary of AHM (including any Tax Returns with
respect to New Holdco and each Subsidiary of New Holdco) have been, or in the
case of material Tax Returns the due date for filing of which is after the date
of this Agreement and before the Closing Date (taking into account any available
extensions), will be, timely filed with appropriate Governmental Entities and
all such Tax Returns are, or in the case of such Tax Returns not yet filled,
will be, true, correct and complete in all material respects, and (ii) all
material Taxes that were shown to be due on such Tax Returns have been, or in
the case of material Taxes due after the date of this Agreement and before the
Closing Date (taking into account any available extensions), will be, timely
paid.
(b) There are no ongoing federal, state, local or foreign audits or
examinations of any Tax Return of AHM or any of its Subsidiaries and, to the
knowledge of AHM, no audits or examinations have been proposed by any taxing
authority.
(c) The most recent financial statements contained in the AHM SEC
Reports reflect an adequate reserve for all Taxes payable by AHM and each
Subsidiary of AHM for all Taxable periods and portions thereof through the date
of such financial statements. No deficiencies for any Taxes have been proposed,
asserted or assessed against AHM that are not adequately reserved for, and there
are no outstanding requests, agreements, consents or waivers to extend the
statutory period of limitations applicable to the assessment of any Taxes or
deficiencies against AHM, and no power of attorney granted by AHM with respect
to any Taxes is currently in force.
(d) AHM is not a party to any agreement providing for the allocation
or sharing of Taxes.
(e) There are no material Liens for Taxes (other than for current
Taxes not yet due and payable) on the assets of AHM or any Subsidiary of AHM.
(f) Neither AHM nor any Subsidiary of AHM has taken or agreed to
take any action that (without regard to any action taken or agreed to be taken
by the Company or any of its Affiliates) would prevent the Transactions from
qualifying as a reorganization within the meaning of Section 368(a) of the Code.
AHM has no knowledge of any agreement, plan or other circumstance that would
prevent the Transactions from qualifying as a reorganization within the meaning
of Section 368(a) of the Code.
(g) AHM has complied in all material respects with all applicable
laws, rules and regulations relating to the payment and withholding of Taxes
(including, without limitation, withholding of Taxes pursuant to Sections 1441,
1442, 1445, 1446, and Subtitle C of the Code or similar provisions under any
state or foreign laws) and has, within the time period prescribed by law,
withheld and paid over to the proper Governmental Entities all material amounts
required to be so withheld and paid over under applicable laws and regulations.
(h) Neither AHM nor any Subsidiary of AHM has taken or agreed to
take any action that would prevent New Holdco from qualifying as a REIT for
federal income tax purposes. AHM has no knowledge of any facts that would
prevent New Holdco from qualifying as a REIT for federal income tax purposes.
4.9 Investment Company Act. Neither AHM or any of its Subsidiaries nor New
Holdco or any of its Subsidiaries is, or at the Closing Date will be, (a) an
"investment company" or a company "controlled" by an investment company within
the meaning of the Investment Company Act of 1940, as amended, (b) 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 (c) subject to regulation under the Federal Power Act or the
Interstate Commerce Act.
4.10 Mortgage Backed Securities.
(a) AHM is on the date of this Agreement the sole owner of each of
the MBS identified on Schedule 4.10 of the AHM Disclosure Schedule ("AHM MBS")
and the related certificates and other instruments evidencing ownership of the
AHM MBS (the "AHM MBS Certificates"), free and clear of any Liens (including,
without limitation, Liens arising under the federal tax laws or ERISA), other
than any AHM Permitted Liens. The term "AHM Permitted Liens" shall mean (i)
Liens set forth in the AHM Disclosure Schedule, , (ii) statutory Liens arising
out of operation of Law with respect to a Liability incurred in the ordinary
course of business and which is not delinquent; (iii) such Liens and other
imperfections of title as do not detract from the value or impair the use of the
property subject thereto or make such property unmarketable; (iv) mechanics'
carriers', workmens', repairmens' or materialmens' Liens that are not
delinquent, and (v) 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 AHM.
(b) To the knowledge of AHM, AHM 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 "AHM Principal MBS
Agreements") and has not received any notice of any default by any master or
special servicer of any AHM MBS the effect of which, individually or in the
aggregate could reasonably be expected to result in a Material Adverse Effect on
AHM.
(c) As of the date of this Agreement, there are no material
agreements (other than AHM Principal MBS Agreements) between AHM and the master
servicer or any special servicer with respect to any series of AHM MBS.
4.11 Mortgage Loans.
(a) As of June 30, 2003, AHM is the sole owner of more than $1.5
billion of mortgage loans (the "AHM Mortgage Loans"), substantially all of which
are pledged pursuant to various borrowing agreements in the ordinary course of
business, of which no such borrowing agreements are in default in any material
respect and is the sole owner or beneficiary of or under any related notes (the
"AHM 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 AHM Mortgage Loans (the "AHM Mortgage Files"), except (i) any AHM
Mortgage Loans disposed of in the ordinary course since the date of this
Agreement, and (ii) to the extent any AHM 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 AHM shall be the sole owner of the real
property securing such foreclosed loan or shall have received the proceeds of
such action to which AHM was entitled, in each case free and clear of any
adverse claims or Liens except AHM Permitted Liens.
(b) To the knowledge of AHM, (i) the lien of each AHM Mortgage is
subject only to "Permitted Exceptions" which consist of the following: (A)
covenants, conditions, restrictions, reservations, rights, Liens, easements,
encumbrances, encroachments, and other matters affecting title acceptable to
prudent mortgage lending institutions generally; (B) rights of tenants with no
options to purchase or rights of first refusal to purchase, except as disclosed
in AHM Mortgage Files; and (C) other matters which, in the aggregate, would not
be reasonably likely to result in a Material Adverse Effect on AHM; (ii) each of
the AHM 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 AHM; and (iii) there is no delinquency in the
payments of principal and interest required to be made under the terms of any
AHM Mortgage Loan in excess of thirty (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 AHM Mortgage Loan (inclusive of any applicable grace or
cure period) that would be reasonably likely to result in a Material Adverse
Effect on AHM.
(c) Except as set forth on Schedule 4.11(c) of the AHM Disclosure
Schedule or in the applicable AHM Mortgage File, AHM 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 AHM Mortgage Loan, AHM Mortgage Note or other
related agreements, (ii) any uncured monetary default in excess of thirty (30)
days or event of acceleration existing under any AHM Mortgage or the related AHM
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 AHM Mortgage or the related AHM 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 AHM.
4.12 Insurance. AHM and each of its Subsidiaries is and, as of the
Effective Time, New Holdco and each of its Subsidiaries will be, insured with
financially responsible insurers in such amounts and against such risks and
losses as are (a) customary in all material respects for companies in the United
States conducting the business conducted by AHM and each of its Subsidiaries and
New Holdco and each of its Subsidiaries, (b) required to be maintained by AHM or
each of its Subsidiaries or New Holdco or each of its Subsidiaries under the
terms of any Contract with respect to the borrowing of money to which either AHM
or any of its Subsidiaries or New Holdco or any of its Subsidiaries is a party
or by which any of their respective properties are bound, and (c) required to be
maintained pursuant to all applicable Laws and Orders, except for (in the case
of clause (c)) such insurance the absence of which would not have a Material
Adverse Effect on AHM or New Holdco. Neither AHM or any of its Subsidiaries or
New Holdco or any of its Subsidiaries has received any notice of cancellation or
termination with respect to any material insurance policy of AHM or any of its
Subsidiaries or New Holdco or any of its Subsidiaries. Each of AHM and its
Subsidiaries and New Holdco and each of its Subsidiaries has fulfilled all of
its obligations under each material insurance policy, including the timely
payment of premiums, other than such failures to fulfill its obligations that
would not, individually or in the aggregate reduce or nullify the benefits under
such policy.
4.13 Opinion of AHM Financial Advisor. AHM has received the opinion of
Friedman, Billings, ▇▇▇▇▇▇ & Co., Inc. (the "AHM Financial Advisor"), dated the
date of this Agreement, to the effect that, as of such date, the Merger
Consideration is fair, from a financial point of view, to AHM and New Holdco, a
draft copy of which opinion has been made available to the Company (the "Draft
Opinion of AHM Financial Advisor").
4.14 Brokers or Finders. 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 similar commission or fee in connection with any of
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of AHM, New Holdco or Merger Sub, except the AHM Financial Advisor,
whose fees and expenses will be paid by AHM in accordance with AHM's agreement
with such firm based upon arrangements made by or on behalf of AHM and
previously disclosed to the Company.
4.15 Litigation. As of the date of this Agreement, there are no Claims
pending or, to AHM's knowledge, threatened against AHM or any of its
Subsidiaries or New Holdco or any of its Subsidiaries, or any properties or
rights of AHM or any of its Subsidiaries or New Holdco or any of its
Subsidiaries, by or before any Governmental Entity, other than Claims that would
not have a Material Adverse Effect on AHM or any of its Subsidiaries or New
Holdco or any of its Subsidiaries. Schedule 4.15 of the AHM Disclosure Schedule
sets forth all Claims which, to the knowledge of AHM, are pending or threatened
against any of New Holdco, AHM or any Subsidiary of AHM or New Holdco as of the
date hereof. There is no judgment, decree, injunction or order of any
Governmental Entity applicable to AHM or any of its Subsidiaries or New Holdco
or any of its Subsidiaries that, when taken together with the Claims, would have
a Material Adverse Effect on AHM or New Holdco, as applicable.
4.16 Employee Benefit Plans; ERISA.
(a) AHM has delivered to, or made available for review by, the
Company true, correct and complete copies of all Plans (collectively, "AHM
Benefit Plans") currently maintained, or contributed to, or required to be
maintained or contributed to, by AHM or New Holdco or any other person or entity
that, together with AHM or New Holdco, is treated as a single employer under
Section 414(b), (c), (m) or (o) of the Code (each a "Commonly Controlled
Entity"), or with respect to which AHM or New Holdco or any Commonly Controlled
Entity has any liability, including, without limitation, all employment,
termination, change in control, severance or other contracts for the benefit of
any current or former employees, officers or directors of AHM or New Holdco that
require any material future performance by AHM or New Holdco. AHM has delivered
to, or made available for review by, the Company true, correct and complete
copies of (i) the three (3) most recent annual report on Form 5500 filed with
the IRS with respect to each of its AHM Benefit Plans (if any such report was
required), including all schedules thereto, (ii) the most recently prepared
actuarial report for each such AHM Benefit Plan for which such a report is
required, (iii) the most recent summary plan description for each such AHM
Benefit Plan for which such summary plan description is required, and all
summaries of material modifications distributed since the most recent summary
plan description, (iv) the most recently received IRS determination letter for
each such AHM Benefit Plan for which a determination letter has been received,
and (v) the most recent trust agreement (if any) and group annuity contract (if
any) relating to any such AHM Benefit Plan. Neither AHM, New Holdco nor any
Commonly Controlled Entity presently sponsors, maintains, contributes to, is
required to contribute to, nor has AHM, New Holdco or any Commonly Controlled
Entity, in the past three (3) years, ever sponsored, maintained, contributed to,
or been required to contribute to, any employee pension benefit plan subject to
Title IV or Section 302 of ERISA or Section 412 of the Code, including, without
limitation, any multiemployer plan within the meaning of Section 3(37) or
4001(a)(3) of ERISA or Section 412 of the Code.
(b) The AHM Benefit Plans have been administered in accordance with
their respective terms in all material respects. AHM and all such AHM Benefit
Plans are in material compliance with all applicable provisions of ERISA and the
Code.
(c) All of the AHM Benefit Plans intended to be qualified under
Section 401(a) of the Code have been the subject of determination letters from
the IRS to the effect that such AHM Benefit Plans are qualified and exempt from
federal income taxes under Sections 401(a) and 501(a), respectively, of the Code
and no such determination letter has been revoked nor, to the knowledge of AHM,
has revocation been threatened. No AHM Benefit Plan has been operated in any
respect that reasonably could result in its disqualification or been amended
since the date of its most recent determination letter or application therefor
in any respect that reasonably could result in its disqualification or
materially increase its costs.
(d) None of AHM, New Holdco or any officer of either of them or any
of the AHM Benefit Plans which are subject to ERISA, any trusts created
thereunder or, to the knowledge of AHM, any trustee or administrator thereof,
has engaged in a non-exempt "prohibited transaction" (as such term is defined in
Section 406 of ERISA or Section 4975 of the Code) or any other breach of
fiduciary responsibility that could subject AHM or New Holdco or any officer of
either of them to tax or penalty under ERISA, the Code or other applicable law
that is material to the business of New Holdco and that has not been corrected.
Neither any of such AHM Benefit Plans nor any of such trusts has been
terminated.
(e) Except as set forth on Schedule 4.16(e) of the AHM Disclosure
Schedule, the transactions contemplated by the Transaction Documents, either
alone or upon the occurrence of any additional or further act or event, will not
result in any payment or an increase in the amount of compensation or benefits
or accelerate the vesting, exercisability or timing of payment of any benefits
payable to or in respect of any current or former employee, director, consultant
or other independent contractor of AHM or New Holdco or the beneficiary or
dependent of any such person or entity.
(f) With respect to any of the AHM Benefit Plans that is an employee
welfare benefit plan, (i) no such AHM Benefit Plan is funded through a "welfare
benefit fund," as such term is defined in Section 419(e) of the Code, (ii) each
such AHM Benefit Plan that is a "group health plan," as such term is defined in
Section 5000(b)(1) of the Code, complies in all material respects with the
applicable requirements of Section 4980B(f) of the Code and (iii) each such AHM
Benefit Plan (including any such AHM Benefit Plan covering retirees or other
former employees) may be amended or terminated without material liability to AHM
or New Holdco.
(g) Except as disclosed on Schedule 4.16(g) of the AHM Disclosure
Schedule, neither AHM nor New Holdco has any material unfunded liabilities
pursuant to any AHM Benefit Plan that is not intended to be qualified under
Section 401(a) of the Code and is an employee pension benefit plan within the
meaning of Section 3(2) of ERISA, including, without limitation, any
nonqualified deferred compensation plan or an excess benefit plan.
(h) No amounts payable (individually or collectively) under any of
the AHM Benefit Plans or any other contract, agreement or arrangement with
respect to which AHM or New Holdco may have any liability are reasonably
expected to fail to be deductible for federal income tax purposes by virtue of
Section 162(m) or Section 280G of the Code.
(i) Neither AHM, New Holdco nor any of their Commonly Controlled
Entities has used the services of workers provided by third party contract labor
suppliers, temporary employees, "leased employees" (as that term is defined in
Section 414(n) of the Code), or individuals who have provided services as
independent contractors under circumstances that could reasonably be expected to
result in the disqualification of any of the AHM Benefit Plans or the imposition
of penalties or excise taxes with respect to the AHM Benefit Plans by the IRS,
the Department of Labor, or the Pension Benefit Guaranty Corporation in an
amount which could reasonably result in material liability to AHM or New Holdco.
(j) Neither AHM, New Holdco nor any of their respective Subsidiaries
are a party to any oral or written agreement or plan, including any AHM Benefit
Plan, any of the benefits of which will be increases, or the vesting or
exercisability of the benefits of which will be accelerated, by the occurrence
of any of the Transactions or the Reorganization either alone or upon the
occurrence of any additional or further acts or events or the value of any
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement either alone or upon the occurrence of any
additional or further acts or events, except for such increases or accelerations
that would not, individually or in the aggregate, be reasonably likely to result
in a Material Adverse Effect on AHM.
4.17 Vote Required. This Agreement has been approved by AHM, as the sole
stockholder of New Holdco and the Reorganization will be approved by New Holdco,
as the sole stockholder of Merger Sub. The issuance of shares of New Holdco
Common Stock in the Merger pursuant to this Agreement and the Transactions
(other than the Reorganization) must be approved by the affirmative vote of the
majority of shares of AHM Common Stock present or represented by proxy at the
AHM Stockholder Meeting (as defined in Section 6.3 hereof) and entitled to vote
and the Reorganization must be approved by a majority of the outstanding shares
of AHM Common Stock entitled to vote thereon (collectively, the "AHM Stockholder
Approval" and, together with the Company Stockholder Approval, the "Stockholder
Approvals"). No other vote of holders of any class or series of securities of
AHM or New Holdco or Merger Sub is necessary to approve this Agreement and the
Transactions. The Board of Directors of AHM, at a meeting duly called and held,
subject to its right to withdraw its support of the Merger and recommend an
Acquisition Proposal pursuant to Section 6.7 hereof, (a) determined that this
Agreement and the Transactions, including the issuance of New Holdco Common
Stock in the Merger (the "Share Issuance") and the Reorganization, are fair to,
and in the best interests of, the stockholders of AHM, (b) approved this
Agreement, the Reorganization and the Share Issuance, (c) has declared that this
Agreement, the Share Issuance and the Reorganization are advisable, and (d)
resolved to recommend that the holders of shares of AHM Common Stock approve the
Reorganization and the Share Issuance. The Board of Directors of New Holdco, at
a meeting duly called and held, subject to its right to withdraw its support of
the Merger and recommend an Acquisition Proposal pursuant to Section 6.7 hereof,
(a) determined that this Agreement and the Transactions, including the Merger
and the Reorganization, are fair to, and in the best interests of, the
stockholders of New Holdco, (b) approved this Agreement and the Transactions and
the Share Issuance, (c) has declared that this Agreement and the Transactions
and the Share Issuance are advisable, and (d) resolved to recommend that AHM, as
the sole stockholder of New Holdco, approve this Agreement, the Transactions and
the Share Issuance.
4.18 Material Contracts.
(a) Except as set forth on Schedule 4.18(a) of the AHM Disclosure
Schedule, all material contracts required to be described in Item 601(b)(1) of
Regulation S-K to which AHM or its Subsidiaries or New Holdco or its
Subsidiaries is a party or may be bound have been filed as exhibits to, or
incorporated by reference in, the AHM SEC Reports (collectively, the "AHM
Material Contracts").
(b) As of the date of this Agreement, (i) there is no breach or
violation of or default by AHM or any of its Subsidiaries under any of the AHM
Material Contracts, except such breaches, violations and defaults as have been
waived, and (ii) no event has occurred with respect to AHM or any of its
Subsidiaries which, with notice or lapse of time or both, could reasonably be
expected to constitute a breach, violation or default, or give rise to a right
of termination, modification, cancellation, foreclosure, imposition of a lien,
prepayment or acceleration under any of the AHM Material Contracts, which
breach, violation or default referred to in clauses (i) or (ii), individually or
in the aggregate with other such breaches, violations or defaults referred to in
clauses (i) or (ii), would cause a Material Adverse Effect on AHM or New Holdco.
True copies of the AHM Material Contracts in effect as of the date hereof have
been delivered or made available to the Company.
4.19 Interim Operations of New Holdco. New Holdco was formed on July 11,
2003 solely for the purpose of engaging in the transactions contemplated by this
Agreement, and, except as may be reasonably required to qualify as a REIT, has
engaged in no other business activities, has entered into no Contracts (other
than pursuant to the transactions contemplated by this Agreement), has no
liabilities or obligations and has conducted its operations only as contemplated
hereby.
4.20 Interim Operations of Merger Sub. Merger Sub will be formed
immediately before the Effective Time solely for the purpose of engaging in the
Reorganization and will not engage in any other business activities, enter into
any Contracts, have any liability or obligations or conduct any operations.
4.21 Certain Agreements. Neither AHM, New Holdco nor Merger Sub is a party
to any oral or written agreement or plan any of the benefits of which will be
increased, or the vesting or exercisability of the benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement either alone or upon the occurrence of any additional or further acts
or events.
4.22 No Material Adverse Effect. Since January 1, 2000, except as
disclosed in the AHM SEC Reports, to the knowledge of AHM, no fact, circumstance
or condition has arisen or existed that could reasonably be expected to result
in a Material Adverse Effect on AHM or New Holdco.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Covenants of the Company. During the period from the date of this
Agreement and continuing until the Effective Time, the Company agrees that
(except (i) as expressly contemplated or permitted by this Agreement, (ii) as
otherwise indicated on the Company Disclosure Schedule, or (iii) to the extent
that AHM shall otherwise consent in writing, which consent shall not be
unreasonably withheld):
(a) Ordinary Course. Subject to Section 5.1(f), the Company shall
carry on its business in the usual, regular and ordinary course in all material
respects, in substantially the same manner as heretofore conducted and, except
as contemplated by this Agreement and the Transactions, take all action
necessary to continue to qualify as a REIT, and the Company shall use its
reasonable efforts to preserve intact its present lines of business, business
organization and reputation, maintain its rights, franchises and permits, keep
available the services of its key officers and employees, maintain its assets
and properties, and preserve its relationships with customers, suppliers and
others having business dealings with it to the end that its ongoing businesses
shall not be impaired in any material respect at the Effective Time; provided,
however, that no action by the Company with respect to matters specifically
addressed by any other provision of this Section 5.1 shall be deemed to be a
breach of this Section 5.1(a) unless such action would also constitute a breach
of one or more of such other provisions.
(b) Dividends; Changes in Stock. Except as contemplated by this
Agreement, the Company shall not:
(i) authorize, declare or pay any dividends on or make other
distributions in respect of any of its equity interests, capital stock or
partnership interests, except for (A) the authorization, declaration and payment
of regular quarterly cash dividends on shares of Company Common Stock in amounts
reasonably estimated by the Company (based upon the Company's then-current
estimates) to be no more than the minimum required for such period to maintain
its REIT status, (B) distributions in accordance with the Company Rights issued
under the Company Rights Plan, and (C) the Final Company Dividend (as defined in
Section 5.3 hereof);
(ii) split, combine or reclassify any of its equity interests
or shares of capital stock or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of or in substitution for the Company's
equity interests or capital stock, except pursuant to the exercise of Company
Options and the Company Rights; or
(iii) repurchase, redeem or otherwise acquire, any equity
interests or capital stock except for redemptions and transfers of shares of
Company Common Stock required under Section 2 of Article V of the Company
Charter or in accordance with the Company Rights.
(c) Grant of Options. The Company shall not grant any options or
other rights or commitments relating to its shares of capital stock or any
security convertible into its shares of capital stock, or any security the value
of which is measured by shares of capital stock, except as contemplated by this
Agreement and except as required pursuant to the terms of the Company Options
and the Company Stock Option Plan.
(d) Tax Matters. Without consulting with AHM, the Company shall not
(i) make or rescind any material election relating to Taxes (except as required
by law or necessary to preserve the Company's status as a REIT) until the
Closing Date, including elections for any and all joint ventures, partnerships,
limited liability companies or other investments with respect to which the
Company has the capacity to make such binding election, (ii) settle or
compromise any material claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to Taxes, (iii) change
in any material respect any of its methods of reporting income or deductions for
federal income tax purposes from those employed in the preparation of its
federal income Tax Returns that have been filed for prior taxable years, (iv)
enter into any Company Tax Protection Agreement, (v) amend any of its Tax
returns or change its organizational structure in any manner that could impact
its current or future tax posture or affect its status as a REIT, or (vi) file
any material Tax Returns or other related documents; provided, however, that the
Company shall not take any action set forth in clauses (i) through (vi) above if
such action is reasonably expected to materially and adversely affect the
Company.
(e) Governing Documents. Except to the extent required to comply
with their respective obligations hereunder or as may be required by Law or
Order (and following written notice to AHM), the Company shall not amend or
propose to amend its Company Charter or bylaws.
(f) Dispositions; Acquisitions. The Company shall not (i) sell,
lease, transfer, encumber or otherwise dispose of, or agree to sell, lease,
transfer, encumber or otherwise dispose of, any of its assets which are material
to the Company, or (ii) purchase or agree to purchase or acquire, any
mortgage-backed securities or other assets which are material to the Company,
except in each case in a manner consistent with past practices, or unless such
purchases or sales are necessary to comply with the applicable REIT rules and
regulations, the Investment Company Act, or the Company's investment policies
(and consistent with the Company's obligations under this Agreement).
Notwithstanding any of the foregoing, the Company shall not take any of the
actions described in (i) or (ii) above after the Determination Date and prior to
the Effective Time without the prior written consent of AHM, which shall not be
unreasonably withheld.
(g) Indebtedness. Except as described on Schedule 5.1(g) of the
Company Disclosure Schedule, the Company shall not: incur or assume any
indebtedness, guarantees, loans or advances not in existence as of the date of
this Agreement except for (i) short-term indebtedness incurred under the
Company's current short-term facilities (and any replacements thereof) incurred
in the ordinary course of business, consistent with past practices, and which is
reasonably expected by the Company to be repaid from cash from continuing
operations within twelve (12) months of the incurrence thereof or from the
proceeds of indebtedness permitted hereunder, or (ii) the amendment, extension,
modification, refunding, renewal, refinancing or replacement of existing
indebtedness after the date of this Agreement, but only if the aggregate
principal amount thereof is not increased thereby, the term thereof is not
extended thereby (or, in the case of replacement indebtedness, the term of such
indebtedness is not for a longer period of time than the period of time
applicable to the indebtedness so replaced).
(h) Discharge of Claims. The Company shall not discharge or satisfy
any Claims (asserted or unasserted), other than discharges or satisfactions
incurred or committed to in the ordinary course of business consistent with past
practice or reflected in the most recent consolidated financial statements (or
the notes thereto) of the Company included in the most recent Company SEC
Reports filed prior to the date of this Agreement.
(i) Books and Records. The Company shall use commercially reasonable
efforts to maintain the books, records and accounts of the Company's business in
the usual, regular and ordinary course of business on a basis consistent with
the Company's past practice and in accordance with GAAP.
(j) Compensation. The Company shall not adopt or make any commitment
to enter into, adopt, amend in any material manner or terminate any agreement,
arrangement, plan or policy between the Company and one or more of its directors
or officers.
(k) Insurance. The Company shall not cancel or terminate any
insurance policy naming it as a beneficiary or a loss payable payee without
notice to AHM, except policies which are replaced without diminution of or gaps
in coverage.
(l) Liquidation, Merger, etc. The Company shall not adopt a plan of
complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization.
(m) Contracts. Except in the ordinary course of business consistent
with past practice, the Company shall not (i) modify, amend, terminate or fail
to use commercially reasonable efforts to renew any Company Material Contract or
waive, release or assign any material rights or claims under a Company Material
Contract to which the Company is a party in a manner adverse to the Company,
(ii) modify, amend or terminate the Management Agreement, or (iii) enter into
any new Company Material Contracts, to the extent such actions would have a
Material Adverse Effect.
(n) Other Actions. The Company shall not 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) except as contemplated by Section 6.6 or 8.1(e)(iii) hereof,
any of the conditions to the Merger set forth in Article VII below not being
satisfied.
(o) Prohibited Actions. The Company shall not agree, commit or
arrange to take any action prohibited under this Section 5.1.
5.2 Covenants of AHM and New Holdco. During the period from the date of
this Agreement and continuing until the Closing Date, AHM and New Holdco each
agrees as to itself and to each Subsidiary of AHM and New Holdco that (except
(i) as expressly contemplated or permitted by this Agreement or the
Reorganization, (ii) as otherwise indicated on the AHM Disclosure Schedule,
(iii) as may be reasonably required to ensure that New Holdco will qualify as a
REIT, or (iv) to the extent that the Company shall otherwise consent in writing,
which consent shall not be unreasonably withheld):
(a) Preservation of Business. AHM and each of its Subsidiaries and New
Holdco and each of its Subsidiaries shall carry on its respective businesses in
the usual, regular and ordinary course in all material respects, in
substantially the same manner as heretofore conducted except as contemplated by
this Agreement and the Transactions, and New Holdco, AHM and each Subsidiary of
AHM and New Holdco shall use its reasonable efforts to preserve intact its
present lines of business, business organization and reputation, maintain its
rights, franchises and permits, keep available the services of its key officers
and employees, maintain its assets and properties, and preserve its
relationships with customers, suppliers and others having business dealings with
it to the end that its ongoing businesses shall not be impaired in any material
respect at the Closing Date; provided, however, that no action by New Holdco,
AHM or any Subsidiary of AHM or New Holdco with respect to matters specifically
addressed by any other provision of this Section 5.2 shall be deemed to be a
breach of this Section 5.2(a) unless such action would constitute a breach of
one or more of such other provisions.
(b) Dividends; Changes in Stock. Except as contemplated by this Agreement,
AHM and New Holdco shall not and shall not permit any of their Subsidiaries to:
(i) authorize, declare or pay any dividends on or make other
distributions in respect of any of its equity interests, capital stock or
partnership interests, except for (A) dividends by wholly-owned Subsidiaries of
AHM or New Holdco, and (B) the authorization, declaration and payment of regular
quarterly cash dividends on shares of AHM Common Stock in amounts consistent
with past practice;
(ii) split, combine or reclassify any of its equity interests
or shares of capital stock or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of or in substitution for AHM's, New
Holdco's or an AHM or New Holdco Subsidiary's equity interests or capital stock,
except pursuant to the exercise of options or other rights referred to in
Section 4.2 hereof; or
(iii) repurchase, redeem or otherwise acquire, or permit any
of their Subsidiaries to purchase, redeem or otherwise acquire, any equity
interests or capital stock.
(c) Grant of Options. None of New Holdco, AHM or any Subsidiary of
AHM or New Holdco shall, except as set forth on Schedule 5.2(c) of the AHM
Disclosure Schedule or with the consent of the Company, grant any options or
other rights or commitments relating to its shares of capital stock or any
security convertible into its shares of capital stock, or any security the value
of which is measured by shares of capital stock except as contemplated by this
Agreement, other than the granting of options or other stock-based awards to
acquire shares of AHM Common Stock under the AHM Stock Option Plans in the
ordinary course of business consistent with past practice.
(d) Tax Matters. AHM, New Holdco and their Affiliates shall use
commercially reasonable efforts to qualify, on or prior to the Effective Time,
(i) New Holdco as a REIT within the meaning of the Code, and (ii) each
Subsidiary of New Holdco (including AHM) as a "qualified REIT Subsidiary" or a
"taxable REIT subsidiary" as such terms are defined under the Code.
(e) Governing Documents. Except to the extent required to comply
with their respective obligations hereunder, in connection with any acquisition
permitted by Section 5.2(g) hereof or as may be required by Law or Order (and
following written notice to the Company), neither AHM nor New Holdco shall, and
neither AHM nor New Holdco shall permit any of their Subsidiaries to, amend or
propose to amend their respective charters or by-laws; provided, however, that
neither AHM nor New Holdco shall, and neither AHM nor New Holdco shall permit
any of their Subsidiaries to, take any action which hinders, prevents or
otherwise has an adverse effect on the Transactions.
(f) Notice of Changes. AHM promptly shall notify the Company of any
material emergency or other material change in the condition (financial or
otherwise), of AHM's or New Holdco's business, properties, assets, liabilities,
prospects or the normal course of their businesses or in the operation of their
properties, or of any material governmental complaints, investigations or
hearings (or communications indicating that the same may be contemplated).
(g) Dispositions; Acquisitions. Prior to obtaining the AHM
Stockholder Approval, neither AHM nor New Holdco shall, directly or indirectly
through a Subsidiary or otherwise, (i) sell, lease, transfer, encumber or
otherwise dispose of, or agree to sell, lease, transfer, encumber or otherwise
dispose of, any of its assets which are material to AHM and its Subsidiaries or
New Holdco and its Subsidiaries, taken as a whole, or (ii) merge or consolidate
with, or acquire all or substantially all of the assets of, or the beneficial
ownership of a majority of the outstanding capital stock or other equity
interests in, any Person in a transaction (A) for aggregate consideration
greater than $20,000,000 (including the present value of any and all prospective
earn-out amounts based on the future performance of the business of the acquired
entity) or (B) requiring the approval of the stockholders of AHM or New Holdco.
(h) Issuance of New Holdco Securities. Neither AHM nor New Holdco
shall, and neither AHM nor New Holdco shall permit any of their Subsidiaries,
except as contemplated by this Agreement, to issue, or commit to issue, or
change the ownership of, their securities, unless such issuance or change in
ownership has been approved by the Company.
(i) Contracts. Except in the ordinary course of business consistent
with past practice or in connection with any acquisition permitted by Section
5.2(g) hereof, neither AHM nor New Holdco shall, and neither AHM nor New Holdco
shall cause any of their Subsidiaries to, (i) modify, amend, terminate or fail
to use commercially reasonable efforts to renew any AHM Material Contract, or
waive release or assign any material rights or claims under an AHM Material
Contract to which it is a party in a manner adverse to AHM or New Holdco or (ii)
enter into any new AHM Material Contracts, to the extent such action would
materially hinder, prevent or otherwise have an adverse effect on the
Transactions.
(j) Acquisitions of Company Capital Stock. Prior to the Effective
Time, neither AHM nor New Holdco shall, and neither AHM or New Holdco shall
permit any of their Subsidiaries to, acquire ownership, beneficially or of
record, of any Company Capital Stock.
(k) Other Actions. Neither AHM nor New Holdco shall knowingly take,
and neither AHM nor New Holdco shall permit any of their Subsidiaries to 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) except as contemplated by Sections 6.6 or 8.1(d)(iii) hereof,
any of the conditions to the Merger set forth in Article VII below not being
satisfied.
(l) Prohibited Actions. Neither AHM nor New Holdco shall, and
neither AHM nor New Holdco shall permit any of their Subsidiaries to, agree,
commit or arrange to take any action prohibited under this Section 5.2.
5.3 Final Company Dividend. The Company shall authorize, declare and pay a
dividend (the "Final Company Dividend") to holders of shares of Company Common
Stock in an amount equal to the minimum dividend necessary in such period to
avoid (a) jeopardizing its status as a REIT under the Code, and (b) the
imposition of income tax under Section 857(b) of the Code and the imposition of
excise tax under Section 4981 of the Code for the taxable year ending on the
Effective Time (provided that the foregoing shall not be deemed to limit the
amount of dividends that are otherwise payable by the Company under the terms of
this Agreement).
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Preparation of Joint Proxy Statement/Prospectus and Registration
Statement.
(a) As promptly as practicable after the execution of this
Agreement, the Company, New Holdco and AHM shall cooperate with each other
regarding, and, prepare and file with the SEC, the Joint Proxy
Statement/Prospectus, and AHM and New Holdco shall prepare and file the
Registration Statement (in which the Joint Proxy Statement/Prospectus will be
included). The Company, New Holdco and AHM will cause the Joint Proxy
Statement/Prospectus and the Registration Statement to comply as to form in all
material respects with the applicable provisions of the Securities Act and the
Exchange Act. Each of the Company, New Holdco and AHM shall use all reasonable
efforts to have or cause the Joint Proxy Statement/Prospectus to be cleared by
the SEC and to cause the Registration Statement to become effective as promptly
as practicable after such filing and to keep the Registration Statement
effective as long as is reasonably necessary to consummate the Merger. Without
limiting the generality of the foregoing, each of the Company, New Holdco and
AHM shall fully cooperate with the other party in the preparation of the Joint
Proxy Statement/Prospectus and the Registration Statement, and shall, upon
request, furnish the other party with all information concerning it and its
Affiliates as the other may deem reasonably necessary or advisable in connection
with the preparation of the Joint Proxy Statement/Prospectus and the
Registration Statement. The Joint Proxy Statement/Prospectus shall include the
recommendations of the Boards of Directors of the Company, AHM and New Holdco
described in Sections 3.17 and 4.17 hereof, respectively, subject to the right
of the Board of Directors of the Company to withdraw, amend or modify such
recommendations in accordance with Section 6.6 below. AHM and New Holdco shall
use their best efforts to take all actions required under any applicable federal
or state securities or Blue Sky Laws in connection with the issuance of shares
of New Holdco Common Stock pursuant to the Merger and will pay all filing fees
incident thereto. As promptly as practicable after the Registration Statement
becomes effective, the Company, AHM and New Holdco shall cause the Joint Proxy
Statement/Prospectus to be mailed to their respective stockholders.
(b) The Company, New Holdco and AHM each agrees that none of the
information supplied by it to be included or incorporated by reference in the
Joint Proxy Statement/Prospectus or any amendment thereof or supplement thereto,
will, on the date of the mailing of the Joint Proxy Statement/Prospectus or any
amendment or supplement thereto, and at the time of the Stockholders Meetings
(as defined in Section 6.3 below), 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. The Company, New Holdco and AHM each
agrees that none of the information supplied by it to be included or
incorporated by reference in the Registration Statement will, at the time the
Registration Statement becomes effective under the Securities Act, 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. For
purposes of the foregoing, it is understood and agreed that information
concerning or related to New Holdco, AHM and their Subsidiaries and the AHM
Stockholders Meeting will be deemed to have been supplied by AHM and New Holdco
and information concerning or related to the Company and the Company
Stockholders Meeting shall be deemed to have been supplied by the Company.
(c) Without limiting the generality of the foregoing, prior to the
Closing Date (i) the Company, AHM and New Holdco shall notify each other as
promptly as practicable upon becoming aware of any event or circumstance which
should be described in an amendment of, or supplement to, the Joint Proxy
Statement/Prospectus or the Registration Statement, (ii) the Company, AHM and
New Holdco shall each notify the other as promptly as practicable after the
receipt by it of any written or oral comments of the SEC on, or of any written
or oral request by the SEC for amendments or supplements to, the Joint Proxy
Statement/Prospectus or the Registration Statement, and shall promptly supply
the other with copies of all correspondence between it or its counsel and the
SEC with respect to any of the foregoing filings, and (iii) the Company, AHM and
New Holdco will provide the other and its counsel with a reasonable opportunity
to review and comment on the Joint Proxy Statement/Prospectus or the
Registration Statement and all responses to requests for additional information
by and replies to comments of the SEC prior to filing such with, or sending such
to, the SEC.
6.2 Access to Information. Subject to the requirements of confidentiality
agreements with Third Parties, each of the Company, on one hand, and New Holdco,
AHM and each Subsidiary of AHM and New Holdco, on the other hand, shall afford
to the other parties or party, as the case may be, and to the officers,
employees, accountants, counsel, financial advisors, sources of financing and
other representatives of such other parties or party, as the case may be,
reasonable access during normal business hours prior to the Effective Time to
all their respective properties, books, contracts, commitments, personnel and
records and, during such period, each of the Company, on the one hand, and New
Holdco, AHM and each Subsidiary of AHM and New Holdco, on the other hand, shall
furnish promptly to the other parties or party, as the case may be, and its
financing sources all other information concerning its business, properties and
personnel as such other parties or party, as the case may be, may reasonably
request. Each of the Company, New Holdco, AHM and each Subsidiary of AHM and New
Holdco agrees that it will not, and will cause its respective representatives
not to, use any information obtained pursuant to this Section 6.2 for any
purpose unrelated to the consummation of the Transactions. The Confidentiality
and Standstill Agreement dated as of April 11, 2003, by and between the Company
and AHM (the "Confidentiality Agreement") shall apply with respect to
information furnished hereunder and any other activities contemplated thereby.
6.3 Stockholders Meetings.
(a) Company Stockholders Meeting. The Company shall, as promptly as
practicable following the execution of this Agreement, duly call, give notice
of, convene and hold a meeting of its stockholders (the "Company Stockholders
Meeting") for the sole purpose of obtaining the Company Stockholder Approval
with respect to the transactions contemplated by this Agreement, shall take all
lawful action to solicit the Company Stockholder Approval and, subject to
Section 6.6 below, the Board of Directors of the Company shall recommend
approval of this Agreement by the stockholders of the Company.
(b) AHM Stockholders Meeting. AHM shall, as promptly as practicable
following the execution of this Agreement, duly call, give notice of, convene
and hold a meeting of its stockholders (the "AHM Stockholders Meeting" and,
together with the Company Stockholders Meeting, the "Stockholders Meetings") for
the sole purpose of obtaining the AHM Stockholder Approval with respect to the
transactions contemplated by this Agreement (including, without limitation, the
Reorganization), shall take all lawful action to solicit the AHM Stockholder
Approval and, subject to Section 6.6 below, the Board of Directors of AHM shall
recommend approval of the Share Issuance and the Reorganization and any and all
other matters necessary to consummate the Transactions under applicable state
law by the stockholders of AHM.
6.4 Approvals. Subject to the terms and conditions herein provided, the
Company, AHM and New Holdco shall: (a) use all reasonable efforts to cooperate
with one another in (i) determining which filings are required to be made prior
to the Effective Time with, and which consents, approvals, permits or
authorizations are required to be obtained prior to the Effective Time from,
governmental or regulatory authorities of the United States, the several states
and foreign jurisdictions and any third parties in connection both the execution
and the delivery of this Agreement, and the consummation of the transactions
contemplated hereby, including without limitation any required filings and
consents under the HSR Act, and (ii) timely making all such filings and timely
seeking all such consents, approvals, permits and authorizations; (b) use all
reasonable efforts to obtain, in writing, the consents listed in and the
consents listed on Schedule 6.4 of the Company Disclosure Schedule (the "Other
Company Consents") in form reasonably satisfactory to the Company and AHM; and
(c) use all reasonable efforts to take, or cause to be taken, all other action
and do, or cause to be done, all other things necessary, proper or appropriate
to consummate and make effective the Transactions, subject in the case of the
Company to the exercise by the Board of Directors of the Company or the Special
Committee of its duties under applicable law. If at any time after the Effective
Time any further action is necessary or desirable to carry out the purpose of
this Agreement, AHM and the Surviving Corporation shall take all such necessary
action.
6.5 Reorganization. AHM and New Holdco shall, and shall cause their
respective Subsidiaries to, use their commercially reasonable efforts to cause
the consummation of the Reorganization.
6.6 Notice of Defaults. The Company shall give prompt notice to AHM and
New Holdco, and each of AHM and New Holdco shall give prompt notice to the
Company, (a) if any representation or warranty made by it contained in this
Agreement that is qualified as to Material Adverse Effect, becomes untrue or
incorrect in any respect, or any such representation or warranty that is not so
qualified becomes untrue or incorrect in any material respect, or (b) of the
failure by it to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
6.7 Acquisition Proposals.
(a) Subject to Section 6.7(b) below, unless and until this Agreement
shall have been terminated by either party pursuant to Article VIII hereof, none
of AHM, New Holdco or the Company shall take or cause, directly or indirectly
(through their respective officers, directors, employees, representatives,
agents or affiliates, including any investment bankers, attorneys or accountants
(collectively, the "Representatives")), any of the following actions with any
party other than AHM or New Holdco or their designees (in the case of the
Company) or the Company (in the case of AHM and New Holdco): (i) solicit,
encourage, initiate or participate in any negotiations, inquiries or discussions
with respect to any offer or proposal to acquire all or a significant part of
its business, assets or capital stock whether by merger, consolidation or other
business combination, purchase of assets, tender or exchange offer or otherwise,
other than with respect to a sale transaction permitted under Section 5.1 or 5.2
hereof (each of the foregoing, an "Acquisition Proposal"); (ii) disclose, in
connection with an Acquisition Proposal, any information or provide access to
its properties, books or records, except as required by law or pursuant to a
governmental request for information; (iii) enter into or execute any agreement
relating to an Acquisition Proposal; or (iv) make or authorize any public
statement, recommendation or solicitation in support of any Acquisition Proposal
other than with respect to the Merger, or as otherwise required by applicable
law. This Section 6.7(a) shall not limit the ability of the Company or AHM to
sell assets in accordance with Sections 5.1(f) or 5.2(g) hereof, respectively.
(b) Notwithstanding the foregoing, prior to the Stockholder
Approvals, (the "Applicable Period"), in response to a bona fide, unsolicited,
written Acquisition Proposal from a Third Party (that does not result from a
breach of this Section 6.7), the Board of Directors of the party receiving such
Acquisition Proposal may, and may authorize and permit its Representatives to,
(i) provide such Third Party with nonpublic information, (ii) otherwise
facilitate any effort or attempt by such Third Party to make such Acquisition
Proposal, (iii) agree to or recommend or endorse any such Acquisition Proposal
with or by any Third Party, (iv) withdraw or modify, or propose publicly to
withdraw or modify, in a manner adverse to the other party hereto, its approval
and recommendation of the Merger and this Agreement, and (v) participate in
discussions and negotiations with such Third Party relating to such Acquisition
Proposal, if and only to the extent that (x) the Board of Directors of the party
receiving such Acquisition Proposal, or any committee thereof, determines in
good faith (after consultation with its financial advisor and legal counsel)
that such Acquisition Proposal is more favorable or is likely to result in an
Acquisition Proposal that is more favorable to its stockholders than the Merger
and is made by a Person believed by the Board of Directors of the party
receiving such Acquisition Proposal, or any committee thereof, to be reasonably
capable of completing such Acquisition Proposal (a "Superior Proposal"), and (y)
the Third Party has entered into a confidentiality agreement pertaining to
nonpublic information regarding the party receiving such Acquisition Proposal
containing terms in the aggregate no more favorable to the Third Party than
those in the Confidentiality Agreement. Neither party shall enter into any
agreement implementing a Superior Proposal prior to the termination of this
Agreement in accordance with Section 8.1 below.
(c) The party receiving such Acquisition Proposal shall promptly
advise the other party orally and in writing of any request for information or
any Acquisition Proposal it receives and any material change in the terms
thereof (but not the terms or identity of the Person making such request or
Acquisition Proposal).
(d) Nothing contained in this Section 6.7 shall prohibit the Company
or AHM or their respective Boards of Directors (i) from taking and disclosing to
their respective stockholders a position contemplated by Rule 14d-9 and Rule
14e-2(a) promulgated under the Exchange Act or from making any legally required
disclosure to their respective stockholders with regard to an Acquisition
Proposal, or (ii) prior to the Company Stockholder Approval or the AHM
Stockholder Approval, as appropriate, from taking any action as contemplated by
Section 8.1(d)(iii) or 8.1(e)(iii) below. Nothing in this Section 6.7 shall
permit the Company or AHM to terminate this Agreement (except as specifically
provided in Article VIII hereof).
(e) For purposes of this Section 6.7, references to the Board of
Directors of the Company shall include the Special Committee.
6.8 Fees and Expenses. Whether or not the Merger is consummated, (i) all
Expenses relating to the preparation, printing and mailing of the Joint Proxy
Statement/Prospectus and the Registration Statement will be shared equally by
AHM and the Company, and (ii) all other Expenses incurred in connection with
this Agreement and the Transaction Documents and the transactions contemplated
hereby and thereby shall be paid by the party incurring such Expenses, except as
provided in Section 8.2 below. As used in this Agreement, "Expenses" includes
all out-of-pocket expenses (including all fees and expenses of counsel,
accountants, investment bankers, experts and consultants to a party hereto and
its affiliates) incurred by a party or on its behalf in connection with or
related to the authorization, preparation, negotiation, execution and
performance of this Agreement and the Transaction Documents and the transactions
contemplated hereby and thereby, including the preparation, printing, filing and
mailing of the Joint Proxy Statement/Prospectus and the solicitation of
stockholder approvals, the filing of applications with the SEC and all other
matters related to the transactions contemplated hereby.
6.9 Directors' and Officers' Indemnification and Insurance.
(a) From and after the Effective Time, the Surviving Corporation
shall provide exculpation and indemnification for each Person who is now or has
been at any time prior to the date hereof or who becomes prior to the Effective
Time, an officer, employee or director of the Company or the Manager (the
"Indemnified Parties") to the same extent provided under existing arrangements
by the Company and the Company Charter and bylaws of the Company, as in effect
on the date hereof; provided, that such exculpation and indemnification covers
actions on or prior to the Effective Time, including, without limitation, all
Transactions contemplated by this Agreement.
(b) In addition to the rights provided in Section 6.9(a) above, in
the event of any threatened or actual Claim, whether civil, criminal or
administrative, including without limitation, any action by or on behalf of any
or all security holders of the Company, AHM or New Holdco, or any Subsidiary of
AHM or New Holdco, or by or in the right of the Company, AHM or New Holdco, or
any Subsidiary of AHM or New Holdco, or any Claim in which any Indemnified Party
is, or is threatened to be, made a party based in whole or in part on, or
arising in whole or in part out of, or pertaining to (i) the fact that he is or
was an officer, employee or director of the Company or any action or omission or
alleged action or omission by such Person in his capacity as an officer,
employee or director, or (ii) this Agreement or the Transactions contemplated by
this Agreement (including, without limitation, the Reorganization), whether in
any case asserted or arising before or after the Effective Time, AHM, New Holdco
and the Surviving Corporation (the "Indemnifying Parties") shall from and after
the Effective Time jointly and severally indemnify and hold harmless the
Indemnified Parties from and against any losses, claims, liabilities, expenses
(including reasonable attorneys' fees and expenses), judgments, fines or amounts
paid in settlement arising out of or relating to any such Claims. AHM, New
Holdco, the Surviving Corporation and the Indemnified Parties hereby agree to
use their best efforts to cooperate in the defense of such Claims. In connection
with any such Claim, the Indemnified Parties shall have the right to select and
retain counsel, at the cost of the Indemnifying Parties, subject to the consent
of the Indemnifying Parties (which consent shall not be unreasonably withheld or
delayed). In addition, after the Effective Time, in the event of any such
threatened or actual Claim, the Indemnifying Parties shall promptly pay and
advance reasonable expenses and costs incurred by each Indemnified Person as
they become due and payable in advance of the final disposition of the Claim to
the fullest extent permitted by law. Notwithstanding anything to the contrary
set forth in this Agreement, the Indemnifying Parties shall not be liable for
any settlement effected without their prior written consent (which consent shall
not be unreasonably withheld or delayed). Any Indemnified Party wishing to claim
indemnification under this Section 6.9, upon learning of any such Claim, shall
promptly notify the Indemnifying Parties of such Claim and the relevant facts
and circumstances with respect thereto; provided however, that the failure to
provide such notice shall not affect the obligations of the Indemnifying Parties
except to the extent such failure to notify materially prejudices the
Indemnifying Parties' ability to defend such Claim; and provided, further,
however, that no Indemnified Party shall be obligated to provide any
notification pursuant to this Section 6.8(b) prior to the Effective Time.
(c) At or prior to fourteen (14) days prior to the Effective Time,
the Company shall obtain a commitment for directors' and officers' liability
insurance policy coverage ("D&O Tail Policy") for acts and omissions prior to
the Effective Time for the directors and officers of the Company and the Manager
(naming the directors and officers of New Holdco for co-defendant coverage (the
"New Holdco Coverage")) with at least $25 million of coverage for a period of
six years following the Effective Time which will provide such directors and
officers and the Manager (and its officers and directors) with coverage on
substantially similar terms as currently provided by the Company to the
directors and officers of the Company and the Manager (and its officers and
directors). For the avoidance of doubt, the inability to obtain the commitment
for the D&O Tail Policy fourteen (14) days prior to the Effective Time shall be
deemed a breach of this Agreement. AHM shall have the right to reasonably review
and approve the D&O Tail Policy, which approval shall not be unreasonably
withheld or delayed. AHM and the Company shall share equally the costs of the
D&O Tail Policy other than the additional fees and premium costs attributable to
the New Holdco Coverage, which such additional costs shall be borne by AHM for
the first $150,000 of such costs, with the remainder to be shared equally
between AHM and the Company.
(d) This Section 6.9 is intended for the irrevocable benefit of, and
to grant third-party rights to, the Indemnified Parties and their successors,
assigns and heirs and shall be binding on all successors and assigns of AHM and
New Holdco, including, without limitation, the Surviving Corporation. Each of
the Indemnified Parties shall be entitled to enforce the covenants contained in
this Section 6.9 and AHM and New Holdco acknowledge and agree that each
Indemnified Party would suffer irreparable harm and that no adequate remedy at
law exists for a breach of such covenants and such Indemnified Party shall be
entitled to injunctive relief and specific performance in the event of any
breach of any provision in this Section 6.9.
(e) In the event that the Surviving Corporation or any of its
respective successors or assigns (i) consolidates with or merges into any other
Person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger, or (ii) transfers or conveys all or substantially
all of its properties and assets to any Person, then, and in each such case, the
successors and assigns of such entity shall expressly assume the obligations set
forth in this Section 6.8, which obligations are expressly intended to be for
the irrevocable benefit of, and shall be enforceable by, each director and
officer covered hereby.
(f) AHM guarantees, unconditionally and absolutely, the performance
of Surviving Corporation's and New Holdco's obligations under this Section 6.8.
6.10 Public Announcements. The Company, New Holdco and AHM and the
Subsidiaries of AHM and New Holdco shall use all reasonable efforts to develop a
joint communications plan and each party shall use all reasonable efforts (i) to
ensure that all press releases and other public statements with respect to the
transactions contemplated hereby shall be consistent with such joint
communications plan, and (ii) unless otherwise required by applicable Law or by
obligations pursuant to any listing agreement with or rules of NASDAQ or the
NYSE, as applicable, in which notice shall be provided, to consult with each
other before issuing any press release or otherwise making any public statement
with respect to this Agreement or the transactions contemplated hereby.
6.11 Listing on NASDAQ; NYSE. AHM and New Holdco shall use their
reasonable best efforts to cause the shares of New Holdco Common Stock issuable
to the stockholders of the Company in the Merger to be eligible for quotation on
NASDAQ or listing on the NYSE immediately prior to the Effective Time.
6.12 Assumption of Company Stock Option Plan. At the Effective Time, the
Company Stock Option Plan will be assumed by the Surviving Corporation.
6.13 Payment of Termination Fee. No later than three (3) Business Days
prior to the Initial Closing Date, the Company shall deposit the Escrow Amount
into the Escrow Account, to be held and released in accordance with the terms
and subject to the conditions set forth in the Escrow Agreement. Pursuant to the
terms and subject to the conditions of the Escrow Agreement, immediately prior
to the Closing, the Escrow Agent shall pay (a) the Termination Fee to the
Manager and (b) any amounts remaining in the Escrow Account (net of any
applicable fees and expenses) to the Surviving Corporation.
6.14 Lock-Up. Prior to Closing, the Company shall cause each of the
Persons listed on Schedule D attached hereto (the "Lock-Up Parties") to enter
into a lock-up agreement with New Holdco and AHM, substantially in the form of
Exhibit G (the "Lock-Up Agreement") pursuant to which the Lock-Up Parties shall
agree that, (a) for a period of 60 days following the Closing Date (the "Initial
Lock-Up Period"), the Lock-Up Parties shall not offer, sell, contract to sell,
grant any option to purchase, make any short sale or otherwise dispose of any of
the shares of New Holdco Common Stock (or the economic interest in such shares
through hedging arrangements, derivative transactions or otherwise) received by
the Lock-Up Parties in the Merger (the "Lock-Up Shares"), and (b) for a period
of 30 days following the expiration of the Initial Lock-Up Period, the Lock-Up
Parties shall not sell greater than 5% of the Lock-Up Shares.
6.15 Section 368(a) Reorganization; Officer's Certificates in Support of
Tax Opinions.
(a) None of AHM, New Holdco, the Company, or any of their respective
Subsidiaries or Affiliates shall take any action, fail to take any action, cause
any action to be taken or not taken, or suffer to exist any condition that would
be reasonably expected to cause the Merger to fail to qualify as a
reorganization within the meaning of Section 368(a) of the Code or fail to
satisfy the conditions set forth in Sections 7.2(e) and 7.3(h) hereof. The
parties hereto hereby adopt this Agreement as a plan of reorganization.
(b) New Holdco will hold at least 34% of the Company's total asset
portfolio acquired in the Merger for a 24-month period following the Effective
Time, as more particularly set forth in the officer's representation letter
substantially in the form attached hereto as Exhibit I-2, executed by AHM and
delivered to counsel for AHM and the Company. Notwithstanding anything else in
this Agreement, New Holdco's obligations contained in this Section 6.15(b) shall
survive the Effective Time. The stockholders of the Company shall be deemed
third-party beneficiaries of this Section 6.15(b).
(c) For purposes of the tax opinions to be entered into pursuant to
Sections 7.2(e) and 7.3(h) of this Agreement, the Company, AHM and New Holdco
shall provide officer's representation letters, substantially in the forms
attached hereto as Exhibits I-1 and I-2, respectively, each dated on or about
the date the Registration Statement shall become effective, and subsequently, on
or about the Closing Date.
6.16 Reorganization Documents. AHM and New Holdco will provide the Company
and its counsel with a reasonable opportunity to review and comment on all
material agreements, certificates and other material documents prepared or
executed by either AHM or New Holdco in connection with the Reorganization and
the transactions contemplated thereby.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of the Company, AHM and New Holdco to effect the Merger
are subject to the satisfaction or waiver at or prior to the Closing of the
following conditions:
(a) Stockholder Approvals. The Company shall have obtained the
Company Stockholder Approval and AHM shall have obtained the AHM Stockholder
Approval.
(b) Governmental Approvals. All material consents, approvals,
permits and authorizations required to be obtained prior to the Effective Time
from any Governmental Entity as indicated in Section 3.3(c) or Schedule 3.3(c)
to the Company Disclosure Schedule or Section 4.3(c) or Schedule 4.3(c) to the
AHM Disclosure Schedule in connection with both the execution and the delivery
of the Transaction Documents, and the consummation of the Transactions
contemplated hereby shall have been made or obtained (as the case may be).
(c) No Injunctions or Restraints; Illegality. No federal, state,
local or foreign, if any, Law shall have been adopted or promulgated, and no
temporary restraining Order, preliminary or permanent injunction or other Order
issued by a court or other Governmental Entity of competent jurisdiction shall
be in effect, having the effect of making the Merger illegal or otherwise
prohibiting consummation of the Merger.
(d) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or shall
have expired.
(e) Effectiveness of Registration Statement. The Registration
Statement containing the Joint Proxy Statement/Prospectus shall have become
effective under the Securities Act and no stop order suspending the
effectiveness thereof shall have been issued and no proceedings for that purpose
shall have been initiated or threatened by the SEC.
(f) Reorganization. The Reorganization shall have occurred.
7.2 Additional Conditions to Obligations of AHM and New Holdco. The
obligations of AHM and New Holdco to effect the Merger are subject to the
satisfaction of, or waiver by AHM, at or prior to the Closing of the following
additional conditions:
(a) Representations and Warranties. Each of the representations and
warranties of the Company contained in this Agreement shall be true and correct
as of the Closing Date as though made on and as of the Closing Date (provided
that those representations and warranties which address matters only as of a
particular date shall remain true and correct as of such date), except in each
case, or the aggregate, as does not constitute a Material Adverse Effect on the
Company at the Closing Date. AHM shall have received a certificate of the Chief
Executive Officer and Chief Financial Officer of the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall
have performed or complied in all material respects with all agreements and
covenants required to be performed by it under this Agreement at or prior to the
Closing Date, and AHM shall have received a certificate of the Chief Executive
Officer and Chief Financial Officer of the Company to such effect.
(c) Required Company Consents. All Required Company Consents, the
failure of which to obtain would have a Material Adverse Effect on the Company
or, following consummation of the Merger, the Surviving Corporation, shall have
been obtained.
(d) Material Adverse Effect. Since the date of this Agreement, there
shall have been no changes in facts or conditions that have had a Material
Adverse Effect on the Company, and AHM shall have received a certificate of the
Chief Executive Officer and Chief Financial Officer of the Company to such
effect.
(e) Tax Opinion. AHM shall have received a written opinion, dated on
or about the date that the Registration Statement shall become effective, and
subsequently, on or about the Closing Date, from Cadwalader, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇
LLP, counsel to AHM, substantially in the form attached hereto as Exhibit H, to
the effect that the Merger will qualify for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code. In rendering
such opinion, Cadwalader, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇ LLP shall be entitled to rely upon
reasonable and customary representations provided by the Company and AHM
substantially in the forms attached hereto as Exhibits I-1 and I-2,
respectively.
(f) REIT Opinion. The Company shall have received the opinion of
O'Melveny & ▇▇▇▇▇ LLP, special counsel to the Company, substantially in the form
attached hereto as Exhibit J, and shall have provided to AHM copies of such
opinion and the corresponding representation letter by the Company.
(g) Final Opinion of Company Financial Advisor. The opinion of the
Company Financial Advisor received by the Company shall conform in all material
respects to the Draft Opinion of Company Financial Advisor made available to AHM
pursuant to Section 3.13 hereof.
(h) Compliance with Investment Guidelines. The assets held by the
Company in its total asset portfolio on the Determination Date shall be
consistent with the investment guidelines set forth on Schedule 7.2(h) attached
hereto; provided, however, that not less than thirty-four percent (34%) of the
Company's total asset portfolio on the Determination Date shall consist of the
asset types listed on Schedule 7.2(h) attached hereto.
7.3 Additional Conditions to Obligations of the Company. The obligations
of the Company to effect the Merger are subject to the satisfaction of, or
waiver by the Company, at or prior to the Closing of the following additional
conditions:
(a) Representations and Warranties. Each of the representations and
warranties of AHM and New Holdco contained in this Agreement shall be true and
correct as of the Closing Date as though made on and as of the Closing Date
(provided that those representations and warranties which address matters only
as of a particular date shall remain true and correct as of such date), except
in each case, or the aggregate, as does not constitute a Material Adverse Effect
on AHM or New Holdco at the Closing Date. The Company shall have received a
certificate of the Chief Executive Officer and Chief Financial Officer of each
of AHM and New Holdco to such effect.
(b) Performance of Obligations of AHM and New Holdco. Each of AHM
and New Holdco shall have performed or complied in all material respects with
all agreements and covenants required to be performed by it under this Agreement
at or prior to the Closing Date, and the Company shall have received a
certificate of the Chief Executive Officer and Chief Financial Officer of AHM to
such effect.
(c) Required AHM Consents. All Required AHM Consents, the failure of
which to obtain would have a Material Adverse Effect on AHM or New Holdco or,
following consummation of the Merger, the Surviving Corporation, shall have been
obtained.
(d) Material Adverse Effect. Since the date of this Agreement, there
shall have been no changes in facts or conditions that have had a Material
Adverse Effect on AHM or New Holdco, and the Company shall have received a
certificate of the Chief Executive Officer and Chief Financial Officer of AHM
and New Holdco to such effect.
(e) Listing. The shares of New Holdco Common Stock to be issued to
stockholders of the Company in the Merger shall have been authorized for
quotation on NASDAQ or listing on the NYSE, subject to notice of issuance.
(f) Third Amendment to Management Agreement. The Third Amendment to
Management Agreement shall have been duly executed by the Company and the
Manager and shall be in full force and effect.
(g) Escrow Agreement; Deposit of Escrow Amount. The Escrow Agreement
shall be in full force and effect and shall not have been amended or terminated
since its original date of execution, and there shall be no conditions to or
impediments on the release of the Escrow Amount and the payment of the
Termination Fee to the Manager at the Effective Time under the Escrow Agreement
other than the consummation of the Merger.
(h) Tax Opinion. The Company shall have received a written opinion
dated on or about the date of the Registration Statement shall become effective,
and subsequently, on or about the Closing Date, from O'Melveny & ▇▇▇▇▇ LLP,
special counsel to the Company, substantially in the form attached hereto as
Exhibit K, to the effect that the Merger will qualify for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code.
In rendering such opinion, O'Melveny & ▇▇▇▇▇ LLP shall be entitled to rely upon
reasonable and customary representations provided by the Company and AHM
substantially in the forms attached hereto as Exhibits I-1 and I-2,
respectively.
(i) REIT Opinion. AHM shall have received the opinion of Cadwalader,
▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, legal counsel to AHM, substantially in the form attached
hereto as Exhibit L, and shall have provided to the Company copies of such
opinion and the corresponding representation letter by New Holdco.
(j) Final AHM Financial Advisor Opinion. The opinion of the AHM
Financial Advisor received by AHM shall conform in all material respects to the
Draft Opinion of AHM Financial Advisor made available to the Company pursuant to
Section 4.13 hereof.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time (except as otherwise provided), whether before or after the
Stockholder Approvals, by written notice from AHM to the Company or the Company
to AHM, as the case may be, as follows:
(a) by mutual written consent of AHM and the Company;
(b) by either the Company or AHM, if the Effective Time shall not
have occurred on or before January 12, 2004 (the "Termination Date"); provided,
however, that the right to terminate this Agreement under this Section 8.1(b)
shall not be available to any party whose failure (or in the case of AHM, the
failure of New Holdco) to fulfill any obligation under this Agreement has been
the cause of, or resulted in, the failure of the Effective Time to occur on or
before the Termination Date; and provided further, however, that if on the
Termination Date the conditions to the Merger set forth in Sections 7.1(b) or
(d) shall not have been fulfilled, but all other conditions to the Merger shall
be fulfilled or shall be capable of being fulfilled, then the Termination Date
shall be automatically be extended to April 12, 2004;
(c) by either the Company or AHM, if any Governmental Entity (i)
shall have issued an order, decree or ruling or taken any other action (which
the parties shall have used their reasonable best efforts to resist, resolve or
lift, as applicable, in accordance with Section 6.4 hereof) permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated by
this Agreement, and such order, decree, ruling or other action shall have become
final and nonappealable, or (ii) shall have failed to issue an order, decree or
ruling or to take any other action (which order, decree, ruling or other action
the parties shall have used their reasonable best efforts to obtain, in
accordance with Section 6.4 hereof), which in either case is necessary to
fulfill the conditions set forth in Sections 7.1(c), (d) or (e), as applicable,
and such denial of a request to issue such order, decree, ruling or take such
other action shall have become final and nonappealable; provided, however, that
the right to terminate this Agreement under this Section 8.1(c) shall not be
available to any party whose failure (or in the case of AHM, the failure of New
Holdco) to comply with Section 6.4 has been the cause of such action or
inaction;
(d) by AHM:
(i) if the approval by the stockholders of the Company
required for the consummation of the Merger shall not have been obtained by
reason of the failure to obtain the Company Stockholder Approval upon the taking
of such vote at a duly called and held meeting of stockholders of the Company,
or at any adjournment thereof;
(ii) in the event of a breach by the Company of any
representation, warranty, covenant or other agreement contained in this
Agreement which (i) would give rise to the failure of a condition set forth in
Section 7.2(a) or (b), as applicable, and (ii) cannot be cured or, if curable,
has not been cured within thirty (30) days after the giving of written notice to
the breaching party of such breach (a "Material Company Breach"); provided that
in no event shall such 30-day period extend beyond the Termination Date;
(iii) if, prior to the AHM Stockholders Meeting, (i) the Board
of Directors of AHM or New Holdco, or any committee thereof, shall have
determined to withdraw or modify, in any manner which is materially adverse to
the Company, its recommendation or approval of the Merger and this Agreement and
the transactions contemplated hereby pursuant to Section 6.7(c), and (ii) AHM or
New Holdco shall have given three (3) Business Days prior written notice to the
Company advising the Company that AHM or New Holdco has received a Superior
Proposal from a third party, and intends to terminate this Agreement in
accordance with this Section 8.1(d)(iii) (during which period AHM shall
negotiate in good faith with the Company concerning any new proposal by the
Company);
(iv) if the Board of Directors of the Company, or any
committee thereof, shall withdraw or modify, in any manner which is materially
adverse to AHM or New Holdco, the Board of Directors' or committee's
recommendation to the Company's stockholders that they approve the Merger or
this Agreement;
(v) if AHM makes the AHM Election at any time during the one
(1) Business Day period commencing at the close of business on the Determination
Date, unless the Company, within one (1) Business Day following the AHM
Election, shall have elected to adjust the Exchange Ratio pursuant to Section
1.7(b)(iv) hereof, in which case the Agreement shall remain in effect and shall
not be terminated pursuant to this Section 8.1(d)(v); or
(vi) in the event of a breach by a Company Significant
Stockholder of any representation, warranty, covenant or other agreement
contained in the Company Voting Agreement to which such Company Significant
Stockholder is a party which cannot be cured or, if curable, has not been cured
prior to the Company Stockholders Meeting.
(e) by the Company:
(i) if the approval by the stockholders of AHM or New Holdco
required for the consummation of the transactions contemplated by this Agreement
shall not have been obtained by reason of the failure to obtain such approvals
upon the taking of such vote at a duly called and held meeting of stockholders
of AHM and New Holdco, or at any adjournment thereof;
(ii) in the event of a breach by AHM or New Holdco of any
representation, warranty, covenant or other agreement contained in this
Agreement which (i) would give rise to the failure of a condition set forth in
Section 7.3(a) or (b), as applicable, and (ii) cannot be cured or, if curable,
has not been cured within thirty (30) days after the giving of written notice to
AHM or New Holdco of such breach (a "Material AHM Breach" and, together with a
"Material Company Breach," a "Material Breach"); provided that in no event shall
such 30-day period extend beyond the Termination Date;
(iii) if, prior to the Company Stockholders Meeting, (i) the
Board of Directors of the Company, or any committee thereof, shall have
determined to withdraw or modify, in any manner which is materially adverse to
AHM or New Holdco, its recommendation or approval of the Merger and this
Agreement and the transactions contemplated hereby pursuant to Section 6.7(c),
and (ii) the Company shall have given three (3) Business Days prior written
notice to AHM advising AHM that the Company has received a Superior Proposal
from a third party, and advising AHM that the Company intends to terminate this
Agreement in accordance with this Section 8.1(e)(iii) (during which period the
Company shall negotiate in good faith with AHM concerning any new proposal by
AHM);
(iv) if the Board of Directors of AHM or New Holdco, or any
committee thereof, shall withdraw or modify, in any manner which is materially
adverse to the Company, the Board of Directors' or committee's recommendation to
AHM's or New Holdco's stockholders that they approve the Merger or this
Agreement;
(v) if the Company makes the Company Election at any time
during the one (1) Business Day period commencing at the close of business on
the Determination Date, unless AHM, within one (1) Business Day following the
Company Election, shall have elected to adjust the Exchange Ratio pursuant to
Section 1.7(b)(v) hereof, in which case the Agreement shall remain in effect and
shall not be terminated pursuant to this Section 8.1(e)(v); or
(vi) in the event of a breach by an AHM Significant
Stockholder of any representation, warranty, covenant or other agreement
contained in the AHM Voting Agreement to which such AHM Significant Stockholder
is a party which cannot be cured or, if curable, has not been cured prior to the
AHM Stockholders Meeting.
8.2 Effect of Termination.
(a) In the event of termination of this Agreement by either the
Company or AHM as provided in Section 8.1, this Agreement shall forthwith become
void and there shall be no liability or obligation (other than in respect of a
prior Material Breach) on the part of AHM or the Company or their respective
officers or directors except with respect to the second sentence of Section 6.2,
Section 6.10, this Section 8.2 and Article IX hereof.
(b) If this Agreement is terminated (i) by the Company pursuant to
Section 8.1(e)(iii), or (ii) by AHM pursuant to Section 8.1(d)(ii), (iv) or (vi)
above, then, in such event, and simultaneously with such termination, the
Company shall pay to AHM an aggregate amount equal to $12,000,000, plus any
documented out-of-pocket Expenses (a "Break-Up Fee"), which Break-Up Fee shall
be payable by wire transfer of same day funds to AHM. AHM and New Holdco hereby
acknowledge and agree that the payment of a Break-Up Fee to AHM pursuant to the
preceding sentence shall fully satisfy the Company's obligations to both AHM and
New Holdco under this Section 8.2(b). The Company acknowledges that the
agreement contained in this Section 8.2(b) is an integral party of the
transactions contemplated by this Agreement and that, without this agreement,
New Holdco and AHM would not enter into this Agreement; accordingly, if the
Company fails promptly to pay the Break-Up Fee and, in order to obtain such
payment, either AHM, New Holdco or both of them commence a suit which results in
a judgment against the Company for the amount of the Break-Up Fee, the Company
shall pay to the prevailing party or parties its reasonable costs and expenses
(including reasonable attorneys' fees and expenses) in connection with such
suit, together with interest thereon at the Applicable Rate on the date such
payment was required to be paid.
(c) If this Agreement is terminated (i) by AHM pursuant to Section
8.1(d)(iii), or (ii) by the Company pursuant to Section 8.1(e)(ii), (iv) or (vi)
above, then, in such event, AHM shall pay to the Company simultaneously with
such termination an amount equal to the Break-Up Fee, which amount shall be
payable by wire transfer of same day funds. AHM acknowledges that the agreement
contained in this Section 8.2(c) is an integral party of the transactions
contemplated by this Agreement and that, without this agreement, the Company
would not enter into this Agreement; accordingly, if AHM fails promptly to pay
the Break-Up Fee and, in order to obtain such payment, the Company commences a
suit which results in a judgment against AHM for the amount of the Break-Up Fee,
AHM shall pay to the Company its reasonable costs and expenses (including
reasonable attorneys' fees and expenses) in connection with such suit, together
with interest thereon at the Applicable Rate on the date such payment was
required to be paid.
(d) The Company's payment of the Break-Up Fee pursuant to Section
8.2(b) above shall be the sole and exclusive remedy of AHM and New Holdco and
any Subsidiary of AHM or New Holdco, against the Company, the Company
Significant Stockholders and its Representatives with respect to the occurrences
giving rise to such payment, except for liabilities or damages caused by the
willful breach of any representations, warranties, covenants or agreements
herein by the Company or the willful breach of any representations, warranties,
covenants or agreements under any Company Voting Agreement by the respective
Company Significant Stockholder.
(e) AHM's payment of the Break-Up Fee pursuant to Section 8.2(c)
above shall be the sole and exclusive remedy of the Company against New Holdco,
AHM and any Subsidiary of AHM, the AHM Significant Stockholders and their
respective Representatives with respect to the occurrences giving rise to such
payment, except for liabilities or damages caused by the willful breach of any
representations, warranties, covenants or agreements herein by AHM or the
willful breach of any representations, warranties, covenants or agreements under
any AHM Voting Agreement by the respective AHM Significant Stockholder.
8.3 Amendment. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any time
before or after the Company Stockholder Approval, but, after any such approval,
no amendment shall be made which by Law or in accordance with the rules of any
relevant stock exchange requires further approval by the Company's stockholders
without such further approval. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
8.4 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto, and (c) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party. The failure of
any party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
ARTICLE IX
GENERAL PROVISIONS
9.1 Non-Survival of Representations, Warranties and Agreements. None of
the representations, warranties, covenants and other agreements in this
Agreement or in any instrument delivered pursuant to this Agreement, including
any rights arising out of any breach of such representations, warranties,
covenants and other agreements, shall survive the Effective Time, except for
those covenants and agreements contained herein and therein that by their terms
apply or are to be performed in whole or in part after the Effective Time and
this Article IX. Nothing in this Section 9.1 shall relieve any party for any
breach of any representation, warranty, covenant or other agreement in this
Agreement occurring prior to termination.
9.2 Notices. All notices and other communications hereunder shall be in
writing (including telecopy, mail or other similar writing, but excluding
e-mail) and shall be deemed duly given (a) on the date of delivery if delivered
personally, or by telecopy, upon confirmation of receipt, (b) on the first (1st)
Business Day following the date of dispatch if delivered by a recognized
next-day courier service, (c) on the tenth (10th) Business Day following the
date of mailing if delivered by registered or certified mail, return receipt
requested, postage prepaid or (d) if given by any other means, when received at
the address specified in this Section 9.2, except, in each case, for a notice of
a change of address, which shall be effective only upon receipt thereof. All
notices hereunder shall be delivered as set forth below, or pursuant to such
other instructions as may be designated in writing by the party to receive such
notice:
(a) if to AHM or New Holdco, to:
American Home Mortgage Holdings, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇.▇▇▇
with a copy to:
Cadwalader, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇.▇▇▇▇▇▇▇▇▇▇@▇▇▇.▇▇▇
(b) if to the Company to:
Apex Mortgage Capital, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President and Chief Executive Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇.▇▇▇▇▇▇@▇▇▇.▇▇▇
with a copy to:
The TCW Group
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇.▇▇▇▇@▇▇▇.▇▇▇
and:
The TCW Group
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇▇.▇▇▇▇▇▇▇▇▇@▇▇▇.▇▇▇
and:
O'Melveny & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇@▇▇▇.▇▇▇
9.3 Interpretation. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents, glossary of defined terms and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation". The inclusion of any matter in the Company
Disclosure Schedule or the AHM Disclosure Schedule in connection with any
representation, warranty, covenant or agreement that is qualified as to
materiality or "Material Adverse Effect" shall not be an admission by the party
delivering such disclosure schedule that such matter is material or would have a
Material Adverse Effect.
9.4 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when each party shall have received counterparts hereof
signed by all other parties hereto, it being understood that the parties need
not sign the same counterpart.
9.5 Damages; Equitable Relief. The parties hereto acknowledge that
monetary damages are an adequate remedy for breach of this Agreement, and that
neither party hereto shall be entitled to specific performance, injunctive
relief, or other equitable remedies for the breach or anticipated breach hereof;
provided, however, that any party hereto may obtain equitable relief to compel
payments contemplated by Section 8.2 hereof in accordance with the terms
thereof.
9.6 Entire Agreement; Third Party Beneficiaries.
(a) Integration. This Agreement together with the Company Disclosure
Schedule, the AHM Disclosure Schedule, the exhibits hereto and the Transaction
Documents constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof, other than the Confidentiality Agreement which shall
survive both the execution and the delivery of this Agreement.
(b) No Third Party Beneficiaries. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
Person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, other than Section 6.8 hereof (which are intended to be for
the benefit of the Persons covered thereby and may be enforced by such Persons).
9.7 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Maryland, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
9.8 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any Law, Order or public
policy, all other terms and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner in order
that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
9.9 Waiver of Jury Trial. Each party to this Agreement waives, to the
fullest extent permitted by applicable Law, any right it may have to a jury
trial in respect of any action, suit or proceeding arising out of or relating to
this Agreement.
9.10 Submission to Jurisdiction. Each of AHM, New Holdco and the Company
irrevocably agrees that any legal action or proceeding with respect to this
Agreement or for recognition and enforcement of any judgment in respect hereof
brought by any party hereto or its successors and assigns may be brought and
determined in the State courts located in New York County or in the United
States District Court for the Southern District of New York, in each case having
subject matter jurisdiction, and each of AHM, New Holdco and the Company hereby
irrevocably submits with regard to any such action or proceeding for itself and
in respect to its property, generally and unconditionally, to the nonexclusive
jurisdiction of the aforesaid courts. By both the execution and the delivery of
this Agreement, the Company appoints O'Melveny & ▇▇▇▇▇ LLP (or at such other
place within the State of New York as my be designated for such purpose), as its
agent upon which process may be served in any such legal action or proceeding.
Service of process upon such agent, together with notice of such service given
to the Company in the manner specified in Section 9.2 hereof, shall be deemed in
every respect effective service of process upon the Company in any legal action
or proceeding. Nothing herein shall in any way be deemed to limit the ability of
AHM to serve any writs, process or summons in any other manner permitted by
applicable Law or Order or to obtain jurisdiction over the Company in such other
jurisdictions and in such manner as may be permitted by applicable Law or Order.
Each of AHM, New Holdco and the Company hereby irrevocably waives, and agrees
not to assert, by way of motion, as a defense or counterclaim or otherwise, in
any action or proceeding with respect to this Agreement, (a) any claim that it
is not personally subject to the jurisdiction of the above-named courts for any
reason other than the failure to serve process in accordance with this Section
9.10, (b) that it or its property is exempt or immune from jurisdiction of any
such court or from any legal process commenced in such courts (whether through
service of notice, attachment prior to judgment, attachment in aid of execution
of judgment, execution of judgment or otherwise) and (c) to the fullest extent
permitted by applicable Law or Order, that (i) the suit, action or proceeding in
any such court is brought in an inconvenient forum, (ii) the venue of such suit,
action or proceeding is improper, and (iii) this Agreement, or the subject
matter hereof, may not be enforced in or by such courts. Notwithstanding
anything contained herein to the contrary, AHM understands and agrees that this
Section 9.10 is not intended to and shall not be deemed to be a consent by the
Company to jurisdiction for any purpose other than the limited purpose of
enforcing this Agreement in accordance with its terms.
9.11 Definitions. As used in this Agreement:
(a) "Affiliate" of a Person shall mean a Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by or is
under common control with, the first mentioned Person.
(b) "Applicable Rate" means a rate per annum equal to the "prime
rate" as set forth in The Wall Street Journal "Money Rates" column plus one
percent (1%).
(c) "Board of Directors" means the Board of Directors of any
specified Person and any committees thereof.
(d) "Business Day" means a day other than Saturday, Sunday or any
day on which banks located in the States of California or New York are
authorized or obligated to close.
(e) "Certificates" means certificates representing shares of Company
Capital Stock.
(f) "Contracts" means any loan or credit agreement, note, mortgage,
bond, indenture, lease, benefit plan or other agreement, obligation or
instrument.
(g) "knowledge" when used with respect to any party means the
knowledge of any senior executive officer of such party after reasonable
inquiry.
(h) "Laws" means any statute, law, ordinance, rule, regulation,
whether federal, state, local or foreign, including, without limitation, (i) the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 and (ii) the rules and regulations of AMEX and
NASDAQ.
(i) "Liens" means all pledges, claims, liens, charges, encumbrances
and security interests of any kind or nature whatsoever.
(j) "Material Adverse Effect" means, with respect to any Person, any
change affecting, or condition having an effect on, such Person and its
Subsidiaries, if any, (i) that is, or would reasonably be expected to be,
materially adverse to the business, assets, liabilities, results of operations
or condition (financial or otherwise) of such Person and its Subsidiaries, if
any, taken as a whole, (ii) that will, or would reasonably be expected to,
prevent or materially impair the ability of such Person to consummate the Merger
before the Termination Date, (iii) that would, or would be reasonably be
expected to, prevent or materially impair the ability of such Person to operate
its or any of its Subsidiaries' businesses following the Effective Time, or (iv)
in the case of the Company, that could reasonably be expected to prevent or
materially impair the Company from qualifying as a REIT prior to the Effective
Time or, in the case of AHM or New Holdco, that could reasonably be expected to
prevent or materially impair New Holdco from qualifying as a REIT on or after
the Effective Time; provided, however, that any such change or effect having the
results described in the foregoing (i) through (iv) that results from (A) a
change in law, rule or regulation, or GAAP or interpretations thereof that
applies to both AHM and the Company, (B) general economic or market conditions,
including, without limitation, changes in interest rates, or (C) economic or
market conditions in the mortgage industry generally shall not be considered
when determining whether a Material Adverse Effect on such Person or its
Subsidiaries has occurred, except to the extent that such change or effect
disproportionately affects such Person or its Subsidiaries in any material
respect; provided, further, that a decline in the share price of the Person
resulting from the public announcement of this Agreement and the proposed Merger
shall not be deemed a Material Adverse Effect on such Person.
(k) "Orders" means any judgment, order or decree, whether federal,
state, local or foreign.
(l) "Person" means a natural person, corporation, limited liability
company, partnership, joint venture, association, trust, unincorporated
organization, Governmental Entity, other entity or group (as defined in the
Exchange Act).
(m) "Subsidiary" when used with respect to any Person means any
corporation or other organization, whether incorporated or unincorporated, (A)
of which such Person or any other Subsidiary of such Person is a general partner
(excluding partnerships, the general partnership interests of which held by such
Person or any Subsidiary of such Person do not have a majority of the voting
interests in such partnership) or (B) at least a majority of the securities or
other interests of which having by their terms ordinary voting power to elect a
majority of the Board of Directors or others performing similar functions with
respect to such corporation or other organization is directly or indirectly
owned or controlled by such Person or by any one or more of its Subsidiaries, or
by such Person and one or more of its Subsidiaries.
(n) "the other party" means, with respect to the Company, AHM and
New Holdco, and means, with respect to AHM or New Holdco, the Company.
(o) "Third Party" means any person other than the Company, New
Holdco, AHM and their respective affiliates.
[Remainder of Page Intentionally Left Blank]
IN WITNESS WHEREOF, AHM, New Holdco and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first above written.
AMERICAN HOME MORTGAGE HOLDINGS, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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AHM NEW HOLDCO, INC.,
a Maryland corporation
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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APEX MORTGAGE CAPITAL, INC.,
a Maryland corporation
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
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[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]