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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported) May 5, 1999
IMPAC COMMERCIAL HOLDINGS, INC.
(Name of registrant as specified in its charter)
Maryland 33-0745075
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
1401 Dove Street, Suite 100
Newport Beach, California 92660
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (949) 475-3600
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(Former name or former address, if changed since last report)
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Item 1. Change in Control of Registrant
On May 5, 1999, Impac Commercial Holdings, Inc. (the "Registrant") executed
a stock purchase agreement to issue to Fortress Partners, L.P. ("Fortress")
approximately $12.0 million of Series B Convertible Preferred Stock with a
coupon of 8.5% paid quarterly in arrears. The preferred stock is initially
convertible into 1,683,635 shares of the Registrant's common stock, subject to
adjustment under certain circumstances. The common stock issuable upon
conversion of the Series B Preferred Stock will have registration rights. In
addition, FIC Management, Inc. ("FIC"), an affiliate of Fortress, entered into a
definitive agreement with RAI Advisors, LLC ("RAI") for the assignment of RAI's
rights and interests in the management agreement with the Registrant, providing
for the management of the Registrant. Furthermore, in connection with these
transactions, the submanagement agreement among RAI, Impac Mortgage Holdings,
Inc. ("IMH") and Impac Funding Corporation, IMH's conduit operations ("IFC"),
was terminated and a new submanagement agreement was entered into between FIC
and IFC, providing for the subcontracting of the management services to the
Registrant. The Right of First Refusal Agreement among the Registrant, RAI, IMH,
IFC and Impac Commercial Capital Corporation was terminated. Lastly, James
Walsh, Timothy R. Busch, Stephan R. Peers and Thomas J. Poletti resigned as
Directors of the Registrant and Wesley R. Edens, Robert I. Kauffman and
Christopher W. Mahowald were appointed onto the Board of Directors. Joseph R.
Tomkinson and Frank P. Filipps remain as Directors. The executive officers of
the Registrant resigned as a group effective May 5, 1999 and the new Board
appointed Mr. Edens as the Registrant's new Chief Executive Officer and other
officers of Fortress as officers the Registrant.
The Registrant has undertaken to recommend the Messrs. Edens, Kauffman,
Mahowald, Tomkinson and Filipps for election to the Board of Directors in the
Registrant's proxy statement to be distributed with respect to the next annual
meeting of the stockholders of the Registrant.
Item 5. Other Events
On May 15, 1999, the Registrant and FIC issued a joint press release
announcing completion of Fortress' equity investment in the Registrant and FIC's
assumption of management responsibility for the Registrant. A copy of the press
release is attached as Exhibit 99.1 to this Form 8-K and is incorporated herein
by reference.
Item 7. Financial Statements and Exhibits
(c) Exhibits
3.1 Articles Supplementary
10.1 Stock Purchase Agreement dated May 5, 1999 between Fortress
Partners, L.P. and the Registrant
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10.2 Amended and Restated Management Agreement dated May 5, 1999 between
FIC Management, Inc. and the Registrant
10.3 Submanagement Agreement dated May 6, 1999 between FIC Management,
Inc. and Impac Funding Corporation
10.4 Registration Rights Agreement dated May 5, 1999 between Fortress
Partners, L.P. and the Registrant
99.1 Press Release dated May 6, 1999
99.2 Risk Factor
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, hereunto duly authorized.
Date: May 20, 1999
IMPAC COMMERCIAL HOLDINGS, INC.
BY: /s/ Randal A. Nardone
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Randal A. Nardone
Secretary
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EXHIBIT 3.1
ARTICLES SUPPLEMENTARY
OF
SERIES B 8.5% CUMULATIVE CONVERTIBLE PREFERRED STOCK
OF
IMPAC COMMERCIAL HOLDINGS, INC.
Impac Commercial Holdings, Inc., a corporation organized and existing
under the laws of the State of Maryland (the "Corporation"), hereby certifies to
the State Department of Assessments and Taxation of Maryland that:
FIRST: Pursuant to the authority granted to and vested in the Board of
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Directors of the Corporation (the "Board of Directors") in accordance with
Article VI of the charter of the Corporation, including these Articles
Supplementary (the "Charter"), the Board of Directors adopted resolutions
reclassifying 479,999 shares (the "Shares") of Preferred Stock (as defined in
the Charter) as a separate series of stock, Series B 8.5% Cumulative Convertible
Preferred Stock, $.01 par value per share (the "Series B Preferred Stock"), with
the preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends or other distributions, qualifications, and terms
and conditions of redemption set forth below. Upon any restatement of the
Charter, the immediately following heading and Sections 1 through 10 of this
Article FIRST shall become Section 6.10 of Article VI of the Charter with any
necessary or appropriate changes to the enumeration or lettering of the sections
or subsections hereof.
Series B 8.5% Cumulative Convertible Preferred Stock
----------------------------------------------------
Section 1. Definitions. Unless the context otherwise requires, the terms
defined in this Section 1 shall have, for all purposes of these Articles
Supplementary, the meanings herein specified (with terms defined in the singular
having comparable meanings when used in the plural).
"Act" shall mean the Securities Act of 1933, as amended.
"affiliate" of a person means a person that directly, or indirectly through
one or more intermediaries, controls or is controlled by, or is under common
control with, the person specified.
"AMEX" shall mean the American Stock Exchange.
"Board of Directors" shall mean the Board of Directors of the Corporation
or any committee authorized by such Board of Directors to perform any of its
responsibilities with respect to the Series B Preferred Stock.
"Business Day" shall mean any day other than a Saturday, Sunday or a day on
which state or federally chartered banking institutions in New York, New York
are not required to be open.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Common Stock" shall mean the common stock, $.01 par value per share, of
the Corporation or such shares of the Corporation's capital stock into which
outstanding shares of Common Stock shall be reclassified.
"Constituent Person" shall have the meaning set forth in subsection (d) of
Section 8.
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"Conversion Date" means the date on which a Series B Holder has delivered
written notice to the Corporation that such Series B Holder elects to convert
Series B Preferred Stock into Common Stock, together with the certificate
evidencing such shares of Series B Preferred Stock.
"Conversion Price" shall mean the conversion price per share of Common
Stock at which shares of the Series B Preferred Stock is convertible into shares
of Common Stock, as such Conversion Price may be adjusted pursuant to Section 8.
The initial Conversion Price shall be $7.1274207 (equivalent to a conversion
rate of 3.50758 shares of Common Stock for each share of Series B Preferred
Stock).
"Current Market Price" of publicly traded Common Stock or any other class
of shares or other security of the Corporation or any other issuer for any day
shall mean the last reported sales price, regular way, on such day or, if no
sale takes place on such day, the average of the reported closing bid and asked
prices on such day, regular way, in either case as reported on the AMEX or, if
such security is not listed or admitted for trading on the AMEX, on the
principal national securities exchange on which such security is listed or
admitted for trading or, if not listed or admitted for trading on any national
securities exchange, on the Nasdaq National Market or, if such security is not
quoted on the Nasdaq National Market, the average of the closing bid and asked
prices on such day in the over-the-counter market as reported by Nasdaq or, if
bid and asked prices for such security on such day shall not have been reported
through Nasdaq, the average of the bid and asked prices on such day as furnished
by any AMEX member firm regularly making a market in such security and selected
for such purpose by the Chief Executive Officer of the Corporation or the Board
of Directors or, if such security is not so listed or quoted, as determined in
good faith at the sole discretion of the Chief Executive Officer of the
Corporation or the Board of Directors, which determination shall be final,
conclusive and binding.
"Distribution Payment Date" shall have the meaning set forth in Section 4.
"Distribution Period" shall have the meaning set forth in Section 4.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" shall mean the fair market value as determined in good
faith at the sole discretion of the Chief Executive Officer or the Board of
Directors, which determination shall be final, conclusive and binding.
"Issue Date" shall mean the first date on which Series B Preferred Stock is
issued and sold.
"Junior Shares" shall have the meaning set forth in Section 3.
"Liquidation Preference" means $25.00 per share of Series B Preferred
Stock, plus accumulated and unpaid distributions (whether or not earned or
declared) thereon.
"Management Agreement" shall mean that agreement, as may be amended from
time to time, dated as of August 4, 1997, between the Corporation and RAI
Advisor, LLC, which agreement is proposed to be assigned by RAI Advisors, LLC to
Fortress Investment Group LLC or an affiliate of Fortress Investment Group LLC.
"Non-Electing Share" shall have the meaning set forth in subsection (d) of
Section 8.
"Ownership Limitation" means the limitation on ownership of the
Corporation's shares (or deemed ownership by virtue of the attribution
provisions of the Code) set forth in Article VII, Section 7.1 of the Charter.
"Parity Shares" shall have the meaning set forth in Section 3.
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"Person" shall mean an individual, corporation, partnership, estate, trust
(including a trust qualified under Section 401(a) or 501(c)(17) of the Code), a
portion of a trust permanently set aside for or to be used exclusively for the
purposes described in Section 642(c) of the Code, association, private
foundation within the meaning of Section 509(a) of the Code, joint stock company
or other entity, and also includes a group as that term is used for purposes of
Section 13(d)(3) of the Exchange Act.
"Preferred Stock" shall mean preferred stock, $.01 par value per share, of
the Corporation.
"Record Date" shall have the meaning set forth in Section 4.
"Redemption Price" shall equal $25.00 per share of Series B Preferred
Stock, plus dividends accumulated and unpaid to the redemption date (whether or
not declared) without interest.
"REIT" shall mean a real estate investment trust under Section 856 of the
Code.
"Series B Holder" means a holder of Series B Preferred Stock.
"Series B Preferred Stock" shall mean the Corporation's Series B 8.5%
Cumulative Convertible Preferred Stock, $.01 par value per share, liquidation
preference $25.00 per share.
"Series B Preferred Stock Redemption Date" shall have the meaning set forth
in subsection (e) of Section 5.
"Set apart for payment" shall be deemed to include, without any action
other than the following, the recording by the Corporation in its accounting
ledgers of any accounting or bookkeeping entry which indicates, pursuant to a
declaration of distributions by the Board of Directors, the allocation of funds
to be paid on any class or series of shares; provided, however, that if any
funds for any class or series of Junior Shares or any Parity Shares are placed
in a separate account of the Corporation or delivered to a disbursing, paying or
other similar agent, then "set apart for payment" with respect to the Series B
Preferred Stock shall mean placing such funds in a separate account or
delivering such funds to a disbursing, paying or other similar agent.
"Trading Day" shall mean any day on which the securities in question are
traded on the AMEX, or if such securities are not listed or admitted for trading
on the AMEX, on the principal national securities exchange on which such
securities are listed or admitted, or if not listed or admitted for trading on
any national securities exchange, on the Nasdaq National Market, or if such
securities are not quoted on such Nasdaq National Market, in the applicable
securities market in which the securities are traded.
"Transaction" shall have the meaning set forth in subsection (d) of Section
8.
"Transfer Agent" means Boston Equiserve, L.P., Boston, Massachusetts or
such other agent or agents of the Corporation as may be designated by the Board
of Directors or its designee as the transfer agent for the Series B Preferred
Stock.
Section 2. Designation and Amount. There shall be a series of Preferred
Stock that shall be designated as "Series B 8.5% Cumulative Convertible
Preferred Stock" and the number of shares constituting such series shall be
479,999. Such number of shares may be increased or decreased by resolution of
the Board of Directors, subject to the terms of Section 7; provided, however,
that no decrease shall reduce the number of shares of Series B Preferred Stock
to less than the number of shares then issued and outstanding plus the number of
shares issuable upon exercise of outstanding rights, options or warrants or upon
conversion of outstanding securities issued by the Corporation.
Section 3. Ranking. In respect of rights to receive distributions and to
participate in distributions or payments in the event of any liquidation,
dissolution or winding up of the Corporation, the Series B Preferred Stock shall
rank pari
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passu with any other shares of preferred stock of the Corporation that the Board
of Directors of the Corporation shall designate as ranking pari passu (the
"Parity Shares"), and will rank senior to the Common Stock, the Series A Junior
Participating Preferred Stock, $.01 par value per share, and any other class or
series of shares of the Corporation that the Board of Directors has not
designated as ranking senior to or pari passu with the Series B Preferred Stock
(collectively, the "Junior Shares"). So long as any shares of Series B Preferred
Stock are outstanding, the Corporation is prohibited from issuing any new shares
of Preferred Stock which are not junior to the Convertible Preferred Stock as to
the payment of dividends or amounts upon liquidation, dissolution and winding
up.
Section 4. Dividends and Distributions. Subject to the prior and superior
rights of the holders of any shares of any series of Preferred Stock ranking
prior and superior to the Series B Preferred Stock with respect to dividends,
the holders of the then outstanding shares of Series B Preferred Stock shall be
entitled to receive, when, as and if authorized and declared by the Board of
Directors out of any funds legally available therefor cumulative cash dividends
in an amount per share equal to $0.53125 per quarter (equal to a rate of 8.5% of
the $25.00 liquidation preference (the "Liquidation Preference") per annum).
Quarterly dividends on the Series B Preferred Stock are payable as authorized by
the Board of Directors, or if not authorized, on the fourth Tuesday of January,
April, July and October of each year, commencing on or about July 27, 1999 (each
such day being hereinafter called a "Distribution Payment Date" and each
calendar quarter immediately preceding a Distribution Payment Date being
hereinafter called the "Distribution Period" corresponding to such Distribution
Payment Date), with respect to each Distribution Period, to stockholders of
record of the Series B Preferred Stock as they appear on the stock transfer
records of the Corporation at the close of business on the dividend record dates
authorized by the Board of Directors, or if none are authorized, on the second
Friday of January, April, July and October (each, a "Record Date"). The amount
of any distribution payable for the initial Distribution Period and for any
other Distribution Period greater or less than a full calendar quarter shall be
prorated and computed on the basis of a 360-day year of twelve 30-day months.
Distributions on each share of Series B Preferred Stock shall accumulate from
and including the date of original issuance thereof, whether or not (1)
distributions on such shares are earned or declared or (2) on any Distribution
Payment Date there shall be funds legally available for the payment of
distributions. Distributions paid on the Series B Preferred Stock in an amount
less than the total amount of such distributions at the time accumulated and
payable on such shares shall be allocated pro rata on a per share basis among
all such shares of Series B Preferred Stock at the time outstanding.
Distributions on account of any arrearage for any past Distribution Periods may
be declared and paid at any time, without reference to any regular distribution,
as may be fixed by the Board of Directors.
The amount of any distributions accumulated on any shares of Series B
Preferred Stock at any Distribution Payment Date shall be the amount of any
unpaid distributions accumulated thereon through and during such Distribution
Period, to and including such Distribution Payment Date, whether or not earned
or declared, and the amount of distributions accumulated on any shares of Series
B Preferred Stock at any date other than a Distribution Payment Date shall be
equal to the sum of the amount of any unpaid distributions accumulated thereon,
to and including the last preceding Distribution Payment Date, whether or not
earned or declared. Accumulated but unpaid distributions will not bear interest
and the holders of the Series B Preferred Stock will not be entitled to any
distributions in excess of full cumulative distributions as described herein.
So long as any shares of Series B Preferred Stock are outstanding, no full
distributions shall be declared or paid or set apart for payment on any other
class or series of Parity Shares or Junior Shares for any period unless full
cumulative distributions on the Series B Preferred Stock have been declared and
paid or declared and a sum sufficient for the payment thereof has been set apart
for payment on the Series B Preferred Stock for all past distribution periods
and the then current distribution period. If distributions are not paid in full,
or not declared in full and a sum sufficient for such full payment is not set
apart for payment thereof, upon the Series B Preferred Stock and any class or
series of Parity Shares, no distributions may be paid on Junior Shares and all
distributions declared upon Series B Preferred Stock and upon any other class or
series of Parity Shares shall be paid or declared pro rata so that in all cases
the amount of distributions paid or declared per share on the Series B Preferred
Stock and Parity Shares shall bear to each other the same ratio that accumulated
distributions per share, including distributions accumulated or in arrears, if
any, on the Series B Preferred Stock and Parity Shares bear to each other.
Except as provided in the preceding sentence, unless full
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cumulative distributions on the Series B Preferred Stock have been paid or
declared and a sum sufficient for such full payment set apart for payment for
all past distribution periods and the then current distribution period, no
distributions (other than distributions in shares of Common Stock or in any
other Junior Shares) shall be declared or paid or set apart for payment or other
distribution upon the Corporation's Common Stock, or, except as provided above,
on any other Junior Shares or Parity Shares, nor shall any Common Stock or any
other Junior Shares or Parity Shares be redeemed, purchased or otherwise
acquired for any consideration (or any payment made to or available for a
sinking fund for the redemption of any such shares) by the Corporation or any
subsidiary of the Corporation (except in connection with a redemption or
purchase or other acquisition of Common Stock made for purposes of an employee
incentive or benefit plan, a conversion into or exchange for Junior Shares or
redemptions for the purpose of preserving the Corporation's compliance with
Section 856(a)(6) and 856(h) of the Code. Any distribution payment made on the
Series B Preferred Stock shall first be credited against the earliest
accumulated but unpaid distribution due with respect to such shares which
remains payable. Holders of the Series B Preferred Stock shall not be entitled
to any distributions, whether payable in cash, property or shares, in excess of
full accumulated distributions as herein provided. No interest or sum of money
in lieu of interest shall be payable in respect of any distribution payment or
payments on the Series B Preferred Stock that may be in arrears.
Except as provided in these Articles Supplementary, the Series B Preferred
Stock shall not be entitled to participate in the earnings or assets of the
Corporation.
Section 5. Redemption.
(a) Subject to subsection (c) of this Section 5, the Series B Preferred
Stock shall be redeemable at the Redemption Price by the Corporation at
any time commencing as of the Issue Date through the fifth anniversary
from the Issue Date, if the closing sales price of the Common Stock, as
reported by the principal stock exchange or over-the-counter trading
market where the Common Stock is listed, averages in excess of 150% of
the Conversion Price for a period of at least 20 consecutive Trading
Days ending within 30 days prior to the notice of redemption, payable
in cash.
(b) The Shares are redeemable at any time at the Redemption Price if the
Board of Directors deems it necessary to maintain the Corporation's
compliance with Section 856(a)(6) and 856(h) of the Code, payable in
cash.
(c) On and after the fifth anniversary of the Issue Date of Series B
Preferred Stock and upon giving of notice as provided below, the Series
B Preferred Stock may be redeemed at the option of the Corporation, in
whole or from time to time in part, at the Redemption Price, payable in
cash.
(d) If fewer than all of the outstanding shares of Series B Preferred Stock
is to be redeemed, the shares to be redeemed will be determined pro
rata or by lot or in such other manner as prescribed by the Board of
Directors in its sole discretion. In the event that such redemption is
to be by lot, if as a result of such redemption any holder of Series B
Preferred Stock would own shares in excess of the Ownership Limitation,
because such holder's shares of Series B Preferred Stock were not
redeemed, or were only redeemed in part, then, except in certain
instances including pursuant to Section 7.2.7 of Article 7 of the
Charter, the Corporation may redeem the requisite number of shares of
Series B Preferred Stock of such holder such that he will not own
shares in excess of the Ownership Limitation subsequent to such
redemption. In such case, a new certificate shall be issued
representing any unredeemed Series B Preferred Stock without cost to
the holder thereof.
(e) Notice of any redemption will be given by mailing of a notice by the
Corporation, postage prepaid, not less than 30 nor more than 60 days
prior to the redemption date, addressed to the respective holders of
record of the Series B Preferred Stock to be redeemed at their
respective addresses as they appear on the stock transfer records of
the Corporation. The notice provided shall state the
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Corporation's election to redeem such shares, stating (1) the date
fixed for redemption thereof (the "Series B Preferred Stock Redemption
Date"), (2) the Redemption Price, (3) the number of shares to be
redeemed (and, if fewer than all the shares of Series B Preferred Stock
are to be redeemed, the number of shares to be redeemed from such
holder), (4) the place(s) where the Series B Preferred Stock
certificates are to be surrendered for payment, (5) that distributions
on the Series B Preferred Stock will cease to accumulate on the Series
B Preferred Stock Redemption Date, and (6) the date on which such
holder's conversion rights as to the Series B Preferred Stock shall
terminate in accordance with Section 8(a).
(f) On or after the Series B Preferred Stock Redemption Date, each holder
of Series B Preferred Stock to be redeemed must present and surrender
his Series B Preferred Stock certificate(s) to the Corporation at the
place designated in such notice and thereupon the Redemption Price of
such shares will be paid to or on the order of the person whose name
appears on such Series B Preferred Stock certificate(s) as the owner
thereof and each such Series B Preferred Stock certificate(s)
surrendered will be canceled. From and after the Series B Preferred
Stock Redemption Date, all distributions on the Series B Preferred
Stock designated for redemption will cease to accumulate and all rights
of the holders thereof (including conversion rights), except the right
to receive the redemption price thereof (including all accumulated and
unpaid distributions up to the Series B Preferred Stock Redemption
Date), will cease and terminate, and such shares will not thereafter be
transferred (except with the consent of the Corporation) in the stock
transfer records of the Corporation, and such shares shall not be
deemed to be outstanding for any purpose whatsoever. At its election,
the Corporation, prior to the Series B Preferred Stock Redemption Date,
may irrevocably deposit the Redemption Price of the Series B Preferred
Stock so called for redemption in trust for the holders thereof with a
bank or trust company, in which case such notice to holders of the
Series B Preferred Stock to be redeemed will (1) state the date of such
deposit, (2) specify the office of such bank or trust company as the
place of payment of the Redemption Price and (3) call upon such holders
to surrender the Series B Preferred Stock certificates representing
such shares at such place on or about the date fixed in such redemption
notice (which may not be later than the Series B Preferred Stock
Redemption Date) against payment of the Redemption Price. Any monies so
deposited which remain unclaimed by the holders of the Series B
Preferred Stock at the end of two years after the Series B Preferred
Stock Redemption Date will be returned by such bank or trust company to
the Corporation.
(g) The holders of Series B Preferred Stock at the close of business on a
Record Date will be entitled to receive the distribution payable with
respect to such Series B Preferred Stock on the corresponding
Distribution Payment Date notwithstanding the redemption thereof
between such Record Date and the corresponding Distribution Payment
Date or the Corporation's default in the payment of the distribution
due. Except as provided above, the Corporation will make no payment or
allowance for unpaid distributions, whether or not in arrears, on
Series B Preferred Stock which have been called for redemption.
Any Common Stock issued upon redemption of the Series B Preferred
Stock shall be validly issued, fully paid and nonassessable.
The Series B Preferred Stock has no stated maturity date and is not
subject to any sinking fund or mandatory redemption provisions.
Section 6. Liquidation Preference.
(a) Upon the voluntary or involuntary dissolution, liquidation or winding
up of the Corporation, the holders of the Series B Preferred Stock then
outstanding shall be entitled to receive and to be paid out of the
assets of the Corporation legally available for distribution to its
stockholders, before any
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payment or distribution shall be made on any Junior Shares, the amount
of $25.00 per share of Series B Preferred Stock, plus accumulated and
unpaid distributions (whether or not earned or declared) thereon.
(b) After the payment to the holders of the Series B Preferred Stock of
the full preferential amounts provided for in this Section 6, the
holders of the Series B Preferred Stock as such shall have no right or
claim to any of the remaining assets of the Corporation.
(c) If, upon any voluntary or involuntary dissolution, liquidation, or
winding up of the Corporation, the preference amounts payable with
respect to the Series B Preferred Stock and any Parity Shares are not
paid in full, no payment will be made to any holder of Junior Shares
and the holders of the Series B Preferred Stock and of such Parity
Shares will share ratably in any such distribution of assets of the
Corporation in proportion to the full respective preferential amounts
provided for in this Section 6 to which they are entitled.
(d) None of (1) the sale or transfer of all or substantially all the
property or business of the Corporation; (2) a statutory share
exchange by the Corporation; or (3) the merger or consolidation of the
Corporation into or with any other entity or the merger or
consolidation of any other entity into or with the Corporation, shall
be deemed to be a dissolution, liquidation or winding up, voluntary or
involuntary, for the purposes of this Section 6.
(e) In determining whether a distribution (other than upon voluntary or
involuntary liquidation), by dividend, redemption or other acquisition
of shares of the Corporation or otherwise, is permitted under Maryland
law, amounts that would be needed, if the Corporation were to be
dissolved at the time of the distribution, to satisfy the preferential
rights upon dissolution of holders of Series B Preferred Stock will
not be added to the Corporation's total liabilities.
Section 7. Voting Rights.
Except as provided below, the holders of the Series B Preferred Stock shall
not be entitled to vote at any meeting of the stockholders for any purpose or
otherwise to participate in any action taken by the Corporation or the
stockholders thereof, or to receive notice of any meeting of stockholders.
(a) In any matter in which the holders of Series B Preferred Stock are
entitled to vote (as expressly provided herein), including any action
by written consent, each share of Series B Preferred Stock shall be
entitled to one vote (except as described in subparagraph (b)).
(b) In the event that (1) the Management Agreement with Fortress is
terminated without cause (as defined therein) or (2) the Corporation
fails to pay two consecutive dividend payments on the Series B
Preferred Stock, or fails to pay an aggregate of six dividend payments
on the Series B Preferred Stock, whether or not consecutive, the
Series B Preferred Stock shall vote with the Common Stock on all
matters submitted to a vote of holders of Common Stock, with the
Series B Preferred Stock and Common Stock voting together as a single
class and with each share of the Series B Preferred Stock being
entitled to a number of votes equal to the number of shares of Common
Stock into which it is convertible as of the record date for any
stockholders meeting at which it is entitled to be voted as a result
of this subparagraph (b). The Series B Preferred Stock shall also vote
together as a class with the Common Stock on any proposal for the
Corporation to merge with or into, or consolidate with, one or more
other entities, sell all or substantially all of the assets of the
Corporation, or participate in a share exchange or any other
extraordinary transaction, with each share of Series B Preferred Stock
entitled to the number of votes equal to the number of shares of
Common Stock into which it
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is convertible as of the record date for the stockholder meeting at
which such proposal will be submitted.
(c) Notwithstanding the foregoing, as long as any Series B Preferred Stock
remains outstanding, in addition to any other vote or consent required
by law or the Charter, the Corporation will not, without the
affirmative vote or consent of the holders of at least two-thirds of
the shares of Series B Preferred Stock outstanding at the time, given
in person or by proxy, either in writing or at a meeting (such series
voting separately as a class), (1) authorize or create any class or
series of shares ranking on a parity with or senior to the Series B
Preferred Stock with respect to the payment of distributions or the
distribution of assets upon liquidation, dissolution or winding up, or
reclassify any authorized shares of the Corporation into such shares,
or create, authorize or issue any obligation or security convertible
into or evidencing the right to purchase any such shares; (2) amend or
alter the rights and preferences in these Articles Supplementary of
the Series B Preferred Stock; (3) increase the authorized number of
shares of Common Stock; (4) issue convertible securities having a
conversion price less than the then current Conversion Price of the
Series B Preferred Stock; or (5) amend, alter or repeal the provisions
of the Corporation's Bylaws, or Charter in connection with any merger
or consolidation, or otherwise (an "Event"), so as to materially and
adversely affect any right, preference, privilege or voting power of
the Series B Preferred Stock (as determined by the Board of Directors
in good faith); provided, however, with respect to the occurrence of
any of the Events set forth in (5) above, so long as the Series B
Preferred Stock (or shares into which the Series B Preferred Stock
have been converted in any successor entity to the Corporation)
remains outstanding and immediately after an Event, there are
outstanding no shares and no securities convertible into shares of any
class of stock ranking as to distribution rights or liquidation
preference senior to or on parity with the Series B Preferred Stock
or, if the Corporation is not the surviving entity, is converted into
a security with substantially identical rights, preferences,
privileges and voting power and immediately after an Event, there are
outstanding no shares and no securities convertible into shares of any
class of stock ranking as to distribution rights or liquidation
preference senior to or on parity with such substantial identical
security, then the occurrence of any such Event shall be deemed not to
materially and adversely affect such rights, preferences, privileges
or voting power of the Series B Preferred Stock; and provided further
that (x) any increase in the amount of the authorized Preferred Stock
or the designation or issuance of any additional Series B Preferred
Stock, or (y) any increase in the amount of authorized Series B
Preferred Stock or any other Preferred Stock of any other series, in
each case ranking on a parity with or junior to the Series B Preferred
Stock with respect to payment of distributions or the distribution of
assets upon liquidation, dissolution or winding up, shall not be
deemed to materially and adversely affect such rights, preferences,
privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding Series B Preferred Stock shall have been redeemed
or called for redemption and sufficient funds to effect such redemption shall
have been deposited in accordance with Section 5.
Section 8. Conversion.
Holders of Series B Preferred Stock shall have the right to convert all of
such shares into Common Stock at one time, as follows:
(a) Subject to and upon compliance with the provisions of this Section 8,
a holder of Series B Preferred Stock shall have the right, at its
option, at any time to convert such shares into the number of fully
paid and nonassessable shares of Common Stock obtained by dividing the
aggregate Liquidation Preference of such shares by the Conversion
Price (as in effect at the time and on the date provided for in the
last paragraph of subsection (b) of this Section 8) by surrendering
such shares to be
8
<PAGE>
converted, such surrender to be made in the manner provided in
subsection (b) of this Section 8; provided, however, that the right to
convert shares called for redemption pursuant to Section 5 shall
terminate at the close of business on the Series B Preferred Stock
Redemption Date fixed for such redemption, unless the Corporation
shall default in making payment of any amounts payable upon such
redemption under Section 5 hereof.
(b) In order to exercise the conversion right, the holder of Series B
Preferred Stock to be converted shall surrender the certificate
evidencing such shares, duly endorsed or assigned to the Corporation
or in blank, at the office of the Transfer Agent, accompanied by
written notice to the Corporation that the holder thereof elects to
convert such Series B Preferred Stock. Unless the shares issuable on
conversion are to be issued in the same name as the name in which such
shares of Series B Preferred Stock are registered, each share
surrendered for conversion shall be accompanied by instruments of
transfer, in form satisfactory to the Corporation, duly executed by
the holder or such holder's duly authorized agent and an amount
sufficient to pay any transfer or similar tax (or evidence reasonably
satisfactory to the Corporation demonstrating that such taxes have
been paid).
Holders of Series B Preferred Stock at the close of business on a
Record Date shall be entitled to receive the distribution payable on
such shares on the corresponding Distribution Payment Date
notwithstanding the conversion thereof following such Record Date and
prior to such Distribution Payment Date. However, Series B Preferred
Stock surrendered for conversion during the period between the close
of business on any Record Date and the opening of business on the
corresponding Distribution Payment Date (except shares converted after
the issuance of a notice of redemption with respect to a Series B
Preferred Stock Redemption Date during such period or coinciding with
such Distribution Payment Date, such Series B Preferred Stock being
entitled to such distribution on the Distribution Payment Date) must
be accompanied by payment of an amount equal to the distribution
payable on such shares on such Distribution Payment Date. A holder of
Series B Preferred Stock on a Record Date who (or whose transferee)
tenders any such shares for conversion into Common Stock on such
Distribution Payment Date will receive the distribution payable by the
Corporation on such Series B Preferred Stock on such date, and the
converting holder need not include payment of the amount of such
distribution upon surrender of Series B Preferred Stock for
conversion. The Corporation shall make further payment or allowance
for, and a converting holder shall be entitled to, unpaid
distributions in arrears (excluding the then-current quarter) on
converted shares and for distributions on the Common Stock issued upon
such conversion.
As promptly as practicable after the surrender of certificates
representing Series B Preferred Stock as aforesaid, the Corporation
shall issue and shall deliver at such office to such holder, or on his
written order, a certificate or certificates representing the number
of full shares of Common Stock issuable upon the conversion of such
shares in accordance with the provisions of this Section 8, and any
fractional interest in respect of a share of Common Stock arising upon
such conversion shall be settled as provided in subsection (c) of this
Section 8. Each conversion shall be deemed to have been effected
immediately prior to the close of business on the date on which the
certificates representing Series B Preferred Stock shall have been
surrendered and such notice (and if applicable, payment of an amount
equal to the distribution payable on such shares) received by the
Corporation as aforesaid, and the person or persons in whose name or
names any certificate or certificates representing Common Stock shall
be issuable upon such conversion shall be deemed to have become the
holder or holders of record of the shares represented thereby at such
time on such date, and such conversion shall be at the Conversion
Price in effect at such time and on such date, unless the stock
transfer books of the Corporation shall be closed on that date, in
which event such person or persons shall be deemed to have become such
holder or holders of record at the opening of business on the next
succeeding day on which such stock transfer books are open, but such
conversion shall be at the Conversion Price
9
<PAGE>
in effect on the date on which such certificates representing Series B
Preferred Stock have been surrendered and such notice received by the
Corporation.
(c) No fractional shares or scrip representing fractions of Common Stock
shall be issued upon conversion of the Series B Preferred Stock.
Instead of any fractional interest in a share of Common Stock that
would otherwise be deliverable upon the conversion of a share of
Series B Preferred Stock, the Corporation shall pay to the holder of
such share an amount in cash based upon the Current Market Price of
Common Stock on the Trading Day immediately preceding the date of
conversion. If more than one share of Series B Preferred Stock shall
be surrendered for conversion at one time by the same holder, the
number of whole shares of Common Stock issuable upon conversion
thereof shall be computed on the basis of the aggregate number of
shares of Series B Preferred Stock so surrendered.
(d) The Conversion Price of the securities into which the Series B
Preferred Stock is convertible shall be adjusted from time to time as
follows:
(1) if the Corporation shall be a party to any transaction (including
without limitation a merger, consolidation, statutory share
exchange, self tender offer for all or substantially all of the
Common Stock, sale of all or substantially all of the
Corporation's assets or recapitalization of the Common Stock
(each of the foregoing being referred to herein as a
"Transaction"), in each case as a result of which Common Stock
shall be converted into the right to receive shares, stock,
securities or other property (including cash or any combination
thereof), each share of Series B Preferred Stock which is not
converted into the right to receive shares, stock, securities or
other property in connection with such Transaction shall
thereafter be convertible into the kind and amount of shares,
stock, securities and other property (including cash or any
combination thereof) receivable upon the consummation of such
Transaction by a holder of that number of shares of Common Stock
into which one share of Series B Preferred Stock was convertible
immediately prior to such Transaction, assuming such holder of
Common Stock (1) is not a Person with which the Corporation
consolidated or into which the Corporation merged or which merged
into the Corporation or to which such sale or transfer was made,
as the case may be (a "Constituent Person"), or an affiliate of a
Constituent Person and (2) failed to exercise his or her rights
of election, if any, as to the kind or amount of shares, stock,
securities and other property (including cash) receivable upon
consummation of such Transaction (each a "Non-Electing Share")
(provided that if the kind or amount of shares, stock, securities
and other property (including cash) receivable upon consummation
of such Transaction by each Non-Electing Share is not the same
for each Non-Electing Share, then the kind and amount of shares,
stock, securities and other property (including cash) receivable
upon consummation of such Transaction for each Non-Electing Share
shall be deemed to be the kind and amount so receivable per share
by a plurality of the Non-Electing Shares). The Corporation shall
not be a party to any Transaction unless the terms of such
Transaction are consistent with the provisions of this subsection
(d), and it shall not consent or agree to the occurrence of any
Transaction until the Corporation has entered into an agreement
with the successor or purchasing entity, as the case may be, for
the benefit of the holders of the Series B Preferred Stock, that
will require such successor or purchasing entity, as the case may
be, to make provision in its certificate or articles of
incorporation or other constituent documents to the end that the
provisions of this subsection (d) shall thereafter
correspondingly be made applicable as nearly as may reasonably
be, in relation to any shares of stock or other securities or
property thereafter deliverable upon conversion of the Series B
Preferred Stock. The provisions of this subsection (d) shall
similarly apply to successive Transactions.
10
<PAGE>
(2) if the Corporation shall at any time or from time to time after
the initial issuance of the Series B Preferred Stock effect a
subdivision of the outstanding Common Stock, the Conversion Price
then in effect immediately before that subdivision shall be
proportionately decreased; conversely, if the Corporation shall
at any time or from time to time after the initial issuance of
the Series B Preferred Stock reduce the outstanding shares of
Common Stock by combination or otherwise, the Conversion Price
then in effect immediately before the combination shall be
proportionately increased. Any adjustment under this subsection
(d)(2) shall become effective at the close of business on the
date the subdivision or combination becomes effective.
(3) if the Corporation at any time or from time to time after the
initial issuance of the Series B Preferred Stock shall make or
issue, or fix a record date for the determination of holders of
Common Stock or other securities entitled to receive, a dividend
or other distribution payable in additional shares of Common
Stock, then and in each such event the Conversion Price for the
Series B Preferred Stock then in effect shall be decreased as of
the time of such issuance or, in the event such a record date
shall have been fixed, as of the close of business on such record
date, by multiplying the Conversion Price for the Series B
Preferred Stock then in effect by a fraction:
(a) the numerator of which shall be the total number of shares
of Common Stock issued and outstanding immediately prior to
the time of such issuance or the close of business on such
record date; and
(b) the denominator of which shall be the total number of shares
of Common Stock issued and outstanding immediately prior to
the time of such issuance or the close of business on such
record date, plus the number of shares of Common Stock
issuable in payment of such dividend or distribution;
provided, however, if such record date shall have been fixed
and such dividend is not fully paid or if such distribution
is not fully made on the date fixed therefor, the Conversion
Price for the Series B Preferred Stock shall be recomputed
accordingly as of the close of business on such record date
and thereafter the Conversion Price for the Series B
Preferred Stock shall be adjusted pursuant to this
subsection (d)(3)(b) as of the time of actual payment of
such dividends or distributions.
(4) if the Corporation at any time or from time to time after the
initial issuance of the Series B Preferred Stock shall make or
issue, or fix a record date for the determination of holders of
Common Stock entitled to receive, a dividend or other
distribution payable in securities of the Corporation other than
shares of Common Stock or securities of any other entity
(including a subsidiary of the Corporation) or other property,
then and in each such event provision shall be made so that the
holders of Series B Preferred Stock shall receive upon conversion
thereof in addition to the number of shares of Common Stock
receivable thereupon, the amount of securities of the Corporation
or such other entity or other property that they would have
received had their Series B Preferred Stock been converted into
Common Stock on the date of such event and had thereafter, during
the period from the date of such event to and including the
conversion date, retained such securities receivable by them as
aforesaid during such period giving application to all
adjustments called for during such period under this Section 8
with respect to the rights of the holders of the Series B
Preferred Stock.
(5) If the Common Stock issuable upon the conversion of the Series B
Preferred Stock shall be changed into the same or a different
number of shares of any class or classes of stock,
11
<PAGE>
whether by capital reorganization, reclassification or otherwise
(other than a subdivision or combination of shares or stock
dividend provided for above, or a reorganization, merger,
consolidation or sale of assets provided for elsewhere in this
Section 8), then and in each such event the holder of each share
of Series B Preferred Stock shall have the right thereafter to
convert such share into the kind and amounts of shares of stock
and other securities and property receivable upon such
reorganization, reclassification or other change, by holders of
the number of shares of Common Stock into which such shares of
Series B Preferred Stock might have been converted immediately
prior to such reorganization, reclassification or change, all
subject to further adjustment as provided herein.
(6) (a) If and whenever on or after the original date of issuance of
shares of Series B Preferred Stock the Corporation issues or
sells, or in accordance with subparagraph (b) of this
subsection (d)(6) is deemed to have issued or sold, any
Junior Shares for a consideration per share less than the
Conversion Price in effect immediately prior to the time of
such issuance or sale, then forthwith upon such issuance or
sale the Conversion Price will be reduced to an amount
determined by dividing (i) the sum of (A) the product
derived by multiplying the Conversion Price in effect
immediately prior to such issuance or sale by the number of
shares of Common Stock outstanding or deemed to be
outstanding immediately prior to such issuance or sale, plus
(B) the consideration, if any, received by the Corporation
upon such issuance or sale, by (ii) the number of shares of
Common Stock outstanding or deemed to be outstanding
immediately after such issuance or sale.
(b) For purposes of determining the adjusted Conversion Price
under subparagraph (a) of this subsection (d)(6), the
following will be applicable:
(i) If the Corporation in any manner grants any rights or
options to subscribe for or to purchase Junior Shares
or any stock or other securities convertible into or
exchangeable for Common Stock (such rights or options
being herein called "Options" and such convertible or
exchangeable stock or securities being herein called
"Convertible Securities") and the price per share for
which Common Stock is issuable upon the exercise of
such Options or upon conversion or exchange of such
Convertible Securities is less than the Conversion
Price in effect immediately prior to the time of the
granting of such Options, then the total maximum number
of Junior Shares issuable upon the exercise of such
Options or upon conversion or exchange of the total
maximum amount of such Convertible Securities issuable
upon the exercise of such Options will be deemed to be
outstanding and to have been issued and sold by the
Corporation for such price per share. For purposes of
this subparagraph (b), the "price per share for which
Junior Shares are issuable" will be determined by
dividing (A) the total amount, if any, received or
receivable by the Corporation as consideration for the
granting of such Options, plus the minimum aggregate
amount of additional consideration payable to the
Corporation upon exercise of all such Options, plus in
the case of such Options which relate to Convertible
Securities, the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon
the issuance or sale of such Convertible Securities and
the conversion or exchange thereof, by (B) the total
maximum number of Junior Shares issuable upon the
exercise of Options or upon the conversion or exchange
of all such Convertible
12
<PAGE>
Securities issuable upon the exercise of such Options.
No further adjustment of the Conversion Price will be
made when Convertible Securities are actually issued
upon the exercise of such options or when Junior Stock
is actually issued upon the exercise of such Options or
the conversion or exchange of such Convertible
Securities.
(ii) If the Corporation in any manner issues or sells any
Convertible Securities and the price per share for
which Junior Shares are issuable upon such conversion
or exchange is less than the Conversion Price in effect
immediately prior to the time of such issue or sale,
then the maximum number of Junior Shares issuable upon
conversion or exchange of such Convertible Securities
will be deemed to be outstanding and to have been
issued and sold by the Corporation for such price per
share. For the purposes of this paragraph, the "price
per share for which Junior Shares are issuable" will be
determined by dividing (A) the total amount received or
receivable by the Corporation as consideration for the
issue or sale of such Convertible Securities, plus the
minimum aggregate amount of additional consideration,
if any, payable to the Corporation upon the conversion
or exchange thereof, by (B) the total maximum number of
Junior Shares issuable upon the conversion or exchange
of all such Convertible Securities. No further
adjustment of the Conversion Price will be made when
Junior Shares are actually issued upon the conversion
or exchange of such Convertible Securities, and if any
such issuance or sale of such Convertible Securities is
made upon exercise of any Options for which adjustments
of the Conversion Price had been or are to be made
pursuant to other provisions of this Section 8, no
further adjustment of the Conversion Price will be made
by reason of such issue or sale.
(iii) If the purchase price provided for in any Options,
the additional consideration, if any, payable upon the
conversion or exchange of any Convertible Securities,
or the rate at which any Convertible Securities are
convertible into or exchangeable for Junior Shares
change at any time, the Conversion Price in effect at
the time of such change will be readjusted to the
Conversion Price which would have been in effect at
such time had such Options or Convertible Securities
still outstanding provided for such changed purchase
price, additional consideration or changed conversion
rate, as the case may be, at the time initially
granted, issued or sold; provided that if such
adjustment would result in an increase of the
Conversion Price then in effect, such adjustment will
not be effective until 30 days after written notice
thereof has been given by the Corporation to all
holders of shares of Series B Preferred Stock.
(iv) Upon the expiration of any Option or the termination of
any right to convert or exchange any Convertible
Security without the exercise of any such Option or
right, the Conversion Price then in effect hereunder
will be adjusted to the Conversion Price which would
have been in effect at the time of such expiration or
termination had such Option or Convertible Security, to
the extent outstanding immediately prior to such
expiration or termination, never been issued.
13
<PAGE>
(v) If any Junior Shares, Option or Convertible Security is
issued or sold or deemed to have been issued or sold
for cash, the consideration received therefor will be
deemed to be the net amount received by the Corporation
therefor. In case any Junior Shares, Options or
Convertible Securities are issued or sold for a
consideration other than cash, the amount of the
consideration other than cash received by the
Corporation will be the fair value of such
consideration, except where such consideration consists
of securities, in which case the amount of
consideration received by the Corporation will be the
Current Market Price thereof as of the date of receipt.
If any Junior Share, Option or Convertible Security is
issued in connection with any merger in which the
Corporation is the surviving corporation, the amount of
consideration therefor will be deemed to be the fair
value of such portion of the net assets and business of
the non-surviving corporation as is attributable to
such Junior Shares, Options or Convertible Securities,
as the case may be. The fair value of any
consideration other than cash and securities will be
determined in good faith by the Board of Directors of
the Corporation.
(vi) In case any Option is issued in connection with the
issue or sale of other securities of the Corporation,
together comprising one integrated transaction in which
no specific consideration is allocated to such Option
by the parties thereto, the Option will be deemed to
have been issued without consideration.
(vii) The number of Junior Shares outstanding at any given
time does not include shares owned or held by or for
the account of the Corporation or any subsidiary, and
the disposition of any shares so owned or held will be
considered an issuance or sale of Junior Shares.
(viii) If the Corporation takes a record of the holders
of Junior Shares (or any class thereof) for the purpose
of entitling them (A) to receive a dividend or other
distribution payable in Junior Shares, Options or in
Convertible Securities or (B) to subscribe for or
purchase Junior Shares, Options or Convertible
Securities, then for purposes of this Section 8 such
record date will be deemed to be the date of the
issuance or sale of the shares of Junior Stock deemed
to have been issued or sold upon the declaration of
such dividend or upon the making of such other
distribution or the date of the granting of such right
of subscription or purchase, as the case may be.
(ix) Anything herein to the contrary notwithstanding, no
adjustment will be made to the Conversion Price by
reason of (A) the issuance of securities of the
Corporation upon conversion of shares of Series B
Preferred Stock, and (B) the issuance of any shares of
the Corporation's capital stock to employees, officers,
directors and consultants of the Corporation directly
pursuant to options and warrants (or pursuant to stock
purchase or option plans) granted to such persons upon
the approval of the Board of Directors of the
Corporation, (C) the issuance of any shares of the
Corporation's capital stock pursuant to any employee
plan, and (D) any issuances pursuant to any of the
Corporation's dividend reinvestment plans.
14
<PAGE>
(7) No adjustment in the Conversion Price shall be required unless
such adjustment would require a cumulative increase or decrease
of at least 1% in such price; provided, however, that any
adjustments that by reason of this subsection (d)(7) are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment until made; and provided,
further, that any adjustment shall be required and made in
accordance with the provisions of this Section 8 (other than this
subsection (d)(7)) not later than such time as may be required in
order to preserve the tax-free nature of a distribution to the
holders of Common Stock. Notwithstanding any other provisions of
this subsection (d), the Corporation shall not be required to
make any adjustment to the Conversion Price for the issuance of
any shares of Common Stock pursuant to any plan providing for the
reinvestment of distributions or interest payable on securities
of the Corporation and the investment of additional optional
amounts in shares of Common Stock under such plan. All
calculations under this Section 7 shall be made to the nearest
cent (with $.005 being rounded upward) or to the nearest one-
tenth of a share (with .05 of a share being rounded upward),as
the case may be.
(e) If:
(1) there shall be any reclassifications of the Common Stock or any
consolidation or merger to which the Corporation is a party and
for which approval of any stockholders of the Corporation is
required, or a statutory share exchange involving the conversion
or exchange of Common Stock into securities or other property, or
a self tender offer by the Corporation for all or substantially
all of its outstanding Common Stock, or the sale or transfer of
all or substantially all of the assets of the Corporation as an
entity and for which approval of any stockholder of the
Corporation is required; or
(2) there shall occur the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation;
then the Corporation shall cause to be filed with the Transfer Agent
and shall cause to be mailed to the holders of the Series B Preferred
Stock at their addresses as shown on the stock transfer records of the
Corporation, as promptly as possible, but at least 15 days prior to
the applicable date hereinafter specified, a notice stating the date
on which such reclassification, consolidation, merger, statutory share
exchange, sale, transfer, liquidation, dissolution or winding up is
expected to become effective, and the date as of which it is expected
that holders of Common Stock of record shall be entitled to exchange
their Common Stock for securities or other property, if any,
deliverable upon such reclassification, consolidation, merger,
statutory share exchange, sale, transfer, liquidation, dissolution or
winding up. Failure to give or receive such notice or any defect
therein shall not affect the legality or validity of the proceedings
described in this Section 8.
(f) Whenever the Conversion Price is adjusted as herein provided, the
Corporation shall promptly file with the Transfer Agent an officer's
certificate setting forth the Conversion Price after such adjustment
and setting forth a brief statement of the facts requiring such
adjustment, which certificate shall be conclusive evidence of the
correctness of such adjustment absent manifest error. Promptly after
delivery of such certificate, the Corporation shall prepare a notice
of such adjustment of the Conversion Price setting forth the adjusted
Conversion Price and the effective date on which such adjustment
becomes effective and shall mail such notice of such adjustment of the
Conversion Price to the holder of each share of Series B Preferred
Stock at such holder's last address as shown on the share records of
the Corporation.
(g) There shall be no adjustment of the Conversion Price in case of the
issuance of any shares of the Corporation in a reorganization,
acquisition or other similar transaction except as specifically set
forth
15
<PAGE>
in this Section 8. If any action or transaction would require
adjustment of the Conversion Price pursuant to more than one
subsection of this Section 8, only one adjustment shall be made, and
such adjustment shall be the amount of adjustment that has the highest
absolute value.
(h) If the Corporation shall take any action affecting the Common Stock,
other than an action described in this Section 8, that would
materially and adversely affect the conversion rights of the holders
of the Series B Preferred Stock, the Conversion Price for the Series B
Preferred Stock may be reduced, to the extent permitted by law, in
such manner, and at such time, as the Board of Directors, in its
reasonable discretion, based in part upon advice of independent
financial and legal advisors, may determine in good faith to be
equitable in the circumstances.
(i) The Corporation will at all times reserve and keep available, free
from preemptive rights, out of the aggregate of its authorized but
unissued shares of Common Stock, for the purpose of effecting
conversion of the Series B Preferred Stock, the full number of shares
of Common Stock deliverable upon the conversion of all outstanding
Series B Preferred Stock not theretofore converted. For purposes of
this subsection (i), the number of shares of Common Stock that shall
be deliverable upon the conversion of all outstanding Series B
Preferred Stock shall be computed as if at the time of computation all
such outstanding shares were held by a single holder.
Any Common Stock issued upon conversion or redemption of, or as a
distribution in respect of, the Series B Preferred Stock shall be
validly issued, fully paid and nonassessable. Before taking any
action that would cause an adjustment reducing the Conversion Price
below the then par value of the Common Stock deliverable upon
conversion of the Series B Preferred Stock, the Corporation will take
any action that, in the opinion of its counsel, may be necessary in
order that the Corporation may validly and legally issue fully paid
and nonassessable Common Stock at such adjusted Conversion Price.
(j) The Corporation will pay any and all documentary stamp or similar
issue or transfer taxes payable in respect of the issue or delivery of
Common Stock or other securities or property on conversion of the
Series B Preferred Stock pursuant hereto; provided, however, that the
Corporation shall not be required to pay any tax that may be payable
in respect of any transfer involved in the issue or delivery of Common
Stock or other securities or property in a name other than that of the
holder of the Series B Preferred Stock to be converted, and no such
issue or delivery shall be made unless and until the person requesting
such issue or delivery has paid to the Corporation the amount of any
such tax or has established, to the reasonable satisfaction of the
Corporation, that such tax has been paid.
Section 9. Ownership and Transfer Limitations.
(a) REIT-Related Restrictions. The Ownership and transfer of the Series B
Preferred Stock shall be restricted as provided in the Charter.
SECOND: The Shares have been reclassified by the Board of Directors
------
pursuant to Article VI of the Charter.
THIRD: These Articles Supplementary have been approved by the Board of
-----
Directors in the manner and by the vote required by law.
FOURTH: The undersigned Secretary of the Corporation acknowledges these
------
Articles Supplementary to be the corporate act of the Corporation and, as to all
matters or facts required to be verified under oath, the undersigned Executive
Vice President acknowledges that to the best of his knowledge, information and
belief, these matters and facts are true in all material respects and that this
statement is made under the penalties for perjury.
16
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused these Articles Supplementary
to be signed in its name and on its behalf by its Executive Vice President and
attested to by its Secretary on this 4 day of May, 1999.
ATTEST:
/s/ Ronald Morrison By: /s/ William Ashmore (SEAL)
- -------------------------------- ------------------------------
Ronald Morrison William Ashmore
Secretary Executive Vice President
17
<PAGE>
$$/nofolio
EXHIBIT 10.1
IMPAC COMMERCIAL HOLDINGS, INC.
-----------------------------------------
SERIES B 8.5% CUMULATIVE CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
May 5, 1999
---------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1
Authorization and Sale of Series B 8.5% Cumulative Convertible Preferred Stock.. 1
------------------------------------------------------------------------------
1.1 Authorization............................................................. 1
-------------
1.2 Sale of Series B Preferred Stock.......................................... 1
--------------------------------
SECTION 2
Closing Date; Delivery.......................................................... 1
----------------------
2.1 Closing................................................................... 1
-------
2.2 Deliveries................................................................ 1
----------
SECTION 3
Representations and Warranties of the Company................................... 2
---------------------------------------------
3.1 Organization and Standing................................................. 2
-------------------------
3.2 Corporate Power........................................................... 2
---------------
3.3 Capitalization............................................................ 2
--------------
3.4 Authorization............................................................. 3
-------------
3.5 Financial Statements...................................................... 3
--------------------
3.6 Internal Controls......................................................... 3
-----------------
3.7 Material Facts............................................................ 4
--------------
3.8 Changes................................................................... 4
-------
3.9 Litigation, etc........................................................... 4
----------------
3.10 Governmental Consents, etc................................................ 4
---------------------------
3.11 Compliance With Other Instruments, None Burdensome, etc................... 5
--------------------------------------------------------
3.12 Subsidiaries.............................................................. 5
------------
3.13 Offering.................................................................. 6
--------
3.14 Brokers or Finders; Other Offers.......................................... 6
--------------------------------
3.15 Charter Exemptions and Other Exclusions................................... 6
---------------------------------------
3.16 Insurance................................................................. 6
---------
3.17 Labor Disputes............................................................ 7
--------------
3.18 Misappropriation.......................................................... 7
----------------
3.19 Stabilization............................................................. 7
-------------
3.20 Investment Company........................................................ 7
------------------
3.21 Environmental Regulation.................................................. 7
------------------------
3.22 Tax Matters............................................................... 7
-----------
3.23 Interlocking Agreements................................................... 8
-----------------------
SECTION 4
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Representations and Warranties of the Purchaser................................. 8
-----------------------------------------------
4.1 Experience................................................................ 8
----------
4.2 Investment................................................................ 9
----------
4.3 Accredited Investor....................................................... 9
------------------
4.4 Risk Factors.............................................................. 9
------------
4.5 Rule 144.................................................................. 9
--------
4.6 No Public Market.......................................................... 9
----------------
4.7 Public Information........................................................ 9
------------------
4.8 Access to Data............................................................10
--------------
4.9 Transactions in Common Stock..............................................10
----------------------------
4.10 Authorization.............................................................10
-------------
4.11 Brokers or Finders........................................................10
------------------
4.12 Tax Consequences..........................................................10
----------------
4.13 REIT Qualification........................................................11
------------------
SECTION 5
Conditions to Purchaser's Obligations at Closing................................11
------------------------------------------------
5.1 Representations and Warranties Correct....................................11
--------------------------------------
5.2 Covenants.................................................................11
---------
5.3 Registration Rights Agreement.............................................11
-----------------------------
5.4 Blue Sky..................................................................11
--------
5.5 Articles Supplementary....................................................11
----------------------
5.6 Assignment of Management Agreement........................................11
----------------------------------
5.7 Termination of Submanagement Agreement....................................12
--------------------------------------
5.8 New Submanagement Agreement...............................................12
---------------------------
5.9 Termination of the Right of First Refusal Agreement.......................12
----------------------------------------------------
5.10 Non-Compete Agreement.....................................................12
---------------------
5.11 Stock Option Plan.........................................................12
-----------------
5.12 Board of Directors........................................................12
------------------
5.13 Legal Matters.............................................................12
-------------
5.14 Opinion of Company's Counsel..............................................13
----------------------------
5.15 Opinion of Company's Maryland Counsel.....................................13
--------------------------------------
5.16 REIT Opinion..............................................................13
------------
5.17 Compliance Certificate....................................................13
----------------------
5.18 Secretary's Certificate...................................................13
-----------------------
SECTION 6
Conditions to Company's Obligations at Closing..................................13
----------------------------------------------
6.1 Representations Correct...................................................13
-----------------------
6.2 Articles Supplementary....................................................13
----------------------
6.3 Registration Rights Agreement.............................................13
-----------------------------
6.4 Assignment of Management Agreement........................................13
----------------------------------
6.5 Legal Matters.............................................................14
-------------
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
SECTION 7
Affirmative Covenants...........................................................14
---------------------
7.1 Financial Information.....................................................14
---------------------
7.2 Company's Corporate Governance............................................14
------------------------------
7.3 Public Announcements......................................................14
--------------------
SECTION 8
Miscellaneous...................................................................14
-------------
8.1 Incorporation by Reference................................................14
--------------------------
8.2 Governing Law.............................................................15
-------------
8.3 Survival..................................................................15
--------
8.4 Successors and Assigns....................................................15
----------------------
8.5 Entire Agreement..........................................................15
----------------
8.6 Amendments and Waivers....................................................15
----------------------
8.7 Notices...................................................................15
-------
8.8 Delays or Omissions.......................................................16
-------------------
8.9 Expenses..................................................................16
--------
8.10 Finder's Fee..............................................................16
------------
8.11 Counterparts..............................................................16
------------
8.12 Severability..............................................................16
------------
8.13 Titles and Subtitles......................................................16
--------------------
</TABLE>
iii
<PAGE>
LIST OF EXHIBITS
EXHIBIT A - ARTICLES SUPPLEMENTARY
EXHIBIT B - SCHEDULE OF EXCEPTIONS
SCHEDULE 3.3.1 OUTSTANDING OPTIONS AND DIVIDEND EQUIVALENT RIGHTS
SCHEDULE 3.3.2 FORM OF STOCK OPTION AGREEMENT
SCHEDULE 3.8 COMPANY'S PRO FORMA BALANCE SHEET AS OF MAY 5, 1999
EXHIBIT C - REGISTRATION RIGHTS AGREEMENT
EXHIBIT D - SECURITIES AND EXCHANGE COMMISSION FILINGS
(1) QUARTERLY REPORT ON FORM 10-Q FOR THE THREE MONTHS ENDED MARCH 31,
1999
(2) AMENDMENT NUMBER ONE TO THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR
THE YEAR ENDED DECEMBER 31, 1998
(3) ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1998
(4) CURRENT REPORTS ON FORM 8-K FILED ON FEBRUARY 11, 1998, FEBRUARY 12,
1998, OCTOBER 15, 1998 AND MAY 5, 1999
(5) REGISTRATION STATEMENT ON FORM 8-A, AS AMENDED REGISTERING THE SERIES
A JUNIOR PARTICIPATING PREFERRED STOCK PURCHASE RIGHTS OF THE COMPANY.
EXHIBIT E - ADDITIONAL RISK FACTORS
EXHIBIT F - FORM OF AMENDMENT NUMBER ONE TO THE COMPANY'S 1997 STOCK
OPTION AND AWARDS PLAN
EXHIBIT G - FORM OF BOARD RESOLUTION
EXHIBIT H - FORM OF FRESHMAN, MARANTZ, ORLANSKI, COOPER & KLEIN LEGAL
OPINION
EXHIBIT I - FORM OF BROWN & WOOD LLP LEGAL OPINION
iv
<PAGE>
IMPAC COMMERCIAL HOLDINGS, INC.
SERIES B 8.5% CUMULATIVE CONVERTIBLE PREFERRED STOCK
PURCHASE AGREEMENT
This Agreement is made as of May 5, 1999, by and between Impac Commercial
Holdings, Inc., a Maryland corporation (the "Company"), and Fortress Partners
L.P., a Delaware limited partnership (the "Purchaser").
SECTION 1
Authorization and Sale of Series B 8.5% Cumulative Convertible Preferred Stock
------------------------------------------------------------------------------
1.1 Authorization. The Company has, or before the Closing (as defined
-------------
below) will have, authorized the sale and issuance of up to 479,999 shares (the
"Shares") of its Series B 8.5% Cumulative Convertible Preferred Stock ($25
liquidation preference per Share) (the "Series B Preferred Stock") having the
rights, preferences, privileges and restrictions set forth in the Articles
Supplementary to the Certificate of Incorporation of the Company (the "Articles
Supplementary") attached hereto as Exhibit A. The Company has, or before the
Closing will have, adopted and filed the Articles Supplementary with the State
Department of Assessments and Taxation of the State of Maryland (the "SDAT").
1.2 Sale of Series B Preferred Stock. Subject to the terms and conditions
--------------------------------
hereof, at the Closing the Company will issue and sell to the Purchaser, and the
Purchaser will purchase from the Company, an aggregate of 479,999 Shares, at a
purchase price of $25.00 per share.
SECTION 2
Closing Date; Delivery
----------------------
2.1 Closing. The closing of the purchase and sale of the Shares (the
-------
"Closing") will be held at the offices of Freshman, Marantz, Orlanski, Cooper &
Klein, 9100 Wilshire Boulevard, Suite 8E, Beverly Hills, California on May 5,
1999 at 2:00 p.m., or at such other time and place as the Company and the
Purchaser mutually agree upon.
2.2 Deliveries. At the Closing, the Company will deliver to the Purchaser
----------
a certificate representing the number of Shares to be purchased by the Purchaser
against payment of the purchase price therefor by wire transfer in the amount of
$11,999,975.
<PAGE>
SECTION 3
Representations and Warranties of the Company
---------------------------------------------
Except as set forth in the Schedule of Exceptions attached hereto as
Exhibit B, the Company represents and warrants to the Purchaser as follows:
3.1 Organization and Standing. The Company is a corporation duly
-------------------------
organized, validly existing and in good standing under the laws of Maryland.
The Company has full corporate power and authority to own or lease all the
assets owned or leased by it and to conduct its business. The Company is duly
licensed or qualified to conduct its business and in good standing as a foreign
organization in all jurisdictions in which the nature of the activities
conducted by it or the character of the assets owned or leased by it makes such
licensing or qualification necessary, except where failure to so license or
qualify, considering all such cases in the aggregate, would not have a material
adverse effect on the business, prospects, properties, condition (financial or
otherwise), net worth or results of operations of the Company and its
subsidiaries (which term as used herein shall include entities consolidated with
the Company for the purposes of generally accepted accounting principles
("GAAP")), taken as a whole. Complete and correct copies of the articles or
certificate of incorporation and of the bylaws of the Company and its
subsidiaries, and all amendments thereto have been delivered to the Purchaser,
and no changes therein will be made subsequent to the date hereof and prior to
the Closing, except that Articles Supplementary will be filed with the SDAT in
order to designate and reclassify the Series B Preferred Stock.
3.2 Corporate Power. The Company has all requisite legal and corporate
---------------
power to execute and deliver this Agreement and the Registration Rights
Agreement in the form attached hereto as Exhibit C, to sell and issue the Shares
hereunder, to issue the Common Stock issuable upon conversion of the Shares, and
to carry out and perform its obligations under the terms of this Agreement and
the Registration Rights Agreement.
3.3 Capitalization. The authorized capital stock of the Company will,
--------------
upon the filing of the Articles Supplementary, consist of 46,217,295 shares of
Common Stock, $.01 par value (the "Common Stock"), of which 8,418,200 shares are
issued and outstanding, 3,782,705 shares of Class A Common Stock, $.01 par
value, of which no shares are issued and outstanding, and 10,000,000 shares of
Preferred Stock, $.01 par value, of which 1,000,000 shares are designated Series
A Junior Participating Preferred Stock and 479,999 shares are designated Series
B Preferred Stock, none of which are issued and outstanding prior to the
Closing. All issued and outstanding shares have been duly authorized and
validly issued, and are fully paid and nonassessable. The rights, preferences,
privileges and restrictions of the Series B Preferred Stock will be as stated in
the Articles Supplementary. The Company has duly and validly reserved 479,999
shares of Series B Preferred Stock for issuance hereunder, and 1,683,635 shares
of Common Stock for issuance upon conversion of the Series B Preferred Stock.
Except as disclosed in this Agreement and the Schedule of Exceptions, attached
hereto as Exhibit B, there are no preemptive or other outstanding rights, voting
agreements, options, warrants, conversion rights or agreements for the purchase
or acquisition from the Company of any shares of its
2
<PAGE>
capital stock or other securities of the Company. There are no dividend
equivalent rights or stock appreciation rights attached to any shares of capital
stock, except as set forth in the Schedule of Exceptions attached hereto as
Exhibit B. All of the outstanding shares of Common Stock (and options to
purchase Common Stock) and other outstanding securities of the Company have been
duly and validly issued in compliance with federal and state securities laws.
3.4 Authorization. This Agreement and the Registration Rights Agreement
-------------
have been duly authorized and validly executed and delivered by the Company and
are legal, valid and binding agreements of the Company enforceable against the
Company in accordance with their terms, subject to the effects of bankruptcy,
insolvency, moratorium, fraudulent conveyance and similar laws relating to or
affecting creditors' rights generally and by general equitable principles. The
issuance and sale of the Shares hereunder have been duly authorized by the
Company, and the Shares, when issued and paid for in accordance with this
Agreement, will be duly and validly issued, fully paid and nonassessable and
will not be subject to preemptive or similar rights. The shares of Common Stock
to be issued upon conversion of the Shares have been duly authorized and
reserved for issuance upon such conversion of the Shares and, when they are
issued and delivered upon conversion of the Shares in accordance with the terms
of the Articles Supplementary, will be validly issued, fully paid and
nonassessable and not subject to any preemptive rights. The holders of the
Shares and the holders of the Common Stock issuable upon conversion of the
Shares will not be subject to personal liability by reason of being such
holders.
3.5 Financial Statements. The financial statements and the related notes
--------------------
and schedules included in the reports incorporated herein by reference and
attached hereto as Exhibit D (all of such reports together, the "Reports")
present fairly the consolidated financial condition of the Company and its
subsidiaries as of the respective dates thereof and the results of operations,
stockholders' equity and cash flows at the respective dates and for the
respective periods covered thereby, all in conformity with GAAP applied on a
consistent basis throughout the entire period involved, except as otherwise
disclosed therein. KPMG LLP (the "Accountants"), who have reported on such
financial statements and schedules, are independent accountants with respect to
the Company and its subsidiaries as required by the Act and the Rules and
Regulations. Such financial statements and the related notes and schedules
incorporated herein by reference have been prepared in conformity with the
requirements of the Act and the Rules and Regulations and present fairly the
information presented therein. The other financial and statistical information
and data included in the Reports are accurately presented and prepared on a
basis consistent with such financial statements and the books and records of the
Company and its subsidiaries.
3.6 Internal Controls. The Company maintains a system of internal
-----------------
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit preparation
of financial statements in conformity with GAAP and to maintain accountability
for assets; (iii) access to assets is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
3
<PAGE>
3.7 Material Facts. On the date that each of the Reports, which consist
--------------
of the Company's Quarterly Report on Form 10-Q for the three months ended March
31, 1999, Amendment Number One to the Company's Annual Report on Form 10-K for
the year ended December 31, 1998 ("Amendment Number One") and the Company's
Annual Report on Form 10-K for the year ended December 31, 1998 (together with
Amendment Number One, the "Annual Report"), the Company's Current Reports on
Form 8-K filed on February 11, 1998, February 12, 1998, October 15, 1998 and May
5, 1999, and the Company's Registration Statement on Form 8-A, as amended ,
registering the Series A Preferred Stock Purchase Rights, including the
financial statements included therein, was filed with the Commission, each of
the Reports did comply with all applicable provisions of the Act and the Rules
and Regulations and did contain all statements required to be stated therein in
accordance with the Act and the Rules and Regulations. On the Closing Date, no
part of the Reports or any such amendment did or will contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein not
misleading, and no event has occurred that would require the filing of an
amendment to the Reports or a current report on Form 8-K to be filed, except
that the Company intends to file a Current Report on Form 8-K in connection with
this transaction.
3.8 Changes. Subsequent to the respective dates as of which information
-------
is given in the Reports attached hereto as Exhibit D and prior to the Closing
Date, except as set forth in the Schedule of Exceptions attached hereto as
Exhibit B,(i) there has not been any change in the capitalization of the Company
or its subsidiaries other than non-material changes in the ordinary course of
business, or any change in the balance sheet of the Company other than changes
set forth on the Company's pro forma balance sheet as of May 5, 1999 attached as
Schedule 3.8 to the Schedule of Exceptions and other than non-material changes
of less than $100,000 (unless such non-material changes aggregate $200,000 or
more, in which case such changes should be included on the Schedule of
Exceptions); (ii) the Company and its subsidiaries have not incurred any
liabilities or obligations, direct or contingent, nor has the Company or its
subsidiaries entered into any transactions not in the ordinary course of
business other than pursuant to this Agreement, the Registration Rights
Agreement and the transactions referred to herein and therein, and (iii) the
Company has not paid or declared any dividends or other distributions of any
kind on any class of its capital stock.
3.9 Litigation, etc. Except as set forth in the Reports, there are no
----------------
actions, suits or proceedings pending, or to the Company's knowledge,
threatened, against or affecting the Company or its subsidiaries or any of their
respective officers in their capacity as such, before or by any Federal or state
court, commission, regulatory body, administrative agency or other governmental
body, domestic or foreign, wherein an unfavorable ruling, decision or finding
might materially adversely affect the business, prospects, properties, condition
(financial or otherwise), net worth or results of operations of the Company and
its subsidiaries, taken as a whole.
3.10 Governmental Consents, etc.
---------------------------
4
<PAGE>
(a) Except in each case as would not materially adversely affect the
business, prospects, properties, condition (financial or otherwise), net worth
or results of operations of the Company and its subsidiaries, taken as a whole,
each of the Company and each subsidiary has (i) all governmental or regulatory
licenses, permits, certificates, consents, orders, approvals and other
authorizations necessary to carry on its business as currently being conducted,
(ii) no reason to believe that any governmental body or agency is considering
limiting, suspending or revoking any such license, permit, certificate, consent,
order, approval or other authorization, (iii) complied with all laws, statutes,
ordinances, rules, regulations and orders applicable to either it or its
business, (iv) not received any notice to the effect that, or otherwise been
advised that, it is not in compliance with any such law, statute, ordinance,
rule, regulation or order, and is not aware of any existing circumstances which
are likely to result in material violations of any of the foregoing, (v) good
and marketable title to all of the properties and assets as owned by it, free
and clear of all liens, charges, encumbrances or restrictions, (vi) peaceful and
undisturbed possession under all material leases to which it is party as lessee,
and (vii) performed all its obligations required to be performed, and is not in
default under, any indenture, mortgage, deed of trust, voting trust agreement,
loan agreement, bond, debenture, note agreement, lease, contract or other
agreement or instrument (collectively, the "contract or other agreements") to
which it is a party or by which its property is bound or affected, except as
otherwise set forth in the Reports, and, to the Company's knowledge, no other
party under any contract or other agreement to which it is a party is in default
in any respect thereunder. Neither the Company nor its subsidiaries are in
violation of any provision of their respective organizational or governing
documents.
(b) The Company has all corporate power and authority to enter into
this Agreement and to carry out the provisions and conditions hereof, and all
consents, authorizations, approvals and orders of any court, government, or
governmental agency or body having jurisdiction over the Company or its
properties or operations required in connection herewith have been obtained,
3.11 Compliance With Other Instruments, None Burdensome, etc. Except as
-------------------------------------------------------
set forth or referred to in the Reports, there are no actions, suits or
proceedings pending, or to the Company's knowledge, threatened, against or
affecting the Company or its subsidiaries or any of their respective officers in
their capacity as such, before or by any Federal or state court, commission,
regulatory body, administrative agency or other governmental body, domestic or
foreign, wherein an unfavorable ruling, decision or finding might materially
adversely affect the business, prospects, properties, condition (financial or
otherwise), net worth or results of operations of the Company and its
subsidiaries, taken as a whole.
3.12 Subsidiaries. Each "significant subsidiary" (as defined in Section
------------
1-02 of Regulation S-X under the Act) of the Company is duly organized, validly
existing and in good standing in the jurisdiction of its incorporation and has
full corporate power and authority to conduct all the activities conducted by
it, to own or lease all the assets owned or leased by it and to conduct its
business. Each such significant subsidiary is duly licensed or qualified to
conduct its business and in good standing as a foreign organization in all
jurisdictions in which the nature of the activities conducted by it or the
character of the assets owned or leased by it makes such licensing or
qualification necessary, except where failure to so license or qualify would not
have
5
<PAGE>
a material adverse effect on the business, properties, condition (financial or
otherwise), net worth or results of operations of the Company and its
subsidiaries, taken as a whole. All the outstanding shares of capital stock of
each of such significant subsidiaries have been duly authorized and validly
issued, are fully paid and nonassessable, and are wholly owned by the Company
directly or through subsidiaries, free and clear of any lien, adverse claim,
security interest, equity or other encumbrance, except where failure to so
license or qualify, considering all such cases in the aggregate, would not have
a material adverse effect on the business, properties, condition (financial or
otherwise), net worth or results of operations of the Company and its
subsidiaries. The only such significant subsidiaries of the company are Impac
Commercial Capital Corporation ("ICCC") , and ICH Commercial Assets Corporation
("ICAC"), each of which are wholly owned subsidiaries of the Company.
3.13 Offering. Subject in part to the accuracy of the representations of
--------
the Purchaser set forth in Section 4 hereof, the offer, sale and issuance of the
Shares (and the Common Stock issuable upon conversion thereof) in conformity
with the terms of this Agreement constitute transactions exempt from the
registration and qualification requirements of Section 5 of the Securities Act
of 1933, as amended (the "Securities Act") and the Maryland General Corporations
Law.
3.14 Brokers or Finders; Other Offers. Except as set forth in the
--------------------------------
Schedule of Excep tions attached hereto as Exhibit B, the Company has not
incurred, and will not incur, directly or indirectly, as a result of any action
taken by the Company, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or the
Registration Rights Agreement.
3.15 Charter Exemptions and Other Exclusions. The issuance of the Shares
---------------------------------------
hereunder and the acquisition of shares of the Common Stock, upon conversion or
redemption of such Shares are excluded by resolutions of the Company's Board of
Directors from the application of the ownership limit set forth in Article VII,
Section 7.2.1 of the Company's charter, and from the provisions of Section 3-602
of the Annotated Code of Maryland (the "Maryland Code") prohibiting business
combinations with Interested Stockholders (as such term is defined in Section 3-
601 of the Maryland Code) . No "fair price," "moratorium," "control share
acquisition," or other similar anti-takeover statute or regulation to which the
Company or its subsidiaries or operations is subject is applicable to the sale
of Shares or the acquisition of Common Stock by the Purchaser upon conversion or
redemption of such Shares or to the Purchaser solely as a result of their
acquisition of such Shares or Common Stock. The Purchaser will not become an
"Acquiring Person" within the meaning of the Rights Agreement, dated as of
October 7, 1998, between the Company and BankBoston, N.A., as amended, solely as
a result of purchasing Shares hereunder or acquiring Common Stock upon
conversion or redemption of such Shares.
3.16 Insurance. The Company maintains insurance of the types and in the
---------
amounts generally deemed adequate for its business, including, but not limited
to, insurance covering all real and personal property owned or leased by the
Company and its subsidiaries against theft,
6
<PAGE>
damage, destruction, acts of vandalism and all other risks customarily insured
against, all of which insurance is in full force and effect.
3.17 Labor Disputes. Neither the Company nor any of its subsidiaries are
--------------
involved in any material labor dispute nor is any such dispute threatened.
3.18 Misappropriation. None of the Company or any of its subsidiaries or
----------------
any of their respective employees or agents have made any payment of funds of
the Company or its subsidiaries, or received or retained any such funds in
violation of any law, rule or regulation where such actions are of a character
required to be disclosed in the Reports.
3.19 Stabilization. The Company and its directors, officers or controlling
-------------
persons have not taken, directly or indirectly, any action intended, or which
might reasonably be expected, to cause or result, under the Act or otherwise,
in, or which has constituted, stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Shares.
3.20 Investment Company. The Company is not, and upon the issuance and
------------------
sale of the Shares as contemplated herein and the application of the net
proceeds therefrom as described in the Prospectus will not be, an "investment
company" or an entity "controlled" by an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended (the "Investment
Company Act"), and is not required to be registered under the Investment Company
Act.
3.21 Environmental Regulation. Except as would not materially adversely
------------------------
affect the business, prospects, properties, condition (financial or otherwise),
net worth or results of operations of the Company and its subsidiaries, taken as
a whole, the business, operations and properties of the Company and its
subsidiaries have been and are being conducted in compliance with all applicable
laws, ordinances, rules, regulations, licenses, permits, approvals, plans,
authorizations or requirements relating to occupational safety and health, or
pollution, or protection of health or the environment (including, without
limitation, those relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants or hazardous or toxic substances, materials
or wastes into ambient air, surface water, groundwater or land, or relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of chemical substances, pollutants, contaminants or
hazardous or toxic substances, materials or wastes, whether solid, gaseous or
liquid in nature) of any governmental department, commission, board, bureau,
agency or instrumentality of the United States, any state or political
subdivision thereof, or any foreign jurisdiction, and all applicable judicial or
administrative agency or regulatory decrees, awards, judgments and orders
relating thereto, and neither the Company nor its subsidiaries has received any
notice from any governmental instrumentality or any third party alleging any
violation thereof or liability thereunder (including, without limitation,
liability for costs of investigating or remediating sites containing hazardous
substances and/or damages to natural resources).
3.2 Tax Matters
-----------
7
<PAGE>
(a) The Company and each of its subsidiaries has timely filed or has had
timely filed on its behalf all Tax Returns (as defined below) that it was
required to file on or before the date hereof, and such Tax Returns are true,
correct and complete. The Company and each of its subsidiaries has timely paid
all Taxes (as defined below) required to be paid by it on or before the date
hereof. No audit or other proceedings with respect to Taxes of the Company or
any of its subsidiaries has been commenced by any taxing authority, and neither
the Company nor any of its subsidiaries has received any written notice of any
audit, claim, deficiency or assessment pending or proposed with respect to any
Taxes of the Company or any of its subsidiaries. There are no liens for Taxes
on any of the properties of the Company or any of its subsidiaries other than
liens for Taxes not yet due and payable.
(b) The Company has made a valid election under applicable law to be
treated as a real estate investment trust ("REIT") as defined in Section 856 of
the Internal Revenue Code of 1986, as amended (the "Code") (and applicable
provisions of state and local law) for its taxable year ending December 31, 1997
and has qualified as a REIT for federal, Maryland state and California state tax
purposes for such year and all subsequent taxable years.
(c) For purposes of this Agreement (i) "Taxes" shall mean all taxes,
charges, fees, levies or other assessments, including income, gross receipts,
excise, real or personal property, sales, withholding, social security, use,
license, net worth, payroll, franchise, transfer and recording taxes, fees and
charges imposed by any federal, state, local or foreign taxing authority; and
such term shall include any interest, penalties or additional amounts
attributable to, imposed on, or with respect to any such taxes, fees, charges,
levies or other assessments; and (ii) "Tax Return" shall mean any report,
return, document, declaration or other information required to be filed with any
taxing authority or jurisdiction with respect to Taxes.
3.23 Interlocking Agreements. To the best knowledge of Richard J.
-----------------------
Johnson, the Chief Financial Officer of the Company, there are no agreements
between the Company and its affiliates on the one hand and RAI Advisors, LLC
("RAI") and its affiliates (including Impac Mortgage Holdings, Inc. ("IMH")) on
the other hand, except as set forth in the Schedule of Exceptions attached
hereto as Exhibit B.
SECTION 4
Representations and Warranties of the Purchaser
-----------------------------------------------
The Purchaser hereby represents and warrants to the Company with respect to
the purchase of the Shares as follows:
4.1 Experience. Purchaser has substantial experience in evaluating and
----------
investing in private placement transactions so that Purchaser is capable of
evaluating the merits and risks of Purchaser's investment in the Company.
Purchaser, by reason of its experience or the financial experience of its
professional advisors who are unaffiliated with and who are not compensated by
the Company or any affiliate or selling agent of the Company, directly or
indirectly, has the capacity to protect its own interests in connection with the
purchase of the Shares hereunder.
8
<PAGE>
4.2 Investment. Purchaser is acquiring the Shares and the underlying
----------
Common Stock for investment for Purchaser's own account, not as a nominee or
agent, and not with the view to, or for resale in connection with, any
distribution thereof. Subject to the provisions of the Registration Rights
Agreement, Purchaser understands that the Shares to be purchased and the
underlying Common Stock have not been registered under the Securities Act by
reason of a specific exemption from the registration provisions of the
Securities Act that depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of such Purchaser's representations as
expressed herein. Purchaser has not been formed for the specific purpose of
acquiring the Shares.
4.3 Accredited Investor. Purchaser is an "accredited investor" as such
-------------------
term is defined in Rule 501 promulgated under the Securities Act.
4.4 Risk Factors. Purchaser has received and read the Risk Factors set
------------
forth in (i) the Annual Report attached hereto as Exhibit D (1) and (ii) the
Risk Factors attached hereto as Exhibit E.
4.5 Rule 144. Subject to the Registration Rights Agreement, Purchaser
--------
acknowledges that the Shares and the underlying Common Stock may be sold only in
a sale registered under the Securities Act or if an exemption from such
registration is available. Purchaser is aware of the provisions of Rule 144
promulgated under the Securities Act, which permit limited resales of shares
purchased in a private placement subject to the satisfaction of certain
conditions, including (except as limited by Rule 144(k)), among other things,
the existence of a public market for the shares, the availability of certain
current public information about the Company, the resale occurring at least one
year after a party has purchased and paid for the security to be sold, the sale
being effected through a "broker's transaction" or in transactions directly with
a "market maker" (as provided by Rule 144(f)) and the number of shares being
sold during any three-month period not exceeding specified limitations.
4.6 No Public Market. Purchaser understands that no public market now
----------------
exists for any of the Shares and that the Company has made no assurances that a
public market will ever exist for the Shares.
4.7 Public Information.
------------------
(a) The Purchaser has received a copy of each of the following
documents filed (or intended to be filed) with the Securities and Exchange
Commission by the Company and incorporated by reference herein:
(1) Quarterly Report on Form 10-Q for the three months ended
March 31, 1999 (to be filed on May 6, 1999);
(2) Amendment Number 1 to the Company's Annual Report on Form
10-K for the year ended December 31, 1998;
9
<PAGE>
(3) Annual Report on Form 10-K for the year ended December 31,
1998;
(4) Current Reports on Form 8-K, filed with the Securities and
Exchange Commission on February 11, February 12, 1999, October
15, 1998 and May 5, 1999; and
(5) Registration Statement on Form 8-A, as amended, registering
the Series A Junior Participating Preferred Stock Purchase Rights
of the Company.
(b) The Purchaser has received a copy of a draft of the Current
Report on Form 8-K the Company intends to file with the Securities and Exchange
Commission in connection with this Agreement.
4.8 Access to Data. Purchaser and its representatives have met with
--------------
representatives of the Company and thereby have had the opportunity to ask
questions of, and receive answers from, said representatives concerning the
Company and the terms and conditions of this transaction as well as to obtain
any information requested by Purchaser. Any questions raised by Purchaser or
its representatives concerning the transaction have been answered to the
satisfaction of Purchaser and its representatives. Purchaser's decision to
purchase the Shares is based in part on the answers to such questions as
Purchaser and its representatives have raised concerning the transaction and on
its own evaluation of the risks and merits of the purchase and the Company's
proposed business activities, provided that the foregoing does not limit the
right of the Purchaser to rely upon the representations and warranties of the
Company set forth in Section 3.
4.9 Transactions in Common Stock. Purchaser represents and warrants to
----------------------------
the Company, as of the date hereof and as of the Closing, that Purchaser has not
effected any transactions in the Common Stock since April 18, 1999.
4.10 Authorization. This Agreement and the Registration Rights Agreement,
-------------
when executed and delivered by Purchaser, will each constitute a valid and
legally binding obligation of Purchaser, enforceable in accordance with its
terms, subject to laws of general application relating to bankruptcy, insolvency
and the relief of debtors and rules of law governing specific performance,
injunctive relief or other equitable remedies.
4.11 Brokers or Finders. The Company has not incurred, and will not
------------------
incur, directly or indirectly, as a result of any action taken by Purchaser, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement.
4.12 Tax Consequences. Purchaser has reviewed with its own tax advisors
----------------
the federal, state, local and foreign tax consequences of this investment and
the transactions contemplated by this Agreement. Purchaser understands that
Purchaser (and not the Company) shall be responsible for Purchaser's own tax
liability that may arise as a result of this investment or the transactions
contemplated by this Agreement.
10
<PAGE>
4.13 REIT Qualification.
------------------
(a) Fortress Investment Corp. ("FIC") owns substantially all of the
interests in the Purchaser and Fortress Principal Investment Group, LLC (which
is owned by four individuals) owns less than 1 percent of the interests in the
Purchaser. No individual owns (within the meaning of Sections 542 and 544 of
the Code) more than 9.8 percent of the outstanding capital stock of FIC.
(b) Subject to a waiver by the Board of Directors of the Company, the
Purchaser agrees that ownership by an individual(within the meaning of Sections
542 and 544 of the Code) of the capital stock of the Company in an amount
greater than 9.8 percent will cause that number of shares of the Company that
causes such individual's ownership to be in excess of 9.8 percent to be
transferred to a trust for the benefit of a charitable beneficiary.
SECTION 5
Conditions to Purchaser's Obligations at Closing
------------------------------------------------
The Purchaser's obligations to purchase the Shares at the Closing are
subject to the ful fillment on or prior to the Closing Date of all of the
conditions set forth below in this Section 5 to the extent not waived by the
Purchaser.
5.1 Representations and Warranties Correct. The representations and
--------------------------------------
warranties made in Section 3 hereof shall be true and correct in all respects
when made, and shall be true and correct in all material respects on the Closing
Date with the same force and effect as if they had been made on and as of said
date.
5.2 Covenants. All covenants, agreements and conditions contained in this
---------
Agree ment to be performed by the Company on or prior to the Closing Date shall
have been performed or complied with.
5.3 Registration Rights Agreement. The Company and the Purchaser shall
-----------------------------
have executed and delivered the Registration Rights Agreement.
5.4 Blue Sky. The Company shall have obtained all necessary blue sky law
--------
permits, if any, and qualifications, or secured exemptions therefrom, required
by any state for the offer and sale of the Shares and the Common Stock issuable
upon conversion of the Shares.
5.5 Articles Supplementary. The Articles Supplementary shall have been
----------------------
filed with the SDAT.
5.6 Assignment of Management Agreement.
----------------------------------
11
<PAGE>
(a) RAI shall have assigned the Management Agreement, dated as of
August 4, 1997 (the "Management Agreement"), with the Company as modified in a
manner acceptable to the Purchaser (the "Assignment") on the Closing Date
pursuant to, and upon satisfaction of the conditions contained in, a definitive
agreement as further described in that Letter of Intent dated April 14, 1999 by
and between Fortress and RAI.
(b) RAI shall have obtained the prior consent to the Assignment from
the Company, with the consent of a majority of the Unaffiliated Directors (as
that term is defined in the Management Agreement), in accordance with Section 14
of the Management Agreement.
5.7 Termination of Submanagement Agreement. The parties to the
--------------------------------------
Submanagement Agreement dated August 4, 1997, between, IMH, Impac Funding
Corporation ("IFC") and RAI, shall have terminated the agreement.
5.8 New Submanagement Agreement. IMH, IFC, RAI and the Purchaser shall
---------------------------
have executed and delivered the new Submanagement Agreement.
5.9 Termination of the Right of First Refusal Agreement. The parties to
----------------------------------------------------
the Right of First Refusal Agreement effective August 8, 1997 among IMH, IFC,
RAI, ICH and ICCC shall have terminated the agreement.
5.10 Non-Compete Agreement. The Non-Compete Agreement dated as of August
---------------------
8, 1997 among the Company, IMH, Impac Mortgage Funding Corporation and ICCC has
lapsed.
5.11 Stock Option Plan. The Company's Stock Option Plan shall have been
-----------------
amended as set forth in the form attached hereto as Exhibit F.
5.12 Board of Directors. All of the Company's directors shall have
------------------
resigned except for Joseph R. Tomkinson and Frank P. Filipps. To fill three of
the vacant seats on the Board of Directors, Messrs. Tomkinson and Filipps shall
have appointed Wesley R. Edens and Robert I. Kauffman (who together shall
constitute the affiliated directors), and an Unaffiliated Director designated by
the Purchaser (together with Messrs. Tomkinson and Filipps, the "Agreed
Directors") to serve on the Board of Directors until the next annual meeting of
stockholders and until his successor is elected and qualifies. The Company shall
have reduced the number of directors comprising the Board of Directors from six
to five. The Board of Directors shall have passed the resolutions in the form
attached hereto as Exhibit G. All stock options held by Messrs. Peers, Walsh,
Busch and Poletti shall continue through their term as set forth therein.
William S. Ashmore, Richard J. Johnson, Mary C. Glass-Schannault, Ronald M.
Morrison and Gretchen D. Verdugo shall have resigned all positions held by each
such person at the Company, ICCC and ICAC. Joseph R. Tomkinson will resign all
positions held by him at the Company, ICCC and ICAC, although he will remain a
director of the Company.
5.13 Legal Matters. All material matters of a legal nature that pertain
-------------
to this Agree ment and the transactions contemplated hereby shall have been
reasonably approved by counsel to the Purchaser.
12
<PAGE>
5.14 Opinion of Company's Counsel. At the Closing, the Purchaser shall
----------------------------
have received from Freshman, Marantz, Orlanski, Cooper & Klein, counsel to the
Company, an opinion addressed to them, dated the Closing Date, in the form
attached hereto as Exhibit H.
5.15 Opinion of Company's Maryland Counsel. At the Closing, the Purchaser
-------------------------------------
shall have received from Brown & Wood LLP, Maryland counsel to the Company, an
opinion addressed to them, dated the Closing Date, in the form attached hereto
as Exhibit I.
5.16 REIT Opinion. At the Closing, Purchaser shall have received an
------------
opinion from Brown & Wood, LLP, tax counsel to the Company, substantially to the
effect that the Company has qualified as a REIT for all periods beginning on the
date of its organization to and including the Closing Date.
5.17 Compliance Certificate. The Company shall have delivered to the
----------------------
Purchaser a certificate, executed by the Chairman or the President of the
Company, dated the Closing Date, certifying to the fulfillment of the conditions
specified in Sections 5.1, 5.2, 5.3, 5.4, 5.5, 5.6, 5.7, 5.8, 5.9, 5.10, 5.11
and 5.12 of this Agreement.
5.18 Secretary's Certificate. The Company shall have delivered to the
-----------------------
Purchaser a certificate, executed by the Secretary of the Company, dated the
Closing Date certifying that attached thereto are the following: Exhibit A, the
Company's Certificate of Incorporation, as amended, Exhibit B the Company's
Bylaws, and Exhibit C, resolutions of the Company's Board of Directors approving
the transactions contemplated in this Agreement, the Registration Rights
Agreement and Termination of the Right of First Refusal Agreement.
SECTION 6
Conditions to Company's Obligations at Closing
----------------------------------------------
The Company's obligation to sell the Shares at the Closing is subject to
the fulfillment of the following conditions to the extent not waived by the
Company:
6.1 Representations Correct. The representations made by the Purchaser in
-----------------------
Section 4 hereof shall be true and correct when made, and shall be true and
correct on the Closing Date.
6.2 Articles Supplementary. The Articles Supplementary shall have been
----------------------
filed with the SDAT.
6.3 Registration Rights Agreement. The Company and the Purchaser shall
-----------------------------
have executed and delivered the Registration Rights Agreement.
6.4 Assignment of Management Agreement.
----------------------------------
(a) RAI Advisors, LLC ("RAI") shall have assigned the Management Agree
ment, dated as of August 4, 1997 (the "Management Agreement"), with the Company
as modi-
13
<PAGE>
fied in a manner acceptable to the Purchaser (the "Assignment") on the Closing
Date pursuant to, and upon satisfaction of the conditions contained in, a
definitive agreement as further described in that Letter of Intent dated April
14, 1999 by and between Fortress and RAI.
(b) RAI shall have obtained the prior consent to the Assignment from
the Company, with the consent of a majority of the Unaffiliated Directors (as
that term is defined in the Management Agreement), in accordance with Section 14
of the Management Agreement.
6.5 Legal Matters. All material matters of a legal nature that pertain to
-------------
this Agreement and the transactions contemplated hereby shall have been
reasonably approved by counsel to the Company.
SECTION 7
Affirmative Covenants
---------------------
The Company (and, in the case of Section 7.3, each party hereto) hereby
covenants and agrees as follows:
7.1 Financial Information. The Company will make generally available to
---------------------
holders of its securities, including the Purchaser, as soon as may be
practicable, but in no event later than the last day of the fifteenth full
calendar month following the current calendar quarter, a consolidated earnings
statement (which need not be audited but shall be in reasonable detail) for a
period of 12 months ended commencing after the Closing Date, and satisfying the
provisions of Section 11(a) of the Act (including Rule 158 of the Rules and
Regulations).
7.2 Company's Corporate Governance. The Company covenants to recommend
------------------------------
the Agreed Directors for election to the Board of Directors in the Company's
proxy statement to be distributed with respect to the annual meeting of the
stockholders of the Company next following the Closing Date.
7.3 Public Announcements. Neither the Company nor the Purchaser, nor any
--------------------
of their affiliates, shall make any public statement, including, without
limitation, any press release, with respect to this Agreement and the
transactions contemplated hereby, without the prior written consent of the other
party (which consent may not be unreasonably withheld), except as may be
required by law.
SECTION 8
Miscellaneous
-------------
8.1 Incorporation by Reference. The following documents are hereby
--------------------------
incorporated by reference herein:
14
<PAGE>
(a) Quarterly Report on Form 10-Q for the three months ended March 31,
1999 (to be filed on May 6, 1999);
(b) Amendment Number One to the Company's Annual Report on Form 10-K
for the year ended December 31, 1998;
(c) Annual Report on Form 10-K for the year ended December 31, 1998;
(d) Current Reports on Form 8-K, filed with the SEC on February 11,
February 12, 1999, October 15, 1998 and May 5, 1999; and
(e) Registration Statement on Form 8-A, as amended, registering the
Series A Junior Participating Preferred Stock Purchase Rights of the Company.
8.2 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of California applicable to contracts
between California residents entered into and to be performed entirely within
the State of California.
8.3 Survival. The representations, warranties, covenants and agreements
--------
made by the parties herein shall survive any investigation made by the Purchaser
or the Company and shall survive the closing of the transactions contemplated
hereby.
8.4 Successors and Assigns. Except as otherwise provided herein, the
----------------------
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
8.5 Entire Agreement. This Agreement and the other documents delivered
----------------
pursuant hereto at the Closing constitute the full and entire understanding and
agreement between the parties regarding the subjects hereof and thereof, and no
party shall be liable or bound to any other party in any manner by any
warranties, representations or covenants except as specifically set forth herein
or therein.
8.6 Amendments and Waivers. Neither this Agreement nor any term hereof
----------------------
may be amended, waived, discharged or terminated other than by a written
instrument signed by the party against whom enforcement of any such amendment,
waiver, discharge or termination is sought; provided, however, that holders of
at least a majority of the Shares (or shares of Common Stock issued upon
conversion of the Shares, provided such shares are Registrable Securities, as
defined in the Registration Rights Agreement, or any combination of shares and
such shares of Common Stock) may, with the written consent of the Company,
waive, modify or amend on behalf of all holders, any provisions hereof
benefitting such holders, so long as the effect thereof will be that all such
holders will be treated equally.
8.7 Notices. All notices and other communications required or permitted
-------
hereunder shall be in writing and shall be effective at the earlier of three
days after being mailed by first class, registered or certified mail, postage
prepaid, or upon delivery if delivered by telex or
15
<PAGE>
facsimile (with confirmation of receipt of such telex or facsimile), by hand or
by messenger or a courier delivery service, addressed (a) if to the Purchaser,
at Fortress Investment Corp., 1301 Avenue of the Americas, 42th Floor, New York,
New York 10019, facsimile (212) 798-6120 or at such other address as the
Purchaser shall have furnished to the Company in writing, or (b) if to any other
holder of Shares, at such address as such holder shall have furnished to the
Company in writing, or, until any such holder so furnishes an address to the
Company, then at the address of the last holder of such Shares who has so
furnished an address to the Company, or (c) if to the Company, at 1401 Dove
Street, Newport Beach, California 92660, facsimile (949) 475-3969 or at such
other address as the Company shall have furnished to the Purchaser and each such
other holder in writing.
8.8 Delays or Omissions. Except as expressly provided herein, no delay or
-------------------
omission to exercise any right, power or remedy accruing to any holder of any
Shares, upon any breach or default of the Company under this Agreement, shall
impair any such right, power or remedy of such holder, nor shall it be construed
to be a waiver of any such breach or default, or an acquiescence therein, or of
or in any similar breach or default thereafter occurring; nor shall any waiver
of any single breach or default be deemed a waiver of any other breach or
default theretofore or thereafter occurring. Except as provided in Section 8.6,
any waiver, permit, consent or approval of any kind or character on the part of
any holder of any breach or default under this Agreement, or any waiver on the
part of any holder of any provisions or conditions of this Agreement, must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement or by law or otherwise
afforded to any holder, shall be cumulative and not alternative.
8.9 Expenses. The Company and the Purchaser shall each bear its own
--------
expenses and legal fees incurred on its behalf with respect to this Agreement
and the transactions contemplated hereby.
8.10 Finder's Fee. Except as set forth in the Schedule of Exceptions
------------
attached hereto as Exhibit B, the Company and the Purchaser agree to indemnify
and hold harmless the other from any liability for any commission or
compensation in the nature of a finder's fee (and the costs and expenses of
defending against such liability or asserted liability) for which the Company or
the Purchaser or any of their respective officers, agents, employees or
representatives is responsible in connection with this transaction.
8.11 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
8.12 Severability. In the case any provision of this Agreement shall be
------------
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
8.13 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
16
<PAGE>
The foregoing Agreement is hereby executed as of the date first above
written.
"COMPANY" IMPAC COMMERCIAL HOLDINGS, INC.,
a Maryland corporation
1401 Dove Street
Newport Beach, CA 92660
By: /s/ Joseph R. Tomkinson
------------------------------------------
Joseph R. Tomkinson
Title: Chairman and Chief Executive Officer
By: /s/ Ronald Morrison
------------------------------------------
Ronald Morrison
Title: General Counsel and Secretary
"PURCHASER" FORTRESS PARTNERS, L.P.,
a Delaware partnership
By: FORTRESS INVESTMENT CORP.,
Its General Partner
1301 Avenue of the Americas, 42nd Floor
New York, New York 10019
By:
__________________________________
Title:
_______________________________
<PAGE>
EXHIBIT A
---------
ARTICLES SUPPLEMENTARY
Please refer to Exhibit 3.1 filed with this Current Report on Form 8-K
for the Articles Supplementary
<PAGE>
EXHIBIT B
---------
SCHEDULE OF EXCEPTIONS TO
REPRESENTATIONS AND WARRANTIES
The following comprise the exceptions of IMPAC COMMERCIAL HOLDINGS, INC.
(the "Company") to the representations and warranties of the Company as set
forth in the Series B Preferred Stock Purchase Agreement dated May5, 1999.
References are to the section number and title of the pertinent representation
or warranty. Each exception noted shall constitute an exception to each
applicable representation and warranty.
3.3 Capitalization. The Company has reserved 632,500 shares for issuance
--------------
pursuant to the 1997 Stock Option and Awards Plan and options to purchase
389,814 shares are outstanding. Attached hereto as Schedule 3.3.1 is a
list of the holders of outstanding options to purchase shares of the
Company's common stock, granted by the Company and a list of dividend
equivalent rights granted by the Company. Attached hereto as Schedule 3.3.2
is a form of Option Agreement with DERs setting forth the terms and
conditions of such rights. The Company has issued and outstanding Series A
Preferred Share Purchase Rights, the rights, privileges and preferences of
which are described in the Reports set forth in Exhibit D to this Stock
Purchase Agreement.
3.8 Changes. Attached hereto as Schedule 3.8 is the pro forma balance sheet of
-------
the Company as of May 5, 1999.
3.14 Brokers or Finders; Other Offers. The Company will pay a cash fee to
--------------------------------
Nationsbanc Montgomery Securities, LLC equal to four percent of the
consideration involved in this sale, subject to a minimum fee of $500,000
for financial advisory and investment banking services rendered in
connection with the transactions contemplated by this Agreement pursuant to
that certain letter agreement between the Company and Nationsbanc
Montgomery Securities LLC dated November 25, 1998.
3.23 Interlocking Agreements. RAI, IMH, IFC and the Purchaser are parties to a
-----------------------
submanagement agreement dated as of May 5, 1999, delivered in connection
with the assignment referenced in Section 5.6 of the Stock Purchase
Agreement.
8.11 Finder's Fee. The Company will pay a fee to Nationsbanc Montgomery
------------
Securities, LLC equal to four percent of the consideration involved in this
sale, subject to a minimum fee of $500,000 for financial advisory and
investment banking services rendered in connection with the transactions
contemplated by this Agreement pursuant to that certain letter agreement
between the Company and Nationsbanc Montgomery Securities LLC dated
November 25, 1998.
19
<PAGE>
SCHEDULE 3.3.1
--------------
OUTSTANDING OPTIONS
AND
DIVIDEND EQUIVALENT RIGHTS
20
<PAGE>
Impac Commercial Holdings, Inc.
OUTSTANDING AND EXERCISABLE BY PRICE
AS OF 5/4/99
Page: 1
File: Osprice
Date: 5/4/99
Time: 10:54:59 AM
<TABLE>
<CAPTION>
Option Expiration Remaining
Name ID Number Date Date Life In Years
- ----------------------------- ------------- ------------- ------------- -------------- --------------------
<S> <C> <C> <C> <C> <C>
Dickinson, Jim 00000073 11/24/98 11/24/01 2.56
Duehring, Lisa 00000075 11/24/98 11/24/01 2.56
Kaucher, Bill 00000077 11/24/98 11/24/01 2.56
Martin, Kim 00000079 11/24/98 11/24/01 2.56
Murray, Kathy 00000082 11/24/98 11/24/01 2.56
Perry, Laura 00000083 11/24/98 11/24/01 2.56
Tucker, Randy 00000085 11/24/98 11/24/01 2.56
Velasco, Zoila 00000086 11/24/98 11/24/01 2.56
Taylor, Todd 00000087 11/24/98 11/24/01 2.56
Galvan, Eugene 00000090 11/24/98 11/24/01 2.56
Nona, Barbara 00000099 11/24/98 11/24/01 2.56
Sterbinszky, Laszlo 00000102 11/24/98 11/24/01 2.56
Vani, Lori 00000103 11/24/98 11/24/01 2.56
Endreson, Clifford 00000107 11/24/98 11/24/01 2.56
Goswiller, Lawrence 00000108 11/24/98 11/24/01 2.56
Perry, Laura 00000110 11/24/98 11/24/01 2.56
Morrison, Ron 00000119 11/24/98 11/24/03 4.56
Davenport, Richard 00000120 11/24/98 11/24/01 2.56
Ashmore, William S. 00000123 11/24/98 11/24/03 4.56
Endresen, William D. 01 00000124 11/24/98 11/24/03 4.56
Glass-Schannault, Mary C 00000125 11/24/98 11/24/03 4.56
Tomkinson, Joseph R. 00000126 11/24/98 11/24/03 4.56
Busch, Timothy R 00000127 11/24/98 11/24/08 9.56
Filipps, Frank P. 00000128 11/24/98 11/24/08 9.56
Peers, Stephan R. 00000129 11/24/98 11/24/08 9.56
Poletti, Thomas 00000130 11/24/98 11/24/08 9.56
Walsh, James 00000131 11/24/98 11/24/08 9.56
Brunk-Verdugo, Gretchen 00000132 11/24/98 11/24/01 2.56
Brunk-Verdugo, Gretchen 00000133 11/24/98 11/24/03 4.56
Johnson, Richard J. 00000134 11/24/98 11/24/03 4.56
Morrison, Ron 00000135 11/24/98 11/24/01 2.56
Avg. Life 5.97
Price: 6.00
Endresen, William D [DERS] 01 00000001 8/4/97 8/4/07 8.25
Ashmore, William S. [DERS] 00000003 8/4/97 8/4/07 8.25
Glass-Schannault, Mary C [DERS] 00000004 8/4/97 8/4/07 8.25
Johnson, Richard J. [DERS] 00000005 8/4/97 8/4/07 8.25
Tomkinson, Joseph R. [DERS] 00000006 8/4/97 8/4/07 8.25
Busch, Timothy R 00000007 8/4/97 8/4/07 8.25
Filipps, Frank P. 00000008 8/4/97 8/4/07 8.25
Peers, Stephan R. 00000009 8/4/97 8/4/07 8.25
Poletti, Thomas 00000010 8/4/97 8/4/07 8.25
</TABLE>
<TABLE>
<CAPTION>
Option Shares Shares
Name Price Outstanding Exercisable/Vesting
- ----------------------------- ---------------------- ------------------------ ----------------------
<S> <C> <C> <C>
Dickinson, Jim $6.0000 200 0
Duehring, Lisa $6.0000 1,000 0
Kaucher, Bill $6.0000 200 0
Martin, Kim $6.0000 800 0
Murray, Kathy $6.0000 800 0
Perry, Laura $6.0000 400 0
Tucker, Randy $6.0000 400 0
Velasco, Zoila $6.0000 400 0
Taylor, Todd $6.0000 1,509 0
Galvan, Eugene $6.0000 1,361 0
Nona, Barbara $6.0000 317 0
Sterbinszky, Laszlo $6.0000 79 0
Vani, Lori $6.0000 79 0
Endreson, Clifford $6.0000 5,000 0
Goswiller, Lawrence $6.0000 5,000 0
Perry, Laura $6.0000 9,000 0
Morrison, Ron $6.0000 7,500 0
Davenport, Richard $6.0000 5,000 0
Ashmore, William S. $6.0000 10,000 0
Endresen, William D. $6.0000 10,000 0
Glass-Schannault, Mary C $6.0000 10,000 0
Tomkinson, Joseph R. $6.0000 10,000 0
Busch, Timothy R $6.0000 20,000 0
Filipps, Frank P. $6.0000 10,000 0
Peers, Stephan R. $6.0000 10,000 0
Poletti, Thomas $6.0000 10,000 0
Walsh, James $6.0000 10,000 0
Brunk-Verdugo, Gretchen $6.0000 1,587 0
Brunk-Verdugo, Gretchen $6.0000 5,000 0
Johnson, Richard J. $6.0000 10,000 0
Morrison, Ron $6.0000 4,016 0
--------------- ------------
Avg. Out $6.0000 159,648 0
Avg. Exer. $0.0000
Endresen, William D [DERS] $15.0000 50,000 16,666
Ashmore, William S. [DERS] $15.0000 10,000 3,333
Glass-Schannault, Mary C [DERS] $15.0000 10,000 3,333
Johnson, Richard J. [DERS] $15.0000 10,000 3,333
Tomkinson, Joseph R. [DERS] $15.0000 10,000 3,333
Busch, Timothy R $15.0000 10,000 5,000
Filipps, Frank P. $15.0000 10,000 5,000
Peers, Stephan R. $15.0000 10,000 5,000
Poletti, Thomas $15.0000 10,000 5,000
</TABLE>
<PAGE>
Impac Commercial Holdings, Inc.
OUTSTANDING AND EXERCISABLE BY PRICE Page: 2
AS OF 5/4/99 File: Osprice
Date: 5/4/99
Time: 10:54:59 AM
<TABLE>
<CAPTION>
Option Expiration Remaining
Name ID Number Date Date Life In Years
----------------------------- ------------- ------------- ------------- -------------- --------------------
<S> <C> <C> <C> <C> <C>
Walsh, James 00000011 8/4/97 8/4/07 8.25
Davenport, Richard 00000012 8/4/97 8/4/07 8.25
Endresen, Clifford 00000013 8/4/97 8/4/07 8.25
Goswiller, Lawrence 00000014 8/4/97 8/4/07 8.25
Avg. Life 8.25
Price: 15.00
Endresen-Weston, Susan 00000047 2/27/98 2/27/08 8.82
Goswiller, Lawrence 00000050 2/27/98 2/27/08 8.82
DER's Endresen, William D (See 01 00000136 2/27/98 2/27/01 1.82
attached
option agreement)
Price: 17.63 Avg. Life 2.94
TOTALS Avg. Life 6.50
</TABLE>
<TABLE>
<CAPTION>
Option Shares Shares
Name Price Outstanding Exercisable/Vesting
----------------------------- ---------------------- ------------------------ ----------------------
<S> <C> <C> <C>
Walsh, James $15.0000 10,000 5,000
Davenport, Richard $15.0000 10,000(1) 3,333
Endresen, Clifford $15.0000 10,000(1) 3,333
Goswiller, Lawrence $15.0000 10,000(1) 3,333
--------------- ------------
Avg. Out. $15.0000 170,000 64,997
Avg. Exer. $15.0000
Endresen-Weston, Susan $17.6250 2,500 833
Goswiller, Lawrence $17.6250 7,000(1) 2,333
DER's Endresen, William D (See $17.6250 50,000(2) 16,666
attached --------------- ------------
option agreement)
Avg. Out. $17.6250 59,500 19,832
Avg. Exer. $17.6250
--------------- ------------
Avg. Out. $11.7091 389,148 84,829
Avg. Exer. $15.6137
</TABLE>
(1) No DER's per option agreements but have been paid incentive compensation
similar to DER's on these shares
(2) Has threshold pricing of 10 yr + 300 b.p. over option price (see agreement)
<PAGE>
SCHEDULE 3.3.2
--------------
FORM OF STOCK OPTION AGREEMENT
21
<PAGE>
SCHEDULE 3.3.2
IMH COMMERCIAL HOLDINGS, INC.
STOCK OPTION AGREEMENT
WITH DERS
This AGREEMENT is made effective as of the 4th day of August, 1997
(the "Option Grant Date"), by and between IMH Commercial Holdings, Inc., a
Maryland corporation (the "Company") and Joseph R. Tomkinson (the "Optionee").
RECITALS
WHEREAS, the Board of Directors of the Company has established the
1997 Stock Option and Awards Plan (the "Plan") effective as of April 14, 1997,
and
WHEREAS, pursuant to the provisions of said Plan, the Board of
Directors of the Company, by action duly taken on June 3, 1997, granted to the
Optionee an option or options (the "Option(s)") to purchase shares of the Common
Stock of the Company on the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants set forth herein and other good and valuable consideration, the
parties hereto agree as follows:
1. (a) The Option(s). The Optionee may, at his option, purchase all
-------------
or any part of an aggregate of 10,000 shares of Common Stock (the "Optioned
Shares"), at the price of $15.00 per share (the "Option Price"), on the terms
and conditions set forth herein.
(b) DERs. Dividend Equivalent Rights ("DERS") shall be credited with
----
respect to the Optioned Shares and the DERs shall be deemed "Current-pay DERs",
as described in the Plan. Current-Pay DERs shall be paid concurrently with any
dividends or distributions paid on the Stock of the Company during the time the
related Option is outstanding in an amount equal to the cash dividend (or Stock
or other property distributed) per share being paid on the Stock times the
number of Optioned Shares. Current-pay
1
<PAGE>
DERs are payable in cash, Stock or such other property as may be distributed to
stockholders.
2. Option Type; Exercise Dates and Exercise. Options intended to
----------------------------------------
qualify as Incentive Stock Options are designated by an "ISO" under the category
"Type." Options intended as separate nonstatutory options are designated by a
"NQSO" under the category "Type" The Option(s) shall be exercisable as to the
specified number of Optioned Shares on and after the "First" dates and on or
before the "Last" dates set forth below:
<TABLE>
<CAPTION>
Exercise Dates
--------------
Type Number of Shares First Last
---- ---------------- ----- ----
<S> <C> <C> <C>
3,333 8/4/98 8/4/2007
- ---------- ------------------ -------------- ------------------
3,333 8/4/99 8/4/2007
- ---------- ------------------ -------------- ------------------
3,334 8/4/2000 8/4/2007
- ---------- ------------------ -------------- ------------------
- ---------- ------------------ -------------- ------------------
- ---------- ------------------ -------------- ------------------
</TABLE>
Optionee acknowledges that he/she understands he/she has no right whatsoever to
exercise the Option(s) granted hereunder with respect to any Optioned Shares
covered by any installment until such installment accrues as provided above.
Optionee further understands that the Option(s) granted hereunder shall expire
and become unexercisable as provided in Section 3(c) below.
This Option shall be deemed exercised as to the shares to be purchased when
written notice of such exercise has been given to the Company at its principal
business office by the Optionee with respect to the Common Stock to be
purchased. Such notice shall be accompanied by full payment in cash or cash
equivalents as determined by the Administrator. As determined by the
Administrator, in its sole discretion, payment in whole or part may also be made
(i) by cancellation of any indebtedness owed by the Company to the Optionee,
(ii) by a full recourse promissory note executed by the Optionee, (iii) in the
form of unrestricted Stock owned by the Optionee, or, in the case of the
exercise of a Non-Qualified Stock Option, Restricted Stock or Performance Shares
subject to an award under the Plan (based, in each case, on the
2
<PAGE>
Fair Market Value of the Stock on the date the option is exercised); provided,
however, that in the case of an Incentive Stock Option, the right to make
payment in the form of already owned shares may be authorized only at the time
of grant, or (iv) by any combination of the foregoing.
3. Governing Plan. This Agreement hereby incorporates by reference the
--------------
Plan and all of the terms and conditions of the Plan as heretofore amended and
as the same may be amended from time to time hereafter in accordance with the
terms thereof, but no such subsequent amendment shall adversely affect the
Optionee's rights under this Agreement and the Plan except as may be required by
applicable law. The Optionee expressly acknowledges and agrees that the
provisions of this Agreement are subject to the Plan; the terms of this
Agreement shall in no manner limit or modify the controlling provisions of the
Plan, and in case of any conflict between the provisions of the Plan and this
Agreement, the provisions of the Plan shall be controlling and binding upon the
parties hereto. The Optionee also hereby expressly acknowledges, represents and
agrees as follows:
(a) Acknowledges receipt of a copy of the Plan, a copy of which is
attached hereto and by reference incorporated herein, and represents that he/she
is familiar with the terms and provisions of said Plan, and hereby accepts this
Agreement subject to all the terms and provisions of said Plan.
(b) Agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions arising under the
Plan.
(c) Acknowledges that he/she is familiar with Sections of the Plan
regarding the exercise of the Option(s) and represents that he/she understands
that said Option(s) must be exercised on or before the earliest of the following
dates, whichever is applicable: (i) the "Last" exercise date noted above in
Section 2; (ii) the day prior to the fifth anniversary, in certain
circumstances, of the Option(s) Grant Date with respect to Options granted as
Incentive Stock Options pursuant to Subsection (5)(a)(ii) and the day prior to
the tenth anniversary of the Option(s) Grant Date with respect to Options
granted as Non-Qualified Stock Options; (iii) the effective date of a sale or
other disposition of all or substantially all of the stock or
3
<PAGE>
assets of the Company, as provided in Section 10 of the Plan; (iv) the date
which is the earlier of (A) three months from the date of termination or (B) the
expiration of such Stock Option's term following the Optionee's termination of
directorship or consulting or other arrangement (unless extended) for any reason
other than death or disability as provided under Subsection 5(i) of the Plan; or
(v) the date that is one year following the Optionee's termination of
employment, directorship or consulting or other arrangement by reason of his/her
death, or the date that is one year following his/her termination of employment,
directorship or consulting or other arrangement by reason of disability,
whichever is applicable, as provided in Subsections 5(g) and 5(h) of the Plan.
(d) Acknowledges, understands and agrees that the existence of the
Plan and the execution of this Agreement are not sufficient by themselves to
cause any exercise of any Option(s) granted as an Incentive Stock Option to
qualify for favorable tax treatment through the application of Section 422(A) of
the Internal Revenue Code; that Optionee must, in order to so qualify,
individually meet by his own action all applicable requirements of Section 422A,
including without limitation the following holding period and employment
requirements:
(1) holding period requirement: no disposition of an
--------------------------
Optioned Share may be made by Optionee within two (2) years from the
date of the granting of the Option(s) nor within one (1) year after
the transfer of such Optioned Share to him/her, and
(2) employment requirement: at all times during the period
----------------------
beginning on the date of the granting of the Option(s) and ending on
the day three (3) months before the date of exercise, the Optionee
must have been an employee of the Company, its Parent, or a Subsidiary
of the Company, of Affiliated Companies, or a corporation or a parent
or subsidiary of such corporation issuing or assuming the Option(s) in
a transaction to which Section
4
<PAGE>
425(a) of the Internal Revenue Code applies, except where the
termination of employment is by means of the employee's disability,
in which case said three (3) month period may be extended to one (1)
year, as provided under Internal Revenue Code Section 422A.
4. Representations and Warranties. As a condition to the exercise of
------------------------------
any portion of an Option, the Company may require the person exercising such
Option to make any representation and/or warranty to the Company as may, in the
judgment of counsel to the Company, be required under any applicable law or
regulation, including but not limited to a representation and warranty that the
shares are being acquired only for investment and without any present intention
to sell or distribute such shares if, in the opinion of counsel for the Company,
such a representation is required under the Securities Act of 1933 or any other
applicable law, regulation or rule of any governmental agency. Optionee hereby
represents to the Company that each of the Option evidenced hereby and the
shares purchasable upon exercise thereof is being acquired only for investment
and without any present intention to sell or distribute such securities.
5. Options Not Transferable. No Stock Option shall be transferable
------------------------
by the optionee otherwise than by will or by the laws of descent and
distribution or, with respect to Non-Qualified Stock Options, pursuant to a
"qualified domestic relations order," as such term is defined in the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). Incentive Stock
Options shall be exercisable, during the optionee's lifetime, only by the
optionee or, with respect to Non-Qualified Stock Options, in accordance with the
terms of a qualified domestic relations order.
6. No Enlargement of Employee Rights. Nothing in this Agreement
---------------------------------
shall be construed to confer upon the Optionee (if an employee) any right to
continued employment with the Company, any Parent or Subsidiary, or any
Affiliated Company, or to restrict in any way the right of the Company, a
Subsidiary or Parent, or Affiliated Company to terminate his/her employment.
Optionee acknowledges that in the absence of an express written employment
agreement to the contrary, Optionee's employment with the Company may be
terminated by the Company at any time, with or without cause.
5
<PAGE>
7. Withholding of Taxes. Optionee authorizes the Company to
--------------------
withhold, in accordance with any applicable law, from any compensation payable
to him any taxes required to be withheld by federal, state or local law as a
result of the grant of the Option(s) or the issuance of stock pursuant to the
exercise of such Option(s).
8. Laws Applicable to Construction. This Agreement shall be
-------------------------------
construed and enforced in accordance with the laws of the State of California.
9. Agreement Binding on Successors. The terms of this Agreement
-------------------------------
shall be binding upon the executors, administrators, heirs, successors,
transferees and assignees of the Optionee.
10. Costs of Litigation. In any action at law or in equity to enforce
-------------------
any of the provisions or rights under this Agreement or the Plan, the
unsuccessful party to such litigation, as determined by the court in a final
judgment or decree, shall pay the successful party or parties all costs,
expenses and reasonable attorneys' fees incurred by the successful party or
parties (including without limitation costs, expenses end fees on any appeals),
and if the successful party recovers judgment in any such action or proceeding
such costs, expenses and attorneys' fees shall be included as part of the
judgment.
11. Necessary Acts. The Optionee agrees to perform all acts and
--------------
execute and deliver any documents that may be reasonably necessary to carry out
the provisions of this Agreement, including but not limited to all acts and
documents related to compliance with federal and/or state securities laws.
12. Counterparts. For convenience this Agreement may be executed in
------------
any number of identical counterparts, each of which shall be deemed a complete
original in itself and may be introduced in evidence or used for any other
purpose without the production of any other counterparts.
13. Invalid Provisions. In the event that any provision of this
------------------
Agreement is found to be invalid or otherwise unenforceable under any applicable
law, such invalidity or unenforceability shall not be construed as rendering any
other provisions contained herein invalid or unenforceable, and all such other
provisions shall be
6
<PAGE>
given full force and effect to the same extent as though the invalid and
unenforceable provision was not contained herein.
14. Limitation on Value of Optioned Shares. Optionee acknowledged
--------------------------------------
that the Plan provides that the aggregate fair market value (determined as of
the date hereof) of the shares of Common Stock to which Options granted as
Incentive Stock Options are exercisable for the first time by Optionee during
any calendar year under all incentive stock option plans of the Company and any
Subsidiary shall not exceed $100,000. It is understood and agreed that should
it be determined that an Option if granted as an Incentive Stock Option
hereunder would exceed such maximum, such Option shall be considered granted as
a Non-Qualified Stock Option to the extent, but only to the extent of such
excess. This limitation shall not apply to any option granted as a Non-
Qualified Stock Option.
7
<PAGE>
IN WITNESS WHEREOF, the Company and the Optionee have executed this
Agreement effective as of the date first written hereinabove.
IMH COMMERCIAL HOLDINGS, INC. OPTIONEE
By:/s/ William S. Ashmore /s/ Joseph R. Tomkinson
---------------------- ------------------------
Name: William S. Ashmore Joseph R. Tomkinson
Title: President
20371 Irvine Ave.
--------------------------
Street Address
Santa Ana Heigts, CA
------------------------
City and State
--------------------------
Social Security No.
By his or her signature below, the spouse of the Optionee, of such
Optionee be legally married as of the date of his execution of this Agreement,
acknowledges that he or she has read this Agreement and the Plan and is familiar
with the terms and provisions thereof, and agrees to be bound by all the terms
and conditions of said Agreement and said Plan document.
___________________________________
Spouse
Dated: ____________________________
By his or her signature below the Optionee represents that he or she
is not legally married as of the date of execution of this Agreement.
/s/Joseph R. Tomkinson
-----------------------
Optionee
Dated: ____________________________
8
<PAGE>
SCHEDULE 3.8
------------
COMPANY'S PRO FORMA BALANCE SHEET
AS OF MAY 5, 1999
22
<PAGE>
Schedule 3.8
Proforma Balance Sheet
IMPAC COMMERCIAL HOLDINGS, INC. - CONSOLIDATED Page &P
3:38pm Cat # MONTHLY BS
BALANCE SHEET
<TABLE>
<CAPTION>
Balance as of Avg. Balance Avg. Balance Avg. Balance
05/05/99 MTD QTD YTD
<S> <C> <C> <C> <C>
CASH - GENERAL OPERATING 370,362.05 0.00 0.00 0.00
CASH - FUTURES TRADING 829,843.25 0.00 0.00 0.00
CASH - TRUSTEE ACCOUNTS 122,732.76 0.00 0.00 0.00
CASH - SPTL TIER PASSBOOK 53,655.25 0.00 0.00 0.00
INVESTMENTS - UNIVERSAL FUND 1,787,780.91 0.00 0.00 0.00
INVESTMENTS - GOVT INSTITUTIONAL FUND 425,545.42 0.00 0.00 0.00
*TOTAL CASH AND CASH EQUIVALENTS* 3,589,919.64 0.00 0.00 0.00
MORTGAGE-BACKED SECURITIES AVAILABLE FOR SALE 7,771,780.00 0.00 0.00 0.00
DISCOUNT - MBS AVAILABLE FOR SALE (1,228,221.93) 0.00 0.00 0.00
RESIDUAL INTEREST IN SECURITIZATIONS 8,989,677.80 0.00 0.00 0.00
INTEREST ONLY STRIP 10,021,790.58 0.00 0.00 0.00
SECURITIES VALUATION ALLOWANCE - EQUITY (248,762.40) 0.00 0.00 0.00
*SUB-TOTAL EQUITY SECURITIES AVAILABLE-FOR-SAL 25,306,264.05 0.00 0.00 0.00
*TOTAL SECURITIES AVAILABLE-FOR-SALE* 25,306,264.05 0.00 0.00 0.00
MORTGAGE LOANS HELD FOR SALE 32,014,446.03 0.00 0.00 0.00
PREMIUMS/(DISCOUNTS) - LOANS HELD FOR SALE (456,318.29) 0.00 0.00 0.00
DEFERRED LOAN FEES- PREFERRED 210,434.83 0.00 0.00 0.00
DEFERRED HEDGING (861,835.89) 0.00 0.00 0.00
*TOTAL LOANS HELD-FOR-SALE* 30,906,726.68 0.00 0.00 0.00
IMPAC COMMERCIAL CAPITAL CORPORATION 0.00 0.00 0.00 0.00
*SUBTOTAL AFFILIATED FINANCE RECEIVABLES* 0.00 0.00 0.00 0.00
*TOTAL FINANCE RECEIVABLES* 0.00 0.00 0.00 0.00
</TABLE>
Page 1 of 5
<PAGE>
IMPAC COMMERCIAL HOLDINGS, INC. - CONSOLIDATED Page &P
3:38pm Cat # MONTHLY BS
BALANCE SHEET
<TABLE>
<CAPTION>
Balance as of Avg. Balance Avg. Balance Avg. Balance
05/05/99 MTD QTD YTD
<S> <C> <C> <C> <C>
MORTGAGE LOANS HELD FOR INV-WESTCO 6,121,143.09 0.00 0.00 0.00
MORTGAGE LOANS HELD FOR INVESTMENT 4,419,462.76 0.00 0.00 0.00
PREMIUM - MORTGAGE LOANS HELD FOR INVESTMENT 23,513.13 0.00 0.00 0.00
*TOTAL LOANS HELD-FOR-INVESTMENT* 10,564,118.98 0.00 0.00 0.00
CMO COLLATERAL - IMPERIAL 1998-3 661,763.58 0.00 0.00 0.00
CMO COLLATERAL - IMPAC CMB 1998-C1 304,444,602.56 0.00 0.00 0.00
PREMIUM - IMPAC CMB 1998-C1 3,704,968.38 0.00 0.00 0.00
PREPAID SECURITIZATION COSTS - IMPAC 1998-C1 8,809,032.36 0.00 0.00 0.00
CMO COLLATERAL - IMPAC CMB 1999-1 3,041,458.35 0.00 0.00 0.00
*TOTAL CMO COLLATERAL* 320,661,825.23 0.00 0.00 0.00
*TOTAL LOAN RECEIVABLES* 362,132,670.89 0.00 0.00 0.00
ALLOWANCE FOR LOAN LOSSES (2,109,876.55) 0.00 0.00 0.00
*TOTAL ALLOWANCE FOR LOAN LOSSES* (2,109,876.55) 0.00 0.00 0.00
*NET LOAN RECEIVABLES* 360,022,794.34 0.00 0.00 0.00
*REO PROPERTIES* 2,000,000.00 0.00 0.00 0.00
FIXED ASSET CLEARING (6,885.92) 0.00 0.00 0.00
BUILDINGS 11,185,618.72 0.00 0.00 0.00
BUILDING IMPROVEMENTS 344,225.26 0.00 0.00 0.00
FURNITURE, FIXTURE & EQUIPMENT 352,123.16 0.00 0.00 0.00
COMPUTER EQUIPMENT AND PERIPHERALS 567,730.39 0.00 0.00 0.00
OFFICE EQUIPMENT 170,506.00 0.00 0.00 0.00
</TABLE>
Page 2 of 5
<PAGE>
IMPAC COMMERCIAL HOLDINGS, INC. - CONSOLIDATED Page &P
3:38 pm Cat # MONTHLY BS
BALANCE SHEET
<TABLE>
<CAPTION>
Balance as of Avg. Balance Avg. Balance Avg. Balance
05/05/99 MTD QTD YTD
<S> <C> <C> <C> <C>
ACCUMULATED DEPRECIATION - FF & E (111,958.56) 0.00 0.00 0.00
ACCUMULATED DEPRECIATION - COMPUTER EQUIPMENT (228,096.91) 0.00 0.00 0.00
ACCUMULATED DEPRECIATION - BUILDINGS (739,902.71) 0.00 0.00 0.00
ACCUMULATED DEPRECIATION - OFFICE EQUIPMENT (3,619.48) 0.00 0.00 0.00
LEASEHOLD IMPROVEMENTS 33,373.50 0.00 0.00 0.00
ACCUMULATED AMORT - LEASEHOLDS 2,750.15 0.00 0.00 0.00
*TOTAL FIXED ASSETS* 11,565,863.60 0.00 0.00 0.00
*ACCRUED INTEREST RECEIVABLE* 2,877,899.25 0.00 0.00 0.00
DUE FROM - ICII (1,500.00) 0.00 0.00 0.00
DUE FROM - IMH 186,611.40 0.00 0.00 0.00
DUE FROM - IWLG 6,751.61 0.00 0.00 0.00
DUE FROM - IMPAC ASSETS 236,515.43 0.00 0.00 0.00
DUE FROM - ICCC (800.00) 0.00 0.00 0.00
DUE FROM - IFC 352,504.08 0.00 0.00 0.00
DUE FROM - ICH (31,781.40) 0.00 0.00 0.00
DUE FROM - DOVE STREET, LLC 31,781.40 0.00 0.00 0.00
DUE FROM - ICHAC 800.00 0.00 0.00 0.00
NOTES RECEIVABLE - EMPLOYEE 100,712.00 0.00 0.00 0.00
INTERCOMPANY - RECEIVABLE/(PAYABLE) 0.00 0.00 0.00 0.00
*TOTAL DUE FROM AFFILIATES* 881,594.52 0.00 0.00 0.00
ACCOUNTS RECEIVABLE 574,173.57 0.00 0.00 0.00
*TOTAL ACCOUNTS RECEIVABLE* 574,173.57 0.00 0.00 0.00
PREPAID EXPENSE - GENERAL 711,471.66 0.00 0.00 0.00
PREPAID EXPENSE - ORGANIZATIONAL 21,720.51 0.00 0.00 0.00
PREPAID EXPENSE - MAINTENANCE CONTRACTS 719.88 0.00 0.00 0.00
</TABLE>
Page 3 of 5
<PAGE>
IMPAC COMMERCIAL HOLDINGS, INC. - CONSOLIDATED Page &P
3:38pm Cat # MONTHLY BS
BALANCE SHEET
<TABLE>
<CAPTION>
Balance as of Avg. Balance Avg. Balance Avg. Balance
05/05/99 MTD QTD YTD
<S> <C> <C> <C> <C>
PREPAID EXPENSE - RENT 119,522.58 0.00 0.00 0.00
PREPAID LEASE DEPOSITS 36,461.67 0.00 0.00 0.00
*TOTAL PREPAID EXPENSE* 889,896.30 0.00 0.00 0.00
INVESTMENT - IMPAC COMMERCIAL CAPITAL CORP 0.00 0.00 0.00
TOTAL ASSETS 407,708,405.27 0.00 0.00 0.00
BORROWINGS - IMPAC COMMERCIAL HOLDINGS (O.36) 0.00 0.00 0.00
BORROWINGS - MORGAN STANLEY 12,974,718.14 0.00 0.00 0.00
*TOTAL WAREHOUSE FACILITIES* 12,974,717.78 0.00 0.00 0.00
BORROWINGS - REVERSE REPURCHASE/BEAR 1,944,000.00 0.00 0.00 0.00
BORROWINGS - REVERSE-REPURCHASE/DLJ 2,713,000.00 0.00 0.00 0.00
*BORROWINGS REVERSE-REPURCHASE AGREEMENTS 4,657,000.00 0.00 0.00 0.00
CMO FINANCING - IMPAC CMB 1998-C1 286,525,936.82 0.00 0.00 0.00
PREMIUM IMPAC CMB 98-C1 (5,864,890.47) 0.00 0.00 0.00
CMO FINANCING - IMPERIAL CMB 1998-3 499,447.98 0.00 0.00 0.00
CMO FINANCING CMB 1999-1 2,970,161.03 0.00 0.00 0.00
*CMO FINANCING* 284,130,655.36 0.00 0.00 0.00
*ACCRUED INTEREST EXPENSE* 1,649,367.04 0.00 0.00 0.00
NOTES PAYABLE - ICCC (DOVE FINANCING) 0.00 0.00 0.00 0.00
*DUE TO AFFILIATES* 0.00 0.00 0.00 0.00
ACCRUED ACCOUNTS PAYABLE 18,150.50 0.00 0.00 0.00
</TABLE>
Page 4 of 5
<PAGE>
IMPAC COMMERCIAL HOLDINGS, INC. - CONSOLIDATED Page &P
3:38pm Cat # MONTHLY BS
BALANCE SHEET
<TABLE>
<CAPTION>
Balance as of Avg. Balance Avg. Balance Avg. Balance
05/05/99 MTD QTD YTD
<S> <C> <C> <C> <C>
ACCRUED LIABILITIES - OTHER 718,235.10 0.00 0.00 0.00
RATE LOCK FEES AND DEPOSITS 103,464.72 0.00 0.00 0.00
THIRD PARTY CLEARING - INDIVIDUAL 32,094.22 0.00 0.00 0.00
SECURITY DEPOSITS 32,420.18 0.00 0.00 0.00
ACCRUED INCOME TAXES - FEDERAL (7,843.25) 0.00 0.00 0.00
ACCRUED INCOME TAXES - STATE 6,482.05 0.00 0.00 0.00
*TOTAL ACCRUED LIABILITIES* 903,003.52 0.00 0.00 0.00
DEFERRED GAIN PAYABLE 0.00 0.00 0.00 0.00
ALLOWANCE FOR REPURCHASES 394,656.20 0.00 0.00 0.00
*TOTAL OTHER LIABILITIES* 394,656.20 0.00 0.00 0.00
TOTAL LIABILITIES 304,709,399.90 0.00 0.00 0.00
*TOTAL MINORITY INTEREST IN SUBS* 355,424.87 0.00 0.00 0.00
COMMON STOCK 84,182.00 0.00 0.00 0.00
SURPLUS - COMMON STOCK 125,933,798.15 0.00 0.00 0.00
RETAINED EARNINGS (7,550,867.25) 0.00 0.00 0.00
CUMULATIVE DIVIDENDS DECLARED (15,574,770.00) 0.00 0.00 0.00
SECURITIES VALUATION ALLOWANCE (248,762.40) 0.00 0.00 0.00
*TOTAL STOCKHOLDER'S EQUITY* 102,643,580.50 0.00 0.00 0.00
TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY 407,708,405.27 0.00 0.00 0.00
</TABLE>
Page 5 of 5
<PAGE>
EXHIBIT C
---------
FORM OF
REGISTRATION RIGHTS AGREEMENT
Please refer to Exhibit 10.4 filed with this Current Report on Form 8-K
for the Registration Rights Agreement
<PAGE>
EXHIBIT D
---------
SECURITIES AND EXCHANGE COMMISSION FILINGS
Please refer to the SEC's website at http://www.sec.gov
for the following Exhibits incorporated by reference
(1) Quarterly Report on Form 10-Q for the three months ended March 31, 1999 (to
be filed May 6, 1999)
(2) Amendment Number One to the Company's Annual Report on Form 10-K for the
year ended December 31, 1998
(3) Annual Report on Form 10-K for the year ended December 31, 1998
(4) Current Reports on Form 8-K filed on February 11, 1998, February 12, 1998,
October 15, 1998 and May 5, 1999
(5) Registration Statement on Form 8-A, as amended, registering the Series A
Junior Participating Preferred Stock Purchase Rights of the Company
<PAGE>
EXHIBIT E
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RISK FACTORS
An investment in the Series B Preferred Stock involves a high degree of
risk. You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones facing our business. Please refer to our Annual Report on Form 10-K,
filed with the Commission on February 26, 1999, for risk factors which relate to
our business operations. Additional risks and uncertainties that we are not pres
ently aware of or that we currently deem immaterial may also impair our business
operations. If any of the following risks actually occur, our business,
financial condition or results of opera tions could be materially adversely
affected. In such case, you may lose all or part of your investment. All of
these risk factors are dependent on each other and so you should read this risk
factors section, and those included in the Form 10-K referenced above, as a
whole.
These Risk Factors also contains forward-looking statements that involve
risks and uncertainties. These forward-looking statements can be identified by
the use of words such as: "believes," "anticipates," "plans," "expects," "may,"
"will," "intends," "estimates" and their derivatives, opposites and similar
expressions. Our actual results could differ materially from those anticipated
in these forward-looking statements as a result of certain factors, including
the risks described below and to those we referred you to.
Risks Related to Issuance of Additional Preferred Stock and Incurrence of Debt
The terms of the Series B Preferred Stock restrict our ability to issue
securities senior to or on a parity with the Series B Preferred Stock. The
issuance of additional preferred stock on a parity with or senior to the Series
B Preferred Stock could have the effect of diluting the interests of holders of
the Series B Preferred Stock. None of the terms of the Series B Preferred Stock
restrict our ability to incur debt. Therefore, we could enter into a highly
leveraged or other transaction that might adversely affect our ability to pay
dividends on the Series B Preferred Stock.
A Public Market for Series B Preferred Stock Will Not Develop
Prior to this offering, there has been no public market for the Series B
Preferred Stock, and we do not intend to list the shares of Series B Preferred
Stock on a stock exchange or an over-the-counter market. Therefore, it is
highly unlikely that an active trading market will develop and be maintained in
the Series B Preferred Stock. If an active market does not develop, you may not
be able to sell your shares promptly or perhaps at all or to sell your shares at
a price equal to or above the price you paid for the shares.
Our Share Prices Have Been and May Continue to be Highly Volatile
The market price of our common stock has been extremely volatile. On
January 23, 1998, the closing price was $19.44 and on October 7, 1998, the
closing price was $2.00. On
1
<PAGE>
May 4, 1999, the closing price was $5.00. The market price of our common stock
is likely to continue to be highly volatile and could be significantly affected
by factors including:
. availability of liquidity
. volatility in the securitization market
. whole loan sale pricing
. margin calls by warehouse lenders
. actual or anticipated fluctuations in our operating results
. interest rates
. prepayments on mortgages
. valuations of securitization related assets
. cost of funds
. general market conditions
In addition, significant price and volume fluctuations in the stock market have
particularly affected the market prices for the common stocks of specialty
finance companies such as ours. These broad market fluctuations have adversely
affected and may continue to adversely affect the market price of our common
stock.
If our results of operations fail to meet the expectations of securities
analysts or investors in a future quarter, the market price of our common stock
could also be materially adversely affected.
Grant of Excepted Holder Status to the Purchaser of Our Series B Preferred Stock
May Affect Our Status as a REIT
The Internal Revenue Code prohibits ownership of more than 50% of a REIT's
shares by five or fewer individuals during the last half of a REIT's taxable
year. Our charter generally precludes anyone from beneficially owning in excess
of 9.8% of our capital stock to ensure that 50% of our capital stock is not held
by five or fewer individuals at any time. However, our charter permits our
board of directors to make exceptions to this ownership limitation, upon the
provision of certain representations and undertakings by a prospective purchaser
of our capital stock, with such person becoming an excepted holder. In
connection with the offering of the Series B Preferred Stock, our board of
directors has authorized excepted holder status to the initial purchaser of the
Series B Preferred Stock. While our charter permits us to redeem the Series B
Preferred Stock at any time if necessary to preserve our REIT status, we cannot
assure you that we will have the funds legally available to redeem a sufficient
number of shares of Series B Preferred Stock to remain a REIT. The loss of REIT
status will have a material adverse affect on our business, financial condition
and results of operations.
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EXHIBIT F
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FORM OF
AMENDMENT NUMBER ONE TO THE COMPANY'S
1997 STOCK OPTION AND AWARDS PLAN
3
<PAGE>
AMENDMENT NUMBER ONE TO THE
IMPAC COMMERCIAL HOLDINGS, INC.
1997 STOCK OPTION AND AWARDS PLAN
This Amendment is made to the Impac Commercial Holdings, Inc.
(formerly, Imperial Credit Commercial Holdings, Inc.) 1997 Stock Option and
Awards Plan (the "Plan") effective as of May 5, 1999. Capitalized terms used
but not defined herein shall have the meanings ascribed to them in the Plan.
WHEREAS, Impac Commercial Holdings, Inc. (the "Company") has
determined that it is in its best interest and that of its stockholders to amend
the Plan as set forth herein.
NOW THEREFORE, the Plan is hereby amended as follows:
1. Section 1(b) of the Plan is amended by adding the following
definitions thereto:
"FIC" means Fortress Investment Corp., a Maryland real estate
investment trust.
"FIC Management" means FIC Management Inc., a Delaware corporation,
and its successors and assigns under that certain Amended and Restated
Management Agreement, dated as of May 5, 1999.
"FIG" means Fortress Investment Group LLC., a Delaware limited
liability company.
2. Section 1(b) of the Plan is amended by changing the definition of
"Affiliated Companies" to mean FIC Management, FIG or FIC or their respective
affiliates.
IN WITNESS WHEREOF, Impac Commercial Holdings, Inc. has caused its
corporate name to be hereunto affixed by its duly authorized officer this 5th
day of May, 1999.
IMPAC COMMERCIAL HOLDINGS, INC.,
By
--------------------------------------------------------
Richard Johnson
Its: Executive Vice President and Chief Financial Officer
By
_______________________________________________________
Ronald Morrison
Its: Secretary
4
<PAGE>
EXHIBIT G
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FORM OF BOARD RESOLUTION
Payment of Dividends
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RESOLVED FURTHER, that for the calendar year 1999 only, the Company shall
pay a minimum annualized dividend of $.50 per share, our of funds legally
available for the payment thereof, for the period commencing May 1, 1999 through
December 31, 1999, with dividends payable quarterly, to the extent of taxable
income for calendar 1999. By way of example, if dividends per share actually
paid in 1999 on or prior to December 31, 1999 were less than $.33 (that is, $.50
prorated from May1, 1999), but there was remaining taxable income available for
distribution to stockholders at year end, additional dividends would be declared
towards and up to (if available) said $.33 per share minimum dividend amount;
RESOLVED FURTHER, that as long as any of the Company's Series B Preferred
Stock remains issued and outstanding and is owned by Fortress or an affiliate
thereof, the two (2) Directors appointed or designated by Fortress Partners,
L.P., shall abstain from voting on any proposed declaration of dividend or
dividends payable by the Company on its Common Stock.
5
<PAGE>
EXHIBIT H
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FORM OF
FRESHMAN, MARANTZ, ORLANSKI, COOPER & KLEIN
LEGAL OPINION
<PAGE>
EXHIBIT 10.1
May 5, 1999
DRAFT
Fortress Investment Corp., as
General Partner for Fortress Partners, L.P.
1301 Avenue of the Americas
42nd Floor
New York, NY 10019
Re: Impac Commercial Holdings, Inc.
Dear Sir/Madam:
We have acted as counsel for Impac Commercial Holdings, Inc., a Maryland
corporation (the "Company") in connection with the issuance and sale of an
aggregate of 479,999 shares (the "Shares") of the Company's Series B 8.5%
Cumulative Convertible Preferred Stock, $.01 par value per share (the "Series B
Preferred Stock"), pursuant to that certain Stock Purchase Agreement dated May 5
, 1999, between the Company and Fortress Partners, L.P. ("Fortress") (the "Stock
Purchase Agreement"), and that certain Registration Rights Agreement dated May
5, 1999, between the Company and Fortress (the "Registration Rights Agreement,"
and, together with the Stock Purchase Agreement, the "Agreements"). This
opinion is being rendered to you pursuant to Section 5.4 of the Stock Purchase
Agreement. Capitalized terms used herein shall have the same meanings given to
them in the Agreements unless otherwise defined herein.
We are licensed to practice law only in the State of California. Accordingly,
except as otherwise specifically stated herein, the opinions expressed herein
are limited in all respects to existing laws of the State of California, the
corporation laws of the State of Maryland and applicable Federal laws, and we
have made no inquiry into, and express no opinion as to, the statutes,
regulations, treaties or common laws of any other nation, state or jurisdiction,
or the effect on the transactions referenced herein of non-compliance under any
such statutes, regulations, treaties or common laws. Except with respect to the
corporate laws of the State of Maryland, with regard to which, we have relied
upon the opinion of Brown & Wood LLP, we have assumed that the laws of any
state, other than California, applicable to the opinions rendered herein are
identical to the laws of the State of California.
As such counsel, we have made such legal and factual examinations and inquiries
as we have
<PAGE>
Fortress Investment Corp. DRAFT
May 5, 1999
Page 2
deemed advisable or necessary for the purpose of rendering this opinion and we
have examined, among other things, originals, certified copies or copies
otherwise identified to us as being true copies of the originals of, or have
received, the following:
(a) The Charter or Articles of Incorporation, including the Articles
Supplementary dated May 5, 1999 creating the Series B Preferred Stock (the
"Articles Supplementary"), whichever is applicable, and Bylaws of the Company
and of Impac Commercial Capital Corporation and Impac Commercial Assets
Corporation (the "significant subsidiaries") and all amendments thereto as in
effect on the date hereof;
(b) Minutes of meetings of or actions taken by the Board of Directors of
the Company and its significant subsidiaries with respect to the transactions
covered by this opinion;
(c) Specimen certificates for shares of the Company's Series B Preferred
Stock;
(d) An executed copy of the Stock Purchase Agreement;
(e) An executed copy of the Registration Rights Agreement;
(f) Executed copy of the opinion of Brown & Wood LLP, special tax counsel
for the Company, dated of even date herewith and delivered to you concurrently
herewith (the "Tax Opinion");
(g) Executed copy of the opinion of Brown & Wood LLP, Maryland counsel to
the Company, dated of even date herewith and delivered to you concurrently
herewith (the "Maryland Opinion");
(h) The certificates of certain state authorities and filing officers; and
(i) The other documents delivered on the Closing Date.
In addition, we have obtained from public officials and from officers of the
Company such other certificates, and we have examined such corporate records,
other documents and questions of law, as we have considered necessary or
appropriate for purposes of this opinion.
In rendering this opinion, we have assumed the genuineness of all signatures on
original documents, the authenticity of all documents submitted to us as
originals, the conformity to
<PAGE>
Fortress Investment Corp. DRAFT
May 5, 1999
Page 3
originals of all documents submitted to us as copies thereof, and the due
execution of all documents where due execution and delivery are a prerequisite
to the effectiveness thereof, other than the signatures of the Company's
officers and directors with respect to the Agreements. In addition, in rendering
our opinion, we have relied on the truthfulness of the representations and
warranties as to factual matters, but not legal conclusions, made by the Company
and you in the Agreements. We have also relied on the truthfulness of
representations as to factual matters, but not legal conclusions, made to us in
certain certificates delivered by the Company to us.
As used in this opinion, the expressions "of which we are aware," "to our
knowledge" or any similar phrase with reference to matters of fact mean that
after an examination of documents made available to us by the Company, and after
inquiries of officers of the Company as we have deemed necessary, but without
any further independent factual investigation, we find no reason to believe that
the opinions expressed herein are factually incorrect. Further, the expressions
"of which we are aware," "to our knowledge" or any similar phrase with reference
to matters of fact refer to the actual knowledge of the attorneys of this firm
who have worked on matters for the Company and its significant subsidiaries.
Except to the extent expressly set forth herein or as we otherwise believe to be
necessary to our opinion, we have not undertaken any independent investigation
to determine the existence or absence of any fact, and no inference as to our
knowledge of the existence or absence of any fact should be drawn from our
representation of the Company or the rendering of the opinions set forth below.
The opinions hereinafter expressed are subject to the following qualifications:
(a) we give no opinion concerning the rules, regulations and related
statutes promulgated by, governing or pertaining to the (i) Federal Deposit
Insurance Corporation; (ii) California State Banking Department (and the
Superintendent of Banks); (iii) the Federal Reserve Board; (iv) any rules and
regulations similar to (i), (ii) and (iii) above; (v) the Government National
Mortgage Association; (vi) Federal Home Loan Mortgage Corporation; (vii) Federal
National Mortgage Association; (viii) California Department of Real Estate; and
(ix) Department of Housing and Urban Development;
(b) we give no opinion, with respect to the enforceability of any
agreement, as to the effect of bankruptcy, insolvency, reorganization,
moratorium and other similar laws (including without limitation, California and
federal laws relating to fraudulent transfers or conveyances) and court
decisions of general application, and other legal or equitable principles of
general application, relating to, limiting or affecting the enforcement of
creditors' rights generally;
<PAGE>
Fortress Investment Corp. DRAFT
May 5, 1999
Page 4
(c) we give no opinion as to the discretion of any court of competent
jurisdiction in awarding equitable remedies, including but not limited to
specific performance or injunctive relief and, limitations imposed by federal or
state securities laws;
(d) we give no opinions as to any limitations imposed by applicable law or
public policy on the enforceability of the indemnification and/or contribution
provisions of the Registration Rights Agreement;
(e) we give no opinion as to the net impact or result of any conflict of
laws between or among laws of competing jurisdictions and the applicability of
the law of any jurisdiction in such instance beyond California;
(f) we give no opinion to the extent that the limitations imposed by a
California court might not permit the exercise or attempted exercise of any
right or remedy provided in any agreement if such exercise or attempted exercise
is deemed to be in breach of the covenant of good faith and fair dealing implied
under California law to exist in all agreements or if the party seeking to
exercise same fails to act in a commercially reasonable manner;
(g) we give no opinion as to the limitations imposed by California law
and court deci sions relating to the strict enforcement of certain covenants in
contracts absent a showing of damage or increased risk to the party seeking
enforcement (such covenants may include, without limitation, covenants to
provide reports or notices and covenants restricting rights of assignment);
(h) we give no opinion as to the effect of certain California court
decisions, indicating that a California court would probably refuse to give
strict and literal effect to contractual provisions if it concluded that
enforcement of such provisions, on the basis of the facts and circumstances then
before such court, were not reasonably necessary to protect the rights and
interest of the party seeking enforcement;
(i) we give no opinion as to the unenforceability under certain
circumstances of contractual provisions respecting various self-help or summary
remedies without notice or opportunity for hearing or correction, especially if
their operation would work a substantial forfeiture or impose a substantial
penalty upon the burdened party;
(j) we give no opinion as to the unenforceability under certain
circumstances of provisions waiving vaguely or broadly stated rights or unknown
future rights and of provisions stating that rights or remedies are not
exclusive, that every right or remedy is cumulative and may
<PAGE>
Fortress Investment Corp. DRAFT
May 5, 1999
Page 5
be exercised in addition to or with any other right or remedy, or that the
election of some particular remedy or remedies does not preclude recourse to one
or more others;
(k) we give no opinion as to the effect of section 1670.5 of the
California Civil Code, which provides that if a court as a matter of law finds a
contract or any clause of a contract to have been "unconscionable" at the time
it was made, the court may refuse to enforce the contract, or the court may
enforce the remainder of the contract without the "unconscionable" clause so as
to avoid an "unconscionable" result. That section also permits parties to
present evidence as to the commercial setting, purpose and effect of any
contract or clause thereof claimed to be "unconscionable" to aid the court in
making its determination; and
(l) we give no opinion as to the effect of Trident Center v. Connecticut
-----------------------------
General Life Ins. Co., 847 F.2d 564 (9th Cir. 1988) in which the Ninth Circuit
- ---------------------
Court of Appeals, applying what it said was California law, held parol evidence
was admissible to vary the provisions of an unambiguous agreement. To the
extent Trident accurately expresses California law on the subject matter, our
-------
opinion assumes that no party to any agreement or document referenced herein in
any action seeking to enforce it offers any parol evidence which varies the
express terms of said agreement or document.
Based upon, and subject to the foregoing, we are of the opinion that:
1. the Company and each "significant subsidiary" (as such term is defined
in Rule 1-02 of Regulation S-X under the Act) of the Company have been duly
incorporated and are validly existing in good standing under the laws of their
jurisdictions of incorporation and are duly qualified to transact business as
foreign corporations and are in good standing under the laws of all other
jurisdictions where the ownership or leasing of their properties or the conduct
of their businesses requires such qualification, except where the failure to be
so qualified or in good standing would not have a material adverse effect
on the business, prospects, properties, condition (financial or otherwise),
net worth or results of operations of the Company and the significant
subsidiaries, taken as a whole;
<PAGE>
Fortress Investment Corp. DRAFT
May 5, 1999
Page 6
2. the Company and each significant subsidiary have full power and
authority to own or lease all the assets owned or leased by them; and the
Company has all corporate power and authority to enter into the Agreements, and
to carry out the provisions and conditions thereof;
3. the Company has all corporate power and authority to enter into the
Agreements, and to carry out the provisions and conditions thereof;
4. all of the issued shares of capital stock of the Company have been
duly authorized and validly issued, and are fully paid and nonassessable and
free of preemptive or other similar rights;
5. the Articles Supplementary have been duly authorized, approved and
adopted by all necessary action on the part of the Company; the Company has
filed the Articles Supplementary with the State of Maryland and has made any
other required filings with the State of Maryland necessary to create the Series
B Preferred Stock;
6. the issuance and sale of (A) the Shares to be purchased on the Closing
Date and (B) the shares of common stock, par value $.01 per share, of the
Company reserved for issuance upon conversion of the Shares (the "Conversion
Shares") have been duly authorized by the Company, and such Shares and
Conversion Shares, when issued and paid for in accordance with the Stock
Purchase Agreement or upon conversion, as applicable, will be duly and validly
issued, fully paid and nonassessable and will not be subject to preemptive or
other similar rights; the holders of such Shares will not be subject to personal
liability by reason of being such holders, except to the extent that: (i) a
director is held liable under Section 2-312(a) of the Maryland General
Corporation Law (the "MGCL") for an unlawful distribution to the stockholder who
accepted the distribution knowing the distribution was made in violation of the
Company's Charter, or Section 2-311 of the MGCL, or (ii) liability is imposed on
the stockholder by law in connection with, and to the extent of, a distribution
made pursuant to a voluntary or involuntary dissolution of the Company;
7. the execution and delivery of the Stock Purchase Agreement have been
duly authorized by all necessary action of the Company, and the Stock Purchase
Agreement has been duly executed and delivered by the Company and is the legal,
valid and binding agreement of the Company, enforceable against the Company in
accordance with its terms;
8. the execution and delivery of the Registration Rights Agreement have
been duly authorized by all necessary action of the Company, and the
Registration Rights Agreement has
<PAGE>
Fortress Investment Corp. DRAFT
May 5, 1999
Page 7
been duly executed and delivered by the Company and is the legal, valid and
binding agreement of the Company, enforceable against the Company in accordance
with its terms;
9. the Company is not, and upon the issuance and sale of the Shares will
not be, an "investment company" as such term is defined under the Investment
Company Act, and is not required to be registered under the Investment Company
Act;
10. commencing with the Company's taxable year ended December 31, 1997,
the Company has been organized in conformity with the requirements for
qualification as a "real estate investment trust," and its proposed method of
operation has enabled and will enable it to meet the requirements for
qualification and taxation as a "real estate investment trust" under the Code;
11. neither the issuance, offering and sale of the Shares pursuant to the
Stock Purchase Agreement nor the compliance by the Company with the other
provisions of the Agreements require the consent, approval, authorization,
registration or qualification of or with any governmental authority, except such
as have been obtained;
12. neither the execution or delivery of the Agreements, nor the offering,
issuance or sale of the Shares or the Conversion Shares, nor the compliance by
the Company with the terms and provisions of the Agreements or of the Articles
Supplementary will conflict with, or result in a breach or violation of, any of
the terms and provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property or
assets of the Company or of the significant subsidiaries pursuant to the terms
of, (A) any material contract or other agreement known to us to which the
Company or any significant subsidiary is a party or by which the Company or any
significant subsidiary or any of their respective properties or assets are
subject, (B) the organizational or governing documents of the Company or any
significant subsidiary, or (C) any judgment, decree or order of any court or
other governmental authority or any arbitrator known to us and applicable to the
Company or any significant subsidiary, except such as would not materially
adversely affect the business, properties, condition (financial or otherwise),
net worth or results of operations of the Company and its significant
subsidiaries taken as a whole.
13. the purchase of the Shares in accordance with the terms of the
Agreements shall not be subject to the limitations set forth in Section 7.2.1 of
the Charter of the Company; the purchase of the Shares in accordance with the
terms of the Agreements shall not cause any the Purchaser to be deemed an
"Acquiring Person" as defined in the Company's Rights Agreement
<PAGE>
Fortress Investment Corp. DRAFT
May 5, 1999
Page 8
dated October 7, 1998, as amended May 5, 1999.
With respect to the foregoing opinions we have relied upon the Tax Opinion and
the Maryland Opinion, of which, a copy of each has been addressed and delivered
to you concurrently herewith.
This opinion is rendered to you in connection with the Stock Purchase Agreement
and is issued solely for your benefit. This opinion may not be relied upon by
you for any other purpose, or relied upon by any other person, firm,
corporation, or other entity for any purpose, nor may this opinion or any copies
thereof be furnished to a third party (other than your legal counsel), filed
with a governmental agency, quoted, referenced, cited or otherwise referred to
without our prior written consent. We disclaim any obligation to advise you of
the developments in areas covered by this opinion that occur after the date of
this opinion. Finally, this opinion is only given as of, and is effective as of,
May 5, 1999.
Very truly yours,
FRESHMAN, MARANTZ, ORLANSKI,
COOPER & KLEIN
a professional corporation
<PAGE>
EXHIBIT I
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FORM OF
BROWN & WOOD LLP
LEGAL OPINION
<PAGE>
May 5, 1999
Impac Commercial Holdings, Inc.
1401 Dove Street
Newport Beach, CA 92660
Fortress Investment Corp.
1301 Avenue of the Americas
42nd Floor
New York, NY 10019
Re: Impac Commercial Holdings, Inc.
Series B 8.5% Cumulative Convertible Preferred Stock
----------------------------------------------------
Ladies and Gentlemen:
We have acted as Maryland counsel to Impac Commercial Holdings, Inc., a
Maryland corporation (the "Company"), in connection with the issuance of 479,999
shares (the "Shares") of Series B 8.5% Cumulative Convertible Preferred Stock
(liquidation preference $25.00 per share), $0.01 par value per share (the
"Series B Preferred Stock") of the Company, and the issuance of 1,683,635 shares
of the Company's common stock, par value $0.01 (the "Common Stock") upon
conversion of the Series B Preferred Stock. The Shares are to be sold by the
Company to Fortress Partners, L.P. ("Fortress"), pursuant to the Series B 8.5%
Cumulative Convertible Preferred Stock Purchase Agreement between the Company
and Fortress, dated May 5, 1999 (the "Stock Purchase Agreement"). The Company
and Fortress have also entered into a Registration Rights Agreement, dated May
5, 1999 (the "Registration Rights Agreement," and together with the Stock
Purchase Agreement, the "Agreements").
This opinion is being delivered pursuant to Section 5.14 of the Stock
Purchase Agreement. Capitalized terms used herein without definition shall have
the same meanings ascribed to such terms in the Stock Purchase Agreement.
In connection with this opinion, we have examined copies of the Agreements
authenticated to our satisfaction. As to various questions of fact material to
our opinion we have relied upon the representations made in the Agreements and
upon certificates of officers of the Company. We have also examined such
certificates of public officials, corporate documents and records and other
certificates, opinions and instruments and have made such other investigations
as we have deemed necessary in connection with the opinion hereinafter set
forth. In such examinations, we have assumed the authenticity of all
signatures, the legal capacity of natural persons, the authenticity of all
documents submitted to us as originals and the conformity to original documents
of all documents submitted to us as certified, photostatic or facsimile copies
and the authenticity of the originals of such latter documents.
References in this opinion to "MGCL" shall mean the Maryland General
Corporation
<PAGE>
Law as in effect of the date hereof. In addition, references to "Maryland Law"
shall mean the MGCL and those laws, rules, and regulations of the State of
Maryland which, in our experience, are normally applicable to transactions of
the type contemplated by the Agreements without considering the participation by
either the Company or Fortress in any regulated industry.
Members of our firm are admitted to the bar in the State of Maryland and
our opinion set forth below is limited solely to the laws of the State of
Maryland.
1. The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Maryland, with
corporate power and authority to own, lease and operate its properties, to
conduct its business as it is presently conducted, and to enter into and
perform its obligations under, or as contemplated under, the Stock Purchase
Agreement.
2. The Company has authorized and outstanding capital stock as of December 31,
1998 as set forth on page F-3 of the Company's Form 10-K for the year
ending December 31, 1998 that was filed with the Securities and Exchange
Commission. The outstanding shares of the Company's Common Stock and Series
A Junior Participating Preferred Stock have been duly authorized and
validly issued and are fully paid and non-assessable.
3. The Shares of Series B Preferred Stock to be sold by the Company pursuant
to the Stock Purchase Agreement have been duly authorized and will be
validly issued, fully paid and non-assessable when issued and paid for as
contemplated by the Stock Purchase Agreement; and no preemptive or other
similar rights arising by operation of law or pursuant to the Company=s
charter or bylaws or, to our knowledge based solely on a certificate of
officers of the Company, similar contractual rights of stockholders exist
with respect to any of the Shares or the issue and sale thereof.
4. The shares of Common Stock to be issued by the Company upon conversion of
the Series B Preferred Stock (the "Conversion Shares") have been duly
authorized and will be validly issued, fully paid and non-assessable when
issued and paid for as contemplated by the Stock Purchase Agreement; and no
preemptive or other similar rights arising by operation of law or pursuant
to the Company=s charter or bylaws or, to our knowledge based solely on a
certificate of officers of the Company, similar contractual rights of
stockholders exist with respect to any of the Conversion Shares or the
issue thereof.
5. Under Maryland Law, the shareholders of the Company have no personal
liability for the debts or obligations of the Company as a result of their
status as shareholders except to the extent that: (i) the subscription
price or other agreed consideration for the outstanding Shares has not been
paid; (ii) a director is held liable under Section 2-312(a) of the MGCL for
an unlawful distribution to the shareholder who accepted the distribution
knowing the distribution was made in violation of the Company's Articles of
Incorporation, as amended, or Section 2-311 of the MGCL; or, (iii)
liability is imposed on
<PAGE>
the shareholder by law in connection with a voluntary or involuntary
dissolution of the Company.
6. The execution and delivery of the Agreements have been duly authorized by
all necessary action of the Company, and the Agreements have been duly
executed and delivered by the Company and are the legal, valid and binding
agreement of the Company, enforceable against the Company in accordance
with their terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization, moratorium and other laws of general applicability relating
to or affecting creditors' rights and to general principles of equity.
7. Neither the execution or delivery of the Agreements, nor the offering,
issuance or sale of the Shares, nor the issuance of the Conversion Shares,
nor the compliance by the Company with the terms and provisions thereof
will conflict with, or result in a breach or violation of, any of the terms
and provisions of, the charter or bylaws of the Company or any Maryland
Law.
8. The Articles Supplementary have been duly authorized, approved and adopted
by all necessary action on the part of the Company. The Company has filed
the Articles Supplementary with the Maryland State Department of
Assessments and Taxation, and has made any other required filing with the
State of Maryland to create the Series B Preferred Stock.
This opinion is furnished only for your benefit in connection with the
matters described in the Agreement and, without our prior written consent, may
not be quoted (in whole or in part) or relied on for any other purpose or by any
other person or entity except Freshman, Marantz, Orlanski, Cooper & Klein,
counsel to the Company.
Very truly yours,
<PAGE>
Exhibit 10.2
AMENDED AND RESTATED MANAGEMENT AGREEMENT
THIS AMENDED AND RESTATED AGREEMENT, entered into as of May 6, 1999,
by and between IMPAC COMMERCIAL HOLDINGS, INC., a Maryland corporation, formerly
known as IMH Commercial Holdings, Inc. (the "Company"), and FIC MANAGEMENT
INC., a Delaware corporation (the "Manager");
WITNESSETH:
WHEREAS, the Company and RAI Advisors, LLC (the "Original Manager")
are parties to that certain Management Agreement, dated as of August 4, 1997 and
effective as of August 8, 1997 (the "Original Management Agreement");
WHEREAS, the Original Manager has assigned, and Manager has assumed,
the rights and obligations under the Original Management Agreement pursuant to
an Assignment and Assumption Agreement, of even date herewith;
WHEREAS, the Company and the Manager desire to amend and restate the
Original Management Agreement on the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein made and intending to be legally bound hereby, the Company and the
Manager hereby agree that the Original Management Agreement is hereby amended
and restated in its entirety to read as follows:
1. Definitions. Whenever used in this Agreement, the following
-----------
terms, unless the context otherwise requires, shall have the following meanings:
(a) "Affiliate" of any entity means (i) any person directly or
indirectly owning, controlling or holding with power to vote, five percent (5%)
or more of the outstanding voting securities of such entity; (ii) any person
five percent (5%) or more of whose outstanding voting securities are directly or
indirectly owned, controlled, or held with power to vote, by such entity; (iii)
any person directly or indirectly controlling, controlled by, or under common
control with, such entity; or (iv) any officer, director, partner or employee of
such entity or any person set forth in (i) - (iii) above. Any person who owns
beneficially, either directly or through one or more controlled companies, more
than twenty-five percent (25%) of the voting securities of any entity shall be
presumed to control such entity. Any person who does not so own more than
twenty-five percent (25%) of the voting securities of any entity shall be
presumed not to control such entity. A natural person shall be presumed not to
be a controlled entity.
(b) "Affiliated Entity" means any entity that may have been or
will be affiliated with the Company, including, without limitation, FIC and any
REIT in which FIC owns, directly or indirectly, a beneficial interest.
<PAGE>
(c) "Affiliated Manager" means FIG or any subsidiary or Affiliate
of the Manager or of FIC or of FIG which provides management services (as
manager or submanager) similar to those contemplated by this Agreement to the
Manager, any subsidiary thereof or any entity in which the Manager owns,
directly or indirectly, a beneficial interest.
(d) "Agreement" means this Amended and Restated Management
Agreement.
(e) "Average Net Worth" for any period means the arithmetic
average of the sum of the gross proceeds from any sale of the Company's equity
securities, before deducting any underwriting discounts and commissions and
other expenses and costs relative to the offering, plus the Company's retained
earnings less dividends declared (without taking into account any losses
incurred in prior periods) computed by taking the daily average of such values
during such period.
(f) "Board of Directors" means the Board of Directors of the
Company.
(g) "CMBSs" means (1) Pass-Through Certificates and (2) REMICs.
(h) "CMO" means an adjustable or fixed-rate debt obligation
(bond) that is collateralized by Commercial Mortgages or mortgage certificates
and issued by private institutions.
(i) "Code" means the Internal Revenue Code of 1986, as amended.
(j) "Commercial Mortgages" mean commercial mortgage assets
including condo-conversion, multi-family property and cooperative apartment
mortgage loans on commercial real property such as industrial and warehouse
properties, office buildings, retail space and shopping malls, hotels and
motels, nursing homes, hospitals, congregate care facilities and senior living
centers.
(k) "Commitment" means the document containing the terms pursuant
to which the Company purchases on a forward basis Mortgage Loans from various
originators, including Affiliates of the Manager.
(l) "Company" means Impac Commercial Holdings, Inc., a Maryland
corporation.
(m) "FIC" means Fortress Investment Corp., a Maryland
corporation.
(n) "FIG" means Fortress Investment Group LLC, a Delaware limited
liability company.
(o) "GAAP" means generally accepted accounting principles.
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(p) "Governing Instruments" means, in the case of a corporation,
the articles of incorporation or charter, as the case may be, and bylaws; in the
case of a partnership, the agreement of partnership or limited partnership, as
applicable, and, if applicable, the certificate of limited partnership; and in
the case of a limited liability company, the certificate of limited liability
company and the limited liability company operating agreement.
(q) "Manager" means FIC Management Inc., a Delaware corporation.
(r) "Net Income" means the net income of the Company as
determined by the Code before the Manager's incentive compensation, the
deduction for dividends paid and any net operating loss deductions arising from
losses in prior periods. The Company's interest expenses for borrowed money
shall be deducted in calculating Net Income.
(s) "Pass-Through Certificates" means securities (or interests
therein) which are Qualified REIT Assets evidencing undivided ownership
interests in a pool of mortgage loans, the holders of which receive a "pass-
through" of the principal and interest paid in connection with the underlying
mortgage loans in accordance with the holders' respective, undivided interests
in the pool. Pass-Through Certificates evidence interests in loans secured by
single family, but not multifamily or commercial, real estate properties.
(t) "Qualified REIT Assets" means (i) real property (including
interests in real property and interests in mortgages on real property), (ii)
shares (or transferable certificates of beneficial interest) in other REITs
which meet the requirements of Sections 856-859 of the Code, (iii) stock or debt
instruments (not otherwise described in (i), (ii) or (iv)) held for not more
than one year that were purchased with the proceeds of (a) an offering of stock
in the Company (other than amounts received pursuant to a dividend reinvestment
plan) or (b) a public offering of debt obligations of the Company which have
maturities of at least 5 years, and (iv) a regular or residual interest in a
REMIC, but only if 95% or more of the assets of such REMIC are assets described
in (i) through (iii).
(u) "REIT" means Real Estate Investment Trust as defined under
Section 856 of the Code.
(v) "REMICS" means serially maturing debt securities secured by a
pool of mortgage loans, the payment on which bear a relationship to the debt
securities, and the issuer of which qualifies as a Real Estate Mortgage
Investment Conduit under Section 860D of the Code.
(w) "Reimbursable Expenses" shall have the meaning set forth in
Section 7 hereof.
(x) "Return on Equity" means return calculated for any quarter by
dividing the Company's Net Income for such quarter by the Company's Average Net
Worth for such quarter.
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(y) "Stockholders" shall mean the owners of the stock of the
Company.
(z) "Ten Year U.S. Treasury Rate" for a quarterly period shall
mean the arithmetic average of the weekly per annum Ten Year Average Yields
published by the Federal Reserve Board during such quarter. In the event that
the Federal Reserve Board does not publish a weekly per annum Ten Year Average
Yield during any week in a quarter, then the Ten Year U.S. Treasury Rate for
such week shall be the weekly per annum Ten Year Average Yields published by any
Federal Reserve Bank or by any U.S. Government department or agency selected by
the Company for such week. In the event that the Company determines in good
faith that for any reason the Company cannot determine the Ten Year U.S.
Treasury Rate for any quarter as provided above, then the Ten Year U.S. Treasury
Rate for such quarter shall be the arithmetic average of the per annum average
yields to maturity based upon the daily closing bids during such quarter for
each of the issues of actively traded marketable U.S. Treasury fixed interest
rate securities (other than securities which can, at the option of the holder,
be surrendered at face value in payment of any federal estate tax) with a final
maturity date not less than eight nor more than twelve years from the date of
each such quotation, as chosen and for each business day (or less frequently if
daily quotations shall not be generally available) in each such quarterly period
in New York City to the Company by at least three recognized dealers in U.S.
Government securities selected by the Company.
(aa) "Unaffiliated Director" means a Director who is independent
of the Company or any manager of the Company (including the Manager).
2. General Duties of the Manager. Subject to the supervision and
-----------------------------
approval of the Board of Directors, the Manager shall provide services to the
Company, and to the extent directed by the Board of Directors, shall provide
similar services to any subsidiary or Affiliate of the Company, as follows:
(a) serve as the Company's consultant with respect to formulation
of investment criteria by the Board of Directors;
(b) advise as to the issuance of Commitments on behalf of the
Company to purchase Commercial Mortgages or purchasing Commercial Mortgages and
CMBSs meeting the investment criteria set from time to time by the Board of
Directors;
(c) advise, negotiate and oversee the securitization of the
Company's Commercial Mortgages in REMICs or CMOs and negotiate terms with rating
agencies and coordinate with investment-bankers as to structure and pricing of
the securities formed by the Company as directed by the Board of Directors;
(d) advise the Company in connection with and assist in its long-
term investment operations;
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(e) furnish reports and statistical and economic research to the
Company regarding the Company's activities and the services performed for the
Company by the Manager;
(f) monitor and provide to the Board of Directors on an on-going
basis price information and other data, obtained from certain nationally-
recognized dealers who maintain markets in Commercial Mortgages identified by
the Board of Directors from time to time, and provide data and advice to the
Board of Directors in connection with the selection and identification of such
dealers;
(g) provide the executive and administrative personnel, office
space and services required in rendering services to the Company, which includes
contracting with appropriate third parties, which may include any Affiliated
Entity or any Affiliated Manager, to provide various services including
facilities and costs related therewith, technology, management information
systems, human resource administration, general ledger accounts, check
processing, accounts payable and other similar operational or administrative
services;
(h) oversee the day-to-day operations of the Company and
supervise the performance of such other administrative functions necessary in
the management of the Company as directed by the Board of Directors;
(i) advise and negotiate agreements on behalf of the Company with
banking institutions and other lenders to provide for the short-term borrowing
of funds by the Company, as directed by the Board of Directors;
(j) communicate on behalf of the Company with the holders of the
equity and debt securities of the Company as required to satisfy the reporting
and other requirements of any governmental bodies or agencies and maintain
effective relations with such holders of the Company's securities, as directed
by the Board of Directors;
(k) advise as to the designation of a servicer for those loans
purchased or originated by the Company;
(l) counsel the Company in connection with policy decisions to be
made by the Board of Directors;
(m) upon request by and in accordance with the direction of the
Board of Directors, invest or reinvest any money of the Company; and
(n) as approved and directed by the Board of Directors, perform
such other services as may be required for management and other activities
relating to the assets of the Company as the Manager shall deem appropriate
under the particular circumstances.
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<PAGE>
The Company agrees that the Manager may delegate any of its duties and
responsibilities hereunder to appropriate third parties, which may include any
Affiliated Entity or an Affiliated Manager.
3. Additional Activities of Manager. Nothing herein shall prevent
--------------------------------
the Manager or its Affiliates, or any Affiliated Manager from engaging in other
businesses or from rendering services of any kind to any other person or entity
(including, without limitation, FIC, Fortress Partners, L.P. and any subsidiary,
Affiliate or preferred stock subsidiary of, or other entity directly or
indirectly owned in whole or in part by, any of the foregoing), including
investment in or advisory service to others investing in any type of real estate
investment, including investments which meet the principal investment objectives
of the Company or its Affiliates. Directors, officers, employees and agents of
the Manager and any Affiliated Manager, or Affiliates of either, may serve as
directors, officers, employees, agents, nominees or signatories for the Company,
any subsidiary or Affiliate of the Company or any Affiliated Entity to the
extent not prohibited by such entity's Governing Instruments. When executing
documents or otherwise acting in such capacities for the Company, such persons
shall use their respective titles in the Company.
4. Records. The Manager shall maintain appropriate books of account
-------
and records relating to services performed hereunder, which books of account and
records shall be accessible for inspection by officers of the Company or
officers of any subsidiary of the Company at any time during normal business
hours. The Manager agrees to keep confidential any and all information it
obtains from time to time in connection with the services it renders hereunder
and shall not disclose any portion thereof to third parties which are not
Affiliates of the Company, an Affiliated Entity, the Manager or an Affiliated
Manager except with the prior written consent of the Company, any subsidiary of
the Company and any entity of which the Company owns an economic interest.
In addition, to the extent executive officers of the Manager provide
services to the Company and its Affiliates through this Agreement, the Manager
will cause such executive officers to enter into non-competition and
confidentiality agreements so that they will not, directly or indirectly,
compete with the business of the Company and such Affiliates; provided, however,
-------- -------
that the executive officers may provide services to any Affiliated Entity, the
Manager, any Affiliated Manager or any Affiliate of any of the foregoing and the
executive officers may perform their respective duties as employees of any of
the foregoing.
5. Obligations of Manager. Anything else in this Agreement to the
----------------------
contrary notwithstanding, the Manager shall refrain from any action which in its
sole judgment made in good faith (i) would adversely affect the status of the
Company and any subsidiary of the Company as a REIT; (ii) would violate any law,
rule or regulation of any governmental body or agency having jurisdiction over
the Company and such subsidiary; or (iii) which would otherwise not be permitted
by the Company's or its subsidiary's Governing Instruments, except that if any
of such actions shall be ordered by the Board of Directors, the Manager shall
promptly notify the Board of Directors of the Manager's judgment that such
action would adversely affect such status or violate any such law,
6
<PAGE>
rule or regulation or the Governing Instruments and shall refrain from taking
such action pending further clarification or instructions from the Board of
Directors. If the Board of Directors thereafter instructs the Manager, despite
the Manager's notification as provided herein, to take any such action and the
Manager so acts upon the instructions given, the Manager shall not be
responsible for any loss of the Company's or its subsidiary's status as a REIT
or violation of any law, rule or regulation or the applicable Governing
Instruments caused thereby.
6. Compensation.
------------
(a) If the Company's annualized Return on Equity during any
fiscal quarter (computed by multiplying the Return on Equity for such fiscal
quarter by four) is in excess of the Ten Year U.S. Treasury Rate plus 2%, the
Company will pay the Manager, for such quarter, an amount equal to 25% of such
excess (the "Performance Fee"), but in no event shall any payment of
compensation under this subsection reduce the Company's annualized Return on
Equity for such quarter to less than the Ten Year U.S. Treasury Rate plus 2%.
(b) The Manager shall compute the compensation payable under
Subsection (a) within 60 days after the end of each calendar quarter, with the
exception of the fourth quarter for which compensation shall be computed within
30 days. In any event, the compensation payable under Subsection (a) shall be
calculated before any income distributions are made to stockholders for the
corresponding period. A copy of the computations made by the Manager to
calculate its compensation shall thereafter be promptly delivered to any
executive officer of the Company and, upon such delivery, payment of the
compensation earned under Subsection (a) shown therein shall be due and payable
within 90 days after the end of such calendar quarter. The compensation due and
payable to the Manager under Subsection (a) shall be paid to the Manager in the
subsequent quarter in which the incentive compensation was earned. The
aggregate amount of the Manager's compensation for each fiscal year shall be
adjusted within 120 days after the end of such fiscal year so as to provide
compensation for such year in the annual amounts stated in Subsection (a) and
any excess owed to, or shortfall owed by, the Manager with respect to such
compensation, collectively, shall be promptly remitted by, or paid to, the
Company. In the event that the time in which the compensation is paid by the
Company to the Manager violates the Company's status to be taxed as a REIT, both
parties shall mutually agree to modify the time set forth in this Section in
which the Manager will be paid the compensation earned under Subsection (a).
7. Reimbursable Expenses of the Manager. Without regard to the
------------------------------------
compensation received hereunder by the Manager, the Company or any subsidiary of
the Company shall reimburse the Manager for its expenses, as set forth in
Section 8, and without limiting the generality of the foregoing, it is
specifically agreed that the following expenses of the Company or any subsidiary
of the Company shall, at the Manager's election, be paid by the Manager and
reimbursed to the Manager by the Company (collectively, "Reimbursable Expenses")
or paid directly by the Company:
(a) The pro rata employment expenses of the personnel and
executive officers employed by the Manager or, to the extent duties and
responsibilities of the Manager
7
<PAGE>
hereunder are delegated to an Affiliated Manager, employed by such Affiliated
Manager, including, but not limited to, salaries, wages, payroll taxes, and the
cost of employee benefit plans;
(b) Travel and other expenses of directors, officers and employees of
the Manager and, as applicable an Affiliated Manager, and of directors,
officers, or employees of the Company or any subsidiary of the Company who are
also directors, officers or employees of the Manager, except expenses of such
persons who are directors of the Company or any subsidiary of the Company
incurred in connection with attending meetings of the Board of Directors or
meetings of holders of the securities of the Company or any subsidiary of the
Company or expenses of persons who are directors, officers, or employees of the
Company or any subsidiary of the Company incurred in connection with attending
meetings, conferences or conventions which relate solely to the business affairs
of the Company or any subsidiary of the Company;
(c) Rent, telephone, utilities, office furniture, equipment and
machinery (including computers, to the extent utilized) and other office
expenses (such as asset/liability software, modeling software and other software
and hardware) of the Manager and, as applicable an Affiliated Manager, needed in
order to perform the Manager's duties as set forth in Section 2 herein;
(d) Bookkeeping fees and expenses of the Company and the Manager and,
as applicable an Affiliated Manager, including any costs of computer services in
connection with this function;
(e) Amounts payable by the Manager pursuant to submanagement
agreements with outside third parties, including any Affiliated Managers, to
provide various services to the Company including facilities and costs related
therewith, technology, management information systems, human resource
administration, general ledger accounts, check processing, accounts payable and
other similar operational services;
(f) Miscellaneous administrative expenses incurred in supervising and
monitoring the Company's investments or any subsidiary's investments or relating
to performance by the Manager of its functions hereunder;
(g) The cost of borrowed money of the Company;
(h) All taxes applicable to the Company or any subsidiary of the
Company including interest and penalties thereon;
(i) Legal audit, accounting, underwriting, brokerage, listing, rating
agency, registration and other fees, printing, engraving and other expenses and
taxes incurred in connection with the issuance, distribution, transfer,
registration and stock exchange listing of the Company's or any subsidiary's
equity securities or debt securities;
8
<PAGE>
(j) Fees and expenses paid to independent contractors, consultants,
managers, and other agents employed directly by the Company or any subsidiary of
the Company or by the Manager or an Affiliated Manager at the Company's or such
subsidiary's request for the account of the Company or any subsidiary of the
Company, it being understood that the Manager (or an Affiliated Manager) shall
have the right to cause any such services to be rendered by its employees or
Affiliates; provided, that such costs thereof to be reimbursed by the Company
--------
hereunder are no greater than those which would be payable to outside
professionals or consultants engaged to perform such services pursuant to
agreements negotiated on an arm's length basis;
(k) Expenses connected with the acquisition, disposition and ownership
of the Company's or any subsidiary's investment assets (including without
limitation commitment fees, brokerage fees, guaranty fees and hedging fees),
including but not limited to ad valorem taxes, costs of foreclosure,
maintenance, repair and improvement of property and premiums for insurance on
property owned by the Company or any subsidiary of the Company; and with regard
to brokerage fees, it is understood that neither the Manager, any Affiliated
Manager, nor any Affiliate of either shall charge a brokerage commission or
similar fee to the Company or any subsidiary of the Company in connection with
the acquisition, disposition or ownership of the Company's or any subsidiary's
investment assets;
(l) The expenses of organizing, modifying or dissolving the Company or
any subsidiary of the Company;
(m) All insurance costs incurred in connection with the Company or any
subsidiary of the Company;
(n) Expenses connected with payments of dividends or interest or
distributions in each or any other form made or caused to be made by the Board
of Directors to holders of the securities of the Company or any subsidiary of
the Company;
(o) Expenses connected with the structuring of the issuance of CMBSs
by the Company or any subsidiary of the Company, including but not limited to
trustee's fees, insurance premiums, and costs of required credit enhancements,
(p) All expenses by third parties connected with communications to
holders of equity securities or debt securities of the Company or any subsidiary
of the Company and the other bookkeeping and clerical work necessary in
maintaining relations with holders of such securities and in complying with the
continuous reporting and other requirements of governmental bodies or agencies,
including any costs of computer services in connection with this function, the
cost of printing and mailing certificates for such securities and proxy
solicitation materials and reports to holders of the Company's or any
subsidiary's securities and reports to third parties required under any
indenture to which the Company or any subsidiary of the Company is a party;
(q) Transfer agent's and registrar's fees and charges;
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<PAGE>
(r) Fees and expenses paid to directors of the Company or any
subsidiary of the Company, the cost of director and officer liability insurance
and premiums for fidelity and errors and omissions insurance;
(s) Legal, accounting and auditing fees and expenses relating to the
Company's or any subsidiary's operations, it being understood that the Manager
(or an Affiliated Manager) shall have the right to cause any such services to be
rendered by its employees or Affiliates; provided, that such costs thereof to be
--------
reimbursed by the Company hereunder are no greater than those which would be
payable to outside professionals or consultants engaged to perform such services
pursuant to agreements negotiated on an arm's length basis;
(t) Any judgment rendered against the Company or any subsidiary of the
Company, or against any director of the Company or any subsidiary of the Company
in his capacity as such for which the Company or any subsidiary of the Company
is required to indemnify such director, by any court or governmental agency;
(u) Expenses relating to any office or office facilities maintained by
the Company or any subsidiary of the Company separate from the office of the
Manager;
(v) Expenses related to the servicing and subservicing of
Commercial Mortgages;
(w) All offering expenses (including accounting, legal, printing,
clerical, personnel, filing and other expenses) incurred in connection with any
offering of debt in or equity of the Company; and
(x) Other miscellaneous expenses of the Company or any subsidiary of
the Company.
8. Computation of Reimbursable Expenses.
------------------------------------
(a) The Company shall reimburse the Manager for all Reimbursable
Expenses on a dollar for dollar basis. Furthermore, the Company shall pay an
additional service charge to the Manager of 15% of the portion of Reimbursable
Expenses incurred directly by the Manager; provided, however, that no such 15%
-------- -------
service charge will be paid to third party service providers.
(b) For the period commencing on the date hereof and ending August 8,
2000, the Company shall pay to the Manager a minimum amount of $500,000 per
annum (which includes the 15% service charge) for Reimbursable Expenses, pro
rated for the partial year commencing on the date hereof and ending August 8,
1999. Thereafter, the Company shall only
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<PAGE>
reimburse the Manager for Reimbursable Expenses incurred, plus the additional
15% service charge contemplated in Subsection (a).
(c) The Manager shall compute the Reimbursable Expenses payable
under Subsections (a) and (b) within 10 days after the end of each month. A copy
of the computations made by the Manager to calculate its reimbursements shall
thereafter be promptly delivered to any executive officer of the Company and,
upon such delivery, payment of reimbursements under Subsection (a) and (b) shown
therein shall be due and payable within 15 days after the end of such month. The
Reimbursable Expenses due and payable to the Manager under Subsections (a) and
(b) shall be paid to the Manager in the month immediately following the month in
which such Reimbursable Expenses were incurred.
9. Limits of Manager Responsibility. (a) The Manager assumes no
--------------------------------
responsibility under this Agreement other than to render the services called for
hereunder in good faith and shall not be responsible for any action of the Board
of Directors in following or declining to follow any advice or recommendations
of the Manager, including as set forth in Section 5 above. The Manager any
Affiliated Manager, and the directors, officers, shareholders, members and
employees of either will not be liable to the Company, any subsidiary of the
Company, the members of the Board of Directors (including the Unaffiliated
Directors) or the Company's or its subsidiary's stockholders for any acts
performed by the Manager, and Affiliated Manager, or the directors, officers,
shareholders, members and employees thereof in accordance with this Agreement,
except by reason of acts or omissions constituting bad faith, willful
misconduct, gross negligence or reckless disregard of their duties. The Company
or its subsidiaries shall reimburse, indemnify and hold harmless the Manager,
any Affiliated Manager, and the shareholders, directors, officers, members and
employees thereof from any and all expenses, losses, damages, liabilities,
demands, charges and claims of any nature whatsoever in respect of or arising
from any acts or omissions of the Manager, such Affiliated Manager, and the
shareholders, directors, officers, members and employees thereof made in good
faith in the performance of the Manager's duties under this Agreement and not
constituting bad faith, willful misconduct, gross negligence or reckless
disregard of its duties.
(b) The Manager shall reimburse, indemnify and hold harmless the
Company, any subsidiaries, or any of their stockholders, directors, officers and
employees of and from any and all expenses, losses, damages, liabilities,
demands, charges and claims (including, without limitation, reasonable attorneys
fees) arising out of any willful and intentional misstatements of fact made by
the Manager or any Affiliated Manager in connection with this Agreement and the
services to be rendered hereunder.
10. No Joint Venture. The Company and the Manager are not partners
----------------
or joint venturers with each other and nothing herein shall be construed to make
them such partners or joint venturers or impose any liabilities as such on
either of them.
11. Term. This Agreement shall continue in force until December 3l,
----
2002 and thereafter it may be extended with the consent of the Manager and by
the affirmative vote of a
11
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majority of the Unaffiliated Directors or by a vote of the holders of a majority
of the outstanding shares of Common Stock of the Company. Each extension shall
be executed in writing by all parties hereto before the expiration of this
Agreement or of any extension thereof.
12. Termination for Cause. This Agreement, or any extension hereof,
---------------------
may be terminated by either party for cause immediately upon written notice,
such termination, if made by the Company, to be effected by a majority vote of
the Unaffiliated Directors or by a vote of a majority of the holders of the
Company's Common Stock. Grounds for termination for cause will occur with
respect to a party if:
(a) Such party shall have violated any material provision of this
Agreement and, after written notice of such violation, shall not cure such
default within 30 days; or
(b) There is entered an order for relief or similar decree or
order with respect to such party by a court having jurisdiction in the premises
in an involuntary case under the federal bankruptcy laws as now or hereafter
constituted or under any applicable federal or state bankruptcy, insolvency or
other similar laws; or such party (A) ceases or admits in writing its inability
to pay its debts as they become due and payable, or makes a general assignment
for the benefit of, or enters into any composition or arrangement with,
creditors; (B) applies for, or consents (by admission of material allegations of
a petition or otherwise) to the appointment of a receiver, trustee, assignee,
custodian, liquidator or sequestrator (or other similar official) of such party
or of any substantial part of its properties or assets, or authorizes such an
application or consent, or proceedings seeking such appointment are commenced
without such authorization, consent or application against such party and
continue undismissed for 30 days; (C) authorizes or files a voluntary petition
in bankruptcy, or applies for or consents (by admission of material allegations
of a petition or otherwise) to the application of any bankruptcy,
reorganization, arrangement, readjustment of debt, insolvency, dissolution,
liquidation or other similar law of any jurisdiction, or authorizes such
application or consent, or proceedings to such end are instituted against such
party without such authorization, application or consent and are approved as
properly instituted and remain undismissed for 30 days or results in
adjudication of bankruptcy or insolvency; or (D) permits or suffer all or any
substantial part of its properties or assets to be sequestered or attached by
court order and the order remains undismissed for 30 days.
Each party agrees that if any of the events specified in this Section
12 shall occur, it will give prompt written notice thereof to the other party's
Board of Directors after the happening of such event.
In addition to the foregoing, grounds for termination for cause will
occur with respect to the Manager if the Manager has engaged in willful
misconduct in the performance of its duties hereunder, the effect of which has a
direct material adverse effect on the financial condition and operations of the
Company in the aggregate.
12
<PAGE>
If this Agreement is terminated pursuant to this Section, such
termination shall be without any further liability or obligation of either party
to the other, except as provided in Section 15.
13. Termination Without Cause. The Company may terminate this
-------------------------
Agreement without cause upon 60 days prior written notice, by a majority vote of
the Unaffiliated Directors or by a vote of the holders of a majority of the
outstanding shares of the Company's Common Stock. In the event this Agreement is
terminated by the Company without cause, or in the event this Agreement is not
renewed by the Company without cause, the Company, in addition to its
obligations under Section 15, shall pay the Manager a termination or non-renewal
fee determined by an independent appraisal. Such appraisal shall be conducted
by a nationally-recognized appraisal firm mutually agreed upon by the parties
and the costs of such appraisal shall be borne equally by the parties. If the
parties are unable to agree upon such appraisal firm within 30 days following
notice of termination or, in the event of non-renewal, the termination date,
then each party shall as soon as reasonably practicable, but in no event more
than 45 days following notice of termination or, in the event of non-renewal,
the termination date, choose a nationally-recognized independent appraisal firm
to conduct an appraisal. In such event, (i) the termination fee shall be deemed
to be the average of the appraisals as conducted by each party's chosen
appraiser and (ii) each party shall pay the costs of its appraiser so chosen.
Any appraisal conducted hereunder shall be performed no later than 45 days
following selection of the appraiser or appraisers. The foregoing provisions of
this Section 13 shall not apply in the event of a termination of this Agreement
made in accordance with the provisions of Section 28 hereof.
14. Assignment; Subcontract. (a) Subject to Section 14(b), this
-----------------------
Agreement shall terminate automatically in the event of its assignment, in whole
or in part, by the Manager unless such assignment is consented to in writing by
the Company with the consent of a majority of the Unaffiliated Directors. Such
an assignment shall bind the assignee hereunder in the same manner as the
Manager is bound hereunder and, to further evidence its obligations hereunder,
the assignee shall execute and deliver to the Company a counterpart of this
Agreement. This Agreement shall not be assignable by the Company without the
consent of the Manager, except in the case of assignment by the Company to a
real estate investment trust or other organization which is a successor (by
merger, consolidation or purchase of assets) to the Company, in which case such
successor organization shall be bound hereunder and by the terms of said
assignment in the same manner as the Company is bound hereunder and shall
execute and deliver to the Manager a counterpart of this Agreement.
(b) The Company and the Manager agree that the Manager may (i)
assign all or any portion of this Agreement to FIC, FIG, Fortress Partners,
L.P., an Affiliate of any of the foregoing or of the Manager or to an Affiliated
Manager; and (ii) enter into a subcontract for the provision of such of the
management services required hereunder as the Manager deems necessary with any
third party, including any permitted assign under clause (i) foregoing, and the
Company hereby consents to the entering into and performance of such
subcontract; provided, however, that
-------- -------
13
<PAGE>
no such arrangement between the Manager and a third party shall relieve the
Manager of any of its duties or obligations hereunder.
15. Action Upon Termination. From and after the effective date of
-----------------------
termination of this Agreement, pursuant to Sections 12, 13 or 14 hereof, the
Manager shall not be entitled to compensation for further services
hereunder, but shall be paid all compensation and Reimbursable Expenses accruing
to the date of termination, subject to adjustments on an annualized basis in
accordance with Section 6(b) and subject to the Reimbursement Expense
minimum amount of $500,000 per annum through August 8, 2000. The Manager shall
forthwith upon such termination deliver to the Board of Directors all property
and documents, corporate records, reports and software of the Company or any
subsidiary of the Company then in the custody of the Manager. The foregoing
provisions of this Section 15 shall apply in the event of a termination of this
Agreement made in accordance with the provisions of Section 28 hereof.
16. Representations and Warranties.
------------------------------
(a) The Company hereby represents and warrants to the Manager as
follows:
(i) Corporate Existence. The Company is a corporation duly
-------------------
organized, validly existing and in good standing under the laws of Maryland, has
the power to own its assets and to transact the business in which it is now
engaged and is duly qualified as a foreign corporation and in good standing
under the laws of such jurisdictions where its ownership or lease of property or
the conduct of its business requires such qualification, except for failures to
be so qualified, authorized or licensed that could not in the aggregate have a
material adverse effect on the business operations, assets or financial
condition of the Company and its subsidiaries, taken as a whole.
(ii) Corporate Power; Authorization; Enforceable Obligations.
-------------------------------------------------------
The Company has the corporate power, authority and legal right to execute,
deliver and perform this Agreement and all obligations required hereunder and
has taken all necessary corporate action to authorize this Agreement on the
terms and conditions hereof and the execution, delivery and performance of this
Agreement and all obligations required hereunder. No consent of any other person
including, without limitation, stockholders and creditors of the Company, and no
license, permit, approval or authorization of, exemption by, notice or report
to, or registration, filing or declaration with, any governmental authority is
required by the Company in connection with this Agreement or the execution,
delivery, performance, validity or enforceability of this Agreement and all
obligations required hereunder. This Agreement has been, and each instrument or
document required hereunder will be, executed and delivered by a duly authorized
officer of the Company, and this Agreement constitutes, and each instrument or
document required hereunder when executed and delivered hereunder will
constitute, the legally valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as such enforcement may
be
14
<PAGE>
limited by bankruptcy, insolvency, moratorium or similar laws now or hereafter
in effect relating to the rights and remedies of creditors generally, and
general principles of equity.
(iii) No Legal Bar to This Agreement. The execution,
------------------------------
delivery and performance of this Agreement and the documents or instruments
required hereunder, will not violate any provision of any existing law or
regulation binding on the Company, or any order, judgment, award or decree of
any court, arbitrator or governmental authority binding on the Company, or the
Governing Instruments of, or any securities issued by the Company or any
mortgage, indenture, lease, contract or other agreement, instrument or
undertaking to which the Company is a party or by which the Company or any of
its assets may be bound, the violation of which would have a material adverse
effect on the business operations, assets or financial condition of the Company
and its subsidiaries, taken as a whole, and will not result in, or require, the
creation or imposition of any lien on any of its property, assets or revenues
pursuant to the provisions of any such mortgage, indenture, lease, contract or
other agreement, instrument or undertaking.
(b) The Manager hereby represents and warrants to the Company as
follows:
(i) Corporate Existence. The Manager is a corporation duly
-------------------
organized, validly existing and in good standing under the laws of Delaware, has
the power to own its assets and to transact the business in which it is now
engaged and is duly qualified as a foreign corporation and in good standing
under the laws of each jurisdiction where its ownership or lease of property or
the conduct of its business requires such qualification, except for failures to
be so qualified, authorized or licensed that could not in the aggregate have a
material adverse effect on the business operations, assets or financial
condition of the Manager and its subsidiaries, taken as a whole. The Manager
does not do business under any fictitious business name.
(ii) Company Power; Authorization; Enforceable Obligations.
-----------------------------------------------------
The Manager has the power, authority and legal right to execute, deliver and
perform this Agreement and all obligations required hereunder and has taken all
necessary action to authorize this Agreement on the terms and conditions hereof
and its execution, delivery and performance of this Agreement and all
obligations required hereunder. No consent of any other person including,
without limitations, shareholders and creditors of the Manager, and no license,
permit, approval or authorization of, exemption by, notice or report to, or
registration, filing or declaration with, any governmental authority is required
by the Manager in connection with this Agreement or the execution, delivery,
performance, validity or enforceability of this Agreement and all obligations
required hereunder. This Agreement has been, and each instrument or document
required hereunder will be, executed and delivered by a duly authorized officer
of the Manager, and this Agreement constitutes, and each instrument or document
required hereunder when executed and delivered hereunder will constitute, the
legally valid and binding obligation of the Manager enforceable against the
Manager in accordance with its terms.
15
<PAGE>
(iii) No Legal Bar to This Agreement. The execution,
------------------------------
delivery and performance of this Agreement and the documents or instruments
required hereunder, will not violate any provision of any existing law or
regulation binding on the Manager, or any order, judgment, award or decree of
any court, arbitrator or governmental authority binding on the Manager, or the
Governing Instruments of, or any securities issued by the Manager or of any
mortgage, indenture, lease, contract or other agreement, instrument or
undertaking to which the Manager is a party or by which the Manager or any of
its assets may be bound, the violation of which would have a material adverse
effect on the business operations, assets or financial condition of the Manager
and its subsidiaries, taken as a whole, and will not result in, or require, the
creation or imposition of any lien on any of its property, assets or revenues
pursuant to the provision of any such mortgage, indenture, lease, contract or
other agreement, instrument or undertaking.
(iv) Ability to Perform. The Manager has, or has the
------------------
ability, through submanagement agreements or otherwise, to procure the services
of one or more third parties who have, the requisite knowledge, abilities,
financial and other resources and willingness to perform the duties of the
Manager hereunder.
17. Arbitration.
-----------
(a) Each controversy, dispute or claim between the parties
arising out of or relating to this Agreement, which controversy, dispute or
claim is not settled in writing within thirty (30) days after the "Claim Date"
(defined as the date on which a party subject to this Agreement gives written
notice to the other that a controversy, dispute or claim exists), will be
settled by binding arbitration in Orange County, California in accordance with
the rules of the American Arbitration Association, which shall constitute the
exclusive remedy for the settlement of any controversy, dispute or claim, and
the parties hereto waive their rights to initiate any legal proceedings against
each other in any court or jurisdiction other than in a State Court of
California or a Federal Court of the United States of America, located in Orange
County, California (the "Court"). Any decision rendered by the arbitrator and
such arbitration will be final, binding and conclusive, subject to Section
17(c).
(b) Except as expressly set forth in this Agreement, the
arbitrator shall determine the manner in which the proceeding is conducted,
including the time and place of all hearings, the order of presentation of
evidence, and all other questions that arise with respect to the course of the
proceeding. All proceedings and hearings conducted before the arbitrator, except
for trial, shall be conducted without a court reporter, except that when any
party so requests, a court reporter will be used at any hearing conducted before
the arbitrator. The party making such a request shall have the obligation to
arrange for any pay for the court reporter. The costs of the court reporter
shall be borne equally by the parties.
(c) The arbitrator shall be required to determine all issues in
accordance with existing case law and the statutory laws of the State of
California. The rules of evidence applicable to proceedings at law in the State
of California will be applicable to the reference
16
<PAGE>
proceeding. The arbitrator shall be empowered to enter equitable as well as
legal relief, to provide all temporary and/or provisional remedies and to enter
equitable orders that will be binding upon the parties. The arbitrator shall
issue a single judgment at the close of the proceeding which shall dispose of
all of the claims of the parties that are the subject of the proceeding. The
parties hereto expressly reserve the right to contest or appeal from the final
judgment or any appealable order or appealable judgment entered by the
arbitrator. The parties hereto expressly reserve the right to findings of fact,
conclusions of law, a written statement of decision, and the right to move for a
new trial or a different judgment, which new trial, if granted, is also to be a
proceeding governed under this provision.
18. Notices. All notices, requests, demands and other communications
-------
provided for hereunder shall be in writing (including telegraphic or facsimile
communications) and shall be mailed (return receipt requested), telegraphed,
sent by facsimile, overnight courier or hand delivered to each party at the
address set forth as follows, or at such other address as either party may
designate by notice to the others, and any such notice, request, demand or other
communication shall be effective upon receipt:
The Company:
Impac Commercial Holdings, Inc.
20371 Irvine Avenue
Santa Ana Heights, California 92707
Telephone: (714) 556-0122
Facsimile: (714) 433-2122
Attention: Joseph R. Tomkinson
Chief Executive Officer
The Manager:
FIC Management Inc.
1301 Avenue of the Americas
New York, New York 10119
Telephone: (212) 798-6110
Facsimile: (212) 798-6122
Attention: Randal A. Nardone
Chief Operating Officer and Secretary
Either party may at any time give notice in writing to the other party
of a change of its address for the purpose of this Section 18.
19. Amendments. This Agreement shall not be amended, changed,
----------
modified, terminated or discharged in whole or in part except by an instrument
in writing signed by all parties hereto, or their respective successors or
permitted assigns, or otherwise as provided herein. The
17
<PAGE>
parties hereto agree that in no event shall an oral modification of this
Agreement be enforceable or valid.
20. Successors and Assigns. This Agreement sha1l become effective
----------------------
when it is executed by all parties and thereafter shall be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns.
21. Attorneys' Fees. In the event that any party shall bring an
---------------
action or proceeding in connection with the performance, breach or
interpretation hereof, then the prevailing party in such action as determined by
the court or other body having jurisdiction shall be entitled to recover from
the losing party in such action, as determined by the court or other body having
jurisdiction, all reasonable costs and expense of litigation or arbitration,
including reasonable attorney's fees, court costs, costs of investigation and
other costs reasonably related to such proceeding.
22. Governing Law. This Agreement shall be governed, construed and
-------------
interpreted in accordance with the laws of the State of California.
23. Headings and Cross References. The section headings hereof have
-----------------------------
been inserted for convenience of reference only and shall not be construed to
affect the meaning, construction or effect of this Agreement. Any reference in
this Agreement to a "Section" or "Subsection" shall be construed, respectively,
as referring to a section of this Agreement or a subsection of a section of this
Agreement.
24. Severability. The invalidity or unenforceability of any
------------
provision of this Agreement shall not affect the validity of any other
provision, and all other provisions shall remain in full force and effect.
25. Entire Agreement. This Agreement contains the entire agreement
----------------
of the parties relating to the subject matter hereof, and the parties hereto
have made no agreements, representations or warranties relating to the subject
matter of this Agreement that are not set forth otherwise herein. This
Agreement supersedes any and all prior agreements, written or oral, between the
parties hereto.
26. Waiver. Any forbearance by a party to this Agreement in
------
exercising any right or remedy under this Agreement or otherwise afforded by
applicable law shall not by a waiver of or preclude the exercise of that or any
other right or remedy.
27. Execution in Counterparts. This Agreement may be executed in one
-------------------------
or more counterparts, any of which shall constitute an original as against any
party whose signature appears on it, and all of which shall together constitute
a single instrument. This Agreement shall become binding when one or more
counterpart, individually or taken together, bear the signatures of both
parties.
18
<PAGE>
28. Buy-In of Management Agreement. In the event that the Company
------------------------------
and the Manager mutually determine to "internalize" management of the Company
and, accordingly to terminate this Agreement, (a) this Agreement will terminate
and (b) the Company will pay to or at the direction of the Manager the
Termination Payment (as hereinafter defined) on the Termination Date (as
hereinafter defined). The term "Termination Date" as used herein means the date
agreed to in writing by the Company and the Manager as the date on which the
"internalization" of the management of the Company is effective. The term
"Termination Payment" as used herein means the payment of cash or common stock
of the Company as mutually agreed and as described below, in an amount equal to
the product of (a) the Stock Multiple (as hereinafter defined) and (b) the
aggregate of the amounts payable pursuant to this Agreement to the Manager and
any Affiliated Manager (without duplication) for the twelve month period ended
immediately prior to the month in which the Termination Date occurs. The term
"Stock Multiple" as used herein means (a) the volume weighted average of the
closing prices of the Company's common equity on the American Stock Exchange
and/or any other exchange(s) on which the Company's common equity is traded
during the twenty (20) days immediately preceding the Termination Date (the
"Termination Price"), divided by (b) the Company's earnings per share for the
twelve month period ended immediately prior to the month in which the
Termination Date occurs. For purposes of calculating the Termination Payment,
the price of the common stock consideration will be equal to the Termination
Price.
[The remainder of this page intentionally left blank.]
19
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers thereunto duly authorized as of the day and year
first above written.
IMPAC COMMERCIAL HOLDINGS, INC.
By:/s/ Joseph R. Tomkinson
Name: Joseph R. Tomkinson
Title: Chief Executive Officer
FIC MANAGEMENT INC.
By:/s/ Randal A. Nardone
Name: Randal A. Nardone
Title: Chief Operating Officer and Secretary
20
<PAGE>
EXHIBIT 10.3
SUBMANAGEMENT AGREEMENT
THIS SUBMANAGEMENT AGREEMENT, entered into as of May 6, 1999, by and
between FIC MANAGEMENT INC., a Delaware corporation ("Manager") and IMPAC
-------
FUNDING CORPORATION, a California corporation ("Submanager") and;
----------
WITNESSETH:
WHEREAS, the IMPAC Commercial Holdings, Inc. (the "Company") and
-------
Manager are parties to that certain Amended and Restated Management Agreement,
dated as of the date hereof (the "Management Agreement");
--------------------
WHEREAS, pursuant to the Management Agreement, Manager has the right
to subcontract to other parties certain obligations of Manager pursuant to the
Management Agreement;
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein made and intending to be legally bound hereby, the parties hereto agree
as follows:
1. Definitions. Whenever used in this Agreement, the following
-----------
terms, unless the context otherwise requires, shall have the following meanings:
(a) "Affiliate" of any entity means (i) any person directly or
indirectly owning, controlling or holding with power to vote, five percent (5%)
or more of the outstanding voting securities of such entity; (ii) any person
five percent (5%) or more of whose outstanding voting securities are directly or
indirectly owned, controlled, or held with power to vote, by such entity; (iii)
any person directly or indirectly controlling, controlled by, or under common
control with, such entity; or (iv) any officer, director, partner or employee of
such entity or any person set forth in (i) - (iii) above. Any person who owns
beneficially, either directly or through one or more controlled companies, more
than twenty-five percent (25%) of the voting securities of any entity shall be
presumed to control such entity. Any person who does not so own more than
twenty-five percent (25%) of the voting securities of any entity shall be
presumed not to control such entity. A natural person shall be presumed not to
be a controlled entity.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Commercial Mortgages" mean commercial mortgage assets
including condo-conversion, multi-family property and cooperative apartment
mortgage loans on commercial real property such as industrial and warehouse
properties, office buildings, retail space and shopping malls, hotels and
motels, nursing homes, hospitals, congregate care facilities and senior living
centers.
(d) "Company" means Impac Commercial Holdings, Inc., a Maryland
corporation.
<PAGE>
(e) "GAAP" means generally accepted accounting principles,
consistently applied.
(f) "Governing Instruments" means, in the case of a corporation,
the articles of incorporation or charter, as the case may be, and bylaws; in the
case of a partnership, the agreement of partnership or limited partnership, as
applicable, and, if applicable, the certificate of limited partnership; and in
the case of a limited liability company, the certificate of limited liability
company and the limited liability company operating agreement.
(g) "Manager" means FIC Management Inc., a Delaware corporation.
(h) "REIT" means a real estate investment trust, as defined under
Section 856 of the Code.
(i) "Submanager" means Impac Funding Corporation, a California
corporation.
2. Submanager's Responsibilities
-----------------------------
(a) Submanager's Services:
----------------------
Subject to the supervision and approval of Manager, and subject
further to the last paragraph of this Section 2(a), Submanager shall provide
services to Manager on behalf of the Company as follows (collectively, the
"Submanagement Services"):
----------------------
(i) at Manager's request and under Manager's
supervision, provide all services reasonably necessary to consummate an orderly
transition of the management services previously provided by Submanager to the
Company as manager pursuant to a Management Agreement, dated as of August 4,
1997 between the Company and the Submanager
(ii) establish and maintain deposit accounts at banking
institutions designated and/or approved by Manager (collectively, the "Deposit
-------
Accounts"), provide daily cash flow reports regarding funds in the Deposit
- --------
Accounts, and disburse funds held in the Deposit Accounts as and when directed
by Manager in writing; Submanager shall have no authority to disburse any funds
held in the Deposit Accounts unless Manager has previously approved such
disbursal and the amount thereof in writing;
(iii) maintain complete, accurate and separate books and
records for the assets of the Company and the funds on deposit in the Deposit
Accounts, the entries of which shall be supported by sufficient documentation to
ascertain that said entries are properly and accurately maintained in accordance
with Manager's financial information requirements, which books and records shall
at all times be the property of Manager;
2
<PAGE>
(iv) provide general ledger and cash flow updates of the
funds on deposit in the Deposit Accounts on a daily basis; provide balance sheet
and other financial statement updates, as requested by Manager, on a monthly
and annual basis; all such financial statements shall be in a form reasonably
satisfactory to Manager and shall be prepared in accordance with GAAP and such
other methods of preparation as may be specified by Manager;
(v) furnish reports and statistical and economic
research reasonably available from its records to Manager regarding the
Company's activities and the services performed for the Company by Submanager;
(vi) coordinate outside legal services to ensure
compliance with federal and state securities laws, regulations and rules
applicable to the Company and/or the assets of the Company ("Applicable
----------
Securities Requirements") and compile and prepare for execution and filing by
- -----------------------
the Company forms 10Q and 10K and all other forms, registration statements,
reports, returns and other compliance materials required by any Applicable
Securities Requirements;
(vii) monitor American Stock Exchange ("AMEX") listing
----
requirements applicable to the Company as a company listed on AMEX and compile
and prepare for execution and filing by the Company all forms, registration
statements, reports, returns and other compliance materials required by AMEX;
(viii) forward promptly to Manager as and when received all
communications received by Submanager from the holders of the equity and debt
securities of the Company; Submanager agrees not to respond or initiate any such
communications without specific instruction to do so from Manager;
(ix) be available to consult with the Manager regarding
the historical activities in connection with acquisitions and potential
dispositions of the assets which the Company holds on the date hereof, as and
when needed by Manager; and
(x) provide accounting personnel (including the services
of Richard Johnson, who is expected to devote substantial, but not exclusive
time thereto) and consultation by other executive and administrative personnel,
office space and services required in rendering services to Manager, including
facilities and costs related therewith, technology, management information
systems, human resource administration, general ledger accounts, accounts
payable and other similar operational or administrative services; provided,
--------
however, that Manager shall reimburse or cause the Company to reimburse
- -------
Submanager for the actual human resource administration cost of persons in
excess of 20 persons on the payroll of the Company.
Submanager and Manager agree that (w) Submanager shall only undertake
such Submanagement Services as are specifically requested by Manager, (x) the
services to be provided by Submanager hereunder shall in no event be broader
than those services which are to be provided
3
<PAGE>
by Manager to the Company under the Management Agreement as in effect as of the
date hereof and which are delegated to Submanager hereunder, (y) in no event
shall Submanager be obligated to provide legal services through its own
employees to Manager on behalf of the Company, and (z) Submanger shall at all
times keep Manager informed of the specific Submanager Services being performed
by Submanager. Additionally, Manager and Submanager agree that Submanager shall
procure that the cost of goods and services provided by third parties (who are
not Affiliates of Submanager, except in the case of an Affiliate of the Manager
which provides human resources administration services with respect to persons
in excess of 20 persons on the payroll of the Company, as to the cost of such
excess services) in connection with Submanager's performance of its duties
hereunder shall be billed directly to the Company by the applicable providers.
(b) Employees; Independent Contractor
---------------------------------
(i) Submanager shall have in its employ at all times a
sufficient number of capable employees to properly, adequately, safely and
economically perform the Submanagement Services. All employees shall be
available to Manager as and when needed for advice and consultation. All matters
pertaining to the employment, supervision, compensation, promotion and discharge
of such employees are the responsibility of Submanager , which is and shall
remain in all respects the employer of such employees. Submanager shall use
reasonable care in the selection of such employees. Submanager shall comply with
all applicable laws and regulations having to do with workers' compensation,
social security, unemployment insurance, hours of labor, wages, working
conditions and other employer-employee related subjects.
(ii) This Agreement is not one of agency by Submanager for
Manager or the Company, but one with Submanager engaged independently in the
business of performing the Submanagement Services on its own behalf as an
independent contractor. Nothing contained in this Agreement shall be deemed to
constitute a partnership, joint venture or any other relationship between
Submanager and Manager except as expressly set forth in this Agreement.
Submanager's authority is limited to performing the Submanagement Services in
accordance with the terms of this Agreement. Submanager shall have no authority
to execute any contract or agreement for or on behalf of Manager or the Company
and is not granted any right or authority to assume or create any liabilities or
make any representation, covenant, agreement or warranty, express or whatsoever,
and Submanager shall inform each party with whom it is dealing that it has no
authority to bind Manager or the Company in any respect or make any
representation binding on Manager or the Company.
3. Records. Submanager shall maintain appropriate books of account
-------
and records relating to services performed hereunder, which books of account and
records shall be accessible for inspection by officers of Manager and the
Company, any Affiliates or subsidiaries thereof and any auditors retained by
Manager or the Company, at any time during normal business hours. Submanager
agrees to keep confidential any and all information it obtains from time to time
in connection with the services it renders hereunder and shall not disclose any
portion thereof to third
4
<PAGE>
parties which are not Affiliates of the Company or Manager or Submanager, except
with the prior written consent of the Company and Manager.
4. Obligations of Submanager. Anything else in this Agreement to
-------------------------
the contrary notwithstanding, Submanager shall refrain from any action which in
its reasonable judgment made in good faith (i) would adversely affect the status
of the Company and any subsidiary of the Company as a REIT; (ii) would violate
any law, rule or regulation of any governmental body or agency having
jurisdiction over the Company and such subsidiary; or (iii) which would
otherwise not be permitted by the Company's or its subsidiary's Governing
Instruments.
5. Compensation. Submanager shall receive as its sole and exclusive
------------
compensation hereunder, the annual sum of $250,000 (the "Management Fee"),
--------------
payable in sixty (60) days in arrears, in equal monthly installments on the
first business day of each calendar month during the Term or the extension
thereof. The first installments of the Management Fee shall be paid by Manager
on July 1, 1999. The Management Fee shall be prorated in the event the Term
begins or ends on a date other than the first or last day, respectively, of a
calendar month. In no event shall Submanager be entitled to reimbursement of
any expenses incurred in connection with this Agreement or the performance of
the Submanagement Services.
6. Limits of Submanager Responsibility. (a) Submanager assumes no
-----------------------------------
responsibility under this Agreement other than to render the services called for
hereunder in good faith and shall not be responsible for any action of Manager
or the Company in following or declining to follow any advice or recommendations
of Submanager. Submanager and its directors, officers, shareholders, members
and employees will not be liable to the Company or Manager, any subsidiary of
thereof, the members of the board of directors of the Company or the Company's
or its subsidiary's stockholders, for any acts performed by Submanager or its
directors, officers, shareholders, members and employees in accordance with this
Agreement, except by reason of acts or omissions constituting bad faith, willful
misconduct, gross negligence or reckless disregard of their duties. Manager
shall reimburse, indemnify and hold harmless Submanager and its shareholders,
directors, officers, members and employees from any and all expenses, losses,
damages, liabilities, demands, charges and claims of any nature whatsoever in
respect of or arising from any acts or omissions of Submanager and its
shareholders, directors, officers, members and employees made in good faith in
the performance of Submanager's duties under this Agreement and not constituting
bad faith, willful misconduct, gross negligence or reckless disregard of its
duties.
(b) Submanager shall reimburse, indemnify and hold harmless
Manager and Company, any subsidiaries thereof, or any of their stockholders,
directors, officers and employees, from any and all expenses, losses, damages,
liabilities, demands, charges and claims (including, without limitation,
reasonable attorneys fees and disbursements) arising out of (x) any willful and
intentional misstatements of fact made by Submanager in connection with this
Agreement and the services to be rendered hereunder, or (y) any act or omission
constituting bad faith, willful misconduct, gross negligence or reckless
disregard of its duties hereunder.
5
<PAGE>
7. Term. This Agreement shall continue in force from the date
----
hereof until December 3l, 1999 (the "Term") and thereafter it may be extended
----
for a single additional one year period to expire on December 31, 2000 by the
mutual agreement of Submanager and Manager. The extension shall be executed in
writing by both parties hereto before the expiration of this Agreement.
8. Termination for Cause. This Agreement, or the extension hereof,
---------------------
may be terminated by either party for cause immediately upon written notice.
Grounds for termination for cause will occur with respect to a party if:
(a) Such party shall have violated any material provision of this
Agreement and, after written notice of such violation, shall not cure such
default within 30 days; or
(b) There is entered an order for relief or similar decree or
order with respect to such party by a court having jurisdiction in the premises
in an involuntary case under the federal bankruptcy laws as now or hereafter
constituted or under any applicable federal or state bankruptcy, insolvency or
other similar laws; or such party (A) ceases or admits in writing its inability
to pay its debts as they become due and payable, or makes a general assignment
for the benefit of, or enters into any composition or arrangement with,
creditors; (B) applies for, or consents (by admission of material allegations of
a petition or otherwise) to the appointment of a receiver, trustee, assignee,
custodian, liquidator or sequestrator (or other similar official) of such party
or of any substantial part of its properties or assets, or authorizes such an
application or consent, or proceedings seeking such appointment are commenced
without such authorization, consent or application against such party and
continue undismissed for 60 days; (C) authorizes or files a voluntary petition
in bankruptcy, or applies for or consents (by admission of material allegations
of a petition or otherwise) to the application of any bankruptcy,
reorganization, arrangement, readjustment of debt, insolvency, dissolution,
liquidation or other similar law of any jurisdiction, or authorizes such
application or consent, or proceedings to such end are instituted against such
party without such authorization, application or consent and are approved as
properly instituted and remain undismissed for 30 days or results in
adjudication of bankruptcy or insolvency; or (D) permits or suffer all or any
substantial part of its properties or assets to be sequestered or attached by
court order and the order remains undismissed for 60 days; or
(c) The Management Agreement is terminated for whatever reason.
Each party agrees that if any of the events specified in this Section
8 shall occur, it will give prompt written notice thereof to the other party
after the happening of such event.
In addition to the foregoing, grounds for termination for cause will
occur with respect to Submanager if Submanager has engaged in bad faith, willful
misconduct, gross negligence or reckless disregard in the performance of its
duties hereunder.
If this Agreement is terminated pursuant to this Section, such
termination shall be without any further liability or obligation of either party
to the other, except that Management Fee
6
<PAGE>
shall be terminated as of the date of such termination and Manager shall pay to
Submanager any portion of the Management Fee earned by Submanager but unpaid by
Manager through the date of termination, at the times specified in Section 5
hereof.
9. Termination Without Cause. (a) Manager may terminate this
-------------------------
Agreement without cause upon 30 days' prior written notice.
(b) Submanager may terminate this Agreement without cause,
upon 90 days' prior written notice to Manager, such notice not to be delivered
prior to January 1, 2000.
(c) If this Agreement is terminated pursuant to this Section
9, such termination shall be without any further liability or obligation of
either party to the other, except that (x) if the termination shall occur during
the initial Term hereof, Manager shall pay to Submanager the remaining unpaid
portion of the Management Fee that would have been earned by Submanager through
December 31, 1999 at the times specified in Section 5 as if this Agreement had
not been terminated and (y) if the termination shall occur during the extension
Term hereof, the Management Fee shall be pro-rated as of the date of such
termination and Manager shall pay to Submanager any portion of the Management
Fee earned by Submanager but unpaid by Manager through the date of termination
at the times specified in Section 5 of this Agreement.
10. Assignment.
----------
(a) This Agreement shall terminate automatically in the event
of its assignment, in whole or in part, by Submanager, unless such assignment
(whether by operation of law, merger or consolidation) (i) is consented to in
writing by Manager, in its sole discretion or (ii) is to an Affiliate of
Submanager or to an entity which is the successor to substantially all of the
assets and operations of Submanager. In no event shall Submanager be permitted
to subcontract all or any portion of it obligations pursuant to this Agreement,
other than to an Affiliate, unless consented to in writing by Manager.
(b) Manager shall be permitted to assign this Agreement
without the consent of Submanager to any transferee of the Manager's interest in
the Management Agreement.
11. Action Upon Termination. From and after the effective date of
-----------------------
termination of this Agreement, pursuant to Sections 8 or 9 hereof, Submanager
shall forthwith upon such termination deliver to Manager all property and copies
of material documents, corporate records, reports and software with respect to
the Company or any subsidiary of the Company then in the custody of Submanager,
to the extent not previously delivered to Manager.
12. Representations and Warranties.
------------------------------
(a) Manager hereby represents and warrants to Submanager as
follows:
7
<PAGE>
(i) Corporate Existence. Manager is a corporation duly
-------------------
organized, validly existing and in good standing under the laws of Delaware, has
the power to own its assets and to transact the business in which it is now
engaged and is duly qualified as a corporation and in good standing under the
laws of such jurisdictions where its ownership or lease of property or the
conduct of its business requires such qualification, except for failures to be
so qualified, authorized or licensed that could not in the aggregate have a
material adverse effect on the business operations, assets or financial
condition of Manager and its subsidiaries, taken as a whole.
(ii) Corporate Power; Authorization; Enforceable
-----------------------------------------
Obligations. Manager has the power, authority and legal right to execute,
- -----------
deliver and perform this Agreement and all obligations required hereunder and
has taken all necessary corporate action to authorize this Agreement on the
terms and conditions hereof and the execution, delivery and performance of this
Agreement and all obligations required hereunder. No consent of any other
person including, without limitation, stockholders and creditors of Manager, and
no license, permit, approval or authorization of, exemption by, notice or report
to, or registration, filing or declaration with, any governmental authority is
required by Manager in connection with this Agreement or the execution,
delivery, performance, validity or enforceability of this Agreement and all
obligations required hereunder. This Agreement has been, and each instrument or
document required hereunder will be, executed and delivered by a duly authorized
officer of Manager, and this Agreement constitutes, and each instrument or
document required hereunder when executed and delivered hereunder will
constitute, the legally valid and binding obligation of Manager enforceable
against Manager in accordance with its terms, except as such enforcement may be
limited by bankruptcy, insolvency, moratorium or similar laws now or hereafter
in effect relating to the rights and remedies of creditors generally, and
general principles of equity.
(iii) No Legal Bar to This Agreement. The execution,
------------------------------
delivery and performance of this Agreement and the documents or instruments
required hereunder, will not violate any provision of any existing law or
regulation binding on Manager, or any order, judgment, award or decree of any
court, arbitrator or governmental authority binding on Manager, or the Governing
Instruments of, or any securities issued by Manager or any mortgage, indenture,
lease, contract or other agreement, instrument or undertaking to which Manager
is a party or by which Manager or any of its assets may be bound, the violation
of which would have a material adverse effect on the business operations, assets
or financial condition of Manager and its subsidiaries, taken as a whole, and
will not result in, or require, the creation or imposition of any lien on any of
its property, assets or revenues pursuant to the provisions of any such
mortgage, indenture, lease, contract or other agreement, instrument or
undertaking.
(b) Submanager hereby represents and warrants to the Company as
follows:
(i) Corporate Existence. Submanager is a corporation
-------------------
duly organized, validly existing and in good standing under the laws of
California, has the power to own itsassets and to transact the business in which
it is now engaged and is duly qualified as a foreign
8
<PAGE>
limited liability company and in good standing under the laws of each
jurisdiction where its ownership or lease of property or the conduct of its
business requires such qualification, except for failures to be so qualified,
authorized or licensed that could not in the aggregate have a material adverse
effect on the business operations, assets or financial condition of Submanager
and its subsidiaries, taken as a whole.
(ii) Company Power; Authorization; Enforceable
-----------------------------------------
Obligations. Submanager has the power, authority and legal right to execute,
- -----------
deliver and perform this Agreement and all obligations required hereunder and
has taken all necessary action to authorize this Agreement on the terms and
conditions hereof and its execution, delivery and performance of this Agreement
and all obligations required hereunder. No consent of any other person
including, without limitations, shareholders and creditors of Submanager, and no
license, permit, approval or authorization of, exemption by, notice or report
to, or registration, filing or declaration with, any governmental authority is
required by Submanager in connection with this Agreement or the execution,
delivery, performance, validity or enforceability of this Agreement and all
obligations required hereunder. This Agreement has been, and each instrument or
document required hereunder will be, executed and delivered by a duly authorized
officer of Submanager, and this Agreement constitutes, and each instrument or
document required hereunder when executed and delivered hereunder will
constitute, the legally valid and binding obligation of Submanager enforceable
against Submanager in accordance with its terms.
(iii) No Legal Bar to This Agreement. The execution,
------------------------------
delivery and performance of this Agreement and the documents or instruments
required hereunder, will not violate any provision of any existing law or
regulation binding on Submanager, or any order, judgment, award or decree of any
court, arbitrator or governmental authority binding on Submanager, or the
Governing Instruments of, or any securities issued by Submanager or of any
mortgage, indenture, lease, contract or other agreement, instrument or
undertaking to which Submanager is a party or by which Submanager or any of its
assets may be bound, the violation of which would have a material adverse effect
on the business operations, assets or financial condition of Submanager and its
subsidiaries, taken as a whole, and will not result in, or require, the creation
or imposition of any lien on any of its property, assets or revenues pursuant to
the provision of any such mortgage, indenture, lease, contract or other
agreement, instrument or undertaking.
13. Notices. All notices, requests, demands and other communications
-------
provided for hereunder shall be in writing (including telegraphic or facsimile
communications) and shall be mailed (return receipt requested), telegraphed,
sent by facsimile, overnight courier or hand delivered to each party at the
address set forth as follows, or at such other address as either party may
designate by notice to the others, and any such notice, request, demand or other
communication shall be effective upon receipt:
9
<PAGE>
Manager:
FIC Management Inc.
1301 Avenue of the Americas
New York, New York 10119
Telephone: (212) 798-6110
Facsimile: (212) 798-6122
Attention: Randal A. Nardone
Chief Operating Officer and Secretary
Submanager
Impac Funding Corporation
1401 Dove Street
Newport Beach, California 92660
Telephone: (949) 475-3942
Facsimile: (949) 475-3967
Attention: Ronald Morrison, Esq.
Either party may at any time give notice in writing to the other party
of a change of its address for the purpose of this Section 13.
14. Amendments. This Agreement shall not be amended, changed,
----------
modified, terminated or discharged in whole or in part except by an instrument
in writing signed by all parties hereto, or their respective successors or
permitted assigns, or otherwise as provided herein. The parties hereto agree
that in no event shall an oral modification of this Agreement be enforceable or
valid.
15. Successors and Assigns. This Agreement sha1l become effective
----------------------
when it is executed by all parties and thereafter shall be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns.
16. Attorneys' Fees. In the event that any party shall bring an
---------------
action or proceeding in connection with the performance, breach or
interpretation hereof, then the prevailing party in such action as determined by
the court or other body having jurisdiction shall be entitled to recover from
the losing party in such action, as determined by the court or other body having
jurisdiction, all reasonable costs and expense of litigation or arbitration,
including reasonable attorneys' fees, court costs, costs of investigation and
other costs reasonably related to such proceeding.
17. Governing Law. THIS AGREEMENT SHALL BE GOVERNED, CONSTRUED AND
-------------
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE
10
<PAGE>
OF CALIFORNIA (WITHOUT GIVING EFFECT TO THE PRINCIPLES THEREOF RELATING TO
CONFLICTS OF LAW). Any legal action or proceeding with respect to this Agreement
and any action for enforcement of any judgment in respect thereof may be brought
in the courts of the State of California or of the United States of America
located in the county of Orange County, California, and, by execution and
delivery of this Agreement, Submanager hereby accepts for itself and in re spect
of its property, generally and unconditionally, the non-exclusive jurisdiction
of the aforesaid courts and appellate courts from any thereof. Submanager
irrevocably consents to the service of pro cess out of any of the aforementioned
courts in any such action or proceeding by the hand delivery, or mailing of
copies thereof by registered or certified mail, postage prepaid, to Submanager
at its address set forth below. Submanager hereby irrevocably waives, to the
extent permitted by applicable law, any objection which it may now or hereafter
have to the laying of venue of any of the aforesaid actions or proceedings
arising out of or in connection with this Agreement brought in the courts
referred to above and hereby further irrevocably waives, to the extent permitted
by appli cable law, and agrees not to plead or claim in any such court that any
such action or proceeding brought in any such court has been brought in an
inconvenient forum. Nothing herein shall affect the right of Manager to serve
process in any other manner permitted by law or to commence legal proceedings or
otherwise proceed against Submanager in any other jurisdiction.
18. Headings and Cross References. The section headings hereof have
-----------------------------
been inserted for convenience of reference only and shall not be construed to
affect the meaning, construction or effect of this Agreement. Any reference in
this Agreement to a "Section" or "Subsection" shall be construed, respectively,
as referring to a section of this Agreement or a subsection of a section of this
Agreement.
19. Severability. The invalidity or unenforceability of any
------------
provision of this Agreement shall not affect the validity of any other
provision, and all other provisions shall remain in full force and effect.
20. Entire Agreement. This Agreement contains the entire agreement
----------------
of the parties relating to the subject matter hereof, and the parties hereto
have made no agreements, representations or warranties relating to the subject
matter of this Agreement that are not set forth otherwise herein. This
Agreement supersedes any and all prior agreements, written or oral, between the
parties hereto.
21. Waiver. Any forbearance by a party to this Agreement in
------
exercising any right or remedy under this Agreement or otherwise afforded by
applicable law shall not by a waiver of or preclude the exercise of that or any
other right or remedy.
22. Waiver of Trial by Jury. The respective parties hereto shall
-----------------------
and they hereby do waive trial by jury in any action, proceeding or counterclaim
brought by either of the parties hereto against the other on any matters
whatsoever arising out of or in any way connected with this Agreement or the
relationship of Manager and Submanager.
11
<PAGE>
23. Execution in Counterparts. This Agreement may be executed in one
-------------------------
or more counterparts, any of which shall constitute an original as against any
party whose signature appears on it, and all of which shall together constitute
a single instrument. This Agreement shall become binding when one or more
counterpart, individually or taken together, bear the signatures of both
parties.
24. Arbitration.
-----------
(a) Each controversy, dispute or claim between the
parties arising out of or relating to this Agreement, which controversy, dispute
or claim is not settled in writing within thirty (30) days after the "Claim
Date" (defined as the date on which a party subject to this Agreement gives
written notice to the other that a controversy, dispute or claim exists), will
be settled by binding arbitration in Orange County, California in accordance
with the rules of the American Arbitration Association, which shall constitute
the exclusive remedy for the settlement of any controversy, dispute or claim,
and the parties hereto waive their rights to initiate any legal proceedings
against each other in any court or jurisdiction other than as provided in
Section 17 (the "Court"). Any decision rendered by the arbitrator and such
arbitration will be final, binding and conclusive, subject to Section 24(c).
(b) Except as expressly set forth in this Agreement, the
arbitrator shall determine the manner in which the proceeding is conducted,
including the time and place of all hearings, the order of presentation of
evidence, and all other questions that arise with respect to the course of the
proceeding. All proceedings and hearings conducted before the arbitrator, except
for trial, shall be conducted without a court reporter, except that when any
party so requests, a court reporter will be used at any hearing conducted before
the arbitrator. The party making such a request shall have the obligation to
arrange for any pay for the court reporter. The costs of the court reporter
shall be borne equally by the parties.
(c) The arbitrator shall be required to determine all
issues in accordance with existing case law and the statutory laws of the State
of California. The rules of evidence applicable to proceedings at law in the
State of California will be applicable to the reference proceeding. The
arbitrator shall be empowered to enter equitable as well as legal relief, to
provide all temporary and/or provisional remedies and to enter equitable orders
that will be binding upon the parties. The arbitrator shall issue a single
judgment at the close of the proceeding which shall dispose of all of the claims
of the parties that are the subject of the proceeding. The parties hereto
expressly reserve the right to contest or appeal from the final judgment or any
appealable order or appealable judgment entered by the arbitrator. The parties
hereto expressly reserve the right to findings of fact, conclusions of law, a
written statement of decision, and the right to move for a new trial or a
different judgment, which new trial, if granted, is also to be a proceeding
governed under this provision.
[The remainder of this page intentionally left blank.]
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers thereunto duly authorized as of the day and year
first above written.
IMPAC FUNDING CORPORATION
By: /s/Joseph R. Tomkinson
Name: Joseph R. Tomkinson
Title: Chief Executive Officer
FIC MANAGEMENT INC.
By:/s/Randal A. Nardone
Name: Randal A. Nardone
Title: Chief Operating Officer and
Secretary
<PAGE>
EXHIBIT 10.4
REGISTRATION RIGHTS AGREEMENT
BETWEEN
IMPAC COMMERCIAL HOLDINGS, INC.
AND
FORTRESS PARTNERS, L.P.
DATED AS OF
MAY 5, 1999
<PAGE>
REGISTRATION RIGHTS AGREEMENT
-----------------------------
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered
into as of May 5, 1999, by and between IMPAC COMMERCIAL HOLDINGS, INC., a
Maryland corporation (the "Company"), and FORTRESS PARTNERS, L.P., a Delaware
partnership ("Fortress").
1. Consideration. Pursuant to that certain Series B 8.5% Cumulative
-------------
Convertible Preferred Stock Purchase Agreement, dated the date hereof (the
"Stock Purchase Agreement"), Fortress and the Company have agreed to enter into
this Agreement to provide for the registration rights set forth herein and the
parties' respective obligations hereunder in consideration of the mutual
covenants contained herein. This Agreement is a condition to the closing under
the Stock Purchase Agreement.
2. Definitions. The following definitions shall apply in addition to those
-----------
terms defined elsewhere herein:
a. "Common Stock" means the Company's Common Stock, $.01 par value per
------------
share.
b. "Continuous Offering" means an Offering pursuant to Rule 415 under the
-------------------
Securities Act, 17 C.F.R. 230.415, or any successor rule of the SEC, if
applicable.
c. "Exchange Act" means the Securities Exchange Act of 1934, as amended,
------------
and the rules and regulations promulgated thereunder.
d. "Holders" means any holder of the Registrable Securities.
-------
e. "Offering" means any public offering of the Common Stock of the
--------
Company, and any other method of disposition of the Common Stock of the Company
that is subject to the registration requirements of the Securities Act or any
other applicable federal or state statute or regulation.
f. "Offering Documents" means all documents relating to an Offering which
------------------
are required to be filed with any governmental agency or authority or to be
delivered to any Person to whom securities of the Company are offered for sale
or sold, including, without limitation, Registration Statements, Prospectuses,
and preliminary Prospectuses, and all material incorporated by reference
therein, and any schedule or exhibit to any of the foregoing, in each case as
such documents may be amended from time to time.
g. "Party" means Fortress or the Company and "Parties" means both
----- -------
Fortress and the Company.
1
<PAGE>
h. "Person" means any individual, corporation, partnership, limited
------
liability company, association, trust or unincorporated association.
i. "Prospectus" means the prospectus included in a Registration
----------
Statement, relating to an Offering in which Common Stock is included, as amended
or supplemented by a prospectus supplement, and all other amendments and
supplements to the Prospectus, including posteffective amendments, and all
material incorporated by reference in such Prospectus.
j. "Registration Expenses" means, with respect to an Offering, any and
---------------------
all expenses incident to the Company's performance of or compliance with the
provisions of this Agreement, including without limitation (a) fees for any
filings required to be made with the National Association of Securities Dealers,
Inc., or the SEC in connection with such Offering, and any other registration
and filing fees, (b) all fees and expenses of complying with securities or blue
sky laws (including reasonable fees and disbursements of one counsel in
connection with blue sky qualifications of the Common Stock to be included in
such Offering), (c) all printing, messenger, telephone, and delivery expenses,
(d) all fees and expenses incurred in connection with the listing of the Common
Stock to be included in such Offering on any securities exchange, and (e) the
reasonable fees and disbursements of counsel for the Company and of its
independent public accountants, including the expenses of any special audits
and/or "cold comfort" letters required by or incident to such performance and
compliance. Registration Expenses shall not include underwriting discounts and
commissions.
k. "Registration Statement" means a registration statement filed with the
----------------------
SEC pursuant to the Securities Act, relating to an Offering in which Common
Stock is included, including any pre- or post-effective amendment thereto, the
Prospectus included therein, and all material incorporated by reference therein,
and any schedule or exhibit to any of the foregoing.
l. "Registrable Securities" means the Common Stock issuable upon
----------------------
conversion of 479,999 shares of Series B Preferred Stock originally issued to
Fortress on the date hereof that are owned by the Holders, and any Common Stock
of the Company issued as (or issuable upon the conversion or exercise of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, such
Common Stock, excluding in all cases, however, any Registrable Securities sold
by a person in a transaction in which his rights under this agreement are not
assigned.
m. "SEC" means the Securities and Exchange Commission.
---
n. "Securities Act" means the Securities Act of 1933, as amended, and the
--------------
rules and regulations promulgated thereunder.
o. "Securities Offering Regulations" means any regulations promulgated by
-------------------------------
any agency or authority of the United States government, under the Securities
Act, or any statute hereafter enacted into law, relating to or governing an
Offering of securities by the Company.
2
<PAGE>
p. "Series B Preferred Stock" means the Series B 8.5% Cumulative
------------------------
Convertible Preferred Stock, $.01 par value per share.
3. a. Incidental Registration Rights. If the Company proposes to make an
------------------------------
Offering of its Common Stock and to prepare Offering Documents not required
pursuant to Paragraph 4 (other than any registration by the Company on Form S-8
or a successor or substantially similar form of (A) an employee stock option,
stock purchase or compensation plan or securities issued or to be issued
pursuant to any such plan, or (B) a dividend investment plan), the Company will
give prompt written notice to each of the Holders (at their respective addresses
as they appear on the stock transfer records of the Company) of its intention to
do so and of the Holders's rights under this Paragraph 3. Upon the written
request of the Holders made within twenty (20) days after the receipt of any
such notice (which request shall specify the number of the Registrable
Securities intended to be disposed of by each Holder), the Company will include
in the Offering Documents relating to such Offering all Registrable Securities
that the Company has been requested to include by the Holders; provided, that if
at any time after giving written notice under this Paragraph 3 the Company shall
determine for any reason not to proceed with the proposed Offering, the Company
may, at its election, give written notice of such determination to the Holders
and thereupon shall be relieved of its obligations to the Holders with respect
to such proposed Offering under this Paragraph 3. Any Holder shall be entitled
to withdraw its request for the inclusion of Registrable Securities in an
Offering and withdraw from the Offering at any time before the time that the
Offering Documents, including any Registration Statement (if applicable), are
declared effective and the Offering has commenced.
b. Continuous Offering. If the Company intends to effect a Continuous
-------------------
Offering (other than any registration by the Company or a successor on Form S-3
regarding a dividend reinvestment plan), the Company will give written notice
thereof to each of the Holders (at their respective addresses as they appear on
the stock transfer records of the Company) and include in such Offering all of
the Registrable Securities which each Holder elects to include in such Offering.
During the period in which a Registration Statement (if applicable) with respect
to a Continuous Offering is effective, if a Holder desires to sell Registrable
Securities in a transaction covered by such Registration Statement, it shall
give notice to the Company of the proposed date of such sale at least thirty
(30) days before such proposed date of sale, and the Company shall take all
actions necessary to permit such sale. Within fifteen (15) days of receipt of
notice of a proposed sale by a Holder, the Company will advise each Holder
either that it has no objection of such a registered sale or that such a
registered sale should be delayed (but in no event for more than 60 days), on
the basis either that the Company is involved in a confidential proposed
transaction or negotiations therefor (which have been previously disclosed to
the Company's Board of Directors) which would not require the Company to make or
amend any public filings under the securities laws at that time, or that such
sale would have a material adverse effect upon the Company's ability to access
the capital markets. Any determination to delay must be made in good faith by a
majority of the Board of Directors. If the Company has not objected to such
proposed registered sale as permitted in this subparagraph (b) within such
fifteen (15) day period, the Company shall take all actions necessary to permit
such sale on the proposed date of sale pursuant to such Registration Statement.
c. Underwritten Offerings. In the case of an underwritten Offering
----------------------
initiated by the Company under this Paragraph 3, including underwritten
Offerings effected as part of a Continuous
3
<PAGE>
Offering, the underwriter(s) and the managing underwriter shall be selected by
the Company. If the managing underwriter advises the Company in writing that, in
its opinion, the number of Registrable Securities and securities of the Company,
if any, being sold exceeds the number that can be sold in such Offering, so as
to be likely to have an adverse effect on the price at which the Company can
sell securities for its own account, then there shall be included in such
Offering (and in the Offering Documents) first, securities of the Company being
sold for its own account, and second, the maximum number of Registrable
Securities requested to be included in such Offering which, in the opinion of
such managing underwriter, can be sold without have such adverse effect on such
price. If Registrable Securities are so excluded from registration in an
Offering, the Company shall, upon the request of Holders owning at least 50% or
more of the aggregate of the shares of Common Stock into which the Series B
Preferred Stock have been, or can be, converted, use its reasonable efforts to
effect a registration with the SEC or take such actions as shall be reasonably
required to effect an Offering (in the event the Registrable Securities are
already registered with the SEC) in respect of such excluded Registrable
Securities as soon as practicable after consummation of such Offering. A Holder
may withdraw its Registrable Securities from such subsequent Offering without
costs or penalty at any time before the effective date of the Registration
Statement relating to such Offering.
d. Expenses. In connection with any offering of Registrable Securities
--------
in connection with a new issuance of Common Stock by the Company, the Company
shall pay all Registration Expenses.
e. Requests to include the Registrable Securities in an Offering pursuant
to this Section 3 shall be unlimited.
4. Demand Registration Rights. The Holders, without limitation as to any
--------------------------
other method of disposition available to it, shall be entitled to dispose of any
or all of the Registrable Securities then held by them in accordance with the
provisions of this Paragraph 4.
a. Requests by The Holders. Upon the receipt by the Company of written
-----------------------
notice from Holders owning at least 50% or more of the aggregate of the shares
of Common Stock into which the Series B Preferred Stock have been, or can be,
converted, of their intent to sell all or part of their Registrable Securities
in an Offering subject to this Paragraph 4 at least 30 days before such proposed
date of sale, and specifying both the number of Registrable Securities to be
sold and the intended method of disposition, the Company will use its best
efforts to register such Registrable Securities so as to permit as soon as
practicable the requested sale of the Registrable Securities. Within fifteen
(15) days of receipt of notice of a proposed sale by such Holders, the Company
will advise such Holders either that it has no objection of such a registered
sale or that such a registered sale should be delayed for up to four months, on
the basis either the Company is involved in a confidential proposed transaction
or negotiations therefor (which have been previously disclosed to the Company's
Board of Directors) which would not require the Company to make or amend any
public filings under the securities laws at that time. If the Company has not
objected to such proposed registered sale as permitted in this subparagraph (a)
within such fifteen (15) day period, the Company shall take all actions
necessary to permit such sale on the proposed date of sale pursuant to such
Registration Statement. If, at any time after giving 30 days written notice
under this Paragraph 4, all such Holders
4
<PAGE>
shall notify the Company in writing that they have determined for any reason not
to proceed with the proposed Offering, then the Company shall terminate such
Offering.
b. Limitation on Requests and Payment of Registration Expenses. The
-----------------------------------------------------------
Holders shall be entitled to make a request to the Company to register
Registrable Securities pursuant to the provisions of this Paragraph 4 on no more
than two occasions. The Company shall not be required to register Registrable
Securities in accordance with the provisions of Paragraph 4(a) if there is
outstanding at the time of the request an effective Registration Statement for a
Continuous Offering and the Holders can dispose of Registrable Securities in
accordance with Paragraph 3(b). Once all Registrable Securities are covered by
an effective Registration Statement, the Company shall not be required to
register any Registrable Securities. The Company will pay all Registration
Expenses in connection with the Offering of Registrable Securities requested by
the Holders pursuant to the second sentence of Paragraph 3(b) or this Paragraph
4. Any Offering abandoned or terminated by the Holders after its filing in
accordance with the provisions of Paragraph 4(a) shall be deemed to be a request
pursuant to this Paragraph 4. Any Offering abandoned or terminated by the
Company after filing shall not be deemed a request pursuant to this Paragraph 4.
c. Selection of Underwriters. If the Holders specify in the notice
-------------------------
delivered to the Company pursuant to Paragraph 4 that they intend to sell
Registrable Securities in an underwritten Offering pursuant to the second
sentence of Paragraph 3(b) or Paragraph 4, the Holders shall be entitled to
select the underwriter(s) and managing underwriter which is also acceptable to
the Company. If the Company issues and sells securities of the same class as
the Registrable Securities contemporaneously with any Offering pursuant to
Paragraph 3(b) or this Paragraph 4, the Company shall (i) sell such securities
to the underwriter(s) selected by the Holders pursuant to this Paragraph 4(c) on
the same terms and conditions as apply to the Holders and (ii) execute and
deliver a copy of the underwriting agreement relating to such Offering. If the
managing underwriter advises the Holders and the Company in writing that, in its
opinion, the number of securities requested to be included in such Offering
exceeds the number that can be sold in such Offering, so as to be likely to have
an adverse effect on the price at which the Registrable Securities or securities
being offered by the Company can be sold, then there shall be included in such
Offering (and in the Offering Documents relating to such Offering) first, the
maximum number of Registrable Securities requested to be included in such
Offering by the Holders and second, the maximum number of securities, if any,
proposed to be sold by the Company for its own account or for the account of any
other holder of the Company's securities, which in the opinion of the managing
underwriter can be sold without having such adverse effect.
d. Registration on Form S-3. The Holders shall have the right to require
------------------------
the Company to register any or all of its shares on Form S-3 (or on Form S-1, if
Form S-3 is not available), including an Offering pursuant to Rule 415 of the
Securities Act.
5. The Company's Duties. If and whenever the Company is required to permit
--------------------
the Holders to effect any Offering as provided in Paragraphs 3 and 4, the
Company covenants and agrees that it will, as expeditiously as possible (but not
later than thirty (30) days after receipt of a request from the Holders), to
include Registrable Securities in a given Offering:
5
<PAGE>
a. (A) prepare all Offering Documents in accordance with all applicable
requirements of the Securities Act, and the Securities Offering Regulations,
including, if requested by the Holders and if permitted by the rules and
regulations of the SEC, a Registration Statement pursuant to Rule 415 of the
Securities Act or any successor rule of the SEC, with respect to such Offering
to permit the disposition of the Registrable Securities by the Holders in
accordance with the intended method of disposition (and, in the case of an
underwritten Offering, consistent in form, substance, and scope with customary
practice for the offering of securities of corporations by nationally recognized
investment banking firms), (B) file with the SEC such Offering Documents and all
other documents required to permit the disposition thereof; provided, that
before filing any such Offering Documents (including any documents incorporated
by reference therein), the Company will furnish to counsel(s) designated by the
Holders and to the underwriter(s), if any, copies of all such Offering
Documents, which Offering Documents shall be subject to the review of such
counsel(s) and the underwriter(s), if any, and, the Company shall make such
changes in such Offering Documents as are reasonably requested by such
counsel(s) or underwriter(s), and (C) use its best efforts to have such Offering
Documents declared effective by, and obtain all approvals from the SEC to the
extent necessary to permit the Offering as promptly as practicable (but in no
event more than 120 days subsequent to the initial filing of the Offering
Documents with the SEC, if such Offering Documents are subject to review by the
SEC); provided, however, that the Company may discontinue any Offering that is
being effected pursuant to Paragraph 3 at any time before the effective date of
the related Offering Documents; and provided, further, that the Company shall
not file any Offering Document which shall be disapproved by the Holders within
a reasonable period after the same has been provided for review;
b. thereafter, prepare and file with the SEC such amendments and post-
effective amendments to the Offering Documents as may be necessary to keep the
Offering Documents continuously effective and cause the Offering Documents to be
supplemented by any required supplement, and as so supplemented to be filed, if
required, with the SEC during the period ending on the later of (i) such time as
all of the Registrable Securities covered by such Offering Documents have been
disposed of in accordance with the intended method of disposition set forth in
such Offering Documents or, in the case of an Offering made pursuant to Rule 415
under the Securities Act or any successor rule of the SEC (if applicable), if
securities remain unsold at the expiration of the Offering, such time as the
Company shall file, with the consent of such Holders, a post-effective amendment
with the SEC deregistering the securities which remain unsold at the termination
of the Offering or (ii) so long as a dealer is required to deliver a Prospectus
in connection with the Offering; provided, that before filing any such post-
effective amendment, the Company will furnish to counsel(s) designated by such
Holders and to the underwriter(s), if any, copies of the post-effective
amendment (including any other document proposed to be filed therewith), which
Offering Documents shall be subject to the review of such counsel(s) and the
underwriter(s), if any, and, where feasible, the Company shall make such changes
in such post-effective amendment as are reasonably requested by such counsel(s)
or underwriter(s);
c. furnish to the Holders and to the underwriter(s), if any, such number
of copies of the Offering Documents (including each amendment and supplement
thereto) as they may reasonably request in order to facilitate the disposition
of the Registrable Securities included in such Offering;
6
<PAGE>
d. register or qualify, or cooperate with the Holders, the
underwriter(s), if any, and their respective counsel in registering or
qualifying, all Registrable Securities covered by the Offering Documents for
offer and sale under the applicable securities or blue sky laws of such
jurisdictions as the Holders and the underwriter(s), if any, shall reasonably
request in writing, and do any and all other acts and things which may be
reasonably necessary or advisable to enable the Holders and the underwriter(s),
if any, to consummate the disposition in such jurisdictions of the Common Stock
covered by the Offering Documents; provided however, that the Company shall not
be required to qualify generally to do business in any jurisdiction where it is
not then so qualified or to take any action that would subject it to general
service of process in any such jurisdiction where it is not then so subject or
subject the Company to any tax in any such jurisdiction where it is not then so
subject;
e. use its reasonable efforts to cause such Common Stock covered by the
Offering Documents to be registered with or approved by such other governmental
agencies or authorities as may be necessary to enable the Holders and the
underwriter(s), if any, to consummate the disposition of such Common Stock;
f. cooperate reasonably with any managing underwriter to effect the sale
of any Registrable Securities, including but not limited to attendance of the
Company's executive officers at any planned "road show" presentations';
g. notify the Holders and the underwriter(s), if any, at any time when
the Offering Documents include an 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 not misleading in light of the circumstances then existing,
and at the request of the Holders or any underwriter, prepare and furnish to
such Person(s), such reasonable number of copies of any amendment or supplement
to the Offering Documents as may be necessary so that, as thereafter delivered
to the purchasers of such Common Stock, such Offering Documents shall not
include 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 not
misleading in light of the circumstances then existing, and to deliver to
purchasers of any other securities of the Company included in the Offering
copies of such Offering Documents as so amended or supplemented;
h. keep the Holders informed of the Company's best estimates of the
earliest date on which the Offering Documents will become effective, and
promptly notify the Holders of (A) the effectiveness of such Offering Documents,
(B) a request by the SEC for an amendment or supplement to such Offering
Documents, (C) the issuance by the SEC of an order suspending the effectiveness
of the Offering Documents, or of the threat of a proceeding for that purpose,
and (D) the suspension of the qualification of any securities included in the
Offering Documents for sale in any jurisdiction or the initiation or threat of
any proceeding for that purpose;
i. materially comply with the provisions of the Securities Offering
Regulations and the Securities Act with respect to the disposition of all
securities covered by the Offering Documents in accordance with the intended
method of distribution of the sellers thereof set forth in such Offering
Documents;
7
<PAGE>
j. use its reasonable efforts to list the securities proposed to be sold
in such Offering on the American Stock Exchange, or on such other securities
exchange on which the Common Stock is then listed, not later than the closing of
the Offering contemplated thereby;
k. enter into such customary agreements (including but not limited to an
underwriting agreement in customary form) and take such other reasonable actions
as the Holders or the underwriter(s), if any, reasonably request in order to
expedite or facilitate the disposition of such Common Stock;
l. obtain such "cold comfort" letter(s) from the Company's independent
public accountants, in customary form and covering matters of the type
customarily covered by "cold comfort" letter(s), as the Holders or the
underwriter(s), if any, shall reasonably request; and
m. upon prior notice, make available for reasonable inspection by any
underwriter(s) participating in any disposition to be effected pursuant to the
Offering Documents and by any attorney, accountant, or other agent retained by
any such Person(s), its financial and other records, pertinent corporate
documents and properties of the Company, and such opportunities to discuss the
business of the Company with its officers, directors, and employees and the
independent public accountants who have certified its financial statements as
shall be necessary, in the opinions of such underwriters' respective counsels,
to conduct a reasonable investigation; provided, that any records, information,
or documents that are designated by the Company in writing as confidential shall
be kept confidential by each such Person, unless disclosure of such records,
information, or documents is required by law, by judicial or administrative
order, or in order to defend a claim asserted against such Person in connection
with such Offering.
6. Information from the Holders.
----------------------------
a. Information. The Company may require each Holder to furnish it with
-----------
such informa tion regarding the Holders and regarding the method of distribution
as is pertinent to the disclosure requirements relating to the Offering of such
Common Stock as the Company may from time to time reasonably request in writing.
b. Use of Offering Documents Upon Notice of Defects. Each Holder agrees,
------------------------------------------------
and shall cause underwriter(s), if any, acting on its behalf to agree, that upon
receipt of any notice from the Company of the happening of any event of the kind
described in Paragraph 5(g), it will immediately discontinue the use of the
Offering Documents covering such Common Stock until the receipt by the Holders
and any such underwriter(s) of the copies of the supplemented or amended
Offering Documents contemplated by such clause and, if so directed by the
Company, the Holders will deliver and cause each underwriter, if any, to deliver
to the Company all copies, other than permanent file copies then in the
possession of the Holders or any such underwriter, of the Offering Documents
covering such Common Stock at the time of receipt of such notice. If the
Company shall give any such notice, the period mentioned in Paragraph 5(b) shall
be extended by the number of days during which offerings were suspended (i.e.,
the period from and including the date of the receipt of such notice pursuant to
Paragraph 5(g), to and including the date when the Holders shall have received
the copies of the supplemented or amended Offering Documents contemplated by
such clause).
8
<PAGE>
7. Resales; Reports Under Exchange Act. In order to permit the Holders to
-----------------------------------
sell the Registrable Securities, if it so desires, pursuant to any applicable
resale exemption under the Securities Offering Regulations or the Securities
Act, the Company will:
a. comply with all rules and regulations of the SEC in connection with
use of any such resale exemption;
b. make and keep available adequate and current public information
regarding the Company;
c. file with the SEC in a timely manner, all reports and other documents
required to be filed under the Securities Act, the Exchange Act, or the
Securities Offering Regulations;
d. furnish to the Holders copies of annual reports required to be filed
under the Exchange Act and the Securities Offering Regulations; and
e. furnish to any Holder, upon request, (A) a copy of the most recent
quarterly report of the Company and such other reports and documents filed by
the Company with the SEC and (B) such other information as may be reasonably
requested to permit a Holder pursuant to any applicable resale exemption under
the Securities Act or the Securities Offering Regulations, if any.
8. Indemnification. The obligations of indemnification of the Parties set
---------------
forth in this Paragraph 8 shall be in addition to any liability which any Party
may otherwise have to any other party.
a. Indemnification by the Company. The Company agrees to indemnify and
------------------------------
hold harmless, to the full extent permitted by law, the Holders, any officers,
directors, employees and agents of a Holder, each Person who participates as an
underwriter in an Offering, each officer, director, employee or agent of such an
underwriter, and each Person who controls (within the meaning of the Securities
Act) any Holder and such an underwriter against any and all losses, claims,
damages, liabilities, expenses, joint or several, including without limitation
reasonable legal or other expenses incurred in connection with investigating or
defending against any loss, claim, damage, or liability, or action or proceeding
(whether commenced or threatened) in respect thereof, caused by any untrue
statement or alleged untrue statement of a material fact contained in any of the
Offering Documents relating to such Offering, or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances under which they were made, except insofar as the same are (i)
made in reliance on and in conformity with any information about any Holder or
any underwriter furnished in writing to the Company by any Holder or any
underwriter specifically for inclusion in the Offering Documents relating to
such Offering or (ii) the result of the fact that any Holder or underwriter sold
Common Stock subject to an Offering to a Person to whom there was not sent or
given, at or before the written configuration of such sale, a copy of the final
Offering Documents, if the Company has previously furnished copies thereof to
such Holder or underwriter and such final Offering Documents corrected such
untrue statement or alleged untrue statement or omission or alleged omission.
9
<PAGE>
b. Indemnification by the Holders. Each Holder agrees to indemnify and
------------------------------
hold harmless, to the full extent permitted by law, the Company, its officers,
directors, employees, and agents, each Person who participates as an underwriter
in an Offering, each officer, director, employee or agent of such an
underwriter, and each Person who controls (within the meaning of the Securities
Act) the Company and such underwriter against any and all losses, claims,
damages, liabilities, and expenses, joint or several, including without
limitation reasonable legal or other expenses incurred in connection with
investigating or defending against any loss, claim, damage, or liability, or
action or proceeding (whether commenced or threatened) in respect thereof,
caused by any untrue statement or alleged untrue statement of a material fact
contained in any of the Offering Documents relating to such Offering or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances under which they were made, but only to the extent
that such untrue statement or omission is made in reliance on and in conformity
with any information furnished in writing by a Holder concerning the Holder to
the Company specifically for inclusion in the Offering Documents relating to
such Offering.
c. Notices of Claims; Procedures. Promptly after receipt by an
-----------------------------
indemnified party hereunder of written notice of the commencement of any action
or proceeding with respect to which a claim for indemnification may be made
pursuant to this Paragraph 8, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
indemnifying party of the commencement of such action; provided, that the
failure of the indemnified party to give notice as provided herein shall not
relieve the indemnifying party of its obligations under this Paragraph 8, except
to the extent that the indemnifying party is actually materially prejudiced by
such failure to give notice. If any such action is brought against an
indemnified party (unless in such indemnified party's reasonable judgment a
conflict of interest between such indemnified and indemnifying parties may exist
in respect of such claim) the indemnifying party will be entitled to participate
in and to assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that it may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified party for
any legal or other expenses subsequently incurred by the latter in connection
with the defense thereof other than reasonable costs of investigation; provided,
however, that, any Person entitled to indemnification hereunder shall have the
right to employ separate counsel and to participate in the defense of such
claim, but the fees and expenses of such counsel shall be at the expense of such
Person unless (A) the indemnifying party has agreed to pay such fees or expenses
or (B) the indemnifying party shall have failed to assume the defense of such
claim and employ counsel reasonably satisfactory to such Person or (C) in the
reasonable judgment of any such Person based upon advice of its counsel, a
conflict of interest may exist between such Person and the indemnifying party
with respect to such claims (in which case, if the Person notifies the
indemnifying party in writing that such Person elects to employ separate counsel
at the expense of the indemnifying party, the indemnifying party shall not have
the right to assume the defense of such claim on behalf of such Person). If
such defense is not assumed by the indemnifying party, the indemnifying party
will not be subject to any liability for any settlement made without its consent
(but such consent will not be unreasonably withheld). No indemnifying party
will consent to entry of any judgment or enter into any settlement which does
not include, as an unconditional term thereof, the giving by the claimant or
plaintiff to such indemnified
10
<PAGE>
party of a release from all liability in respect to such claim or litigation. An
indemnifying party who is not entitled to or elects not to, assume the defense
of a claim will not be obligated to pay the fees and expenses of more than one
counsel in each jurisdiction for all parties indemnified by such indemnifying
party with respect to such claim, unless in the reasonable judgment of any
indemnified party a conflict of interest may exist between such indemnified
party and any other of such indemnified parties with respect to such claim, in
which event the indemnifying party shall be obligated to pay the fees and
expenses of such additional counsel or counsels.
d. Contribution. If the indemnification provided for this in this
------------
Paragraph 8 from the indemnifying party is unavailable to an indemnified party
hereunder (other than pursuant to the terms hereof) in respect of any losses,
claims, damages, liabilities, or expenses referred to therein, then the
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities, or expenses in such proportion as
is appropriate to reflect the relative fault of the indemnifying party and
indemnified parties in connection with the actions that resulted in such losses,
claims, damages, liabilities, or expenses, as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and
indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue statement or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact, has been made by, or relates to information supplied by, such indemnifying
party or indemnified parties, and the parties' relative intent, knowledge,
access to information, and opportunity to correct or prevent such action. The
amount paid or payable by a Party as a result of the losses, claims, damages,
liabilities, and expense referred to above shall be deemed to include, subject
to the limitations set forth in this Paragraph 8(d) any legal or other fees or
expenses reasonably incurred by such party in connection with any investigation
or proceeding. The Parties agree that it would not be just and equitable if
contributions pursuant to this Paragraph 8(d) were determined by a pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to above. No Person guilty of fraudulent
misrepresentation shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation.
e. This Paragraph 8 shall apply to each Registration Statement filed by
the Company pursuant to this Agreement that includes Registrable Securities.
9. Assignment of Registration Rights. The rights to cause the Company to
---------------------------------
register Registrable Securities pursuant to this Agreement may be assigned (but
only with all related obligations) by a Holder, provided that the Company is,
within a reasonable time after such transfer, furnished with written notice of
the name and address of such transferee or assignee and the securities with
respect to which such registration rights are being assigned; and provided,
further, that such assignment shall be effective only if immediately following
such transfer the further disposition of such securities by the transferee or
assignee is restricted under the Securities Act. For the purposes of
determining the number of shares of Registrable Securities held by a transferee
or assignee, the holdings of transferees and assignees of a partnership who are
partners or retired partners of such partnership (including spouses and
ancestors, lineal descendants and siblings of such partners or spouses who
acquire Registrable Securities by gift, will or intestate succession) shall be
aggregated together and with the partnership; provided that all assignees and
transferees who would not qualify individually for
11
<PAGE>
assignment of registration rights shall have a single attorney-in-fact for the
purpose of exercising any rights, receiving notices or taking any action under
this Agreement.
10. Miscellaneous.
-------------
a. Amendments and Waivers. Any term of this Agreement may be amended and
----------------------
the observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively), only with
the written consent of the Company and the holders of a majority of the
Registrable Securities then outstanding. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of any
Registrable Securities then outstanding, each future holder of all such
Registrable Securities, and the Company.
b. Successors, Assigns and Transferees. This Agreement shall be binding
-----------------------------------
upon the parties hereto and their respective successors and assigns.
c. Notices. Any notice, request, demand, consent, approval or other
-------
communication permitted or required to be given to any of the parties hereunder
shall be deemed given when received, shall be in writing, and shall be delivered
in person or sent by certified mail, postage prepaid, or by private courier
service or by telecopy or telex, to such party at its address set forth below or
at such other address as such party may hereunder furnish in writing to the
other parties.
(i) if to the Company, to:
Impac Commercial Holdings, Inc.
1401 Dove Street
Newport Beach, California 92660
Attention: Joseph R. Tomkinson
(ii) if to Fortress:
Fortress Investment Corp., as general partner
1301 Avenue of the Americas, 42nd Floor
New York, NY 10019
Attention: Randal Nardone
d. Headings. The headings in this Agreement are for the convenience of
--------
reference only and shall not limit or otherwise affect the meaning of the
interpretation of this Agreement or any provision hereof.
e. Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of such provision in every other respect and of the
remaining provisions hereof shall not be in any way impaired, it being intended
that all rights, powers and privileges of the parties hereto shall be
enforceable to the fullest extent permitted by law.
12
<PAGE>
f. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when so executed shall be deemed an original, and
all such counterparts shall together constitute one and the same instrument.
g. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the United States of America and, in the absence of
controlling federal law, in accordance with the laws of the State of California.
h. Entire Agreement. This Agreement embodies the entire Agreement of the
----------------
parties hereto in relation to the subject matter hereof and supersedes all prior
understandings or agreements, oral or written, with respect thereto among the
parties hereto.
i. Certain Remedies. Without in any way limited the remedies otherwise
----------------
available under this Agreement, the parties hereto acknowledge that, in the
event of any breach or nonperformance by any party of the agreements or
covenants required by this Agreement to be performed or observed by it, the
other parties shall be entitled to such equitable remedies as may be
appropriate, including, without limitation specific performance.
13
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has executed this Agreement or
caused this Agreement to be executed on its behalf as of the date first written
above.
IMPAC COMMERCIAL HOLDINGS, INC.
By:/s/ Joseph R. Tomkinson
Name: Joseph R. Tomkinson
Title: Chief Executive Officer
FORTRESS PARTNERS, L.P.
By:/s/Randy Nardone
Name: Randy Nardone
Title: C.O.O.
14
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Exhibit 99.1
Contact: FOR IMMEDIATE RELEASE
Jonathan Ashley Scott Sunshine
Managing Director, Fortress Alan Towers Associates
212 798-6123 212 354-5020
FORTRESS AND ICH ANNOUNCE THAT FORTRESS MAKES EQUITY INVESTMENT IN ICH AND
ASSUMES MANAGEMENT RESPONSIBILITY
--------------------------------------------------------------
NEW YORK, May 6, 1999 - Impac Commercial Holdings, Inc. ("ICH"), an externally
managed and publicly traded mortgage real estate investment trust (AMEX: "ICH")
and Fortress Investment Corp., a real estate investment and asset management
company, today reported that they had concluded two separate but related
transactions. First, Fortress purchased approximately $12 million of convertible
preferred stock in ICH. In a second transaction, Fortress was assigned the ICH
management contract and will assume day-to-day management responsibility for
ICH.
The convertible preferred stock has a coupon of 8.5% and is convertible into
approximately 16% of the common stock of ICH as of the date hereof at a price of
approximately $7.13 per share. The pricing of the preferred stock represents a
premium to market value, but a discount to ICH's net asset value.
"We believe that the mortgage REIT sector presents excellent investment
opportunities. We view this transaction as the first of a series of
acquisitions we intend to pursue to expand our activities in the real estate
securities markets. ICH is a logical first investment in that it has an
excellent commercial mortgage platform and a sound balance sheet. We believe
that its business will be better served by a larger capital base and enhanced
liquidity, of which our investment represents the first step. Our interests are
aligned with the ICH shareholders and our goal is to reposition the Company's
balance sheet and enhance shareholder value by creating a high sustainable
dividend in the future." said Wesley R. Edens, Fortress's Chief Executive
Officer.
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Joe Tomkinson, the outgoing CEO of ICH, who will remain on the board of
directors commented, "In conjunction with this transaction the board has
approved a pro-rated $.50 per share dividend to the extent of earnings for the
remainder of 1999. I believe that this new equity infusion coupled with
Fortress's ability to tap alternative financing sources will enable our conduit
to effectively continue its original business plan." Mr. Tomkinson continued. "
I further believe that this change in management will enable the company to
foster a strategy designed to take advantage of today's opportunities in the
commercial mortgage market. I look forward to working with the board as these
strategies come to fruition to enhance shareholder value."
James Walsh, Timothy Busch, Steven Peers and Thomas Poletti resigned from ICH's
board of directors and Wesley Edens (Fortress's CEO) and Robert Kauffman
(Fortress's President) have been elected to serve on a new five-person board,
along with Christopher Mahowald, a new independent director. The executive
officers of ICH resigned as a group effective yesterday and Fortress and ICH
anticipate that the new board will immediately appoint Mr. Edens as ICH's new
CEO and other officers of Fortress as officers of ICH.
ICH was established in 1997 and was formed to pursue opportunities in the
commercial mortgage sector.
Fortress was formed in June 1998 by Wesley R. Edens, Robert I. Kauffman, Randal
A. Nardone and Erik P. Nygaard to invest opportunistically in real estate assets
on a global basis. Fortress completed its initial capitalization with $410
million of private equity on July 1 and is managed by Fortress Investment Group
LLC. Fortress seeks to produce attractive risk-adjusted returns through a
disciplined investment process that focuses on undervalued and distressed real
estate related assets, both domestic and international.
This press release contains forward-looking statements within the meaning of
Section
2
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27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. These forward-looking statements can be identified by our use of words
like "intend" and "goal". We cannot assure you that our intentions to expand our
activities in the real estate securities markets or our goals to reposition
ICH's balance sheet to create shareholder value by creating a sustainable
dividend will ever materialize. If our goals and intentions do not materialize,
our actual results could differ materially from those anticipated in such
forward-looking statements.
# # #
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Exhibit 99.2
Risk Factor
Grant of Excepted Holder Status to the Purchaser of Registrant's Series B
Preferred Stock May Affect Registrant's Status as a REIT
The Internal Revenue Code prohibits ownership of more than 50% of a REIT's
shares by five or fewer individuals during the last half of a REIT's taxable
year. Our charter generally precludes anyone from beneficially owning in excess
of 9.8% of our capital stock to ensure that 50% of our capital stock is not held
by five or fewer individuals at any time. However, our charter permits our
board of directors to make exceptions to this ownership limitation, upon the
provision of certain representations and undertakings by a prospective purchaser
of our capital stock, with such person becoming an excepted holder. In
connection with the offering of the Series B Preferred Stock, our board of
directors authorized excepted holder status to the initial purchaser of the
Series B Preferred Stock. While our charter permits us to redeem the Series B
Preferred Stock at any time if necessary to preserve our REIT status, we cannot
assure holders of Series B Preferred Stock that we will have the funds legally
available to redeem a sufficient number of shares of Series B Preferred Stock to
remain a REIT. The loss of REIT status will have a material adverse affect on
our business, financial condition and results of operations.
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