SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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) APRIL 10, 1998
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AMERICA FIRST MORTGAGE INVESTMENTS, INC.
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(Exact Name of Registrant as Specified in its Charter)
MARYLAND
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(State or Other Jurisdiction of Incorporation)
1-13991 13-3974868
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(Commission (IRS Employer
File Number) Identification No.)
399 PARK AVENUE, 36TH FLOOR, NEW YORK, NEW YORK 10022
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (212) 935-8760
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ITEM 2: ACQUISITION OR DISPOSITION OF ASSETS
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(a) On April 10, 1998, America First Mortgage Investments, Inc., a
Maryland corporation (the "Company"), consummated a combination transaction
(the "Merger") with America First Participating/Preferred Equity Mortgage Fund
Limited Partnership, a Delaware limited partnership ("Prep Fund 1"), America
First Prep Fund 2 Limited Partnership, a Delaware limited partnership ("Prep
Fund 2"), and America First Prep Fund 2 Pension Series Limited Partnership, a
Delaware limited partnership ("Pension Fund," and together with Prep Fund 1 and
Prep Fund 2, the "Partnerships"). The Merger was approved by the holders of
interests in the Partnerships representing a majority in interest of the out-
standing interests in each of such Partnerships.
In connection with the Merger, (i) Prep Fund 1 and Prep Fund 2 merged with
and into the Company, (ii) Pension Fund merged with AF Merger, L.P., a Delaware
limited partnership subsidiary of the Company, and survived the merger becoming
a subsidiary of the Company, (iii) all of the outstanding Exchangeable Units
representing assigned limited partnership interests in Prep Fund 1 ("Prep Fund
1 Units") were converted (at the rate of 1.00 share for each Prep Fund 1 Unit)
into an aggregate of 5,775,797 shares of common stock, par value $.01 per share
(the "Common Stock"), of the Company, (iv) all of the outstanding Beneficial
Unit Certificates representing assigned limited partnership interests in Prep
Fund 2 ("Prep Fund 2 BUCs") were converted (at the rate of approximately 1.26
shares for each Prep Fund 2 BUC) into an aggregate of 2,012,269 shares of
Common Stock and (v) 1,160,821 of the 1,183,373 outstanding Beneficial Unit
Certificates representing assigned limited partnership interests in Pension
Fund ("Pension BUCs") were converted (at the rate of approximately 1.31 shares
for each Pension BUC) into an aggregate of 1,153,552 shares of Common Stock.
In addition to the foregoing, holders of 22,552 Pension BUCs elected to
continue their current investment in Pension Fund by remaining as investors in
Pension Fund through the retention of the same security that was originally
issued to, or subsequently acquired by, such holders (the "Retention Option").
Pursuant to the terms of the Merger, the Company will also make a one-time
cash payment of $1.06 per share (the "Cash Merger Payment"), which will be paid
in four equal quarterly payments during the first year following the Merger, to
stockholders entitled to receive distributions; provided, however, any
distributions paid to stockholders by the Company out of earnings during this
first year will have the effect of reducing the amount of the Cash Merger
Payment so that the amount paid to stockholders will still be, in the
aggregate, equal to $1.06 per share.
As a result of the Merger, the Company has become the direct and indirect
owner, subject to liabilities, of five fixed-rate mortgage-backed securities
collateralized by first mortgage loans on multifamily properties which are
guaranteed by the Government National Mortgage Association ("Ginnie
Mae"), fixed-rate mortgage-backed securities collateralized by pools of single-
family mortgages which are guaranteed by Ginnie Mae or the Federal National
Mortgage Association, eight preferred real estate participations representing
limited partnership interests in partnerships that own the multifamily
properties collateralizing such mortgage-backed securities, all of the equity
interest in one limited partnership owning a multifamily property and one
participating first mortgage loan on a multifamily property (collectively, the
"Assets").
The shares of Common Stock issued in the Merger were allocated among the
Partnerships in proportion to their respective net asset values, which were
intended to represent fairly the relative value of the Assets held by the
Partnerships. Based on Prep Fund 1's net asset value of $53,169,546, Prep Fund
2's net asset value of $18,533,307 and Pension Fund's net asset value of
$10,896,068, an aggregate of 5,775,797 shares of Common Stock had been
allocated in the Merger to Prep Fund 1, 2,012,336 shares of Common Stock had
been allocated in the Merger to Prep Fund 2 and a maximum of 1,183,373 shares
of Common Stock had been allocated in the Merger to Pension Fund. The number
of shares of Common Stock issued in the Merger to each holder of interests in
the Partnerships was rounded to the nearest whole share and, in lieu of issuing
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fractional shares, the Company made cash payments to such holders equal in
amount to the fair market value of such fractional shares. In addition, to the
extent that holders of Pension BUCs elected the Retention Option in lieu of
receiving shares of Common Stock in the Merger, the aggregate number of shares
of Common Stock issued to Pension Fund in the Merger was reduced by the number
of shares of Common Stock that would have been issued in exchange for such
retained Pension BUCs. In connection with the organization of the Company and
pursuant to the merger agreement among the parties, the general partners of the
Partnerships (the "General Partners") were issued 90,621 shares of Common Stock
and were not issued any additional shares as a result of the Merger.
Stewart Zimmerman, President and Chief Executive Officer of the Company,
William S. Gorin, Executive Vice President of the Company, and Ronald A.
Freydberg, Senior Vice President of the Company, were, until the consummation
of the Merger, employed by America First Companies, L.L.C., the entity which
controlled the General Partners ("America First"). Michael B. Yanney, the
Chairman of the Board of Directors of the Company, is currently Chairman of the
Board of Directors and Chief Executive Officer of America First. Gary
Thompson, Chief Financial Officer of the Company, is currently a Vice President
of America First. George Krauss, a director of the Company, is currently a
director of America First. All of the foregoing individuals are currently
employed by, or affiliated with, America First Mortgage Advisory Corporation,
a corporation which is majority-owned by America First and manages the day-to-
day activities of, and provides other related services to, the Company.
(b) The multifamily property which is indirectly wholly-owned by the
Company through its ownership of all of the equity interest in the one
limited partnership owning such property is Morrowood Townhouses in Morrow,
Georgia. The Company intends to continue to have the property operate as a
multifamily residence.
ITEM 7: FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
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(a) FINANCIAL STATEMENTS:
Audited Financial Statements of Prep Fund 1 as of December 31, 1997
and 1996 and for the years ended December 31, 1997, 1996 and 1995
are incorporated by reference herein from Prep Fund 1's Annual
Report on Form 10-K for the year ended December 31, 1997 (File No.
0-15854)).
Audited Financial Statements of Prep Fund 2 as of December 31, 1997
and 1996 and for the years ended December 31, 1997, 1996 and 1995
are incorporated by reference herein from Prep Fund 2's Annual
Report on Form 10-K for the year ended December 31, 1997 (File No.
1-10022)).
Audited Financial Statements of Pension Fund as of December 31, 1997
and 1996 and for the years ended December 31, 1997, 1996 and 1995
are incorporated by reference herein from Pension Fund's Annual
Report on Form 10-K for the year ended December 31, 1997 (File No.
0-17582)).
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(b) PRO FORMA FINANCIAL INFORMATION:
As of the date of this report, it is impracticable for the Company
to file the required pro forma financial information with respect to
the Merger. Accordingly, such required pro forma financial
information will be filed as soon as it is available, but in no
event later than 60 days after the date on which this report must be
filed.
(c) EXHIBITS:
3.1 Amended and Restated Articles of Incorporation of the Company
3.2 Amended and Restated Bylaws of the Company
10.1 Advisory Agreement, dated April 9, 1998, by and between the
Company and the Advisor
10.2 1997 Stock Option Plan of the Company
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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.
Dated: April 23, 1998 AMERICA FIRST MORTGAGE INVESTMENTS, INC.
By: /s/STEWART ZIMMERMAN
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Stewart Zimmerman
President and Chief Executive Officer
AMERICA FIRST MORTGAGE INVESTMENTS, INC.
ARTICLES OF AMENDMENT AND RESTATEMENT
AMERICA FIRST MORTGAGE INVESTMENTS, INC., a
Maryland corporation, having its principal office in
Baltimore, Maryland (which is hereinafter called the
"Corporation"), hereby certifies to the State
Department of Assessments and Taxation of Maryland
that:
FIRST: The Charter of the Corporation is hereby
amended and restated to read in its entirety as
follows:
AMERICA FIRST MORTGAGE INVESTMENTS, INC.
AMENDED AND RESTATED ARTICLES OF INCORPORATION
FIRST: THE UNDERSIGNED, Billie J. Swoboda, whose
address is 32 South Street, Baltimore, Maryland 21202,
being at least eighteen years of age, acting as
incorporator, does hereby form a corporation under the
general laws of the State of Maryland.
SECOND: The name of the corporation (which is
hereinafter called the "Corporation") is:
America First Mortgage Investments, Inc.
THIRD: (a) The purposes for which, and any of
which, the Corporation is formed and the business and
objects to be carried on and promoted by it are:
(1) To engage in the business of a REIT as
that phrase is defined in the Code, and to engage
in any lawful act or activity for which
corporations may be organized under the Maryland
General Corporation Law; and
(2) To engage in any one or more businesses
or transactions, or to acquire all or any portion
of any entity engaged in any one or more
businesses or transactions, which the Board of
Directors may from time to time authorize or
approve, whether or not related to the business
described elsewhere in this Article or to any
other business at the time or theretofore engaged
in by the Corporation.
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(b) The foregoing enumerated purposes and objects
shall be in no way limited or restricted by reference
to, or inference from, the terms of any other clause of
this or any other Article of the Charter of the
Corporation, and each shall be regarded as independent;
and they are intended to be and shall be construed as
powers as well as purposes and objects of the
Corporation and shall be in addition to and not in
limitation of the general powers of corporations under
the general laws of the State of Maryland.
FOURTH: The present address of the principal
office of the Corporation in this State of Maryland is
32 South Street, Baltimore, Maryland 21202.
FIFTH: The name and address of the resident agent
of the Corporation in this State are: The Corporation
Trust Incorporated, 32 South Street, Baltimore,
Maryland 21202. Said resident agent is a Maryland
corporation.
SIXTH: (a) The total number of shares of stock of
all classes which the Corporation has authority to
issue is 500,000,000 shares of capital stock (par value
$.01 per share), amounting in aggregate par value to
$5,000,000, of which shares 375,000,000 are initially
classified as "Common Stock," and 125,000,000 are
initially classified as "Excess Stock." Subject to
Article NINTH, the Board of Directors may classify and
reclassify any unissued shares of capital stock by
setting or changing in any one or more respects the
preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends,
qualifications or terms or conditions of redemption of
such shares of capital stock.
(b) Subject to Article NINTH, the following is a
description of the preferences, conversion and other
rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of
redemption of the Common Stock of the Corporation:
(1) Each share of Common Stock shall have
one vote and, except as otherwise provided in
respect of any class of stock hereafter classified
or reclassified, the exclusive voting power for
all purposes shall be vested in the holders of the
Common Stock. Shares of Common Stock shall not
have cumulative voting rights;
(2) Subject to the provisions of law and any
preferences of any class of stock hereafter
classified or reclassified, dividends or other
distributions, including dividends or other
distributions payable in shares of another class
of the Corporation's stock, may be paid ratably on
the Common Stock at such time and in such amounts
as the Board of Directors may deem advisable;
(3) In the event of any liquidation,
dissolution or winding up of the Corporation,
whether voluntary or involuntary, the holders of
the Common Stock shall be entitled, together with
the holders of Excess Stock and any other class of
stock hereafter classified or reclassified not
having a preference on distributions in the
liquidation, dissolution or winding up of the
Corporation, to share ratably in the net assets of
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the Corporation remaining, after payment or
provision for payment of the debts and other
liabilities of the Corporation and the amount to
which the holders of any class of stock hereafter
classified or reclassified having a preference on
distributions in the liquidation, dissolution or
winding up of the Corporation shall be entitled;
and
(4) Each share of Common Stock is
convertible into Excess Stock as provided in
Article NINTH.
(c) A description of the preferences, conversion
and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms
and conditions of redemption of the Excess Stock of the
Corporation is set forth in Article NINTH.
(d) Subject to the foregoing, the power of the
Board of Directors to classify and reclassify any of
the shares of capital stock shall include, without
limitation, subject to the provisions of the Charter,
authority to classify or reclassify any unissued shares
of such stock into a class or classes of preferred
stock, preference stock, special stock or other stock,
and to divide and classify shares of any class into one
or more series of such class, by determining, fixing or
altering one or more of the following:
(1) The distinctive designation of such
class or series and the number of shares to
constitute such class or series; provided, that,
unless otherwise prohibited by the terms of such
or any other class or series, the number of shares
of any class or series may be decreased by the
Board of Directors in connection with any
classification or reclassification of unissued
shares and the number of shares of such class or
series may be increased by the Board of Directors
in connection with any such classification or
reclassification, and any shares of any class or
series which have been redeemed, purchased,
otherwise acquired or converted into shares of
Common Stock or any other class or series shall
become part of the authorized capital stock and be
subject to classification and reclassification as
provided in this subparagraph;
(2) Whether or not shares of such class or
series shall have dividend rights and, if so, the
rates, amounts and times at which, and the
conditions under which, dividends shall be payable
on shares of such class or series, whether any
such dividends shall rank senior or junior to or
on a parity with the dividends payable on any
other class or series of stock, and the status of
any such dividends as cumulative, cumulative to a
limited extent or non-cumulative and as
participating or non-participating;
(3) Whether or not shares of such class or
series shall have voting rights, in addition to
any voting rights provided by law and, if so, the
terms of such voting rights; provided, that there
shall be no increase in the number of directors
except as set forth in paragraph (a) of Article
SEVENTH;
(4) Whether or not shares of such class or
series shall have conversion or exchange
privileges and, if so, the terms and conditions
thereof, including provision for adjustment of the
conversion or exchange rate in such events or at
such times as the Board of Directors shall
determine;
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(5) Whether or not shares of such class or
series shall be subject to redemption and, if so,
the terms and conditions of such redemption,
including the date or dates upon or after which
they shall be redeemable and the amount per share
payable in case of redemption, which amount may
vary under different conditions and at different
redemption dates; and whether or not there shall
be any sinking fund or purchase account in respect
thereof, and if so, the terms thereof;
(6) The rights of the holders of shares of
such class or series upon the liquidation,
dissolution or winding up of the affairs of, or
upon any distribution of the assets of, the
Corporation, which rights may vary depending upon
whether such liquidation, dissolution or winding
up is voluntary or involuntary and, if voluntary,
may vary at different dates, and whether such
rights shall rank senior or junior to or on a
parity with such rights of any other class or
series of stock;
(7) Whether or not there shall be any
limitations applicable, while shares of such class
or series are outstanding, upon the payment of
dividends or making of distributions on, or the
acquisition of, or the use of moneys for purchase
or redemption of, any stock of the Corporation, or
upon any other action of the Corporation,
including action under this subparagraph, and, if
so, the terms and conditions thereof; and
(8) Any other preferences, rights,
restrictions, including restrictions on
transferability, and qualifications of shares of
such class or series, not inconsistent with law
and the Charter of the Corporation.
(e) For the purposes hereof and of any articles
supplementary to the Charter providing for the
classification or reclassification of any shares of
capital stock or of any other charter document of the
Corporation (unless otherwise provided in any such
articles or document), any class or series of stock of
the Corporation shall be deemed to rank:
(1) prior to another class or series either
as to dividends or upon liquidation, if the
holders of such class or series shall be entitled
to the receipt of dividends or of amounts
distributable on liquidation, dissolution or
winding up, as the case may be, in preference or
priority to holders of such other class or series;
(2) on a parity with another class or series
either as to dividends or upon liquidation,
whether or not the dividend rates, dividend
payment dates or redemption or liquidation price
per share thereof be different from those of such
others, if the holders of such class or series of
stock shall be entitled to receipt of dividends or
amounts distributable upon liquidation,
dissolution or winding up, as the case may be, in
proportion to their respective dividend rates or
redemption or liquidation prices, without
preference or priority over the holders of such
other class or series; and
(3) junior to another class or series
either as to dividends or upon liquidation, if the
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rights of the holders of such class or series
shall be subject or subordinate to the rights of
the holders of such other class or series in
respect of the receipt of dividends or the amounts
distributable upon liquidation, dissolution or
winding up, as the case may be.
SEVENTH: (a) The business and affairs of the
Corporation shall be managed under the direction of the
Board of Directors. The number of directors of the
Corporation shall be seven, which number may be
increased or decreased by at least two-thirds of the
entire Board of Directors pursuant to the Bylaws of the
Corporation, but shall never be less than the minimum
number permitted by the general laws of the State of
Maryland now or hereafter in force. After the closing
of the Combination Transaction at least a majority of
the directors shall be Independent Directors.
(b) Subject to the rights of the holders of any
class of Preferred Stock then outstanding, newly
created directorships resulting from any increase in
the authorized number of directors or any vacancies on
the Board of Directors resulting from death,
resignation, retirement, disqualification, removal from
office or other cause shall be filled by the required
vote of the stockholders or the directors then in
office. A director so chosen by the stockholders shall
hold office for the balance of the term then remaining.
A director so chosen by the remaining directors shall
hold office until the next annual meeting of
stockholders, at which time the stockholders shall
elect a director to hold office for the balance of the
term then remaining. No decrease in the number of
directors constituting the Board of Directors shall
affect the tenure of office of any director.
(c) Whenever the holders of any one or more
series of Preferred Stock of the Corporation shall have
the right, voting separately as a class, to elect one
or more directors of the Corporation, the Board of
Directors shall consist of said directors so elected in
addition to the number of directors fixed as provided
in paragraph (a) of this Article SEVENTH or in the Byl-
aws. Notwithstanding the foregoing, and except as
otherwise may be required by law, whenever the holders
of any one or more series of Preferred Stock of the
Corporation shall have the right, voting separately as
a class, to elect one or more directors of the
Corporation, the terms of the director or directors
elected by such holders shall expire at the next
succeeding annual meeting of stockholders.
(d) Subject to the rights of the holders of any
class separately entitled to elect one or more
directors, any director, or the entire Board of
Directors, may be removed from office at any time, but
only for cause and then only by the affirmative vote of
the holders of at least 80% of the combined voting
power of all classes of shares of capital stock
entitled to vote in the election for directors voting
together as a single class.
(e) The directors shall be divided into three
classes as follows:
(a) The term of office of
Class I shall be until the 1999
annual meeting of stockholders and
until their successors shall be
elected and have qualified and
thereafter shall be for three years
and until their successors shall be
elected and have qualified;
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(b) the term of office of
Class II shall be until the 2000
annual meeting of stockholders and
until their successors shall be
elected and have qualified and
thereafter shall be for three years
and until their successors shall be
elected and have qualified; and
(c) the term of office of
Class III shall be until the 2001
annual meeting of stockholders and
until their successors shall be
elected and have qualified and
thereafter shall be for three years
and until their successors shall be
elected and have qualified.
(f) The names of the individuals who will serve
as directors of the Corporation until their successors
are elected and qualify are as follows:
(d) The following persons
shall serve as Class I directors:
Michael B. Yanney
Gregor Medinger
(e) The following persons
shall serve as Class II directors:
George H. Krauss
Michael L. Dahir
(f) The following persons
shall serve as Class III directors:
George V. Janzen
Stewart Zimmerman
W. David Scott
If the number of directors is changed, any increase or
decrease shall be apportioned among the classes so as
to maintain or attain, if possible, the equality of the
number of directors in each class. If such equality is
not possible, the increase or decrease shall be
apportioned among the classes in such a way that the
difference in the number of directors in any two
classes shall not exceed one. Stockholder votes to
elect directors shall be conducted in the manner
provided in the Bylaws.
EIGHTH: (a) The following provisions are hereby
adopted for the purpose of defining, limiting and
regulating the powers of the Corporation and of the
directors and the stockholders:
(1) The Board of Directors is hereby
empowered to authorize the issuance from time to
time of shares of its stock of any class, whether
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now or hereafter authorized, or securities
convertible into shares of its stock of any class
or classes, whether now or hereafter authorized,
for such consideration as may be deemed advisable
by the Board of Directors and without any action
by the stockholders.
(2) No holder of any stock or any other
securities of the Corporation, whether now or
hereafter authorized, shall have any preemptive
right to subscribe for or purchase any stock or
any other securities of the Corporation other than
such, if any, as the Board of Directors, in its
sole discretion, may determine and at such price
or prices and upon such other terms as the Board
of Directors, in its sole discretion, may fix; and
any stock or other securities which the Board of
Directors may determine to offer for subscription
may, as the Board of Directors in its sole
discretion shall determine, be offered to the
holders of any class, series or type of stock or
other securities at the time outstanding to the
exclusion of the holders of any or all other
classes, series or types of stock or other
securities at the time outstanding.
(3) The Board of Directors of the
Corporation shall, consistent with applicable law,
have power in its sole discretion to determine
from time to time in accordance with sound
accounting practice or other reasonable valuation
methods what constitutes annual or other net
profits, earnings, surplus or net assets in excess
of capital; to fix and vary from time to time the
amount to be reserved as working capital, or
determine that retained earnings or surplus shall
remain in the hands of the Corporation; to set
apart out of any funds of the Corporation such
reserve or reserves in such amount or amounts and
for such proper purpose or purposes as it shall
determine and to abolish any such reserve or any
part thereof; to redeem or purchase its stock or
to distribute and pay distributions or dividends
in stock, cash or other securities or property,
out of surplus or any other funds or amounts
legally available therefor, at such times and to
the stockholders of record on such dates as it
may, from time to time, determine; to determine
the amount, purpose, time of creation, increase or
decrease, alteration or cancellation of any
reserves or charges and the propriety thereof
(whether or not any obligation or liability for
which such reserves or charges shall have been
created shall have been paid or discharged); to
determine the fair value and any matters relating
to the acquisition, holding and disposition of any
assets by the Corporation; and to determine
whether and to what extent and at what times and
places and under what conditions and regulations
the books, accounts and documents of the
Corporation, or any of them, shall be open to the
inspection of stockholders, except as otherwise
provided by statute or by the Bylaws, and, except
as so provided, no stockholder shall have any
right to inspect any book, account or document of
the Corporation unless authorized so to do by
resolution of the Board of Directors.
(4) The Board of Directors shall, in
connection with the exercise of its business
judgment involving a Business Combination (as
defined in Section 3-601 of the Maryland General
Corporation Law) or any actual or proposed
transaction which would or may involve a change in
control of the Corporation (whether by purchases
of shares of stock or any other securities of the
Corporation, in the open market or otherwise,
tender offer, merger, consolidation, dissolution,
liquidation, sale of all or substantially all of
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the assets of the Corporation, proxy solicitation
or otherwise), in determining what is in the best
interests of the Corporation and its stockholders
and in making any recommendation to its
stockholders, give due consideration to all
relevant factors, including, but not limited to
(A) the economic effect, both immediate and long-
term, upon the Corporation's stockholders,
including stockholders, if any, who do not
participate in the transaction; (B) the social and
economic effect on the employees, customers of,
and others dealing with, the Corporation and its
subsidiaries and on the communities in which the
Corporation and its subsidiaries operate or are
located; (C) whether the proposal is acceptable
based on the historical and current operating
results or financial condition of the Corporation;
(D) whether a more favorable price could be
obtained for the Corporation's stock or other
securities in the future; (E) the reputation and
business practices of the offeror and its
management and affiliates as they would affect the
employees of the Corporation and its subsidiaries;
(F) the future value of the stock or any other
securities of the Corporation; (G) any antitrust
or other legal and regulatory issues that are
raised by the proposal; and (H) the business and
financial condition and earnings prospects of the
acquiring person or entity, including, but not
limited to, debt service and other existing
financial obligations, financial obligations to be
incurred in connection with the acquisition, and
other likely financial obligations of the
acquiring person or entity. If the Board of
Directors determines that any proposed Business
Combination (as defined in Section 3-601 of the
Maryland General Corporation Law) or actual or
proposed transaction which would or may involve a
change in control of the Corporation should be
rejected, it may take any lawful action to defeat
such transaction, including, but not limited to,
any or all of the following: advising stockholders
not to accept the proposal; instituting litigation
against the party making the proposal; filing
complaints with governmental and regulatory
authorities; acquiring the stock or any of the
securities of the Corporation; selling or
otherwise issuing authorized but unissued stock,
other securities or granting options or rights
with respect thereto; acquiring a company to
create an antitrust or other regulatory problem
for the party making the proposal; and obtaining a
more favorable offer from another individual or
entity.
(5) The Corporation may provide any
indemnification permitted by the general laws of
Maryland and shall indemnify current and former
directors, officers, agents and employees as
follows: (A) the Corporation shall indemnify its
directors and officers, whether serving the
Corporation or, at its request, any other entity,
to the full extent required or permitted by the
general laws of the State of Maryland now or
hereafter in force, including the advance of
expenses under the procedures and to the full
extent permitted by law and (B) the Corporation
shall indemnify other employees and agents,
whether serving the Corporation or at its request
any other entity, to such extent as shall be
authorized by the Board of Directors or the
Corporation's Bylaws and be permitted by law. The
foregoing rights of indemnification shall not be
exclusive of any other rights to which those
seeking indemnification may be entitled. The
Board of Directors may take such action as is
necessary to carry out these indemnification
provisions and is expressly empowered to adopt,
approve and amend from time to time such bylaws,
resolutions or contracts implementing such
provisions or such further indemnification
arrangements as may be permitted by law. No
amendment of the Charter of the Corporation or
repeal of any of its provisions shall limit or
eliminate the right to indemnification provided
hereunder with respect to acts or omissions
8
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occurring prior to such amendment or repeal or
shall limit or eliminate the rights granted under
indemnification agreements entered into by the
Corporation and its directors, officers, agents
and employees.
(6) To the fullest extent permitted by
Maryland statutory or decisional law, as amended
or interpreted, no current and former director or
officer of the Corporation shall be personally
liable to the Corporation or its stockholders for
money damages. No amendment of the Charter of the
Corporation or repeal of any of its provisions
shall limit or eliminate the benefits provided to
directors and officers under this provision with
respect to any act or omission which occurred
prior to such amendment or repeal.
(7) For any stockholder proposal to be
presented in connection with an annual meeting of
stockholders of the Corporation, including any
proposal relating to the nomination of a director
to be elected to the Board of Directors of the
Corporation, the stockholders must have given
timely notice thereof in writing to the Secretary
of the Corporation in the manner and containing
the information required by the Bylaws.
Stockholder proposals to be presented in
connection with a special meeting of stockholders
will be presented by the Corporation only to the
extent required by Section 2-502 of the Maryland
General Corporation Law.
(8) Notwithstanding any provision of law
requiring the authorization of any action by a
greater proportion than a majority of the total
number of shares of all classes of capital stock
or of the total number of shares of any class of
capital stock, such action shall be valid and
effective if authorized by the affirmative vote of
the holders of a majority of the total number of
shares of all classes outstanding and entitled to
vote thereon, except as otherwise provided in the
Charter.
(b) The Corporation reserves the right from time
to time to amend, alter, change or repeal any provision
contained in the Charter, including any amendments
changing the terms or contract rights, as expressly set
forth in the Charter, of any of its outstanding stock
by classification, reclassification or otherwise, by a
majority of the directors' adopting a resolution
setting forth the proposed change, declaring its
advisability, and either calling a special meeting of
the stockholders entitled to vote on the proposed
change, or directing the proposed change to be
considered at the next annual stockholders meeting.
Unless otherwise provided herein, the proposed change
will be effective only if it is adopted upon the
affirmative vote of the holders of not less than a
majority of the aggregate votes entitled to be cast
thereon (considered for this purpose as a single
class); provided, however, that any amendment to,
repeal of or adoption of any provision inconsistent
with Article SEVENTH or subparagraphs (a)(4), (a)(5),
(a)(6) or (a)(7) or this paragraph (b) of this Article
EIGHTH will be effective only if it is adopted upon the
affirmative vote of not less than 80% of the aggregate
votes entitled to be cast thereon (considered for this
purpose as a single class), and any amendment of the
definition of "America First Group" in Article ELEVENTH
will be effective only if it is adopted upon the
affirmative vote of not less than a majority of votes
entitled to be cast thereon by members of the America
First Group.
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(c) In furtherance and not in limitation of the
powers conferred by statute, the Board of Directors is
expressly authorized to make, alter or repeal the
Bylaws of the Corporation.
(d) The enumeration and definition of particular
powers of the Board of Directors included in the
foregoing shall in no way be limited or restricted by
reference to or inference from the terms of any other
clause of this or any other Article of the Charter of
the Corporation, or construed as or deemed by inference
or otherwise in any manner to exclude or limit any
powers conferred upon the Board of Directors under the
general laws of the State of Maryland now or hereafter
in force.
NINTH: (a) (1) Except as provided in paragraph (h)
of this Article NINTH, from the date of the closing of
the Combination Transaction and prior to the
Restriction Termination Date, no Person shall
Beneficially Own or Constructively Own shares of the
outstanding Equity Stock in excess of the Ownership
Limit; (2) except as provided in paragraph (h) of this
Article NINTH, from the date of the closing of the
Combination Transaction and prior to the Restriction
Termination Date, any Transfer or other event that, if
effective, would result in any Person Beneficially
Owning or Constructively Owning Equity Stock in excess
of the Ownership Limit shall be void ab initio as to
that number of shares of Equity Stock which would be
otherwise Beneficially or Constructively Owned by such
Person in excess of the Ownership Limit, and the
intended transferee or the holder, as the case may be,
shall acquire no rights in such excess shares of Equity
Stock; (3) except as provided in paragraph (h) of this
Article NINTH, from the date of the closing of the
Combination Transaction and prior to the Restriction
Termination Date, any Transfer or other event that, if
effective, would result in the Equity Stock's being
Beneficially Owned by fewer than 100 Persons
(determined without reference to any rules of
attribution) shall be void ab initio as to that number
of shares of Equity Stock which would be otherwise
Beneficially or Constructively Owned by the transferee
or holder, and the intended transferee or the holder,
as the case may be, shall acquire no rights in such
excess shares of Equity Stock; and (4) from the date of
the closing of the Combination Transaction and prior to
the Restriction Termination Date, any Transfer of
shares of Equity Stock or other event that, if
effective, would result in the Corporation's being
"closely held" within the meaning of Section 856(h) of
the Code shall be void ab initio as to that number of
shares of Equity Stock which would cause the
Corporation to be "closely held" within the meaning of
Section 856(h) of the Code, and the intended transferee
or the holder, as the case may be, shall acquire no
rights in such excess shares of Equity Stock.
(b) (1) If, notwithstanding the other provisions
contained in this Article NINTH, at any time after the
date of the closing of the Combination Transaction and
prior to the Restriction Termination Date, there is a
purported Transfer or other event such that any Person
would either Beneficially Own or Constructively Own
Equity Stock in excess of the Ownership Limit, then,
except as otherwise provided in paragraph (h) of this
Article NINTH, such shares of Equity Stock in excess of
the Ownership Limit (rounded up to the nearest whole
share) shall be automatically converted into an equal
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<PAGE>
number of shares of Excess Stock (such conversion shall
be effective as of the close of business on the
Business Day prior to the date of the Transfer or other
event); and (2) if, notwithstanding the other
provisions contained in this Article NINTH (but subject
to paragraph (m) of this Article NINTH), at any time
after the date of the closing of the Combination
Transaction and prior to the Restriction Termination
Date, there is a purported Transfer or other event
which, if effective, would cause the Corporation to
become "closely held" within the meaning of Section
856(h) of the Code, then the shares of Equity Stock
being Transferred or which are otherwise affected by
the other event and which, in either case, would cause
the Corporation to be "closely held" within the meaning
of Section 856(h) of the Code (rounded up to the
nearest whole share) shall be automatically converted
into an equal number of shares of Excess Stock (such
conversion shall be effective as of the close of
business on the Business Day prior to the date of the
Transfer, change in capital structure or other event).
(c) If the Board of Directors or its designees at
any time determines in good faith that a Transfer or
other event has taken place in violation of paragraph
(a) of this Article NINTH or that a Person intends to
acquire or has attempted to acquire Beneficial
Ownership or Constructive Ownership of any shares of
Equity Stock in violation of paragraph (a) of this
Article NINTH, the Board of Directors or its designees
shall take such action as it or they deem advisable to
refuse to give effect to or to prevent such Transfer or
other event, including, but not limited to, refusing to
give effect to such Transfer or other event on the
books of the Corporation or instituting proceedings to
enjoin such Transfer or other event; provided, however,
that any Transfer or other event or any attempted
Transfer or other event in violation of paragraph (a)
of this Article NINTH shall be void ab initio and
automatically result in the conversion described in
paragraph (b) of this Article NINTH, irrespective of
any action (or non-action) by the Board of Directors or
its designees.
(d) Any Person who acquires or attempts or
intends to acquire shares of Equity Stock in violation
of paragraph (a) of this Article NINTH, or any Person
who is a transferee or holder such that Excess Stock
results under paragraph (b) of this Article NINTH,
shall immediately give written notice to the
Corporation of such event and shall provide to the
Corporation such other information as the Corporation
may request, in good faith, in order to determine the
effect, if any, of such Transfer or other event or such
attempted Transfer or other event on the Corporation's
status as a REIT.
(e) From the date of the closing of the
Combination Transaction and prior to the Restriction
Termination Date: (1) every Beneficial Owner or
Constructive Owner of 5% or more (or such other
percentage at the time prescribed by the Code or the
regulations promulgated thereunder) of the outstanding
Equity Stock of the Corporation shall, within 30 days
after January 1 of each year, give written notice to
the Corporation stating the name and address of such
Beneficial Owner or Constructive Owner, the number of
shares of Equity Stock Beneficially Owned or
Constructively Owned and a description of the manner in
which such shares are held and shall provide to the
Corporation such additional information as the
Corporation may request in order to determine the
effect, if any, of such Beneficial Ownership on the
Corporation's status as a REIT and to ensure compliance
with the Ownership Limit; and (2) each Person who is a
Beneficial Owner or Constructive Owner of Equity Stock
and each Person (including the stockholder of record)
who is holding Equity Stock for a Beneficial Owner or
Constructive Owner shall provide to the Corporation
such information as the Corporation may request, in
good faith, in order to determine the Corporation's
status as a REIT and to ensure compliance with the
Ownership Limit.
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<PAGE>
(f) Nothing contained in this Article NINTH (but
subject to paragraph (m) of this Article NINTH) shall
limit the authority of the Board of Directors to take
such other action as it deems necessary or advisable to
protect the Corporation and the interests of its
stockholders by preservation of the Corporation's
status as a REIT and to ensure compliance with the
Ownership Limit.
(g) In the case of an ambiguity in the
application of any of the provisions of this Article
NINTH or any definition contained in Article ELEVENTH,
the Board of Directors shall have the power to
determine the application of the provisions of this
Article NINTH or any definition contained in Article
ELEVENTH with respect to any situation based on the
facts known to it. In the event this Article NINTH
requires any action by the Board of Directors and the
Charter fails to provide specific guidance with respect
to such action, the Board of Directors shall have the
power to determine the action to be taken so long as
such action is not contrary to the provisions of this
Article NINTH or any definition contained in Article
ELEVENTH.
(h) The Board of Directors, upon receipt of a
ruling from the Internal Revenue Service or an opinion
of counsel or other evidence satisfactory to the Board
of Directors and upon such other conditions as the
Board of Directors may direct, in each case to the
effect that the restrictions contained in subparagraph
(a)(3) and/or subparagraph (a)(4) of this Article NINTH
will not be violated, may exempt a Person from the
Ownership Limit if (1) such Person is not an individual
for purposes of Section 542(a)(2) of the Code or is an
underwriter which participates in an offering of the
Equity Stock for a period of 90 days following the
purchase by such underwriter of the Equity Stock;
(2) the Board of Directors obtains such representations
and undertakings from such Person as are reasonably
necessary to ascertain that no individual's Beneficial
or Constructive Ownership of Equity Stock will violate
the Ownership Limit; and (3) such Person agrees that
any violation or attempted violation will result in
such Equity Stock being converted into Excess Stock in
accordance with paragraph (b) of this Article NINTH;
provided, however, this exemption shall be available
only if the intended transferee has given written
notice to the Board of Directors of the proposed
transfer no later than the fifteenth day prior to such
transfer that, if consummated, would result in the
intended transferee's owning shares of Equity Stock in
excess of the Ownership Limit.
(i) Each certificate for Equity Stock shall bear
the following legend:
The securities represented by this
certificate are subject to
restrictions on Beneficial and
Constructive Ownership and Transfer
for the purpose of the
Corporation's maintenance of its
status as a Real Estate Investment
Trust under the Internal Revenue
Code of 1986, as amended (the
"Code"). Except as otherwise
provided in the Charter of the
Corporation, (1) no Person may
Beneficially Own or Constructively
Own shares of Equity Stock in
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<PAGE>
excess of 9.8% (in value or number)
of the outstanding Capital Stock of
the Corporation; or (2) there shall
be no Transfer or other event that
would cause a violation of the
Ownership Limit, that would result
in Equity Stock of the Corporation
being Beneficially Owned by fewer
than 100 persons or that would
result in the Corporation's being
"closely held" under section 856(h)
of the Code. Any Person who
violates, or attempts to
Beneficially Own or Constructively
Own shares of Equity Stock in
excess of, the above limitations
must immediately notify the
Corporation in writing. If the
restrictions on transfer or
ownership are violated, the shares
of Equity Stock represented hereby
will be automatically converted
into shares of Excess Stock which
will be held in trust for the
benefit of one or more Charitable
Beneficiaries as provided in the
Charter. In addition, upon the
occurrence of certain events,
attempted Transfers in violation of
the restrictions described above
may be void ab initio. All
capitalized terms in this legend
have the meanings defined in the
Charter of the Corporation, as the
same may be amended from time to
time, a copy of which, including
the restrictions on transfer and
ownership, will be furnished to
each holder of Capital Stock of the
Corporation on request and without
charge.
(j) (1) Upon any purported Transfer or other
event that results in Excess Stock pursuant to
paragraph (b) of this Article NINTH, such Excess
Stock shall be deemed to have been transferred to
the Trustee as trustee of a Trust for the
exclusive benefit of one or more Charitable
Beneficiaries. Such transfer to the Trustee shall
be deemed to be effective as of the close of
business on the Business Day prior to the
purported Transfer or other event that results in
Equity Stock being converted into Excess Stock.
The Trustee shall be appointed by the Corporation
and shall be a Person unaffiliated with the
Corporation and any Prohibited Owner. Each
Charitable Beneficiary shall be designated by the
Corporation as provided in subparagraph (j)(6) of
this Article NINTH.
(2) Shares of Excess Stock so held in trust
shall be issued and outstanding stock of the
Corporation. The Prohibited Owner shall have no
rights in the Excess Stock held by the Trustee
except as set forth in paragraph (j) of this
Article NINTH. The Prohibited Owner shall not
benefit economically from ownership of any Excess
Stock held in trust by the Trustee, shall have no
rights to dividends and shall not possess any
rights to vote or other rights attributable to the
shares held in the Trust.
(3) The Trustee shall have all voting rights
and rights to dividends or other distributions
with respect to shares of Excess Stock held in the
Trust, which rights shall be exercised for the
exclusive benefit of the Charitable Beneficiary.
Any dividend or other distribution paid prior to
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<PAGE>
the discovery by the Corporation that the shares
of Equity Stock have been converted into Excess
Stock shall be paid with respect to such shares of
Excess Stock to the Trustee upon demand and any
dividend or other distribution authorized but
unpaid shall be paid when due to the Trustee. Any
dividends or distributions so paid over to the
Trustee shall be held in trust for the Charitable
Beneficiary. The Prohibited Owner shall have no
voting rights with respect to shares of Excess
Stock held in the Trust and, subject to Maryland
law, effective as of the date that the shares of
Equity Stock have been converted into Excess Stock
and transferred to the Trustee, the Trustee shall
have the authority (at the Trustee's sole
discretion) (i) to rescind as void any vote cast
by a Prohibited Owner prior to the discovery by
the Corporation that the shares of Equity Stock
have been converted into Excess Stock and (ii) to
recast such vote in accordance with the desires of
the Trustee acting for the benefit of the
Charitable Beneficiary. Notwithstanding the
provisions of this Article EIGHTH, until the
Corporation has received notification that shares
of Equity Stock have been converted into Excess
Stock and transferred into a Trust, the
Corporation shall be entitled to rely on its share
transfer and other stockholder records for
purposes of preparing lists of stockholders
entitled to vote at meetings, determining the
validity and authority of proxies and otherwise
conducting votes of stockholders.
(4) Within 20 days of receiving notice from
the Corporation that Excess Stock has been
transferred to the Trust, the Trustee of the Trust
shall sell the shares held in the Trust to a
Person, designated by the Trustee, whose ownership
of the shares will not violate the ownership
limitations set forth in this Article NINTH and
who upon purchase of the shares will receive
shares of the class or series which was converted
into Excess Stock. Upon such sale, the interest
of the Charitable Beneficiary in the shares sold
shall terminate and the Trustee shall distribute
the net proceeds of the sale to the Prohibited
Owner and to the Charitable Beneficiary as
provided in this subparagraph (j)(4) of this
Article NINTH. The Prohibited Owner shall receive
the lesser of (1) the price paid by the Prohibited
Owner for the Excess Stock or, if the Prohibited
Owner did not give value for the Excess Stock in
connection with the event causing the Excess Stock
to be held in the Trust (e.g., in the case of a
gift, devise or other such transaction), the
Market Price of the Excess Stock on the day of the
event causing the Excess Stock to be held in the
Trust and (2) the price per share of Excess Stock
received by the Trustee from the sale or other
disposition of the Excess Stock held in the Trust.
Any net sales proceeds in excess of the amount
payable to the Prohibited Owner shall be
immediately paid to the Charitable Beneficiary.
If, prior to the discovery by the Corporation that
Excess Stock has been transferred to the Trustee,
such Excess Stock is sold by a Prohibited Owner,
then (i) such shares shall be deemed to have been
sold on behalf of the Trust and (ii) to the extent
that the Prohibited Owner received an amount for
such Excess Stock that exceeds the amount that
such Prohibited Owner was entitled to receive
pursuant to this subparagraph (j)(4) of this
Article NINTH, such excess shall be paid to the
Trustee upon demand. In the event of any
voluntary or involuntary liquidation, dissolution
or winding up of, or any distribution of assets
of, the Corporation prior to the sale of the
Excess Stock by the Trustee as set forth in this
subparagraph (j)(4) of this Article NINTH, the
Prohibited Owner shall receive the lesser of (1)
the price paid by the Prohibited Owner for the
Excess Stock or, if the Prohibited Owner did not
give value for the Excess Stock in connection with
the event causing the Excess Stock to be held in
the Trust (e.g., in the case of a gift, devise or
other such transaction), the Market Price of the
Excess Stock on the day of the event causing the
Excess Stock to be held in the Trust and (2) the
amount of assets received in respect of the Excess
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<PAGE>
Stock in any liquidation, dissolution or winding
up of, or any distribution of the assets of, the
Corporation. Any net sales proceeds or assets
received in excess of the amount payable to the
Prohibited Owner shall be immediately paid to the
Charitable Beneficiary.
(5) Excess Stock transferred to the Trustee
shall be deemed to have been offered for sale to
the Corporation, or its designee, at a price per
share equal to the lesser of (i) the price per
share in the transaction that resulted in such
transfer to the Trust (or, in the case of a gift,
devise or other such transaction, the Market Price
at the time of such gift, devise or other such
transaction) and (ii) the Market Price on the date
the Corporation, or its designee, accepts such
offer. The Corporation shall have the right to
accept such offer until the Trustee has sold the
Excess Stock held in the Trust pursuant to
subparagraph (j)(4) of this Article NINTH. Upon
such sale to the Corporation, the interest of the
Charitable Beneficiary in the Excess Stock sold
shall terminate and the Trustee shall distribute
the net proceeds of the sale to the Prohibited
Owner.
(6) By written notice to the Trustee, the
Corporation shall designate one or more nonprofit
organizations to be the Charitable Beneficiary of
the interest in the Trust such that (i) the Excess
Stock held in the Trust would not violate the
restrictions set forth in subparagraph (a) of this
Article NINTH in the hands of such Charitable
Beneficiary and (ii) each such organization must
be described in Section 501(c)(3) of the Code and
contributions to each such organization must be
eligible for deduction under each of Sections
170(b)(1)(A), 2055 and 2522 of the Code.
(k) Nothing contained in this Article NINTH (but
subject to paragraph (m) of this Article NINTH) or in
any other provision of the Charter shall limit the
authority of the Board of Directors to take such other
action as it in its sole discretion deems necessary or
advisable to protect the Corporation and the interests
of the stockholders by maintaining the Corporation's
eligibility to be, and preserving the Corporation's
status as, a qualified REIT under the Code.
(l) If any of the foregoing restrictions on
transfer of Excess Stock are determined to be void,
invalid or unenforceable by any court of competent
jurisdiction, then the Prohibited Owner may be deemed,
at the option of the Corporation, to have acted as an
agent of the Corporation in acquiring such Excess Stock
and to hold such Excess Stock on behalf of the
Corporation.
(m) Nothing in this Article NINTH precludes the
settlement of transactions entered into through the
facilities of the New York Stock Exchange.
Notwithstanding the fact that such settlement occurs,
certain transactions may be settled by providing Excess
Stock as set forth in this Article NINTH.
TENTH: The duration of the Corporation shall be
perpetual.
ELEVENTH: The following terms shall have the
following meanings in the Charter:
"Beneficial Ownership" shall mean
ownership of Capital Stock by a Person,
whether the interest in the shares of Capital
Stock is held directly or indirectly
(including by a nominee), and shall include
interests that would be treated as owned
15
<PAGE>
through the application of Section 544 of the
Code, as modified by Section 856(h)(1)(B) of
the Code. The terms "Beneficial Owner,"
"Beneficially Owns" and "Beneficially Owned"
shall have correlative meanings.
"Board of Directors" shall mean the
Board of Directors of the Corporation.
"Business Day" shall mean any day, other
than a Saturday or Sunday, that is neither a
legal holiday nor a day on which banking
institutions in New York City are authorized
or required by law, regulation or executive
order to close.
"Bylaws" shall mean the Bylaws of the
Corporation.
"Capital Stock" shall mean all classes
and series of stock which the Corporation
shall have authority to issue and shall
include stock that is Common Stock, Excess
Stock, Preferred Stock or other stock.
"Charitable Beneficiary" shall mean one
or more beneficiaries of the Trust as
determined pursuant to subparagraph (j)(6) of
Article NINTH; provided, however, that each
such organization must be described in
Section 501(c)(3) of the Code and
contributions to each such organization must
be eligible for deduction under each of
Sections 170(b)(1)(A), 2055 and 2522 of the
Code.
"Code" shall mean the Internal Revenue
Code of 1986, as amended from time to time.
"Combination Transaction" means the
proposed combination of the Corporation and
America First Participating/Preferred Equity
Mortgage Fund Limited Partnership, America
First Prep Fund 2 Limited Partnership and, if
applicable, America First Prep Fund 2 Pension
Series Limited Partnership.
"Constructive Ownership" shall mean
ownership of Capital Stock by a Person,
whether the interest in the shares of Capital
Stock is held directly or indirectly
(including by nominee), and shall include
interests that would be treated as owned
through the application of Section 318 of the
Code, as modified by Section 856(d)(5) of the
Code. The terms "Constructive Owner,"
"Constructively Owns" and "Constructively
Owned" shall have correlative meanings.
"Equity Stock" shall mean stock that is
either Common Stock or Preferred Stock.
"Independent Director" means a director
of the Corporation who is neither an employee
of the Corporation nor an employee or
director of America First Mortgage Advisory
Corporation, a Maryland corporation.
"Market Price" on any date shall mean
the average of the Closing Prices for each of
the five preceding Trading Days. The
"Closing Price" on any date shall mean the
last sale price, regular way, or, in case no
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<PAGE>
such sale takes place on such day, the
average of the closing bid and asked prices,
regular way, in either case as reported in
the principal consolidated transaction
reporting system with respect to securities
listed or admitted to trading on the New York
Stock Exchange or, if the Equity Stock is not
listed or admitted to trading on the New York
Stock Exchange, as reported in the principal
consolidated transaction reporting system
with respect to securities listed on the
principal national securities exchange on
which the Equity Stock is listed or admitted
to trading or, if the Equity Stock is not
listed or admitted to trading on any national
securities exchange, the last quoted price,
or if not so quoted, the average of the high
bid and low asked prices in the over-the-
counter market, as reported by the National
Association of Securities Dealers, Inc.
Automated Quotation System or, if such system
is no longer in use, the principal other
automated quotations system that may then be
in use or, if the Equity Stock is not quoted
by any such organization, the average of the
closing bid and asked prices as furnished by
a professional market maker making a market
in the Equity Stock selected by the Board of
Directors of the Corporation. "Trading Day"
shall mean a day on which the principal
national securities exchange on which the
Equity Stock is listed or admitted to trading
is open for the transaction of business or,
if the Equity Stock is not listed or admitted
to trading on any national securities
exchange, shall mean any day other than a
Saturday, a Sunday or a day on which banking
institutions in the State of New York are
authorized or obligated by law or executive
order to close.
"Ownership Limit" shall mean 9.8% (in
value or number) of the outstanding Capital
Stock of the Corporation.
"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 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 Securities Exchange
Act of 1934, as amended.
"Prohibited Owner" shall mean, with
respect to any purported Transfer or other
event, any Person who, but for the provisions
of subparagraph (j)(1) of Article NINTH,
would Beneficially Own or Constructively Own
shares of Excess Stock, and if appropriate in
the context, shall also mean any Person who
would have been the record owner of the
shares of Excess Stock that the Prohibited
Owner would have so owned.
"REIT" shall mean a Real Estate
Investment Trust under Section 856 of the
Code.
"Restriction Termination Date" shall
mean the first day after the date of the
closing of the Combination Transaction on
which the Board of Directors determines that
it is no longer in the best interests of the
Corporation to attempt to, or continue to,
qualify as a REIT.
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"Transfer" shall mean any sale,
transfer, gift, hypothecation, pledge,
assignment, devise or other disposition of
Capital Stock (including (i) the granting of
any option or entering into any agreement for
the sale, transfer or other disposition of
Equity Stock or (ii) the sale, transfer,
assignment or other disposition of any
securities or rights convertible into or
exchangeable for Capital Stock), whether
voluntary or involuntary, whether of record,
constructively or beneficially and whether by
operation of law or otherwise.
"Trust" shall mean the trust created
pursuant to subparagraph (j)(1) of Article
NINTH.
"Trustee" shall mean the Person
unaffiliated with the Corporation and any
Prohibited Owner that is appointed by the
Corporation to serve as trustee of the Trust.
"Voting Stock" shall mean the
outstanding shares of Capital Stock of the
Corporation entitled to vote generally in the
election of directors.
TWELFTH: In the event any term, provision,
sentence or paragraph of the Charter of the Corporation
is declared by a court of competent jurisdiction to be
invalid or unenforceable, such term, provision,
sentence or paragraph shall be deemed severed from the
remainder of the Charter, and the balance of the
Charter shall remain in effect and be enforced to the
fullest extent permitted by law and shall be construed
to preserve the intent and purposes of the Charter.
Any such invalidity or unenforceability in any
jurisdiction shall not invalidate or render
unenforceable such term, provision, sentence or
paragraph of the Charter in any other jurisdiction.
IN WITNESS WHEREOF, I have signed these Articles
of Incorporation, acknowledging the same to be my act,
on the 24th day of July, 1997.
/s/Billie J. Swoboda
--------------------
SECOND: The foregoing amendment to the charter
of the Corporation does not increase the authorized
stock of the Corporation.
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THIRD: The foregoing amendment to the charter
of the Corporation has been approved by the Board of
Directors. No stock entitled to be voted on the matter
was outstanding or subscribed for at the time of
approval by the Board of Directors.
IN WITNESS WHEREOF, AMERICA FIRST MORTGAGE
INVESTMENTS, INC. has caused these presents to be
signed in its name and on its behalf by its Chief
Executive Officer and President and witnessed by its
Secretary on April 8, 1998.
/s/ Stewart Zimmerman
Name: Stewart Zimmerman
Title: Chief Executive
Officer and
President
Witness:
/s/ William S. Gorin
- ---------------------
Name: William S. Gorin
Title: Secretary
THE UNDERSIGNED, Chief Executive Officer and
President of AMERICA FIRST MORTGAGE INVESTMENTS, INC.,
who executed on behalf of the corporation the foregoing
Articles of Amendment and Restatement of which this
certificate is made a part hereby acknowledges in the
name and on behalf of said corporation the foregoing
Articles of Amendment and Restatement to be the
corporate act of said corporation and hereby certifies
that to the best of his knowledge, information and
belief the matters and facts set forth therein with
respect to the authorization and approval thereof are
true in all material respects under the penalties of
perjury.
/s/ Stewart Zimmerman
Name: Stewart Zimmerman
Title: Chief Executive
Officer and
President
19
AMERICA FIRST MORTGAGE INVESTMENTS, INC.
AMENDED AND RESTATED BYLAWS
ARTICLE I.
STOCKHOLDERS
SECTION 1.1 Annual Meetings. America
First Mortgage Investments, Inc. (the "Corporation")
shall hold an annual meeting of its stockholders to
elect directors and transact any other business within
its powers, either at 10:00 a.m. on the first Wednesday
of May in each year if not a legal holiday, or at such
other time on such other day falling on or before the
30th day thereafter as shall be set by the Board of
Directors. Except as the Corporation's Articles of
Incorporation, as amended and supplemented (the
"Charter"), or statute provides otherwise, any business
may be considered at an annual meeting without the
purpose of the meeting having been specified in the
notice. Failure to hold an annual meeting does not
invalidate the Corporation's existence or affect any
otherwise valid corporate acts. The Corporation shall
hold its first annual meeting of stockholders beginning
with the year 1999.
SECTION 1.2 Special Meeting. At any time
in the interval between annual meetings, a special
meeting of the stockholders may be called by the
Chairman of the Board or the President or by a majority
of the Board of Directors by vote at a meeting or in
writing (addressed to the Secretary of the Corporation)
with or without a meeting. Special meetings of the
stockholders shall be called by the Secretary at the
request of stockholders only on the written request of
stockholders entitled to cast at least a majority of
all the votes entitled to be cast at the meeting. A
request for a special meeting shall state the purpose
of the meeting and the matters proposed to be acted on
at it. The Secretary shall inform the stockholders who
make the request of the reasonably estimated costs of
preparing and mailing a notice of the meeting and, on
payment of these costs to the Corporation, notify each
stockholder entitled to notice of the meeting. Unless
requested by stockholders entitled to cast a majority
of all the votes entitled to be cast at the meeting, a
special meeting need not be called to consider any
matter which is substantially the same as a matter
voted on at any special meeting of stockholders held in
the preceding 12 months.
SECTION 1.3 Place of Meetings. Meetings
of stockholders shall be held at such place in the
United States as is set from time to time by the Board
of Directors.
SECTION 1.4 Notice of Meetings; Waiver of
Notice. Not less than ten nor more than 90 days before
each stockholders' meeting, the Secretary shall give
written notice of the meeting to each stockholder
<PAGE>
entitled to vote at the meeting and each other
stockholder entitled to notice of the meeting. The
notice shall state the time and place of the meeting
and, if the meeting is a special meeting or notice of
the purpose is required by statute, the purpose of the
meeting. Notice is given to a stockholder when it is
personally delivered to him, left at his residence or
usual place of business or mailed to him at his address
as it appears on the records of the Corporation.
Notwithstanding the foregoing provisions, each person
who is entitled to notice waives notice if before or
after the meeting he signs a waiver of the notice which
is filed with the records of stockholders' meetings or
is present at the meeting in person or by proxy.
SECTION 1.5 Quorum; Voting. Unless the
Charter or statute provides otherwise, at a meeting of
stockholders, the presence in person or by proxy of
stockholders entitled to cast a majority of all the
votes entitled to be cast at the meeting constitutes a
quorum and a majority of all the votes cast at a
meeting at which a quorum is present is sufficient to
approve any matter which properly comes before the
meeting, except that a plurality of all the votes cast
at a meeting at which a quorum is present is sufficient
to elect a director.
SECTION 1.6 Adjournments. Whether or not
a quorum is present, a meeting of stockholders convened
on the date for which it was called may be adjourned
from time to time without further notice by a majority
vote of the stockholders, present in person or by
proxy, to a date not more than 120 days after the
original record date. Any business which might have
been transacted at the meeting as originally notified
may be deferred and transacted at any such adjourned
meeting at which a quorum shall be present.
SECTION 1.7 General Right to Vote;
Proxies. Unless the Charter provides for a greater or
lesser number of votes per share or limits or denies
voting rights, each outstanding share of stock,
regardless of class, is entitled to one vote on each
matter submitted to a vote at a meeting of
stockholders. In all elections for directors, each
share of stock may be voted for as many individuals as
there are directors to be elected and for whose
election the share is entitled to be voted. A
stockholder may vote the stock he owns of record either
in person or by written proxy signed by the stockholder
or by his duly authorized attorney in fact. Unless a
proxy provides otherwise, it is not valid more than 11
months after its date. A proxy is revocable by a
stockholder at any time without condition or
qualification unless the proxy states that it is
irrevocable and the proxy is coupled with an interest.
A proxy may be made irrevocable for so long as it is
coupled with an interest. The interest with which a
proxy may be coupled includes an interest in the stock
to be voted under the proxy or another general interest
in the Corporation or its assets or liabilities.
SECTION 1.8 List of Stockholders. At each
meeting of stockholders, a full, true and complete list
of all stockholders entitled to vote at such meeting,
showing the number and class of shares held by each and
certified by the transfer agent for such class or by
the Secretary, shall be furnished by the Secretary.
SECTION 1.9 Conduct of Business and
Voting. At all meetings of stockholders, unless the
voting is conducted by inspectors, the proxies and
ballots shall be received, and all questions touching
the qualification of voters and the validity of
proxies, the acceptance or rejection of votes and
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procedures for the conduct of business not otherwise
specified by these Bylaws, the Charter or law, shall be
decided or determined by the chairman of the meeting.
If demanded by stockholders, present in person or by
proxy, entitled to cast 10% in number of votes entitled
to be cast or if ordered by the chairman of the
meeting, the vote upon any election or question shall
be taken by ballot and, upon like demand or order, the
voting shall be conducted by two inspectors, in which
event the proxies and ballots shall be received, and
all questions touching the qualification of voters and
the validity of proxies and the acceptance or rejection
of votes shall be decided, by such inspectors. Unless
so demanded or ordered, no vote need be by ballot and
voting need not be conducted by inspector or inspectors
to act at such meeting, and in default of such election
the chairman of the meeting may appoint an inspector or
inspectors. No candidate for election as a director at
a meeting shall serve as an inspector thereat.
SECTION 1.10 Informal Action by
Stockholders. Any action required or permitted to be
taken at a meeting of stockholders may be taken without
a meeting if there is filed with the records of
stockholders meetings a unanimous written consent which
sets forth the action and is signed by each stockholder
entitled to vote on the matter and a written waiver of
any right to dissent signed by each stockholder
entitled to notice of the meeting but not entitled to
vote at it.
SECTION 1.11 Stockholder Proposals. For
any stockholder proposal to be presented in connection
with an annual meeting of stockholders of the
Corporation, including any proposal relating to the
nomination of a director to be elected to the Board of
Directors of the Corporation, the stockholders must
have given timely written notice thereof in writing to
the Secretary of the Corporation. In order for such
notice to be timely, such notice must be received by
the Corporation not less than 60 nor more than 90 days
prior to the first anniversary of the previous year's
annual meeting. For the 1999 annual meeting the
previous year's meeting shall be deemed to have taken
place on May 7, 1998; provided that this sentence shall
cease to be a part of the Bylaws after the holding of
the 1999 annual meeting and any adjustments thereof.
ARTICLE II.
BOARD OF DIRECTORS
SECTION 2.1 Function of Directors. The
business and affairs of the Corporation shall be
managed under the direction of its Board of Directors.
All powers of the Corporation may be exercised by or
under authority of the Board of Directors, except as
conferred on or reserved to the stockholders by statute
or by the Charter or Bylaws.
SECTION 2.2 Number of Directors. The
Corporation shall have at least three directors;
provided that, if there is no stock outstanding, the
number of Directors may be less than three but not less
than one and, if there is stock outstanding and so long
as there are less than three stockholders, the number
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<PAGE>
of Directors may be less than three but not less than
the number of stockholders. The Corporation shall have
three directors, which shall be the number of directors
until changed as herein provided. Except as the
Charter provides otherwise, a majority of the entire
Board of Directors may alter the number of directors
set by the Charter to not exceeding 15 nor less than
the minimum number then permitted herein, but the
action may not affect the tenure of office of any
director.
SECTION 2.3 Election and Tenure of
Directors. Subject to the rights of the holders of any
class of stock separately entitled to elect one or more
directors, at each annual meeting, the stockholders
shall elect directors to hold office until the next
annual meeting and until their successors are elected
and qualify.
SECTION 2.4 Removal of Director. Any
director or the entire Board of Directors may be
removed only in accordance with the provisions of the
Charter.
SECTION 2.5 Vacancy on Board. Subject to
the rights of the holders of any class of stock
separately entitled to elect one or more directors, the
stockholders may elect a successor to fill a vacancy on
the Board of Directors which results from the removal
of a director. A director elected by the stockholders
to fill a vacancy which results from the removal of a
director serves for the balance of the term of the
removed director. Subject to the rights of the holders
of any class of stock separately entitled to elect one
or more directors, a majority of the remaining
directors, whether or not sufficient to constitute a
quorum, may fill a vacancy on the Board of Directors
which results from any cause except an increase in the
number of directors and a majority of the entire Board
of Directors may fill a vacancy which results from an
increase in the number of directors. A director
elected by the Board of Directors to fill a vacancy
serves until the next annual meeting of stockholders
and until his successor is elected and qualifies.
SECTION 2.6 Regular Meetings. After each
meeting of stockholders at which directors shall have
been elected, the Board of Directors shall meet as soon
thereafter as practicable for the purpose of
organization and the transaction of other business. In
the event that no other time and place are specified by
resolution of the Board of Directors or announced by
the President or the Chairman at such stockholders
meeting, the Board of Directors shall meet immediately
following the close of, and at the place of, such
stockholders meeting. Any other regular meeting of the
Board of Directors shall be held on such date and time
and at such place as may be designated from time to
time by the Board of Directors. No notice of such
meeting following a stockholders meeting or any other
regular meeting shall be necessary if held as
hereinabove provided.
SECTION 2.7 Special Meetings. Special
meetings of the Board of Directors may be called at any
time by the Chairman of the Board or the President or
by a majority of the Board of Directors by vote at a
meeting or in writing with or without a meeting. A
special meeting of the Board of Directors shall be held
on such date and at any place as may be designated from
time to time by the Board of Directors. In the absence
of designation such meeting shall be held at such place
as may be designated in the call.
SECTION 2.8 Notice of Meeting. Except as
provided in Section 2.6, the Secretary shall give
notice to each director of each regular and special
meeting of the Board of Directors. The notice shall
4
<PAGE>
state the time and place of the meeting. Notice is
given to a director when it is delivered personally to
him, left at his residence or usual place of business,
or sent by telegraph, facsimile transmission or
telephone, at least 24 hours before the time of the
meeting or, in the alternative by mail to his address
as it shall appear on the records of the Corporation,
at least 72 hours before the time of the meeting.
Unless the Bylaws or a resolution of the Board of
Directors provides otherwise, the notice need not state
the business to be transacted at or the purposes of any
regular or special meeting of the Board of Directors.
No notice of any meeting of the Board of Directors need
be given to any director who attends except where a
director attends a meeting for the express purpose of
objecting to the transaction of any business because
the meeting is not lawfully called or convened or to
any director who, in writing executed and filed with
the records of the meeting either before or after the
holding thereof, waives such notice. Any meeting of
the Board of Directors, regular or special, may adjourn
from time to time to reconvene at the same or some
other place, and no notice need be given of any such
adjourned meeting other than by announcement.
SECTION 2.9 Quorum; Action by Directors.
A majority of the entire Board of Directors shall
constitute a quorum for the transaction of business.
In the absence of a quorum, the directors present by
majority vote and without notice other than by
announcement may adjourn the meeting from time to time
until a quorum shall attend. At any such adjourned
meeting at which a quorum shall be present, any
business may be transacted which might have been
transacted at the meeting as originally notified.
Unless statute or the Charter or Bylaws requires a
greater proportion, the action of a majority of the
directors present at a meeting at which a quorum is
present is action of the Board of Directors. Any
action required or permitted to be taken at a meeting
of the Board of Directors may be taken without a
meeting, if a unanimous written consent which sets
forth the action is signed by each member of the Board
of Directors and filed with the minutes of proceedings
of the Board of Directors.
SECTION 2.10 Meeting by Conference
Telephone. Members of the Board of Directors may
participate in a meeting by means of a conference
telephone or similar communications equipment if all
persons participating in the meeting can hear each
other at the same time. Participation in a meeting by
these means constitutes presence in person at a
meeting.
SECTION 2.11 Compensation. By resolution
of the Board of Directors a fixed sum and expenses, if
any, for attendance at each regular or special meeting
of the Board of Directors or of committees thereof, and
other compensation for their services as such or on
committees of the Board of Directors, may be paid to
directors. Directors who are full-time employees of
the Corporation need not be paid for attendance at
meetings of the board or committees thereof for which
fees are paid to other directors. A director who
serves the Corporation in any other capacity also may
receive compensation for such other services, pursuant
to a resolution of the directors.
SECTION 2.12 Advisory Directors. The Board
of Directors may by resolution appoint advisory
directors to the Board of Directors, who may also serve
as directors emeriti, and shall have such authority and
receive such compensation and reimbursement as the
Board of Directors shall provide. Advisory directors
or directors emeriti shall not have the authority to
participate by vote in the transaction of business.
5
<PAGE>
ARTICLE III.
COMMITTEES
SECTION 3.1 Committees. The Board of
Directors may appoint from among its members an Audit
Committee, Compensation Committee, Investment
Committee, and other committees composed of one or more
directors and delegate to these committees any of the
powers of the Board of Directors, except the power to
declare dividends or other distributions on stock,
elect directors, issue stock other than as provided in
the next sentence, recommend to the stockholders any
action which requires stockholder approval, amend the
Bylaws or approve any merger or share exchange which
does not require stockholder approval. The entire
Audit Committee and a majority of the Compensation
Committee shall be directors who are independent of
management. If the Board of Directors has given
general authorization for the issuance of stock
providing for or establishing a method or procedure for
determining the maximum number of shares to be issued,
a committee of the Board of Directors, in accordance
with that general authorization or any stock option or
other plan or program adopted by the Board of
Directors, may authorize or fix the terms of stock
subject to classification or reclassification and the
terms on which any stock may be issued, including all
terms and conditions required or permitted to be
established or authorized by the Board of Directors.
SECTION 3.2 Committee Procedure. Each
committee may fix rules of procedure for its business.
A majority of the members of a committee shall
constitute a quorum for the transaction of business and
the act of a majority of those present at a meeting at
which a quorum is present shall be the act of the
committee. The members of a committee present at any
meeting, whether or not they constitute a quorum, may
appoint a director to act in the place of an absent
member. Any action required or permitted to be taken
at a meeting of a committee may be taken without a
meeting, if an unanimous written consent which sets
forth the action is signed by each member of the
committee and filed with the minutes of the committee.
The members of a committee may conduct any meeting
thereof by conference telephone in accordance with the
provisions of Section 2.10.
SECTION 3.3 Emergency. In the event of a
state of disaster of sufficient severity to prevent the
conduct and management of the affairs and business of
the Corporation by its directors and officers as
contemplated by the Charter and the Bylaws, any two or
more available members of the then incumbent Executive
Committee shall constitute a quorum of that Committee
for the full conduct and management of the affairs and
business of the Corporation in accordance with the
provisions of Section 3.1. In the event of the
unavailability, at such time, of a minimum of two
members of the then incumbent Executive Committee, the
available directors shall elect an Executive Committee
consisting of any two members of the Board of
Directors, whether or not they be officers of the
6
<PAGE>
Corporation, which two members shall constitute the
Executive Committee for the full conduct and management
of the affairs of the Corporation in accordance with
the foregoing provisions of this Section. This Section
shall be subject to implementation by resolution of the
Board of Directors passed from time to time for that
purpose, and any provisions of the Bylaws (other than
this Section) and any resolutions which are contrary to
the provisions of this Section or to the provisions of
any such implementary resolutions shall be suspended
until it shall be determined by any interim Executive
Committee acting under this Section that it shall be to
the advantage of the Corporation to resume the conduct
and management of its affairs and business under all
the other provisions of the Bylaws.
ARTICLE IV.
SECTION 4.1 Executive and Other Officers.
The Corporation shall have a President, a Secretary and
a Treasurer. It may also have a Chairman of the Board.
The Board of Directors shall designate who shall serve
as chief executive officer, who shall have general
supervision of the business and affairs of the
Corporation, and may designate a chief operating
officer, who shall have supervision of the operations
of the Corporation. In the absence of any designation,
the Chairman of the Board, if there be one, shall serve
as chief executive officer and the President shall
serve as chief operating officer. The same person may
hold both offices. The Corporation may also have one
or more Vice-Presidents, assistant officers and
subordinate officers as may be established by the Board
of Directors. A person may hold more than one office
in the Corporation except that no person may serve
concurrently as both President and Vice-President of
the Corporation. The Chairman of the Board shall be a
director; the other officers may be directors.
SECTION 4.2 Chairman of the Board. The
Chairman of the Board, if one be elected, shall preside
at all meetings of the Board of Directors and of the
stockholders at which he or she shall be present.
Unless otherwise specified by the Board of Directors,
he or she shall be the chief executive officer of the
Corporation. In general, he or she shall perform such
duties as are customarily performed by the chief
executive officer of a corporation and may perform any
duties of the President and shall perform such other
duties as are from time to time assigned to him or her
by the Board of Directors.
SECTION 4.3 President. Unless otherwise
provided by resolution of the Board of Directors, the
President, in the absence of the Chairman of the Board,
shall preside at all meetings of the Board of Directors
and of the stockholders at which he or she shall be
present. Unless otherwise specified by the Board of
Directors, the President shall be the chief operating
officer of the Corporation and perform the duties
customarily performed by chief operating officers. He
or she may sign and execute, in the name of the
Corporation, all authorized deeds, mortgages, bonds,
contracts or other instruments, except in cases in
which the signing and execution thereof shall have been
expressly delegated to some other officer or agent of
the Corporation. In general, he or she shall perform
such other duties customarily performed by a president
of a corporation and shall perform such other duties
and have such other powers as are from time to time
assigned to him by the Board of Directors or the chief
executive officer of the Corporation.
SECTION 4.4 Vice-Presidents. The Vice-
President or Vice-Presidents, at the request of the
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<PAGE>
chief executive officer or the President, or in the
President's absence or during his or her inability to
act, shall perform the duties and exercise the
functions of the President, and when so acting shall
have the powers of the President. If there be more
than one Vice-President, the Board of Directors may
determine which one or more of the Vice-Presidents
shall perform any of such duties or exercise any of
such functions, or if such determination is not made by
the Board of Directors, the chief executive officer or
the President may make such determination; otherwise
any of the Vice-Presidents may perform any of such
duties or exercise any of such functions. The Vice-
President or Vice-Presidents shall have such other
powers and perform such other duties, and have such
additional descriptive designations in their titles (if
any), as are from time to time assigned to them by the
Board of Directors, the chief executive officer or the
President.
SECTION 4.5 Secretary. The Secretary
shall keep the minutes of the meetings of the
stockholders and the meetings of the Board of Directors
and any committees thereof, in books provided for the
purpose; the Secretary shall see that all notices are
duly given in accordance with the provisions of these
Bylaws or as required by law; he or she shall be
custodian of the records of the Corporation; he or she
may witness any document on behalf of the Corporation,
the execution of which is duly authorized, see that the
Corporation's seal is affixed where such document is
required or desired to be under its seal, and, when so
affixed, may attest the same. In general, he or she
shall perform such other duties customarily performed
by a secretary of a corporation and shall perform such
other duties and have such other powers as are from
time to time assigned to him or her by the Board of
Directors, the chief executive officer or the
President.
SECTION 4.6 Treasurer. the Treasurer
shall have charge of, and be responsible for, all
funds, securities, receipts and disbursements of the
Corporation and shall deposit, or cause to be
deposited, in the name of the Corporation, all moneys
or other valuable effects in such banks, trust
companies or other depositories as shall, from time to
time, be selected by the Board of Directors; he shall
render to the President and to the Board of Directors,
whenever requested, an account of the financial
condition of the Corporation; and, in general, he shall
perform all the duties incident to the office of a
treasurer of a corporation, and such other duties as
are from time to time assigned to him by the Board of
Directors, the chief executive officer or the
President.
SECTION 4.7 Assistant and Subordinate
Officers. The assistant and subordinate officers of
the Corporation are all officers below the office of
Vice-President, Secretary or Treasurer. The assistant
or subordinate officers shall have such duties as are
from time to time assigned to them by the Board of
Directors, the chief executive officer or the
President.
SECTION 4.8 Election, Tenure and Removal
of Officers. The Board of Directors shall elect the
officers. The Board of Directors may from time to time
authorize any committee or officer to appoint assistant
and subordinate officers. Election or appointment of
an officer, employee or agent shall not of itself
create contract rights. All officers shall be
appointed to hold their offices, respectively, during
8
<PAGE>
the pleasure of the Board of Directors. The Board of
Directors (or, as to any assistant or subordinate
officer, any committee or officer does not prejudice
any of his or her contract rights. The Board of
Directors (or, as to any assistant or subordinate
officer, any committee or officer authorized by the
Board of Directors) may fill a vacancy which occurs in
any office for the unexpired portion of the term.
SECTION 4.9 Compensation. The Board of
Directors or the Compensation Committee thereof shall
have power to fix the salaries and other compensation
and remuneration, of whatever kind, of all officers of
the Corporation. No officer shall be prevented from
receiving such salary by reason of the fact that he is
also a director of the Corporation. The Board of
Directors may authorize any committee or officer, upon
whom the power of appointing assistant and subordinate
officers may have been conferred, to fix the salaries,
compensation and remuneration of such assistant and
subordinate officers.
ARTICLE V.
DIVISIONAL TITLES
SECTION 5.1 Conferring Divisional Titles.
The Board of Directors may from time to time confer
upon any employee of a division of the Corporation the
title of President, Vice-President, Treasurer or
Controller of such division or any other title or
titles deemed appropriate, or may authorize the
Chairman of the Board or the President to do so. Any
such titles so conferred may be discontinued and
withdrawn at any time by the Board of Directors or by
the Chairman of the Board or the President if so
authorized by the Board of Directors. Any employee of
a division designated by such a division title shall
have the powers and duties with respect to such
division as shall be prescribed by the Board of
Directors, the Chairman of the Board or the President.
SECTION 5.2 Effect of Divisional Titles.
The conferring of divisional titles shall not create an
office of the Corporation under Article IV unless
specifically designated as such by the Board of
Directors; but any person who is an officer of the
Corporation may also have a divisional title.
ARTICLE VI.
STOCK
SECTION 6.1 Certificates for Stock. The
Board of Directors may determine to issue certificated
or uncertificated shares of capital stock and other
securities of the Corporation. For certificated stock,
each stockholder is entitled to certificates which
represent and certify the shares of stock he or she
holds in the Corporation. Each stock certificate shall
include on its face the name of the Corporation, the
name of the stockholder or other person to whom it is
issued, and the class of stock and number of shares it
represents. It shall also include on its face or back
(a) a statement of any restrictions on transferability
and (b) a statement which provides in substance that
the Corporation will furnish to any stockholder on
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request and without charge a full statement of the
designations and any preferences, conversion and other
rights, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of
redemption of the stock of each class which the
Corporation is authorized to issue, of the differences
in the relative rights and preferences between the
shares of each series of a preferred or special class
in series which the Corporation is authorized to issue,
to the extent they have been set, and of the authority
of the Board of Directors to set the relative rights
and preferences of subsequent series of a preferred or
special class of stock and any restrictions on
transferability. Such request may be made to the
Secretary or to its transfer agent. Upon the issuance
of uncertificated shares of capital stock, the
Corporation shall send the stockholder a written
statement of the same information required above on the
certificate and by the Maryland Uniform Commercial Code
- - Investment Securities. It shall be in such form, not
inconsistent with law or with the Charter, as shall be
approved by the Board of Directors or any officer or
officers designated for such purpose by resolution of
the Board of Directors. Each stock certificate shall
be signed by the Chairman of the Board, the President,
or a Vice-President, and countersigned by the
Secretary, an Assistant Secretary, the Treasurer, or an
Assistant Treasurer. Each certificate may be sealed
with the actual corporate seal or a facsimile of it or
in any other form and the signatures may be either
manual or facsimile signatures. A certificate is valid
and may be issued whether or not an officer who signed
it is still an officer when it is issued. A
certificate may not be issued until the stock
represented by it is fully paid.
SECTION 6.2 Transfers. The Board of
Directors shall have power and authority to make such
rules and regulations as it may deem expedient
concerning the issue, transfer and registration of
certificates of stock; and may appoint transfer agents
and registrars thereof. The duties of transfer agent
and registrar may be combined.
SECTION 6.3 Record Dates and Closing of
Transfer Books. The Board of Directors may set a
record date or direct that the stock transfer books be
closed for a stated period for the purpose of making
any proper determination with respect to stockholders,
including which stockholders are entitled to notice of
a meeting, vote at a meeting, receive a dividend or be
allotted other rights. The record date may not be
prior to the close of business on the day the record
date is fixed nor, subject to Section 1.6, more than 90
days before the date on which the action requiring the
determination will be taken; the transfer books may not
be closed for a period longer than 20 days; and, in the
case of a meeting of stockholders, the record date or
the closing of the transfer books shall be at least ten
days before the date of the meeting.
SECTION 6.4 Stock Ledger. The Corporation
shall maintain a stock ledger which contains the name
and address of each stockholder and the number of
shares of stock of each class which the stockholder
holds. The stock ledger may be in written form or in
any other form which can be converted within a
reasonable time into written form for visual
inspection. The original or a duplicate of the stock
ledger shall be kept at the offices of a transfer agent
for the particular class of stock, or, if none, at the
principal office in the State of Maryland or the
principal executive offices of the Corporation.
SECTION 6.5 Certification of Beneficial
Owners. The Board of Directors may adopt by resolution
a procedure by which a stockholder of the Corporation
may certify in writing to the Corporation that any
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shares of stock registered in the name of the
stockholder are held for the account of a specified
person other than the stockholder. The resolution
shall set forth the class of stockholders who may
certify; the purpose for which the certification may be
made; the form of certification and the information to
be contained in it; if the certification is with
respect to a record date or closing of the stock
transfer books, the time after the record date or
closing of the stock transfer books within which the
certification must be received by the Corporation; and
any other provisions with respect to the procedure
which the Board of Directors considers necessary or
desirable. On receipt of a certification which
complies with the procedure adopted by the Board of
Directors in accordance with this Section, the person
specified in the certification is, for the purpose set
forth in the certification, the holder of record of the
specified stock in place of the stockholder who makes
the certification.
SECTION 6.6 Lost Stock Certifications.
The Board of Directors of the Corporation may determine
the conditions for issuing a new stock certificate in
place of one which is alleged to have been lost, stolen
or destroyed, or the Board of Directors may delegate
such power to any officer or officers of the
Corporation. In their discretion, the Board of
Directors or such officer or officers may require the
owner of the certificate to give bond, with sufficient
surety, to indemnify the Corporation against any loss
or claim arising as a result of the issuance of a new
certificate. In their discretion, the Board of
Directors or such officer or officers may refuse to
issue such new certificate save upon the order of some
court having jurisdiction in the premises.
SECTION 6.7 Exemption from Control Share
Acquisition Statute. The provisions of Sections 3-701
to 3-709 of the Corporations and Associations Article
of the Annotated Code of Maryland shall not apply to
any share of the capital stock of the Corporation now
or hereafter beneficially held (during the period of
such beneficial ownership) by American First Companies,
L.L.C., any of its present or future affiliates and
associates or any person acting in concert or as part
of a group with any of the foregoing persons. Such
shares of capital stock are exempted from such Sections
to the fullest extent permitted by Maryland law.
ARTICLE VII.
FINANCE
SECTION 7.1 Checks, Drafts, Etc. All
checks, drafts and orders for the payment of money,
notes and other evidences of indebtedness, issued in
the name of the Corporation, shall, unless otherwise
provided by resolution of the Board of Directors, be
signed by the President, a Vice-President or an
Assistant Vice-President and countersigned by the
Treasurer, an Assistant Treasurer, the Secretary or an
Assistant Secretary.
SECTION 7.2 Annual Statement of Affairs.
The President or chief accounting officer shall prepare
annually a full and correct statement of the affairs of
the Corporation, to include a balance sheet and a
financial statement of operations for the preceding
fiscal year. The statement of affairs shall be
submitted at the annual meeting of the stockholders
and, within 20 days after the meeting, place on file at
the Corporation's principal office.
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SECTION 7.3 Fiscal Year. The fiscal year
of the Corporation shall be the twelve calendar months
period ending December 31 in each year, unless
otherwise provided by the Board of Directors.
SECTION 7.4 Dividends. If declared by the
Board of Directors at any meeting thereof, the
Corporation may pay dividends on its shares in cash,
property or in shares of the capital stock of the
Corporation, unless such dividend is contrary to law or
to a restriction contained in the Charter.
SECTION 7.5 Contracts. To the extent
permitted by the applicable law, and except as
otherwise prescribed by the Charter or these Bylaws
with respect to certificates for shares, the Board of
Directors may authorize any officer, employee or agent
of the Corporation to enter into any contract or
execute and deliver any instrument in the name of and
on behalf of the Corporation. Such authority may be
general or confined to specific instances.
ARTICLE VIII.
SUNDRY PROVISIONS
SECTION 8.1 Books and Records. The
Corporation shall keep correct and complete books and
records of its accounts and transactions and minutes of
the proceedings of its stockholders and Board of
Directors and of any executive or other committee when
exercising any of the powers of the Board of Directors.
The books and records of a Corporation may be in
written form or in any other form which can be
converted within a reasonable time into written form
for visual inspection. Minutes shall be recorded in
written form but may be maintained in the form of a
reproduction. The original or a certified copy of the
Bylaws shall be kept at the principal office of the
Corporation.
SECTION 8.2 Corporate Seal. The Board of
Directors shall provide a suitable seal, bearing the
name of the Corporation, which shall be in the charge
of the Secretary. The Board of Directors may authorize
one or more duplicate seals and provide for the custody
thereof. If the Corporation is required to place its
corporation seal to a document, it is sufficient to
meet the requirement of any law, rule or regulation
relating to a corporate seal to place the word "Seal"
adjacent to the signature of the person authorized to
sign the document on behalf of the Corporation.
SECTION 8.3 Bonds. The Board of Directors
may require any officer, agent or employee of the
Corporation to give a bond to the Corporation,
conditioned upon the faithful discharge of his duties,
with one or more sureties and in such amount as may be
satisfactory to the Board of Directors.
SECTION 8.4 Voting Upon Shares in Other
Corporations. Stock of other corporations or
associations, registered in the name of the
Corporation, may be voted by the President, a Vice-
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President or a proxy appointed by either of them. The
Board of Directors, however, may by resolution appoint
some other person to vote such shares, in which case
such person shall be entitled to vote such shares upon
the production of a certified copy of such resolution.
SECTION 8.5 Mail. Any notice or other
document which is required by these Bylaws to be mailed
shall be deposited in the United States mails, postage
prepaid.
SECTION 8.6 Execution of Documents. A
person who holds more than one office in the
Corporation may not act in more than one capacity to
execute, acknowledge or verify an instrument required
by law to be executed, acknowledged or verified by more
than one officer.
SECTION 8.7 Amendments. Subject to the
special provisions of Section 2.02, in accordance with
the Charter, these Bylaws may be repealed, altered,
amended or rescinded (a) by the stockholders of the
Corporation only by vote of not less than 80% of the
outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors
(considered for this purpose as one class) cast at any
meeting of the stockholders called for that purpose
(provided that notice of such proposed repeal,
alteration, amendment or rescission is included in the
notice of such meeting) or (b) by vote of a majority of
the Board of Directors at a meeting held in accordance
with the provisions of these Bylaws.
ARTICLE IX.
INDEMNIFICATION
SECTION 9.1 Procedure. Any
indemnification, or payment of expenses in advance of
the final disposition of any proceeding, shall be made
promptly, and in any event within 60 days, upon the
written request of the director or officer entitled to
seek indemnification (the "Indemnified Party"). The
right to indemnification and advances hereunder shall
be enforceable by the Indemnified Party in any court of
competent jurisdiction, if (i) the Corporation denies
such request, in whole or in part or (ii) no
disposition thereof is made within 60 days. The
Indemnified Party's costs and expenses incurred in
connection with successfully establishing his right to
indemnification, in whole or in part, in any such
action shall also be reimbursed by the Corporation. It
shall be a defense to any action for advance of
expenses that (a) a determination has been made that
the facts then known to those making the determination
would preclude indemnification or (b) the Corporation
has not received either (i) an undertaking as required
by law to repay such advances in the event it shall
ultimately be determined that the standard of conduct
has not been met or (ii) a written affirmation by the
Indemnified Party of such Indemnified Party's good
faith belief that the standard of conduct necessary for
indemnification by the Corporation has been met.
SECTION 9.2 Exclusivity, Etc. The
indemnification and advance of expenses provided by the
Charter and these Bylaws shall not be deemed exclusive
of any other rights to which a person seeking
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indemnification or advance of expenses may be entitled
under any law (common or statutory) or any agreement,
vote of stockholders or disinterested directors or
other provision that is consistent with law, both as to
action in his official capacity and as to action in
another capacity while holding office or while employed
by or acting as agent for the Corporation, shall
continue in respect of all events occurring while a
person was a director or officer after such person has
ceased to be a director or officer, and shall inure to
the benefit of the estate, heirs, executors and
administrators of such person. The Corporation shall
not be liable for any payment under this Bylaw in
connection with a claim made by a director or officer
to the extent such director or officer has otherwise
actually received payment under insurance policy,
agreement, vote or otherwise, of the amounts otherwise
indemnifiable hereunder. All rights to indemnification
and advance of expenses under the Charter of the
Corporation and hereunder shall be deemed to be a
contract between the Corporation and each director or
officer of the Corporation who serves or served in such
capacity at any time while this Bylaw is in effect.
Nothing herein shall prevent the amendment of this
Bylaw, provided that no such amendment shall diminish
the rights of any person hereunder with respect to
events occurring or claims made before its adoption or
as to claims made after its adoption in respect of
events occurring before its adoption. Any repeal or
modification of this Bylaw shall not in any way
diminish any rights to indemnification or advance of
expenses of such director or officer or the obligations
of the Corporation arising hereunder with respect to
events occurring, or claims made, while this Bylaw or
any provisions hereof is in force.
SECTION 9.3 Severability; Definitions.
The invalidity or unenforceability of any provision of
this Article IX shall not affect the validity or
enforceability of any other provisions hereof. The
phrase "this Bylaw" in this Article IX means this
Article IX in its entirely.
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ADVISORY AGREEMENT
THIS AGREEMENT is entered into as of April 9, 1998
by and between AMERICA FIRST MORTGAGE INVESTMENTS INC.,
a Maryland corporation (the "COMPANY"), and AMERICA
FIRST MORTGAGE ADVISORY CORPORATION, a Maryland
corporation (the "ADVISOR").
W I T N E S S E T H:
WHEREAS, the Company is a newly-formed corporation
that intends to qualify as a real estate investment
trust (a "REIT") under Sections 856 through 860 of the
Internal Revenue Code of 1986, as amended (the "CODE");
WHEREAS, the Company, directly or through its
Subsidiaries, invests in adjustable-rate Mortgage
Securities, Mortgage Loans and other real estate
related investments meeting the investment criteria
established from time to time by its Board of Directors
(collectively, "MORTGAGE ASSETS"); and
WHEREAS, the Company desires to retain the Advisor
to manage the operations and investments of the Company
and its Subsidiaries and to perform administrative
services for the Company and its Subsidiaries, each in
the manner and on the terms set forth in this
Agreement.
NOW THEREFORE, in consideration of the mutual
agreements herein set forth, the parties hereto agree
as follows:
SECTION 1. DEFINITIONS. Capitalized terms used
herein shall have the respective meanings assigned them
in this Section 1:
(a) "Agreement" means this Advisory Agreement
between the Company and the Advisor, as amended from
time to time.
(b) "Closing Date" means April 9, 1998.
(c) "Common Stock" means the common stock, par
value $0.01 per share, of the Company.
(d) "Governing Instruments" means the articles of
incorporation and bylaws, in the case of a corporation,
the limited liability company agreement, in the case of
a limited liability company and the partnership
agreement, in the case of a partnership.
<PAGE>
(e) "Independent Directors" means those members
of the Board of Directors of the Company who are
neither executive officers of the Company nor executive
officers or directors of the Advisor.
(f) "Mortgage Loans" means mortgage loans that
are eligible for inclusion in a pool that would
collateralize Mortgage Securities.
(g) "Mortgage Securities" means mortgaged-backed
securities, including adjustable- rate securities and
private-issue securities.
(h) "Net Income" means the net income of the
Company determined in accordance with GAAP before the
Advisor'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.
(i) "Qualified REIT Subsidiary" means a
corporation 100% of the stock of which is held by the
Company at all times during the existence of the
corporation, consistent with the definition of
Qualified REIT Subsidiary in Section 856(i)(2) of the
Code.
(j) "Return on Equity" for any period means that
amount produced by dividing the Company's Net Income
for such period by its Stockholder's Equity for such
period. For purposes of calculating the incentive
compensation payable to the Advisor, Return on Equity
is not related to the actual distributions received by
stockholders.
(k) "Stockholders' Equity" means the excess of
total assets of the Company minus its total liabilities
as determined in accordance with GAAP.
(l) "Subsidiary" shall mean any corporation,
whether now existing or in the future established, of
which the Company, directly or indirectly, owns more
than 50% of the outstanding voting securities of any
class or classes, any business trust, partnership or
similar non-corporate form in which the Company,
directly or indirectly, owns more than 50% of the
beneficial interests.
(m) "Ten-Year US Treasury Rate" means the average
of the weekly average yield to maturity for U.S.
Treasury securities (adjusted to a constant maturity of
ten years) as published weekly by the Federal Reserve
Board during a quarter.
SECTION 2. GENERAL DUTIES OF THE ADVISOR.
Subject to the supervision of the Board of Directors,
the Advisor shall provide services to the Company, and
to the extent directed by the Board of Directors, shall
provide similar services to any Subsidiary of the
Company as follows:
(a) administer the day-to-day operations of the
Company and its Subsidiaries and perform or supervise
the performance of such administrative functions
necessary in the management of the Company and its
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Subsidiaries as may be agreed upon by the Advisor and
the Board of Directors including, without limitation,
collection of revenues and payment of expenses, debts
and obligations and maintenance of appropriate computer
services to provide such administrative functions;
(b) serve as the Company's consultant with
respect to formulation of investment criteria and
preparation of policy guidelines by the Board of
Directors ("GUIDELINES");
(c) represent the Company in connection with the
purchase, accumulation, financing and securitization of
Mortgage Assets;
(d) furnish reports and statistical and economic
research to the Company regarding the investments,
activities and results of operations of the Company and
its Subsidiaries and the services performed for the
Company and its Subsidiaries by the Advisor;
(e) monitor and provide to the Board of Directors
on an on-going basis price information and other data
regarding the market maintained by certain nationally
recognized dealers in Mortgage Assets 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;
(f) communicate on behalf of the Company with the
holders of equity and debt securities of the Company as
required to satisfy the continuous reporting and other
requirements of any governmental or regulatory bodies
or agencies and maintain effective relations with such
holders of the Company's securities;
(g) to the extent not otherwise subject to an
agreement executed by the Company, designate a servicer
for those Mortgage Loans sold to the Company by
originators or sellers that have elected not to service
such loans and arrange for the monitoring and
administering of such servicers;
(h) counsel the Company in connection with policy
decisions to be made by the Board of Directors;
(i) upon request by, and in accordance with the
directions of, the Board of Directors, invest or
reinvest any money of the Company;
(j) engage in hedging activities on behalf of the
Company or any of its Subsidiaries consistent with the
Company's qualification as a REIT and any other
directions of the Board of Directors;
(k) arrange for the issuance of Mortgage
Securities from pools of Mortgage Loans acquired by the
Company and its Subsidiaries, and provide to the
Company directly or through another appropriate party
all services in connection with the creation of
Mortgage Securities including:
(i) serving as consultant with respect
to the structuring of each series of
Mortgage Securities;
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(ii) negotiating the rating requirements
with rating agencies with respect to the
rating of each series of Mortgage
Securities;
(iii) accumulating and reviewing all
Mortgage Loans which may secure or
constitute the mortgage pool for each
series of Mortgage Securities;
(iv) negotiating all agreements and
credit enhancements with respect to each
series of Mortgage Securities;
(v) issuing commitments on behalf of
the Company and its Subsidiaries to
purchase Mortgage Loans to be used to
secure or constitute the mortgage pool for
each series of Mortgage Securities;
(vi) organizing and administering all
activities in connection with the closing
of each series of Mortgage Securities,
including all negotiations and agreements
with underwriters, trustees, servicers,
master servicers and other parties; and
(vii) performing such other services
as may be required from time to time for
completing the creation of each series of
Mortgage Securities;
(l) provide to the Company directly or through
another appropriate party all services in connection
with the administration of each series of Mortgage
Securities created by the Company;
(m) provide the executive and administrative
personnel and services required in rendering the
foregoing services to the Company and its Subsidiaries;
(n) supervise compliance with REIT provisions of
the Code and maintain exemption from the Investment
Company Act of 1940, as amended;
(o) qualify and cause the Company to qualify to
do business in all applicable jurisdictions;
(p) cause the Company to retain qualified
accountants and tax experts for at least a two year
period to assist in developing appropriate accounting
procedures and testing systems and conducting quarterly
compliance reviews;
(q) comply with and use its best efforts to cause
the Company to comply with all applicable laws; and
(r) as approved and directed by the Board of
Directors, perform such other services as may be
required from time to time for management and other
activities relating to the assets of the Company and
its Subsidiaries as the Advisor shall deem appropriate
under the particular circumstances.
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SECTION 3. ADDITIONAL ACTIVITIES OF ADVISOR.
Nothing herein shall prevent the Advisor or any of its
affiliates from engaging in other businesses or from
rendering services of any kind to any other person or
entity, 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 and its
Subsidiaries. Directors, officers, employees and
agents of the Advisor or affiliates of the Advisor may
serve as directors, officers, employees, agents,
nominees or signatories for the Company or any of its
Subsidiaries, to the extent permitted by its Governing
Instruments, as from time to time amended, or by any
resolutions duly adopted by the Board of Directors
pursuant to the Company'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.
SECTION 4. BANK ACCOUNTS. At the direction of
the Board of Directors, the Advisor may establish and
maintain one or more bank accounts in the name of the
Company or any of its Subsidiaries, and may collect and
deposit into any such account or accounts, and disburse
funds from any such account or accounts, under such
terms and conditions as the Board of Directors may
approve; and the Advisor shall from time to time render
appropriate accounting of such collections and payments
to the Board of Directors and, upon request, to the
auditors of the Company or any of its Subsidiaries.
SECTION 5. RECORDS; CONFIDENTIALITY. The Advisor
shall maintain appropriate books of account and records
relating to services performed hereunder, and such
books of account and records shall be accessible for
inspection by representatives of the Company or any of
its Subsidiaries at any time during normal business
hours. The Advisor shall keep confidential any and all
information it obtains from time to time in connection
with the services it renders under this Agreement and
shall not disclose any portion thereof to non-
affiliated third parties except with the prior written
consent of the Company or any of its Subsidiaries.
SECTION 6. OBLIGATIONS OF ADVISOR.
(a) The Advisor shall require each seller or
transferor of Mortgage Assets to the Company to make
such representations and warranties regarding such
Mortgage Assets as may, in the judgment of the Advisor,
be necessary and appropriate. In addition, the Advisor
shall take such other action as it deems necessary or
appropriate with regard to the protection of the
Company's Mortgage Assets and other investments.
(b) The Advisor shall refrain from any action
which, in its sole judgment made in good faith, would
adversely affect the status of the Company as a REIT
or, if applicable, any of its Subsidiaries as either a
Qualified REIT Subsidiary or a partnership for federal
income tax purposes or which, in its sole judgment made
in good faith, would violate any law, rule or
regulation of any governmental or regulatory body or
agency having jurisdiction over the Company or any such
Subsidiary or which would otherwise not be permitted by
the Company's or any such Subsidiary's Governing
Instruments. If the Advisor is ordered to take any
such action by the Board of Directors, the Advisor
shall promptly notify the Board of Directors of the
Advisor's judgment that such action would adversely
affect the status of the Company or any of its
Subsidiaries under the Code or violate any such law,
rule or regulation or the Governing Instruments.
Notwithstanding the foregoing, the Advisor, its
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directors, officers, stockholders and employees shall
not be liable to the Company, any Subsidiary of the
Company, the Independent Directors or the Company's or
any Subsidiary's stockholders for any act or omission
by the Advisor, its directors, officers, stockholders
or employees except as provided in Section 11 of this
Agreement.
SECTION 7. COMPENSATION.
(a) The Company shall pay to the Advisor, for
services rendered under this Agreement, an annual base
management fee in an amount equal to 1.10% of the first
$300 million of Stockholders' Equity of the Company,
plus .80% of the portion of Stockholders' Equity of the
Company above $300 million, payable each month (pro
rated based on the number of days elapsed during any
partial month) in arrears, commencing with the month in
which the Closing Date occurs. The base management fee
shall be calculated by the Advisor within 15 days after
the end of each month, and such calculation shall be
promptly delivered to the Company. The Company shall
pay the base management fee payable pursuant to this
Section 7(a) for each month within 30 days after the
end of each month.
(b) If the Company's annualized Return on Equity
for 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 1%, the
Company shall pay the Advisor as incentive compensation
for such quarter an amount equal to 20% of the dollar
amount by which the annualized Return on Equity of the
Company for such fiscal quarter exceeds the amount
necessary to provide an annualized Return on Equity
equal to the Ten-Year U.S. Treasury Rate plus 1%. The
Advisor shall compute the incentive compensation
payable under this Section 7(b) within 45 days after
the end of each fiscal quarter. The Company shall pay
the incentive compensation with respect to each fiscal
quarter within 15 days following the delivery to the
Company of the Advisor's written statement setting
forth the computation of the incentive fee for such
quarter.
(c) If loans are made to the Company by an
affiliate of the Advisor, the maximum amount of
interest that may be charged by such affiliate shall be
the prime rate publicly announced by Citibank, N.A.
from time to time plus 1% per year.
SECTION 8. EXPENSES OF THE COMPANY. The Company
or any of its Subsidiaries shall pay all of its
expenses and shall reimburse the Advisor for documented
expenses of the Advisor incurred on its behalf.
Notwithstanding the foregoing, the Advisor shall be
responsible for paying the compensation of the
Company's officers and other personnel required for the
Company's day-to-day operations.
SECTION 9. REIMBURSEMENT OF EXPENSES INCURRED BY
THE ADVISOR.
Expenses incurred by the Advisor on behalf of the
Company shall be reimbursed monthly to the Advisor
within 30 days after the end of each month. The
Advisor shall prepare a statement documenting the
expenses of the Company and those incurred by the
Advisor on behalf of the Company during each month, and
shall deliver such statement to the Company within 15
days after the end of each month.
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SECTION 10. MONITORING SERVICING. The Advisor
will monitor and administer the servicing of the
Company's Mortgage Loans, other than those Mortgage
Loans pooled to back Mortgage Securities. Such
monitoring and administrative services will include,
but not be limited to, the following activities:
serving as the Company's consultant with respect to the
servicing of Mortgage Loans; collection of information
and submission of reports pertaining to the Mortgage
Loans and to moneys remitted to the Advisor or the
Company by servicers; periodic review and evaluation of
the performance of each servicer to determine its
compliance with the terms and conditions of the
Servicing Agreement and, if deemed appropriate,
recommending to the Company the termination of such
Servicing Agreement; acting as a liaison between
servicers and the Company and working with servicers to
the extent necessary to improve their servicing
performance; review of and recommendations as to fire
losses, easement problems and condemnation, delinquency
and foreclosure procedures with regard to the Mortgage
Loans; review of servicers' delinquency, foreclosing
and other reports on Mortgage Loans; supervising claims
filed under any mortgage insurance policies; and
enforcing the obligation of any servicer to repurchase
Mortgage Loans from the Company. The Advisor may enter
into subcontracts with other parties, including its
affiliates, to provide any such services for the
Advisor.
SECTION 11. LIMITS OF ADVISOR RESPONSIBILITY.
(a) The Advisor 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 Advisor, including as set forth
in Section 6(b) of this Agreement. The Advisor and its
directors, officers, stockholders and employees will
not be liable to the Company, any of its Subsidiaries,
the Independent Directors or the Company's or its
Subsidiary's stockholders for any acts or omissions by
the Advisor, its directors, officers, stockholders or
employees under or in connection 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
Subsidiary shall reimburse, indemnify and hold harmless
the Advisor and its stockholders, directors, officers
and employees of and from any and all expenses, losses,
damages, liabilities, demands, charges and claims of
any nature whatsoever (including, without limitation,
reasonable attorneys' fees) in respect of or arising
from any acts or omissions of the Advisor or its
stockholders, directors, officers and employees made in
good faith in the performance of the Advisor's duties
under this Agreement and not constituting bad faith,
willful misconduct, gross negligence or reckless
disregard of its duties.
(b) The Advisor shall reimburse, indemnify and
hold harmless the Company, any Subsidiary, 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) arising
out of any intentional misstatements of fact made by
the Advisor in connection with this Agreement and the
services to be rendered hereunder.
SECTION 12. NO JOINT VENTURE. The Company and
the Advisor 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 liability as such on either of them.
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SECTION 13. TERM. This Agreement shall commence
on the Closing Date and shall continue in force for a
period of five years and thereafter it may be extended
only with the consent of the Advisor and by the
affirmative vote of a majority of the Board of
Directors, including a majority of the Independent
Directors. Each extension shall be executed in writing
by the parties hereto before the expiration of this
Agreement or any extension thereof. Each such
extension shall be effective for a period corresponding
to the fiscal year of the Company, but in no case
exceeding one year.
SECTION 14. TERMINATION BY COMPANY FOR CAUSE. At
the option of the Company, this Agreement or any
extension hereof shall be and become terminated upon 60
days' written notice of termination from the Board of
Directors to the Advisor if any of the following events
shall occur:
(a) if the Advisor shall materially breach any
provision of this Agreement and, after notice of such
breach, shall not cure such breach within 30 days; or
(b) there is entered an order for relief or
similar decree or order with respect to the Advisor by
a court having competent jurisdiction 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 the Advisor (i) 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, (ii) 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) for itself or for any substantial part of its
assets or authorizes such an application or consent,
(iii) 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 (iv) permits or suffers all or any
substantial part of its assets to be sequestered or
attached by court order and the order remains
undismissed for 30 days; or proceedings seeking the
appointment of a receiver, trustee, assignee,
custodian, liquidator or sequestrator (or other similar
official) for the Advisor or for any substantial part
of its assets are commenced without authorization,
consent or application against the Advisor and continue
undismissed for 30 days; or proceedings to sequester or
attach all or any substantial part of the Advisor's
assets are instituted against the Advisor without
authorization, consent and application and are approved
as properly instituted and remain undismissed for 30
days or result in adjudication of bankruptcy or
insolvency.
If any of the events specified in this Section 14 shall
occur, the Advisor shall give prompt written notice
thereof to the Board of Directors upon the happening of
such event.
SECTION 15. TERMINATION WITHOUT CAUSE. Either
party may terminate this Agreement without cause upon
60 days prior written notice, by (i) in the case of
termination by the Company, a majority vote of the
Independent Directors or by a vote of the holders of a
majority of the outstanding shares of the Company's
Common Stock, and (ii), in the case of termination by
8
<PAGE>
the Advisor, by a majority vote of the Board of
Directors of the Advisor. 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 17, shall pay the Advisor 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.
SECTION 16. ASSIGNMENTS.
(a) Except as set forth in Section 16(b) of this
Agreement, this Agreement shall terminate automatically
in the event of its assignment, in whole or in part, by
the Advisor, unless such assignment is consented to in
writing by the Company with the approval of a majority
of the Independent Directors. Any such assignment
shall bind the assignee hereunder in the same manner as
the Advisor is bound. In addition, the assignee shall
execute and deliver to the Company a joinder agreement
to this Agreement naming such assignee as Advisor.
This Agreement shall not be assigned by the Company
without the prior written consent of the Advisor,
except in the case of assignment by the Company to a
REIT 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 such
assignment in the same manner as the Company is bound
hereunder.
(b) Notwithstanding any provision of this
Agreement, the Advisor may subcontract and assign any
or all of its responsibilities under Sections 2(k),
2(l) and 10 of this Agreement to any of its affiliates,
and the Company hereby consents to any such assignment
and subcontracting.
SECTION 17. ACTION UPON TERMINATION. From and
after the effective date of termination of this
Agreement, pursuant to Sections 14, 15 or 16 of this
Agreement, the Advisor shall not be entitled to
compensation for further services hereunder, but shall
be paid all compensation accruing to the date of
termination, including deferred incentive compensation
which is recoverable in accordance with Section 7(c) of
this Agreement. Upon such termination, the Advisor
shall forthwith:
(a) after deducting any accrued compensation and
reimbursement for its expenses to which it is then
entitled, pay over to the Company or any of its
9
<PAGE>
Subsidiaries all money collected and held for the
account of the Company or any of its Subsidiaries
pursuant to this Agreement;
(b) deliver to the Board of Directors a full
accounting, including a statement showing all payments
collected by it and a statement of all money held by
it, covering the period following the date of the last
accounting furnished to the Board of Directors with
respect to the Company or any of its Subsidiaries; and
(c) deliver to the Board of Directors all
property and documents of the Company or any of its
Subsidiaries then in the custody of the Advisor.
SECTION 18. RELEASE OF MONEY OR OTHER PROPERTY
UPON WRITTEN REQUEST. The Advisor agrees that any
money or other property of the Company or any of its
Subsidiaries held by the Advisor under this Agreement
shall be held by the Advisor as custodian for the
Company or any such Subsidiary, and the Advisor's
records shall be appropriately marked clearly to
reflect the ownership of such money or other property
by the Company or any such Subsidiary. Upon the
receipt by the Advisor of a written request signed by a
duly authorized officer of the Company requesting the
Advisor to release to the Company or any of its
Subsidiaries any money or other property then held by
the Advisor for the account of the Company or any of
its Subsidiaries under this Agreement, the Advisor
shall release such money or other property to the
Company or any of its Subsidiaries within a reasonable
period of time, but in no event later than 60 days
following such request. The Advisor shall not be
liable to the Company, any Subsidiary of the Company,
the Independent Directors, or the Company's or its
Subsidiary's stockholders for any acts performed or
omissions to act by the Company or any of its
Subsidiaries in connection with the money or other
property released to the Company or any of its
Subsidiaries in accordance with this Section 18. The
Company and any of its Subsidiaries shall indemnify the
Advisor, its directors, officers, stockholders and
employees against any and all expenses, losses,
damages, liabilities, demands, charges and claims of
any nature whatsoever, which arise in connection with
the Advisor's release of such money or other property
to the Company or any of its Subsidiaries in accordance
with the terms of this Section 18. Indemnification
pursuant to this provision shall be in addition to any
right of the Advisor to indemnification under Section
11 of this Agreement.
SECTION 19. REPRESENTATIONS AND WARRANTIES.
(a) The Company hereby represents and warrants to
the Advisor as follows:
(i) The Company is duly incorporated,
validly existing and in good standing under the laws of
Maryland, has full corporate power and authority to own
its assets and to transact the business in which it is
now engaged and is duly qualified or registered 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 or registration, except where the failure
to be so qualified or registered would 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.
The Company does not do business under any fictitious
business name.
(ii) The Company has the corporate power and
authority to execute, deliver and perform this
10
<PAGE>
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 or
regulatory authority or agency 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 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) 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 or regulatory
authority or agency binding on the Company, or the
Governing Instruments of, or any securities issued by,
the Company or any of its subsidiaries, or any
mortgage, indenture, lease, contract or other
agreement, instrument or undertaking to which the
Company or any of its Subsidiaries is a party or by
which the Company, any Subsidiary of the Company or any
of their 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 their property, assets
or revenues pursuant to the provisions of any such
mortgage, indenture, lease, contract or other
agreement, instrument or undertaking.
(b) The Advisor hereby represents and warrants to
the Company as follows:
(i) The Advisor is duly incorporated,
validly existing and in good standing under the laws of
Maryland, has full corporate power and authority to own
its assets and to transact the business in which it is
now engaged and is duly qualified or registered to do
business and is 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 or registration, except where the failure
to be so qualified or registered would not in the
aggregate have a material adverse effect on the
business, operations, assets or financial condition of
the Advisor and its Subsidiaries, taken as a whole.
The Advisor does not do business under any fictitious
business name.
(ii) The Advisor has the corporate power and
authority to execute, deliver and perform this
Agreement and all obligations required hereunder and
has taken all necessary partnership 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
11
<PAGE>
consent of any other person including, without
limitation, partners and creditors of the Advisor, and
no license, permit, approval or authorization of,
exemption by, notice or report to, or registration,
filing or declaration with, any governmental or
regulatory authority or agency is required by the
Advisor 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 agent of
the Advisor, 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 Advisor enforceable
against the Advisor in accordance with its terms.
(iii) 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 Advisor, or any order, judgment, award or decree of
any court, arbitrator, or governmental or regulatory
authority or agency binding on the Advisor, or the
partnership agreement of, or any securities issued by,
the Advisor or any of its Subsidiaries, or any
mortgage, indenture, lease, contract or other
agreement, instrument or undertaking to which the
Advisor or any of its Subsidiaries is a party or by
which the Advisor or any Subsidiary of the Advisor 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
Advisor and its Subsidiaries, taken as a whole, and
will not result in, or require, the creation or
imposition of any lien on any of their property, assets
or revenues pursuant to the provisions of any such
mortgage indenture, lease, contract or other agreement,
instrument or undertaking.
SECTION 20. NOTICES. Unless expressly provided
otherwise herein, all notices, request, demands and
other communications required or permitted under this
Agreement shall be in writing and shall be deemed to
have been duly given, made and received when delivered
against receipt or upon actual receipt of registered or
certified mail, postage prepaid, return receipt
requested. The parties may deliver to each other
notice by electronically transmitted facsimile copies
provided that such facsimile notice is followed within
24 hours by any type of notice otherwise provided for
in this paragraph. Any notice shall be duly addressed
to the parties as follows:
(a) If to the Company:
399 Park Avenue
New York, New York 10022
Attention: Stewart Zimmerman
Telephone: (212) 935-8760
with a copy given in the manner
prescribed above, to:
Rogers & Wells
200 Park Avenue
New York, New York 10166
Attention: Jay L. Bernstein, Esq.
Telephone: (212) 878-8223
<PAGE>
(b) If to the Advisor:
399 Park Avenue
New York, New York 10022
Attention: Stewart Zimmerman
Telephone: (212) 935-8760
with a copy given in the manner
prescribed above, to:
Rogers & Wells
200 Park Avenue
New York, New York 10166
Attention: Jay L. Bernstein, Esq.
Telephone: (212) 878-8223
12
Either party may alter the address to which
communications or copies are to be sent by giving
notice of such change of address in conformity with the
provisions of this Section 20 for the giving of notice.
SECTION 21. BINDING NATURE OF AGREEMENT:
SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the parties
hereto and their respective heirs, personal
representatives, successors and assigns as provided
herein.
SECTION 22. ENTIRE AGREEMENT. This Agreement
contains the entire agreement and understanding among
the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous
agreements, understandings, inducements and conditions,
express or implied, oral or written, of any nature
whatsoever with respect to the subject matter hereof.
The express terms hereof control and supersede any
course of performance and/or usage of the trade
inconsistent with any of the terms hereof. This
Agreement may not be modified or amended other than by
an agreement in writing.
SECTION 23. CONTROLLING LAW. This Agreement
and all questions relating to its validity,
interpretation, performance and enforcement shall be
governed by and construed, interpreted and enforced in
accordance with the laws of the State of Maryland,
notwithstanding any Maryland or other conflict of law
provisions to the contrary.
SECTION 24. SCHEDULES AND EXHIBITS. All
Schedules and Exhibits referred to herein or attached
hereto are hereby incorporated by reference into, and
made a part of, this Agreement.
SECTION 25. NO WAIVER. Neither the failure nor
any delay on the part of a party to exercise any right,
remedy, power or privilege under this Agreement shall
operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or
privilege preclude any other or further exercise of the
13
<PAGE>
same or of any other right, remedy, power or privilege,
nor shall any waiver of any right, remedy, power or
privilege with respect to any occurrence be construed
as a waiver of such right, remedy, power or privilege
with respect to any other occurrence. No waiver shall
be effective unless it is in writing and is signed by
the party asserted to have granted such waiver.
SECTION 26. TITLES NOT TO AFFECT
INTERPRETATION. The titles of paragraphs and
subparagraphs contained in this Agreement are for
convenience only, and they neither form a part of this
Agreement nor are they to be used in the construction
or interpretation hereof.
SECTION 27. EXECUTION IN COUNTERPARTS. This
Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an
original as against any party whose signature appears
thereon, and all of which shall together constitute one
and the same instrument. This Agreement shall become
binding when one or more counterparts hereof,
individually or taken together, shall bear the
signatures of all of the parties reflected hereon as
the signatories.
SECTION 28. PROVISIONS SEPARABLE. The
provisions of this Agreement are independent of and
separable from each other, and no provision shall be
affected or rendered invalid or unenforceable by virtue
of the fact that for any reason any other or others or
them may be invalid or unenforceable in whole or in
part.
SECTION 29. GENDER. Words used herein
regardless of the number and gender specifically used,
shall be deemed and construed to include any other
number, singular or plural, and any other gender,
masculine, feminine or neuter, as the context requires.
SECTION 30. COMPUTATION OF INTEREST. Interest
will be computed on the basis of a 360-day year
consisting of twelve months of thirty days each.
14
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement as of the date first written
above.
Company:
AMERICA FIRST MORTGAGE
INVESTMENTS, INC.
a Maryland corporation
By: /s/ Stewart Zimmerman
------------------------
Name: Stewart Zimmerman
Title: President and Chief
Executive Officer
Advisor:
AMERICA FIRST MORTGAGE ADVISORY
CORPORATION
a Maryland corporation
By: /s/ Stewart Zimmerman
-------------------------
Name: Stewart Zimmerman
Title: President and Chief
Executive Officer
15
AMERICA FIRST MORTGAGE INVESTMENTS, INC.
1997 STOCK OPTION PLAN
1. PURPOSE. The Plan is intended to provide
incentive to key employees, officers, directors and
others expected to provide significant services to the
Company, including the employees, officers and
directors of the Participating Companies, to encourage
proprietary interest in the Company, to encourage such
key employees to remain in the employ of the Company
and the other Participating Companies, to attract new
employees with outstanding qualifications, and to
afford additional incentive to others to increase their
efforts in providing significant services to the
Company and the other Participating Companies. In
furtherance thereof, the Plan permits awards of equity-
based incentives to key employees, officers and
directors of, and certain other providers of services
to, the Participating Companies.
2. DEFINITIONS.
a. "Act" shall mean the Securities Act of
1933, as amended.
b. "Advisor" shall mean America First
Mortgage Advisory Corporation, a Maryland Corporation.
c. "Agreement" shall mean a written
agreement entered into between the Company and the
recipient of a Grant pursuant to section 7(b)(i)
hereof.
d. "Board" shall mean the Board of
Directors of the Company.
e. "Cause" shall mean, unless otherwise
provided in the Optionee's Agreement, (i) engaging in
(A) willful or gross misconduct or (B) willful or gross
neglect, (ii) repeatedly failing to adhere to the
directions of superiors or the Board or the written
policies and practices of the Company, (iii) the
commission of a felony or a crime of moral turpitude,
or any crime involving the Company, (iv) fraud,
misappropriation, embezzlement or material or repeated
insubordination, (v) a material breach of the
Optionee's employment agreement (if any) with the
Company (other than a termination of employment by the
Optionee), or (vi) any illegal act detrimental to the
Company; all as determined by the Committee.
f. "Class I Participant" shall mean any
director of the Company who is also appointed to serve
on the Committee and who at the time of his appointment
qualifies as a "Non-Employee Director" under Rule 16b-
3(b)(3)(i) promulgated under the Exchange Act and, to
the extent that relief from the limitation of Section
162(m) of the Code is sought, as an "Outside Director"
under Section 1.162-27(e)(3)(i) of the Treasury
Regulations. The Plan is intended to provide Grants to
Class I Participants pursuant to the formula set forth
in Section 7(a).
<PAGE>
g. "Class II Participant" shall mean all
Eligible Persons, except the Class I Participants.
h. "Code" shall mean the Internal Revenue
Code of 1986, as amended.
i. "Committee" shall mean the Compensation
Committee, consisting solely of Class I Participants,
appointed by the Board in accordance with Section 4 of
the Plan.
j. "Common Stock" shall mean the Company's
Common Stock, par value $0.01, either currently
existing or authorized hereafter.
k. "Company" shall mean America First
Mortgage Investments, Inc., a Maryland corporation.
l. "DER" shall mean a dividend equivalent
right consisting of the right to receive, as specified
by the Committee or the Board at the time of Grant,
cash in an amount equal to the dividend distributions
paid on a share of Common Stock subject to an option.
m. "Disability" shall mean the occurrence
of an event which would entitle an employee of the
Company to the payment of disability income under one
of the Company's approved long-term disability income
plans or a long-term disability as determined by the
Committee in its absolute discretion pursuant to any
other standard as may be adopted by the Committee.
n. "Eligible Persons" shall mean officers,
directors and employees of the Participating Companies
and other persons expected to provide significant
services (of a type expressly approved by the Committee
as covered services for these purposes) to the Company.
For purposes of the Plan, a director (other than a
member of the Committee), in his or her capacity as
such, or a consultant, vendor, customer, or other
provider of significant services to the Company shall
be deemed to be an Eligible Person, but will be
eligible to receive Non-qualified Stock Options, or
DERs, only after a finding by the Committee or Board in
its discretion that the value of the services rendered
or to be rendered to the Participating Company is at
least equal to the value of the Grants being awarded.
o. "Employee" shall mean an individual,
including an officer of a Participating Company, who is
employed (within the meaning of Code Section 3401 and
the regulations thereunder) by the Participating
Company.
p. "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
q. "Exercise Price" shall mean the price
per Share of Common Stock, determined by the Board or
the Committee, at which an Option may be exercised.
r. "Fair Market Value" shall mean the value
of one share of Common Stock, determined as follows:
2
<PAGE>
i. If the Shares are then listed on a
national stock exchange, the closing sales
price per Share on the exchange for the last
preceding date on which there was a sale of
Shares on such exchange, as determined by the
Committee.
ii. If the Shares are not then listed
on a national stock exchange but are then
traded on an over-the-counter market, the
average of the closing bid and asked prices
for the Shares in such over-the-counter
market for the last preceding date on which
there was a sale of such Shares in such
market, as determined by the Committee.
iii. If neither (i) nor (ii) applies,
such value as the Committee in its discretion
may in good faith determine.
Notwithstanding the foregoing, where the Shares are
listed or traded, the Committee may make discretionary
determinations in good faith where the Shares have not
been traded for 10 trading days.
s. "Grant" shall mean the issuance of an
Incentive Stock Option, Non-qualified Stock Option, DER
or any combination thereof to an Eligible Person. The
Committee will determine the eligibility of employees,
officers, directors and others expected to provide
significant services to the Participating Companies
based on, among other factors, the position and
responsibilities of such individuals, the nature and
value to the Participating Company of such individuals
accomplishments and potential contribution to the
success of the Participating Company whether directly
or through its subsidiaries.
t. "Incentive Stock Option" shall mean an
Option of the type described in Section 422(b) of the
Code issued to an Employee.
u. "Non-qualified Stock Option" shall mean
an Option not described in Section 422(b) of the Code.
v. "Option" shall mean any option, whether
an Incentive Stock Option or a Non-qualified Stock
Option, to purchase, at a price and for the term fixed
by the Committee in accordance with the Plan, and
subject to such other limitations and restrictions in
the Plan and the applicable Agreement, a number of
Shares determined by the Committee.
w. "Optionee" shall mean any Eligible
Person to whom an Option is granted, or the Successors
of the Optionee, as the context so requires.
x. "Participating Companies" shall mean the
Company, Advisor and any subsidiary of any of them
which with the consent of the Board participates in the
Plan.
y. "Plan" shall mean the Company's 1997
Stock Option Plan, as set forth herein, and as the same
may from time to time be amended.
3
<PAGE>
z. "Purchase Price" shall mean the Exercise
Price times the number of Shares with respect to which
an Option is exercised.
aa. "Retirement" shall mean, unless
otherwise provided by the Committee in the Optionee's
Agreement, (i) the Termination (other than for Cause)
of Service of an Optionee on or after the Optionee's
attainment of age 65 (ii) on or after the Optionee's
attainment of age 55 with five consecutive years of
service with the Participating Companies or (iii) as
determined by the Committee in its absolute discretion
pursuant to such other standard as may be adopted by
the Committee.
bb. "Shares" shall mean shares of Common
Stock of the Company, adjusted in accordance with
Section 10 of the Plan (if applicable).
cc. "Subsidiary" shall mean any corporation,
partnership, or other entity at least 50% of the
economic interest in the equity of which is owned by
the Company or by another Subsidiary.
dd. "Successors of the Optionee" shall mean
the legal representative of the estate of a deceased
Optionee or the person or persons who shall acquire the
right to exercise an Option by bequest or inheritance
or by reason of the death of the Optionee.
ee. "Termination of Service" shall mean the
time when the employee-employer relationship or
directorship, or other service relationship (sufficient
to constitute service as an Eligible Person) between
the Optionee and the Participating Companies is
terminated for any reason, with or without Cause,
including but not limited to any termination by
resignation, discharge, death or Retirement; provided,
however, Termination of Service shall not include a
termination where there is a simultaneous reemployment
of the Optionee by a Participating Company or other
continuation of service (sufficient to constitute
service as an Eligible Person) for a Participating
Company. The Committee, in its absolute discretion,
shall determine the effects of all matters and
questions relating to Termination of Service, including
but not limited to the question of whether any
Termination of Service was for Cause and all questions
of whether particular leaves of absence constitute
Terminations of Employment.
3. EFFECTIVE DATE. Unless already approved by
shareholders, the Plan will be submitted to
shareholders for their approval within twelve months
after receipt of Board approval. Any Grants awarded
before approval of the Plan by the Company's
shareholders shall be accrued for the benefit of the
participant until the Plan has been approved by the
shareholders.
4. ADMINISTRATION.
a. Membership on Committee. The Plan shall
be administered by the Committee appointed by the
Board. If no Committee is designated by the Board to
act for those purposes, the full Board shall have the
rights and responsibilities of the Committee hereunder.
4
<PAGE>
b. Committee Meetings. The acts of a
majority of the members present at any meeting of the
Committee at which a quorum is present, or acts
approved in writing by a majority of the entire
Committee, shall be the acts of the Committee for
purposes of the Plan. If and to the extent applicable,
no member of the Committee may act as to matters under
the Plan specifically relating to such member.
c. Grant Awards. The Committee shall from
time to time at its discretion select the Class II
Participants who are to be issued Grants, determine the
number of Shares (i) to be optioned or (ii) with
respect to which the Grant is to be issued, to each
Class II Participant and designate any Options granted
as Incentive Stock Options or Non-qualified Stock
Options, or both, except that no Incentive Stock
Options may be granted to an Eligible Person who is not
an Employee of the Company. The Committee shall (i)
determine the terms and conditions, not inconsistent
with the terms of the Plan, of any Grants awarded
hereunder, (including, but not limited to the
performance goals and periods applicable to the award
of Grants); (ii) determine the time or times when and
the manner and condition in which each Option shall be
exercisable and the duration of the exercise period;
and (iii) determine or impose other conditions to the
Grant or exercise of Options under the Plan as it may
deem appropriate. The Committee shall cause each
Option to be designated as an Incentive Stock Option or
a Non-qualified Stock Option. The Optionee shall take
whatever additional actions and execute whatever
additional documents the Committee may in its
reasonable judgment deem necessary or advisable in
order to carry or effect one or more of the obligations
or restrictions imposed on the Optionee pursuant to the
express provisions of the Plan and the Agreement. DERs
will be exercisable separately or together with
Options, and paid in cash or other consideration at
such times and in accordance with such rules, as the
Committee shall determine in its discretion. Unless
expressly provided hereunder, the Committee, with
respect to any Grant, may exercise its discretion
hereunder at the time of the award or thereafter. The
interpretation and construction by the Committee of any
provision of the Plan or of any Option granted
thereunder shall be final. Without limiting the
generality of Section 18, no member of the Committee
shall be liable for any action or determination made in
good faith with respect to the Plan or any Grant
hereunder.
5. PARTICIPATION.
a. Eligibility. Only Eligible Persons
shall be eligible to receive Grants under the Plan.
b. Limitation of Ownership. No Options
shall be granted under the Plan to any person who after
such Grant would beneficially own more than 9.8% of the
outstanding shares of Common Stock of the Company,
unless expressly and specifically waived by action of
the independent Directors of the Board.
c. Stock Ownership. For purposes of (b)
above, in determining stock ownership an Optionee shall
be considered as owning the stock owned, directly or
indirectly, by or for his brothers, sisters, spouses,
ancestors and lineal descendants. Stock owned,
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<PAGE>
directly or indirectly, by or for a corporation,
partnership, estate or trust shall be considered as
being owned proportionately by or for its shareholders,
partners or beneficiaries. Stock with respect to which
any person holds an Option shall be considered to be
owned by such person.
d. Outstanding Stock. For purposes of (b)
above, "outstanding shares" shall include all stock
actually issued and outstanding immediately after the
grant of the Option to the Optionee. With respect to
the Stock Ownership of any Optionee, "outstanding
shares" shall include shares authorized for issue under
outstanding Options held by such Optionee, but not
options held by any other person.
6. STOCK. Subject to adjustments pursuant to
Section 10, Options with respect to an aggregate of no
more than 1,000,000 Shares may be granted under the
Plan, nor may the number of Shares subject to Options
outstanding at any time exceed 10% of the total
outstanding shares of the Company's Common Stock. In
no event may any Optionee receive Options for more than
100,000 Shares of Common Stock over the life of the
Plan. Notwithstanding the foregoing provisions of this
Section 6, Shares as to which an Option is granted
under the Plan that remains unexercised at the
expiration, forfeiture or other termination of such
Option may be the subject of the grant of further
Options. Shares of Common Stock issued hereunder may
consist, in whole or in part, of authorized and
unissued shares or treasury shares. The certificates
for Shares issued hereunder may include any legend
which the Committee deems appropriate to reflect any
restrictions on transfer hereunder or under the
Agreement, or as the Committee may otherwise deem
appropriate.
7. TERMS AND CONDITIONS OF OPTIONS.
a. Class I Participants.
i. Initial Awards. Awards under this
Section 7(a) shall be made to Class I Participants
only. Each Class I Participant shall
automatically be granted a Non-qualified Stock
Option to purchase 5,000 shares of Common Stock
upon the date such person is initially appointed
to the Committee.
ii. Periodic Awards. Subject to the
limitations set forth in Sections 5 and 6, without
any further action by the Board or the Committee,
each Class I Participant shall be granted Non-
qualified Stock Options to purchase:
(1) Fixed offering. As of the
pricing date of any firm commitment public
offering or direct placement of the Common
Stock, a number of shares of Common Stock
equal to the total number of shares of Common
Stock sold under the offering (including
shares sold under the underwriter's
overallotment) multiplied by .0075; and
(2) Continuous offering. As of
the last business day on which the New York
Stock Exchange is open for trading during
each fiscal quarter of the Company, a number
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<PAGE>
of shares of Common Stock equal to the total
number of shares of Common Stock sold by the
Company during such fiscal quarter multiplied
by .0075, excluding (A) Options granted
pursuant to the sale of Common Stock during
the calendar quarter under subsection (1)
above, (B) any shares of Common Stock issued
under any compensatory dividend reinvestment
or other stock purchase plan maintained by
the Company and (C) shares acquired pursuant
to the exercise of Options granted under the
Plan.
iii. Exercise Price. Each Option
granted to Class I Participants shall be
exercisable at the Fair Market Value of the Common
Stock on the date of Grant.
iv. Option Period and Adjustments.
Each Option granted to a Class I Participant shall
become exercisable commencing one year after the
date of Grant (unless otherwise provided in the
applicable Agreement) and shall expire 10 years
thereafter. Options granted to Class I
Participants shall be subject to adjustment as
provided in Section 10 provided that such
adjustment and any action by the Board or the
Committee with respect to the Plan and such
Options satisfies the requirements for exemption
under Rule 16b-3 and does not cause any member of
the Committee to be disqualified as a Non-Employee
Director under such Rule.
v. Phase-in of DERs for Class I
Participants. The Company will issue DERs at the
same time as the Options in the amount of: 25% of
the Options granted to each Class I Participant in
1997, 35% of the Options granted to each Class I
Participant in 1998, 45% of the Options granted to
each Class I Participant in 1999, 55% of the
Options granted to each Class I Participant in
2000, 65% of the Options granted to each Class I
Participant in 2001, and 75% of the Options
granted to each Class I Participant in following
years.
vi. Notwithstanding the foregoing, the
Board may prospectively, from time to time,
discontinue, reduce or increase the amount of any
or all of the Grants otherwise to be made under
this Section 7(a).
b. Class II Participants.
i. Agreements. Grants to Class II
Participants shall be evidenced by written
Agreements in such form as the Committee shall
from time to time determine. Such Agreements
shall comply with and be subject to the terms and
conditions set forth below.
ii. Number of Shares. Each Option or
other Grant granted to a Class II Participant
shall state the number of Shares to which it
pertains and shall provide for the adjustment
thereof in accordance with the provisions of
Section 10 hereof.
c. Grants. Subject to the terms and
conditions of the Plan and consistent with the
Company's intention for the Committee to exercise the
greatest permissible flexibility under Rule 16b-3 in
awarding Grants, the Committee shall have the power:
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<PAGE>
i. to determine from time to time the
Grants to be granted to Eligible Persons under the
Plan and to prescribe the terms and provisions
(which need not be identical) of Grants granted
under the Plan to such persons;
ii. to construe and interpret the Plan
and Grants thereunder and to establish, amend, and
revoke rules and regulations for administration of
the Plan. In this connection, the Committee may
correct any defect or supply any omission, or
reconcile any inconsistency in the Plan, in any
Agreement, or in any related agreements, in the
manner and to the extent it shall deem necessary
or expedient to make the Plan fully effective.
All decisions and determinations by the Committee
in the exercise of this power shall be final and
binding upon the Participating Companies and the
Optionees and Grantees;
iii. to amend any outstanding Grant,
subject to Section 12, and to accelerate or extend
the vesting or exercisability of any Grant and to
waive conditions or restrictions on any Grants, to
the extent it shall deem appropriate; and
iv. generally to exercise such powers
and to perform such acts as are deemed necessary
or expedient to promote the best interests of the
Company with respect to the Plan.
Each Agreement with a Class II Participant
shall state the Exercise Price. The Exercise Price for
any Option shall not be less than the Fair Market Value
on the date of Grant.
d. Medium and Time of Payment. Except as
may otherwise be provided below, the Purchase Price for
each Option granted to a Class II Participant shall be
payable in full in United States dollars upon the
exercise of the Option. In the event the Company
determines that it is required to withhold taxes as a
result of the exercise of an Option, as a condition to
the exercise thereof, an Employee may be required to
make arrangements satisfactory to the Company to enable
it to satisfy such withholding requirements in
accordance with Section 15. If the applicable
Agreement so provides, and the Committee otherwise so
permits, the Purchase Price may be paid in one or a
combination of the following:
i. by a certified or bank cashier's
check;
ii. by the surrender of Shares in good
form for transfer, owned by the person exercising
the Option and having a Fair Market Value on the
date of exercise equal to the Purchase Price, or
in any combination of cash and Shares, as long as
the sum of the cash so paid and the Fair Market
Value of the Shares so surrendered equals the
Purchase Price;
iii. by cancellation of indebtedness
owed by the Company to the Optionee;
iv. by a loan or extension of credit
from the Company evidenced by a full recourse
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<PAGE>
promissory note executed by the Optionee. The
interest rate and other terms and conditions of
such note shall be determined by the Committee (in
which case the Committee may require that the
Optionee pledge his or her Shares to the Company
for the purpose of securing the payment of such
note, and in no event shall the stock
certificate(s) representing such Shares be
released to the Optionee until such note shall
have been paid in full); or
v. by any combination of such methods
of payment or any other method acceptable to the
Committee in its discretion.
Except in the case of Options exercised
by certified or bank cashier's check, the
Committee may impose limitations and prohibitions
on the exercise of Options as it deems
appropriate, including, without limitation, any
limitation or prohibition designed to avoid
accounting consequences which may result from the
use of Common Stock as payment upon exercise of an
Option. Any fractional Shares resulting from an
Optionee's election that are accepted by the
Company shall in the discretion of the Committee
be paid in cash.
e. Term and Nontransferability of Grants
and Options.
i. Each Grant shall state the time or
times which all or part thereof becomes
exercisable, subject to the following
restrictions.
ii. No Grant shall be exercisable
except by the Optionee or a transferee permitted
hereunder.
iii. No Option shall be assignable or
transferable, except by will or the laws of
descent and distribution of the state wherein the
Optionee is domiciled at the time of his death;
provided, however, that the Committee may (but
need not) permit other transfers, where the
Committee concludes that such transferability (i)
does not result in accelerated taxation, (ii) does
not cause any Option intended to be an Incentive
Stock Option to fail to be described in Section
422(b) of the Code and (iii) is otherwise
appropriate and desirable.
iv. No Option shall be exercisable
until such time as set forth in the applicable
Agreement (but in no event after the expiration of
such Grant).
v. Unless otherwise provided in the
Agreement, no DERs shall be exercisable (i) until
such time as set forth in the applicable agreement
or (ii) the expiration of such Grant.
vi. The Committee may not modify,
extend or renew any Option granted to any Class I
Participant unless such modification, extension or
renewal shall satisfy any and all applicable
requirements of Rule 16b-3. The foregoing
notwithstanding, no modification of an Option
shall, without the consent of the Optionee, alter
or impair any rights or obligations under any
Option previously granted.
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<PAGE>
f. Termination of Service, Except by death,
Retirement or Disability. Unless otherwise provided in
the applicable Agreement, upon any Termination of
Service for any reason other than his or her death,
Retirement or Disability, an Optionee shall have the
right, subject to the restrictions of subsection (c)
above, to exercise his or her Grant at any time within
three months after Termination of Service, but only to
the extent that, at the date of Termination of Service,
the Optionee's right to exercise such Grant had accrued
pursuant to the terms of the Agreement and had not
previously been exercised; provided, however, that,
unless otherwise provided in the Agreement, if there
occurs a Termination of Service by a Participating
Company for Cause or a termination of Service by the
Optionee (other than on account of death, Retirement or
Disability), any Grant not exercised in full prior to
such termination shall be canceled. For this purpose,
the service relationship shall be treated as continuing
intact while the Optionee is on military leave, sick
leave or other bona fide leave of absence (to be
determined in the discretion of the Committee).
g. Death of Optionee. Unless otherwise
provided in the applicable Agreement, if the Optionee
dies while an Eligible Person or within three months
after any Termination of Service other than for Cause
or a termination of Service by the Optionee (other than
on account of death, Retirement or Disability), and has
not fully exercised the Grant, then the Grant may be
exercised in full, subject to the restrictions of
subsection (c) above, at any time within 12 months
after the Optionee's death, by the Successor of the
Optionee, but only to the extent that, at the date of
death, the Optionee's right to exercise such Grant had
accrued and had not been forfeited pursuant to the
terms of the Agreement and had not previously been
exercised.
h. Disability or Retirement of Grant
Recipient. Unless otherwise provided in the Agreement,
upon Termination of Service for reason of Disability or
Retirement, such Grant recipient shall have the right,
subject to the restrictions of subsection (c) above, to
exercise the Grant at any time within 24 months after
Termination of Service, but only to the extent that, at
the date of Termination of Service, the Grant
recipient's right to exercise such Grant had accrued
pursuant to the terms of the applicable Agreement and
had not previously been exercised.
i. Rights as a Shareholder. An Optionee, a
Successor of the Optionee, or the holder of a DER shall
have no rights as a shareholder with respect to any
Shares covered by his or her Grant until, in the case
of an Optionee, the date of the issuance of a stock
certificate for such Shares. No adjustment shall be
made for dividends (ordinary or extraordinary, whether
in cash, securities or other property), distributions
or other rights for which the record date is prior to
the date such stock certificate is issued, except as
provided in Section 10.
j. Modification, Extension and Renewal of
Option. Within the limitations of the Plan, and only
with respect to Options granted to Class II
Participants, the Committee may modify, extend or renew
outstanding Options or accept the cancellation of
outstanding Options (to the extent not previously
10
<PAGE>
exercised) for the granting of new Options in
substitution therefor. The Committee may modify,
extend or renew any Option granted to any Class I
Participant, unless such modification, extension or
renewal would not satisfy any applicable requirements
of Rule 16b-3. The foregoing notwithstanding, no
modification of an Option shall, without the consent of
the Optionee, alter or impair any rights or obligations
under any Option previously granted.
k. Other Provisions. The Agreement
authorized under the Plan may contain such other
provisions not inconsistent with the terms of the Plan
(including, without limitation, restrictions upon the
exercise of the Option) as the Committee shall deem
advisable.
8. SPECIAL RULES FOR INCENTIVE STOCK OPTIONS.
a. In the case of Incentive Stock Options
granted hereunder, the aggregate Fair Market Value
(determined as of the date of the Grant thereof) of the
Shares with respect to which Incentive Stock Options
become exercisable by any Optionee for the first time
during any calendar year (under the Plan and all other
plans maintained by the Participating Companies, their
parent or Subsidiaries) shall not exceed $100,000.
b. In the case of an individual described
in Section 422(b)(6) of the Code (relating to certain
10% owners), the Exercise Price with respect to an
Incentive Stock Option shall not be less than 110% of
the Fair Market Value of a Share on the day the Option
is granted and the term of an Incentive Stock Option
shall be no more than five years from the date of
grant.
c. If Shares acquired upon exercise of an
Incentive Stock Option are disposed of in a
disqualifying disposition within the meaning of Section
422 of the Code by an Optionee prior to the expiration
of either two years from the date of grant of such
Option or one year from the transfer of Shares to the
Optionee pursuant to the exercise of such Option, or in
any other disqualifying disposition within the meaning
of Section 422 of the Code, such Optionee shall notify
the Company in writing as soon as practicable
thereafter of the date and terms of such disposition
and, if the Company thereupon has a tax-withholding
obligation, shall pay to the Company an amount equal to
any withholding tax the Company is required to pay as a
result of the disqualifying disposition.
9. TERM OF PLAN. Options may be granted
pursuant to the Plan until the expiration of 10 years
from the effective date of the Plan.
10. RECAPITALIZATION AND CHANGES OF CONTROL.
a. Subject to any required action by
shareholders, if (i) the Company shall at any time be
involved in a merger, consolidation, dissolution,
liquidation, reorganization, exchange of shares, sale
of all or substantially all of the assets or stock of
the Company or a transaction similar thereto, (ii) any
stock dividend, stock split, reverse stock split, stock
combination, reclassification, recapitalization or
other similar change in the capital structure of the
Company, or any distribution to holders of Common Stock
11
<PAGE>
other than cash dividends, shall occur or (iii) any
other event shall occur which in the judgment of the
Committee necessitates action by way of adjusting the
terms of the outstanding Options or rights under the
Grant of a DER, then the Committee shall forthwith take
any such action as in its judgment shall be necessary
to preserve to the Optionees rights substantially
proportionate to the rights existing prior to such
event, and to maintain the continuing availability of
Shares under Section 6 (if Shares are otherwise then
available) in a manner consistent with the intent
hereof, including, without limitation, adjustments in
(x) the number and kind of shares subject to Options,
(y) the Option Price, and (z) the number and kind of
shares available under Section 6; provided that this
provision shall not be effective to the extent that the
Company or the Committee determines that the
accelerated vesting of the Options upon the occurrence
of a Change of Control as contemplated hereby would
adversely affect the ability of the Company or acquiror
(in the case of a Change of Control in connection with
which the Company is not the surviving corporation) to
use the pooling method of accounting in connection with
a Change of Control transaction, if such method of
accounting would otherwise be available and desired by
the Company or acquiror. To the extent that such
action shall include an increase or decrease in the
number of shares subject to outstanding Options, the
number of shares available under Section 6 above shall
be increased or decreased, as the case may be,
proportionately.
b. Subject to any required action by
shareholders, if the Company is the surviving
corporation in any merger or consolidation, each
outstanding Option and the rights under the Grant of a
DER shall pertain and apply to the securities to which
a holder of the number of Shares subject to the Option
would have been entitled. In the event of a merger or
consolidation in which the Company is not the surviving
corporation, the date of exercisability of each
outstanding Grant shall be accelerated to a date prior
to such merger or consolidation, unless the agreement
of merger or consolidation provides for the assumption
of the Grant by the successor to the Company.
c. To the extent that the foregoing
adjustment related to securities of the Company, such
adjustments shall be made by the Committee, whose
determination shall be conclusive and binding on all
persons.
d. Except as expressly provided in this
Section 10, the recipient of the Grant shall have no
rights by reason of subdivision or consolidation of
shares of stock of any class, the payment of any stock
dividend or any other increase or decrease in the
number of shares of stock of any class or by reason of
any dissolution, liquidation, merger or consolidation
or spin-off of assets or stock of another corporation,
and any issue by the Company of shares of stock of any
class, or securities convertible into shares of stock
of any class, shall not affect, and no adjustment by
reason thereof shall be made with respect to, the
number or Exercise Price of Shares subject to an
Option.
e. Grants made pursuant to the Plan shall
not affect in any way the right or power to the Company
to make adjustments, reclassifications, reorganizations
or changes of its capital or business structure, to
merge or consolidate or to dissolve, liquidate, sell or
transfer all or any part of its business assets.
f. Upon the occurrence of a Change of
Control:
i. The Committee as constituted
immediately before the Change of Control may make
such adjustments as it, in its discretion,
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<PAGE>
determines are necessary or appropriate in light
of the Change of Control (including, without
limitation, the substitution of stock other than
stock of the Company as the stock optioned
hereunder, and the acceleration of the
exercisability of the Options), provided that the
Committee determines that such adjustments do not
have a substantial adverse economic impact on the
Optionee as determined at the time of the
adjustments.
ii. All restrictions and conditions on
each DER shall automatically lapse and all Grants
under the Plan shall be deemed fully vested.
g. "Change of Control" shall mean the
occurrence of any one of the following events:
i. any "person," as such term is used
in Sections 13(d) and 14(d) of the Act (other than
the Company, any of its Affiliates or any trustee,
fiduciary or other person or entity holding
securities under any employee benefit plan or
trust of the Company or any of its Affiliates)
together with all "affiliates" and "associates"
(as such terms are defined in Rule 12b-2 under the
Act) of such person, shall become the "beneficial
owner" (as such term is defined in Rule 13d-3
under the Act), directly or indirectly, of
securities of the Company representing 30% or more
of either (A) the combined voting power of the
Company's then outstanding securities having the
right to vote in an election of the Board of
Directors ("voting securities") or (B) the then
outstanding Shares (in either such case other than
as a result of an acquisition of securities
directly from the Company); or
ii. persons who, as of the effective
date of the Plan, constitute the Company's Board
of Directors (the "Incumbent Directors") cease for
any reason, including, without limitation, as a
result of a tender offer, proxy contest, merger or
similar transaction, to constitute at least a
majority of the Board, provided that any person
becoming a Director of the Company subsequent to
the effective date whose election or nomination
for election was approved by a vote of at least a
majority of the Incumbent Directors shall, for
purposes of the Plan, be considered an Incumbent
Director; or
iii. there shall occur (A) any
consolidation or merger of the Company or any
Subsidiary where the shareholders of the Company,
immediately prior to the consolidation or merger,
would not, immediately after the consolidation or
merger, beneficially own (as such term is defined
in Rule 13d-3 under the Act), directly or
indirectly, shares representing in the aggregate
50% or more of the voting securities of the
corporation issuing cash or securities in the
consolidation or merger (or of its ultimate parent
corporation, if any), (B) any sale, lease,
exchange or other transfer (in one transaction or
a series of transactions contemplated or arranged
by any party as a single plan) of all or
substantially all of the assets of the Company or
(C) any plan or proposal for the liquidation or
dissolution of the Company.
Notwithstanding the foregoing, a "Change of Control"
shall not be deemed to have occurred for purposes of
the foregoing clause (i) solely as the result of an
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acquisition of securities by the Company which, by
reducing the number of Shares or other voting
securities outstanding, increases (x) the proportionate
number of Shares beneficially owned by any person to
30% or more of the Shares then outstanding or (y) the
proportionate voting power represented by the voting
securities beneficially owned by any person to 30% or
more of the combined voting power of all then
outstanding voting securities; provided, however, that,
if any person referred to in clause (x) or (y) of this
sentence shall thereafter become the beneficial owner
of any additional Shares or other voting securities
(other than pursuant to a stock split, stock dividend,
or similar transaction), then a "Change of Control"
shall be deemed to have occurred for purposes of this
subsection (g).
11. EFFECT OF CERTAIN TRANSACTIONS. In the case
of (i) the dissolution or liquidation of the Company,
(ii) a merger, consolidation, reorganization or other
business combination in which the Company is acquired
by another entity or in which the Company is not the
surviving entity, or (iii) any sale, lease, exchange or
other transfer (in one transaction or a series of
transactions contemplated or arranged by any party as a
single plan) of all or substantially all of the assets
of the Company, the Plan and the Grants issued
hereunder shall terminate upon the effectiveness of any
such transaction or event, unless provision is made in
connection with such transaction for the assumption of
Grants theretofore granted, or the substitution for
such Grants of new Grants, by the successor entity or
parent thereof, with appropriate adjustment as to the
number and kind of shares and the per share exercise
prices, as provided in Section 10. In the event of
such termination, all outstanding Options and Grants
shall be exercisable in full for at least fifteen days
prior to the date of such termination whether or not
otherwise exercisable during such period.
12. SECURITIES LAW REQUIREMENTS.
a. Legality of Issuance. The issuance of
any Shares upon the exercise of any Option and the
grant of any Option shall be contingent upon the
following:
i. the obligation of the Company to
sell Shares with respect to Options granted under
the Plan shall be subject to all applicable laws,
rules and regulations, including all applicable
federal and state securities laws, and the
obtaining of all such approvals by governmental
agencies as may be deemed necessary or appropriate
by the Committee;
ii. the Committee may make such changes
to the Plan as may be necessary or appropriate to
comply with the rules and regulations of any
government authority or to obtain tax benefits
applicable to stock options; and
iii. each Option is subject to the
requirement that, if at any time the Committee
determines, in its discretion, that the listing,
registration or qualification of Shares issuable
pursuant to the Plan is required by any securities
exchange or under any state or federal law, or the
consent or approval of any governmental regulatory
14
<PAGE>
body is necessary or desirable as a condition of,
or in connection with, the grant of an Option or
the issuance of Shares, no Options shall be
granted or payment made or Shares issued, in whole
or in part, unless listing, registration,
qualification, consent or approval has been
effected or obtained free of any conditions in a
manner acceptable to the Committee.
b. Restrictions on Transfer. Regardless of
whether the offering and sale of Shares under the Plan
has been registered under the Act or has been
registered or qualified under the securities laws of
any state, the Company may impose restrictions on the
sale, pledge or other transfer of such Shares
(including the placement of appropriate legends on
stock certificates) if, in the judgment of the Company
and its counsel, such restrictions are necessary or
desirable in order to achieve compliance with the
provisions of the Act, the securities laws of any state
or any other law. In the event that the sale of Shares
under the Plan is not registered under the Act but an
exemption is available which requires an investment
representation or other representation, each Optionee
shall be required to represent that such Shares are
being acquired for investment, and not with a view to
the sale or distribution thereof, and to make such
other representations as are deemed necessary or
appropriate by the Company and its counsel. Any
determination by the Company and its counsel in
connection with any of the matters set forth in this
Section 11 shall be conclusive and binding on all
persons. Without limiting the generality of the last
sentence of Section 6, stock certificates evidencing
Shares acquired under the Plan pursuant to an
unregistered transaction shall bear the following
restrictive legend and such other restrictive legends
as are required or deemed advisable under the
provisions of any applicable law.
"THE SALE OF THE SECURITIES REPRESENTED
HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 (THE "ACT"). ANY TRANSFER OF SUCH SECURITIES
WILL BE INVALID UNLESS A REGISTRATION STATEMENT UNDER
THE ACT IS IN EFFECT AS TO SUCH TRANSFER OR IN THE
OPINION OF COUNSEL FOR THE ISSUER SUCH REGISTRATION IS
UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH
THE ACT."
c. Registration or Qualification of
Securities. The Company may, but shall not be
obligated to, register or qualify the issuance of
Options and/or the sale of Shares under the Act or any
other applicable law. The Company shall not be
obligated to take any affirmative action in order to
cause the issuance of Options or the sale of Shares
under the Plan to comply with any law.
d. Exchange of Certificates. If, in the
opinion of the Company and its counsel, any legend
placed on a stock certificate representing Shares sold
under the Plan is no longer required, the holder of
such certificate shall be entitled to exchange such
certificate for a certificate representing the same
number of Shares but lacking such legend.
13. AMENDMENT OF THE PLAN. The Board may from
time to time, with respect to any Shares at the time
not subject to Options, suspend or discontinue the Plan
or revise or amend it in any respect whatsoever. The
Board may amend the Plan as it shall deem advisable,
except that no amendment may adversely affect an
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Optionee with respect to Options previously granted
unless such amendments are in connection with
compliance with applicable laws; provided that the
Board may not make any amendment in the Plan that
would, if such amendment were not approved by the
holders of the Common Stock, cause the Plan to fail to
comply with any requirement or applicable law or
regulation, unless and until the approval of the
holders of such Common Stock is obtained.
14. APPLICATION OF FUNDS. The proceeds received
by the Company from the sale of Common Stock pursuant
to the exercise of an Option will be used for general
corporate purposes.
15. TAX WITHHOLDING. Each recipient of a Grant
shall, no later than the date as of which the value of
any Grant first becomes includable in the gross income
of the recipient for federal income tax purposes, pay
to the Company, or make arrangements satisfactory to
the Company regarding payment of any federal, state or
local taxes of any kind that are required by law to be
withheld with respect to such income. An Optionee may
elect to have such tax withholding satisfied, in whole
or in part, by (i) authorizing the Company to withhold
a number of Shares to be issued pursuant to a Grant
equal to the Fair Market Value as of the date
withholding is effected that would satisfy the
withholding amount due, (ii) transferring to the
Company Shares owned by the Optionee with a Fair Market
Value equal to the amount of the required withholding
tax, or (iii) in the case of an Optionee who is an
Employee of the Company at the time such withholding is
effected, by withholding from the Optionee's cash
compensation. Notwithstanding anything contained in
the Plan to the contrary, the Optionee's satisfaction
of any tax-withholding requirements imposed by the
Committee shall be a condition precedent to the
Company's obligation as may otherwise by provided
hereunder to provide Shares to the Optionee, and the
failure of the Optionee to satisfy such requirements
with respect to the exercise of an Option shall cause
such Option to be forfeited.
16. NOTICES. All notices under the Plan shall be
in writing, and if to the Company, shall be delivered
to the Board or mailed to its principal office,
addressed to the attention of the Board; and if to the
Optionee or recipient of a Grant, shall be delivered
personally or mailed to the Optionee or recipient of a
Grant at the address appearing in the records of the
Participating Company. Such addresses may be changed
at any time by written notice to the other party given
in accordance with this Section 16.
17. RIGHTS TO EMPLOYMENT OR OTHER SERVICE.
Nothing in the Plan or in any Option or Grant granted
pursuant to the Plan shall confer on any individual any
right to continue in the employ or other service of the
Company (if applicable) or interfere in any way with
the right of the Company and its shareholders to
terminate the individual's employment or other service
at any time.
18. EXCULPATION AND INDEMNIFICATION. To the
maximum extent permitted by law, the Company shall
indemnify and hold harmless the members of the Board
and the members of the Committee from and against any
and all liabilities, costs and expenses incurred by
such persons as a result of any act or omission to act
in connection with the performance of such person's
duties, responsibilities and obligations under the
Plan, other than such liabilities, costs and expenses
as may result from the gross negligence, bad faith,
willful misconduct or criminal acts of such persons.
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19. NO FUND CREATED. Any and all payments
hereunder to recipients of Grants hereunder shall be
made from the general funds of the Company (or, if
applicable, a Participating Company), and no special or
separate fund shall be established or other segregation
of assets made to assure such payments; provided that
bookkeeping reserves may be established in connection
with the satisfaction of payment obligations hereunder.
The obligations of the Company under the Plan are
unsecured and constitute a mere promise by the Company
to make benefit payments in the future, and, to the
extent that any person acquires a right to receive
payments under the Plan from the Company (or, if
applicable, a Participating Company), such right shall
be no greater than the right of an general unsecured
creditor of the Company (or, if applicable, a
Participating Company).
20. CAPTIONS. The use of captions in the Plan is
for convenience. The captions are not intended to
provide substantive rights.
21. GOVERNING LAW. THE PLAN SHALL BE GOVERNED BY
THE LAWS OF MARYLAND, WITHOUT REFERENCE TO PRINCIPLES
OF CONFLICT OF LAWS.
22. EXECUTION. The Company has caused the Plan
to be executed in the name and on behalf of the Company
by an officer of the Company thereunto duly authorized.
DATED: December 12, 1997
AMERICA FIRST MORTGAGE
INVESTMENTS, INC.
a Maryland corporation
By: /s/ Stewart Zimmerman
----------------------
Name: Stewart Zimmerman
Title: President and
Chief
Executive Officer
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